RNS No 2763p
WORTHINGTON GROUP PLC
30 July 1999
Results for the Year Ended 31 March 1999
The Trading Statement made on 1 February 1999, triggered off a series of
reactions, resulting in my appointment as Chairman and simultaneously, I
reconstructed the Board in order to respond to the changed business environment
that prevails within the industry, and to carry through an action plan for the
financial restructuring of your Group.
The bank facilities were reorganised as part of the corporate plan. Interest
payable is far too high and is a drain on our resources, absorbing funds which
are needed for ongoing investment. The Board is committed to reducing gearing,
therefore, as quickly as asset sales will allow. Consequently, working capital
allocations are being scaled down through encashment of stocks, better debtor
control, and the sale of surplus land and buildings. To complete the degearing
plan, there will have to be disposals of some of the operating subsidiaries, and
the final outcome should be a much smaller Group, operating in niche markets. In
the meantime, we are reducing our exposure in certain areas, to eliminate any
potential loss making operations.
Thereafter, it will be the intention of the Board to make such acquisitions,
which will lead to a material diversification from our current activities and
provide a new core business, which can be the base for future growth, enjoying a
good quality of sustainable earnings, which in turn, will restore shareholder
value.
The Trading Statement on 1 February, referred to a review of the carrying value
of the Group's assets, which has now been completed, and has resulted in
exceptional write-offs and provisions, totalling #5.4m, compared to the estimate
of some #4m made at the time. These exceptional items refer principally to
assets held at March 1998, which might well have been written down in previous
years.
A further consequence of that review, revealed two fundamental errors in the
accounts, first in relation to a difference in the bank reconciliation and with
the debtor ledgers and, second a correction of the inappropriate basis of
absorption of overheads into stock, which produced an incorrect valuation.
These, and a change in the Group's accounting policy towards design and
development costs, amount to #5.03m, and the details are shown in the notes
accompanying the Financial Statements, as prior year adjustments. The
comparative figures for the previous years have accordingly been restated.
In addition to the above, fair value adjustments of #1.1m were made to the
Balance Sheet of Jerome Group plc, acquired in October 1998, and exceptional
reorganisation costs of #1m had to be incurred, which were not foreseen at the
time of the acquisition.
The corporation tax recoverable from the year ended 31 March 1998. amounts to
#1.05m, and there may be further amounts recoverable in respect of earlier
years. However, Accounting Standard SSAP15 requires that unrecovered ACT should
be written-off, if it cannot be recovered within one financial year and,
consequently, an amount of #606,000 has been written-off in this year's tax
charge.
In the circumstances the Board consider it prudent to omit a final dividend for
the year ended 31 March 1999.
Any analysis, therefore, of this year's results, must take into account these
significant adjustments, which will then give a better picture of the trading
performance of the Group, which at operating level, more or less broke even, in
what as a very difficult trading year. The performance of our subsidiaries was
mixed, yet there were sufficient encouraging signs to suggest that there is a
good nucleus of profitable operations.
Shareholders should be aware that the profile of our earnings will follow the
vagaries of the volatile textile cycle, and there is no distinctive advantage
that makes the operations immune to those cycles. In the last half of the
financial year, the retail trade suffered a setback, and the repercussions were
quickly passed back up the pipeline as confidence diminished. This caused severe
disruption, which affected our performance. Given the base cost structure of
many of our subsidiaries, we were not able to respond quickly, and this partly
accounts for unavoidable losses in the second half.
The cost base generally was far too high and steps have already been completed
to reduce the overhead structure significantly. The downsizing should result in
better efficiencies and, simultaneously, reduce the risk. The head office in
Willesden has been closed and moved to Shipley, West Yorkshire saving #500,000
annually. Further ongoing cost reduction programmes are a high priority, as the
industry will continue to be reshaped in years to come as a result of
accelerating structural changes through the globalisation of production, the
increasing trend for outsourcing abroad in low cost countries, and the ever
present threat of disruptive imported competition, particularly when sterling
appreciates, as it has done in recent months.
A large proportion of our business is conducted with Marks & Spencer's
suppliers, who have not enjoyed the best of fortunes recently, but our trade
with them is recovering, and they represent a major element of group sales, with
a direct correlation to our profitability.
