RNS Number:3838Q
Dickinson Legg Group PLC
01 October 2003
For Immediate Release 1 October, 2003
DICKINSON LEGG GROUP PLC
PRELIMINARY RESULTS
Dickinson Legg Group plc, ('the Company'), a leading designer and global
supplier of primary tobacco processing and forced convection drying equipment
solutions, today announces its maiden preliminary results for the year ended 30
June 2003.
Highlights:
* Successful conclusion of demerger and AIM listing
* Group turnover at #49.2m (2002: #54.2m)
* Group operating profit (pre-exceptionals) at #3.1m (2002: #6.7m)
* Diluted EPS (pre-exceptionals) at 6.8p (2002: 16.2p)
* Substantial reduction in net debt to #0.4m
* Dividend proposed of 1.5p, deferred to 1 July 2004
* New Defined Contribution Pension Scheme implemented
Commenting on prospects, Chairman Barry Stevenson, said:
"The markets in which the Group operate are very competitive and in most, demand
is weak. The strengthening of the Euro against Sterling in recent months should
help, but until there are definite signs of an upturn in global capital goods
markets, difficult trading conditions will continue. However, in our new form
we are much better placed to deal with these conditions.
It is the Board's view that the Group is now in a position to consider
acquisitions. Opportunities are being sought in related fields to our present
activities to determine where shareholder value can be enhanced by this means."
For further information, please contact:
Dickinson Legg Group plc Today 020 7466 5000;
Barry Stevenson, Chairman thereafter 01962 841788
Tom Mackie, Chief Executive
Buchanan Communications 020 7466 5000
Richard Darby / Bobbie Swanson
Notes to Editors:
The Company's businesses comprise Dickinson Legg Limited, a world leader in the
manufacture and installation of primary tobacco processing equipment, and
Spooner Industries Limited, a specialist air drying equipment manufacturer for
the paper, converting (plastic film, foil and textile), metals and food
industries.
Chairman's Statement
This is the first annual report of Dickinson Legg Group plc, which was demerged
from Brunel Holdings plc on 13 December 2002. The demerger's principal
objectives were the realisation of value for capital tax losses, which were
unlikely to be utilised by the on-going business, a reduction in debt and to
release the Group from pension fund liabilities, which at 30 June 2002 had an
FRS 17 deficit of #15 million. In addition, head office costs were reduced,
under-performing assets disposed of and the negative balance on distributable
reserves eliminated, making possible the payment of dividends.
The transition to the new group has taken a great deal of senior management
time, but has gone smoothly and all the objectives have been achieved. The
final step was the acceptance by employees of a new defined contribution pension
scheme, which eliminates the possibility of a pension fund deficit arising in
the future.
The Group is now comprised of two profitable businesses operating globally in
the design and manufacture of process equipment for the tobacco, paper, metal
and food industries. The emphasis in both businesses is on design, based on
process knowledge developed in close co-operation with customers.
Results
The accounts have been prepared on the basis that Dickinson Legg Group was in
its current form throughout the year in accordance with the rules of merger
accounting.
Due to Dickinson Legg not benefiting from an exceptionally large contract as it
did the previous year, Group turnover for the year was 9% down and Group
operating profit before exceptionals 54% down. Total operating profit of #3.21
million before exceptional charges showed a marked improvement in the second
half and the year's results were in line with market expectations at the time of
the demerger. Spooner Industries continued to make progress in the second half
achieving #0.43 million operating profit for the year (2002: #nil). Exceptional
charges of #0.78 million were below the #1 million stated in the AIM admission
document and comprised redundancy costs of #340,000 with the balance being
demerger related costs (Refer to note 2 for further detail).
Diluted earnings per share before exceptionals were 6.8p (2002: 16.2p).
The nature of our business with large, irregular cash receipts does result in
fluctuations in the net debt position, which showed a small increase in the
second half to #0.4 million. This represents 7.6% of net assets. Net financing
costs were 44% lower than in the previous year.
Dividend
Thought has been given to the best way of using the Group's pool of Advance
Corporation Tax, thereby reducing tax payments and alternatives to the payment
of a cash dividend were considered as indicated in the AIM listing document.
