Interim Results
05 December 2003 - 6:01PM
UK Regulatory
RNS Number:9027S
Arla Foods UK PLC
05 December 2003
5 December 2003
ARLA FOODS UK plc
(formerly Express Dairies plc)
INTERIM RESULTS OF EXPRESS DAIRIES plc
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
* Completion of Arla-Express merger creates broadly-based, full-service
UK dairy company with leading market positions and strong brands
* Expected merger synergies will deliver improved profitability
* Underlying* pre-tax profit #10.3 million (2002: #14.0 million) --
restrained by delay in normal business decisions while awaiting
Competition Commission's decision on merger with Arla UK
* Adjusted earnings per share 2.5 pence (2002: 3.2 pence)
* Interim dividend increased 25.0 per cent to 0.5 pence (2002: 0.4
pence)
* Home delivery business on track to deliver six million parcels this
year
* Year end to be changed to 30 September to correspond with Arla Foods
amba
* Before exceptional items and goodwill amortisation, adjusted for discontinued
activities.
"Arla Foods UK has some of the strongest brands and best facilities in the UK
dairy industry. Our strong management team is making good progress with the
detailed analysis of plans for the delivery of synergies, and I anticipate that
we will be able to make our first announcements of specific plans early in 2004.
We look forward to delivering the benefits of the merger."
- Sir David Naish, Chairman
ENQUIRIES:
Arla Foods UK plc Hudson Sandler
Neil Davidson, Chief Executive Lesley Allan/Michael Sandler
Nigel Peet, Finance Director 020 7796 4133
020 7796 4133 on Friday 5 December
0116 281 6281 thereafter
Chairman's Statement
Results for the six months to 30 September 2003 are in line with our
expectations and reflect the Board's decision to await the outcome of the
Competition Commission's enquiry into the proposed merger with Arla UK, and
consequently not to defend some business or to progress cost base reduction on a
stand-alone basis. Following regulatory clearance, the merger was completed on
22 October, giving us a much-improved competitive position as a broadly based UK
dairy business with leading market positions and strong brands. We have
already created a single management team who are working well together, and are
making good progress with detailed planning for business integration.
Results
We noted in our preliminary statement that profitability in the first half of
the year would be restrained by our decision to defer action on certain volume
and cost issues in the light of our proposed merger. Underlying* pre-tax profit
for the six months to 30 September 2003 was #10.3 million (2002: #14.0 million),
on continuing turnover of #323.5 million (2002: #345.4 million). There were no
non-operating exceptional items, though we have borne an operating exceptional
item of #1.8 million, representing banking fees related to the merger. On an
FRS 3 basis, profit before taxation was #6.3 million (2002: #5.6 million).
Adjusted earnings per share were 2.5 pence (2002: 3.2 pence) and basic earnings
per share were 1.3 pence (2002: 1.1 pence).
Finances
Net debt at 30 September was #105.9 million, compared with #121.2 million at the
same point last year and #103.3 million at our year-end in March 2003. The cash
outflow in the first half includes payments totalling #6.7 million for banking
and advisory fees in connection with the merger. Underlying debt has remained
under tight control.
* Before exceptional items and goodwill amortisation, adjusted for discontinued
activities.
Dividend
The Board of Arla Foods UK recognises the importance of dividends to
shareholders, and is committed to pursuing a progressive policy in line with
long term earnings potential and cash flow, whilst maintaining appropriate
levels of dividend cover.
We have declared an increased interim dividend of 0.5 pence per share (2002: 0.4
pence), a rise of 25 per cent. This reflects our confidence in the prospects of
the enlarged Group, and will be paid on 13 February 2004 to shareholders on the
register at the close of business on 23 January 2004. Shareholders in Express
Dairies plc have already benefited from the special dividend of 9.6 pence per
share, paid on 4 November on completion of the merger with Arla UK.
Business review
We are determined to maintain our position as the major supplier of milk to the
supermarket sector. Our home delivery business has continued to outperform the
market, with our growing parcels operation aiding franchisee retention. The
Chief Executive comments more fully on these and other business developments in
his Review.
Relationships with producers
Both parties to the merger that has created Arla Foods UK have long track
records of building inclusive relationships with producers, and our 51 per cent
shareholder, the Arla Foods amba group is Europe's largest farmer-owned dairy
co-operative. We are building on the relationships with the farmer members of
Arla UK's direct supply groups, mirroring our long-established relationship with
the Express Milk Partnership, and are also successfully developing our strategic
alliance and joint venture with Milk Link. As we have previously stated, the
extra payments for fresh milk made by the retailers for the benefit of farmers
were passed on to our producers in full, reflecting the proportion of our own
production that falls into this sector.
Financial calendar
The financial year-end of Arla Foods UK is to be changed to 30 September 2004,
corresponding with that of our majority shareholder Arla Foods amba. This means
that the current financial period will run for 18 months to 30 September, and
that we will produce a second interim report for the 12 months to 31 March 2004.
The Board
Following the completion of the merger we welcomed onto the board of Arla Foods
UK plc Jens Bigum, Mikael Christiansen, Simon Stevens, Ake Modig and Kim Nielsen
and we are already enjoying working with them.
Outlook
Arla Foods UK has some of the strongest brands and best facilities in the UK
dairy industry, and a strong united management team. Experience since the
merger has demonstrated many close cultural affinities between the two
businesses, and our senior team is making good progress with the detailed
analysis of plans for the delivery of synergies. I anticipate that we will be
able to make our first announcements of specific plans early in 2004. Morale in
the business is high and we look forward to delivering the benefits of the
merger, strengthening our market position and finances and through this
generating growth across the business.
Sir David Naish
Chairman
Chief Executive's Review
We have long worked for consolidation of the UK dairy industry, in the interests
of all participants in the supply chain. I am delighted that we are now so well
placed to deliver the benefits of substantial cost reductions and significantly
improved balance in our business. Arla Foods UK has the financial, technical
and managerial resources to compete effectively right across the chilled dairy
cabinet, with excellent and well-supported brands, and increased representation
in higher growth, added value sectors.
Strategic development
As the Chairman has noted, the former Express Dairies and Arla UK managements
are working well together as a single team, and we have been pleased to discover
many more similarities than differences between our two businesses. Desktop
studies on the scope for capacity rationalisation and integration are rapidly
being translated into reality through detailed analysis of the enlarged Group's
facilities, and we are on course to make our first announcements of proposed
management action early in 2004. As stated in the Listing Particulars
published in March, we expect to realise annual pre-tax cost savings in excess
of #20 million by the end of the third year following completion, at a cash cost
of approximately #15 million.
Retail milk and cream
The enlarged Group is the clear UK market leader in this sector, and will
benefit from substantial investment to create some of the most modern facilities
in our industry. The #10 million reconstruction of our Manchester factory will
be completed in March 2005, effectively creating a new dairy that will be the
most up-to-date facility in the North West. Development of the new Leeds plant
is well advanced and we are on track to commence processing trials in June 2004
and full production by October next year. This #55 million investment sets new
standards for dairy technology and engineering in the UK, underlining the
advantages we derive from access to the technical and development resources of
Arla Foods amba in Scandinavia.
Losses in Scotland were held at a similar level to those of the first half last
year, as we await the outcome of the Competition Appeals Tribunal's hearings on
the investigation under Chapter II (abuse of dominant position) of the
Competition Act. We welcome the OFT's decision to reopen its investigation
under Chapter I (cartel).
Cravendale, the only mainstream branded fresh milk in the UK, has continued to
gain market share ahead of expectations since its move to national distribution
in May 2002. It is now a #50 million-plus brand accounting for 3 per cent of
all fresh milk sold in larger supermarkets, and up to six per cent of some
retailers' sales. Recent growth has been substantial at 44 per cent year on
year, and we are planning to support the brand with further significant
marketing investment.
Dairy spreads, speciality cheese and added value products
The enlarged Group is a category leader in the butter, spreads and margarine
market with a share of some 25 per cent with two out of the three leading brands
- Lurpak and Anchor - and five of the top 15 individual products in the
category.
The recent successful development of Lurpak Spreadable and Lurpak Spreadable
Lighter butters underlines Arla's skills in product innovation and consumer
insight. Lurpak Lighter has already become the second largest product within
the spreadable sector, while Anchor Spreadable has returned to significant value
growth following successful marketing support.
We have also seen very positive consumer and customer responses to our two
re-launches within the cheese category, Anchor Cheddar and Discover.
Our specialist cheese business HT Webb has seen significant volume growth over
the 12 months since its acquisition.
Our joint venture with Milk Link at the Frome creamery in Somerset, now launched
as Staplemead Dairy Products Limited, has continued to develop satisfactorily,
with volumes benefiting from new product introductions, and additional listings
with both new and established customers.
Home delivery
The Express home delivery business has continued to outperform the market. Our
volume decline in the six months to September was held to 10 per cent, compared
with a 13 per cent reduction in the market overall. Our mail delivery business
continues to expand, with the product range we handle now including photographs
as well as catalogues, directories, contact lenses, CDs and books. In total we
expect to deliver some six million items in the first year of our current
Postcomm licence, which was granted in April 2003. This service is popular with
our customers and with our franchisees, aiding retention and so contributing to
the relative resilience of our milk delivery operations.
We are examining the potential to extend parcel delivery to the smaller doorstep
operations of Arla UK, while our foodservice operations will benefit from their
ability to deliver a combined range of Express and Arla dairy products.
Distribution
Our chilled distribution business has taken advantage of the switch to factory
gate collection to win additional business with the major retailers.
People
All our people worked well through the prolonged period of uncertainty from the
announcement of the proposed merger in March until the receipt of regulatory
clearance in October. The rationalisation of capacity that will follow the
merger of the businesses is essential in the long-term interests of our
employees as well as producers, customers and shareholders, but will clearly
lead to some job losses. We aim to end uncertainty by beginning the process of
employee consultation as early as we can, and providing the fullest possible
support to all those affected. I would like to express my appreciation of the
understanding and resilience that all our people have shown throughout 2003, and
look forward to their continued support in building Arla Foods UK as the
country's leading dairy company.
Neil Davidson
Chief Executive
Financial Review
Corporate transactions
The merger with Arla UK completed on 22 October 2003. Under the terms of the
merger we issued 310,859,359 new shares to the Arla Foods amba Group. The new
shares have a nominal value of 2p each and had a market value on the day of
issue of 44.375p each. The pro-forma goodwill calculation in the Listing
Particulars used a share price of 25.5p each: the higher actual share price at
completion changes the pro-forma calculation to generate positive goodwill of
#32.2m compared to negative goodwill of #26.4m in the Listing Particulars. The
actual goodwill calculation is still subject to confirmation of the fair value
adjustments to the Arla UK balance sheet.
Exceptional costs of #1.8m relate to new bank facilities, obtained as a
necessary pre condition of the merger, which remained undrawn at 30 September
2003.
Profit
Underlying pre tax profit, which we consider to be our primary profit measure,
fell to #10.3m, on continuing turnover down 6.3% at #323.5m.
Six months to 30 Six months to 30 Year to
September 2003 September 2002 31 March 2003
#m #m #m
___________ ___________ ________
Total operating profit (including share of joint venture 11.8 17.7 33.6
loss & pre exceptionals)
Discontinued operations - (0.9) (0.9)
Goodwill amortisation 2.2 2.2 4.6
Net interest payable (3.7) (5.0) (8.9)
________ ________ ______
Underlying pre tax profit 10.3 14.0 28.4
________ ________ ______
________ ________ ______
Total operating profit on continuing operations fell by #5 million to #11.8
million (2002: #16.8 million) due to lower milk volumes. Supply to the major
supermarkets fell where certain business was not defended whilst our full dairy
cost base has been retained until post merger capacity rationalisation plans are
finalised. Home delivery milk volume declines were again matched by lower depot
costs to limit the impact on operating profits.
As in previous years, goodwill amortisation primarily represents the Glanbia UK
liquid milk acquisition in 1999. The discontinued activities in prior periods
relate to the sale of our UHT business.
Free cash flow analysis
Our net debt increased slightly in the period under review, as shown below:
Six months to 30 Six months to 30 Year to
September 2003 September 2002 31 March 2003
#m #m #m
__________ ___________ ________
Net cash inflow from operating activities 5.9 25.9 56.8
Add back cash exceptionals 1.8 6.3 12.8
Fixed asset acquisitions (5.3) (3.5) (10.9)
Wholesale doorstep acquisitions (0.2) (0.2) (0.4)
Proceeds from asset disposals 2.5 3.2 5.6
Net tax paid - (0.2) (1.2)
_______ _______ _______
Underlying free cash flow 4.7 31.5 62.7
Net acquisitions - (4.7) (5.3)
Proceeds from disposals of businesses,
including lease liabilities - 30.9 30.9
Cash exceptionals (1.8) (6.3) (12.8)
_______ ______ _______
Free cash flow 2.9 51.4 75.5
Interest (3.7) (3.8) (8.8)
Dividends (1.8) - (1.2)
_______ ______ _______
(Increase)/decrease in net debt during the period (2.6) 47.6 65.5
_______ ______ _______
_______ ______ _______
The #20 million reduction in net cash inflow from operating activities was
primarily due to a #17.2m swing in working capital movements; the main elements
being merger transaction costs inflating debtors at 30 September 2003 and the
cash spend against accruals made for depot closures just prior to last year-end.
Further significant investment in our supermarket dairies, particularly at
Manchester, has been authorised but not yet incurred. Asset disposal proceeds
mainly reflect the sale of surplus depots.
Interest
Net interest payable of #3.7 million was #1.3 million lower than last year,
reflecting the significant reduction in net debt over recent periods as we have
focused on our core businesses.
Taxation
The effective group tax rate, excluding exceptionals, is 34.6%. As in previous
periods we anticipate that the effective rate in the future will continue above
30% as goodwill amortisation on our previous corporate transactions will not
become an allowable deduction for tax.
Earnings per share
Lower operating profits drove the reduction in adjusted earnings per share (i.e.
pre exceptional items and goodwill amortisation and adjusted for discontinued
activities) to 2.5 pence (2002: 3.2 pence). With exceptional costs limited to
#1.8 million (2002: #7.1million) basic earnings per share improved to 1.3 pence
(2002: 1.1 pence).
Nigel Peet
Finance Director
GROUP PROFIT AND LOSS ACCOUNT
for the six months to 30 September 2003
Unaudited Unaudited Audited
Six months to Six months to Year
30.09.03 30.09.02 to 31.03.03
#m #m #m
Notes
Turnover
Group and share of joint venture 325.3 364.1 716.2
Less share of joint venture (1.8) (1.2) (1.5)
Continuing operations 323.5 345.4 697.2
Discontinued operations - 17.5 17.5
______ ______ ______
Group turnover 2 323.5 362.9 714.7
Cost of sales (220.5) (236.1) (474.5)
______ _____ _____
Gross profit 103.0 126.8 240.2
Operating expenses before goodwill amortisation
and operating exceptional items 3 (88.9) (106.8) (201.7)
______ ______ ______
Operating profit before goodwill amortisation and 14.1 20.0 38.5
operating exceptional items
Goodwill amortisation (2.2) (2.2) (4.6)
Operating exceptional items 4 (1.8) (6.7) (12.9)
______ _______ _______
Operating profit
Continuing operations 10.1 10.2 20.1
Discontinued operations - 0.9 0.9
______ ______ ______
10.1 11.1 21.0
Share of loss in joint venture (0.1) (0.1) (0.3)
______ ______ ______
10.0 11.0 20.7
Non operating exceptional items 4 - (0.4) 0.2
______ ______ ______
10.0 10.6 20.9
Net interest payable 5 (3.7) (5.0) (8.9)
______ ______ ______
Profit on ordinary activities before taxation 6.3 5.6 12.0
Tax on profit on ordinary activities 6 (2.3) (2.3) (4.4)
______ _______ ______
Profit on ordinary activities after taxation 4.0 3.3 7.6
Equity dividends (3.0) (1.2) (3.0)
______ ______ ______
Retained profit for the period 1.0 2.1 4.6
______ ______ ______
Earnings per ordinary share - basic 7 1.3p 1.1p 2.6p
- adjusted 7 2.5p 3.2p 6.7p
- diluted 7 1.3p 1.1p 2.6p
Group statement of total recognised gains and losses
There are no recognised gains and losses for the period other than the profit of
#4.0m shown above.
SUMMARISED GROUP BALANCE SHEET
at 30 September 2003
Unaudited Unaudited Audited
30.9.03 30.9.02 31.03.03
#m #m #m
Fixed assets
Intangible assets 55.2 59.3 57.2
Tangible assets 127.8 136.5 133.1
Investments
Investment in joint venture
Share of gross assets 3.8 3.6 3.7
Share of gross liabilities (1.7) (1.2) (1.5)
______ ______ ______
2.1 2.4 2.2
Investment in associate 2.0 - 2.0
Other investments 0.2 0.7 0.3
______ ______ ______
4.3 3.1 4.5
______ ______ ______
187.3 198.9 194.8
______ ______ ______
Current assets
Stocks 6.8 12.3 7.4
Debtors 71.4 75.1 64.2
Cash at bank and in hand 12.9 14.6 21.6
______ ______ ______
91.1 102.0 93.2
______ ______ ______
Creditors: due within one year
Borrowings 11.3 3.6 14.0
Trade creditors 54.8 55.5 58.4
Other creditors and accruals 36.3 48.8 40.4
Current taxation 8.9 5.5 6.1
Dividend payable 3.0 1.2 1.8
______ ______ _______
114.3 114.6 120.7
______ ______ ______
Net current liabilities (23.2) (12.6) (27.5)
______ ______ ______
Total assets less current liabilities 164.1 186.3 167.3
______ ______ ______
Creditors: due after one year
Borrowings 107.5 132.2 110.9
Deferred income - 0.4 -
______ ______ ______
107.5 132.6 110.9
______ ______ ______
Provisions for liabilities and charges
Deferred taxation 9.8 10.2 10.5
Post retirement health care 1.3 1.5 1.4
_______ _______ _______
11.1 11.7 11.9
_______ _______ _______
45.5 42.0 44.5
_______ _______ _______
_______ _______ _______
Capital and reserves
Called up share capital 6.0 6.0 6.0
Share premium account 0.2 0.2 0.2
Merger reserve (4.9) (4.9) (4.9)
Profit and loss account 44.2 40.7 43.2
_______ _______ _______
Equity shareholders' funds 45.5 42.0 44.5
_______ _______ _______
_______ _______ _______
GROUP CASH FLOW STATEMENT
for the six months to 30 September 2003
Unaudited Unaudited Audited
Six months Six months Year
to 30.9.03 to 30.09.02 to 31.03.03
#m #m #m
Operating profit 10.0 11.0 20.7
Share of loss in joint venture 0.1 0.1 0.3
Depreciation including operating exceptional write down 8.9 10.7 19.4
Amortisation 2.2 2.2 4.6
Provision against fixed asset investment - - 0.3
Profit on disposal of intangible fixed assets - - (0.1)
Working capital movement (15.3) 1.9 11.6
______ ______ ______
Net cash inflow from operating activities 5.9 25.9 56.8
Returns on investments and servicing of finance
Net proceeds on realised gains on financial instruments - 1.2 0.3
Interest received 0.1 - 0.3
Interest paid (3.6) (4.8) (9.1)
Interest element of finance lease rental payments (0.2) (0.2) (0.3)
______ ______ ______
Net cash outflow from returns on investments and servicing of
finance (3.7) (3.8) (8.8)
Taxation paid - (0.2) (1.2)
Capital expenditure and financial investment
Purchase of tangible fixed assets (5.3) (3.5) (10.9)
Proceeds from disposal of intangible and tangible fixed assets 2.5 3.2 5.6
______ ______ ______
Net cash outflow from capital expenditure (2.8) (0.3) (5.3)
Acquisitions and disposals
Disposals of businesses (including expenses) - 30.0 30.0
Acquisitions of businesses (including expenses) (0.2) (4.9) (5.7)
______ ______ ______
Net cash (outflow)/inflow on acquisitions and disposals (0.2) 25.1 24.3
Equity dividends paid (1.8) - (1.2)
______ ______ ______
Cash (outflow)/inflow before financing (2.6) 46.7 64.6
______ ______ ______
Financing
Movement in short term borrowings - 0.3 (1.7)
Movement in long term borrowings (7.8) (44.6) (64.7)
Repurchase and cancellation of US Loan Notes - (8.7) (8.7)
Proceeds from sale and leaseback transactions 9.8 - -
Capital element of finance lease rental payments (3.2) (2.3) (2.5)
_______ _______ _______
Net cash outflow from financing (1.2) (55.3) (77.6)
_______ _______ _______
Decrease in cash in the period (3.8) (8.6) (13.0)
_______ _______ _______
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
for the six months to 30 September 2003
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Profit attributable to equity shareholders 4.0 3.3 7.6
Equity dividends (3.0) (1.2) (3.0)
_______ _______ _______
1.0 2.1 4.6
Other movements:
Goodwill realised - 8.2 8.2
_______ _______ _______
Net increase in equity shareholders' funds 1.0 10.3 12.8
Opening equity shareholders' funds 44.5 31.7 31.7
______ ______ ______
Closing equity shareholders' funds 45.5 42.0 44.5
______ ______ ______
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months to 30 September 2003
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Decrease in cash in the period (3.8) (8.6) (13.0)
Cash outflow from decrease in debt and lease financing 1.2 55.3 77.6
_______ _______ _______
Change in net debt arising from cash flows (2.6) 46.7 64.6
Finance leases disposed of with businesses - 0.9 0.9
_______ _______ _______
(Increase)/decrease in net debt in the period (2.6) 47.6 65.5
_______ _______ _______
Net debt brought forward (103.3) (168.8) (168.8)
_______ _______ _______
Net debt carried forward (105.9) (121.2) (103.3)
_______ _______ _______
NOTES TO THE ACCOUNTS
1. Basis of preparation
The interim report, which was approved by the Board of Directors on 5
December 2003, does not comprise full accounts within the meaning of the
Companies Act 1985. The interim financial information is unaudited but has been
reviewed by the auditors. It has been prepared on a consistent basis using the
same accounting policies set out in the audited accounts for the year to 31
March 2003.
Comparative figures for the year ended 31 March 2003 have been extracted
from the statutory accounts which have been filed with the Registrar of
Companies and on which the auditors gave an unqualified report.
2. Turnover
Turnover by geographic market amounted to:-
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Continuing operations
UK 316.9 341.6 686.4
Rest of Europe 6.6 3.8 10.8
Rest of the World - - -
______ ______ ______
323.5 345.4 697.2
Discontinued operations
UK - 17.4 17.4
Rest of Europe - 0.1 0.1
Rest of the World - - -
______ ______ ______
- 17.5 17.5
Total
UK 316.9 359.0 703.8
Rest of Europe 6.6 3.9 10.9
Rest of the World - - -
______ ______ ______
323.5 362.9 714.7
______ ______ _____
3. Operating expenses
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Distribution costs (71.1) (85.0) (149.3)
Administrative expenses (20.0) (24.0) (57.0)
_______ _______ _______
(91.1) (109.0) (206.3)
Add back goodwill amortisation 2.2 2.2 4.6
_______ _______ _______
Operating expenses before goodwill amortisation and
operating exceptional items (88.9) (106.8) (201.7)
_______ _______ _______
NOTES TO THE ACCOUNTS (continued)
4. Exceptional items
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Operating exceptional items:
Bank facility/rationalisation costs (1.8) (6.7) (12.9)
_______ _______ _______
Non operating exceptional items:
Losses on disposals of businesses - (0.4) (0.8)
Profit on disposal of fixed assets - - 1.0
_______ _______ ______
- (0.4) 0.2
_______ _______ _______
The operational exceptional item arises from additional bank facility costs
incurred as part of the merger and other associated arrangements with Arla Foods
plc. The operating exceptional items in the six months to 30 September 2002 and
in the year to 31 March 2003 arose primarily from the rationalisation of the
group's depot network, from the costs of sales and management restructuring and
from the continuing centralisation of the group's administration and financial
functions.
The loss on disposal of businesses in the year to 31 March 2003 related to the
disposal of the group's UHT operations and Frome creamery. This loss was after
writing back #8.2m goodwill previously written off to reserves.
A tax credit of #0.5m arises on exceptional items (30.9.02: #2.5m, 31.3.03:
#4.3m)
5. Net interest payable
Unaudited Unaudited Audited
Six months to Six months Year
30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Net interest payable (3.7) (5.3) (9.2)
Net recognised gains on financial instruments - 0.3 0.3
______ ______ ______
(3.7) (5.0) (8.9)
______ ______ ______
6. Taxation
The taxation charge for the six months to 30 September 2003 has been
calculated on the basis of the estimated effective tax rate on profits pre
exceptional items for the full year of 34.6% (2002: 37.8%). The estimated
effective tax rate is more than 30% due principally to goodwill amortisation for
which no tax relief is available.
NOTES TO THE ACCOUNTS (continued)
7. Earnings per ordinary share
Unaudited Unaudited Audited
Six months Six months Year
to 30.09.03 to 30.09.02 to 31.03.03
#m #m #m
Calculation of earnings:
FRS 14 - basic and diluted 4.0 3.3 7.6
______ ______ ______
Adjusted:
Profit for the period 4.0 3.3 7.6
Add back/(deduct):
Discontinued operations - (0.9) (0.9)
Exceptional items 1.8 7.1 12.7
Tax thereon (0.5) (2.2) (4.0)
______ ______ ______
1.3 4.0 7.8
Goodwill amortisation, pre exceptionals
on continuing activities 2.2 2.2 4.6
______ ______ ______
Adjusted earnings 7.5 9.5 20.0
______ ______ ______
Unaudited Unaudited Audited
Six months to 30.09.03 Six months Year
No.m to 30.09.02 to 31.03.03
No.m No.m
Calculation of weighted average number of shares
FRS 14 - basic/adjusted/diluted 297.4 297.3 297.3
______ ______ ______
Weighted average number of shares year on year is after taking account of shares
in the company held on behalf of the group LTIP.
Adjusted earnings per share is included as, in the opinion of the directors, it
provides a better understanding of the underlying trading performance of the
group.
Diluted earnings per share includes the weighted average number of shares in
issue during the year after including the effect of all potentially dilutive
shares.
8. The interim report is being posted to all shareholders and will be
available on request from the Secretary, Arla Foods UK plc (formerly Express
Dairies plc), Express House, Meridian East, Meridian Business Park, Leicester,
LE19 1TR.
INDEPENDENT REVIEW REPORT TO ARLA FOODS UK PLC
(FORMERLY EXPRESS DAIRIES PLC)
We have been instructed by the company to review the financial information for
the six months ended 30 September 2003, which comprises the Group Profit and
Loss Account, Summarised Group Balance Sheet, Group Cash Flow Statement and the
related notes 1 to 8. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the London Stock Exchange which require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2003.
Ernst & Young LLP
Nottingham
5 December 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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