9th Sep 2005 07:00
AGA Foodservice Group PLC09 September 2005 9th September 2005FOR IMMEDIATE RELEASE AGA FOODSERVICE GROUP PLC 2005 INTERIM FINANCIAL REPORT HIGHLIGHTS Half year to 30th June 2005 2004 Increase £m £m %Revenue 225.4 203.8 10.6Group operating profit 16.9 15.2 11.2Profit before income tax 18.0 15.5 16.1Basic earnings per share 11.3p 9.7p 16.5Dividend per share proposed 3.0p 2.5p 20.0Shareholders' equity 275.1 254.7Net cash 3.5 19.4 Highlights: • Progress in all four business segments. • Aga and Rangemaster, our major consumer operations, again set record profits. • Foodservice orders have steadily become more encouraging in most refrigeration and bakery markets as the year has progressed. • The Group still had net cash at the half year and is looking to deliver higher returns from its four year investment programme. • Dividend increased by a further 20% - 76% over four years - as the benefits of the strategy are delivered. "This is a strong performance and we have made tangible strategic progressduring the first half. Through our chosen markets in premium consumer andcommercial kitchens, we are aligning ourselves with growth areas and bringinginnovation to them. We have first class brands, leading market positions and ahigh quality management team so we expect to maintain the momentum we haveestablished in the second half and beyond." William McGrath Chief Executive Enquiries: William McGrath, Chief Executive 020 7404 5959 (today) Shaun Smith, Finance Director 0121 711 6015 (thereafter) Simon Sporborg(Brunswick) 020 7404 5959 Aga Foodservice Group plc 2005 Interim Results CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT The first half of 2005 was another positive period for the Group. Tangibleprogress was made in the key investment themes we have developed forshareholders of: • Expanding our international premium cooker and refrigeration businesses. • Creating a world leading equipment provider for the supermarket and artisan bakers' markets through Aga Bakery. • Being a leading equipment supplier into the commercial kitchen as new investment cycles driven by energy and health needs get underway. The results continue to show the progress achieved since Aga became our centrestage operation in early 2001. Financial Results These unaudited results are the first to be reported under InternationalFinancial Reporting Standards (IFRS). As expected the impact has been limited, but positive, as the Group had moved to adopt equivalent standards early.Revenue in the six months to 30th June 2005 increased by 10.6% to £225.4 millionof which 4% was organic growth. Group operating profits rose by 11.2% to £16.9million, which was mostly organic. Profit before income tax rose 16.1% to £18.0 million. Basic earnings per share were 16.5% higher at 11.3p after a tax rate of 20%. Theproposed dividend per share has also been substantially increased again thisyear to 3.0p per share, up 20% at the half year. This brings a cumulativeincrease of 76% over the last four-year period reflecting the way in which thestrategic development plans are now bringing through sustained earnings growth. During the first half of the year we continued our investment programmes and wespent £10.4 million on acquisitions. The net cash position, however, remainedpositive at £3.5 million, down from £19.4 million a year earlier. Consumer Operations Aga and Rangemaster are now well established forces in premium appliance marketsand the combination of international expansion, product innovation and strongroutes to market all helped drive growth. Even against a slower UK consumerbackdrop, record profits were achieved. For both businesses the expansion of ourcookware and refrigeration lines is to be an important driver providing greaterbreadth to the businesses. 