RNS Number:7172L
Airsprung Furniture Group PLC
30 May 2003
AIRSPRUNG FURNITURE GROUP PLC
Chairman's Statement
The Group recorded a pre-tax loss of #471,000 after exceptional items (2002:
#505,000 profit) on sales of #66.5 million (2002: #74.0 million). These
disappointing results were due in the main to a worse than expected performance
from Bymacks which operates at the entry point level in the upholstery market,
major strategic changes at Airsprung Beds and difficult trading conditions, all
of which are explained more fully within the Chief Executive's report.
The results were below expectations due to actions taken to accelerate changes
originally planned for 2003/04 at Airsprung Beds together with their costs into
the current year, which included redundancy and termination costs relating to a
significant reduction in headcount. We also made a provision of #250,000 to
cover a fuel oil contamination problem at the Dursley site that has now been
sold, and took a more stringent policy on slow moving stock. These actions
should minimise the risk of unexpected profit hits in the coming year.
Profitability did however show an improvement in the second half with a profit
before tax and exceptional items of #640,000 compared with a loss in the first
half.
The Group was free of bank debt at the year end, the bank balance being #1.3
million. This was despite a delay on completion of the sale of our Dursley
site, originally due on 28 March 2003, but the #1.8 million not being received
until 2 May 2003.
As with many other pension funds the Group's pension scheme has experienced a
worsening performance, and reports an FRS 17 valuation deficit of #6.9 million
net of deferred tax as at 31 March 2003. Action has been taken to address the
situation limiting the increase in the Group's contributions to #100,000 per
annum with effect from 1 April 2003.
The board is recommending a final dividend of 2.0p per ordinary share; in
addition the board will be recommending a special dividend of 5.0p per ordinary
share as we feel it appropriate to return to shareholders the profit on the sale
of the Dursley property bearing in mind the strength of the balance sheet. The
final dividend of 2.0p and the special dividend of 5.0p per ordinary share is
payable on 25 July 2003 to shareholders on the register on 4 July 2003. The
ex-dividend date is 2 July 2003. Together with the interim dividend of 1.0p,
this makes the total dividend for the year 8.0p per ordinary share (2002:
3.0p).
During the course of the year discussions concerning a possible offer for the
company took place, however these were discontinued on 18 March 2003.
We are now in the process of recruiting further non-executive directors as Mr D
P L Howe retired during the year. Also Mr S Harrington left the Group, and I
would like to thank both him and Mr Howe for their valued contributions.
The current developments and public debate on corporate governance are being
studied by the directors, and consideration is being given to these issues in
the imminent selection of new non-executive directors. The board remains
committed to best practice in corporate governance as reflected in how the board
and its committees function.
On behalf of the board I thank all the Group's employees for their commitment
and co-operation during a year of considerable change.
The board has decided that it intends to transfer its listing from the Official
List to the Alternative Investment Market ("AIM") of the London Stock Exchange.
The board considers that AIM is a more appropriate market for Airsprung given
its size and nature.
The company will apply shortly for its entire issued ordinary share capital to
be admitted to trading on AIM. It is expected that dealing in Airsprung shares
on AIM will commence on 1 August 2003, when the company's listing on the
Official List will be cancelled.
The board is delighted with the changes effected by Tony Lisanti in his first
year as Chief Executive and it is felt that all the Group's companies are now in
a position to move forward positively, being far more focused than previously
with an added professionalism to the management structure. No further major
structural changes likely to have a detrimental effect on the company's
performance are anticipated. It is expected that the coming year should see an
improved performance; however, much will depend on a general improvement in the
very difficult trading conditions we have experienced in this past year in
upholstery in particular and in the furniture industry as a whole since January
2003.
