Half-year Report

RNS Number : 7822B

Pittards PLC

25 September 2018

 

25 September 2018

PITTARDS PLC

("Pittards" or "the Group")

Interim results for the six months ended 30 June 2018

Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for retailers, manufacturers and distributors today announces its results for the six months ended 30 June 2018.

Half year ended 30 June 2018

§ Revenue increased 2% to £14.5m (H1 2017: £14.2m)

§ EBITDA increased to £0.8m (H1 2017: £0.7m)

§ Profit before tax £0.1m (H1 2017: £0.1m)

§ Net assets £20.1m (31 December: £19.8m)

§ Further progress developing targeted new business with orders to produce bulk sampling.

Stephen Yapp, Chairman commented: "The first six months of 2018 has seen satisfactory trading alongside continued investment to strengthen our operational capability and scalability.

The strategic priorities remain enhancing our offering to existing customers whilst developing new customers in the interiors and performance footwear markets. Good progress has been made in these areas allowing us to look ahead with confidence."

For further information, please contact:

Pittards plc	www.pittards.com
Stephen Yapp, Chairman Reg Hankey, CEO Matthew O'Rourke, CFO	[phone]
WH Ireland Limited	www.whirelandcb.com
Mike Coe, Chris Savidge	[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

for the SIX MONTHS ENDED 30 JUNE 2018

The first six months' results show satisfactory trading and progress in advancing our strategy. During this period we have continued to invest in people and technology to augment our operational capability. We have also made steady progress in embedding a more efficient supply chain.

This investment in resource and operations enables us to enhance our offering to existing customers and strengthen our capability and scalability for serving the targeted interiors and performance footwear markets.

Half year ended 30 June 2018

·      Revenue increased 2% to £14.5m (H1 2017: £14.2m)

·      EBITDA increased to £0.8m (H1 2017: £0.7m)

·      Profit before tax £0.1m (H1 2017: £0.1m)

·      Net assets £20.1m (31 December: £19.8m)

·      Further progress developing targeted new business with orders to produce bulk sampling.

Financial review

Revenue increased 2% to £14.5m, with increases in both the UK and Ethiopia. Due principally to a change in mix, gross margin for the first six months was 21.2%, down on the full year margin achieved last year of 23.4%.  

Profit before tax improved slightly year on year, to £0.1m, against an unfavourable foreign exchange backdrop and continuing investments to modernise our facilities and support potential business opportunities. In line with prior years, full year profits are anticipated to be weighted towards the second half of the year.

Net assets overall remained at similar levels to that in December. Inventory has increased by £0.4m since 31 December 2017, but is £1.2m lower than at the same time last year. The increase since December is due to new product sampling, partially offset by a reduction in slower moving stock, with inventory days of sale improving year on year from 282 to 249 days. The increase in net debt to £9.8m is primarily due to working capital timing differences which we anticipate will have predominantly reversed by the year end. It is also due to the investments made in new business opportunities. As at 30 June 2018 the headroom in our borrowing facilities was £3.6m.

Operational and strategic update

Globally, customers in our existing markets continue to experience a challenging environment arising from the prevailing uncertainty of geopolitical and market factors. Consequently, our UK facilities were affected by a reduction in orders for hide manufacturing towards the latter half of the period, although the production of skins remained stable.

The new government and recent lifting of the state of emergency are helpful to our Ethiopian Division, however, there are still some political uncertainties which we are monitoring closely. The manufacturing of utility and dress gloves remain our core finished product and we have expanded the training of our staff to accommodate our entrance into the casual shoes market, as we pursue our strategy to have a more balanced product portfolio. Alongside this, we continue to drive operational efficiencies through investments in technology and improving our supply chain management. Further investments are planned in the second half of the year to support the new product ranges and ongoing modernisation of our tannery. 

The initiatives to reduce slower moving stock continue to gain traction and now include a dedicated resource to identify innovative solutions for better utilisation. 

