Interim Results
Pittards PLC
02 September 2004
PITTARDS plc
Interim results for the six months ended 30 June 2004
Chairman's Interim Statement
The deterioration in trading conditions and the weakness of the US dollar that
affected us in the second half of last year continued into the first half of
2004. Some of our customers have been destocking in this period of reduced
demand. Consequently, in the six months ended 30 June 2004 we incurred a loss
before tax of £1.2m - slightly less than estimated in our trading statement
dated 7 July 2004.
Sales turnover for the period was £38.5m (2003 - £43.5m), a record 87% of which
was to customers outside the UK. In a depressed and challenging market, the
volume of finished leather sold in the period was 12.5% less than in the first
half of 2003. The average price per foot was slightly higher, despite the
depreciation of the US dollar, due to changes in the mix of business.
All three divisions incurred operating losses in the first quarter, but
increased sales volumes coupled with cost savings meant that the Glove Leather
and Shoe & Leathergoods Divisions were profitable in the second quarter. The
Raw Materials Division has struggled throughout the period, and consultations
have begun, which may lead to the closure or sale of this business.
The Group operating loss for the first half of 2004 was £0.9m (2003 - profit
£1.1m), which after higher interest costs amounted to a pre-tax loss of £1.2m
(2003 - profit £0.8m). After a tax credit of £0.3m and preference dividends of
£0.1m the loss per ordinary share was 4.7p (2003 - earnings per share 1.9p). In
view of the unprofitable trading so far this year, the board does not propose to
pay an interim dividend. (2003 - 1.0p per share). Dividend policy for the year
as a whole will be determined in the light of the trading performance in the
second half of the year, and the progress with potential asset disposals.
Net assets were £21.5m as at 30 June 2004, equivalent to 85p per ordinary share.
Total borrowings, including leases and a five year term loan of £3.5m drawn
down at the end of March, totalled £11.1m as at 30 June (2003 - £10.0m) - 52% of
shareholders' funds. The increase in borrowings is primarily attributable to
the implementation of an Enterprise Resource Planning computer system which
commenced in mid 2003 and is due for completion shortly at a total cost of
around £1.5m. The benefits from this investment should start to flow towards
the end of the current year.
The Glove Leather Division had a difficult first half. In a highly competitive
market, and with more than three quarters of the Division's sales denominated in
US dollars, the sterling value of turnover fell by 5.3% on virtually unchanged
volumes. This was due, in part, to the mix of sales, but mainly to the 15%
depreciation of the dollar year on year. Dress glove leather turnover was up 9%
on last year, whereas sports glove leather sales fell by 14% due to currency and
particularly weak demand from the baseball equipment market. Sales and margins
from the military and service glove sectors benefited from the technically
advanced Custom Image Generation ('CIG') leathers introduced in the second half
of last year.
Sales turnover in the Shoe & Leathergoods Division fell by 14.6% compared to
last year with the underlying volume down by 21.3%. Volumes in 2003 had been
boosted by a sports shoe leather programme which was only marginally profitable
and was not repeated in 2004. The Division got off to an extremely slow start
to the year as certain key customers destocked in response to the weak demand.
A period of short time working was introduced for four weeks during February.
Volumes recovered sharply during quarter 2 and current order levels indicate
that the Division will be much busier during the second half of the year.
The Raw Materials Division was reorganised two and a half years ago following
the outbreak of Foot & Mouth Disease. The Kinghorn operation was closed,
freeing up a 25 acre site for redevelopment, and the reduced production capacity
was concentrated at the Langholm site. However, the reduction in demand for UK
domestic sheepskins for the production of nappa clothing leather has been such
that the Division is unable to operate profitably as a fellmongery.
Consultations have begun which may ultimately lead to our withdrawal from this
business either through closure or sale.
The Kinghorn site, which has a book value of £0.5m, will be marketed as soon as
the outline planning application submitted in August 2003 is determined. The
application, which is for residential development on approximately 10 acres of
the 25 acre site, is in conformity with the Kirkcaldy Area Local Plan.
We shall be issuing our third Environmental Report during September 2004. The
Report describes the environmental impacts of our business, and how we are
managing them. It also monitors the progress we are making in addressing
environmental issues. You will shortly be able to view or download a copy of
the Report on our web-site (www.pittardsleather.com) or, if you prefer, you can
obtain a copy by contacting the registered office.
In view of the Company's size, and the ever increasing burden and cost of
compliance with the regulatory requirements of the Official List of the London
Stock Exchange, the Board now considers that the Alternative Investment Market
(AIM) is a more appropriate market for the Company's shares. Accordingly the
Company has applied for its entire issued ordinary share capital and preference
share capital to be admitted to trading on AIM. It is expected that dealings
will cease on the Official List at the close of business on 29 September 2004
and will commence on AIM with effect from 30 September 2004.
Having reached the age of 60 in May 2004, and having completed more than forty
years service, John Pittard has decided to relinquish his responsibilities as
Chief Executive of the Group, with effect from 1 September 2004 and has resigned
from the Board. In view of the Board's decision to withdraw from the business
carried on by the Raw Materials Division, Robert Paisley, Managing Director of
that Division has also resigned from the Board with effect from 1 September
2004. We thank them both for their considerable contribution to the Group
during more than forty years of dedicated and loyal service.
Stephen Boyd joined the Group as of 1 September as Deputy Executive Chairman, to
whom the other executive directors will report. A chemical engineer by
training, he has worked in a variety of manufacturing industries, including five
years as Group Chief Executive of Capital Industries plc.
The global economic climate continues to be unstable, and exchange rates to be
volatile. Sales prospects for the second half are better than for the first
although demand from the international market for leather remains depressed.
With the benefit of ongoing cost savings and efficiency improvements, we expect
our continuing activities to operate profitably in the second half of the year.
There will be exceptional costs in the second half associated with our
withdrawal from the Raw Materials Division which could be substantial. Together
with the loss reported for the first half, this will result in a loss before tax
for the Group for the year as a whole.
R C Tomkinson
Chairman
2 September 2004
Contacts:
Robert Tomkinson, Chairman 01935 474321
John Buckley, Group Financial Director 01935 474321
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
for the six months ended 30 June 2004
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2004 2003 2003
Note £'000 £'000 £'000
Turnover 38,528 43,545 85,429
Operating profit before pension cost 246 2,261 3,601
Pension cost (1,143) (1,196) (2,091)
Operating (loss) profit (897) 1,065 1,510
Profit on disposal of fixed assets - - -
(Loss) profit on ordinary
activities before interest (897) 1,065 1,510
Net interest payable (280) (248) (486)
(Loss) profit on ordinary
activities before taxation (1,177) 817 1,024
Taxation 310 (284) (323)
(Loss) profit on ordinary
activities after taxation (867) 533 701
Dividends
Preference 129 128 257
Ordinary - 222 331
129 350 588
Retained (loss) profit (996) 183 113
(Loss) earnings per share 1
- basic (4.7)p 1.9p 2.1p
- diluted (4.7)p 1.9p 2.0p
There were no discontinued activities in 2004 or 2003. The results relate
entirely to continuing operations
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES (UNAUDITED)
for the six months ended 30 June 2004
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
(Loss) profit for period (867) 533 701
Prior year adjustment (note 4) (342) - -
Total recognised (losses) gains since last annual report
(1,209) 533 701
CONSOLIDATED STATEMENT OF MOVEMENT ON SHAREHOLDERS FUNDS (UNAUDITED)
for the six months ended 30 June 2004
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
At 1 January as previously reported 22,723 22,596 22,596
Prior year adjustment (note 4) (342) (399) (399)
At 1 January as restated 22,381 22,197 22,197
(Loss) profit for the period (867) 533 701
Dividends (129) (350) (588)
Movement in investment in own shares 80 59 57
Issue of new shares - 15 14
At end of period 21,465 22,454 22,381
CONSOLIDATED BALANCE SHEET (UNAUDITED)
as at 30 June 2004
30 June 30 June 31 December
2004 2003 2003
restated restated
£'000 £'000 £'000
Fixed assets
Tangible 18,373 16,911 17,984
Current assets
Stocks 13,500 14,984 14,209
Debtors 10,325 12,703 9,941
Cash at bank & in hand 25 24 22
23,850 27,711 24,172
Creditors - Amounts falling
due within one year
Bank loans & overdrafts (7,140) (9,577) (9,937)
Trade creditors (5,528) (7,190) (5,270)
Other creditors (3,439) (4,238) (3,126)
(16,107) (21,005) (18,333)
Net current assets 7,743 6,706 5,839
Total assets less current liabilities 26,116 23,617 23,823
Creditors - Amounts falling
due after more than one year (3,781) (318) (262)
Provisions for liabilities and charges (870) (845) (1,180)
21,465 22,454 22,381
Capital & Reserves
Called up share capital 8,227 8,228 8,227
Investment in own shares (262) (340) (342)
Reserves 13,500 14,566 14,496
Shareholders' funds 21,465 22,454 22,381
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
for the six months ended 30 June 2004
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2004 2003 2003
£'000 £'000 £'000 £'000 £'000 £'000
Net cash inflow (outflow) from operating activities 1,346 (1,552) 1,212
Returns on investments and servicing
of finance
Interest paid (274) (129) (478)
Preference dividends paid (129) (128) (257)
Net cash outflow from returns on investments and servicing of (403) (257) (735)
finance
Taxation
UK corporation tax (paid) received (93) 9 (454)
Net cash (outflow) inflow from taxation (93) 9 (454)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,255) (516) (2,425)
Purchase of matching shares under Restricted Share Plan (15) (52) (35)
Sale of tangible fixed assets 11 17 14
Net cash outflow from capital expenditure and financial (1,259) (551) (2,446)
investment
Equity dividends paid (221) (409) (629)
Net cash (outflow) before financing (630) (2,760) (3,052)
Financing
Issue of shares on exercise of options - 15 14
New bank loan 3,500 - -
Capital element of finance lease rental repayments (70) (62) (131)
Net cash inflow (outflow) from financing 3,430 (47) (117)
Increase (decrease) in cash 2,800 (2,807) (3,169)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2004 2003 2003
£'000 £'000 £'000
Increase (decrease) in cash 2,800 (2,807) (3,169)
Capital element of finance lease rental repayments 70 62 131
Change in net debt arising from cash flows 2,870 (2,745) (3,038)
New bank loan (3,500) - -
New hire purchase contracts (120) (204) (204)
Movement in net debt (750) (2,949) (3,242)
Net debt at beginning of period (10,308) (7,066) (7,066)
Net debt at end of period (11,058) (10,015) (10,308)
NOTES
Six months ended Six months ended
30 June 2004 30 June 2003
1. (Loss) earnings per ordinary share £'000 £'000
(Loss) profit on ordinary activities after taxation (867) 533
Preference dividends (129) (128)
(Loss) earnings (996) 405
Weighted average number of ordinary shares in issue
(excluding the shares owned by the Pittards employee share ownership '000 '000
trust)
Basic 21,185 21,217
In 2004 the weighted average number of ordinary shares for the purpose of
calculating the diluted earnings per ordinary share is identical to that used
for basic earnings per ordinary share. This is because the exercise of share
options and vesting of conditional shares under the Restricted Share Plan would
have the effect of reducing the loss per ordinary share and is therefore not
dilutive under the terms of FRS 14.
In 2003 the number of dilutive potential ordinary shares was 453,000 relating to
conditional shares under the Restricted Share Plan. This gives a total weighted
average number of ordinary shares for the purposes of calculating the diluted
earnings per ordinary share for 2003 of 21,670,000.
2. Reconciliation of operating (loss) profit to net cash flows from operating
activities:
Six months ended Six months Year ended 31
30 June 2004 ended 30 June December 2003
2003
£'000 £'000 £'000
Operating (loss) profit (897) 1,065 1,510
Depreciation charges 986 848 1,684
Amortisation of shares under RSP 95 111 92
(Profit) loss on sale of tangible fixed assets (11) - 3
Decrease (increase) in stocks 709 (1,364) (589)
(Increase) decrease in debtors (291) (1,962) 893
Increase (decrease) in creditors 755 (250) (2,381)
Net cash inflow (outflow) from operating activities 1,346 (1,552) 1,212
3. The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 31 December 2003. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
4. The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
31 December 2003, with the exception of the adoption of the Urgent Issues Task
Force Abstract 38 'Accounting for ESOP Trusts'. This requires that the cost of
own shares, previously reported as a fixed asset investment, be shown as a
deduction from shareholders' funds.
A prior year adjustment has been made to reflect this change. There has been no
impact on the current or prior year profit and loss account. Opening net assets
have been reduced by £342,000 from £22,723,000 to £22,381,000. Prior year
comparatives have been restated accordingly.
5. The report containing the interim financial information is to be sent
direct to shareholders. Copies of the report are available to the public from
the registered office of Pittards plc. The address of the registered office is:
Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA.
This information is provided by RNS
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Monday, 13th May 2024
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