RNS Number:5810P
Bakery Services PLC
10 September 2003
BAKERY SERVICES PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2003
2003 Highlights
* Business restructuring successfully completed.
* Operating profitability restored - #69,940 (2002 - #1,266,273 loss).
* Cash inflow from operating activities restored - #246,381 (2002
#182,072 outflow).
* Legal issue with managed store resolved (subject to contract).
* Funding realised for the development of the Don Millers franchise business.
Chairman's Statement
Overview
During the year the Group successfully completed the planned reduction in
operating costs and restructuring of its businesses.
This has resulted in a return to operating profitability and positive cash flows
as shown in the financial statements.
In addition the Group has reached a satisfactory agreement (subject to contract)
with the landlord of the Don Millers managed unit in Nottingham to which we have
comprehensively referred in previous reports. Trading at this unit had, in the
past, resulted in considerable losses but the store is now trading profitably.
Following legal advice, and after due consideration of the likely costs of any
action, your Board has concluded that it is in shareholders best interests to
prosecute a legal claim against its former solicitors in respect of the
acquisition of the Don Millers business in March 2000. In reaching this decision
your Board has been mindful of both the quantum of losses sustained and the
resulting set back to the development of the Group.
Accordingly, in April 2003 the Company's wholly owned subsidiary Don Millers
Limited brought a claim for damages for negligence against its former solicitors
arising from the acquisition of certain assets of Fresh Connection Limited and
Fresh Connections (Holdings) Limited from its joint administrative receivers in
March 2000. Damages in excess of #400,000 are being sought.
Although all claims have to date been rejected, your Board and its legal
advisors consider that no substantive basis for rejection has been provided.
Every effort is being made by your Board to reach an early settlement of this
matter.
Subsequent to the year-end the Group completed the sale of its entire holding of
#990,000 non-redeemable #1 preference shares in coffeeheaven international plc
for a cash consideration of #250,000 (before expenses). These preference shares
were created in November 2001 as part of the demerger of Bakery Services Polska
SA, the Group's Polish based coffee bar business.
The principal reason for the sale is to provide funding for the development of
the Group's Don Millers business. The Board agreed the sale after obtaining an
independent professional valuation for the preference shares and approved the
sale only after full consideration had been given to alternative options for the
raising of new capital.
A book loss on the above sale together with estimated costs amounting to
#760,000 has been provided in the financial statements. Under current accounting
convention your Board is of the opinion that, given the valuation provided, a
similar provision would have had to be made irrespective of whether or not an
actual sale of the preference shares had been completed.
The above sale is a material transaction for the Group. Accordingly a Pro Forma
Balance Sheet as at 31 March 2003 reflecting its effect is set out in note 2 of
Notes to the Financial Statements.
The proceeds of sale of the preference shares, together with existing cash
resources and banking facilities, provide a meaningful level of working capital
from which the Group can now further develop the Don Millers business.
Trading Results
Total Group sales for the year ended 31 March 2003 were #3,888,408 (2002 -
continuing only #4,088,566).
Sales are broken down as follows:
2003 2002
Inbake Limited 3,281,098 3,570,973
Don Millers Limited 607,310 510,823
Bakery Services Polska SA nil 470,913
________ ________
Total 3,888,408 4,552,709
======= =======
Inbake Limited
The decline in sales revenues from the Group's in-store bakery business, Inbake
Limited, continues last year's pattern and is due in the main to a store
closure. Like-for-like store sales declined slightly by 0.5% (2002 - decline
1.9%) in the year.
Gross margins improved for the second year to 35.4% (2002 - 33.7%) and Inbake's
profits before tax increased over the same period last year to #107,835 (2002 -
#52,104).
Don Millers Limited
Franchise revenue in Don Millers Limited is received in the form of fees based
on the underlying turnover of each franchise business. Underlying sales revenues
generated by Don Millers franchises were #3.8M (2002 - #4.1M). The reduction
reflects a closure of one non-performing franchise unit and the conversion of
one franchise unit to a managed store.
The trading performance of Don Millers continues to meet the expectations of
your Board.
