The recent financial crises impacting economies across the globe have been
particularly severe for Iceland.
Whilst Alfesca is listed on the NASDAQ OMX Stock Exchange in Iceland, the
recent turmoil in the Icelandic economy has not affected the operations of the
Group, as the company has no trading activity in Iceland. The key markets of
Alfesca are in mainland Europe and, in particular, UK, France and Spain.
Alfesca closed its 2007/08 financial year with total net sales of €647.4
million, up 9% against the previous year, and an EBITDA of €62.5 million,
representing a 22% improvement year on year.
As widely reported, the economic and trading environment in Europe has
deteriorated in recent months affecting all consumer businesses. However,
Alfesca's broad portfolio of products, based on four core pillars, and balanced
spread of branded and private label sales through a wide range of customers in
different geographic markets in Europe, provides Alfesca with a diversified
business model and a resilient base to face the challenges ahead. Current
trading has softened in the difficult environment but demand for Alfesca's
products has been keeping at a steady level.
The fall in the value of the Icelandic Krona has not affected the results nor
financial standing of the Group, since its main operating currencies are the
Euro and the British sterling.
Alfesca is a profitable and cash generative business, benefiting from a strong
balance sheet with an equity ratio of 47.6% and good liquidity. Alfesca´s
long term debt financing is provided by a large consortium of major European
banks under a €280 million term loan and revolving credit facility, which
matures in 2014. The net debt of the Group was €166.7 million, as at 30 June
2008.
The Icelandic banks, Kaupthing and Glitnir, which are currently under
administration, participate in the credit facility of the Group as members of
the banking syndicate. However, their participation accounts for only 30% of
the total facility and their continued involvement going forward is under
review. Notwithstanding this situation, as Alfesca has access to facilities
from other banks in its existing syndicate, the current status of Kaupthing and
Glitnir do not give rise to any solvency concerns. Accordingly, based on its
strong financial standing, the Group is able to finance its operations in the
normal course.
Alfesca is due to repay Icelandic Krona denominated bonds totalling
approximately €12.0 million on 15 November 2008. A further and final amount
totalling approximately €3.0 million is also due to be repaid on 1 February
2009, in accordance with the terms of the bonds. Alfesca has specific
facilities in place to repay the bonds. However, due to restrictions and the
technical difficulties currently being experienced in connection with the
foreign currency settlement system with Iceland there is a risk of delay to the
funds being transferred on the due date. Alfesca is currently working with the
relevant financial institutions in Iceland to resolve the issues and to
minimise any difficulties.
Separately and in light of the current state of the financial markets, the
board of directors believe it is prudent for the Company to preserve its cash
position and accordingly have resolved not to recommend payment of dividends of
€12 million for the financial year 2007/08 at its annual general meeting on 18
November 2008.
The financial crises in Iceland and the devaluation of the Icelandic Krona has,
however, had a major negative impact on the share price of Alfesca, as it is
listed in the local currency. Since the start of the new financial year, 1
July, Alfesca's share price has fallen by over 41% . The fall in value in the
share price is furthermore exacerbated for non-Icelandic investors due to the
devaluation of the Icelandic Krona, which has weakened by over 30% during the
same short period .
At its annual general meeting in September 2007, Alfesca passed the necessary
resolutions to enable it to relist its shares in Euros, once the Euro
settlement system was established in Iceland. It is highly regrettable,
therefore, that this process could not be concluded as the shareholders and the
Company considered it in the long term interest of Alfesca to implement this
change and to make Alfesca accessible to the international investment
community.
Following the exceptional developments in Iceland and delisting of a number of
the large financial companies and banks, the Icelandic equity market has
diminished in size and has not been able to resume normal function. Alfesca
looks forward to the re-establishment of an orderly market in Iceland and the
foundations for normal share price formation being restored as quickly as
possible for the benefit of its shareholders. Until such time, Alfesca will
monitor closely the full restoration of a strong and stable stock exchange to
ensure that it is the right platform for its future development.
Alfesca will publish its next quarterly results for Q1 2008/09 after the
markets have closed on 18 November 2008.
