AIREA Regulatory News (AIEA)

15 Sep 2005 07:03

Sirdar PLC14 September 2005 Summary • Group turnover up 4% to £71.4m. • Operating profit before exceptional items up 17% to £3.2m. • Adjusted earnings per share up 1% to 3.58p. • Final dividend up 17% to 1.40p per share, making a total dividend for the year of 2.10p per share. • Net debt down £3.2m to £9.2m. • Transfer to Alternative Investment Market proposed. • Streamlined board and new management structure agreed. • Brewin Dolphin Securities appointed as financial advisors and stockbrokers. • Residential Floor Coverings operation remains an area of concern and the subject of significant focus. • Potential for profitable growth within regenerated Contract Floor Coverings operation. • Significant contribution from restructured Specialist Yarns division. • Cost of product recall in line with expectations. Sirdar PLC Preliminary results for the year ended 30th June 2005 Chairman's Statement Introduction The interim statement summarised the conclusion of our review of the group'sstrategy and confirmed our intention of focussing on the profitable growth ofour existing operations. We are currently implementing a wide range ofinitiatives in pursuit of this objective. The diverse and challenging nature ofthe markets in which we operate requires the careful prioritisation of ourtransformation programme to ensure that the identified benefits are deliveredwithin agreed timescales. Where implementation is near completion, as in theSpecialist Yarns division, the benefits are clear, reaffirming our vision thatexceeding customer expectations through the marketing of innovative qualityproducts provides the greatest opportunity of delivering enhanced shareholdervalue. The results Turnover for the year was £71.4m (2004: £68.8m). Operating profit excludingexceptional items amounted to £3.2m (2004: £2.8m). The statutory operatingprofit amounted to £3.7m after exceptional income of £0.5m (2004: £1.2m afterexceptional costs of £1.6m). Divisional performance reviews are contained withinthe Group Chief Executive's Review. Earnings and dividend per share Basic earnings per share amounted to 4.26p (2004: 1.13p). Adjusted earnings pershare, which is calculated to show the underlying performance of the group andexcludes the exceptional item, amounted to 3.58p per share (2004: 3.56p). Theresults to June 2004 benefited from a prior year tax credit of £0.5m, which wasnot repeated in the current year. The directors are proposing a final dividendof 1.40p (2004: 1.20p) per share. The dividend is payable on 22nd November 2005to those shareholders on the register of members at the close of business on28th October 2005. Regulatory status A move to the Alternative Investment Market (AIM) is proposed which would allowthe group to operate within a market more appropriate to its size and resources.The move will be proposed as a resolution at an extraordinary general meetingand if the resolution is passed, will take place shortly afterwards. Management and personnel The proposal to move to AIM, coupled with the ongoing drive to reduce costs andmaximise efficiencies, has led to a review of the management structure. Theproposed simplification detailed below is designed to balance the requirementfor a dynamic, value-adding central function with the need to control costs. Duncan Verity has indicated his wish to retire from his role as group chiefexecutive with effect from 31st December 2005, and I would like to record theboard's appreciation of his contribution to the group's development and wish himwell for the future. Following his retirement, Duncan's responsibilities will bereallocated between other members of the board. Steve Harrison will resign from his role as senior independent non-executivedirector and will be appointed to an executive role as chief operating officer,on a part-time basis, with effect from 1st January 2006. In this role he willbe directly accountable for the achievement of sales, profit and cash-flowtargets for the operating businesses. Kevin Henry will continue to be responsible for finance and planning and willcombine this with his responsibilities for the residential floor coveringsbusiness. Carolyn Tobin will remain a non-executive director and I will be slightlyincreasing my time commitment in my role as non-executive chairman to helpensure the realisation of our vision for the group. Current trading and future prospects Despite the overall gains achieved during the year, areas of concern still existand further work is required to consolidate and strengthen the group. Theslowdown in consumer spending, combined with rapidly changing fashions,continues to generate fresh