Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
REPORT OF
FOREIGN PRIVATE ISSUER
Pursuant
to Rule 13a-16 or 15d-16
Under the
Securities Exchange Act of 1934
For
the month of May 2005
Commission
File Number 1-15032
Enodis
plc
(Company’s
name in English)
Washington
House, 40-41 Conduit Street
London,
W1S 2YQ, United Kingdom
(Address
of principal executive office)
Indicate
by check mark whether the Company files or will file annual reports under cover
of Form 20-F or Form 40-F.
Form
20-F: x Form
40-F: o
Indicate
by check mark if the Company is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1):
Yes:
o No: x
Indicate
by check mark if the Company is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7):
Indicate
by check mark whether the Company, 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.
If “Yes”
is marked, indicate below the file number assigned to the Company in connection
with Rule 12g3-2(b): 82-________.
Explanatory
Notes:
This
report includes the text of Management’s Discussion and Analysis of Financial
Condition and Results of Operations for Enodis plc (the “Company”) concerning
the 26 weeks ended April 2, 2005. This report, including the materials
incorporated herein, 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. The forward-looking
statements, by their nature, involve 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, including unfavorable changes in the price of
commodities or raw materials; consolidation or loss of large customers; adverse
changes in customer purchasing patterns; competitive pricing pressures; the
Company’s ability to successfully innovate, develop and market new products;
currency fluctuations; the outcome of lawsuits against the Company; the
Company’s ability to recognize deferred tax assets; and other risks related to
the Company’s U.S., U.K. and foreign operations. A more complete description of
the Company’s risk factors is included under "Risk Factors" in the Company’s
Annual Report on Form 20-F which was filed with the SEC during December
2004.
****************************************************
On May
17, 2005, Enodis plc released an
announcement regarding its financial results for the 26 weeks ended April 2,
2005. That announcement is incorporated herein by this reference, and the full
text of the announcement is attached as Exhibit 99.1 to this report.
****************************************************
Also on
May 17, 2005, Enodis plc released an announcement regarding a capital
restructuring program including, among other things, a proposed capital
reduction to create distributable reserves to enable the Company to pay
dividends, the termination of the Company’s US ADR program, delisting of the
Company’s securities from the NYSE and the Company’s tender offer and consent
solicitation for the repurchase of its senior Notes (see below). That
announcement is incorporated herein by this reference, and the full text of the
announcement is attached as Exhibit 99.2 to this report.
****************************************************
Also on
May 17, 2005, Enodis
plc released an announcement regarding the commencement of its cash tender offer
to purchase its outstanding £100 million of 10-3/8% senior notes due 2012 and
solicitation of consents to amendments to the note indenture (the "Tender
Offer"). That announcement is incorporated herein by this reference, and the
full text of the announcement is attached as Exhibit 99.3 to this report. On the
same day, the Company issued an Offer to Purchase and Consent Solicitation
Statement to its senior note holders regarding the Tender Offer. That offer and
consent solicitation is incorporated herein by this reference, and the full text
of the document is attached as Exhibit 99.4 to this report. On May 18, 2005 the
Company intends to publish a notice in d'Wort, as
required by the Luxembourg Stock Exchange, on which the senior notes are listed,
regarding the Tender Offer. That notice is incorporated herein by this
reference, and the full text of the notice is attached as Exhibit 99.5 to this
report.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
You
should read this discussion in conjunction with our half yearly financial
statements included with this document, as well as our audited Fiscal 2004
financial statements and the discussions in Item 3, Item 5, Item 8 and Item 11
of our Annual Report on Form 20-F for Fiscal 2004.
Our
financial statements are prepared in accordance with U.K. GAAP, which differs
from U.S. GAAP. A summary of the adjustments to retained profit/(loss) for the
period, required when reconciling the amounts recorded in the consolidated
financial statements to the corresponding amounts in accordance with U.S. GAAP,
is presented in Note 9 to the financial statements included with this
document.
Throughout
this document, the 26 weeks ended April 2, 2005 and March 27, 2004 are called
“1st Half
2005” and “1st Half
2004”, respectively. The 13 weeks ended April 2, 2005 and March 27, 2004 are
called “2nd Quarter
2005” and “2nd Quarter
2004”, respectively. The 13 weeks ended January 1, 2005 and December 27, 2003
are called “1st Quarter
2005” and “1st Quarter
2004”, respectively. The 52 weeks ending October 1, 2005 are called “Fiscal
2005”, and the 53 weeks ended October 2, 2004 are called “Fiscal 2004”,
respectively. The terms “we”, “us”, “our” and “Enodis” refer to Enodis plc and
its consolidated subsidiaries, except where the context requires
otherwise.
In our
discussions of turnover and operating profit/(loss) before exceptional items, we
use the terms “comparable turnover” and “comparable operating profit” to refer
to measures of turnover and operating profits that reflect adjustments to our
results to eliminate the effects of businesses that have been disposed of, as
well as the effects of foreign exchange rate movements arising on translation of
our overseas results into pounds sterling. The effects of foreign exchange rate
movements are calculated by retranslating prior period results at rates used to
translate current period results into pounds sterling. We provide
reconciliations for all comparable turnover and operating profit amounts to the
most directly comparable U.K. GAAP measure. Management uses comparable
information to measure the underlying trends of the business and monitor
performance. We believe that these comparable financial measures give a helpful
view of our results and facilitate comparisons from period to period in light of
disposals and the variable effect of foreign exchange rate movements. Our
comparable results should not be regarded as a replacement for corresponding
U.K. GAAP measures, and we also note that “comparable turnover” and “comparable
operating profit” as defined or presented by us may not be comparable to
similarly titled measures reported by other companies.
Overview
We
operate in three reporting segments: global food service equipment (85% of
turnover in 1st Half
2005), food retail equipment (15% of turnover in 1st Half
2005) and property (0% of turnover in 1st Half
2005). 77% of our turnover was generated from our operations in North America
during 1st Half
2005, and therefore our trading activities are primarily undertaken in U.S.
dollars.
Total
turnover in 1st Half
2005 was £308.3 million compared to £290.8 million in 1st Half
2004. This increase in turnover includes the net adverse effect of foreign
exchange rate movements of £13.0 million, particularly due to the translation of
our U.S. dollar results. Removing this effect, and the effect of businesses
disposed of during Fiscal 2005, our comparable turnover increased by £32.4
million or 11.9% in 1st Half
2005 compared to 1st Half
2004, primarily due to increased volumes.
Operating
profit before exceptional items in 1st Half
2005
increased by 8.0% to £14.9 million compared to £13.8 million in 1st Half
2004 as
the effects from improved turnover and cost reduction measures more than offset
materials cost inflation. Additionally, our property losses were £0.8 million
lower during 1st Half
2005 when compared to 1st Half
2004.
