TIDMNSH
RNS Number : 0240S
Norish PLC
12 March 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Chairman's Statement
Norish plc (AIM: NSH), is pleased to announce its results for
the year ended 31 December 2020.
Notwithstanding Covid 19 and Brexit associated disruption, our
business performed very well in the period under review.
-- The cold store division saw an EBITDA decline of only 2%,
despite greatly reduced pallet intakes and slower stock turn.
-- Our dairy division continues to execute to plan,
commercialising A2 protein milk products from our own unique milk
source.
-- The protein sourcing business continued to be profitable in the period under review.
-- Balance sheet further improved, with net debt reduced.
-- Strategic review of Cold Store Assets initiated.
Group Financial Highlights
-- Group revenue reduced by 2% to GBP33.4m (2019: GBP34.1m)
-- Profit before tax reduced by 14% to GBP1.98m (2019: GBP2.31m)
-- Diluted adjusted Eps decreased by 21% to 5.02p (2019: 6.33p)
-- Effective tax rates increased to 23.7% (2019: 17.8%)
-- Operating margins decreased by 90 bps to 6.9% (2019: 7.8%)
-- Dividend proposed at 2.0 EURcent per share (2019: proposed
not paid of 1.90 EURcent per share)
-- Net debt was reduced from StgGBP9.7m at start of year to StgGBP8.7m at year end.
-- Interest cover was 7.3 times (2019: 7.7 times)
Diluted adjusted EPS is calculated using profit for the
financial year from continuing operations as the measure of
earnings. Financial information above, including comparative
information, is from continuing operations only.
Divisional Highlights
GBP'm Cold Stores Sourcing Dairy
2020 2019 % Growth 2020 2019 % Growth 2020 2019 % Growth
------ ------ --------- ----- ----- --------- ------ ------ ---------
Revenue 14.6 15.1 (3.3%) 17.8 18.2 (2.2%) 1.0 0.9 11%
------ ------ --------- ----- ----- --------- ------ ------ ---------
EBITDA 4.6 4.7 (2.1%) 0.3 0.4 (25%) 0.0 0.0 0%
------ ------ --------- ----- ----- --------- ------ ------ ---------
Operating
Profit 3.0 3.3 (9.1%) 0.3 0.4 (25%) (0.1) (0.1) 0%
------ ------ --------- ----- ----- --------- ------ ------ ---------
Operating
Margin 20.5% 21.9% 1.8% 2.2% (10%) (11%)
------ ------ --------- ----- ----- --------- ------ ------ ---------
Cold Store division
Cold stores, which comprise our largest business activity, saw a
modest 3.3% reduction in sales (from StgGBP15.1m to StgGBP14.6m), a
very creditable performance in a year which saw some of our end
user markets, both Chinese and domestic, closed for a number of
months because of the Covid 19 Pandemic.
Chairman's Statement (Continued)
Pallets receipted, the lifeblood of our business, were down 19%,
year on year, while blast freezing volumes were down 8%, year on
year. Average stock turn dis-improved from 6.6
weeks in 2019 to 7.5 weeks in 2020. Average month end occupancy
for 2020 was 87%. This compares with average occupancy of 95% in
2019.
Against that context, divisional profits came in at a robust
StgGBP3m, a 9.1% decline on the Stg GBP3.3m in the prior year.
Divisional margins stood at 20.5% in 2020, 140 basis points below
the 21.9% margin outturn for 2019.
The year was characterised by a good if brief start, a decline
through to June, with markets bottoming out in July and August
before strongly recovering since then. The overall result reflects
prompt and significant cost control, together with continued
pricing initiatives in place around sales mix and tiered
pricing.
Sourcing Division
Sales at our sourcing division declined by 2.2% in 2020,
compared with the same period in 2019, from GBP18.2m to GBP17.8m.
Operating profit declined by a corresponding 25%, from GBP0.4m to
GBP0.3m, reflecting the trading impact of COVID-19.
The Group's original investment in the main Sourcing subsidiary,
Townview Foods Ltd, has been fully recouped and the structures are
in place to continue development of this business.
