Final Results - Operating Profit Up 31%
Hill & Smith Holdings PLC
30 November 1999
PRELIMINARY RESULTS
CONTINUED PROGRESS - REORGANISATION COMPLETE
Hill & Smith Holdings PLC ('Hill & Smith' or the 'Group'), the Midlands-based
engineering group, announces its preliminary results for the year ended 30
September 1999.
Key Points:
* Operating profit at £4.78 million (1998: £3.63 million) - up 31%
* Pre-tax profit at £3.56 million (1998 restated: loss £1.57 million)
* Turnover on continuing operations at £56.5 million
* Earnings per share at IIMR level 7.01p (1998 restated: 3.46p)
* Final dividend maintained at 2.1p per share
* Operating cash flow per share at 22.47p (1998: 19.49p)
* Net borrowings reduced to £4.43 million (1998: £11.26 million)
* Berry Safety Systems acquired for £3 million - further appropriate
acquisitions sought
* Re-organisation complete - focus on organic growth
David Winterbottom, Chairman, said: 'I am delighted to confirm to you that
the situation I reported in my Interim Statement for the half year, outlining
the progress achieved, has been sustained for the full trading year. Our
operating profits for the year to 30 September 1999 increased by 31.7% to
£4.78 million (1998: £3.63 million). We are, of course, now required to adopt
the new financial reporting standard FRS12, to which I made reference at the
half year. This changes the presentation of our full year accounts and has
the effect of reducing the displayed profits on ordinary activities before tax
to £3.56 million (1998: loss £1.57 million).
'The Board has continued to concentrate on cash management within the Group,
operating cash flow per share was 22.47p, an increase on last year's 19.49p,
and we achieved net borrowings of £4.43 million at the year end (1998: £11.26
million). This was after expending £3 million to acquire Berry Safety Systems
Limited.
'The major reorganisation of the Group's businesses is now completed and the
Board is concentrating on organic growth and the introduction of new products.
Additionally, we continue to look for appropriate acquisitions in line with
our core strategy. Mindful of the above and recognising the need to
consolidate and build the good health of the Company, the Board is
recommending a final dividend for the year of 2.1p per share (1998: 2.1p per
share), making a total for the year of 4.2p per share (1998: 4.2p per share).
'Finally I come to current and future trading. Conditions continue to be
difficult for the engineering sector. However, given the usual caveat about
no further adverse change in economic conditions, I look forward to a
satisfactory outcome to the current trading year.'
For further information, please contact:
Hill & Smith Holdings PLC Tel: 01902 357 910
David Winterbottom, Chairman
David Grove, Deputy Chairman & Group Chief Executive
Rawlings Financial PR Limited Tel: 01756 770 376
Catriona Valentine
CHAIRMAN'S STATEMENT
I am delighted to confirm to you that the situation I reported in my Interim
Statement for the half year, outlining the progress achieved, has been
sustained for the full trading year. Our operating profits for the year to 30
September 1999 increased by 31.7% to £4.78 million (1998: £3.63 million). We
are, of course, now required to adopt the new financial reporting standard
FRS12, to which I made reference at the half year. This changes the
presentation of our full year accounts and has the effect of reducing the
displayed profits on ordinary activities before tax to £3.56 million (1998:
loss £1.57 million).
These adjustments due to FRS12 must be confusing to the reader of the report
and accounts, but net assets at September 1999 and earnings before exceptional
items remain unaffected by these changes.
The effect of the various adjustments is that the tax charge is 36% for the
year and this leaves the IIMR EPS at 7.01p per share (1998: 3.46p per share).
The Board has continued to concentrate on cash management within the Group,
operating cash flow per share was 22.47p, an increase on last year's 19.49p,
and we achieved net borrowings of £4.43 million at the year end (1998: £11.26
million). This was after expending £3 million to acquire Berry Safety Systems
Limited.
The major reorganisation of the Group's businesses is now completed and the
Board is concentrating on organic growth and the introduction of new products.
Additionally, we continue to look for appropriate acquisitions in line with
our core strategy. Mindful of the above and recognising the need to
consolidate and build the good health of the Company, the Board is
recommending a final dividend for the year of 2.1p per share (1998: 2.1p per
share), making a total for the year of 4.2p per share (1998: 4.2p per share).
At the AGM in March, Mr John Silk retired from the Board and following the
shareholders' approval, John was appointed Life President of the Company - a
position which he will hold with distinction. Mr David Grove, following the
AGM, was confirmed as Deputy Chairman and Group Chief Executive.
Our systems have been checked and cleared for Year 2000 compatibility,
although our operations are not highly microprocessor dependent. Contingency
plans are in place to ensure that senior management are available to make any
urgent decisions in the first days of the new year.
May I thank all employees for their sustained efforts and success through yet
another year of change. Our greatest asset is our people and we must never
forget that in dictating how we deal with corporate situations from time to
time.
Finally I come to current and future trading. Conditions continue to be
difficult for the engineering sector. However, given the usual caveat about
no further adverse change in economic conditions, I look forward to a
satisfactory outcome to the current trading year.
David S Winterbottom
Chairman
30 November 1999
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 1999
1999 1999 1999 1998 1998 1998
Continu Discont Total Contin Discont Total
ing inued uing inued Restated
£000 £000 £000 £000 £000 £000
Turnover - continuing 55,651 5,435 61,086 55,811 20,686 76,497
- acquisitions 854 - 854 - - -
------- ------- ------- ------- ------- -------
56,505 5,435 61,940 55,811 20,686 76,497
Cost of sales (40,350) (4,389) (44,739) (39,742) (16,871) (56,613)
------- ------- ------- ------- ------- -------
Gross Profit 16,155 1,046 17,201 16,069 3,815 19,884
Distribution cost (2,583) (343) (2,926) (2,268) (1,226) (3,494)
Administrative expenses (8,752) (745) (9,497) (9,593) (3,169) (12,762)
------- ------- ------- ------- ------- -------
Operating profit/(loss):-
Excluding acquisitions
and exceptional items 4,644 (42) 4,602 4,428 (580) 3,848
Acquisitions 176 - 176 - - -
Exceptional items - - - (220) - (220)
Operating profit/(loss) 4,820 (42) 4,778 4,208 (580) 3,628
Profit on sale of
property - - - 153 - 153
Loss on sale of net
net assets - (925) (925) - (2,116) (2,116)
Related goodwill - 386 386 - (2,187) (2,187)
Less 1997 provision - - - - 400 400
Loss on sale of
businesses - (539) (539) - (3,903) (3,903)
------- ------- ------- ------- ------- -------
Profit/(loss) on
ordinary activities
before interest 4,820 (581) 4,239 4,361 (4,483) (122)
Interest payable (677) (1,444)
------- -------
Profit/(loss) on
ordinary activities
before tax 3,562 (1,566)
Taxation (note 1) (1,269) (378)
------- -------
Profit/(loss) for
the financial year 2,293 (1,944)
Dividends (1,635) (1,661)
------- -------
Retained profit/(deficit)
for the year 658 (3,605)
======= =======
Earnings per share: (note 2)
FRS 3 Basic 5.82p (4.92)p
Diluted 5.81p (4.92)p
IIMR 7.01p 3.46p
CONSOLIDATED BALANCE SHEET
As at 30 September 1999
1999 1998
Restated
£000 £000
Fixed assets
Intangible assets - goodwill 2,826 -
Tangible assets 17,054 24,093
Investments 1,400 -
------- -------
21,280 24,093
Current assets
Property held for realisation 906 460
Stocks 6,624 9,614
Debtors 14,841 18,739
Cash at bank and in hand 1,291 23
------- -------
23,662 28,836
Creditors (amounts due within one year) (18,488) (23,200)
------- -------
Net current assets 5,174 5,636
------- -------
Total assets less current liabilities 26,454 29,729
Creditors (amounts due after one year) (2,843) (5,245)
Provision for liabilities and charges (531) (901)
------- -------
Net assets 23,080 23,583
======= =======
Capital and reserves
Called up share capital 9,734 9,890
Share premium (note 3a) 133 133
Revaluation reserves (note 3b) 1,907 2,290
Capital redemption service (note 3c) 156 -
Profit and loss account (note 3d) 11,150 11,270
------- -------
Equity shareholders' funds 23,080 23,583
======= =======
Net assets per share 59.28p 59.61p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 30 September 1999
1999 1998
Restated
£000 £000
Profit/(loss) for the financial year 2,293 (1,944)
Revaluation deficit (373) (1,164)
Exchange differences 4 7
------- -------
Total recognised gains and losses
relating to the year 1,924 (3,101)
=======
Prior year adjustment 900
-------
Total gains and loss recognised
since last annual report 2,824
=======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1999 1998
Restated
£000 £000
Profit/(loss) for the financial year 2,293 (1,944)
Dividends (1,635) (1,661)
------- -------
658 (3,605)
New share capital subscribed - 46
Revaluation deficit (373) (1,164)
Exchange differences 4 7
Goodwill taken to profit and loss
account on disposal (386) 2,187
Purchase of own shares (406) -
------- -------
Net movement in shareholders' funds (503) (2,529)
Opening shareholders' funds (originally
£22,683,000 restated for prior year
adjustment £900,000) 23,583 26,112
------- -------
Closing shareholders' funds 23,080 23,583
======= =======
Prior year adjustment - Change of Accounting Policy
The implementation of Financial Reporting Standard 12: provisions, contingent
liabilities and contingent assets has required the Directors to amend the
Group's accounting policy in respect of certain of the provisions made at 30
September 1998.
