Half-year Report

RNS Number : 2461K

Pittards PLC

20 September 2016

 



20 September 2016

Pittards plc

("Pittards" or "the Company")

Interim Results

for the six months ended 30 June 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 six months ended 30 June 2016.

The key highlights for the half year were as follows:

Financial Highlights:

•       Revenue £13.4m (H1 2015: £15.6m)

•       EBITDA £0.8m (H1 2015: £1.0m)

•       Profit before tax of £0.3m (H1 2015: £0.6m)

•       Basic earnings per share of 1.56p (H1 2015: 4.47p), impacted by the share issue in June 2015

•       Net assets £24.8m (H1 2015: £23.8m)

Strategic Highlights:

•     Development of strategic roadmap making good progress with a number of medium-term initiatives defined and prioritised investments made

•     Board recruitment completed

Stephen Yapp, Chairman commented: "Pittards has traded profitably in a challenging first half in which we saw a continuation of the depressed demand for leather in similar market conditions to those at the end of 2015.

"We have made progress in identifying the Company's medium-term priorities and associated investment requirements, supported by an adequate cash position and solid balance sheet. 

"The second half continues to benefit from a favorable currency impact and the Board remains confident that the Company can deliver full year results in line with our expectations and the actions identified will help to build a platform for future growth." 

For further information please contact: 

Pittards plc	www.pittardsleather.com
Stephen Yapp, Chairman Reg Hankey, CEO	[phone]
Matt O'Rourke, CFO
WH Ireland Limited	www.whirelandplc.com
John Wakefield/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

INTRODUCTION

In my first letter to you as the Chairman of Pittards plc, I am reassured by the fundamentals of its businesses and encouraged about the opportunities that lie ahead. The Company is in a transitional phase and continues to operate in an uncertain economic environment. Against this backdrop, it had a challenging first half of 2016 although we made progress in determining the medium-term priorities.

The key highlights for the half year were:

Financial Highlights:

•       Revenue  £13.4m (H1 2015: £15.6m)

•       EBITDA £0.8m (H1 2015: £1.0m)

•       Profit before tax of £0.3m (H1 2015: £0.6m)

•       Basic earnings per share of 1.56p (H1: 2015 4.47p), impacted by the share issue in June 2015

•       Net assets £24.8m (H1 2015: £23.8m)

Strategic Highlights:

•     Development of strategic roadmap making good progress with a number of key medium-term initiatives defined and prioritised investments made

•     Board recruitment completed

MARKET CONDITIONS

Volumes in the leather industry remain depressed reflecting reduced demand from China and Russia and high inventories following mild winters which all have a direct impact on our markets.

Global leather sales are estimated to be worth over $85bn (source: UKLF). Pittards is targeting the following core markets: performance gloves, footwear, lifestyle and interiors, which play to our sales and manufacturing strengths, optimise our supply chain and give us a balanced portfolio. Golf remains an important market for us with the golf markets (gloves and shoes) in the US and the Rest of the World each worth approximately $500m.

RESULTS

Revenue declined by 14% to £13.4m. This reflected weaker global demand which affected all divisions with the exception of the Ethiopia Consumer Division which grew revenue year on year due to increased production and sales of work and dress gloves.

Gross Margin at 22.7% improved by 1 percentage point year on year mainly due to favourable raw material prices and currency rates. EBITDA was down to £0.8m from £1.0m as a consequence of reduced volumes and our investment in people.

Profit before tax reduced to £0.3m (H1 2015: £0.6m) and basic earnings per share to 1.56p (H1 2015 4.47p), also impacted by the share issue in June 2015.

As at 30 June 2016, net debt was £8.2m (H1 2015: £6.9m) reflecting investment in: the final instalment to buy ETSC (which is a main supplier of Ethiopian skins) of approximately £0.3m, buying out the minority interest in the Ethiopian-based Pittards Global Sourcing for £0.2m and capital investment of £0.8m.

STRATEGIC UPDATE

Pittards, proud of its heritage, is aware of the need to evolve as a business to remain competitive as it develops the next phase of growth.

We aim to extend our competitive edge within the identified markets that play to our strengths via innovation, service, manufacturing and marketing initiatives.  To facilitate this, we have updated the management structure and are recruiting to fill a small number of identified gaps.

The purchase of the freehold of the Yeovil site in 2015 secured the future of our UK manufacturing operations. As mentioned above, further investments were made in the first half to strengthen our Ethiopian operations and help modernise the UK Leather Division.

BOARD CHANGES

I was appointed Chairman on 16 May 2016 and would like to thank my predecessor Stephen Boyd for his valuable contribution during his time at the Company.

On 1 June, Matthew O'Rourke was appointed CFO bringing with him a wealth of industry and financial experience. As previously announced, effective from that date, Jill Williams resigned from this role and became a non-executive director.

OUTLOOK

Pittards has traded profitably in a challenging first half in which we saw a continuation of the depressed demand for leather in similar market conditions to those at the end of 2015.

We have made progress in identifying the Company's medium-term priorities and associated investment requirements, supported by an adequate cash position and solid balance sheet. 

The second half continues to benefit from a favourable currency impact and the Board remains confident that the Company can deliver full year results in line with our expectations and the actions identified will help to build a platform for future growth.

Stephen Yapp

Chairman

20 September 2016

 

Consolidated income statement (unaudited) for the six months ended 30 June 2016

Year ended 31 December 2015 £'000		Note	Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
30,523	Revenue		13,373	15,623
(23,902)	Cost of sales		(10,339)	(12,239)
6,621	Gross profit		3,034	3,384
(1,919)	Distribution costs		(857)	(1,016)
(3,275)	Administrative expenses		(1,555)	(1,616)
(312)	Administrative expenses - exceptional restructuring costs		(98)	-
1,115	Profit from operations before finance costs		524	752
(484)	Finance costs		(215)	(218)
24	Finance income		5	21
655	Profit before taxation		314	555
(184)	Taxation charge	2	(97)	(118)
471	Profit for the period after taxation		217	437
	Profit attributable to:
474	Owners of the parent		217	442
(3)	Non-controlling interest		-	(5)
471			217	437
	Earnings per share attributable to equity shareholders of the parent	1
3.98p	- basic		1.56p	4.47p
3.88p	- diluted		1.51p	4.47p

Consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2016

Year ended 31 December 2015 £'000		Six months ended June 2016 £'000	Six months ended June 2015 £'000
471	Profit for the period after taxation	217	437
	Other comprehensive income (expense) Items that will not be reclassified to profit or loss
182	Revaluation of land and buildings	-	-
13	Revaluation of land and buildings -  unrealised exchange gain (loss)	123	(63)
195		123	(63)
	Items that may be subsequently reclassified to profit or loss
58	Unrealised exchange gain (loss) on translation of overseas subsidiaries	353	(178)
58		353	(178)
253	Other comprehensive income (expense)	476	(241)
724	Total comprehensive income for the period	693	196
	Total comprehensive income (expense) attributable to:
717	Owners of the parent	693	207
7	Non-controlling interest	-	(11)

Consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2016

	Share capital £'000	Share premium £'000	Capital reserve £'000	Retained earnings £'000	Translation reserve £'000	Shares held by ESOP £'000	Revaluation reserve £'000	Total 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 period
Profit for the period after taxation	-	-	-	442	-	-	-	442	(5)	437
Other comprehensive income
Unrealised exchange loss on translation of foreign subsidiaries	-	-	-	-	(178)	-	(57)	(235)	(6)	(241)
Total other comprehensive income	-	-	-	-	(178)	-	(57)	(235)	(6)	(241)
Total comprehensive income for the period	-	-	-	442	(178)	-	(57)	207	(11)	196
Transactions with owners
Proceeds from share issue	2,313	2,984	-	-	-	-	-	5,297	-	5,297
Total transactions with owners	2,313	2,984	-	-	-	-	-	5,297	-	5,297
At 30 June 2015	6,944	2,984	6,475	9,049	(2,928)	(495)	1,611	23,640	161	23,801
Comprehensive income for the period
Profit for the period after taxation	-	-	-	32	-	-	-	32	2	34
Other comprehensive income
Gain on the revaluation of buildings	-	-	-	-	-	-	172	172	10	182
Unrealised exchange gain on translation of foreign subsidiaries	-	-	-	-	236	-	70	306	6	312
Total other comprehensive income	-	-	-	-	236	-	242	478	16	494
Total comprehensive income for the period	-	-	-	32	236	-	242	510	18	528
At 31 December 2015	6,944	2,984	6,475	9,081	(2,692)	(495)	1,853	24,150	179	24,329
Comprehensive income for the period
Profit for the period after taxation	-	-	-	217	-	-	-	217	-	217
Other comprehensive income
Unrealised exchange gain on translation of foreign subsidiaries	-	-	-	-	353	-	123	476	-	476
Total other comprehensive income	-	-	-	-	353	-	123	476	-	476
Total comprehensive income for the period	-	-	-	217	353	-	123	693	-	693
Transactions with owners
Purchase of non-controlling interest	-	-	-	-	-	-	-	-	(179)	(179)
Total transactions with owners	-	-	-	-	-	-	-	-	(179)	(179)
At 30 June 2016	6,944	2,984	6,475	9,298	(2,339)	(495)	1,976	24,843	-	24,843

Consolidated balance sheet (unaudited)

as at 30 June 2016

31 December 2015 £'000		Note	30 June 2016 £'000	30 June 2015 £'000
	ASSETS
	Non-current assets
10,679	Property, plant and equipment		11,448	10,170
273	Intangible assets		257	176
1,586	Deferred income tax asset	3	1,394	1,363
12,538	Total non-current assets		13,099	11,709
	Current assets
18,872	Inventories		20,139	18,378
4,017	Trade and other receivables		4,307	5,165
485	Cash and cash equivalents		358	249
26	Current income tax recoverable		54	38
90	Deferred income tax asset	3	234	321
23,490	Total current assets		25,092	24,151
36,028	Total assets		38,191	35,860
	LIABILITIES
	Current liabilities
(92)	Deferred income tax liability	3	-	(62)
(4,664)	Trade and other payables		(4,660)	(4,881)
-	Current income tax liability		(13)	-
(3,806)	Interest bearing loans, borrowings and overdrafts		(5,503)	(3,216)
(8,562)	Total current liabilities		(10,176)	(8,159)
	Non-current liabilities
-	Deferred income tax liability	3	(106)	-
(3,137)	Interest bearing loans, borrowings and overdrafts		(3,066)	(3,900)
(3,137)	Total non-current liabilities		(3,172)	(3,900)
(11,699)	Total liabilities		(13,348)	(12,059)
24,329	Net assets		24,843	23,801
	EQUITY
6,944	Share capital		6,944	6,944
2,984	Share premium		2,984	2,984
6,475	Capital reserve		6,475	6,475
(495)	Shares held by ESOP		(495)	(495)
9,081	Retained earnings		9,298	9,049
(2,692)	Translation reserve		(2,339)	(2,928)
1,853	Revaluation reserve		1,976	1,611
24,150	Total equity attributable to owners of the parent		24,843	23,640
179	Non-controlling interest		-	161
24,329	Total equity		24,843	23,801

Statement of cash flows (unaudited)

for the six months ended 30 June 2016

Year ended 31 December 2015 £'000		Note	Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
	Cash flows from operating activities
962	Cash generated from (used in) operations	4	(394)	(292)
(183)	Tax paid		(53)	(202)
(447)	Interest paid		(212)	(191)
332	Net cash generated from (used in) operating activities		(659)	(685)
	Cash flows from investing activities
(4,350)	Purchases of property, plant and equipment		(736)	(3,978)
(108)	Purchases of intangible assets		(1)	-
-	Purchase of investments		(191)	-
(4,458)	Net cash used in investing activities		(928)	(3,978)
	Cash flows from financing activities
3,651	Proceeds from borrowings		340	3,922
(1,733)	Repayment of bank loans		(376)	(957)
35	New finance lease obligations		337	35
(42)	Repayment of obligations under finance leases		(13)	(20)
5,297	Proceeds from share issue		-	5,297
7,208	Net cash generated from financing activities		288	8,277
3,082	Increase (decrease) in cash and cash equivalents		(1,299)	3,614
(4,551)	Cash and cash equivalents at beginning of period		(1,474)	(4,551)
(5)	Exchange (losses) gains on cash and cash equivalents		8	14
(1,474)	Cash and cash equivalents at end of period		(2,765)	(923)

