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Blueheath Holdings (BOK)

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Wednesday 04 May, 2005

Blueheath Holdings

Final Results

Blueheath Holdings PLC
04 May 2005


Immediate Release                                                     4 May 2005




                             Blueheath Holdings plc
                         ('Blueheath' or the 'Company')

                              Preliminary Results

                         'Delivering sustainable growth'

Blueheath is a national delivered wholesaler using sophisticated, proprietary
technology to offer a substantial cost advantage over established players in the
£16.4bn grocery wholesale sector. The Company today announces preliminary
results for the year ended 26th February 2005.

The Company completed a successful flotation on AIM in July 2004. At the issue
price of 121 pence per share, the Company raised £18.5 million (before expenses)
through an institutional placing.

Final Results - Key Points

  • Turnover increased 12% to £70.2m (2004 - £62.7m)
  • Operating loss before exceptionals reduced by 27% to £4.86m (2004 -
    £6.65m). Operating loss after exceptionals(1)  reduced by 20% to £5.34m
    (2004 - £6.65m)
  • Cash deposits and facilities at year end of £15.1m with all substantial
    debt repaid
  • Met or exceeded all operational targets on order fulfilment, on-time
    delivery and stock holding
  • Strong pipeline of new business since year end taking annualised run rate
    to over £100m:

          - Confirmation of four wins previously announced in March, including 
            Park Garages
          - Blueheath today announces two further account wins, Highway Stops 
            and Gala Casinos
          - Strong pipeline of accounts at trial and tender stage

  • £4.9m acquisition of CTM Wholesale in April 2005, adding up to £40m of
    turnover to the enlarged business - initial integration progressing well.
  • Higher quality multiple accounts now amounting to over 50% of turnover
    (2003: 35%)
  • Gross margins improved to 5.9% (2003: 5.0%) reflecting greater buying
    volumes

(1) Exceptional items of £0.48m (2004 - nil) comprising expenses associated with
flotation and financial restructuring


Commenting on the results and prospects, Douglas Gurr, Chief Executive, said:

'The Group has made good progress in growing the business over the past year.
With continued success in securing important new contracts and the successful
conclusion of our first acquisition, we expect to see strong growth in the year
ahead as we progress towards breakeven.'

For further details:

Blueheath Holdings plc
Douglas Gurr, Chief Executive                                 Tel: 020 7689 2455
Simon Mindham, Finance Director                               Tel: 020 7689 2464

Buchanan Communications                                       Tel: 020 7466 5000
Mark Edwards / Nicola Cronk / Tom Carroll



Notes to editors:

Blueheath is a wholesaler of groceries to convenience stores in the £16.4
billion UK grocery wholesale sector. The Group sells and arranges the
distribution of approximately 3,100, primarily ambient, product lines to over
1,600 independent and multiple retail and leisure outlets within the UK.
Blueheath's innovative technology-driven business model is founded on the basic
principles of stripping out unnecessary supply chain costs and overheads and
passing on financial and operational benefits to customers. This enables
Blueheath to offer customers a wholesale delivery service of groceries at close
to Cash & Carry prices.

Blueheath achieves cost savings in three ways:

1. Operating on low stock levels through the use of sophisticated, proprietary
   stock prediction technology.

2. Using spare distribution capacity through its partnership with British
   Bakeries Ltd and other operators.

3. The extensive use of process automation to minimise administration costs.



CHAIRMAN'S STATEMENT

Final Results

Blueheath is pleased to announce its maiden final results for the year ended
26th February 2005 following its flotation on AIM on 20 July 2004.

Turnover for the 12 months ending 26th February 2005 increased by 12% to £70.2m
(2004 - £62.7m).

Operating losses before exceptionals reduced by 27% to £4.86m (2004 - £6.65m).
Gross margins improved to 5.9% (2004 - 5.0%) and total overhead costs before
exceptional costs as a percentage of sales reduced from 15.7% to 12.8%.
Exceptional costs in the year were £0.48m (2004 - £nil) and the operating loss
was £5.34m (2004 - £6.65m).

As of 26th February the company had repaid all substantial debt and held a total
of £15.1m in cash deposits and facilities, comprising £11.1m of cash and cash
held as current asset investments, and £4.0m of un-drawn invoice discounting
facilities.

Operational Performance

Operationally the company has performed well over the period, continuing to meet
or exceed its key targets.

