LONDON, Feb. 10, 2004 (PRIMEZONE) -- Enodis PLC:
Results for the 13 weeks ended 27 December 2003 (Q104)
UNDERLYING PERFORMANCE REMAINS ON TRACK
Group Financial Highlights - GBPm (except EPS)
Q104 Q103
Turnover 148.3 156.8
Operating Profit 5.8 2.9
Adjusted Operating Profit* 9.0 8.1
Profit/(loss) before Tax 2.1 (0.2)
Adjusted Profit before Tax** 4.4 2.5
Basic and diluted earnings per share 0.3p --
Adjusted basic and diluted earnings per 0.9P 0.5p
share**
Like-for-like*** Food Equipment turnover 148.0 149.7
Like-for-like Food Equipment operating profit 12.0 9.9
Net Debt 130.4 182.0
Key Points
* * Turnaround in Food Retail Equipment leads to a GBP2.1m (21%) improvement in Food Equipment like-for-like operating profit to GBP12.0m.
o Food Service Equipment -- North America like-for-like operating profit up 8% to GBP9.6m despite a sales decline of 3% reflecting the continued effect of difficult markets and lower sales to certain Quick Service Restaurants ("QSRs") o Food Service Equipment -- Europe/Asia like-for-like operating profit of GBP1.1m includes increased product development costs o Food Retail Equipment like-for-like operating profit of GBP1.3m against a loss of GBP0.7m in Q103, as management actions at Kysor Warren show benefits and Kysor Panel improves
* * Net debt down GBP9.3m to GBP130.4m from September 2003, mainly due to favourable foreign exchange movements * Before operating exceptional items and goodwill amortisation (see note 3 to the attached results for more details). ** Before all exceptional items and goodwill amortisation (see Other Financial Information in the attached results for details). *** Prior year turnover and adjusted operating profit adjusted for foreign exchange (see Other Financial Information in the attached results for details). The above adjusted information is used throughout this document and is presented to indicate underlying operating performance of the Group.
Dave McCulloch, Chief Executive Officer, said:
"The aggressive cost actions taken in 2003 are reflected in positive Q1 results. Our assumption of modest market growth in 2004 is unchanged. Positive economic news in the USA does provide a degree of cautious optimism for increased food equipment demand for the second half of the year although we have yet to see any clear change in trend. Our 2004 key initiatives are on track and are being accelerated to offset recent increases in steel surcharges.
The US dollar exchange rate had minimal effect on profit translation in the quarter but will affect the balance of the year.
Our expectations for underlying performance for the year have not changed since the time of our full year statement in November 2003."
A conference call for equity investors and analysts will be held today at 9.30am and for bond holders at 11.00am today. For details, please contact Sorrell Beynon at Financial Dynamics on +44 20 7269 7291, or Tina Mularski at Enodis on +44 20 7304 6006.
SEC Filings
Enodis plc has a secondary listing on the New York Stock Exchange (Ticker symbol:ENO) and files reports with the Securities and Exchange Commission (SEC) in the US. These reports contain additional information that is not included in this press release. Copies of the reports are available on the SEC website at www.sec.gov.
This press release contains "forward-looking statements," within the meaning of the U.S. federal securities laws, that represent our expectations or beliefs regarding future events, based on currently available information, including statements concerning our anticipated performance. These statements by their nature involve risks and uncertainties, many of which are beyond our control. Our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, including our substantial debt obligations and restrictive covenants; susceptibility to economic downturns including delays on market improvements; competitive pricing pressures; consolidation or loss of large customers; changes in customer purchasing patterns; the results of technological developments; currency fluctuations; the outcome of current lawsuits; and other risks related to our U.S., U.K. and foreign operations. A more complete description of our risk factors is included under "Risk Factors" in our Form 20-F which was filed with the SEC during December 2003, as well as in more recent Form 6-K reports furnished with the SEC.
CHIEF EXECUTIVE OFFICER'S REVIEW
Results
Turnover in Q104 was GBP148.3m (Q103 : GBP156.8m) with approximately GBP7.1m of the decline due to the translation effect of the weakening US dollar, offset in part by a strengthening Euro. Like-for-like Food Equipment turnover was down 1%.
Like-for-like Food Equipment operating profit improved 21% as actions started in early 2003 at Kysor Warren continue to be reflected in improved results. As the year progresses we believe this quarter on quarter improvement will lessen as significant improvements were seen at Kysor Warren by Q403. The increase in like-for-like Food Equipment operating profit was partly offset by the translation effects of the weakening US dollar (GBP0.3m in the quarter).
Profit before tax, goodwill amortisation and exceptional items increased to GBP4.4m (Q103 : GBP2.5m) with adjusted operating profit GBP0.9m better and interest GBP1.0m lower than the prior year.
Profit after tax was GBP1.4m compared to GBPnil in Q103.
Net debt fell to GBP130.4m (at 27 September 2003 : GBP139.7m) with GBP7.9m of the decrease arising from favourable foreign exchange movements. Compared to Q103, net debt was down GBP51.6m (28%) at period end.
Compared to Q103, improved operating cashflow of GBP2.0m and lower interest payments (GBP1.1m) more than offset a GBP1.3m net increase in capital expenditure as we invested in ERP systems. Cash conversion days were 43, an improvement of 6 days from Q103.
