RNS Number:8706Q
Thorntons PLC
06 September 2005
For Immediate Release 6 September 2005
Thorntons PLC
Announcement of Preliminary Results for
52 weeks ended 25 June 2005 (audited)
Further Progress
Thorntons PLC, the manufacturer, retailer and distributor of high quality
confectionery and other sweet foods, today reports preliminary results for the
52 weeks ended 25 June 2005.
Financial Key Points
(#m) 2005 2004 Change
Turnover 187.7 178.7 + 5.0%
Profit before tax and exceptional items 9.8 8.0 +23.0%
Profit before tax 8.2 7.0 +16.4%
Operating cash flow before working capital
movements 22.2 20.5 + 8.4%
Earnings per share before exceptional items 10.33p 8.82p +17.1%
Earnings per share 8.55p 7.64p +11.9%
Dividend per share 6.80p 6.80p -
Net debt (29.2) (26.0) Increased 12.2%
Gearing 68.3% 62.8% Increased 8.8%
* Profit before tax up 16.4% on turnover increased by 5.0%
* Profit before tax and exceptional items up 23.0% to #9.8m
* Cash flow remains strong
* Dividend unchanged at 6.80p
Strategic Key Points:
* Sales performance overall encouraging
* Sales to other retailers more than doubled to #22.8m; own shop
like-for-like sales declined by 0.7%
* Individual sales channel gross margins continue to improve
* More investment in own shops and marketing planned
Commenting Christopher Burnett, Executive Chairman, said:
"The business achieved further growth despite the difficult retail environment.
Profit before tax increased by 16.4% after restructuring costs of more than #1m.
Pre-exceptionals the profit grew by 23.0%. Total sales in the first few weeks of
the new financial year, traditionally our weakest period, are running slightly
below last year."
On 19 August 2005, the Company announced that it had received a pre-conditional
offer proposal from Christopher Burnett regarding a possible offer for the
Company at 185p per share (inclusive of any final dividend declared in respect
of the year ended 25 June 2005). Christopher Burnett is continuing to hold
discussions with potential funders and a further announcement will be made in
due course.
For further information, please contact:
John Wall - Finance Director, Thorntons PLC 01773 542339
James Fenwick - Rothschild 0113 200 1900
Charles Ryland / Nicola Cronk - Buchanan Communications 0207 466 5000
CHAIRMAN'S STATEMENT
Sales in the year to 25th June 2005 at #187.7m were 5% ahead of last year. Our
own shops which account for 70% of sales were down by 2%. This was after the net
closure of nine shops. On a like-for-like basis the decline was only 0.7%.
The part of the business that accounted for most of the growth in turnover was
the sale of a selected range of Thorntons branded products into other retailers,
principally the major supermarket groups. Here sales grew from #10.0m last year
to #22.3m this year, an increase of 123%. Having now established a presence in
this important retail channel we would expect the rate of growth to decline to a
more modest level.
It has for many years been part of our strategy to satisfy the market for
Thorntons products in parts of the country where our own shop is not justified,
through a network of franchised outlets. Sales grew this year by 4.2% to #13.4m
following the opening of 13 new ventures. There are now 216 franchisees.
Thorntons Direct continues to disappoint. Sales declined again this year. Given
our market leadership position in the premium box chocolate market, this should
be a much more significant part of the Company. We are in the course of making
management and other changes which should begin to rebuild this business.
It is pleasing to be able to report a 16.4% improvement in profit before tax to
#8.2m after reorganisation and other exceptional costs of #1.7m. These charges
arise from our ongoing efforts to improve the efficiency of the business and
reduce overheads.
The Board recommends an unchanged final dividend of 4.85 pence per ordinary
share, making an unchanged total of 6.80 pence per share for the year. Despite
the improvement in profitability, the dividend is still only 1.25 times covered.
The dividend will be paid on 30 November 2005 to shareholders on the register on
4 November 2005. The ex dividend date will be 2 November 2005.
I would like to express my appreciation to my executive and non-executive
colleagues on the Board for the support they have provided during the year.
Also, my thanks go to all the managers and employees throughout the Company
whose efforts have resulted in our improved performance.
Christopher Burnett
Executive Chairman
5 September 2005
CHIEF EXECUTIVE'S REPORT
I am pleased to inform you of another year of improvement, as demonstrated by
the growth in sales and profits. Whilst this progress is welcome, we are not
satisfied that we have created a business yet that is fit enough for the future.
