Final Results

NWF GROUP PLC 5 August 1999 NWF Group plc (Diversified Industrials) PRELIMINARY RESULTS FOR THE YEAR TO 31 MAY 1999 CHAIRMAN'S STATEMENT Financial Highlights: Improved performances from all four businesses Turnover increase of 15% from £86m to £99m Pre-exceptional pre-tax profits up 38% from £2.2m to £3.0m Pre-exceptional e.p.s. up 33% from 19.9p to 26.5p Dividends per share increased 14% from 8.3p to 9.5p Group in strong position for further growth The Group continues to improve its performance in each of its operations and I am pleased to report record pre-exceptional pre-tax profits of £3,027,000 (£2,189,000 in 1998) for the year to 31 May 1999. Sales grew to £99m from 86m last year. Trading results All four businesses contributed to the performance increase over the previous year. In Agriculture, feed volumes again reached record levels with a large number of new customers and we have once again expanded our manufacturing capacity. Distribution had a busy year with the Boughey grocery distribution business showing good results. Fuels, continuing the pattern of recent years, showed a further expansion in volumes returning record profits once again. The Retail business consolidated the major garden centre acquired at the end of last year and brought the total of Country Stores to six by the addition of Melton Mowbray in November. Cash flows and funding The cash generated from operating activities was £792,000 above last year's level and the net cash outflow before financing was £2,115,000 lower with no acquisitions more than compensating for increased capital expenditure mainly on Agriculture production facilities, Retail expansion and commercial vehicles across the Group. Year-end gearing stands at 60% (65%) and interest cover, on a pre-exceptional basis, remains comfortable at 8.1 times (6.7 times). No new shares were issued during the year. Restructuring We have decided to close the R.N. Bolton Limited business which had been acquired in 1994. The Company was over-dependent on a small number of diverse clients and it has proved difficult to secure better premises in its locality for possible future development. We do not feel that we can justify applying further resources to this task. An exceptional charge of £1.4m is shown in the 1998/99 Profit & Loss Account. This consists of approximately £0.4m of actual closure costs plus £1.0m goodwill which was written off on acquisition in 1994/95 to reserves. In accordance with present accounting practice, as a result of this closure decision, this goodwill must now be written off through the P&L Account. Shareholders' Funds are not affected by this treatment of goodwill. I would like to express my thanks to those who have worked with the Bolton business during our period of ownership to try to build its future. Dividend At the Annual General Meeting, we shall be proposing a final dividend of 6.6p (5.5p) per share, bringing the total for the year to 9.5p per share (8.3p). This level of dividend would be covered 2.8 times (2.4 times) by pre-exceptional post-tax profit. Subject to shareholder approval, the final dividend will be paid on 1 November 1999 to shareholders on the register at 27 August 1999. Outlook for the current year The results for the Group have moved strongly towards a second-half bias so that first-half variances on the previous year have to be interpreted with caution as to their full-year implications. All four businesses have good growth prospects for 1999/2000. We would expect organic growth in each area with further market share gains utilising the new Agriculture capacity, new supermarket customers for Distribution, further geographical expansion from Fuels, especially around the new centres of Nottingham and Melton Mowbray, and finally, a continuing improvement in the performances of the Retail outlets. We shall furthermore remain active in the search for appropriate acquisitions. After a successful year in 1998/99, I am confident that the Group is in a strong position to continue to grow in the current year and I will be pleased to comment on progress at the Annual General Meeting. Employees Our numbers have reached the 500 mark although the total at any moment reflects the seasonality of each business. There has been a welcome influx of talent and enthusiasm to add to the skills which are seeing us through a tough time in our original agricultural market sector. My thanks go to all NWF employees and I wish the Managing Directors and their colleagues every possible success in this new year. I would also like to extend a welcome to all new customers who are experiencing the benefits of trading with NWF companies and to all shareholders who have joined us during 1998/99. J. Roy Willis Chairman 4 August 1999 CHIEF EXECUTIVE'S REVIEW The Group I am very pleased to report that each business performed well this year bringing trading profits to record levels. The shape of the Group has also improved further by discontinuing a Distribution activity which had no clear future and by adding a further Retail Country Store. As intended, the balance in operating profits between our activities has further approached parity. Group turnover rose from £86m to £99m reflecting higher activity all round. Operating margins on sales rose from 3.0% to 3.5% reflecting both individual performances and a changing mix towards higher margin business. Agriculture The ruminant feed market was some 7% firmer in 1998/99 following a less favourable summer in 1998 for the harvesting of forage. NWF's performance was once again exceptional, however, with volume gains in the year of the order of 33% showing that