However, it was decided that shareholders' interests were best served by paying
a cash dividend, but to defer payment until the new financial year in order to
optimise the tax position. This will save the Company #0.14 million. The
directors are therefore recommending the payment of 1.5p dividend on 1 July 2004
to include 0.2p enhancement in compensation for the deferred payment.
Going forward it is the intention that, subject to satisfactory performance, a
progressive dividend policy will be implemented and an interim dividend
representing approximately one third of the total year's dividend will be
payable in the future.
Prospects
As indicated in the Chief Executive's report, the markets in which the Group
operates are very competitive. In most, demand is weak which is reflected in
Dickinson Legg's opening order position, which was lower than at the beginning
of the previous year. It is therefore particularly noteworthy that Spooner has
entered the current year with a record order book. The strengthening of the
Euro against Sterling in recent months should help but until there are definite
signs of an upturn in global capital goods markets, difficult trading conditions
will continue. However, in our new form we are much better placed to deal with
these conditions. We expect this year's performance to be strongly biased
towards the second half.
It is the Board's view that the Group is now in a position to consider
acquisitions. Opportunities are being sought in related fields to our present
activities to determine where shareholder value can be enhanced by this means.
People
Inevitably the demerger created uncertainty for employees, particularly with
regard to their pension rights. My thanks are due to all concerned for their
efforts and co-operation in resolving difficult issues amicably and without
disruption.
During the year Tom Mackie and David Heath became respectively Group Managing
Director and Group Financial Director. On 1 July 2003, Tom Mackie was appointed
Chief Executive and I gave up my executive role, reverting to being Chairman.
I am pleased that Robert Davis joined the Board as non-executive director on 1
September 2003. His extensive management experience in international
engineering companies will be of great value to us. Moger Woolley, who was for
eight years Chairman of Brunel and subsequently non-executive director first of
Brunel then of Dickinson Legg Group plc, has decided to retire after the Annual
General Meeting. His advice and support has been of great value and I wish him
a long and happy retirement.
Barry Stevenson
Chairman
1 October 2003
Chief Executive's Review
Primary Tobacco Processing Equipment
Dickinson Legg Businesses
Following an exceptional performance in 2002, Dickinson Legg suffered from a low
order intake in the early months of the new financial year. Turnover was 18%
lower at #37.6 million and operating profit was 54% lower at #3.2 million before
exceptional charges as the comparative period benefited from the #14 million
Samsung contract. The sales mix changed from the previous year, the lower margin
installation sales representing a larger proportion of turnover. Low
manufacturing activity in the first half of the financial period resulted in
significant under recovery of overheads. Management restructured the business to
lower the cost base by reducing the headcount by some 15%, resulting in
annualised savings of #0.4 million. The benefits of this action and an
improvement in the order book resulted in a much stronger financial performance
in the second half of the year, as indicated in the interim statement.
The new Expanded Stem System (ESS) marketed exclusively under license from R J
Reynolds in the United States is generating a number of serious enquiries. Two
new orders valued in excess of #4 million were received during the year, one of
which was for an existing customer of the system. Four projects for the High
Expansion Drying (HXD) system, jointly developed with BAT, generated sales in
excess of #6 million to customers in Asia. The new high-speed cutters RC5 and
RC6 are being well received by the market with a number of units sold to the
multinational and independent tobacco processors.
In addition to the new products launched in the last few years, we continue to
focus our product development on enhancements to our existing product range,
often in response to feedback from our customers. A major exercise on our range
of silos was completed in the year improving serviceability and reducing cost.
Our spares and wear parts business - based in Andover, Hampshire and Richmond,
Virginia - performed well albeit volumes in the United States were marginally
lower than anticipated due to customers reducing their inventories. Several
cutters were refurbished for customers, which generated additional spares
volumes. As the population of the new RC5 and RC6 cutters grows, the demand for
spare parts will increase.
Our Indian Joint Venture, Dickinson Fowler, made excellent progress in the year,
meeting customers' quality and delivery requirements whilst increasing volumes
and profits. The low cost structure is improving the company's overall
competitive position and providing a vehicle for better access to the Asian
market.
