Dewhurst Regulatory News (DWHT)

4 Dec 2007 07:01

Dewhurst PLC04 December 2007 CHAIRMAN'S STATEMENT Results I am delighted to report an improvement in sales and profits this year. Salesgrew 5% to a record £31.4 million (£29.8 million). Profit improved from £3.4million to £3.8 million, just short of 2005's restated record figure. The secondhalf of the year was much busier than anticipated. Sales were 10% higher thanthe first half with strong global demand for keypads and a better performance onUK Lift products. The additional sales together with our continuing tight control on overheadsgenerated the improved profitability in the second half, leading to theexcellent full year position. The high demand with constrained resources has put pressure on our staff, whohave worked extremely hard to achieve these results. I would like tocongratulate and thank them for these efforts. Operations I have previously mentioned that our lean manufacturing programme has simplifiedproduction and created space in the factory. In July we therefore moved ourLondon LiftStore staff back into our premises in Hounslow saving on the leasingand other premises costs for this operation. We still feel it is important forthis Group to retain their LiftStore identity, so we have dedicated a separatearea in the factory and office for them. A major customer moved their manufacturing from the UK to Hungary in 2006. Wehave continued to supply them from the UK, but this position has becomeincreasingly difficult with short lead times and high variability in product anddemand. As a result we have taken the decision to open a factory in Hungary tosupport this customer. The unfortunate consequence of this is that we will haveto cut back our workforce at the factory in Hounslow in the Spring and this willlead to a number of redundancies. Many of the staff have been making productsfor this customer for 20 years, so it will be a sad day for us. I would like topay tribute to their dedication over the years and their continuing dedicationnow while we organise and effect this transfer. Products Considerable resources this year have been put into engineering a new range ofkeypad products for Automated Teller Machines. It is expected that theseproducts will move into volume production in the next calendar year. We havealso expended a great deal of effort on developing a solar powered version ofour Flecta bollard. With the emphasis today on reducing our impact on theenvironment, this product is generating considerable interest from localauthorities all around the country. Acquisitions Just after the year end we added the products and business of SwitchingComponents to the Group. This is quite a small UK operation selling andmanufacturing lift pushbuttons and as a result it will not be run as a separatecompany, but will be absorbed into the Hounslow business. Outlook The coming year will entail a certain amount of cost and disruption because ofthe move of a significant amount of work from Hounslow to Hungary. However thisis an investment which should help us to reduce costs in the longer term. Demand currently is reasonably steady. There can be a lag between changes in theeconomic situation and its effect on our orders as projects have already beeninitiated. Any downturn in the market as a result of current economic turmoil isnot likely to affect us until the second quarter or later. Richard DewhurstChairman REVIEW OF OPERATIONS Operating Highlights The climate for manufacturing companies around the world and most certainly inthe UK continues to be very challenging, The first half of the year wasdisappointing with lower than expected sales in most companies across the Group.We knew that we needed to continue to streamline processes and reduce overheadsbut were perhaps unable to effect these changes as fast as we would have liked.However they were driven through in the second half and coupled with improvedlevels of revenue, ensured that the second half results were in line with ourexpectations. We have worked very hard to refine all our systems and we are now at a stagewhere we have taken the majority of benefits from this type of activity. We willcontinue to strive to improve all our processes but now we must focus onincreasing revenues in order to grow profit. In the majority of our businesseswe do now have some solid product improvements that can really lead to salesgrowth and deliver the profit improvements that we are looking for in the mediumterm. UNITED KINGDOM One and a half years ago our largest customer for our keypad products opened upa plant in Hungary and at the beginning of this year they announced thatproduction at their UK plant would be dramatically scaled back and mostproduction moved to Hungary. It quickly became clear that it would not bepossible to service this customer to the levels that we felt appropriate fromthe UK. Transit times and costs made this impractical. We looked at how we could address this issue and after careful analysis it wasdecided that the best course of action was to start up a new operation inHungary. During the latter stages of the year we recruited a General Manager forthis operation as well as acquiring premises. We will be working hard during thecoming year to transfer our keypad production to this new site and this willallow us to improve the service levels to this key customer. For many years now we have been under intense price pressure in our keypadbusiness. We have managed to more or less offset these effects by improvementsto our manufacturing processes and through value engineering. This pressurecontinues but our move to Hungary will give us improved access to lower costsuppliers, which may allow us to improve keypad sales in markets where cost isthe key driver. The decision to move the manufacturing of keypads was taken during a very busyperiod and at a time when we needed the full support of our team at Hounslow.Despite the uncertainty about job security, everyone has worked exceptionallydiligently and allowed us to continue to provide high levels of service to ourcustomers. We are very grateful to everyone for their support during thisdifficult period. Keypad Division Demand for encrypted pin pads and other ATM assemblies, has remained strongthroughout the year. Design