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Share Name | Share Symbol | Market | Type |
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Service Corporation International | TG:SVC | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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-0.68 | -0.98% | 68.58 | 66.80 | 67.12 | 68.58 | 68.58 | 68.58 | 4 | 14:56:25 |
2nd June 2003 Christian Salvesen Results for year to 31 March 2003 Key financials * Total turnover up 5% to £877m (2002: £835m) * Profit before tax - As adjusted, 30% lower at £20.1m* (2002: £28.9m restated) - As reported, loss before tax of £5.5m (2002: profit of £8.5m restated) * Earnings per share - As adjusted, 27% lower at 5.69p* (2002: 7.78p restated) - As reported, loss per share of 3.09p (2002: earnings per share of 0.71p restated) * Continued strong free cashflow**; £20.6m generated for the year * Recommended final dividend 1.0p, making a total for the year of 3.65p * Before exceptional items and goodwill amortisation ** Free cashflow is defined as cash inflow before use of liquid resources, financing, dividends and acquisitions and disposals Operational highlights * UK Industrial Division profits were down on last year but performance improved in the second half as a result of restructuring initiatives; £30m annualised of new business was won * UK Food and Consumer profits held back by facility start-up costs; dedicated contract renewals remain under considerable margin pressure * Loss-making German Industrial business sold since year-end * Industrial Division in France maintains profits and margins * Industrial Division in Spain making progress * Robust performance from Food and Consumer businesses in mainland Europe * Major contract with Marks & Spencer renewed Edward Roderick, Chief Executive of Christian Salvesen, commented: "This has been a difficult year for Christian Salvesen, but we are now confident that the restructuring is beginning to produce real progress and should result in an improved performance going forward. "In the UK, economic and trading conditions have remained extremely challenging, with a corresponding effect on both volumes and margins. However, the fundamental review of our two divisions, previously announced, has enabled us to tailor our operations to current market conditions. We have exited insufficiently profitable business, reduced headcount and fleet size and enabled our UK businesses to regain much of their competitiveness. Crucially, our UK margins at 4%, although reduced, remain in line with the industry average. "We plan to continue the restructuring process with the merger of the two UK divisions in order to extract maximum value from our core skills of network transportation and shared-user warehousing. This process is on-going at this time. "We have sold our German business as a result of the further deterioration in the German economy which severely hampered our actions to turn this loss-making business around. "Our performance elsewhere in Europe has been encouraging and we remain one of the most profitable UK logistics companies operating in mainland Europe. Our French industrial business has performed exceptionally well in a slowing economic climate. In Spain, we have returned our industrial business to break-even and we are confident that this business will move into profit in the current financial year. "Our Food and Consumer businesses in mainland Europe have produced excellent results, driven forward by our new pan-European management structure. In Benelux, we have strengthened our position in frozen and chilled food distribution and in France, our improved performance came from close control of costs and strong new business wins. Our joint ventures in Iberia and Italy have both had a very successful year; in Spain the JV is market leader in chilled distribution. "Therefore, whilst the past year's performance has been disappointing, we are confident that we have now grasped the nettle and that the current year will begin to see the benefits of our actions. This progress is in spite of continued difficult trading conditions and the burden of a £4.8m increase in the profit and loss account pension charge in the new financial year. "Christian Salvesen remains a cash generative business with high quality assets in our key markets, and a strong reputation amongst our customer base - as witnessed by our rate of new business wins and contract renewals. We are now in a position to concentrate upon leveraging those qualities in order to deliver improved returns to shareholders." For further information, please contact: Christian Salvesen PLC 2 June 2003: 020 7357 9477 Edward Roderick, Chief Executive Thereafter: 01604 662600 Peter Aspden, Finance Director Frances Gibson-Smith, Head of Investor Relations Hogarth Partnership (for Christian 020 7357 9477 Salvesen PLC) John Olsen / Tom Leatherbarrow A briefing for analysts will be held at 0930 on Monday 2nd June 2003 at the Media Centre, The London Stock Exchange. The presentation will be audio webcast later in the day on http://www.salvesen.com CHRISTIAN SALVESEN PLC RESULTS FOR THE YEAR TO 31 MARCH 2003 These financial results reflect the continuing difficult conditions for many of our businesses. In particular, a third successive year of manufacturing recession has hampered management efforts to counteract rising costs and weak volumes. Despite this, we have maintained slightly higher margins than most UK-based competitors in mainland Europe and our UK margins are in