Interim Results

PITTARDS PLC 1 September 1999 Pittards plc produces technically advanced leather for many of the world's leading brands of gloves, shoes, luxury leathergoods and sports equipment. 1st September 1999 Interim Results for the six months ended 30 June 1999 Summary Six months ended Six months ended 30 June 1999 30 June 1998 Turnover £30.1m £39.2m Profit (loss) before taxation £0.9m £(0.7)m Earnings (loss) per share 3.5p (3.7)p Ordinary dividend 1.0p 1.0p Net assets per share 97.7p 94.5p Gearing 29.0% 38.0% * All three divisions traded profitably * Borrowings have reduced by £2m year on year * Interim dividend has been maintained * The increased commitment to innovation and accelerated pace of new product development is delivering results Robert Tomkinson, Chairman of Pittards, commented: 'The Company is making steady progress in spite of the unhelpful conditions in many of our markets. Current trading is reasonable and we are optimistic about prospects for the year as a whole.' For further information, please contact: John Pittard - Group Managing Director John Buckley - Group Financial Director Pittards plc - Tel: 01935 474321 Chairman's Interim Statement The Company continues to make steady progress overall in spite of the generally unhelpful conditions in many of our markets. The profit before tax for the six months ended 30 June 1999 was £0.9M compared to a loss of £0.7M in the first half of last year, and a profit of £0.8M in the second. General world demand for leather in the sport and leisure sectors remained depressed throughout the period, and sales turnover of £30.1M was 23% less than at the interim stage in 1998. This reduction was in part due to lower underlying raw material prices, but mainly the result of the temporary reduction in the requirements of certain customers of the Glove Leather Division of which I warned shareholders at our AGM in May. I am pleased to report that the orders from those customers for the balance of the year are rebuilding steadily. There was no tax charge in the period due to the availability of tax losses brought forward and, after allowing for the preference dividend, the earnings were £0.7m, equivalent to 3.5 pence per share. (1998 - 3.7p loss per share). Your board has declared an interim ordinary dividend of 1.0p (1998 - 1.0p per share) which will be paid on 1 November 1999 to shareholders on the register on 1 October 1999. The Glove Leather Division achieved year on year growth in all segments of its business other than golf. Elsewhere in the sports sector, notably baseball, volumes were good, as were sales to dress and service glove manufacturers. However, the overall volume of sales in the Division was 19% down on the first half of 1998, and this was entirely attributable to a phase of destocking by companies supplying golf gloves which began in the latter part of last year. Current indications are that this phase is now over, and demand is beginning to improve. The full impact of lower sales volume on the Division's profit margin was mitigated by measures taken to reduce operational gearing, which include the tight management of costs, and further improvements in production efficiency. The increased commitment to innovation, and initiatives to accelerate the process of new product development are already delivering results, and promises much for the future. The recovery in profitability in the Shoe and Leathergoods Division during the second half of 1998 continued into the first half of this year. Although, the pace of this recovery has been tempered by the generally poor world demand for leather, new product introductions have contributed to an overall improvement of 13% in sales volume. Better raw material utilisation, increased productivity and reduced costs have helped to counter the effects of intense pressure on margins and the continued strength of sterling. The Raw Materials Division has traded profitably since the collapse in the sheepskin market in the Autumn of last year. The price of sheepskins remained at low levels for most of the first half, and this has prompted an increasing demand from garment leather producers in Southern Europe and Asia. The Division's profit for the first six months of the current year was usefully ahead of that for the same period in 1998. After a period of substantial investment in both manufacturing divisions in recent years, capital expenditure has been kept low during the first half of the year and is planned to remain so in the second. Bank borrowings at 30 June 1999 were £7.0M (29% of Shareholders funds) compared with £8.9M (38%) at the same point last year. Borrowings have increased by £2M since the beginning of the year but this is in line with the seasonal working capital cycle in our business. The lower level of borrowings in the current year, coupled with the benefit of lower interest rates resulted in the halving of interest costs in the period, compared with the first half of last year. Year 2000 issues and the Group's approach to addressing them were described in the 1998 Report and Accounts. Our plan to ensure that all significant risks are covered well in advance of critical dates with minimum disruption to the business is being executed in line with the original timescales set. Current trading is reasonable and we are optimistic about our prospects for the year as a whole. However we are conscious of the importance of the continued prosperity of the US economy to our business and to the global economy. CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED) for the six months ended 30 June 1999 Year ended Six months Six months 31 December ended 30 June ended 30 June 1998 1999 1998 £'000 Note £'000 £'000 74,320 Turnover 30,142 39,216 ------ ------ ------ 1,016 Operating profit (loss) 1,140 (231) ------ ------ ------ Profit (loss) on ordinary 1,016 activities before interest 1,140 (231) (931) Net interest payable (243) (488) ------ ------ ------ Profit (loss) on ordinary 85 activities before taxation 897 (719) 99 Taxation - 51 ------ ------ ------ Profit (loss) on ordinary 184 activities after taxation 897 (668) ------ ------ ------ (0.5p) Earnings (loss) per share 1 3.5p (3.7p) ------ ------ ------ Dividends 285 Preference 143 143 763 Ordinary 218 218 ------ ------ ------ 1,048 361 361 ------ ------ ------ (864) Retained profit (loss) 536 (1,029) ------ ------ ------ There were no discontinued activities in 1999 or 1998. The results relate entirely to continuing operations. CONSOLIDATED BALANCE SHEET (UNAUDITED) as at 30 June 1999 31 December 30 June 30 June 1998 1999 1998 £'000 £'000 £'000 18,869 Fixed assets 18,262 19,655 ------ ------ ------ Current assets 12,229 Stocks 11,767 13,665 7,153 Debtors 8,912 9,913 23 Investments 15 32 57 Cash at bank and in hand 44 40 ------ ------ ------ 19,462 20,738 23,650 ------ ------ ------ Creditors - Amounts falling due within one year (3,596) Bank loans and overdrafts (7,028) (5,478) (5,930) Trade creditors (4,313) (5,781) (3,595) Other creditors (3,369) (4,873) ------ ------ ------ (13,121) (14,710) (16,132) ------ ------ ------ 6,341 Net current assets 6,028 7,518 ------ ------ ------ 25,210 Total assets less current liabilities 24,290 27,173 Creditors - Amounts falling due after (1,448) more than one year - (3,492) - Provisions for liabilities and charges - (84) ------ ------ ------ 23,762 24,290 23,597 ------ ------ ------ Capital and Reserves 8,449 Called up share capital 8,449 8,449 15,292 Reserves 15,820 15,127 ------ ------ ------ 23,741 Shareholders' funds 24,269 23,576 21 Minority interest 21 21 ------ ------ ------ 23,762 24,290 23,597 ------ ------ ------ SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) for the six months ended 30 June 1999 Year ended Six months Six months 31 December ended 30 June ended 30 June 1998 1999 1998 £'000 Notes £'000 £'000 Net cash (outflow) inflow 5,599 from operating activities 2 (911) 741 Returns on investments and (1,240) servicing of finance (293) (626) (261) Taxation (91) (90) Capital expenditure and financial investment Purchase of tangible fixed (890) assets (159) (683) (9) Purchase of shares for ESOP (2) (9) 3,113 Sale of tangible fixed assets 41 2,787 ------ ------ ------ Net cash (outflow) inflow from capital expenditure and 2,214 financial investment (120) 2,095 (763) Equity dividends paid (545) (545) ------ ------ ------ 5,549 (1,960) 1,575 Financing (1,502) Repayment of term loans (4,198) (1,222) Capital element of finance (102) lease repayments (29) (57) ------ ------ ------ (1,604) Net cash outflow from financing (4,227) (1,279) ------ ------ ------ 3,945 (Decrease) increase in cash (6,187) 296 ------ ------ ------ Reconciliation of net cash flow to movement in net debt 3,945 (Decrease) increase in cash (6,187) 296 1,502 Repayment of term loans 4,198 1,222 Capital element of finance lease 102 repayments 29 57 ------ ------ ------ Movement in net debt resulting from 5,549 cash flows (1,960) 1,575 3 Exchange difference 7 2 ------ ------ ------ 5,552 Movement in net debt (1,953) 1,577 (10,583) Net debt at beginning of period (5,031) (10,583) ------ ------ ------ (5,031) Net debt at end of period (6,984) (9,006) ------ ------ ------ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED) for the six month ended 30 June 1999 Year ended Six month Six months 31 December ended 30 June ended 30 June 1998 1999 1998 £'000 £'000 £'000 Profit (loss) on ordinary activities 184 after taxation 897 (668) Exchange difference on retranslation 3 of net assets of subsidiary undertakings (8) 3 ------ ------ ------ 187 889 (665) ------ ------ ------ Notes 1. The earnings per share are based on a profit on ordinary activities after taxation and preference dividends of £754,000 (1998 loss - £811,000) and on 21,797,638 (1998 - 21,797,638) ordinary shares being the weighted average number of shares in issue during the period. 2. Reconciliation of operating profit to net cash flows from operating activities: Year ended Six months Six months 31 December ended 30 June ended 30 June 1998 1999 1998 £'000 £'000 £'000 1,016 Operating profit (loss) 1,140 (231) 1,485 Depreciation charges 766 816 19 Amortisation of matching shares under RSP 10 10 (25) (Profit)loss on sale of tangible fixed assets (41) 13 2,449 Decrease in stocks 462 1,013 2,214 (Increase)/decrease in debtors (1,771) (357) (1,559) (Decrease)/increase in creditors (1,477) (523) Net cash (outflow) inflow from operating ------ ------ ------ 5,599 activities (911) 741 ------ ------ ------ 3. The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the financial year ended 31 December 1998. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. 4. The interim financial information has been prepared on the basis of accounting policies set out in the Group's statutory accounts for the year ended 31 December 1998. 5. The report, containing the interim financial information, is to be sent direct to shareholders. Copies of the report are available to the public from the registered office of Pittards plc. The address of the registered office is: Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA. INDEPENDENT REVIEW REPORT TO PITTARDS PLC Introduction We have been instructed by the Company to review the financial information set out above and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' Responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 1999. Ernst & Young Becket House 1 Lambeth Palace Road London SE1 7EU 1 September 1999

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