RNS Number:7335F
Merrydown PLC
29 November 2004
Under embargo 7am 29 November 2004
MERRYDOWN PLC
Interim results for the six months ended 30 September 2004
"Exceptional performance in first half from Shloer and Merrydown Vintage"
Merrydown PLC, the brand development company, which markets the leading Shloer
and Merrydown Vintage cider brands, today announces interim results for the six
months ended 30 September 2004.
Highlights
* Operating profit #0.78m (2003: operating loss #0.10m)
* Turnaround from historical pattern of first half operating losses
* Group turnover increased by 8% to #8.88m (2003: #8.20m as restated)
- Shloer turnover up 14% to #5.52m underlining its long-term strength
- Merrydown Vintage grew strongly resulting in turnover up 15%
* Shloer continues to outperform within the adult soft drinks market
* Merrydown Vintage achieved accelerating growth in the major multiples
* Transformation into focused brand development business nearing completion
* Bottling at the Horam factory ended in November as planned
* Net cash at 30 September increased to #1.86m (2003: #1.68m) after the
#0.80m share buy back in December 2003
Nigel Freer, Chief Executive of Merrydown, commented:
"The first six months of this financial year have been very busy for Merrydown.
I am delighted with the performance of the Company, considering the challenges
of the closure of the Horam plant. The Company's transformation into a focused
brand development company nears its completion and we look forward with
enthusiasm to tackling the important Christmas period."
For further information, please contact:
Merrydown PLC 020 7067 0700
Nigel Freer, Chief Executive
Mike Dinnis, Finance Director
Weber Shandwick Square Mile 020 7067 0700
Chris Lynch / Sarah Richardson
Print resolution images are available for the media to view and download from
www.vismedia.co.uk
Chief Executive's Review
Overview
The past six months have been a period of dramatic change for the Company. Both
Shloer and Merrydown Vintage have grown strongly in the first half of the year
and this positive performance has moved the Group's half year operating result
firmly into profit for the first time for four years. This is very encouraging
at the time when the transformation into a focused brand development business
nears completion and further endorses the strategic focus on our core brands.
Shloer
Poor weather in the late summer created difficult conditions for many soft
drinks brands. Shloer is less weather sensitive than many soft drinks,
nevertheless it is affected by overall consumption patterns. However, against
this background, Shloer's continued growth underlines its long-term strength.
Shloer turnover increased by 14% to #5.52m (2003: #4.83m as restated). This is
in excess of the growth of about 6% recorded for the total adult soft drinks
market over the same period and considerably ahead of Shloer's direct
competitors.
National press advertising is being used for the next stage of the brand's
development and provides a cost effective route to deliver highly targeted
campaigns. A substantial campaign is planned for December which will also be
supported with Adshel posters located near 1,250 key grocery superstores.
The next new product launch has now been scheduled for next spring to allow a
clear trade focus on the core Shloer products at Christmas. Sales of Posh Squash
and Sorelle are building steadily although total volumes are not yet at
significant enough levels to determine their long-term potential. Our commitment
to develop sales in the out-of-home sector is already bearing fruit with
extended listings for Shloer cans in Moto service stations from January
following a successful trial.
Merrydown Cider
Merrydown Vintage sales have picked up strongly in the first half of the year
with a turnaround in the wholesale sector plus accelerating growth in the major
multiples resulting in Vintage turnover 15% higher than for the same period last
year. Polarisation within the cider market is favouring Merrydown's position as
a unique and premium cider packaged in glass. In the major multiples increased
distribution has given Vintage a larger share of a rationalised fixture.
White cider and bulk products have continued to decline and overall cider
turnover was in line with last year. However margins have improved because of
the favourable product mix.
Financial results
Operating profit before exceptional items was #0.78m (2003: loss #0.10m). This
excellent performance is mainly driven by the 8% growth in Group turnover and
planned lower marketing expenditure. Marketing costs were #0.2m less than in the
same period last year although they are expected to be at least #0.5m higher in
the second half of the current financial year with the significant Shloer
Christmas campaign. Net interest income of #0.06m (2003 #0.02m) increased due to
higher cash balances in the early part of the year and higher interest rates.
The exceptional loss on termination of the Horam operation was #2.19m including
#1.20m impairment write down of plant and machinery. As we indicated in July the
total costs of closure are likely to be in the region of #2.5m. In line with our
initial closure timetable, bottling has now ceased and most of the redundancies
have taken effect in November. We thank all of our employees for their
constructive approach to this period of transition. The tax credit recognises
the impact of the exceptional losses in the half year. The resulting loss on
ordinary activities after taxation is #1.03m (2003: loss #0.05m). We expect to
sell the property by 31 March 2006.
