On 28 September, Simonds Farsons Cisk plc published its interim financial statements for the six-month period ended 31 July 2016.
During the first six months of the 2016/17 financial year, the Farsons Group generated €45.8 million in revenues, representing a 3.6% increase over the previous comparable figure reflecting the strong growth of Malta’s economy as well as buoyant tourist arrivals and expenditure. Revenue from the ‘Brewing, production & sale of branded beers & beverages’ increased by 3.6% to €24.7 million – the major contributor to the Group’s growth in absolute terms. Similarly, revenue in the ‘operation of franchised food retailing’ expanded by almost 12% to €7 million largely reflecting the opening of two new outlets. On the other hand, turnover was relatively flat with respect to the ‘Importation and sale of food and beverages including wines and spirits’ at €14.1 million.
Cost of sales also increased by 1.7% to €27.6 million leading to a record gross profit of €18.2 million, representing a 6.5% increase over the previous comparable period. Similarly, the gross profit margin improved to 39.8% from 38.7% during the six months ended 31 July 2015.
Other operating expenses increased by 1.3% to €11.8 million leading to an operating profit of €6.5 million which represents an 17.6% increase over the previous comparable period. Similarly, the operating profit margin reached a record 14.1% compared to 12.4% during the six months ended 31 July 2015. The Brewing segment registered an 18.9% increase in operating results to €5.7 million reflecting the aforementioned buoyant economic conditions. The franchised food retailing business registered an increase of 20.6% in operating results to €0.57 million whilst the operating result of the importation arm contracted by 1.8% to €1.13 million in view of the continued challenges and intense competition within the sector.
After accounting for net finance costs of €0.67 million (0.4% lower than the previous comparable period), the Group’s pre-tax profit amounted to a record €5.8 million, representing a 20.1% increase over the previous comparable period. The tax expense amounted to €0.24 million leading to a net profit figure of €5.5 million compared to €6.3 million recorded during the six months ended 31 July 2015 which included a favourable one-off adjustment of €1.8 million. This translates into an earnings per share of €0.185 (HY to Jul 15: €0.211).
Looking ahead, the Directors explained that the Group’s business remains highly dependent on the prevailing economic climate, consumer confidence and disposable income together with the performance of the tourism sector. Additionally, the market remains highly competitive with constant pressures on volumes and margins. The Directors also identified the continuing softness in economic growth across the EU and the developments following Brexit as potential macroeconomic threats.
Efficiency improvements through investment, technology, innovation and cost containment remain on-going. At the same time, the Group remains committed to internationalizing its business through exports growth in view of the new market opportunities. The Group also believes that although the increased focus on consumer health offers challenges these could also be turned into opportunities going forward.
Beer Packaging Facility
The beer packaging facility inaugurated on 7 September 2016 should enable the Group to extend and expand its export business. The Directors also noted that although the envisaged benefits from the investment in the new beer packaging facility will start to be realized towards the latter part of the Group’s current financial year ending 31 January 2017, the full-year results will be adversely impacted by the significant additional depreciation charge related to this investment.
Ongoing Capital Investment
Further to the Company Announcement dated 29 May 2015 in which the Group explained that planning applications for the development of the Farsons Business Park were duly submitted to the Planning Authority, the Directors noted that since then, further detailed designs and analysis is being carried out. Meanwhile, the construction of two additional floors to the office block to accommodate the Group’s administrative requirements as well as the extension of the logistics centre are underway.
Farsons Business Park
It remains the Board’s intention to present to shareholders a formal request to approve the spin-off of a number of the Group’s property assets including the main building of the old Brewery complex. Additional work related to design and business planning is being carried out as the planning application process is well underway. Works are expected to commence in the second half of 2017 while funding requirements and options (coupled with details on the spin-off plan) continue to be analysed and prepared.
The Directors declared an unchanged net interim dividend of €0.0333 per share to all shareholders as at close of trading on Monday 3 October. The interim dividend will subsequently be paid on Wednesday 19 October.