RNS Number:6218M
Faupel Trading Group PLC
23 June 2003
IMMEDIATE RELEASE
23rd June 2003
PRELIMINARY RESULTS
"Operating loss more than halved
Balance sheet remains sound"
Faupel Trading Group plc, which imports quality textile goods mainly from China
for sale to leading retailers and wholesalers, has today announced preliminary
results for the year ended 31st March 2003.
KEY POINTS
* Pre-tax loss of #875,000 (2002: loss #2,200,000), including #377,000 of
one-off, non-recurring items. Operating loss #527,000 (2002: loss
#1,619,000).
* Bank debt, less cash, reduced by #959,000.
* Stock reduced by #855,000.
* Loss per share 5.6p (2002: loss per share 17.1p).
* The Board is not recommending a final dividend and no interim dividend
was paid in the year (2002: 0.0p).
Commenting on the results David Newbigging, Chairman, said:
"The general business environment remains tough, particularly for small and
medium sized businesses, but our balance sheet is sound and we now have a leaner
structure. Following the changes outlined in the Chairman's Statement, we are
hopeful of returning to profitability in the forthcoming year."
Enquiries:
Faupel Trading Group plc
Laurence Mead, Chief Executive Tel: 020 8339 3100
James McClean, Finance Director
Buchanan Communications Ltd Tel: 020 7466 5000
Tim Thompson/Catherine Miles
Chairman's Statement
Results
The Group's consolidated loss before tax for the year ended 31st March 2003 was
#875,000 (2002: loss #2,200,000). #498,000 (2002: loss #1,870,000) of the
year's loss was attributable to trading operations, with the balance being made
up principally by the need to recognise dilapidations on our leased Birmingham
warehouse (#250,000) and a write down of #100,000 on the value of our Thames
Ditton freehold property. We also incurred a loss during the year of #27,000 on
the sale of our 15% interest in Paragon Brand Management (Hong Kong) Limited.
The dilapidations charge relates to nearly 15 years occupation and needs to be
considered in that light.
The year to 31st March 2003 in terms of the profit and loss account did not show
as much progress as previously expected but, as predicted, the second half was
better than the first half and we saw further significant reductions in net debt
and stock, as outlined below.
Finance
During the year our bank debt net of cash balances reduced by #959,000, which in
turn led to a reduction in net interest cost of #233,000. Stock levels were
reduced by #855,000 and trade debtors remained broadly unchanged. The turnaround
in the last two years has been significant, with net debt down by #3.7 million
and stock reduced by #4.5 million.
The active management of our balance sheet remains a key objective
Dividend
Given the loss for the year, the Board is not recommending the payment of a
final dividend. No interim dividend was paid during the year.
Operations
This was another year of significant change and further progress for Faupel in
its long-term re-positioning. The Company's operations are now concentrated in
three Divisions: Faupel Home Furnishings, Faupel Brands and Industrial Products.
Faupel Home Furnishings - the largest - was created from the merger of our three
established businesses of Stapleton, Amery's and Arditti. The new division is a
significant force in the UK soft furnishings sector and we have already seen
financial benefits from rationalising the sales force and product lines. We have
also been able to reduce our overheads as a consequence of this merger of
trading activities, and we are confident that we can grow the business in the
future without significantly adding to costs.
Faupel Brands' largest component is our Champion branded outdoor wear, which had
a solid year of progress after the dramatic restructuring of our Garments
business in the previous year. We are continuing to invest in this brand's
future. The other brand in this division is Blue Sea, under which our refocused
nightwear business now trades. A search continues to find brands which could be
added to our existing range and benefit from our sourcing strengths in the Far
East.
Chairman's Statement
Operations
Our remaining activities now comprise the Industrial Products division,
including our new Faupel Safety Products (PPE) business. This business will be a
major supplier to the independent wholesalers in the construction industry and
we are enthusiastic about its prospects going forward. That part of this
division's business which supplies textiles to the travel and tourism
industries, has suffered due to the very tough environment in which these
industries currently operate.
Strategy
Following the restructuring described above, our immediate aim is to return to
profitability, whilst building further profit and cash generating capacity into
each division. In the Home Furnishings sector, opportunities exist to improve
margins and sales, whilst also reducing costs, based on annual sales of #20
million, several thousand active customers and a broad product range.
Our Brands business is smaller, but we aim to grow this organically going
forward. We also believe there are opportunities for brand acquisitions and
several possibilities are under consideration.
The Industrial Products division has been strengthened with the addition of new
management and we see good potential for growing this business based on our
ability to source products competitively in Asia.
Change of Company name
At the forthcoming Annual General Meeting the shareholders will be asked to
approve the Company's name being changed to Faupel plc.
People
There have been no changes on the Board in the past year, although there have
been many changes in the organisation and structure of Faupel as described
above. All those who work for Faupel have had to embrace these
sometimes-radical changes and I thank them for their willingness to do so, for
their enthusiasm and for their loyalty.
Prospects
The general business environment remains tough, particularly for small and
medium sized businesses, but our balance sheet is sound and we now have a leaner
structure. Following the changes outlined in this Statement, we are hopeful of
returning to profitability in the forthcoming year.
David Newbigging
Chairman
22nd June 2003
Chief Executive's Report
The year ended 31st March 2003 was another difficult and challenging time for
Faupel, not least because of the sense of almost constant change under which we
have all been living. We have risen to the challenges and have continued to
make progress however, and with the merger of our three home furnishings
businesses into one new division, Faupel Home Furnishings, we are entering into
a more settled phase. We have also addressed many of the strategic challenges
that were facing us but the travel and tourism sector of our business remains of
some concern. That part of our business was previously a solid contributor but
the well publicised difficulties within the airline and tourism industries have
taken their toll. We continue to work hard to overcome these problems however,
particularly by looking for other customers in the transportation sector.
Results
Reporting a loss for the year is a disappointment, but it is important to look
at these results in detail, with significant one-off costs impacting the
headline loss. From a trading perspective we had some periods of real progress,
interspersed with some steps backwards. There were a number of specific reasons
for this but many of the smaller issues that could have been dealt with in
isolation all occurred in the same 6 month period. With the Group going through
so much change, these severely stretched our management resources at the time.
We were unfortunate to have one of our senior, key managers laid low with
unexpected health problems but he has now made a full recovery. The end result
was a significant loss, albeit substantially reduced from the previous year.
We had been expecting better contributions from our Amery's division and our
Directs business, both of which were negatively influenced by unforeseeable
events as mentioned above. However, in the last quarter of the year Group sales
were 6% ahead of budget, margins were solid, and I am pleased to be able to
report that both are now rapidly improving and should make a positive
contribution this year.
Whilst the profit and loss side of the business is disappointing, the tight
control of our balance sheet - which had been a key goal for the year - was
achieved. The Chairman has already outlined the continuing reduction in net debt
that we have achieved. While some of this resulted from an overall reduction in
the size of the business, by exiting from unprofitable activities which had been
a drag on the business for a number of years, the positive effects of tighter
control procedures were also a major factor. Far higher demands have been placed
on our brand managers as a consequence, and I am pleased to be able to say they
have risen to these challenges very effectively. Our balance sheet is now more
robust and of better quality.
The road to profitability
The challenges facing Faupel's current trading activities are sales and margin
growth. We have restructured the company and thanks to the improvements in
business processes we have the ability to service a far greater level of sales
with very little additional overhead. The additional gross profit from such
increased sales would contribute to the net profit line quickly, significantly
enhancing shareholder returns. In addition, we continue to focus on pushing
margins up and we have seen successes in this regard this year with overall
margins ahead of the year to 31st March 2000, the last profitable year before
the clearance of the discount garments stock dramatically depressed margins.
Chief Executive's Report
Structure
We have completed a thorough overhaul of the corporate structure and our
business is now divided into three main selling divisions, all of which have a
distinct rationale, joined by a common business model of buying product from
third party suppliers, primarily in China and South East Asia.
However, whereas Faupel was previously a trading organisation, we are moving
towards being a brand ownership and product management group, where we will have
a higher level of control over both revenue and margins. This process will
continue over the next few years so that we will become much more than our old
role as merely middlemen in a trading process. Whilst there are plenty of
companies bringing product to market, no matter how low the price goes the
quality and the design of the product needs to be right if it is to find a
buyer. We are extremely focused on being price competitive and we will continue
to squeeze our overheads structure down so that we can always compete on price,
but a large element of our focus will be on improving our product management and
product design skills so that we can match this price competitiveness with an
excellence in design and styling. We are already seeing steps forward in this
regard and I have confidence in the products that our brand managers are now
developing.
We have seen major improvements in the logistics side of the business and we
expect more in this area over the next year. As an example, we now consolidate
all the Group's buy in China through a single freight forwarder and consolidate
these shipments in two warehouses, one in Shanghai, the other in Qingdao. Our
Thames Ditton office is home to our accounts department and some of our sales
and design staff, but all day to day operations have been consolidated in our
Oldbury (West Midlands) warehouse and our Manchester office. We own the freehold
to our Thames Ditton property and we will be reviewing options in this regard,
which may result in the relocation of the remaining Thames Ditton staff to
smaller, more economic offices in due course.
SARS
I am pleased to say that thanks to a very close level of cooperation between our
UK and China offices, we have not been badly affected by the outbreak of the
SARS virus in China. There have been some operational issues but these have by
and large been overcome. In fact we feel that we have been better able to
service our customers than some of our competitors.
The Future
Faupel is inherently a good business and our strategy has been to take a
measured approach to restoring profitability. Phase 1 has now been substantially
completed in that the balance sheet is no longer under strain. Phase 2 is to
develop new skills which are complementary to our businesses and to find ways to
service Faupel's considerable customer base so that margins and revenues can
grow in the future. We are now entering Phase 2 and I am sure this will bring
rewards to shareholders and give us the opportunity to build on the Group's
activities by acquisition.
Chief Executive's Report
People
As mentioned previously, it has been a year of significant change. I would like
to thank everybody within the Company for their positive attitude to that
change. We will find it increasingly difficult to reduce working capital
further and although we will be keeping a tight rein over balance sheet
management, as we grow, returning to profitability is our main challenge.
Laurence Mead
Group Chief Executive
22nd June 2003
Consolidated Profit and Loss Account
for the year ended 31 March 2003
Notes 2003 2002
#'000 #'000
Turnover 26,937 35,377
Cost of sales (21,156) (29,816)
Gross profit 5,781 5,561
Distribution costs (3,743) (4,331)
Administration expenses 5 (2,565) (2,849)
Operating loss 3 (527) (1,619)
Interest receivable 30 30
Interest payable (378) (611)
Loss on ordinary activities
before taxation (875) (2,200)
Tax on loss on ordinary activities - -
Loss on ordinary activities
after taxation and for the financial year (875) (2,200)
Loss per ordinary share, basic and diluted 4 (5.6)p (17.1)p
Consolidated Balance Sheet
at 31 March 2003
2003 2002
Note #'000 #'000
Fixed assets
Tangible assets 5 1,556 1,748
Investments - 85
1,556 1,833
Current assets
Stock and goods in transit 3,407 4,262
Debtors and prepayments 4,938 4,819
Cash at bank and in hand 1,072 1,469
9,417 10,550
Creditors: amounts falling due within one year 6 (6,416) (7,201)
Net current assets 3,001 3,349
Total assets less current liabilities 4,557 5,182
Provisions for liabilities and charges (250) -
Net assets 4,307 5,182
Capital and reserves
Called up share capital 785 785
Share premium account 2,882 2,882
Revaluation reserve 682 682
Other reserve 93 93
Profit and loss account (135) 740
Equity shareholders' funds 4,307 5,182
Consolidated Cash Flow Statement
for the year ended 31 March 2003
2003 2002
Notes #'000 #'000
Cash inflow from operating activities 7 1,328 2,706
Returns on investments and servicing of finance 8 (348) (587)
Taxation (6) -
Capital expenditure and financial investment 8 (15) (71)
Cash inflow before management of liquid resources and
financing 959 2,048
Management of liquid resources 8 (1,356) (1,346)
Financing 8 - 699
(Decrease)/increase in cash in the year (397) 1,401
Reconciliation of net cash flow to movement in cash
2003 2002
#'000 #'000
(Decrease)/increase in cash in the year (397) 1,401
Cash at beginning of year 1,469 68
Cash at end of year 1,072 1,469
Consolidated Cash Flow Statement
for the year ended 31 March 2003 (continued)
Reconciliation of net cash flow to movement in net bank debt
2003 2002
#'000 #'000
Bills of exchange at beginning of year (5,756) (7,102)
Cash at beginning of year 1,469 68
Bank debt net of cash at beginning of year (4,287) (7,034)
Management of liquid resources 1,356 1,346
(Decrease)/increase in cash in the year (397) 1,401
Reduction in bank debt net of cash 959 2,747
Bills of exchange at end of year (4,400) (5,756)
Cash at end of year 1,072 1,469
Bank debt net of cash at end of year (3,328) (4,287)
Notes:
1. The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31st March 2003 or
2002. The financial information for 2003 and 2002 is derived from the statutory
financial statements for those years. The statutory financial statements for
2002 have been delivered to the Registrar of Companies. The statutory accounts
for 2003 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting. The Group's auditors, KPMG Audit Plc, have reported on
the 2003 and 2002 financial statements. Their reports were unqualified and did
not contain a statement under 237(2) or (3) of the Companies Act 1985.
2. It is anticipated that the report and financial statements will be
posted to shareholders on 25th July 2003. The Annual General Meeting will be
held on 27th August 2003.
3. Turnover and operating profit/(loss)
2003 2002 2003 2002
Operating Operating
Sales Sales Profit/(loss) Profit/(loss)
(as restated) (as restated)
#'000 #'000 #'000 #'000
Business sector analysis
Home Furnishings 20,194 23,335 1,050 1,116
Brands - Garments 2,753 8,124 (61) (1,529)
Industrial Products 3,990 3,918 125 282
Central admin costs - - (1,264) (1,158)
-------- -------- -------- --------
Before one-off, non-recurring items 26,937 35,377 (150) (1,289)
-------- -------- -------- --------
Charge for dilapidations on warehouse
leases (250) -
Loss on sale of investment (27) -
Impairment of freehold property (note 5) (100) -
Compensation payment and related legal
costs paid to former director - (164)
Cost of renewing bank facilities
and creating new share option schemes - (166)
-------- --------
Operating loss (527) (1,619)
-------- --------
The loss on sale of investment and impairment of freehold property are
attributable to central administration costs. The charge for dilapidations on
the warehouse leases cannot be allocated to segments on any reasonable basis as
the warehouses concerned have been used for a number of purposes over the lease
period.
4. Loss per ordinary share
Loss per share is based on the Group loss after taxation of #875,000 (2002: loss
#2,200,000) and the weighted average number of ordinary shares in issue during
the year of 15,709,447 (2002: 12,882,050).
Diluted loss per share, calculated in accordance with FRS 14, is unchanged from
the basic loss per share.
5. The recoverable amount of Faupel House, the Company's freehold
property, has been assessed at #1.25m including fixtures and fittings. In
accordance with FRS 11, the property has therefore been impaired by #100,000.
This impairment has been included within administration expenses.
6. Creditors include #4,400,000 (2002: #5,756,000) of bills of exchange
payable to banks.
7. Cash flow from operating activities
Reconciliation of operating loss to operating cash flow
2003 2002
#'000 #'000
Operating loss (527) (1,619)
Depreciation 165 150
Impairment of property 100 -
Loss on sale of investment 27 -
Decrease in stocks 855 3,670
(Increase)/decrease in debtors (119) 1,093
Increase/(decrease) in creditors 577 (588)
Increase in provisions for liabilities and charges 250 -
Net cash inflow from operating activities 1,328 2,706
8. Analysis of cash flows for headings netted in the cash flow statement
2003 2002
#'000 #'000
Returns on investments and servicing of finance
Interest received 30 30
Interest paid (378) (617)
Net cash outflow for returns on investments and servicing
of finance (348) (587)
Capital expenditure and financial investment
Purchase of tangible fixed assets (73) (71)
Proceeds from sale of investment 58 -
Net cash outflow for capital expenditure
and financial investment (15) (71)
Management of liquid resources
Decrease in bills of exchange payable to banks (1,356) (1,346)
Net cash outflow from
management of liquid resources (1,356) (1,346)
Financing
Issuing of ordinary share capital - 800
Expenses associated with issue - (101)
Net cash inflow from financing - 699
This information is provided by RNS
The company news service from the London Stock Exchange
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