• Unique new business created through Booker merger
  • Cost savings and synergies of at least £50 million expected next year
  • Iceland like for like food sales up 6%
  • Group profit before taxation up 10% to £32.1 million
  • Diluted earnings per share up 12% to 10.73 pence
  • Interim dividend up 10% to 2.2 pence per share
  • Roll-out of new Iceland.co.uk fascia and 'Extra' range under way
  • Extending range of organic food at everyday supermarket prices
  • Trialling sales of Iceland and Woodward products through Booker
  • Experimenting with extended range home shopping offer
'Despite poor summer weather and a highly competitive market, Iceland's like for like food sales in the nine weeks to 2nd September have grown by 4.5 per cent, while Booker's like for like sales excluding tobacco are up 2.0 per cent. We are vigorously pursuing every opportunity to drive down costs, and to maximise the selling opportunities created by the merger of these two highly complementary businesses.'

ENQUIRIES:

Iceland Group
Malcolm Walker C.B.E., Chairman 020 7796 4133 on 5 Sept / 01244 830100
Stuart Rose, Chief Executive 020 7796 4133 on 5 Sept / 020 7411 5585
Andrew Pritchard, Group Finance Director 020 7796 4133 on 5 Sept / 01244 830100
Charles Wilson, Managing Director - Booker 020 7796 4133 on 5 Sept / 01933 371000
Russell Ford, Managing Director - Iceland 020 7796 4133 on 5 Sept / 01244 830100

Hudson Sandler
Keith Hann / Michael Sandler 020 7796 4133


CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

The core Iceland business maintained a robust performance in the first six months of 2000, with like for like food sales up 6 per cent and Group pre-tax profit up 10 per cent. We continued to differentiate Iceland from its competitors through an emphasis on Food You Can Trust, announcing in June that we would convert our complete frozen vegetable range to organic at everyday supermarket prices in October this year. The merger with Booker has created a unique new business serving retail and trade customers through both traditional and new economy formats. Our integration teams are up and running, and our experience to date underpins our confidence in the delivery of our forecast cost savings, and in our ability to seize the expected opportunities to drive top-line growth.

Results

Like for like food sales growth of six per cent was sustained throughout the first half, and total sales rose by eight per cent to £997.9 million. Operating profit grew by 10 per cent to £39.5 million, with a slight increase in our operating margin. Pre-tax profit grew by 10 per cent to £32.1 million, and diluted earnings per share rose by 12 per cent to 10.73 pence.

Finances

The Booker acquisition was completed on 23rd June and therefore made no material contribution to our trading results in the first half. The Group balance sheet at 1st July does reflect its consolidation, with net assets of £576.0 million, borrowings of £477.8 million and goodwill of £427.5 million. Gearing is 83 per cent and pro forma interest cover is 3.4 times, which we regard as comfortable in the light of the enlarged Group's strong cash generation.

Dividend

The Board has declared an interim dividend of 2.2 pence per share (1999: 2.0 pence), an increase of 10 per cent. This will be payable on 13 November 2000 to all shareholders on the register at the close of business on 15 September 2000. As a result of the change in the enlarged Group's year end from December to March, we will announce our recommended final dividend in June 2001, and will adjust this payment to reflect its coverage of a nine month period. We remain committed to our policy of raising dividends broadly in line with the growth of earnings per share over the medium term.

Iceland.co.uk

The core Iceland retail business has continued to make good progress. Following the successful trials of our Extra convenience store format, we have decided to include elements of its extended range in all refurbished stores. We plan 85 such refurbishments this year, around half of which will carry the complete Extra range including fresh fruit and vegetables, health and beauty products, and extended chilled, grocery and non-food ranges. The product offer in the other refitted stores will be tailored to reflect our analysis of sales potential, based on their location, customer mix and local competitive profile. All refurbished stores will carry the new Iceland.co.uk fascia, which is being rolled out progressively across the chain. It will be carried by 250 stores by end of 2000, and by the entire chain by June 2001. Our vehicle fleet will all carry the new livery by October 2000.

