Last checked at 2 Dec 2008 07:00
CHAIRMAN'S STATEMENT
Results
Although the economic climate looking forward may appear bleak we should not fail to celebrate the excellent performance of the Group this year. I am delighted to report record results with significant improvement in sales and profits. Sales grew 16% to a record £36.3 million (£31.4 million). Profit before tax improved 21% from £3.9 million to £4.7 million. Earnings per share growth was even stronger at 45% as a result of a lower tax charge and the share buy backs during the year. Demand was considerably stronger in the second half of the year bolstered by some major projects in the UK and Australia.
The greater profitability in the second half was partly as a result of the stronger sales and partly the flow through of savings from staffing reductions at the Hounslow factory in the first half.
It has been a difficult and challenging year for staff, but they can be very proud of the excellent results achieved. I would like to thank them for their contribution to the outstanding performance.
Operations
We completed the move of our main keypad manufacturing operations to Hungary on schedule during the first quarter of 2008. The transfer was conducted with little, if any, disruption to customers in a speedy and efficient manner. I would like to congratulate and thank the team involved for their effective planning and implementation of this move. It is expected that further products will be transferred during the coming year.
We have had some changes to the senior management team during the year. John Bailey was appointed the new Managing Director of TMP and George Foleanu was promoted to General Manager at Dupar. We welcome John to the Group and George to his new role and wish them both success.
It has been very gratifying that in recent months we have received recognition for the Group from both customers and industry bodies through winning several prestigious awards for our products and customer service.
Products
The new keypad range and the solar powered bollard that I referred to in last year's statement have both gone into volume production during the year. They have generated encouraging sales and show good prospects for the future. We have developed an Eco mode for our Ethos lift control system that aims to minimise the energy usage of the lift by switching off certain components and driving the lift more economically with gentler acceleration at times of low usage. This has been enthusiastically received by building owners and lift consultants. We will continue to invest in the development of environmental and safety related products, which we believe will be growing markets in the years to come.
Outlook
The strong results this year show that the Group has not yet been impacted by the global economic turmoil. The early part of the new financial year has remained reasonably positive, but customers are now beginning to report significant falls in their orders, which we expect will affect us in the first quarter of 2009 calendar year.
Clearly market conditions are volatile and in such conditions it is difficult to predict outcomes for the near and medium term. There will be challenges ahead and we need to be careful to monitor our business exposures. However, fundamentally the Group remains in a relatively strong position with an international spread of business and the benefit of no net debt. We will focus our energy and attention on weathering the economic storm and capitalising on the opportunities for long term growth.
Richard Dewhurst
Chairman
REVIEW OF OPERATIONS
Operating Highlights
This has been a year of consolidation across many of the Group companies, with a wide range of new products having been introduced in the previous year. There has also been continued focus on efficient and lean manufacturing and raising the bar in terms of improved customer service and on time delivery. Our efforts in this area have been rewarded with Supplier Awards from two key customers in India and China, which is most encouraging.
In today's environment change is a recurring theme and we must continue to adapt the businesses if we are to stay one step ahead of the competition. In the past change was something that was met with trepidation; now it is taken for granted. Looking back on the year it seemed a perfectly normal year, business as usual, however three of our businesses moved location, one of them by 1,000 miles. We introduced three major new products all of which exceeded sales forecasts and we managed those increases in our stride. At the same time across the Group we had record sales, the growth coming primarily from overseas sales of lift products and UK sales of transport products.
The tight control on costs in all companies coupled with the success of new products has brought the profit improvements that we had planned. As the business climate becomes more challenging we will need to continue to deliver improvements in these areas if we are to progress.
UNITED KINGDOM
Dewhurst Manufacturing
The face of Dewhurst in the UK has changed quite dramatically over the past twelve months. All Keypad manufacture has now moved to Hungary, leaving only Lift and Rail in the UK. The focus now at Dewhurst Manufacturing is very much on the Lift Industry. We will be able to concentrate on our lift products, working to increase the range, improve our website and marketing literature. As many of the subsidiaries operate within the Lift Industry, we would hope that this will benefit their sales and product offering.
