Final Results

Tandem Group PLC 03 May 2007 TANDEM GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2007 Chairman's statement Turnover for the year ended 31 January 2007 was £33,785,000 compared to £42,760,000 last year. There was a profit before taxation of £511,000 compared to a loss last year of £2,157,000. Cycles Our cycle businesses enjoyed a good year with profitability well ahead of last year. Production in the UK ceased in June 2006 with all bicycles now being specified and designed in the UK and manufactured abroad under the supervision of our own quality control team. Exceptional costs of £234,000 were incurred in closing the production facilities but going forward significant overhead and working capital savings will be made. Turnover in the cycle businesses was down on last year due to reduced sales to some national retailers where margins are lower. Sales through our traditional customer base of independent retailers and mail order increased following additional resources in sales and marketing. The Group's brands are shown at the front of the annual report. Sales of the premier brands, Falcon, Claud Butler, and Dawes continue to expand. Sports, leisure and toys Sales of wheeled toys under Thomas the Tank Engine and Bob the Builder brands performed well. Snooker, pool and outdoor play products from the Pot Black and Hedstrom ranges have been redesigned by the product development team at MV Sports & Leisure. Customer reaction has been good and it is expected that these product ranges will make a valuable contribution going forward. Sales from the UK operation were down on last year with increased competition against some of our longer-established licences and cautious buying from national retailers. Turnover from our Hong Kong operation increased over last year. As it is expected that this trend will continue, synergies with our other Group companies are being developed to reduce our combined overhead base in the UK. New licences, which will be backed by a combination of television and cinema exposure, have been secured including a wheeled toys range under the Transformers brand. Golf equipment Turnover at Ben Sayers was up on the previous year despite the decision to withdraw from low margin business. Sales to independent retailers and export continue to grow as the customer base expands. A number of new and innovative products have been introduced in the 2007 product range resulting in an increasing level of orders being received. Pensions The Group operates two pension schemes that have defined benefit liabilities. The two schemes had funds invested totalling £10.8 million at 31 January 2007 compared with £10.6 million at 31 January 2006. Investment income and growth during the year was £0.7 million. Pensions and transfer payments paid out totalled £0.5 million, representing 4.5% of the funds invested at 31 January 2007. The deficits in the schemes, before deducting the deferred tax asset, valued under Financial Reporting Standard 17 at 31 January 2007, totalled £2.1 million compared to £3.0 million last year. The schemes are closed to new members. New employees can join the Group's defined contribution schemes, where no deficit can be incurred. In accordance with the recommendation from the schemes' actuaries, the Company has to make payments totalling £207,000 per annum to reduce the deficit of the schemes. The schemes' actuaries have calculated the deficit using guidelines that the government and Institute of Actuaries agree could well be inappropriate and which consequently are being withdrawn. Meanwhile we are obliged to make these payments which deplete funds available for investment to grow the business. In addition to the payments being made to reduce the deficit of the schemes the Group is paying the schemes' administration costs and levies to the Pension Protection Fund. As well as the cost, a disproportionate amount of management time is spent dealing with matters relating to the pension schemes. In view of this, work is underway on a scheme to buy out certain members' benefits in order to significantly reduce or eliminate the schemes' deficits. Employees We wish to thank all management and employees for their contribution in returning the Group to profitability. There have been many changes in recent years including the relocation of the Pot Black business and the closure of bicycle production. Our staff have responded well to the challenges and we now have an established team of management and staff with the skills to take the business forward. Current trading The year to 31 January 2007 has been a period of consolidation following the loss in the previous year. Bicycle production has been successfully outsourced and the profitable products within the Pot Black and Hedstrom ranges are making an important