2nd June 2003
Christian Salvesen
Results for year to 31 March 2003
Key financials
* Total turnover up 5% to �877m (2002: �835m)
* Profit before tax
- As adjusted, 30% lower at �20.1m* (2002: �28.9m restated)
- As reported, loss before tax of �5.5m (2002: profit of �8.5m restated)
* Earnings per share
- As adjusted, 27% lower at 5.69p* (2002: 7.78p restated)
- As reported, loss per share of 3.09p (2002: earnings per share of 0.71p
restated)
* Continued strong free cashflow**; �20.6m generated for the year
* Recommended final dividend 1.0p, making a total for the year of 3.65p
* Before exceptional items and goodwill amortisation
** Free cashflow is defined as cash inflow before use of liquid resources,
financing, dividends and acquisitions and disposals
Operational highlights
* UK Industrial Division profits were down on last year but performance
improved in the second half as a result of restructuring initiatives; �30m
annualised of new business was won
* UK Food and Consumer profits held back by facility start-up costs;
dedicated contract renewals remain under considerable margin pressure
* Loss-making German Industrial business sold since year-end
* Industrial Division in France maintains profits and margins
* Industrial Division in Spain making progress
* Robust performance from Food and Consumer businesses in mainland Europe
* Major contract with Marks & Spencer renewed
Edward Roderick, Chief Executive of Christian Salvesen, commented:
"This has been a difficult year for Christian Salvesen, but we are now
confident that the restructuring is beginning to produce real progress and
should result in an improved performance going forward.
"In the UK, economic and trading conditions have remained extremely
challenging, with a corresponding effect on both volumes and margins. However,
the fundamental review of our two divisions, previously announced, has enabled
us to tailor our operations to current market conditions. We have exited
insufficiently profitable business, reduced headcount and fleet size and
enabled our UK businesses to regain much of their competitiveness. Crucially,
our UK margins at 4%, although reduced, remain in line with the industry
average.
"We plan to continue the restructuring process with the merger of the two UK
divisions in order to extract maximum value from our core skills of network
transportation and shared-user warehousing. This process is on-going at this
time.
"We have sold our German business as a result of the further deterioration in
the German economy which severely hampered our actions to turn this loss-making
business around.
"Our performance elsewhere in Europe has been encouraging and we remain one of
the most profitable UK logistics companies operating in mainland Europe. Our
French industrial business has performed exceptionally well in a slowing
economic climate. In Spain, we have returned our industrial business to
break-even and we are confident that this business will move into profit in the
current financial year.
"Our Food and Consumer businesses in mainland Europe have produced excellent
results, driven forward by our new pan-European management structure. In
Benelux, we have strengthened our position in frozen and chilled food
distribution and in France, our improved performance came from close control of
costs and strong new business wins. Our joint ventures in Iberia and Italy have
both had a very successful year; in Spain the JV is market leader in chilled
distribution.
"Therefore, whilst the past year's performance has been disappointing, we are
confident that we have now grasped the nettle and that the current year will
begin to see the benefits of our actions. This progress is in spite of
continued difficult trading conditions and the burden of a �4.8m increase in
the profit and loss account pension charge in the new financial year.
"Christian Salvesen remains a cash generative business with high quality assets
in our key markets, and a strong reputation amongst our customer base - as
witnessed by our rate of new business wins and contract renewals. We are now in
a position to concentrate upon leveraging those qualities in order to deliver
improved returns to shareholders."
For further information, please contact:
Christian Salvesen PLC 2 June 2003: 020 7357 9477
Edward Roderick, Chief Executive Thereafter: 01604 662600
Peter Aspden, Finance Director
Frances Gibson-Smith, Head of Investor
Relations
Hogarth Partnership (for Christian 020 7357 9477
Salvesen PLC)
John Olsen / Tom Leatherbarrow
A briefing for analysts will be held at 0930 on Monday 2nd June 2003 at the
Media Centre, The London Stock Exchange. The presentation will be audio webcast
later in the day on http://www.salvesen.com
CHRISTIAN SALVESEN PLC
RESULTS FOR THE YEAR TO 31 MARCH 2003
These financial results reflect the continuing difficult conditions for many of
our businesses. In particular, a third successive year of manufacturing
recession has hampered management efforts to counteract rising costs and weak
volumes. Despite this, we have maintained slightly higher margins than most
UK-based competitors in mainland Europe and our UK margins are in line with the
industry average.
The quality of our customer base continues to improve as we eliminate
unprofitable contracts. Our contract renewal rate of over 85% confirms that
customer confidence in the quality of our service remains strong.
The Food and Consumer businesses proved resilient in mainland Europe, but in
the UK delays in opening a new facility reduced profitability. This sector
remains under severe pricing pressure.
Our Industrial operations' shared-user networks are particularly sensitive to
declining volumes. Despite this, our French business maintained its profits and
margins. In the UK after a poor first half, profitability has been improving
following the action we have taken, but recovery has been slower than
anticipated, held back by the poor economic climate.
In 2002 we said we would restore our Spanish and German Industrial businesses
to profitability within two years, through aggressive restructuring. Our
progress in Spain has been good and we reached a breakeven run rate by the year
end. However, despite our actions, the German business remained loss-making,
hampered by the declining economy, and it was sold to the management in May
2003. This setback will not deflect us from achieving our European strategic
goals over the longer term and we intend to maintain our German presence via
strategic partnerships and joint ventures.
On 15 May the board announced that it had received an unsolicited preliminary
expression of interest from a financial buyer regarding a possible offer for
the company. Since then we have confirmed that we are no longer in such
discussions with any parties.
Group results
Total turnover, including our share from joint ventures, increased 5.0% to
�877.4m.
The Group is reporting a pre-tax loss of �5.5m after exceptional costs of �
21.4m and goodwill amortisation. Earnings per share fell from a restated 0.71p
in the previous year to a loss per share of 3.09p.
Underlying profit - before taxation, goodwill amortisation and exceptional
items - declined 30.4% to �20.1m. On the same basis, earnings per share fell by
26.9% from 7.78p to 5.69p. Margins slipped to 2.9% from 4.2%: although much
lower than three years ago, they are still in line with the industry average in
the UK.
The Group incurred exceptional costs of �21.4m in the year. This was
principally the part loss on disposal of the German industrial business
totalling �9.6m and the �5.2m cost of restructuring our operations. There will
be a further exceptional charge in respect of the German business of
approximately �10 million in the new financial year following completion of the
sale.
Capital cash expenditure was �40.9m, mainly on new vehicles and construction of
cold stores at Easton and Bedworth in the UK. We expect to reduce capital
expenditure in the new financial year thereby improving cash generation. Net
debt rose slightly to �133.3m.
Cash flow remains strong and the �20.6m net inflow of cash before use of liquid
resources, financing, dividends and acquisitions and disposals resulted from
good control of working capital and asset sales.
To improve our capital structure we began a share repurchase programme, buying
and cancelling 1.2m shares during the year at a cost of �0.7m.
Dividend
The board has recommended a final dividend of 1.0p, making a total of 3.65p for
the year. This level of total dividend will form a sustainable base for
dividends in future years. In the medium term the board intends to rebuild
dividend cover to two times earnings before exceptional costs and goodwill
amortisation. The dividend will be paid on 12 August 2003 to shareholders on
the register at 18 July.
Food and Consumer Division
UK
Food and Consumer Division - UK 2003 2002
(restated)
Turnover �305.5m �291.0m
Operating profit* �15.1m �21.6m
Operating profit �7.7m �20.4m
Operating margin* 4.9% 7.4%
* Before exceptional items and goodwill amortisation
In the UK, we increased sales by 5%, but lost profitability in a market
impacted by continuing fierce price competition among food retailers. We also
faced increased costs during the start-up of new cold stores at Bedworth and,
more critically, Easton.
A month-long delay in the opening of Easton meant that we had to make
alternative warehousing and transport arrangements to maintain customer service
during the critical pre-Christmas period.
Pricing pressures mounted and volumes softened throughout the year, with slower
than expected restocking after Christmas. We closed a site at Evesham and
exited the chill market as this business had become unprofitable.
As our customers strive to cut costs our strategy has been to modernise working
practices and continually enhance productivity and efficiency. We are also
developing partnerships with major clients so that we can respond better to
changes in their businesses and provide added value services wherever possible.
Following the food sector's example, we are now helping consumer retailers to
adopt factory gate pricing - sourcing globally and controlling the supply chain
from manufacturer to store.
Our business development team did well, continuing to build the new business
pipeline even though many companies are responding to the uncertain climate by
delaying both renewals and new contracts. In March, we renewed a five-year
contract covering three general merchandise sites for Marks & Spencer against
strong competition and won a contract for its new homeware and furniture stores
starting early in 2004.
Other significant wins included a four-year frozen food storage contract from
McCain, vegetable supply contracts from Safeway and JD Wetherspoon, and new
contracts from Manor Bakeries, Asda and Douwe Egbert. We have also renewed our
contract with Safeway, for its site at Bellshill for a further five years.
Our Support Services business continues to develop the relationship with Asda,
which began with the major contract won in March 2002. We recently opened a
120,000 sq.ft. depot at Magna Park to accommodate both service centre
activities and those of a new contract to handle returned electrical goods.
Reverse logistics is a fast growing sector fed by increasingly stringent
environmental legislation. Safeway became the latest supermarket group to sign
up for our COMET reverse logistics system for tracking loose items such as
trays and pallets in the supply chain.
Development of Support Services as a European business is continuing with the
opening of an additional shared-user site in Valencia and the expansion of a
dedicated site in Vitoria, both in Spain. We now collect Spanish fruit and
vegetables for delivery to UK supermarkets and return the trays to Spain for
washing: the vehicles for Spain also pick up return loads from Danone in France
and Ter Beke and Tropicana in Belgium.
Food manufacturing was hit by pricing pressure as competitors across Europe
chased volume in a very tight market. RVP Foods, acquired in April 2002, has
been successfully integrated and its vegetable production, processing and
packaging operation is feeding additional volumes through our Easton site and
the distribution network. The acquisition brought us Safeway and Iceland as new
customers and we have retained our major direct sales contracts with Tesco and
Waitrose.
Mainland Europe
Food and Consumer Division - 2003 2002
mainland Europe (including
share of joint ventures in
Spain, Italy and Benelux)
Turnover �154.5m �143.1m
Operating profit* �6.0m �4.8m
Operating profit �3.4m �5.5m
Operating margin* 3.9% 3.4%
* Before exceptional items and goodwill amortisation
On the mainland we performed well despite strong pricing pressure, with profit
and margin growth outstripping competitors in both France and Benelux. In
France we performed slightly better than the previous year through stringent
cost control in a stagnant market and despite difficulties at the Rognac site.