Lift Division
Demand across the range of our key markets has been very steady throughout the year. The introduction of the M-20 pushbutton last year has allowed us to offer a wider choice of button designs and a broader spectrum of pricing options. The Far East has continued to be an important market for us with encouraging sales in both Hong Kong and Singapore. Despite strong competition in Europe we have continued to grow our network of distributors and they in turn have grown the sales of our products strongly. We have also grown our relationship with one of the key multinational lift companies in Europe and they have chosen to add the M-20 as a standard offering in one of their lift products.
Our engineers are working hard on a range of new pushbutton and indicator products which will come into production early in 2009 and which should gain us considerable additional sales.
Rail Division
Over the year we have rationalised our range of rail products, discontinuing some of the older products and focusing more attention on the newer ones. This brought forward some demand and resulted in a significant increase in sales for the division.
LiftStore
This year has been the first full year that the LiftStore fixture business has been housed back in the Dewhurst building at Inverness Road. The move carried out last year was successful and through the year the team at LiftStore have integrated very well into their new environment. The location has allowed us to rationalise our stocks, reducing them in areas where product can be quickly replenished from Dewhurst and then increasing them in other areas where appropriate. In our previous location on time delivery was fairly good, but we are currently achieving around 96% on time delivery and are confident that we can continue to improve this over the coming year.
We have a steady flow of engineering projects that we are running from LiftStore in Hounslow and our aim is to have product that we can sell to other Group companies. The first of these is a new stylised Hall Lantern, which has been well received in the UK and we believe will prove popular abroad.
Our Ethos controller product continues to sell extremely well throughout the UK. The new Eco Mode available on the Ethos controller ensures that the minimum amount of power is used by the lift and this has understandably been very popular with our customers.
We continually work on additions to the range, the VCom speed control is now well established and we aim to add serial communication early in 2009.
Demand for our Monitoring products has again grown with more customers signing up for the CMS Anywhere product. We have also seen an increase of monitoring from airport operators where the cost of broken down equipment has a significant impact on their operations and their reputation. We also see this as an excellent opportunity in the current year.
Traffic Management Products (TMP)
Change has been quite a theme at TMP during the year. We said goodbye to Chris Nicklin who was Managing Director at TMP prior to the acquisition and continued through the first two years of Dewhurst ownership. Chris made a massive contribution to a range of new products that were introduced post acquisition and which have helped to significantly boost the performance at the company.
In January we welcomed John Bailey to the company as our new MD. John has considerable experience of the highways industry and has enormous enthusiasm for TMP and the task ahead.
The introduction of the Solalite, our new solar powered bollard, brought a steep change in sales to the company and has ensured that we achieved the level of performance that the Board anticipated when acquiring the company. Although non-illuminated and solar powered bollards are still in the minority on our roads, they are becoming an increasingly common sight, which is very encouraging.
The final change of the year was that the business moved to a new location close to Crawley. In our previous location we had separate office and factory areas, now both areas are under one roof, which will bring efficiency benefits. We also have a considerably large office area and factory space, which is required as our volumes increase.
EUROPE
Dewhurst Hungary
Production began in Hungary early in the year and it took approximately three months to bring on the full range of keypad products. Demand early in the year was lower than normal but this allowed us to iron out any manufacturing issues. As the year went on demand has grown and the staff in Hungary have met some very significant output challenges extremely efficiently.
Towards the end of the year the business gained ISO 9001 certification, which was achieved well within 12 months of set up, a great achievement.
The focus during this year will be to move the assembly of our lift auxiliary products to Hungary and to continue our parts localisation programme to reduce material and transport costs.
NORTH AMERICA
Dupar Controls
This year saw the promotion of George Foleanu to General Manager of Dupar, following the resignation of David Dunlop. David guided Dupar through ten years of growth and we are grateful for his endeavours. George has enormous experience in the lift components industry with both an engineering and manufacturing background as well as a good understanding of sales and marketing. We wish him great success in his new role.
Canadian sales have remained strong in an increasingly competitive market. Through production efficiencies and improved levels of customer service we have positioned ourselves well to grow during the current year.