£900,000 out of the provisions for loss on disposal of subsidiaries originally
made at 30 September 1998 have been released and the actual loss is shown as
an exceptional item in the twelve months to 30 September 1999.
Comparative figures have been restated accordingly. There is no effect on
closing shareholders' funds. Apart from this change, the accounting policies
are consistent with those adopted in last year's financial statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 1999
1999 1998
£000 £000 £000 £000
Net cash inflow from operating
activities (note 4) 8,851 7,703
Returns on investments and
servicing of finance
Interest received 14 223
Interest paid (635) (1,608)
Interest element of finance
lease rental payments (56) (677) (59) (1,444)
------- -------
Taxation
Corporation tax paid (748) (462)
Capital expenditure
Purchase of tangible fixed assets (1,987) (3,927)
Sale of tangible fixed assets 3,728 1,122
Sale of property held for realisation 444 2,185 - (2,805)
------- -------
Acquisitions and disposals
Sale of businesses net of
costs of disposal (note 5a) (377) 2,518
Purchase of business (note 5b) (1,175) (1,552) - 2,518
------- -------
Equity dividends paid (831) (1,659)
------- -------
Cash inflow before financing 7,228 3,851
Financing
Issue of share capital - 46
Capital element of finance lease
rental payments net of advances 189 (278)
Repayment of loans (1,608) (3,224)
Purchase of own shares (406) (1,825) - (3,456)
------- ------- ------- -------
Increase in cash 5,403 395
======= =======
Reconciliation of net cash flow
to movement in net debt
Movement in cash 5,403 395
Decrease in debt and lease financing 1,419 3,502
------- -------
Changes in net debt from cash flows 6,822 3,897
New finance leases - (12)
------- -------
Movement in net debt in year 6,822 3,885
Net debt as at 30 September 1998 (11,255) (15,140)
------- -------
Net debt as at 30 September 1999 (note 6) (4,433) (11,255)
======= =======
NOTES TO THE ACCOUNTS
1 Taxation on (loss)/profit on ordinary
activities
1999 1998
£000 £000
UK corporation tax at 30.5% (1998: 31%) 1,118 330
Deferred taxation (29) 103
Adjustments relating to an earlier year
Corporation tax 180 (55)
------ ------
1,269 378
====== ======
The tax charge includes relief of £70,000 (1998: £439,000) relating to non
operating exceptional items.
2 Earnings per share
The FRS3 basic earnings per share is arrived at by dividing the profit after
tax of £2.293m (1998: restated loss £1.944m) by 39,389,495 shares (1998:
39,518,286), being the weighted average number of ordinary shares in issue
during the year.
The FRS3 diluted earnings per share is arrived at by adjusting for share
options.
The IIMR earnings per share is arrived at by dividing the operating profit
less interest and tax of £2.762m (1998: £1.367m) by 39,389,495 shares (1998:
39,518,286), being the weighted average number of ordinary shares in issue
during the year.