After its very successful trial in Birmingham, the Bhs Food Store concept was extended to a further 11 locations during the first half, covering a broad mix of towns and store types. Some of these additional units are trading well, while the performance of others is slightly below our expectations. We are awaiting clarification of Bhs's own strategy under its new owners and managers before considering further development of the concept.

We are committed to making high quality, wholesome and natural food available to all, at affordable prices. In June we converted our entire standard ice cream tub range to organic, and in October we will also complete the conversion of our Iceland brand frozen vegetable range. Our move to make organic food available at ordinary supermarket prices has been very well received by consumers, and we will progressively convert further major ranges in the future.

Booker Cash & Carry

The Booker cash and carry business has achieved further planned efficiency improvements in both its branches and the supply chain. The roll-out of new designs for the 'Happy Shopper' own label range is proceeding to plan, and the 'Premier' convenience store fascia has been extended to 550 UK locations. Catering turnover has benefited from a range of initiatives to extend the product range, guarantee availability on key lines and hold prices throughout the summer season as an aid to menu planning. Booker sold its 50 per cent interest in Booker Tate on 11 August 2000, completing the programme of non-core business disposals that began in 1998.

Woodward Foodservice

Woodward has continued to perform well, growing in line with our plans. It recently won a major contract to supply Punch Taverns nationwide, and is well on course to meet our target of becoming a £100 million turnover business by 2001. The merger with Booker creates new opportunities, giving access to Booker's 300,000-strong catering customer base.

Integration

We have established cross-business teams tasked with maximising cost savings and synergies for the enlarged Group in buying, the supply chain and e-commerce, and with developing sales of Iceland and Woodward products through Booker and of the Booker range through Iceland. All our work to date underpins our confidence in the delivery of cost savings and trading synergies of not less than £20 million in the current trading period to March 2001, and of at least £50 million in the year to March 2002.

E-commerce

Last year Iceland launched the first Internet home shopping service to be truly available nationwide, and the only service that is free of delivery and administration charges subject to a minimum order value of £40. Further developments are planned under our new home shopping director Jon Grey, who joined us in May. We have recently begun an initial trial offering a significantly wider product range, picked from a Booker depot. The Booker business-to-business internet portal is also undergoing trials with small customer groups, and has received an encouraging response. We are confident that there is significant potential to leverage our already strong position in e-commerce, by combining Iceland's brand and home delivery expertise with Booker's low cost space and supply chain.

Management

Following completion of the merger on 23rd June, Malcolm Walker became Chairman and Stuart Rose Chief Executive of the enlarged Group, with Charles Wilson as Managing Director of Booker and Russell Ford as Managing Director of Iceland. Andrew Pritchard continues as Group Finance Director. There are four non-executive directors: Tom Knowlton and Iain Sharp from the former Iceland board, and David Price and Alan Smith from Booker. The cultures of Iceland and Booker are proving genuinely complementary. We are pleased to report that our executive teams at and below board level are working well together, and are enthusiastically committed to maximising the potential benefits of combining the two businesses.

We would also like to take this opportunity to record our appreciation of the contributions of those directors of Iceland and Booker who retired from the respective boards to facilitate the merger.

Outlook

Despite poor summer weather and a highly competitive market, Iceland's like for like food sales in the nine weeks to 2nd September have grown by 4.5 per cent, while Booker's like for like sales excluding tobacco are up 2.0 per cent. We are vigorously pursuing every opportunity to drive down costs, and to maximise the selling opportunities created by the merger of these two highly complementary businesses. The enlarged Iceland Group has a distinctive position on the high street, a strong platform for growth in catering and e-commerce, and great opportunities to realise economies of scale in buying, logistics and administration. We view the future with confidence and enthusiasm.

