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Zetar PLC (ZTR)

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Wednesday 20 July, 2011

Zetar PLC

Final Results

RNS Number : 6943K
Zetar PLC
20 July 2011
 



20th July 2011

 

Zetar Plc

 

("Zetar", "the Company" or the "Group")

 

Preliminary Results for the year ended 30th April 2011

 

 

Zetar Plc, the AIM listed confectionery and snack foods group, announces its preliminary results for the year ended 30th April 2011.

 

Financial Highlights

·      Revenue up 2% to £135.0m (2010: £131.9m)

·      Adjusted profit before tax* up 6% at £6.7m (2010: £6.4m)

·      EBITDA increased to £9.8m (2010: £9.6m)

·      Adjusted diluted EPS* up 9% to 38.5p (2010: 35.4p)

·      Net debt at year end of £14.9m (2010: £11.1m) due to late Easter but over £2m lower year-on-year by end of May 2011

·      Net assets up £4.5m to £46.3m, representing £3.50 per share

·      New committed bank facilities until September 2014

·      Proposed inaugural dividend of 2.25 pence per ordinary share

 

* Adjusted profit before tax (PBT) and earnings per share (EPS) are both stated before one-off items, amortisation of intangible assets, share-based payments, the fair value movement on financial instruments and the net result from discontinued activities.

 

Operational Highlights

·      Improved quality of business - over 33% of sales generated by brands

·      Record Confectionery performance from increased everyday and better sales mix allied to cost efficiencies

·      Natural Snacks' second-half operating margin increased to 4.5% from 2.6%

·      Strong pipeline of licensed brands

·      Integration of Derwent Lynton (acquired April 2011) progressing on plan

 

Post year-end Highlights

·      Encouraging start to the current year with sales in the first eleven weeks up year-on-year by 6% to £17.2m (2010: £16.2m)

·      Strategic partnerships formed with two major European companies, the first steps towards creating a "one-stop shop" for licensors covering all confectionery categories across the UK and Europe

·      Recent award of 2012 London Olympics "food gifting" licence

 

 

Ian Blackburn, Chief Executive of Zetar Plc, commented:

"We are pleased with the progress made during a year of many challenges. In particular, our Confectionery division achieved a record result reflecting a continued increase in everyday sales and improved mix of higher margin products allied to further cost efficiencies.  The margins in our Natural Snacks division improved significantly in the second half as price increases were implemented following the dramatic rise in commodity prices, and more branded products were sold".

 

"We have set ambitious plans for the Group to enhance revenue and margin over the next three years. Our key focus is to drive sales of premium private label and branded products across both divisions. We have made good progress in the past year on extending our portfolio of innovative snack products sold under renowned brands, including Branston and Ambrosia. This trend has continued into the current year with Sharwoods and the recent signing of the Tango licence for orange-flavoured chocolate products. Private label sales also remain a core opportunity as retailers devote more shelf-space to premium, added-value products".

 

"The Group's strong financial base provides the resource to realise this strategy. We have the platform to further innovate and grow, including small acquisitions such Derwent Lynton which was completed in April. The Group's future prospects and increased financial strength are reflected in the Board's decision to pay an inaugural dividend."

 

 

- Ends -

 

Enquiries:

Zetar Plc


Ian Blackburn (Chief Executive)

Tel: 020 7284 9509

Mark Stott (Group Finance Director)

Tel: 020 7284 9543



Liberum Capital Limited

Tel: 020 3100 2000

Simon Atkinson

Christopher Britton




Financial Dynamics

Tel: 020 7831 3113

Caroline Stewart

Georgina Bonham


 

 

Chairman's Statement

 

Overview

The year ended 30 April 2011 saw continued good progress by the Group, as we focussed on improving the quality of our sales mix and developing our branded portfolio. Last year we delivered a strong financial recovery and this year we have grown profits further despite our Natural Snacks division having to contend with rising raw materials costs.

 

The Group's investment in its Confectionery division's facilities and product development enabled us to improve the quality of our business, increasing the sales of its branded and private label chocolate products by 10% which, when allied to a further cost reduction programme, was reflected in a significant improvement in margins to 6.7% (2010: 5.6%) resulting in a record profit for the division.

 

The dramatic increase in commodity nut and dried fruit costs in the first half of the year was absorbed by the business for a period of time but subsequently necessitated pursuit of price increases for the Natural Snacks division. The inevitable time-lag in obtaining price increases from customers resulted in a reduced margin for the year. However, in the second-half, the division's margins improved significantly as price increases were implemented and it started to roll out its new premium added-value snacks.

 

The product development work of previous years and refinement of the Zetar brand model is coming to fruition. Our experience as the market leader in the UK in the use of licensed character brands has been successfully extended to incorporate brands that are aimed at a wider market for everyday chocolate countlines. We have also transferred the concept to the Natural Snacks division and are excited by the growth potential afforded by this opportunity. In the current year we have already launched four new established food brands to complement the existing portfolio, with more in the pipeline.

 

The success of our product development focus means that we are able to set an ambitious business plan for the next 3 years which reflects the Board's confidence in the Group's future prospects.

 

Financial Performance

Following strong growth and profit recovery in 2010, the business has made further progress during 2011.

 

Despite the difficult trading environment experienced by the Natural Snacks division, Group sales and adjusted operating profit for the year ended 30 April 2011 increased by 2% to £135.0m (2010: £131.9m) and by 3% to £7.5m (2010: £7.3m) respectively. Adjusted profit before tax increased by 6% to £6.7m (2010: £6.4m) assisted by a reduction in interest paid of 18% to £0.8m (2010: £1.0m).

 

Reported net borrowings were £14.9m (2010: £11.1m). However, as highlighted to the market a year ago, the exceptionally late Easter created an unusual increase in debtors at the financial year-end which resulted in a temporary increase in year-end net debt of approximately £5m. This had unwound by the end of the following month, bringing debtors back to a normal level such that net borrowings at the end of May 2011 were over £2m lower than May 2010.

 

Dividend

The Group has generated underlying free cash in each of the last two years as well as maintaining a healthy level of investment to promote future earnings growth. Consequently, the Board believes it is appropriate to pay shareholders a dividend. The intention is to make a single dividend payment each year, after the Group's peak borrowing period, which will be related to earnings growth. In respect of the year ended 30 April 2011 the Board recommends the payment of a dividend of 2.25p per ordinary share to shareholders on the register at 7 October 2011 with a payment date of 4 November 2011.

 

People

We have a loyal workforce led by an experienced management team. The Board recognises the commitment of the Group's employees and is grateful for their contributions to delivering another year of earnings growth for the Group. I would also like to take the opportunity to welcome employees of Derwent Lynton, the business we acquired during April 2011.

 

The future

The new financial year has commenced on-track and the Board's confidence in the Group's future prospects and financial strength is reflected in its decision to pay a dividend for the first time.

 

The Group has established a resilient business which has been able to grow its profits through the challenging commercial environment of the last three years. In the short term there is potential for further recovery in the margins of the Natural Snacks division based on the progress made in the second half of last year. We are also privileged to recently have been awarded the licence for "food gifting" for the 2012 London Olympics.

