Preliminary Results

RNS Number : 2240X

Dewhurst PLC

02 December 2010

 



Dewhurst PLC

("Dewhurst" or the "Group")

Preliminary Results for the year ended 30 September 2010

CHAIRMAN'S STATEMENT

Highlights

o  Sales increase to £37.0 million (2009: £35.8 million)

o  Profits before tax increase to £4.8 million (2009: £4.4 million)

o  Proposed final dividend increased to 4.24p (2009: 4.04p)

o  Overseas markets remain buoyant

Results

It gives me great pleasure to report a set of record results, particularly in the current economic climate.  Sales were up 3.2% to £37.0 million (2009: £35.8 million) and profits before tax were up 9.0% to £4.8 million (2009: £4.4 million). 

The explanation of the sales performance for the full year is essentially the same as it was for the first half.  Lift Division sales were higher, but this was mainly due to currency strength in overseas markets.  The Transport Division achieved meaningful growth assisted by a full year contribution from Cortest acquired during last year.  Keypad sales fell on lower volumes and lower prices, though they did recover somewhat in the second half.

It has been another very challenging year with unpredictable demand and employees have had to be constantly ready to adapt to changing circumstances.  They have responded magnificently and I would like to thank them on your behalf.

Investment

The most significant project of the year has been the search for new headquarters and factory premises and the subsequent agreement to purchase a building at Hampton Farm Industrial Estate.  The site is approximately 2 miles from our present location in Hounslow.  The building is in the process of being refurbished and will be extended and fitted out to our requirements in 2011. We anticipate that we will move sometime in the second half of 2011.

We have also made an investment in two linked businesses in California with the expectation that we purchase the remaining shares no later than 1 July 2014. Elevator Research & Manufacturing (ERM) and Winter & Bain (W&B) are both in the US elevator business.  ERM manufactures lift car and door control fixtures, whilst W&B make platforms, cabs, doors, pumps and hydraulic jacks.  This investment strengthens our presence in the US elevator market.  While the US market is not particularly strong at the moment, it is a significant market and we are investing here for growth in the long term.

Pension

After many years trying to support and maintain our defined benefit pension scheme, we have this year agreed with the members to close it to future accrual.  We have seen the deficit on the scheme worsen substantially over recent years and we have had to act to limit the risks to shareholders and the business going forward.  Whilst this change will not necessarily reduce the deficit immediately, it is envisaged that this will in the very long term control future risk.

Outlook

We have seen the nervousness at UK local authorities about their future funding lead to a slowdown in orders in the UK in the second half.  We expect this situation to continue to bear down on UK orders for the foreseeable future.  Overseas  markets however remain more buoyant, particularly in Asia and Australia.

Clearly there will be abnormal costs associated with our planned major factory move next year, which will affect our bottom line profit before tax.  We will be making every effort to minimise the effect on the Group's operating performance.

Richard Dewhurst

Chairman

REVIEW OF OPERATIONS

Operating Highlights

Although the trading environment in the UK continued to be very difficult, our overseas markets were not impacted by the slowdown to nearly the same extent.  This has allowed us to report an improvement in turnover and profits over the last financial year.

The building industry tends to be affected by recessions comparatively later in the economic cycle and since our products are used in the last stages of a building programme, we do see recessions later than other companies. As such, we expect that the coming financial year will be a challenging one for us.

Across all our companies we have focussed significantly on quality.  This involves continuously improving the quality of service, of our designs and of our manufacturing processes.  We have been aided and encouraged by our key suppliers and nowhere has more progress been made than in our plant in Hungary.   Dewhurst Hungary has the most experience with advanced quality systems and we are working to adopt their best practices across all Group companies.

Once again, in difficult circumstances all our employees, across all companies have made a significant contribution and we are very grateful to them for their hard work and dedication.

UNITED KINGDOM

Dewhurst UK Manufacturing

In 2009, its first year as a stand-alone company following the reorganisation and transfer of the bulk of assembly to Hungary, Dewhurst UK Manufacturing made a substantial loss.  Last year, in its second year of operation, that loss was greatly reduced. In the coming year we aim to make substantial further progress.   There has therefore been significant focus on cost control, margin improvement and increasing sales.  We have significantly increased sales in North America to two independent fixture manufacturers as well as improved sales through Europe to both OEM's and distributors.

