Half Yearly Report

RNS Number : 6551U

Tandem Group PLC

20 October 2010

TANDEM GROUP PLC

("Tandem" or the "Company")

HALF YEARLY REPORT

The Board of Tandem announces its half yearly report for the six months to 31 July 2010.

CHAIRMAN'S STATEMENT

Introduction

I am pleased to present the unaudited financial statements for the 6 months ended 31 July 2010. Although the period has been one of uncertainty, with volatility in raw material prices, freight costs and the US dollar coupled with shipping line disruptions and far east labour shortages, we have increased revenue and profit before tax compared to the same period last year and strengthened our balance sheet.

Results

Revenue for the 6 month period to 31 July 2010 increased to £19,062,000 from £18,949,000 in the comparative period last year. Profit before tax improved by 18.5% to £648,000 (2009 - £547,000). Net assets also increased by 6.0% to £7,707,000 (2009 - £7,268,000).

Bicycles and accessories

Bicycles and accessories businesses revenue decreased by 7.8% to £11,900,000 (2009 - £12,912,000) as a result of a reduction in the value of a promotional contract with a national retailer.

Turnover with our independent bicycle retailers increased and, as we previously reported, revenue from our Dawes cycle business in particular showed growth ahead of market performance.

Despite the significant cost pressures, operating profit in our bicycles and accessories businesses increased to £424,000 compared to £284,000 in the same period last year.

Sports, leisure and toys

There was an increase in revenue of 18.6% in our sports, leisure and toys businesses to £7,162,000 against £6,037,000 last year.

Our established licensed properties including Ben 10, Thomas and Fireman Sam performed strongly during the period and we have been encouraged by sales from our new licences including Iron Man 2, Moxie Girlz and Star Wars.

Revenue from all of our own brands of Ben Sayers, Hedstrom, Kickmaster and Pot Black was ahead of the comparative period. Sales of Ben Sayers package sets in particular were ahead of expectations.

Operating profit in the sports, leisure and toys businesses for the period was £655,000, an increase of 5.5% on £621,000 in the same period last year.

Trading update

Group revenue for the 37 week period to 15 October was approximately £26.9 million compared to £27.3 million in the comparative period last year.

In the bicycles and accessories businesses revenue to 15 October was approximately £16.0 million against £17.3 million in the prior year. As we have previously reported, turnover from a bicycle promotional contract with a national retailer was £1.4 million lower than the comparative period at the half year and we expect this to be £2 million lower by the end of the year.

As previously stated, sales in the sports, leisure and toys sector from our Ben 10 license were behind the exceptionally high levels experienced in the same period last year. Furthermore, Thomas sales were also down following the license for the battery operated train reverting to a new master toy licensee. Despite this, revenue for the 37 week period to 15 October was approximately £10.9 million compared to £9.9 million last year, with continuing strong performance from our own brands and new licences.

Outlook

September and October have been challenging months, particularly in the bicycles and accessories businesses, due to cautious consumer spending and delayed purchasing by independent retailers of our junior models for Christmas. As a result we remain cautious about the Group's outlook for the Christmas trading period.

Bicycle selections with national retailers have increased for Spring/Summer 2011.

We are also pleased to report that stock availability has been brought forward for our 2011 bicycle ranges which should enable improved sales in January to our independent dealers following our annual trade shows.

Reaction to our new 2011 sports, leisure and toys product ranges has been good. I am pleased to report that Spring/Summer 2011 catalogue listings continue to grow and exceed our expectations. In particular, selections of our new licences, Ben & Holly's Little Kingdom and Tinga Tinga Tales, are very encouraging.

With Chinese New Year being early next year, we expect January 2011 sales to be ahead of last year as goods are shipped before the holiday period.

Summary

Following the detailed strategic review undertaken earlier this year, your Board has started to implement the measures necessary to achieve our objectives of enhancing shareholder value. This involves achieving growth both organically and by the careful identification of suitable acquisitions. We are investing in human resources, infrastructure and the additional brand and marketing activities necessary to support our sustainable growth objectives in the medium to long term. We will be keeping investors informed of developments.

Dividend

In line with our announcement on 3 September 2010, we declare an interim dividend of 1p per share to shareholders on the share register as at 27 October 2010 for payment before 26 November 2010.

MPJ Keene

Chairman

20 October 2010

CONDENSED CONSOLIDATED INCOME STATEMENT

For the 6 months ended 31 July 2010

	Note	6 months ended 31 July 2010	6 months ended 31 July 2009		Year ended 31 January 2010
		Unaudited	Unaudited		Audited
		£'000	£'000		£'000


Revenue		19,062		18,949		35,678

Cost of sales		(14,152)		(14,367)		(25,998)

Gross profit		4,910		4,582		9,680


Operating expenses		(4,197)		(3,967)		(8,463)

Operating profit		713		615		1,217

Finance costs		(65)		(68)		(194)

Profit before taxation		648		547		1,023

Tax (expense)/credit		(47)		187		(22)

Net profit for the period		601		734		1,001


		Pence		Pence (restated)		Pence
Earnings per share
Basic	3	10.89		12.75		17.67


Diluted	3	10.70		12.75		17.67

All figures relate to continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended 31 July 2010

	6 months ended 31 July 2010	6 months ended 31 July 200 2009	Year ended 31 January 2010
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000

Profit for the period	601	734	1,001

Other comprehensive income:
Foreign exchange differences on translation of overseas subsidiaries	57	(330)	(250)
Actuarial loss on pension schemes	-	-	(578)
Movement in pension schemes' deferred tax provision	(19)	(22)	136
Other comprehensive income for the period	38	(352)	(692)

Total comprehensive income attributable to equity shareholders of Tandem Group plc	639	382	309

All figures relate to continuing operations.

CONDENSED CONSOLIDATED BALANCE SHEET

As at 31 July 2010

	At 31 July 2010	At 31 July 2009	At 31 January 2010
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000

Non current assets
Goodwill	2,236	2,236	2,236
Property, plant and equipment	372	425	368
Deferred taxation	1,342	1,222	1,365
	3,950	3,883	3,969

Current assets
Inventories	6,706	6,731	4,991
Trade and other receivables	8,120	6,333	3,956
Cash and cash equivalents	2,785	1,989	3,046
	17,611	15,053	11,993


Total assets	21,561	18,936	15,962

Current liabilities
Trade and other payables	(8,950)	(6,842)	(5,352)
Financial liabilities	(3,086)	(3,517)	(1,856)
Current tax liabilities	(436)	(423)	(301)
	(12,472)	(10,782)	(7,509)
Non current liabilities
Pension schemes' deficits	(1,382)	(886)	(1,450)

Total liabilities	(13,854)	(11,668)	(8,959)


Net assets	7,707	7,268	7,003


Equity
Share capital	1,503	1,503	1,503
Shares held in treasury	(115)	(64)	(129)
Other reserves	2,816	2,679	2,759
Profit and loss account	3,503	3,150	2,870
Total equity	7,707	7,268	7,003

CONDENSED Consolidated statement of changes in equity

As at 31 July 2010

	Share capital	Shares held in treasury	Merger reserve	Capital redemption reserve	Translation reserve	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

At 1 February 2009	1,503	(64)	1,036	1,427	546	2,410	6,858
Net profit for the period	-	-	-	-	-	734	734
Retranslation of overseas subsidiaries	-	-	-	-	(330)	-	(330)
Share based payments	-	-	-	-	-	6	6
At 31 July 2009	1,503	(64)	1,036	1,427	216	3,150	7,268

Net profit for the period	-	-	-	-	-	267	267
Retranslation of overseas subsidiaries	-	-	-	-	80	-	80
Net actuarial loss on pension schemes	-	-	-	-	-	(442)	(442)
Share buyback	-	(65)	-	-	-	(114)	(179)
Share based payments	-	-	-	-	-	9	9
At 31 January 2010	1,503	(129)	1,036	1,427	296	2,870	7,003

Net profit for the period	-	-	-	-	-	601	601
Retranslation of overseas subsidiaries	-	-	-	-	57	-	57
Exercise of share options	-	14	-	-	-	26	40
Share based payments	-	-	-	-	-	6	6
At 31 July 2010	1,503	(115)	1,036	1,427	353	3,503	7,707

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the 6 months ended 31 July 2010

	6 months ended 31 July 2010	6 months ended 31 July 2009	Year ended 31 January 2010
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Cash flows from operating activities
Net profit for the period	601	734	1,001
Adjustments:
Depreciation of property, plant and equipment	49	72	132
Finance costs	65	68	194
Tax expense/(credit)	47	(187)	22
Taxation paid	(53)	(34)	(282)
Share based payments	6	6	15
Fair value adjustments of forward contracts	-	763	437
Net cash inflow from operating activities before movements in working capital	715	1,422	1,519

(Increase)/decrease in inventories	(1,715)	852	2,592
(Increase)/decrease in trade and other receivables	(4,141)	(1,198)	1,173
Increase/(decrease) in trade and other payables	3,644	(1,430)	(3,095)
Net cash (utilised)/generated from operations	(1,497)	(354)	2,189

Cash flows from investing activities
Purchases of property, plant and equipment	(53)	(12)	(16)
Net cash used in investing activities	(53)	(12)	(16)

Cash flows from financing activities
Increase/(decrease) in invoice financing	1,230	602	(733)
Interest paid	(38)	(42)	(89)
Exercise of share options	40	-	-
Payment to acquire own shares	-	-	(179)
Net cash from/(used in) financing activities	1,232	560	(1,001)


Net (decrease)/increase in cash and cash equivalents	(318)	194	1,172
Cash and cash equivalents at beginning of period	3,046	2,121	2,121
Effect of foreign exchange rate changes	57	(326)	(247)
Cash and cash equivalents at end of period	2,785	1,989	3,046

NOTES TO THE HALF YEARLY REPORT

1 General information

Tandem Group plc is a public limited company incorporated and domiciled in the United Kingdom with its shares listed on AIM of the London Stock Exchange.

The principal activity of the Group is the design, development and distribution of sports and leisure equipment.

The ultimate parent company of the Group is Tandem Group plc whose principal place of business and registered office address is 35 Tameside Drive, Castle Bromwich, Birmingham,
B35 7AG.

The interim financial statements for the period ended 31 July 2010 (including the comparatives for the periods ended 31 July 2009 and 31 January 2010) were approved by the Board of Directors on 20 October 2010. Under the Security Regulations Act of the European Union ("EU"), amendments to the financial statements are not permitted after they have been approved.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 January 2010, prepared under International Financial Reporting Standards ("IFRS"), have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Sections 498(2) and 498(3) of the Companies Act 2006.

This interim financial information has been prepared using the accounting policies set out in the Group's 2010 statutory accounts. Copies of the annual statutory accounts and the interim report may be obtained by writing to Tandem Group plc, 35 Tameside Drive, Castle Bromwich, Birmingham, B35 7AG and can be found on the Company's website at www.tandemgroup.co.uk.

The net retirement benefit obligation recognised at 31 July 2010 is based on the actuarial valuation under IAS19 at 31 January 2010 updated for movements in net defined benefit pension income and contributions paid during the half year period. The deferred tax effect of movements in the net retirement benefit obligation has also been recognised in the half year. A full valuation for IAS19 financial reporting purposes will be carried out for incorporation in the audited financial statements for the year ending 31 January 2011.

2 segmental reporting

For management purposes the Group is organised into two operating segments. The revenues and net results for these segments are shown below:

	Bicycles and accessories	Sports, leisure and toys	Total
	£'000	£'000	£'000
6 months to 31 July 2010

Revenue	11,900	7,162	19,062

Segment result	424	655	1,079
Unallocated corporate expenses			(366)
Operating profit			713
Finance costs			(65)
Result for the period before taxation			648
Tax expense			(47)
Net profit for the period			601

6 months to 31 July 2009

Revenue	12,912	6,037	18,949

Segment result	284	621	905
Unallocated corporate expenses			(290)
Operating profit			615
Finance costs			(68)
Result for the period before taxation			547
Tax credit			187
Net profit for the period			734

Year ended 31 January 2010

Revenue	21,951	13,727	35,678

Segment result before management charges	689	1,201	1,890
Management charges	(564)	(104)	(668)
Segment result after management charges			1,222
Unallocated corporate expenses			(5)
Operating profit			1,217
Finance costs			(194)
Profit before taxation			1,023
Tax expense			(22)
Net profit for the year			1,001

3 earnings per share

The calculation of earnings per share is based on the net result and ordinary shares in issue during the period as follows:

	6 months ended 31 July 2010	6 months ended 31 July 2009 Restated	Year ended 31 January 2010
	£'000	£'000	£'000

Net profit for the period	601	734	1,001

Weighted average shares in issue used for basic earnings per share	5,520,563	5,757,480	5,665,222
Weighted average dilutive shares under option	96,632	-	-
Average number of shares used for diluted earnings per share	5,617,195	5,757,480	5,665,222


	Pence	Pence	Pence
Basic earnings per share	10.89	12.75	17.67

Diluted earnings per share	10.70	12.75	17.67