Dekel Agri Regulatory News (DKL)

1 Nov 2005 07:01

Dickinson Legg Group PLC01 November 2005 DICKINSON LEGG GROUP PLC Preliminary Results for the Year Ended 30 June 2005 Dickinson Legg Group, a leading specialist engineering group, incorporatingDickinson Legg and Spooner Industries announces preliminary results for the yearended 30 June 2005. Highlights • Group turnover £32.2 million (2004: £42.5 million); • Operating profit (pre-exceptionals) £0.19 million (2004: £1.35 million), (post-exceptionals £2.77 million; 2004: £1.11 million); • Profit before tax £3.01 million (2004: £1.36 million); • Diluted adjusted earnings per share 0.4p (restated 2004:2.0p), basic earnings per share 4.7p (restated 2004: 1.5p) • Net cash at year end £0.84 million (2004: net cash £1.98 million). • Spooner property deal resulting in an exceptional gain of £2.95 million Commenting on prospects, Barry Stevenson, Chairman said: "We have no reason to expect an improvement in the markets we are serving in theforeseeable future. In the circumstances we intend to continue to reduce costwherever practicable, conserve resources and pursue every business opportunityvigorously. We remain of the view that consolidation of the primary tobaccomachinery market is necessary." For further information please contact: Dickinson Legg Group plc 01962 841 788Tom Mackie, Chief ExecutiveDavid Heath, Group Finance Director Rowan Dartington & Co. Limited 0117 933 0011Barrie Newton Notes to Editors: The Company's businesses comprise Dickinson Legg Limited, a world leader in themanufacture and installation of primary tobacco processing equipment, andSpooner Industries Limited, a specialist air drying equipment manufacturer forthe paper, converting (plastic film, foil and textile), metals and foodindustries. Chairman's Statement The outcome for the year to June 2005 was in line with market expectations andas previously indicated trading conditions proved to be exceptionally difficult.Group turnover was 24% down on last year and 34% down on 2003, reflecting thedecline in the markets we serve. Running manufacturing businesses in thesecircumstances is extremely difficult. Cost has been taken out wherever it wasfelt possible without damaging the longer term prospects of the businesses andit is mainly due to these actions that the Group has remained in profit. The Spooner property deal, details of which are given in the Chief Executive'sreport, will put that business on a better footing in the medium term. It hasalso strengthened the Group balance sheet by contributing to the increase in netassets by 36% to £6.7 million. Results Group turnover of £32.2 million (2004: £42.5 million) was 24% down and Groupoperating profit before exceptional items was 86% lower at £0.19 million (2004:£1.35 million). After exceptional items Group operating profit was £2.77million (2004: £1.11 million). There was a net exceptional credit before tax of £2.58 million. This compriseda £2.95 million credit resulting from the Spooner property deal and a £0.37million charge incurred on the previously reported abortive acquisition andsubsequent negotiations. Diluted adjusted earnings per share before exceptional items were 0.4p (restated2004: 2.0p). Net cash at the year end was £0.84 million which showed areduction over the year of £1.15 million after the payment of £0.91 milliondividend. Dividend In view of the results for the year and the Group's prospects the Board hasdecided not to recommend payment of a final dividend. Prospects We have no reason to expect an improvement in the markets we are serving in theforeseeable future. In the circumstances we intend to continue to reduce costwherever practicable, conserve resources and pursue every business opportunityvigorously. We remain of the view that consolidation of the primary tobaccomachinery market is necessary. People Employees have continued to work with dedication in difficult circumstances andI very much appreciate their efforts. B B StevensonChairman1 November 2005 Chief Executive's Review Primary Tobacco Processing Equipment Dickinson Legg Businesses Dickinson Legg's sales of new equipment was 30% lower than the previous year,due to a lack of major projects, which was in part offset by increased sales ofspares and wear parts. Turnover, including the Group's share of the jointventure was 20% lower