Philip Bradshaw
Chairman
30 May 2003
AIRSPRUNG FURNITURE GROUP PLC
Chief Executive's Report
During the past financial year, the directors have undertaken a fundamental
review regarding the viability in the medium and long term of all of the Group's
divisions. Business activities that would have required unacceptable levels of
investment in management resource and/or assets in order to provide a reasonable
expectation of continuing profits have ceased operations as, for example, is the
case with the Airsprung Beds factory in Scotland. Non-core activities such as
the fillings business of Fitex have been sold at full book value to a specialist
fillings supplier that is now providing the Group with both contemporary and
financially advantageous products. In the cases of Airsprung Beds at
Trowbridge, Peter Guild and Bymacks Upholstery, the review of these businesses
has indicated that given an injection of both time and management expertise to
provide clear focus to its activities, profitable and sustainable businesses may
be developed. During the past year, within the Group there have been a number
of successful and profitable businesses, unfortunately counter balanced by
several challenging businesses that have significantly undermined overall
profitability. The restructuring that has taken place over the last 12 months
which has involved a substantial reduction in employee numbers should, however,
provide a platform for all Group companies to improve performance going forward.
The result for the year is below our previous expectations. This has been
caused primarily by two factors. First, the bringing forward of re-organisation
plans at Airsprung Beds in Trowbridge, which was completed in May 2003; and
secondly the fall-off in demand that commenced in January 2003, mainly in our
upholstery businesses and which did not recover to expected levels in the last
quarter of 2002/03.
With all of the planned major restructuring now complete, the strategy of the
Group is clearly focused on beds and upholstery manufacture and supply,
predominantly on the UK market. Each of the businesses will operate in discrete
market segments, thus duplication of activity between companies will be
insignificant.
The areas of the Group that have given rise to the profit shortfalls in the year
are addressed below.
Airsprung Beds, Trowbridge
This division's inability to match capacity with demand continued to be the
major factor in depressing profitability. During Quarter 4 of the financial
year the management structure was fundamentally overhauled, both at director as
well as at middle management level. The existing expertise in the company was
bolstered by introducing individuals with significant experience in global
manufacturing, logistics, and sales and marketing. This exercise has resulted
in a very capable, focused and results orientated management team being
established within Airsprung Beds. The outcome of this re-organisation has seen
the manufacturing processes virtually completely re-engineered at Trowbridge,
coupled with fundamental changes in working practices.
Many of the operational problems that have adversely affected Airsprung Beds in
recent years are now either resolved or are markedly improved. The results in
financial terms are expected to become apparent in the latter half of the new
financial year. Although the recovery will be gradual at Airsprung Beds, I am
confident that it is now firmly under way.
Bymacks
Bymacks has operated traditionally at the entry point level in the upholstery
market place. Bymacks has, along with its competitors, been subjected to large
scale competition from low priced upholstery imports, principally from Eastern
Europe, Italy and the Far East. A major review of this subsidiary took place in
mid 2002, resulting in the strategy to move its market position into higher
specification, higher added value products. Coupled with this market
repositioning has been the restructuring of the operations, effectively halving
the numbers employed. In April 2003 the business moved to a dedicated facility
which is expected to bring operational efficiencies.
The challenges faced by Bymacks remain considerable and recovery to an
acceptable profit is not likely to be seen within the new financial year, but
its repositioning during 2002/03 will provide it with an opportunity to generate
profits in the future.
Peter Guild
Peter Guild, our upper end upholstery business acquired in June 2001, has
consistently failed to meet the expectations upon which it was acquired. The
review of this particular business resulted in the appointment of a new managing
director and finance director. The cost base of Peter Guild has now been
thoroughly addressed and this, coupled with its high emphasis on new product
development, has provided Peter Guild with a firm platform for growth. Here
again, however, the new financial year is not likely to see a significant profit
generated. A return to an acceptable profit is not expected until 2004/05.
Overview
Many of the businesses within the Group have faced significant challenges during
the year, not only from difficult market conditions but also from disruption
caused by fundamental remodelling of internal operations. A great deal has been
achieved by the local management and our employees, for which the Board is
grateful. In what is clearly an increasingly competitive industry, the drive
for improvements in base costs, new product development and operating
efficiencies will remain paramount in our strategic thinking.
