Final Results

Tandem Group PLC 22 April 2005 TANDEM GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2005 Chairman's statement Profit before taxation from the Group's activities was £1,200,000 compared to £609,000 last year, on turnover of £52,683,000 (2004 - £56,899,000). Falcon and Dawes We have two bicycle businesses with the brands of Falcon, Dawes, Claud Butler, Shogun, British Eagle and Optima. Manufacturing at the Group's factory in the U.K. concentrates on the higher value quality products for which demand is increasing. Turnover in the bicycle business was lower than the previous year following the withdrawal from low margin business and a worldwide shortage in the first half of the year of components used to manufacture the higher value products. Profitability in 2004 was below the potential and must be improved. We have opportunities to achieve sales growth of the higher value products, improve margins and further reduce our overheads from operational efficiencies. 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. The strength of the brands has enabled MV to increase sales and improve margins, resulting in a very successful year. A strong management team has developed new products whilst controlling overheads and working capital utilisation. Additions to the product range are continually being sought. MV has the capability to take on more turnover and build on its existing base. Pot Black Pot Black was acquired by the Group in September 2000 when over 80% of its turnover came from snooker and pool products, predominantly in the second half of the year. Since acquisition a range of outdoor play products has been developed to increase sales in the first half of the year. It has been a difficult year for Pot Black, particularly on snooker and pool products in the second half of the year, with increased competition from unbranded imports leading to price deflation, reduced sales and margins. A trading loss was incurred in the year at an unacceptable level and this has continued into the current financial year. Changes have been made and a strategic review is taking place to identify the best way to profit from this well known brand in the future. Ben Sayers Although our smallest business, Ben Sayers has good brand awareness in the golf market. Turnover in Ben Sayers declined from the previous year following the cessation of a golf clothing distribution agreement. Despite reduced overheads the results were disappointing. We expect better results from Ben Sayers following changes to the product range and a much wider distribution. Summary Our balance sheet continues to strengthen with net assets increasing to £8,178,000 as at 31 January 2005, compared with £6,551,000 as at 31 January 2004. During the year we were able to purchase all the issued preference share capital in the Group companies held by external shareholders, contributing an additional £749,000 to our Group net assets. A strong and improving balance sheet is necessary for us to continue to further build on our relationships with our worldwide suppliers and strengthens partnerships to our mutual interest. In addition, it is important to build confidence with our customers who need competitively priced products of consistent quality from a reliable supplier. With a strong Tandem Group presence we will do all we can to help our customers prosper. Notwithstanding the profit increase, I should tell you that your Board is disappointed with the overall result. With the actions taken in the last three years, opportunities for substantial sales and profit performance were in place, but in certain areas we failed to take full advantage of our improved position. I am fully aware of the challenging market that we operate in and this calls for a strong performance from all managers and staff. I regret that we fell short of what was possible. Of course we have exceptions and the results from certain areas of our Group exceeded budget. Inevitably we have to improve and changes are being made around our Group with the introduction of new operating standards with clear targets that will demand better performance from all our staff. Your Board is determined to see these changes implemented. With retailers reporting a slow start to the year, it will be a tough time ahead for the managers and staff in our operating businesses. Despite this and the cost of the changes being made, we still expect to have a satisfactory year. Our challenge is to improve our performance, further enhance our balance sheet and be in a position to reward our shareholders. Graham Waldron Chairman 22 April 2005 Consolidated profit and loss account Year ended 31 January 2005 Notes 2005 2004 £'000 £'000 £'000 £'000 Turnover Continuing operations 52,683 56,256 Discontinued operations - 643 -------- -------- 52,683 56,899 Cost of sales 4 (35,794) (40,403) -------- -------- Gross profit 16,889 16,496 Operating expenses 4 (15,190) (15,552) Net goodwill (amortisation)/release (9) 237 -------- -------- Total operating expenses (15,199) (15,315) -------- -------- Operating profit Continuing operations 1,690 979 Discontinued operations - 202 -------- -------- Profit on ordinary activities before interest 1,690 1,181 Net interest payable (490) (572) -------- -------- Profit on ordinary activities before taxation 1,200 609 Tax charge on profit on ordinary activities (74) (3) -------- -------- Profit on ordinary activities after taxation 1,126 606 Non-equity minority interests - (27) -------- -------- Profit for the financial year transferred to reserves 1,126 579 -------- -------- Earnings per share Pence Pence Basic 3.00 1.64 -------- -------- Diluted 2.94 1.62 -------- -------- Consolidated balance sheet At 31 January 2005 Notes 2005 2004 £'000 £'000 Fixed assets Intangible assets 3,317 3,523 Negative goodwill - (197) -------- -------- 3,317 3,326 Tangible assets 919 1,396 -------- -------- 4,236 4,722 -------- -------- Current assets Stocks 3 8,494 8,291 Debtors 7,731 9,275 Cash at bank and in hand 2,855 1,965 -------- -------- 19,080 19,531 -------- -------- Creditors - amounts falling due within one year 3 15,138 15,947 -------- -------- Net current assets 3,942 3,584 -------- -------- Total assets less current liabilities 8,178 8,306 Creditors - amounts falling due after more than one year - 1,006 Non-equity minority interests - 749 -------- -------- Net assets 8,178 6,551 -------- -------- 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 5,363 Profit and loss account (1,045) (6,609) -------- -------- Equity shareholders' funds 8,178 6,551 -------- -------- Consolidated cash flow statement Year ended 31 January 2005 Cash flow 2005 2004 Notes £'000 £'000 Net cash inflow from operating activities 1 2,510 4,436 ------- ------- Returns on investments and servicing of finance Interest paid (476) (556) Interest element of hire purchase rentals (14) (16) ------- ------- Net cash outflow from returns on investments and servicing of finance (490) (572) ------- ------- Taxation (4) (3) ------- ------- Capital expenditure Purchase of tangible fixed assets (141) (351) Sale of tangible fixed assets 77 35 ------- ------- Net cash outflow from capital expenditure (64) (316) ------- ------- Acquisitions and disposals Purchase of subsidiary undertakings - (449) Net cash at bank and in hand acquired with subsidiary - 185 Disposal of subsidiary undertakings - 1,245 ------- ------- Net cash inflow from acquisitions and disposals - 981 ------- ------- Net cash inflow before financing 1,952 4,526 ------- ------- Financing Expenses incurred in issue of ordinary shares - (193) Purchase of subsidiary companies preference shares (163) - Repayments of amounts borrowed (800) (880) Capital element of hire purchase rentals (99) (114) ------- ------- Net cash outflow from financing (1,062) (1,187) ------- ------- Increase in cash 2 & 3 890 3,339 ------- ------- Notes to consolidated cash flow statement 1. Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000 Operating profit 1,690 1,181 Depreciation charges 570 637 Amortisation of goodwill 206 206 Negative goodwill released (197) (443) Profit on sale of tangible fixed assets (29) (4) (Increase)/decrease in stocks (203) 906 Decrease/(increase) in debtors 1,523 (1,209) (Decrease)/increase in creditors (1,050) 3,231 Utilisation of provisions on discontinued activities - (69) ------- ------- Net cash inflow from operating activities 2,510 4,436 ------- ------- 2. Reconciliation of net cash inflow to movement in net funds 2005 2004 £'000 £'000 Increase in cash 890 3,339 Cash to repay finance leases and hire purchase contracts 99 114 Bank loan 800 800 ------- ------- Changes in net funds resulting from cash flows 1,789 4,253 Lease and hire purchase obligations acquired with subsidiary - (65) Loan acquired with subsidiary - (80) ------- ------- Movement in net funds in the year 1,789 4,108 Net funds/(debt) at 1 February 64 (4,044) ------- ------- Net funds at 31 January 1,853 64 ------- ------- 3. Analysis of net funds At At 1 February Cash Non-cash 31 January 2004 flow flow 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 1,965 890 - 2,855 Bank loan due within 1 year (800) 800 (900) (900) Bank loan due after 1 year (900) - 900 - Other loans (80) - - (80) Hire purchase creditors (121) 99 - (22) -------- -------- -------- -------- 64 1,789 - 1,853 -------- -------- -------- -------- 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 2005 or 2004. The financial information for 2004 is derived from the statutory accounts for the year ended 31 January 2004 which have been delivered to the Registrar of Companies. The auditors have reported on the accounts for the financial years ended 31 January 2004 and 31 January 2005. 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 2005 will be delivered to the Registrar of Companies following the Group's Annual General Meeting. 3. The balance sheet at 31 January 2004 has been restated to recognise goods in transit. Stock and creditors have been increased by £698,000 to £8,291,000 and £15,947,000 respectively. 4. In the profit and loss account for the year ended 31 January 2004, £562,000 has been reallocated to operating expenses from cost of sales. 5. Net goodwill (amortisation)/release comprises goodwill amortisation of £206,000 (2004 - £206,000) and negative goodwill released of £197,000 (2004 - £443,000). 6. No dividend on the ordinary shares is being proposed (2004 - £nil). 7. Earnings per share 2005 2004 £'000 £'000 Profit for the year used for basic and diluted earnings per share calculation 1,126 579 ------- -------- Number Number Weighted average number of ordinary shares in issue during the year used for basic earnings per share calculation 37,584,412 35,333,215 Weighted average number of shares under option 1,740,000 1,310,959 Number of ordinary shares that would have to be issued at fair value (1,016,252) (942,252) --------- --------- Weighted average number of ordinary shares in issue during the year used for diluted earnings per share calculation 38,308,160 35,701,922 --------- --------- Earnings per share Pence Pence Basic 3.00 1.64 Diluted 2.94 1.62 8. The Annual Report and Accounts will be posted to shareholders shortly. 9. The Annual General Meeting will be held at 11:00 a.m. on 9 June 2005 at Eversheds LLP, 1 Royal Standard Place, Nottingham NG1 6FZ. 22 April 2005 This information is provided by RNS The company news service from the London Stock Exchange

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