line with the industry average. The quality of our customer base continues to improve as we eliminate unprofitable contracts. Our contract renewal rate of over 85% confirms that customer confidence in the quality of our service remains strong. The Food and Consumer businesses proved resilient in mainland Europe, but in the UK delays in opening a new facility reduced profitability. This sector remains under severe pricing pressure. Our Industrial operations' shared-user networks are particularly sensitive to declining volumes. Despite this, our French business maintained its profits and margins. In the UK after a poor first half, profitability has been improving following the action we have taken, but recovery has been slower than anticipated, held back by the poor economic climate. In 2002 we said we would restore our Spanish and German Industrial businesses to profitability within two years, through aggressive restructuring. Our progress in Spain has been good and we reached a breakeven run rate by the year end. However, despite our actions, the German business remained loss-making, hampered by the declining economy, and it was sold to the management in May 2003. This setback will not deflect us from achieving our European strategic goals over the longer term and we intend to maintain our German presence via strategic partnerships and joint ventures. On 15 May the board announced that it had received an unsolicited preliminary expression of interest from a financial buyer regarding a possible offer for the company. Since then we have confirmed that we are no longer in such discussions with any parties. Group results Total turnover, including our share from joint ventures, increased 5.0% to £877.4m. The Group is reporting a pre-tax loss of £5.5m after exceptional costs of £ 21.4m and goodwill amortisation. Earnings per share fell from a restated 0.71p in the previous year to a loss per share of 3.09p. Underlying profit - before taxation, goodwill amortisation and exceptional items - declined 30.4% to £20.1m. On the same basis, earnings per share fell by 26.9% from 7.78p to 5.69p. Margins slipped to 2.9% from 4.2%: although much lower than three years ago, they are still in line with the industry average in the UK. The Group incurred exceptional costs of £21.4m in the year. This was principally the part loss on disposal of the German industrial business totalling £9.6m and the £5.2m cost of restructuring our operations. There will be a further exceptional charge in respect of the German business of approximately £10 million in the new financial year following completion of the sale. Capital cash expenditure was £40.9m, mainly on new vehicles and construction of cold stores at Easton and Bedworth in the UK. We expect to reduce capital expenditure in the new financial year thereby improving cash generation. Net debt rose slightly to £133.3m. Cash flow remains strong and the £20.6m net inflow of cash before use of liquid resources, financing, dividends and acquisitions and disposals resulted from good control of working capital and asset sales. To improve our capital structure we began a share repurchase programme, buying and cancelling 1.2m shares during the year at a cost of £0.7m. Dividend The board has recommended a final dividend of 1.0p, making a total of 3.65p for the year. This level of total dividend will form a sustainable base for dividends in future years. In the medium term the board intends to rebuild dividend cover to two times earnings before exceptional costs and goodwill amortisation. The dividend will be paid on 12 August 2003 to shareholders on the register at 18 July. Food and Consumer Division UK Food and Consumer Division - UK 2003 2002 (restated) Turnover £305.5m £291.0m Operating profit* £15.1m £21.6m Operating profit £7.7m £20.4m Operating margin* 4.9% 7.4% * Before exceptional items and goodwill amortisation In the UK, we increased sales by 5%, but lost profitability in a market impacted by continuing fierce price competition among food retailers. We also faced increased costs during the start-up of new cold stores at Bedworth and, more critically, Easton. A month-long delay in the opening of Easton meant that we had to make alternative warehousing and transport arrangements to maintain customer service during the critical pre-Christmas period. Pricing pressures mounted and volumes softened throughout the year, with slower than expected restocking after Christmas. We closed a site at Evesham and exited the chill market as this business had become unprofitable. As our customers strive to cut costs our strategy has been to modernise working practices and continually enhance productivity and efficiency. We are also developing partnerships with major clients so that we can respond better to changes in their businesses and provide added value services wherever possible. Following the food sector's example, we are now helping consumer retailers to adopt factory gate pricing - sourcing globally and controlling the supply chain from manufacturer to store. Our business development team did well, continuing to build the new business pipeline even though many companies are responding to the uncertain climate by delaying both renewals and new contracts. In March, we renewed a five-year contract covering three general merchandise sites for Marks & Spencer against strong competition and won a contract for its new homeware and furniture stores starting early in 2004. Other significant wins included a four-year frozen food storage