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Auckland Airport announces annual results for year ending 30 June 2009
Auckland International Airport Limited (Auckland Airport) today announced its annual results.
In a year of especially challenging business conditions, Auckland Airport is pleased to report on a sound business performance. The financial result highlights growth across most revenue lines flowing through to an increase in operating earnings before interest, depreciation, and amortisation (EBITDA).
Auckland Airport chairman, Tony Frankham, said, "The operating performance of the company in 2009 was pleasing in a challenging economic environment. Financially, our underlying net profit after tax of $105.9m is within the guidance range forecast last year, and operationally Auckland Airport takes tremendous pride in being recognised as one of the 10 best airports in the world, in the 2009 independent Skytrax World Airport awards."
Chief executive, Simon Moutter, said, "In March 2009 we unveiled our new growth strategy, and its implementation is now well underway and influencing business performance. Of particular note in the results is a growth in revenue to $369.2m, operating EBITDA to $280.4m, and reduced capital expenditure of $87.5m. These reflect our efforts to focus on key markets, work harder with our customers, drive greater yield, and tightly manage ongoing operational and infrastructure costs."
The operating EBITDA result of $280.4 million was an increase of $4.6 million (1.6 per cent) over 2008. The operating EBITDA margin was 75.9 per cent, a decrease from the 2008 margin of 78.6 per cent.
The profit after tax for the 2009 financial year was $41.7 million. Adjusted for the effect of the revaluation of investment property, and the costs of restructuring, the profit after tax would be $105.9 million.
The 2009 financial result shows a decrease in the valuation of the Company's investment property portfolio of $64.6 million, compared with an increase in valuation of $13.7 million for 2008. This results in the reported net profit after tax for 2009 being considerably less than in 2008. As movements in investment properties are non-cash adjustments, they will not affect dividends to shareholders.
In the 2009 year, total passenger movements were 13,012,917, a decrease of 1.4 per cent over the 2008 year. Total aircraft movements were 156,781, a decrease of 1.8 per cent over 2008. International aircraft movements increased by 4.4 per cent, while domestic aircraft movements decreased by 3.8 per cent.
Total ordinary dividends for the 2009 financial year will amount to 8.20 cents per share (equivalent to last year) or $100.449 million in total.
The reduced capital expenditure programme of $87.5 million was invested in a range of airfield, terminal, retail and property projects. These included the completion of Pier B of the International Terminal, the opening of the new "Park & Ride" off-terminal parking offering, ongoing work on the Northern Runway and the commencement of the first floor redevelopment at the International Terminal.
Auckland Airport's increased focus on air service development was reflected with the winning of new air services from Emirates, Pacific Blue and Jetstar during the year. A greater investment into tourism partnerships has also helped drive volume and strengthen airline relationships. Other major operational achievements include the completion of a process efficiency pilot programme with the border agencies, the completion of a joint venture deal to develop a top-class airport hotel, and a very strong health and safety performance.
Forecasting is difficult when global travel demand conditions are unstable and passenger volume growth remains uncertain. For the 2010 financial year we expect net profit after tax (excluding any fair value changes and other one-off items) to be in the range of $93 million to $100 million, and capital expenditure to be in the range of $60 million to $65 million, excluding yet to be committed property development.
As always, this guidance is subject to any other material adverse events, significant one-off expenses, non-cash fair value changes to property, and further deterioration due to the global market conditions, or other unforeseeable circumstances.
For further information, please contact:
Simon Moutter Chief executive +64 9 255 9167
Simon Robertson Chief financial officer +64 9 255 9174
- Total passenger movements down 1.4 per cent to 13,012,917.
- International passenger movements (including transits and transfers) down 1.4 per cent to 7,359,611. Excluding transits and transfers, international passenger movements down 2.1 per cent to 6,393,587.
- Domestic passenger movements down 1.5 per cent to 5,653,306.
- Aircraft movements down 1.8 per cent to 156,781.
- Total MCTOW down 1.5 per cent to 5,850,025 tonnes.
-Revenue up 5.2 per cent to $369.2 million.
- Operating EBITDA up 1.6 per cent to $280.4 million*.
- Non-cash investment property fair value decrease of $64.6 million.
- Profit after tax down 63.1 per cent to $41.7 million.
- Excluding the investment property revaluation changes, 2009 restructuring costs, 2008 long term incentive provision reversal and 2008 takeover costs (and all relevant tax effects) profit after tax was up 2.1 per cent to $105.9 million.
- Fully imputed final dividend of 4.45 cents per share to be paid on 23 October 2009.
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Date: 28/08/2009 08:48 Type: FLLYR Company: Delegat's Group Limited Headline: DGL - Full Year Result 2009
DELEGAT'S GROUP LIMITED Results for announcement to the market Reporting Period 12 months to 30 June 2009 Previous Reporting Period 12 months to 30 June 2008
Amount (000s) Percentage change Revenue from ordinary activities $229,398 37% Profit from ordinary activities after tax attributable to shareholders $30,049 57% Net profit attributable to shareholders $30,049 57%
Audit The financial statements attached to this report have been audited and are not subject to a qualification. A copy of the audit report applicable to the full financial statements is attached to this announcement.
Comments Refer to the Full Year Review appended.
Dividends The Directors have declared a final dividend of 8.0 cents per share. The dividend will be fully imputed and a supplementary dividend of 1.4 cents will be paid to overseas shareholders in accordance with Listing Rule 7.12.7. Cents per share Imputed Cents per share Final Dividend for the year ended 30 June 2009 8.0 cents 3.94 cents
Record date 9 October 2009 Dividend Payment Date 23 October 2009
Net Tangible Assets per share Current Year Previous corresponding year Net Tangible Assets per share $1.67 $1.43
DELEGAT'S GROUP LIMITED ANNUAL REPORT 2009
2009 Highlights - Deloitte/Management Magazine Top 200 Company of the Year Award 2008.
- Oyster Bay Marlborough Pinot Noir Gold Medal San Francisco Wine Competition 2009.
- Delegat Reserve Marlborough Sauvignon Blanc was awarded 5 stars by Cuisine Magazine New Zealand.
- Oyster Bay Marlborough Sauvignon Blanc wins Premium White Wine of the Year for the forth consecutive year at the Australian Liquor Industry Awards 2008.
- The influential US Wall Street Journal rates Oyster Bay Sauvignon Blanc as a wine every seafood restaurant in the world should have on their list.
- Oyster Bay is the fastest growing top 10 imported wine brand by value over $US10 in the United States.
- Oyster Bay Marlborough Sauvignon Blanc is the biggest selling bottled wine by value in Australia.
- The Group expands its Canadian operations through the establishment of a 15 strong in-market sales team.
On behalf of the Board of Directors I am very pleased to present to you the financial results of Delegat's Group Limited (Delegat's) for the year ended 30 June 2009. It is indeed pleasing to report that the Group continues to deliver strong sales and financial performance that sustains and reinforces the strength, quality and integrity of the Group's business model, which together with the heightened global demand for the Oyster Bay brand positions the Group for ongoing future growth. The results stand as testimony to the quality of the brand in the eyes of wine consumers world-wide despite the prevailing economic trading environment.
Total revenue for the year under review is $229.4 million compared to $167.0 million in the 2008 year - an increase of 37%. Earnings before interest, taxes, depreciation and amortisation (EBITDA) at $65.0 million is 17% ahead of last year. Net profit after tax for the year of $30.0 million is 57% ahead of the 2008 year.
It has become widely recognised that the cash flow statement has been elevated in importance in respect of financial reporting. For the Group, the Cash Flow from Operating Activities has increased from $8.3 million in the 2008 year to $42.6 million in the year under review - an increase in excess of 400%.
I am also pleased to advise that given the profit level achieved, your Directors have approved a fully imputed dividend payout of 8 cents per share. The dividend for the year ended 30 June 2009 will be paid on 23 October 2009 to Shareholders on record at 9 October 2009. This dividend recognises both the desire to reward Shareholders while at the same time increasing the fund to support the growth aspirations of the company for ultimate Shareholder wealth creation.
The Board meets regularly, as does the Audit and Compliance Committee. It is acutely aware of the need for transparency and the requirements of good governance. As a global company, the need to be responsive to each of the regulatory environments in which the Group operates becomes paramount and appropriate use is made of professional advisors to ensure compliance. The Group continues a rigorous currency management policy as part of a global centralised treasury.
Our Great Wine People
I wish to take this opportunity to acknowledge the Delegat's staff. The Board places on record its appreciation to each of them, whether they are in New Zealand, Australia, the United Kingdom, Canada or the United States of America who, together with the leadership provided by the Managing Director, execute and deliver on the plan.
As reported in the Interim Report, the Group was the recipient of the prestigious 2008 Company of the Year Trophy awarded by the Deloitte/Management Magazine. Your Board considers the results for the year ended 30 June 2009 suitably endorses and confirms the recognition.
There has been considerable media reporting on inventory and supply issues within the wine industry and the pressures brought to bear on a number of its participants. Your Board is confident that its priority to grow Shareholder value is undiminished and will continue to seek out opportunities that are wealth accretive and to ensure sustainable growth for Delegat's continues. I look forward to reporting on our progress at the Annual Meeting on Wednesday, 2 December 2009.
Robert Wilton Chairman Delegat's Group Limited
MANAGING DIRECTOR'S REPORT
The record sales and profit results achieved in a challenging year are testament to the strength of the Group's business model.
The year under review has been a challenging business environment. Most industries have been affected by the global recession, which has undermined consumer confidence and resulted in de-stocking throughout global supply chains. The New Zealand wine industry has also been somewhat affected by some producers finding that their supply from the record 2008 vintage exceeded demand for their products.
Despite this challenging business environment Delegat's business has continued to thrive with total revenue growing by 37% to $229.4 million. Net profit after tax grew to $30.0 million, 57% ahead of last year.
The Group has demonstrated the strength of its business model in a global market where wine consumers are shopping smarter and seeking out brands that deliver value relative to their price point. Oyster Bay continues to open the eyes of Super Premium consumers around the world to New Zealand's benchmark cool-climates wine styles. These consumers are embracing Oyster Bay as a recognised, trusted brand that delivers superior premium value.
Underpinning the Group's sustained growth is its own global distribution network which is unique for a New Zealand wine business. The Group's best-in-class in-market sales teams remain focused on growing Oyster Bay's global distribution and working closely with customers to realise the brand's long term growth potential.
Importantly, the Group has been able to effectively manage and maximise its in-market price realisation whilst delivering record volume growth.
New Zealand Wine Industry Review
The New Zealand wine industry has continued to enhance its reputation as a world class producer of Sauvignon Blanc, Chardonnay, Pinot Noir and Merlot, while also achieving strong sales growth in key export markets. With industry export sales reaching $992 million for the year ending 30 June 2009, a 24% increase on the previous year, the New Zealand wine industry is well on track to deliver $1 billion of export sales by 2010.
Favourable flowering and growing conditions resulted in a 2009 harvest of 285,000 tonnes, unchanged from the record 2008 vintage. Although the national producing area has continued to rise, producers are managing vineyard yields to preserve Super Premium quality standards while also maintaining adequate levels of supply.
As noted earlier, a number of New Zealand wine producers with less established sales and marketing infrastructure have found that their supply from the record 2008 vintage exceeded demand for their products. This imbalance has resulted in increased levels of discounting by lesser known labels. The Group has been largely unaffected by this activity to date with most of the impact being concentrated on private label and lower price wine producers.
New Zealand wine exports have grown from $180 million to $992 million over the last decade and are forecast to grow in volume from 12.6 million cases in 2009 to 19.3 million cases by 2014.
The Group continues to focus on making world-class Super Premium wine, marketed through strong and established brands. The Group is well placed to continue to lead New Zealand category growth and further develop Oyster Bay as one of the world's great Super Premium wine brands over the coming years.
Global Sales Performance In 2009 the Group achieved global sales of 1,738,000 cases, 20% higher than the previous year. The Oyster Bay brand continues to lead the growth of the New Zealand wine category in global markets and is becoming increasingly established as one of the world's great Super Premium wine brands.
The Group continues to invest in growing the global distribution of its brands to achieve profitable long term growth. The Global Sales & Marketing Division now comprises 89 people of whom 84 are based offshore in Australia, the United Kingdom, the United States and Canada. A highlight of the year was the establishment of a 15 person in-market sales team in Canada to spearhead the long term growth of the Oyster Bay brand in that market.
The Group has a unique distribution model with significant in-market sales teams, which together with the well established Oyster Bay brand and world-class wine quality, provides the Group with sustainable competitive advantage. The sales and profit growth achieved in 2009 are testament to the strength of the Group's business model.
The Group's Oyster Bay brand is the leading New Zealand wine brand in the United Kingdom. Substantial growth has been achieved with current customers and through increasing distribution in all channels. Highlights of the year include achieving strong distribution growth with Chardonnay, Pinot Noir, and Merlot. During the year Oyster Bay Merlot became the United Kingdom's top selling Merlot by value above GBP5.00.
The Group continues to achieve profitable growth in Australia. Oyster Bay Sauvignon Blanc is now the biggest selling still wine by volume and value. During the year Oyster Bay Pinot Noir became the biggest selling Pinot Noir by volume and value in Australia, while Oyster Bay Chardonnay is the biggest selling Chardonnay above A$15. The Group's growth in 2009 was underpinned by continuing distribution growth and increasing rate of sale per point of distribution. The Group is well placed to capitalise on significant further growth opportunities in 2010.
The Group has established the foundation for long-term growth in the United States. For the first time Oyster Bay has become a top 10 imported wine brand by value over US$10. During the year the Group established a national sales office in New York City and increased the in-market sales team to 21 people. The in-market sales team has built productive working relationships with distributors throughout the United States, which are expected to underpin strong sales growth in 2010.
Oyster Bay has consistently been the leading New Zealand wine brand in Canada for over 16 years. During the year the Group established a 15 person in-market sales team to spearhead the long-term growth of the Oyster Bay brand. This key initiative follows the Group's successful model of using wholly owned in-market sales subsidiaries in the United Kingdom, Australia and the United States. The new in-market sales team will underpin the Group's ability to develop closer relationships with customers and realise Oyster Bay's significant growth potential.
The Group achieved strong sales volume and value growth with the Oyster Bay brand. Oyster Bay is a leading Super Premium brand in the New Zealand market place. During the year the Delegat brand was repositioned and profitability was improved. The Group remains focused on maintaining and developing a sustainable, profitable business in the New Zealand market through the Oyster Bay and Delegat brands.
