SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2001
Enodis plc
Washington House, 40-41 Conduit Street
London, W1S 2YQ, United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F: X Form 40-F: ______
---------
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes: _______ No: X
---------
This Form 6-K is being filed to provide the following materials: (1) A
press release, dated May 24, 2001 containing the Enodis plc Interim results for
the six months ended March 31, 2001; and (2) A meeting circular regarding the
Extraordinary Meeting of Shareholders to be held June 11, 2001 for the purpose
of approving the sale of Enodis' Building and Consumer Products Division.
Enodis PLC Interim results for the six months ended 31 March 2001
LONDON, May 24, 2001 -- Enodis PLC (London: ENO; NYSE: ENO) today announced
that strong management actions put business back on course but market conditions
remain difficult.
. Financial highlights
. Food Equipment sales (Pounds)419.7 million - down 9% on a like-for-
like basis, reflecting the reduction in sales at Retail together with
the deterioration in market conditions in the USA
. Food Equipment operating profit before exceptional items and goodwill
amortisation (Pounds)36.7 million - against (Pounds)32 million minimum
indicated in 23 March trading statement
. Building and Consumer Products operating profit (Pounds)7.6 million,
down (Pounds)2.6 million on sales of (Pounds)132.9 million
(Pounds)138.7 million)
. Exceptional items (Pounds)46.3 million for restructuring, settlement
of Bomar litigation, revision of accounting estimates and write-off of
financing costs
. Group profit before tax, amortisation, and exceptional items
(Pounds)18.7 million (Pounds)50.5 million)
. Net debt at 31 March 2001 (Pounds)494 million, up from (Pounds)434
million at 30 September 2000 reflecting the strengthening of the US
dollar and the funding of the Jackson acquisition
. Adjusted diluted earnings per share 6.5 p (2000: 16.9 p)
. Interim dividend 2.0 p per share (2000: 4.4 p).
. Strong management actions taken
. Simplified organisation; 10% headcount reduction and other savings
expected to benefit second half by over (Pounds)15 million: annualised
saving will be over (Pounds)30 million
. Turnaround in Food Retail well advanced, market conditions very
difficult.
. Important commercial developments
. Improved distribution channel management to leverage dealer
relationships and to facilitate our representatives selling the full
range of Enodis products
. Sharpened focus on key accounts in simple, lower-cost organisation
. Jackson acquisition adds leading dishwasher brand
. Continued investment in new product development. Cont...
. New medium-term financing in place
. Building and Consumer Products Division sale announced
. Approximately (Pounds)95 million reduction in net debt
. Group now focused exclusively on Food Equipment.
. Review of options well underway.
Peter Brooks, Chairman, said:
"These results are very disappointing. However we have made significant progress
in addressing market-related and other issues facing the Group. We have strong
businesses with good products and brands, leading market positions and committed
employees together with an experienced executive team. The actions we have taken
have strengthened the Group, leaving Enodis well placed to benefit as and when
trading conditions improve, especially in North America where we have a
significant market position.
"The Board's objectives are the restoration of shareholder value and reduction
of debt. Its review of options to achieve these objectives is progressing well.
Relationships with customers, dealers, distributors and employees are central to
the future development of the business and creation of shareholder value."
For further enquiries:
Peter Brooks Chairman 020 7304 6016
Andrew Allner Chief Financial Officer 020 7304 6016
Steve Jacobs Financial Dynamics 020 7831 3113
INTERIM REPORT TO SHAREHOLDERS
Introduction
The Group's results for the six months ended 31 March 2001 clearly reflect the
deterioration in market conditions in North America which has affected both our
Food Service Equipment and Food Retail Equipment businesses. The downturn in the
market was especially severe in Food Retail Equipment and was compounded in
Enodis' case by a store closure programme at a major account.
The results of our Building and Consumer Products Division have been impacted by
the sale process.
Comparatives are further impacted by the absence of corporate property profits,
which last year amounted to (Pounds)10.4 million in the first half. In the
second half, such profits are expected to be approximately (Pounds)7-8 million.
The results include exceptional items totalling (Pounds)46.3 million in respect
of actions taken by management to reduce costs, address accounting issues,
settle litigation and refinance the Group's debt.
Like-for-like comparisons in this document of sales and operating profit results
reflect level exchange rates and exclude the effects of acquisitions.
The strong management actions taken will result in significant benefits in the
second half and future periods.
Results
Profit before tax, goodwill amortisation and exceptional items decreased by 63%
to (Pounds)18.7 million. Foreign exchange rate movement benefited operating
profit by (Pounds)2.3 million.
In Food Equipment, operating profit before goodwill amortisation and exceptional
items decreased by 29%, with operating margins down from 12.4% to 8.7%,
primarily in the North American businesses. In Building and Consumer Products
operating profit was down 25%, with sales down 4% and operating margins down 1.7
percentage points.
Adjusted diluted earnings per share fell by 62% to 6.5 p.
Financing
Net cash flow from operating activities at (Pounds)35.0 million was 59% down on
last year. After payment of interest, dividends and capital expenditure, which
was tightly controlled, the effect of exchange rate movements and the cost of
the acquisition of Jackson, net debt at 31 March 2001 was (Pounds)493.8 million
compared to (Pounds)434.2 million at the end of the last financial year. The
sale of the Building and Consumer Product Division will result in a reduction in
net debt of approximately (Pounds)95 million.
During the period, the Group entered into new medium-term facilities to
refinance the Scotsman acquisition debt. Interest cover, before goodwill
amortisation and exceptional items, was 1.9 times compared to 3.9 times in the
comparable period. Tight cash control is a key focus for management.
Exceptional Items
The loss on ordinary activities before interest and taxation of (Pounds)12.4
million includes (Pounds)40.5 million in respect of operating exceptional items.
During the period a programme of aggressive cost reduction measures was
initiated across the Food Equipment Division. The costs associated with this
programme in the first half amounted to (Pounds)14.5 million. A reassessment of
accounting estimates generates an additional, non-cash, exceptional charge of
(Pounds)13.7 million: this arises principally from more conservative estimates
of warranty provisions following adoption of FRS 18. A further cash charge of
(Pounds)12.3 million relates to an agreement
reached, post 31 March 2001, to settle the previously disclosed Bomar-related
litigation. Finally, capitalised costs of (Pounds)5.8 million relating to the
financing of the Scotsman acquisition have been written off.
Dividend
The Board has declared an interim dividend of 2.0p per share, reduced from 4.4p
per share last year. This is consistent with the level indicated in the trading
statement made on 23 March 2001. The interim dividend will be paid on 6 July
2001 to ordinary shareholders on the register on 15 June 2001.
FOOD SERVICE EQUIPMENT - NORTH AMERICA
Our Food Service Equipment Group in North America offers the broadest range of
products in the industry, comprising cooking, warming, refrigeration,
ventilation, dishwashing and food-preparation equipment as well as ice machines
and beverage systems. Customers include quick-serve and full-service
restaurants, hotels, institutional customers and drinks manufacturers.
Market conditions deteriorated over the period as the US economy slowed. Leading
restaurant chains have significantly curtailed their new store opening and
refurbishment programmes, and many independent restaurants and hotel operators
are delaying new openings and replacement of non-essential equipment. Dealer
volumes have reduced and the previously high growth rates enjoyed by buying
groups have moderated. The market for ice machines is down some 10-15% and
demand for beverage dispensing equipment is soft. Overall, our assessment is
that the market is currently down approximately 10% compared to the prior year.
This slowdown has had a severe impact on the entire food equipment industry, as
evidenced by published results from our competitors. Against this background,
it is a measure of the strength of our business that available evidence points
to Enodis largely holding or gaining share.
Operating profit was (Pounds)23.0 million (2000: (Pounds) 28.8 million), with
margins adversely impacted by lower volumes, adverse mix and operational
difficulties at one of our ice businesses.
Firm actions have been taken to reduce costs. These include a headcount
reduction of 297 employees, which, together with discretionary spend reductions,
are expected to result in cost savings of some (Pounds)10.6 million in the
second half and (Pounds)18.0 million on an annualised basis. Operating
difficulties at one of our ice-machine plants have been addressed as evidenced
recently by "Supplier of the Year" awards from two of our major customers.
We have continued to pursue our "integrated selling" strategy - providing a full
range of products and support services to provide solutions for our customers.
There is growing evidence that this strategy is enhancing our competitive
position with major end users in harmony with our distribution partners.
We have sharpened the management of our distribution channels in three important
ways. Firstly, we have realigned our independent sales representatives in the
USA, enabling them to sell the full Enodis product range. Secondly, we are
targeting end-users more effectively through key account teams working in
concert with our dealers, as well as providing improved training and support to
consultants. Thirdly, we are co-ordinating the efforts of our distributors in
the top ten food equipment markets outside the USA.
Notable successes during the period included significant new business gains from
buying groups in the USA and achievement of "preferred vendor" status with two
major healthcare providers and a leading contract caterer. We also agreed terms
to supply Integrated Solution Packages (ISPs) to three major
customers. In addition, we have substantially increased "walk-in" cooler
business with our Food Service customers.
The acquisition of Jackson in the USA brings a leading dishwasher brand to our
product range. This product line is now being introduced to other markets, with
particular success in Canada.
We have maintained our investment in new product development at around 2-3% of
sales, focused through our Global Technology Centre in Tampa, Florida. Major
projects relate to odour removal from ventilation, online kitchen monitoring and
microwave convection ovens.
Together with the actions taken to reduce costs, these developments further
strengthen our competitive position and we believe will enable us to emerge from
the current downturn in a stronger position than we entered it.
FOOD SERVICE EQUIPMENT - EUROPE AND REST OF WORLD
Our Food Service Equipment Group in Europe and ROW comprises manufacturing
businesses in ice machines, steam combination ovens, microwave and combi-
microwave ovens, preparation equipment, beverage systems and other general food
service equipment, together with the distribution of products manufactured in
North America.
The European market accounts for 22%, of our world wide business. The Group has
growing positions in the ice-machine markets of China and Thailand and
substantial exports of ice machines and combination ovens from plants in Europe
to a network of distributors in most other world markets. Overall, the market in
Europe is broadly flat compared to the prior year.
Operating profit at (Pounds)9.2 million in the first half was slightly ahead of
the prior year reflecting the benefits of a property transaction and favourable
foreign exchange movements. The launch of the Enodis brand and full product
range in major European markets, providing customers with a wide-range of
equipment through an integrated commercial team, has been well received by key-
accounts, consultants and distributors alike.
On-going investment in new product development throughout the Region has seen
important new products launched by Convotherm, Sammic, our ice businesses and
Merrychef, where a new range of microwave products has been developed for a
large North American restaurant chain.
In the UK, we recently announced the consolidation of the internal sales office,
service and financial administration departments from all food equipment sites
on to a single site in Sheffield effective from October 2001. This programme
will provide customers with a "central service" for food equipment orders,
technical advice and sales/service support. Overhead cost in the UK operation
will reduce by over (Pounds)1million as a result.
In this region our cost savings actions will reduce headcount by almost 100 with
expected benefits in the second half of over (Pounds)1 million and almost
(Pounds)5 million on an annualised basis.
FOOD RETAIL EQUIPMENT
Our Food Retail Equipment businesses in North America and Australia manufacture
commercial refrigeration products, including display cabinets, "walk-in"
coolers, freezers and refrigeration systems, and storage units. Customers are
principally supermarkets and convenience stores.
Demand for Food Retail Equipment is currently down some 15-20% in the USA year-
on-year and, as previously announced, our US business has been further impacted
by the store-closure programme at a major account referred to above. As a
result, operating profit in the first half was (Pounds)4.5 million, down from
(Pounds)13.8 million in the comparable period.
A vigorous programme of actions has been taken to turn around this business
including the appointment of a new management team, two plant closures and the
launch of new product lines in the USA, and the restructuring of our Australian
operations.
In total the actions taken will reduce headcount in the Retail group by 539
employees, 23% of the total, and deliver second-half cost savings of (Pounds)2.7
million and full year cost savings of some (Pounds)6.0 million.
Our businesses which provide "walk-in" coolers and freezers have continued to
perform well.
The actions we have taken will lead to a significant improvement in performance
as market conditions improve.
BUILDING AND CONSUMER PRODUCTS
Magnet manufactures and sells domestic kitchen furniture and other joinery
products, including windows and doors. It also distributes bathroom products,
mainly under the C.P. Hart brand.
Market conditions were challenging in the first half. Consumer confidence was
lower than the corresponding period last year which was boosted by Millennium
optimism. The housing market also slowed, with first-half housing transactions
down every month year-on-year, ultimately averaging 13% down overall.
Against this background, the Division's turnover declined by 4% against the
prior year to (Pounds)132.9 million, and operating profit was 25% down at
(Pounds)7.6 million. These results have been adversely impacted by the sale
process described in the next paragraph.
On 23 April 2001, we announced that we had entered into an agreement for the
sale of our Building and Consumer Products Division to a subsidiary company of
Nobia AB. Separately today, we issued a circular to shareholders convening an
Extraordinary General Meeting on 11 June 2001 to approve the transaction.
FUTURE
The Group's immediate priorities are to deliver the second half plan profit and
cash including full realisation of cost savings.
Our strategy to create significant value for shareholders by continuing to build
and develop the world's leading Food Equipment group has, in the current
difficult market conditions, been refocused around a simpler organisation, lower
cost base and a more realistic time scale for implementation.
The Group has strong underlying businesses with good products and brands, strong
market positions and committed employees. Strong customer, dealer and
distributor, and employee relationships are central to its strategy for creating
value.
The Board recognises the requirement to restore shareholder value and reduce
debt. It is therefore carrying out a review of all options to determine the best
way of achieving this. Whilst good progress has been made it is too early to
draw any conclusions from this exercise.
MANAGEMENT
As previously announced, we have introduced a simplified and streamlined
organisation structure, with the three divisions reflected above. This enables
us to maintain a high level of customer focus but at a
lower cost. Our search for a new CEO is continuing and the outcome will be
announced as soon as possible. In the meantime, our interim arrangements with a
tight Executive Team are working well.