The strategy to create a stronger business is clear to your management team. In
fact, as I looked back at last year's annual report, I noted that what I have to
say on the strategy is similar to what I said last year. What is different is an
even greater emphasis on improving the net margin through more efficient
manufacturing and tight cost control, whilst assuming that total sales growth
will be modest.
SALES GROWTH
We will continue to implement a strategy of profitably growing sales through
multiple channels to the customer, which recognises the need to develop and
exploit our existing high street assets as well as the continuing growth in edge
of town and online shopping. The overall market for confectionery is growing
slightly in value terms but is flat, at best, in volume terms. Therefore, it
would be imprudent for us to assume anything other than low growth in total
sales.
1. Own stores
In last year's annual report, I signalled that the 'pruning exercise' in our
retail estate was largely complete and I expected to see a small growth in the
number of outlets. However, over the last 12 months the number of outlets has
fallen by 9 to 369. Whilst we opened 4 stores on new retail parks (and re-sited
two others to more profitable locations), we closed 13 stores. These comprised:
*5 stores which were multiple representations in a town and enhanced the
profit from those towns
*5 stores with expired leases and very low profitability
*2 loss making stores which were handed back to the landlord
*1 store for which the landlord paid a premium to take back the property
for development
Whilst we cannot rule out closing more stores, we have a continuing desire to
gain more representation on new retail parks and within the M25. In the
expectation of finding enough suitable sites, we should see a modest increase in
the number of stores over the coming year.
Total sales declined by 2% to #134.1m, largely as a result of the net closures.
Like-for-like sales (which take out the effect of opening and closing stores)
only declined by 0.7% and this was an encouraging performance in the context of
a well reported slow down in retail sales. We believe this reassuring result was
as a consequence of the investment in our store colleagues' product knowledge
and selling skills over the last 2 years and tighter management processes. New
product development, of course, also played its part, with the relaunch of the
Eden boxed chocolate range being the most significant event. This range is
designed to appeal to younger women and has seen double digit sales growth
complemented by an enhanced margin since its relaunch.
In the coming year, we aim to increase like-for-like sales in four ways. First,
to attract more people into the stores, we will increase investment in
advertising by over 50% versus last year's spend. The advertising will operate
at two levels: firstly, an all year round press campaign which profiles each of
the 5 boxed chocolate ranges in turn and makes potential customers aware of the
significant innovation in the range over the last 3 years; in addition, we will
run seasonal campaigns for the Christmas and Spring seasons.
The other three mechanisms to drive sales will aim to increase the percentage of
people who enter the store and purchase, often called "conversion". The first is
the retail environment. We have been conducting trials of various merchandising
systems for our products. These low cost enhancements are currently being rolled
out across the whole estate. In addition, selected stores will be given a
complete refit. The cash payback on stores refitted so far has been less than 3
years.
The second way to increase conversion will be by further investment in
packaging. We have made real improvements over the last few years but as tastes
change and the competition lifts their game, we need to keep improving the
quality of our gift related products in particular.
Finally, and most importantly, we will continue to improve store colleagues'
skills by good recruitment and training focussed on product knowledge and
selling.
2. Franchises
Franchise sales increased by 4.2% to #13.4m on the back of an increase of 13
outlets to a total of 216. We anticipate growth in this channel's sales over the
coming year through an increase in the number of outlets and the benefit of the
increased investment in advertising and packaging mentioned above.
We have also reviewed how we support our franchisees and aim to invest more in
product knowledge and incentives to drive sales and profits.
3. Thorntons Direct
The last year was a disappointing one for Thorntons Direct, especially since the
online market for consumer goods continues to grow, as sales declined by 6.6% to
#4.9m. It has become clear that we will need to revitalise the offer and spend
more on building awareness of our website and catalogues. We have also made a
change to the leadership of this business, with an external recruit with broad
sales and marketing experience.
4. Commercial
Branded commercial sales grew by 123% to #22.3m. This was driven principally by
2004/5 being the first full year of boxed chocolate sales through this channel.
As we aim now to focus on serving our existing accounts, we anticipate that
sales growth will be much less than has been seen over the first three years of
this business.
The private label business, which is principally with Marks & Spencer, declined
by 6% to #12.9m. This reflected the delisting of a few products and a shift in
the promotional balance. In many ways, the last year was one of transition and
we expect our sales to stabilise and then show modest growth as a result of new
listings and the continuing growth in M&S's food business.
IMPROVED MARGIN AND COSTS
Improving the cost and quality of manufacturing is without doubt our most
important priority over the next 2 to 3 years.