Don Millers revenues are split as follows:
2003 2002
# #
Franchise income 9 units (2002 - 11) 240,379 250,932
Managed store sales 2 units (2002 - 1) 366,931 259,891
________ ________
Total company 607,310 510,823
======= =======
Franchise fee income declined 4.2% following the closure of a non-performing
unit and the conversion of one franchise to a managed unit.
Reflecting these changes, revenues from managed stores grew 41%.
Profits before tax for Don Millers are broken down as follows:
2003 2002
# #
Operating profit franchise stores 152,765 161,613
Operating profit/(loss) managed stores 1,121 (102,140)
________ ________
Combined operating profit 153,886 59,473
Release of goodwill provision (managed stores) - 52,390
________ ________
Total company 153,886 111,863
======= =======
The above demonstrates the very significant turnaround in operating results that
has been achieved for the managed stores.
Bakery Services Polska SA
Sales for Bakery Services Polska S.A. (shown for the prior year only) cover the
period to 29 November 2001 when this company was demerged from the Group. The
Board's reasons for demerging this business from the Group have been previously
addressed in a separate circular to shareholders dated 5 November 2001.
Group Summary
Retained losses for the year were #697,073 (2002 - #1,384,329) made up as
follows:
2003 2002
# #
Operating profit/(loss) 69,940 (1,266,273)
Interest receivable/(payable) net (7,013) 9,429
________ ________
Pre-tax profit/(loss) 62,927 (1,256,844)
Provision for loss on sale of preference (760,000) -
shares in August 2003
Net adjustment 2002 (combined) - (127,485)
________ ________
Retained loss for year (697,073) (1,384,329)
======= =======
Basic losses per share were 0.49p (2002 - 1.26p loss).
Cash at bank and in hand at 31 March 2003 was #171,117 (2002 - #61,319). This
position is significantly enhanced by #130,056 (2002 - #133,950) of total
debtors representing cash collected by third parties.
The Group's Balance Sheet remains materially debt free (other than trade
related). Bank overdraft facilities (recently renewed) of #200,000 are available
to the Group.
Your Board proposes no dividend for the year.
Operational Review
Bakery Division - Inbake (R)
The Company's principal customer base remains the various regions of the
Co-operative Group (CWS) Limited. Outlets are generally operated as in-store
bakery concessions within supermarkets and are located in England and Northern
Ireland.
Bakery concessions fall into three classifications broadly reflecting activity.
Number of Bakery Units - 2003 v 2002
* "Scratch" bakeries where the finished product is made from ingredients
mixed and baked as one process by craft bakers. These bakeries are
equipped with Company assets and operated by Company staff.
* "Mini" bakeries where French bread and rolls are finished, cream cakes
are made and traditional breads delivered from one of Inbake's "scratch"
bakeries.
* "Satellites" where all products are "delivered-in" from one of Inbake's
"scratch" bakeries.
Sales from most outlets are made direct to the consumer and the cash collected
through the checkout tills of the host supermarket.
As indicated in previous reports, revenues for Inbake continue to decline as its
principal customer, the CWS, increasingly focuses on smaller market town stores.
We expect this trend to continue and it is possible that further CWS stores in
which Inbake trades may, at some point in the future, be sold or close.
Although revenues are declining, the Inbake business is profitable. Your Board's
challenge is to manage the revenue decline in a way that maximises cash flow and
profit yet remains consistent with maintaining the Company's high standard of
customer service.
Franchise Division - Don Millers (R)
Don Millers Limited operates nine retail bakery and sandwich cafe franchises and
two managed stores, from high street and shopping centre locations predominantly
in the midlands and north of England, under the brand name Don Millers.
Don Millers is an established retail bakery business and has been trading since
1972. Your Board believes that the brand has strong consumer awareness and can
be revitalised into a major franchise business.
As mentioned in previous statements, a period of operational consolidation
followed acquisition of the Don Millers business by the Group in March 2000.
Your Board has now concluded a programme of brand re-positioning and completed
development of a comprehensive franchising package. This offers Don Millers as
an attractive contemporary franchise opportunity.
