RNS Number:3990M
Willington PLC
17 June 2003
WILLINGTON PLC
PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
CHAIRMAN'S STATEMENT
The better performance normally produced by the group in the second half of the
year did not materialise in 2002. The deepening recession in manufacturing
industry in both the UK and Europe affected demand for the group's products and
services and led to greater price competition. The additional impact of market
instability and cost pressures in certain of our businesses combined to produce
a very disappointing outcome for the year.
In response to the effects of the prolonged recession, the group carried out a
financial review of its operations with the object of reducing working capital
and operating overheads. Action was taken to improve the use of cash resources
with the result that the group was able to increase its cash flow from
operations to #2,091,000 (2001 #1,332,000) and reduce net debt by #749,000 (2001
#885,000 increase).
Our storage division has historically been the main contributor to group profits
and cash flow. In order to improve both the medium and longer-term benefits to
shareholders we agreed to purchase the remaining 20.5 per cent minority
shareholding in our IBL subsidiary at a significant discount to book asset
value. In 2003, we have made further reductions in the operating overheads of
our container storage business in response to a sharp fall in revenues from the
outflow of units for military use in the Gulf War. This exceptional event is
likely to have an adverse effect on the results of the division for 2003.
In our distribution division, the decision was taken to change the sales
structure in our chemical business in order to obtain more focus. I am pleased
to report that there has been a significant improvement in revenue in the first
quarter of 2003. In our rubber business the volatility in the world rubber
prices seen in 2002 now appears to have receded and, going into 2003, we have
been able to make further reductions in overhead costs.
The net carrying value of goodwill in the group balance sheet has been reduced
by some #1.6 million in 2002. This reduction reflects the discount paid for the
IBL minority, an adjustment in relation to deferred consideration in our
chemical distribution business and the directors' decision to make an
exceptional write down in the goodwill of our other distribution businesses.
The group produced an operating profit before amortisation and exceptional write
down of goodwill of #317,000 (2001 #944,000 from continuing operations) and a
loss on ordinary activities before taxation of #575,000 (2001 profit #270,000)
on a slightly lower turnover of #32.8m (2001 continuing operations turnover
#34.8m). Earnings per share and headline earnings per share, which excludes
goodwill costs, were respectively losses of 8.21p and 0.68p per share (2001
profits of 1.13p and 3.89p).
Since trading conditions continue to be difficult, the directors recommend that
no dividend will be paid for the year (2001 1p per share). Recognising that this
decision, as well as the recent performance of, and immediate outlook for, the
group, will be disappointing to shareholders, the directors, with the support of
the principal shareholders, are actively giving consideration to ways in which
shareholder value could be made more reflective of the underlying asset value of
the group, as the directors do not believe that the current market value of the
group fairly reflects this value. Such consideration must, however, necessarily
be constrained by the special tax constraints applicable to those shareholders
who obtained Enterprise Investment Scheme reliefs on the subscription of their
shares in the company. Those constraints will continue to have particular
relevance until the expiry of the Enterprise Investment Scheme retention period,
which runs until the end of 2003.
May I once again take this opportunity of recording your Board's appreciation of
the effort and commitment shown by all our employees during the year.
R M ROBINOW
16 June 2003
Chairman
REVIEW OF OPERATIONS
The Storage Division
The storage division comprises the activities of International Bulk Liquids
(Storage & Transport) Limited ('IBL') and of IBL's wholly owned subsidiary
London Container Services Limited ('LCS'). IBL itself has two operating units
which trade as IBL Cold Stores and IBL Bulk Liquids. The division provides
logistics services in the UK for products which require specialised storage and
distribution. During the year Willington plc agreed to purchase the remaining
minority holding in the shares of IBL amounting to 20.5 per cent. IBL is now a
wholly owned subsidiary of the Group.
IBL Bulk Liquids
IBL Bulk Liquids provides services and facilities for the handling and storage
of bulk liquids. Its operations are based in the city of Hull and are located at
two sites on the River Hull and one situated in the Port of Hull. The total site
area occupied is some eight acres. Hull is well located for north European
import and export shipping and Continental deep-sea transhipment ports and has
excellent connections to the UK road and rail networks.
