HYNS.L Regulatory News (HYNS)

28 Jul 2005 07:00

Haynes Publishing Group PLC28 July 2005 HAYNES PUBLISHING GROUP P.L.C. PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31 MAY 2005 Haynes Publishing Group P.L.C. (Haynes) is the worldwide market leader in theproduction and sale of automotive and motorcycle repair manuals. The Group publishes many other DIY titles as well as an extensive array of booksabout motor sport, vehicles and general transport. Through its subsidiary SuttonPublishing, the Group also publishes a range of military and general historybooks and biographies. KEY POINTS • Turnover of £36.3 million (2004: £39.0 million) • Group operating profit of £8.4 million (2004: £8.4 million) • Profit before tax and goodwill amortisation of £8.9 million (2004: £8.8 million) • Profit before tax of £8.4 million (2004: £8.3 million) • Adjusted earnings per share, before goodwill amortisation, of 34.6 pence (2004: 33.8 pence) • Basic earnings per share of 31.3 pence (2004: 30.4 pence) • Net cash of £1.8 million (2004: net borrowings of £1.5 million) • Full year dividend of 14.5 pence per share (2004: 12.0 pence per share) Contacts: Eric Oakley, Group Chief Executive 01963 442024 Haynes Publishing Group P.L.C. John Haynes OBE, Chairman 01963 442009 Haynes Publishing Group P.L.C. Barrie Newton 0117 9330011 Rowan Dartington Chairman's Statement During the year, the underlying performance of the Group remained strong, in anenvironment characterised by a weak Dollar and high oil prices, which continuedthe pressure on raw material costs. Profit before tax for the year was £8.4million (2004: £8.3 million) which represents the Group's third consecutive yearof record profits and reinforces the strength of our core business against achallenging economic background. As a Group, with a significant proportion of our operations located in NorthAmerica, we are very familiar with the risks associated with exchange ratemovements, particularly when translating the results of our US operations intoSterling. Likewise, experience would indicate that short term swings will eventhemselves out in the longer run. Nevertheless, it is pertinent to note whencomparing the results of this year against the prior year that, had the Sterlingto Dollar exchange rate stayed the same as last year, the turnover of the Groupwould have increased by £1.5 million to £37.8 million and the profit before taxby £0.5 million to £8.9 million, which on a level playing field basis would haveactually increased the stated profit by 7%. Results summary In summary, the Group profit before tax and goodwill amortisation ("goodwill")was £8.9 million (2004: £8.8 million), on turnover of £36.3 million (2004: £39.0million). Adjusted earnings per share, before goodwill, increased by 2% to 34.6pence (2004: 33.8 pence). Performance overview In the US, in local currency, turnover ended the year in line with last yearwhile segmental profit increased by 8% helped by production efficiencies whichhad a positive impact on the cost of goods, a mid-year price increase, new titlereleases and another strong performance in Australia. In the UK and Europe, we experienced lower demand from our key customers, whichhad an impact on turnover in our core activities. Paradoxically, this was duringa year where two reports into the automotive aftermarket made the headlines.First, in November 2004, the Which? Magazine survey reported that 73% of UKgarage services were completed to an unsatisfactory standard, 67% failed to pickup existing faults and 23% carried out unnecessary work while servicing avehicle. This survey was followed, in June 2005, by a report from the TradingStandards Institute which similarly highlighted that three quarters of garagesfailed to service vehicles correctly. As a business, we are aware of theperception that vehicles are becoming increasingly difficult to work on. Thereare still many tasks and safety checks that can be performed on a vehicle by theowner and, by using the trusted Haynes step by step approach as shown in ourmanuals, it is possible for people of all ages, gender and ability to care fortheir car or motorcycle. This is not to mention the money that can be saved bydoing so. Reinforcing this message to the end consumer will remain a keyobjective during the coming year. Dividend During the second half of the year, the Group returned to a cash positiveposition, the first time since 1999. As mentioned in previous reports, it hasbeen a key driver for the Board to pay down Group borrowings as quickly aspossible. The return to net cash in such a short space of time reflects not onlythe astuteness of the Chilton acquisition in January 2001, but also demonstratesthe cash generative nature of