RNS No 2236a
NFC PLC
3 June 1999
FURTHER PROGRESS AT NFC
Results for the six months ended 31 March 1999
* Turnover from continuing operations #1,190.0m, up 9% (1998 : #1,092.2m)
* Operating profit from continuing operations before exceptional items
#55.0m, up 10% (1998 : #50.2m)
* Profit before tax and exceptional items #46.1m, down 11% (1998 : #51.9m),
reflecting higher interest costs after return of surplus capital
* Earnings per share before exceptional items 5.2p, an advance of 18% (1998 :
4.4p)
* Interim dividend of 2.2 pence per share (1998 : 2.0 pence), an increase of
10%
Sir Christopher Bland, Chairman of NFC plc, said:
"We have achieved good operating profit growth, driven by strong profit
improvement in our logistics operations worldwide; our main moving services
markets were generally subdued in the half year. We expect to make further
progress in the remainder of this financial year."
Enquiries Gerry Murphy, NFC 0171 317 0123
Patrick Toyne Sewell,
Citigate Dewe Rogerson 0171 638 9571
Results
Group turnover from continuing operations increased by 9% to #1,190.0m (1998 :
#1,092.2m). At constant exchange rates and excluding the impact of
acquisitions, the underlying turnover of continuing operations grew by 5%.
Group operating profit from continuing operations before exceptional items
increased by 10% to #55.0m (1998 : #50.2m). At constant exchange rates and
excluding the impact of acquisitions, the underlying operating profit of
continuing operations grew by 5%.
Strong profit growth was achieved in Exel Logistics (profit up 16%),
reflecting continuing organic business growth in Americas and Asia Pacific
(profit up 15%); and in Europe (profit up 17%), the impact of the Walsh
Western acquisition and the completion of the restructuring programme
announced in 1997.
Allied Pickfords' underlying profit increased by 12% when a one-off retirement
programme gain (#1m) in the US reported in last year's results is excluded,
(3% decline as reported). Markets in the off-peak season were generally
subdued both in Europe (profit up 2%) and the Americas but Asia Pacific had a
strong peak season. Americas and Asia Pacific underlying profit was up #0.7m
or 50% after excluding last year's one-off US retirement programme gain, (12%
decline as reported).
Interest costs were #8.9m (1998 : net income of #2.2m), reflecting the
increased debt following the return of #307.3m of surplus capital to
shareholders at the end of last year. Interest cover for the half year
(excluding exceptional items) was 6.2 times.
Net exceptional items amounted to a charge of #6.6m (1998 : #2.2m) as a result
of the adoption of new Financial Reporting Standards (see Accounting
Developments and Exceptional Items below). Exceptional items also include the
net profit on the sale of properties #1.5m (1998 : #0.4m), and last year a
profit on disposal of businesses (#7.1m).
Profit before tax and exceptional items was down by 11% to #46.1m (1998 :
#51.9m), reflecting the increased interest cost described above. Including
exceptional items, profit before tax was #39.5m (1998 : #49.7m).
NFC's effective rate of tax on profit before exceptional items was reduced to
36% (1998 : 36.5%).
Earnings per share before exceptional items advanced by 18% to 5.2p (1998 :
4.4p), the year on year increase being enhanced by the lower number of shares
following the return of surplus capital last September. Including exceptional
items, the FRS 3 earnings per share were 3.9p (1998 : 3.8p).
Cash
Net cash inflow from operating activities improved from #11.8m to #24.6m. Net
cash outflow before financing was #48.7m, up from last year (#5.9m),
reflecting acquisition payments in the period of #9.7m compared with business
disposal proceeds last year of #47.1m.
At 31 March 1999, NFC's net borrowings were #260.4m (1998: net cash of #48.5m,
since when NFC has returned #307.3m of surplus capital to shareholders). The
half year end balance sheet gearing was 97%.
Dividends
The Board has declared an interim dividend of 2.2p per share, compared with
2.0p per share last year, to be paid on 19 July 1999 to shareholders on the
register on 18 June 1999. Following the abolition of the ACT and foreign
income dividend legislation, this will be paid as a normal dividend.
