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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ransom(William) | LSE:RNSM | London | Ordinary Share | GB0007249682 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMRNSM
RNS Number : 4598Y
Ransom(William) & Son PLC
22 December 2010
For Immediate Release 22 December 2010
WILLIAM RANSOM & SON PLC
("Ransom", "the Group" or "the Company")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
William Ransom & Son Plc, a natural healthcare Company, today announces its unaudited interim results for the six months ended 30 September 2010.
Highlights for the period:
-- Revenue of GBP13.1m (2009: GBP16m);
-- Reduction in UK Consumer Health division sales of GBP3m post disposals;
-- GBP0.2m improvement in operating profit at Pharmaceuticals division to GBP13,000 (2009: loss of GBP0.2m);
-- Natural Products division operating profit increased by GBP0.4m to GBP0.4m operating profit (2009: loss GBP30,000);
-- Operating profit before exceptional items of GBP0.8m (2009: GBP33 000). Overall operating profit of GBP0.4m (2009:loss GBP2.7m);
-- Pre exceptional operating expenses reduced by 26% to GBP3.2m (2009:GBP4.3m);
-- Underlying profit per share 0.77p (2009: loss 0.05p). Overall profit per share 0.38p (2009:loss 3.27p);
-- Net bank debt reduced by GBP3.1m to GBP2.6m (2009: GBP5.7m);
-- Secured three year financing agreement with KBC Business Capital in April 2010;
-- Exited loss making operations in Italy in July 2010;
-- Fred Whitcomb appointed Chief Executive on 27 September; and
-- Sir Roger Jones appointed as non-executive Chairman at AGM.
Subsequent events - Scheme of arrangement
On 17 December 2010 the Company announced its intention to change its corporate structure by introducing a new parent Company as the holding company of the Company, to be effected by a scheme of arrangement (the "Scheme"), and cancel the Company's admission to trading on AIM. A circular setting out the details of the Scheme and convening the shareholders meetings is being posted today in conjunction with a more detailed announcement.
Sir Roger Jones, Non-executive Chairman of Ransom, commenting on the interim results and outlook, said,
"The various initiatives highlighted in previous statements have largely been implemented. However, whist some progress has been made in operating profit, the improvement has not been derived from sales increase but rather from cost savings and a significant reduction in brand support. The outlook for the Company remains extremely challenging".
For further information please contact:
William Ransom & Son plc +44 (0)1462 437615 Fred Whitcomb - Chief Executive Buchanan Communications +44 (0)20 7466 5000 Charles Ryland / James Strong Daniel Stewart & Company PLC +44 (0)20 7776 6550 Paul Shackleton and James Felix
Chairman's Statement
Results
In the six months to 30 September 2010, Group sales were GBP13.1m (2009: GBP16m). Consumer Health Division sales fell by 29% to GBP7.1m (2009: GBP10m) mainly due to brand disposals and current market conditions. Selling and distribution costs have been reduced by GBP1.3m to GBP1.4m (2009: GBP2.7m). Administrative costs before exceptional costs increased by GBP0.15m to GBP1.75m (2009: GBP1.6m).
The Group made an operating profit before exceptional costs of GBP0.8m (2009: GBP33,000) and an overall operating profit of GBP0.4m (2009: loss GBP2.7m including GBP2.5m goodwill impairment). The losses in the Pharmaceutical Division were reduced by GBP0.2m to a breakeven position (2009: loss GBP0.2m). The Natural Products Division operating profit increased by GBP0.4m to GBP0.4m (2009: loss GBP30,000).
Adjusted profit per share 0.77p (2009: loss 0.05p) and overall profit per share was 0.38p (2009: loss 3.27p).
Net debt, consisting of a Bank loan, invoice discount facility, overdraft less cash and cash equivalents, at 30 September 2010 was reduced by GBP3.1m to GBP2.6m (2009: GBP5.7m).
Dividend
The Company is not in a position to pay a dividend at this time.
Refinancing
On 9 April 2010 the Company underwent a refinancing with KBC Business Capital which gave the Company some additional headroom.
Board
Ivor Harrison decided to leave the Company and subsequently left the Board of directors on 27 September. The Board appointed Fred Whitcomb as Chief Executive in his place.
Fred Whitcomb was appointed to the Board as a non-executive director on 14 June 2010. Fred was a founder of Optima with Steve Quinn which Ransom acquired in 2005 and was an executive director of the Company between June 2005 and December 2007. He remains a significant shareholder of the Company with just under 14% of the equity and since June 2008 has been a director of Dr Organic limited a Company in which he is also a significant shareholder. Having welcomed Fred back into the Company after his departure in 2007, the Board felt that his entrepreneurial drive will help grow sales and develop new opportunities for Ransom, building on the groundwork of his predecessor.
David Suddens served on the Board as a non-executive director for three and a half years, the last three years as Chairman, and Tim Bridge served for four and a half years. At the AGM I replaced David Suddens as non-executive Chairman and on behalf of the Board I would like to thank David and Tim for the invaluable support and advice they have provided to the Board during their tenure.
It is the Director's intention to review the composition of the Board to ensure that it is suitable for the status of the Company.
Employees
I wish to thank all staff for their ongoing support and good spirit in dealing with the challenges faced.
