21 Mar 2017 07:00
21 March 2017
Pittards plc
("Pittards" or "the Group")
Full year results for the year ended 31 December 2016
Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for sale to retailers, manufacturers and distributors today announces its results for the year ended 31 December 2016.
Year ended 31 December 2016:
· Revenue £27.0m (2015: £30.5m)
· Underlying PBT £0.2m and LBT of £4.1m (2015 PBT: £0.7m) after an exceptional stock write-down of £4.3m
· Net assets £21.3m (2015: £24.3m), net assets per share 153.38p (2015: 204.45p)
· New management team in place from the final quarter of 2016
· Restructured operationally to become two reporting divisions: "UK" and "Ethiopia"
Stephen Yapp, Chairman commented: "We are putting in place the necessary pillars that will strengthen Pittards' position as a leading performance-leather expert, supported by scalable manufacturing operations and a highly capable management team.
"The restructuring and strengthening of the management team was completed in the final quarter of 2016 and strides have already been made to evolve and progress the strategic priorities and milestones for the next three years. Further updates on this will be given later this year.
"Whilst it is still early days, we are beginning to experience a more positive demand environment for leather. Together with the actions being identified and taken, the Board believe we will start to see a benefit in the latter part of 2017 and that the prospects for the future are promising."
For further information please contact:
Pittards plc | www.pittardsleather.com |
Stephen Yapp, Chairman Reg Hankey, CEO | +44 (0) 1935 474 321 |
Matt O'Rourke, CFO | |
WHIreland Limited | www.whirelandplc.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
2016 was an active year for Pittards during which we have been primarily focused on the management team and structure to develop and implement a medium term strategic plan. As previously communicated, the financial performance during the year was overshadowed by challenging market conditions and political disruption in Ethiopia in the latter part of 2016.
The restructuring and strengthening of the management team was completed in the final quarter of the year and strides have already been made towards identifying the market priorities for the next three years. This will allow us to pursue growth opportunities both in existing core and new markets that are considered to be most aligned with our skills and expertise.
Year ended 31 December 2016:
· Revenue £27.0m (2015: £30.5m)
· Underlying PBT £0.2m and LBT of £4.1m (2015 PBT: £0.7m) after an exceptional stock write-down of £4.3m
· Net assets £21.3m (2015: £24.3m), net assets per share 153.38p (2015: 204.45p)
· New management team in place from the final quarter of 2016
· Restructured operationally to become two reporting divisions: "UK" and "Ethiopia"
Market conditions
The global leather market continues to be challenging for companies looking for growth against a backdrop of significant global change and weak consumer demand. Demand in our core markets of shoe, sport and dress gloves remains depressed and we now believe that after four years of contraction, the dress glove market has rebalanced at this lower level. Encouragingly though, we are beginning to see some signs that growth may return in some of our other markets during the latter part of 2017.
In line with an intention to broaden our market base, we are reviewing additional potential markets. Initial findings have identified both the interiors and general footwear markets as having the characteristics our capabilities can best leverage.
Financial review
Overall the Group had a difficult year financially with depressed leather volumes and a number of non-recurring items.
Revenue was down 11% to £27.0m as a consequence of reduced demand and the impact on the Ethiopian business of the political disruption. The political environment in Ethiopia has stabilised and our manufacturing production capabilities there are now returning to more normal levels.
Gross margin continued to improve at 24% pre-provision (2015: 22%) reflecting favourable currency improvements mainly US dollar-related.
The Board has conducted a detailed review of the stock holding and has decided to take a £4.3m provision reducing the year end stock to £17.4m. This provision takes 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 relative to skins business. The provision relates to low end dress and sport glove leather, with a write down of £1.3m in the UK and £3.0m in Ethiopia.
Underlying PBT for the year was £0.2m and after the exceptional stock write-down, the LBT for the year was £4.1m (2015 PBT: £0.7m)
Net debt increased by £3.6m to £10.1m. This reflects an increase in working capital and capital investment of £1.4m. The UK banking facilities were renewed in December 2016 with available Group banking facilities of £13.0m.
The Group's structure has been simplified into two divisions - UK and Ethiopia - and our focus during 2017 will be to develop and implement a range of key financial measures which both reflect the individual trading environments and deliver returns above the cost of capital.
Board changes
As previously announced, I was appointed Chairman on 16 May 2016 and on 1 June 2016 Matthew O'Rourke was appointed CFO and Jill Williams resigned from this role. She became a non-executive director on 1 January 2017.
