Preliminary Results

Norish plc

Preliminary results 2019

Norish plc (AIM: NSH), is pleased to announce its results for the year ended 31 December 2019.

Financial Highlights

· Profit before tax increased by 20% to £2.4m (2018: £2m)

· Diluted adjusted Eps increased by 28% to 6.57p (2018: 5.13p)

· Group revenue decreased by 0.8% to £36.5m (2018: £36.8m)

· Operating margins increased to 7.5% (2018: 6.5%)

· Dividend increased by 5.6% to 1.90 €cent (2018: 1.80 €cent)

· Net debt was reduced from Stg£10.5m at start of year to Stg£9.7m at year end.

· Interest cover has increased to 7.9 times (2018: 6.1 times)

Diluted adjusted EPS is calculated using profit for the financial year from continuing operations as the measure of earnings. Comparative financial information has been restated following the adoption of IFRS 16 Leases.

Divisional Highlights

Cold Store division

Cold Stores, which comprise by far our largest business activity saw sales increase by 10.2% or £1.4m, from £13.7m to £15.1m. This growth in revenue, saw divisional profits grow by 13.8%, from £2.9m to £3.3m.

The drivers of the growth in revenue, comprise a 6% increase in pallets handled, a 14% increase in blast frozen throughput, an improved stock turn (from 7.0 weeks to 6.6 weeks) and a slightly higher occupancy level. Occupancy increased from 94% in 2018, to 95% in 2019.

Power units consumed were higher by 1%, a creditable performance in the context of 14% growth in blast freezing volumes. 

Sourcing Division

Sales at our sourcing division declined by 8.4% in 2019, compared with the same period in 2018, from £22.5m to £20.6m. Operating profit declined by a corresponding 33.3%, from £0.6m to £0.4m, reflecting trading uncertainty and currency fluctuations arising from the ongoing Brexit process.

The Group's original investment in the main Sourcing subsidiary, Townview Foods, has been fully recouped and the structures are in place to continue to develop this business.

Dairy Division

Our investment in dairy, whilst still in the development stage, is progressing well.

Cantwellscourt Farm's operating performance in 2019 was much improved on the prior year. Milk production was 56% ahead year on year, reflecting underlying improvement across the key operating metrics; production per cow, pasture grown and herd fertility. In the second half of the year, we also completed the conversion of the herd to 100% A2-protein - the result of an intensive program of genetic testing. The cost of conversion has been expensed through the income statement of the dairy division.

Discontinued

During 2018 the group decided to exit the Juice business for the ready to drinks market. A loss in the current year of £0.13m was incurred, compared to £0.39m last year.

Outlook

Despite the uncertainty surrounding COVID-19 we remain optimistic for the year ahead.

Notwithstanding disruption in shipments to China year to date, we believe that activity in our cold store division will return to anticipated levels over the balance of the year. The fundamental market opportunity of facilitating exports of protein to China remains intact. Within our cold store business, our investment in robotics in the North West division is starting to deliver results.

Within our sourcing division we have added fish as a protein, and we expect to increase sales and improve on profitability.

Our subsidiary, Grass to Milk Company, remains on track to launch A2-protein based dairy products in targeted export markets in the second half of 2020. The business has allocated resources across technical, regulatory & nutrition workstreams along with investment in-market in order to successfully execute its commercial strategy. We believe the business is well placed to add value to our unique A2-protein milk supply. 

Dividend

The board recommends the payment of a final dividend of 1.90 €cent per share. This will be paid on 16 October 2020 to those shareholders on the register on the 25 September 2020. It will bring the total dividend in respect of the financial year to 1.90 €cent per share, against 1.80 €cent per share last year, an increase of 5.6%.

On behalf of the board, I would like to thank the management team and staff for their commitment and contribution in 2019.

Ted O'Neill

Chairman

The average cold store occupancy increased from 94% to 95%, pallets received increased 6% and blast freezing throughput increased 14%. The significant feature of the year was the improvement of the profitability and returns at our cold stores.

Sales

Total Group revenue decreased by 0.8% to £36.5m (2018: £36.8m). Cold store revenues increased by 10.2% to £15.1m (2018: £13.7m). Revenues were mainly up on the increase in pallets received and blast freezing volumes. Revenues in the sourcing division decreased by 8.4% to £20.6m (2018: £22.5m). Townview Foods mainly accounted for the decreased sales.

Gross profit

Gross profit increased by 8% to £3.44m (2018: £3.20m).

Operating profit

Operating profit increased by 15% to £2.74m (2018: £2.39m).

Finance expense (net)

Finance expense decreased to £0.35m (2018: £0.39m).

Loss from discontinued operations

During 2018 the group decided to exit the Juice business for the ready to drink market. A loss in the current year of £0.13m was incurred (2018: loss £0.39m).

Earnings per share

The basic adjusted earnings per share increased by 28% to 6.57p (2018: 5.13p).

Capital

During the period we invested £1.73m (2018: £2.74m) in capital assets, £0.58m was invested in robotics at the North West cold store division and the balance of £1.15m in other capital expenditure for the cold store division.

Cash Position

Net debt decreased to £9.7m (2018: £10.5m). Cash generated from operations amount to £3.5m (2018: £2.8m) and financing activities absorbed £1.8m (2018: £Nil). Investment in assets was made of £2.3m (2018: £2.9m).

Dividend

The board recommends the payment of a final dividend of 1.90 €cent per share. This will be paid on 16 October 2020 to those shareholders on the register on the 25 September 2020. It will bring the total dividend in respect of the financial year to 1.90 €cent per share, against 1.80 €cent per share last year, an increase of 5.6%.

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 purposes 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 £2.1m term loans of which £1.64m are at floating base rate plus a bank margin of 1.85% and £0.19m are at a floating rate of 3.75% and £0.25m are at Euribor plus a bank margin of 1.85%.

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 term loan 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 2019

at 31 December 2019

Consolidated Statement of Changes in Equity

For the financial year ended 31 December 2019