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Blueheath Holdings (BOK)

  Print      Mail a friend       Annual reports

Tuesday 01 November, 2005

Blueheath Holdings

Interim Results

Blueheath Holdings PLC
01 November 2005

For Immediate Release                                            1 November 2005

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

                                Interim Results

                      Acquisition of AC Ward & Son Limited

Blueheath is a national delivered wholesaler using sophisticated, proprietary
technology to offer a substantial cost advantage over established players in the
£16.4bn grocery wholesale sector. The Company today announces its Interim
results for the six months ended 27 August 2005.

Interim Results - Key Points

  • Turnover increased 53% to £52.3m (2004 - £34.2m) further strengthening the
    business model.
  • The Company met or exceeded all operational targets on order-fulfilment,
    on-time delivery and stock holding.
  • Operating loss reduced by 17% to £2.27m (2004 - £2.75m). Retained loss
    reduced by 46% to £2.03m (2004 - £3.78m).
  • The integration of CTM Wholesale acquired in April 2005 is proceeding
  • Management has been strengthened with the appointment of Andrew King as
    Director of Buying.

Contract Wins - Key Points

Blueheath has added three new accounts since the last statement in August. This
gives a total 14 new accounts added since the start of Blueheath's financial
year, with a full recovery from the loss last year of Snax 24.

There remains a strong forward pipeline of new business with 10 accounts
currently at trial, tender, or advanced discussion stage. These accounts have a
combined annual value of £77m.

Acquisition of AC Ward & Son Limited ('ACW') - Key Points

Blueheath is today pleased to announce the acquisition of ACW.

•         ACW is a traditional delivered wholesaler based in the South East.

•         For the ten months to October 2005, ACW is expected to report an
          annualised turnover of £55m and has net assets of £0.7m.

•         The acquisition is for up to £3.0m in cash with £1.0m contingent on
          subsequent sales performance.

•         Plans are in place for the integration of the business into the
          current operation with the associated cost savings falling in the 
          2006/07 financial year.

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

'The Group has continued its progress towards breakeven with encouraging
progress on the integration of CTM Wholesale and further account wins. With
growing evidence of the benefits from the integration of CTM, there has been a
shift in focus towards further potential acquisitions. I am delighted therefore
to announce the acquisition of ACW which represents another significant step in
the Company's progress.

Whilst the benefits of our business model and associated cost savings to
customers remain strong and continue to be well received, the process of account
roll-out remains challenging and difficult to predict.  This is balanced by our
ability to attract and acquire traditional distribution businesses with their
associated turnover which can be rapidly adapted to the Blueheath operating

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

Buchanan Communications
Mark Edwards / Nicola Cronk / James Strong                   Tel: 020 7466 5000

Notes to editors:

Blueheath is a wholesaler of groceries to convenience stores in the £16.4
billion UK grocery wholesale sector. The Company sells and arranges the
distribution of approximately 3,100, primarily ambient, product lines to over
2,000 independent and multiple retail and leisure outlets within the UK.
Blueheath's innovative technology-driven business model is founded on the basic
principle 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, and

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


Interim Results

Blueheath is pleased to announce its interim results for the six months ended 27
August 2005.

The company has continued to make progress towards breakeven with turnover for
the 6 months ending 27 August 2005 increased by 53% to £52.3m (28 August 2004 -

Operating loss reduced by 17% to £2.27m (2004 - £2.75m). Retained loss reduced
by 46% to £2.03m (2004 - £3.78m). Gross margins were level at 6.0% (28 August
2004 - 6.0%), reflecting the short term impact of integrating the lower margin
CTM business. Buying synergies are expected to flow through during the second
half of the current fiscal year. Total overhead costs before exceptional costs
as a percentage of sales further reduced from 12.6% to 10.4%.

As of 27 August 2005 the Company had repaid all substantial debt and held a
total of £16.4m in cash deposits and facilities (28 August 2004 - £14.4m),
comprising £4.3m of cash, £8.2m of cash deposits held against tobacco credit,
and £3.9m of un-drawn invoice discounting facilities.

The Directors will be reviewing the dividend policy as the Company continues to
progress and grow.

Operational Performance

Operationally the company has performed well over the period, continuing to meet
or exceed its key operational targets on order fulfilment, on-time delivery and
stock holding. This was in spite of the level of management attention that has
inevitably been focused on the integration of the CTM business.  These are key
performance measurements for Blueheath and we continue to be committed to
providing the best possible service to all our customers.

