Interim Results

S & U PLC 16 September 1999 S & U PLC - INTERIM RESULTS HALF YEAR PROFITS £2,514,000 (1998 £2,695,000, restated), INCLUDING START UP COSTS OF NEW SUBSIDIARY, ON TURNOVER OF £31,197,000 (£30,415,000). NEW SUBSIDIARY ADVANTAGE FINANCE LTD FORMED TO PROVIDE HIRE- PURCHASE FINANCE FOR MOTOR VEHICLES IN THE SUB-PRIME MARKET. 'HIGH EXPECTATIONS OF THIS EXCITING DEVELOPMENT - INVESTMENT IN FUTURE ENHANCED PROFITABILITY' CHAIRMAN'S INTERIM STATEMENT Trading profits for the six months ended 31 July 1999 are £2,514,000, which includes a loss of £107,000 from Advantage Finance Ltd., the new start-up subsidiary, as against £2,695,000 last year. Sales for the period are £31,197,000 compared to £30,415,000 for the comparative period last year. Last Year's comparative figures have been restated in line with the changes in recognition of deferred revenue detailed in the annual report. In this first half of the year business in the midlands and south of the country was significantly up on the comparative period. The north-west showed a reasonable improvement, but the north-east was unacceptable. Some of that is due to the run on from management problems in the area mentioned last year, but part is due to the lower economic activity in that region. Costs have increased but I am pleased to say that these are mainly to fund expansion and should be seen as investments in the future. One highly significant investment in the future made during the period under review is the establishment of a new wholly-owned subsidiary company, Advantage Finance Limited. Formed round a team of people experienced in the field, Advantage is providing hire-purchase finance for motor vehicles in the sub-prime market. Advantage was incorporated in mid May and commenced trading in July. We have justifiably high expectations of this exciting development, which is complementary to the mainstream business. The Interim dividend for the period of 5p per ordinary share is the same as this time last year. This will be paid on 12th November 1999 to ordinary shareholders on the register at 15th October. In the second half of the year we expect that the gradual improvement in turnover that we have seen since May will continue. Whilst we will see increased turnover, the profits will be held down by the budgeted initial investment costs in the new subsidiary. Because of this investment in future enhanced profitability, we look forward to the future with enthusiasm and confidence. Derek M Coombs Chairman Enquiries: (1:00 - 5:30pm) Derek Coombs Anthony Coombs Chairman Managing Director Tel: 0171-352 6709 Tel: 0121- 7057777 MANAGING DIRECTOR'S STATEMENT Although first half trading results are broadly the same as last year, they reflect an important period of work when the foundations for your company's future expansion have been laid. Management changes have been, and continue to be, made particularly at our North Eastern subsidiary where results since the half-year indicate a rather more encouraging turnaround in profitability. The remainder of our home collected finance business continues to grow both in productivity and profitability and is now producing rates of sales growth which are not only above budget but are the best seen for more than a decade. Meanwhile the first half has seen the further rationalisation of our loan range, a simplification of paperwork and an important improvement in gross margins. We have seen a small but significant increase in our customer base. This trend will continue and be strengthened by a better targeted acquisition strategy. The quality of our book debt remains high and has improved slightly on last year. In particular, in apparent contrast to recent trends in our industry our bad debt experience remains consistent and set to meet our budgets for the full year. Our hosiery manufacturing subsidiary, A E Holt, has shown a more encouraging turnaround both in moving from loss to profit in the first half and in expanding sales whilst maintaining very tight cost control. Its niche market, making women's hosiery for export to Northern Europe looks both stable and capable of growth. Although the first half results for our Group only partially reflect it, I am confident that the groundwork laid over the past six months and reflected in our current buoyant trading will lead to satisfactory growth in both profitability and shareholder value. Year 2000 The 'Year 2000' problem or ' millennium bug' refers to the risk of business being affected by the failure of computer controlled systems to cope with the change of date from 1999 to 2000. The computer hardware in use in the business has been kept up to date and all renewed over the past few years. The supplier has assured us that the major business control software suite, which we have been using has no millennium problems. However, as part of our development programme, during the year this system has been fully re-written by the same software house, which has worked with us for the past eighteen years. Parallel runs are due to commence imminently and we will be using the new system well before the end of the calendar year. A careful investigation of other systems has been carried out and no millennium bug problems are expected. The directors do not regard the costs of this exercise as exceptional as it forms part of the normal process of updating the group's equipment and software, and the level of expenditure on the year 2000 issue over and above this normal expenditure is not considered material. Anthony M V Coombs Managing Director CONSOLIDATED PROFIT AND LOSS ACCOUNTS FOR THE SIX MONTHS ENDED 31ST JULY, 1999 Six months Six months Financial Year ended ended ended 31.7.99 31.7.98 31.1.99 (Restated) Note £000's £000's £000's Turnover 3 31,197 30,415 64,833 ===== ===== ====== Group operating profit 3 2,648 2,790 6,066 Net interest payable (134) (95) (214) Profit on ordinary activities before taxation 2,514 2,695 5,852 Tax on profit on ordinary activities (762) (827) (1,796) _____ _____ _____ Profit on ordinary activities after taxation being profit for the financial period 1,752 1,868 4,056 Preference dividends paid On 4.2% cumulative shares. (4) (4) (8) On 31.5% cumulative shares. (71) (71) (142) _____ _____ ____ Profit available for appropriation 1,677 1,793 3,906 Dividend on ordinary shares (587) (587) (2,348) _____ _____ _____ Retained profit for the financial period 1,090 1,206 1,558 ===== ===== ===== Earnings per ordinary share 4 14.3p 15.3p 33.3p ===== ===== ===== Dividends per ordinary share 5.0p 5.0p 20.0p ===== ===== ===== All activities derive from continuing operations. CONSOLIDATED BALANCE SHEETS 31ST JULY, 1999 31.7.99 31.7.98 31.1.99 Note £000's £000's £000's Fixed assets Tangible assets 3,014 2,915 2,891 ===== ===== ===== Current assets Amounts receivable from customers 30,512 27,856 30,629 Stocks 439 596 422 Debtors 851 569 671 Cash at bank and in hand 1 1 1 ------- ------ ------- 31,803 29,022 31,723 Creditors: amounts falling due within one year (7,554) (6,672) (8,441) ------- ------- ------- Net current assets 24,249 22,350 23,282 -------- -------- -------- Total net assets 3 27,263 25,265 26,173 ======= ======= ====== Capital and reserves: Called up share capital 2,117 2,117 2,117 Share premium account 2,136 2,136 2,136 Revaluation reserve 631 631 631 Profit and loss account 22,379 20,381 21,289 ______ ______ ______ Total shareholders' funds 27,263 25,265 26,173 ====== ====== ====== Attributable to equity shareholders 26,613 24,615 25,523 Attributable to non-equity shareholders 650 650 650 ------- ------- ------- 27,263 25,265 26,173 ====== ======= ======= These financial statements were approved by the Board of Directors on 10th September 1999. Signed on behalf of the Board of Directors D M Coombs A M V Coombs Directors CONSOLIDATED CASH FLOW STATEMENT FOR SIX MONTHS ENDED 31ST JULY, 1999 Six months Six months Financial year ended ended ended 31.7.99 31.7.98 31.1.99 Note £000's £000's £000's Cash flow from operating activities 5 2,953 3,075 3,933 Returns on investments and servicing of finance (211) (196) (364) Taxation (18) (20) (1,920) Capital expenditure and financial investment (395) (305) (567) Equity dividends paid (1,761) (1,702) (2,289) ------- ------- ------- Increase/(decrease) in cash in the period 568 852 (1,207) ======= ====== ====== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Six months Six months Financial year ended ended ended 31.7.99 31.7.98 31.1.99 £000's £000's £000's Increase/(decrease) in cash in the period 568 852 (1,207) ------- ------ ------- Movement in net funds in the period 568 852 (1,207) Net debt at start of period (4,721) (3,514) (3,514) ------- ------- ------- Net debt at end of period (4,153) (2,662) (4,721) ====== ====== ====== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months ended 31st July, 1999 Six months Six months Financial Year ended ended ended 31.7.99 31.7.98 31.1.99 (Restated) £000's £000's £000's Profit for the financial period attributable to the shareholders 1,752 1,868 4,056 ------ ------ ------ 1,752 1,868 4,056 ====== ====== ====== Note of prior period adjustment Total recognised gains and losses relating to the period (as above) 1,752 1,868 4,056 Prior period adjustment (Note 2) - (1,592) (1,592) _____ ______ ______ Total gains and losses recognised since the last annual report 1,752 276 2,464 ====== ====== ====== NOTES TO THE INTERIM STATEMENTS 1. ACCOUNTING POLICIES The financial information within the interim report has been prepared in accordance with applicable accounting standards. Since the preparation of the previous financial statements, the group has adopted the recommendations set out in Financial Reporting Standard ('FRS') 12. There is no effect on the current and prior periods from adopting the new accounting policy. 2. PRIOR YEAR ADJUSTMENTS At 31 January 1999, the directors reviewed the accounting policies used in the preparation of the financial statements and the preparation of information and identified several adjustments which were made to provide greater transparency or to ensure compliance with accounting standards The interim statement at 31 July 1998 did not include a consolidated balance sheet, consolidated cash flow statement, or consolidated statement of total recognised gains and losses. As a result, comparatives have been restated at 31 July 1998 for the consolidated profit and loss account only. Apart from those noted below, prior year adjustments as stated in the previous financial statements do not affect the consolidated profit and loss account at 31 July 1998. DEFERRED REVENUE The calculation of deferred revenue was revised to spread the income from consumer credit agreements over the term of the agreement. Previously a proportion of profit on such agreements was taken on their inception. The prior period adjustment gave rise to a net cumulative reduction in group reserves of £1,592,000. The comparative figures for the period to 31 July 1998 have been restated in accordance with the new method, resulting in an increase in consolidated turnover and profit before tax of £605,000 and an increase in group profit for the period of £605,000. DISCLOSURES The amount provided for doubtful debt was deducted before group operating profit. This amount was included in turnover in the 1998 interim statement. The 1998 consolidated profit and loss account has been restated for this change which has no impact on profit before tax. 3. ANALYSES OF TURNOVER, OPERATING PROFIT/(LOSS) AND NET ASSETS/(LIABILITIES) All operations are situated in the United Kingdom. Analyses by class of business of turnover, operating profit/(loss) and net assets/(liabilities) are stated below. TURNOVER Six months Six months Financial Year ended ended ended 31.7.99 31.7.98 31.1.99 (Restated) £000's £000's £000's Class of business Consumer credit,rentals and other retail trading 30,440 29,882 63,745 Manufacturing 662 533 1,088 ------- ------- ------ 31,102 30,415 64,833 Motor car finance (new venture) 95 - - ------- ------- ------- 31,197 30,415 64,833 ======= ======= ====== OPERATING PROFIT/(LOSS) Six months Six months Financial year ended ended ended 31.7.99 31.7.98 31.1.99 (Restated) £000's £000's £000's Class of business Consumer credit, rentals and other retail trading 2,716 2,805 6,159 Manufacturing 37 (15) (93) ------ ------ ------ 2,753 2,790 6,066 Motor car finance (new venture) (105) - - ----- ----- ----- 2,648 2,790 6,066 ===== ===== ===== NET ASSETS/(LIABILITIES) Six months Six months Financial year ended ended ended 31.7.99 31.7.98 31.1.99 £000's £000's £000's Class of business Consumer credit, rentals and other retail trading 26,935 24,961 25,964 Manufacturing 403 304 209 ------ ------ ------ 27,338 25,265 26,173 Motor car finance (new venture) (75) - - ------ ------ ------ 27,263 25,265 26,173 ====== ====== ====== 4. EARNINGS PER ORDINARY SHARE The calculation of earnings per Ordinary share is based on profit after tax of £1,752,000 (for the period ended 31 July 1998 - £1,868,000 (restated), and the year ended 31 January 1999 - £4,056,000) from which is deducted Preference dividends of £75,000 (for the period ended 31 July 1998 - £75,000, and the year ended 31 January 1999 - £150,000) giving earnings of £1,677,000 (for the period ended 31 July 1998 - £1,793,000 (restated) and the year ended 31 January 1999 - £3,906,000). The number of shares used in the calculation is the average number of shares in issue during the year of 11,737,228 (for the period ended 31 July 1998 and the year ended 31 January 1999 -11,737,228). Diluted earnings per share is the same as basic earnings per share. 5. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES Six months Six months Financial year ended ended ended 31.7.99 31.7.98 31.1.99 (Restated) £000's £000's £000's Operating profit 2,648 2,790 6,066 Depreciation 260 277 548 Loss/(profit) on sale of fixed assets 12 (5) 10 (Increase)/decrease in stocks (17) (144) 30 Decrease/(increase) in amounts receivable from customers 117 32 (2,741) (Increase)/decrease in debtors (180) 612 160 Increase/(decrease) in creditors 113 (487) (140) ------ ------ ------ operating activities 2,953 3,075 3,933 ====== ===== ===== 6. INTERIM REPORT In accordance with the Companies Act 1985, the abridged figures in respect of the financial year ended 31 January 1999 are not full accounts. Full group accounts for that period have been delivered to the Registrar of Companies with an unqualified audit report. Copies of this Interim Report are being posted to all shareholders and will be made available to the public at the Company's registered office at Royal House, Prince's Gate, Solihull B91 3QQ.

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