8th Sep 2006 07:00
8th September 2006FOR IMMEDIATE RELEASE AGA FOODSERVICE GROUP PLC 2006 INTERIM RESULTS HIGHLIGHTS Half year to 30th June 2006 2005 Increase ‚£m ‚£m %Revenue 273.3 225.4 21.3Operating profit 20.1 16.9 18.9Profit before tax 20.0 18.0 11.1Basic earnings per share 12.4p 11.3p 9.7Dividend per share proposed 3.5p 3.0p 16.7Shareholders' funds 312.4 275.1 Net cash 10.7 3.5 Highlights: * Record first half profits. * Continued progress within our Consumer operations with Aga and Rangemaster demonstrating the success of growing the business internationally and of new product introductions. * Good progress in Foodservice operations, particularly bakery and refrigeration in Europe. * Strong financial position with net cash of ‚£10.7 million at the half year. * Dividend increased by 16.7% to 3.5 pence. "These are another strong set of interim results with good organic growth,strong cashflow and a significant increase in the dividend. We have identifiedand invested in what have become the major growth segments in consumer andcommercial cooking and are seeing the benefits. We expect current trends tocontinue through the second half." William McGrath Chief ExecutiveEnquiries:William McGrath, Chief Executive 020 7404 5959 (today)Shaun Smith, Finance Director 0121 711 6015 (thereafter)Simon Sporborg / Nina Coad (Brunswick) 020 7404 5959 Aga Foodservice Group plc 2006 Interim Results CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT The first half of 2006 was a further encouraging period for the Group. Profitincreases continued and the good prospects for the Group were reinforced by thegrowing interest in quality cookers in the domestic market and by the need formore efficient commercial products. As these trends accelerate they will drivethe results of the Group. We will continue the process of investing in ourproducts and brands and acquire compatible operations to reinforce existingbusinesses as seen this year with the acquisitions of Eloma and Amana.Financial ResultsRevenue in the six months to 30th June 2006 increased by 21.3% to ‚£273.3million. Of the turnover growth, 8.1% was organic. Group operating profits roseby 18.9% to ‚£20.1 million. Profit before tax rose 11.1% to ‚£20 million withinterest, as expected, lower than last year when ‚£0.7 million interest onoverpaid tax was received.Basic earnings per share were 9.7% higher at 12.4p after a tax rate of 21%. Theproposed dividend per share has been significantly increased again this year to3.5 pence per share, up 16.7%. The dividend has doubled in the last five-yearperiod as the strategic development plans have delivered sustained earningsgrowth.Consumer OperationsAga and Rangemaster are now well established forces in the premium appliancemarket and the combination of international expansion, product innovation andstrong routes to market all helped drive growth. Even against a slow UKconsumer backdrop, record profits were achieved. The operational gearingavailable to both businesses from cooker volume growth remains a major driverof the Group's profit growth and both operations are benefiting from theongoing expansion of our cookware and refrigeration lines.In the first half we have sold 9,000 cast iron cookers under the Aga, Rayburnand Stanley brands and we have set a target of 20,000 for the full year. Therise of the electric model as a proportion of Aga sales continues and Aga isestablishing itself internationally in both heat storage and conventionalcooking products. We sold 6,500 Aga branded cookers in the first half of which2,300 were outside the UK and we expect a strong end to the year. Our owncooker retail operations performed well. The Fired Earth chain is now under thecontrol of a single UK Aga retail team and we have focused the range on paint,tiles, bathrooms and now kitchen furniture made by Grange.Rangemaster had another strong period with overall cooker sales up 7% to 32,500with international sales growing well representing 18% of sales compared with13% in the prior year. Performance in the Irish, French and US markets wasstrong as the benefits of investment in these markets over recent years paidoff. We expect these trends to continue as our powerful product offeringcombines with a shift in demand being seen in these markets from built-in tofree-standing kitchens. Brands like La Cornue and Heartland are alsobeneficiaries of this trend.Marvel leads the Group's progress in refrigeration from the USA and has had anexcellent first half with its sales up over 12% - led by the growing trend for`outdoor living'. The markets of our home furnishings operations at Domain andGrange remained soft. After a management restructuring and with a strong newproduct programme, a better second half is expected. The first half resultsincluded costs for reorganisation and stock clearances.Foodservice OperationsOur bakery operations had a strong first half. Sales into central Europe andinto Africa bolstered our French based operations and in the UK we benefitedfrom investment programmes notably by Marks & Spencer and Sainsbury's. In theUSA our doughnut equipment operation saw strong sales to Wal-Mart and Dunkin'Donuts. We chose to focus our operations on supermarkets and cut back on oursemi-industrial lines. The cost of these measures, including stock