RNS Number:2429Q
Stoddard International PLC
26 September 2003
Stoddard International PLC
Interim results for the six months
ended 30 June 2003
26 September 2003
CHAIRMAN'S STATEMENT
Introduction
The first half of 2003 has been a difficult trading period with both internal
and external factors affecting performance. As intimated in the 2002 annual
report, 2003 has been the second year of major structural change with associated
short-term disruption, inefficiencies and expense. In particularly tough market
conditions we have substantially progressed the relocation of all our facilities
on to the one site in Kilmarnock. This ambitious project will be completed by
the end of the year.
Throughout the period trading across most of our markets has been demanding.
This has been attributable to the continuing general fall in demand for woven
Axminster products and the particular withdrawal of certain of these products
from our portfolio. The reduction of sales of Axminster accounted for the
entire sales decline in the period, with sales of all other products growing by
6%. Sales have also been affected by the disruption associated with relocating
to one factory and distribution difficulties in April and May. These problems
are now substantially behind us.
Our customers, employees and other stakeholders have remained supportive of the
changes we are making in our business and we are grateful for their
understanding during this difficult and lengthy transitional period.
Turnover at #14.3m was 12% down against the equivalent period last year
resulting in an operating loss of #1.6m (2002 - #0.4m loss) before exceptional
items, in line with our expectations. Around half of this deterioration (#0.6m)
was attributable to an increased cost of pensions. Net exceptional costs
including full provision for the remaining redundancies arising from the
restructuring were #0.5m (2002 - #0.3m). Interest charges were similar to the
comparable period at #0.5m. The loss before tax including exceptional items
increased to #2.6m (2002 - #1.2m). The directors do not propose a dividend.
Net debt increased by #4.6m in the period to #17.2m as a result of continuing
losses, seasonal working capital requirements and the costs of restructuring.
Your board expects cash receipts from the disposal of properties will
significantly reduce this debt in the short-term and our banks remain
supportive.
Retail
Our UK business that includes the Stoddard and Louis de Poortere brands reported
sales of #12.0m down 11% from last year. The depressed carpet market and the
decline in relatively expensive traditional Axminster products in particular
have continued. Internal problems during the transition and in particular,
commissioning our high speed looms also contributed. All carpet manufacturing
is now fully operational in Kilmarnock and our service is improving.
In the same period, Colortec patterned tufted sales increased by 80% and we
continue to develop this area. Sales of our Louis de Poortere products were up
19% following recent product launches. However these improvements were unable
to compensate for the downturn in our woven Axminster performance. While heavily
patterned carpets have suffered more than plain and textured in recent years,
minimal contemporary designs have been relatively successful and our distinctive
programme, properly branded and priced, has been well received in the market.
This programme is being further developed.
We expect that recently refreshed twist ranges and generally improving service
levels across our retail products will result in an improvement in our retail
sales.
Contract/Export
Sales were 16% down against the equivalent period in 2002 at #2.4m despite an
improvement in USA and Europe where sales grew by 18% and 27% respectively.
Sales in the UK however were down 33%. Markets remain difficult but there are
pleasing developments in the hospitality sector particularly with the
development of Colortec tufted technology. In those markets where we are a small
player we do expect results to show sizeable swings between trading periods and
to be more patchy and unpredictable.
Operations
All carpet manufacturing is now operational in Kilmarnock. The spinning mill
will be fully relocated and dye works commissioned to plan in November. The Head
Office relocation is underway and will be completed in stages before the
year-end. Extensive training has been necessary for the workforce and is
ongoing. Overall employment levels by the end of the year will be around 500,
which is a reduction of 250 over the past two years.
Wool prices have stabilised however energy costs and related by-products such as
nylon have increased. The variable quality of some external yarn supplies has
caused service problems particularly when trying to increase stockholding prior
to machinery being decommissioned and relocated to Kilmarnock. This has led to
the loss of some customer orders, as we have been unable to achieve acceptable
delivery timescales, which has understandably strained relationships.
Property disposal programme
In June outline planning consent for residential development was granted for the
majority of the Elderslie site and we will shortly convene an EGM to approve the
disposal of this part of the site for proceeds in excess of #6m to be paid over
the next few months. However planning consent was refused on the remainder of
the site and this is currently subject to a planning appeal due to be heard in
November.
We expect to receive the balance of the proceeds from Safeway amounting to
approximately #3m once we vacate the Mill Street site in Kilmarnock and the
necessary final consents are obtained.
Prospects
Structural change continues in the European carpet sector and with markets
generally depressed, over-capacity in the industry continues. We continue to
pursue our strategy which we believe best serves our stakeholders' interests.
We anticipate the difficult trading conditions to continue into 2004 and trading
losses will continue to be borne for the balance of 2003. By the year-end the
restructuring exercise will be complete and the benefits of operating from a
single integrated site will be realised from the New Year. We therefore look
forward to 2004 with greater confidence free of the major upheaval of recent
years. In particular we will return management focus towards delivering
improved customer service and introduce a number of exciting product
initiatives.
We believe we will then be well placed to take advantage of the opportunities
that we see and be better equipped to deal with uncertain market conditions. We
will continue to work closely with our strategic partners towards strengthening
our position as a leading player in the UK carpet industry.
Alan Scott
Chairman
26 September 2003
Enquiries:
Alan Lawson, Chief Executive Tel: 01505 577000
Michael Stewart, Finance Director
PROFIT & LOSS ACCOUNT
SIX MONTHS ENDED 30 JUNE 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Turnover 14,338 16,379 32,301
Operating loss before
exceptional items (1,572) (441) (2,209)
Operating exceptional Note 3 (527) (254) (1,938)
items
Operating loss Note 4 (2,099) (695) (4,147)
Net interest payable (510) (464) (923)
Loss on ordinary activities
before taxation (2,609) (1,159) (5,070)
Taxation - - -
Loss on ordinary activities
after taxation (2,609) (1,159) (5,070)
Accrued preference (62) (62) (125)
dividends
Retained loss for the (2,671) (1,221) (5,195)
period
Basic and diluted loss per (4.0)p (1.7)p (7.8)p
ordinary share
BALANCE SHEET
AT 30 JUNE 2003
Unaudited Unaudited Audited
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Fixed Assets
Tangible assets 14,081 14,958 14,361
Current Assets
Stocks 8,616 10,741 8,050
Debtors 12,709 12,046 11,859
Cash at bank and in hand 130 94 237
21,455 22,881 20,146
Creditors: amounts falling due within (22,103) (18,323) (18,341)
one year
Net current assets (648) 4,558 1,805
Total assets less current liabilities 13,433 19,516 16,166
Creditors: amounts falling due
after more than one year (3,991) (3,346) (3,814)
Provisions for liabilities and (549) (60) (508)
charges
Accruals and deferred income
Deferred government grants (1,112) (1,684) (1,392)
Net assets 7,781 14,426 10,452
Capital and reserves
Called up share capital 8,430 8,430 8,430
Reserves (649) 5,996 2,022
Shareholders' funds 7,781 14,426 10,452
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Net cash outflow from
continuing activities Note 5 (4,030) (2,407) (2,820)
Returns on investments and
servicing of finance
Net interest paid (404) (359) (691)
Interest paid under finance (106) (106) (233)
lease and hire purchase
agreements (510) (465) (924)
Taxation - - -
Capital expenditure and
financial investment
Payments to acquire (300) (1,245) (1,619)
tangible assets
Net proceeds received from - 2,570 2,570
exceptional property
disposal
Receipts from sales of 198 46 212
tangible assets
Government grant received - 850 850
(102) 2,221 2,013
Net cash outflow before (4,642) (651) (1,731)
financing
Financing
New term loan 500 - 1,000
Capital element of finance (313) (438) (745)
lease rental payments
Decrease in cash in the (4,455) (1,089) (1,476)
period
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Decrease in cash (4,455) (1,089) (1,476)
New term loan (500) - (1,000)
Cash outflow from decrease in lease 313 438 745
financing
Change in net debt resulting from (4,642) (651) (1,731)
cash outflows
Net debt at beginning of the (12,580) (10,849) (10,849)
period
Net debt at end of the period (17,222) (11,500) (12,580)
Notes to the Accounts
1. Basis of Preparation
The Interim reports for the six months ended 30 June 2003 and 30 June 2002
are unaudited, but have been prepared on the basis of accounting policies
expected to be adopted in the annual accounts for the year ended 31
December 2003. These are consistent with those set out in the audited
accounts for the year ended 31 December 2002. The results for the year
ended 31 December 2002 are an abridged version of the Company's full
accounts which carried an unqualified auditors' report, and which did not
contain a statement under either section 237(2) or section 237(3) of the
Companies Act 1985. The full accounts have been filed with the Registrar
of Companies.
2. Loss per Share
The loss per ordinary share has been calculated by dividing the loss
attributable to ordinary shareholders, after deferred preference dividends,
by the average number of shares in issue during the period.
3. Operating Exceptional Items
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Redundancy costs 490 369 1,203
Disposal of surplus assets (189) (115) (154)
Other relocation costs 226 - 889
527 254 1,938
4. Net Operating Expenses
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Restated
Selling & distribution costs 3,295 3,356 6,636
Administrative expenses 928 641 1,420
Other operating income (599) (119) (205)
3,624 3,878 7,851
Administrative expenses in the 2002 interim results above are restated to
reflect the release of deferred government grants against cost of sales
rather than administrative expenses. As the grant was received in relation
to the purchase of plant and machinery it is considered more appropriate to
classify the amortisation of this grant income to cost of sales where the
depreciation has been reflected. The adjustment is a #0.3m reduction in
cost of sales and a similar increase in administrative expenses.
Notes to the Accounts (Continued)
5. Reconciliation of Operating Loss to Operating Cash Flow
six months six months year
ended ended ended
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Operating loss before exceptionals (1,572) (441) (2,209)
Depreciation charges 571 576 1,159
Government grant release (280) (265) (557)
(Increase)/Decrease in working (2,098) (1,908) 40
capital
Cash outflow from operating (3,379) (2,038) (1,567)
activities before exceptionals
Cash outflow related to exceptional (651) (369) (1,253)
items
Net cash outflow from continuing (4,030) (2,407) (2,820)
activities
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