RNS Number:6503S
Richmond Foods PLC
01 December 2003
Richmond Foods
Press Release
IMMEDIATE, Monday, 1 December 2003
Preliminary results for the 52 weeks ended 28 September 2003
Financial highlights (figures in #000s)
28 Sep 29 Sep +/- on
2003 2002 2002
Turnover 127,232 116,699 + 9.0%
Operating profit* 12,290 10,239 + 20.0%
Interest* 1,782 2,032 - 12.3%
Profit before tax * 10,508 8,207 + 28.0%
Earnings per share (pence) 33.6 27.1 + 24.0%
Dividend per share (pence) 6.0 4.5 + 33.3%
Interest cover (times)* 6.9 5.0 + 38.0%
* pre - LTIP and exceptionals
* Profit before tax* up 28% this year and 109% since 2001.
* Richmond has continued to increase its share of the UK market,
which grew 6.4% during the year.
* The company's share of the take home market, which accounts for
approximately 80% of the company's sales, increased to 27.7% from 24.8% during
the key 12 week summer period.
* Implementation of the 3-year #27million investment programme
continued successfully without disrupting production which reached record
levels.
* Year-end gearing fell from 96% to 59% after funding capital
expenditure of #11.7 million.
* The acquisition since the year end of Oldfields, for #3.95million,
is expected to enhance earnings for the current year.
Ross Warburton, Chairman of Richmond Foods, said: "This has been another year of
impressive growth at Richmond. We look forward to continuing to grow market
share over the next twelve months and to make further progress towards our
strategic goal of being the UK's leading ice cream manufacturer by value."
For further information contact:
James Lambert
Chief Executive, Richmond Foods plc
Mobile: 07850 702042
Andy Finneran
Finance Director, Richmond Foods plc
Mobile: 07860 414490
Simon Bloomfield or Ian Seaton
Bankside Consultants
Tel: 020 7444 4140
Mobile: 07771 758517
Chairman's Report 2003
I am pleased to report on a further year of impressive growth at Richmond Foods.
Profit before taxation and LTIP charge, increased from #8.2 million to #10.5
million, a rise of 28 %, on turnover up 9.0% from #116.7 million to #127.2
million. The excellent performance in the second half reflected not only the
warm summer but also the market share gains in both our impulse and take home
businesses.
Basic earnings per share, before a net LTIP charge of #352,000, grew 24% from
27.1p to 33.6p. From the seasonal high of 164% at the interim stage, gearing
fell to 59% at the year-end from 96% last year, which was at the lower end of
our expectations.
Your Board is proposing a final dividend of 5.5p, making a total for the full
year of 6.0p, an increase of 33.3% on the 4.5p paid last year and covered over 5
times. The proposed final dividend will be paid on 3rd February 2004, if
approved at the AGM on 14th January 2004, to shareholders on the register at
12th December 2003.
As I said in my interim statement, our primary mission over the last twelve
months at Richmond has been to realise the organic growth potential of the
business and I believe that we have made a strong start to achieving this
objective. Market share in the largest part of our business, the take-home
market, rose from 24.8% to 27.7%. In the impulse sector, our share grew from
24.6% to 25.1% in a market boosted by July and August's fine weather.
Our commitment to improved service levels and our deliberate policy of
increasing stock levels earlier in the year meant that we were able to satisfy
the buoyant demand experienced during the hot summer months. However, this was
not the only contributor to our growth with the successful introduction of new
product lines, in both the individual ice cream and premium tub categories,
playing its part. We believe we have made significant strides in leveraging the
Nestle brand in this regard and there remains considerable scope for further
development in this and in our private label business.
The sales growth during the last twelve months has been underpinned by our #27
million capital investment programme, which is about to enter its third year. We
are now seeing this investment bear fruit in terms of our innovation capability
as well as improvements in efficiency and increased capacity at our two major
sites. This investment will see the introduction of two new major production
lines, one at Leeming Bar and the other at Crossgates during the early part of
2004.