Accounting Developments and Exceptional Items
Adoption of FRS 12 "Provisions and Contingencies" has necessitated a
restatement of the restructuring provision of #49m originally charged to the
profit and loss account in 1996/97. The costs have now been charged to the
profit and loss account in the periods in which the expense was committed.
The total charge for restructuring over the years 1997 to 1999 remains #49m,
with the final amount of #8.1m being charged in this half year's accounts
(1998 : #9.7m).
Year 2000
NFC's Year 2000 programme is on track with the actions and timetable
summarised in the 1998 Annual Report. The bulk of the work to replace or
rectify major systems and equipment has been completed. Assessments of each
business unit's interfaces with its customers and suppliers, as well as the
preparation of contingency plans covering key operating and commercial risks,
are under way. However, notwithstanding the comprehensive nature of NFC's
Year 2000 programme, the diversity of systems in use and the reliance to an
extent on customer-provided systems makes it impossible to guarantee that no
Year 2000 problems will arise.
Outlook
NFC has achieved good operating profit growth, driven by strong improvement in
Exel Logistics worldwide; Allied Pickfords' main moving services markets were
generally subdued in the half year. In the second half of the year, the
present momentum in Exel Logistics Americas is expected to continue, although
Exel Logistics Europe's revenue growth is expected to be slower due to the
timing of 1998 acquisitions. Allied Pickfords' busy summer season will
reflect economic conditions in the UK and the US; early signs are encouraging
in both markets. Further progress is expected in the remainder of this
financial year.
Exel Logistics - Europe
Continuing operations:
Turnover #658.0m (up 10%, 9% at constant exchange rates)
Operating profit # 24.6m (up 17%, 17% at constant exchange rates)
Turnover increased by 10%, or 4% excluding acquisitions (principally Exel
Walsh Western acquired in July 1998) and exchange rate differences. The
growth in the dedicated contracts businesses (including Tradeteam)was 14%, 5%
excluding acquisitions and exchange rate differences. In the local and
network businesses, aggregate turnover was up 2% year on year.
Operating profit improved by 17%, benefiting from the contribution from the
Exel Walsh Western and Monros acquisitions and by the substantial completion
of the restructuring programme started in 1997. Overall, dedicated contract
logistics performed satisfactorily, particularly regarding margin improvement
and contract renewals, with the exception of Automotive and
Petroleum/Chemicals, where market conditions in the UK were difficult.
Improvement has been achieved in the French chill network results, in spite of
continuing difficult trading conditions, but the performance of the Spanish
network deteriorated.
Exel Logistics Europe has achieved significant new business building on its
investment in systems and international sector knowledge. New customers
include Senior Tube, Retevision, Hydrogas, Nissan and Avebury Taverns. Heads
of agreement to operate a Northern European Distribution Centre in Belgium on
behalf of Tyco Healthcare Group Europe have been signed. Xpress Group,
Europe's largest independent supplier of wheel and tyre assembly services to
vehicle and tyre manufacturers, was acquired in May, extending Exel Logistics'
strategic capability in the European automotive logistics market. Also in
May, Exel Logistics announced a joint venture with Tibbett & Britten Group
plc, called Joint Retail Logistics Limited, to operate all of Marks &
Spencer's general merchandise transport services in the UK and Ireland, under
a five year contract. The joint venture will be managed using Exel Logistics'
class leading Isotrak (vehicle management) and Orion (scheduling)
technologies. Significant additional business has been won with Tesco,
Sainsbury, Seat, Goodyear, Rover, Hydro Group and British Gas Services.
Exel Logistics - Americas and Asia Pacific
Turnover #229.5m (up 20%, 20% at constant exchange rates)
Operating profit # 12.4m (up 15%, 16% at constant exchange rates)
Exel Logistics Americas achieved strong turnover growth of 26% as a result of
growth in the base business and new contracts from both existing and new
customers. Merchants Home Delivery's turnover improved by 5% and Exel
Logistics Asia Pacific experienced 50% turnover growth from a small base due
to new contract start ups in Thailand.