OUTLOOK
The actions we have taken to reduce costs, improve our competitive position and
address specific operational and management issues should, together with the
natural seasonality of the business, lead to a much improved second half
performance from our core Food Equipment business, subject to there being no
further material decline in levels of demand.
Next year will see the full benefit of the actions we have taken and this,
together with anticipated improvements in market conditions, should lead to a
significant recovery in profitability.
P M Brooks
Chairman
Copies of the 2001 unaudited interim results will be posted to shareholders
today as part of the letter from the Chairman convening an Extraordinary General
Meeting to approve the disposal of the Building and Consumer Products Division.
Copies are also available to the public on request to the Secretary at the
Registered Office of the Company, Washington House, 40-41 Conduit Street, London
W1S 2YQ, telephone 020 7304 6000. The interim results are posted on the
Company's web site: www.enodis.com.
Unaudited group profit and loss account
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m
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Turnover
Principal businesses 552.6 554.3 1,160.2
Property 0.9 13.7 19.9
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Continuing operations /2/ 553.5 568.0 1,180.1
Operating costs (565.9) (513.2) (1,061.8)
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Operating (loss) / profit
Principal businesses before goodwill amortisation and operating exceptional items 44.3 61.8 138.6
Operating exceptional items /4/ (40.5) - -
Amortisation of goodwill (11.7) (10.0) (21.4)
----------------------------------
Principal businesses after goodwill amortisation and operating exceptional items (7.9) 51.8 117.2
Property - 7.3 8.4
Corporate costs (4.5) (4.3) (7.3)
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Continuing operations /3/ (12.4) 54.8 118.3
Profit on disposal of property fixed assets - 3.1 3.0
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(Loss) / profit on ordinary activities before interest and taxation (12.4) 57.9 121.3
Net interest payable and similar charges (21.1) (17.4) (37.5)
Financing exceptional item /4/ (5.8) - -
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(Loss) / profit on ordinary activities before taxation (39.3) 40.5 83.8
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Profit before taxation, goodwill amortisation and operating/financing exceptional items 18.7 50.5 105.2
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Tax on (loss) / profit on ordinary activities /5/ (2.5) (5.1) (14.2)
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(Loss) / profit on ordinary activities after taxation (41.8) 35.4 69.6
Minority interests - (0.2) (0.3)
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(Loss) / profit for the period (41.8) 35.2 69.3
Equity dividends /6/ (5.0) (11.0) (33.9)
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Transfer to reserves (46.8) 24.2 35.4
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Pence Pence Pence
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Basic earnings / (loss) per share /7/ (16.8) 16.0 29.6
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Adjusted basic earnings per share /7/ 6.5 19.2 37.4
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Diluted earnings / (loss) per share 7 (16.7) 14.1 27.7
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Adjusted diluted earnings per share /7/ 6.5 16.9 35.0
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Unaudited statement of total recognised gains and losses
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Note (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
(Loss) / profit for the period (41.8) 35.2 69.3
Currency translation differences on foreign currency net investments /9/ 1.5 (0.4) 1.3
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Total recognised gains and losses in the period (40.3) 34.8 70.6
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Unaudited group balance sheet
31 March 1 April 30 September
2001 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Fixed assets
Intangible assets: Goodwill 434.5 376.0 412.7
Tangible assets 172.6 164.0 171.8
Investments 8.0 7.3 7.2
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615.1 547.3 591.7
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Current assets
Stocks 160.3 144.4 153.1
Debtors 222.3 202.3 221.1
Cash at bank and in hand 58.0 16.7 28.5
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440.6 363.4 402.7
Creditors falling due within one year
Borrowings (0.4) (65.5) (90.4)
Other creditors (281.5) (247.7) (276.9)
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Net current assets 158.7 50.2 35.4
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Total assets less current liabilities /8/ 773.8 597.5 627.1
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Financed by:
Creditors falling due after more than one year
Borrowings 549.8 356.6 366.6
Provisions for liabilities and charges 54.7 39.3 45.6
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604.5 395.9 412.2
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Capital and reserves
Called up share capital 125.0 124.8 125.0
Reserves 43.6 75.6 88.8
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Equity shareholders' funds /9/ 168.6 200.4 213.8
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Equity minority interests 0.7 1.2 1.1
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773.8 597.5 627.1
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Unaudited group cash flow statement
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Notes (Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities a 35.0 86.0 160.5
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Return on investments and servicing of finance
Interest paid (22.8) (16.8) (37.5)
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Taxation
Overseas and UK tax paid (0.9) (5.1) (10.2)
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Capital expenditure and financial investment
Payments to acquire tangible fixed assets (8.1) (17.3) (32.1)
Receipts from sale of tangible fixed assets 3.1 6.5 8.2
Payments to acquire fixed asset investments (0.1) - 0.6
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(5.1) (10.8) (23.3)
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Acquisitions and disposals
Purchase of subsidiary undertakings and minority interests 11 (25.0) (29.9) (48.2)
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(25.0) (29.9) (48.2)
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Equity dividends paid (23.3) (18.0) (28.6)
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Cash (outflow) inflow before use of liquid
resources and financing * (42.1) 5.4 12.7
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Management of liquid resources
Cash transferred from term deposits - 1.0 1.0
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Financing
Issue of shares 0.1 0.1 0.6
Redemption of CULS - (1.1) (1.1)
Additional net borrowings 62.1 1.8 0.6
Term loan (repayment) - (15.7) (32.4)
Scotsman acquisition facility (repayment) (521.1) - -
Drawings on new facility 529.8 - -
Repayment of other loans - (0.2) 19.2
Capital element of finance lease payments 0.7 (0.3) (0.7)
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71.6 (15.4) (13.8)
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Increase (decrease) in cash in the period 29.5 (9.0) (0.1)
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* Enodis Group includes as liquid resources term deposits with a maturity of
less than 90 days
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Unaudited cash flow reconciliations
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
(a) Reconciliation of operating (loss) / profit to net cash inflow from operating
activities
Operating (loss) / profit (12.4) 54.8 118.3
Operating exceptional items 40.5 - -
Depreciation 12.6 11.6 23.8
Gain on sale of fixed assets (1.7) (0.2) (0.3)
Amortisation of goodwill 11.7 10.0 21.4
(Increase) decrease in stock (2.8) 2.4 (0.5)
Decrease in debtors 1.6 11.3 6.0
(Decrease) in creditors (9.5) (6.2) (3.6)
Provisions (net) (5.0) 2.3 (4.6)
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Net cash inflow from operating activities 35.0 86.0 160.5
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(b) Reconciliation of net cash flow to movement in net debt
Increase (decrease) in net cash in the period 29.5 (9.0) (0.1)
Cash (inflow) outflow from (decrease) increase in liquid resources - (1.0) -
Loans and finance leases acquired with subsidiary undertakings - (0.8) (0.8)
Cash (inflow) outflow from capital element of finance lease payments (0.7) 0.3 0.7
Term loan repayment - 15.7 -
Repayment of other loans - 0.2 (19.2)
Repayment of Scotsman acquisition facility 521.1 - -
New facility drawings (529.8) - -
Repayment of / (additional) borrowings (62.1) (1.8) 31.8
Conversion of Loan Stock to Ordinary Shares - 93.3 93.3
Cash redemption of CULS - 1.1 1.1
Translation difference (17.6) (10.7) (42.3)
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Movement in net funds (59.6) 87.3 64.5
Net debt at start of period (434.2) (498.7) (498.7)
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Net debt at end of period (493.8) (411.4) (434.2)
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(c) Reconciliation of net debt to Balance Sheet
Cash at bank 58.0 16.7 28.5
Current borrowing (0.4) (65.5) (90.4)
Exclude current portion of deferred financing costs (0.8) (1.3) (1.2)
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Current net cash / (debt) 56.8 (50.1) (63.1)
Long term lease obligations (0.8) (0.9) (0.5)
Long term debt (549.0) (355.7) (366.1)
Exclude non current portion of deferred financing costs (0.8) (4.7) (4.5)
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Net debt at end of period (493.8) (411.4) (434.2)
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Notes to the unaudited interim results
1 Basis of Preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's financial statements for the year
ended 30 September 2000.
Following a recent reorganisation, the segmental analysis of results and assets
has been prepared in accordance with the new Group management structure. Prior
year comparatives have been restated accordingly.
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2 Turnover
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
(Restated) (Restated)
------------------------------------------------------------------------------------------------------------------------------------
Food Service North America 224.1 222.8 487.0
Food Service North America Acquisitions 10.7 - -
Food Service Europe and Rest of World 87.4 81.4 178.1
Food Retail 97.5 111.4 219.4
-----------------------------------------------
Food Equipment 419.7 415.6 884.5
Building and consumer products 132.9 138.7 275.7
Property 0.9 13.7 19.9
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Continuing operations 553.5 568.0 1,180.1
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Group turnover has benefited from favourable exchange rates by (Pounds)26.1m compared to the prior year.
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3 Operating (loss) / profit
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
(Restated) (Restated)
------------------------------------------------------------------------------------------------------------------------------------
Food Service North America 22.1 28.8 66.3
Food Service North America Acquisitions 0.9 - -
Food Service Europe and Rest of World 9.2 9.0 22.6
Food Retail 4.5 13.8 22.6
----------------------------------------------
36.7 51.6 111.5
Food Equipment goodwill amortisation (11.7) (10.0) (21.4)
-----------------------------------------------
Food Equipment 25.0 41.6 90.1
Exceptional items (40.5) - -
----------------------------------------------
(15.5) 41.6 90.1
Building and consumer products 7.6 10.2 27.1
Property - 7.3 8.4
Corporate costs (4.5) (4.3) (7.3)
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Continuing operations (12.4) 54.8 118.3
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Group operating profit has benefited from favourable exchange rates by (Pounds)2.3m compared to the prior year.
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4 Exceptional items
(Pounds)m
Restructuring costs 14.5
Revisions to working capital provisions and other exceptional warranty costs 13.7
Litigation costs 12.3
--------
Operating exceptional items 40.5
========
Financing exceptional item 5.8
========
Restructuring costs of (Pounds)14.5m comprise the costs associated with a number
of rationalisation projects including headcount savings and manufacturing
efficiency improvements announced before 31 March 2001.
Following the publication of FRS18 "Accounting Policies", the Group has
reassessed its accounting estimates for warranty provisions and provided an
additional (Pounds)8.0m. In addition, exceptional warranty costs of (Pounds)4.5m
have arisen in the period and previously capitalised development costs of
(Pounds)1.2m have been written off.
Subsequent to 31 March 2001, the Group reached agreement in the Bomar case for
payment of $17.5m ((Pounds)12.3m) in settlement of all claims. A payment of
$10.0m has been made in May 2001 with a further $7.5m due in October 2001.
During the period, the Group entered into new facilities to refinance the
Scotsman acquisition debt. The capitalised costs of the previous financing
arrangements relating primarily to arrangement and other fees totalling
(Pounds)5.8m have been written off.
--------------------------------------------------------------------------------
Notes to unaudited interim results continued
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5 Taxation
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
The tax charge for the current period comprised:
UK taxation - - (0.7)
Foreign taxation (2.5) (5.1) (13.5)
------------------------------------------------------------------------------------------------------------------------------------
(2.5) (5.1) (14.2)
------------------------------------------------------------------------------------------------------------------------------------
A tax charge has principally arisen because of profits arising in overseas countries where there are no available losses.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
6 Equity dividends
An interim dividend of 2.0p (net) per share (March 2000: 4.4p (net)) has been declared.
------------------------------------------------------------------------------------------------------------------------------------
7 Earnings /(loss) per share
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Basic earnings ((loss) / profit on ordinary activities after taxation and minority
interests) (41.8) 35.2 69.3
CULS interest - 0.1 0.1
------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings / (loss) (41.8) 35.3 69.4
------------------------------------------------------------------------------------------------------------------------------------
m m m
------------------------------------------------------------------------------------------------------------------------------------
Basic weighted average number of shares 248.8 219.8 234.0
Employee share options 0.5 1.4 1.5
Share save options 0.3 1.0 0.9
CULS - 28.6 14.3
------------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average number of shares 249.6 250.8 250.7
------------------------------------------------------------------------------------------------------------------------------------
Pence Pence Pence
------------------------------------------------------------------------------------------------------------------------------------
Basic earnings / (loss) per share (16.8) 16.0 29.6
Basic earnings per share on exceptional items 18.6 - -
Basic earnings per share on goodwill amortisation 4.7 4.6 9.1
Basic earnings per share on disposal of property fixed assets - (1.4) (1.3)
------------------------------------------------------------------------------------------------------------------------------------
Adjusted basic earnings per share 6.5 19.2 37.4
------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings / (loss) per share (16.7) 14.1 27.7
Diluted earnings per share on exceptional items 18.5 - -
Diluted earnings per share on goodwill amortisation 4.7 4.0 8.5
Diluted earnings per share on disposal of property fixed assets - (1.2) (1.2)
------------------------------------------------------------------------------------------------------------------------------------
Adjusted diluted earnings per share 6.5 16.9 35.0
------------------------------------------------------------------------------------------------------------------------------------
Notes to unaudited interim results continued
------------------------------------------------------------------------------------------------------------------------------------
8 Total assets less current liabilities
31 March 1 April 30 September
2001 2000 2000
(Pounds)m (Pounds)m (Pounds)m
(Restated) (Restated)
------------------------------------------------------------------------------------------------------------------------------------
Food Service North America 487.8 436.3 458.0
Food Service Europe 99.1 74.3 91.1
Food Retail 60.4 65.5 68.5
Building and consumer products 79.4 72.0 81.3
Property 8.8 5.9 9.1
Investments 4.5 4.7 4.8
Discontinued operations 0.1 1.0 0.1
------------------------------------------------------------------------------------------------------------------------------------
740.1 659.7 712.9
Corporate (23.1) (12.1) (22.7)
Net cash/(debt) 56.8 (50.1) (63.1)
------------------------------------------------------------------------------------------------------------------------------------
773.8 597.5 627.1
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
9 Equity shareholders' funds
Share Share Profit
Capital Premium & loss Total
(Pounds)m (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
At 1 October 2000 125.0 238.9 (150.1) 213.8
Shares issued - 0.1 - 0.1
Loss for the period - - (46.8) (46.8)
Currency realignment - - 1.5 1.5
------------------------------------------------------------------------------------------------------------------------------------
At 31 March 2001 125.0 239.0 (195.4) 168.6
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
10 Foreign currency translation
The results of subsidiary companies reporting in currencies other than the Pound
Sterling have been translated at the average rate prevailing for each month for
the 26 weeks to 31 March 2001, the weighted average exchange rate for sales and
profit being (Pounds)1=$1.461. Results to 1 April 2000 were translated at the
rate of (Pounds)1=$1.604 and full year results to September 2000 at
(Pounds)1=$1.557.
