Interim Results
Dickinson Legg Group PLC
25 February 2003
For Immediate Release 26 February 2003
DICKINSON LEGG GROUP PLC
INTERIM RESULTS
SIX MONTHS ENDED 31 DECEMBER, 2002
Dickinson Legg Group PLC, ('the Company'), today announces its first interim
results since the Company demerged from Brunel Holdings plc in December 2002.
The Company's businesses comprise Dickinson Legg Limited, a world leader in the
manufacture and installation of primary tobacco processing equipment, and
Spooner Industries Limited, a specialist air drying equipment manufacturer for
the paper, converting (plastic film, foil and textile), metals and food
industries.
Highlights
• Successful conclusion of demerger from Brunel Holdings and formation of
Dickinson Legg Group PLC
• Group turnover at £21.8m
• Group operating profit (pre-exceptionals) at £0.77m
• EPS at 1.73p (pre-exceptionals)
• Net funds have increased by £3.83 million to eliminate gearing after
disposal of Guinness Peat Group shares
• Improved order intake at Dickinson Legg
• Spooner Industries order book at record levels
• Tom Mackie appointed as Group Managing Director
Commenting on the results, Executive Chairman Barry Stevenson, said:
'The transition to the demerged group has gone smoothly. Profits were affected
by the slow order intake at Dickinson Legg in the early months but this has
improved and together with a very strong order book at Spooner indicates the
second half will show a significant advance.'
For further information, please contact:
Dickinson Legg Group PLC (today 020 7466 5000;
thereafter 01962 841788)
Barry Stevenson, Executive Chairman
Tom Mackie, Managing Director
Buchanan Communications 020 7466 5000
Richard Darby / Bobbie Swanson
Chairman's Statement
This is the first interim statement of Dickinson Legg Group since the demerger
of the Group from Brunel Holdings plc on 17 December 2002. For almost all of
the period under review, the business of the Group was operating as part of
Brunel Holdings plc and did not benefit from the impact of the recent
re-organisation of the Group's businesses undertaken at the time of the
demerger. During the period, a significant amount of senior management time was
devoted to the demerger. The transition to the demerged group has gone smoothly
and the planned changes to personnel and the relocation of head office has been
successfully implemented. However, profits were substantially down on the
exceptional results reported last year.
I indicated in my statement in the last Brunel Annual Report and in the demerger
documentation, that order intake at Dickinson Legg Limited, the primary tobacco
process equipment manufacturer, was slow in the early months of this financial
year and that management had taken pre-emptive action to lower the cost base by
reducing headcount by about 15%. I am pleased to say that order intake has
increased in recent months and that the order book is now at an improved level.
The recently introduced Expanded Shredded Stem System, has been well received
with two plants installed and commissioned and a number of enquiries
outstanding. Orders for the new RC6 high speed cutter have also been received.
The Indian Joint Venture of Dickinson Legg Limited, Dickinson Fowler Limited,
which benefits from a low-cost structure continues to make good progress by
increasing both output levels and profits. This has helped to offset the
pressure on margins.
Spooner Industries, the specialist air drying equipment manufacturer, has made a
welcome return to profits after making losses in the second half of the last
financial year. In spite of Spooner's markets being flat, order intake was
strong with particular success in the metals market and in North America. The
order book now stands at record levels although intense competition has kept
margins under pressure.
The planned reduction in head office costs following the demerger is now
complete. In conjunction with the change in head office, changes have been made
to the Group management structure and Tom Mackie was appointed Group Managing
Director on 1 February, 2003. Tom will combine this position with his previous
responsibilities as Managing Director of Dickinson Legg Limited. David Heath
has combined the roles of Group Finance Director and Company Secretary with his
previous role of Finance Director of Dickinson Legg Limited.
Results
The interim accounts have been prepared on the basis that Dickinson Legg Group
was in its current form during the period covered by the accounts as this better
represents the performance of the ongoing Group.
Group turnover at £21.80 million was 14% lower than the previous year and the
operating profit (pre-exceptional items) was down to £0.77m from £3.81 million.
The reduction in turnover and profits occurred almost entirely at Dickinson Legg
Limited and was attributable to a shortage of orders and the comparative period
having the benefit of the exceptional Samsung contract. Exceptional charges
totalling £673,000 were comprised of demerger, formation and restructuring
costs. Full year exceptional charges are not expected to exceed the £1 million
stated in the AIM Admission particulars.