further market share had been won. The compound feed volume sold, at over 160,000 tonnes, was another all-time high which led to excellent unit manufacturing costs. Further boosted by good sales of other farm inputs, the Agriculture Division turned in operating profits of £851,000, an improvement of 58% on 1997/98. The continued success of this operation has justified the installation, already nearly completed, of a fourth production line in the feed mill at Wardle where the third line, commissioned only three years ago, is now being fully utilised. The separate blends plant has also proved to be a worthwhile development with sales more than double the previous year. Our field staff have worked hard throughout the year to help our farmer customers chart their best course forward through the difficulties of low milk prices and uncertain market circumstances. Distribution Within the Division, Boughey Distribution had a record year, contributing the major share of the total operating profits of £1,228,000 (£984,000 in 1998). Activity levels were high in warehousing, distribution and packing. The year saw continued investment in vehicles and IT systems to maintain the high levels of service enjoyed by our customers. The decision was taken, however, to close the R.N. Bolton Limited operation at Wigan. This business had been acquired in November 1994 and had always relied on a relatively small number of clients whose needs did not easily lend themselves to consolidated distribution. There has been serious effort expended in trying to develop the business base by acquiring suitable premises for multi-user activity but nothing has been identified which offered sufficiently attractive returns. Fuels Fuels had another exceptional year with operating profits at £874,000 compared to the record high of £800,000 in the previous year. The volume of product sold exceeded 150 million litres, having passed the 100 million litres mark only two years ago. All depots contributed to this result, including the first full years of J.W. Keep (Bristol) and Bassett Fuels (Wootton Bassett). In addition, starts were made with sales offices based in Nottingham and Melton Mowbray. Retail Against a background of severely reduced farmer spending and indifferent gardening weather in 1998/99, Retail has advanced from operating profits of £250,000 last time to £500,000. Most of the progress came from the first full year at Rivendell Nurseries & Garden Centre which increased sales and where the main objectives were to invest in bringing the business under NWF control, extending product ranges and attracting new customers. Progress has been made on all three objectives and we look forward to developing this business further in the next financial year and beyond. Extra plant growing capacity, extended sales areas and improved information technology are planned in 1999/2000. The Country Stores now number six with the opening of Melton Mowbray in November as planned. Together, the stores have successfully added non- farmer sales to their traditional base of agricultural products. Wrexham and Melton are new premises, performing ahead of plan, while Whitchurch and Market Drayton have been enlarged to good effect. Developments are in train for Wardle and the Isle of Man. Priorities for 1999/2000 We face the new year with confidence. Each of the four businesses has strong leadership, competent and motivated staff and a clear view of where its next steps lie. We believe that we can make further progress as a successful regional player in each of our markets, sharing our home site and corporate overheads, and thereby deliver further increasing shareholder value. In Agriculture, we will continue to win market share, as evidenced by our track record, by acquiring more customers to fill the new capacity in the feed mill. The Distribution business can now focus clearly on the exploitation of the excellent storage and customer service facilities at Wardle. Fuels will seek to develop its new territories as well as continuing to penetrate existing areas. The Retail business has the objective of continuing to realise the performance potential of its present sites. In addition to this organic improvement of the existing operations, we will be alert to the possibilities of smaller acquisitions or start-ups such as fuel depots or Country Stores. Beyond that, we will continue to investigate larger opportunities where we feel they would be in the shareholder's interest. Graham R. Scott Chief Executive 4 August 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MAY 1999 1999 1998 ----------------- --------------- £'000 £'000 £'000 £'000 TURNOVER 98,547 85,950 Cost of sales (89,610) (79,269) ----- ------ GROSS PROFIT 8,937 6,681 Administrative (5,484) (4,107) expenses ------- ------- OPERATING PROFIT 3,453 2,574 Exceptional item Provision for loss on business to be closed (414) Write off of (987) attributable goodwill -------- (1,401) - ------- ------- 2,052 2,574 Net interest payable (426) (385) ------- ------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,626 2,189 Taxation (853) (634) ------- ------- PROFIT AFTER TAXATION 773 1,555 Equity dividends (750) (657) ------- ------- RETAINED PROFIT TRANSFERRED TO RESERVES 23 898 ====== ====== Earnings per share Adjusted (excluding exceptional 26.5p 19.9p item) Basic (including exceptional 9.8p 19.9p item) Diluted (including exceptional 9.8p 19.9p item) There were no recognised gains and losses other than the profit for both years. CONSOLIDATED BALANCE SHEET - 31 MAY 1999 1999 1998 --------------- ------------------ £'000 £'000 £'000 £'000 FIXED ASSETS Tangible assets 14,562 14,183 Investments - 2 ------- -------- 14,562 14,185 CURRENT ASSETS Stocks 3,757 2,635 Debtors 13,184 12,395 Cash and bank 23 859 balances ------- -------- 16,964 15,889 CREDITORS - Amounts falling due within (16,500) (14,622) one year ------- -------- NET CURRENT ASSETS 464 1,267 ------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 15,026 15,452 CREDITORS - Amounts falling due after more than one year (3,800) (5,250) PROVISIONS FOR LIABILITIES AND CHARGES Pensions accrual (168) (183) Deferred taxation (539) (548) ------- -------- (707) (731) ------- -------- NET ASSETS 10,519 9,471 ====== ====== CAPITAL AND RESERVES EQUITY SHARE CAPITAL 1,975 1,975 RESERVES Share premium 520 520 Capital reserve 213 - Profit and loss 6,108 5,247 account Revaluation reserve 1,703 1,729 ------- -------- 8,544 7,496 ------- -------- SHAREHOLDERS' FUNDS 10,519 9,471 ====== ====== CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MAY 1999 1999 1998 --------------- --------------- £'000 £'000 £'000 £'000 NET CASH INFLOW FROM OPERATING ACTIVITIES 4,002 3,210 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid (411) (370) TAXATION Corporation tax paid (800) (665) ------- ------ 2,791 2,175 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible (2,288) (1,313) fixed assets Sale of tangible fixed 208 89 assets Disposal of trade 2 - investment ------ ------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (2,078) (1,224) ------- ------ 713 951 ACQUISITIONS AND DISPOSALS Acquisition of - (3,202) businesses Net cash acquired with - 700 businesses Deferred payment for businesses acquired in (188) (75) prior year ------ ------- NET CASH OUTFLOW FOR ACQUISITIONS AND (188) (2,577) DISPOSALS EQUITY DIVIDENDS PAID (664) (628) ------- ------ NET CASH OUTFLOW BEFORE FINANCING (139) (2,254) FINANCING Medium term loan (1,000) (1,000) repayment Medium term loan - 2,500 received Shares issued for cash consideration, including - 148 premium ------- ------ DECREASE IN CASH IN THE YEAR (1,139) (606) ====== ====== NOTES EXCEPTIONAL ITEM 1999 --------- £'000 The exceptional item comprises: Cessation of operation of the R N Bolton Limited business: Provision for loss on disposal of 237 fixed assets Severance costs 127 Other expenses 50 --------- 414 Write off of attributable goodwill 987 --------- 1,401 ====== TAXATION 1999 1998 ---------- ---------- £'000 £'000 UK Corporation tax at 31% 900 626 Deferred tax (11) (5) ---------- ---------- 889 621 Prior year - current tax (38) - - deferred tax 2 13 ---------- ---------- 853 634 ====== ====== The above figures include a corporation tax credit of £55,000 and a deferred tax credit of £26,000 in respect of the exceptional item. SEGMENTAL INFORMATION Turnover Operating Net operating profit assets --------- -------------- -------------- 1999 1998 1999 1998 1999 1998 ------ ------ ------ ------ ------ ------ Business £'000 £'000 £'000 £'000 £'000 £'000 Agriculture 26,735 24,017 851 540 5,769 5,696 Distribution10,841 10,221 1,228 984 7,593 7,954 Fuels 52,085 47,354 874 800 3,106 2,492 Retail 8,886 4,358 500 250 4,647 3,848 ------ ------ ------ ------ ------ ------ 98,547 85,950 3,453 2,574 21,115 19,990 ====== ====== ====== ====== ====== ====== EARNINGS PER SHARE The calculation of basic earnings per share is based on profit after tax for the financial year divided by 7,900,941 ordinary shares being the number of ordinary shares in issue. The calculation of earnings per share, excluding the exceptional item, is based on profit, before the exceptional, item of £3,027,000 less tax (adjusted for a tax credit of £81,000 on the exceptional item) of £934,000 giving an adjusted profit after taxation of £2,093,000 divided by 7,900,941 ordinary shares being the number of ordinary shares in issue. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 1999 1998 --------------- ---------------- £'000 £'000 £'000 £'000 Operating profit 3,453 2,574 Depreciation charge 1,621 1,427 Profit on sale of (157) (76) tangible fixed assets Increase in stocks (1,122) (240) Increase in debtors (789) (1,937) Increase in creditors 1,011 1,487 Decrease in pensions (15) (25) accrual ------- -------- (915) (715) ------ ------ Net cash inflow from operating activities 4,002 3,210 ====== ====== ANALYSIS OF NET DEBT Other At 31 non- At 31 May Cash cash May 1998 flow changes 1999 ------- -------- ------- -------- £'000 £'000 £'000 £'000 Cash and bank 859 (836) - 23 balances Overdrafts (2,995) (303) - (3,298) ------- -------- ------- -------- (2,136) (1,139) - (3,275) Debt due after one (3,000) - 500 (2,500) year Debt due within one (1,000) 1,000 (500) (500) year ------- -------- ------- -------- Total (6,136) (139) - (6,275) ====== ====== ====== ====== Annual Report to be published 6 September 1999 Annual General Meeting 30 September1999 Dividend: -to be paid 1 November 1999 -record date for shareholders 27 August 1999 Annual Report: This preliminary announcement does not form the Group's statutory accounts. The figures shown in this release have been extracted from the Group's full financial statements which, for the year ended 31 May 1998, have been delivered, and for the year ended 31 May 1999 will be delivered to the Registrar of Companies. Both carry an unqualified audit report. The financial statements for the year ended 31 May 1999 have been prepared in accordance with applicable accounting standards, using the same accounting policies as set out in the Annual Report for the year ended 31 May 1998. Copies of the Annual Report can be obtained from the Company's registered office: Wardle, Nantwich, Cheshire, CW5 6BP.

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