Final Results

Worthington Group PLC 18 July 2005 Worthington Group plc Results for the Year Ended 31 March 2005 After a year of further rationalisation, the outcomes of which are reflected in the results, the Group now consists of three properties and investments in Worthington Manufacturing at Macclesfield and Trimmings by Design in Derby, to which I refer later in this statement, and has thus contracted to a position where there is limited downside risk and the opportunity to encash the property assets. The cash generation expected should now finally make the Group a more attractive proposition for a merger or reversal. Worthington Manufacturing We vacated the newly built Macclesfield premises in October 2004, moving the business to rented premises at Lyme Green whilst expanding the use of our warehouse facilities in Morocco to include some production using plant exported from Macclesfield. This gave for a more compact and efficient operation, compatible with reduced demand for UK manufacture of the products, in the face of aggressive and unrelenting competition from the Far East. The first few months following the move were profitable, justifying the considerable downsizing, but the early part of 2005 witnessed a further decline in their fortunes as more goods were made offshore and a further rationalisation was then necessary. In any event, the manufacture of textile products in the UK has little future currently, with the competition now accelerating from overseas production. We had hoped for a longer time scale to maintain our production but, in recent months, it has become clear that our expectations for continued viability were not to be realised and difficult decisions had to be taken. Accordingly we have entered into a joint venture/partnership with Jessop & Baird (Hong Kong) Ltd in Hong Kong and China, which is a complicated arrangement, and will continue until September 2006 when the lease at Lyme Green will come to an end. We will be transferring the goodwill and the remaining plant and machinery, at cost, to the newly formed joint venture company, of which we will have a minority interest, with the expectation that the Far East connection and the offshore production can yield a successful investment for us. The final outcome of this venture depends wholly on whether or not it is successful.. We shall be retaining all the other assets and liabilities, which should release some Â£500,000 currently employed in the business, which will be applied to reduction of borrowings. The move to Lyme Green and the transfer of assets to the joint venture have produced some exceptional losses which include Â£215,000 of redundancies, Â£629,000 for asset write offs and Â£28,000 of moving costs, added to which the business itself lost Â£198,000 during the year. Trimmings by Design By their standards this was a difficult year as they are witnessing more competition from abroad, but they have a unique product and are looking to rationalise their production facilities in the UK and purchase more from overseas to satisfy their customer catchment area. They have a strong brand and there is no reason why they should not be successful in this new form. Properties We have granted an option to a Builder, subject to planning permission, for the sale of the site at Eccleshill, Bradford, which should show a profit over book value of some Â£600,000 (no tax being payable). The sales price is in the region of Â£1 million with all the due diligence having now been done on the site by the Builder. Planning permission approval should be available within the next 3-4 months. The newly built premises at Fence Avenue, Macclesfield has been marketed at a price of Â£3.1 million and there has been reasonable interest. There are few similar sites available in South Manchester and the prospects of a sale in the next few months do not look unreasonable. The site at Keighley is more problematical, as initial discussions with the Local Authority have indicated that they would not permit a residential development on that site as it is zoned in an industrial area. We are of course considering our position and whether to put in planning application and appeal any unfavourable response. In the meantime we are marketing this site, as is, for some Â£2.5 million. We have tenants producing rental income for the next two years, so we can take a more leisured approach whilst we explore the options available to us. Directors Following the Joint Venture arrangements, John Smith, who was Managing Director of Worthington Manufacturing, has retired from the Group Board and subsidiaries to commit himself entirely to the future of that new venture. Roger Green, FCA, who has been a Non-Executive Director since April 1999, and who was formerly Finance Director at Bodycote International Plc, will also be leaving the Board at the AGM and we shall seek to make an appointment of a new Non-Executive Director in the near future. He has made an excellent contribution to our affairs. To both of these colleagues I would like to extend our grateful thanks, on your behalf, for their considerable efforts and commitment to the Group, during a very difficult period when we have had to cope with the vagaries and volatility of a fast shrinking textile business, absorb the pension deficit and write off monies which were due to us from the collapsed Independent Insurance Company. It is hard to recall a moment when all of us have not had continually to deal with crisis management. Pensions On the FRS17 basis the net deficit is now down to Â£2,313,000. During the year reduced contributions to the pension scheme were agreed between the Company and the Trustees, following the 2004 actuarial valuation, which showed the Company was ahead of the agreed plan to clear the deficit over a ten year period. Contributions for 2005/6 have been agreed at some Â£250,000 per annum, increasing by 3% per annum. Besides Head Office costs, which have been kept to a minimum, the pension contributions are the only other cash demand annually on the Company, a proportion of which will be funded by the rental income from Keighley. Move to AIM After careful consideration, the Board has concluded that the interests of the Group are best served by a move from the Official List to AIM. It is felt that the AIM market is more appropriate given the size of the Group and the transfer should also help reduce the annual fees. The Board has today commenced the process to affect this transfer to AIM. Notice will shortly be given of our intention to cancel the listing of the Group shares on the Official List and application will be made for the shares to be admitted to trading on AIM. General Clearly, with the sales of our properties and the subsequent repayment of borrowings, the Company will in the end have a net cash balance and will save interest charges incurred, which for the year just ended amounted to some Â£137,000. These results can only be viewed in the light of the expectations for the Group going forward which has now, finally, been tidied up, but not without further unexpected costs from former subsidiaries, which emerged during the year, and which have had to be dealt with through the profit and loss account. Furthermore, we are now in the process of winding up our dormant subsidiaries and settling the tax affairs all of which will incur some costs. In truth, the last few years have not been easy for the Company. Some of our problems were undoubtedly inherited, others forced on us by changing market conditions. However, it is no use looking back, what we have to do now is take advantage of our vastly improved situation. J C Dwek CBE Chairman 18 July 2005 Worthington Group plc Consolidated Profit & Loss Account for the year ended 31 March 2005 2005 2004 Â£'000 Â£'000 Turnover 4,812 9,197 Cost of sales (3,429) (6,928) Gross profit 1,383 2,269 Distribution costs (285) (698) Administrative expenses excluding (1,759) (2,715) exceptional items Administrative expenses exceptional items (872) (938) (2,631) (3,653) ______ ______ Group operating loss (1,533) (2,082) Share of operating profits of associated undertaking 149 137 Total operating loss: Group and share of associated undertaking (1,384) (1,945) Profit/(loss) on disposal of fixed assets 37 (58) Loss before interest and taxation (1,347) (2,003) Interest payable and similar charges: Group (86) (80) Share of interest of associated undertaking (32) (39) Loss on ordinary activities before taxation (1,465) (2,122) Taxation _ 42 Share of taxation of associated undertaking (44) (49) Loss on ordinary activities after taxation (1,509) (2,129) Dividends payable - - Retained loss for the year (1,509) (2,129) Loss per share-basic - before exceptional items and disposals (5.4p) (9.6p) - after exceptional items and disposals (12.8p) (18.0p) Worthington Group plc Consolidated Balance Sheet At 31 March 2005 2005 2004 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Tangible assets 1,013 5,367 Investments: Interest in associated undertaking 811 803 811 803 1,824 6,170 Current assets Current asset investments 3,480 - Stock 283 690 Debtors: amounts falling due within one year 1,172 1.775 Debtors: amounts falling due after more than one 869 946 year Cash at bank and in hand 1 1 5,805 3,412 Creditors: amounts falling due within one year (1,980) (2,171) Net current assets 3,825 1,241 Total assets less current liabilities 5,649 7,411 Creditors: amounts falling due after more than one (1,321) (1,574) year Net assets 4,328 5,837 Capital and reserves Called up share capital 11,807 11,807 Share premium account 9,836 9,836 Capital redemption reserve 128 128 Profit and loss account (17,443) (15,934) Shareholders' funds 4,328 5,837 Worthington Group plc Consolidated Cashflow Statement for the year ended 31 March 2005 2005 2004 Â£'000 Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating activities (230) 714 Dividends from associates 66 66 Returns on investments and servicing of finance: Interest paid (84) (73) Interest element of finance lease rental (payments) (2) (7) (86) (80) Capital expenditure and financial investment: Purchase of tangible fixed assets (net of finance (38) (220) leases) Sale of tangible fixed assets 121 521 Investment in associated undertaking - (35) 83 266 Net cash (outflow)/ inflow before financing (167) 966 Financing: Capital element of finance lease rental payments (28) (72) Debt due within one year: Repayments of long term borrowings (250) (246) (278) (318) (Decrease)/increase in cash in the year (445) 648 Worthington Group plc Notes forming part of the preliminary announcement for the year ended 31 March 2005 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 2004. The financial information included within the preliminary announcement does not constitute the group's audited statutory accounts for the financial year ended 31 March 2005. The financial information for 2004 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 2005 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 18 July 2005. The Group currently meets its day to day working capital requirements through the support of its bankers. The Bank has indicated that it is not committed to renewing the Group's facilities when they are reviewed on 2 January 2006. The Chairman has indicated that in the event that these facilities are not renewed he will introduce the necessary funds to support the Group. On this basis the Directors consider it appropriate to prepare the financial statements on a going concern basis. 2. Turnover, Profits and Net Assets Turnover and profit before taxation is attributable to the Group's principal activity. Turnover is derived from the following markets: 2004 2004 Â£'000 Â£'000 United Kingdom 2,150 4,770 Eire and the rest of Europe 365 326 Rest of the World 2,297 4,101 4,812 9,197 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 the 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: 2005 2004 Â£'000 Â£'000 Manufacture, importation and distribution of textile components 4,328 5,837 Worthington Group plc Notes forming part of the preliminary announcement for the year ended 31 March 2005 (Cont.) 3. Exceptional items 2005 2004 Â£'000 Â£'000 Redundancy costs 215 258 Impairment of fixed assets 629 542 Other closure costs 28 138 872 938 4. Taxation 2005 2004 Â£'000 Â£'000 Adjustments in respect of prior periods - 42 Share of tax in associated undertaking (44) (49) (44) (7) 5. Loss per share The loss 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 after adjusting for the share capital re-organisation was 11,807,013 (2004: 11,807,013) and the loss after exceptional items and taxation was Â£1,509,000 (2004: Â£2,129,000). The loss per share before exceptional items has been disclosed in the accounts for the year ended 31 March 2005. There is no difference between the basic and diluted loss per share in either year. 6. Reconciliation of operating loss to net cash inflow from operating activities 2005 2004 Â£'000 Â£'000 Operating loss before exceptional costs (661) (1,144) Exceptional costs (872) (938) Operating loss (1,533) (2,082) Depreciation/impairment and amortisation of goodwill 819 980 Provision against investment - 35 Decrease in stocks 407 193 Decrease in debtors 680 5,024 Decrease in creditors (603) (3,436) Net cash (outflow)/ inflow from operating activities (230) 714 Worthington Group plc Notes forming part of the preliminary announcement for the year ended 31 March 2005 (Cont.) 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 Suite 1, Courthill House, 66 Water Lane, Wilmslow, Cheshire, SK9 5AP. Enquiries: Worthington Group plc Joe Dwek CBE, Chairman Tel: 01625 549082 This information is provided by RNS The company news service from the London Stock Exchange

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