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