Final Results Part I - US
18 Novembro 2003 - 5:05AM
UK Regulatory
RNS Number:1733S
Enodis PLC
18 November 2003
PART 1
18 November 2003
Preliminary Results for the 52 weeks ended 27 September 2003
Group Financial Highlights - #m (except EPS)
Q403 Q402 FY03 FY02
(unaudited) (unaudited)
Food Equipment adjusted operating profit* 22.7 17.7 64.9 67.2
Effect of disposals and foreign exchange (0.3) (7.4)
Food Equipment like-for-like operating profit** 22.7 17.4 64.9 59.8
Group adjusted profit before tax*** 19.3 17.6 38.9 38.0
Group profit/(loss) before tax 11.2 12.3 15.9 (85.8)
Adjusted diluted earnings per share(p)*** 3.6 4.7 7.7 10.4
Basic earnings/(loss) per share(p) 2.0 3.5 2.4 (24.8)
Period end net debt 139.7 186.1
Key Points
* Group returns to profit before tax - #15.9m (FY02: loss of #85.8m)
* Net debt reduced by 25% in FY03 to #139.7m - down from #365.9m at
September 2001
* Q4 Food Equipment like-for-like operating profit** up 30% on prior
year, reflecting an improved performance in Food Service Equipment -
Europe/Asia and the return to profit in Food Retail Equipment
* Full Year Food Equipment like-for-like operating profit** up 9%,
reflecting primarily Food Retail Equipment's return to profitability
(FY03: #4.0m, FY02: loss of #5.1m)
* Strong pre-exceptional operating cashflow generation of #70.6m (after
capital expenditure)
Peter Brooks, Chairman, Enodis plc, said:
"I am delighted to report that Enodis has returned to profitability. Overall,
2003 has been a year of considerable achievement despite continuing challenging
markets. We look forward to seeing further progress this year as we maintain
our drive to rebuild shareholder value."
Dave McCulloch, Chief Executive Officer, Enodis plc, added:
"Many key operating metrics show an advance over last year, including the
impressive turnaround in Food Retail Equipment. The 25% reduction in net debt
exceeded our expectations and reflects the strong cash generative nature of the
Group. We will continue to focus on cost, further reducing net debt and gaining
profitable market share through innovative products and concentration on key
markets and customers.
"We have based our planning on modest market growth over the next year. While
economic indicators are pointing to a US recovery, we have yet to see this
reflected in increased order rates, as capital spending on food equipment
typically lags any improvement in macro economic conditions. We remain
confident of the long term outlook for Enodis."
* Before operating exceptional items and goodwill amortisation (see note 3
to the attached results for details).
** Prior year like-for-like further adjusted for disposals and foreign
exchange (see Other Unaudited Financial Information in the attached results for
details).
*** Before all exceptional items and goodwill amortisation (see Other Unaudited
Financial Information in the attached results for details).
The above adjusted information is used throughout this document and is presented
to indicate the underlying operating performance of the Group.
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
Annual Report on Form 20-F
Enodis has a secondary listing on the New York Stock Exchange. Under the terms
of this listing we are required to prepare and file with the Securities and
Exchange Commission (SEC) in the US an annual report on Form 20-F. This report
includes a US style explanation of our full year results (MD&A) and contains
more detail of certain matters, for example liquidity and capital resources,
historical cash flows and legal proceedings including more detail on the status
of the Consolidated Industries case. We intend to file our Form 20-F during
December 2003 and once this has occurred you will be able to obtain a copy on
the SEC website at www.sec.gov.
This press release contains "forward-looking statements," within the meaning of
the U.S. federal securities laws, that represent our expectations or beliefs
regarding future events, based on currently available information, including
statements concerning our anticipated performance. These statements by their
nature involve risks and uncertainties, many of which are beyond our control.
Our actual results could differ materially from those expressed in the
forward-looking statements due to a variety of important factors, including our
substantial debt obligations and restrictive covenants; susceptibility to
economic downturns including delays on market improvements; competitive pricing
pressures; consolidation or loss of large customers; changes in customer
purchasing patterns; the results of technological developments; currency
fluctuations; the outcome of current lawsuits; and other risks related to our
U.S., U.K. and foreign operations. A more complete description of our risk
factors is included under "Risk Factors" in our Form 20-F which was filed with
the SEC during December 2002, as well as in more recent Form 6-K reports
furnished with the SEC.
CHIEF EXECUTIVE OFFICER'S REVIEW
Results
Turnover was #679.4m (FY02 : #793.2m) with like-for-like Food Equipment turnover
down 2% in difficult markets.
