Final Results
Tandem Group PLC
22 April 2002
Immediate 22 April 2002
TANDEM GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2002
Tandem Group plc, the sports and leisure group and one of the leading
manufacturers and distributors of bicycles in the UK, today announced its
preliminary results for the year ended 31 January 2002.
RESULTS
2002 *2001
£000 £'000
Turnover 35,320 26,500
Profit on ordinary activities before interest and tax 1,225 777
*Restated
KEY POINTS
• Turnover up 22%
• Profit on ordinary activities before interest and taxation up 58%
• Two acquisitions, Dawes Cycles and Ben Sayers, integrated successfully
and trading well
• Pot Black makes major profit contribution in first full year since
acquisition
• Falcon factory reorganised to accommodate high value production
including Dawes
Commenting on this announcement, Chairman Graham Waldron, said:
'The continuing progress of Falcon and the successful integration of our four
acquisitions since September 2000 have transformed the Group. Efforts will
continue to expand sales and increase profitability at all businesses.
'We continue, with caution, to seek further acquisitions in the sports and
leisure equipment market in both existing product areas and new ones. The
Board's clearly defined objective in its acquisition strategy is to acquire
businesses capable of generating high net returns on sales and higher than
average return on capital employed.'
For further information, please contact:
Mervyn Keene, Finance Director, Tandem Group plc 01733 211399
David Haggie, Haggie Financial Limited 020 7417 8989 (mobile: 07768 332486)
Chairman's statement
______________________________________________________________
I am pleased to announce that the results for the year ended 31 January 2002
show a profit on ordinary activities before interest and taxation of £1,225,000,
an increase of 58% over the previous year.
In our interim report issued on 31 October 2001, the Board reported that all
businesses were performing well and that the busy Christmas period represented a
significant profit opportunity particularly at Falcon and Pot Black. The results
above demonstrate that both sales and margins were in line with expectations
over that crucial period and we are delighted to present to shareholders a year
of considerable progress. Operating profit on continuing activities in the last
six months of the financial year increased by 111% from the previous year to
£1,101,000.
Acquisitions
On 26 June 2001, the business and certain assets of Dawes Cycles were acquired
for a total consideration of £736,000 including costs. The results of the
acquisition of Dawes have been included in the Group financial statements from
that date.
Dawes was established in 1926 and the brand name has strong awareness in the
cycling market and among the general public. Dawes' reputation was built
originally around its range of classic touring bikes, although it now has an
extensive product range including trekking, city (including folding), tandem,
sports, hybrid and mountain bikes.
On 25 February 2002, the Group widened its presence in sporting goods with the
acquisition of the business and certain assets of Ben Sayers, one of the oldest
independent golf club manufacturers in the world with over 120 years of trading.
Ben Sayers manufactures and distributes golf clubs, bags and other
accessories. The consideration for the acquisition was £982,000 plus expenses.
Funding for the acquisition was provided by the placing of 49,000,000 new
ordinary shares at a price of 5p per share raising £2,250,000, net of expenses.
Funds raised in excess of the consideration are being used to provide further
working capital, in particular to develop the Ben Sayers business and to reduce
Tandem Group debt.
Falcon Cycles
The Falcon business based in North Lincolnshire is one of the largest
manufacturers of bicycles in the UK, with its well-established brand names of
Falcon, Claud Butler, Townsend and British Eagle amongst the market leaders.
Customers include an increasing number of independent bicycle dealers, mail
order companies and national retailers. The business again performed well and
produced an operating profit well ahead of the previous year. Falcon continues
to produce good returns in a highly competitive market and maintains an
excellent reputation for product quality and service.
Falcon's factory premises have been reorganised with the introduction of an
additional separate production area specialising in high value and more
technically advanced models. This now accommodates the production requirement
of Dawes.
The management team at Falcon, led by the managing director, Steven Bell, who
joined the company in January 2001, is to be congratulated on a very successful
year. Their hard work and endeavour is much appreciated.
Dawes Cycles
Dawes operates independently of Falcon in marketing and selling strategy with
the differential in brand profile enabling the Group to grow its overall market
share in both volume and value at the expense of its competitors.
During January 2002, the production of Dawes cycles was transferred to Falcon's
factory in North Lincolnshire and the marketing, distribution and administrative
functions were moved along with our Two Wheel Trading business to premises in
the West Midlands. The benefit from the reduction in overheads will be achieved
post year-end. Dawes customers have remained loyal since the acquisition and
now that production is fully integrated at Falcon, Dawes should become
profitable and cash generative.
Two Wheel Trading
Turnover at Two Wheel Trading increased by 24% over the previous year largely as
a result of the successful launch of our retail sales division, which sells
cycle accessories direct to retailers. Additional fashion led brands have been
introduced and the strengthening of the retail sales force in the second half of
last year is already reaping benefits.