at £24.2 million (2004: £30.2 million) and operatingprofit before exceptional items was 34% lower at £1.45 million (2004: £2.22million) when compared with the previous year. The majority of new machine sales arose from projects requiring Dickinson Legg'skey products for processing tobacco leaf, including one project for the ExpandedStem System (ESS), marketed exclusively under license from R J Reynolds in theUnited States. There were also several small projects for processing the stem ofthe tobacco leaf utilising Dickinson Legg's STS and Admoist products. Further development work on our conveying and storage solutions resulted in anorder for £1.5 million to replace a customer's current system with an automatedline for the transport and packing of the tobacco. Two further projects havebeen secured for our newly developed vertical slicer reported on last year andseveral strong enquiries for other units are being pursued. Our spares and wear parts businesses - based in Andover, Hampshire and Richmond,Virginia - both performed well enjoying increased volumes compared with theprevious year. A number of refurbishment projects were undertaken for customersthereby generating additional component requirements, which compensated forfewer spares packages associated with lower volumes of new machines. Our Indian joint venture, Dickinson Fowler had a very good first half year,delivering two major projects, but experienced a downturn in the second half dueto a lack of significant orders from the UK business. The market for primary tobacco processing equipment remains depressed and isreflected in Dickinson Legg's opening order book being lower than at thebeginning of the previous year. Competition for available business is fierce andmargins will remain under pressure, whilst there is an excess of capacity. Air Drying Equipment Spooner Industries Spooner suffered from a combination of a very low opening order book and sloworder intake in the early part of the year. The improved order loading by theclose of the half year generated an improved operating performance in the secondhalf, resulting in break-even for that period. Consequently, turnover for theyear was 30.4% lower at £9.257 million (2004: £13.304 million) and there was anoperating loss of £0.478 million (2004: £0.056 million). Significant ordersincluded two projects for multiple dryers for coated paper and film with a valueof £3.9 million and three projects for the food sector valued at £2.1 million.One of these projects was the culmination of a two year development programmefor a highly specialised dryer which is expected to lead to orders for a numberof similar machines over the next twelve months. Agreement was reached with the landlord of the leasehold premises occupied bySpooner Industries in Ilkley, West Yorkshire, to vacate the current premiseswithin two years in a deal worth £3.5 million to the Group. Payment will bereceived over a two year period through a combination of cash or land and cash.The Company has benefited from a one time exceptional profit before tax of £2.95million in this financial year. Spooner has entered the new financial year with a reasonable order book butorder intake continues to be lumpy. Although there are a number of qualityprospects, competition is intense and customers are generally taking longer toconclude contracts. T M MackieChief Executive1 November 2005 Financial Review Introduction The financial statements have been prepared in accordance with applicableaccounting standards, using policies consistent with the previous period. Operating Results Profit on ordinary activities before interest, taxation and exceptional itemsfor the period was £0.38 million against £1.62 million in the previous year.Earnings before interest, taxation, depreciation and amortisation were £3.49million (2004: £2.03 million). The tobacco processing equipment businesses saw asignificant downturn in activity resulting in turnover being down £6 million,however its' contribution to group turnover increased to 72% (2004: 69%). Thefall in turnover experienced this financial year has resulted in a 34% loweroperating profit. Such is the nature of the capital equipment markets in whichwe operate, after seeing a 20% increase in turnover in the air drying businesslast year, we saw a 30% decline this year. This fall in