27 Mar 2018 07:00
27 March 2018
PITTARDS PLC
("Pittards" or "the Group")
Full Year Results for the year ended 31 December 2017
Pittards plc, the specialist producer of technically advanced leather and luxury goods for retailers, manufacturers and distributors today announces its results for the year ended 31 December 2017.
Year ended 31 December 2017:
§ Revenue £30.3m (2016: £27.0m)
§ Profit before tax £0.4m (2016: underlying profit before tax £0.2m, loss before tax of £4.1m after exceptional stock write down of £4.3m)
§ Gearing improved to 40% (2016: 48%), reduction in net debt and increased bank facilities
§ Review of strategy completed
§ Pipeline of new business has reached the bulk sampling stage.
Stephen Yapp, Chairman commented: "Fundamental changes were made in 2017 including improving the operational and financial performance of the business whilst establishing the clear strategic priorities for the medium term and investing accordingly.
The Group has entered 2018 with a new divisional structure in place, enhanced financial disciplines, reduced net debt and the resources to support our growth ambitions. We are well placed to leverage promising opportunities from existing and new customers that will accelerate our performance and increase shareholder value."
For further information, please contact:
Pittards plc
| www.pittards.com |
Stephen Yapp, Chairman
Reg Hankey, CEO
Matthew O'Rourke, CFO | +44 (0) 1935 474 321
|
WH Ireland Limited
| www.whirelandcb.com |
Mike Coe, Ed Allsopp | +44 (0) 117 945 3470 |
This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those regulations.
CHAIRMAN'S STATEMENT
for the year ended 31 December 2017
The Group's financial performance improved in 2017 with an increase in underlying profit before tax, a reduction in the net debt position and a heightened focus on reducing stock levels that is starting to gain traction. In parallel to this, we completed the reshaping of our operations into the two divisions "UK" and "Ethiopia" with respective reporting and management structures and clarified our strategic priorities for the medium term.
Our optimism for the future is supported by a pipeline of new business that has reached the bulk sampling stage with new customers within both our existing and target markets.
Highlights - Year ended 31 December 2017:
· Revenue £30.3m (2016: £27.0m)
· Profit before tax £0.4m (2016: underlying profit before tax £0.2m, loss before tax of £4.1m after exceptional stock write down of £4.3m)
· Gearing improved to 40% (2016: 48%), reduction in net debt and increased bank facilities
· Review of strategy completed
· Pipeline of new business has reached the bulk sampling stage.
Strategic update
We have identified which markets present the best opportunities for a balanced, market-led, client and product focused portfolio, that will capitalise upon our production capabilities and expertise, and will drive growth.
The foundations of our business remain the footwear and performance glove markets. The global glove market, worth circa $250m (source: 9Dimen/Industry), is seeing a shift towards casual and active leather gloves which presents us with further opportunities. The strength of our existing customer relationships and expertise give us a competitive advantage.
We are also targeting new customers within our existing markets. Footwear presents the biggest growth opportunity; lifestyle trends are driving the growth of the Athleisure and Outdoor categories in a combined market segment worth around $60 billion (source: SGI 2015 Wholesale). Our established UK footwear leather manufacturing capability and expertise is well placed to meet the needs of leading brands in this sector who are prioritising differentiation and innovation. In addition, global companies are increasingly looking to Ethiopia as a manufacturing location creating a further opportunity for Pittards Ethiopia.
In order to build a balanced portfolio we are also working to develop new customers in new markets. The interiors sector, which has a global market value of around $39 billion (source: Transparency Market Research 2016) is a target market for Pittards. Interiors has increased its share of total leather usage from 7% in 1990 to 27% in 2015 (source: UKLF). Pittards is well placed with its performance leathers to meet the needs of this market place.
Financial review
The Group's financial performance improved year-on-year as we implemented better disciplines, policies and procedures across the business while investing to support our growth plans.
Revenue increased 12% to £30.3m with increased volumes in our existing markets in both the UK and Ethiopia. Profit before tax for the year improved to £0.4m as a result of higher turnover and operational efficiencies. Alongside this we have strengthened our senior management team and invested in modernising our drying process.
