Final Results
Tandem Group PLC
07 April 2003
April 2003
TANDEM GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2003
Tandem Group plc, the sports and leisure equipment manufacturer and distributor
today announced its preliminary results for the year ended 31 January 2003.
RESULTS
2003 2002
£'000 £'000
Turnover 37,317 35,320
Operating profit 787 1,225
Net interest payable 553 657
Pre-tax profit 234 568
Shareholders' funds 4,709 1,953
Earnings per share (before goodwill amortisation)
Basic and diluted (see note 5) 0.24p 0.32p
HIGHLIGHTS
• Acquisition of the Ben Sayers golf equipment business.
• Acquisition of AIM listed MV Sports Group Plc should be
completed on 8 April 2003.
• Strong sales of Claud Butler and Dawes high specification
bicycles.
• Another successful year for Pot Black which is now a major
contributor to the Group's profitability.
• Stephen Hendry MBE has signed a 3 year endorsement deal. Growth
opportunities for market share in cue sports.
• Much improved balance sheet with gearing at lowest level for 8
years.
Commenting on Tandem's progress, Chairman Graham Waldron, said:
'The Group's priority is to improve shareholder value and increase
profitability. The investment and development of brands in our key product
groups and the recent acquisition of the MV Sports Group Plc puts the Group in a
stronger position than for many years'.
For further information, please contact:
Mervyn Keene, Finance Director, Tandem Group plc 01733 211399
David Haggie, Haggie Financial Limited 020 7417 8989
Chairman's statement
This has been a year of considerable activity including the acquisitions of the
Ben Sayers golf equipment business and the AIM quoted MV Sports Group Plc ('MV
Sports'), a company that distributes sports and leisure products and toys. The
MV Sports acquisition should be completed on 8 April 2003.
As previously reported, competition in the lower specification bicycle market in
the important months of November and December adversely affected Christmas sales
volumes and full year profits from this part of the business were below
expectations. The indoor and outdoor play equipment business traded in line
with budget for the year.
The results for the year ended 31 January 2003 are in line with the forecast
announced on 3 February 2003 and show a profit on ordinary activities before
interest, goodwill amortisation and taxation of £988,000 compared to £1,372,000
last year. Interest payable was £553,000 (2002 - £657,000) and goodwill
amortisation was £201,000 (2002 - £147,000).
Falcon
Sales of the high specification models in the upper price points, particularly
the Claud Butler range, increased over the previous year. Lower specification
products were affected by cheap imports and national grocery retailers taking
market share from our traditional customer base. This reduced Falcon's
operating profit and reversed the trend seen in the previous year.
In a highly competitive market Falcon, with its well-established brand names of
Falcon, Claud Butler, Townsend and British Eagle, continues to maintain an
excellent reputation for product quality and service. Operational changes have
been introduced which will improve the profitability of the Falcon business.
The product range has been rationalised allowing sales of lower priced products
to be generated at acceptable margins and also leading to significant savings of
fixed costs. The 2003 product range has been well received by key customers and
increased listings have been achieved, not only in lower value products, but
also in higher value models. Market share in the bicycle market is therefore
expected to increase during 2003.
Dawes Cycles
Dawes is a long established brand, with products in the mid to upper price
points, and has strong awareness in the cycling market and with the general
public. It operates independently of Falcon in its marketing and selling
strategy with the differential in brand profile enabling the Group to grow its
overall market share in both volume and value.
Although Dawes showed an improvement over the previous year, its results for the
year to 31 January 2003, the first full year since acquisition, were below our
target. Much effort is being made to increase and improve distribution among
independent cycle dealers which, coupled with a lowering of fixed costs, should
enable the business to make a satisfactory contribution to the Group's results.
Two Wheel Trading
In the interim statement we reported that our cycle accessory business suffered
from supply chain problems. These were resolved leading to a much improved
second half of the year.
Efforts are being concentrated on improving the utilisation of working capital
and controlling fixed costs.
Pot Black
I am pleased to report another year of growth at Pot Black, which is now a major
contributor to the Group's profitability. New products contributed to an
increase in turnover and with further improvements to operational efficiency, a
satisfactory return on sales was achieved.
There was significant growth in the sales of outdoor play equipment during the
year establishing Pot Black as a major supplier in this sector.
Further opportunities to develop the cue sport business of Pot Black have been
identified and resources have been directed in that area. It is expected that
this will increase turnover with favourable margins. In line with this,
seven-times world champion Stephen Hendry MBE, the most successful snooker
player of all-time, has signed a new 3 year endorsement deal with Pot Black. He
will wear the Pot Black logo on his waistcoat at all ranking tournaments
worldwide and will feature widely in Pot Black's publicity material. In
addition he will also help to design and promote a completely new range of
higher value slate bed tables, cues and other accessories for both snooker and
English pool.
Pot Black will be moving into new premises in the summer, which should produce
more efficiencies and pave the way for further expansion.