Earnings per share pre-exceptionals were 1.73p (2001: 9.07p).
Net funds have increased by £3.83 million to eliminate gearing, after taking
account of the disposal of the shares in Guinness Peat Group plc.
Dividend
As stated in the AIM admission document, the directors do not intend to make any
dividend recommendation until the announcement of the Group results for the year
ending 30 June, 2003. It is the Directors' expectation that a dividend will be
paid at that time although this may be in the form of a scrip in order to
maximise the use of the Group's pool of Advance Corporation Tax.
Prospects
The current order book at Dickinson Legg will result in a substantial
improvement in profits for the second half of the financial year and Spooner
will also show further progress with the main challenge being to process the
high volume of orders in hand.
It is difficult to assess at this stage what effect the current international,
political and economic uncertainties are having on the Group's markets and what
impact this will have for the next financial year. There are a good number of
order prospects for Dickinson Legg Limited but the competition for these is
likely to be strong and the tender process may be delayed. However, Dickinson
Legg Limited, with its new products, leaner form and low cost manufacturing
capability in India is well positioned against its competitors to win these
orders. Spooner has already a strong order book for the next financial year and
there are a number of attractive prospects which, if converted into orders, will
improve the position further.
Taking all of the above comments into account, the Company continues to trade in
line with market expectations, as set at the time of the demerger.
Barry Stevenson
Chairman 26 February 2003
Dickinson Legg Group plc
Group profit and loss account (unaudited)
for the six months ended 31 December 2002
Six months to 31 December 2002
Six months to
Before 31 December Year ended
Notes exceptional Exceptional 2001 30 June 2002
items items Total
£000 £000 £000 £000 £000
Turnover including share of joint 2 22,163 - 22,163 25,815 55,257
venture
Less: Share of joint venture 3 (358) - (358) (382) (1,101)
Group turnover 21,805 - 21,805 25,433 54,156
Operating profit/(loss) 2 647 (572) 75 3,801 6,107
Share of operating profit in joint 3 119 - 119 7 73
venture
Operating profit/(loss) including joint
venture 2,4 766 (572) 194 3,808 6,180
Exceptional items 4 - (101) (101) - -
Profit/(loss) on ordinary activities
before interest 766 (673) 93 3,808 6,180
Net interest (payable)/receivable
Group (133) - (133) (218) (392)
Joint ventures 5 - 5 12 13
Profit/(loss) on ordinary activities
before taxation 638 (673) (35) 3,602 5,801
Tax on (loss)/profit on ordinary 5 (9) - (9) (306) (494)
activities
Profit/(loss) on ordinary activities
after taxation 629 (673) (44) 3,296 5,307
Dividends 6 (14,421) - (14,421) - (289)
Retained (loss)/profit for the period (13,792) (673) (14,465) 3,296 5,018
Earnings/(loss) per share 1.73p (1.85)p (0.12)p 9.07p 14.60p
Dickinson Legg Group plc
Group balance sheet (unaudited)
as at 31 December 2002
31 December 2002 31 December 2001 30 June 2002
Notes £000 £000 £000
Fixed assets
Intangible assets 3,648 4,349 3,775
Tangible assets 1,238 1,451 1,377
Investments
Interests in joint venture:
Share of gross assets 998 623 728
Share of gross liabilities (472) (296) (405)
Share of net assets 526 327 323
5,412 6,127 5,475
Current assets
Stock 2,123 1,852 1,976
Debtors 12,407 9,854 16,211
Investments 1,500 - -
Cash at bank and in hand 218 108 103
16,248 11,814 18,290
Current liabilities
Creditors - amounts falling due within one (16,490) (15,399) (19,013)
year
Net current assets (242) (3,585) (723)
Total assets less current liabilities 5,170 2,542 4,752
Creditors - amounts falling due after
more than one year - - (13)
Provisions for liabilities and charges (1,362) (1,142) (1,323)
Total net assets 3,808 1,400 3,416
Capital and reserves
Called up share capital 7,271 - -
Merger reserve 45,234 - -
Other reserves 40,155 - -
Profit and loss account (88,852) - -
Owners' net investment - 1,400 3,416
Equity shareholders' funds 8 3,808 1,400 3,416
Dickinson Legg Group plc
Group statement of cashflows (unaudited)
for the six months ended 31 December 2002
Six months to Six months to Year to
31 December 2002 31 December 2001 30 June 2002
£000 £000 £000
Net cash inflow from operating activities 3,791 6,218 6,545
Returns on investments and servicing of
finance
Net interest paid (133) (218) (392)
Taxation (253) - (279)
Capital expenditure
Development costs incurred - - (193)
Purchase of fixed assets (59) (126) (245)
Dividends paid (1,682) - (289)
Cash inflow before financing 1,664 5,874 5,147
Financing
Increase in Brunel Holdings plc invested 659 27 288
capital
Net capital element of finance lease rentals (66) (64) (141)
Reduction in bank loans/loan notes (883) (7) (7)
Increase in cash 1,374 5,830 5,287
Reconciliation of net cashflows to movement in
net funds/(debt)
Increase in cash 1,374 5,830 5,287
Repayment of long term loans/loan notes 883 7 7
Net repayment of capital element of finance 66 64 141
leases
Change in net funds/(debt) from cashflows 2,323 5,901 5,435
Shares in Guinness Peat Group plc received on
demerger 1,500 - -
New finance leases - - (12)
Currency translation differences 10 41 86
Movement in net funds /(debt) in the period 3,833 5,942 5,509
Net (debt) at beginning of period (3,684) (9,193) (9,193)
Net funds/(debt) at end of period 149 (3,251) (3,684)
Dickinson Legg Group plc
Notes to the Interim Statements - Continued
1 Basis of preparation
Dickinson Legg Group plc was incorporated on 26 September 2002 as Temple plc and
changed its name to Dickinson Legg Group plc on 4 October 2002. On 16 December
2002, its ordinary shares were listed on the Alternative Investment Market
following a group reorganisation undertaken by Brunel Holdings plc ('Brunel') to
demerge its trading businesses.
With effect from 1 April 2002 Legg Limited ('Legg'), a wholly owned subsidiary
of Brunel, acquired the entire issued share capital of Dickinson Legg Limited ('
'DLL'') and Spooner Industries Limited (''SIL'') from Tod Limited (''Tod''), a
wholly owned subsidiary of Brunel, for £21,500,000, and the entire issued share
capital of Thomas Robinson Group Limited (''TRG'') from Brunel for £1. On 23
April 2002 Legg Limited acquired the entire issued shares of Brunel America Inc.
(''BAI'') from Brunel for $1,500,000. As at 30 June 2002, the consideration
payable to Tod and Brunel for these transactions were still outstanding on
intercompany accounts.
Pursuant to an agreement concerning the reorganisation:
• Legg paid Tod £21,500,000 of cash in settlement of the purchase
consideration for DLL and SIL. This payment was funded by an intercompany loan
from Brunel; and
• Brunel waived all amounts owed to it by Legg, including the £21,500,000
lent to Legg to fund the payment to Tod, the $1,500,000 consideration payable
for the purchase of BAI and the £1 consideration payable for TRG.
On 13 December 2002 Dickinson Legg Group plc acquired from Brunel 100% of the
ordinary share capital of Legg. The consideration for this transaction was in
the form of ordinary share capital of Dickinson Legg Group plc issued to the
shareholders of Brunel. Accordingly, this transaction has been accounted for
using merger accounting principles.
Viewed in isolation, the legal form of the transactions by which Legg acquired
DLL, SIL, TRG and BAI is that of acquisitions for cash rather than shares. On
this basis, the transactions do not meet all the conditions for merger
accounting set out in Schedule 4A to the Companies Act 1985, and Financial
Reporting Standard 6 (''FRS6'') would require Legg to use acquisition
accounting, rather than merger accounting, for these transactions.
If acquisition accounting were used to account for these transactions the
separable net assets of DLL, SIL, TRG and BAI would be recorded at their fair
values at the date of their acquisitions by Legg, substantial goodwill and
goodwill amortisation charges would arise and only the post acquisition results
would be reflected in the financial statements of the Dickinson Legg Group. The
directors consider that to apply acquisition accounting would have failed to
give a true and fair view of the state of affairs and results of the Dickinson
Legg Group, as the series of transactions is a group reconstruction rather than
an acquisition since the ultimate shareholders of Legg are the same as those of
Brunel and, in substance, no consideration is given by Legg.
Accordingly, the directors have accounted for Legg's acquisitions of DLL, SIL,
TRG and BAI using merger accounting. The directors consider that it is not
practicable to quantify the effects of this departure from the Companies Act
1985 and FRS6. These interim accounts have been prepared as if the Dickinson
Legg Group had been demerged from Brunel Holdings PLC prior to 1 July 2001. This
presents information, which better reflects the ongoing operations of the Group.
Dickinson Legg Group plc
Notes to the Interim Statements - Continued
2 Segmental analysis Six months to Six months to Year to
31 December 31 December 30 June
By business segment 2002 2001 2002
£000 £000 £000
Turnover:
Tobacco processing equipment
Group 16,744 21,653 45,417
Joint venture 358 382 1,101
Air drying equipment 5,061 3,763 8,739
Other activities - 17 -
Continuing operations 22,163 25,815 55,257
Operating profit/(loss):
Tobacco processing equipment
Group 675 3,763 6,874
Joint venture 119 7 73
Air drying equipment 98 158 3
Other activities (126) (118) (181)
Exceptional items (572) (2) (589)
Continuing operations 194 3,808 6,180
3 Joint Venture The Group has a 50% investment in Dickinson Fowler
Limited, a company in India which manufactures tobacco processing
equipment.
Turnover Operating
Profit
Analysis of the financial results for the six month
period £'000 £'000
to 31 December 2002:
Trade with Dickinson Legg Ltd 752 292
Trade with third parties 716 238
Total 1,468 530
Group share of trade with third parties 358 119
Dickinson Legg Group plc
Notes to the Interim Statements - Continued
Exceptional items
4
Six months to Six months to Year to 30 June
Notes 31 December 31 December 2002
2002 2001
£000 £000 £000
Exceptional items within operating
profit:
Group demerger and formation costs i (232) - -
Restructuring costs ii (340) (2) (2)
Write off of development costs - - (587)
(572) (2) (589)
Other exceptional items
Group demerger and formation costs i (101) - -
(101) (2) (589)
i. Included in these sums are the costs borne by the group for listing on the
AIM market. The costs included in arriving at operating profit represent a
recharge from the former parent company, Brunel Holdings plc, for the management
time expended in negotiating the demerger. The costs included after operating
profit include the advisors and printing costs related to the admission of the
group on AIM.
ii. These costs relate to redundancy programs within the Tobacco processing
equipment business.
5 Taxation
The taxation charge for the current period is based upon the estimated effective
tax rate for the full year of 25%. The figures in the other periods shown are
calculated in a similar manner.
6 Dividends
The dividends shown are the amounts paid to Brunel Holdings plc in the period
prior to the demerger, and therefore do not represent dividends paid by
Dickinson Legg Group plc.
7 Pension scheme
As part of the demerger agreement with Brunel Holdings plc, the employees in the
Brunel Holdings pension scheme will continue to participate in the Brunel
Holdings plc group pension scheme until 13 June 2003. This cost is borne by
Dickinson Legg Group plc.
Dickinson Legg Group plc is committed to establishing a new pension scheme for
the employees of the group, negotiations with employee representatives are
on-going.
8 Reconciliation of movement in equity shareholders' funds
Total equity
Called up Merger Other Profit and Owners net shareholders'
share reserves reserves loss account investment funds
capital
£'000 £000 £000 £000 £000 £000
At 1 July 2002 - - - - 3,416 3,416
Retained loss before demerger - - - - (14,480) (14,480)
Funding flows with Brunel - - - - 12,739 12,739
Holdings
Currency translation differences
pre-
demerger - - - - (41) (41)
Transfer on demerger 7,271 45,234 40,155 (88,867) (1,634) 2,159
Retained profit after demerger - - - 15 - 15
At 31 December 2002 7,271 45,234 40,155 (88,852) - 3,808
9 The Group results for the six months ended 31 December 2002 and 31 December
2001 are neither audited nor reviewed by independent auditors. The results for
the year ended 30 June 2002 have been prepared on the basis set out in note 1
and do not constitute statutory accounts. Statutory accounts for the year ended
30 June 2002 for the United Kingdom subsidiary companies have been delivered to
the Registrar of Companies and included the auditors' report, in accordance with
section 235 of the Companies Act 1985, which were unqualified and did not
contain a statement under either section 237(2) or section 237(3) of the
Companies Act 1985.
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