Q3 Results - Part I
05 Agosto 2003 - 4:01AM
UK Regulatory
RNS Number:3227O
Enodis PLC
05 August 2003
5 August 2003
Results for the 39 weeks ended 28 June 2003
Group Financial Highlights
#m (except EPS)
Q303 Q302 YTD03 YTD02
Food Equipment adjusted operating profit* 18.6 19.1 42.2 49.5
Effect of disposals and foreign exchange (1.2) (7.1)
Food Equipment like-for-like** operating profit 18.6 17.9 42.2 42.4
Group adjusted profit before tax*** 11.3 9.1 19.6 20.4
Group profit/(loss) before tax 6.7 (89.9) 4.7 (98.1)
Adjusted diluted/earnings per share(p)*** 2.4 2.1 4.1 5.3
Basic earnings/(loss) per share(p) 1.2 (23.4) 0.4 (30.1)
Period end net debt 174.0 225.7
Key Points
* Group adjusted Q3 profit before tax up 24% to #11.3m (Q302 : #9.1m)
* 4% improvement in overall Q3 Food Equipment like-for-like operating profit
* Global Food Service Equipment like-for-like operating profit down #2.4m
(13%) in the quarter, primarily in the US, due to continuing difficult
market conditions offset in part by cost reductions
* Food Retail Equipment delivered operating profits of #2.0m, up #3.1m on
prior year like-for-like Q3. Kysor Warren turnaround on track - breakeven
in Q3
* Net debt further reduced to #174m - 23% lower than prior year
Dave McCulloch, Chief Executive Officer, said:
" Overall operating performance in Q3 was in line with the Board's expectations
and we are pleased to see continuing improvement in adjusted profit before tax
and net debt. Despite difficult markets, we continue to see the results of our
ongoing aggressive cost reductions and of management actions at Kysor Warren. We
remain tightly focused on improving operating performance, reducing net debt and
on introducing innovative products to gain profitable share. We are not assuming
any significant change in market conditions in the near term."
For further enquiries:
Dave McCulloch Chief Executive Officer 020 7304 6006
Dave Wrench Chief Financial Officer 020 7304 6006
Richard Mountain Financial Dynamics 020 7269 7291
A conference call for equity investors and analysts will be held today at 9:30am
and for bondholders at 11:00am today. For details, please contact Sorrel Beynon
at Financial Dynamics on 020 7269 7291 or Tina Mularski at Enodis on 020 7304
6006.
Management's Discussion and Analysis (MD&A)
Under the terms of our 10 3/8% senior subordinated notes we are required to
prepare and furnish an MD&A to the Securities and Exchange Commission (SEC) in
the US on Form 6-K. The MD&A is a US style explanation of our H103 results and
contains more detail of certain matters, for example liquidity and capital
resources, historical cashflows and legal proceedings including more detail on
the status of the Consolidated Industries case. You will be able to obtain a
copy of the Form 6-K filing on the SEC website at www.sec.gov.
CHIEF EXECUTIVE OFFICER'S REVIEW
Overview of Q3
Adjusted profit before tax in the quarter was up 24% on prior year at #11.3m.
We have, as expected, experienced continuing difficult market conditions
throughout our Food Equipment businesses. Despite this, the quarter has seen
like-for-like Food Equipment operating profit* up 4% versus Q3 last year. This
has been achieved as a result of the early benefits of the cost saving measures
we announced with our H1 2003 results and substantially improved results in our
Food Retail businesses, particularly Kysor Warren.
Our cost reduction programme has limited the effect on operating profit of
generally depressed market conditions, lower sales to certain Quick Serve
Restaurant chains and pricing and margin pressures particularly at our North
American refrigeration business. Global Food Service Equipment like-for-like
operating profits were down 13% in Q303 and 8% in the year to date.
As we envisaged, Kysor Warren broke even in Q303 as the turnaround continued.
Food Retail Equipment in total made operating profits of #2.0m in the quarter,
up from #0.7m in Q203 and a loss of #0.8m in Q103.
Net debt was #174.0m, 23% below prior year. Significantly reduced debt levels,
principally resulting from the prior year disposal programme and our strong
operating cashflow, have led to a reduction in interest costs of #2.8m in the
quarter compared to prior year.
Year to date Results
YTD profit before tax, goodwill amortisation and exceptional items was #19.6m
(YTD 02 : #20.4m). The change from prior year was principally caused by:
#m
* Loss of YTD operating profit from
businesses sold during FY02 (4.4)
* Impact of foreign exchange rates
on operating profits (2.7)
* Lower interest charge 6.5
Like-for-like YTD Food Equipment operating profits were flat, with an
improvement in Food Retail Equipment to YTD operating profits of #1.9m (YTD 02
like-for-like operating loss of #1.6m) offsetting an 8% decline in Food Service
Equipment.
* Throughout this discussion, operating profit is before operating
exceptional items and goodwill amortisation (see note 3 in the attached
results for details).
Exceptional Items
As discussed in our interim announcement on 8 May 2003, we implemented a cost
reduction and restructuring programme to mitigate the anticipated impact of
slower markets in the second half. The total exceptional charge in respect of
such measures expected in the year is around #6m, of which #1.8m was recognised
in H103. A further #1.2m was recognised in Q303 and we will implement
previously planned programmes costing approximately #1.6m in Q403. We have
recently identified other programmes costing approximately #1.3m which will be
charged in Q4 and will yield benefits in 2004. Cost savings from all programmes
in the second half of the current year are targeted to be approximately #9m, of
which approximately #4m has been achieved in this quarter.
