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Norish Plc (NSH)

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Thursday 20 September, 2018

Norish Plc

Half-year Report

RNS Number : 2979B
Norish PLC
20 September 2018
 

 

 

Norish plc

Interim results 2018

Results

 

Norish plc (AIM: NSH), is pleased to announce its interim results for the six months ended 30 June 2018.

 

Financial Highlights

·    Fully diluted adjusted EPS ahead by 16%, year on year, from 1.9p to 2.2p

·    Balance sheet in excellent shape. Net debt reduced from Stg £5.4m at Dec 17 to Stg £5m at June 2018.

·    Interest cover at 10.9 times, up from 7.2 times last year

·    Operating profit ahead by 15%, from Stg £0.83m to Stg £0.95m

·    Profit before tax ahead by 21%, from Stg £0.71m to Stg £0.86m

 

Operational Highlights

 

Cold Store division

 

Cold Stores are our largest business activity, accounting for circa 86% of the non-current assets in the business. This division saw operating profits grow by 17% in the first six months of the year, from Stg £1m to Stg £1.2m. Divisional operating margins expanded from 14.3% to 17.7%, year on year.

 

Within the cold store division, sales at a headline level were down 4%, from £7m to £6.7m. We experienced lower blast freezing activity, reflecting a down cycle in the pork market, particularly to China. As a consequence, the first half was characterised by a greater percentage of lower remunerative storage type business, within the overall sales mix. Occupancy increased from 90% in the first half of 2017, to 92% in the first half of 2018.

 

Costs in the cold store division were significantly reduced; labour (our largest cost) was down 6%, year on year while power expense (our second largest cost) was reduced by 16%, against the same period last year. Labour and power combined were lowered by 10% or Stg £0.3m. Power units consumed were lower by 12%. This reflects the aforementioned reduction in blast freezing activity, together with benefits coming through from the implementation of energy saving initiatives.

 

Within the division, the South East business performed particularly well, with sales ahead by 6%, year on year, to Stg £3.4m and contribution ahead by 32%, year on year. The North West business saw sales reduce by 14% to stg £3.3m and contribution by 2%, reflecting specific customer issues together with the down cycle in the pork export market. 

 

Sourcing Division

 

Sales at our sourcing division fell by 13% in the first half of 2018, compared with the same period in 2017, from £11.5m to £9.7m. Contribution declined by a corresponding 14%, year on year, from £0.32m to £0.3m. A reduction in protein supply has impacted the results. Town View Foods sources protein products mainly beef, pork, lamb and chicken. Sales from pork and chicken decreased by £1m during the period, while sales from beef and lamb decreased by £0.7m.

 

 

Town View Foods, the largest business within the Sourcing division, has repaid its investment within five years of its acquisition. A new deal has been agreed with management to cover an additional five year period.

 

 

Dairy Division

 

In our dairy business, we continue to make progress. At Cantwellscourt Farm, milk production was 3.2%, ahead year on year, despite a late start to the grazing season and lower than normal grass growth, later in the period, arising from the onset of drought conditions. Encouragingly, in the context of a difficult period, our operating costs declined 16% year on year, as we continue to focus on improving operating performance.

 

We are reinvesting the cash from our farming business into rearing replacements with circa 400 heifers coming into production over the next two years.

 

Discontinued

 

During the period the group decided to exit the Juice business for the ready to drinks market. A loss of £0.29m was incurred, compared to £0.07m last year.

 

Outlook

 

The Temperature Controlled market would appear to be operating close to capacity, as we head into the seasonally important final months of the year. Increasing demand could well be a driver for improving rates in relation to the services we provide. A lack of investment in new capacity over a long number of years, together with regulation forcing older plants to shut down and market displacement due to Brexit related issues, have all combined to tighten available cold storage capacity.

 

Our cold store business continues to focus on improving revenue and by reducing our operating costs. The second half should see further benefits from initiatives undertaken in the latter half of 2017 and the first half of 2018. We expect to make further progress in our cold store business over the remainder of 2018 and into 2019.

 

Our cold store assets are well invested. It is worth noting that of the 408,000 sq. foot of temperature-controlled facilities which we operate (on 30 acres), we actually own circa 328,000 sq. foot (on 25 acres). This gives us flexibility to work with our customers in order to meet their needs in this evolving temperature-controlled marketplace. To date, it would appear that Brexit, if anything, has been positive for our cold store business. The concern with possible disruption towards the end of March 2019, should see further demand for frozen and ambient space in the short term. Longer term, supply lines will likely change for some protein sources underpinning the need for greater traceability and existing cold storage capacity within the food chain. Increasingly cold stores are being viewed as integral to the traceability requirements of the marketplace.

 

Within the sourcing division we have recently added fish to our protein supply and are implementing other initiatives to get back on a growth trajectory.

 

In the dairy business, drought has impacted pasture growth over the summer months, with less than 25% of normal rainfall in the main growing period of May to August. Thankfully we have not had to use any of our winter reserves, harvested earlier in 2018.  We have sown forage crops to augment our winter feed requirements. We expect the operating performance in the second half to show continued improvement, year on year, following on a similar trend to the first half of 2018.

