Half-year Report

RNS Number : 8618M

Pittards PLC

19 September 2019

 

19 September 2019

PITTARDS PLC

("Pittards" or "the Group")

Interim results for the six months ended 30 June 2019

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 2019.

Half year ended 30 June 2019

·      Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)

·      EBITDA £0.8m (H1 2018: £0.8m)

·      Profit before tax increased to £0.2m (H1 2018: £0.1m)

·      Net assets £18.5m (31 December 2018: £18.5m)

·      Gross margin improved to 29.7% (31 December 2018: 25.1%)

·      Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing

Stephen Yapp, Chairman commented: "The themes outlined in our 2018 annual report have continued into the first half of 2019; we have delivered a solid financial performance against ongoing fluctuations in global trading and made important progress to diversify our business.

"The improvement in profitability reflects the hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers, whilst taking further steps to create a more balanced portfolio.

"We enter the second half of the year with a good order book, lower cost base and improved margins.  Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profit and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature."

For further information, please contact:

Pittards plc	www.pittards.com
Stephen Yapp, Chairman Reg Hankey, CEO Richard Briere	[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 2019

The first half of 2019 experienced a continuation of the themes outlined at the end of 2018; we delivered a solid financial performance against ongoing fluctuations in global trading and made further progress aligned with our strategic goals.

The improvement in profitability reflects the ongoing hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers whilst taking further steps to create a more balanced portfolio.

Half year ended 30 June 2019

§ Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)

§ EBITDA £0.8m (H1 2018: £0.8m)

§ Profit before tax increased to £0.2m (H1 2018: £0.1m)

§ Net assets £18.5m (31 December 2018: £18.5m)

§ Gross margin improved to 29.7% (31 December 2018: 25.1%)

§ Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing

Financial review

Revenue for the first half decreased 16% to £12.1m within both our UK and Ethiopian divisions as a result of a decrease in orders from our core customers and destocking within their supply chain. 

Profit before tax for the first half was double the equivalent period last year at £0.2m, a pleasing result given the reduction in sales volumes.

Continuing the improvement from last year where they stood at 25.1% for the full year, gross margins rose significantly to 29.7% helped by lower headcount in production, reduced raw material prices and currency gains.

Our stock level increased by £0.4m to £16.7m, although this was £0.2m lower than at the same point two years ago, and our slower moving stock at £2.2m remained unchanged since the year end. Despite pressure from lower volumes, and short-term timing effects on key bulk orders, we are encouraged that new channels and product ranges coupled with the more typical volumes we anticipate, will make some inroads in the second half.

Net assets were unchanged at £18.5m (December 2018 £18.5m). Net debt was unchanged at £9.8m compared with the same time last year although it was up £2.1m on December 2018 due to timing differences in working capital during the summer. We anticipate these timing differences will reverse by year end.

The tax charge for the period was £0.05m due to profits in Ethiopia. Generally, the Group enjoys a favourable tax position with significant prior year tax losses unutilised and anticipates minimal tax payments for the year ahead.

Operational and strategic update

Persistent global uncertainty continued to impact customers in our existing and target markets in the first half of the year and consequently, volumes in both our UK and Ethiopia divisions were depressed. Against this backdrop, we have delivered a stable financial performance, and ensured that the quality of service was maintained for all customers.

In the UK Division, the automotive market is gaining traction; automotive customers have increased their orders on an incremental steady basis signifying that we are now establishing ourselves as a manufacturer of this specialist upholstery, where both our quality and price point are positioning us attractively for future growth. 

The aviation markets are engaging with us directly and we are at various stages of the protracted sampling process with a number of potential customers. We have entered the bulk sampling stage with a big shoe provider and are actively in dialogue with others, again with our offering well placed to compete.

