Lennox Holdings plc ("Lennox" or the "Company")
Interim Results for the six months ended 30 June 2006
Lennox Holdings plc is a leading distributor of branded and own label British
food and drink products to Spain. Its market position has been built up over
fourteen years, selling UK branded products to supermarket chains and other
outlets. These products include many brands popular in Britain and the Company
has maintained a strong market presence despite the challenges it has faced in
the last six months.
KEY POINTS
* Trading and profitability significantly affected by lack of working capital
and the investigation into warranty claim during the period
* Management and infrastructure now in place to enable a move towards
profitability
* New initiatives put in place to augment sales and margins
* Rationalised product base has led to improved margins post period end
* Expansion of customer base towards commercial consumers
* Integrated stock/order control system leading to operating efficiencies
* Successful launch of own label brand: 'Maybury'
* Continued growth in tourists and ex-pats to Spain provides sustained
healthy demand for home branded products
Ray Greenwood, Chief Executive, commented:
"Over the last 12 months our greatest trading issue has been lack of working
capital. The fund raising in July has provided us with the platform with which
to meet our short term goals of rebuilding the business and achieving
profitability. The resolution of the warranty claim investigation has enabled
us to return to running our business. Market conditions remain healthy and we
look forward to the opportunities ahead."
22 September 2006
Enquiries:
Lennox Holdings plc 00 34 96 573 31 79
Ray Greenwood, Chief Executive
Nexus Financial Ltd 0207 451 7068
Nicholas Nelson/Kathy Boate
CHAIRMAN'S STATEMENT
Introduction
Trading in the period to June 2006 was constrained by a lack of working capital
and issues arising from the Company's investigation into the warranty claims. A
huge amount of senior management time along with financial and other resources
was diverted to this. The matter was brought to a close on 26 July when
shareholders approved a refinancing of some �2.94m and the appointments of
myself as Chairman and Rolf Silver as Finance Director.
The Board has received indications that the Spanish tax authorities are likely
to accept a repayment schedule over the next few years. This is expected to be
formalised in the coming weeks.
Although considerable management time has been diverted in the past six months,
the Company has maintained a sufficient level of trading to ensure that the
needs of its customers and suppliers have been met.
Financial Overview
Due to the pressures on resources, group revenues declined by 27% to �3.7m (H1
2005: �5.0m). This was principally attributable to lack of working capital. In
addition, a significant amount of management time was taken up in investigating
the warranty claim.
With resources once more focussed exclusively on the business, the Directors
are confident of rebuilding sales and look forward to the possibility of
reporting progress later in the year.
A small improvement in gross margins from 21.8% (as seen in the year ended 31
December 2005) to 22.6% for the period to 30 June 2006, resulted from a focus
on business efficiencies. The Directors anticipate this trend towards higher
margin conditions will continue as a result of two principal factors: firstly,
the Company recently completed a commercial audit into the product lines and
has discontinued, where possible, the less profitable products. In addition,
there has been a targeted move into higher margin, higher turnover lines.
Secondly the installation of a fully functional operation system has brought
with it certain efficiencies and clarity of management information.
The loss before tax of �1.0m is after non recurring costs of circa �200k
relating to the warranty claim and associated investigation.
The refinancing, which raised �2.94m, was approved by shareholders on 26 July.
The Board anticipates that this will provide the Company with sufficient
working capital to meet its trading objective of returning to profitability.
The full benefit of the fundraising will not be felt until 2007 due to the
seasonal nature of the business.
Trading Progress
European Supplies, the Company's trading subsidiary, is recognised as a major
player in the distribution of Northern European food and household products to
Spain's ex-pat community.
The core two pronged strategy remains intact: satisfying ex-pat consumers and
forming distribution alliances with food manufacturers to promote and
distribute their products in the Spanish domestic market.
Core distribution business
The strength of demand for British goods from UK citizens living and visiting
Spain remains high. The Company estimates that more than one million UK
citizens own property in the country and over 16 million people every year
choose Spain for their holiday. This tourism is resulting in more second homes,
as can be witnessed through the continual building throughout the Mediterranean
region.
