Simonds Farsons Cisk plc published its interim results to July 31, 2008 following a Board of Directors' meeting held on September 30. The directors declared a net interim dividend, out of tax exempt profits, of €0.0078 per share (July 2007: €0.009). The interim dividend will be paid on October 24 to those shareholders as at close of trading on October 7.
The key highlights are:
• Revenue up 4.6 per cent to €35.3 million;
• Operating profit declines 31 per cent to €2 million;
• Profit for the period of €0.9 million;
• Net interim dividend of €0.0078 per share;
• Total assets of €161.3 million.
During the first six months of the financial year to July 31, Group turnover increased by 4.6 per cent to €35.3 million as all business segments registered improved revenue levels. Revenue from the brewing, production and sale of branded beers and beverages amounted to €21.5 million, representing 60.9 per cent of the Group's total turnover, on increased sales of beer and soft drinks. However, although revenue from this segment increased by 4.2 per cent, profitability declined by 37.2 per cent to €1.7 million; this is mainly attributable to the liberalisation of the soft drinks market and the effect of parallel trading and illicit importation.
Farsons Group reported that some products were being imported illegally thus not being subjected to eco contribution and also the imposition of VAT. This placed the Group at an unfair competitive disadvantage and strong representations have been made to the government in this regard. The operation of franchised food retailing, namely Pizza Hut, Burger King, KFC and TGIF, registered an 11.4 per cent growth in revenues to €4.3 million but more importantly this business unit registered a substantial increase in profitability to €0.34 million from the comparative figure of €0.12 million recorded in the six months ending July 31, 2007. The other two business segments, namely the importation, wholesale and retail of food and beverages and the property management, performed in line with the results achieved in the comparative period last year.
Group operating profit declined by 31 per cent to €2 million, on increased packaging costs and initial set-up problems on the new production lines during the transition from glass bottles to PET and cans. Following the investment in the new logistics centre and the centralisation of all distribution operations in Mrieħel, the various depots were no longer required and the company decided to sell these buildings to partly finance the new investments. In fact, during the year ending January 31, 2008, Simonds Farsons Cisk sold the depots in Gudja and part of Tal-Balal.
In the first six months of the current financial year, the company managed to sell the remaining depots in Ta' Qali, Birkirkara, and the other portion of Tal-Balal, resulting in a profit on disposal of €0.52 million. Interest payable increased by 45.7 per cent to €1 million due to the commissioning of the new soft drinks and distribution plants at the beginning of the year. Prior to the completion of these facilities, Farsons used to capitalise any interest costs related to this new investment. Simonds Farsons Cisk's pre-tax profit dropped to €1.5 million from €3.3 million in the comparative period last year. After accounting for a tax charge of €0.54 million, the Group recorded a profit for the period under review of €0.98 million, substantially lower than the €2.88 million in profits recorded in the comparative six months ending July 31, 2007.
Total assets increased by 4.7 per cent to €161 million with shareholders' funds of €83 million representing a net asset value per share of €3.23.
In the interim results publication the directors also stated that, due to the full liberalisation of the market which resulted in heightened competition, it will be implementing a cost-cutting exercise including a reduction in overheads and downsizing its workforce by 60 employees.
This downsizing will take place in the next 12 months and will be a combination of natural retirements and early and voluntary retirement schemes.
Meanwhile, a few weeks ago, Simonds Farsons Cisk announced the opening of a new one-stop beverage shop next to The Brewery in Mrieħel which will be replacing the Wands Cash & Carry operation previously situated in the Wands site in Qormi. farsonsdirect.com is the new outlet spread over an area of 150 square metres, offering a vast range of wines, spirits, beers, non-alcoholic brands and accessories.
The relocation of this retail outlet from Qormi to Mrieħel vacated the Wands site. In previous meetings with stockbrokers and financial intermediaries, Group CEO Louis A. Farrugia had explained that while the Mrieħel frontage could be developed into a business park, the Wands site measuring 12,800 square metres (11.4 tumoli) may be either sold or turned into a high-rise commercial block due to its centralised location and proximity to an arterial road network. This property restructuring exercise is part of the Group's plans to separate the substantial property interests not used in core operations from the other business activities.
In the last Annual General Meeting shareholders were briefed on the current proposals being considered which mainly revolve around the separate listing of the property company on the Malta Stock Exchange.
The Farsons' Board had explained in the 2008 Annual Report that this restructuring should ultimately lead to added shareholder value.
Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, "RFC", are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved
The key highlights are:
• Revenue up 4.6 per cent to €35.3 million;
• Operating profit declines 31 per cent to €2 million;
• Profit for the period of €0.9 million;
• Net interim dividend of €0.0078 per share;
• Total assets of €161.3 million.
During the first six months of the financial year to July 31, Group turnover increased by 4.6 per cent to €35.3 million as all business segments registered improved revenue levels. Revenue from the brewing, production and sale of branded beers and beverages amounted to €21.5 million, representing 60.9 per cent of the Group's total turnover, on increased sales of beer and soft drinks. However, although revenue from this segment increased by 4.2 per cent, profitability declined by 37.2 per cent to €1.7 million; this is mainly attributable to the liberalisation of the soft drinks market and the effect of parallel trading and illicit importation.
Farsons Group reported that some products were being imported illegally thus not being subjected to eco contribution and also the imposition of VAT. This placed the Group at an unfair competitive disadvantage and strong representations have been made to the government in this regard. The operation of franchised food retailing, namely Pizza Hut, Burger King, KFC and TGIF, registered an 11.4 per cent growth in revenues to €4.3 million but more importantly this business unit registered a substantial increase in profitability to €0.34 million from the comparative figure of €0.12 million recorded in the six months ending July 31, 2007. The other two business segments, namely the importation, wholesale and retail of food and beverages and the property management, performed in line with the results achieved in the comparative period last year.
Group operating profit declined by 31 per cent to €2 million, on increased packaging costs and initial set-up problems on the new production lines during the transition from glass bottles to PET and cans. Following the investment in the new logistics centre and the centralisation of all distribution operations in Mrieħel, the various depots were no longer required and the company decided to sell these buildings to partly finance the new investments. In fact, during the year ending January 31, 2008, Simonds Farsons Cisk sold the depots in Gudja and part of Tal-Balal.
In the first six months of the current financial year, the company managed to sell the remaining depots in Ta' Qali, Birkirkara, and the other portion of Tal-Balal, resulting in a profit on disposal of €0.52 million. Interest payable increased by 45.7 per cent to €1 million due to the commissioning of the new soft drinks and distribution plants at the beginning of the year. Prior to the completion of these facilities, Farsons used to capitalise any interest costs related to this new investment. Simonds Farsons Cisk's pre-tax profit dropped to €1.5 million from €3.3 million in the comparative period last year. After accounting for a tax charge of €0.54 million, the Group recorded a profit for the period under review of €0.98 million, substantially lower than the €2.88 million in profits recorded in the comparative six months ending July 31, 2007.
Total assets increased by 4.7 per cent to €161 million with shareholders' funds of €83 million representing a net asset value per share of €3.23.
In the interim results publication the directors also stated that, due to the full liberalisation of the market which resulted in heightened competition, it will be implementing a cost-cutting exercise including a reduction in overheads and downsizing its workforce by 60 employees.
This downsizing will take place in the next 12 months and will be a combination of natural retirements and early and voluntary retirement schemes.
Meanwhile, a few weeks ago, Simonds Farsons Cisk announced the opening of a new one-stop beverage shop next to The Brewery in Mrieħel which will be replacing the Wands Cash & Carry operation previously situated in the Wands site in Qormi. farsonsdirect.com is the new outlet spread over an area of 150 square metres, offering a vast range of wines, spirits, beers, non-alcoholic brands and accessories.
The relocation of this retail outlet from Qormi to Mrieħel vacated the Wands site. In previous meetings with stockbrokers and financial intermediaries, Group CEO Louis A. Farrugia had explained that while the Mrieħel frontage could be developed into a business park, the Wands site measuring 12,800 square metres (11.4 tumoli) may be either sold or turned into a high-rise commercial block due to its centralised location and proximity to an arterial road network. This property restructuring exercise is part of the Group's plans to separate the substantial property interests not used in core operations from the other business activities.
In the last Annual General Meeting shareholders were briefed on the current proposals being considered which mainly revolve around the separate listing of the property company on the Malta Stock Exchange.
The Farsons' Board had explained in the 2008 Annual Report that this restructuring should ultimately lead to added shareholder value.
Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, "RFC", are members of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2008 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved