Final Results

RNS Number : 9962Z

Pittards PLC

21 March 2017

 

21 March 2017

Pittards plc

("Pittards" or "the Group")

Full year results for the year ended 31 December 2016

Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for sale to retailers, manufacturers and distributors today announces its results for the year ended 31 December 2016.

Year ended 31 December 2016:

                ·      Revenue £27.0m (2015: £30.5m)

                ·      Underlying PBT £0.2m and LBT of £4.1m (2015 PBT: £0.7m) after an exceptional stock write-down of £4.3m

·      Net assets £21.3m (2015: £24.3m), net assets per share 153.38p (2015: 204.45p)

·      New management team in place from the final quarter of 2016

·      Restructured operationally to become two reporting divisions: "UK" and "Ethiopia"

Stephen Yapp, Chairman commented: "We are putting in place the necessary pillars that will strengthen Pittards' position as a leading performance-leather expert, supported by scalable manufacturing operations and a highly capable management team.

"The restructuring and strengthening of the management team was completed in the final quarter of 2016 and strides have already been made to evolve and progress the strategic priorities and milestones for the next three years. Further updates on this will be given later this year.

"Whilst it is still early days, we are beginning to experience a more positive demand environment for leather. Together with the actions being identified and taken, the Board believe we will start to see a benefit in the latter part of 2017 and that the prospects for the future are promising." 

For further information please contact: 

Pittards plc	www.pittardsleather.com
Stephen Yapp, Chairman Reg Hankey, CEO	[phone]
Matt O'Rourke, CFO
WHIreland Limited	www.whirelandplc.com
Mike Coe/Ed Allsopp	[phone]

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Chairman's statement

2016 was an active year for Pittards during which we have been primarily focused on the management team and structure to develop and implement a medium term strategic plan. As previously communicated, the financial performance during the year was overshadowed by challenging market conditions and political disruption in Ethiopia in the latter part of 2016.

The restructuring and strengthening of the management team was completed in the final quarter of the year and strides have already been made towards identifying the market priorities for the next three years. This will allow us to pursue growth opportunities both in existing core and new markets that are considered to be most aligned with our skills and expertise.

Year ended 31 December 2016:

                ·      Revenue £27.0m (2015: £30.5m)

                ·      Underlying PBT £0.2m and LBT of £4.1m (2015 PBT: £0.7m) after an exceptional stock write-down of £4.3m

·      Net assets £21.3m (2015: £24.3m), net assets per share 153.38p (2015: 204.45p)

·      New management team in place from the final quarter of 2016

·      Restructured operationally to become two reporting divisions: "UK" and "Ethiopia"

Market conditions

The global leather market continues to be challenging for companies looking for growth against a backdrop of significant global change and weak consumer demand. Demand in our core markets of shoe, sport and dress gloves remains depressed and we now believe that after four years of contraction, the dress glove market has rebalanced at this lower level. Encouragingly though, we are beginning to see some signs that growth may return in some of our other markets during the latter part of 2017.

In line with an intention to broaden our market base, we are reviewing additional potential markets. Initial findings have identified both the interiors and general footwear markets as having the characteristics our capabilities can best leverage.

Financial review

Overall the Group had a difficult year financially with depressed leather volumes and a number of non-recurring items.

Revenue was down 11% to £27.0m as a consequence of reduced demand and the impact on the Ethiopian business of the political disruption. The political environment in Ethiopia has stabilised and our manufacturing production capabilities there are now returning to more normal levels.

Gross margin continued to improve at 24% pre-provision (2015: 22%) reflecting favourable currency improvements mainly US dollar-related.

The Board has conducted a detailed review of the stock holding and has decided to take a £4.3m provision reducing the year end stock to £17.4m. This provision takes into account: the impact of currency translation, slow moving stock and the potential strategic shift in the business moving towards a higher proportion of hide relative to skins business. The provision relates to low end dress and sport glove leather, with a write down of £1.3m in the UK and £3.0m in Ethiopia.

Underlying PBT for the year was £0.2m and after the exceptional stock write-down, the LBT for the year was £4.1m (2015 PBT: £0.7m)

Net debt increased by £3.6m to £10.1m. This reflects an increase in working capital and capital investment of £1.4m.  The UK banking facilities were renewed in December 2016 with available Group banking facilities of £13.0m.

The Group's structure has been simplified into two divisions - UK and Ethiopia - and our focus during 2017 will be to develop and implement a range of key financial measures which both reflect the individual trading environments and deliver returns above the cost of capital.

Board changes

As previously announced, I was appointed Chairman on 16 May 2016 and on 1 June 2016 Matthew O'Rourke was appointed CFO and Jill Williams resigned from this role. She became a non-executive director on 1 January 2017.

Team

Throughout the past year, the Group has been in a transitional phase. To have executed the changes outlined internally, whilst adopting a 'business as usual' approach externally, is testament to the commitment and hard work of our 1600 employees to whom I would like to express my thanks.

Outlook

The restructuring and strengthening of the management team was completed in the final quarter of 2016 and strides have already been made to evolve and progress the strategic priorities and milestones for the next three years. Further updates on this will be given later this year.

