Final Results

Worthington Group PLC 14 July 2003 Worthington Group plc Results for the Year Ended 31 March 2003 The Group's operating profit for the year was Â£792,000 from our continuing operations after including exceptional losses of Â£238,000 and other income of Â£1,694,000. The trading loss before these items is therefore Â£664,000 which can be explained by increased pension contributions, the trading losses at Armitage and the corresponding asset write downs. Our main subsidiary, Worthington Manufacturing at Macclesfield, virtually broke even in the full year despite a good first half performance. The rationalisation programme had to be continued during the year under review driven by ever-changing market forces, and the need to eradicate any further trading losses. West Yorkshire Weavers closed during the year, despite our best endeavours to find a strategy which would enable it to return to profitability. Write-offs of Â£267,000 are shown in the accounts under the heading of ' Discontinued Operations' reflecting the trading losses and closure costs. Discontinued Operations also includes final closure costs of Â£85,000 for Merralls and Gardiners which were closed last year. Some cash has been released to the Group which might otherwise have been lost had we continued to trade these subsidiaries. Textiles in the UK have been contracting for some years, and these companies which formerly enjoyed enormous prestige, witnessed the decline of their markets and their closure became inevitable. PENSIONS In common with most companies, a review of the current pension schemes has produced additional liabilities. The S Jerome & Sons scheme was discontinued on 1 April 2001 but final valuations have not yet been agreed. A provision of Â£193,000 continues to be carried against any eventual shortfall in the funding of the scheme. The minimum funding requirement valuation which was referred to in the half year statement has now been completed for the Jerome Retirement Benefit Scheme. The company has agreed to address the existing shortfall of Â£3 million by equal monthly contributions over the next ten years, which will impact adversely on our profit and loss account to the extent of Â£300,000 per annum. This may be affected by a further valuation of the scheme to be carried out in 3 years time. WORTHINGTON MANUFACTURING LIMITED Worthington Manufacturing, suppliers of components to the ladies lingerie market, had a difficult second half, due to lower sales, an adverse product mix and an increase in raw material prices, so that for the full year this division barely broke even. This was very disappointing considering our expectations and improved facilities at the purpose-built factory at Macclesfield. The problems encountered have now been addressed and our first quarter figures are broadly in line with budget. The opening of a facility in Morocco, together with a number of new products, has generated an increase in sales with a simultaneous enlarged catchment area in North Africa, Asia and Eastern Europe. The sad news is, our domestic market continues to shrink as customers go offshore to low cost production countries for their finished products. This worrying trend shows no sign of abatement. Other than the growing rental income from our properties, the Group depends primarily on this source of profits as it represents the only remaining trading operation. There are approximately Â£7.5 million of capital assets employed which have to yield an acceptable return. A continuing review is therefore necessary and remains a high priority on our agenda, but hopefully the need for further rationalisation might well be deferred until market conditions are clarified. ARMITAGE FINISHING COMPANY It was planned that Armitage would continue to operate on the basis that the annual trading result was neutral, but cash would be generated from its depreciation charge of some Â£200,000 per annum. However, trade proved unrewarding, resulting in an operating loss of Â£159,000 before exceptionals during the year. Consequently, we accepted an invitation to merge the business with a Huddersfield based competitor who also has dyeing and finishing facilities, and formed a new company, Indygo Limited. Contracts were exchanged on 3 July 2003, conditional on a successful completion of a consultation period with the workforce under TUPE regulations. The new enlarged company will have economies of scale under a similar cost structure and this should make it profitable. Worthington will be providing the majority of Armitage's plant and machinery to the new company, under an operating lease payable over five years in equal monthly instalments; the cash generated will roughly equate to the depreciation charge but now without the potential risk of the trading losses. We have written off Â£224,000 of accelerated depreciation in these accounts. We shall retain the property with a view to redevelopment and would expect a surplus over book value. We shall retain 35% of the equity of the new combined operation of Indygo Limited and expect to receive dividends in due course when cashflow permits. TRIMMINGS BY DESIGN Our investment continues to be successful with our share of the profit after interest totalling Â£194,000. We also received dividends of Â£44,000 in the year. There is an annual charge of Â£29,000 being the amortisation of goodwill which is being written off over a total of 10 years. PROPERTIES Selkirk Site The Selkirk site consists of one large modern factory of 40,000 sq. ft. and adjacent properties that need refurbishment, but we expect to conclude a sale of the factory within the next few months, the proceeds of which should exceed the book value. Offers are under consideration for the rest of the site. Keighley We are in the process of letting the vacant areas of the Keighley site, formerly occupied by Merralls and West Yorkshire Weavers and when fully leased we would expect to receive rental income from the site of some Â£220,000 per annum. This site (approximately 6 acres) could become quite valuable in the years to come but first we shall have to apply for planning consent for change of use, and then market it appropriately. LITIGATION We have recently settled the claims against our former auditors for errors arising out of the 1998 accounts and previous years. From the settlement proceeds we will discharge our liabilities to Penmarric Plc. The net effect to the Group is shown in the accounts as 'Other Income' of Â£1.694 million which will be used to repay our overdraft and will still leave the Group in a cash positive situation excluding of course our long-term loan and mortgage on the Macclesfield property. CONCLUSION During the previous years we have received a number of setbacks, not least the Â£3 million underpayment shortfall from The Independent Insurance Company on our fire claim and this year the increased pension liabilities, so it has taken longer to get a straight edge. Superimposed on these problem areas have been the rationalisation programmes, asset write-offs and redundancy costs as the Group endeavoured to find a new commercial equilibrium. We have come a long way and preserved a significant amount of our assets but clearly the Group is now at a crossroads regarding its future. Shareholders' patience will be required because we have a risk averse management strategy and cannot afford to take decisions which might jeopardise the improved situation in which we now find ourselves. However, there are prospects with emerging technologies which we find attractive but we need to find a cost effective point of entry in order to have a sustainable future. We accept that there is a need to re-invent ourselves speedily but we are taking a cautious and prudent approach and actively seeking to find new businesses now that the Group has been slimmed down and is consequently much more financially attractive. We would like to thank our colleagues, staff and employees for their help and commitment. J C Dwek CBE J R Taylor Chairman Chief Executive 11 July 2003 Enquiries: Worthington Group plc Joe Dwek CBE, Chairman Tel: 01625 549082 John Taylor, Tel: 01535 605271 Chief Executive Mob: 07768 383153 Worthington Group plc Consolidated Profit & Loss Account for the year ended 31 March 2003 Continuing Discontinued 2003 2002 Operations Operations Â£'000 Â£'000 Â£'000 Â£'000 Turnover 12,178 1,345 13,523 20,595 Cost of sales (9,209) (1,274) (10,483) (16,057) Gross profit 2,969 71 3,040 4,538 Distribution costs (759) (135) (894) (1,846) Administrative expenses excluding (2,874) (183) (3,057) (3,133) exceptional items Administrative expenses exceptional items (238) (102) (340) (946) (3,112) (285) (3,397) (4,079) Net other operating income exceptional item 1,694 - 1,694 - Other operating income - - - 136 Group operating profit/(loss) 792 (349) 443 (1,251) Share of operating profits of associated 238 - 238 237 undertaking Total operating profit/(loss): Group and 1,030 (349) 681 (1,014) share of associated undertaking Loss on disposal of fixed assets (7) - (7) (39) Diminution in value of fixed assets - - - (400) Profit/(loss) before interest and taxation 1,023 (349) 674 (1,453) Interest payable and similar charges: Group (21) (3) (24) (328) Share of interest of associated (44) - (44) (57) undertaking Profit/(loss) on ordinary activities before 958 (352) 606 (1,838) taxation Taxation - 910 Share of taxation of associated undertaking (63) (45) Profit/(loss) on ordinary activities after 543 (973) taxation Dividends paid and proposed - - Retained profit/(loss) for the year 543 (973) (Loss)/earnings per share - before exceptional items and disposals (0.7p) 0.3p - after exceptional items 0.5p (0.8p) Worthington Group plc Consolidated Balance Sheet At 31 March 2003 2003 2002 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets: negative goodwill (48) (56) Tangible assets 6,754 7,912 Investments: Unlisted investment - 27 Interest in associated undertaking 785 698 785 725 7,491 8,581 Current assets Stock 883 1,812 Debtors: amounts falling due after more than one 6,810 4,132 year Debtors: amounts falling due within one year 935 833 Cash 2 743 8,630 7,520 Creditors: amounts falling due within one year (6,297) (8,544) Net current assets/(liabilities) 2,333 (1,024) Total assets less current liabilities 9,824 7,557 Creditors: amounts falling due after more than one (1,858) (134) year Net assets 7,966 7,423 Capital and reserves Called up share capital 11,807 11,807 Share premium account 9,836 9,836 Capital redemption reserve 128 128 Revaluation reserve 285 285 Profit and loss account (14,090) (14,633) Shareholders' funds 7,966 7,423 Worthington Group plc Consolidated Cashflow Statement for the year ended 31 March 2003 2003 2002 Â£'000 Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating activities (341) 6,835 Dividends from associates 44 - Returns on investments and servicing of finance: Interest (paid) (12) (291) Interest element of finance lease rental (payments) (12) (37) (24) (328) Taxation: UK corporation tax repayment 199 46 Capital expenditure and financial investment: Purchase of tangible fixed assets (net of finance (373) (3,283) leases) Sale of tangible fixed assets 700 1,690 327 (1,593) Equity dividends paid - (59) Net cash inflow before financing 205 4,901 Financing: Capital element of finance lease rental payments (220) (345) Debt due within one year: (Repayments)/receipt of short term borrowings (400) 650 Receipt of long term borrowings 1,817 - Bill of exchange - (500) 1,197 (195) Increase in cash in the year 1,402 4,706 Worthington Group plc Notes forming part of the preliminary announcement for the year ended 31 March 2003 1. Accounts The financial information included within the preliminary announcement has been prepared on the basis of accounting policies consistent with those set out in the annual report to shareholders for the year ended 31 March 2003. The financial information included within the preliminary announcement does not constitute the group's audited statutory accounts for the financial year ended 31 March 2003 or 31 March 2002. The financial information for 2002 is derived from the statutory accounts for that period. Full audited accounts of Worthington Group plc in respect of that period (which received an unqualified audit opinion and did not contain a statement under either section 237 (2) or (3) of the Companies Act 1985) have been delivered to the registrar of companies. The statutory accounts for 2003 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies following the Company's annual general meeting. The board of directors approved this preliminary announcement on 11 July 2003. 2. Turnover, Profits and Net Assets Turnover and profit before taxation is attributable to the Group's principal activities. Turnover is derived from the following markets: 2003 2002 Â£'000 Â£'000 United Kingdom 7,145 12,389 Eire and the rest of Europe 1,390 3,159 Rest of the World 4,988 5,047 13,523 20,595 A further analysis of turnover and pre-tax profits originating overseas has not been given since, in the opinion of the directors, the amounts involved are not material. The principal activities of the Group are manufacture, importation and distribution of textile components. These are regarded as a single activity for segmental reporting purposes. The net assets of the Group over this activity are as follows: 2003 2002 Â£'000 Â£'000 Manufacture, importation and distribution of textile components 7,966 7,423 3. Exceptional items included in continuing operations 2003 2002 Â£'000 Â£'000 Redundancy costs 14 - Accelerated depreciation on fixed assets 224 - 238 - 4. Exceptional items included in discontinued operations 2003 2002 Â£'000 Â£'000 Provision against debtors and stocks 102 173 Provision for diminution in value of fixed assets 28 578 Other closure costs (28) 595 102 1,346 5. Net other operating income exceptional item 2003 2002 Â£'000 Â£'000 Settlement of action against former auditors 4,700 - Less: claim by Penmarric Plc and associated costs (3,006) - 1,694 - The Company reached a settlement with its former auditors for an amount of Â£4,700,000 out of which Â£3,006,000 is payable to Penmarric Plc under the Dispute Resolution Agreement. 6. Taxation 2003 2002 Â£'000 Â£'000 Adjustment in respect of prior periods - 910 Share of tax in associated undertaking (63) (45) (63) 865 7. Dividends payable 2003 2002 Â£'000 Â£'000 Final proposed dividend of nil p per share on 118,070,163 shares (2002: nil p per share on 118,070,163 shares) - - 6. Earnings per share The earnings per share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of shares in issue during the year was 118,070,163 (2002: 118,070,163) and the profit after exceptional items and taxation was Â£543,000 (2002: loss Â£973,000). The loss per share before exceptional items has been disclosed in the accounts for the year ended 31 March 2003. The diluted earnings per share are based on a weighted average number of shares during the year of 118,070,163 (2002: 118,142,445). 7. Copies of the Annual Report Copies of the Annual Report are available from the Company Secretary at the registered office which is situated at Fence Avenue, Macclesfield, Cheshire, SK10 1LW. This information is provided by RNS The company news service from the London Stock Exchange

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