Dairy Division
Our subsidiary, Grass to Milk Company Ltd, completed a key
milestone in its development; delivering its first shipment of A2
protein product to China, in the final quarter of 2020.
Cantwellscourt Farm Ltd's operating performance in 2020 was
consistent with our expectations. Our herd, now fully converted to
producing A2 milk, generated revenue 11% ahead year on year. This
was driven by better production output per cow and reflective
increase in milk market pricing.
Our farming enterprise continues to improve across key operating
KPI's. Cantwellscourt Farm Ltd is providing A2 protein milk supply
to Grass to Milk Ltd in the first instance.
Chairman's Statement (Continued)
Discontinued
During 2020, the group decided to discontinue ambient
warehousing in Ireland. A loss in the current year of GBP0.07m was
incurred, compared with GBP0.06m last year.
Outlook
I am pleased to report that the improvement in the cold store
division in the later months of 2020, has continued through January
and February and into March of 2021.
Our product sourcing division has been impacted by Covid 19 and
Brexit in January & February 2021. We expect to see this to
recover in the second quarter of 2021. We have identified an
opportunity to develop a protein export business to South Africa,
and we expect to see growth in this area during 2021 .
We are happy with the progress made with the development of our
A2 protein milk supply via Cantwellscourt Farm Ltd. Grass to Milk
Company Ltd has launched its first A2 protein, using our own unique
milk source. We plan to ramp up production in 2021 in conjunction
with our commercial partners in the Chinese market. We will
continue to execute on our strategy; continuing to develop dairy
products with functional nutrition benefits, derived from our
unique A2 protein grass-fed milk source.
Strategic Review
Over the course of the year, Norish received a number of
expressions of interest, from third parties, for some or all of its
cold stores. As a result, the board of Norish are now carrying out
a strategic review in respect of all of the assets and businesses
within this division.
The strategic review is at an early stage and the outcome cannot
be determined at this time.
Dividend
The board recommends the payment of a final dividend of 2.0
EURcent per share. This will be paid on 15 October 2021 to those
shareholders on the register on the 24 September 2021. It will
bring the total dividend in respect of the financial year to 2.0
EURcent per share, against Nil EURcent per share last year.
On behalf of the board, I would like to thank the management
team and staff for their commitment and contribution in 2020.
Ted O'Neill
11 March 2021
Financial Review
The average cold store occupancy decreased from 95% to 87%,
pallets received decreased 19% and blast freezing throughput
decreased 8%.
Sales
Total Group revenue decreased by 2% to GBP33.4m (2019:
GBP34.1m). Cold store revenues decreased by 3.3% to GBP14.6m (2019:
GBP15.1m). Revenues were mainly down on the lower pallets received
and lower blast freezing volumes. Revenues in the sourcing division
decreased by 2.2% to GBP17.8m (2019: GBP18.2m).
Gross profit
Gross profit decreased by 12% to GBP2.97m (2019: GBP3.37m).
Operating profit
Operating profit decreased by 14% to GBP2.29m (2019:
GBP2.66m).
Finance expense (net )
Finance expense decreased to GBP0.31m (2019: GBP0.35m).
Loss from discontinued operations
During 2020, the group decided to discontinue the ambient
warehousing in Ireland following on from the group exit in 2018 in
the Juice business for the ready to drink market. A loss in the
current year of GBP0.07m was incurred, compared to GBP0.06m last
year.
Earnings per share
The basic adjusted earnings per share decreased by 21% to 5.02p
(2019: 6.33p).
Capital
During the period we invested GBP2.2m (2019: GBP2.3m) in
investing activities. GBP1.74m was invested in plant and equipment
of which GBP0.36m was invested in Blast Freezers at the Wrexham
store and GBP1.24m in other capital expenditure for the cold store
division. GBP0.14m was invested in dairy division. We also invested
GBP0.7m in respect of the commercialisation of our A2 protein milk
business. We sold and purchased Biological assets which netted
GBP0.2m in surplus cash.
Cash Position
Net debt decreased to GBP8.7m (2019: GBP9.7m). Cash generated
from operations amounted to GBP3.2m (2019: GBP3.5m) and financing
activities absorbed GBP0.5m (2019: GBP1.8m). Investment in assets
was made of GBP2.2m (2019: GBP2.3m).