Ben Sayers
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.
Chairman's statement continued
Significant expenditure has been invested in repositioning the Ben Sayers brand
since its acquisition. New products have been introduced and more recently, in
November 2002, we announced our appointment as exclusive distributor, for the UK
and certain European countries, of the Joey Rodolfo and Resort 2 golf clothing
brands with the aim of further strengthening and widening the customer base of
our golf business. Already sales of the Spring 2003 ranges are encouraging.
With increased sales and marketing expenditure the business showed an operating
loss of £134,000 for the period since acquisition. The benefit of the
additional sales and marketing costs and savings in product and fixed costs
should enable our golf business to return to profit in the current year.
Employees
There have been re-organisations in the past year and the completion of the MV
acquisition will bring further changes in the next few months. We would like to
thank all staff for their enthusiastic commitment in dealing with the issues
that arise in a fast growing and rapidly changing group.
Acquisitions
On 18 March 2003, shareholders approved resolutions at an Extraordinary General
Meeting which will enable the acquisition of the MV Sports to be completed on 8
April 2003. The acquisition is by way of a scheme of arrangement under section
425 of the Companies Act 1985, which was sanctioned by the High Court on 7 April
2003. Our shareholders also approved a share capital reorganisation to
consolidate the voting ordinary shares in the Company on the basis of one new
ordinary share for ten voting ordinary shares existing before the consolidation.
Shareholders in MV Sports will receive 2 new ordinary shares in Tandem for
every 430 MV Sports shares.
Your board believes that the MV Sports business is complementary to our current
businesses. The product range features famous brands such as Barbie, Bob the
Builder, Groovy Chick and many others. The increase in the number of products
and customers will provide opportunities for all of the Group's businesses. The
core turnover of MV Sports increases the Group's turnover by more than 40% and
with a lower cost base this acquisition should become a major profit
contributor.
Savings in central overheads (not least of which is the cost of two companies
maintaining a public quotation) are also anticipated. We are aware that
investor interest in smaller companies is not always strong but that interest
tends to improve as companies become larger. The increase in the Group's market
capitalisation as a result of the acquisition of MV Sports, while in no way
guaranteeing instant wider institutional investor interest will, in the opinion
of the Directors, improve the likelihood that such interest will be generated.
Current trading
Trading is in line with expectations and the action that has been taken at the
businesses in the Group should lead to improved results for the current year.
Strategy and future prospects
Efforts will continue to expand sales, control costs and increase profitability
and cash flow at all businesses.
There will be significant opportunities following the acquisition of MV Sports
and resources are being deployed to ensure its successful integration into the
Group.
The balance sheet was significantly strengthened during the year with net assets
rising from £3,092,000 to £5,431,000, reducing gearing to its lowest level for 8
years. New bank facility agreements with HSBC Bank plc were signed on 30
January 2003. As part of the agreements, HSBC Bank plc are providing a £2.5
million three year loan together with overdraft facilities of up to £3 million.
This replaces the previous facility, which was repayable on demand. Net current
assets at 31 January 2003 were £2,653,000, which is an improvement of over £12
million since 1999. Completion of the MV Sports acquisition will further
strengthen the Group's balance sheet. The last audited accounts for MV Sports
as at 30 June 2002 showed net assets of £5,116,000, including borrowings of only
£800,000.
Following the work carried out in the last few years the Group now has a solid
balance sheet and a firm base for further consolidation and future expansion.
Your board looks forward to another year of progress and improvement in
shareholder value.
Graham Waldron
Chairman
7 April 2003
Consolidated profit and loss account
Year ended 31 January 2003
2003 2002
£'000 £'000 £'000 £'000
Turnover
Continuing operations 35,330 35,288
Acquisitions 1,987 -
37,317 35,288
Discontinued operations - 32
37,317 35,320
Cost of sales (26,382) (25,324)
Gross profit 10,935 9,996
Net operating expenses (10,148) (8,771)
Operating profit
Continuing operations 917 1,478
Acquisitions (134) (282)
783 1,196
Discontinued operations (24) (3)
- utilisation of prior year provision 28 32
Profit on ordinary activities before 787 1,225
interest
Net interest payable (553) (657)
Profit on ordinary activities before taxation 234 568
Tax on profit on ordinary activities 9 (4)
Profit on ordinary activities after taxation 243 564
Non equity minority interests 151 (54)
Profit for the financial year transferred to reserves 394 510
Earnings per share Pence Pence
Basic and diluted 0.16 0.25
Adjusted, before goodwill amortisation
Basic and diluted 0.24 0.32
Consolidated balance sheet
At 31 January 2003
2003 2002
£'000 £'000
Fixed assets
Intangible assets 3,692 3,056
Negative goodwill (197) (71)
3,495 2,985
Tangible assets 1,153 1,354
4,648 4,339
Current assets
Stocks 7,133 6,347
Debtors 6,433 5,619
13,566 11,966
Creditors - amounts falling due within one year
Bank overdraft 1,374 4,137
Other creditors 9,539 8,946
10,913 13,083
Net current assets/(liabilities) 2,653 (1,117)
Total assets less current liabilities 7,301 3,222
Creditors - amounts falling due after more than one year 1,801 33
Provisions for liabilities and charges 69 97
Net assets 5,431 3,092
Capital and reserves
Called up share capital 11,174 9,214
Share premium account 5,442 5,040
Capital reserve 406 406
Merger reserve 63 63
Profit and loss account (12,376) (12,770)
Equity shareholders' funds 4,709 1,953
Non-equity minority interests 722 1,139
5,431 3,092
Consolidated cash flow statement
Year ended 31 January 2003
Notes 2003 2002
£'000 £'000
Net cash inflow from operating activities A 9 1,237
Returns on investments and servicing of finance
Interest paid (544) (655)
Interest element of hire purchase rentals (9) (2)
Bank fees paid - (31)
Net cash outflow from returns on investments and servicing of finance (553) (688)
Taxation - -
Capital expenditure
Purchase of tangible fixed assets (214) (335)
Sale of tangible fixed assets 48 27
Net cash outflow from capital expenditure (166) (308)
Acquisitions
Purchase of subsidiary undertakings B (1,170) (145)
Additional costs of prior year acquisition - (9)
Purchase of subsidiary company preference shares (140) (19)
Net cash outflow from acquisitions (1,310) (173)
Net cash (outflow)/inflow before financing (2,020) 68
Financing
Ordinary shares issued 2,450 -
Expenses incurred in issue of ordinary shares (88) -
New loans 2,500 -
Capital element of hire purchase rentals (79) (30)
Net cash inflow/(outflow) from financing 4,783 (30)
Increase in cash C & D 2,763 38
Notes to consolidated cash flow statement
A. Reconciliation of operating profit to net cash inflow from operating activities 2003 2002
£'000 £'000
Operating profit 787 1,225
Depreciation charges 384 390
Amortisation of goodwill 201 147
Profit on sale of tangible fixed assets (13) (3)
(Increase)/decrease in stocks (457) 662
(Increase)/decrease in debtors (800) 10
Decrease in creditors (65) (1,162)
Utilisation of provisions on discontinued activities (28) (32)
Net cash inflow from operating activities 9 1,237
B. Purchase of subsidiary undertaking 2003 2002
£'000 £'000
Net assets acquired
Tangible fixed assets 5 -
Stocks 487 1,081
Debtors - 988
Creditors - (2,061)
Loans and finance leases - (8)
492 -
Goodwill 678 736
1,170 736
Satisfied by
Shares allotted - 231
Cash consideration 982 -
Deferred consideration - cash - 360
Acquisition costs capitalised 188 145
1,170 736
C. Reconciliation of net cash inflow to movement in net debt 2003 2002
£'000 £'000
Increase in cash 2,763 38
Cash to repay finance leases and hire purchase contracts 79 30
Changes in net debt resulting from cash flows 2,842 68
Bank loan (2,500) -
New finance leases (231) -
Lease and hire purchase obligations acquired with purchase of - (8)
businesses
Movement in net debt in the year 111 60
Net debt at 1 February 2002 (4,155) (4,215)
Net debt at 31 January 2003 (4,044) (4,155)
D. Analysis of net debt At Cash flow Non-cash At
1 February movements 31 January
2002 2003
£'000 £'000 £'000 £'000
Bank overdraft (4,137) 2,763 - (1,374)
Bank loan - (2,500) - (2,500)
Hire purchase creditors (18) 79 (231) (170)
(4,155) 342 (231) (4,044)
Notes to the preliminary results
1. This preliminary announcement is not the Group's statutory accounts
but extracts therefrom and is prepared on the basis of the accounting policies
as used in the 2002 financial statements. Statutory accounts dealing with the
financial year ended 31 January 2002 have been delivered to the Registrar of
Companies, however, statutory accounts dealing with the financial year ended 31
January 2003 have not yet been delivered. The auditors have reported on the
accounts for the financial year ended 31 January 2002 and 31 January 2003.
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 2003 will be
delivered to the registrar of companies following the Group's annual general
meeting.
3. No dividend on the ordinary shares is being proposed (2002 - £nil)
4. Non-equity minority interests comprises dividends waived amounting to
£178,000 less dividends accrued of £27,000.
5. The calculation of basic and diluted earnings per share is based on
profits of £394,000 (2002 - £510,000) and on an average of 250,465,916 (2002 -
203,096,053) ordinary shares in issue during the year. Diluted earnings per
share is after taking into consideration share options.
6. The Annual Report and Accounts will be posted to shareholders shortly.
7. The Annual General Meeting will be held at 11:00 a.m. on 3 June 2003
at Eversheds, 1 Royal Standard Place, Nottingham NG1 6FZ.
7 April 2003
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