Pot Black
I am delighted to report that the year proved to be very successful resulting in
Pot Black being a major contributor to the Group's profitability. The
introduction of a new range of outdoor play equipment contributed to the
increase of 25% in turnover for the business over the previous year. This
product range is of great benefit to the Group with its counter seasonality to
snooker and pool enabling better utilisation of labour and overheads.
Considerable improvement has been made to the operational efficiency of the
business and increasing volumes have resulted in lower component costs. The
combination therefore of higher gross margins and significantly reduced fixed
overheads has generated a very satisfactory return on sales. Much higher stock
turn and improved supplier terms have enabled Pot Black to be a major generator
of cash within the Group.
Earnings per share
The earnings per share for the year ended 31 January 2001 has been restated from
1.34p to 1.07p to include the non-voting 'A' ordinary shares in the
calculations. These shares were previously excluded from the calculations on
the basis that they are non-voting and redeemable by the Group at any time for a
consideration of 0.001p per share. It is the Group's intention to redeem these
shares as soon as possible for a total consideration of £1,021. The adjusted
earnings per share figure, before goodwill amortisation, for the year ended 31
January 2001 has also been restated. If the non-voting 'A' ordinary shares were
excluded from the calculation, the figure for the year ended 31 January 2002
would be 0.32p, compared with 0.22p if the 'A' ordinary shares are included.
Employees
We are pleased to welcome the employees of both Dawes and Ben Sayers to the
Group. We are grateful to the management and employees of Pot Black and Two
Wheel Trading for their contribution to the Group's significantly improved
performance in their first full year with the Group. In addition we would like
to thank all staff for their enthusiastic commitment.
Current trading
The results for the first quarter should show further improvements over the same
period last year.
Demand for bicycles at both Falcon and Dawes are in line with expectations and
forecasts by major customers give us confidence that the Group will continue to
make solid progress in this our biggest product area. With increased demand,
production of Dawes models has increased in April.
Direct sales to retailers at Two Wheel Trading continue to exceed the same
period last year. Reduced fixed costs will help operating results to be
maintained.
Demand for outdoor play products at Pot Black continues to exceed our
expectations and restocking of snooker and pool tables after the strong
Christmas demand was completed in February and March. The results for the first
quarter will therefore show improvement in both turnover and profitability over
last year.
Our entry into the golf market with Ben Sayers has been well received by
customers, suppliers and employees. The latest product innovations have
received excellent reviews by both trade and consumer press and sales to date
are most encouraging. Additions to the product range are planned for
introduction later in the year. The sales team has been strengthened and
marketing expenditure targeted to achieve maximum impact on turnover and
profitability.
Strategy and future prospects
The continuing progress of Falcon and the successful integration of our four
acquisitions since September 2000 have transformed the Group. Efforts will
continue to expand sales and increase profitability at all businesses.
We continue, with caution, to seek further acquisitions in the sports and
leisure equipment market in both existing product areas and new ones. The
Board's clearly defined objective in its acquisition strategy is to acquire
businesses capable of generating high net returns on sales and higher than
average return on capital employed.
Your board looks forward to another year of progress and improvement in
shareholder value.
Graham Waldron
Chairman
19 April 2002
Consolidated profit and loss account
______________________________________________________________
Year ended 31 January 2002
2002 2001 Restated *
£'000 £'000 £'000 £'000
Turnover
Continuing operations 32,554 26,467
Acquisitions 2,734 -
Discontinued operations 32 33
35,320 26,500
Cost of sales (25,324) (19,840)
Gross profit 9,996 6,660
Net operating expenses (8,771) (5,883)
Operating profit
Continuing operations 1,478 734
Acquisitions (282) -
Discontinued operations (3) (274)
- release/utilisation of prior year provision 32 317
1,225 777
Profit on ordinary activities before 1,225 777
interest
Net interest payable (657) (846)
Bank debt written off less bank fees - 1,731
Net interest payable and similar (charges)/credits (657) 885
Profit on ordinary activities before taxation 568 1,662
Tax on profit on ordinary activities (4) 188
Profit on ordinary activities after taxation 564 1,850
Non equity minority interests (54) (65)
Profit for the financial year transferred to reserves 510 1,785
Earnings per share Pence Pence
Basic and diluted 0.17 1.04
Adjusted, before goodwill amortisation
Basic and diluted 0.22 1.07
* The consolidated profit and loss account for the year ended 31 January 2001
has been restated for the adoption of FRS 19, the further analysis of interest
payable and for the recalculation of the earnings per share.
