AIREA Regulatory News (AIEA)

17 Mar 2005 07:01

Sirdar PLC16 March 2005 Sirdar PLC Interim results for the six months ended 31st December 2004 Summary • Group turnover up 3% to £36.0m• Operating profit before exceptional items up 44% to £2.2m• Adjusted earnings per share up 58% to 2.46p• Interim dividend up 17% to 0.70p per share• Net debt down £3.0m to £9.4m• Specialist Yarns reorganisation complete, current trading ahead of expectations• Significant challenges remain within the Floor Coverings division• New senior management appointments in all divisions• Increased emphasis on innovation and customer service• Cost of product recall of hand knitting yarn, Fizz, to be quantified Introduction The Chairman's Statement in the last Annual Report outlined the board'scommitment to review the group's strategy. The conclusion of this reviewreaffirmed our intention to focus on achieving the profitable growth of ourexisting operations and a number of intiatives have been implemented to achievethis. We will continue to build on the strength of our brands, drive innovationand seek to increase our competitive advantage and shareholder value. The results Turnover for the half year to 31st December 2004 was £36.0m (2003: £34.8m)generating operating profit before exceptional items of £2.2m (2003: £1.5m).After net exceptional credits of £0.4m, the operating profit amounted to £2.6m(2003: £1.5m). Earnings per share increased 99% to 3.11p (2003: 1.56p). Adjustedearnings per share, calculated after excluding exceptional items, net of tax,was 2.46p (2003: 1.56p). Cash inflow from operating activities amounted to £3.8m (2003: £2.6m). Efficientstock management compensated for the adverse debtor movement created by theincreased activity. Tight control over capital expenditure, a reduced dividendand effective tax planning helped reduce net debt by £3.0m to £9.4m. The board has declared an increased interim dividend of 0.70p per share (2003:0.60p). The dividend is payable on 9th May 2005 to those shareholders on theregister of members at the close of business on 15th April 2005. Specialist Yarns Whilst sales remained static at £7.6m (2003: £7.6m), the sales mix changedsubstantially. Sales of hand knitting yarns increased significantly,compensating for the planned reduction in the, lower margin, machine yarnsbusiness. Operating profit increased to £1.0m (2003: nil) before net exceptionalincome of £0.4m, relating to the settlement following legal action againstformer directors and profit on sale of fixed assets offset by the write off ofrecalled stock. The success to date provides more evidence that the concept of a marketing anddistribution company, focused on innovation and customer service, represents agood strategy for this business. The board is aware of the division's changingrisk profile and the new opportunities and challenges it presents. However, webelieve the structure of the business and the dedication and professionalism ofits staff, will secure a continuation of the encouraging performance to date. Floor Coverings Despite increased sales in this division of £28.3m (2003: £27.2m), it isdisappointing to report a reduced operating profit of £1.5m (2003: £1.8m). Sales of Contract Floor Coverings held up well in the period. However, profithas been impacted as a result of continued pressure on margins, coupled with anadverse sales mix. The change in managing director at the division brings freshimpetus and new initiatives to improve performance and provides optimism for thefuture. Residential Floor Coverings experienced a continuing trend of increased importsof lower quality, lower price, carpet, in a fiercely competitive but stagnantmarket. This environment continued to prove challenging for this highly gearedoperation and has resulted in a disappointing performance in the period. Thebusiness structure requires strict risk management procedures to control costsand maximise opportunities. Managing the operational risks within a disciplinedfinancial foundation is vital to the future success of this business. Management changes As announced on 21st February 2005, Jim Gatherum stepped down from his positionas managing director of the group's Residential Floor Coverings operation. Witheffect from 1st March 2005 Kevin Henry, group finance director, assumed therole, relinquishing his position as managing director of the Specialist Yarnsdivision. Russell Morris, the former sales and marketing director, was appointedto the position of managing director of the Specialist Yarns division. Product recall As announced on 9th February 2005, the Specialist Yarns division instigated aproduct recall of a fashion hand knitting yarn, Fizz, due to concerns over itsflammability. Appropriate mechanisms have been put in place to communicate theproduct recall and deal efficiently with the collection and indemnificationprocess. An exceptional charge of £0.2m has been recognised relating to thewrite off of stock. The cost of recalling product already sold by retailerscannot be quantified at present and has therefore, been disclosed as acontingent liability. A further announcement will be made when a clearer pictureof the cost is available. However, we expect that