Dewhurst Regulatory News (DWHT)

7 Dec 2006 09:01

Dewhurst PLC07 December 2006 CHAIRMAN'S STATEMENT Results This report is prepared under International Financial Reporting Standards forthe first time. Information of the effect of the new standards is set out in theFinancial Review. It is disappointing to report a fall in sales and profits this year after fouryears of steady progress, during which profits increased by 150%. This yearsales fell marginally to £29.7 million (£30.0 million) and profits were £3.4million compared to last year's restated £3.9 million. Of the drop in profits,£0.2 million was as a result of trading performance and the remaining £0.3million was caused by changes in the presentation of pensions costs. A positive aspect of the results is our continued strong cash flow. Despitespending £4.7 million on investment in acquisitions, plant and equipment, westill ended the year with £5.1 million cash, only £1.4 million lower than lastyear. Although the figures are not as good as we would have wished, they have beenachieved in a very challenging environment for manufacturing companies. Aspreviously reported, prices are falling on many of our product ranges. We havecontinued to drive costs down, but this year we have not been able fully toabsorb the cost increases, which have been rising at a faster rate thanpreviously. I know employees have worked hard in these circumstances to try tomaintain our performance and I would like to thank them for their hard work anddedication this year. Operations Our focus in the year has been on continuing to try to improve customer service.In line with this objective we have extended our Lean initiatives to LiftStorein Flint and Australian Lift Components. Every member of staff in theselocations is being trained in Lean principles and practices and this is expectedto generate continued improvements in our processes in the future. Products We have made substantial investments in developing new products during the year.We have continued the work on our new lift controller, Ethos, to broaden therange of applications it can support. This has helped to rationalise our productrange while providing customers with significantly improved technology. Thesebenefits have brought us opportunities with a number of new customers. We have designed a number of versions of our Unipad keypad concept both tobroaden our standard range and to provide solutions for specific customerprojects. We have also developed a new weatherproof pushbutton, which issuitable for a wide array of exterior applications including transportation. Traffic Management Products (TMP) TMP joined the Group in January. TMP provides traffic products, particularlythose focused on passive safety. Passively safe products are designed tominimise injury in road traffic accidents and thereby contribute to theGovernment's objective of making our roads ever safer. TMP was the initiator ofthe non-illuminated keep left bollard that is now becoming a common sight on UKroads. The bollard reduces CO2 emissions, provides a more consistent performanceand needs minimal maintenance. TMP also sells a range of passively safe polesfor use as lighting columns, traffic signal posts and signposts. Outlook The outlook for manufacturing companies is expected to remain extremelychallenging. Continual downward pressure on prices is likely to result in erodedmargins in the coming year. We do have a strong pipeline of new products, whichwill help offset this somewhat. We are also looking to achieve growth fromtraffic products in the medium term. Richard DewhurstChairman REVIEW OF OPERATIONS Operating Highlights The current climate in the UK is not at all favourable for companies involved inmanufacturing. We are going through difficult times but despite this goodprogress has been made. We have continued to focus on improving levels ofservice, which we believe is fundamental to growing revenues. We have also putenormous emphasis into new product development and moving our key product rangesforward. Investing more heavily in this area than we have in the past hashighlighted opportunities throughout the marketing and design process where wecan improve and this will be important to our future success. This year has seen the completion of our programme to move all subsidiarycompanies onto one computer system, with Traffic Management Products, LiftMaterial and The Fixture Company all coming on line. Although it is a relativelyrecent event, we are already seeing the benefits in day-to-day operations ofhaving all companies on the same system. We now have much better visibility ofany trends at individual companies and can act much earlier on any potentialissues or opportunities. UNITED KINGDOM The strong price erosion that has been with us for the past three yearscontinues to be the most pressing problem that we face. Sourcing of volumeproducts from low cost regions is becoming more and more prevalent and we haveworked hard to purchase many of our components from these regions. At the sametime it is critical for us to ensure our UK based assembly is as efficient aspossible, so that we remain competitive. We do believe