Group case sales in Ireland, Asia Pacific and other markets for the year were 18% higher than the previous year. The highlight of the year was strong growth in Ireland where Oyster Bay is now well established as a leading Super Premium wine brand.
The Group achieved average price realisation of $124.59 per case, 11% ahead of the previous year. This increase in price realisation was driven by in-market price increases, changes in sales mix and favourable foreign exchange movements. A highlight of the year was the successful implementation of price increases in the important and growing United States market. The increased price realisation and sales volume growth achieved during the year demonstrate the strength of the Oyster Bay brand.
Brands & Communications
The Group continues to invest in marketing activities to establish consumer awareness and grow the Oyster Bay brand in its key international markets.
The Group has an acute understanding of its global consumer profile and in the current economic climate has seen a temporary trend of consumers dining out less and increasingly entertaining at home. New Zealand's assertive, elegant cool-climate aperitif wine styles suit this trend very well.
On the back of this shift in channel purchasing behaviour, consumers continue to seek out and rely on recognised brands that offer quality and brand cachet. A true testament of brand strength lies in its ability to consistently deliver relative value and relevance to consumers in any economic climate. Oyster Bay has been well positioned to meet consumer needs as a strongly differentiated, Super Premium brand offering and continuing to grow its market share.
A global marketing focus for the Group has been to grow awareness and stimulate consumer trial of Chardonnay, Merlot and Pinot Noir, to continue to broaden the Oyster Bay brand experience beyond its highly successful Sauvignon Blanc. Oyster Bay is already a clear New Zealand market leader across all it varietals in its key export markets.
Delegat's harvested 24,268 tonnes in 2009, which was 2% below the forecasted yield and a decrease of 9% on the previous vintage. The Group's grape supply is well balanced with demand from international markets effectively underpinning planned sales growth.
The Marlborough and Hawke's Bay growing seasons both delivered excellent quality fruit. The Group continues to place a strong focus on managing yields to balance with Super Premium quality fruit and has rigorous viticulture programmes in place to deliver upon this objective.
Marlborough Growing Season
Marlborough experienced a wet winter which had the benefit of recharging the water table and irrigation aquifer. Spring was warm and dry, which aided flowering and fruit set across all varieties. Importantly, flowering occurred in ideal conditions without frost impairment. This resulted in very good bunch count across all varieties and vineyard sites. Shoot and bunch thinning was undertaken in November to balance yield with fruit concentration. Fine weather conditions continued throughout January. February experienced higher than average rainfall and cooler than average temperatures, which called for careful canopy management to ensure sufficient fruit exposure to minimise the incidence of disease. Warm weather returned in March, resulting in ideal growing conditions for flavour development, fruit maturity and harvest. Vineyard blocks were closely monitored and progressively harvested at full physiological ripeness and flavour profiles.
Hawke's Bay Growing Season
Hawke's Bay experienced a dry winter. Ideal warm and dry weather conditions throughout spring and summer contributed to excellent budburst, shoot growth, canopy vigour, flowering and fruit set. Season data shows a warmer and drier than average growing season. These ideal weather conditions enabled full flavour development in the fruit and ultimately delivered stunning fruit quality.
The Group is a significant land user in the Marlborough and Hawkes Bay regions. As a founding member and strong proponent of Sustainable Winegrowing New Zealand, the Group continues to have a commitment to sustainable production in its wider sense. The Group has embarked on a Global Sustainability Initiative designed to provide a coordinated approach to sustainability activities across our entire business, including the international markets in which we operate.
Group winemaking operations continue to be performed to a high standard, supported by high-calibre technical staff, resulting in the ongoing, efficient production of consistently high-quality Super Premium wines.
No additional tank capacity was required across the Group's winemaking facilities for the 2009 vintage, while a cooperage housing 6500 barrels was completed at the Marlborough winery in time for the 2009 vintage.
The Hawke's Bay winery, which continues to be leased from Indevin Limited, has added much needed processing capacity, while being an excellent facility for delivering high-quality winemaking processes and Super Premium wines.
The Auckland winery, as previously reported, is operating at full capacity as the Group's production, packaging and global distribution facility. This year has seen the need to employ additional contract packaging capacity.
Major Awards and Accolades The Group was the proud recipient of the Deloitte/Management Magazine Top 200 Company of the Year Award 2008. This prestigious award recognises business performance and excellence.
The Group's wines continue to receive major awards and accolades from the world's leading wine commentators and competitions.
- Oyster Bay Marlborough Pinot Noir, Gold Medal San Francisco Wine Competition 2009.
- Delegat Reserve Marlborough Sauvignon Blanc was awarded 5 stars by Cuisine Magazine New Zealand.
- The influential US Wall Street Journal rates Oyster Bay Sauvignon Blanc as a wine every seafood restaurant in the world should have on their list.
- Oyster Bay Pinot Noir 2007 was awarded 89 Points by leading US wine publication, Wine Spectator.
Delegat's has a proud global culture of collaboration and high performance and our employees are focused on delivering successful outcomes. We aim to attract and retain professionals who are best in class and this is evident in the quality and calibre of employees across the business.
I would like to offer a personal thanks to all Delegat's Great Wine People, who have gone the extra mile to deliver a tremendous outcome in a challenging year.
The Group's performance in the past year has demonstrated the resilience of its business model. In many markets the Oyster Bay brand is now successfully established as a major wine brand for retailers and restaurateurs. Importantly, long-term consumer trends continue to favour our wine styles and the Group has sustainable competitive advantages in the areas of brand, distribution, supply and product quality.
In our view the current challenging business environment is likely to prevail throughout 2010. Volatile and unfavourable exchanges rates along with the uncertain economic outlook make if difficult to accurately forecast financial performance. Nevertheless, in the 2010 financial year the Group expects to achieve continued sales growth and a profit result at least in line with the past year's record performance.
The Group has achieved tremendous success over the past decade and remains focused on realising the significant long-term growth potential of the business through executing our strategy to establish Oyster Bay as one of the world's great Super Premium wine brands.
I would like to take this opportunity to acknowledge the ongoing support of our Shareholders, grower partners, customers, suppliers and the Board.
Jim Delegat Managing Director Delegat's Group Limited
For further information please contact: Jim Delegat Managing Director Delegat's Group Limited +64 9 359 7300
Andre Gaylard Chief Financial Officer Delegat's Group Limited +64 9 359 7300
Preliminary full year report on consolidated results (including the results for the previous period) in accordance with Listing Rule 10.4.2.
The Group's financial statements have been prepared in accordance with New Zealand International Financial Reporting Standards and are based on audited financial statements.
The Listed Issuer has a formally constituted Audit Committee of the Board of Directors.
The financial statements are presented in US$ millions.
Reporting Period 12 months to 30 June 2008 Previous Reporting Period 12 months to 30 June 2009
Amount US$ millions Percentage change Revenue from ordinary activities 322 -14.6% Profit (loss) from ordinary activities after tax attributable to security holders 0 -100.0% Net profit (loss) attributable to security holders 0 -100.0%
Amount per security Imputed amount per security Interim/Final Dividend No dividend is proposed for the year Not applicable Record Date Not applicable Dividend Payment Date Not applicable
28 August 2009
There are forward-looking statements included in this document. As forward-looking statements are predictive in nature, they are subject to a number of risks and uncertainties relating to Tenon, its operations, the markets in which it competes and other factors (some of which are beyond the control of Tenon). As a result of the foregoing, actual results and conditions may differ materially from those expressed or implied by such statements. In particular Tenon's operations and results are significantly influenced by the level of activity in the various sectors of the economies in which it competes. Fluctuations in industrial output, commercial and residential construction activity, changes in availability of capital, declining housing turnover and pricing, declining levels of repairs, remodelling and additions to existing homes in North America, relative exchange rates, interest rates in each market, and profitability of customers, can have a substantial impact on Tenon's results of operations and financial condition. Other risks include competitor product development and demand and pricing and customer concentration risk.
All references in this document to $ or “dollars” are references to United States dollars unless otherwise stated.
OVERVIEW 2009 saw a continuation of extremely difficult macro operating conditions for Tenon. As we noted in our Interim Report, and as has been widely publicised in the news media, these market conditions (refer Current Market Conditions discussion below) are quite unprecedented in our industry. The cyclical decline in the US housing sector that initially began in 2006-2007, followed a period of 3-4 years of significant growth that had pushed house prices and housing starts to all time highs. The subsequent decline from those highs has been steep and dramatic, and unfortunately, exacerbated by the impact of the global credit crisis that took hold in the first half of our fiscal 2009 year. Tighter access to credit, rising unemployment, and the flow-on impact of those factors into lower residential housing investment, higher home foreclosures, lower house sales volumes and prices, and increased housing inventory, emerged as new and further hurdles for the US housing sector to overcome.
In the current tough operating environment we could have chosen to focus only on very immediate operating metrics, such as current year earnings and cash flow. Whilst short-term financial targets were certainly a key focus for us, we elected not to make those our sole focus. We have also taken the opportunity at this point in the cycle to lock in our leading market position, by putting in place a series of growth initiatives designed to establish a much higher earnings base for the Company for when we enter the recovery phase of this cycle than we had when the down-phase began three years ago. These initiatives, along with those that we plan to pursue in the future, are discussed in detail in the Growth section of this Report below. In terms of our immediate financial objectives, 2009 saw Tenon:
- Right-size the business to meet the demands of the current operating environment. This required reductions in shifts at each of our manufacturing facilities, resulting in headcount attrition, with total Group employee numbers of around 1,100 today being some 200 below the peak of two years ago;
- Continue capital expenditure at well under half the annual depreciation and amortisation level – a reflection of the healthy operational state of our manufacturing facilities and our low “business as usual” capital needs;
- Enter into a supply chain financing programme, which has now allowed Tenon to receive payment for a large part of its receivables well in advance of normal credit payment terms;
- Reduce net interest bearing debt and deferred liabilities to $35 million - down by $53 million from a high of $88 million recorded only two years ago. This has been a major achievement for the Company;
- Renegotiate the banking covenants in the Group’s financing facility – with the US bank syndicate agreeing to favourably amend the key interest cover and leverage ratios in order to provide the Company with greater headroom at this very low point of the operating cycle. The Group’s renegotiated syndicated bank facility does not expire until June 2012;
- Generate net cash from operating activities of $42 million – an extremely strong performance in the current market conditions, and a reflection of the positive impact of the working capital initiatives put in place during the period and the $16 million benefit from the introduction of the supply chain financing programme;
- Maintain gross margin percentages across the Group at fiscal 2008 levels, despite the much tougher operating conditions experienced in 2009; and
- Report operating earnings (i.e. earnings before interest, tax, depreciation and amortisations – “EBITDA”) of $10 million.
The earnings result was in line with market expectations and the EBITDA guidance we had given of $10-$11 million for the year. That the result was down on the $16 million recorded in 2008 is a reflection of the fact that operating conditions deteriorated markedly across the period with the onset of the global credit crisis, the effects of which intensified as the year progressed. This impact more than offset the spring-lift in earnings which we would normally have experienced. This can be seen in the next four charts, which show the movement in Tenon’s key value drivers in recent periods, compared with their more normal long-run levels.
[ 4 CHARTS : "Big Box" Building Retailers Average Same Store Sales; New and Existing Housing; NZD/USD Exchange Rate; Moulding & Better Lumber Pricing ]
The chart below reconciles our earnings result as it was impacted by the key value drivers of our business in fiscal 2009. Although obviously simplified, the chart is helpful in providing an overview of the changes in our operating environment year-on-year.
[ CHART - 2009 EBITDA RECONCILIATION ]
Given the dramatic decline in operating and macro-market conditions that have occurred, producing the financial performance that we did in 2009 is positive, and a reflection of the strong strategic positioning the Company has now established and the application of tight operating disciplines over the past 12 months. In particular, generating sufficient cash flow from operating activities to enable net interest bearing debt and deferred liabilities to be reduced by over $50 million (inclusive of the benefit of the supply chain financing programme) over the past two years is a highly creditable achievement.
CURRENT MARKET CONDITIONS There can be no argument that the level of activity in our sector today is considerably lower than it was a year ago. By way of example, annualised housing starts for June 2009 were down 47% on the annualised rate recorded for June 2008. A similar fall holds true for remodeling activity, which is off approximately 35% from its level of two years ago. Indeed, and as we noted in our Interim Review to shareholders, we are currently in an environment where the traditional counter-cyclicality of remodeling spend with new house construction has not occurred. As a result of the broad based global recession, for the first time, significant declines in both market segments have occurred simultaneously. Historically, remodeling spend has tracked at relatively constant and consistent levels, with steady growth that has survived the “downs” of the new housing cycles. As Tenon’s key driver is remodeling spend, it is that decline that has impacted us the most. The “Big Box” building retailers’ same-store previous comparable period % sales figures (shown in the top chart on page 3) best indicate the negative trend we have been dealing with in this regard.
On the positive side, there have been some recent signs emerging that the worst of the housing market decline may have passed. Factors / metrics cited by analysts in this regard include:
- The positive impact that the US government’s housing stimulus package has begun to have – i.e. a $8,000 first-time home buyer tax credit (available until 30 November 2009), and the “Making Home Affordable” programme which provides the opportunity for some eight million homeowners to avoid foreclosure by refinancing their existing mortgage commitments; - A significant increase in housing affordability – a reflection of relatively low mortgage borrowing rates and the significant decline that has occurred in the median price of new homes which is now back down to 2003 levels; - Falls in inventories (as measured in months of supply) of existing homes (9.4 months as at July ‘09) and new homes (7.5 months as at July ‘09) from their peaks earlier in the year of 11.0 months and 12.4 months respectively; - An increase in the pending homes sales index (i.e. contracted sales not yet completed) in June 2009, reflecting five consecutive months of index gains; - Two consecutive quarterly improvements in the National Association of Home Builders remodeling market index – an index that measures market demand for current and future residential remodeling projects; - An increase in new housing starts – with the July 2009 seasonally adjusted figure of 581,000 new houses being some 19% higher than the low of 488,000 housing starts recorded in January this year; - An increase in existing single-family home sales (a significant driver of remodeling spend) in July 2009 to an adjusted annual level of 4.6 million, up from the low in January of 4 million; and
- Two consecutive monthly (May and June) increases in house prices, as measured by the S&P Case-Shiller US Home Price Indices.
