Fresh from its £51 million takeover of Cuisine de France, foods group IAWS has turned in an excellent set of full-year results, comfortably ahead of market forecasts.
Pre-tax profits rose by 37 per cent to £25.3 million in the year to the end of July, while sales were ahead by 5 per cent to £581.8 million. The profits figure was distorted by an exceptional gain of £4 million on the sale of Lisburn Proteins, but even when this gain is excluded, the results came in ahead of forecasts. The shares were 1p higher on 258p.
The £51 million acquisition of Cuisine de France will have a major impact on IAWS's balance sheet, with gearing rising from 30 per cent to around 100 per cent, but interest cover will remain strong with interest charges covered over four times by operating profits.
Asked whether the recent big acquisition means that IAWS was unlikely to bid for any of the British foods businesses being sold off by Dalgety and Harrisons & Crosfeld, chief executive Mr Philip Lynch was coy. He said, however: "It would be stupid to take on something and take our eyes off the ball, we are great believers in digesting something first and then moving on," an indication that IAWS is unlikely to make a big acquisition until Cuisine de France is fully integrated into the IAWS structure.
Finance director Mr David Martin said, however, that the cost of the Cuisine de France acquisition would not be a limiting factor if IAWS wanted to make an acquisition. "We have our own cash flow, we can borrow, we have access to private placings and our own shareholders." He added, however, that looking to IAWS shareholders for funding would be very much a last resort.
IAWS will be investing £12 million over the next year in developing the Cuisine de France business, between expanding the Irish plant in Tallaght and building a greenfield operation in Britain.
The Cuisine de France acquisition gave IAWS a more balanced business, and all four parts of the business - food, animal feed, fertilisers and proteins and oils now have broadly equal status in terms of operating profits. "We have no dependence on any single sector," said Mr Lynch.
Last year, IAWS's food operations performed well, with one major factor being the addition of the Master Foods agency. The new Bolands flour mill performed ahead of expectations and flour volumes increased over the period.
Animal feed volumes declined as did product prices, but Mr Lynch said prospects for the current year were encouraging with livestock and dairy herds at record levels and a more favourable outlook for key areas of the beef sector.
Fertilisers produced increased earnings despite lower volumes - although volumes in Britain increased as a result of the Kent acquisition. The Cedest acquisition in France has opened up new opportunities and IAWS is looking to add to the French company's product base, particularly in the horticultural fertiliser area.
During the year, IAWS spent £34 million on capital expenditure and acquisitions, but generated £21 million in free cash. As a result, interest cover remained high at 5.3 times. Earnings per share - adjusted for exceptional items - were up 16 per cent to 13.7p, while a final dividend of 1.68p has been declared, an increase of 10 per cent.
Mr Lynch flatly rejected suggestions that IAWS was being "mean" with its dividend. "If anybody has invested in us for the dividend, they should sell the shares, if they want a dividend they should go into the banks and get 6 per cent.
He added that between the dividend and the rise in the share price, shareholder value for those who invested in the past 12 months has risen by 52 per cent.
