RNS Number:4713T
IWP International PLC
19 December 2003
IWP INTERNATIONAL PLC
PRELIMINARY ANNOUNCEMENT
RESULTS FOR 6 MONTHS ENDED 30 SEPTEMBER 2003
Embargoed for release 19 December 2003, 11.00am
Tom Byrne
Murray Consultants
Tel: +353 1 498 0300
INTERIM RESULTS FOR 6 MONTHS ENDED 30 SEPTEMBER 2003
FINANCIAL HIGHLIGHTS
Six Months to 30 September
2003 2002 Increase/
(Decrease)
Euro'm Euro'm
Sales Revenue* 99.6 112.2 (11%)
Group Operating Profit (before goodwill)* 4.3 3.4 26%
Profit after tax * 0.5 (0.3)
Adjusted EPS - (before goodwill)* 1.27c 0.27c +1.00c
Exceptional Charges ** (5.4) (8.5)
Net Debt (107.2) (92.9) (14.3)
* Represents results on continuing businesses before exceptional
items
**Exceptional charge for 2002 excludes the loss on the sale of
subsidiaries (Euro57.1m)
KEY POINTS - CONTINUING BUSINESSES
* Operating Profit (before goodwill and exceptional items) up 26%.
* Operating Margin increased from 3.0% to 4.3%.
* Decline in Sales Revenue due to adverse exchange rates and elimination
of unprofitable sales.
* Exceptional charge of Euro5.4m for impairment value of Canadian business
and compensation for loss of office to certain executives.
* Group Net Debt increased by Euro14.3m to Euro107.2m.
* Group is in breach of banking covenants at 30 September 2003. The
directors believe that revised funding arrangements can be agreed to give time
for the Group to reduce debt and improve earnings.
* Plan for disposal of non-core assets in place to reduce debt.
* Directors decide that an interim dividend will not be paid.
Chief Executive's Commentary
The results for the six months to September 2003 are set out below, including an
analysis by sector.
Operating profit (before goodwill and exceptional items) from continuing
businesses for the half year increased by Euro0.9m to Euro4.3m. The breakdown between
continuing and discontinued businesses is as follows.
Sales Revenue
Six Months to 30 September
2003 2002 Increase/
(Decrease)
Euro'm Euro'm Euro'm
Continuing Businesses 99.6 112.2 (12.6)
Discontinued Businesses - 140.5 (140.5)
------- ------ ------
Total 99.6 252.7 (153.1)
------- ------ -------
Operating Profit - before goodwill and exceptional items
Six Months to 30 September
2003 2002 Increase/
(Decrease)
Euro'm Euro'm Euro'm
Continuing Businesses 6.2 3.9 2.3
Head Office Costs (1.9) (0.5) (1.4)
------- ------ ------
4.3 3.4 0.9
Discontinued Businesses - 6.9 (6.9)
------- ------ ------
Operating Profit 4.3 10.3 (6.0)
------- ------ ------
The discontinued businesses comprises mainly the Household Division which was
sold in September 2002. The Group continues to hold a 35% Equity stake and a
sterling Deep Discount Bond in this business. The current value of this bond,
including rolled up interest, is #23.6m Sterling.
Sales Revenue fell by Euro12.6m of which Euro8.8m was due to adverse exchange rates.
During the period the process of eliminating unprofitable sales continued -
notably the cessation of the Michael Harvey range of aerosol products at
Constance Carroll.
The head office costs in 2002 did not include Euro1.4m which was charged against
the loss on the Household disposal. Hence in total terms there was no increase
in head office costs. The directors recognise that in any event these costs need
to be reduced to reflect the current scale of the Group's activities.
The profit after tax on continuing businesses (before exceptional items) is
Euro0.5m which compares to a loss of Euro0.3m in 2002. The movement from operating
profit (before goodwill and exceptional items) is as follows.