Alongside with its core gloving products, our Ethiopian operation has now established itself as a shoe manufacturer for Soul of Africa and Vivo Barefoot. Whilst a nascent market for us, it is growing on a steady basis. Accordingly, in the first half we invested in a new manufacturing production line, for which training is well progressed, and further modest investments are anticipated in the second half. Together with our own shoe manufacturing brand NTOTO, these products are helping to achieve our objective of a more balanced portfolio.

Board changes

As previously announced Richard Briere joined the Board as CFO on 19^th March 2019.

Outlook

The outcome of Brexit remains uncertain and could lead to a short-term impact to the movement of products, the quantum or timing of which is too speculative to judge accurately. However, with 90% of the Group's sales outside Europe and dual manufacturing production in our UK and Ethiopia divisions, we are optimistic that whilst the lack of clarity persists any risk can be managed within our existing model.

We enter the second half of the year with a good order book, lower cost base and improved margins. Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profits and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature.

 

CONSOLIDATED INCOME STATEMENT

for the SIX MONTHS ENDED 30 JuNE 2019

		Six months ended	Six months ended	Year ended
		30-Jun-19	30-Jun-18	31-Dec-18
	Note	£'000	£'000	£'000
		Unaudited	Unaudited	Audited
Revenue		12,132	14,505	28,469
Cost of sales		(8,528)	(11,426)	(21,318)
Gross profit		3,604	3,079	7,151
Distribution costs		(1,119)	(1,070)	(2,209)
Administrative expenses		(1,975)	(1,578)	(3,950)
Profit from operations before finance costs		510	431	992
Finance costs		(286)	(344)	(647)
Finance income		-	9	9
Profit before taxation		224	96	354
Taxation	4	(53)	29	(2,283)
Profit for the period after taxation		171	125	(1,929)
Earnings per share	3
Basic		1.23p	0.90p	(13.91p)
Diluted		1.22p	0.90p	(13.76p)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the SIX MONTHS Ended 30 JUNE 2019

		Six months ended	Six months ended	Year ended
		30-Jun-19	30-Jun-18	31-Dec-18
		£'000	£'000	£'000
		Unaudited	Unaudited	Audited
Profit for the period after taxation		171	125	(1,929)
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of land and buildings		-	-	219
Revaluation of land and buildings - unrealised exchange gain/(loss)		(47)	29	49
		(47)	29	268
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain/(loss) on translation of overseas subsidiaries		(159)	172	389
Fair value losses on foreign currency cash flow hedges		(19)	-	(52)
		(178)	172	337
Other comprehensive (loss)/income		(225)	201	605
Total comprehensive (loss)/income for the period		(54)	326	(1,324)

 

CONSOLIDATED statement of Changes in equity

for the six months ENDED 30 JUNE 2019

	Note	Share capital	Share premium	Capital reserve	Shares held by ESOP	Share based payment reserve	Cash flow hedge reserve	Translation reserve	Revaluation reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2018		6,944	2,984	6,475	(495)	131	-	(3,520)	1,813	5,432	19,764
Opening balance adjustment		-	-	-	-	-	-	-	-	(26)	(26)
At 1 January 2018 (restated)		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 loss on translation of foreign subsidiaries		-	-	-	-	-	-	172	29	-	201
Total other comprehensive loss		-	-	-	-	-	-	172	29	-	201
Total comprehensive (loss)/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
Comprehensive income for the period
Profit for the period after taxation		-	-	-	-	-	-	-	-	(2,054)	(2,054)
Other comprehensive income
Gain on the revaluation of buildings		-	-	-	-	-	-	-	219	-	219
Unrealised exchange loss on translation of foreign subsidiaries		-	-	-	-	-	-	217	20	-	237
Fair value losses on foreign currency cash flow hedges		-	-	-	-	-	(52)	-	-	-	(52)
Total other comprehensive expense		-	-	-	-	-	(52)	217	239	-	404
Total comprehensive (loss)/income for the period		-	-	-	-	-	(52)	217	239	(2,054)	(1,650)
Share based payment expense		-	-	-	-	14	-	-	-	43	57
At 31 December 2018		6,944	2,984	6,475	(495)	203	(52)	(3,131)	2,081	3,520	18,529
Comprehensive income for the period
Profit for the period after taxation		-	-	-	-	-	-	-	-	171	171
Other comprehensive income
Unrealised exchange gain on translation of foreign subsidiaries		-	-	-	-	-	-	(164)	(47)	-	(211)
Fair value losses on foreign currency cash flow hedges		-	-	-	-	-	(19)	-	-	-	(19)
Total other comprehensive income		-	-	-	-	-	(19)	(164)	(47)	-	(230)
Total comprehensive income for the period		-	-	-	-	-	(19)	(164)	(47)	171	(59)
Share based payment expense		-	-	-	-	42	-	-	-	-	42
At 30 June 2019		6,944	2,984	6,475	(495)	245	(71)	(3,295)	2,034	3,691	18,512

 

CONSOLIDATED BALANCE SHEET

AS AT 30 JUNE 2019

		30-Jun-19	30-Jun-18	31-Dec-18
	Note	£'000	£'000	£'000
		Unaudited	Unaudited	Audited
ASSETS
Non-current assets
Property, plant and equipment		10,970	10,760	11,006
Intangible assets		121	178	147
Deferred income tax asset	5	-	1,967	-
Total non-current assets		11,091	12,905	11,153
Current assets
Inventories		16,749	15,701	16,306
Trade and other receivables		4,695	4,682	3,306
Cash and cash equivalents		367	91	598
Current income tax recoverable		-	-	-
Total current assets		21,811	20,474	20,210
Total assets		32,902	33,379	31,363
LIABILITIES
Current liabilities
Trade and other payables		(4,069)	(3,261)	(4,350)
Interest bearing loans, borrowings and overdrafts		(8,491)	(7,609)	(7,756)
Total current liabilities		(12,560)	(10,870)	(12,106)
Non-current liabilities
Deferred income tax liability	5	(49)	(154)	(162)
Interest bearing loans, borrowings and overdrafts		(1,781)	(2,233)	(566)
Total non-current liabilities		(1,830)	(2,387)	(728)
Total liabilities		(14,390)	(13,257)	(12,834)
Net assets		18,512	20,122	18,529
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		245	189	203
Cash flow hedge reserve		(71)	-	(52)
Translation reserve		(3,295)	(3,348)	(3,131)
Revaluation reserve		2,034	1,842	2,081
Retained earnings		3,691	5,531	3,520
Total equity		18,512	20,122	18,529

 

CONSOLIDATED STATEMENT of cash flows

for the SIX MONTHS ended 30 JUNE 2019

		Six months ended	Six months ended	Year ended
		30-Jun-19	30-Jun-18	31-Dec-18
	Note	£'000	£'000	£'000
		Unaudited	Unaudited	Audited
Cash flows from operating activities
Cash (used in)/generated from operations	6	(814)	(1,107)	1,583
Tax paid		(350)	(26)	(11)
Interest paid		(254)	(330)	(634)
Net cash (used in)/generated from operating activities		(1,418)	(1,463)	938
Cash flows from investing activities
Purchases of property, plant and equipment		(491)	(245)	(588)
Purchases of intangible assets		-	-	-
Net cash used in investing activities		(491)	(245)	(588)
Cash flows from financing activities
Proceeds from borrowings		809	1	-
Repayment of bank loans		(472)	(662)	(1,304)
New finance lease obligations		200	41	41
Repayment of obligations under finance leases		(90)	(41)	(85)
Net cash used in financing activities		447	(661)	(1,348)
(Decrease)/increase in cash and cash equivalents		(1,462)	(2,369)	(998)
Cash and cash equivalents at beginning of period		(3,695)	(2,698)	(2,698)
Exchange gains on cash and cash equivalents		(3)	-	1
Cash and cash equivalents at end of period		(5,160)	(5,067)	(3,695)

 

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 2019 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 2018. 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 19 September 2019.

2.     New standards

The Group has adopted IFRS 16 Leases from 1 January 2019, using the modified retrospective method. Applying this method, the comparative information for the 2018 fiscal year has not been restated.

At 1 January 2019, the Group recognised right-of-use assets of £200k and lease liabilities of £200k. The Group has decided not to apply the new guidance to leases whose term will end within twelve months of the date of initial application. In such cases, the leases will be accounted for as short-term leases and the lease payments associated with them will be recognised as an expense from short-term leases. The following reconciliation to the opening balance for the lease liabilities as at 1 January 2019 is based upon the operating lease obligations as at 31 December 2018:

			Consolidated
			01-Jan-19
			£'000
Operating lease obligations at 31 December 2018			260
Minimum lease payments (notional amount) on finance lease liabilities at 31 December 2018			200
Relief option for short-term leases			(3)
Relief option for leases of low-value assets			(25)
Other			(26)
Gross lease liabilities at 31 December 2018			406
Discounting			(13)
Lease liabilities at 1 January 2019			393
Present value of finance lease liabilities as at 31 December 2018			(193)
Additional lease liabilities as a result of the initial application of IFRS 16 as at 1 January 2019			200

The lease liabilities were discounted at the borrowing rate as at 1 January 2019. The weighted average discount rate was 6.63%.

 

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	Six months ended	Year ended
	30-Jun-19	30-Jun-18	31-Dec-18
	£'000	£'000	£'000
Profit for the period after taxation	171	125	(1,929)
	'000s	'000s	'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.

	Six months ended	Six months ended	Year ended
	30-Jun-19	30-Jun-18	31-Dec-18
	£'000	£'000	£'000
Profit for the period after taxation	171	125	(1,929)
	'000s	'000s	'000s
Weighted average number of ordinary shares in issue	14,025	13,879	14,023

4.       Taxation

	Six months ended	Six months ended	Year ended
	30-Jun-19	30-Jun-18	31-Dec-18
	£'000	£'000	£'000
Analysis of the charge in the period
The charge based on the profit for the period comprises:
Corporation tax on profit for the year	-	-	263
Foreign tax on profit for the period	90	15	89
Foreign tax related to prior years	75	9	10
Total current tax	165	24	362
Deferred tax
Origination and reversal of temporary differences	(112)	(53)	26
Impact of change in UK tax rate	-	-	(6)
Derecognition of deferred tax asset	-	-	1,901
Total deferred tax	(112)	(53)	1,921
Income tax (credit)/charge	53	(29)	2,283

5.       Deferred taxation

	30-Jun-19	30-Jun-18	31-Dec-18
	£'000	£'000	£'000
Deferred tax asset	-	1,967	-
Deferred tax liabilities	(49)	(154)	(162)
Deferred tax asset (net)	(49)	1,813	(162)

The Group has unrecognised deferred tax assets of £1.9m.

 

6.     Cash (used in)/generated from operations

	Six months ended	Six months ended	Year ended
	30-Jun-19	30-Jun-18	31-Dec-18
	£'000	£'000	£'000
Profit before taxation	224	96	354
Adjustments for:
Depreciation of property, plant and equipment	357	339	705
Amortisation of intangibles	26	31	62
Bank and other interest charges	286	335	638
Share based payment expense	42	58	115
Other non-cash items in Income Statement	165	125	194
Operating cash flows before movement in working capital	1,100	984	2,068
Movements in working capital (excluding exchange differences on consolidation):
(Increase)/decrease in inventories	(581)	(275)	(710)
(Increase)/decrease in receivables	(1,377)	(620)	792
(Decrease)/increase in payables	44	(1,196)	(567)
Cash (used in)/generated from operations	(814)	(1,107)	1,583

7.     Availability of interim report

The interim report will be available on the Company's website www.pittards.com.

 

END

 

 

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