Scheme of arrangement
On 17 December 2010 the Company announced its intention to change its corporate structure by introducing a new parent Company as the holding company of the Company, to be effected by a scheme of arrangement (the "Scheme"), and cancel the Company's admission to trading on AIM. A circular setting out the details of the Scheme and convening the shareholders meetings is being posted today in conjunction with a more detailed announcement.
Outlook
Progress will be impossible to maintain if the UK Consumer Health Division's sales continue to fall. Uncertainty also continues to surround the Pharmaceutical Division's future performance as more fully disclosed in note 2 to the accounts. The management team are determined to mitigate falling sales and are focused on engineering a recovery.
Sir Roger Jones, Chairman
22 December 2010
Chief Executive's Review
Implementation of the Strategy
The strategy remains largely unchanged to that of the previous Board - to re-establish the Company's fortunes by returning to being a leading branded natural healthcare Company with outsourced manufacturing as follows:
1. Whilst working to improve the Company's performance we will continue to evaluate the position of the Pharmaceutical Division.
2. To halt the slide in UK Consumer Health Division's sales.
3. To recapture lost clients and markets.
4. To continue the overhaul of the supply chain and cost cutting.
The market remains extremely challenging; the improvement in financial performance has been achieved through cost cutting and a major reduction in brand support. The objective remains to halt the slide in sales and to build for the future notwithstanding a reduction of marketing resources available. Following the significant work invested in aligning the Company's cost base over the last two years, it is the Board's key objective to halt the sales reduction in the short term and increase the Company's sales in the medium to long term.
Consumer Health Division
In the first half of the year, sales of consumer healthcare products decreased by 29%, to GBP7.1m (2009: GBP10m). Of this, GBP1.8m was due to the disposal of a number of brands in the last quarter of the year ended March 2010.
The Consumer Health Division operating profit increased by GBP2.7m to GBP1.5m (2009: loss GBP1.2m including GBP2.5m goodwill impairment) despite the above mentioned reduction in sales. This was achieved through continued costs reduction and implementation of a number of supply chain initiatives.
On 12 July 2010 the Company's subsidiary Optima Italia S.r.l ("OIS") entered into an agreement to sell certain business assets and liabilities to Optima Naturals S.r.l ("ONS"), a new Company to be formed by the current manager of OIS, and appoint ONS as the distributor of a range of the Company's products in Italy and other territories.
The Company will receive total cash consideration of GBP45,000 for these assets which have a book value of approximately GBP6,000. OIS generated annual sales of approximately GBP1.3m and achieved an operating profit of approximately GBP70,000 for the year ended 31 March 2010.
Natural Products Division
The Natural Products Division traded well during the first half of the year with third party sales up 11% on the same period last year to GBP1.9m (2009: 1.7m). The combination of the sales increase and the implementation of a number of margin enhancement initiatives resulted in a GBP0.4m increase of operating profit compared with the same period last year.
The Company continues to integrate the know-how of the Natural Products Division into the Consumer Health Division and better utilise the division's knowledge and expertise in order to further expand the division's sales and operating results.
Pharmaceutical Division
Sales for the Pharmaceutical Division in the period decreased by 7% to GBP4.1m (2009: GBP4.4m) of which GBP0.8m relates to sales decrease of Radian B to the purchaser of the brand post disposal in December 2008. It is the intention of the purchaser to move the above production out of the division in due course. In the period the division returned to a breakeven position and made an operating profit of GBP13,000 (2009: loss GBP0.2m).
The Pharmaceutical Division's ability to maintain a breakeven position has had a material impact on the overall performance of the Company and the Board is reviewing the division's current performance and outlook on an ongoing basis.
Financial Review
Group revenue for the six months ended 30 September 2010 decreased by 18% to GBP13.1m (2009: GBP16m), as detailed above. Like for like revenue excluding brand disposals and discontinued lines decreased by 8%.
Selling and distribution costs decreased by 48% to GBP1.4m as a result of actions taken to restructure the Company's consumer and trade support spend in the period. Total administrative costs decreased by GBP2.2m to GBP2.1m (2009: GBP4.3m) mostly as a result of GBP2.5m goodwill impairment, (GBP0.15m increase excluding exceptional items).
After carefully estimating the carrying value of goodwill at the balance sheet date, the financial assumptions used and the present value of the cash generating unit (Consumer Health Division), the book value of goodwill was identified as representing the carrying value of goodwill as at the balance sheet date.
The Group made an operating profit before exceptional costs of GBP0.8m (2009: GBP33,000) and overall operating profit of GBP0.4m (2009: loss GBP2.7m including GBP2.5m goodwill impairment). The GBP3.1m improvement in the overall operating profit is primarily the result of the GBP2.5m goodwill impairment recorded in the same period last year, GBP1.3m reduction in sales and distribution costs, GBP0.6m improvement in manufacturing divisions operating results offset by the sales reduction in the Consumer Heath Division after brand disposals.
On 9 April 2010 the Company agreed a three year financing agreement with KBC Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The Company's existing debt facilities were replaced by long term asset based facilities with KBC comprising:
- Up to GBP3.5m invoice discount facility based on the Company's eligible trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructuring the Company agreed to various operational and financial covenants measured on a monthly basis in line with its forecast provided to KBC.
Net debt as at 30 September 2010 was GBP2.6m (2009: GBP5.7m).
