28th Sep 2006 07:05
Legacy Distribution Group Inc28 September 2006 28 September 2006 Legacy Distribution Group, Inc. ("Legacy" or "the Company") Interim Results for the Six Months to 30 June 2006 DELIVERING THE GOODS Legacy Distribution Group, Inc., (AIM: LDG), the Arizona based wholesaler anddistributor of tobacco and grocery products to the convenience store market,today announces its interim results for the six months ended 30 June 2006. Theresults show a significant improvement over 2005 and solid progress made in theimplementation of the Company's strategy for growth. Highlights of the results include: •Gross profit up over 38.8% to US$2.4 million (2005: US$1.7 million) with a gross margin of 10.8% (2005: 5.0%) •Operating profit increased to US$0.5 million (2005: US$0.03 million) •Earnings before tax increased to US$0.3 million (2005: loss US$0.1 million) with net margin growth to 0.9% •Turnover was US$22.3 million (2005: US$34.4 million) reflecting the Company's strategy of rationalising unprofitable clients •Basic earnings per share improved to 0.3c (2005: loss 0.2c) •Successful IPO and admission to AIM in March 2006 raising US$2.0 million net •Two significant contracts won and then extended with major clients, Albertsons and the QDN Corporation •Convenience store market share increased from less than 1% to 4% in the Arizona /Nevada market •Fred Gretsch and Tim Riedel appointed to the Board as Chief Financial Officer and Chief Marketing Officer respectively, providing further strength and depth to the senior management team •Gary Nelson appointed as Vice President of Non Tobacco Category Management in August 2006, continuing commitment to growth of non tobacco products division growth •Trading in second half combined with healthy order book and opportunity pipeline leads to a positive outlook for the full year. Commenting on the results, Legacy's chairman, Michael Mills said: "The resultsfor our first half year are extremely encouraging and I am convinced that Legacyis 'delivering the goods' in both senses. We have significantly improved bothgross margin and operating profit and progressed our transformation from being aniche supplier of tobacco products to a business that is rapidly growing marketshare in the wider convenience store market. "To date, our growth has been achieved organically, helped particularly by thecontracts with Albertsons and QDN. We remain committed to looking for suitableacquisition opportunities and I hope to be able to make further announcements onthis in the coming months." For further information: Legacy Distribution Group Inc.: Tel: +1 (0) 602 344 6750Frank Patton (CEO)/Fred Gretsch (CFO) Tavistock Communications: Tel: +44 (0) 20 7920 3150Richard Sunderland/Rachel Drysdale Corporate Synergy Plc: Tel: +44 (0) 20 7448 4400Oliver Cairns/Romil Patel CHAIRMAN'S STATEMENT During the period the Company has successfully managed the transition from aprivate to a public company whose shares are quoted on the AIM market of theLondon Stock Exchange. Since the start of the year, management has concentratedon its stated strategy of generating improved margins by diversifying theCompany's product mix and the customer base. As laid out in the strategy set out at the time of our IPO, we are moving awayfrom being a niche distributor of purely tobacco products to becoming awholesale convenience store distributor. To that end, the Company isrelinquishing low margin and unprofitable business in order to concentrate onmore appropriate types of customers. Although this has resulted in lower salesrevenue in the short term, it has allowed us to not only improve gross marginsdramatically but also to provide a better quality and more efficient service toother clients, new and old. This strategy has already resulted in substantialcontract wins, as evidenced by the recent announcements regarding QDN andAlbertsons, and, going forward, we expect this to translate into increasedsales. We will continue to focus on profitable sales growth by utilizing our longstanding core competency of distributing tobacco products to solicit and winconvenience store customers in the Arizona and Nevada marketplaces and beyond.We are also confident that our focus on a broader product range and specificcustomer sectors will yield significant shareholder return in the near term. To further develop the non tobacco side of the business, we appointed GaryNelson in August 2006 as Vice President of Non Tobacco Category Management.Formerly a senior category manager at Winn Dixie, the multi-billion dollar USgrocery chain, his responsibilities include key account management, as well asoverall responsibility for all non tobacco products in the Legacy portfolio. During the period, Legacy also appointed Fred Gretsch to the Board as ChiefFinancial Officer. Fred brings with him over 30 years of financial managementexperience and will be a tremendous asset to the Company. Additionally, Legacyappointed Tim Riedel, the Chief Marketing Officer, to the Board. Thisappointment was a priority, given the key role that he plays in our businessstrategy. In addition to the organic growth strategy outlined above, the Company isdeveloping a sound acquisition strategy to generate rapid