Portmeirion Regulatory News (PMP)

11 Aug 2006 07:01

Portmeirion Group PLC11 August 2006 PORTMEIRION GROUP PLC RESULTS FOR 6 MONTHS ENDED 30 JUNE 2006 CHAIRMAN'S STATEMENT Financial Highlights - 2006 pre-exceptionals profit of £787,000, compared to £243,000 (restated) in 2005. - 2006 pre-tax profit after exceptionals of £510,000 compared to £197,000 (restated) in 2005. - 2006 earnings per share 3.34p compared to 1.46p (restated) in 2005. - Total export sales increased by 2.7%, representing 72% of total Group sales. - Proposed interim dividend maintained at 3.30p. Dividend The Board has decided to maintain the interim dividend at 3.30p per ordinaryshare of 5p each, payable on 2 October 2006 to shareholders on the register on 8September 2006. Trading Performance I am pleased to report that the Group produced a pre-tax profit of £787,000,before exceptional redundancy costs, of £277,000. The pre-tax profit beforeexceptional items, therefore, was a commendable 224% improvement on thecomparable profit in the first half of 2005. Total Group turnover declined by5.7% in the first half, compared to the first half of 2005. However, there was asignificant increase of 3 percentage points in manufacturing gross margin andthis, together with higher gross profit margins on imported products, more thanoffset the effect of the lower turnover. However, the Board recognises thatGroup sales must increase in order to sustain profit improvement. Although total Group turnover was lower, export turnover increased by 2.7%,following a healthy increase of 18% in 2005. Turnover in the US was particularlygood, being 9% ahead of 2005, and accounting for 40% of total Group turnover. However, the sound export performance was undermined by a disappointing declineof 22% in sales in the UK. I had anticipated an improvement in UK sales in thesecond quarter, with the introduction of several new product ranges. In theevent, these new ranges, all produced in the Far East, became available only atthe end of June, and so did not provide the uplift expected. These ranges arenow in distribution to our retail customers and are selling well, and Itherefore anticipate the improvement in sales from the new products in thesecond half of the year. Our association with Sophie Conran has proved to beparticularly successful. Initial demand for the range, jointly designed with herexclusively for Portmeirion, has far exceeded expectations and now extendsbeyond the UK to our markets in the US, Canada, Europe and Australia. The Groupwill substantially increase promotional activity with its well-known classicranges, in order to further underpin a sales recovery in the UK. Manufacturing & Outsourcing The results clearly demonstrate the profitability improvements to be achievedfrom implementation of the Group's strategy. The consolidation of UK manufacturing of our classic ranges has produced asignificant improvement in gross profit margin. The Group has reducedmanufacturing costs, while maintaining overall capacity, and I am sure thatfurther improvements in productivity will ensue. At the same time, new contemporary designs that have been outsourced to the FarEast have been produced to the Group's required quality standards, and are nowselling well at more competitive prices. I am confident that the Group's stated aim of outsourcing 50% of product willresult in incremental sales in the medium and long term, and reduce the riskinherent with manufacturing almost solely in the UK. New Warehouse & Distribution Centre The new 64,000 sq.ft. building is under construction and on schedule. Some £3million in capital expenditure will be needed to mechanise and fit out thebuilding, to be operational by Spring 2007. With the Group's strong balancesheet, I expect this to be completed without any borrowing. Current Trading & Prospects The reinvention of the Group and its style of trading continues apace. The Group's strategy of developing contemporary ranges in the Far East, whilstconsolidating UK manufacturing, is now proving to be very successful. Tablewarein the UK and US is becoming ever more price competitive, and the timely move torespond with our own lower priced ranges with the Portmeirion brand and designcontent will be expanded. We have introduced a high proportion of giftwareproducts in our new ranges, and supported this with new ranges of giftglassware. I anticipate that the market in the UK for our classic ranges will continue tobe challenging but we can increase our