Final Results

Portmeirion Group PLC 17 March 2005 PORTMEIRION GROUP PLC RESULTS FOR YEAR ENDED 31ST DECEMBER 2004 CHAIRMAN'S STATEMENT Financial summary for the year 2004 2003 Â£000's Â£000's Turnover 27,686 28,512 ----------------------------- --------- ----------- Pre-tax (loss)/profit before operating exceptionals (398) 2,003 ----------------------------- --------- ----------- Pre-tax (loss)/profit after operating exceptionals (1,591) 2,003 ----------------------------- --------- ----------- Basic (loss)/earnings per share (10.99p) 12.54p ----------------------------- --------- ----------- Dividends per share 13.25p 13.25p ----------------------------- --------- ----------- Sales for the year were Â£27.686 million, 2.9% below the previous year. If Group sales are compared on a like for like exchange rate, sales in 2004 were 0.5% greater than the previous year. The loss before taxation, and before operating exceptional items, of Â£0.398 million compares with a profit of Â£2.003 million for the previous year. Operating exceptional asset write-downs of Â£1.193 million, arising from planned reorganisation, bring the total loss for the year to Â£1.591 million. The Board is recommending a final dividend of 9.95p bringing the total to 13.25p for the year. This is unchanged from 2003. Results for the Year The major factors that caused the Group to fall into a modest loss before tax and operating exceptionals were: - A slight fall in annual sales, in a very challenging retail environment. - A further fall in the value of the US dollar, which has cost the Group Â£0.5million in the year. - A first full year contribution of Â£0.35 million to the Group's defined benefit pension scheme, which was closed in 1999. This contribution is now ongoing. The operating exceptional non-cash costs of Â£1.193.million have been incurred primarily as a result of the major reorganisation of the Group's manufacturing and warehouse facilities, referred to in the announcement of 4th November 2004. The Group has also included in this figure asset write-downs of Â£236k associated with the planned closure of its Japanese subsidiary. Sales in the UK were 1.7% lower than the previous year, in the face of intense low-cost competition from product ranges sourced overseas. Some 1.5% of margin had to be sacrificed to maintain this level of sales. Sales in the US grew by 17%. This excellent improvement is, however, reduced to 6.6% when converted into sterling at the higher exchange rate. The improvement in the US was mainly the result of the new lower priced PS Portmeirion Studio ranges that accounted for some $2.0 million incremental sales. I believe we can continue to make progress in the US with additional products designed in the US specifically for their market. However, the weakened dollar continues to undermine our efforts. The Group's policy is to sell US dollars forward, since the US has traditionally accounted for at least 35% of total sales. The Group sells up to 1 year in advance, for between 70% and 80% of expected currency requirements. In 2003 the average rate of conversion was $1.5199, in 2004 it was $1.6691 and for 2005 the Group is hedged at $1.7848. This further fall in the value of the US dollar is likely to cost a further Â£0.5 million of pre-tax profit this year. Sales in all our other export markets were below the previous year. The most significant was Korea, where, after several years of significant growth, sales fell by 4.7%. However, I expect the Group's sales to return to growth in Korea during 2005. The other major reduction in sales was in Italy, with a fall of 40%, due to a change of distributor in this market. Again, I expect sales to increase this year in Italy. Since the Group has maintained a strong balance sheet the Board has decided to recommend that the dividend for the full year be maintained at 13.25p. The Board believes that the Group must adapt evermore rapidly to the changes that have so negatively affected the ceramic manufacturing industry in the UK. Although the programme of product diversification over the last few years has helped, UK manufactured ceramics still account for 80% of Group sales. In order to return to healthy sales growth and profitability, the Board has embarked upon a programme of major reorganisation. Product Strategy Under the PORTMEIRION brand, the Group will continue to develop lower-priced ranges, sourced overseas, to meet the intense low-cost competition now dominating the UK and US markets. The Group will continue to diversify into complementary housewares, such as glassware, gifts and placemats. I expect sourced products to increase from 20% to 50% of an increased sales level in the next 3 years. Since most imported products are bought in US dollars, this has the additional advantage of contributing to a natural hedge against a fluctuating exchange rate. The Group will continue to expand the very successful and well-established classic ranges. Initiatives such as the freezer to oven cookware range, designed in conjunction with Aga and decorated with classic Portmeirion designs, have been a notable success in a difficult year. Manufacturing & Warehouse Reorganisation As announced on the 4th November 2004, the Group is reducing its UK manufacturing, warehousing and distribution operations from 4 sites to 2, while maintaining current production capacity. Progress since the announcement has been good. The consolidation of the smaller manufacturing site into the larger main site is underway, and I expect this move to be completed during the first half of the year. The Group currently operates from 2 warehouse sites. The plans to move to a new purpose-built and larger warehouse early in 2006 with modern handling equipment are well advanced. The total expenditure, including capital, on the reorganisation, which will result in the closure of 2 freehold sites, is planned to be under Â£1.0 million in 2005. However, proceeds from the sale of the 2 sites are expected to exceed this. The anticipated reduction in operating costs will be approximately Â£0.5 million per annum, with full effect from 2006. This reorganisation will ensure that the Group improves productivity in manufacturing, warehousing and distribution, so as to meet the increasing competitive challenges. Management Structure The reorganisation has resulted in a modest reduction in the size of the management team and workforce. However, I believe there is a major opportunity to increase sales to non-US export markets, which have suffered a decline in the last few years. To this end the Group has appointed a new Sales Director, Export Sales Manager, and Marketing Manager. I am confident that this new team will have a positive impact in existing markets, and in opening up new markets, such as China and Russia. Current Trading & Prospects I expect 2005 to be a year of radical repositioning of the Company, which will result in less dependence on UK ceramic manufacturing in the future. Sales so far in 2005 are slightly below the same period of 2004, and I think it is unrealistic to expect significant sales growth this year given the challenging environment we face. With improved efficiencies and tight cost control, I do believe the Group can bring about a significant improvement in performance. With new, targeted product ranges and the bulk of the reorganisation completed, I expect significant progress from 2006 onward. I would like to thank the management team and the whole workforce for their contribution in 2004, in meeting the challenges of a difficult year, and in helping to reposition the Group to meet the challenges we face. Arthur Ralley Chairman 16 March 2005 For further information please contact: Arthur Ralley, Chairman Brett Phillips, Group Finance Director Tel: (01782) 744 721 PORTMEIRION GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31st December 2004 Before Operating exceptional exceptional items items Total Total 2004 2004 2004 2003 Â£000's Â£000's Â£000's Â£000's Turnover - continuing operations 3 27,686 - 27,686 28,512 Raw materials and operating costs (28,418) (1,193) (29,611) (26,665) ------- ------- ------- ------- Operating (loss)/profit - continuing operations (732) (1,193) (1,925) 1,847 Share of profit of associated undertakings 145 - 145 216 Interest receivable and similar income 211 - 211 174 Interest payable and similar (22) - (22) - charges Impairment of investment in associated undertaking - - - (234) ------- ------- ------- ------- (Loss)/profit on ordinary activities before taxation (398) (1,193) (1,591) 2,003 Taxation on (loss)/profit on ordinary activities 454 (697) ------- ------- (Loss)/profit on ordinary activities after taxation being the (loss)/profit for the financial year (1,137) 1,306 Dividends paid and proposed (1,371) (1,381) ------- ------- Retained loss for the financial year (2,508) (75) ======= ======= (Loss)/earnings per share 4 (10.99p) 12.54p ======= ======= Diluted (loss)/earnings per share 4 (10.99p) 12.53p ======= ======= Dividends per share 5 13.25p 13.25p ======= ======= See notes PORTMEIRION GROUP PLC CONSOLIDATED BALANCE SHEET As at 31st December 2004 2004 2003 Â£000's Â£000's Â£000's Â£000's Fixed assets Tangible assets 6,279 7,872 Investments 1,544 1,460 ------- ------- 7,823 9,332 Current assets Stocks 6,054 6,775 Debtors 5,926 4,868 Cash at bank and in hand 4,859 7,228 ------- ------- 16,839 18,871 Creditors: amounts falling due within one year (3,680) (3,932) ------- ------- Net current assets 13,159 14,939 ------- ------- Total assets less current liabilities 20,982 24,271 Provisions for liabilities and charges (19) (307) ------- ------- Net assets 20,963 23,964 ======= ======= Capital and reserves Called up share capital 521 521 Share premium account 4,580 4,580 Treasury shares (202) - Profit and loss account 16,064 18,863 ------- ------- Equity shareholders' funds 20,963 23,964 ======= ======= PORTMEIRION GROUP PLC CONSOLIDATED CASH FLOW STATEMENT For the year ended 31st December 2004 2004 2003 Notes Â£000's Â£000's Cash inflow from operating activities 7 48 1,852 Returns on investments and servicing of finance 8 171 173 Taxation (604) (431) Capital expenditure and financial investment 8 (414) (697) Equity dividends paid (1,368) (1,381) ------- ------- Cash outflow before use of liquid resources and financing (2,167) (484) Management of liquid resources 2,560 420 Financing 8 (202) 34 ------- ------- Increase/(decrease) in cash in the year 6 191 (30) ======= ======= Reconciliation of net cash flow to movement in net funds 2004 2003 Â£000's Â£000's Increase/(decrease) in cash in the year 191 (30) Cash inflow from decrease in liquid resources (2,560) (420) Net funds at 1st January 7,228 7,678 ------- ------- Net funds at 31st December 4,859 7,228 ======= ======= PORTMEIRION GROUP PLC STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the year ended 31st December 2004 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2004 2003 Â£000's Â£000's (Loss)/profit for the financial year (1,137) 1,306 Currency translation differences (291) (342) ------- ------- Total recognised gains and losses for the financial year (1,428) 964 ======= ======= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2004 2003 Â£000's Â£000's (Loss)/profit for the financial year (1,137) 1,306 Dividends (1,371) (1,381) Currency translation differences (291) (342) Shares issued under employee share schemes - 34 Purchase of treasury shares (202) - ------- ------- Net reduction to shareholders' funds (3,001) (383) Opening shareholders' funds 23,964 24,347 ------- ------- Closing shareholders' funds 20,963 23,964 ======= ======= PORTMEIRION GROUP PLC NOTES 1. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31st December 2004 and 2003 but is derived from those accounts. Statutory accounts for 2003, which have been delivered to the Registrar of Companies, contain an unqualified audit opinion and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. Statutory accounts for the year ended 31st December 2004 on which the auditors have given an unqualified opinion and do not contain a statement under Section 237(2) or (3) of the Companies Act 1985 will be delivered to the Registrar of Companies in due course. This announcement was approved by the Board of Directors on 16th March 2005. 2. Operating exceptional items A review of the Group's cost base and profitability has led to the decision to consolidate manufacturing onto one site in Stoke-on-Trent and to close down the Group's subsidiary in Japan and two retail outlets in the UK. The resultant write-down of fixed assets and stocks has been included in operating costs but has been treated as exceptional. These exceptional costs are: 2004 2003 Â£000's Â£000's Write down of fixed assets 977 - Write down of stocks 216 - ------- ------- 1,193 - ======= ======= 3. Turnover by destination 2004 2003 Â£000's Â£000's United Kingdom 11,848 12,055 North America 10,256 9,920 European Union 1,338 1,873 Far East 3,913 4,099 Rest of the World 331 565 ------- ------- 27,686 28,512 ======= ======= 4. (Loss)/earnings per share Basic The basic (loss)/earnings per share are calculated by dividing the loss after taxation of Â£1,137,000 (2003 - profits of Â£1,306,000) by the weighted average number of Ordinary shares in issue during the year of 10,350,192 (2003 - 10,414,918). Diluted The diluted (loss)/earnings per share is calculated in accordance with Financial Reporting Standard 14 (FRS 14). This calculation uses a weighted average number of Ordinary shares in issue adjusted to assume conversion of all dilutive potential Ordinary shares and is shown below: 2004 2003 Weighted Loss Weighted Earnings Loss Number of per Share Earnings Number of per Share Â£ Shares (Pence) Â£ Shares (Pence) Basic (loss)/earnings per share (1,137,000) 10,350,192 (10.99) 1,306,000 10,414,918 12.54 Effect of dilutive securities: employee share options - - - - 6,000 - -------- ------- ------- ------- -------- ------- Diluted (loss)/earnings per share (1,137,000) 10,350,192 (10.99) 1,306,000 10,420,918 12.53 ======== ======= ======= ======= ======== ======= FRS 14 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that option holders would act irrationally and there are no other diluting future share issues, diluted loss per share equals basic loss per share. 5. Dividends The Directors propose the payment of a final dividend of 9.95p (2003 - 9.95p) per Ordinary share on 20th May 2005 to shareholders on the register on 29th April 2005. 6. Analysis of net funds At 1st Cash At 31st January 2004 flow December 2004 Â£000's Â£000's Â£000's Cash in hand, at bank 1,164 191 1,355 Short term money market deposits 6,064 (2,560) 3,504 -------- -------- ---------- Total 7,228 (2,369) 4,859 ======== ======== ========== Short term money market deposits include deposits of up to 30 days maturity and are included within cash in the Group's balance sheet. 7. Reconciliation of operating (loss)/profit to operating cash flows 2004 2003 Â£000's Â£000's Operating (loss)/profit (1,925) 1,847 Depreciation 987 950 Impairment of tangible fixed assets - operating 977 - exceptional Exchange loss (248) (305) (Profit)/loss on sale of tangible fixed (3) 35 assets Decrease/(increase) in stocks 721 (580) (Increase)/decrease in debtors (441) 611 Decrease in creditors (20) (706) ------- ------- Net cash inflow from operating 48 1,852 activities ======= ======= All of the above relate to continuing operations. 8. Analysis of cash flows for headings netted in the cash flow statement 2004 2003 Â£000's Â£000's Returns on investments and servicing of finance Interest received 193 173 Interest paid (22) - ------- ------- Net cash inflow from returns on investments and servicing of finance 171 173 ======= ======== Capital expenditure and financial investment Purchase of tangible fixed assets (437) (801) Sale of tangible fixed assets 23 104 ------- ------- Net cash outflow for capital expenditure and financial investments (414) (697) ======= ======== Financing Issue of Ordinary shares under share - 34 option schemes Purchase of treasury shares (202) - ------- ------- Net cash (outflow)/inflow from (202) 34 financing ======= ======== This information is provided by RNS The company news service from the London Stock Exchange

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