Final Results
Sirdar PLC
16 September 2004
Sirdar PLC
Preliminary results for the year ended 30th June 2004
Chairman's Statement
Introduction
In my first statement to shareholders as chairman of Sirdar PLC, I have to
report that the difficult trading conditions referred to in the interim report
to December 2003 continued throughout the period to June 2004. This has resulted
in an unsatisfactory outcome for the year and the board is therefore undertaking
a fundamental review of every aspect of the group's strategy.
Our vision for the group is to exceed customer expectations in the marketing of
innovative quality products and we are currently putting in place a wide range
of initiatives to capitalise on future opportunities, and deliver enhanced
shareholder value over time.
Reorganisation of Specialist Yarns division
It was also announced in the interim statement that we intended to cease
manufacturing at the Wakefield site. These proposals were implemented on time
and within budget. Early indications are that the new strategy has been
implemented successfully and all transitional issues have been managed
effectively. This has ensured the Specialist Yarns division is now well placed
to concentrate on building market share with a strong programme of innovation.
The results
Turnover for the year was £68.8m (2003: £69.9m). Operating profit excluding
exceptional items amounted to £2.8m (2003: £5.4m) although the result for this
year is after charging additional pension costs of approximately £1.0m as
detailed in the trading update issued in December 2003. The statutory operating
profit amounted to £1.2m after exceptional costs of £1.6m. These costs were
slightly less than the amount of £1.8m indicated in the interim statement.
Divisional performance reviews and further financial information are contained
within the Group Chief Executive's Review.
Earnings and dividend per share
Basic earning per share amounted to 1.13p (2003: 6.60p). Adjusted earnings per
share, which is calculated to show the underlying performance of the group and
excludes the exceptional item, amounted to 3.56p per share. The directors are
proposing a final dividend of 1.20p (2003: 4.00p) per share. The dividend is
payable on 22nd November 2004 to those shareholders on the register of members
at the close of business on 29th October 2004.
Management and personnel
After 43 years with the group, Gerry Lumb retired from his position as chairman
on the 30th April 2004. Gerry served the group in a number of roles including
company secretary, managing director and most recently as chairman. We would
like to thank him for his contribution and commitment to the business and to
wish him a long and happy retirement.
Following Philip Howard's resignation in February 2004 we commenced our search
for a new senior independent non-executive director. Upon completion of this
process, we were pleased to announce the appointment of Steve Harrison on 1st
July 2004. Steve has 15 years experience at both executive and non-executive
director levels and brings a wealth of knowledge to the Sirdar board.
After 37 years with Burmatex, Richard Clark is to retire on 13th October 2004.
We would like to thank Richard for his enthusiasm and commitment over many years
and wish him well in his retirement. Gordon Donald joined Burmatex in August
2004 and will assume the position of managing director of that subsidiary
company upon Richard's retirement. Gordon is 48 and has held a number of senior
management positions in the textile industry with the Coats Viyella group and
Gaskell PLC.
In addition to the above, I would like to thank all our team members for their
dedication in difficult trading conditions and for their continuing support in
addressing the challenges we face.
Current trading and future prospects
The closure of the manufacturing facilities in Wakefield was sad but necessary
in an increasingly competitive global market place. The prospects for the
current financial year are uncertain but conditions are likely to remain
challenging. Whilst sales to date are ahead of last year, pressure on margins
continues from changes in the product mix and cost increases. Current
initiatives, managed with vigour and determination, will enable us to increase
our focus on reducing costs, accelerate innovation and major on the strength of
our brands and people. Through this programme, we plan to increase market share
in our chosen product categories, and aim to deliver an improving level of
profitability.
TIM VERNON 16th September 2004
Chairman
Group Chief Executive's Review
Introduction
This has been a challenging year of change. Increased levels of imports combined
with the continued popularity of alternative floor coverings and a slow down in
the new and refurbished office market have provided fierce competition and price
pressure.
As a result, a review of the floor covering business has been performed and we
are in the process of implementing changes designed to strengthen this business,
whilst maintaining sufficient flexibility to exploit opportunities as they
arise.
The reorganisation of the Specialist Yarns division announced in March 2004 has
also been completed and early evidence suggests the transition has been
successful and justified.
Floor Coverings division
Sales of floor coverings, including residential and contract products, fell by
3% to £54.6m (2003: £56.4m). The resulting operating profit was £3.1m (2003:
£5.8m). The loss of sales, combined with cost increases and the additional
pension costs, all contributed to the profit reduction.
Throughout the year we continued our policy of resisting price pressures and
endeavoured to protect margins even though at times these pressures were
intense. However, I feel it was necessary to protect our brands and market
position.
Contract floor covering products are marketed under the Burmatex, Carpet Tile
Company (CTC) and Burmafloors International brands. The sale of Burmatex
products in the home market were slightly below the previous year. CTC sales
were also lower than expectations mainly as a result of the lack of activity
within the London office market. However, the shortfall was compensated for by a
significant increase in export sales resulting in overall sales being slightly
ahead of 2003.
Residential floor coverings are marketed under the Ryalux, Lomas and Pownall
brands. This market has been particularly difficult and has resulted in sales
reducing by approximately 5%. The growth of low quality, low price carpet
imports and the continuing popularity of laminate and wood flooring has had a
significant impact, creating an extremely competitive market where margins are
routinely sacrificed for volume. Our reluctance to compete on such terms has
helped to maintain the strength of our brands, which remain synonymous with
quality.
Operating our own distribution fleet has enabled us to avoid the delivery
problems suffered by our competitors caused by the failure of Carpet Express. We
have launched a number of new ranges and we exited the Padiham manufacturing
site as planned. We continued our programme of capital investment installing
machinery designed to generate operational efficiencies and reduce waste.
Specialist Yarns division
Turnover in this division increased to £14.2m (2003: £13.5m). The underlying
result was similar to that achieved in the last two years with additional
pension costs being offset by the profit on increased sales. After exceptional
reorganisation costs the operating loss amounted to £1.4m (2003: profit £0.1m).
This division has achieved a major reorganisation over recent months with the
implementation of the strategic plan. Manufacturing at the Wakefield site has
now ceased, and the entire product range is sourced from overseas suppliers
whose attitude to quality is commensurate with our own, and where the breadth of
product choice and price is advantageous. Headcount reduced by 175 during the
year. However, we have retained approximately 100 employees in sales and
marketing, design, warehousing, distribution and administration. The management
team has implemented the changes successfully and with minimum disruption to
customer service. This reorganisation was unfortunately essential if the
division was to remain a viable business and generate a more acceptable return
on our investment. This business is now on a much firmer footing and we are
confident about its future prospects.
Conclusion
In this year of change a number of significant senior management appointments
were made. These have further enhanced an already strong team, providing fresh
impetus to help meet the numerous and significant challenges that lie ahead.
The prospects for hand knitting yarns in both the home and export markets remain
strong. The reorganisation of the Specialist Yarns division has provided a firm
base from which to capitalise on these opportunities, and we are looking forward
to a more prosperous future.
Early indications from the review of our Floor Coverings division suggest that
by accepting change, and driving innovation, opportunities exist to increase our
competitive position and broaden our appeal. Through exploiting new markets,
both at home and abroad, and by maintaining our cost focus, we are confident of
achieving the required revitalisation.
Finally I wish to express my thanks for the considerable efforts and support of
all the group's employees in what was a challenging year of change.
DUNCAN VERITY 16th September 2004
Group Chief Executive
Enquiries:
Duncan Verity 01924 371501
Group Chief Executive, Sirdar PLC
Kevin Henry 01924 371501
Group Finance Director, Sirdar PLC
Consolidated Profit and Loss Account
year ended 30th June 2004
Excluding Exceptional Including
exceptional item exceptional
Note item (note 3) item
2004 2004 2004 2003
£000 £000 £000 £000
Turnover 2 68,770 - 68,770 69,900
Operating costs (66,004) (1,606) (67,610) (64,494)
Operating profit 2 2,766 (1,606) 1,160 5,406
Net interest payable and similar charges (783) - (783) (586)
Profit before taxation 1,983 (1,606) 377 4,820
Taxation (335) 482 147 (1,770)
Profit for the year 1,648 (1,124) 524 3,050
Dividends 4 (832) - (832) (2,775)
(Deficit)/retained profit for the year 816 (1,124) (308) 275
Earnings per share
5
(basic and diluted) 3.56p (2.43)p 1.13p 6.60p
There were no recognised gains or losses in the year other than the loss shown
above.
The results shown in the profit and loss account derive wholly from continuing
activities.
There is no difference between the profit on ordinary activities before taxation
and the deficit for the year stated above and their historical cost equivalents.
Consolidated Balance Sheet
as at 30th June 2004
2004 2003
£000 £000 £000 £000
Fixed assets
Intangible 14,617 15,497
Tangible 16,421 17,459
31,038 32,956
Current assets
Stocks 16,853 17,891
Debtors 14,694 12,996
Cash at bank and in hand 614 453
32,161 31,340
Creditors (due within one year) (18,126) (15,973)
Net current assets 14,035 15,367
Total assets less current liabilities 45,073 48,323
Creditors (due after more than one year) (6,772) (9,736)
Deferred taxation (3,259) (3,237)
35,042 35,350
Equity shareholders' funds
Called up share capital 11,561 11,561
Share premium account 504 504
Capital redemption reserve 2,395 2,395
Profit and loss account 20,582 20,890
35,042 35,350
Consolidated Cash Flow Statement
year ended 30th June 2004
2004 2003
Note £000 £000 £000 £000
Net cash inflow from operating activities 6 5,823 9,298
Returns on investments and servicing of finance
Interest received - 310
Interest paid and similar charges (754) (883)
(754) (573)
5,069 8,725
Corporation tax paid (1,994) (1,328)
Capital expenditure
Purchase of tangible fixed assets (1,464) (1,416)
Sale of tangible fixed assets 429 374
(1,035) (1,042)
Acquisitions and disposals
Acquisition of subsidiary undertaking - (5,293)
Cash balance acquired with subsidiary undertaking - 291
Receipt of deferred consideration - 350
- (4,652)
Equity dividends paid (2,127) (2,775)
Cash outflow before financing (87) (1,072)
Financing
Receipt from cash collateral account - 11,333
New bank loan - 14,038
Redemption of loan notes (137) (25,445)
Payments into cash collateral account - (1,666)
Repayment of bank loans (2,827) (2,300)
(2,964) (4,040)
Decrease in cash 7 (3,051) (5,112)
A reconciliation of net cash flow to movement in net debt is set out in note 8.
Notes
1. Basis of preparation
These preliminary financial statements, which have been prepared on a basis
consistent with the previous year, do not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. The information for the
year ended 30th June 2004 is an extract from the group's statutory financial
statements on which the company's auditors, PricewaterhouseCoopers LLP, have
given an unqualified opinion in accordance with Section 235 of the Companies Act
1985, and are to be delivered to the Registrar of Companies.
The announcement has been agreed with the company's auditors for release.
2. Segmental Information
Analysis of results by class of business
Net operating
Turnover Operating profit assets/(liabilities)
2004 2003 2004 2003 2004 2003
£000 £000 £000 £000 £000 £000
Floor Coverings 54,605 56,441 3,143 5,838 38,098 38,679
Specialist Yarns 14,165 13,459 (1,414) 142 8,789 10,562
68,770 69,900 1,729 5,980 46,887 49,241
Central group costs/assets/ (569) (574) 1,177 (1,117)
(liabilities)
Total net operating assets 48,064 48,124
Operating profit 1,160 5,406
Net interest payable and similar charges (783) (586)
Profit before taxation 377 4,820
Net operating assets are stated excluding inter-company financing and are
derived from the balance sheet total by excluding bank borrowings, loans and
loan notes totalling £13,022,000 (2003: £12,774,000).
3. Exceptional item
2004
£000
Raw materials and consumables 434
Other external charges 380
Staff costs 792
1,606
The exceptional costs relate principally to redundancies, stock write downs, and
provisions for additional charges associated with the reorganisation of the
Specialist Yarns division. Other external charges amounted to £653,000 but have
been shown net of the profit on sale of fixed assets connected with the
reorganisation of £273,000. The corporation tax deduction in relation to these
exceptional costs amounted to £482,000.
4. Dividends
2004 2003
£000 £000
Interim - 0.60p (2003: 2.00p) 277 925
Proposed final - 1.20p (2003: 4.00p) 555 1,850
832 2,775
5. Earnings per share
The calculation of basic earnings per share is based on earnings of £524,000
(2003: £3,050,000) and on 46,242,455 (2003: 46,242,455) ordinary shares, being
the weighted average number in issue during the year.
Adjusted earnings per share, as set out below, is calculated after excluding
exceptional costs of £1,124,000, net of tax, incurred during the reorganisation
of the Specialist Yarns division in the year ended 30 th June 2004 and is
presented in order to demonstrate the underlying performance of the group.
2004 2003
Earnings Earnings Earnings Earnings
per share per share
£000 pence £000 pence
Earnings and basic earnings per share 524 1.13 3,050 6.60
Exceptional reorganisation costs 1,124 2.43 - -
Adjusted earnings and basic earnings per share 1,648 3.56 3,050 6.60
There is no dilution caused by share options.
6. Reconciliation of operating profit to net cash inflow from
operating activities
2004 2003
£000 £000
Operating profit 1,160 5,406
Depreciation 2,278 2,423
Goodwill amortisation 880 869
Profit on sale of tangible fixed assets (286) (58)
Decrease/(increase) in stocks 1,038 (1,368)
(Increase)/decrease in debtors (418) 1,605
Increase in creditors 1,171 421
Net cash inflow from operating activities 5,823 9,298
Net operational exceptional cash outflows amounted to £605,000 consisting
primarily of redundancy costs offset by proceeds from the sale of fixed assets.
7. Analysis of changes in net debt
2004 Cash flows Loan note redemption 2003
£000 £000 £000 £000
Cash at bank 614 161 - 453
Bank overdrafts (3,212) (3,212) - -
(2,598) (3,051) - 453
Loan notes (512) - 137 (649)
Bank loan (9,298) 2,827 - (12,125)
Total net debt (12,408) (224) 137 (12,321)
8. Reconciliation of movement in net debt
2004 2003
£000 £000
Decrease in cash (3,051) (5,112)
Receipt from cash collateral account - (11,333)
New bank loan - (14,038)
Redemption of loan notes 137 25,445
Payments into cash collateral account - 1,666
Repayment of bank loans 2,827 2,300
Movement in net debt (87) (1,072)
Net debt at start of year (12,321) (11,249)
Net debt at end of year (12,408) (12,321)
This information is provided by RNS
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