Strategic Minerals Regulatory News (SML)

26 Sep 2005 07:00

Smallbone PLC26 September 2005 SMALLBONE plc ("Smallbone" or "the Group") Interim results for the six months ended 30 June 2005 Smallbone plc, the supplier of luxury kitchens and floors is pleased to announceits interim results for the six months ended 30 June 2005. The Group is comprised of Smallbone of Devizes and Mark Wilkinson Furniture, twoof the UK's leading designers of bespoke kitchens, bathrooms and bedroomfurniture; and Paris Ceramics, a supplier of high quality stone primarilyoperating in the US. Financial Highlights • Turnover up 20% to £12.4 million (2004: £10.3 million)• Operating profit before goodwill amortisation increased by 175% to £110,000 (2004: £40,000)• Loss before taxation reduced to £126,000 (2004: £229,000)• Strong operating cash flow of £2.1m in first six months (2004: £0.6m) Operational Highlights • Acquisition of Mark Wilkinson Furniture Limited on 15 June 2005• New Smallbone of Devizes showrooms opened in St John's Wood (May 2005) and Glasgow (July 2005)• Launch of new Smallbone of Devizes kitchen range, "Walnut & Silver", in January 2005• Strong growth in Paris Ceramics in the US Outlook • New Smallbone of Devizes bedroom and bathroom range on track to be launched in January 2006• Lease signed for flagship Smallbone of Devizes showroom in New York, planned opening next Spring• New Mark Wilkinson Furniture showroom opening in Harrogate by January 2006• Enhanced prospects for the Group through the full integration of Mark Wilkinson Furniture• Group order book (excluding Mark Wilkinson Furniture) of £16 million, up 14% on last year Charlie Smallbone, Chairman & Chief Executive, commented: " We have made considerable progress in the first six months of this year to laythe foundations for the future growth of the Group. With the integration andexpansion of Mark Wilkinson Furniture, the launch of our new bedroom andbathroom ranges and the opening of Smallbone in the US, we have an exciting yearahead of us. However, what is also particularly pleasing is to see the earlyfruits of our expansion strategy being realised in the strong growth of ouroperating cash flows in the first six months of this year." 26 September 2005 Enquiries: SMALLBONE plc Tel: +44 (0)1380 729090Charles Smallbone, Chairman & Chief ExecutiveGordon Montgomery, Finance Director COLLEGE HILL Tel: +44 (0)207 457 2020Nick Elwes / Kate Pope CHARLES STANLEY & CoMark Taylor Tel: +44 (0)207 739 8200 SMALLBONE plc ("Smallbone" or "the Group") Chairman and Chief Executive's Statement I am pleased to report the Group's interim results for the six months ended 30June 2005 which contain half a month of Mark Wilkinson Furniture's ("MWF")figures in the consolidated profit and loss account and cash flow. Financial Results In the six months ended 30 June 2005, Group turnover increased to £12.4m (2004:£10.3m), which represents a 20% increase over the same period in 2004 and, afterexcluding the effect of acquiring MWF, represents a 12% increase over thecomparable prior year period. Operating profit before goodwill amortisation forthe period also increased to £110,000 (2004: £40,000) and the loss beforetaxation reduced to £126,000 for the period (2004: £229,000 loss) despiteadditional Group costs being incurred as a result of being a public company. This increase in sales and improvement in profitability, over a period whenother companies seem to be experiencing reduced consumer confidence, supportsour strategy of expanding our showroom distribution network. The growth indemand that we are experiencing is particularly evidenced in our strong positiveoperating cash flows in the first six months of this year of £2.1m (2004:£0.6m), which largely results from the increase in order deposits fromcustomers. The Directors are not recommending payment of an interim dividend. Operational review One of the key drivers for organic growth that we stated at our flotation inJuly 2004 is the expansion of Smallbone of Devizes's showroom network in the UK.The Company now has 11 showrooms in the UK. Since the float, we have openedshowrooms in Sunningdale (October 2004), St. John's Wood, London (May 2005) andGlasgow (July 2005). Whilst it is too early to judge the impact from the lattertwo, Sunningdale has performed ahead of our expectations, which gives usconfidence in our continuing roll-out strategy of new showrooms. Another driver that we have stated for enhancing organic growth is to continueto update and broaden Smallbone of Devizes's product offering. To this end, welaunched a new kitchen range, "Walnut & Silver", in January 2005. For the firstsix months, this range has only been on display in our Knightsbridge showroom,with encouraging initial order intakes. Our Glasgow showroom also now has thenew range on display and it will be rolled out to other showrooms over the next12 months. In 2004, we also launched Smallbone Stone, offering a range of stonefloors and in-house granite worktops. After initial teething problems with ourin-house granite workshop that has held back our production capacity, we are nowon track to be producing half the Group's monthly granite worktop sales by theend of the year. As expected, the introduction of Smallbone Stone is leading toincreased margins in Smallbone of Devizes. Paris Ceramics in the US has started the year well, with delivered sales up 18%on 2004 and order intake