Significant improvements in Customer Satisfaction and Quality have been made, with on time deliveries running at 96%.  There is an enormous variety in the range of products that we manufacture which involves a great deal of human intervention.  Inevitably errors occur but we have worked throughout the year on closed loop corrective actions to eradicate these errors. This has led to improvements but there are further opportunities in this area.

We have worked harder on our lean and continuous improvement programmes and have appointed a programme manager to ensure that projects are driven forward in these areas.  Through the year we have halved the lead-times for the majority of our products.  This has allowed our subsidiaries in turn to offer greatly improved lead-times to their customers, thus increasing levels of service throughout the Group.  Our progress in this area was assisted by the investment in a second Amada laser machine for our pushbutton production.  This means we now have two identical machines in this area which makes programming easier and improves flexibility.

The forthcoming move out of the Inverness Road manufacturing site is of course a major project.   Having been on this site for over 90 years we have accumulated a fair amount of obsolete stock and plant.   Throughout the year, the team has worked extremely hard to sort and then dispose of these items and they have done an excellent job.   There is still more to do but we will be in the position by the end of January 2011 where anything that is left in Inverness Road will be current and will need to be moved to our new site.  The move itself is likely to take place in the second half of 2011 and will be an interesting challenge for all those at Dewhurst UK Manufacturing.  We believe that we can complete this move with only minimal, if any impact to deliveries or the quality of the product we are shipping.

We have had a steady year within our Design department.  There has been considerable work in ensuring that we explore new designs thoroughly and we now have a rigorous programme that includes both Design and Process FMEA's.  At the recent National Association of Elevator Contractors Exhibition we launched our new illuminated Braille product for the North American market, the US91 Optic. It has been extremely well received and should help to strengthen our position in that market.

LiftStore

As previously indicated, during the last financial year the UK market did not really improve for LiftStore.  Despite this LiftStore were able to slightly increase their sales. Through a difficult year, the whole team has continued to work very hard and positively, making good progress in a number of key areas.  We continued to hold our market share in tough times and that is a testament to the product quality and to the service that LiftStore supplies.  We have also continued to invest significantly in new products for the future.   The Ethos Hall Call Destination Control that was reported in the last Annual Report is a major development programme that continued throughout last year and is now ready for sale. Further improvements have been made to our Eco Mode offering.   There is a global drive to improve the efficiency of buildings and both of the above products offer building owners good energy savings in their lifts.

Work has continued with our auto dialler partner Design Com of Australia, who have developed a new and improved LX8 auto dialler product for the UK market.  This product together with its Health Check Software (which validates that the phone is functioning correctly), has proved very popular across a wide range of customers with large lift portfolios.  

On the fixture side of the business there has been a real focus on improving margins by taking more of the manufacturing process in house.  In the past LiftStore have been reliant on two or three key fabrication suppliers.  We have now however, brought laser cutting, welding and finishing in house, which has not only allowed us to improve margins but also to improve our responsiveness and reduce our lead-times.

Traffic Management Products (TMP)

In what was a very soft market in the last financial year, TMP managed to achieve solid growth in sales.  Demand for our non-illuminated and solar powered traffic bollards remained very strong but in addition, we delivered good growth through our signpost columns.   TMP Spectralyte Signposts are passively safe, which means when a vehicle hits them, they will collapse, causing minimum damage to the vehicle and its occupants.  The advantage of this type of product to the highways authorities is that they do not need to place a crash barrier around the sign.   Also our signposts are maintenance free and have no scrap value so are not attractive to thieves.

In the traffic bollard sector of the market, one can see just by driving around that many more competitors have entered the market.  On one hand that helps us, in as much as it gives greater momentum to the acceptance of non-illuminated bollards but it does create pricing pressures.

As with LiftStore, the market is not easy in the UK at the moment and a lot of our customers are facing budget constraints for the coming year.  However with a number of new products due to come on line in 2011, our objective is to improve the outlook.

Cortest

The first full year of the business under Dewhurst ownership saw a tentative start as we focussed on increasing market awareness of the business and of non-destructive testing in general.  Sales in the second half were much stronger with several new clients engaging the services of Cortest for a mixture of PFI and remedial works ranging from specialist non-destructive and electrical testing to data collection.

