RNS Number:7807D
Blueheath Holdings PLC
30 May 2006
For Immediate Release 30 May 2006
Blueheath Holdings plc
("Blueheath" or the "Company")
Preliminary Results for the 53 weeks ended 4 March 2006
"Making the business profitable"
Blueheath is a national delivered wholesaler using sophisticated, proprietary
technology to offer a substantial cost advantage over established players in the
grocery wholesale sector. The Company today announces preliminary results for
the 53 weeks ended 4 March 2006.
Final Results - Key Points
* Turnover increased 89% to #132.3m (2005 - #70.2m).
* Loss before exceptionals reduced by 16% to #4.9m (2005 - #5.8m) and after
exceptionals(1) by 16% to #5.3m (2005 - #6.3m).
* Cash deposits and undrawn facilities at year end of #6.6m.
* Met or exceeded all operational targets on order fulfilment, on-time
delivery and stock holding.
* On track to complete initial integration work on acquisitions of CTM
Wholesale Limited and AC Ward & Son Limited in the first quarter of the new
financial year.
Future forecast
* Further cost savings opportunities identified from a logistics
restructuring sufficient to generate satisfactory operating profits at the
current level of sales and gross margin.
* Promising pipeline of new business since year end with two new wins:
Benjys, Cineworld, and three extensions: Park Garages, Gala Bingo and
Vendsetters/Snack-in-the-Box.
* Management changes to support next stage of business evolution:
- Richard Rose joining the business with immediate effect in role of
Deputy Chairman.
- Company founder and Chief Executive, Douglas Gurr, stepping down. The
Company has identified a successor to Mr Gurr whose name will be announced
shortly.
* Placing of 26,250,000 new ordinary shares at 20p per share to raise #5.25
million (before expenses) to fund the restructuring and provide sufficient
comfort within the working capital.
Commenting on the results and prospects, Douglas Gurr, Chief Executive, said:
"The Group is on track to compete the restructuring needed to deliver
satisfactory operating profits at the current level of sales and margin whilst
continuing to secure important new contracts. We expect to see another year of
strong growth combined with a significant shift in business profitability."
For further information please contact:
Buchanan Communications Tel: 020 7466 5000
Mark Edwards / James Strong
Evolution Securities Tel: 020 7071 4300
Michael Brennan / Bobbie Hilliam
(1) Exceptional items of #0.38m (2005 - #0.48m) relating to one off integration
costs associated with the Company's acquisitions
Notes to editors:
Blueheath is a wholesaler of groceries to convenience stores in the #16.8
billion UK grocery wholesale sector. The Group sells and arranges the
distribution of approximately 3,500, primarily ambient, product lines to over
5,000 independent and multiple retail and leisure outlets within the UK.
Blueheath's innovative technology-driven business model is founded on the basic
principles of stripping out unnecessary supply chain costs and overheads and
passing on financial and operational benefits to customers. This enables
Blueheath to offer customers a wholesale delivery service of groceries at close
to Cash & Carry prices.
Blueheath achieves cost savings in three ways:
1. Operating on low stock levels through the use of sophisticated, proprietary
stock prediction technology.
2. Using spare distribution capacity through its partnership with British
Bakeries Ltd and other operators.
3. The extensive use of process automation to minimise administration costs.
CHAIRMAN'S STATEMENT
Final Results
Blueheath is pleased to announce its final results for the 53 weeks ended 4
March 2006.
Turnover for the 53 weeks ended 4 March 2006 increased by 89% to #132.3m (2005 -
#70.2m).
Retained losses before exceptionals decreased by 16% to #4.9m (2005 - #5.8m).
Gross margins decreased slightly to 5.7% (2005 - 5.8%) and total overhead costs
before exceptional costs as a percentage of sales decreased from 12.9% to 9.5%.
Exceptional costs in the year were #0.38m (2005 - #0.48m) and the retained loss
after exceptionals reduced by 16% to #5.3m (2005 - #6.3m).
As of 4 March 2006 the Company held a total of #6.6m in cash deposits and
facilities, comprising #0.9m of cash #3.0 million of cash deposits held against
supplier credit and #2.7m of un-drawn invoice discounting facilities.
