Information  X 
Enter a valid email address

Hi-Tec Sports PLC (HTS)

  Print      Mail a friend

Friday 16 July, 1999

Hi-Tec Sports PLC

Final Results

16 July 1999
                       HI-TEC Sports Plc
     Preliminary results for the year ended 30 April 1999
HI-TEC  Sports Plc, the international designer and  wholesaler
of  performance and sports footwear, announces its preliminary
results for the year ended 30 April 1999.
                                             1999        1998
                                             ____        ____
Turnover                                    £82.3m      £89.9m
(Loss)/profit before taxation              £(3.0)m       £3.7m
Gross margins                                30.8%         34%
(Loss)/earnings per share                   (5.4)p        5.4p
Dividend per share                            1.0p        1.5p
-    Stocks reduced to £18.7m (1998: £27.15m)
-    Gearing 30% (1998: 20%)
-    Substantially strengthened management, particularly in USA
-    Continued investment in design and technology
-    Change of financial year-end to calendar year
Frank van Wezel, HI-TEC's Chairman, comments:
'Whilst  some  markets  continue to face challenging  economic
environments, we start the year with a strengthened management
team,  reduced stocks, a solid order book and better products.
We  continue to focus our efforts on developing the profitable
areas  of  the  business and those with  the  most  potential,
whilst   improving  further  our  product  design,   technical
innovation  and  operational efficiency. Taking  all  of  this
together,  we  anticipate an improved  trading  and  financial
For further information, please contact:
HI-TEC Sports Plc
Paul Harrison, Group Chief Executive            01702 541 741
Donald Bell, Group Finance Director
Ludgate Communications
Tim Davis                                       0171 253 2252
                       HI-TEC Sports Plc
                     CHAIRMAN'S STATEMENT
The  year  under review showed good performances in  our  home
markets,  the  United  Kingdom and Ireland  and  in  parts  of
Continental  Europe.  We are also happy to report steady  high
margin growth for the MAGNUM brand.
However,  it  has  been a year of two stories  for  the  group
during  which time we have not only produced some good results
as  mentioned  but also had to endure difficult  circumstances
which,  for differing reasons, have adversely affected two  of
our  key  operations.  A period of difficulty  for  our  North
American  operations caused  mainly  by  surplus  sports  shoe
inventories selling through the market at reduced prices, and,
secondly, a sales decline in Asia as well as  parts  of  South
America have affected overall results.
On  16 March, we announced that due to the poor performance of
the North American operations, HI-TEC Sports Plc was likely to
report  a loss for the year, the final outcome of which  would
be  determined by the group's performance during the final six
weeks  of the financial year. What we could not anticipate  at
that  time  was the marked effect during that six week  period
that  the  factors referred to above would have on  the  final
Given  these  difficult circumstances,  a  marginally  reduced
turnover of £82.3m (1998: £89.9m) with gross profit margins of
30.8%  (1998:  34%)  is, we believe, a  creditable outcome and
reflects  the  inherent  value of the  HI-TEC  brand  and  the
progress that continues to be made in product design, sourcing
and distribution.
Whilst  the  reported loss of £3.0m (1998:  £3.7m  profit)  is
disappointing,  it  must  be put  into  context,  as  it  also
reflects remedial action already taken to address the  group's
trading    position,    including   £1.0m    in    exceptional
reorganisation,  redundancy and asset  write-off  costs.   The
result also reflects £1.0m received as a cash settlement of  a
legal dispute dating back to 1992.
Despite   these  setbacks  good  working  capital   management
generated net cash inflows of £3.0m. This inflow was applied to
the   reduction  of  expensive  trade  finance  which  yielded
interest  savings  of  £0.6m and gave  a  modest  increase  in
gearing  from 20% to 30%.  Stocks at the year end were  £18.7m
compared  with  the previous year's figures  of  £27.1m.   The
excellent  debtors collection periods achieved last year  have
been maintained during the period under review.  The effect of
the  efforts to manage working capital is that all  stock  and
debtors  are current with any old items either sold at reduced
margins  or  carrying full provisions.  The balance  sheet  is
thus very strong .
Earnings  per share show a loss of 5.4p (1998: 5.4p earnings).
Given the circumstances, the  board is not  recommending  the
payment of a final dividend.
Strategic development
On  25  November,  we announced that having  investigated  the
opportunities for an association with a larger partner,  talks
had been terminated as none of the approaches were in the best
interests of shareholders. Whilst the Board will consider  any
serious  approach,  HI-TEC will continue to pursue  strategies
for  its future development as an independent group and  build
shareholder value through the profitable development  of  both
the HI-TEC and MAGNUM brands.
Management and staff
During  the year under review and in recent months, the senior
management  of  the Group has been substantially strengthened,
in particular in North America.
Last  November,  Jonathan Caplan was appointed  President  and
Chief  Executive  Officer  of HI-TEC  USA.   He  is  a  former
President of Keds Corporation and Stride Rite Children's Group
(both Divisions of Stride Rite Corporation); and of the Laredo
Boot Company (a division of Genesco Inc.).
At  the  same  time, Neale Attenborough was appointed  a  non-
executive  Director of HI-TEC Sports Plc.   He  has  extensive
North American and European industry experience, and was  most
recently Executive Vice President and President Branded  Group
at  Genesco.  He  is a past Vice President of  a  division  of
Reebok Inc.
Last  month,  we announced the appointment of Donald  Bell  as
Group  Finance Director.  He joined from Muraspec  Limited  (a
subsidiary  of  Gencorp Inc.) and has extensive financial  and
general  management  experience gained  in  both  the  UK  and
I  would  like  to  thank all staff for their  enthusiasm  and
dedication,  often  in  challenging  circumstances.  It  is  a
tribute to them all that the HI-TEC and MAGNUM brands continue
to develop in their respective marketplaces.
Third-party endorsement
It is important to note that, despite recent difficulties, HI-
TEC  Sports  Plc  has retained its ranking at  14th  place  in
Sporting  Goods  Intelligence's annual rating of  the  world's
branded athletic footwear companies.  This underlines both the
value  and  the potential of the company's brands.   In  North
America, HI-TEC has maintained 4th place in the Rugged Outdoor
Change of financial year-end
In  recent years, the outcome of the financial year has become
increasingly  dependent  upon  the  performance  in  the  last
quarter  ending 30 April.   Given  the industry's  seasonality
and  the  importance  of  the  spring season,  the  board  has
decided to  change  the  financial year-end  to  31  December,
effective this year.
This  change will bring HI-TEC Sports Plc into line  with  the
majority  of  the  international sportswear industry  so  that
results  may  be  more easily compared.  It  will  also  allow
management to focus on customer service during the key selling
Whilst  some  markets  continue to face  challenging  economic
environments, we start the year with a strengthened management
team,  reduced stocks, a solid order book and better products.
We  continue to focus our efforts on developing the profitable
areas  of  the  business and those with  the  most  potential,
whilst   improving  further  our  product  design,   technical
innovation  and  operational efficiency. Taking  all  of  this
together,  we  anticipate an improved  trading  and  financial
Frank van Wezel
                       HI-TEC Sports Plc
                   CHIEF EXECUTIVE'S REVIEW
During  the second half of 1997 there was an overall weakening
of  the Athletic Footwear and Apparel market which resulted in
an over-supply of inventory in the marketplace. These  factors
continued to   prevail  during  1998  which  was  a  period of
retail  consolidation   for   this   industry  together   with
considerable  swings   in   consumer  demand  towards  certain
categories  of product.
Recent   market  surveys  show  a  clear  shift  in   consumer
participation  away  from  'team' sports  to  more  individual
activities such as water-sports, fitness training, running and
outdoor activities such as backpacking, climbing, walking  and
camping. What is clear is that the marketplace has become more
fragmented and that significant opportunities still exist  for
niche players. The company therefore continues its focus  with
both  the  HI-TEC  and   MAGNUM  brands  and  on  providing  a
combination  of  style,  performance  and  value  in   certain
In  these challenging circumstances our approach has  been  to
renew and replenish management, to de-risk by reducing working
capital  and, most importantly, to improve the entire  process
and  the  accuracy  with which we bring  product  to  specific
categories in the marketplace.
Good  progress  has  been  made in improving  working  capital
through significantly reducing stocks.  This has been achieved  
by a combination of disposing of old inventories, streamlining
the   product  development  process,  improved  product  range
management and reducing product-to-market lead-times.
New  management  teams  have  been  installed  in  both  North
American  subsidiaries, HI-TEC Sports International  &  HI-TEC
Sports  Taiwan;  a thorough reorganisation and rationalisation
has been implemented in South Africa, and a new subsidiary  in
Central  Europe  has  been opened in the Czech  Republic.   In
addition  to  a  new Group Finance Director we have  appointed
Group Managers for Product Development and Marketing.
We   have   continued  our  policy  of  investing  in  design,
development  and  technological innovation thus  ensuring  the
product offering in our four core categories; OUTDOOR, INDOOR,
GOLF & MAGNUM SERVICE remains highly competitive in terms  of
specification, quality, performance and value.  Our investment
in people within the areas of  design and  technology  both in
North America and in Europe; completed a reorganisation of our
product  development  process;  and  have  recruited  industry
professionals  to  ensure  every  part of  this  process  from
'market  needs  identification'  through  design, development,
specification, pricing and  quality  control  is managed.
We  now have greater flexibility with our key suppliers and  a
wider  choice of factories. Production is now concentrated  in
factories  in  China,  Vietnam,  Korea  and  Bangladesh.   Our
relationships with long-standing suppliers remain  strong  and
we  are grateful to those who have undertaken major investment
and reorganisation in order to assist us.
Brand promotion
The  group's investment in marketing and promotion is  centred
on   cost-effective,   category-specific  opportunities   that
provide  a maximum return for minimal investment.  Central  to
the  promotion of the HI-TEC Outdoor brand is the  sponsorship
in  the  USA and UK of the widely publicised Adventure  Racing
Series,  where, the television coverage and event  advertising
surrounding the series suggests a return considerably  greater
than the original investment.
Our first major event in the UK, held in May, was televised by
Channel  Four, reflecting just how quickly interest is growing
in  adventure  sports.  In parallel, there is a clear  fashion
trend developing for adventure sports footwear.
United Kingdom and Ireland
Turnover  was  maintained at £31.4m (1998: £31.9m),  producing
operating profit of £2.7m (1998: £3.2m).  This is a creditable
outcome  in  a  year where the UK market for  sports  footwear
decreased  and  underlines the resilience  of  our  sport  and
athletic  business in the UK and is witness to the  growth  of
our Rugged outdoor business and the strength of our management
North America
Turnover  reduced  to  £28.6m  (1998:  £32.5m),  producing  an
operating loss of £2.0m (1998: £3.1m profit).  The market  was
severely  affected by surplus sports shoe inventories  selling
through the market at reduced prices.
In  addition to the new Chief Executive Officer referred to by
the Chairman, the US operation's sales, marketing and customer
services  are also under new leadership.  The design team  has
been  reinforced, new category managers are in place  and  the
sales management is now being reorganised.  To ensure this new
team has every chance in its  key market, old stocks have been
cleared  and the product range now fully reflects the  efforts
of the new product development and design teams.
Continental Europe
In Continental Europe, sales improved to £10.8m (1998: £9.3m),
although  operating  profit stayed  at  £0.3m  (1998:  £0.3m).
Turnover  growth  and  a  profit  contribution  by  our  Czech
Republic subsidiary, which was formed last February to provide
our bridgehead into Central Europe, was satisfactory.
Our Spanish operation performed well, holding market share and
returning   to   profitability  after  the   previous   year's
devaluation of the Peseta caused losses.
Rest of the World
Turnover  for the Rest of the World was reduced substantially,
from  £16.2m to £11.5m.  This produced an operating profit  of
£3,000  (1998:  £1.3m). This is largely as  a  result  of  the
impact   of  the  poor  Asian  and  South  American   economic
environments, compounded by certain countries imposing  import
restrictions in order to protect domestic economies.
HI-TEC  South  Africa broke-even despite a 25% devaluation  in
the Rand.
As  a  result of the improvements that have been made  to  the
balance sheet, the management, the product development process
and the products, the group is well positioned for modest growth
and a return to profitability.
Paul Harrison
Chief Executive
for the 52 week period ended 30 April 1999
                                                 52 week     52 week
                                                  period      period 
                                                   ended       ended
                                                30 April       1 May   
                                                    1999        1998
                                                   £'000       £'000
TURNOVER                                          82,291      89,875
Cost of sales                                    (56,945)    (59,373)
                                                 _______     _______
GROSS PROFIT                                      25,346      30,502
Selling and distribution costs                   (15,971)    (15,769)
Exceptional items                                  
Litigation receipt                                   963           -
Re-organisation, redundancy and asset write-off
costs                                               (991)          -
                                                 _______     _______
Net exceptional items                                (28)          -
Administrative expenses including exceptional
items above                                      (10,429)     (8,666)
OPERATING (LOSS)/PROFIT                           (1,054)      6,067
Interest receivable and similar income               257         425
Interest payable and similar charges              (2,171)     (2,787)
                                                 _______     _______
TAXATION                                          (2,968)      3,705
Tax credit/(charge) on (loss)/profit on
ordinary activities                                  212        (930)
                                                 _______     _______
TAXATION                                          (2,756)      2,775
Equity minority interests                            (21)        (16)
                                                 _______     _______
Dividends                                           (258)       (767)
                                                 _______     _______
RETAINED (LOSS)/PROFIT FOR THE PERIOD             (3,035)      1,992
                                                 =======     =======
Earnings per share                                  (5.4)p       5.4p
Diluted (loss)/earnings per share                   (5.4)p       5.4p
                                                 =======     =======
For  the  52 week period ended 30 April 1999 and  the 52 week period
ended 1 May 1998 all turnover was derived from continuing operations.
For the 52 week period ended 30 April 1999
                                                 52 week     52 week
                                                  period      period
                                                   ended       ended
                                                30 April       1 May
                                                    1999        1998
                                                   £'000       £'000
(Loss)/profit attributable to shareholders        (2,777)      2,759
Translation differences                              (43)       (531)
                                                 _______     _______
Total gains and losses recognised in the period   (2,820)      2,228
                                                 =======     =======
The results disclosed above are on an unmodified historical cost
                                                 52 week     52 week
                                                  period      period
                                                   ended       ended
                                                30 April       1 May
                                                    1999        1998
                                                   £'000       £'000
Equity shareholders' funds at beginning of
period                                            22,091      20,463
Profit attributable to shareholders               (2,777)      2,759
Dividends                                           (258)       (767)
Translation differences                              (43)       (531)
New share capital issued                             284         126
Script dividends                                      21          41
                                                 _______     _______
Equity shareholders' funds at end of period       19,318      22,091
                                                 =======     =======
30 April 1999
                                                    1999        1998
                                                   £'000       £'000
Intangible assets                                    571         616
Tangible assets                                    1,409       1,657
                                                 _______     _______
                                                   1,980       2,273
                                                 _______     _______
Stocks                                            18,743      27,153
Debtors                                           24,555      25,636
Investments                                           10           5
Cash at bank and in hand                           4,702       6,537
                                                 _______     _______
                                                  48,010      59,331
CREDITORS: amounts falling due within one
year                                             (30,148)    (38,904)
                                                 _______     _______
NET CURRENT ASSETS                                17,862      20,427
TOTAL ASSETS LESS CURRENT LIABILITIES             19,842      22,700
CREDITORS: amounts falling due after more
than one year                                       (115)       (216)
PROVISIONS FOR LIABILITIES AND CHARGES               (89)        (23)
                                                 _______     _______
                                                  19,638      22,461
                                                 =======     =======
Called up share capital                           13,080      12,796
Share premium account                             15,682      15,929
Profit and loss account                           (9,968)     (6,634)
                                                 _______     _______
Equity shareholders' funds                        19,318      22,091
Equity minority interests                            320         370
                                                 _______     _______
                                                  19,638      22,461
                                                 =======     =======
These financial statements were approved by the Board of
Directors on 15 July  1999.
Signed on behalf of the Board of Directors
F van Wezel
For the 52 week period ended 30 April 1999
                          52 week period ended  52 week period ended
                                 30 April 1999            1 May 1998
                                 £'000   £'000         £'000   £'000
Net cash inflow from operating
activities                               2,554                 5,384
                                       _______               _______
Returns on investments and
servicing of finance
Interest received                  257                   425
Interest paid                   (2,207)               (2,728)
Interest element of
finance lease rental payments      (25)                  (24)
                               _______               _______
Net cash outflow from returns
on investments and servicing
of finance                              (1,975)               (2,327)
UK and overseas corporate
tax paid                                  (811)               (1,373)
Capital expenditure and
financial investment
Tangible fixed assets acquired    (469)                 (848)
Tangible fixed assets sold         181                   173
Intangible fixed assets acquired   (28)                  (82)
Investments acquired                (5)                    -
                               _______               _______
Net cash outflow from
capital expenditure and
financial investment                      (321)                 (757)
Equity dividends paid                     (712)                 (888)
                                       _______               _______
Net cash (outflow)/inflow
before financing                        (1,265)                   39
Capital element of finance
lease rentals                     (119)                 (127)
Proceeds of share issue             37                    70
Bank loans                           -                    (1)
                               _______               _______
Net cash outflow from financing            (82)                  (58)
                                       _______               _______
Decrease in cash                        (1,347)                  (19)
                                       =======               =======
For the 52 week period ended 30 April 1999
     The  whole of the Group's business derives from the selling and
     distribution of sports footwear and leisurewear. The geographical
     composition by destination of the business was as follows:
                                  52 week period ended 30 April 1999   
                               Turnover   (loss)/Profit   Net assets
                                  £'000           £'000        £'000     
Geographical area:
North America                    28,645          (2,042)       9,372
UK and Ireland                   31,355           2,732       13,119
Continental Europe               10,812             274        1,750
Rest of World                    11,479               3        1,273
                               ________        ________     ________
                                 82,291             967       25,514
                               ========                     ========
Head office costs                                (1,993)
Exceptional item                                    (28)
Operating (loss)/profit                          (1,054)  
Other income less interest                       (1,914)    
(Loss)/profit before tax                        (2,968)
                                               ________     ________
Capital employed                                              25,514
Equity minority interests                                       (320)           
Net borrowings (excluding finance leases)                     (5,876)
                                  52 week period ended 1 May 1998   
                               Turnover        Profit     Net assets
                                  £'000         £'000          £'000     
Geographical area:
North America                    32,475         3,090         11,788
UK and Ireland                   31,894         3,165         12,779
Continental Europe                9,325           329          1,172
Rest of World                    16,181         1,338          1,135
                               ________      ________       ________
                                 89,875         7,922         26,874
                               ========                     ========
Head office costs                              (1,855)
Exceptional item                                    -
Operating (loss)/profit                         6,067
Other income less interest                     (2,362)
(Loss)/profit before tax                        3,705
                                             ________       ________
Capital employed                                              26,874
Equity minority interests                                       (370)
Net borrowings (excluding finance leases)                     (4,413)
The turnover shown above includes the following amounts which
originate in the UK:
                                              52 week        52 week
                                         period ended   period ended
                                        30 April 1999     1 May 1998
                                                £'000          £'000
Continental Europe                              2,819          5,226
Rest of World                                   5,719          5,987
                                              _______        _______
                                                8,538         11,213
                                              =======        =======
                                              52 week        52 week
                                         period ended   period ended
                                        30 April 1999     1 May 1998
                                                £'000          £'000
UK corporation tax for the period at
30.9% (1998 - 31%)                                (93)          (429)
Overseas taxation                                 416           (508)
                                              _______        _______
                                                  323           (937)
Deferred tax                                      (83)             7    =======        =======
The  tax charge for the period is disproportionately high due to the
lack of recognition of deferred  tax assets within the group in
accordance with SSAP 15.
There  are  no  unprovided deferred tax liabilities (1998 - £98,986).
No  provision is made in respect of tax which might be payable if the
retained profits of overseas subsidiaries were distributed to the UK.
The  calculation of earnings per share is  based  on  the following:
                                              52 week        52 week
                                         period ended   period ended
                                        30 April 1999     1 May 1998
                                                £'000          £'000
(Loss)/profit after minority interest          (2,777)         2,759
                                              =======        =======
                                                  No.            No.
                                                 '000           '000
Weighted average number of ordinary shares     51,456         50,819
                                              =======        =======
The  dilution  of earnings per share caused by the exercise of share
options would not be material.
                                                  1999          1998
                                                 £'000         £'000
Interim - paid 0.5p (1998 - 0.6p)
per ordinary share                                 258           306
Final - nil p (1998 - 0.9p) per ordinary share       -           461
                                               _______       _______
                                                   258           767
                                               =======       =======
The   financial  information  set  out  above  does  not  constitute
the Company's statutory accounts.  Statutory accounts for the period
ended 1  May  1998   have  been   filed   with   the   Registrar  of
Companies.  The  Statutory  accounts  for  the period ended 30 April
1999  will  be  filed at Companies House upon receiving the approval
of  the  Annual General Meeting.  The auditors have reported  on the
accounts for  the  year  ended 1  May  1998  and  their  report  was
unqualified and did  not  contain  a  statement  under section 237(2)
or (3) of the  Companies  Act 1985.
Copies  of  the  Annual  Report  and  Accounts  will  be  posted  to
shareholders.  Further copies can be obtained from HI-TEC Sports Plc,
Aviation Way, Southend-on-Sea,  Essex SS2 6GH.

a d v e r t i s e m e n t