In the last year, we have taken out a layer of management in the factory and
improved the quality of the people in the remaining structure through
recruitment and training. This resulted in restructuring costs of #1.3m but we
expect a rapid payback on this investment.
In the next year, improvement will come from continuing rationalisation of
products and substantially increasing the quality of forecasting, planning and
scheduling processes. This will improve the utilisation of our workforce and
machinery. It will also reduce margin erosion created by waste from the
production lines or by products going out of date or being reduced in price to
clear them. The new processes will require new investment in systems, which we
highlighted in last year's report under the banner of Project Focus.
We have also been seeking better input prices by increasing Far East sourcing
and bringing greater competition to new contracts for all goods and services.
There are still significant opportunities to buy better and this work will
continue. Some of the savings will be used to cover the increase in energy
prices that we will face in the coming year as existing contracts come to an
end.
As the new forecasting, planning and scheduling processes bed in, we can then
focus on the configuration, reliability and set-up of our production equipment,
some of which will require greater involvement of the frontline workforce in
continuous improvement. It will not require significant investment in capital
equipment, as any bottlenecks can be freed up by better planning processes or
minor projects on the existing equipment. However, the need to improve our
supply chain systems means that total company capital investment will be similar
in level to the last financial year, at about #11m.
The overhead cost reduction exercise started by Project Rebalance last year has
continued and we expect to find further savings as we identify smarter ways of
working and cut out non-value adding activity.
SUMMARY AND OUTLOOK
Our strategy is clear: we expect to steadily increase sales across all channels
by prudent investment in advertising, packaging, service and the retail
environment, whilst making substantial improvement in margin and overhead costs
to fund this investment and increase returns to shareholders.
Total group sales for the first 9 weeks of the new financial year are slightly
below last year's. The hotter weather this summer has had an effect on own shop
and franchise sales, however, with increased investment in advertising, our
products and our stores we still remain confident of achieving growth in the
remainder of the financial year.
Peter Burdon
Chief Executive
5 September 2005
FINANCE DIRECTOR'S REPORT
The Company's business has continued to develop in the direction that was set
last year which has led to an improvement in operating profit of 15.4% to
#10.3m. This has been achieved through a 5.0% increase in sales to #187.7m
coupled with active management of the Company's discretionary overheads and the
overhead savings generated through the Rebalance project which sought to
decrease or at least contain the growth in the Company's cost base.
Sales
Within the overall sales growth figure of 5.0% own shop sales declined by 2.0%
in the year. Although like-for-like sales growth was a positive 0.8% in the
first half of the year the difficult retail climate which we began to experience
just before Christmas and which continued throughout the second half led to a
decrease in like-for-like sales of 3.4% in the last 24 weeks of the financial
year. As a result, like-for-like sales for the year as a whole finished down by
0.7%. In addition to the weakness in like-for-like sales there was a loss of
sales due to the net reduction in the size of our retail estate.
Franchise sales grew over the year at a respectable rate of 4.2% although,
again, performance was weaker in the second half than in the first half.
Commercial sales (both branded and unbranded) grew in total by 48.4% in the year
as the Company implemented its strategy to develop new channels to market other
than through its own retail chain. However, the rate of growth slowed somewhat
from the rate experienced in the first half year of 80.5% as the corresponding
performance in the previous year reflected a major expansion in the range and
the customer base.
Sales by Thorntons Direct, the mail order and online sales division, declined by
6.6% in the year.
Margins
Margins expressed as a percentage of sales continue to fall from 52.4% last year
to 51.4% this year. A large part of this drop in percentage margin was accounted
for by the fact that commercial sales are at wholesale rather than retail
prices. However, the margin has also been impacted by a stricter application of
the Group's stock write-down policy which has led to an increase in stock
provision of #0.8m of which half impacts the margin and the rest impacts selling
and distribution expenses. Despite these adverse effects gross profit grew by
#2.9m as a consequence of the growth in total sales. Net margins i.e. after
deducting all selling and distribution expenses continue to improve from 15.6%
of sales last year to 16.1% this year due to the fact that the increased
commercial sales are made at a relatively low overhead cost.
Efforts continue to be made to smooth production through the year in order to
reduce unit costs. The benefits of this in the year have to a large extent been
counterbalanced by adverse cost variances which arose as a result of the
transition in the production management structure in order to achieve the
long-term cost savings planned as part of the Rebalance project.
