23 April 2008 - Zetar, the AIM listed confectionery and snack foods group, announces the following trading update in advance of the publication of its preliminary results for the year ending 30 April 2008.
Confectionery
An early Easter in 2008 compressed sales into a short selling period and resulted in the cancellation of some late private label orders. However, a robust performance by Kinnerton’s character license products at both Christmas and Easter, a first full year contribution from Horsley Hick & Flower, increased distribution of chocolate and yoghurt coated fruits and nuts, and new third party manufacturing contracts are expected to result in the division’s adjusted operating profit* exceeding that for the previous year.
Natural & Premium Snacks
The inclusion of Humdinger’s results for the full year, compared to ten months for the previous year, accounts for approximately nine per cent of the increase in divisional sales. Agreed price increases have allowed the division to recover a significant part of its raw material cost increases and the like-for-like adjusted operating profit* of the division is expected to be approximately ten per cent ahead of the previous year.
The Baked Snacks Company (“BSC”)
BSC was formed in May 2007 to acquire the assets and business of Britannia Biscuits Company (International) Ltd and to enable Zetar to enter the rapidly developing market for healthier baked (not fried) snacks. Initial efforts were focused on completing the factory and developing products for customer launches in the last quarter of the current financial year, with significant capital and revenue investment being incurred by the Group. As is the nature of all start up operations, BSC’s results are highly sensitive to the timing of new business sales. Despite initial customer launches in February 2008, enabling BSC to approach break even for that month, the postponement of subsequent launches until after the financial year end will result in the expected adjusted operating loss* for the current year increasing to approximately £1.0 million. Potential customer enquiries remain high and support the Board’s confidence in the potential for BSC’s products.
Group results
Group adjusted operating profit* for the year ending 30 April 2008 is expected to be approximately in line with that reported in the previous year (despite absorbing the start up losses incurred at BSC referred to above).
As reported in the half year results, interest costs have been adversely impacted due to abnormal LIBOR margins over base rate. This condition has persisted into the second half and will result in finance charges of approximately £0.1 million more than previously expected.
It is anticipated that Group net debt at 30 April 2008 will be in line with market expectations.
Outlook
Despite a general deterioration in the UK economy, reduced consumer spending and rising raw material and other costs, which will continue to provide the Group with a challenging trading environment, the Board believes that Zetar is well positioned to meet these challenges as it continues to invest across its divisions and focus on differentiating its products in the more dynamic indulgent and healthier eating sectors of the food market.
The Board is confident that the Group’s financial performance in 2008/09 will benefit from: recent investments; BSC achieving profitability; and a full-year contribution from Lir.
The Group’s preliminary results for the year ending 30 April 2008 are expected to be announced on 23 July 2008.