Whilst it is still early days, we are beginning to experience a more positive demand environment for leather. Together with the actions being identified and taken, the Board believe we will start to see a benefit in the latter part of 2017 and that the prospects for the future are promising.

Consolidated income statement

for the year ended 31 December 2016

 

 

Continuing operations	Note	2016 £’000	2015 £’000
Revenue		27,009	30,523
Cost of sales		(20,554)	(23,902)
Cost of sales – exceptional stock provision	3	(4,307)	-
Gross profit		2,148	6,621
Distribution costs		(2,167)	(1,919)
Administrative expenses		(3,572)	(3,275)
Administrative expenses – exceptional restructuring costs		-	(312)
(Loss)/Profit from operations before finance costs		(3,591)	1,115
Finance costs		(499)	(484)
Finance income		19	24
(Loss)/Profit before taxation		(4,071)	655
Taxation	6	(75)	(184)
(Loss)/Profit for the year after taxation		(4,146)	471
(Loss)/Profit attributable to:
Owners of the parent		(4,146)	474
Non controlling interest		-	(3)
		(4,146)	471
(Loss)/Earnings per share attributable to the owners of the parent
Basic	4	(29.89p)	3.98p
Diluted	4	(28.91p)	3.88p

 

 

Consolidated statement of comprehensive income

for the year ended 31 December 2016

 

 

	2016 £’000	2015 £’000
(Loss)/Profit for the year after taxation	(4,146)	471
Other comprehensive income Items that will not be reclassified to profit or loss
Revaluation of land and buildings	135	182
Revaluation of land and buildings – unrealised exchange gain	279	13
	414	195
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain on translation of overseas subsidiaries	827	58
	827	58
Other comprehensive income	1,241	253
Total comprehensive (loss)/income for the year	(2,905)	724
Total comprehensive (loss)/income attributable to:
Owners of the parent	(2,905)	717
Non controlling interest	-	7

Consolidated statement of changes in equity

for the year ended 31 December 2016

 

 

	Share capital £’000	Share premium £’000	Capital reserve £’000	Retained earnings £’000	Translation reserve £’000	Shares held by ESOP £’000	Revaluation reserve £’000	Share based payment reserve £’000	Total equity attributable to owners of the parent £’000	Non- controlling interest £’000	Total equity £’000
At 1 January 2015	4,631	–	6,475	8,607	(2,750)	(495)	1,668	–	18,136	172	18,308
Comprehensive income for the year:
Profit/(Loss) for the year after taxation	–	–	–	474	–	–	–	–	474	(3)	471
Other comprehensive income:
Gain on the revaluation of buildings	–	–	–	–	–	–	172	–	172	10	182
Unrealised exchange gain on translation of foreign subsidiaries	–	–	–	–	58	–	13	–	71	–	71
Total other comprehensive income	–	–	–	–	58	–	185	–	243	10	253
Total comprehensive income for the year	–	–	–	474	58	–	185	–	717	7	724
Transactions with owners:
Proceeds from shares issued	2,313	2,984	–	–	–	–	–	–	5,297	–	5,297
Total transactions with owners	2,313	2,984	–	–	–	–	–	–	5,297	–	5,297
At 1 January 2016	6,944	2,984	6,475	9,081	(2,692)	(495)	1,853	–	24,150	179	24,329
Comprehensive income for the year:
Loss for the year after taxation	–	–	–	(4,146)	–	–	–	–	(4,146)	–	(4,146)
Other comprehensive income:
Gain on the revaluation of buildings	–	–	–	–	–	–	135	–	135	–	135
Unrealised exchange gain on translation of foreign subsidiaries	–	–	–	–	827	–	279	–	1,106	–	1,106
Total other comprehensive income	–	–	–	–	827	–	414	–	1,241	–	1,241
Total comprehensive (expense)/income for the year	–	–	–	(4,146)	827	–	414	–	(2,905)	–	(2,905)
Share based payment expense	–	–	–	–	–	–	–	29	29	–	29
Purchase of non controlling interest	–	–	–	–	–	–	–	–	–	(179)	(179)
At 31 December 2016	6,944	2,984	6,475	4,935	(1,865)	(495)	2,267	29	21,274	–	21,274

 

 

 

Balance sheet

as at 31 December 2016

 

 

	2016 £’000	2015 £’000
ASSETS
Non-current assets
Property, plant and equipment	12,106	10,679
Intangible assets	243	273
Investments in subsidiary undertakings	–	–
Deferred income tax asset	1,800	1,676
Total non-current assets	14,149	12,628
Current assets
Inventories	17,353	18,872
Trade and other receivables	4,388	4,017
Cash and cash equivalents	206	485
Current income tax recoverable	38	26
Total current assets	21,985	23,400
Total assets	36,134	36,028
LIABILITIES
Current liabilities
Trade and other payables	(4,362)	(4,664)
Interest bearing loans, borrowings and overdrafts	(6,781)	(3,806)
Total current liabilities	(11,143)	(8,470)
Non-current liabilities
Deferred income tax liability	(183)	(92)
Interest bearing loans, borrowings and overdrafts	(3,534)	(3,137)
Total non-current liabilities	(3,717)	(3,229)
Total liabilities	(14,860)	(11,699)
Net assets	21,274	24,329
EQUITY
Share capital	6,944	6,944
Share premium	2,984	2,984
Capital reserve	6,475	6,475
Shares held by ESOP	(495)	(495)
Share based payment reserve	29	–
Translation reserve	(1,865)	(2,692)
Revaluation reserve	2,267	1,853
Retained earnings	4,935	9,081
Total equity attributable to owners of the parent	21,274	24,150
Non-controlling interest	–	179
TOTAL EQUITY	21,274	24,329