In October 2003 we announced the #3.95 million acquisition of Oldfields, the
Sheffield based supplier of bulk ice cream to both the retail and foodservice
sectors. We expect this acquisition to enhance earnings in the current trading
period. This, together with our programme of new product launches planned for
next year, and the winning of significant new business at the end of the season,
leaves us optimistic for the company's prospects.
These excellent results would not be achieved were it not for the outstanding
efforts of all those who work at Richmond. I thank them, on your behalf, for all
their contributions this year which has helped make Richmond one of the most
successful food companies in the UK.
We expect to continue to increase our share of a growing market and to make
further progress towards our strategic goal of being the UK's leading ice cream
manufacturer by value. The Board looks forward to further achievement from your
company during the current year.
W R Warburton
Chairman
1st December 2003
Chief Executive's Review
Richmond continues to pursue its strategy to become "Number 1 supplier of ice
cream in the UK by value" having further consolidated its position, by volume,
during this financial year. This has shown sales rising by 9% and profit before
tax by 28%.
We have achieved this by growing our Nestle branded business by 28% and focusing
on the areas of growth in own label such as the dairy tub ice cream market.
Profitability further benefited from lower operating costs resulting from the
previous year's consolidation of sites.
On 2 October 2003, we bought Oldfields, a manufacturer of own label tub ice
cream. We are now transferring Oldfields' production to our existing factories,
resulting in higher capacity utilisation and a better return on fixed costs.
MARKETS
During the year, the total ice cream market grew by 6.4%. Despite a poor start,
sales were boosted by the hottest summer since 1995, particularly in the impulse
sector where sales were up 10.7%. The take home market, which accounts for
approximately 80% of our business and is less seasonal, grew by a more modest
4.3%.
TAKE HOME MARKET
This market grew by 12% during the key twelve week summer season but Richmond's
turnover rose by 25% during this period to achieve a 27.7% market share. This
reflects exceptional growth in the fast-growing premium tub market where we
increased sales by 89% in a market up 22%. The main contributors to this
increase were the successful launch of new own label lines with Sainsbury,
Safeway and the Coop, increasing sales of Asda Really Creamy and the launch of
the Nestle tub range.
The ice lollies sector, helped by the hot weather, showed strong growth of 27%
and Richmond grew 31% to achieve a 58% market share. This has been achieved by
increasing sales of Fab, Fruit Pastils, Ribena and Mivvi. Own label products
also continued to perform well.
From a small base, we grew our share of the take home individual ice cream
market, which accounts for 19% of the entire UK ice cream market. This sector
was up 1.5% in the summer season but we increased our sales by 50% resulting in
our share growing from 7.2% to 9.9%. This was helped by the launches of Milky
Bar and Smarties Soft and the re-launch of Rolo.
WRAPPED IMPULSE MARKET
This market has grown by 10.7% this year but only returned to the levels of 2000
which is still 40% below the peak year of 1995. Richmond increased its share
from 24.6% to 25.1% as the result of increased penetration of our Fab Five
brands, namely Fab, Rowntrees Fruit Pastil, Smarties Pop Up, Ribena and Mivvi.
We have also re-designed our Ice Creamery machines replacing 1,500 existing ones
and selling a further 1,500. This has resulted in almost doubling our prior year
sales. We will bring production in-house in the current trading year and plan to
develop some branded varieties to continue to grow this new market.
SCOOPING AND SOFT ICE CREAM
This market has shown growth of 7%, benefiting from the good summer. This
continues to be a very fragmented market often served by local manufacturers.
However we continue to offer our foodservice customers both own label products
and Mr Softee, La Cremeria and Napoli brands.