 

We have an ambitious business plan for the next three years in which we have set some challenging but realistic targets for both revenue and margin growth. This involves rolling out our brand model with additional licensed brand launches across both divisions and capitalising on opportunities to drive our private label sales as UK retailers seek to complement their value-for-money ranges with more premium added-value products.

 

We see opportunities to grow our export sales, particularly into mainland Europe. We are already the UK's leading character confectioner and in June 2011 we formed strategic partnerships with two other major European companies in this sector, taking first steps towards the creation of "a one stop shop" for licensors covering all confectionery categories across a wide range of European territories.

 

Importantly we have secured the bank funding to facilitate delivery of the organic growth envisaged by our plan and are entering a phase of careful and considered small bolt on acquisitions. The first of these, Derwent Lynton, was completed in April and its integration within the Group is progressing to plan.

 

We are excited about the future of the Group and look to it with confidence.

 

 

David Williams

Non-executive Chairman

 

 

Operational Review

 

Overview

The year ended 30 April 2011 saw continued good progress by the Group, as we focussed on improving the quality of our business and mitigating the impact of increasing commodity costs on our Natural Snacks division. Following on from last year's strong recovery we have delivered further profit growth this year.

 

The results of Zetar for the 12 months ended 30 April 2011 may be summarised as follows: -

 

Sales

Adjusted profit before tax

£135.0m

£6.7m 

+ 2%

+ 6%

(2010: £131.9m)

(2010: £6.4m)

 

 

Adjusted operating profit

Adjusted diluted EPS

£7.5m

38.5p

+3%

+ 9%

(2010: £7.3m)

(2010: 35.4p)

 

We are particularly delighted to have achieved these results in a year where commodity raw material prices have increased at their fastest rate in recent years causing our Natural Snacks division to have a difficult year. In the face of adversity, it still delivered a commendable operating profit of £1.8m, which when combined with a record operating profit of £5.7m from the Confectionery division, despite the unseasonal warm Easter, has enabled the Group to make further financial progress as shown above.

 

Trading performance

 

Following on from strong revenue growth in previous years, Group sales increased by 2% to £135.0m (2010: £131.9m). This year, in line with its strategy, the Group intensified its focus on improving the quality of sales, successfully increasing the proportion of branded sales to over 33% of Group turnover. Despite input cost inflation, adjusted operating margin moved ahead to 5.6% (2010: 5.5%).

 

An excellent result for the Confectionery Division compensated for a difficult year for the Snacks Division where record highs were seen in raw material costs, exacerbated by the continuing weakness in the sterling exchange rate. Having absorbed as much as possible of the cost increases ourselves, price increases were then passed on to customers, resulting in improved margins for the Snacks Division in the second-half.

 

Our continuing focus on cash management reduced underlying borrowings over the year by over £2m and facilitated an 18% reduction in net financing costs to £0.79m (2010: £0.96m). Adjusted profit before tax improved by 6% to £6.7m (2010: £6.4m) and adjusted diluted earnings per share rose by 9% to 38.5p (2010: 35.4p).

 

The overall financial position of the Group has strengthened. New four year banking facilities were signed during September 2010, underpinning the organic growth plans through to 2014. The new facilities are competitively priced and provide the Group with sufficient working capital headroom to achieve the expected future growth of the next three years.

 

The "one-off" costs associated with the new bank facilities amounted to £0.5m. In the period we received additional final proceeds from the disposal of The Baked Snacks Company Limited amounting to £0.5m (net of expenses).

 

Confectionery division

 

Sales

Adjusted operating profit

£85.9m

£5.7m 

Up 3%

Up 22%

(2010: £83.2m)

(2010: £4.7m)

 

In the year ended 30 April 2011, the Confectionery division delivered sales of £85.9m up 3% year-on-year (2010: £83.2m) and adjusted operating profit up 22% to £5.7m (2010: £4.7m). The division's overall operating margin has recovered significantly to 6.7% (2010: 5.6%).

 

The division has been focussed on improving the quality of its sales mix over the past year and driving sales through its enhanced HHF and Lir factories. Whilst retaining its UK leadership in the supply of children's licensed character chocolate products (through its Kinnerton brand) and its strength in seasonal novelties at both Christmas and Easter, the division has made good progress in pursuing its strategy to increase the sales of everyday (all year round) products to approximately 40% of divisional sales.

 

Although shoppers remain cautious in general terms, and promotional activity across all FMCG categories has increased year-on-year, total Christmas confectionery market sales grew by almost 4% in value to £593million1. Easter confectionery market sales also grew by 3.5% to £291million2 despite the widely-reported impact on sales of exceptionally warm weather.

 

The market growth at Christmas was driven by boxed chocolates, up 4% to £472m1, where we are represented by our Lir and Bailey's brands as well as supplying an increasing number of retailers with premium private label boxed chocolates. In addition, traditional Christmas confectionery product lines grew 2% to £122m1 where growth derived from novelties (including advent calendars) and selection boxes, in which we participated for the first time.

 

Our position in this marketplace continues to improve (source: Nielsen Scantrack1 2):

-   we are the 4th largest confectionery supplier of traditional Christmas lines after Cadbury, Nestle and Mars, with the Kinnerton brand's retail sales advancing by 14%;

-   we increased our share of the Christmas novelty sub-sector to 15%, remaining second after Cadbury;

-   we have extended our position as the "no. 1" in advent calendars, selling over 10 million, with 39% of the market;

-   we successfully entered the Christmas "selection boxes" growth category for the first time; and

-   our adult chocolate brands, Baileys and Lir, continue to grow - in particular Baileys retail sales increased to £13m.

 

1  Source (Christmas confectionery) : Nielsen Scantrack to 16 weeks 25/12/10

2  Source (Easter confectionery) : Nielsen Scantrack 16 weeks to 23/04/11

 

The Confectionery division has a broad portfolio of licensing arrangements and values its strong relationships with many brand licensing houses including Fox, Mattel, Disney and Diageo. Hello Kitty and Toy Story 3 were particularly successful during the year. Our stature in the licensing industry continues to impress as evidenced by winning the "Best Licensed Food Range" at the 2010 Licensing Awards for the Hello Kitty seasonal gift range.

 

Our Irish subsidiary, Lir Chocolates Limited ("Lir"), has again experienced good sales growth, up by 8% in the year in local currency. More importantly, Lir has doubled its profitability, although its profit potential remains constrained by the strength of the Euro against Sterling. We have laid the foundations for further profit growth in 2012 by implementing various operational initiatives to improve cost-efficiency. The Baileys range, which is produced under licence by Lir, is now established as a major seasonal confectionery brand, growing sales by 6% compared to the prior year. Lir's continuing commercial success is attributable to its focus on quality and great tasting products. Our own Lir brand achieved sales growth of 29%, albeit from a relatively modest base, and we anticipate further progress in the second half of the new financial year when the brand undergoes a re-launch with new contemporary packaging, aiming to recruit new consumers for the award-winning chocolates (Lir has won 9 prestigious "Great Taste" awards over the past 3 years).