Order fulfilment improved to 97.4% for the year (2004 - 96.9%), a particularly
pleasing result as it covered an extensive period over Summer 2004 when supplier
inbound performance fell well below 90%. On-time delivery improved to 98.7% for
the year (2004 - 97.8%) reflecting a number of process changes to improve the
information flow and a good performance by our delivery partners. Total average
stock days - a key measure of the effectiveness of the Blueheath operating model
- increased slightly to 5.8 for the year (2004 - 4.8) reflecting periods of
higher buffering to manage the roll out of significant new customer accounts. At
the same time, variable distribution cost per case - the key business cost
measure - reduced by 13.4% through the implementation of a series of process
improvements and through the effect of greater volumes leading improved
utilisation rates.  Buying margins improved to 5.9% (2004 - 5.0%) reflecting the
effect of greater buying volumes.

Business growth is the key factor in driving operational leverage through
improved buying terms, further improvements in the efficiency of picking and
delivery operations, and in contributing to fixed warehouse and central overhead
costs.  The business continues to have ample capacity for further expansion.

New Account Wins

The business took a strategic decision some two years ago to expand our offer
from our core customer base of individual independent retailers to multiple
account chains.  This strategy has paid excellent dividends with multiple
accounts now amounting to over 50% of the Blueheath business (2004 - 35%).

In early March, the company announced four new account wins which we are today
pleased to confirm as Park Garages (a Grocer Top 50 leading independent
retailer), leisure operator PGL, Intervend - the company's first food service
operator, and a substantial second forecourt operator. These wins were offset by
one loss, in January 2005, of forecourt operator Snax 24.

The Company is today delighted to announce two further account wins: leading
forecourt retailer Highway Stops, and leisure operator Gala Casinos. These six
accounts are being progressively rolled out and, when fully operational, will
take the run rate of the core business to over £100m.

There is in addition a strong forward pipeline of new business with some 8
accounts currently at trial or tender stage with a combined value of
approximately £90m. Historically, the Company has managed to convert 30- 40% of
such prospects.



Acquisition of CTM Wholesale

Given the importance of overall business growth, the Company took the
opportunity to supplement its organic growth through the acquisition in April
2005 of CTM Wholesale Limited ('CTM'). CTM is a traditional delivered wholesale
business to the grocery wholesale market and also has a small cash and carry
operation. It operates from a single warehouse depot located in Wrexham, Wales
and is expected to report turnover of £45.0 million for the year ending 2nd
April 2005, giving a proforma 2004-05 turnover for the Enlarged Group of some
£115m.

CTM represents an opportunity to supplement the organic growth of the Company
through the acquisition of a traditional regional delivered wholesalers. The
Directors anticipate the Enlarged Group will be able to achieve improved
operating margins through combining buying volumes, the application of
Blueheath's technology and business processes to the CTM operation, and the
integration of central overheads.

Whilst it is still very early days, the reaction from both staff and customers
has been extremely positive, and the early work on integration is progressing
well.

Channel Management

A further good example of the use of Blueheath's technology is the 'Channel
Management' initiative, launched with nine leading suppliers in Summer 2004. The
initiative, which includes activities to drive sales of new products, execution
of retail promotions and sharing of supplier and retailer best practice, is
delivering impressive results.  Recent retailer promotions achieved sales
uplifts of between 245% and 770% during promotion and on average 66% post
promotion. A new product launch achieved just short of 70% retailer distribution
in the first 2 weeks.

The concept is about using the power of information to manage the product supply
to the convenience retail sector with the same precision as the multiples.  All
suppliers have access to a real-time online system so they can track their sales
and target product to specific stores at specific times.

Channel Management brings the supplier and retailer closer together to the
benefit of all parties. Response from both store owners and suppliers such as
Nestle Rowntree, Masterfoods and United Biscuits has been excellent, reinforcing
Blueheath's reputation for innovation in the industry.

Company Background

In four years since commencing its national rollout, Blueheath has created a
unique national distribution network offering a next-day delivery service on a
full range of goods to the UK's independent and multiple convenience market.
Blueheath's operations were founded on the simple principle of stripping-out
unnecessary supply chain costs in order to offer a full delivery service at
close to cash & carry prices.

The Company has invested heavily in building the technology and infrastructure
necessary to support this unique national distribution network and is pursuing a
strategy of business growth through the addition of new customer accounts to
build the scale necessary to cover the fixed distribution and administrative
expenses.

A major event in the history of the Company was its successful completion of a
stock market listing on 20th July 2004 on the AIM market of the London Stock
Exchange raising £18.5m before costs of £1.5m. The primary purpose of the
listing was to repay £1.8m of short-term debt and provide working capital to
fund the further expansion of the business.