The Group, therefore, now consists of discrete manufacturing units (three bed
companies, three upholstery companies and a mattress/upholstery foam processing
company) operating on increasingly common information technology and accounting
systems. The businesses that have been under performing for some years have
either ceased operation or have now been fundamentally restructured in order to
provide a sound platform to provide profits for the Group. No further major
restructuring is envisaged, but should it become necessary to do so, action will
now be timely.
Considerable efforts across the whole of the Group are being expended on the
development of new and more profitable products. All of the companies are now
leaner and their management highly incentivised on profit and cash generation.
My expectations are that providing background market conditions return at least
to pre-December 2002 levels, the new financial year will see a marked
improvement in the Group's performance.
Properties
During the year we have disposed of two properties, both showing a premium
compared with book value. The Dursley site, previously housing Bymacks, was
sold for redevelopment, generating a profit of #1.3 million. Due to a
relatively minor fuel oil contamination problem that requires remediation, a
retainer of #250,000 has been placed in independent control in order to cover
the de-contamination, but there will be no requirement to provide a further
indemnity to the purchaser of the Dursley site.
Upon closure of the Airsprung Beds facility in Glasgow, the vacant property was
placed on the market. The Group received a formal offer for the site in excess
of its book value which was accepted in March 2003. Subsequently, this offer
was reduced by the prospective purchaser and the decision has been taken to
re-market the property.
During January 2003 a warehouse in Trowbridge surplus to requirements was
disposed of, realising #800,000 against a net book value of #550,000.
The sale of the Fitex assets to a major supplier now realises an additional
income from rent as the purchaser is operating the assets on the existing
Trowbridge site.
The feasibility study regarding a potential move to a purpose built facility for
our highly successful Sprung Slumber business continues into the new financial
year. Sprung Slumber, based in Okehampton, Devon, is in need of increased
physical space in order to accommodate its growing business.
In conclusion, upon the sale of the Glasgow facility, Airsprung Furniture Group
will have no further surplus properties. Furthermore, all planned
rationalisation of operations in terms of sites will have taken place.
Markets
Market conditions in 2002/03 were highly challenging, especially at the entry
point upholstery level. Very high levels of competition, mainly from imports
from low cost sources in the Far East and Eastern Europe, created significant
price pressure. This situation shows no sign of changing, and the actions of
many of our competitors in either moving manufacturing overseas or closing
operations altogether, unfortunately provide a backdrop to the state of this
market for these types of product. Demand for beds, however, remained
reasonably strong for the first nine months, with both Gainsborough and Sprung
Slumber posting acceptable profits for the year. Since the turn of the calendar
year, however, depressed retail sales for furniture in total have led to a
marked reduction in demand. At May 2003 there are early signs that, following
the uncertainty caused by the war in Iraq, increases in National Insurance
contributions and general fears over domestic property deflation, demand is
picking up.
Price pressure from several major retailers has become fierce, with suppliers
increasingly subjected to requests for previously unnegotiated discounts or
rebates. Airsprung's efforts in developing exciting and profitable new products
for the market place will, however, stand it in good stead as and when market
conditions improve.
Tony Lisanti
Chief Executive
30 May 2003
AIRSPRUNG FURNITURE GROUP PLC
Financial Review
Turnover and operating results
On sales of #66.5 million the Group posted an operating profit of #222,000
before exceptional items of #1.9 million. The exceptional items figure includes
#1.0 million in respect of the closure of Airsprung Scotland, #500,000 for the
restructure and relocation of Bymacks, and a further #400,000 for redundancy and
termination costs at Airsprung Beds, Trowbridge.
Tax
The tax credit of #281,000 includes #32,000 corporation tax credit and #249,000
deferred tax movements, relating primarily to tax losses. As a result of the
reorganisation of the statutory entities into trading divisions on 31 March
2002, the tax losses occurred predominantly within the newly organised Airsprung
Furniture Limited and are therefore not available for offset against prior year
tax payments and thus are carried forward against future taxable profits. As a
consequence of the tax loss performance it is anticipated that there will be no
corporation tax payments on account in the new financial year.
