Norish plc

Preliminary results 2017

 

Results

 

Norish plc (AIM: NSH), is pleased to announce its preliminary results for the year ended 31 December 2017.

 

Financial Highlights

·     Total revenue increased by 31.5% to £42.3m (2016: £32.1m)

·     Revenue from the Cold Store division increased by 13.3% to £14.3m (2016: £12.6m)

·     Revenue from the Sourcing division increased by 41% to £27.4m (2016: £19.5m)

·     Operating profit for the Group increased by 96% to £1.71m (2016: £0.87m)

·     Profit before tax increased by 138% to £1.5m (2016 : £0.6m)

·     Diluted adjusted Eps increased by 140% to 3.6p (2016 : 1.5p)

·     Dividend increased by 10% to 1.65 €cent (2016: 1.50 €cent)

·     Net debt was £5.4m at year end (2016: £5.2m)

 

 

Operational Highlights

 

·     Cold stores comprise, by far the greatest proportion of our capital employed. This division recorded sales growth of 13.3%, when compared with 2016. Divisional contribution increased from £2.1m to £3.3m

 

·     The North West Cold store division recorded sales growth of 15.9% and contribution growth of 85% in 2017, compared to the prior year. The South East Cold store division recorded sales growth of 10.8% and contribution growth of 28.5% on the same basis. This growth, at both divisions, is the result of a combination of increased volumes, improved profile of work and improved pricing.

 

·     The contribution of Town View Foods which is a Protein Sourcing business, was ahead of the last year, with sales growth of 29% and contribution ahead by 12%.

 

·     Our start-up businesses, including dairy and Foro International Connections Limited generated a combined loss of £0.3m in 2017. We expect both businesses to be profitable in 2018.

 

Operations

 

Cold Store Division

 

The North West cold store division which comprises the freehold sites at Wrexham and Birmingham performed strongly in 2017, reflecting a combination of increased intakes, greater blast freezing volumes, improved pricing with an increasing focus on costs, particularly towards the back end of the year.

 

The South East division, which comprises the sites at Bury St. Edmunds (freehold), Braintree (leasehold), Gillingham (long term leasehold at a peppercorn rent) and East Kent (leasehold) performed ahead of the same period last year. Within the mix Bury saw strong growth in profitability, albeit from a low base, which helped overall divisional performance. Sales in the South East increased by 10.8%, reflecting higher intakes and greater blast freezing volumes.

 

 

 

 

 

 

Sourcing Division

 

Our Sourcing division which was previously known as the Commodity division consists of Town View Foods Limited and Foro International Connections Limited. Sales for the division accounted for £27.4m and £19.5m last year. The division contributed £0.53m for the period unchanged from the same period last year.

 

Town View Foods Limited accounted for sales of £23.8m, against £18.5m last year. It contributed £0.62m for the period, up from £0.56m for the same period last year. Town View Foods sources protein products mainly beef, pork, lamb and chicken. Sales from pork and chicken increased by £3.7m during the period, while sales from beef and lamb increased by £1.6m.

 

Foro International Connections Limited trades in the sale of juice to the ready to drinks market along with other retail goods. Sales increased to £3.5m from £1m. It recorded a loss of £0.1m against a breakeven in 2016.

 

Dairy

 

The dairy division continues to make progress. We have completed our capital investment phase in the business - we now have a high quality leased asset which should deliver attractive returns on capital out over the next decade and beyond. Our asset utilization and operational efficiency will continue to improve as we build our dairy herd at Cantwellscourt Farm, through 2018. Our 2018 Spring calving experience has been very good with all key KPI's delivered on.

 

 

Capital

 

During the period we invested £1.8m (2016: £1.7m), £1.3m in the dairy farm in Kilkenny and £0.5m in routine capital expenditure in the cold store division.

 

Outlook

 

 

We anticipate another strong year of profit growth in 2018, underpinned by the initiation of a continuous improvement programme across the business.

 

In our Cold Store Divisions , both our North West and South East Divisions have delivered profit growth in the first two months of 2018. We are actively engaged in programmes to both control and, where appropriate  reduce costs.

 

Despite the current volatility in its underlying markets, our protein sourcing division had a good start to the year. We are confident that its low risk operating model can continue to deliver in line with expectation.

 

Our dairy farming division is expected to increase asset utilisation and operational efficiency in 2018 as we build our herd at Cantwellscourt Farm. Our Spring calving experience in 2018 has been very good with all key KPIs delivered on. We believe our dairy business has significant scope to grow from its existing asset base but also via adjacent opportunities along the value chain in the years ahead. 

 

 

 

 

Financial Review

 

Total equity at 31 December 2017 stood at £16m (2016: £15.3m). Net debt at 31 December 2017 was £5.4m compared to £5.2m at 31 December 2016.

 

Dividend

 

The board recommends the payment of a final dividend of 1.65€cent per share. This will be paid on 19 October 2018 to those shareholders on the register on the 28 September 2018. It will bring the total dividend in respect of the financial year to 1.65 €cent per share, against 1.50€cent per share last year, an increase of 10%.

 

Brexit

 

The United Kingdom is due to leave the EU on the 29 March 2019. It is difficult to pin point any direct impacts from the ongoing Brexit discussions other than to say they are hardly positive for business generally. However, our balance sheet is in good shape and leaves us well positioned to benefit from any disruption and consequent opportunity which may arise.

 

 

On behalf of the board, I would like to thank the management team and staff for their commitment and

contribution in 2017.

 

 

 

 

 

 

Ted O'Neill

Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The number of pallets handled in increased by 8%, and we handled 15% additional pallets for blast freezing in 2017.  The average occupancy increased from 85% to 92%.

 

The significant feature of the year was the improvement of the profitability and returns at our cold stores.

 

Sales

 

Total Group revenue increased by 31.5% to £42.2m (2016: £32.1m). Cold store revenues increased by 13.3% to £14.3m (2015: £12.6m).  Revenues were up mainly as a result of an increase in blast freezing volumes. Revenues in the sourcing division increased by 41% to £27.4m (2016: £19.5m). Townview Foods mainly accounted for the increased sales.

 

Gross profit

 

Gross profit increased to £2.6m (2016: £1.3m).

 

Deferred consideration

 

During the year we provided £0.1m (2016 : nil) in respect of the additional payments required in respect of the acquisition of Townview Foods.

 

Operating profit

 

Operating profit increased to £1.7m (2016: £0.9m).

 

Finance expense (net )

 

Finance expense decreased to £0.21m (2016: £0.27m).

 

Loss from discontinued operations

 

As part of the Group's strategy to exit the ambient sector we recorded a loss of Nil (2016: £0.1m).

 

In 2016, the Group exited the FMCG market and recorded a loss of £0.1m during 2017 (2016: £0.1m).

 

Earnings per share

 

The basic adjusted earnings per share increased to 3.6p (2016: 1.5p).

 

Capital

 

During the year we invested £1.9m (2016: £1.7m): £1.3 in capital outlay in the dairy farm in Kilkenny and £0.6m in routine capital expenditure in the cold store division.

 

 

 

Cash Position

 

Net debt increased to £5.4m (2016: £5.2m). Operating activities generated £2.5m (2016: used £0.3m) and financing activities absorbed £1.1m (2016: absorbed £0.9m). Investment in assets was made of £1.9m (2016: £1.7m).

 

Dividend

 

The board recommends the payment of a final dividend of 1.65 €cent per share. This will be paid on 19 October 2018 to those shareholders on the register on the 28 September 2018. It will bring the total dividend in respect of the financial year to 1.65 €cent per share, against 1.50 €cent per share last year, an increase of 10%.

 

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 purpose 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, £2.9m term loans of which, £0.4m are at floating base rate plus a bank margin of 1.2% and £0.7m are at floating base rate plus a bank margin of 1.75% and £0.41m are floating at bank base rate plus a bank margin of 2.75% and £1.12m are floating at bank base rate plus a margin of 3% and £0.27m are at a floating rate of 3.75%.

 

In February 2018 the Group renegotiated its terms loans and have refinanced £2.2m of the above term loans at floating base rate plus a 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, 66% of the Group's 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 2017

				2017	2016
				£'000	£'000
Continuing operations
Revenue				42,183	32,098
Cost of sales				(39,550)	(30,757)
Gross profit				2,633	1,341
Other income				66	238
Deferred Consideration				(100)	-
Administrative expenses				(889)	(707)
Operating profit from continuing operations				1,710	872
Finance income - fair value gain on swaps				10	20
Finance income - interest receivable				1	10
Finance expenses - interest paid				(201)	(240)
Finance expenses - notional interest				(13)	(29)
Profit on continuing activities before taxation				1,507	633
Income taxes - Corporation tax				(413)	(210)
Income taxes - Deferred tax				(28)	18
Profit for the financial year from continuing operations				1,066	441
Loss from discontinued operations				(73)	(161)
Profit for the financial year				993	280
Other comprehensive income				-	-
Total comprehensive income for the year				993	280
Profit for the financial year attributable to owners of the parent				993	291
Loss for the financial year attributable to non-controlling interest				-	(11)
Total comprehensive income for the financial year attributable to owners of the parent				993	291
Total comprehensive expense for the financial year attributable to non-controlling interest				-	(11)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME   for the financial year ended 31 December 2017
				2017	2016
Earnings per share expressed in pence per share:
From continuing operations - basic				3.6p	1.5p
- diluted				3.6p	1.5p
From discontinued operations - basic				(0.2)p	(0.6)p
- diluted				(0.2)p	(0.6)p

 

 

at 31 December 2017

			2017	2016
			£'000	£'000
Non current assets
Goodwill			2,338	2,338
Intangible assets			141	65
Property, plant and equipment			17,759	16,635
Biological assets			624	540
			20,862	19,578
Current assets
Trade and other receivables			7,537	6,264
Inventories			709	483
Cash and cash equivalents			1,558	2,044
Assets of disposal group classified as held for sale			279	698
			10,083	9,489
TOTAL ASSETS			30,945	29,067
Equity attributable to equity holders of the patent and non-controlling  interest
Share capital			5,616	5,616
Share premium account			7,281	7,281
Other reserves			103	23
Treasury shares			(563)	(563)
Retained earnings			3,516	2,926
Equity attributable to equity holders of the parent			15,953	15,283
Non controlling Interest			-	(22)
TOTAL EQUITY			15,953	15,261
Non-current liabilities
Borrowings			2,390	3,006
Financial liabilities  at fair value through profit or loss			-	44
Deferred tax			953	925
			3,343	3,975
Current liabilities
Trade and other payables			6,680	5,082
Financial liabilities  at fair value through profit or loss			29	255
Current tax liabilities			367	205
Borrowings			4,555	4,282
Liabilities of disposal group classified as held for sale			18	7
			11,649	9,831
TOTAL EQUITY AND LIABILITIES			30,945	29,067

 

 

 

 

 

Consolidated Statement of Changes in Equity

 

For the financial year ended 31 December 2017

 

 

			l				Non-
	Share	Share	Other	Treasury	Retained		Controlling	Total
	capital	premium	Reserves	shares	earnings	Total	interest	Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2016	5,344	6,990	23	-	2,981	15,338	(11)	15,327
Net profit/(loss) for the financial year	-	-	-		291	291	(11)	280
Total comprehensive income  for the financial year	-	-	-	-	291	291	(11)	280
Issue of share capital	272	291	-	-	-	563	-	563
Equity dividends paid (recognised directly in equity)	-	-	-	-	(346)	(346)	-	(346)
Treasury shares acquired	-	-	-	(563)	-	(563)	-	(563)
Transactions with owners	272	291	-	(563)	(55)	(55)	(11)	(66)
At 31 December 2016	5,616	7,281	23	(563)	2,926	15,283	(22)	15,261
Net profit/(loss) for the financial year	-	-	-		993	993	-	993
Total comprehensive income  for the financial year	-	-	-		993	993	-	993
Issue of share capital	-	-	-		-	-	-	-
Equity dividends paid (recognised directly in equity)	-	-	-		(381)	(381)	-	(381)
Foreign Exchange gain	-	-	80	-	-	80	-	80
Minority Interest acquired	-	-	-	-	(22)	(22)	22	-
Transactions with owners	-	-	80	-	590	670	22	692
At 31 December 2017	5,616	7,281	103	(563)	3,516	15,953	-	15,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for the financial year ended 31 December 2017		2017	2016
		£'000	£'000
Profit on continuing activities before taxation		1,507	633
Gain on biological assets		(66)	(238)
Amortisation of intangible assets		6	-
Foreign exchange gain		63	-
Loss on discontinued activities		(73)	(161)
Deferred Consideration		100	-
Finance expenses		214	269
Finance income		(11)	(30)
Depreciation - property, plant and equipment-net		709	625
		2,449	1,098
Changes in working capital and provisions:
Increase  in inventories		(226)	(97)
Increase in trade and other receivables		(854)	(1,130)
Increase/(decrease) in current liabilities held for sale		11	(200)
Increase in payables		1,598	885
Cash generated from operations		2,978	556
Interest paid		(201)	(240)
Interest received		1	10
Taxation paid		(251)	(49)
Net cash generated from operating activities		2,527	277
Investing activities
Investment in Intangible assets		(82)	(65)
Purchase of property, plant and equipment		(1,816)	(1,375)
Purchase of biological assets		(19)	(302)
Net cash used in investing activities		(1,917)	(1,742)
Financing activities
Dividends paid to shareholders		(381)	(346)
Deferred consideration payments		(372)	(220)
Invoice finance receipts		487	440
Overdraft receipt		(94)	304
Finance lease capital repayments		(189)	(147)
Term loan advance		266	-
Finance lease advance		24	218
Term loan repayments		(837)	(1,123)
Net cash outflow from financing activities		(1,096)	(874)
Net decrease in cash and cash equivalents		(486)	(2,339)
Cash and cash equivalents and bank overdrafts, Beginning of period		2,044	4,383
Cash and cash equivalents end of period		1,558	2,044