RNS Number:2940J
Dowding & Mills PLC
27 March 2003
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Thursday, 27 March 2003
IMMEDIATE RELEASE
Dowding & Mills PLC
Interim Results
half year ended 31 December 2002
Statement by Executive Chairman, Tudor Davies
Introduction
I was appointed Chairman of Dowding & Mills PLC ("the Group" or "the Company")
immediately following the Board changes at the Annual General Meeting on 29
November 2002.
Subsequent to my appointment, I conducted an initial financial and operational
review of the Group's businesses. A combination of market conditions, together
with the need for exceptional charges to reflect a more prudent view of the
carrying value of the Group's assets and re-organisation costs arising from the
review, prompted our announcement on 20 December 2002. This announcement
informed the Stock Exchange that the Board did not believe it would be
appropriate for the Company to pay a dividend in respect of year ending 30 June
2003 and would be preserving its resources in order to facilitate a strategic
re-organisation of the Group's activities.
Board Changes
Doug Rogers was appointed Deputy Chairman on 31 August 2002 and Peter Guest was
appointed as a Non-Executive Director on 31 January 2003.
Doug Rogers and Peter Guest have provided valuable assistance with the
re-organisation of the Group, and the Board has decided to appoint Peter Guest
as Managing Director with effect from 1 April 2003. His extensive commercial
and technical experience in this industry is invaluable to his fellow Directors
and the Company as the Board completes the review and implements change.
Brian Gibbon resigned on 14 November 2002. Stuart Moberley, David Sankey and
Henk Hammendorp decided not to seek re-election at the Annual General Meeting on
29 November 2002. Martyn Habgood resigned on 29 November 2002. Roger Feaviour
resigned on 31 January 2003.
Results
For the half year to 31 December 2002, turnover was relatively unchanged at
#61.5 million (2001: #62 million) with the Group remaining profitable at the
operating level with profits of #2.0 million (2001: #4.7 million) in the period.
However, this result reflects a decline in margins and an increase in
overheads due to higher insurance costs and additional contributions to
pensions.
Profit before tax and exceptional items was #1.0 million (2001: #3.7 million),
and exceptional items totalled #22.8 million (2001: #1.7 million), resulting in
a loss after taxation of #19.9 million (2001: profit of #1.3 million). Details
of the exceptional charge and a prior year adjustment are given in the notes to
the Interim Report.
The cash outflow for the period amounted to some #3.4 million, of which #1.6
million related to capital expenditure committed prior to the Board changes, and
#1.2 million to the cost of the 2002 financial year final dividend.
Strategic Review
The previous growth strategy to become an International Engineering Services
Group, and the accompanying high levels of spend on re-organisation,
acquisitions, complex computer systems, and capital projects, has been financed
from borrowings without a corresponding increase in returns, directly impacting
on value to shareholders.
continued...
The focus now is to reverse the trend of rising borrowings through strict
control of working capital, and capital expenditure. Cash generation is a
priority with the emphasis firmly on restoring value for shareholders by
ensuring profits earned are turned into cash, and borrowings reduced.
Our initial review of the Group businesses identified the need for an
exceptional charge of #22.8 million which in the main has no cash effect, but is
necessary to write down goodwill and tangible assets to a carrying value more
commensurate with the return they can generate or the estimated realisable
value, particularly where re-organisation is anticipated.
Due to the geographical spread and number of businesses involved (50 operating
units in the U.K., Holland, Luxembourg, U.S.A. and Australia), the review will
be an on-going process for several months.
Re-organisation
The initial review of the U.K. operations has identified a considerable number
of issues, and action has been taken to improve the structure of the Group and
the reporting lines to management.
At the branch level, satisfactory returns are being made in most cases, but
overhead costs were disproportionate at the regional and central functions. In
January we commenced a cost down programme to improve the profitability of the
Group, involving the reduction of staff at all levels within the Group's Central
and Regional support functions. This action has re-aligned the responsibility
for the local area business to the Branch Managers which will speed up decision
making and allow management teams more control over their resources.
In February we reviewed the structure, productivity efficiencies and
profitability of the under-performing businesses within the UK Branch network.
We have closed three of our Electronics branches, and there has been a reduction
in personnel throughout the Engineering Services network. In total, 160
employees have either left the Company or are going through a redundancy
consultation process.
Whilst these actions are regrettable for all those employees affected by the
re-structuring programme, it has been necessary to ensure that, in these
difficult and challenging times, we remain competitive and continue to deliver
the best possible service levels to our customers.
Outlook
The ongoing plan is to improve profitability and cash generation in order to
reduce borrowings and improve shareholder value. With depreciation and
amortisation running at an annualised level in the region of #4.0 million, and
the emphasis on strict control of costs, capital expenditure and working
capital, the Group is expected to reduce borrowings once the re-organisation is
complete.
The Board is committed to building on the market leading position that Dowding &
Mills has in the industry, and although in the short-term the effects of the
re-organisation and weaknesses in the economy will impact on the second half,
the benefits are expected to flow through later in 2003.
Enquiries:
Tudor Davies, Chairman Fiona Tooley Graeme Cull
Dowding & Mills PLC Citigate Dewe Rogerson Arbuthnot Securities
Tel: 0121 766 6161 Tel: 0121 455 8370 Tel: 020 7002 4600
Mobile: 07785 703523 Mobile: 07976 228397
Dowding & Mills PLC
Interim Results
Unaudited Consolidated Profit and Loss Account
Half year ended 31 December 2002
Restated
Half year to 31/12/02 Half year to 31/12/01
Before Before
Exceptional Exceptional Exceptional Exceptional
Items Items Total Items Items Total
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 61,530 - 61,530 62,014 - 62,014
Operating profit 2,002 (22,846) (20,844) 4,736 (1,713) 3,023
Net interest payable (998) - (998) (1,029) - (1,029)
Profit on ordinary activities before tax 1,004 (22,846) (21,842) 3,707 (1,713) 1,994
Tax on ordinary activities (394) 2,355 1,961 (1,233) 565 (668)
Profit on ordinary activities after tax 610 (20,491) (19,881) 2,474 (1,148) 1,326
Minority interests - - - - - -
Profit for the period 610 (20,491) (19,881) 2,474 (1,148) 1,326
Dividends - - - (1,233) - (1,233)
Retained profit 610 (20,491) (19,881) 1,241 (1,148) 93
Earnings per share (EPS) 0.40 (13.30) (12.90) 1.61 (0.75) 0.86
EPS before amortisation of goodwill 0.58 (8.87) (8.29) 1.83 (0.75) 1.08
Dividend per share 0.00 0.80
Dowding & Mills PLC
Interim Results
Unaudited Consolidated Profit and Loss Account
Half year ended 31 December 2002
Restated
Full year to 30/06/02
Before
Exceptional Exceptional
Items Items Total
#'000 #'000 #'000
Turnover 121,983 - 121,983
Operating profit 7,577 (7,058) 519
Net interest payable (1,938) - (1,938)
Profit on ordinary activities before tax 5,639 (7,058) (1,419)
Tax on ordinary activities (1,744) 1,456 (288)
Profit on ordinary activities after tax 3,895 (5,602) (1,707)
Minority interests (9) - (9)
Profit for the period 3,886 (5,602) (1,716)
Dividends (2,466) - (2,466)
Retained profit 1,420 (5,602) (4,182)
Earnings per share (EPS) 2.53 (3.64) (1.11)
EPS before amortisation of goodwill 2.89 (2.46) 0.43
Dividend per share 1.60
Dowding & Mills PLC
Interim Results
Unaudited Balance Sheet
As at 31 December 2002
(Note 1) (Note 1)
Restated Restated
31/12/02 31/12/01 30/06/02
#'000 #'000 #'000
NET ASSETS EMPLOYED
Fixed assets:
Intangible assets 2,087 11,229 9,201
Tangible assets 39,309 44,776 45,166
41,396 56,005 54,367
Current assets
Stock and work in progress 8,088 13,592 13,414
Debtors 27,896 33,216 29,868
Bank and cash balances 1,894 2,903 3,416
37,878 49,711 46,698
Creditors - amounts falling due within one year:
Loans and overdrafts (16,143) (11,026) (12,192)
Other creditors (16,582) (20,582) (20,020)
Net current assets 5,153 18,103 14,486
Total assets less current liabilities 46,549 74,108 68,853
Creditors - loans falling due after more than one year (20,959) (24,184) (23,068)
Provisions for liabilities and charges (4,523) (3,355) (3,741)
Net assets 21,067 46,569 42,044
REPRESENTED BY
Shareholders' funds:
Share capital 15,410 15,410 15,410
Reserves 5,657 30,879 26,360
21,067 46,289 41,770
Minority interests - 280 274
21,067 46,569 42,044
Dowding & Mills PLC
Interim Results
Summarised Unaudited Cash Flow Statement
Half year ended 31 December 2002
Half year to Half year to Full year to
31/12/02 31/12/01 30/06/02
#'000 #'000 #'000
Net cash inflow from operating activities (see note 5) 1,650 4,474 11,389
Net interest paid (983) (1,052) (2,041)
Dividends paid (1,233) (2,404) (3,637)
Taxation paid (860) (723) (1,524)
Net capital expenditure (1,609) (1,515) (4,869)
Acquisition/disposal of businesses (273) - -
Financing (79) 3,425 2,340
(Decrease)/increase in cash and cash equivalents (3,387) 2,205 1,658
Unaudited Reconciliation of Net Cash Flow to Movement in Net Debt
Half year to Half year to Full year to
31/12/02 31/12/01 30/06/02
#'000 #'000 #'000
Increase/(decrease) in cash in the period (3,387) 2,205 1,658
Cash inflow/(outflow) from movement in debt 79 (3,425) (2,340)
(3,308) (1,220) (682)
Other non-cash items:
Translation difference (56) (1) (77)
Movement in net debt in the period (3,364) (1,221) (759)
Opening net debt (31,844) (31,085) (31,085)
Closing net debt (35,208) (32,306) (31,844)
Statement of Total Recognised Gains and Losses
Restated Restated
Half year to Half year to Full year to
31/12/02 31/12/01 30/06/02
#'000 #'000 #'000
(Loss)/profit for the period (19,881) 1,326 (1,716)
Currency translation differences on overseas investments (821) (436) (680)
Total recognised gains and losses for the period (20,702) 890 (2,396)
Prior year adjustment (as explained in note 1) (1,028) - -
Total gains and losses recognised since last annual report (21,730) 890 (2,396)
Dowding & Mills PLC
Interim Results
Notes
1. With the exception of the accounting policy for turnover, the
accounting policies used to complete the Interim Report are consistent with
those used to complete the Group Accounts for the year ended 30 June 2002. The
figures for the year ended 30 June 2002 and for the half year to 31 December
2001 have been restated to reflect this change in accounting policy.