Exel Logistics Americas' operating profit increased by 22% with profit growth
across all market sectors. Merchants experienced some operational difficulties
due to driver shortages in the first quarter. In Asia Pacific, the two new
contracts in Thailand are now contributing to the region's profitability.
Exel Logistics Americas continued to demonstrate strong growth in the first
half of 1999. New business included two large import centres for Wal-Mart, a
national delivery network for Xerox Engineering Systems and a
multi-temperature distribution operation for Mitsui Bussan/Southland 7-11.
Additional business was secured with Procter & Gamble, Hershey, S C Johnson,
Compaq, Dow Chemicals, Bayer and Goodyear. Exel Logistics' new transportation
management technology has been chosen by Goodyear, Compaq and Dupont.
Allied Pickfords - Europe
Turnover #67.1m (up 1%, unchanged at constant exchange rates)
Operating profit # 5.5m (up 2%, 4% at constant exchange rates)
Increased turnover from Vanguard Engineering (acquired in November 1998) was
offset by a subdued UK market for Pickfords' commercial moving through the
winter. Turnover from household moving in the UK was unchanged during the
off-peak season, with continuing growth in international moves compensating
for a small decrease in Pickfords' domestic activity. Ahead of the peak
summer season, domestic activity levels show signs of improving.
Overall, operating profit was marginally improved by the close control of
overhead costs.
The Vanguard Engineering acquisition is being integrated with Pickfords
Industrial and will be Europe's largest industrial moving business (trading as
Pickfords Vanguard). The costs of integration (#0.7m) will be borne
throughout the current financial year, primarily in the second half.
Continental Europe operations again improved profit, led by revenue growth in
international home moving, partly offset by a slowdown in office moving.
Allied Pickfords - Americas and Asia Pacific
Turnover #235.4m (down 1%, unchanged at constant exchange rates)
Operating profit # 2.1m (down 12%, 9% at constant exchange rates)
In North America, Allied Van Lines' off-peak domestic relocations turnover was
unchanged, with reduced volumes in national account and military activity
offset by improvements in private transferee moves. Allied International's
revenues decreased by 9%, due to fewer military relocations but commercial
moving continued to grow (up 5%). In Asia Pacific (including Australia and
New Zealand) turnover increased by 9% across all sectors.
The underlying profit improved by #0.7m or 50% (excluding a #1m pensions gain
in last year's results) driven by strong improvements in the Asia Pacific peak
season. Reported operating profit was down by 12%. The Asia Pacific profit
increase was achieved across all countries, in both Removals and Records
Management, as a result of business growth and improved margins. In its
off-peak season, the underlying profit in Allied North America was unchanged.
Ahead of the peak summer season in North America, early indications of market
activity are encouraging.
Group Profit and Loss Account
for the six months ended 31 March 1999
Six Six
months months Year
ended ended ended
31.3.99 31.3.98 30.9.98
(as (as
restated) restated)
Note #m #m #m
------- -------- --------
Turnover 1
Continuing Operations 1,190.0 1,092.2 2,313.3
Discontinued operations - 20.2 20.2
------- -------- --------
Total turnover 1,190.0 1,112.4 2,333.5
======= ======== ========
Operating profit 1
Continuing operations 55.0 50.2 121.9
Discontinued operations - (0.5) (0.5)
---- ---- -----
Operating profit before
exceptional items 55.0 49.7 121.4
Exceptional costs of
reorganisation in
continuing operations 2 (8.1) (9.7) (24.6)
---- ---- -----
Total operating profit 46.9 40.0 96.8
Profit on disposals
of properties in
continuing operations 1.5 0.4 1.3
Profit on disposals
of discontinued
operations - 7.1 7.0
---- ---- -----
Profit before
interest 48.4 47.5 105.1
Interest (8.9) 2.2 4.7
==== ==== =====
Profit before
tax and
exceptional items 46.1 51.9 126.1
Exceptional items (6.6) (2.2) (16.3)
==== ==== =====
Profit on
ordinary activities
before taxation 39.5 49.7 109.8
Tax on profit on
ordinary activities (16.6) (18.9) (46.0)
Tax on exceptional
items - (2.2) (2.7)
---- ---- ----
Profit on
ordinary activities
after taxation 22.9 28.6 61.1
Equity minority
interests (2.5) (2.5) (6.0)
---- ---- ----
Earnings 20.4 26.1 55.1
Dividends (11.5) (14.0) (29.7)
---- ---- ----
Retained profit 5 8.9 12.1 25.4
==== ==== ====
Basic and Diluted
Earnings per share
Including
exceptional items 3.9p 3.8p 8.0p
Attributable to
exceptional items 1.3p 0.6p 2.8p
---- ---- -----
Before exceptional
items 5.2p 4.4p 10.8p
==== ==== =====
Group Total Recognised Gains and Losses
for the six months ended 31 March 1999
(unaudited)
Six Six
months months Year
ended ended ended
31.3.99 31.3.98 30.9.98
(as (as
restated) restated)
#m #m #m
------- -------- --------
Earnings 20.4 26.1 55.1
Exchange
differences 0.9 2.2 (2.1)
Tax on exchange
differences - - (1.0)
Unrealised surplus
on revaluation
of properties - - 5.4
---- ---- ----
Total gains
and losses
recognised in
the period 21.3 28.3 57.4
==== ==== ====
Group Cash Flow Statement
for the six months ended 31 March 1999
(unaudited)
Six Six
months months Year
ended ended ended
31.3.99 31.3.98 30.9.98
(as (as
restated) restated)
Note #m #m #m
------- -------- --------
Operating profit 1 46.9 40.0 96.8
Depreciation 36.8 39.3 77.8
(Profit)/loss on
disposals of
tangible fixed
assets (0.6) 0.4 (0.1)
Movement in
pensions
prepayment (11.0) (11.1) (22.2)
Movements in
provisions 3 (2.7) 4.3 7.8
Movements in
working capital (44.8) (61.1) 1.4
---- ---- ----
Net cash inflow
from operating
activities 24.6 11.8 161.5
Net interest
(paid)/received (3.7) 2.3 4.9
Dividend paid
to minority
shareholder (7.8) (3.2) (3.2)
Tax paid (12.9) (13.6) (37.2)
==== ==== ====
Purchases of tangible
fixed assets and
investments (39.6) (49.9) (102.0)
Disposals of
tangible fixed
assets 16.0 31.7 45.1
==== ==== ====
Net cash outflow
for capital
expenditure and
financial investment (23.6) (18.2) (56.9)
---- ---- ----
Free cash flow (23.4) (20.9) 69.1
Net cash (outflow)/
inflow for
acquisitions and
disposals (9.7) 47.1 34.9
Equity dividends paid (15.6) (32.1) (46.0)
---- ---- ----
Net cash (outflow)/
inflow before
financing 4 (48.7) (5.9) 58.0
Net cash (outflow)/
inflow from
financing (2.1) 1.8 (193.5)
---- ---- -----
Decrease in cash (50.8) (4.1) (135.5)
==== ==== =====
Group Balance Sheet as at 31 March 1999
(unaudited)
31.3.99 31.3.98 30.9.98
(as (as
restated) restated)
Note #m #m #m
------- -------- --------
Fixed assets 534.8 511.7 531.3
------- -------- --------
Current assets
(excluding cash) 393.9 366.3 417.6
Debtors falling
due after more
than one year 207.5 193.5 195.4
Cash 63.6 199.7 77.2
Creditors: Amounts
falling due within
one year
Short-term borrowings (78.9) (3.9) (41.8)
Other creditors (402.7) (369.6) (484.1)
----- ----- -----
Net current assets 183.4 386.0 164.3
----- ----- -----
Total assets less
current liabilities 718.2 897.7 695.6
Creditors: Amounts
falling due after
more than one year
Long-term borrowings (245.1) (147.3) (233.2)
