Last checked at 1 Dec 2009 07:00
CHAIRMAN'S STATEMENT
Results
In extremely turbulent world economic conditions I am pleased to report that the Group has performed with some degree of resilience. Sales were down just 1.4% to £35.8 million (£36.3 million) and profits before tax were £4.4 million (£4.7 million) down 5.4%. Although we have not reached the level of last year's records, these figures are still the second best in the company's history and a creditable performance in our 90th year.
The second half was the opposite of the first half, with sales lower in the UK and North America, while in Australia sales recovered from the poor first half figures. The deterioration in UK output was expected given the decline in orders in the first half, reported in the interim statement.
Achieving these results has certainly been tough and I know it has taken even greater effort than last year's record performance. I would like to register my thanks to all our employees, who have dedicated themselves to achieving the best possible outcome in a difficult environment.
Review
The recent celebration of our 90th birthday on November 5th prompted me to review our longer term progress, particularly that since our 75th anniversary in 1994. The company had had a difficult period during the 1970s in common with much of UK manufacturing, but had survived and refocused in the 1980s enabling it to grow and prosper. By 1994 sales and profits were at then record levels of £11 million and £1.3 million respectively. During the year the company had bought Thames Valley Lift Company. This was to signal a new period of expansion for the group. The biggest change since that year has been to extend the geographical and product spread of the business. We are still a specialist, but we are spread into more areas to reduce our risk and dependence on individual markets. Since the start of 1994 the Group has gone from a business at Hounslow with one Canadian subsidiary to a global business with 10 operating subsidiaries on 4 continents.
This change has not been without its difficulties and the biggest upheaval has certainly been on the original Dewhurst Hounslow business. The pressure on prices and as a result on costs has taken its toll in some ways, but it has also forced us to become more productive. Work on making our operations leaner has been one of the major achievements of the last few years. This has enabled us to strip out huge amounts of waste, improve competitiveness, make people's jobs more fulfilling and most importantly improve our service to the customer.
I believe we can be proud of the progress the Group has made in these last 15 years. Both sales and profits are more than 3 times higher than 1994. Sales are more broadly spread, 65% being overseas compared with 28% in 1994. On time delivery and overdue orders have significantly improved over the period. The product range is broader and stronger with more sales coming from more modern products. That we are achieving this with only 6% more people than we had back in 1994 shows how we have improved our productivity throughout the organisation.
Outlook
Although we aim to continue our progress in the long term, short term 2010 is likely to be more challenging than 2009. The economic climate means there is no let up on the pressure on prices and costs. Project related demand is beginning to tail off as few new projects have been started in the last year. We are also likely to be affected by the coming squeeze in UK public finances, as directly and indirectly the public sector is an important proportion of our UK sales, but it is difficult to predict the degree and the timing of the impact.
Richard Dewhurst
Chairman
REVIEW OF OPERATIONS
Operating Highlights
We are operating in a very difficult economic environment, so it was clear from the outset that this year was going to be a real challenge. The strong results achieved in 2008 however acted as a significant incentive to try to build on.
On the back of 2008, we set some very challenging objectives and although we did not achieve them all, we produced reasonable results. We have had considerable pressure on pricing in all our markets but particularly in keypad. Demand has been down and therefore the competition for orders has been fierce. However all our employees in all the companies have really worked very hard to ensure cost reductions are driven through, to improve levels of customer service and to win orders in the face of strong opposition. We are very grateful for the hard work put in by everyone throughout the year.
Good progress has been made during the year in strengthening our sales resource and developing new products. This will provide a good platform for the coming year.
UNITED KINGDOM
Dewhurst UK Manufacturing
The UK component manufacturing element of the business has been separated into a new company (Dewhurst UK Manufacturing), although this is still trading under the Dewhurst name. With the completion of the move of keypad and auxiliary manufacture to Hungary, what is left in the UK is essentially the Lift Pushbutton business and we intend to continue to manufacture these items long term in the UK. After five years of significant change it is refreshing to look forward, knowing that there is no further need for major reorganisation. The job now is to focus within our sector in the lift industry and to just grow that business to the best of our ability. This is a challenge that everyone at Dewhurst is confident of achieving.
Lift Division
The new products that were alluded to in last year's Annual Report were launched in the second quarter of the year. We have redesigned our flagship Compact 2 product. The depth of the product has been reduced which is a big benefit to the lift companies, especially when they are modernising lifts. This new product is Compact 3 and we have refined and improved features that were previously popular (in Compact 2) making the product significantly easier to install and wire. Initial response from customers has been very positive and the product was well received at the recent elevator trade show Interlift.
We have also launched a new Anti-Bacterial pushbutton the US95AB. Teaming up with Microban who are a Global leader in anti-bacterial additives for plastic, we have produced the first European pushbutton product of this type. Within the industry and the medical profession it is recognised that elevator pushbuttons are responsible for transmitting bacteria such as MRSA and E-Coli. The new US95 AB is resistant to these and many other bacteria and will offer lift users a new level of protection. Although it is early days since the launch, initial reaction has been very positive and we expect the product to be successful in the coming financial year.
Sales of Lift products through Dewhurst have held up well during the year. European sales continue to be firm and although Far East sales have not been as buoyant as last year, we have benefited from some good contracts in other regions. Our Jumbo pushbuttons have been selected to be used on the lifts in the new Delhi Metro, our first major contract in India.
Dewhurst has worked hard during the year to support the needs of its subsidiary company customers. Lead-times have been reduced by a further five days on fast moving items, allowing deliveries from the subsidiaries to be improved. There have also been more products designed to meet the specific needs of key customers around the group, which will bring growth in revenues in the coming year.
LiftStore
This has been a more difficult year for LiftStore with the UK economy being harder hit than many of the other markets around the world. In previous years we were involved in a large number of infrastructure projects and these slowed down last year. It is felt though that despite this, there will be a push to complete a lot of these projects before the 2012 Olympics.
This slow down had the greatest effect on our Fixture Business, with demand for our Controller and Monitoring products holding up very well. The Ethos controller product continues to be very popular throughout the UK and we launched a new variant of this product at the Interlift exhibition.
The Ethos Lift Destination Control System allows a user to select and register the floor that they wish to travel to, in the lift lobby on the ground floor. A display then informs them which lift they should take. They walk to that lift and it takes them to their desired floor. The advantage of this is that the lift system has advanced information on which floors need to be served and can arrange the selection of lifts more efficiently. This reduces waiting times for passengers and energy costs for owners.
On the Fixture side of the business, although this has been a more challenging year, the arrival of new products such as Compact 3 and the Microban Range of pushbuttons, boost our opportunities for the future.
Traffic Management Products (TMP)
The business has operated for its first full year from the new premises in Crawley and it has been a real plus to have all the manufacturing and offices under one roof.
In November the TMP Heritage Solalite won the prestigious 'Innovative Road Construction / Maintenance Product of the Year' Award at the 2008 Highways Magazine Excellence Awards. As the first ever solar powered, internally illuminated bollard available in the UK, the TMP Heritage Solalite provides considerable cost savings and benefits to the environment for its users. As you drive around the country now, TMP non-illuminated and solar powered bollards are becoming more and more common and even though a number of competitors have entered the market, we still remain the strong market leader. There are further opportunities in this area and we are working hard to realise them.
July saw the completion of our acquisition of Cortest. The Company is a specialist in non-destructive testing of lighting columns, which is a growing requirement in the UK. Cortest have diversified into testing other highway products as well as carrying out general maintenance and data collection. They are now able to offer an unparalleled and comprehensive service to all those involved in street lighting and highways maintenance. The opportunities for Cortest look excellent in the current climate where testing of such products is becoming increasingly important.
EUROPE
Dewhurst Hungary
We have had our first full year of production in our new Hungary plant and by and large things have gone very well. The task of coming to terms with the keypad and function display key (FDK) products has been made all the more difficult as this year we have had to phase out the current range of products and phase in an all-new range. This has gone very smoothly but it was a complex juggling act, ensuring that we were able to deliver the outgoing product on short lead-times while at the same time keeping a good eye on inventory so that any obsolescence issues were minimised.
We were concerned at the start of the credit crunch that demand for capital assets such as automatic teller machines (ATMs) would be badly affected. Sales of our keypad and FDK products have been hit but the sector held up during the year better than we feared. The biggest challenge we currently face is the enormous price pressure that we are under with margins constantly being squeezed. We are working hard to ensure that we can still achieve a fair margin on these products but it is getting more difficult every year.
We have now completed the transfer of assembly of our lift auxiliary products to Hungary and we continue our parts localisation programme to reduce material and transport costs.
NORTH AMERICA
The continent is a key market for our elevator pushbuttons. The Group has two subsidiaries in North America but we have worked hard over the years to partner with other fixture manufacturers where there is little likelihood (from a geographical standpoint) of these companies competing with Dupar Controls or The Fixture Company. We now have two key partners in the USA, one in Los Angeles and another in New York and the opportunity for sales growth through these two companies is promising. The Group will continue to explore opportunities as they arise in the North American market.
Dupar Controls
Dupar have had an impressive year on all fronts, rejecting any thought or talk of a downturn. They have benefited from continued strength in the Canadian building industry and produced good figures.
Despite the solid results, the North American market remains very competitive and subject to considerable price pressure. Dupar have had to work hard to preserve their margins, increase market share and continually improve productivity.
Dupar are rigorous in the way that they keep improving their production techniques. Although this is a theme across the Group at all our manufacturing sites, it is probably at Dupar where the greatest attention is paid to continuous improvement. They have carried out a third plant reorganisation, as they strive to ensure that production is as efficient as possible.
The Fixture Company (TFC)
Having essentially rebuilt the business in the last financial year, this year was one to capitalise on the improvements in customer service and quality and to translate those benefits into improved sales. This has been achieved although TFC still has a relatively small national market share, so the opportunity is there for further progress. In the coming year TFC will strive to build on the successes and relationships forged this year to establish themselves as the primary supplier of Fixtures in the mid west.
AUSTRALASIA
Australian Lift Components (ALC)
The previous year saw strong growth in Australia and it was always going to be difficult to match that. The first quarter saw a sharp reduction in demand as a result of nervousness regarding the world economy. However confidence recovered quickly and Australia avoided recession leading to good demand for our products in the second half of the year.
We have invested further in sales resource, which has proven invaluable in these competitive times but will also allow us to broaden ALC's product offering in the coming years.
During the year we formed a strategic partnership with the leading Australian Lift Phone and Display manufacturer. This partnership has worked well in Australasia and we are now distributing this company's products in the UK and Europe.
Lift Material
Lift Material saw a similar picture in terms of demand to that at ALC, so they also benefited from a stronger second half.
The challenge that we face at Lift Material is to have a stream of new lines to distribute. We had previously taken on a European line of pit ladders and last year was a year when this product really caught on. This success was gained after a number of years of effort promoting the product and seeking acceptance from our customers. This scenario is really the norm for Lift Material. Each year we add a number of new lines, which we promote hard. Some fall away, but those that become established in the market can be very rewarding.
David Dewhurst
Group Managing Director
FINANCIAL REVIEW
Strong Results
As predicted in the interim results the second half of 2009 was expected to be difficult with a depressed UK economy and continuing pricing pressures. The UK operations worked hard to limit the impact, whilst overseas operations performed strongly resulting in revenue only decreasing by 1.4% from £36.3 million to £35.8 million.
The impact of our efforts on operating profit was even more marked. Despite the falling revenue, operating profit rose 3.7% from £4.4 million to £4.5 million. This reflects an increase in margins to 12.6% (2008: 12.0%) and sets a new group record.
Finance income reflects the loose monetary policy necessitated by the financial crisis. Despite increasing our cash during the year bank interest rates available dropped drastically resulting in reduced interest income. Finance costs show the other side of this effect with a decline in the defined benefit pension scheme costs. The net result is an overall profit before tax decrease of £0.25 million from £4.7 million to £4.4 million.
Group Restructuring
The board has restructured the group by separating trading businesses from the holding operation and property. As a result on 1 April 2009 the property in LiftStore Ltd was transferred to Dewhurst plc and from 1 October 2009 the UK manufacturing business of Dewhurst plc was extracted into Dewhurst UK Manufacturing Ltd.
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 increases in both assets and liabilities. Yet again the movement in the equity and bond markets and in discount rates has caused significant changes in the valuation of the scheme assets and liabilities resulting in the overall scheme deficit increasing from £3.7 million to £6.1 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 within an agreed timeframe have been fully implemented.
Good Cash Flow
Cash flow was once again very good. With Hungary now in full production and inventory decreasing, the group was able to generate £4.7 million cash from operations. This coupled with the fact no shares were repurchased during the year and no acquisition of property meant the group ended the year at £7.5 million, up £2.4 million.
We started and finished the year with no borrowing, ensuring the balance sheet remained strong, an important stabiliser in the current environment.
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.
With the group growing and increasing its percentage of profit before tax earned and held in foreign currencies during the year from 33% to 40% and seeing significant exchange rate movements, active steps were taken by the board to monitor and manage this currency risk. As reported in note 25 the group used derivatives in the form of foreign exchange contracts to manage its risk.
Dividends
Dividends are accounted for when paid and approved, and not when proposed, therefore the proposed final dividend for 2009 has not been accrued at the balance sheet date. The total dividend for 2009 of 6.06p per share, up 5.2% against last year's 5.76p, is covered 6.3 times by earnings. Shareholders' funds improved from £17.9 million to £19.5 million.
There was no reduction in the number of allotted shares during the year.
Jared Sinclair
Finance Director
Consolidated income statement
| For the year ended 30 September 2009 | ||||||
| 2009 | 2008 | |||||
| Continuing operations | £(000) | £(000) | ||||
| Revenue | 35,835 | 36,326 | ||||
| Operating costs | (31,324) | (31,974) | ||||
| Operating profit | 4,511 | 4,352 | ||||
| Finance income | 87 | 329 | ||||
| Finance costs | (170) | (2) | ||||
| Profit before taxation | 4,428 | 4,679 | ||||
| Tax on profit | (1,157) | (1,238) | ||||
| Profit for the financial year | 3,271 | 3,441 | ||||
| Basic and diluted earnings per share | 38.43p | 38.92p | ||||
Consolidated statement of recognised income and expense
| 2009 | 2008 | ||||
| £(000) | £(000) | ||||
| Net income/(expense) recognised directly in equity: | |||||
| Actuarial gains/(losses) on the defined benefit pension scheme | (2,765) | (440) | |||
| Exchange differences on translation of foreign operations | 1,134 | 433 | |||
| Tax on items taken directly to equity | 457 | (68) | |||
| Net income/(expense) recognised directly in equity in the year | (1,174) | (75) | |||
| Profit for the financial year | 3,271 | 3,441 | |||
| Total recognised income and expense for the year | 2,097 | 3,366 | |||
Consolidated balance sheet
| At 30 September 2009 | |||||
| 2009 | 2008 | ||||
| £(000) | £(000) | ||||
| Non-current assets | |||||
| Goodwill | 5,896 | 5,554 | |||
| Other intangibles | 264 | 43 | |||
| Property, plant and equipment | 4,519 | 4,219 | |||
| Deferred tax asset | 1,218 | 877 | |||
| 11,897 | 10,693 | ||||
| Current assets | |||||
| Inventories | 3,983 | 4,122 | |||
| Trade and other receivables | 7,077 | 7,154 | |||
| Current tax assets | 17 | - | |||
| Cash and cash equivalents | 7,476 | 5,120 | |||
| 18,553 | 16,396 | ||||
| Total assets | 30,450 | 27,089 | |||
| Current liabilities | |||||
| Trade and other payables | 4,540 | 4,664 | |||
| Current tax liabilities | - | 492 | |||
| Short term provisions | 358 | 350 | |||
| 4,898 | 5,506 | ||||
| Non-current liabilities | |||||
| Retirement benefit obligation | 6,072 | 3,700 | |||
| Total liabilities | 10,970 | 9,206 | |||
| Net assets | 19,480 | 17,883 | |||
| Equity | |||||
| Share capital | 851 | 851 | |||
| Share premium account | 157 | 157 | |||
| Capital redemption reserve | 286 | 286 | |||
| Translation reserve | 1,648 | 832 | |||
| Retained earnings | 16,538 | 15,757 | |||
| Total equity | 19,480 | 17,883 | |||
Consolidated cash flow statement
| For the year ended 30 September 2009 | |||||
| 2009 | 2008 | ||||
| £(000) | £(000) | ||||
| Cash flows from operating activities | |||||
| Operating profit | 4,511 | 4,352 | |||
| Depreciation and amortisation | 575 | 534 | |||
| Additional (income)/costs to pension scheme | (562) | (423) | |||
| Exchange adjustments | 70 | 199 | |||
| (Profit)/loss on disposal of property, plant and equipment | 1 | (15) | |||
| 4,595 | 4,647 | ||||
| (Increase)/decrease in inventories | 139 | (1,294) | |||
| (Increase)/decrease in trade and other receivables | 77 | (177) | |||
| Increase/(decrease) in trade and other payables | (124) | 786 | |||
| Increase/(decrease) in provisions | 8 | 250 | |||
| Cash generated from operations | 4,695 | 4,212 | |||
| Interest paid | (1) | (2) | |||
| Income tax paid | (1,555) | (1,147) | |||
| Net cash from operating activities | 3,139 | 3,063 | |||
| Cash flows from investing activities | |||||
| Acquisition of business and assets | (260) | (250) | |||
| Proceeds from sale of property, plant and equipment | 4 | 21 | |||
| Purchase of property, plant and equipment | (396) | (1,890) | |||
| Development costs capitalised | (50) | (7) | |||
| Interest received | 87 | 235 | |||
| Net cash used in investing activities | (615) | (1,891) | |||
| Cash flows from financing activities | |||||
| Dividends paid | (499) | (495) | |||
| Purchase of own shares | - | (2,334) | |||
| Net cash used in financing activities | (499) | (2,829) | |||
| Net increase/(decrease) in cash and cash equivalents | 2,025 | (1,657) | |||
| Cash and cash equivalents at beginning of year | 5,120 | 6,659 | |||
| Exchange adjustments on cash and cash equivalents | 331 | 118 | |||
| Cash and cash equivalents at end of year | 7,476 | 5,120 | |||
AGM, results and dividends
The trading profit for the year, after taxation, amounted to £3,271k (2008: £3,441k).
A final dividend on the Ordinary and 'A' ordinary shares of 4.04p per 10p share (2008: 3.84p) for the financial year ending 30 September 2009 will be proposed at the Annual General Meeting to be held on 28 January 2010. If approved, this dividend will be paid on 1 March 2010 to members on the register at 8 January 2010.
An interim dividend of 2.02p per share (2008: 1.92p) was paid on 25 August 2009.
Earnings per share and dividend per share
| Weighted average number of shares | ||
| 2009 | 2008 | |
| No. | No. | |
| For basic and diluted earnings per share | 8,511,398 | 8,841,253 |
The calculation of basic and diluted earnings per share is based on the profit attributable to shareholders and on 8,511,398 Ordinary 10p and 'A' ordinary 10p shares, being the weighted average number of shares in issue throughout the financial year.
| 2009 | 2008 | |
| Paid dividends per 10p ordinary share | £(000) | £(000) |
| 2008 final paid of 3.84p (2007: 3.60p) | (327) | (331) |
| 2009 interim paid of 2.02p (2008: 1.92p) | (172) | (164) |
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 4.04p (2008: 3.84p) per share, totalling £344k (2008: £327k). 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 2009 or 2008. Statutory accounts for 2008, have been delivered to the Registrar of Companies. The statutory accounts for 2009 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 2009. The auditor has also reported on the 2008 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 2006 that are applicable to companies adopting IFRS. The company is registered and incorporated in the United Kingdom; and quoted on AIM.