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Norish Plc (NSH)

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Friday 20 September, 2019

Norish Plc

Half-year Report

RNS Number : 0337N
Norish PLC
20 September 2019
 

 

Norish plc

Interim results 2019

Results

 

Norish plc (AIM: NSH), is pleased to announce its interim results for the six months ended 30 June 2019.

 

Financial Highlights

·    Operating profit ahead by 37%, from £1.0m to £1.4m.

·    Profit before tax ahead by 43%, from £0.9m to £1.3m

·    Fully diluted adjusted EPS ahead by 41%, year on year, from 2.2p to 3.1p

·    Net debt after IFRS 16 adjustments reduced from Stg £10.1m at Dec-18 to Stg £9.6m at Jun-19. (Pre-IFRS 16 it reduced from £4.9m to £4.7m).

 

Divisional Highlights

 

 

£'m

Cold Store

Sourcing

Dairy


Jun-19

Jun-18

% Growth

Jun-19

Jun-18

% Growth

Jun-19

Jun-18

% Growth

Revenue

7.3

6.7

10.4%

9.8

11.6

(15.5%)

0.4

0.2

100%

Operating Profit

1.6

1.3

23%

0.2

0.3

(33.3%)

(0.1)

(0.2)

50%

Operating Margin

21.6%

17.9%


2.0%

2.6%


(25%)

(100%)


 

 

Cold Store division

 

Cold Stores are our largest business activity, accounting for circa 75% of the non-current assets in the business. Sales in cold stores increased by 9% or £0.6m, from £6.7m to £7.3m. This growth in revenue, combined with tight cost control, saw divisional profits grow by 23% or £0.3m.

 

The drivers of the growth in revenue, which was predominantly North West based, comprised a 13% increase in pallets handled, a 13% increase in blast frozen throughput, an improved stock turn (from 7.0 weeks to 6.6 weeks) and a slightly higher occupancy level. Occupancy increased from 93% in the first half of 2018, to 95% in the first half of 2019.

 

Labour and energy, our two largest costs were up 2%, year on year. Power units consumed were lower by 2%, a creditable performance in the context of 13% growth in blast freezing volumes.

Operating margins expanded from 17.9% to 21.6%, year on year.

 

Sourcing Division

 

Sales at our sourcing division declined by 15.5% in the first half of 2019, compared with the same period in 2018, from £11.4m to £9.8m. Operating profit declined by a corresponding 33.3%, year on year, from £0.3m to £0.2m, reflecting trading uncertainty and currency fluctuations arising from the ongoing Brexit process.

 

 

Dairy Division

 

In our dairy business, we continue to make progress.

 

At Cantwellscourt Farm, milk production was 68% ahead year on year, reflecting a very good grass growing period, improved management, increased stock numbers and a maturing herd. Our partnership with Captal Farms has resulted in a more robust operating model with sourcing economies, benchmarking with other Captal Farms across key KPIs and support from a highly skilled operations team.   

 

Our subsidiary, Grass to Milk Company, is developing an A2-protein milk supply and combining this with novel dairy processing IP, to develop an early-life stage milk-based beverage targeting high-value export markets. Grass to Milk Company is targeting commercial production in the second half of 2020.

 

Discontinued

 

During the period the group decided to exit the Juice business for the ready to drinks market. A loss of £Nil was incurred, compared to £0.3m last year.

 

Outlook

 

Our cold store business continues to focus on improved revenue generation (in particular sales mix) by working collaboratively with customers, in the context of the resources available to the business. We continue to pursue initiatives to offset underlying cost growth pressures. In a general sense, the Temperature Controlled market appears to be operating close to capacity, as we head into the important final months of the year.

 

We expect to make further progress in our cold store business over the remainder of the year and beyond.

 

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

 

With respect to the dairy division, it has been a very good year for grass production and this together with renewed focus on cost control should see the farm generate a much-improved result.

 

Next year should see an opportunity to further increase stock numbers and transition to an A2 protein dairy herd. We expect Grass to Milk Company to achieve commercial sales in the second half of 2020; a major milestone in the development of this niche, value-add dairy business.

 

Dividend

 

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

 

The final dividend of 1.80 €cent per share announced earlier in the year will be paid on 18 October 2019 to those shareholders on the register on the 27 September 2019.