Other creditors (17.7) (9.4) (17.9)
Provisions 3 (160.4) (139.4) (161.4)
----- ----- -----
295.0 601.6 283.1
===== ===== =====
Equity shareholders'
funds 5 268.2 573.3 258.4
Equity minority
interests 26.8 28.3 24.7
----- ----- -----
295.0 601.6 283.1
===== ===== =====
Net(debt)/cash 4 (260.4) 48.5 (197.8)
===== ======== =====
Gearing 97% net cash 77%
===== ======== =====
Average number
of shares ranking
for dividends 2 521.4m 696.4m 684.9m
====== ====== ======
Notes
1 SEGMENTAL INFORMATION
Six months Six months Year ended
ended 31.3.99 ended 31.3.98 30.9.98
Rev- Operating Rev- Operating Rev- Operating
enue profit enue profit enue profit
(as (as
restated) restated)
#m #m #m #m #m #m
----- ----- ----- ----- ------ -----
Continuing
Operations
Exel Logistics
Europe 658.0 24.6 596.8 21.1 1,217.7 50.4
Americas and
Asia Pacific 229.5 12.4 191.6 10.8 397.3 21.9
----- ---- ----- ---- ------- ----
887.5 37.0 788.4 31.9 1,615.0 72.3
===== ==== ===== ==== ======= ====
Allied Pickfords
Europe 67.1 5.5 66.5 5.4 140.8 16.8
Americas and
Asia Pacific 235.4 2.1 237.3 2.4 557.5 11.6
----- ---- ----- ---- ----- ----
302.5 7.6 303.8 7.8 698.3 28.4
===== ==== ===== ==== ===== ====
Total 1,190.0 44.6 1,092.2 39.7 2,313.3 100.7
Pensions
credit (UK) - 10.4 - 10.5 - 21.2
------- ---- ------- ---- ------- -----
1,190.0 55.0 1,092.2 50.2 2,313.3 121.9
Discontinued
operations
Exel
Logistics
Europe - - 20.2 (0.5) 20.2 (0.5)
------- ---- ------- ---- -------- -----
1,190.0 55.0 1,112.4 49.7 2,333.5 121.4
Exceptional
items
(Europe)
Re-organ-
isation
costs - (8.1) - (9.7) - (24.6)
------- ---- ------- ---- ------- -----
1,190.0 46.9 1,112.4 40.0 2,333.5 96.8
======= ==== ======= ==== ======= =====
Continuing
operations
United
Kingdom
and Ireland 533.3 31.3 504.0 28.3 1,025.4 68.3
Continental
Europe 191.8 (1.2) 159.3 (1.8) 333.1 (1.1)
Americas 434.9 13.1 400.8 12.9 900.3 33.2
Asia Pacific 30.0 1.4 28.1 0.3 54.5 0.3
------- ---- ------- ---- ------- -----
1,190.0 44.6 1,092.2 39.7 2,313.3 100.7
Pensions
credit
(UK) - 10.4 - 10.5 - 21.2
------- ---- ------- ---- ------- -----
1,190.0 55.0 1,092.2 50.2 2,313.3 121.9
Discontinued
operations
Europe - - 20.2 (0.5) 20.2 (0.5)
------- ---- ------- ---- ------- -----
1,190.0 55.0 1,112.4 49.7 2,333.5 121.4
======= ==== ======= ==== ======= =====
2 NEW FINANCIAL REPORTING STANDARDS
New Financial Reporting Standards apply to these accounts and to the accounts
for the year ending 30 September 1999. The principal effect on these accounts
is in respect of the restatement of the restructuring provision of #49m
created in 1996/97, now charged to the profit and loss account in the periods
in which the expense was committed, as required by FRS 12. The average number
of shares ranking for dividends has been restated to exclude shares owned by
the Group's ESOP, as required by FRS 14. From 1 October 1998, goodwill on
acquisitions has been capitalised and amortised over its useful life in
accordance with FRS 10; the effect in the current year is not material.
3 PROVISIONS
Reorgan- Surplus
isation properties Insurance Other Total
#m #m #m #m #m
------- ---------- --------- ----- -----
Opening balances
as previously
reported 17.3 13.6 70.8 76.9 178.6
Prior year
adjustment - FRS 12 (17.3) - - 0.1 (17.2)
---- ---- ---- ---- -----
- 13.6 70.8 77.0 161.4
Exchange
differences - (0.1) 1.9 (0.1) 1.7
Charged to
profit and
loss account - - 24.4 - 24.4
Utilised - (1.0) (24.4) (1.7) (27.1)
---- ---- ----- ---- -----
Closing balance - 12.5 72.7 75.2 160.4
==== ==== ==== ==== =====
Other provisions consist primarily of deferred tax.