Whilst these are all positives that indicate the market may now have bottomed and be stabilising, it is still “early days,” and we are likely to see considerable fluctuations in short-term data of this type. In addition, as rising unemployment in the US in fiscal 2010 will undoubtedly have a further impact on both residential housing spending (i.e. remodeling) and housing foreclosures (which were up in July), we will be maintaining a cautious approach as we enter fiscal 2010. Given the considerable uncertainty that exists around the paths and levels of our key value drivers over the next year - particularly the NZD:USD cross rates and the extent of the housing sector recovery that eventuates in the next 12 months – we will not be giving earnings guidance at this point in the year. We will however, update shareholders on our progress at the ASM in November, by which time market conditions may make forecasting a little easier.
GROWTH In the Overview section of this Review, we outlined our desire to put in place growth initiatives that would see us considerably advance the strategic positioning and earnings base of the Company moving forward. Although much has already been achieved in this regard, unfortunately the current operating environment masks the gains that have been made. With time, as the housing sector recovers, the embedded earnings growth now in place will become clearly evident.
While we operate multiple streams of earnings growth, they can be very broadly summarised into two generic categories – organic growth and acquisitive growth. The diagram below outlines, in a very simplified form, the model we are adopting in this regard.
[ GROWTH DIAGRAM ]
We thought it helpful to give examples of each of these growth-streams so that shareholders can fully understand the path we are moving down.
Achieving a greater market share with our existing customers, and growing organically as our customers grow, is the lowest-risk / highest-return growth opportunity we have. We already understand our key customers’ product and service needs, and can act as partners with them to grow their own businesses. An example of this is the growth in our store count with our largest customer, Lowe’s, as they have expanded across North America. At the peak of the cycle, in 2006, our full-service distribution business, Empire, was servicing some 650 Lowe’s stores. Today, at the bottom of the cycle, we are now servicing in excess of 850 Lowe’s stores, representing approximately 50% of total Lowe’s stores operating today.
[ CHART - EMPIRE STORE COUNT WITH LOWE'S ]
This is also a good example of the point made above in relation to embedded growth – i.e. that bottom-of-the-cycle market conditions are masking the increased earnings base that has been built into the business through this organic store growth. Although we do still anticipate future Lowe’s store growth in future years we certainly do not take it for granted, and we realise that it is totally dependent upon us continuing our industry-leading level of service-delivery to this very important customer. It is this superior service-delivery that has allowed us to grow with Lowe’s as they have entered the Canadian market, where we have also now extended our full service mouldings distribution programme.
Accessing new customers is extremely difficult in the current environment, however we have been able to successfully do this with our pro-dealer business activities. By way of example, over the last 12 months Fletcher Wood Solutions (FWS) has added four new, regionally significant distributors, which in aggregate adds 25 new stocking facilities for FWS products. In each case, LIFESPAN (R) has been the initial attraction for these new distributors, but they have quickly then seen value in FWS’ full product offerings, and broadened their distribution arrangements to include these other products. The impact of acquiring new customers at the bottom of the cycle will be very meaningful for Tenon as the recovery phase begins.
The introduction of new innovative products allows us to maintain and grow our business with existing customers, and also to attract new customers. RapidFit (R) mouldings (i.e. mouldings used in a renovation which are installed directly over existing mouldings without requiring their removal first) and the National Trust series of mouldings and mantels are only two examples of some of the full-service, new product offerings Tenon introduced in 2009. These are incrementally additive to other new product offerings that have been launched in recent years, such as our primed board programme. These three products are shown in the pictures below. Developing these innovative products allows our customers, in-turn, to make new exclusive product offerings to their customers – and in so doing, opening up new revenue streams for Tenon.
[ THREE PRODUCT PHOTOS ]
Expanding into new market segments is a major undertaking, which can only come after considerable market and competitor analysis has been completed. Following the completion of just such an analysis, we entered the outdoor market, initially with our Armour Wood (R) and LIFESPAN (R) outdoor treated trim-board products. These products have been well-received in the market. By way of example, the chart on the following page shows the growth of Armour Wood (R) into the Lowe’s stores that we currently service.
[ CHART - GROWTH OF ARMOUR WOOD INTO LOWE'S STORES ]
You can see that, at almost 500 stores, Armour Wood (R) is now represented in more than half the Lowe’s stores we service – a figure that has more than doubled in the past 12 months from the 200 store level at June 2008. This per annum compound store growth rate is extremely pleasing, yet these trim board products represent only a small fraction of the total outdoor market potential offered by treated pine products. The next diagram shows this point for the total house exterior.
[ DIAGRAM - POTENTIAL OUTDOOR APPLICATIONS ]
To put this into dollar terms, the total market size for the outdoor segment is estimated to be more than $30 billion – some 10 times the size of Tenon’s traditional mouldings market.
The application of new technology has the ability to dramatically change the landscape of products supplied into the outdoor segment, and in particular the value proposition that wood-based alternatives will be able to offer. Tenon has already invested heavily into the research of these exciting new technologies, and is well-positioned to take advantage of them as they emerge. We will update you on developments during the next 12 months.
We have in the past also undertaken acquisitive growth, but only where it is consistent with our specialty products model. The acquisition of Ornamental Mouldings in fiscal 2007 and Southwest Moulding Co in 2006-2009 (where we progressively bought out the minority interest, with the final $9 million payment being made in the 2009 fiscal year) are good examples of this activity. Although the earnings of both these acquired businesses has been affected by the current market down-turn, the strategic premise and fit with Tenon’s existing businesses which underpinned their acquisition rationale still holds true, and their real value to the Company will ultimately be reflected in Group earnings as the cycle recovers. In addition, with the acquisition of the outstanding interest in Southwest Mouldings, all Tenon’s operating businesses are now 100% owned, allowing us to freely extract the full synergy gains across the Group under our One-Company programme.
GOVERNANCE Tenon’s ASM was held in New York in November last year, providing an opportunity for the Company to speak directly with its US-based shareholders. This year our ASM will return to Auckland. Venue details and timing will be separately provided to shareholders with the notice of meeting.
In April this year, Rubicon, our 58% majority shareholder, was required to have an independent report prepared on its value. Grant Samuel prepared that report, and when assessing the constituent elements of Rubicon’s total valuation, valued Tenon in a range of $1.52 - $4.07 per share. This wide range is of course a reflection of the earnings base of Tenon under different operating environments, with the low end of the range reflecting current market conditions and the higher end of the range being indicative of the Tenon’s potential earnings under mid-cycle conditions. The mid-cycle valuation is a pleasing independent endorsement of the Tenon’s previously stated view on this same matter.
Effective from 1 September 2009, Mr Tom B Highley will become Tenon’s new CEO. Tom is currently the President of The Empire Company – Tenon’s 100% owned full-service distribution business into the Lowe’s and pro-dealer markets in the US. Tom has been with Empire for eight years, the past five years of which have been in his current role, and prior to that he was Vice President of Empire’s pro-dealer division. During that time Tom has had responsibility for actively re-engineering Empire’s business model, so that it can take advantage of its market growth opportunities whilst at the same time continuing to meet the heightened customer-service levels that have made it a market leader.
A full external search process was undertaken by the Board, to ensure we benchmarked our internal candidates against the best available external executives for the role before a new CEO decision was made. It is a reflection of the Company’s management depth that an internal candidate was selected out of this process as being the best candidate to step up into the top role in the organisation. In this regard, each of our existing direct operational reports to the CEO has, on average, almost 20 years of experience in the business - experience has been highly valuable to us in the current operating environment.
Tom replaces our current CEO, Mark Eglinton, who will be leaving Tenon in September and returning home to New Zealand to take up a chief executive role outside of Tenon. Mark has been with the Company for nine years, the last four of which were as CEO - a period which saw the Company undertake an extensive restructuring and strategic repositioning of its core business activities. We would like to take this opportunity to thank Mark for his outstanding contribution and strong leadership of Tenon through this period, and in particular in the recent challenging operating environment. We wish him well in his future.
OUTLOOK We are confident that the long-term outlook for Tenon remains strong. The repositioning and restructuring of the Company that has taken place over the last 2-3 years, the earnings growth initiatives that have already been seeded along with further growth options we plan to put in place over the next 18-24 months, and the positive longer-term US macro-housing fundamentals (e.g. forecast household formation and an aging housing stock in the US), all bode well for Tenon’s future performance.
Conditions in the immediate-to-short term, however, are more difficult to predict. The path of the NZD:USD cross rate is a complete unknown, and its volatility extremely difficult to manage. It is disappointing that neither the Reserve Bank nor the Government seem able to address what is clearly a critical and highly-volatile value-driver for all NZ-based exporters selling in US dollars. If New Zealand‘s economic recovery is to be export-led, and the country’s export sector is to grow, then addressing this most fundamental of issues should be at the top of the agenda of those decision makers.
Rising unemployment in the US will undoubtedly have an impact on a housing sector recovery, however this factor should be moderated to some extent by increased housing affordability resulting from the significant drop in both house prices and interest rates that has already occurred, and by the US government’s housing stimulus package through the first half of our fiscal 2010 year. We will, however, still be working on the basis that operating conditions will continue to be difficult and volatile, and we will once again be managing our activities to tight operating disciplines – just as we did in 2009.
Having said that, and as noted in the introduction to this report, we are also very keen to see the Company strengthen and grow its existing activities to ensure its earnings leverage to the emerging cyclical upswing is optimized. We will be very focused in our pursuit of this activity – which, as outlined in the Growth section above, will be centred on both organic and acquisitive growth activities.
We naturally favour organic growth, as it is an activity that we must undertake in any case to protect our existing leading market position. It is also a path we know well, having been successful with it in the past. Our experience is that organic growth offers us the lowest-risk and highest-return for our investment dollars, and we will be very actively pursuing those opportunities first. By way of example, and as already signaled to shareholders, we believe the outdoor segment offers huge potential for the Company, and we are hopeful of announcing the next major step of this strategy in the new calendar year. By its very nature, organic growth does carry with it the need to build some degree of working capital and negative short-term earnings in order to initially support the customer proposition, however we plan to manage these needs and impacts to match the available funding within our existing bank facility.
Quite apart from organic opportunities, the current difficult market conditions may well present us with acquisition opportunities which offer us the potential to make a step-change in the Company’s earnings level. We have investigated several such opportunities over the past year, however for a variety of reasons they did not eventuate. It goes without saying that we are seeking only those opportunities that are consistent with Tenon’s specialty business model, as we strongly believe that is the best positioning for our business. Although acquisitions outside this strategic model may be available, we have chosen not to progress those as they would only serve to dilute the successful specialty business model we have worked so hard to establish. We will, however, continue to investigate the right acquisitions on a proactive basis, and we will have no hesitation in bringing them to shareholders for approval should we see them as fitting well with our existing business model, and being in the best long-term interests of the Company.
As we enter fiscal 2010, we would like to take the opportunity to thank all our stakeholders for their support over the past year. We look forward to updating you again on the Company’s activities and progress at our Annual Shareholders’ Meeting in November this year.
Preliminary Announcement for the year ended 30 June 2009
1 NZ WINDFARMS LIMITED (NWF) PRELIMINARY ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009
On behalf of the Directors it is my pleasure to report on the progress the Company has made in the year to 30 June 2009.
As highlighted in the December 2008 Interim Report, the most significant event for the Company during this reporting period occurred on 8 December 2008 when the Company announced that its wholly owned subsidiary, NZWL-TRH Limited, had reached an agreement with NPBB Pty Limited to purchase NPBB's 50% interest in the Te Rere Hau Wind Farm Joint Venture for $20.1 million in cash. The first tranche payment of $18 million was settled on 17 March 2009 and the balance of $2.1 million is due on 17 September 2009.
The acquisition of NPBB’s interest in the Te Rere Hau wind farm has focused our attention and resources on maximising value extraction from this high quality asset ahead of other sites with lower wind speeds.
FINANCIAL PERFORMANCE Financial performance was steady for the year to 30 June 2009. Net operating deficit before discount on acquisition of the remaining 50% interest in the Te Rere Hau Joint Venture and tax, was $2,655,000 (30 June 2008 - $3,654,000 profit). Revenue from electricity generation increased from $162,000 in the 2008 financial year to $812,000 as turbines were livened to the grid and became operational. However, this revenue increase was offset by higher operational costs and depreciation from the extra commissioned turbines. Revenue has also been impacted by lower than expected electricity prices resulting from higher than average inflows of water into the hydro lakes and lower demand due to the economic recession. Interest income of $2,938,000 was $2,860,000 less than in the 2008 financial year due to lower interest rates prevailing in the market and as a result of expending funds on the Te Rere Hau build programme.
The discount on the acquisition of NPBB’s 50% share of the Te Rere Hau Joint Venture was $3,209,000. This does not include the future income the Company will receive from the extra 50% of the carbon credits from the project as these are not recognised until earned.
Net profit for the year was $961,000 (30 June 2008 - $2,418,000). Total assets at 30 June 2009 were $94,413,000 (30 June 2008 - $84,046,000).
DIVIDEND The 2007 Prospectus forecasted that no dividends were expected to be paid in the financial years ending 30 June 2007 and 30 June 2008 and that the Company’s intended dividend policy was to pay 50% of the operating free cash flow earned from the sale of electricity from the financial year ending 30 June 2009 onwards.
During the year ended 30 June 2009 the operating free cash flow earned from the sale of electricity was a deficit of $3,011,000.
The cash flow deficit is the result of timing delays from that forecasted in the Prospectus to complete construction of the Te Rere Hau wind farm.
As a result your Board has resolved that no dividend will be declared for the financial year ended 30 June 2009.
FUNDING Following the successful capital raising in June 2007, the Company secured the financial resources to progress with its share of the Te Rere Hau project and to accelerate the sourcing and consenting of further projects.
The acquisition of NPBB’s 50% interest in the Te Rere Hau Wind Farm Joint Venture is a positive step forward in driving the Company’s growth through the purchase of an asset on an excellent site that is familiar and well advanced in construction.
The acquisition has resulted in the requirement to raise additional funds to complete the Te Rere Hau wind farm project.
2 However the Board has determined that it will not finalise a funding strategy until it has a better understanding of the implications of not receiving IEC certified turbines, and has established that the turbines are or will be fit for purpose for the Te Rere Hau wind farm site.
The consequence of not having finalised its funding strategy is that there exists at the date of this report an uncertainty that the Company is in a position to pay its debts as they fall due. The Board and management are totally focused on obtaining independent expert advice on whether the turbines supplied and to be supplied are fit for purpose and if they are not, what is required to make the turbines fit for purpose.
