Last checked at 3 Jul 2008 07:00
HEATH (Samuel) & SONS PLC
3RD JULY 2008
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2008
CHAIRMAN'S STATEMENT
The results for the year to 31st March 2008 were well down on the previous one, but not quite as much as anticipated. Turnover fell 4%, and operating profit was down from £1,469,000 to £1,182,000.
In March, non-Executive Director Charles Flint died. His keen and probing mind and wise counsel will be very much missed by his colleagues.
Roger Jeynes will also be relinquishing his directorship of the Management Board, as he moves to much shorter working hours. He has been responsible for the development of two world patented and unique products, the Perkomatic and later the Perko-Powermatic door closers. Unbeknown to him, we did try to obtain recognition for this, and his work in Europe with C.E.N., on a more countrywide basis. We were told that he was almost certainly of the wrong ethnic background for such an award. What strange times we live in, when you might consider engineering innovation to be vital to this country. These remarks are, in no way, meant to show any lack of appreciation of the skills and hard work of the wide variety of people, with whom I have had the privilege to work, for over fifty years.
Your Directors believe that a purchase of the Company's shares at the right price level could benefit the Company, and thereby its shareholders. Accordingly, your Directors are seeking your approval for the purchase of up to 15% of the issued share capital, 380,298 shares, between Annual General Meetings.
The change in the product mix, which was foreseen for the previous year, is continuing. We have commodity prices through the roof, and by any standards difficult trading conditions practically everywhere. This is combined with the reluctance of the market to accept higher prices against any logical rationale. All this forces me to anticipate a further significant fall in profits for the coming year.
However, on the basis of the Company's strong balance sheet, your Directors are recommending a same again final dividend of 12.5 pence per share.
CONSOLIDATED INCOME STATEMENT
| Total 2008 | Total 2007 | |||
| £000 | £000 | |||
| Continuing operations | ||||
| Revenue | 12,191 | 12,712 | ||
| Cost of sales | 5,355 | 5,702 | ||
| Gross profit | 6,836 | 7,010 | ||
| Distribution costs | 384 | 411 | ||
| Administrative expenses | 5,270 | 5,130 | ||
| Operating profit: | ||||
| Net of contributions to pension deficit | 672 | 964 | ||
| Contributions to pension deficit | 510 | 505 | ||
| 1,182 | 1,469 | |||
| Finance income | 778 | 787 | ||
| Finance costs | 568 | 523 | ||
| 210 | 264 | |||
| Profit before taxation | 1,392 | 1,733 | ||
| Taxation | 345 | 349 | ||
| Profit for the year | 1,047 | 1,384 | ||
| Basic and diluted earnings per ordinary share | 41.3 p | 54.5 p | ||
CONSOLIDATED BALANCE SHEET
| 2008 £000 | 2007 £000 | |||
| Non current assets | ||||
| Property, plant and equipment | 2,934 | 3,201 | ||
| Deferred tax asset | 101 | 235 | ||
| 3,035 | 3,436 | |||
| Current assets | ||||
| Inventories | 2,787 | 2,645 | ||
| Trade and other receivables | 2,166 | 2,135 | ||
| Cash and cash equivalents | 1,728 | 1,901 | ||
| Total current assets | 6,681 | |||
| Total assets | 9,716 | 10,117 | ||
| Current liabilities | ||||
| Trade and other payables | 986 | 1,183 | ||
| Current tax payable | 213 | 245 | ||
| Total current liabilities | 1,199 | 1,428 | ||
| Non current liabilities | ||||
| Pension scheme deficit | 360 | 783 | ||
| Deferred tax liability | 252 | 292 | ||
| Total non current liabilities | 612 | 1,075 | ||
| Total liabilities | 1,811 | 2,503 | ||
| Net assets | 7,905 | 7,614 | ||
| Equity | ||||
| Called up share capital | 254 | 254 | ||
| Capital redemption reserve | 109 | 109 | ||
| Retained earnings | 7,542 | 7,251 | ||
| Equity shareholders' funds | 7,905 | 7,614 | ||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Share capital | Capital redemption reserve | Retained earnings | Total equity | |
| £000 | £000 | £000 | £000 | |
| Balance at 31st March 2006 | 255 | 108 | 6,733 | 7,096 |
| Actuarial losses on defined benefit pension scheme | - | - | (301) | (301) |
| Deferred taxation on items taken to equity | - | - | 90 | 90 |
| Net income recognised directly in equity | - | - | (211) | (211) |
| Profit for the period | - | - | 1,384 | 1,384 |
| Total recognised income and expense for the period | - | - | 1,173 | 1,173 |
| Purchase of own shares | (1) | 1 | - | - |
| Premium on purchase of own shares | - | - | (57) | (57) |
| Equity dividends paid | - | - | (598) | (598) |
| Balance at 31st March 2007 | 254 | 109 | 7,251 | 7,614 |
| Actuarial loss on defined benefit pension scheme | - | - | (200) | (200) |
| Deferred taxation on items taken to equity | - | - | 40 | 40 |
| Net loss recognised directly in equity | - | - | (160) | (160) |
| Profit for the period | - | - | 1,047 | 1,047 |
| Total recognised income and expense for the period | - | - | 887 | 887 |
| Equity dividends paid | - | - | (596) | (596) |
| Balance at 31st March 2008 | 254 | 109 | 7,542 | 7,905 |
CONSOLIDATED AND PARENT CASH FLOW STATEMENTS
| Note | 2008 | 2007 | ||
| £000 | £000 | |||
| Net cash inflow from operating activities | 6 | 519 | 205 | |
| Cashflow from investing activities | ||||
| Purchases of property, plant and equipment | (226) | (490) | ||
| Proceeds from sale of property, plant and equipment | 33 | 51 | ||
| Interest received | 97 | 99 | ||
| Net cash outflow from investing activities | (96) | (340) | ||
| Net cash outflow from financing activities | ||||
| Purchase of own shares | - | (57) | ||
| Equity dividends paid | (596) | (598) | ||
| Net cash outflow from financing activities | (596) | (655) | ||
| Decrease in cash and cash equivalents | (173) | (790) | ||
| Cash and cash equivalents at beginning of period | 1,901 | 2,691 | ||
| Cash and cash equivalents at end of period | 1,728 | 1,901 | ||
1. Adoption of new and revised Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1st April 2007. The adoption of the following IFRSs has not impacted the audited financial statements other than for disclosure.
IFRS 3 - Business Combinations
IFRS 7 - Financial Instruments - disclosure
IAS 1 - Presentation of Financial Statements
IAS 27 - Consolidated and Separate Financial Statements
At the date of authorisation of these financial statements, the following Standard which has not been applied in these financial statements was in issue but not yet effective:
IFRS 8 - Operating Segments
The other Standards and Interpretations are not expected to have any significant impact on the Group's financial statement, in their periods of initial application, except for the additional disclosures on operating segments when the relevant standard comes into effect for periods commencing on or after 1st January 2009.
2. Accounting policies
Basis of accounting
The financial statements, upon which this financial information is based, have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) for the first time. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 7.
The financial statements have been prepared under the historical cost basis.
3. Critical accounting and key sources of estimation
Critical judgements in applying the entity's accounting policies
In the process of applying the entity's accounting policies, which are described above, the directors have made the following judgements that have the most significant effect on the amounts recognised in the financial statements.
Income taxes
The Group is subject to income taxes in the United Kingdom. Judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The recoverable amounts of the Group's deferred tax assets have been determined based on the Board's estimates of future taxable profits and income and tax rates.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Retirement benefit scheme deficit
The valuation of expected returns on assets and the present value of the liabilities of the scheme are determined by assumptions and estimates made by the directors based on the current information to hand. Therefore amounts are open to fluctuations in the future due to unforeseen changes or additional factors that come to light following the year end.
4. Dividends
| 2008 | 2007 | ||
| £ 000 | £ 000 | ||
| Final dividend for the year ended 31st March 2007 of 12.5 pence per share (2006: 12.5 pence per share) | 317 | 319 | |
| Interim dividend for the year ended 31st March 2008 of 11.0 pence per share (2007: 11.0 pence per share) | 279 | 279 | |
| 596 | 598 | ||
In addition to the dividends paid during the year the directors are recommending a final dividend for 2008 of 12.5 pence per share amounting to £317,000. The proposed final dividend is subject to approval at the Annual General Meeting (see note 8) and has not been included as a liability in these accounts.
5. Earnings per share
The basic and diluted earnings per share are calculated by dividing the relevant profit after taxation of £1,047,000 (2007: £1,384,000) by the average number of ordinary shares in issue during the year being 2,535,000 (2007: 2,538,700). The number of shares used in the calculation is the same for both basic and diluted earnings.
6. Notes to the cash flow statement
| 2008 | 2007 | ||
| £000 | £000 | ||
| Results from operating activities | 1,182 | 1,469 | |
| Depreciation of property, plant and equipment | 468 | 450 | |
| Gain on disposal of property, plant and equipment | (8) | (2) | |
| Operating cash flows before movements in working capital | 1,642 | 1,917 | |
| Increase in inventories | (142) | (454) | |
| (Increase)/decrease in receivables | (31) | 19 | |
| Decrease in payables | (197) | (572) | |
| Pension contributions | (510) | (505) | |
| Cash generated by operations | 762 | 405 | |
| Income tax paid | (243) | (200) | |
| Net cash flow from operating activities | 519 | 205 |
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.
7. Explanation of transition to IFRS
The Group has applied IFRS 1 "First Time Adoption of International Financial Reporting Standards" as a starting point for reporting under IFRS. The Group's date of transition is 1st April 2006 and comparative information has been restated to reflect in the Group's adoption of IFRS except where otherwise required or permitted by IFRS 1.
IFRS 1 requires an entity to comply with each IFRS and IAS effective at the reporting date for its first financial statements prepared under IFRS. As a general rule, IFRS 1 requires such standards to be applied retrospectively. However, the standard allows several optional exemptions from full retrospective application.
The Group has elected to take advantage of the following exemption. Business combinations made prior to 1st April 2006 will not be accounted for under IFRS 3 "Business Combinations" and as such the value of goodwill in the balance sheet at that date will be the same amount under IFRS as that recorded in the UK GAAP financial statements, subject to the completion of an annual impairment review.
No adjustments were required in order for the Group to comply with IFRS.
8. Annual General Meeting
The Annual General Meeting has been fixed for Friday 15th August 2008 at 12 noon. The final Ordinary Share dividend of 12.5 pence will be declared payable on 22nd August 2008 to ordinary shareholders registered at close of business on 25th July 2008.
9. Section 240 statement
The financial information set out above does not constitute the company's statutory accounts for the years ended 31st March 2008 or 2007. Statutory accounts for 2007, which were prepared under UK GAAP, have been delivered to the Registrar of Companies, and those for 2008 prepared under IFRS, will be delivered in due course. The auditors have reported on the 2007 accounts; their report was unqualified, did not include references to any matters by way of emphasis without qualifying their report and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.