1st Nov 2005 07:02
Blueheath Holdings PLC01 November 2005 For Immediate Release 1 November 2005 Blueheath Holdings plc ("Blueheath" or the "Company") Interim Results Acquisition of AC Ward & Son Limited Blueheath is a national delivered wholesaler using sophisticated, proprietarytechnology to offer a substantial cost advantage over established players in the£16.4bn grocery wholesale sector. The Company today announces its Interimresults for the six months ended 27 August 2005. Interim Results - Key Points • Turnover increased 53% to £52.3m (2004 - £34.2m) further strengthening the business model. • The Company met or exceeded all operational targets on order-fulfilment, on-time delivery and stock holding. • Operating loss reduced by 17% to £2.27m (2004 - £2.75m). Retained loss reduced by 46% to £2.03m (2004 - £3.78m). • The integration of CTM Wholesale acquired in April 2005 is proceeding well. • Management has been strengthened with the appointment of Andrew King as Director of Buying. Contract Wins - Key Points Blueheath has added three new accounts since the last statement in August. Thisgives a total 14 new accounts added since the start of Blueheath's financialyear, with a full recovery from the loss last year of Snax 24. There remains a strong forward pipeline of new business with 10 accountscurrently at trial, tender, or advanced discussion stage. These accounts have acombined annual value of £77m. Acquisition of AC Ward & Son Limited ("ACW") - Key Points Blueheath is today pleased to announce the acquisition of ACW. • ACW is a traditional delivered wholesaler based in the South East. • For the ten months to October 2005, ACW is expected to report an annualised turnover of £55m and has net assets of £0.7m. • The acquisition is for up to £3.0m in cash with £1.0m contingent on subsequent sales performance. • Plans are in place for the integration of the business into the current operation with the associated cost savings falling in the 2006/07 financial year. Commenting on the results and prospects, Douglas Gurr, Chief Executive, said: "The Group has continued its progress towards breakeven with encouragingprogress on the integration of CTM Wholesale and further account wins. Withgrowing evidence of the benefits from the integration of CTM, there has been ashift in focus towards further potential acquisitions. I am delighted thereforeto announce the acquisition of ACW which represents another significant step inthe Company's progress. Whilst the benefits of our business model and associated cost savings tocustomers remain strong and continue to be well received, the process of accountroll-out remains challenging and difficult to predict. This is balanced by ourability to attract and acquire traditional distribution businesses with theirassociated turnover which can be rapidly adapted to the Blueheath operatingmodel." For further details:Blueheath Holdings plcDouglas Gurr, Chief Executive Tel: 020 7689 2455Simon Mindham, Finance Director Tel: 020 7689 2464 Buchanan CommunicationsMark Edwards / Nicola Cronk / James Strong Tel: 020 7466 5000 Notes to editors: Blueheath is a wholesaler of groceries to convenience stores in the £16.4billion UK grocery wholesale sector. The Company sells and arranges thedistribution of approximately 3,100, primarily ambient, product lines to over2,000 independent and multiple retail and leisure outlets within the UK.Blueheath's innovative technology-driven business model is founded on the basicprinciple 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, and 3. the extensive use of process automation to minimise administration costs. CHAIRMAN'S STATEMENT Interim Results Blueheath is pleased to announce its interim results for the six months ended 27August 2005. The company has continued to make progress towards breakeven with turnover forthe 6 months ending 27 August 2005 increased by 53% to £52.3m (28 August 2004 -£34.2m). Operating loss reduced by 17% to £2.27m (2004 - £2.75m). Retained loss reducedby 46% to £2.03m (2004 - £3.78m). Gross margins were level at 6.0% (28 August2004 - 6.0%), reflecting the short term impact of integrating the lower marginCTM business. Buying synergies are expected to flow through during the secondhalf of the current fiscal year. Total overhead costs before exceptional costsas a percentage of sales further reduced from 12.6% to 10.4%. As of 27 August 2005 the Company had repaid all substantial debt and held atotal of £16.4m in cash deposits and facilities (28 August 2004 - £14.4m),comprising £4.3m of cash, £8.2m of cash deposits held against tobacco credit,and £3.9m of un-drawn invoice discounting facilities. The Directors will be reviewing the dividend policy as the Company continues toprogress and grow. Operational Performance Operationally the company has performed well over the period, continuing