Net cash inflow from operating activities for the period was GBP0.4m (2009: outflow GBP1.9m), of which GBP0.3m was a increase in working capital (2009: GBP1.4m) primarily as a result of GBP0.8m decrease in payables (2009: increase GBP0.7m).
Fred Whitcomb
Chief Executive
22 December 2010
Consolidated Interim Income Statement
For the six months ended 30 September 2010
Unaudited six months to 30 Unaudited six months to 30 Audited year ended 31 March September 2010 September 2009 2010 Before Before exceptional Before exceptional Exceptional items Exceptional Total exceptional Exceptional items items Total (Restated) items (Restated) items items Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue 13,094 - 13,094 16,021 - 16,021 30,231 - 30,231 Cost of sales (9,174) - (9,174) (11,681) - (11,681) (22,262) - (22,262) __ __ __ __ __ __ __ __ __ Gross profit 3,920 - 3,920 4,340 - 4,340 7,969 - 7,969 Selling and distribution costs (1,414) - (1,414) (2,703) - (2,703) (5,210) - (5,210) Administrative expenses (1,752) - (1,752) (1,604) (2,477) (4,081) (3,219) (13,132) (16,351) Reorganisation expenses - (331) (331) - (245) (245) - (818) (818) ---------------- ------------ ------------ --------- ------------ ------------ ----------- ------------ ------------ --------- Total Administrative expenses (1,752) (331) (2,083) (1,604) (2,722) (4,326) (3,219) (13,950) (17,169) Gain on disposal of intangible assets - - - - - - - 2,244 2,244 __ _ __ __ _ __ __ __ __ Operating profit/(loss) 754 (331) 423 33 (2,722) (2,689) (460) (11,706) (12,166) Finance costs (61) - (61) (123) - (123) (283) (102) (385) __ __ __ __ __ __ __ __ __ Profit (loss) before taxation 693 (331) 362 (90) (2,722) (2,812) (743) (11,808) (12,551) Taxation (expense)/ credit (40) - (40) 46 - 46 (16) 332 316 __ __ __ __ __ __ __ __ __ Profit (loss) from continuing operations attributable to equity holders of the parent 653 (331) 322 (44) (2,722) (2,766) (759) (11,476) (12,235) __ __ __ __ __ __ __ __ __ Profit/(loss) in earning per share: Basic profit/(loss) for the period attributable to ordinary equity holders of the parent 0.77 0.38 (0.05) (3.27) (0.90) (14.49) Diluted profit/(loss) for the period attributable to ordinary equity holders of the parent 0.77 0.38 (0.05) (3.27) (0.90) (14.49)
Exceptional items are described more fully in Note 4.
Consolidated Interim Statement of Comprehensive Income
For the six months ended September 2010
Unaudited Unaudited Audited Six months Six months Year ended to 30 September to 30 September 31 March 2010 2009 2010 GBP'000 GBP'000 GBP'000 Profit (loss) for the period 322 (2,766) (12,235) _ __ _ Exchange adjustment on foreign currency retranslation (13) 3 (13) _ __ _ Other comprehensive income for the period, net of tax (13) 3 (13) _ __ _ Total comprehensive income for the period, net of tax 309 (2,763) (12,248) Attributed to equity holders of the parent 309 (2,763) (12,248)
Consolidated Interim Balance Sheet
At 30 September 2010
Unaudited Audited 30 September Unaudited 30 31 March 2010 September 2009 2010 GBP'000 GBP'000 GBP'000 Non-current assets Property, plant and equipment 2 ,435 4,534 2,799 Intangible assets: Software 18 33 23 Goodwill (Note 7) 10,615 19,716 10,615 Other acquired intangible assets 599 1,287 589 Long term deposit 151 - - __ __ _ 13,818 25,570 14,026 __ __ _ Current assets Inventories 3,563 5,189 3,681 Trade and other receivables 5,966 7,918 6,243 Current tax asset - 14 - Cash and cash equivalents 688 572 52 __ __ _ 10,217 13,693 9,976 __ __ _ Total assets 24,035 39,263 24,002 Current liabilities Trade and other payables 4,526 7,298 5,346 Bank overdraft and loans 193 732 186 Obligations under finance leases 49 66 67 Invoice discount facility 2,756 3,856 2,566 Current tax liabilities 40 - - Interest Rate Swap - 82 28 Provisions 178 54 94 __ __ _ 7,742 12,088 8,287 __ __ _ Net current assets 2,475 1,605 1,689 __ __ _ Non-current liabilities Bank loans 289 1,669 - Deferred tax liabilities - 274 - Obligations under finance leases 90 142 110 __ __ _ 379 2,085 110 __ __ _ Total liabilities 8,121 14,173 8,397 Net assets 15,914 25,090 15,605 Equity Share capital 8,443 8,443 8,443 Share premium reserve 22,013 22,013 22,013 Revaluation reserve - - - Share based payment reserve 2 2 2 Translation reserve (24) 5 (11) Retained earnings (14,520) (5,373) (14,842) __ __ _ Equity attributable to equity holders of the parent 15,914 25,090 15,605
Consolidated Interim Statement of Changes in Equity
For the six months ended September 2010
Share Based Total Share Share Revaluation Payment Translation Other Retained Capital Premium Reserve Reserve Reserve Reserves Earnings Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2009 8,443 22,013 125 22 2 129 (2,732) 27,853 Loss for the period - - - - - - (2,766) (2,766) Other comprehensive income - - - - 3 3 - 3 --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Total comprehensive income - - - - 3 3 (2,766) (2,763) --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Property disposal - - (125) - - (125) 125 - --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- At September 2009 8,443 22,013 - 2 5 7 (5,373) 25,090 --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Loss for the period - - - - - - (9,469) (9,469) Other comprehensive income - - - - (16) (16) - (16) --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Total Comprehensive income - - - - (16) (16) (9,469) (9,485) --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- At 31 March 2010 8,443 22,013 - 2 (11) (9) (14,842) 15,605 --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Profit for period - - - - - - 322 322 Other comprehensive income - - - - (13) (13) - (13) --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- Total Comprehensive income - - - - (13) (13) 322 309 --------------- -------- -------- ------------ -------- ------------ --------- --------- -------- At 30 September 2010 8,443 22,013 - 2 (24) (22) (14,520) 15,914 --------------- -------- -------- ------------ -------- ------------ --------- --------- --------