Following several years of high investment by the major tobacco customers, there
has been a general slow down in the number and scale of projects, resulting in
an extremely competitive marketplace. Dickinson Legg's range of key processing
equipment continues to generate opportunities at a time when our customers'
capital expenditure is constrained.
Air Drying Equipment
Spooner Industries
Spooner Industries delivered a significant improvement in performance,
increasing turnover by 32% to #11.56 million and returning an operating profit
of #0.43 million, generating an operating margin of 3.7%. This achievement is
more remarkable given the flat markets in which the company has been competing
against predominantly Euro based competition when Sterling was particularly
strong.
Spooner has applied its expertise in forced air convection technology to expand
into other market sectors, supplying custom-designed process equipment. In
addition to its traditional markets in the paper and converting industries,
Spooner has established a position in the metals industry, in galvanising and
coil coating, and is developing a growing presence in the food industry, in
baking and cooling. Orders valued at #4.8 million were secured during the year
in the metals industry. New environmental standards are expected to lead to
higher investment in North America over the next two or three years where we
have recently secured a large order for coil coat ovens.
Spooner Industries has entered the current financial year with a record order
book. New opportunities are being explored in the non-wovens market sector,
which has been identified as a growth market. General activity in the paper
equipment market has been low, with the exception of China, and we do not expect
this situation to change in the near future. However, the technically advanced
Spooner ModuleDryer, developed in partnership with Voith Paper, is now regarded
as a proven product and is expected to provide an increased number of
opportunities. The traditional market for the supply of film and foil converting
lines in Europe is in a period of consolidation and it is still uncertain as to
what effect this will have.
Tom Mackie
Chief Executive
1 October 2003
Financial Review
Introduction
The accounting policies of our former holding company, Brunel Holdings, have
been adopted and applied throughout the periods covered by these financial
statements.
Operating Results
Profit on ordinary activities before taxation and exceptionals for the period
was #3.0 million against #6.39 million in the previous year, a year which
included the benefits of Dickinson Legg Limited's exceptional #14 million order
from Samsung. Earnings before interest, tax, depreciation and amortisation were
#3.71 million (2002: #7.31 million). The tobacco processing equipment businesses
contribution to group turnover was 77% (2002: 82%) and it contributed the
majority of operating profit before exceptional items. The air-drying business,
Spooner, saw significant growth, with turnover increasing by 32% and an improved
#0.43 million (2002: #nil) operating profit.
Exceptional Items
As a result of the demerger and listing of the Group on the Alternative
Investment Market, the Group incurred advisors and printing costs amounting to
#0.14 million and management charges from Brunel Holdings amounting to #0.23
million. The Group also incurred costs of #0.06 million on the selection and
establishment of the new pension arrangements and a redundancy program in
Dickinson Legg Limited resulted in exceptional costs of #0.34 million.
Interest
Interest payable was 53% lower than that incurred in 2002, due primarily to the
#2.35 million cash generated by the businesses combined with the fall in bank
base rates. Interest cover is unchanged at 13.7 times.
Taxation
The effective rate of tax for the year is 14.4% (2002: 8.5%), which amounts to
#0.32 million (2002: #0.49 million). The increase in the effective rate of tax
is due to writing back less Advance Corporation Tax, being #0.36 million (2002:
#0.60 million). At 30 June 2003, the Group has #0.12 million of unrecognised
ACT, which may reduce tax in future years.
Dividends
The Board is recommending the payment of a 1.5p final dividend. In order to
maximise the utilisation of the Group's pool of Advance Corporation Tax, the
dividend will be paid on 1 July 2004 to shareholders on the register on 28 May
2004.
Earnings Per Share
The basic earnings per share calculated in accordance with FRS 14 were 5.2p
(2002: 14.6p). The earnings per share before exceptional items and allowing for
the dilutive effect of the share options were 6.8p (2002: 16.2p). See note 4 for
further detail.
Capital Expenditure
Capital expenditure totalled #0.16 million in the year (2002: #0.25 million),
the majority of which was spent on improvements to the Group's information
systems.
Research and Development
#0.28 million (2002: #0.31 million) was predominantly spent on the on-going
development of existing product lines. These developments were written off
through the profit and loss account.
