PTD.L Regulatory News (PTD)

25 September 2018

PITTARDS PLC

("Pittards" or "the Group")

Interim results for the six months ended 30 June 2018

Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for retailers, manufacturers and distributors today announces its results for the six months ended 30 June 2018.

Half year ended 30 June 2018

§ Revenue increased 2% to £14.5m (H1 2017: £14.2m)

§ EBITDA increased to £0.8m (H1 2017: £0.7m)

§ Profit before tax £0.1m (H1 2017: £0.1m)

§ Net assets £20.1m (31 December: £19.8m)

§ Further progress developing targeted new business with orders to produce bulk sampling.

Stephen Yapp, Chairman commented: "The first six months of 2018 has seen satisfactory trading alongside continued investment to strengthen our operational capability and scalability.

The strategic priorities remain enhancing our offering to existing customers whilst developing new customers in the interiors and performance footwear markets. Good progress has been made in these areas allowing us to look ahead with confidence."

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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 SIX MONTHS ENDED 30 JUNE 2018

The first six months' results show satisfactory trading and progress in advancing our strategy. During this period we have continued to invest in people and technology to augment our operational capability. We have also made steady progress in embedding a more efficient supply chain.

This investment in resource and operations enables us to enhance our offering to existing customers and strengthen our capability and scalability for serving the targeted interiors and performance footwear markets.

Half year ended 30 June 2018

· Revenue increased 2% to £14.5m (H1 2017: £14.2m)

· EBITDA increased to £0.8m (H1 2017: £0.7m)

· Profit before tax £0.1m (H1 2017: £0.1m)

· Net assets £20.1m (31 December: £19.8m)

· Further progress developing targeted new business with orders to produce bulk sampling.

Financial review

Revenue increased 2% to £14.5m, with increases in both the UK and Ethiopia. Due principally to a change in mix, gross margin for the first six months was 21.2%, down on the full year margin achieved last year of 23.4%.

Profit before tax improved slightly year on year, to £0.1m, against an unfavourable foreign exchange backdrop and continuing investments to modernise our facilities and support potential business opportunities. In line with prior years, full year profits are anticipated to be weighted towards the second half of the year.

Net assets overall remained at similar levels to that in December. Inventory has increased by £0.4m since 31 December 2017, but is £1.2m lower than at the same time last year. The increase since December is due to new product sampling, partially offset by a reduction in slower moving stock, with inventory days of sale improving year on year from 282 to 249 days. The increase in net debt to £9.8m is primarily due to working capital timing differences which we anticipate will have predominantly reversed by the year end. It is also due to the investments made in new business opportunities. As at 30 June 2018 the headroom in our borrowing facilities was £3.6m.

Operational and strategic update

Globally, customers in our existing markets continue to experience a challenging environment arising from the prevailing uncertainty of geopolitical and market factors. Consequently, our UK facilities were affected by a reduction in orders for hide manufacturing towards the latter half of the period, although the production of skins remained stable.

The new government and recent lifting of the state of emergency are helpful to our Ethiopian Division, however, there are still some political uncertainties which we are monitoring closely. The manufacturing of utility and dress gloves remain our core finished product and we have expanded the training of our staff to accommodate our entrance into the casual shoes market, as we pursue our strategy to have a more balanced product portfolio. Alongside this, we continue to drive operational efficiencies through investments in technology and improving our supply chain management. Further investments are planned in the second half of the year to support the new product ranges and ongoing modernisation of our tannery. 

The initiatives to reduce slower moving stock continue to gain traction and now include a dedicated resource to identify innovative solutions for better utilisation. 

Encouragingly, our pipeline of opportunities within our target markets progressed further, with a few customers entering the significant final bulk sampling phase which typically precedes larger and repeat volumes. 

Outlook

As a large proportion of our production is exported, the introduction of tariff barriers globally is likely to create uncertainty which may have an effect on our core business in the second half.

However, against this backdrop our strategic priorities remain enhancing our offering to existing customers whilst developing new customers in the interiors and performance footwear markets. Good progress has been made in these areas allowing us to look ahead with confidence.

CONSOLIDATED INCOME STATEMENT

for the SIX MONTHS ENDED 30 JuNE 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the SIX MONTHS Ended 30 JUNE 2018

CONSOLIDATED statement of Changes in equity

for the six months ENDED 30 JUNE 2018

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2018

CONSOLIDATED STATEMENT of cash flows

for the SIX MONTHS ended 30 JUNE 2018

NOTES TO THE CONSOLIDATED ACCOUNTS (UNAUDITED)

1. Basis of preparation

The financial information set out in the interim statements for the six months ended 30 June 2018 and the comparative figures are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. As permitted, this interim report has been prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 Interim Financial Reporting, therefore it is not fully in compliance with International Financial Reporting Standards (IFRS).

The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2017. Those accounts, upon which the auditor issued an unqualified opinion, have been delivered to the Registrar of Companies. The auditor's report did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

These financial statements are presented in sterling, being the functional currency of the primary economic environment in which the Group operates.

Pittards plc is a public limited company incorporated and domiciled under the Companies Act 2006 in England. It is quoted on the Alternative Investment Market ("AIM"). 

The directors approved and authorised the interim statement for issue on 25 September 2018. 

2. Opening balance adjustment

The Group has adopted IFRS 9 Financial Instruments (IFRS 9) and IFRS 15 Revenue from contracts with customers (IFRS 15) from 1 January 2018. The modified retrospective approach has been applied in both instances, with an adjustment made to opening retained earnings to reflect the brought forward position at the start of the year.

Under IFRS 9, the impairment of financial assets is now provided for on an expected loss basis, rather than incurred loss, resulting in an increase in the accounts receivable provisions of £0.017m as at 1 January 2018. The impact on the current period is to increase the accounts receivable provisions by £0.006m. 

Following the adoption of IFRS 15, any variable consideration, such as early payment discount, is considered as part of the initial recognition of revenue for the transaction and therefore shown as a reduction in total revenue, rather than a separate cost disclosed within distribution costs. An opening provision against accounts receivable in relation to variable consideration as at 1 January 2018 of £0.009m has been recognised. The impact on the current period is a reduction in revenue of £0.026m, a reduction in distribution costs of £0.019m and therefore an increase in the accounts receivable provisions of £0.007m. 

3. Earnings per ordinary share

a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year excluding the shares owned by the Pittards employee share ownership trust.

b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by the shares issued under the 2017 Save As You Earn (SAYE) scheme. The 2015 Long Term Incentive Plan (LTIP) lapsed in the period, with no shares issued.

4. Taxation

5. Deferred taxation

The Group has unrecognised deferred tax assets of £0.311m.

6. Cash (used in)/generated from operations

7. Availability of interim report

The interim report will be available on the Company's website www.pittards.com, in accordance with AIM Rule 20.