Interim Results
S & U PLC
16 September 1999
S & U PLC - INTERIM RESULTS
HALF YEAR PROFITS £2,514,000 (1998 £2,695,000, restated),
INCLUDING START UP COSTS OF NEW SUBSIDIARY, ON TURNOVER OF
£31,197,000 (£30,415,000).
NEW SUBSIDIARY ADVANTAGE FINANCE LTD FORMED TO PROVIDE HIRE-
PURCHASE FINANCE FOR MOTOR VEHICLES IN THE SUB-PRIME MARKET.
'HIGH EXPECTATIONS OF THIS EXCITING DEVELOPMENT - INVESTMENT IN
FUTURE ENHANCED PROFITABILITY'
CHAIRMAN'S INTERIM STATEMENT
Trading profits for the six months ended 31 July 1999 are £2,514,000, which
includes a loss of £107,000 from Advantage Finance Ltd., the new start-up
subsidiary, as against £2,695,000 last year. Sales for the period are
£31,197,000 compared to £30,415,000 for the comparative period last year. Last
Year's comparative figures have been restated in line with the changes in
recognition of deferred revenue detailed in the annual report.
In this first half of the year business in the midlands and south of the
country was significantly up on the comparative period. The north-west showed
a reasonable improvement, but the north-east was unacceptable. Some of that is
due to the run on from management problems in the area mentioned last year,
but part is due to the lower economic activity in that region.
Costs have increased but I am pleased to say that these are mainly to fund
expansion and should be seen as investments in the future.
One highly significant investment in the future made during the period under
review is the establishment of a new wholly-owned subsidiary company,
Advantage Finance Limited. Formed round a team of people experienced in the
field, Advantage is providing hire-purchase finance for motor vehicles in the
sub-prime market. Advantage was incorporated in mid May and commenced trading
in July. We have justifiably high expectations of this exciting development,
which is complementary to the mainstream business.
The Interim dividend for the period of 5p per ordinary share is the same as
this time last year. This will be paid on 12th November 1999 to ordinary
shareholders on the register at 15th October.
In the second half of the year we expect that the gradual improvement in
turnover that we have seen since May will continue. Whilst we will see
increased turnover, the profits will be held down by the budgeted initial
investment costs in the new subsidiary. Because of this investment in future
enhanced profitability, we look forward to the future with enthusiasm and
confidence.
Derek M Coombs
Chairman
Enquiries: (1:00 - 5:30pm)
Derek Coombs Anthony Coombs
Chairman Managing Director
Tel: 0171-352 6709 Tel: 0121- 7057777
MANAGING DIRECTOR'S STATEMENT
Although first half trading results are broadly the same as last year, they
reflect an important period of work when the foundations for your company's
future expansion have been laid. Management changes have been, and continue to
be, made particularly at our North Eastern subsidiary where results since the
half-year indicate a rather more encouraging turnaround in profitability. The
remainder of our home collected finance business continues to grow both in
productivity and profitability and is now producing rates of sales growth
which are not only above budget but are the best seen for more than a decade.
Meanwhile the first half has seen the further rationalisation of our loan
range, a simplification of paperwork and an important improvement in gross
margins. We have seen a small but significant increase in our customer base.
This trend will continue and be strengthened by a better targeted acquisition
strategy.
The quality of our book debt remains high and has improved slightly on last
year. In particular, in apparent contrast to recent trends in our industry our
bad debt experience remains consistent and set to meet our budgets for the
full year.
Our hosiery manufacturing subsidiary, A E Holt, has shown a more encouraging
turnaround both in moving from loss to profit in the first half and in
expanding sales whilst maintaining very tight cost control. Its niche market,
making women's hosiery for export to Northern Europe looks both stable and
capable of growth.
Although the first half results for our Group only partially reflect it, I am
confident that the groundwork laid over the past six months and reflected in
our current buoyant trading will lead to satisfactory growth in both
profitability and shareholder value.
Year 2000
The 'Year 2000' problem or ' millennium bug' refers to the risk of business
being affected by the failure of computer controlled systems to cope with the
change of date from 1999 to 2000.
The computer hardware in use in the business has been kept up to date and all
renewed over the past few years. The supplier has assured us that the major
business control software suite, which we have been using has no millennium
problems. However, as part of our development programme, during the year this
system has been fully re-written by the same software house, which has worked
with us for the past eighteen years. Parallel runs are due to commence
imminently and we will be using the new system well before the end of the
calendar year.
A careful investigation of other systems has been carried out and no
millennium bug problems are expected.
The directors do not regard the costs of this exercise as exceptional as it
forms part of the normal process of updating the group's equipment and
software, and the level of expenditure on the year 2000 issue over and above
this normal expenditure is not considered material.