to meetor exceed its key operational targets on order fulfilment, on-time delivery andstock holding. This was in spite of the level of management attention that hasinevitably been focused on the integration of the CTM business. These are keyperformance measurements for Blueheath and we continue to be committed toproviding the best possible service to all our customers. Business growth is 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. The business continues to have ample capacity for further expansion. Integration of CTM Wholesale The Company acquired CTM Wholesale Limited in April 2005 for a consideration of£5.6m. At the time, the Directors anticipated that the enlarged group would beable to achieve improved operating margins through combining buying volumes, theapplication of Blueheath's technology and business processes to the CTMoperation, and the integration of central overheads. At the same time, theDirectors identified the potential loss of customers as the key risk in thisbusiness integration. We are pleased to report that the integration has progressed smoothly, achievingor exceeding the internal targets set for the integration. We are also pleasedto report that there have been no material customer losses or staff issues. Blueheath's stock management technology has been successfully applied to the CTMbusiness. This has enabled the acquired stock of £3.4m (30 days) to be reducedto £1.6m (14 days) releasing almost £1.9m in cash and lowering the effectivepurchase price to £3.7m. Purchasing integration is on track to deliver theexpected synergies with the benefits being phased in over the second half of thefinancial year. Integration of the central overheads is proceeding according toplan. Acquisition of AC Ward & Son Limited Following the successful integration of the CTM business, Blueheath is todayannouncing the acquisition of AC Ward & Son Limited ("ACW") for up to £3.0million in cash (the "Acquisition"). ACW is a traditional delivered wholesale business. It operates from a singlewarehouse depot located in Thurrock in the South East of England. For the tenmonths to October 2005, ACW is expected to report an annualised turnover of£55m, and has net assets of £0.7m. Of the cash consideration of up £3.0m, a total of £1.0m is conditional on thesales performance of the business in the period immediately followingacquisition. ACW represents another good opportunity to supplement the organic growth of thebusiness. As with CTM, the Directors anticipate that the enlarged group will beable to achieve improved operating margins through combining buying volumes, theapplication of Blueheath's technology and business processes to the ACWoperation, and the integration of central overheads. Contract Wins The business took a strategic decision some two and a half years ago to expandthe offer from the core customer base of individual independent retailers tomultiple account chains. Since the start of the financial year, the business hasadded some 14 new multiple accounts across the full range of forecourt,convenience, leisure and news and more recently food service sectors. Overall, the business has done well to recover from the loss last year of theSnax 24 account which, at the time, was the Company's largest customer. Salesexcluding the loss of Snax 24 increased by 29% which resulted in an overallsales gain in the core business of 4% and reflect a satisfactory performance inadding new accounts. The business is continuing to roll out the new accountsbut as has previously been highlighted, the pace of the roll out of outlets isbeyond the Company's control and some of these accounts have been progressingmore slowly than originally expected. In addition, the Company has a strong pipeline of new business with 10 accountscurrently at trial, tender, or advanced discussion stage. These accounts havethe potential to deliver £77m of additional revenue. Historically, the Companyhas managed to convert 30-40% of such prospects although, having just completedthe acquisition of ACW, the management will focus on integrating the businessand generating the operational efficiencies and cost savings from thisacquisition. As a result, the current rate of organic growth is expected to slowover the next few months. The Directors are taking steps to recruit additionalpersonnel so that organic growth and the identification, acquisition andintegration of potential targets can be pursued in tandem. Management With the new business wins and the acquisition of ACW, the scope and scale ofthe business has expanded very considerably over the past 12 months. TheDirectors have accordingly taken the decision to strengthen the management teamand are delighted to announce that Andrew King (39) formerly Buying Director ofthe T & S Stores convenience chain has agreed to join the business as Directorof