8th Mar 2005 07:11
Geest PLC08 March 2005 8 March 2005 GEEST PLC PRELIMINARY RESULTS 2004 Preliminary results for the 52 weeks ended 1 January 2005 • Underlying Group sales* up 5% (reported, as adjusted for 53 weeks, down2%) • Profit before tax and exceptional costs of £34.4 million (2003restated: £37.6 million) in line with our expectations • Underlying Group operating profit** (before goodwill amortisation andexceptional costs) down 4% to £39.3 million, affected by the cost of newbusiness in France and the loss of some flowers business in the UK • Reported total operating profit up 20% to £36.6 million (2003 restated:£30.4 million) • Net margins maintained in core UK fresh prepared foods business,despite challenging retail conditions • Successful improvement programme implemented and achievements ahead oftarget, creating savings of £24 million in the period. Savings at a similarlevel expected in 2005. • Strong increase in free cash flow to £71 million (2003: £42 million);capital expenditure reduced from £47 million to £33 million • Strong balance sheet; debt less than one times EBITDA+, pension fund insurplus • As announced separately today, as part of the proposed offer fromBakkavor, a special dividend payment of 7 pence will be made to shareholders *Underlying sales are sales adjusted for the change in accounting treatment ofour produce sales to an agency basis (following change in trading agreement withour customer), the fire at Tilbrook and an extra week of sales in 2003** Underlying operating profit is profit before the additional costs for FRS 17over and above the long term funding costs of pensions+ Earnings before interest, tax, depreciation and goodwill amortisation Commenting on these results and the Group's prospects, Geest's Chairman, SirJohn Banham, said: "These results are a good achievement in a difficult year in which there was anunprecedented level of competition between food retailers. In response, weaccelerated our improvement programme and made savings of £24 million, whichhelped to maintain our margins and improve our cash flow. Following theseactions, Geest remains in good shape to continue to manage market pressures inthe food retail environment, which is expected to remain challenging, and tofulfil strong consumer demand for fresh prepared foods in the UK and on theContinent." Connected announcementsFor information regarding a recommended offer for Geest PLC by Bakkavor, pleaserefer to today's announcement by Bakkavor. Conference call details A conference call for analysts and shareholders has been scheduled for 09:30 GMTwith Gareth Voyle (Chief Executive Officer) and Mark Pullen (Group FinanceDirector) on Tuesday 8 March 2005. For those wishing to participate, thetelephone conference number is 0845 146 2044 (from the UK) and +44 (0) 1452 567624 (from overseas). The purpose of the conference call is to discuss thesepreliminary results and, as an aid, financial slides are available to view ordownload from the Geest website www.geest.co.uk (click on the 'Investors'section, followed by 'Results'), or use the following link directly http://www.geest.co.uk/gst/investors/results/ Enquiries: Gareth VoyleChief Executive OfficerGeest PLC Tel: 01775 761111 Mark PullenGroup Finance DirectorGeest PLC Tel: 01775 761111 Paula CooperGroup Communications ManagerGeest PLC Tel: 01775 761111 Tim SprattFinancial Dynamics Tel: 0207 831 3113 EXTRACTS FROM THE CHAIRMAN'S STATEMENT AND OPERATING REVIEW OVERVIEW In 2004 our core markets continued to grow. Our improvement programme, whichcommenced in the last quarter of 2003, generated results which were better thanexpected and which gained momentum throughout the period. However, there was anunprecedented level of competition and change in the grocery retail sector,which impacted our UK businesses in particular. PERFORMANCE REVIEW Underlying Group sales* grew by 5%, whilst reported sales (adjusted for 53weeks) declined by 2% to £830.6 million (2003: £851.1 million). As previouslyannounced, this is due to the change in the accounting treatment of our producesales to an agency basis (following the change in the trading agreement with ourcustomer) and to the loss of sales following the fire at Tilbrook. Underlying Group operating profit** (before goodwill amortisation andexceptional costs) decreased by 4% to £39.3 million (2003 restated: £41.0million). Reported total operating profit was up 20% to £36.6 million (2003restated: £30.4 million), owing to the prior year's exceptional cost of £9.9million. In our main business, UK fresh prepared foods, net margin was held atthe same