MARKETING AND INNOVATION
As a result of the Nestle acquisition and the appointment of Kate Needham as
Marketing Director, we have made significant strides forward in the marketing of
both our branded and own label products and gained a much better understanding
of the markets in which we compete. Our extensive consumer research has allowed
Richmond to better target its product launches so we have fewer but more
successful ones. This will be particularly important this year as we start to
launch new branded and own label products in cones, bars and the chocolate stick
markets, which will be manufactured as a result of our capital investment
programme.
We will continue to build on the successful innovation that we have seen in the
premium tubs market over the last 18 months. We have also added several new
senior technologists to the team and invested in improved facilities at
Leeming Bar to deliver new innovative products quicker to market.
SALES
Sales have improved by over 9% this year and over 44% over the past two years,
reflecting the benefits of the Nestle acquisition and the subsequent development
of its product range. Our strategy is to sell a wide range of branded and own
label products to a broad customer base. Our success is demonstrated by the fact
that our top five supermarket customers only account for 58% of total sales, and
the business is well positioned to continue this success after any further
industry consolidation.
Our sales margin stayed broadly flat despite higher promotional activity and
several Nestle branded products have been re-launched in September 2003 to
generate better margins for both us and our customers.
The sales team has been consolidated under the leadership of Mike Fraine into
our head office in Leeming Bar, allowing Richmond to exploit better the sales
opportunities resulting from supermarket retailers moving into garage forecourts
and convenience stores.
Service levels improved during the year and compared favourably to all UK ice
cream manufacturers during the summer heat wave. This has resulted in winning
some new business which will benefit the current year.
OPERATIONS
Production performance this year improved significantly with efficiency gains
achieved at all four sites. This led to an improvement in product quality and
service levels.
We have continued to implement our three-year capital expenditure programme and,
despite the disruption it caused, simultaneously reached record levels of
production. We are on target to complete, by March 2004, the installation of two
new mix plants, one at each of our two northern sites, as well as new cone, ice
cream bar and dairy lines. We have also upgraded and improved many other lines.
These new lines, used for both own label and branded products, will provide the
capacity for organic growth over the next two years as we target a 20% share of
the #200 million take home individual ice cream market. It is a great credit to
our colleagues at Richmond that production has not been interrupted whilst this
major exercise has been taking place.
DEVELOPING PEOPLE
The rapid growth being achieved by Richmond places major challenges on all our
employees. The new offices above the factory at Leeming Bar have brought a major
improvement in both efficiency of administration and improved communication.
Many high calibre new colleagues have joined Richmond during the year, bringing
new skills and improved team working.
We remain totally committed to training at all levels within Richmond using
Investors In People and National Vocational Qualifications as the main vehicles
for delivery.
OUTLOOK
This has been a good year for your company with the successful move to organic
growth and the proof that we can both manage brands and accelerate their rate of
sales growth.
On the back of the extensive capital investment programme we will introduce many
new branded and own label products this year to continue our organic growth. We
expect to continue to grow market share in a growing market and to make further
progress towards our strategic goal of being "The Number One Supplier of Ice
Cream in the UK".
J S Lambert
Chief Executive Officer
1st December 2003
FINANCIAL REVIEW
This has been another successful year for Richmond with profit before tax, LTIP
charges and exceptionals, up 28% to #10.5million from #8.2million.
CONSOLIDATED PROFIT AND LOSS ACCOUNT SUMMARY
(pre LTIP and exceptionals)
52 weeks 53 weeks 52 weeks 52 weeks 52 weeks
28 Sept 1 Oct 30 Sept 29 Sept 2002 28 Sept
1999 2000 2001 #'000 2003
#'000 #'000 #'000 #'000
Turnover 51,955 70,583 88,454 116,699 127,232
-------- -------- -------- --------- ---------
Gross Profit 13,383 17,724 21,694 30,510 33,215
25.8% 25.1% 24.5% 26.1% 26.1%
Overheads -9,362 -12,664 -14,936 -20,271 -20,925
-------- -------- -------- -------- --------
Operating 4,021 5,060 6,758 10,239 12,290
profit
Interest -998 -1,286 -1,738 -2,032 -1,782
-------- -------- -------- -------- --------
Profit before 3,023 3,774 5,020 8,207 10,508
tax ======== ======== ======== ======== ========
Operating 7.7% 7.2% 7.6% 8.8% 9.7%
margin
EBITDA 6,498 8,123 10,482 14,846 17,332
EBITDA margin 12.5% 11.5% 11.9% 12.7% 13.6%
Interest cover 4.0 3.9 3.9 5.0 6.9
Basic EPS (p) 10.1 13.0 16.5 27.1 33.6
Turnover has increased by 9% to #127.2 million from #116.7 million and with the
gross margin staying unchanged at 26.1%, the gross profit has increased by 9% to
#33.2 million.
As a result of the overheads increasing by only 3%, the operating profit has
increased by over #2 million to #12.3 million from #10.2 million, which is an
increase of over 20%. In addition, the operating margin has risen from 8.8% to
9.7%.
INTEREST
The fall in the interest charge by #250,000 to #1.78 million means that interest
cover is now almost 7 times. This reduction is down to a mixture of lower
interest rates and a fall in the average level of debt.
Last year the Board fixed the loan taken out to finance the acquisition in 2001
of the Allied Frozen Food ice cream business at 5.16%. However, the fall in base
rate during the year has had a favourable impact on the interest paid on the
overdraft and the variable rate loan. Whilst almost all year-end debt is fixed,
the variable rate debt increases with the seasonal working capital cycle and
represents around half of the peak level of debt. The Board is comfortable, for
the time being, with the company's level of interest rate exposure which it will
continue to review in the light of likely interest rates in the future.
CAPITAL EXPENDITURE
We have now completed the second year in our three-year capital programme. This
programme will facilitate a significant increase in our capacity and has already
facilitated innovation and will continue to generate efficiencies in overheads
and variable costs.
To date we have spent over #16 million and have approved further #8 million. It
is unlikely that expenditure this year will exceed that of 2003 (#11.7 million).
The depreciation charge rose from #4.1 million to #4.6 million and will rise
further when the assets are fully operational.
Acquisition of Oldfields Ice Cream Limited
On 2 October 2003, Richmond announced the acquisition of Oldfields Ice Cream
Limited for a net cash consideration of #3.95million financed from our existing
overdraft facility. Under the terms of the deal there was a back-to-back sale of
the Oldfields site in Sheffield to the vendors and, following a subsequent
consultation process, it was agreed to transfer production to existing Richmond
sites by the end of the 2003. Assets retained by Richmond consist of working
capital and plant and machinery. Oldfields' sales for the year to 31 December
2002 were #5.5 million and the Board expects the acquisition to enhance earnings
in the current year.
Taxation and earnings
The effective tax rate of 25.9% on profit before tax and LTIP charges compares
to 24.7% last year. This reflects the utilisation of tax losses which will
remain available for approximately 2 more years although, as a result of
goodwill arising on the Oldfields acquisition, the effective rate may be
slightly higher for the current financial year.
Basic earnings per share before LTIP charges have increased by 24% from 27.1p to
33.6p.
Total Shareholder Return
Last year, during the three-year period covered by the second tranche of
Richmond's Long Term Incentive Plan, Richmond shares outperformed a pre-defined
list of comparator companies quoted on the London Stock Exchange in the food
manufacturing sector. So far this year, and with approximately one month left of
the period covered by the third tranche, Richmond's total shareholder return has
outperformed all other comparator returns by a significant margin. Having also
similarly performed in the first tranche, Richmond has been the top performing
quoted small food company over the five years from 1998 - 2003. Furthermore, as
a reward for delivering real shareholder value over this period, over 260
employees have been given the opportunity to participate in this success.
The comparator groups in respect of the latest two tranches have been enlarged
to include all quoted food companies regardless of size.