Including
the loss on sale of Vent Master, we have incurred £13.7 million of exceptional
charges during 1st Half
2005. This includes £5.4 million of charges in respect of our European
restructuring program, which remains on track. We expect the full year charge to
be approximately £6.5 million. We are seeing the early benefits of this program,
although we do not expect to see the full annual benefits of approximately £2
million until Fiscal 2006. Additionally, we recognized a loss of £7.4 million in
respect of the sale of our Vent Master business, which includes £8.0 million of
goodwill previously charged to reserves, as well as a tax charge of £0.2 million
relating to this sale. During 1st Half
2005 we have also incurred £0.7 million in respect of our capital restructuring
program, which is aimed at allowing us to be able to pay dividends. These
exceptional charges contributed to our overall loss in 1st Half
2005 of £6.6 million.
Net debt
at April 2, 2005 was £92.6 million, an increase of £1.3 million when compared to
£91.3 million at the end of Fiscal 2004, as described under “Liquidity and
Capital Resources” below.
During
1st Half
2005 we had a net cash outflow of £17.2 million as we used cash on hand to repay
loans, fund our operating and restructuring activities and continue our program
of capital expenditure. This is discussed in more detail under “Historical Cash
Flows” below.
Current
Financial and Trend Information
Consumer
spending on food and beverage continues to grow, driven by lifestyle changes and
increased disposable income.
For the
balance of Fiscal 2005, we expect the North American food service equipment
market to grow at an annualized rate of approximately 4.5% and weakness in
European markets to continue.
In our
Food Service Equipment – North America
businesses, we are well positioned to meet demand for new menu items, especially
at regional and global restaurant chains where the key requirements of “fast –
hot – fresh” can be met by our range of Accelerated Cooking Technology®
products. We expect our turnover growth to continue, albeit at a slower rate
than in 1st Half
2005 against the strong comparators of 9% growth in comparable turnover for the
third quarter of Fiscal 2004 and 10% growth in comparable turnover in the fourth
quarter of Fiscal 2004. In particular, in the third quarter of Fiscal 2005, we
expect that the impact of additional orders
placed in December 2004 in advance of our January 2005 price increase will be
counter-balanced. During
the second half of Fiscal 2005, we expect to feel the full impact of materials
cost inflation in all our businesses but we should continue to be able to
mitigate this through price increases, lean manufacturing and purchasing
initiatives.
Our Food
Service Equipment - Europe/Asia businesses will continue to face challenging
market conditions in which it is difficult to pass on increased materials costs
to our customers. We will focus on new product opportunities particularly from
Scotsman Beverage Systems and Convotherm. We expect to see continued benefits
from the successful completion of our European restructuring program.
Additionally,
across our Food Service Equipment businesses, we will incur increased strategic
expenditure on investment in marketing and new product development on next
generation products, as well as on investment in infrastructure in Asia to
support our major restaurant chain customers in that region.
Based on
order backlog and order rates, our Food Retail Equipment businesses should have
a strong second half of Fiscal 2005 in terms of turnover but market conditions
will make it difficult for us to pass on increased materials costs to our
customers.
In the
second half of Fiscal 2005, we expect to incur further costs in respect of our
capital restructuring program bringing the total to approximately £21 million.
We will not see the annualized benefits of this program, which we expect to be
approximately £8 million, until Fiscal 2006. In addition, as previously
discussed, we expect to incur costs of approximately £1 million for the
completion of our current European restructuring program.
Taking
account of all these factors, we anticipate underlying performance for Fiscal
2005 to be in line with our expectations at the time of our 1st Quarter
2005 announcement.
Results
of Operations
The
following table sets forth our consolidated profit and loss accounts for
1st Half
2005, 1st Half
2004, 2nd Quarter
2005 and 2nd Quarter
2004.
| |
|
1st
Half
2005 |
|
1st
Half
2004 |
|
%
Change* |
|
2nd
Quarter
2005 |
|
2nd
Quarter
2004 |
|
%
Change* |
|
Turnover: |
|
(in
millions, except percentages) |
|
Global
Food Service Equipment |
|
£260.9 |
|
£247.0 |
|
5.6% |
|
£132.5 |
|
£122.7 |
|
8.0% |
|
Food
Retail Equipment |
|
47.3 |
|
43.5 |
|
8.7% |
|
26.3 |
|
19.8 |
|
32.8% |
|
Property |
|
0.1 |
|
0.3 |
|
(66.7%) |
|
0.1 |
|
- |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
turnover |
|
308.3 |
|
290.8 |
|
6.0% |
|
158.9 |
|
142.5 |
|
11.5% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit/(loss) before goodwill amortization and exceptional
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
Food Service Equipment |
|
24.1 |
|
22.7 |
|
6.2% |
|
13.0 |
|
12.0 |
|
8.3% |
|
Food
Retail Equipment |
|
1.7 |
|
2.4 |
|
(29.2%) |
|
1.4 |
|
1.1 |
|
27.3% |
|
Property |
|
(0.1) |
|
(0.9) |
|
88.9% |
|
0.1 |
|
(0.2) |
|
n/m |
|
Goodwill
amortization |
|
(5.8) |
|
(6.0) |
|
3.3% |
|
(2.9) |
|
(2.8) |
|
(3.6%) |
|
Corporate
costs |
|
(5.0) |
|
(4.4) |
|
(13.6%) |
|
(2.8) |
|
(2.1) |
|
(33.3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit before exceptional items |
|
14.9 |
|
13.8 |
|
8.0% |
|
8.8 |
|
8.0 |
|
10.0% |
|
Operating
exceptional items |
|
(6.1) |
|
- |
|
n/m |
|
(0.9) |
|
- |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit/(loss) |
|
8.8 |
|
13.8 |
|
(36.2%) |
|
7.9 |
|
8.0 |
|
(1.3%) |
|
Profit/(loss)
on disposal of businesses |
|
(7.4) |
|
2.2 |
|
n/m |
|
(7.4) |
|
1.3 |
|
n/m |
|
Net
interest payable and similar charges |
|
(5.6) |
|
(8.8) |
|
36.4% |
|
(2.8) |
|
(4.2) |
|
33.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss)
on ordinary activities before taxation |
|
(4.2) |
|
7.2 |
|
n/m |
|
(2.3) |
|
5.1 |
|
n/m |
|
Tax
on profit/(loss) on ordinary activities |
|
(2.2) |
|
(1.9) |
|
(15.8%) |
|
(1.2) |
|
(1.2) |
|
0.0% |
|
Equity
minority interest |
|
(0.2) |
|
(0.1) |
|
(100.0%) |
|
(0.1) |
|
(0.1) |
|
0.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss)
for the period |
|
£(6.6) |
|
£5.2 |
|
n/m |
|
£(3.6) |
|
£3.8 |
|
n/m |
*
Favorable/(adverse)
n/m -
Not meaningful
1st
Half 2005 compared to 1st
Half 2004
In the
tables below that discuss comparable results the effect of foreign exchange rate
movements is calculated by retranslating prior period results at rates used to
translate current period results.