Buying. Andrew is a significant addition to the management team, having hadextensive experience in our sector. He has been working with Blueheath in aconsulting capacity since June 2005 and has made a valuable contribution insupporting the integration of CTM. James Ward (34), formerly managing director of ACW will also be joining thebusiness to support the integration of the ACW business and assist with futurebusiness development. Company Background In four and a half years since commencing its national rollout, Blueheath hascreated a unique national distribution network offering a next-day deliveryservice on a full range of goods to the UK's independent and multipleconvenience market. Blueheath's operations were founded on the simple principleof stripping-out unnecessary supply chain costs in order to offer a fulldelivery service at close to cash & carry prices. The Company has invested heavily in building the technology and infrastructurenecessary to support this unique national distribution network and is pursuing astrategy of business growth through the addition of new customer accounts tobuild the scale necessary to cover the fixed distribution and administrativeexpenses. Company Outlook Looking forward, the Company intends to continue a dual strategy of both organicand acquisition led growth to drive scale and maximise profitability. Theencouraging progress with the integration of CTM has demonstrated Blueheath'sability to manage the acquisition and integration process whilst stilldelivering organic growth. Although the next six months will offer a sizablechallenge in integrating the ACW business, the Company is confident that thiscan be successfully achieved. In the short term, this focus on the integration of ACW will inevitably affectthe speed with which the Company can take on further new accounts, but when theprocess is completed the Company is optimistic that the business will haveachieved breakeven and be in an excellent position to support further growth. Colin SmithChairman1 November 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)Results for the six months ended 27 August 2005 Six months ended 28 August 2004 Year ended Six months as restated 26 February ended 27 see note 10 2005 August 2005 as restated Note see note 10 £'000 £'000 £'000Turnover Continuing operations 35,694 34,178 70,151 Acquisitions 16,596 - - 52,290 34,178 70,151Cost of sales (49,142) (32,128) (66,017) Gross profit 3,148 2,050 4,134 Distribution costs (3,098) (2,444) (5,027)Administrative expenses Goodwill amortisation (40) - -Share option charges (44) (24) (80) Other (2,234) (2,329) (4,445) (5,416) (4,797) (9,552) Operating (loss) profit Continuing operations (2,562) (2,747) (5,418) Acquisitions 294 - - (2,268) (2,747) (5,418)Interest receivable and similar income 280 46 253Interest payable and similar charges (37) (1,083) (1,142) Loss on ordinary activities before taxation (2,025) (3,784) (6,307) Tax on loss on ordinary activities - - - Retained loss for the financial period (2,025) (3,784) (6,307) Loss per share - basic and diluted (pence) 3 (4.5) (16.1) (19.5) 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. CONSOLIDATED BALANCE SHEET (UNAUDITED)At 27 August 2005 As at 28 As at 26 August 2004 February as restated 2005 Note As at 27 see note 10 as restated August 2005 see note 10 £'000 £'000 £'000FIXED ASSETSIntangible assets 2,177 - -Tangible assets 275 245 229 2,452 245 229 CURRENT ASSETSStocks 3,018 1,606 1,125Debtors 11,416 5,780 5,968Current investments 4 8,200 10,540 5,100Cash at bank and in hand 4,306 - 6,027 26,940 17,926 18,220 CREDITORS: amounts falling due within oneyear (13,900) (4,403) (6,869) NET CURRENT ASSETS 13,040 13,523 11,351 TOTAL ASSETS LESS CURRENT LIABILITIES, BEINGNET ASSETS 15,492 13,768 11,580 CAPITAL AND RESERVESCalled up share capital 455 411 414Share premium account 22,926 16,798 17,074Other reserve 17,874 17,874 17,874Profit and loss account (25,887) (21,339) (23,862)Share option reserve 124 24 80 EQUITY SHAREHOLDERS' FUNDS 9 15,492 13,768 11,580 CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)Results for the six months ended 27 August 2005 Six months Six months Year ended 27 ended 28 ended 26 August August February 2005 2004 2005 £'000 £'000 £'000 Note Net cash outflow from operations 7 (703) (4,435) (3,677) Returns on investments and servicing of financeInterest paid (37) (351) (309)Interest received 280 46 253 Net cash outflow from returns on investment and servicingof finance 243 (305) (56) Capital expenditure and financial investmentPurchase of tangible fixed assets (34) (168) (311)Sale of tangible fixed assets - 5 - Net cash outflow from capital expenditure and financialinvestments (34) (163) (311) Acquisitions and disposalsPayment to acquire investment in subsidiary (5,619) - -Net cash acquired with subsidiary 1,261 - - Net cash outflow from acquisitions and disposals (4,358) - - Net cash outflow before management of liquid resourcesand financing (4,852) (4,903) (4,044) Management of liquid resourcesIncrease in short term deposits (3,100) (10,540) (11,128) FinancingIssue of ordinary share capital (net of issue costs) 5,893 17,142 17,230Issue of other loan - 1,500 -Repayment of other loan - (1,500) -Repayment of short term debt facility - (2,058) -Increase in short term debt facility - 33 -Bank loan repaid - - (1,841)Finance leases repaid (27) - - Net cash inflow from financing 5,866 15,117 15,389 (Decrease) increase in cash 8 (2,086) (326) 217 Notes 1 Basis of preparation The financial information has been prepared in accordance with the policies setout in the statutory financial statements of Blue Heath Direct Limited for theyear ended 26 February 2005. The company changed its accounting policy forshare options as fully described in note 10. These interim financial statements do not constitute statutory financialstatements within the meaning of section 240 of the Companies Act 1985. Resultsfor the six months periods ended 27 August 2005 and 28 August 2004 have not beenaudited. The results for the year ended 26 February 2005 have been extractedfrom the statutory financial statements of Blueheath Holdings plc and restatedwhere appropriate as explained in note 10. The financial statements for theyear ended 26 February 2005 have been filed with the Registrar of Companies andupon which the auditors reported without qualification. 2 Corporate restructuring - comparative period During the six months ended 28 August 2004 the Group carried out a corporaterestructuring consisting of the introduction of a new holding Companyincorporated on 4 June 2004 under the name Blueheath Holdings Limited. On 13July 2004 its name was changed to Blueheath Holdings plc when it re-registeredas a public limited company. On 12 July 2004 Blueheath Holdings Limited acquired the entire share capital ofBlue Heath Direct Limited in exchange for the issue of shares to shareholders ona one for one basis. The restructuring represented a change in the identity of the holding companyrather than on acquisition of the business. Consequently, the restructuring hasbeen accounted for using merger accounting principles. Therefore, although Blueheath Holdings plc did not become the parent company ofthe Group until 12 July 2004, the Group financial information is presented as ifthe companies had always been part of the same group. In accordance with Sections 131 and 133 of the Companies Act 1985, BlueheathHoldings plc has taken no account of any premium on the shares issued to acquireBlue Heath Direct Limited and has recorded the cost of the investment at thenominal value of the shares issued. The resulting difference on consolidationhas been credited to a merger reserve. 3 Loss per share Basic and diluted loss per ordinary share has been calculated by dividing theloss after taxation for the periods as shown in the table below. Six months Year ended 28 August 2004 ended 26 February Six months as restated 2005 ended 27 see note 10 August 2005 as restated see note 10 Losses (£'000) (2,025) (3,784) (6,307)Weighted average number of shares 44,578,163 23,514,430 32,310,492 The Company had ordinary shares in issue of 45,468,776 as of 27 August 2005. FRS14 requires presentation of diluted EPS when a company could be called uponto issue shares that would decrease net profit or increase net loss per share.For a loss making company with outstanding share options, net loss per sharewould only be increased by the exercise of out of the money options. Since itseems inappropriate to assume that option holders would act irrationally andthere are no other diluting future share issues, diluted EPS equals basic EPS. 4 Current asset investments The group has £8.2m (26 February 2005 : £5.1m; 28 August 2004 : nil) of shortterm deposits with Lloyds Commercial Finance Limited. This deposit isrestricted as it is held by Lloyds Commercial Finance Limited as security forguarantees to suppliers for the provision of credit. 4 Share capital and share premium Blueheath Holdings plc ("the Company") incorporated on 4 June 2004 with 1ordinary share of £0.01. Subsequently it effected a group reconstruction inorder to acquire, on a share for share basis, Blue Heath Direct Limited. Aspart of this re-organisation the Company issued 25,768,399 ordinary shares. On 19 July 2004 the Company placed 15,289,256 new ordinary shares and obtainedadmission for the entire share capital of the Company to the AlternativeInvestment Market ("AIM") of the London Stock Exchange. The placing raised£16,950,582 being £152,893 of share capital and £16,797,689 of share premiumafter deduction of £1,549,418 in respect of costs associated with the raising ofequity. On 8 April 2005 the Company placed 3,870,970 new ordinary shares that raised£38,709 share capital and £5,751,297 of share premium after the deduction of£209,996 in respect of costs associated with the raising of equity. Theproceeds from this placing were used to fund the acquisition of CTM WholesaleLimited (see note 11. 