RNS Number:4647B
Bakery Services PLC
02 August 2004
BAKERY SERVICES PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2004
2004 HIGHLIGHTS
* Sales decline 7% to #3,629,363.
* Like-for-like sales growth + 0.3% (2003 - decline 0.5%).
* Positive cash flows from operations before working capital changes
#41,483(2003 - #171,849).
* Opening of first Don Millers store in new trading format 'Millers
Eating Experience'TM expected late August 2004.
* Solid trading results from in-store bakery business despite
contracting revenues.
CHAIRMAN'S STATEMENT
Overview
The year has been one of focus on operational consolidation and the securing of
retail sites to trial the new Don Millers concept - 'Millers Eating Experience'TM.
The first of the new style units is expected to open in late August 2004
at a prime location in Temple Row, Birmingham.
To strengthen the management team, Justin Waldock (37) joined the company in
September 2003. Justin comes to us with a wealth of relevant practical
experience and is specifically tasked with development and roll out of the
'Millers Eating Experience' concept.
At the Group's in-store bakery business - Inbake Limited - the focus remained to
maximise operating income from declining revenues. This was achieved despite the
closure of a further host superstore during the year.
Regrettably the Don Millers unit in Nottingham (to which we have comprehensively
referred in previous reports) has again become a cause for concern. In our
previous reports we indicated that a franchise arrangement had been concluded to
take over day-to-day management of this store and our expectation was that this
would eliminate losses from this unit.
However in June 2004 the Company was obliged to reassume management of the store
due to the ill health of the franchise operator. As a result the Company is once
again in discussions with the landlord of the unit to determine if terms can be
agreed for a lease surrender. The Board has been advised that under the
circumstances any cost of surrender may be recoverable as part of the legal
claim referred to below and accordingly an appropriate provision has been
included in the statement of claim. Until this matter is resolved the Company
will be obliged to divert resources towards the management of this unit to
mitigate losses.
Progress with the settlement of the long running legal dispute in relation to
the acquisition of Don Millers business in March 2000 (addressed extensively in
previous reports) has been frustratingly slow. In the opinion of the Company's
legal team, developments during the past year have only further strengthened the
Company's case. Mediation is under consideration by both parties as a means of
resolving the matter. The present claim by the Company is now likely to exceed
#1 million.
Trading Results
Total Group sales for the year ended 31 March 2004 were #3,629,363
(2003 - #3,888,408) broken down as follows:
2004 2003
# #
Inbake Limited 2,963,483 3,281,098
Don Millers Limited 665,880 607,310
_________ _________
Total 3,629,363 3,888,408
======== ========
Inbake Limited
The anticipated decline in sales revenues from the Group's in-store bakery
business, Inbake Limited, continues the pattern of prior years and is in the
main due to host store closures. However during the year like- for- like store
sales grew by 0.3% (2003 - decline 0.5%) and participation in total host store
sales continued to improve.
Gross margins also improved for the third year running to 37.8% (2003 - 35.4%).
Despite the fall in sales revenue, operating profits from Inbake were broadly
the same as the prior year at #312,465 (2003 - #314,804) and are stated after
charging #35,000 of one off closure and related costs.
These results are a considerable credit to our Inbake team lead by Colin Taylor.
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 in the year generated by Don Millers franchises were
#3.2M (2003 - #3.8M). This reduction in total revenues arises from the closure
of two stores - one due to a compulsory purchase order and the second due to the
expiry of the shop lease.
Like-for-like underlying revenues were broadly flat compared to the prior year.
Don Millers revenues are split as follows:
2004 2003
# #
Franchise income 7 units (2003 - 9) 205,782 240,379
Managed store sales 2 units (2003 - 2) 460,098 366,931
_________ _________
Total company 665,880 607,310
======== ========
Overall franchise fee income declined 14% due to the store closures referred to
above. Like-for-like fee income was broadly flat compared to the prior year.
Operating profits for Don Millers are broken down as follows:
2004 2003
# #
Operating profit franchise stores 65,704 152,765
Operating (loss)/profit (35,204) 1,121
_________ _________
Total company 30,500 153,886
======== ========
Franchise store profits this year are stated after charging development expenses
relating to the new 'Millers Eating Experience' concept of some #45,000.
Group Summary
Retained losses for the year were #57,880 (2003 - #697,073) made up as follows:
2004 2003
# #
Operating (losses)/profits (59,324) 69,940
Interest receivable/(payable) net 1,444 (7,013)
_________ _________
Total operating (losses)/profit (57,880) 62,927
Restructuring costs - provision for loss on
sale of preference shares in August 2003 Nil (760,000)
_________ _________
Retained loss for year (57,880) (697,073)
======== ========
Basic losses per share were 0.04p (2003 - 0.49p loss).
Cash at bank and in hand at 31 March 2004 was #232,796 (2003 - #171,117). This
position is significantly enhanced by #97,053 (2003 -#130,056) of total debtors
representing cash collected by third parties.
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.
* "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 our "scratch"
bakeries.
* "Satellites" where all products are "delivered-in" from one of our
"scratch" bakeries.
Sales from most outlets are made direct to the consumer and the cash collected
through the checkout tills of the host supermarket.
During the year one scratch bakery closed following the sale of the CWS host
store resulting an estimated loss in annual sales revenue to Inbake of some
#250,000.
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.
In June 2004 the Company was advised that a further CWS store was to close in
2004. This will result in a further loss of annual sales revenue to Inbake
amounting to approximately #200,000.
Although revenues are and will continue to decline, the Inbake business is
profitable and is expected to remain so for some time unless the rate of host
store closures increases. Currently your Board has no knowledge of any further
closures at the present time.
