RNS Number:0740J
Dewhurst PLC
04 December 2007
CHAIRMAN'S STATEMENT
Results
I am delighted to report an improvement in sales and profits this year. Sales
grew 5% to a record #31.4 million (#29.8 million). Profit improved from #3.4
million to #3.8 million, just short of 2005's restated record figure. The second
half of the year was much busier than anticipated. Sales were 10% higher than
the first half with strong global demand for keypads and a better performance on
UK Lift products.
The additional sales together with our continuing tight control on overheads
generated the improved profitability in the second half, leading to the
excellent full year position.
The high demand with constrained resources has put pressure on our staff, who
have worked extremely hard to achieve these results. I would like to
congratulate and thank them for these efforts.
Operations
I have previously mentioned that our lean manufacturing programme has simplified
production and created space in the factory. In July we therefore moved our
London LiftStore staff back into our premises in Hounslow saving on the leasing
and other premises costs for this operation. We still feel it is important for
this Group to retain their LiftStore identity, so we have dedicated a separate
area in the factory and office for them.
A major customer moved their manufacturing from the UK to Hungary in 2006. We
have continued to supply them from the UK, but this position has become
increasingly difficult with short lead times and high variability in product and
demand. As a result we have taken the decision to open a factory in Hungary to
support this customer. The unfortunate consequence of this is that we will have
to cut back our workforce at the factory in Hounslow in the Spring and this will
lead to a number of redundancies. Many of the staff have been making products
for this customer for 20 years, so it will be a sad day for us. I would like to
pay tribute to their dedication over the years and their continuing dedication
now while we organise and effect this transfer.
Products
Considerable resources this year have been put into engineering a new range of
keypad products for Automated Teller Machines. It is expected that these
products will move into volume production in the next calendar year. We have
also expended a great deal of effort on developing a solar powered version of
our Flecta bollard. With the emphasis today on reducing our impact on the
environment, this product is generating considerable interest from local
authorities all around the country.
Acquisitions
Just after the year end we added the products and business of Switching
Components to the Group. This is quite a small UK operation selling and
manufacturing lift pushbuttons and as a result it will not be run as a separate
company, but will be absorbed into the Hounslow business.
Outlook
The coming year will entail a certain amount of cost and disruption because of
the move of a significant amount of work from Hounslow to Hungary. However this
is an investment which should help us to reduce costs in the longer term.
Demand currently is reasonably steady. There can be a lag between changes in the
economic situation and its effect on our orders as projects have already been
initiated. Any downturn in the market as a result of current economic turmoil is
not likely to affect us until the second quarter or later.
Richard Dewhurst
Chairman
REVIEW OF OPERATIONS
Operating Highlights
The climate for manufacturing companies around the world and most certainly in
the UK continues to be very challenging, The first half of the year was
disappointing with lower than expected sales in most companies across the Group.
We knew that we needed to continue to streamline processes and reduce overheads
but were perhaps unable to effect these changes as fast as we would have liked.
However they were driven through in the second half and coupled with improved
levels of revenue, ensured that the second half results were in line with our
expectations.
We have worked very hard to refine all our systems and we are now at a stage
where we have taken the majority of benefits from this type of activity. We will
continue to strive to improve all our processes but now we must focus on
increasing revenues in order to grow profit. In the majority of our businesses
we do now have some solid product improvements that can really lead to sales
growth and deliver the profit improvements that we are looking for in the medium
term.
UNITED KINGDOM
One and a half years ago our largest customer for our keypad products opened up
a plant in Hungary and at the beginning of this year they announced that
production at their UK plant would be dramatically scaled back and most
production moved to Hungary. It quickly became clear that it would not be
possible to service this customer to the levels that we felt appropriate from
the UK. Transit times and costs made this impractical.
We looked at how we could address this issue and after careful analysis it was
decided that the best course of action was to start up a new operation in
Hungary. During the latter stages of the year we recruited a General Manager for
this operation as well as acquiring premises. We will be working hard during the
coming year to transfer our keypad production to this new site and this will
allow us to improve the service levels to this key customer.
For many years now we have been under intense price pressure in our keypad
business. We have managed to more or less offset these effects by improvements
to our manufacturing processes and through value engineering. This pressure
continues but our move to Hungary will give us improved access to lower cost
suppliers, which may allow us to improve keypad sales in markets where cost is
the key driver.
The decision to move the manufacturing of keypads was taken during a very busy
period and at a time when we needed the full support of our team at Hounslow.
Despite the uncertainty about job security, everyone has worked exceptionally
diligently and allowed us to continue to provide high levels of service to our
customers. We are very grateful to everyone for their support during this
difficult period.
Keypad Division
Demand for encrypted pin pads and other ATM assemblies, has remained strong
throughout the year.
Design activity has also been high this year. We have spent the best part of the
year designing two new products for one of our key customers. The first is a new
keypad, which will go into production during the first quarter of next year. The
challenges on this project have been considerable but they have been met and
overcome by our design team. The second is a function key bezel, which has been
successfully developed and will also be going into production in the first
quarter of next year.
Sales of our other keypads grew strongly through the year and can be seen
throughout the UK in a number of different applications.
Rail Division
We launched our new rail pushbutton at Railtex 07 in February. The product was
well received but it is critical for us to produce a family of products covering
different applications in order to really penetrate the market effectively.
Sales for our other rail products have remained steady through the year.
Lift Division
Activity in most of our more important elevator markets strengthened through the
year and we experienced good growth in sales in the Lift Division. Our key Far
East markets and particularly Hong Kong saw solid growth as new projects started
to come through after two or three rather lean years. Our appointment of a
Product Development Manager in that market came at just the right time, but we
must still do more to develop the full potential of this important market.
Sales to Europe continued to grow, with a large number of projects coming
through, particularly in the first half of the year. Helped by the introduction
of the new M-20 range of buttons, we have been able to build up a wider network
of distributors over the last two years and sales through these outlets look set
for solid continued growth for the next few years.
LiftStore
The success of the Ethos controller family has continued through the year. Sales
have grown really quite dramatically in what is a fairly stable market, so our
market share is now well up on two or three years ago.
Development of the Ethos family continues and during the year we launched a new
speed control product V-Com, which significantly improves the ride comfort of
the lift and allows the speed profile to be modified very easily. This new
system utilises some very sophisticated new shaft positioning devices that have
also been developed by the in house team at LiftStore.
This has been a year of transition for our Monitoring Division. The move of
large chunks of housing stock into Housing Associations has had an impact on the
short term demand for monitoring but longer term, the importance of key
performance indicators will drive more Associations towards automated monitoring
of their key assets such as lifts.
In terms of development we have focused on ensuring that customers are able to
monitor their lifts from a much wider range of sites. Previously a customer's
Central Monitoring System would have been located in their Head Office and all
screens and programs were only accessible in Head Office. This year we launched
CMS Anywhere, which as the name suggests allows screens and programs to be
accessed anywhere over the internet. So if people are working from home or
satellite offices, they can still view their lift monitoring system.
The greatest changes that LiftStore have seen this year have probably been in
the Fixture Division. Around five years ago we separated this business from
Dewhurst and moved it out to a new location. This action was critical to ensure
that customers could see that this new business really was separate from
Dewhurst. In the intervening period we have freed up a large amount of space,
both in the offices and on the factory floor at Inverness Road. This space was
more than adequate for LiftStore's fixture business and so it was decided to
move it back into the main premises. This was achieved in the second half of the
year with the minimum of disruption and the team involved in this move did an
excellent job.
Throughout the year, in all three of LiftStore's business divisions we have seen
a steady increase in sales from infrastructure customers, in particular Network
Rail and London Underground. It is a testament to LiftStore's products that they
have been chosen by these two important customers and it will lead to strong
sales in the medium term as lifts in stations around the country are modernised.
Traffic Management Products (TMP)
The first full year of ownership of TMP has been a learning curve for the
Dewhurst management team, although the route to market in the highways industry
is similar in many ways to that of the lift market.
We have worked very hard on development of the Flecta (Traffic Bollards) range.
We introduced a new shape of bollard in the first half of the year and then in
the second half of the year we launched Solalite, which we believe will herald a
new era in bollard design.
Solalite is a solar powered illuminated bollard, primarily aimed for the UK
highway market. There are a number of applications where standards insist that
bollards must be illuminated for safety reasons. However conventional
illuminated bollards cause CO2 emissions, are expensive to run and inconvenient
to install. Solalite avoids all these disadvantages, whilst still providing
illumination to the bollard through the use of solar power.
This year has also seen the successful approval testing of our Passively Safe
range of lamp columns, traffic signal posts and signposts. With this testing now
behind us we will be able to sell the product without constraints and demand for
this type of product is expected to increase throughout the UK.
NORTH AMERICA
Dupar Controls
The market conditions for elevator products in Canada improved in the year and
Dupar achieved some good growth in their fixtures sales. The new M-20 pushbutton
was very well received by some of our larger customers and has helped to boost
sales throughout the year.
In contrast demand for keypad products weakened considerably and more or less
offset the gains in elevator sales. We would hope that this is a temporary
effect and that the demand for keypads strengthens again during the coming year.
The management team at Dupar was reorganised during the year, with George
Foleanu, our Engineering Manager, moving up to take the role of Operations
Manager. He has continued to work hard on the lean programme with his team and
this year we have made great strides in improving processes. In particular, on
time delivery performance has improved markedly.
The Fixture Company (TFC)
This year has seen the arrival of a new General Manager at The Fixture Company
and we welcome Jim Buster to the team. There have been a number of other
personnel changes at the company and this has made Jim's task quite a challenge.
There are however positive signs that sales are starting to improve and the
opportunities for TFC continue to be good.
AUSTRALASIA
Australian Lift Components (ALC)
The Australian market saw some good growth in the year, which benefited both ALC
and Lift Material. Demand for ALC's fixture products was boosted by the launch
of new variants of M-20 designed to meet the particular specifications for the
Australian market.
The lean programme that ALC embarked upon last year has continued this year with
the help of local consultants. Definite improvements to customer support are
clearly visible already from this programme.
Lift Material
With the Australian market buoyant, demand for Lift Material's wide range of
products has been strong and the company has had a good year.
We have been successful in adding a number of new lines to the portfolio and
these products have been well received by the market.
David Dewhurst
Group Managing Director
FINANCIAL REVIEW
Results
Despite a difficult first half year and increasing pricing pressures, the second
half saw a strong performance particularly from keypads and lift controllers.
Revenue increased by 5.5% from #29.8 million to #31.4 million.
The impact on operating profit was even more marked. At the half year we
reported a fall in operating profit of 11.2%, but with the second half
generating operating profits 29% higher than the first half, the group ended the
year with an increase of 7.7% from #3,328k to #3,583k. This reflects an increase
in margins to 11.4% (2006: 11.2%).
Finance income reports an improvement in bank deposit interest, as a result of
our continuing cash generation through the year. Finance costs show the defined
benefit pension scheme costs also improved by #125k, resulting in an overall
profit before tax increase of #459k from #3,394k to #3,853k.
Pension Scheme Deficit
A more detailed explanation of the retirement benefit fund assets and
liabilities movements is reported in note 22 under IAS 19, but this year has
seen a 34% reduction in the scheme deficit from #5.7 million to #3.8 million. In
addition to current service contributions the group continues to pay a fixed sum
of #0.5 million annually to reduce the fund deficit and all recommendations made
by the scheme's actuary to eliminate the scheme deficit have been fully
implemented.
Strong Cash Flow
Cash flow was once again very good. Despite high trade receivables as a result
of the strong second half performance, the group was still able to generate #3.2
million cash from operations and end the year up #1.5 million at #6.7 million.
We started and finished the year ungeared.
Auditor
I am pleased to report that Chantrey Vellacott DFK LLP was appointed on 23
August 2007 as the group's primary auditor.
Treasury Policy
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. There
is no formal policy for matching foreign currency cash flows or matching
exposure to foreign currency net assets. However these issues are regularly
monitored. As shown in note 25, there is no material currency exposure to the
group at the year end. The group's reported trading profit was not significantly
affected by currency movement with approximately 24% of profit before tax being
earned in foreign currencies during the year ended 30 September 2007.
Dividends
Dividends are accounted for when paid and approved, and not when proposed,
therefore the proposed final dividend for 2007 has not been accrued at the
balance sheet date. The total dividend for 2007 of 5.40p per share, up 5.3%
against last year's 5.13p, is covered 5.2 times by earnings. Shareholders' funds
improved from #13.9 million to #17.3 million.
There was a reduction in the number of allotted shares during the year and on
1 October 2007, and these have been fully reported in the directors' report.
Jared Sinclair
Finance Director
Consolidated income statement
For the year ended 30 September 2007
--------------------------------------------------------------------------------
2007 2006
Continuing operations #(000) #(000)
--------------------------------------------------------------------------------
Revenue 31,394 29,766
Operating costs (27,811) (26,438)
--------------------------------------------------------------------------------
Operating profit 3,583 3,328
Finance income 272 165
Finance costs (2) (99)
--------------------------------------------------------------------------------
Profit before taxation 3,853 3,394
Tax on profit (1,216) (1,081)
--------------------------------------------------------------------------------
Profit for the financial year 2,637 2,313
--------------------------------------------------------------------------------
Basic and diluted earnings per share 26.87p 23.48p
--------------------------------------------------------------------------------
Consolidated statement of recognised income and expense
--------------------------------------------------------------------------------
2007 2006
#(000) #(000)
--------------------------------------------------------------------------------
Net income/(expense) recognised directly in equity:
Actuarial gains/(losses) on the defined benefit
pension scheme 1,550 1,637
Exchange differences on translation of foreign
operations 424 (346)
Tax on items taken directly to equity (592) (387)
--------------------------------------------------------------------------------
Net income/(expense) recognised directly in equity
in the year 1,382 904
--------------------------------------------------------------------------------
Profit for the financial year 2,637 2,313
--------------------------------------------------------------------------------
Total recognised income and expense for the year 4,019 3,217
--------------------------------------------------------------------------------
Consolidated balance sheet
At 30 September 2007
--------------------------------------------------------------------------------
2007 2006
#(000) #(000)
--------------------------------------------------------------------------------
Non-current assets
Goodwill 5,318 5,192
Other intangibles 112 89
Property, plant and equipment 2,695 2,804
Deferred tax asset 1,081 1,746
--------------------------------------------------------------------------------
9,206 9,831
Current assets
Inventories 2,778 3,037
Trade and other receivables 6,977 5,664
Cash and cash equivalents 6,659 5,077
--------------------------------------------------------------------------------
16,414 13,778
--------------------------------------------------------------------------------
Total assets 25,620 23,609
--------------------------------------------------------------------------------
Current liabilities
Trade and other payables 3,878 3,442
Current tax liabilities 519 388
Short term provisions 100 150
--------------------------------------------------------------------------------
4,497 3,980
Non-current liabilities
Retirement benefit obligation 3,777 5,697
--------------------------------------------------------------------------------
Total liabilities 8,274 9,677
--------------------------------------------------------------------------------
Net assets 17,346 13,932
--------------------------------------------------------------------------------
Equity
Share capital 980 985
Share premium account 157 157
Capital redemption reserve 157 152
Translation reserve 512 215
Retained earnings 15,540 12,423
--------------------------------------------------------------------------------
Total equity 17,346 13,932
--------------------------------------------------------------------------------
Consolidated cash flow statement
For the year ended 30 September 2007
--------------------------------------------------------------------------------
2007 2006
#(000) #(000)
--------------------------------------------------------------------------------
Cash flows from operating activities
Operating profit 3,583 3,328
Depreciation and amortisation 473 463
Additional (income)/costs to pension scheme (344) 131
Exchange adjustments 196 (98)
(Profit)/loss on disposal of property, plant and equipment (2) (3)
--------------------------------------------------------------------------------
3,906 3,821
(Increase)/decrease in inventories 259 996
(Increase)/decrease in trade and other receivables (1,313) 513
Increase/(decrease) in trade and other payables 436 (366)
Increase/(decrease) in provisions (50) (50)
--------------------------------------------------------------------------------
Cash generated from operations 3,238 4,914
Interest paid (2) -
Income tax paid (1,015) (1,147)
--------------------------------------------------------------------------------
Net cash from operating activities 2,221 3,767
--------------------------------------------------------------------------------
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of cash acquired) - (4,322)
Proceeds from sale of property, plant and equipment 21 14
Purchase of property, plant and equipment (236) (320)
Development costs capitalised (114) (109)
Interest received 246 165
--------------------------------------------------------------------------------
Net cash used in investing activities (83) (4,572)
--------------------------------------------------------------------------------
Cash flows from financing activities
Dividends paid (512) (490)
Purchase of own shares (93) -
--------------------------------------------------------------------------------
Net cash used in financing activities (605) (490)
--------------------------------------------------------------------------------
Net increase/(decrease) in cash and cash equivalents 1,533 (1,295)
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 5,077 6,438
Exchange adjustments on cash and cash equivalents 49 (66)
--------------------------------------------------------------------------------
Cash and cash equivalents at end of year 6,659 5,077
--------------------------------------------------------------------------------
AGM, results and dividends
The trading profit for the year, after taxation, amounted to #2,637k (2006:
#2,313k).
A final dividend on the Ordinary and 'A' ordinary shares of 3.60p per 10p share
(2006: 3.42p) for the financial year ending 30 September 2007 will be proposed
at the Annual General Meeting to be held on 31 January 2008. If approved, this
dividend will be paid on 3 March 2008 to members on the register at 11 January
2008.
An interim dividend of 1.80p per share (2006: 1.71p) was paid on 28 August 2007.
Earnings per share and dividend per share
Weighted average number of shares
--------------------------------------------------------------------------------
2007 2006
No No
--------------------------------------------------------------------------------
For basic and diluted earnings per share 9,815,709 9,851,898
--------------------------------------------------------------------------------
The calculation of basic and diluted earnings per share is based on the profit
attributable to shareholders and on 9,815,709 Ordinary 10p and 'A' ordinary 10p
shares, being the weighted average number of shares in issue throughout the
financial year.
--------------------------------------------------------------------------------
2007 2006
Paid dividends per 10p ordinary share #(000) #(000)
--------------------------------------------------------------------------------
2006 final paid of 3.42p (2005: 3.26p) (336) (322)
2007 interim paid of 1.80p (2006: 1.71p) (176) (168)
--------------------------------------------------------------------------------
The final proposed dividend is based on 3,522,200 Ordinary 10p shares and
5,681,198 'A' ordinary 10p shares, being the latest number of shares in issue
allowing for the 600,000 'A' ordinary 10p share repurchase on 1 October 2007.
The directors are proposing a final dividend of 3.60p (2006: 3.42p) per share,
totalling #331k (2006: #336k). This dividend has not been accrued at the balance
sheet date.
Basis of preparation
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2007 or 2006. Statutory
accounts for 2006, which were prepared under IFRS, have been delivered to the
Registrar of Companies. The statutory accounts for 2007 which are prepared under
accounting standards adopted by the EU will be delivered to the Registrar of
Companies following the company's annual general meeting. The auditors have
reported on the 2007 and 2006 accounts; their reports were unqualified, did not
include references to any matters to which the auditors drew attention by way of
emphasis without qualifying their reports and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985.
Dewhurst plc has elected to prepare its consolidated and company financial
statements in accordance with International Financial Reporting Standards
adopted for use in the European Union ("EU") (IFRS) from 1 October 2005. The
group and company financial statements have been prepared in accordance with
those parts of the Companies Act 1985 that are applicable to companies adopting
IFRS. The company is registered and incorporated in the United Kingdom; and
quoted on AIM.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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