Dewhurst Regulatory News (DWHT)

6 Dec 2005 07:01

Dewhurst PLC06 December 2005 CHAIRMAN'S STATEMENT Results I am delighted to report another record set of results for the Group. Sales were up 2.5% at £30.0 million and profits were up 4.6% to £3.5 million. The improved figures were primarily achieved through the effect of theacquisition of Lift Material in Australia together with increased interestearned on our higher cash balances. The strong cash flow has been one of theencouraging aspects of the year's performance. It has been accomplished, inpart, by improving the reliability of our deliveries and working with suppliersto enable us to reduce our stock levels. The results are a credit to the determination and resourcefulness of ouremployees and I thank all members of staff for the part they have played in theyear's achievements. Operations & Products As outlined at the Half Year, we reduced staffing at the main Hounslow factoryby around 10% in March. We have simplified our administrative processes and, asa result, have removed some management functions. These actions are all part ofour strategy of making the company 'leaner'. We started 'lean' initiatives inCanada during the year and the programme is currently being extended to othercompanies in the Group. Our focus is on simplification and reducing lead times. Our new pushbutton range was launched at the major European and North Americanlift industry exhibitions recently and was well received. It has already beenspecified for a major refurbishment project in Chicago. The new keypad productsare generating considerable interest for a range of different applications,including cash dispensers, petrol pumps and ticket machines. Lift Material We completed the acquisition of Lift Material at the end of June. We welcomeTony Pegg, the General Manager, and his team to the Group. Lift Materialdistributes pushbuttons, displays, safety edges, cable and a wide range ofother products to the lift industry in Australia. The company has a well-respected product range and there are further opportunities to expand and enhance that range. Management After 16 years as managing director and more than 9 as a non-executive, ColinJohnson is retiring from the Board on 31st December 2005. He joined us at adifficult time for the company and made a major contribution to the resurgencesince that time. He has provided calm and wise counsel to me over many yearsand this and his breadth of experience will be greatly missed. We wish Colin afull and happy retirement. AIM It is now our intention to recommend to shareholders a move to AIM.The proposalwill be outlined in a separate circular. Outlook Spurred by falling prices we have achieved significant efficiency improvementsin recent years and have established cheaper sources of component supplies. Wecontinue to look for further gains in these areas, but are reaching the pointwhere the savings are harder to find and less valuable. At the same time, costsare rising in a number of areas, particularly those related to oil such asenergy and plastics. To maintain our position in existing markets we have to work hard to improvevalue for the customer. This means better products, higher service levels andshorter lead times, not just lower prices. We have invested heavily in allthese areas during the year. The above factors lead me to believe that in thecurrent environment our most significant prospect for growth is with acquisitions. We continue our active programme of searching for such investmentopportunities. Richard DewhurstChairman REVIEW OF OPERATIONS Operating Highlights In the current business environment, the critical driver, other than cost isservice. Across all companies the key objective is to seek continualimprovement in service levels. This is being achieved in a number of areas. Weare putting more focus on our website, to ensure customers have easy access toproduct information. We are ensuring close contact between customers and ourin-house sales administration teams. Leadtimes are being driven down and weconstantly strive for 100% on time delivery. At the end of the day serviceneeds to be our differentiator. We have made significant progress at allcompanies in this area and this has been the key factor in delivering thisyear's figures. UNITED KINGDOM At the start of the year price erosion was significantly out stripping costerosion and we spent the first half of the year addressing this situation. Thislead to a further reduction in headcount at our Hounslow factory and an on-going movement of sourced items from UK suppliers to suppliers in low costregions. The size of the team at Hounslow is now in line with currentrequirements. We need to be able to cope with both peaks and troughs in demandand with the further cross training that has been carried out in the lasttwenty-four months, we are well set up for the shifts in demand. Our Lean Manufacturing programme continues in most areas and continuousimprovement through Lean Manufacturing is critical to our business. Stock andwork in progress have both reduced sharply and we expect further improvementover the next twelve months. Despite this our on time delivery in all threeareas of the business has remained at over 90%. Alan Orr and his OperationsTeam have transformed these figures over the last two years: a greatachievement and one they are keen to continue to build on. Activity in new product design has continued through the year at a high level,with a large number of new products coming to market in both the keypad andlift businesses. It is very rewarding and great fun to see so many new productstake the step from a picture on a screen into something you can hold in yourhand. The pipeline of new ideas is still very full and will keep our team ofdesigners busy throughout the coming year. Although we have reduced our time tomarket for new products, there are still opportunities to reduce this lead-timefurther and we will continue to work on this in the future. Keypad Division It has been an interesting year for the Keypad Division and one full ofchallenges. Sales of encrypting pinpads (EPP) have declined, as expectedfollowing the completion of a large retrofit programme by one of our customers.However, new sales into non-banking applications, particularly petrol pumps,helped to minimise this effect. The launch of our new generation of Unipad encrypting pinpads was met with agreat deal of interest and several customers are building Unipad into their newproduct designs. The product has been launched in three variants, the standardstainless steel product, a plastic version and also an eye-catching illuminating version. Rail Division We have had a similar year in the Rail Division to last year, with nosignificant projects and the focus has been on smaller repair and modernizationorders. We still feel there are opportunities in the industry and we arelooking at a number of options to raise our profile. Lift Division As with the Keypad Division, the Lift Division has had an interesting andchallenging year. All our subsidiary companies have worked hard to reduce theirstock levels and this has had an impact on our business at Hounslow in terms ofreduced demand. This factor coupled with weak demand from the Far East marketshas made the business more difficult and has led to flat sales within the LiftDivision. Neither of these issues though is long term, so we would expect to see a strengthening of sales over the coming year. The new products that were launched last year have performed well, with ourJumbo pushbutton achieving annual sales in its first full year significantlyhigher than those we achieved with its predecessor. The design team have been busy on new products for the Lift Division and through the course of the year we have introduced three major new products tothe market and a host of additions to our various ranges. The most important launch was our new M-20 entry-level button, which will allowus to compete with products from the Far East and Southern Europe. Initialresponse to this product has been exciting and it will become an important partof our product range. A new dot matrix vandal resistant display has also been launched and hasachieved a high level of early sales in local authority housing upgrades. LiftStore Ethos, our new generation lift controller, has been well received since launchand sales of the product are growing each month. We have seen a significantreduction in the number of installation-related site call outs, proving thatEthos is considerably easier to install than our traditional controllers. As weaim to improve service levels, ease of installation of our products is a keydriver and our customers require fit and forget products. It has been a busy year for the Monitoring Division and once again they havewon contracts to install monitoring systems into a wide range of facilities.This year, for the first time we are providing systems for retail applications,where it is not only lifts that are being monitored, but also plant and machinery. In the Fixture Division, demand for pushbuttons and complete lift fixtures hasincreased and we are continuing to put resource into ensuring that our fixturesmeet the changing requirements of our customers. It is important that wecontinue to add value through the supply of complete fixtures with displays,autodiallers and other ancillary items. Achieving the value added sales will bekey to ensuring that the business grows, following the expected reduction inDisability Discrimination Act work. NORTH AMERICA Dupar Controls Sales at Dupar rose once again, with a strong increase in lift sales more thanoffsetting a reduction in keypad sales. Profits were slightly down on theprevious year as a result of a currency write down on the intercompany loanbetween Dupar and The Fixture Company. This is the most tangible effect of thesharp change in value between the Canadian and US Dollars, but it has also hadan impact on Dupar's margins on sales to US customers. In 2004 we invested heavily in plant and machinery at Dupar. This year thefocus has very much been on lean manufacturing and improving the flow of workthrough the factory. We have recruited a new operations manager who has beenworking with our UK based lean manufacturing team and together they haverevised the layout of the shop floor to create a smoother flow of work aroundthe factory. The new layout has worked well, giving the team at Dupar greater visibility ofwork around them. It has helped to improve on time deliveries, but there isstill work to be done on further improvement. In June, Dupar moved on to the same computer system that is in use here atHounslow. The changeover was completed without any major disruption, which is atribute to the team involved. We now have the four largest companies in theGroup on the same system and this is bringing benefits to all in numerousareas. Keypad sales fell back with the expected reduction in EPP keypads but remain animportant part of the business. The Fixture Company The Fixture Company (TFC) had relatively solid growth once again this year andthe sales team continue to work hard to increase their market share. TFC havebeen successful in winning new contracts for fixtures to go into Home Lifts,which is a fast growing sector of the US elevator industry. AUSTRALASIA Australian Lift Components As had been anticipated the Australian market has flattened off over the lasttwelve months and ALC saw a slight reduction in sales. However like Hounslow,ALC have done a great deal of work in improving processes and ensuring thatthey drive hard on efficiencies. They were therefore able to show an improvement once again in profits. ALC continue to win many projects to install their fixtures in prestigiousbuildings throughout Australia. The demands of customers and the product weoffer in markets like Australia can be more sophisticated than in other areas.Rolling some of these ideas out across other markets will help to boostrevenues across all companies. Lift Material We were very pleased in July to announce the acquisition of Lift Material. Thecompany has been our distributor in Australia for approximately eighteen years.They began by solely distributing our products but have added world class liftcomponent brands to their portfolio over the years. They now have an excellentrange of products that they sell widely throughout the Australasian market. Webelieve that there are good opportunities to add to this range and to take thebusiness forward. The team at Lift Material have built a good reputation for customer service,which is critical in the distribution business, and we are certain that we cantransfer some of their ideas to other more manufacturing based companies withinthe Group. David DewhurstGroup Managing Director FINANCIAL REVIEW Results Turnover increased by 2.5% from £29.3 million to £30.0 million. Operatingprofits before amortisation of goodwill rose by £72,000, from £3,383,000 to£3,455,000. Goodwill amortisation was £160,000, up from £157,000. Net interestearned rose £83,000 from £107,000 to £190,000. Profit before tax rose from£3,333,000 to £3,485,000. Capital Investments Additions to fixed assets were £166,000 for the year. The major additions forthe group were the implementation of the new group computer system at Dupar, anengraving machine and a new linishing machine. This lower level of capitalinvestment is a direct result of the lean focus on improving through people,processes and manufacturing practices. Capital commitments at the year endinclude a new bending machine and improved networking hardware and software. Cash Flow The group ended the year with cash and short-term deposits, up £1.0 million to£6.4 million. This position was achieved after acquiring the business andassets of the partnership trading as Lift Material in Australia for a totalconsideration of £871,000. The cash generated is a direct result of improvedperformance, reduced capital expenditure and continuing tight stock controls asinstigated in 2003. Operating cash flow for the year was £3.6 million, downfrom £3.9 million due to adverse movements to trade debtors and creditors. Dividends aid increased from £440,000 to £466,000. 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. There is no formal policy for matching foreign currency cash flows or matchingexposure to foreign currency net assets. However these issues are regularlymonitored. There is no material currency exposure to the group at the year end.The group's reported trading profit was not significantly affected by currencymovement with approximately 36% being earned in foreign currencies during theyear ended 30 September 2005. Tax and Dividends The current tax charge for the year rose to £1,193,000 (34.2%) from £1,141,000(34.2%) an increase of £52,000. Although there is no movement in the effectivetax rate, £29,000 of the increase in tax charge relates to a prior yearsadjustment. The proposed total dividend of 4.89p per share, up 5.2% against last year's 4.65p, is covered 4.6 times by earnings. Shareholders' funds improved from £13.2 million to £15.7 million. There was no reduction of sharesduring the year. International Financial Reporting Standards ("IFRS") From 1 October 2005 onwards, the group will prepare its consolidated financialstatements in accordance with IFRS. The interim and annual report and accountsfor 2005/6 will therefore contain restated comparatives for 2004/5 preparedunder IFRS. There will be some presentational differences, but in summary theimpact on trading results is not expected to be material. Despite the inclusionin the Balance Sheet of a pension deficit and the change from goodwillamortisation to impairment, the move to IFRS will not change how the group ismanaged and will have no impact on cash flow. Jared SinclairFinance Director Consolidated profit and loss account For the year ended 30 September 2005------------------------------------------------------------------------------- 2005 2004 £ £ £ £-------------------------- --------- --------- --------- ---------Turnover - Continuing Operations 29,648,927 29,265,462 - Acquisitions 345,517 - 29,994,444 29,265,462 Operating costs- Continuing Operations (26,456,165) (26,039,522)- Acquisitions (243,263) - (26,699,428) (26,039,522)----------------------- --------- --------- --------- ---------Operating profit beforeamortisation of goodwill 3,455,368 3,383,033Amortisation of goodwill (160,352) (157,093)----------------------- --------- --------- --------- ---------Operating profit - Continuing Operations 3,192,762 3,225,940 - Acquisitions 102,254 - 3,295,016 3,225,940Net interest 190,200 107,093------------------- --------- --------- --------- ---------Profit on ordinary activities before taxation 3,485,216 3,333,033Tax on profiton ordinary activities (1,250,612) (1,142,345)----------------------- --------- --------- --------- ---------Profit for the financial year 2,234,604 2,190,688 Dividends per 10p ordinary shareInterim paid of 1.63p (2004: 1.55p) (160,586) (152,704)Proposed final of 3.26p (2004: 3.10p) (321,172) (305,408)----------------------- --------- --------- --------- --------- (481,758) (458,112)----------------------- --------- --------- --------- ---------Retained profit for thefinancial year 1,752,846 1,732,576----------------------- --------- --------- --------- ---------Basic and dilutedearnings per share 22.68p 22.24p----------------------- --------- --------- --------- --------- Consolidated balance sheetAt 30 September 2005 2005 2004 £ £ £ £-------------------- ---------- ---------- ---------- ----------Fixed assetsIntangible 1,371,134 811,964Tangible- Land and buildings 1,569,367 1,534,814- Plant and machinery 1,341,306 1,509,245-------------------- ---------- ---------- ---------- ---------- 2,910,673 3,044,059-------------------- ---------- ---------- ---------- ---------- 4,281,807 3,856,023Current assetsStocks 3,777,966 4,152,556Debtors 5,726,107 5,067,207Short-term deposits 3,034,362 2,982,472Cash at bank and in hand 3,403,649 2,465,272-------------------- ---------- ---------- ---------- ---------- 15,942,084 14,667,507Creditors: amounts fallingdue within one year 4,372,981 5,066,109-------------------- ---------- ---------- ---------- ----------Net current assets 11,569,103 9,601,398-------------------- ---------- ---------- ---------- ----------Total assets less current liabilities 15,850,910 13,457,421 Creditors: due after one year - 974Provisions for liabilities and charges 200,000 210,000-------------------- ---------- ---------- ---------- ----------Net assets 15,650,910 13,246,447-------------------- ---------- ---------- ---------- ---------- Capital and reservesCalled up share capital 985,190 985,190Share premium account 157,083 157,083Revaluation reserve 423,001 423,001Capital redemption reserve 151,570 151,570Profit and loss account 13,934,066 11,529,603-------------------- ---------- ---------- ---------- ----------Equity shareholders' funds 15,650,910 13,246,447-------------------- ---------- ---------- ---------- ---------- The financial statements were approved by the board of directors on 5 December2005 and were signed on its behalf by: Richard Dewhurst, Chairman Jared Sinclair, Finance Director Consolidated cash flow statement For the year ended 30 September 2005 2005 2004-------------------- ---------- --------- ---------- -------- £ £ £ £Net cash inflow from operating activities 3,625,514 3,865,186 Returns on investmentsand servicing of finance:Interest and dividends received 191,517 107,761Interest paid (1,317) (107)Interest element from financelease rental payments - (561)--------------------- ---------- --------- ---------- --------Net cash inflow/(outflow) from returns on investments and servicing of finance 190,200 107,093Taxation:UK taxation (873,550) (724,294)Overseas taxation (424,729) (281,368)------------------------ ---------- --------- ---------- --------Net cash outflow from taxation (1,298,279) (1,005,662) Capital expenditure andfinancial investment:Purchase of tangible fixed assets (165,673) (768,742)Sale of tangible fixed assets 17,773 176,303------------------------ ---------- --------- ---------- ---------Net cash outflow from capital expenditure & financial investment (147,900) (592,439) Acquisitions and disposals:Purchase of subsidiary undertakings (913,274) ------------------------- ---------- --------- ---------- ---------Net cash inflow/(outflow) fromacquisitions and disposals (913,274) - Equity dividends paid (465,994) (440,379)------------------------ ---------- --------- ---------- ---------Net cash inflow before use ofliquid resources and financing 990,267 1,933,799 Management of liquid resourcesPlaced on short-term deposit (51,890) (1,758,327)------------------------ ---------- --------- ---------- --------- (51,890) (1,758,327)FinancingCapital element of financelease rental payments - (10,764)------------------------ ---------- --------- ---------- --------- - (10,764)------------------------ ---------- --------- ---------- ---------Increase/(decrease) in cash in year 938,377 164,708------------------------ ---------- --------- ---------- --------- AGM, results and dividends The trading profit for the year, after taxation, amounted to £2,234,604 (2004:£2,190,688). A final dividend on the Ordinary and 'A' ordinary shares of 3.26p per 10p share(2004: 3.10p) will be proposed at the Annual General Meeting to be held on 2February 2006. If approved, this dividend will be paid on 6 March 2006 tomembers on the register at 13 January 2006. An interim dividend of 1.63p per share (2004: 1.55p) was paid on 30 August 2005.These dividends absorb £481,758 (2004: £458,112) of the profit for the yearleaving a balance retained of £1,752,846 (2004: £1,732,576) which has beentransferred to group reserves. Basis of preparation The above financial information does not constitute full accounts within themeaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2004 is extractedfrom the group's financial statements to that date which received an unqualified auditors' report and have been filed with the Registrar of Companies. The financial information for the year ended 30 September 2005 is extracted from the group's financial statements to that date which received anunqualified auditors' report and will be filed with the Registrar of Companies. The financial information presented in the preliminary announcement has beenprepared on the basis of the accounting policies set out in the most recentlypublished set of annual financial statements. Earnings per share and dividend per shareWeighted average number of shares------------------------------------- ----------- ----------- 2005 2004 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. 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. This information is provided by RNS The company news service from the London Stock Exchange