level as 2003. This was despite 2% selling price deflation, marketprice increases on raw materials and the extra FRS 17 pension cost. Growthwould have been greater but for the substantial changes in our sales base asSafeway (previously a significant customer of Geest) was taken over. In our Continental European business, profit fell by £11/2 million - the upfront cost of a significant number of new customer wins and product launches atCrudi. Profit from our fresh produce business declined by £2 million. As reported atthe interims, we lost some business, principally in flower bouquets, followingour main customer's decision to move business to a larger specialist supplier. Profit before tax and exceptional costs was £34.4 million (2003 restated: £37.6million) - in line with our expectations - after a higher gross interest costfollowing the rise in interest rates in the period. Free cash flow increased strongly in the year to £71 million from £42 million.Part of this was used to acquire Anglia Crown for £14.2 million in cash,allowing us to expand into a new fresh prepared foods market. We also used £12million to buy back some 3% of issued share capital. Capital expenditure in the period was £33 million, 12% less than depreciation,and we invested in new production capacity for pizzas, ready meals, salads andprepared fruit. Looking forward, sales growth in the order of 8% can beaccommodated by capital expenditure at the level of depreciation. Earnings per share (before exceptional costs) fell by 21% to 34.2 pence (2003restated: 43.2 pence) reflecting, in the main, a return to a more typicaleffective tax rate for Geest of 26% (2003 restated: 15%). Earnings per share(after exceptional costs) were 33.2 pence (2003 restated: 33.9 pence). Net debtof £73.8 million as at 1 January 2005 was slightly less than 1 times EBITDA. RETURNS TO SHAREHOLDERS We did not achieve our share buy back target of 5% of issued share capital, astakeover speculation curtailed our programme towards the end of the year. Intotal, the Company acquired 2.3 million shares in 2004, representing some 3% ofthe shares in issue. As announced separately today, a special dividend of 7.0 pence per share isproposed as part of the recommended offer for Geest by Bakkavor. This dividendwill be payable to all shareholders on the register at the Dividend Record Time(6pm on 12 May 2005). It is expected that this special dividend will be paid on27 May 2005. In the event that the deal announced today does not proceed, theGeest Board is committed to maintaining a progressive dividend policy and wouldexpect to announce an additional interim dividend at that time. OPERATING REVIEW BY BUSINESS STREAM UK fresh prepared foods 2004 2003 (restated) % Year-on-year growthTurnover £611.4 m £606.9 m 3%#Operating profit £34.2 m £34.0 m(before goodwillamortisation)% net margin 5.6% 5.6% Includes a joint venture in 2004 Sales growth adjusted for an extra week in 2003 # 4% after adjusting for the effect of the fire at Tilbrook In 2004, trading conditions remained difficult as retailers focused on price toan unprecedented degree and pressure on their suppliers' margins intensified.At the end of 2003, we instigated a Group-wide response to improve efficienciesin three targeted areas: our supply chain ("buying better"), our production ("making better") and our customer supply ("selling better"). In addition, wemerged complementary business units, which reduced the number of management jobsby around 10%. Overall, our improvement programme was more successful than wehad anticipated at the beginning of 2004 and generated savings of £24 million,which offset the pressures we faced throughout 2004 and will continue to face in2005. We expect to achieve a similar level of savings in 2005. Despite high retail price competition in the food sector, our core UK freshprepared foods market grew 6% in value (nearer to 8% in volume). This continuedgrowth reflects increasing consumer demand for good quality, nutritious andconvenient fresh prepared foods. Overall, we achieved sales growth and maintained our net margin in our UK freshprepared foods business, which represents around three quarters of Groupturnover. As previously indicated, the takeover of Safeway - and the subsequentrationalisation of suppliers under its new ownership - meant that our sales tothis customer were much lower as we entered 2005 than they had been a yearearlier. We moved from an annualised run rate of around £65 million toprospective sales of £30 million for 2005. As a result, our overall UK freshprepared foods sales growth was held back by