contract from McCain, vegetable supply contracts from Safeway and JD Wetherspoon, and new contracts from Manor Bakeries, Asda and Douwe Egbert. We have also renewed our contract with Safeway, for its site at Bellshill for a further five years. Our Support Services business continues to develop the relationship with Asda, which began with the major contract won in March 2002. We recently opened a 120,000 sq.ft. depot at Magna Park to accommodate both service centre activities and those of a new contract to handle returned electrical goods. Reverse logistics is a fast growing sector fed by increasingly stringent environmental legislation. Safeway became the latest supermarket group to sign up for our COMET reverse logistics system for tracking loose items such as trays and pallets in the supply chain. Development of Support Services as a European business is continuing with the opening of an additional shared-user site in Valencia and the expansion of a dedicated site in Vitoria, both in Spain. We now collect Spanish fruit and vegetables for delivery to UK supermarkets and return the trays to Spain for washing: the vehicles for Spain also pick up return loads from Danone in France and Ter Beke and Tropicana in Belgium. Food manufacturing was hit by pricing pressure as competitors across Europe chased volume in a very tight market. RVP Foods, acquired in April 2002, has been successfully integrated and its vegetable production, processing and packaging operation is feeding additional volumes through our Easton site and the distribution network. The acquisition brought us Safeway and Iceland as new customers and we have retained our major direct sales contracts with Tesco and Waitrose. Mainland Europe Food and Consumer Division - 2003 2002 mainland Europe (including share of joint ventures in Spain, Italy and Benelux) Turnover £154.5m £143.1m Operating profit* £6.0m £4.8m Operating profit £3.4m £5.5m Operating margin* 3.9% 3.4% * Before exceptional items and goodwill amortisation On the mainland we performed well despite strong pricing pressure, with profit and margin growth outstripping competitors in both France and Benelux. In France we performed slightly better than the previous year through stringent cost control in a stagnant market and despite difficulties at the Rognac site. We won new food business with Lidl, Schaal, Aldi, Carrefour and Le Mutant, and renewed contracts with Masterfoods, Penny Market and Go Sport, the sports clothing and equipment retailer. Sales and profits grew strongly in Benelux, where we further strengthened our position in frozen and chilled food distribution. Closer partnership with our leading retail customers is enabling us to integrate frozen food supply chains by bringing retailers and their suppliers together in our three well located cold stores across the region. Our shared-user proposition was a crucial factor in securing nationwide frozen food business in the Netherlands from Albert Heijn, which renewed our four-year contract for the south of the country and added another covering the north. We also gained a large, six-year contract to distribute Unilever's frozen food across the Netherlands and additional frozen food warehousing and distribution business from Laurus. These contracts will involve further enhancement of our site at Hoogeveen, where we recently implemented our ULTIMA warehouse management system. Our joint venture with the leading Dutch meat business, Dumeco, gained a further boost when our partner acquired one of its largest competitors. This will significantly increase volumes through the Boxtel chilled distribution centre. This operation in the Netherlands and our distribution centre for Nestlé and Ter Beke in Baasrode, Belgium, provide a strong basis for further expansion in the still fragmented Benelux chill market. In Italy, our joint venture performed as planned, servicing its customers Galbani and Danone. We are pursuing opportunities with new customers to extend the operation. In Spain and Portugal, Salvesen Logística continued to grow its share of the fast-expanding temperature controlled market and maintained its market leadership in chilled food distribution. The division's excellent network coverage of Spain enables it to offer a strongly differentiated quality service and it has expanded its international traffic for Tesco, Ter Beke and Garcia Carrion using the factory gate pricing approach. The company signed a new contract with Canela Foods and DIA, part of Carrefour, added volumes to its existing contract. Industrial Division UK Industrial Division - UK 2003 2002 (restated) Turnover £180.7m £177.6m Operating profit* £6.0m £11.4m Operating profit £6.0m £9.6m Operating margin* 3.3% 6.4% * Before exceptional items and goodwill amortisation Turnover increased by 2% to £180.7m but sharply reduced margins reflected tough trading conditions for manufacturers. The highly geared shared-user network has been impacted by lower volumes, while intense pricing pressure made it difficult to recover inflation and insurance cost increases. Market conditions worsened over the Christmas period: many clients had extended shutdowns and volumes were slow to pick up afterwards. To adapt the business to the market we increased efficiencies and applied price increases where we could, downsized the fleet, eliminated unprofitable business and closed our Stoke site. This brought steady performance improvement in the second half. New business worth an annualised £30m included a five-year contract, worth