--------------------------------------------------------------------------------
11 Acquisitions
During the period, the Group acquired the entire share capital of Jackson MSC
Inc., for (Pounds)24.3m in cash including fees. Net assets of (Pounds)4.9m were
acquired. Provisional goodwill of (Pounds)19.4m has been capitalised and will be
amortised over a period of 20 years.
--------------------------------------------------------------------------------
12 Results for 2000
The accounts in this statement do not comprise full accounts within the meaning
of section 240 of the Companies Act 1985. The figures for the 52 weeks to 30
September 2000 have been extracted from the 2000 Annual Report but do not
comprise statutory accounts for that period. The audited financial statements
have been delivered to the Registrar of Companies. The Auditors made an
unqualified report on those accounts and their report did not contain any
statement under section 237 (2) or (3) of the Companies Act 1985.
The figures for the 26 weeks to 1 April 2000 were extracted from the 2000
interim statement which was reviewed but not audited.
--------------------------------------------------------------------------------
13 Events occurring after the end of the financial period
On 20 April 2001, the Group entered into an agreement for the sale of its
Building and Consumer Products division to a subsidiary company of Nobia AB. The
consideration for the sale of the division was (Pounds)114.0 million in cash,
(Pounds)20.0 million in vendor loan notes together with warrants to acquire
shares in Nobia AB. The consideration will be adjusted on a pound for pound
basis to the extent that there is a difference between the value of the net
assets of the division as at 31 March 2001 and (Pounds)83.8m. A payment of
(Pounds)10.0m will be made by the Group to Magnet Limited immediately prior to
completion in respect of pension funding.
The net profit before tax on the sale will be approximately (Pounds)25.0m and
will not be subject to a tax charge as capital losses are available.
The sale is conditional upon shareholder approval and competition clearance from
the EU. It is expected to be completed in June 2001.
--------------------------------------------------------------------------------
This press release contains "forward-looking statements," within the meaning of
the U.S. federal securities laws, that represent the Company's expectations or
beliefs regarding future events, based on currently available information,
including statements concerning its anticipated performance and plans. These
statements by their nature involve substantial risks and uncertainties, many of
which are beyond the Company's control. The Company's actual results could
differ materially from those expressed in the forward-looking statements due to
a variety of important factors. Factors that could cause the Company's results
to differ materially from its expectations include: the Company's susceptibility
to regional economic downturns, currency fluctuations, large customer order
slowdowns and other risks related to its U.S., U.K. and foreign operations; its
ability to realize cost savings from its cost reduction program; keen
competition in its fragmented and consolidating industry; and the other risk
factors and more complete descriptions of these factors found under "Risk
Factors" in the Company's Form 20-F filed with the SEC.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt as to the action you should take, you should consult your stockbroker,
bank manager, solicitor, accountant or other independent adviser authorised
under the Financial Services Act 1986 immediately.
If you have sold or otherwise transferred all of your ordinary shares in Enodis,
please send this document and the accompanying document to the purchaser or
transferee or to the stockbroker, bank or other agent through whom the sale or
transfer was effected for delivery to the purchaser or transferee.
Salomon Brothers International Limited, trading as Schroder Salomon Smith
Barney, which is regulated in the United Kingdom by The Securities and Futures
Authority Limited, is acting for Enodis and no one else in connection with the
Disposal and will not be responsible to anyone other than Enodis for providing
the protections afforded to customers of Schroder Salomon Smith Barney or for
providing advice in relation to the Disposal. Schroders is a trademark of
Schroders Holdings PLC and is used under licence by Salomon Brothers
International Limited.
________________________________________________________________________________
[LOGO OF ENODIS PLC]
Proposed disposal of the
Building and Consumer Products Division
and
Interim Results for the six months ended 31 March 2001
________________________________________________________________________________
Your attention is drawn to the letter from the Chairman of Enodis which is set
out on pages 3 to 5 of this document and recommends you to vote in favour of the
resolution to be proposed at the Extraordinary General Meeting referred to
below.
Notice of the Extraordinary General Meeting of Enodis, to be held at the offices
of Clifford Chance LLP, 200 Aldersgate Street, London EC1A 4JJ at 10.30 am, on
11 June 2001 to approve the proposed Disposal, is set out on page 38 of this
document. A form of proxy for use at the Extraordinary General Meeting is
enclosed and, to be valid, should be completed and returned as soon as possible,
but in any event so as to be received by the Company's registrars, Computershare
Services PLC, Registrars Department at PO Box 1075, Bristol BS99 3FA not later
than 10.30 am on 9 June 2001.
-------------------------------------------------------------------------------
Contents
Page
Part I: Letter from the Chairman of Enodis 3
Part II: Interim results for the six months ended March 2001 31 6
Part III: Financial information relating to the Building and Consumer Division Products 22
Part IV: Unaudited pro forma statement of net assets of the Continuing Group 24
Part V: Summary of the principal terms and conditions relating to the Disposal 28
Part VI: Additional information 30
Definitions 36
Notice of Extraordinary General Meeting 38
------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Expected Timetable of Principal Events
Latest time and date for receipt of forms of proxy................................... 10.30 am on 9 June 2001
Extraordinary General Meeting........................................................ 10.30am on 11 June 2001
Expected date for Completion.................................................................... 14 June 2001
-------------------------------------------------------------------------------------------------------------
2
Part I
Letter from the Chairman of Enodis
[LOGO OF ENODIS PLC]
(Registered in England and Wales with no.109849)
Directors: Registered office:
Peter Brooks (Chairman (non-executive)) Enodis plc
Andrew Allner (Chief financial officer) Washington House
Andrew Roake (Chief operating officer) 40-41 Conduit Street
Eryl Morris (Non-executive) London W1S 2YQ
Robert Briggs (Non-executive)
Waldemar Schmidt (Non-executive)
To Shareholders and, for information only, to participants in the Enodis Share
Option Schemes.
24 May 2001
Dear Shareholder
1. Interim Results
Enodis has today announced its interim results for the six months ended 31
March 2001. These are set out in Part II of this document.
2. Disposal of the Building and Consumer Products Division
On 23 April 2001, the Board of Enodis announced that it had reached an
agreement to sell its Building and Consumer Products Division (on a debt free,
cash free basis) to a wholly owned subsidiary of Nobia for (pound)134 million
payable on Completion (subject to certain post Completion adjustments), of
which (pound)114 million is to be satisfied in cash and (pound)20 million is to
be satisfied in the form of a vendor loan, together with warrants to acquire
Nobia shares.
In view of its size, the Disposal is conditional upon the approval of
Shareholders at an Extraordinary General Meeting. Accordingly, an EGM is to be
held on 11 June 2001 and a notice convening the EGM is set out on page 38 of
this document. The Disposal is also conditional on the receipt by Nobia of
regulatory approval from the Competition Directorate General of the EU
Commission.
The purpose of this document is to provide Shareholders with further information
on the Disposal, explain why the Board of Enodis considers the Disposal to be in
the best interests of Enodis and its Shareholders as a whole, and to recommend
that you vote in favour of the Disposal. The resolution to approve the Disposal
is set out in the notice of Extraordinary General Meeting on page 38 of this
document.
3. Information on the Building and Consumer Products Division
The Building and Consumer Products Division comprises (i) Magnet, a leading UK
manufacturer and retailer of domestic kitchen furniture and other joinery
products including windows and doors, and (ii) C.P. Hart which distributes
bathroom products. The Division has over 225 outlets throughout the UK, four
plants and employs some 2,300 people. In the year ended 30 September 2000 sales
were (pound)275.7 million and operating profits were (pound)25.3 million after
allocation of corporate costs.
As at 30 September 2000, the book value of the net assets of the Building and
Consumer Products Division, (excluding amounts due to Enodis of (pound)24.2
million) was (pound)80.3 million.
Additional financial information on the Building and Consumer Products Division
is included in Part III of this document. Shareholders should read the whole of
this document and not rely solely on the summarised information above.
3
4. Background to and reasons for the Disposal
Following the acquisition of Scotsman Industries, Inc. by Enodis in August
1999, the Board of Enodis concluded that the Building and Consumer Products
Division was no longer as core to its business as previously. The sale of the
Division will enable Enodis to focus solely on its core commercial food
equipment business which, through its broad range of "hot" and "cold" side
products, is a leading global food equipment manufacturer by turnover. The net
cash proceeds of the Disposal will be used to reduce the Group's existing debt
level.
5. Financial effects of the Disposal
An unaudited pro forma statement of net assets of the Company following the
Disposal is set out for illustrative purposes in Part IV of this document.
The sale is expected to result in a net exceptional profit over book value of
approximately (pound)25 million, which will be recorded in Enodis' results for
the year ending 30 September 2001. Due to the availability of capital losses no
tax is expected to be payable on the exceptional profit.
The cash proceeds of the Disposal (net of the vendor loan, the pensions payment
referred to in paragraph 6 below and any net asset adjustment as referred to in
paragraph 6 below) will be used to reduce the Group's indebtedness. As
illustrated in the pro forma statement of net assets in Part IV of this
document, the application of these proceeds would have reduced indebtedness
(total borrowings net of cash and excluding deferred financing costs of
(pound)1.6 million) as at 31 March 2001 from (pound)493.8 million to
(pound)400.3 million.
The loss of the Building and Consumer Products Division's contribution will be
partially offset by a reduction in the interest payable on the Company's loans
and bank facilities as a result of the reduction of the level of debt.
6. Principal terms and conditions of the Disposal
The consideration of (pound)134 million for the Division is subject to a pound
for pound adjustment to the extent that (i) there is any difference between the
value of the Division's net assets (excluding borrowings, cash and goodwill) at
31 March 2001 and (pound)83.8 million and (ii) the Division has any borrowings
or cash on its books as at Completion. The Disposal Agreement contains
commercial and tax warranties and indemnities appropriate to a transaction of
this nature. In addition, Enodis will contribute (pound)10 million to Magnet
immediately prior to Completion in respect of a shortfall in the funding of the
Magnet Group Pension Scheme.
The (pound)20 million vendor loan which forms part of the consideration for the
Division is repayable in 2009 or on a sale or public offering of Nobia, if
earlier. The loan is subordinated to Nobia's bank and mezzanine debt and
interest is payable to Enodis at 3.5 per cent. over LIBOR. In addition,
warrants representing 1 per cent. of the issued share capital of Nobia will be
issued to Enodis on Completion, together with the right for Enodis to call for
warrants representing a further 0.5 per cent. of the issued share capital of
Nobia after the first anniversary of the Completion Date and warrants
representing a further 0.5 per cent. of the issued share capital of Nobia after
the second anniversary of the Completion Date, if on each such date the vendor
loan remains outstanding. If the vendor loan is repaid to Enodis within the two
year period following Completion Enodis is entitled to receive an early
prepayment penalty of (pound)0.8 million in cash in the first year following
Completion and (pound)0.4 million in cash in the second year following
Completion. The warrants entitle Enodis to subscribe for shares in Nobia for
nil consideration. In total these warrants are estimated to have a potential
value of up to (pound)2 million.
The Disposal will be effected in accordance with the terms of the Disposal
Agreement, a summary of which is set out in Part V of this document. The only
conditions to Completion are the passing of the requisite resolution at the
EGM, notice of which is set out on page 38 of this document, and the receipt of
regulatory approval from the Competition Directorate General of the EU
Commission.
7. Current trading and Continuing Group prospects
The following statement regarding current trading and Continuing Group prospects
is set out in the interim results of Enodis for the six months ended 31 March
2001 which are set out in Part II of this document.
"The actions we have taken to reduce costs, improve our competitive position and
address specific operational and management issues should, together with the
natural seasonality of the business, lead to a much improved second half
performance for our core food equipment business, subject to there being no
further material decline in levels of demand.
Next year will see the full benefit of the actions we have taken and this,
together with anticipated improvements in market conditions, should lead to a
significant recovery in profitability."
4
8. Extraordinary General Meeting
The Disposal is conditional, inter alia, upon the approval of Shareholders and,
accordingly, a notice convening an Extraordinary General Meeting to be held at
the offices of Clifford Chance LLP located at 200 Aldersgate Street, London EC1A
4JJ at 10.30 am on 11 June 2001 is set out on page 38 of this document. At this
meeting, an ordinary resolution will be proposed to approve the terms of the
Disposal.
9. Action to be taken
Whether or not you are able to attend the meeting, please complete the
accompanying form of proxy and return it to the Company's Registrar at the
address shown on the form. Guidance as to how to fill in the form is given on
the form itself. To be valid at the Extraordinary General Meeting, the form of
proxy must be received by the Company's Registrar no later than 10.30 am on 9
June 2001. Even if you return the form of proxy, you may still attend and vote
in person at the Extraordinary General Meeting as I encourage you to do.
10. Further information
Your attention is drawn to the further information contained in Parts II to VI
of this document.
11. Recommendation
Your Directors, who have received financial advice from Schroder Salomon Smith
Barney, consider the 14. Disposal to be in the interests of the Company. In
providing advice to the Directors, Schroder Salomon Smith Barney has placed
reliance upon the Directors' commercial assessments of the Disposal.
Your Directors consider that the Disposal is in the best interests of the
Shareholders as a whole. They accordingly recommend that you vote in favour of
the resolution to be proposed at the Extraordinary General Meeting, as they
intend to do in respect of their own beneficial holdings of, in aggregate,
158,800 Enodis Shares (whether held as Enodis Shares or Enodis ADSs),
representing approximately 0.07 per cent. of the entire issued ordinary share
capital of the Company.
Yours faithfully,
/s/ Peter Brooks
Peter Brooks
Chairman
5
Part II
Interim Results for the six months ended 31 March 2001
Set out below is the full text of the interim results of Enodis for the six
months ended 31 March 2001.
"ENODIS PLC 24 May 2001
Interim results for the six months ended 31 March 2001.
Strong management actions put business back on course but market conditions
remain difficult.
. Financial highlights
. Food Equipment sales (pound)419.7 million - down 9% on alike-for
like basis, reflecting the reduction in sales at Retail together
with the deterioration in market conditions in the USA
. Food Equipment operating profit before exceptional items and
goodwill amortisation (pound)36.7 million - against (pound)32
million minimum indicated in 23 March trading statement
. Building and Consumer Products operating profit(pound)7.6
million, down(pound)2.6 million on sales of(pound)132.9 million
((pound)138.7 million)
. Exceptional items(pound)46.3 million for restructuring,
settlement of Bomar litigation, revision of accounting estimates
and write-off of financing costs
. Group profit before tax, amortisation, and exceptional items
(pound)18.7 million ((pound)50.5 million)
. Net debt at 31 March 2001 (pound)494 million, up from (pound)434
million at 30 September 2000 reflecting the strengthening of the
US dollar and the funding of the Jackson acquisition
. Adjusted diluted earnings per share 6.5p (2000: 16.9p)
. Interim dividend 2.0p per share (2000: 4.4p).
. Strong management actions taken
. Simplified organisation; 10% headcount reduction and other
savings expected to benefit second half by over(pound)15
million: annualised saving will be over(pound)30 million
. Turnaround in Food Retail well advanced, market conditions very
difficult.
. Important commercial developments
. Improved distribution channel management to leverage dealer
relationships and to facilitate our representatives selling the
full range of Enodis products
. Sharpened focus on key accounts in simple, lower-cost
organisation
. Jackson acquisition adds leading dishwasher brand
. Continued investment in new product development.
. New medium-term financing in place
. Building and Consumer Products Division sale announced
. Approximately(pound)95 million reduction in net d
. Group now focused exclusively on Food Equipment.
. Review of options well underway.
6
Peter Brooks, Chairman, said:
"These results are very disappointing. However we have made significant progress
in addressing market-related and other issues facing the Group. We have strong
businesses with good products and brands, leading market positions and committed
employees together with an experienced executive team. The actions we have taken
have strengthened the Group, leaving Enodis well placed to benefit as and when
trading conditions improve, especially in North America where we have a
significant market position.
"The Board's objectives are the restoration of shareholder value and reduction
of debt. Its review of options to achieve these objectives is progressing well.
Relationships with customers, dealers, distributors and employees are central to
the future development of the business and creation of shareholder value."
For further enquiries:
Peter Brooks Chairman 020 7304 6016
Andrew Allner Chief Financial Officer 020 7304 6016
Steve Jacobs Financial Dynamics 020 7831 3113
7
INTERIM REPORT TO SHAREHOLDERS
Introduction
The Group's results for the six months ended 31 March 2001 clearly reflect the
deterioration in market conditions in North America which has affected both our
Food Service Equipment and Food Retail Equipment businesses. The downturn in the
market was especially severe in Food Retail Equipment and was compounded in
Enodis' case by a store closure programme at a major account.
The results of our Building and Consumer Products Division have been impacted
by the sale process.
Comparatives are further impacted by the absence of corporate property profits,
which last year amounted to (pound)10.4 million in the first half. In the
second half, such profits are expected to be approximately (pound)7-8 million.
The results include exceptional items totalling (pound)46.3 million in respect
of actions taken by management to reduce costs, address accounting issues,
settle litigation and refinance the Group's debt.
Like-for-like comparisons in this document of sales and operating profit
results reflect level exchange rates and exclude the effects of acquisitions.
The strong management actions taken will result in significant benefits in the
second half and future periods.
Results
Profit before tax, goodwill amortisation and exceptional items decreased by 63%
to (pound)18.7 million. Foreign exchange rate movement benefited operating
profit by (pound)2.3 million.
In Food Equipment, operating profit before goodwill amortisation and
exceptional items decreased by 29%, with operating margins down from 12.4% to
8.7%, primarily in the North American businesses. In Building and Consumer
Products operating profit was down 25%, with sales down 4% and operating
margins down 1.7 percentage points.
Adjusted diluted earnings per share fell by 62% to 6.5p.
Financing
Net cash flow from operating activities at (pound)35.0 million was 59% down on
last year. After payment of interest, dividends and capital expenditure, which
was tightly controlled, the effect of exchange rate movements and the cost of
the acquisition of Jackson, net debt at 31 March 2001 was (pound)493.8 million
compared to (pound)434.2 million at the end of the last financial year. The
sale of the Building and Consumer Product Division will result in a reduction
in net debt of approximately (pound)95 million.
During the period, the Group entered into new medium-term facilities to
refinance the Scotsman acquisition debt. Interest cover, before goodwill
amortisation and exceptional items, was 1.9 times compared to 3.9 times in the
comparable period. Tight cash control is a key focus for management.
Exceptional Items
The loss on ordinary activities before interest and taxation of (pound)12.4
million includes (pound)40.5 million in respect of operating exceptional items.
During the period a programme of aggressive cost reduction measures was
initiated across the Food Equipment Division. The costs associated with this
programme in the first half amounted to (pound)14.5 million. A reassessment of
accounting estimates generates an additional, non-cash, exceptional charge of
(pound)13.7 million: this arises principally from more conservative estimates
of warranty provisions following adoption of FRS 18. A further cash charge of
(pound)12.3 million relates to an agreement reached, post 31 March 2001, to
settle the previously disclosed Bomar-related litigation. Finally, capitalised
costs of (pound)5.8 million relating to the financing of the Scotsman
acquisition have been written off.
Dividend
The Board has declared an interim dividend of 2.0p per share, reduced from 4.4p
per share last year. This is consistent with the level indicated in the trading
statement made on 23 March 2001. The interim dividend will be paid on 6 July
2001 to ordinary shareholders on the register on 15 June 2001.
8
FOOD SERVICE EQUIPMENT - NORTH AMERICA
Our Food Service Equipment Group in North America offers the broadest range of
products in the industry, comprising cooking, warming, refrigeration,
ventilation, dishwashing and food-preparation equipment as well as ice machines
and beverage systems. Customers include quick-serve and full-service
restaurants, hotels, institutional customers and drinks manufacturers.
Market conditions deteriorated over the period as the US economy slowed.
Leading restaurant chains have significantly curtailed their new store opening
and refurbishment programmes, and many independent restaurants and hotel
operators are delaying new openings and replacement of non-essential equipment.
Dealer volumes have reduced and the previously high growth rates enjoyed by
buying groups have moderated. The market for ice machines is down some 10-15%
and demand for beverage dispensing equipment is soft. Overall, our assessment
is that the market is currently down approximately 10% compared to the prior
year.
This slowdown has had a severe impact on the entire food equipment industry, as
evidenced by published results from our competitors. Against this background,
it is a measure of the strength of our business that available evidence points
to Enodis largely holding or gaining share.
Operating profit was (pound)23.0 million (2000: (pound) 28.8 million), with
margins adversely impacted by lower volumes, adverse mix and operational
difficulties at one of our ice businesses.
Firm actions have been taken to reduce costs. These include a headcount
reduction of 297 employees, which, together with discretionary spend
reductions, are expected to result in cost savings of some (pound)10.6 million
in the second half and (pound)18.0 million on an annualised basis. Operating
difficulties at one of our ice-machine plants have been addressed as evidenced
recently by "Supplier of the Year" awards from two of our major customers.
We have continued to pursue our "integrated selling" strategy - providing a
full range of products and support services to provide solutions for our
customers. There is growing evidence that this strategy is enhancing our
competitive position with major end users in harmony with our distribution
partners.
We have sharpened the management of our distribution channels in three
important ways. Firstly, we have realigned our independent sales
representatives in the USA, enabling them to sell the full Enodis product
range. Secondly, we are targeting end-users more effectively through key
account teams working in concert with our dealers, as well as providing
improved training and support to consultants. Thirdly, we are co-ordinating the
efforts of our distributors in the top ten food equipment markets outside the
USA.
Notable successes during the period included significant new business gains
from buying groups in the USA and achievement of "preferred vendor" status with
two major healthcare providers and a leading contract caterer. We also agreed
terms to supply Integrated Solution Packages (ISPs) to three major customers.
In addition, we have substantially increased "walk-in" cooler business with our
Food Service customers.
The acquisition of Jackson in the USA brings a leading dishwasher brand to our
product range. This product line is now being introduced to other markets, with
particular success in Canada.
We have maintained our investment in new product development at around 2-3% of
sales, focused through our Global Technology Centre in Tampa, Florida. Major
projects relate to odour removal from ventilation, online kitchen monitoring and
microwave convection ovens.
Together with the actions taken to reduce costs, these developments further
strengthen our competitive position and we believe will enable us to emerge from
the current downturn in a stronger position than we entered it.
FOOD SERVICE EQUIPMENT - EUROPE AND REST OF WORLD
Our Food Service Equipment Group in Europe and ROW comprises manufacturing
businesses in ice machines, steam combination ovens, microwave and
combi-microwave ovens, preparation equipment, beverage systems and other general
food service equipment, together with the distribution of products manufactured
in North America.
The European market accounts for 22%, of our world wide business. The Group has
growing positions in the ice-machine markets of China and Thailand and
substantial exports of ice machines and combination ovens from plants in Europe
to a network of distributors in most other world markets. Overall, the market in
Europe is broadly flat compared to the prior year.
9
Operating profit at (pound)9.2 million in the first half was slightly ahead of
the prior year reflecting the benefits of a property transaction and favourable
foreign exchange movements. The launch of the Enodis brand and full product
range in major European markets, providing customers with a wide-range of
equipment through an integrated commercial team, has been well received by
key-accounts, consultants and distributors alike.
On-going investment in new product development throughout the Region has seen
important new products launched by Convotherm, Sammic, our ice businesses and
Merrychef, where a new range of microwave products has been developed for a
large North American restaurant chain.
In the UK, we recently announced the consolidation of the internal sales office,
service and financial administration departments from all food equipment sites
on to a single site in Sheffield effective from October 2001. This programme
will provide customers with a "central service" for food equipment orders,
technical advice and sales/service support. Overhead cost in the UK operation
will reduce by over (pound)1million as a result.
In this region our cost savings actions will reduce headcount by almost 100
with expected benefits in the second half of over (pound)1 million and almost
(pound)5 million on an annualised basis.
FOOD RETAIL EQUIPMENT
Our Food Retail Equipment businesses in North America and Australia manufacture
commercial refrigeration products, including display cabinets, "walk-in"
coolers, freezers and refrigeration systems, and storage units. Customers are
principally supermarkets and convenience stores.
Demand for Food Retail Equipment is currently down some 15-20% in the USA
year-on-year and, as previously announced, our US business has been further
impacted by the store-closure programme at a major account referred to above. As
a result, operating profit in the first half was (pound)4.5 million, down from
(pound)13.8 million in the comparable period.
A vigorous programme of actions has been taken to turn around this business
including the appointment of a new management team, two plant closures and the
launch of new product lines in the USA, and the restructuring of our Australian
operations.
In total the actions taken will reduce headcount in the Retail group by 539
employees, 23% of the total, and deliver second-half cost savings of (pound)2.7
million and full year cost savings of some (pound)6 million.
Our businesses which provide "walk-in" coolers and freezers have continued to
perform well.
The actions we have taken will lead to a significant improvement in performance
as market conditions improve.
BUILDING AND CONSUMER PRODUCTS
Magnet manufactures and sells domestic kitchen furniture and other joinery
products, including windows and doors. It also distributes bathroom products,
mainly under the C.P. Hart brand.
Market conditions were challenging in the first half. Consumer confidence was
lower than the corresponding period last year which was boosted by Millennium
optimism. The housing market also slowed, with first-half housing transactions
down every month year-on-year, ultimately averaging 13% down overall.
Against this background, the Division's turnover declined by 4% against the
prior year to (pound)132.9 million, and operating profit was 25% down at
(pound)7.6 million. These results have been adversely impacted by the sale
process described in the next paragraph.
On 23 April 2001, we announced that we had entered into an agreement for the
sale of our Building and Consumer Products Division to a subsidiary company of
Nobia AB. Separately today, we issued a circular to shareholders convening an
Extraordinary General Meeting on 11 June 2001 to approve the transaction.
FUTURE
The Group's immediate priorities are to deliver the second half plan profit and
cash including full realisation of cost savings.
Our strategy to create significant value for shareholders by continuing to
build and develop the world's leading Food Equipment group has, in the current
difficult market conditions, been refocused around a simpler organisation,
lower cost base and a more realistic time scale for implementation.
10
The Group has strong underlying businesses with good products and brands, strong
market positions and committed employees. Strong customer, dealer and
distributor, and employee relationships are central to its strategy for creating
value.
The Board recognises the requirement to restore shareholder value and reduce
debt. It is therefore carrying out a review of all options to determine the best
way of achieving this. Whilst good progress has been made it is too early to
draw any conclusions from this exercise.
MANAGEMENT
As previously announced, we have introduced a simplified and streamlined
organisation structure, with the three divisions reflected above. This enables
us to maintain a high level of customer focus but at a lower cost. Our search
for a new CEO is continuing and the outcome will be announced as soon as
possible. In the meantime, our interim arrangements with a tight Executive Team
are working well.
OUTLOOK
The actions we have taken to reduce costs, improve our competitive position and
address specific operational and management issues should, together with the
natural seasonality of the business, lead to a much improved second half
performance from our core Food Equipment business, subject to there being no
further material decline in levels of demand.
Next year will see the full benefit of the actions we have taken and this,
together with anticipated improvements in market conditions, should lead to a
significant recovery in profitability.