over £20 million (around 3%) in2004. In February 2004, a fire destroyed a production building in one of our readymeal facilities, Tilbrook. All employees were evacuated safely and promptly.In the following weeks, the team at Tilbrook performed spectacularly to bringthe site back into production, albeit at a lower level than previously possible,and the principal customer for this site has remained extremely supportive.Approximately £9 million of our UK fresh prepared foods sales were lost due toreduced capacity as a result of the fire. Profits were unaffected as additionalcosts and profit from lost sales were covered by insurance. In 2005, furthercapacity will be brought on stream at another ready meals site, Mariner Foods,to recoup those sales and meet growing consumer demand. Unsurprisingly, we saw a decline in sales of salads in the wet summer of 2004when compared with the hot, dry summer of 2003 which generated high sales ofcold-eating products. As salads represent a significant proportion of oursales, this decline impacted our UK fresh prepared sales growth by 1-2%. In February 2004, we opened a new pizza facility on our site at Holbeach inLincolnshire, after an investment of £18 million. We have invested specificallyto produce high quality pizzas very efficiently. Production levels increasedthroughout 2004 as business was transferred from the (now closed) site atGosberton and from Katie's in Harrow. As expected, the Holbeach Pizzeriaincurred substantial start-up losses in the year and is now well placed forgrowth in 2005. Our Saxon Valley site, which makes ready meals, faced substantial disruption in2004. Originally operated as a site dedicated to one customer, it became amulti-customer site late in 2003 and this change entailed a significant numberof new product launches. Our sales of dips grew strongly with continued high demand for vegetable-baseddips such as salsa. Our performance benefited from the new automated facilityat Spalding, which came into operation late in 2003, and our dips businessachieved record throughput in 2004. Barton attracted a new customer in the Spring of 2004 for pasta and theadditional volume moved the business back into profitability. Isleport Foods continued its strong sales growth, 58% in 2004, due to itssuccessful development of high quality cakes, cheesecakes and dairy desserts. In September 2004, we acquired Anglia Crown for a cash consideration of £14.2million (plus a pay-out dependent on performance, capped at £2 million) and weare pleased with its performance to date. Anglia Crown, which at the time ofacquisition had annualised sales of £16 million, is the second largest player inthe delivered meal sector for UK hospitals and the leading player in freshprepared meals. We expect good growth from this acquisition, which reflects ourintention to pursue opportunities in fresh prepared foods through newdistribution channels, which are complementary to our core customer base. In October 2004, we announced the formation of a new 50:50 joint venture calledFresh Cook with Rannoch Food Group to supply ready to cook meals made with rawingredients - one of the fastest-growing areas of the fresh ready meals marketsector. The business is on track to meet 2005 targets. Continental Europe fresh prepared foods 2004 2003 % Year-on-year (restated) growthTurnover £80.3 m £78.4 m 4%Operating loss £(1.9) m £(0.3) m(before goodwill amortisation) Sales growth adjusted for an extra week in 2003 Crudi, our French and Spanish business acquired in 2003, went throughsubstantial change and disruption in 2004 in order to ensure that it met thefollowing strategic criteria we had set for it to: • develop sales to McDonald's as this customer broadens its repertoire ofhealthy-eating products; • act as a base for supply of prepared fruit from European countries(complementing our operation in South Africa); and • enter the Spanish retail market for prepared leaf salads. In 2004 we trebled the number of customers at Crudi. For one of them, Caprabo,we launched a complete range of prepared leafy salads under its own brand. Wecommenced supply of prepared fruit to Germany and the UK and, for McDonald's, wechanged virtually all of our existing range of products and then expanded itsubstantially. There was significant disruption as the new customers andproducts were introduced and, as a result, Crudi reported a loss in 2004. Cinquieme Saison, which supplies French retailers with prepared leafy salad,experienced significant price deflation in 2004 (up to 10%) due to pressure fromour larger competitors. Excellent work by our employees