GOING CONCERN The financial statements have been prepared using the going concern assumption. The continued operations of the Group are dependent on the ability to fund future activities from operational cash flows and funding.
The Company and its subsidiaries have prepared business plans and budgets which indicate that cash generated as a result of operations is insufficient for the Company to continue operating for a period of at least 12 months from the date these financial statements were approved by the Board of Directors.
The Company is proposing to raise funding in order to complete the development of the Te Rere Hau wind farm. On completion of the wind farm the Company’s cash flow projections demonstrate sufficient net cash surpluses to fund the ongoing operations of the wind farm. The timing and method of raising funding will be determined by the Board pending progress with resolving the IEC certification issue.
For the reasons set out above, the Board believes the going concern assumption is a valid basis on which to prepare the financial statements. The Board reached this conclusion having regard to the circumstances which they consider likely to affect the Company during the period of one year from the date these financial statements are approved, and to circumstances which they believe will occur after that date which could affect the validity of the going concern assumption.
While the Board is confident in the Company's ability to continue as a going concern, there is uncertainty with respect to achieving the operational cash flows predicted and the raising of additional funding prior to utilisation of available cash resources. Accordingly, there is uncertainty as to whether the Company can continue as a going concern and therefore whether it will be able to pay its debts as and when they become due and payable. If the Company was unable to continue in operational existence and pay debts as and when they become due and payable, adjustments have to be made to reflect the situation that assets may need to be realised and liabilities extinguished other than in the normal course of business, and at amounts which could differ significantly from the amounts at which they are currently recorded in the statement of financial position.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
The external auditor has referred to the fundamental uncertainty in its audit report.
TE RERE HAU PROJECT Since October 2008 when the electricity connection was completed for the site, progress on the installation of turbines has been good. All of the 28 turbines in Stage 2 and 13 turbines of Stage 3 had been fully commissioned by the end of the financial year. The remaining 19 Stage 3 turbines are expected to be fully commissioned by the end of October 2009. At 19 August 2009 a total of 50 turbines were livened to the grid and operational.
Turbine availability for the first six months of the 2009 calendar year was reported by Windflow Technology to be 91.4%. This is below the warranted availability level of 95%, which gets calculated over a full calendar year. Recently installed turbines are currently operating at an acceptable level. Depending on the year end availability figure a warranty claim may apply.
The Te Rere Hau wind farm is currently consented for 97 turbines. The last 32 turbines comprise Batch 4 of the turbine order placed with Windflow Technology on 30 September 2008.
3 When selecting the Windflow WF500 turbines for use at Te Rere Hau, NZ Windfarms required that Windflow Technology agree to seek Class 1A Design Certification of the WF500 turbine in accordance with the International Electrotechnical Committee Standard WT-01:2003 (“IEC Class 1A Certification”). The Company has placed orders with Windflow Technology for 97 turbines in reliance on positive progress reports from WTL on the certification process.
Windflow Technology has advised that the turbines supplied to date and intended to be supplied for use at Te Rere Hau will not meet IEC Class 1A Certification standard. We are now seeking expert advice to determine how material the difference between the turbines supplied is from turbines that would gain IEC certification. We are also reserving our position in regard to what mitigation or remediation we will seek from Windflow Technology. Our objective is to be satisfied that all of the turbines supplied by WTL will be fit for purpose on the Te Rere Hau site.
On 29 May 2009 NZ Windfarms lodged a Resource Consent application with Tararua District Council to install 56 turbines in an area adjoining the current consented Te Rere Hau wind farm. This Extension area has a better wind resource than the lower slopes of the existing farm and hence NZ Windfarms would like to preferentially locate most or all of the Batch 4 turbines in this area. Submissions closed on 27 July 2009 and management is in the process of reviewing them. The Resource Consent hearing is scheduled to commence on 5 October 2009.
We recently had an independent energy yield forecast completed for the whole Te Rere Hau site, incorporating wind and turbine performance data gathered from the site over the past two years. This has shown by optimising the development and siting the 32 Batch 4 turbines in the Extension area an expected annual energy yield of 153 Gigawatt hours per annum is forecast from an installed capacity of 48.5 MW (97 turbines). The study has also shown that the expected annual output from siting all the Batch 4 turbines on the lower slopes of the existing consented Te Rere Hau site would be 122 Gigawatt hours per annum.
The location and timing of the construction programme for Stage 4 will depend on the progress and outcome of the consent application and the IEC review, and the Company will choose the best option to give the optimum outcome.
Successful consenting of the Extension area will also present NZ Windfarms with expansion opportunity beyond the current project scope and allow existing infrastructure to be leveraged. NZ Windfarms forecast output from 56 turbines (inclusive of the planned relocation of Batch 4 turbines) in the Extension area is 95 Gigawatt hours per annum.
Should we be successful with the resource consent we will evaluate the economics of installing the additional 24 turbines in the Extension area.
OTHER PROJECTS In May 2009 the Company sold its interest in the Mt Stuart project, near Milton, Otago. As signaled in the Interim Report, the Mt Stuart project was not significant to NZWL and the sale allows all efforts to focus on successful completion of the Te Rere Hau wind farm. The sale resulted in a small gain for NZWL.
Earlier this year a review of the WindPower Maungatua wind farm project showed that continued investment in the project could not be justified and that lead to the decision to abandon the project. In recognition that NZ Windfarms will not proceed with this project capitalised costs to date have been expensed.
DIRECTORS AND STAFF On 1 May 2009 Wyatt Creech was appointed as an additional Director of NZ Windfarms Limited. Shareholders will be invited to confirm this appointment at this year’s Annual Meeting.
The refocus on Te Rere Hau has seen a staffing restructure to better match staff resources with planned activity level. Staffing levels will continue to be monitored to ensure optimal resources are achieved.
FUTURE PROSPECTS Our first priority remains the completion of the Te Rere Hau project. We want to achieve a quick resolution to the present issue with Windflow over turbine certification so we can proceed with confidence to raise the necessary funding to complete the 4 project. A positive outcome to the resource consent application on the Extension will also provide a better energy yield from the first 97 turbines ordered.
By the end of October we will have the first three stages of the project completed, a total of 65 turbines which are expected to provide an annual energy yield of 95GWh. This will enable the Company to generate positive operational cash flow on an annual basis with expected electricity and carbon prices and average annual wind conditions.
Completion of Stage 4 will be dependent on the outcome of the resource consent process but we are optimistic that we can complete that stage by the end of the financial year We are forecasting a small profit for the year ended 30 June 2010, with the Company generating positive profits and cash flow from the following year, once the project is completed. However, the Company is still exposed to the spot market for electricity revenue and thus will have earnings volatility while this remains the case. We continue to monitor this exposure and the trade- offs between revenue certainty and the cost of achieving that certainty with a generation source subject to the weather conditions on a daily basis.
Derek Walker Chairman For further information contact: Steve Cross Chief Executive Officer 021 899 853 or 03 943 5410
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CHARLIE’S GROUP LIMITED FULL YEAR RESULTS TO 30 JUNE 2009
Sales Growth despite challenging year
Premium beverage company, Charlie’s Group Limited (NZSX: CHA) (CGL or the Company), today announced its audited results for the financial year ended 30 June 2009 reporting a year on year increase in Gross Sales of 2%, a negative earnings before interest, tax, depreciation and amortisation (EBITDA) of ($925k) and a net loss after tax of ($1,815k). These results are in line with previous guidance.
This result is a reflection of the current economic environment in conjunction with a number of non-recurring costs that CGL has incurred in the year ended 30 June 2009.
Gross Sales of $34.0 million for the year represents a continuation of the Company’s track record of year on year sales growth since listing. It is pleasing to note that growth in Australia continues to increase significantly. At half year CGL reported 21% growth on the previous year in the Australian market, and CGL is happy to advise that this trend has continued and improved – with year on year sales growth of 31%. In addition export sales have increased by 21% over the year.
These sales improvements have, however, been offset by a reduction in New Zealand sales of 2% for the year. Despite this reduction, CGL’s New Zealand market share over the period grew slightly.
The Company’s goal since listing has been to fully establish itself in the non alcoholic beverage market through execution of its Re-Investment for Growth strategy. The success of this strategy is evident in:
1) The growth in Gross Sales from $9 million in 2005 to $34 million in the year ended 30 June 2009.
2) CGL now has dedicated manufacturing facilities in NZ and Australia.
3) The control of a valuable, extensive, distribution platform in NZ and Australia and market leading brands.
The Company has a successfully established business and has achieved high growth. The strategy for the Company going forward is to generate sustainable profitability for its shareholders. CGL’s plan to achieve this new strategy is set out in the Outlook section below.
Year in Review
The plan for the year ended 30 June 2009 was for the Company to continue the ‘Re-investment for Growth Strategy’. However, like many businesses, CGL felt the impact of the recession on consumer spending and faced a number of challenges within its business.
As advised earlier, major challenges that CGL encountered during the year ended 30 June 2009 included:
1) CGL incurred high non recurring discounting costs related due to clearance of deleted product lines in the second half of the year as part of a product rationalisation program. This clearance has now been completed.
2) CGL discovered in late January 2009 that certain inputs into product costing models were inaccurate due to the issues with the implementation of its then new IT system. As a result of this issue, CGL also incurred one off costs related to correcting the system of approximately $150k. The IT system is now performing to original expectations, and providing valuable data and analysis enabling CGL to manage it business more efficiently.
3) While CGL successfully completed establishment of its Renmark plant in Australia to its internal timetable (the beginning of the current financial year), CGL encountered a number of setup and operating challenges that resulted in higher than budgeted production costs for the year ended 30 June 2009. These included non-recurring set up costs such as high wastage and labour, product testing and stock write offs as production processes were perfected and the new production team trained. The facility has now been running for over 12 months and, over this time, production techniques have been greatly improved resulting in significant reductions in production costs for Charlie’s branded products for the year ahead.
4) The transition from having the Charlie’s brand products contract packed by third parties to packing these products (in a new bottle) at CGL’s new Renmark facility resulted in CGL holding very high stock levels for the first 6 months of the year, in order to ensure continuity of supply to customers. This also resulted in higher warehousing and freighting costs for the period and therefore higher interest costs from increased working capital requirements. The transition is now completed and stock levels have returned to normal.
5) Finance & Administration costs contain $160k of non-recurring legal and consulting costs associated with corporate activity during the latter part of the year.
Commentary on Financial Results
On the positive side, the CGL group’s total inventory holding decreased from $5.3 million at 30 June 2008 to $4.6 million at 30 June 2009, which resulted in cash flow from operating activities improving by 11%.
Selling & Distribution expenses increased by $1,935k from the previous financial year. This related to increased expenditure on personnel, distribution and infrastructure costs and the non-recurring cost of clearing deleted product lines in the second half of the financial year and to the change in discounting strategy and the treatment thereof.
Marketing expenses decreased by $1,245k from the previous financial year.
Administration and other expenses increased by $1,226k from the previous financial year due to the treatment of administrative costs during the set up of Charlie’s Group (Australia) Pty Limited (CGL’s Australian operating subsidiary). These ongoing costs were captured in the administrative and other expense line during the financial year while correct product costing procedures were being developed. Ongoing overhead costs related to the Renmark facility will be recovered as part of the product costs that run through cost of goods sold.
The management team at CGL have completed some significant projects in the last 12 months, including the commissioning of the Renmark facility and the implementation of a new IT system. These projects, which were necessary to improve the overall long term platform for the CGL group, resulted in the short term operating issues outlined.
However, these issues are now resolved and the successful implementation of these projects has created an improved and stable platform on which the CGL group can base its operations for the future.
The significant change in the Company’s strategy has resulted in a number of material changes to the structure of CGL’s operating business to reflect the need to produce immediate, sustainable profitable results.
A review of current operating expenditure in the last quarter of the year ended 30 June 2009 is expected to produce cost savings of $2.5 million per annum.
CGL has also significantly improved internal controls and procedures, which will greatly increase the operating efficiency of the CGL group and its ability to adapt to changing market conditions.
CGL’s Board is currently reviewing the capital structure of the CGL group.
Total bank debt (advanced by ANZ) at 30 June 2009 was $7.0million, which generated an annual interest cost of $641k. CGL is in the process of re-structuring its balance sheet, the first step in this plan is the sale and lease back of 87 Henderson Valley Road for $2.5million, and an unconditional agreement for sale and purchase was signed on 21 August 2009, with settlement expected to occur on 30 October 2009. The net proceeds of this transaction will be used to repay facilities with ANZ. ANZ have agreed to renew CGL’s remaining facilities until 30 August 2010, and the credit support arrangements in place through CGL’s largest shareholder, Collins Asset Management, remain in place.
Stefan Lepionka, CGL’s CEO noted “Our internal focus is to consolidate and take a conservative approach to the new financial year in order to generate profits regardless of the challenges within the current economic climate. Action on this strategy has been taken during the last quarter of the year, resulting in significant cost reductions in the business commencing at the start of the new financial year. On a positive note, it is pleasing to have started the 2010 financial year well with both July 2009 financial results and August 2009 Gross Sales to date well ahead of the same periods last year.”
He noted “Australia continues to be a large opportunity and growth market for the Group and as such is commanding much focus in the current financial year. This includes the recent appointment of a dedicated National Sales Manager in the Australian market. This early success gives us the confidence to continue to support this market”.
For further information, please contact:
Stefan Lepionka Chief Executive Officer 021 930 916
PYNE GOULD CORPORATION LIMITED RESULTS ANNOUNCEMENT TO THE MARKET
Reporting Period - 12 months to 30 June 2009 Previous Reporting Period - 12 Months to 30 June 2008
Amount Percentage $'000 Change
Total operating revenue 198,085 -17% Net Profit (Loss) after tax and before abnormal gains attributable to shareholders (54,355) N/C Net Profit (Loss) after tax attributable to shareholders (54,355) N/C
Amount per share Imputed Amount Final Dividend Nil
6/30/09 6/30/08 Net Tangible Assets per share $1.62 $2.41 Earnings per share (before abnormals) (55.1 cents) 45.6 cents
Pyne Gould Corporation Limited (PGC) today confirmed the impact of one-off write downs on its results for the year ended 30 June 2009 in reporting an after tax loss of $54.4m. Underlying operational performance for the Group, including that from PGW, was $25.1m.