Net cash at 30 September was #1.86m (2003: #1.68m). Stock levels were increased
by production at both Horam and our third party bottlers ahead of the Horam
closure and the busy Christmas period. The higher stocks were mainly funded by
higher creditors, which also include accrued exceptional costs.
In view of the exceptional losses reported in the half year, the Board has
decided not to declare an interim dividend. Since the refinancing in 1998, #3.8m
has been returned to shareholders by way of dividends and share buy backs and
this places some short-term constraint on the distributable reserves available
for further returns. Building shareholder value will continue with appropriate
brand investment to ensure that the Company's current success continues.
Outlook
On 10th November the Board announced that it is currently in discussions which
may or may not lead to an offer for the Company. These discussions are still at
a very early stage and there is no certainty that a formal offer will result. A
further announcement will be made in due course as and when appropriate.
Plans are now in place for the Shloer upweighted promotional activity in
December. The strong growth of Merrydown Vintage has continued in October and
November. The Group has achieved an excellent performance in the first half of
the financial year and we therefore look forward with confidence to the rest of
the financial year.
Nigel Freer
Chief Executive 29 November 2004
GROUP PROFIT AND LOSS ACCOUNT
6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
(unaudited) (unaudited) (audited)
as restated
Notes #'000 #'000 #'000
-------------------------------------------------------------------------------
Turnover 2 8,884 8,203 20,325
------- -------- --------
Operating profit/(loss) 776 (99) 1,686
Loss on termination of operation 3 (2,186) - -
Net interest receivable 61 24 38
------- -------- --------
(Loss)/profit on ordinary
activities before taxation (1,349) (75) 1,724
Taxation credit/(charge) on
(loss)/profit on ordinary
activities 323 22 (507)
------- -------- --------
(Loss)/profit on ordinary
activities after taxation (1,026) (53) 1,217
Dividends - - (291)
------- -------- --------
Retained (loss)/profit (1,026) (53) 926
------- -------- --------
(Loss)/earnings per ordinary
share
-basic 4 (4.75p) (0.23p) 5.51p
-diluted (4.75p) (0.23p) 5.36p
Earnings/(loss) per share before
exceptional items
-basic 2.80p (0.23p) 5.51p
-diluted 2.70p (0.23p) 5.36p
-------- -------- -------
The Group has no recognised gains and losses other than the (loss)/profit above
and therefore no separate statement of total recognised gains and losses has
been presented.
SUMMARISED GROUP BALANCE SHEET
As at As at As at
30 September 30 September 31 March
2004 2003 2004
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
-------------------------------------------------------------------------------
Fixed assets 6,546 7,911 7,840
---------- -------- --------
Current assets
Properties held for resale 618 618 618
Stocks 3,720 2,406 2,053
Debtors 5,413 4,647 4,395
Cash at bank and in hand 1,858 1,678 3,518
---------- -------- --------
11,609 9,349 10,584
Creditors: amounts falling due within
one year 6,758 4,738 5,727
---------- -------- --------
Net current assets 4,851 4,611 4,857
---------- -------- --------
Total assets less current liabilities 11,397 12,522 12,697
Provisions for liabilities and charges - 275 274
---------- -------- --------
Net assets 11,397 12,247 12,423
---------- -------- --------
Equity shareholders' funds 11,397 12,247 12,423
---------- -------- --------
GROUP CASH FLOW STATEMENT
6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
(unaudited) (unaudited) (audited)
Notes #'000 #'000 #'000
-------------------------------------------------------------------------------
Operating activities
Net cash (outflow)/inflow from
operating activities before
exceptional costs 5 (a) (1,096) (308) 2,697
Outflow related to termination
of operation (70) - -
-------- -------- -------
Net cash (outflow)/inflow from
operating activities (1,166) (308) 2,697
-------- -------- -------
Returns on investment and
servicing of finance
Net interest received 61 24 38
Taxation
UK corporation tax paid (244) (155) (479)
Capital expenditure
Purchase of tangible fixed (20) (158) (210)
assets
Equity dividends paid (291) (237) (237)
Management of liquid resources
Cash withdrawn from/(placed on)
short term deposit 1,750 400 (1,250)
-------- -------- -------
Net cash inflow/(outflow) before
financing 90 (434) 559
Acquisition of own shares - (37) (840)
-------- -------- -------
Increase/(decrease) in cash in
the period 5 (b) 90 (471) (281)
-------- -------- -------
NOTES
1. Basis of preparation
The unaudited financial statements for the six month period ended 30 September
2004 have been prepared using accounting policies set out in the 31 March 2004
financial statements.