179,789 staff share options were exercised raising £1,797 share capital and£105,409 share premium. 6 Operating exceptional costs Six months Six months Year ended 29 ended 28 ended 26 August August February 2005 2004 2005 £'000 £'000 £'000 Restructuring of finance - 314 314Expenses associated with flotation - 138 164 - 452 478 7 Reconciliation of operating loss to operating cash outflow Six months ended 28 August 2004 As at 26 February Six months as restated 2005 ended 29 see note 10 August 2005 as restated £'000 see note 10 £'000 £'000 Operating loss (2,268) (2,747) (5,418)Depreciation charge 173 142 299Amortisation charge 40 - -FRS 20 share option charge 44 24 80(Profit) loss on disposal of fixed assets - (4) 4Decrease (increase) in stocks 1,570 (818) (1,997)(Increase) decrease in debtors (2,129) (1,542) 3,692Increase (decrease) in creditors 1,867 510 (337) (703) (4,435) (3,677) 8 Analysis and reconciliation of net debt Acquisitions (net of cash 26 February Cash overdraft 27 August 2005 flow acquired) 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 6,027 2,637 (4,358) 4,306Overdrafts - (364) - (364) 2,273Current asset investments 5,100 3,100 - 8,200Debt due within one year (217) 217 - - Net funds 10,910 5,590 (4,358) 12,142 9 Reconciliation of movements in group shareholders' funds (deficit) Six months Six months Year ended 27 ended 28 ended 26 August August February 2005 2004 2005 £'000 £'000 £'000 Loss for the financial period (as restated, see note 10) (2,025) (3,784) (6,307)Share conversion - 7,555 7,555New shares issued 6,103 18,511 18,790Share issue costs (210) (1,560) (1,560)Movement in share option reserve (as restated, see note 10) 44 24 80 Net increase in shareholders' funds 3,912 20,746 18,558Opening shareholders' funds (deficit) 11,580 (6,978) (6,978) Closing shareholders' funds 15,492 13,768 11,580 10 Prior year restatement - Implementation of FRS 20 "Share base payment" Accounting policy change The group has applied the requirements of FRS 20 Share-based Payments. Inaccordance with the transitional provisions, FRS 20 has been applied to allgrants of equity instruments after 7 November 2002 that were unvested as of 1January 2005. The group issues equity-settled share-based payments to certain employees anddirectors. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the group's estimate of shares that will eventually vest. Fair value is measured by use of a Black-Scholes model. The expected life usedin the model has been adjusted, based on management's best estimate, for theeffects of non-transferability, exercise restrictions, and behaviouralconsiderations. A liability equal to the portion of the goods or services received is recognisedat the current fair value determined at each balance sheet date for cash-settledshare-based payments. Impact of restatement The impact of implementing FRS 20 "Share base payment" has had the followingimpact on the financial statements. PROFIT AND LOSS ACCOUNT Six months Year ended 28 ended August 26 February 2004 2005 £'000 £'000 Administrative expenses as previously stated 2,329 4,445FRS 20 "Share based payment" charge 24 80 Administrative expenses as restated 2,353 4,525 Loss per share - basic and diluted (pence) aspreviously stated (16.0) (19.4) FRS 20 "Share based payment" charge (0.1) (0.1) Loss per share - basic and diluted (pence) as restated (16.1) (19.5) BALANCE SHEET 28 August 26 February 2004 2005 £'000 £'000 Profit and loss account as previously stated (21,315) (23,782)FRS 20 "Share based payment" (24) (80) Profit and loss account as restated (21,339) (23,862) Share option reserve previously stated - -FRS 20 "Share based payment" 24 80 Share option reserve as restated 24 80 11 Acquisitions in the period On 14 April 2005, the Company acquired a 100% interest in CTM Wholesale Limitedfor a consideration of £5.6 million including £0.4 million of deferredconsideration and £0.3m of related expenses. At the date of acquisition thedirectors have estimated that CTM Wholesale Limited had net assets with aprovisional fair value of £3.4 million, giving rise to provisional goodwill of£2.2 million. The acquisition was funded via the completion of a share placing which is fullydescribed in note 5. 12 Post balance sheet event On 1 November 2005, the directors announced the Company acquired a 100% interestin A C Ward & Son Limited for a total cash consideration of up to £3.0 million,with £1.0m contingent on subsequent sales performance. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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