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For the six months to 30 June 2003
This is my first Chairman´s statement since I joined the Board and became Chairman on 1 May.
On 30 July it was announced that I would assume the position of Executive Chairman and that Paul Byrne, Chief Executive, would resign as a director and will leave the company at the end of September. I would like to take this opportunity to thank Paul for his significant contribution to the development of the business, in an extremely difficult trading environment over the last five years.
We are also reducing central and operational costs through the closure of the Reigate head office and by reducing the number of management and administrative personnel employed in the business. These changes will streamline the control of the business and reflect a structure more in keeping with the present size of the Group.
The pre-tax loss for the six months ended 30 June 2003 was £0.8m compared with a profit of £0.4m in the same period last year. This year´s result includes £0.7m of reorganisation costs as well as an amount of £0.3m in respect of handling revenue charged in advance. This revenue has previously been accounted for on receipt of goods, rather than apportioning revenue against the cost incurred when the goods are despatched from store. This non-cash adjustment is an accepted and prudent practice in the storage industry.
Adjusted earnings per share decreased from 1.9p to1.5p. Despite the loss reported an unchanged interim dividend of €1.27c is being declared.
Turnover has decreased by 4%, mainly in our ambient and commodity business as a result of a further drop in cocoa tonnages. In addition a major coffee retailer transferred their operation to the continent with a consequent negative effect on our Felixstowe location. This turnover is in the process of being replaced. Further new business needs to be generated to return Felixstowe to an acceptable level of profitability. In addition we have invested a further £0.3m in new warehousing facilities at York where we are experiencing increased demand from our customers.
The cold storage division performed reasonably well despite further significant increases in insurance costs. Our stores are relatively full but due to the over-capacity in the industry our storage and handling rates are not yet at acceptable economic levels.
The performance of our ambient and commodity business was very similar to last year despite the loss of the coffee business mentioned above. We have changed our commodity storage strategy by taking the opportunity to reduce fixed costs by exiting a substantial lease commitment and utilising third party warehouse facilities on variable rates.
The introduction of our new commodity warehouse system has greatly improved both our administration and customer information capabilities.
Agreement in principle has been reached to dispose of our Liverpool property at book value of £0.3m. This property does not figure in our future strategy.
The interim dividend of €1.27c will be paid on 17 October 2003 to shareholders on the register at 26 September 2003. A decision on a final dividend will be made in light of the company´s performance over the second half of the year.
Our business is going through a period of further change and like most businesses is suffering from additional insurance costs, which are difficult to recover from our existing customer base. The results are steady, however, with the management action being taken I would hope to see some improvement in the performance of the Group. However our trading environment continues to be difficult and I would caution against over-optimism for the second-half of the year.
Ted O´Neill
Chairman
11 September 2003