We won new food business with Lidl, Schaal, Aldi, Carrefour and Le Mutant, and
renewed contracts with Masterfoods, Penny Market and Go Sport, the sports
clothing and equipment retailer.
Sales and profits grew strongly in Benelux, where we further strengthened our
position in frozen and chilled food distribution. Closer partnership with our
leading retail customers is enabling us to integrate frozen food supply chains
by bringing retailers and their suppliers together in our three well located
cold stores across the region.
Our shared-user proposition was a crucial factor in securing nationwide frozen
food business in the Netherlands from Albert Heijn, which renewed our four-year
contract for the south of the country and added another covering the north. We
also gained a large, six-year contract to distribute Unilever's frozen food
across the Netherlands and additional frozen food warehousing and distribution
business from Laurus. These contracts will involve further enhancement of our
site at Hoogeveen, where we recently implemented our ULTIMA warehouse
management system.
Our joint venture with the leading Dutch meat business, Dumeco, gained a
further boost when our partner acquired one of its largest competitors. This
will significantly increase volumes through the Boxtel chilled distribution
centre. This operation in the Netherlands and our distribution centre for
Nestl� and Ter Beke in Baasrode, Belgium, provide a strong basis for further
expansion in the still fragmented Benelux chill market.
In Italy, our joint venture performed as planned, servicing its customers
Galbani and Danone. We are pursuing opportunities with new customers to extend
the operation.
In Spain and Portugal, Salvesen Log�stica continued to grow its share of the
fast-expanding temperature controlled market and maintained its market
leadership in chilled food distribution.
The division's excellent network coverage of Spain enables it to offer a
strongly differentiated quality service and it has expanded its international
traffic for Tesco, Ter Beke and Garcia Carrion using the factory gate pricing
approach. The company signed a new contract with Canela Foods and DIA, part of
Carrefour, added volumes to its existing contract.
Industrial Division
UK
Industrial Division - UK 2003 2002
(restated)
Turnover �180.7m �177.6m
Operating profit* �6.0m �11.4m
Operating profit �6.0m �9.6m
Operating margin* 3.3% 6.4%
* Before exceptional items and goodwill amortisation
Turnover increased by 2% to �180.7m but sharply reduced margins reflected tough
trading conditions for manufacturers. The highly geared shared-user network has
been impacted by lower volumes, while intense pricing pressure made it
difficult to recover inflation and insurance cost increases.
Market conditions worsened over the Christmas period: many clients had extended
shutdowns and volumes were slow to pick up afterwards. To adapt the business to
the market we increased efficiencies and applied price increases where we
could, downsized the fleet, eliminated unprofitable business and closed our
Stoke site. This brought steady performance improvement in the second half.
New business worth an annualised �30m included a five-year contract, worth more
than �10m a year, from the Goodyear/Dunlop joint venture that holds over 20% of
the UK replacement tyre market. We also signed major new business with Smurfit
and Kappa Packaging against strong competition. Other new clients include
Rittal, Mereway, Hobart Manufacturing and Ashland Plastics. Renewals included
Rockware, PPG, Bong, ExxonMobil, Jewson and Canon.
Iberia
Industrial Division - Spain and 2003 2002
Portugal
Turnover �92.7m �88.4m
Operating (loss)* (�0.2m) (�1.1m)
Operating (loss) (�3.2m) (�5.5m)
Operating margin* - -
Industrial activity has been depressed in Spain - particularly in the
automotive sector, to which our Industrial operation remains heavily exposed.
Downward pricing pressure from customers has been exacerbated by intense
competition among transport companies to maintain trading volumes and there is
little to raise expectations in the short to medium term.
Against this background we reduced the operating loss, before exceptional items
and goodwill amortisation, from �0.4m in the first half, reflecting the
continuing cost of building up the network, to just �0.2m for the year as a
whole. We expect a return to profitability this year as we further develop the
pallet distribution network through strategic alliances with subcontractors and
maintain downward pressure on costs.
We are successfully diversifying the business away from over-reliance on
automotive original equipment - making particularly good progress in sectors
such as chemicals, ceramics and the automotive aftermarket, which is less
volatile than the original equipment market. New business wins included
contracts from Henkel, Radici Plastics, Exportlan Terminal, Incoera, Aceros
Bergara, Fuchs Lubricants, Dynasol Elastomers and DIA, part of Carrefour. We
won new automotive business with Volvo Truck and additional volumes from Opel
International, Vector, and Renault in Portugal and Slovenia.
France
Industrial Division - France 2003 2002
Turnover �102.4m �89.3m
Operating profit* �3.9m �3.8m
Operating profit �2.1m �2.7m
Operating margin* 3.8% 4.3%
* Before exceptional items and goodwill amortisation
Despite the slowing economy our strategy of delivering quality, value added
services and shared productivity gains helped us retain market share and
partially offset pricing pressures - although increases were hard to win. Many
customers were reluctant to commit to long-term contracts and others used
surplus labour to take distribution back in-house. But Darfeuille proved
resilient, with new business wins more than compensating for volume reductions
by existing customers.
Revenue rose 15%, with significant wins from La Poste, Univar, Valeo and Bardal
and additional business from Condat, Trelleborg Bostik, BFI, Sun Chemical and
Materis. A major new contract with Michelin started in April 2003.