Operational performance
The Company has performed well over the period, continuing to meet or exceed its
key operational targets on order fulfilment, on-time delivery and stock holding.
Order fulfilment held at 97.0 per cent for the year (2005 - 97.4 per cent) a
good result as it covered a period of significant activity on acquisition
integration. On-time delivery improved again to 99.2 per cent for the year (2005
- 98.7 per cent) reflecting a continuing good performance by our delivery
partners and good performance from the acquired in-house operations. Total
average stock days increased to 11.4 for the year (2005 - 5.8) reflecting the
higher levels of stock in the acquired businesses where the Blueheath operating
model and stock management technology were still only partly implemented at the
year end.
Business growth remains the key factor in driving operational leverage through
improved buying terms, further improvements in the efficiency of picking and
delivery operations, and in contributing to fixed warehouse and central overhead
costs. Gross margins declined slightly reflecting business mix and delays in the
delivery of merger benefits until the switch to a single buying group could be
completed in February 2006.
Initial acquisition integration
The Company acquired A C Ward & Son Limited ("ACW") in November 2005 following
the acquisition of CTM Wholesale Limited ("CTM") earlier in the year. At the
time, the Directors anticipated that the enlarged group would be able to achieve
improved operating margins through combining buying volumes, the application of
Blueheath's technology and business processes to the ACW operation, and the
integration of central overheads.
Since that time, the Company has completed a major range harmonisation exercise,
combined the group's purchasing into a single buying group, implemented the
Blueheath stock management technology at both Wrexham and Thurrock, implemented
the Blueheath operational model fully at Thurrock and partly at Wrexham,
combined the Southern transport operations into a single operation thereby
generating substantial costs savings, moved the picking of all South Eastern
Blueheath customers to Thurrock to better utilise capacity at the Thurrock site
and eliminate trunking costs from Tamworth, and removed overhead costs through
the elimination of duplicated functions across the group.
The Directors are pleased to report that the Company remains on track to
complete the planned initial integration work in the first quarter of the new
financial year.
Further operational improvement
Following the initial integration work on CTM and ACW, the Company has conducted
a detailed review of the business operations and the current customer profile
and locations to ensure that the Company is on track to reach a platform of
scale from which the Directors expect the business to be profitable when the
final stages of the integration have been completed. The review has taken into
account business integration, current trading, margin improvements and
distribution assumptions.
The review has identified a number of opportunities to reduce materially the
operating costs of the business. Principal amongst these is that the improved
stock management and business processes from the application of the Blueheath
business model had increased capacity sufficiently at the Company's operations
at Thurrock and Wrexham to enable the closure of the Company's, third-party
operated, warehouse at Tamworth. The review has also identified a number of
opportunities to further reduce administration costs through further integration
of combined functions.
The review has shown that the integration work delivered to date together with a
further logistics restructuring should be sufficient to generate satisfactory
operating profits at the current level of sales and gross margin. Reflecting on
these findings, the Board has decided that the immediate focus of the business
should be to implement the logistics restructure in order to go through
breakeven into profit on the current level of sales. The full time growth focus
will return once the cost base has been restructured.
Whilst the review indicated that the current levels of sales, cost reduction
programme and restructuring proposals should enable the Company to achieve cash
flow breakeven, the current Directors and Richard Rose believe that it would be
prudent to raise additional equity capital to fund the cost reduction programme
and restructuring and provide sufficient comfort within the working capital.
New Account wins
In the course of the year, the Company acquired CTM and ACW and the recent focus
of the business has been on integrating these two businesses and converting the
operations to the Blueheath model. As indicated in earlier announcements it has
also been a difficult year overall for the wholesale market with a number of
customers trading below the level of the previous year.
Despite this, the Company had continued to deliver organic growth through new
account wins and contract extensions with existing customers and is today
pleased to announce two new account wins: Benjys sandwich chain and Cineworld
Cinemas as well as three account extensions: new sites with Grocer Top 50,
leading independent forecourt operator Park Garages, new sites with leisure
operator Gala Bingo and a contract extension to the Vendsetters foodservice
business of vending operator Snack-in-the-Box.