The Hull facilities comprise some 130 storage tanks with individual sizes
ranging from 50 to 1,700 cubic metres and a total capacity of some 34,000 cubic
metres. In order to meet a wide range of product requirements certain tanks are
fitted with internal coatings, insulation and steam heating coils and some are
constructed of stainless steel. In addition to handling facilities for road
tankers and tank containers, each of the sites has berthing for ships and
barges, with larger vessels up to 7,000 tonnes deadweight being accommodated at
the Port of Hull site. Ancillary services are also provided including blending
and mixing, drumming and canning, steam heating of liquids and wash bay and
public weighbridge facilities. IBL Bulk Liquids has an established customer base
in the edible oil and chemical industries, including a number of multinational
groups.
In 2002, the tonnage of products handled and the revenue earned by IBL Bulk
Liquids were some 8 per cent lower than the previous year reflecting a fall in
demand for storage services in the later months of the year. The strength of the
market for bulk liquids storage depends on industrial activity which continued
to experience recessionary pressures. Against this difficult background and
increasing competition for available business, the bulk liquids operation
achieved an acceptable profit, albeit lower than that produced in 2001.
Progress was made in obtaining suitable business for the new one-acre site
acquired in 2001 and potential exists for further improvement in revenues. The
cost effectiveness and quality of service provided by IBL Bulk Liquids should
ensure that it is well placed to benefit from any upturn in storage demand.
Although throughput in the first few months of 2003 continued at the lower
levels experienced in the final months of 2002, activity has now improved. If
this trend continues then profits for the current year should be at least equal
to those achieved in 2002.
IBL Cold Stores
IBL Cold Stores provides temperature controlled storage and distribution
services, primarily to the food industry. Its operations are based on a
four-acre site at Knowsley on the outskirts of Liverpool. The location of the
site close to the M57 motorway provides convenient access to the national
motorway network.
The facilities at Knowsley comprise a 110,000 square foot temperature controlled
store in which some 66,000 square feet are dedicated to cold storage, 26,000
square feet to chill storage and the balance to service areas, including
enclosed loading bays. The storage areas are varied and adaptable, being divided
into 13 chambers, ranging in size from 4,000 to 14,000 square feet and operating
at temperatures between plus 10 and minus 24 degrees Celsius. IBL Cold Stores
has also developed a comprehensive computerised stock control and movement
system in order to support the superior service levels demanded by its
established food industry customers.
During 2002 market conditions in the public cold storage industry remained
depressed. This situation has existed for the past three years and has resulted
in an overcapacity in storage facilities and severe price competition for
available business. Also in 2002 the industry, including IBL Cold Stores,
suffered substantial increases in property and liability insurance rates and a
consequent significant increase in overhead costs.
As reported at the interim stage, occupancy and throughput levels at IBL Cold
Stores for the first half of 2002 were at seasonally low levels. As expected
there was a considerable improvement in activity in the second half of the year
but the upturn was not as large as experienced in earlier years because of the
quieter Christmas trading period this year. As a result overall occupancy and
throughput for the year were lower than in 2001 and the corresponding reduction
in revenue and substantially higher insurance costs meant that IBL Cold Stores
recorded a small loss for the year.
Business levels in the early months of 2003 have been better than in the
corresponding period last year. However there has been a further substantial
increase in insurance costs in 2003 which will inhibit a recovery in profit for
the current year.
IBL Cold Stores is an efficiently run business. It is hoped that insurance costs
have now peaked and that more realistic rates will be obtainable from 2004. This
prospect, combined with an improvement in market conditions, should ensure
better results from the business in the future.
London Container Services
LCS provides storage and repair services to owners and operators of freight
containers and has developed a resale and hire business for containers used in
the domestic market.
The main LCS depot is situated on a fourteen-acre site at Rainham in Essex. The
depot provides open storage for containers and incorporates refurbishment and
fabrication workshops in which major repairs are carried out. The depot has
storage capacity for 8,500 containers and is equipped to handle around 3,000
container movements per month. Additional smaller depots, totalling some six
acres, are operated at Leeds, Southampton and Tilbury.