4 RECONCILIATION OF DEBT
Six Six
months months Year
ended ended ended
31.3.99 31.3.98 30.9.98
#m #m #m
---------- ---------- -------
Net cash (outflow/
inflow before
financing (48.7) (5.9) 58.0
Return of surplus
capital to
shareholders
including costs - - (310.8)
Exchange differences (11.0) 0.2 2.4
Arising on
acquisitions (0.4) - (8.0)
New leases - (2.1) (2.8)
(Payments)/receipts
in respect of
foreign currency
hedges (2.5) 2.9 10.0
----- ---- -----
Movement in debt (62.6) (4.9) (251.2)
Opening (debt)/net
cash (197.8) 53.4 53.4
----- ---- -----
Closing (debt)/
net cash (260.4) 48.5 (197.8)
===== ==== =====
5 MOVEMENTS IN SHAREHOLDERS' FUNDS
Six Six
months months Year
ended ended ended
31.3.99 31.3.98 30.9.98
(as restated) (as restated)
#m #m #m
---------- ----------- -----------
Earnings 20.4 26.1 55.1
Dividends (11.5) (14.0) (29.7)
---- ---- ----
8.9 12.1 25.4
Return of surplus
capital to
shareholders
including costs - - (310.8)
Exchange differences 0.9 2.2 (2.1)
Tax on
exchange differences - - (1.0)
Unrealised surplus
on revaluation
of properties - - 5.4
Goodwill
released on
disposals - 1.2 1.7
Goodwill on
acquisitions - (1.3) (19.3)
----- ----- -----
Net movement in
shareholders' funds 9.8 14.2 (300.7)
Opening shareholders'
funds as
previously reported 250.4 529.5 529.5
Prior year adjustment
- FRS 12 8.0 29.6 29.6
----- ----- -----
Closing shareholders'
funds 268.2 573.3 258.4
===== ===== =====
6 FOREIGN CURRENCIES
Results of businesses accounting in foreign currencies are translated at
average rates of exchange ruling in the period. Balance sheets of
such businesses are translated at rates ruling at the balance sheet dates.
31.3.99 31.3.98 30.9.98
Rates of exchange
for the US dollar
Average 1.65 1.65 1.65
Period end 1.61 1.67 1.70
7 STATUTORY GROUP ACCOUNTS
The accounts for the year ended 30 September 1998 set out above are not the
company's statutory accounts. The statutory group accounts for the year on
which the auditors have given an unqualified report (which made no statement
under sections 237(2) or (3) of the Companies Act 1985) have been filed with
the Registrar of Companies.
Review report by the auditors to NFC plc
We have received the interim financial information set out on page 7 to 12 in
respect of the six months ended 31 March 1999, which is the responsibility of,
and has been approved by, the Directors. Our responsibility is to report on
the results of our review.
Our review was carried out having regard to the Bulletin, Review of Interim
Financial Information, issued by the Auditing Practices Board. This review
consisted principally of obtaining an understanding of the process for the
preparation of the interim financial information, applying analytical
procedures to the underlying financial data, assessing whether accounting
policies have been consistently applied and making enquiries of the group's
management responsible for financial and accounting matters. The review
excluded audit procedures such as tests of controls and verification of assets
and liabilities and was therefore substantially less in scope than an audit
performed in accordance with Auditing Standards. Accordingly we do not express
an audit opinion on the interim financial information.
On the basis of our review:
* we are not aware of any material modifications that should be made to
the interim financial information as presented; and
* in our opinion the interim financial information has been prepared using
accounting policies consistent with those adopted by NFC plc in its
accounts for the year ended 30 September 1998, except for the changes
necessary to comply with new Financial Reporting Standards as referred
to in note 2.
Ernst & Young
London
END
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