Balance sheet and cash flow
Capital expenditure in the year amounted to #1.0 million relating mainly to
plant and equipment at Airsprung Beds and Sprung Slumber. Proceeds from asset
disposals totalling #1.2 million relate primarily to surplus property at
Trowbridge and the deposit on the sale of the former Bymacks factory at Dursley.
The contract for this latter item completed on 2 May 2003 with receipts of
#1.8 million. At #1.3 million, depreciation remains at a similar level to that
reported in 2002.
Within working capital stocks fell by #1.0 million, and a reduction of #800,000
in creditors was offset by a similar reduction in the level of debtors.
Consequently, despite the #1.7 million operating loss, a cash inflow of #659,000
from operating activities is reported and as at 31 March 2003 the Group held net
funds of #1.3 million.
Pension fund
In line with the general trend of deteriorating pension fund performance, the
FRS 17 valuation of the Group's pension fund revealed a deficit of #9.9 million
as at 31 March 2003. This had been reduced by in excess of #500,000 by 30 April
2003 as a result of changes in the capital markets. The last actuarial
valuation for purposes of determining the level of future contributions to be
made to the fund showed a deficit of #1.5 million as at 1 April 2002. In the
light of falling stock market returns an interim review was commissioned as at
November 2002 which revealed that the deficit had increased to #5.0 million.
Consequently, the company decided to reduce the future accrual rate for salaried
staff from 60ths to 80ths with effect from 1 April 2003. It was also decided to
increase employee and employer contributions as recommended by the Scheme
Actuary. The net effect of these two steps, excluding the impact of reducing
employee numbers, is to increase pension contribution costs to the Group by
#100,000 per annum from 1 April 2003.
We believe the actions taken will remove the current deficit in the pension fund
over the future contribution period.
Shareholders' funds
Equity shareholders' funds stand at #19.3 million, resulting in a net asset
value per share of 81p.
Andrew Alsop
Financial Director
30 May 2003
Consolidated Profit and Loss Account
for the year ended 31 March 2003
Before
exceptional Exceptional 2002/3 2001/2
items items Total Total
#000 #000 #000 #000
Turnover
Continuing operations 66,453 - 66,453 74,007
Cost of sales
Continuing operations 48,060 1,582 49,642 54,373
Gross profit 18,393 (1,582) 16,811 19,634
Net operating expenses
Before exceptional items 18,171 - 18,171 18,267
Exceptional items - 353 353 821
Net operating expenses 18,171 353 18,524 19,088
Total operating (loss)/profit 222 (1,935) (1,713) 546
Profit on sale of discontinued operations - 127
Profit on sale of fixed assets 1,299 -
(Loss)/profit on ordinary activities before interest (414) 673
Net interest payable (57) (168)
(Loss)/profit on ordinary activities before taxation (471) 505
Tax on ordinary activities 281 103
(Loss)/profit for the financial year
(including the company #1,245,000;
2002 #12,054,000) (190) 608
Equity dividends (1,910) (716)
Non-equity dividends (66) (66)
Loss for the financial year (2,166) (174)
(Loss)/earnings per ordinary share (1.1p) 2.3p
There is no material difference between the (loss)/profit on ordinary activities
before taxation and the loss for the financial year and their historical cost
equivalent for the periods stated above.
