RNS Number:2539O
Dewhurst PLC
6 December 2001
CHAIRMAN'S STATEMENT
Results
As expected this year has been challenging, but we again achieved record
sales. Group sales were up 6%, but group profits were down 9% before
exceptional items. The sales growth was primarily generated by the parent
company, Dupar Controls and The Fixture Company, together with the impact of a
full year's contribution from Australia. The deterioration in profit was
essentially at the parent company with subsidiaries overall similar to last
year. In the current economic climate and considering the inevitably
disruptive effects of the factory reorganisations referred to below, the
results are a credit to our employees' dedication and I would like to thank
them for their contribution this year. The directors are recommending a final
dividend of 2.64p, making a total of 3.96p for the year, a 6% increase.
Factory Reorganisation
The major elements of our reorganisation have been completed within the
projected timescale and budget. The electrical distribution system has been
substantially replaced and our ancient wiring removed. We have moved and
consolidated our sheet metal processes and relocated our moulding section. As
part of the moves we have refurbished the parts of the factory that these
sections have moved to. Some of the stores have been amalgamated. The
remaining task is to complete the stores consolidation during the coming year.
The reorganisation was a major project undertaken by the production team and
it is to their credit that it has been achieved according to plan.
During the year we also created a new organisation, LiftStore, dedicated to UK
customers. A considerable amount of work went into the planning and launch of
this new venture. This is explained in more detail in the Review of
Operations.
Management
I am delighted to welcome Peter Tett to the Board this year as a non-executive
director. Peter has many years' experience in engineering businesses, most
recently as a director of Halma plc, where he was responsible for the European
Halma Companies involved in the lift industry. We look forward to the benefit
of his knowledge and advice.
Outlook
These are uncertain times and it is difficult to predict the likely
performance of the major international economies in the coming year. For the
Lift Division we see a different picture in the UK and overseas. The UK market
has been constrained by skills shortages in the industry in recent years. As a
result there is a backlog of demand and we have not yet seen any sign of a
downturn. In export markets, the Far East and US have deteriorated, and are
likely to continue to be depressed through 2002.
Rail demand is expected to be stable, although the uncertainty surrounding
Railtrack is a cause for concern. The Keypad Division has started the year
positively, but remains an area in which we have limited forward visibility.
Our focus this year will be on improving customer service and on our
continuing drive on cost effectiveness to meet the challenges of the current
economic climate. We also need to continue our investment in training and
developing our staff, in developing new products and in equipment and
production processes to maintain the Group's progress.
R M Dewhurst
Chairman
REVIEW OF OPERATIONS
Operating Highlights
Group sales grew 6% overall. This year the majority of the growth was in the
UK, with export sales, whilst still growing, reducing their contribution to
39% of total Group sales. The Keypad Division provided this growth with sales
increasing both in the UK and overseas. Rail demand was stable. For the Lift
Division, the UK registered a small improvement, but export sales fell back
from the very strong performance in 2000, particularly in Asian markets.
At Hounslow, the parent company achieved record sales supported by the strong
performance from keypads. The company has coped well with two significant
organisational issues during the year. Firstly, we have separated the part of
the organisation specifically involved with UK customers, including sales,
administration and manufacturing. This new organisation, named LiftStore,
operates from different premises but close to the main Hounslow factory.
The second major issue has been the factory reorganisation. The most
significant element of cost in this reorganisation has been the complete
replacement of the electrical distribution system, which was undertaken on
safety grounds. Our previous system was very old and had become difficult to
repair or modify safely. Process flow has been improved by moving our sheet
metal and moulding sections. This had enabled us to streamline the manufacture
of our most highly customisable items with the objective of reducing lead
times and increasing responsiveness. We have consolidated our stores into two
major areas and renewed the racking in these areas to improve accessibility
and turnaround times.