Costs
Excluding exceptional costs the growth in selling, distribution and
administrative costs has been contained at 1.0% despite the effects of inflation
(1.8% including exceptional costs). Discretionary overheads were actively
managed and the cost base benefited from the effect of the cost savings
generated by the Rebalance project together with savings in employer pension
contributions resulting from increasing the employees' share of the cost of
financing the deficit in the defined benefit pension scheme.
Exceptional costs of #1.7m relate to the one-off costs of the Rebalance project
which is now complete and to adjustments to several long standing balance sheet
items as a result of a detailed review.
In line with the change made at the half year we have continued to show the
profit on disposal of properties separately after operating profit as we believe
this gives a fairer measure of underlying performance. Gains this year amounted
to #188,000 versus the #634,000 recorded last year which included two
significant one-off gains on disposal.
Profits and Tax
Pre-tax profits rose by 16.4% from #7.0m to #8.2m.
The overall tax charge for the year is 31.7% of profit before tax compared with
29.1% last year. However, if the effect of prior year items is stripped out, the
current year tax charge is 32.6% of profit compared with 33.0% last year. The
theoretical tax charge of 30% continues to be adversely affected by the fact
that an element of the Company's capital investment does not qualify for tax
allowances although every effort is made to mitigate this.
Dividends and shareholder returns
Basic earnings per share have increased by 11.9% from 7.64p per share to 8.55p
per share. Despite the increase in profits the level of dividend cover remains
low and, therefore, the directors are recommending that the full year dividend
per share should remain at 6.80p per share which means that a final dividend of
4.85p per share will be paid in November.
Cash
Operating cash flows before working capital movements improved from #20.5m last
year to #22.2m this year.
Total working capital movements were unfavourable by #4.1m compared with last
year. The unfavourable movement of #5.3m incurred last year due to the stock
build-up resulting from a more level production cycle through the year was not
repeated this year. Procedures for credit control of debtors were tightened with
the result that the 48.4% increase in commercial sales did not translate into a
comparable increase in debtors. There was an apparent significant outflow to
creditors this year compared with last year's inflow as a result of not delaying
rent, PAYE and supplier payments beyond their due date at the year end as has
been the practice in the past. Average net debt during the year has been
significantly lower than last year leading to lower interest costs despite
higher interest rates.
Capital investment in the year amounted to #11.2m of which #4.8m was funded
through finance leases. The main investments were in the Company's ongoing
improvement of its information systems, factory automation and the first stage
of fire protection systems for the factory. We anticipate a capital spend of a
similar order of magnitude in the 2005/06 financial year on IT systems, new and
refitted stores, factory investment and the final stage of the fire protection
systems.
The fourth tranche of the Company's US dollar fixed term loan was repaid on
schedule during the year which means that there remains only one more tranche of
#7.9m outstanding due for repayment in March 2006.
International Financial Reporting Standards
Work has continued on assessing the impact of complying with International
Financial Reporting Standards (IFRS) which will apply to the Company's half year
results for 2005/06. The main areas of difference between UK GAAP and IFRS are
anticipated to be the recognition of the Company's pension scheme in the balance
sheet, the recognition of the cost of employee share options and the timing of
the recognition of the liability to pay dividends which will affect the balance
sheet but not the actual cash payment.
Information Systems
The FOCUS project reflects the Company's significant commitment to rebuilding
its core IT systems many of which were reaching the end of their life as a
result of technological obsolescence. Work has continued throughout the year
with the successful implementation of a number of the modules within the overall
project. However there have been some problems in implementing one of the key
modules as a result of problems with some of the software written specifically
for Thorntons which should be overcome in the near future. In the meantime, work
is progressing on identifying and implementing improved planning and supply
processes which will capitalise on the investment made in the FOCUS project.
Possible offer for the Company
On 19 August 2005, the Company announced that it had received a pre-conditional
offer proposal from Christopher Burnett regarding a possible offer for the
Company at 185p per share (inclusive of any final
dividend declared in respect of the year ended 25 June 2005). Christopher
Burnett is continuing to hold discussions with potential funders and a further
announcement will be made in due course.
John Wall
Finance Director
5 September 2005
Consolidated profit and loss account
for 52 weeks ended 25 June 2005
--------------------- ------ --------------- ---------------
For 52 weeks ended 25 June 2005 For 52 weeks ended 26 June 2004
(restated)
Notes Before Excep- Total Before Excep- Total
exceptional tional Exceptional tional
items items items items
(note 2) (note 2)
#'000 #'000 #'000 #'000 #'000 #'000
--------------------- ------ ------ ------ ------ ------ ------ ------
Turnover 1 187,704 - 187,704 178,746 - 178,746
--------------------- ------ ------ ------ ------ ------ ------ ------
Cost of sales (91,257) - (91,257) (85,181) - (85,181)
--------------------- ------ ------ ------ ------ ------ ------ ------
Gross profit 96,447 - 96,447 93,565 - 93,565
--------------------- ------ ------ ------ ------ ------ ------ ------
Selling and
distribution
costs (66,228) - (66,228) (65,622) - (65,622)
--------------------- ------ ------ ------ ------ ------ ------ ------
Administrative
expenses (19,045) (1,658) (20,703) (18,768) (970) (19,738)
--------------------- ------ ------ ------ ------ ------ ------ ------
Other
operating
income 816 - 816 745 - 745
--------------------- ------ ------ ------ ------ ------ ------ ------
Operating
profit 11,990 (1,658) 10,332 9,920 (970) 8,950
--------------------- ------ ------ ------ ------ ------ ------ ------
Profit on
disposal of
properties 188 - 188 634 - 634
--------------------- ------ ------ ------ ------ ------ ------ ------
Profit before
interest 12,178 (1,658) 10,520 10,554 (970) 9,584
--------------------- ------ ------ ------ ------ ------ ------ ------
Interest
receivable and
similar income 42 - 42 119 - 119
--------------------- ------ ------ ------ ------ ------ ------ ------
Interest
payable and
similar
charges (2,408) - (2,408) (2,697) - (2,697)
--------------------- ------ ------ ------ ------ ------ ------ ------
Profit on
ordinary
activities
before
taxation 9,812 (1,658) 8,154 7,976 (970) 7,006
--------------------- ------ ------ ------ ------ ------ ------ ------
Taxation (3,081) 497 (2,584) (2,239) 202 (2,037)
--------------------- ------ ------ ------ ------ ------ ------ ------
Profit for the
period 6,731 (1,161) 5,570 5,737 (768) 4,969
--------------------- ------ ------ ------ ------ ------ ------ ------
Dividends 3 (4,460) - (4,460) (4,426) - (4,426)
--------------------- ------ ------ ------ ------ ------ ------ ------
Retained
profit for the
period 2,271 (1,161) 1,110 1,311 (768) 543
--------------------- ------ ------ ------ ------ ------ ------ ------
--------------------- ------ ------ ------ ------ ------ ------ ------
Basic earnings
per ordinary
share (pence) 4 10.33 (1.78) 8.55 8.82 (1.18) 7.64
--------------------- ------ ------ ------ ------ ------ ------ ------
Fully diluted
earnings per
ordinary share
(pence) 4 10.21 (1.76) 8.45 8.52 (1.14) 7.38
--------------------- ------ ------ ------ ------ ------ ------ ------
All amounts above relate solely to continuing operations.
Note of consolidated historical cost profits and losses
for 52 weeks ended 25 June 2005
------------------------------------------ ------ ------
2005 2004
#'000 #'000
------------------------------------------ ------ ------
Reported profit on ordinary activities before taxation 8,154 7,006
------------------------------------------ ------ ------
Difference between historical cost depreciation and actual
depreciation charge for the year calculated on the revalued
amount 3 3
------------------------------------------ ------ ------
Realisation of property revaluation gains of previous years - 286
------------------------------------------ ------ ------
Historical cost profit on ordinary activities before taxation 8,157 7,295
------------------------------------------ ------ ------
Historical retained profit for the period after taxation and
dividends 1,113 832
------------------------------------------ ------ ------
Statement of consolidated total recognised gains and losses
There were no material gains and losses incurred during the period other than
the retained profit for the period included in the consolidated profit and loss
account above and hence no statement of consolidated total recognised gains and
losses has been presented.