These new wins, together with the full year effect of the acquired businesses
will take the run rate of the business to well in excess of the turnover for the
53 weeks ended 4 March 2006.
Management
The Company is reaching an important stage in its evolution. The conclusion of
the current programme of business restructuring should take the business through
breakeven and into profit, with the business well placed to deliver further
growth both organically and potentially through further acquisition. The
challenge of the next 2-3 years will be the effective implementation of the
clearly laid out business strategy and operating model.
To help deliver this next stage, the Company is today announcing a number of
management changes. Richard Rose will be joining the Board on 30 May 2006 in the
role of deputy chairman. I then intend to hand-over the role of chairman to
Richard, resulting in the chairman being an executive within the Group, with
effect from 1 September 2006. Richard was previously chief executive of Whittard
of Chelsea plc. Prior to that he has been a Director of Hagemeyer (UK) Ltd and
chief executive of WF Electrical plc. Richard has a strong track record in
delivering business growth and shareholder value and will be taking primary
responsibility for business strategy and investor relations.
Management (continued)
Having led the Company over the past five years from pure start up to its
current scale and position as a leading player in the wholesale market, the
Chief Executive and Company founder, Douglas Gurr, has announced his intention
to step down with effect from 31 August 2006. The Company has identified a
successor to Mr Gurr whose name will be announced shortly.
Outlook
The Company has now built a scale platform which, with the final stages of the
acquisition integration and the further identified cost savings will, the
Directors believe, take the Company into profitability.
Looking forward, the Company continues to be well placed to grow both
organically through new account wins and potentially through further
acquisitions of traditional wholesalers which can be converted to the Blueheath
model of operation. The Company has been successful in securing two new multiple
accounts and three account extensions and continues to pursue a promising
pipeline of potential new business although the precise timing of new account
wins is always hard to predict and these accounts take some time to become fully
operational. The Company is therefore expecting another year of strong growth
combined with a significant shift in business profitability as the margin and
costs benefits from the reaming integration work flow through.
Colin Smith
Chairman
30 May 2006
BLUEHEATH HOLDINGS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
53 weeks ended 4 March 2006
53 weeks ended 4 March 2006 52 weeks ended 26 February 2005
As restated (see note 6)
Note Before Operating Total Before Operating Total
operating exceptio-nal operating exceptio-nal
exceptio-nal items #'000 exceptio-nal items (see #'000
items items note 2)
(see note 2)
#'000 #'000 #'000
#'000
TURNOVER
Continuing 76,004 - 76,004 70,151 - 70,151
operations
Acquisitions 56,251 - 56,251 - - -
132,255 - 132,255 70,151 - 70,151
Cost of sales (124,688) - (124,688) (66,017) - (66,017)
Gross profit 7,567 - 7,567 4,134 - 4,134
Distribution (7,450) - (7,450) (5,027) - (5,027)
costs
Administrative
expenses
Goodwill (140) - (140) - - -
amortisation
Share option (79) - (79) (80) - (80)
charges
Other (4,962) (382) (5,344) (3,967) (478) (4,445)
(5,181) (382) (5,563) (4,047) (478) (4,525)
OPERATING LOSS
Continuing (5,325) (300) (5,625) (4,940) (478) (5,418)
operations
Acquisitions 261 (82) 179 - - -
(5,064) (382) (5,446) (4,940) (478) (5,418)
Interest 398 - 398 253 - 253
receivable and
similar income
Interest (233) - (233) (1,142) - (1,142)
payable and
similar charges
LOSS ON (4,899) (382) (5,281) (5,829) (478) (6,307)
ORDINARY
ACTIVITIES
BEFORE TAXATION
Tax on loss on - - - - - -
ordinary
activities
LOSS FOR THE (4,899) (382) (5,281) (5,829) (478) (6,307)
FINANCIAL
PERIOD
LOSS PER
ORDINARY SHARE
Basic and 3 (11.7) (19.5)
diluted (pence)
There are no recognised gains or losses for the current financial period and
preceding financial period other than as stated in the profit and loss account.
All activities derive from continuing operations.
