6th Jul 2007 07:00
6th July 2007FOR IMMEDIATE RELEASE PRE-CLOSE TRADING UPDATE SALE OF FOODSERVICE OPERATIONS UNDER CONSIDERATION
In line with established market practice, Aga Foodservice Group ("the Group"), which sells premium cookers and refrigerators into the domestic and commercial markets, is issuing its regular trading update ahead of its interim results for the half year ended 30th June 2007, which will be announced on 7th September 2007. An update on corporate strategy is also being provided.
Overview
Profit before tax for the continuing businesses for the half year is estimated at ‚£22 million and the Group's trading expectations for the full year are unchanged.
* Aga and Rangemaster continued to underpin a good performance from our European consumer operations. * In Foodservice we benefited from our breadth of products and in particular from microwave, combi and bake-off oven sales. * The Board is working on a plan to separate the foodservice operations from the consumer operations as it believes this can unlock value for shareholders. This may involve the sale of the foodservice businesses.
William McGrath, Chief Executive of Aga Foodservice Group, commented: "We have leading edge products, a good geographical spread and considerable momentum within our foodservice businesses. As was the case with our Pipe Systems businesses in the run up to their disposal in 2001 we have now created pivotal market positions for these businesses and are again looking to unlock value for shareholders.
Our consumer business has exceedingly high quality brands led by the iconic Aga, a track record of strong growth and excellent routes to market. We can grow it more aggressively both organically and through acquisition and shareholders can benefit from having an attractive business with a single market focus."
Enquiries:
William McGrath, Chief Executive, Aga Foodservice Group plc - 0121 711 6015
Simon Sporborg/Nina Coad, Brunswick Group - 020 7404 5959
AGA FOODSERVICE GROUP PLC UPDATE ON 6TH JULY 2007 FURTHER INFORMATION:Consumer
The strength of our cooker and refrigeration brands underpinned the first half trading. Cast iron cooker volumes, provided by Aga, Rayburn and Stanley, were up 7%. There is considerable interest in the imminent launch of the programmable electric Aga. Enquiries and home surveys continue to show satisfactory trends. Rangemaster performed strongly with sales up 7% and with exports - notably to Ireland and France - representing 20% of sales. Fired Earth overall LFL sales were flat.
In the USA Marvel grew sales again on the back of a good 2006 in spite of slower consumer spending. Product innovation such as the introduction of electronic controls have been well received and will drive second half sales.
Foodservice
UK foodservice operations performed well, with the continuing roll out programmes with the Prison Service in the public sector and with pub chains investing more as the smoking ban approached. Our Eloma combi business won important new orders in the UK and USA. In the USA Amana Commercial Microwaves had a strong first half selling to chains including McDonalds and KFC. With an exciting new product introduction programme over the next year, Amana is proving a considerable asset to the Group.
In bakery, France and the UK were slow but the wider European expansion process continued well. Our new Managing Director for European Bakery is working to implement our plans to rationalise our ranges, reduce costs and drive returns. In North American Bakery, where the integration of the Belshaw and Adamatic operations is already well underway, performance was improved. We are focusing on our bakery operations as an area where margin improvement can improve overall Group returns.
Financial Information
As at 31st December 2006 the Group's pension schemes had a surplus of ‚£24 million on assets of ‚£784.6 million. Subsequent market movements most notably in bond yields have had the effect of increasing the surplus to be included in the balance sheet at 30th June 2007 on an IAS 19 basis to over ‚£55 million.
In the first half of 2007 property profits were around ‚£1 million compared to ‚£ 1.8 million in the prior period.
The reported tax rate in 2006 was around 20%. The tax rate is not expected to change materially in the current year.
On 1st June 2007 the company paid a special dividend of 43 pence per share at an aggregate cost of ‚£56 million. The special dividend was followed by a share consolidation. The share consolidation means that there are now 115 million shares in issue and that the weighted average number of shares in 2007 as a whole will be circa 121 million compared to 129 million in 2006.
Domain disposal
As announced on 18th June 2007 the Group has sold its US home fashions business, Domain, for ‚£3.5 million. There will be a small overall loss from discontinued operations in the first half taking into account operating losses and realisation costs in the period. The Domain management team will continue to drive Aga sales through Domain stores.
Return targets
We have set return targets and continue to develop further operational strategies to ensure we can deliver on them.
In recent years we have had a facility efficiency improvement programme - often involving factory moves partly funded by the sale of sites once change of use planning permission has been obtained. Such plans have been implemented at Falcon, Millers and Waterford Stanley and are currently underway at Williams, Amana and Belshaw. These moves to improved facilities will continue.
Corporate development
Over the last six years we have created a pivotal position in the commercial food service sector, built on national, regional and product champions and supported by a strong pipeline of new products. As was seen in 2001 when a strategic review led to the sale of the Pipe Systems businesses we keep under review the best development plans for the businesses and how to ensure that this generates the greatest value for shareholders. As our proposals to merge with Enodis last year did not proceed we have evaluated other possibilities for our foodservice businesses. We are now working with Dresdner Kleinwort and Citi to unlock the value of these businesses for shareholders which, at an acceptable price, may involve the sale of the foodservice operations.
On the consumer side of the business we have enjoyed sustained organic growth in operating profits over the last six years. We have established a leading position in premium kitchen appliances, driven by the successes of Aga, Rangemaster and Marvel. Rising individual prosperity, coupled with a greater focus on quality, means that this segment should continue to experience above average growth and can generate returns above those achievable by the Group as currently structured. We intend to accelerate the development and marketing efforts of our current businesses and we will give further details about this with the interim results on 7th September 2007.
A copy of the presentation to be used in meetings with analysts today will be posted on the corporate website at www.agafoodservice.com. This presentation will contain further details of the production facility upgrades.
Enquiries:
William McGrath, Chief Executive, Aga Foodservice Group plc - 0121 711 6015
Simon Sporborg/Nina Coad, Brunswick Group - 020 7404 5959
Dresdner Kleinwort Limited ("Dresdner Kleinwort") and Citigroup Global Markets Limited ("Citi"), which are authorised and regulated by the Financial Services Authority, are acting for Aga Foodservice Group plc and for no-one else in connection with the contents of this document and will not be responsible to anyone other than Aga Foodservice Group plc for providing the protections afforded to customers of Dresdner Kleinwort or Citi, or for affording advice in relation to the contents of this document or any matters referred to herein.
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