Simonds Farsons Cisk plc - Full-Year Results
On 16 May 2018, Simonds Farsons Cisk plc published its preliminary results for the financial year ended 31 January 2018.
Performance Overview
During the period under review, Farsons registered a 7.8% increase in turnover to a record of just under €95 million (FY2016/17: €88.1 million). This is also 4.3% higher than the forecasted figure of €91.1 million provided in the bond prospectus dated 31 July 2017. In this respect, Farsons explained that despite the tough competitive operating environment, all of its business segments experienced growth during the period under review on the back of the continued positive performance of the local economy, the sustained growth of the tourism industry, the favourable weather conditions experienced during most of 2017, as well as the various crowd events hosted during the year. Moreover, the Group continued to invest in targeted and effective marketing campaigns, coupled with innovative product solutions and propositions.
Cost of sales increased in line with revenues (+7.9%) whilst administrative expenses surged by 11.2% to €12.1 million (FY2016/17: €10.9 million). On the other hand, selling and distribution costs eased by 3.5% to €10.3 million. Nonetheless, operating profit increased by just over 14% to a record of €14.7 million compared to €12.9 million in 2016/17. Excluding depreciation and amortisation charges, EBITDA amounted to €22 million – an increase of €1 million over the previous financial year and 15% higher than previously estimated. Moreover, the EBITDA and the operating profit margins improved to 23.2% and 15.4% from 21.9% and 14.6% respectively. This reflects the higher volume of business generated, the relatively fixed cost nature of most of the Group’s overheads, the various management initiatives aimed at improving productivity, as well as the gains in efficiencies following the various investments to the production lines undertaken in recent years.
Despite an increase of €3.9 million in net borrowings, net finance costs dropped by 17.6% to €1.21 million, largely driven by the coupon rate differential between the 6% bonds which were redeemed in September 2017 and the new bonds with a coupon rate of 3.5%.
Overall, the Group registered a record pre-tax profit of €13.5 million (FY2016/17: €11.4 million). After taking into account a tax credit of €0.95 million and a loss of €0.64 million from the Group’s discontinued operations (i.e. the business related to Trident Estates plc), Farsons posted yet another record net profit of €13.8 million. This represents an improvement of 13.4% over the previous comparable period and is also 38.4% higher than previously anticipated. The profit for the year of €13.8 million translates into an earnings per share of €0.459 (FY2016/17: €0.404).
The condensed Statement of Financial Position shows that total assets decreased by 10.6% to €163.5 million, mainly due to the spin-off of Trident Estates plc in the later part of January 2018. On the other hand, total liabilities increased by 12.1% to €66.9 million reflecting the higher level of net borrowings which were also partly used to finance a cash injection of €6.5 million into Trident Estates plc prior to the spin-off. As a result, shareholders’ funds dropped by 21.6% to €96.6 million. This translates into a net asset value per share of €3.221 (FY2016/17: €4.109). Furthermore, given the Group’s improved profitability and smaller capital base, the return on average equity climbed to 12.5% from 10.4% as at 31 January 2017.
Dividend
The Directors are recommending a final net dividend (paid out of tax exempt profits) of €0.0867 per share, representing an 8.3% increase over the final net dividend paid out in respect of the previous financial year (€0.08 per share). The dividend will be paid on 22 June 2018 to all shareholders as at close of trading on 18 May 2018, and subject to shareholders’ approval at the upcoming Annual General Meeting scheduled to be held on 21 June 2018.
Coupled with the interim dividend of €0.0333 per share, the total net dividend declared in respect of the financial year ended 31 January 2018 amounted to €0.12 per share, representing a near 6% increase over the total net dividend distributed in the previous comparable period (€0.1133 per share).
Outlook
Looking ahead, Farsons noted that it remains vigilant to the ever-changing conditions of both the local and the overseas markets, and is committed to further investments as required in order to continue transforming challenges into tangible market opportunities. The positive performance of the local economy, which has enhanced the performance of the Group and is expected to persist further, will continue to impact profitability.
Farsons also continues to build on its two growth pillars namely, innovation and internationalisation. Following the significant investments made by the Group in recent years, the further tapping of selected export markets remains a priority for Farsons. Moreover, the Group is committed at developing new products which proactively meet, and exceed, the constant change in expectations of consumers.