Final Results
Worthington Group PLC
18 July 2005
Worthington Group plc
Results for the Year Ended 31 March 2005
After a year of further rationalisation, the outcomes of which are reflected in
the results, the Group now consists of three properties and investments in
Worthington Manufacturing at Macclesfield and Trimmings by Design in Derby, to
which I refer later in this statement, and has thus contracted to a position
where there is limited downside risk and the opportunity to encash the property
assets. The cash generation expected should now finally make the Group a more
attractive proposition for a merger or reversal.
Worthington Manufacturing
We vacated the newly built Macclesfield premises in October 2004, moving the
business to rented premises at Lyme Green whilst expanding the use of our
warehouse facilities in Morocco to include some production using plant exported
from Macclesfield. This gave for a more compact and efficient operation,
compatible with reduced demand for UK manufacture of the products, in the face
of aggressive and unrelenting competition from the Far East. The first few
months following the move were profitable, justifying the considerable
downsizing, but the early part of 2005 witnessed a further decline in their
fortunes as more goods were made offshore and a further rationalisation was then
necessary.
In any event, the manufacture of textile products in the UK has little future
currently, with the competition now accelerating from overseas production. We
had hoped for a longer time scale to maintain our production but, in recent
months, it has become clear that our expectations for continued viability were
not to be realised and difficult decisions had to be taken.
Accordingly we have entered into a joint venture/partnership with Jessop & Baird
(Hong Kong) Ltd in Hong Kong and China, which is a complicated arrangement, and
will continue until September 2006 when the lease at Lyme Green will come to an
end. We will be transferring the goodwill and the remaining plant and
machinery, at cost, to the newly formed joint venture company, of which we will
have a minority interest, with the expectation that the Far East connection and
the offshore production can yield a successful investment for us. The final
outcome of this venture depends wholly on whether or not it is successful.. We
shall be retaining all the other assets and liabilities, which should release
some £500,000 currently employed in the business, which will be applied to
reduction of borrowings.
The move to Lyme Green and the transfer of assets to the joint venture have
produced some exceptional losses which include £215,000 of redundancies,
£629,000 for asset write offs and £28,000 of moving costs, added to which the
business itself lost £198,000 during the year.
Trimmings by Design
By their standards this was a difficult year as they are witnessing more
competition from abroad, but they have a unique product and are looking to
rationalise their production facilities in the UK and purchase more from
overseas to satisfy their customer catchment area. They have a strong brand and
there is no reason why they should not be successful in this new form.
Properties
We have granted an option to a Builder, subject to planning permission, for the
sale of the site at Eccleshill, Bradford, which should show a profit over book
value of some £600,000 (no tax being payable). The sales price is in the region
of £1 million with all the due diligence having now been done on the site by the
Builder. Planning permission approval should be available within the next 3-4
months.
The newly built premises at Fence Avenue, Macclesfield has been marketed at a
price of £3.1 million and there has been reasonable interest. There are few
similar sites available in South Manchester and the prospects of a sale in the
next few months do not look unreasonable.
The site at Keighley is more problematical, as initial discussions with the
Local Authority have indicated that they would not permit a residential
development on that site as it is zoned in an industrial area. We are of course
considering our position and whether to put in planning application and appeal
any unfavourable response. In the meantime we are marketing this site, as is,
for some £2.5 million. We have tenants producing rental income for the next two
years, so we can take a more leisured approach whilst we explore the options
available to us.
Directors
Following the Joint Venture arrangements, John Smith, who was Managing Director
of Worthington Manufacturing, has retired from the Group Board and subsidiaries
to commit himself entirely to the future of that new venture.
Roger Green, FCA, who has been a Non-Executive Director since April 1999, and
who was formerly Finance Director at Bodycote International Plc, will also be
leaving the Board at the AGM and we shall seek to make an appointment of a new
Non-Executive Director in the near future. He has made an excellent contribution
to our affairs.
To both of these colleagues I would like to extend our grateful thanks, on your
behalf, for their considerable efforts and commitment to the Group, during a
very difficult period when we have had to cope with the vagaries and volatility
of a fast shrinking textile business, absorb the pension deficit and write off
monies which were due to us from the collapsed Independent Insurance Company.
It is hard to recall a moment when all of us have not had continually to deal
with crisis management.
Pensions
On the FRS17 basis the net deficit is now down to £2,313,000. During the year
reduced contributions to the pension scheme were agreed between the Company and
the Trustees, following the 2004 actuarial valuation, which showed the Company
was ahead of the agreed plan to clear the deficit over a ten year period.
Contributions for 2005/6 have been agreed at some £250,000 per annum, increasing
by 3% per annum.
Besides Head Office costs, which have been kept to a minimum, the pension
contributions are the only other cash demand annually on the Company, a
proportion of which will be funded by the rental income from Keighley.
Move to AIM
After careful consideration, the Board has concluded that the interests of the
Group are best served by a move from the Official List to AIM. It is felt that
the AIM market is more appropriate given the size of the Group and the transfer
should also help reduce the annual fees.
The Board has today commenced the process to affect this transfer to AIM.
Notice will shortly be given of our intention to cancel the listing of the Group
shares on the Official List and application will be made for the shares to be
admitted to trading on AIM.
General
Clearly, with the sales of our properties and the subsequent repayment of
borrowings, the Company will in the end have a net cash balance and will save
interest charges incurred, which for the year just ended amounted to some
£137,000.
These results can only be viewed in the light of the expectations for the Group
going forward which has now, finally, been tidied up, but not without further
unexpected costs from former subsidiaries, which emerged during the year, and
which have had to be dealt with through the profit and loss account.
Furthermore, we are now in the process of winding up our dormant subsidiaries
and settling the tax affairs all of which will incur some costs.