Financial Review (Continued)
Dividend
The board recommends the payment of a final dividend of 2.0
EURcent per share. This will be paid on 15 October 2021 to those
shareholders on the register on the 24 September 2021. It will
bring the total dividend in respect of the financial year to 2.0
EURcent per share, against Nil EURcent per share last year.
Treasury policy and management
The treasury function, which is managed centrally, handles all
Group funding, debt, cash, working capital and foreign exchange
exposures. Group treasury policy concentrates on the minimisation
of risk in all of the above
areas and is overseen and approved by the Board. Speculative positions are not taken.
Financial risk management
The Group's financial instruments comprise borrowings, cash, and
various items, such as trade receivables, trade payables etc., that
arise directly from its operations. The main purposes of the
financial instruments not arising directly from operations is to
raise finance for the Group's operations.
The Group may enter into derivative transactions such as
interest rate swaps, caps or forward foreign currency transactions
in order to minimise its risks. The purpose of such transactions is
to manage the interest rate and currency risks arising from the
Group's operations and its sources of finance.
The main risks arising from the Group's financial instruments
are interest rate risk, liquidity risk, credit risk and foreign
exchange risk. The Group's policies for managing each of these
risks are summarised below.
Interest rate risk
The Group finances its operations through a mixture of retained
profits, bank and other borrowings at both fixed and floating rates
of interest and working capital. The Group determines the level of
borrowings at fixed rates of interest having regard to current
market rates and future trends. At the year-end there are GBP1.7m
term loans of which GBP1.32m are at floating base rate plus a bank
margin of 1.85% and GBP0.18m are at a floating rate of 3.75% and
GBP0.2m are at Euribor plus a bank margin of 1.85%.
Liquidity risk
The Group's policy is that, in order to ensure continuity of
funding, a significant portion of its borrowings should mature in
more than one year. At the year-end, 76% of the Group's term loan
borrowings were due to mature in more than one year. The Group
achieves short-term flexibility by means of invoice finance and
overdraft.
Financial Review (Continued)
Credit risk
The Group's policy is to minimise exposure to credit risk by
performing the appropriate customer due diligence and monitoring
the exposure to credit risk. Furthermore, for much of the Group's
trading activities the Group has physical custody over customer's
inventory.
Foreign exchange risk
The Group's policy is to manage foreign exchange risk which
arises principally in the product sourcing division. The Group does
this by mainly purchasing euros at a fixed rate forward and using
this rate in establishing a selling price for its goods in order to
maintain an acceptable margin.
Aidan Hughes
Finance Director
Consolidated STATEMENT OF COMPREHENSIVE INCOME
for the financial year ended 31 December 2020
2020 2019
GBP'000 GBP'000
Continuing operations
Revenue 33,361 34,100
Cost of sales (30,389) (30,733)
Gross profit 2,972 3,367
------------ --------
Other income 182 107
Administrative expenses (865) (811)
Operating profit from continuing
operations 2,289 2,663
------------ --------
Finance income - interest receivable 1 1
Finance expenses - lease interest (196) (229)
Finance expenses - interest on bank
loans (117) (120)
Profit on continuing activities before
taxation 1,977 2,315
------------ --------
Income taxes - Corporation tax (224) (247)
Income taxes - Deferred tax (245) (165)
Profit for the financial year from
continuing operations 1,508 1,903
Loss for the financial year from
discontinued operations (71) (62)
Profit for the financial year attributable
to
owners of the parent 1,437 1,841
Other comprehensive income 162 -
------------ --------
Total comprehensive income for the
financial year attributable to owners
of the parent 1,599 1,841
============ ========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
---------------------------------------------------------------
for the financial year ended 31 December 2020(continued)
2020 2019
Earnings per share expressed in pence
per share:
From continuing operations
- basic 5.02p 6.33p
- diluted 5.02p 6.33p
From discontinued operations
- basic (0.24)p (0.21)p
- diluted (0.24)p (0.21)p
Consolidated Statement of financial position
at 31 December 2020
2020 2019
GBP'000 GBP'000
Non current assets
Goodwill 2,338 2,338
Intangible assets 1,269 564
Property, plant and equipment 22,898 22,777
Biological assets 770 824
27,275 26,503
------- -------
Current assets
Trade and other receivables 7,526 6,857
Inventories 58 1,105
Cash and cash equivalents 1,550 1,054
Assets of disposal group classified
as held for sale 381 277
9,515 9,293
------- -------
TOTAL ASSETS 36,790 35,796
------- -------
Equity attributable to owners of the
parent
Share capital 5,640 5,640
Share premium account 7,321 7,321
Other reserves 141 (21)
Retained earnings 5,750 4,313
------- -------
TOTAL EQUITY 18,852 17,253
------- -------
Non-current liabilities
Borrowings 5,514 5,935
Deferred tax 1,244 1,002
6,758 6,937
------- -------
Current liabilities
Trade and other payables 6,288 6,564
Current tax liabilities 151 231
Borrowings 4,741 4,811
11,180 11,606
------- -------
TOTAL EQUITY AND LIABILITIES 36,790 35,796
------- -------
Consolidated Statement of Changes in Equity
For the financial year ended 31 December 2020
Share Share Other Treasury Retained
capital premium Reserves shares Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 5,640 7,321 103 (563) 3,484 15,985
------- ------- -------- -------- -------- -------
Profit for the financial
year - - - - 1,841 1,841
------- ------- -------- -------- -------- -------
Total comprehensive
income for the financial
year - - - - 1,841 1,841
Transfer of treasury
shares - - - 563 (563) -
Equity dividends paid - - - - (449) (449)
Foreign exchange gain - - (124) - - (124)
Transactions with owners - - (124) 563 (1,012) (573)
At 31 December 2019 5,640 7,321 (21) - 4,313 17,253
------- ------- -------- -------- -------- -------
Profit for the financial
year - - - - 1,437 1,437
Foreign exchange gain - - 162 - - 162
------- ------- -------- -------- -------- -------
Total comprehensive
income for the financial
year - - 162 - 1,437 1,599
Equity dividends paid - - - - - -
Transactions with owners - - 162 - 1,437 1,599
At 31 December 2020 5,640 7,321 141 - 5,750 18,852
======= ======= ======== ======== ======== =======
Consolidated Cash Flow Statement
for the financial year ended 31 December
2020 2020 2019
GBP'000 GBP'000
Cash flow from operating activities
Profit on continuing activities before
taxation 1,977 2,315
Gain on biological assets (182) (107)
Foreign exchange (gain)/loss (55) 97
Loss on discontinued activities (71) (62)
Finance expenses 316 349
Finance income (1) (1)
Depreciation - property, plant and
equipment-net 1,789 1,649
Operating cash flows before changes
in working capital 3,773 4,240
Changes in working capital and provisions:
Decrease/(Increase) in inventories 1,047 (481)
Increase in trade and other receivables (669) (607)
(Increase)/decrease in current assets
held for sale (104) 47
Decrease in current liabilities held
for sale - (15)
(Decrease)/Increase in payables (276) 1,118
Net cash inflow from operations 3,771 4,302
Interest paid (316) (349)
Interest received 1 1
Taxation paid (304) (406)
------- -------
Net cash generated from operating activities 3,152 3,548
------- -------
Cash flow from investing activities
Investment in intangible assets (705) (419)
Purchase of property, plant and equipment (1,741) (1,734)
Sale of biological assets 346 209
Purchase of biological assets (65) (324)
------- -------
Net cash used in investing activities (2,165) (2,268)
------- -------
Cash flows from financing activities
Dividends paid to shareholders - (449)
Invoice finance payments (150) (502)
Lease liability capital repayments (845) (979)
Term loan advance - 300
Lease liability advances 882 271
Term loan repayments (378) (410)
------- -------
Net cash outflow from financing activities (491) (1,769)
------- -------
Net increase/(decrease) in cash and
cash equivalents 496 (489)
------- -------
Cash and cash equivalents beginning
of the financial year 1,054 1,543
Cash and cash equivalents end of the
financial year 1,550 1,054
------- -------
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