RNS Number:0541L
Abbeycrest PLC
14 May 2003
For Immediate Release 14 May 2003
Abbeycrest Plc
Final results for the 12 months ended 28 February 2003
Results in line with expectations; Turnover up to #99m; Proposed Final Dividend
Abbeycrest Plc, the UK's leading jewellery manufacturing and distribution
business, announces final results for the year ended 28 February 2003. The
results are in line with the trading update made by the Company in January of
this year.
In his statement to shareholders, Mr. Michael Lever, Chairman said:
"Excellent progress has been made in turning around the fortunes of the Company
in the second half of the year. Some difficult decisions have had to be made in
order to ensure that the necessary levels of financial and management control
are in place but the results of this action are now beginning to be manifest."
Key extracts from the Chairman's Statement and Results:
*Turnover of #98.8m (2002: #91.5m)
*Pre-tax loss before goodwill of #0.3m (2002: #2.4m profit)
*Basic loss per share of 4.1p (2002: earnings per share of 4.7p)
*Proposed final dividend of 1.0p per share
*Total net assets at year-end of #27.3m (110p per share) excluding
minority interests
*Year-end gearing reduced to 88% (2002: 97%) - expected to fall further
next year
*Much improved financial controls over working capital
*Major operational improvements in stock procurement and planning
*New #2m purpose-built factory in Thailand now operational
On Current Trading, Mr. Lever stated:
"Sales in G&A, the main trading subsidiary of the Group have begun the year
ahead of our targets... elsewhere within the Group I am pleased to report that
sales overall for the first month of the year have exceeded both the equivalent
period last year and budget. For the second month we have seen a slowdown, which
we believe to be a temporary reaction to international events."
On Prospects he said:
"Initial indications for the current financial year are promising. The
improvements that have been achieved in the operation and control of G&A
Limited, in particular, and the Group in general over the second half of the
year have been manifest and are already bearing fruit. The commercial advantages
and growth potential of Abbeycrest Thailand's new gold jewellery factory will be
felt in the current financial year, as will the concentration of Essex
International's production on the same site.
"The business review process, established in September 2002, continues with the
aims of focusing and simplifying the business and I anticipate reporting the
benefits of this later in the year and returning, in due course, Abbeycrest Plc
to historical levels of financial performance"
-ends-
Enquiries:
Michael Lever, Chairman, Abbeycrest Plc
Phil Walker, Group Finance Director, Abbeycrest Plc 020 7786 9600 Today Only
0113 284 5702 Thereafter
Paul Vann/Victoria Stephens, Binns & Co. PR Limited 020 7786 9600
Chairman's Statement
The difficulties experienced by the Group during the first half of the year
ended 28th February 2003 have been well documented in the interim report and
therefore it is my intention here to outline the excellent progress that has
been made in turning around the fortunes of the company in the second half of
the year. In that regard some difficult decisions have had to be made in order
to tighten up the Group's financial and management controls. The results of this
action are now beginning to be manifest and are outlined in more detail in the
trading review below.
Results
For the year ended 28th February 2003, Group turnover increased by 8.1% to
#98.8m. Pre-tax loss before goodwill was #0.3m (2002 - #2.4m profit). After tax
and minority interest of #0.4m (2002 - #1.0m) loss attributable to shareholders
was #1.0m (2002 - #1.1m profit).
Basic loss per share was 4.1p (2002 - 4.7p profit). At 28th February 2003 total
net assets, excluding minority interests, were #27.3m equating to #1.10p per
share.
Dividends
At the interim announcement it was noted that the directors felt it
inappropriate to pay an interim dividend. In the light of the working capital
improvements achieved in the second half of the year and the Group's improving
prospects, the directors recommend that a final dividend of 1.0p per share be
paid (2002 - total dividend 6p).
Balance Sheet
One of the most significant improvements during the second half of the year
ended 28th February 2003 has been the much improved control over working capital
within G&A Limited which has naturally fed through into the Group balance sheet.
Tighter financial controls under the new G&A finance director have contributed
significantly but undoubtedly the biggest impact has been in the area of stock
planning and purchasing. A supply chain specialist has been brought in to
establish "best practice" in stock systems. The impact on the stock balances
within G&A has been marked, resulting in Group stock levels dropping by #4.2m
with further reductions planned in the current financial year. This, together
with tighter controls on debtors, has resulted in Group borrowings (including
leased gold) reducing by #3.6m in the year to #25.0m, despite having paid off
#3.4m in loan notes to the Brown & Newirth directors and invested around #2m in
Abbeycrest Thailand in the year. This has resulted in a reduction in year end
gearing to 88% (2002 - 97%). The directors foresee a further significant
reduction in gearing next year as the improved planning and purchasing systems
take effect over a full trading cycle.
Review of Business
Whilst the Group experienced a number of operational issues in the first half of
the financial year, it has been encouraging that demand has remained robust and
Group sales have increased by 8.1%. The improvements in practices and procedures
in key areas across the Group should mean that turnover should convert through
more effectively to profit in the current year rather than being lost in
inefficiencies.
The UK
G&A Ltd generates around 80% of the Group's turnover and remains one of Europe's
largest distributors of gold and gemset jewellery. The pre-tax loss of #1.9m
(2002 - #0.3m profit) has to be set against the context of significant
re-assessment of provisions made at the previous year-end which, when reviewed
at the half-year, were shown to be inadequate. The largest single item in this
process was an additional stock provision of #1.9m to cover excess and obsolete
stock with a gross value of around #6m. Progress in disposing of this excess
stock has been pleasing, with around #2.2m being sold in the second half of the
year. G & A is now operating on a much tighter basis with regard to customer
stock returns.
I am pleased to report that the SAP computer system, about which much has
previously been written, is performing adequately to support the business.
Levels of customer service have now returned to those enjoyed before the system
was implemented. A business process review has been undertaken and a drive is
well underway to simplify the business and apply strict commercial criteria to
all operational areas. It is anticipated that the benefits of this will be felt
in enhanced gross margins.
The downscaling of the G&A gold jewellery manufacturing facility in Birmingham
has proceeded extremely well with assembly of product being established in
Thailand. The move has unfortunately led to job losses in the UK but it is
essential that the company remains competitive in world markets.
Brown & Newirth ("B & N") our market leading wedding ring manufacturer, has
completed another excellent year with record sales and pre-tax profits. B&N has
proved a splendid purchase for the Group and has outperformed projections made
at the time of acquisition.
DRT, the Group's wristwear manufacturer based in Teesside, produced a
disappointing result for the year with a small pre-tax loss, largely due to a
move in fashion away from its staple product, the lightweight "gate" bracelet. A
new range of products introduced at Christmas has been well received by the
market and the Group looks forward to a positive contribution this year.
Eric's Jewellers Ltd continues to provide a useful outlet to dispose of excess
inventories and recorded an excellent increase in pre-tax profit and strong cash
generation.
Overseas
Dynamic Creations Limited, based in Hong Kong, continues to go from strength to
strength and provides an excellent source of innovative low cost gemset product
for the UK multiple market and new export markets. Turnover rose 6% to #12.1m
with pre-tax profits rising 30% to #1.6m.
As noted above, the Group has opened a brand new purpose built factory in
Lamphun in northern Thailand under the "Abbeycrest Thailand Limited" banner.
Built to allow low-cost, world-class assembly of gold jewellery, the transfer of
production out from our Birmingham site has gone better than expected. The
benefits of this low cost base will only be felt for the first time in the
current financial year. Commercial production commenced in February 2003.
Essex International, based in Thailand, has had a mixed year with
well-publicised management issues having to be addressed. The company recorded a
loss before tax of #0.2m for the year ended 28th February 2003 (2002 - #0.2m
profit) The process of recruiting has been completed and we look forward to the
current financial year with confidence in the new management. In addition a cost
reduction programme has been instituted together with a centralisation of
production by closing the two existing factories and sharing the new facilities
recently opened by Abbeycrest Thailand. It is anticipated that this will give
rise to significant operating synergies, though the effect of these will only
really be felt in the year 2004/05.
People
The first half of the year was a testing one for our employees, particularly
within G&A and Essex International. The reaction of our employees to such
challenges has been excellent and is a contributor to the optimism with which we
have entered the new financial year and I would like to thank them for this.
Current Trading
Sales in G&A, the main trading subsidiary of the Group, have begun the year
ahead of our targets helped by lower crediting levels, a reflection of the
better levels of customer service being delivered. In the interim statement I
stated that the challenge for the management was to ensure that the areas of
business that the company is involved in translate efficiently through to the
bottom line, I am pleased to report that this challenge has been met and we are
now seeing the benefits in enhanced financial performance.
Elsewhere within the Group, I am pleased to report that sales overall for the
first month of the new financial year at the other Group subsidiaries have
exceeded both the equivalent period last year and budget. For the second month
we have seen a slowdown, which we believe to be a temporary reaction to
international events.
Prospects
As indicated above, initial indications for the current financial year are
promising. The improvements that have been achieved in the operation and control
of G&A Limited, in particular, and the Group in general over the second half of
the year to 28th February 2003 have been manifest and are already bearing fruit.
The commercial advantages and growth potential of Abbeycrest Thailand's new gold
jewellery factory will be felt in the current financial year, as will the
concentration of Essex International's production on the same site.
The business review process, established in September 2002, continues with the
aims of focusing and simplifying the business and I anticipate reporting the
benefits of this later in the year and returning , in due course, Abbeycrest Plc
to historical levels of financial performance.
Consolidated Profit and Loss Account
For the year ended 28 February 2003
Unaudited
2003 2002
#'000 #'000
Turnover - Existing operations 99,099 91,627
- Less share of joint venture (259) (152)
-------- --------
- Continuing operations 98,840 91,475
----------------------------- -------- --------
Operating profit - Before goodwill and exceptional 1,956 4,348
item
- Goodwill (net) (233) (224)
----------------------------- -------- --------
- Continuing operations 1,723 4,124
Share of operating loss in joint venture (6) (30)
Interest 241 220
receivable
Interest payable and similar charges (2,521) (2,176)
Interest payable by joint venture - (1)
-------- --------
--------
(Loss)/profit on ordinary activities before taxation (563) 2,137
Tax on (loss)/profit on ordinary activities 132 (611)
-------- --------
--------
(Loss)/profit on ordinary activities after taxation (431) 1,526
Minority equity interests (568) (397)
-------- --------
--------
(Loss)/profit for the financial period (999) 1,129
Dividends paid and proposed on equity shares (249) (1,491)
-------- --------
--------
Retained (loss)/profit for the period (1,248) (362)
-------- --------
--------
(Loss)/earnings per share - basic (4.1p) 4.7p
- diluted (4.0p) 4.5p
Dividends per share 1.0p 6.0p
Consolidated Balance Sheet
As at year ended 28 February 2003
Unaudited
2003 2002
#'000 #'000
Fixed assets
Goodwill 2,579 2,914
Negative goodwill (407) (644)
--------- --------
2,172 2,270
Tangible fixed assets 10,663 9,929
Investments 540 540
--------- --------
11,203 10,469
Investment in joint venture:
Share of gross assets 166 165
Share of gross liabilities (125) (122)
--------- --------
--------
41 43
--------- --------
13,416 12,782
--------- --------
Current assets
Stocks 32,200 36,398
Debtors 17,706 19,617
Cash at bank and in hand 7,917 5,286
--------- --------
--------
57,823 61,301
Creditors
Amounts falling due within one year 37,917 40,302
--------- --------
Net current assets 19,906 20,999
Total assets less current liabilities 33,322 33,781
Creditors
Amounts falling due after more than one year 4,909 3,768
Provisions for liabilities and charges 123 478
--------- --------
--------
Net assets 28,290 29,535
--------- --------
Capital and reserves
Called up share capital 2,488 2,486
Shares to be issued 580 580
Share premium account 5,186 5,178
Merger reserve 199 199
Profit and loss account 18,861 20,533
--------- --------
Equity shareholders' funds 27,314 28,976
Minority equity interests 976 559
--------- --------
Total capital employed 28,290 29,535
--------- --------
Consolidated Cash Flow Statement
For the year ended 28 February 2003
Unaudited
Notes 2003 2002
#'000 #'000
Net cash inflow from operating activities 1 6,126 1,813
Returns on investments and servicing of 2 (2,468) (2,080)
finance
Taxation (456) (918)
Capital expenditure and financial investment 2 (2,809) (1,158)
Acquisitions 2 - (723)
Equity dividends paid (1,045) (1,627)
--------- --------
Cash outflow before financing (652) (4,693)
Financing 2 2,437 (321)
--------- --------
Increase/(decrease) in cash in the period 3 1,785 (5,014)
--------- --------
Notes to the Year End Financial Statements
For year ended 28 February 2003
1. Reconciliation of operating profit to net cash inflow from operating
activities
Unaudited
2003 2002
#'000 #'000
Operating profit 1,723 4,124
Depreciation 1,961 1,883
Decrease in value of own shares - 50
Amortisation of goodwill 233 224
Loss/(profit) on sale of tangible fixed assets 55 (54)
Profit on sale of investments - (21)
Foreign exchange movement - 51
Decrease/(increase) in stocks 4,075 (9,558)
Decrease/(increase) in debtors 1,937 (1,131)
(Decrease)/increase in creditors (3,858) 6,245
-------- ---------
Net cash inflow from operating activities 6,126 1,813
-------- ---------
2. Analysis of cash flows
Unaudited
2003 2002
Returns on investments and servicing of finance #'000 #'000
Interest received 241 220
Interest paid (2,556) (2,298)
Interest element of finance lease rental payments (2) (2)
Dividend paid to minority interest (151) -
-------- ---------
Net cash outflow from returns on investments and (2,468) (2,080)
servicing of finance -------- ---------
Capital expenditure and financial investment
Purchase of tangible fixed assets (3,078) (1,291)
Sale of tangible fixed assets 269 133
-------- ---------
Net cash outflow from capital expenditure and (2,809) (1,158)
financial investment -------- ---------
Acquisitions and disposals
Purchase of business - (1,127)
Cash from sale of investments - 404
-------- ---------
Net cash outflow from acquisitions and disposals - (723)
-------- ---------
Financing
Issue of ordinary share capital 10 3
New secured loan 6,500 -
Repayment of secured loan (650) (300)
Repayment of loan notes (3,399) -
Capital element of finance lease rental payments (24) (24)
-------- ---------
Net cash inflow/(outflow) from financing 2,437 (321)
-------- ---------
Notes to the Year End Financial Statements
For year ended 28 February 2003
3. Reconciliation of net cash flow to the movement in net debt
Unaudited
2003 2002
#'000 #'000
Increase/(decrease) in the 1,785 (5,014)
period
Cash (inflow)/outflow and (increase)/ (2,427) 324
decrease in debt and lease financing --------
--------
---------
(642) (4,690)
New finance leases (28) -
Exchange difference (71) (17)
--------- --------
(741) (4,707)
Net debt at the (23,502) (18,795)
beginning of --------- --------
the year
Net debt at the (24,243) (23,502)
end of the --------- --------
year
Analysis of net At 28 February
debt 2003
At 1 March Exchange Non Cash
2002 Cashflow Movement Movement
#'000 #'000 #'000 #'000 #'000
Cash at bank 5,286 2,702 (71) - 7,917
and in hand
Overdrafts (25,335) (917) - - (26,252)
-------- --------- --------- --------- --------
(20,049) 1,785 (71) - (18,335)
Debt due after - (4,550) - - (4,550)
one year
Debt due within - (1,300) - - (1,300)
one year
Loan Notes (3,399) 3,399 - - -
Finance (54) 24 - (28) (58)
Leases -------- --------- --------- --------- --------
(3,453) (2,427) - (28) (5,908)
-------- --------- --------- --------- --------
(23,502) (642) (71) (28) (24,243)
-------- --------- --------- --------- --------
4. Analysis of gearing
Unaudited
2003 2002
#'000 #'000
Bank loans and overdrafts (26,252) (25,335)
Gold leasing (676) (4,984)
Finance leases (31) (24)
Cash 7,917 5,286
Deferred consideration - loan notes (150) (3,549)
Medium term loan (5,850) -
--------- --------
(25,042) (28,606)
--------- --------
Net assets 28,290 29,535
--------- --------
Gearing 88% 97%
Notes to the Year End Financial Statements
(continued)
Note 5
The accounting policies used in this preliminary statement are consistent with
those applied in the financial statements for the financial period ended 28
February 2002.
Note 6
The financial information set out above does not comprise the company's
statutory accounts. Statutory accounts for the previous year ended 28 February
2002 have been delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified and did not contain any statement under section
237(2) or (3) of the Companies Act 1985.
Note 7
The auditors have not reported on the financial statements for the year ended 28
February 2003, nor have any such financial statements been delivered to the
Registrar of Companies.
Note 8
(Loss)/earnings per share have been calculated using the weighted average number
of shares in issue during the period of 24,269,362 (2002 - 24,813,749). The
proposed final dividend of 1p per share will be paid on 17 July 2003 to
shareholders on the register on 27 June 2003.
Note 9
Copies of the Report and Accounts are being sent to shareholders on the 18 June
2003 and will be available to members of the general public at that date from
the Company Secretary, Abbeycrest Plc, Peter Rosenberg House,11/15 Wilmington
Grove, Leeds, LS7 2BQ.
This information is provided by RNS
The company news service from the London Stock Exchange
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