Interim Results

Portmeirion Group PLC 11 August 2006 PORTMEIRION GROUP PLC RESULTS FOR 6 MONTHS ENDED 30 JUNE 2006 CHAIRMAN'S STATEMENT Financial Highlights - 2006 pre-exceptionals profit of £787,000, compared to £243,000 (restated) in 2005. - 2006 pre-tax profit after exceptionals of £510,000 compared to £197,000 (restated) in 2005. - 2006 earnings per share 3.34p compared to 1.46p (restated) in 2005. - Total export sales increased by 2.7%, representing 72% of total Group sales. - Proposed interim dividend maintained at 3.30p. Dividend The Board has decided to maintain the interim dividend at 3.30p per ordinary share of 5p each, payable on 2 October 2006 to shareholders on the register on 8 September 2006. Trading Performance I am pleased to report that the Group produced a pre-tax profit of £787,000, before exceptional redundancy costs, of £277,000. The pre-tax profit before exceptional items, therefore, was a commendable 224% improvement on the comparable profit in the first half of 2005. Total Group turnover declined by 5.7% in the first half, compared to the first half of 2005. However, there was a significant increase of 3 percentage points in manufacturing gross margin and this, together with higher gross profit margins on imported products, more than offset the effect of the lower turnover. However, the Board recognises that Group sales must increase in order to sustain profit improvement. Although total Group turnover was lower, export turnover increased by 2.7%, following a healthy increase of 18% in 2005. Turnover in the US was particularly good, being 9% ahead of 2005, and accounting for 40% of total Group turnover. However, the sound export performance was undermined by a disappointing decline of 22% in sales in the UK. I had anticipated an improvement in UK sales in the second quarter, with the introduction of several new product ranges. In the event, these new ranges, all produced in the Far East, became available only at the end of June, and so did not provide the uplift expected. These ranges are now in distribution to our retail customers and are selling well, and I therefore anticipate the improvement in sales from the new products in the second half of the year. Our association with Sophie Conran has proved to be particularly successful. Initial demand for the range, jointly designed with her exclusively for Portmeirion, has far exceeded expectations and now extends beyond the UK to our markets in the US, Canada, Europe and Australia. The Group will substantially increase promotional activity with its well-known classic ranges, in order to further underpin a sales recovery in the UK. Manufacturing & Outsourcing The results clearly demonstrate the profitability improvements to be achieved from implementation of the Group's strategy. The consolidation of UK manufacturing of our classic ranges has produced a significant improvement in gross profit margin. The Group has reduced manufacturing costs, while maintaining overall capacity, and I am sure that further improvements in productivity will ensue. At the same time, new contemporary designs that have been outsourced to the Far East have been produced to the Group's required quality standards, and are now selling well at more competitive prices. I am confident that the Group's stated aim of outsourcing 50% of product will result in incremental sales in the medium and long term, and reduce the risk inherent with manufacturing almost solely in the UK. New Warehouse & Distribution Centre The new 64,000 sq.ft. building is under construction and on schedule. Some £3 million in capital expenditure will be needed to mechanise and fit out the building, to be operational by Spring 2007. With the Group's strong balance sheet, I expect this to be completed without any borrowing. Current Trading & Prospects The reinvention of the Group and its style of trading continues apace. The Group's strategy of developing contemporary ranges in the Far East, whilst consolidating UK manufacturing, is now proving to be very successful. Tableware in the UK and US is becoming ever more price competitive, and the timely move to respond with our own lower priced ranges with the Portmeirion brand and design content will be expanded. We have introduced a high proportion of giftware products in our new ranges, and supported this with new ranges of gift glassware. I anticipate that the market in the UK for our classic ranges will continue to be challenging but we can increase our export business with these ranges, particularly in the US. The second half has started positively