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21st January 2004
SOMERFIELD plc
ANNOUNCEMENT OF INTERIM RESULTS
GOOD PROGRESS AS PACE OF RECOVERY IMPROVES
Somerfield plc today announced its results for the interim period of 28 weeks
ended 8 November 2003. The key points are:
* Operating profit before exceptional items was £17.2 million, compared with
£7.9 million last year
* Profit before tax and exceptional items was £15.5 million, compared with £
6.4 million last year
* Attributable profit of £17.6 million, compared with £12.5 million last year
* Underlying earnings per share of 3.2p, compared with 1.4p
* Interim dividend of 0.6p per share, a 50% increase compared to last year
* Strong balance sheet with gearing at 1.4%
* Like-for-like sales for Somerfield +2.2%, Kwik Save -1.0% and Group +0.9%
* The first 10 weeks of the second half generated like-for-like sales growth
for Somerfield +2.3%, Kwik Save +0.4% and Group +1.5%
John von Spreckelsen, Executive Chairman, commented:
"The pace of recovery is improving as we continue to implement the Group
strategy. The investment programme is renewing our stores and we continue to
develop our customer offer. While both estates still require significant
investment, particularly Kwik Save, I am pleased to report that operating
profit has more than doubled in the period despite incurring dual distribution
costs associated with the integration of the new North West depot. The interim
dividend is to be raised to 0.6 pence per share. We expect the Group's
performance to continue to be in line with the Board's expectations."
Introduction
The Group has achieved a significant increase in profitability in the first
half of the current financial year with Group like-for-like sales growth of
+0.9%. Despite industry wide competitive pricing pressures, the Group's gross
margins have remained level. At the beginning of the period, the distribution
centre in the North West at Lea Green, St Helens, Merseyside opened on time and
to budget. The Group has therefore absorbed significant additional distribution
costs of approximately £5 million to fund dual costs of running surplus depots
prior to their closure.
A net exceptional profit of £2.1 million was made in the period. This comprises
profits from property disposals, of which £11.8 million was generated from the
North West depot's sale and leaseback, partially offset by redundancy costs and
other closure costs associated with the rationalisation of the supply chain
depot network.
The Group's balance sheet remains strong with net debt at £10.7 million and
gearing at only 1.4%. Good cash generation from operations has been
supplemented by proceeds from the disposal of surplus properties, enabling the
Group to continue the sizeable capital expenditure investment programme
required to transform the estates of both Somerfield and Kwik Save. Capital
expenditure in the period was £112.1 million, almost all of which has been
invested in our store retail estate. This compares with £107.1 million at the
previous half year which included costs associated with the construction of our
distribution centre in the North West.
In view of the Group's continuing progress, the Board is pleased to declare an
interim dividend of 0.6 pence per share, representing an increase of 50%
compared to last year.
Strategy and Operating Review
In July 2003, the Group's strategy for growth was announced. The first half of
the year has seen the Group continuing to concentrate on accelerating the
recovery through growth within its invested estate.
Property portfolio
A principal part of the strategy is ultimately to trade from retail trading
areas of 2,000 to 15,000 square feet for Somerfield stores and approximately
6,000 to 12,000 square feet for Kwik Save stores. Where stores require
downsizing we stated that we would aim to add complementary retailers. Within a
few of our larger stores we have downsized the retail space allocated to the
core Somerfield and Kwik Save customer offer and have trials running with
Peacocks, a clothing retailer, and Tchibo, a German non-food retailer. These
trials are encouraging and we are considering further rollouts, as well as
exploring opportunities with other complementary retailers.
Somerfield
The like-for-like sales growth for Somerfield in the period was +2.2%. In the
main, this sales growth performance has been achieved from stores that have
benefited from capital investment. Approximately 25% of the total Somerfield
estate has undergone a transformation and the benefits to sales growth are now
being reflected in the fascia like-for-like sales statistics.
During the period, 30 new concept stores were opened and nine Kwik Save stores
were converted to the new Somerfield format. The Group strategy provides for
Kwik Save to Somerfield store conversions where and when the customer
demographics are appropriate. These 39 concept stores, including the nine Kwik
Save conversions, are experiencing like-for-like sales growth of approximately
20% on average. These results demonstrate what can be achieved from the Group's
estate when the offer and concept are right for the demographic location.
In the second half of the year, around 30 stores are planned to undergo a
concept refit and by the year end approximately one-third of the Somerfield
estate will have benefited from this type of investment.