During the period the Company set its sights on a range of initiatives designed
to improve the quality of earnings: a diversification towards the commercial
catering market, capitalising further on the frozen foods opportunity,
developing own brand products and expanding into new regions.
The product range has been proactively rationalised by removing low margin and
low turnover product lines and where possible, placing a greater emphasis on
high value, high volume products with more rapid stock turnover. Consequently,
the range of customers has been expanded to include the commercial marketplace,
taking in hotels, restaurants and other caterers, which require catering
packaged products.
The Company's own branded line of food and beverage products, 'Maybury',
launched at the end of last year, has received a positive response from
consumers who regard this brand as providing high quality at an affordable
cost. The range has been expanded to 20 products and it is hoped that this
will be increased to 25 by the end of this year.
The Company's presence in Mallorca was formalised in March 2006 with the
opening of a 945 square metre distribution facility. Mallorca is a prime
tourist and ex-pat region with an estimated 600,000 Britons on the island at
any one time throughout the summer season. This is also used as a base to
serve Minorca and Ibiza. The Company is currently supplying approximately 210
outlets and has been encouraged by the strong initial demand for its product
range
Joint ventures and distribution alliances
Demand for Lennox's products amongst the Spanish population is growing
sufficiently to warrant further marketing investment. The Company has
developed strong ties with a range of suppliers who are intent on opening up
the entire Spanish market place for their brands. These include Unilever,
Ocean Spray, Baxters and Struik, all well known food companies who have chosen
Lennox as their sole distributor in Spain.
Outlook
Over the last 12 months our greatest trading issue has been lack of working
capital. The fund raising in July has provided us with the platform with which
to meet our short term goals of rebuilding the business and returning to
profitability. The resolution of the warranty claim investigation has enabled
us to return to running our business. Market conditions remain healthy and we
look forward to the opportunities ahead.
Nigel Terry
Chairman
Lennox Holdings plc
Consolidated Income Statement for the 6 months ended 30 June 2006
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
�000 �000 �000
Revenue 3,709 5,008 9,779
Cost of sales (2,869) (3,623) (7,650)
Gross Profit 840 1,385 2,129
Administrative expenses (1,883) (1,255) (3,628)
Profit from operations (1,043) 130 (1,499)
Finance cost (3) (37) (88)
(Loss)/Profit before taxation (1,046) 93 (1,587)
Taxation - (28) -
(Loss)/Profit after taxation (1,046) 65 (1,587)
Dividend - - (154)
Profit for the period (1,046) 65 (1,741)
Basic and diluted earnings per share (4.25p) 0.3p (6.6p)
Dividend per share - - 0.1p
All activities relate to continuing operations
Lennox Holdings plc
Statement of changes in equity for the 6 months to 30 June 2006
Share Share Other Retained
capital premium Reserves Earnings Total
�000 �000 �000 �000 �000
Balance at 1 January 2006 2,420 6,971 - (8,525) 866
Costs of fundraising - (138) - - (138)
Exchange differences - - - 22 22
Surplus on revaluation of property - - 805 - 805
Net income and expenses recognised directly in equity - (138) 805 22 689
Profit for the period - - - (1,046) (1,046)
Total recognised income and expense for the period - (138) 805 (1,024) (357)
Issue of share capital 245 - - - 245
Balance at 30 June 2006 2,665 6,833 805 (9,549) 754
Statement of recognised income and expense for the 6 months ended 30 June 2006
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
�000 �000 �000
Profit for the year (1,046) 65 (1,741)
Exchange differences on translation of foreign entities 22 (7) 2
Goodwill impairments losses - - (5,306)
Total recognised income and expense for the year (1,024) 58 (7,045)
Lennox Holdings plc
Consolidated Balance Sheet at 30 June 2006
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
�000 �000 �000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2,844 1,869 1,952
Goodwill 1 5,307 1
2,845 7,176 1,953
CURRENT ASSETS
Inventories 1,413 1,776 1,546
Trade and other receivables 2,202 2,450 2,515
Cash and cash equivalents 164 612 269
Total current assets 3,779 4,838 4,330
TOTAL ASSETS 6,624 12,014 6,283
