RNS Number : 9731F
Norish PLC
13 March 2020
Norish plc
Preliminary results 2019
Norish plc (AIM: NSH), is pleased to announce its results for the year ended 31 December 2019.
Financial Highlights
· Profit before tax increased by 20% to £2.4m (2018: £2m)
· Diluted adjusted Eps increased by 28% to 6.57p (2018: 5.13p)
· Group revenue decreased by 0.8% to £36.5m (2018: £36.8m)
· Operating margins increased to 7.5% (2018: 6.5%)
· Dividend increased by 5.6% to 1.90 €cent (2018: 1.80 €cent)
· Net debt was reduced from Stg£10.5m at start of year to Stg£9.7m at year end.
· Interest cover has increased to 7.9 times (2018: 6.1 times)
Diluted adjusted EPS is calculated using profit for the financial year from continuing operations as the measure of earnings. Comparative financial information has been restated following the adoption of IFRS 16 Leases.
Divisional Highlights
£'m
Cold Stores
Sourcing
Dairy
2019
2018
% Growth
2019
2018
% Growth
2019
2018
% Growth
Revenue
15.1
13.7
10.2%
20.6
22.5
(8.4%)
0.9
0.5
80%
EBITDA
4.7
4.1
14.6%
0.5
0.7
(28.6%)
0.0
(0.2)
Operating Profit
3.3
2.9
13.8%
0.4
0.6
(33.3%)
(0.1)
(0.3)
66.7%
Operating Margin
21.9%
21.2%
1.9%
2.7%
(11%)
(60%)
Cold Store division
Cold Stores, which comprise by far our largest business activity saw sales increase by 10.2% or £1.4m, from £13.7m to £15.1m. This growth in revenue, saw divisional profits grow by 13.8%, from £2.9m to £3.3m.
The drivers of the growth in revenue, comprise a 6% increase in pallets handled, a 14% increase in blast frozen throughput, an improved stock turn (from 7.0 weeks to 6.6 weeks) and a slightly higher occupancy level. Occupancy increased from 94% in 2018, to 95% in 2019.
Power units consumed were higher by 1%, a creditable performance in the context of 14% growth in blast freezing volumes.
Sourcing Division
Sales at our sourcing division declined by 8.4% in 2019, compared with the same period in 2018, from £22.5m to £20.6m. Operating profit declined by a corresponding 33.3%, from £0.6m to £0.4m, reflecting trading uncertainty and currency fluctuations arising from the ongoing Brexit process.
The Group's original investment in the main Sourcing subsidiary, Townview Foods, has been fully recouped and the structures are in place to continue to develop this business.
Dairy Division
Our investment in dairy, whilst still in the development stage, is progressing well.
Cantwellscourt Farm's operating performance in 2019 was much improved on the prior year. Milk production was 56% ahead year on year, reflecting underlying improvement across the key operating metrics; production per cow, pasture grown and herd fertility. In the second half of the year, we also completed the conversion of the herd to 100% A2-protein - the result of an intensive program of genetic testing. The cost of conversion has been expensed through the income statement of the dairy division.
Discontinued
During 2018 the group decided to exit the Juice business for the ready to drinks market. A loss in the current year of £0.13m was incurred, compared to £0.39m last year.
Outlook
Despite the uncertainty surrounding COVID-19 we remain optimistic for the year ahead.
Notwithstanding disruption in shipments to China year to date, we believe that activity in our cold store division will return to anticipated levels over the balance of the year. The fundamental market opportunity of facilitating exports of protein to China remains intact. Within our cold store business, our investment in robotics in the North West division is starting to deliver results.
Within our sourcing division we have added fish as a protein, and we expect to increase sales and improve on profitability.
Our subsidiary, Grass to Milk Company, remains on track to launch A2-protein based dairy products in targeted export markets in the second half of 2020. The business has allocated resources across technical, regulatory & nutrition workstreams along with investment in-market in order to successfully execute its commercial strategy. We believe the business is well placed to add value to our unique A2-protein milk supply.
Dividend
The board recommends the payment of a final dividend of 1.90 €cent per share. This will be paid on 16 October 2020 to those shareholders on the register on the 25 September 2020. It will bring the total dividend in respect of the financial year to 1.90 €cent per share, against 1.80 €cent per share last year, an increase of 5.6%.
On behalf of the board, I would like to thank the management team and staff for their commitment and contribution in 2019.
Ted O'Neill
Chairman
Financial Review
The average cold store occupancy increased from 94% to 95%, pallets received increased 6% and blast freezing throughput increased 14%. The significant feature of the year was the improvement of the profitability and returns at our cold stores.
Sales
Total Group revenue decreased by 0.8% to £36.5m (2018: £36.8m). Cold store revenues increased by 10.2% to £15.1m (2018: £13.7m). Revenues were mainly up on the increase in pallets received and blast freezing volumes. Revenues in the sourcing division decreased by 8.4% to £20.6m (2018: £22.5m). Townview Foods mainly accounted for the decreased sales.
Gross profit
Gross profit increased by 8% to £3.44m (2018: £3.20m).
Operating profit
Operating profit increased by 15% to £2.74m (2018: £2.39m).
Finance expense (net)
Finance expense decreased to £0.35m (2018: £0.39m).
Loss from discontinued operations
During 2018 the group decided to exit the Juice business for the ready to drink market. A loss in the current year of £0.13m was incurred (2018: loss £0.39m).
Earnings per share
The basic adjusted earnings per share increased by 28% to 6.57p (2018: 5.13p).
Capital
During the period we invested £1.73m (2018: £2.74m) in capital assets, £0.58m was invested in robotics at the North West cold store division and the balance of £1.15m in other capital expenditure for the cold store division.
Cash Position
Net debt decreased to £9.7m (2018: £10.5m). Cash generated from operations amount to £3.5m (2018: £2.8m) and financing activities absorbed £1.8m (2018: £Nil). Investment in assets was made of £2.3m (2018: £2.9m).
Dividend
The board recommends the payment of a final dividend of 1.90 €cent per share. This will be paid on 16 October 2020 to those shareholders on the register on the 25 September 2020. It will bring the total dividend in respect of the financial year to 1.90 €cent per share, against 1.80 €cent per share last year, an increase of 5.6%.
Treasury policy and management
The treasury function, which is managed centrally, handles all Group funding, debt, cash, working capital and foreign exchange exposures. Group treasury policy concentrates on the minimisation of risk in all of the above areas and is overseen and approved by the Board. Speculative positions are not taken.
Financial risk management
The Group's financial instruments comprise borrowings, cash, derivatives, and various items, such as trade receivables, trade payables etc., that arise directly from its operations. The main purposes of the financial instruments not arising directly from operations is to raise finance for the Group's operations.
The Group may enter into derivative transactions such as interest rate swaps, caps or forward foreign currency transactions in order to minimise its risks. The purpose of such transactions is to manage the interest rate and currency risks arising from the Group's operations and its sources of finance.
The main risks arising from the Group's financial instruments are interest rate risk and, liquidity risk. The Group's policies for managing each of these risks are summarised below.
Interest rate risk
The Group finances its operations through a mixture of retained profits, bank and other borrowings at both fixed and floating rates of interest and working capital. The Group determines the level of borrowings at fixed rates of interest having regard to current market rates and future trends. At the year-end there are £2.1m term loans of which £1.64m are at floating base rate plus a bank margin of 1.85% and £0.19m are at a floating rate of 3.75% and £0.25m are at Euribor plus a bank margin of 1.85%.
Liquidity risk
The Group's policy is that, in order to ensure continuity of funding, a significant portion of its borrowings should mature in more than one year. At the year-end, 73% of the Group's term loan borrowings were due to mature in more than one year. The Group achieves short-term flexibility by means of invoice finance and overdraft.
Aidan Hughes
Finance Director
Consolidated STATEMENT OF COMPREHENSIVE INCOME
for the financial year ended 31 December 2019
2019
2018
£'000
£'000 (Restated)
Continuing operations
Revenue
36,500
36,802
Cost of sales
(33,060)
(33,601)
Gross profit
3,440
3,201
Other income
107
43
Administrative expenses
(811)
(851)
Operating profit from continuing operations
2,736
2,393
Finance income - interest receivable
1
3
Finance expenses - interest on bank loans
(120)
(187)
Finance expenses - lease interest
(229)
(209)
Profit on continuing activities before taxation
2,388
2,000
Income taxes - Corporation tax
(247)
(393)
Income taxes - Deferred tax
(165)
(63)
Profit for the financial year from continuing operations
1,976
1,544
Loss from discontinued operations
(135)
(379)
Profit for the financial year attributable to owners of the parent
1,841
1,165
Other comprehensive income
-
-
Total comprehensive income for the year attributable to owners of the parent
1,841
1,165
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the financial year ended 31 December 2019(continued)
2019
2018
Earnings per share expressed in pence per share:
From continuing operations - basic
6.57p
5.13p
- diluted
6.57p
5.13p
From discontinued operations - basic
(0.45)p
(1.26)p
- diluted
(0.45)p
(1.26)p
Consolidated Statement of financial position
at 31 December 2019
2019
2018
£'000
£'000 (Restated)
Non current assets
Goodwill
2,338
2,338
Intangible assets
564
166
Property, plant and equipment
22,777
22,857
Biological assets
824
639
26,503
26,000
Current assets
Trade and other receivables
6,857
6,250
Inventories
1,105
624
Cash and cash equivalents
1,054
1,543
Assets of disposal group classified as held for sale
277
324
9,293
8,741
TOTAL ASSETS
35,796
34,741
Equity attributable to equity holders of the parent
Share capital
5,640
5,640
Share premium account
7,321
7,321
Other reserves
(21)
103
Treasury shares
-
(563)
Retained earnings
4,313
3,484
TOTAL EQUITY
17,253
15,985
Non-current liabilities
Borrowings
6,100
6,654
Deferred tax
1,002
839
7,102
7,493
Current liabilities
Trade and other payables
6,564
5,446
Current tax liabilities
231
390
Borrowings
4,646
5,412
Liabilities of disposal group classified as held for sale
-
15
11,441
11,263
TOTAL EQUITY AND LIABILITIES
35,796
34,741
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2019
Share
Share
Other
Treasury
Retained
capital
premium
Reserves
shares
Earnings
Total
£'000
£'000
£'000
£'000
£'000 (Restated)
£'000
At 1 January 2018
5,616
7,281
103
(563)
3,516
15,953
IFRS 16 adjustments
-
-
-
-
(783)
(783)
At 1 January 2018 - Restated
5,616
7,281
103
(563)
2,733
15,170
Net profit for the financial year
-
-
-
1,165
1,165
Total comprehensive income for the financial year - Restated
-
-
-
-
1,165
1,165
Issue of share capital
24
40
-
-
-
64
Equity dividends paid (recognised directly in equity)
-
-
-
-
(413)
(413)
Foreign exchange gain
-
-
-
-
-
-
Transactions with owners
24
40
-
-
(413)
(349)
At 31 December 2018
5,640
7,321
103
(563)
3,485
15,986
Net profit for the financial year
-
-
-
-
1,841
1,841
Total comprehensive income for the financial year
-
-
-
-
1,841
1,841
Transfer of treasury shares
-
-
-
563
(563)
-
Equity dividends paid (recognised directly in equity)
-
-
-
-
(450)
(450)
Foreign exchange gain
-
-
(124)
-
-
(124)
Transactions with owners
-
-
(124)
563
(1,013)
(574)
At 31 December 2019
5,640
7,321
(21)
-
4,313
17,253
Consolidated Cash Flow Statement
for the financial year ended 31 December 2019
2019
2018
£'000
£'000 (restated)
Profit on continuing activities before taxation
2,388
2,000
Gain on biological assets
(107)
(43)
Amortisation of intangible assets
-
141
Foreign exchange loss/(gain)
97
(23)
Loss on discontinued activities
(135)
(379)
Finance expenses
349
396
Finance income
(1)
(3)
Depreciation - property, plant and equipment-net
1,649
1,396
Net cashflows from operating activities
4,240
3,485
Changes in working capital and provisions:
(Increase)/decrease in inventories
(481)
85
(Increase)/decrease in trade and other receivables
(607)
1,287
Decrease/(increase) in current assets held for sale
47
(45)
Decrease in current liabilities held for sale
(15)
(3)
Increase /(decrease) in payables
1,118
(1,234)
Cash generated from operations
4,302
3,575
Interest paid
(349)
(396)
Interest received
1
3
Taxation paid
(406)
(370)
Net cash generated from operating activities
3,548
2,812
Investing activities
Investment in intangible assets
(419)
(166)
Purchase of property, plant and equipment
(1,734)
(2,744)
Sale of biological assets
209
68
Purchase of biological assets
(324)
(35)
Net cash used in investing activities
(2,268)
(2,877)
Financing Dividends paid to shareholders
(449)
(413)
Deferred consideration payments
-
(29)
Share issue proceeds
-
64
Invoice finance receipts
(502)
551
Overdraft repayment
-
(210)
Finance lease capital repayments
(979)
(861)
Term loan advance
300
2,200
Finance lease advance
271
1,657
Term loan repayments
(410)
(2,909)
Net cash (outflow)/inflow from financing activities
(1,769)
50
Net decrease in cash and cash equivalents
(489)
(15)
Cash and cash equivalents beginning of period
1,543
1,558
Cash and cash equivalents end of period
1,054
1,543
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