Strategic Minerals Regulatory News (SML)

4 Apr 2005 07:00

Smallbone PLC04 April 2005 Smallbone PLC Preliminary Results for the year ended 31 December 2004 Smallbone plc, the supplier of luxury kitchens and stone flooring, todayannounces its maiden preliminary results since its admission to AIM in July2004. Financial Highlights • Turnover increased 56% to £23.6 million (2003: £15.0 million) through improved trading performances across all subsidiaries and full year's contribution from Smallbone of Devizes • Operating profit before goodwill and exceptionals of £1.05 million (2003: loss of £31,000) • Profit before tax of £386,000 (2003: loss £345,000) • Earnings per share, adjusted for goodwill amortisation and exceptional items, of 5.25p (2003: loss 0.61p) Operational Highlights • New Smallbone showroom in Sunningdale successfully opened and outlets in St Johns Wood, London and Glasgow due to open within next three months • Negotiations underway for Smallbone New York flagship store to open in early 2006 • Smallbone 2004 order intake up 17% to £22.6 million; Paris Ceramics 2004 order intake up 34% to $9.9 million • Smallbone Stone fully integrated and granite workshop successfully established • Paris Ceramics operation in the US had strong sales of $9.5 million; new showroom successfully opened in Washington DC Outlook • Record 2005 opening Group forward order book of over £14 million, up 36% • New Walnut & Silver kitchen range launched in January to encouraging market response • Launch of new bedroom and bathroom ranges this coming winter Charles Smallbone, Chairman and Chief Executive, commented: "2004 was a good year. Not only did we deliver our planned turnaround of theGroup but our July float raised the capital to fund our organic growth strategy.Now we have a solid, profitable base from which to build and 2005 will be a yearof investment, increasing the number of showrooms and ranges that we offer, withthe aim of achieving substantial growth in 2006 and 2007." 4 April 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 Smallbone plc Chairman's statement 2004 proved a significant and highly positive watershed in the development ofSmallbone plc. Our flotation on AIM in July 2004 not only raised the capital required to meetour organic growth plans but also heightened the profile of the Group and openedup the opportunity to issue shares in order to finance organic and acquisitivegrowth. Financial results Significantly, 2004 marked a turnaround for the Group. Turnover increased to£23.6 million (2003: £15.0 million). Operating profits before goodwillamortisation and exceptional items increased to £1.05 million (2003: loss of£31,000) and pre-tax profits, post exceptional items, were £386,000 (2003: lossof £345,000). This improvement has been achieved despite having absorbed theadditional cost of being a public company and, as we previously indicated in ourtrading update in February, pre-tax profits for the period were adverselyaffected by an exceptional charge of £236,000, attributable to one-offexceptional items relating to the Group's US subsidiary, Paris Ceramics Inc. Adjusted earnings per share was 5.25 pence (2003: loss of 0.61 pence). TheDirectors are not recommending payment of a dividend. The turnaround has resulted from improved trading performances across allsubsidiaries and, in particular, can be attributed to our more pro-activeapproach to sales in our kitchens business. These results were also positivelyenhanced by the savings and efficiencies made by restructuring our ParisCeramics business in the UK and the integration of a selection of its flooringproducts into Smallbone of Devizes to form Smallbone Stone. It has also beenextremely encouraging to see the growth in our Paris Ceramics business in theUS. Operational review We acquired Smallbone of Devizes in July 2003, so 2004 represents its first fullfinancial year in the Group. In 2004 its turnover was £17.3 million yielding anoperating profit of £1,063,000. This compares favourably to a turnover of £13million and operating profits of £246,000 in the year to 31 March 2003, the lastaudited financial year before our acquisition. We believe that Smallbone of Devizes has the most widely recognised brand in theluxury kitchen market but has suffered over the last 10 years from lack ofshowroom coverage, lack of new products and, prior to its acquisition by theGroup, less than optimal sales management. As referred to in our July 2004prospectus, we aim to correct these fundamental deficiencies together withimplementing operating efficiencies, which should result in increased sales andprofits. Improved