Consolidated balance sheet
----------------------- --------- ---------
As at As at
25 June 2005 26 June 2004
#'000 (as restated)
#'000
--------------------- ---- --------- ---------
Fixed assets
--------------------- ---- --------- ---------
Tangible assets 79,544 80,329
--------------------- ---- --------- ---------
--------------------- ---- --------- ---------
Current assets
--------------------- ---- --------- ---------
Stocks 17,958 18,912
--------------------- ---- --------- ---------
Debtors 13,592 12,818
--------------------- ---- --------- ---------
Cash at bank and in hand 874 1,599
--------------------- ---- --------- ---------
32,424 33,329
--------------------- ---- --------- ---------
Creditors: amounts falling due within one (52,902) (48,788)
year ---- --------- ---------
---------------------
Net current liabilities (20,478) (15,459)
--------------------- ---- --------- ---------
Total assets less current liabilities 59,066 64,870
--------------------- ---- --------- ---------
Creditors: amounts falling due after one year (7,247) (14,568)
--------------------- ---- --------- ---------
Provisions for liabilities and charges (9,091) (8,896)
--------------------- ---- --------- ---------
Net assets 42,728 41,406
--------------------- ---- --------- ---------
--------------------- ---- --------- ---------
Capital and reserves
--------------------- ---- --------- ---------
Share capital 6,669 6,663
--------------------- ---- --------- ---------
Share premium 12,528 12,483
--------------------- ---- --------- ---------
Revaluation reserves 183 186
--------------------- ---- --------- ---------
Profit and loss account 23,348 22,074
--------------------- ---- --------- ---------
Equity shareholders' funds 42,728 41,406
--------------------- ---- --------- ---------
These financial statements were approved by the Board of Directors on 5
September 2005 and were signed on its behalf by:
C T Burnett J R Wall
Chairman Finance Director
Movements in consolidated equity shareholders' funds
for 52 weeks ended 25 June 2005
---------------------------- ------- -------
2005 2004
#'000 #'000
---------------------------- ------- -------
Profit for the period 5,570 4,969
---------------------------- ------- -------
Dividends (4,460) (4,426)
---------------------------- ------- -------
Retained profit for the period 1,110 543
---------------------------- ------- -------
New share capital issued 51 90
---------------------------- ------- -------
Movement in investment in own shares 161 (895)
---------------------------- ------- -------
Net increase /(decrease) in equity shareholders' funds 1,322 (262)
---------------------------- ------- -------
Opening equity shareholders' funds 41,406 41,668
---------------------------- ------- -------
Closing equity shareholders' funds 42,728 41,406
---------------------------- ------- -------
Consolidated cash flow statement
for 52 weeks ended 25 June 2005
---------------------------- ------ ------------- ------------
Notes 2005 2004
#'000 #'000
---------------------------- ------ ------------- ------------
Cash inflow from operating activities 5 15,749 18,132
---------------------------- ------ ------------- ------------
Returns on investments and servicing of (2,514) (2,825)
finance ------ ------------- ------------
----------------------------
Taxation (2,429) (1,627)
---------------------------- ------ ------------- ------------
Capital expenditure and financial investment (4,827) (2,492)
---------------------------- ------ ------------- ------------
Equity dividends paid (4,428) (4,423)
---------------------------- ------ ------------- ------------
Cash inflow before management of liquid
resources and 1,551 6,765
financing ------ ------------- ------------
----------------------------
Management of liquid resources - 500
---------------------------- ------ ------------- ------------
Financing - issue of shares 51 90
---------------------------- ------ ------------- ------------
- decrease in debt (5,330) (9,808)
---------------------------- ------ ------------- ------------
Decrease in cash in the period 6 (3,728) (2,453)
---------------------------- ------ ------------- ------------
Reconciliation of net cash flow to movement in net debt
for 52 weeks ended 25 June 2005
----------------------------- ----- ------------- ------------
Notes 2005 2004
#'000 #'000
----------------------------- ----- ------------- ------------
Decrease in cash in the period 6 (3,728) (2,453)
----------------------------- ----- ------------- ------------
Cash outflow from decrease in debt 6 5,330 9,808
----------------------------- ----- ------------- ------------
Cash inflow from decrease in liquid resources 6 - (500)
----------------------------- ----- ------------- ------------
Change in net debt resulting from cash flows 6 1,602 6,855
----------------------------- ----- ------------- ------------
Inception of new finance leases 6 (4,779) (3,985)
----------------------------- ----- ------------- ------------
Movement in net debt in the period 6 (3,177) 2,870
----------------------------- ----- ------------- ------------
Net debt at beginning of period 6 (25,994) (28,864)
----------------------------- ----- ------------- ------------
Net debt at end of period 6 (29,171) (25,994)
----------------------------- ----- ------------- ------------
Notes to the preliminary announcement
This preliminary announcement, which has been prepared on a basis consistent
with the previous year other than for:
* profit on disposal of properties of #188,000 (2004: #634,000) which, in
accordance with FRS 3 'Reporting Financial Performance', is now disclosed
after operating profit for all financial periods; and
* Dilapidation provisions of #429,000 (2004: #110,000) which were
previously included within creditors are now disclosed within provisions for
liabilities and charges.
This announcement has been agreed with the Group's auditors for release, it does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
Except for the restatements as described above, the financial information for
the years ended 25 June 2005 and 26 June 2004 has been derived from the Group
accounts for those years. The Group accounts for the year ended 25 June 2005, on
which the auditors issued an unqualified report which did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985, were approved
by the directors on 5 September 2005 and have not yet been delivered to the
Register of Companies but are expected to be published in week commencing 12
September 2005.
1 Turnover
--------------------------------- ---------- ----------
2005 2004
#'000 #'000
--------------------------------- ---------- ----------
Turnover, all originating in the UK, sold to:
--------------------------------- ---------- ----------
United Kingdom 185,460 176,704
--------------------------------- ---------- ----------
Europe and the rest of the world 2,244 2,042
--------------------------------- ---------- ----------
Total turnover 187,704 178,746
--------------------------------- ---------- ----------
Profit before taxation and net assets relate solely to continuing operations in
the UK and from the Group's principal activity.
2 Exceptional items
--------------------------------- ---------- ----------
2005 2004
#'000 #'000
--------------------------------- ---------- ----------
Exceptional items comprise:
--------------------------------- ---------- ----------
Restructuring costs 1,266 685
--------------------------------- ---------- ----------
Write-off of redundant assets 475 -
--------------------------------- ---------- ----------
Unrecognised VAT liability from prior periods 360 934
--------------------------------- ---------- ----------
Release of surplus accruals (443) -
--------------------------------- ---------- ----------
Write-back of amortisation on lapsed share option schemes - (945)
--------------------------------- ---------- ----------
Costs associated with abortive takeover talks - 296
--------------------------------- ---------- ----------
Total exceptional items 1,658 970
--------------------------------- ---------- ----------
Restructuring costs
Restructuring costs comprising redundancy and other costs directly relating to
Project Rebalance.
Write-off of redundant assets
During the second half of the year management completed a review of the Group's
fixed assets and identified a number of assets which are no longer in use or
could not be located. The net book value of these assets of #475,000 has been
written off. There is no cash impact arising from this item.
Unrecognised VAT liability from prior periods
Unrecognised VAT liability arising between 1999 and 2002. There is no cash
impact arising from this item.
Release of surplus accruals
During the second half of the year management identified accruals established in
prior years which are no longer required as the liability to which they related
has been extinguished. Accordingly the surplus accruals have been written back.
There is no cash impact arising from this item.
Notes to the preliminary announcement (continued)
2 Exceptional items (continued)
Write-back of amortisation on lapsed share option scheme
Write-back of amortisation relating to 504,610 shares held by a trust in
connection with the Long Term Incentive Plan. The plan lapsed in November 2003.
There is no cash impact arising from this item.
Costs associated with abortive takeover talks
Costs associated with abortive takeover talks relating to consultancy and other
direct costs in connection with a possible offer for the Company.
3 Dividends
--------------------------- ------- ------- ------- -------
2005 2004
Dividend per Dividend per 2005 2004
share share #'000 #'000
--------------------------- ------- ------- ------- -------
10 pence ordinary shares:
--------------------------- ------- ------- ------- -------
Interim Paid 1.95p 1.95p 1,271 1,269
--------------------------- ------- ------- ------- -------
Final Proposed 4.85p 4.85p 3,189 3,157
--------------------------- ------- ------- ------- -------
Total Dividends 6.80p 6.80p 4,460 4,426
--------------------------- ------- ------- ------- -------
The trusts operating the LTIP and 2001 Executive Share Option Scheme have waived
all but 0.01p per share as dividends on the 1,541,808 (2004: 1,541,808) shares
in their possession at the year-end. As such no dividend has been accrued for
these shareholdings although additional amounts have been provided in
anticipation of the conversion of share options.
4 Earnings per share
Basic earning per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the period, excluding those held in the ESOP which are treated as
cancelled.
For diluted earnings per share the weighted average number of shares in issue is
adjusted to assume conversion of all diluted potential ordinary shares. These
represent share options granted to employees where the exercise price is less
than the average market price of the Company's shares during the period.
The earnings per share figure is also shown before exceptional items. It is the
directors opinion that this best represents the underlying performance of the
business.