that there is demand forlast minute product configuration in the UK and combining this with efficientlysourced components, we can remain successful. Central to this is the work that we are doing in our Lean Manufacturingprogramme. This has been an important initiative for the past two years and willremain essential to the success of the business. Streamlining the assemblyprocess, eliminating waste, minimising space requirement and reducing stocks areall important factors that the management team focus on continuously. We haveachieved very good initial success but we constantly revisit our processes tolook for improvements and it is very satisfying, three years into the programmehow much we are achieving in this area on a daily basis. This is an area whereall employees can make significant contributions and our staff have done a greatjob in this area. Keypad Division There has been a great deal of price pressure in this area of the business, butdemand for encrypted pin pads and other ATM assemblies has remained reasonablystrong. The launch of Unipad last year was met with a great deal of interest. Howevermuch of the demand is project based and that takes a long time to convert intoactual orders. We have been working on several projects during the year, basedon variants of the Unipad concept. One of these variants has been selected foruse on petrol pump payment terminals for a major UK supermarket chain. Theseproducts will start to be installed in a rolling programme over the coming year.We also launched a new family of more compact 'small key' Unipads that are aimedat the ticket machine market rather than ATM's and these have already been soldinto a number of new projects. We have through the year built a strong relationship with a number of encryptionproviders and we need to continue to strengthen those ties in the future. Rail Division The division has been buoyed this year by the winning of a couple of reasonablesized orders for new rolling stock projects. We will also be launching our new rail pushbutton at Railtex 07 in February.This pushbutton has a range of innovative features, which we believe should makeit very competitive in the market. For the first time in a number of years wewill focus strongly on the rail market in the coming months. Lift Division New construction in some of our key export markets have remained at low levelsand this has hampered our sales recovery. We have recruited a new Hong Kongbased Business Development Manager who will be instrumental in building strongerlinks with our customers in that region and ensure that, when conditionsimprove, we benefit from the upturn. Over the last two years we have put a great deal of emphasis on the Europeanmarket and that has paid dividends with our European sales seeing strong growth. Although a lot of design emphasis has been in other product areas this year, wehave significantly grown the M-20 pushbutton family over the last twelve months.The M-20 has been selected in a number of prestigious sites on both sides of theAtlantic in the past year. Although primarily designed for the rail market, our weatherproof pushbutton hasachieved a promising start by being chosen for a new range of platform lifts forwheelchair users. During the year we have worked closely with our Elevator display partner andthis has led to a promising increase in sales both in the UK and overseas. LiftStore It was reported last year that Ethos our new generation of lift controller hadhad a successful launch. The team at LiftStore have built on that success andcustomer response to the product has exceeded expectations. The ease ofinstallation of Ethos, combined with its reliability has given the product anexcellent reputation. It has also allowed us to gain market share against someestablished competitors. During the year we have added to the Ethos family witha suite of software tools and new speed profiling hardware to improve ridecomfort. The complete Ethos range is a major investment and further excitingdevelopments are in the pipeline for future years. Our Monitoring division started the year very strongly but certainly the secondhalf proved much more difficult for the division. The gradual move in thecontrol of housing stock away from Local Authorities towards HousingAssociations has changed our market and we are in the process of reconfiguringour offering to make it more relevant to potential customers. It is encouraginghowever that Key Performance Service Indicators are becoming a way of life inthis sector, since our monitoring products can help deliver such indicators verysimply. In the Fixture Division, the resources that we have put into strengthening ourfixture team are paying off and we continue to develop that business. A great deal of emphasis has been put into Lean Manufacturing throughout thegroup, but particularly in our Flint factory. The required assembly space hasbeen halved, stocks significantly reduced and we are in a good position to reapefficiency gains as Ethos volumes increase. Traffic Management Products (TMP) We acquired the TMP business in January of this year. Dewhurst have beeninvolved in the transport industry