There have been no changes in other exceptional items recognised in the first
half.
Cashflow and Financing
At the time of our interim announcement, we anticipated a small rise in net debt
in Q303. However, favourable exchange rates and a slightly better than
anticipated underlying cashflow performance brought about a reduction in net
debt.
Net debt at 28 June 2003 was #174.0m, down from #181.0m at 29 March 2003 and
#186.1m at 28 September 2002. The reduction from 28 September 2002 is the
result of continued strong operating cash inflow, after capital expenditure but
before exceptional items, of #31.4m offset by interest payments of #16.8m, tax
of #6.0m and exceptional items of #5.7m. Changes in foreign exchange rates have
reduced debt by #9.2m.
Earnings per Share
In the quarter, adjusted diluted earnings per share were 2.4p (Q302 : 2.1p).
Year to date adjusted diluted earnings per share were 4.1p (Q302 YTD : 5.3p).
Basic earnings per share for the year to date were 0.4p (Q302 YTD : loss per
share of 30.1p).
REVIEW OF OPERATIONS
Global Food Service Equipment
Global Food Service Equipment comprises our operations in North America, which
contribute approximately three quarters of our Food Service Equipment turnover,
and those in Europe/ Asia.
In March we indicated we were seeing sluggish markets, capex reductions at
certain Quick Serve Restaurant chains, and margin pressures in the refrigeration
sector. Despite aggressive and prompt cost reduction actions, these market
factors have led to Q3 like-for-like operating profits in Global Food Service
Equipment being down 13% in the quarter.
In the short term, we are not assuming any significant change in market
conditions and are focused on cost reduction, improved operating performance,
and continued product innovation to increase our penetration of those restaurant
chains which are growing or changing menus to increase same store turnover.
Results
Turnover (#m) Q303 Q302 FX & Disposals Like-for-like
Q302
Food Service Equipment
- North America 103.1 125.9 (14.5) 111.4
Food Service Equipment
- Europe/Asia 38.8 36.7 1.9 38.6
Global Food Service Equipment 141.9 162.6 (12.6) 150.0
Like-for-like turnover of our North American operations, including exports, was
down 7% in the quarter due to weak sales to certain Quick Serve Restaurant
chains and the expected general market softness throughout North America.
Like-for-like turnover in Food Service - Europe/Asia was flat.
Operating Profit (#m) Q303 Q302 FX & Disposals Like-for-like
Q302
Food Service Equipment
- North America 13.3 17.6 (1.6) 16.0
Food Service Equipment
- Europe/Asia 3.3 2.7 0.3 3.0
Global Food Service Equipment 16.6 20.3 (1.3) 19.0
Like-for-like operating profits in our North American operations declined 17% in
the quarter. In addition to the volume related factors mentioned above, our
North American refrigeration business has continued to experience pricing
pressures and down-trading by customers to lower margin products. Cost savings
from the programmes instituted when we identified market softness earlier in the
year were approximately #4m.
Like-for-like operating profits in Food Service Equipment - Europe/Asia were up
10% with continuing improvements in the UK.
Food Retail Equipment
Our Food Retail Equipment business operates in North America only with five
plants in the US and sales/service offices in Canada and Mexico.
(#m) Q303 Q302 FX & Disposals Like-for-like
Q302
Turnover 29.8 37.0 (6.0) 31.0
Operating profit 2.0 (1.2) 0.1 (1.1)
Like-for-like turnover was down 4% in the quarter, reflecting our decision to
shed certain unprofitable business at Kysor Warren.
The performance of Kysor Warren, which had previously been losing market share
for some 4 years and incurred heavy losses in 2002, has continued to improve and
we achieved our target of breakeven in Q3. By focusing on quality, on-time
delivery, and responsive customer service, Kysor Warren is beginning to regain
lost customers and attract new ones. An intense focus on the implementation of
"lean manufacturing" has dramatically improved operating margins. In addition
Kysor Panel Systems performed strongly with a clear focus on cost control.
Property
Development of our Felsted property is continuing and we expect profits of #4m
in Q403. There were no property profits in the quarter or year to date.
Current Trading and Outlook
Our expectations for both the food equipment market and our performance for the
full year are unchanged from those expressed at the time of our half year
announcement in May 2003.
We expect to achieve our cost reduction target of approximately #9m for the
second half.
Food Retail Equipment is expected to continue its improvement in Q4 (compared to
prior year Q4 losses of #3.6m) as Kysor Warren returns to profitability.
Total exceptional items for the year will be in the order of #7.5m.
We remain targeted on further reduction in debt by the year end.
The Food Service sector is large and consumer spending on consumption of food
and beverages outside the home remains robust and is forecast to continue to
grow. Although the short term outlook for our business continues to be
uncertain we expect that when the market for food equipment recovers, demand
will be led by replacement spending across the large installed base. We remain
confident of Enodis' ability to capitalise on the opportunities which will
arise.
We continue to focus on targeting key markets and accounts, together with
innovative new product development as well as cost reduction measures.
Dave McCulloch
Chief Executive Officer
5 August 2003
--------------------------
* Before operating exceptional items and goodwill amortisation (see note 3 to
the attached results for details).
** Like-for-like adjusted for disposals and foreign exchange (see Other
Financial Information in the attached results for details).
*** Before all exceptional items and goodwill amortisation (see Other Financial
Information in the attached results for details).
The above adjusted information is presented to indicate the underlying
operational performance of the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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