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Johnston Group PLC (JHT)

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Wednesday 31 March, 2004

Johnston Group PLC

Final Results

Johnston Group PLC
31 March 2004



                               Johnston Group PLC
                              Preliminary Results
                      for the year ended 31st December 2003

                                                                 31st March 2004


•  Turnover increased from £144.5 million to £150.8 million

•  Profit before tax of £0.1 million

•  Profit before tax and impairment charge amounted to £2.6 million

•  Loss per share of 0.7p per ordinary share before impairment charge,
   reflecting reduced profits and a high tax charge of 58%

•  Non-cash impairment charge of £2.5 million primarily relating to
   Madvac in Canada

•  Proposed final dividend of 3.0p per ordinary share, which, if approved
   makes a total dividend for the year of 8.25p per ordinary share
   (2002: 13.75p)

•  Shareholders' funds amounted to £47.7 million as at 31st December
   2003, representing a net asset value per ordinary share of 430.8p

•  The Construction Materials division and Johnston Sweepers both made
   profits, but the other subsidiaries reported losses principally due to
   difficult trading conditions

•  Chris Woodwark, Chairman, commented: 'As foreshadowed in the Trading
   Update issued on 12th December 2003, a number of factors have impacted
   on these results including problems integrating the Norquip product into
   Saxon Specialist Vehicles and continued low levels of orders at Madvac.
   However, we remain confident that the actions taken, coupled with the
   underlying strength of the Group's businesses, should lead to an improved
   trading performance in 2004.'

For further information:

Marcus Jordan                   Lulu Bridges / Peter Willetts
Johnston Group PLC              Tavistock Communications
Tel: 01737 242 466              Tel: 020 7920 3150



Chairman's Statement

Overview

This is my first statement to shareholders and I regrettably have to report a
weak year's trading for the Group. The construction materials companies and
Johnston Sweepers apart, the other subsidiaries reported losses. In addition,
and as foreshadowed in the Trading Update issued on 12th December 2003, the
Board has been obliged to conduct an impairment review of the acquired assets
and goodwill of the Canadian subsidiary, Madvac Inc., which has resulted in a
substantial non-cash write-down of these assets against an already modest Group
profit.


On turnover of £150.8 million, which was marginally ahead of that for 2002, the
Group's profit before taxation and the impairment charge was £2.6 million.
Profit before taxation after taking account of the impairment charge was £0.1
million. As a consequence the Board is recommending a reduced final dividend of
3.00p per ordinary share, which if approved by shareholders will make a dividend
for the full year of 8.25p per ordinary share.


The Johnston Roadstone quarries performed extremely well despite the competitive
market and the Government's levy on quarried aggregates, which has affected
sales of dry stone materials. Planning consent to access further reserves at
Leinthall Quarry was secured in 2002 and consent to extend Leaton Quarry is
being finalised.


Johnston Pipes again produced a significant improvement in profits. The concrete
division continues to benefit from production efficiencies and diversification
into new products. Although the GRP division was profitable in 2003, the current
order book is weak and the division faces a difficult year ahead. The company
continues to seek new opportunities for both its concrete and GRP products.


The engineering division again produced mixed performances. Johnston Sweepers in
the UK had a good year, achieving a high level of output and producing a
creditable profit. The company continues to streamline its product development
and invest in its manufacturing operations. The launch of two products, the new
V series chassis-mounted vacuum sweeper and an upgraded compact sweeper, had a
significant impact on the market. In Denmark, Johnston Beam made significant
progress in increasing market activity and starts 2004 with a healthy order
book.


The Group's North American operations had another poor year with Johnston
Sweeper Company and Madvac continuing to face weak municipal markets created by
depressed economic conditions. The Board has embarked upon a strategy for
restructuring the North American operations. A new purpose-built factory in
Montreal, which now houses the manufacture of the Madvac product range, will
shortly accommodate a new chassis-mounted mechanical sweeper and the assembly of
vacuum sweepers. Montreal will become the supply centre for all these products
throughout North America. It is envisaged that considerable cost savings will be
achieved by placing these operations under one roof.


The specialist vehicles division had a very disappointing year. At Saxon
Specialist Vehicles in the UK, performance was adversely affected by a weak
order book and continuing production difficulties associated with the Norquip
airport support vehicles. The Board is in the process of making management
changes. In Australia, MacDonald Johnston Engineering increased its turnover,
but the first half results were adversely affected by a weak Australian dollar
and a national pay dispute that seriously disrupted production. The second half
showed an improvement and the order book remains good.


Financial Review


Group turnover of £150.8 million was a small increase over 2002. Both the
construction materials and engineering divisions were slightly ahead of the
prior year.


Profit before taxation was £0.1 million. This profit is after accounting for the
non-cash impairment charge of £2.5 million relating primarily to the intangible
asset carrying value of Madvac.


The Group operating profit before impairment charges, which reflects the trading
performance of the Group's continuing operations, was £3.1 million. This is a
decline of 33.7% against the 2002 operating profit of £4.6 million. The decline
in profit is attributable to the substantial increase in engineering division
losses; in particular at Saxon Specialist Vehicles and Madvac. Saxon Specialist
Vehicles had an extremely difficult year with problems relating to the
integration of the Norquip hilift product and Madvac suffered from adverse
market conditions in North America. As referred to in the Trading Update last
December an impairment review of the carrying value of the Madvac fixed assets
and goodwill was undertaken after the year end which resulted in a non-cash
charge of £2.4 million. In addition intellectual property relating to the
Norquip hilift product was written off in Saxon Specialist Vehicles.

Cash flow from operating activities amounted to £4.8 million. This is below the
previous year and reflects the combination of lower operating profit and
increased working capital. Capital expenditure at £7.0 million exceeded
depreciation of £3.4 million. This included expenditure on new premises at
Madvac together with a laser cutting machine and paint plant at Johnston
Sweepers Limited. Cash outflow before financing was £7.0 million and net debt
increased to £10.8 million. Gearing was 22.6% and interest cover before
impairment charge was 6.7 times.


The tax charge for the year amounted to £1.5 million. This represents an overall
tax rate of 58.4% measured against the profit before tax and impairment charge
of £2.6 million. This is considerably higher than the standard UK tax rate of
30%. The main factors contributing to the increased rate are overseas tax losses
not utilised in the Canadian and Australian operations.


The combination of the reduced profit and high tax charge has impacted on
earnings. The basic loss per ordinary share is 23.5p. This loss reduces to 0.7p
per ordinary share before the impairment charge.


An interim dividend of 5.25p per ordinary share was paid in December 2003 and
the Board is recommending a final dividend of 3p per ordinary share, giving a
dividend for the year of 8.25p.


The loss for the year after taxation, minority interest and dividends was £3.4
million and shareholders' funds at 31st December 2003 were £47.7 million. This
represents an asset value per ordinary share of 430.8p.


Outlook


Although 2003 has been a difficult year for the Group, the Board remains
confident that the actions being taken, coupled with the underlying strength of
the Group's businesses, should lead to an improved trading performance in 2004,
the Group's centennial year.


I would like to pay tribute to my predecessor, Roger Holland, who retired as
Chairman and from the Board on 31st December. Prior to his appointment as
Chairman in October 1998, Roger had been a non-executive director since 1994 and
on behalf of his colleagues I wish him a happy retirement.


Finally, I would like to express my gratitude to all employees for their efforts
in these difficult times and to my fellow directors for their support and I look
forward to sharing with both employees and directors the Group's future success.


Chris Woodwark
Chairman
31st March 2004



GROUP PROFIT AND LOSS
ACCOUNT
                                   Results
                                    before
                                impairment    Impairment       Total
For the year ended 31st                                         2003       2002
December 2003                         £000          £000        £000       £000
________________________________________________________________________________

Turnover from continuing
operations                         150,757           ---     150,757    144,525

Operating costs less other
income                            (147,705)       (2,466)   (150,171)  (139,925)
________________________________________________________________________________

Group operating profit from          3,052        (2,466)        586      4,600
continuing operations
Profit on disposal of fixed
assets                                 ---           ---         ---      1,028
________________________________________________________________________________

Profit on ordinary activities
before interest and taxation         3,052        (2,466)        586      5,628
Interest receivable and
similar income                         132           ---         132        125
Interest payable and similar
charges                               (588)          ---        (588)      (565)
________________________________________________________________________________

Profit on ordinary activities
before taxation                      2,596        (2,466)        130      5,188
Tax on profit on ordinary
activities                          (1,515)          ---      (1,515)    (1,335)
________________________________________________________________________________

(Loss)/profit on ordinary 
activities after taxation           1,081        (2,466)     (1,385)      3,853
Minority interest - equity         (1,059)          ---      (1,059)     (1,193)
________________________________________________________________________________

(Loss)/profit attributable to
shareholders                            22        (2,466)     (2,444)     2,660
Dividends on equity and
non-equity shares                                               (994)    (1,589)
________________________________________________________________________________

