Final Results
Dickinson Legg Group PLC
01 November 2005
DICKINSON LEGG GROUP PLC
Preliminary Results for the Year Ended 30 June 2005
Dickinson Legg Group, a leading specialist engineering group, incorporating
Dickinson Legg and Spooner Industries announces preliminary results for the year
ended 30 June 2005.
Highlights
• Group turnover £32.2 million (2004: £42.5 million);
• Operating profit (pre-exceptionals) £0.19 million (2004: £1.35
million), (post-exceptionals £2.77 million; 2004: £1.11 million);
• Profit before tax £3.01 million (2004: £1.36 million);
• Diluted adjusted earnings per share 0.4p (restated 2004:2.0p), basic
earnings per share 4.7p (restated 2004: 1.5p)
• Net cash at year end £0.84 million (2004: net cash £1.98 million).
• Spooner property deal resulting in an exceptional gain of £2.95
million
Commenting on prospects, Barry Stevenson, Chairman said:
'We have no reason to expect an improvement in the markets we are serving in the
foreseeable future. In the circumstances we intend to continue to reduce cost
wherever practicable, conserve resources and pursue every business opportunity
vigorously. We remain of the view that consolidation of the primary tobacco
machinery market is necessary.'
For further information please contact:
Dickinson Legg Group plc 01962 841 788
Tom Mackie, Chief Executive
David Heath, Group Finance Director
Rowan Dartington & Co. Limited 0117 933 0011
Barrie Newton
Notes to Editors:
The Company's businesses comprise Dickinson Legg Limited, a world leader in the
manufacture and installation of primary tobacco processing equipment, and
Spooner Industries Limited, a specialist air drying equipment manufacturer for
the paper, converting (plastic film, foil and textile), metals and food
industries.
Chairman's Statement
The outcome for the year to June 2005 was in line with market expectations and
as previously indicated trading conditions proved to be exceptionally difficult.
Group turnover was 24% down on last year and 34% down on 2003, reflecting the
decline in the markets we serve. Running manufacturing businesses in these
circumstances is extremely difficult. Cost has been taken out wherever it was
felt possible without damaging the longer term prospects of the businesses and
it is mainly due to these actions that the Group has remained in profit.
The Spooner property deal, details of which are given in the Chief Executive's
report, will put that business on a better footing in the medium term. It has
also strengthened the Group balance sheet by contributing to the increase in net
assets by 36% to £6.7 million.
Results
Group turnover of £32.2 million (2004: £42.5 million) was 24% down and Group
operating profit before exceptional items was 86% lower at £0.19 million (2004:
£1.35 million). After exceptional items Group operating profit was £2.77
million (2004: £1.11 million).
There was a net exceptional credit before tax of £2.58 million. This comprised
a £2.95 million credit resulting from the Spooner property deal and a £0.37
million charge incurred on the previously reported abortive acquisition and
subsequent negotiations.
Diluted adjusted earnings per share before exceptional items were 0.4p (restated
2004: 2.0p). Net cash at the year end was £0.84 million which showed a
reduction over the year of £1.15 million after the payment of £0.91 million
dividend.
Dividend
In view of the results for the year and the Group's prospects the Board has
decided not to recommend payment of a final dividend.
Prospects
We have no reason to expect an improvement in the markets we are serving in the
foreseeable future. In the circumstances we intend to continue to reduce cost
wherever practicable, conserve resources and pursue every business opportunity
vigorously. We remain of the view that consolidation of the primary tobacco
machinery market is necessary.
People
Employees have continued to work with dedication in difficult circumstances and
I very much appreciate their efforts.
B B Stevenson
Chairman
1 November 2005
Chief Executive's Review
Primary Tobacco Processing Equipment
Dickinson Legg Businesses
Dickinson Legg's sales of new equipment was 30% lower than the previous year,
due to a lack of major projects, which was in part offset by increased sales of
spares and wear parts. Turnover, including the Group's share of the joint
venture was 20% lower at £24.2 million (2004: £30.2 million) and operating
profit before exceptional items was 34% lower at £1.45 million (2004: £2.22
million) when compared with the previous year.