LONG TERM INCENTIVE PLAN
Current/Final Final Award
From To TSR Position
Tranche 1 30/10/1998 30/10/2001 291.1 1st 100%
Tranche 2 17/12/1999 15/12/2002 486.9 1st 100%
Tranche 3 * 17/12/2000 17/09/2003 434.6 1st 100%
Tranche 4 * 24/01/2002 23/10/2003 153.0 10th 80%
* in progress and LTIP awards have been based on estimated final awards
(Tranche 5 is less than one year old and is not included.)
Dividends
A final dividend for the year of 5.5p is proposed. This would give a total
dividend for the year of 6.0p, a 33.3% increase over last year, covered more
than five times.
Balance Sheet and Cashflow
Year-end net borrowings have fallen by #4.7 million to #17.3 million, despite
the capital expenditure programme totalling #11.7 million this year. Assets have
increased from #23.0 million to #29.3 million and, as a result, gearing has
fallen from over 96% to 59%.
The increase in fixed assets of #4.6 million to #43.1 million reflects the
investment in new production capacity. During the year, a conscious decision was
made to hold more stock to facilitate higher levels of service but such was the
demand at the peak of the summer that despite the tremendous efforts of the
factories during the summer and a subsequent upturn in production, stocks had
reduced by approximately #1.8 million at the end of September.
The cash inflow for the year was #1.2 million (2002: #1.4million) after repaying
#4.5million in loans and funding net capital expenditure, before proceeds from
sales of fixed assets, of #9.0 million.
Treasury Policies and Financial Risk
During the year the amount of product imported from Nestle companies fell. This
followed the rise in the Euro which restricted the level of promotion of these
products such that the company switched to selling higher margin own
manufactured product.
The Board is in the process of reviewing the company's supplier settlement
policy for the forthcoming year, with the aim, where possible, of requiring
suppliers to bill in sterling. As a result and the hedging of 50% of the
remaining Euro requirement, the Board is satisfied that there is no significant
foreign exchange exposure.
Conclusion
As the company grows, the balance sheet remains robust as a result of debt and
gearing having continued to fall. This has been another record year for the
company and the Board remain confident that its financial strength will enable
it to fund its current plans.
A B Finneran
Finance Director
1st December 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
52 weeks ended 28 September 2003
52 weeks ended 52 weeks ended
28 September 2003 29 September 2002
Before
Before LTIP & Exceptionals
Exceptionals
LTIP LTIP Total #'000 (note 3) LTIP Total
#'000 #'000 #'000 #'000 #'000 #'000
TURNOVER 127,232 127,232 116,699 116,699
Cost of 94,017 94,017 86,189 86,189
sales
_________ _______ ______ _________ _________ ______ ______
33,215 33,215 30,510 30,510
Net operating 20,925 503 21,428 20,271 980 376 20,271
expenses
_________ _______ ______ _________ _________ ______ ______
OPERATING 12,290 (503) 11,787 10,239 (980) (376) 8,883
PROFIT
Interest (1,782) (1,782) (2,032) (2,032)
payable and
similar _________ _______ ______ _________ _______ __ ____ __ ____ __
charges
PROFIT ON
ORDINARY
ACTIVITIES 10,508 (503) 10,005 8,207 (980) (376) 6,851
BEFORE
TAXATION
Tax on profit 2,723 (151) 2,572 2,027 (294) (113) 1,620
on ordinary
activities _________ _______ ______ _________ _________ ______ ______
PROFIT FOR 7,785 (352) 7,433 6,180 (686) (263) 5,231
THE
FINANCIAL
YEAR
Equity 1,389 - 1,389 1,041 - - 1,041
dividends
(note 4)
_________ _______ ______ _________ _________ ______ ______
PROFIT FOR
THE
FINANCIAL
YEAR 6,396 (352) 6,044 5,139 (686) (263) 4,190
TRANSFERRED
TO/RESERVES ====== ====== ===== ====== ====== ====== ======