Costs remain controlled and we stabilised the impact of fuel price rises by
introducing a surcharge system in February 2003.
We opened a new satellite site at Bellegarde-sur-Valserine, relocated the
Toulouse depot and completed the new Angers depot in April 2003. The merger of
the Guyon subsidiary with Darfeuille Services added two new depots to the
network and we are working on further improvements to network efficiency.
Germany
Industrial Division - Germany 2003 2002
Turnover �41.6m �45.9m
Operating (loss)* (�5.1m) (�5.2m)
Operating (loss) (�17.1m) (�22.2m)
Operating margin* - -
* Before exceptional items and goodwill amortisation
Action to restructure the German business under its new management team
included closure of four depots and a workshop; closure of the loss-making
tanker operation; completion of a centralisation project and withdrawals from
unprofitable business.
The increasing effectiveness of our sales organisation kept performance on
target in the first quarter, but the German economy slowed sharply over the
summer and continued to deteriorate for the rest of the year. Our restructuring
programme, though rigorous, proved no match for this and the final result for
the year was only a marginal improvement on the previous year. Sale of the
business was clearly the best option for the Group.
UK Restructuring
In February we announced that we intended to restructure our UK businesses by
integrating the UK Food & Consumer and UK Industrial businesses. This process
will improve profitability, optimise back office performance and costs,
maximise operational efficiency, and significantly improve customer service and
sales efficiency.
Our UK Industrial division has particular strength in transport operations,
while Food and Consumer excels in warehousing: the merger will enhance our
ability to provide outstanding end-to-end supply chain solutions for all our UK
customers. Operating as a single entity, under the responsibility of a new UK
Managing Director whose recruitment is on-going, will also enable us to bring a
wider range of skills and perspectives to bear on sales and marketing, service
and customer retention.
The restructuring process is continuing at this time and we are confident that
it will result in a more focussed and competitive business.
Pensions
The Group has now fully implemented FRS 17. The board believes that early
adoption of FRS17 represents best accounting practice, ensuring that the impact
of the Group's pension position can be clearly understood.
The sharp fall in the UK stock market has seen the deficit on the pension
scheme increase from �9.6m to �64.5m after deferred taxation relief. This will
impact the financing cost of pensions significantly in 2003/04 as FRS17 uses
the year-end deficit as a base for calculating the forthcoming year profit and
loss charge. The total FRS17 cost of pensions was �4.8m in 2002, rising to �
5.7m in 2003 and �10.5m in 2004. From a cash funding viewpoint, the company is
paying an additional �1m in contributions above the regular cost from1 January
2003.
The defined benefit pension scheme has been closed to new recruits since April
2000. The UK defined contribution scheme, launched in April 2001, has proven
popular and does offer a more cost effective way of providing pensions to our
employees. UK employees are eligible to join the scheme after a qualifying
period of six months' service.
Board and Management
Jonathan Fry intends to step down from his position as Chairman on 30 September
2003, after six years in the role. Current non-executive director Dr David
Fish, who joined the Board of Christian Salvesen on 22 October 2002 after a
long and distinguished career with Mars Inc, the global snack and pet food
manufacturer, will assume the role of Chairman at that time. Dr Fish has
already made a substantial contribution to the Company. He will take over on 1
October 2003.
Peter Cawdron has agreed to take on the role of senior independent director and
a further non-executive director will be recruited.
Looking forward
It will take time to rebuild shareholder value but the sale of the German
operation is a substantial step forward. We will continue to service this
market through an alliance with our former business and additional partnerships
or joint ventures.
Food and Consumer profits were hit last year by disruption during the
changeover to the new cold store at Easton but will benefit now that the
facility is fully operational. Competition is likely to remain intense, with
resulting pricing pressures, but in mainland Europe the division is proving
resilient.
Our UK Industrial networks will stay under pressure while manufacturing remains
in recession; but the action we have already taken is raising network
profitability and they are also well placed to take advantage of any economic
upturn. We firmly believe we can restore historic levels of profitability in
Spain.
Overall, the company is in better competitive shape than a year ago, with a
good new business pipeline. Tough trading conditions are set to persist and,
with rising pension costs, will constrain profits this year. We are confident
that we are taking the right actions to weather current market conditions and
we expect to make progress this year.
