Preliminary Results

RNS Number : 5350Y

Dewhurst PLC

02 December 2014

 



Dewhurst PLC

("Dewhurst" or the "Group")

Preliminary Results for the year ended 30 September 2014

Chairman's Statement

Results

I am delighted to report that we have bounced back from last year's disappointing results to achieve our second best figures for sales and profits and a record for earnings per share. Sales were up 7% to £46.6 million (2013: £43.7 million), operating profit before amortisation of acquired intangibles was £5.5 million (2013: £4.1 million before goodwill write down) and profit before tax was £4.8 million (2013: £2.2 million) up 117%. All current and prior year profit figures have been reduced this year by up to £0.4 million due to a change in the standard for reporting pension costs.

The growth in sales was predominantly in the UK with all three UK companies recording double digit sales increases. We also benefited from a good first full year of sales from last year's acquisition of Dual Engraving in Perth, Western Australia. All but one of the overseas operations registered sales growth in local currency, but the strengthening pound somewhat reduced the positive impact of the local performance.

It has been a demanding year with periodic peaks in sales that have challenged our production capabilities to the full. However, the sales and operations teams have risen to the challenge and have largely managed customers' requirements. Our employees have shown dedication and skill in achieving our objectives and I would like to thank them for their efforts this year.

We are again proposing a substantial increase in the dividend, to move towards our target of a maximum 4 times cover on average.  This year's proposal is an increase of 1p, giving a full year dividend of 9.00p (2013: 8.00p) which is 12.5% up on last year.

Operations and People

We have not been looking for acquisition opportunities this year. Instead our focus has been on trying to improve the effectiveness of the operations within the Group. As part of those efforts we have been developing our range of metrics and working to ensure there is a clearer link between our business strategies and our employees' individual objectives and contributions. We have also tried to improve our communication of these issues using a variety of different means.

Two new general managers have taken up their positions during the year: Dan Robinson took over at TMP in April and Mike Canzoneri started at ERM in September. We welcome them to the Group and wish them success in their roles with us.

I am pleased to report that, after a lull in recent years, we have taken on several apprentices and trainees in the last year.

Product Investment

We have launched a new version of our solar powered traffic bollard and an enhanced security ATM keypad during the year. We have also been putting considerable investment into products that will be launched in the near future. A lot of work is going on behind the scenes to develop and test these new products. In recent years we have increased our investment in quality measurement tools and testing facilities to improve the reliability of products at launch.

Outlook

Currently demand remains stable, but news on the economy is variable and volatile. From our perspective, Australia seems more buoyant than last year and there are some reasonable projects scheduled for the coming year. The signs in the UK and North America are also reasonably positive, whilst elsewhere the picture is less certain. However, the UK may struggle to maintain its positive momentum if the Eurozone returns to recession and there is also the political uncertainty of the coming general election.

We will continue to aim to generate improvements from within our operations, but the persistent strength of the pound is likely to reduce the benefit of overseas sales.

Richard Dewhurst

Chairman

Strategic Report

Business Review

The company and Group principal activity in the course of the year continued to be the manufacture of electrical components and control equipment for industrial and commercial capital goods. The Group maintained its position as a specialist supplier of equipment to lift, transport and keypad sectors. A business review of the Group's operations is dealt with below in operating highlights and in the Chairman's Statement.

Principal Risks and Uncertainties

The board is informed at every meeting of the principal risks and uncertainties across the Group which could have a material impact on the Group's long and short term performance and action plans to mitigate these risks. The Group's risk assessment process is designed to identify, manage and mitigate business risks. Business and operational risks are referred to in the business review. Financial risks, being currency and credit risk are covered within the financial review.

Key Performance Indicators

The directors believe that the key financial performance indicators relevant to the Group are earnings per share, adjusted operating profit, profit before tax and return on equity which are stated in the five year review. The key non-financial performance indicators relevant to the Group are quality measures and on-time deliveries to our customers.

Operating Highlights

This year was a pleasing improvement on the previous year. Sales at the majority of Group Companies have grown which has generated an increase in Group profit figures.

In line with the Chairman, I would like to thank our staff across all Group Companies for their hard work and for the progress we have made together.

UNITED KINGDOM

Dewhurst UK Manufacturing

It was encouraging that after a difficult period last year, sales recovered strongly in 2014, particularly for our lift products. The improvement was evenly spread across domestic and overseas sales.

In the UK we have focused on building our sales of complete fixtures. Rather than just selling loose components, we are aiming to sell complete signalisation systems. With these we are able to add value in terms of additional components and complete some work in the factory, such as panel wiring, that would normally be carried out on site.  