more than £10m a year, from the Goodyear/Dunlop joint venture that holds over 20% of the UK replacement tyre market. We also signed major new business with Smurfit and Kappa Packaging against strong competition. Other new clients include Rittal, Mereway, Hobart Manufacturing and Ashland Plastics. Renewals included Rockware, PPG, Bong, ExxonMobil, Jewson and Canon. Iberia Industrial Division - Spain and 2003 2002 Portugal Turnover £92.7m £88.4m Operating (loss)* (£0.2m) (£1.1m) Operating (loss) (£3.2m) (£5.5m) Operating margin* - - Industrial activity has been depressed in Spain - particularly in the automotive sector, to which our Industrial operation remains heavily exposed. Downward pricing pressure from customers has been exacerbated by intense competition among transport companies to maintain trading volumes and there is little to raise expectations in the short to medium term. Against this background we reduced the operating loss, before exceptional items and goodwill amortisation, from £0.4m in the first half, reflecting the continuing cost of building up the network, to just £0.2m for the year as a whole. We expect a return to profitability this year as we further develop the pallet distribution network through strategic alliances with subcontractors and maintain downward pressure on costs. We are successfully diversifying the business away from over-reliance on automotive original equipment - making particularly good progress in sectors such as chemicals, ceramics and the automotive aftermarket, which is less volatile than the original equipment market. New business wins included contracts from Henkel, Radici Plastics, Exportlan Terminal, Incoera, Aceros Bergara, Fuchs Lubricants, Dynasol Elastomers and DIA, part of Carrefour. We won new automotive business with Volvo Truck and additional volumes from Opel International, Vector, and Renault in Portugal and Slovenia. France Industrial Division - France 2003 2002 Turnover £102.4m £89.3m Operating profit* £3.9m £3.8m Operating profit £2.1m £2.7m Operating margin* 3.8% 4.3% * Before exceptional items and goodwill amortisation Despite the slowing economy our strategy of delivering quality, value added services and shared productivity gains helped us retain market share and partially offset pricing pressures - although increases were hard to win. Many customers were reluctant to commit to long-term contracts and others used surplus labour to take distribution back in-house. But Darfeuille proved resilient, with new business wins more than compensating for volume reductions by existing customers. Revenue rose 15%, with significant wins from La Poste, Univar, Valeo and Bardal and additional business from Condat, Trelleborg Bostik, BFI, Sun Chemical and Materis. A major new contract with Michelin started in April 2003. Costs remain controlled and we stabilised the impact of fuel price rises by introducing a surcharge system in February 2003. We opened a new satellite site at Bellegarde-sur-Valserine, relocated the Toulouse depot and completed the new Angers depot in April 2003. The merger of the Guyon subsidiary with Darfeuille Services added two new depots to the network and we are working on further improvements to network efficiency. Germany Industrial Division - Germany 2003 2002 Turnover £41.6m £45.9m Operating (loss)* (£5.1m) (£5.2m) Operating (loss) (£17.1m) (£22.2m) Operating margin* - - * Before exceptional items and goodwill amortisation Action to restructure the German business under its new management team included closure of four depots and a workshop; closure of the loss-making tanker operation; completion of a centralisation project and withdrawals from unprofitable business. The increasing effectiveness of our sales organisation kept performance on target in the first quarter, but the German economy slowed sharply over the summer and continued to deteriorate for the rest of the year. Our restructuring programme, though rigorous, proved no match for this and the final result for the year was only a marginal improvement on the previous year. Sale of the business was clearly the best option for the Group. UK Restructuring In February we announced that we intended to restructure our UK businesses by integrating the UK Food & Consumer and UK Industrial businesses. This process will improve profitability, optimise back office performance and costs, maximise operational efficiency, and significantly improve customer service and sales efficiency. Our UK Industrial division has particular strength in transport operations, while Food and Consumer excels in warehousing: the merger will enhance our ability to provide outstanding end-to-end supply chain solutions for all our UK customers. Operating as a single entity, under the responsibility of a new UK Managing Director whose recruitment is on-going, will also enable us to bring a wider range of skills and perspectives to bear on sales and marketing, service and customer retention. The restructuring process is continuing at this time and we are confident that it will result in a more focussed and competitive business. Pensions The Group has now fully implemented FRS 17. The board believes that early adoption of FRS17 represents best accounting practice, ensuring that the impact of the Group's pension position can be clearly understood. The sharp fall in the UK stock market has seen the deficit on the pension scheme increase from £9.6m to £64.5m after deferred taxation relief. This will impact the financing cost of pensions