The nature of Cortest's services lend themselves well to supporting private and public clients whose own expertise and resource has been lost as a result of reduced Government spending.  Our focus is to continue the proactive marketing of the business whilst continuing to seek new business through technical innovation and development of new markets.

EUROPE

Dewhurst Hungary

In its second full year of operation Dewhurst Hungary has been able to show some growth as demand for our keypad products improved during the second half of the year.  As usual we face significant price pressure on these products and we are working continually to reduce costs by value engineering all products.

As intimated in the introduction, Dewhurst Hungary have made great progress in their quality systems and in our sector we are developing world class quality systems that should put us in a strong position to win more business.  One of the great challenges we now face is to broaden our customer base, both in the banking and lift industries.

NORTH AMERICA

Dupar Controls 

In 2009 Dupar showed excellent sales growth in the Elevator sector and in the last year they have maintained a high level of sales. Our products are very different to the standard North American offerings and are proving to be popular with end customers.

As with other Group companies, Dupar has focussed on improving quality within its operations.   A number of Process FMEA exercises were performed, which resulted in the assembly process, being streamlined and the opportunities for error being minimised.   Even though the U.S. market is stagnant at present, the Canadian market is still reasonably buoyant.

The Fixture Company (TFC)

The US Elevator Industry has been impacted quite hard by the reduction in construction projects and this slowdown has necessitated further restructuring of the management organisation at TFC. Control of the company now comes under Dupar and together they are working hard to increase their market share in the mid-west.

AUSTRALASIA & ASIA

Australian Lift Components (ALC)

After two very good years, this was always going to be a more difficult year as the building industry in Australia faced a slowdown.  Overall sales increased but were boosted through a strategic partnership that we set up with GAL/Hollister Whitney of the U.S.A.

GAL/Hollister Whitney produces a range of components for lifts including items such as door operators, locks, machines and rope gripping devices.   These products have been well received in the Australian market and ALC are confident that they can build substantial sales over the coming years.

Lift Material

Sales fell back slightly at Lift Material after a very strong year the previous year.  We have however introduced and established a number of good new products into the Australian market such as Roller Guides and LED lighting for lifts.

We continue to work hard to broaden the range of lift products that we are able to offer the Australian market and reduce of dependency on any one high volume product.

Dewhurst Hong Kong

It is a creditable achievement that in its first year of operation, Dewhurst Hong Kong has made a small but important contribution to the Group's profits.

Hong Kong has always been an important market for us but over the years our customers buying profiles have changed from a small number of large orders to a larger number of smaller orders.  As a result of this, we have had to alter the way that we service this market.  The only sensible way to do that was to start up a company in Hong Kong and supply orders from stock.  This has worked well and we are now developing a good reputation for delivery and service within the local market.

The market in Hong Kong is currently relatively buoyant with a large number of new building projects due to start in the next twelve months.  As well as new build projects, the modernisation market is at last starting to gather pace and this can only increase over the coming years.   With our new operation in Hong Kong we are well positioned to take full advantage of these opportunities.

David Dewhurst

Group Managing Director

FINANCIAL REVIEW

Solid Results

Despite a depressed UK economy and previously reported nervousness over public sector spending cuts, Dewhurst had a solid performance particularly with its lift and transport products. Revenue increased 3.2% from £35.8 million to £37.0 million and operating profit rose 8.0% from £4.5 million to £4.9 million.

The weak pound this year meant the group benefited on consolidation from a strong currency translation of our overseas sales and profits in particular from our Canadian and Australian subsidiaries.

Good Cash Flow

Cash flow was once again very good with £4.7m of cash being generated from operations. Despite acquiring shares in ERM and W&B for a total consideration of £667k (US$1m) and investing in new property, plant and equipment the group ended the year with cash and short-term deposits, up £2.1 million at £9.6 million.

As detailed in the directors' report the company recently exchanged contracts to purchase a new property for the Group headquarters and factory. The financing of this capital commitment, expected to be in the region of £5.2 million, will come from existing cash balances. When the move is complete the board's intention is to sell the Inverness Road site, subject to approval of the planning application currently in process.