The net assets reduction to £19.8m largely reflects movements in foreign exchange, notably the Ethiopian Birr devaluation, which the Board consider will improve the competitiveness of our Ethiopian business.
Stock reduction remains a key priority. Stock levels reduced in the year to £15.3m (2016: £17.4m) primarily due to movements in foreign exchange. In addition, the initiatives and incentives now in place are beginning to reduce slow moving stock across the Group and we anticipate making further progress in 2018.
One of our key financial measures is the Return on Capital Employed. This has increased in 2017 to 4.1% and our near term objective is to deliver returns above our estimated Weighted Average Cost of Capital of approximately 7%.
We have adequate funding to support our growth objectives; total net debt decreased to £8.0m (2016: £10.1m) and we have negotiated both an increase and improvement in our facilities from £12.2m to £13.7m.
Dividends
The Board has decided not to pay a dividend with respect to the year ended 31 December 2017; however, it is the Board's intention to return to the dividend paying list as soon as it deems it appropriate.
Board changes
As previously announced, Jill Williams stood down as non-executive director on 31 December 2017. Jill had been a director of the company for 10 years and the Board would like to thank Jill for her contribution to the Group. There were no further changes to the Board during the year which is positioned to support the management team and drive the strategy to take Pittards into its next stage of growth.
Team
I would like to thank all of our employees for their continued hard work and understanding throughout this period of notable change. They have contributed significantly to making 2017 a year of great progress.
Outlook
The Group has entered 2018 with a new divisional structure in place, enhanced financial disciplines, reduced net debt and the resources to support our growth ambitions. We are well placed to leverage promising opportunities from existing and new customers that will accelerate our performance and increase shareholder value.
CONSOLIDATED INCOME STATEMENT
for the YEAR ENDED 31 DECEMBER 2017
2017 | 2016 | ||
Continuing Operations | Note | £'000 | £'000 |
Revenue | 30,287 | 27,009 | |
Cost of sales | (23,194) | (20,554) | |
Cost of sales - exceptional stock provision | 2 | - | (4,307) |
Gross Profit | 7,093 | 2,148 | |
Distribution costs | (2,443) | (2,167) | |
Administrative expenses | (3,716) | (3,572) | |
Profit/(loss) from operations before finance costs | 934 | (3,591) | |
Finance costs | (521) | (499) | |
Finance income | - | 19 | |
Profit/(loss) before taxation | 413 | (4,071) | |
Taxation | 84 | (75) | |
Profit/(loss) for the year after taxation | 497 | (4,146) | |
Earnings/(loss) per share | |||
Basic | 3 | 3.58p | (29.89p) |
Diluted | 3 | 3.49p | (28.91p) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 DECEMBER 2017
2017 | 2016 | |
£'000 | £'000 | |
Profit/(loss) for the year after taxation | 497 | (4,146) |
Other comprehensive income Items that will not be reclassified to profit or loss | ||
Revaluation of land and buildings | 171 | 135 |
Revaluation of land and buildings - unrealised exchange (loss)/gain | (625) | 279 |
(454) | 414 | |
Items that may be subsequently reclassified to profit or loss | ||
Unrealised exchange (loss)/gain on translation of overseas subsidiaries | (1,655) | 827 |
Other comprehensive (loss)/income | (2,109) | 1,241 |
Total comprehensive loss for the year | (1,612) | (2,905) |
CONSOLIDATED statement of Changes in equity
for the year ended 31 DECEMBER 2017
Share Capital |
Share premium |
Capital reserve |
Shares held by ESOP |
Share based payment reserve |
Translation reserve |
Revaluation reserve |
Retained earnings |
Total equity attributable to owners of parent |
Non-controlling interest |
Total equity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 January 2016 | 6,944 | 2,984 | 6,475 | (495) | - | (2,692) | 1,853 | 9,081 | 24,150 | 179 | 24,329 |
Comprehensive income for the year: | |||||||||||
Loss for the year after taxation | - | - | - | - | - | - | - | (4,146) | (4,146) | - | (4,146) |
Other comprehensive income: | |||||||||||
Gain on revaluation of buildings | - | - | - | - | - | - | 135 | - | 135 | - | 135 |