contribution to the MV business. Overheads continue to be closely monitored and the focus is now on building sales. Resources have been concentrated in product development, sales and marketing. We have a wide portfolio of new andestablished products. The Group has performed well in the first quarter of the current financial year, with turnover up 15% on the previous year. Your Board is optimistic about the prospects for the rest of the financial year. Graham Waldron Chairman 3 May 2007 Consolidated profit and loss account ______________________________________________________________ Year ended 31 January 2007 Year ended 31 January 2006 Before Exceptional After Before Exceptional After exceptional items and exceptional exceptional items and exceptional items and goodwill items and items and goodwill items and goodwill amortisation goodwill goodwill amortisation goodwill amortisation amortisation amortisation amortisation £'000 £'000 £'000 £'000 £'000 £'000 Turnover 33,785 33,785 42,760 42,760 Cost of sales (23,132) (23,132) (30,819) (30,819) ________ ________ ________ ________ Gross profit 10,653 10,653 11,941 11,941 ________ ________ ________ ________ Net operating expenses (9,462) (234) (9,696) (11,715) (1,382) (13,097) Goodwill amortisation and impairment (175) (175) (640) (640) ________ ________ ________ ________ ________ ________ Total operating expenses (9,462) (409) (9,871) (11,715) (2,022) (13,737) ________ ________ ________ ________ ________ ________ Operating profit/(loss) 1,191 (409) 782 226 (2,022) (1,796) Finance charges (271) (361) ________ ________ ________ ________ ________ ________ Profit/(loss)on ordinary activities before taxation 511 (2,157) Tax credit/(charge)on profit/(loss)on ordinary activities 285 (152) ________ ________ Profit/(loss)on ordinary activities after taxation transferred to/(from) reserves 796 (2,309) ________ ________ Earnings/(loss)per share Pence Pence Basic and diluted 2.12 (6.14) All figures relate to continuing operations. Consolidated balance sheet ______________________________________________________________ At 31 January 2007 2007 2006 £'000 £'000 Fixed assets Intangible assets 2,502 2,677 Tangible assets 403 563 ________ ________ 2,905 3,240 ________ ________ Current assets Stocks 5,676 5,664 Debtors 6,135 5,527 Cash at bank and in hand 551 2,426 ________ ________ 12,362 13,617 Creditors - amounts falling due within one year (8,855) (11,076) ________ ________ Net current assets 3,507 2,541 ________ ________ Net assets before pension schemes' deficits 6,412 5,781 Pension schemes' deficits (1,496) (2,839) ________ ________ Net assets after pension schemes' deficits 4,916 2,942 ________ ________ Capital and reserves Called up share capital 1,503 1,503 Share premium account 5,258 5,258 Merger reserve 1,036 1,036 Other reserves 1,453 1,426 Profit and loss account (4,334) (6,281) ________ ________ Shareholders' funds 4,916 2,942 ________ ________ Statement of movements on reserves ______________________________________________________________ Year ended 31 January 2007 Share Merger Other Profit Total premium reserve reserves and loss account account Restated £'000 £'000 £'000 £'000 £'000 Balance at 1 February 2006 5,258 1,036 1,426 (6,281) 1,439 Profit for the year - - - 796 796 Re-translation of overseas subsidiaries - - - (70) (70) Actuarial gains on pension schemes - - - 1,221 1,221 Share-based payments - - 27 - 27 _______ _______ _______ _______ _______ Balance at 31 January 2007 5,258 1,036 1,453 (4,334) 3,413 _______ _______ _______ _______ _______ Reconciliation of movements in shareholders' funds ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Profit/(loss) for the year 796 (2,309) Re-translation of overseas subsidiaries (70) 38 Actuarial gain/(loss) on pension schemes including related deferred tax asset 1,221 (910) Share-based payments 27 - _______ _______ Net addition/(deduction) to shareholders' funds 1,974 (3,181) Opening shareholders' funds 2,942 6,123 _______ _______ Closing shareholders' funds 4,916 2,942 _______ _______ Statement of total recognised gains and losses ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Profit/(loss) for the year 796 (2,309) Re-translation of overseas subsidiaries (70) 38 Actuarial gain/(loss) on pension schemes including related deferred tax asset 1,221 (910) Share-based payments 27 - _______ _______ Total recognised gains and losses since the last annual report 1,974 (3,181) _______ _______ Consolidated cash flow statement ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Net cash (outflow)/inflow from operating activities (1,455) 1,046 _______ _______ Returns on investments and servicing of finance Interest paid (271) (358) Interest element of hire purchase rentals - (3) _______ _______ Net cash outflow from returns on investments and servicing of finance (271) (361) _______ _______ Taxation (85) (43) _______ _______ Capital expenditure Purchase of tangible fixed assets (94) (119) Sale of tangible fixed assets 31 49 _______ _______ Net cash outflow from capital expenditure (63) (70) _______ _______ Net cash (outflow)/inflow before financing (1,874) 572 _______ _______ Financing Repayments of amounts borrowed - (980) Capital element of hire purchase rentals (1) (21) _______ _______ Net cash outflow from financing (1) (1,001) _______ _______ Decrease in cash (1,875) (429) _______ _______ Notes to consolidated cash flow statement 1. Reconciliation of operating profit/(loss) to net cash (outflow)/inflow from operating activities 2007 2006 £'000 £'000 Operating profit/(loss) 782 (1,796) Depreciation charges 173 307 Provision for impairment/amortisation of goodwill 175 640 Loss on sale of tangible fixed assets 48 119 (Increase)/decrease in stocks (12) 2,830 (Increase)/decrease in debtors (262) 2,095 Decrease in creditors (2,268) (3,024) Adjustment for pension funding and share-based payments (91) (125) _______ _______ Net cash (outflow)/inflow from operating activities (1,455) 1,046 _______ _______ 2. Reconciliation of net cash outflow to movement in net funds 2007 2006 £'000 £'000 Decrease in cash (1,875) (429) Cash to repay finance leases and hire purchase contracts 1 21 Bank loan - 900 Other loans - 80 _______ _______ Changes in net funds resulting from cash flows (1,874) 572 Net funds at 1 February 2,425 1,853 _______ _______ Net funds at 31 January 551 2,425 _______ _______ 3. Analysis of net funds At Cash flow At 1 February 31 January 2006 2007 £'000 £'000 £'000 Cash at bank and in hand 2,426 (1,875) 551 Hire purchase creditors (1) 1 - ________ ________ ________ Net funds 2,425 (1,874) 551 ________ ________ ________ Notes to the preliminary results 1. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated balance sheet at 31 January 2007, the consolidated profit and loss account, the statement of movements on reserves, the reconciliation of movements in shareholders' funds, the statement of recognised gains and losses, the consolidated cash flow statement and the associated notes for the year then ended have been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. The statutory accounts for the year ended 31 January 2007 will be delivered to the Registrar of Companies following the Group's Annual General Meeting. The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The principal accounting policies of the Group are set out in the Group's 2006 annual report and financial statements with the following addition: Share-based payments Following the introduction of FRS 20 the Group's accounting policy relating to share-based payments has altered and is set out below. All share-based payment arrangements arising after 7 November 2002 are recognised in the consolidated financial statements. The Group operates equity-settled share-based remuneration plans for remuneration of its employees. Options are issued by the parent to the employees of its subsidiaries. As such, the charge for the share-based remuneration is recognised in the subsidiary company profit and loss account with no charge being borne in the ultimate parent profit and loss account. All employee services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to the share-based payment reserve, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment is made to the expense recognised in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. This change in accounting policy has resulted in a decrease to the profit before taxation of £27,000 for the year ended 31 January 2007, with no material impact for the prior year. This change has not resulted in any increase or decrease in net assets. 2. No dividend on the ordinary shares is being proposed (2006 - £nil). 3. Earnings per share 2007 2006 £'000 £'000 Profit/(loss) for the year used for basic and diluted earnings per share calculation 796 (2,309) _______ _______ Number Number Weighted average number of ordinary shares in issue during the year used for basic and diluted earnings per share calculation 37,584,412 37,584,412 _______ _______ Earnings/(loss) per share Pence Pence Basic and diluted 2.12 (6.14) _______ _______ The calculation of the basic and diluted earnings per share is based on the profit/(loss) on ordinary activities after tax and on the weighted average number of ordinary shares in issue during the year. 4. The annual report and accounts will be posted to shareholders shortly. 5. The Annual General Meeting will be held at 11:00 a.m. on 14 June 2007 at Eversheds LLP, 1 Royal Standard Place, Nottingham NG1 6FZ. 3 May 2007 This information is provided by RNS The company news service from the London Stock Exchange

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