Euro'm
Group Operating Profit (before goodwill) 4.3
Goodwill amortisation (0.5)
Net impact of 35% shareholding in Jeyes Holdings Ltd (0.6)
Net Interest Charge (2.1)
Taxation (0.6)
--------
Profit after Tax 0.5
--------
The Group share of the net loss incurred by Jeyes Holdings Ltd was Euro0.6m in the
half year. However this business is performing well at operating profit level
and is broadly in line with expectations.
The interest charge of Euro2.1m compares with a charge of Euro3.4m in 2002 reflecting
the reduction in group debt as a result of the sale of the Household Division.
Exceptional Costs
The exceptional charge of Euro5.4m comprises Euro4.6m in relation to impairment of
assets in our Canadian business. This includes impairment of goodwill, stock and
debtors. The balance of the charge relates to compensation for loss of office to
certain executives. The majority of this charge will not impact cash.
Group Net Debt
In the six months to 30 September 2003 net debt increased by Euro10.1m to Euro107.2m,
largely due to the payment of some of the exceptional charges provided for in
the year ended 31 March 2003 and a reduced focus on working capital levels. The
directors recognise that this level of debt is too high and actions are in place
to reduce debt through the disposal of non-core assets and improvements in
working capital management.
In particular it is intended that the Group will dispose of its Putzfeld
business as it is clearly non-core in a personal care products company.
The net debt of Euro107.2m is a gross figure as the Jeyes Deep Discount Bond is not
netted against debt.
Sector Analysis
The following is an analysis of the businesses between UK and Mainland Europe.
UK Activities
The UK businesses comprise:
* Constance Carroll - which manufactures and markets branded
cosmetics under the Constance Carroll and Collection 2000 brands.
* Fine Fragrances & Cosmetics - which markets a range of branded
fragrances, hair care and cosmetics including Van Gils, Fade Out and Jerome
Russell.
* Burlington Gifts - which markets a range of cosmetic gift
products (including the Canadian Gifts business which is now managed as part of
the Burlington Business)
Six Months to 30 September
2003 2002 Increase/
(Decrease)
Euro'm Euro'm Euro'm
Sales Revenue 42.8 49.8 (7.0)
Operating Profit 4.5 5.1 (0.6)
Operating Margin 10.5% 10.2% 0.3%
The fall of Euro7.0m in sales revenue is mainly due to adverse exchange rates, the
impact of which was Euro5.0m and the elimination of the Michael Harvey range of
aerosol production, Euro2.0m.
The operating margin on sales increased by 0.3% to 10.5%
Production difficulties at Constance Carroll arising from the major
restructuring which has taken place also impacted on revenue and earnings. This
area is now receiving significant management attention.
Mainland Europe Activities
The European businesses comprise:
*Royal Sanders - located in Holland manufactures and markets personal care
products under customer label brands
*Polbita - located in Poland with 300 retail outlets selling toiletries
and cosmetics and a substantial wholesale distribution activity.
*Putzfeld - located in Holland manufactures and markets plastic components
for industrial end uses.
Six Months to 30 September
2003 2002 Increase/
(Decrease)
Euro'm Euro'm Euro'm
Sales Revenue 56.8 62.4 (5.6)
Operating Profit 1.7 (1.2) 2.9
Operating Margin 3.0% (1.9%) 4.9%
Adverse exchange rates accounted for Euro3.8m of the sales revenue reduction. Royal
Sanders in particular recording sales growth of 7%. Putzfeld sales increased by
6%.
This result represents a significant improvement. Royal Sanders returned to
profit after a difficult year in 2002. Polbita, although recording an operating
loss in the period, substantially reduced the level of loss and continues to
make progress. Putzfeld continued to trade well and delivered a 5% increase in
operating profit.
Despite the improvements, the overall margin level at 3% is clearly low and
continued progress will be necessary to improve on this.
Group Funding
The Group is in breach of certain loan note and banking covenants at 30
September 2003 due to the loss of the Household Division profits (6 months of
which are included in the March 2003 results) and the increased borrowings of
Euro10.1m between March 2003 and September 2003.