As well as the store investment programme, the strategy for the Somerfield
fascia requires continued focus on the customer offer, providing our customers
with excellent fresh food from convenient mid-size supermarkets. The first half
year has seen Somerfield continue to improve store standards, thereby ensuring
our customers experience a high level of in-store service, and continued
development of our customer product offering. In the period, our own label
ranges were extended, providing our customers with great choice and value. Own
label is an important part of the Somerfield offer, representing over £1.1
billion of annualised turnover.
At the recent independent Quality Food & Drink awards, Somerfield was
shortlisted for eight awards and won two first place awards. In the
International Wine Challenge 2003, Somerfield was awarded the prestigious title
of "great value white wine of the year" for its Domaine du Bois Viognier 2002
and Somerfield won over 200 awards, of which six were gold, and 46 were for
wines exclusive to Somerfield.
Kwik Save
In the first half year, Kwik Save like-for-like sales declined -1.0%. Within
Kwik Save, 14 stores last year, and 32 stores in the first half of this year,
benefited from the Kwik Save investment programme out of a total estate of 649
stores. Although these stores are showing encouraging growth, they represent
only a small part of the Kwik Save estate and, therefore, do not have a
material impact on Kwik Save's overall like-for-like sales performance.
For the remainder of the financial year, around 30 stores are planned to
benefit from the capital expenditure programme. During the period, 22 stores
were closed where no prospect of achieving satisfactory returns was identified.
The disposal proceeds were applied to regenerate the operating estate.
The Kwik Save strategy focuses on price for day-to-day food needs which is key
to our customers. We have therefore maintained our price competitiveness and
launched the Kwik Save "priceless" campaign at the end of May, which is proving
to be very popular with our customers. We have upgraded our in-store systems so
that we now have the capability to run multi-buy promotions, enhancing customer
choice.
Of critical importance is choice and range for our customers and we have added
around 390 new own label lines in the first half. Our own label product range
now represents approximately £200 million of annualised turnover. In addition,
the "Simply" value brand, which was introduced into Kwik Save in January 2003
to complement our own label range, now comprises a range of almost 200 products
representing approximately £80 million of annualised turnover. Other areas of
focus for Kwik Save are on shelf product availability, store standards and
customer service and security. Encouraging progress is being made in all these
areas.
New business
We are currently focusing on two specific business opportunities, our petrol
forecourt operations and our partnership model piloted with TM Retail.
By the end of the half year, we were operating 27 petrol forecourt sites. This
estate comprises the Group's original 18 TotalFinaElf forecourts and nine newly
opened sites from a total of 12 sites acquired from Margram Holdings. The
remaining three sites are due to open during the 2004 calendar year. All the
petrol forecourt sites operate under the Somerfield fascia.
We are working with TM Retail to develop a new Somerfield store partnership
model. By the end of the period, we were trialling six stores under a joint
Somerfield/Martin's fascia. Under the agreement, Somerfield supply and deliver
a full range of fresh, ambient and frozen food, both branded and own label, as
well as beer, wines and spirits. Somerfield also provide advice regarding
range, price, marketing and merchandising of the food offer. Since the trial
stores have begun to trade under the joint fascia, sales have roughly doubled.
Somerfield is preparing to roll-out its new franchise package for independent
retailers early in 2004. Following the pilot exercise, the work on IT systems,
store design, distribution, range and other business areas that require
refining in order to ensure excellent levels of service to future franchisees
is nearing completion. We envisage that our first trials with other independent
operators will launch by the end of the first quarter of next year, with a full
roll-out programme in place by the middle of 2004. We believe the combination
of our excellent fresh food offer, our national distribution capabilities and
our competitive pricing will encourage independent retailers to move to the
Somerfield franchise offer, to grow their business further, and allow them to
successfully compete in the increasingly demanding convenience store market.
Supply Chain
The continued rationalisation of the Group's supply chain represents a key
strategic element of the Group's recovery. At the beginning of the period, the
Lea Green distribution centre opened on time and to budget. This depot became
fully operational during the period enabling the Group to close four depots by
the half year with a further three depots scheduled to close in the second
half. While this will create a more efficient supply chain, the Group absorbed
significant additional distribution costs of approximately £5 million to fund
the dual costs of running depots prior to closure. The dual running costs will
continue into the second half of the financial year. By the time we report on
the year end results, we expect the Group's supply chain to be operating out of
16 depots.