our core businesses. Accordingly, the Board is proposing a final dividend of 9.5 pence per share,giving a total dividend for the year of 14.5 pence per share, an increase of 21%over last year (2004: 12.0 total pence per share). Once approved at the AnnualGeneral Meeting, the final dividend will be paid on 28 October 2005 toshareholders on the register at the close of business on 30 September 2005. Theshares will be declared ex-dividend on 28 September 2005. Board I am delighted to report that Andrew Garner joined the Board as a non-executiveDirector on 31 March 2005. Andrew is presently the Chief Executive ofConstellation Corporation plc, a Trustee of the Haynes International MotorMuseum and sits on the Board of the London Philharmonic Orchestra. Andrew has awealth of experience to bring to the Board and as a keen competitive motoringenthusiast he is well suited to his new role with Haynes. Employees Personally and on behalf of the Board I would like to acknowledge the dedicationand enthusiasm of our employees and thank them for their efforts during theyear. As each year passes the experience base of our business grows and togetherwith the introduction of new employees it ensures the mix of staff remainsvibrant while stable. I would also like to thank the Group Chief Executive, EricOakley and the UK & European Managing Director, J Haynes and all the otherDirectors for their proven ability, talents and leadership skills in taking theGroup to an all time record profit. J H Haynes, OBEChairman27 July 2005 Chief Executive's Review Results overview The progress we have made as a Group during the year has, to some extent, beenmasked by the impact of a weak US Dollar and although we did see a small rallyin the rate towards the end of our financial year, this was too late to affectthe average rate for the year which is used to translate the results of our USbusiness into Sterling. At constant exchange rates, we would have seen profitbefore tax increase by £0.5m to £8.9 million, an increase of 7% over the prioryear. The impact of the weakened Dollar, which averaged $1.86 to the £ duringthe year, 7% higher than last year, meant reportable profit before tax was £8.4million, an increase of 1% against the prior year. During the year, we benefited from production efficiencies which had a positiveimpact on the cost of goods. In the latter half of the year, however, weexperienced cost increases in our major material supplies and whilst we havebeen largely successful in managing the implications of these higher prices,there is a growing pressure on margins. When considering the above, the fact that, as a Group, we managed to finish theyear ahead of last year, despite the unfavourable economic climate, is testimonyto the strength of our underlying businesses and to the dedication of our staffwho have risen to the challenges which face them, while remaining focussed onthe job in hand. North America and Australia Sales in the US, in local currency, ended the year broadly in line with lastyear at $39.1 million (2004: $39.3 million). The first quarter was characterisedby inventory reduction programmes by our major retailers, but was, to somedegree, compensated for by an element of pre-price increase ordering late in thesecond quarter. This, in turn reduced sales during the third quarter. Strongsales in the all important final quarter of the year meant that, for the year asa whole, turnover was restored in line with last year. In addition, thepublication of three new Haynes Xtreme titles, covering the truck and sportsutility vehicle markets, in the second half of the year helped boost sales inthis range, with turnover during the second half of the year nearly double thatof the first six months. As a result of the high initial sell-in of this newrange in our last financial year, turnover, on a like for like basis, ended theperiod behind last year. In Australia, sales continued to outperform the prior year helped by favourableexchange rate movements and ended the year 9% ahead of last year. The need to successfully market our products is a key driver for future growthof the US business and with this in mind, we have recently strengthened ourresources in this area. Although still early days, positive initiatives arebeing developed as a result of the work being undertaken to-date, and the workof strengthening awareness of the Haynes brand in the US will develop furthermomentum. This will include the development of a new more dynamic US website inthe coming year. As for profitability, the continuation of the weak Dollar throughout the yearhad a significant impact when translating the results of the business intoSterling and whilst the segmental profit, in local currency, ended the year 8%ahead at $13.6 million (2004: $12.6 million) after conversion to Sterling theincrease was only 1% at £7.4 million (2004: £7.3 million). United Kingdom and Europe - Automotive Manual sales in our core UK & European automotive markets were adverselyinfluenced by lower purchasing patterns from key retailers, particularly duringthe first half of the year. By contrast, in the second half of the year, welaunched our 'Win a Mini Cooper' promotion, whereby the winner will receive theactual Mini that was stripped down, photographed and rebuilt in our UK workshopat Sparkford; with progress of the project monitored on the Haynes website. Thishas been our first national promotion for a number of years and has been wellreceived by both our customers and the end consumer alike. Whilst we have seen apositive impact on sales in the last quarter, as a result of this promotion, thesales could not recoup the shortfall of the first six months and manual salesended the year 6% behind the prior year. In France, we once again suffered from staff turnover, but for the first time intwo years, we have entered the new financial year with a full compliment ofsales representatives. With our strongest publishing programme for a number ofyears planned for the coming year, we expect to see an improvement from thisarea in 2006. Sales of our new range of task specific consumer technical manuals sold well andended the year 77% ahead of the prior year. Likewise, sales of our Max Powerrange of modifying titles continue to perform well and with one new title andthree titles updated during the year, this helped increase sales of the range by5% over the prior year. - General Publishing Sales of Haynes originated titles ended the year 5% ahead of last year helped bystrong sales of the Home & Computer range. This range, which builds on thestrength of our step by step guide to DIY and which has been applied to tasks inand around the home had 'Build Your Own PC' ending the year as the Haynes BookDivision's top selling title. There were four new releases in this categoryduring the year, of which two were included in the division's top 10 sellingtitles. Late in the period we published the HGV Man Manual, the latest title tobe released in the popular Family Series. Obesity is quickly threatening tobecome the biggest single risk to the nation's health and the Haynes HGV ManManual offers down-to-earth advice to men on how to achieve and then maintain ahealthy weight. The title has been sponsored by the Men's Health Forum, with 50pfrom each copy sold going to charity. Sales in Sutton Publishing ended the year 9% down on the previous year. This canbe largely explained by the decision to concentrate editorial efforts on Suttonbranded product and less on lower margin third party publishing. As a result,sales of the core History and Biography titles ended the year 6% ahead of theprior year with new title releases including Bill Wyman's "Treasure Islands"which, although only published late into the trading year, finished the periodas the division's top selling book. Other popular titles released during theyear include "The Ration Diet Book", "The Great Warbow" and "Patrick Moore: TheAutobiography". During the year, a new website www.suttonpublishing.co.uk went live and willallow the business to promote the archive of backlist titles, covering not onlyhistory and biography, but also the popular "In Old Photographs" series.Management expects the introduction of the website coupled with a new backlistcatalogue to generate additional value from the Suttons business in the comingyear. The improved mix of turnover coupled with the benefits of lower stockobsolescence, as a result of the new inventory management systems introducedthis time last year, helped the financial performance of the business. Whilststill loss making, there has been a significant improvement in the results ofthis division against the prior year. - Book Manufacturing The Production Division increased its printing for third party publishers' by10% over the prior year, the second consecutive year of double digit growth. Abroader customer base, the creation of a full-time sales role and strong repeatbusiness with key customers helped contribute to the increased turnover. Group borrowings and cash flow During the year, the Group generated £9.7 million of cash inflow from operatingactivities (2004: £11.2 million) which represented 108% of operating profitbefore goodwill (2004: 125%). The apparent reduction in overall cash flow fromoperating activities between 2004 and 2005 derives from a reduction in stock in2004, which increased working capital in that year and was primarily the resultof a weaker dollar. At the end of the year, the Group had positive net cash of £1.8 million (2004:net borrowings of £1.5 million) which demonstrates an aggressive pay down of theGroup debt achieved through tight cash control. Financing cash flows were higheras the repayment of Group borrowings increased by £0.4 million, while paymentsto tax authorities and distributions to shareholders increased by £0.5 millionand £0.8 million respectively. Netting against the increased outflows was areduction in the deferred consideration in relation to the Chilton acquisitionfrom 2001 of £0.7 million. International Financial Reporting Standards (IFRS) As mentioned in our half year statement, in common with all companies listed onan EU stock exchange, we will be required to report our consolidated Groupaccounts in accordance with EU endorsed IFRS's, as published by theInternational Accounting Standards Board (IASB), for our accounting periodscommencing on or after 1 January 2005. In preparation for the transition, we have undertaken a review of the impact thenew standards will have on our reportable results and we can confirm that, as aresult of the review we have undertaken to-date, the principal changes will beas a result of adoption of IAS 19 "Employee Benefits" in relation to our definedbenefit pension schemes, IFRS 3 "Business Combinations" in relation to goodwilland IAS 10 "Events after the balance sheet date" in relation to dividends. The next set of interim results, which will be for the 6 months ended 30November 2005, will be prepared under the new IFRS' including restatedcomparatives and a reconciliation of the changes under IFRS from UK GAAP. Group Outlook We are living in very uncertain times and management expects the year ahead tobe challenging. Early trading supports this view. Performance in the businesseshas improved somewhat in recent weeks and while it remains very early in thefinancial year, we continue to believe there is every opportunity for furthergrowth in the year ahead. Clearly, a continuance of recent trends in exchangerates would positively impact profitability. There is an increasing perception that vehicles are becoming increasinglydifficult to work on; a perception that, as a Group, we need to dispel. Clearly,technology for both cars and motorcycles has improved and, on the whole,vehicles have become more reliable. There are, however, still a large number ofrelatively straight forward tasks that can be performed, many with little or noprior experience and such tasks will not only save the vehicle owner money, butcan also make vehicle ownership a more complete experience. There continues to be considerable scope for vehicle owners to improve theirknowledge of the workings of their vehicle. Such knowledge helps to empower thevehicle owner in an environment which many find intimidating. This is a messagethat we need to make sure reaches the end consumer and, through a number ofdifferent marketing initiatives, it will be very much the focus of our effortsduring the coming year. Currently, a major objective of many automotive aftermarket retailers around theworld is to create further growth in the DIY market. There is no doubt thatHaynes Manuals can play an integral part in these programmes and the Companywill continue to make this point strongly in the year ahead. Also, during the coming year, we will look to expand on the strength of theHaynes brand and the opportunities that have arisen as a result of our brandprofile including the link up with both Formula 1TM and MotoGP as officialpublisher of their season reviews. The Board is aware that such openings need toreflect 'opportunities' and be with 'partners' that compliment our brandstrengths. This is, however, a part of the business where we are confident wecan do more and, shortly after the financial year-end, we brought in additionalresource to concentrate specifically on this area. Finally, we continue to seek opportunities to expand the business and willcarefully evaluate such openings as they arise; currently there are a number ofprojects in the evaluation stage. The Group is presently in its strongestfinancial position for a number of years and as such is well placed to moveforward when the Board feels the opportunity is right to do so. Eric OakleyChief Executive27 July 2005 PRELIMINARY GROUP PROFIT AND LOSS ACCOUNTfor the 12 months ended 31 May 2005 31 May 2005 31 May 2004 (unaudited) (unaudited) Turnover Profit Turnover Profit £000 £000 £000 £000 Continuing activities:UK and Europe 15,287 1,329 16,340 1,216North America and Australia 21,048 7,352 22,670 7,285 36,335 8,681 39,010 8,501Group income less expenses and goodwill (255) (109)Operating profit- Before goodwill amortisation 8,953 8,947- Goodwill amortisation (527) (555)Group operating profit 8,426 8,392 Net interest payable (39) (119) Group profit on ordinary activities before 8,387 8,273taxation Taxation: Current (3,208) (3,280) Deferred (56) (16) (3,264) (3,296)Profit after taxation 5,123 4,977 DividendsInterim paid 5.0p (2004: 4.0p) (818) (654)Final proposed 9.5p (2004: 8.0p) (1,553) (1,308) (2,371) (1,962) Profit retained and transferred to reserves 2,752 3,015 Earnings per 20p share - Basic earnings 31.3 30.4 - Diluted earnings 31.3 30.4 - Adjusted earnings (pre-goodwill) 34.6 33.8 PRELIMINARY GROUP RECOGNISED GAINS AND LOSSESfor the 12 months ended 31 May 2005 (Unaudited) 2005 2004 £000 £000Profit for the financial year 5,123 4,977Exchange rate movement 167 (1,806)Total recognised gains for the year 5,290 3,171 PRELIMINARY RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDSAs at 31 May 2005 (Unaudited) 2005 2004 £000 £000Total recognised gains for the year 5,290 3,171Dividends (2,371) (1,962)Net movement in equity shareholders' funds 2,919 1,209Equity shareholders' funds at beginning of year 27,135 25,926Equity shareholders' funds at 31 May 30,054 27,135 PRELIMINARY GROUP BALANCE SHEETAs at 31 May 2005 (Unaudited) 2005 2004 £000 £000Fixed AssetsIntangible assets: Goodwill 5,644 6,150Tangible Assets 7,131 7,673Investments 2 2 12,777 13,825 Current assetsStock 12,224 12,080Debtors 11,035 11,766Cash at bank and in hand 2,741 1,726 26,000 25,572 Creditors - amounts falling due within one year- Borrowings (969) (1,588)- Other creditors (7,187) (8,334) (8,156) (9,922)Net current assets 17,844 15,650Total assets less current liabilities 30,621 29,475 Creditors - amounts falling due after more than one year- Borrowings - (1,588)- Other creditors (424) (372) (424) (1,960) Provisions for liabilities and charges (143) (380)Net assets 30,054 27,135 Capital and ReservesCalled up share capital 3,270 3,270Share premium account 638 638Profit and loss account 26,146 23,227Equity shareholders' funds 30,054 27,135 PRELIMINARY GROUP CASHFLOW STATEMENTfor the 12 months ended 31 May 2005 (Unaudited) 2005 2004 £000 £000Net cash inflow from operating activities- Operating profit 8,426 8,392- Depreciation and goodwill amortisation 1,629 1,891- (Profit)/loss on disposal of fixed assets (22) 5- (Increase)/decrease in stocks (144) 1,572- Decrease/(increase) in debtors 437 (442)- Decrease in creditors (656) (251) 9,670 11,167 Returns on investment and servicing of finance (44) (122)Taxation (3,445) (2,972)Capital expenditure and financial investment (522) (669)Acquisitions and disposals (441) (1,111)Equity dividends paid (2,126) (1,308) Cash inflow before financing 3,092 4,985Financing (2,639) (2,190)Increase in cash during the year 453 2,795 RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS 2005 2004 £000 £000 Increase in cash in the year 453 2,795Cash outflow from movement in borrowings 2,639 2,190Change in net funds resulting from cash flows 3,092 4,985Exchange rate movements 130 (865)Movement in net funds during the year 3,222 4,120Net funds at start of year (1,450) (5,570)Net funds at end of year 1,772 (1,450) NOTES: 1. The final dividend, if approved, will be paid on 28 October 2005to shareholders on the register at the close of business on 30 September 2005.Shares will be declared ex dividend on 28 September 2005. 2. The results for 31 May 2005 contained in this announcement, uponwhich the auditors have not yet reported, constitute non-statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The DirectorsReport and audited accounts for 31 May 2005 will be posted to shareholders on 22August 2005 and delivered to the Registrar of Companies following the AnnualGeneral Meeting which will be held on 13 October 2005. This preliminaryannouncement is not being posted to shareholders, but is available on the UK website http://www.haynes.co.uk/investor. Copies of the Directors' report and audited accounts can be obtained from:The Group Company Secretary, Haynes Publishing Group P.L.C.,Sparkford, Near Yeovil, Somerset BA22 7JJ (telephone 01963 440635). 3. Earnings per share is calculated on the Group profit, aftertaxation, of £5,123,000 (2004: £4,977,000) and on the weighted average of16,351,540 (2004: 16,351,540) ordinary shares allotted. The adjusted earningsper share figure excludes goodwill charged through the profit and loss accountduring the year of £527,000 (2004: £555,000). As at 31 May 2005 and 31 May 2004 there were no outstanding options on either ofthe Company's two classes of shares. Accordingly, there was no differencebetween the weighted average and the fully diluted potential average number ofshares. This information is provided by RNS The company news service from the London Stock Exchange