TIDMNSH
RNS Number : 2270S
Norish PLC
08 March 2019
Norish plc
Preliminary results 2018
Results
Norish plc (AIM: NSH), is pleased to announce its preliminary
results for the year ended 31 December 2018.
Financial Highlights
-- Profit before tax increased by 17.6% to GBP1.94m (2017: GBP1.65m)
-- Diluted adjusted Eps increased by 22% to 5p (2017: 4.1p)
-- Group revenue decreased by 12.4% to GBP36.8m (2017: GBP42.0m)
-- Dividend increased by 9% to 1.80 EURcent (2017: 1.65 EURcent)
-- Net debt was reduced from GBP5.4m at start of year to GBP4.9m at year end.
-- Interest cover has increased to 11.4 times (2017: 8.7 times)
Operations
Cold Store Division
Cold stores are our largest business activity, accounting for
circa 75% of the non-current assets in the business. Sales were
down 4%, from GBP14.3m to GBP13.7m in 2018, due mainly to a
reduction in blast freezing activity. Sales excluding blast
freezing were GBP11.3m, down marginally from GBP11.7m from the
prior year. Divisional profits grew by 17%, from GBP2.3m to
GBP2.7m. Divisional margins improved from 16.0% to 19.7%.
2018 was characterised by lower intake, lower stock turn and
higher storage revenues, when compared with the prior year.
Occupancy was up two percentage points to 94%.
Costs at site level were reduced by 7%, to more than compensate
for the reduction in revenue. Labour, our largest cost, was down
5%, year on year, while power (our second largest cost) was reduced
by 10%, against the prior year. Labour and power combined were
lowered by 7% or Stg GBP0.46m. Power units consumed were lower by
11%, year on year. This reflects the aforementioned reduction in
blast freezing activity, together with benefits coming through from
the implementation of energy saving initiatives.
Sourcing Division
Market conditions resulted in a reduction in protein supply
during the year under review.
However, while sales fell by 17% from GBP27.2m to GBP22.5m,
contribution declined by just 3% from GBP0.68m to GBP0.64m.
Townview Foods sources protein products mainly beef, pork, lamb and
chicken. Sales from pork and chicken decreased by GBP3.2m during
the year, while sales from beef and lamb decreased by GBP2.1m.
Townview Foods, the largest business within the Sourcing
Division has repaid its investment, in full, within 5 years of its
acquisition. A new structure has been put in place, with
management, to continue to develop the business, for an additional
5 year period.
During the year the Group decided to discontinue trading in the
sale of juice to the ready to drinks market. This activity was
conducted via Foro International Connections Limited ("Foro"). Foro
continues to source non-protein products for the Irish market.
Dairy
The dairy division delivered some underlying progress in 2018
despite challenging weather conditions in the Spring/Summer period.
Milk deliveries were up 18% year-on-year reflecting a more mature
herd profile whilst underlying costs ex-feed were marginally lower.
A cold Spring and subsequent Summer drought resulted in lower
pasture production and higher feed costs - this also impacted milk
production to some extent. Mark-to-market stock values also
declined year-on-year reflecting similar conditions across the
industry.
Discontinued
During the year the group decided to exit the Juice business for
the ready to drinks market, which is part of Foro International
Connections. A loss of GBP0.38m was incurred, compared to GBP0.1m
last year.
In 2016, the Group exited the FMCG market and recorded a loss of
GBPnil during 2018 (2017: GBP0.1m).
Capital
During the period we invested GBP1.16m (2017: GBP1.82m),
GBP0.33m in the dairy farm in Kilkenny and GBP0.83m in routine
capital expenditure in the cold store division.
Outlook
We anticipate another year of strong profit growth for the group
in 2019.
In our cold store division, the year has got off to a strong
start in the first two months of the year. Management continues to
focus on maximising both sales mix and pricing, in a market that is
currently more favorable to cold storage businesses, than it has
been at any time in the most recent past. Focus on underlying cost
improvement will continue. We look forward to further improving
returns in this division during the current year.
