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I am pleased to present my first Annual Report since joining the Board as Chairman on 1 May 2003.
Following the resignation of our Chief Executive Paul Byrne I became Executive Chairman in July. The Board 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.
In conjunction with the executive management a review has been undertaken of our business base, comprising temperature controlled, ambient and commodity warehousing.
We are committed to the further development of our temperature-controlled activity, which is a strong performer in a difficult market. We recognise the need for consolidation in this area and anticipate being a part of this change. Ambient warehousing is very fragmented, however there are opportunities in which we are interested and will be pursuing them in the coming months. In commodities we see a lesser opportunity to develop in a declining UK cocoa market, this is emphasised by the recent communication from a major customer of their intention to change their cocoa processing procedure which will adversely affect our income streams. This change will occur in 2005. However, we believe there is further growth potential in the coffee market.
As part of this overall review we have reduced 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 have streamlined the control of the business and reflect a structure more in keeping with the present size of the Group.
Currently we are assessing the best use of the company asset base in developing shareholder value.
The Group has declared a pre-tax loss of £0.4m (2002 loss of £2.5m).
After excluding the effect of goodwill amortisation and exceptional items, the adjusted pre-tax profits of £0.5m compare with £0.8m adjusted pre-tax profits in 2002. This year´s result includes exceptional items of £0.6m of reorganisation costs as well as an amount of £0.3m in respect of handling and storage revenue charged in advance. Handling revenue has previously been accounted for on receipt of goods, rather than apportioning some of the revenue against the cost incurred when the goods are despatched from store. Storage revenue billed in advance is now apportioned over the full weekly rental period. These treatments are acceptable and prudent practices in the storage industry.
Adjusted earnings per share decreased from 5.9p to 4.3p
Borrowings were reduced by £0.9m to £2.7m. This was helped with the sale of our Liverpool site for £0.3m. This property does not feature in our strategy and was sold at book value.
At the interim stage we declared a dividend of € 1.27c per share. Despite the loss reported the directors are recommending a final dividend of €1.27c, subject to shareholders´ approval. This brings the total dividend for the year to €2.54c. (2002 - €5.27c)
Whilst this is a reduction on previous years, the company needs to preserve its resources to both strengthen and re-position itself in the market place.
The results reflect the full effect of the increased insurance costs, £0.2m higher than last year.
This 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. Turnover has increased by 1%, which arose mainly as a result of new business won at Wrexham and, to a lesser extent, East Kent. However this was offset by small reductions in turnover at other sites.
Turnover has reduced by 12% predominantly as a result of the continued decline in cocoa volumes.
The performance of our ambient and commodity business is down on the previous year. This is mainly as a result of a reduced contribution at Felixstowe, due to the loss of a coffee retailer, who transferred their operation to the continent at the start of 2003. We are making a concerted effort to attract new business to Felixstowe to bring it to an acceptable level of profitability.
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.
Our York store continues to perform well. We have invested a further £0.3m in new facilities at York where we are experiencing increased demand from our customers.
The introduction of our new commodity warehouse system has greatly improved both our administration and customer information capabilities.
In addition to the Board changes highlighted above, there were other Board changes during the year:
I am pleased to announce that Willie McCarter was appointed to the Board at last year´s Annual General Meeting. He has been appointed our Senior Independent Non - Executive Director.
John Paterson stepped down at the Annual General Meeting having served the Board for 10 years, latterly as Chairman. John made a significant contribution to the group and we wish him a long and happy retirement.
Robert Noonan resigned from the Board on 13th March 2003.
We are very grateful to have dedicated and hard working employees who understand the needs of our customers in our sector of the competitive service industry. The Board would like to thank them for their contribution.
Conditions in the markets in which we operate are expected to remain challenging in the current year. This is emphasised by the need to replace business that will be lost in 2005 referred to earlier. All necessary steps are being taken to both consolidate and grow the Group´s business base and we are targeting a number of initiatives to achieve these aims.
Ted O´Neill
Executive Chairman
27 February 2004
For reference:
Murray Consultants
Joe Murray Tel: 00 353 1 498 0300
The results herein do not represent full accounts. Full accounts for the year ended 31 December 2003, upon which the Auditors have given an unqualified audit report, have not yet been filed with the Registrar of Companies. Full accounts for the year ended 31 December 2002 containing an unqualified audit report from the Auditors have been delivered to the Registrar of Companies.
The audited profit and loss account, balance sheet and cash flow statement in sterling currency, with comparatives, are attached. For information purposes these are also expressed in Euro (€) at the rate of €1 = £0.70, the conversion rate applicable on 31 December 2003. The Euro (€) figures are not audited.