In the past the business has been constrained by a lack of development capital.
As set out above, this funding issue has largely been addressed and your Board
now has the resources to expand the business.
Future Prospects
The Group has successfully come though a number of very challenging years.
Profitability has been restored, a number of critical business issues have been
resolved and funding is now available for the business to move forward.
Although the long-term future of the Group lies with the success of Don Millers,
the larger part of the Group's activities is, and will continue for some time to
be, Inbake's in-store bakery business.
In the current year trading for both the Group's businesses has been in line
with your Board's expectations. However failure of the 2003 grain harvests in
central Europe, due to extreme weather conditions, has resulted in a substantial
increase in flour prices, the first for many years. These become effective from
September 2003. Whether Inbake, in particular, can successfully pass these
increases on to consumers without adversely impacting sales volumes is still
uncertain.
Notwithstanding this your Board remains confident that the progress the Group
has made over the past few years has positioned it well for the future.
Richard D. Worthington
Non-Executive Chairman and Financial Director
10 September 2003
Consolidated Profit and Loss Account for the year ended 31 March 2003
2003 2002
# # # #
All continuing Continuing Discounted Total
Turnover 3,888,408 4,088,566 464,143 4,552,709
Cost of (2,351,740) (2,574,010) (239,246) (2,813,256)
sales
__________ __________ __________ __________
Gross profit 1,536,668 1,514,556 224,897 1,739,453
Distribution (496,411) (621,654) - (621,654)
costs
Administrative
expenses
(including
exceptional
items) (970,317) (1,845,348) (538,724) (2,384,072)
Operating
profit/(loss)
before
exceptional
items 69,940 (329,710) (215,917) (545,627)
Exceptional
operating
expenses - (622,736) (97,910) (720,646)
__________ __________ __________ __________
Operating 69,940 (952,446) (313,827) (1,266,273)
profit/(loss)
Restructuring - (131,613) - (131,613)
costs
Loss on
disposal of
tangible fixed
assets - (366,194) - (366,194)
Provision for
loss on
disposal of
investment (760,000) - - -
__________ __________ __________ __________
Loss on
ordinary
activities
before
interest (690,060) (1,450,253) (313,827) (1,764,080)
Interest 79 16,984
receivable
Interest (7,092) (7,555)
payable
__________ __________
Loss on
ordinary
activities
before tax (697,073) (1,754,651)
Taxation on
profit on
ordinary
activities - -
__________ __________
Loss on
ordinary
activities
after tax (697,073) (1,754,651)
Minority - 42,086
Interests
Increase in reserves on demerger of
subsidiary - 328,236
__________ __________
Retained loss for the period (697,073) (1,384,329)
======= =======
Loss per share
- Basic (0.49p) (1.26p)
- Fully diluted (0.49p) (1.26p)
Consolidated Balance sheet as at 31 March 2003
2003 2002
# #
Fixed assets
Tangible assets 363,518 418,255
Investments 230,000 990,000
________ ________
593,518 1,408,255
Current assets
Stocks 106,967 131,236
Debtors 355,869 398,193
Cash at bank and in hand 171,117 61,319
________ ________
633,953 590,748
Creditors: amounts falling due within one (752,163) (813,192)
year
________ ________
Net current liabilities (118,210) (222,444)
________ ________
Total assets less current liabilities 475,308 1,185,811
Creditors: amounts falling due after more than (8,289) (21,719)
one year
________ ________
Net assets 467,019 1,164,092
======= =======
Capital and reserves
Called up share capital 140,833 140,833
Share premium 2,569,162 2,569,162
Profit and loss account (2,242,976) (1,545,903)
________ ________
Shareholders' funds - all equity 467,019 1,164,092
======= =======
Group Cash Flow Statement for the period from 1 April 2002 to 31 March 2003
2003 2002
# #
Net cash inflow from operating activities 246,381 (182,072)
Returns on investments and servicing of finance (7,013) 9,429
Capital expenditure (46,649) (158,212)
________ ________
192,719 (330,855)
Equity dividends paid - -
________ ________
192,719 (330,855)
Financing (16,511) 206,258
________ ________
Increase/(decrease) in cash 176,208 (124,597)
======= =======
Reconciliation of net cash flow to movement in net 176,208 (124,597)
debt
Increase/(decrease) in cash in the period 176,208 (124,597)
Decrease in debt and lease financing 16,511 30,617
New finance leases - (42,778)
Other non-cash changes - (43,974)
________ ________
Change in net debt 192,719 (180,732)
Net (debt)/funds at 1 April (96,895) 83,837
________ ________
Net funds/(debt) at 31 March 95,824 (96,895)
======= =======
NOTES TO THE FINANCIAL STATEMENTS
1. Preliminary Results
These preliminary results have been extracted from the Company's audited
accounts which have been approved and signed by the directors and auditors, but
have not yet been delivered to the Registrar of Companies. The audited accounts
have been prepared under the historical cost convention using the accounting
policies set out in the Company's 2003 financial statements.