sales and earningsgrowth. We have identified a number of potential opportunities and expect that,with access to capital markets via AIM, we can progress these in the near term;adding geographic reach and/or providing us with a platform to manage additionallarge national customers. We expect these to have a positive impact on both theCompany's income statement and balance sheet and result in a continualimprovement in shareholder value over the next three to five years. Michael MillsChairman27 September 2006 CHIEF EXECUTIVE OFFICER'S REVIEW We have achieved a number of milestones in the last six months, Legacy'sadmission to AIM in March 2006 being of particular note. We have also won, andsubsequently extended, sizable contracts from Albertsons and QDN and grown theconvenience store segment of our business, which has flowed through into greatlyimproved gross margins and an increase in earnings. Legacy's biggest objective is to make the transition from being a narrowlyfocused niche distributor to a broad line convenience store distributor and wecontinue to make solid progress in this area. The results of the last six monthsclearly illustrate the type of improvements that can be achieved in our coremarkets with the correct product mix and the right team working towards a commonobjective. Both Legacy's gross margin percentage and gross margin dollars havesignificantly improved during the first six months. We have made good inroads into our strategy of rationalizing some unprofitablecustomers, which, although resulting in lower turnover, when compared to lastyear, has allowed us to increase the gross margin dollars by $0.7 million byfocusing on customers with a higher mix of non tobacco products. Legacy's reputation for operational excellence in terms of reliability, customerservice and ease of use will drive further organic sales growth in ourconvenience store division, as evidenced over the past twelve months by anincrease in Legacy's share of this market from less than 1% to 4%. Current and potential customers generally choose their supplier on the basis ofoperational excellence rather than just price. We are confident that Legacy'sreputation, based on its 50 plus year history, and our focus on customer servicewill continue to provide contract wins, such as the significant new contracts wehave already announced. To achieve even higher levels of operational excellence,the Company will invest in a next generation Enterprise Resource Planning (ERP)platform along with a new handheld ordering device. These systems will allow theCompany to better forecast demand whilst providing customers with real timeinventory information. Over 3,000 independent convenience stores, representing an annual sales value of$450 million, exist in the markets Legacy serves. The projected growth of thesemarkets during the next five years is estimated to be between 5% and 8%, whichis directly attributable to the population growth in Arizona and Nevadaprojected by the US Government. The appointments of Fred Gretsch and Gary Nelson are big steps forward forLegacy. They will both play key roles in our growth strategies. Gary providesthe disciplines necessary to allow Legacy to maximize gross margins from all thenon tobacco categories. Legacy must stay focused on finding results oriented,customer focused employees in order to achieve the committed goals. Legacy'smanagers and employees will be the defining difference between the Company andits competition. As a direct result of our growth in the convenience stores, Legacy hasintroduced a number of new product lines including hanging bag candy, automotiveproducts, beverages and prepared foods. The additions of the automotive andbeverage products were critical to our convenience store growth for the period.These products represent 5% to 7% of the annual sales volume and 15% of profitfor a convenience store owner. During the period, Legacy also expanded its snackproduct portfolio by transitioning to a direct buying relationship with FritoLay. The successful completion of our IPO is a major step forward, providing us withadditional capital to pursue our strategic expansion plans both organically andvia acquisition. Legacy has developed, and is pursuing, an acquisition strategyto increase geographical reach and to diversify the type of customers that weservice; improving turnover, gross margin dollars and earnings in the shortterm. We continue to make solid progress across all aspects of the business and I lookforward to the future with confidence. Frank PattonChief Executive Officer27 September 2006 Profit and Loss statement for the six month period ended 30 June 2006--------------------------------------------------------------------- Unaudited Audited Audited 30 June 30 June 31 December 2006 2005 2005 US$ '000 US$ '000 US$ '000 Turnover 22,299 34,404 64,574Gross Profit 2,408 1,734 3,546Operating Profit/(Loss) 512 26 (586)Profit/(Loss) before tax 329 (133) (911)Net Profit/(Loss) 194 (133) (711)Basic earnings/(Loss) per share (US Cents) 0.3 (0.2) (1.0) Diluted earnings/(Loss) per share (US Cents) 0.3 (0.2) (1.2) Balance Sheet as of 30 June 2006-------------------------------- Unaudited Audited Audited 30 June 30 June 31 December 2006 2005 