Final Results

Tandem Group PLC 16 May 2006 TANDEM GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2006 Chairman's statement Turnover was £42,760,000 compared to £52,683,000 last year. The operating profit, after including the trading losses from Pot Black and before exceptional costs of £1,382,000 and goodwill amortisation and impairment of £640,000, was £226,000 compared to £1,725,000 in the prior year. After deducting exceptional costs and goodwill amortisation and impairment the operating loss was £1,796,000. There was a loss before taxation of £2,157,000 compared to a profit last year of £1,179,000. Falcon and Dawes Turnover in the bicycle business, with the well known brands of Falcon, Dawes, Claud Butler, Shogun, British Eagle and Optima, was lower than the previous year as we maintain the policy of withdrawing from low margin business with questionable profitability. Although there are no reliable statistics produced it was generally believed that sales in the U.K. of lower priced bikes in 2005 were down on the previous year in line with the difficult market conditions. Our continuing policy of reducing costs resulted in an increase in profitability. With our reputation for product design and service our customer base continues to grow, from which we should benefit as the retail environment improves. Further sales resources have been added. Production at the Group's manufacturing facilities in the U.K. has been reducing over the last few years and has been concentrating on the higher value bikes. This will cease in the summer of 2006 as production is moved abroad. Overhead savings will be made which, together with a reduction in working capital, should lead to increased profitability. MV Sports MV distributes a range of products featuring high profile brand and character licences including Barbie, Groovy Chick, Bang on the Door Baby, Thomas the Tank Engine, Bob the Builder and a range of football training equipment under the Kickmaster brand. Following a record year to 31 January 2005, turnover for the year to 31 January 2006 was somewhat lower. A significant catalogue shop customer closed. There was increased competition against some of our longer established licences and a challenging retail sector. Sales opportunities with low margins were not pursued. Lower overheads failed to compensate for the reduced turnover. The success of the MV business is down to having the right brands and licences and product innovation. More resources have been placed in these areas. New ranges including Barbie Fairytopia, Barbie Mermaidia, Barbie 12 Dancing Princesses, Fireman Sam and Winx Club have been developed for 2006. Pot Black The management of Pot Black failed to deal with the increased competition from unbranded imports and the changes required following the introduction of new British Standards on outdoor play products' safety regulations. It was decided that, with losses mounting, the Devon operations should be closed. Exceptional costs of £1,382,000 were incurred in closing down the operations of which £410,000 was cash outflow for employee severance payments, lease terminations and removal costs. The balance of £972,000 was in respect of writing down the book value of plant and machinery, stock and debtors to their recoverable amount. In view of the losses, a provision of £434,000 has been made against the goodwill of Pot Black in accordance with Financial Reporting Standard 11. The profitable products within the Pot Black range are being continued and further developed to meet market requirements to contribute a useful margin within the MV business. Ben Sayers Although Ben Sayers is our smallest business, the brand is one of the oldest in golf, having been established in 1876. We have withdrawn from low margin business and turnover was slightly down on the previous year but with a much improved customer base. The results were better than last year but still not up to the potential. New systems have been put in place to ensure improved product availability and customer service. The new M Series range for 2006 has received good trade and consumer press coverage and has been enthusiastically received by retailers. Pensions As required by Financial Reporting Standard 17 (FRS17) we have included the actuarial deficits on the Group's pension schemes' defined benefit sections on the balance sheet for the first time. We have restated the previous year's figures accordingly. The Group operates two pension schemes that have defined benefit liabilities. There is only one active member receiving defined benefit pension accruals and new members of both schemes can join the defined contribution sections, where no deficit can be incurred. In accordance with the advice from the schemes' actuaries, payments totalling £188,000 per annum are currently being made to reduce the deficit of the schemes. The schemes' actuaries calculate the deficit using guidelines that the government and Institute of Actuaries agree could be inappropriate and which consequently are being withdrawn. Nevertheless we are obliged to make these payments which deplete funds available for investment to grow the business. The two schemes had funds invested totalling £10.6 million at 31 January 2006 compared with £9.2 million at 31 January 2005. Investment income and growth during the year was £1.8 million. Pensions and transfer payments paid out totalled £443,000, representing 4.2% of the funds invested at 31 January 2006. Summary The losses at Pot Black and the cost of stopping them are now behind us. We have reviewed our forecasting procedures to ensure that any loss making activities are swiftly dealt with so that in the future we do not incur similar problems such as those experienced at Pot Black. Reporting controls, particularly those relating to stock, have been improved. Whilst these events have clearly had an adverse effect on our balance sheet, careful control of working capital has increased net funds. Current trading Trading in the first quarter of the current financial year is in line with budget on a reduced turnover following the withdrawal from low margin or unprofitable business. As in previous years our profits will be concentrated in the second half of the financial year. Your board and the management in the businesses are fully aware of the need to return to the level of progress that the Group made in previous years. Graham Waldron Chairman 16 May 2006 Consolidated profit and loss account Year ended 31 January 2006 Year ended Before goodwill Goodwill After goodwill 31 January amortisation/ amortisation/ amortisation/ 2005 impairment and impairment impairment and Restated exceptional and exceptional items exceptional items items £'000 £'000 £'000 £'000 Turnover 42,760 - 42,760 52,683 Cost of sales (30,819) - (30,819) (35,794) -------- -------- -------- -------- Gross profit 11,941 - 11,941 16,889 -------- -------- -------- -------- Net operating expenses (11,715) (1,382) (13,097) (15,155) Goodwill amortisation and - (640) (640) (9) impairment -------- -------- -------- -------- Total operating expenses (11,715) (2,022) (13,737) (15,164) -------- -------- -------- -------- Operating profit/(loss) 226 (2,022) (1,796) 1,725 -------- -------- Finance charges (361) (546) -------- -------- (Loss)/profit on ordinary activities before taxation (2,157) 1,179 Tax charge on (loss)/profit on ordinary activities (152) (74) -------- -------- (Loss)/profit on ordinary activities after taxation transferred(from)/to reserves (2,309) 1,105 -------- -------- (Loss)/earnings per share Pence Pence Basic (6.14) 2.94 --------- -------- Diluted (6.14) 2.89 --------- -------- Consolidated balance sheet At 31 January 2006 2005 2006 Restated £'000 £'000 Fixed assets Intangible assets 2,677 3,317 Tangible assets 563 919 -------- -------- 3,240 4,236 -------- -------- Current assets Stocks 5,664 8,494 Debtors 5,527 7,731 Cash at bank and in hand 2,426 2,855 -------- -------- 13,617 19,080 Creditors - amounts falling due within one year (11,076) (15,138) -------- -------- Net current assets 2,541 3,942 -------- -------- Net assets before pension schemes' deficits 5,781 8,178 Pension schemes' deficits (2,839) (2,055) -------- -------- Net assets after pension schemes' deficits 2,942 6,123 -------- -------- Capital and reserves Called up share capital 1,503 1,503 Share premium account 5,258 5,258 Merger reserve 1,036 1,036 Other reserves 1,426 1,426 Profit and loss account (6,281) (3,100) -------- -------- Equity shareholders' funds 2,942 6,123 -------- -------- Consolidated cash flow statement Year ended 31 January 2006 Cash flow Notes 2006 2005 Restated £'000 £'000 Net cash inflow from operating activities 1 1,046 2,566 ------- ------- Returns on investments and servicing of finance Interest paid (358) (532) Interest element of hire purchase rentals (3) (14) ------- ------- Net cash outflow from returns on investments and servicing of finance (361) (546) ------- ------- Taxation (43) (4) ------- ------- Capital expenditure Purchase of tangible fixed assets (119) (141) Sale of tangible fixed assets 49 77 ------- ------- Net cash outflow from capital expenditure (70) (64) ------- ------- Net cash inflow before financing 572 1,952 ------- ------- Financing Purchase of subsidiary companies' preference shares - (163) Repayments of amounts borrowed (980) (800) Capital element of hire purchase rentals (21) (99) ------- ------- Net cash outflow from financing (1,001) (1,062) ------- ------- (Decrease)/increase in cash 2 & 3 (429) 890 ------- ------- Notes to consolidated cash flow statement 1. Reconciliation of operating profit to net cash inflow from operating activities 2006 2005 £'000 £'000 Operating (loss)/profit (1,796) 1,725 Depreciation charges 307 570 Provision for impairment/amortisation of goodwill 640 206 Negative goodwill released - (197) Loss/(profit) on sale of tangible fixed assets 119 (29) Decrease/(increase) in stocks 2,830 (203) Decrease in debtors 2,095 1,523 Decrease in creditors (3,024) (1,008) Adjustment for pension funding (125) (21) ------- ------- Net cash inflow from operating activities 1,046 2,566 ------- ------- 2. Reconciliation of net cash inflow to movement in net funds 2006 2005 £'000 £'000 (Decrease)/increase in cash (429) 890 Cash to repay finance leases and hire purchase contracts 21 99 Bank loan 900 800 Other loans 80 - ------- ------- Changes in net funds resulting from cash flows 572 1,789 Net funds at 1 February 1,853 64 ------- ------- Net funds at 31 January 2,425 1,853 ------- ------- 3. Analysis of net funds At At 1 February 31 January 2005 Cash flow 2006 £'000 £'000 £'000 Cash at bank and in hand 2,855 (429) 2,426 Bank loan due within 1 year (900) 900 - Other loans (80) 80 - Hire purchase creditors (22) 21 (1) -------- -------- -------- 1,853 572 2,425 -------- -------- -------- Notes to the preliminary results 1. The financial information in this preliminary announcement does not constitute the Group's statutory accounts for the years ended 31 January 2006 or 2005. The financial information for 2005 is derived from the statutory accounts for the year ended 31 January 2005, restated for the adoption of FRS 17, which have been delivered to the Registrar of Companies. The auditors have reported on the accounts for the financial years ended 31 January 2005 and 31 January 2006. Their reports were unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. 2. The statutory accounts for the year ended 31 January 2006 will be delivered to the Registrar of Companies following the Group's Annual General Meeting. 3. The adoption of FRS 17 has required changes in the method of accounting for defined benefit pension schemes. As a result of this change in accounting policy the comparatives have been restated as follows: Pension P&L scheme Reserve deficits £'000 £'000 2005 as previously reported - (1,045) ------- ------- Adoption of FRS 17 at 1 February 2004 (1,832) (1,832) During the year ended 31 January 2005 (223) (223) ------- ------- Adoption of FRS 17 at 31 January 2005 (2,055) (2,055) ------- ------- 2005 restated (2,055) (3,100) ------- ------- The effect of the adoption of FRS 17 on the 2005 profit and loss account is to increase the previously reported operating profit by £35,000 to £1,725,000 and increase the previously reported other finance costs from £nil to £56,000. 4. No dividend on the ordinary shares is being proposed (2005 - £nil). 5. Earnings per share 2006 2005 £'000 £'000 Profit for the year used for basic and diluted earnings per share calculation (2,309) 1,105 ------- -------- Number Number Weighted average number of ordinary shares in issue during the year used for basic and adjusted earnings per share calculation 37,584,412 37,584,412 Weighted average number of shares under option - 1,635,000 Number of ordinary shares that would have to be issued at fair value - (942,926) ------- ------- Weighted average number of ordinary shares in issue during the year used for diluted earnings per share calculation 37,584,412 38,264,486 ------- ------- Earnings per share Pence Pence Basic (6.14) 2.94 Diluted (6.14) 2.89 FRS 14 requires presentation of diluted earnings per share ('EPS') when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that option holders would act irrationally and there are no other diluting future share issues, diluted EPS equals basic EPS. 6. The Annual Report and Accounts will be posted to shareholders shortly. 7. The Annual General Meeting will be held at 11:00 a.m. on 27 June 2006 at Eversheds LLP, 1 Royal Standard Place, Nottingham NG1 6FZ. 16 May 2006 This information is provided by RNS The company news service from the London Stock Exchange

Companies

Tandem Group (TND)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today