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital 2,665 2,420 2420
Share premium 6,833 6,740 6971
Other reserves 805 - -
Retained earnings (9,549) (55) (8,525)
TOTAL EQUITY 754 9,105 866
LIABILITIES
NON-CURRENT LIABILITIES
Long term loans 961 996 990
Obligations under finance leases 76 - 20
Other liabilities 1,232 - -
2,269 996 1,010
CURRENT LIABILITIES
Bank overdrafts and loans - 165 67
Obligations under finance leases 66 93 53
Trade and other payables 1,639 1,522 2,252
Current tax liabilities 24 - 131
Accruals and other liabilities 1,872 133 1,904
Total liabilities 3,601 1,913 4,407
TOTAL EQUITY AND LIABILITIES 6,624 12,014 6,283
Lennox Holdings plc
Consolidated cashflow statement
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
�000 �000 �000
NET CASH FROM OPERATING ACTIVITIES (1,036) 76 28
INVESTING ACTIVITIES
Proceeds on disposal of fixed assets - - 3
Purchases of property, plant and equipment (41) (259) (433)
Acquisition of subsidiaries - - -
NET CASH USED IN INVESTING ACTIVITIES (41) (259) (430)
FINANCING ACTIVITIES
Dividends paid - (154) (154)
New borrowings 826 234 305
Repayments of obligations under finance leases (32) (30) (50)
Proceeds of share issue 245 - -
(Decrease) in bank overdraft (67) (201)
NET CASH USED IN FINANCE ACTIVITIES 972 50 (100)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (105) 165 (502)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 269 580 771
Effect of foreign exchange rate charges - - -
CASH AND CASH EQUIVALENTS AT END OF PERIOD 164 612 269
Lennox Holdings plc
Reconciliation of operating profit to net cash inflow from operating activities
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
�000 �000 �000
Profit for the period (1,046) 65 (1,587)
Deprecation 73 86 128
Foreign exchange adjustments 27 (203) 48
Interest expense 23 37 88
(923) (15) (1,323)
(Decrease)/Increase in Inventories (133) (120) 110
(Decrease)/Increase in receivables 313 (280) (346)
Decrease/(Increase) in payables (270) 568 1,675
Taxation paid - (40) -
(1,013) 113 116
Interest paid (23) (37) (88)
NET CASH FROM OPERATING ACTIVITIES (1,036) 76 28
Lennox Holdings plc
Notes to the Interim Statements
1. Basis of Accounting
The financial information contained in this interim report does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Financial information is presented on the basis of the accounting policies of
the group as set out in the Annual report for the year ended 31 December 2005
The consolidated profit and loss account and cash flow statements for the 6
months to 30 June 2006 and 30 June 2005 and the consolidated balance sheet at
30 June 2006 are unaudited. The financial information for the year ended 31
December 2005 has been extracted from the statutory accounts filed with The
Registrar of Companies which contained a qualified audit report and an adverse
statement under Section 237 (3) of the Companies Act 1985.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs). The financial statements have also been
prepared in accordance with IFRSs adopted for use in the European Union and
therefore comply with Article 4 of the EU IAS Regulation.
The financial statements have been prepared on the historical costs basis.
2. Dividends
The directors do not recommend the payment of an interim dividend (2005:154,000).
3. Earnings per share
Earnings per share have been calculated by dividing the group's profit after
tax from ordinary activities by the weighted number of ordinary shares in issue.
Unaudited Unaudited Audited
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December
2005
Weighted average number of ordinary shares 24,609,850 24,201,652 24,201,652
(Loss)/Profit after tax on ordinary activities (1,046,000) 65,000 (1,587,000)
Basic and fully diluted earnings per share (4.25p) 0.3p (6.6p)
4. Comparative Figures
The full year audited numbers for 2005 contain substantial provisions which
relate to the full year trading position. As these provisions cannot be
apportioned, the board considers it impractical to restate the interim accounts
to 30 June 2005.
5. Post Balance Sheet Events
The second tranche of the funding totalling �1.93m was received by the Company on 31 July 2005.
Approval of report
The interim financial information for the six months ended 30 June 2006 was
approved by the Board on 21 September 2006
Availability of Interim Report
Copies of the interim statement are available from the Company's Registered
Office at:
55 Gower Street
London
END
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