HILL STATION PLC (THE "COMPANY")
FINAL RESULTS
Hill Station plc, the Cwmbran ice cream manufacturer, is pleased to announce
its results for the year ended 31 October 2007.
Financial statistics in the year ended 31 October 2007
* Turnover of �9,133,406 (2006 - �13,870,604)
* Gross profit of �70,327 (2006 - �1,449,891)
* EBIT loss of �4,345,178 (2006 - �4,570,111)
* Loss before tax of �5,410,434 (2006 - �4,767,922)
* Net assets of �2,907,535 (2006 - �3,385,002)
Results
As a result of poor weather and loss of market share due to competitive
pressures and the steady elimination of low or negative margin sales, the Group
made a significant loss for the year of �5,410,434. This loss includes
significant non-recurring costs relating to a redemption premium on loan stock.
The year end loss was greater than expected at the interim stage due to
continuing raw material price rises poor summer weather and initial resistance
from customers to accept price increases.
Turnover decreased by 34 per cent. to �9,133,406.
Earnings per share in the year fell from a loss of 0.67 pence per share to 0.71
pence per share. No dividend is proposed.
Financing
The Group finances its activities through a mixture of equity, cash, bank
borrowings, creditor finance and loan stock.
During the year, �4,945,000 was raised from the issue of new equity and net
debt increased by �1,434,487. These funds helped to finance the acquisition of
the assets of The So Real Ice Company and also provided additional working
capital.
Net assets at the end of the year were �2,907,535, compared with �3,385,002 at
the end of 2006. The impact of the retained loss of �5.4 million on net assets
was offset by the �4.9 million of new equity raised.
Since the year end, in January 2008, the Company raised �912,500 of additional
loan stock to provide additional working capital.
On 2 April 2008, the Company announced that its bankers intended to cap the
amount of its invoice discount facility at �1.1 million notwithstanding an
increasing debtor ledger and that this would create a cash deficit going
forward requiring additional funding. We are now in advanced discussions with
shareholders and other potential invoice discount providers with a view to
obtaining alternative financing.
Cash flow and working capital
Our working capital management during the year has proved difficult reflecting
the challenging market conditions with net operating cash outflow of �3,452,008
(2006: �883,430 outflow). This resulted in a net debt position at 31 October
2007 of �4,477,101 (2006: �3,042,614, as restated).
Total stock was �1,282,520 (2006: �1,597,201).
Given our working capital requirements, focus on tight working capital
management has been and remains vital. The Company is making good progress in
improving cash collection from debtors.
Operational review
The financial results for the year ended 31 October 2007 reflect the continuing
difficult trading conditions due to the poor Summer weather which continued
into the Autumn, the ongoing struggle to improve margins by passing on very
significant raw material cost increases to customers, and managing the effects
on the business of the consequent cash drain that all this caused. In addition,
in the early part of the year, the integration delays with the move from
Cheadle to Cwmbran took their toll.
The acquisition of the assets and trade of So Real Ice was completed in late
August and integrated successfully by mid September thereby extending the
Group's portfolio of branded ice creams and customer base. In addition,
administrative costs have been reduced significantly compared to the previous
year reflecting management's review of all aspects of the Group to achieve cost
savings wherever possible.
Post balance sheet date events
Since the year end, �912,500 of loan stock has been issued and the board has
been significantly strengthened with the appointment of Cliff Carter as CEO,
Robert Alstead as Group Finance Director, John Dixon as Non Executive Director
and Martin Mallinson as operations director of Loseley Dairy Ice Cream Ltd.
The new board is making significant progress to achieve our various milestones.
Current trading and prospects
In November 2007, the new management team led by Cliff Carter the new CEO
implemented a recovery plan which shows the Company being EBITDA positive by
the end of the 2007/2008 trading year. The plan is dependent on continuing to
drive four key objectives. These are:
1. The gaining of substantial new business.
2. Recovery of raw material increases.
3. Improvement in factory efficiencies
4. Reduction in the business overheads
The Company has been successful at gaining new business and from the beginning
of April all of the identified new business objectives have been secured. This
new business has been secured with large retail and wholesale customers and
will add significantly to the companies' turnover this year.
In Summer 2007, the Company announced that it would require price increases
from its customer base to recover the large increases in raw material seen
during the previous twelve months. These increases have been implemented and
the Company is grateful for the support of their customer base for the speedy
response and implementation of these necessary increases.
The manufacturing process has been substantially improved with a major review
of planning and purchasing undertaken. All the key indicators are showing
substantial improvements with direct labour, waste levels, distribution costs
and energy consumption showing positive trends.
As a consequence of the price rises and the gains made in the manufacturing
process the gross profit has shown marked improvement.
A thorough review of the overhead spend has continued with the result that
overheads are significantly lower than last year. The Company fully expects to
make further reductions against forecast over the period of this financial
year.
The Board is pleased with the progress made and expects a satisfactory outcome
for the first half of the year.
I firmly believe that my next report will be altogether more pleasing to read.
On behalf of the Board
Peter C Salter
Director
Dated 30 April 2008
CONSOLIDATED PROFIT & LOSS ACCOUNT
FOR THE YEAR ENDED 31 OCTOBER 2007
Year ended 31 October 2007 Year
Before ended 31
acquisitions Acquisitions Total October 2006
� � � �
TURNOVER 8,793,619 339,787 9,133,406 13,870,604
Cost of sales (8,650,354) (412,725) (9,063,079) (12,420,713)
GROSS PROFIT 143,265 (72,938) 70,327 1,449,891
Selling and distribution (2,270,623) (3,279) (2,273,902) (2,397,691)
Administrative expenses (2,137,387) (4,216) (2,141,603) (3,122,311)
OPERATING LOSS (4,264,745) (80,433) (4,345,178) (4,070,111)
Exceptional items - - - (500,000)
OPERATING LOSS AFTER
EXCEPTIONAL ITEMS (4,264,745) (80,433) (4,345,178) (4,570,111)
Interest receivable - 5,779
Redemption premium (720,000) -
Interest payable (345,256) (203,590)
LOSS ON ORDINARY
ACTIVITIES BEFORE (5,410,434) (4,767,922)
TAXATION
TAX ON LOSS ON
ORDINARY ACTIVITIES - (374,502)
LOSS ON ORDINARY
ACTIVITIES AFTER (5,410,434) (5,142,424)
TAXATION
LOSS PER SHARE
Basic and diluted loss (0.71p) (0.67p)
per share
There were no recognised gains and losses for 2007 or 2006 other than those
included in the profit and loss account.
All the activities of the current period are classed as continuing.
CONSOLIDATED BALANCE SHEET
AS AT 31 OCTOBER 2007
(As restated)
31 October 2007 31 October 2006
� � � �
FIXED ASSETS
Intangible assets 4,978,359 4,592,952
Tangible assets 3,825,000 4,174,571
8,803,359 8,767,523
CURRENT ASSETS
Stocks 1,282,520 1,597,201
Debtors 2,251,243 2,551,180
Cash at bank 380,805 38,267
3,914,568 4,186,648
CREDITORS: amounts
falling
due within one year (5,278,650) (6,832,423)
NET CURRENT LIABILITIES (1,364,082) (2,645,775)
TOTAL ASSETS LESS
CURRENT LIABILITIES 7,439,277 6,121,748
CREDITORS: amounts
falling
due after more than one (4,531,742) (2,736,746)
year
NET ASSETS 2,907,535 3,385,002
CAPITAL AND RESERVES
Called up share capital 5,812,970 867,970
Share premium account 8,360,185 8,372,218
Other reserves 931,952 931,952
Profit and loss account (12,197,572) (6,787,138)
SHAREHOLDERS' FUNDS 2,907,535 3,385,002
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 OCTOBER 2007
Year Year
ended ended
31 October 31 October
2007 2006
� �
Net cash flow from operating activities (3,452,008) (883,430)
Returns on investments and servicing of (161,919) (197,807)
finance
Capital expenditure and financial investment (251,797) 142,159
Acquisitions and disposals (769,386) (6,372,118)
CASH OUTFLOW BEFORE FINANCING (4,635,110) (7,311,196)
Financing 5,030,506 7,130,038
INCREASE / (DECREASE) IN CASH IN THE YEAR 395,396 (181,158)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/DEBT
FOR THE YEAR ENDED 31 OCTOBER 2007
(As
restated)
Year Year
ended ended
31 October 31 October
2007 2006
� �
Increase/(Decrease) in cash in the period 395,396 (181,158)
Cash outflow from decrease in debt and lease 602,461 1,554,953
financing
New loans (2,240,000) (910,000)
CHANGE IN NET FUNDS/DEBT RESULTING FROM CASH (1,242,143) 463,795
FLOWS
New finance leases 7,656 (660,095)
Bank loans acquired with subsidiaries - (1,169,509)
Finance leases acquired with subsidiaries (200,000) (190,979)
MOVEMENT IN NET (DEBT)/FUNDS IN THE YEAR (1,434,487) (1,556,788)
Net (debt)/funds at 1 November (3,042,614) 12,946
NET DEBT AT 31 October (4,477,101) (1,543,842)
Invoice discounting facility - (1,498,772)
NET DEBT AT 31 October (as restated) (4,477,101) (3,042,614)
ACCOUNTING POLICIES
1.BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost
convention and in accordance with applicable United Kingdom accounting
standards.
Hill Station plc will adopt International Financial Reporting Standards
("IFRS") with effect from 1 November 2007, in accordance with the European
Union Regulations and the AIM Rules. The first financial information prepared
under IFRS will be for the six months to 30 April 2008.
2. GOING CONCERN
The Directors note that the Group has made losses in the current and previous
year. The Group's forecasts, which do not take account of the potential payment
resulting from the legal dispute, currently show a projected cash shortage, and
the Group's ability to continue as a going concern is dependent on its ability
to secure additional funding. Negotiations to secure this additional funding
are at an advanced stage and the financial statements have therefore been
prepared on the going concern basis.
3. BASIS OF CONSOLIDATION
The financial statements consolidate the accounts of Hill Station plc and all
of its subsidiary undertakings ('subsidiaries'). The acquisition method of
accounting has been adopted. Under this method the results of all the
subsidiary undertakings are included in the consolidated profit and loss
account from the date of acquisition or up to the date of disposal. Intra-Group
sales and profits are eliminated on consolidation and sales and profit figures
relate to external transactions only.
Under Section 230 of the Companies Act 1985 the Company is exempt from the
requirement to present its own profit and loss account.
4. TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided at rates calculated to write off the cost of fixed assets, less their
estimated residual value, over their expected useful lives on the following
bases:
Freehold buildings - 2% straight line
Freehold improvements - 10% straight line
Plant and machinery - 7-33% straight line
Motor vehicles - 25% straight line
Fixtures and fittings - 20-33% straight line
5. STOCKS
Stocks are valued at the lower of cost and net realisable value after making
due allowance for obsolete and slow-moving stocks. Cost includes all direct
costs and an appropriate proportion of fixed and variable overheads.
6. EARNINGS PER SHARE
The weighted average number of shares for the earnings per share calculation
was as follows:
Weighted
average
Number of number
Date Event shares in Days of shares
issue
31/10/2006 Opening balance 347,188,070 92 87,510,418
31/01/2007 Share issue 389,188,070 201 214,320,006
20/08/2007 Share issue 2,285,188,070 1 6,260,789
21/08/2007 Share issue 2,325,188,070 71 452,296,857
31/10/2007 Closing balance 2,325,188,070 - -
760,388,070
Information with regard to diluted losses per share has not been presented as
the losses are considered to be non-dilutive.
7. PRIOR YEAR ADJUSTMENT
A prior year adjustment has been made to correct the accounting of government
grants. SSAP 4 `Accounting for government grants' states that grants should be
recorded in accruals and deferred income and released to the profit and loss
account over the period of the useful economic life of the related assets. In
the previous year the grants were incorrectly included within provisions for
liabilities and charges. An amount of �1,590,508 has been transferred to
accruals and deferred income for the previous year via a prior year adjustment
in accordance with FRS 3 `Reporting financial performance' in order to correct
this. There is no effect on net assets or the loss for the current or prior
year.
In accordance with FRS 1 `Cash flow statements' the Group's invoice discounting
facility has been reclassified to form a part of net debt as at 31 October
2006.
8. The financial information in this statement does not constitute the
Company's statutory accounts for the year ended 31 October 2007 or 2006 (as
derived).
9. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company has been convened for 11.00 am on 17
June 2008 at Loseley Park, Llantarnam Park Way, Cwmbran, Gwent, NP44 3GA
10. REPORTS AND ACCOUNTS
Copies of the Reports and Accounts for the year ended 31 October 2007 are being
sent to shareholders shortly. Further copies will be available from the
Company's registered office at Loseley Park, Llantarnam Park Way, Cwmbran,
Gwent, NP44 3GA and the Company's website www.hillstationplc.co.uk.
ENQUIRIES:
Hill Station Plc
Cliff Carter, Chief Executive Officer
Tel: 01633 833000
Nominated Advisor
Dowgate Capital Advisors Ltd
Tony Rawlinson, Chairman
Tel: 020 74924777
Broker
J M Finn Capital Markets Ltd
Charles Cunningham
Tel: 020 76001658
END
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