6,200 Aga branded cookers were sold in the first half of which over 25% wereoutside the UK. The globally available 13-amp electric Aga has proved a keyinnovation because of the ease and flexibility of installation and it accountedfor 13% of these sales. At Rangemaster, product upgrades and innovations - 175years after it launched its first cooker - again helped raise market share. With Waterford Stanley now adding significantly to our presence in the fastgrowing Irish market, the impetus should be sustained. Fired Earth saw sales down 5% in weak markets. The tile and paint ranges seen innew catalogues are strong and the ties with Group companies are provingeffective. Pleasingly, sales since the half year are up on last year. Despite flat like-for-like home furnishing sales, Domain saw profits improvewith the help of Far East sourced products and appliance sales. Marvel, theconsumer refrigeration company, performed well and with further productionefficiencies being achieved and products now being sold into Europe, marginswere up. Foodservice Operations The commercial kitchen has seen years of under investment but with higher energycosts and health, hygiene and emission concerns growing rapidly, we believe thisis set to change. As government focuses on carbon emissions, higher equipmentefficiency standards can be expected. The Group's commitment to innovation andenergy efficiency means it is well placed to provide the capital equipment muchneeded in many kitchens. This is seen not only in the Infinity Fryer but also inour refrigerators, which are leaders on efficiency grounds, measured againstgovernment regulatory criteria in both Europe and the USA. Our Williams refrigeration operation which sells in the UK, Australia and theFar East, has seen a sustained upturn in orders - up a further 15% this year. Incommercial cooking, markets remain quiet. The Infinity Fryer, which cuts energyuse, reduces waste oil and reduces the overall cost of food production, providesa powerful test case of customer's changing attitudes. In the USA, while our bakery business, Belshaw, performed well, the low valueadded refrigeration markets remain tough. The purchase of the Stellar Steamproduct line is a move in evolving our activity to centre on higher margin andhealthier cooking approaches. Our European bakery operations moved from a quiet to a more active phase in thesecond quarter. Our French-based operation saw significant orders come in, notonly from the French artisan bread market but encouragingly from CentralEuropean markets. In the UK, we saw growth not only in product sales but also atour successful cleaning and maintenance operation, Millers. Strategic Development Over the last four years we have built steadily to create strength and depthwhere our core cooking and refrigeration competencies serve us well. We expectto maintain the same strategic direction as we reach a net indebted rather thannet cash position as the acquisition and investment programmes continue. Within our main business segments we are simplifying management structures.Going forward, Aga, Rangemaster and Aga Bakery teams will each manage over £100million in annual revenues. Our Aga brand will be reinforced with our consumer customers under the theme'Keep Aga Company'. The message is that there is a wide range of high qualitybrands now accessible under the Aga umbrella with a consistent quality ofproduct available in our shops, catalogues and online. The recent purchase ofDivertimenti as a cookware arm for Rangemaster, La Cornue and Falcon, reinforcesthese themes. Current Trading We continue to perform well in our core UK consumer markets. We are, however,slowly reducing our reliance on the UK consumer through our determined effortsto internationalise and we look to overseas markets to provide growth in thesecond half for both our UK-based and US operations. In foodservice, we have been pleased with orders over the summer and continue towork on some major projects and accounts to provide continuing momentum. We believe we have correctly identified and aligned ourselves with growthmarkets. We expect benefits from these positions - hence our confidence that2005 will be another good year for the Group. V Cocker W B McGrathChairman Chief Executive9th September 2005 AGA FOODSERVICE GROUP PLC INTERIM FINANCIAL STATEMENTS (i) CONSOLIDATED INCOME STATEMENT Half year Half year Year to to June to June December 2005 2004 2004 £m £m £m Total revenue (note 3) 225.4 203.8 433.7 Group operating profit (note 3) 16.9 15.2 35.2 Share of post tax result of associate 0.1 - 0.5 Profit before finance income and income tax 17.0 15.2 35.7 Finance income 1.3 0.6 1.4 Finance costs (0.3) (0.3) (0.8) Profit before income tax 18.0 15.5 36.3 Income tax expense (note 4) (3.6) (3.1) (7.1) Profit for the period 14.4 12.4 29.2 Profit attributable to equity shareholders 14.4 12.4 29.1 Profit attributable to minority interests - - 0.1 Profit for the period 14.4 12.4 29.2 Earnings per share (note 5) p p p Basic 11.3 9.7 22.9 Diluted 11.2 9.6 22.8 p p p Dividend per share paid (note 6) 5.8 5.0 7.5 All operations are continuing (ii) CONSOLIDATED BALANCE SHEET Half year Half year Year to to June to June December 2005 2004 2004 £m £m £mNon-current assetsGoodwill 140.9 136.0 137.4Intangible assets 13.5 5.5 8.5Property, plant and equipment 81.8 72.5 77.5Investments 6.0 5.9 6.5Retirement benefit asset - - 1.2Deferred tax asset 11.6 7.3 5.6 253.8 227.2 236.7 Current assetsInventories 84.6 63.0 70.2Trade and other receivables 83.2 75.9 78.6Cash and cash equivalents 32.9 40.5 49.8 200.7 179.4 198.6 Total assets 454.5 406.6 435.3 Current liabilitiesBorrowings (26.9) (2.4) (23.1)Trade and other payables (97.4) (87.1) (102.7)Current tax liabilities (7.8) (5.5) (2.1)Current provisions (3.9) (1.1) (1.3) (136.0) (96.1) (129.2) Net current assets 64.7 83.3 69.4 Non-current liabilitiesBorrowings (2.5) (18.7) (1.6)Retirement benefit obligation (22.6) (18.1) (7.8)Deferred tax liabilities (5.0) (4.3) (5.0)Provisions (13.1) (14.3) (15.9) (43.2) (55.4) (30.3) Total liabilities (179.2) (151.5) (159.5) Net assets 275.3 255.1 275.8 Shareholders' equityShare capital 32.0 31.4 31.5Share premium account 65.4 59.9 60.9Other reserves 38.1 38.3 38.1Retained earnings 139.6 125.1 145.1 Total shareholders' equity 275.1 254.7 275.6Minority interest in equity 0.2 0.4 0.2 Total equity 275.3 255.1 275.8 (iii) CONSOLIDATED CASH FLOW STATEMENT Half year Half year Year to to June to June December 2005 2004 2004 £m £m £mCash flows from operating activitiesCash generated from operations (3.8) 9.4 32.9Interest received 1.3 0.6 1.4Interest paid (0.1) (0.3) (0.8)Tax repayment / (payment) 3.0 (1.8) (5.5) Net cash generated from operatingactivities 0.4 7.9 28.0 Cash flows from investing activitiesAcquisition of subsidiary, net ofcash acquired (note 9) (5.6) - (4.6)Purchase of property, plant andequipment (5.4) (6.3) (14.6)Expenditure on product development (1.0) (1.4) (2.8)Proceeds from disposal of property,plant and equipment 0.3 4.6 7.8 Net cash used in investingactivities (11.7) (3.1) (14.2) Cash flows from financing activitiesDividends paid to shareholders (7.4) (6.4) (9.6)Net proceeds from issue of ordinaryshare capital 2.2 - 1.1Repayment of / (loan) to associatedundertaking 0.3 (0.3) (0.3)Purchase of own shares - (8.9) (9.4)Repayment of borrowings acquiredwith acquisition (4.8) - -Finance lease inception /(repayment) 0.1 (0.1) 0.1Repayment of borrowings (0.1) (0.9) (2.5)New bank loans raised 4.0 0.4 4.8 Net cash used in financingactivities (5.7) (16.2) (15.8) Effects of exchange rate changes 0.1 (0.1) (0.2) Net decrease in cash and cashequivalents (16.9) (11.5) (2.2)Cash and cash equivalents atbeginning of period 49.8 52.0 52.0 Cash and cash equivalents at end ofperiod 32.9 40.5 49.8 (iv) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Half