In addition to the depot rationalisation programme, depot efficiency has been
separately identified as part of the Group strategy. Efficiency savings are
being achieved through the continued roll out of a single depot warehouse
system, due to be completed around the year end. Also, three of our largest
sites are benefiting from the efficiencies generated from the use of a voice
picking system.
Cost control
Cost control is a key element to ensure the Group's financial recovery. In July
2003, we set out stringent targets for cost savings across the Group. There are
many on-going activities aimed at reducing cost and achieving maximum returns
from funds invested.
Financial Review
Group Results
At the operating profit level before exceptional items, the Group recorded a
profit of £17.2 million compared with the prior period profit of £7.9 million,
an increase of 118%. Profit before tax and exceptional items of £15.5 million
compares with the prior period of £6.4 million. Underlying earnings per share
increased to 3.2 pence from 1.4 pence.
Sales Performance
Sales
Sales for the period were broadly flat at £2.69 billion despite stores that are
now closed which generated sales of £36.3 million in the corresponding period
of 2002/03.
The Group has adopted the Amendment to Financial Reporting Standard 5 ("FRS 5")
on "Reporting the Substance of Transactions: Revenue Recognition", which became
effective for the period under review. The main adjusting impact of this
amendment for the Group is to remove retail partner sales from the reported
statutory turnover but include the commission element earned from retail
partners within turnover. This adjustment has been reflected on the face of the
statutory profit and loss account along with prior year restatements.
Like-for-like sales
By fascia, like-for-like sales performance, which is calculated from sales
including retail partner sales, was as follows:
Full year H1 10 weeks of H2
to 26.4.03 2003/04
Store fascia analysis
Somerfield (%) +0.9 +2.2 +2.3%
Kwik Save (%) +1.2 -1.0 +0.4%
Group (%) +1.0 +0.9 +1.5%
There is no common industry standard on the calculation of like-for-like sales.
Somerfield includes all transactions with their net cash value going through
our tills, but excluding lottery sales and the sales receipts from the
electronic top-up of phone cards. Had electronic top-up sales of phone cards
been included in the like-for-like sales data it would have improved as
follows:-
H1 10 weeks of H2
2003/04
Store fascia analysis
Somerfield (%) +2.8 +2.7%
Kwik Save (%) -1.0 +0.8%
Group (%) +1.2 +1.9%
Exceptional Items
A net exceptional item of £2.1 million has been credited in the period as set
out in note 7 to the financial statements. This item comprises operating and
non operating exceptional items. At the operating level, a £6.8 million charge
relating to the cost of central and depot redundancies and other closure costs
associated with the Group's depot rationalisation has been taken.
A sale and leaseback arrangement on the distribution centre at St Helens,
Merseyside, generated a profit on disposal of £11.8 million. The consideration
from the sale was £38.1 million and was received on completion. The profit on
disposal will be sheltered for tax purposes by capital losses brought forward
from prior years. In line with our normal portfolio review, some 23 other store
properties and sundry assets were also disposed of during the period and have
been recorded as a non operating exceptional item.
An exceptional interest charge of £1.9 million has been recorded and represents
bank fees associated with a funding arrangement as set out in note 12 to the
financial statements.
Interest
The interest charge in the period was £1.7 million, compared to the prior half
year total interest charge of £1.5 million. An exceptional charge of £1.9
million has been recorded within the interest line as explained above.
Taxation
No tax charge has been recorded as the Group has sufficient tax losses to
utilise against any tax arising in the period.
Dividends
The Board has declared an interim dividend of 0.6 pence per share, an increase
of 50%.
Strong Cash Flows and Balance Sheet
In the period, the Group's total operating cash flow was £68.3 million,
compared with £58.7 million in the prior period. Cash generation has been
sufficiently strong to enable the Group to fund £107.8 million of capital
expenditure payments, representing a £9.7 million increase on the prior period.
In addition, net borrowings reduced by £1.4 million to £10.7 million compared
with the same period last year.
Total capital additions were £112.1 million and comprise £69.6 million on store
conversions, refits and upgrades; £10.0 million on the improvement of computer
systems, of which £6.8 million was specific to stores; £6.2 million on
distribution; and £26.3 million on store infrastructure and property
acquisitions.
Shareholders' funds increased to £783.1 million from £765.9 million at the year
end.