 

 

 

Norish plc





Consolidated income statement





For the six months ended 30 June 2019












Six months

Six months

Year



ended

ended

ended



30 June

30 June

31 December



2019

2018

2018



(Unaudited)

(Restated)

(Restated)








£'000

£'000

£'000






Continuing operations





Revenue


17,512

18,454

36,802

Cost of sales


(15,775)

(17,054)

(33,658)

Gross profit


1,737

1,400

3,144






Other income


70

24

43

Administrative expenses


(381)

(383)

(851)

 

Operating profit from continuing operations


1,426

1,041

2,336






Finance income - interest receivable


-

-

3

Finance expenses - interest paid


(167)

(163)

(363)






Profit on continuing activities before taxation


1,259

878

1,976






Income taxes - Corporation tax


(311)

(216)

(393)

Income taxes - Deferred tax


-

-

(46)






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


948

662

1,537






Loss from discontinued activities


(16)

(289)

(379)






Profit for the period


932

373

1,158






Other comprehensive income


-

-

-






Total comprehensive income for the year


932

373

1,158

 

Profit for the period attributable to owners of parent


932

373

1,158

Loss for the financial year attributable to non-controlling interest


-

-

-

Earnings per share expressed in pence per share:





From continuing operations

- basic


3.1p

2.2p

5.1p

- diluted


3.1p

2.2p

5.1p

From discontinued operations

- basic


0p

(1.0)p

(1.3)p

- diluted


0p

(1.0)p

(1.3)p

 

 










Norish plc




 

Interim balance sheet




 

As at 30 June 2019




 


As at

As at

As at

 


30 June

30 June

31 December

 


2019

2018

2018

 


(Unaudited)

(Restated)

(Restated)

 





 


£'000

£'000

£'000

 

ASSETS




 

Non-current assets




 

Goodwill

2,338

2,338

2,338

 

Intangible assets

332

54

166

 

Biological assets

674

658

639

 

Property, plant and equipment

22,644

21,559

22,871

 


25,988

24,609

26,014

 

Current assets




 

Trade and other receivables

6,230

6,721

6,250

 

Inventories

993

480

624

 

Cash and cash equivalents

973

1,167

1,543

 

Assets of disposal group classified as held for sale

284

363

324

 


8,480

8,731

8,741

 





 

TOTAL ASSETS

34,468

33,340

34,755

 





 

Equity attributable to equity holders of the parent

And non-controlling interest




 

Share capital

5,640

5,640

5,640

 

Share premium account

7,321

7,321

7,321

 

Other reserves

103

103

103

 

Treasury shares

(563)

(563)

(563)

 

Retained earnings

4,682

3,374

3,719

 

TOTAL EQUITY

17,183

15,875

16,220

 

 

Non-current liabilities




 

Borrowings

6,119

5,673

6,222

 

Deferred tax

999

953

999

 


7,118

6,626

7,221

 





 

Current liabilities




 

Trade and other payables

4,993

5,699

5,446

 

Current tax liabilities

747

583

390

 

Borrowings

4,427

4,494

5,433

 

Liabilities of disposal group classified as held for sale

-

63

15

 


10,167

10,839

11,284

 





 

TOTAL EQUITY AND LIABILITIES

34,468

33,340

34,755

 





 

 

 

 




 

Norish plc

Consolidated statement of changes in equity

For the six months ended 30 June 2019









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 2018

5,616

7,281

103

(563)

3,516

15,953

-

15,953

 










 

Transition impact of IFRS 16





(512)

(512)


(512)

 

At 1 January 2018 Restated

5,616

7,281

103

(563)

3,004

15,441


15,441

 

Net profit for the financial period

-

-

-


373

373

 

-

 

373

 

Total comprehensive income for the period

-

-

-

-

373

373

-

373

 

Issue of share capital

24

40

-

-

-

64

-

64

 

Equity dividends paid (recognised directly in equity)

-

-

-

-

-

-

-

-

 

Treasury shares acquired

-

-

-

-

-

-

-

-

 

Transactions with owners

24

40

-

-

373

437

-

437

 

At 30 June 2018

5,640

7,321

103

(563)

3,377

15,878

-

15,878

 










 

Net profit/(loss) for the financial period

-

-

-


785

785

-

785

 

Total comprehensive income for the period

-

-

-


785

785

-

785

 

Issue of share capital

-

-

-


-

-

-

-

 

Equity dividends paid (recognised directly in equity)

-

-

-


(413)

(413)

-

(413)

 

Foreign Exchange gain

-

-

-

-

-

-

-

-

 

Transactions with owners

-

-

-

-

372

372

-

372

 

At 31 December 2018

5,640

7,321

103

 

(563)

3,749

16,250

-

16,250

 

 

Net profit for the financial period

-

-

-


932

932

-

932

Total comprehensive income for the period

-

-

-


932

932

-

932

Issue of share capital

-

-

-


-

-

-

-

Equity dividends paid (recognised directly in equity)

-

-

-


-

-

-

-

Foreign Exchange gain

-

-

-

-

-

-

-

-

Transactions with owners

-

-

-

-

932

932

-

932

At 30 June 2019

5,640

7,321

103

 

(563)

4,682

17,183

-

17,183

 

 

 

 

 

 

 

 

Norish plc



 

 

Consolidated cash flow statement




For the six months ended 30 June 2019





Six months

Six months

Year


Ended

ended

Ended


30 June

30 June

31 December


2019

2018

2018


(Unaudited)

(Restated)

(Restated)


£'000

£'000

£'000

Profit on continuing activities before taxation

1,259

878

1,976

Gain on biological assets

(70)

(24)

(43)

Amortisation of intangible assets

-

141

141

Foreign exchange gain

-

-

(23)

Loss on discontinued activities

(16)

