Interim Results
December 28 2001 - 5:09AM
UK Regulatory
RNS Number:2712P
Bakery Services PLC
28 December 2001
Bakery Services plc ("the Group") - Interim Results
CHAIRMAN'S STATEMENT
OVERVIEW
The past six months have been dominated by the demerger of our Polish
business, Bakery Services Polska S.A. (being renamed CHI Polska S.A.) which
trades as coffeeheaven(R).
The demerger was approved at an Extraordinary General Meeting of Bakery
Services plc ("the Group") on November 29th 2001. On December 3rd 2001
coffeeheaven international plc, ("CHI") which through its UK subsidiary
coffeeheaven holdings Limited owns CHI Polska S.A., was admitted to the
Alternative Investment Market of the London Stock Exchange as a separately
quoted company. The demerger was effected through a dividend in specie under
which all Group shareholders at the qualifying date became shareholders in the
newly quoted CHI. Qualifying shareholders should have now received share
certificates relating to their holding in CHI.
Your Board believes that this transaction has successfully released
incremental value to the Group's shareholders and that the value currently
attributed to the CHI business validates the Group's decision to enter the
Polish market and subsequently demerge the business.
The Group's remaining activities are carried out principally by two UK
operating companies; Inbake Limited and Don Millers Limited. During the last
six months both these businesses have performed broadly in line with your
Board's expectations. Going forward they will now receive the fully focused
attention of the Group's management who have the primary near term goal of
returning the Group to satisfactory levels of profitability. This is to be
achieved, as described below, through organically growing sales in Inbake
Limited, rolling out the Don Millers franchise business and reducing central
overheads.
As reported in previous statements, considerable on going UK overhead costs
have been incurred by the Group that were primarily attributable to the
start-up, development and support of the Polish business. Following the
demerger of CHI Polska SA these levels of overhead cost are no longer required
and will be progressively reduced.
Review of Operations
Bakery Division - Inbake(R)
Inbake Limited operates in-store bakeries trading from concession sites in
large United Kingdom based supermarkets. As announced previously, to expand
the reach of the Don Millers brand (see below) and to reduce marketing costs,
the programme of re-branding selected Inbake concessions to the Don Millers
name has continued during the period. Trading results from re-branded
concessions continue to be encouraging.
Over the last few years your Board has been implementing a strategy of
diversification primarily as a result of declining margins and growth
opportunities in the Group's core business of in-store bakeries.
However during the last six months it has become increasingly apparent that
new business opportunities, that have the potential to produce adequate
investment returns, are emerging. This has come about as a result of
consolidation within the UK food-retailing sector in particular the merger of
the Cooperative Wholesale Society (CWS) - Inbake's principal customer - and
the Cooperative Retail Society (CRS). Your Board is pursuing these new
opportunities and hopes to be able to report further to shareholders during
the next six months.
In previous statements we referred to the trial concession with Somerfield.
Although this trial is a success, for a number of commercial reasons there are
no immediate plans to develop further concessions with this customer. We will
continue to trade the trial store.
Whilst operating profits from Inbake remain weak, the business continues to be
an important cash generator for the Group. The emerging opportunities for
sales growth (as described above) has the potential to considerably enhance
the profitability of this division.
Franchise Division -Don Millers (R)
Don Millers Limited is the franchisor for eleven retail bakery and sandwich
cafe franchises operating in high street and shopping centre locations,
predominantly in the midlands and north of England.
Underlying sales revenues and operating profits continue to exceed your
Board's expectations since the acquisition of this business from the Receivers
of Fresh Connection Limited in March 2000. Since the business came under the
management of the Group several franchises have achieved significant sales
growth. This is important as Don Miller's income is derived from franchise
fees based on these underlying sales. Considerable work has already been done
on preparing the systems, documentation and brand re-positioning necessary to
roll out the franchise offering. In previous reports I outlined the three
phases of development for this business. Having competed the first two phases
of this programme, your Board has now decided to implement the third phase -
being a roll out of stores - much more cautiously. This is being done to
conserve cash for investment in the Inbake business from which a more
immediate investment return is expected to be achieved and to ensure the
franchise business benefits from an expected weakening of the UK retail
property market.
Don Millers is an established retail bakery business and has been trading
since 1972. Your Board remains confident that the brand has strong consumer
awareness and can be revitalised into a major franchise business.
Summary of Financial Results
Group turnover for the period was #2,392,308 (2000 - #2,235,528). Group losses
before exceptional expenses relating to the demerger and taxation but after
deducting minority interests and goodwill amortisation were #234,467 (2000 -
#215,727). Losses in both the current and prior year periods include amounts of
#201,726 and #117,903 respectively relating to Bakery Services Polska S.A.
which was demerged from the Group effective November 29th 2001.
Taxation in the current and prior year comparative period was nil.
Net cash outflows from operating activities before working capital changes
were #170,433 (2000 - #158,021).
Cash balances at 30 September 2001 were #300,906 (2000 - # 663,910) and the
Group's Balance Sheet remains materially debt free (other than trade related)
Basic losses per share were 0.26p (2000 - 0.21p)
Outlook
The Group has been through a period of rapid change during the last
twenty-four months with the development of the business in Poland and the
purchase of Don Millers. Having now successfully demerged the Polish business,
your Board's primary focus is to return the Group to overall profitability.