turnover has led to anoperating loss of £0.48 million (2004: loss of £0.06 million). However the costreduction programmes in both business areas in previous years have significantlyhelped in maintaining a profitable Group. Exceptional Items Following lengthy discussions and after undertaking extensive due diligence on atarget company, the Board of Directors took the decision not to proceed with anacquisition. The Group incurred related costs with external advisors totalling£0.37 million. In the last month of the financial year, agreement was reached with the landlordof the leasehold premises occupied by Spooner Industries Limited in Ilkley, WestYorkshire, to vacate the current premises within two years. The agreementprovides for the Company to erect a purpose built freehold premises on anadjacent site, through a combination of land and cash. Payment will be receivedover a two-year period, with the majority of the cash inflow due to arise in2006/7. The £2.95 million exceptional profit is the net value of the cash andthe fair value of the land that will be received less estimated committedrelocation costs. Interest Total interest moved from a net payable to net receivable in the year. This washelped by the cash generated in previous years. The main contributor to thetotal interest receivable was the joint venture. Interest cover remains healthyat 12.8 times (2004:15.8 times). Taxation The effective rate of tax for the year is 42.9% (2004: 59.5%), which amounts to£1.29 million (restated 2004: £0.81 million). £1.05 million of the tax on theSpooner exceptional profit has been provided for in these financial statements.This may be mitigated depending on future actions and options available to theGroup. The Group has taken advice on the availability of certain unrelieved AdvanceCorporation Tax (ACT) utilised by the Group in prior periods. It would appearthat surrendered ACT used by a Group company since the de-merger from BrunelHoldings plc in December 2002, was not available. The estimated tax liabilityis £269,000 and full provision has been made in these financial statements andshown as a prior year adjustment. The reduction in the deferred tax asset of £0.12 million is mainly due to theutilisation of our USA tax losses. We anticipate that these losses will be fullyutilised in the forthcoming financial year. Further details can be found in note3. Dividends After considering the future prospects and working capital requirements of theGroup the Board is not recommending the payment of a dividend. Earnings Per Share The earnings per share calculated in accordance with FRS 14 were 4.7p (restated2004: 1.5p). The earnings per share before exceptional items were 0.4p(restated 2004: 2.0p). See note 5 for further detail. Capital Expenditure As a result of the downturn in activity experienced across the Group plannedcapital expenditure was scaled back and totalled only £0.04 million in the year(2004: £0.16 million), The majority of this was spent on the essentialreplacement of existing assets. Research and Development £0.20 million (2004: £0.27 million) was spent on the on-going development ofexisting product lines. In the Dickinson Legg business the developments of noteinclude a friction drive multi-tier silo and a teaser unit, which produces ametered flow of roll-your-own tobacco. These developments were written offthrough the profit and loss account. Financing The net current asset position, excluding the effect of the exceptional profiton surrender of the lease, is in line with the 2004 year-end position. The netcash outflow for the year of £1.15 million follows two years, which sawcumulative net inflows in excess of £4.7 million. The majority of the outflowwas due to the £0.91 million deferred dividend payments, which took place on 1July 2004. As a consequence net funds have decreased to £0.84 million at 30 June2005. The Group continues to have its main banking relationship with Lloyds TSB.Following a review of the Group's banking requirements a reduced on demandfacility of £6.0 million in aggregate was agreed. Although, at the year-end, theGroup was cash positive, the facility is required to cover the significantguarantee and bonding requests from the Group's customers. The year-endguarantee and bonding liability are disclosed in note 7. Share Capital and Reserves The merger