RGD.L Regulatory News (RGD)

27 Jul 2005 07:01

Napier Brown Foods PLC27 July 2005 FOR RELEASE7.00 AM27 JULY 2005 Napier Brown Foods plc ("Napier Brown Foods" or "the Company")(Largest independent sugar merchant in the UK and supplier of sugar, value-added sugar, nut products, dairy powders and associated food products) AUDITED PRELIMINARY RESULTS FOR THE 53 WEEK PERIOD ENDED 3 APRIL 2005 * Second set of results since admission to AIM * Turnover of £270 million * Operating profit before goodwill amortisation, exceptional items and additional administrative costs associated with the delay in the integration of James Budgett Sugars Limited costs of £10.6 million * Operating profit, for the period, of £5.9 million * Profit before tax of £3.12 million * Second interim dividend proposed of 2p per share (total for the year 3p) * Successful acquisition and integration into Napier Brown & Company of: o James Budgett Sugars Limited o Renshaw Scott Limited * Recommended all share offer from The Real Good Food Company Further enquiries Napier Brown Foods plcChris Thomas (Chief Executive) 020 7335 2500Simon Barrell (Finance Director) 020 7335 2500 Beattie FinancialBrian Coleman-Smith / Jo Clewlow / Tim Pilgrim 020 7053 6400 Background note: Napier Brown Foods is the holding company of a group of companies which isfocussed on the supply of sugar, value-added sugar and nut products and dairypowders and associated food products. Napier Brown Foods trades trades throughits subsidiary, Napier Brown & Company which, in turn, operates Garrett, Sefcoland James Budgett, together with the business acquired from Renshaw Scott, intwo trading divisions, the Ingredients and Renshaw divisions. Napier Brown & Company, including the James Budgett business, is the largestindependent, non-refining, distributor of sugar in the UK. It also suppliessugar, dairy products, blends and associated ingredients to the food industry.Through its Renshaw division, it is a supplier of value-added sugar and nutproducts. The Renshaw Scott business, part of the Renshaw division, is the UK'sleading manufacturer of marzipans, for the retail and industrial sectors andalso a manufacturer of ready to roll icings, baking chocolate and jam to theindustrial sector. Napier Brown Foods' Group administrative headquarters is based in St Katharine'sDock on the edge of the City of London. Napier Brown & Company's Ingredients division operates from a freehold factoryand rented warehouse space in Normanton, near Leeds, where it mills, sieves andpacks brown and white sugars and provides a blending facility for the Group andits customers and from a sales office in Thornbury (ex Garrett). The Renshaw division operates from Runcorn, Cheshire, where it manufactures itsrange of products from a freehold factory with associated warehousing and theRenshaw Scott business operates from two factories in Liverpool and Carluke,Scotland. Chairman's Statement It gives me great pleasure to present the group's first set of full year resultsfor the 53 week period ended 3 April 2005. We have had a busy year and, as I reported in the interim statement, much hasbeen achieved. The integration of the three companies purchased at the time of the flotation into Napier Brown & Company ("NBC") was completed at the end of last year andtherefore these results include a full year of trading as one company. Thebenefits of the integration are continuing to accrue as the businesses work moreclosely together selling a broader range of products across a larger customerbase. This was followed by the acquisition of James Budgett Sugars Limited ("JBS") on7 July 2004 for £17.4 million. JBS has been a supplier of sugar in the UK since1857 and its addition to the group expands our sugar operations. At the time ofthe interim report I reported that we had planned to integrate JBS into NBCimmediately but this plan was delayed by the decision of the Office of FairTrading to refer the merger to the Competition Commission. I am pleased toreport that, in March 2005, the Competition Commission allowed us to continuewith our acquisition of JBS. Following the announcement, we have within a veryshort space of time, closed all of JBS's operations and integrated them into theIngredients division of NBC. As previously announced, the delay in integratingJBS has resulted in additional administrative costs of £0.6 million in the yearunder review. On 2 September 2004, the Company acquired the trade and certain assets ofRenshaw Scott Limited ("Renshaw"), which has two manufacturing sites, Liverpooland Carluke. At the Liverpool site the company manufactures icings and marzipanfor the baking industry. These operations were very similar to those performedat our Runcorn production site and on 30 September 2004 we announced that themajority of the Runcorn site would be closed, leaving only nut production in adedicated plant, while all manufacturing of icings and marzipan would betransferred to the Liverpool site. The transfer of the Runcorn business was inaccordance with the Board's action plan and all production has now beentransferred to the Liverpool site. The freehold manufacturing units at Runcorn,which previously housed those activities that have now been moved to theLiverpool site, is currently being actively marketed and a number of partieshave shown interest. The Board have received an offer of £2.2 million for theseunits. As a result of bringing together the two businesses at the Liverpool sitethe Board expects significant production efficiencies to emerge over the coming12-18 months. The Carluke site manufactures baking chocolate and retail jams and remains astandalone production unit. Greater focus has been given to the site since ouracquisition and I look forward to reporting increased levels of business fromthis site together with the launch of new product ranges in my next statement. Following the acquisition of Renshaw we have formed two divisions within NBC,the Ingredients and Renshaw divisions, both of which work closely together. Thecreation of two divisions is for operational purposes only. We continue to haveone business activity being the supply of sugar related products to the foodindustry. I am delighted to propose a second interim dividend of 2 pence per share whichwill be payable on 31 August 2005, to those shareholders on the register on 5August 2005. This will bring the total dividend payable for the year to 3 penceper share which is in line with our stated policy (based on the Company'snormalised profit) at the time the Company was admitted to trading on AIM. Trading Results The trading results for the 53 week period ended 3 April 2005 were in line withmanagement expectations showing a profit before exceptional items and taxationof £4.8 million (2004: £1.2 million). Exceptional items in the period, whichrelated to costs of reorganising the business and closure of an acquiredbusiness, amounted to £1.7 million (2004: £0.4 million). Operating profit before exceptional items, the additional JBS costs andamortisation of goodwill for the 53 week period ended 3 April 2005 was £10.6million (2004: £1.9 million) as follows: 2005 2004 £'million £'million Operating profit 5.9 1.1Amortisation of goodwill 2.4 0.4Exceptional items 1.7 0.4JBS additional costs 0.6 - --------- -------- 10.6 1.9 ========= ======== The comparative figures are for the period from 7 July 2003 and only includeNBC's trading results for the period from 18 December 2003. The results for the53 week period ended 3 April 2005 show a full year of NBC's trading togetherwith two significant acquisitions. Consequently, the group has changedsignificantly in the last year and as such the Directors no longer consider itappropriate to include a pro forma profit and loss account. The basic earnings per share for the year under review rose from 4.56 pence to4.78 pence. Before taking into account amortisation of goodwill, the basicearnings per share was 13.74 pence (2004: 9.47 pence) and before goodwillamortisation and exceptional items basic earnings per share was 20.21 pence(2004: 13.91 pence). The gearing of the group at the year end was 168 per cent. This has continued ata high level in part due to the additional costs associated with the CompetitionCommission Inquiry and as stated in previous reports the Board had not expectedany significant change in the levels of gearing by the year end. In the period under review the business has generated an operating cash flow(before financing costs) of £8 million. The group continues to be cashgenerative and this along with further facilities available will enable thegroup to manage its debt and reduce gearing levels in the future. Interest cover for the 53 week period ended 3 April 2005 was 2.9 times operatingprofit before amortisation of goodwill (2004: 4.8 times). Hedging Following a review of the previous hedging arrangements the company has takensteps to hedge its interest rate exposure on borrowings. During the period thecompany entered into two interest rate swaps, which cover £36 million of thegroups borrowing. Staff I started my statement by saying it has been an exceptionally busy time for thegroup and how much has been achieved in the last year. It is a credit to ourstaff that so much has been achieved in such a short period and I would like tothank them for their efforts over the year. Outlook Current trading is in line with management expectations. The group now has a 'clear run' ahead of it. The integration of all theacquisitions has been completed and a structure is now in place to enable theboard to operate the group more efficiently. Consequently, the Board believesthat we can now more readily take advantage of the production synergies and thecross selling opportunities offered by the enlarged group. The Company announced on 27 June 2005 that the European Commission has announcedits proposals for the reform of the EU sugar regime. In summary, the EUCommission proposes to reduce EU sugar production over a four year period,commencing in July 2006. Consequently, it is expected that EU prices willeventually be 39 per cent. lower than current pricing levels, which would bringthem more into line with world market levels. As a result of the changes, the Board expects that certain EU producers andrefiners will cease to trade, while others have acknowledged that their profitmargins will be reduced. Furthermore, these changes are expected to increase theamount of imported sugars from the developing world to compensate for theproposed reduction in EU sugar production. The Company welcomes these proposed changes and the Board believes they willstrengthen its position in the sugar market, particularly as the Company is nota sugar refiner and sources its sugars from a number of producers. Earlier today, The Real Good Food Company plc ("RGFC") announced the terms of anall share recommended offer for the Company. As you will have read in theCompany's AIM prospectus and my previous statements it was always the intentionof the Company to seek to broaden its base into valued added areas within thefood industry. This offer, given the trading activities of RGFC, will allow usto follow our stated strategy and enable shareholders to hold shares in abroader based food group. If our shareholders decide to accept the offer, as I and my family interestshave undertaken to do, I look forward to working closely with the managementteam of RGFC. Shareholders will note that under the terms of the offer Christopher Thomas andI will remain actively involved at board level to oversee the integration of thetwo businesses and the development of the trading activities of the enlargedgroup. P G Ridgwell Consolidated profit and loss accountFor the 53 week period ended 3 April 2005 Notes 2005 2004 £'000 £'000 TurnoverContinuing operations 186,887 49,151Acquisitions 83,098 - -------- -------- 269,985 49,151Cost of sales 2 (251,578) (45,877) -------- --------Gross profit 2 18,407 3,274Administrative expenses (net) 2 (10,077) (1,737)Amortisation of goodwill 2 (2,379) (429) -------- --------Operating profitContinuing operations 2 3,267 1,108Acquisitions 2 2,684 - -------- -------- 5,951 1,108Finance charges (net) (2,835) (320) -------- --------Profit on ordinary activities before taxation 3,116 788Tax on profit on ordinary activities 3 (1,847) (389) -------- --------Profit on ordinary activities after taxation 1,269 399Dividends payable 4 (847) - -------- --------Profit for the financial year retained andtransferred to reserves 422 399 ======== ========Earnings per shareBasic 5 4.78p 4.56pDiluted 5 5.00p 3.42p ======== ========Earnings per share before goodwill amortisationBasic 5 13.74p 9.47pDiluted 5 12.41p 7.12p ======== ========Earnings per share before goodwill amortisation andexceptional itemsBasic 5 20.21p 13.91pDiluted 5 17.76p 10.46p ======== ======== There are no recognised gains and losses in the year other than as shown in theprofit and loss account. All amounts relate to continuing operations and include the results of theacquisitions during the year. Consolidated balance sheet 3 April 2005 Notes 2005 2004 Restated (Note 6) £'000 £'000Fixed assetsIntangible assets 6 52,833 32,305Tangible assets 15,032 9,499 -------- -------- 67,865 41,804 -------- --------Current assetsStocks 8,856 5,917Debtors 29,312 19,972Cash at bank and in hand 2,973 784 -------- -------- 41,141 26,673Creditors: Amounts falling due within one yearOther creditors (45,029) (20,250) -------- --------Net current (liabilities)/assets (3,888) 6,423 -------- --------Total assets less current liabilities 63,977 48,227 -------- --------Creditors: Amounts falling due after more than oneyearConvertible debt (2,774) (9,274)Other creditors (27,200) (12,000) -------- -------- (29,974) (21,274) -------- --------Provisions for liabilities and charges (1,825) (2,000) -------- --------Net assets 32,178 24,953 ======== ======== Capital and reservesCalled up share capital 14,124 11,414Share premium account 5,849 4,958Merger reserve 11,384 8,182Profit and loss account 821 399 -------- --------Total equity shareholders' funds 32,178 24,953 ======== ======== Consolidated cash flow statementFor the 53 week period ended 3 April 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 8,009 683Returns on investments and servicing of finance (1,933) (320)Taxation (2,114) (456)Capital expenditure and financial investment (413) (286)Acquisitions and disposals (28,994) (20,668)Equity dividends paid (282) - -------- --------Cash outflow before financing (25,727) (21,047)Financing 14,647 21,554 -------- --------Increase in cash in the financial year (11,080) 507 ======== ======== 2005 2004 £'000 £'000 (Decrease)/increase in cash in the financial year (11,090) 507Cash inflow from increase in loans (15,200) (12,000) -------- --------Change in net debt resulting from cash flows infinancial year (26,290) (11,493)Loan notes issued (non-cash movement) - (15,774)Deferred consideration (non-cash movement) (500) -Finance leases paid/(acquired) 10 (10) -------- --------Movement in net debt in financial year (26,780) (27,277)Net debt at 28 March 2004 (27,277) - -------- --------Net debt at 3 April 2005 (54,057) (27,277) ======== ======== Reconciliation of operating profit to cash flows 2005 2004 £'000 £'000 Operating profit 5,951 1,108Depreciation 1,399 327Amortisation 2,379 429Profit on sale of tangible fixed assets (8) (2)Decrease in stocks 1,297 943Decrease/(increase) in debtors 2,626 (105)Decrease in creditors (5,635) (2,017) -------- --------Net cash inflow from operating activities 8,009 683 ======== ======== Analysis of cash flows 2005 2004 £'000 £'000Returns on investments and servicing of financeInterest received 376 10Interest paid (2,309) (330) -------- --------Net cash outflow (1,933) (320) ======== ========TaxationUK corporation tax paid (2,114) (456) -------- --------Net cash outflow (2,114) (456) ======== ========Capital expenditure and financial investmentPurchase of tangible fixed assets (625) (290)Sale of tangible fixed assets 212 4 -------- --------Net cash outflow (413) (286) ======== ========Acquisitions and disposalsPurchase of subsidiary undertaking (28,141) (20,000)Fees in respect of purchase (2,800) (679)Net cash acquired with subsidiary undertakings 1,947 11 -------- --------Net cash outflow (28,994) (20,668) ======== ========FinancingIssue of ordinary share capital 6,803 24,554Less shares issued for acquisition (6,705) (15,000)Net medium term bank loans 14,549 12,000 -------- --------Net cash inflow 14,647 21,554 ======== ======== Companies acquired in the year contributed £76,000 to the group's net operatingcash flows, paid £1,018,000 in respect of taxation and utilised £407,000 forcapital expenditure. Analysis and reconciliation of net debt 28 Mar Cash Other non-cash 3 April 2005 changes 2004 Flow £'000 £'000 £'000 £'000 Cash in hand, at bank 784 2,189 - 2,973Overdrafts (277) (13,279) (500) (14,056) -------- -------- -------- -------- 507 (11,090) (500) (11,083) -------- -------- -------- --------Debt due after 1 year (21,274) (15,200) 6,500 (29,974)Debt due within 1 year (6,500) - (6,500) (13,000)Finance leases (10) 10 - - -------- -------- -------- --------Net debt (27,277) (26,280) (500) (54,057) ======== ======== ======== ======== NOTES TO THE PRELIMINARY RESULTS 1 Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The Group balance sheet at 3 April 2005 and the Group profit and loss account,Group cash flow statement and associated notes for the 53 week period then endedhave been extracted from the Group's annual report and financial statements.These will be delivered to the Registrar of Companies following the Company'sannual general meeting. The auditors have reported on the financial statementsfor the 53 week period ended 3 April 2005; their report was unqualified and didnot contain statements under s237 (2) or (3) Companies Act 1985. The balancesheet has been restated for a reclassification of reserves and the inclusion ofthe pension deficit acquired at the time of acquisition of the Napier Browncompanies (note 6). 2. Cost of sales, gross profit and administrative expenses (net) In relation to the acquisition of James Budgett Sugars Limited and Renshaw Scottcontinuing operations in the 53 week period ended 3 April 2005 include cost ofsales £78,023,000, gross profit £9,444,000 and net administrative expenses£2,395,500 and operating profit of £2,684,000. Included within administrative expenses are the following exceptional operatingitems in respect of the acquisitions during the year: The exceptional items relate to: 2005 2004 £'000 £'000 Reorganisation of the business 1,286 389Costs of closure of acquired business 433 - -------- -------- Total 1,719 389 ======== ======== In addition, included within administrative expenses are operational runningcosts of James Budgett Sugars Limited which was acquired during the year and wassubject to Competition Commission clearance which delayed the integration of thebusiness into the Ingredients division. Operating costs incurred between October2004 and 3 April 2005 were £598,000. 