We started and finished the year with no borrowing.

Pension Scheme Deficit

A more detailed analysis of the retirement benefit fund assets and liabilities movements is reported in note 22 under IAS 19, but yet again this year has seen significant increases in both assets and liabilities. Unfortunately the scheme deficit increased further from £6.1 million to £8.1 million.

With the cost of the final salary pension provision continuing to increase, the board reluctantly closed the defined benefit scheme to future accrual in order to secure the pensions already accrued, achieve future risk reduction and protect the long term future of the Group. Closing the scheme to future accrual will help limit the increase in liabilities and help the Group to fulfill its commitment to eliminate the current deficit.

Current contributing members, who from 1 October 2010 will no longer build up future benefits in the defined benefit scheme, will build up future pension benefits in a new group defined contribution scheme.

In addition to the new defined contribution costs, the Group will continue to pay a fixed sum of £1.4 million annually to reduce the defined benefit pension scheme deficit and all recommendations made by the scheme's actuary to eliminate the scheme deficit within an agreed timeframe have been fully implemented.

Treasury Policy

The Group seeks to reduce or eliminate financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The policies and procedures operated are regularly reviewed and approved by the board. By varying the duration of its fixed and floating cash deposits, the Group maximises the return on interest earned.

With around a third of profit before tax earned and held in foreign currencies the Group continued to use derivatives in the form of foreign exchange contracts to manage its currency risk, as reported in note 25. 

Dividends

Dividends are accounted for when paid or approved, and not when proposed, therefore the proposed final dividend for 2010 has not been accrued at the balance sheet date. The total dividend for 2010 of 6.36p per share, up 5.0% against last year's 6.06p, is covered 6.4 times by earnings. Shareholders' funds improved from £19.5 million to £21.1 million.

There was no change in the number of allotted shares during the year.

Jared Sinclair

Finance Director

For further details please contact:

Dewhurst Plc	Tel: [phone]
Jared Sinclair, Finance Director
Seymour Pierce Ltd (Nominated Adviser)	Tel: [phone]
Freddy Crossley / David Foreman (Corporate Finance)
Paul Jewell (Corporate Broking)

Consolidated income statement

For the year ended 30 September 2010
					2010	2009
Continuing operations					£(000)	£(000)
Revenue					36,975	35,835
Operating costs					(32,104)	(31,324)
Operating profit					4,871	4,511
Share of profit from associates					6	-
Finance income					103	87
Finance costs					(153)	(170)
Profit before taxation					4,827	4,428
Tax on profit					(1,339)	(1,157)
Profit for the financial year					3,488	3,271
Basic and diluted earnings per share					40.97p	38.43p

Consolidated statement of recognised income and expense

				2010	2009
				£(000)	£(000)
Net income/(expense) recognised directly in equity:
Actuarial gains/(losses) on the defined benefit pension scheme				(2,497)	(2,765)
Exchange differences on translation of foreign operations				613	1,134
Tax on items taken directly to equity				528	457
Net income/(expense) recognised directly in equity in the year				(1,356)	(1,174)
Profit for the financial year				3,488	3,271
Total recognised income and expense for the year				2,132	2,097

 

 

Consolidated balance sheet

At 30 September 2010
				2010	2009
				£(000)	£(000)
Non-current assets
Goodwill				6,122	5,896
Other intangibles				184	264
Property, plant and equipment				4,609	4,519
Deferred tax asset				1,563	1,218
Investments in associates				639	-
				13,117	11,897
Current assets
Inventories				4,009	3,983
Trade and other receivables				6,908	7,077
Current tax assets				111	17
Cash and cash equivalents				9,593	7,476
				20,621	18,553
Total assets				33,738	30,450
Current liabilities
Trade and other payables				4,234	4,540
Short term provisions				349	358
				4,583	4,898
Non-current liabilities
Retirement benefit obligation				8,068	6,072
Total liabilities				12,651	10,970
Net assets				21,087	19,480
Equity
Share capital				851	851
Share premium account				157	157
Capital redemption reserve				286	286
Translation reserve				2,089	1,648
Retained earnings				17,704	16,538
Total equity				21,087	19,480