 

In terms of the Confectionery division's facilities, a major extension of the factory at HHF was completed just prior to the year-end. In addition, Derwent Lynton, a Derby-based manufacturer and wholesaler of chocolate & confectionery, was acquired in April 2011. Following a strategic review of the business and consultation with employees we decided to close the Derby factory and transfer the business and its plant and machinery to our existing HHF factory. 

 

In summary, the Confectionery division has delivered an admirable result in a highly competitive marketplace. The outlook for the new financial year is positive, with encouraging indications for Christmas 2011.

 

Natural Snacks division

 

Sales

Adjusted operating profit

£49.1m

£1.8m

Up 1%

Down 32%

(2010: £48.7m)

(2010: £2.6m)

 

In the year ended 30 April 2011, sales of the Natural Snacks division amounted to £49.1m (2010: £48.7m) and adjusted operating profit of £1.8m (2010: £2.6m). The division's overall operating profit margin for the year was 3.6% (2010: 5.4%), comprising a much-improved second-half of 4.5% compared to first-half margin of 2.6%.

 

The dominant feature in the market over the past 12 months has been raw material cost inflation. Costs escalated throughout calendar year 2010, with most nuts and fruits reaching record highs, peaking around Christmas. The primary factor driving input cost inflation has been increasing demand from developing nations such as China & India, which coincided with a year of relatively poor global harvests, but was also exacerbated by financial speculators trading in agricultural commodities. This led to the overall dried fruit, nuts and seeds market being slightly down in terms of sales volumes during 2010 although value was ahead by 5%3 as a result of price inflation.

 

3  Source : combined (Home Baking and Fruit) IRI 52 weeks ending 14 May 2011 and (Nuts) IRI 52 weeks ending 19 March 2011

 

The impact of cost inflation on the division's overall result for the year has masked the underlying improvement in Natural Snacks' quality of earnings. As the year progressed we implemented a rolling programme of price increases in a bid to recover input cost inflation. Where margins to supply commoditised products have been squeezed to unacceptably low levels, we declined to supply. We have intensified efforts to bring new branded products to the market, both licensed and our own proprietary brands, where greater returns are available to us, thereby reducing exposure to commodity price volatility and enhancing the return on sales. The first-half was particularly hit by the sharp rise in raw material costs but  the result of management's action to address this can be seen in the sharp recovery of margin to 4.5% in the second-half (albeit below historic norms), exiting the year in much better shape.

 

The division's turnover was marginally ahead of last year. The upside from price increases was offset by declining sales volumes as cost inflation fed through to retail selling prices, particularly private-label. Nevertheless branded products proved resilient, in both fruit and nut products, with our portfolio significantly out-performing the market. For example, turnover of our own Fruit Factory brand increased by more than 50% (and is now a £7m brand at retail value), making it the no. 2 brand in the snacking fruit sector, and licensed nuts (Marmite, Reggae Reggae and Sunpat) grew by over 50%.

 

Retailer brand lines remain the largest share of the snacking nuts category, representing 70% of sales, and the Natural Snacks division is one of the UK's largest suppliers.  The emergence of new brands and added-value products into the snacking nuts category has gained momentum and these are leading the path to recovery as they re-excite the imagination of consumers. Its portfolio of licensed brands makes the Natural Snacks division the 4th largest and fastest growing player in the supply of branded nuts.

 

In line with its strategy to become less reliant on commodity-type products, the division is expanding its portfolio of licensing arrangements and values its relationships with brand owners such as Unilever, Premier Foods and Ocean Spray. In the latter part of the year we brought new snacking brands to the market - custard-coated fruit pieces under the Ambrosia brand and savoury nut-based snack products under the Sharwoods and Branston brands. These brands have been well-received when presented to customers and we expect these to contribute to the new financial year. Furthermore, we are excited by the prospects for other famous brands in the pipeline which we believe will perform well in the snacking sector. We expect Natural Snacks' operating margins to improve further in response to increasing sales volumes of the new generation of branded value-added products.

 

The Natural Snacks division is an established major player in the dried fruit and nut snacking market and continues to enjoy consumer support for its healthier proposition. Its innovation and product development pipeline are impressing customers, and the division's earnings will progress further as pace picks-up in bringing more added-value products to market 

 

Strategy

 

We believe that although there are several critical elements to the Group's continued success, the principal commitment to product innovation underpins everything that we endeavour to achieve. In today's increasingly competitive market place the ability to provide a differentiated product proposition for our retail customers and the ultimate consumer is paramount. We strive to provide bespoke solutions where required to do so for all core customers, serviced by dedicated relationship development teams who pro-actively generate new products for customers to enable them to offer a point of difference. Our well-invested flexible manufacturing facilities are essential to support this strategy, whether producing unique new products or value-for-money variants of an existing range to help our customers achieve their pricing needs.

 

Our current product development focus has a number of components:

·      provide bespoke products aligned with customers' current strategy;

·      expand the range of "everyday" chocolates with appeal across the age spectrum;

·      create and select "award winning chocolates" for inclusion in Lir brand relaunch;

·      extend the fruit-based snacks range;

·      utilise technology acquired with Derwent Lynton to develop new ranges of products; and

·      develop products complementary to the pipeline of new licences.

 

As detailed below, the Group sells its products primarily to retailers in private label and branded formats, and to other manufacturers. We recognise that in due course there are potential opportunities to sell our products through other channels such as food service businesses.

 

Private label

It is well-documented that supermarkets are devoting more shelf-space to private label where their returns are superior. One of the major strengths of Zetar's divisions is their ability to align products with its customers' strategy. Furthermore, consumers are currently choosing to switch into private label, in particular premium private label products. According to a recent Kantar report, in a relatively flat overall market, shoppers purchased 11% more premium private-label products in calendar year 2010 from supermarkets than the previous year. The Group is now well established as a major supplier to UK retailers of their private label added-value chocolate confectionery and fruit and nut snacks, a sector that we believe will continue to provide further growth potential.

 

Brands

We also believe that there are opportunities to significantly increase branded sales. The Group will invest carefully in its own brands and also build upon the Confectionery division's long and successful track record in character licensing by extending this strategy to encompass iconic food brands across both divisions. We believe that both proprietary and licensed brands have strong growth potential in our chosen sectors.

 

Proprietary brands

We will concentrate our efforts on the following four existing owned brands which will be used to market innovative premium products yielding attractive margins for both the retailers and our business:

 

·      Lir chocolates have consistently won awards for their quality. Following detailed consumer research we have redesigned the Lir packaging to provide a new contemporary livery so that the packs will stand out on shelf and emphasise the quality of the product manufactured by an "Award Winning Chocolatier", yet sold at a competitive price offering consumers "affordable luxury". Working on the principle that people buy with their eyes, and buy more if they like them, the re-launch of Lir is being supported in the Autumn with a tasting opportunity for a quarter of a million targeted consumers and a co-ordinated PR campaign.

 

·      Fruit Factory has been developed as the umbrella brand for our expanding portfolio of fruit-based snacks. "Making fruit fun" is designed for mothers to help them encourage their children to eat healthier snacks. The range includes fruit-based snacks such as mini fruit boxes, bars, fruit stars, strings and flakes in pack sizes designed to cater for the growing lunch box market.