Pension Schemes
The FRS 17 pension deficit has reduced since the year end from £99 million to £
87 million. The deficit for the half year has been calculated using estimated
pension scheme data, prepared in accordance with the same assumptions as those
used in the year end annual report.
Current Trading
In the first 10 weeks of the second half, to 17 January 2004, Group
like-for-like sales were +1.5%; Somerfield fascia sales for this period were
+2.3% and Kwik Save fascia sales were +0.4%. Our next trading update will be in
May, after the financial year ending 24 April 2004.
For further information contact:
Somerfield plc
John von Spreckelsen - Executive Chairman c/o Cardew Chancery
Steve Back - Group Finance Director 020 7930 0777
Cardew Chancery
Anthony Cardew or 020 7930 0777
Nadja Vetter
Somerfield plc
Consolidated Profit and Loss Account
for the 28 weeks ended 8 November 2003
Exceptional Restated Restated
Items 2003/04 2002/03 2002/03
(Note 7) (28 (28 (52
weeks) weeks) weeks)
Notes £m £m £m £m £m
Sales 2,693.6 2,693.6 2,682.2 5,000.1
Valued added tax (179.3) (179.3) (177.7) (331.8)
Net retail partner 1 (104.1) (104.1) (97.4) (184.0)
turnover
Turnover 2 2,410.2 2,410.2 2,407.1 4,484.3
Cost of sales (2,339.2) (5.2) (2,344.4) (2,346.2) (4,360.3)
Gross profit 71.0 (5.2) 65.8 60.9 124.0
Administrative expenses (53.8) (1.6) (55.4) (56.3) (101.9)
Operating profit 17.2 (6.8) 10.4 4.6 22.1
Profit on disposal of 7 - 10.8 10.8 8.9 17.0
fixed assets
Profit on ordinary 17.2 4.0 21.2 13.5 39.1
activities before interest
Interest payable and 3 (1.7) (1.9) (3.6) (1.5) (4.3)
similar charges
Profit on ordinary 15.5 2.1 17.6 12.0 34.8
activities before taxation
Taxation on profit on 4 - - - 0.5 5.0
ordinary activities
Profit on ordinary 15.5 2.1 17.6 12.5 39.8
activities after taxation
Dividends 5 (2.9) (1.9) (8.0)
Retained profit 14.7 10.6 31.8
Earnings per share 6
Underlying 3.2p 1.4p 6.3p
Basic 3.6p 2.6p 8.2p
Diluted 3.6p 2.6p 8.1p
Somerfield plc
Consolidated Balance Sheet
as at 8 November 2003
As at As at As at
8 Nov 2003 9 Nov 2002 26 Apr 2003
Notes £m £m £m
Fixed assets
Properties, plant and equipment 8 1,044.6 983.0 1,013.9
Investment in own shares 7.5 7.6 7.6
1,052.1 990.6 1,021.5
Current assets
Stock 346.0 360.8 290.4
Debtors 9 151.0 143.2 117.8
Short term investments 0.5 2.5 0.5
Cash at bank and in hand 106.5 88.3 127.7
604.0 594.8 536.4
Creditors: amounts falling due 10 (794.5) (725.6) (766.8)
within one year
Net current liabilities (190.5) (130.8) (230.4)
Total assets less current 861.6 859.8 791.1
liabilities
Creditors: amounts falling due 11 (68.7) (102.2) (13.6)
after more
than one year
Provisions for liabilities and 13 (9.8) (13.4) (11.6)
charges
783.1 744.2 765.9
Capital and reserves
Called up share capital 49.9 49.5 49.6
Share premium account 36.4 33.8 34.2
Revaluation reserve 67.4 73.1 69.6
Other reserves 335.3 335.3 335.3
Profit and loss account 294.1 252.5 277.2
Equity shareholders' funds 783.1 744.2 765.9
Somerfield plc
Consolidated Cash Flow Statement
for the 28 weeks ended 8 November 2003
2003/04 2002/03 2002/03
(28 weeks) (28 weeks) (52 weeks)
Note £m £m £m
Net cash inflow from operating 14 68.3 58.7 131.8
activities
Returns on investment and servicing of
finance
Interest received 1.3 0.5 1.3
Interest paid (3.3) (2.2) (5.3)
Interest element of hire purchase and (0.6) - (0.3)
finance lease rental payments
Net cash outflow from returns on (2.6) (1.7) (4.3)
investment
and servicing of finance
Taxation
Corporation tax refund 0.3 2.5 3.0
Net cash inflow from taxation 0.3 2.5 3.0
Capital expenditure and financial
investment
Payments to acquire fixed assets (107.8) (98.1) (178.9)
Receipts on sale of fixed assets 41.0 6.1 45.5
Payment to acquire own shares - (0.6) (0.6)
Net cash outflow from capital (66.8) (92.6) (134.0)
expenditure
and financial investment
Equity dividends paid (6.1) (4.9) (6.9)