year Half year Year to to June to June December 2005 2004 2004 £m £m £m Profit for period 14.4 12.4 29.2 Exchange adjustments onnet investments 1.3 (2.0) (3.4)Realisation of propertyrevaluation gains - - 0.3Actuarial (losses) /gains on defined benefitpension schemes (20.0) 9.0 18.2Tax on items takendirectly to reserves 6.0 (3.2) (4.5) Net losses notrecognised in incomestatement (12.7) 3.8 10.6 Total recognised incomefor period 1.7 16.2 39.8 Attributable to:Equity shareholders 1.7 16.2 39.7Minority interests - - 0.1 1.7 16.2 39.8 (v) SUPPLEMENTARY STATEMENT Reconciliation of operating profit to net cash (outflow) / inflow from operatingactivities Half year Half year Year to to June to June December 2005 2004 2004 £m £m £m Operating profit 16.9 15.2 35.2Amortisation of intangible assets 0.6 0.4 1.0Depreciation 4.1 3.9 7.7Profit on disposal of plant,property and equipment (0.1) (1.2) (1.3)(Increase) / decrease ininventories (9.6) (2.5) (8.0)(Increase) / decrease inreceivables (3.0) (1.5) (10.5)Increase / (decrease) in payables (12.0) (1.6) 12.1Increase / (decrease) in provisions (0.7) (3.3) (3.3) Net cash (outflow) / inflow fromoperating activities (3.8) 9.4 32.9 AGA FOODSERVICE GROUP PLC NOTES TO THE INTERIM FINANCIAL REPORT 1. GENERAL INFORMATION The information for the year ended 31st December 2004 does not constitutestatutory accounts as defined by section 240 of the Companies Act 1985. A copyof the Group's UK GAAP statutory accounts for the year has been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualified. 2. ACCOUNTING POLICIES The interim financial report has been prepared in accordance with InternationalFinancial Reporting Standards (IFRS). The accounting policies and basis ofpreparation followed in the interim report are as published by the Group, in itstransition document, on 15th August 2005, which are available on the Group'swebsite www.agafoodservice.com. The reconciliations of equity at 1st January 2004 (date of transition to IFRS),30th June 2004 and at 31st December 2004 (date of last UK GAAP financialstatements) and the reconciliation of profit for the period to 30th June 2004and to 31st December 2004, as required by IFRS 1, were shown in the'Restatement of Financial Information under IFRS 2004' document published on15th August 2005. The financial information presented in this document has been prepared on thebasis of all IFRSs, including International Accounting Standards (IAS) andinterpretations issued by the International Accounting Standards Board (IASB)and its committees, and as interpreted by any regulatory bodies applicable tothe Group published by 30th June 2005. These are subject to ongoing amendmentby the IASB and subsequent endorsement by the European Commission and are therefore subject to possible change. Further standards and interpretations mayalso be issued that will be applicable for financial years beginning on orafter 1st January 2005 or that are applicable to later accounting periods butmay be adopted early. The Group's first IFRS financial statements may,therefore, be prepared in accordance with some different accounting policiesfrom the financial information presented here. In preparing this financialinformation, the Group has assumed that the European Commission will endorsethe amendment to IAS 19, 'Employee Benefits - Actuarial Gains and Losses, GroupPlans and Disclosures'. 