 

·      Humdinger brand has been developed to sell a selection of new affordable savoury snack concepts, for example using seeds and legumes. "Wasabi peas" have already become established as a successful product line with a number of UK retailers.  Humdinger is the co-brand for savoury licensed products. 

 

·      Kinnerton brand is already established as the UK's leading children's novelty chocolate brand, licensing well-known characters from companies such as Disney and Nickelodeon. We create a portfolio of character licences to appeal across a broad range of children. Some characters such as Barbie and the Simpsons remain popular for many years and others have a more limited one or two year lifespan. Last year Hello Kitty and Toy Story 3 were extremely successful and we are confident that in Fireman Sam, Cars 2, Disney's Dora the Explorer, Sponge Bob and new teenage hit Victorious, as well as Captain America and Peppa Pig, we have a strong line-up for the current year.

 

Licensed brands

 

We are in the process of creating a portfolio of premium brands, normally co-branded with our own proprietary brands, utilising brand values that have been built-up with significant investment by the brand owner over many years. This enables us to introduce new products to the market, gaining instant access to the brand's established loyal customer base with immediate visual recognition on shelf.

 

We select brands complementary to the profile and eating quality of the products we develop, seeking to build a portfolio with appeal across the spectrum of consumers. Baileys (co-branded with Lir) was the first of the Group's licensed food brands which, since 2008, the Confectionery division has grown into a premium chocolate brand with retail sales value approaching £13m. This was followed by the launch of Famous Grouse last year. A licence for Tango has recently been agreed under which a range of orange-flavoured chocolate products with wider age appeal will be developed and sold from Spring 2012.

 

The Natural Snacks division trialled the concept by manufacturing Marmite cashew nuts for Unilever, which were introduced to the market in 2009, followed up last year by the division's first licensed brand "Reggae Reggae" (co-branded with Humdinger). We are beginning to see the returns from this two year investment programme as the pace of product launches increases and in 2011 we have already launched new snacks under the Branston, Sharwoods and Ambrosia brands. A pipeline of products is under development and several other brand licences, some with global recognition, have been agreed and will be brought to market at the beginning of 2012. 

 

Third party contracts

The Group also manufactures products for other major manufacturers, either on a regular or ad hoc sub-contract basis. In recent years some lower margin contract business was undertaken in order to utilise some of our increased factory capacity whilst we developed more profitable added-value products for private label and branded sales. In the longer term this business will reduce as a percentage of total Group revenue but some contract business will be retained in order to help balance our seasonal production activity.

 

Summary

 

Last year approximately half of Group's sales were to private label customers, almost 20% for third party manufacturers and branded sales (proprietary and licensed brands) increased to more than 33%. We plan to continue this trend and are targeting brand sales increasing to more than 35% in the current year with a longer term aspiration to exceed 45% of Group revenues.

 

The Group also has ambitions to increase its export sales, particularly to mainland Europe. We have taken the first steps to establishing a partnership of Europe's leading character confectioners by forming strategic partnerships with sector leading companies in Spain and Italy and are in discussions with other potential partners to widen our geographic coverage.

 

Our stronger financial position and new bank facilities will provide the resource to realise our organic growth strategy. This will be enhanced by a careful and considered approach to small acquisitions, particularly those with an immediate opportunity to integrate into our existing production facilities, such as Derwent Lynton, a small confectionery business based in Derby which was acquired in April. Its current Derby factory will be closed by September and the business transferred to our HHF production unit, thus enhancing our product and packaging capability. We remain vigilant for other complementary opportunities for both divisions.

 

Current trading

 

We have to be cautious in the face of the slower volume growth being reported by UK retailers and indications that inflation will continue to be a feature over the coming months. However, we are encouraged that the Group's sales for the first eleven weeks of the current year are up by 6% to £17.2m (2010: £16.2m) and the early indications are that Christmas orders will be in line with our expectations. 

 

Finally, the Group is privileged to have recently been awarded the licence for "food gifting" for the 2012 London Olympics, which will contribute to the end of this year and the beginning of next year's results.

 

 

Ian Blackburn

Chief Executive

 

Clive Beecham

Group Managing Director

 

 

 

Financial Review

 

Results for the year4

Total turnover increased by 2% to £135.0m (2010: £131.9m); adjusted operating profit was up 3% at £7.5m (2010: £7.3m) and adjusted profit before tax was up 6% at £6.7m (2010: £6.4m). EBITDA reached £9.8m (2010: £9.6m) representing 7.2% of sales.

 

Net finance costs in the year improved to £0.8m (2010: £1.0m), reflecting the reduction in average levels of debt. Net interest was covered 9.5 times by adjusted operating profits (2010: 7.6 times) and 12.3 times by adjusted EBITDA (2010: 10.1 times).

 

Adjusted operating profit, profit before tax and diluted earnings per share exclude intangible asset amortisation, share-based payment charges, the fair value movement on financial instruments and one-off costs relating to acquisitions

 

Earnings per share4

The Group's adjusted basic and diluted earnings per share were up 9.3% and 8.8% respectively at 38.7p and 38.5p respectively (2010: both at 35.4p). Basic earnings per share were 35.1p (2010: 32.6p).

 

Dividend

The proposed dividend for the year of 2.25 pence per share will be the first that the Group has paid. It is covered 17 times by earnings and will be paid on 4 November 2011 to all shareholders on the resister at 7 October 2011.

 

Taxation

The adjusted tax charge for the year was £1.8m (2010: £1.7m) at an effective tax rate of 26.3% (2010: 27.1%) on profit before tax, lower than the prior year due to utilisation of brought-forward group relief. The net deferred taxation liability at 30 April 2011 was £1.6m (2010: £1.4m).

 

Adjusting items

Amortisation of intangible assets, which now stand at only £0.1m in the balance sheet, and share-based payments together, amounted to £0.5m (2010: £0.6m). IFRS adjustments in respect of market value assessment of financial instruments amounted to a credit of £0.2m (2010: credit of £0.2m).

 

The administrative expenses charge of £0.3m (2010: nil) relates to costs associated with the acquisition of Derwent Lynton.

 

The finance costs of £0.3m (2010: credit of £0.2m) include £0.5m (2010: nil) in respect of the aggregate costs incurred in terminating the previous banking facilities with Barclays and establishing new facilities with HSBC as well as a credit of £0.2m (2010: credit of £0.2m) representing the fair value adjustment on interest rate swaps closed out in September 2010.

 

The net result from discontinued operations of £0.5m relates to a final payment of deferred consideration in respect of the Group's former subsidiary, Baked Snacks, which was sold on 30 April 2009.

 

Deferred consideration

£38,093 deferred consideration is due to be paid in May 2012 to the vendors of Derwent Lynton. No other deferred or contingent consideration is outstanding.

 

Equity funding

At 30 April 2011 there were 13,238,695 (2009: 13,238,695) ordinary shares in issue, of which 472,000 (2010: 224,500) were owned by Zetar's Employee Benefit Trust which are classified as treasury shares.

 

Cash flow

The Group again demonstrated strong underlying cash generation from operations although this was masked by the impact on year-end working capital of the late Easter (24th April compared to 4th April in 2010), thereby deferring cash collection until after the year-end as can be seen from trade debtors being approximately £5m higher than 2010. Adjusting for the timing of Easter, underlying borrowings reduced by circa-£2m year-on-year. The Group remains focussed on improving cash generation and reduction of net debt.

 

Payments of corporation tax during the year were £1.4m (2010: £1.4m), in line with the prior year, benefiting from the availability of brought-forward Group relief.

 

Capital expenditure during the year amounted to £3.8m (2010: £2.1m) demonstrating our commitment to ensuring we have well-invested, flexible manufacturing facilities and to accommodate new products.

 

Borrowings and facilities

The Group's total net debt at 30 April 2011 amounted to £14.9m (2010: £11.1m), comprising net bank and other asset finance indebtedness. As noted above, the year-end debt was inflated by circa-£5m.and, on a like-for-like basis, we expect net debt at the end of 2012 to return to the downwards trajectory established in 2010.

 

During the year, the principal facilities were provided by Barclays Bank PLC until 22 September 2010 and then by HSBC Bank PLC. The HSBC rates range between 1.67% and 2.35% above base rate or LIBOR. Unamortised costs amounting to £0.35m (2010: £0.1m) at 30 April 2011, associated with raising these facilities, are being written off over their remaining life.

 

The Group's previous interest rate swap was cancelled during September 2010. Subsequently, post year-end, the Group has set-up a new interest rate swap covering approximately half of the Group's projected borrowings from May 2012 until September 2014 at a rate of 1.8% over bank base rate, increasing to 2.0% in May 2013 and 2.48% in May 2014.

 

The table below shows the Group's total facilities and utilisation at 30 April 2011.

 

Total facilities and utilisation


Maturity/

Committed

Drawn


Repayment

Facility

at 30 April


Date


2011*

Facility


£m

£m

Invoice financing

September 2014

24.0

12.9

Revolving credit

September 2014

see below**

-

Amortising term loans

May 2011 to
September 2014

6.1

6.1

Asset finance loans/HP


1.1

0.1

Total


31.2

19.1

* The amounts drawn exclude cash balances.

 

** In addition to the facilities declared in the above table, the Group has a revolving credit facility, which fluctuates on a monthly basis in accordance with the seasonal working capital requirements of the Group from the minimum in April (£4.5m) to the maximum between July and October (£13.0m) of each year; it is committed to September 2014 in line with the other facilities. None of this facility was drawn down at the year end.

 

Treasury policies

The Group operates a centralised treasury function, which controls cash management and borrowings and the Group's financial risks. The main treasury risks faced by the Group are liquidity, interest rates and foreign currency. The Group uses financial instruments to manage its foreign currency and interest rate risks. Transactions of a speculative nature are prohibited.

 

Review of assets and goodwill

The Board has reviewed the value of its assets and goodwill at 30 April 2011, in accordance with the assumptions and procedures set out in the financial statements; it concluded that there is no impairment of goodwill and assets at that date.

 

Net Assets

The Group's balance sheet has strengthened with net assets of £46.3 million (2010: £41.8 million) representing net assets per share of £3.50 (2010: £3.16).

 

 

 

Mark Stott

Group Finance Director

 

 

Consolidated income statement

For the year ended 30 April 2011



2011

2011


2010

2010




Adjusted

Adjusting

2011

Adjusted*

Adjusting

2010



results

items

Total

results

items

Total


Note

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Revenue

2

134,998

-

134,998

131,922

-

131,922

Cost of sales


(107,677)

-

(107,677)

(105,112)

-

(105,112)

Gross profit


27,321

-

27,321

26,810

-

26,810

Distribution costs


(5,550)

-

(5,550)

(5,495)

-

(5,495)

Administrative expenses:

 

 

 

 

 

 

 

- other administrative expenses


(14,271)

(267)

(14,538)

(14,003)

-

(14,003)

- amortisation of intangible assets

 

-

(170)

(170)

-

(299)

(299)

- share-based payments

 

-

(330)

(330)

-

(287)

(287)

Operating profit


7,500

(767)

6,733

7,312

(586)

6,726

Interest income

3

3

-

3

11

-

11

Finance costs

3

(793)

(308)

(1,101)

(968)

201

(767)

Profit from continuing operations before taxation


6,710

(1,075)

5,635

6,355

(385)

5,970

Tax on profit from continuing activities

4

(1,764)

108

(1,656)

(1,722)

20

(1,702)

Net result from continuing operations


4,946

(967)

3,979

4,633

(365)

4,268

Net result from discontinued operations

 

-

503

503

-

-

-

Net result for the period


4,946

(464)

4,482

4,633

(365)

4,268

Basic earnings per share (p)

5

 

 

35.1

 

 

32.6

Diluted earnings per share (p)

5

 

 

34.9

 

 

32.6

Adjusted basic earnings per share (p)*

5

38.7

 

 

35.4

 

 

Adjusted diluted earnings per share (p)*

5

38.5

 

 

35.4

 

 

*   Adjusted operating profit and adjusted earnings per share are stated before one-off items, amortisation of intangible assets, share-based payments, the fair value movement on financial instruments and the net result from discontinued operations.

 

 

Consolidated statement of comprehensive income

For the year ended 30 April 2011

 


2011

2010


Total

Total


£'000

 £'000

Profit for the year

4,482

4,268

Other comprehensive income:

 

 

- currency translation differences

245

(917)

Other comprehensive income

245

(917)

Total comprehensive income for the year

4,727

3,351

Attributable to:

 

 

- owners of the parent

4,727

3,351

 

 

Consolidated balance sheet

At 30 April 2011

 



2011

2010


Note

£'000

£'000

Non-current assets




Goodwill


30,520

30,342

Other intangible assets


140

309

Property, plant and equipment

6

16,583

14,886

Deferred tax asset


149

213



47,392

45,750

Current assets




Inventories


16,453

16,039

Trade and other receivables

7

24,935

19,062

Cash at bank

13

4,282

4,257



45,670

39,358

Total assets


93,062

85,108

Current liabilities




Trade and other payables

8

(25,075)

(25,176)

Deferred consideration


(38)

-

Current tax liabilities


(620)

(524)

Obligations under finance leases

9

(75)

(90)

Derivative financial instruments


(157)

(406)

Borrowings and overdrafts

10

(14,509)

(12,885)



(40,474)

(39,081)

Net current assets


5,196

277

Non-current liabilities




Deferred consideration


-

(300)

Deferred tax liabilities


(1,750)

(1,605)

Obligations under finance leases

9

(15)

(77)

Borrowings and overdrafts

13

(4,536)

(2,290)



(6,301)

(4,272)

Total liabilities


(46,775)

(43,353)

Net assets


46,287

41,755

Equity




Share capital


1,324

1,324

Share premium account


28,266

28,266

Merger reserve


3,411

3,411

Equity reserve

11

2,664

2,089

Retained earnings

11

10,622

6,665

Total equity attributable to equity holders of the parent


46,287

41,755

 

The financial statements were approved by the Board for issue on 20 July 2011.

 

 

Consolidated cash flow statement

For the year ended 30 April 2011

 



2011

2010


Note

£'000

£'000

Cash flow from operating activities




Profit from continuing operations before taxation


5,635

5,970

Finance costs

3

1,101

767

Interest income

3

(3)

(11)

Share-based payments


330

287

Depreciation


2,267

2,337

Loss/(profit) on sale of plant and equipment


9

(113)

Amortisation of intangible assets


170

299

Net movement in working capital


(6,040)

(179)

Decrease/(increase) in inventories


72

(1,720)

(Increase)/decrease in receivables


(5,295)

128

(Decrease)/increase in payables


(817)

1,413

Total cash flow from operations


3,469

9,357

Net interest paid

3

(1,347)

(957)

Tax paid


(1,369)

(1,415)

Total cash flow from operating activities


753

6,985

Cash flow from investing activities




Purchase of property, plant and equipment


(3,789)

(2,098)

Proceeds from sale of plant and equipment


45

259

Disposal of subsidiary


500

-

Total cash impact of acquisitions


(848)

(220)

Acquisition of business


(483)

(220)

Net borrowings assumed on acquisition


(365)

-

Net cash flow from investing activities


(4,092)

(2,059)

Cash flow from financing activities




Net proceeds from issue of ordinary share capital


-

14

Purchase of own shares


(525)

(250)

Proceeds from new borrowings


7,000

-

Repayment of borrowings


(5,174)

(2,545)

Finance lease repayments


(91)

(214)

Net cash flow from financing activities


1,210

(2,995)

Net (decrease)/increase in cash and cash equivalents


(2,129)

1,931

Cash and cash equivalents at beginning of the year


(6,608)

(8,127)

Effect of foreign exchange rate movements


96

(412)

Cash and cash equivalents at the end of the year


(8,641)

(6,608)

Cash and cash equivalents comprise:




Cash at bank

13

4,282

4,257

Bank overdraft

13

(12,923)

(10,865)



(8,641)

(6,608)

 

 

Consolidated statement of changes in equity

For the year ended 30 April 2011

 


Attributable to equity holders of the parent



Share






 Share

premium

Merger

Equity

Retained



capital

account

reserve

 reserve

 earnings

 Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 May 2009

1,324

28,252

3,411

2,719

2,647

38,353

Comprehensive income

 

 

 

 

 

 

Profit for the year

-

-

-

-

4,268

4,268

Other comprehensive income

 

 

 

 

 

 

Exchange (loss) on translation of foreign operations

-

-

-

(917)

-

(917)

Total other comprehensive income

-

-

-

(917)

-

(917)

Total comprehensive income

-

-

-

(917)

4,268

3,351

Transactions with owners:

 

 

 

 

 

 

  - Issue of new ordinary shares

-

14

-

-

-

14

  - Purchase of own shares

-

-

-

-

(250)

(250)

  - Share-based payment charge

-

-

-

287

-

287

Total transactions with owners

-

14

-

287

(250)

51

Balance at 30 April 2010

1,324

28,266

3,411

2,089

6,665

41,755

Comprehensive income

 

 

 

 

 

 

Profit for the year

-

-

-

-

4,482

4,482

Other comprehensive income

 

 

 

 

 

 

Exchange gain on translation of foreign operations

-

-

-

245

-

245

Total other comprehensive income

-

-

-

245

-

245

Total comprehensive income

-

-

-

245

4,482

4,727

Transactions with owners:

 

 

 

 

 

 

  - Purchase of own shares

-

-

-

-

(525)

(525)

  - Share-based payment charge

-

-

-

330

-

330

Total transactions with owners

-

-

-

330

(525)

(195)

Balance at 30 April 2011

1,324

28,266

3,411

2,664

10,622

46.287

 

 

Notes to the consolidated financial statements

For the year ended 30 April 2011

 

 

1. PREPARATION OF FINANCIAL STATEMENTS

 

The financial information in this announcement does not constitute the Group's statutory financial statements for the years ended 30 April 2011 or 2010 but is derived from these accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's annual general meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in August 2011. The accounting policies used in this preliminary announcement are consistent with those that the Directors have used in the Group's audited financial statements for the year ended 30 April 2011.

 

The financial statements are prepared under the historical cost convention, except for the revaluation of financial instruments. The financial statements are presented in Sterling because that is the currency of the primary economic environment in which the Group operates.

 

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

 

2. SEGMENTAL INFORMATION

 

For management purposes, the Group is organised into two divisions: Confectionery; and Natural Snacks. These divisions are continuing activities and include the following principal trading subsidiaries:

 

Confectionery

Kinnerton (Confectionery) Company Limited

Kinnerton (Confectionery) Australia Pty Limited

Lir Chocolates Limited

Derwent Lynton Co Limited

 

Natural Snacks

Humdinger Limited

 

Segment revenue and results

An analysis of the Group's continuing operations is as follows:


Revenue


Adjusted operating profit


Total result


2011

2010


2011

2010


2011

2010


£'000

£'000


£'000

£'000


£'000

£'000

Confectionery

85,861

83,205

 

5,726

4,686

 

5,008

4,409

Natural Snacks

49,137

48,717

 

1,774

2,626

 

1,725

2,317

 

134,998

131,922

 

 

 

 

 

 

Operating profit

 

 

 

7,500

7,312

 

6,733

6,726

Finance costs (net of interest income)

 

 

 

(790)

(957)

 

(1,098)

(756)

Profit before tax

 

 

 

6,710

6,355

 

5,635

5,970

Tax

 

 

 

(1,764)

(1,722)

 

(1,656)

(1,702)

Profit for the year

 


 

4,946

4,633

 

3,979

4,268

Revenue reported represents sale of goods to external customers. Inter-segment sales made at market rates were £0.2m (2010: £0.6m).

 

Segment assets and liabilities


Segment total assets


Segment total liabilities


2011

2010


2011

2010


£'000

£'000


£'000

£'000

Confectionery

62,349

54,620

 

30,983

24,148

Natural Snacks

28,412

29,729

 

13,638

16,243

Total of all segments

90,761

84,349

 

44,621

40,391

Net unallocated*

2,301

759

 

2,154

2,962

Consolidated

93,062

85,108

 

46,775

43,353

*   Net unallocated assets and liabilities principally comprise centrally held assets and liabilities (which mainly include sundry receivables and bank loans and cash); together with derivative financial instrument balances, and deferred tax assets on share-based payments and derivative financial instruments.

 

Other segment information


Depreciation

and amortisation


Capital additions


2011

2010


2011

2010


£'000

£'000


£'000

£'000

Confectionery

1,980

2,097

 

3,549

1,710

Natural Snacks

457

539

 

240

388

Consolidated

2,437

2,636

 

3,789

2,098

 

Geographical segments

The Group operates in four geographical areas - the United Kingdom, Europe, Australia and the Rest of the World. The Group's revenue from external customers and its segment assets by geographical location are detailed below. Revenue from external customers is segmented by the geographical destination of sales and assets are segmented by their location.


Revenue from

external customers


Segment total assets


Segment non-current assets


Acquisition of

Segment non-current  assets*


2011

2010


2011

2010


2011

2010


2011

2010


£'000

£'000


£'000

£'000


£'000

£'000


£'000

£'000

United Kingdom

124,037

122,526

 

82,501

76,870

 

43,502

42,284

 

160

-

Europe

5,229

4,305

 

9,104

6,906

 

3,734

3,246

 

-

-

Australia

2,988

2,870

 

1,455

1,332

 

7

7

 

-

-

Rest of the world

2,744

2,221

 

2

-

 

-

-

 

-

-

 

134,998

 

93,062

85,108

 

47,243

45,537

 

160

-

*   Acquisition segment assets comprise the fair value of net assets acquired, including the value of goodwill and intangible assets, arising on acquisitions during the year.

 

During the year ended 30 April 2011, the Group derived revenue of £36.4m, £28.6m and £15.6m from three major customers (2010: £36.1m, £23.2m and £16.0m) across the Confectionery and Natural Snacks segments.

 

 

3.  FINANCE COSTS AND INCOME


2011

2010


£'000

£'000

Finance costs

 

 

Interest payable on bank borrowings (including amortisation of issue costs)

785

937

Interest payable on obligations under finance leases

8

31

Refinancing costs

532

-

Other costs

25

-

Total interest payable

1,350

968

Change in fair value of financial instruments designated as at fair value through profit or loss

(249)

(201)

Net finance costs for continuing businesses

1,101

767

Finance income

 

 

Interest received on bank deposits

(3)

(11)

 

 

4.  TAX

The tax analysis is as follows:

 


Adjusted

Adjusting


Adjusted

Adjusting



results

items

Total

results

items

Total


2011

2011

2011

2010

2010

2010


£'000

£'000

£'000

£'000

£'000

£'000

Current tax

 

 

 

 

 

 

UK corporation tax on profits for the year or on adjustments

1,747

(126)

1,621

1,816

(37)

1,779

Adjustments in respect of prior periods

(127)

-

(127)

(93)

-

(93)

Total current tax

1,620

(126)

1,494

1,723

(37)

1,686

Deferred tax

 

 

 

 

 

 

Origination and reversal of temporary differences

144

18

162

(1)

17

16

Tax on profit on ordinary activities or adjusting items

1,764

(108)

1,656

1,722

(20)

1,702

Reconciliation of tax charge

 

 

 

 

 

 

Profit before tax

6,710

(1,075)

5,635

6,355

(385)

5,970

Tax at UK corporation tax rate of 27.86% (2010: 28%)

1,869

(299)

1,570

1,779

(108)

1,671

Adjustments in respect of prior periods

(127)

-

(127)

(93)

-

(93)

Other

(74)

(30)

(104)

(43)

13

(30)

Share-based payments adjustment

-

86

86

-

(5)

(5)

Abolition of industrial buildings allowance

73

-

73

(36)

-

(36)

Tax effect of expenses that are not deductible in determining taxable profit

23

135

158

115

80

195

Tax expense for the period

1,764

(108)

1,656

1,722

(20)

1,702

 

It was recently announced that, effective from 5 April 2011, the main rate of UK corporation tax would reduce from 28.0% to 26.0%. This became substantively enacted on 29 March 2011. The time-weighted rate for the Group's financial year-ended 30 April 2011 is therefore 27.86%.

 

 

5. EARNINGS PER SHARE

The calculation of the basic and diluted earnings/(loss) per share is based on the following data:

 


2011


2010



Weighted




Weighted




average




average




number of

Amount



number of

Amount


Earnings

of shares

per share


Earnings

of shares

per share


£'000

000s

p


£'000

000s

p

Basic earnings per share

4,482

12,779

35.1

 

4,268

13,105

32.6

Diluted earnings per share

4,482

12,848

34.9

 

4,268

13,105

32.6

Adjusted* basic earnings per share

4,946

12,779

38.7

 

4,633

13,105

35.4

Adjusted* diluted earnings per share

4,946

12,848

38.5

 

4,633

13,105

35.4

Basic earnings per share on continuing operations

3,979

12,779

31.1

 

4,268

13,105

32.6

Diluted earnings per share on continuing operations

3,979

12,848

31.0

 

4,268

13,105

32.6

Basic earnings per share on discontinued operations

503

12,779

3.9

 

-

-

-

Diluted earnings per share on discontinued operations

503

12,848

3.9

 

-

-

-

* Adjusted earnings per share are stated before one-off items, amortisation of intangible assets, share-based payments, the fair value movement on financial instruments and the net result from discontinued operations.

 

 

Reconciliations between the various weighted average numbers of shares shown above are as follows:


Year ended 30 April 2011


Year ended 30 April 2010


Basic

Diluted


Basic

Diluted


earnings

earnings


earnings

earnings


per share

per share


per share

per share

Weighted average number of shares

13,238,695

12,778,934

 

13,231,195

13,104,877

Weighted average number of shares issued

-

-

 

-

496

Weighted average number of options (vested)

-

69,286

 

-

-

Weighted average number of shares held by the Zetar Plc EBT

(459,761)

-

 

(126,318)

-

Weighted average number of shares used for earnings per share

12,778,934

12,848,220

 

13,104,877

13,105,373

 

The calculation of basic EPS is based on reported profit after tax and the weighted average number of shares during each year. Diluted EPS is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive ordinary shares in accordance with IAS 33. Potentially dilutive ordinary shares arise from share options and warrants. Adjusted basic and diluted EPS have also been calculated, as in the opinion of the Directors, this provides shareholders with further information regarding trends in the Group's results.

 

Adjusted earnings used in the calculation of adjusted EPS have been calculated on continuing operations after taking into account the items listed below:

Adjusting items

2011

2010


£'000

£'000

Amortisation of intangibles

170

299

Acquisition costs

267

-

Share-based payments

330

287

Net finance costs/(income)

308

(201)

 

1,075

385

Tax benefit

(108)

(20)

 

967

365

Disposal of subsidiary

(503)

-

 

464

365

The adjusted basic and diluted EPS have been calculated using the net results for the appropriate years adjusted to remove the results from discontinued operation, one-off items and exceptional items where relevant. 

 

 

6. PROPERTY, PLANT AND EQUIPMENT


Freehold

Leasehold

Plant and

Fixtures and

Motor



property

improvements

equipment

fittings

vehicles

Total


£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 1 May 2009

3,055

821

17,022

866

12

21,776

Additions

165

162

1,712

50

9

2,098

Other

-

-

63

-

-

63

Transfers

459

-

(459)

-

-

-

Disposal of property, plant and equipment

-

-

(441)

-

-

(441)

Exchange differences

-

(38)

(74)

(8)

1

(119)

At 30 April 2010

3,679

945

17,823

908

22

23,377

Additions

619

63

2,534

573

-

3,789

Acquisition of subsidiary undertakings

-

-

1,676

124

-

1,800

Disposal of property, plant and equipment

-

-

(68)

(36)

-

(104)

Exchange differences

-

26

57

14

1

98

At 30 April 2011

4,298

1,034

22,022

1,583

23

28,960

 

 

 

 

 

 

 


 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

At 1 May 2009

(301)

(67)

(5,817)

(303)

(5)

(6,493)

Charge for the period

(178)

(58)

(1,877)

(219)

(5)

(2,337)

Transfers

(64)

-

64

-

-

-

Disposal of property, plant and equipment

-

-

295

-

-

295

Exchange differences

-

5

35

4

-

44

At 30 April 2010

(543)

(120)

(7,300)

(518)

(10)

(8,491)

Acquisition of subsidiary undertakings

-

-

(1,517)

(124)

-

(1,641)

Charge for the period

(117)

(58)

(1,904)

(184)

(4)

(2,267)

Transfers

64

-

(64)

-

-

-

Disposal of property, plant and equipment

-

-

47

3

-

50

Exchange differences

-

(3)

(22)

(3)

-

(28)

At 30 April 2011

(596)

(181)

(10,760)

(826)

(14)

(12,377)

Carrying amount







At 30 April 2010

3,136

825

10,523

390

12

14,886

At 30 April 2011

3,702

853

11,262

757

9

16,583

 

The carrying amount of property, plant and equipment includes an amount of £368,000 (2010: £585,000) in respect of assets held under finance leases.

 

An amount of £45,000 (2010: £259,000) was received from third-parties for items of property, plant and equipment sold during the year.

 

 

7.  TRADE AND OTHER RECEIVABLES


2011

2010


£'000

£'000

Trade receivables

22,145

16,790

Less: provision for impairment of receivables

(65)

(95)

Trade receivables - net of provisions

22,080

16,695

Other debtors

303

414

Prepayments and accrued income

2,552

1,953

 

24,935

19,062

Trade receivables represent debts due for the sale of goods to customers. The provision for impairment of receivables is estimated by the Group's management based on prior experience.

 

The balance at 30 April 2011 of £24.9m is £5.9m greater than the prior year due predominantly to the timing of Easter which was 3 weeks later than in 2010 and hence, as noted in the Finance Review, the cash collection for a proportion of Easter sales was deferred until after the year-end. By the end of May 2011, the trade receivables balance had been reduced to a figure lower than May 2010.

 

The average credit period taken by customers is 43 days (2010: 38 days). Trade receivables are denominated predominantly in Sterling. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Trade and other receivables are categorised as loans and receivables under IAS 39. Of the total net trade receivables balance, £1,944,000 (2010: £1,887,000) is outside the credit terms given by the Group and past due. Management considers that this balance continues to be recoverable.

 

The movement in the provision for the impairment of trade receivables was as follows:


2011

2010


£'000

£'000

Balance at beginning of the year

95

375

Charged to the income statement

5

79

Utilised

(35)

(359)

Balance at end of the year

65

95

 

 

8. TRADE AND OTHER PAYABLES


2011

2010


£'000

£'000

Trade payables

16,771

19,155

Other taxation and social security

4,080

2,910

Accruals and deferred income

3,934

2,914

Other creditors

290

197

 

25,075

25,176

Trade payables represent amounts payable for goods and services received. The average credit period taken by the Group on trade payables was 48 days (2010: 59 days). The Directors consider that the carrying amount of trade and other payables approximates to their fair value. £2,767,000 (2010: £1,105,000) of trade payables are denominated in currencies other than Sterling, principally Euro.

 

 

9. OBLIGATIONS UNDER FINANCE LEASES


Minimum

lease payments


Present value of

minimum lease payments


2011

2010


2011

2010


£'000

£'000


£'000

£'000

Leases expiring:

 

 

 

 

 

Within one year

75

92

 

75

91

Between one and five years

15

76

 

15

76

 

90

168

 

90

167

Less future finance costs

-

(1)

 

 

 

Present value of lease obligations

90

167

 

 

 

Amount due for settlement within twelve months

75

91

 

 

 

Amount due for settlement after twelve months

15

76

 

 

 

The average lease term is 5 years (2010: five years). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease obligations are denominated in Sterling except for £3,728 (2010: £35,524) denominated in Euros. The carrying amount of the Group's finance lease liabilities approximates to their fair value. The Group's obligations under finance leases are secured by the lessors' charges over the assets concerned. The average effective interest rate on finance leases was 3.1% (2010: 2.5%).

 

 

10.  BORROWINGS AND OVERDRAFTS


2011

2010


£'000

£'000

Bank loans and overdraft

19,045

15,175

The borrowings are repayable as follows:

 

 

- on demand or within one year

14,509

12,885

Amounts due for settlement within twelve months

14,509

12,885

Amounts due for settlement after more than twelve months:

 

 

- between one and two years

1,835

1,790

- between two and five years

2,701

500

 

4,536

2,290

The weighted average interest rates paid on the above borrowings were: bank loans and overdrafts 3.2% (2010: 4%).

 

The bank loans and overdrafts comprise amounts drawn down under bank overdraft/revolving credit and asset based lending facilities of £12,923,000 (2010: £10,865,000) and amortising bank loans and asset finance of £6,122,000 (2010: £4,311,000). These borrowings are secured on the assets of the Group. The Directors consider that the carrying amount of bank loans and overdrafts and loan notes approximate to their fair value at the year end. Bank loans and overdrafts and loan notes are denominated in Sterling.

 

 

11. EQUITY RESERVES


Equity reserve



Foreign





currency





translation

Share-based


Retained


reserve

payment

Total

earnings


£'000

£'000

£'000

£'000

At 1 May 2009

1,961

758

2,719

2,647

Share-based payment charge

-

287

287

-

Exchange losses on translation of foreign operations

(917)

-

(917)

-

Purchase of own shares

-

-

-

(250)

Profit for the year

-

-

-

4,268

At 30 April 2010

1,044

1,045

2,089

6,665

Share-based payment charge

-

330

330

-

Exchange losses on translation of foreign operations

245

-

245

-

Purchase of own shares

-

-

-

(525)

Profit for the year

-

-

-

4,482

At 30 April 2011

1,289

1,375

2,664

10,622

The equity reserve comprises: (i) the exchange gain/loss arising on translation of the net assets of overseas operations Kinnerton (Confectionery) Australia Pty Limited and Lir Chocolates Limited into Sterling at the balance sheet dates; and (ii) share-based payments charged to the income statement as well as the deferred tax effects arising on the recognition of deferred tax assets in respect of temporary differences related to all share-based incentives.

 

 

12.  RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT


2011

2010


£'000

£'000

(Decrease)/increase in cash and cash equivalents

(2,129)

1,931

Cash (in)/outflow from movement in debt financing

(1,826)

2,545

Cash outflow from movement in lease financing

91

214

Movement in net debt arising from cash flows

(3,864)

4,690

Other non-cash changes

96

(412)

Net debt at the start of the year

(11,085)

(15,364)

Net debt at 30 April

(14,853)

(11,085)

 

 

13. ANALYSIS OF NET DEBT


2011

2010


£'000

£'000

Cash at bank

4,282

4,257

Bank overdraft

(12,923)

(10,865)

 

(8,641)

(6,608)

Debt due within one year

(1,586)

(2,020)

Debt due after one year

(4,536)

(2,290)

Finance leases

(90)

(167)

Net debt at 30 April

(14,853)

(11,085)

 

 

14.  ANNUAL GENERAL MEETING

 

Notice is given that the 2011 Annual General Meeting of Zetar Plc (the "Company") will be held at the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 10am on 28 September 2011

 

 

- ENDS-


This information is provided by RNS
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