Final Results

Pittards PLC 18 March 2005 Pittards plc Pittards plc produces technically advanced leather for many of the world's leading brands of gloves, shoes, luxury leathergoods and sports equipment. 18 March 2005 Results for the year ended 31 December 2004 Summary Year ended Year ended 31 Dec 2004 31 Dec 2003 Â£m Â£m Turnover 73.2 85.4 Percentage export 87% 86% Operating (loss) profit before exceptional and discontinuance costs (2.5) 1.5 Exceptional and discontinuance costs (2.3) - Operating (loss) profit (4.8) 1.5 (Loss) profit before tax (5.5) 1.0 (Loss) earnings per share (20.8p) 2.1p Ordinary dividend - 1.5p Net assets per share 72p 93p Stephen Boyd, Chairman of Pittards, commented: 'The international market for leather has remained depressed during the second half of the year, and the weakness of the US dollar continues. During 2004 we have suffered the costs of restructuring the business, and closing the loss making Raw Materials Division. The benefits from ongoing cost savings and efficiency improvements and from our investment in IT will be felt in 2005. The international market for leather is not expected to recover before the second quarter. However, with the exports still increasing, with a lower cost base far more in line with current level of demand and with strong growth in areas of new product introductions, the Company is better placed to make progress in the first half of 2005.' - ends - For further information, please contact: Stephen Boyd - Chairman John Buckley - Group Financial Director Pittards plc Tel: 01935 474321 Results for the year ended 31 December 2004 Chairman's statement In our interim statement, we announced a pre-tax loss of Â£1.2m. This was slightly less than estimated in our July trading update which had made it clear that we were experiencing harsh trading conditions as a result of the continued weakness of the US dollar, destocking by customers and generally reduced demand. The view was expressed in the interim statement that with the benefit of ongoing cost savings and efficiency improvements, we could expect our continuing activities to operate profitably in the second half of the year. However, towards the end of the year, the absence of any discernible recovery in the international market for leather made it necessary for us to issue another trading update to the effect that it was unlikely that the continuing activities would operate profitably in the second half of the year. In the event, with further substantial exceptional items having to be taken into account, second half losses exceeded those recorded in the first half. Pre-tax losses for the year as a whole have emerged at Â£5.5m after Â£2.5m of exceptional costs and costs on discontinued operations, none of which are recurring, principally relating to the closure of the Raw Materials Division. In these circumstances, the directors are unable to recommend the payment of a final ordinary dividend. Sales turnover for the year was Â£73.2m (2003 - Â£85.4m), 87% of which was to customers outside the UK (2003 - 86%). The international market for leather remained depressed throughout the year and the volume of finished leather sold by us was 17% less than in 2003. The average sterling price per foot was virtually unchanged as the depreciation of the US dollar was broadly offset by dollar price increases, and by changes in the mix of business. The Raw Materials Division ceased the production of sheepskin pelts at its Langholm factory on 8 October 2004. The sale of the factory for Â£0.12m was completed on 17 December 2004. The Division's loss for the year, including the costs associated with the closure, was Â£1.7m and has been shown separately as ' discontinued' in the accompanying financial statements. Conditional contracts for the sale of the Raw Materials Division's remaining former factory site at Kinghorn, Fife, for a price of Â£3.15m were exchanged on 24 December 2004. Completion of the sale is conditional upon receipt of an outline planning consent satisfactory to the purchaser. Approximately 10 acres of this 25 acre site are zoned for residential development in the Kirkcaldy Area Local Plan. An application for outline planning consent in conformity with the Local Plan was submitted in August 2003. At the year-end, we thought it appropriate to obtain a professional open market valuation of the site. The valuation has not been incorporated in the balance sheet as the asset is disclosed as a Current Asset to which the alternative valuation rules permitted by FRS 15 'Accounting for Fixed Assets' do not apply. Had the Group been permitted to show the asset at its open market value for redevelopment, a surplus of Â£2.1m, net of selling costs of Â£0.1m, would have been transferred to reserves, increasing shareholders' funds to Â£20.1m. Net assets, as at 31 December 2004, were Â£18.0m, equivalent to 72.1p per ordinary share. Total borrowings rose to Â£11.7m (2003 - Â£10.3m) and gearing rose to 65% (2003 - 46%). This was primarily as a result of the degree to which the unwinding of working capital in both the continuing and discontinued businesses fell short of the operating losses and exceptional costs for the year. The project to implement a new enterprise resource planning computer system which began in mid-2003 was completed towards the end of the year. We are starting to see the benefits of enhanced planning and resource allocation information as we move into 2005. More than three quarters of the Glove Leather Division's sales are denominated in US dollars. The sterling value of turnover in the year fell by 13%, and the underlying volume by 10%. Strong growth was achieved in sales to the military and service sectors, based on the introduction of our technically advanced Custom Image Generation