Team
Throughout the past year, the Group has been in a transitional phase. To have executed the changes outlined internally, whilst adopting a 'business as usual' approach externally, is testament to the commitment and hard work of our 1600 employees to whom I would like to express my thanks.
Outlook
The restructuring and strengthening of the management team was completed in the final quarter of 2016 and strides have already been made to evolve and progress the strategic priorities and milestones for the next three years. Further updates on this will be given later this year.
Whilst it is still early days, we are beginning to experience a more positive demand environment for leather. Together with the actions being identified and taken, the Board believe we will start to see a benefit in the latter part of 2017 and that the prospects for the future are promising.
Continuing operations | Note | 2016 £’000 | 2015 £’000 |
Revenue | 27,009 | 30,523 | |
Cost of sales | (20,554) | (23,902) | |
Cost of sales – exceptional stock provision | 3 | (4,307) | - |
Gross profit | 2,148 | 6,621 | |
Distribution costs | (2,167) | (1,919) | |
Administrative expenses | (3,572) | (3,275) | |
Administrative expenses – exceptional restructuring costs | - | (312) | |
(Loss)/Profit from operations before finance costs | (3,591) | 1,115 | |
Finance costs | (499) | (484) | |
Finance income | 19 | 24 | |
(Loss)/Profit before taxation | (4,071) | 655 | |
Taxation | 6 | (75) | (184) |
(Loss)/Profit for the year after taxation | (4,146) | 471 | |
(Loss)/Profit attributable to: | |||
Owners of the parent | (4,146) | 474 | |
Non controlling interest | - | (3) | |
(4,146) | 471 | ||
(Loss)/Earnings per share attributable to the owners of the parent | |||
Basic | 4 | (29.89p) | 3.98p |
Diluted | 4 | (28.91p) | 3.88p |
2016 £’000 | 2015 £’000 | |
(Loss)/Profit for the year after taxation | (4,146) | 471 |
Other comprehensive incomeItems that will not be reclassified to profit or loss | ||
Revaluation of land and buildings | 135 | 182 |
Revaluation of land and buildings – unrealised exchange gain | 279 | 13 |
414 | 195 | |
Items that may be subsequently reclassified to profit or loss | ||
Unrealised exchange gain on translation of overseas subsidiaries | 827 | 58 |
827 | 58 | |
Other comprehensive income | 1,241 | 253 |
Total comprehensive (loss)/income for the year | (2,905) | 724 |
Total comprehensive (loss)/income attributable to: | ||
Owners of the parent | (2,905) | 717 |
Non controlling interest | - | 7 |
Share capital £’000 | Share premium £’000 | Capital reserve £’000 | Retained earnings £’000 | Translation reserve £’000 | Shares held by ESOP £’000 | Revaluation reserve £’000 | Share based payment reserve £’000 | Total equity attributable to owners of the parent £’000 | Non- controlling interest £’000 | Total equity £’000 | |
At 1 January 2015 | 4,631 | – | 6,475 | 8,607 | (2,750) | (495) | 1,668 | – | 18,136 | 172 | 18,308 |
Comprehensive income for the year: | |||||||||||
Profit/(Loss) for the year after taxation | – | – | – | 474 | – | – | – | – | 474 | (3) | 471 |
Other comprehensive income: | |||||||||||
Gain on the revaluation of buildings | – | – | – | – | – | – | 172 | – | 172 | 10 | 182 |
Unrealised exchange gain on translation of foreign subsidiaries | – | – | – | – | 58 | – | 13 | – | 71 | – | 71 |
Total other comprehensive income | – | – | – | – | 58 | – | 185 | – | 243 | 10 | 253 |
Total comprehensive income for the year | – | – | – | 474 | 58 | – | 185 | – | 717 | 7 | 724 |
Transactions with owners: | |||||||||||
Proceeds from shares issued | 2,313 | 2,984 | – | – | – | – | – | – | 5,297 | – | 5,297 |
Total transactions with owners | 2,313 | 2,984 | – | – | – | – | – | – | 5,297 | – | 5,297 |
At 1 January 2016 | 6,944 | 2,984 | 6,475 | 9,081 | (2,692) | (495) | 1,853 | – | 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 the 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 (expense)/income for the year | – | – | – | (4,146) | 827 | – | 414 | – | (2,905) | – | (2,905) |
Share based payment expense | – | – | – | – | – | – | – | 29 | 29 | – | 29 |