Anthony M V Coombs
Managing Director
CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE SIX MONTHS ENDED 31ST JULY, 1999
Six months Six months Financial
Year
ended ended ended
31.7.99 31.7.98 31.1.99
(Restated)
Note £000's £000's £000's
Turnover 3 31,197 30,415 64,833
===== ===== ======
Group
operating profit 3 2,648 2,790 6,066
Net interest payable (134) (95) (214)
Profit on ordinary
activities before
taxation 2,514 2,695 5,852
Tax on profit on ordinary
activities (762) (827) (1,796)
_____ _____ _____
Profit on ordinary
activities after taxation
being profit for the
financial period 1,752 1,868 4,056
Preference dividends paid
On 4.2% cumulative shares. (4) (4) (8)
On 31.5% cumulative shares. (71) (71) (142)
_____ _____ ____
Profit available
for appropriation 1,677 1,793 3,906
Dividend on
ordinary shares (587) (587) (2,348)
_____ _____ _____
Retained profit for the
financial period 1,090 1,206 1,558
===== ===== =====
Earnings per
ordinary share 4 14.3p 15.3p 33.3p
===== ===== =====
Dividends per
ordinary share 5.0p 5.0p 20.0p
===== ===== =====
All activities derive from continuing operations.
CONSOLIDATED BALANCE SHEETS 31ST JULY, 1999
31.7.99 31.7.98 31.1.99
Note £000's £000's £000's
Fixed assets
Tangible assets 3,014 2,915 2,891
===== ===== =====
Current assets
Amounts receivable
from customers 30,512 27,856 30,629
Stocks 439 596 422
Debtors 851 569 671
Cash at bank and
in hand 1 1 1
------- ------ -------
31,803 29,022 31,723
Creditors:
amounts falling
due within one year (7,554) (6,672) (8,441)
------- ------- -------
Net current assets 24,249 22,350 23,282
-------- -------- --------
Total net assets 3 27,263 25,265 26,173
======= ======= ======
Capital and reserves:
Called up share capital 2,117 2,117 2,117
Share premium account 2,136 2,136 2,136
Revaluation reserve 631 631 631
Profit and loss account 22,379 20,381 21,289
______ ______ ______
Total shareholders' funds 27,263 25,265 26,173
====== ====== ======
Attributable to equity
shareholders 26,613 24,615 25,523
Attributable to non-equity
shareholders 650 650 650
------- ------- -------
27,263 25,265 26,173
====== ======= =======
These financial statements were approved by the Board of Directors on 10th
September 1999.
Signed on behalf of the Board of Directors
D M Coombs
A M V Coombs
Directors
CONSOLIDATED CASH FLOW STATEMENT FOR SIX MONTHS ENDED 31ST JULY, 1999
Six months Six months Financial
year
ended ended ended
31.7.99 31.7.98 31.1.99
Note £000's £000's £000's
Cash flow from
operating
activities 5 2,953 3,075 3,933
Returns on investments
and servicing of finance (211) (196) (364)
Taxation (18) (20) (1,920)
Capital expenditure and
financial investment (395) (305) (567)
Equity dividends paid (1,761) (1,702) (2,289)
------- ------- -------
Increase/(decrease)
in cash in the period 568 852 (1,207)
======= ====== ======
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months Six months Financial
year
ended ended ended
31.7.99 31.7.98 31.1.99
£000's £000's £000's
Increase/(decrease) in
cash in the period 568 852 (1,207)
------- ------ -------
Movement in net funds
in the period 568 852 (1,207)
Net debt at start
of period (4,721) (3,514) (3,514)
------- ------- -------
Net debt at end of period (4,153) (2,662) (4,721)
====== ====== ======
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six months ended 31st July, 1999
Six months Six months Financial
Year
ended ended ended
31.7.99 31.7.98 31.1.99
(Restated)
£000's £000's £000's
Profit for the financial
period attributable to
the shareholders 1,752 1,868 4,056
------ ------ ------
1,752 1,868 4,056
====== ====== ======
Note of prior period adjustment
Total recognised gains
and losses relating to
the period (as above) 1,752 1,868 4,056
Prior period adjustment
(Note 2) - (1,592) (1,592)
_____ ______ ______
Total gains and losses
recognised since the
last annual report 1,752 276 2,464
====== ====== ======
NOTES TO THE INTERIM STATEMENTS
1. ACCOUNTING POLICIES
The financial information within the interim report has been prepared in
accordance with applicable accounting standards. Since the preparation of
the previous financial statements, the group has adopted the
recommendations set out in Financial Reporting Standard ('FRS') 12.
There is no effect on the current and prior periods from adopting the new
accounting policy.
2. PRIOR YEAR ADJUSTMENTS
At 31 January 1999, the directors reviewed the accounting policies used in
the preparation of the financial statements and the preparation of
information and identified several adjustments which were made to provide
greater transparency or to ensure compliance with accounting standards
The interim statement at 31 July 1998 did not include a consolidated
balance sheet, consolidated cash flow statement, or consolidated statement
of total recognised gains and losses. As a result, comparatives have been
restated at 31 July 1998 for the consolidated profit and loss account only.
Apart from those noted below, prior year adjustments as stated in the
previous financial statements do not affect the consolidated profit and
loss account at 31 July 1998.
DEFERRED REVENUE
The calculation of deferred revenue was revised to spread the income from
consumer credit agreements over the term of the agreement. Previously a
proportion of profit on such agreements was taken on their inception.
The prior period adjustment gave rise to a net cumulative reduction in
group reserves of £1,592,000. The comparative figures for the period to 31
July 1998 have been restated in accordance with the new method, resulting
in an increase in consolidated turnover and profit before tax of £605,000
and an increase in group profit for the period of £605,000.
DISCLOSURES
The amount provided for doubtful debt was deducted before group operating
profit. This amount was included in turnover in the 1998 interim statement.
The 1998 consolidated profit and loss account has been restated for this
change which has no impact on profit before tax.
3. ANALYSES OF TURNOVER, OPERATING PROFIT/(LOSS) AND NET ASSETS/(LIABILITIES)
All operations are situated in the United Kingdom. Analyses by class of
business of turnover, operating profit/(loss) and net assets/(liabilities)
are stated below.
TURNOVER
Six months Six months Financial
Year
ended ended ended
31.7.99 31.7.98 31.1.99
(Restated)
£000's £000's £000's
Class of business
Consumer credit,rentals
and other retail trading 30,440 29,882 63,745
Manufacturing 662 533 1,088
------- ------- ------
31,102 30,415 64,833
Motor car finance
(new venture) 95 - -
------- ------- -------
31,197 30,415 64,833
======= ======= ======
OPERATING PROFIT/(LOSS)
Six months Six months Financial
year
ended ended ended
31.7.99 31.7.98 31.1.99
(Restated)
£000's £000's £000's
Class of business
Consumer credit, rentals
and other retail trading 2,716 2,805 6,159
Manufacturing 37 (15) (93)
------ ------ ------
2,753 2,790 6,066
Motor car finance
(new venture) (105) - -
----- ----- -----
2,648 2,790 6,066
===== ===== =====
NET ASSETS/(LIABILITIES)
Six months Six months Financial
year
ended ended ended
31.7.99 31.7.98 31.1.99
£000's £000's £000's
Class of business
Consumer credit, rentals
and other retail trading 26,935 24,961 25,964
Manufacturing 403 304 209
------ ------ ------
27,338 25,265 26,173
Motor car finance
(new venture) (75) - -
------ ------ ------
27,263 25,265 26,173
====== ====== ======
4. EARNINGS PER ORDINARY SHARE
The calculation of earnings per Ordinary share is based on profit after
tax of £1,752,000 (for the period ended 31 July 1998 - £1,868,000
(restated), and the year ended 31 January 1999 - £4,056,000) from which is
deducted Preference dividends of £75,000 (for the period ended 31 July
1998 - £75,000, and the year ended 31 January 1999 - £150,000) giving
earnings of £1,677,000 (for the period ended 31 July 1998 - £1,793,000
(restated) and the year ended 31 January 1999 - £3,906,000).
The number of shares used in the calculation is the average number of
shares in issue during the year of 11,737,228 (for the period ended 31
July 1998 and the year ended 31 January 1999 -11,737,228).
Diluted earnings per share is the same as basic earnings per share.
5. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
Six months Six months Financial
year
ended ended ended
31.7.99 31.7.98 31.1.99
(Restated)
£000's £000's £000's
Operating profit 2,648 2,790 6,066
Depreciation 260 277 548
Loss/(profit) on
sale of fixed assets 12 (5) 10
(Increase)/decrease
in stocks (17) (144) 30
Decrease/(increase)
in amounts receivable
from customers 117 32 (2,741)
(Increase)/decrease
in debtors (180) 612 160
Increase/(decrease)
in creditors 113 (487) (140)
------ ------ ------
operating activities 2,953 3,075 3,933
====== ===== =====
6. INTERIM REPORT
In accordance with the Companies Act 1985, the abridged figures in respect
of the financial year ended 31 January 1999 are not full accounts. Full
group accounts for that period have been delivered to the Registrar of
Companies with an unqualified audit report.
Copies of this Interim Report are being posted to all shareholders and
will be made available to the public at the Company's registered office at
Royal House, Prince's Gate, Solihull B91 3QQ.
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