Turnover
Included
within turnover are all shipping and handling costs billed to our customers.
Turnover increased by £17.5 million, or 6.0%, to £308.3 million in
1st Half
2005 from £290.8 million in 1st Half
2004. The reasons for this increase are analyzed in the discussions of our
reportable segments below.
The
following table sets forth a summary reconciliation of our total turnover to
comparable turnover for our reportable segments.
| |
1st
Half
2005 |
|
Effect
of Disposals |
|
Comparable
1st
Half 2005 |
|
1st
Half
2004 |
|
Effect
of Disposals |
|
Foreign
Exchange |
|
Comparable
1st
Half 2004 |
|
Comparable
change |
| |
(in
millions, except percentages) |
|
Global
Food Service Equipment |
£260.9 |
|
£(4.3) |
|
£256.6 |
|
£247.0 |
|
£(6.2) |
|
£(10.2) |
|
£230.6 |
|
£26.0 |
|
11.3% |
|
Food
Retail Equipment |
47.3 |
|
- |
|
47.3 |
|
43.5 |
|
- |
|
(2.8) |
|
40.7 |
|
6.6 |
|
16.2% |
|
Property |
0.1 |
|
- |
|
0.1 |
|
0.3 |
|
- |
|
- |
|
0.3 |
|
(0.2) |
|
(66.7%) |
| |
£308.3 |
|
£(4.3) |
|
£304.0 |
|
£290.8 |
|
£(6.2) |
|
£(13.0) |
|
£271.6 |
|
£32.4 |
|
11.9% |
Global
Food Service Equipment. The
following table sets forth a geographic breakdown of turnover for our Global
Food Service Equipment segment and shows these amounts as a percentage of
turnover from the segment.
| |
1st Half
2005 |
|
1st Half
2004 |
|
Change |
| |
(in
millions, except percentages) |
|
North
America |
£190.9 |
|
73.2% |
|
£179.3 |
|
72.6% |
|
£11.6 |
|
6.5% |
|
Europe/Asia |
70.0 |
|
26.8% |
|
67.7 |
|
27.4% |
|
2.3 |
|
3.4% |
|
Total
Global Food Service Equipment |
£260.9 |
|
100.0% |
|
£247.0 |
|
100.0% |
|
£13.9 |
|
5.6% |
The
following table sets forth, by geographical region, a summary reconciliation of
our turnover to comparable turnover from our Global Food Service Equipment
segment.
| |
1st
Half
2005 |
|
Effect
of
Disposals |
|
Comparable
1st
Half 2005 |
|
1st
Half
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
1st
Half 2004 |
|
Comparable
change |
| |
(in
millions, except percentages) |
|
North
America |
£190.9 |
|
£(2.6) |
|
£188.3 |
|
£179.3 |
|
£(3.9) |
|
£(10.5) |
|
£164.9 |
|
£23.4 |
|
14.2% |
|
Europe/Asia |
70.0 |
|
(1.7) |
|
68.3 |
|
67.7 |
|
(2.3) |
|
0.3 |
|
65.7 |
|
2.6 |
|
4.0% |
|
Total
Global Food Service Equipment |
£260.9 |
|
£(4.3) |
|
£256.6 |
|
£247.0 |
|
£(6.2) |
|
£(10.2) |
|
£230.6 |
|
£26.0 |
|
11.3% |
Turnover
in the Global Food Service Equipment segment increased by £13.9 million, or
5.6%, to £260.9 million in 1st Half
2005 from £247.0 million in 1st Half
2004. In comparison to 1st Half
2004, our comparable turnover increased by £26.0 million during 1st Half
2005 primarily due to volume increases. This increase in comparable turnover was
partially offset by net adverse foreign exchange rate movements of £10.2 million
along with £1.9 million of lower turnover from our Vent Master business disposed
of during 1st Half
2005.
In our
North America operations, our improved volumes were due in part to continued
market improvements. Our 1st Half
2005 increase was also due to additional sales to both regional and global
restaurant chains whose capital expenditures are increasing. These customers
increased expenditure on equipment to open new stores and refurbish existing
ones, which generates increased demand for our core hot and cold offerings.
Furthermore, these chains are expanding their menu offerings, which often
requires new products to support such expansion. Lastly, our growth during
1st Half
2005 was partially driven by additional orders placed in advance of our January
2005 price increase. Accordingly, the effects of our January 2005 price increase
on our turnover should largely become apparent during the 2nd half of
Fiscal 2005. During 1st Half
2005 we completed a roll-out of hot deli sandwich stations for McDonald’s in
Canada, Australia and New Zealand, which contributed to our North America
results.
Turnover
from Europe/Asia increased by £2.3
million, or 3.4%, to £70.0 million in 1st Half
2005 from £67.7 million in 1st Half
2004. This includes the impact of £0.3 million of favorable foreign exchange
rate movements, but is partially offset by £0.6 million due to the effect of
businesses disposed of during 1st Half
2005. On a comparable basis our turnover increased by £2.6 million during
1st Half
2005 when compared to 1st Half
2004. In the U.K., markets proved to be difficult. However, Scotsman Beverage
Systems achieved significant sales growth, particularly with Scottish Courage,
through a combination of new product sales and broader market penetration. Sales
of our Converthem +3 combi-ovens continue to increase as we phase out the
preceding +2 series. North American +2 distribution contracts had contributed to
our turnover during 1st Half
2004, however these contracts expired. We intend to manufacture the +3 series in
North America in the future. Turnover at our ice businesses in Europe and Asia
was broadly flat during 1st Half
2005 when compared to 1st Half
2004.
Food
Retail Equipment. When
compared to 1st Half
2004, we increased our Food Retail
Equipment segment’s comparable turnover by £6.6 million to £47.3 million. Our
increased turnover was due to increases in existing market share, including
securing new sales contracts. Our turnover also benefited from the effects of
recent price increases. Our comparable turnover was partially offset by adverse
foreign exchange rate movements of £2.8 million.
Property.
Turnover
of £0.1 million for 1st Half
2005
compares to £0.3 million for 1st Half
2004 for
our Property
segment. During both periods we sold small industrial properties in the U.K. We
expect that further revenues will arise during the year, especially in the
fourth quarter of Fiscal 2005 in connection with ongoing development at and sale
of part of our land in Felsted, England. However, we expect Fiscal 2005 turnover
to significantly reduce as compared to Fiscal 2004 as smaller tranches are
expected to be sold.