2005 US$ '000 US$ '000 US$ '000 ASSETSCURRENT ASSETSCash and cash equivalents 39 - -Accounts receivable 1,430 2,405 1,671Inventory 2,600 1,934 1,701Due from shareholders/related parties - 459 459Recoverable income taxes 380 - 270Deferred income taxes - 44 -Other current assets 364 175 403 -------------------------------------TOTAL CURRENT ASSETS 4,813 5,017 4,504 -------------------------------------Property and equipment, net 1,140 967 1,265Deposits 62 126 46Goodwill 1,502 1,502 1,502 -------------------------------------TOTAL ASSETS 7,517 7,612 7,317 ===================================== LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESChecks drawn in excess of cash - 24 48Line of credit 2,500 1,750 3,000Accounts payable 923 925 787Accrued expenses 2 88 -Cigarette and tobacco taxes payable 609 1,219 -Income tax payable 57 72 72Current portion of notes payable 460 242 467Holdback note payable - 405 430 -------------------------------------TOTAL CURRENT LIABILITIES 4,551 4,725 4,804 -------------------------------------Notes and leases payable, net of currentportion 1,504 1,615 1,793Deferred income taxes 260 235 260Commitments and contingencies - - - -------------------------------------TOTAL LIABILITIES 6,315 6,574 6,857 ===================================== STOCKHOLDERS'/MEMBERS' EQUITYMembers' Capital - 1,150 1,150Common stock, par value .001 73 - -Additional paid-in capital 1,623 - -Retained earnings (495) (112) (689) -------------------------------------TOTAL STOCKHOLDERS'/MEMBERS EQUITY 1,202 1,038 460 -------------------------------------TOTAL LIABILITIES AND EQUITY 7,517 7,612 7,317 ===================================== Cashflow statement for the six months ended 30 June 2006-------------------------------------------------------- Unaudited Audited Audited 30 June 30 June 31 December 2006 2005 2005 US$'000 US$'000 US$'000 NET INCOME/(LOSS) 194 (133) (711)Adjustments to reconcile net income to net cash flow provided by (used in) operatingactivities: Depreciation and amortization 126 89 269 Loss (gain) on sale of assets - - 20 Provision for bad debts - 125 187 Provision for deferred income taxes - - 70Changes in Operating Assets and Liabilities Accounts receivable 240 (1,328) (656) Deposits (16) - - Inventory (898) 138 371 Property and equipment - - - Other current assets 40 (126) (545) Recoverable income taxes (110) - - Accounts payable and accrued expenses 138 538 42 Cigarette and tobacco tax payable 609 540 (679) Income taxes payable (15) - - Other liabilities - 64 - ---------------------------------NET CASH PROVIDED BY (USED IN) OPERATINGACTIVITIES 308 (93) (1,249) --------------------------------- CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property and equipment - (191) (228)Note due to seller - - 25Note due from investor - (20) (20) ---------------------------------NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - (211) (223) --------------------------------- CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of Common Stock 1,478 - -Payment of Offering Costs (303) - -Borrowings on lines of credit 510 5,887 10,941Payments on line of credit (1,687) (5,531) (9,335)Proceeds from related party note - - 100Payment of seller holdback note (430) - -Collection of loan to related party 459 - -Payments on long-term debt (295) (121) (279) ---------------------------------NET CASH (USED IN) PROVIDED BY FINANCINGACTIVITIES (268) 235 1,427 --------------------------------- NET INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 39 (69) (45) CASH AND CASH EQUIVALENTS - Beginning of Period - 45 45 ---------------------------------CASH AND CASH EQUIVALENTS - End of Period 39 (24) - ================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest 183 136 325Fixed assets purchased under leases or for debt - - 461 ================================= Notes to the Interim Results 1. Basis of PreparationThe results for the six months ended 30 June 2006 are unaudited. They have beenprepared on an accounting basis and policies that are consistent with those usedin the preparation of the audited financial statements of the Company for the 12months ended 31 December 2005 and the 6 months ended 30 June 2005, which wereprepared in accordance with US Generally Accepted Accounting Principles (USGAAP). As a requirement of the Company's admission to AIM, the results for thesix months ended 30 June 2005 were audited. 2. Earnings per ShareEarnings per share has been calculated based on 73,596,328 (75,799,718 fullydiluted) ordinary shares for the six months ended 30 June 2006 and 73,596,328(75,799,718 fully diluted) ordinary shares for the six months ended 30 June2005. 3. Name change and mergerOn 2 February 2006 Best Holdings Acquisition Company LLC, an Arizona corporationwas merged into Legacy Distribution Group, Inc., a Delaware corporation, in a tax free exchange. 4. Admission to trading on AIMOn 16 March 2006, Legacy Distribution Group, Inc. was admitted to the LondonStock Exchange on the AIM which included issuing new shares and exchanging oldshares of existing shareholders for restricted shares subject to Regulation S. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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