Cash outflow before use of liquid (6.9) (38.0) (10.4)
resources
and financing
Management of liquid resources
Movement on short term investments - 0.1 2.1
Financing
Issue of share capital 2.5 0.4 1.0
Movement in bank loans (15.0) 40.0 50.0
Capital element of hire purchase and (1.8) (0.4) (1.2)
finance lease rental payments
Cash (outflow)/inflow from financing (14.3) 40.0 49.8
(Decrease)/increase in cash in the (21.2) 2.1 41.5
period
Somerfield plc
Reconciliation of Movements in Shareholders' Funds
for the 28 weeks ended 8 November 2003
2003/04 2002/03 2002/03
(28 weeks) (28 weeks) (52 weeks)
£m £m £m
Profit on ordinary activities after taxation 17.6 12.5 39.8
Dividends (2.9) (1.9) (8.0)
New share capital subscribed 0.3 - 0.2
Premium on new share capital subscribed 2.2 0.5 0.8
Net increase in shareholders' funds 17.2 11.1 32.8
Opening shareholders' funds 765.9 733.1 733.1
Closing shareholders' funds 783.1 744.2 765.9
Somerfield plc
Notes to the Interim Statement of Results
1. Basis of preparation
The interim financial statements were approved by the Board of Directors on 20
January 2004. This information is unaudited but has been reviewed by our
auditors in accordance with best practice. The interim financial information
has been prepared on the basis of the accounting policies set out in the
Group's statutory accounts for the year ended 26 April 2003, with the exception
of a revision to turnover, required by Financial Reporting Standard 5:
"Reporting the Substance of Transactions: Revenue Recognition" ("FRS 5"),
explained below.
The financial information of Somerfield plc for the 52 weeks ended 26 April
2003, has been extracted from the statutory accounts for that period, except as
discussed below, which have been delivered to the Registrar of Companies and on
which the auditors gave an unqualified report which did not contain a statement
under Section 237(2) or (3) of the Companies Act 1985.
The Group has adopted FRS 5, which became effective for the half year. The main
adjusting impact of this amendment for the Group is to remove retail partner
turnover from the reported statutory turnover but include the commission
element earned from retail partners within turnover. This adjustment has been
reflected on the face of the statutory profit and loss account along with prior
year restatements. FRS 5 as amended also requires only the commission element
of mobile phone e-top up to be included within turnover and the free sale
element of buy-one-get-one-free offers to be excluded from turnover. Somerfield
already complies with both of these potential adjustments.
2. Turnover and segmental analysis
The Group operates only in the business of food retailing and associated
activities, with business wholly transacted in the United Kingdom. An analysis
of turnover, at the respective period ends, is as follows:
Restated Restated
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Somerfield fascia 1,475.8 1,421.0 2,649.3
Kwik Save fascia 924.6 973.1 1,797.2
Closed stores 9.8 13.0 37.8
2,410.2 2,407.1 4,484.3
3. Interest payable and similar charges
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Bank loans and overdrafts 2.1 1.8 4.7
Other interest payable 0.9 0.4 1.0
Other interest receivable (1.3) (0.7) (1.4)
1.7 1.5 4.3
Costs associated with a funding 1.9 - -
arrangement
3.6 1.5 4.3
Somerfield plc
Notes to the Interim Statement of Results
4. Taxation
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Corporation tax - prior year - (0.5) (5.0)
5. Dividends
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Interim dividend of 0.6p (2002/03: 0.4p) 2.9 1.9 1.9
Final dividend - - 6.1
2.9 1.9 8.0
The interim dividend will be paid on 5 March 2004 to holders of ordinary shares
on the register at the close of business on 6 February 2004. The shares will
become ex-dividend on 4 February 2004.
6. Earnings per share
The calculation of basic earnings per share is based upon the profit on
ordinary activities after taxation of £17.6 million (28 weeks to 9 November
2002: profit of £12.5 million) divided by the weighted average number of
ordinary shares in issue during the period of 486.8 million (28 weeks to 9
November 2002: 485.8 million). Underlying earnings per share, excluding
exceptional items, have been calculated in order to allow shareholders to
assess the underlying results of the business. This underlying earnings per
share measure is based on the same number of shares in issue as the basic
calculation and the profit on ordinary activities after taxation, but excluding
exceptional items and amounts to a profit of £15.5 million (28 weeks to 9
November 2002: profit of £6.9 million).
In accordance with FRS 14 "Earnings Per Share", diluted earnings per share have
been disclosed. The diluted earnings per share are based upon the profit on
ordinary activities after taxation of £17.6 million (28 weeks to 9 November
2002: profit of £12.5 million). The dilution effect is calculated on the full
exercise of all ordinary share options granted by the Group, including
performance based options where the performance condition has been met. The
calculation compares the difference between the exercise price of exercisable
share options, weighted for the period over which they were outstanding, with
the average daily mid-market closing price over the period. The resulting total
number of shares on which diluted earnings per share have been calculated is as
follows:
28 weeks to 28 weeks 52 weeks
to to
8 Nov 2003 9 Nov 2002 26 Apr
2003
million million million
Basic weighted average number of shares in 486.8 485.8 485.6
issue in the period
Weighted average number of dilutive
potential ordinary shares:
- Employee share options 7.6 3.9 4.6
Total number of shares for calculating 494.4 489.7 490.2
diluted earnings per share
Somerfield plc
Notes to the Interim Statement of Results
7. Exceptional items
Exceptional items credited/(charged) to the profit and loss account are as
follows:
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
Notes £m £m £m
Operating exceptional items:
Exceptional cost of sales items
Other operating exceptional items (1) (5.2) (3.3) (8.0)
Exceptional administrative expenses
items
Other operating exceptional items (1) (1.6) - -
(6.8) (3.3) (8.0)
Non operating exceptional items:
Profit on disposal of fixed assets (2) 10.8 8.9 17.0
4.0 5.6 9.0
Exceptional interest charges:
Costs associated with a funding (3) (1.9) - -
arrangement
Exceptional items credited to 2.1 5.6 9.0
profit before taxation
Taxation on exceptional items - - -
Exceptional items credited to 2.1 5.6 9.0
profit
after taxation
1. Other operating exceptional items
Other operating exceptional items relate to the cost of central and depot
redundancies and other closure costs associated with the Group's depot
rationalisation.
2. Profit on disposal of fixed assets
This comprises the profit on the sale of the St Helens, Merseyside distribution
centre as well as profits and losses from store and other sundry property
disposals.
3. Costs associated with a funding arrangement
The current year charge represents bank fees associated with a funding
arrangement as set out in note 12.
Somerfield plc
Notes to the Interim Statement of Results
8. Movement in tangible fixed assets
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Beginning of the period 1,013.9 941.7 941.7
Capital additions 112.1 107.1 189.6
Capital disposals (30.0) (18.1) (26.0)
Depreciation (51.4) (47.7) (91.4)
End of the period 1,044.6 983.0 1,013.9
9. Debtors
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Other debtors 109.8 103.3 91.9
Prepayments and accrued income 41.2 39.9 25.9
151.0 143.2 117.8
10. Creditors: amounts falling due within one year
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Trade creditors 539.3 526.0 457.8
Loan facilities 54.8 - 109.6
Finance lease obligations 4.3 0.7 2.5
Corporation tax 8.5 12.2 8.3
Other creditors 116.2 105.0 98.0
Other accruals 68.5 79.8 84.5
Proposed dividends 2.9 1.9 6.1
794.5 725.6 766.8
Somerfield plc
Notes to the Interim Statement of Results
11. Creditors: amounts falling due after more than one year
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Loan facilities 40.0 99.5 -
Finance lease obligations 18.6 2.7 13.6
Other creditors 10.1 - -
68.7 102.2 13.6
12. Borrowings
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Amounts falling due after more than one 58.6 102.2 13.6
year
Amounts falling due within one year 59.1 0.7 112.1
117.7 102.9 125.7
At the end of the last financial year, the Group's facilities comprised a £100
million revolving credit facility and £30 million overdraft facility. Included
within amounts falling due within one year was a short term loan of £110
million. This loan temporarily repaid all advances under a three-year committed
revolving credit facility, which expires in April 2005. The loan included an
amount of £55 million relating to a 5-month synthetic zero coupon loan with a
nominal value of £55 million arising from two offsetting oil-based derivative
instruments with a maturity date of 17 September 2003; and an amount of £55
million relating to an 8-month synthetic zero coupon loan with a nominal value
of £55 million arising from two offsetting oil-based derivative instruments
with a maturity date of 18 December 2003.
