TIDMTND
RNS Number : 6315R
Tandem Group PLC
04 March 2019
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 2018 which are due to be announced in April 2019.
Trading and operations
As previously reported, the first half of 2018 was characterised
by exceedingly poor weather in February and March, large overstocks
with a certain national retailer, other customers actively trying
to de-stock and the ongoing impact of the demise of Toys R Us. As a
result, revenue was nearly 30% behind the same period in 2017.
However, in the second half of 2018 the Group experienced
revenue growth of nearly 6% as it recovered from the poor start to
the year. This was despite a difficult economic backdrop and a
number of negative indicators both in the macro economy and
indicators specific to our sectors. As an example, the UK outdoor
toy market was reported to have declined by 17% in 2018.
Although there was a reduction in revenue of approximately 12%
to GBP32.5 million for the year ended 31 December 2018, the Group's
profit before tax for the year is expected to be only marginally
behind the prior year.
Revenue from the toys business was behind the prior year but
much less so than the reported overall market decline. The recovery
in revenue gathered greater momentum as the year progressed.
In licensed wheeled toy categories, our L.O.L Surprise! licence
was the standout performer during the year. In other licences, Paw
Patrol, Batman, Peppa Pig and Disney Princess made a solid
contribution.
In our own brands, Hedstrom continued to perform ahead of the
prior year and our new brand, U-Move performed strongly. Following
a challenging year in 2017 for Ben Sayers, revenue recovered in
2018 and was 15% ahead of the previous year.
For the first time in many years, MV Sports & Leisure
exhibited at the Nuremberg Toy Fair at the end of January 2019 with
positive feedback following the show. This was in addition to the
excellent response from our recent exhibition at the London Toy
Fair.
We were delighted with the progress and growth in turnover in
Independent Bicycle Dealers (IBD) of our Squish bicycle brand.
Sales continued to be more challenging for the Dawes and Claud
Butler brands. Falcon, Townsend and Elswick brands made a healthy
contribution to revenue from our national account customers.
Total revenue from the bicycle businesses saw a further
reduction for the year, although the second half of the year was
only slightly behind 2017. Our bicycle operations maintained
profitability during the year.
Revenue in our Expressco business reduced during the year,
principally due to a changing buying pattern from one customer in
the early part of the year. However, the second half performed
strongly with a double digit increase in revenue. Overall
profitability for this business for the year increased. Growth was
enhanced from newly introduced outdoor products combined with our
new 'At Home Comforts' indoor ranges.
Whilst we continue to strive for sales from our own websites we
cannot ignore the potential from third party sites and therefore
continued to take advantage of these sales platforms also.
We continued our drive to improve our gross margin by improving
supplier buying prices in the businesses for a number of our
products.
Over 600 new products were introduced across the Group during
the year which also helped to improve gross margin. These included
products for all the new licenced properties, an entirely new range
of IBD bicycles, and nearly 200 products launched in our direct to
consumer business.
Following a programme of discounting older models of bicycles in
2017, we were able to improve gross margin in 2018 with the launch
of our new range.
Group operating expenses reduced by nearly 6% in the year. We
were acutely aware of the need to control costs during a period of
reduced revenue.
We continued to manage our working capital position carefully
whilst generating cash and paying down debt. Following on from the
exceptionally low levels at the end of the year in 2017, stock also
remained well under control in 2018.
Outlook
The year has started very strongly for the Group, principally
driven by the MV Sports & Leisure business where the forward
order book is considerably ahead of the same time last year.
We have secured additional business with several national
retailers and expect to increase revenue, based on current
listings, with a number of others.
We are pleased to announce that we have now signed the agreement
with The Walt Disney Company to extend our portfolio of licenses
for 2019 and beyond. This will significantly expand our range to
incorporate their major properties, including Disney and Marvel.
This will now encompass highly successful entertainment and
consumer product franchises such as Frozen, Toy Story, Spider-Man,
Lion King, Disney Princess and Avengers.
Our lightweight children's bicycles range, Squish, saw strong
double digit revenue growth in the early part of 2019. We expect
this to continue as we implement our marketing plans to develop
brand recognition further.
The number of new products developed for 2019 in our direct to
consumer business is significant. Not only have we fully redesigned
and extended our gazebo range with higher specification components
and fabrics, we have developed new products in outdoor, leisure,
home, mobility and Christmas categories.
We are optimistic about the outlook for 2019. Whilst we are
mindful of macro-economic uncertainties, we expect to achieve
significant turnover growth and we continue to be extremely
confident in our ability 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
4 March 2019
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END
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