Interim Results
Sirdar PLC
26 March 2004
Operating Review
Introduction
As detailed in the trading update released on 12th December 2003, market
conditions were difficult throughout the six months to 31st December 2003. It
was also reported that, following an updated valuation of the group's pension
scheme, there would be an additional pension charge of approximately £1.0
million in the current financial year. These factors have combined to produce
disappointing results for the half-year.
The results
Turnover for the half-year to 31st December 2003 was £34,840,000 (2002:
£36,511,000) generating operating profit for the period of £1,531,000 (2002:
£3,428,000) and profit before taxation of £1,164,000 (2002: £3,019,000).
Earnings per share decreased by 63% to 1.56p.
Cash inflow from operating activities during the period amounted to £2,635,000
(2002: £5,735,000). However, corporation tax payments, capital expenditure and
the payment of last year's final dividend meant that net debt increased by
£1,709,000 to £14,030,000.
In view of these results, the board has declared an interim dividend of 0.60p
(2002: 2.00p) per share. This dividend is payable on 11th May 2004 to those
shareholders on the register of members at the close of business on 13th April
2004.
Floor coverings
Sales in this division were £27,222,000 (2002: £29,434,000) reflecting difficult
market conditions which, combined with additional pension costs, reduced
operating profit to £1,811,000 (2002: £3,410,000).
Ryalux and Pownall were affected by competition from both imports and
alternative floor coverings. In view of these challenges, the board instigated
a strategic review of the group's residential floor coverings businesses.
Through external market research, focus groups and market analysis a plan has
been developed consisting of significant initiatives to increase sales combined
with a number of measures to improve manufacturing efficiency and reduce costs.
Management are currently implementing two projects to improve manufacturing
efficiency which enabled the recent closure of a satellite facility in Padiham.
Burmatex has also encountered difficult market conditions with cutbacks in
public expenditure and a lack of office lettings and refurbishment in the UK
market. Exports performed better, particularly in North America. Overall the
Burmatex brand performed better than the more expensive Carpet Tile Company
brand as customers favoured lower price products.
Specialist yarns
Sales increased to £7,618,000 (2002: £7,077,000) due to the success of Tilsa
products in the USA. However, additional pension costs impacted operating
profits which were £13,000 (2002: £353,000).
After another unacceptable result from this division, the board has concluded
that it is not viable in its current form. We believe that, if restructured, we
can reduce both costs and risks resulting in a significantly more profitable
business going forward and accordingly we intend to start a programme of
consultation with the work force and the appropriate trade unions about a
proposal to cease manufacturing at the Wakefield site. Over the last five years,
the proportion of sourced product has increased significantly and the board
believes that it is now appropriate to consider a move to full outsourcing of
finished product. It is anticipated that this move will cost approximately £1.8
million, made up of severance payments, asset write offs and excess
establishment costs. We expect this programme to be completed by the autumn of
2004 and to deliver a quick return on the cost of implementation.
Board changes
As announced at the annual general meeting in November 2003, Gerry Lumb will
retire on 30th April 2004. In view of this, we were pleased to announce on 12th
March 2004 that Tim Vernon had joined the board as a non-executive director and
that he will assume the position of non-executive chairman with effect from 1st
May 2004.
Philip Howard resigned for personal reasons on 17th February 2004. Philip
served as senior independent non-executive director for over five years and we
thank him for his contribution to the group over that period.
Dividend policy
The board has considered carefully the dividend payable for the current year and
also the likely level of dividends payable in the future. The board expects to
recommend a total dividend for the year ending 30th June 2004 of 1.80p per
share, reflecting the difficult market conditions and the restructuring measures
being implemented in the second half. As the profitability of the company
improves the board will consider an appropriate increase in the dividend. The
board intends that future dividend payments will be covered approximately 1.5
times by the pre-exceptional post tax earnings.
Current trading and future prospects
Trading conditions in the early part of 2004 remained difficult. However, there
has been a positive market response to new product launches and there are some
signs that these difficulties may be starting to ease. As part of the ongoing
strategy of reducing costs and risks, the increased cost of funding the defined
benefit pension scheme has prompted a review of the current arrangements and
their appropriateness going forward. In conjunction with the other initiatives
detailed above, these measures provide the basis for increased profitability in
the future.