in this businessimproved productivity significantly and Cinquieme Saison was profitable, despitethe price pressure. Vaco, our business in Belgium supplying The Netherlands, saw sales growth ofaround 5% in its core ready meals range to its principal customer, Albert Heijn. In agreement with this customer, Vaco is now focusing on a narrower range ofproducts, which led to the withdrawal of products such as pizza and pasta. Thisrefocusing reduced reported sales but allows a better base for future growth.Vaco was profitable in 2004. Produce 2004 2003 % Year-on-year % Year-on-year growth growth (consistent accounting practice)Turnover £148.8 m £191.5 m (21)% 17%Operating profit £5.5 m £7.6 m (28)%(before goodwillamortisation)% net margin 3.7% 4.0% Includes joint venture and (in 2003) associate income Sales adjusted for an extra week in 2003 In 2004, our fresh produce business went through considerable change andexpansion as we continued to restructure this business. This process isdesigned to reduce risk and develop cash growth and is nearly complete.Previously, we supplied one retail customer with virtually all of its whole headsalads, grown both domestically and imported. In the middle of 2004, weextended the portfolio and signed a five-year agreement with the same customer,which allowed us to become sole supplier of virtually all of its importedproduce (other than bananas). We created a new company called InternationalProduce Ltd (IPL) (of which we own 76%) to manage this business. Our existingbusiness, English Village Salads (EVS), now focuses on whole head salads growndomestically. As a result of the trading agreement with the customer, both IPLand EVS sales have been accounted for on an agency basis since July 2004. The effect of this change is a reported decline in sales for our producebusiness stream and also for the Group as a whole. On the basis of consistentsales reporting practice, produce sales grew by 17%. Our business selling bouquets of flowers to major retailers lost its principalcustomer, who consolidated its supply base. As a result, this business and ourjoint venture, The Flower Team, were closed in October, unfortunately with someredundancies (as previously reported). The impact of this business loss was ayear-on-year reduction in operating profit of about £1 million. We also closedone of our wholesale flower branches, which resulted in a £0.7 millionexceptional cost from goodwill previously written off to reserves. Ouryear-on-year profit was also affected by a one-off contribution (associated withthe sale of Enzafruit Worldwide Ltd) of over £1/2 million in 2003, which was notrepeated in 2004. Geest QV, our potato joint venture business, had a difficult start to the yearas disruption to supply depressed profit in the first half. However, itrecovered well in the second half, almost matching its 2003 full year profitfigure. MARKET CONDITIONS AND OUTLOOK Looking forward, there is clear continued growth in consumer demand for ourproducts. In our largest business stream, UK fresh prepared foods, currentmarket growth rates are 6% and continue to remain well ahead of the general foodmarket. We gained additional retail business at the end of 2004, amounting tosome £30 million of annualised sales, which should benefit sales levelsthroughout 2005. Since the period end, we have announced our intention to acquire the trade andmoveable assets of the prepared leafy salads business of G's Marketing Ltd.This allows consolidation in this key market sector. Only around 2% of our prepared products contained an ingredient, the subject ofthe Sudan 1 national product recall in February 2005. The cost is likely to berelatively low and should be recovered from our supplier. We expect high levels of retail price competition to continue and the foodretail trading environment is likely to remain very challenging. However, wewill continue to generate savings from our improvement programme, which shouldstand us in good stead to manage pressure on margins. We remain confident of the opportunity for further growth for Geest, supportedby its leading market positions, its focus on fresh prepared foods and produceand its well-invested and modern production base. FINANCIAL REVIEW Pensions We implemented FRS 17 'Retirement benefits' in 2004 to aid clear understandingof the position of our pension fund, which is in surplus. The accounts for the fifty three weeks ended 3 January 2004 have been restatedfor the move to FRS 17 and result in a higher charge to profit before tax of£3.8 million and a reduction in net assets of £13.0 million. One effect of introducing FRS 17 is that there is now an element of volatilityin operating profit because of the way in which FRS 17 defines the currentservice cost of pensions. It varies from the long term funding cost; in 2004 itwas £1.4 million greater than the funding cost but in 2003 it was only £0.3million greater i.e. our reported operating profit worsened solely as a resultof this volatility (caused by a movement in the interest rate on AA ratedcorporate bonds). 