The majority of new machine sales arose from projects requiring Dickinson Legg's
key products for processing tobacco leaf, including one project for the Expanded
Stem System (ESS), marketed exclusively under license from R J Reynolds in the
United States. There were also several small projects for processing the stem of
the tobacco leaf utilising Dickinson Legg's STS and Admoist products.
Further development work on our conveying and storage solutions resulted in an
order for £1.5 million to replace a customer's current system with an automated
line for the transport and packing of the tobacco. Two further projects have
been secured for our newly developed vertical slicer reported on last year and
several strong enquiries for other units are being pursued.
Our spares and wear parts businesses - based in Andover, Hampshire and Richmond,
Virginia - both performed well enjoying increased volumes compared with the
previous year. A number of refurbishment projects were undertaken for customers
thereby generating additional component requirements, which compensated for
fewer spares packages associated with lower volumes of new machines.
Our Indian joint venture, Dickinson Fowler had a very good first half year,
delivering two major projects, but experienced a downturn in the second half due
to a lack of significant orders from the UK business.
The market for primary tobacco processing equipment remains depressed and is
reflected in Dickinson Legg's opening order book being lower than at the
beginning of the previous year. Competition for available business is fierce and
margins will remain under pressure, whilst there is an excess of capacity.
Air Drying Equipment
Spooner Industries
Spooner suffered from a combination of a very low opening order book and slow
order intake in the early part of the year. The improved order loading by the
close of the half year generated an improved operating performance in the second
half, resulting in break-even for that period. Consequently, turnover for the
year was 30.4% lower at £9.257 million (2004: £13.304 million) and there was an
operating loss of £0.478 million (2004: £0.056 million). Significant orders
included two projects for multiple dryers for coated paper and film with a value
of £3.9 million and three projects for the food sector valued at £2.1 million.
One of these projects was the culmination of a two year development programme
for a highly specialised dryer which is expected to lead to orders for a number
of similar machines over the next twelve months.
Agreement was reached with the landlord of the leasehold premises occupied by
Spooner Industries in Ilkley, West Yorkshire, to vacate the current premises
within two years in a deal worth £3.5 million to the Group. Payment will be
received over a two year period through a combination of cash or land and cash.
The Company has benefited from a one time exceptional profit before tax of £2.95
million in this financial year.
Spooner has entered the new financial year with a reasonable order book but
order intake continues to be lumpy. Although there are a number of quality
prospects, competition is intense and customers are generally taking longer to
conclude contracts.
T M Mackie
Chief Executive
1 November 2005
Financial Review
Introduction
The financial statements have been prepared in accordance with applicable
accounting standards, using policies consistent with the previous period.
Operating Results
Profit on ordinary activities before interest, taxation and exceptional items
for the period was £0.38 million against £1.62 million in the previous year.
Earnings before interest, taxation, depreciation and amortisation were £3.49
million (2004: £2.03 million). The tobacco processing equipment businesses saw a
significant downturn in activity resulting in turnover being down £6 million,
however its' contribution to group turnover increased to 72% (2004: 69%). The
fall in turnover experienced this financial year has resulted in a 34% lower
operating profit. Such is the nature of the capital equipment markets in which
we operate, after seeing a 20% increase in turnover in the air drying business
last year, we saw a 30% decline this year. This fall in turnover has led to an
operating loss of £0.48 million (2004: loss of £0.06 million). However the cost
reduction programmes in both business areas in previous years have significantly
helped in maintaining a profitable Group.
Exceptional Items
Following lengthy discussions and after undertaking extensive due diligence on a
target company, the Board of Directors took the decision not to proceed with an
acquisition. The Group incurred related costs with external advisors totalling
£0.37 million.
In the last month of the financial year, agreement was reached with the landlord
of the leasehold premises occupied by Spooner Industries Limited in Ilkley, West
Yorkshire, to vacate the current premises within two years. The agreement
provides for the Company to erect a purpose built freehold premises on an
adjacent site, through a combination of land and cash. Payment will be received
over a two-year period, with the majority of the cash inflow due to arise in
2006/7. The £2.95 million exceptional profit is the net value of the cash and
the fair value of the land that will be received less estimated committed
relocation costs.
Interest
Total interest moved from a net payable to net receivable in the year. This was
helped by the cash generated in previous years. The main contributor to the
total interest receivable was the joint venture. Interest cover remains healthy
at 12.8 times (2004:15.8 times).
Taxation
The effective rate of tax for the year is 42.9% (2004: 59.5%), which amounts to
£1.29 million (restated 2004: £0.81 million). £1.05 million of the tax on the
Spooner exceptional profit has been provided for in these financial statements.
This may be mitigated depending on future actions and options available to the
Group.
The Group has taken advice on the availability of certain unrelieved Advance
Corporation Tax (ACT) utilised by the Group in prior periods. It would appear
that surrendered ACT used by a Group company since the de-merger from Brunel
Holdings plc in December 2002, was not available. The estimated tax liability
is £269,000 and full provision has been made in these financial statements and
shown as a prior year adjustment.
The reduction in the deferred tax asset of £0.12 million is mainly due to the
utilisation of our USA tax losses. We anticipate that these losses will be fully
utilised in the forthcoming financial year. Further details can be found in note
3.
Dividends
After considering the future prospects and working capital requirements of the
Group the Board is not recommending the payment of a dividend.
Earnings Per Share
The earnings per share calculated in accordance with FRS 14 were 4.7p (restated
2004: 1.5p). The earnings per share before exceptional items were 0.4p
(restated 2004: 2.0p). See note 5 for further detail.
Capital Expenditure
As a result of the downturn in activity experienced across the Group planned
capital expenditure was scaled back and totalled only £0.04 million in the year
(2004: £0.16 million), The majority of this was spent on the essential
replacement of existing assets.
Research and Development
£0.20 million (2004: £0.27 million) was spent on the on-going development of
existing product lines. In the Dickinson Legg business the developments of note
include a friction drive multi-tier silo and a teaser unit, which produces a
metered flow of roll-your-own tobacco. These developments were written off
through the profit and loss account.
Financing
The net current asset position, excluding the effect of the exceptional profit
on surrender of the lease, is in line with the 2004 year-end position. The net
cash outflow for the year of £1.15 million follows two years, which saw
cumulative net inflows in excess of £4.7 million. The majority of the outflow
was due to the £0.91 million deferred dividend payments, which took place on 1
July 2004. As a consequence net funds have decreased to £0.84 million at 30 June
2005.
The Group continues to have its main banking relationship with Lloyds TSB.
Following a review of the Group's banking requirements a reduced on demand
facility of £6.0 million in aggregate was agreed. Although, at the year-end, the
Group was cash positive, the facility is required to cover the significant
guarantee and bonding requests from the Group's customers. The year-end
guarantee and bonding liability are disclosed in note 7.
Share Capital and Reserves
The merger reserves arose from the demerger from Brunel Holdings plc and an
internal reorganisation prior to demerger in 2002. Other reserves of £39.50
million and the £46.26 million deficit on the profit & loss account are derived
from the inclusion of a 'non trading' subsidiary company Thomas Robinson Group
Limited. The negative profit and loss reserves do not prevent Dickinson Legg
Group plc from paying dividends to shareholders as the Company has positive
distributable reserves.
Treasury Activities
The Group continues to use financial instruments to manage risk. The Group does
not engage in speculative activity. Treasury activities are reported on a
monthly basis to the Board.
The principal financial risks faced by the Group are foreign exchange and to a
much lesser extent interest rate risk. The Group operates a risk averse policy
to foreign exchange exposures. Contract and trading transactions in non-local
currencies are hedged (using foreign currency forward contracts) as soon as
there is reasonable certainty in the amounts and timings.
International Financial Reporting Standards ('IFRS')
The Group will be required to prepare its financial statements for the financial
year ended 30 June 2008 in accordance with IFRS.
D G Heath
Group Finance Director
1 November 2005
Group Profit & Loss Account
For the year ended 30 June 2005
2005 2004
(unaudited) (restated)
Before Exceptional Total Before Exceptional Total
Exceptional Items Exceptional Items
Items Items
Note £000 £000 £000 £000 £000 £000
Turnover
Turnover (including 33,452 - 33,452 43,543 - 43,543
share of joint venture)
- continuing
Less share of turnover (1,257) - (1,257) (1,073) - (1,073)
of joint
venture - continuing
Group 1 32,195 - 32,195 42,470 - 42,470
turnover-continuing
Cost of Sales (24,657) - (24,657) (31,971) - (31,971)
Gross Profit 7,538 - 7,538 10,499 - 10,499
Distribution costs (4,954) - (4,954) (6,180) - (6,180)
Administrative expenses 2 (2,548) (367) (2,915) (3,148) (239) (3,387)
Other operating income 150 2,953 3,103 174 - 174
Group operating profit 186 2,586 2,772 1,345 (239) 1,106
- continuing
Share of operating 196 - 196 279 - 279
profit in joint venture
- continuing
Profit on ordinary 1&2 382 2,586 2,968 1,624 (239) 1,385
activities
before interest
Interest receivable and 36 - 36 13 - 13
similar income:
Group
Share of Joint venture 42 - 42 54 - 54
Interest payable and (36) - (36) (92) - (92)
similar charges
Profit on ordinary 424 2,586 3,010 1,599 (239) 1,360
activities
before taxation
Taxation on profit on 3 (161) (1,028) (1,189) (800) 65 (735)
ordinary activities:
Group
Share of joint venture (101) - (101) (74) - (74)
Profit for the 162 1,558 1,720 725 (174) 551
financial year
Dividends 4 - - - (364) - (364)
Retained profit / 6 162 1,558 1,720 361 (174) 187
(loss) for the
financial year
Earnings per 20p 5
share : 4.7p 1.5p
Basic
Diluted 5
4.7p 1.5p
Diluted adjusted 5
basis 0.4p 2.0p
Group Balance Sheet
as at 30 June 2005
2005 2005 2004 2004
(unaudited) (unaudited) (restated) (restated)
Note £000 £000 £000 £000
Fixed assets
Intangible assets 3,059 3,283
Tangible assets 576 853
Interest in joint venture
- share of gross 1,300 1,329
assets
- share of gross (621) (734)
liabilities
679 595
4,314 4,731
Current assets
Stocks 1,463 1,522
Debtors - due less than one 7,993 11,896
year
- due more than one 2,974 -
year
Cash at bank and in hand 3,920 5,339
16,350 18,757
Creditors - amounts falling due (12,130) (17,071)
within one year
Net current assets 4,220 1,686
Total assets less current 8,534 6,417
liabilities
Provisions for liabilities and (1,822) (1,487)
charges
Net assets 1 6,712 4,930
Capital and reserves
Called up share capital 6 7,271 7,271
Merger reserve 6 45,234 45,234
Other reserves 6 39,496 39,496
Profit and loss account 6 (85,289) (87,071)
Shareholders' funds - equity 6 6,712 4,930
The Group's cash at bank and in hand balance has been restated to show gross
certain cash at bank and bank overdraft positions, which had previously been
shown net.
Group Statement of Total Recognised Gains and Losses
For the year ended 30 June 2005
2005 2004
(unaudited) (restated)
Note £000 £000
Profit for the financial year 1,720 551
Currency translation differences on foreign currency net investments 62 (116)
Total recognised gains and losses in the year 6 1,782 435
Prior year adjustment (as explained in note 6) (269)
Total recognised gains since last Annual Report 1,513
There is no difference between the reported profits of the Group and the profits
on an historical cost basis.
Group Cash Flow Statement
for the year ended 30 June 2005
2005 2004
(unaudited)
£000 £000 £000 £000
Net cash (outflow) / inflow from operating (196) 2,836
activities
Dividends received from joint venture 97 -
Returns on investments and servicing of finance
Interest received 36 13
Interest paid (36) (89)
Interest element of finance lease rental payments - (3)
Net cash outflow from returns on
investments and servicing of finance - (79)
Taxation (118) (198)
Capital expenditure
Purchase of tangible fixed assets (41) (157)
Sale of tangible fixed assets 19 -
Net cash outflow from capital expenditure (22) (157)
Equity dividends paid to shareholders (909) -
Net cash inflow before use of liquid resources and (1,148) 2,402
financing
Financing
Capital element of finance lease rental payments - (13)
- (13)
(Decrease) / increase in cash (1,148) 2,389
Reconciliation of movement in net funds 1 July Cash Flow Exchange 30 June
2004 Movement 2005
£000 £000 £000 £000
Cash at bank and in hand 5,339 (1,434) 15 3,920
Overdrafts (3,364) 286 (5) (3,083)
1,975 (1,148) 10 837
Notes to the financial statement
1 Segmental reporting
By business Turnover Operating profit/ Operating profit/ Net assets /
segment: (loss) before (loss) after (liabilities)
exceptional items exceptional items
2005 2004 2005 2004 2005 2004 2005 2004
(unaudited) (unaudited) (unaudited) (unaudited) (restated)
£000 £000 £000 £000 £000 £000 £000 £000
Tobacco
processing
machinery
Group 22,938 29,166 1,261 1,937 1,261 1,698 5,868 5,962
Joint 1,257 1,073 196 279 196 279 679 595
venture
Air drying 9,257 13,304 (481) (56) 2,472 (56) 2,530 1,279
equipment
Other - - (594) (536) (961) (536) (2,365) (2,906)
activities
Continuing 33,452 43,543 382 1,624 2,968 1,385 6,712 4,930
operations
Group 32,195 42,470 186 1,345 2,772 1,106 9,116 7,699
Joint 1,257 1,073 196 279 196 279 679 595
venture
33,452 43,543 382 1,624 2,968 1,385 9,795 8,294
Net debt - (3,083) (3,364)
external
6,712 4,930
Geographical Turnover Operating profit/ Operating profit/ Net assets /
(loss) before (loss) after (liabilities)
(by origin): exceptional items exceptional items
2005 2004 2005 2004 2005 2004 2005 2004
(unaudited) (unaudited) (unaudited) (unaudited) (restated)
£000 £000 £000 £000 £000 £000 £000 £000
United
Kingdom
(trading 30,283 40,451 291 1,495 3,244 1,256 7,200 6,512
activities)
United - - (594) (536) (961) (536) (2,365) (2,906)
Kingdom
(other
activities)
United States 1,912 2,019 489 386 489 386 1,198 729
of America
Rest of the 1,257 1,073 196 279 196 279 679 595
World
33,452 43,543 382 1,624 2,968 1,385 6,712 4,930
Group 32,195 42,470 186 1,345 2,772 1,106 9,116 7,699
Joint venture 1,257 1,073 196 279 196 279 679 595
33,452 43,543 382 1,624 2,968 1,385 9,795 8,294
Net debt - (3,083) (3,364)
external
6,712 4,930
Turnover
Geographical (by destination): 2005 2004
£000 £000
(unaudited)
United Kingdom 9,030 6,894
United States of America 3,236 5,990
Europe 8,319 13,234
Rest of the World 12,867 17,425
Continuing operations 33,452 43,543
Group 32,195 42,470
Joint venture 1,257 1,073
33,452 43,543
2 Exceptional items
Notes 2005 2004
(unaudited)
£000 £000
Profit on surrender of lease i 2,953 -
Abortive acquisition costs ii (367) -
Reorganisation / Restructuring costs iii -- (239)
Total exceptional items 2,586 (239)
i. Agreement has been reached with the landlord of the leasehold premises
occupied by Spooner Industries Limited in Ilkley, West Yorkshire, to surrender
the existing lease and vacate the current premises within two years in a deal
worth £3.5 million to the Group. Payment will be received over a two year
period through a combination of cash or land and cash. The value shown is the
net value of the cash and land that will be received less the estimated
relocation costs. The estimated tax charge on this gain is £1.05 million for
which full provision has been made in these financial statements. This may be
mitigated depending on future actions and options available to the Group. In
accordance with this agreement, £0.06 million was received in the year ended 30
June 2005.
ii. Following lengthy discussions and after undertaking extensive due
diligence on a target company, the Board of Directors took the decision not to
proceed with an acquisition. These costs represent third party services only.