the final cost will beconsiderably lower than the retail sales value of the yarn of £2.7m. Procedureshave been implemented to ensure no current or future products encounter similarissues. Pension costs To provide greater consistency of pension provision across the group and toreduce the risks of volatility in pension costs, amendments have been made tothe benefit structure within the group's final salary scheme. Accrual of salaryrelated benefits ceased from 28th February 2005, being replaced by a moneypurchase arrangement from 1st March 2005. Current trading and future prospects Trading to date in 2005 has reflected substantially the patterns displayed toDecember 2004. Continued drive and focus has maintained the strong underlying performance ofthe Specialist Yarns division. The demand for hand knitting yarn remains strong,providing justifiable optimism regarding the future prospects of this division.The timing of many of the changes in the Floor Coverings division means that,although the board remains confident with the changes it has made, it is tooearly to report on progress. We have taken steps to improve management and employee quality and to focus themon customer service and innovation. The board believes that we can build astronger business from this firm foundation. 17th March 2005 Enquiries: Duncan Verity 01924 371 501Group Chief Executive, Sirdar PLC Kevin Henry 01924 371 501Group Finance Director, Sirdar PLC Consolidated Profit and Loss Account6 months ended 31st December 2004 Unaudited Unaudited Audited 6 months ended 6 months ended year ended 31st December 31st December 30th June 2004 2003 2004 Note £000 £000 £000 Turnover 2 35,979 34,840 68,770 Operating costs (33,780) (33,309) (66,004)Exceptional income/(cost) 3 432 - (1,606)Net operating costs (33,348) (33,309) (67,610)Operating profit 2 2,631 1,531 1,160 Net interest payable and similar charges (372) (367) (783)Profit before taxation 2,259 1,164 377Taxation (819) (442) 147Profit for the period 1,440 722 524Dividends 4 (324) (277) (832)Retained profit/(loss) for the period 7 1,116 445 (308)Earnings per share(basic and diluted) 5 3.11p 1.56p 1.13p(adjusted) 5 2.46p 1.56p 3.56p There were no recognised gains or losses in the period other than the profitshown 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 profit/(loss) for the period stated above and their historical costequivalents. Consolidated Balance Sheetas at 31st December 2004 Unaudited Unaudited Audited 31st December 2004 31st December 2003 30th June 2004 Note £000 £000 £000 £000 £000 £000 Fixed assetsIntangible 14,177 15,053 14,617Tangible 15,966 17,128 16,421 30,143 32,181 31,038Current assetsStocks 14,791 17,571 16,853Debtors 15,312 14,243 14,694Cash at bank and in hand 565 1,013 614 30,668 32,827 32,161Creditors (due within one year) (16,140) (17,694) (18,126)Net current assets 14,528 15,133 14,035Total assets less current liabilities 44,671 47,314 45, 073Creditors (due after more than one (5,253) (8,290) (6,772)year)Deferred taxation 6 (3,260) (3,229) (3,259) 36,158 35,795 35,042Equity shareholders' fundsCalled up share capital 11,561 11,561 11,561Share premium account 504 504 504Capital redemption reserve 2,395 2,395 2,395Profit and loss account 7 21,698 21,335 20,582 36,158 35,795 35,042 Consolidated Cash Flow Statement6 months ended 31st December 2004 Unaudited Unaudited Audited 6 months ended 6 months ended year ended 31st December 2004 31st December 2003 30th June 2004 Note £000 £000 £000 £000 £000 £000Net cash inflow from operating activities 9 3,848 2,635 5,823Returns on investments and servicing of financeInterest paid and similar charges (375) (345) (754) 3,473 2,290 5,069Corporation tax 620 (1,495) (1,994)Capital expenditurePurchase of tangible fixed assets (681) (856) (1,464)Sale of tangible fixed assets 192 202 429 (489) (654) (1,035) Equity dividends paid (555) (1,850) (2,127)Cash inflow/(outflow) before financing 3,049 (1,709) (87)Financing Redemption of loan notes (14) (35) (137)Repayment of bank loans (1,505) (1,411) (2,827) (1,519) (1,446) (2,964) Increase/(decrease) in cash 10 1,530 (3,155) (3,051) A reconciliation of net cash flow to movement in net debt is set out in note 11. NOTES 1 BASIS OF PREPARATION The financial information has been prepared using the accounting policies set out in the group's report and financial statements for the year ended 30th June 2004. The comparative figures for the year ended 30th June 2004 do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. Statutory financial statements for the year ended 30th June 2004 have been delivered to the Registrar of Companies. The auditors have reported on those financial statements. Their report was not qualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2 SEGMENTAL INFORMATION Analysis of results by class of business Turnover 6 months ended 6 months ended Year ended 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Floor Coverings 28,348 27,222 54,605 Specialist Yarns 7,631 7,618 14,165 35,979 34,840 68,770 6 months ended 6 months ended Year ended 31st December 31st December 30th June 2004 2003 2004 Operating profit £000 £000 £000 Floor Coverings 1,472 1,811 3,143 Specialist Yarns 1,441 