Interim Results
Dickinson Legg Group PLC
23 February 2005
Dickinson Legg Group PLC
Interim Results for the Six Months ended 31 December 2004
Dickinson Legg Group is a specialist engineering group, incorporating Dickinson
Legg Limited and Spooner Industries Limited. Dickinson Legg Limited is a world
leader in the manufacturing and installation of primary tobacco processing
equipment and Spooner Industries Limited is a specialist air drying equipment
manufacturer for the paper, converting, metals and food industries.
• Turnover at Dickinson Legg affected by a lack of major projects, in part
offset by improved sales of spare parts. Markets remain depressed and highly
competitive
• Spooner Industries commenced the year with a very low order book, but
recent order successes will result in an improved second half
Financials
• Turnover £13.804 million (2003: £19.028 million)
• Loss before tax £0.62 million (2003: profit £0.062 million)
• Exceptional costs related to an aborted transaction £0.31 million (2003:
nil)
• Diluted adjusted loss per share 1.51p (2003: 0.10p), basic loss per share
2.36p (2003: 0.10p)
• Net funds £1.293 million (2003: £1.562 million)
For further information, please contact:
Dickinson Legg Group PLC 01962 841788
Tom Mackie, Chief Executive
David Heath, Financial Director
Rowan Dartington 0117 933 0011
Barrie Newton
Operating Review
The markets for our capital equipment have continued to be depressed which is
reflected in the disappointing results for the first half year, with the
Dickinson Legg Group reporting turnover of £13.804 million and an operating loss
before exceptionals of £0.295 million. Spooner Industries performance was
severely restricted by a very low order book at the start of the financial year.
A key element of the Company's strategy is to participate in the consolidation
of the tobacco processing industry. Following lengthy negotiations and after
undertaking extensive due diligence on a target company, the board took the
decision not to proceed with an acquisition, since it was deemed not to be in
the best interests of our shareholders. This has resulted in an exceptional
charge of £0.31 million.
Dickinson Legg, the primary tobacco process equipment manufacturer and its
Indian Joint Venture had combined revenues of £11.157 million (2003: £11.869
million) and an operating profit of £0.448 million (2003: £0.288 million). New
equipment sales were lower due to the lack of major projects, which was in part
offset by improved sales of spares and wear parts in both the UK and USA. A
number of smaller contracts recently secured will lead to an improvement in
financial performance in the second half year relative to the first half. The
Joint Venture, Dickinson Fowler, performed extremely well in the period as a
result of delivering two major contracts, but lower levels of activity are
expected in the second half year.
Spooner Industries, the specialist air drying equipment manufacturer, suffered
from a very low order book at the start of the financial period reflected in
turnover of £3.507 million (2003: £7.534 million) and an operating loss of
£0.478 million (2003: profit £0.162 million). Order intake was slow in the early
part of the period, but had improved significantly as the period closed. This
should lead to a better operating performance in the second half year. A number
of the orders awarded are for the supply of ovens and dryers for the food market
which is a result of our recent re-entry into this sector.
Results
Group turnover at £13.804 million was 27.5% lower than the previous half year
and the operating loss, including the joint venture before exceptional items,
was £0.295 million compared to a profit of £0.118 million. The majority of the
reduction in sales and the whole of the reduction in profit is attributable to
Spooner, as a result of commencing the period with a very low order book. The
improved operating margin for the tobacco business resulted from a higher
proportion of sales arising from spares and the joint venture.
The basic loss per share was 2.36p (2003: 0.10p). Diluted adjusted loss per
share before exceptional items was 1.51p (2003: 0.10p).
Net funds at the half year were £1.293 million which is a reduction of £0.269
million for the comparative period and is £0.682 million lower than the year
ending 30 June 2004.
The Group net interest charge was reduced from £0.056 million to £0.015 million
in the comparative period.
Taxation
The tax charge for the period is £0.237million (2003: £0.055million). This is a
result of overseas earnings incurring a tax charge and a charge for shadow
Advance Corporation Tax which has arisen through the payment of cash dividends,
combined with the lack of UK taxable profits in this period. This adverse effect
will be less significant in the second half.
Dividend
In view of the disappointing results and the uncertain prospects, the Directors
are not recommending payment of an interim dividend.
Prospects
There is no evidence of a sustained upturn in the markets we serve and trading
will continue to be difficult going forward. The Company continues to have a
number of quality prospects for Dickinson Legg and Spooner Industries, but
competition remains intense for the available business. The current order books
of the businesses should result in an improved performance in the second half.
Trading remains in line with our expectations at the time of the AGM Statement
in December 2004.
Barry Stevenson, Chairman 23 February 2005
Dickinson Legg Group PLC
Group profit and loss account (unaudited)
for the six months ended 31 December 2004
Notes Six months to 31 Six months to 31 Year ended 30
December 2004 December 2003 June 2004
(restated - note 5)
£000 £000 £000
Turnover including share of joint venture 1 14,664 19,403 43,543
Less: Share of joint venture 1 (860) (375) (1,073)
Group turnover 13,804 19,028 42,470
Operating (loss) / profit before exceptional 1 (481) 56 1,345
items
Operating exceptional items 2 (310) - (239)
Operating (loss) / profit (791) 56 1,106
Share of operating profit in joint venture 1 186 62 279
(Loss) / profit on ordinary activities 1 (605) 118 1,385
before interest
Net interest (payable)/receivable
Group (26) (65) (79)
Joint venture 11 9 54
(Loss) / profit on ordinary activities (620) 62 1,360
before taxation
Tax on (loss) / profit on ordinary 3 (237) (55) (730)
activities
(Loss) / profit on ordinary activities after (857) 7 630
taxation
Dividends 4 - (182) (364)
Retained (loss) / profit for the period (857) (175) 266
Basic (loss) / earnings per 20p share (2.36)p 0.10p 1.70p
Adjusted EPS (pre-exceptional items) (1.51)p 0.10p 2.20p
All results relate to continuing activities
Dickinson Legg Group PLC
Group balance sheet (unaudited)
as at 31 December 2004
31 December 2004 31 December 2003 30 June 2004
(restated - note 5)
Notes £000 £000 £000
Fixed assets
Intangible assets 3,159 3,398 3,283
Tangible assets 721 1,008 853
Investments
Interests in joint venture:
Share of gross assets 1,286 911 1,329
Share of gross liabilities (565) (389) (734)
Share of net assets 721 522 595
4,601 4,928 4,731
Current assets
Stock 1,536 2,190 1,522
Debtors 7,610 10,904 11,896
Cash at bank and in hand 1,293 1,564 1,975
10,439 14,658 15,393
Current liabilities
Creditors - amounts falling due within (9,491) (13,185) (13,438)
one year
Net current assets / (liabilities) 948 1,473 1,955
Total assets less current liabilities 5,549 6,401 6,686
Provisions for liabilities and charges (1,250) (1,403) (1,487)
Total net assets 4,299 4,998 5,199
Capital and reserves
Called up share capital 7,271 7,271 7,271
Merger reserve 45,234 45,234 45,234
Other reserves 39,496 39,496 39,496
Profit and loss account (87,702) (87,003) (86,802)
Equity shareholders' funds 6 4,299 4,998 5,199
Dickinson Legg Group PLC
Group statement of cashflows (unaudited)
for the six months ended 31 December 2004
Six months to Six months to Year to
31 December 2004 31 December 2003 30 June 2004
£000 £000 £000
Net cash inflow from operating activities 312 2,245 2,836
Dividends received from joint venture 85 - -
Returns on investments and servicing of
finance
Net interest paid (15) (56) (79)
Taxation (111) (134) (198)
Capital expenditure
Purchase of fixed assets (18) (78) (157)
Cash inflow before financing 253 1,977 2,402
Equity dividends paid to shareholders (909) - -
Financing
Net capital element of finance lease - (11) (13)
rentals
(Decrease) / increase in cash (656) 1,966 2,389
Reconciliation of net cashflows to movement in
net funds / (debt)
(Decrease) / increase in cash (656) 1,966 2,389
Net repayment of capital element of - 11 13
finance leases
Change in net funds from cashflows (656) 1,977 2,402
Currency translation differences (26) (15) (27)
Movement in net funds in the period (682) 1,962 2,375
Net funds / (debt) at beginning of period 1,975 (400) (400)
Net funds at end of period 1,293 1,562 1,975
Dickinson Legg Group PLC
Notes to the Interim Statements
1 Segmental analysis
By business segment
Six months to Year to
31 December 30 June
2004 2003 2004
(restated)
£000 £000 £000
Turnover:
Tobacco processing equipment
Group 10,297 11,494 29,166
Joint venture 860 375 1,073
11,157 11,869 30,239
Air drying equipment 3,507 7,534 13,304
Continuing operations 14,664 19,403 43,543
Operating profit/(loss):
Tobacco processing equipment
Group 262 226 1,937
Joint venture 186 62 279
448 288 2,216
Air drying equipment (478) 162 (56)
Other activities (265) (332) (536)
Operating (loss) / profit before exceptional items (295) 118 1,624
Exceptional items (310) - (239)
Continuing operations (605) 118 1,385
2 Exceptional items
Six months to Year to
Notes 31 December 30 June
2004 2003 2004
£000 £000 £000
Exceptional items within operating profit:
Abortive acquisition costs i (310) - -
Restructuring costs ii - - (239)
(310) - (239)
i 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.
ii The comparative amounts relate to the combination of an onerous lease
provision and accelerated depreciation as a result of a reorganisation of
the company's activities, which has now been completed.
3 Taxation
The tax charge for the period is £0.237 million (Dec 2003 : £0.055 million). The
tax charge reflects the combination of foreign corporation taxes and the
displacement of ACT that was previously recognised.
4 Dividends
Due to the result achieved to date and the future trading prospects, no interim
dividend has been declared.
5 Prior year adjustment
In November 2003 the Accounting Standards Board published Application Note G,
'Revenue Recognition', in respect of FRS5 'Reporting the Substance of
Transactions'. As a result of this the Directors have reviewed the Group's
policy in respect of revenue recognition on significant long-term contracts.
Previously the elements of contracts in relation to the design & manufacture of
machinery and the installation & commissioning of the equipment had been
accounted for separately. Revenue relating to the design & manufacture of the
machinery would have been fully recognised on shipment and then the installation
& commissioning would have been recognised up to customer acceptance. The policy
has been revised such that, where there is no separate contract, all phases of
the project are combined and revenue recognised with reference to total cost
from design through to customer acceptance. The effect of this change in policy
is to spread the revenue recognition over a longer time period.
This change in accounting policy has been recognised in these accounts as a
prior year adjustment and comparative figures for the period to December 2003
have been restated from those previously disclosed. The comparative figure for
the year ended 30 June 2004 incorporated this change in the Group's policy, full
details of the effect on these figures can be found in the Report and Accounts
2004.
The effect of the prior year adjustment, on the December 2003 comparative, was
to defer £30,000 of profit previously recognised into subsequent periods.
Debtors increased by £529,000 and creditors - amounts falling due within one
year increased by £559,000.
6 Reconciliation of movement in equity shareholders' funds
Called up Merger Other Profit and Total equity
share capital reserves reserves loss account shareholders'
funds
£'000 £000 £000 £000 £000
At 1 July 2004 7,271 45,234 39,496 (86,802) 5,199
Retained loss - - - (857) (857)
Currency translation - - - (43) (43)
differences
At 31 December 2004 7,271 45,234 39,496 (87,702) 4,299
7 Accounts
The Group results for the six months ended 31 December 2004 and 31 December 2003
are neither audited nor reviewed by independent auditors. The results for the
year ended 30 June 2004 set out above are an abridged version of the Group's
full accounts for that year and do not constitute statutory accounts. Statutory
accounts for the year ended 30 June 2004 for the United Kingdom subsidiary
companies have been delivered to the Registrar of Companies and included the
auditors' report, in accordance with section 235 of the Companies Act 1985,which
were unqualified and did not contain a statement under either section 237(2) or
section 237(3) of the Companies Act 1985.
Accounting policies have been consistently applied on the basis set out in the
Group's financial statements for the year ended 30 June 2004.
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