challenges. Such a changeable environment createsuncertainty and strains resources, creating a difficult position from which toachieve sustainable growth. However, the management team has a collectiveambition to build an increasing share of our principal markets and we remainconfident that the group is well placed to exploit growth opportunities. We will continue to major on the strengths of our brands and people and promotean innovative culture to ensure the group is well positioned to meet all futurechallenges and take advantage of opportunities as they arise. I would like to thank all our team members for their support in addressing thechallenges facing the group and dealing with the difficult market conditions inwhich we are operating. TIM VERNON 15th September 2005Chairman Group Chief Executive's Review Introduction The climate of change that surrounded the group during 2004 has remainedthroughout the current year. Rapid evolution has been necessary to combat anincreasingly competitive market place whilst maintaining profitability. Theperformance of the group against such a demanding backdrop provides optimism forthe future. However, areas of unsatisfactory performance still exist whichrequire attention. As outlined within the Chairman's Statement this will be my final review due tomy impending retirement. My original contract ended in 2004 but, at the requestof the board, I was pleased to extend that contract to oversee the significantchanges that have occurred since that time. However, with those changes completeand the new board structure and personnel agreed, it is an appropriate time forme to retire and to allow the new team to take the business forward. My time atSirdar PLC has been challenging, yet enjoyable and fulfilling and I have enjoyedcontributing to the development of both the people and the businesses within thegroup. Floor Coverings division Turnover of the Floor Coverings division was £56.2m (2004: £54.6m) in the yearto 30th June 2005. This generated an operating profit of £1.6m (2004: £3.1m).The reduction in operating profit noted in the year is a reflection of themarket conditions within which we are operating, particularly in relation toresidential carpets. The residential floor coverings operation, marketed under the Ryalux, Lomas andPownall brands, remains an area of concern for group management and one ofsignificant focus. A continuation of trends noted previously relating toincreased imports, the popularity of alternative floor coverings, tough highstreet conditions and rising raw material and utility costs have all combined tocreate the most challenging environment in recent times. The number of businessfailures within this sector is indicative of these conditions and serves tohighlight the ongoing difficulties faced by UK based manufacturers. A dedicated team, led by Kevin Henry, is striving to compete profitably in thesedifficult conditions. Attempts to rationalise a complex cost base continue, withprogress being made in the year in establishing a leaner management structuredesigned to reduce costs and improve flexibility. Such changes are necessary ifthe business is to evolve and adapt to its current environment. Work to generateefficiencies and improve profitability is ongoing although the size andcomplexity of the operation is likely to slow progress. It is difficult toenvisage a change within the market easing the problems we are currently facing,consequently, a significant upturn in the fortunes of this operation in theshort term is unlikely. Contract floor covering products are marketed under the Burmatex, Carpet TileCompany and Burmafloors International brands. The appointment of Gordon Donaldas managing director was announced in last year's annual report. Since hisappointment further senior personnel changes have occurred, providing freshimpetus and a renewed drive, resulting in a new look to the business coveringbranding, product offering and target markets. The result of this regenerationis a strong, vibrant operation well positioned to meet the challenges ofbusiness in the twenty-first century. I am confident these changes will enableus to retain our position as a market leader and provide a platform forprofitable growth. Specialist Yarns division Turnover in this division increased to £15.3m (2004: £14.2m). The increase isattributable to a combination of a gain in sales of hand knitting yarns and aplanned reduction in the, lower margin, machine yarns business. This movement inthe sales mix, combined with the benefits obtained from the reorganisation,resulted in an operating profit of £2.7m (2004: loss £1.4m). The Specialist Yarns division's products are marketed under