On 26 May 2021, Simonds Farsons Cisk plc published its Annual Report & Financial Statements for the year ended 31 January 2021.
During the period under review, Farsons registered a 29.4% decline in revenues to €73.0 million (FY2019/20: €103.5 million) as all business segments suffered from the challenges brought about by the COVID-19 pandemic. This figure is also 7.8% lower than the forecast of €79.1 million as provided in the Financial Analysis Summary (‘FAS’) published on 23 September 2020. Revenue from ‘Brewing, production and sale of branded beers and beverages’ was 24.5% lower than the previous comparable period and amounted to €41.6 million (representing 57% of total revenues). Moreover, sales generated by the ‘Operation of franchised food retailing establishments’ segment slipped by 34.7% to €11.7 million while revenues at the ‘Importation, wholesale and retail of food and beverages’ segment contracted by 35.2% to €19.7 million.
On the expenditure side, total costs eased by 33.3% to €67.3 million reflecting the marked reduction in business as well as the Group’s efforts at mitigating the negative financial impact of the pandemic. In fact, Farsons explained that although its full work force was maintained, the Group implemented a number of cost saving measures including ‘shut down’ days while it also took advantage of the COVID-19 wage supplement scheme offered by the Government of Malta.
Given the much larger drop in revenues than the reduction in costs, operating profit slumped by 58.6% to just under €5.7 million (FY2019/20: €13.7 million). Similarly, the operating profit margin declined to 7.8% from 13.2% in the previous financial year. Excluding depreciation and amortisation charges, EBITDA fell by 34.7% to €14.8 million which, in turn, is 20.2% higher than the projected figure of €12.3 million.
Overall, Farsons reported a profit before tax of €4.4 million compared to 12.3 million in the 2019/20 financial year. After taking into account a tax charge of €1.1 million (FY2019/20: tax charge of €0.45 million), the Group posted a net profit of €3.3 million which, in turn, translates into a return on average equity of 2.8% (FY2019/20: 10.6%).
The Statement of Financial Position shows a marginal reduction of 0.5% in total assets to €187 million, as the increases in plant, property and equipment (+ €2.0 million) and cash balances (+€ 8.7 million) were offset by the reduction of inventories (-€3.0 million) and trade and other receivables (-€7.7 million). Total liabilities declined by 6.0% to €67.4 million as the increase in trade and other payables (+€3.5 million) were offset by the reduction of €7.6 million in total debt to €41.4 million (when including lease liabilities amounting to €5.6 million). As a result, the equity base of Farsons expanded by 3.0% to €119.7 million. Meanwhile, given the reduction in debt and the further increase in the equity base, the Group’s gearing ratio (calculated as net debt divided by net debt plus equity) improved to 16.8% from 25.9% as at 31 January 2020.
In view of the prevailing uncertainties related to COVID-19, and in the long-term interest of the business, the Directors of Farsons resolved not to recommend a final dividend. The Board believes that it would be prudent to wait further and assess the situation following the opening up of tourism in the coming days. In this context, Farsons also added that it would consider favourably the declaration of an interim dividend at the half yearly results in September 2021 once a better view of how the business performed over the summer months.
In their commentary, the Directors explained that Farsons looks ahead with cautious optimism as the efficient COVID-19 vaccine roll out together with the ease of restrictions are giving a positive outlook for the months ahead, notwithstanding the risks of the emergence of new and highly transmittable variants. Farsons believes that it is now better placed to address the challenges ahead and unless any unexpected public health issues occur, it expects to report improved results for the current financial year ending 31 January 2022.