write-offswas over ‚£0.8 million in the first half and leaves us well placed as we directour sales effort towards cafƒ© bakeries and US supermarkets where interest inhealthy quality breads is growing.We have seen continuing growth from our refrigeration operations withsignificant improvement for Victory in the USA and particularly goodperformances in China and Australia. In prime cooking, the UK remains quiet,although the steady increase in sales of the Infinity fryer is an importantfeature - as are sales of the Eloma combination ovens, which are gainingrecognition beyond their German domestic base following the acquisition inFebruary.Our conviction is that the commercial kitchen has seen years of underinvestment and that higher energy costs and health, hygiene and emissionconcerns are growing rapidly. Change is coming - a point now widely accepted byequipment producers. As Governments focus on carbon emissions and majorcompanies address the subject, higher equipment efficiency standards can beexpected. The Group's commitment to innovation and energy efficiency means itis well placed to provide the capital equipment much needed in many kitchens.This is seen not only in the Infinity fryer but also in our refrigerators,which are leaders on efficiency grounds. We have been named as a 2006 US EnergyStar Partner of the Year for the US Federal Government.Strategic DevelopmentOver the last five years we have created strong market leading positions withinthe consumer and commercial appliance markets for cookers and fridges. Our newproduct programmes are central to our progress. At Aga we have a bio-fuelenabled product and heat storage electric cookers which lend themselves toenergy management and micro-generation. Also, Rangemaster and Marvel are addingexciting new feature-led products.In foodservice we are leading the drive for more healthy food, produced quickerand more efficiently. Our recent acquisition of Amana is part of this process.It brings the world's leading commercial microwave company into the Group andprovides excellent major account links and a platform for expansion inaccelerated cooking.Growth rates in our markets are increasing, underlining the benefits of ourinvestments in recent years. There are further organic and acquisitionopportunities available which we are pursuing and we expect consolidation inthe sectors to continue at all levels.Current TradingWe continue to perform well in our core UK consumer appliance markets and havethe products now available to sustain that position. Our determined efforts todevelop new markets for our cookers are proving effective and we expect to seefurther growth in the second half, notably in Ireland and France.In foodservice order intake is satisfactory and we continue to work on somemajor projects and accounts to provide continuing momentum.We believe that we have correctly identified and aligned ourselves with growthmarkets and with underlying customer trends which will continue to driveprofitability in the future. Accordingly we are confident that 2006 will beanother good year for the Group and that we are well positioned for furtherexpansion.V Cocker CBE W B McGrathChairman Chief Executive8th September 2006 AGA FOODSERVICE GROUP PLC INTERIM RESULTS CONSOLIDATED INCOME STATEMENT Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ Note ‚£m ‚£m ‚£m Revenue 3 273.3 225.4 501.8_________________________________________________________________________________________ Group operating profit 3 20.1 16.9 41.7Share of post tax result from associate - 0.1 0.1_________________________________________________________________________________________ Profit before finance (costs)/income 20.1 17.0 41.8Finance income 0.4 1.3 2.3Finance costs (0.5) (0.3) (1.1)_________________________________________________________________________________________ Profit before tax 20.0 18.0 43.0Income tax expense 4 (4.2) (3.6) (8.6)_________________________________________________________________________________________ Profit for the period 15.8 14.4 34.4_________________________________________________________________________________________ Profit attributable to equity shareholders 15.9 14.4 34.0(Loss) / profit attributable to minority interests (0.1) - 0.4_________________________________________________________________________________________ Profit for the period 15.8 14.4 34.4_________________________________________________________________________________________ Earnings per share 5 p p pBasic 12.4 11.3 26.6Diluted 12.3 11.2 26.5_________________________________________________________________________________________ Dividend per share 6 p p pPaid 6.2 5.8 8.8Proposed 3.5 3.0 9.2_________________________________________________________________________________________ The above results relate to continuing operations. CONSOLIDATED BALANCE SHEET Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ ‚£m ‚£m ‚£m Non-current assets Goodwill 154.4 140.9 154.2Intangible assets 20.1 13.5 19.1Property, plant and equipment 86.1 81.8 85.3Investments 0.3 6.0 0.3Deferred tax assets 5.6 11.6 11.3_________________________________________________________________________________________ 266.5 253.8 270.2_________________________________________________________________________________________ Current assets Inventories 98.6 84.6 89.4Trade and other receivables 87.9 83.2 90.5Cash and cash equivalents 48.9 32.9 55.4_________________________________________________________________________________________ 235.4 200.7 235.3_________________________________________________________________________________________Total assets 501.9 454.5 505.5_________________________________________________________________________________________Current liabilities Borrowings (3.9) (26.9) (2.1)Trade and other payables (113.1) (97.4) (117.5)Current tax liabilities (11.1) (7.8) (8.6)Current provisions (6.7) (3.9) (5.1)_________________________________________________________________________________________ (134.8) (136.0) (133.3)_________________________________________________________________________________________ Net current assets 100.6 64.7 102.0_________________________________________________________________________________________ Non-current liabilities Borrowings (34.3) (2.5) (32.9)Other payables (0.8) - (0.8)Retirement benefit surplus/(obligation) 1.0 (22.6) (18.2)Deferred tax liabilities (7.9) (5.0) (7.6)Provisions (10.5) (13.1) (11.7)_________________________________________________________________________________________ (52.5) (43.2) (71.2)_________________________________________________________________________________________ Total liabilities (187.3) (179.2) (204.5)_________________________________________________________________________________________ Net assets 314.6 275.3 301.0_________________________________________________________________________________________ Shareholders' equity Share capital 32.2 32.0 32.1Share premium account 67.4 65.4 65.8Other reserves 31.6 38.1 38.3Retained earnings 181.2 139.6 162.5_________________________________________________________________________________________ Total shareholders' equity 312.4 275.1 298.7Minority interest in equity 2.2 0.2 2.3_________________________________________________________________________________________ Total equity 314.6 275.3 301.0_________________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ Note ‚£m ‚£m ‚£m Cash flows from operating activities Cash generated from operations 11.9 (3.8) 37.8Finance income 0.4 1.3 2.3Finance costs (0.5) (0.1) (1.0)Tax (payment) / repayment (1.7) 3.0 1.2_________________________________________________________________________________________ Net cash generated from operating activities 10.1 0.4 40.3_________________________________________________________________________________________ Cash flows from investing activities Acquisition of subsidiaries, net of cash 7 (5.0) (5.6) (13.8)acquired Purchase of property, plant and equipment (6.4) (5.4) (10.6)Expenditure on intangibles (2.1) (1.0) (3.2)Proceeds from disposal of property, plant and 2.6 0.3 0.7equipment _________________________________________________________________________________________ Net cash used in investing activities (10.9) (11.7) (26.9)_________________________________________________________________________________________ Cash flows from financing activities Dividends paid to shareholders (8.0) (7.4) (11.3)Net proceeds from issue of ordinary share capital 1.7 2.2 2.7Repayment of loan to associated undertaking - 0.3 0.3Repayment of borrowings acquired with acquisitions (3.0) (4.8) (4.8)Finance lease (repayment) / inception (1.7) 0.1 (0.4)Repayment of borrowings (0.8) (0.1) (3.8)New bank loans raised 5.6 4.0 9.1_________________________________________________________________________________________ Net cash used in financing activities (6.2) (5.7) (8.2)_________________________________________________________________________________________ Effects of exchange rate changes 0.5 0.1 0.4_________________________________________________________________________________________ Net (decrease) / increase in cash and cash (6.5) (16.9) 5.6equivalents Cash and cash equivalents at beginning of period 55.4 49.8 49.8_________________________________________________________________________________________ Cash and cash equivalents at end of period 48.9 32.9 55.4_________________________________________________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ ‚£m ‚£m ‚£m Profit for period 15.8 14.4 34.4_________________________________________________________________________________________ Exchange adjustments on net investments (5.4) 1.3 5.4Cash flow hedges - - (0.1)Actuarial gains/(losses) on defined benefit 15.3 (20.0) (17.5)pension schemes Tax on items taken directly to reserves (4.6) 6.0 5.3_________________________________________________________________________________________ Net gains/(losses) not recognised in income 5.3 (12.7) (6.9)statement _________________________________________________________________________________________ Total recognised income for period 21.1 1.7 27.5_________________________________________________________________________________________ Attributable to: Equity shareholders 21.2 1.7 27.1Minority interests (0.1) - 0.4_________________________________________________________________________________________ 21.1 1.7 27.5_________________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT - RECONCILIATION Reconciliation of operating profit to net cash inflow / (outflow) from operating