Farsons said today that its turnover increased by 4.6% in the six months to the end of July but its pre-tax profit dropped to €1,520,000 (2007 : €3,312,000).
The group said in a company statement that its turnover grew to €35,306,000. The gross profit margin decreased from 23.4% to 21.5% while the operating profit amounted to €2,010,000 (2007 : €2,905,000).
"In considering the results for the period, attention is drawn to the following factors," the group said.
"Group turnover improved due to increased sales across all business segments. In particular, beer sales registered growth in value and volumes;
"While soft drink sales increased in volumes, sales values per litre decreased substantially. This was mainly due to changes in consumer preferences to one way packaging as a result of the full liberalization of the soft drinks market.
"The franchise food retail and import businesses continued to perform well, achieving growth in a number of product sectors.
"Operating profits were impacted by initial efficiency set-up problems encountered with the newly commissioned production lines. These are being addressed, and production efficiencies are now approaching target levels.
"Gross margins have also been adversely affected by the advent of illicitly imported beverages, which have not been subjected to eco contribution, and, in some cases, VAT, thus placing the group under significant unfair competitive disadvantage. Strong representations have been made to Government in this regard.
"The interim results were also affected by a lower profit on the disposal of property and an increase in finance costs, the latter as a result of the commissioning of the new soft drinks production line and distribution centre at the beginning of the year. In 2007, prior to commissioning, interest costs were capitalized.
"The group is now operating in a wholly liberalized market in which price competition is acute. The board of directors, through its management structures, is in the course of implementing a permanent cost reduction programme. Such programme includes reductions in overhead costs and a head count reduction of 60 persons within the next 12 months through natural and early retirements and voluntary schemes. These cost reductions can be implemented directly as a result of the capital expenditure programme and reorganization undertaken over the past two years. The board of directors is determined and confident that it will achieve these targeted cost reductions, and that, as a result of these measures, the emerging cost structures will allow for improved profitability levels going forward."
The board of directors is recommending a net interim dividend of €200,000 in respect of the financial year ending 31 January 2009, payable on 24 October 2008 to the ordinary shareholders who will be on the register of members of the company on 10 October 2008. The interim dividend will be paid out of tax exempt profits and is equivalent to €0.0078 per share.
In its last full year results, announced in May, Farsons reported a pre-tax profit of €4,002,000 up by an impressive 88% over the previous year's result of €2,124,000.