Final Results
Sirdar PLC
19 September 2002
Sirdar PLC
Preliminary results for the year ended 30th June 2002
Highlights
• Disposal of Acropolis Hotels Limited for £13.7m generated a profit of
£5.0m, and reaffirms strategy to focus on core business
• Turnover has remained broadly static at £65.1m (2001: £65.5m) due to full
year contribution from Ryalux, and despite difficult market conditions
• Operating profits have fallen to £4.9m (2001: £9.7m) due to continuing
pressure on margins
• Full year dividend per share maintained at 6.00p
• Acquisition of William Pownall and Sons subsequent to the year-end for
£5.0m strengthens position in high quality wool rich carpets
Chairman's Statement
Introduction
At the beginning of the financial year the group took another significant step
towards its strategy of concentrating on its core business by completing the
disposal of Acropolis Hotels Limited for net proceeds of £13.7m. This disposal
enabled the group to reduce net debt significantly and make available cash
resources to fund suitable acquisitions. After consideration of a number of
investment opportunities, the board were pleased to announce the acquisition of
William Pownall and Sons Limited for £5m on 15th August 2002.
The results
In my interim statement in March 2002 I reported that the difficult trading
conditions faced by the group in the first half of the year had continued into
the second half. Although there was a modest improvement in market conditions
in the final quarter of the year, sales did not return to the levels experienced
twelve months previously.
Turnover of £65.1m (2001: £65.6m) included a twelve month contribution from
Ryalux compared to nine months last year. However, this increase was partially
offset by prior year sales of £4.7m from the Hotel with no equivalent
contribution this year. Operating profit of £4.9m (2001: £9.7m) reflects these
difficult market conditions and the exclusion of any contribution from the
Hotel. Profit before taxation was £9.1m (2001: £8.5m) due to the profit on
disposal of the Hotel of £5.0m and a lower interest charge.
Divisional performance reviews and further financial information are contained
within the Group Chief Executive's Review and the Finance Report.
Earnings and dividend per share
The performance detailed above resulted in earnings per share of 16.36p (2001:
12.83p). The directors are recommending a final dividend of 4.00p per share
which is the same as last year. This dividend is payable on 25th November 2002
to those shareholders on the register of members at the close of business on 1st
November 2002.
Management and personnel
I would like to thank all our employees for their support in helping the group
face up to the difficult market conditions and supporting our plans to develop
and grow the business. I would also like to take this opportunity to welcome
the directors, management and staff of William Pownall and Sons Limited to the
group.
Current trading and future prospects
Whilst market conditions continue to be difficult, your board is confident that
the group is well positioned to meet the challenges and we will look to
strengthen our core business through further acquisitions when the opportunity
arises.
GERRY LUMB
Chairman
19th September 2002
Group Chief Executive's Review
Introduction
Shortly after my appointment last year, I re-affirmed the group's strategy to
focus on our core business. I was able to report that the sale of the hotel
business in July 2001 had given us the opportunity to reinvest in our core
activity. We reported in March 2002 that we continued to seek suitable
opportunities for investment but that we were being particularly diligent in
order to identify the most appropriate targets. I was, therefore, delighted
that in August 2002 we concluded the acquisition of William Pownall and Sons
Limited, a Lancashire-based manufacturer and distributor of high quality, wool
rich carpets. This acquisition strengthens our position in the residential
carpet sector and is expected to be earnings enhancing in the current financial
year.
Floor coverings division
Contract floor covering products are marketed under the Burmatex and Carpet Tile
Company brands. Burmatex supplies fibre bonded products in sheet and tiles
along with tufted tiles, whilst the Carpet Tile Company offers up-market tufted
tiles.
Residential products are marketed under the Ryalux, William Lomas and Rugs by
Ryalux brands. As described above, subsequent to the year end we added the
William Pownall range of products to our residential carpet business.
Sales of the floor coverings division increased by 12% to £50.4m (2001: £45.0m)
due to the inclusion of Ryalux for a full year for the first time. However
there was an underlying reduction in like-for-like sales which, combined with
pressure on margins, resulted in the division generating an operating profit of
£5.4m (2001: £8.0m). Although Ryalux sales had been below expectations earlier
in the year, sales towards the end of the current year were at similar levels to
last year, but margins have been affected by customers continuing to favour
lower priced products. Burmatex continued to encounter difficult trading
conditions, particularly in respect of export sales, but sales improved towards
the end of the year.
We have continued to make capital expenditure investment in this division. At
Burmatex we have commissioned new machinery to improve product quality and at
Ryalux we have invested in information systems to improve customer service
levels. We have also continued to focus on our product offerings at both of
these businesses. Ryalux has made significant investment in the brands,
focussing on the product quality and promotion of the direct delivery service.
Ryalux has also launched two new ranges at the start of the financial year,
Chatsworth Classics and V&A Twist, and has re-launched the long-standing
Devonshire Twist range subsequent to the year end. Burmatex also launched a
new, 30 colour, fibre bonded range which has re-juvenated sales in this sector.
Customer reaction has been very positive to all of these new products.