 

Elsewhere, we are at the early stages of an exciting collaboration with a successful large-scale dairy farming business that will leverage our collective resources to develop a differentiated business model with significant potential for value creation in the coming years.

 

Over the past number of years, the Group's decision to invest significantly in both cold storage assets, and protein sourcing businesses, has proved to be the correct strategy. This strategy, combined with the investment in a highly motivated executive management team, which has brought a new energy and dynamic to the business, leaves the Group very well placed, for further growth and development, in the years ahead.

 

Dividend

 

The board does not recommend the payment of an interim dividend, unchanged from last year.

 

The final dividend of 1.65€cent per share announced earlier in the year will be paid on 19 October 2018 to those shareholders on the register on the 28 September 2018.

  

 

 

 

Norish plc

 

 

 

 

Consolidated income statement

 

 

 

 

For the six months ended 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

Six months

Six months

Year

 

 

ended

ended

ended

 

 

30 June

30 June

31 December

 

 

2018

2017

2017

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

 

 

 

 

 

£'000

£'000

£'000

 

 

 

 

 

Continuing operations

 

 

 

 

Revenue

 

18,454

20,545

42,012

Cost of sales

 

(17,145)

(19,351)

(39,160)

Gross profit

 

1,309

1,194

2,852

 

 

 

 

 

Other income

 

24

49

66

Deferred Consideration

 

-

-

(100)

Administrative expenses

 

(383)

(414)

(889)

 

Operating profit from continuing operations

 

950

829

1,929

 

 

 

 

 

Finance income- fair value gain on swaps

 

-

10

10

Finance income - interest receivable

 

-

-

1

Finance expenses - interest paid

 

(87)

(113)

(201)

Finance expenses - notional interest

 

-

(12)

(13)

 

 

 

 

 

Profit on continuing activities before taxation

 

863

714

1,726

 

 

 

 

 

Income taxes - Corporation tax

 

(216)

(141)

(413)

Income taxes - Deferred tax

 

 

 

(28)

 

 

 

 

 

Profit for the period attributable to owners of the parent from continuing operations

 

647

573

1,285

 

 

 

 

 

Loss from discontinued activities

 

(289)

(75)

(292)

 

 

 

 

 

Profit for the period

 

358

498

993

 

 

 

 

 

Other comprehensive income

 

-

-

-

 

 

 

 

 

Total comprehensive income for the year

 

358

498

993

 

Profit for the period attributable to owners of parent

 

358

514

993

Loss for the financial year attributable to non-controlling interest

 

-

(16)

-

Earnings per share expressed in pence per share:

 

 

 

 

From continuing operations

- basic

 

2.2p

1.9p

4.4p

- diluted

 

2.2p

1.9p

4.4p

From discontinued operations

- basic

 

(1.0)p

(0.2)p

(1.0)p

- diluted

 

(1.0)p

(0.2)p

(1.0)p

 

 

 

 

 

Norish plc

 

 

 

 

Interim balance sheet

 

 

 

 

As at 30 June 2018

 

 

 

 

 

As at

As at

As at

 

 

30 June

30 June

31 December

 

 

2018

2017

2017

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

 

 

 

 

 

£'000

£'000

£'000

 

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

2,338

2,338

2,338

 

Intangible assets

54

147

141

 

Biological assets

658

618

624

 

Property, plant and equipment

18,046

17,449

17,759

 

 

21,096

20,552

20,862

 

Current assets

 

 

 

 

Trade and other receivables

6,721

7,327

7,537

 

Inventories

480

505

709

 

Cash and cash equivalents

1,167

1,279

1,558

 

Assets of disposal group classified as held for sale

363

284

279

 

 

8,731

9,395

10,083

 

 

 

 

 

 

TOTAL ASSETS

29,827

29,947

30,945

 

 

 

 

 

 

Equity attributable to equity holders of the parent

And non-controlling interest

 

 

 

 

Share capital

5,640

5,616

5,616

 

Share premium account

7,321

7,281

7,281

 

Other reserves

103

23

103

 

Treasury shares

(563)

(563)

(563)

 

Retained earnings

3,874

3,440

3,516

 

Equity attributable to equity holders of the parent

16,375

15,797

15,953

 

Non-controlling Interest

-

(38)

-

 

TOTAL EQUITY

16,375

15,759

15,953

 

Non-current liabilities

 

 

 

 

Borrowings

2,159

2,485

2,390

 

Financial Liabilities at fair value through profit or loss

-

-

-

 

Deferred tax

953

925

953

 

 

3,112

3,410

3,343

 

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

5,699

6,067

6,680

 

Financial Liabilities at fair value through profit or loss

-

167

29

 

Current tax liabilities

583

346

367

 

Borrowings

3,995

4,192

4,555

 

Liabilities of disposal group classified as held for sale

63

6

18

 

 

10,340

10,778

11,649

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

29,827

29,947

30,945

 

 

 

