Preliminary Results

Worthington Group PLC 12 July 2002 PRELIMINARY ANNOUNCEMENT Results for the Year Ended 31 March 2002 In keeping with many other sectors of the UK economy after September 11th there was a definite downturn in trade which impacted on the second half of the year, with confidence much reduced. This warranted a serious review of the remaining operations and in consequence the Board decided to contract its trading activities and only retain those sectors which would provide sustainable operating profits. Moreover, the insurance premiums, which have risen from Â£149,000 to Â£450,000, accelerated the decisions. Worthington Manufacturing at Macclesfield and Armitage, the finishing company in Eccleshill, will now comprise the residue of the Group and between them should generate sufficient cash for repayment of existing debt. I have already mentioned in a previous Statement that the collapse of the Independent Insurance Company caused a financial setback because we were unable to recover some Â£2.7million of the outstanding claim. Nevertheless, bank borrowings were reduced from Â£7.5million to Â£3.1million and had it not been for this setback we would have virtually eradicated them. Therefore we have reorganised our bank borrowings which should be repaid out of current cash flow should funds permit. The Group will now have divested itself of much of the remaining difficult areas and make a much more attractive scenario for potential mergers and acquisitions, which remain very much uppermost in our minds. We had hoped to reduce our operations in these fields under the umbrella of a new acquisition but this has not proved to be possible given that we were still carrying potential risk situations. Despite our best endeavours and the numerous reorganisation programmes we have no alternative but to close Merralls and Gardiners simply because market conditions give us no reason to be comfortable. We could not continue loss making situations where any upturn was far from certain. Their customer base was contracting daily and thus the closures were inevitable as no suitable buyers could be found. Equally, West Yorkshire Weavers had struggled in previous years to make an acceptable return on capital employed, and therefore we are presently reviewing reasonable offers for this business, thus releasing totally the Keighley site for sale or rental. Provisions for the discontinued areas of our business are shown in the accounts under a separate heading and total approximately Â£1.3million of write-offs for plant and machinery, buildings and current assets. Worthington Manufacturing which produces lingerie components was the only company to show improvements throughout the year. Their profits would have been enhanced had it not been for the absorption of the relocation costs from the various temporary outside plants to the newly built premises on Fence Avenue in May 2001. The relocation took several months and the costs were non-recoverable as they were out of time for the business interruption claim in the previous insurance policy following the fire. These costs were substantial but the new facilities are much more efficient and contain state of the art equipment. We are hopeful that this division will be the engine room of the Group. The new factory and adjacent office block are prestigious premises. Armitage, having made a contribution in the first half, made considerable losses in the second half as a result of the loss of a major customer. The cost base was therefore reduced and alternative techniques and products to serve new markets have been introduced with some success. We envisage that Armitage should now break even after charging depreciation on its assets and the resulting cash flow will also help to reduce Group indebtedness and capital employed. I referred to the closure of Gardiner of Selkirk in the half-year statement since when we have made further provisions for the reduced value of the premises, as the property market itself in Selkirk is somewhat difficult at the moment. This has been an asset realisation programme. Furthermore, we have reduced Head Office costs considerably as the smaller Group could not sustain or warrant the previous overhead structure. In the second half of the year we actually halved Head Office costs and they will be further reduced, down to the bare minimum, by the end of this current year. Although the remaining Group is much smaller now and less exposed to the vagaries of the textile industry, it does give us better opportunities to complete our objectives without the somewhat debilitating operating areas which have concerned us for the last few years. By contracting to this smaller base the Group is more flexible and, providing Armitage performs and Worthington Manufacturing continues to achieve its targets, then we can afford to wait until the right opportunity for expansion comes along. In any event, any diversification of the Group in 2001 would still not receive a successful endorsement given the performance of the Stock Market. Opportunities will come and I am now more confident that we are better placed to take advantage of any proposals. There were insufficient opportunities of sustainable calibre for us to take forward but this was not unexpected given the slowdown in merger and acquisition activity in the UK and the unwillingness of the City to support companies where there is any perceived risk. With that in mind we concentrated our efforts on our remaining businesses whilst marking time for the next generation of innovative ideas to come forward. Your Board is pursuing a claim for substantial damages against its previous auditors and has instructed the Company's solicitors to pursue the claim vigorously. Briefly the claim relates to the preparation and presentation of the Company's accounts particularly for the year end 31 March 1998 (which accounts had to be restated at the end of March 1999) and losses suffered by the Company as a result. The claim is disputed by the previous auditors. Stephen Fletcher, our Financial Director, joined us from Bodycote International plc in March 2000, since when he has worked successfully to improve the financial controls and internal disciplines, and resolved many of the outstanding financial difficulties which the new Board inherited. With the virtual completion of our initial strategic plan it became obvious that there was not going to be a role for a full-time Financial Director and therefore Stephen Fletcher is to take up a new position as of 1 September 2002. We wish him every success in his future career. It is to his credit that the internal accounting functions within the Group are now sufficiently strong that the task work of the Financial Director has changed and on this basis a new appointment will be made as soon as possible. We thank him most warmly for all his work which has been highly valued and much appreciated. In a difficult trading year, accompanied by all the changes, I would like to thank on your behalf my colleagues, staff and employees for their hard work, commitment and understanding. J C Dwek CBE Chairman 12 July 2002 WORTHINGTON GROUP PLC Consolidated Profit and Loss Account for the year ended 31 March 2002 Continuing Discontinued Exceptional Discontinued Year ended Year ended operations operations (pre items (note 3) operations 31 March 31 March exceptionals) 2002 2001 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 17,988 2,607 - 2,607 20,595 21,371 Cost of sales (13,645) (2,412) - (2,412) (16,057) (17,342) Gross Profit 4,343 195 - 195 4,538 4,029 Distribution costs (1,524) (322) - (322) (1,846) (2,336) Administrative expenses (2,880) (253) (946) (1,199) (4,079) (4,059) Other operating income 136 - - - 136 926 Group operating profit/(loss) 75 (380) (946) (1,326) (1,251) (1,440) Share of operating profits of 237 - - - 237 201 associated company Operating profit/(loss) 312 (380) (946) (1,326) (1,014) (1,239) (Loss)/profit on disposal of (39) - - - (39) 3,796 fixed assets Diminution in value of fixed - - (400) (400) (400) - assets Loss on sale of businesses - - - - - (245) Profit/(loss) on ordinary 273 (380) (1,346) (1,726) (1,453) 2,312 activities before interest Interest payable - Group (198) (130) - (130) (328) Interest payable - share of (57) - - - (57) (746) associated company Profit/(loss) on ordinary 18 (510) (1,346) (1,856) (1,838) 1,566 activities before taxation Taxation on profits from 910 - ordinary activities Taxation on share of profits from associated (45) (66) undertaking (Loss)/profit on ordinary (973) 1,500 activities after taxation Dividends paid and proposed - (59) (Accumulated loss)/retained (973) 1,441 profit for the period Earnings/(loss) per share - basic and diluted - before exceptional items and 0.3p (0.2)p disposals - after exceptional items (0.8)p 1.3p WORTHINGTON GROUP PLC Consolidated Balance Sheet at 31 March 2002 2002 2002 2001 2001 Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets: negative goodwill (56) (64) Tangible assets 7,912 7,934 Investments: Unlisted Investment 27 27 Investment in subsidiary undertakings 698 725 563 590 8,581 8,460 Current assets Stocks 1,812 2,637 Debtors : amounts falling due within one year 4,132 9,932 Debtors : amounts falling due after more than one year 833 850 Cash at bank and in hand 743 6 7,520 13,425 Creditors: amounts falling due within one year (8,544) (13,239) Net current liabilities/assets (1,024) 186 Total assets less current liabilities 7,557 8,646 Creditors: amounts falling due after more than one year (134) (250) Net assets 7,423 8,396 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 285 737 Profit and loss account (14,633) (14,112) Shareholders' equity funds 7,423 8,396 WORTHINGTON GROUP PLC Consolidated Cash Flow Statement for the year ended 31 March 2002 2002 2002 2001 2001 Â£'000 Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 6,835 1,463 Returns on investments and servicing of finance Interest paid (291) (594) Interest element of finance lease rentals (37) (77) (328) (671) Taxation: U.K. corporation tax paid 46 - Capital expenditure: Purchase of tangible fixed assets (3,283) (2,189) Sale of tangible fixed assets 1,690 2,992 (1,593) 803 Acquisitions and disposals Sale of subsidiary undertakings - 20 Receipt of deferred consideration - 968 - 988 Equity dividends paid (59) (118) Net cash inflow before financing 4,901 2,465 Financing: Capital element of finance lease rentals (345) (1,008) Short term borrowings 650 (3,103) Bill of exchange (500) 500 (195) (3,611) Increase/(decrease) in cash in period 4,706 (1,146) WORTHINGTON GROUP PLC Notes forming part of the preliminary announcement for the year ended 31 March 2002 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 2001, with the exception of the applications of FRS 19 for the first time. The adoption of FRS 19 has had no material effect on the financial statements and accordingly no prior year adjustment is required. The financial information included within the preliminary announcement does not constitute the group's audited statutory accounts for the financial year ended 31 March 2002 or 31 March 2001. The financial information for 2001 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 2002 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 12 July 2002. 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: 2002 2001 Â£'000 Â£'000 United Kingdom 12,389 13,487 Eire and rest of Europe 3,159 2,587 Rest of the World 5,047 5,297 20,595 21,371 A further analysis of turnover and pre-tax profits originating overseas has not been given since, in the opinion of the directors, the amounts are not material. The principal activities of the Group are regarded as a single activity for segmental reporting purposes. The net assets of the Group shown over this activity are as follows: 2002 2001 Â£'000 Â£'000 Manufacture,importation and distribution of textile 7,423 8,396 components 3 Exceptional items in discontinued operations 2002 2001 Â£'000 Â£'000 Provision against debtors and stock 173 370 Provision for diminution in value of fixed assets 578 156 Other closure costs 595 184 1,346 710 4 Taxation 2002 2001 Â£'000 Â£'000 Adjustment in respect of prior periods 910 - Share of tax in associated undertaking (45) (66) 865 (66) 5 Dividends payable 2002 2001 Â£'000 Â£'000 Final proposed dividend of nil p per share on 118,070,163 - 59 shares 6 Loss per share The loss per share has been calculated using the weighted average number of shares in issue during the relevant financial periods of 118,070,163 shares (2001: 118,070,163). The loss after exceptonal items nd taxation was Â£973,000 (2001: profit of Â£1,500,000). 7 Copies of Annual Report Copies of the Annual Report are available from the Company Secretary at the registered office which is situated at Chatsworth Works, Dalton Lane, Keighley, West Yorkshire BD21 4HR. Enquiries: Worthington Group plc Chairman Tel: 01625 549082 John Taylor, Chief Executive Tel: 01535 297700 This information is provided by RNS The company news service from the London Stock Exchange

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