26th March 2004
Consolidated Profit and Loss Account
6 months ended 31st December 2003
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31st December 2003 31st December 2002 30th June 2003
Note £000 £000 £000
Turnover 2 34,840 36,511 69,900
Operating costs (33,309) (33,083) (64,494)
Operating Profit 2 1,531 3,428 5,406
Net interest payable and similar charges (367) (409) (586)
Profit before taxation 1,164 3,019 4,820
Taxation (442) (1,055) (1,770)
Profit for the period 722 1,964 3,050
Dividends 3 (277) (925) (2,775)
Retained profit for the period 6 445 1,039 275
Earnings per share
(basic and diluted) 4 1.56p 4.25p 6.60p
There were no recognised gains or losses in the period other than the profit
shown above.
Consolidated Balance Sheet
as at 31st December 2003 Unaudited Unaudited Audited
31st December 2003 31st December 2002 30th June 2003
Note £000 £000 £000 £000 £000 £000
Fixed Assets
Intangible 15,053 15,898 15,497
Tangible 17,128 17,981 17,459
32,181 33,879 32,956
Current Assets
Stocks 17,571 15,718 17,891
Debtors 14,243 14,751 12,996
Cash at bank and in hand 1,013 294 453
32,827 30,763 31,340
Creditors (due within one year) (17,694) (14,024) (15,973)
Net current assets 15,133 16,739 15,367
Total assets less current liabilities 47,314 50,618 48,323
Creditors (due after more than one year) (8,290) (11,329) (9,736)
Deferred taxation 5 (3,229) (3,175) (3,237)
35,795 36,114 35,350
Equity shareholders' funds
Called up share capital 11,561 11,561 11,561
Share premium account 504 504 504
Capital redemption reserve 2,395 2,395 2,395
Profit and loss account 6 21,335 21,654 20,890
35,795 36,114 35,350
Consolidated Cash Flow Statement
6 months ended 31st December 2003 Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31st December 2003 31st December 2002 30th June
2003
Note £000 £000 £000 £000 £000 £000
Net cash inflow from operating activities 8 2,635 5,735 9,298
Returns on investments and servicing of finance
Interest received - 171 310
Interest paid and similar charges (345) (518) (883)
(345) (347) (573)
2,290 5,388 8,725
Corporation tax paid (1,495) (684) (1,328)
Capital expenditure
Purchase of tangible fixed assets (856) (686) (1,416)
Sale of tangible fixed assets 202 10 374
(654) (676) (1,042)
Acquisitions and disposals
Acquisition of subsidiary undertaking - (5,293) (5,293)
Cash balance acquired with subsidiary - 291 291
undertaking
Receipt of deferred consideration - - 350
(5,002) (4,652)
Equity dividends paid (1,850) (1,850) (2,775)
Cash outflow before financing (1,709) (2,824) (1,072)
Financing
Receipt from cash collateral account - 11,333 11,333
New bank loan - 14,038 14,038
Redemption of loan notes (35) (25,371) (25,445)
Payments into cash collateral account - (1,666) (1,666)
Repayment of bank loans (1,411) (781) (2,300)
(1,446) (2,447) (4,040)
Decrease in cash 9 (3,155) (5,271) (5,112)
A reconciliation of net cash flow to movement in net debt is set out in note 10.
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 2003.
The comparative figures for the year ended 30th June 2003 do not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 30th June
2003 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 6 months ended 6 months ended Year ended
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Floor coverings 27,222 29,434 56,441
Specialist yarns 7,618 7,077 13,459
34,840 36,511 69,900
6 months ended 6 months ended Year ended
31st December 31st December 30th June
2003 2002 2003
Operating profit
£000 £000 £000
Floor coverings 1,811 3,410 5,838
Specialist yarns 13 353 142
1,824 3,763 5,980
Central group costs (293) (335) (574)
1,531 3,428 5,406
Net operating assets/(liabilities) 31st December 2003 31st December 2002 30th June 2003
£000 £000 £000
Floor coverings 39,208 39,757 38,679
Specialist yarns 10,186 11,357 10,562
49,394 51,114 49,241
Central group assets/(liabilities) 431 (822) (1,117)
49,825 50,292 48,124
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 £14,030,000 (31st December 2002: £14,528,000, 30th June
2003: £12,774,000) and deferred consideration of £nil (31st December 2002:
£350,000, 30th June 2003: £nil) receivable on the disposal of Eversure Textiles
Limited.
3 DIVIDENDS
6 months ended 6 months ended Year ended
31st December 2003 31st December 2002 30th June 2003
£000 £000 £000
Interim 277 925 925
Final - - 1,850
277 925 2,775
The interim dividend of 0.60p (2002: 2.00p) per share will be paid on 11th May
2004 to members registered at the close of business on 13th April 2004. The
final dividend in respect of the year ended 30th June 2003 amounted to 4.00p per
share.
4 EARNINGS PER SHARE
Earnings and basic earnings per share is 1.56p (31st December 2002: 4.25p, 30th
June 2003: 6.60p). The calculation of basic earnings per share is based on
earnings of £722,000 (31st December 2002: £1,964,000, 30th June 2003:
£3,050,000) and on 46,242,455 (31st December 2002: 46,242,455, 30th June 2003:
46,242,455) ordinary shares being the weighted average number in issue during
the period. There is no dilution caused by share options.
5 DEFERRED TAX
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Brought forward 3,237 3,096 3,096
Profit and loss account (8) (55) 7
Acquisition of subsidiary - 134 134
Carried forward 3,229 3,175 3,237
6 PROFIT AND LOSS ACCOUNT
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Brought forward 20,890 20,615 20,615
Profit for the period 445 1,039 275
Carried forward 21,335 21,654 20,890
7 RECONCILIATION OF MOVEMENTS IN GROUP EQUITY SHAREHOLDERS' FUNDS
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Profit for the period 722 1,964 3,050
Dividends (277) (925) (2,775)
Net increase in equity shareholders' funds 445 1,039 275
Opening equity shareholders' funds 35,350 35,075 35,075
Closing equity shareholders' funds 35,795 36,114 35,350
8 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months ended 6 months ended Year ended
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Operating profit 1,531 3,428 5,406
Depreciation 1,149 1,227 2,423
Goodwill amortisation 444 423 869
Profit on sale of tangible (237) (12) (58)
fixed assets
Decrease/(increase) in stocks 320 804 (1,368)
(Increase)/decrease in debtors (1,189) 448 1,605
Increase/(decrease) in 617 (583) 421
creditors
Net cash inflow from operating activities 2,635 5,735 9,298
9 ANALYSIS OF CHANGES IN NET DEBT
31st December 2003 Cash flows Loan note 30th June 2003
redemption
£000 £000 £000 £000
Cash at bank 1,013 560 - 453
Bank overdrafts (3,715) (3,715) - -
(2,702) (3,155) - 453
Loan notes (614) - 35 (649)
Bank loan (10,714) 1,411 - (12,125)
Total net debt (14,030) (1,744) 35 (12,321)
10 RECONCILIATION OF MOVEMENT IN NET DEBT
31st December 31st December 30th June
2003 2002 2003
£000 £000 £000
Decrease in cash (3,155) (5,271) (5,112)
Receipt from cash collateral account - (11,333) (11,333)
New bank loan - (14,038) (14,038)
Redemption of loan notes 35 25,371 25,445
Payments into cash collateral account - 1,666 1,666
Repayment of bank loans 1,411 781 2,300
Movement in net debt (1,709) (2,824) (1,072)
Net debt at start of period (12,321) (11,249) (11,249)
Net debt at end of period (14,030) (14,073) (12,321)
OTHER INFORMATION
The interim results are unaudited.
Further copies of this report are available from the Company Secretary at the
registered office at Flanshaw Lane, Alverthorpe, Wakefield, West Yorkshire WF2
9ND.
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