2. Post Balance Sheet events
On 10 July 2003 the Company agreed to sell the #990,000 cumulative
non-redeemable 5% preference shares in coffeeheaven international plc, which it
held at 31 March 2003, to coffeeheaven international plc for a consideration of
#250,000. The anticipated costs relating to this transaction amount to #20,000.
The transaction was completed on 5 August following an Extraordinary General
Meeting of coffeeheaven international plc. Provision for the loss on disposal of
these shares, which amounts to #760,000, has been made in these financial
statements.
The above transaction has a material effect on the Balance Sheet of the Group.
Below is a Pro Forma Group Balance Sheet (unaudited) as at 31 March 2003
adjusted to reflect the sale of the preference shares and the receipt of the
proceeds of the sale.
Pro Forma Group Balance Sheet
Audited Group Sale of Pro forma
Balance Sheet preference Group Balance
as at 31 March shares in sheet as at 31
2003 coffeeheaven March 2003
international
plc
# # #
Fixed assets
Tangible assets 363,518 363,518
Investments 230,000 (230,000) -
________ ________
593,518 363,518
Current assets
Stocks 106,967 106,967
Debtors 355,869 355,869
Cash at bank and in hand 171,117 230,000 401,117
________ ________
633,953 863,953
Creditors: amounts falling (752,163) (752,163)
due within one year
________ ________
Net current (liabilities)/ (118,210) 111,790
assets
________ ________
Total assets less current 475,308 475,308
liabilities
Creditors: amounts falling (8,289) (8,289)
due after more than one
year
________ ________
Net assets 467,019 467,019
======= =======
Capital and reserves
Called up share capital 140,833 140,833
Share premium 2,569,162 2,569,162
Profit and loss account (2,242,976) (2,242,976)
________ ________
Shareholders' funds - all 467,019 467,019
equity
======= =======
3. Movements on shareholders funds
2003 2002
# #
At 1 April 1,164,092 2,311,546
Retained loss (697,073) (1,384,329)
Shares issued - 236,875
__________ __________
As at 31 March 467,019 1,164,092
======== ========
4. Earnings per share
Earnings per ordinary share is calculated as follows:-
Basic Fully diluted
2003 2002 2003 2002
# # # #
(Loss)/profit
attributable
to ordinary
shareholders (697,073) (1,754,651) (697,073) (1,754,651)
Weighted
average number
of ordinary
shares 140,833,333 139,463,470 140,833,333 139,463,470
Earnings per
ordinary
share (0.49p) (1.26p) (0.49p) (1.26p)
========= ========= ========= =========
5. 2003 Report and Accounts
The 2003 report and accounts will be published and copies sent to shareholders.
Further copies will be available from the nominated adviser: Smith & Williamson
Corporate Finance, No 1 Riding House Street, London, W1A 3AS.
6. Copy of Announcement
A copy of this announcement will be available from the nominated adviser: Smith
& Williamson Corporate Finance Limited, No 1 Riding House Street, London, W1A
3AS for one month from the date of this announcement
This information is provided by RNS
The company news service from the London Stock Exchange
END
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