Interim Results

United Overseas Group PLC 19 September 2000 UNITED OVERSEAS GROUP PLC Interim Results for the six months ended 30th June 2000 Strong recovery Pre-tax profits of £1.6m; EPS of 0.54p (Basic); Turnover up 10 percent Mr. Jeffrey Curtiss, founder, to retire in March 2001 United Overseas Group plc ('UOG'), Europe's largest group specialising in the world-wide purchase, sale and distribution of excess inventory to retail and wholesale customers, announces much improved results for the six months ended 30th June 2000 including a return to profitability and further strengthening of its Balance Sheet. Mr. Alex Watson, Chairman, said in his statement to shareholders: 'This turnaround in performance is particularly encouraging given that it is against a background of the current retail trading conditions and justifies the decisive management actions taken over the last twelve months'. Key points of the results and extracts from the Chairman's statement * Turnover up 10 per cent to £63.1m (1999: £57.4m) * Much improved performances in the UK (sales up 10 per cent) and North America (sales up 34 per cent) * Gross profit margin improved to 25 per cent (1999: 22 per cent) * Pre-tax profit of £1.6 m (1999: £0.3m loss) * Balance Sheet management a continuing priority; stock levels reduced by £1m; creditors significantly lower; net current assets increased by £2m year on year * No interim dividend declared; Board will evaluate the Group's improving position * Further senior management appointments in North America and Europe complete management restructuring commenced last year * Jeffrey Curtiss to step down as Group Chief Executive to become Vice- Chairman ahead of retirement in March 2001 Regarding prospects for the rest of the current year and beyond, Mr. Watson added: 'We expect that the retail environment will remain challenging for the foreseeable future. However, the Board is encouraged by the Group's performance to date and.with our strengthened management team, we are confident that we are well positioned for sustainable profitable growth over the longer term.' Enquiries: Michael Corke:- Group Chief Executive, Phil Carr: - Group Finance Director, United Overseas Group plc Tel: 01733 362 300 Paul Vann: - Binns & Co PR Limited Tel: 020 7786 9600 CHAIRMAN'S STATEMENT I am delighted to announce that the results for the six months to 30th June 2000 have shown a strong recovery over the corresponding six months period to 30th June 1999. The Group has achieved a pre-tax profit of £1.6 million against a comparable loss of £0.3 million. Turnover has increased by 10% to £63.1 million and the gross profit margin has improved from 22% to 25%. Stock levels have been reduced by a further £1 million since 31st December making a total reduction of £4 million over the last 12 months. In addition to the reduction in stock levels the Group's creditors are significantly lower resulting in a £2 million increase in net current assets over the position at 30 June 1999. The most significant areas of improvement have been in our UK and North American operations, both in terms of Profit performance and Balance Sheet management. Sales in the United States have increased by 34% (now representing 17% of total Group sales) during the period as a result of strengthened buying activity and increased sales to both national and regional chain stores. In anticipation of future growth in the U.S. market, we are in the process of expanding our existing showroom facilities and relocating our offices to new premises adjacent to our warehousing facilities. United Overseas Limited, our principal UK subsidiary, has experienced a sales growth of 10% and benefited substantially from enhanced gross profit margins, resultant from improved stock management, as well as greater efficiencies. Furthermore, our Dutch operations have benefited from the operational efficiencies derived from the new European Distribution Centre in Moerdijk, The Netherlands which became fully functional in September 1999. This turnaround in performance is particularly encouraging given that it is against a background of the current retail trading conditions and justifies the decisive management actions taken over the last twelve months. As I announced at the Group's Annual General meeting in June, Phil Carr has succeeded Terry Balkham as Group Financial Director. Phil has been with the Group since 1997 and was previously Group Financial Controller. Bert Boersema was appointed to the main Board as Managing Director, Northern Continental Europe, assuming the responsibilities previously held by his late uncle, Eppe Boersema. In addition, the Board appointed in April 2000 John Gordon and Robert van den Heuvel as Non-Executive Directors, both of whom have taken up duties on the Audit Committee and the Remuneration and Nominations Committee. Both John and Robert bring a wealth of financial and international experience that will benefit the Group. Earlier this month we announced two senior appointments in The Netherlands and the United States, which will enhance and consolidate our trading opportunities in the important toy sector. Ries van Eijck was appointed to the Board of Intertading Agencies Boersema BV, the Group's subsidiary based in Moerdijk, The Netherlands and Chuck Miller was appointed Vice President of Merchandising for UniTrade Marketing, our operating subsidiary based in the United States. Both executives have extensive experience of the international toy industry having worked for a number of well known toy retail chains including Toys R US. These appointments, together with the earlier appointments of Phil Green, who joined the Group as Managing Director, United Overseas Limited in August 1999 and has 25 years retailing experience gained at Woolworths plc and Michael Corke, who was appointed Group Managing Director in November 1999, and has 28 years of senior international management experience in marketing and distribution of branded consumer goods having previously worked for Hutchinson Whampoa Ltd (Hong Kong) and Hagemeyer N.V. (The Netherlands), complete the essential management restructuring, which commenced last year. Against the background of the Group's financial turnaround and substantially improved trading performance, supported by a strengthened Executive and Non- Executive management team, Jeffrey Curtiss, the Group's founder, has decided to step down from his role of Chief Executive Officer and to take the position of Vice Chairman, prior to retiring from the Board in March 2001. Michael Corke, Group Managing Director, will assume Jeffrey's executive responsibilities with immediate effect. The Board is committed to the programme of change and the management of its resources, and therefore, has decided not to declare an interim dividend at this time, but will continue to monitor and evaluate the Group's improving position with the intention of returning to dividend payments as soon as practicable. As previously announced the Group has appointed Williams de Broe as stockbrokers and financial advisors, effective 1st September 2000. We expect that the retail environment will remain challenging for the foreseeable future. However, the Board is encouraged by the Group's performance to date and, as Europe's leading international distributor of excess branded consumer products, with our strengthened management team, we are confident that we are well positioned for sustainable profit growth. Alex Watson Chairman 19 September 2000 Consolidated Profit and Loss Account For the period ended 30 June 2000 6 months 6 months 12 months ended ended ended 30/06/00 30/06/99 31/12/99 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 ---------- ---------- --------- Turnover 2 63,060 57,406 113,192 Cost of sales (47,589) (44,840) (90,689) ---------- ---------- --------- Gross profit 15,471 12,566 22,503 Distribution costs (5,012) (5,104) (10,576) Administrative costs (7,526) (6,544) (13,639) Other operating income 259 163 222 Amortisation of goodwill 3 (249) (252) (499) ---------- ---------- --------- Operating profit/(loss) 2,943 829 (1,989) Profit on disposal of property - - 192 Net interest payable (1,333) (1,171) (2,147) ---------- ---------- --------- Profit/(loss) on ordinary activities before taxation 1,610 (342) (3,944) Taxation 4 (759) (158) (125) ---------- ---------- --------- Profit/(loss) on ordinary activities after taxation 851 (500) (4,069) Minority interests (100) (118) (205) ---------- ---------- --------- Profit/(loss) attributable to shareholders 751 (618) (4,274) Dividends 5 - - - ---------- ---------- --------- Retained profit/(loss) for the period 751 (618) (4,274) ---------- ---------- --------- Earnings per share 6 - Basic 0.54p (0.44)p (3.07)p - Fully diluted 0.54p (0.44)p (3.07)p - Adjusted basic 0.72p (0.26)p (2.71)p ---------- ---------- --------- Dividends per share 5 - - - ---------- ---------- --------- Consolidated Balance Sheet At 30 June 2000 At 30/06/00 At 30/06/99 At 31/12/99 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 ---------- ---------- --------- Fixed assets Intangible assets 9,539 9,698 9,800 Tangible assets 3,540 8,724 2,777 Investments 300 250 300 ---------- ---------- --------- 13,379 18,672 12,877 ---------- ---------- --------- Current assets Stocks 34,583 38,735 35,671 Debtors 29,218 29,486 22,544 Cash at bank and in hand 1,185 1,066 1,742 ---------- ---------- --------- 64,986 69,287 59,957 Creditors: amounts falling due within one year (41,582) (47,879) (36,777) ---------- ---------- --------- Net current assets 23,404 21,408 23,180 ---------- ---------- --------- Total assets less current liabilities 36,783 40,080 36,057 Creditors: amounts falling due after more than one year (2,015) (2,386) (2,272) ---------- ---------- --------- Net assets 34,768 37,694 33,785 ---------- ---------- --------- Capital and reserves Called up share capital 13,990 13,990 13,990 Share premium account 55,207 55,207 55,207 Profit and loss account 3 (34,945) (31,832) (35,828) ---------- ---------- --------- Equity shareholders' funds 34,252 37,365 33,369 Equity minority interests 516 329 416 ---------- ---------- --------- 34,768 37,694 33,785 ---------- ---------- --------- Consolidated Cash Flow Statement For the period ended 30 June 2000 6 months 6 months 12 months ended ended ended 30/06/00 30/06/99 31/12/99 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ---------- ---------- --------- Net cash (outflow)/inflow from operating activities (13) (1,671) 4,170 ---------- ---------- --------- Returns on investments and servicing of finance Interest received 46 16 81 Interest paid and similar charges (1,215) (1,200) (2,095) Interest element of hire purchase and finance leases (39) (26) (60) ---------- ---------- --------- Net cash outflow from returns on investments and servicing of finance (1,208) (1,210) (2,074) ---------- ---------- --------- Taxation UK corporation tax (paid)/recovered (43) 871 323 Overseas taxation (paid)/recovered (931) 398 346 ---------- ---------- --------- Net cash (outflow)/inflow from taxation (974) 1,269 669 ---------- ---------- --------- Capital expenditure and financial investment Purchase of intangible fixed assets - - (26) Purchase of tangible fixed assets (764) (2,982) (4,132) Purchase of fixed asset investments - (50) (100) Sale of tangible fixed assets 23 47 7,434 ---------- ---------- --------- Net cash (outflow)/inflow from capital expenditure and financial investment (741) (2,985) 3,176 ---------- ---------- --------- Acquisitions and disposals Purchase of subsidiary undertakings - (22) - ---------- ---------- --------- Net cash outflow from acquisitions and disposals - (22) - ---------- ---------- --------- Equity dividends paid - (182) (182) ---------- ---------- --------- Cash (outflow)/inflow before use of liquid resources and financing (2,936) (4,801) 5,759 ---------- ---------- --------- Financing Loans repaid (683) - (7,600) Capital element of finance lease rentals (211) (214) (500) New short term finance - 1,776 2,796 ---------- ---------- --------- Net cash (outflow)/inflow from financing (894) 1,562 (5,304) ---------- ---------- --------- (Decrease)/increase in cash in the period (3,830) (3,239) 455 ---------- ---------- --------- Reconciliation of Operating Profit/(Loss) to Net Cash Flow from Operating Activities For the period ended 30 June 2000 6 months 6 months 12 months ended ended ended 30/06/00 30/06/99 31/12/99 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ----------- ----------- --------- Operating profit/(loss) 2,943 829 (1,989) Depreciation of fixed assets 404 380 783 Amortisation of trade marks 9 11 44 Amortisation of goodwill 249 252 499 (Profit)/loss on sale of tangible fixed assets (1) (3) 12 Decrease in stocks 1,440 3,869 6,032 (Increase)/decrease in debtors (7,187) (2,828) 4,217 Increase/(decrease) in creditors 2,097 (4,161) (5,374) Exchange movements in respect of foreign undertakings 33 (20) (54) ----------- ---------- --------- Net (outflow)/inflow from operating activities (13) (1,671) 4,170 ----------- ---------- --------- Reconciliation of Net Cash Flow to Movement in Net Debt For the period ended 30 June 2000 6 months 6 months 12 months ended ended ended 30/06/00 30/06/99 31/12/99 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ----------- ----------- ---------- (Decrease)/increase in cash in the period (3,830) (3,239) 455 Cash outflow/(inflow) from decrease in debt and finance leasing 894 (1,562) 5,304 ----------- ----------- ---------- Change in net funds resulting from cash flows (2,936) (4,801) 5,759 Foreign exchange movements (185) - 729 New finance leases (404) (21) (288) ----------- ----------- ---------- Movement in net debt (3,525) (4,822) 6,200 ----------- ----------- ---------- Opening net debt (21,850) (28,050) (28,050) Movement in net debt (3,525) (4,822) 6,200 ----------- ----------- ---------- Closing net debt (25,375) (32,872) (21,850) ----------- ----------- ---------- Notes 1 Nature of the Financial Information The Company prepares statutory accounts annually to 31 December. These are the interim accounts covering the six months ended 30 June 2000. The results for the six months ended 30 June 1999 and the year ended 31 December 1999, are extracted from the previous year's interim and final accounts respectively. The results for the six months ended 30 June 2000 and 1999 are unaudited, and have been prepared in accordance with the accounting policies set out in the Company's annual report. The financial information set out above does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The results for the year ended 31 December 1999 are an abridged version of the full statutory accounts that have an unqualified audit report and have been delivered to the Registrar of Companies. 2 Turnover and Profit before Tax 6 months 6 months 12 months ended ended ended 30/06/00 30/06/99 31/12/99 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ----------- ----------- --------- Turnover by destination: United Kingdom 29,582 26,686 55,086 Rest of Europe 21,618 21,946 41,491 North America 11,860 8,774 16,615 ----------- ----------- --------- 63,060 57,406 113,192 ----------- ----------- --------- By origin: United Kingdom 32,416 28,671 59,391 Rest of Europe 19,982 20,576 38,559 North America 10,662 8,159 15,242 ----------- ----------- --------- 63,060 57,406 113,192 ----------- ----------- --------- Profit/(loss) before tax by origin: United Kingdom 468 (1,223) (4,019) Rest of Europe 783 845 230 North America 359 36 (155) ----------- ----------- --------- 1,610 (342) (3,944) ----------- ----------- --------- Figures for the rest of the world have been incorporated within the category for North America. 3 Profit and Loss Account In accordance with Financial Reporting Standard 10 Goodwill and Intangible Assets, goodwill arising from acquisitions before 1 January 1998 has been written off to reserves. For acquisitions after this date, the goodwill arising has been capitalised and is being amortised through the profit and loss account over the Directors' estimate of their useful economic life. 4 Taxation The taxation charge for the six months to 30 June 2000 and 1999 is based on the anticipated tax position for the full year. 5 Dividends No interim dividend is proposed for the six months ended 30 June 2000 (1999: nil). 6 Earnings per Share Basic earnings per share for the six months ended 30 June 2000 is calculated by dividing the profit on ordinary activities after taxation and minority interests of £751,000 by 139,903,939 (30 June 1999: loss £618,000 by 139,496,709; 31 December 1999: loss £4,274,000 by 139,364,613) being the weighted average number of ordinary shares of 10 pence each in issue during the period after taking account of the purchases of ordinary shares by the Employee Share Ownership Plan (ESOP). The adjusted basic earnings per share for the six months ended 30 June 2000 is calculated by dividing the profit on ordinary activities after taxation and minority interests and before amortisation of goodwill of £1,000,000 by 139,903,939 (30 June 1999: loss £366,000 by 139,496,709: 31 December 1999: loss £3,775,000 by 139,364,613) being the weighted average number of ordinary shares of 10 pence in issue during the period after taking account of the purchases of ordinary shares by the ESOP. No dilution arises as a result of the share options in issue, as the value at which they were granted is in excess of both the market price at 30 June 2000 and the average market price for the six months, and therefore no options would be exercised. Accordingly the fully diluted earnings per share is identical to the basic earnings per share as stated above. 7 Interim Statement Copies of the Interim Statement are being sent to shareholders and are available from the Company Secretary, United Overseas Group Plc, United House, Shrewsbury Avenue, Woodston, Peterborough PE2 7BZ.

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