(289)

(379)

Finance expenses

167

163

363

Finance income

-

-

(3)

Depreciation - property, plant and equipment

826

652

1,427


2,166

1,521

3,459

Changes in working capital:




Decrease /(increase) in inventories

(369)

229

85

Decrease in trade and other receivables

20

732

1,287

Increase/(decrease) in trade and other receivables for disposal

40

-

(45)

Increase/(decrease) in current liabilities held for sale

(15)

45

(3)

(Decrease)/increase in payables

(453)

(981)

(1,234)

Cash generated from operations

1,389

1,546

3,549





Interest paid

(167)

(163)

(363)

Interest received

-

-

3

Taxation refund/(paid)

46

-

(370)

Net cash from operating activities

1,268

1,383

2,819

Investing activities




Investment in intangible assets

(166)

(54)

(166)

Purchase of biological assets

(4)

-

(35)

Sale of biological assets

39


68

Purchase of property, plant and equipment

(599)

(687)

(2,756)

Net cash used in investing activities

(730)

(741)

(2,889)

Financing activities




Dividends paid to shareholders

-

-

(413)

Deferred consideration payments

-

(29)

(29)

Share issue proceeds

-

64

64

Invoice finance (payments)/receipts

(799)

(325)

551

Overdraft receipts

-

-

(210)

Finance lease capital repayments

(514)

(348)

(868)

Finance lease advance

51

-

1,669

Term loan advance

314

-

2,200

Term loan repayments

(160)

(395)

(2,909)

Net cash used in financing activities

(1,108)

(1,033)

(55)





Net decrease in cash and cash equivalents

(570)

(391)

(15)

Cash and cash equivalents, at beginning of period

1,543

1,558

1,558

Cash and cash equivalents end of period

973

1,167

1,543

 

Note: The accounting policies applied throughout the period are consistent with those applied for the year ended 31 December 2018, as set out in the 2018 Annual Report.

 

 

Transition to IFRS 16 Leases

 

The accounting policies adopted in the preparation of the interim statement for the six-month period ending 30 June 2019 are consistent with those adopted in the annual report for the year ended 31 December 2018 with the exception of transition to IFRS 16 Leases.

 

IFRS 16 has been endorsed by the EU and is effective from 1 January 2019. For lessees, the standard removes the distinction between finance leases (on balance sheet) and operating leases (off balance sheet) and introduces a single lessee accounting model where almost all leases are recognised on balance sheet as both assets and liabilities.

 

The Group has applied the standard using the full retrospective approach. Accordingly, the 2018 financial information included in these interim financial statements has been restated for the effects of transition to IFRS 16. A cumulative transitional adjustment has been recorded on 1 January 2018, the date of initial application. The Group only applies IFRS 16 to leases which were previously identified as leases under IAS 17 and IFRIC 4 in accordance with the practical expedient allowed under IFRS 16.

 

The Group's loan covenants are on a 'frozen-GAAP' basis and, accordingly, the transition to IFRS 16 has had no impact.

 

Impact of Consolidated Statement of Comprehensive Income

 

For the six-month period ended 30 June 2018, cost of sales reduced by a net £91,000 and finance expense increased by a net £76,000 resulting in an overall £15,000 increase in the profit for the period. Cost of sales reduced as the expense (fixed fees only) relating to operating leases has been replaced by a lesser amount of depreciation expense relating to the right to use asset resulting in a net reduction in cost of sales in the period.

 

For the six-month period ended 30 June 2018, finance expense increased as a result of the recognition of interest on the additional lease liabilities recognised under IFRS16's single lessee accounting model.

 

Overall, a net gain arose in the six-month period ended 30 June 2018 as the reduction in cost of sales exceeded the increase in finance expense as a result of the differing pattern of recognition between depreciation expense and finance expense.

 

Impact on Consolidated Statement of Financial Position

 

At 30 June 2018, the right to use asset recognised under IFRS's single lessee accounting model increased property, plant and equipment by £3,513,000 (31 December 2018: £4,746,000, 1 January 2018: £3,766,000).

 

At 30 June 2018, the additional lease liability recognised under IFRS's single lessee accounting model increased borrowings by £4,013,000 (31 December 2018: £5,221,000, 1 January 2018: £4,280,000).

 

At 30 June 2018, the combined adjustments to both property, plant and equipment and borrowings resulted in a reduction in equity of £500,000 (31 December 2018: £475,000, 1 January 2018: £512,000).

 

Impact on Consolidated Statement of Cash Flows

 

For the six-month period ended 30 June 2018 cash flow generated by operating activities increased by £186,000 and cash flow used in financing activities increased by a similar amount as a result of payments in relation to previously recognised operating leases being classified as finance expenses as opposed to lease expenses.

 

The amounts stated above are subject to audit and, as a result, may be subject to change.

 

 

 

 

Enquiries:

Norish


Aidan Hughes, Finance Director

Telephone: + 44 1293 862 498



 

Davy


Anthony Farrell

Telephone: + 353 1 679 6363

 


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