RNS Number:5322Q
Qualceram Shires PLC
20 March 2008
Qualceram Shires plc
Preliminary statement for the year ended 31 December 2007
Qualceram Shires plc (the "Group"), a leading manufacturer, and distributor of a
wide range of bathroom suites, today announces its preliminary results for the
year ended 31 December 2007.
Summary
* Turnover: Euro90.0m (2006:Euro102m)
* Gross margin: 30.5% (2006:32.3%)
* Operating profit: Euro6.2m (2006:Euro4.1m)
* Profit before exceptional items Euro1.1m (2006:Euro4.1m)
* Earnings per share: 6.14c (2006:15.72c)
Commenting on the results, John O'Loughlin, Chief Executive of Qualceram Shires
plc said: "The financial year under review presented the Group with a volatile
and uncertain property market which was primarily responsible for a lower than
expected financial performance. However, the recent disposal of the Arklow
property (in the same volatile and uncertain property market), for Euro30.025
million represented very good value for the Group's shareholders. The disposal
has further strengthened the balance sheet, and combined with management's
continuing efforts to improve the cost base (annualised cost savings introduced
since the start of 2008, and accrued for in 2007, amount to Euro3 million), we are
confident that the Group will weather the current downturn and emerge as a
stronger Group, positioned for growth."
John O'Loughlin Aidan Clince
Chief Executive Company Secretary
Qualceram Shires plc Qualceram Shires plc
00-353-402-31288 00-353-1-4047600
Drury Communications (Dublin)
Paddy Hughes Tel: 00-353-1-2605000 / 00-353-87-6167811
Notes to Editors
Qualceram Shires plc is a leading manufacturer, marketer and distributor of a
wide range of bathroom suites through five principal brands, namely Qualceram,
Shires, Shaws of Darwen, Selecta and Trent. The Qualceram brand offers a
diverse and comprehensive range of traditional and contemporary bathroom
products. Shires has been one of the leading brands in the United Kingdom and
Ireland for over half a century. The Group's Selecta brand is regarded for its
range of showering products, most notably for its high standards of quality and
choice. Established in 1897, Shaws of Darwen produces a unique product set of
handmade fireclay sinks, and over 100 years old, the Trent brand maintains
bathroom suite designs of every era, from early Victorian times through to
today. With leading market positions in Ireland and the UK, coupled with
increasing access to other international markets the Group's strategy is to
increase market share in the luxury end of the bathroom products sector by
offering a complete package of branded products, supported by superior customer
service.
www.qualceram-shires.com
Chairman's Statement
As predicted at the time of publication of the Group's Interim Results in
September last year, and subsequently reiterated in a trading statement in
October, the financial year ended 31 December, 2007 proved to be a challenging
year for the Group. Our main markets have been affected to a greater degree than
expected by economic factors outside the control of the Group. In both the UK
and Ireland, the slowdown in their respective economies, the increase in
interest rates and the marked fall in new housing starts, particularly in the
last quarter of the year, have contributed to the fall in sales of the Group's
bathroom products resulting in lower than expected profits for the year.
Results
Group turnover fell by 11.7% to Euro90.0 million (2006: Euro102.0m). In Ireland,
turnover fell to Euro37.6 million (2006: Euro45.0m) and in the UK turnover reduced to
Euro45.9 million (2006: Euro50.3m). Operating profit for the year, before exceptional
items, was Euro1.1 million (2006: Euro4.1m). A restructuring programme to counter the
effect of the slow down in the construction sector was announced in October 2007
and exceptional items incurred in relation to the implementation of this
programme amounted to Euro11.3million. The exceptional gain from the sale of the
Group's 13 acre property in Arklow, Co. Wicklow was Euro16.4 million and this
resulted in a net exceptional gain of Euro5.1 million. Profit from operating
activities, before taxation was Euro5.4 million (2006: Euro3.9 m).
Trading
Ireland
The Irish construction sector weakened in the second half of 2007 due to
uncertainty over stamp duty, rising interest rates and curtailed credit.
Qualceram Shires has maintained its position in a contracted market, but pricing
of the Group's products has come under pressure as competitors reduce prices to
generate sales.
The number of houses built in Ireland in 2007 declined to 78,000 compared to
93,000 new builds in 2006, a fall of 16%. Although the number of houses to be
built in Ireland in 2008 is likely to reduce further, house prices are reducing
and there is anecdotal evidence of house sales improving once prices are
realigned. Demographic demand for new houses in Ireland to meet population
growth is forecast to exceed 60,000 units per annum.
The underlying fundamentals of the Irish market appear to be strong, and the
Central Bank of Ireland is predicting a soft, rather than a hard landing in the
economy overall. The Department of Finance in Ireland forecasts GNP growth of
2.6% for 2008.
UK
The UK housing market during 2007 has been disappointing and increasing interest
rates and lending restrictions have curtailed demand by buyers and put pressure
on house prices. These factors have impacted on sales of our products in the UK
in 2007. Reservation levels with UK house builders have dropped by up to 20%
during 2007 as consumers adopted a waiting game and the clampdown on loans took
effect. However, visitors to sales sites is holding up which may be an
indication that demand will improve as interest rates reduce.
Statistics released by the National House Building Council (NHBC) showed that
new homes completed by NHBC builders in 2007 in the UK totalled 186,000 units.
While the Government plans to increase new house construction to 240,000 units
per annum to meet demographic demand is welcome, these are long term plans and
are unlikely to have an impact in the short term and consequently housing market
conditions are likely to remain subdued over the coming eighteen.
Government targets on the social housing front look ambitious and while a
positive trend is expected, any significant rise in volumes is dependent on the
ability of the planning system to release the required land.
Public housing repairs and renewals activity continued to decline in 2007
despite the allocation of additional funds to improve the condition of existing
social homes. In fact the Government has relaxed its target of ensuring that
all social housing meets the 'decent homes' standard by 2010
Despite concerns for the UK market due to global conditions, in the medium term,
the fundamentals are favourable with demand for housing exceeding supply, low
unemployment and interest rates.
Property
At the Extraordinary General Meeting held on 14 November 2007, shareholders
approved the sale of the Group's 13 acre property in Arklow, Co. Wicklow. The
sale was completed on 4 February, 2008 when the purchase price of Euro30.025
million was paid to the Group. In the current volatile and uncertain property
market, the consideration achieved represents very good value.
The Group will continue to occupy the premises in Arklow as its head office for
a period of two and a half years from the date of completion at a nominal rent.
A new site in the locality has been identified and is currently under
negotiation. The Group intends to develop a modern state-of-the-art logistics, R
&D and manufacturing facility for the business. The Board regards the relocation
as an important investment to safeguard the future prospects of the Group.
Dividend
The Board believes it is important to preserve the Group's cash resources at
this time and is not recommending the payment of a dividend.
Outlook
Over recent years, our industry has faced an increasingly challenging
environment - intensive competition from Asia, direct outsourcing by a number of
major merchants, and ever increasing energy costs. These are further compounded
by markets that have deteriorated during 2007.
It is anticipated that 2008 will be a challenging year and the Board have
already taken decisive action to reduce costs further in order to counteract the
downturn in house building and worsening markets.
Included within the 2007 results is an exceptional charge of Euro6.7m relating to
reorganisation and redundancy costs. These costs relate to restructuring within
each of the Group's operating divisions and include costs relating to the
closure of its shower enclosure and ceramics plants and the re-organisation of
its distribution centres. The cash cost of the exceptional charge is Euro1.4m.
The Company has also provided in the 2007 figures for losses relating to the
disposal of its leasehold interests in Stoke on Trent and Rochdale.
Turnover for January and February of 2008 is 27% down on the same period last
year due to challenging market conditions in both our key markets.
With a stronger balance sheet following the disposal of the Arklow property and
continuous improvement of its cost base the Board is confident that the Group
will emerge from this downturn leaner and fitter which will serve as a platform
for future growth.
Appreciation
Again I would like to thank our customers, suppliers and shareholders for their
continued support during 2007. I would also like to acknowledge the hard work of
the employees and the management team in 2007.
Peter Addison
Chairman
20 March, 2008
Qualceram Shires plc
Income statement for the year ended 31 December 2007
Note 2007 2006
Euro'000 Euro'000
Turnover 2 90,051 101,987
Cost of sales 62,549 69,093
Gross profit 27,502 32,894
Operating expenses (26,399) (28,825)
Other operating income - 7
1,103 4,076
Exceptional items 4 5,142 -
Profit from operating activities before interest 6,245 4,076
Net interest payable (887) (154)
Profit from operating activities before taxation 5,358 3,922
Taxation (3,996) (436)
Profit from operating activities after taxation 1,362 3,486
Dividends approved - (832)
Profit retained for the financial year 1,362 2,654
Basic earnings per share 3 6.14c 15.72c
Qualceram Shires plc
Statement of total recognised income and expense for the year ended 31 December
2007
2007 2006
Euro'000 Euro'000
Profit after taxation 1,362 3,486
Dividends approved - (832)
Profit retained for the year 1,362 2,654
Currency translation effects:
On results for the year 726 (28)
On foreign currency net investments (301) (378)
Total recognised gains for the financial year 1,787 2,248
Note of historical cost profit for the year ended 31 December 2007
The difference between the reported profits and those calculated on an
unmodified historical cost basis is not material.
Reconciliation of movement on shareholders' funds
For the year ended 31 December 2007
2007 2006
Euro'000 Euro'000
Profit after taxation 1,362 3,486
Dividends approved - (832)
Currency translation
On results for the year 726 (28)
On foreign currency net investments (301) (378)
Net addition to shareholders funds 1,787 2,248
Balance at beginning of financial year 23,226 20,978
Balance at end of financial year 25,013 23,226
Qualceram Shires plc
Consolidated balance sheet as at 31 December 2007
2007 2006
Euro'000 Euro'000
Assets
Non-current assets
Tangible assets 3,264 9,542
Investment property - 6,269
Intangible assets 10,454 10,454
Deferred tax assets 1,107 1,585
14,825 27,850
Current assets
Stocks 13,926 16,858
Debtors 46,421 25,471
Bank - -
60,347 42,329
Total assets 75,172 70,179
Equity and Liabilities
Capital and reserves
Share capital 2,660 2,660
Share premium 17,921 17,921
Capital reserve 5,183 5,183
Reserves (751) (2,538)
25,013 23,226
Non-current liabilities
Deferred tax 4 1,109
Employee benefit obligations 3,689 5,194
3,693 6,303
Current liabilities
Trade and other payables 21,348 17,627
Current tax liabilities 7,848 3,140
Interest bearing liabilities 17,270 19,883
46,466 40,650
Total equity and liabilities 75,172 70,179
Qualceram Shires plc
Consolidated cash flow statement for the year ended 31 December 2007
2007 2006
Euro'000 Euro'000
Profit before taxation 5,358 3,922
Adjustments for
Depreciation 3,789 1,722
Interest expense 887 154
Profit on sale of fixed assets (17,929) -
Exchange rate movement 1,389 (406)
(6,506) 5,392
Decrease in inventories 2,932 642
Decrease/(increase) in trade and other receivables 4,532 (3,337)
Increase in trade and other payables 2,942 798
Cash generated from operations 3,900 3,495
Income taxes paid (158) (11)
Interest paid (891) (228)
Net cash flow from operating activities 2,851 3,256
Investing activities
Proceeds from sale of property, plant and equipment - -
Purchase of property, plant and equipment (238) (1,176)
Net cash from/(used in) investing activities 2,613 (1,176)
Finance activities
Payment of finance lease activities - -
Dividends paid - (1,298)
Loan repaid (4,154) (328)
Net cash (used in)/from financing activities (4,154) (1,626)
Net (decrease)/increase in cash and cash equivalents (1,541) 454
Cash and cash equivalents at the beginning of the year (729) (1,183)
Cash and cash equivalents at the end of the year (2,270) (729)
Qualceram Shires plc
Notes to the preliminary statement for the year ended 31 December 2007
1. Basis of Preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and IFRIC interpretations endorsed by the
European Union and those parts of the Companies Acts, 1963 to 2005 applicable to
companies reporting under IFRS. The financial statements have been prepared
under the historical cost convention as modified by the revaluation of land and
buildings, available for sale investments, and financial assets and liabilities
held for trading.
The Group's date of transition to IFRS is 1 January 2004. The comparative
figures have been restated to reflect IFRS, except where otherwise required or
permitted by IFRS 1, First Time Adoption of International Financial Reporting
Standards.
The currency used in these accounts is the Euro, which is denoted by "Euro" or
the symbol 'Euro'.
2. Analysis of turnover
The group's principal activities are the manufacturing, sale and distribution of
bathroom products. An analysis by product and geographical market is detailed
below:
Analysis by product 2007 2006
Euro'000 Euro'000
Manufactured products 24,564 35,551
Agency 65,487 66,436
90,051 101,987
Geographical analysis by market 2007 2006
Euro'000 Euro'000
United Kingdom 45,930 50,269
Ireland 37,585 45,027
Mainland Europe 2,129 2,342
Other 4,407 4,349
90,051 101,987
3. Earnings per ordinary share
Basic earnings per share is based on profit after taxation of Euro1.362m (2006:
Euro3.486m) and on a weighted average number of ordinary shares in issue of
22,170,111 (2006: 22,170,111).
Fully diluted earnings per share does not differ significantly from the basic
earnings per share.
4. Exceptional items
2007 2006
Euro'000 Euro'000
Profit on disposal of fixed assets 17,929 -
Directors pension contribution (1,500) -
Re-organisation and restructuring costs (5,324) -
Redundancy and service costs (1,392) -
Provision for disposal of leasehold properties (4,571) -
5,142 -
In 2007 the Group entered into an unconditional contract to sell its property at
South Quay, Arklow, Co. Wicklow for Euro30.025m to Brattice Properties Ltd. The
proceeds from the disposal were received on the 4th of February 2008.
For the year ended 31st December 2007 John J. O'Loughlin, John Byrne and Thomas
J. Byrne were entitled to a pension contribution of Euro500,000 from the Company
following the completion of the sale of the Arklow property.
The Group has provided for the implementation of a restructuring programme to
counter the slowdown in the construction sector. The financial statements
provide for the costs associated with the closure of its shower enclosure and
ceramics plants, the re-organisation of its distribution centres and disposal of
its leaseholds in Rochdale and Stoke on Trent.
5. Analysis of net debt
At 1 Jan Cash flow Non-Cash Exchange At 31 Dec
2007 Changes Movement 2007
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Cash in hand (729) (1,541) - - (2,270)
Debt due within one year (19,154) 4,154 - - (15,000)
Debt due between one and two years - - - - -
Debt due between two and five years - - - - -
Debt due after five years - - - - -
Finance leases - - - - -
Net Debt (19,883) 2,613 - - (17,270)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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