Preliminary Results
Worthington Group PLC
13 July 2007
Worthington Group plc ('the Company')
Results for the Year Ended 31 March 2007
13 July 2007
The year ended 31 March 2007 has witnessed progress in the rationalisation of
the Groups assets and the simplification of the historic structure of the
businesses. The period produced a profit of £145,000, but after allowing for non
recurring provisions and write offs explained below relating to the disposal of
the Joint Venture, resulted in an overall loss of £331,000 (2006: £274,000
profit). The net asset value of the Group now stands at £2,586,000. (2006:
£2,985,000).
During the year we considered several propositions for the future development of
the Group, some of which came close to final negotiations. We are continually
driven to seek opportunities now that we have a more defined corporate profile,
notwithstanding the continuing problem of the pension deficit. Good propositions
are not easy to find and must be sustainable.
During the year we completed the sale of two freehold properties at Fence Avenue
and Eccleshill for £2,750,000 and £1,050,000 which eliminated all borrowings and
left us with a net cash position at the year end of £882,000. £250,000 of the
sale proceeds relating to the Eccleshill site were deferred and secured on the
site via a second charge. We expect to receive this amount plus substantial
interest shortly.
Shareholders will recall that we established a joint venture agreement between
our former subsidiary Worthington Manufacturing Ltd ('WML' )and Jessop and Baird
Hong Kong ('JBHK') in July 2005. The plant and equipment of WML was sold at the
then book value of £400,000 to the Joint Venture ('JV') and we loaned £200,000
to it taking up a 49% stake. JBHK also loaned £200,000 to the JV for their 51%
interest and both parties advanced a further £100,000 each in additional loans -
with an option for the JV to call on a further £100,000 each. Separately a
further £100,000 of plant owned by WML in Morocco was rented to the JV for
£10,000 per annum over 10 years. The transaction allowed us to realise the stock
and book debts of WML in an orderly manner and it was always our intention to
sell our 49% stake in September 2006 with a simultaneous repayment of our
outstanding loans.
In September 2006 it became clear, for a variety of reasons, that the best
solution was to renegotiate this sale option and agreement. There was a certain
ambiguity in the original deal that resulted in us having to meet redundancy
costs, which had not been anticipated and for which we then became responsible.
A charge of £52,000 has been included in the income statement for these costs.
By September 2006 we had loaned £375,000 in total to the JV and to sweeten the
transaction it seemed prudent to accept a £75,000 write off in order to secure
the sale and repayment of the remaining £300,000. This deal was completed in
January 2007 with the loan capital to be repaid in monthly instalments of
£10,000 plus interest
However, I have to inform shareholders that this agreement has not been
fulfilled and no repayments have been made, either of interest or capital to
date. Accordingly, in light of this, it seems prudent for us to make provision
for the £300,000 of loans and the remaining plant rented to them in Morocco with
a book value of £61,000. These provisions and write offs have resulted in an
overall non-recurring loss on disposal relating to the JV of £476,000 which is
included in the income statement.
This has been an unhappy transaction, despite our high hopes that the Joint
Venture would really take off thus justifying our confidence in the business
acumen of our Hong Kong partners who are very heavily involved in this field of
activity. On the plus side however the transaction has enabled us to realise
near full value of our subsidiary's stocks and debtors (in excess of £1.2m)
which otherwise might not have been possible.
We currently retain a 44% shareholding in Trimmings by Design Limited (a former
subsidiary) and their results have to be consolidated within our accounts. The
business is trading profitably in the current year and we have included in this
period our share of after tax profits and goodwill impairment, which amounts to
£33,000. The business is now operating on one site having sold its Leek
property. It continues to trade profitably and is actively looking for
acquisitions. A management charge of £153,000 was received in the year. There
were no dividends declared this year.
The Group's 34 non-trading or dormant subsidiaries have now been placed into
Members Voluntary liquidation or have been struck off completing the restructure
of the Group.
Turning to our remaining Keighley site, I am pleased to report that we have now
re-let the vacant area at the site following the loss of a tenant who ceased
trading in November 2006. We continue to explore the best ways to redevelop the
site and obtain planning consent.
The current rental income from our Keighley site and the interest on both our
cash and the loan from Trimmings by Design are just sufficient to meet the
estimated ongoing costs of the head office. This includes the annual pension
scheme administration costs which amounted to £48,000 (2006:£59,000) but
excludes the annual payments made to the scheme to reduce the deficit which
amounted to £257,000 (2006: £250,000).
The former Jerome retirement benefit scheme is the only remaining scheme that
requires funding by the Group. The deficit has once again reduced in the year by
£148,000 to £1,803,000 ( 2006: £1,951,000). The reduction in the year would have
been far greater had it not been for the increases applied to the estimated
liabilities of the scheme to reflect current mortality rates. In accordance with
standard practice these have not been updated since the last full actuarial
valuation carried out on 5 April 2004. The scheme actuaries are presently
performing the tri-annual review of the scheme as at 5 April 2007 and we have
accordingly updated the mortality rates used in the IAS 19 calculations to more
closely reflect the rates that will be used in the review. The results of the
review will form the basis of negotiations with the Trustees as to the future
level of contributions that are required to the scheme.
The Board continues to monitor the investment performance of the scheme together
with rental income and head office costs which are viewed as the key performance
indicators for the Group at this time.
We are continuing to turn the remaining assets of the Group into cash and are
pursuing suitable investment opportunities whilst keeping costs to a bare
minimum.
J C Dwek CBE
Chairman
13 July 2007
Worthington Group plc
Consolidated Income Statement
for the year ended 31 March 2007
2007 2006
Notes £'000 £'000
Continuing Operations
Revenue 2 313 140
Cost of sales - -
Gross profit 313 140
Administrative expenses (277) (291)
Other income 3 - 714
Operating profit 36 563
Investment revenues 4 107 53
Finance costs 5 (48) (213)
Share of post-tax profits/(losses) of
associates
10 50 (121)
Loss on disposal of interest in associates
6 (476) -
(Loss)/ profit on continuing operations before
taxation
(331) 282
Tax on continuing operations 7 - -
(Loss)/ profit on continuing operations after
taxation
(331) 282
Loss after taxation from discontinued
operations
10 - (8)
(Loss)/profit after taxation for the current (331)
year
274
(Loss)/earnings per ordinary
Share - basic and fully diluted 8 (2.8p) 2.3p
Earnings per ordinary share from discontinued operations is not disclosed
separately as the amounts are immaterial.
No note of historical cost income and expenses has been prepared as the
historical cost income and expenses are the same as detailed in the above income
statement.
All items above from turnover to operating profit are derived from continuing
operations.
Consolidated Balance Sheet
At 31 March 2007
Note 2007 2006
£'000 £'000 £'000 £'000
Non-current assets
Tangible assets - Property 1,800 1,800
- Plant and machinery - 71
Investments: Interest in associated
undertakings 724 646
2,524 2,517
Current assets
Current asset investments - 3,750
Trade and other receivables due within 1 321 387
year
Trade and other receivables due after more 800 805
than 1 year
Cash at bank and in hand 882 -
2,003 4,942
Total assets 4,527 7,459
Current liabilities
Trade and other payables 138 493
Bank overdrafts and loans - 2,030
138 2,523
Non-current liabilities
Retirement benefit obligation 1,803 1,951
1,803 1,951
Total liabilities (1,941) (4,474)
Net assets 2,586 2,985
Equity
Called up share capital 11,807 11,807
Share premium account 9,836 9,836
Capital redemption reserve 128 128
Revaluation Reserve - 624
Profit and loss account (19,185) (19,410)
Total Equity 2,586 2,985
Statement of Recognised Income and Expense
Group Company Group Company
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Retained (loss)/profit for the financial year (331) 274 (357) (311)
Revaluation of property - 624 - -
Actuarial gain/(loss)on retirement benefit
obligation (82) 167 (82) 167
Disposal of associate 14 - - -
Total recognised (losses)/gains for the year (399) 1,065 (439) (144)
Reconciliation
Opening reserves at 1 April 2,985 1,920 2,700 2,844
Total recognised (losses)/gains for the year (399) 1,065 (439) (144)
Closing reserves at 31 March 2,586 2,985 2,261 2,700
Following a review of the 2006 financial statements an error was found in the
restated balance sheet presented in respect of the 2005 comparatives re-stated
to reflect the transition from UK GAAP to IFRS. A revised reconciliation of the
movements in shareholders' funds and between IFRS and UK GAAP has been included
in note 9.
Consolidated Cashflow Statement
for the year ended 31 March 2007
2007 2006
£'000 £'000
Operating profit 36 563
Operating loss from discontinued activities - (8)
Depreciation and revaluation adjustments 10 (689)
Profit on disposal of investment property and plant (50) (218)
Write off of associate (52) -
Movement in trade and other receivables 59 1,337
Movement in trade and other payables excluding pension
obligation (67) (748)
Payments to Pension scheme (257) (250)
Net cash outflow from operating activities (321) (13)
Cash flow from financing activities
Interest paid (21) (158)
Proceeds from short term loans - 238
Repayment of short term loans (288) -
Repayment of Bank borrowings (1,500) (71)
Repayment of hire purchase - (6)
Net cash (used) /generated by financing (1,809) 3
Cashflow from investing activities
Interest received 67 53
Proceeds from sale of investments 3,550 -
Proceeds on disposal of plant and equipment - 403
Loans to associates (75) (300)
Dividends received from associated undertakings - 44
Net cash generated by investing activities 3,542 200
Increase in cash and cash equivalents 1,412 190
Notes forming part of the preliminary announcement for the year ended 31 March
2007
1. Basis of preparation
The financial statements of the Group and the Company have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union and as applied in accordance with the provisions of the
Companies Act 1985. The principal accounting policies adopted by the Group are
set out in the Group's Annual Report and have been applied consistently
throughout the reporting period.
The financial information in this announcement, which was approved by the Board
of Directors on 13 July 2007, does not constitute the Company's statutory
accounts for the years ended 31 March 2007 or 2006, but is derived from these
accounts.
Statutory accounts to 31 March 2006 have been delivered to the Registrar of
Companies and those for 2007 will be delivered following the Company's annual
general meeting. The auditors have reported on these accounts; their reports
were unqualified and did not contain statements under S237(2) or (3) of the
Companies Act 1985.
The financial information has been prepared on the historical cost basis,
modified to include the revaluation of certain fixed assets.
2. Segmental Analysis
The following is an analysis of the revenue and results for the period, analysed
by business segment, the Group's primary basis of segmentation.
Revenue Revenue Result Result Revenue Result
30/09/05 30/09/05
2007 2006 2007 2006 2005 2005
£'000 £'000 £'000 £'000 £'000 £'000
Continuing Operations
Property 313 140 36 563 67 (110)
Discontinued Operations
Textiles - 1,456 - (8) 1,335 59
Total revenue and 313 1,596 36 555
operating profit
from continuing and
discontinued
operations
1,402 (51)
3.Other income
2007 2006
£'000 £'000
Write down of current asset investment - (354)
Gain on revaluation of Keighley property - 1,068
Exceptional gain - 714
4.Investment Revenues
2007 2006
£'000 £'000
Loan note interest 52 53
Interest on bank deposits 55 -
Exceptional gain 107 53
5.Finance Costs
2007 2006
£'000 £'000
Bank loans and overdrafts repayable within 5 years 21 158
Pension scheme net finance charge 27 55
Exceptional gain 48 213
6.Loss on disposal of interests in associates
2007 2006
£'000 £'000
Loans to associate written off 75 -
Provision against loans to associate 300 -
Fixed asset impairment provisions 61 -
Redundancy and other costs of disposal 52 -
Share of net liabilities disposed (12) -
Net cash outflow from operating activities 476 -
7.Taxation
No corporation charge has been provided for 2007 or 2006 as a result of the
availability of various reliefs.
8.Earnings per share
The earnings per share has been calculated using the weighted average number of
shares in issue during the relevant financial periods. The weighted average
number of shares in issue during the year was 11,807,013 (2006: 11,807,013) and
the loss after taxation was £331,000 ( 2006: profit £274,000).
There is no difference between the basic and diluted loss per share in either
year.
9.Re-stated reconciliation of movements in shareholders' funds and between IFRS
and UK GAAP.
The tables below set out the re-stated reconciliation between the IFRS
accounting standards adopted on 1st April 2005 and the UK GAAP accounting
standards previously used in the preparation of the Group's accounts.
Group Group
31 March 2006 31 March 2005
£'000 £'000
Profit/(loss) before Taxation under IFRS 274 (1,310)
Retirement benefit adjustments - (199)
Profit/(loss) before taxation under UK GAAP 274 (1,509)
Net Assets
Net assets under IFRS 2,985 1,920
Prior year adjustment - 95
Retirement benefit obligation - 2,313
Net assets under UK GAAP 2,985 4,328
Capital and Reserves
Shareholders funds under IFRS 2,985 1,920
Prior year adjustment - 95
Retained earnings adjustment - 2,313
Shareholders funds under UK GAAP 2,985 4,328
Group Group
31 March 2006 31 March 2005
£'000 £'000
Reconciliation of movements in shareholders' funds
Opening shareholders' funds at 1 April under IFRS 1,920 3,169
Prior Year adjustment - (95)
Opening shareholders' funds at 1 April under IFRS as re-stated 1,920 3,074
Revaluation of Properties 624 -
Movement in retirement benefit reserve 167 156
Profit/ ( loss) after tax for current year 274 (1,310)
Closing shareholders' funds at 31 March under IFRS 2,985 1,920
The prior year adjustments in the Group accounts relate to provisions against
historic balances in dormant subsidiaries which came to light when preparing to
liquidate them.
10.Comparative information
The comparatives to the Income Statement have been adjusted to be fully
compliant with IFRS. To be more specific, both the loss after tax from
discontinued operations and the share of the result of associates are shown as
single line items for £8,000 and £121,000 respectively in these financial
statements. In 2006's financial statements these were disclosed as follows:-
(i)Loss after tax from discontinued operations
£'000
Revenue 1,456
Cost of sales (1,019)
Administrative expenses (445)
Loss after tax (8)
(ii)Share of result of associate
£'000
Share of loss of associates (90)
Share of interest of associates (31)
Share of losses of associates (121)
This change in presentation does not affect the reported result in 2006.
11.Copies of the Annual Report
Copies of the Annual Report are available from the Company Secretary at the
registered office which is situated at Suite 1, Courthill House, 66 Water Lane,
Wilmslow, Cheshire, SK9 5AP.
Enquiries: Worthington Group plc
Joe Dwek CBE, Chairman Tel: 01625 549082
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