export business with these ranges,particularly in the US. The second half has started positively with Group sales in July above last year. Finally, the Group still has a significant freehold property site that will bevacated and sold when the new warehouse is commissioned, in 2007. For all these reasons, I anticipate an improvement in overall Group sales and acommensurate increase in profitability. The Board will continue with its policy of maintaining the dividend wheneverpossible. Chairmanship I would like to take this opportunity to announce that on reaching my 65th yearin April 2007, I will retire from the Board. Consideration of a successor is underway, and an announcement will be made indue course. A. RalleyChairman10 August 2006 INDEPENDENT REVIEW REPORT TOPORTMEIRION GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated profit andloss account, the consolidated balance sheet, the consolidated cash flowstatement, the statement of total recognised gains and losses, thereconciliation of movements in shareholders' funds and related notes 1 to 11. Wehave read the other information contained in the interim statement andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim statement, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom auditing standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPChartered Accountants, Birmingham, UK10 August 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Notes Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Turnover - continuingoperations 8 12,232 12,968 27,552 -------------------------- ------- -------- -------- --------Raw materials and operatingcosts (excluding exceptionalcosts) (11,484) (12,777) (26,045)Exceptional operating costs (277) (284) (284)-------------------------- ------- -------- -------- --------Raw materials and operatingcosts (11,761) (13,061) (26,329)-------------------------- ------- -------- -------- --------Operating profit beforeexceptional costs -continuing operations 748 191 1,507Exceptional operating costs (277) (284) (284)-------------------------- ------- -------- -------- -------- Operating profit/(loss) afterexceptional costs -continuing operations 471 (93) 1,223 Exceptional profit on sale oftangible fixed assets - 238 238Share of (loss)/profit ofassociated undertakings (55) 9 68Interest receivable andsimilar income 130 84 207Interest payable and similarcharges (1) - (2)Other finance costs (35) (41) (81)Exceptional impairment ofinvestment in associatedundertaking - - (273) -------- -------- --------Profit on ordinary activitiesbefore taxation 510 197 1,380 -------------------------- ------- -------- -------- --------Profit on ordinary activitiesbefore exceptional items andtaxation 787 243 1,699 Exceptional items 6 (277) (46) (319) -------- -------- -------- Profit on ordinary activitiesbefore taxation 510 197 1,380-------------------------- ------- -------- -------- -------- Taxation on profit onordinary activities (181) (49) (317) -------- -------- --------Profit for the period 329 148 1,063 ======== ======== ======== Earnings per share 4 3.34p 1.46p 10.57p ======== ======== ======== Diluted earnings per share 4 3.31p 1.46p 10.54p ======== ======== ======== Dividend per share 5 3.30p 3.30p 13.25p ======== ======== ======== The comparative figures for the 6 months to 30 June 2005 have been restated to reflect the implementation of FRS 20 "Share Based Payment" and the correct treatment of the pension fund contributions under FRS 17. CONSOLIDATED BALANCE SHEET As restated As restated As at 30.6.06 As at 30.6.05 As at 31.12.05 £000's £000's £000's £000's £000's £000's Fixed assetsTangible assets 5,137 5,577 5,335Investments 1,369 1,584 1,413 ------ ------ ------ 6,506 7,161 6,748 Current assetsStocks 6,859 6,457 5,913Debtors 4,815 4,958 5,243Cash at bank and in 5,209 4,272 6,294hand ------ ------ ------ 16,883 15,687 17,450 Creditors: amountsfalling due withinone year (3,504) (2,083) (3,080) ------ ------ ------ Net current assets 13,379 13,604 14,370 ------ ------ ------ Total assets lesscurrent liabilities 19,885 20,765 21,118 Provisions forliabilities and (44) (19) (43)charges ------ ------ ------ Net assets excludingpension deficit 19,841 20,746 21,075 Pension deficit net of (2,773) (2,265) (2,870)related deferred tax ------ ------ ------Net assets includingpension deficit 17,068 18,481 18,205 ====== ====== ====== Capital and reservesCalled up share 523 521 521capitalShare premium 4,657 4,580 4,580accountTreasury shares (1,263) (691) (964)Share based paymentreserve 22 4 12Profit and loss 13,129 14,067 14,056account ------ ------ ------Equity shareholders'funds 17,068 18,481 18,205 ====== ====== ====== CONSOLIDATED CASH FLOW STATEMENT Notes Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's Cash flow from operating activities 10 (224) 109 3,033 Returns on investments andservicing of finance 11 180 88 148 Taxation refunded 437 202 54 Capital expenditure and financial 11 (236) 502 292investments Equity dividends paid (982) (999) (1,330) --------- --------- ---------Cash (outflow)/inflow before use ofliquid resources and financing (825) (98) 2,197 Management of liquid resources 1,263 504 (1,654) Financing 11 (260) (489) (762) --------- --------- ---------Increase/(decrease) in cash in theperiod 178 (83) (219) ========= ========= ========= Reconciliation of net cash flow tomovement in net funds Increase/(decrease) in cash in theperiod 178 (83) (219) Cash (inflow)/outflow from(decrease)/increase in liquidresources (1,263) (504) 1,654 Net funds at 1 January 6,294 4,859 4,859 --------- --------- ---------Net funds at period end 9 5,209 4,272 6,294 ========= ========= ========= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES As restated As restated Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's Profit for the period 329 148 1,063 Currency translation differences (234) 196 380 Actuarial loss on defined benefitpension scheme - - (998)Related deferred tax - - 299 --------- --------- ---------Total recognised gains and losses forthe period 95 344 744 Prior period adjustment (Note 7) 1 - - --------- --------- ---------Total recognised gains and lossessince the last annual report 96 344 744 ========= ========= ========= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Profit for the period 329 148 1,063 Movement in pension scheme liability - - (779) Dividends (982) (999) (1,330) Currency translation differences (234) 196 380 Shares issued under employee shareschemes 79 - - Increase/(decrease) in share basedpayment reserve 10 (5) 3 Purchase of treasury shares (299) (489) (762) Purchase of equity interest (40) - - --------- --------- ---------Net reduction in shareholders' funds (1,137) (1,149) (1,425) ========= ========= ========= Opening shareholders' funds aspreviously stated 18,204 19,632 19,632 Prior period adjustment (Note 7) 1 (2) (2) --------- --------- ---------Opening shareholders' funds asrestated 18,205 19,630 19,630 ========= ========= ========= Closing shareholders' funds 17,068 18,481 18,205 ========= ========= ========= NOTES 1. The interim financial statements for the six months ended 30 June 2006 andthe six months ended 30 June 2005 have been reviewed by the auditors but notaudited. 2. The comparative figures for the financial year ended 31 December 2005 are notthe Group's statutory accounts for that year. Those accounts have been reportedon by the Group's auditors and delivered to the Registrar of Companies. Thereport of the auditors was unqualified and did not contain a statement underSection 237(2) or (3) of the Companies Act 1985. 3. This Interim Statement has been prepared in accordance with the accountingpolicies set out in the Group's 2005 Report and Accounts with the exception ofshare based payments. FRS 20 "Share Based Payment" is applicable for the firsttime and has a prior year impact which is detailed in Note 7. 4. Earnings per share The earnings per share are calculated on profit after tax of £329,000 (2005 -£148,000) and the weighted average number of ordinary shares of 9,852,718 (2005- 10,163,016) in issue during the period. The share options in existence duringthe six months ended 30 June 2006 have a dilutive effect as defined by FinancialReporting Standard 22 (FRS 22). The diluted earnings per share under FRS 22 arecalculated on earnings of £329,000 and a weighted average number of ordinaryshares in issue adjusted to assume conversion of all dilutive potential ordinaryshares which is 9,951,750. The share options in existence during the six monthsended 30 June 2005 did not have a dilutive effect as defined by FRS 22. 5. Dividend A dividend of 3.3p (2005 - 3.3p) per ordinary share will be paid on 2 October2006 to shareholders on the register on 8 September 2006. 