significantly in 2003/04 as FRS17 uses the year-end deficit as a base for calculating the forthcoming year profit and loss charge. The total FRS17 cost of pensions was £4.8m in 2002, rising to £ 5.7m in 2003 and £10.5m in 2004. From a cash funding viewpoint, the company is paying an additional £1m in contributions above the regular cost from1 January 2003. The defined benefit pension scheme has been closed to new recruits since April 2000. The UK defined contribution scheme, launched in April 2001, has proven popular and does offer a more cost effective way of providing pensions to our employees. UK employees are eligible to join the scheme after a qualifying period of six months' service. Board and Management Jonathan Fry intends to step down from his position as Chairman on 30 September 2003, after six years in the role. Current non-executive director Dr David Fish, who joined the Board of Christian Salvesen on 22 October 2002 after a long and distinguished career with Mars Inc, the global snack and pet food manufacturer, will assume the role of Chairman at that time. Dr Fish has already made a substantial contribution to the Company. He will take over on 1 October 2003. Peter Cawdron has agreed to take on the role of senior independent director and a further non-executive director will be recruited. Looking forward It will take time to rebuild shareholder value but the sale of the German operation is a substantial step forward. We will continue to service this market through an alliance with our former business and additional partnerships or joint ventures. Food and Consumer profits were hit last year by disruption during the changeover to the new cold store at Easton but will benefit now that the facility is fully operational. Competition is likely to remain intense, with resulting pricing pressures, but in mainland Europe the division is proving resilient. Our UK Industrial networks will stay under pressure while manufacturing remains in recession; but the action we have already taken is raising network profitability and they are also well placed to take advantage of any economic upturn. We firmly believe we can restore historic levels of profitability in Spain. Overall, the company is in better competitive shape than a year ago, with a good new business pipeline. Tough trading conditions are set to persist and, with rising pension costs, will constrain profits this year. We are confident that we are taking the right actions to weather current market conditions and we expect to make progress this year. Group profit and loss account For the year ended 31 March 2003 Before Before goodwill Goodwill goodwill Goodwill amortisation amortisation amortisation amortisation and and and and exceptional exceptional exceptional exceptional items items Total items items Total 2002 2002 2002 Notes 2003 2003 2003 (restated) (restated) (restated) £m £m £m £m £m £m Turnover (group and share of joint ventures) Continuing operations 835.8 - 835.8 789.4 - 789.4 Discontinued operations 41.6 - 41.6 45.9 - 45.9 1 877.4 - 877.4 835.3 - 835.3 Less: share of joint (47.8) - (47.8) (41.6) - (41.6) ventures' turnover Group turnover 829.6 - 829.6 793.7 - 793.7 Operating profit Continuing operations 28.8 (14.8) 14.0 38.8 (11.5) 27.3 Discontinued operations (5.1) (2.4) (7.5) (5.2) (17.3) (22.5) Group operating profit 23.7 (17.2) 6.5 33.6 (28.8) 4.8 Share of operating profit in Joint ventures 1.9 - 1.9 1.7 - 1.7 Associates 0.1 - 0.1 - - - Total operating profit 25.7 (17.2) 8.5 35.3 (28.8) 6.5 Exceptional items Continuing operations: Gains on disposal of fixed assets - - - - 5.4 5.4 Discontinued operations: Surpluses in respect of businesses - 1.2 1.2 - 3.0 3.0 sold in prior years Loss on disposal of discontinued - (9.6) (9.6) - - - operations 10 Profit on ordinary activities 25.7 (25.6) 0.1 35.3 (20.4) 14.9 before interest Net interest payable 3 (6.7) - (6.7) (7.2) - (7.2) Other finance income 4 1.1 - 1.1 0.8 - 0.8 Profit /(loss) on ordinary 20.1 (25.6) (5.5) 28.9 (20.4) 8.5 activities before taxation 1,2 Tax on profit on 5 (5.0) 2.3 (2.7) (8.2) 1.6 (6.6) ordinary activities Profit/(loss) for the 15.1 (23.3) (8.2) 20.7 (18.8) 1.9 financial year Dividends on ordinary 6 (9.6) (17.6) shares Transfer from reserves for the (17.8) (15.7) financial year Earnings per share Basic (3.09p) 0.71p Diluted (3.09p) 0.71p Excluding exceptional items and goodwill 5.69p 7.78p amortisation Dividends per ordinary share 6 3.65p 6.60p Further analysis of goodwill amortisation and exceptional items can be found in note 2. The acquisition during the year has not been disclosed separately on the face of the profit and loss account. See note 8. There is no difference between the profit on ordinary activities before taxation and the profit for the financial year stated above and their historical cost equivalents. Balance sheets As at 31 March 2003 Notes Group Company Group 2002 Company 2002 2003 (restated) 2003 (restated) £m £m £m £m Fixed assets Intangible assets 72.0 72.0 - - Tangible assets 205.5 215.2 0.6 1.1 Investments in subsidiaries - - 382.9 357.9 Investments in joint ventures - - Share of gross assets 12.8 10.4 - - Share of gross liabilities (8.9) (7.5) - - 3.9 2.9 - - Investment in associated 0.8 0.7 - - undertakings Investment in own shares 0.3 0.6 0.3 0.6 282.5 291.4 383.8 359.6 Current assets Stocks 21.9 16.7 - - Debtors 138.2 153.2 2.0 2.8 Investments - 0.3 - 0.1 Cash at bank and in hand 40.1 31.5 3.0 0.1 200.2 201.7 5.0 3.0 Creditors: amounts falling due within one year Borrowings (4.4) (17.6) (8.3) (18.0) Trade and other creditors (176.2) (189.5) (10.6) (14.6) (180.6) (207.1) (18.9) (32.6) Net current assets/(liabilities) 19.6 (5.4) (13.9) (29.6) Total assets less current 302.1 286.0 369.9 330.0 liabilities Creditors: amounts falling due beyond one year Borrowings (169.0) (132.2) (163.5) (126.4) Other creditors (6.5) (8.1) - - Provisions for liabilities and (17.9) (18.9) (2.0) (2.0) charges Total net assets excluding net 108.7 126.8 204.4 201.6 pension liabilities Net pension liabilities 9 (64.5) (9.6) - - Total net assets including net 44.2 117.2 204.4 201.6 pension liabilities Capital and reserves Called up share capital 74.6 74.9 74.6 74.9 Share premium account 43.8 43.8 43.8 43.8 Capital redemption reserve 3.8 3.5 3.8 3.5 Profit and loss account (78.0) (5.0) 82.2 79.4 Equity shareholders' funds 44.2 117.2 204.4 201.6 Approved by the board of directors on 2 June 2003 and signed on its behalf by: Directors: Jonathan Fry Peter Aspden Group cashflow statement For the year ended 31 March 2003 Notes 2003 2003 2002 2002 £m £m £m £m Net cash inflow from 7 57.8 66.7 operating activities Dividends received from joint 0.6 0.3 ventures Returns on investments and servicing of finance Interest received 0.7 1.3 Interest paid (7.2) (8.3) Finance lease interest paid (0.4) (0.7) Settlement of banking dispute - (1.7) Net cash outflow from returns on investments (6.9) (9.4) and servicing of finance Taxation UK corporation tax paid (5.5) (8.8) Overseas tax repaid/(paid) 2.2 (2.0) Tax paid (3.3) (10.8) Capital expenditure and financial investment Purchase of tangible fixed (40.9) (42.1) assets Transfer/purchase of own - 0.9 shares Proceeds on disposal of 13.3 20.7 tangible fixed assets Net cash outflow for capital expenditure and financial investment (27.6) (20.5) Acquisitions and disposals Acquisitions of businesses 8 (2.8) (3.7) Net cash outflow for acquisitions and (2.8) (3.7) disposals Equity dividends paid (17.6) (17.6) Net cash inflow before use of liquid 0.2 5.0 resources and financing Management of liquid resources (Increase)/decrease in short (3.8) 0.6 term deposits Net cash (outflow)/ inflow from management of liquid resources (3.8) 0.6 Financing Buy-back of ordinary share (0.7) - capital (Decrease)/increase in debt (12.3) 6.6 due within one year Decrease in finance leases (0.7) (0.8) due within one year Increase in debt due after 20.3 4.5 one year Decrease in finance leases (0.3) (9.9) due after one year Net cash inflow from 6.3 0.4 financing Increase in cash in the year 2.7 6.0 Group cashflow statement continued For the year ended 31 March 2003 2003 2002 £m £m Reconciliation of net cashflow to movement in net debt Increase in cash 2.7 6.0 Cash inflow from increase in debt (7.0) (0.4) Cash outflow/(inflow) from increase/(decrease) in 3.8 (0.6) liquid resources Changes in net debt resulting from cashflows (0.5) 5.0 Translation difference (14.5) 1.6 Movement in net debt in the year (15.0) 6.6 Opening net debt (118.3) (124.9) Closing net debt (133.3) (118.3) Statement of Group total recognised gains and losses For the year ended 31 March 2003 Notes 2003 2002 £m (restated) £m (Loss)/profit for the financial year (8.2) 1.9 Exchange translation effect on foreign currency 1.4 (0.3) net investments Taxation on foreign currency exchange differences - (0.2) Actuarial loss recognised in the pension scheme 9 (74.2) (31.3) Deferred tax relating to pension liability 9 18.3 9.4 Total recognised gains and losses for the year (62.7) (20.5) Prior year adjustment 9 (11.3) - 2002 prior year adjustment - FRS19 deferred tax - (7.9) Total losses recognised since last annual report (74.0) (28.4) Reconciliation of movements in Group shareholders' funds For the year ended 31 March 2003 Notes 2003 2002 £m (restated) £m (Loss)/profit for the financial year (8.2) 1.9 Dividends (9.6) (17.6) (17.8) (15.7) Exchange translation effect on foreign currency net 1.4 (0.3) investments Taxation on foreign currency exchange differences - (0.2) Share buy-back (0.7) - Write off of impaired goodwill previously written - 2.5 off to reserves Actuarial loss recognised in the pension scheme 9 (74.2) (31.3) Deferred tax relating to pension liability 9 18.3 9.4 Net decrease in shareholders' funds for the year (73.0) (35.6) Shareholders' funds at start of year (originally £128.5m 117.2 152.8 before deducting prior year adjustment of £11.3m) Shareholders' funds at end of year 44.2 117.2 Notes to the preliminary announcement Note 1 Turnover, profit and net assets Segmental analysis Profit/ Profit/ (loss) (loss) before Net before tax Net assets Turnover Turnover tax 2002 assets 2002 2003 2002 2003 (restated) 2003 (restated) £m £m £m £m £m £m By geographical area and by class of business: Continuing operations Food and Consumer - United Kingdom 305.5 291.0 15.1 21.6 79.2 79.4 - Mainland Europe - Group 106.7 101.5 4.0 3.1 20.1 23.5 - Joint ventures 47.8 41.6 2.0 1.7 3.9 2.9 Total Food and Consumer 460.0 434.1 21.1 26.4 103.2 105.8 Industrial - United Kingdom 180.7 177.6 6.0 11.4 48.2 49.2 - Iberia 92.7 88.4 (0.2) (1.1) 60.3 55.0 - France 102.4 89.3 3.9 3.8 30.3 27.3 Total Industrial 375.8 355.3 9.7 14.1 138.8 131.5 835.8 789.4 30.8 40.5 242.0 237.3 Discontinued operations Industrial - Germany 41.6 45.9 (5.1) (5.2) - 7.8 877.4 835.3 25.7 35.3 242.0 245.1 Goodwill amortisation Food and Consumer - United - - (0.1) (0.2) - - Kingdom Industrial - Iberia - - (3.0) (2.9) - - - France - - (1.1) (1.1) - - - Germany - - - (0.3) - - 877.4 835.3 21.5 30.8 242.0 245.1 Exceptional