Consolidated Interim Cash Flow Statement
For the six months ended 30 September 2010
Unaudited Unaudited Audited Six months Six months Year ended to 30 September to 30 September 31 March 2010 2009 2010 GBP'000 GBP'000 GBP'000 Net cash from operating activities (Note 6) 399 (1,912) (1,662) __ __ _ Investing activities Purchase of property, plant and equipment (18) (88) (199) Disposal of property, plant and equipment 8 100 100 Long term deposit (151) - - Purchase of intangible assets (8) (49) (142) Disposal of intangible assets - - 3,034 Proceeds from disposal of investment property - 125 125 __ __ _ Net cash used in investing activities (169) 88 2,918 __ __ _ Financing activities Proceeds from bank loans 560 - - Repayment of bank loans (79) (309) (2,503) Repayment of interest swap (28) (31) (85) Capital element of finance lease rental payments (38) (33) (65) __ __ _ Net cash from financing activities 415 (373) (2,653) __ __ _ Net increase/(decrease) in cash and cash equivalents 645 (2,197) (1,397) Net Foreign Exchange Difference (13) (3) (12) __ __ _ 632 (2,200) (1,409) __ __ _ Cash and cash equivalents at the beginning of the period (2,700) (1,291) (1,291) __ __ _ Cash and cash equivalents at the end of the period (2,068) (3,491) (2,700)
Cash and cash equivalents are described more fully in Note 8.
Notes to the financial statements
For the six months ended 30 September 2010
1. General information
The interim report was formally approved by the Board of Directors on 22 December 2010. The financial information set out in this document does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information in respect of the periods ended 30 September 2010 and 2009 is unaudited but has been reviewed by the Company's auditors, Ernst & Young LLP. Their report is attached at the end of these interim statements. The audit report for the year ended 31 March 2010 was unqualified but included an emphasis of matter for the going concern assumption.
The financial information comprises the unaudited interim results for the six months ended 30 September 2009 and 30 September 2009, together with the audited results for the year ended 31 March 2010. The financial information has been prepared using accounting policies followed in the preparation of the Group's annual financial statements for the year ended 31 March 2010, except for the adoption of the new standards and interpretations which are mandatory for periods beginning on or after 1 January 2009:
-- IFRS 2 Shared based payments - Vesting and Conditions and Cancellations
The standard has been amended to clarify the definition of vesting conditions and to prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The adoption of this amendment did not have any impact on the financial position or performance of the Group.
-- IFRS 8 Operating Segments
This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this standard did not have any effect on the financial position or performance of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS 14 Segment Reporting. Additional disclosures about each of these segments are shown in Note 3, including comparative information.
-- IAS 1 Revised Presentation of Financial Statements
The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owners changes in equity presented as a single line. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements.
-- IAS 23 Borrowing Costs
The revised lAS 23 requires capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The Group's previous policy was to expense borrowing costs as they were incurred. In accordance with the transitional provisions of the amended lAS 23, the Group has adopted the standard on a prospective basis. Therefore, borrowing costs are capitalised on qualifying assets with a commencement date on or after 1 January 2009. During the 12 months to 31 December 2009 no borrowing costs were incurred on qualifying assets.
-- IAS 32 Financial Instruments: Presentation and lAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation
The standards have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria.
The adoption of these standards did not affect the Group results of operations or financial position in the six months ended 30 September 2010.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2010 which have been filed with the Registrar of Companies. The financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (GBP000) except when otherwise indicated.
Notes to the financial statements
For the six months ended 30 September 2010
1. General information (continued)
Prior year reclassification
In the prior year accounts, sales discounts and free stock given to customers were included within selling and distribution costs. In the current year, the directors have reclassified the above treatment as follows:
- reduced price and retrospective discounts have been deducted from turnover
- free stock has been included in cost of sales.
This is considered by the directors to be a more appropriate classification of these items and has no impact on the operating loss for the period of six months to September 2010.
Previously stated Reclassification Restated 2009 2009 2009 GBP'000 GBP'000 GBP'000 Revenue 16,743 (722) 16,021 Cost of sales (11,594) (87) (11,681) Gross profit 5,149 (809) 4,340 Selling and distribution costs (3,512) 809 (2,703)
2. Material uncertainty relating to going concern
On 26 February 2009 the Company reached an agreement with its lending bank to restructure its banking facilities and secured the lending bank's long term support. The Company's banking facilities were restructured as follows:
- GBP2.6m term loan bearing an interest rate of LIBOR plus 3.75% repayable in quarterly instalments commencing June 2009 through to March 2013.
- Up to GBP4m invoice discount facility based on the Company's trade receivables position bearing an interest rate of base plus 3.25%
- GBP0.1m overdraft facility.
During the year ended March 2010 the Company worked closely with its lending bank and agreed to continue to reduce its bank debt through the disposal of non-core assets. During the last quarter of the year ended March 2010 the Company disposed of various non-core assets for a total of GBP3m of which GBP2.6m were used to reduce the Company's long term loan and convert the residual term loan in total of GBP0.5m to an overdraft facility in February 2010.
On 9 April 2010 the Company agreed a three year financing agreement with KBC Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The Company's existing debt facilities were replaced by long term asset based facilities with KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the Company's eligible trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructure the Company agreed various operational and financial covenants measured on a monthly basis in line with the Company's forecast provided to KBC.
Notes to the financial statements
For the six months ended 30 September 2010
2. Material uncertainty relating to going concern (continued)
As more fully disclosed in the Chairman's statement, changes were made to the board during September and October 2010. In recognition of this, the directors have agreed a comprehensive transition plan for the period up to the Company's AGM. The directors do not consider that this significantly increases the risk around the successful delivery of the turnaround plan.
The directors have also prepared forecasts for the business for the period to 31 March 2012 on the basis of this long term agreement with the Company's bank KBC. These forecasts reflect the Company's best estimates concerning the impact of the following on its ability to meet its banking covenants:
-- current economic downturn
-- the Company's exposure to different sales channels across the business
-- the Company's ability to meet its sales forecast and operating margin notwithstanding the Pharmaceutical Division recovery plan, and required headroom and cash generation
-- The Pharmaceutical division customer concentration combined with estimated future changes in the coming year
-- the Company's ability to achieve the planned supply chain savings
The directors have identified and considered whether the Company will be able to achieve its plan for the year and banking covenants as agreed with its lending bank under various scenarios. In anticipation of challenging market conditions in the four months period to 31 March 2011 focused mainly at the consumer health division, the Company's lending bank agreed to waive its monthly financial covenants for the period December 2010 to 31 March 2011 subject to reducing by GBP100,000 the Company's headroom during the waiver period. The directors have also considered the performance of the pharmaceutical division and its performance to date and for the rest of the forecast period, the underlying sales assumptions required to meet the consumer health division's sales targets post brand disposals in the current difficult retail economic climate, and the uncertainty of achieving the sales targets in time to meet the turnaround plan and, as a result, its banking covenants. In the event that the Company is not able to materially achieve its forecast the Company will not be able to meet the covenants agreed with its lending bank.
The above factors give rise to a material uncertainty which may cast significant doubt upon the ability of the Company to meet its banking covenants and continue as a going concern.
Having carefully considered these uncertainties the directors are satisfied that the cash flow forecasts have been properly prepared and demonstrate that the Company can meet its liabilities as they fall due in line with the agreed debt structure for the foreseeable future. On this basis they believe that it is appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments to the balance sheet intangible or tangible fixed assets, the reclassification of long term liabilities or provision for further liabilities.
3. Segmental information
For management purposes the Group is currently organized into three operating divisions and a corporate head office. The three operating divisions are:
Consumer Health Sale of consumer branded health products. Pharmaceutical Manufacture of the Group's own Medicines and Healthcare products Regulatory Agency ('MHRA') licensed products and pharmaceutical and over-the-counter products for third parties. Natural Products Manufacture of botanical extracts used as ingredients by the Pharmaceutical division and sold to third parties. Such extracts are used both as active pharmaceutical ingredients and as nutraceuticals.
Management monitors the operating results of its operating divisions separately for the purpose of making decisions about performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated statements. Group financing (including finance costs and finance revenue) and income taxes are managed on a Group basis and are not allocated to operating segments.