P M Brooks
Chairman
Copies of the 2001 unaudited interim results will be posted to shareholders
today as part of the letter from the Chairman convening an Extraordinary
General Meeting to approve the disposal of the Building and Consumer Products
Division.
Copies are also available to the public on request to the Secretary at the
Registered Office of the Company, Washington House, 40-41 Conduit Street,
London W1S 2YQ, telephone 020 7304 6000. The interim results are posted on the
Company's web site: www.enodis.com.
11
Unaudited group profit and loss account
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Notes (pound)m (pound)m (pound)m
-------------------------------------------------------------------------------------------------------------------
Turnover
Principal businesses 552.6 554.3 1,160.2
Property 0.9 13.7 19.9
----------- ----------- ------------
Continuing operations 2 553.5 568.0 1,180.1
Operating costs (565.9) (513.2) (1,061.8)
----------- ----------- ------------
Operating (loss)/profit
Principal businesses before goodwill amortisation and
operating exceptional items 44.3 61.8 138.6
Operating exceptional items 4 (40.5) - -
Amortisation of goodwill (11.7) (10.0) (21.4)
----------- ----------- ------------
Principal businesses after goodwill amortisation and
operating exceptional items (7.9) 51.8 117.2
Property - 7.3 8.4
Corporate costs (4.5) (4.3) (7.3)
----------- ----------- ------------
Continuing operations 3 (12.4) 54.8 118.3
Profit on disposal of property fixed assets - 3.1 3.0
----------- ----------- ------------
(Loss)/profit on ordinary activities before interest
and taxation (12.4) 57.9 121.3
Net interest payable and similar charges (21.1) (17.4) (37.5)
Financing exceptional item 4 (5.8) - -
----------- ----------- ------------
(Loss)/profit on ordinary activities before taxation (39.3) 40.5 83.8
-------------------------------------------------------------------------------------------------------------------
Profit before, taxation, goodwill amortisation and
operating/financing exceptional items 18.7 50.5 105.2
-------------------------------------------------------------------------------------------------------------------
Tax on (loss)/profit on ordinary activities 5 (2.5) (5.1) (14.2)
----------- ----------- ------------
(Loss)/profit on ordinary activities after taxation (41.8) 35.4 69.6
Minority interests - (0.2) (0.3)
----------- ----------- ------------
(Loss)/profit for the period (41.8) 35.2 69.3
Equity dividends 6 (5.0) (11.0) (33.9)
----------- ----------- ------------
Transfer to reserves (46.8) 24.2 35.4
=========== =========== ============
Pence Pence Pence
Basic earnings/(loss) per share 7 (16.8) 16.0 29.6
----------- ----------- ------------
Adjusted basic earnings per share 7 6.5 19.2 37.4
----------- ----------- ------------
Diluted earnings/(loss) per share 7 (16.7) 14.1 27.7
----------- ----------- ------------
Adjusted diluted earnings per share 7 6.5 16.9 35.0
=========== =========== ============
Unaudited statement of total recognised gains and losses
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Note (pound)m (pound)m (pound)m
-------------------------------------------------------------------------------------------------------------------
(Loss) / profit for the period (41.8) 35.2 69.3
Currency translation differences on foreign currency
net investments 9 1.5 (0.4) 1.3
----------- ----------- ------------
Total recognised gains and losses in the period (40.3) 34.8 70.6
=========== =========== ============
12
Unaudited group balance sheet
31 March 1 April 30 September
2001 2000 2000
Notes (pound)m (pound)m (pound)m
--------------------------------------------------------------------------------------------------------
Fixed assets
Intangible assets: Goodwill 434.5 376.0 412.7
Tangible assets 172.6 164.0 171.8
Investments 8.0 7.3 7.2
-------- ------- ------------
615.1 547.3 591.7
-------- ------- ------------
Current assets
Stocks 160.3 144.4 153.1
Debtors 222.3 202.3 221.1
Cash at bank and in hand 58.0 16.7 28.5
-------- ------- ------------
440.6 363.4 402.7
Creditors falling due within one year
Borrowings (0.4) (65.5) (90.4)
Other creditors (281.5) (247.7) (276.9)
-------- ------- ------------
Net current assets 158.7 50.2 35.4
-------- ------- ------------
Total assets less current liabilities 8 773.8 597.5 627.1
======== ======= ============
Financed by:
Creditors falling due after more than
one year
Borrowings 549.8 356.6 366.6
Provisions for liabilities and charges 54.7 39.3 45.6
-------- ------- ------------
604.5 395.9 412.2
-------- ------- ------------
Capital and reserves
Called up share capital 125.0 124.8 125.0
Reserves 43.6 75.6 88.8
-------- ------- ------------
Equity shareholders' funds 9 168.6 200.4 213.8
-------- ------- ------------
Equity minority interests 0.7 1.2 1.1
-------- ------- ------------
773.8 597.5 627.1
======== ======= ============
13
Unaudited group cash flow statement
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
Notes (pound)m (pound)m (pound)m
---------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities
a 35.0 86.0 160.5
----------- ----------- ------------
Return on investments and servicing of
finance
Interest paid (22.8) (16.8) (37.5)
----------- ----------- ------------
Taxation
Overseas and UK tax paid (0.9) (5.1) (10.2)
----------- ----------- ------------
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (8.1) (17.3) (32.1)
Receipts from sale of tangible fixed assets 3.1 6.5 8.2
Payments to acquire fixed asset investments (0.1) - 0.6
----------- ----------- ------------
(5.1) (10.8) (23.3)
----------- ----------- ------------
Acquisitions and disposals
Purchase of subsidiary undertakings and
minority interests 11 (25.0) (29.9) (48.2)
----------- ----------- ------------
(25.0) (29.9) (48.2)
----------- ----------- ------------
Equity dividends paid (23.3) (18.0) (28.6)
----------- ----------- ------------
Cash (outflow) inflow before use of liquid
resources and financing* (42.1) 5.4 12.7
----------- ----------- ------------
Management of liquid resources
Cash transferred from term deposits - 1.0 1.0
----------- ----------- ------------
Financing
Issue of shares 0.1 0.1 0.6
Redemption of CULS - (1.1) (1.1)
Additional net borrowings 62.1 1.8 0.6
Term loan (repayment) - (15.7) (32.4)
Scotsman acquisition facility (repayment) (521.1) - -
Drawings on new facility 529.8 - -
Repayment of other loans - (0.2) 19.2
Capital element of finance lease payments 0.7 (0.3) (0.7)
----------- ----------- ------------
71.6 (15.4) (13.8)
----------- ----------- ------------
Increase (decrease) in cash in the period 29.5 (9.0) (0.1)
=========== =========== ============
*Enodis Group includes as liquid resources term deposits with a maturity of
less than 90 days
14
Unaudited cash flow reconciliations
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
------------------------------------------------------------------------------------------------------------------
(a) Reconciliation of operating (loss)/profit to net cash
in flow from operating activities
Operating (loss)/profit (12.4) 54.8 118.3
Operating exceptional items 40.5 - -
Depreciation 12.6 11.6 23.8
Gain on sale of fixed assets (1.7) (0.2) (0.3)
Amortisation of goodwill 11.7 10.0 21.4
(Increase) decrease in stock (2.8) 2.4 (0.5)
Decrease in debtors 1.6 11.3 6.0
(Decrease) in creditors (9.5) (6.2) (3.6)
Provisions (net) (5.0) 2.3 (4.6)
------------- ----------- ------------
Net cash inflow from operating activities 35.0 86.0 160.5
============= =========== ============
(b) Reconciliation of net cash flow to movement in net debt
Increase (decrease) in net cash in the period 29.5 (9.0) (0.1)
Cash (inflow) outflow from (decrease) in liquid
resources - (1.0) -
Loans and finance leases acquired subsidiary
undertakings - (0.8) (0.8)
Cash (inflow) outflow from capital element finance lease
payments (0.7) 0.3 0.7
Term loan repayment - 15.7 -
Repayment of other loans - 0.2 (19.2)
Repayment of Scotsman acquisition facility 521.1 - -
New facility drawings (529.8) - -
Repayment of / (additional) borrowings (62.1) (1.8) 31.8
Conversion of Loan Stock to Ordinary Shares - 93.3 93.3
Cash redemption of CULS - 1.1 1.1
Translation difference (17.6) (10.7) (42.3)
------------- ----------- ------------
Movement in net funds (59.6) 87.3 64.5
Net debt at start of period (434.2) (498.7) (498.7)
------------- ----------- ------------
Net debt at end of period (493.8) (411.4) (434.2)
============= =========== ============
(c) Reconciliation of net debt to Balance Sheet
Cash at bank 58.0 16.7 28.5
Current borrowing (0.4) (65.5) (90.4)
Exclude current potion of deferred financing costs (0.8) (1.3) (1.2)
------------- ----------- ------------
Current net cash/(debt) 56.8 (50.1) (63.1)
Long term lease obligations (0.8) (0.9) (0.5)
Long term debt (549.0) (355.7) (366.1)
Exclude non current portion of deferred financing costs (0.8) (4.7) (4.5)
------------- ----------- ------------
Net debt at end of period (493.8) (411.4) (434.2)
============= =========== ============
15
Notes to the unaudited interim results
1. Basis of Preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's financial statements for the
year ended 30 September 2000.
Following a recent reorganisation, the segmental analysis of results and
assets has been prepared in accordance with the new Group management
structure. Prior year comparatives have been restated accordingly.
2. Turnover
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
(Restated) (Restated)
---------------------------------------------------------------------------------------------
Food Service North America 224.1 222.8 487.0
Food Service North America Acquisitions 10.7 - -
Food Service Europe and Rest of World 87.4 81.4 178.1
Food Retail 97.5 111.4 219.4
----------- ----------- ------------
Food Equipment 419.7 415.6 884.5
Building and consumer products 132.9 138.7 275.7
Property 0.9 13.7 19.9
----------- ----------- ------------
Continuing operations 553.5 568.0 1,180.1
=========== =========== ============
Group turnover benefited from favourable exchange rates by (pound)26.1m
compared to the prior year.
3. Operating (loss)/profit
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
(Restated) (Restated)
---------------------------------------------------------------------------------------------
Food Service North America 22.1 28.8 66.3
Food Service North America Acquisitions 0.9 - -
Food Service Europe and Rest of World 9.2 9.0 22.6
Food Retail 4.5 13.8 22.6
----------- ----------- ------------
36.7 51.6 111.5
Food Equipment goodwill amortisation (11.7) (10.0) (21.4)
----------- ----------- ------------
Food Equipment 25.0 41.6 90.1
Exceptional items (40.5) - -
----------- ----------- ------------
(15.5) 41.6 90.1
Building and consumer products 7.6 10.2 27.1
Property - 7.3 8.4
Corporate costs (4.5) (4.3) (7.3)
----------- ----------- ------------
Continuing operations (12.4) 54.8 118.3
=========== =========== ============
Group operating profit has benefited from favourable exchange rates by
(pound)2.3m compared to the prior year.
16
4. Exceptional items
(pound)m
---------------------------------------------------------------------------------------------------------
Restructuring costs 14.5
Revisions to working capital provisions and other exceptional warranty costs 13.7
Litigation costs 12.3
--------
Operating exceptional items 40.5
========
Financing exceptional item 5.8
========
Restructuring costs of (pound)14.5m comprise the costs associated with a
number of rationalisation projects including headcount savings and
manufacturing efficiency improvements announced before 31 March 2001.
Following the publication of FRS18 "Accounting Policies", the Group has
reassessed its accounting estimates for warranty provisions and provided
an additional (pound)8.0m. In addition, exceptional warranty costs of
(pound)4.5m have arisen in the period and previously capitalised
development costs of (pound)1.2m have been written off.
Subsequent to 31 March 2001, the Group reached agreement in the Bomar
case for payment of $17.5m ((pound)12.3m) in settlement of all claims. A
payment of $10.0m has been made in May 2001 with a further $7.5m due in
October 2001.
During the period, the Group entered into new facilities to refinance the
Scotsman acquisition debt. The capitalised costs of the previous
financing arrangements relating primarily to arrangement and other fees
totalling (pound)5.8m have been written off.
5. Taxation
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
--------------------------------------------------------------------------------------------------------
The tax charge for the current period comprised:
UK taxation - - (0.7)
Foreign taxation (2.5) (5.1) (13.5)
---------- ---------- -----------
(2.5) (5.1) (14.2)
========== ========== ===========
A tax charge has principally arisen because of profits arising in
overseas countries where there are no available losses.
6. Equity dividends
An interim dividend of 2.0p (net) per share (March 2000: 4.4p (net)) has
been declared.
17
7. Earnings /(loss) per share
26 weeks to 26 weeks to 52 weeks to
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
----------------------------------------------------------------------------------------------------------------------
Basic earnings ((loss)/profit on ordinary activities
after taxation and minorty interests) (41.8) 35.2 69.3
CULS interest - 0.1 0.1
----------- ----------- ------------
Diluted earnings/(loss) (41.8) 35.3 69.4
=========== =========== ============
m m m
----------------------------------------------------------------------------------------------------------------------
Basic weighted average number of shares 248.8 219.8 234.0
Employee share options 0.5 1.4 1.5
Share save options 0.3 1.0 0.9
CULS - 28.6 14.3
----------- ----------- ------------
Diluted weighted average number of shares 249.6 250.8 250.7
=========== =========== ============
Pence Pence Pence
----------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share (16.8) 16.0 29.6
Basic earnings per share on exceptional items 18.6 - -
Basic earnings per share on goodwill amortisation 4.7 4.6 9.1
Basic earnings per share on disposal of property
fixed assets - (1.4) (1.3)
----------- ----------- ------------
Adjusted basic earnings per share 6.5 19.2 37.4
----------- ----------- ------------
Diluted earnings / (loss) per share (16.7) 14.1 27.7
Diluted earnings per share on exceptionl items 18.5 - -
Diluted earnings per share on goodwill amortisation 4.7 4.0 8.5
Diluted earnings per share on disposal of property
fixed assets - (1.2) (1.2)
----------- ----------- ------------
Adjusted diluted earnings per share 6.5 16.9 35.0
=========== =========== ============
18
8. Total assets less current liabilities
31 March 1 April 30 September
2001 2000 2000
(pound)m (pound)m (pound)m
(Restated) (Restated)
----------------------------------------------------------------------------------------------------------
Food Service North America 487.8 436.3 458.0
Food Service Europe 99.1 74.3 91.1
Food Retail 60.4 65.5 68.5
Building and consumer products 79.4 72.0 81.3
Property 8.8 5.9 9.1
Investments 4.5 4.7 4.8
Discontinued operations 0.1 1.0 0.1
-------- ---------- ------------
740.1 659.7 712.9
Corporate (23.1) (12.1) (22.7)
Net cash/(debt) 56.8 (50.1) (63.1)
-------- ---------- ------------
773.8 597.5 627.1
======== ========== ============
9. Equity shareholders' funds
Share Share Profit
Capital Premium & loss Total
(pound)m (pound)m (pound)m (pound)m
----------------------------------------------------------------------------------------------------------
At 1 October 2000 125.0 238.9 (150.1) 213.8
Shares issued - 0.1 - 0.1
Loss for the period - - (46.8) (46.8)
Currency realignment - - 1.5 1.5
-------- -------- -------- --------
At 31 March 2001 125.0 239.0 (195.4) 168.6
======== ======== ======== ========
10. Foreign currency translation
The results of subsidiary companies reporting in currencies other than
the Pound Sterling have been translated at the average rate prevailing
for each month for the 26 weeks to 31 March 2001, the weighted average
exchange rate for sales and profit being (pound)1=$1.461. Results to 1
April 2000 were translated at the rate of (pound)1=$1.604 and full year
results to September 2000 at (pound)1=$1.557.
11. Acquisitions
During the period, the Group acquired the entire share capital of Jackson
MSC Inc., for (pound)24.3m in cash including fees. Net assets of (pound)4.9m
were acquired. Provisional goodwill of (pound)19.4m has been capitalised and
will be amortised over a period of 20 years.
12. Results for 2000
The accounts in this statement do not comprise full accounts within the
meaning of section 240 of the Companies Act 1985.
The figures for the 52 weeks to 30 September 2000 have been extracted from
the 2000 Annual Report but do not comprise statutory accounts for that
period. The audited financial statements have been delivered to the
Registrar of Companies. The Auditors made an unqualified report on those
accounts and their report did not contain any statement under section 237
(2) or (3) of the Companies Act 1985.
The figures for the 26 weeks to 1 April 2000 were extracted from the 2000
interim statement which was reviewed but not audited.
19
13. Events occurring after the end of the financial period
On 20 April 2001, the Group entered into an agreement for the sale of
its Building and Consumer Products division to a subsidiary company of
Nobia AB. The consideration for the sale of the division was
(pound)114.0 million in cash, (pound)20.0 million in vendor loan notes
together with warrants to acquire shares in Nobia AB. The consideration
will be adjusted on a pound for pound basis to the extent that there is
a difference between the value of the net assets of the division as at
31 March 2001 and (pound)83.8m. A payment of (pound)10.0m will be made
by the Group to Magnet Limited immediately prior to completion in
respect of pension funding.
The net profit before tax on the sale will be approximately (pound)25.0m
and will not be subject to a tax charge as capital losses are available.
The sale is conditional upon shareholder approval and competition
clearance from the EU. It is expected to be completed in June 2001.
20
INDEPENDENT REVIEW REPORT TO ENODIS plc
Introduction
We have been instructed by the company to review the financial information
set out on pages 12 to 20 and we have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by the directors. The
Listing Rules require that the accounting policies and presentation applied
to the interim figures should be consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists
principally of making enquiries of group management and applying analytical
procedures to the financial information and underlying financial data and
based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope
than an audit performed in accordance with Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the
twenty-six weeks ended 31 March 2001.
Deloitte and Touche Chartered Accountants
Hill House
1 Little New Street, London EC4A 3TR
24 May 2001"
21
Part III
Financial Information Relating to the
Building and Consumer Products Division
1. Basis of preparation
The Building and Consumer Products Division has historically not been audited
on a stand alone basis. Consequently the financial information on the Building
and Consumer Products Division set out below has been extracted without
material adjustment from consolidation schedules prepared for the published
audited consolidated financial statements of Enodis for the 52 week period
ended 26 September 1998, the 53 week period ended 2 October 1999 and the 52
week period ended 30 September 2000.
The auditors, Deloitte & Touche, Chartered Accountants and Registered Auditors,
have given audit opinions on the consolidated financial statements of Enodis in
respect of each of the three financial years ended 30 September 2000 which were
unqualified and did not contain any statement under section 237(2) to (4) of
the Companies Act 1985 (as amended).
The financial information set out below does not constitute full statutory
financial statements within the meaning of section 240 of the Companies Act
1985 (as amended).
2. Profit and loss accounts
Set out below are the profit and loss accounts of the Building and Consumer
Products Division for the 52 week period ended 26 September 1998, the 53 week
period ended 2 October 1999 and the 52 week period ended 30 September 2000.
1998 1999 2000
(pound)m (pound)m (pound)m
--------------------------------------------------------------------------------
Turnover 250.5 265.6 275.7
Cost of sales (166.2) (171.7) (176.5)
------- ------- -------
Gross profit 84.3 93.9 99.2
Other operating expenses (67.6) (71.0) (73.9)
------- ------- -------
Operating profit 16.7 22.9 25.3
Net interest payable (1.7) (0.6) (2.5)
------- ------- -------
Profit on ordinary activities before taxation 15.0 22.3 22.8
Tax on profit on ordinary activities (0.2) -- --
------- ------- -------
Profit on ordinary activities after taxation 14.8 22.3 22.8
======= ======= =======
The results for the 52 week period ended 26 September 1998 were prepared prior
to any allocation of corporate cost. The results for the 52 week period ended 26
September 1998 are therefore not strictly comparable to the results presented
for the 53 week period ended 2 October 1999 and the 52 week period ended 30
September 2000. The operating profit for the 53 week period ended 2 October 1999
and for the 52 week period ended 30 September 2000 are net of corporate cost
allocations of (pound)1.1 million and (pound)1.8 million respectively. Based on
the same method of allocation as in the 52 week period to 30 September 2000,
(pound)2.2 million of corporate costs would have been allocated to the Building
and Consumer Products Division for the 52 week period ended 26 September 1998.
22
3. Balance sheet
Set out below is the balance sheet of the Building and Consumer Products
Division as at 30 September 2000:
2000
(pound)m
(Note 1)
----------------------------------------------------------------------------
Fixed assets
Tangible assets 52.2
--------
Current assets
Stocks 45.1
Debtors 35.0
--------
80.1
Creditors falling due within one year (51.0)
--------
Net current assets 29.1
--------
Total assets less current liabilities 81.3
========
Financed by:
Provisions for liabilities and charges 1.0
Borrowings-amounts due to Enodis 24.2
Share capital and reserves/Net assets 56.1
--------
81.3
========
(1) Any borrowings due to Enodis by the Building and Consumer Products Division
at the Completion Date will be repaid to Enodis at Completion as part of the
(pound)134 million consideration.
23
Part IV
Unaudited pro forma statement of net assets
of the Continuing Group
Introduction
Set out on page 25 is the unaudited pro forma statement of net assets as at 31
March 2001 (the "pro forma financial information"), which has been prepared on
the assumption that the disposal of the Building and Consumer Products Division
as described in Part V of this document had occurred as at that date.
Because of the nature of pro forma financial information it may not give a true
picture of the Continuing Group's financial position and has been prepared for
illustrative purposes only.
The unaudited pro forma statement of net assets as at 31 March 2001 has been
extracted without material adjustment from the consolidation schedules used in
preparing the unaudited balance sheet of Enodis as set out in its consolidated
interim results for the 26 week period ended 31 March 2001, as set out in Part
II of this document, with further adjustments in accordance with paragraph
12.29 of the Listing Rules.
The unaudited pro forma financial information does not take any account of
trading results or movements in working capital and cash flows of Enodis or the
Building and Consumer Products Division since 31 March 2001.
24
Unaudited pro forma statement of net assets as at 31 March 2001
Adjustments
------------------------------
Building and Disposal
Consumer proceeds net
Products of taxation Pro forma
Enodis Division and net assets
31 March 31 March transaction 31 March
2001 2001 costs 2001
(Note 1) (Note 2) (Notes 3 to 6)
(pound)m (pound)m (pound)m (pound)m
Fixed assets
Intangible asset: goodwill 434.5 - - 434.5
Tangible assets 172.6 (51.7) - 120.9
Investments 8.0 - - 8.0
-------- ------------ ------------- ----------
615.1 (51.7) - 563.4
-------- ------------ ------------- ----------
Current assets and liabilities
Stocks 160.3 (42.9) - 117.4
Debtors 222.3 (30.4) 20.0 211.90
Cash at bank and in hand 58.0 (4.0) 4.0 58.0
-------- ------------ ------------- ----------
440.6 (77.3) 24.0 387.3
-------- ------------ ------------- ----------
Creditors falling due within one year
Borrowings (0.4) - - (0.4)
Other creditors (281.5) 45.6 - (235.9)
-------- ------------ ------------- ----------
(281.9) 45.6 - (236.3)
-------- ------------ ------------- ----------
Net current assets/(liabilities) 158.7 (31.7) 24.0 151.0
-------- ------------ ------------- ----------
Total assets less current liabilities 773.8 (83.4) 24.0 714.4
======== ============ ============= ==========
Financed by:
Creditors falling due after more than
one year: Borrowings 549.8 - (93.5) 456.3
Provisions for liabilities and charges 54.7 (1.1) - 53.6
-------- ------------ ------------- ----------
604.5 (1.1) (93.5) 509.9
-------- ------------ ------------- ----------
Amounts due to Enodis - (19.8) 19.8 -
Equity shareholders' funds 168.6 (62.5) 97.7 203.8
Equity minority interests 0.7 - - 0.7
-------- ------------ ------------- ----------
Pro forma net aassets 169.3 (82.3) 117.5 204.5
-------- ------------ ------------- ----------
773.8 (83.4) 24.0 714.4
======== ============ ============= ==========
25
Notes:
1. The net assets of Enodis have been extracted without material adjustment from
the balance sheet as set out in the unaudited consolidated interim results of
Enodis for the 26 week period ended 31 March 2001.
2. The unaudited net assets of the Building and Consumer Products Division have
been extracted without material adjustment from consolidation schedules
prepared for the purposes of the unaudited consolidated interim results of
Enodis for the 26 week period ended 31 March 2001.
3. The estimated net disposal proceeds of (pound)113.5 million consist of the
following items:
(pound)million
Sale consideration 134.0
Pension fund payment (10.0)
Estimated cash transaction costs (5.0)
Provisional net asset adjustment (5.5)
-------
113.5
=======
No value has been attributed to the warrants in the share capital of Nobia
to be issued to Enodis at and after Completion. (pound)93.5 million of the
proceeds will be applied to reduce borrowings and (pound)20.0 million will
be added to debtors (which represents the vendor loan note).
4. Due to the availability of tax losses no tax is expected to be paid on the
exceptional profit.
5. The net inter-company balance between the Building and Consumer Products
Division and the Continuing Group at 31 March 2001 was (pound)19.8 million
of borrowings and (pound)4.0 million of cash. These have been excluded from
the net assets to be disposed of.
6. Negative goodwill previously credited to reserves of (pound)4.5 million will
be added to the profit on Disposal. This will have no impact on shareholders'
funds.
7. Provisions for costs directly attributable to the Disposal will be charged
against the profit calculated at the Completion Date. These provisions have
not been reflected in the pro forma net assets at 31 March 2001.
26
LETTER FROM DELOITTE & TOUCHE
[LOGO]
Hill House
1 Little New Street
London EC4A 3TR
The Directors
Enodis plc
Washington House
40-41 Conduit Street
London W1S 2YQ
Salomon Brothers International Limited
(trading as Schroder Salomon Smith Barney)
Victoria Plaza
111 Buckingham Palace Road
London SW1W 0SB
24 May 2001
Dear Sirs
Enodis plc ("the Company ")
We report on the unaudited pro forma statement of net assets ("the pro forma
financial information") set out in Part IV of the Circular dated 24 May 2001
("the Circular") issued by Enodis plc. The pro forma financial information has
been prepared for illustrative purposes only to provide information about how
the proposed disposal of the Building and Consumer Products Division might have
affected the financial information presented.
Responsibilities
It is the responsibility solely of the Directors of the Company to prepare the
pro forma financial information in accordance with paragraph 12.29 of the
Listing Rules of the UK Listing Authority ("the Listing Rules").
It is our responsibility to form an opinion, as required by the Listing Rules,
on the pro forma financial information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the pro forma financial
information beyond that owed to those to whom our reports were addressed by us
at the dates of their issue.
Basis of opinion
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards and the Bulletin 1998/8 "Reporting on pro forma financial
information pursuant to the Listing Rules" issued by the Auditing Practices
Board. Our work, which involved no independent examination of any of the
underlying financial information, consisted primarily of comparing the
unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the pro forma financial
information with the Directors of the Company.
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis
stated;
(b) such basis is consistent with the accounting policies of the Company; and
(c) the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 12.29 of the Listing Rules.
Yours faithfully
Deloitte & Touche
Chartered Accountants
27
Part V
Summary of the Principal Terms and Conditions
Relating to the Disposal
The Purchaser, a wholly owned subsidiary of Nobia, has agreed to acquire the
Building and Consumer Products Division on a debt free/cash free basis for a
consideration of (pound)134 million payable on Completion (subject to post
Completion adjustment as detailed below), of which (pound)114 million is payable
in cash and (pound)20 million is in the form of a vendor loan, together with
warrants to acquire shares in Nobia. Nobia has agreed to guarantee all of the
Purchaser's obligations under the Disposal Agreement.
The vendor loan is repayable in 2009 or on a sale or public offering of Nobia
if earlier. The loan is subordinated to Nobia's bank and mezzanine debt and
interest is payable to Enodis at 3.5 per cent. over LIBOR.
Warrants representing 1 per cent. of the issued share capital of Nobia will be
issued to Enodis on Completion, together with the right for Enodis to call for
warrants representing a further 0.5 per cent. of the issued share capital of
Nobia after the first anniversary of the Completion Date and warrants
representing a further 0.5 per cent. of the issued share capital of Nobia after
the second anniversary of the Completion Date, if on each such date the vendor
loan remains outstanding. If the vendor loan is repaid to Enodis within the two
year period following Completion Enodis is entitled to receive an early
prepayment penalty of (pound)0.8 million in cash in the first year following
Completion and (pound)0.4 million in cash in the second year following
Completion. In total these warrants are estimated to have a potential value of
up to (pound)2 million. The warrants entitle Enodis to subscribe for shares in
Nobia for nil consideration. It is the intention of Enodis to retain these
warrants for investment purposes.
In addition:
(i) following a post Completion audit, the consideration will be increased on
a pound for pound basis to the extent that net assets (excluding
borrowings, cash and goodwill) at 31 March 2001 exceed (pound)83.8
million or reduced on a pound for pound basis to the extent that such net
assets are below (pound)83.8 million. Any such increase in the
consideration will be made by increasing the amount of the vendor loan
and any such decrease will be made by Enodis repaying such amount of the
cash consideration. There are no maximum or minimum limits to any such
increase or decrease;
(ii) all balances between the Division and the Continuing Group will be
settled at the Completion Date out of the cash consideration;
(iii) the cash consideration will be increased by the amount of any cash and
reduced by the amount of any third party borrowings remaining on the
books of the Division at the Completion Date;
(iv) the Purchaser is to assume the net profits of the Division as from (but
excluding) 31 March 2001; and
(v) Enodis will contribute (pound)10 million to Magnet immediately prior to
Completion in respect of a shortfall in the funding of the Magnet Group
Pension Scheme.
The Disposal Agreement contains certain warranties and indemnities from Enodis
in relation to the Division. In particular, Enodis has given an indemnity to the
Purchaser for certain specified environmental and property matters up to an
aggregate cap of (pound)3 million for 3 years from the Completion Date, together
with an indemnity for unknown environmental matters up to an aggregate cap of
(pound)2 million for 6 years from the Completion Date. There is also a customary
tax deed of indemnity given by Enodis in favour of the Purchaser.
Claims for breach of any warranty related to taxation and claims under the tax
deed of indemnity must be made within seven years of the Completion Date. All
other claims for breach of warranty must be made within two years of the
Completion Date.
The maximum amount which may be recovered by the Purchaser for any claims under
the Disposal Agreement is an amount equal to the consideration, following post
Completion adjustment. A claim may only be made by the Purchaser under the
warranties in the event that the value of such claim (or the aggregate value of
all similar claims) exceeds (pound)10,000 and that the aggregate value of all
such claims exceeds (pound)1 million in which event the whole amount may be
claimed and not just the excess.
28
Completion is conditional upon the approval of the Shareholders at the EGM and
receipt by Nobia of confirmation from the Competition Directorate General of the
EU Commission that it does not intend to initiate proceedings or make a
referral. It is expected that the relevant confirmation will be received by 28
May 2001.
In the event that the Disposal does not complete due to the Purchaser's or
Nobia's failure to meet their respective Completion obligations under the
Disposal Agreement, the Purchaser has agreed to pay Enodis (pound)10 million in
liquidated damages. A letter of credit from Svenska Handelsbanken has been
obtained as security for the payment of the (pound)10 million.
29
Part VI
Additional Information
1. Responsibility statement
The Directors of Enodis, whose names are set out below, accept responsibility
for the information contained in this document. To the best of the knowledge
and belief of the Directors (who have taken reasonable care to ensure that such
is the case), the information contained in this document is in accordance with
the facts and does not omit anything likely to affect the import of such
information.
The Directors are:
Peter Brooks (Chairman (non-executive))
Andrew Allner (Chief Financial Officer)
Andrew Roake (Chief Operating Officer)
Eryl Morris (Non-Executive)
Robert Briggs (Non-Executive)
Waldemar Schmidt (Non-Executive)
The business address of all of the Directors is Washington House, 40-41 Conduit
Street, London W1S 2YQ.
2. Directors and other interests
(a) Interests in shares
The interests as at 22 May 2001 (being the latest practicable date prior to
the publication of this document) of each Director in securities of the
Company, as have been notified to the Company pursuant to sections 324 or
328 of the Act, or are required to be entered in the register of Directors'
interests maintained under section 325 of the Act, or which are interests
of a connected person of a Director which a would, if the connected person
were a Director, be required to be so notified or entered and the existence
of which is known to or could with reasonable diligence be ascertained by
that Director, are shown below (all of which are held beneficially) and all
of which are individually and in total less than three per cent. of the
entire issued share capital of Enodis:
Enodis Shares
represented
by Enodis
Director Enodis Shares ADSs
Peter Brooks 20,000 -
Andrew Allner 4,500 -
Andrew Roake 100,000 10,000
Eryl Morris 20,000 -
Robert Briggs - 2,000
Waldemar Schmidt 2,300 -
Andrew Roake holds options to acquire Enodis Shares under certain of the
Executive Schemes, each of which has been granted for nil consideration,
details of which are set out below:
Date from
which Latest expiry
Enodis Shares under option Exercise price exercisable date
254,802 187.5p 28.11.00 28.11.07
37,935 180.0p 17.11.01 17.11.08
90,197 314.0p 24.11.02 24.11.09
77,640 322.0p 03.07.03 03.07.10
Pursuant to the requirements of the Act, Andrew Allner, as well as all
other UK employees, is deemed to be interested in the Enodis Shares held by
the trustees of the Company's 1993 Executive Share Option Scheme. As at 22
May 2001, that interest was in 1,269,341 Enodis Shares in total, being 0.51
per cent. of the entire issued share capital of Enodis.
30
Save as disclosed above, no Director nor any person connected (within the
meaning of section 346 of the Act) with a Director has any beneficial
interests in the share capital of Enodis or of any of its subsidiary
undertakings.
(b) Directors' interest in transactions
No Director has or has had any interest in any transaction which is or was
of an unusual nature, contains or contained unusual terms or which is or
was significant to the business of the Enodis Group and which was effected
by any member of the Enodis Group during the current or immediately
preceding financial year, or during any earlier financial year and which
remains in any respect outstanding or unperformed.
(c) Directors' service agreements
Enodis Corporation, a subsidiary of the Company, employs Andrew Roake under
a service agreement dated 9 December 1997. The agreement has no fixed term
but may be terminated by Enodis Corporation on 12 months' notice and by Mr
Roake on two months' notice. In the event of a termination without cause
following a change of control of Enodis before 31 March 2002, Mr Roake is
entitled to his basic salary for 2 years from the date of termination. Mr
Roake currently receives a salary of $535,000 ((pound)374,597) per annum.
In addition, Mr Roake is eligible to receive a bonus for the current year
equal to twice gross annual salary if (i) certain earnings targets for
Enodis are achieved and (ii) a share price of (pound)2.00 following the
announcement of Enodis' full year results is achieved. He is also entitled
to receive other benefits, such as pension benefits, the cost of private
health insurance, life assurance, use of a company car and use of a mobile
phone. The annual value of these other benefits for the year ended 30
September 2000 was $13,710 ((pound)9,599) and is not expected to be
materially different in the current year.
Enodis has also agreed to grant Mr Roake an option under the 2001 Executive
Share Option Scheme, with a value of twice his annual base salary, based on
an exercise price of (pound)1.81 per Enodis Share. If the price of the
Enodis Shares increases before the date of grant, Mr Roake is entitled upon
exercise of the options to the difference between the actual exercise price
and (pound)1.81 per Enodis Share. If there is a change of control of Enodis
prior to the date of grant, Mr Roake will receive a cash payment of the
amount that would have been paid to him if he had been granted and had
exercised the option at an exercise price of (pound)1.81 per Enodis Share
and had sold the shares at the purchase price paid by the acquiror.
Enodis employs Andrew Allner under a service agreement dated 20 October
2000. The agreement has no fixed term but may be terminated by the Company
on 12 months' notice and by Mr Allner on 3 months' notice. If Enodis
terminates Mr Allner's employment without cause or there is a change of
control of Enodis within the first 18 months of Mr Allner's employment with
Enodis, Mr Allner is entitled to a payment equal to 95 per cent. of his
basic salary (and 95 per cent of additional salary payable in lieu of
pensions contributions (as described below) in the case of termination, if
the Board agrees; and 95 per cent. of his bonus in the case of change of
control) for one year from the date of termination. Mr Allner currently
receives a basic salary of (pound)245,000 per annum together with a further
amount equal to 27 per cent. of basic salary in lieu of membership of the
Company's pension arrangements for Directors.
In addition, Mr Allner is eligible to receive a special bonus based on the
price of Enodis Shares after the preliminary announcement of the annual
results for the financial year ending 30 September 2001, of (pound)5,000
for each 1 pence that the share price then exceeds 100 pence per Enodis
Share, or, if there is a change of control of Enodis prior to the
preliminary announcement, (pound)5,000 for each 1 pence that the purchase
price exceeds 100 pence per Enodis Share at the time any offer for the
entire issued share capital of Enodis is declared wholly unconditional,
subject to a minimum of (pound)250,000.
Enodis has also agreed to grant to Mr Allner an option under the 2001
Executive Share Option Scheme, on the same terms as the option granted to
Mr Roake as referred to above. Mr Allner is also entitled to other
benefits, such as the cost of private health insurance, life assurance, use
of a company car and use of a mobile phone. The estimated annual value of
these other benefits is expected to be approximately (pound)19,637.
Neither Mr Roake nor Mr Allner are entitled to any other commission or
profit sharing arrangements. Save as disclosed in this paragraph 2(c),
there are no existing or proposed Directors' service contracts. The
aggregate remuneration of the Directors will not be varied as a consequence
of the Disposal.
31
(d) Directors' letters of appointment
The Company has entered into letters of appointment with each of the non-
executive Directors. Mr Brooks was appointed pursuant to a letter of
appointment dated 21 May 1998. The terms of his appointment were recently
amended by a letter dated 10 April 2001 pursuant to which Mr Brooks agreed
to increase his time commitment to the Company until such date as a new
Chief Executive Officer is appointed or until either party gives to the
other four weeks' notice in writing to terminate this temporary arrangement
and to revert to the previous arrangement. Mr Brooks receives a fee of
(pound)210,000 per annum in respect of this revised arrangement. Mr Morris
and Mr Schmidt each receive a fee of (pound)32,500 per annum pursuant to
letters of appointment dated 13 July 1998 and 27 January 2000 respectively
(as amended). Mr Briggs receives a fee of (pound)27,500 pursuant to a
letter of appointment dated 21 July 2000. Each of the non-executive
directors has been appointed for a proposed initial period of five years.
However, this is not a fixed term and none of them is entitled to any
compensation for early termination. Each of the non-executive directors is
entitled to claim expenses but receives no other benefits.
3. Substantial interests in shares
Save as disclosed below, the Company is not aware of any person who, directly or
indirectly, had an interest in three per cent. or more of the issued share
capital of the Company as at 22 May 2001 (being the latest practicable date
prior to the publication of this document):
Percentage of
issued Enodis
Shareholder Enodis Shares Share Capital
Harris Associates L.P. 25,979,600 10.40
Standard Life Group 9,435,317 3.78
Bank of New York Nominees 9,288,080 3.71
4. Material contracts
(a) Continuing Group
The only contracts, other than contracts entered into in the ordinary
course of business, which have been entered into by any member of the
Continuing Group (i) within the two years immediately preceding the date of
this document which are or may be material or (ii) which contain any
provision under which any member of the Continuing Group has any obligation
or entitlement which is or may be material to the Continuing Group as at
the date of this document are as follows:
(i) the Disposal Agreement;
(ii) an inter-creditor deed dated 20 April 2001 between (1) Nobia and
certain of its subsidiaries (2) certain financial institutions
acting as senior lenders (3) Enodis (4) Svenska Handlesbanken AB
(publ) (as facility agent) (5) Intermediate Capital Group PLC as
agent for the mezzanine lenders (6) Svenska Handlesbanken AB (publ)
as security agent which, inter alia, provides that the vendor loan
of (pound)20 million granted to Enodis pursuant to the Disposal
Agreement is subordinated to Nobia's existing senior and mezzanine
debt;
(iii) a facility agreement dated 12 March 2001 between (1) Enodis and
certain subsidiaries (2) Salomon Brothers International Limited
("Salomon Brothers") and The Royal Bank of Scotland plc ("RBS") and
(3) RBS (as amended on 20 April 2001 and 22 May 2001) pursuant to
which RBS and Salomon Brothers acted as arrangers of the facility
and RBS acted as agent for certain banks (the "Banks"). Pursuant to
the terms of the agreement, the Banks have agreed to extend to
Enodis a (pound)400 million revolving credit facility for a period
of five years commencing on 12 March 2001 and a (pound)200 million
revolving credit facility for a period of 364 days commencing on 22
May 2001 which may be converted at the option of Enodis on the 364th
day following 22 May 2001 into term loans with a repayment date of
22 May 2003. Interest is charged on amounts borrowed at a rate
equivalent to LIBOR, the applicable margin and mandatory costs. The
applicable margin is to be determined according to the leveraged
ratio of the Continuing Group and ranges from 0.75 per cent. above
LIBOR to 1.5 per cent. above LIBOR;
(iv) a settlement agreement dated 14 May 2001 between (1) International
Minerals and Resources, S.A. ("IMR") (2) International Shipping
Company, S.A ("ISL") (3) S Katz (4) Bomar Resources Inc. (5) Bomar
Resources, Inc. (6) Bomar Resources Holdings, Inc and (7) Enodis
pursuant to which Enodis agreed to pay a total of $17.5 million to
IMR and ISR in final settlement of certain
32
claims related to Bomar Resources Inc., a former indirect subsidiary
of Enodis. Of the $17.5 million, $10 million was paid on 14 May 2001
and $7.5 million will be payable on 1 October 2001;
(v) an agreement dated 9 November 2000 between (1) Ecolab Inc and (2)
Enodis Corporation pursuant to which Enodis Corporation purchased
the entire issued shares of common stock of Jackson MSC Inc for a
total consideration of (pound)23.7 million. The agreement contains
warranties in favour of Enodis Corporation which survive for a
period of eighteen months from the completion date (other than
warranties in respect of certain tax matters which survive for a
period of four years from the completion date and warranties in
respect of the shares being acquired which survive for the
applicable statute of limitations). Enodis Corporation may only
claim for breach of warranty if its losses exceed $500,000 in total
(in which case it may only claim for the excess above $500,000),
subject to a maximum cap on liability of $7,500,000;
(vi) a deposit agreement dated 11 July 2000 between (1) the Company (2)
Bank of New York and (3) all owners and holders from time to time of
Enodis ADRs pursuant to which Bank of New York acts as depositary
and registrar for the Enodis ADRs. Generally, the depositary will
issue and register ADRs as requested against the deposit of Enodis
Shares with its London or corporate trust office and upon payment of
fees, expenses and taxes. The depositary will also deliver the
underlying Enodis Shares as requested against the deposit of Enodis
ADRs for cancellation and upon payment of fees, expenses and taxes;
(vii) a merger agreement dated 1 July 1999 between (1) Welbilt Corporation
(now known as Enodis Corporation) (2) Berisford Acquisition
Corporation and (3) Scotsman Industries Inc ("Scotsman") pursuant
to which Berisford Acquisition Corporation merged with Scotsman. The
purchase price of each share in Scotsman was $33.00 and the total
cost of the acquisition (including assumed debt) was $791.5 million.
The period for buyer representation and warranty claims under the
merger agreement has expired. A continuing obligation still exists
under which Enodis Corporation is to ensure that directors' and
officers' liability insurance continues to be maintained in respect
of Scotsman directors and officers until 13 August 2005.
(b) Building and Consumer Products Division
Other than contracts entered into in the ordinary course of business, the
Building and Consumer Products Division has not entered into any contracts
(i) within the two years immediately preceding the date of this document
which are or may be material or (ii) which contain any provision under
which any member of the Building and Consumer Products Division has any
obligation or entitlement which is or may be material to the Building and
Consumer Products Division at the date of this document.
5. Litigation
(a) Continuing Group
(i) The Continuing Group is aware of the following legal proceedings
which may have a significant effect on the financial position of the
Continuing Group. Enodis Corporation has been named in a number of
lawsuits throughout the United States in which the plaintiffs seek
to hold it liable for the alleged obligations of its former
subsidiary, Consolidated Industries Corp. of Lafayette, Indiana
("Consolidated") by reason of Consolidated's alleged design and
manufacture of some 870,000 defective home furnaces. Consolidated's
alleged liability in respect of these furnaces is potentially in the
range of $35 million to $600 million. Enodis Corporation sold
Consolidated to an unrelated party in 1998. The plaintiffs all
contend that Enodis Corporation is the alter ego of Consolidated and
therefore liable for its debts. The plaintiffs are also seeking to
recover approximately $30 million of Consolidated's revenues during
the years 1987 to 1998 that were transferred to Enodis Corporation
for various reasons. The issue of whether Consolidated and/or Enodis
Corporation has insurance coverage for some or all of these
contingent liabilities is also the subject of litigation. The
plaintiffs in these actions who are seeking to hold Enodis
Corporation accountable for the liabilities of Consolidated include
Daniel L. Freeland, in his capacity as trustee of the Chapter 7
Estate of Consolidated, the Trane Company, a division of America
Standard, Amana, LLC, and Janet Pearce, on behalf of a class of
homeowners claiming to be entitled to have their furnaces replaced
free of charge. Enodis Corporation has thoroughly investigated these
claims and has been advised that they are utterly without merit and
is defending them vigorously. In the event of an
33
outcome adverse to Enodis Corporation, it is currently unclear to
what extent, if any, the liability of Enodis Corporation would be
covered by insurance.
(ii) The Continuing Group is aware of the following legal proceedings
(which have now been settled as set out below) which could have had
a significant effect on the financial position of the Continuing
Group during the twelve months preceding the date of the document.
In 1996 Bomar Resources Holdings Inc. ("BRHI"), among others,
brought an action against the Company in the U.S. Federal District
Court for the Southern District of New York based on an indemnity
that the Company gave in connection with the 1988 sale of its former
subsidiary, Bomar Resources Inc. ("Bomar"), to BRHI's predecessors.
In September 1999, the jury found the Company liable to indemnify
BRHI, and judgment was entered against it in August 2000 for $1.8
million plus interest and for 50 per cent. of any future costs and
damages actually paid by BRHI as a result of a separate action in
New York federal court against Bomar brought by International
Mineral and Resources, S.A. ("IMR") ("the IMR federal case"),
concerning Bomar's interference with IMR's contract to purchase a
shipping vessel in 1987. The Company appealed the judgment, and BRHI
and Bomar cross-appealed. In addition, IMR and a related entity
appealed against the district court's decision denying their motion
to intervene in the action post-judgment.
Separately, in October 1999, judgment was entered against Bomar and
other defendants in the IMR federal case, holding Bomar liable to
IMR in the principal amount of $24.5 million, plus interest from
1988. This amount was subsequently reduced to $19.75 million plus
interest.
In January 2000, IMR and a related entity commenced proceedings
against the Company, BRHI and others in the New York State court.
The Company has been informed that in December 2000 or early January
2001 Bomar and BRHI entered into a settlement with IMR. In
connection with the settlement, BRHI consented to the entry of a
judgment against it and in favour of IMR in the state court action
in the total amount of $44.4 million.
The Company has entered into a settlement agreement dated 14 May
2001 in relation to both cases described above pursuant to which
$17.5 million is payable by the Company to IMR and ISR. Further
details of the settlement agreement are set out in paragraph
4(a)(iv) of this Part VI.
(iii) Save as disclosed above, there are no legal or arbitration
proceedings and, so far as Enodis is aware, no such proceedings are
pending or threatened which may have or have had in the recent past
(including at least the twelve months immediately preceding the date
of this document) a significant effect on the financial position of
the Continuing Group.
(b) Building and Consumer Products Division
There are no legal or arbitration proceedings and, no such proceedings are
pending or threatened which may or have had in the recent past (including
at least the twelve months immediately preceding the date of this document)
a significant effect on the financial position of the Building and Consumer
Products Division.
6. Working Capital
The Company is of the opinion that, taking into account available bank and other
facilities and the net proceeds of the Disposal, the Continuing Group has
sufficient working capital for its present requirements, that is for at least
the next twelve months from the date of this document.
7. Miscellaneous
(a) Schroder Salomon Smith Barney has given and has not withdrawn its written
consent to the issue of this document with the inclusion herein of the
references to its name in the form and context in which they appear.
(b) Deloitte & Touche has given and has not withdrawn its written consent to
the inclusion within this document of its reports and the references to its
name in the form and context in which they appear.
(c) Save as disclosed in the statement on current trading and Continuing Group
prospects in paragraph 7 of Part I of this document, there has been no
significant change in the trading or financial position of the Continuing
Group since 31 March 2001, the date to which the most recent financial
information was prepared which was included in the interim results of
Enodis.
34
(d) There has been no significant change in the trading or financial position
of the Building and Consumer Products Division since 30 September 2000, the
date to which the most recent audited financial information was prepared.
(e) This document has been prepared in accordance with the Listing Rules for
distribution to Enodis Shareholders. Although it will be available in the
US it is not subject to, and has not been prepared accordance with the
rules of the US Securities and Exchange Commission.
8. Documents available for inspection
Copies of the following documents may be inspected at the registered office of
the Company and at the offices Clifford Chance LLP, 200 Aldersgate Street,
London EC1A 4JJ during usual business hours on any weekday (Saturdays and public
holidays excepted) from the date of this document until the conclusion of the
Extraordinary General Meeting and any adjournment thereof:
(a) the memorandum and articles of association of the Company;
(b) the audited consolidated accounts of Enodis for the 53 week period ended 2
October 1999 and the week period ended 30 September 2000;
(c) the unaudited interim results for the six months ended 31 March 2001 set
out in Part II of this document
(d) the audited accounts of the statutory entities comprising the Building and
Consumer Products Division the 53 week period ended 2 October 1999 and the
52 week period ended 30 September 2000;
(e) the report of Deloitte & Touche in relation to the pro forma statement of
net assets set out in Part IV this document;
(f) the Directors' service agreements referred to in paragraph 2(c) above;
(g) the letters of appointment of the non-executive Directors referred to in
paragraph 2(d) above;
(h) the material contracts referred to in paragraph 4 above;
(i) the consent letters referred to in paragraphs 7(a) and 7(b) above; and
(j) this document.
24 May 2001
35
Definitions
In this document and the form of proxy enclosed herewith, the following
definitions shall have the following meanings, unless the context otherwise
requires:
"Building and Consumer Products the businesses of Magnet and C.P. Hart
Division" or "Division"
"C.P. Hart" C.P. Hart & Sons Limited, an indirect
of subsidiary Enodis
"Clifford Chance LLP" Clifford Chance Limited Liability
Partnership
"Company's Registrars" Computershare Services PLC, Registrars
Department, PO Box 82, Caxton House,
Redcliffe Way, Bristol BS99 3FA
"Completion" completion of the Disposal
"Completion Date" the date of Completion
"Continuing Group" the Enodis Group excluding the Building
and Consumer Products Division
"Directors" or "Board" the directors of Enodis
"Disposal" the proposed disposal by Enodis of the
Building and Consumer Products Division
"Disposal Agreement" the conditional agreement for the sale
of the Building and Consumer Products
Division between Enodis, the Purchaser
and Nobia dated 20 April 2001
"EGM" or "Extraordinary the extraordinary general meeting of
General Meeting" Enodis due to be held at 10.30 am on
11 June 2001
"Enodis" or "Company" Enodis plc
"Enodis ADRs" the receipts evidencing the Enodis ADSs
"Enodis ADSs" American Depositary Shares each
representing four Enodis Shares
"Enodis Group" or "Group" Enodis and its subsidiary undertakings
"Enodis Share Option Schemes" the Executive Schemes and the Sharesave
Schemes
"Enodis Shareholders" the holders of Enodis Shares
or "Shareholders"
"Enodis Shares" ordinary shares of 50p each in the
capital of Enodis
"Executive Schemes" the Enodis 1984 Executive Share Option
Scheme, the, Enodis 1993 Executive Share
Option Scheme, the Enodis 1995 Executive
Share Option Scheme and the Enodis 2001
Executive Share Option Scheme
"LIBOR" the London Inter-Bank Offered Rate for
deposits in sterling as shown on the
page which displays the British Bankers
Association interest settlement rate on
the Dow Jones Market Service at
approximately 11 am London time on the
first day for an interest period
"Listing Rules" the listing rules of the UK Listing
Authority, made under Section 142 of the
Financial Services Act 1986
"Magnet" Magnet Limited, an indirect subsidiary
of Enodis
"Nobia" Nobia AB
"Purchaser" Inhoco 2297 Limited, a wholly owned
subsidiary of Nobia
36
"Sharesave Schemes" the Enodis 1984 SAYE Scheme and the
Enodis 1992 Sharesave Scheme
"Schroder Salomon Smith Barney" Salomon Brothers International Limited
trading as Schroder Salomon Smith Barney
"UK Listing Authority" the Financial Services Authority in its
capacity as the competent authority for
the purposes of Part IV of the Financial
Services Act 1986
Unless otherwise stated, amounts denominated in US dollars have been translated
into pounds sterling at the rate of $1.4282 for every (pound)1.00, being the
exchange rate prevailing at the close of business on 22 May 2001 (being the
latest practicable date prior to publication of this document), as quoted in the
Financial Times on 23 May 2001.
37
Enodis plc
Registered No: 109849
Notice of Extraordinary General Meeting
NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of the Company will
be held at 10.30 am on 11 June 2001 at the offices of Clifford Chance LLP, 200
Aldersgate Street, London EC1A 4JJ for the purpose of considering and, if
thought fit, passing the following resolution which will be proposed as an
Ordinary Resolution.
ORDINARY RESOLUTION
THAT the proposed disposal by the Company of the Building and Consumer Products
Division be and is hereby approved on the terms and conditions set out in the
circular to Enodis Shareholders dated 24 May 2001 and in the disposal agreement
dated 20 April 2001 between the Company, Inhoco 2297 Limited and Nobia AB with
such non material amendments thereto as the directors of the Company (or any
duly constituted committee thereof) may consider appropriate.
Date: 24 May 2001
Registered office: BY ORDER OF THE BOARD
Washington House D R Hooper
40-41 Conduit Street Secretary
London
W1S 2YQ
___________
Notes:
1. A member entitled to attend and vote at the meeting is also entitled to
appoint a proxy to attend and, on a poll, vote instead of him. The proxy
need not be a member of the Company. A form is enclosed for the use of
members unable to attend the meeting.
2. To be effective, the proxy form and any authority under which it is
executed (or a notarially certified copy of such authority) must be
deposited at the offices of the Company's Registrars, not less than 48
hours before the time appointed for holding the meeting or any adjourned
meeting to which it relates, or (in the case of a poll taken otherwise than
at or on the same day as the meeting or adjourned meeting) for the taking
of the poll at which it is to be used. Deposit of the proxy form does not
prevent a member attending and voting in person at the meeting or an
adjournment of the meeting or on a poll.
3. In accordance with Regulation 34 of the Uncertificated Securities
Regulations 1995, only those members entered on the register of members of
the Company as at 6.00 pm on 9 June 2001 shall be entitled to attend or
vote at the meeting in respect of the number of shares registered in their
name at that time. Changes to entries on the register of members after 6.00
pm on 9 June 2001 shall be disregarded in determining the rights of any
persons to attend or vote at the meeting.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENODIS PLC
May 24, 2001
By: /s/ Andrew J. Allner
---------------------------
Name: Andrew J. Allner
Title: Chief Financial Officer