with Group sales in July above last year. Finally, the Group still has a significant freehold property site that will be vacated and sold when the new warehouse is commissioned, in 2007. For all these reasons, I anticipate an improvement in overall Group sales and a commensurate increase in profitability. The Board will continue with its policy of maintaining the dividend whenever possible. Chairmanship I would like to take this opportunity to announce that on reaching my 65th year in April 2007, I will retire from the Board. Consideration of a successor is underway, and an announcement will be made in due course. A. Ralley Chairman 10 August 2006 INDEPENDENT REVIEW REPORT TO PORTMEIRION GROUP PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 30 June 2006 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the statement of total recognised gains and losses, the reconciliation of movements in shareholders' funds and related notes 1 to 11. We have read the other information contained in the interim statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company, in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim statement, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are also responsible for ensuring that the accounting policies and presentation applied to the interim figures are 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 the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. 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 United Kingdom 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 2006. Deloitte & Touche LLP Chartered Accountants, Birmingham, UK 10 August 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT Notes Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Turnover - continuing operations 8 12,232 12,968 27,552 -------------------------- ------- -------- -------- -------- Raw materials and operating costs (excluding exceptional costs) (11,484) (12,777) (26,045) Exceptional operating costs (277) (284) (284) -------------------------- ------- -------- -------- -------- Raw materials and operating costs (11,761) (13,061) (26,329) -------------------------- ------- -------- -------- -------- Operating profit before exceptional costs - continuing operations 748 191 1,507 Exceptional operating costs (277) (284) (284) -------------------------- ------- -------- -------- -------- Operating profit/(loss) after exceptional costs - continuing operations 471 (93) 1,223 Exceptional profit on sale of tangible fixed assets - 238 238 Share of (loss)/profit of associated undertakings (55) 9 68 Interest receivable and similar income 130 84 207 Interest payable and similar charges (1) - (2) Other finance costs (35) (41) (81) Exceptional impairment of investment in associated undertaking - - (273) -------- -------- -------- Profit on ordinary activities before taxation 510 197 1,380 -------------------------- ------- -------- -------- -------- Profit on ordinary activities before exceptional items and taxation 787 243 1,699 Exceptional items 6 (277) (46) (319) -------- -------- -------- Profit on ordinary activities before taxation 510 197 1,380 -------------------------- ------- -------- -------- -------- Taxation on profit on ordinary activities (181) (49) (317) -------- -------- -------- Profit for the period 329 148 1,063 ======== ======== ======== Earnings per share 4 3.34p 1.46p 10.57p ======== ======== ======== Diluted earnings per share 4 3.31p 1.46p 10.54p ======== ======== ======== Dividend per share 5 3.30p 3.30p 13.25p ======== ======== ======== The comparative figures for the 6 months to 30 June 2005 have been restated to reflect the implementation of FRS 20 'Share Based Payment' and the correct treatment of the pension fund contributions under FRS 17. CONSOLIDATED BALANCE SHEET As restated As restated As at 30.6.06 As at 30.6.05 As at 31.12.05 £000's £000's £000's £000's £000's £000's Fixed assets Tangible assets 5,137 5,577 5,335 Investments 1,369 1,584 1,413 ------ ------ ------ 6,506 7,161 6,748 Current assets Stocks 6,859 6,457 5,913 Debtors 4,815 4,958 5,243 Cash at bank and in 5,209 4,272 6,294 hand ------ ------ ------ 16,883 15,687 17,450 Creditors: amounts falling due within one year (3,504) (2,083) (3,080) ------ ------ ------ Net current assets 13,379 13,604 14,370 ------ ------ ------ Total assets less current liabilities 19,885 20,765 21,118 Provisions for liabilities and (44) (19) (43) charges ------ ------ ------ Net assets excluding pension deficit 19,841 20,746 21,075 Pension deficit net of (2,773) (2,265) (2,870) related deferred tax ------ ------ ------ Net assets including pension deficit 17,068 18,481 18,205 ====== ====== ====== Capital and reserves Called up share 523 521 521 capital Share premium 4,657 4,580 4,580 account Treasury shares (1,263) (691) (964) Share based payment reserve 22 4 12 Profit and loss 13,129 14,067 14,056 account ------ ------ ------ Equity shareholders' funds 17,068 18,481 18,205 ====== ====== ====== CONSOLIDATED CASH FLOW STATEMENT Notes Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's Cash flow from operating activities 10 (224) 109 3,033 Returns on investments and servicing of finance 11 180 88 148 Taxation refunded 437 202 54 Capital expenditure and financial 11 (236) 502 292 investments Equity dividends paid (982) (999) (1,330) --------- --------- --------- Cash (outflow)/inflow before use of liquid resources and financing (825) (98) 2,197 Management of liquid resources 1,263 504 (1,654) Financing 11 (260) (489) (762) --------- --------- --------- Increase/(decrease) in cash in the period 178 (83) (219) ========= ========= ========= Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash in the period 178 (83) (219) Cash (inflow)/outflow from (decrease)/increase in liquid resources (1,263) (504) 1,654 Net funds at 1 January 6,294 4,859 4,859 --------- --------- --------- Net funds at period end 9 5,209 4,272 6,294 ========= ========= ========= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES As restated As restated Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's Profit for the period 329 148 1,063 Currency translation differences (234) 196 380 Actuarial loss on defined benefit pension scheme - - (998) Related deferred tax - - 299 --------- --------- --------- Total recognised gains and losses for the period 95 344 744 Prior period adjustment (Note 7) 1 - - --------- --------- --------- Total recognised gains and losses since the last annual report 96 344 744 ========= ========= ========= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Profit for the period 329 148 1,063 Movement in pension scheme liability - - (779) Dividends (982) (999) (1,330) Currency translation differences (234) 196 380 Shares issued under employee share schemes 79 - - Increase/(decrease) in share based payment reserve 10 (5) 3 Purchase of treasury shares (299) (489) (762) Purchase of equity interest (40) - - --------- --------- --------- Net reduction in shareholders' funds (1,137) (1,149) (1,425) ========= ========= ========= Opening shareholders' funds as previously stated 18,204 19,632 19,632 Prior period adjustment (Note 7) 1 (2) (2) --------- --------- --------- Opening shareholders' funds as restated 18,205 19,630 19,630 ========= ========= ========= Closing shareholders' funds 17,068 18,481 18,205 ========= ========= ========= NOTES 1. The interim financial statements for the six months ended 30 June 2006 and the six months ended 30 June 2005 have been reviewed by the auditors but not audited. 2. The comparative figures for the financial year ended 31 December 2005 are not the Group's statutory accounts for that year. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 3. This Interim Statement has been prepared in accordance with the accounting policies set out in the Group's 2005 Report and Accounts with the exception of share based payments. FRS 20 'Share Based Payment' is applicable for the first time and has a prior year impact which is detailed in Note 7. 4. Earnings per share The earnings per share are calculated on profit after tax of £329,000 (2005 - £148,000) and the weighted average number of ordinary shares of 9,852,718 (2005 - 10,163,016) in issue during the period. The share options in existence during the six months ended 30 June 2006 have a dilutive effect as defined by Financial Reporting Standard 22 (FRS 22). The diluted earnings per share under FRS 22 are calculated on earnings of £329,000 and a weighted average number of ordinary shares in issue adjusted to assume conversion of all dilutive potential ordinary shares which is 9,951,750. The share options in existence during the six months ended 30 June 2005 did not have a dilutive effect as defined by FRS 22. 5. Dividend A dividend of 3.3p (2005 - 3.3p) per ordinary share will be paid on 2 October 2006 to shareholders on the register on 8 September 2006. 6. Exceptional items The rationalisation and reorganisation of the business continued in the first half of 2006. The exceptional redundancy costs incurred as a result were £277,000. The analysis of exceptional costs incurred during 2006 and 2005 is as follows: Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's Exceptional operating costs (277) (284) (284) Profit on sale of tangible fixed assets - 238 238 Impairment of investment in associated undertaking - - (273) --------- --------- --------- (277) (46) (319) ========= ========= ========= 7. Prior period adjustments The Group has applied FRS 20 'Share Based Payment' for the first time. Under this financial reporting standard the profit and loss account is charged with the fair value of share based payments. In the case of Portmeirion this has resulted in fair values being established for share options and phantom share options which have been granted. The resulting prior year adjustments were as follows: The closing shareholders' funds as at 31 December 2005 were restated £000's as follows: Shareholders' funds at 31 December 2005 as previously stated 18,204 Adjustment to liability for phantom share options under FRS 20 1 -------- Shareholders' funds at 31 December 2005 as restated 18,205 ======== The opening shareholders' funds as at 1 January 2005 were restated as £000's follows: Shareholders' funds at 1 January as previously stated 19,632 Adjustment to liability for phantom share options under FRS 20 (2) -------- Shareholders' funds at 1 January 2005 as restated 19,630 ======== Also under FRS 20 a reserve for share based payment has been created. The balances on this reserve were as follows: As at As at As at 30.6.06 30.6.05 31.12.05 £000's £000's £000's Share based payment reserve 22 4 12 ======== ======== ======== In addition to the above, the profit and loss account for the six months ended 30 June 2005 has been restated to adjust for the funding of the pension scheme, as required by FRS 17. This has resulted in a credit to the previously published income statement of £174,000, and is consistent with the full year treatment at 31 December 2005. 8. Turnover by destination Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's United Kingdom 3,422 4,391 9,562 North America 5,458 4,701 10,864 Other European Union 723 882 1,542 Far East 2,419 2,774 5,186 Rest of the World 210 220 398 -------- -------- -------- 12,232 12,968 27,552 ======== ======== ======== 9. Analysis of net funds As at As at As at 30.6.06 30.6.05 31.12.05 £000's £000's £000's Cash in hand, at bank 1,314 1,272 1,136 Short term money market deposits 3,895 3,000 5,158 -------- -------- -------- Total 5,209 4,272 6,294 ======== ======== ======== 10. Reconciliation of operating profit to operating cash flows Six Months As restated As restated to 30.6.06 Six Months Year to 30.6.05 to 31.12.05 £000's £000's £000's Operating profit/(loss) 471 (93) 1,223 Depreciation 386 483 952 Contribution to defined benefit pension (174) (174) (348) scheme Charge/(credit) for share based payments 10 (5) 3 Exchange (loss)/gain (160) 109 200 (Profit)/loss on sale of tangible fixed (6) 9 21 assets (Increase)/decrease in stocks (946) (403) 141 Decrease in debtors 56 755 456 Increase/(decrease) in creditors 139 (572) 385 -------- -------- -------- Net cash (outflow)/inflow from operating (224) 109 3,033 activities ======== ======== ======== All of the above relate to continuing operations. 11. Analysis of cash flows for headings netted in the cash flow statement Six Months Six Months Year to 30.6.06 to 30.6.05 to 31.12.05 £000's £000's £000's £000's £000's £000's Returns on investments and servicing of finance Interest received 181 88 150 Interest paid (1) - (2) ------ ------ ------- Net cash inflow for returns on investments and servicing of finance 180 88 148 ====== ====== ======= Capital expenditure and financial investments Purchase of tangible fixed assets (247) (224) (458) Sale of tangible fixed assets 11 726 750 ------ ------ ------- Net cash (outflow)/inflow for capital expenditure and financial investments (236) 502 292 ====== ====== ======= Financing Issue of ordinary shares under share option schemes 79 - - Purchase of equity interest (40) - - Purchase of treasury shares (299) (489) (762) ------ ------ ------- Net cash outflow from financing (260) (489) (762) ====== ====== ======= This interim statement will be posted out to shareholders in August and will be available from the Company Secretary at Portmeirion Group PLC, London Road, Stoke-on-Trent, Staffs. ST4 7QQ or from the website, www.portmeirion.com after 31 August 2006. For further information please contact: Arthur Ralley (Chairman) Brett Phillips (Finance Director) Tel: 01782 744721 Fax: 01782 743493 This information is provided by RNS The company news service from the London Stock Exchange
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