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Unaudited Six Adjustment months to Consumer Natural and September health Pharmaceutical products eliminations Consolidated 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue Sales to external Customer 7,073 4,142 1,879 13,094 Inter-segment sales 10 321 325 (656) - Segment revenue 7,083 4,463 2,204 (656) 13,094 Operating results Segment results 1,508 13 405 - 1,926 Unallocated expenses (1,503) Group operating profit 423 Net finance costs (61) Profit before taxation 362 Tax charge (40) Profit for the six months 322 Assets and liabilities Segment assets 16,118 2,785 4,206 - 23,109 Unallocated assets 926 Total assets 24,035 Segment liabilities 1,959 1,526 497 3,982 Unallocated liabilities 4,139 8,121 Other segment information Capital expenditure: Property, plant and equipment - 18 - 18 Intangible assets 8 - - 8 Depreciation and amortisation 22 219 133 3 377 Write-off of inventories 23 158 13 - 194
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Unaudited Six Adjustment months to Consumer Natural and September 2009 health Pharmaceutical products eliminations Consolidated (Restated) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue Sales to external Customer 9,954 4,371 1,697 - 16,022 Inter-segment sales - 295 235 (530) - Segment revenue 9,954 4,666 1,932 (530) 16,022 Operating results Segment results (1,152) (164) (30) - (1,346) Unallocated expenses (1,343) Group operating loss (2,689) Net finance costs (123) Loss before taxation (2,812) Tax credit 46 Loss for the six months (2,766) Assets and liabilities Segment assets 30,760 4,329 3,556 - 38,645 Unallocated assets 618 Total assets 39,263 Segment liabilities 3,771 665 1,522 - 5,958 Unallocated liabilities 8,215 Total liabilities 14,173 Other segment information Capital expenditure: Property, plant and equipment - 88 - - 88 Intangible assets 49 - - - 49 Depreciation and amortisation 34 232 137 28 431 Intangibles assets Amortisation 3 - - - 3 Impairment loss recognised in profit and loss 2,477 - - - 2,477 Write-off of inventories 45 - - - 45
Notes to the financial statements
For the six months ended 30 September 2010
3. Segmental information (continued)
Adjustment Audited Consumer Natural and Year ended health Pharmaceutical products eliminations Consolidated 31 March 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue Sales to external Customer 17,700 8,826 3,705 - 30,231 Inter-segment sales - 489 340 (829) - Segment revenue 17,700 9,315 4,045 (829) 30,231 Operating results Segment results (7,961) (1,868) 464 - (9,365) Unallocated expenses (2,801) Group operating loss (12,166) Net finance costs (385) Loss before taxation (12,551) Tax credit 316 Loss for the year (12,235) Assets and liabilities Segment assets 17,632 3,050 3,223 - 23,905 Unallocated assets 97 Total assets 24,002 Segment liabilities 2,818 1,142 429 - 4,389 Unallocated liabilities 4,008 8,397 Other segment information Capital expenditure: Property, plant and equipment 9 184 6 - 199 Intangible assets 142 - - - 142 Depreciation and amortisation 73 1,907 270 37 2,287 Write-off of inventories - 441 31 169 641 Impairment loss recognised in profit or loss 11,578 - - - 11,578
Notes to the financial statements
For the six months ending 30 September 2010 3. Segmental information (continued)
Unaudited Unaudited Six months Six months to September to September 2009 Audited Year 2010 (Restated) ended 2010 Geographical segment GBP'000 GBP'000 GBP'000 Revenue United Kingdom 9,282 11,582 21,460 Europe, excluding United Kingdom 1,194 2,161 4,380 Asia and Middle East 2,224 1,661 3,189 Africa 303 276 559 Australia 91 80 291 The Americas - 261 352 Group revenue 13,094 16,021 30,231
The revenue information above is based on the location of the customer and is not seasonal.
Unaudited Unaudited Audited Year At September At September ended 31 2010 2009 March 2010 GBP'000 GBP'000 GBP'000 Non-current assets United Kingdom 13,818 25,563 14,016 Europe excluding United Kingdom - 7 10 Group non-current assets 13,818 25,570 14,026
The Group does not actively manage its business on a geographical basis and accordingly does not analyse operating profit on that basis.
Notes to the financial statements
For the six months ended 30 September 2010
4. Exceptional Items
The Group has incurred exceptional costs in the period associated with the fundamental restructuring of the business.
The Group presents as exceptional items on the face of the income statement, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, to facilitate comparison with prior periods and a better understanding of trends in financial performance.
These costs are analysed as follows:
Unaudited Unaudited Six months Six months to September to September Audited year 2010 2009 ended 2010 GBP'000 GBP'000 GBP'000 Recognised in loss attributable to equity holders of the parent: Goodwill impairment - 2,477 11,578 Corporate and other restructuring 311 245 818 Gain on disposal of intangible asset - - (2,244) Net loss on disposal of Italian subsidiary 20 - - Impairment of property, plant and equipment - - 1,438 Product recall - - 116 Finance costs - - 102 Tax impact of exceptional items - - (332) 331 2,722 11,476
Goodwill impairment
After carefully estimating the carrying value of the goodwill at the balance sheet date, the book value was identified as being impaired during the year ended 31 March 2010. Consequently the book value of the goodwill was reduced by GBP11.6m for the year ended March 2010.
Corporate and other restructuring
As part of the fundamental restructuring of the business, costs have been incurred in restructuring the Board, terminating a premises lease, providing of interim management resource and in recruiting the new management team.
Gain on disposal of intangible assets
During the year ended March 2010, the Company disposed of a number of non-core products for a total of GBP3m realising a gain on disposal of GBP2.2m.
Impairment of property, plant and equipment
After carefully estimating the carrying value of the property plant and equipment at the balance sheet date, the book value was identified as being impaired. Consequently the book value of the property, plant and equipment was reduced by GBP1.4m in the year ended March 2010 to reflect the carrying value as at 31 March 2010.
Finance costs
Finance costs in relation to the restructuring of the Company and its financing in the year ended March 2010.
Notes to the financial statements
For the six months ended 30 September 2010
4. Exceptional Items (continued)
Product recall
During the year ended March 2010 the Company incurred costs due to a recall of a licensed product including a contaminated ingredient supplied to the Company. The provision reflects the estimated future costs following the product recall.
Disposal of Optima Italy S.r.l
On 12 July 2010 the Company's subsidiary Optima Italia S.r.l ("OIS") entered into an agreement to sell certain business assets and liabilities to Optima Naturals S.r.l ("ONS"), a new Company to be formed by the current manager of OIS, and appoint ONS as the distributor of a range of the Company's products in Italy and other territories.