The re-emergence of growth potential within Inbake Limited together with the
opportunity offered through the further development of Don Millers is highly
encouraging. Whilst full year results to 31 March 2001 will continue to show
losses, your Board anticipates that in due course the Group will return to
profitability.
Richard D. Worthington
Non-Executive Chairman and Financial Director
28 December 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited six months Audited 31
March
ended 30 September
UK Polish Total Total Total
Businesses Business
2001 2001 2001 2000 2001
#'000 #'000 #'000 #'000 #'000
Turnover 2,083 309 2,392 2,235 4,484
Cost of sales (1,321) (159) (1,480) (1,421) (2,871)
---------- ---------- ---------- ---------- ----------
Gross profit 762 150 912 814 1,613
---------- ---------- ---------- ---------- ----------
Gross margin 36.6% 48.5% 38.1% 36.4% 36.0%
---------- ---------- ---------- ---------- ----------
Distribution costs (331) (2) (333) (319) (620)
Administrative (475) (350) (825) (746) (1,528)
expenses
---------- ---------- ---------- ---------- ----------
Operating loss (44) (202) (246) (251) (535)
Provision for
de-merger
expenses (130) - -
Net interest
receivable/
(payable) (2) 9 21
---------- ---------- ----------
Loss on ordinary
activities
before taxation (378) (242) (514)
Taxation - - -
---------- ---------- ----------
Loss on ordinary
activities
after taxation (378) (242) (514)
Minority interests 14 26 88
---------- ---------- ----------
Retained loss for (364) (216) (426)
period
====== ====== ======
Loss per share
- Basic (0.26)p (0.21)p (0.39)p
- Fully diluted (0.26)p (2.21)p (0.39)p
====== ====== ======
CONSOLIDATED BALANCE SHEET
Unaudited six months Audited
ended 30 September 31 March
2001 2000 2001
#'000 #'000 #'000
Fixed assets
- Intangible assets 761 547 809
- Tangible assets 1,240 1,102 1,204
- Investments - -
---------- ---------- ----------
2,001 1,649 2,013
Current assets
- Stocks 142 160 149
- Debtors 493 656 585
- Cash at bank and in hand 301 664 211
---------- ---------- ----------
936 1,480 945
Creditors: amounts falling due within one year (740) (668) (672)
---------- ---------- ----------
Net current assets/(liabilities) 196 812 273
---------- ---------- ----------
Total assets less current liabilities 2,197 2,461 2,286
Creditors: amounts falling due after more than (35) (14) (7)
one year
Provisions for liabilities and charges (132) - (52)
Minority interests - all equity 98 23 84
---------- ---------- ----------
Net assets 2,128 2,470 2,311
====== ====== ======
Capital and reserves
- Called up share capital 141 116 116
- Share premium 2,569 2,357 2,357
- Profit and loss account (582) (3) (162)
---------- ---------- ----------
Shareholders' funds - all equity 2,128 2,470 2,311
====== ====== ======
CONSOLIDATED CASH FLOW STATEMENT
Unaudited six months Audited
ended 30 September 31 March
2001 2000 2001
#'000 #'000 #'000
Net cash outflow from operating activities (75) (360) (193)
Returns on investments and servicing of (3) 4 20
finance
Taxation - - -
Capital expenditure (109) (150) (870)
---------- ---------- ----------
(187) (506) (1,043)
Equity dividends paid - - -
---------- ---------- ----------
(187) (506) (1,043)
Financing 222 715 699
---------- ---------- ----------
35 209 (344)
====== ====== ======
Reconciliation of net cash flow to movements
in net funds/(debt)
Increase/(decrease) in cash in the period 35 209 (344)
Decrease in debt and lease financing 15 14 23
New finance leases (42) (9) (9)
====== ======= ======
Change in net funds/(debt) 8 214 (330)
Net funds at start of period 84 414 414
---------- ---------- ----------
Net funds at end of period 92 628 84
====== ====== ======
Notes
1. Publication of Non-Statutory Accounts
The financial information contained in this interim statement does not
constitute accounts as defined by section 240 of the Companies Act 1985. The
financial information for the full preceding year is based on the statutory
accounts for the year ended 31 March 2000. Those accounts, upon which the
Auditors issued an unqualified opinion have been delivered to the Registrar
of Companies.
2. Basis of Preparation of Interim Financial Information
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 31 March 2001.
3. De-merger expenses
Bakery Polska S.A. was de-merged from the Group on 29 November 2001.
Provision for the costs relating to the de-merger have been provided for as
an exceptional item in the Group profit and loss account for the six months
ended 30 September 2001.
4. Taxation
The Directors believe that tax losses brought forward will result in no tax
charge for the period.
5. Loss per share
The calculation of earnings per share is based on the profit after tax for
the financial period divided by the weighted average number of ordinary
shares in issue during the period. The weighted average number of ordinary
shares in issue for the periods reported were as follows:
Unaudited six months Audited
ended 30 September 31 March
2001 2000 2001
Basic:
Weighted average number of ordinary 139,463,470 103,745,901 109,825,613
shares in issue
Fully diluted:
Weighted average number of ordinary 139,463,470 103,745,901 109,825,613
shares in issue
6. Copies of this interim statement will be available from the nominated
adviser, Smith & Williamson Corporate Finance, No 1 Riding House Street,
London, W1A 3AS, free of charge, for one month from the date of this
announcement and on the Company's website, www.bakeryservices.co.uk, in due
course.
-ends-
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