Malcolm C. Walker CBE, Chairman
Stuart Rose, Chief Executive

 

GROUP PROFIT AND LOSS ACCOUNT FOR THE 26 WEEKS ENDED 1 JULY 2000

  26 weeks
ended
1 July 2000
(Unaudited)
£m
26 weeks
ended
3 July 1999
(Unaudited)
£m
52 weeks
ended
1 Jan 2000
(Audited)
£m
Turnover 997.9 925.6 1917.7
Operating profit before operating
exceptional items
39.5 35.9 78.4
Operating exceptional items:
Redundancy costs
0.0 0.0 4.1
Operating profit after operating
exceptional items
39.5 35.9 74.3
Non-operating exceptional items:
Provision for loss on disposal of fixed assets
0.0 0.0 2.1
  39.5 35.9 72.2
Interest payable 7.4 6.7 13.1
Profit on ordinary activities before taxation 32.1 29.2 59.1
Tax on profit on ordinary activities 10.3 9.6 20.3
Profit on ordinary activities after taxation 21.8 19.6 38.8
Dividends 7.2 3.9 12.6
Other appropriations - non-equity shares 0.0 0.3 0.3
Retained profit for the period 14.6 15.4 25.9



  pence pence *pence
Earnings per ordinary share - basic 11.10 11.09 20.84
Earnings per ordinary share - diluted 10.73 9.55 18.94
Dividend per ordinary share 2.20 2.00 6.40

* The earnings per ordinary share for the 52 weeks ended 1 January 2000 are stated after exceptional items

There were no material gains or losses other than the profit for the current and previous financial periods.


GROUP BALANCE SHEET AS AT 1 JULY 2000


  As at
1 July 2000
(Unaudited)
£m
As at
3 July 1999
(Unaudited)
£m
As at
1 January 2000
(Audited)
£m
Fixed Assets      
Intangible assets 437.9 1.2 7.1
Tangible assets 720.3 484.6 492.6
Investments 22.7 11.9 14.0
  1,180.9 497.7 513.7
Current Assets         
Stocks 327.5 91.9 112.4
Debtors: due after one year 100.5 0.0 0.0
Debtors: due within one year 145.4 50.9 74.4
Short term deposits 14.5 12.7 12.6
Cash at bank and in hand 34.6 33.6 35.7
  622.5 189.1 235.1
Creditors: due within one year (671.7) (276.2) (335.0)
Net current liabilities (49.2) (87.1) (99.9)
Total assets less current liabilities 1,131.7 410.6 413.8
Creditors: due after one year (506.4) (204.3) (196.2)
Provisions for liabilities and charges (49.3) 0.0 0.0
  576.0 206.3 217.6



  As at
1 July 2000
(Unaudited)
£m
As at
3 July 1999
(Unaudited)
£m
As at
1 January 2000
(Audited)
£m
Capital and reserves:      
Called up share capital      
Issued 20.7 21.8 20.5
To be issued 13.2 0.0 0.0
Share premium account 14.1 9.6 13.0
Merger reserve      
Balance 14.1 14.1 14.1
Arising on acquisition of Booker 330.1 0.0 0.0
Profit and loss account 183.8 160.8 170.0
Shareholders' funds 576.0 206.3 217.6

Shareholders' funds above include £nil (3 July 1999 - £10.2m, 1 January 2000 - £nil) relating to non-equity shareholders.

GROUP CASH FLOW STATEMENT FOR THE 26 WEEKS ENDED 1 JULY 2000

  26 weeks
ended
1 July 2000
(Unaudited)
£m
26 weeks
ended
3 July 1999
(Unaudited)
£m
52 weeks
ended
1 January 2000
(Audited)
£m
Cash flow from operating activities 46.3 64.5 161.8
Servicing of finance (9.3) (7.4) (14.7)
Taxation (6.5) 0.5 (23.2)
Capital expenditure and financial investment (34.3) (57.0) (84.7)
Acquisitions (0.3) (0.6) (14.5)
Equity dividends paid (8.7) (6.9) (10.9)
Cash (outflow)/inflow before use of liquid resources and financing (12.8) (6.9) 13.8
Management of liquid resources (1.9) 1.3 1.4
Financing 13.4 16.0 13.9
(Decrease)/increase in cash for the period (1.3) 10.4 29.1
Reconciliation of net cash flow to movement in net debt:      
(Decrease)/increase in cash for the period (1.3) 10.4 29.1
Cash inflow from movement in debt and lease financing (13.0) (15.4) (12.3)
Cash outflow/(inflow) from movement in liquid resources 1.9 (1.3) (1.4)
Borrowings acquired with subsidiaries (296.9) 0.0 (3.8)
Movement in net debt in the period (309.3) (6.3) 11.6
Net debt at 2 January 2000 (168.5) (180.1) (180.1)
Net debt at 1 July 2000 (477.8) (186.4) (168.5)