The calculations of earnings per share are based on the following:
------------------ ------ ------- -------- ------ ------- -------
2005 2005 2005 2004 2004 2004
Results Basic Fully Results Basic Fully
earnings diluted earnings diluted
#'000 per earnings #'000 per earnings
share share
per per
share share
------------------ ------ ------- -------- ------ ------- -------
Profit for the
period before
exceptional
items 6,731 10.33 10.21p 5,737 8.82p 8.52p
------------------ ------ ------- -------- ------ ------- -------
Exceptional
items (post
tax) (1,161) (1.78)p (1.76)p (768) (1.18)p (1.14)p
------------------ ------ ------- -------- ------ ------- -------
Profit for the
period 5,570 8.55p 8.45p 4,969 7.64p 7.38p
------------------ ------ ------- -------- ------ ------- -------
------------------ ------ ------- -------- ------ ------- -------
Weighted average
number of shares: 2005 2004
Number of Ordinary Number of Ordinary
Shares Shares
---------------------------- ------------ ------------
Basic weighted
average number of
ordinary shares 65,118,846 65,084,717
---------------------------- ------------ ------------
Dilutive effect from
share options 700,115 2,283,205
---------------------------- ------------ ------------
Fully diluted
weighted average
number of ordinary
shares 65,818,961 67,367,922
---------------------------- ------------ ------------
Notes to the preliminary announcment (continued)
5 Reconciliation of operating profit to net cash inflow from operating
activities
-------------------------------------- -------- ------
2005 2004
#'000 #'000
-------------------------------------- -------- ------
Operating profit 10,332 8,950
-------------------------------------- -------- ------
Loss on disposal of fixed assets 10 17
-------------------------------------- -------- ------
Depreciation charges 11,715 11,199
-------------------------------------- -------- ------
Movement in investment in own shares 161 50
-------------------------------------- -------- ------
Non-cash movements in provisions (36) (41)
-------------------------------------- -------- ------
Exceptional items with no cash impact - 290
-------------------------------------- -------- ------
Operating cash flows before working capital movements 22,182 20,465
-------------------------------------- -------- ------
Cash flows relating to previous years provisions - (35)
-------------------------------------- -------- ------
Decrease/(increase) in stocks 954 (5,253)
-------------------------------------- -------- ------
Increase in debtors (774) (65)
-------------------------------------- -------- ------
(Decrease)/increase in creditors (6,613) 3,020
-------------------------------------- -------- ------
Net cash inflow from operating activities 15,749 18,132
-------------------------------------- -------- ------
6 Analysis of net debt
-------------------------- -------- -------- -------- --------
Group At Cash Other non-cash At
27 June flow changes 25 June
2004 2005
-------------------------- -------- -------- -------- --------
#'000 #'000 #'000 #'000
Cash at bank and in hand 1,599 (725) - 874
-------------------------- -------- -------- -------- --------
Overdraft - (3,003) - (3,003)
-------------------------- -------- -------- -------- --------
- (3,728) - (2,129)
-------------------------- -------- -------- -------- --------
Debt due within one year (9,615) 815 (7,914) (16,714)
-------------------------- -------- -------- -------- --------
Debt due after one year (7,914) - 7,914 -
-------------------------- -------- -------- -------- --------
Finance leases (10,064) 4,515 (4,779) (10,328)
-------------------------- -------- -------- -------- --------
(27,593) 5,330 (4,779) (27,042)
-------------------------- -------- -------- -------- --------
Net debt (25,994) 1,602 (4,779) (29,171)
-------------------------- -------- -------- -------- --------
-------------------------- -------- -------- -------- --------
Group At Cash Other non-cash At
28 June flow changes 26 June
2003 2004
-------------------------- -------- -------- -------- --------
#'000 #'000 #'000 #'000
Cash at bank and in hand 4,052 (2,453) - 1,599
-------------------------- -------- -------- -------- --------
Debt due within one year (7,915) 6,215 (7,915) (9,615)
-------------------------- -------- -------- -------- --------
Debt due after one year (15,829) - 7,915 (7,914)
-------------------------- -------- -------- -------- --------
Finance leases (9,672) 3,593 (3,985) (10,064)
-------------------------- -------- -------- -------- --------
(33,416) 9,808 (3,985) (27,593)
-------------------------- -------- -------- -------- --------
Cash on deposit 500 (500) - -
-------------------------- -------- -------- -------- --------
Net debt (28,864) 6,855 (3,985) (25,994)
-------------------------- -------- -------- -------- --------
Major non-cash transactions
During the period the Group entered into finance lease agreements in respect of
various fittings, plant and equipment with capital values at the inception of
the leases of #4,779,000 (2004: #3,985,000).
Gearing ratio
The gearing ratio is calculated as year end net debt divided by year end equity
shareholders' funds.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BCGDCCUGGGUU
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