PTD.L Regulatory News (PTD)

19 September 2019

PITTARDS PLC

("Pittards" or "the Group")

Interim results for the six months ended 30 June 2019

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 2019.

Half year ended 30 June 2019

·; Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)

·; EBITDA £0.8m (H1 2018: £0.8m)

·; Profit before tax increased to £0.2m (H1 2018: £0.1m)

·; Net assets £18.5m (31 December 2018: £18.5m)

·; Gross margin improved to 29.7% (31 December 2018: 25.1%)

·; Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing

Stephen Yapp, Chairman commented: "The themes outlined in our 2018 annual report have continued into the first half of 2019; we have delivered a solid financial performance against ongoing fluctuations in global trading and made important progress to diversify our business.

"The improvement in profitability reflects the hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers, whilst taking further steps to create a more balanced portfolio.

"We enter the second half of the year with a good order book, lower cost base and improved margins. Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profit and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature."

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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 2019

The first half of 2019 experienced a continuation of the themes outlined at the end of 2018; we delivered a solid financial performance against ongoing fluctuations in global trading and made further progress aligned with our strategic goals.

The improvement in profitability reflects the ongoing hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers whilst taking further steps to create a more balanced portfolio.

Half year ended 30 June 2019

§ Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)

§ EBITDA £0.8m (H1 2018: £0.8m)

§ Profit before tax increased to £0.2m (H1 2018: £0.1m)

§ Net assets £18.5m (31 December 2018: £18.5m)

§ Gross margin improved to 29.7% (31 December 2018: 25.1%)

§ Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing

Financial review

Revenue for the first half decreased 16% to £12.1m within both our UK and Ethiopian divisions as a result of a decrease in orders from our core customers and destocking within their supply chain. 

Profit before tax for the first half was double the equivalent period last year at £0.2m, a pleasing result given the reduction in sales volumes.

Continuing the improvement from last year where they stood at 25.1% for the full year, gross margins rose significantly to 29.7% helped by lower headcount in production, reduced raw material prices and currency gains.

Our stock level increased by £0.4m to £16.7m, although this was £0.2m lower than at the same point two years ago, and our slower moving stock at £2.2m remained unchanged since the year end. Despite pressure from lower volumes, and short-term timing effects on key bulk orders, we are encouraged that new channels and product ranges coupled with the more typical volumes we anticipate, will make some inroads in the second half.

Net assets were unchanged at £18.5m (December 2018 £18.5m). Net debt was unchanged at £9.8m compared with the same time last year although it was up £2.1m on December 2018 due to timing differences in working capital during the summer. We anticipate these timing differences will reverse by year end.

The tax charge for the period was £0.05m due to profits in Ethiopia. Generally, the Group enjoys a favourable tax position with significant prior year tax losses unutilised and anticipates minimal tax payments for the year ahead.

Operational and strategic update

Persistent global uncertainty continued to impact customers in our existing and target markets in the first half of the year and consequently, volumes in both our UK and Ethiopia divisions were depressed. Against this backdrop, we have delivered a stable financial performance, and ensured that the quality of service was maintained for all customers.

In the UK Division, the automotive market is gaining traction; automotive customers have increased their orders on an incremental steady basis signifying that we are now establishing ourselves as a manufacturer of this specialist upholstery, where both our quality and price point are positioning us attractively for future growth. 

The aviation markets are engaging with us directly and we are at various stages of the protracted sampling process with a number of potential customers. We have entered the bulk sampling stage with a big shoe provider and are actively in dialogue with others, again with our offering well placed to compete.

Alongside with its core gloving products, our Ethiopian operation has now established itself as a shoe manufacturer for Soul of Africa and Vivo Barefoot. Whilst a nascent market for us, it is growing on a steady basis. Accordingly, in the first half we invested in a new manufacturing production line, for which training is well progressed, and further modest investments are anticipated in the second half. Together with our own shoe manufacturing brand NTOTO, these products are helping to achieve our objective of a more balanced portfolio.

Board changes

As previously announced Richard Briere joined the Board as CFO on 19th March 2019.

Outlook

The outcome of Brexit remains uncertain and could lead to a short-term impact to the movement of products, the quantum or timing of which is too speculative to judge accurately. However, with 90% of the Group's sales outside Europe and dual manufacturing production in our UK and Ethiopia divisions, we are optimistic that whilst the lack of clarity persists any risk can be managed within our existing model.

We enter the second half of the year with a good order book, lower cost base and improved margins. Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profits and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature.

CONSOLIDATED INCOME STATEMENT

for the SIX MONTHS ENDED 30 JuNE 2019

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the SIX MONTHS Ended 30 JUNE 2019

CONSOLIDATED statement of Changes in equity

for the six months ENDED 30 JUNE 2019

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2019

CONSOLIDATED STATEMENT of cash flows

for the SIX MONTHS ended 30 JUNE 2019

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 2019 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 2018. 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 19 September 2019.

2. New standards

The Group has adopted IFRS 16 Leases from 1 January 2019, using the modified retrospective method. Applying this method, the comparative information for the 2018 fiscal year has not been restated.

At 1 January 2019, the Group recognised right-of-use assets of £200k and lease liabilities of £200k. The Group has decided not to apply the new guidance to leases whose term will end within twelve months of the date of initial application. In such cases, the leases will be accounted for as short-term leases and the lease payments associated with them will be recognised as an expense from short-term leases. The following reconciliation to the opening balance for the lease liabilities as at 1 January 2019 is based upon the operating lease obligations as at 31 December 2018:

The lease liabilities were discounted at the borrowing rate as at 1 January 2019. The weighted average discount rate was 6.63%.

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.

4. Taxation

5. Deferred taxation

The Group has unrecognised deferred tax assets of £1.9m.

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.