30th May 2006 16:30
Blueheath Holdings PLC30 May 2006 For Immediate Release 30 May 2006 Blueheath Holdings plc ("Blueheath" or the "Company") Preliminary Results for the 53 weeks ended 4 March 2006 "Making the business profitable" Blueheath is a national delivered wholesaler using sophisticated, proprietarytechnology to offer a substantial cost advantage over established players in thegrocery wholesale sector. The Company today announces preliminary results forthe 53 weeks ended 4 March 2006. Final Results - Key Points * Turnover increased 89% to £132.3m (2005 - £70.2m). * Loss before exceptionals reduced by 16% to £4.9m (2005 - £5.8m) and after exceptionals(1) by 16% to £5.3m (2005 - £6.3m). * Cash deposits and undrawn facilities at year end of £6.6m. * Met or exceeded all operational targets on order fulfilment, on-time delivery and stock holding. * On track to complete initial integration work on acquisitions of CTM Wholesale Limited and AC Ward & Son Limited in the first quarter of the new financial year. Future forecast * Further cost savings opportunities identified from a logistics restructuring sufficient to generate satisfactory operating profits at the current level of sales and gross margin. * Promising pipeline of new business since year end with two new wins: Benjys, Cineworld, and three extensions: Park Garages, Gala Bingo and Vendsetters/Snack-in-the-Box. * Management changes to support next stage of business evolution: - Richard Rose joining the business with immediate effect in role ofDeputy Chairman. - Company founder and Chief Executive, Douglas Gurr, stepping down. TheCompany has identified a successor to Mr Gurr whose name will be announcedshortly. * Placing of 26,250,000 new ordinary shares at 20p per share to raise £5.25 million (before expenses) to fund the restructuring and provide sufficient comfort within the working capital. Commenting on the results and prospects, Douglas Gurr, Chief Executive, said: "The Group is on track to compete the restructuring needed to deliversatisfactory operating profits at the current level of sales and margin whilstcontinuing to secure important new contracts. We expect to see another year ofstrong growth combined with a significant shift in business profitability." For further information please contact:Buchanan Communications Tel: 020 7466 5000Mark Edwards / James Strong Evolution Securities Tel: 020 7071 4300Michael Brennan / Bobbie Hilliam (1) Exceptional items of £0.38m (2005 - £0.48m) relating to one off integrationcosts associated with the Company's acquisitions Notes to editors: Blueheath is a wholesaler of groceries to convenience stores in the £16.8billion UK grocery wholesale sector. The Group sells and arranges thedistribution of approximately 3,500, primarily ambient, product lines to over5,000 independent and multiple retail and leisure outlets within the UK.Blueheath's innovative technology-driven business model is founded on the basicprinciples of stripping out unnecessary supply chain costs and overheads andpassing on financial and operational benefits to customers. This enablesBlueheath to offer customers a wholesale delivery service of groceries at closeto Cash & Carry prices. Blueheath achieves cost savings in three ways: 1. Operating on low stock levels through the use of sophisticated, proprietarystock prediction technology. 2. Using spare distribution capacity through its partnership with BritishBakeries Ltd and other operators. 3. The extensive use of process automation to minimise administration costs. CHAIRMAN'S STATEMENT Final Results Blueheath is pleased to announce its final results for the 53 weeks ended 4March 2006. Turnover for the 53 weeks ended 4 March 2006 increased by 89% to £132.3m (2005 -£70.2m). Retained losses before exceptionals decreased by 16% to £4.9m (2005 - £5.8m).Gross margins decreased slightly to 5.7% (2005 - 5.8%) and total overhead costsbefore exceptional costs as a percentage of sales decreased from 12.9% to 9.5%.Exceptional costs in the year were £0.38m (2005 - £0.48m) and the retained lossafter exceptionals reduced by 16% to £5.3m (2005 - £6.3m). As of 4 March 2006 the Company held a total of £6.6m in cash deposits andfacilities, comprising £0.9m of cash £3.0 million of cash deposits held againstsupplier credit and £2.7m of un-drawn invoice discounting facilities. Operational performance The Company has performed well over the period, continuing to meet or exceed itskey operational targets on order fulfilment, on-time delivery and stock