reserves arose from the demerger from Brunel Holdings plc and aninternal reorganisation prior to demerger in 2002. Other reserves of £39.50million and the £46.26 million deficit on the profit & loss account are derivedfrom the inclusion of a 'non trading' subsidiary company Thomas Robinson GroupLimited. The negative profit and loss reserves do not prevent Dickinson LeggGroup plc from paying dividends to shareholders as the Company has positivedistributable reserves. Treasury Activities The Group continues to use financial instruments to manage risk. The Group doesnot engage in speculative activity. Treasury activities are reported on amonthly basis to the Board. The principal financial risks faced by the Group are foreign exchange and to amuch lesser extent interest rate risk. The Group operates a risk averse policyto foreign exchange exposures. Contract and trading transactions in non-localcurrencies are hedged (using foreign currency forward contracts) as soon asthere is reasonable certainty in the amounts and timings. International Financial Reporting Standards ("IFRS") The Group will be required to prepare its financial statements for the financialyear ended 30 June 2008 in accordance with IFRS. D G HeathGroup Finance Director1 November 2005 Group Profit & Loss AccountFor the year ended 30 June 2005 2005 2004 (unaudited) (restated) Before Exceptional Total Before Exceptional Total Exceptional Items Exceptional Items Items Items Note £000 £000 £000 £000 £000 £000 Turnover Turnover (including 33,452 - 33,452 43,543 - 43,543share of joint venture)- continuing Less share of turnover (1,257) - (1,257) (1,073) - (1,073)of jointventure - continuing Group 1 32,195 - 32,195 42,470 - 42,470turnover-continuing Cost of Sales (24,657) - (24,657) (31,971) - (31,971) Gross Profit 7,538 - 7,538 10,499 - 10,499 Distribution costs (4,954) - (4,954) (6,180) - (6,180) Administrative expenses 2 (2,548) (367) (2,915) (3,148) (239) (3,387) Other operating income 150 2,953 3,103 174 - 174 Group operating profit 186 2,586 2,772 1,345 (239) 1,106- continuing Share of operating 196 - 196 279 - 279profit in joint venture- continuing Profit on ordinary 1&2 382 2,586 2,968 1,624 (239) 1,385activitiesbefore interest Interest receivable and 36 - 36 13 - 13similar income: GroupShare of Joint venture 42 - 42 54 - 54 Interest payable and (36) - (36) (92) - (92)similar charges Profit on ordinary 424 2,586 3,010 1,599 (239) 1,360activitiesbefore taxation Taxation on profit on 3 (161) (1,028) (1,189) (800) 65 (735)ordinary activities: GroupShare of joint venture (101) - (101) (74) - (74) Profit for the 162 1,558 1,720 725 (174) 551financial year Dividends 4 - - - (364) - (364) Retained profit / 6 162 1,558 1,720 361 (174) 187(loss) for thefinancial year Earnings per 20p 5share : 4.7p 1.5p BasicDiluted 5 4.7p 1.5pDiluted adjusted 5basis 0.4p 2.0p Group Balance Sheetas at 30 June 2005 2005 2005 2004 2004 (unaudited) (unaudited) (restated) (restated) Note £000 £000 £000 £000 Fixed assetsIntangible assets 3,059 3,283Tangible assets 576 853Interest in joint venture - share of gross 1,300 1,329 assets - share of gross (621) (734) liabilities 679 595 4,314 4,731Current assetsStocks 1,463 1,522Debtors - due less than one 7,993 11,896 year - due more than one 2,974 - yearCash at bank and in hand 3,920 5,339 16,350 18,757 Creditors - amounts falling due (12,130) (17,071)within one year Net current assets 4,220 1,686 Total assets less current 8,534 6,417liabilities Provisions for liabilities and (1,822) (1,487)charges Net assets 1 6,712 4,930 Capital and reservesCalled up share capital 6 7,271 7,271Merger reserve 6 45,234 45,234Other reserves 6 39,496 39,496Profit and loss account 6 (85,289) (87,071) Shareholders' funds - equity 6 6,712 4,930 The Group's cash at bank and in hand balance has been restated to show grosscertain cash at bank and bank overdraft positions, which had previously beenshown net. Group Statement of Total Recognised Gains and LossesFor the year ended 30 June 2005 2005 2004 (unaudited) (restated) Note £000 £000 Profit for the financial year 1,720 551 Currency translation differences on foreign currency net investments 62 (116) Total recognised gains and losses in the year 6 1,782 435 Prior year adjustment (as explained in note 6) (269) Total recognised gains since last Annual Report 1,513 There is no difference between the reported profits of the Group and the profitson an historical cost basis. Group Cash Flow Statementfor the year ended 30 June 2005 2005 2004 (unaudited) £000 £000 £000 £000 Net cash (outflow) / inflow from operating (196) 2,836activities Dividends received from joint venture 97 - Returns on investments and servicing of finance Interest received 36 13 Interest paid (36) (89) Interest element of finance lease rental payments - (3) Net cash outflow from returns oninvestments and servicing of finance - (79) Taxation (118) (198) Capital expenditure Purchase of tangible fixed assets (41) (157) Sale of tangible fixed assets 19 - Net cash outflow from capital expenditure (22) (157) Equity dividends paid to shareholders (909) - Net cash inflow before use of liquid resources and (1,148) 2,402financing Financing Capital element of finance lease rental payments - (13) - (13) (Decrease) / increase in cash (1,148) 2,389 Reconciliation of movement in net funds 1 July Cash Flow Exchange 30 June 2004 Movement 2005 £000 £000 £000 £000 Cash at bank and in hand 5,339 (1,434) 15 3,920 Overdrafts (3,364) 286 (5) (3,083) 1,975 (1,148) 10 837 Notes to the financial statement 1 Segmental reporting By business Turnover Operating profit/ Operating profit/ Net assets /segment: (loss) before (loss) after (liabilities) exceptional items exceptional items 2005 2004 2005 2004 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) (unaudited) (restated) £000 £000 £000 £000 £000 £000 £000 £000TobaccoprocessingmachineryGroup 22,938 29,166 1,261 1,937 1,261 1,698 5,868 5,962Joint 1,257 1,073 196 279 196 279 679 595ventureAir drying 9,257 13,304 (481) (56) 2,472 (56) 2,530 1,279equipmentOther - - (594) (536) (961) (536) (2,365) (2,906)activities Continuing 33,452 43,543 382 1,624 2,968 1,385 6,712 4,930operations Group 32,195 42,470 186 1,345 2,772 1,106 9,116 7,699Joint 1,257 1,073 196 279 196 279 679 595venture 33,452 43,543 382 1,624 2,968 1,385 9,795 8,294 Net debt - (3,083) (3,364)external 6,712 4,930 Geographical Turnover Operating profit/ Operating profit/ Net assets / (loss) before (loss) after (liabilities)(by origin): exceptional items exceptional items 2005 2004 2005 2004 2005 2004 2005 2004 (unaudited) (unaudited) (unaudited) (unaudited) (restated) £000 £000 £000 £000 £000 £000 £000 £000UnitedKingdom(trading 30,283 40,451 291 1,495 3,244 1,256 7,200 6,512activities)United - - (594) (536) (961) (536) (2,365) (2,906)Kingdom(otheractivities)United States 1,912 2,019 489 386 489 386 1,198 729of AmericaRest of the 1,257 1,073 196 279 196 279 679 595World 33,452 43,543 382 1,624 2,968 1,385 6,712 4,930 Group 32,195 42,470 186 1,345 2,772 1,106 9,116 7,699Joint venture 1,257 1,073 196 279 196 279 679 595 33,452 43,543 382 1,624 2,968 1,385 9,795 8,294 Net debt - (3,083) (3,364)external 6,712 4,930 TurnoverGeographical (by destination): 2005 2004 £000 £000 (unaudited)United Kingdom 9,030 6,894United States of America 3,236 5,990Europe 8,319 13,234Rest of the World 12,867 17,425 Continuing operations 33,452 43,543 Group 32,195 42,470Joint venture 1,257 1,073 33,452 43,543 2 Exceptional items Notes 2005 2004 (unaudited) £000 £000 Profit on surrender of lease i 2,953 -Abortive acquisition costs ii (367) -Reorganisation / Restructuring costs iii -- (239)Total exceptional items 2,586 (239) i. Agreement has been reached with the landlord of the leasehold premisesoccupied by Spooner Industries Limited in Ilkley, West Yorkshire, to surrenderthe existing lease and vacate the current premises within two years in a dealworth £3.5 million to the Group. Payment will be received over a two yearperiod through a combination of cash or land and cash. The value shown is thenet value of the cash and land that will be received less the estimatedrelocation costs. The estimated tax charge on this gain is £1.05 million forwhich full provision has been made in these financial statements. This may bemitigated depending on future actions and options available to the Group. Inaccordance with this agreement, £0.06 million was received in the year ended 30June 2005. ii. Following lengthy discussions and after undertaking extensive duediligence on a target company, the Board of Directors took the decision not toproceed with an acquisition. These costs represent third party services only. iii. The comparative amounts relate to the combination of an onerous leaseprovision and accelerated depreciation as a result of a reorganisation ofDickinson Legg Limited's activities 3 Taxation 2005 2004 (unaudited) (restated) £000 £000 UK Corporation tax at 30% (2004: 30%) 1,103 314Double taxation relief (58) -Foreign tax 120 83ACT written off - 506Deferred taxation 95 (179)Prior year charge 30 85 1,290 809The tax charge relates to the following:Dickinson Legg Group 1,189 735Joint venture 101 74 1,290 809Analysis of charge in period Current tax:United Kingdom Corporation tax @ 30% 1,045 314Prior year adjustment 30 85 1,075 399Foreign tax: Overseas subsidiaries 19 9Share of joint venture 101 74 Total current tax 1,195 482 ACT written off - 506 Deferred tax:Origination and reversal of timing differences 95 (179)Total deferred tax 95 (179) Tax on profit on ordinary activities 1,290 809 4 Dividends 2005 2004 (unaudited) £000 £000Ordinary shares Interim at £nil per 20p share (2004: 0.5 pence) - 182 Final proposed at £nil per 20p share (2004: 0.5pence) - 182 - 364 5 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares inissue. For diluted earnings per share, the weighted average number of ordinaryshares in issue is adjusted to assume conversion of all dilutive potentialordinary shares. Reconciliations of earnings and weighted average number ofshares used in the calculations are set out below: Earnings Weighted Total 2005 Earnings Weighted Total 2004 average Earnings per Average Earnings shares share Shares Per share Number Number (pence) £'000 ('000s) (restarted) ('000s) (pence) (unaudited)Basic earnings pershare 1,720 36,355 4.7 551 36,355 1.5 Add:Dilutive effect ofShare options - - - - 187 - Diluted earnings pershare 1,720 36,355 4.7 551 36,542 1.5 (Less)/add:Exceptional items (2,586) - (7.1) 239 - 0.7 Less:Tax effect of theexceptional costs 1,028 - 2.8 (65) - (0.2) Adjusted dilutedearnings per share 162 36,355 0.4 725 36,542 2.0 There is no dilutive effect of the share options during the 2005 financial year,as the average share price for the year was less than the exercise price of theshare options. 6 Reserves Group £'000 £'000 £'000 £'000 £'000 At 1 July 2004 as 7,271 45,234 39,496 (86,802) 5,199previously reported Prior year adjustment - - - (269) (269) At 1 July 2004 7,271 45,234 39,496 (87,071) 4,930 Retained profit for the - - - 1,720 1,720year Currency translation - - - 62 62differences As at 30 June 2005 7,271 45,234 39,496 (85,289) 6,712(unaudited) The Group has taken advice on the availability of certain unrelieved AdvanceCorporation Tax (ACT) utilised by the Group in prior periods. It would appearthat surrendered ACT used by a Group company since the de-merger from BrunelHoldings plc in December 2002, was not available. The estimated tax liabilityis £269,000 and full provision has been made in these financial statements andshown as a prior year adjustment. The merger reserve arises on consolidation and represents the difference betweenthe cost of investment and capital in Group companies at the date of merger. 7 Contingent liabilities The Group have the following contingent liabilities which have not been providedin the balance sheet since no actual liability is expected to arise: Bonds and Guarantees At 30 June 2005, the Group had outstanding bank and insurance guarantees inrespect of advance payments, performance and other bonds totalling £3,334,000(2004: £2,561,000). 8 Annual Report and Accounts & AGM The Annual Report and Accounts will be posted to shareholders shortly and willbe available from the Company's Registered office at Moorside Road, Winchester,Hampshire SO23 7SS. 9 Preliminary Announcement This preliminary announcement has been prepared on the basis of the accountingpolicies set out in the annual financial statements for the year ending 30 June2005. The financial information set out in this preliminary announcement doesnot constitute the company's statutory accounts for the years ended 30 June 2005or 30 June 2004. The financial information for the year ended 30 June 2004 isderived from the statutory accounts for that year, which have been delivered tothe Registrar of companies. The auditors report on those accounts wasunqualified and did not contain a statement under either section 237 (2) or (3)of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange