Interim Results

Sirdar PLC 21 March 2001 SIRDAR PLC 21st MARCH 2001 INTERIM RESULTS FOR THE SIX MONTHS TO 31st DECEMBER 2000 Chairman's Statement Introduction Since my statement in September 2000 accompanying the results for the year ended 30th June 2000 there have been significant changes to the structure of the group and its management. The acquisition of Ryalux Carpets Limited was completed on 10th October 2000 and I would like to take this opportunity to welcome all the employees of Ryalux to the Sirdar group. Following the acquisition of Ryalux the board decided that a full time Group Chief Executive should be appointed and Duncan Verity, who joined the main board on 17th October 2000, was appointed to that position with effect from 1st January 2001. At the same time I became Non-executive Chairman. The results I am pleased to report that operating profit for the half year to 31st December 2000 was £4,760,000 (1999: £3,245,000). After allowing for interest payable the profit before taxation was £4,385,000 (1999: £3,137,000). Ryalux contributed turnover of £7,949,000 and operating profit, before goodwill amortisation, of £1,251,000 in the twelve weeks from the date of its acquisition and the group also benefited from elimination of the losses at Eversure Textiles which was disposed of in June 2000. Cash generation from operating activities has once again been very strong amounting to £4,921,000 during the period. The overall decrease in cash, having taken on net overdrafts of £2,303,000 with the acquisition of Ryalux, was £145,000. Net debt rose to £28,567,000 following the issue of £24,642,000 loan notes to finance the acquisition. The improved performance detailed above and the method of financing the acquisition of Ryalux has resulted in an increase in earnings per share of 45 per cent. to 6.69p and an increase in adjusted earnings per share of 52 per cent. to 7.00p. The board has declared an interim dividend of 2.00p per share which represents a 5 per cent. increase on last year's interim dividend. This dividend is payable on 8th May 2001 to those shareholders on the register of members at the close of business on 6th April 2001. Floor coverings This division has been significantly strengthened by the acquisition of Ryalux. The two businesses of Burmatex and Ryalux now constitute the major part of the group's activities. Both businesses are well established market leaders with reputations for quality and track records of strong profitability and cash generation. Ryalux has instigated a number of major initiatives recently including the introduction of Tru-trac technology to improve the quality of its top of the range velvet carpets. It has also launched a new brand 'Rugs by Ryalux' to capitalise on the demand for rugs generated by the current popularity of laminate, wood and other smooth flooring. Sales at Burmatex have increased from £10,872,000 to £11,371,000 due to Burmatex and the Carpet Tile Company maximising their opportunities with strong performances from their leading products within their range of contract carpet and carpet tiles. Costs have been well controlled and in spite of some price pressures this has resulted in an operating profit of £2,647,000 compared to £2,572,000 to December 1999. Confidence in the future has lead Burmatex to place an order for a new £1million production facility for fibre bonded carpet. This investment will not only improve quality, reduce waste and increase margins but will enable the company to develop new and exciting products whilst maintaining itself at the leading edge of technology. Hand knitting and machine yarns Turnover in this division increased to £8,559,000 including a contribution of £971,000 from Clutsom & Kemp. Sirdar hand knit sales and Tilsa machine yarn sales improved over last year with both businesses having success in export markets, particularly in Eire and the USA. The new machines for Clutsom & Kemp were commissioned later than expected but are now fully operational. This delay did, however, impact on operating profit which was £538,000 (1999: £561,000). There has also been some rationalisation of the customer base in the UK and the development of sales to new export markets is a priority. Hotel The hotel has continued to trade well throughout the period with turnover showing growth to £2,359,000 and operating profit virtually in line with last year at £676,000. Current trading and future prospects Over the last twelve months the board has made significant progress in implementing the strategy set out following last year's strategic review. The loss making curtains and accessories division has been sold and acquisitions have been completed for both the yarns division and the floor coverings division. We have appointed a Group Chief Executive whose previous experience as Chief Executive of Ryalux reflects the new balance of the group. He and the board are confident that we have the right strategy and structure to continue to produce the desired results. The main emphasis will remain on our core business of floor coverings and specialist yarns. We are actively seeking further acquisitions in our core business area whilst consideration is being given to the disposal of non-core activities. The second half of the year has started well. Contract floor coverings are particularly buoyant and, with a new production management team in place with effect from 1st January 2001, Burmatex are confident about the outlook for the next six months. In addition, close co-operation is taking place between Burmatex and Ryalux over the sales of existing products, development of new products and the exploitation of new markets. Ryalux is well covered in terms of raw material supplies at favourable prices and this will help to maintain or improve margins over the next eighteen months. The second half of the year will also benefit from the inclusion of Ryalux for the full period compared to less than half of the first period. Yarns sales are continuing the trends recorded in the first half but are facing up to further rationalisation of the UK customer base. The recent growth in export sales from this division is expected to continue. Overall, I believe these results demonstrate the excellent progress made in implementing the board's declared strategy and I am confident of further significant progress in the future. GERRY LUMB Chairman 21st March 2001 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 6 months ended 31st December 2000 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 31st 31st 30th December December June 2000 1999 2000 £000 £000 £000 Note Turnover Continuing operations - ongoing 22,289 20,305 41,082 Continuing operations - acquisitions 7,949 - - Discontinued operations - 3,901 6,498 2 30,238 24,206 47,580 Operating profit Continuing operations - ongoing 3,655 3,682 7,321 Continuing operations - acquisitions 1,251 - - Discontinued operations - (437) (1,272) Operating profit before goodwill amortisation 4,906 3,245 6,049 Goodwill amortisation (146) - - Operating profit 2 4,760 3,245 6,049 Continuing operations - ongoing 3,655 3,682 7,321 Continuing operations - acquisitions 1,105 - - Discontinued operations - (437) (1,272) Operating profit 2 4,760 3,245 6,049 Loss on disposal of discontinued operation 2 - - (7,024) Interest payable (375) (108) (193) Profit/(loss) before taxation 4,385 3,137 (1,168) Taxation 1,293 940 1,776 Profit/(loss) for the period 3,092 2,197 (2,944) Dividends 3 925 906 2,686 Retained profit/(loss) 5 2,167 1,291 (5,630) for the period Earnings/(loss) per 4 6.69p 4.60p (6.19p) share (Basic and fully diluted) Adjusted earnings per 4 7.00p 4.60p 8.58p share There are no recognised gains or losses other than those disclosed in the consolidated profit and loss account. Consolidated Balance Sheet as at 31st December 2000 Unaudited Unaudited Audited 31st 31st 30th June December 2000 December 2000 1999 £000 £000 £000 £000 £000 £000 Note Tangible 28,877 23,631 22,652 fixed assets Intangible 12,980 - - fixed assets Current assets Stocks 18,236 12,107 9,935 Debtors 13,453 9,660 8,119 Cash at bank 975 215 314 and in hand 32,664 21,982 18,368 Creditors (due witin one year) 15,049 12,106 10,703 Net current assets 17,615 9,876 7,665 Total assets less current liabilities 59,472 33,507 30,317 Creditors (due after one year) 27,699 773 721 31,773 32,734 29,596 Equity shareholders' funds Called up ordinary share capital 11,561 11,920 11,556 Share premium account 5 504 499 499 Capital redemption reserve 5 2,395 2,031 2,395 Profit and loss account5 17,313 18,284 15,146 31,773 32,734 29,596 Consolidated Cash Flow Statement 6 months ended 31st December 2000 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30th June 31st 31st 2000 December December 2000 1999 £000 £000 £000 £000 £000 £000 Note Net cash inflow from operating activities 7 4,921 4,056 9,100 Servicing of finance Interest paid (251) (111) (193) (251) (111) (193) Corporation tax (paid)/received (500) 31 (1,220) Capital expenditure Purchase of tangible fixed assets (1,065) (598) (1,062) Sale of tangible fixed assets and assets previously held for resale 2,134 112 198 1,069 (486) (864) Acquisitions and disposals Acquisition of business (including) net overdraft acquired) (3,591) - (262) Disposal of subsidiary undertaking - - 44 (3,591) - (218) Equity dividends paid (1,781) (1,818) (2,724) (133) 1,672 3,881 Financing Issue of share capital 10 131 131 Purchase of own shares - (272) (1,151) Repayment of bank loan (22) - - (12) (141) (1,020) (Decrease)/ increase in 8 (145) 1,531 2,861 cash A reconciliation of net cash flow to movement in net debt is set out in Note 9. Notes: 1. BASIS OF PREPARATION The financial information has been prepared using the accounting policies set out in the group's report and accounts for the year ended 30th June 2000. The comparative figures for the year ended 30th June 2000 do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 30th June 2000 have been delivered to the Registrar of Companies. The auditors have reported on those accounts. Their report was not qualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. SEGMENTAL INFORMATION Analysis of results by class of business Turnover 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Floor coverings 19,320 10,872 22,023 Hand knitting and machine yarns 8,559 7,106 14,496 Hotel 2,359 2,327 4,563 Continuing 30,238 20,305 41,082 Curtains and accessories - 3,901 6,498 (discontinued) 30,238 24,206 47,580 Operating profit/(loss) before central group costs 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Floor coverings 3,752 2,572 5,348 Hand knitting and machine yarns 538 561 944 Hotel 676 679 1,299 Continuing 4,966 3,812 7,591 Curtains and accessories - (419) (1,239) (discontinued) 4,966 3,393 6,352 Central group costs (206) (148) (303) Operating profit 4,760 3,245 6,049 Loss on disposal of subsidiary - - (7,024) 4,760 3,245 (975) Net interest (375) (108) (193) 4,385 3,137 (1,168) Net operating assets 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Floor coverings 34,504 7,531 8,416 Hand knitting and machine yarns 16,270 13,713 13,034 Hotel 10,111 9,573 9,424 Continuing 60,885 30,817 30,874 Curtains and accessories - 4,906 - (discontinued) 60,885 35,723 30,874 The results of Ryalux Carpets Limited are included within the floor coverings division from the date of acquisition. 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 £29,542,000 (31st December 1999: £2,989,000, 30th June 2000: £1,758,000) and excluding deferred consideration receivable of £430,000 (31st December 1999: Nil, 30th June 2000: £480,000) on the disposal of Eversure Textiles Limited. The loss on disposal of subsidiary in the year ended 30th June 2000 relates to the sale of Eversure Textiles Limited. 3. DIVIDENDS 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Ordinary :- Interim - 2.00p (1999 : 1.90p) 925 906 906 Final - 3.85p - - 1,780 925 906 2,686 4. EARNINGS/(LOSS) PER SHARE The calculation of basic earnings/(loss) per share is based on earnings of £3,092,000 (31st December 1999: earnings of £2,197,000, 30th June 2000: losses of £2,944,000) and on 46,230,716 (31st December 1999: 47,775,385, 30th June 2000: 47,565,240) ordinary shares being the weighted average number in issue during the period. Adjusted earnings per share is calculated after excluding the goodwill amortisation in the period ended 31st December 2000 and after excluding the loss on disposal of subsidiary in the year ended 30th June 2000 and is calculated in order to demonstrate the underlying progress of the group. There is no dilution caused by share options. 5. RESERVES 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Share premium account Brought forward 499 421 421 Premium on shares issued 5 78 78 Carried forward 504 499 499 Capital redemption reserve Brought forward 2,395 1,938 1,938 Purchase of own shares - 93 457 Carried forward 2,395 2,031 2,395 Profit and loss account Brought forward 15,146 17,265 17,265 Profit/(loss) for period 2,167 1,291 (5,630) Goodwill written back - - 4,662 Purchase of own shares - (272) (1,151) Carried forward 17,313 18,284 15,146 6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Profit/(loss) for period 3,092 2,197 (2,944) Dividends (925) (906) (2,686) 2,167 1,291 (5,630) New share capital subscribed 10 131 131 Purchase of own shares - (272) (1,151) Goodwill written back - - 4,662 Net addition to /(reduction in) shareholders' 2,177 1,150 (1,988) funds Opening shareholders' funds 29,596 31,584 31,584 Closing shareholders' funds 31,773 32,734 29,596 7. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 Operating profit 4,760 3,245 6,049 Depreciation 1,181 1,015 1,923 Goodwill amortisation 146 - - Profit on sale of tangible fixed assets (385) (67) (108) Decrease in stock 1,239 329 545 Decrease/(increase 56 (523) (323) in debtors (Decrease) /increase (2,076) 57 1,014 in creditors Net cash inflow from operating activities 4,921 4,056 9,100 8. ANALYSIS OF CHANGES IN NET DEBT 31st Cash Other 30th December flows June 2000 2000 £000 £000 £000 £000 Cash at bank and in hand 975 661 - 314 Bank overdrafts (2,564) (806) - (1,758) (1,589) (145) - (1,444) Loan notes (26,462) - (26,462) - issued Bank loan acquired (516) 22 (538) - with subsidiary Total net debt (28,567) (123) (27,000) (1,444) 31st Cash Other 30th December flows June 1999 £000 1999 £000 £000 £000 Cash at bank and in hand 215 (24) - 239 Bank overdrafts (2,989) 1,555 - (4,544) Total net debt (2,774) 1,531 - (4,305) 30th June Cash Other 30th 2000 flows June £000 £000 1999 £000 £000 Cash at bank and in hand 314 75 - 239 Bank overdrafts (1,758) 2,786 - (4,544) Total net debt (1,444) 2,861 - (4,305) 9. RECONCILIATION OF MOVEMENT IN NET DEBT 31st 31st 30th June December December 2000 2000 1999 £000 £000 £000 (Decrease) increase in cash (145) 1,531 2,861 Loan notes (26,462) - - issued Bank loan acquired (538) - - with subsidiary Bank loan repaid during the 22 - - period Movement in net (27,123) 1,531 2,861 debt Net debt at start (1,444) (4,305) (4,305) of period Net debt at end of period (28,567) (2,774) (1,444) 10. ACQUISITION OF RYALUX CARPETS LIMITED On 10th October 2000 the Company acquired Ryalux Carpets Limited for a total consideration of £27,750,000. Ryalux has contributed £1,332,000 to operating cash flow, paid £324,000 in respect of interest and utilised £391,000 for capital expenditure £000 The net assets acquired were as follows:- Tangible fixed assets 6,484 Assets held for resale 1,562 Intangible fixed assets 1,879 Stock 9,540 Debtors 5,430 Cash & bank balances 50 Bank overdrafts (2,353) Creditors (4,797) Taxation (754) Bank loan (538) Net assets acquired 16,503 Goodwill 11,247 27,750 Consideration Loan notes 26,462 Cash 100 Acquisition costs 1,188 27,750 Assets held for resale comprised certain assets not related to the ongoing activities of Ryalux which, under the terms of the Sale and Purchase Agreement, were repurchased by one of the vendors immediately following completion. Loan notes amounting to £26,462,000 were issued to the vendors, bear interest at 4 per cent. and are redeemable by the vendors on not less than 30 days notice on 30th April and 31st October in each calendar year. OTHER INFORMATION The interim results are unaudited A copy of the announcement will be sent to shareholders and further copies will be available from the Company Secretary at the registered office at Flanshaw Lane, Alverthorpe, Wakefield, West Yorkshire, WF2 9ND.

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