items Food and Consumer - United - - (7.3) (1.0) - - Kingdom - Mainland Europe - - (2.6) 0.7 - - Industrial - United Kingdom - - - (1.8) - - - Iberia - - - (1.5) - - - France - - (0.7) - - - - Germany - - (12.0) (17.0) - - Unallocated items - - 1.2 4.7 - - 877.4 835.3 0.1 14.9 242.0 245.1 Unallocated net interest - - (6.7) (7.2) - - payable Unallocated other finance - - 1.1 0.8 - - income Unallocated net pension - - - - (64.5) (9.6) deficit Unallocated net debt - - - - (133.3) (118.3) 877.4 835.3 (5.5) 8.5 44.2 117.2 Turnover excludes sales of £77.9m (2002 £73.3m) where the Group is obliged under certain logistics contracts to purchase goods on customers' behalf and sell them on at cost. Turnover by geographical market and turnover by geographical origin are not materially different. The segmental analysis format above will change in 2003/04 as a result of the UK business reorganisation which has been announced. Note 2 Analysis of goodwill amortisation and exceptional items Attributable Attributable tax tax 2003 2003 2002 2002 £m £m £m £m Exceptional items - trading items Restructuring costs (3.9) 0.3 (12.5) 1.0 Site closure costs (1.3) 0.3 (3.2) 0.7 Loan note received previously - - 1.7 (0.4) provided for Provision for customer claim (2.6) 0.9 - - Impairment of goodwill (3.7) - (6.9) - Impairment of goodwill previously - - (2.5) - charged to profit and loss reserves Integration costs (1.5) 0.3 - - Independent Insurance liquidation - - (0.9) 0.3 (13.0) 1.8 (24.3) 1.6 Non - trading exceptional items Gains on disposal of fixed assets - - 5.4 (0.5) Surpluses in respect of businesses 1.2 - 3.0 - sold in prior years Loss on disposal of discontinued (9.6) - - - operations (note 10) (8.4) - 8.4 (0.5) (21.4) 1.8 (15.9) 1.1 Goodwill amortisation (4.2) 0.5 (4.5) 0.5 (25.6) 2.3 (20.4) 1.6 Note 3 Net interest payable 2003 2002 £m £m Interest payable on loans and overdrafts Bank loans and overdrafts 7.0 7.7 Interest payable on finance leases 0.4 0.7 7.4 8.4 Interest receivable (0.7) (1.2) Group interest 6.7 7.2 £0.5m of interest was capitalised during the year (2002 £0.1m) relating to 100% of the interest resulting from the funding of two UK capital projects. Interest on these projects was capitalised on a gross, pre tax basis based on ongoing LIBOR rate plus 1%. Note 4 Other finance income 2002 2003 (restated) £m £m Expected return on pension scheme 11.9 9.6 assets Interest on pension scheme liabilities (10.8) (8.8) Net return 1.1 0.8 Note 5 Tax on profit on ordinary activities 2003 2002 £m £m On the profit for the year UK tax at 30% (2002 30%) 4.2 5.6 Overseas tax 0.1 1.9 Share of joint ventures' tax 0.7 0.7 5.0 8.2 Tax attributable to exceptional items and goodwill amortisation: UK tax (0.9) (1.4) Overseas tax (1.4) (0.2) (2.3) (1.6) 2.7 6.6 Note 6 Dividends on ordinary shares 2003 2002 £m £m Interim paid 2.65p per share (2002 2.65p) 7.1 7.1 Final proposed 1.00p per share (2002 3.95p) 2.5 10.5 Total 3.65p per share (2002 6.60p) 9.6 17.6 Note 7 Reconciliation of operating profit to net cash inflow from operating activities 2002 2003 (restated) £m £m Total operating profit 8.5 6.5 Share of profit in joint ventures and associates (2.0) (1.7) Goodwill amortisation 4.2 4.5 Exceptional items 13.0 24.3 Depreciation charges 35.3 36.4 Earnings before interest, tax, depreciation, amortisation 59.0 70.0 and exceptional items (EBITDA) Difference between pension charge and cash contributions (0.4) (0.4) Increase in stocks (2.0) (2.2) Decrease/(increase) in debtors 15.5 (12.3) (Decrease)/increase in creditors (4.7) 19.6 Exceptional items (9.6) (8.0) Net cash inflow from operating activities 57.8 66.7 Note 8 Acquisitions On 22 April 2002 the Group completed the acquisition of the green vegetable processing activities plus certain assets and liabilities of RVP Foods Limited for a total consideration of £2.8m. The acquisition has been accounted for using acquisition accounting principles. Value at Fair Value Adjusted acquisition adjustments fair values £m £m £m Tangible fixed assets 0.5 0.9 1.4 Stocks 3.2 (0.8) 2.4 Creditors (1.0) - (1.0) Net assets acquired 2.7 0.1 2.8 Goodwill - Consideration - cash (including acquisition 2.8 costs) Fair value adjustments bring the value of tangible fixed assets up to market value and reduce stock value down to cost equivalent. The business has now been fully integrated into the UK Food and Consumer business and as such the results post acquisition cannot be readily identified. Note 9 Pension commitments The Group operates a number of pension schemes involving defined benefit and defined contribution schemes. The total pension cost for the Group was £11.2m (2002 £9.7m) of which £6.6m (2002 £4.5m) relates to the UK defined benefit scheme and £0.8m (2002 £0.5m) relates to the UK defined contribution scheme. The assets of the schemes are held in separate trustee administered funds. In the UK, the main scheme is of the defined benefit type and pension costs are assessed with the advice of qualified actuaries, using the projected unit method. The latest actuarial valuation of the Scheme was at 31 December 2001. The adoption of FRS 17 has led to a restatement of the Group's prior year profit and loss account, statement of total recognised gains and losses, reconciliation of movements in shareholders' funds and balance sheet. The effect of the adjustment is: £m Net increase in shareholders' funds as at 1 April 2001 10.9 2001/02 - change in valuation of fund assets and liabilities (21.9) - profit and loss account adjustment (see