Your Board's challenge in respect of the Inbake business remains to manage the
revenue decline in a way that maximises cash flow and profit yet is consistent
with maintaining the Company's high standard of customer service.
Franchise Division - Don Millers(R)
Don Millers Limited operates seven retail bakery and sandwich cafe franchises
from high street and shopping centre locations, predominantly in the midlands
and north of England, under the brand name Don Millers.
As indicated above your Board has completed development of a new contemporary
franchising opportunity - 'Millers Eating Experience'. Information about this
exciting concept can be found on a new web site at www.millersexperience.com.
With the saturation of cafe and gastronomy outlets in London, many leading
operators are looking to expand into cities and towns throughout the UK. This
has lead to competition for prime locations. However the Company as been
successful in securing an ideal site in Birmingham to trial the 'Millers Eating
Experience' concept. Currently under construction, the new store is expected to
open in late August 2004.
It is anticipated that most of the existing portfolio of Don Millers franchised
units will continue to trade in their present format. However where appropriate
existing franchisees will be offered the opportunity to convert to the new
format in due course.
Future Prospects
The Group's future success depends to a considerable degree upon the success of
'Millers Eating Experience'. Your Board believe that success or otherwise of the
pilot store is likely to become apparent within a short time after the opening
date.
The other significant matter is the outcome of the Company's pending legal claim
now estimated at more than #1M. Settlement at even a somewhat lower figure will
substantially increase the working capital available to the Group. Shareholders
will be separately advised of any significant development in this matter.
As your Board has indicated in the past the long-term future of the Group lies
with the success of 'Millers Eating Experience'. However 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 both the Group's businesses are trading ahead of
expectations. Inbake's in-store business has been performing exceptionally well
achieving like-for-like sales growth of around 5.5% in the quarter to 30 June
2004.
Richard D. Worthington
Non-Executive Chairman and Financial Director
2 August 2004
Consolidated Profit and Loss Account
for the year ended 31 March 2004
2004 2003
# #
Turnover 3,629,363 3,888,408
Cost of sales (2,166,245) (2,351,740)
__________ __________
Gross profit 1,463,118 1,536,668
Distribution costs (435,858) (496,411)
Administrative expenses (1,086,584) (970,317)
__________ __________
Operating(loss)/profit (59,324) 69,940
Provision for loss on disposal of investment - (760,000)
__________ __________
Loss on ordinary activities before interest (59,324) (690,060)
Interest receivable 5,924 79
Interest payable (4,480) (7,092)
__________ __________
Loss on ordinary activities before tax (57,880) (697,073)
Taxation on profit on ordinary activities - -
__________ __________
Retained loss for the period (57,880) (697,073)
========= =========
Loss per share
- Basic (0.04p) (0.49p)
- Fully diluted (0.04p) (0.49p)
Statement of total recognised gains and losses for the year ended 31 March 2004
The company has not recognised gains or losses other than the loss for the above
two financial years.
Consolidated Balance Sheet
as at 31 March 2004
2004 2003
# #
Fixed assets
Tangible assets 346,916 363,518
Investments - 230,000
________ ________
346,916 593,518
Current assets
Stocks 131,549 106,967
Debtors 373,927 355,869
Cash at bank and in hand 232,796 171,117
________ ________
738,272 633,953
Creditors: amounts falling due within one (651,382) (752,163)
year
________ ________
Net current assets/(liabilities) 86,890 (118,210)
________ ________
Total assets less current liabilities 433,806 475,308
Creditors: amounts falling due after more than (24,667) (8,289)
one year
________ ________
Net assets 409,139 467,019
======= =======
Capital and reserves
Called up share capital 140,833 140,833
Share premium 2,569,162 2,569,162
Profit and loss account (2,300,856) (2,242,976)
________ ________
Shareholders' funds - all equity 409,139 467,019
======= =======
Approved and signed on behalf of the Board of Directors on 2 August 2004.
Keith A Bentley Richard D Worthington
Director Director
Group Cash Flow Statement
for the period from 1 April 2004 to 31 March 2004
2004 2003
# #
Net cash (outflow)/inflow from operating (252,812) 246,381
activities
Returns on investments and servicing of finance 1,444 (7,013)
Capital expenditure (net) 183,848 (46,649)
________ ________
(67,520) 192,719
Equity dividends paid - -
________ ________
(67,520) 192,719
Financing (20,968) (16,511)
________ ________
(Decrease)/increase in cash (88,488) 176,208
======= =======
Reconciliation of net cash flow to movement in net
debt
(Decrease)/increase in cash in the period (88,488) 176,208
Decrease in debt and lease financing 20,968 16,511
New finance leases (45,159) -
Redemption of finance leases 7,106 -
________ ________
Change in net debt (105,573) 192,719
Net funds/(debt)at 1 April 95,824 (96,895)
________ ________
Net(debt)/funds at 31 March (9,749) 95,824
======= =======
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 2004 financial statements.
2. Movements on shareholders funds
2004 2003
# #
At 1 April 467,019 1,164,092
Retained loss (57,880) (697,073)
__________ __________
As at 31 March 409,139 467,019
======== ========
3. Earnings per share
Earnings per ordinary share is calculated as follows:-
Basic Fully diluted
2004 2003 2004 2003
# # # #
Loss
attributable
to ordinary (57,880) (697,073) (57,880) (697,073)
shareholders
Weighted
average number
of ordinary 140,833,333 140,833,333 140,833,333 140,833,333
shares
Earnings per (0.04p) (0.49p) (0.04p) (0.49p)
ordinary
share
========= ========= ========= =========
4. 2004 Report and Accounts
The 2004 report and accounts will be published and copies sent to shareholders.
Further copies will be available from the nominated adviser: Smith & Williamson
Corporate Finance Limited, No 1 Riding House Street, London, W1A 3AS.
5. 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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