BLUEHEATH HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
4 March 2006
4 March 26
2006 February
#'000 2005
As
restated
(see note
6)
#'000
FIXED ASSETS
Intangible assets 5,094 -
Tangible assets 873 229
5,967 229
CURRENT ASSETS
Stocks 5,349 1,125
Debtors 14,849 5,968
Current asset investments 3,005 5,100
Cash at bank and in hand 900 6,027
24,103 18,220
CREDITORS: amounts falling due (17,191) (6,869)
within one year
NET CURRENT ASSETS 6,912 11,351
TOTAL ASSETS LESS CURRENT 12,879 11,580
LIABILITIES
CREDITORS: amounts falling due (380) -
after more than one year
NET ASSETS 12,499 11,580
CAPITAL AND RESERVES
Called up share capital 457 414
Share premium account 23,152 17,074
Share option reserve 159 80
Profit and loss account (29,143) (23,862)
Merger reserve 17,874 17,874
EQUITY SHAREHOLDERS' FUNDS 12,499 11,580
BLUEHEATH HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
53 weeks ended 4 March 2006
Note 53 weeks 52 weeks
ended 4 ended 26
March February
2006 2005
#'000 #'000
Net cash outflow from operating 4 (9,323) (3,677)
activities
Returns on investments and servicing of
finance
Interest paid (233) (309)
Interest received 398 253
Net cash inflow (outflow) from returns 165 (56)
on investments and servicing of finance
Taxation
Uk corporation tax paid (333) -
Net cash outflow from taxation (333) -
Capital expenditure and financial
investment
Payments to acquire plant and equipment (125) (311)
Net cash outflow from capital (125) (311)
expenditure and financial investment
Acquisitions
Purchase of subsidiary undertakings (8,635) -
Net cash acquired with subsidiary 1,261 -
undertakings
(7,374) -
Net cash outflow before management of (16,990) (4,044)
liquid resources and financing
Management of liquid resources
Decrease (increase) in short term 2,095 (11,128)
deposits
Financing
Issue of ordinary share capital 6,121 17,230
Repayment of finance leases (570) -
Bank loan drawn down (repaid) 3,368 (1,841)
Net cash inflow from financing 8,919 15,389
(Decrease) increase in cash in the 5 (5,976) 217
period
BLUEHEATH HOLDINGS PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
53 weeks ended 4 March 2006
1. BASIS OF PREPARATION / STATUTORY ACCOUNTS
This Preliminary Statement was approved by the Directors on 30 May 2006. The
financial information contained in this preliminary announcement of unaudited
final results does not constitute the group's statutory accounts for the 53
weeks ended 4 March 2006 or 52 weeks ended 26 February 2005. With the exception
of the adoption of FRS20 (see note 6) the accounting policies that have been
applied are consistent with those applied in the preceding annual accounts. The
accounts for the 52 weeks ended 26 February 2005 have been delivered to the
Registrar of Companies. The statutory accounts for the 52 weeks ended 26
February 2005 have been reported on by the Company's auditors; the report on
these accounts was unqualified and they did not contain any statement under
section 237(2) or (3) of the Companies Act 1985. The accounts for the 53 weeks
ended 4 March 2006 have not been audited. The statutory accounts for the period
ended 4 March 2006 will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's annual general
meeting.
The Directors have considered the funding position of the group for it to
achieve its development strategy and to meet its continuing requirements for the
foreseeable future. To this end the Directors are in an advanced position to
secure additional equity financing to enable the business to finance its
predicted growth. At the date of issuing this announcement the Directors have
secured a fully underwritten share placement of #5.25 million, which now
requires shareholder approval before it can be completed. The shareholders of
the Company have been informed of this funding transaction and it will be
considered and voted upon at an Extraordinary General Meeting to be held on 23
June 2006. The Directors believe that with this additional financing the Group
will have sufficient funds to meet its development objectives and continuing
requirements and have therefore prepared this financial information on the going
concern basis.
As highlighted above the Directors are at an advanced stage of completing an
equity funding transaction to secure financing for the Group's development and
present requirements. The completion of this financing arrangement is dependent,
amongst other things, upon shareholder approval which will be determined on 23
June 2006. As a consequence of this uncertainty, together with any events that
may arise up to the date that the accounts are to be signed, at the date of
issuing this statement the auditors have indicated to the Directors that their
audit report may include an emphasis of matter paragraph on the Group's ability
to continue as a going concern.
2. OPERATING EXCEPTIONALS
Operating exceptional items in the period relate to one off integration costs
associated with the Company's acquisitions. For the comparative period the
exceptional items comprised expenses associated with flotation and financial
restructuring.
3. BASIC AND DILUTED LOSS PER ORDINARY SHARE
The calculation of loss per ordinary share for the current period is based on
the loss for the period of #5,281,000 (2005 - loss of #6,307,000 as restated)
and the weighted average number of ordinary shares of 45,147,626 (2005 -
32,310,492). The Company had 45,738,122 ordinary shares in issue as of 4 March
2006.
FRS14 requires presentation of diluted earnings per share where a Company could
be called upon to issue shares that would decrease net profit or increase net
loss per share. For a loss making Company with outstanding share options, the
net loss per share would be decreased by the exercise of options, and hence no
adjustment has been made to the diluted loss per share as presented.
BLUEHEATH HOLDINGS PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
53 weeks ended 4 March 2006
4. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOWS
53 weeks 52 weeks
ended ended 26
February
4 March 2005
2006 restated
#'000 #'000
Operating loss (5,446) (5,418)
Goodwill amortisation 140 -
Depreciation 372 299
Loss on sale of fixed assets - 4
Decrease (increase) in debtors 154 (1,997)
(Decrease) increase in creditors (7,055) 3,692
Share option charges 79 80
Decrease (increase) in stocks 2,433 (337)
Net cash outflow from operating (9,323) (3,677)
activities
5. ANALYSIS AND RECONCILIATION OF NET (DEBT) FUNDS
At 27 Cash Acquisi-tions At 4
February (excluding
2005 flow cash and March
overdrafts) 2006
#'000 #'000
#'000 #'000
Cash at bank and in hand 6,027 (5,127) - 900
Bank overdraft (5) (849) - (854)
(5,976)
Debt due within one year (217) (2,650) (3,856) (6,723)
Finance leases - 69 (570) (501)
(2,581)
Current asset investments 5,100 (2,095) - 3,005
Total net funds (debt) 10,905 (10,652) (4,426) (4,173)
BLUEHEATH HOLDINGS PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
53 weeks ended 4 March 2006
5. ANALYSIS AND RECONCILIATION OF NET (DEBT) FUNDS (continued)
4 March 26
2006 February
2005
#'000 #'000
(Decrease) increase in cash in the period (5,976) 217
Cash (inflow) outflow from change in debt (2,581) 1,841
financing
Cash (inflow) outflow from change in liquid (2,095) 11,128
resources
Change in net debt resulting from cash flows (10,652) 13,186
Loans and finance leases acquired with subsidiary (4,426) -
Decrease in debt financing - 6,720
Change in net debt resulting from non cash flows (4,426) 6,720
Change in net debt (15,078) 19,906
Net funds (debt) at 27 February 2005 10,905 (9,001)
Net (debt) funds at 4 March 2006 (4,173) 10,905
6. IMPACT OF RESTATEMENT
The impact of implementing FRS 20 "Share based payment" has had the following
impact on the group financial statements.
PROFIT AND LOSS ACCOUNT Year
ended 26
February
2005
#'000
Administrative expenses as previously 4,445
stated
FRS 20 "Share based payment" charge 80
Administrative expenses as restated 4,525
Loss per share - basic and diluted (19.4)
(pence) as previously stated
FRS 20 "Share based payment" charge (0.1)
Loss per share - basic and diluted (19.5)
(pence) as restated
BLUEHEATH HOLDINGS PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
53 weeks ended 4 March 2006
6. IMPACT OF RESTATEMENT (continued)
BALANCE SHEET 26
February
2005
#'000
Profit and loss account as previously (23,782)
stated
FRS 20 "Share based payment" (80)
Profit and loss account as restated (23,862)
Share option reserve previously stated -
FRS 20 "Share based payment" 80
Share option reserve as restated 80
--------------------------
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