Purchase of non controlling interest | – | – | – | – | – | – | – | – | – | (179) | (179) |
At 31 December 2016 | 6,944 | 2,984 | 6,475 | 4,935 | (1,865) | (495) | 2,267 | 29 | 21,274 | – | 21,274 |
2016 £’000 | 2015 £’000 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 12,106 | 10,679 |
Intangible assets | 243 | 273 |
Investments in subsidiary undertakings | – | – |
Deferred income tax asset | 1,800 | 1,676 |
Total non-current assets | 14,149 | 12,628 |
Current assets | ||
Inventories | 17,353 | 18,872 |
Trade and other receivables | 4,388 | 4,017 |
Cash and cash equivalents | 206 | 485 |
Current income tax recoverable | 38 | 26 |
Total current assets | 21,985 | 23,400 |
Total assets | 36,134 | 36,028 |
LIABILITIES | ||
Current liabilities | ||
Trade and other payables | (4,362) | (4,664) |
Interest bearing loans, borrowings and overdrafts | (6,781) | (3,806) |
Total current liabilities | (11,143) | (8,470) |
Non-current liabilities | ||
Deferred income tax liability | (183) | (92) |
Interest bearing loans, borrowings and overdrafts | (3,534) | (3,137) |
Total non-current liabilities | (3,717) | (3,229) |
Total liabilities | (14,860) | (11,699) |
Net assets | 21,274 | 24,329 |
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 | 29 | – |
Translation reserve | (1,865) | (2,692) |
Revaluation reserve | 2,267 | 1,853 |
Retained earnings | 4,935 | 9,081 |
Total equity attributable to owners of the parent | 21,274 | 24,150 |
Non-controlling interest | – | 179 |
TOTAL EQUITY | 21,274 | 24,329 |
Note | 2016 £’000 | 2015 £’000 | |
Cash flows from operating activities | |||
Cash (used in)/generated from operations | 5 | (1,336) | 962 |
Tax paid | (81) | (183) | |
Interest paid | (480) | (447) | |
Net cash (used in)/generated from operating activities | (1,897) | 332 | |
Cash flows from investing activities | |||
Purchases of property, plant and equipment | (1,181) | (4,350) | |
Purchases of intangible assets | (5) | (108) | |
Purchase of investments | (192) | – | |
Net cash used in investing activities | (1,378) | (4,458) | |
Cash flows from financing activities | |||
Proceeds from borrowings | 2,364 | 3,651 | |
Repayment of bank loans | (1,658) | (1,733) | |
New finance lease obligations | 374 | 35 | |
Repayment of obligations under finance leases and hire purchase obligations | (88) | (42) | |
Proceeds from share issue (net of costs) | – | 5,297 | |
Net cash generated from financing activities | 992 | 7,208 | |
(Decrease)/increase in cash and cash equivalents | (2,283) | 3,082 | |
Cash and cash equivalents at beginning of the year | (1,474) | (4,551) | |
Exchange gains/(losses) on cash and cash equivalents | 19 | (5) | |
Cash and cash equivalents at end of the year | (3,738) | (1,474) |
2016 £’000 | 2015 £’000 | |
Cost of sales – exceptional stock provision | 4,307 | – |
Administrative expenses – exceptional restructuring costs | – | 312 |
4,307 | 312 |
2016 £’000 | 2015 £’000 | |
Analysis of the (loss)/profit in the year: | ||
(Loss)/Profit for the year attributable to owners of the parent | (4,146) | 474 |
Weighted average number of ordinary shares in issue(excluding the shares owned by the Pittards Employee Share Ownership Trust) | ’000s | ’000s |
Basic | 13,870 | 11,900 |
Diluted | 14,341 | 12,201 |
Basic (loss)/earnings per ordinary 50p share | (29.89p) | 3.98p |
Diluted (loss)/earnings per ordinary 50p share | (28.91p) | 3.88p |
Group | ||
2016 £’000 | 2015 £’000 | |
(Loss)/Profit before taxation | (4,071) | 655 |
Adjustments for: | ||
Depreciation of property, plant and equipment | 605 | 456 |
Amortisation | 35 | 22 |
Bank and other interest charges | 480 | 447 |
Share based payment expense | 29 | - |
Other non-cash items in Income Statement | (61) | (47) |
Operating cash flows before movement in working capital | (2,983) | 1,533 |
Movements in working capital (excluding exchange differences on consolidation): | ||
Decrease/(increase) in inventories | 2,912 | (1,003) |
(Increase)/decrease in receivables | (194) | 911 |
(Decrease)/increase in payables | (1,071) | (479) |
Cash (used in)/generated from operations | (1,336) | 962 |