activities Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ ‚£m ‚£m ‚£mOperating profit 20.1 16.9 41.7Amortisation of intangible assets 1.0 0.6 1.9Depreciation 5.2 4.1 9.8Profit on disposal of property, plant and equipment (1.8) (0.1) (0.2)(Increase) / decrease in inventories (8.9) (9.6) (4.9)Decrease / (increase) in receivables 2.6 (3.0) (4.1)(Decrease) / increase in payables (5.9) (12.0) (3.0)(Decrease) / increase in provisions (0.4) (0.7) (3.4)_________________________________________________________________________________________ Net cash inflow / (outflow) from operating 11.9 (3.8) 37.8activities _________________________________________________________________________________________ AGA FOODSERVICE GROUP PLC NOTES TO THE INTERIM FINANCIAL REPORT 1. BASIS OF PREPARATION Financial information presented here is unaudited but has been reviewed by theGroup's auditor. Its review opinion appears below. Comparatives for the yearended 31st December 2005 are not the Group's statutory accounts for that yearas defined by Section 240 of the Companies Act 1985. Those accounts have beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified.2. ACCOUNTING POLICIES The interim consolidated financial statements do not include all informationand disclosures required in the annual financial statements. They have,however, been prepared using the same accounting policies as used in thepreparation of the Group's annual financial statements for the year ended 31stDecember 2005.3. SEGMENTAL ANALYSIS For management purposes, the Group is organised into four operating divisionsand these divisions are the basis on which the Group reports its primarysegmental information.By primary business group Half year to Half year to Year to June 2006 June 2005 December 2005 Revenue Operating Revenue Operating Revenue Operating profit* profit profit ______________________________________________________________ ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m UK & European Consumer 116.1 11.5 89.0 9.6 215.2 23.0US Consumer 39.1 (0.2) 34.4 1.4 69.6 2.3UK & European Foodservice 95.3 8.1 81.0 4.5 172.8 14.0US Foodservice 22.8 0.7 21.0 1.4 44.2 2.4_________________________________________________________________________________________ Total operations 273.3 20.1 225.4 16.9 501.8 41.7Share of result of associate - - - 0.1 - 0.1Net finance (cost) / income - (0.1) - 1.0 - 1.2_________________________________________________________________________________________ Profit before tax - 20.0 - 18.0 - 43.0Income tax expense - (4.2) - (3.6) - (8.6)_________________________________________________________________________________________ Profit for the period - 15.8 - 14.4 - 34.4_________________________________________________________________________________________ The share of result of associate relates to the UK & European Consumer segment. * Operating profit includes reorganisation costs in US Consumer and in US Foodservice of ‚£0.8m each and a property profit in UK and European Foodservice of ‚£1.8m. Revenue by secondary segment - geographical origin Half year to Half year to Year to June 2006 June 2005 December 2005 ______________________________________________________________ ‚£m % ‚£m % ‚£m % United Kingdom 139.3 51.0 126.4 56.1 267.5 53.3North America 62.4 22.8 55.2 24.5 113.4 22.6Europe 65.6 24.0 40.5 18.0 113.4 22.6Rest of World 6.0 2.2 3.3 1.4 7.5 1.5_________________________________________________________________________________________ Total Group 273.3 100.0 225.4 100.0 501.8 100.0_________________________________________________________________________________________ 4. TAXATION Corporation tax for the interim period to 30th June 2006 has been charged atthe estimated rates chargeable for the full year in the respectivejurisdictions as follows: Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ ‚£m ‚£m ‚£mCurrent tax UK corporation tax 2.7 0.8 2.6Overseas tax 1.5 2.8 3.9_________________________________________________________________________________________ 4.2 3.6 6.5Deferred tax UK corporation tax - - 2.9Overseas tax - - (0.8)_________________________________________________________________________________________ - - 2.1_________________________________________________________________________________________Total income tax expense 4.2 3.6 8.6_________________________________________________________________________________________5. EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on thefollowing data - all activities are continuing: Half year Half year Year to to June to June December 2006 2005 2005 _________________________________________ ‚£m ‚£m ‚£mEarnings Profit for the period 15.8 14.4 34.4Minority interests 0.1 - (0.4)_________________________________________________________________________________________ Earnings - basic and diluted EPS 15.9 14.4 34.0_________________________________________________________________________________________ Weighted average number of shares in issue million million millionFor basic EPS calculation 128.7 127.0 127.6Dilutive effect of share options 1.1 1.2 0.8_________________________________________________________________________________________ For diluted EPS calculation 129.8 128.2 128.4_________________________________________________________________________________________ Earnings per share p p pBasic 12.4 11.3 26.6Diluted 12.3 11.2 26.5_________________________________________________________________________________________6. DIVIDENDS Half year Half year to June to June 2006 2005 _______________________ ‚£m ‚£mAmounts recognised as distributions to equity shareholders in the period: Final dividend of 6.2p for the year ended 31st December 2005(2004: 5.8p) per share 8.0 7.4 The directors are proposing an interim dividend in respect of the financialyear ending 31st December 2006 of 3.5p per share (2005 : 3.0p).7. ACQUISITION OF SUBSIDIARIES On 2nd February 2006, the Group acquired 100% of the issued share capital ofEloma, a German combi-oven maker, for a consideration of ‚£7.6m. Thistransaction has been accounted for by the purchase method of accounting. Prior year Fair value fair value Provisional Book value adjustments adjustments fair values _______________________________________________________ ‚£m ‚£m ‚£m ‚£m Net assets acquired Intangible assets - Brands 0.4 (0.3) - 0.1Property, plant and equipment 2.9 (0.3) (0.1) 2.5Inventories 3.0 (0.2) (0.2) 2.6Trade and other receivables 2.6 (0.2) - 2.4Borrowings < 1 year (3.0) - - (3.0)Trade and other payables (1.4) - - (1.4)Retirement benefit obligation (0.5) - - (0.5)Current provisions - - (0.9) (0.9)Net assets acquired 4.0 (1.0) (1.2) 1.8________________________________________________________________________________________ Total consideration 4.6 ________________________________________________________________________________________ Goodwill arising on acquisitions: - in the period 0.6 1.0 - 1.6- prior year - - 1.2 1.2Total goodwill 0.6 1.0 1.2 2.8 ________________________________________________________________________________________ Net cash outflow arising on acquisitions: Cash consideration 4.6Repayment of borrowings acquired 3.0Deferred consideration Waterford Stanley 0.4Total cash outflow 8.0________________________________________________________________________________________The fair value adjustments bring the acquired company in line with the Group'saccounting policies.Prior year fair value adjustments relate to Waterford Stanley ‚£1.0m and others‚£0.2m finalising the provisional fair values made in 2005. If the acquisitionof Eloma had been completed on the first day of the financial year, Groupresults would not have been materially different. 8. BANK LOANS AND OVERDRAFTS In the period bank loans denominated in overseas currencies (US dollars andEuros) of ‚£2.7m have been issued to hedge overseas investments.9. SHARE CAPITAL During the period 690,750 ordinary shares of 25p each (nominal value ‚£172,688)were issued in connection with the Company's share option schemes for anaggregate consideration of ‚£1.7m.10. RETIREMENT BENEFIT SCHEMESDefined benefit schemesPlan assets have been valued at a market value of ‚£745.3m and the definedbenefit liabilities at ‚£744.3m, at the interim date. The liabilities have beenrolled forward from 31st December 2005 and adjusted to take account of theincrease in bond yields, which have increased the discount rate from 4.8% to5.3%.11. EVENTS AFTER THE BALANCE SHEET DATEOn 7th September 2006 the Group acquired `Amana', a US product line ofcommercial microwaves for $49.25m in cash. In the year to 31st December 2005the turnover was $43m and operating profit $4.7m. NOTES TO THE INTERIM FINANCIAL REPORT Independent Review Report to Aga Foodservice Group plc IntroductionWe have been instructed by the company to review the financial information forthe six months ended 30th June 2006 which comprises Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income and Expense, and the related notes1 to 11.We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information.This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 `Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed.Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in the preceding annual accounts. Any changes to thesepolicies, together with the reasons for the amendment are disclosed.Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have been applied,unless otherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information.Review conclusionAPB Bulletin 1999/4 requires that we state that we have not reviewed theinterim comparative figures included in the interim report.On the basis of our review, with the exception of the matter described in thepreceding paragraph, we are not aware of any material modifications that shouldbe made to the financial information as presented for the six months ended 30thJune 2006.Ernst & Young LLPBirmingham8th September 2006 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. 354715Registrars:Lloyds TSB RegistrarsThe CausewayWorthingWest SussexBN99 6DATelephone (Helpline): 0870 600 3953International (Helpline): 0044 (0) 121 415 7047Auditors:Ernst & Young LLP - Appointed auditors on 1st June 2006 following completion ofa tender process.Financial Advisers and Joint Stockbrokers:Dresdner KleinwortJoint Stockbrokers:Collins Stewart 2006 financial calendar Record date for Interim ordinary dividend 10th November 2006Interim ordinary dividend payable 6th December 20062006 year end 31st December 2006ENDAGA FOODSERVICE GROUP PLCRelated Shares:
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