Sepp's Gourmet Foods Ltd.

Sepp's Gourmet Foods Ltd.

March 14, 2005 12:54 ET

Sepp's Q2 2005 Results: Second Consecutive Quarter of Positive EBITDA


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: SEPP'S GOURMET FOODS LTD.

TSX SYMBOL: SGO

MARCH 14, 2005 - 12:54 ET

Sepp's Q2 2005 Results: Second Consecutive Quarter of
Positive EBITDA

SURREY, BRITISH COLUMBIA--(CCNMatthews - March 14, 2005) - Sepp's
Gourmet Foods Ltd. (TSX:SGO) ("Sepp's" or the "Company") announces
results for the second quarter 2005 and for the six months ending
January 31, 2005. Detailed information is available by visiting the
Company's site on the SEDAR website at www.sedar.com and reviewing the
MD&A and Financial Statements.

Second Quarter 2005

- Operating earnings before interest, taxes, depreciation and
amortization (Operating EBITDA) was $296,000 for the three months ending
January 31, 2005 compared to ($208,000) in the similar period in 2004.

- The Company recorded a pre-tax loss of $45,000 for the period compared
to a pre-tax loss of $559,000 in the same period last year.

- The Company reduced its long-term debt from $2.2 million to $1.6
million. Total interest-bearing debt increased by $382,000 during the
period to $4.13 million. The Company had negative working capital of
$275,000 at January 31, 2005, down from a $177,000 positive working
capital position at July 31, 2004.

- The gross profit margin of the Company improved to 15% from 10.4% in
the comparable period. Gross profit increased to $1.37 million from
$1.12 million last year. Selling, general and administration expenses
were $1.13 million, down from $1.5 million last year.

- Sales for the three months ending January 31, 2005 were $9.07 million,
down from $10.70 million in the comparable period 2004 (see chart
below). A number of factors contributed to lower sales: the sale of the
pate division in October 2003; the sale of the First City bakery
division in August; the appreciation of the Canadian dollar; and a
change from a buy-sell to a commission structure with one of the
Company's main principals in the distribution division.

- In the three months ending January 31, 2005 the Company had negative
cash flow from operating activities of $149,000, a decrease from
$1,167,000 positive cash flow in the similar period last year. However,
before the changes in non-cash working capital, the Company achieved
$304,000 in cash flow, compared to a negative $146,000 in the same
period last year.

Mr. Tom Poole, President and CEO, stated: "Restructuring efforts are
continuing. The many changes that have been initiated over the past
eighteen months have resulted in a leaner, more focused company and we
are pleased to report the second consecutive quarter of positive EBITDA
and improved gross margins. The launch of a number of exciting new
products such as a microwaveable grilled cheese sandwich, coupled with
the Company's restructuring efforts, have had a positive impact on
operating results."

The first six months of 2005

- Operating EBITDA for the first six months was $544,000, an improvement
over the negative operating EBITDA of $255,000 experienced last year.

- The Company recorded a pre-tax loss of $121,000 for the six month
period compared to a pre-tax loss of $1,014,000 in the same period last
year (before the sale of the pate division).

- Sales for the first six months of fiscal year 2005 were $16.88
million, down from $22.02 million in the comparable period 2004 (see
chart below). A number of factors contributed to lower sales: the sale
of the pate division in October 2003; the appreciation of the Canadian
dollar; and a change in the distribution arrangement with one of the
Company's main principals in the distribution division which saw a
conversion to a commission structure for a portion of the goods sold.

- The gross profit margin of the Company in the first six months
improved to 14.5% from 10.5% in the comparable period. Gross profit
increased to $2.44 million from $2.32 million last year. Selling,
general and administration expenses were $2.23 million, down from the
$3.00 million last year.

- In the six months ending January 31, 2005 the Company had negative
cash flow from operating activities of $160,000, an improvement over the
negative $614,000 in the similar period last year. Before the changes in
non-cash working capital, the Company achieved positive $419,000 in cash
flow, compared to negative $333,000 in the same period last year.

Mr. Tom Poole, President and CEO, stated: "The many changes made in the
past eighteen months have resulted in a significant improvement in the
Company's operations. We continue to focus on the fast-growing frozen
breakfast category while looking to add innovative products targeted at
the convenience food market."

Sepp's Gourmet Foods Ltd. is a producer and marketer of specialty
prepared foods for the retail grocery and food service sectors in North
and South America, and Southeast Asia. Sepp's is a publicly traded
company traded on The TSX under the symbol SGO.

This release may contain forward-looking statements. Various factors
could cause actual results to differ materially from those projected in
forward-looking statements. Although the Company believes that the
forward-looking statements contained herein are reasonable, it can give
no assurance that the Company's expectations are correct. All
forward-looking statements are expressly qualified in their entirety by
this cautionary statement.

Comparative figures for the three months ended January 31, 2005 compared
to the three months ended January 31, 2004(except for balance sheet
information which is compared to July 31, 2004)



--------------------------------------------------------------------
($000's) except per share data January 31, January 31, 2004
2005 or July 31, 2004
--------------------------------------------------------------------
Sales 9,072 10,708
--------------------------------------------------------------------
Cost of Sales 7,707 9,592
--------------------------------------------------------------------
Gross Profit 1,365 1,116
--------------------------------------------------------------------
Expenses 1,395 1,675
--------------------------------------------------------------------
Operating EBITDA 296 (208)
--------------------------------------------------------------------
Net Earnings (45) (413)
--------------------------------------------------------------------
Working Capital (275) 177
--------------------------------------------------------------------
Property Plant and Equipment 5,557 5,729
--------------------------------------------------------------------
Total Assets 12,390 13,285
--------------------------------------------------------------------
Long Term Debt 1,639 2,202
--------------------------------------------------------------------
Total interest bearing debt 4,126 3,744
--------------------------------------------------------------------
Shareholder's Equity 3,779 3,841
--------------------------------------------------------------------
Cash flows from operating activities (149) 1,167
--------------------------------------------------------------------
Earnings per share ($0.00) ($0.03)
--------------------------------------------------------------------
Shares Outstanding
(Basic Weighted Average) 16,017,971 13,133,188
--------------------------------------------------------------------


Comparative figures for first six months of fiscal period 2005 and 2004



--------------------------------------------------------------------
($000's) except per share data Ended Ended
January 31, January 31,
2005 2004
--------------------------------------------------------------------
Sales 16,875 22,024
--------------------------------------------------------------------
Cost of Sales 14,431 19,703
--------------------------------------------------------------------
Gross Profit 2,444 2,321
--------------------------------------------------------------------
Expenses 2,628 3,335
--------------------------------------------------------------------
Operating EBITDA 601 (255)
--------------------------------------------------------------------
Pre-tax earnings before sale
of pate division (121) (1,014)
--------------------------------------------------------------------
Net Earnings (121) 202
--------------------------------------------------------------------
Cash flows from operating activities (160) (614)
--------------------------------------------------------------------
Earnings per share ($0.01) $0.02
--------------------------------------------------------------------
Shares Outstanding
(Basic Weighted Average) 16,017,971 13,147,971
--------------------------------------------------------------------



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Sepp's Gourmet Foods Ltd.
    Tom Poole
    President
    (604) 535-5457
    or
    Sepp's Gourmet Foods Ltd.
    Jim Pratt
    Chief Financial Officer
    (604) 574-2166
    www.seppsfoods.com
    The Toronto Stock Exchange has not reviewed nor has accepted the
    responsibility for the accuracy and adequacy of this news release.