Statement of total recognised gains and losses
for the year ended 31 March 2003
2002/3 2001/2
#000 #000
(Loss)/profit for the financial year (190) 608
Prior year adjustment - deferred tax - (1,157)
Total losses recognised since last annual report (190) (549)
Reconciliation of movements in shareholders' funds
for the year ended 31 March 2003
2002/3 2001/2
#000 #000
(Loss)/profit for the financial year (190) 608
Dividends and appropriations (1,976) (782)
Net movement in shareholders' funds (2,166) (174)
Opening shareholders' funds 22,143 22,317
Closing shareholders' funds 19,977 22,143
Balance sheets at 31 March 2003
Group Company
2003 2002 2003 2002
#000 #000 #000 #000
Assets employed
Fixed assets
Intangible assets 904 956 - -
Tangible assets 14,303 16,942 58 81
Investments - - 1,070 1,070
15,207 17,898 1,128 1,151
Current assets
Stocks 4,677 5,677 - -
Debtors (2003: including #2,412,000
relating to amounts recoverable from
fixed asset sales; 2002: nil) 13,069 11,341 25,467 26,169
Cash at bank and in hand 1,343 1,611 - -
19,089 18,629 25,467 26,169
Creditors: amounts falling due
within one year 13,127 12,941 2,978 2,972
Net current assets 5,962 5,688 22,489 23,197
Total assets less current liabilities 21,169 23,586 23,617 24,348
Financed by
Creditors: amounts falling due
after more than one year - 2 - -
Provisions for liabilities and charges 1,192 1,441 - -
1,192 1,443 - -
Capital and reserves
Called up share capital 3,044 3,044 3,044 3,044
Share premium account 2,348 2,348 2,348 2,348
Capital redemption reserve 2,345 2,345 2,345 2,345
Revaluation reserve 1,617 1,617 - -
Profit and loss account 10,623 12,789 15,880 16,611
19,977 22,143 23,617 24,348
Equity shareholders' funds 19,322 21,488 22,962 23,693
Non-equity shareholders' funds 655 655 655 655
Total shareholders' funds 19,977 22,143 23,617 24,348
21,169 23,586 23,617 24,348
Consolidated cash flow statement
for the year ended 31 March 2003
2002/3 2001/2
#000 #000 #000 #000
Net cash inflow from operating
activities 659 2,556
Returns on investments and
servicing of finance
Interest received 8 8
Interest paid (64) (173)
Interest paid on finance leases and
similar hire purchase contracts (1) (3)
Non-equity dividends and
appropriations paid (66) (66)
Net cash outflow from returns on
investments and servicing of finance (123) (234)
Taxation
UK corporation tax (308) (251)
Capital expenditure and financial
investment
Receipts from sales of assets 1,203 3,123
Tangible fixed assets purchased (977) (1,283)
226 1,840
Acquisitions and disposals
Purchase of business assets and
goodwill - (64)
Disposal of subsidiary business - 127
Net overdraft acquired with subsidiary
business - (233)
- (170)
Equity dividends paid (716) (1,648)
Net cash (outflow)/inflow before financing (262) 2,093
Financing
Repayment of loan acquired with
subsidiary business - (775)
Capital element of finance lease
rental payments (6) (64)
Net cash outflow from financing (6) (839)
(Decrease)/increase in cash (268) 1,254
Analysis of cash balances 2003 2002 Change
in year
#000 #000 #000
Cash at bank and in hand 1,343 1,611 (268)
Notes for the year ended 31 March 2003
1 This summary of results does not constitute the statutory financial
statements for the year ended 31 March 2003 The financial statements have not
yet been delivered to the Registrar of Companies, nor have the auditors yet
reported on them. The report and full financial statements will be posted to
shareholders in due course. The financial information for the year ended 31
March 2002 has been extracted from the full report and statements which have
been filed with the Registrar of Companies.
2 Total turnover includes turnover generated in the UK of #65.0 million
(2002: #71.7 million) and export sales of #1.5 million (2002: #2.3 million).
3 The directors recommend a final dividend of 2p per ordinary share and a
special dividend of 5p per ordinary share payable on 25 July 2003 to
shareholders on the register at the close of business on 4 July 2003.
4 The earnings per ordinary share have been calculated on 23,889,000
ordinary shares (2002: 23,889,000) being the weighted average number of shares
in issue during the period.
This information is provided by RNS
The company news service from the London Stock Exchange
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