The UK frozen food sector is currently the fastest growing
retail category, growing at 4% per annum. A combination of factors
is driving this growth including growth in online shopping
premiumisation of the category, as well as providing a solution to
food waste. This growth comes against a background of a cold store
market which has seen a lack of significant investment over an
extended number of years.
Despite the current volatility in its underlying markets, our
protein sourcing division is well placed to deliver in line with
expectation on the back of its low risk operating model.
Our dairy farming division is now performing strongly. Work in
relation to our major dairy project is ongoing at pace. We have
assembled a very experienced team, to drive this initiative, to
achieve the market position we have set for this development over a
two to four-year time frame.
Financial Review
Total equity at 31 December 2018 stood at GBP16.7m (2017:
GBP16.0m). Net debt at 31 December 2018 was GBP4.9m compared to
GBP5.4m at 31 December 2017.
Dividend
The board recommends the payment of a final dividend of 1.80
EURcent per share. This will be paid on 18 October 2019 to those
shareholders on the register on the 27 September 2019. It will
bring the total dividend in respect of the financial year to 1.80
EURcent per share, against 1.65 EURcent per share last year, an
increase of 9%.
Brexit
The United Kingdom is due to leave the EU on the 29 March 2019.
It is difficult to pin point any direct impacts from the ongoing
Brexit discussions other than to say they are hardly positive for
business generally. However, our balance sheet is in excellent
shape and leaves us well positioned to benefit from any disruption
and consequent opportunity which may arise.
On behalf of the board, I would like to thank the management
team and staff for their commitment and contribution in 2018.
Ted O'Neill
Chairman
Financial Review
The average occupancy increased from 92% to 94%.
The significant feature of the year was the improvement of the
profitability and returns at our cold stores.
Sales
Total Group revenue decreased by 12.4% to GBP36.8m (2017:
GBP42.0m). Cold store revenues decreased by 4% to GBP13.7m (2017:
GBP14.3m). Revenues were mainly down on the back of a reduction in
blast freezing volumes. Revenues in the sourcing division decreased
by 17.6% to GBP22.5m (2017: GBP27.2m). Townview Foods mainly
accounted for the decreased sales.
Gross profit
Gross profit increased by 5% to GBP2.93m (2017: GBP2.78m).
Operating profit
Operating profit increased by 14% to GBP2.12m (2017:
GBP1.86m).
Finance expense (net)
Finance expense decreased to GBP0.19m (2017: GBP0.21m).
Loss from discontinued operations
During the year the group decided to exit the Juice business for
the ready to drinks market. A loss of GBP0.38m was incurred,
compared to GBP0.1m last year.
In 2016, the Group exited the FMCG market and recorded a loss of
GBPnil during 2018 (2017: GBP0.1m).
Earnings per share
The basic adjusted earnings per share increased by 22% to 5p
(2017: 4.1p).
Capital
During the period we invested GBP1.16m (2017: GBP1.82m),
GBP0.33m in the dairy farm in Kilkenny and GBP0.83m in routine
capital expenditure in the cold store division.
Cash Position
Net debt decreased to GBP4.9m (2017: GBP5.4m). Cash generated
from operations amount to GBP2.2m (2017: GBP2.5m) and financing
activities absorbed GBP0.9m (2017: GBP1.1m). Investment in assets
was made of GBP1.3m (2017: GBP1.9m).
Dividend
The board recommends the payment of a final dividend of 1.80
EURcent per share. This will be paid on 18 October 2019 to those
shareholders on the register on the 27 September 2019. It will
bring the total dividend in respect of the financial year to 1.80
EURcent per share, against 1.65 EURcent per share last year, an
increase of 9%.
Treasury policy and management
The treasury function, which is managed centrally, handles all
Group funding, debt, cash, working capital and foreign exchange
exposures. Group treasury policy concentrates on the minimisation
of risk in all of the above areas and is overseen and approved by
the Board. Speculative positions are not taken.