Specialist yarns division
This division includes hand knit yarns, which are marketed through the Sirdar
and Hayfield brands, and industrial machine yarns marketed under the Tilsa
brand. The division has also recently introduced a range of high-performance
technical yarns.
Specialist yarn sales for the year were £14.7m (2001: £15.9m) due to a
combination of modest growth in hand knit sales being offset by the
discontinuation of elastomeric yarns sales in September 2001 following the
closure of Clutsom & Kemp. The continued pressure on margins combined with
reduced production volumes, resulted in an operating profit of £30,000 (2001:
£610,000).
Capital expenditure during the year has been on new machinery, which can be used
for both the existing machine yarns and the new technical yarns. The
development of the technical yarns is currently in the early stages, although
there are encouraging signs that the developments will prove to be successful in
the medium term due to the technical yarns' potential wide range of
applications.
Current trading and future prospects
Overall, floor covering sales are broadly in line with last year and, with the
addition of Pownall from the middle of August 2002, we anticipate an improvement
in the full year result from this division.
The situation within the specialist yarns division is mixed with hand knit sales
enjoying a very strong start to the year but machine yarn sales well down on the
same period last year. The potential for the new technical yarns is exciting,
and your board is optimistic about the technical yarn developments.
Your board remains committed to addressing the main challenges of maximising
returns from the existing business in continuing difficult market conditions.
In line with our stated strategy we will continue to seek to strengthen our
position in the floor coverings market by investing in suitable opportunities as
they arise.
DUNCAN VERITY
Group Chief Executive
19th September 2002
Enquiries:
Mr J D Verity, Group Chief Executive, Sirdar PLC 01924 371 501
Mr K F Henry, Group Finance Director, Sirdar PLC 01924 371 501
Consolidated Profit and Loss Account
year ended 30th June 2002
2002 2001
As restated
£000 £000
Note
Turnover
- Continuing operations 65,143 60,924
- Discontinued operations - 4,659
2 65,143 65,583
Operating costs (60,215) (55,897)
Operating profit
- Continuing operations 4,928 8,188
- Discontinued operations - 1,498
2 4,928 9,686
Profit on disposal of subsidiary 5,032 -
undertaking
Net interest payable and similar (849) (1,203)
charges
Profit before taxation 9,111 8,483
Taxation (1,548) (2,552)
Profit for the year 7,563 5,931
Dividends 3 (2,775) (2,775)
Retained profit for the year 4,788 3,156
Earnings per share
- (basic and fully diluted) 4 16.36p 12.83p
Statement of Total Recognised Gains and Losses
year ended 30th June 2002
2002 2001
As restated
£000 £000
Profit for the year 7,563 5,931
Total recognised gains and losses relating to the year 7,563 5,931
Prior year adjustment (2,306) -
Total gains and losses recognised since last annual report 5,257 5,931
Consolidated Balance Sheet
as at 30th June 2002
2002 2001
As restated
£000 £000 £000 £000
Fixed Assets
Intangible 13,035 13,759
Tangible 17,751 28,732
30,786 42,491
Current assets
Stocks 15,375 18,308
Debtors 13,345 12,182
Cash at bank and in hand 15,232 2,849
43,952 33,339
Creditors (due within one year) (10,172) (15,535)
Net current assets 33,780 17,804
Total assets less current liabilities 64,566 60,295
Creditors (due after more than one year) (26,395) (26,681)
Deferred taxation (3,096) (3,327)
35,075 30,287
Equity shareholders' funds
Called up share capital 11,561 11,561
Share premium account 504 504
Capital redemption reserve 2,395 2,395
Profit and loss account 20,615 15,827
35,075 30,287
Consolidated Cash Flow Statement
year ended 30th June 2002
2002 2001
£000 £000 £000 £000
Note
Net cash inflow from operating activities 5 9,150 12,341
Returns on investments and servicing of
finance
Interest received 651 48
Interest paid and similar charges (1,659) (1,106)
(1,008) (1,058)
8,142 11,283
Corporation tax paid (2,473) (2,988)
Capital expenditure
Purchase of tangible fixed assets (2,073) (1,817)
Sale of tangible fixed assets and assets previously 157 1,895
held for resale
(1,916) 78
Acquisitions and disposals
Acquisition of business - (1,288)
Net overdraft acquired - (1,979)
Disposal of subsidiary undertaking 13,697 -
Cash balance disposed of with subsidiary (21) -
undertaking
Receipt of deferred consideration - 130
13,676 (3,137)
Equity dividends paid (2,775) (2,705)
Cash inflow before financing 14,654 2,531
Financing
Issue of share capital - 10
Redemption of loan notes - (168)
Payment into cash collateral account (7,548) (2,319)
Repayment of bank loan (86) (65)
(7,634) (2,542)
Increase/(decrease) in cash 6 7,020 (11)
A reconciliation of net cash flow to movement in net debt is set out in note 7.
NOTES
1. Basis of preparation
These preliminary financial statements do not constitute statutory accounts
within the meaning of section 240 of the Companies Act 1985. The group's
statutory financial statements on which the company's auditors,
PricewaterhouseCoopers, have given an unqualified opinion in accordance with
Section 235 of the Companies Act 1985, are to be delivered to the Registrar of
Companies.
The financial information for the year ended 30th June 2001 has been extracted
from the audited accounts for that year as restated following the adoption of
Financial Reporting Standard 19, Deferred Tax from 1st July 2001. Adoption of
this standard represents a change from the previous accounting policy and the
comparative figures at 30 June 2001 have been restated with a net reduction in
shareholders' funds of £2,306,000. Certain other comparative information has
also been restated to accord with the analysis adopted at 30th June 2002. The
auditor's report on the accounts for the year ended 30 June 2001 was unqualified
and did not contain any statement under section 237 of the Companies Act 1985.
2. Segmental information
Analysis of results by class of business
Turnover Operating profit Net operating assets/
(liabilities)
2002 2001 2002 2001 2002 2001
As restated
£000 £000 £000 £000 £000 £000
Floor coverings 50,426 45,043 5,433 8,046 36,778 38,229
Specialist yarns 14,717 15,881 30 610 11,137 11,038
Ongoing 65,143 60,924 5,463 8,656 47,915 49,267
Hotel (discontinued) - 4,659 - 1,525 - 8,262
65,143 65,583 5,463 10,181 47,915 57,529
Central group (535) (495) (1,376) (1,160)
costs/liabilities
Total net operating assets 46,539 56,369
Operating profit 4,928 9,686
Profit on disposal of subsidiary 5,032 -
undertaking
9,960 9,686
Net interest payable and similar (849) (1,203)
charges
Profit before taxation 9,111 8,483
Net operating assets are stated excluding inter-company financing and are derived from the balance
sheet total by excluding bank borrowings, loans and loan notes totalling £26,481,000 (2001:
£28,751,000), cash collateral of £9,667,000 (2001: £2,319,000), cash on deposit of £5,000,000 (2001:
£nil) and deferred consideration of £350,000 (2001: £350,000) receivable on the disposal of Eversure
Textiles Limited.
3. Dividends
2002 2001
£000 £000
Interim - 2.00p (2001: 2.00p) 925 925
Proposed final - 4.00p (2001: 4.00p) 1,850 1,850
2,775 2,775
4. Earnings per share
The calculation of basic earnings per share is based on earnings of £7,563,000 (2001: £5,931,000) and
on 46,242,455 (2001: 46,236,537) ordinary shares, being the weighted average number in issue during
the year.
Adjusted earnings per share, as set out below, is calculated after excluding the profit on disposal of
subsidiary of £5,032,000 in the year ended 30th June 2002 and is presented in order to demonstrate the
underlying performance of the group.
2002 2001
Earnings Profit per share Earnings Profit per
share
£'000 pence £'000 Pence
Earnings and basic profit 7,563 16.36 5,931 12.83
per share
Profit on disposal of (5,032) (10.89) -
subsidiary
Adjusted earnings and profit per 2,531 5.47 5,931 12.83
share
There is no dilution caused by share options.
5. Reconciliation of operating profit to net cash inflow from operating activities
2002 2001
£000 £000
Operating profit 4,928 9,686
Depreciation 2,385 2,479
Goodwill amortisation 724 519
Loss/(profit) on sale of tangible fixed assets 69 (28)
Decrease in stocks 2,884 983
(Increase)/decrease in debtors (1,324) 744
Decrease in creditors (516) (2,042)
Net cash inflow from operating activities 9,150 12,341
6. Analysis of changes in net debt
2002 Cash flows Loan note 2001
redemption
£000 £000 £000 £000
Cash at bank and in hand 5,565 5,035 - 530
Bank overdrafts - 1,985 - (1,985)
5,565 7,020 - (1,455)
Cash collateral account 9,667 7,548 (200) 2,319
Loan notes (26,094) - 200 (26,294)
Bank loan (387) 86 - (473)
Total net debt (11,249) 14,654 - (25,903)
7. Reconciliation of movement in net debt
2002 2001
£000 £000
Increase/(decrease) in cash 7,020 (11)
Loan notes issued - (26,462)
Loan notes redeemed - 168
Payment into cash collateral account 7,548 2,319
Bank loan acquired with subsidiary - (538)
Bank loan repaid during year 86 65
Movement in net debt 14,654 (24,459)
Net debt at start of year (25,903) (1,444)
Net debt at end of year (11,249) (25,903)
8. Profit on disposal of subsidiary undertaking
On 5th July 2001 the group disposed of its interest in the entire issued share capital of Acropolis Hotels
Limited.
£000
Net assets disposed of comprised:
Tangible fixed assets 9,811
Stock 49
Debtors 328
Cash balance 21
Creditors (419)
Deferred tax (1,125)
8,665
Profit on disposal 5,032
Proceeds of disposal (net of expenses of £440,000) 13,697
9. Post balance sheet event
On 15th August 2002 the group acquired the whole of the issued share capital of William Pownall and Sons Limited, a
Lancashire-based manufacturer and distributor of high quality wool rich carpets, for a cash consideration of £5.0
million. The anticipated value of net assets of Pownall to be acquired at completion is £2.25 million with any
variation from this level being subject to a pound for pound adjustment to consideration, based on final completion
accounts.
END
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