Like-for-like Food Equipment operating profit improved 9%. Food Retail
Equipment like-for-like operating profit improved by #9.1m due to a significant
improvement at Kysor Warren, which offset a 6% decline in Global Food Service
Equipment where tight cost control mitigated the impact of difficult market
conditions.
Full year profit before tax, goodwill amortisation and exceptional items was
#38.9m (FY02 : #38.0m). In addition to the improvement in like-for-like
operating profits, key components of the change from prior year are:
#m
* Loss of operating profit from businesses sold in FY02 (4.4)
* Impact of foreign exchange rates on operating profit (3.0)
* Lower property profit (2.6)
* Lower interest charge 7.4
Profit before tax was #15.9m (FY02 : loss of #85.8m), with exceptional items
reducing to #9.2m from #104.8m.
Profit after tax was #9.5m compared to losses of #86.8m in the prior year.
Q4 profit after tax was #8.1m (FY02 #13.8m) with the reduction predominantly due
to the timing of recognition of exceptional items and tax adjustments.
Full year net debt reduced by 25% to #139.7m through a combination of excellent
cash performance and the benefit of #9.6m of favourable foreign exchange
movements.
Cashflow
The Group continues to demonstrate strong cash generative characteristics.
Operating cash flow before payments in respect of exceptional items and after
capital expenditure, in the year was #70.6m (FY02 : #91.0m). Operating working
capital was again improved through our focus on cash conversion days, which
ended this year better than our target of 40 days. Capital expenditure was
slightly up, although some projects were delayed into FY04. In the longer term
we expect capital expenditure to broadly equal depreciation.
REVIEW OF OPERATIONS
Global Food Service Equipment
Global Food Service Equipment comprises our operations in North America, and
those in Europe/ Asia. North America contributes approximately three quarters of
our Global Food Service Equipment turnover.
In March we indicated that we were seeing sluggish markets, capital expenditure
reductions at certain Quick Service Restaurant chains and margin pressures in
the refrigeration sector. Accordingly, we took aggressive and prompt cost
reduction actions throughout the Group at the half year, supplemented by further
actions in Europe in Q403.
These actions and a strong performance from our Ice businesses in North America
and Europe over the summer months have limited the impact of market factors to a
decline in FY03 like-for-like operating profit of 6% and Q403 of 1%. Our North
American refrigeration businesses delivered operating profit in Q4, compared to
break even in the first nine months due to continued improvement and seasonal
volume factors.
Turnover (#m) FY03 FY02 FX & Like-for-like
Disposals FY02
Food Service Equipment
- North America 408.4 474.1 (58.4) 415.7
Food Service Equipment
- Europe/Asia 144.5 145.0 (1.3) 143.7
Global Food Service Equipment 552.9 619.1 (59.7) 559.4
Food Service Equipment North America like-for-like sales were down 2% due to
lower sales to certain Quick Service Restaurant chains, which started to have an
impact in late Q203. This was offset by strong sales in Canada up 25% as we
rolled out Merrychef ovens at a major chain, establishing the Merrychef brand in
North America.
Europe/Asia like-for-like sales were up 1% overall following good performances
at our European Ice businesses.
Worldwide Q4 like-for-like sales were down 2% with weaker North American sales
due to reductions at certain Quick Service Restaurant chains being largely
offset by a 7% increase in Europe/Asia as our continental European businesses
improved on last year in a tough market.
Operating Profit (#m) FY03 FY02 FX & Like-for-like
Disposals FY02
Food Service Equipment
- North America 50.7 60.8 (5.8) 55.0
Food Service Equipment
- Europe/Asia 10.2 9.7 0.2 9.9
Global Food Service Equipment 60.9 70.5 (5.6) 64.9
Food Service Equipment - North America like-for-like operating profit declined
8% due to lower overall turnover and pricing and margin pressure at our North
American refrigeration businesses. The stronger European performance was due to
improvement in our UK businesses. Overall, like-for-like operating profit was
down 6%.
Q4 like-for-like operating profit was down 1%, with Food Service Equipment -
North America being down 4% compared to a fall of 17% in Q303. The impact of
lower sales was offset by our cost reductions, improved margins at our North
American Ice businesses and our North American refrigeration business delivering
operating profits. Our European like-for-like operating profits improved 18%
because of improved performances in the UK, Germany and our Ice businesses.
Food Retail Equipment
Our Food Retail Equipment business operates in North America with five plants in
the US and sales/service offices in Canada and Mexico.
(#m) FY03 FY02 FX & Like-for-like
Disposals FY02
Turnover 110.8 158.0 (37.9) 120.1
Operating profit 4.0 (3.3) (1.8) (5.1)
The like-for-like sales decline in Food Retail arose as Kysor Warren shed
unprofitable business and Kysor Panel Systems recorded lower sales in a
difficult market.
The substantial improvement in operating results arose from Kysor Warren, which
has performed ahead of plan and achieved a break-even result for the year as a
whole. Amongst other actions, the introduction of lean manufacturing, which has
been successful elsewhere in the Group, along with right-sizing the business and
improving quality and on-time delivery, has eliminated the substantial prior
year losses. Kysor Panel Systems has improved operating profit by maintaining
its clear focus on cost control, and delivered strong operating profits.
The strong Q4 performance at Kysor Warren, which made profits in the quarter and
beat our internal targets, along with a solid performance at Kysor Panel Systems
led to Q403 operating profit of #2.1m compared to a like-for-like loss of #3.5m
in Q402.
Corporate Costs
Corporate costs before exceptional items at #9.5m have increased #1.6m from
prior year represented by pension related charges of #0.9m and an increased cost
burden arising from UK and US corporate governance requirements. Q4 costs
include a number of one-time charges and increased personnel costs.
OTHER
Exceptional Items
Exceptional items recognised in Q403 and the full year are:
Q403 FY03
#m #m
Restructuring costs 3.1 6.1
Increase in provisions for vacant properties 0.8 3.3
Profit on disposal of businesses (0.8) (3.3)
Increase in legal fee accruals 1.4 3.1
4.5 9.2
Restructuring costs relate to the rationalisation of our businesses following
our recognition of weakening markets in the US, the costs of relocating the
CEO's office to Tampa in Florida and restructuring of certain European
businesses in Q4. We delivered the expected #9m of cost savings in the second
half and expect a further #4m in the first half of FY04.
Slower activity in the property market has caused us to reassess our provisions
in respect of vacant leasehold properties. This has been offset by the release
of disposal warranty provisions that are no longer required.
Our view of the merits of the Consolidated Industries litigation claims is
unchanged. We have increased our estimate of the costs of legal fees for
defending the claims as the legal process is proving to be slower than
previously anticipated.
Property
We successfully sold a further tranche of the Felsted, Essex, property which
gave rise to turnover of #15.7m (FY02 : #16.1m) and operating profit of #5.4m
(FY02 : #8.0m). Annual profit from property development is expected to continue
to reduce over time.
Interest
The net interest cost of #21.9m is #7.4m down from the prior year
pre-exceptional charge. Lower principal balances along with lower base interest
rates helped reduce the charge. However, the increased proportion of our net
debt represented by our #100m senior subordinated notes at 10 3/8%
increased the average cost of debt.
Tax
Our tax charge for the year on pre-exceptional profit is #8.2m (FY02: #1.2m).
The current tax charge on current year profits of #7.4m (FY02: #5.8m) is
approximately 19% of profit before tax, goodwill amortisation and exceptional
items. Our UK and US operations benefit from brought forward tax losses. The
charge in the year relates principally to tax on profits of our European and
Canadian businesses which increased in FY03. The FY02 charge benefited from the
release of an accrual following settlement of a US tax audit.
Earnings per Share
Adjusted diluted earnings per share is 7.7p compared to 10.4p in FY02 due in
part to the higher tax charge and also the increased average number of shares in
issue for the full year. Basic earnings per share was 2.4p (FY02 : loss of
24.8p).
Dividends
No dividend will be paid this year.
CURRENT TRADING & OUTLOOK
The food service sector is large and growing, driven by increasing disposable
income and lifestyle changes, which in the long term drives growth in the food
equipment market.
We have based our planning over the next year on stable foreign exchange rates
and modest market growth, recognising continued constraints on capital spending
among our customers and the lag which exists between macro-economic growth and
capital spending on food equipment.
FY04 will see the full year effect of capital expenditure cutbacks made at
certain Quick Service Restaurant chains and we do not expect an easing of the
margin pressures experienced during FY03.
Cost control remains a priority throughout our businesses, including further
implementation of lean manufacturing. We will seek increased market share by
capitalising on new product development, with increased development spending in
FY04 on a small number of high value projects and continued focus on our key
markets. We also expect to build on the substantial progress made last year at
Kysor Warren, as this business continues to regain its position in the food
retail equipment market.
We expect to see further net debt reduction, weighted towards the latter part of
the year, in line with seasonal cashflows.
Food service equipment users demand innovative solutions to expanding menus,
attention to safety concerns and improved efficiency. The breadth of our food
equipment product range, combined with the resources of our Technology Center,
put us in a strong position to meet these demands and take advantage of the
growing food service market. We remain confident in the long term outlook for
Enodis.
Dave McCulloch
Chief Executive Officer
18 November 2003
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