6. Exceptional items The rationalisation and reorganisation of the business continued in the firsthalf of 2006. The exceptional redundancy costs incurred as a result were£277,000. The analysis of exceptional costs incurred during 2006 and 2005 is as follows: Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000'sExceptional operating costs (277) (284) (284)Profit on sale of tangible fixedassets - 238 238Impairment of investment in associatedundertaking - - (273) --------- --------- --------- (277) (46) (319) ========= ========= ========= 7. Prior period adjustments The Group has applied FRS 20 "Share Based Payment" for the first time. Underthis financial reporting standard the profit and loss account is charged withthe fair value of share based payments. In the case of Portmeirion this hasresulted in fair values being established for share options and phantom shareoptions which have been granted. The resulting prior year adjustments were asfollows: The closing shareholders' funds as at 31 December 2005 were restated £000'sas follows: Shareholders' funds at 31 December 2005 as previously stated 18,204 Adjustment to liability for phantom share options under FRS 20 1 --------Shareholders' funds at 31 December 2005 as restated 18,205 ======== The opening shareholders' funds as at 1 January 2005 were restated as £000'sfollows: Shareholders' funds at 1 January as previously stated 19,632 Adjustment to liability for phantom share options under FRS 20 (2) --------Shareholders' funds at 1 January 2005 as restated 19,630 ======== Also under FRS 20 a reserve for share based payment has been created. Thebalances on this reserve were as follows: As at As at As at 30.6.06 30.6.05 31.12.05 £000's £000's £000's Share based payment reserve 22 4 12 ======== ======== ======== In addition to the above, the profit and loss account for the six months ended 30 June 2005 has been restated to adjust for the funding of the pension scheme, as required by FRS 17. This has resulted in a credit to the previously published income statement of £174,000, and is consistent with the full year treatment at 31 December 2005. 8. Turnover by destination Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's United Kingdom 3,422 4,391 9,562 North America 5,458 4,701 10,864 Other European Union 723 882 1,542 Far East 2,419 2,774 5,186 Rest of the World 210 220 398 -------- -------- -------- 12,232 12,968 27,552 ======== ======== ======== 9. Analysis of net funds As at As at As at 30.6.06 30.6.05 31.12.05 £000's £000's £000's Cash in hand, at bank 1,314 1,272 1,136 Short term money market deposits 3,895 3,000 5,158 -------- -------- -------- Total 5,209 4,272 6,294 ======== ======== ======== 10. Reconciliation of operating profit to operating cash flows Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Operating profit/(loss) 471 (93) 1,223 Depreciation 386 483 952 Contribution to defined benefit pension (174) (174) (348) scheme Charge/(credit) for share based payments 10 (5) 3 Exchange (loss)/gain (160) 109 200 (Profit)/loss on sale of tangible fixed (6) 9 21 assets (Increase)/decrease in stocks (946) (403) 141 Decrease in debtors 56 755 456 Increase/(decrease) in creditors 139 (572) 385 -------- -------- -------- Net cash (outflow)/inflow from operating (224) 109 3,033 activities ======== ======== ======== All of the above relate to continuing operations. 11. Analysis of cash flows for headings netted in the cash flow statement Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's £000's £000's £000's Returns on investments andservicing of financeInterest received 181 88 150Interest paid (1) - (2) ------ ------ ------- Net cash inflow for returns oninvestments and servicingof finance 180 88 148 ====== ====== ======= Capital expenditure and financialinvestmentsPurchase of tangible fixedassets (247) (224) (458)Sale of tangible fixedassets 11 726 750 ------ ------ ------- Net cash (outflow)/inflow forcapital expenditureand financial investments (236) 502 292 ====== ====== ======= FinancingIssue of ordinary shares undershare option schemes 79 - -Purchase of equity interest (40) - -Purchase of treasuryshares (299) (489) (762) ------ ------ ------- Net cash outflow fromfinancing (260) (489) (762) ====== ====== ======= This interim statement will be posted out to shareholders in August and will beavailable from the Company Secretary at Portmeirion Group PLC, London Road,Stoke-on-Trent, Staffs. ST4 7QQ or from the website, www.portmeirion.com after31 August 2006. For further information please contact: Arthur Ralley (Chairman) Brett Phillips (Finance Director) Tel: 01782 744721 Fax: 01782 743493 This information is provided by RNS The company news service from the London Stock Exchange