Following the results of the financial and operational reviews referred to in
the Chairman's statement and, in particular, the need to reflect a more prudent
view in light of current market conditions, the Directors are of the opinion
that the revised accounting policy for turnover is more appropriate than the
previous policy.
The effect of this change in the 6 months to December 2002 was to increase
turnover by #2.0 million from #59.5 million to #61.5 million, increase operating
profits by #0.7million from #1.3 million to #2.0 million, and, as at 31 December
2002, decrease net assets by #0.8 million from #21.9 million to #21.1 million.
The revised policy is as follows:
Group turnover represents the net amounts invoiced to customers for goods and
services supplied in respect of ordinary activities, excluding intra-Group
transactions and value added tax. In addition, the long term contacts policy,
in accordance with SSAP 9, is to recognise turnover in line with an estimation
of contract completeness.
The figures for the year ended 30 June 2002 are an abridged statement of the
full Group Accounts for that year which have been delivered to the Registrar of
Companies and on which the auditors have made an unqualified report.
2. Earnings per share are calculated on losses of #19,881,000 (restated
2001: earnings of #1,326,000) and on a weighted average of 154,095,548 (2001:
154,095,548) ordinary shares in issue.
The earnings per share before exceptional items is calculated on attributable
earnings of #610,000 (restated 2001: #2,474,000) and on a weighted average of
154,095,548 (2001: 154,095,548) ordinary shares in issue.
3. Exceptional costs charged in the period amount to #22,846,000:-
#'000
Reorganisation 2,047
Impairment of goodwill 6,827
Impairment of fixed assets 4,840
Changes in accounting estimates 7,731
Provision for onerous leases 1,401
Total 22,846
Reorganisation
The reorganisation of the business has continued throughout the period,
including the Board changes in November 2002. The cost includes settlement of
the former Directors' contracts, a number of redundancies at management level
and other costs involved in restructuring the branch network.
Impairment of goodwill
The Board reviewed the carrying values of the goodwill in the light of the
current trading performance and future intentions for the relevant businesses
and have provided against the carrying value of the goodwill accordingly.
continued...
Impairment of fixed assets
The Board has reviewed the carrying values and useful economic lives of certain
fixed assets as required by FRS11 and has concluded that in certain instances
impairment provision is required.
Changes in accounting estimates
The new Board has performed an in-depth review of the working capital of the
Group and concluded that additional provisions are appropriate in the light of
current and expected future trading. The valuation of stock, work in progress
and debtors has been adjusted accordingly.
Provision for onerous leases
The branch restructuring programme has left the Group with a number of
properties which are either empty or not being fully utilised by the Group.
Efforts are made to sub-let these properties, but where a contract has not been
signed, provision has been made for the present obligation under these leases on
a discounted basis.
4. The currency translation differences arise because of the different
rates of exchange used at the end of each respective period.
5. Reconciliation of operating profit to net cash inflow from operating
activities
Restated Restated
Half year to Half year to Full year to
31/12/02 31/12/01 30/06/02
#'000 #'000 #'000
Pre exceptional operating profit 2,002 4,736 7,577
Exceptional costs (22,846) (1,713) (7,058)
Operating profit (20,844) 3,023 519
Depreciation charge 2,176 2,549 5,400
Impairment of fixed assets 4,352 - -
Amortisation of goodwill 266 336 558
Impairment of goodwill 6,841 - 1,808
Loss/(profit) on sale of tangible fixed assets 21 (248) (183)
(Increase)/decrease in working capital 8,040 (780) 3,303
Increase/(decrease) in provisions for liabilities and charges 798 (406) (16)
Net cash inflow from operating activities 1,650 4,474 11,389
6. This interim report is being sent by post to all registered
shareholders. Additional copies are available from the Company's Registered
Office: Camp Hill, Birmingham, B12 OJJ.
This information is provided by RNS
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END
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