The depots utilise modern container handling equipment in order to achieve
efficient use of yard areas, optimisation of storage capacity and fast handling
of units to and from road vehicles. A fully integrated on-line computer system,
linked to major customers worldwide, controls receipts, repair estimating and
authorisation, stock and deliveries of all containers handled by LCS.
As previously reported LCS returned to profit in the first half of the year.
Costs were reduced, container sales continued to grow and the volume of
containers stored did not decrease. Events towards the end of the year were not
so favourable because storage volumes at the Rainham depot declined sharply due
to repositioning of units abroad and sale of older units by certain customers.
It also became necessary to vacate the Southampton depot, which had been a
useful adjunct to the LCS business, and, because no cost effective alternative
was available, it was decided to cease operations at the port. Whilst the
overall performance of LCS for the year showed a useful improvement over that
for 2001, the fall in revenues in the last quarter resulted in the company
making a small loss for the year.
A further large fall in storage volumes occurred in the early months of 2003
because of military requirements for the Gulf War. Action has been taken to
reduce operating costs to a level which reflects the lower revenue expected for
the remainder of the year. Improved results at LCS will only be achieved when
business volumes recover.
The Distribution Division
The distribution division comprises the businesses of three wholly owned
subsidiaries of the group: The White Sea & Baltic Company Limited ('White Sea'),
F Holm Chemie Handels GmbH ('Holm') and R.E.B. Willcox Limited ('Willcox').
During the year the division was engaged in the merchanting and distribution of
speciality chemicals and natural rubber. Sales were predominantly to
manufacturing industries based in the UK and Continental Europe.
White Sea
White Sea is based in Leeds and distributes speciality chemicals principally in
the UK.
The speciality chemicals distributed by White Sea fall into the following main
categories: oleochemicals, pine chemicals, fragrances, fine chemicals,
surfactants and industrial chemicals. These products are used in the formulation
and manufacture of personal care and household products such as cosmetics,
toiletries, detergents, cleaners and polishes and also in a wide variety of
consumer and industrial products including paints, adhesives, plastics, paper,
textiles and lubricants. Certain products are sold to chemical manufacturers as
intermediate raw materials or processing aids (e.g. emulsifiers, solvents,
stabilisers and dispersants).
The encouraging progress reported for the first half of the 2002 year was not
sustained in the remainder of the year. Because of the effects of the recession,
conditions in the UK chemicals market remained very competitive and revenue was
affected. In light of this trend the decision was taken to centralise sales
activities so that a more effective sales structure would be in place for the
future. The results of these changes were not immediate and therefore White Sea
only achieved a small improvement on the loss sustained in the previous year.
Sales in the first quarter of 2003 have risen significantly and the benefits of
more focused selling are now evident. Further improvement in sales performance
is expected but the rate of progress is likely to be dependent on the recovery
in market conditions in the chemical industry.
Holm
Holm is based in Pinneberg, on the outskirts of Hamburg and distributes
speciality chemicals throughout Continental Europe.
The main products supplied by Holm are oleochemicals. Customers include a number
of major European chemical, personal care and household product manufacturers.
2002 was a more challenging year for the business because of recession in the
German market where price competition was strong. Against this background a
satisfactory profit was achieved for the year.
Trading volumes in 2003 have been lower than in the corresponding period last
year and unless market conditions improve it is likely that a lower profit will
be made for the year.
Willcox
Willcox is based in London and distributes natural hevea rubber and latex in the
UK and Europe.
Since its acquisition by the Group in 2000, volume sales of the rubber
distribution business have shown steady growth year on year. The business has an
established network of suppliers in South East Asia and Africa and has
progressively widened its customer base in the UK and Europe. Although the
principal consumption of natural rubber remains in the automotive industry,
Willcox has derived an increasing proportion of its sales from other end-uses
such as the manufacture of adhesive tapes, household goods and industrial
products.
Although demand for natural rubber remained subdued in the UK and Europe, the
target for growth in sales volume was achieved in 2002. However the benefits of
larger volume and further reductions in overhead costs were unexpectedly
affected by a major increase in world rubber prices. Defaults in supply
contracts which originated in the major producing country, Thailand, had a
dramatic effect on world prices which rose by over 80 per cent during the year.
Volume sales at Willcox were initially affected but recovered. However Willcox
did suffer a number of supplier defaults which resulted in a pre-tax loss being
recorded for the year as a whole.
In 2003 world rubber prices have settled around the higher levels seen at the
end of 2002 but the variation in short term prices is larger than normal.
Assuming the world market for rubber remains orderly, Willcox can expect to
return to profit in 2003.
CONSOLIDATED BALANCE SHEET
as at 31 December 2002
2002 2001
#000 #000
Fixed assets
Positive goodwill 3,134 4,024
Negative goodwill (707) -
2,427 4,024
Tangible 4,885 5,299
7,312 9,323
Current assets
Stocks 1,887 2,139
Debtors 6,131 7,734
Cash at bank 281 108
8,299 9,981
Creditors: amounts due in less than one year (7,716) (8,711)
Net current assets 583 1,270
Total assets less current liabilities 7,895 10,593
Creditors: amounts due in more than one year (862) (1,446)
7,033 9,147
Provisions for liabilities and charges (86) (81)
Net assets 6,947 9,066
Capital and reserves
Called-up share capital 2,126 2,126
Share premium account 5,122 5,122
Profit and loss account (301) 397
Equity shareholders' funds 6,947 7,645
Equity minority interests - 1,421
Total capital employed 6,947 9,066
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2002
2002 2001
Discontinued Continuing
Total activities activities Total
#000 #000 #000 #000
Turnover 32,768 4,696 34,819 39,515
Cost of sales (29,841) (4,281) (31,541) (35,822)
Gross profit 2,927 415 3,278 3,693
Other operating expenses (net) (3,250) (375) (2,565) (2,940)
Group operating profit before goodwill 317 44 944 988
amortisation and impairment
Amortisation of goodwill (210) (4) (231) (235)
Impairment of goodwill (430) - - -
Group operating (loss) profit (323) 40 713 753
Interest payable (252) (88) (395) (483)
(Loss) profit on ordinary activities
before taxation (575) (48) 318 270
____ _____
Tax on (loss) profit on ordinary
activities (104) (118)
(Loss) profit on ordinary activities
after taxation (679) 152
Minority interests (19) (56)
(Loss) profit for the year (698) 96
Dividend - (85)
Retained (loss) profit for the year (698) 11
Headline (loss) earnings per ordinary share
- basic (0.68)p 3.89p
(Loss) earnings per ordinary share
- basic (8.21)p 1.13p
The group has no other recognised gains or losses in either year other than the
(loss)/profit for that year.
All activity in 2002 arises from continuing operations. Discontinued activities
in 2001 consisted of the disposal of the jute products business of R.E.B.Willcox
Ltd.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2002
2002 2001
#000 #000
Net cash inflow from operating activities 2,091 1,332
______
Returns on investments and servicing of finance
Interest paid (211) (451)
Interest element of finance lease payments (41) (32)
Dividends paid to minority interest - (8)
______
(252) (491)
______
Taxation (paid) received (191) 75
______
Capital expenditure
Purchase of tangible fixed assets (374) (725)
Sale of tangible fixed assets 136 118
______
(238) (607)
______
Acquisitions and disposals
Purchase consideration paid (576) (1,736)
Disposal of discontinued activity - 942
______
(576) (794)
______
Equity dividends paid (85) (400)
______
Net cash inflow (outflow) before financing 749 (885)
______
Financing
Repayment of 9% unsecured loan notes - (206)
6% unsecured loan notes repaid (38) (39)
New secured bank loans 129 635
Repayment of secured bank loans (539) (204)
Capital element of finance lease payments (34) (225)
______
(482) (39)
______
Increase (decrease) in cash 267 (924)
______
NOTES TO THE PRELIMINARY STATEMENT
1 Nature of financial information
The preliminary statement which has been agreed with the Company's auditors was
approved by the Board on 16 June 2003. The results for 2002 are abridged from
the Company's financial statements and have yet to be approved or delivered to
the Registrar of Companies. Comparative figures have been extracted from the
consolidated financial statements for the period ended 31 December 2001 on which
the auditors reported without qualification, which have been filed with the
Registrar of Companies in England and Wales and which contained no statement
under section 237(2) or (3) of the Companies Act 1985.
2 Segmental information
In the tables below the group's net assets, turnover and (loss) profit before
taxation (excluding result of sales of assets) are analysed by geographical area
and by business class.
Net assets, in the case of the geographical analysis, are allocated to the area
where the main operation of a particular activity is carried out and where the
majority of that activity's assets are situated.
(a) Net assets 2002 2001
#000 #000
Net assets - by geographical area
United Kingdom 6,699 8,870
Rest of Europe 248 196
______
6,947 9,066
______
Net assets - by business class
Storage 5,138 6,800
Distribution 1,809 2,266
______
6,947 9,066
______
(b) Turnover 2002 2001
#000 #000
Turnover - by geographical area, by destination
United Kingdom 16,140 19,451
Rest of Europe 14,227 14,619
Asia 2,202 3,432
Rest of World 199 2,013
______
32,768 39,515
______
Turnover - by business class
Storage 7,253 7,502
Distribution 25,515 32,013
______
32,768 39,515
______
Turnover by origin of transaction arose almost entirely in the United Kingdom.
(c) Profit (loss) before taxation by business class 2002 2001
#000 #000
Storage 139 353
Distribution (714) (83)
______
(575) 270
______
Profit (loss) by origin of transaction arose almost entirely in the United Kingdom.
3. Earnings per share
Earnings per share have been calculated on the profit on ordinary activities
after taxation attributable to ordinary shareholders divided by the average
number of ordinary shares in issue (2002 8,504,171 shares 2001 8,504,171
shares).
Headline earnings per ordinary share has been calculated on the same basis, but
before goodwill amortisation and the impairment of goodwill. The directors
believe that this gives a better understanding of the group's earnings.
4. Dividend on ordinary shares
2002 2001
#000 #000
No dividend is proposed (2001 1p per share) - 85
_____ _____
5 Reconciliation of operating profit to operating cashflow
2002 2001
#000 #000
Operating (loss) profit (323) 753
Amortisation of goodwill 210 235
Impairment of goodwill 430 -
Depreciation (including profit on disposals) 652 665
Decrease (increase) in stocks 252 (559)
Decrease in debtors 1,603 1,404
(Decrease) in creditors (733) (1,166)
_____
Net cash inflow from operating activities 2,091 1,332
_____
6 Analysis of net debt
Beginning of year #000 Cashflow Closing
#000 #000
Cash 108 173 281
Overdrafts (4,230) 94 (4,136)
_____ _____ _____
(4,122) 267 (3,855)
Loans (see below) (1,043) 448 (595)
Finance leases (205) 34 (171)
_____
(5,370) 749 (4,621)
_____
Loans are analysed as follows
Beginning of year Cashflow Closing
#000 #000 #000
Amounts due in more than one year (811) 268 (543)
Amounts due in less than one year (232) 180 (52)
_____ _____ _____
(1,043) 448 (595)
_____
Analysis of net debt (continued)
2002 2001
#000 #000
Increase (decrease) in cash in the period 267 (924)
Cash outflow from decrease in debt and leases 482 39
_____ _____
749 (885)
Net debt at beginning of period (5,370) (4,485)
_____ _____
Net debt at end of period (4,621) (5,370)
_____ _____
7. Financial Statements
Copies of the financial statements for the year ended 31 December 2002 are being
sent to all shareholders and will be available from the Company's registered
office at 3rd Floor, 40-42 Osnaburgh Street, London NW1 3ND, in the near future.
Enquiries:
Vincent Troy, Managing Director - 020 7419 0100
Malcolm Baskerville, Finance Director - 0151 549 1082
This information is provided by RNS
The company news service from the London Stock Exchange
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