By 8 November 2003, only the 5-month synthetic zero coupon loan had matured,
with the 8-month synthetic zero coupon loan maturing in the second half year.
Bank fees associated with these transactions, of £1.9 million, have been taken
to the profit and loss account as at the half year end and disclosed as
exceptional, and a further £3 million will be taken as exceptional in the
second half year.
13. Provisions for liabilities and charges
The utilisation of provisions for liabilities and charges in the period to 8
November 2003 is set out below:
As at Provided in Used in As at
26 Apr 2003 the period the period 8 Nov 2003
£m £m £m £m
Litigation provision 2.2 - - 2.2
Closed properties 9.4 - (1.8) 7.6
11.6 - (1.8) 9.8
Somerfield plc
Notes to the Interim Statement of Results
14. Net cash inflow from operating activities
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Operating profit before exceptional items 17.2 7.9 30.1
Exceptional items charged to operating (6.8) (3.3) (8.0)
profit
10.4 4.6 22.1
Depreciation 51.4 47.7 91.4
(Increase)/decrease in stocks (55.6) (36.0) 34.4
Increase in debtors (33.2) (6.6) (2.5)
Increase/(decrease) in creditors 97.1 51.0 (9.8)
Movement in respect of provisions (1.8) (2.0) (3.8)
68.3 58.7 131.8
15. Free cash flow and net debt
a. Free cash flow
The operating cash flow before the payment of dividends and financing items is
as follows:
28 weeks to 28 weeks to 52 weeks to
8 Nov 2003 9 Nov 2002 26 Apr 2003
£m £m £m
Cash inflow from operating activities 68.3 58.7 131.8
Net interest paid (2.6) (1.7) (4.3)
Taxation received 0.3 2.5 3.0
Capital expenditure (107.8) (98.1) (178.9)
Asset sales 41.0 6.1 45.5
Purchase of own shares - (0.6) (0.6)
Free cash flow (0.8) (33.1) (3.5)
b. Movement in net debt
£m
Opening net funds 2.5
Free cash flow (0.8)
Dividends (6.1)
Issue of ordinary shares 2.5
New finance leases (8.6)
Other non cash movements (0.2)
Closing net debt (10.7)
Closing net debt is analysed within the balance sheet at 8 November 2003 as
follows:
£m
Loan facilities (94.8)
Finance leases - due within one year (4.3)
- due after one year (18.6)
Cash at bank and in hand 106.5
Short term investments 0.5
Net debt (10.7)
Somerfield plc
Notes to the Interim Statement of Results
16. Retirement benefits under FRS 17
The FRS 17 pension deficit has reduced since the year end from £99 million to £
87 million. The deficit for the half year has been calculated using estimated
pension scheme data, prepared in accordance with the same assumptions as those
used in the year end annual report.
17. Distribution of the report and accounts
Copies of the interim financial statements will be sent to shareholders and
will be available after 9 February 2004 from the Company Secretary, Somerfield
plc, Somerfield House, Whitchurch Lane, Bristol BS14 0TJ. The interim results
will be available on Somerfield's web site at www.somerfield.plc.uk.
Information on Somerfield can also usually be obtained from financial web sites
through the use of the ticker symbol "SOF".
18. Shareholder enquiries
Computershare Investor Services PLC maintain the company's share register and
the separate Somerfield Employee Share Scheme Registers. Enquiries about
shareholdings should be addressed to the Registrars at Computershare Investor
Services PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol, BS99 7NH
(telephone 0870 702 0000).
Somerfield plc
Notes to the Interim Statement of Results
Independent review report to Somerfield plc
Introduction
We have been instructed by the Company to review the financial information for
the 28 weeks ended 8 November 2003 which comprises the consolidated profit and
loss account, consolidated balance sheet, consolidated cash flow statement,
reconciliation of movements in shareholders' funds and the related notes 1 to
18. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4 "Review of interim financial information" issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 28 weeks ended
8 November 2003.
Ernst & Young LLP
London
20 January 2004
END
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