Notes (unaudited)

1.  Earnings per share attributable to equity shareholders of the parent

     In the period to 30 June 2016, no new shares were issued (June 2015: 4,626,651).

     (a)  Basic

     Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year excluding the shares owned by the Pittards employee share ownership trust.

Year ended 31 December 2015 £'000		Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
474	Profit attributable to equity holders of the company	217	442
Shares '000		Shares '000	Shares '000
11,900	Weighted average number of ordinary shares in issue	13,870	9,886

(b)  Diluted

     Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by the shares issued under the 2015 Long Term Incentive Plan (LTIP).

Year ended 31 December 2015 £'000		Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
474	Profit attributable to equity holders of the company	217	442
Shares '000		Shares '000	Shares '000
12,201	Weighted average number of ordinary shares in issue	14,341	9,886

2.  Taxation

Year ended 31 December 2015 £'000		Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
	Analysis of the charge in the period The charge based on the profit for the year comprises:
2	Corporation tax on profit for the year	-	-
30	Foreign tax on profit for the year	13	13
-	Foreign tax related to prior years	27	-
32	Total current tax	40	13
	Deferred tax
(28)	Origination and reversal of temporary differences	57	105
180	Impact of change in UK tax rate	-	-
152	Total deferred tax	57	105
184	Income tax charge	97	118

3.  Deferred taxation

     The Group has recognised and unrecognised deferred tax assets in respect of temporary differences and losses.

Year ended 31 December 2015 £'000		Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
	Deferred tax assets
1,586	Deferred tax asset to be recovered after more than 12 months	1,394	1,363
90	Deferred tax asset to be recovered within 12 months	234	321
1,676		1,628	1,684
	Deferred tax liabilities
(92)	Deferred tax liability to be realised after more than 12 months	(106)	(62)
-	Deferred tax liability to be realised within 12 months	-	-
(92)		(106)	(62)
1,584	Deferred tax assets (net)	1,522	1,622

4. Cash used in operations

Year ended 31 December 2015 £'000		Six months ended 30 June 2016 £'000	Six months ended 30 June 2015 £'000
655	Profit before taxation	314	555
	Adjustments for:
456	Depreciation of property plant and equipment	283	215
22	Amortisation	17	11
447	Bank and other interest charges	210	191
(47)	Other non-cash items in Income Statement	(10)	7
1,533	Operating cash flows before movement in working capital	814	979
	Movements in working capital (excluding exchange differences on consolidation)
(1,003)	Increase in inventories	(651)	(835)
911	Decrease (increase) in trade and other receivables	(213)	(378)
(479)	Decrease in trade and other payables	(344)	(58)
962	Cash used in operations	(394)	(292)

5. Basis of preparation

     The financial information contained in this interim statement has not been audited or reviewed by the Company's auditor and does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The directors approved and authorised this interim statement for issue on 20 September 2016. The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2015. Those accounts, upon which the auditor issued an unqualified opinion, have been delivered to the Registrar of Companies. The auditor's report did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

     Pittards plc is a public limited company incorporated and domiciled under the Companies Act 2006 in England. It is quoted on the Alternative Investment Market ("AIM").

     These financial statements are presented in sterling as that is considered to be the functional currency of the primary economic environment in which the Group operates.

     As permitted this interim report has been prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 "Interim Financial Reporting" therefore it is not fully in compliance with IFRS.

6. Availability of interim report

     The interim report will be available at the Company's website www.pittards.com, in accordance with AIM Rule 20.

 

END

 

 

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