for many years. Although it may appear thatTMP's main product lines are outside areas where we have historically operated,we consider that there are similarities in the marketing approach which providesynergies. TMP mainly sells products driven by legislation and specification toa local authority customer base with which we are very familiar. TMP's lead product range is the Flecta non-illuminated keep left bollard, whichhas sold strongly throughout the year. The product, as its name suggests, doesnot need to be illuminated, unlike the majority of bollards on the UK's roads.This advantage reduces the operational cost to virtually zero as well aseliminating carbon emissions and light pollution. As well as these importantadvantages, the Flecta can withstand impact from a car and simply bounce backinto place, providing significant maintenance savings. We have also been working closely with our manufacturing partner for PassiveSafety lighting columns, signposts and traffic signal posts. Preparing theseproducts for sale has been a lengthy process, as we are required to carry out asignificant number of tests on the various posts. However there is an excellentlong-term market for these products and the future prospects for TMP's productslook very encouraging. NORTH AMERICA Dupar Controls The North American market softened during the year giving both Dupar Controlsand The Fixture Company a challenging time. Competition is intensifying in themarket but the launch in North America of the M-20 pushbutton has been of realbenefit to Dupar Controls and has allowed us to win new business as well assecure existing contracts. We have continued to work on the Lean Manufacturing programme at Dupar Controls,particularly improving the final assembly process. There are still significantopportunities to improve administrative and manufacturing processes, which weintend to carry out in the coming year. The Fixture Company (TFC) After last year's solid growth TFC lost momentum somewhat this year and salesare not as strong as we would like. The market for our products in the UnitedStates is very large and offers us real opportunity for sustained growth. We arecurrently not making the most of these opportunities and through 2007 we will bereaddressing our marketing plan. AUSTRALASIA Australian Lift Components (ALC) The Australian market remained relatively flat through the year. We suffered adownturn in sales from our largest customer, who is sourcing more packages fromChina, but have worked hard in developing other customers to minimise the effectof any downturn. ALC have focused heavily on initiating a Lean Manufacturing programme with thehelp of a team from Hounslow and will continue through 2007 with local support.In April the factory space was re-laid out and the flow around the plant hasbeen extensively streamlined. There is still opportunity for significantreductions in stock and we would expect to see the effect of this through 2007. Lift Material This has been a good first full year for Lift Material with sales of all keyproducts performing in line with expectations. Towards the end of the year thecompany won an order for its largest project: pushbuttons, displays and safetyedges for the prestigious Central Plaza One building in Brisbane, the thirdhighest in the city. One of our drivers for acquiring the business was to add new product lines totheir offering and we have been successful in introducing two particularlystrong brands to our portfolio that will lead to increased revenues during thecurrent year. David DewhurstGroup Managing Director FINANCIAL REVIEW International Financial Reporting Standards ("IFRS") Dewhurst plc has elected to prepare its consolidated and company financialstatements in accordance with International Financial Reporting Standards asadopted by the EU (IFRS). These are the first financial statements of thecompany and the group prepared under IFRS and so in line with the transitionalprovisions set out in IFRS 1, the directors have restated the comparative 2005year figures, where necessary, to align the numbers previously reported under UKGAAP with IFRS. As reported last year despite the inclusion in the Balance Sheet of a pensiondeficit and deferred tax and the change from goodwill amortisation toimpairment, the move to IFRS did not change how the group was managed and had noimpact on cash flow. The full financial statements will provide a more detailed explanation of thetransition to IFRS but I have summarised the key elements of the restatement oflast year's figures in the table below. Profit on ordinary 2005activities before taxation £(000) UK GAAP 3,485Pension costs 151Goodwill 160R&D capitalised 75 --------IFRS 3,871 -------- Results Despite a difficult year, revenue decreased only marginally by 0.8% from £30.0million to £29.8 million. Profit on ordinary activities before taxation on theother hand dropped £477k, from £3,871k to £3,394k. Only £183k of the fall wasdue to trading performance, £294k was as a result of a movement in the pensioncharge. Strong Cash Flow Cash flow was once again very good. The group generated £4.9 million cash fromoperations and, despite