 

 

 

 

 

 

 

 

Norish plc

Consolidated statement of changes in equity

For the six months ended 30 June 2018

 

 

 

 

 

 

 

 

Non-

 

 

 

Share

Share

Other

Treasury

Retained

 

Controlling

Total

 

 

capital

premium

Reserves

shares

earnings

Total

interest

Equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

5,616

7,281

23

(563)

2,926

15,283

(22)

15,261

 

 

 

 

 

 

 

 

 

 

 

Net profit/(loss) for the financial year

-

-

-

 

-

-

 

-

 

-

 

Total comprehensive income for the period

-

-

-

-

514

514

(16)

498

 

Issue of share capital

-

-

-

-

-

-

-

-

 

Equity dividends paid (recognised directly in equity)

-

-

-

-

-

-

-

-

 

Treasury shares acquired

-

-

-

-

-

-

-

-

 

Transactions with owners

-

-

-

-

514

514

(16)

498

 

At 30 June 2017

5,616

7,281

23

(563)

3,440

15,797

(38)

15,759

 

 

 

 

 

 

 

 

 

 

 

Net profit/(loss) for the financial period

-

-

-

 

479

479

16

495

 

Total comprehensive income for the period

-

-

-

 

479

479

16

495

 

Issue of share capital

-

-

-

 

-

-

-

-

 

Equity dividends paid (recognised directly in equity)

-

-

-

 

(381)

(381)

-

(381)

 

Foreign Exchange gain

-

-

80

-

-

80

-

80

 

Minority Interest acquired

-

-

-

-

(22)

(22)

22

-

 

Transactions with owners

-

-

80

-

76

156

22

194

 

At 31 December 2017

5,616

7,281

103

 

(563)

3,516

15,953

-

15,953

 

                                 

 

Net profit/(loss) for the financial period

-

-

-

 

358

358

-

358

Total comprehensive income for the period

-

-

-

 

358

358

-

358

Issue of share capital

24

40

-

 

-

64

-

64

Equity dividends paid (recognised directly in equity)

-

-

-

 

-

-

-

-

Foreign Exchange gain

-

-

-

-

-

-

-

-

Minority Interest acquired

-

-

-

-

-

-

-

-

Transactions with owners

24

40

-

-

358

422

-

422

At 30 June 2018

5,640

7,321

103

 

(563)

3,874

16,375

-

16,375

 

 

 

 

 

Norish plc

 

 

 

Consolidated cash flow statement

 

 

 

For the six months ended 30 June 2018

 

 

 

 

Six months

Six months

Year

 

Ended

ended

Ended

 

30 June

30 June

31 December

 

2018

2017

2017

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Profit on continuing activities before taxation

863

714

1,726

Gain on biological assets

(24)

(49)

(66)

Amortisation of intangible assets

141

-

6

Foreign exchange gain

-

-

63

Loss on discontinued activities

(289)

(75)

(292)

Deferred Consideration

-

-

100

Finance expenses

87

125

214

Finance income

-

(10)

(11)

Depreciation - property, plant and equipment

400

360

709

 

1,178

1,066

2,449

Changes in working capital:

 

 

 

Decrease /(increase) in inventories

229

(22)

(226)

Decrease/(increase) in trade and other receivables

732

(649)

(854)

Increase/(decrease) in current liabilities held for sale

45

(1)

11

(Decrease)/increase in payables

(981)

983

1,598

Cash generated from operations

1,203

1,377

2,978

 

 

 

 

Interest paid

(87)

(113)

(201)

Interest received

-

-

1

Taxation paid

-

-

(251)

Net cash from operating activities

1,116

1,264

2,527

Investing activities

 

 

 

Investment in intangible assets

(54)

(82)

(82)

Purchase of biological assets

-

(29)

(19)

Purchase of property, plant and equipment

(687)

(1,175)

(1,816)

Net cash used in investing activities

(741)

(1,286)

(1,917)

Financing activities

 

 

 

Dividends paid to shareholders

-

-

(381)

Deferred consideration payments

(29)

(133)

(372)

Share issue proceeds

64

-

-

Invoice finance (payments)/receipts

(325)

(74)

487

Overdraft receipts

-

-

(94)

Finance lease capital repayments

(81)

(118)

(189)

Finance lease advance

-

-

24

Term loan advance

-

-

266

Term loan repayments

(395)

(418)

(837)

Net cash used in financing activities

(766)

(743)

(1,096)

 

 

 

 

Net decrease in cash and cash equivalents

(391)

(765)

(486)

 

 

 

 

Cash and cash equivalents, at beginning of period

1,558

2,044

2,044

Cash and cash equivalents end of period

1,167

1,279

1,558

 

Note: The accounting policies applied throughout the period are consistent with those applied for the year ended 31 December 2017, as set out in the 2017 Annual Report.

 

Enquiries:

Norish

 

Aidan Hughes, Finance Director

Telephone: + 44 1293 862 498

 

 

 

Davy

 

Anthony Farrell

Telephone: + 353 1 679 6363

 


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