The market interest in our UniBlade product range has led us to significantly extend the number of variants to suit different markets and installations. As this type of product is normally specified at an early stage in the design process, it takes some time for orders to come to fruition. However it is pleasing to see our new UniBlade already installed in such prestigious buildings as 122 Leadenhall Street (the "Cheesegrater") and the new Queens Terminal (T2) at Heathrow Airport.

We have continued to work on improving processes throughout the year, with particular focus on waste.  We have extensive moulding facilities at Feltham and we were aware that an unacceptable proportion of the moulding material we purchase was ending up as waste. We implemented a project to significantly reduce this and through improved planning, changes to tooling and product rationalisation we have been able to reduce this waste.

We believe the improvements we have seen on the sales side will be sustained and we have now increased our investment in young people with the addition of two apprentices. We have recruited one into our Design Team and the other in our Customer Support and Programming Team. With the apprentices we have previously taken on in manufacturing and accounts we now have a group of four.   Although this is not a large number, it is an appropriate rate of growth for our business at this time.

Thames Valley Controls

Thames Valley Controls enjoyed a very busy year. After many years of reduced Local Authority spending, it seems that purse strings have been loosened for lifts in the last two years. TVC have benefitted from this, both with their controller products and lift monitoring systems. Our online monitoring system, CMS Anywhere, has proven to be just what the market needs. Lift operations can be simply checked, either on the move or from the office. This is essential for today's housing and facilities managers who are required to deliver weekly and monthly KPIs to residents on lift performance.   As the demands on these managers become more and more onerous, we believe the opportunities for our monitoring products will grow. During the year we also released a new Remote Indicator Display (RID), which enables facilities managers to display a message on a remote screen simply by sending it a SMS text message. This means residents can be easily informed about building repairs or maintenance works.

On controller development, a great deal of time and effort has gone in to perfecting our Ethos 2 controller to ensure market leading functionality.

Once again we have been able to start the year with a strong order book that should continue through the coming year.

TMP

We successfully completed our search for a new Managing Director at TMP when Dan Robinson joined in April. He has since carried out a strategic business review that has tailored the business to better meet medium term needs.

Regulatory requirements in the UK, with regard to road signage, have gone through some significant changes in the past twelve months. TMP were required to make some design changes to its core product to ensure the new codes were met. This resulted in the launch of a new solar powered bollard, Evo-S, with new front and wider side profiles, as well as increased light output. Evo-S is fully compliant with the latest code requirements and carries an all-important CE mark.   Since its launch mid-way through the year, it has been very well received and has enjoyed good sales.

A key element of reboundable, reflective bollards is the base: the component which allows the bollard to flex and then return to its original position. Historically we have used a spring mechanism that was developed and supplied by a third party. As price competition has grown and since this is such an important element of the bollard, we made the decision to develop our own base. Over the last two years we have carried out extensive design work and testing on our own base design.   From 2015, the bollard products we manufacture and supply will all use the new TMP base which offers improved impact performance at lower cost.

It does seem as though spending on road infrastructure will gradually increase over the coming years, so we believe there are still significant opportunities to grow the business at TMP. We have added additional design resource to facilitate the flow of new products.

EUROPE

Dewhurst Hungary

In this business we are always under pressure on margins and this year was no exception. Sales grew marginally and we were able to implement some overhead reductions, which allowed us to improve on last year's performance.

During the year Dewhurst Hungary worked with colleagues in the UK to develop a new design of keypad for one of our key customers. The new keypad meets the latest Payment Card Industry's Security Standards, which are extremely stringent. The upgraded product was developed on tight timescales but was delivered to market absolutely in line with our customers' requirements.

The test laboratory in Hungary is now fully commissioned and we are carrying out on-going life tests of all keypad products that we manufacture in Hungary.

We continue to focus strongly on quality to ensure that the number of rejects, measured in parts rejected per million remains below our customers' target. To meet such a stringent target requires a great deal of hard work and attention to detail and the team in Hungary have worked well to achieve these targets. It is our intention to apply elements of this best practice in quality more widely across Group Companies.

NORTH AMERICA

Dupar Controls

The North American economy continued to be reasonably buoyant and Dupar Controls took advantage of this, growing sales again this year.

Dupar sales are predominantly in Canada but the business has a Chicago sales office to cover the mid-western United States. After a few lean years, this office has grown sales strongly over the last twelve months and we will be targeting to continue to extend our customer base in this area over the coming years.

The increased sales at Dupar have intensified pressure on our production facilities in Ontario. In order to boost capacity we have invested in a further CNC engraving machine and also added a second evening shift. This allowed us to meet the additional demand and ensure that lead times were not unduly extended.