52 weeks ended 53 weeks ended 1 Jan 2005 3 Jan 2004 (restated) £ millionDefined benefit pension charge to operating profit 4.6 3.3Interest credit (2.8) (1.5)Net charge against profit before tax 1.8 1.8 The pension fund remains in surplus. AcquisitionWe acquired Anglia Crown Limited - a supplier of fresh ready meals to hospitals- at an initial cost of £14.2 million in September 2004. A furtherconsideration, capped at £2 million, is payable dependent on performance. Thisbusiness was profitable upon acquisition and remains so. Sales accounting From July 2004 onwards, the sales of International Produce Limited and (IPL)and English Village Salads (EVS) were accounted for on an agency basis,following a change in the trading agreement with our customer. This does notaffect reported profits but reduces reported sales as follows: 52 weeks ended 53 weeks ended 1 Jan 2005 3 Jan 2004 £ millionProduce reported turnover 148.8 191.5Produce turnover recorded on an agency basis consistentlythroughout period 84.1 73.2 Interest and taxation Gross interest payable (before net finance income under FRS 17) for the periodwas £5.0 million against £4.2 million in 2003. This increase reflects bothrising interest rates and the timing of the reduction in debt, which happenedlate in the period. Interest cover (before goodwill amortisation andexceptional costs) at over seven times remains comfortably below our targetlevel and well within banking covenants. The Group tax charge for the period was £9.0 million, an effective rate of tax(before exceptional costs) of 26% (2003 restated: 15%) compared to the standardUK corporation tax rate of 30%. Our rate in 2003 was exceptionally lowfollowing the satisfactory settlement of two outstanding tax issues and has nowreturned to a rate which is more typical for Geest. We will continue to work toobtain an effective tax rate below the standard rate. We aim to achieve this bythe continued use of tax planning for major transactions and the possible use oftax losses in future years. Earnings per share Earnings per share (after exceptional costs) were 33.2 pence (2003 restated:33.9 pence). Before exceptional costs, earnings per share reduced by 21% to34.2 pence (2003 restated: 43.2 pence), owing, in the main, to the change in oureffective tax rate, as reported above. Exceptional item in the period Following the closure of one of our wholesale flower branches, goodwill of £0.7million - previously written off to reserves - has been recognised and chargedas an exceptional cost. Accounting standards Our accounting policies fully reflect the requirements of the AccountingStandards Board. We have adopted FRS 17 'Retirement benefits' earlier thannecessary. This standard requires that the surplus or deficit in a pensionscheme (measured with reference to the fair values of the scheme assets andliabilities) is shown on the employer's balance sheet. The overall figures inthe performance statements reflect the changes in those fair values year onyear. In 2003, we formed a working group to assess and understand the implications ofIFRS and prepare for the corresponding accounting treatment and restatement.This has ensured that we are now in a position to adopt IFRS for the comingperiods. Consolidated profit and loss account for the fifty two weeks ended 1 January 2005 52 weeks 53 weeks ended 1 ended 3 January January 2005 2004 Note £ million Restated (note 1) Before Exceptional Before Exceptional costs costs exceptional exceptional costs (note 4) costs (note 4) Total Total Turnover 2 Group and share of joint ventures 845.2 - 845.2 881.9 - 881.9 Less: share of joint ventures' turnover (14.6) - (14.6) (14.4) - (14.4) 3 Group turnover 830.6 - 830.6 867.5 - 867.5 Group operating profit/(loss) before goodwill amortisation 37.9 - 37.9 40.7 (9.9) 30.8 Goodwill amortisation (1.5) - (1.5) (1.2) - (1.2) 3 Group operating profit/(loss) 36.4 - 36.4 39.5 (9.9) 29.6 Share of joint ventures' operating profit 0.2 - 0.2 0.6 - 0.6 Share of associate's operating profit - - - 0.2 - 0.2 2 Total operating profit/(loss) 36.6 - 36.6 40.3 (9.9) 30.4 Loss on termination of an operation - (0.7) (0.7) - - - Net