up 10%. We will be adding a new showroom to ourexisting network before the year end, in Naples Florida. We are also relocatingour existing Boston showroom to a more prominent location in the Boston DesignCentre, and completely refurbishing our flagship Paris Ceramics New Yorkshowroom. Mark Wilkinson Furniture On 15 June 2005, the Group acquired Mark Wilkinson Furniture Limited ("MWF"),one of the largest competitors in the UK market to Smallbone of Devizes, with asuperb track record for design, quality and service. The maximum purchase pricepayable for MWF is £5.6m, of which £1m is the debt acquired with the business.The senior management of MWF are all staying with the company and have takenshares in the Group to the value of £1.8m of the consideration, demonstratingtheir commitment to the future success of the enlarged Group. In the year ended31st December 2004, MWF had sales of £19.2m and declared a profit beforetaxation of £279,437. Our strategy, as with Smallbone of Devizes, is to preserve the independence andquality of each brand in the market and to build upon MWF's existing showroomnetwork (currently 8 showrooms), widening their distribution. To this end, a newMWF showroom will be opening in Harrogate by January 2006. As with Smallbone ofDevizes, we believe that there is an opportunity to expand this network quiteconsiderably. We shall also, as a group, benefit from selling the stone flooringand granite worktop products through the MWF showrooms over the coming year.MWF's production and administrative operations are based close to Smallbone ofDevizes's operations in Wiltshire, which will enable the Group to shareresources to meet its expansion plans and, with the combined purchasing powernow available to us, achieve economies of scale. The acquisition makes the Group one of the pre-eminent bespoke cabinet makers inboth the UK and Europe, with an estimated 15% of the UK market. Post Balance Sheet Events To assist with our expansion plans, we took the opportunity to raise £545,000 ofnew equity capital, net of expenses, by placing 772,078 ordinary shares at 71pper share on 8 July 2005 with several new institutional investors. Management / Board I was particularly pleased to welcome Mark and Cynthia Wilkinson onto the Boardof Smallbone plc, following the acquisition of MWF. Mark, Cynthia and I workedtogether in the early days of establishing Smallbone of Devizes back in the late'70s and early '80s, before they set up on their own. In June, I was alsopleased to announce that Gordon Montgomery joined the Group full-time as GroupFinance Director, having been advising us on an ad-hoc consultancy basis fromthe time of our float in July last year. We now have an experienced team in ourmarket sector and a workforce that is unsurpassed for its expertise in thedesign and manufacture of fine cabinetry. Current Trading and Outlook Although there has been evidence of consumer caution in the first six months ofthe year, our Group order book (excluding MWF) was £16m at 30 June 2005, some14% up on 2004's comparative. This, together with some evidence of an improvingretail environment since the half year, gives us confidence in meeting ourtrading expectations for 2005. The coming six months will see us further broaden the base of our business withthe establishment in Spring 2006 of the new flagship showroom in New York forSmallbone of Devizes - located on the corner of Lexington and 65th Street; thelaunch of Smallbone of Devizes's new bedroom and bathroom ranges in January; theopening of a new showroom for MWF in Harrogate; and exploiting the synergiesavailable between MWF and Smallbone of Devizes. By growing the breadth of ouroffering, our showroom distribution network and the geographical markets inwhich we operate, we are laying the foundations to deliver our plans forsubstantial future earnings growth and the Board is confident of the prospectsfor the Group. Charles Smallbone Chairman and Chief Executive 26 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the 6 months to 30 June 2005 Unaudited Unaudited Audited Six months to Six months to Year to Notes 30 June 2005 30 June 2004 31 December 2004 £'000 £'000 £'000 Turnover- from continuing operations 11,535 10,305 23,563- from acquisitions 859 - -- Total 12,394 10,305 23,563 Operating charges excluding goodwill amortisation (12,284) (10,265) (22,682) Operating profit before goodwill amortisation and interest- from continuing operations 84 40 881- from acquisitions 26 - -- Total 110 40 881 Goodwill amortisation (174) (163) (327) Operating (loss) / profit (64) (123) 554 Net Interest payable (62) (106) (168) (Loss) / profit on ordinary activities before taxation forthe period (126) (229) 386 Taxation (12) 0 (83) Retained (loss) / profit for the period (138) (229) 303 (Loss) / Earnings per share 2 Basic (pence per share) (0.74) (1.53) 1.84Diluted (pence per share) (0.74) (1.53) 1.79 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES For the 6 months to 30 June 2005 (Loss) / Profit for the period (138) (229) 303Foreign exchange (losses) / gains (25) - 19 Total recognised gains and losses for the period (163) (229) 322 CONSOLIDATED BALANCE SHEET As at 30 June 2005 Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000Fixed assetsIntangible assets 11,534 5,947 5,804Tangible assets 5,998 2,006 2,345 17,532 7,953 8,149 Current assetsStocks 5,480 2,859 2,582Debtors 3,041 1,941 