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.

Integration of CTM Wholesale

The Company acquired CTM Wholesale Limited in April 2005 for a consideration of
£5.6m. At the time, the Directors anticipated that the enlarged group would 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.  At the same time, the
Directors identified the potential loss of customers as the key risk in this
business integration.

We are pleased to report that the integration has progressed smoothly, achieving
or exceeding the internal targets set for the integration.  We are also pleased
to report that there have been no material customer losses or staff issues.

Blueheath's stock management technology has been successfully applied to the CTM
business. This has enabled the acquired stock of £3.4m (30 days) to be reduced
to £1.6m (14 days) releasing almost £1.9m in cash and lowering the effective
purchase price to £3.7m.   Purchasing integration is on track to deliver the
expected synergies with the benefits being phased in over the second half of the
financial year. Integration of the central overheads is proceeding according to

Acquisition of AC Ward & Son Limited

Following the successful integration of the CTM business, Blueheath is today
announcing the acquisition of AC Ward & Son Limited ('ACW') for up to £3.0
million in cash (the 'Acquisition').

ACW is a traditional delivered wholesale business. It operates from a single
warehouse depot located in Thurrock in the South East of England. For the ten
months to October 2005, ACW is expected to report an annualised turnover of
£55m, and has net assets of £0.7m.

Of the cash consideration of up £3.0m, a total of £1.0m is conditional on the
sales performance of the business in the period immediately following

ACW represents another good opportunity to supplement the organic growth of the
business. As with CTM, the Directors anticipate that 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 ACW
operation, and the integration of central overheads.

Contract Wins

The business took a strategic decision some two and a half years ago to expand
the offer from the core customer base of individual independent retailers to
multiple account chains. Since the start of the financial year, the business has
added some 14 new multiple accounts across the full range of forecourt,
convenience, leisure and news and more recently food service sectors.

Overall, the business has done well to recover from the loss last year of the
Snax 24 account which, at the time, was the Company's largest customer. Sales
excluding the loss of Snax 24 increased by 29% which resulted in an overall
sales gain in the core business of 4% and reflect a satisfactory performance in
adding new accounts.  The business is continuing to roll out the new accounts
but as has previously been highlighted, the pace of the roll out of outlets is
beyond the Company's control and some of these accounts have been progressing
more slowly than originally expected.

In addition, the Company has a strong pipeline of new business with 10 accounts
currently at trial, tender, or advanced discussion stage. These accounts have
the potential to deliver £77m of additional revenue. Historically, the Company
has managed to convert 30-40% of such prospects although, having just completed
the acquisition of ACW, the management will focus on integrating the business
and generating the operational efficiencies and cost savings from this
acquisition. As a result, the current rate of organic growth is expected to slow
over the next few months. The Directors are taking steps to recruit additional
personnel so that organic growth and the identification, acquisition and
integration of potential targets can be pursued in tandem.


With the new business wins and the acquisition of ACW, the scope and scale of
the business has expanded very considerably over the past 12 months.  The
Directors have accordingly taken the decision to strengthen the management team
and are delighted to announce that Andrew King (39) formerly Buying Director of
the T & S Stores convenience chain has agreed to join the business as Director
of Buying. Andrew is a significant addition to the management team, having had
extensive experience in our sector. He has been working with Blueheath in a
consulting capacity since June 2005 and has made a valuable contribution in
supporting the integration of CTM.

James Ward (34), formerly managing director of ACW will also be joining the
business to support the integration of the ACW business and assist with future
business development.

Company Background

In four and a half 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

Company Outlook

Looking forward, the Company intends to continue a dual strategy of both organic
and acquisition led growth to drive scale and maximise profitability. The
encouraging progress with the integration of CTM has demonstrated Blueheath's
ability to manage the acquisition and integration process whilst still
delivering organic growth. Although the next six months will offer a sizable
challenge in integrating the ACW business, the Company is confident that this
can be successfully achieved.

In the short term, this focus on the integration of ACW will inevitably affect
the speed with which the Company can take on further new accounts, but when the
process is completed the Company is optimistic that the business will have
achieved breakeven and be in an excellent position to support further growth.

Colin Smith
1 November 2005

Results for the six months ended 27 August 2005

                                                                        Six months
                                                                          ended 28
                                                                       August 2004   Year ended
                                                           Six months  as restated  26 February
                                                             ended 27  see note 10         2005
                                                          August 2005               as restated 
                                            Note                                    see note 10
                                                                £'000        £'000        £'000
      Continuing operations                                    35,694       34,178        70,151
      Acquisitions                                             16,596            -             -

                                                               52,290       34,178        70,151
Cost of sales                                                (49,142)     (32,128)      (66,017)

Gross profit                                                    3,148        2,050         4,134

Distribution costs                                            (3,098)      (2,444)       (5,027)
Administrative expenses
      Goodwill amortisation                                      (40)            -             -
Share option charges                                             (44)         (24)          (80)
      Other                                                   (2,234)      (2,329)       (4,445)

                                                              (5,416)      (4,797)       (9,552)

Operating (loss) profit
      Continuing operations                                   (2,562)      (2,747)       (5,418)
      Acquisitions                                                294            -             -

                                                              (2,268)      (2,747)       (5,418)
Interest receivable and similar income                            280           46           253
Interest payable and similar charges                             (37)      (1,083)       (1,142)

Loss on ordinary activities before taxation                   (2,025)      (3,784)       (6,307)

Tax on loss on ordinary activities                                  -            -             -

Retained loss for the financial period                        (2,025)      (3,784)       (6,307)

Loss per share - basic and diluted (pence)             3        (4.5)       (16.1)        (19.5)

There are no recognised gains or losses for the current financial period and
preceding financial period other than as stated in the profit and loss account.

At 27 August 2005

                                                                           As at 28     As at 26
                                                                        August 2004     February
                                                                        as restated         2005
                                             Note             As at 27  see note 10  as restated
                                                           August 2005               see note 10
                                                                 £'000        £'000        £'000
Intangible assets                                                2,177            -            -
Tangible assets                                                    275          245          229

                                                                 2,452          245          229

Stocks                                                           3,018        1,606        1,125
Debtors                                                         11,416        5,780        5,968
Current investments                          4                   8,200       10,540        5,100
Cash at bank and in hand                                         4,306            -        6,027

                                                                26,940       17,926       18,220

CREDITORS: amounts falling due within one
year                                                          (13,900)      (4,403)      (6,869)

NET CURRENT ASSETS                                              13,040       13,523       11,351

NET ASSETS                                                      15,492       13,768       11,580
Called up share capital                                            455          411          414
Share premium account                                           22,926       16,798       17,074
Other reserve                                                   17,874       17,874       17,874
Profit and loss account                                       (25,887)     (21,339)     (23,862)
Share option reserve                                               124           24           80

EQUITY SHAREHOLDERS' FUNDS                   9                  15,492       13,768       11,580

Results for the six months ended 27 August 2005

                                                                        Six months   Six months        Year
                                                                          ended 27     ended 28    ended 26
                                                                            August       August    February
                                                                              2005         2004        2005
                                                                             £'000        £'000       £'000

Net cash outflow from operations                          7                   (703)      (4,435)      (3,677)

Returns on investments and servicing of finance
Interest paid                                                                  (37)        (351)        (309)
Interest received                                                               280           46          253

Net cash outflow from returns on investment and servicing
of finance                                                                      243        (305)         (56)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                              (34)        (168)        (311)
Sale of tangible fixed assets                                                     -            5            -

Net cash outflow from capital expenditure and financial
investments                                                                    (34)        (163)        (311)

Acquisitions and disposals
Payment to acquire investment in subsidiary                                 (5,619)            -            -
Net cash acquired with subsidiary                                             1,261            -            -

Net cash outflow from acquisitions and disposals                            (4,358)            -            -

Net cash outflow before management of liquid resources
and financing                                                               (4,852)      (4,903)      (4,044)
Management of liquid resources
Increase in short term deposits                                             (3,100)     (10,540)     (11,128)

Issue of ordinary share capital (net of issue costs)                          5,893       17,142       17,230
Issue of other loan                                                               -        1,500            -
Repayment of other loan                                                           -      (1,500)            -
Repayment of short term debt facility                                             -      (2,058)            -
Increase in short term debt facility                                              -           33            -
Bank loan repaid                                                                  -            -      (1,841)
Finance leases repaid                                                          (27)            -            -

Net cash inflow from financing                                                5,866       15,117       15,389

(Decrease) increase in cash                               8                 (2,086)        (326)          217


1          Basis of preparation

The financial information has been prepared in accordance with the policies set
out in the statutory financial statements of Blue Heath Direct Limited for the
year ended 26 February 2005.  The company changed its accounting policy for
share options as fully described in note 10.

These interim financial statements do not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985.  Results
for the six months periods ended 27 August 2005 and 28 August 2004 have not been
audited.  The results for the year ended 26 February 2005 have been extracted
from the statutory financial statements of Blueheath Holdings plc and restated
where appropriate as explained in note 10.  The financial statements for the
year ended 26 February 2005 have been filed with the Registrar of Companies and
upon which the auditors reported without qualification.

2          Corporate restructuring - comparative period

During the six months ended 28 August 2004 the Group carried out a corporate
restructuring consisting of the introduction of a new holding Company
incorporated on 4 June 2004 under the name Blueheath Holdings Limited.  On 13
July 2004 its name was changed to Blueheath Holdings plc when it re-registered
as a public limited company.

On 12 July 2004 Blueheath Holdings Limited acquired the entire share capital of
Blue Heath Direct Limited in exchange for the issue of shares to shareholders on
a one for one basis.

The restructuring represented a change in the identity of the holding company
rather than on acquisition of the business.  Consequently, the restructuring has
been accounted for using merger accounting principles.

Therefore, although Blueheath Holdings plc did not become the parent company of
the Group until 12 July 2004, the Group financial information is presented as if
the companies had always been part of the same group.

In accordance with Sections 131 and 133 of the Companies Act 1985, Blueheath
Holdings plc has taken no account of any premium on the shares issued to acquire
Blue Heath Direct Limited and has recorded the cost of the investment at the
nominal value of the shares issued.  The resulting difference on consolidation
has been credited to a merger reserve.

3          Loss per share

Basic and diluted loss per ordinary share has been calculated by dividing the
loss after taxation for the periods as shown in the table below.
                                                                             Six months   Year
                                                                             ended 28
                                                                             August 2004  ended 26
                                                                 Six months   as restated  2005
                                                                   ended 27   see note 10
                                                                August 2005               as restated
                                                                                          see note 10

Losses (£'000)                                                       (2,025)      (3,784)      (6,307)
Weighted average number of shares                                 44,578,163   23,514,430   32,310,492

The Company had ordinary shares in issue of 45,468,776 as of 27 August 2005.

FRS14 requires presentation of diluted EPS when a company could be called upon
to issue shares that would decrease net profit or increase net loss per share.
For a loss making company with outstanding share options, net loss per share
would only be increased by the exercise of out of the money options.  Since it
seems inappropriate to assume that option holders would act irrationally and
there are no other diluting future share issues, diluted EPS equals basic EPS.

4          Current asset investments

The group has £8.2m (26 February 2005 : £5.1m; 28 August 2004 : nil) of short
term deposits with Lloyds Commercial Finance Limited.  This deposit is
restricted as it is held by Lloyds Commercial Finance Limited as security for
guarantees to suppliers for the provision of credit.

4          Share capital and share premium

Blueheath Holdings plc ('the Company') incorporated on 4 June 2004 with 1
ordinary share of £0.01.  Subsequently it effected a group reconstruction in
order to acquire, on a share for share basis, Blue Heath Direct Limited.  As
part of this re-organisation the Company issued 25,768,399 ordinary shares.

On 19 July 2004 the Company placed 15,289,256 new ordinary shares and obtained
admission for the entire share capital of the Company to the Alternative
Investment Market ('AIM') of the London Stock Exchange.   The placing raised
£16,950,582 being £152,893 of share capital and £16,797,689 of share premium
after deduction of £1,549,418 in respect of costs associated with the raising of

On 8 April 2005 the Company placed 3,870,970 new ordinary shares that raised
£38,709 share capital and £5,751,297 of share premium after the deduction of
£209,996 in respect of costs associated with the raising of equity.  The
proceeds from this placing were used to fund the acquisition of CTM Wholesale
Limited (see note 11.

179,789 staff share options were exercised raising £1,797 share capital and
£105,409 share premium.

6          Operating exceptional costs
                                                                         Six months   Six months        Year
                                                                           ended 29     ended 28    ended 26
                                                                             August       August    February
                                                                               2005         2004        2005
                                                                              £'000        £'000       £'000  

Restructuring of finance                                                          -          314          314
Expenses associated with flotation                                                -          138          164

                                                                                  -          452          478

7          Reconciliation of operating loss to operating cash outflow
                                                                                    Six months
                                                                                    ended 28
                                                                                    August 2004  As at 26
                                                                       Six months   as restated  2005
                                                                       ended 29     see note 10
                                                                       August 2005               as restated
                                                                                    £'000        see note 10

Operating loss                                                              (2,268)      (2,747)      (5,418)
Depreciation charge                                                             173          142          299
Amortisation charge                                                              40            -            -
FRS 20 share option charge                                                       44           24           80
(Profit) loss on disposal of fixed assets                                         -          (4)            4
Decrease (increase) in stocks                                                 1,570        (818)      (1,997)
(Increase) decrease in debtors                                              (2,129)      (1,542)        3,692
Increase (decrease) in creditors                                              1,867          510        (337)

                                                                              (703)      (4,435)      (3,677)

8          Analysis and reconciliation of net debt

                                                                               (net of cash
                                                      26 February         Cash    overdraft        27 August
                                                             2005         flow     acquired)            2005
                                                            £'000        £'000        £'000            £'000            

Cash at bank and in hand                                    6,027        2,637          (4,358)        4,306
Overdrafts                                                      -        (364)                -        (364)

Current asset investments                                   5,100        3,100                -        8,200
Debt due within one year                                    (217)          217                -            -

Net funds                                                  10,910        5,590          (4,358)       12,142

9          Reconciliation of movements in group shareholders' funds (deficit)

                                                                 Six months   Six months         Year
                                                                   ended 27     ended 28     ended 26
                                                                     August       August     February
                                                                       2005         2004         2005
                                                                      £'000        £'000        £'000

Loss for the financial period (as restated, see note 10)             (2,025)      (3,784)      (6,307)
Share conversion                                                           -        7,555        7,555
New shares issued                                                      6,103       18,511       18,790
Share issue costs                                                      (210)      (1,560)      (1,560)
Movement in share option reserve (as restated, see note 10)               44           24           80

Net increase in shareholders' funds                                    3,912       20,746       18,558
Opening shareholders' funds (deficit)                                 11,580      (6,978)      (6,978)

Closing shareholders' funds                                           15,492       13,768       11,580

10        Prior year restatement - Implementation of FRS 20 'Share base payment'

Accounting policy change

The group has applied the requirements of FRS 20 Share-based Payments. In
accordance with the transitional provisions, FRS 20 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
January 2005.

The group issues equity-settled share-based payments to certain employees and
directors. Equity-settled share-based payments are measured at fair value at the
date of grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the group's estimate of shares that will eventually vest.

Fair value is measured by use of a Black-Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate, for the
effects of non-transferability, exercise restrictions, and behavioural

A liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each balance sheet date for cash-settled
share-based payments.

Impact of restatement

The impact of implementing FRS 20 'Share base payment' has had the following
impact on the financial statements.

PROFIT AND LOSS ACCOUNT                                    Six months             Year
                                                             ended 28            ended
                                                               August      26 February 
                                                                 2004             2005
                                                                £'000            £'000

Administrative expenses as previously stated                    2,329            4,445
FRS 20 'Share based payment' charge                                24               80

Administrative expenses as restated                             2,353            4,525

Loss per share - basic and diluted (pence) as
previously stated
                                                               (16.0)           (19.4)

FRS 20 'Share based payment' charge                             (0.1)            (0.1)

Loss per share - basic and diluted (pence) as restated         (16.1)           (19.5)

BALANCE SHEET                                                           
                                                             28 August 26 February
                                                                  2004        2005
                                                                 £'000       £'000

Profit and loss account as previously stated                   (21,315)     (23,782)
FRS 20 'Share based payment'                                       (24)         (80)

Profit and loss account as restated                            (21,339)     (23,862)

Share option reserve previously stated                                -            -
FRS 20 'Share based payment'                                         24           80

Share option reserve as restated                                     24           80

11        Acquisitions in the period

On 14 April 2005, the Company acquired a 100% interest in CTM Wholesale Limited
for a consideration of £5.6 million including £0.4 million of deferred
consideration and £0.3m of related expenses.  At the date of acquisition the
directors have estimated that CTM Wholesale Limited had net assets with a
provisional fair value of £3.4 million, giving rise to provisional goodwill of
£2.2 million.

The acquisition was funded via the completion of a share placing which is fully
described in note 5.

12        Post balance sheet event

On 1 November 2005, the directors announced the Company acquired a 100% interest
in A C Ward & Son Limited for a total cash consideration of up to £3.0 million,
with £1.0m contingent on subsequent sales performance.

                      This information is provided by RNS
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