In truth, the last few years have not been easy for the Company. Some of our
problems were undoubtedly inherited, others forced on us by changing market
conditions. However, it is no use looking back, what we have to do now is take
advantage of our vastly improved situation.
J C Dwek CBE
Chairman
18 July 2005
Worthington Group plc
Consolidated Profit & Loss Account
for the year ended 31 March 2005
2005 2004
£'000 £'000
Turnover 4,812 9,197
Cost of sales (3,429) (6,928)
Gross profit 1,383 2,269
Distribution costs (285) (698)
Administrative expenses excluding (1,759) (2,715)
exceptional items
Administrative expenses exceptional items (872) (938)
(2,631) (3,653)
______ ______
Group operating loss (1,533) (2,082)
Share of operating profits of associated
undertaking 149 137
Total operating loss: Group and share of
associated undertaking (1,384) (1,945)
Profit/(loss) on disposal of fixed assets 37 (58)
Loss before interest and taxation (1,347) (2,003)
Interest payable and similar charges:
Group (86) (80)
Share of interest of associated
undertaking (32) (39)
Loss on ordinary activities before taxation (1,465) (2,122)
Taxation _ 42
Share of taxation of associated undertaking (44) (49)
Loss on ordinary activities after taxation (1,509) (2,129)
Dividends payable - -
Retained loss for the year (1,509) (2,129)
Loss per share-basic
- before exceptional items and disposals (5.4p) (9.6p)
- after exceptional items and disposals
(12.8p) (18.0p)
Worthington Group plc
Consolidated Balance Sheet
At 31 March 2005
2005 2004
£'000 £'000 £'000 £'000
Fixed assets
Tangible assets 1,013 5,367
Investments: Interest in associated undertaking 811 803
811 803
1,824 6,170
Current assets
Current asset investments 3,480 -
Stock 283 690
Debtors: amounts falling due within one year 1,172 1.775
Debtors: amounts falling due after more than one 869 946
year
Cash at bank and in hand 1 1
5,805 3,412
Creditors: amounts falling due within one year (1,980) (2,171)
Net current assets 3,825 1,241
Total assets less current liabilities 5,649 7,411
Creditors: amounts falling due after more than one (1,321) (1,574)
year
Net assets 4,328 5,837
Capital and reserves
Called up share capital 11,807 11,807
Share premium account 9,836 9,836
Capital redemption reserve 128 128
Profit and loss account (17,443) (15,934)
Shareholders' funds 4,328 5,837
Worthington Group plc
Consolidated Cashflow Statement
for the year ended 31 March 2005
2005 2004
£'000 £'000 £'000 £'000
Net cash (outflow)/inflow from operating activities (230) 714
Dividends from associates 66 66
Returns on investments and servicing of finance:
Interest paid (84) (73)
Interest element of finance lease rental (payments) (2) (7)
(86) (80)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (net of finance (38) (220)
leases)
Sale of tangible fixed assets 121 521
Investment in associated undertaking - (35)
83 266
Net cash (outflow)/ inflow before financing (167) 966
Financing:
Capital element of finance lease rental payments (28) (72)
Debt due within one year:
Repayments of long term borrowings (250) (246)
(278) (318)
(Decrease)/increase in cash in the year (445) 648
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2005
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 2004.
The financial information included within the preliminary announcement does
not constitute the group's audited statutory accounts for the financial
year ended 31 March 2005. The financial information for 2004 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 2005 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 18 July 2005.
The Group currently meets its day to day working capital requirements
through the support of its bankers. The Bank has indicated that it is not
committed to renewing the Group's facilities when they are reviewed on 2
January 2006. The Chairman has indicated that in the event that these
facilities are not renewed he will introduce the necessary funds to support
the Group. On this basis the Directors consider it appropriate to prepare
the financial statements on a going concern basis.
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 2004
£'000 £'000
United Kingdom 2,150 4,770
Eire and the rest of Europe 365 326
Rest of the World 2,297 4,101
4,812 9,197
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 the 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:
2005 2004
£'000 £'000
Manufacture, importation and distribution of textile components 4,328 5,837
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2005 (Cont.)
3. Exceptional items
2005 2004
£'000 £'000
Redundancy costs 215 258
Impairment of fixed assets 629 542
Other closure costs 28 138
872 938
4. Taxation
2005 2004
£'000 £'000
Adjustments in respect of prior periods - 42
Share of tax in associated undertaking (44) (49)
(44) (7)
5. Loss per share
The loss 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 after adjusting for the share capital
re-organisation was 11,807,013 (2004: 11,807,013) and the loss after exceptional
items and taxation was £1,509,000 (2004: £2,129,000). The loss per share before
exceptional items has been disclosed in the accounts for the year ended 31 March
2005.
There is no difference between the basic and diluted loss per share in either
year.
6. Reconciliation of operating loss to net cash inflow from operating
activities
2005 2004
£'000 £'000
Operating loss before exceptional costs (661) (1,144)
Exceptional costs (872) (938)
Operating loss (1,533) (2,082)
Depreciation/impairment and amortisation of goodwill 819 980
Provision against investment - 35
Decrease in stocks 407 193
Decrease in debtors 680 5,024
Decrease in creditors (603) (3,436)
Net cash (outflow)/ inflow from operating activities (230) 714
Worthington Group plc
Notes forming part of the preliminary announcement for the year ended 31 March
2005 (Cont.)
7. Copies of the Annual Report
Copies of the Annual Report are available from the Company Secretary at the
registered office which is situated at Suite 1, Courthill House, 66 Water Lane,
Wilmslow, Cheshire, SK9 5AP.
Enquiries:
Worthington Group plc
Joe Dwek CBE, Chairman Tel: 01625 549082
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