Final Results
March 13 2009 - 3:00AM
UK Regulatory
TIDMAGA
13th March 2009
FOR IMMEDIATE RELEASE
AGA RANGEMASTER GROUP PLC
2008 PRELIMINARY RESULTS
Year to 31st December 2008 Restated
2007
Continuing operations GBPm GBPm
Revenue 279.4 291.8
Operating profit 11.1 24.4
Profit before tax 14.4 27.0
Basic earnings per share 14.4p 18.9p
Shareholders' equity 214.7 355.0
Net cash* 5.8 169.1
EBITDA (before non-recurring costs) 24.6 39.2
*During the year the Group returned GBP151.2 million to shareholders including a
capital return of GBP139.7 million.
Strategic and operational highlights
- The Group delivered sound profits and had net cash at the end of 2008
leaving us with a strong balance sheet to help us withstand challenging
market conditions.
- Overall cooker sales were lower in the year but some lines, notably wood
burning stoves and Rayburn cookers, performed well.
- The underlying order intake is currently down nearly 20% on the prior year
- with the US operations lower but Rangemaster better than the average.
- Given our intention to concentrate on cash conservation through 2009, no
final dividend is proposed, leaving the dividend for 2008 at 4.0 pence,
which was in addition to the capital return of 121.0 pence.
- In 2009 product innovation and the benefits of a lower sterling exchange
rate will help our drive for greater market shares. Cost cuts, reduced
capital expenditure and lower working capital will further strengthen the
cash position.
William McGrath, Chief Executive, commented: "The sound financial base we have
established and the benefits of many years of investment in production, product
and brands mean that we should be able to deal effectively with the current
economic downturn as we work to strengthen our market shares and win new
customers."
Enquiries:
William McGrath, Chief Executive {0207 404 5959 (today)
Shaun Smith, Finance Director {01926 455 731 (thereafter)
Simon Sporborg/Charlotte Kenyon, Brunswick 0207 404 5959
AGA RANGEMASTER GROUP PLC
2008 PRELIMINARY RESULTS
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Overview
Our outstanding consumer brands provide the Group with its intrinsic strength
and this has been much needed in the current difficult markets. We have
adjusted rapidly to the challenging economic circumstances seen in a cyclical
downturn which accelerated as consumer confidence fell in the second half of
the year and more recently as unemployment has risen.
The year started relatively well. We had completed the sale of our foodservice
operations before market values declined and returned over GBP150 million to
shareholders, paid down our bank debt and kept the Group in a net cash
position. We also reached an agreement with the trustees on the approach to the
financing of the pension scheme through to 2020. For the continuing operations
we had set performance targets to grow revenue and raise returns. The first
half year showed our resilience and operating profits (excluding property
profits) rose in the half year even though markets were distinctly tightening.
From September onwards we saw marked, sustained declines in activity and order
levels were down by around 15% in the last third of the year. This had an
appreciable impact on profitability and led us to take further action to cut
costs and adjust production levels to re-align them with demand. Having taken
these steps, the outlook is now tied to the assessment of when the markets in
which we operate first stabilise and then start to recover.
Trading performance
We saw 2008 become more difficult as the year progressed. Hence the marked
deterioration in performance which saw second half results appreciably below
those achieved in the first half.
For Aga, Rayburn and Stanley, our cast iron cooker brands, volumes were down
21.5% in the year. Average selling prices, however, particularly for Agas, were
higher as some customers moved to larger models. Volumes of lower value models
sold to Irish local authorities fell sharply. 40% of sales were outside the UK.
Electric Agas represented 60% of sales and 3-oven Agas were 40% - both all time
highs. At Rayburn sales were flat but within the numbers solid fuel burning
models rose from 36% to 54% of the total - largely at the expense of oil
models. A strong product line for Aga and Stanley was solid fuel - primarily
wood burning - stoves where record volumes were achieved of over 15,000 units
in Ireland and over 4,500 units in the UK. Cookware continued to do well and we
aim to develop this business further in 2009.