Outlook

Looking forward, the Company is well placed to grow both organically through new
account wins and potentially through further tactical acquisitions of
traditional wholesalers which can be converted to the Blueheath model of
operation. The Company has been successful in securing a number of new multiple
accounts since the end of the financial year and continues to pursue a healthy
pipeline of new business although the precise timing of new account wins is
always hard to predict and these accounts take some time to become fully
operational. Whilst still at an early stage, the integration of CTM Wholesale is
progressing well, although it will take some time to realise the full benefits
from conversion to the Blueheath operating model. The Company is therefore
expecting a year of strong growth combined with steady integration work as the
business progresses towards breakeven.

Colin Smith

Chairman

4 May 2005

CONSOLIDATED PROFIT AND LOSS ACCOUNT

52 weeks ended 26 February 2005
                                                                                              52 weeks
                                                                                              ended 28
                                                         52 weeks ended 26 February 2005      February
                                                        Before     Operating                      2004
                                                     operating   exceptional       Total         Total
                                                   exceptional         items                 
                                                         items                                                          
                                            Note         £'000         £'000       £'000         £'000
                                                         
                                                                                                                        
TURNOVER                                                 70,151             -      70,151       62,676

Cost of sales                                          (66,017)             -    (66,017)     (59,507)

Gross profit                                              4,134             -       4,134        3,169

Distribution costs                                      (5,027)             -     (5,027)      (5,325)
Administrative expenses                                 (3,967)         (478)     (4,445)      (4,494)

OPERATING LOSS                                          (4,860)         (478)     (5,338)      (6,650)

Interest receivable and similar income                      253             -         253            -
Interest payable and similar charges                     (1,142)            -     (1,142)        (826)

LOSS ON ORDINARY ACTIVITIES
 BEFORE TAXATION                                         (5,749)        (478)     (6,227)      (7,476)

                                                               
Tax on loss on ordinary activities                            -             -           -            -

RETAINED LOSS FOR THE FINANCIAL 
 PERIOD                                                  (5,749)        (478)     (6,227)      (7,476)

                                                               

LOSS PER ORDINARY SHARE                     1
Basic and diluted (pence)                                                          (19.3)       (41.0)




CONSOLIDATED BALANCE SHEET

26 February 2005
                                          Note          26 February  28 February
                                                               2005         2004
                                                              £'000        £'000
                                                                       
                                                                                                              
FIXED ASSETS
Tangible assets                                                 229          220


CURRENT ASSETS
Stocks                                                        1,125          788
Debtors                                                       5,968        3,971
Current asset investments                                     5,100            -
Cash at bank and in hand                                      6,027            -

                                                             18,220        4,759

CREDITORS: amounts falling due
   within one year                                          (6,869)      (5,232)

NET CURRENT ASSETS (LIABILITIES)                             11,351        (473)

TOTAL ASSETS LESS CURRENT 
 LIABILITIES                                                 11,580        (253)

                                                                
CREDITORS: amounts falling due
after more than one year
Convertible debt                                                  -      (6,725)

NET ASSETS (LIABILITIES)                                     11,580      (6,978)

CAPITAL AND RESERVES
Called up share capital                                         414          182
Share premium account                                        17,074            -
Profit and loss account                                    (23,782)     (17,555)
Other reserve                                                17,874       10,395

EQUITY SHAREHOLDERS' FUNDS 
 (DEFICIT)                                                   11,580      (6,978)

                                                                



CONSOLIDATED CASH FLOW STATEMENT

52 weeks ended 26 February 2005
                                                         Note           52 weeks    52 weeks
                                                                        ended 26    ended 28
                                                                        February    February
                                                                            2005        2004
                                                                           £'000       £'000

Net cash outflow from operating activities                2              (3,677)      (6,899)

Returns on investments and servicing of finance
Interest paid                                                              (309)        (129)
Interest received                                                            253            -
Finance costs incurred in issue of other loans                                 -         (55)

Net cash outflow from returns on investments and
servicing of finance                                                        (56)        (184)
                                                                               
Capital expenditure and financial investment
Payments to acquire plant and equipment                                    (311)        (139)
Sale of tangible fixed assets                                                  -           22

Net cash outflow from capital expenditure and financial
investment                                                                 (311)        (117)
                                                                              
Net cash outflow before management of liquid resources
and financing                                                            (4,044)      (7,200)
                                                                            
Management of liquid resources
Increase in short term deposits                                         (11,128)            -

Financing
Issue of ordinary share capital                                            17230            -
Repayment of short term debt facility                                          -        1,264
Issue of convertible loans                                                     -        6,095
Bank loan                                                                (1,841)            -

Net cash inflow from financing                                            15,389        7,359

(Decrease) increase in cash in the period                 3                  217          159



NOTES:

1.             BASIC AND DILUTED LOSS PER ORDINARY SHARE

The calculation of loss per ordinary share for the current year is based on the
loss for the year of £6,227,000 (2004 - loss of £7,476,000) and the weighted
average number of ordinary shares of 32,310,492 (2004 - 18,213,601).  The
company had ordinary shares in issue of 41,418,022 as of 26 February 2005.

FRS14 requires presentation of diluted earning per share where a company could
be called upon to issue shares that would decrease net profit or increase net
loss per share.  For a loss making company with outstanding share options, the
net loss per share would be decreased by the exercise of options, and hence no
adjustment has been made to the diluted loss per share as presented.

2.             RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS


                                                           52 weeks     52 weeks
                                                           ended 26     ended 28
                                                           February     February
                                                               2005         2004
                                                              £'000        £'000

Operating loss                                              (5,338)      (6,650)
Depreciation                                                    299          287
Loss on sale of fixed assets                                      4            2
Increase in debtors                                         (1,997)      (1,414)
Increase in creditors                                         3,692        1,086
Increase in stocks                                            (337)        (210)

Net cash outflow from operating activities                  (3,677)      (6,899)




3.             ANALYSIS AND RECONCILIATION OF NET FUNDS (DEBT)
                                                                                                 
                                                                                                At 26
                                                    At 1 March         Cash     Non-cash     February
                                                          2004         flow     movement         2005
                                                         £'000        £'000        £'000        £'000
                                                                               
                                                                       
Cash at bank and in hand                                     -            4            -            4
Bank overdraft                                           (218)          213            -          (5)
                                                                        217

Debt due after one year                                 (6,725)            -        6,725            -
Debt due within one year                                (2,058)        1,841            -        (217)
Liquid resources                                              -       11,128            -       11,128

Total net funds (debt)                                  (9,001)       13,186        6,725       10,910



                                                                             26 February  28 February
                                                                                    2005         2004
                                                                                   £'000        £'000

Increase in cash in the period                                                       217          159
Cash outflow from decrease in debt financing                                       1,841      (7,359)
Cash outflow from increase in liquid resources                                    11,128            -

Change in net debt resulting from cash flows                                      13,186      (7,200)

(Decrease) increase in debt financing                                              6,725        (630)

Change in net debt resulting from non cash flows                                   6,725        (630)

Change in net debt                                                                19,911      (7,830)
Net debt at 1 March 2004                                                         (9,001)      (1,171)

Net funds (debt) at 26 February 2005                                              10,910      (9,001)




4.             POST BALANCE SHEET EVENTS

On 14 April 2005, Blueheath holdings plc acquired the entire share capital of
CTM Wholesale Limited ('CTM') for up to £4.9 million in cash. CTM is a
traditional delivered wholesale business to the grocery wholesale market and
also has a small cash and carry operation. It operates from a single warehouse
depot located in Wrexham, Wales.  Based on the audited financial accounts of
that business for the year ended 4 April 2004, CTM Wholesale Limited reported
turnover of £47.9 million and made a profit of £0.4 million.  Based on the
Directors' review of unaudited management accounts and forecasts for the year
ending 2 April 2005, the Directors of Blueheath Holdings expect CTM to report
turnover of £45.0 million, operating profit of £0.5 million and net assets of
£3.4 million.

Of the total cash consideration,  £3.9 million is payable on completion, with
the remaining £1.0 million paid into a retention account to be released on the
anniversary of completion of the Acquisition dependent on, amongst other
matters, the  net operating assets of CTM as at completion.

In order to finance the Acquisition the Company raised £6,000,003.50 (before
expenses) through a vendor placing and cash placing of 3,870,970 new ordinary
shares ('New Ordinary Shares') by Evolution Securities (as agent for the
Company) with institutional investors (the 'Placing'). Of the total cash
consideration payable by Blueheath, £3.9 million will be funded by the net
proceeds of the vendor placing of 2,516,130 New Ordinary Shares, which will be
paid directly to the vendors. The balance of the cash consideration will be
satisfied by the net proceeds of the cash placing of 1,354,840 New Ordinary
Shares.

The New Ordinary Shares represented approximately 9.34 per cent of the Company's
existing issued share capital and approximately 8.54 per cent of the Company's
issued share capital following the Placing. The New Ordinary Shares rank pari
passu in all respects with the existing ordinary shares of the Company.

5.           These results have been extracted from the full accounts.

6.           The financial information represents the first set of audited
information prepared by the Company.  The accounts have been prepared using
merger accounting principles and comparative figures have been prepared on that
basis.  The auditors have issued an unqualified report which did not contain a
statement under section 232 (2) or (3) in the full accounts which will be
distributed to shareholders and delivered to the Registrar of Companies in due
course. Further copies of the Preliminary Results are available at the Company's
Registered Office:



     Blueheath Holdings PLC
     132 Upper Street
     London
     N1 1QP




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