utilising £4.3 million to acquire Traffic ManagementProducts Ltd, ended the year down just £1.3 million at £5.1 million. Thecontinuation of our lean programmes across the group reduced inventories by £1.0million whilst maintaining service levels. We started and finished the year ungeared. Treasury Policy The group seeks to reduce or eliminate financial risk to ensure sufficientliquidity is available to meet foreseeable needs, and to invest cash assetssafely and profitably. The policies and procedures operated are regularlyreviewed and approved by the board. By varying the duration of its fixed andfloating cash deposits, the group maximises the return on interest earned. Thereis no formal policy for matching foreign currency cash flows or matchingexposure to foreign currency net assets. However these issues are regularlymonitored. As shown in note 25, there is no material currency exposure to thegroup at the year end. The group's reported trading profit was not significantlyaffected by currency movement with approximately 29% of profit before tax beingearned in foreign currencies during the year ended 30 September 2006. Dividends Dividends are now accounted for when paid and approved, and not when proposed, therefore the proposed final dividend for 2006 has not been accrued at thebalance sheet date. The total dividend for 2006 of 5.13p per share, up 4.9%against last year's 4.89p, is covered 4.6 times by earnings. Shareholders' fundsimproved from £11.2 million to £13.9 million. There was no reduction of sharesduring the year. Jared SinclairFinance Director Consolidated income statement For the year ended 30 September 2006------------------------------------------------------ ----------- ---------- 2006 2005Continuing Operations £(000) £(000)------------------------------------------------------ ----------- ---------- Revenue 29,766 29,994 Operating costs (26,438) (26,171) Operating profit 3,328 3,823Finance Income 165 191Finance Costs (99) (143)------------------------------ -------- ----------- ----------Profit before taxation 3,394 3,871Tax on profit (1,081) (1,173)------------------------------ -------- ----------- ----------Profit for the financial year 2,313 2,698------------------------------ -------- ----------- ----------Basic and diluted earnings per share 23.48p 27.39p------------------------------ -------- ----------- ---------- Consolidated statement of recognised income and expense ----------- ----------- ----------- ----------- ----------- ----------- 2006 2005 £(000) £(000) ----------- ----------- ----------- ----------- ----------- -----------Net income/(expense) recognised directly in equity:Actuarial gains/(losses) on the defined benefitpension scheme 1,637 (1,561)Exchange differences on translation of foreignoperations (346) 652Tax on items taken directly to equity (387) 273------------------------------------- ----------- -----------Net income/(expense) recognised directly in equityin the year. 904 (636)------------------------------------- ----------- -----------Profit for the financial year 2,313 2,698------------------------------------- ----------- -----------Total recognised income and expense for the year 3,217 2,062------------------------------------- ----------- ----------- Consolidated balance sheet At 30 September 2006----------------------------------------------------- ---------- ---------- 2006 2005 £(000) £(000)------------------------ ------ ---------- ---------- ---------- ----------Non-current assetsGoodwill 5,192 1,531Other intangibles 89 34Property, plant and 2,804 2,952equipmentDeferred tax asset 1,746 2,100-------------------- ------ ---------- ---------- ---------- ---------- 9,831 6,617Current assetsInventories 3,037 3,778Trade and other receivables 5,664 5,726Cash and cash equivalents 5,077 6,438-------------------- ------ ---------- ---------- ---------- ---------- 13,778 15,942-------------------- ------ ---------- ---------- ---------- ----------Total assets 23,609 22,559-------------------- ------ ---------- ---------- ---------- ---------- Current liabilitiesTrade and other payables 3,442 3,588Current tax liabilities 388 464Short term provisions 150 200-------------------- ------ ---------- ---------- ---------- ---------- 3,980 4,252Non-current liabilitiesRetirement benefit obligation 5,697 7,104-------------------- ------ ---------- ---------- ---------- ---------- 5,697 7,104-------------------- ------ ---------- ---------- ---------- ----------Total Liabilities 9,677 11,356-------------------- ------ ---------- ---------- ---------- ----------Net assets 13,932 11,203-------------------- ------ ---------- ---------- ---------- ---------- Equity Share capital 985 985Share premium account 157 157Capital redemption reserve 152 152Translation reserve 215 457Retained earnings 12,423 9,452-------------------- ------ ---------- ---------- ---------- ----------Total equity 13,932 11,203-------------------- ------ ---------- ---------- ---------- ---------- Consolidated cash flow statement For the year ended 30 September 2006------------------------------------------------------------------------------- 2006 