(Loss)/retained profit for the
year                                                          (3,438)     1,071
================================================================================

(Loss)/earnings per ordinary
share
Basic                                (0.72)p                  (23.49)p    23.64p
Diluted                              (0.72)p                  (23.49)p    23.64p
================================================================================





GROUP BALANCE SHEET

At 31st December 2003                                     2003            2002
                                                          £000            £000
________________________________________________________________________________
Fixed assets
Intangible assets                                          170           2,373
Tangible assets                                         33,422          29,420
________________________________________________________________________________

                                                        33,592          31,793
________________________________________________________________________________
Current assets
Stocks                                                  27,667          26,331
Debtors                                                 31,654          28,079
Cash at bank and in hand                                 5,307           7,173
________________________________________________________________________________

                                                        64,628          61,583
________________________________________________________________________________

Creditors: amounts falling due within one year         (35,359)        (31,850)
________________________________________________________________________________

Net current assets                                      29,269          29,733
________________________________________________________________________________

Total assets less current liabilities                   62,861          61,526
Creditors: amounts falling due after one year          (11,239)         (7,331)
Provisions for liabilities and charges                  (2,370)         (2,222)
________________________________________________________________________________

                                                        49,252          51,973
================================================================================

Capital and reserves
Called-up share capital                                  2,083           2,083
Share premium account                                    1,347           1,347
Revaluation reserve                                      5,866           5,987
Profit and loss account                                 38,357          40,889
________________________________________________________________________________

Shareholders' funds                                     47,653          50,306

Equity interests                                        46,653          49,306
Non-equity interests                                     1,000           1,000
________________________________________________________________________________

Minority interest - equity                               1,599           1,667
________________________________________________________________________________

                                                        49,252          51,973
================================================================================






GROUP CASH FLOW STATEMENT

For the year ended 31st December 2003                  2003               2002
                                             £000      £000     £000      £000
________________________________________________________________________________

Cash inflow from operating activities                 4,802              7,498

Returns on investment and servicing of               (1,670)            (1,849)
finance

Taxation                                             (1,564)            (1,401)

Net capital expenditure                              (6,951)              (471)

Acquisition                                             (87)               (87)

Equity dividends paid                                (1,489)            (1,489)
________________________________________________________________________________

Cash (outflow)/inflow before financing               (6,959)             2,201

Financing - increase in debt                4,641                287
________________________________________________________________________________

Cash inflow from financing                            4,641                287
________________________________________________________________________________

(Decrease)/increase in cash in the year              (2,318)             2,488
================================================================================





Notes to Preliminary Results

1. Divisional analysis of results of continuing operations                    
                                                                Operating
                                            Turnover           profit/(loss)
By activity                              2003       2002      2003      2002
                                         £000       £000      £000      £000
________________________________________________________________________________

Engineering                           113,140    109,168    (4,407)     (115)
Construction
materials                              37,617     35,357     5,872     5,895
________________________________________________________________________________

                                      150,757    144,525     1,465     5,780
Central                                   ---        ---      (879)   (1,180)
________________________________________________________________________________

                                       150,757    144,525       586     4,600
================================================================================

2. The Board is recommending a final dividend of 3.00p per ordinary share
   (2002: 8.50p) payable on 9th July 2004 to shareholders on the register as at
   11th June 2004, which, with the interim dividend of 5.25p (2002:   5.25p)
   makes 8.25p for the year (2002: 13.75p).

3. The calculation of the (loss)/earnings per share is based on Group loss for
   the year attributable to ordinary shareholders of £2,544,000 (2002: profit
   - £2,560,000) divided by the weighted average number of ordinary shares in
   issue. The weighted average number of ordinary shares in issue was 10,829,070
   (2002:10,829,070). Diluted (loss)/earnings per share reflecting outstanding
   share options was based on 10,829,070 (2002:10,829,070) ordinary shares,
   using an average share price for the year of 320p (2002:306p).

4. The Annual General Meeting will be held on Thursday 27th May 2004.

5. The preliminary results set out above do not constitute the Company's
   statutory accounts for the years ended 31st December 2003 or 2002 but are
   derived from those accounts. Statutory accounts for 2002 have been delivered
   to the Registrar of Companies and those for 2003 will be delivered in due
   course. The auditors have reported on these accounts; their reports were
   unqualified and did not contain a statement under section 237(2) or (3) of
   the Companies Act 1985. Copies of the full accounts for the year ended 31st
   December 2003 will be posted to shareholders on 28th April 2004.








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