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Farsons reports profit before tax of €12.3 million 5/27/2020

Farsons reports profit before tax of €12.3 million

Board of Directors will not propose final dividend

Simonds Farsons Cisk plc has announced its financial results for year ended January 2020 at a time of a very dynamic and increasingly demanding market environment. Turnover improved by 4% over last year having now reached €103 million.   Turnover increases came from the Group’s beer and beverages sectors as well as strong growth from the franchised food retailing sector.  Despite this turnover growth, the Farsons Group has seen a decline in its pre-taxation profit level from €14 million last year to €12.3 million this year.   Profit before taxation fell short of last year’s profit due to compression of the gross margin, an increase in the required impairment provision relating to trade debtor receivable balances along with increased payroll costs which were particularly propelled by the tight labour market conditions.

The Group’s profit after taxation was further reduced as it was deemed not appropriate to increase further the recognized deferred tax asset.  In facing up to the crisis created by the COVID-19 pandemic, the Board of Directors will continue to give utmost priority to all its various stakeholders.  Farsons has entered into this crisis from a position of strength following several years of considerable capital investment and record profits. Additionally, since the COVID-19 outbreak, the Board has implemented measures directed at protecting and preserving the commercial well-being of the Farsons Group by taking a number of cost-cutting and other initiatives.

Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to €22.7 million, a marginal decrease of 2% compared to last year.  The Group’s net borrowings increased by €1 million and the gearing ratio increased from 23.4% to 25.9%. Total equity of the Group increased from €108 million to more than €116 million, reflecting the profit generated net of the dividends distributed earlier during the year.

Farsons Group Chief Executive Officer Norman Aquilina said: “With these results in mind, it remains critical for us to continue to focus closely on our productivity levels and overall competitiveness to be able to best respond to the extraordinary market conditions that currently prevail.  Our cost structures, along with our ability to optimise on all our investments and value-added activity, need to be kept under constant review so as to ensure that we maintain the most productive and cost-efficient set-up possible.”

“Announcing these results in the midst of the COVID-19 pandemic not only makes the current global scenario seem even more surreal and challenging, but has brought about a new reality and way of living, requiring us to continue to undertake various structural changes and corrective actions needed to further strengthen our business model,” explained Mr Aquilina.

Commenting on the Group’s performance, Farsons Group Chairman Louis A Farrugia said: “The existing strength of the Farsons Group’s financial position and our core product range along with the measures being undertaken by management during these unprecedented times, will ensure our resilience and support and sustain our operations during the difficult period ahead.  Regretfully, due to the current uncertain environment, the Board has reluctantly concluded that in the long-term interest of the business, it would not be prudent to propose a final dividend at this time.  Our performance and future prospects will be kept under constant review and shareholders can rest assured that dividend distributions will be resumed immediately when judged prudent to do so.”

Mr Farrugia also referred to the Old Brewhouse project, reporting progress on its restoration and transformation into an office and leisure centre which will include a Visitors’ Attraction featuring the Farsons story, a brew pub, a brand store, cafeteria and a ‘Cisk Sky Bar’.  This project has been planned alongside the ‘Trident Business Park’ campus being undertaken by Trident Estates plc.  The Chairman noted that it was unfortunate that the project has also been impacted by COVID-19 implications, also observing that the projects were both planned as long-term investments.

With respect to the financial year under review, an interim dividend of €1 million that is €0.0333 per ordinary share had been approved at the Board Meeting held on 25th September 2019 and distributed to shareholders on 16th October 2019.  In view of the impact on the business of the COVID-19 pandemic and the uncertainty caused by the inadequate visibility concerning the timing of any amelioration of the current crisis and any recovery therefrom, the Board of Directors has not deemed it appropriate at this time to recommend the payment of a final dividend to the forthcoming Annual General Meeting, which had been provisionally scheduled to be held on the 25th June 2020 but is likely to be postponed to a later date due to the current situation.