Operating
Profit/(Loss) before Exceptional Items
Operating
profit before exceptional items increased by £1.1 million, or 8.0%, to £14.9
million in 1st Half
2005 from
£13.8 million in 1st Half
2004.
The
reasons for this increase are analyzed in the discussions of our reportable
segments below.
We
include all licensing and food equipment shipping, handling, inspection and
distribution costs within the related food equipment segment’s operating
profit/(loss).
The
following table sets forth a summary reconciliation of operating profit before
goodwill amortization and exceptional items to comparable operating
profit/(loss) before goodwill amortization and exceptional items for our
reportable segments:
| |
1st
Half
2005 |
|
Effect
of
Disposals |
|
Comparable
1st
Half 2005 |
|
1st
Half
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
1st
Half 2004 |
|
Comparable
change |
| |
(in
millions, except percentages) |
|
Global
Food Service Equipment |
£24.1 |
|
£0.6 |
|
£24.7 |
|
£22.7 |
|
£0.2 |
|
£(1.1) |
|
£21.8 |
|
£2.9 |
|
13.3% |
|
Food
Retail Equipment |
1.7 |
|
- |
|
1.7 |
|
2.4 |
|
- |
|
(0.1) |
|
2.3 |
|
(0.6) |
|
(26.1%) |
|
Property |
(0.1) |
|
- |
|
(0.1) |
|
(0.9) |
|
- |
|
- |
|
(0.9) |
|
0.8 |
|
88.9% |
| |
£25.7 |
|
£0.6 |
|
£26.3 |
|
£24.2 |
|
£0.2 |
|
£(1.2) |
|
£23.2 |
|
3.1 |
|
13.4% |
Global
Food Service Equipment. The
following table sets forth a geographic breakdown of our operating profit before
goodwill amortization and exceptional items for our Global Food Service
Equipment segment and shows these amounts as a percentage of operating profit
for the segment.
| |
1st Half
2005 |
|
1st Half
2004 |
|
Change |
| |
(in
millions, except percentages) |
|
North
America |
£22.2 |
|
92.1% |
|
£20.3 |
|
89.4% |
|
£1.9 |
|
9.4% |
|
Europe/Asia |
1.9 |
|
7.9% |
|
2.4 |
|
10.6% |
|
(0.5) |
|
(20.8%) |
|
Total
Global Food Service Equipment |
£24.1 |
|
100.0% |
|
£22.7 |
|
100.0% |
|
£1.4 |
|
6.2% |
The
following table sets forth, by geographical region, a summary reconciliation of
operating profit before goodwill amortization and exceptional items to
comparable operating profit for our Global Food Service Equipment
segment.
| |
1st
Half
2005 |
|
Effect
of
Disposals |
|
Comparable
1st
Half 2005 |
|
1st
Half
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
1st
Half 2004 |
|
Comparable
change |
| |
(in
millions, except percentages) |
|
North
America |
£22.2 |
|
£0.2 |
|
£22.4 |
|
£20.3 |
|
£(0.2) |
|
£(1.1) |
|
£19.0 |
|
£3.4 |
|
17.9% |
|
Europe/Asia |
1.9 |
|
0.4 |
|
2.3 |
|
2.4 |
|
0.4 |
|
- |
|
2.8 |
|
(0.5) |
|
(17.9%) |
|
Total
Global Food Service Equipment |
£24.1 |
|
£0.6 |
|
£24.7 |
|
£22.7 |
|
£0.2 |
|
£(1.1) |
|
£21.8 |
|
£2.9 |
|
13.3% |
Operating
profit before goodwill amortization and exceptional items for the Global Food
Service Equipment segment increased by £1.4 million, or 6.2%, to £24.1 million
in 1st Half
2005 from £22.7 million in 1st Half
2004. £2.9 million of this increase was attributable to improved trading
performance. This was partially offset by £1.1 million due to the effect of
adverse foreign exchange rate movements and £0.4 million due to the effect of
businesses disposed of during 1st Half
2005. Our £2.9 million improvement in comparable operating profit was due to our
improved performance at our North American operations. Our improvements have
been achieved despite recent materials cost increases.
Operating
profit before goodwill amortization and exceptional items for North America
increased by £1.9 million, or 9.4%, to £22.2 million in 1st Half
2005 from £20.3 million in 1st Half
2004 due to the effect of improved volumes, sales price increases and lean
manufacturing and purchasing initiatives. These benefits were partially offset
by increased materials costs as well as £1.1 million due to the effect
of adverse foreign exchange rate movements and £0.4 million due to the effect of
businesses disposed of during 1st Half
2005. On a comparable basis, operating profit was up 17.9%.
Operating
profit before goodwill amortization and exceptional items in Europe/Asia
decreased by £0.5 million, or 20.8%, to £1.9 million in 1st Half
2005 from £2.4 million in 1st Half
2004. On a comparable basis, the effects of increased turnover were offset by
increased materials costs and changes in our product mix.
Food
Retail Equipment.
Operating profit before goodwill amortization and exceptional items decreased by
£0.7 million to £1.7 million in 1st Half
2005 from £2.4 million in 1st Half
2004. Our increased turnover during 1st Half
2005 was more than offset by the effect of
increased materials costs, which are difficult to pass on in this sector. We
were also impacted by £0.1
million due to the effect of adverse foreign exchange rate movements.
Property. A loss
of £0.1 million in 1st Half
2005 compares to a loss of £0.9 million in 1st Half
2004, due to the timing of costs relating to our development projects. The
charges incurred for both periods relate to the ongoing cost of managing of our
residual property portfolio.
Corporate
Costs.
Corporate costs before exceptional items were £0.6 million higher in
1st Half
2005 at £5.0 million compared to £4.4 million for 1st Half
2004. This was due to increased compliance costs.
Goodwill
Amortization. Amortization
of goodwill decreased by £0.2 million to £5.8 million in 1st Half
2005 from £6.0 million in 1st Half
2004 due to the impact of foreign exchange rate movements. These charges do not
affect our cash flows.
Operating
Exceptional Items. During
1st Half
2005 we incurred £6.1 million of operating exceptional items compared to £0 in
1st Half
2004. £5.4 million of our 1st Half
2005 exceptional charge related to our European restructuring program, which is
progressing in line with our expectations. There were three elements to our
European restructuring program, being the closure of our Guyon factory in
France; consolidation of manufacturing for our European Beverage business into
the U.K. from Germany; and the reshaping of other U.K. businesses including the
exiting of some minor unprofitable product lines. We will see early benefits
from this program during the balance of Fiscal 2005, although we will not see
the full benefit, which is expected to be approximately £2 million per annum,
until Fiscal 2006.