Keypad sales from Dupar will decline during the current year as more business is channelled through Dewhurst Hungary. This will however allow us to focus more on our key lift market and growth into Eastern markets in the United States.
The Fixture Company (TFC)
This has been a difficult year for the Fixture Company. The new management team have, to a certain extent been forced to rebuild the business. This has taken the full year but there are definite signs of progress and improved sales. The opportunities continue to be significant in the Mid-West and we now need to capitalise on these to deliver sustained growth.
TFC have also moved premises in the financial year. They are now located slightly further outside Chicago but the move has allowed them to set up their operation more efficiently and this is bringing immediate benefits.
AUSTRALASIA
Australian Lift Components (ALC)
It was apparent earlier in 2007 that demand throughout Australia was likely to grow quite significantly in 2008 and that has indeed proved to be the case with ALC showing excellent growth in their fixture products. Growth has come, not only from the general market, but also from an increase in our market share as a result of our improved service.
The team at ALC continue to focus closely on their Lean programme and this has seen many benefits.
There has been significant investment in ALC this year, with the purchase of a new Trumpf laser-cutting machine, similar to the one we bought in Canada recently. We have also acquired the ALC premises, which we had been leasing previously.
Lift Material
Lift Material also benefited from the improved market conditions this year and achieved solid sales growth in virtually all product lines that they supply. It was however the lift safety products that performed best with an excellent contract in Melbourne for lift rope brakes. The VG Rope Brake used in this contract, provides over speed protection for the lift in both the upward and downward direction. The electro-mechanical design is fail safe and there is no need for additional equipment in the machine room such as compressors or hydraulics (that is required by competitor products).
We continue to grow the resources at Lift Material to improve customer service and are investing heavily in training to support the wide range of products that we are now offering.
Although Lift Material is essentially a distributor with little or no manufacturing carried out on the premises, the staff there have also considered the opportunities for Lean improvements. The warehouse has been totally reorganised making much more efficient use of space and easing loading and unloading.
David Dewhurst
Group Managing Director
FINANCIAL REVIEW
Strong Results
Despite a difficult global economy and continuing pricing pressures, Dewhurst saw strong performance particularly from lift and transport products. Revenue increased by 15.7% from £31.4 million to £36.3 million.
The impact on operating profit was even more marked. At the half year we reported a rise in operating profit of 9.2%, but with the second half generating operating profits 31.0% higher than last year, the group ended the year with an increase of 21.5% from £3,583k to £4,352k. This reflects an increase in margins to 12.0% (2007: 11.4%) and sets a new group record, beating 2005's operating profit of £3,823k.
Finance income reports no real improvement in bank deposit interest, a result of reduced deposits due to the share repurchase programme and property acquisition during the year. Finance costs show the defined benefit pension scheme costs improved by £68k, resulting in an overall profit before tax increase of £826k from £3,853k to £4,679k.
Pension Scheme Deficit
A more detailed explanation of the retirement benefit fund assets and liabilities movements is reported in note 22 under IAS 19, but this year has seen significant reductions in both assets and liabilities. The movement in equity and bond markets and in discount rates has caused changes in the valuation of the scheme assets and liabilities but overall the scheme deficit fell only slightly from £3.8 million to £3.7 million. In addition to current service contributions the group continues to pay a fixed sum of £0.5 million annually to reduce the fund deficit and all recommendations made by the scheme's actuary to eliminate the scheme deficit have been fully implemented.
Good Cash Flow
Cash flow was once again very good. Despite increased inventories as we switched some production from the UK to Hungary, the group was still able to generate £4.2 million cash from operations. This enabled Dewhurst plc to repurchase 13% of its shares for £2.3m and invest £1.9m in property, plant and equipment across the group and still end the year at £5.1 million, down only £1.5 million. The significant capital expenditure related to the acquisition of Australian Lift Component's leasehold property for £1.1m and two new lasers totalling £465k for the UK and Australia markets.
We started and finished the year with no borrowing.
Treasury Policy
The group seeks to reduce or eliminate financial risk to ensure sufficient liquidity is available to meet foreseeable needs, and to invest cash assets safely and profitably. The policies and procedures operated are regularly reviewed and approved by the board. By varying the duration of its fixed and floating cash deposits, the group maximises the return on interest earned. As shown in note 25, there is no material currency exposure to the group at the year end. The group's reported trading profit was not significantly affected by currency movement despite approximately 33% of profit before tax being earned in foreign currencies during the year ended 30 September 2008. Whilst there is no formal policy for matching foreign currency cash flows or matching exposure to foreign currency net assets, as the group grows and increases its percentage earned and held in foreign currencies active steps are being taken by the board to monitor and manage this currency risk.
Dividends
Dividends are accounted for when approved and not when proposed, therefore the proposed final dividend for 2008 has not been accrued at the balance sheet date. The total dividend for 2008 of 5.76p per share, up 6.7% against last year's 5.40p, is covered 7.0 times by earnings. Shareholders' funds improved from £17.3 million to £18.0 million.
There was a reduction in the number of allotted shares during the year, and these have been fully reported in the directors' report on page 13.
Jared Sinclair
Finance Director
Consolidated income statement
| For the year ended 30 September 2008 | ||||||
| 2008 | 2007 | |||||
| Continuing operations | £(000) | £(000) | ||||
| Revenue | 36,326 | 31,394 | ||||
| Operating costs | (31,974) | (27,811) | ||||
| Operating profit | 4,352 | 3,583 | ||||
| Finance income | 329 | 272 | ||||
| Finance costs | (2) | (2) | ||||
| Profit before taxation | 4,679 | 3,853 | ||||
| Tax on profit | (1,238) | (1,216) | ||||
| Profit for the financial year | 3,441 | 2,637 | ||||
| Basic and diluted earnings per share | 38.92p | 26.87p | ||||
Consolidated statement of recognised income and expense
| 2008 | 2007 | ||||
| £(000) | £(000) | ||||
| Net income/(expense) recognised directly in equity: | |||||
| Actuarial gains/(losses) on the defined benefit pension scheme | (440) | 1,550 | |||
| Exchange differences on translation of foreign operations | 433 | 424 | |||
| Tax on items taken directly to equity | (68) | (592) | |||
| Net income/(expense) recognised directly in equity in the year | (75) | 1,382 | |||
| Profit for the financial year | 3,441 | 2,637 | |||
| Total recognised income and expense for the year | 3,366 | 4,019 | |||
Consolidated balance sheet
| At 30 September 2008 | |||||
| 2008 | 2007 | ||||
| £(000) | £(000) | ||||
| Non-current assets | |||||
| Goodwill | 5,554 | 5,318 | |||
| Other intangibles | 43 | 112 | |||
| Property, plant and equipment | 4,219 | 2,695 | |||
| Deferred tax asset | 877 | 1,081 | |||
| 10,693 | 9,206 | ||||
| Current assets | |||||
| Inventories | 4,122 | 2,778 | |||
| Trade and other receivables | 7,154 | 6,977 | |||
| Cash and cash equivalents | 5,120 | 6,659 | |||
| 16,396 | 16,414 | ||||
| Total assets | 27,089 | 25,620 | |||
| Current liabilities | |||||
| Trade and other payables | 4,664 | 3,878 | |||
| Current tax liabilities | 492 | 519 | |||
| Short term provisions | 350 | 100 | |||
| 5,506 | 4,497 | ||||
| Non-current liabilities | |||||
| Retirement benefit obligation | 3,700 | 3,777 | |||
| Total liabilities | 9,206 | 8,274 | |||
| Net assets | 17,883 | 17,346 | |||
| Equity | |||||
| Share capital | 851 | 980 | |||
| Share premium account | 157 | 157 | |||
| Capital redemption reserve | 286 | 157 | |||
| Translation reserve | 832 | 512 | |||
| Retained earnings | 15,757 | 15,540 | |||
| Total equity | 17,883 | 17,346 | |||
Consolidated cash flow statement
| For the year ended 30 September 2008 | |||||
| 2008 | 2007 | ||||
| £(000) | £(000) | ||||
| Cash flows from operating activities | |||||
| Operating profit | 4,352 | 3,583 | |||
| Depreciation and amortisation | 534 | 473 | |||
| Additional (income)/costs to pension scheme | (423) | (344) | |||
| Exchange adjustments | 199 | 196 | |||
| (Profit)/loss on disposal of property, plant and equipment | (15) | (2) | |||
| 4,647 | 3,906 | ||||
| (Increase)/decrease in inventories | (1,294) | 259 | |||
| (Increase)/decrease in trade and other receivables | (177) | (1,313) | |||
| Increase/(decrease) in trade and other payables | 786 | 436 | |||
| Increase/(decrease) in provisions | 250 | (50) | |||
| Cash generated from operations | 4,212 | 3,238 | |||
| Interest paid | (2) | (2) | |||
| Income tax paid | (1,147) | (1,015) | |||
| Net cash from operating activities | 3,063 | 2,221 | |||
| Cash flows from investing activities | |||||
| Acquisition of business and assets | (250) | - | |||
| Proceeds from sale of property, plant and equipment | 21 | 21 | |||
| Purchase of property, plant and equipment | (1,890) | (236) | |||
| Development costs capitalised | (7) | (114) | |||
| Interest received | 235 | 246 | |||
| Net cash used in investing activities | (1,891) | (83) | |||
| Cash flows from financing activities | |||||
| Dividends paid | (495) | (512) | |||
| Purchase of own shares | (2,334) | (93) | |||
| Net cash used in financing activities | (2,829) | (605) | |||
| Net increase/(decrease) in cash and cash equivalents | (1,657) | 1,533 | |||
| Cash and cash equivalents at beginning of year | 6,659 | 5,077 | |||
| Exchange adjustments on cash and cash equivalents | 118 | 49 | |||
| Cash and cash equivalents at end of year | 5,120 | 6,659 | |||
AGM, results and dividends
The trading profit for the year, after taxation, amounted to £3,441k (2007: £2,637k).
A final dividend on the Ordinary and 'A' ordinary shares of 3.84p per 10p share (2007: 3.60p) for the financial year ending 30 September 2008 will be proposed at the Annual General Meeting to be held on 29 January 2009. If approved, this dividend will be paid on 2 March 2009 to members on the register at 9 January 2009.
An interim dividend of 1.92p per share (2007: 1.80p) was paid on 26 August 2008.
Earnings per share and dividend per share
| Weighted average number of shares | ||
| 2008 | 2007 | |
| No. | No. | |
| For basic and diluted earnings per share | 8,841,253 | 9,815,709 |
The calculation of basic and diluted earnings per share is based on the profit attributable to shareholders and on 8,841,253 Ordinary 10p and 'A' ordinary 10p shares, being the weighted average number of shares in issue throughout the financial year.
| 2008 | 2007 | |
| Paid dividends per 10p ordinary share | £(000) | £(000) |
| 2007 final paid of 3.60p (2006: 3.42p) | (331) | (336) |
| 2008 interim paid of 1.92p (2007: 1.80p) | (164) | (176) |
The final proposed dividend is based on 3,309,200 Ordinary 10p shares and 5,202,198 'A' ordinary 10p shares, being the latest number of shares in issue. The directors are proposing a final dividend of 3.84p (2007: 3.60p) per share, totalling £327k (2007: £331k). This dividend has not been accrued at the balance sheet date.
Basis of preparation
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2008 or 2007. Statutory accounts for 2007, have been delivered to the Registrar of Companies. The statutory accounts for 2008 which are prepared under IFRS as adopted by the EU will be delivered to the Registrar of Companies following the company's annual general meeting.
The preliminary statement of results has been reviewed by and agreed with the Company's auditor, Chantrey Vellacott DFK LLP, who have indicated that they will be giving an unqualified opinion in their report on the statutory financial statements for 2008. The auditor has also reported on the 2007 accounts. Their report was unqualified, did not include references to any matters to which the auditor drew attention to by way of emphasis without qualifying the opinion and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
Dewhurst plc has elected to prepare its consolidated and company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("EU") (IFRS) from 1 October 2005. The group and company financial statements have been prepared in accordance with those parts of the Companies Act 1985 that are applicable to companies adopting IFRS. The company is registered and incorporated in the United Kingdom; and quoted on AIM.