As foreshadowed on 21 July 2009, the full year result was impacted by the write down relating to the impairment of MARAC’s property development loans. After tax write downs to the property development portfolio of $59.5m (being an additional $37.5m after tax to the $22m after tax charge taken at the half year to 31 December 2008) were recognised for the year ended 30 June 2009 at the parent company level as a result of PGC’s underwrite of MARAC’s property book. Also impacting the result was a loss of $13.8m arising from PGC’s 20.7% investment in PGG Wrightson (PGW), which suffered a range of one off and non operating costs totalling $96.4m in the year to 30 June 2009.
The PGC chairman, Sam Maling, said: “The loss is disappointing especially given the group’s long and proud history. While we should continue to look forward, we need to learn from mistakes made and ensure that they don’t happen again. Like many others, MARAC got caught up in the demand for property development finance and the high returns that were offered. Changes have been made and will continue to be made as we move forward. In that regard we have a well developed plan to refocus the group to become New Zealand’s only publicly listed banking and asset management company. This process is well underway with the starting point being the recent appointment of Jeff Greenslade as Chief Executive.” (See more details under headline: New Strategic Focus Update.)
Mr Maling said that the approach taken in writing down the property development assets was necessary and realistic in the current environment. “We wanted to recognise all known impairments in full in the current financial year and lay the platform for repositioning the group for future growth.”
The Board has decided that, in the context of PGC’s stated intention to raise capital, PGC will not pay a final dividend. The total dividend for the year ended 30 June 2009 remains at a fully imputed 5 cents per share (23 cents for the previous corresponding period), being the amount of the interim dividend which was paid on 27 March 2009.
Mr Maling said: “On the positive side the underlying performances of our two business segments – financial services (MARAC) and trustee services (Perpetual Trust) – were encouraging in this operating environment.”
- Divisional Performances
The core MARAC businesses, which are based around providing vehicle, plant and equipment and cash flow based working capital finance to New Zealanders and New Zealand businesses, performed well, recording a normalised net profit after tax for the period of $19.5m, compared to $27.9m in the 2008 financial year. While the impact of the current economic environment has translated to lower profits in the 2009 year, the Underlying Performance* of MARAC remains strong at $41.3m ($47.3m in 2008). The fall in Underlying Performance arose largely as a result of MARAC deriving lower fee income following its decision to exit the property sector.
In the 12 month period to 30 June 2009, the size of the receivables book fell by $88.1m to $1355.0m due to the impact of a lower level of economic activity earlier in the financial year and following a strategic decision to cease lending in the property development sector.
The Consumer Finance division has benefited from the exit of several major competitors from the motor vehicle finance market. The division has also gained significant market share in the key segment of quality used car and franchise dealerships. Distribution has been further strengthened with the recent announcement of a strategic partnership with AA Finance.
There has been a noticeable improvement in business sentiment post March this year. Lending activity in the Commercial division has improved as a result. With fewer competitors and an improving economy, receivables growth in the Commercial division was steady over the remainder of the financial year.
MARAC’s NZX listed 5 year secured bond, which closed over subscribed in July 2008 raising $104.2m, added more diversity and duration to MARAC’s funding profile.
The mainstay of MARAC’s funding continues to be its retail debenture program. Retail investors have proven to be extremely loyal and have continued to support MARAC with solid levels of new funding and reinvestments. This loyalty was demonstrated by the large number of attendees at MARAC’s first ever series of investor forums late last year, something that will be repeated later this year.
MARAC holds $804.3m of retail funds (excluding funds raised by the secured bond issue) as at 30 June 2009.
MARAC’s credit rating was recently downgraded to BB+. Whilst Standard & Poor’s stated that MARAC was “one of the stronger finance companies in New Zealand” it identified MARAC’s exposure to the property development sector as an issue – which MARAC has now exited.
- The introduction of the New Zealand Deposit Guarantee Scheme in October 2008 resulted in large inflows of new funds. However, MARAC immediately took steps to ensure that the overall funding mix was not distorted by ‘guarantee chasers’. MARAC’s strategy has been to maintain a low level of maturities around the scheme’s initial expiry date of 12 October 2010. Currently, 30% of MARAC’s debenture book matures after 12 October 2010.
The recently announced extension of the scheme to 31 December 2011 will assist with investor confidence and with an orderly exit from the scheme. MARAC qualifies for the new scheme and it is our current intention to apply to be covered.
2. Perpetual Trust
Perpetual Trust contributed total operating revenue of $16.2m ($16.9m for the previous corresponding period) and net profit after tax of $3.3m, compared to $3.7m for the previous corresponding period.
The performance reflected current economic conditions, with revenue and net profit down on last year, although this is the second highest net profit result to date. Perpetual Trust has a well diversified income stream and has continued to perform solidly in most core areas.
Perpetual Trust’s client base continues to grow in numbers but the decline in assets under administration due to decreasing property values and declining investment markets has impacted revenue. Growth in underlying client numbers positions Perpetual Trust well for revenue and profit growth in the future.
2009 is a significant year in the history of this business – it marks Perpetual Trust’s 125th anniversary, and the 75th jubilee of PGG Trust.
3. PGG Wrightson
PGG Wrightson, (an NZSX listed company in which PGC has a 20.7% shareholding), reported its annual result yesterday.
PGG Wrightson reported a solid performance with net operating profit after tax and before one-off and non-trading items of $30.0m. The company performed well in the first six months, but in the second half, particularly in the April to June quarter, experienced increased pressure on margins.
A number of non trading items, including the settlement with Silver Fern Farms and a revaluation of the investment in NZ Farming Systems Uruguay, which together totalled $96.4m, resulted in a reported loss after one-off and non trading items of $66.4m. PGC's share of this net loss was $13.8m.
PGG Wrightson has renegotiated a revised banking package with its banking group and is reviewing its capital structure, including considering a potential capital raising.
New Strategic Focus Update
On 21 July PGC announced plans to reposition itself to become New Zealand’s only publicly listed banking and asset management company. As outlined at the time this included: - A decision by MARAC to cease property development lending, to refocus on its core business of plant, equipment and vehicle and cashflow based working capital financing and to tighten its credit processes. - The sale and transfer of approximately $175m of MARAC’s property development book to another division within PGC and ultimately to Torchlight Credit Fund. - A restated intention for MARAC to become a registered bank after regaining its investment grade credit rating and gaining Reserve Bank approval. - The creation of a new asset management business – Perpetual Asset Management.
The company’s new CEO, Jeff Greenslade, said a key factor in achieving PGC’s stated aims is a successful capital raising.
“We have over the last month made significant progress on the capital raising with the appointment of First NZ Capital. We are close to determining the amount of capital required for the business to achieve its medium term goals. As part of that process we are working through the required due diligence and prospectus preparation process and expect to be able to provide a further update in the second half of September. It is our expectation that any equity raising will be fully underwritten.”
The factors which will determine the amount of permanent equity capital to be raised include: - Ensuring MARAC has sufficient capital to comfortably comply with both bank regulations and non-bank deposit taker regulations. - Providing consideration to MARAC for the sale and transfer of property development loans to Torchlight Credit Fund. - Repayment all outstanding bank debt at the PGC level. Positioning MARAC so it is able to pursue future consolidation opportunities. - Enabling PGC to support growth initiatives within its other businesses and investments.
Mr Greenslade said that it was important to get the capital structure right for the group going forward. “We want to do this once and we want to do it right,” he said.
“MARAC has a sound underlying business once the property development assets are removed. The expertise in our business means it has the perfect platform to expand its financing activities, albeit in a very disciplined and strategic way, both organically and through acquisitions. As signalled in the recent announcement extending the Crown Guarantee scheme, it is expected that industry consolidation will occur and we want to be at the forefront of this.
“As Standard & Poor’s rightly noted, ‘MARAC is one of the stronger finance companies in New Zealand.’ We know what we have to do to earn back our investment grade credit rating. This is a high priority for MARAC.”
Mr Greenslade said that the creation of Perpetual Asset Management provided PGC with an attractive opportunity to expand and also diversify its earnings base.
“Spread across PGC’s businesses are 50,000 to 80,000 customers reflecting middle New Zealand – urban and rural businesses, their owners, and mid-to-high income earning individuals. This is not just a valuable demographic – it is also one that is increasingly under-serviced by financial institutions. When you add this to our many ancillary business relationships, our potential customer base increases significantly.
“So the purchase of EPAM, completed earlier this month, and the creation of Perpetual Asset Management provides a great opportunity to service this customer base and a foundation to build a market-leading financial services business.”
The appointment of John Duncan to head Perpetual Asset Management was made earlier this month.
Mr Maling said that all shareholders would get the opportunity to participate in a capital raising.
“George Kerr, an associated person of Pyne Family Holdings and PGC’s largest shareholder, has re-iterated his support of the capital raising.”
- Ends -
For further information contact: Geoff Senescall Senescall Akers Limited M 021-481 234 E [email protected]
Northland Port Corporation has announced a surplus $2.693 million ( 6.30 cents/share) for the year to 30 June 2009.
This compares to a surplus of $10.049 million (23.12 cents/share) for the previous year.
Commenting on the result Chairman, Geoff Vazey advised that the main reason for the drop in surplus was the inclusion in the 2008 result of a one off gain of approximately $7.6 million on the sale of the Company’s 50% interest in marina and waterway joint venture, Marsden Cove Ltd. He stated that the underlying Group had performed satisfactorily, with a particularly strong performance coming from Associate Company Northport.
Cargo volumes through the port at 1.64 million tonnes were approximately 200,000 tonnes ahead of those of the previous year. Indications are that the recent high levels of log exports will continue into the foreseeable future. Conversely there has been a drop in fertilizer volumes.
The formal designation process for the rail link has continued during the year and a hearing before Regional and District Council Commissioners will commence in late August.In the long term the port will need a rail link to enable it to handle ever increasing volumes. The designation is fundamental to be able to build the rail link. The successful introduction of the designation is immensely important to the future growth of Northland’s export businesses as they rely on an efficient supply chain to world markets.
The down turn in the property market has reduced the progress of tenanting the Company’s land adjacent to the port. However interest continues to be shown in the industrially zoned land at Marsden Point with a conditional lease signed with one party for an area of 10 hectares. A resource consent application for the proposed production unit is expected to be submitted shortly. Discussions continue with another party to provide an option on an area of 6 hectares for another industrial development. With the recent upturn in forestry in the Region it is anticipated that this level of interest will continue.
DIVIDEND A final dividend of 3 cents/share (2008 - 5 cents/share), fully imputed will be paid on 25 September 2009, bringing total ordinary dividends declared in respect of the year to 5.5 cents/share (2008 - 8 cents/share).
Preliminary Full Year Report and Release for 30 June 2009
Chairman’s and Chief Executive’s review
Just Water International Limited Results for year ended 30 June 2009
Just Water International Limited (JWI) presents its full year results for the year ended 30 June 2009.
The directors are pleased with progress, as reflected in the consolidated results. EBIT of $4.590 million (2008 - $3.085 million) increased by 49% over the previous year and EBITDA of $9.118 million (2008 - $6.274 million) by 45%. After tax profit was $1.804 million (2008 - $0.595 million), an increase of 203%.
The result reflects a successful year in terms of expanding the base of water-coolers in New Zealand, and the restructuring in Australia has set an excellent base for the profit improvement to continue.
Depreciation and amortisation increased from $3.2 million in 2008 to $4.5 million in the current year. This is as a result of the increase in the base of water coolers. Depreciation on our new ERP system was only charged for the last three months of the year, but it will increase the depreciation charge in 2010 by about $600,000.
At last we can report that our major challenges in Australia are behind us, and we believe the improved performance over the last year will continue.
Since we floated the Company, we have maintained that the growth in our base of water-coolers determined the future short and mid-term profitability. However, this has become far less relevant as a result of the growing importance of sales in the residential sector in both countries. This has a greater impact on short term profitability.
During the year, Hon Jim McLay resigned to take up an appointment as New Zealand’s Permanent Representative to the United Nations.
Mr McLay led the Company through the IPO in June 2004 as Chairman, and his experience and vision has been instrumental to the success of the IPO and continued progress of the Company. The current directors, management and staff have been honoured to have Mr McLay as Chairman for the last five years, and wish him well in his new career.
We have been fortunate to secure Sir Don McKinnon to replace him; Don is a man who has served the last eight years as the Commonwealth Secretary-General, following a 21 year career in New Zealand politics.
JWI is declaring a fully-imputed net dividend of 1.98 cents per share, giving a total net dividend of 3.58 cents per share. This is equivalent to a gross dividend of 5.34 cents per share. This maintains the dividend paid in the previous year.
The Dividend Reinvestment Plan will continue for payment of this dividend.
The bank has a requirement that our EBIT must cover interest by 2.5 times (2008 – 1.5 times). Our actual interest rate cover, (before one-off costs) at June 2009 was 2.4 times. We expect earnings in 2010 will remedy this breach. The bank regards the breach as minor and does not require action. Our EBITDA to interest ratio is still a healthy 4.2 times (2008 – 3.0 times).
The directors wish to acknowledge the efforts of all employees in a period of substantial change. It recognises the pressure that the restructuring in both countries in a time of economic uncertainty, and the installation of a new ERP system in New Zealand, has caused, and thanks them for their ongoing support.
Tony Falkenstein, CEO 021 950 856
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HY to 26/07/2009 $6.52M ($3.09M) +111.0% Int Div 2.00cps
BRISCOE GROUP LIMITED Results for announcement to the market Reporting Period; Half-Year 26 January 2009 to 26 July 2009 Previous reporting period; Half-Year 28 January 2008 to 27 July 2008
Amount (000s); Percentage change
Sales revenue from ordinary activities $185,285 +1.8%
Profit from ordinary activities after tax attributable to shareholders $6,521 +111.0.6%
Net profit attributable to shareholders. $6,521 +111.0%
EPS: 3.1cps 1.4cps
Interim Dividend Gross amount per share 2.00 cents Imputed amount per share 2.00 cents
Record Date: 25/09/09 Payment Date: 02/10/09 Imputation tax credit: $0.009851
The directors of Briscoe Group Limited announce a net profit after tax (NPAT) of $6.52 million for the half-year ended 26 July 2009. This compares to the $3.09 million for the corresponding period a year ago and represents an increase of 111%. The result is in line with the advice given to the market on 21 August. The half-year results are unaudited.