The Company will receive total cash consideration of GBP45,000 for these assets which have a book value of approximately GBP6,000. OIS generated annual sales of approximately GBP1.3m and achieved an operating profit of approximately GBP70,000 for the year ended 31 March 2010.
5. Earning/(loss) per share
The calculation of earnings/(loss) per share is based on the profit/(loss) on ordinary activities after taxation and the weighted average number of ordinary shares of the Company.
Unaudited Unaudited Six months Six months to September to September Audited Year 2010 2009 ended 2010 No. No. No. Weighted average number of shares: For basic earnings per share 84,410,207 84,410,207 84,410,207 Outstanding share options - - - For diluted earnings per share 84,410,207 84,410,207 84,410,207 GBP'000 GBP'000 GBP'000 Profit/(loss) attributable to shareholders 322 (2,766) (759) Exceptional items 331 2,722 (11,476) Adjusted profit/(loss) 653 (44) (12,235) P P P Profit (loss) per share Basic profit (loss) per share 0.38 (3.27) (14.49) Diluted profit (loss) per share 0.38 (3.27) (14.49) Adjusted earnings/(loss) per share Basic profit (loss) per share 0.77 (0.05) (0.90) Diluted profit (loss)loss per share 0.77 (0.05) (0.90)
The above table shows overall profit per share and the profit per share adjusted to exclude the impact of exceptional costs. Notes to the financial statements
For the six months ended 30 September 2010
6. Analysis of cash flow
Six months Six months Year ended to 30 September to 30 September 31 March 2010 2009 2010 GBP'000 GBP'000 GBP'000 Unaudited Unaudited Audited Profit (loss) for the period 322 (2,766) (12,235) Adjustments for: Depreciation on property, plant and equipment 374 431 838 Gain on disposal of intangible assets - - (2,244) Amortisation of intangible assets 3 3 11 Impairment of goodwill and intangible asset - 2,477 11,578 Increase/(decrease) in provisions 84 (551) (511) Impairment of investment property, plant and equipment - - 1,438 Taxation Expense/(income) 40 (46) (317) Net finance costs 61 124 284 Operating cash flows before movements in working capital 884 (328) (1,158) Decrease/ (increase) in inventories 118 (258) 1,250 Decrease / (increase) in receivables 277 (1,862) (173) (Decrease)/ increase in payables (825) 660 (1,296) Net movement in working capital (430) (1,460) (219) Cash (consumed) / generated by operations 454 (1,788) (1,377) Income tax paid - (8) (7) Interest paid (46) (104) (263) Interest element of finance lease rental payments (9) (12) (15) Interest received - - - Net cash from operating activities 399 (1,912) (1,662)
Notes to the financial statements
For the six months ended 30 September 2010
7. Intangible assets
Patents and licences consist of intangible assets acquired through business combinations. These assets have indefinite useful lives, as they relate to the Group's marketed brands. Licences have been granted for a minimum of 10 years with the option of renewal based on whether the Group meets performance targets during the initial term. Because similar licences have been successfully renewed in the past, the Group has concluded that these assets have an indefinite useful life.
After carefully estimating the carrying value of goodwill at the balance sheet date, the financial assumptions
used and the present value of the cash generating unit the book value of goodwill was identified as representing the carrying value of goodwill as at the balance sheet date. The directors have re-evaluated the financial assumptions used and the present value of the cash flow of the cash generating unit.
With effect from 1 April 2006, the date of transition to IFRS, goodwill was no longer amortised but is now subject to annual impairment testing. Value in use is calculated as the net present value of the projected risk-adjusted cash flows of the cash generating unit to which goodwill is allocated. The cash flow projections are based on business plans approved by management for the first year and a projection which covers a period of 15 years. The discount rate applied may vary depending on the risk profile of the asset being valued but is 15% (2010: 15%) which is the Group's average pre-tax discount rate derived from a capital asset pricing model.
The directors are of the view that the impairment should be based on a 15 year forecast (2010: 15 years). The directors consider a 15 year period is appropriate due to the indefinite useful life of some of the assets and the forecasted performance of the consumer healthcare division's healthcare brands.
The key assumptions for the value in use calculations are those regarding the launch dates of products employing
these technologies, their long term growth rates, the discount rate used and the period over which the cash flows
are projected. The assumptions made reflect past experience, market research and expectations of future market
trends.
Impairment of goodwill and intangibles with indefinite lives
Goodwill acquired through business combinations and patents and licenses have been allocated for impairment
testing purposes to the consumer health cash generating unit, which is also a reportable segment. This represents
the lowest level in the Group at which goodwill is monitored for internal management purposes.
The recoverable amount of the consumer health cash generating unit has been determined based on a value in use calculation using cash flow projections over a period of 15 years based on financial forecasts approved by the Board for the year ending March 2011. The discount rate applied to cash flow projections is 15% (2010: 15%) and cash flows beyond the one year forecast are extrapolated using a growth rate from 3%-5% in the first 4 years and 1% thereafter (2010: 3%-4% to 1%).
a. Key assumptions used in value in use calculations
The calculation of value in use for the consumer health cash generating unit is most sensitive to the following assumptions:
-- Gross margin
-- Discount rates
-- Growth rate used to extrapolate cash flows beyond the forecast period.
