TIDMTND
RNS Number : 3126G
Tandem Group PLC
01 March 2018
Tandem Group plc
(the "Group")
TRADING UPDATE
Tandem Group plc (AIM: TND), designers, developers, distributors
and retailers of sports, leisure and mobility equipment, announces
a trading update ahead of its annual results for the year ended 31
December 2017 which are due to be announced in April 2018.
Trading and operations
Despite a small reduction in turnover of approximately 4% to
GBP36.8 million in the year ended 31 December 2017, the Group's net
profit for the year is expected to be significantly ahead of the
prior year.
Although the cost control measures taken to streamline bicycle
operations brought about an expected reduction in turnover, this
enabled a positive impact on profitability.
Toy sales were broadly flat compared to the prior year. However,
this was a strong result against a backdrop of a reported decline
in revenues in the UK outdoor toy market of 6% in 2017.
As anticipated, our direct to consumer operations continued to
show revenue growth.
There was a strong focus during the year to improve our gross
margin. Despite cost pressures, we were able to achieve better
supplier buying prices for a number of key products. Where this
could not be successfully achieved, products were re-sourced.
Additionally, in accordance with our ongoing product development
programmes, a considerable number of new products were introduced
across the Group during 2017.
Finally, there was a greater concentration on more profitable
product lines.
Group overheads reduced by approximately 3% for the year.
Following a review of the revised structure of the Group and the
degree to which operations across the Group are now integrated it
is not possible to accurately identify operating segments. However,
we are able to report on various operations of the Group as
follows.
In licensed categories, our Cars 3, PJ Masks and Batman wheeled
toy licences performed very strongly in the year. Other licences,
including Disney Princess and Trolls delivered a solid
performance.
In our own brands, Stunted delivered an exceptional year and
Hedstrom showed growth over the prior year.
However, it was a more challenging year for Ben Sayers with
revenue behind the prior year.
We previously reported that the US parent company of one of our
major customers, Toys R Us, had filed for Chapter 11 bankruptcy
protection in the US and Canada. We considered this course of
action concerning, and prudently decided that we would no longer
trade with them until the position was rectified. Subsequent to
this, the UK company entered administration on 28 February.
Consequently, although we have no outstanding debtors balance, this
has and will continue to have an adverse impact on revenue.
Although Claud Butler and Dawes bicycle sales to independent
cycle shops reduced, sales to corporate customers under the Falcon,
Townsend and Elswick brands grew. We continue to be particularly
encouraged by our Squish and British Eagle brands which both saw
increased turnover during the year.
As a result of the restructuring of our bicycle operations we
previously reported that we expected to save approximately GBP1.0
million of related overhead costs in 2017. We are pleased to report
that this was achieved.
Following these actions, our bicycle operations returned to
profitability in 2017.
In our direct to consumer operations revenue increased during
the year. Categories including gazebos, electric golf trolleys and
inflatable spas all showed growth. Our new range of indoor heating
products was also a success.
All direct to consumer websites were fully functional during the
year and there was continued automation and integration with our
larger online customers and their sales platforms.
A major achievement for the year was in stock control and
working capital management across the Group. A programme to
eliminate non-current product lines, particularly bicycles, before
the end of the year was put into place and delivered. This has
enabled us to enter 2018 with reduced stock holdings ready to
introduce 2018 models to the market.
As a result of these efforts, interest bearing debt reduced by
over 75% from GBP4.2 million at 31 December 2016 to approximately
GBP1.0 million at 31 December 2017.
Outlook
The start of 2018 has been more challenging for the Group.
However, we have secured many new licences including Hatchimals, Jo
Jo Siwa, LOL Surprise, Rusty Rivets, Super Wings, Nella the
Princess Knight and Jurassic World.
We expect a strong year from Kickmaster in light of the
forthcoming World Cup in Russia and we anticipate a better
performance from Ben Sayers following exciting new developments to
the product range for 2018.
We received excellent feedback again from our recent exhibition
at the London Toy Fair and our bicycle 2018 product launch show in
January.
Our product ranges for 2018 are extensive and varied whilst
maintaining a strong focus on our core values of quality and
value.
Nevertheless, we have some concerns about the levels of stock
some of our national retailer customers are carrying forward from
the prior year in both toys and outdoor product categories and we
expect this to have a negative impact on performance of the Group
in the first quarter of the year. Consequently, revenue to date and
our forward order book are currently behind the previous year.
We are pleased with the progress of our Squish lightweight
bicycle brand and have won new business with a significant retail
customer for 2018 and entered into an exclusive distribution
arrangement with a new partner covering the Republic of Ireland and
Northern Ireland.
Our own brand Pro Rider mobility scooter range has been fully
redesigned and will be launched at Naidex, Europe's most
comprehensive trade, professional and consumer event dedicated to
the independent living sector, where we will be exhibiting in
April.
During the course of the year we also expect to develop our
direct to consumer websites further and recruit in the areas of
product development and marketing in order to bring more new and
innovative products to market.
Our use of automated technology in our operations, logistics and
distribution will continue to be streamlined to enable an ever more
efficient process from customer order to despatch and delivery.
We are cautious about the outlook for the year ahead, but we
remain confident that we have the resources and personnel to
deliver profitability to our shareholders.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (MAR).
Enquiries:
Tandem Group plc
Steve Grant, Chief Executive
Jim Shears, Group Finance Director and Company Secretary
Telephone 0121 748 8075
Nominated Adviser
Cairn Financial Advisers LLP
Tony Rawlinson
James Caithie
Telephone 020 7213 0880
1 March 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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