Unrealised exchange gain on translation of foreign subsidiaries | - | - | - | - | - | 827 | 279 | - | 1,106 | - | 1,106 |
Total other comprehensive income | - | - | - | - | - | 827 | 414 | - | 1,241 | - | 1,241 |
Total comprehensive income/(loss) for the year | - | - | - | - | - | 827 | 414 | (4,146) | (2,905) | - | (2,905) |
Shared based payment expense | - | - | - | - | 29 | - | - | - | 29 | - | 29 |
Purchase of non-controlling interest | - | - | - | - | - | - | - | - | - | (179) | (179) |
At 1 January 2017 | 6,944 | 2,984 | 6,475 | (495) | 29 | (1,865) | 2,267 | 4,935 | 21,274 | - | 21,274 |
Comprehensive income for the year: | |||||||||||
Profit for the year after taxation | - | - | - | - | - | - | - | 497 | 497 | - | 497 |
Other comprehensive income: | |||||||||||
Gain on revaluation of buildings | - | - | - | - | - | - | 171 | - | 171 | - | 171 |
Unrealised exchange loss on translation of foreign subsidiaries | - | - | - | - | - | (1,655) | (625) | - | (2,280) | - | (2,280) |
Total other comprehensive loss | - | - | - | - | - | (1,655) | (454) | - | (2,109) | - | (2,109) |
Total comprehensive (loss)/income for the year | - | - | - | - | - | (1,655) | (454) | 497 | (1,612) | - | (1,612) |
Share based payment expense | - | - | - | - | 102 | - | - | - | 102 | - | 102 |
At 31 December 2017 | 6,944 | 2,984 | 6,475 | (495) | 131 | (3,520) | 1,813 | 5,432 | 19,764 | - | 19,764 |
BALANCE SHEET
AS AT 31 DECEMBER 2017
2017 | 2016 | |
£'000 | £'000 | |
Assets | ||
Non-current assets | ||
Property, plant and equipment | 10,778 | 12,106 |
Intangible assets | 209 | 243 |
Deferred income tax asset | 1,901 | 1,800 |
Total non-current assets | 12,888 | 14,149 |
Current assets | ||
Inventories | 15,332 | 17,353 |
Trade and other receivables | 3,991 | 4,388 |
Cash and cash equivalents | 327 | 206 |
Current income tax recoverable | 41 | 38 |
Total current assets | 19,691 | 21,985 |
Total assets | 32,579 | 36,134 |
Liabilities | ||
Current liabilities | ||
Trade and other payables | (4,358) | (4,362) |
Interest bearing loans, borrowings and overdrafts | (5,641) | (6,781) |
Total current liabilities | (9,999) | (11,143) |
Non-current liabilities | ||
Deferred income tax liability | (140) | (183) |
Interest bearing loans, borrowings and overdrafts | (2,676) | (3,534) |
Total non-current liabilities | (2,816) | (3,717) |
Total liabilities | (12,815) | (14,860) |
Net assets | 19,764 | 21,274 |
Equity | ||
Share capital | 6,944 | 6,944 |
Share premium | 2,984 | 2,984 |
Capital reserve | 6,475 | 6,475 |
Shares held by ESOP | (495) | (495) |
Share based payment reserve | 131 | 29 |
Translation reserve | (3,520) | (1,865) |
Revaluation reserve | 1,813 | 2,267 |
Retained earnings | 5,432 | 4,935 |
Total equity | 19,764 | 21,274 |
STATEMENT of cash flows
for the year ended 31 DECEMBER 2017
2017 | 2016 | ||
Note | £'000 | £'000 | |
Cash flows from operating activities | |||
Cash generated from/(used in) operations | 4 | 2,299 | (1,336) |
Tax paid | (48) | (81) | |
Interest paid | (516) | (480) | |
Net cash generated from/(used in) operating activities | 1,735 | (1,897) | |
Cash flows from investing activities | |||
Purchases of property, plant and equipment | (696) | (1,181) | |
Purchases of intangible assets | (2) | (5) | |
Purchase of investments | - | (192) | |
Net cash used in investing activities | (698) | (1,378) | |
Cash flows from financing activities | |||
Proceeds from borrowings | 1,096 | 2,364 | |
Repayment of bank loans | (1,072) | (1,658) | |
New finance lease obligations | - | 374 | |
Repayment of obligations under finance leases | (84) | (88) | |
Net cash (used in)/generated from financing activities | (60) | 992 | |
Increase/(decrease) in cash and cash equivalents | 977 | (2,283) | |
Cash and cash equivalents at beginning of the year | (3,738) | (1,474) | |
Exchange gains on cash and cash equivalents | 63 | 19 | |
Cash and cash equivalents at the end of the year | (2,698) | (3,738) | |
NOTES TO THE FINAnCIAL STATEMENTS for the year ended 31 DECEMBER 2017
1. Basis of preparation
The consolidated financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") including International Accounting Standards ("IAS") and IFRS Interpretations Committee ("IFRS IC") interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under accounting standards as adopted for use in the EU.
The information in this preliminary statement has been extracted from the audited financial statements for the years ended 31 December 2017 and 2016 and as such, does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. A full annual report and accounts for the year ended 31 December 2016, on which the auditor has issued an unqualified audit report, has been delivered to the Registrar of Companies. The Group's annual report and accounts for 2017, on which the auditors have issued an unqualified audit report, will be delivered to the Registrar of Companies in due course. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts.
The preliminary announcement was approved by the board of directors and authorised for issue on 26 March 2018.
2. Exceptional items
2017 | 2016 | |
£'000 | £'000 | |
Cost of sales - exceptional stock provision | - | (4,307) |
In 2016, the Board conducted a detailed review of the stock holding and recognised a provision of £4.307m. This took into account the impact of currency translation, slow moving stock and the potential strategic shift in the business moving towards a higher proportion of hide business. The provision related to low end dress and sport glove leather, with a write down of £1.271m in the UK and £3.036m in Ethiopia.
3. Earnings/(loss) per ordinary share
2017 | 2016 | |
£'000 | £'000 | |
Analysis of the profit/(loss) in the year: | ||
Profit/(loss) for the year | 497 | (4,146) |
Weighted average number of ordinary shares in issue (excluding the shares owned by Pittards Employee Share Ownership Trust) | '000s | '000s |
Basic | 13,870 | 13,870 |
Diluted | 14,224 | 14,341 |
Basic earnings/(loss) per ordinary 50p share | 3.58p | (29.89p) |
Diluted earnings/(loss) per ordinary 50p share | 3.49p | (28.91p) |
4. Cash generated from/(used in) operations
2017 | 2016 | |
£'000 | £'000 | |
Profit/(loss) before taxation | 413 | (4,071) |
Adjustments for: | ||
Depreciation of property, plant and equipment | 604 | 605 |
Amortisation | 36 | 35 |
Bank and other interest charges | 521 | 480 |
Share based payment expense | 102 | 29 |
Other non-cash items in Income Statement | (133) | (61) |
Operating cash flows before movement in working capital | 1,543 | (2,983) |
Movements in working capital (excluding exchange differences on consolidation): | ||
(Increase)/decrease in inventories | (749) | 2,912 |
Increase in receivables | (47) | (194) |
Increase/(decrease) in payables | 1,552 | (1,071) |
Cash generated from/(used in) operations | 2,299 | (1,336) |
5. Taxation
The group has recognised a deferred tax asset of £1.901m (2016: £1.800m) in respect of losses out of a total potential deferred tax asset of £1.901m (2016: £1.800m).
6. Additional Information
Copies of the 2017 Annual Report and Accounts will be posted to shareholders in April and will be available on the company's website at www.pittards.com. Further copies may be obtained by contacting the Company Secretary at Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA. The annual general meeting is to be held at the registered office on 15 May 2018 at 12pm.