Costs
charged include severance and outplacement-related costs of £2.4 million, fixed
asset and inventory write downs of £1.4 million and £1.0 million of other
closure costs. The majority of this program has been finalized, and we expect to
incur further charges of approximately £1.2 million, principally in respect of
severance costs in the balance of Fiscal 2005, as the program is completed. We
expect our Fiscal 2005 costs to total approximately £6.5 million, with a cash
outflow of £4.6 million.
We have
also incurred operating exceptional costs of £0.7 million during 1st Half
2005 relating to our capital restructuring, which is intended to enable us to
create distributable reserves and resume paying dividends. As we disclosed in
our Fiscal 2004 Form 20-F, this process requires shareholder and court consents
which we expect to receive during the remainder of Fiscal 2005. We have now
added to this program our intention to redeem our senior subordinated notes, the
cancellation of our ADR program and delisting from the NYSE. We expect our
Fiscal 2005 exceptional costs for our corporate restructuring to be
approximately £21 million, including approximately £14.5 million of interest
prepayments on the redemption of our senior subordinated notes, approximately
£3.6 million of non-cash write off of deferred finance costs and approximately
£2.6 million of fees. Our expected cost savings from these actions are discussed
below under “Liquidity and Capital Resources”.
The
following table shows a reconciliation of the beginning and ending U.K GAAP
liability balances for the above restructuring programs during 1st Half
2005:
| |
European
Restructuring |
|
Capital
Restructuring |
| |
severance
and
outplacement |
|
fixed
asset and
inventory write downs |
|
other
closure
costs |
|
|
| |
(in
millions) |
|
Opening
liability Oct 3, 2004 |
£- |
|
£- |
|
£0.2 |
|
£- |
|
Exceptional
charges accrued |
2.4 |
|
1.4 |
|
1.6 |
|
0.7 |
|
Write
downs |
- |
|
(1.4) |
|
- |
|
- |
|
Payments |
(1.5) |
|
- |
|
(1.0) |
|
(0.2) |
|
Closing
liability April 2, 2005 |
£0.9 |
|
£- |
|
£0.8 |
|
£0.5 |
Profit/loss
on Disposal of Businesses. On March
4, 2005, we completed the sale of our Vent Master business to the Halton Group.
We received £3.1 million ($6 million) in cash and incurred cash costs associated
with the sale of £0.6 million. The exceptional loss on disposal was £7.4
million, primarily due to the write back of £8.0 million of goodwill previously
charged to reserves. During 1st Half
2004 we recognized a profit of £2.2 million due to the expiration of warranties
that were given at the time of previous disposals of non-core businesses.
Net
Interest Payable and Similar Expenses. Net
interest payable and similar expenses totaled £5.6 million during 1st Half
2005 compared with £8.8 million in 1st Half
2004. The decrease from 1st Half
2004 is the result of lower average net debt balances of £92.0 million in
1st Half
2005 compared to £130.8 million in 1st Half
2004; lower finance charges on our new revolving credit facility, which was
entered into during September 2004, a reduction in our weighted average interest
rate from approximately 9.4% in 1st Half
2004 to approximately 9.1% in 1st Half
2005, along with lower deferred finance amortization charges of £0.7 million.
Tax
on Profit/(Loss) on Ordinary Activities. Our net
tax expense increased by £0.3 million to £2.2 million during 1st Half
2005 compared to £1.9 million in 1st Half
2004. During 1st Half
2005 our tax charge benefited from a net £0.8 million deferred tax credit,
however this was more than offset by a £0.9 million increase in current taxes
and £0.2 million charge on exceptional items during 1st Half
2005. The increase in our current tax expense to £2.8 million is due to profit
increases in tax paying jurisdictions. This resulted in an increase of our
current
tax rate, when compared to our profit before goodwill amortization and
exceptional items, from 17.3% in 1st Half
2004 to 18.5% in 1st Half
2005. Our effective current tax rate is lower than the statutory rate in the
U.S., the jurisdiction where we earn the majority of our taxable profit, because
we currently benefit from the effect of tax loss carryforwards.
Taking
all of the above into account our overall loss in 1st Half
2005 was £6.6 million.
2nd
Quarter 2005 compared to 2nd
Quarter 2004
Turnover
Included
within turnover are all shipping and handling costs billed to our customers.
Total turnover increased by £16.4 million, or 11.5%, to
£158.9 million in 2nd Quarter
2005 from £142.5 million in 2nd Quarter
2004. The reasons for this increase are analyzed in the tables and discussions
below.
The
following table sets forth a summary reconciliation of our turnover to
comparable turnover for our reportable segments.
| |
2nd
Quarter
2005 |
|
Effect
of
Disposals |
|
Comparable
2nd
Quarter
2005 |
|
2nd
Quarter
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
2nd
Quarter
2004 |
|
Comparable
change |
| |
(in
millions, except percentages) |
|
Global
Food Service Equipment |
£132.5 |
|
£(1.6) |
|
£130.9 |
|
£122.7 |
|
£(3.3) |
|
£(3.0) |
|
£116.4 |
|
£14.5 |
|
12.5% |
|
Food
Retail Equipment |
26.3 |
|
- |
|
26.3 |
|
19.8 |
|
- |
|
(0.8) |
|
19.0 |
|
7.3 |
|
38.4% |
|
Property |
0.1 |
|
- |
|
0.1 |
|
- |
|
- |
|
- |
|
- |
|
0.1 |
|
n/m |
| |
£158.9 |
|
£(1.6) |
|
£157.3 |
|
£142.5 |
|
£(3.3) |
|
£(3.8) |
|
£135.4 |
|
£21.9 |
|
16.2% |
Global
Food Service Equipment. The
following table sets forth a geographic breakdown of turnover for our Global
Food Service Equipment segment and shows these amounts as a percentage of
turnover from the segment.
| |
|
2nd
Quarter 2005 |
|
2nd
Quarter 2004 |
|
Change |
|
| |
|
(£
in millions, except percentages) |
|
|
North
America |
|
|
£97.6 |
|
|
73.7% |
|
|
£88.8 |
|
|
72.4% |
|
|
£8.8 |
|
|
9.9% |
|
|
Europe/Asia |
|
|
34.9 |
|
|
26.3% |
|
|
33.9 |
|
|
27.6% |
|
|
1.0 |
|
|
2.9% |
|
|
Total
Global Food Service Equipment |
|
|
£132.5 |
|
|
100.0% |
|
|
£122.7 |
|
|
100.0% |
|
|
£9.8 |
|
|
8.0% |
|
The
following table sets forth, by geographical region, a summary reconciliation of
our turnover to comparable turnover from our Global Food Service Equipment
segment.
| |
|
2nd
Quarter
2005 |
|
Effect
of
Disposals |
|
Comparable
2nd
Quarter 2005 |
|
2nd
Quarter
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
2nd
Quarter 2004 |
|
Comparable
change |
|
| |
|
(in
millions, except percentages) |
|
|
North
America |
|
|
£97.6 |
|
|
£(0.8) |
|
|
£96.8 |
|
|
£88.8 |
|
|
£(2.0) |
|
|
£(3.3) |
|
|
£83.5 |
|
|
£13.3 |
|
|
15.9% |
|
|
Europe/Asia |
|
|
34.9 |
|
|
(0.8) |
|
|
34.1 |
|
|
33.9 |
|
|
(1.3) |
|
|
0.3 |
|
|
32.9 |
|
|
1.2 |
|
|
3.6% |
|
|
Total
Global Food Service Equipment |
|
|
£132.5 |
|
|
£(1.6) |
|
|
£130.9 |
|
|
£122.7 |
|
|
£(3.3) |
|
|
£(3.0) |
|
|
£116.4 |
|
|
£14.5 |
|
|
12.5% |
|
In our
Global Food Service Equipment North America operations, our turnover increased
by £8.8 million or 9.9% to £97.6 million during 2nd Quarter
2005 from £88.8 million during 2nd Quarter
2004. Our increase in volumes more than offset the adverse effects of £3.3
million from foreign exchange rate movements. Our comparable turnover increased
by £13.3 million to £96.8 million as a result of improved volumes attributable
to continued market improvements as well as increased sales due to orders placed
before our January 1, 2005 price rise. We expect the effect of this increase in
orders to balance out during the third quarter of Fiscal 2005.
Turnover
from Europe/Asia increased by £1.0 million to £34.9 million during 2nd Quarter
2005 from £33.9 million during 2nd Quarter
2004. On a comparable basis, our turnover increased by £1.2 million or 3.6% in
2nd Quarter
2005 to £34.1 million compared to £32.9 million in 2nd Quarter
2004. Our European Beverage businesses showed positive results due to sales of
new products, and our distribution businesses increased their turnover due to
the recent launch of our Convotherm +3 combi-ovens. However, elsewhere in the
U.K. turnover was marginally lower due to difficult market conditions, while
turnover at our ice businesses in Europe and Asia was essentially flat.
Food
Retail Equipment. During
2nd Quarter
2005, our turnover increased by £6.5 million to £26.3 million from £19.8 million
in 2nd Quarter
2004. This increase was due to increased volumes and price rises partially
offset by £0.8 million arising from adverse foreign exchange rate movements. On
a comparable basis, our turnover increased by £7.3 million to £26.3 million from
increased volumes which were principally due to an increased order intake during
2nd Quarter
2005. Part of this increase was attributable to the deferral of orders in
previous periods. While the food retail sector is competitive, we have benefited
from the effect of price increases with some customers during 2nd Quarter
2005.
Property.
£0.1
million of Property turnover arose during 2nd Quarter
2005 due to the sale of a small industrial property in the U.K. There was no
turnover for property in 2nd Quarter
2004.
Operating
Profit/(Loss) before Exceptional Items
Operating
profit before exceptional items increased by £0.8 million, or 10.0%, to £8.8
million in 2nd Quarter
2005 from £8.0 million in 2nd Quarter
2004. The
reasons for this increase are analyzed below.
We
include all licensing and food equipment shipping, handling, inspection and
distribution costs within the related food equipment segment’s operating
profit/(loss).
The
following table sets forth a summary reconciliation of operating profit before
goodwill amortization and exceptional items to comparable operating profit
before goodwill amortization and exceptional items for our reportable
segments:
| |
|
2nd
Quarter
2005 |
|
Effect
of
Disposals |
|
Comparable
2nd
Quarter 2005 |
|
2nd
Quarter
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
2nd
Quarter 2004 |
|
Comparable
change |
|
| |
|
(in
millions, except percentages) |
|
|
Global
Food Service Equipment |
|
|
£13.0 |
|
|
£0.4 |
|
|
£13.4 |
|
|
£12.0 |
|
|
£0.1 |
|
|
£(0.4) |
|
|
£11.7 |
|
|
£1.7 |
|
|
14.5% |
|
|
Food
Retail Equipment |
|
|
1.4 |
|
|
- |
|
|
1.4 |
|
|
1.1 |
|
|
- |
|
|
- |
|
|
1.1 |
|
|
0.3 |
|
|
27.3% |
|
|
Property |
|
|
0.1 |
|
|
- |
|
|
0.1 |
|
|
(0.2) |
|
|
- |
|
|
- |
|
|
(0.2) |
|
|
0.3 |
|
|
n/m |
|
|
|
|
|
£14.5 |
|
|
£0.4 |
|
|
£14.9 |
|
|
£12.9 |
|
|
£0.1 |
|
|
£(0.4) |
|
|
£12.6 |
|
|
£2.3 |
|
|
18.3% |
|
Global
Food Service Equipment. The
following table sets forth a geographic breakdown of our operating profit before
goodwill amortization and exceptional items for our Global Food Service
Equipment segment and shows these amounts as a percentage of operating profit
for the segment.
| |
|
2nd
Quarter 2005 |
|
2nd
Quarter 2004 |
|
Change |
|
| |
|
(£
in millions, except percentages) |
|
|
North
America |
|
|
£12.0 |
|
|
92.3% |
|
|
£10.7 |
|
|
89.2% |
|
|
£1.3 |
|
|
12.1% |
|
|
Europe/Asia |
|
|
1.0 |
|
|
7.7% |
|
|
1.3 |
|
|
10.8% |
|
|
(0.3) |
|
|
(23.1%) |
|
|
Total
Global Food Service Equipment |
|
|
£13.0 |
|
|
100.0% |
|
|
£12.0 |
|
|
100.0% |
|
|
£1.0 |
|
|
8.3% |
|
The
following table sets forth, by geographical region, a summary reconciliation of
operating profit before goodwill amortization and exceptional items to
comparable operating profit for our Global Food Service Equipment
segment.
| |
|
2nd
Quarter
2005 |
|
Effect
of
Disposals |
|
Comparable
2nd
Quarter 2005 |
|
2nd
Quarter
2004 |
|
Effect
of
Disposals |
|
Foreign
Exchange |
|
Comparable
2nd
Quarter 2004 |
|
Comparable
change |
|
| |
|
(in
millions, except percentages) |
|
|
North
America |
|
|
£12.0 |
|
|
£0.3 |
|
|
£12.3 |
|
|
£10.7 |
|
|
£(0.1) |
|
|
£(0.4) |
|
|
£10.2 |
|
|
£2.1 |
|
|
20.6% |
|
|
Europe/Asia |
|
|
1.0 |
|
|
0.1 |
|
|
1.1 |
|
|
1.3 |
|
|
0.2 |
|
|
- |
|
|
1.5 |
|
|
(0.4) |
|
|
(26.7%) |
|
|
Total
Global Food Service Equipment |
|
|
£13.0 |
|
|
£0.4 |
|
|
£13.4 |
|
|
£12.0 |
|
|
£0.1 |
|
|
£(0.4) |
|
|
£11.7 |
|
|
£1.7 |
|
|
14.5% |
|
Compared
to 2nd Quarter
2004, our North America operating profit before goodwill amortization and
exceptional items increased by £1.3 million to £12.0 million. This increase
includes the adverse impact of £0.4 million arising from the effect of foreign
exchange rate movements. On a comparable basis our operating profit before
goodwill amortization and exceptional items increased by 20.6% or £2.1 million
to £12.3 million in 2nd Quarter
2005 from £10.2 million in 2nd Quarter
2004. Increases in volume and the benefits from our lean manufacturing and
purchasing initiatives have more than offset significant increases in materials
costs. We expect that the impact of our January 1, 2005 price increase will be
seen in later periods.
Our
operating profit before goodwill
amortization and exceptional items in Europe/Asia was £1.0 million for
2nd Quarter
2005, reflecting a decrease of £0.3 when compared to 2nd Quarter
2004. Removing
the effect of businesses disposed of during 2nd Quarter
2005, our comparable operating profit before
goodwill amortization and exceptional items decreased
by £0.4 million, or 26.7%, to £1.1 million in
2nd Quarter
2005 from £1.5 million in 2nd Quarter
2004. Changes in product mix and cost pressures, particularly in the U.K., more
than offset the effects of improved
comparable turnover. Our Scotsman Beverage System business enjoyed a strong
quarter and our distribution companies improved performance as a result of the
roll-out of our Convotherm +3 combi-ovens.
Food
Retail Equipment. The
increase in operating profit before goodwill amortisation and exceptional items
during 2nd Quarter
2005 was attributable to the effect of improved volumes. However, any increases
in sales prices have lagged behind the effect of materials price inflation, and
so our operating profit has not shown the same improvement as our increase in
turnover.
Property. A
profit of £0.1 million in 2nd Quarter
2005 compares to a loss of £0.2 million in 2nd Quarter
2004. The charges incurred for both periods relate to the ongoing costs of
managing of our residual property portfolio.
Corporate
Costs.
Corporate costs, before exceptional items were £2.8 million in 2nd Quarter
2005 compared to £2.1 million during 2nd Quarter
2004. This was due to increased compliance costs.
Goodwill
Amortization. Amortization
of goodwill increased by £0.1 million to £2.9 million in 2nd Quarter
2005 from £2.8 million in 2nd Quarter
2004 due to the impact of foreign exchange rate movements. These charges do not
affect our cash flows.
Operating
Exceptional Items. During
2nd Quarter
2005 we recognized £0.7 million in respect of costs incurred with our corporate
restructuring program, as discussed above. We also incurred an additional £0.2
million in relation to our European restructuring program. The bulk of the costs
of our European restructuring program were charged during 1st Quarter
2005.
Profit/loss
on Disposal of Businesses. We
recognized a loss on disposal of £7.4 million relating to our Vent Master
business during 2nd Quarter
2005, as discussed above. This loss includes £8.0 million of goodwill previously
charged to reserves. Our 2004 profit arose due to the expiration of warranties
that were given at the time of previous disposals of non-core businesses.
Net
Interest Payable and Similar Expenses. Net
interest payable and similar expenses were £2.8 million during 2nd Quarter
2005, compared with £4.2 million in 2nd Quarter
2004. The decrease from 2nd Quarter
2004 is the result of lower average debt balances, lower average costs of
borrowing and lower deferred finance amortization charges.
Tax
on Profit/(Loss) on Ordinary Activities. Overall
our net tax expense for both 2nd Quarter
2005 was unchanged from 2nd Quarter
2004 at £1.2 million, however our current tax charge increased by £0.6 million
from 2nd Quarter
2004 to £1.8 million in 2nd Quarter
2005 due to our expected increase in taxable profits for Fiscal 2006. We also
recognized a charge of £0.2 million relating to exceptional items during
2nd Quarter
2005. These increases were offset by a net profit and loss credit for deferred
tax of £0.8 million during 2nd Quarter
2005.
Taking
all of the above into account our overall loss for 2nd Quarter
2005 was £3.6 million.
U.S.
GAAP Reconciliation
Net
profit under U.S. GAAP in 1st Half
2005 was £5.8 million compared to a loss of £6.6 million for the same period
under U.K. GAAP. For 1st Half
2005 the significant differences when reconciling from U.K. GAAP to U.S. GAAP
related to a reversal of goodwill amortization of £5.8 million, lower charges
with respect to restructuring of £1.0 million, a reduced loss on sale of
businesses of £7.1 million due to differences in goodwill values and higher
pension costs of £0.8 million under U.S. GAAP.
Net
profit under U.S. GAAP for 1st Half
2004 was £6.5 million compared to a profit of £5.2 million for the same period
under U.K. GAAP. For 1st Half
2004 the significant differences when reconciling from U.K. GAAP to U.S. GAAP
related to a reversal of goodwill amortization of £6.0 million and an additional
deferred taxation charge of £4.2 million under U.S. GAAP.
Liquidity
and Capital Resources
Our net
debt increased by £1.3 million to £92.6 million at April 2, 2005 from £91.3
million at October 2, 2004. Our increase in net debt during 1st Half
2005 was partially offset by £3.7 million arising from favorable foreign
exchange rate movements.
Today we
have announced proposed actions to allow the reinstatement of dividends, which
will require holding an Extraordinary General Meeting to approve a capital
reduction. This announcement also discusses our tender offer for the redemption
of our 10-3/8% senior subordinated notes; terminating our ADR program; and
delisting from the NYSE. These actions, among others, are described in more
detail in a separate press release that is being distributed today. We expect
this program to result in a Fiscal 2005 exceptional charge of approximately £21
million, including approximately £14.5 million of interest prepayment on the
redemption of our £100 million of senior subordinated notes, approximately £3.6
million of non-cash write off of deferred financing costs and approximately £2.6
million of fees. We expect that our proposals will increase our net debt by
approximately £17 million assuming that 100% of our senior subordinated notes
are redeemed.
The
capital restructuring program, in addition to enabling dividend payments, is
expected to provide considerable financial benefits to us, including annual cash
interest savings of approximately £4.5 million and compliance and listing cost
savings of approximately £3.0 million per annum. Considering these external
costs alone, and making no allowance for the significant savings of management
time, we are of the view that this program has a two year payback, a positive
net present value and is earnings enhancing in Fiscal 2006.
On
April 2,
2005, we had
£35.7 million
of cash and cash equivalents compared to £52.4 million at the end of Fiscal
2004. During 1st Half
2005, we used £17.2 million of cash, £12.2 million of which was used to repay
principal on our loans and £8.2 million for payments of interest and tax. We
also used £7.1 million for net investment in fixed assets. These cash outflows
were partially offset by £6.2 million of cash inflows from operating activities;
£2.8 million from the net proceeds from the sale of our Vent Master business;
£1.0 million from the issue of share capital upon the exercise of employee stock
options and £0.3 million from a dividend received from our joint venture
operations. Also see
discussion of “Historical Cash Flows” below.
On May 6,
2005 we amended our senior debt facilities to increase our borrowing
availability from $225 million to $400 million. The additional amount will be
available to us to refinance our senior subordinated notes and cannot be drawn
on before this occurs. The terms of our amended facilities are otherwise
unchanged from those entered into on September 17, 2004, under which interest is
charged at floating rates. The terms of our senior debt facilities are described
in more detail in our description of credit and debt facilities discussed in
Item 5 of our Annual Report on Form 20-F for Fiscal 2004.
Excluding
the increase to our facility of $175 million mentioned above, we had £52.2
million
of borrowing availability compared
to £54.4
million as of the end of Fiscal 2004. Borrowing
availability under our senior credit facility is conditional upon our ongoing
compliance with financial covenants and other non-financial restrictions.
Details of these conditions are discussed in Item 3 of our Annual Report on Form
20-F for Fiscal 2004, and have not changed as a result of the amendment of the
facility. Based on cash on hand and cash flows expected from operations, we
expect to comply with these covenants and restrictions in the short and long
term.
Due to
the seasonality of our business, the majority of our net cash inflows from
operating activities generally arise during the second half of our fiscal year.
On an annual basis our historical cash inflows from operating activities have
more than met our requirements to fund our operating activities (including
research and development), tax payments, servicing of debt and net capital
expenditures. Based upon our current projections, we expect that our future
annual cash inflows will continue to meet our foreseeable funding requirements
in the short and long term, with the exception of any unforeseen outcomes
associated with material unfavorable final judgments in the Consolidated-related
lawsuits, as discussed in Item 8 under Legal Proceedings in our Fiscal 2004 Form
20-F.
Contractual
Obligations
We are
also party to various contractual obligations that impact our liquidity and
capital resources, including the payment of interest and the repayment of
principal on our long-term debt. In addition as part of our normal business
practices, we enter into contracts with suppliers for purchases of commodities,
raw materials, components and services. These arrangements may contain fixed or
minimum quantity purchase requirements. We enter into these arrangements to
facilitate an adequate supply of these materials as well as to ensure
pre-determinable pricing levels. These supply contracts are typically effective
for a period of 12 to 24 months. As these obligations are under executory
contracts, no liability is recognized until the occurrence of a future event,
for example the purchase of materials.
We are
also subject to obligations under finance and operating leases, and from time to
time we also have performance bonds in place.
Historical
Cash Flows
The
following table sets forth a summary of cash flow items for the periods
presented:
| |
1st
Half 2005 |
1st
Half 2004 |
| |
(in
millions) |
|
Net
cash (outflow)/inflow from operating activities before exceptional
items |
£8.9 |
£21.2 |
|
Net
cash outflow from operating exceptional items |
(2.7) |
- |
|
Net
cash (outflow)/inflow from operating activities |
6.2 |
21.2 |
| |
|
|
|
Dividends
from joint ventures |
0.3 |
- |
|
Return
on investments and servicing of finance |
(5.4) |
(8.0) |
|
Taxation |
(2.8) |
(1.9) |
|
Capital
expenditure and financial investment |
(7.1) |
(4.7) |
|
Disposal
of subsidiary undertakings |
2.8 |
- |
|
Financing
activities |
(11.2) |
(31.9) |
Operating
Activities
Compared
to 1st Half
2004, our operating cash flow before exceptional items for 1st Half
2005 was £12.3 million lower at £8.9 million. Our reduction of cash inflows
during 1st Half
2005 is attributable to the timing of cash
receipts, where Fiscal 2004 had an additional week of trading into October 2004.
This had the effect of additional cash collections at the end of Fiscal 2004
rather than at the beginning of the 1st Quarter
of Fiscal 2005. Additionally, during 1st Half
2005, we have made increased payments due to an increased level of accounts
payable and accruals held at the end of Fiscal 2004, driven by our prior year
increase in operating activities, as well as the impact from the current years
trading activity.
Net cash
used for current year operating exceptional items was £2.7 million compared to
£0 during 1st Half
2004. The operating exceptional items during 1st Half
2005 represented costs associated with our European restructuring and capital
restructuring programs.
Return
on Investment and Servicing of Finance
Our net
interest payments during 1st Half
2005 were £5.4 million compared to £8.0 million during 1st Half
2004. The £2.6 million reduction in cash paid for interest payments and
servicing of debt is attributable to lower average debt balances and lower
interest costs under our revolving credit facility, which was entered into
during September 2004.
Capital
Expenditure and Financial Investment
During
1st Half
2005 we
increased our net cash outflow for capital expenditure and financial investment
by £2.4
million to £7.1 million as we continued
our program of replacements and upgrades of our equipment.
Financing
Activities
Our net
cash outflow from financing activities was £11.2 million during 1st Half
2005 compared to £31.9 million during 1st Half
2004. In 1st Half
2004 we reduced our cash balances to repay part of the principal of our
revolving credit borrowing facility. This was partially offset by cash inflows
of £1.0 million arising from the exercise of stock options. We remain focused on
reducing our net debt through cash inflows from operating
activities.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| |
|
|
| |
ENODIS
PLC |
|
|
|
| May 17, 2005 |
By: |
/s/ David McCulloch |
| |
Name: David
McCulloch |
| |
Title: Chief
Executive Officer |
EXHIBIT INDEX
Exhibit
Number Description
| 99.1 |
Press
Announcement of the Company distributed on May 17, 2005 regarding
financial results. |
| 99.2 |
Press
Announcement of the Company distributed on May 17, 2005 regarding a
capital restructuring. |
| 99.3 |
Press
Announcement of the Company dated May 17, 2005 regarding the commencement
of its tender offer and consent solicitation. |
| 99.4 |
Offer
to Purchase and Consent Solicitation Statement of the Company dated May 17
2005. |
| 99.5. |
Notice,
dated May 18, 2005, announcing the commencement of the tender offer and
consent solicitation. |