below) (0.3) Net impact on shareholders' funds as at 1 April 2002 (11.3) The impact on the profit and loss account is as follows: 2003 2002 £m £m Adjustment to staff costs 1.9 (1.1) Other finance income recognised 1.1 0.8 3.0 (0.3) Deferred tax (0.9) - 2.1 (0.3) The actuarial valuation of the Christian Salvesen Pension Scheme was updated to 31 March 2003 by a qualified independent actuary. The major assumptions used by the actuary were: 2003 2002 2001 Rate of increase in salaries 3.5% 3.5% 3.3% Rate of increase in deferred pensions 2.5% 2.5% 2.3% Rate of increase in pensions payments 2.5% 2.5% 2.3% Discount rate 5.4% 6.0% 6.1% Inflation assumption 2.5% 2.5% 2.3% The assets in the scheme and the expected rates of return at the balance sheet dates were: Long-term Long-term Long term rate rate rate of expected of expected of expected return 2003 return 2002 return 2001 Equities 7.3% 96.4 7.7% 130.7 6.25% 127.3 Bonds 4.3% 31.0 5.2% 29.9 4.75% 31.8 Other 3.45% 2.1 4.0% 0.8 4.0% - Total market value of 129.5 161.4 159.1 assets Present value of scheme (215.9) (175.1) (142.7) liabilities (Deficit)/surplus in the (86.4) (13.7) 16.4 schemes Related deferred tax 21.9 4.1 (4.9) asset/(liability) (64.5) (9.6) 11.5 £21.9m of a potential deferred tax asset of £25.9m has been recognised, which is the directors' best estimate of the amount recoverable in the foreseeable future. The movements in the scheme surplus/(deficit) were: 2003 2002 £m £m At 1 April 2002 (13.7) 16.4 Current service costs (6.6) (5.6) Contributions 7.0 6.0 Past service costs - - Other finance income 1.1 0.8 Actuarial loss (74.2) (31.3) At 31 March 2003 (86.4) (13.7) The actuarial valuation at 31 March 2003 showed an increase in the deficit from £13.7m to £86.4m. It has been agreed with the trustees that with effect from 1 January 2003 contributions will be paid at the rate of 12.8% of pensionable salaries plus an additional amount of £1m per annum. Notes to the preliminary announcement continued Note 9 Pension commitments 2003 2002 £m £m Current service costs excluding defined contribution schemes 6.6 5.6 Past service costs - - Total operating charge 6.6 5.6 Costs are anticipated to increase as a proportion of total payroll costs, as the scheme is now closed to new entrants. Analysis of amounts recognised in the statement of total recognised gains and losses 2003 2002 £m £m Actual return less expected return on pension scheme assets (49.7) (10.5) Experience gains and losses arising on the scheme liabilities 3.1 (4.0) Changes in assumptions underlying the present value of the (27.6) (16.8) scheme liabilities Actuarial loss recognised in statement of total recognised (74.2) (31.3) gains and losses: Deferred tax relating to actuarial loss 18.3 9.4 (55.9) (21.9) History of experience gains and losses 2003 2002 £m £m Actual return less expected return on pension scheme assets (49.7) (10.5) Expressed as a percentage of scheme assets (38.4%) (6.5%) Experience gains and losses arising on the scheme liabilities 3.1 (4.0) Expressed as a percentage of scheme liabilities 1.5% (2.3%) Actuarial loss recognised in statement of total recognised (74.2) (31.3) gains and losses Expressed as a percentage of scheme liabilities (34.4%) (17.8%) Note 10 Post balance sheet event On 21 May 2003 the Group completed the sale of its German Industrial business to the Managing Director of the business for a nominal consideration. Included in exceptional items is an amount of £9.6m representing the impairment of the consolidated net assets of the business to be disposed of. The consolidated net assets at 31 March 2003 of the German business were as follows:- £m Tangible fixed assets 14.0 Stocks 0.1 Debtors 6.2 Creditors (8.7) Provisions (1.6) Investments 0.2 10.2 Exchange translation difference in conversion from profit and loss (0.6) account average rate to closing balance sheet rate Exceptional loss on disposal of business 9.6 In addition, the 2004 Group accounts will reflect a further exceptional charge of around £10m representing, movements in net assets between 31 March 2003 and the completion date, transaction costs, the elimination of cash within the business and the settlement of inter company balances at completion. Other Notes (i) The above figures represent an abridged version of the Group's full accounts for the financial year ended 31 March 2003 upon which the auditors have given an unqualified report. The statutory accounts of the Group will be filed with the Registrar of Companies in due course. This report is prepared on the basis of accounting policies as set out in the published financial statements for the year ended 31 March 2002 with the exception that the Group has now fully adopted the principles of Financial Reporting Standard 17 `Retirement Benefits', the impact of which is disclosed in note 9. (ii) Earnings per share are calculated on a weighted average of the shares in issue for the year. (iii) The annual report will be posted to shareholders on 10 June 2003 and will be available on request from The Secretary, Christian Salvesen PLC, 500 Pavilion Drive, Northampton NN4 7YJ. The Annual General Meeting will be held in Edinburgh on 9 July 2003. (iv) The final dividend of 1p will be recommended to shareholders and, if approved, will be paid on 12 August 2003 to shareholders on the register on 18 July 2003. Share will trade ex - dividend from 16 July 2003. (v) This preliminary announcement was approved by the board of directors on 2 June 2003. END
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