The directors have declared a fully imputed interim dividend of 2.00 cents per share (last year interim 1.00 cent). This is consistent with Briscoe Group’s policy of paying at least 60% of the Group’s tax paid earnings as dividends. Books will close to determine entitlements at 5pm on 25 September 2009 and payment will be made on 2 October 2009.
The earnings were generated on sales of $185.29 million compared to the $181.95 million generated in the same period last year. Included in the NPAT is an asset impairment adjustment of $827,627 in respect of four specialty stores within the Group’s 58 store homeware segment. These stores have to date been unable to achieve acceptable levels of profitability in the highly competitive and unpredictable markets in which they operate. All other stores in the Group are trading well notwithstanding the challenges of the difficult retail market.
Gross margin percentage increased from 39.39% to 40.34% reflecting predominantly the benefits being obtained from the SAP system, which has now been fully operational across the entire Group for over twelve months. The system is proving effective in assisting us with automated replenishment, as well as to achieve better analysis and management of inventory. The increased ability to extract data quickly has enabled us to develop the process of reviewing our inventory ranges in a more timely and sophisticated manner and to make decisions that protect and improve margin.
In the period under review, homeware sales decreased 0.09% from $126.14 million to $126.03 million and sporting goods sales increased 6.17% from $55.81 million to $59.25 million.
On a same store basis, homeware sales decreased by 1.37%, while sporting goods sales increased by 6.17%.
Rod Duke, Group Managing Director, said: “We are really pleased to be able to report such a good recovery for the first half of the year. If you were to exclude the impairment adjustment as a one ‘one-off‘ correction, NPAT would have been 138% higher than the half year performance of last year.
“The market continues to be very competitive with the level and frequency of discounting increasing, particularly throughout the homeware market. The challenge for us has been to drive profitability without the reliance on substantial top-line sales growth. The initiatives we have implemented around inventory management and cost control have protected our margin and enhanced profitability. For example, significantly reducing the size of our marketing function, further developing the profit centre structure within which our stores operate, introducing steering committees to the buying process and continuing to demand improved value on all cost lines have all contributed to a more efficient and effective cost base.
“We have deliberately limited the expansion of store numbers this year, choosing to focus on getting the best from our existing store network. Since July last year the Group has opened an additional four stores. Last year Briscoes Homeware opened a new store in Masterton and Living & Giving opened stores at Atrium in Auckland City and Queensgate in Lower Hutt. In June this year Living & Giving opened a further store at Riccarton in Christchurch. During August settlement was made on the purchase of a property in Palmerston North and in due course we will relocate our existing Briscoes Homeware and Rebel Sport stores there.
“We will continue with a conservative approach in relation to any further expansion of Living & Giving stores until market conditions support profitable expansion in this highly discretionary area of the homeware segment.”
Inventory levels at 26 July 2009 were $64.89 million compared to $65.21 million at the same time last year. The decrease of $0.32 million reflects the continued focus the Group has had on its inventory control during a challenging period for retailers in which the Group opened an additional four stores.
Rod Duke, said: “We are optimistic about Group performance as we move through the second half of this year. Inventory is in great shape and we will continue to benefit from the operating efficiencies, albeit at a diminishing rate, generated from the cost reduction initiatives implemented progressively since early last year.
”The uncertainty of the economic environment continues to make it difficult to accurately predict a result for the second half of this year. While we are confident of exceeding the $8.5 million NPAT we achieved for last year’s second half, the percentage increase is likely to be considerably less than the increase achieved for the first half of this year.”
Wednesday 9 September 2009
Contact for enquiries:
Rod Duke Group Managing Director Tel: (09) 815 3737
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The Warehouse Group - 2009 Annual Results Announcement
THE WAREHOUSE GROUP LIMITED Results for announcement to the market Reporting Period: 28 July 2008 to 2 August 2009 Previous Reporting Period: 30 July 2007 to 27 July 2008
CONSOLIDATED OPERATING STATEMENT 2009 Full Year Performance
REVENUE $1,720.755 million versus $1,735.030 million in 2008, a decrease of 0.8 %
OPERATING PROFIT $124.952 million versus $121.140 million in 2008, an increase of 3.1 %
EARNINGS BEFORE INTEREST AND TAX $116.128 million versus $134.687 million in 2008, a decrease of 13.8 %
PROFIT BEFORE TAX $109.291 million versus $128.293 million in 2008, a decrease of 14.8 %
PROFIT ATTRIBUTABLE TO PARENT SHAREHOLDERS $76.782 million versus $90.769 million in 2008, a decrease of 15.4 %
EARNINGS PER SHARE 24.9 cents per share versus 29.4 cents per share in 2008, a decrease of 15.3 %
Final Dividend: 5.5 cps Special Dividend: 10.0 cps Record Date: 06 November 2009 Date Payable: 18 November 2009
Tax credits on final and special dividend: Fully imputed for New Zealand residents; Supplementary dividend payable to non-residents.
THE WAREHOUSE GROUP ANNOUNCES ANNUAL RESULT
Adjusted Earnings up 5.3% to $85.2 million Ordinary Dividend maintained, Special Dividend announced
Auckland, 11 September 2009 – The board of The Warehouse Group today announced a net profit after tax excluding unusual items of $85.2 million compared to $80.9 million in F08, up 5.3%. Net profit after tax for the second half, excluding unusual items, was $28.4 million up 17.8%.
Reported net profit after tax for the 53 weeks ended 2 August 2009 was $76.8 million after incurring a $7.4 million post tax charge relating to the exit from fresh food and liquor. This compares to reported net profit after tax for the previous year of $90.8 million which included a benefit from the reversal of warranty provisions of $7.2 million.
Group sales for the year were $1.72 billion, down 0.8% on the previous year.
The directors have declared a final dividend of 5.5 cents per share bringing the total ordinary dividend for the year to 21.0 cents per share, unchanged from last year. The directors have also declared a special dividend of 10.0 cents per share. Both dividend payments will be fully imputed at a rate of 33.0 percent.
In announcing the result, Chairman Keith Smith says, “In light of economic conditions prevailing during the trading period this is an excellent result. Very strong cash flow has enabled us to not only maintain our final ordinary dividend for the year but to also distribute accumulated imputation credits to shareholders by way of special dividend, a very pleasing outcome”.
The Warehouse reported sales of $1.53 billion level with last year. Adjusting for F09’s 53rd trading week and discontinued fresh food and liquor categories, sales were down 0.8%. Same store sales were down 0.4% for the year.
The Warehouse achieved earnings before interest and tax of $120.2 million up 6.6% on last year including $5.0 million in profit improvement relating to the exit from fresh food and liquor.
Commenting on The Warehouse performance, Group Chief Executive Officer, Ian Morrice says “This is a good result, one that reflects a strong trading plan to drive sales and the measured response we have taken in a very difficult trading environment. Our focus on gross margin, inventory management and cost reduction underpinned the profit outcome and strong operating cash flows”.
Mr Morrice says “same store sales for the second half were up 1.6% with fourth quarter same store sales up 2.3%. This was achieved by reinforcing our position as the price and value leader, competing vigorously and providing for customers’ everyday needs in difficult times”.
Mr Morrice says “the challenging environment and focus on trading has not disrupted the implementation of key growth initiatives. During the year our on-line sales channel was made transactional and we opened our first Warehouse Local store in Mosgiel. We have also continued to invest in building our capability“.
Warehouse Stationery reported sales of $187.2 million down 6.2% on last year. After adjusting for the 53rd trading week sales were down 7.0%. Same store sales were down 7.1% for the year. Earnings before interest and tax for the year were $1.6 million compared to $5.1 million in F08.
“During this economic downturn many specialist retailers have been particularly hard hit”, Mr Morrice says. “Cost reduction initiatives implemented during the year were not sufficient to offset the impact of sales deleverage. The market for big ticket items was particularly difficult with most of Warehouse Stationery’s sales reduction attributable to office furniture and technology products. Warehouse Stationery is now very focused on achieving a successful turnaround with near term emphasis on retail basics, in particular product, price and in-store execution. Results achieved over the last few months have been very encouraging”.
Mr Morrice said that whilst retail sales demand is expected to gradually improve over the coming year, uncertainty would continue to be a feature of the economic environment and whether recent signs of economic improvement would translate into a sustained upturn remained to be seen. Over the next twelve months The Warehouse will be focusing on growth through product and format development reinforcing its strong value proposition.
Dividends will be paid on 18 November 2009 with the entitlement date being 6 November 2009.
A sales update for Q1 F10, ending 1 November 2009 is due for release on 13 November 2009.
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Financial result for the three months ended June 2009 (Unaudited)
The Mainfreight Group is pleased to report a net surplus after taxation and before abnormals of $4.02 million, however this is a decrease of 51.1% compared to the same period last year.
Consolidated sales revenues for the period were $261.67 million, a decrease of 9.5%. Excluding foreign exchange adjustments, the decrease is 17.2%.
EBITDA for the period of $11.72 million is down by 29.2% on the prior year’s result of $16.56 million (excluding foreign exchange, 31.9%).
Abnormal costs (after tax) of $1.27 million were incurred during the period, and relate to further restructuring undertaken to deliver improved operational performance. We do not expect to incur substantial additional abnormal costs for the remainder of this financial year.
Trading conditions in all countries during the first three months of the financial year were difficult, and followed trading similar to that experienced during January to March 2009.
While Group performance has not matched last year’s records, highlights for the quarter include New Zealand International, Australia International and Australia Domestic operations, all performing better than the same period last year.
New Zealand Domestic New Zealand Domestic EBITDA declined by 28.2% to $5.89 million compared with the same period last year, primarily as a result of freight volume deterioration. Sales revenues were down 17.8% to $62.15 million.
Following the quarter end, volumes have improved during July and August. Warehousing volumes continue to increase as customers begin to build stock inventories. Domestic Transport volumes are expected to increase as these inventories make their way to market.
A freight rate review is expected to be implemented by 1 November.
New Zealand International While revenues were off 3.0% versus the year prior at $23.21 million, EBITDA improved 22.0% to $0.79 million. Cost reductions and improved market share in the airfreight sector contributed significantly to these results.
This momentum has continued into our second quarter, where trading is on par with the prior year.
Australia All our operations in Australia have performed better during this last quarter, particularly as improvements in operating costs began to take effect
Australian Domestic In our Domestic operations, revenues remained under pressure declining 5.9% to $42.21 million, however EBITDA improved 28.6% to $1.96 million.
The improvements made in our Logistics business during this past year have assisted, as has an increase in market share secured by our Distribution business.
Trading results continue to show improvement through July and August, with most weekly results ahead of the prior year.
Australian International Internationally, our revenues are ahead of the same period last year, up 21.4% to $43.93 million. These were assisted by the contribution of revenues from the Halford acquisition, as import volumes continue to be eroded in the current economic climate.
EBITDA improved 78.3% to $1.55 million. Prior year performance was poor in comparison, and the current quarter’s results reflect the cost benefits realised through merging Halford into the Mainfreight operations.
Trading during July and August remains patchy and behind the prior year.
United States of America General trading in the USA has been difficult and this has certainly impacted revenues in both our American divisions.
Total revenues declined 18.0% to $84.85 million (excluding foreign exchange the decline is 35.8%). The majority of this decline is in our Mainfreight USA operations, where revenue is down from $61.72 million to $47.76 million. CaroTrans declined 11.1% from $41.73 million to $37.08 million.
EBITDA performance in CaroTrans improved 9.5% to $2.75 million as margins have improved with LCL freight volumes offsetting FCL volume decreases. Mainfreight USA EBITDA declined 179.0% to a negative $1.74 million. Combined EBITDA totalled $1.00 million.
Domestic freight volumes in Mainfreight USA continue to be depressed. Change of senior management has been a stimulus for renewed vigour within the business. Market share and sales growth remain our highest priority.
CaroTrans is delivering improved margins as LCL freight volumes increase, with trading during July and August on par with the year prior.
Asia International Our revenues improved over last year’s, up 6.7% to $5.33 million as a consequence of foreign exchange fluctuations; however when excluding foreign exchange this declines 16.5%. Freight volumes remain substantially below last year’s.
EBITDA for the quarter declined to $0.52 million, a decrease of 12.5%.
Market share increase in airfreight volumes, particularly to the USA, is a positive feature of the quarter.
Export orders appear to be on the increase during July and August. International shipping rates are also on the rise as shipping tonnage is adjusted to match volume. Peak season tariff increases are expected to be applied from 1 September.
Shipping rate decreases during the year contributed to lower revenue levels in all our International divisions.
Funding As advised at our Annual Meeting of Shareholders in July, our bank debt facilities have been renegotiated through to June 2012.
Facility levels are confirmed in two tranches: NZ$125 million and US$50 million. Funding costs have increased in line with market conditions.
Group Operating Cash Flows Operating cash flows were $13.65 million, a decline from $15.54 million reflecting trading performance in this first quarter.
Capital expenditure totalled $5.67 million, of which $2.90 million related to property development.
Net debt declined to $100.00 million, down from $115.28 million at March 2009. Currency fluctuations assisted this reduction by an amount of $8.53 million.
Outlook This first quarter performance reflects difficult trading conditions in all of our markets; a not unexpected outcome given the decline in volumes seen during the first three months of the 2009 calendar year.
During this time we have taken the opportunity to respond with better margin management, cost reductions and strong sales strategies – all measures that will stand us in good stead for the future.
Trading in July and August sees some improvement and it is our expectation that this will continue into the third and fourth quarters.
For further information, please contact Don Braid, Group Managing Director, telephone +64 9 259 5503, +64 274 961 637 or email [email protected].
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Pumpkin Patch Limited Audited results for the 12 months ended 31 July 2009
Notes: - all references to dollars are NZ Dollars unless otherwise stated
Major Achievements In 2009 - Net bank debt down 77% to $18m. Debt facilities in place until December 2011. - Inventory down $42m to $80m. Holdings now in line with current market requirements. - Implementation of a reorganisation plan for the United States retail stores. - Net profit before tax excluding all United States stores and non-recurring items up 7.8% to $25.1m. - Overheads realigned to match the current environment. - The Company is well positioned for when trading conditions improve and to take advantage of market opportunities as they arise.
Pumpkin Patch Limited has today announced its audited result for the 12 months ended 31 July 2009.
Overview During 2009 the Company embarked on number of strategic initiatives to strengthen its Balance Sheet and increase market share in a difficult retail environment.
As a result of those initiatives the Company has successfully reduced net bank debt by 77% to $18.4m, reduced inventory holdings by 34% or $41.6m, developed and implemented a reorganisation plan for its United States retail operation, and realigned overheads across all business units.
