Simonds Farsons Cisk plc - Full-Year Results
On 12 May, Simonds Farsons Cisk plc published its preliminary results for the financial year ended 31 January 2016.
Performance Overview
During the financial year ended 31 January 2016, Simonds Farsons Cisk plc registered a 7.2% increase in turnover to a record €84.9 million on the back of increased consumer demand for Farsons’ products. The Group’s business was supported by yet another record year across the tourism industry in Malta as well as by favourable weather conditions throughout the whole year coupled with the Group’s continued efforts on innovation and exports. The preliminary results give a brief overview of the performance of each of the Group’s business segments as follows:
- Brewing & Bottling: continued to register growth in both turnover and profitability largely reflecting the solid performances and contributions of the Group’s successful flagship products, Cisk and Kinnie.
- Beverage Importation: registered a remarkable good performance with revenue growth recorded across its diversified portfolio of products reflecting the targeted marketing and sales initiatives as well as the launch of new products. The announcement also noted that the Group’s own retail outlet, Farsonsdirect, has also registered growth in sales as it is attracting a growing number of both private clients and trade customers.
- Food importation: targeted measures to address the relatively poor performance of this segment were undertaken during the period under review which should lead to improved results during the current financial year ending 31 January 2017 despite the intense competition within this business sector.
- Franchised Food: registered an encouraging performance with growth in both turnover and profitability. The latter was particularly boosted by the inclusion of the full-year’s performance of the Qormi Burger King drive-thru restaurant.
Cost of sales also increased by 4.5% to €51.9 million leading to a gross profit of just under €33 million representing an 11.8% improvements over the previous year’s comparable figure.
Given the increased business activity of the Group, selling & distribution costs increased by 3.6% to €10.2 million and administrative expenses grew by 15.3% to €11.1 million. Moreover, the Group incurred €0.3 million in other operating expenses.
Overall, the Group’s operating profit for the financial year under review amounted to €11.5 million representing an 18.4% improvement over that reported last year.
The Group’s performance for the financial year under review was also boosted by a 6.6% drop in net finance costs to €1.4 million largely reflecting further repayments of bank borrowings.
As a result, for the financial year ended 31 January 2016, the Group’s profit before tax amounted to a record €10.1 million representing a 22.8% improvement over the previous financial year’s pre-tax profit figure.
The results for the period under review were further boosted by a €0.9 million tax credit. Last year, the Group benefited from a €5.2 million tax credit.
The discontinued operations of the Group, comprising the property-related business which is the subject of a planned spin-off in 2017, registered a €0.2 million profit compared to a €5.4 million loss in the previous financial year. The profit registered during the period under review is largely attributable to the reduction in the deferred tax liability as per the new capital gains tax rules as announced within the 2015 Government Budget Speech.
Overall, the Group registered a net profit of €11.2 million, up 40.1% from the comparable figure registered during the financial year ended 31 January 2014. This translates into an earnings per share of €0.3741 (FY15: €0.267).
The Statement of Financial Position shows an 8.7% growth in total assets to €162.6 million and a 7.6% increase in total liabilities to €53.1 million. This led to an overall 9.2% increase in total equity to €109.46 million. This translates into a net asset value per share of €3.65 (FY15: €3.34).
Dividend
The Directors recommended a final dividend (out of tax exempt profits) of €0.0733 per share representing a 10.1% increase over the final dividend paid out in respect of the previous financial year. This dividend will be paid on 30 June 2016 to all shareholders as at the close of trading on 25 May subject to shareholder approval at the upcoming Annual General Meeting scheduled to be held on 28 June.
Coupled with the interim dividend of €0.0333 per share, the total net dividend declared in respect of the financial year ended 31 January 2016 amounted to €0.1066 per share representing a 6.7% increase over the previous year’s dividend.
Property Interests
The Board reiterated its intention to hive off a number of properties and eventually ‘spin-off’ part of the Group’s property interests into a separate and distinct property-focused public company listed on the Malta Stock Exchange. In this respect, the Board will be seeking shareholder approval during the June 2017 Annual General Meeting with the aim of listing the property shares by the end of the same year.
In the meantime, the Group maintained its efforts with regards to the €60 million Farsons Business Park. Once completed, the project will contain 18,500 square metres of lettable office space, food and beverage facilities, visitor attractions, a gym and a multi-level car park. Works are expected to commence in 2017, starting off with the old brewhouse development, and is expected to be completed in 2020.
Investments
The Directors also noted that the new €27 million beer packaging facility will be officially inaugurated in September 2016. Nonetheless, beer packaging is already underway in the new facility with the full benefits of this investment to start materialising during the second half of the current financial year ending 31 January 2017. The new facility will enable the Group to implement a broader and more ambitious export strategy.
Furthermore, construction works on the expansion of the logistics and warehousing operations together with the extension of an additional two floors on top of the administrative office are underway. Once completed in August 2017, these extensions, which are projected to cost around €10 million, will enable the Group to support the planned expansion of the export business as well as enabling the start of the Farsons Business Park development.
Outlook
Looking forward, the Directors noted that revenue growth within the soft-drinks market is expected to remain under pressure. Changes in consumer preferences offer challenges but also opportunities in equal measure that the Group is addressing accordingly. On the other hand, in line with international trends, the craft beers segment is achieving increasing market share. In this respect, the Group will continue to align its product portfolio through innovation and further development of its own beer brands, particularly in view of the Group’s export growth strategy which will be facilitated by the new beer packaging facility.