Consolidated balance sheet
______________________________________________________________
At 31 January 2002
2002 2001 Restated *
£'000 £'000
Fixed assets
Intangible assets 3,056 2,295
Negative goodwill (71) (35)
Tangible assets 1,354 1,514
4,339 3,774
Current assets
Stocks 6,347 6,010
Debtors 5,619 4,646
11,966 10,656
Creditors - amounts falling due within one year
Bank overdraft 4,137 4,175
Other creditors 8,946 7,724
13,083 11,899
Net current liabilities (1,117) (1,243)
Total assets less current liabilities 3,222 2,531
Creditors - amounts falling due after more than one year 33 50
Provisions for liabilities and charges 97 129
Net assets 3,092 2,352
Capital and reserves
Called up share capital 9,214 9,046
Share premium account 5,040 5,040
Capital reserve 406 406
Merger reserve 63 -
Profit and loss account (12,770) (13,280)
Equity shareholders' funds 1,953 1,212
Non-equity minority interests 1,139 1,140
3,092 2,352
* The consolidated balance sheet as at 31 January 2001 has been restated for the
adoption of FRS 19.
Consolidated cash flow statement
______________________________________________________________
Year ended 31 January 2002
Notes 2002 2001
£'000 £'000
Net cash inflow from operating activities A 1,237 3,064
Returns on investments and servicing of finance
Interest paid (655) (842)
Interest element of hire purchase rentals (2) (4)
Bank fees paid (31) (398)
Net cash outflow from returns on investments and servicing of finance (688) (1,244)
Taxation - -
Capital expenditure
Purchase of tangible fixed assets (335) (74)
Sale of tangible fixed assets 27 8
Sale of assets held for resale - 349
Net cash (outflow)/inflow from capital expenditure (308) 283
Acquisitions
Purchase of subsidiary undertakings B (145) (1,305)
Additional costs of prior year acquisition (9) -
Bank overdrafts of subsidiary undertakings acquired - (2,212)
Purchase of subsidiary company preference shares (19) (15)
Net cash outflow from acquisitions (173) (3,532)
Net cash inflow/(outflow) before financing 68 (1,429)
Financing
Ordinary shares issued - 4,580
Expenses incurred in issue of ordinary shares - (489)
Capital element of hire purchase rentals (30) (25)
Net cash (outflow)/inflow from financing (30) 4,066
Increase in cash C & D 38 2,637
Notes to consolidated cash flow statement
_____________________________________________________________
A. Reconciliation of operating profit to net cash inflow from operating activities 2002 2001
£'000 £'000
Operating profit 1,225 777
Depreciation charges 390 298
Amortisation of goodwill 147 39
Profit on sale of tangible fixed assets (3) (4)
Loss on sale of assets held for resale - 237
Decrease in stocks 662 141
Decrease in debtors 10 467
(Decrease)/increase in creditors (1,162) 1,426
Release of provisions on discontinued activities (32) (317)
Net cash inflow from operating activities 1,237 3,064
B. Purchase of subsidiary undertaking 2002 2001
£'000 £'000
Net assets acquired
Tangible fixed assets - 640
Stocks 1,081 2,345
Debtors 988 1,639
Creditors (2,061) (2,766)
Loans and finance leases (8) (42)
Net debt - (2,212)
- (396)
Goodwill 736 2,334
736 1,938
Satisfied by
Shares allotted 231 633
Deferred consideration - cash 360 -
Acquisition costs capitalised 145 305
Cash - 1,000
736 1,938
C. Reconciliation of net cash inflow to movement in net debt 2002 2001
£'000 £'000
Increase in cash 38 2,637
Cash to repay finance leases and hire purchase contracts 30 25
Changes in net debt resulting from cash flows 68 2,662
Other non-cash changes - 2,539
Lease and hire purchase obligations acquired with purchase of businesses (8) (42)
Movement in net debt in the year 60 5,159
Net debt at 1 February 2001 (4,215) (9,374)
Net debt at 31 January 2002 (4,155) (4,215)
D. Analysis of net debt At Non-cash At
1 February movement 31 January
2001 Cash flow 2002
£'000 £'000 £'000 £'000
Bank overdraft (4,175) 38 - (4,137)
Hire purchase creditors (40) 30 (8) (18)
(4,215) 68 (8) (4,155)
The non-cash movement consists of lease and hire purchase obligations acquired
with the purchase of Dawes Cycles.
Notes to the preliminary results
_____________________________________________________________
1. This preliminary announcement is not the Group's statutory accounts
but extracts therefrom. Statutory accounts dealing with the financial year
ended 31 January 2001 have been delivered to the Registrar of Companies,
however, statutory accounts dealing with the financial year ended 31 January
2002 have not yet been delivered. The auditors have reported on the accounts
for the financial year ended 31 January 2001 and 31 January 2002. Their reports
were unqualified and did not contain a statement under section 237 (2) or (3) of
the Companies Act 1985.
2. The statutory accounts for the year ended 31 January 2002 will be
delivered to the registrar of companies following the Group's annual general
meeting.
3. The calculation of basic earnings per share is based on profits of
£510,000 (2001 - £1,785,000) and on an average of 305,221,362 (2001 -
170,939,750) ordinary shares in issue during the year. Diluted earnings per
share is after taking into consideration share options which gives an average of
305,221,362 (2001 - 170,984,133) ordinary shares.
4. The Annual Report and Accounts will be posted to shareholders shortly.
19 April 2002
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