Final Results

Dinkie Heel PLC
3 May 2002



                                Dinkie Heel plc

    Preliminary announcement of results for the year ended 31 December 2001


                         Chairman's statement (extract)


Strategic direction

Over the last fifteen months the board has decided that it must move its two
significant UK manufacturing businesses offshore to lower production costs and
to restore product competitiveness and profitability.

To this end the closure of Phillips Rubber manufacturing in Manchester was
announced twelve months ago. Relocation of production overseas is now complete,
contracts for the sale of the Manchester property have been exchanged,
distribution has been transferred to Bristol and profitability from the
resulting UK distribution business is now within prospect.

In the toe cap business further reductions in overheads were made during 2001.
However those savings proved insufficient in the face of a rapid fall away of
orders during the last six months of the year. Your board therefore decided that
it must accelerate its plan to cease manufacture of toe caps in Bristol and
transfer production to our associate in Botswana, to whom the tooling and some
plant are being licenced. The decision was announced on 4 April and both the
employee consultation and the detailed planning of the production transfer are
well in hand.

The overall plan has the full support of your board and, as note 1 indicates,
the board believes that it will be able to achieve its objectives within the
enhanced banking facilities that have been made available.

The Company has a loyal and long serving staff. I regret that these changes have
and will entail the redundancy of so many of them. To those made redundant I
offer my thanks for their service and best wishes for the future.


Financial results

Turnover for the year was £9,341,000 (2000, £10,152,000) and the operating loss
before exceptional items was £328,000 (2000, £242,000). After exceptional items
of £1,055,000 the operating loss from continuing operations was £1,383,000
(2000, £301,000). Interest payable was £178,000 and the loss for the financial
year totalled £1,561,000 (2000, £475,000). The basic loss per share was 10.57p
(2000, 3.22p).

Net cash outflow from operating activities was £222,000 (2000, inflow £324,000).
Net debt increased by £586,000 to £2,764,000 representing gearing at the balance
sheet date of 175.9% (2000, 69.5%).

The reorganisation of the toe cap and Phillips Rubber businesses into one
Dinkie-Phillips business based in Bristol now clearly distinguishes this
division from the Davies Odell division in Northamptonshire. The segmental
analysis given in note 2 and my review of the year recognise this distinction
and give further information about each division.


Review of the year

Davies Odell sales increased by 5.4% to £4,703,000 (£4,460,000), for the first
time accounting for more than 50% of the sales of the entire Company, and the
divisional operating profit increased by 77% to £422,000 (2000, £238,000). Sales
of body armour products increased by 33% and benefited from the improved design
and market focus given to them. Matting product sales grew only slowly in the
face of a very difficult year for the agricultural industry. Together the sales
of body armour and matting were £2,599,000 (2000, £2,354,000) representing 55%
(2000, 53%) of the sales of the division. Sales to the footwear trade were
unchanged from those of 2000.

The Dinkie-FCE toe cap business suffered an 11% reduction in sales volume by
comparison with 2000 with a 2% fall in the first half of the year being followed
by a 20% fall in the second half. Sales prices were maintained despite
continuing global price pressure. Labour costs were reduced by 11% and other
overheads (before exceptional items) by 14% but these savings were insufficient
to counter the loss of contribution on the lower sales.

The Phillips Rubber business of moulded rubber products for footwear repairers
and manufacturers was severely affected by the closure and transfer that began
in September 2001. Sales fell significantly in that period and in the second
half of the year were 43% below those of the same period in 2000. Production had
continued satisfactorily for much of the year allowing stock to be built in
anticipation of the move but was disrupted as the closure became imminent.
Removal of the stock was accompanied by a reappraisal of its value and a
consequent write down of £48,000.

Taken together the Dinkie-Phillips business reported sales down 18% at
£4,638,000 (2000, £5,692,000) and an operating loss before exceptional items for
the year of £554,000 (2000, £291,000).

Before the payment of restructuring costs the Company generated net cash inflow
from operating activities of £130,000 (2000, £383,000). Working capital
requirement reflected the level of activity and was reduced in the
Dinkie-Phillips business and increased in Davies Odell. Overall the reduction in
net working capital was £15,000 (2000, £197,000). After restructuring costs the
net cash outflow from operating activities for the year was £222,000 (2000,
inflow £324,000). Capital expenditure was restricted to £87,000 (2000,
£105,000). The cost of investment in the associated company in Botswana was
£99,000.


Exceptional items

The strategic direction of the Company has involved the payment of
reorganisation costs in the year of £352,000. Of this sum £181,000 related to
the closure of Phillips Rubber in Manchester and removal of its remaining UK
operations to Bristol. Restructuring the Bristol operation to accommodate the
Phillips Rubber business and to reduce the workforce as demand for toe caps fell
cost £90,000. Costs were incurred in setting up the new toe cap production
facility in Botswana and a provision of £25,000 for a share of the establishment
costs has been made. Consultants' fees related to all of these changes amounted
to £56,000.

Goodwill includes that arising in 1998 on purchase of the FCE toe cap business.
The board considers that it is prudent to make provision in these accounts
against the £403,000 un-amortised portion of this cost remaining at December
2001.

Transfer of the Phillips and toe cap businesses to overseas manufacture will
result in surplus plant and machinery that may have little open market value.
The Board has considered the carrying value of these assets and has decided to
make an impairment provision against them of £300,000.


Dividends

The board is concentrating its efforts on returning the Company to healthy
profit and to conserving the cash required. It considers that it cannot
recommend a dividend for the year (2000, nil).


Prospects

Davies Odell has begun the year satisfactorily. Sales of matting products are
increasing again after the pause caused by foot and mouth disease and sales of
body armour products remain strong. Performance to date is in line with plan.

Sales order intake for Phillips Rubber products has begun the year at planned
levels but supplies from South Africa were running behind demand in the first
few months. Major efforts have been made to rectify this and production is now
keeping up with demand.

The orderly run down of toe cap production in Bristol and the rapid build up of
capacity in Botswana are key to the creation of a profitable business in the
future. Considerable management planning at both ends is being put into securing
these outcomes. Success will mean a return to toe cap profitability in 2003
based upon supply exclusively from Botswana.


Richard Organ
Chairman



Profit and Loss Account
Year ended 31 December 2001

                                                                                        2001            2000
                                                                                       £'000           £'000

Turnover from continuing operations                                                    9,341          10,152
Cost of sales                                                                        (8,938)         (9,616)
Gross profit                                                                             403             536
Net operating expenses (including exceptional items)                                 (1,786)           (837)
Operating loss before exceptional items                                                (328)           (242)
Exceptional items
   Restructuring costs                                                                 (352)            (59)
   Goodwill impairment provision                                                       (403)               -
   Plant & Machinery impairment provision                                              (300)               -


Operating loss from continuing operations                                            (1,383)           (301)
Interest payable                                                                       (178)           (174)
Loss on ordinary activities before taxation                                          (1,561)           (475)
Taxation                                                                                   -               -
Loss for the financial year                                                          (1,561)           (475)
Dividends                                                                                  -               -
Loss for the year set against reserves                                               (1,561)           (475)
Loss per share - basic                                                              (10.57p)         (3.22p)

 
The Company has no recognised gains or losses other than the loss for the
financial year as set out above.



Balance Sheet
31 December 2001

                                                                                        2001            2000
                                                                                       £'000           £'000
Net assets employed

Fixed Assets:
Intangible assets                                                                         41             470
Tangible assets                                                                        2,310           3,015
Investment in associate                                                                   74               -
                                                                                       2,425           3,485
Current assets:
Stocks                                                                                 1,218           1,446
Debtors                                                                                1,652           1,751
Property held for resale                                                                 100               -
Cash at bank and in hand                                                                  17              17
                                                                                       2,987           3,214

Creditors: amounts falling due within one year                                       (3,059)         (2,850)
Net current (liabilities)/assets                                                        (72)             364
Total assets less current liabilities                                                  2,353           3,849
Creditors: amounts falling due after more than one year                                (782)           (717)
Provisions for liabilities and charges                                                     -               -
                                                                                       1,571           3,132

Capital and reserves:
Called up share capital                                                                  738             738
Share premium                                                                            715             715
Revaluation reserve                                                                      520             528
Profit and loss account                                                                (402)           1,151
Total equity shareholders' funds                                                       1,571           3,132



Cash Flow Statement
Year ended 31 December 2001

                                                                                    2001           2000
                                                                                   £'000          £'000

Reconciliation of operating loss to net cash (outflow)/inflow from 
operating activities

Operating loss                                                                   (1,383)          (301)
Depreciation charges                                                                 418            428
Impairment provisions                                                                703              -
Associate, establishment costs provision                                              25              -
Decrease in stocks                                                                   228            124
Decrease in debtors                                                                   99            318
Decrease in creditors                                                              (312)          (245)
Net cash (outflow)/inflow from operating activities                                (222)            324

Cash Flow Statement

Net cash (outflow)/inflow from operating activities                                (222)            324
Returns on investments and servicing of finance                                    (178)          (174)
Capital expenditure                                                                 (87)          (105)
Acquisitions                                                                        (99)           (65)
                                                                                   (586)           (20)
Financing                                                                           (23)          (136)
Decrease in cash                                                                   (609)          (156)