sales management has been the first area that we have been able toimpact, although the accounting results always lag the improvement that we aremaking in sales orders because the gestation period between taking an order andits installation, which is when we account for the sale, typically takes between6 and 9 months. Our order intake has been very encouraging with the £22.6million of orders placed in 2004 being 17% higher than 2003. The improvementwould have been even higher had we not experienced a marked slowdown in ourexports to the US market. However, when compared with the growth we haveexperienced in our US-based Paris Ceramics business, we feel that this onlyunderlines the importance of our strategy to open a flagship showroom in the USby 2006 rather than continue to service it from the UK. We are currentlynegotiating to lease one of two possible showroom sites in New York, focusingour search specifically on the Upper East Side in Manhattan. We have also made good progress with opening new showrooms in the UK. OurSunningdale showroom opened in September 2004 and we have taken leases onshowrooms in St. John's Wood and Glasgow, which are both due to open within thenext 3 months. We estimate that it takes 10 months before a new showroom reachesbreakeven but, once it is fully up and running, we expect it to average inexcess of £1.25 million of sales and approximately £400,000 of contribution toprofit. Hence, the efforts and investment that we are making now will onlyreally begin to impact in the 2006 and 2007 results. After these new openings,the company will have 11 UK showrooms and, we believe, there is plenty of scopefor more in the UK market. Our aim of introducing new products is also coming to fruition. In January 2005,we launched our first new kitchen range for 3 years, the "Walnut & Silver"range, and the initial response from the market is encouraging. This comingwinter we will launch 2 new ranges of bedrooms and bathrooms and the designs forthese are well underway. In the 1980s, bedrooms and bathrooms used to compriseabout 30% of our sales whereas they now account for only about 10%. We believethat this is an offering ripe for growth. During the latter part of 2004, we launched Smallbone Stone as a brand to marketstone flooring products through our showroom network. Smallbone Stone is arationalised offering from our Paris Ceramics range, particularly selected forsuitability for kitchen and bathroom flooring and has allowed us to makesubstantial savings in our Paris Ceramics operation in the UK. All theseinitiatives are paying off in increased sales and margins. We also opened agranite workshop, which enables us to supply our own range of granite worktops.This has not only improved our margins, as we used to subcontract this function,but has enabled us to source and work with some rare and semi-precious stones tobroaden choice and individuality for our customers. Smallbone of Devizes' Managing Director, Sally Wilkinson and her team havedriven hard and coped tremendously well with all the changes and growth of thebusiness in 2004 and I would like to thank them, on behalf of myself and all theshareholders, for their sterling efforts. In 2004 we made significant changes to the Paris Ceramics business. Previously,Paris Ceramics Limited would source and buy the entire range of product andwould sell to Paris Ceramics Inc. for a small additional handling charge. NowParis Ceramics Inc. is directly responsible for its business and Smallbone ofDevizes directly sources a rationalised range of stone flooring products intoSmallbone Stone. Turning to Paris Ceramics Inc in the US, I am pleased to report that sales arebouncing back vigorously after the tough market conditions experienced in thewake of 9/11. In 2004, the company had a turnover of $9.5 million, up 13% on2003, and had an order intake of $9.9 million, up 34% on 2003. Margins haveimproved, as we have been able to increase prices to compensate for thestrengthening of the euro, where most of the product is sourced, against thedollar. In March 2004 we opened a new showroom in Washington DC and, in October, weupgraded our San Francisco showroom to a larger, higher profile site, which hasalready been a great success. In 2005, a new showroom is planned in Florida andwe will also be relocating our Boston showroom and undertaking a substantialrefurbishment of our New York showroom during the year. We have also seen ahigher rate of growth coming through from our established showrooms, whichshould enable us to substantially meet our growth targets. On the product development side, we have concentrated on sourcing new andalternative stones and to add processing capability in order to increase ourdifferentiation and ability to add value to the raw material. Regrettably, PCI's profits suffered due to unexpected, and one-off, charges thatwe announced on 10 February, which adversely affected our pre-tax profits.Firstly, we chose to make settlement for a product liability claim that aroserelating to a one-off installation that PCI supplied in 1993. Secondly, weincurred some US tax penalites and interest relating to payment of sales taxesfrom various US states. Both of these one-off charges have now been fullyresolved. My sincerest thanks must go to David Guthrie, PCI's Chief Operating Officer andthe PCI team for all their hard work and efforts during a year of greattransition. Outlook We have started 2005 well with a record Group order book of £14.2 million, up36% on 2004. As a Group, we have the capital to fulfil our organic growth plans and 2005 willbe a year of investment as we lay the foundations for substantial profit growthin 2006 and beyond. We are also anxious to increase our market share at theluxury end of the home furnishings sector and, to that end, we are keeping oureyes open for suitable acquisition opportunities. Finally, I would like to thank my fellow Directors for their commitment,enthusiasm and hard work and also our professional advisers for theirencouragement and sound advice, especially during the flotation process. Charles SmallboneChairman & Chief Executive Consolidated profit and loss account for the year ended 31 December 2004 Note 2004 2003 Unaudited Audited £'000 £'000 Turnover 2 23,563 15,027 Operating charges (23,009) (15,312) Operating profit / (loss) 2 554 (285) Interest receivable and similar income 64 45Interest payable and similar charges (232) (105) Profit / (loss) on ordinary activitiesbefore taxation 2, 3 386 (345) Taxation on profit / (loss) on ordinaryactivities 4 (83) - Retained profit /(loss) for the financialYear 303 (345) Earnings / (loss) per share 5 Basic (pence per share) 1.84p (2.30)pDiluted (pence per share) 1.79p (2.30)p Adjusted earnings / (loss) per share before goodwill amortisation and exceptional costsAdjusted basic (pence per share) 5.25p (0.61)pAdjusted diluted (pence per share) 5.13p (0.61)p All amounts relate to continuing activities. Consolidated statement of total recognised gains and losses for the year ended31 December 2004 2004 2003 Unaudited Audited £'000 £'000 Profit / (loss) for the financial year 303 (345)Foreign exchange gains 19 70 Total recognised gains and losses for the financial year 322 (275) Consolidated balance sheet at 31 December 2004 Note 2004 2004 2003 2003 Unaudited Unaudited Audited Audited £'000 £'000 £'000 £'000 Fixed assetsIntangible assets 5,804 6,110Tangible assets 2,345 1,800 8,149 7,910 Current assetsStocks 2,582 2,495Debtors 1,615 2,267Cash at bank and in hand 735 2,538 4,932 7,300Creditors: amounts falling duewithin one year (8,589) (12,337) Net current liabilities (3,657) (5,037) Total assets less current liabilities 4,492 2,873 Creditors: amounts falling dueafter more than one year (1,332) (1,500) 3,160 1,373 Capital and reservesShare capital 920 1Share premium 1,296 750Other reserve 1,958 1,958Profit and loss account (1,014) (1,336) Equity shareholders' funds 6 3,160 1,373 Consolidated cash flow statement for the year ended 31 December 2004 Note 2004 2004 2003 2003 Unaudited Unaudited Audited Audited £'000 £'000 £'000 £'000 Net cash outflow from operatingactivities 7(a) (590) (1,036) Returns on investments andservicing of financeInterest received 64 45Interest paid (195) (105)Interest element of finance leaserental (1) - Net cash outflow fromreturns on investments andservicing of finance (132) (60) Taxation Corporation tax paid (29) (275) Capital expenditure and financialinvestmentPayments to acquire tangible fixedasset (960) (99) (960) (99)Acquisitions Purchase of subsidiary undertakings - (3,354)Net cash acquired with subsidiaryundertakings - 4,495Further consideration paid in respectof prior period acquisitions (21) (15) (21) 1,126 Cash outflow before financing (1,732) (344) FinancingShare capital issued (net of issuecosts) 1,465 -New loans - 3,060Loans repaid (1,526) (68)Capital element of finance leasesrepaid (6) - Net cash (outflow) / inflow fromfinancing (67) 2,992 (Decrease) / increase in cash 7(b) (1,799) 2,648 Notes to the preliminary financial information 1 Basis of preparation The accounting policies adopted in this preliminary announcement are consistentwith those in the most recent set of annual financial statements. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 31 December 2004 or 2003. The financialinformation for the year ended 31 December 2003 is derived from the company'sstatutory accounts for that year and those statutory accounts have beendelivered to the Registrar of Companies. The auditors have reported on thoseaccounts; their report was unqualified and did not contain statements under theCompanies Act 1985, s237(2) or (3). The statutory accounts for the year ended31 December 2004 will be finalised on the basis of the financial informationpresented in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. 2 Segmental analysis i) By class of business Turnover Pre-tax profit / (loss) 2004 2003 2004 2003 £'000 £'000 £'000 £'000Kitchens, bedrooms and bathrooms 17,313 8,454 1,063 607 Stone products 6,250 6,573 (509) (892) 23,563 15,027 554 (285)Net interest (168) (60) Profit / (loss) on ordinary activitiesbefore taxation 386 (345) ii) Analysis by geographical market Turnover Pre-tax profit / (loss) 2004 2003 2004 2003 £'000 £'000 £'000 £'000United Kingdom 18,358 9,890 303 (398)North America 5,205 5,137 251 113 23,563 15,027 554 (285)Net interest (168) (60) Profit / (loss) on ordinary activitiesbefore taxation 386 (345) 3 Exceptional costs Profit before tax is stated after charging the following exceptional costs: 2004 2003 £'000 £'000Product liability settlement 125 -Penalties and interest on late payment of USA sales taxes 111 - 4 Taxation on profit /(loss) on ordinary activities The tax assessed for the period is lower than the standard rate of corporationtax in the UK applied to profit before tax due primarily to the utilisation ofprior year losses. 5 Earnings per share Earnings per ordinary share have been calculated using the weighted averagenumber of shares in issue during the year of 16,479,043 (2003: 15,000,000), andthe earnings, being profit after tax, are £352,000 (2003: Loss £345,000). Thecalculation of the earnings per share before goodwill amortisation andexceptional costs use an adjusted profit after tax of £915,000 (2003: Loss£91,000). The shares used in the calculation of diluted earnings per share are as follows: 2004 2003 Number Number Shares used for calculation of basis EPS 16,479,043 15,000,000Exercise of options 372,838 - 16,851,881 15,000,000 An adjusted earnings per share is also shown, calculated by reference toearnings before exceptional items and goodwill amortisation. The Directorsconsider that this gives a useful indication of underlying performance. Theeffect of adjusting earnings for goodwill amortisation and exceptional items isshown below: 2004 2003 £'000 Basic Diluted £'000 Basic DilutedProfit for the year 303 1.84p 1.79p (345) (2.30)p (2.30)pGoodwill amortisation 327 1.98p 1.94p 254 1.69p 1.69pExceptional items 236 1.43p 1.40p - - - 866 5.25p 5.13p (91) (0.61)p (0.61)p 6 Reconciliation of movements in shareholders' funds 2004 2003 £'000 £'000Profit / (loss) for the period 303 (345)Foreign exchange differences 19 70Proceeds from issue of shares 2,008 -Costs attributable to share issue (543) -Net additions /(deductions) to /(from) shareholders' funds 1,787 (275)Opening shareholders' funds 1,373 1,648 Closing shareholder's funds 3,160 1,373 7 Notes to the cash flow statement a) Reconciliation of operating loss to net cash outflow from operatingactivities 2004 2003 £'000 £'000 Operating profit / (loss) 554 (285)Amortisation of goodwill 327 254Depreciation of tangible fixed assets 512 345Loss on disposal of tangible fixed assets - 19Increase in stocks (87) (39)Decrease / (increase) in debtors 652 (321)Decrease in creditors (2,548) (1,009) Net cash outflow from operating activities (590) (1,036) b) Reconciliation of net cash flow to movements in net debt 2004 2003 £'000 £'000 (Decrease) / increase in cash (1,799) 2,648 Cash outflow / (inflow) from changes in debt 1,532 (2,992) Movement in net debt arising from cashflows (267) (344)Net debt acquired with subsidiary undertaking - -Net debt arising on acquisition of subsidiaryundertaking - (398)New finance leases (121) - Opening net debt (962) (220) Closing net debt (1,350) (962) c) Analysis of net debt At At 1 January 31 December 2004 Cash flow Other 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand 2,538 (1,803) - 735Overdrafts (4) 4 - - 2,534 (1,799) - 735Bank loans due within one year (1,560) 1,526 (242) (276)Bank loans due after one year (1,500) - 242 (1,258)Loan notes due within one year (398) - - (398)Other loans due within one year (38) - - (38)Finance lease and hire purchase liabilities - 6 (121) (115) Total (962) (267) (121) (1,350) This information is provided by RNS The company news service from the London Stock Exchange