13 (1,414) 2,913 1,824 1,729 Central group costs (282) (293) (569) 2,631 1,531 1,160 The operating result for the Specialist Yarns division for the 6 months ended 31st December 2004 is stated after net exceptional income of £432,000 (year ended 30th June 2004: after net exceptional costs of £1,606,000) as described in note 3. Net operating assets 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Floor Coverings 36,194 39,208 38,098 Specialist Yarns 7,570 10,186 8,789 43,764 49,394 46,887 Central group assets 2,318 431 1,177 46,082 49,825 48,064 Net operating assets are stated excluding inter-company financing and arederived from the balance sheet total by excluding bank borrowings, loans andloan notes totalling £9,924,000 (31st December 2003: £14,030,000, 30th June2004: £13,022,000). 3 EXCEPTIONAL INCOME/(COST) 6 months ended 6 months ended Year ended 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Settlement of legal action 250 - - Profit on sale of fixed assets 337 - 273 Raw materials and consumables (155) - (434) Other external charges - - (653) Staff costs - - (792) 432 - (1,606) The exceptional item in the 6 months ended 31st December 2004 relates tosettlement following legal action, for breach of contract, against formerdirectors, profit on the sale of fixed assets and the write off of recalledstock on hand and held at retailers. All exceptional items relate to theSpecialist 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 6 months ended 6 months ended Year ended 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Interim 324 277 277 Final - - 555 324 277 832 The interim dividend of 0.70p (2003: 0.60p) per share will be paid on 9th May2005 to members registered at the close of business on 15th April 2005. Thefinal dividend in respect of the year ended 30th June 2004 amounted to 1.20p pershare. 5 EARNINGS PER SHARE The calculation of basic earnings per share is based on earnings of £1,440,000 (31st December 2003: £722,000, 30th June 2004: £524,000) and on 46,242,455 (31st December 2003: 46,242,455, 30th June 2004: 46,242,455) ordinary shares, being the weighted average number in issue during the period. Adjusted earnings per share, as set out below, is calculated after excluding net exceptional items, net of tax, and is presented in order to demonstrate the underlying performance of the group. 6 months ended 6 months ended Year ended 31st December 2004 31st December 2003 30th June 2004 £000 pence £000 pence £000 pence Earnings and basic 1,440 3.11 722 1.56 524 1.13 earnings per share Exceptional (income)/cost (302) (0.65) - - 1,124 2.43 Adjusted earnings and 1,138 2.46 722 1.56 1,648 3.56 basic earnings per share There is no dilution caused by share options. 6 DEFERRED TAX 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Brought forward 3,259 3,237 3,237 Profit and loss account 1 (8) 22 Carried forward 3,260 3,229 3,259 7 PROFIT AND LOSS ACCOUNT 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Brought forward 20,582 20,890 20,890 Profit/(loss) for the period 1,116 445 (308) Carried forward 21,698 21,335 20,582 8 RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Profit for the period 1,440 722 524 Dividends (324) (277) (832) Net increase/(decrease) in equity shareholders' 1,116 445 (308) funds Opening equity shareholders' funds 35,042 35,350 35,350 Closing equity shareholders' funds 36,158 35,795 35,042 9 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 6 months ended 6 months ended Year ended 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Operating profit 2,631 1,531 1,160 Depreciation 1,001 1,149 2,278 Goodwill amortisation 440 444 880 Profit on sale of tangible fixed assets (352) (237) (286) Decrease in stocks 2,062 320 1,038 (Increase) in debtors (1,551) (1,189) (418) (Decrease)/increase in creditors (383) 617 1,171 Net cash inflow from operating activities 3,848 2,635 5,823 10 ANALYSIS OF CHANGES IN NET DEBT 31st December Cash flows Loan note 30th June 2004 redemption 2004 £000 £000 £000 £000 Cash at bank and in hand 565 (49) - 614 Bank overdrafts (1,633) 1,579 - (3,212) (1,068) 1,530 - (2,598) Loan notes (498) - 14 (512) Bank loan (7,793) 1,505 - (9,298) Total net debt (9,359) 3,035 14 (12,408) 11 RECONCILIATION OF MOVEMENT IN NET DEBT 31st December 31st December 30th June 2004 2003 2004 £000 £000 £000 Increase/(decrease) in cash 1,530 (3,155) (3,051) Redemption of loan notes 14 35 137 Repayment of bank loans 1,505 1,411 2,827 Movement in net debt 3,049 (1,709) (87) Net debt at start of period (12,408) (12,321) (12,321) Net debt at end of period (9,359) (14,030) (12,408) 12 CONTINGENT LIABILITY As detailed in the announcement on 9th February 2005, the Specialist Yarnsdivision has instigated a product recall of Fizz, a fashion hand knitting yarn. The cost of compensating customers for returns cannot be quantified at presentdue to uncertainty surrounding the level of returns. OTHER INFORMATION The interim results are unaudited. Further copies of this report are available from the Company Secretary at theregistered office at Flanshaw Lane, Alverthorpe, Wakefield, West Yorkshire WF29ND. This information is provided by RNS The company news service from the London Stock Exchange