Reconciliation of net cash flow to movement in net debt
Decrease in cash in the period                                                     (609)          (156)
Cash reduction from change in debt                                                    23            136
Change in net debt                                                                 (586)           (20)
Net debt at 1 January 2001                                                       (2,178)        (2,158)
Net debt at 31 December 2001                                                     (2,764)        (2,178)



Notes


1.   Basis of preparing the financial statements - going concern

The Company meets its long term and short term working capital requirements from
a combination of bank loan and bank overdraft and working capital facilities. At
31 December 2001 the Company had the following borrowings:

          Bank overdraft and working capital facilities          £1,956,000
          Bank loan                                                £825,000

The terms of these borrowings are shown in the accounts. The overdraft bank
borrowings are repayable on demand and the bank loan has a scheduled repayment
plan.

The ability of the Company to manage within its facilities is dependent on
generating sufficient profits and cash flows from its future operations. The
Company is currently in the process of implementing a detailed restructuring
program of its Bristol operations. The plan involves closure of production in
Bristol and outsourcing toe cap production to an associated undertaking in
Botswana. The directors believe that these are the steps necessary to return the
Company to profitability.

The directors have prepared detailed profit and loss and cash flow forecasts and
projections that include the planned restructuring for the period to 31 December
2003.

Based on these forecasts the principal lender has offered to renew and enhance
the Company's facilities. The facilities consist of bank overdraft and working
capital facilities to a maximum of £2,800,000 and a capital holiday on the bank
loan of £825,000 until October 2002. The bank overdraft facilities may be
withdrawn at any time and are due for review in June 2002. On 8 April 2002 the
directors accepted these facilities.

The directors believe that they will be able to achieve the forecasts and
operate within the new facilities and therefore believe it appropriate to
prepare the accounts on a going concern basis. There can be no certainty about
this. The directors have reduced the carrying value of the assets of the Company
at 31 December 2001 by an impairment provision of £703,000. The financial
statements do not include any further adjustments that might prove necessary
were the forecasts not to be achieved and the support of the Company's principal
lender withdrawn.


2.    Turnover and segmental analysis

The United Kingdom is the source of turnover and operating profit and the
principal location of the net assets of the Company. The directors consider that
the Company operates in two business segments serving various markets. Turnover,
loss on ordinary activities before taxation and net assets are analysed as
follows:


Segment of activity:                        Dinkie - Phillips         Davies Odell            Company
                                               2001       2000       2001       2000      2001      2000
                                              £'000      £'000      £'000      £'000     £'000     £'000

Turnover                                      4,638      5,692      4,703      4,460     9,341    10,152

Operating (loss)/profit before                (554)      (291)        422        238     (132)      (53)
exceptional items
Exceptional items                           (1,055)       (59)          -          -   (1,055)      (59)
Operating (loss)/profit before Group        (1,609)      (350)        422        238   (1,187)     (112)
costs
Group costs                                                                              (196)     (189)
Operating loss                                                                         (1,383)     (301)
Interest payable                                                                         (178)     (174)
Company loss before taxation                                                           (1,561)     (475)

Net assets                                    2,926      4,050      1,409      1,260     4,335     5,310

Unallocated net liabilities                                                            (2,764)   (2,178)
Total net assets                                                                         1,571     3,132

Geographical analysis of turnover:
United Kingdom                                                                           5,571     5,839
Rest of Europe                                                                             889     1,194
The Americas                                                                               914       977
Australasia                                                                                 56        74
Far East                                                                                 1,180     1,184
Africa                                                                                     731       884
Total turnover                                                                           9,341    10,152


3.    The Annual Report and Financial Statements will be sent to all
shareholders. Further copies will be available to the public from the Company
Secretary at the Company's registered office, St Ivel Way, Warmley, Bristol BS30
8TY.

4.    The basic loss per share is calculated on losses of £1,561,000
(2000, £475,000) and on 14,770,000 (2000, 14,770,000) ordinary shares. As losses
have been incurred in each year the exercise of options would not have been
dilutive and accordingly basic and diluted earnings per share are the same.

5.    The abridged Accounts for the year ended 31 December 2001 and
2000 do not constitute statutory accounts and are an extract from the Company's
statutory accounts on which the auditors give an unqualified opinion.



For further information contact:

Ken Rees, Winningtons                         0117 317 9477, mobile [phone]
John Wakefield, Rowan Dartington              0117 933 0020
Geoff Martin, Dinkie Heel                     0117 961 3163



                      This information is provided by RNS
            The company news service from the London Stock Exchange