holding. Order fulfilment held at 97.0 per cent for the year (2005 - 97.4 per cent) agood result as it covered a period of significant activity on acquisitionintegration. On-time delivery improved again to 99.2 per cent for the year (2005- 98.7 per cent) reflecting a continuing good performance by our deliverypartners and good performance from the acquired in-house operations. Totalaverage stock days increased to 11.4 for the year (2005 - 5.8) reflecting thehigher levels of stock in the acquired businesses where the Blueheath operatingmodel and stock management technology were still only partly implemented at theyear end. Business growth remains the key factor in driving operational leverage throughimproved buying terms, further improvements in the efficiency of picking anddelivery operations, and in contributing to fixed warehouse and central overheadcosts. Gross margins declined slightly reflecting business mix and delays in thedelivery of merger benefits until the switch to a single buying group could becompleted in February 2006. Initial acquisition integration The Company acquired A C Ward & Son Limited ("ACW") in November 2005 followingthe acquisition of CTM Wholesale Limited ("CTM") earlier in the year. At thetime, the Directors anticipated that the enlarged group would be able to achieveimproved operating margins through combining buying volumes, the application ofBlueheath's technology and business processes to the ACW operation, and theintegration of central overheads. Since that time, the Company has completed a major range harmonisation exercise,combined the group's purchasing into a single buying group, implemented theBlueheath stock management technology at both Wrexham and Thurrock, implementedthe Blueheath operational model fully at Thurrock and partly at Wrexham,combined the Southern transport operations into a single operation therebygenerating substantial costs savings, moved the picking of all South EasternBlueheath customers to Thurrock to better utilise capacity at the Thurrock siteand eliminate trunking costs from Tamworth, and removed overhead costs throughthe elimination of duplicated functions across the group. The Directors are pleased to report that the Company remains on track tocomplete the planned initial integration work in the first quarter of the newfinancial year. Further operational improvement Following the initial integration work on CTM and ACW, the Company has conducteda detailed review of the business operations and the current customer profileand locations to ensure that the Company is on track to reach a platform ofscale from which the Directors expect the business to be profitable when thefinal stages of the integration have been completed. The review has taken intoaccount business integration, current trading, margin improvements anddistribution assumptions. The review has identified a number of opportunities to reduce materially theoperating costs of the business. Principal amongst these is that the improvedstock management and business processes from the application of the Blueheathbusiness model had increased capacity sufficiently at the Company's operationsat Thurrock and Wrexham to enable the closure of the Company's, third-partyoperated, warehouse at Tamworth. The review has also identified a number ofopportunities to further reduce administration costs through further integrationof combined functions. The review has shown that the integration work delivered to date together with afurther logistics restructuring should be sufficient to generate satisfactoryoperating profits at the current level of sales and gross margin. Reflecting onthese findings, the Board has decided that the immediate focus of the businessshould be to implement the logistics restructure in order to go throughbreakeven into profit on the current level of sales. The full time growth focuswill return once the cost base has been restructured. Whilst the review indicated that the current levels of sales, cost reductionprogramme and restructuring proposals should enable the Company to achieve cashflow breakeven, the current Directors and Richard Rose believe that it would beprudent to raise additional equity capital to fund the cost reduction programmeand restructuring and provide sufficient comfort within the working capital. New Account wins In the course of the year, the Company acquired CTM and ACW and the recent focusof the business has been on integrating these two businesses and converting theoperations to the Blueheath model. As