REVIEW OF OPERATIONS
Global Food Service Equipment
Global Food Service Equipment comprises our operations in North America, which contribute approximately 75% of our Global Food Service Equipment annual turnover, and those in Europe/Asia.
Although a number of US macro-economic indicators show improvement, our markets continue to be difficult, with few clear trends apparent. This appears to be consistent with our experience, which has identified a lag between macro-economic growth and capital spending on food equipment. In addition, we are seeing the Q1 on Q1 impact of capital expenditure cutbacks made at certain QSR chains in Q203.
The cost reduction actions we took in March 2003 delivered almost GBP2m of cost savings in this quarter. These, and a one-off pension credit of GBP0.5m, have offset difficult markets and led to like-for-like operating profits improving by 1%. Our North American refrigeration businesses continue to experience margin pressure and broke even in the quarter.
Turnover GBPm Q104 Q103 FX Like-for-like
Q103
Food Service Equipment 90.5 100.1 (6.9) 93.2
-- North America
Food Service Equipment 33.8 32.0 1.5 33.5
-- Europe/Asia
Global Food Service 124.3 132.1 (5.4) 126.7
Equipment
Food Service Equipment -- North America like-for-like sales were down 3% due to lower sales to certain QSR chains, which started to have an impact in Q203, and generally mixed market conditions.
FSE -- Europe/Asia like-for-like sales were up 1% with good performance in continental Europe and at our ice businesses offsetting lower UK sales.
Adjusted Operating Profit Q104 Q103 FX Like-for-like GBPm Q103 Food Service Equipment -- 9.6 9.4 (0.5) 8.9 North America Food Service Equipment -- 1.1 1.6 0.1 1.7 Europe/Asia Global Food Service 10.7 11.0 (0.4) 10.6 Equipment
Food Service Equipment -- North America like-for-like operating profit was up 8%, including the impact of a one-off pension credit of GBP0.5m.
The impact of lower turnover and continued pricing and margin pressure was offset by the benefits of the cost reduction exercise undertaken in early 2003 and improved margins in our ice businesses caused by increased sales and cost control.
In Food Service Equipment -- Europe/Asia, as discussed in our 2003 full year statement, we incurred increased product development costs in central Europe. In the UK the contribution from a roll-out of Merrychef ovens into North America was not repeated in the current period.
Food Retail Equipment
Our Food Retail Equipment business predominantly operates in North America, with sales/service offices in Canada and Mexico.
GBPm Q104 Q103 FX Like-for-like
Q103
Turnover 23.7 24.7 (1.7) 23.0
Adjusted Operating 1.3 (0.8) 0.1 (0.7)
Profit
Kysor Warren has continued to show improving results with small Q1 profits for the first time in 3 years. Although like-for-like turnover is lower than in the prior year, we have continued to focus on more profitable business and improved quality, on time delivery and customer service. However trading conditions remain difficult.
Kysor Panel Systems has continued to improve sales, to both supermarket and convenience store customers, compared to Q103. This, along with the continued focus on operating efficiency, has improved adjusted operating profit.
OTHER
Exceptional Items
The exceptional item in the period relates to the release of disposal warranty accruals that are no longer required. There is no cash impact of this release.
Interest
Interest charge in the quarter reduced by GBP1.0m to GBP4.6m primarily due to our lower average debt balance.
Property
As discussed in our 2003 full year statement, we continue to expect annual profits from property development to reduce over time. The charge in the period relates to the ongoing costs of running our residual property portfolio and the phasing of costs relating to development projects.
Earnings per share
Adjusted diluted earnings per share were 0.9p. (Q103 : 0.5p). Basic earnings per share were 0.3p (Q103 : nil).
OUTLOOK
Comparison of our like-for-like Q104 results with the prior year include a number of factors that will not repeat, or whose effect will be lessened in later quarters. These factors include:-
* * the detrimental impact on quarter on quarter comparisons of capital expenditure cutbacks at certain QSR chains which started in Q203 * * the benefits of the turnaround of Kysor Warren which commenced in Q203 * * a one-off pension credit in Food Service Equipment - North America in the current quarter of GBP0.5m. Our cost savings programmes should yield more than GBP1.5m in Q204, and the key initiatives announced in our annual report are on track.
Our planning for 2004 is based upon a number of key factors including modest market growth, recognising continued constraints on capital spending among our customers and the lag which our experience indicates exists between macro-economic growth and capital spending on food equipment. To date, we are not seeing a substantial change in customer capital expenditure, but we believe that recent US economic performance gives grounds for cautious optimism for increased food equipment demand in the second half. We have increased prices and are accelerating our lean manufacturing and purchasing initiatives to offset substantial increases in steel surcharges.
Our reported results are impacted by the translational effect of currency exchange rates principally in US dollars and Euros. In 2003 the average US$ exchange rate that we used was $1.60 : GBP1. Currently the rate is approximately $1.85 : GBP1, giving rise to a translational risk for the balance of the year. Each one cent movement of the US dollar and the Euro impacts our annual adjusted operating profit by approximately GBP0.3m and GBP0.1m respectively.
Our expectations of the Group's underlying performance for the half year ending 27 March 2004 and full year ending 2 October 2004 have not changed since the time of our full year statement in November 2003.
Dave McCulloch Chief Executive Officer
10 February 2004
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