For Rangemaster six years of sustained growth ended in the second half. The
swift decline of the new build housing market and subsequently the decline in
housing transactions reduced demand, first for the trade-led sink operations
and then for the cooker business. Within the product mix the good underlying
trend lines continued. The Group had over 40% by volume and over 50% by value
of the UK range cooker market. 90cm width models were again particularly
strong. The breadth of the range with cooker hoods, splash backs, fridges and
sinks all provided greater opportunities for customers to buy Rangemaster
branded products - notably we performed particularly well in the rapidly
growing Rangemaster centres in dealer stores. In France and Belgium we again
grew rapidly and offset weak sales in Ireland. After four years of investment,
France and Belgium are now a GBP6 million market for us. We have around 1,500
displays and with range cooking now a firmly established part of the market we
are looking for further significant growth.
For Fired Earth a good first half gave way to a difficult second half in which
it was again loss making. The fundamentals of the business - the product mix
led by tiles and paint backed by bathrooms and with kitchen furniture
increasingly prominent - sourcing, distribution and the retail presentation are
all in good shape. Using these strengths and the links with the Group's
customer base and the 25th anniversary celebrations all suggest Fired Earth is
capable of improved results in 2009.
In North America trading proved tough all year with consumer confidence
remaining low and appliance sales across all regions and markets sharply lower.
With Marvel we took the major step of consolidating our two US refrigeration
plants and moving to a newly built factory where we expect the lower unit cost
of production and strong product mix we have developed to generate good profit
levels in due course. Volumes are currently running over 25% below last year.
Cooker sales in 2008 in North America similarly fell 5% in a market down 14%.
Financial performance
Total revenues for the Group were ahead at the half year by 1.9% but for the
full year revenues were down 4.2% at GBP279.4 million (7.6% lower at constant
exchange rates) as sales of our core products slowed. Of total revenues 37% was
generated outside the UK.
Operating profit before non-recurring costs was GBP16.5 million (2007: GBP30.4
million - restated for GBP0.6 million of reallocated costs) including a net
pension credit of GBP5.4 million (2007: GBP6.0 million). The first half performance
was resilient but as consumer confidence weakened the second half revenues were
down by 10% year on year and profits fell.
In response to the deteriorating trading conditions the Group implemented a
series of reorganisation measures at a full year cost of GBP5.3 million. These
mainly related to the reorganisations and headcount reductions at Waterford
Stanley (cost GBP1.4 million), Rangemaster (cost GBP0.9 million) and Marvel in the
US (cost GBP1.9 million). Full year cost savings of over GBP6 million have been
targeted through these plans. We have also reached a number of agreements with
the workforce and Unions on working shorter hours while demand remains
exceptionally low. This is in the interest of both employees and the Group as
it provides us with the ability to respond when the upturn in consumer
confidence materialises. The total number of employees has fallen in the year
from 3,169 and is now under 2,700.
Following the GBP265 million sale of the foodservice operations the Group
successfully completed a GBP139.7 million capital return to shareholders in May
which makes the total amount returned to shareholders since 2001 GBP616 million.
Total net finance income for the year was GBP3.2 million. In the first half net
finance income was GBP3.4 million whilst in the second half there was a net cost
of GBP0.2 million. The high level of interest income in the first half was a
result of the substantial cash balance the Group held following the foodservice
disposal pending the GBP139.7 million capital return.
The Group continues to take a careful approach to financial planning and that
coupled with the structural changes in the Group over a period of time has been
the reason behind our lower than standard rate tax charge. In 2008 the tax
charge was GBP2.7 million, a rate of 18.8% on pre-tax profits. We expect the rate
in 2009 to be close to 20%.
Cash inflow from continuing operations decreased by GBP0.9 million to GBP4.5
million. Inventories were higher as customers destocked in the final quarter of
the year and trade payables fell as purchases decreased as a result of lower
activity levels in the business. The net disposal cash outflow, following the
foodservice disposal, totalled GBP2.4 million as fees and expenses of GBP7.2
million were settled.
Net cash flow on capital expenditure during the year, including intangibles,
was GBP13.0 million. In the year we invested an initial GBP4 million in a new
factory for Marvel in the US. The final GBP2.8 million was paid in January 2009.
We expect that capital expenditure in 2009 will be below the depreciation
charge in 2008 of GBP6.8 million.
The cash tax paid was GBP2.7 million (2007: GBP4.9 million). Dividends paid in the
year including the capital return totalled GBP151.2 million (2007: GBP69.1
million).