Financial risk management
The Group's financial instruments comprise borrowings, cash,
derivatives, and various items, such as trade receivables, trade
payables etc., that arise directly from its operations. The main
purpose of the financial instruments not arising directly from
operations is to raise finance for the Group's operations.
The Group may enter into derivative transactions such as
interest rate swaps, caps or forward foreign currency transactions
in order to minimise its risks. The purpose of such transactions is
to manage the interest rate and currency risks arising from the
Group's operations and its sources of finance.
The main risks arising from the Group's financial instruments
are interest rate risk and, liquidity risk. The Group's policies
for managing each of these risks are summarised below.
Interest rate risk
The Group finances its operations through a mixture of retained
profits, bank and other borrowings at both fixed and floating rates
of interest, and working capital. The Group determines the level of
borrowings at fixed rates of interest having regard to current
market rates and future trends. At the year-end there are, GBP2.2m
term loans of which, GBP1.96m are at floating base rate plus a bank
margin of 1.85% and GBP0.24m are at a floating rate of 3.75%.
Liquidity risk
The Group's policy is that, in order to ensure continuity of
funding, a significant portion of its borrowings should mature in
more than one year. At the year-end, 73% of the Group's borrowings
were due to mature in more than one year. The Group achieves
short-term flexibility by means of invoice finance and
overdraft.
Aidan Hughes
Finance Director
Consolidated STATEMENT OF COMPREHENSIVE INCOME
for the financial year ended 31 December 2018
2018 2017
GBP'000 GBP'000
Continuing operations
Revenue 36,802 42,012
Cost of sales (33,871) (39,233)
Gross profit 2,931 2,779
------------- --------
Other income 43 66
Deferred consideration - (100)
Administrative expenses (851) (889)
Operating profit from continuing
operations 2,123 1,856
------------- --------
Finance income - fair value gain
on swaps - 10
Finance income - interest receivable 3 1
Finance expenses - interest paid (187) (201)
Finance expenses - notional interest - (13)
Profit on continuing activities before
taxation 1,939 1,653
------------- --------
Income taxes - Corporation tax (393) (413)
Income taxes - Deferred tax (46) (28)
Profit for the financial year from
continuing operations 1,500 1,212
Loss from discontinued operations (379) (219)
Profit for the financial year attributable
to
owners of the parent 1,121 993
Other comprehensive income - -
------------- --------
Total comprehensive income for the
year attributable to owners of the
parent 1,121 993
============= ========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the financial year ended 31 December 2018
2018 2017
Earnings per share expressed in pence
per share:
From continuing operations
- basic 5.0p 4.1p
- diluted 5.0p 4.1p
From discontinued operations
- basic (1.3)p (0.7)p
- diluted (1.3)p (0.7)p
Consolidated Statement of financial position
at 31 December 2018
2018 2017
GBP'000 GBP'000
Non current assets
Goodwill 2,338 2,338
Intangible assets 166 141
Property, plant and equipment 18,125 17,759
Biological assets 639 624
21,268 20,862
------- -------
Current assets
Trade and other receivables 6,250 7,537
Inventories 624 709
Cash and cash equivalents 1,543 1,558
Assets of disposal group classified
as held for sale 324 279
8,741 10,083
------- -------
TOTAL ASSETS 30,009 30,945
------- -------
Equity attributable to equity holders
of the parent
Share capital 5,640 5,616
Share premium account 7,321 7,281
Other reserves 103 103
Treasury shares (563) (563)
Retained earnings 4,224 3,516
------- -------
TOTAL EQUITY 16,725 15,953
------- -------
Non-current liabilities
Borrowings 1,787 2,390
Deferred tax 999 953
2,786 3,343
------- -------
Current liabilities
