Final Results

Tandem Group PLC 01 May 2008 TANDEM GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2008 Chairman's statement ______________________________________________________________ Turnover for the year ended 31 January 2008 was £34,878,000 compared to £33,785,000 last year. There was a profit before taxation of £1,105,000 compared to £649,000. Bicycles and accessories The total number of bicycles sold increased by 4.8% over the previous year. With lower sales of higher priced models, due predominantly to the bad weather, revenue in our cycle businesses was down by 5.9%. Our UK based product development team continues to design and develop new bicycles to provide our customers with innovative and exciting products reinforcing our commitment to independent bicycle retailers. Sports, leisure and toys Turnover in the sports, leisure and toy sector was up 16.3% over the previous year. Sales of the brands 'Hedstrom', 'In the Night Garden' and 'C'Mons' performed well. 'Hedstrom' is a wide range of outdoor play equipment including swings, slides and multiplay products. The 'In the Night Garden' range of wheeled toys is based on the very successful BBC children's programme. 'C'Mons' are the characters used by the Vauxhall motor company in the marketing of the Corsa, which was voted 'What Car' Car of the Year 2007. Sales of Ben Sayers golf equipment continue to expand with the introduction of new products with the latest design and technology features. Improvements to shareholder value We continue to explore ways to enhance shareholder value. The profit for the year and the elimination of the Tandem pension scheme deficit has substantially increased shareholders' funds. In the year ended 31 January 2008 we generated £1,843,000 of cash enabling us to deal with the deficit on The Tandem pension scheme and buy some of our shares back. On the 22 February 2008 the Group purchased 1,600,000 of its own shares and transferred them into treasury. This increases shareholder value and will improve earnings per share going forward. At the forthcoming Annual General Meeting we are asking shareholders' authority for the Company to continue to purchase its own shares. The Company would only exercise the authority if the effect of doing so would be to increase the earnings per share of the remaining shareholders and be in the best interests of shareholders generally. In addition, in exercising such authority, the Company would comply with the current guidelines of the ABI and the UK Listing Authority. A large number of shareholders own a small number of shares, which they find uneconomical to sell. We are therefore offering shareholders holding 1,000 shares or less the opportunity, for a limited period, to sell their shares without any dealing costs. They will also be offered the opportunity to purchase more shares at a reduced fixed commission rate. Decreasing the number of small shareholders will reduce the administration costs of the Company. Further details of the offer will be sent to relevant shareholders shortly. Pensions The Group operates two pension schemes that have defined benefit liabilities. I reported in the Interim Statement issued on 17 October 2007 that work was continuing on ways to further reduce or eliminate the deficit on the pension schemes. We are keen to protect the interest of the members of the Group's pension schemes and give them every possible opportunity to utilise the benefit to suit their personal circumstances. Following a significant amount of work with the scheme's administrators and actuary, members of the Tandem Group Pension Plan were offered the opportunity, for a limited period, to accept a cash sum to forego their non-statutory increases in pension. Thirty six percent of members of the scheme accepted the offer and a total payment of £352,000 was made in March 2008 to the members. This made a major contribution in eliminating the £1,547,000 deficit on the Tandem scheme at 31 January 2007 and turning it into a surplus of £971,000. In accordance with the accounting standard IAS 19 we have recognised £264,000 of this surplus on our balance sheet in these financial statements. The deficit on the Casket Group Retirement and Death Benefit Scheme decreased from £590,000 last year to £546,000. We are now looking at ways to reduce or eliminate this deficit. Employees We wish to thank all management and employees for their contribution in increasing the Group's profitability. We have an established team of management and staff with the skills to take the business forward. Summary The year ended 31 January 2008 was a good year for your Group with turnover up 3.2% and profit before tax up 70.3%. Even with the increased turnover tight control of costs limited the increase in operating expenses to under 1%. The year ahead will be challenging. Most retailers expect trading conditions to be difficult with the uncertainty in the economy. In addition, our suppliers are experiencing exceptional increases in steel, oil and labour costs, particularly in Asia. Additional effort and creativity will be required from our management teams and staff to ensure that, by working closely with suppliers, our customers can maintain and grow their sales. We do not anticipate any growth in turnover for the first half of the year compared to last year. Turnover in the first quarter of the current year was down on the high levels achieved last year but with improved margins and firm management of operating expenses the profit before tax in this period was ahead of the same period last year. Increased selections with national retailers and new character licences should improve sales in the second half of the year compared to last year. Graham Waldron Chairman 1 May 2008 For further information contact: Tandem Group plc Mervyn Keene 01733 211065 KBC Peel Hunt Nick Maslen or Richard Newman 020 7418 8900 Consolidated income statement ______________________________________________________________ Note Year ended 31 Year ended 31 January 2008 January 2007 £'000 £'000 Revenue 3 34,878 33,785 Cost of sales (23,753) (23,169) ------- ------- Gross profit 11,125 10,616 Operating expenses (9,773) (9,696) ------- ------- Operating profit 1,352 920 Finance costs (280) (271) Finance income 33 - ------- ------- Profit before taxation 1,105 649 Tax income - 297 ------- ------- Net profit for the year 1,105 946 Earnings per share 4 Pence Pence Basic 2.94 2.52 ------- ------- Diluted 2.91 2.52 ------- ------- All figures relate to continuing operations. Consolidated balance sheet ______________________________________________________________ At 31 January 2008 2008 2007 £'000 £'000 Non current assets Goodwill 2,661 2,677 Property, plant and equipment 510 403 Deferred taxation 970 1,354 Pension scheme surplus 264 - ------- ------- 4,405 4,434 ------- ------- Current assets Inventories 5,582 5,676 Trade and other receivables 5,556 5,435 Cash and cash equivalents 2,389 551 ------- ------- 13,527 11,662 ------- ------- Total assets 17,932 16,096 ------- ------- Current liabilities Trade and other payables (7,792) (6,076) Financial liabilities (2,300) (2,456) Current tax liabilities (326) (365) ------- ------- (10,418) (8,897) ------- ------- Non current liabilities Pension schemes' deficits (546) (2,137) Deferred taxation (74) - ------- ------- (620) (2,137) ------- ------- Total liabilities (11,038) (11,034) ------- ------- Net assets 6,894 5,062 ------- ------- Equity Share capital 1,503 1,503 Share premium 5,258 5,258 Other reserves 2,426 2,431 Profit and loss account (2,293) (4,130) ------- ------- Total equity 6,894 5,062 ------- ------- Consolidated statement of recognised income and expense ______________________________________________________________ Year ended 31 Year ended 31 January 2008 January 2007 £'000 £'000 Foreign exchange differences on translation of overseas assets (5) (70) Actuarial gain on pension schemes 1,281 1,221 Movement in pension schemes' deferred tax provision (562) - ------- ------- Net income recognised directly in equity 714 1,151 Net profit for the year 1,105 946 ------- ------- Total recognised income and expense 1,819 2,097 ------- ------- Statement of movements on reserves ______________________________________________________________ Capital Profit Share Merger redemption Translation and loss account reserve reserve reserve account Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 February 2006 5,258 1,036 1,427 38 (6,324) 1,435 Profit for the year - - - - 946 946 Re-translation of overseas subsidiaries - - - (70) - (70) Net actuarial gains on pension schemes - - - - 1,221 1,221 Share based payments - - - - 27 27 ------- ------- ------- ------- ------- ------- Balance at 1 February 2007 5,258 1,036 1,427 (32) (4,130) 3,559 Profit for the year - - - - 1,105 1,105 Re-translation of overseas subsidiaries - - - (5) - (5) Net actuarial gains on pension schemes - - - - 719 719 Share based payments - - - - 13 13 ------- ------- ------- ------- ------- ------- Balance at 31 January 2008 5,258 1,036 1,427 (37) (2,293) 5,391 ------- ------- ------- ------- ------- ------- Consolidated cash flow statement ______________________________________________________________ Year ended Year ended 31 January 2008 31 January 2007 £'000 £'000 Cash flows from operating activities Net profit for the year 1,105 946 Adjustments: Depreciation of property, plant and equipment 152 173 Goodwill impairment 16 - (Profit)/loss on sale of property, plant and equipment (11) 48 Finance cost 280 271 Finance income (33) - Taxation paid (89) (85) Tax income - (297) Share based payments 13 27 Fair value adjustments of forward contracts (42) 37 ------- ------- Net cash inflow from operating activities before movements in working capital 1,391 1,120 Decrease/(increase) in inventories 94 (12) Increase in trade and other receivables (225) (681) Increase/(decrease) in trade and other payables 1,203 (1,166) ------- ------- Cash generated/(utilised) from operations 2,463 (739) Cash flows from investing activities Purchases of property, plant and equipment (259) (94) Sale of property, plant and equipment 11 31 ------- ------- Net cash used in investing activities (248) (63) Cash flows from financing activities Decrease in invoice financing (115) (726) Capital element of finance lease rentals - (1) Interest paid (257) (276) ------- ------- Net cash used in financing activities (372) (1,003) Net increase/(decrease) in cash and cash equivalents 1,843 (1,805) Cash and cash equivalents at beginning of year 551 2,426 Effect of foreign exchange rate changes (5) (70) ------- ------- Cash and cash equivalents at end of year 2,389 551 ------- ------- Notes to the preliminary results _____________________________________________________________ 1. General information The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated income statement, the consolidated balance sheet at 31 January 2008, the consolidated statement of recognised income and expense, the statement of movements on reserves, the consolidated cash flow statement and the associated notes for the year then ended have been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. The statutory accounts for the year ended 31 January 2008 will be delivered to the Registrar of Companies following the Group's Annual General Meeting. 2. Basis of preparation The consolidated financial statements of the Group have been prepared under the historical cost convention and in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and the IFRS as issued by the International Accounting Standards Board. The transition to IFRS has been made in accordance with International Financial Reporting Standard 1, 'First-time adoption of International Financial Reporting Standards'. The transition to IFRS reporting has resulted in a number of changes in the reported financial statements, notes thereto and accounting principles compared to the previous annual report. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are set out in the financial statements for the year ended 31 January 2008 and were summarised in the interim financial statements for the period ended 31 July 2007. The accounting policies are the same as those adopted for the interim financial statements. The key areas of estimation uncertainty and judgment in the financial statements are as detailed below: Impairment of goodwill The annual impairment assessment in respect of goodwill requires estimates of the value in use of cash generating units to which goodwill has been allocated to be calculated. As a result, estimates of future cash flows are required, together with an appropriate discount factor for the purpose of determining the present value of those cash flows. Pension scheme valuation The liabilities in respect of defined benefit pension schemes are calculated by qualified actuaries and reviewed by the Group, but are necessarily based on subjective assumptions. The principal uncertainties relate to the estimation of the life expectancies of scheme members, future investment yields and general market conditions for factors such as inflation and interest rates. Profits and losses in relation to changes in actuarial assumptions are taken directly to reserves and therefore do not impact on the profitability of the business, but the changes do impact on net assets. Useful lives of property, plant and equipment Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the estimated period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Due to the long life of the assets, changes to the estimates used can result in significant variations in the carrying value. Inventory The Group reviews the net realisable value of and demand for its inventory on an ongoing basis to ensure recorded inventory is stated at the lower of cost or net realisable value. Factors that could impact estimated demand and selling prices are the timing and success of future technological innovations, competitor actions, suppliers prices and economic trends. If total inventory losses differ, the Group's consolidated net income in the year would have improved or declined, depending upon whether the actual results were better or worse than expected. 3. Segmental reporting For management purposes the Group is organised into two operating segments. The revenues, results and net assets for these segments are shown below: (a) By business segment Sports, Bicycles and leisure accessories and toys Total £'000 £'000 £'000 Year ended 31 January 2008 Revenue 18,675 16,203 34,878 ------- ------- ------- Segment result 1,176 800 1,976 ------- ------- ------- Unallocated corporate expenses (624) ------- Operating profit 1,352 Finance costs (280) Finance income 33 ------- Profit before taxation 1,105 Tax income - ------- Net profit for the year 1,105 ------- Segment assets 8,923 4,818 13,741 Unallocated assets 5,346 ------- 19,087 Segment liabilities (6,506) (4,294) (10,800) Unallocatedliabilities (1,393) ------- (12,193) ------- Consolidated net assets 6,894 ------- Capital additions 157 102 259 ------- ------- ------- Depreciation and goodwill impairment 84 84 168 ------- ------- ------- Year ended 31 January 2007 Revenue 19,852 13,933 33,785 ------- ------- ------- Segment result 1,260 147 1,407 ------- ------- ------- Unallocated corporate expenses (487) ------- Operating profit 920 Finance costs (271) ------- Profit before taxation 649 Tax income 297 ------- Net profit for the year 946 ------- Segment assets 8,750 4,533 13,283 Unallocated assets 13,277 ------- 26,560 Segment liabilities (7,113) (4,718) (11,831) Unallocated liabilities (9,667) ------- (21,498) ------- Consolidated net assets 5,062 ------- Capital additions 18 76 94 ------- ------- ------- Depreciation and goodwill impairment 61 112 173 ------- ------- ------- (b) By geographical segment United Rest of Kingdom Europe the World Total £'000 £'000 £'000 £'000 Year ended 31 January 2008 Revenue 32,425 1,748 705 34,878 ------- ------- ------- ------- Assets 16,902 - 2,185 19,087 Liabilities (11,028) - (1,165) (12,193) ------- ------- ------- ------- Net assets 5,874 - 1,020 6,894 ------- ------- ------- ------- Capital additions 259 - - 259 ------- ------- ------- ------- Year ended 31 January 2007 Revenue 31,108 1,857 820 33,785 ------- ------- ------- ------- Assets 25,100 - 1,460 26,560 Liabilities (20,754) - (744) (21,498) ------- ------- ------- ------- Net assets 4,346 - 716 5,062 ------- ------- ------- ------- Capital additions 94 - - 94 ------- ------- ------- ------- 4. Earnings per share The calculation of earnings per share is based on the net profit and ordinary shares in issue during the year as follows: Year ended Year ended 31 January 31 January 2008 2007 £'000 £'000 Net profit for the year 1,105 946 --------- --------- Weighted average shares in issue used for basic earnings per share 37,584,412 37,584,412 Weighted average dilutive shares under option 2,834,726 - Number of shares that would have been issued at fair value (2,415,422) - --------- --------- Average number of shares used for diluted earnings per share 38,003,716 37,584,412 --------- --------- Pence Pence Basic earnings per share 2.94 2.52 ------- ------- Diluted earnings per share 2.91 2.52 ------- ------- 5. Dividend No dividend on the ordinary shares is being proposed (2007 - £nil). 6. Annual report and accounts The annual report and accounts will be posted to shareholders shortly and will be available on the Company's website, www.tandemgroup.co.uk. 7. Annual General Meeting The Annual General Meeting will be held at 11:00 a.m. on 19 June 2008 at MV Sports & Leisure Ltd, 35 Tameside Drive, Castle Bromwich, Birmingham, B35 7AG. 1 May 2008 This information is provided by RNS The company news service from the London Stock Exchange

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