the Sirdar, Tilsatecand Tilsa brands. As announced in the interim report, Russell Morris now leadsthe division, with the appointment of a new sales and marketing directorproviding fresh impetus. The transformation from a manufacturing business to acustomer focused, innovative, marketing and distribution led operation was wellmanaged and has proven successful. Further work is now required to consolidatethe considerable progress made to date and to explore additional value addingopportunities. Conclusion The factors underpinning the achievements of the Specialist Yarns division inthe year are still present. By utilising the experience gained to date we canfurther enhance our product offering and processes and are confident of buildingon our success. The residential floor coverings operation will remain an area of focus for theboard and subsidiary management. The complexity of the operation, combined withtough market conditions, further complicates the revitalisation process and willincrease the time necessary to achieve this. The contract floor coveringsbusiness is being operated from a simpler structure and is being supported by amore buoyant market. The changes occurring within this business are thereforecapable of faster implementation and are likely to have a more immediate impacton profitability. The degree of change, both internally and externally, throughout this and theprevious year appears now to be indicative of the nature of our markets and ourindustry. Evolving and adapting to these changes is a necessary skill to thrivein such an environment. The planned changes to a more streamlined boardstructure, complemented by a move to AIM, should provide sufficient flexibilityto ensure we can capitalise on the opportunities this environment of changepresents. Finally, I would like to thank all the group's employees and everyone connectedwith Sirdar PLC for their support throughout my time with the group and wishthem a prosperous future. DUNCAN VERITY 15th September 2005Group Chief Executive Enquiries: Duncan Verity 01924 371501Group Chief Executive, Sirdar PLC Kevin Henry 01924 371501Group Finance Director, Sirdar PLC Consolidated Profit and Loss Account year ended 30th June 2005 Note 2005 2004 £000 £000Turnover 2 71,422 68,770 Operating costs (68,186) (66,004)Exceptional income/(costs) 3 452 (1,606)Net operating costs (67,734) (67,610) Operating profit 2 3,688 1,160Net interest payable and similar charges (690) (783)Profit before taxation 2,998 377Taxation (1,028) 147Profit for the year 1,970 524Dividends 4 (971) (832)Retained profit/(loss) for the year 999 (308)Earnings per share(basic and diluted) 5 4.26p 1.13p There were no recognised gains or losses in the year other than the profit/(loss) shown above. The results shown in the profit and loss account derive wholly from continuingactivities. There is no difference between the profit on ordinary activities before taxationand the retained profit/(loss) for the year stated above and their historicalcost equivalents. Consolidated Balance Sheet as at 30th June 2005 2005 2004 £000 £000 £000 £000Fixed assetsIntangible 13,737 14,617Tangible 15,694 16,421 29,431 31,038 Current assetsStocks 17,344 16,853Debtors 15,638 14,694Cash at bank and in hand 485 614 33,467 32,161 Creditors (due within one year) (19,877) (18,126)Net current assets 13,590 14,035Total assets less current liabilities 43,021 45,073Creditors (due after more than one year) (3,733) (6,772)Deferred taxation (3,247) (3,259) 36,041 35,042 Equity shareholders' fundsCalled up share capital 11,561 11,561Share premium account 504 504Capital redemption reserve 2,395 2,395Profit and loss account 21,581 20,582 36,041 35,042 Consolidated Cash Flow Statement year ended 30th June 2005 2005 2004 Note £000 £000 £000 £000 Net cash inflow from operating activities 6 5,995 5,823Interest paid and similar charges (720) (754) 5,275 5,069 Corporation tax paid (122) (1,994)Capital expenditurePurchase of tangible fixed assets (1,415) (1,464)Sale of tangible fixed assets 340 429 (1,075) (1,035) Equity dividends paid (879) (2,127)Cash inflow/(outflow) before financing 3,199 (87)FinancingRedemption of loan notes (118) (137)Repayment of bank loans (2,921) (2,827) (3,039) (2,964) Increase/(decrease) in cash 7 160 (3,051) A reconciliation of net cash flow to movement in net debt is set out in note 8. Notes 1. Basis of preparation These preliminary financial statements, which have been prepared on a basisconsistent with the previous year, do not constitute statutory accounts withinthe meaning of section 240 of the Companies Act 1985. The information for theyear ended 30th June 2005 is an extract from the group's statutory financialstatements on which the company's auditors, PricewaterhouseCoopers LLP, havegiven an unqualified opinion in accordance with Section 235 of the Companies Act1985, and are to be delivered to the Registrar of Companies. The announcement has been agreed with the company's auditors for release. 2. Segmental information Analysis of results by class of business Net operating Turnover Operating profit assets 2005 2004 2005 2004 2005 2004 £000 £000 £000 £000 £000 £000 Floor Coverings 56,162 54,605 1,614 3,143 35,807 38,098Specialist Yarns 15,260 14,165 2,671 (1,414) 8,144 8,789 71,422 68,770 4,285 1,729 43,951 46,887 Central group (costs)/assets (597) (569) 1,784 1,177Total net operating assets 45,735 48,064Operating profit 3,688 1,160 Net interest payable and similar charges (690) (783)Profit before taxation 2,998 377 Net operating assets are stated excluding inter-company financing and arederived from the balance sheet total by excluding bank borrowings, loans andloan notes totalling £9,694,000 (2004: £13,022,000). 3. Exceptional item Exceptional operating (income)/charges 2005 2004 £000 £000Raw materials and consumables (72) 434Other external charges (239) 380Staff costs (76) 792Settlement of legal action (250) -Profit on sale of fixed assets (332) -Fizz recall costs 517 - (452) 1,606 The exceptional cost in the year relates to the recall of the fashion handknitting yarn, Fizz. The cost includes the write off of stock on hand and stockheld at retailers, an estimate of the cost of recalling product already sold byretailers and other associated costs. The exceptional income in the year relates to settlement following legal actionfor breach of contract against former directors, profit on the sale of fixedassets associated with the decision to cease manufacturing and the release ofprovisions associated with the reorganisation of the Specialist Yarns division. The exceptional costs incurred in the year ended 30th June 2004 relatedprincipally to redundancies, stock write downs and provisions for additionalcharges associated with the reorganisation of the Specialist Yarns division. 4. Dividends 2005 2004 £000 £000Interim - 0.70p per share (2004: 0.60p) 324 277Proposed final - 1.40p per share (2004: 1.20p) 647 555 971 832 5. Earnings per share The calculation of basic earnings per share is based on earnings of £1,970,000(2004: £524,000) and on 46,242,455 (2004: 46,242,455) ordinary shares, being theweighted average number in issue during the year. Adjusted earnings per share, as set out below, is calculated after excludingexceptional items of £316,000, net of tax, consisting of the cost of the productrecall of the fashion hand knitting yarn Fizz, offset by a settlement followinglegal action for breach of contract against former directors, profit on the saleof fixed assets associated with the decision to cease manufacturing and therelease of provisions associated with the reorganisation of the Specialist Yarnsdivision. Adjusted earnings per share for the year ended 30th June 2004 is calculatedafter excluding exceptional costs of £1,124,000, net of tax, incurred during thereorganisation of the Specialist Yarns division. The adjusted earnings per shareis presented in order to demonstrate the underlying performance of the group. 2005 2004 Earnings Earnings Earnings Earnings per share per share £000 pence £000 penceEarnings and basic earnings per share 1,970 4.26 524 1.13Exceptional item (316) (0.68) 1,124 2.43Adjusted earnings and basic earnings per share 1,654 3.58 1,648 3.56 There is no dilution caused by share options. 6. Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £000 £000 Operating profit 3,688 1,160Depreciation 2,022 2,278Goodwill amortisation 880 880Profit on sale of tangible fixed assets (357) (286)(Increase)/decrease in stocks (491) 1,038Increase in debtors (1,625) (418)Increase in creditors 1,878 1,171 Net cash inflow from operating activities 5,995 5,823 Net operational exceptional cashflows amounted to an inflow of £350,000 (2004:outflow £605,000). 7. Analysis of changes in net debt 2005 Cash flows Loan note redemption 2004 £000 £000 £000 £000Cash at bank 485 (129) - 614Bank overdrafts (2,923) 289 - (3,212) (2,438) 160 - (2,598) Loan notes (394) - 118 (512)Bank loans (6,377) 2,921 - (9,298)Total net debt (9,209) 3,081 118 (12,408) 8. Reconciliation of movement in net debt 2005 2004 £000 £000 Increase/(decrease) in cash 160 (3,051)Redemption of loan notes 118 137Repayment of bank loans 2,921 2,827Movement in net debt 3,199 (87)Net debt at start of year (12,408) (12,321)Net debt at end of year (9,209) (12,408) This information is provided by RNS The company news service from the London Stock Exchange