activity has also been high this year. We have spent the best part of theyear designing two new products for one of our key customers. The first is a newkeypad, which will go into production during the first quarter of next year. Thechallenges on this project have been considerable but they have been met andovercome by our design team. The second is a function key bezel, which has beensuccessfully developed and will also be going into production in the firstquarter of next year. Sales of our other keypads grew strongly through the year and can be seenthroughout the UK in a number of different applications. Rail Division We launched our new rail pushbutton at Railtex 07 in February. The product waswell received but it is critical for us to produce a family of products coveringdifferent applications in order to really penetrate the market effectively. Sales for our other rail products have remained steady through the year. Lift Division Activity in most of our more important elevator markets strengthened through theyear and we experienced good growth in sales in the Lift Division. Our key FarEast markets and particularly Hong Kong saw solid growth as new projects startedto come through after two or three rather lean years. Our appointment of aProduct Development Manager in that market came at just the right time, but wemust still do more to develop the full potential of this important market. Sales to Europe continued to grow, with a large number of projects comingthrough, particularly in the first half of the year. Helped by the introductionof the new M-20 range of buttons, we have been able to build up a wider networkof distributors over the last two years and sales through these outlets look setfor solid continued growth for the next few years. LiftStore The success of the Ethos controller family has continued through the year. Saleshave grown really quite dramatically in what is a fairly stable market, so ourmarket share is now well up on two or three years ago. Development of the Ethos family continues and during the year we launched a newspeed control product V-Com, which significantly improves the ride comfort ofthe lift and allows the speed profile to be modified very easily. This newsystem utilises some very sophisticated new shaft positioning devices that havealso been developed by the in house team at LiftStore. This has been a year of transition for our Monitoring Division. The move oflarge chunks of housing stock into Housing Associations has had an impact on theshort term demand for monitoring but longer term, the importance of keyperformance indicators will drive more Associations towards automated monitoringof their key assets such as lifts. In terms of development we have focused on ensuring that customers are able tomonitor their lifts from a much wider range of sites. Previously a customer'sCentral Monitoring System would have been located in their Head Office and allscreens and programs were only accessible in Head Office. This year we launchedCMS Anywhere, which as the name suggests allows screens and programs to beaccessed anywhere over the internet. So if people are working from home orsatellite offices, they can still view their lift monitoring system. The greatest changes that LiftStore have seen this year have probably been inthe Fixture Division. Around five years ago we separated this business fromDewhurst and moved it out to a new location. This action was critical to ensurethat customers could see that this new business really was separate fromDewhurst. In the intervening period we have freed up a large amount of space,both in the offices and on the factory floor at Inverness Road. This space wasmore than adequate for LiftStore's fixture business and so it was decided tomove it back into the main premises. This was achieved in the second half of theyear with the minimum of disruption and the team involved in this move did anexcellent job. Throughout the year, in all three of LiftStore's business divisions we have seena steady increase in sales from infrastructure customers, in particular NetworkRail and London Underground. It is a testament to LiftStore's products that theyhave been chosen by these two important customers and it will lead to strongsales in the medium term as lifts in stations around the country are modernised. Traffic Management Products (TMP) The first full year of ownership of TMP has been a learning curve for theDewhurst management team, although the route to market in the highways industryis similar in many ways to that of the lift market. We have worked very hard on development of the Flecta (Traffic Bollards) range.We introduced a new shape of bollard in the first half of the year and then inthe second half of the year we launched Solalite, which we believe will herald anew era in bollard design. Solalite is a solar powered illuminated bollard, primarily aimed for the UKhighway market. There are a number of applications where standards insist thatbollards must be illuminated for safety reasons. However conventionalilluminated bollards cause CO2 emissions, are expensive to run and inconvenientto install. Solalite avoids all these disadvantages, whilst still providingillumination to the bollard through the use of solar power. This year has also seen the successful approval testing of our Passively Saferange of lamp columns, traffic signal posts and signposts. With this testing nowbehind us we will be able to sell the product without constraints and demand forthis type of product is expected to increase throughout the UK. NORTH AMERICA Dupar Controls The market conditions for elevator products in Canada improved in the year andDupar achieved some good growth in their fixtures sales. The new M-20 pushbuttonwas very well received by some of our larger customers and has helped to boostsales throughout the year. In contrast demand for keypad products weakened considerably and more or lessoffset the gains in elevator sales. We would hope that this is a temporaryeffect and that the demand for keypads strengthens again during the coming year. The management team at Dupar was reorganised during the year, with GeorgeFoleanu, our Engineering Manager, moving up to take the role of OperationsManager. He has continued to work hard on the lean programme with his team andthis year we have made great strides in improving processes. In particular, ontime delivery performance has improved markedly. The Fixture Company (TFC) This year has seen the arrival of a new General Manager at The Fixture Companyand we welcome Jim Buster to the team. There have been a number of otherpersonnel changes at the company and this has made Jim's task quite a challenge.There are however positive signs that sales are starting to improve and theopportunities for TFC continue to be good. AUSTRALASIA Australian Lift Components (ALC) The Australian market saw some good growth in the year, which benefited both ALCand Lift Material. Demand for ALC's fixture products was boosted by the launchof new variants of M-20 designed to meet the particular specifications for theAustralian market. The lean programme that ALC embarked upon last year has continued this year withthe help of local consultants. Definite improvements to customer support areclearly visible already from this programme. Lift Material With the Australian market buoyant, demand for Lift Material's wide range ofproducts has been strong and the company has had a good year. We have been successful in adding a number of new lines to the portfolio andthese products have been well received by the market. David DewhurstGroup Managing Director FINANCIAL REVIEW Results Despite a difficult first half year and increasing pricing pressures, the secondhalf saw a strong performance particularly from keypads and lift controllers.Revenue increased by 5.5% from £29.8 million to £31.4 million. The impact on operating profit was even more marked. At the half year wereported a fall in operating profit of 11.2%, but with the second halfgenerating operating profits 29% higher than the first half, the group ended theyear with an increase of 7.7% from £3,328k to £3,583k. This reflects an increasein margins to 11.4% (2006: 11.2%). Finance income reports an improvement in bank deposit interest, as a result ofour continuing cash generation through the year. Finance costs show the definedbenefit pension scheme costs also improved by £125k, resulting in an overallprofit before tax increase of £459k from £3,394k to £3,853k. Pension Scheme Deficit A more detailed explanation of the retirement benefit fund assets andliabilities movements is reported in note 22 under IAS 19, but this year hasseen a 34% reduction in the scheme deficit from £5.7 million to £3.8 million. Inaddition to current service contributions the group continues to pay a fixed sumof £0.5 million annually to reduce the fund deficit and all recommendations madeby the scheme's actuary to eliminate the scheme deficit have been fullyimplemented. Strong Cash Flow Cash flow was once again very good. Despite high trade receivables as a resultof the strong second half performance, the group was still able to generate £3.2million cash from operations and end the year up £1.5 million at £6.7 million. We started and finished the year ungeared. Auditor I am pleased to report that Chantrey Vellacott DFK LLP was appointed on 23August 2007 as the group's primary auditor. 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 24% of profit before tax beingearned in foreign currencies during the year ended 30 September 2007. Dividends Dividends are accounted for when paid and approved, and not when proposed, therefore the proposed final dividend for 2007 has not been accrued at thebalance sheet date. The total dividend for 2007 of 5.40p per share, up 5.3%against last year's 5.13p, is covered 5.2 times by earnings. Shareholders' fundsimproved from £13.9 million to £17.3 million. There was a reduction in the number of allotted shares during the year and on 1 October 2007, and these have been fully reported in the directors' report. Jared SinclairFinance Director Consolidated income statement For the year ended 30 September 2007-------------------------------------------------------------------------------- 2007 2006Continuing operations £(000) £(000)--------------------------------------------------------------------------------Revenue 31,394 29,766 Operating costs (27,811) (26,438)--------------------------------------------------------------------------------Operating profit 3,583 3,328 Finance income 272 165Finance costs (2) (99)--------------------------------------------------------------------------------Profit before taxation 3,853 3,394 Tax on profit (1,216) (1,081)--------------------------------------------------------------------------------Profit for the financial year 2,637 2,313--------------------------------------------------------------------------------Basic and diluted earnings per share 26.87p 23.48p-------------------------------------------------------------------------------- Consolidated statement of recognised income and expense-------------------------------------------------------------------------------- 2007 2006 £(000) £(000)--------------------------------------------------------------------------------Net income/(expense) recognised directly in equity:Actuarial gains/(losses) on the defined benefitpension scheme 1,550 1,637Exchange differences on translation of foreignoperations 424 (346)Tax on items taken directly to equity (592) (387)--------------------------------------------------------------------------------Net income/(expense) recognised directly in equityin the year 1,382 904--------------------------------------------------------------------------------Profit for the financial year 2,637 2,313--------------------------------------------------------------------------------Total recognised income and expense for the year 4,019 3,217-------------------------------------------------------------------------------- Consolidated balance sheet At 30 September 2007-------------------------------------------------------------------------------- 2007 2006 £(000) £(000)--------------------------------------------------------------------------------Non-current assetsGoodwill 5,318 5,192Other intangibles 112 89Property, plant and equipment 2,695 2,804Deferred tax asset 1,081 1,746-------------------------------------------------------------------------------- 9,206 9,831Current assetsInventories 2,778 3,037Trade and other receivables 6,977 5,664Cash and cash equivalents 6,659 5,077-------------------------------------------------------------------------------- 16,414 13,778--------------------------------------------------------------------------------Total assets 25,620 23,609-------------------------------------------------------------------------------- Current liabilitiesTrade and other payables 3,878 3,442Current tax liabilities 519 388Short term provisions 100 150-------------------------------------------------------------------------------- 4,497 3,980Non-current liabilitiesRetirement benefit obligation 3,777 5,697--------------------------------------------------------------------------------Total liabilities 8,274 9,677--------------------------------------------------------------------------------Net assets 17,346 13,932-------------------------------------------------------------------------------- Equity Share capital 980 985Share premium account 157 157Capital redemption reserve 157 152Translation reserve 512 215Retained earnings 15,540 12,423--------------------------------------------------------------------------------Total equity 17,346 13,932-------------------------------------------------------------------------------- Consolidated cash flow statement For the year ended 30 September 2007-------------------------------------------------------------------------------- 2007 2006 £(000) £(000)--------------------------------------------------------------------------------Cash flows from operating activitiesOperating profit 3,583 3,328Depreciation and amortisation 473 463Additional (income)/costs to pension scheme (344) 131Exchange adjustments 196 (98)(Profit)/loss on disposal of property, plant and equipment (2) (3)-------------------------------------------------------------------------------- 3,906 3,821(Increase)/decrease in inventories 259 996(Increase)/decrease in trade and other receivables (1,313) 513Increase/(decrease) in trade and other payables 436 (366)Increase/(decrease) in provisions (50) (50)--------------------------------------------------------------------------------Cash generated from operations 3,238 4,914Interest paid (2) -Income tax paid (1,015) (1,147)--------------------------------------------------------------------------------Net cash from operating activities 2,221 3,767-------------------------------------------------------------------------------- Cash flows from investing activitiesAcquisition of subsidiary undertakings (net of cash acquired) - (4,322)Proceeds from sale of property, plant and equipment 21 14Purchase of property, plant and equipment (236) (320)Development costs capitalised (114) (109)Interest received 246 165--------------------------------------------------------------------------------Net cash used in investing activities (83) (4,572)-------------------------------------------------------------------------------- Cash flows from financing activitiesDividends paid (512) (490)Purchase of own shares (93) ---------------------------------------------------------------------------------Net cash used in financing activities (605) (490)-------------------------------------------------------------------------------- Net increase/(decrease) in cash and cash equivalents 1,533 (1,295)--------------------------------------------------------------------------------Cash and cash equivalents at beginning of year 5,077 6,438 Exchange adjustments on cash and cash equivalents 49 (66)--------------------------------------------------------------------------------Cash and cash equivalents at end of year 6,659 5,077-------------------------------------------------------------------------------- AGM, results and dividends The trading profit for the year, after taxation, amounted to £2,637k (2006:£2,313k). A final dividend on the Ordinary and 'A' ordinary shares of 3.60p per 10p share(2006: 3.42p) for the financial year ending 30 September 2007 will be proposedat the Annual General Meeting to be held on 31 January 2008. If approved, thisdividend will be paid on 3 March 2008 to members on the register at 11 January2008. An interim dividend of 1.80p per share (2006: 1.71p) was paid on 28 August 2007. Earnings per share and dividend per share Weighted average number of shares-------------------------------------------------------------------------------- 2007 2006 No No--------------------------------------------------------------------------------For basic and diluted earnings per share 9,815,709 9,851,898-------------------------------------------------------------------------------- The calculation of basic and diluted earnings per share is based on the profitattributable to shareholders and on 9,815,709 Ordinary 10p and 'A' ordinary 10pshares, being the weighted average number of shares in issue throughout thefinancial year. -------------------------------------------------------------------------------- 2007 2006Paid dividends per 10p ordinary share £(000) £(000)--------------------------------------------------------------------------------2006 final paid of 3.42p (2005: 3.26p) (336) (322)2007 interim paid of 1.80p (2006: 1.71p) (176) (168)-------------------------------------------------------------------------------- The final proposed dividend is based on 3,522,200 Ordinary 10p shares and5,681,198 'A' ordinary 10p shares, being the latest number of shares in issueallowing for the 600,000 'A' ordinary 10p share repurchase on 1 October 2007. The directors are proposing a final dividend of 3.60p (2006: 3.42p) per share,totalling £331k (2006: £336k). This dividend has not been accrued at the balancesheet date. Basis of preparation The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 September 2007 or 2006. Statutoryaccounts for 2006, which were prepared under IFRS, have been delivered to theRegistrar of Companies. The statutory accounts for 2007 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 2007 and 2006 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 have been prepared in accordance withthose parts of the Companies Act 1985 that are applicable to companies adoptingIFRS. The company is registered and incorporated in the United Kingdom; andquoted on AIM. This information is provided by RNS The company news service from the London Stock Exchange