3 Reserves
1999 1998
£000 £000
(a) Share premium
At 30 September 1998 133 108
Premium on shares issued - 25
------- -------
At 30 September 1999 133 133
======= =======
(b) Revaluation reserve
At 30 September 1998 2,290
Transfer to profit and loss account (10)
Revaluation deficit (373)
-------
At 30 September 1999 1,907
=======
(c) Capital redemption reserve
At 30 September 1998 -
Purchase of 625,000 shares 156
-------
At 30 September 1999 156
-------
(d) Profit and loss account
At 30 September 1998 11,270 12,626
Profit/(loss) for the year 658 (3,605)
Goodwill on disposal (386) 2,187
Exchange difference 4 7
Transfer from revaluation reserve 10 55
Purchase of own shares (406) -
------- -------
At 30 September 1999 11,150 11,270
======= =======
4 Reconciliation of operating
profit to net cash inflows from
operating activities
1999 1998
£000 £000
Operating profit 4,778 3,628
Depreciation 1,922 2,097
Stock 2,259 2,864
Debtors 1,639 (935)
Creditors (1,496) 1,286
Provisions (104) 198
Reorganisation costs (147) (1,435)
------- -------
8,851 7,703
======= =======
Operating cash flow per share 22.47p 19.49p
5(a) Effect of disposal of
businesses
1999 1998
£000 £000
Sale of forging interests and Tipton Steel
Tangible fixed assets 2,186 1,249
Stocks 877 2,086
Debtors 2,348 2,648
Bank overdraft 168 (486)
Creditors (1,830) (2,588)
Taxation (4) (97)
Deferred tax (90) (9)
------- -------
Net assets 3,655 2,803
Loss on disposals (925) (771)
------- -------
Consideration received 2,730 2,032
======= =======
Satisfied by:
Cash proceeds less costs of disposal (209) 2,032
Fixed asset investments 1,400 -
Offset against purchase of Berry Systems 1,539 -
------- -------
2,730 2,032
======= =======
Net cash (outflow)/inflow
Net cash proceeds (209) 2,032
Disposal of (cash)/bank overdraft (168) 486
------- -------
Cash (outflow)/inflow (377) 2,518
======= =======
5(b) Effect of acquisition of business 1999
£000
Acquisition of Berry Safety Systems
Tangible fixed assets 13
Stocks 146
Debtors 395
Cash at bank 3,470
Creditors (440)
Taxation (286)
-------
Net assets 3,298
Goodwill on acquisition 2,886
-------
Consideration paid 6,184
=======
Satisfied by:
Cash 4,645
Net proceeds from sale of forges 1,539
-------
6,184
=======
Net cash outflow
Consideration 6,184
Acquisition of cash at bank (3,470)
-------
Net consideration 2,714
Net proceeds from sale of forges (1,539)
-------
Cash outflow 1,175
=======
5(c) Major non-cash transactions
Consideration for the purchase of Berry Safety Systems Limited on 12 May 1999
was satisfied in part by the proceeds from the sale of the Group's forging
companies, amounting to £2,539,000 less the Group's investment of £1,000,000,
comprising shares in and loans to the purchaser.
Proceeds from the sale of Tipton Steel Stockholders Limited on 28 May 1999
were satisfied in part by the Group's investment of £400,000, comprising
preference shares in and loans to the purchaser.
6 Analysis of net debt Other
1999 Cashflow non-cash 1998
£000 £000 £000 £000
Cash at bank and in hand 1,291 1,268 - 23
Bank overdrafts - 4,135 - (4,135)
------- ------- ------- -------
1,291 5,403 - (4,112)
======= ======= ======= =======
Debt due after one year (2,375) - 2,500 (4,875)
Debt due within one year (2,500) 1,608 (2,500) (1,608)
Finance leases (849) (189) - (660)
------- ------- ------- -------
(5,724) 1,419 - (7,143)
======= ======= ======= =======
(4,433) 6,822 - (11,255)
======= ======= ======= =======
7 a) The proposed final dividend will be paid on 7 April 2000 to
shareholders on the register on 11 February 2000 (ex-dividend date 7
February 2000).
b) The financial information set out in this preliminary announcement does
not constitute the company's statutory accounts for the years ended 30
September 1998 or 1999. Statutory accounts for 1998 have been delivered
to the Registrar of Companies and those for 1999 will be delivered
following the company's annual general meeting. The auditors have
reported on those accounts; their reports were unqualified and did not
contain statements under Section 237(2) or (3) of the Companies Act
1985.
c) The Annual Report will be posted to shareholders on 11 February 2000
and will be available from the registered office at Springvale
Industrial & Business Park, Bilston, West Midlands, WV14 0QL.
d) The Annual General Meeting will be held at The Copthorne Hotel, Level
Street, Brierley Hill, at 12:00 noon on Thursday 23 March 2000 - PLEASE
NOTE AMENDED DATE.
e) Financial Calendar:
Preliminary Announcement of results to 30 September 1999
30 November 1999
Annual General Meeting
23 March 2000
Payment of proposed Final Dividend
7 April 2000
Interim Results Announcement
May 2000
Payment of Interim Dividend
October 2000
Preliminary Announcement of results to 30 September 2000
November 2000
8 This Preliminary Announcement of results for the year ended 30
September 1999 was approved by the Directors on 30 November 1999.
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