Gross margins are based on average values achieved in the two years preceding the start of the budget period. These are increased during the long term forecast period as a result of efficiencies achieved during the forecast period.
Notes to the financial statements
For the six months ended 30 September 2010
7. Intangible assets (continued)
Discount rates reflect management's estimate of the Group's average pre-tax discount rate derived from a capital asset pricing model adjusted to current market conditions.
Growth rate estimates are based on published industry research and management expectation that the consumer healthcare division will increase its market share within the natural health care market as a result of increased penetration with its existing and new customers.
b. Sensitivity to changes in assumptions
There are reasonable possible changes in key assumptions which could cause the carrying value of the unit to exceed its recoverable amount. These are discussed below.
-- Gross margin assumptions - a reduction of 1% in projected gross margin during the forecast period would
result in a further impairment charge of GBP0.7m.
-- Discount rates - an increase of 1% in the assumed discount rate during the projections period would result
in a further impairment charge of GBP0.7m.
-- Growth rate assumptions - a reduction of 1% in the forecasted growth rate during the projection period
will result in a further impairment charge of GBP1.4m.
8. Cash and short-term deposits
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following:
Year ended At 30 September At September 31 March 2010 2009 2010 GBP'000 GBP'000 GBP'000 Unaudited Unaudited Audited Cash at bank and in hand 688 572 52 Bank overdraft and invoice discount facility (2,756) (4,063) (2,752) (2,068) (3,491) (2,700)
Notes to the financial statements
For the six months ended 30 September 2010
9. Financial Liabilities
Year ended At 30 September At 30 September 31 March 2010 2009 2010 GBP'000 GBP'000 GBP'000 Unaudited Unaudited Audited Current: Bank overdraft - 207 186 Invoice discount facility 2,757 3,856 2,566 Current obligations under finance leases and hire purchase contracts 49 66 67 Interest rate swap - 82 28 Current instalments due on bank loans 192 525 - 2,998 4,736 2,847 Non-Current: Non-current obligations under finance leases and hire purchase contracts 90 142 110 Non-current instalments due on bank loans 289 1,669 - 379 1,811 110 Bank loans: Bank Loan 481 2,194 -
The bank overdraft is secured by a floating charge over the Group's assets.
On 26 February 2009 the Group restructured its UK banking facilities and replaced the majority of its overdraft with an invoice discount facility based on the Company's outstanding trade receivables. The UK facility was secured by a fix charge over the Company's trade receivables and interest was charged at 3.25% above base rate.
The term loan is repayable by instalments with the final payment falling due on 31 March 2013. Interest is charged at 3.75% above 3 month LIBOR.
During the year ended March 2010 the Company worked closely with its lending bank and agreed to continue to reduce its bank debt through the disposal of non-core assets. During the last quarter of the year ended March 2010 the Company disposed of various non-core assets for a total of GBP3m of which GBP2.6m were used to reduce the Company's long term loan and convert the residual term loan in total of GBP0.5m to an overdraft facility in February 2010. The overdraft facility was repaid in April 2010 as part of the above mentioned financing agreement with KBC Business Capital.
In June 2007 the Group entered into a GBP2,000,000 LIBOR interest swap bearing 6.19% fixed rate to hedge the Group interest rate exposure against its term loan expiring in June 2010. As at 31 March 2010 the Group provided GBP28,000 (2009: GBP113,000) for the interest swap liability which was fully repaid in April 2010.
Notes to the financial statements
For the six months ended 30 September 2010
9. Financial Liabilities (continued)
On 9 April 2010 the Company agreed a three year financing agreement with KBC Business Capital, the asset based lending division of KBC Bank N.V. ("KBC"). The Company's existing debt facilities were replaced by long term asset based facilities with KBC that are comprised of:
- Up to GBP3.5m invoice discount facility based on the Company's eligible trade receivable position bearing an interest rate of base plus 2%
- Up to GBP1.25m stock facility based on the Company's eligible stock position bearing an interest rate of base plus 2.5%
- GBP0.56m plant and machinery facility payable in 35 equal monthly payments commencing in May 2010 bearing an interest rate of base plus 3%
As part of the above debt restructure the Company agreed various operational and financial covenants measured on a monthly basis in line with the Company's forecast provided to KBC.
The bank term loan was secured by a cross debenture and guarantee between the Company, Health Perception (UK) Limited, Optima Healthcare Limited and Optima Health (Ireland) Limited and by a debenture granting fixed and floating security over all assets of the Company and selected trademarks as agreed with the Company's lending bank.
INDEPENDENT REVIEW REPORT TO WILLIAM RANSOM & SON PLC
Introduction
We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 which comprises the Consolidated Interim Income Statement, Consolidated Interim Statement of Comprehensive Income Consolidated Interim Balance Sheet, Consolidated Interim Statements of Changes in Equity, Consolidated Interim Cash Flow Statement and the related notes 1-9. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM rules issued by the London Stock Exchange.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with International Financial Reporting Standards as adopted by the European Union and in accordance with the AIM rules issued by the London Stock Exchange.
Emphasis of matter - going concern
In forming our conclusion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 2 in the Interim Report concerning the Company's ability to continue as a going concern. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the ability to continue as a going concern. The Interim Report does not include the adjustment that would result if the Company was unable to continue as a going concern.
Ernst & Young LLP
Luton
22 December 2010
This information is provided by RNS
The company news service from the London Stock Exchange
END
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