Throughout this period of significant change our employees made every effort
to maintain our support to our customers. Although our on time delivery
performance deteriorated a little in the middle of the year, it has now
recovered, and, in fact, further improved.
Thames Valley Controls' sales and profits slipped back from last years' record
levels with the delay in some significant remote monitoring projects.
In Canada, Dupar Controls achieved good sales growth and a significant
increase in profitability. The new management team have established themselves
and are focussed on improving internal organisation. The company obtained
preferred supplier status with one of the major international lift companies
during the year.
The Fixture Company, USA, had another year of significant progress, generating
around 50% sales growth on last year. This growth helped the company achieve
profitability in the second half.
Down under, Australian Lift Components (ALC) had a slightly disappointing
year. A lull in activity and lower sales had been expected following the
Sydney Olympics, but the effect on margins was greater than forecast. However
the outlook is much more promising.
UNITED KINGDOM
This year the growth in the UK has come from the Keypad Division, driven by
new product introductions.
Hounslow
Keypad Division
Keypad sales grew strongly in the year both in the UK and overseas, including
a gradual build up of sales to China.
During the year NCR's Personas 86 outdoor through-the-wall Automatic Teller
Machine (ATM) came fully on stream and this was a significant contributor to
the growth. Our function display screen keypad (FDK) for this product comes in
three variants: plain keys, braille keys or a touch screen.
We introduced similar FDK's for a new drive up ATM and a new indoor machine.
Further considerable design engineering has been carried out on a new range of
numeric keypads to be introduced in the coming year.
Rail Division
It has been a useful year for the Rail Division, as well as continuing to sell
our current standard products of LED conversion kits, body side indicators and
track side signal boxes, we have put time and effort into market research to
gain a better understanding of the current needs of this niche market. This
will enable us to improve product focus for the coming years.
Lift Division
We expected this year to be challenging. It was not clear how strong the UK
market would be and we were aware that there would be a significant slowdown
in some of our Far Eastern export markets.
On the Dewhurst side of the UK business we have had a very busy year. It was
intimated in last year's review that we needed to look at new ways to approach
the UK market and we have addressed that issue this year. There are two great
opportunities for us in the UK with the Dewhurst products. The first is to add
a good deal of value, mainly to the push button products, by incorporating
them in faceplates along with other Dewhurst products. This we do routinely in
North America and Australia but have not done to nearly the same extent in the
UK. The second is to be significantly more focussed in the UK on the needs of
the customers and to meet their requirements for personalised service, with
same day or next day delivery of the bulk of stock products. In order to
achieve these objectives we decided to move the UK Lift Business out of the
Hounslow factory and locate it in it's own dedicated plant. We carried out the
move in June and launched the new business as LiftStore the following month.
The project required a considerable amount of extra effort, both from staff
moving to LiftStore and people at the main factory and we thank all those
involved for their dedication and commitment.
Demand for Dewhurst products in the UK has continued to be strong, with a good
deal of modernisation work taking place. The new LADs 2 Autodial system, which
was successfully introduced last year, has sold well in its first full year.
Demand for our Compact 2 pushbuttons has also been very strong and the product
continues to be selected for use in landmark buildings throughout the UK.
Product development through the year focused on the Compact 2 Micro
pushbutton. For this product we have teamed up with Duraswitch of the USA and
adapted their unique Pushgate technology to be used in a lift pushbutton. This
gives us a key advantage of much longer product life than that of conventional
micro switches. As well as that key advantage, the Compact 2 Micro has a
greatly reduced depth and is significantly easier to install. We launched the
product at the recent Interlift Exhibition and the initial response was
excellent.
Overseas we have had a more difficult year with a sharp downturn in our
well-established Far Eastern markets. Unfortunately it is unlikely that these
markets will recover in the short term although longer term the outlook is
brighter.
Through the year we have expanded our distributor network in Europe and we
will continue with this strategy where possible. We have also had some success
in developing our sales to European multinational companies and we are now
increasing the focus in this area with the appointment of a European Account
Director.
Thames Valley Controls
The shortage of skilled labour in the Lift Industry that was referred to
earlier in the report, always has a greater impact on Thames Valley than on
Dewhurst, so it was a considerable achievement for Thames Valley to record
much improved results in the Controller Division. This was made possible by
all the work that has been done over the last two years in reducing the cost
of the controller and improving margins. The Monitoring Division had a more
difficult year, with a number of key projects being delayed.
At Thames Valley there has been an accelerated rate of progress on our '
Fastrack' program. This program allows us to quote and engineer our orders in
a fraction of the time that it used to take us and provides an important
advantage over our competition. It is anticipated that all our mainstream
products will be able to be processed through 'Fastrack' by the middle of next
year. Also at Thames Valley we have had the first full year of sales from our
new Hylogic (hydraulic) Controller, which has sold extremely strongly this
year - a great credit to the team that developed the new product. The
introduction of Hylogic ensures that we have competitive products across the
whole range of requirements.
NORTH AMERICA
We have focused on strengthening the infrastructure of the businesses in North
America and are now in a better position to take advantage of forecast growth.
Dupar Controls
It has been a year of consolidation at Dupar Controls. There have been some
key issues that the new General Manager has had to address during his first
year and these issues have been resolved logically and efficiently. We still
have the opportunity to improve on our manufacturing efficiencies and we have
strengthened the manufacturing management during the year to ensure that those
opportunities are realised in the coming year. Like Thames Valley, there has
been a great deal of work done on reducing engineering time at Dupar and we
have now integrated the computerised drawing process with the manufacturing
build information. Again, this reduces the time taken to process jobs and
reduces the risk of processing errors.
We had a number of good sales successes in the last year and output in Canada
has continued to rise - the outlook for the coming year also looks reasonably
encouraging and we will be increasing our sales staff to ensure that we
capitalise on the opportunities.
During the year we added to the range of products that we distribute, taking
on the EMS Auto dialler phone range, for which Dupar is the exclusive Canadian
distributor.
The Fixture Company
This has been a good year for The Fixture Company. They have benefited from
the first full year of sales of the Formula Systems FCU Infra-red Door
Detectors and despite registering a slight loss for the year overall, they
made profits in the second half.
Fixture sales have continued to grow, helped by the signing of an important
agreement with a West Coast fixture manufacturer to incorporate our products
within his range.
AUSTRALASIA
ALC had a difficult year due to the reduced demand, however excellent work has
been done to ensure long term sales growth.
Australian Lift Components
This year was a more difficult one for ALC, in the fallout after the
acquisition there were a number of changes in personnel and so a certain
amount of restructuring needed to take place. The market was also more
difficult, with a lull in demand following the rush to complete work in the
Sydney area for the Olympic Games.
The important issues have however been addressed and a great deal of work has
been done in extending the customer base. This is starting to reap rewards and
the outlook for the coming year is very positive.
D Dewhurst
Group Managing Director - Lift Division
FINANCIAL REVIEW
Results
Turnover increased by 6% from #21.7 million to #22.9 million. Operating
profits before exceptional items and goodwill fell by #121,000, from
#2,095,000 to #1,974,000. Exceptional items were #460,000 in the year. Goodwill
amortisation was #141,000, up from #100,000. Net interest earned of #10,000
became net interest paid of #15,000 as a result of a full year's interest on
the loan taken to finance the investment in Australian Lift Components (ALC).
Profit before tax fell from #2,005,000 to #1,359,000.
Capital Investments
Additions to fixed assets were #357,000 for the year. A major purchase was a
new robotic stud welding machine which will give us much greater production
flexibility whilst maintaining quality and cost. We also purchased a new
climatic test chamber and a new colour blending system for our moulding
section. There was no major IT spending in the year, but we selected a new
fully integrated manufacturing system for Thames Valley Controls Ltd, which
will be implemented in the coming year.
Cash Flow
The group ended the year with cash and investments up from #1.7 million to
#1.8 million. This position was achieved after spending a net #423,000 on the
refurbishment of the Hounslow factory, a net #140,000 on shares, as well as
repaying #154,000 of the ALC acquisition loan. The loan is denominated in
Australian Dollars to match our exposure. Trade creditors have increased for a
number of reasons. A significant proportion of the refurbishment was carried
out in the last months of the year, purchases for production increased towards
the year end and payment terms were slightly extended with some of our
suppliers. Operating cash flow was #1.8 million for the year. Dividends paid
increased from #366,000 to #388,000.
The group seeks to reduce or eliminate financial risk, to ensure sufficient
liquidity is available to meet foreseeable needs, and to invest cash assets
safely and profitably. The policies and procedures operated are regularly
reviewed and approved by the Board. By varying the duration of its fixed and
floating cash deposits, the group maximises the return on interest earned. The
group's reported trading profit was not significantly affected by currency
movement with approximately 21% being earned in foreign currencies during the
period ended 30 September 2001.
Tax and Dividends
The tax charge for the year fell to #505,000 (37.2%) from #663,000 (33.1%).
The main reasons for the increased percentage were the effect of a full year's
goodwill amortisation (which is not allowable for tax) and the higher tax
rates in Australia. The proposed total dividend of 3.96p per share, up 5.6%
against last year 3.75p, is covered 2.1 times by earnings. Shareholders' funds
improved from #9.5 million to #9.6 million, with a net reduction of 139,000
shares during the year.
Consolidated profit and loss account
For the year ended 30 September 2001
2001 2000
# # # #
Turnover 22,902,771 21,660,106
Operating costs (21,528,910) (19,664,938)
Operating profit before 1,974,135 2,095,414
exceptional items and
amortisation of goodwill
Exceptional items (459,747) -
Amortisation of goodwill (140,527) (100,246)
Operating profit 1,373,861 1,995,168
Net interest (14,790) 10,235
Profit on ordinary activities 1,359,071 2,005,403
before taxation
Tax on profit on ordinary (505,374) (662,918)
activities
Profit for the financial year 853,697 1,342,485
Dividends per 10p ordinary share
Interim paid of 1.32p (2000: (134,371) (128,983)
1.25p)
Proposed final of 2.64p (2000: (268,744) (253,755)
2.50p)
(403,115) (382,738)
Retained profit for the 450,582 959,747
financial year
Basic earnings per share 8.41p 13.01p
Diluted earnings per share 8.36p 12.90p
All amounts relate only to continuing operations.
Consolidated balance sheet
At 30 September 2001
2001 2000
# # # #
Fixed assets
Intangible 1,079,018 1,327,290
Tangible
- Land and buildings 1,361,440 1,388,823
- Plant and machinery 1,540,483 1,769,156
2,901,923 3,157,979
3,980,941 4,485,269
Current assets
Stocks 4,368,467 4,150,620
Debtors 4,441,429 4,050,268
Investments 175,358 26,501
Cash at bank and in hand 1,624,340 1,707,376
9,934,765
Creditors:
amounts falling due within one year 4,362,029 4,053,157
Net current assets 6,247,565 5,881,608
Total assets less current 10,228,506 10,366,877
liabilities
Creditors: due after one year 480,111 734,254
Provisions for liabilities and 155,000 145,000
charges
Net assets 9,593,395 9,487,623
Capital and reserves
Called up share capital 1,017,970 1,031,870
Share premium account 157,083 126,658
Revaluation reserve 423,001 423,001
Capital redemption reserve 118,790 96,940
Profit and loss account 7,876,551 7,809,154
Equity shareholders' funds 9,593,395 9,487,623
The financial statements were approved by the board of directors on 5 December
2001 and were signed on its behalf by:
R M Dewhurst Chairman
D Dewhurst Group Managing Director - Lift Division
Consolidated cash flow statement
For the year ended 30 September 2001
2001 2000
# # # #
Net cash inflow from operating 1,842,304 1,982,424
activities
Returns on investments
and servicing of finance:
Interest and dividends received 57,067 57,073
Interest paid (65,122) (45,711)
Interest element from finance (6,735) (1,127)
lease rental payments
Net cash inflow from returns on
investments
and servicing of finance (14,790) 10,235
Taxation:
UK taxation (573,646) (336,663)
Overseas taxation (125,307) (134,670)
Net cash outflow from taxation (698,953) (471,333)
Capital expenditure and financial
investment:
Purchase of fixed assets (357,071) (403,122)
Sale of tangible fixed assets 22,673 52,462
Net cash outflow from capital
expenditure
& financial investment (334,398) (350,660)
Acquisitions and disposals:
Purchase of subsidiary - (1,664,321)
undertakings
Net cash outflow from acquisitions - (1,664,321)
Equity dividends paid (388,126) (366,313)
Net cash inflow/(outflow) before use
of liquid resources and financing 406,037 (859,968)
Management of liquid resources
Sale/(purchase) of short-term (175,358) 752,400
deposits
Sale of investments 26,501 -
(148,857) 752,400
Financing
Bank loan - 1,000,000
Bank loan repayments (153,891) (93,209)
Capital element of finance lease (46,764) (41,484)
rental payments
Issue of share capital 38,375 -
Repurchase of shares (177,936) -
(340,216) 865,307
Increase/(decrease) in cash in (83,036) 757,739
year
AGM, results and dividends
The trading profit for the period, after taxation, amounted to #853,697 (2000:
#1,342,485).
A final dividend on the Ordinary and 'A' ordinary shares of 2.64p per 10p
share (2000: 2.50p) will be proposed at the Annual General Meeting to be held
on 28 January 2002. If approved, this dividend will be paid on 25 February
2002 to members on the register at 18 January 2002.
An interim dividend of 1.32p per share (2000: 1.25p) was paid on 3 September
2001.
These dividends absorb #403,115 (2000: #382,738) of the profit for the period
leaving a balance retained of #450,582 (2000: #959,747) which has been
transferred to group reserves.
Basis of preparation
The above financial information does not constitute full accounts within the
meaning of Section 240 of the Companies Act 1985.
The financial information for the year ended 30 September October 2000 is
extracted from the Group's financial statements to that date which received an
unqualified auditors' report and have been filed with the Registrar of
Companies. The financial information for the year ended 30 September 2001 is
extracted from the Group's financial statements to that date which received an
unqualified auditors' report and will be filed with the Registrar of
Companies.
The financial information presented in the preliminary announcement has been
prepared on the basis of the accounting policies set out in the most recently
published set of annual financial statements, with the exception of pension
costs. This states as required under the Welfare Reform and Pensions Act 1999
and Stakeholder Pension Schemes Regulations 2000 that the group has offered
access to a stakeholder pension scheme to employees in its UK based companies.
The group has adopted the transitional disclosure requirements of FRS 17
"Retirement Benefits".
Earnings per share and dividend per share
Weighted average number of shares
2001 2000
No No
For basic earnings per share 10,146,095 10,318,698
Share options 62,076 85,500
For diluted earnings per share 10,208,171 10,404,198
The calculation of basic earnings per share is based on the profit
attributable to shareholders and on 10,146,095 Ordinary 10p and 'A' ordinary
10p shares, being the weighted average number of shares in issue throughout
the financial year.
For diluted earnings per share the weighted average number of ordinary shares
in issue is adjusted by assuming that all conversion of all share options
exercised during the year were converted at the beginning of the year.
The final proposed dividend is based on 3,570,700 Ordinary 10p shares and
6,608,998 'A' ordinary 10p shares, being the expected number of shares on the
proposed record date.
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