indicated in earlier announcements it hasalso been a difficult year overall for the wholesale market with a number ofcustomers trading below the level of the previous year. Despite this, the Company had continued to deliver organic growth through newaccount wins and contract extensions with existing customers and is todaypleased to announce two new account wins: Benjys sandwich chain and CineworldCinemas as well as three account extensions: new sites with Grocer Top 50,leading independent forecourt operator Park Garages, new sites with leisureoperator Gala Bingo and a contract extension to the Vendsetters foodservicebusiness of vending operator Snack-in-the-Box. These new wins, together with the full year effect of the acquired businesseswill take the run rate of the business to well in excess of the turnover for the53 weeks ended 4 March 2006. Management The Company is reaching an important stage in its evolution. The conclusion ofthe current programme of business restructuring should take the business throughbreakeven and into profit, with the business well placed to deliver furthergrowth both organically and potentially through further acquisition. Thechallenge of the next 2-3 years will be the effective implementation of theclearly laid out business strategy and operating model. To help deliver this next stage, the Company is today announcing a number ofmanagement changes. Richard Rose will be joining the Board on 30 May 2006 in therole of deputy chairman. I then intend to hand-over the role of chairman toRichard, resulting in the chairman being an executive within the Group, witheffect from 1 September 2006. Richard was previously chief executive of Whittardof Chelsea plc. Prior to that he has been a Director of Hagemeyer (UK) Ltd andchief executive of WF Electrical plc. Richard has a strong track record indelivering business growth and shareholder value and will be taking primaryresponsibility for business strategy and investor relations. Management (continued) Having led the Company over the past five years from pure start up to itscurrent scale and position as a leading player in the wholesale market, theChief Executive and Company founder, Douglas Gurr, has announced his intentionto step down with effect from 31 August 2006. The Company has identified asuccessor to Mr Gurr whose name will be announced shortly. Outlook The Company has now built a scale platform which, with the final stages of theacquisition integration and the further identified cost savings will, theDirectors believe, take the Company into profitability. Looking forward, the Company continues to be well placed to grow bothorganically through new account wins and potentially through furtheracquisitions of traditional wholesalers which can be converted to the Blueheathmodel of operation. The Company has been successful in securing two new multipleaccounts and three account extensions and continues to pursue a promisingpipeline of potential new business although the precise timing of new accountwins is always hard to predict and these accounts take some time to become fullyoperational. The Company is therefore expecting another year of strong growthcombined with a significant shift in business profitability as the margin andcosts benefits from the reaming integration work flow through. Colin Smith Chairman 30 May 2006 BLUEHEATH HOLDINGS PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT 53 weeks ended 4 March 2006 53 weeks ended 4 March 2006 52 weeks ended 26 February 2005 As restated (see note 6) Note Before Operating Total Before Operating Total operating exceptio-nal operating exceptio-nal exceptio-nal items £'000 exceptio-nal items (see £'000 items items note 2) (see note 2) £'000 £'000 £'000 £'000 TURNOVERContinuing 76,004 - 76,004 70,151 - 70,151operationsAcquisitions 56,251 - 56,251 - - - 132,255 - 132,255 70,151 - 70,151Cost of sales (124,688) - (124,688) (66,017) - (66,017) Gross profit 7,567 - 7,567 4,134 - 4,134 Distribution (7,450) - (7,450) (5,027) - (5,027)costsAdministrativeexpensesGoodwill (140) - (140) - - -amortisationShare option (79) - (79) (80) - (80)chargesOther (4,962) (382) (5,344) (3,967) (478) (4,445) (5,181) (382) (5,563) (4,047) (478) (4,525) OPERATING LOSSContinuing (5,325) (300) (5,625) (4,940) (478) (5,418)operationsAcquisitions 261 (82) 179 - - - (5,064) (382) (5,446) (4,940) (478) (5,418)Interest 398 - 398 253 - 253receivable andsimilar incomeInterest (233) - (233) (1,142) - (1,142)payable andsimilar charges LOSS ON (4,899) (382) (5,281) (5,829) (478) (6,307)ORDINARYACTIVITIESBEFORE TAXATION Tax on loss on - - - - - -ordinaryactivities LOSS FOR THE (4,899) (382) (5,281) (5,829) (478) (6,307)FINANCIALPERIOD LOSS PERORDINARY SHAREBasic and 3 (11.7) (19.5)diluted (pence) There are no recognised gains or losses for the current financial period andpreceding financial period other than as stated in the profit and loss account. All activities derive from continuing operations. BLUEHEATH HOLDINGS PLC CONSOLIDATED BALANCE SHEET 4 March 2006 4 March 26 2006 February £'000 2005 As restated (see note 6) £'000 FIXED ASSETSIntangible assets 5,094 -Tangible assets 873 229 5,967 229 CURRENT ASSETSStocks 5,349 1,125Debtors 14,849 5,968Current asset investments 3,005 5,100Cash at bank and in hand 900 6,027 24,103 18,220 CREDITORS: amounts falling due (17,191) (6,869) within one year NET CURRENT ASSETS 6,912 11,351 TOTAL ASSETS LESS CURRENT 12,879 11,580LIABILITIES CREDITORS: amounts falling due (380) -after more than one year NET ASSETS 12,499 11,580 CAPITAL AND RESERVESCalled up share capital 457 414Share premium account 23,152 17,074Share option reserve 159 80Profit and loss account (29,143) (23,862)Merger reserve 17,874 17,874 EQUITY SHAREHOLDERS' FUNDS 12,499 11,580 BLUEHEATH HOLDINGS PLCCONSOLIDATED CASH FLOW STATEMENT53 weeks ended 4 March 2006 Note 53 weeks 52 weeks ended 4 ended 26 March February 2006 2005 £'000 £'000 Net cash outflow from operating 4 (9,323) (3,677)activities Returns on investments and servicing offinanceInterest paid (233) (309)Interest received 398 253 Net cash inflow (outflow) from returns 165 (56)on investments and servicing of finance TaxationUk corporation tax paid (333) - Net cash outflow from taxation (333) - Capital expenditure and financialinvestmentPayments to acquire plant and equipment (125) (311) Net cash outflow from capital (125) (311)expenditure and financial investment AcquisitionsPurchase of subsidiary undertakings (8,635) -Net cash acquired with subsidiary 1,261 -undertakings (7,374) - Net cash outflow before management of (16,990) (4,044)liquid resources and financing Management of liquid resourcesDecrease (increase) in short term 2,095 (11,128)deposits FinancingIssue of ordinary share capital 6,121 17,230Repayment of finance leases (570) -Bank loan drawn down (repaid) 3,368 (1,841) Net cash inflow from financing 8,919 15,389 (Decrease) increase in cash in the 5 (5,976) 217period BLUEHEATH HOLDINGS PLCNOTES TO THE PRELIMINARY ANNOUNCEMENT53 weeks ended 4 March 2006 1. BASIS OF PREPARATION / STATUTORY ACCOUNTS This Preliminary Statement was approved by the Directors on 30 May 2006. Thefinancial information contained in this preliminary announcement of unauditedfinal results does not constitute the group's statutory accounts for the 53weeks ended 4 March 2006 or 52 weeks ended 26 February 2005. With the exceptionof the adoption of FRS20 (see note 6) the accounting policies that have beenapplied are consistent with those applied in the preceding annual accounts. Theaccounts for the 52 weeks ended 26 February 2005 have been delivered to theRegistrar of Companies. The statutory accounts for the 52 weeks ended 26February 2005 have been reported on by the Company's auditors; the report onthese accounts was unqualified and they did not contain any statement undersection 237(2) or (3) of the Companies Act 1985. The accounts for the 53 weeksended 4 March 2006 have not been audited. The statutory accounts for the periodended 4 March 2006 will be finalised on the basis of the financial informationpresented by the Directors in this preliminary announcement and will bedelivered to the Registrar of Companies following the Company's annual generalmeeting. The Directors have considered the funding position of the group for it toachieve its development strategy and to meet its continuing requirements for theforeseeable future. To this end the Directors are in an advanced position tosecure additional equity financing to enable the business to finance itspredicted growth. At the date of issuing this announcement the Directors havesecured a fully underwritten share placement of £5.25 million, which nowrequires shareholder approval before it can be completed. The shareholders ofthe Company have been informed of this funding transaction and it will beconsidered and voted upon at an Extraordinary General Meeting to be held on 23June 2006. The Directors believe that with this additional financing the Groupwill have sufficient funds to meet its development objectives and