RNS Number:7404B
Kenwood Appliances PLC
1 December 1999
Interim results: half year ended 1st October 1999
Kenwood results in line with expectations plus further
progress on borrowings
#m
6 mths to 6 mths to
1.10.99 2.10.99
Sales
from
continuing
business 63.1 69.2
Gross
Margins 35.0% 36.5%
Operating
Profit 1.1 3.2
(Loss)/
Profit
Before
Exceptionals
& tax (0.2) 0.9
Exceptional
items (3.1) (0.1)
(Loss)
Profit
before tax (3.3) 0.8
Net
Borrowings 30.5 39.7
(Loss)/
Earnings
per share
- before
exceptionals (0.6p) 1.3p
- after
exceptionals (7.3p) 1.1p
David Nash, Chairman said today: -
"Despite the strength of sterling, the Group traded in line
with expectations in the first half.
Tight control of capital expenditure and working capital, in
the period, resulted in a further #9.2m reduction in
borrowings, compared to September 1998, after spending #1.7m
on restructuring charges. Net interest payable fell from
#2.3m to #1.4m."
Colin Gordon, Chief Executive said today: -
"Whilst sales for continuing operations fell 9% from #69.2m to
#63.1m, due to sterling's impact on exports and a difficult
Italian market, we have seen considerable progress elsewhere
during this period. Sales in the rest of the world have
stabilised and in the UK Kenwood's new products have generated
an encouraging 9% growth in revenues in a market which grew by
less than 1%."
"The decline in gross margins was almost wholly the result of
the continuing weakness of the Euro."
"There was considerable progress with our strategy to
transform Kenwood into an agile brand led company with the
restructuring programme continuing on plan. Fixed costs were
reduced by #2.7m and the number of employees fell from 2,346
to 1,821."
"As always, the full year result will be dependent upon the
Christmas season. Despite the continuing strength of sterling,
trading in October and November has been encouraging, with
continuing growth in the UK, recovery in Asia and a positive
response to the new products launched in Italy. The Board
therefore anticipates, in the absence of unforeseen
circumstances, that the benefits from new products and cost
reductions will result in a profit before tax and exceptional
charges for the full year."
For further information:
Colin Gordon
Tel: 0171 638 9571 (today)
Chief Executive, Kenwood Appliances
Tel: 01705 476 000 (thereafter)
Simon Rigby, Alex Brown
Tel: 0171 638 9571
Citigate Dewe Rogerson
KENWOOD APPLIANCES PLC
INTERIM RESULTS: HALF YEAR ENDED 1ST OCTOBER 1999
FINANCIAL RESULTS
Total sales in the half-year were #64.2m compared to #73.4m.
Sales from continuing operations were #63.1m compared to
#69.2m last year. This represents a fall of 8.9% and is due
to sterling's impact on exports and a difficult Italian
market.
Gross margins fell from 36.5% to 35.0%, almost all of which is
accounted for by currency.
Distribution and administration costs were reduced by #1.7m to
#21.3m as the benefits from the restructuring programme are
being realised.
Net interest charges fell #0.9m to #1.4m.
The loss before tax and exceptionals was #0.2m compared to a
profit of #0.9m in 1998/9. This was in line with the position
anticipated by the Board in the preliminary announcement made
on the 1st July 1999.
Exceptional charges of #3.1m have been incurred principally to
cover the loss on disposal of the specialist engineering
business and the cost of the continuing restructuring
programme in the UK. These costs were in line with the
forecast made in July.
The loss after exceptionals and before tax was #3.3m compared
to a profit of #0.8m in 1998/99. At this stage the Directors
are not recommending an interim dividend.
Tight controls on capital expenditure and reduced working
capital resulted in borrowings reducing by #9.2m, in the past
twelve months, to #30.5m.
TRADING REVIEW
UK
Turnover of Kenwood products rose by 9% to #20.1m in a
market which grew by less than 1%. Kenwood grew share in
categories where its new product programme had a
significant impact including deep fat fryers and kettles.
Margins were also significantly better than last year.
Italy
Difficult market conditions in Italy had a
disproportionate effect in certain niche categories,
where Ariete is strongest. Consequently its domestic
turnover fell 23% to 20.6 bn lire (#6.9m). This is being
addressed in the second half by an aggressive programme
of new product launches. Export sales were 6% lower at
18.2 bn lire (#6.1m). Vapori exports to the USA and
Australia were very encouraging.
For Mizushi the strategy remains unchanged, namely to
reduce borrowings whilst trading at breakeven. Turnover
stabilised at 9.4bn lire (#3.2m). Working capital fell by
67% to 5.5 bn lire (#1.8m) compared to 16.8 bn lire
(#6.1m) at 2nd October 1998.
Overseas Subsidiaries
All of the overseas subsidiaries showed an improvement in
contribution with the exception of Poland and South
Africa. The closure of the Polish sales company is
planned for the fourth quarter and new product launches
are anticipated to address the issues in South Africa.
The Asian businesses of Malaysia, Singapore and Hong Kong
saw strong growth.
Export Markets - Kenwood Distributors
Sales continue to be difficult to many export markets and
as a result turnover fell 19% to #10.2m.
Manufacturing and Sourcing
The changes in Havant manufacturing are nearing
completion. In the half year production of food
processors and deep fat fryers commenced in China. The
only activity still to be transferred from the UK is the
production of motors which is currently being piloted in
the Company's Chinese factory. Manufacturing headcount in
the UK fell by 286 to 244 during the six months.
The proportion of third party manufacture rose to 65%
from 61% in line with the strategic refocusing of the
business.
Kenwood Transformation Programme
Significant progress has been made in executing the
programme to transform Kenwood into an agile brand led
business. A number of further steps have been taken In
the last six months: -
* The specialist engineering business on the Isle of
Wight was sold for #1.1m;
* The European distribution of Kenwood product was
outsourced to UPS World-wide Logistics;
* Total headcount fell to 1,821 compared to 2,346 in
September 1998 and of this total the Group employed 399
personnel in the UK compared to 843 a year ago.
FUTURE PROSPECTS
As always, the full year result will be dependent upon the
Christmas season. Despite the continuing strength of sterling,
trading in October and November has been encouraging with
continuing growth in the UK, recovery in Asia and a positive
response to the new products launched in Italy. The Board
therefore anticipates, in the absence of unforeseen
circumstances, that the benefits from new products and cost
reductions will result in a profit before tax and exceptional
charges for the full year.
Consolidated Profit & Loss Account
Un- Un- Un- Un- Audited
audited audited audited audited yr to
6 mths 6 mths 6 mths 6 mths 2 April
1 Oct 1 Oct 1 Oct 2 Oct 1999
1999 1999 1999 1998
#000's #000's #000's #000's #000's
Before
Excep- Excep Total
tional tional
Turnover:
Continuing
operations 63,061 - 63,061 69,236 145,016
Discontinuing
operations 1,111 - 1,111 4,126 9,105
---- ---- ---- ---- ----
64,172 - 64,172 73,362 154,121
Cost
of
sales (41,691) -(41,691)(46,569)(101,077)
---- ---- ---- ---- ----
Gross
profit 22,481 - 22,481 26,793 53,044
Distribution
costs (15,081) -(15,081)(15,340)(35,721)
Administrative
expenses (6,234) - (6,234) (7,686)(14,248)
---- ---- ---- ---- ----
(21,315) -(21,315)(23,026)(49,969)
---- ---- ---- ---- ----
1,166 - 1,166 3,767 3,075
Other
operating
expenditure (51) - (51) (578) 59
Operating
profit:
Continuing
operations 1,233 - 1,233 3,299 3,689
Discontinued
operations (118) - (118) (110) (555)
1,115 - 1,115 3,189 3,134
Exceptional
items:
Continuing
fundamental
reorganisation - (1,589) (1,589) (105) (8,884)
Discontinued
loss on
sale of
operation - (1,483) (1,483) - -
Bank
Interest
receivable 192 - 192 37 704
Interest
payable (1,545) - (1,545) (2,308) (4,708)
---- ---- ---- ---- ----
(1,353) - (1,353) (2,271) (4,004)
---- ---- ---- ---- ----
(Loss)/
profit on
ordinary
activities
before
taxation (238) (3,072) (3,310) 813 (9,754)
Tax on
Ordinary
activities (37) - (37) (317) (1,519)
---- ---- ---- ---- ----
(Loss)/
profit
attributable
to
members of
the
parent
company (275) (3,072) (3,347) 496(11,273)
Earnings
per share -0.6p -6.7p -7.3p 1.1p -24.6p
Fully
diluted
earnings
per share -0.6p -6.7p -7.3p 1.1p -24.6p
Balance sheet
Unaudited Unaudited Audited
1 Oct 2 Oct 2 Apr
1999 1998 1999
#000's #000's #000's
Fixed
assets
Tangible
Fixed
assets 23,182 36,261 27,467
Investments 1,927 1,927 1,927
---- ---- ----
25,109 38,188 29,394
---- ---- ----
Current
assets
Stocks 24,270 31,860 21,698
Debtors 40,384 48,416 40,658
Cash at
bank and
in hand 7,509 12,898 9,670
---- ---- ----
72,163 93,174 72,026
---- ---- ----
Creditors :
Amounts
falling
due
within
1 year
Borrowings (37,764) (51,991) (38,284)
Trade and
Other
creditors (38,981) (43,760) (38,205)
---- ---- ----
Net
Current
liabilities (4,582) (2,577) (4,463)
---- ---- ----
Total
Assets
Less
Current
liabilities 20,527 35,611 24,931
Creditors :
Amounts
falling
due
after
more
than 1 year (287) (645) (602)
Provision
for
liabilities
and charges (712) (119) (1,005)
---- ---- ----
19,528 34,847 23,324
---- ---- ----
Capital
& reserves
Called up
share
capital 4,586 4,586 4,586
Share
premium 25,101 25,101 25,101
Special
reserve 2,180 2,180 2,180
Profit
& loss
account (12,339) 2,980 (8,543)
---- ---- ----
19,528 34,847 23,324
---- ---- ----
Group Statement of Cash Flows
Unaudited Unaudited Audited
1 Oct 2 Oct 2 Apr
1999 1998 1999
#000's #000's #000's
Operating
profit 1,115 3,189 3,134
Depreciation 2,767 3,565 7,207
Loss/
(profit)
on disposal
of fixed
assets - 133 -
(Increase)/
decrease
in stock (3,624) 1,126 10,455
(Increase)/
decrease
in debtors (665) (1,675) 2,574
Increase/
(decrease)
in creditors 1,197 (1,890) (4,596)
---- ---- ----
790 4,448 18,774
Cash
outflow
from
exceptional
items (1,656) (1,203) (2,777)
---- ---- ----
Net
cash
(outflow)/
inflow
from
operating
activities (866) 3,245 15,997
Returns
on
investments
& servicing
of finance (1,353) (2,315) (4,004)
Taxation (37) (644) (763)
Capital
expenditure (218) (2,525) (4,666)
Acquisitions
& disposals 990 (244) -
Financing
- loans
repaid (9,118) (3,736) (21,402)
---- ---- ----
(Decrease)
in cash
in the
period (10,602) (6,219) (14,838)
---- ---- ----
Reconciliation
to net
debt:
(Decrease)
in cash
in the
period (10,602) (6,219) (14,838)
Cash
outflow
from
decrease
in debt
and lease
financing 9,118 3,736 21,402
---- ---- ----
Change in
net debt
resulting
from cash
flows (1,484) (2,483) 6,564
Translation
difference 158 (1,799) (324)
---- ---- ----
Movement
in net
debt in
the period (1,326) (4,282) 6,240
Opening
net
debt (29,216) (35,456) (35,456)
---- ---- ----
Closing
net
debt (30,542) (39,738) (29,216)
---- ---- ----
Turnover & Segmental Analysis
Unaudited Unaudited Audited
1 Oct 2 Oct 2 Apr
1999 1998 1999
#000's #000's #000's
Turnover
by
destination:
Sales
to
third
parties
UK 20,298 20,889 40,939
Continental
Europe 28,651 36,725 80,563
Rest
of the
world 15,223 15,748 32,619
---- ---- ----
64,172 73,362 154,121
---- ---- ----
Turnover
by origin:
Total
sales
UK 33,611 35,348 71,039
Continental
Europe 29,931 37,864 82,842
Rest of
the
world 17,734 19,302 37,714
---- ---- ----
81,276 92,514 191,595
---- ---- ----
Inter-
segment
sales
UK 6,105 6,506 14,056
Continental
Europe 3,406 4,176 8,386
Rest of
the world 7,593 8,470 15,032
---- ---- ----
17,104 19,152 37,474
---- ---- ----
Sales to
third
parties
UK 27,506 28,842 56,983
Continental
Europe 26,525 33,688 74,456
Rest of
the world 10,141 10,832 22,682
---- ---- ----
64,172 73,362 154,121
---- ---- ----
Notes
1. The interim financial statements are unaudited and do not
constitute full accounts within the meaning of the Companies
Act 1985. Figures for the financial year to 2nd April 1999
have been extracted from the financial statements which have
been delivered to the Registrar of Companies on which the
Auditors have given an unqualified report.
2. The financial statements have been prepared on the basis
of the accounting policies set out in the group's 1999
statutory accounts.
3. A copy of the announcement will be sent to shareholders,
additional copies can be obtained from the Company Secretary,
Kenwood Appliances Plc, New Lane Havant Hants PO9 2NH
END
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