Total group revenue grew 4.5% to $428.6m despite the extremely difficult retail conditions experienced in all the Company’s global markets.
The extreme retail volatility experienced in the United States continued to materially impact Group earnings across 2009. Net profit after tax excluding all United States stores and non-recurring items was $25.1m up 7.8%. The implementation of the United States store reorganisation plan has lead to impairments and other non-recurring costs of $39.9m being recognised this year.
Net profit after tax excluding the 15 closed United States stores and non-recurring items was $18.5m down 4.2%. With these 15 United States stores included but excluding non-recurring items NPAT was $14.7m down 13.9%.
Australia Retail Despite the soft retail environment encountered for much of the year the Australian stores continued to trade reasonably well with turnover up 2.5% on 2008.
Segment EBIT of $38.5m (FY08: $41.0m) reflected increased promotional activity across the year and the continued drive to build market share and consolidate the brand’s positioning.
During the period 5 new stores opened (FY08: 5) taking total stores to 111.
New Zealand Retail The New Zealand retail environment was challenging during the year however the strength of the brand and increased promotional activity lessened the impact of those conditions with sales only marginally down 1.9%.
A change in sales mix resulting from the opening of 4 Outlet stores since the beginning of 2008 and increased promotional activity during 2009 impacted segment margins. As a result EBIT for the year was down to $11.1m (FY08: $12.6m).
Two new stores were opened during the year (FY08: 3), taking store numbers to 51.
Wholesale and Direct Wholesale and Direct turnover was $62.5m, up 5.3% on 2008. Softer conditions being faced by wholesale partners in their home markets lead to lower wholesale orders especially in the latter part of the year. This however was offset by lower average export exchange rates and a strong performance from the mail order and internet business.
EBIT for the year was $16.6m up 6.7% on last year.
United Kingdom Retail United Kingdom retail sales conditions continued to be very volatile throughout the year.
While sales were similar to last year high promotional activity was necessary leading to a generally lower margin. The EBIT loss for the year was $5.0m (2008: $2.6m) before non-recurring impairment charges.
As a result of the annual review of stores required under IAS36 (Impairment of Assets) the Company has made a non-cash impairment charge in 2009 of $6.4m to adjust downwards the carrying value of 10 United Kingdom stores. The Company is implementing strategies that focus on improving the operating results of the lower performing stores.
During the year 1 new store was opened (2008: 5) taking the total number of stores to 36.
United States Retail In response to the extremely difficult economic environment in the United States and the high levels of uncertainty as to how long those conditions would continue the Company implemented a reorganisation plan for the United States retail stores. Under that plan 15 of the Company’s 35 stores were closed. Leases on the remaining 20 stores are being renegotiated at levels that better reflect current market conditions.
The total costs of the reorganisation are approximately $39.9m including the full impairment of all fixed assets in the United States, inventory revaluation costs, employee obligations, and legal and other professional fees. Approximately $4.8m of those costs are cash in nature.
Due to the corporate structures employed in the United States the reorganisation plan does not impact any other trading segment including the United States wholesale company. The plan utilises legal protections afforded to United States corporate bodies that reorganise their business operations and therefore does not impact the New Zealand parent company.
Excluding the non-recurring reorganisation costs the segment generated an operating EBIT loss of $14.8m for the year (2008: $9.2m). Adverse trading conditions and the relatively young age of the majority of the stores made it impossible for stores to make any headway in 2009.
Unallocated Overheads Unallocated overheads were $19.7m down 10.3% (2008: $22.0m). This reflected reductions in overheads across Head Office functions and lower unrealised mark to market losses on foreign exchange contracts. The result includes approximately $1.0m of one off restructuring costs.
Cash Flows and Balance Sheet The Company has significantly strengthened its Balance Sheet to be well positioned to deal with any ongoing trading uncertainty and to take advantage of any market opportunities that arise.
Net bank debt has reduced significantly by $62.9m or 77% to $18.4m.
Continued focus on the management of inventory levels across all markets has resulted in a $41.6m or 34% reduction in inventory holdings. Inventory at July 2009 was $80.2m.
Capital expenditure cash flows totalled $11.8m (2008: $35.9m).
Dividend The Directors have approved the payment of a final dividend for 2009 of 4.50 cents per share (2008: 3.50cps) taking the total dividend for the 2009 year to 7.50 cents per share (2008: 7.50cps). The dividend will be paid on 22nd October 2009, have a record date of 8th October 2009, and will be fully imputed for New Zealand shareholders and fully franked for Australian shareholders. Non-resident shareholders will receive a supplementary dividend.
Foreign Currency As reported in November 2008 Pumpkin Patch realigned its foreign exchange cover portfolio to recognise both the changing retail market conditions and the volatility in foreign exchange markets. Movements in the NZD around that time lead to significant mark to market gains on foreign exchange cover.
Approximately $36m of mark to market gains were realised resulting in an immediate reduction in bank debt.
As outlined previously the realignment of cover would not materially impact earnings before interest and tax in 2009 and later years. Under International Financial Reporting Standards (IFRS) the mark to market gains that have been realised are required to be held in reserves and taken to earnings in the period in which the original foreign currency contract was due to mature.
Outlook for 2010 Trading conditions are expected to remain difficult in the near term. Despite this uncertainty the initiatives undertaken in 2009 have positioned the Company well to take advantage of improved trading conditions when they eventuate.
Australia Trading conditions are expected to remain subdued. The Company will continue to promote strongly to grow market share and strengthen the brand’s market position.
The Company is currently assessing a number of new store locations across Australia to consolidate its store network and to take advantage of opportunities that arise in softer retail environments.
New Zealand The current retail environment is expected to continue in the near term. The Company will continue to focus on growing market share and reinforcing the strength of the Pumpkin Patch brand in the market.
Wholesale Wholesale customers are expected to lower their orders in 2010 as they deal with challenging conditions in their home markets. However the Company continues to work closely with its partners to develop brand growth opportunities.
The Direct operations will continue to identify and develop growth opportunities across all of its markets.
United Kingdom The poor economic environment is expected to continue and trading will remain volatile. Despite this the Company expects to have some improvement on the 2009 result in the coming year. Recent supply chain initiatives are improving the flow of product into the market.
The leasing market has softened significantly which will lead to lower rental costs however the full impact of this will not be seen for a number of years while leases go through scheduled reviews.
This environment is also creating possible new store opportunities which are currently being assessed.
United States While the reorganised store network is expected to have a significant positive impact on total Group earnings and cash flows in 2010 trading in the United States remains very unpredictable with no immediate signs of recovery being seen. The Company continues to closely monitor all stores on a store by store basis and implement strategies to improve performance.
The changes made in the United States will provide shareholders with better financial outcomes in the near term and create a more sound foundation on which the Company can develop its United States strategy in the longer term
Bank debt Based on current trading conditions and expected working capital and capital expenditure requirements bank debt is expected to remain around current levels.
The bulk of the bank debt facilities are in place until December 2011.
Inventory Focus will continue to be directed at inventory management strategies to ensure inventory levels remain around current levels based on an average store holding basis.
Foreign Exchange While the Company maintains good levels of foreign exchange cover the ongoing volatility of the New Zealand Dollar makes it increasingly difficult to predict how foreign exchange rates will influence the 2010 result and plan for longer term growth initiatives.
Summary During the last eighteen months Pumpkin Patch faced unprecedented volatility in all of its markets. While Australasia now appears to be more stable other markets remain volatile. The Company continues to adjust its strategies to meet market demands and is confident that it will continue to make progress in 2010 despite some challenges in the near term.
The Company embarked on a major debt reduction program in 2009 which has significantly strengthened its balance sheet and positions it well for the future.
Pumpkin Patch remains the leading specialty childrenswear offer in Australasia and plans to further expand in these markets. Even though trading conditions will remain very challenging in the United Kingdom and earnings will be impacted the brand continues to get stronger. The changes made in the United States will deliver much improved financial outcomes for our shareholders in years to come.
We thank the entire team at Pumpkin Patch for a tremendous effort over the last year.
On behalf of the Board of Directors
Maurice Prendergast Chief Executive Officer
Greg Muir Chairman
Pumpkin Patch Limited 23rd September 2009
Audited financial result for the 12 months ended 31 July 2009 This report has been prepared in a manner which complies with New Zealand International Financial Reporting Standards (NZIFRS) and gives a true and fair view of the matters to which the report relates and is based on audited financial statements. It should be read in conjunction with Appendix 1 and Appendix 7 issued to the New Zealand Stock Exchange on 23rd September 2009.
CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE (Under NZIFRS)
Current Full Year NZ$'000; Up/ Down %; Previous Corresponding Full Year NZ$'000
TOTAL OPERATING REVENUE FROM CONTINUING ACTIVITIES: $412,348; Up 3.2%; $399,466
PROFIT BEFORE TAX FROM CONTINUING ACTIVITIES AND BEFORE NON-RECURRING ITEMS AND INCOME TAX: $27,383; Down 12.5%; $31,294
NON-RECURRING ITEMS ATTRIBUTABLE TO CONTINUING ACTIVITIES: ($16,787); NIL
PROFIT FROM CONTINUING ACTIVITIES BEFORE INCOME TAX: $10,596; Down 66.1%; $31,294
LESS INCOME TAX ON PROFIT FROM CONTINUING ACTIVITIES: $8,834; Down 26.0%; $11,941
PROFIT AFTER TAX FROM CONTINUING ACTIVITIES ITEMS: $1,762; Down 90.9%; $19,353
LOSS FROM DISCOUNTINUED OPERATIONS AFTER TAX: ($28,501); ($2,274)
OPERATING (LOSS) SURPLUS AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: ($26,739); $17,079
Final Dividend: 4.50 cps (2008: 3.50cps) Record Date: 8th October 2009 Date Payable: 22nd October 2009
Tax credits on final dividend: Fully imputed for New Zealand residents; fully franked for Australian residents; Supplementary dividend payable to non-residents.
To assist with the interpretation of the financial result and the assessment of the impact of discontinued and non-recurring items the following section provides additional disclosures of the financial result for the Group including the disclosure of net profit after tax excluding non-recurring items:
Current Full Year NZ$'000; Up/ Down %; Previous Corresponding Full Year NZ$'000
TOTAL OPERATING REVENUE FROM CONTINUING AND DISCONTINUED ACTVITIES: $412,348; Up 3.2%; $399,466
OPERATING SURPLUS AFTER TAX EXCLUDING DISCOUNTINUED ACTIVITIES AND NON-RECURRING ITEMS: $18,549; Down 4.2%; $19,353
OPERATING LOSSES AFTER TAX FROM DISCOUNTINUED ACTIVITIES: ($3,843); Up 68.9%; ($2,274)
OPERATING PROFIT AFTER TAX EXCLUDING NON-RECURRING ITEMS: $14,706; Down 13.9%; $17,079
NON-RECURRING ITEMS AFTER TAX: $41,445; NIL
OPERATING SURPLUS (LOSS) AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER: ($26,739); $17,079
PPL - segment note.pdf
PPL 1H09 Chief Executive Officer's statement.pdf
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HALLENSTEIN GLASSON HOLDINGS LIMITED Results for announcement to the market
This report has been prepared in a manner which complies with New Zealand International Financial Reporting Standards (NZIFRS) and is based on audited financial statements.
Reporting Period 12 months to 1 August 2009 Previous Reporting Period 12 months to 1 August 2008
Amount (000s) Percentage change Revenue from ordinary activities: $198,197; +2.3% Profit from ordinary activities after tax attributable to security holders: $12,803; -19.3% Net surplus attributable to security holders: $12,803; -19.3%
Final Dividend Amount per security Imputed amount per security: 11 cents; 5.4179 cents Record Date: 4 December 2009 Dividend Payment Date: 11 December 2008
The Directors of Hallenstein Glasson Holdings limited advise that the audited profit after tax for the year ended 1 August 2009 was $12.803 million, down 19.3% on the prior year ($15.868 million). Total sales were $198.197 million, up 2.3% on the prior year ($193.748 million). The directors have declared a final dividend of 11 cents per share, imputed at the rate of 33.0 percent. The dividend will be paid on 11th December 2009, with entitlement date being 4th December 2009.
Chairman of directors Warren Bell said that the retail conditions had been particularly difficult in the first half of the year, but there were signs that economic conditions had stabilized, albeit at a low level in the latter part of the year. “The battle for market share has resulted in margin erosion, however, we have continued to demonstrate our ability to tightly manage inventory with inventories at balance date $15.182 million, down 9% on last year. Our net cash position also improved from $18.350 million to $26.044 million, and to improve the quality of our balance sheet during difficult economic times is pleasing.”
CEO Roy Dillon commented that the result reflected the strategy developed last year to drive sales and retain market share, which would protect the company’s business and position it well to reap benefits as market conditions improved. Our profit for the second half of the year was an increase of 10% on the second half last year. This was mainly driven by improved performance from Glassons in Australia. We are particularly encouraged by our results in Australia, where we have implemented new strategies to improve our business model and pave the way for a profitable future. Although the market has not been hit so hard by economic circumstances, same store sales in Australia improved 12.5% in Australian dollars, with most of the improvement generated in the second half of the year. One new store was opened at Doncaster, Melbourne in August 2008. New Zealand has experienced a more difficult environment, although our new womenswear chain Storm has bucked the trend and shown encouraging results. Same store sales for Storm lifted 12% for the year, and a further store was opened in Milford Auckland in October 2008. Since balance date, two further Storm stores have been opened, one in Napier, and one in Christchurch in the Merivale Mall. Storm now has a total of 6 stores, and further stores will be opened as suitable sites become available. Both Glassons and Hallensteins faced a very competitive market in New Zealand, achieving sales at the expense of margin. Glassons opened one new store at Blenheim during November 2008, and Hallensteins added a further store at Masterton in March 2009. The total number of stores in the group now stands at 116. In addition, both Glassons and Hallensteins sell on line. The on line business has shown consistent growth over the period, but still only accounts for a very small part of the business. With the exception of Storm, a period of consolidation will ensue before further store openings are planned for Glassons in Australia and New Zealand, and also for Hallensteins.
It is extremely difficult to project the level of future profitability in this environment, and although we expect our trading performance will show improvement over the ensuing period, we are unable to provide any future profit guidance at this stage. We will, however, provide a further update at the Company’s annual meeting in December 2009.