We are currently in discussion with our lending institutions to put in place
revised arrangements to give time for the Group to reduce debt levels and
improve earnings. These discussions are progressing and the directors are
confident that a satisfactory outcome can be achieved before the Company's
financial year-end, 31 March 2004. The costs associated with the revised funding
discussions will impact on future earnings.
Outlook
Second half year trading has started well and we are confident that the
operating performance for the year to 31 March 2004 will remain ahead of 2003.
The business faces a significant challenge in order to reduce borrowings into
line with the scale of the Group's activities. The key priorities for the coming
year are as follows.
1. To conclude discussions with the Group's banks and loan note holders in
order to provide a stable financial framework within which to manage the Group
and grow earnings.
2. To dispose of non-core assets in order to reduce Group debt.
3. To significantly improve the management of cash within the businesses
including establishing more effective controls over accounts receivable and
stock levels.
4. To strengthen management resource in certain key areas of the business.
5. To maintain a strong focus on managing our brands and further developing
customer relationships.
6. To develop a strategic direction for the Group which can be clearly
understood by all internal and external audiences.
Finally, in spite of the difficult circumstances outlined in this statement, the
Group is trading profitably and is capable of growth in the future. A key task
is to restore confidence in the Group with its customers, employees and all
stakeholders in the business. The management team recognises and is fully
committed to this objective.
Dividend
In view of the current discussions with our banks and loan note holders the
Directors have decided that it would be inappropriate to declare an interim
dividend.
JM Murphy
Chief Executive
19 December 2003
IWP INTERNATIONAL PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT (Unaudited)
Six Months ended 30 September 2003
2003 2003 2003 2002
Euro'000 Euro'000 Euro'000 Euro'000
Exceptional Total Total
Items
Turnover 99,647 - 99,647 252,690
Cost of sales (68,140) - (68,140) (187,066)
-------- --------- -------- --------
Gross profit 31,507 - 31,507 65,624
-------- --------- -------- --------
Operating Expenses
Goodwill amortisation (454) - (454) (1,883)
Exceptional items - (5,379) (5,379) (8,472)
Other (27,237) - (27,237) (55,321)
-------- --------- -------- --------
(27,691) (5,379) (33,070) (65,676)
-------- --------- -------- --------
Group operating profit / (loss) 3,816 (5,379) (1,563) (52)
Share of associate - operating 1,521 - 1,521 -
profit
-------- --------- -------- --------
Total operating profit / (loss) 5,337 (5,379) (42) (52)
Loss on sale of subsidiaries - - - (57,103)
Group interest payable (2,090) - (2,090) (3,425)
Share of associate - interest (2,047) - (2,047) -
payable -------- --------- -------- --------
Profit / (Loss) before taxation 1,200 (5,379) (4,179) (60,580)
Group taxation (654) - (654) (1,297)
Share of associate - taxation (63) - (63) -
-------- --------- -------- --------
Profit / (Loss) after taxation 483 (5,379) (4,896) (61,877)
Dividends - - - (1,664)
-------- --------- -------- --------
Profit / (Loss) retained 483 (5,379) (4,896) (63,541)
-------- --------- -------- --------
Adjusted earnings per share (Euro 1.27 - 1.27 7.07
cents) -------- --------- -------- --------
Basic earnings / (Loss) per share 0.65 (7.27) (6.63) (82.08)
(Euro cents) -------- --------- -------- --------
IWP INTERNATIONAL PLC
CONSOLIDATED BALANCE SHEET (Unaudited)
30 September 2003
2003 2002
Euro'000 Euro'000
Fixed assets
Intangible Assets 12,880 16,654
Tangible Assets 38,139 46,579
Financial Assets 37,569 35,175
--------- ----------
88,588 98,408
Current assets
Stocks 44,577 50,916
Debtors 42,841 54,044
Cash at bank & in hand 1,796 45,681
--------- ----------
89,214 150,641
Creditors - Amounts falling due within one year
Other creditors (61,519) (74,205)
Finance Debt (108,980) -
--------- ----------
(170,499) (74,205)
--------- ----------
Net current (liabilities)/assets (81,285) 76,436
--------- ----------
Total assets less current liabilities 7,303 174,844
--------- ----------
Creditors - Amounts falling due after more than one
year
Other long term creditors - (2,500)
Finance Debt - (138,599)
--------- ----------
- (141,099)
Provisions for liabilities & charges - (1,201)
--------- ----------
Net Assets 7,303 32,544
--------- ----------
Capital and reserves including non-equity interests
Called up share capital 12,427 12,427
Share premium 142,947 142,945
Revaluation reserve - 76
Other reserves (11,599) (6,241)
Profit and loss account - after elimination of goodwill (136,472) (116,663)
--------- ----------
Total shareholders' funds 7,303 32,544
--------- ----------
Analysis of shareholders' funds
Equity 7,233 32,474
Non equity 70 70
--------- ----------
7,303 32,544
--------- ----------
IWP INTERNATIONAL PLC
CONSOLIDATED CASH FLOW STATEMENT (Unaudited)
Six months Ended 30 September 2003
Notes 2003 2002
Euro'000 Euro'000
Net cash (outflow)/inflow from operating (3) (5,438) 3,019
activities --------- ---------
Returns on investments and servicing of finance
Interest paid (4,763) (5,352)
Taxation 1,876 (1,756)
--------- ---------
Capital expenditure
Purchase of tangible fixed assets (1,293) (6,275)
Purchase of intangible fixed assets (19) -
Sales of tangible fixed assets 114 156
--------- ---------
(1,198) (6,119)
Acquisitions and disposals
Proceeds from sale of subsidiaries - 96,928
Earnout payments on previous acquisitions - (2,150)
--------- ---------
- 94,778
--------- ---------
Cash (outflow)/inflow before financing (9,523) 84,570
--------- ---------
Financing
Purchase of own shares - (1,498)
--------- ---------
Net cash outflow from financing - (1,498)
--------- ---------
Movement in Net Debt (2) (9,523) 83,072
--------- ---------
IWP INTERNATIONAL PLC
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Six months Ended 30 September 2003
(1) Basis of Preparation of Unaudited Interim Consolidated Financial Statements
These Unaudited interim consolidated financial statements have been prepared
applying the accounting policies described on pages 25 and 26 of the published
accounts for the year ended 31 March 2003.
The Group was in breach of certain loan note and banking covenants at 30
September 2003 and are currently in discussion with the lenders involved. As a
result of these breaches the related borrowings become repayable on demand and
have been reclassified as amounts falling due within one year.
The financial statements have been prepared on the going concern basis which
assumes that the company and its subsidiaries will continue in operational
existence for the foreseeable future. This assumption is based on the directors'
belief that these discussions with its lenders will be successfully concluded
and having regard to the Group's business plans and current trading position.
(2) Reconciliation of net cash flow to movements in net debt
2003 2002
Euro'000 Euro'000
(Decrease)/Increase in cash in the period (9,523) 28,778
Decrease in debt financing - 54,294
--------- ---------
Change in net debt resulting from cash flows (9,523) 83,072
Translation adjustment (553) (170)
--------- ---------
Movement in net debt in the period (10,076) 82,902
Net debt at 1 April (97,108) (175,820)
--------- ---------
Net debt at 30 September (107,184) (92,918)
--------- ---------
(3) Net cash (outflow)/inflow from operating activities for the six months
to 30 September 2003.
2003 2002
Euro'000 Euro'000
Operating loss (1,563) (52)
Non-cash exceptional items 3,169 7,358
(Profit)/Loss on Disposal of Fixed Assets (43) 247
Depreciation 3,546 8,205
Amortisation of intangible assets 742 1,883
Increase in debtors (2,558) (4,346)
Decrease in stocks 352 3,783
Decrease in creditors (9,083) (14,059)
--------- ---------
(5,438) 3,019
--------- ---------
These financial statements do not constitute full accounts. Financial statements
for the year ended 31 March 2003, which received an unqualified audit report,
are available from the Company Secretary.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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