Retail sales volumes now reported, suggest that the economy is poised for a good
recovery and, being leaner, fitter and more efficient, we are better positioned
to be able to take advantage of these better times.
The Board is now concentrating on the future development of the Group and is
hopeful that shareholders and stakeholders will be the recipient of better
tidings in future years.
Joe Dwek CBE
Executive Chairman
Enquiries:
Worthington Group plc
Joe Dwek CBE, Chairman 01625 549082
Gavin Kaye, Finance Director, 0181 459 9038
Worthington Group plc
Consolidated Profit & Loss Account
for the year ended 31 March 1999
Existing l
Operations Exceptional
(Before Items
Exceptions) (Note 3)
#'000 #'000
Turnover 34,707 -
Cost of sales (25,774) (4,917)
Gross Profit 8,933 (4,917)
Distribution costs (6,336) -
Administration expenses (2,580) (488)
17 (5,405)
Other operating income 36 -
Operating (loss)/profit 53 (5,405)
Profit on disposal of fixed assets 4 -
(Loss)/profit before interest 57 (5,405)
Net interest payable (1,071) -
(Loss)/profit before taxation (1,014) (5,405)
Existing l
Operations Acquisitions
#'000 #'000
Turnover 34,707 10,294
Cost of sales (30,691) (8,416)
Gross Profit 4,016 1,878
Distribution costs (6,336) (845)
Adminstration expenses (3,068) (1,368)
(5,388) (335)
Other operating income 36 -
Operating (loss)/profit (5,352) (335)
Profit on disposal of fixed assets 4 130
(Loss)/profit before interest (5,348) (205)
Net interest payable (1,071) (284)
(Loss)/profit before taxation (6,419) (489)
1998
1999 (Re-stated)
#'000 #'000
Turnover 45,001 38,722
Cost of sales (39,107) (26,403)
Gross Profit 5,894 12,319
Distribution costs (7,181) (5,866)
Adminstration expenses (4,436) (2,708)
(5,723) 3,745
Other operating income 36 15
Operating (loss)/profit (5,687) 3,760
Profit on disposal of fixed assets 134 6
(Loss)/profit before interest (5,553) 3,766
Net interest payable (1,355) (1,056)
(Loss)/profit before taxation (6,908) 2,710
Taxation (301) (616)
(Loss)/profit after taxation (7,209) 2,094
Dividends payable (556) (1,275)
Retained (loss)/profit (7,765) 819
(Loss)/earnings per share
- before exceptional items (2.1p) 5.1p
- after exceptional items (15.8p) 5.1p
- diluted earnings per share (15.8p) 5.1p
Consolidated Balance Sheet
as at 31 March 1999
1998 1998
1999 1999 (Re-stated) (Re-stated)
#'000 #'000 #'000 #'000
Fixed assets
Tangible assets 19,528 11,009
Negative goodwill (80) -
Investments 27
19,475 11,009
Current assets
Stocks 10,016 8,660
Debtors 12,474 9,147
Cash 28 10
22,518 17,817
Creditors due in less than
one year (29,256) (16,899)
Net current(liabilities)/assets (6,738) 918
Total assets less current liabilities 12,737 11,927
Creditors due in more than one year (6,040) (3,666)
Deferred taxation -
Net assets 6,697 8,261
Capital and reserves
Share capital 5,238 4,113
Share premium 16,219 10,680
Capital reseves 128 128
Merger reserve (713) (713)
Revaluation reverse 737 1,200
Profit and loss account (14,912) (7,147)
Shareholders'funds 6,697 8,261
Consolidated Cash Flow Statement
for the year ended 31 March 1999
1998 1998
1999 1999(Re-stated) (Re-stated)
#'000 #'000 #'000 #'000
Net cash inflow from 1,305 3,845
operating activities
Returns on investments
and servicing of finance:
Interest (paid) (1,185) (996)
Interest element of finance lease (170) (60)
rental payments
(1,355) (1,056)
UK corporation tax, including (842) (1,021)
advance corporation tax
Capital expenditure and financial invest
Purchase of tangible fixed assets (811) (1,016)
(net of finance leases)
Sale of tangible fixed assets 393 57
(418) (959)
Acquisitions and disposals:
(Purchase) of subsidiary undertakings (554) -
Overdrafts acquired with subsidiary (2,412) -
(2,966) -
Equity dividends (paid) (1,275) (1,067)
Special dividend paid on acquisition (207) -
Net cash (outflow) before financing (5,758) (258)
Financing:
Issue of ordinary share capital 7 79
(net of expenses)
Capital element of finance (662) (311)
lease rental payments
Debt due within one year:
Increase in short term borrowings 500 1,000
Repayments of short term borrowings (1,200) (3,660)
Debt due after more than one year:
New loan repayable 2003 - 1,346
New loan repayable 2008 4,620 2,280
Repayment of long term borrowings (3,803) -
(538) 734
(Decrease)/increase in cash (6,296) 476
Notes
1. The results included within this Preliminary Announcement are extracted from
the Annual Report and Financial Statements on which the auditors have given
an unqualified report.