Trade and other payables 5,446 6,680
Financial liabilities at fair value
through profit or loss - 29
Current tax liabilities 390 367
Borrowings 4,647 4,555
Liabilities of disposal group classified
as held for sale 15 18
10,498 11,649
------- -------
TOTAL EQUITY AND LIABILITIES 30,009 30,945
------- -------
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2018
Non-
Share Share Other Treasury Retained Controlling Total
capital premium Reserves shares earnings Total interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 5,616 7,281 23 (563) 2,926 15,283 (22) 15,261
------- ------- -------- -------- -------- ------- ----------- -------
Net profit for the
financial year - - - 993 993 - 993
------- ------- -------- -------- -------- ------- ----------- -------
Total comprehensive
income for the financial
year - - - - 993 993 - 993
Issue of share capital - - - - - - - -
Equity dividends
paid (recognised
directly in equity) - - - - (381) (381) - (381)
Foreign exchange
gain - - 80 - - 80 - 80
Minority Interest
acquired - - - - (22) (22) 22 -
------- ------- -------- -------- -------- ------- ----------- -------
Transactions with
owners - - 80 - 590 670 22 692
At 31 December 2017 5,616 7,281 103 (563) 3,516 15,953 - 15,953
------- ------- -------- -------- -------- ------- ----------- -------
Net profit for the
financial year - - - 1,121 1,121 - 1,121
------- ------- -------- -------- -------- ------- ----------- -------
Total comprehensive
income for the financial
year - - - 1,121 1,121 - 1,121
Issue of share capital 24 40 - - 64 - 64
Equity dividends
paid (recognised
directly in equity) - - - (413) (413) - (413)
Foreign exchange
gain - - - - - - - -
Minority Interest
acquired - - - - - - - -
Transactions with
owners 24 40 - - 708 772 - 772
At 31 December 2018 5,640 7,321 103 (563) 4,224 16,725 - 16,725
======= ======= ======== ======== ======== ======= =========== =======
Consolidated Cash Flow Statement
for the financial year ended 31 December
2018 2018 2017
GBP'000 GBP'000
Profit on continuing activities before
taxation 1,939 1,653
Gain on biological assets (43) (66)
Amortisation of intangible assets 141 6
Foreign exchange (loss)/gain (23) 63
Loss on discontinued activities (379) (219)
Deferred consideration - 100
Finance expenses 187 214
Finance income (3) (11)
Depreciation - property, plant and
equipment-net 812 709
2,631 2,449
Changes in working capital and provisions:
(Decrease)/increase in inventories 85 (226)
Decrease/(increase) in trade and other
receivables 1,287 (854)
Decrease/(increase) in current assets
held for sale (45) -
(Decrease)/Increase in current liabilities
held for sale (3) 11
(Decrease) /Increase in payables (1,234) 1,598
Cash generated from operations 2,721 2,978
Interest paid (187) (201)
Interest received 3 1
Taxation paid (370) (251)
------- -------
Net cash generated from operating activities 2,167 2,527
------- -------
Investing activities
Investment in intangible assets (166) (82)
Purchase of property, plant and equipment (1,160) (1,816)
Sale of biological assets 68 -
Purchase of biological assets (35) (19)
------- -------
Net cash used in investing activities (1,293) (1,917)
------- -------
Financing activities
Dividends paid to shareholders (413) (381)
Deferred consideration payments (29) (372)
Share issue proceeds 64 -
Invoice finance receipts 551 487
Overdraft repayments (210) (94)
Finance lease capital repayments (216) (189)
Term loan advance 2,200 266
Finance lease advance 73 24
Term loan repayments (2,909) (837)
------- -------
Net cash outflow from financing activities (889) (1,096)
------- -------
Net decrease in cash and cash equivalents (15) (486)
------- -------
Cash and cash equivalents and bank
overdrafts,
Beginning of period 1,558 2,044
Cash and cash equivalents end of period 1,543 1,558
------- -------
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END
FR JRMFTMBBMBPL
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