At 31st December 2008 the IAS 19 net retirement benefit surplus was GBP57.5
million compared with a GBP31.3 million surplus at the half year and a 2007
year end surplus of GBP79.6 million. The year end discount rate of 6.4% (2007:
5.8%) reflects higher corporate bond rates and has led to a significant
reduction in the IAS 19 pension liability to GBP597.5 million (2007: GBP697.3
million). Scheme assets totalled GBP655.0 million (2007: GBP776.9 million) as the
fall in equity, property and bond markets all hit market values of assets held.
The net pension credit in the year was GBP5.4 million (2007: GBP6.0 million) and is
expected to fall to approximately GBP1.0 million in 2009 based on the directors'
view of the expected return on scheme assets based on current yield curves.
Cash contributions into the scheme were GBP1.3 million in the year. A similar
level is expected in 2009.
Basic earnings per share, after taking account of the special capital
repayments and the reduced number of shares in issue, were 14.4 pence. This
compares with 18.9 pence per share in the prior year. The Group ended the year
with net cash of GBP5.8 million compared with net cash of GBP169.1 million at the
end of 2007 and GBP16.9 million at the half year. Since the half year we have
invested GBP4 million in the new Marvel factory, spent GBP2.8 million in cash on
the reorganisation programme and currency movements have increased the value of
currency loans held for hedging purposes by GBP3.2 million. Currency movements
account for GBP19.4 million of the GBP22.7 million movement in net assets in the
year excluding net cash balances.
Dividend payments
We have a long standing dividend cover target of 2.5 times fully taxed
earnings. Given the outturn for 2008, the 4.0 pence interim dividend already
paid, the capital return of 121.0 pence and the high degree of uncertainty
about prospects for 2009, the board has decided not to recommend the payment of
a final dividend this year.
2009: A year of innovation is in a long tradition
2009 sees the Group celebrate 300 years of innovation which runs through both
Aga and Rangemaster's history with deeply embedded engineering and
manufacturing skills. Appended is a commentary of the contribution made by the
Group.
The last year as usual has seen a number of significant initiatives:
- The move of the Marvel factory to a new purpose built, state-of-the-art
facility in Greenville, Michigan featuring a new paint plant bringing the
highest quality finishing to the product range.
- The introduction of the programmable gas Aga - alongside the electric
version - cutting running costs in use by around 25%.
- The introduction of induction technology - bringing the responsiveness of
electric cooking up to the level of a gas hob - first into the Falcon range
and then into the best selling Rangemaster line up.
- The launch of a single cavity cooker with a divider to be used when
preparing smaller meals - designed to save energy and costs for the
consumer.
- The introduction of a new, energy efficient generation of wood burning
Rayburn cookers and Aga and Stanley stoves responding to the revival of
interest in wood as a carbon neutral fuel which is more cost efficient than
oil.
We are also aligning our electric products to link in with a resurgence of
interest in cheap rate overnight electricity as major producers seek to find
markets in heat storage products for their otherwise wasted production from
power stations that cannot be turned off overnight. Similarly, we are working
with a number of micro generators of electricity who see the Aga as providing
an appropriate conduit into the consumer market. These developments are
'Aganomics' and 'Rayburnomics' in action emphasising the economic and
environmental case for cast iron cooking.
So after 300 years, the Group is still innovating and developing its products
in line with market trends and customer needs.
Strategy and outlook
Last year we set demanding performance and growth targets that are not readily
achievable in current difficult market conditions. We will retain our target of
a 12% return on sales in the longer term whilst recognising that sales and
margin conservation together with a tight focus on cash flow will be the
immediate priorities of the Group.
We have made progress over 2008 in Customer Relationship Management ("CRM") and
our objective of making better use of the Group's customer database. Having a
central commercial hub with call centre and marketing resources at the head
office is proving successful. Recent responses to campaigns, notably by Aga,
have been encouraging and such customer contact will contribute substantially
to enabling us to realise the long-term potential of the Group and our brands.
Our objective is to ensure that we can emerge stronger from the current
downturn with improved market positions and to show we have the product
platform and targeted customer base on which to build.
Economic conditions are difficult but they continue to evolve rapidly. A key
task is to ensure that we are able to respond quickly to changing
circumstances. The decline in sterling is an advantage when we export to Europe
and the USA whilst at the same time handicaps European producers selling into
the UK. With interest rates on savings at historical lows, we are likely to see
people invest in refurbishing their current homes - even if they are not moving
home. In addition, we have some particularly strong brands and products to take
to customers and our 300 years of innovation; the new product lines stylishly
addressing the economic and environmental needs of the day.
The upgrade options for Aga products underpin our work to re-invigorate sales
from both existing as well as new customers to Aga. At Rangemaster the complete
kitchen appliance solution we have is winning support with dealers and
consumers alike.
Order intake is currently approximately 20% down on the same time last year and
we are assuming that the order intake will continue to be weak. The operational
gearing of the Group should enable us to respond well as soon as market
conditions ease. The Group is well positioned with a strong balance sheet;
outstanding brands; deeply rooted manufacturing skills; product initiatives;
and a focus to cash management.
The current markets are the least encouraging for many years but we are ready
to take on these challenges and expect to become stronger with improved market
shares. Changing with the times is something on which the Group has thrived -
through 300 years of innovation.
J Coleman W B McGrath
Chairman Chief Executive
13th March 2009
CONSOLIDATED INCOME STATEMENT
Year to 31st December Restated
2008 2007
GBPm GBPm
Continuing operations
Revenue 279.4 291.8
Net operating costs (268.3) (267.4)
______________________________________________________________________________________
Group operating profit 11.1 24.4
Net pension credit 5.4 6.0
Non-recurring cost (5.3) -
______________________________________________________________________________________
Profit before net finance income and income tax 11.2 30.4
Finance income 4.8 2.0
Finance costs (1.6) (5.4)
______________________________________________________________________________________
Profit before income tax 14.4 27.0
Income tax expense (2.7) (4.2)
______________________________________________________________________________________
Profit for year from continuing operations 11.7 22.8
Discontinued operations
Post tax profit from discontinued operations - 40.7
_____________________________________________________________________________________
Profit for year 11.7 63.5
_____________________________________________________________________________________
Profit attributable to equity shareholders 12.4 63.4
(Loss) / profit attributable to minority (0.7) 0.1
shareholders
______________________________________________________________________________________
Profit for year 11.7 63.5
_____________________________________________________________________________________
Earnings per share - continuing operations p p
Basic 14.4 18.9
Diluted 14.4 18.7
_____________________________________________________________________________________
p p
Dividend per share 4.0 11.5
Cash return / special dividend 121.0 43.0
______________________________________________________________________________________
CONSOLIDATED BALANCE SHEET
As at 31st December 2008 2007
GBPm GBPm
Non-current assets
Goodwill 70.9 60.1
Intangible assets 24.0 18.0
Property, plant and equipment 58.7 51.7
Retirement benefit surplus 58.7 80.4
Deferred tax assets 5.5 2.7
__________________________________________________________________________________
217.8 212.9
__________________________________________________________________________________
Current assets
Inventories 63.5 54.9
Trade and other receivables 39.9 46.4
Current tax assets 2.1 1.5
Cash and cash equivalents 42.9 181.5
___________________________________________________________________________________
148.4 284.3
Assets held for sale 1.9 - ____________________________________________________________________________________
Total assets 368.1 497.2
Current liabilities
Borrowings (9.7) (4.3)
Trade and other payables (66.8) (76.4)
Current tax liabilities (11.6) (8.7)
Current provisions (4.3) (2.6)
___________________________________________________________________________________
(92.4) (92.0)
__________________________________________________________________________________
Net current assets 56.0 192.3
__________________________________________________________________________________
Non-current liabilities
Borrowings (27.4) (8.1)
Retirement benefit obligation (1.2) (0.8)
Deferred tax liabilities (21.9) (29.9)
Provisions (8.7) (9.3)
___________________________________________________________________________________
(59.2) (48.1)
___________________________________________________________________________________
Total liabilities (151.6) (140.1)
__________________________________________________________________________________
Net assets 216.5 357.1
__________________________________________________________________________________
Shareholders' equity
Share capital 32.5 32.4
Share premium account 29.6 68.8
Other reserves 95.5 37.1
Retained earnings 57.1 216.7
__________________________________________________________________________________
Shareholders' equity 214.7 355.0
Minority interest in equity 1.8 2.1
__________________________________________________________________________________
Total equity 216.5 357.1
__________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT
Year to 31st December 2008 2007
GBPm GBPm
Cash flows from operating activities
Cash generated from operations post pensions items 4.5 12.4
Finance income 5.0 1.8
Finance costs (1.6) (5.0)
Tax payment (2.7) (4.9)
____________________________________________________________________________________
Net cash generated from operating activities 5.2 4.3
____________________________________________________________________________________
Cash flows from investing activities
Disposal proceeds from sale of subsidiaries less costs (2.4) 259.8
Purchase of property, plant and equipment (10.2) (17.1)
Expenditure on intangibles (3.3) (3.9)
Proceeds from disposal of property, plant and equipment 0.5 5.3
____________________________________________________________________________________
Net cash (used in) / from investing activities (15.4) 244.1
____________________________________________________________________________________
Cash flows from financing activities
Dividends and cash return paid to shareholders (151.2) (69.1)
Net proceeds from issue of ordinary share capital and costs
of share consolidation (0.1) 1.1
Repayment of borrowings (1.5) (43.4)
New bank loans raised 22.7 1.7
_____________________________________________________________________________________
Net cash used in financing activities (130.1) (109.7)
_____________________________________________________________________________________
Effects of exchange rate changes 1.7 (0.4)
_____________________________________________________________________________________
Net (decrease)/increase in cash and cash equivalents (138.6) 138.3
Cash and cash equivalents at beginning of year 181.5 43.2
_____________________________________________________________________________________
Cash and cash equivalents at end of year 42.9 181.5
_____________________________________________________________________________________
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year to 31st December 2008 2007
GBPm GBPm
Profit for year 11.7 63.5
_________________________________________________________________________________________
Exchange adjustments on net investments 19.4 3.1
Actuarial (losses)/gains on defined benefit pension schemes (28.7) 27.4
Deferred tax on items taken direct to reserves 7.9 (10.8)
_________________________________________________________________________________________
Income and expenses recognised directly in equity (1.4) 19.7
_________________________________________________________________________________________
Transfers to income statement
Movement on exchange gains as a result of disposals - 5.5
_________________________________________________________________________________________
Total recognised income for year 10.3 88.7
_________________________________________________________________________________________
Attributable to:
Equity shareholders 11.0 88.6
Minority interests (0.7) 0.1
_________________________________________________________________________________________
Total recognised income for year 10.3 88.7
_________________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT - RECONCILIATION
Cash generated from operations
Continuing Total
2008 Restated Restated
2007 2007
GBPm GBPm GBPm
Profit before income tax - continuing operations 14.4 27.0 27.0
Profit before income tax - discontinued operations - - 13.3
Net finance (income)/costs (3.2) 3.4 3.0
Share based payments expense - 0.5 0.9
Amortisation of intangibles 1.3 1.2 2.2
Depreciation 6.8 7.6 11.2
Loss/(profit) on disposal of property, plant and equipment 0.3 (1.3) (1.3)
Increase in inventories (3.6) (7.1) (24.4)
Decrease/(increase) in receivables 5.4 (2.2) (9.7)
(Decrease)/increase in payables (10.7) 0.7 17.1
Increase/(decrease) in provisions 0.5 (0.1) (0.3)
Increase in pensions (6.7) (9.8) (12.1)
Pension scheme additional cash contributions - (14.5) (14.5)
______________________________________________________________________________________________
Cash generated from operations post pensions items 4.5 5.4 12.4
______________________________________________________________________________________________
SEGMENTAL ANALYSIS
There are two operating segments which meet the aggregation criteria of IFRS 8
in full therefore the directors consider that there is only one reportable
aggregated segment, as aggregation is consistent with the core principle that
the result is to provide information that enable users to evaluate the nature
and financial effects of the business activities in which the Group engages and
the economic environments in which it operates. The operating segments have
similar economic characteristics, products and services, production processes,
types and classes of customer and methods used to distribute products. The
directors consider the aggregated reportable segment to be the manufacture and
sale of range cookers and related home fashions product. Therefore the majority
of the disclosures as required under IFRS 8 have already been given in these
financial statements.
Segment assets include property, plant and equipment, intangibles, inventories,
retirement benefit surpluses and receivables. Non-current assets exclude
retirement benefit surplus and deferred tax assets.
Entity wide disclosures in respect of revenues from external customers and
non-current assets are provided below.
2008 2007
Total Non- Total Non-
segment current segment current
Revenue assets assets Revenue assets assets
GBPm GBPm GBPm GBPm GBPm GBPm
United Kingdom 175.3 191.0 73.6 182.9 218.1 74.0
North America 40.0 55.0 34.4 42.1 37.4 21.1
Europe 60.0 71.6 45.6 63.2 56.0 34.7
Rest of World 4.1 - - 3.6 - -
______________________________________________________________________________________________
Total continuing 279.4 317.6 153.6 291.8 311.5 129.8
operations
Discontinued operations - - - 279.9 - -
Tax - 7.6 - - 4.2 -
Cash - 42.9 - - 181.5 -
______________________________________________________________________________________________
Total 279.4 368.1 153.6 571.7 497.2 129.8
______________________________________________________________________________________________
NOTES
1. Dividends
The directors are not proposing a final dividend in respect of the financial
year ended 31st December 2008 (2007: 7.65p). An interim dividend of 4.0p per
share (2007: 3.85p) has already been paid. A return of cash of GBP1.21 per share
was paid during the year (2007: a special dividend was paid of 43.0p per
share).
2. Exchange rates
The income statements of overseas subsidiaries are translated into sterling
using average exchange rates and balance sheets are translated at year end
rates.
3. Net pension credit
2008 2007
GBPm GBPm
Pension cost (3.5) (3.9)
Curtailment gain - 0.3
Net pensions returns on assets and interest costs 8.9 9.6
_________________________________________________________________________________
Net pension credit 5.4 6.0
_________________________________________________________________________________
4. Income tax
2008 2007
GBPm GBPm
United Kingdom corporation tax based on a rate of
28.5% (2007: 30%):
Current tax on income for year 1.5 2.1
Adjustments in respect of prior years 2.6 (0.3)
________________________________________________________________________________
United Kingdom corporation tax 4.1 1.8
Overseas current tax on income for year 1.4 3.6
________________________________________________________________________________
Total current tax 5.5 5.4
________________________________________________________________________________
United Kingdom deferred tax (credit) / charge in year (1.6) 2.6
Overseas deferred tax credit in year (1.2) (1.7)
________________________________________________________________________________
Total deferred tax (credit) / charge (2.8) 0.9
________________________________________________________________________________
Total United Kingdom tax 2.5 4.4
Total overseas tax 0.2 1.9
________________________________________________________________________________
Total income tax 2.7 6.3
________________________________________________________________________________
Income tax charge
Continuing 2.7 4.2
Discontinued - 2.1
________________________________________________________________________________
Total income tax 2.7 6.3
________________________________________________________________________________
5. Earnings per share
2008 Restated
2007
GBPm GBPm
Earnings
Profit after tax for year from continuing operations 11.7 22.8
Minority interests 0.7 (0.1)
________________________________________________________________________________
Earnings from continuing operations - for basic and
diluted EPS 12.4 22.7
Profit from discontinued operations - 40.7
________________________________________________________________________________
Profit attributable to equity shareholders 12.4 63.4
________________________________________________________________________________
Weighted average number of shares in issue million million
For basic EPS calculation 85.9 120.3
Dilutive effect of share options and Long-Term Incentive Plan 0.2 1.1
________________________________________________________________________________
For diluted EPS calculation 86.1 121.4
________________________________________________________________________________
Earnings per share p p
Continuing operations
Basic 14.4 18.9
Diluted 14.4 18.7
________________________________________________________________________________
Total operations
Basic 14.4 52.7
Diluted 14.4 52.2
________________________________________________________________________________
6. Non-recurring cost
The GBP5.3m non-recurring cost relates to redundancy and reorganisation
programmes across the Group, primarily at Marvel, Rangemaster and Waterford
Stanley.
7. Restatement
The 2007 income statement has been restated by GBP0.6m between continued
operations and discontinued operations due to the correction of the allocation
of corporate costs.
2009 Financial Calendar
Report and accounts posted 27th March 2009
Annual General Meeting 8th May 2009
2009 half year end 30th June 2009
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31st December 2008 and 2007.
The financial information within this announcement is prepared in line with the
accounting policies presented within the Company's statutory accounts.
Statutory accounts for 2007 have been delivered to the Registrar of Companies
and those for 2008 will be delivered following the Company's Annual General
Meeting. The Company's auditor has reported on these accounts; its reports were
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
APPENDIX
300 YEARS OF INNOVATION : OUR MANUFACTURING TRADITION
Two emblematic projects for us in 2008 were making the gas Aga programmable and
taking induction technology into mainstream cooking products. Both of these
initiatives fit well into a pattern stretching back to the origins of the Group
three hundred years ago in which the Group has been a great product innovator
using its core strengths and experiences in manufacturing.
The significance of our Group's 2009 anniversary is internationally recognised.
In 1709 our foundry in Coalbrookdale - where the Aga and the Rayburn cookers
are made - became the birthplace of industry. Then Abraham Darby was looking to
raise cooking pot production levels with his new sand moulds first smelting
iron ore with coke - not charcoal - in his blast furnace. The curves of the
cooking pots made the techniques difficult but when mastered they could be used
more widely and more dependably, notably in the casings for steam engine
pistons. The momentum for industrialisation was underway. Subsequently the
foundry became a World Heritage Site and one of which we are very proud. And as
in 1709 cast iron cooking pots are a core product.
The foundry was where the Ironbridge across the Severn was built in 1779 and
from there ever more elaborate cast iron railings and models were produced for
sale into international markets.
A business was sustained in heating stoves and from the mid 19th century cast
iron range cookers were made there - direct ancestors of the Rayburn (first
built in 1946). After the Second World War production of Aga cookers was also
moved to Coalbrookdale by the Group - then called Allied Ironfounders.
The Coalbrookdale foundry was modernised in the 1990s and today production and
environmental standards are very high. An example is air quality in
Coalbrookdale. On a wall in the foundry is a list of all 32 foundry managers
dating back to Abraham Darby himself who have run the foundry with a record of
the achievements of generations of foundry workers.
The thread of innovation runs widely throughout the Group. Rangemaster's
manufacturing base in Leamington Spa is where the modern range cooker was
invented in 1830 - with a single heat source being used to heat a number of
separate ovens. The 'Kitchener' won a Gold Medal from Queen Victoria at the
Great Exhibition of 1851 and was to be found in the kitchens of the homes and
palaces of the European elite in the second half of the 19th century. The
business continued to lead in cooking and introduced the first separate grill,
dual fuel cooker and the modern range cooker itself.
La Cornue's vaulted oven still used to produce the best French food from a
myriad of starred French chefs, was invented in 1908 by the Dupuy family. All
of these cooking traditions were re-interpreted by Gustaf Dalén, the Swedish
Nobel prize-winning physicist, as a heat storage cooker, the Aga, in 1922.
The Group has long been involved in commercial and domestic oven
manufacture. The Falcon cooker operation in Scotland was the heart of the
commercial business sold in 2007 and Stanley, our Irish business, was
originally an offshoot of it in the 1920s.
Engineering and manufacturing skills are deeply embedded in the Group. They
have been sharpened in recent years as the Group has invested heavily in its
manufacturing facilities, in engineering and in research and development. GBP50
million has been invested in the last five years alone - as we have accelerated
our development programmes.
These initiatives are made possible because the Group is open to ideas and
interested in production processes. The Group has invested in a succession of
projects across our businesses to introduce lean manufacturing into the culture
and to find the best sources of components or - where appropriate - sub
assemblies for the Group.
We have been alive to the progress of industries and technologies around us -
most notably motor manufacturing which has set efficiency and effectiveness
standards for many years. Lean manufacturing, notably production flows, use of
robotics and flexibility in assembly, have all been features of our progress.
We have also been watchful in our approach to procurement. We have a sourcing
team in Shanghai that provides access to Far East markets. We have not,
however, sought to off-shore core manufacturing competencies leaving us
vulnerable to shifts in economic patterns.
The Group has deliberately decided to keep core skills, which set its products
apart, close to its core markets and in-house. Hence, we remain manufacturers
in the UK of the major product lines while in France we continue to manufacture
the classic La Cornue products and in Canada the classic Heartland products. In
the USA we decided to keep manufacturing close to Marvel's core USA customers
while at the same time looking for expansion into European markets.
We have a long track record of innovation. Adjusting our product to changing
consumer and market needs is central to our business approach. This is clearly
seen with our Aga and Rayburn products. Over the last six years we have
introduced a new generation of electric products; we have added a third oven
into the standard Aga footprint and we have made electric and now the gas Aga
programmable. We will in the second half of this year be able to offer
nearly all existing owners opportunities to either trade up or to have their
existing products made programmable.
A manufacturing area where Britain leads the world is in range cooking - Great
British cookers - which we are taking not only to a home market but with
determination to export markets.
So after 300 years of innovation, the Group can see clear outlines of where the
development story goes next.
END
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