Pensions
Following the demerger from Brunel Holdings plc, the employees of Dickinson Legg
Limited and Spooner Industries Limited who were participants of the Brunel
Holdings plc defined benefit pension scheme continued to participate in that
scheme until 13 June 2003. From 14 June 2003, those employees became
participants of a defined contribution scheme, established by the Group for its
eligible UK employees.
Financing
There has been a marked improvement from the net current liability position of
#0.72 million last year to #2.09 million net current asset position as at 30
June 2003, principally due to a positive cash in-flow for the year of #2.35
million. Some #1.96 million of this has been achieved from normal trading
activities and the remaining net inflow of #0.39m gained as a result of the
demerger. Consequently the net debt of the Group has been reduced from #3.68
million to #0.40 million at 30 June 2003 representing 8% of net assets (2002:
108%).
Following the demerger the group retained its banking facilities with Lloyds
TSB. These are on demand facilities amounting to #12.70 million in aggregate and
are not subject to financial covenants.
Share Capital and Reserves
The merger reserves have arisen from the demerger from Brunel Holdings plc and
an internal reorganisation prior to demerger (as described in the basis of
preparation note below). Other reserves of #40.20 million and the #87.44 million
deficit on the profit and loss account are derived from the inclusion of a '
non-trading' subsidiary company, Thomas Robinson Group Limited. The negative
profit and loss reserves of the Group do not prevent Dickinson Legg Group plc
from paying dividends to shareholders as the Company has positive distributable
reserves.
Treasury Activities
The Group has adopted the policies applied by the former holding company, Brunel
Holdings plc, and the Group uses financial instruments to manage risk. The
Group does not engage in speculative activity. Treasury activities are reported
on a monthly basis to the Board and are subject to review by internal audit.
The principal financial risks faced by the Group are foreign exchange and to a
much lesser extent interest rate risk. The Group operates a risk averse policy
to foreign exchange exposures. Contract and trading transactions in non-local
currencies are hedged (using foreign currency forward contracts) as soon as
there is reasonable certainty in the amounts and timings.
Preliminary Announcement
The financial information contained in this preliminary announcement does not
constitute full statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
David Heath
Group Financial Director
1 October 2003
Dickinson Legg Group plc
GROUP PROFIT AND LOSS ACCOUNT
For the year ended 30 June 2003
2003 2002
Note Before Before
Exceptional Exceptional Exceptional Exceptional
Items Items Total Items Items Total
#000 #000 #000 #000 #000 #000
Turnover
Turnover (including share of joint venture) 49,714 - 49,714 55,257 - 55,257
- continuing
Less share of turnover of joint venture - (529) - (529) (1,101) - (1,101)
continuing
Group turnover 1 49,185 - 49,185 54,156 - 54,156
Cost of Sales (35,108) - (35,108) (35,689) (587) (36,276)
Gross Profit 14,077 - 14,077 18,467 (587) 17,880
Distribution costs (7,319) - (7,319) (7,844) - (7,844)
Administration expenses 2 (3,790) (634) (4,424) (4,092) - (4,092)
Other operating income 117 - 117 163 - 163
Group operating profit - continuing 3,085 (634) 2,451 6,694 (587) 6,107
Share of operating profit in joint venture - 129 - 129 73 - 73
continuing
Total operating profit: Group & share of 1&2 3,214 (634) 2,580 6,767 (587) 6,180
joint venture
Exceptional items
Group demerger and formation costs 2 - (144) (144) - - -
Profit on ordinary activities before 3,214 (778) 2,436 6,767 (587) 6,180
interest
Interest receivable and similar income 24 - 24 123 - 123
Interest payable and similar charges (236) - (236) (502) - (502)
Profit on ordinary activities before 3,002 (778) 2,224 6,388 (587) 5,801
taxation
Taxation on profit on ordinary activities (510) 190 (320) (494) - (494)
Profit for the financial year 2,492 (588) 1,904 5,894 (587) 5,307
Dividends 3 (14,963) - (14,963) (289) - (289)
Retained (loss)/profit for the financial 5 (12,471) (588) (13,059) 5,605 (587) 5,018
year transferred (from)/to reserves
Earnings per 20p share: Basic 4 5.2 p 14.6 p
Diluted 4 5.2 p 14.6 p
Diluted adjusted basis 4 6.8 p 16.2 p
Dickinson Legg Group plc
GROUP BALANCE SHEET
as at 30 June 2003
2003 2003 2002 2002
Note #000 #000 #000 #000
Fixed assets
Intangible assets 3,529 3,775
Tangible assets 1,132 1,377
Interest in joint venture
- share of gross assets 825 728
- share of gross liabilities (340) (405)
485 323
5,146 5,475
Current assets
Stocks 1,340 1,976
Debtors - due less than one year 17,807 14,809
- due after one year - 1,402
Cash at bank and in hand 283 103
19,430 18,290
Current liabilities
Creditors - amounts falling due (17,343) (19,013)
within one year
Net current assets / (liabilities) 2,087 (723)
Total assets less current liabilities 7,233 4,752
Creditors - amounts falling due after more than (545) (13)
one year
Provisions for liabilities and charges (1,420) (1,323)
Net assets 1 5,268 3,416
Capital and reserves
Called up share capital 5 7,271 -
Merger reserve 5 45,234 -
Other reserves 5 40,204 -
Profit and loss account 5 (87,441) -
Owner's net investment 5 - 3,416
Shareholders' funds - equity 5 5,268 3,416
Dickinson Legg Group plc
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 June 2003
2003 2002
#000 #000
Profit for the financial year 1,904 5,307
Currency translation differences on foreign currency net investments (36) 34
Total recognised gains and losses in the year 1,868 5,341
There is no difference between the reported profits of the Company and the
profits on an historical cost basis
Dickinson Legg Group plc
GROUP CASH FLOW STATEMENT
for the year ended 30 June 2003
2003 2002
#000 #000 #000 #000
Net cash inflow from operating activities 3,636 6,545
Dividends received from joint venture 85 -
Returns on investments and servicing of finance
Interest received 3 110
Interest paid (210) (477)
Interest element of finance lease rental (8) (25)
payments
Net cash outflow from returns on investments and
servicing of finance (215) (392)
Taxation (400) (279)
Capital expenditure
Development costs incurred - (193)
Purchase of tangible fixed assets (158) (245)
(158) (438)
Equity dividends paid pre-demerger (see note 3) (1,679) (289)
Net cash inflow before use of liquid resources and
financing 1,269 5,147
Management of liquid resources
Disposal of current asset investments 1,500 -
Financing
Group demerger and formation costs (144) -
Increase in Brunel Holdings plc invested 708 288
capital
Capital element of finance lease rental (99) (141)
payments
Reduction in bank loans and loan notes (883) (7)
(418) 140
Increase in cash 2,351 5,287
NOTES
1. Segmental reporting
By business segment: Operating Operating Net
profit/(loss) profit/(loss) assets/(liabilities)
Turnover before exceptional after exceptional
items items
2003 2002 2003 2002 2003 2002 2003 2002
#000 #000 #000 #000 #000 #000 #000 #000
Tobacco processing machinery
Group 37,623 45,417 3,176 6,874 2,836 6,287 5,876 6,564
Joint venture 529 1,101 129 73 129 73 485 323
Air drying equipment 11,562 8,739 430 1 430 1 (208) 180
Other activities - - (521) (181) (815) (181) (485) 33
Continuing operations 49,714 55,257 3,214 6,767 2,580 6,180 5,668 7,100
Group 49,185 54,156 3,085 6,694 2,451 6,107 5,183 6,777
Joint venture 529 1,101 129 73 129 73 485 323
49,714 55,257 3,214 6,767 2,580 6,180 5,668 7,100
Net debt - external (400) (3,684)
5,268 3,416
Other activities are predominantly head office costs. In 2002 the head office
costs of the former holding company were recharged to its subsidiary companies
and so are reflected in the results of the trading business segments.
Geographical (by origin): Operating Operating Net
profit/(loss)before profit/(loss) assets/
Turnover exceptional items after exceptional (liabilities)
items
2003 2002 2003 2002 2003 2002 2003 2002
#000 #000 #000 #000 #000 #000 #000 #000
United Kingdom (trading 47,395 50,721 3,249 6,321 2,909 5,734 5,304 6,148
activities)
United Kingdom (other activities) - - (521) (181) (815) (181) (485) 33
United States of America 1,790 3,435 357 554 357 554 364 596
Rest of the World 529 1,101 129 73 129 73 485 323
49,714 55,257 3,214 6,767 2,580 6,180 5,668 7,100
Group 49,185 54,156 3,085 6,694 2,451 6,107 5,183 6,777
Joint venture 529 1,101 129 73 129 73 485 323
49,714 55,257 3,214 6,767 2,580 6,180 5,668 7,100
Net debt - external (400) (3,684)
5,268 3,416
Geographical (by destination): Turnover
2003 2002
#000 #000
United Kingdom 2,912 4,654
United States of America 4,547 5,661
Europe 16,090 7,314
Rest of the World 26,215 37,628
Continuing operations 49,764 55,257
Group 49,185 54,156
Joint venture 529 1,101
49,714 55,257
2. Exceptional items
Notes 2003 2002
#000 #000
Group demerger and formation costs i (232) -
Restructuring costs ii (340) -
Pensions advice iii (62) -
Write off development costs - (587)
Exceptional items within operating (634) (587)
profit
Group demerger and formation costs i (144) -
Total exceptional items (778) (587)
i Included in these sums are the costs borne by the Group for
listing on AIM. The costs included in arriving at operating profit represent a
recharge from the former parent company, Brunel Holdings plc, for the management
time expended in negotiating the demerger. The costs included after operating
profit include only the direct costs related to the admission of the group on
AIM, which include advisors and print costs.
ii These costs relate to redundancy programmes within the tobacco
processing equipment business (not related to the demerger).
iii These costs relate to the selection and start up costs of the
Group's defined contribution pension scheme.
3. Dividends
2003 2002
#000 #000
Dividends prior to demerger:
Amounts paid to former holding company, Brunel Holdings
plc in the period prior to the demerger, and therefore do
not represent dividends paid by Dickinson Legg Group plc
The dividend was settled as follows:
- waived inter-company loans 12,739 -
- cash payment 1,679 289
14,418 289
Dividends following demerger:
Ordinary shares:
Final proposed (to be paid on 1 July 2004) at 1.5 pence 545 -
per share
14,963 289
4. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue. For the period prior to the admission of Dickinson Legg Group plc on
AIM, the weighted average number of shares used in the calculation is the number
of shares in issue at Admission.
Weighted Total 2003 Weighted Total 2002
average Earnings average Earnings
Earnings shares per share Earnings shares per share
#000 Number (pence) #000 Number (pence)
('000s) ('000s)
Basic earnings per share 1,904 36,355 5.2 5,307 36,355 14.6
Add : Dilutive effect of share options - 162 - - - -
Diluted earnings per share 1,904 36,517 5.2 5,307 36,355 14.6
Add : Exceptional costs 778 - 2.1 587 - 1.6
Less : Tax effect of the exceptional (190) - (0.5) - - -
costs
Adjusted diluted earnings per share 2,492 36,517 6.8 5,894 36,355 16.2
5. Reconciliation of movement in shareholders' funds
Called up Merger Other Profit & Owners net Total
share reserves reserves loss investment
capital account
#000 #000 #000 #000 #000 #000
Group
As at 1 July 2002 - - - - 3,416 3,416
Retained loss before demerger - - - - (14,480) (14,480)
Funding flows with Brunel Holdings - - - - 12,739 12,739
Currency translation differences pre-demerger - - - - (41) (41)
Transfer on demerger 7,271 45,234 40,204 (88,867) (1,634) 2,208
Retained profit after demerger - - - 1,421 - 1,421
Currency translation differences since - - - 5 - 5
demerger
As at 30 June 2003 7,271 45,234 40,204 (87,441) - 5,268
The merger reserve arises in part on the acquisition of Dickinson Legg Limited,
Spooner Industries Limited, Thomas Robinson Group Limited and Brunel America
Inc. in April 2002 and also on the acquisition of Legg Limited by Dickinson Legg
Group plc in December 2002.
6. Contingent liabilities
The Group has the following contingent liabilities, which have not been provided
in the balance sheet since no actual liability is expected to arise:
Bonds and Guarantees
The Group had at 30 June 2003 outstanding bank and insurance guarantees in
respect of advance payments, performance and other bonds totaling #4,784,000
(2002: #4,309,000).
7. Basis of preparation
Dickinson Legg Group plc was incorporated on 26 September 2002 as Temple plc and
changed its name to Dickinson Legg Group plc on 4 October 2002. On 16 December
2002, its ordinary shares were listed on the Alternative Investment Market ("AIM
") following a group reorganisation undertaken by Brunel Holdings plc ("Brunel")
to demerge its trading businesses.
With effect from 1 April 2002 Legg Limited ("Legg"), a wholly owned subsidiary
of Brunel, acquired the entire issued share capital of Dickinson Legg Limited ('
'DLL'') and Spooner Industries Limited (''SIL'') from Tod Limited (''Tod''), a
wholly owned subsidiary of Brunel, for #21,500,000, and the entire issued share
capital of Thomas Robinson Group Limited (''TRG'') from Brunel for #1. On 23
April 2002 Legg Limited acquired the entire issued shares of Brunel America Inc.
(''BAI'') from Brunel for $1,500,000. As at 30 June 2002, the consideration
payable to Tod and Brunel for these transactions was still outstanding on
intercompany accounts.
Pursuant to an agreement concerning the reorganisation:
* Legg paid Tod #21,500,000 of cash in settlement of the purchase
consideration for DLL and SIL. This payment was funded by an intercompany
loan from Brunel; and
* Brunel waived all amounts owed to it by Legg, including the #21,500,000
lent to Legg
To fund the payment to Tod, the $1,500,000 consideration payable for the
purchase of BAI and the #1 consideration payable for TRG.
On 13 December 2002 Dickinson Legg Group plc acquired from Brunel 100% of the
ordinary share capital of Legg. The consideration for this transaction of
#24,500,000 was in the form of ordinary share capital of Dickinson Legg Group
plc ("Group") issued to the shareholders of Brunel. Accordingly, this
transaction has been accounted for using merger accounting principles. As part
of this transaction, Brunel contributed listed shares to Dickinson Legg Group
plc to the value of #1,500,000 as settlement of the amount owed by Brunel to
Spooner Industries Limited.
Viewed in isolation, the legal form of the transactions by which Legg acquired
DLL, SIL, TRG and BAI is that of acquisitions for cash rather than shares. On
this basis, the transactions do not meet all the conditions for merger
accounting set out in Schedule 4A to the Companies Act 1985, and Financial
Reporting Standard 6 (''FRS6''), which would require Legg to use acquisition
accounting, rather than merger accounting, for these transactions.
If acquisition accounting were used to account for these transactions the
separable net assets of DLL, SIL, TRG and BAI would be recorded at their fair
values at the date of their acquisitions by Legg, substantial goodwill and
goodwill amortisation charges would arise and only the post acquisition results
would be reflected in the financial statements of the Dickinson Legg Group. The
directors consider that to apply acquisition accounting would fail to give a
true and fair view of the state of affairs and results of the Dickinson Legg
Group. This is due to the fact that the series of transactions is a group
reconstruction rather than an acquisition since the ultimate shareholders of
Legg are the same as those of Brunel and, in substance, no consideration is
given by Legg.
Accordingly, the directors have accounted for Legg's acquisitions of DLL, SIL,
TRG and BAI using merger accounting. The directors consider that it is not
practicable to quantify the effects of this departure from the Companies Act
1985 and FRS6. These accounts have been prepared as if the Dickinson Legg Group
had been demerged from Brunel Holdings PLC prior to 1 July 2001. This presents
information, which better reflects the ongoing operations of the Group.
8. Annual Report and Accounts & AGM
The Annual Report and Accounts will be posted to shareholders shortly and will
be available from the Company's Registered office at Moorside Road, Winchester,
Hampshire SO23 7SS. The Company's AGM will be held on 25 November 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
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