3. SEGMENTAL ANALYSIS For management purposes, the Group is organised into four operating divisions and these divisions are the basis on which the Group reports its primary segmental information. By primary business Half year to Half year to Year togroup June 2005 June 2004 December 2004 Revenue Operating Revenue Operating Revenue Operating profit profit profit £m £m £m £m £m £m UK & European Consumer 89.0 9.6 83.1 8.9 175.4 19.6 US Consumer 34.4 1.4 31.8 0.5 65.4 2.0 UK & European Foodservice 81.0 4.5 69.6 3.8 151.5 10.2 US Foodservice 21.0 1.4 19.3 2.0* 41.4 3.4 Total operations 225.4 16.9 203.8 15.2 433.7 35.2 Share of result of associate - 0.1 - - - 0.5 Net finance income - 1.0 - 0.3 - 0.6 Profit before income tax - 18.0 - 15.5 - 36.3 Income tax expense - (3.6) - (3.1) - (7.1) Profit for the period - 14.4 - 12.4 - 29.2 *In 2004 US Foodservice included £0.8m of property profits. The share of result of associate relates to the UK & European Consumer segment. NOTES TO THE INTERIM FINANCIAL REPORT 3. SEGMENTAL ANALYSIS (CONTINUED) By secondary Half year to Half year to Year tosegment - June 2005 June 2004 December 2004geographical Turnover Operating Turnover Operating Turnover Operatingorigin profit profit profit £m £m £m £m £m £m United Kingdom 126.4 12.6 123.3 11.3 258.5 25.9 North America 55.2 2.4 51.0 2.2 106.8 4.6 Europe 40.5 1.3 27.1 1.2 63.3 3.1 Rest of World 3.3 0.6 2.4 0.5 5.1 1.6 Total Group 225.4 16.9 203.8 15.2 433.7 35.2 Turnover by Half year to Half year to Year togeographical June 2005 June 2004 December 2004destination £m % £m % £m % United Kingdom 118.4 52.5 116.6 57.2 246.3 56.8North America 55.8 24.8 50.5 24.8 107.9 24.9Europe 40.0 17.7 28.4 13.9 63.6 14.6Rest of World 11.2 5.0 8.3 4.1 15.9 3.7 Total Group 225.4 100.0 203.8 100.0 433.7 100.0 4. INCOME TAX Corporation tax for the interim period to 30th June 2005 has been charged at theestimated rates chargeable for the full year in the respective jurisdictions as follows: Half year Half year Year to to June to June December 2005 2004 2004 £m £m £mCurrent taxUK corporation tax 0.8 2.2 2.5Overseas tax 2.8 0.9 2.6 3.6 3.1 5.1 Deferred taxUK corporation tax - - 2.1Overseas tax - - (0.1) - - 2.0 Total income tax expense 3.6 3.1 7.1 NOTES TO THE INTERIM FINANCIAL REPORT 5. EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on the following data - all activities are continuing: Half year Half year Year to to June to June December 2005 2004 2004 Earnings £m £m £mProfit for the period 14.4 12.4 29.2Minority interests - - (0.1) Earnings for the purpose of thebasic and diluted EPS being the netprofit attributable to equity shareholders 14.4 12.4 29.1 Weighted average number of shares in million million millionissue For basic EPS calculation 127.0 128.3 127.0Dilutive effect of share options 1.2 0.6 0.6 For diluted EPS calculation 128.2 128.9 127.6 Earnings per share p p p Basic 11.3 9.7 22.9Diluted 11.2 9.6 22.8 6. DIVIDENDS Half year Half year Year to to June to June December 2005 2004 2004 £m £m £mAmounts recognised as distributions toequity shareholders in the period: Final dividend of 5.8p for the yearended 31st December 2004 (2003: 7.4 6.4 6.45.0p) per share Proposed interim dividend for theyear ended 31st December 2005 of 3.9 3.1 3.13.0p (2004: 2.5p) per share The proposed interim dividend was approved by the Board on 8th September 2005 and has not been included as a liability as at 30th June 2005. 7. BANK LOANS AND OVERDRAFTS In the period bank loans denominated in overseas currencies (US dollars andEuros) of £4.0m have been issued to hedge overseas investments. NOTES TO THE INTERIM FINANCIAL REPORT 8. SHARE CAPITAL During the period 951,337 ordinary shares of 25p each (nominal value £237,834)were issued in connection with the Company's share option scheme for an aggregate consideration of £2.2m. On 1st April 2005, the Company issued 1,179,834 shares of 25p each (nominalvalue £294,959) to four Domain officers in lieu of the deferred cash payment as part of the acquisition of Domain Inc in 2002. 9. ACQUISITION OF SUBSIDIARY On 3rd June 2005, the Group acquired 100% of the issued share capital of FurdoLimited, the holding company of Waterford Stanley Limited, for a considerationof £4.7m. The company is involved in the manufacture and distribution of castiron cookers in Ireland. This transaction has been accounted for by the purchasemethod of accounting. Book value Fair value Provisional adjustments fair values £m £m £mNet assets acquiredProperty,plant and 1.3 1.6 2.9equipmentInventories 4.0 - 4.0Trade and other 2.8 - 2.8receivablesTrade and (5.7) - (5.7)other payablesBank loans (4.8) (1.6) (6.4) (2.4) - (2.4)Intangible assets - Brands - 4.4 4.4 - Goodwill - 2.7 2.7 Total consideration 4.7 Satisfied by:Cash 4.1Attributable costs and deferred 0.6consideration - outstanding Net cash outflow arising on acquisitions:Cash consideration 4.1 Repayment of borrowings acquired 4.8 Cash consideration for prior year acquisitions 1.5 10.4 The fair value adjustments bring the acquired company in line with the Group'saccounting policies. If the acquisition of Waterford Stanley had been completedon the first day of the financial year, Group revenues for the six month periodwould have been £8.8m higher and Group operating profit would have been £0.5mhigher. 10. RETIREMENT BENEFIT SCHEMES Defined benefit schemes Plan assets have been valued at a market value of £704m and the defined benefitliabilities at £726m, at the interim date. The liabilities have been rolledforward from 31st December 2004 and adjusted to take account of the decrease inbond yields, which has reduced the discount rate from 5.35% to 5.0%. NOTES TO THE INTERIM FINANCIAL REPORT 11. EVENTS AFTER THE BALANCE SHEET DATE On 6th July 2005 the Group increased its shareholding in Grange from 40.7% to75.0% for a consideration of Euros 7.5m (£5.1m). In the year to 31st December2004, Grange made a profit before tax of Euros 2.0m on turnover of Euros 45.6m,net assets at the time were Euros 4.6m. On 29th July 2005 Aga Foodservice Inc, a Group subsidiary, acquired 'StellarSteam', a US product line of commercial boilerless food steamers for $2.1m. Inthe year to 31st December 2004 the turnover was $2.3m. On 12th August 2005 the Group acquired Divertimenti, the London based high endkitchenware business, for up to £1.4m in cash. In the year to 30th June 2005the turnover was £2.5m. Independent review report to Aga Foodservice Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30th June 2005 which comprises consolidated interim balancesheet as at 30th June 2005 and the related consolidated interim statements ofincome, cash flows and consolidated statement of recognised income and expensefor the six months then ended 30th June 2005 and related notes. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the company willbe prepared in accordance with accounting standards adopted for use in theEuropean Union. This interim report has been prepared in accordance with thebasis set out in note 2. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in note 2, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with accounting standards adopted for use in the European Union.The IFRS standards and IFRIC interpretations that will be applicable and adoptedfor use in the European Union at 31st December 2005 are not known with certaintyat the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30th June 2005. PricewaterhouseCoopers LLPChartered AccountantsBirmingham9th September 2005 MAIN ADDRESSES AND ADVISERS Head Office and Registered Office Aga Foodservice Group plc4 Arleston WayShirleySolihullB90 4LHTelephone: 0121 711 6000Fax: 0121 711 6001e-mail: [email protected]: www.agafoodservice.comRegistered in England No. 354715 Registrars Lloyds TSB RegistrarsThe CausewayWorthingWest SussexBN99 6DATelephone (Helpline): 0870 600 3953 Auditors PricewaterhouseCoopers LLP Financial Advisers and Joint Stockbrokers Dresdner Kleinwort Wasserstein Joint Stockbrokers Collins Stewart 2005 FINANCIAL CALENDAR Record date for interim ordinary dividend 11th NovemberInterim ordinary dividend payable 7th December2005 year end 31st December This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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