Encouragingly, our pipeline of opportunities within our target markets progressed further, with a few customers entering the significant final bulk sampling phase which typically precedes larger and repeat volumes. 

Outlook

As a large proportion of our production is exported, the introduction of tariff barriers globally is likely to create uncertainty which may have an effect on our core business in the second half.

However, against this backdrop our strategic priorities remain enhancing our offering to existing customers whilst developing new customers in the interiors and performance footwear markets. Good progress has been made in these areas allowing us to look ahead with confidence.

CONSOLIDATED INCOME STATEMENT

for the SIX MONTHS ENDED 30 JuNE 2018

		Six months ended 30 June 2018	Six months ended 30 June 2017	Year ended 31 December 2017
		£'000	£'000	£'000
		Unaudited	Unaudited	Audited
	Note
Revenue		14,505	14,229	30,287
Cost of sales		(11,426)	(10,866)	(23,194)
Gross profit		3,079	3,363	7,093
Distribution costs		(1,070)	(1,064)	(2,443)
Administrative expenses		(1,578)	(1,938)	(3,716)
Profit from operations before finance costs		431	361	934
Finance costs		(344)	(276)	(521)
Finance income		9	-	-
Profit before taxation		96	85	413
Taxation	4	29	(45)	84
Profit for the period after taxation		125	40	497
Earnings per share	3
Basic		0.90p	0.29p	3.58p
Diluted		0.90p	0.28p	3.49p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the SIX MONTHS Ended 30 JUNE 2018

	Six months ended 30 June 2018	Six months ended  30 June 2017	Year ended 31 December 2017
	£'000	£'000	£'000
	Unaudited	Unaudited	Audited
Profit for the period after taxation	125	40	497
Other comprehensive income Items that will not be reclassified to profit or loss
Revaluation of land and buildings	-	-	171
Revaluation of land and buildings - unrealised exchange gain/(loss)	29	(213)	(625)
	29	(213)	(454)
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain/(loss) on translation of overseas subsidiaries	172	(489)	(1,655)
Other comprehensive income/(loss)	201	(702)	(2,109)
Total comprehensive income/(loss) for the period	326	(662)	(1,612)

CONSOLIDATED statement of Changes in equity

for the six months ENDED 30 JUNE 2018

	Note	Share capital	Share premium	Capital reserve	Shares held by ESOP	Share based  payment reserve	Translation reserve	Revaluation reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2017		6,944	2,984	6,475	(495)	29	(1,865)	2,267	4,935	21,274
Comprehensive income for the period
Profit for the period after taxation		-	-	-	-	-	-	-	40	40
Other comprehensive income
Unrealised exchange loss on translation of foreign subsidiaries		-	-	-	-	-	(489)	(213)	-	(702)
Total other comprehensive loss		-	-	-	-	-	(489)	(213)	-	(702)
Total comprehensive (loss)/income for the period		-	-	-	-	-	(489)	(213)	40	(662)
Shared based payment expense		-	-	-	-	54	-	-	-	54
At 30 June 2017		6,944	2,984	6,475	(495)	83	(2,354)	2,054	4,975	20,666
Comprehensive income for the period
Profit for the period after taxation		-	-	-	-	-	-	-	457	457
Other comprehensive income
Gain on the revaluation of buildings		-	-	-	-	-	-	171	-	171
Unrealised exchange loss on translation of foreign subsidiaries		-	-	-	-	-	(1,166)	(412)	-	(1,578)
Total other comprehensive loss		-	-	-	-	-	(1,166)	(241)	-	(1,407)
Total comprehensive (loss)/income for the period		-	-	-	-	-	(1,166)	(241)	457	(950)
Share based payment expense		-	-	-	-	48	-	-	-	48
At 31 December 2017		6,944	2,984	6,475	(495)	131	(3,520)	1,813	5,432	19,764
Opening balance adjustment	2	-	-	-	-	-	-	-	(26)	(26)
At 1 January 2018		6,944	2,984	6,475	(495)	131	(3,520)	1,813	5,406	19,738
Comprehensive income for the period
Profit for the period after taxation		-	-	-	-	-	-	-	125	125
Other comprehensive income
Unrealised exchange gain on translation of foreign subsidiaries		-	-	-	-	-	172	29	-	201
Total other comprehensive income		-	-	-	-	-	172	29	-	201
Total comprehensive income for the period		-	-	-	-	-	172	29	125	326
Share based payment expense		-	-	-	-	58	-	-	-	58
At 30 June 2018		6,944	2,984	6,475	(495)	189	(3,348)	1,842	5,531	20,122

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2018

		30 June 2018	30 June 2017	31 December 2017
	Note	£'000	£'000	£'000
		Unaudited	Unaudited	Audited
Assets
Non-current assets
Property, plant and equipment		10,760	11,534	10,778
Intangible assets		178	227	209
Deferred income tax asset	5	1,967	1,761	1,901
Total non-current assets		12,905	13,522	12,888
Current assets
Inventories		15,701	16,956	15,332
Trade and other receivables		4,682	4,208	3,991
Cash and cash equivalents		91	469	327
Current income tax recoverable		-	46	41
Total current assets		20,474	21,679	19,691
Total assets		33,379	35,201	32,579
Liabilities
Current liabilities
Trade and other payables		(3,261)	(4,772)	(4,358)
Interest bearing loans, borrowings and overdrafts		(7,609)	(7,560)	(5,641)
Total current liabilities		(10,870)	(12,332)	(9,999)
Non-current liabilities
Deferred income tax liability	5	(154)	(178)	(140)
Interest bearing loans and borrowings		(2,233)	(2,025)	(2,676)
Total non-current liabilities		(2,387)	(2,203)	(2,816)
Total liabilities		(13,257)	(14,535)	(12,815)
Net assets		20,122	20,666	19,764
Equity
Share capital		6,944	6,944	6,944
Share premium		2,984	2,984	2,984
Capital reserve		6,475	6,475	6,475
Shares held by ESOP		(495)	(495)	(495)
Share based payment reserve		189	83	131
Translation reserve		(3,348)	(2,354)	(3,520)
Revaluation reserve		1,842	2,054	1,813
Retained earnings		5,531	4,975	5,432
Total equity		20,122	20,666	19,764

CONSOLIDATED STATEMENT of cash flows

for the SIX MONTHS ended 30 JUNE 2018

		Six months ended 30 June 2018	Six months ended  30 June 2017	Year ended  31 December 2017
	Note	£'000	£'000	£'000
		Unaudited	Unaudited	Audited
Cash flows from operating activities
Cash (used in)/generated from operations	6	(1,107)	1,191	2,299
Tax paid		(26)	-	(48)
Interest paid		(330)	(276)	(516)
Net cash (used in)/generated from operating activities		(1,463)	915	1,735
Cash flows from investing activities
Purchases of property, plant and equipment		(245)	(289)	(696)
Purchases of intangible assets		-	(2)	(2)
Net cash used in investing activities		(245)	(291)	(698)
Cash flows from financing activities
Proceeds from borrowings		1	737	1,096
Repayment of bank loans		(662)	(834)	(1,072)
New finance lease obligations		41	-	-
Repayment of obligations under finance leases		(41)	(41)	(84)
Net cash used in financing activities		(661)	(138)	(60)
(Decrease)/increase in cash and cash equivalents		(2,369)	486	977
Cash and cash equivalents at beginning of the period		(2,698)	(3,738)	(3,738)
Exchange gains on cash and cash equivalents		-	21	63
Cash and cash equivalents at end of the period		(5,067)	(3,231)	(2,698)

NOTES TO THE CONSOLIDATED ACCOUNTS (UNAUDITED)

1.     Basis of preparation

The financial information set out in the interim statements for the six months ended 30 June 2018 and the comparative figures are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. 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 International Financial Reporting Standards (IFRS).

The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2017. 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.