Group profit and loss account
For the year ended 31
March 2003
Before
Before goodwill Goodwill
goodwill Goodwill amortisation amortisation
amortisation amortisation and and
and and exceptional exceptional
exceptional exceptional items items Total
items items Total 2002 2002 2002
Notes 2003 2003 2003 (restated) (restated) (restated)
�m �m �m �m �m �m
Turnover (group and share of
joint ventures)
Continuing operations 835.8 - 835.8 789.4 - 789.4
Discontinued operations 41.6 - 41.6 45.9 - 45.9
1 877.4 - 877.4 835.3 - 835.3
Less: share of joint (47.8) - (47.8) (41.6) - (41.6)
ventures' turnover
Group turnover 829.6 - 829.6 793.7 - 793.7
Operating profit
Continuing operations 28.8 (14.8) 14.0 38.8 (11.5) 27.3
Discontinued operations (5.1) (2.4) (7.5) (5.2) (17.3) (22.5)
Group operating profit 23.7 (17.2) 6.5 33.6 (28.8) 4.8
Share of operating profit in
Joint ventures 1.9 - 1.9 1.7 - 1.7
Associates 0.1 - 0.1 - - -
Total operating profit 25.7 (17.2) 8.5 35.3 (28.8) 6.5
Exceptional items
Continuing operations:
Gains on disposal of fixed assets - - - - 5.4 5.4
Discontinued
operations:
Surpluses in respect of businesses - 1.2 1.2 - 3.0 3.0
sold in prior years
Loss on disposal of discontinued - (9.6) (9.6) - - -
operations 10
Profit on ordinary activities 25.7 (25.6) 0.1 35.3 (20.4) 14.9
before interest
Net interest payable 3 (6.7) - (6.7) (7.2) - (7.2)
Other finance income 4 1.1 - 1.1 0.8 - 0.8
Profit /(loss) on ordinary 20.1 (25.6) (5.5) 28.9 (20.4) 8.5
activities before taxation 1,2
Tax on profit on 5 (5.0) 2.3 (2.7) (8.2) 1.6 (6.6)
ordinary activities
Profit/(loss) for the 15.1 (23.3) (8.2) 20.7 (18.8) 1.9
financial year
Dividends on ordinary 6 (9.6) (17.6)
shares
Transfer from reserves for the (17.8) (15.7)
financial year
Earnings per share
Basic (3.09p) 0.71p
Diluted (3.09p) 0.71p
Excluding exceptional items and
goodwill 5.69p 7.78p
amortisation
Dividends per ordinary share 6 3.65p 6.60p
Further analysis of goodwill amortisation and exceptional items can be found in
note 2.
The acquisition during the year has not been disclosed separately on the face
of the profit and loss account. See note 8.
There is no difference between the profit on ordinary activities before
taxation and the profit for the financial year stated above and their
historical cost equivalents.
Balance sheets
As at 31 March 2003
Notes Group Company
Group 2002 Company 2002
2003 (restated) 2003 (restated)
�m �m �m �m
Fixed assets
Intangible assets 72.0 72.0 - -
Tangible assets 205.5 215.2 0.6 1.1
Investments in subsidiaries - - 382.9 357.9
Investments in joint ventures - -
Share of gross assets 12.8 10.4 - -
Share of gross liabilities (8.9) (7.5) - -
3.9 2.9 - -
Investment in associated 0.8 0.7 - -
undertakings
Investment in own shares 0.3 0.6 0.3 0.6
282.5 291.4 383.8 359.6
Current assets
Stocks 21.9 16.7 - -
Debtors 138.2 153.2 2.0 2.8
Investments - 0.3 - 0.1
Cash at bank and in hand 40.1 31.5 3.0 0.1
200.2 201.7 5.0 3.0
Creditors: amounts falling due
within one year
Borrowings (4.4) (17.6) (8.3) (18.0)
Trade and other creditors (176.2) (189.5) (10.6) (14.6)
(180.6) (207.1) (18.9) (32.6)
Net current assets/(liabilities) 19.6 (5.4) (13.9) (29.6)
Total assets less current 302.1 286.0 369.9 330.0
liabilities
Creditors: amounts falling due
beyond one year
Borrowings (169.0) (132.2) (163.5) (126.4)
Other creditors (6.5) (8.1) - -
Provisions for liabilities and (17.9) (18.9) (2.0) (2.0)
charges
Total net assets excluding net 108.7 126.8 204.4 201.6
pension liabilities
Net pension liabilities 9 (64.5) (9.6) - -
Total net assets including net 44.2 117.2 204.4 201.6
pension liabilities
Capital and reserves
Called up share capital 74.6 74.9 74.6 74.9
Share premium account 43.8 43.8 43.8 43.8
Capital redemption reserve 3.8 3.5 3.8 3.5
Profit and loss account (78.0) (5.0) 82.2 79.4
Equity shareholders' funds 44.2 117.2 204.4 201.6
Approved by the board of directors on 2 June 2003 and signed on its behalf by:
Directors:
Jonathan Fry
Peter Aspden
Group cashflow statement
For the year ended 31 March 2003
Notes 2003 2003 2002 2002
�m �m �m �m
Net cash inflow from 7 57.8 66.7
operating activities
Dividends received from joint 0.6 0.3
ventures
Returns on investments and
servicing of finance
Interest received 0.7 1.3
Interest paid (7.2) (8.3)
Finance lease interest paid (0.4) (0.7)
Settlement of banking dispute - (1.7)
Net cash outflow from returns on
investments (6.9) (9.4)
and servicing of finance
Taxation
UK corporation tax paid (5.5) (8.8)
Overseas tax repaid/(paid) 2.2 (2.0)
Tax paid (3.3) (10.8)
Capital expenditure and financial
investment
Purchase of tangible fixed (40.9) (42.1)
assets
Transfer/purchase of own - 0.9
shares
Proceeds on disposal of 13.3 20.7
tangible fixed assets