iii. The comparative amounts relate to the combination of an onerous lease
provision and accelerated depreciation as a result of a reorganisation of
Dickinson Legg Limited's activities
3 Taxation
2005 2004
(unaudited) (restated)
£000 £000
UK Corporation tax at 30% (2004: 30%) 1,103 314
Double taxation relief (58) -
Foreign tax 120 83
ACT written off - 506
Deferred taxation 95 (179)
Prior year charge 30 85
1,290 809
The tax charge relates to the following:
Dickinson Legg Group 1,189 735
Joint venture 101 74
1,290 809
Analysis of charge in period
Current tax:
United Kingdom Corporation tax @ 30% 1,045 314
Prior year adjustment 30 85
1,075 399
Foreign tax:
Overseas subsidiaries 19 9
Share of joint venture 101 74
Total current tax 1,195 482
ACT written off - 506
Deferred tax:
Origination and reversal of timing differences 95 (179)
Total deferred tax 95 (179)
Tax on profit on ordinary activities 1,290 809
4 Dividends
2005 2004
(unaudited)
£000 £000
Ordinary shares
Interim at £nil per 20p share (2004: 0.5 pence) - 182
Final proposed at £nil per 20p share (2004: 0.5pence) - 182
- 364
5 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue. For diluted earnings per share, the weighted average number of ordinary
shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. Reconciliations of earnings and weighted average number of
shares used in the calculations are set out below:
Earnings Weighted Total 2005 Earnings Weighted Total 2004
average Earnings per Average Earnings
shares share Shares Per share
Number Number
(pence)
£'000 ('000s) (restarted) ('000s) (pence)
(unaudited)
Basic earnings per
share 1,720 36,355 4.7 551 36,355 1.5
Add:
Dilutive effect of
Share options - - - - 187 -
Diluted earnings per
share 1,720 36,355 4.7 551 36,542 1.5
(Less)/add:
Exceptional items (2,586) - (7.1) 239 - 0.7
Less:
Tax effect of the
exceptional costs 1,028 - 2.8 (65) - (0.2)
Adjusted diluted
earnings per share 162 36,355 0.4 725 36,542 2.0
There is no dilutive effect of the share options during the 2005 financial year,
as the average share price for the year was less than the exercise price of the
share options.
6 Reserves
Group £'000 £'000 £'000 £'000 £'000
At 1 July 2004 as 7,271 45,234 39,496 (86,802) 5,199
previously reported
Prior year adjustment - - - (269) (269)
At 1 July 2004 7,271 45,234 39,496 (87,071) 4,930
Retained profit for the - - - 1,720 1,720
year
Currency translation - - - 62 62
differences
As at 30 June 2005 7,271 45,234 39,496 (85,289) 6,712
(unaudited)
The Group has taken advice on the availability of certain unrelieved Advance
Corporation Tax (ACT) utilised by the Group in prior periods. It would appear
that surrendered ACT used by a Group company since the de-merger from Brunel
Holdings plc in December 2002, was not available. The estimated tax liability
is £269,000 and full provision has been made in these financial statements and
shown as a prior year adjustment.
The merger reserve arises on consolidation and represents the difference between
the cost of investment and capital in Group companies at the date of merger.
7 Contingent liabilities
The Group have the following contingent liabilities which have not been provided
in the balance sheet since no actual liability is expected to arise:
Bonds and Guarantees
At 30 June 2005, the Group had outstanding bank and insurance guarantees in
respect of advance payments, performance and other bonds totalling £3,334,000
(2004: £2,561,000).
8 Annual Report and Accounts & AGM
The Annual Report and Accounts will be posted to shareholders shortly and will
be available from the Company's Registered office at Moorside Road, Winchester,
Hampshire SO23 7SS.
9 Preliminary Announcement
This preliminary announcement has been prepared on the basis of the accounting
policies set out in the annual financial statements for the year ending 30 June
2005. The financial information set out in this preliminary announcement does
not constitute the company's statutory accounts for the years ended 30 June 2005
or 30 June 2004. The financial information for the year ended 30 June 2004 is
derived from the statutory accounts for that year, which have been delivered to
the Registrar of companies. The auditors report on those accounts was
unqualified and did not contain a statement under either section 237 (2) or (3)
of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP