TIDMPTD
RNS Number : 7372U
Pittards PLC
02 April 2019
2 April 2019
PITTARDS PLC
("Pittards" or "the Group")
Full Year Results for the year ended 31 December 2018
Pittards plc, the specialist producer of technically advanced
leather and luxury goods for retailers, manufacturers and
distributors today announces its results for the year ended 31
December 2018.
Year ended 31 December 2018:
-- Revenue GBP28.5m (2017: GBP30.3m)
-- Profit before tax GBP0.4m (2017: GBP0.4m)
-- EBITDA GBP1.8m (2017: GBP1.6m)
-- Net assets GBP18.5m (2017: GBP19.8m)
-- Net debt GBP7.7m (2017: GBP8.0m)
-- New foothold in automotive and airline markets
-- Progression of footwear manufacturing in Ethiopia.
Stephen Yapp, Chairman commented: "Good progress has already
been made in implementing the Group's stated objectives. Whilst the
Group must be mindful of the unpredictable global economic
situation, in several respects the Group has entered 2019 well
positioned for growth with clear priorities, a stable financial
base with available banking facility headroom of GBP5.5m and a
positive outlook about our near-term opportunities."
For further information, please contact:
Pittards plc www.pittards.com
Stephen Yapp, Chairman
Reg Hankey, CEO
Richard Briere, CFO +44 (0) 1935 474 321
WH Ireland Limited www.whirelandcb.com
Mike Coe, Chris Savidge +44 (0) 117 945 3470
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those regulations.
CHAIRMAN'S STATEMENT
for the year ended 31 December 2018
"It has been a year of solid achievement where the Group has
delivered stable results, established the pillars for growth and
made strategically important inroads."
At the beginning of 2018, the Group established its strategic
vision for the business and unveiled its priorities; to deliver an
excellent service to its core customers whilst targeting the
interiors and performance footwear markets. This will create a more
balanced business and product portfolio that builds upon the
strengths of its customer base, expertise in leather innovation and
focuses the business on areas which will most enhance financial
performance. Further details of current opportunities and the
strategically important progress made are outlined by the CEO, Reg
Hankey, in his review.
Throughout the year, the number of global uncertainties and
challenges has not reduced, and it is against this backdrop that
the business delivered results for 2018 in line with market
expectations. To achieve this in a year of transition and
investment to strengthen its people, technology and manufacturing
capabilities, reflects the quality and hard work of the staff
throughout the business.
As previously announced, Matthew O'Rourke left the company at
the end of the year after two and a half years of service and we
wish him well for the future. Subsequently, Richard Briere was
welcomed to the Board as CFO on 19 March 2019, bringing with him
experience from both manufacturing and distribution industries.
Good progress has already been made in implementing the Group's
stated objectives. Whilst the Group must be mindful of the
unpredictable global economic situation, in several respects the
Group has entered 2019 well positioned for growth, with clear
priorities, a stable financial base with available headroom of
GBP5.5m, and a positive outlook about its near-term
opportunities.
The Group's optimism for the future is supported by new business
opportunities that are now beyond the bulk sampling stage, with new
customers in both its existing and target markets.
CHIEF EXECUTIVE's STATEMENT
for the year ended 31 December 2018
2018 was a year of strategic progress and steady financial
performance. The Group has had a productive year supporting its
existing customer base, mainly focused upon balance sheet
management and progressing its pipeline of innovative products to
new markets.
Highlights - Year ended 31 December 2018:
-- Revenue GBP28.5m (2017: GBP30.3m)
-- Profit before tax GBP0.4m (2017: GBP0.4m)
-- EBITDA GBP1.8m, (2017: GBP1.6m)
-- Net assets GBP18.5m (2017: GBP19.8m)
-- Net debt GBP7.7m (2017: GBP8.0m)
-- New foothold in automotive and airline markets
-- Progression of footwear manufacturing in Ethiopia.
Financial review
Despite reduced revenue at GBP28.5m (2017: GBP30.3m), the Group
has improved gross profit to GBP7.2m (2017: GBP7.1m).
The global economic climate was subdued during 2018 with overall
weaker demand. In particular, demand for shoe leather was lower
reflecting global trends in this market. The Group remained focused
on the gross margin where lower raw material prices were
favourable, improving gross margin to 25% (2017: 23%).
EBITDA increased to GBP1.8m (2017: GBP1.6m) resulting in a
profit before tax of GBP0.4m (2017: GBP0.4m). Net assets decreased
to GBP18.5m (2017: GBP19.8m). Net debt was lower at GBP7.7m (2017:
GBP8.0m). The Group's banking facilities have been renewed and give
headroom of GBP5.5m, adequate for the Group's medium-term growth
objectives.
The Group has taken the prudent view in line with IAS 12 'Income
Taxes' to eliminate the deferred tax asset of GBP1.9m in the year.
This has no effect on the operating performance, cash, debt or the
Group's outlook, which remains unchanged. This now leaves the
Group's net asset value per share fully covered by tangible assets
at 133.59p (2017: 142.30p).
The tax charge for the year of GBP2.3m includes GBP1.9m relating
to a deferred tax charge which was written down to meet the IAS12
requirement and GBP0.3m relating to Ethiopian tax on profits
relating to prior year; both are one time in nature. The Group
expects a more normalised split of profits between the UK and
Ethiopia in 2019 and retains taxable losses in the UK of GBP11.2m
to utilise in future periods.
Overall inventory levels have increased to GBP16.3m (2017:
GBP15.3m), with the increase in raw materials of GBP2.4m being
partially offset by a GBP1.6m reduction in work in progress and
finished goods. The increase in raw material stocks is largely a
result of two factors which fall outside the Group's core stock
holding; these factors being the strategic purchase of raw
materials, mainly chemicals from Europe ahead of Brexit, along with
additional stock items to support the Group's new shoe production
line. The Group continues to make progress in reducing the levels
of some of the more difficult stocks, in particular sheepskins, and
this continues to remain a key focus.
One of the Group's key financial measures is Return on Capital
Employed. This has increased in 2018 to 5.2% (2017: 4.1%) and the
Group's near-term objective is to deliver returns above its
estimated Weighted Average Cost of Capital of approximately 7%.
Market view
The overall global economic climate remains complex. There
continues to be speculation around the impact of Brexit and general
trading conditions in Europe. The economic implications resulting
from the impact of Brexit are largely beyond the control of the
Group, however, the Group will continue to review the impact of
Brexit with key suppliers, stakeholders and professional advisors.
The uncertainty regarding the trading relationship between the US
and China has a greater impact on the global leather industry.
As a predominantly global export business, the Group's trade is
clearly affected by these macro-economic trends. Such a period of
uncertainty also presents opportunities for the Company as pricing
pressures on raw materials are subdued and more customers are
seeking innovation, supply chain integrity and trusted
relationships as brands seek to capture the millennial customer,
more than 70% of whom would be happy to pay extra for sustainable
products. 23.3bn square feet of leather is sold globally of which
4% is glove leather, 47% is footwear leather and 27% is automotive
and furniture leather.
The Group anticipates these trends will continue into 2019.
Operations
During the year, the Group has continued to build on its
capacity and capabilities to both meet the demands of its new
markets and deliver against its objectives. This has seen a
targeted capital investment, a devolved management structure, with
two divisions - the UK and Ethiopia - with their own operational
and financial accountability and the strengthening of the senior
management team through the recruitment of a UK Sales Director and
a Technical Director, who are based at the UK operations in
Yeovil.
Strategic progress
Pittards remains one of the oldest manufacturers of high quality
and performance leathers with a diverse customer base of premium
brands across its core markets of shoe, gloving and leather goods.
Delivering on the expectations of the Group's core customers in
performance gloves and footwear, from both divisions, remains a key
focus and the Group will continue to enhance its offering to ensure
it meets their needs. Alongside this, and as already communicated,
the Group intends to leverage its heritage, competitive advantage
and expertise to broaden the business into new products and markets
to maximise its growth.
The Group's strategy recognises that most of its current, core
customers operate in niche market sectors and the Group has long
established excellent relationships within these sectors. The
Group's established customer base is very important for its
long-term success, but its growth opportunities are limited in
these niche markets. In order to build medium and long-term growth
into the business, the Group needs to develop into new market
sectors. The Group's growth strategy for the UK business is
predominantly targeted upon increasing leather sales, both to the
whole hide interiors markets, embracing automotive, airline and
others, together with a new emphasis upon larger shoe leather
brands.
In the UK, the business has now started to supply the automotive
and airline markets with initial production beyond the sampling
stage. Inevitably, the business will need to build on this
foundation into higher volumes, but the Group now believes it has a
clearly established foothold in this new market sector where
leather use is forecast to continue to grow at a Compound Annual
Growth Rate of 6.5%, to a value of $46.3 billion by 2022. The
investment of a whole-hide shaving machine means the Group's whole
hide production volume capabilities are secure.
The Group's commitment to remain at the forefront of leather
innovation will help the business deliver against customer
requirements and is evidenced by the progression and increase of
its pipeline for other potential customers in the UK.
Additionally, in the UK, the Company is sampling new products
into some new large shoe brands, although the global market is weak
in this area, the Company does anticipate making further progress
in the near-term.
For the Ethiopian business, the strategy is to focus on the
development of finished product manufacture, in particular shoes
and gloves. The division has increased its manufacturing
capabilities for footwear by investing in people and machinery.
Consequently, the division has expanded its product offering and
volumes and become established as a reliable resource for these
finished products. This strategically significant development
further diversifies the business model with customers including
Soul of Africa, Vivo Barefoot, and in 2019 another niche brand is
planned.
In addition to the investment in shoe machinery at Pittards
Products Manufacturing (PPM), the Group has also added new tanning
drums and fleshing machines to Ethiopia Tannery Share Company
(ETSC) to upgrade its capacity. Together with the purchase of the
whole-hide shaving machine, the Group has invested GBP0.6m this
year. The Group is continuing to invest in machinery in the first
half of 2019, with the purchase of a whole-hide splitting machine,
two measuring machines and a wet blue shaving machine underway for
ETSC.
Summary
It has taken time to build the platform to implement the Group's
vision for the business in parallel with servicing its core
customers. This was a year of progress and whilst there is much
more ahead of the Group, it has started to demonstrate its ability
to differentiate its customer-focused model to provide a more
balanced portfolio, deliver growth and remain a world class
provider of leather and finished leather products.
CONSOLIDATED INCOME STATEMENT
for the YEARED 31 DECEMBER 2018
2018 2017
Continuing operations Note GBP'000 GBP'000
Revenue 28,469 30,287
Cost of sales (21,318) (23,194)
Gross profit 7,151 7,093
Distribution costs (2,209) (2,443)
Administrative expenses (3,950) (3,716)
--------- ---------
Profit from operations before finance costs 992 934
Finance costs (647) (521)
Finance income 9 -
--------- ---------
Profit before taxation 354 413
Taxation (2,283) 84
--------- ---------
(Loss)/profit for the year after taxation (1,929) 497
--------- ---------
Earnings per share
--------- ---------
Basic 2 (13.91p) 3.58p
Diluted 2 (13.76p) 3.49p
--------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 DECEMBER 2018
2018 2017
GBP'000 GBP'000
(Loss)/profit for the year after taxation (1,929) 497
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Revaluation of land and buildings 219 171
Revaluation of land and buildings - unrealised exchange gain/(loss) 49 (625)
-------- --------
268 (454)
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain/(loss) on translation of overseas subsidiaries 389 (1,655)
Fair value losses on foreign currency cash flow hedges (52) -
-------- --------
337 (1,655)
Other comprehensive income/(loss) 605 (2,109)
-------- --------
Total comprehensive loss for the year (1,324) (1,612)
CONSOLIDATED statement of Changes in equity
for the year ended 31 DECEMBER 2018
Shares Share Cash
held based flow
Share Share Capital by payment hedge Translation Revaluation Retained Total
Capital premium reserve ESOP reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
At 1 January 2017 6,944 2,984 6,475 (495) 29 - (1,865) 2,267 4,935 21,274
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Comprehensive
income/(expense)
for the year:
Profit for the
year after
taxation - - - - - - - - 497 497
Other
comprehensive
income/(loss):
Gain on
revaluation of
buildings - - - - - - - 171 - 171
Unrealised
exchange loss on
translation of
foreign
subsidiaries - - - - - - (1,655) (625) - (2,280)
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Total other
comprehensive
loss - - - - - - (1,655) (454) - (2,109)
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Total
comprehensive
(loss)/income for
the year - - - - - - (1,655) (454) 497 (1,612)
Share-based
payment expense - - - - 102 - - - - 102
At I January 2018
(as previously
published) 6,944 2,984 6,475 (495) 131 - (3,520) 1,813 5,432 19,764
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Impact of the
adoption of new
standards - - - - - - - - (26) (26)
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
At 1 January 2018
(restated) 6,944 2,984 6,475 (495) 131 - (3,520) 1,813 5,406 19,738
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Comprehensive
income for the
year:
Loss for the year
after taxation - - - - - - - - (1,929) (1,929)
Other
comprehensive
income/(expense):
Gain on
revaluation of
buildings - - - - - - - 219 - 219
Unrealised
exchange gain on
translation of
foreign
subsidiaries - - - - - - 389 49 - 438
Fair value losses
on foreign
currency cash
flow hedges - - - - - (52) - - - (52)
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Total other
comprehensive
income - - - - - (52) 389 268 - 605
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Total
comprehensive
income/(loss) for
the year - - - - - (52) 389 268 (1,929) (1,324)
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
Share-based
payment expense - - - - 72 - - - 43 115
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
At 31 December
2018 6,944 2,984 6,475 (495) 203 (52) (3,131) 2,081 3,520 18,529
--------- --------- --------- -------- --------- -------- ------------- ------------- ---------- --------
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2018
2018 2017
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 11,006 10,778
Intangible assets 147 209
Deferred income tax asset - 1,901
--------- ---------
Total non-current assets 11,153 12,888
Current assets
Inventories 16,306 15,332
Trade and other receivables 3,306 3,991
Cash and cash equivalents 598 327
Current income tax recoverable - 41
--------- ---------
Total current assets 20,210 19,691
--------- ---------
Total assets 31,363 32,579
--------- ---------
Liabilities
Current liabilities
Trade and other payables (4,350) (4,358)
Interest bearing loans, borrowings and overdrafts (7,756) (5,641)
--------- ---------
Total current liabilities (12,106) (9,999)
--------- ---------
Non-current liabilities
Deferred income tax liability (162) (140)
Interest bearing loans, borrowings and overdrafts (566) (2,676)
--------- ---------
Total non-current liabilities (728) (2,816)
--------- ---------
Total liabilities (12,834) (12,815)
--------- ---------
Net assets 18,529 19,764
--------- ---------
Equity
Share capital 6,944 6,944
Share premium 2,984 2,984
Capital reserve 6,475 6,475
Shares held by ESOP (495) (495)
Share based payment reserve 203 131
Cash flow hedge reserve (52) -
Translation reserve (3,131) (3,520)
Revaluation reserve 2,081 1,813
Retained earnings 3,520 5,432
--------- ---------
Total equity 18,529 19,764
--------- ---------
STATEMENT of cash flows
for the year ended 31 DECEMBER 2018
2018 2017
Note GBP'000 GBP'000
Cash flows from operating activities
Cash generated from/(used in) operations 3 1,583 2,299
Tax paid (11) (48)
Interest paid (634) (516)
-------- --------
Net cash generated from operating activities 938 1,735
-------- --------
Cash flows from investing activities
Purchases of property, plant and equipment (588) (696)
Purchases of intangible assets - (2)
Net cash used in investing activities (588) (698)
-------- --------
Cash flows from financing activities
Proceeds from borrowings - 1,096
Repayment of bank loans (1,304) (1,072)
New finance lease obligations 41 -
Repayment of obligations under finance leases (85) (84)
-------- --------
Net cash used in financing activities (1,348) (60)
-------- --------
(Decrease)/increase in cash and cash equivalents (998) 977
-------- --------
Cash and cash equivalents at beginning of the year (2,698) (3,738)
Exchange gains on cash and cash equivalents 1 63
-------- --------
Cash and cash equivalents at the end of the year (3,695) (2,698)
-------- --------
NOTES TO THE FINAnCIAL STATEMENTS for the year ended 31 DECEMBER
2018
1. Basis of preparation
The consolidated financial statements have been prepared on a
going concern basis and in accordance with International Financial
Reporting Standards ("IFRS") including International Accounting
Standards ("IAS") and IFRS Interpretations Committee ("IFRS IC")
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under accounting standards as
adopted for use in the EU.
The information in this preliminary statement has been extracted
from the audited financial statements for the years ended 31
December 2018 and 2017 and as such, does not constitute statutory
accounts within the meaning of s434 of the Companies Act 2006. A
full annual report for the year ended 31 December 2018 on which the
auditor has issued an unqualified audit report, has been delivered
to the Registrar of Companies. The Group's annual report for 2018,
on which the auditors have issued an unqualified audit report, will
be delivered to the Registrar of Companies in due course. No
statement has been made by the auditor under Section 498(2) or (3)
of the Companies Act 2006 in respect of either of these sets of
accounts.
The preliminary announcement was approved by the board of
directors and authorised for issue on 1 April 2019.
2. Earnings per ordinary share
2018 2017
GBP'000 GBP'000
Analysis of the profit in the year:
(Loss)/profit for the year (1,929) 497
--------- --------
Weighted average number of ordinary shares in issue (excluding the shares owned by Pittards
Employee Share Ownership Trust) '000s '000s
Basic 13,870 13,870
Diluted 14,023 14,224
--------- --------
Basic earnings per ordinary 50p share (13.91p) 3.58p
Diluted earnings per ordinary 50p share (13.76p) 3.49p
--------- --------
3. Cash generated from operations
2018 2017
GBP'000 GBP'000
Profit before taxation 354 413
Adjustments for:
Depreciation of property, plant and equipment 705 604
Amortisation 62 36
Bank and other interest charges 638 521
Share-based payment expense 115 102
Other non-cash items in Income Statement 194 (133)
-------- --------
Operating cash flows before movement in working capital 2,068 1,543
-------- --------
Movements in working capital (excluding exchange differences on consolidation):
Increase in inventories (710) (749)
Decrease/(increase) in receivables 792 (47)
(Decrease)/increase in payables (567) 1,552
-------- --------
Cash generated from operations 1,583 2,299
-------- --------
4. Taxation
In accordance with the requirements of IAS12, the directors
considered the potential utilisation of the deferred tax asset and
have taken a prudent view to derecognise the deferred tax asset of
GBP1.901m. This has no effect on the Group's operating performance,
cash, debt or the Group's outlook, which remains unchanged.
5. Additional information
Copies of the 2018 Annual Report will be posted to shareholders
in April and will be available on the company's website at
www.pittards.com. Further copies may be obtained by contacting the
Company Secretary at Pittards plc, Sherborne Road, Yeovil,
Somerset, BA21 5BA. The annual general meeting is to be held at the
registered office on 15 May 2019 at 12pm.
This information is provided by RNS, the news service of the
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END
FR EFLFBKZFXBBZ
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