W J Bell Chairman of Directors 24th September 2009
For further information contact: Roy Dillon CEO +64 21 938859
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18/09/2009 11:12 p.m. NZX STATEMENT 25 SEPTEMBER 2009.
Earnings Rebound for Postie Plus
With a very good second half recovery that was among the best performances in the New Zealand retail sector this year, Postie Plus Group has jumped out of last year’s losses to deliver a profit in its 2009 year. The net surplus for the twelve months ended 2 August 2009 was $615,000, compared with a loss of $10.85m last year. “This strong turnaround follows our very good increase in fourth quarter sales (up 12.58% on 2008) and is pleasing to achieve in the face of an economic recession,” said the managing director Ron Boskell. “It is the culmination of restructuring steps, cost savings, and a fresh contemporary product offer that was attractive to our customers in both urban and heartland New Zealand. “During the year the entire retail sector faced the challenge of much slower consumer spending. Yet in this difficult business climate we gained market share and our sales revenue from continuing operations was up 2.52% from $107.67m to $110.38m, on a total store basis.” “On the basis of continuous operations the Postie Plus Group has made a substantial turnaround of $8.58m in earnings before interest and taxation, in reaching $2.00m.” At balance date, the group comprised 103 stores represented by its two major retail brands, Postie+ 79 apparel stores and Baby City 24 childrens wear and equipment stores. Earnings per share are 1.54 cents, compared with -27.13 cents last year. “We are seeing the rewards of the restructuring steps taken” he said. “The move from a significant annual loss to a modest profit reflects the huge effort by all staff to restore momentum within the business.
“Within continuing operations, we have trimmed costs by 5.5% overall and with a material reduction in distribution costs of $1.71m or 19.7% to $6.95m ($8.67m).” PPGL’s debt reduction programme and lower interest costs on faster moving stock has reduced net financing costs by 28.6% to $1.17m ($1.64m). A focus on capital management in all areas led a significant improvement in working capital of $3.30m. The consolidation of Postie+ distribution under one roof at Christchurch has delivered control over inventories with the result that fresh apparel offers are now in-store more frequently and at lower distribution cost. “We have exceeded our goal of saving $1m in our first year since integrating Postie+ inventory with a third party logistics operator and this is a gain that is sustainable,” said Mr Boskell. “Our profit improvement programme made major inroads on costs as we tightened our internal processes to gain greater efficiencies. In our trading activities we have focused on making a faster response to market indicators, increasing stock-turns and reducing shrinkage.” “It wasn’t until Christmas 2008 before we saw the turnaround gather speed and we hit targets during the important December-January months. In each subsequent quarter our sales performance improved and in the fourth quarter we saw a very good 12.58% increase, confirming that the product range was what the market wanted.” Mr Boskell said Postie+ has worked its way through the recession without sacrificing margin more than necessary. “We bought well and were supported by very good promotions offering great value to our customers and were not dragged into a weekly discounting model. It was very pleasing to see the winter finishing stock at low acceptable levels” Improvements in fashion style, fit and quality saw Postie+’s apparel even more popular to a wider cross-section of the market. “Our product has undergone change to reflect the contemporary market so aptly represented by Jane Kiely as the new face of Postie+.” “We continue to improve the customer experience of our stores and in the current half-year will be investing further into our core brands,” said Mr Boskell. “A new concept store opened in Botany, Auckland, this week, and another will open in Westfield Manukau later during this quarter, both providing a fresh contemporary look that we know our customers will enjoy.” “Our loyalty card programme through the Postie+ Reward Card and the Baby City Bub Club Reward Card has been overwhelmingly successful,” said Mr Boskell. Within Postie+, the Schooltex brand programme maintained its position as a quality provider of school uniforms throughout New Zealand. He said Baby City had again made a strong contribution to group earnings with growth in market share through an increasingly wider offering to a growing market. We are excited about the growth Babycity has attained and look forward to further growth in the year to come.
Outlook: The chairman, Mr Peter van Rij said the sales and earnings results, growth in market share, and gains from restructuring place PPGL in a stronger position for the summer season. “The prospects of the current quarter bringing an end to the two year recession will be welcomed by all retailers. “Since balance date our momentum continues with further improvement in sales by comparison to 2008.” “While our investment in store development is indicative of our underlying optimism, market conditions remain challenging with any recovery in consumer confidence likely to take time,” said Mr van Rij. “PPGL aims to minimise the extent of the customary first half loss and expects to maximise its earnings in the second half.” “Given the early stage of the recovery and the need to conserve capital, the board will not declare a dividend for the year. The restoration of shareholder value is a primary objective of the board.”
FOR FURTHER INFORMATION PLEASE CONTACT:
Mr Ron Boskell Chief Executive Postie Plus Group Ltd Tel (03) 339 5700 Mobile (027) 221 7561
Directors’ Report to Shareholders For the Half Year ended 14 September 2009
- Net Profit after Tax for the half year (excluding non-trading items) was $9.2 million (89.4% up on prior year). Reported profit (including non-trading items) was $8.9 million, up 240% on prior year.
- Total revenues of $169.9 million were 4.6% up on prior year, with same store sales up 6.7% for the half, still driven primarily by KFC.
- Non-trading items were only $0.5 million, down from $3.2 million in the prior year. No further impairment charge to the carrying value of goodwill on the Pizza Hut business was required this year ($2.5 million last year).
- Margins in both KFC and Pizza Hut businesses were up $5 million and $1 million respectively as the benefits of improving sales and reduced input costs flowed through.
- Directors have declared a fully imputed interim dividend of 4.5 cents per ordinary share payable on 20 November 2009, up 50% on last year.
Group Operating Results
Restaurant Brands’ unaudited net profit after tax (excluding non-trading items) for the half year ended 14 September 2009 was $9.2 million, 89.4% up on the prior year result of $4.9 million and slightly above previous market guidance of $8.7 million. Reported profit was $8.9 million or 9.1 cents per share, 240% up on prior year.
The increase in reported profit largely arose from the fact that the company was not required to take up any further impairment charge to the carrying value of goodwill on the Pizza Hut business ($2.5 million in the previous half year). This is reflective of the improved underlying performance of the Pizza Hut business over the first half of the year.
KFC and Pizza Hut enjoyed some improvements in margin over prior year by $5 million and $1 million respectively. Incremental leverage from higher sales, better operational efficiencies and some reduced input costs all assisted in improving brand EBITDA.
Total operating revenue at $169.9 million was 4.6% up on prior year, with both KFC and Pizza Hut sales growth partially offset by a decline in Starbucks Coffee sales. Total group same store sales however continued to grow at 6.7% for the half.
Directors are pleased with the improved performance in what has been a challenging economic environment.
The KFC business continued its strong growth on the back of its transformation programme, with total revenues of $118.2 million, up 7.1% on prior year and 8.8% on a same store sales basis. A strong pipeline of new product and promotional activity contributed to the strong sales growth. The first half saw the successful launch of the Popcorn Chicken Roller, new meals such as the Ultimate Burger Meal with Wicked Wings and return of old favourites such as Hot & Spicy and the legendary KFC Tower Burger.
With leverage from strong sales levels, continued operational efficiencies and a tight focus on input costs the KFC business managed to produce a solid improvement in EBITDA for the half year. KFC’s EBITDA at $24.0 million (20.3% of sales) was $5.0 million (26.1%) up on prior year.
Three stores were transformed over the half year, being Alexandra, Whakatane and Quay Street (Auckland) with all performing to expectations.
A total of 37 stores have now been transformed of the 84 stores in the network, with another three stores expected to be completed by year end bringing the total transformations to almost 50% of the total. One new store will be opened in Greenlane (Auckland) by year end.
KFC store numbers are three down on prior year at 84.
The Pizza Hut business has begun to show signs of a turnaround in sales and earnings. It delivered same store sales growth of 5.2% for both the first and second quarters of the year, the first growth in the brand’s sales for nearly four years. Pizza Hut achieved sales of $35.4 million for the half, which were up 2.4% in total and 5.2% on a same store sales basis.
A number of new marketing initiatives were undertaken in producing this sales growth.
The business continues to be run very tightly. Strong operational controls over wastage and labour, loss prevention initiatives and some changes to menu with higher margin products have all assisted in improving margin. These activities, together with the leverage from higher sales growth, all assisted in producing a resulting EBITDA of $2.2 million for the half, which was $1.0 million or 85.9% up on prior year.
The company concluded an agreement with Yum! Restaurants International on the future of the Pizza Hut brand in New Zealand in June of this year. As previously explained, this agreement provides for Restaurant Brands' continued franchise of the brand, but with greater flexibility to sell down to independent franchisees. Directors believe that this is a most satisfactory outcome, enabling the company to maximise its return on its investment in the brand through retention or divestment.
Pizza Hut finished the half with 92 stores, of which seven were red roof restaurants.
Continued weakness in coffee and food sales hampered the Starbucks Coffee performance for the half year. With total sales of $16.1 million, down 7.1% on the prior year and 3.8% on a same store basis, this business lost some traction.
The lower sales also hampered profitability, with EBITDA of $1.4 million down $0.3 million or 17.4% on the previous year.
With management changes, a tighter emphasis on store efficiencies, a new food programme and the benefit of a higher exchange rate, it is planned to restore sales growth and profitability back to this brand by year end.
Store numbers at 42 did not change over the half, but were two down on the prior year.
Corporate & Other
General and administration expenses at $7.0 million were up 26.3% on the prior half year. This has largely arisen from some headcount increases as the underlying businesses have grown, and higher levels of incentive payments as the company enjoys higher levels of profitability. G&A costs, however, represent only 4% of total revenues.
Interest expense at $0.8 million continues to fall ($1.6 million down) against prior year as Restaurant Brands continues to see significantly lower borrowing levels and interest rates.
Non-trading items of $0.5 million were considerably lower than last year’s $3.2 million.
Last year’s non-trading items included a $2.5 million impairment charge taken up on the Pizza Hut business. With the turnaround in operating performance, there is currently no requirement to take up any further write downs.
Cash Flow & Balance Sheet
Total assets at $100.9 million were flat versus the previous year end, with property, plant and equipment at $71.4 million versus $71.8 million at year end. Capital expenditure essentially matched depreciation charges and there were no substantial write downs on intangibles. Total liabilities at $58.6 million were $5.4 million down on the full year balance, with the $7.9 million increase in creditors more than offset by the $14.6 million reduction in borrowings.
Debt levels continued to reduce, with total borrowings at $19.8 million at the half year, compared with $34.4 million at previous year end and $40.8 million for the previous half year.
Operating cash flows of $23.4 million were strongly up on the previous half year’s $10.5 million, in line with the improved profitability and some timing differences in creditors’ payments.
Cash outflows from investing activities were $4.5 million compared with $5.0 million for the first half last year. KFC store transformation expenditure was the most significant item in the capital budget for the half year.
The improved profit performance and stronger balance sheet has led directors to declare an interim dividend of 4.5 cents per share (50% up on last year).
The dividend will be paid on Friday 20 November 2009 to all shareholders on the register at 5pm on Friday 6 November 2009. For overseas shareholders, a supplementary dividend of 0.79412 cents per share will be paid at the same time.
Directors have elected to continue to suspend the dividend reinvestment plan for the time being, but will review this again prior to the declaration of the final dividend.
The KFC business will continue to deliver solid profits into the second half year, but it will be rolling over some very strong second half results for the prior year. Pizza Hut is expected to continue the positive sales growth trend of the previous two quarters and maintain the margin improvements of the first half. An improvement in the Starbucks Coffee business in sales and margin is also expected towards the end of the financial year.
KFC transformation spend will continue with another three stores to be transformed by year end. As previously announced, a small number of Pizza Hut stores will be sold to franchisees over the next few months.
Directors anticipate that the company will make a full year profit (excluding non-trading items) in the vicinity of $15 million for the 2009/10 year.
For further information, please contact:
Russel Creedy Grant Ellis CEO CFO/Company Secretary Phone: 525 8722 Phone: 525 8722
RESTAURANT BRANDS GROUP Consolidated Income Statement For period 1 March to 14 September 2009 (2010 Half Year)
1st Half 2010 1st Half 2009 14 September 2009 vs Prior 8 September 2008 Unaudited Unaudited Restated $NZ000's % $NZ000's
Other revenue 264 7.8 245 Total operating revenue 169,939 4.6 162,507
Cost of goods sold (138,244) (2.4) (135,052)
Gross margin 31,695 15.4 27,455
Distribution expenses (2,109) 12.4 (2,408) Marketing expenses (8,588) 16.0 (10,220) General and administration expenses (7,018) (26.3) (5,558)
EBIT before non-trading 13,980 50.8 9,269
Non-trading (532) 83.5 (3,228)
EBIT 13,448 122.6 6,041
Interest expense (832) 66.1 (2,454)
Net profit before tax 12,616 251.7 3,587
Taxation expense (3,745) (282.9) (978)
Net profit after tax (NPAT) from continuing operations 8,871 240.0 2,609
Total profit after tax (NPAT) 8,871 240.0 2,609
Total NPAT excluding non-trading 9,243 89.4 4,879
EBITDA before G&A % Sales % Sales KFC 24,008 20.3 26.1 19,045 17.3 Pizza Hut 2,209 6.2 85.9 1,188 3.4 Starbucks Coffee 1,350 8.4 (17.4) 1,635 9.4 Total New Zealand 27,567 16.2 26.1 21,868 13.5
Ratios Net tangible assets per security (net tangible assets divided by number of shares) in cents 18.6 8.3c
Cost of goods sold are direct costs of operating stores: food, paper, freight, labour and store overheads Distribution expenses are costs of distributing product from store Marketing expenses are call centre, advertising and local store marketing expenses General and administration expenses (G&A) are non store related overheads
Restaurant Brands New Zealand Limited Results for announcement to the market
Reporting Period 6 months to 14 September 2009 Previous Reporting Period 6 months to 8 September 2008
Amount (000s) Percentage change Revenue from ordinary activities NZ$169,939 4.6% Profit from ordinary activities after tax attributable to security holder. NZ$8,871 240.0% Net profit attributable to security holders. NZ$8,871 240.0%
Interim/Final Dividend Amount per share Imputed amount per share Interim NZ 4.5 cents NZ 1.92857 cents
Record Date 6 November 2009 Dividend Payment Date 20 November 2009
Comments: A brief Refer to attached report
This report is based on accounts which have not been audited. The report is provided with the accounts which accompany this announcement.
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