Net cash outflow for capital
expenditure and
financial investment (27.6) (20.5)
Acquisitions and disposals
Acquisitions of businesses 8 (2.8) (3.7)
Net cash outflow for acquisitions and (2.8) (3.7)
disposals
Equity dividends paid (17.6) (17.6)
Net cash inflow before use of liquid 0.2 5.0
resources and financing
Management of liquid
resources
(Increase)/decrease in short (3.8) 0.6
term deposits
Net cash (outflow)/ inflow from
management of liquid resources (3.8) 0.6
Financing
Buy-back of ordinary share (0.7) -
capital
(Decrease)/increase in debt (12.3) 6.6
due within one year
Decrease in finance leases (0.7) (0.8)
due within one year
Increase in debt due after 20.3 4.5
one year
Decrease in finance leases (0.3) (9.9)
due after one year
Net cash inflow from 6.3 0.4
financing
Increase in cash in the year 2.7 6.0
Group cashflow statement continued
For the year ended 31 March 2003
2003 2002
�m �m
Reconciliation of net cashflow to movement in net debt
Increase in cash 2.7 6.0
Cash inflow from increase in debt (7.0) (0.4)
Cash outflow/(inflow) from increase/(decrease) in 3.8 (0.6)
liquid resources
Changes in net debt resulting from cashflows (0.5) 5.0
Translation difference (14.5) 1.6
Movement in net debt in the year (15.0) 6.6
Opening net debt (118.3) (124.9)
Closing net debt (133.3) (118.3)
Statement of Group total recognised gains and losses
For the year ended 31 March 2003
Notes 2003 2002
�m (restated)
�m
(Loss)/profit for the financial year (8.2) 1.9
Exchange translation effect on foreign currency 1.4 (0.3)
net investments
Taxation on foreign currency exchange differences - (0.2)
Actuarial loss recognised in the pension scheme 9 (74.2) (31.3)
Deferred tax relating to pension liability 9 18.3 9.4
Total recognised gains and losses for the year (62.7) (20.5)
Prior year adjustment 9 (11.3) -
2002 prior year adjustment - FRS19 deferred tax - (7.9)
Total losses recognised since last annual report (74.0) (28.4)
Reconciliation of movements in Group shareholders' funds
For the year ended 31 March 2003
Notes 2003 2002
�m (restated)
�m
(Loss)/profit for the financial year (8.2) 1.9
Dividends (9.6) (17.6)
(17.8) (15.7)
Exchange translation effect on foreign currency net 1.4 (0.3)
investments
Taxation on foreign currency exchange differences - (0.2)
Share buy-back (0.7) -
Write off of impaired goodwill previously written - 2.5
off to reserves
Actuarial loss recognised in the pension scheme 9 (74.2) (31.3)
Deferred tax relating to pension liability 9 18.3 9.4
Net decrease in shareholders' funds for the year (73.0) (35.6)
Shareholders' funds at start of year (originally �128.5m 117.2 152.8
before deducting prior year adjustment of �11.3m)
Shareholders' funds at end of year 44.2 117.2
Notes to the preliminary announcement
Note 1 Turnover, profit and net assets
Segmental analysis Profit/
Profit/ (loss)
(loss) before Net
before tax Net assets
Turnover Turnover tax 2002 assets 2002
2003 2002 2003 (restated) 2003 (restated)
�m �m �m �m �m �m
By geographical area and by
class of business:
Continuing operations
Food and Consumer
- United Kingdom 305.5 291.0 15.1 21.6 79.2 79.4
- Mainland Europe
- Group 106.7 101.5 4.0 3.1 20.1 23.5
- Joint ventures 47.8 41.6 2.0 1.7 3.9 2.9
Total Food and Consumer 460.0 434.1 21.1 26.4 103.2 105.8
Industrial
- United Kingdom 180.7 177.6 6.0 11.4 48.2 49.2
- Iberia 92.7 88.4 (0.2) (1.1) 60.3 55.0
- France 102.4 89.3 3.9 3.8 30.3 27.3
Total Industrial 375.8 355.3 9.7 14.1 138.8 131.5
835.8 789.4 30.8 40.5 242.0 237.3
Discontinued operations
Industrial - Germany 41.6 45.9 (5.1) (5.2) - 7.8
877.4 835.3 25.7 35.3 242.0 245.1
Goodwill amortisation
Food and Consumer - United - - (0.1) (0.2) - -
Kingdom
Industrial - Iberia - - (3.0) (2.9) - -
- France - - (1.1) (1.1) - -
- Germany - - - (0.3) - -
877.4 835.3 21.5 30.8 242.0 245.1
Exceptional items
Food and Consumer - United - - (7.3) (1.0) - -
Kingdom
- Mainland Europe - - (2.6) 0.7 - -
Industrial - United Kingdom - - - (1.8) - -
- Iberia - - - (1.5) - -
- France - - (0.7) - - -
- Germany - - (12.0) (17.0) - -
Unallocated items - - 1.2 4.7 - -
877.4 835.3 0.1 14.9 242.0 245.1
Unallocated net interest - - (6.7) (7.2) - -
payable
Unallocated other finance - - 1.1 0.8 - -
income
Unallocated net pension - - - - (64.5) (9.6)
deficit
Unallocated net debt - - - - (133.3) (118.3)
877.4 835.3 (5.5) 8.5 44.2 117.2
Turnover excludes sales of �77.9m (2002 �73.3m) where the Group is obliged
under certain logistics contracts to purchase goods on customers' behalf and
sell them on at cost.
Turnover by geographical market and turnover by geographical origin are not
materially different.
The segmental analysis format above will change in 2003/04 as a result of the
UK business reorganisation which has been announced.
Note 2 Analysis of goodwill amortisation and exceptional items
Attributable Attributable
tax tax
2003 2003 2002 2002
�m �m �m �m
Exceptional items - trading items
Restructuring costs (3.9) 0.3 (12.5) 1.0
Site closure costs (1.3) 0.3 (3.2) 0.7
Loan note received previously - - 1.7 (0.4)
provided for
Provision for customer claim (2.6) 0.9 - -
Impairment of goodwill (3.7) - (6.9) -
Impairment of goodwill previously - - (2.5) -
charged to profit and loss reserves
Integration costs (1.5) 0.3 - -
Independent Insurance liquidation - - (0.9) 0.3
(13.0) 1.8 (24.3) 1.6
Non - trading exceptional items
Gains on disposal of fixed assets - - 5.4 (0.5)
Surpluses in respect of businesses 1.2 - 3.0 -
sold in prior years
Loss on disposal of discontinued (9.6) - - -
operations (note 10)
(8.4) - 8.4 (0.5)
(21.4) 1.8 (15.9) 1.1
Goodwill amortisation (4.2) 0.5 (4.5) 0.5
(25.6) 2.3 (20.4) 1.6
Note 3 Net interest payable
2003 2002
�m �m
Interest payable on loans and
overdrafts
Bank loans and overdrafts 7.0 7.7
Interest payable on finance leases 0.4 0.7
7.4 8.4
Interest receivable (0.7) (1.2)
Group interest 6.7 7.2
�0.5m of interest was capitalised during the year (2002 �0.1m) relating to 100%
of the interest resulting from the funding of two UK capital projects. Interest
on these projects was capitalised on a gross, pre tax basis based on ongoing
LIBOR rate plus 1%.
Note 4 Other finance income 2002
2003 (restated)
�m �m
Expected return on pension scheme 11.9 9.6
assets
Interest on pension scheme liabilities (10.8) (8.8)
Net return 1.1 0.8
Note 5 Tax on profit on ordinary activities 2003 2002
�m �m
On the profit for the year
UK tax at 30% (2002 30%) 4.2 5.6
Overseas tax 0.1 1.9
Share of joint ventures' tax 0.7 0.7
5.0 8.2
Tax attributable to exceptional items
and goodwill amortisation:
UK tax (0.9) (1.4)
Overseas tax (1.4) (0.2)
(2.3) (1.6)
2.7 6.6
Note 6 Dividends on ordinary shares
2003 2002
�m �m
Interim paid 2.65p per share (2002 2.65p) 7.1 7.1
Final proposed 1.00p per share (2002 3.95p) 2.5 10.5
Total 3.65p per share (2002 6.60p) 9.6 17.6
Note 7 Reconciliation of operating profit to net cash inflow from operating
activities
2002
2003 (restated)
�m �m
Total operating profit 8.5 6.5
Share of profit in joint ventures and associates (2.0) (1.7)
Goodwill amortisation 4.2 4.5
Exceptional items 13.0 24.3
Depreciation charges 35.3 36.4
Earnings before interest, tax, depreciation, amortisation 59.0 70.0
and exceptional items (EBITDA)
Difference between pension charge and cash contributions (0.4) (0.4)
Increase in stocks (2.0) (2.2)
Decrease/(increase) in debtors 15.5 (12.3)
(Decrease)/increase in creditors (4.7) 19.6
Exceptional items (9.6) (8.0)
Net cash inflow from operating activities 57.8 66.7
Note 8 Acquisitions
On 22 April 2002 the Group completed the acquisition of the green vegetable
processing activities plus certain assets and liabilities of RVP Foods Limited
for a total consideration of �2.8m. The acquisition has been accounted for
using acquisition accounting principles.
Value at Fair Value Adjusted
acquisition adjustments fair values
�m �m �m
Tangible fixed assets 0.5 0.9 1.4
Stocks 3.2 (0.8) 2.4
Creditors (1.0) - (1.0)
Net assets acquired 2.7 0.1 2.8
Goodwill -
Consideration - cash (including acquisition 2.8
costs)
Fair value adjustments bring the value of tangible fixed assets up to market
value and reduce stock value down to cost equivalent.
The business has now been fully integrated into the UK Food and Consumer
business and as such the results post acquisition cannot be readily identified.
Note 9 Pension commitments
The Group operates a number of pension schemes involving defined benefit and
defined contribution schemes. The total pension cost for the Group was �11.2m
(2002 �9.7m) of which �6.6m (2002 �4.5m) relates to the UK defined benefit
scheme and �0.8m (2002 �0.5m) relates to the UK defined contribution scheme.
The assets of the schemes are held in separate trustee administered funds.
In the UK, the main scheme is of the defined benefit type and pension costs are
assessed with the advice of qualified actuaries, using the projected unit
method. The latest actuarial valuation of the Scheme was at 31 December 2001.
The adoption of FRS 17 has led to a restatement of the Group's prior year
profit and loss account, statement of total recognised gains and losses,
reconciliation of movements in shareholders' funds and balance sheet. The
effect of the adjustment is:
�m
Net increase in shareholders' funds as at 1 April 2001 10.9
2001/02 - change in valuation of fund assets and liabilities (21.9)
- profit and loss account adjustment (see below) (0.3)
Net impact on shareholders' funds as at 1 April 2002 (11.3)
The impact on the profit and loss account is as follows:
2003 2002
�m �m
Adjustment to staff costs 1.9 (1.1)
Other finance income recognised 1.1 0.8
3.0 (0.3)
Deferred tax (0.9) -
2.1 (0.3)
The actuarial valuation of the Christian Salvesen Pension Scheme was updated to
31 March 2003 by a qualified independent actuary.
The major assumptions used by the actuary were:
2003 2002 2001
Rate of increase in salaries 3.5% 3.5% 3.3%
Rate of increase in deferred pensions 2.5% 2.5% 2.3%
Rate of increase in pensions payments 2.5% 2.5% 2.3%
Discount rate 5.4% 6.0% 6.1%
Inflation assumption 2.5% 2.5% 2.3%
The assets in the scheme and the expected rates of return at the balance sheet
dates were:
Long-term Long-term Long term
rate rate rate
of expected of expected of expected
return 2003 return 2002 return 2001
Equities 7.3% 96.4 7.7% 130.7 6.25% 127.3
Bonds 4.3% 31.0 5.2% 29.9 4.75% 31.8
Other 3.45% 2.1 4.0% 0.8 4.0% -
Total market value of 129.5 161.4 159.1
assets
Present value of scheme (215.9) (175.1) (142.7)
liabilities
(Deficit)/surplus in the (86.4) (13.7) 16.4
schemes
Related deferred tax 21.9 4.1 (4.9)
asset/(liability)
(64.5) (9.6) 11.5
�21.9m of a potential deferred tax asset of �25.9m has been recognised, which
is the directors' best estimate of the amount recoverable in the foreseeable
future.
The movements in the scheme surplus/(deficit) were:
2003 2002
�m �m
At 1 April 2002 (13.7) 16.4
Current service costs (6.6) (5.6)
Contributions 7.0 6.0
Past service costs - -
Other finance income 1.1 0.8
Actuarial loss (74.2) (31.3)
At 31 March 2003 (86.4) (13.7)
The actuarial valuation at 31 March 2003 showed an increase in the deficit from
�13.7m to �86.4m. It has been agreed with the trustees that with effect from 1
January 2003 contributions will be paid at the rate of 12.8% of pensionable
salaries plus an additional amount of �1m per annum.
Notes to the preliminary announcement continued
Note 9 Pension commitments
2003 2002
�m �m
Current service costs excluding defined contribution schemes 6.6 5.6
Past service costs - -
Total operating charge 6.6 5.6
Costs are anticipated to increase as a proportion of total payroll costs, as
the scheme is now closed to new entrants.
Analysis of amounts recognised in the statement of total
recognised gains and losses
2003 2002
�m �m
Actual return less expected return on pension scheme assets (49.7) (10.5)
Experience gains and losses arising on the scheme liabilities 3.1 (4.0)
Changes in assumptions underlying the present value of the (27.6) (16.8)
scheme liabilities
Actuarial loss recognised in statement of total recognised (74.2) (31.3)
gains and losses:
Deferred tax relating to actuarial loss 18.3 9.4
(55.9) (21.9)
History of experience gains and losses
2003 2002
�m �m
Actual return less expected return on pension scheme assets (49.7) (10.5)
Expressed as a percentage of scheme assets (38.4%) (6.5%)
Experience gains and losses arising on the scheme liabilities 3.1 (4.0)
Expressed as a percentage of scheme liabilities 1.5% (2.3%)
Actuarial loss recognised in statement of total recognised (74.2) (31.3)
gains and losses
Expressed as a percentage of scheme liabilities (34.4%) (17.8%)
Note 10 Post balance sheet event
On 21 May 2003 the Group completed the sale of its German Industrial business
to the Managing Director of the business for a nominal consideration.
Included in exceptional items is an amount of �9.6m representing the impairment
of the consolidated net assets of the business to be disposed of.
The consolidated net assets at 31 March 2003 of the German business were as
follows:-
�m
Tangible fixed assets 14.0
Stocks 0.1
Debtors 6.2
Creditors (8.7)
Provisions (1.6)
Investments 0.2
10.2
Exchange translation difference in conversion from profit and loss (0.6)
account average rate to closing balance sheet rate
Exceptional loss on disposal of business 9.6
In addition, the 2004 Group accounts will reflect a further exceptional charge
of around �10m representing, movements in net assets between 31 March 2003 and
the completion date, transaction costs, the elimination of cash within the
business and the settlement of inter company balances at completion.
Other Notes
(i) The above figures represent an abridged version of the Group's full
accounts for the financial year ended 31 March 2003 upon which the auditors
have given an unqualified report. The statutory accounts of the Group will be
filed with the Registrar of Companies in due course. This report is prepared on
the basis of accounting policies as set out in the published financial
statements for the year ended 31 March 2002 with the exception that the Group
has now fully adopted the principles of Financial Reporting Standard 17
`Retirement Benefits', the impact of which is disclosed in note 9.
(ii) Earnings per share are calculated on a weighted average of the shares in
issue for the year.
(iii) The annual report will be posted to shareholders on 10 June 2003 and will
be available on request from The Secretary, Christian Salvesen PLC, 500
Pavilion Drive, Northampton NN4 7YJ. The Annual General Meeting will be held in
Edinburgh on 9 July 2003.
(iv) The final dividend of 1p will be recommended to shareholders and, if
approved, will be paid on 12 August 2003 to shareholders on the register on 18
July 2003. Share will trade ex - dividend from 16 July 2003.
(v) This preliminary announcement was approved by the board of directors on 2
June 2003.
END