Final Results
Worthington Group PLC
12 July 2004
Worthington Group plc
Results for the Year Ended 31 March 2004
This has been a very difficult year for your Group with many of our plans not
reaching expectations. By way of explanation, the operating loss for the year of
£2,082,000 includes payments of £313,000 to the pension fund, a loss of £261,000
from our main trading subsidiary Worthington Manufacturing Limited, plus a
further £422,000 being the closure costs of the dye house and rationalisation
programme which commenced in March 2004.
Shareholders should be aware that virtually none of the customers of Worthington
Manufacturing Limited now manufacture in the United Kingdom, preferring to
source ready-made products from the Far East, so that we have for some time been
in a declining market. The problem has been compounded by the fact that the UK
High Street has not enjoyed a good level of sales for our products in recent
months and being in the supply chain this has substantially affected us. For
some years now your Group has experienced the continuing decline of the UK
textile and clothing market and the omens are far from good because the bottom
of the market has probably not yet been reached. Thus we have not been able to
develop the Group as we would have wanted because of the set backs experienced.
We have operated in difficult markets without any real sign of upturn and in
recent years closure management has dominated the corporate strategy. This has
meant that our ultimate goal will take longer to be effective.
PENSIONS
During the year we appointed Jardine Lloyd Thompson as Actuaries and
Administrators of our main Final Salary Scheme and they have carried out a
review to ascertain the current shortfall of the scheme. The draft valuation
shows that the current shortfall of the scheme has reduced from £2.9 million two
years ago to £1.7 million.
We will continue to address this shortfall by the payment of regular instalments
over the next nine years at the current rate of £300,000 per annum which
obviously impacts on our Group profitability and cash flow. There is an
additional pension liability of £34,000 per year being paid to a former Director
of Jerome Group Plc for which we have assumed responsibility since the
acquisition.
WORTHINGTON MANUFACTURING LIMITED
Worthington Manufacturing, Macclesfield, supplies components to the ladies
lingerie market which are manufactured overseas and then returned to the UK as
complete garments for sale in the High Street, especially to Marks & Spencer.
There are several different areas of production within this business, all of
which need to perform well to achieve an overall positive result. However, the
performances have been mixed due to volatile sales and unfortunately they have
incurred losses in the year.
A first review of their operations confirmed that certain of their production
units should be closed and the shortfall made up by outsourcing. It was decided
in 2004 to close the dye house and the costs of the closure, redundancies and
asset write downs amount to £422,000. Suitable arrangements have been made to
have the products dyed in the UK at competitive prices and to the standards that
our major customers require.
The budgets going forward suggest that this business might now be profitable in
the latter half of the year and must be enhanced by further cost reductions. We
cannot be over confident however as much will depend on our customers who are
themselves dependent upon the High Street as we are merely one part of a
vulnerable supply chain. In the meantime after a good April, sales for May and
June have been below budget, losses have been incurred and solutions are under
consideration.
The Board are extremely aware of the need to make an acceptable return on
capital employed and to some extent therefore Worthington Manufacturing are at a
crossroads such that achieving budgeted performance is essential to their
continuing in business. The factory building is probably now too large and
expensive given the reduction of the business and alternatives are being
explored, which may release the current factory site. In the meantime there are
one or two new growth areas which are expected to generate additional income.
The operation in Morocco has performed well and whilst it remains a very small
part of our total business it nevertheless is a learning point for us if we too
have to manufacture overseas to complement and support our customers on a more
local basis.
ARMITAGE FINISHING COMPANY
We had hoped that there would be some synergy, cost reduction and additional
profitability when we transferred the business to Indygo Limited as a joint
venture with the former business of Drummond Parkland, but our hopes were short
lived. Indygo could not attract the right amount of business to maintain
viability and in the absence of further funding, the company closed in January
2004. We had to make write-offs of £516,000 for redundant plant and machinery
and other costs and these are shown as part of our losses under the heading of '
Discontinued Operations'.
Armitage had once been a premier finishing company for the Yorkshire worsted
trade but in the current climate the closure came much earlier than we had
anticipated. The closure costs were always a potential liability with the
likelihood that at some time in the future they would be incurred.
TRIMMINGS BY DESIGN
This has been another successful year for them, but they are also finding
increased competition from the Far East, and will be considering outsourcing
some of their products as a means of staying competitive.
PROPERTIES
Selkirk Site
The sale of this property was completed in December 2003 for £350,000.
Keighley
We expect to let the vacant areas at Keighley in the next few months which will
then yield a total annual rental income of £225,000 per annum. This site of
approximately six acres may become valuable in the future as a development
project and we are in the process of applying for planning consent for change of
use. In the meantime the rental income will help support the Group's ongoing
pension obligations.
Macclesfield
Shareholders will recall that following the fire at Macclesfield we constructed
a stand-alone office building on three floors of approximately 7,500 square feet
with a modern factory. However with the closure of the dye house, to which I
referred above, we are able to move all the administration into the factory
releasing the office block for rental which we are advised should achieve an
annual figure of around £85,000. We do not wish to sell the office block
separately as it represents a more attractive property when taken together with
the adjacent factory.
BOARD CHANGES
As a result of the contraction of the Group, we made some changes to the Board
and I took over the role as Chief Executive as well as Chairman. To my
predecessor John Taylor I would like on your behalf to thank him for all his
hard work and effort since he joined the team in April 1999. We will be
retaining his services as a Consultant for the time being.
We also said goodbye to Professor Peter Foster who also joined the team in April
1999 and Mr Sidney Friedland who had been with the Board for many years and
whose contributions were invaluable and gratefully accepted.
The head office team is now very small with salaries of approximately £50,000
per annum.
SHARE CAPITAL
The current par value of the Ordinary Shares is 10p each and we are presently
unable to issue shares since the current price is around 3p per share.
Therefore, your Directors consider the timing is now right to alter the
structure of the share capital as detailed in the Circular which accompanies
these accounts and as per the resolutions which will be put to Shareholders at
the Annual General Meeting.
Shareholders should note that the overall value of their shareholding will
remain the same immediately following the reorganisation.
CONCLUSION
It does seem that every year we have a plethora of reasons as to why the Group
has not made real progress but this should be balanced by an understanding of
the industries in which we have operated and the unabated acceleration of the
decline of the industry in general. The comfort zone remains the fact that we
have £5.8 million of net assets which if turned into cash, could present a very
attractive proposition for a merger or reversal, and this could be a reality if
we are forced to reconsider the position in Macclesfield, which will determine
our corporate strategy going forward.
THANKS
I would like on your behalf to thank all the staff, employees and my colleagues
for their hard work during the year, all of whom have met the challenges with
dedication and commitment.
J C Dwek CBE
Chairman
9 July 2004
Worthington Group plc
Consolidated Profit & Loss Account
for the year ended 31 March 2004
Continuing Discontinued 2004 2003
Operations Operations £'000 £'000
£'000 £'000
Turnover 8,656 541 9,197 13,523
Cost of sales (6,420) (508) (6,928) (10,483)
Gross profit 2,236 33 2,269 3,040
Distribution costs (529) (169) (698) (894)
Administrative expenses excluding (2,640) (75) (2,715) (3,057)
exceptional items
Administrative expenses exceptional items (422) (516) (938) (340)
(3,062) (591) (3,653) (3,397)
Net other operating income exceptional item - - - 1,694
Group operating (loss)/profit (1,355) (727) (2,082) 443
Share of operating profits/(losses) of
associated undertaking 172 (35) 137 238
Total operating (loss)/profit: Group and
share of associated undertaking (1,183) (762) (1,945) 681
Profit/(loss) on disposal of fixed assets 58 (116) (58) (7)
(Loss)/profit before interest and taxation (1,125) (878) (2,003) 674
Interest payable and similar charges:
Group (75) (5) (80) (24)
Share of interest of associated (39) - (39) (44)
undertaking
(Loss)/profit on ordinary activities before (1,239) (883) (2,122) 606
taxation
Taxation 42 -
Share of taxation of associated undertaking (49) (63)
(Loss)/profit on ordinary activities after (2,129) 543
taxation
Dividends payable - -
Retained (loss)/profit for the year (2,129) 543
Earnings/(loss) per share-basic
- before exceptional items and disposals (1.0p) (0.7p)
- after exceptional items and disposals (1.8p) 0.5p
Worthington Group plc
Consolidated Balance Sheet
At 31 March 2004
2004 2003
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets: negative goodwill - (48)
Tangible assets 5,367 6,754
Investments: Interest in associated undertaking 803 785
803 785
6,170 7,491
Current assets
Stock 690 883
Debtors: amounts falling due within one year 1,775 6,810
Debtors: amounts falling due after more than one 946 935
year
Cash at bank and in hand 1 2
3,412 8,630
Creditors: amounts falling due within one year (2,171) (6,297)
Net current assets 1,241 2,333
Total assets less current liabilities 7,411 9,824
Creditors: amounts falling due after more than one (1,574) (1,858)
year
Net assets 5,837 7,966
Capital and reserves
Called up share capital 11,807 11,807
Share premium account 9,836 9,836
Capital redemption reserve 128 128
Revaluation reserve 285 285
Profit and loss account (16,219) (14,090)
Shareholders' funds 5,837 7,966
Worthington Group plc
Consolidated Cashflow Statement
for the year ended 31 March 2004
2004 2003
£'000 £'000 £'000 £'000
Net cash inflow/(outflow) from operating activities 714 (341)
Dividends from associates 66 44
Returns on investments and servicing of finance:
Interest (paid) (73) (12)
Interest element of finance lease rental (payments) (7) (12)
(80) (24)
Taxation:
UK corporation tax repayment - 199
Capital expenditure and financial investment:
Purchase of tangible fixed assets (net of finance (220) (373)
leases)
Sale of tangible fixed assets 521 700
Investment in associated undertaking (35) -
266 327
Net cash inflow before financing 966 205
Financing:
Capital element of finance lease rental payments (72) (220)
Debt due within one year:
Repayments of short term borrowings - (400)
(Repayments)/receipt of long term borrowings (246) 1,817
(318) 1,197
Increase in cash in the year 648 1,402
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2004
1. Accounts
The financial information included within the preliminary announcement has
been prepared on the basis of accounting policies consistent with those set
out in the annual report to shareholders for the year ended 31 March 2003.
The financial information included within the preliminary
announcement does not constitute the group's audited statutory accounts for
the financial year ended 31 March 2004 or 31 March 2003. The financial
information for 2003 is derived from the statutory accounts for that
period. Full audited accounts of Worthington Group plc in respect of that
period (which received an unqualified audit opinion and did not contain a
statement under either section 237 (2) or (3) of the Companies Act 1985)
have been delivered to the registrar of companies. The statutory accounts
for 2004 will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement and will be
delivered to the registrar of companies following the Company's annual
general meeting. The board of directors approved this preliminary
announcement on 9 July 2004.
2. Turnover, Profits and Net Assets
Turnover and profit before taxation is attributable to the Group's
principal activity. Turnover is derived from the following markets:
2004 2003
£'000 £'000
United Kingdom 4,770 7,145
Eire and the rest of Europe 326 1,390
Rest of the World 4,101 4,988
9,197 13,523
A further analysis of turnover and pre-tax profits originating overseas has
not been given since, in the opinion of the directors, the amounts involved
are not material.
The principal activities of the Group are manufacture, importation
and distribution of textile components. These are regarded as a single
activity for segmental reporting purposes.
The net assets of the Group over this activity are as follows:
2004 2003
£'000 £'000
Manufacture, importation and distribution of textile components 5,837 7,966
3. Exceptional items included in continuing operations
2004 2003
£'000 £'000
Redundancy costs 182 14
Impairment of fixed assets 136 -
Accelerated depreciation on fixed assets - 224
Other closure costs 104 -
422 238
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2004 (Cont.)
4. Exceptional items included in discontinued operations
2004 2003
£'000 £'000
Provision against debtors and stocks - 102
Provision for diminution in value of fixed assets - 28
Redundancy costs 76 -
Impairment of fixed assets 406 -
Other closure costs 34 (28)
516 102
5. Net other operating income exceptional item
2004 2003
£'000 £'000
Settlement of action against former auditors - 4,700
Less: claim by Penmarric Plc and associated costs - (3,006)
- 1,694
The Company reached a settlement with its former auditors for an amount of
£4,700,000 out of which £3,006,000 is payable to Penmarric Plc under
the Dispute Resolution Agreement.
6. Taxation
2004 2003
£'000 £'000
Adjustments in respect of prior periods 42 -
Share of tax in associated undertaking (49) (63)
(7) (63)
7. Earnings per share
The earnings per share has been calculated using the weighted average
number of shares in issue during the relevant financial periods. The
weighted average number of shares in issue during the year was 118,070,163
(2003: 118,070,163) and the loss after exceptional items and taxation was
£2,129,000 (2003: profit £543,000). The loss per share before exceptional
items has been disclosed in the accounts for the year ended 31 March 2004.
There is no difference between the basic and diluted earnings/(loss) per
share in either year.
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2004 (Cont.)
8. Reconciliation of operating loss to net cash inflow from operating
activities
2004 2003
£'000 £'000
Operating loss before exceptional costs (1,144) (911)
Exceptional costs (938) (340)
Exceptional net income - 1,694
Operating (loss)/profit (2,082) 443
Depreciation/impairment and amortisation of goodwill 980 843
Provision against investment 35 -
Decrease in stocks 193 929
Decrease/(increase) in debtors 5,024 (2,979)
(Decrease)/increase in creditors (3,436) 423
Net cash inflow/(outflow)from operating activities 714 (341)
9. Copies of the Annual Report
Copies of the Annual Report are available from the Company Secretary at the
registered office which is situated at Fence Avenue, Macclesfield,
Cheshire, SK10 1LW.
Enquiries:
Worthington Group plc
Joe Dwek CBE, Chairman Tel: 01625 549082
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