 

 

 

 

Statement of cash flows

for the year ended 31 December 2016

 

	Note	2016 £’000	2015 £’000
Cash flows from operating activities
Cash (used in)/generated from operations	5	(1,336)	962
Tax paid		(81)	(183)
Interest paid		(480)	(447)
Net cash (used in)/generated from operating activities		(1,897)	332
Cash flows from investing activities
Purchases of property, plant and equipment		(1,181)	(4,350)
Purchases of intangible assets		(5)	(108)
Purchase of investments		(192)	–
Net cash used in investing activities		(1,378)	(4,458)
Cash flows from financing activities
Proceeds from borrowings		2,364	3,651
Repayment of bank loans		(1,658)	(1,733)
New finance lease obligations		374	35
Repayment of obligations under finance leases and hire purchase obligations		(88)	(42)
Proceeds from share issue (net of costs)		–	5,297
Net cash generated from financing activities		992	7,208
(Decrease)/increase in cash and cash equivalents		(2,283)	3,082
Cash and cash equivalents at beginning of the year		(1,474)	(4,551)
Exchange gains/(losses) on cash and cash equivalents		19	(5)
Cash and cash equivalents at end of the year		(3,738)	(1,474)

 

 

 

 

Notes

 

1.     The figures for the years ended 31 December 2016 and 2015 do not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The figures for the year ended 31 December 2016 have been extracted from the statutory accounts for that year which have yet to be delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. A full Report and Accounts for the year ended 31 December 2015, on which the auditor has issued an unqualified audit report has been delivered to the Registrar of Companies. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts.

The preliminary announcement was approved by the board of directors and authorised for issue on 20 March 2017.

2.     Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the European Union (“IFRS”) and IFRS IC interpretations in issue at the balance sheet date.

 

The consolidated financial statements have been prepared in accordance with the Companies Act 2006, applicable to companies reporting under IFRS.

 

The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2016 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards (‘IFRS’).

 

 

3.     Exceptional items

	2016 £’000	2015 £’000
Cost of sales – exceptional stock provision	4,307	–
Administrative expenses – exceptional restructuring costs	–	312
	4,307	312

 

The Board have conducted a detailed review of the stock holding and have decided to take a £4.307m provision reducing the year end stock to £17.353m. This takes into account: the impact of currency translation, slow moving stock and the potential strategic shift in the business moving towards a higher proportion of hide business. The provision relates to low end dress and sport glove leather, with a write down of £1.271m in the UK and £3.036m in Ethiopia.

4.     (Loss)/Earnings per ordinary share

	2016 £’000	2015 £’000
Analysis of the (loss)/profit in the year:
(Loss)/Profit for the year attributable to owners of the parent	(4,146)	474
Weighted average number of ordinary shares in issue (excluding the shares owned by the Pittards Employee Share Ownership Trust)	’000s	’000s
Basic	13,870	11,900
Diluted	14,341	12,201
Basic (loss)/earnings per ordinary 50p share	(29.89p)	3.98p
Diluted (loss)/earnings per ordinary 50p share	(28.91p)	3.88p

 

  

5.     Cash (used in)/generated from operations

 

	Group
	2016 £’000	2015 £’000
(Loss)/Profit before taxation	(4,071)	655
Adjustments for:
Depreciation of property, plant and equipment	605	456
Amortisation	35	22
Bank and other interest charges	480	447
Share based payment expense	29	-
Other non-cash items in Income Statement	(61)	(47)
Operating cash flows before movement in working capital	(2,983)	1,533
Movements in working capital (excluding exchange differences on consolidation):
Decrease/(increase) in inventories	2,912	(1,003)
(Increase)/decrease in receivables	(194)	911
(Decrease)/increase in payables	(1,071)	(479)
Cash (used in)/generated from operations	(1,336)	962

 

6.     Taxation

The Group has recognised a deferred tax asset of £1.800m (2015: £1.676m) in respect of losses out of a total potential deferred tax asset of £1.800m (2015: £1.676m).

The tax charge reduced to £0.075m (2015: £0.184m), mainly as a result of the creation of tax losses following the performance during the year, offset by a historic tax charge in Ethiopia.

 

7.     Copies of the 2016 Annual Report and Accounts will be posted to shareholders in April and will be available on the Company’s website at www.pittards.com. Further copies may be obtained by contacting the Company Secretary at Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA. The annual general meeting is to be held at the registered office on 16 May 2017 at 12pm.

 

END

 

 

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