2005----------------------------- ------- --- -------- -------- -------- £(000) £(000)Cash flows from operating activitiesOperating profit 3,328 3,823Depreciation and amortisation 463 478Additional costs to pension scheme 131 (293)Exchange adjustments (98) 314(Profit)/loss on disposal ofproperty, plant and equipment (3) (3)----------------------------- ------- --- -------- -------- -------- 3,821 4,319(Increase)/decrease in inventories 996 663(Increase)/decrease in trade and other receivables 513 (717)Increase/(decrease) in trade and other payables (366) (601)Increase/(decrease) in provisions (50) (10)----------------------------- ------- --- -------- -------- --------Cash generated from operations 4,914 3,654Interest paid - (1)Income tax paid (1,147) (1,298)----------------------------- ------- --- -------- -------- --------Net cash from operating activities 3,767 2,355 Cash flows from investing activitiesAcquisition of subsidiaryundertakings (net of cash acquired) (4,322) (915) Proceeds from sale of property, plant and equipment 14 18Purchase of property, plant and equipment (320) (227)Development costs capitalised (109) (49)Interest received 165 191----------------------------- ------- --- -------- -------- --------Net cash used in investing activities (4,572) (982) Cash flows from financing activitiesDividends paid (490) (466)----------------------------- ------- --- -------- -------- --------Net cash used in financing (490) (466)activities----------------------------- ------- --- -------- -------- --------Net increase/(decrease) in cash and cash equivalents (1,295) 907----------------------------- ------- --- -------- -------- -------- Cash and cash equivalents at beginning of year 6,438 5,448 Exchange adjustments on cash and cash equivalents (66) 83----------------------------- ------- --- -------- -------- -------- Cash and cash equivalents at end of year 5,077 6,438----------------------------- ------- --- -------- -------- -------- AGM, results and dividends The trading profit for the year, after taxation, amounted to £2,313k (2005:£2,698k). A final dividend on the Ordinary and 'A' ordinary shares of 3.42p per 10p share(2005: 3.26p) will be proposed at the Annual General Meeting to be held on 31January 2007. If approved, this dividend will be paid on 5 March 2007 to memberson the register at 12 January 2007. An interim dividend of 1.71p per share (2005: 1.63p) was paid on 29 August 2006. Earnings per share and dividend per shareWeighted average number of shares------------------------------------- ----------- ----------- 2006 2005 No No------------------------------------- ----------- -----------For basic and diluted earnings per share 9,851,898 9,851,898------------------------------------- ----------- ----------- The calculation of basic and diluted earnings per share is based on the profitattributable to shareholders and on 9,851,898 Ordinary 10p and 'A' ordinary 10pshares, being the weighted average number of shares in issue throughout thefinancial year. ------------------------------------- ----------- ----------- 2006 2005Paid dividends per 10p ordinary share £(000) £(000)------------------------------------- ----------- -----------2005 final paid of 3.26p (2004: 3.10p) (322) (305)2006 interim paid of 1.71p (2005: 1.63p) (168) (161)------------------------------------- ----------- ----------- The final proposed dividend is based on 3,570,700 Ordinary 10p shares and6,281,198 'A' ordinary 10p shares, being the number of shares in issue at thebalance sheet date. The directors are proposing a final dividend of 3.42p (20053.26p) per share, totalling £337k (2005: £322k). This dividend has not beenaccrued at the balance sheet date. Basis of preparation The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 September 2006 or 2005. Statutoryaccounts for 2005, which were prepared under UK GAAP, have been delivered to theRegistrar of Companies. The statutory accounts for 2006 which are prepared underaccounting standards adopted by the EU will be delivered to the Registrar ofCompanies following the company's annual general meeting. The auditors havereported on the 2006 and 2005 accounts; their reports were unqualified, did notinclude references to any matters to which the auditors drew attention by way ofemphasis without qualifying their reports and did not contain a statement undersection 237(2) or (3) of the Companies Act 1985. Dewhurst plc has elected to prepare its consolidated and company financialstatements in accordance with International Financial Reporting Standardsadopted for use in the European Union ("EU") (IFRS) from 1 October 2005. Thegroup and company financial statements will be prepared in accordance with thoseparts of The Companies Act 1985 that are applicable to companies adopting IFRSand comply with Article 4 of the EU IAS legislation. The transition date to IFRSfor Dewhurst plc is 1 October 2004. IFRS 1 has been applied in the preparationof the financial statement and the disclosures required by IFRS 1 concerning thetransition from UK GAAP to IFRSs are explained and given in the notes. This information is provided by RNS The company news service from the London Stock Exchange