These financial statements are presented in sterling, being the functional currency of the primary economic environment in which the Group operates.

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"). 

The directors approved and authorised the interim statement for issue on 25 September 2018. 

2.     Opening balance adjustment

The Group has adopted IFRS 9 Financial Instruments (IFRS 9) and IFRS 15 Revenue from contracts with customers (IFRS 15) from 1 January 2018. The modified retrospective approach has been applied in both instances, with an adjustment made to opening retained earnings to reflect the brought forward position at the start of the year.

	1 January 2018
	£'000
IFRS 9 adjustment	17
IFRS 15 adjustment	9
	26

Under IFRS 9, the impairment of financial assets is now provided for on an expected loss basis, rather than incurred loss, resulting in an increase in the accounts receivable provisions of £0.017m as at 1 January 2018. The impact on the current period is to increase the accounts receivable provisions by £0.006m. 

Following the adoption of IFRS 15, any variable consideration, such as early payment discount, is considered as part of the initial recognition of revenue for the transaction and therefore shown as a reduction in total revenue, rather than a separate cost disclosed within distribution costs. An opening provision against accounts receivable in relation to variable consideration as at 1 January 2018 of £0.009m has been recognised. The impact on the current period is a reduction in revenue of £0.026m, a reduction in distribution costs of £0.019m and therefore an increase in the accounts receivable provisions of £0.007m. 

3.     Earnings per ordinary share

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.

	Six months ended  30 June 2018	Six months ended  30 June 2017	Year ended 31 December 2017
	£'000	£'000	£'000
Profit for the period after taxation	125	40	497
	Shares '000s	Shares '000s	Shares '000s
Weighted average number of ordinary shares in issue	13,870	13,870	13,870

b)   Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by the shares issued under the 2017 Save As You Earn (SAYE) scheme. The 2015 Long Term Incentive Plan (LTIP) lapsed in the period, with no shares issued.

	Six months ended  30 June 2018	Six months ended 30 June 2017	Year ended  31 December 2017
	£'000	£'000	£'000
Profit for the period after taxation	125	40	497
	Shares '000s	Shares '000s	Shares '000s
Weighted average number of ordinary shares in issue	13,879	14,304	14,224

4.     Taxation

	Six months ended  30 June 2018	Six months ended  30 June 2017	Year ended 31 December 2017
	£'000	£'000	£'000
Analysis of the charge in the period
The charge based on the profit for the period comprises:
Foreign tax on profit for the period	15	-	32
Foreign tax related to prior years	9	-	-
Total current tax	24	-	32
Deferred tax
Origination and reversal of temporary differences	(53)	45	(128)
Impact of change in UK tax rate	-	-	12
Total deferred tax	(53)	45	(116)
Income tax (credit)/charge	(29)	45	(84)

5.     Deferred taxation

	30 June 2018	30 June 2017	31 December 2017
	£'000	£'000	£'000
Deferred tax asset	1,967	1,761	1,901
Deferred tax liability	(154)	(178)	(140)
Deferred tax asset (net)	1,813	1,583	1,761

The Group has unrecognised deferred tax assets of £0.311m.

6.     Cash (used in)/generated from operations

	Six months ended 30 June 2018	Six months ended  30 June 2017	Year ended  31 December 2017
	£'000	£'000	£'000
Profit before taxation	96	85	413
Adjustments for:
Depreciation of property, plant and equipment	339	319	604
Amortisation of intangibles	31	18	36
Bank and other interest charges	335	276	521
Share based payment expense	58	54	102
Other non-cash items in Income Statement	125	87	(133)
Operating cash flows before movement in working capital	984	839	1,543
Movements in working capital (excluding exchange differences on consolidation):
(Increase)/decrease in inventories	(275)	(618)	(749)
(Increase)/decrease in receivables	(620)	29	(47)
(Decrease)/increase in payables	(1,196)	941	1,552
Cash (used in)/generated from operations	(1,107)	1,191	2,299

7.     Availability of interim report

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

 

END

 

 

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