Last checked at 9 Jul 2009 07:00
HEATH (Samuel) & SONS PLC
9th JULY 2009
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2009
CHAIRMAN'S STATEMENT
As I warned at the half-year stage, trading collapsed at the end of September 2008. The result is that we are showing a profit before taxation for the year to 31st March 2009 of £292,000 against £1,392,000 the previous year, on sales down from £12,085,000 to £10,897,000.
Difficulties for businesses like ours have been well chronicled elsewhere and ours was certainly no exception. With a drop in sales as sudden and severe as this, it is very difficult to repair the damage immediately. Overall, but mainly on the manufacturing side of the business, we made 16% of our people redundant. A figure of £162,000 of redundancy payments is included in our profit figure.
Our profit before taxation for the first time has been enhanced by the capitalisation of Research and Development expenditure of £164,000. This now needs to be declared under International Financial Reporting Standards (IFRS), but I perhaps should point out, that the effect of this change is tax neutral.
Significant numbers of our customers have gone out of business, with regrettably no sign that this process has ended. Added to our problems was the reluctance of our credit insurers to continue cover on many of our clients, both home and overseas. This has had the bizarre effect of limiting already much curtailed sales. With these factors in mind, we have taken a cautious view of our bad debts and stock valuation.
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, 380,148 shares, between Annual General Meetings.
What of the future? It is quite clear that things are not going to return to normal in the short term. If we start to cut back on our sales and marketing side, we will do great harm to the business. We have therefore decided, for the time being, not to do so and to play the long game, which is perhaps not usual for a public company in the U.K. We understand however that in other countries, for a company of our size, this type of decision is normal. We are therefore budgeting for a manageable loss for the coming year, which only a much improved trading environment would eliminate.
The balance sheet remains strong with net assets at 31st March 2009 amounting to £6,709,000 (2008: £7,905,000). We have replaced some of our bank balances with other investments in order to protect the yield on these funds. However, in spite of the strength of this balance sheet, we feel it wise to halve the proposed final dividend to 6.25 pence per share.
Sam Heath
Chairman
9th July 2009
CONSOLIDATED INCOME STATEMENT
| 2009 | 2008 | ||||
| (Restated) | (Restated) | ||||
| £000 | £000 | £000 | £000 | ||
| Continuing operations | |||||
| Revenue | 10,897 | 12,085 | |||
| Cost of sales | (5,952) | (6,293) | |||
| Exceptional expenses (Redundancy payments) | (162) | (6,114) | (112) | (6,405) | |
| -------- | -------- | -------- | -------- | ||
| Gross profit | 4,783 | 5,680 | |||
| Distribution costs | (3,036) | (3,003) | |||
| Administrative expenses | (1,504) | (1,495) | |||
| -------- | -------- | ||||
| Operating profit | 243 | 1,182 | |||
| Finance income | 593 | 778 | |||
| Finance costs | (544) | (568) | |||
| -------- | -------- | ||||
| Profit before taxation | 292 | 1,392 | |||
| Taxation | 23 | (345) | |||
| -------- | -------- | ||||
| Profit for the year | 315 | 1,047 | |||
| ==== | ==== | ||||
| Basic and diluted earnings per ordinary share | 12.5p | 41.3p | |||
| ==== | ==== | ||||
CONSOLIDATED BALANCE SHEET
| 2009 | 2008 | ||
| £000 | £000 | ||
| Non current assets | |||
| Intangible assets | 164 | - | |
| Property, plant and equipment | 2,617 | 2,934 | |
| Deferred tax asset | 284 | 101 | |
| -------- | -------- | ||
| 3,065 | 3,035 | ||
| -------- | -------- | ||
| Current assets | |||
| Inventories | 2,654 | 2,787 | |
| Trade and other receivables | 1,753 | 2,166 | |
| Current tax receivable | 88 | - | |
| Available for sale financial assets | 770 | - | |
| Cash and cash equivalents | 571 | 1,728 | |
| -------- | -------- | ||
| Total current assets | 5,836 | 6,681 | |
| -------- | -------- | ||
| Total assets | 8,901 | 9,716 | |
| ==== | ==== | ||
| Current liabilities | |||
| Trade and other payables | (859) | (986) | |
| Derivative financial instruments | (103) | - | |
| Current tax payable | - | (213) | |
| -------- | -------- | ||
| Total current liabilities | (962) | (1,199) | |
| -------- | -------- | ||
| Non current liabilities | |||
| Pension scheme deficit | (1,015) | (360) | |
| Deferred tax liability | (215) | (252) | |
| -------- | -------- | ||
| Total non current liabilities | (1,230) | (612) | |
| -------- | -------- | ||
| Total liabilities | (2,192) | (1,811) | |
| -------- | -------- | ||
| Net assets | 6,709 | 7,905 | |
| -------- | -------- | ||
| Equity | |||
| Called up share capital | 254 | 254 | |
| Capital redemption reserve | 109 | 109 | |
| Retained earnings | 6,346 | 7,542 | |
| -------- | -------- | ||
| Equity shareholders' funds | 6,709 | 7,905 | |
| ==== | ==== |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Share capital | Capital redemption reserve | Retained earnings | Total equity | |
| £000 | £000 | £000 | £000 | |
| Balance at 31 March 2007 | 254 | 109 | 7,251 | 7,614 |
| Actuarial losses on defined benefit pension scheme | - | - | (200) | (200) |
| Deferred taxation on items taken to equity | - | - | 40 | 40 |
| -------- | -------- | -------- | -------- | |
| Net income 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 31 March 2008 | 254 | 109 | 7,542 | 7,905 |
| Actuarial loss on defined benefit pension scheme | - | - | (1,153) | (1,153) |
| Deferred taxation on items taken to equity | - | - | 322 | 322 |
| -------- | -------- | -------- | -------- | |
| Net loss recognised directly in equity | - | - | (831) | (831) |
| Profit for the period | - | - | 315 | 315 |
| -------- | -------- | -------- | -------- | |
| Total recognised income and expense for the period | - | - | (516) | (516) |
| Gains on available for sale financial assets | - | - | 23 | 23 |
| Cash flow hedges | - | - | (103) | (103) |
| Premium on purchase of own shares | - | - | (4) | (4) |
| Equity dividends paid | - | - | (596) | (596) |
| -------- | -------- | -------- | -------- | |
| Balance at 31 March 2009 | 254 | 109 | 6,346 | 6,709 |
| ==== | ==== | ==== | ==== |
CONSOLIDATED AND PARENT CASH FLOW STATEMENTS
| Note | 2009 | 2008 | |
| £000 | £000 | ||
| Net cash inflow from operating activities | 6 | 458 | 519 |
| -------- | -------- | ||
| Cash flow from investing activities | |||
| Purchases of property, plant and equipment | (203) | (226) | |
| Proceeds from sale of property, plant and equipment | 43 | 33 | |
| Purchase of intangible assets | (164) | - | |
| Purchase of available for sale financial assets | (747) | - | |
| Interest received | 56 | 97 | |
| -------- | -------- | ||
| Net cash outflow from investing activities | (1,015) | (96) | |
| -------- | -------- | ||
| Net cash outflow from financing activities | |||
| Purchase of own shares | (4) | - | |
| Equity dividends paid | (596) | (596) | |
| -------- | -------- | ||
| Net cash outflow from financing activities | (600) | (596) | |
| -------- | -------- | ||
| Decrease in cash and cash equivalents | (1,157) | (173) | |
| Cash and cash equivalents at beginning of period | 1,728 | 1,901 | |
| -------- | -------- | ||
| Cash and cash equivalents at end of period | 571 | 1,728 | |
| ==== | ==== |
| 1 | Adoption of new and revised Standards | |||
| 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 upon the financial statements: | ||||
| IFRIC 10 - Interim Financial Reporting and Impairment | ||||
| At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: | ||||
| IFRS 8 - Operating Segments | ||||
| IFRIC 11 - Group and Treasury Share Transactions | ||||
| These standards and interpretations are not expected to have any significant impact on the Group's financial statements, 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). | ||||
| The comparative figures in the Income Statement have been restated merely to reflect a more conventional presentation and have no affect on the overall profitability of the Group. | ||||
| The financial statements have been prepared under the historical cost basis. | ||||
| Intangible assets | ||||
| Research and development costs represent typical internally generated assets of relevance for the Group. Costs incurred in relation to individual projects are capitalised only when the future economic benefit of the project is probable and it is the intention of management to complete the intangible asset and use it or sell it. | ||||
| Research costs are expensed as incurred. | ||||
| For intangible assets with finite useful lives, amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over its useful economic life when the asset is available for use, as follows: | ||||
| Research and development costs | 20% per annum on cost | |||
| Hedging | ||||
| The normal course of the Group's business exposes it to currency exchange rate fluctuations. In order to hedge this risk the Group has entered into foreign exchange contracts. This type of arrangement under IAS39 is classified as a "Cash Flow Hedge". The proportion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity, and the ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement. | ||||
| 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 | |||
| 2009 | 2008 | |||
| £000 | £000 | |||
| Final dividend for the year ended 31st March 2008 of 12.5 pence per share (2007: 12.5 pence per share) | 317 | 317 | ||
| Interim dividend for the year ended 31st March 2009 of 11.0 pence per share (2008: 11.0 pence per share) | 279 | 279 | ||
| -------- | -------- | |||
| 596 | 596 | |||
| ==== | ==== | |||
| In addition to the dividends paid during the year the directors are recommending a final dividend for 2009 of 6.25 pence per share amounting to £158,000. The proposed final dividend is subject to approval at the Annual General Meeting (see note 7) 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 £315,000 (2008: £1,047,000) by the average number of ordinary shares in issue during the year being 2,534,577 (2008: 2,535,000). The number of shares used in the calculation is the same for both basic and diluted earnings. | ||||
| 6 | Notes to the cash flow statement | |||
| 2009 | 2008 | |||
| £000 | £000 | |||
| Results from operating activities | 243 | 1,182 | ||
| Depreciation of property, plant and equipment | 471 | 468 | ||
| Loss/(gain) on disposal of property, plant and equipment | 12 | (8) | ||
| -------- | -------- | |||
| Operating cash flows before movements in working capital | 726 | 1,642 | ||
| Decrease/(increase) in inventories | 133 | (142) | ||
| Decrease)/(increase) in receivables | 413 | (31) | ||
| Decrease in payables | (133) | (197) | ||
| Pension contributions | (505) | (510) | ||
| -------- | -------- | |||
| Cash generated by operations | 634 | 762 | ||
| Income tax paid | (176) | (243) | ||
| -------- | -------- | |||
| Net cash flow from operating activities | 458 | 519 | ||
| ==== | ==== | |||
| 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 | Annual General Meeting | |||
| The Annual General Meeting has been fixed for 14th August 2009 at 12 noon. The final Ordinary Share dividend of 6.25 pence, if approved, will be payable on 21st August 2009 to ordinary shareholders registered at close of business on 24th July 2009. | ||||
| 8 | Section 240 statement (Section 435 of the Companies Act 2006) | |||
| The financial information set out above does not constitute the company's statutory accounts for the years ended 31st March 2009 or 2008. Statutory accounts for 2008 have been delivered to the Registrar of Companies, and those for 2009 will be delivered in due course. The auditors have reported on the 2008 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 (Section 498 (2) or (3) of the Companies Act 2006). | ||||