interest payable (2.2) - (2.2) (2.7) - (2.7) Profit/(loss) on ordinary activities 34.4 (0.7) 33.7 37.6 (9.9) 27.7 before taxation 5 Taxation on profit/(loss) on ordinary (9.0) - (9.0) (5.7) 3.0 (2.7) activities Profit/(loss) on ordinary activities after 25.4 (0.7) 24.7 31.9 (6.9) 25.0 taxation Equity minority interests (0.2) - (0.2) 0.1 - 0.1 Profit/(loss) for the financial period 25.2 (0.7) 24.5 32.0 (6.9) 25.1 6 Dividends paid and proposed (11.2) - (11.2) (15.6) - (15.6) Retained profit/(loss) for the period 14.0 (0.7) 13.3 16.4 (6.9) 9.5 7 Basic earnings per share 34.2p (1.0)p 33.2p 43.2p (9.3)p 33.9p 7 Diluted earnings per share 33.1p 33.8p 6 Dividend per share 15.6p 20.9p In both the current and preceding periods, the Group made no materialacquisitions. In the current period a material loss of £0.7 million arose onthe termination of a small discontinued operation and relates to goodwillwritten back. No material discontinued operations arose in any of the periods.Details of other acquisitions and disposals are shown in note 8. Consolidated statement of total recognised gains and lossesfor the fifty two weeks ended 1 January 2005 52 weeks ended 53 weeks ended 1 January 3 January 2005 2004£ million Restated (note 1)Group profit for the financial period 24.5 24.5Share of joint ventures' profit for the period - 0.4Share of associate's profit for the period - 0.2Profit for the financial period 24.5 25.1Actuarial gain/(loss) recognised on pension scheme 3.8 (1.4)Deferred tax associated with actuarial gain/(loss) (1.1) 0.4Exchange differences on translation of foreign currency assets andliabilities 0.6 0.2Total recognised gains and losses for the period 27.8 24.3 Note on prior period adjustmentTotal recognised gains and losses for the period as above 27.8Prior period adjustment (note 1) (13.0)Total recognised gains and losses recognised since last Annual Report 14.8 Reconciliation of movements in equity shareholders' fundsfor the fifty two weeks ended 1 January 2005 52 weeks ended 53 weeks ended 1 January 3 January 2005 2004 Restated £ million (note 1)Total recognised gains and losses for the financial 27.8 24.3periodDividends to ordinary shareholders (11.2) (15.6)Goodwill written back on termination 0.7 -Purchase of treasury shares (12.0) -Costs associated with purchase of treasury shares (0.1) -Other movements on reserve for own (0.5) 0.3sharesNew share capital subscribed 1.1 1.1Net increase in equity shareholders' funds 5.8 10.1Opening equity shareholders' funds * 171.4 161.3Closing equity shareholders' funds 177.2 171.4 * Opening equity shareholders' funds at 3 January 2004 were originally £184.4million before the prior period adjustment of £13.0 million. Consolidated balance sheet as at 1 January 2005 1 January 3 January 2005 2004 £ million Restated (note 1) Fixed assets Intangible assets 32.9 22.8 Tangible assets 269.7 267.9 Investment in joint ventures 2.3 0.5 304.9 291.2 Current assets Stocks 20.6 18.7 Debtors: due within one year 111.4 108.0 due after more than one year 1.0 1.1 Total debtors 112.4 109.1 Cash at bank and in hand 24.0 22.7 157.0 150.5 Creditors: Amounts falling due within one year Borrowings (6.6) (6.6) Other creditors (167.1) (148.6) (173.7) (155.2) Net current liabilities (16.7) (4.7) Total assets less current liabilities 288.2 286.5 Creditors: Amounts falling due after more than one year Borrowings (91.2) (93.6) Provisions for liabilities and charges (20.9) (20.1) Net assets before pension asset/(liability) 176.1 172.8 Net pension asset/(liability) 1.4 (1.2) Net assets 177.5 171.6 Capital and reserves Called up share capital 3.8 3.8 Share premium account 24.0 22.9 Revaluation reserve 0.1 0.1 Reserve for own shares (14.8) (2.3) Profit and loss account 164.1 146.9 Equity shareholders' funds 177.2 171.4 Equity minority interests 0.3 0.2 177.5 171.6 Consolidated cash flow statement for the fifty two weeks ended 1 January 2005 52 weeks 53 weeks ended ended 1 January 3 January 2005 2004 £ million Note 9 Net cash inflow from operating activities 90.3 61.7 Dividends from associate and joint ventures 0.2 0.4 Returns on investments and servicing of finance (5.0) (4.5) Taxation paid (8.0) (7.6) Capital expenditure and financial investment (33.0) (47.2) Acquisitions and disposals (13.7) (15.1) Equity dividends paid (15.9) (14.8) Net cash inflow/(outflow) before use of liquid resources and financing 14.9 (27.1) Management of liquid resources (2.8) 11.2 Financing (13.4) 23.9 (Decrease)/increase in cash in the period (1.3) 8.0 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the period (1.3) 8.0 Cash flow increasing debt (2.9) (28.9) Cash flow decreasing lease financing 5.4 6.1 Cash flow increasing/(decreasing) liquid resources 2.8 (11.2) Change in net debt resulting from cash flows 4.0 (26.0) Loans and finance leases acquired with subsidiary undertaking - (2.4) Translation difference (0.3) (1.4) Movement in net debt in the period 3.7 (29.8) Net debt at the beginning of the period (77.5) (47.7) Net debt at the end of the period (73.8) (77.5) Notes to the accounts for the fifty two weeks ended 1 January 2005 1 Prior period adjustment Full implementation of FRS 17 'Retirement benefits' has been carried out for thefirst time in the fifty two weeks ended 1 January 2005. The effect for theGroup on the prior period results of implementing FRS 17 is as follows: 53 weeks ended 3 January 2004£ millionProfit & loss account Decrease in operating profit (5.3)Decrease in net interest payable 1.5Decrease in taxation on profit/(loss) on ordinary activities 1.1Decrease in profit /(loss) after taxation (2.7) Balance sheet Decrease in others debtors due in more than one year (16.8)Decrease in deferred tax creditor 5.0Increase in net pension liability (1.2)Decrease in equity shareholders' funds (13.0) Cash flow Decrease in Group operating profit (5.3)Increase in debtors (1.3)Decrease in SSAP 24 debtor 5.0Retirement benefits less contributions 1.6 - . 2 Segmental analysis An analysis of turnover, including UK sales of the joint ventures of £14.6million (2003: £14.4 million), by geographical destination is set out below: 52 weeks ended 53 weeks ended£ millions 1 January 2005 3 January 2004 UK 759.0 795.5Rest of Europe 82.3 80.6Other 3.9 5.8 845.2 881.9 . By activity 52 weeks ended 1 January 2005 53 weeks ended 3 January 2004 £ million Restated (note 1) Assets Profit/ Assets Profit/ Employed Turnover (loss) Employed Turnover (loss)UK fresh prepared foods 255.6 611.4 33.5 246.2 606.9 33.5Continental Europe freshprepared foods 37.5 80.3 (2.7) 35.7 78.4 (1.0)Produce (10.7) 148.8 5.5 0.6 191.5 7.6Other 1.3 4.7 0.3 3.7 5.1 0.2 283.7 845.2 36.6 286.2 881.9 40.3Net debt (73.8) - - (77.5) - -Non-operating (37.5) - - (37.1) - - 172.4 845.2 36.6 171.6 881.9 40.3Loss on termination ofoperations (0.7) (9.9)Net interest payable (2.2) (2.7)Profit before taxation 33.7 27.7 3 An analysis of results from continuing operations An analysis of results from continuing operations, excluding the joint venturesand associate undertaking, is set out below: 52 weeks ended 53 weeks ended 1 January 2005 3 January 2004 £ million Restated (note 1) Before Exceptional costs exceptional costs (note 4) Total TotalGroup turnover 830.6 867.5 - 867.5 Cost of sales (712.4) (737.9) (7.2) (745.1)Gross profit/(loss) 118.2 129.6 (7.2) 122.4Administrative expenses (excluding goodwill (80.3) (88.9) (2.7) (91.6)amortisation)Goodwill amortisation (1.5) (1.2) - (1.2)Group operating profit/(loss) 36.4 39.5 (9.9) 29.6 4 Loss on termination of operations and exceptional costs A loss on termination of an operation of £0.7 million arose on the closure of awholesale flower branch and represents the goodwill written back from reserves. The exceptional costs in the fifty three weeks ended 3 January 2004 of £6.9million net of taxation related to the mothballing of the Gosberton facility andtransfer of business to Holbeach. The gross costs comprised cash expended inthe period amounting to £1.4 million, provisions for redundancy and other costscommitted to at the period end amounting to £2.4 million and the net book valueof fixed assets written off amounting to £6.1 million. 5 Taxation The tax charge for the fifty two weeks ended 1 January 2005 of £9.0 million(fifty three weeks ended 3 January 2004 (restated): £2.7 million) has beencalculated based upon the effective tax rate of 26% pre-exceptional costs and27% post-exceptional costs (fifty three weeks ended 3 January 2004 (restated):15% pre-exceptional costs and 10% post-exceptional costs). 6 Dividends 52 weeks ended 53 weeks ended £ million 1 January 2005 3 January 2004Interim dividend paid of 8.6p (2003: 8.0p) 6.1 6.0Special dividend of 7.0p (2003: nil) 5.1 -Proposed final dividend of nil (2003: 12.9p) - 9.6Total dividend of 15.6p (2003: 20.9p) 11.2 15.6 7 Earnings per share Earnings per share are calculated based upon the results and weighted averagenumber of shares for the financial period as follows: 52 weeks ended 53 weeks ended 1 January 2005 3 January 2004 Restated (note 1) Earnings per Weighted Earnings Weighted share average no. per share average no. Result Result pence £ 000 of shares pence £ 000 of sharesBasic earnings per share - pre 34.2 25,222 73,719,369 43.2 32,037 74,229,229exceptionalBasic earnings per share - exceptional (1.0) (728) 73,719,369 (9.3) (6,938) 74,229,229Basic earnings per share - total 33.2 24,494 73,719,369 33.9 25,099 74,229,229Diluted earnings per share 33.1 24,494 74,089,212 33.8 25,099 74,323,949 The diluted weighted average number of shares is made up as follows: 52 weeks ended 53 weeks endedNumber of shares 1 January 2005 3 January 2004Weighted average number of ordinary shares 73,719,369 74,229,229Add: maximum dilution re share options 369,843 94,720Diluted weighted average number of ordinary shares 74,089,212 74,323,949 8 Acquisitions and disposals The acquisitions in the fifty two weeks ended 1 January 2005 were all accountedfor by the acquisition method of accounting. The net assets and trading resultsof these businesses since acquisition are included in the Group's continuingactivities and are not material. On 14 July 2004, Geest PLC acquired for £76,000 cash, a 76% share in the equityof a new business called International Produce Limited (International Produce). The purpose of the business is to simplify the supply chain for imported produceto Asda Wal*Mart (Asda). International Produce combines the current importactivity of Geest's English Village Salads (EVS) - a business dedicated to Asda- and the business of Thames Fruit Ltd (Thames) - an exclusive importer ofcitrus fruits and melons for Asda. EVS's profit reduced as a result of the transfer of business to InternationalProduce but the overall impact of the transaction on Geest in 2004 is a smallincrease in earnings. As a result of the revised supply contract with Asda, in the second half of2004, Geest accounted for sales for both International Produce and EVS - for thesupply of produce - as if they were agents, which does not affect reportedprofits but reduces reported sales as follows: 52 weeks ended 53 weeks ended£ million 1 January 2005 3 January 2004Produce turnover reported in these accounts 148.8 191.5Produce turnover recorded on an agency basis consistently throughout the period 84.1 73.2 On 10 September 2004, Geest PLC acquired, for an anticipated £15.2 million cash,100% of the shares of Anglia Crown Ltd. The gross fair value of the assetsacquired amounted to £2.6 million plus cash of £1.1 million, generating goodwillof £11.5 million. On 16 September 2004, the Group entered into a joint venture with Rannoch FoodGroup Limited named Geest RFG Fresh Cook Limited (Fresh Cook). Fresh Cook isjointly owned and its principal activity is the production of ready to cookmeals using raw ingredients. The loss on termination of an operation of £0.7 million arose on the closure ofa wholesale flower branch and represents the goodwill written back fromreserves. 9 Net cash inflow from operating activities 52 weeks ended 53 weeks ended 1 January 2005 3 January 2004 £ million Restated (note 1)Group operating profit 36.4 29.6Depreciation 36.5 33.1Impairment of fixed assets (included in exceptional costs) - 6.1Loss on sale of fixed assets 0.3 0.7Amortisation of goodwill 1.5 1.2Amortisation of government grants (0.2) (0.2)Increase in stocks (1.4) (0.6)Increase in debtors (1.5) (12.0)Increase in creditors and provisions 15.8 2.2Retirement benefits charge less contributions 2.9 1.6Net cash inflow from operating activities 90.3 61.7 Included in movements in creditors is a £2.1 million outflow (2003: £2.4 millioninflow) relating to exceptional costs. 10 Basis of accounting The results for the fifty two weeks ended 1 January 2005 have been prepared onthe basis of the accounting policies set out in the Company's Annual Report andAccounts for the fifty three weeks ended 3 January 2004, other than the adoptionof FRS 17 as outlined in note 1. The financial information set out above does not constitute the Company'sstatutory accounts for the fifty two weeks ended 1 January 2005 or the fiftythree weeks ended 3 January 2004 but is derived from those accounts. Statutoryaccounts for fifty three weeks ended 3 January 2004 have been delivered to theregistrar of companies, and those for the fifty two weeks ended 1 January 2005will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified anddid not contain statements under section 237(2) or (3) of the Companies Act1985. The preliminary announcement was approved by the Board of Directors on 7 March2005. The Annual Report and Accounts will be received by shareholders from 18 April2005 and will be available from the Company's registered office from 18 April2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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