The figures for the year ended 31 March 2004 are extracted from the statutory
accounts for that year which have been delivered to the Registrar of Companies
and on which the auditors gave an unqualified report without any statement under
section 237(2) or (3) of the Companies Act, 1985.
The Group results, which are neither audited nor reviewed, incorporate the
unaudited results of the Company and its subsidiaries for the financial period
ended 30 September 2004. In accordance with section 240(3) Companies Act 1985,
such unaudited results do not constitute statutory accounts of the Company or
the Group.
The taxation charge for the six months to 30 September 2004 has been calculated
of the basis of the estimated effective tax rate for the year to 31 March 2005.
For the period ended 30 September 2003 it was the Group's policy to include
off-invoice price discounts only within the definition of turnover. The
accounting policy was reviewed in the year ended 31 March 2004 in view of
guidance on the relevant reporting standards and the practice of other drinks
companies. The Directors then considered it appropriate to include all
volume-related trade expenditure within turnover. This represented a change in
accounting policy and as such has been accounted for as a prior period
adjustment. The effect of the change is to reduce turnover and gross profit by
#1.63m (September 2003: #1.48m, March 2004: #4.59m) but it has no impact on
operating profit or profit on ordinary activities before taxation for the
current or comparative periods.
2. Turnover 6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
as restated
#'000 #'000 #'000
-------------------------------------------------------------------------------
United Kingdom 8,783 8,099 20,009
Rest of Europe 90 99 296
Other Countries 11 5 20
-------- --------- --------
8,884 8,203 20,325
-------- --------- --------
All sales originate in the United Kingdom.
3. Loss on termination of operation
The Company announced on 15 July 2004 its intention to cease manufacturing so as
to focus on its successful brand development strategy. Restructuring costs and
fixed asset write offs are expected to amount to #2,500,000 for the year to 31
March 2005. Costs expensed to date of #2,186,000 include #1,202,000 in relation
to the impairment of fixed assets such as factory plant & machinery with
restructuring costs making up the balance.
4. (Loss)/earnings per ordinary share
The calculation of basic (loss)/earnings per ordinary share is based on a (loss)
/profit on ordinary activities after taxation of (#1,026,000) (September 2003:
(#53,000); March 2004: #1,217,000). The calculation of earnings/(loss) per
ordinary share before exceptionals is based on a profit/(loss) on ordinary
activities after taxation and before exceptional items of #604,000 (September
2003: (#53,000); March 2004: #1,217,000).
The weighted average number of shares in issue during the period was 21,577,514
(September 2003: 22,597,323; March 2004: 22,087,418).
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has one class of dilutive potential ordinary shares; those
contingently issuable shares under the Group's long-term Executive incentive
plans.
5. Group Cash Flow Statement
(a) Reconciliation of operating profit/(loss) to net cash (outflow)/inflow from
operating activities
6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
#'000 #'000 #'000
-------------------------------------------------------------------------------
Operating profit/(loss) 776 (99) 1,686
Depreciation charges 108 118 238
Loss on disposal of tangible fixed
assets 5 2 5
(Increase)/decrease in stocks (1,822) (239) 114
Increase in debtors (969) (1,262) (1,010)
Increase in creditors 806 1,172 1,664
--------- --------- -------
Net cash (outflow)/inflow from
operating activities (1,096) (308) 2,697
--------- --------- -------
(b) Reconciliation of net cash flow to movement in net cash
-------------------------------------------------------------------------------
6 months to 6 months to Year to
30 September 30 September 31 March
2004 2003 2004
#'000 #'000 #'000
Increase/(decrease) in cash in the
period 90 (471) (281)
Cash flow from decrease in liquid
resources (1,750) (400) 1,250
--------- --------- -------
Movement in net cash in the period (1,660) (871) 969
Net cash at start of period 3,518 2,549 2,549
--------- --------- -------
Net cash at end of period 1,858 1,678 3,518
--------- --------- -------
(c) Analysis of net cash
As at Change in As at
30 September half year 31 March
2004 2003
#'000 #'000 #'000
-------------------------------------------------------------------------------
Cash at bank and in hand 358 90 268
Liquid resources 1,500 (1,750) 3,250
-------- --------- -------
1,858 (1,660) 3,518
-------- --------- -------
6. Interim report
The interim report will be posted to shareholders and copies will be available
from the Company's Registered Office: Horam Manor, Heathfield, East Sussex TN21
0JA. Telephone: 0870 442 9748.
This information is provided by RNS
The company news service from the London Stock Exchange
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