Earnings per 33.6p (1.5p) 32.1p 27.1p (3.0p) (1.2p) 22.9p
share (note 5)
====== ====== ===== ======= ===== ===== =====
Diluted 32.5p (1.5p) 31.0p 26.1p (2.9p) (1.1p) 22.1p
earnings per
share
====== ====== ===== ======= ===== ===== =====
CONSOLIDATED BALANCE SHEET
28 September 2003
2003 2002
#'000 #'000
FIXED ASSETS
Intangible assets 5,073 5,551
Tangible assets 38,026 32,958
__________ __________
43,099 38,509
__________ __________
CURRENT ASSETS
Stocks 14,296 16,133
Debtors 20,859 22,167
Cash at bank and in hand 3,352 2,136
__________ __________
38,507 40,436
CREDITORS: amounts falling due within one year (33,968) (34,096)
__________ __________
NET CURRENT ASSETS 4,539 6,340
__________ __________
TOTAL ASSETS LESS CURRENT LIABILITIES 47,638 44,849
CREDITORS: amounts falling due after more than one (14,555) (18,651)
year
PROVISIONS FOR LIABILITIES AND CHARGES (3,714) (3,214)
__________ __________
NET ASSETS 29,369 22,984
========= =========
CAPITAL AND RESERVES
Called up share capital 1,158 1,156
Share premium account 5,004 4,899
Capital redemption reserve 759 759
Merger reserve 2,982 2,982
Profit and loss account 19,235 12,880
__________ __________
Shareholders funds - equity 29,138 22,676
Minority interest - non equity 231 308
__________ __________
CAPITAL EMPLOYED 29,369 22,984
========= =========
CONSOLIDATED CASHFLOW STATEMENT
52 weeks ended 28 September 2003
52 weeks ended 52 weeks ended
28 September 29 September
2003 2002
#'000 #'000
Net cash inflow from operating activities 19,480 13,959
Net cash outflow from returns on investments (1,782) (2,032)
and servicing of finance
Taxation (1,909) (956)
Net cash outflow for capital expenditure (7,117) (2,079)
Acquisition - (9,850)
Equity dividends paid (1,042) (845)
__________ __________
Net cash inflow/(outflow) before financing 7,630 (1,803)
Net cash (outflow)/inflow from financing (6,414) 3,213
__________ __________
Increase in cash 1,216 1,410
========= =========
Richmond Foods plc
Notes
1. The preliminary results have been prepared under the
historical cost convention and in accordance with applicable Accounting
Standards using accounting policies that have been applied consistently.
2. The financial information set out above does not constitute
the Company's statutory accounts for the 52 weeks year ended 28 September 2003.
The information relating to the 52 weeks ended 29 September 2002 has been
extracted from the 2002 Annual Report and Accounts, which received an
unqualified auditors' report and have been delivered to the Registrar of
Companies.
3. The exceptional item in 2002 related to employment and other
contractual costs arising from the integration of the Nestle ice cream business.
4. The Board is proposing a final dividend of 5.50p per share,
(2002: 4.00p) giving a total dividend for the year of 6.00p per share. Subject
to confirmation at the Annual General Meeting, the dividend on the Ordinary
Shares will be posted on 3 February 2004 to the registered holders as 12
December 2003.
5. The calculation of earnings per ordinary share is based on
profits of #7,785,000 (2002: #6,180,000) prior to the Long Term Incentive Plan
charge and exceptionals, both net of tax, of #352,000 (2002: #263,000) and #Nil
(2002: #686,000) respectively and on 23,152,618 ordinary shares being the
weighted average number in issue during the year (2002: 22,771,897). The diluted
earnings per ordinary share reflect the effect of the Long Term Incentive Plan
shares. The dilution is based on 23,977,562 shares (2002: 23,721,091).
6. The 2003 Report and Accounts will be mailed to shareholders
and copies will be available at the registered office: Richmond House, Leeming
Bar, Northallerton, North Yorkshire, DL7 9UL.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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