Correction - Half-year Report

INTERIM RESULTS - CORRECTION

This is a correction to the "Half-Year Report" announcement released on 20 August 2020 at 10:30am London time under RNS No.7099W which erroneously stated in the Divisional Highlights table that the Jun-20 Sourcing Revenue was £7.4m, operating margin was 1.4% and the growth for the period was (24.5%). This has been corrected to state that the June-20 Sourcing Revenue was £8.4m, operating margin was 1.2% and the growth for the period was (14.3%). 

All other details remain unchanged.

 The full amended text is shown below.

Norish plc

Interim results 2020

Results

Norish plc (AIM: NSH), is pleased to announce its interim results for the six months ended 30 June 2020.

Financial Highlights

·    During the period the Group's balance sheet continued to strengthen

·    Sales fell 9% from £17.5m to £15.9m

·    Fully diluted adjusted EPS fell by 34%, year on year, from 3.1p to 2.06p

·    Pre-IFRS 16 net debt reduced by £2m from £4.7m to £2.7m. Net debt after IFRS 16 adjustments reduced from Stg £9.7m at Dec-19 to Stg £7.7m at Jun-20. Cash availability amounts to £3m at June 2020.

·    Interest cover pre IFRS 16 was 14.9 times.

Divisional Highlights

Cold Stores

Sales in the temperature-controlled division declined 2.7%, a creditable performance given the considerable disruption to trade in both our cold store divisions, arising as a result of the Covid 19 pandemic. Overall profits declined by 19% reflecting the high fixed cost nature of the business.

Pallets into our cold stores, the life blood of our business, were particularly impacted as our end user market (China and foodservice) was neutered by covid 19, down 24%, year on year, in the period. Blast freezing volumes saw a reduction in activity from 65,220 pallets blast frozen to 59,351 pallets blast frozen. A second key metric, that of stock turn, again reflected the state of flux in the market, with average stock holding moving out from 6.6 weeks to 8.2 weeks. Pricing action offset these headwinds in significant part.

Like for like operational costs were cut to reflect lower activity levels but some new additional costs were incurred to minimise the risk of an outbreak of Covid 19 at our sites. Cold store profits declined by 6.4% in the South East, in the period under review, while profits declined by 22% in the North West.

Sourcing Division

Sales at our sourcing division declined by 14% in the first half of 2020, compared with the same period in 2019, from £9.8m to £8.4m. Operating profit declined by a corresponding 50%, year on year, from £0.2m to £0.1m, reflecting the impact of Covid 19 and tighter margins.

Dairy Division

Our investment in dairy is moving from the development to commercial phase. 

Our subsidiary, Grass to Milk Company, continues to execute to plan with its first A2 protein-based product in the final stages of development and an expected launch of this product, in high value export markets by the year end. The business has built considerable technical and commercial expertise to support a successful product launch and is engaging with a strong in-market commercial partner. We believe the business is well placed to add value to our unique grass-fed A2-protein milk supply. 

Cantwell's Court Farm's operating performance in the first half of 2020 was consistent with our expectations. Milk revenue was 3% ahead year on year, reflecting a 6% increase in volume driven by better production per cow and a 3% decline in pricing. Operating costs were ahead year-on-year reflecting lower than average pasture growth in the first half, initially due to a wet Spring followed by drought conditions in May and June. Our farming enterprise continues to improve incrementally across key operating KPIs, and our herd is now fully converted to A2 which will form the basis for our future A2-protein milk supply. 

The dairy divisions performance was impacted by incurring £0.1m in converting to an A2 herd.

Outlook

Our cold store business customer base substantially covers the UK Food Service and Chinese pork markets. Both markets were severely disrupted by Covid 19, resulting in customers converting stock to cash, in the first instance, in order to generate liquidity. This dynamic resulted in greater outflows of product, something we believe is necessarily transitory in nature.

Pricing in the Chinese pork market has recovered to a level which should sustain a strong export trade over the balance of the year, which will be positive for our North West division. In the South East, management have adapted our offering to reflect the current state of the British Food Service market, which is recovering in any event. We expect the profitability of our South Eastern division to be ahead of last year.

We are happy with the significant progress made with the development of our A2 protein milk supply via Cantwell's Court Farm. Grass to Milk Company remains on track to launch its first A2 protein-based product before year end, using our unique milk source.

The fallout in the UK Food Service market has afforded Town View Foods, our protein trading subsidiary, the opportunity to increase our trading network and rebuild our business. With an eye to opportunities post Brexit, we are now extending our footprint to South America on a minimal cost basis.

We believe our balance sheet strength affords us opportunity in the current environment, vis a vis many of our competitors in the sector.

Dividend

The board does not recommend the payment of an interim dividend, unchanged from last year.

Note: The accounting policies applied throughout the period are consistent with those applied for the year ended 31 December 2019, as set out in the 2019 Annual Report.

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