Nicosia / CY. (ifr) International Food Retail Capital PLC (IFR Capital), the investment company focused on consolidation opportunities in the European food retail sector, announces its interim results for the six months ended 30 June 2009. Summary / highlights:
- Strong increase in EBITDA of 19,4 percent from 15,5 million EUR (2008) to 18,5 million EUR (2009).
- Lower sales volume from termination of unprofitable Hamker contracts, resulting in significant gross margin improvement.
- Significant efficiency improvements from integration of Hamker into Homann.
- Acquisition of the food dressings production line from Walter Rau.
- Disposal of low margin Hamker margarine business.
- Internationalisation of the Nordsee franchise is on track – seven store openings during 2009.
- Improvement of capital structure by partial switch of preference shares into ordinary shares.
- No agreement with ACP regarding sale of its investment in IFR Capital.
Operational and Financial Review
The reporting period include full six month contributions from Nordsee GmbH («Nordsee»), Homann Chilled Food GmbH («Homann»), Hamker Lebensmittel Beteiligungs GmbH + Co. KG («Hamker») and Bastian´s GmbH («Bastian´s»).
The Company´s revenues for the six months ended 30 June 2009 were 363,0 million EUR (2008: 374,0 million EUR), while EBITDA before exceptional items amounted to 18,5 million EUR (2008: 15,5 million EUR). Both reported sales and EBITDA are in line with the Board´s expectations and have remained so for the period since 30 June 2009. The equity to total asset ratio at the end of the period was 23,0 percent. IFR Capital currently has 162 million EUR of interest bearing debt and 114 million EUR of preferred equity in issue (including accrued interest).
The Nordsee division in Germany and Austria generated an EBITDA of 4,9 million EUR. Sales increased by 0,8 percent on a like for like basis. The Directors believe that Nordsee is well positioned and growing faster than the wider German gastronomy market. Nordsee is expanding its international business to the Middle East and to Southern and Eastern Europe with further openings planned in Bratislava, Palma de Mallorca, Bucharest, Istanbul, Riga, Sofia and Athens. It is the intention to enter the Scandinavian and Polish markets in the near term.
The Homann/Hamker division generated 211 million EUR of sales for the period and almost doubled its EBITDA from 6,8 million EUR to 13,4 million EUR. An overall decline in net sales of 5,5 million EUR (of which 3,9 million EUR can be attributed to a reclassification of listing fees) was deliberately enforced in the private label and hard discount channel as Homann renegotiated its sales prices favouring increased margins over volume. Supported by decreased raw material costs, these measures resulted in a significant improvement in gross profit margins throughout all sales channels. The integration projects lead to savings in direct costs, especially variable labour resulting from the closure of the Lintorf salad factory (Hamker). Compared to previous year efficiency improvements stabilised the co-packing production for Kraft and Unilever. Overhead cost decreased from the integration of the sales force and several administrative functions.
Bastian´s, the premium bakery concept, continued to generate strong growth of 13 percent on like for like sales. The new store in Cologne has proven a success and further locations are being investigated for future development and growth.
The High Court proceedings between IFR Capital and ACP Capital PLC («ACP») relating to the claim by ACP for an increase of the margin on a part of the Company´s debt are currently stayed. IFR Capital has in the meantime started legal proceedings in the Royal Court of Jersey against ACP for breach of contractual and fiduciary obligations. IFR Capital is seeking damages in the amount of at least 28,4 million EUR as of the end of May 2009, continuing to accrue at a rate of approximately 50’000 EUR per day.
With effect of 17 March 2009, Theo Müller, the sole holder of the Class B Preference Shares and a substantial shareholder in IFR Capital, has restructured his investments in the IFR group and converted a part of his Class B Preference Shares in IFR Jersey Limited into 200’000’000 new ordinary shares in IFR Capital and Heiner Kamps, CEO of the Company, has increased his shareholding in the Company significantly. As a result of this transaction, the preference share capital held by shareholders outside the group has been reduced considerably. The Directors believe that the share exchange is in the best interests of IFR Capital and its shareholders and has reduced the financial burden from the preferential dividend without any cash outflow.
However, the Company strongly believes that the capital structure needs to be further improved. Given the terms of the preferred equity, it is essential that the preferred equity is wholly refinanced, either by way of redemption or conversion into ordinary equity on acceptable terms to the Board. Theo Müller, one of the owners of the preferred equity, is still strongly supportive of further converting the preferred equity into ordinary equity. However, ACP, the other external owner of the preferred equity, does not wish to convert its preferred equity into ordinary equity but rather wants to sell its whole investment in IFR Capital. Given the shareholder structure of the Company, only investors in line with the intentions of Heiner Kamps and Theo Müller are willing to purchase the investment of ACP in IFR Capital. Whilst in the Directors´ opinion, ACP has received a fair cash offer for its investment in IFR Capital no agreement to date has been reached.