NOTES TO THE ACCOUNTS

1. Basis of preparation of interim financial information

The interim financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 1 January 2000. Expenses are accrued in accordance with the same principles used in the preparation of the annual accounts.

2. Exceptional items

The exceptional costs relate to the reorganisation of the retail division's distribution network.

3. Interest payable

Interest on bank loans and overdrafts 6.0 6.1 12.6
Finance charges payable under finance leases 1.4 1.1 1.8
Capitalised interest 0.0 (0.5) (1.3)
  7.4 6.7 13.1

4. Tax on profit on ordinary activities
    Taxation is provided at 32.0 per cent, being the anticipated rate of taxation for 2000 (26 weeks ended 3 July 1999 - 33.0 per cent, 52 weeks ended 1 January 2000 - 33.0 per cent).

5. Dividends

Ordinary dividend on equity shares 7.2 3.9 12.6
Amortisation of redemption premium on preference shares 0.0 0.3 0.3
6. Basic and diluted earnings per ordinary share
    Earnings per ordinary share are based on profit for the financial period after exceptional items, and after deducting other appropriations of £21.8m (26 weeks ended 3 July 1999 - £19.3m, 52 weeks ended 1 January 2000 - £38.5m), and the weighted average number of ordinary shares in issue of 196.4m (26 weeks ended 3 July 1999 - 173.8m, 52 weeks ended 1 January 2000 - 184.7m), after excluding the shares owned by the Iceland Group Employee Share Ownership Plan.
    Diluted earnings per ordinary share are based on profit on ordinary activities after exceptional items and tax of £21.8m (26 weeks ended 3 July 1999 - £19.6m, 52 weeks ended 1 January 2000 - £38.8m), and the weighted average number of ordinary shares in issue of 203.2m (26 weeks ended 3 July 1999 - 205.1m, 52 weeks ended 1 January 2000 - 204.8m) after adjusting for the effect of any dilutive potential ordinary shares.
7. Reconciliation of movement in shareholders' funds
  26 weeks
ended
1 July 2000
(Unaudited)
£m
26 weeks
ended
3 July 1999
(Unaudited)
£m
52 weeks
ended
1 January 2000
(Audited)
£m
Profit for the period 21.8 19.6 38.8
Dividends paid and proposed (7.2) (3.9) (12.6)
New share capital allotted, including premium 1.3 20.3 29.5
Redemption of preference shares, including premium 0.0 (19.7) (27.9)
Quest contribution (0.9) 0.0 0.0
Exchange gain / (loss) 0.1 (0.4) (0.6)
Share capital to be issued in relation to the acquisition of Booker 343.3 0.0 0.0
Net increase in shareholders' funds 358.4 15.9 27.2
Shareholders' funds at the beginning of the period 217.6 190.4 190.4
Shareholders' funds at the end of the period 576.0 206.3 217.6

8. Acquisition of Booker plc

On 25 May 2000 the boards of Iceland and Booker plc announced that they had agreed the terms of the acquisition of Booker by Iceland. On 23 June the offer became unconditional. The offer was made on the basis of 0.5292 Iceland shares being issued for each Booker share held.

The interim financial statements include Booker plc. As the acquisition occurred just before the half year end, the impact of Booker on the trading results of the enlarged group is immaterial. On this basis, Booker's results are not included in the Group Profit and Loss Account.

The net assets of Booker at the date of acquisition are:

  Book Value
£m
Fair value
adjustments
£m
Fair value
to the group
£m
Tangible fixed assets 237.9 (8.9) 229.0
Intangible fixed assets 3.3 0.0 3.3
Investments 5.7 (0.5) 5.2
Stocks 227.9 0.0 227.9
Debtors 169.6 0.0 169.6
Cash 1.6 0.0 1.6
Creditors: due within one year (358.2) (4.2) (362.4)
Creditors: due after one year (295.2) (3.0) (298.2)
Provisions for liabilities and charges (24.2) (11.4) (35.6)
  (31.6) (28.0) (59.6)
Goodwill arising on acquisition     427.5
      367.9
Discharged by:      
Fair value of shares issued     343.3
Costs associated with the acquisition     24.6
      367.9

9. Reconciliation of operating profit to operating cash flows

  26 weeks
ended
1 July 2000
(Unaudited)
£m
26 weeks
ended
3 July 1999
(Unaudited)
£m
52 weeks
ended
1 January 2000
(Audited)
£m
Operating profit before exceptional items 39.5 35.9 78.4
Depreciation 30.8 28.0 57.1
Loss on sale of fixed assets 0.2 0.5 0.4
Amortisation of goodwill 0.2 0.0 0.1
Exceptional costs 0.0 0.0 (1.0)
Exchange gain/(loss) 0.1 (0.4) (0.6)
Decrease in stocks 12.8 23.6 4.4
(Increase)/decrease in debtors (1.7) 10.0 (9.4)
(Decrease)/increase in creditors (35.6) (33.1) 32.4
Net cash inflow from operating activities 46.3 64.5 161.8

10. Analysis of cash flows for headings netted in the cash flow statement

Servicing of finance: 26 weeks
ended
1 July 2000
(Unaudited)
£m
26 weeks
ended
3 July 1999
(Unaudited)
£m
52 weeks
ended
1 Jan 2000
(Audited)
£m
Interest paid (8.1) (6.3) (12.8)
Interest element of finance lease rental payments (1.2) (1.1) (1.9)
Net cash outflow for servicing of finance (9.3) (7.4) (14.7)
Capital expenditure and financial investment:      
Purchase of tangible fixed assets (31.7) (54.8) (93.8)
Sale of tangible fixed assets 0.9 1.9 15.3
Purchase of shares for ESOP (3.5) (4.1) (6.2)
Net cash outflow for capital expenditure and financial investment (34.3) (57.0) (84.7)
Management of liquid resources:      
(Increase)/decrease in short term deposits (1.9) 1.3 1.4
Cash (outflow)/inflow from management of liquid resources (1.9) 1.3 1.4
Financing:      
Issue of share capital 1.3 0.6 1.6
Purchase of shares for Quest (0.9) 0.0 0.0
Proceeds from new borrowings 182.8 17.0 25.0
Repayment of borrowings (163.1) 0.0 (24.2)
Proceeds from finance leases 0.0 2.7 19.4
Capital element of finance lease repayments (6.7) (4.3) (7.9)
Net cash inflow from financing 13.4 16.0 13.9

11. Analysis of net debt

  As at
2 Jan 2000
£m
Cash
flow
£m
Borrowings
acquired with
Booker
£m
As at
1 July 2000
£m
Cash at bank and in hand 35.7 (2.7) 1.6 34.6
Overdrafts (3.8) 1.4 0.0 (2.4)
  31.9 (1.3) 1.6 32.2
Debt due within 1 year (4.1) 0.1 (3.2) (7.2)
Debt due after 1 year (165.9) (19.8) (295.3) (481.0)
Finance leases (43.0) 6.7 0.0 (36.3)
  (213.0) (13.0) (298.5) (524.5)
Current asset investment 12.6 1.9 0.0 14.5
Total (168.5) (12.4) (296.9) (477.8)

12. This interim financial information, which is unaudited, does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The accounts for the 52 weeks ended 1 January 2000 are an abridged version of the Group's full accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985.