Norish - Cold Storage Specialists

Reporting currency

The Group continues to report its results in pounds Sterling, as all of its operating activities are carried out in the United Kingdom. The financial information contained in the profit and loss account and balance sheet is also expressed in Euro, solely for convenience, at the rate of €1 = £0.6241, the closing rate for the period. Reference throughout the Annual Report to pounds refers to Sterling unless otherwise stated.

Turnover and operating profit

All of the Group´s turnover during the year under review arose in the United Kingdom. Turnover in Norish Food Care, the Group´s cold storage division, fell by 3.4% to £7.08m. The gross profit in this division was £2.02m, representing 28.5% of turnover. The gross profit in 2000 was supplemented by compensation received from a landlord as detailed in Note 2 to the financial statements. Over-capacity in the cold storage industry continued to depress demand for our services.

The ambient warehousing division, BWA, recorded turnover of £6.53m and a gross profit of £1.05m, a margin of 16.1%. This compares unfavourably with the turnover of £5.29m and gross profit of £1.22m for the eight months post-acquisition period in 1999. While reduced UK cocoa imports led to falling stock levels throughout the year, this was partly counteracted by significant growth in the non-commodity element of the business.

Group operating profit reduced by 10.4% to £2.14m.

Associated undertaking

The Group´s interest in its Irish associate was disposed of in June at a profit of £0.25m. Income from the associate was £0.02m up to the date of disposal, compared with £0.19m in respect of the previous year.

Profit before taxation

Group profit before taxation, at £2.02m, was 13.1% below the previous year.

Taxation

The tax charge of £0.53m represents an effective rate of tax on profits of 26.2% compared with 30.5% in 1999.

Key ratios

Basic earnings per share reduced from 19.1p to 17.6p. Adjusted earnings per share (excluding goodwill, and income from and profit on sale of associate) decreased from 18.3p to 16.6p.

The Group´s return on average capital employed reduced from 23.3% in 1999 to 18.4% in 2000.

Interest cover was 6.2 compared with 10.1 in 1999.

Dividend cover was 5.4 compared with 5.7 in 1999.

Year-end gearing was 55% compared with 64% at 31 December 1999.

Acquisition and capital expenditure

Total acquisition and capital expenditure was £2.02m. Acquisition expenditure related to the purchase for £0.45m of East Kent Cold Storage Company Ltd., and the purchase for £0.35m of the ambient warehousing business of RSH at Beningbrough, near York.

Depreciation and goodwill amortisation totalling £1.04m (1999: £0.85m) was charged.

Cash position

The Group´s operating cash flow for the year was £2.85m (1999: £3.11m). Net debt, including loan notes, at the year-end was £4.99m (1999: £5.04m). The Group retains adequate term loan and overdraft facilities and is well placed to support future growth and development.

Treasury policy and management

The treasury function, which is managed centrally, handles all Group funding, debt, cash, working capital and foreign exchange exposures. Group treasury policy concentrates on the minimisation of risk in all of the above areas and is overseen and approved by the Board. Speculative positions are not taken.

The Group´s financial instruments comprise borrowings, cash and liquid resources, and various items, such as trade debtors, trade creditors etc., that arise directly from its operations. The main purpose of the financial instruments not arising directly from operations is to raise finance for the Group´s operations.

The Group may enter into derivative transactions such as interest rate swaps or forward foreign currency transactions in order to minimise its risks. The purpose of such transactions is to manage the interest rate and currency risks arising from the Group´s operations and its sources of finance. It is Group policy not to trade in financial instruments.

The main risks arising from the Group´s financial instruments are interest rate risk, liquidity risk and foreign exchange risk. The Group´s policies for managing each of these risks are summarised below.

The Group finances its operations through a mixture of retained profits, bank borrowings and working capital, at both fixed and floating rates of interest. The Group determines the level of borrowings at fixed rates of interest having regard to current market rates and future trends. At the year-end, interest rates on all of the Group´s borrowings were fixed in advance for three months.

The Group´s policy is that, in order to ensure continuity of funding, a significant portion of its borrowings should mature in more than one year. At the year-end, 54% of the Group´s borrowings were due to mature in more than one year.

The Group achieves short-term flexibility by means of a revolving credit facility and overdraft facilities.

As all of the Group´s trading activities take place in the United Kingdom the Group borrows in sterling currency only, and now reports its results in sterling currency.

Shareholders´ funds

Shareholders´ funds increased during the year by 15.6% to £9.06m as follows:

Greg O´Hara
Finance Director
1 March 2001

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