3 Tax on profit on ordinary activities The tax charge comprises: 2005 2004 £'000 £'000Current taxUK corporation tax 1,189 308Adjustments in respect of prior periods 21 - -------- -------- 1,210 308 -------- --------Deferred taxOrigination and reversal of timing differences 637 81 -------- --------Total deferred tax 637 81 -------- --------Total tax on profit on ordinary activities 1,847 389 ======== ======== The differences between the total current tax shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profitbefore tax is as follows: 2005 2004 £'000 £'000 Group profit on ordinary activities before tax 3,116 788 ======== ======== The group earns its profits primarily in the UK. Therefore the tax rate used fortax on profit on ordinary activities is the standard rate for UK corporationtax, currently 30% (2004: 30%). The group's planned level of capital investment is expected to remain at similarlevels to the current year. Therefore, it expects to be able to claim capitalallowances in excess of depreciation in future years, at a similar level to thecurrent year. 2005 2004 £'000 £'000Tax on group profit on ordinary activities at standard UKcorporationtax rate of 30% 935 237Effects of:Goodwill and other non deductible items 726 174Capital allowances in excess of depreciation (232) (103)Short term timing differences (240) -Over provision in prior years 21 - -------- --------Group current tax charge for year 1,210 308 ======== ======== 4. Dividend paid and proposed 2005 2004 £'000 £'000Equity shares- interim paid of 1p per ordinary share 282 -- proposed second interim of 2p per ordinary share 565 - -------- -------- 847 - ======== ======== 5. Earnings per share Earnings per share is calculated on the basis of profit for the year of£1,269,000 (2004: £399,000) divided by the weighted average number of shares inissue for the 53 week period to 3 April 2005 of 26,548,367 (2004 8,746,799). The diluted earnings per share is calculated on the assumption all options andwarrants granted were exercised and that all convertible loan notes areconverted. This would give rise to a total weighted average number of ordinaryshares in issue for the year of 32,125,281 (2004: 11,633,107) The profit for thediluted earnings per share is based on the profit for the 53 week period to 3April 2005 of £1,269,000 and adding back interest on the convertible loan notes(based on the assumption that they had converted at the beginning of the period)of £338,000 giving a total profit of £1,607,000 (2004: £399,000). The directors present the basic and diluted earnings per share on the profit forthe financial year before goodwill amortisation and exceptional items; beforegoodwill amortisation and without adjustment as follows: Basic Basic Diluted Diluted -------- -------- -------- -------- 2005 2004 2005 2004 £'000 £'000 £'000 £'000 Profit for thefinancial yearbeforegoodwillamortisationandexceptionalitems 5,367 1,217 5,705 1,217 -------- -------- -------- --------Profit for thefinancial yearbeforegoodwillamortisation 3,648 828 3,986 828 -------- -------- -------- --------Profit for thefinancial year 1,269 399 1,607 399 -------- -------- -------- -------- Basic earnings Basic earnings Diluted Diluted per share per share earnings per earnings per share share 2005 2004 2005 2004 Earnings pershare beforegoodwillamortisationandexceptionalitems 20.21p 13.91p 17.76p 10.46p -------- -------- -------- --------Earnings pershare beforegoodwillamortisation 13.74p 9.47p 12.41p 7.12p -------- -------- -------- --------Earnings pershare 4.78p 4.56p 5.00p 3.42p -------- -------- -------- -------- 2005 2004 Number of Number of shares shares Weighted average number of shares:For basic earnings per share 26,548,367 8,746,799Exercise of warrants 418,648 46,634Exercise of share options 185,661 99,659Convertible loan notes 4,972,605 2,740,015 ---------- ----------For diluted earnings per share 32,125,281 11,633,107 ========== ========== The earnings per share for 2004 is based on results for the period fromincorporation which only include the trading companies' results from 18 December2003 to 28 March 2004. In addition, the weighted average number of shares for 2004 reflects the issueof shares on 18 December 2003 only weighted for the period from incorporation to28 March 2004. The calculation does not therefore reflect a full year's earningper share in issue. 6 Intangible fixed assets - goodwill 2005 £'000CostAt 29 March 2004 31,334Prior year adjustment 1,400 --------As restated 32,734Additions 22,780Additional costs in respect of previous acquisitions 127 --------At 3 April 2005 55,641 --------AmortisationAt 29 March 2004 429Charge for the year 2,379 --------At 3 April 2005 2,808 --------Net book valueAt 29 March 2004 as restated 32,305 ========At 3 April 2005 52,833 ========The restated pension deficit relates to the inclusion of the Defined Benefitpension schemes deficit acquired at the time of the acquisition of the NapierBrown companies of £2.0 million net of deferred tax of £0.6 million. 7 Copies of reports and accounts Copies of the Report and Accounts will be sent to shareholders shortly and willbe available to members of the public from the Company's registered office,International House, 1 St Katharine's Way, London E1W 1XB. 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