leathers, and also to the golf market based on new product introductions with Titleist FootJoy. However, the loss in volume sales of leather for dress gloves, baseball batters' gloves and for comfort shoes more than offset these achievements as the Division lost ground to competitors who were largely unaffected by the weakness of the US dollar and who priced accordingly. The Division has been vigorously addressing its cost base. Although its raw material purchases are denominated in US dollars, the majority of its other costs, particularly payroll, are in sterling. During the year, management has reduced the numbers employed at all levels within the Yeovil business from 297 to 255 (14%) through a combination of natural wastage and redundancy. The Shoe and Leathergoods Division suffered an 11% drop in turnover compared with 2003, with finished leather sales volumes down by 22%. The volume shortfall arose mainly in the leisure footwear sector where two significant customers - one European and one Asian - undertook substantial destocking exercises at different stages during the year. Sales to the sports footwear and leathergoods sectors held up well, but with some sacrifice to margin, as a result of the dollar's devaluation. The Division has been attacking its cost base in Leeds, and has reduced the numbers employed throughout the business from 375 to 333 (11%) during the course of the year. The Company's entire issued ordinary share capital and preference share capital were admitted to trading on AIM with effect from 30 September 2004. The transfer from the Official List of the London Stock Exchange has reduced both the burden and the cost of compliance to a level more appropriate to the size of the Company. John Pittard decided to relinquish his responsibilities as Chief Executive of the Group with effect from 1 September 2004, and resigned from the Board. Robert Paisley, Managing Director of the Raw Materials Division also resigned from the Board on 1 September 2004, following the Board's decision to close that Division. John Pittard and Robert Paisley have each completed more than forty years of dedicated and loyal service and we thank them both for their considerable contribution to the Group during that time. Robert Tomkinson, who had been Chairman since 1997, retired from the Board on 6 December 2004. We thank him for his contribution over the last seven years. I joined the Group as of 1 September 2004 as Deputy Executive Chairman and was appointed Chairman on 6 December, following Robert Tomkinson's retirement. Although the international market for leather is not expected to recover much before the second quarter, we have entered 2005 with a cost base more in line with the current depressed level of demand. The total number of employees in early 2005 is less than 600, and compares with 770 twelve months ago. We have made substantial savings in central overheads, some of which were made possible by the transfer to AIM. We shall be carrying out progessively more of our initial processing closer to source. Our investment in research and development continues to support our strategy to provide customers with innovative leathers which are differentiated from competing products by their performance, properties, quality and consistency. The investment in an integrated IT infrastructure will enhance our ability to allocate our resources effectively and to provide our customers with the highest standards of service. Stephen Boyd Chairman 18 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 Year ended Year ended Continuing Discontinued 31 Dec 31 Dec Trading Exceptional Total 2004 2003 Note (a) Note (b) Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 58,478 - 58,478 14,676 73,154 85,429 Cost of sales (50,755) - (50,755) (14,703) (65,458) (71,523) Gross profit 7,723 - 7,723 (27) 7,696 13,906 Distribution costs (4,845) - (4,845) (573) (5,418) (6,056) Administrative expenses (5,370) (802) (6,172) (934) (7,106) (6,340) Operating profit (2,492) (802) (3,294) (1,534) (4,828) 1,510 Interest payable (672) (486) Profit on ordinary activities (5,500) 1,024 before taxation Taxation 1,349 (323) Profit on ordinary activities (4,151) 701 after taxation Dividends - equity and 2 (257) (588) non-equity Transfer to reserves (4,408) 113 Earnings per share - basic 3 (20.8p) 2.1p - diluted 3 (20.8p) 2.0p (a) Continuing operations - exceptional relates to redundancy and other related costs of reorganising the continuing operations of the business. (b) Discontinued operations comprises the results of the Raw Materials Division. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES for the year ended 31 December 2004 Year ended Year ended 31 Dec 31 Dec 2004 2003 Â£'000 Â£'000 (Loss) profit for period (4,151) 701 Due to the implementation of UITF 38 - Accounting for ESOP Trusts, net assets have reduced by Â£342,000 as explained in Note 1. CONSOLIDATED STATEMENT OF MOVEMENT ON SHAREHOLDERS' FUNDS for the year ended 31 December 2004 Year ended Year ended 31 Dec 31 Dec 2004 2003 Note Â£'000 Â£'000 At 1 January as previously reported 22,723 22,596 Prior year adjustment 1 (342) (399) At 1 January as restated 22,381 22,197 Total recognised gains & losses (4,151) 701 Dividends (257) (588) Cost of own shares purchased (15) (51) Share based expense recognised in the profit & loss 5 108 account Issue of new shares - 14 At end of period 17,963 22,381 CONSOLIDATED BALANCE SHEET as at 31 December 2004 31 Dec 31 Dec 2004 2003 Restated Note Â£'000 Â£'000 Fixed assets Tangible fixed assets 17,774 17,984 Current assets Assets held for resale 4 748 481 Stocks 10,171 13,728 Debtors 9,029 9,941 Cash at bank & in hand 23 22 19,971 24,172 Creditors - amounts falling due within one year Bank loans & overdrafts (7,163) (9,937) Trade creditors (4,509) (5,270) Other creditors (3,757) (3,126) (15,429) (18,333) Net current assets 4,542 5,839 Total assets less current liabilities 22,316 23,823 Provisions for liabilities & charges - (1,180) Creditors - amounts falling due after more than one year (4,353) (262) 17,963 22,381 Capital & Reserves Called up share capital 8,227 8,227 Own shares (495) (485) Reserves 10,231 14,639 Shareholders' funds (including Â£2,701,500 attributable to non-equity interests) 17,963 22,381 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2004 Year ended Year ended 31 Dec 2004 31 Dec 2003 Restated Note Â£'000 Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 5 1,210 1,228 Returns on investments and servicing of finance Interest paid (613) (478) Preference dividends paid (257) (257) Net cash outflow from returns on investments and servicing of (870) (735) finance Taxation UK corporation tax paid - (454) UK corporation tax received 135 - Net cash outflow from taxation 135 (454) Capital expenditure and financial investment Purchase of tangible fixed assets (1,281) (2,425) Sale of tangible fixed assets 170 14 Net cash outflow from capital expenditure and financial (1,111) (2,411) investment Equity dividends paid (110) (629) Net cash outflow before financing (746) (3,001) Financing Issue of shares on exercise of options - 14 Purchase of matching shares under Restricted Share Plan (15) (51) New bank loans 4,499 - Repayment of bank loans (101) - Capital element of finance lease rental repayments (243) (131) Net cash inflow (outflow) from financing 4,140 (168) Increase (decrease) in cash 3,394 (3,169) Reconciliation of net cashflow to movement in net debt Increase (decrease) in cash 3,394 (3,169) Repayment of bank loans 101 - Capital element of finance lease rentals and hire purchase repayments 243 131 New bank loans (4,499) - Change in net debt resulting from cash flows (761) (3,038) New finance lease arrangements and hire purchase contracts (610) (204) Movement in net debt (1,371) (3,242) Net debt at 1 January (10,308) (7,066) Net debt at 31 December (11,679) (10,308) Notes 1. The figures for the year ended 31 December 2004 are unaudited and do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2003, set out above, are extracted from the full accounts for that year with the exception of a restatement relating to the change in accounting policy set out below. A full Report and Accounts for 2003 including an unqualified report from the auditors, has been filed with the Registrar of Companies. In preparing the financial statements for the current year the Group has adopted Urgent Issues Task Force Abstract 38 'Accounting for ESOP Trusts'. This requires that the cost of own shares, previously reported as a fixed asset investment, be shown as a deduction from shareholders' funds. A prior year adjustment has been made to reflect this change. There has been no impact on the prior or current year profit & loss account. The Group's opening net assets have been reduced by Â£342,000 from Â£22,723,000 to Â£22,381,000. The Company's opening net assets have been reduced by Â£342,000 from Â£15,111,000 to Â£14,769,000. Prior year comparatives have been restated accordingly. 2. Dividends 2004 2003 Â£'000 Â£'000 Equity: Ordinary interim - nil per share (2003 - 1.00p) - 221 Ordinary final proposed - nil per share (2003 - 0.50p) - 110 Total ordinary for year - nil per share (2003 - 1.50p) - 331 Non-equity: Preference paid 30 June and 31 December 257 257 257 588 3. Earnings per ordinary share Basic earnings per ordinary share are based on the loss on ordinary activities after taxation and preference dividends of Â£4,408,000 (2003 - profit Â£444,000) and 21,156,000 ordinary shares, being the weighted average number of ordinary shares in issue during the year after excluding the shares owned by the Pittards Employee Share Ownership Trust. In 2004, the number of dilutive potential ordinary shares was nil (2003 - 25,000) relating to employee share options, and nil (2003 - 453,000) relating to employee long term incentive plans. This gives a total weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share for 2004 of 21,156,000 (2003 - 21,672,000). 4. Assets held for resale Assets held for resale are carried at the lower of cost and net realisable value. A full valuation of the property was carried out by Jones Lang LaSalle (Scotland) Ltd, Chartered Surveyors, at 31 December 2004. In their opinion the open market value for redevelopment at that date was Â£3,000,000 compared with the net book amount of Â£748,000. The valuation has not been incorporated in the balance sheet as the asset is disclosed as a Current Asset to which the alternative valuation rules permitted by FRS 15 'Accounting for Fixed Assets' do not apply. Had the Group been permitted to show the asset at its open market value for redevelopment a surplus of Â£2,172,000, net of selling costs of Â£80,000, would have been transferred to reserves, increasing shareholders' funds to Â£20,135,000. 5. Note to the statement of cashflows Reconciliation of operating profit to net cash flows from operating activities 2004 2003 restated Â£'000 Â£'000 Operating (loss) profit (4,828) 1,510 Depreciation charges 1,787 1,684 Share based expense 5 108 Loss on sale of tangible fixed assets 144 3 Increase in assets held for resale (267) (140) Decrease (increase) in stocks 3,557 (449) Decrease in debtors 946 893 Decrease in creditors (134) (2,381) Net cash inflow from operating activities 1,210 1,228 6. Copies of the 2004 Annual Report and Accounts will be posted to shareholders in early April. 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 5 May 2005. This information is provided by RNS The company news service from the London Stock Exchange

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