2. The comparative figures for the year ended 31 March 1998 do not constitute
the Company's statutory accounts for the year and have been amended by way of
the prior year adjustments referred to in Note 4 below. Statutory accounts
for 1998 have been delivered to the registrar of companies on which the
auditors have reported, their report was unqualified and did not contain a
statement under Sections 237(2) or (3) of the Companies Act 1985.
3. Exceptional Items
1999 1998
#'000 #'000
Reassessment of net realisable value of stocks held
at 31 March 1998 not sold by 31 March 1999 (3,429) -
Provision against debtors and prepayments due as at 31
March 1998 not recovered by 31 March 1999 or
considered recoverable thereafter (1,124) -
Previous under-provision of liabilities (522) -
Provision for repayment of income tax in respect
of the potential cancellation of profit related
pay scheme (180) -
Provision for diminution in value of plant & machinery (150) -
(5,405) -
4. Prior Year Adjustments
1998
Change in
Accounting accounting
errors policy Total
#'000 #'000 #'000
Write off of development costs - 1,067 1,067
Error in basis of stock absorption
valuation 2,993 - 2,993
Invoice discounting accounting error 1,684 - 1,684
4,677 1,067 5,744
Corporation tax credit in respect
of the above (461) - (461)
Release of deferred tax provision - (254) (254)
4,216 813 5,029
1997 & Prior Years
Change in
Accounting accounting
errors policy Total
#'000 #'000 #'000
Write off of development costs - 907 907
Error in basis of stock absorption
valuation 2,031 - 2,031
Invoice discounting accounting error 1,158 - 1,158
3,189 907 4,096
Corporation tax credit in respect
of the above - - -
Release of deferred tax provision (104) - (104)
3,085 907 3,992
(i) Write off of development costs
The Group has reviewed its treatment of development costs.
Previously the Group classified such costs as prepayments and wrote
them off against future revenue. This year's financial review reveals
that it would be more appropriate to write these costs off as they
arise, as a consequence the previous accounting entries have been
re-stated. The effect of this change in policy is neutral on the
result of the year to 31 March 1999.
(ii) Error in the basis of stock absorption value
A review of the basis of stock absorption has revealed that in prior
years inappropriate costs had been absorbed.
(iii) Invoice discounting accounting error
In prior years, the cumulative timing differences had arisen between
operating divisions and the treasury department in accounting for
receipts from debtors by the invoice discounter.
5. Loss Per Share
The loss per share has been calculated using the weighted average number of
shares in issue during the relevant financial periods. The weighted average
number of shares in issue during the year was 45,650,305 (1998: 41,050,723)
and the loss after exceptional items and taxation was #7,209,000 (1998:
re-stated earnings - #2,094,000). The loss before exceptional items after
taxation for the year was #966,000.
The diluted earnings per share are based on a weighted average number of
shares during the year of 45,702,670 (1998: 41,129,724).
6. Copies of the Annual Report and Financial statements will be distributed
when available and may then be obtained from the Company's head office:
Victoria Works, Shipley, West Yorkshire BD17 7EF.
END
FR RMMMBLLTJBBL
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