continuingrequirements and have therefore prepared this financial information on the goingconcern basis. As highlighted above the Directors are at an advanced stage of completing anequity funding transaction to secure financing for the Group's development andpresent requirements. The completion of this financing arrangement is dependent,amongst other things, upon shareholder approval which will be determined on 23June 2006. As a consequence of this uncertainty, together with any events thatmay arise up to the date that the accounts are to be signed, at the date ofissuing this statement the auditors have indicated to the Directors that theiraudit report may include an emphasis of matter paragraph on the Group's abilityto continue as a going concern. 2. OPERATING EXCEPTIONALS Operating exceptional items in the period relate to one off integration costsassociated with the Company's acquisitions. For the comparative period theexceptional items comprised expenses associated with flotation and financialrestructuring. 3. BASIC AND DILUTED LOSS PER ORDINARY SHARE The calculation of loss per ordinary share for the current period is based onthe loss for the period of £5,281,000 (2005 - loss of £6,307,000 as restated)and the weighted average number of ordinary shares of 45,147,626 (2005 -32,310,492). The Company had 45,738,122 ordinary shares in issue as of 4 March2006. FRS14 requires presentation of diluted earnings per share where a Company couldbe called upon to issue shares that would decrease net profit or increase netloss per share. For a loss making Company with outstanding share options, thenet loss per share would be decreased by the exercise of options, and hence noadjustment has been made to the diluted loss per share as presented. BLUEHEATH HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT 53 weeks ended 4 March 2006 4. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS 53 weeks 52 weeks ended ended 26 February 4 March 2005 2006 restated £'000 £'000 Operating loss (5,446) (5,418)Goodwill amortisation 140 -Depreciation 372 299Loss on sale of fixed assets - 4Decrease (increase) in debtors 154 (1,997)(Decrease) increase in creditors (7,055) 3,692Share option charges 79 80Decrease (increase) in stocks 2,433 (337) Net cash outflow from operating (9,323) (3,677)activities 5. ANALYSIS AND RECONCILIATION OF NET (DEBT) FUNDS At 27 Cash Acquisi-tions At 4 February (excluding 2005 flow cash and March overdrafts) 2006 £'000 £'000 £'000 £'000 Cash at bank and in hand 6,027 (5,127) - 900Bank overdraft (5) (849) - (854) (5,976) Debt due within one year (217) (2,650) (3,856) (6,723)Finance leases - 69 (570) (501) (2,581) Current asset investments 5,100 (2,095) - 3,005 Total net funds (debt) 10,905 (10,652) (4,426) (4,173) BLUEHEATH HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT 53 weeks ended 4 March 2006 5. ANALYSIS AND RECONCILIATION OF NET (DEBT) FUNDS (continued) 4 March 26 2006 February 2005 £'000 £'000 (Decrease) increase in cash in the period (5,976) 217Cash (inflow) outflow from change in debt (2,581) 1,841financingCash (inflow) outflow from change in liquid (2,095) 11,128resources Change in net debt resulting from cash flows (10,652) 13,186 Loans and finance leases acquired with subsidiary (4,426) -Decrease in debt financing - 6,720 Change in net debt resulting from non cash flows (4,426) 6,720 Change in net debt (15,078) 19,906Net funds (debt) at 27 February 2005 10,905 (9,001) Net (debt) funds at 4 March 2006 (4,173) 10,905 6. IMPACT OF RESTATEMENT The impact of implementing FRS 20 "Share based payment" has had the followingimpact on the group financial statements. PROFIT AND LOSS ACCOUNT Year ended 26 February 2005 £'000 Administrative expenses as previously 4,445statedFRS 20 "Share based payment" charge 80 Administrative expenses as restated 4,525 Loss per share - basic and diluted (19.4)(pence) as previously stated FRS 20 "Share based payment" charge (0.1) Loss per share - basic and diluted (19.5)(pence) as restated BLUEHEATH HOLDINGS PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT 53 weeks ended 4 March 2006 6. IMPACT OF RESTATEMENT (continued) BALANCE SHEET 26 February 2005 £'000 Profit and loss account as previously (23,782)statedFRS 20 "Share based payment" (80) Profit and loss account as restated (23,862) Share option reserve previously stated -FRS 20 "Share based payment" 80 Share option reserve as restated 80 -------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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