Portmeirion Regulatory News (PMP)

16 Mar 2006 08:05

Portmeirion Group PLC16 March 2006 Portmeirion Group plc Results for the year ended 31 December 2005 CHAIRMAN'S STATEMENT Financial summary for the year 2005 Restated £000's (Note 4) 2004 £000'sTurnover 27,552 27,686----------------------------- --------- ---------Pre-tax profit/(loss) before operating 1,351 (420)exceptionals --------- --------------------------------------Pre-tax profit/(loss) 1,032 (1,613)----------------------------- --------- ---------Basic earnings/(loss) per share 7.11p (11.20p)----------------------------- --------- ---------Dividends per share 13.25p 13.25p----------------------------- --------- --------- Highlights: • Annual sales of £27.552 million, 2.7% above the previous year whenmeasured in the same US dollar exchange rate, but level with last year followingthe sterling/dollar exchange rate movement. • 2005 pre-tax operating profit £1.351 million compared to a loss of£0.420 million (restated) in 2004. • Final proposed dividend maintained at 9.95p. • 2005 earnings per share 7.11p, compared to a loss of 11.20p in 2004. Exceptional items for the year amounted to £0.319 million compared with £1.193million in the previous year. Therefore, the total profit for the year, beforetaxation, was £1.032 million compared with a loss of £1.613 million (restated)the previous year. The Board is recommending a final dividend of 9.95p bringing the total to 13.25pfor the year, unchanged from 2004. The dividend will be paid, subject toshareholders' approval, on 26th May 2006, to shareholders on the register at theclose of business on 28th April 2006. We are nearing our short-term goal ofensuring that the dividend is covered by earnings. Results for the Year I am pleased to report that, following the major re-organisation of theCompany's manufacturing plants, a creditable profit improvement of some £2.6million was achieved. This was also after absorbing approximately £0.5 millionin costs due to the further fall, at our hedged rates, in the value of the USdollar to sterling. Since sales in the US account for over a third of the total,the Company hedges exchange rate risk by selling dollars forward. In 2004 thehedged rate was $1.63, and in 2005 $1.78. The Group is largely hedged at $1.82for 2006, so additional exchange losses should be minimal for the current year. The 2005 full year contribution of £0.35 million to the Group's now closeddefined benefit pension scheme has been reviewed, following the scheme'sactuarial valuation during 2005. As a result the contribution will remain at thesame level for 2006. Exceptional operating costs in 2005 consisted of £0.284 million following theconsolidation of the two manufacturing sites in Stoke-on-Trent to one. The Boardalso decided to take an impairment charge of the Group's investment in FurlongMills, a company supplying raw material to the ceramic industry. This impairmentis a non-cash write-down of £0.273 million. These exceptional costs were offsetby an exceptional gain of £0.238 million following the sale of the vacatedmanufacturing site. The 2.7% improvement in sales on a constant exchange rate basis was achievedwith an exceptional export performance, which more than offset a disappointingUK market result. Sales in the US in dollars increased by an impressive 11%, to $18.275 million,representing 37% of total sales in sterling. This was achieved with improvedsales of our established classic tableware patterns, plus the addition of lowerpriced Portmeirion Studio ranges, sourced from overseas. The team at our USsubsidiary is to be congratulated on a fine performance in improving marketshare. Sales to South Korea increased by a remarkable 41% to £4.670 million, followinga major expansion in the number of retail outlets stocking the Company's classicranges. There is still opportunity for growth with new product ranges to beintroduced this year. Apart from Japan, where we changed from selling through awholly-owned subsidiary to a local distributor, all our other major exportmarkets showed healthy sales increases leading to a total Group export salesincrease of 18% on a constant exchange rate basis. Sales in the UK were 19% below the previous year. Although the performance wasaffected to some extent by reduced consumer spending, and fewer tourists, Ibelieve this disappointing sales trend will be corrected with the introductionof much needed new product ranges. No fewer than five new ranges are beingdelivered to our retail customers in the second quarter of this year, whichshould lead to the essential improvement in sales. The result of this sales performance and exceptional gains on property disposalhas increased the Group's cash balance to £6.3 million at the end of the year.There will be a further cash gain following the sale of our secondarywarehousing site when the new warehouse is completed. This will ensure that theCompany maintains a strong balance sheet while still investing £3.0 million incapital expenditure for mechanising and equipping the new warehouse. Product Strategy The markets in both the UK and US continue to be subjected to retail pricedeflation. Low cost retailers and the supermarket groups continue to expandtheir non-food offering, and our department store customers and independentretailers are responding by offering good quality products at ever lower prices.The Group's strategy of producing excellent design and quality in new productranges under the Portmeirion brand, sourced overseas, is now beginning to showresults, while the classic ranges continue to be produced at our Stoke-on-Trentfactory. Most notable of the five new products this Spring is a range of ceramic cookwaredesigned by Sophie Conran. This has met with a tremendous response, both in theUK and abroad. I expect this product range to be sold in the US, Japan,Australia and South Korea, and will open up new channels of distribution forPortmeirion. Manufacturing & Warehouse Reorganisation As a result of the consolidation of our manufacturing sites, I had anticipated areduction in annual operating costs of approximately £0.5 million per annum. Iam pleased to confirm that approximately half of these saving were achieved inthe second half of 2005, and as a result the manufacturing gross margin improvedby 3 percentage points compared to the previous year. Further cost reductionshave been made at the start of 2006, since the Group is now faced with anincrease of at least £0.25 million in energy costs this year. However, theoverall level of annual cost reduction should be maintained. As reported in December 2005, the contract has now been placed for the lease ofthe Group's new warehouse and distribution centre. Construction work has begun,and completion is planned for the end of 2006, with operations commencing inSpring 2007. Management Structure The Group has continued to strengthen the sales and marketing team in 2005,without increasing the overall size of the management team. Resources have beentransferred from production and support services, so that the cost base has notincreased. This adjustment to the management structure is in anticipation ofcontinued growth in the number of sourced product ranges, and the need to marketour classic ranges to new export markets. Current Trading & Prospects I expect 2006 to be another challenging year, with consumer spending on a tightrein. Sales so far this year are below the previous year, but broadly in linewith expectations. As I have reported, I expect the sales trend to improve asour new ranges come to market in the second quarter of this year. Our consumers now require new casual dining products every season, and we willmaintain the momentum of new product introductions. This, together with constantimprovement in efficiency and productivity, will, I believe, result incontinuing improvement in the Group's performance. I would particularly like to thank the management team and workforce for theircontribution to the successful repositioning of the Group in 2005, which willnow continue through this year. Arthur RalleyChairman15th March 2006 For further information please contact: Arthur Ralley, ChairmanBrett Phillips, Group Finance Director Tel. 01782 744721 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31st December 2005 As restated Notes Before Exceptional Total Before Exceptional Total exceptional items 2005 exceptional items 2004 items 2005 £000's items 2004 £000's 2005 £000's 2004 £000's £000's £000's Turnover - continuing 5 27,552 - 27,552 27,686 - 27,686operations Raw materials and operating 2 (26,393) (284) (26,677) (28,418) (1,193) (29,611)costs ------- ------- ------ ------- ------- ------Operating profit/(loss) - 1,159 (284) 875 (732) (1,193) (1,925)continuing operations Profit on sale of tangible 2 - 238 238 - - -fixed assetsShare of profit of 68 - 68 145 - 145associated undertakingsInterest receivable and 207 - 207 211 - 211similar incomeInterest payable and (2) - (2) (22) - (22)similar chargesOther finance costs (81) - (81) (22) - (22)Impairment of investment in 2 - (273) (273) - - -associated undertaking ------- ------- ------ ------- ------- ------Profit/(loss) on ordinary 1,351 (319) 1,032 (420) (1,193) (1,613)activities before taxation Taxation on profit/(loss) (317) 454on ordinary activities Profit/(loss) on ordinaryactivities after taxation ------ ------being the profit/(loss) for 715 (1,159)the financial year ====== ====== Earnings/(loss) per share 3 7.11p (11.20p) ====== ======= ======= ====== Diluted earnings/(loss) per 3 7.09p (11.20p)share ====== ======= ======= ====== Dividends per share paid 6 13.25p 13.25pand proposed ====== ======= ======= ====== CONSOLIDATED BALANCE SHEETAs at 31st December 2005 As restated 2005 2004 £000's £000's £000's £000's Fixed assetsTangible assets 5,335 6,279Investments 1,413 1,544 ------- ------- 6,748 7,823 Current assetsStocks 5,913 6,054Debtors 5,243 5,926Cash at bank and in hand 6,294 4,859 ------ ------- 17,450 16,839 Creditors: amounts falling due within (3,081) (2,653)one year ------ ------- Net current assets 14,369 14,186 ------- -------Total assets less current liabilities 21,117 22,009 Provisions for liabilities and charges (43) (19) ------- -------Net assets excluding pension deficit 21,074 21,990 Pension deficit net of related (2,870) (2,358)deferred tax ------- -------Net assets including pension deficit 18,204 19,632 ======= ======= Capital and reservesCalled up share capital 521 521Share premium account 4,580 4,580Treasury shares (964) (202)Profit and loss account 14,067 14,733 ------- -------Equity shareholders' funds 18,204 19,632 ======= ======= PORTMEIRION GROUP PLCCONSOLIDATED CASH FLOW STATEMENTFor the year ended 31st December 2005 2005 2004 Notes £000's £000's Cash inflow from operating 8 3,033 48activities Returns on investments and 9 148 171servicing of finance Taxation received/(paid) 54 (604) Capital expenditure and 9 292 (414)financial investment Equity dividends paid (1,330) (1,368) ------- ------- Cash inflow/(outflow) before 2,197 (2,167)use of liquid resources andfinancing Management of liquid (1,654) 2,560resources Financing 9 (762) (202) ------- -------(Decrease)/increase in cash 7 (219) 191in the year ======= ======= Reconciliation of net cash flow to movement innet funds 2005 2004 £000's £000's (Decrease)/increase in cash (219) 191in the year Cash outflow/(inflow) from increase/(decrease)in liquidresources 1,654 (2,560) Net funds at 1st January 4,859 7,228 ------- -------Net funds at 31st December 6,294 4,859 ======= ======= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESRECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFor the year ended 31st December 2005 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES As restated 2005 2004 £000's £000's Profit/(loss) for the financial year 715 (1,159) Currency translation differences 380 (291) Actuarial loss on defined benefit pension scheme (998) (1,572)Related deferred tax 299 472 ------- -------Total recognised gains and losses for the financial 396 (2,550)year Prior year adjustment (1,331) - ------- -------Total recognised gains and losses since the last (935) (2,550)annual report ======= ======= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS As restated 2005 2004 £000's £000's Profit/(loss) for the financial year 715 (1,159) Movement in pension scheme liability (431) (850) Dividends paid (1,330) (1,379) Currency translation differences 380 (291) Purchase of treasury shares (762) (202) ------- -------Net reduction in shareholders' funds (1,428) (3,881) ------- ------- Opening shareholders' funds as previously stated 20,963 23,964 Prior year adjustment (1,331) (451) ------- -------Opening shareholders' funds as restated 19,632 23,513 ------- ------- ------- -------Closing shareholders' funds 18,204 19,632 ======= ======= NOTES 1. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31st December 2005 and 2004 but isderived from those accounts. Statutory accounts for 2004 which have beendelivered to the Registrar of Companies, contain an unqualified audit opinionand did not contain a statement under Section 237(2) or (3) of the Companies Act1985. Statutory accounts for the year ended 31st December 2005 on which theauditors have given an unqualified opinion and do not contain a statement underSection 237(2) or (3) of the Companies Act 1985 will be delivered to theRegistrar of Companies in due course. The principal accounting policies havebeen applied consistently except for the change in accounting policies as statedin Note 4. This announcement was approved by the Board of Directors on 15thMarch 2006. 2. Exceptional items The consolidation of manufacturing onto one site referred to in the 2004 annualreport was completed during the six months ended 30 June 2005. The exceptionaloperating costs incurred as a result of this move and redundancies were£284,000. Following the consolidation of manufacturing the vacated freehold premises weresold. The resulting exceptional gain is analysed as follows: £000's Net proceeds (£700,000 less selling expenses of £12,000) 688Less: Impaired value of site (450) ----------Exceptional gain 238 ========== Furlong Mills is a supplier of raw materials to the ceramic manufacturingindustry and, in the light of continuing changes to that industry in the UK, animpairment review has been carried out which has resulted in an additionalimpairment provision of £273,000. 3. Earnings per share Basic The basic earnings/(loss) per share are calculated by dividing the profit aftertaxation of £715,000 (2004 - loss of £1,159,000 as restated) by the weightedaverage number of Ordinary shares in issue during the year of 10,057,467 (2004 -10,350,192). Diluted The diluted earnings/(loss) per share is calculated in accordance with FinancialReporting Standard 22 (FRS 22). This calculation uses a weighted average number of Ordinary shares inissue adjusted to assume conversion of all dilutive potential Ordinary sharesand is shown below: Earnings 2005 Earnings Loss As restated Loss £ Weighted per £ 2004 per Share Share Number of (Pence) Weighted (Pence) Shares Number of Shares Basic earnings/ 715,000 10,057,467 7.11 (1,159,000) 10,350,192 (11.20)(loss) per share Effect of dilutivesecurities:employee share - 23,636 - - - -options ------ -------- ------ ------- ------- ----------Diluted earnings/ 715,000 10,081,103 7.09 (1,159,000) 10,350,192 (11.20)(loss) per share ====== ======== ====== ======= ========== ======= FRS 22 requires presentation of diluted earnings per share when a company couldbe called upon to issue shares that would decrease net profit or increase netloss per share. For a loss making company with outstanding share options, netloss per share would only be increased by the exercise of out-of-the-moneyoptions. Since it seems inappropriate to assume that option holders would actirrationally and there are no other diluting future share issues, diluted lossper share in 2004 equals basic loss per share. 4. Prior year adjustments In addition to applying FRS 17 "Retirement Benefits" in full the Group has alsoapplied FRS 21 " Events after the balance sheet date". Under this financialreporting standard dividends which have been declared after the balance sheetare not recognised as a liability. Accordingly an adjustment has been made forthe provision of £1,027,000 for dividends in the accounts for the year ended31st December 2004. The total of the prior period adjustments arising from the application of FRS 17and FRS 21 is analysed as follows: The closing shareholders' funds as at 31st December 2004 were restated asfollows: £000's £000's Shareholders' funds at 31st December 2004 as 20,963previously stated Pension scheme liability as at 31st December 2004, net (2,358)of related deferred taxLiability for 2004 final dividend not declared at 31st 1,027December 2004 ------- Total prior period adjustment (1,331) --------Shareholders' funds at 31st December 2004 as restated 19,632 ======== The opening shareholders' funds as at 1st January 2004 £000's £000'swere restated as follows: Shareholders' funds at 1st January as previously 23,964stated Pension scheme liability as at 31st December 2003, net (1,486)of related deferred taxLiability for 2003 final dividend not declared at 31st 1,035December 2003 ------- Total prior period adjustment (451) --------Shareholders' funds at 1st January 2004 as restated 23,513 ======== In respect of FRS 17, the prior year adjustments have resulted in an otherfinance charge of £81,000 in the 2005 profit and loss account (2004 - £22,000). 5. Turnover by destination Turnover by destination 2005 2004 £000's £000's United Kingdom 9,562 11,848North America 10,864 10,256European Union 1,542 1,338Far East 5,186 3,913Rest of the World 398 331 ------- -------- 27,552 27,686 ======= ======== 6. Dividends The Directors propose the payment of a final dividend of 9.95p (2003 - 9.95p)per Ordinary share on 26th May 2006 to shareholders on the register on 28thApril 2006. 7. Analysis of net funds At 1st Cash At 31st January flow December 2005 2005 £000's £000's £000's Cash in hand, at bank 1,355 (219) 1,136 Short term money market deposits 3,504 1,654 5,158 -------- -------- -------- Total 4,859 1,435 6,294 ======== ======== ======== 8. Reconciliation of operating profit to operating cash flows 2005 2004 £000's £000's Operating profit/(loss) 875 (1,925)Depreciation 952 987Impairment of tangible fixed assets - operating - 977exceptionalExchange gain/(loss) 200 (248)Loss/(profit) on sale of tangible fixed assets 21 (3)Decrease in stocks 141 721Decrease/(increase) in debtors 456 (441)Increase/(decrease) in creditors 388 (20) ------- --------Net cash inflow from operating activities 3,033 48 ======= ======== All of the above relate to continuing operations. 9. Analysis of cash flows for headings netted in the cash flow statement 2005 2005 2004 2004 £000's £000's £000's £000'sReturns on investments and servicingof finance Interest received 150 193Interest paid (2) (22) ------ ------- Net cash inflow from returns oninvestments and servicing of finance 148 171 ======= ======== Capital expenditure and financial investment Purchase of tangible fixed assets (458) (437)Sale of tangible fixed assets 750 23 ------ ------- Net cash inflow/(outflow) for capitalexpenditure and financial investments 292 (414) ======= ======== Financing Purchase of treasury shares (762) (202) ------ ------- Net cash outflow from financing (762) (202) ======= ======== This information is provided by RNS The company news service from the London Stock Exchange