1,615Cash at bank and in hand 783 2,557 735 9,304 7,357 4,932 Creditors: amounts falling due within one year (16,633) (12,866) (8,589) Net current liabilities (7,329) (5,509) (3,657) Total assets less current liabilities 10,203 2,444 4,492Creditors: amounts falling due after more than oneyear (5,406) (1,300) (1,332) Net assets 4,797 1,144 3,160 Capital and reservesCalled up share capital 1,074 1 920Share premium account 2,942 750 1,296Other reserves 1,958 1,958 1,958Profit and loss account (1,177) (1,565) (1,014) Shareholders' funds 4,797 1,144 3,160 CONSOLIDATED CASH FLOW STATEMENT For the 6 months to 30 June 2005 Notes Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000Net cash inflow / (outflow) from operatingactivities 3(a) 2,054 592 (590) Returns on investments and servicing offinanceInterest received 12 33 64Interest paid (71) (139) (195)Interest element of finance lease rental (3) - (1) Net cash outflow from returns on investments and (62) (106) (132)servicing of finance TaxationUK corporation tax paid - - (29) Tax paid - - (29) Capital expenditureCapital expenditure and financial investmentPurchase of tangible fixed assets (1,245) (456) (960) Net cash outflow from capital expenditure (1,245) (456) (960) AcquisitionsPurchase of subsidiary undertaking (4,810) - -Net debt acquired with subsidiary undertakings (1,556) - -Further consideration paid on prior periodacquisitions - - (21) Net cashflow from acquisitions (6,366) - (21) Net cash (outflow) / inflow before financing (5,619) 30 (1,732) Share capital issued 1,800 - 1,465New secured loans 3,750 - -Loans repaid (138) - (1,526)New finance leases 124 - -Capital element of finance leases repaid (27) - (6) Net cash inflow / (outflow) from financing 5,509 - (67) (Decrease) / increase in cash in the period 3(b) (110) 30 (1,799) NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Basis of preparation The consolidated interim financial statements have been prepared under thehistorical cost convention and in accordance with applicable accountingstandards. The accounting policies applied are consistent with those set out inthe financial statements of Smallbone plc for the year ended 31 December 2004.The interim financial statements are unaudited and do not constitute accountswithin the meaning of section 240 of the Companies Act 1985. The financialinformation for the year ended 31 December 2004 has been extracted from theGroup's statutory accounts for that period, which have been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain any statement under section 237 of the Companies Act 1985. 2. Earnings per share Earnings per share ("EPS") have been calculated on the result after tax and onthe weighted average number of shares in issue and under option during theperiod taking account of sub-division and scrip issue of shares that occurredimmediately prior to admission to the AIM in July 2004, as set out below: 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Shares used for calculation of basic EPS 18,659,587 15,000,000 16,479,043Exercise of options 547,444 - 372,838 Shares used for calculation of diluted EPS 19,207,031 15,000,000 16,851,881 An adjusted earnings per share is also shown below, calculated by reference toearnings before exceptional items and goodwill amortisation. The Directorsconsider that this gives a useful indication of underlying performance. All figures are stated in pence per share 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 Adjusted earnings / (loss) per share beforegoodwill amortisation and exceptional costsAdjusted basic (pence per share) 0.19 (0.44) 5.25Adjusted diluted (pence per share) 0.19 (0.44) 5.13 The earnings / (losses) used in the adjusted earnings per share calculation areshown below: 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 (Loss) / profit for the period (138) (229) 303Goodwill amortisation 174 163 327Exceptional items - - 236Earnings / (Losses) used for adjusted EPS 36 (66) 866 3. Notes to the Consolidated Cash Flow Statement for the 6 months ended 30June 2005 (a) Reconciliation of operating profit to operating cash flows Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Operating (loss) / profit (64) (123) 881Goodwill amortisation 174 163 327Foreign exchange loss relating to non-operating activities - 11 -Depreciation charges 317 250 512Decrease / (increase) in stock 267 (364) (87)(Increase)/decrease in debtors (383) 326 652Increase/(decrease) in creditors 1,743 329 (2,548) Net cash inflow / (outflow) from operating activities 2,054 592 (590) (b) Reconciliation of cash flow to movement in net debt Unaudited Unaudited Audited 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 (Decrease) / Increase in cash in the period (110) 30 (1,799)Cash (inflow) / outflow from debt (3,585) - 1,532Change in net debt resulting from cash flows (3,695) 30 (267)Net debt arising on acquisition of subsidiary undertaking (500) - -New finance leases (124) - (121)Movement in net (debt) / funds in the period (4,319) 30 (388) Net debt at the beginning of the period (1,350) (962) (962)Net debt at the end of the period (5,669) (992) (1,350) 4. Availability of interims A copy of this interim statement is being sent to shareholders and copies areavailable from the Company's Registered Office at The Hopton Workshop, Devizes,Wiltshire, SN10 2EU. This information is provided by RNS The company news service from the London Stock Exchange