Final Results

RNS Number : 5543Z

Pittards PLC

19 March 2012

 



PITTARDS plc

(AIM:PTD)

Preliminary announcement of results for the year ended 31 December 2011

	Year ended  31 December 2011			Year ended 31 December 2010
		£m			£m
Revenue		38.2			36.1
Percentage export		93%			91%
Profit on operations before finance costs		3.1			3.3
Finance costs		(0.3)			(0.4)
Profit before taxation		2.8			2.9
					Restated
Net assets		16.0			11.6

Highlights

-               Revenue up 6%  to £38.2m (2010: £36.1m)

-               Profit from trading (without adjustments to acquisition impairment) £2.7m, as prior year

-               Pre-tax profit from trading activities £3.1m (2010: £3.3m)

-               Cash used in operations of £0.4m  (2010: generated £3.4m)

-               Net assets increased by 38% from £11.6m to £16.0m

-               Net borrowings increased to £4.9m from £3.0m (restated)

-               Gearing now 31% (2010: restated 26%)

Stephen Boyd, Chairman of Pittards, commented:

The Group succeeded in significantly strengthening its balance sheet, extending its brand and increasing revenues in 2011 but against a backdrop of rising raw material prices, as I advised earlier in the year, and this coupled with structural changes in the supply chain has caused  the unadjusted trading profit to remain at £2.7m..

- ends -

For further information, please contact:

Stephen Boyd, Chairman                                                    Pittards plc                            Tel: [phone]

Reg Hankey, CEO                                                                Pittards plc                            Tel: [phone]

Jill Williams, Finance Director                                            Pittards plc                            Tel: [phone]

John Wakefield                                                                    WH Ireland                           Tel: [phone]

Preliminary announcement of results

for the year ended 31 December 2011

Chairman's statement

The Group succeeded in significantly strengthening its balance sheet, extending its brand and increasing revenues in 2011 but against a backdrop of rising raw material prices, as I advised earlier in the year and this coupled with structural changes in the supply chain has caused the unadjusted trading profit to remain at £2.7m.

The consolidated profit from operations of £3.1m is slightly behind the £3.3m achieved in 2010, but this is after adjustments to acquisition impairments of £0.6m in 2010 and £0.4m in 2011, so the overall trading outturn was very similar.  The Group now owns three freehold properties in Ethiopia which were revalued at year end in line with our accounting policy, leading to a benefit to comprehensive income of £0.8m (2010: £0.6m).  Finance costs of £0.3m represented a reduction from £0.4m in 2010 as the Group negotiated improved rates with its UK bank and the loan taken to fund the purchase of Ethiopia Share Tannery Co (ETSC) was further paid down.

Following the recognition  of £1m of the previously unrecognised deferred taxation asset in 2010, a further £1m has been recognised in 2011 as the directors believe it can be justified by reference to continued successful future trading. The tax charge of £0.1m due on ETSC operations has been reduced to a tax credit of £0.9m and the profit for the year after taxation is £3.6m (2010: £3.7m).

Revenue of £38.2m is 6% ahead of £36.1m in 2010 with demand from key customers remaining firm.  Raw material prices rose steadily, in line with many other commodities around the world as demand exceeded supply, and we sought to pass this along the supply chain with price increases.

In September 2011 the Ethiopian government announced that they would be imposing a tariff of 150% on exports of crust (semi processed) leather from mid December.  This sharply increased prices as the tanners in Ethiopia all tried to buy and process for export as much material as possible before the tariff took effect, with a consequent adverse effect on margins.  We were determined that supplies to major customers should not be disrupted whilst we accelerated the transfer to finished production at ETSC (the logical response to this situation) hence we had to buy additional stock at the prevailing prices which reduced gross margin in the second half of the year.

Our strategic purchase of ETSC in late 2009 put us in a strong position to benefit from the tariff situation and I am pleased to report that the factory has responded very positively to the challenge of taking many more of our sheepskin products to the finished stage for direct export to our customers, which should generate savings on freight costs during 2012. We are making adjustments to our cost base in Yeovil, where we will no longer be processing Ethiopian crust skins.  The Yeovil factory is now being backfilled with more bovine and goatskin products and we are utilising our extensive contacts around the world to source new raw material supplies for technically advanced products to be made here .

Net assets rose significantly from £11.6m (restated) at the end of 2010 to £16.0m, which reflected our investment in property, plant and equipment (mainly in Ethiopia), a further recognition of the unrecognised deferred tax asset and a substantial increase in inventory levels to accommodate the effect of the new crust tariff, which will potentially unwind in the first half of 2012.  Net borrowings of £4.9m rose from £3.0m (restated) at the end of 2010 due mainly to the increased holding of inventory at year end and are expected to reduce to more normal levels by the half year.  The gearing ratio of 31% is in line with expectations (2010: 26% restated).

We have commenced with our lawyers the process of restructuring our balance sheet to enable the payment of dividends in the future. It is our intention to complete the process during 2012, which will involve a general meeting of shareholders.

During 2011 we doubled the size of our retail shop in Yeovil to display more of our garments and the extensive range of Daines & Hathaway classic English leathergoods,  and in response to customer demand we are about to add a coffee shop alongside it. Our heritage of technical and innovative skills in Yeovil is being supplemented by our developing design capability, which positions us to benefit strongly from the current 'Made in Britain' movement.

Within Ethiopia we established a new production unit for the manufacture of industrial gloves for a major US customer during 2011.  Initially this was based in a rented unit but it has now moved to a new purpose built factory on the Addis ringroad next door to our garment production factory which is now nearing completion.  Demand is so strong that we have now rented an additional larger unit on the same prominent trading estate.  We are considering moving into other types of glove manufacturing as our confidence and expertise at finished product manufacture grow.

We continue to seek suitable farms on which to establish our own flocks of sheep to be farmed on best practice lines to achieve improved skin quality, meat quality and yield.  It is recognised that this would be extremely advantageous to the Ethiopian economy and that local farmers' cooperatives would be likely to reflect our practices once they could see the benefits in terms of increased selling prices for their animals.

We were pleased to be finalists in both the PricewaterhouseCoopers West of England Business of the Year Awards in June and in two categories of the UK Fashion & Textile Awards in October, with the positive recognition that they brought.  We were delighted that Pittards Products Manufacturing SC, our glove-making business, recently won a Best Investor award from the Leather Industry Development Institute at the All Africa Leather Fair in Addis Ababa.

Our workforce of 1180 across the  UK and Ethiopian operations have risen to the challenges of the year and they continue to coordinate their efforts exceptionally well, working closely in the transfer of products between the factories.

Demand from customers is still strong and our increased production levels of both leather and finished products in a lower cost environment make us well placed to benefit from this, however raw material prices remain stubbornly high which puts pressure on margins and we will need to continue to pass this price pressure down the supply chain.  The premium Pittards brand is growing in reach and influence as we explore new sectors and market opportunities globally for our leather and leather products.

Stephen Boyd  

Chairman

16 March 2012

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2011

	Note	2011 £'000		2010 £'000
Continuing operations:
Revenue		38,194		36,086
Cost of sales - trading		(29,328)		(27,343)
Cost of sales - adjustment to acquisition impairment	6	-		567
Gross profit		8,866		9,310
Distribution costs		(2,767)		(2,507)
Administrative expenses		(3,547)		(3,494)
Administrative expenses - adjustment to acquisition impairment	6	398		-
Gain (loss) on foreign currency translation		100		(12)
Profit from operations before finance costs		3,050		3,297
Finance  costs		(292)		(366)
Profit before taxation		2,758		2,931
Taxation credit	5	879		731
Profit  for the year after taxation		3,637		3,662
Profit attributable to:
Owners of the parent		3,645		3,662
Non controlling interest		(8)		-
		3,637		3,662
Earnings per share attributable to equityholders of the company
Basic	3	0.83p		0.85p
Diluted	3	0.82p		0.84p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2011

		2011 £'000		2010 £'000 restated
Profit for the year after taxation Other comprehensive income		3,637		3,662
Unrealised exchange loss on translation of overseas subsidiaries		(238)		(1,543)
Revaluation of land and buildings		848		552
Other comprehensive income		610		(991)
Total comprehensive income for the year		4,247		2,671
Total comprehensive income attributable to:
Owners of the parent		4,084		2,899
Non controlling interest		163		-

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2011

	Share capital	Share premium account	Capital redemption reserve	Capital reserve	Retained earnings	Translation reserve	Shares held by ESOP	Revaluation reserve	Share options reserve	Total attributable to owners of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2010 - as previously reported	4,298	5,184	8,158	6,475	(15,900)	(10)	(495)	-	-	7,710	24	7,734
Restatement	-	-	-	-	1,074	-	-	-	-	1,074	-	1,074
At 1 January 2010  - restated	4,298	5,184	8,158	6,475	(14,826)	(10)	(495)	-	-	8,784	24	8,808
Comprehensive income for the year
Retained profit for the year	-	-	-	-	3,662		-	-	-	3,662	-	3,662
Other comprehensive income
Gain on the revaluation of buildings	-	-	-	-	-		-	552	-	552	-	552
Unrealised exchange loss on  translation of foreign subsidiaries - restated	-	-	-	-	-	(1,543)	-	-	-	(1,543)	-	(1,543)
Total other comprehensive income - restated	-	-	-	-	-	(1,543)	-	552	-	(991)	-	(991)
Total comprehensive income for the year - restated	-	-	-	-	3,662	(1,543)	-	552	-	2,671	-	2,671
Transactions with owners
Employee share option scheme - value of employee services	-	-	-	-	-	-	-	-	48	48	-	48
Proceeds from shares issued	33	15	-	-	-	-	-	-	-	48	-	48
Investment in Pittards Global Sourcing	-	-	-	-	-	-	-	-	-	-	26	26
Total transactions with owners	33	15	-	-	-	-	-	-	48	96	26	122
At 1 January 2011 - restated	4,331	5,199	8,158	6,475	(11,164)	(1,553)	(495)	552	48	11,551	50	11,601
Comprehensive income for the year
Retained profit for the year	-	-	-	-	3,645	-	-	-	-	3,645	(8)	3,637
Other comprehensive income
Gain on the revaluation of buildings	-	-	-	-	-	-	-	677	-	677	171	848
Unrealised exchange loss on  translation of foreign subsidiaries	-	-	-	-	-	(220)	-	(18)	-	(238)	-	(238)
Total other comprehensive income	-	-	-	-	-	(220)	-	659	-	439	171	610
Total comprehensive income for the year	-	-	-	-	3,645	(220)	-	659	-	4,084	163	4,247
Transactions with owners
Proceeds from shares issued	79	51	-	-	-	-	-	-	-	130	-	130
Total transactions with owners	79	51	-	-	-	-	-	-	-	130	-	130
At 31 December 2011	4, 410	5,250	8,158	6,475	(7,519)	(1,773)	(495)	1,211	48	15,765	213	15,978

CONSOLIDATED BALANCE SHEET

As at 31 December 2011

			2011	2010 restated
			£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment			6,441	4,987
Intangible assets			15	115
Investments in subsidiary undertakings			-	-
Deferred income tax asset			2,005	1,000
Available for sale financial instruments			15	2
Total non-current assets			8,476	6,104
Current assets
Inventories			14,524	10,444
Trade and other receivables			3,833	3,751
Cash and cash equivalents			1,142	1,307
Total current assets			19,499	15,502
Total assets			27,975	21,606
LIABILITIES
Current liabilities
Trade and other payables			(5,904)	(5,595)
Current income tax liability			(1)	(97)
Interest bearing loans, borrowings and overdrafts			(6,092)	(2,022)
Total current liabilities			(11,997)	(7,714)
Non-current liabilities
Interest bearing loans and borrowings and overdrafts			-	(2,291)
Total non-current liabilities			-	(2,291)
Total liabilities			(11,997)	(10,005)
Net assets			15,978	11,601
EQUITY
Called up share capital			4,410	4,331
Share premium account			5,250	5,199
			8,158	8,158
Capital redemption reserve
Capital reserve			6,475	6,475
Shares held by ESOP			(495)	(495)
Retained earnings			(7,519)	(11,164)
Translation reserve			(1,773)	(1,553)
Revaluation reserve			1,211	552
Share options reserve			48	48
Total equity attributable to owners of the parent			15,765	11,551
Non-controlling interest			213	50
TOTAL EQUITY			15,978	11,601

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2011

		2011		2010
	Note	£'000		£'000
Cash flows from operating activities
Cash (used in) generated from operations	4	(412)		3,401
Tax paid		(187)		(80)
Interest paid		(247)		(284)
Net cash (used in) generated from operating activities		(846)		3,037
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		-		10
Purchases of property, plant and equipment		(1,261)		(675)
Purchases of intangible assets		(6)		(17)
Investment in available for sale financial assets		(13)
Net cash used in investing activities		(1,280)		(682)
Cash flows from financing activities
Loan financing		-		2,500
Repayment of bank loans		(2,714)		(1,340)
Repayment of obligations under finance leases and hire purchase obligations		(23)		(47)
Share issue		130		48
Net cash (used in ) generated from financing activities		(2,607)		1,161
(Decrease) increase in cash and cash equivalents		(4,733)		3,516
Cash and cash equivalents at beginning of the year		1,307		(2,237)
Exchange gains on cash and cash equivalents		14		28
Cash and cash equivalents at end of the year		(3,412)		1,307

Notes

1.         The figures for the years ended 31 December 2011 and 2010 do not constitute statutory accounts within the meaning of s434 of the Companies Act 2006.  The figures for the year ended 31 December 2011 have been extracted from the statutory accounts for that year which have yet to be delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report.  A full Report and Accounts for the year ended 31 December 2010, on which the auditor has issued an unqualified audit report has been delivered to the Registrar of Companies. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts.

This preliminary announcement was approved by the board of directors and authorised for issue on 16 March 2012.

2.             Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together "IFRS") as endorsed by the European Union.

The consolidated financial statements have been prepared in accordance with the Companies Act 2006, applicable to companies reporting under IFRS.

The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2011 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

3.             Earnings per ordinary share

	2011	2010
	£'000	£'000
Analysis of the profit in the year
Profit for the year attributable to equityholders of the company	3,645	3,662
Weighted average number of ordinary shares in issue (excluding the shares owned by the Pittards Employee Share Ownership Trust)	'000's	'000's
Basic	440,098	430,591
Diluted	443,650	436,240
Basic earnings per ordinary share	0.83p	0.85p
Diluted earnings per ordinary share	0.82p	0.84p

Notes - continued

4.             Cash (used in) generated from operations

	2011	2010 restated
	£'000	£'000
Profit before taxation	2,758	2,931
Adjustments for:
Depreciation of property, plant and equipment	752	759
Amortisation	106	99
Profit on sale of plant and equipment	-	(7)
Bank and other interest charges	247	284
Other non-cash items in Income Statement	(252)	(12)
Share based payments	-	48
Operating cash flows before movement in working capital	3,611	4,102
Movements in working capital (excluding exchange differences on consolidation):
Increase in inventories	(4,195)	(1,138)
Increase in receivables	(197)	(671)
Increase in payables	369	1,108
Cash (used in) generated from operations	(412)	3,401

5.             Taxation

The Group has recognised a deferred tax asset of £2.0m (2010: £1.0m)in respect of losses out of a total potential deferred tax asset of £3.137m (2010: £4.599m). The element of the deferred tax asset not yet recognised would be available to be utilised against future UK taxable profits. 

6.             Assessment of fair values

The directors had to make certain assumptions for the assessment of fair value of various assets on the acquisition of ETSC. At the end of 2010 investigations into inventory held provided necessary assurances that the inventory was fairly valued therefore a release of £0.567m of impairment provision was recognised in the Income Statement. The provisional fair values on acquisition were not updated because the ability to release the provision was identified during a stock take on 31 December 2010, which was outside the twelve months permitted under IFRS3 to revise provisional fair values.

At the end of 2011 the remaining provisions of £0.465m have been released to the Income Statement. £0.398m of this release has been disclosed on the face of the Income Statement and £0.067m has been released through administrative expenses, offsetting expenses incurred to which the provisions relate.

7.             Copies of the 2011 Annual Report and Accounts will be posted to shareholders in April and will be available on the Company's website at www.pittardsleather.com. Further copies may be obtained by contacting the Company Secretary at Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA. The annual general meeting is to be held at the registered office on 9 May 2012.

 

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