Consolidated cash flow statement

For the year ended 30 September 2010
				2010	2009
				£(000)	£(000)
Cash flows from operating activities
Operating profit				4,871	4,511
Depreciation and amortisation				680	575
Additional (income)/costs to pension scheme				(654)	(562)
Exchange adjustments				23	70
(Profit)/loss on disposal of property, plant and equipment				(2)	1
				4,918	4,595
(Increase)/decrease in inventories				(26)	139
(Increase)/decrease in trade and other receivables				169	77
Increase/(decrease) in trade and other payables				(306)	(124)
Increase/(decrease) in provisions				(9)	8
Cash generated from operations				4,746	4,695
Interest paid				-	(1)
Income tax paid				(1,262)	(1,555)
Net cash from operating activities				3,484	3,139
Cash flows from investing activities
Acquisition of associate undertakings				(667)	-
Acquisition of business and assets				-	(260)
Proceeds from sale of property, plant and equipment				75	4
Purchase of property, plant and equipment				(484)	(396)
Development costs capitalised				(38)	(50)
Interest received				103	87
Net cash used in investing activities				(1,011)	(615)
Cash flows from financing activities
Dividends paid				(524)	(499)
Net cash used in financing activities				(524)	(499)
Net increase/(decrease) in cash and cash equivalents				1,949	2,025
Cash and cash equivalents at beginning of year				7,476	5,120
Exchange adjustments on cash and cash equivalents				168	331
Cash and cash equivalents at end of year				9,593	7,476

 

Notes

 

1.     AGM, results and dividends

 

The trading profit for the year, after taxation, amounted to £3,488k (2009: £3,271k).

A final dividend on the Ordinary and 'A' non-voting ordinary shares of 4.24p per 10p share (2009: 4.04p) for the financial year ended 30 September 2010 will be proposed at the Annual General Meeting (AGM) to be held on 27 January 2011. If approved, this dividend will be paid on 15 February 2011 to members on the register at 14 January 2011.

An interim dividend of 2.12p per share (2009: 2.02p) was paid on 31 August 2010.

 

 

2.     Earnings per share and dividend per share

Weighted average number of shares
	2010	2009
	No.	No.
For basic and diluted earnings per share	8,511,398	8,511,398

The calculation of basic and diluted earnings per share is based on the profit for the financial year and on 8,511,398 Ordinary 10p and 'A' non-voting ordinary 10p shares, being the weighted average number of shares in issue throughout the financial year.

	2010	2009
Paid dividends per 10p ordinary share	£(000)	£(000)
2009 final paid of 4.04p (2008: 3.84p)	(344)	(327)
2010 interim paid of 2.12p (2009: 2.02p)	(180)	(172)

The final proposed dividend is based on 3,309,200 Ordinary 10p shares and 5,202,198 'A' non-voting ordinary 10p shares, being the latest number of shares in issue.  The directors are proposing a final dividend of 4.24p (2009: 4.04p) per share, totalling £361k (2009: £344k).  This dividend has not been accrued at the balance sheet date.

3.     Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2010 or 2009. Statutory accounts for 2009, have been delivered to the Registrar of Companies. The statutory accounts for 2010 which are prepared under IFRS as adopted by the EU will be delivered to the Registrar of Companies following the company's annual general meeting. 

The preliminary statement of results has been reviewed by and agreed with the Company's auditor, Chantrey Vellacott DFK LLP, who have indicated that they will be giving an unqualified opinion in their report on the statutory financial statements for 2010. The auditor has also reported on the 2009 accounts. Their report was unqualified, did not include references to any matters to which the auditor drew attention to by way of emphasis without qualifying the opinion and did not contain a statement under section 498 of the Companies Act 2006.

Dewhurst plc has elected to prepare its consolidated and company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("EU") (IFRS) from 1 October 2005.  The group and company financial statements have been prepared in accordance with those parts of the Companies Act 2006 that are applicable to companies adopting IFRS. The company is registered and incorporated in the United Kingdom; and quoted on AIM.

It is expected that the audited Report and Accounts for the year ended 30 September 2010 will be sent to shareholders and will also be available on the Company's website www.dewhurst.co.uk  on 22 December 2010.

 

 

END

 

 

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