Elevator Research & Manufacturing (ERM)

At the start of the year we changed the management structure in North America to foster harmonisation of standards between Dupar and ERM. We promoted George Foleanu, the General Manager of Dupar Controls, to Vice President of North American Operations.

Our aim is to provide a more consistent offering from Dupar and ERM, so whether a customer purchases a set of fixtures from either company, they will get the same experience, in terms of service, drawings, product design and quality. To achieve this ambition we needed one person with the correct level of experience and expertise based in North America to be responsible for both Dupar Controls and ERM.   George is the ideal person for this role.

We have also had a change of General Manager at ERM and we welcome Mike Canzoneri to the team.

Like Dupar, ERM benefitted from the improved economic situation in the U.S. and sales rose. Through the second half of the year, we saw some return for the additional investment we have put in to ERM on the production side. The percentage of deliveries shipped on time improved significantly and the backlog was eradicated. The challenge now is to ensure this higher level of service is continued through next year.

AUSTRALIA & ASIA

Australian Lift Components (ALC)

This was a challenging year for ALC. Merging two companies is always difficult and it took longer for us to iron out all the issues as we merged JAS into ALC. These distractions coupled with a reduction in sales in the first half of the year led to a disappointing performance. It was however a year of two halves, with their performance dramatically improving in the second half of the year.  The team at ALC have now set the business up positively for the coming year.

Lift Material

Lift Material grew sales throughout the year. The EHC product line, which we believed would be one of our core lines, performed very strongly. We benefitted not only from good sales of handrails but also encouraging sales of a wide range of escalator spare parts.

We have invested in additional training of our staff this year on the wide range of products we distribute. Customers often have the opportunity to buy products direct from the manufacturer but they choose to buy from us at Lift Material because of the local technical and installation support that we can offer them.

Dual Engraving

Dual's business in Western Australia continued to be busy throughout the year and we had a number of major projects in Perth where we supplied custom lift interiors.

The plan for Perth includes further development of the city centre, so there is certainly opportunity to grow the business over the medium term. To that end we are investing more resource into administration and manufacturing. This will ensure that we are able to boost our capacity to meet the available demand.

Dewhurst Hong Kong

Dewhurst Hong Kong has been operational for approximately four years and has built up an excellent reputation for its products and services over this time.

The market in Hong Kong remains quite buoyant. We predominantly sell into the local housing and infrastructure sectors. There is currently a great deal of infrastructure investment in Hong Kong, particularly for the railways, with a number of extensions to the Mass Transit Rail System and the new high-speed rail link to China.

Having previously only sold Dewhurst products, this year Dewhurst Hong Kong took on the distribution of Avire safety edges for lifts. Initial sales have been very encouraging.

Approved and signed on behalf of the board

David Dewhurst

Group Managing Director

1 December 2014

Financial Review

Trading results

Dewhurst sales figures were the second highest we have reported and much improved on last year. We achieved stronger sales across all sectors but the main growth areas were the UK lift and transport sectors. Whilst the UK still faced very tough competition both sectors saw Local Authorities return to spending, particularly for products that help them achieve improvements in their key performance indicators. Overall revenue increased by 6.7% from £43.7 million to £46.6 million.

Having restructured parts of the business last year and looked hard at overheads we were well placed to control these costs and benefit as revenue returned. As a result operating profit before goodwill write down and acquired intangible amortisation increased by 34.1% from £4.1 million to £5.5 million and in percentage terms increased from 9.3% to 11.7% of revenue.

Strong cash position

Cash flow was once again very good with £3.9 million of cash being generated from operations. Despite pension contributions of £1.4 million, increased dividends as well as a small share repurchase the strong trading performance meant the group ended the year with cash and short-term deposits at £12.9 million, up £2.4 million from £10.5 million in 2013. This is aligned with the Group's philosophy of maintaining a strong cash position together with minimal borrowing.

We started and finished the year with no borrowing or bank overdraft facility.

Pension scheme deficit

This year has seen the scheme deficit increase by £1.7 million from £10.5 million to £12.2 million. The scheme was closed to future accrual in 2010 and the company has since paid in £1.4 million annually to reduce the deficit. As previously reported the movement in the liability discount rate, which is  used to calculate the net present value of future liabilities and is traditionally based upon 15 year AA bond yields, tends to have the biggest impact on the scheme deficit and this year is no different. With a move back down from 4.3% to 3.8% this one assumption change had approximately a £3.6 million negative impact on the scheme position. 

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.

Pension scheme reporting change

In addition this year, the rule relating to the calculation of net costs on the pension scheme that are reported through the consolidated income statement finance cost section has changed. No longer are companies required to report the expected return on pension scheme assets based upon the long-term rate of return expected for equities, bonds, etc. but instead are required to use the same rate of return for all assets as defined by the liability discount rate.  This change has no impact on the balance sheet deficit but increases the finance costs reported through the consolidated income statement by £0.4 million as well as decreases the actuarial gains / (losses) on the defined benefit pension scheme reported through the consolidated statement of recognised income and expense. We have also been required by IAS 19 (revised) to adjust the comparatives for earlier years and the increase in finance costs is as follows - 2013: £0.4 million, 2012: £0.1 million, 2011: £0.3 million and 2010: £0.2 million.

Amortisation of acquired intangibles

The A$1.6 million acquired intangibles arising from Dual Engraving in 2013 relate to the customer list and key relationships present at date of acquisition; these are being written off over their deemed useful economic life of 3 years. The amortisation will continue until February 2016 when the assets will be fully written off.

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 over half of profit before tax earned and held in foreign currencies, the Group continues to hedge internally where possible and to consider the need to use derivatives in the form of foreign exchange contracts to manage its currency risk. As discussed last year, to reduce the impact of currency risk the Group successfully switched Dewhurst (Hungary) Kft's local reporting currency from Hungarian Forints to Pounds Sterling from 1 October 2013 to match its functional currency. Whilst Dewhurst (Hungary) Kft still operates in US Dollars as well as Pounds Sterling, this change has seen a marked reduction in the impact of foreign currency fluctuation in 2014.

Dividends

Dividends are accounted for when paid or approved by shareholders, and not when proposed, therefore the proposed final dividend for 2014 has not been accrued at the balance sheet date. The total dividend for 2014 of 9.00p per share is 13% up on 2013 and is covered 5.2 times by earnings. Total equity improved from £21.9 million to £22.4 million.

There was a reduction in the number of allotted shares during the year, and these have been fully reported in the directors' report

Jared Sinclair

Finance Director

1 December 2014

For further details please contact:

Dewhurst Plc	Tel: [phone]
Richard Dewhurst, Chairman Jared Sinclair, Finance Director
Cantor Fitzgerald Europe Ltd (Nominated Adviser)	Tel: [phone]
Rick Thompson / David Foreman (Corporate Finance)
Paul Jewell (Corporate Broking)

 

 

Consolidated income statement

For the year ended 30 September 2014
						2014		2013^
Continuing operations						£(000)		£(000)
Revenue						46,616		43,698
Operating costs						(41,437)		(41,104)
Adjusted operating profit*						5,475		4,084
Goodwill write down						-		(1,266)
Amortisation of acquired intangibles						(296)		(224)
Operating profit						5,179		2,594
Finance income						85		100
Finance costs						(452)		(475)
Profit before taxation						4,812		2,219
Taxation						(866)		(1,307)
Profit for the financial year						3,946		912
Attributable to:
Equity shareholders of the company						3,930		960
Non-controlling interests						16		(48)
						3,946		912
Basic and diluted earnings per share							46.22p		11.28p

* Operating profit before goodwill write down and amortisation of acquired intangibles

 

Consolidated statement of recognised income and expense

				2014	2013^
				£(000)	£(000)
Net income/(expense) recognised directly in equity:
Actuarial gains/(losses) on the defined benefit pension scheme				(2,570)	444
Exchange differences on translation of foreign operations				(669)	(947)
Tax on items taken directly to equity				648	184
Net income/(expense) recognised directly in equity in the year				(2,591)	(319)
Profit for the financial year				3,946	912
Total recognised income and expense for the year				1,355	593
Attributable to:
Equity shareholders of the company				1,379	717
Non-controlling interests				(24)	(124)
				1,355	593

^ Restated. For more information see pension scheme reporting change detailed in the Financial Review

 

 

 

Consolidated balance sheet

At 30 September 2014
				2014	2013
				£(000)	£(000)
Non-current assets
Goodwill				3,129	3,173
Other intangibles				463	836
Property, plant and equipment				8,665	9,240
Deferred tax asset				2,086	1,709
				14,343	14,958
Current assets
Inventories				4,501	4,557
Trade and other receivables				9,199	8,556
Current tax assets				26	20
Cash and cash equivalents				12,928	10,506
				26,654	23,639
Total assets				40,997	38,597
Current liabilities
Trade and other payables				5,398	5,445
Short-term provisions				959	752
				6,357	6,197
Non-current liabilities
Retirement benefit obligation				12,192	10,530
Total liabilities				18,549	16,727
Net assets				22,448	21,870
Equity
Share capital				847	851
Share premium account				157	157
Capital redemption reserve				290	286
Translation reserve				929	1,425
Retained earnings				19,590	18,540
Total attributable to equity shareholders of the company				21,813	21,259
Non-controlling interests				635	611
Total equity				22,448	21,870

The financial statements were approved by the board of directors and authorised for issue on 1 December 2014 and were signed on its behalf by:

Richard Dewhurst  Chairman

Jared Sinclair  Finance Director

Company Registration Number: 160314

Consolidated cash flow statement

For the year ended 30 September 2014
				2014 £(000)	2013 £(000)
Cash flows from operating activities
Operating profit				5,179	2,594
Goodwill write down				-	1,266
Depreciation and amortisation				1,194	1,198
Additional contributions to pension scheme				(1,360)	(1,356)
Exchange adjustments				(57)	35
(Profit)/loss on disposal of property, plant and equipment				(21)	75
				4,935	3,812
(Increase)/decrease in inventories				56	415
(Increase)/decrease in trade and other receivables				(643)	(135)
Increase/(decrease) in trade and other payables				(47)	(308)
Increase/(decrease) in provisions				207	30
Cash generated from operations				4,508	3,814
Interest paid				-	(1)
Tax paid				(605)	(869)
Net cash from operating activities				3,903	2,944
Cash flows from investing activities
Acquisition of business and assets				(112)	(1,716)
Proceeds from sale of property, plant and equipment				47	22
Purchase of property, plant and equipment				(408)	(587)
Development costs capitalised				(70)	(112)
Interest received				85	100
Net cash generated from/(used in) investing activities				(458)	(2,293)
Cash flows from financing activities
Dividends paid				(720)	(1,023)
Purchase of own shares				(104)	-
Net cash used in financing activities				(824)	(1,023)
Net increase/(decrease) in cash and cash equivalents				2,621	(372)
Cash and cash equivalents at beginning of year				10,506	11,101
Exchange adjustments on cash and cash equivalents				(199)	(223)
Cash and cash equivalents at end of year				12,928	10,506

 

Notes

 

1. AGM, results and dividends

The trading profit for the year, after taxation, amounted to £3.9 million (2013: £0.9 million).

A final dividend on the Ordinary and 'A' non-voting ordinary shares of 6.20p per share (2013: 5.66p) for the financial year ended 30 September 2014 will be proposed at the Annual General Meeting (AGM) to be held on 3 February 2015. If approved, this dividend will be paid on 19 February 2015 to members on the register at 16 January 2015.

An interim dividend of 2.80p per share (2013: 2.34p) was paid on 27 August 2014

 

2. Earnings per share and dividend per share

	2014	2013
Weighted average number of shares	No.	No.
For basic and diluted earnings per share	8,504,298	8,511,398

The calculation of basic and diluted earnings per share is based on the profit for the financial year of £3,930,280 and on 8,504,298 Ordinary 10p and 'A' non-voting ordinary 10p shares, being the weighted average number of shares in issue throughout the financial year.

	2014	2013
Paid dividends per 10p ordinary share	£(000)	£(000)
2013 final paid of 5.66p (2012: 9.68p)	(482)	(824)
2014 interim paid of 2.80p (2013: 2.34p)	(238)	(199)
	(720)	(1,023)

The final proposed dividend is based on 3,309,200 Ordinary 10p shares and 5,165,698 'A' non-voting ordinary 10p shares, being the latest number of shares in issue.  The directors are proposing a final dividend of 6.20p (2013: 5.66p) per share, totalling £525k (2013: £482k).  This dividend has not been accrued at the balance sheet date.

3. Contingent liability

On 13 December 2013 AIG Specialty Insurance Company filed a complaint against Dewhurst (Hungary) Kft claiming $US7 million in respect of a purported product failure of a component supplied to a third party.  Dewhurst (Hungary) Kft believes it has a strong defence and intends to defend the claim with the utmost vigour.

4. Accounting policies

The accounting policies applied to the 2014 accounts have been consistent with 2013 in all manner except as required by IAS19 (revised) where the comparative recalculation and reporting of the expected return on assets on the pension scheme have been adjusted and restated throughout these financial statements.

5. Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2014 or 2013. Statutory accounts for 2013, have been delivered to the Registrar of Companies. The statutory accounts for 2014 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 2014. The auditor has also reported on the 2013 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 prepared its consolidated and company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) 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 2014 will be sent to shareholders and will also be available on the Company's website www.dewhurst.co.uk  on 22 December 2014.

 

END

 

 

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