RNS No 3647b
KENWOOD APPLIANCES PLC
1st December 1998
KENWOOD APPLIANCES PLC
INTERIM RESULTS: HALF YEAR ENDING 2 OCTOBER 1998
Sales hit by slowdown in consumer spending in key markets.
Restructuring programme accelerated
6 months to 6 months to
2/10/98 3/10/97
Restated*
Sales #73.4m #81.5m
Operating Profit #3.2m #4.6m
Profit before tax and exceptionals #0.9m #2.2m
Profits before tax #0.8m #0.4m
Borrowings #39.7m #47.4m
EPS 1.1p 0.1p
Dividend - -
Gross Margins 36.7% 35.1%
*Restated for FRS 12
David Nash, Chairman, said today:
"Sales and profits in the first half were hit by a serious
slowdown in consumer spending in the UK and a number of our
other key markets, coupled with the turbulence in markets
outside Europe. Despite these difficult trading conditions,
the progress made in improving gross margins was maintained.
"As a result of tight control of capital expenditure and
working capital, borrowings were reduced substantially. The
Directors are not recommending an interim dividend."
Colin Gordon, Chief Executive, said today:
"The current difficult trading environment has accelerated the
need to implement Kenwood's strategy of moving away from
vertically integrated manufacturing and focusing upon brand
marketing. As part of this strategy there will be a number of
important product launches in the second half. A series of
measures to cut costs and increase competitiveness, such as
moving the manufacture of more product lines to China,
centralising European warehousing operations and streamlining
our international businesses, are being implemented.
"As ever, the full year results will be dependent upon the
Christmas season. However, at this stage the Board anticipates
the disappointing market conditions will continue and that
profits for the second half will be no higher than those made
in the first half."
For further enquiries:
Kenwood Appliances Plc T: 0171 282 8000 (today only)
Colin Gordon, Chief Executive 01705 476 000 (thereafter)
Graham Wickenden, Group Finance Director
Citigate Dewe Rogerson T: 0171 282 8000
Simon Rigby
Alex Brown
01 December 1998
UNAUDITED
KENWOOD APPLIANCES PLC
INTERIM RESULTS: HALF YEAR ENDING 2 OCTOBER 1998
FINANCIAL RESULTS
Sales of continuing operations for the half-year were #73.4m
compared to #80.4m last year. This represents a fall of 8.7%.
Profits before tax and exceptionals were #0.9m compared to
#2.2m for 1996/7. The margin improvements of last year were
maintained and gross margins increased to 36.7% from 35.1%.
Tight controls on capital expenditure and reduced working
capital resulted in borrowings reducing by #7.7m to #39.7m in
the past twelve months.
TRADING REVIEW
UK
After a promising start there was a significant sales
slow down in the second quarter. Turnover fell 8.3% to
#19.7m. Core market categories for Kenwood, such as food
processors and fryers were weak, however, percentage
gross margins showed an encouraging improvement.
Italy
Ariete
Ariete performed well; domestic turnover increased by
2.0% to 26.6 billion Lira (#9.3m) and exports grew by
37.0% to 22.1 billion Lira (#7.7m). A new range of
kitchen appliances was launched at the end of the period
and sales of the steam broom, Vapori, to the U.S., have
been encouraging.
Mizushi
Better weather in Italy resulted in a sales increase of
50% in the rate of sell out in the domestic market, which
contributed to a reduction in debtors. Working capital
was reduced to #6.1m compared to #10.2m at 3rd October
1997.
Overseas Subsidiaries
In France, new product launches and better sales mix
resulted in a significant improvement in contribution.
Germany also showed an improved contribution over last
year, but remains a difficult market and a new sales
strategy has been implemented. The subsidiaries outside
Europe were affected by the economic turmoil with
significant sales declines recorded in Malaysia (-52%),
Singapore (-13%), South Africa (-11%) and New Zealand (-
19%).
Export Markets - Kenwood Distributors
The impact of the increase of the strength of sterling
last year continued to hit sales, which were 20% down at
#12.4m. Margins were maintained. Trading in Russia was
severely disrupted by the economic downturn, however
Kenwood's conservative trading policies have ensured
minimal exposure to bad debt. A change of distributor in
the largest export market, Australia, has resulted in a
temporary sales decline.
Manufacturing & Product Sourcing
UK
Manufacturing employment was reduced by 129 to 674 in the
six months. The move out of primary engineering
activities has been successfully completed. Further
models are currently being transferred to China.
China
Third party manufacture in China rose to 29% from 26% as
the Group's policy of outsourcing more product took
effect. Over capacity exists within the region and as a
result cost prices are expected to continue to fall.
RESTRUCTURING
The restructuring programme, instigated in 1997, is being
accelerated:
* A further reduction in the UK workforce was implemented in
May at a cost of #940k, involving 89 redundancies.
* Total worldwide employment has fallen by 646 to 2346 (-22%).
* Outsourcing European logistics is progressing.
* Excess property on the Havant site is for sale.
* We anticipate closing or streamlining a number of our
overseas sales subsidiaries.
PROSPECTS
Prospects have materially worsened in the UK since mid-summer
with declining consumer confidence resulting in reduced sales
and destocking by certain customers. Much will depend on the
Christmas season although the Group is not anticipating any
recovery.
After a strong first half in Italy, the outlook for the second
half is less buoyant. France continues to improve. There is,
however, no prospect of an early recovery in the Asia Pacific
or Eastern European markets.
In the light of these more difficult trading circumstances the
Board anticipates the disappointing market conditions will
continue and that profits for the second half will be no
higher than those made in the first half. Consequently the
Board is accelerating its strategy to move away from
vertically integrated manufacturing and to focus upon brand
marketing. As part of this strategy there will be a number of
important product launches in the second half. Additionally,
the manufacture of further products will be transferred to
China, European warehousing is being outsourced and the
distribution structure streamlined.
Group Profit & Loss Account
As restated As restated
Unaudited Unaudited Audited
6 months to 6 months to year to
2/10/98 3/10/97 3/4/98
#000 #000 #000
Turnover:
Continuing operations 73,362 80,380 168,371
Discontinued operations - 1,085 1,966
_________ _________ _________
73,362 81,465 170,337
Cost of sales (46,458) (52,841) (110,465)
_________ _________ _________
Gross profit 26,904 28,624 59,872
Distribution costs (14,465) (14,837) (34,518)
Administrative expenses (7,686) (7,350) (13,314)
_________ _________ _________
(22,151) (22,187) (47,832)
_________ _________ _________
4,753 6,437 12,040
Other operating
expenditure (1,564) (1,812) (1,745)
_________ _________ _________
Operating profit:
Continuing operations 3,189 4,412 9,935
Discontinued operations - 213 360
3,189 4,625 10,295
Exceptional items:
Continuing
- fundamental reorganisation (105) (1,791) (3,713)
Discontinued
- profit on sale of operation - - 569
Bank interest receivable 37 126 603
Interest payable (2,308) (2,556) (5,297)
_________ _________ _________
(2,271) (2,430) (4,694)
_________ _________ _________
Profit on ordinary
activities before taxation 813 404 2,457
Tax on ordinary activities (317) (360) (2,191)
_________ _________ _________
Profit attributable
to members of the
parent company 496 44 266
Earnings per share 1.1 p 0.1 p 0.6 p
Fully diluted
earnings per share 1.1 p 0.1 p 0.6 p
Group Balance Sheet
As restated As restated
Unaudited Unaudited Audited
2/10/98 3/10/97 3/4/98
#000 #000 #000
Fixed assets
Tangible fixed assets 36,261 39,778 37,058
Investments 1,927 1,927 1,927
_________ _________ _________
38,188 41,705 38,985
_________ _________ _________
Current assets
Stocks 31,860 31,149 32,203
Debtors 48,416 52,781 45,776
Cash at bank and in hand 12,898 12,937 20,470
_________ _________ _________
93,174 96,867 98,449
_________ _________ _________
Creditors: amounts
falling due
within one year
Borrowings (51,991) (58,881) (54,598)
Trade and other creditors (43,760) (41,281) (45,770)
_________ _________ _________
Net current liabilties (2,577) (3,295) (1,919)
_________ _________ _________
Total assets less
current liabilities 35,611 38,410 37,066
_________ _________ _________
Creditors: amounts falling due
after more than one year
Borrowings (645) (1,437) (1,328)
Provisions for
liabilities and charges (119) (455) (1,153)
_________ _________ _________
34,847 36,518 34,585
======== ======== ========
Capital and reserves
Called up share capital 4,586 4,586 4,586
Share premium 25,101 31,101 25,101
Special reserve 2,180 - 2,180
Profit and loss account 2,980 831 2,718
_________ _________ _________
34,847 36,518 34,585
======== ======== ========
Group Statement of Cash Flows
Unaudited Unaudited Audited
6 months to 6 months to year to
2/10/98 3/10/97 3/4/98
#000 #000 #000
Operating profit 3,189 4,625 10,295
Depreciation 3,565 3,845 7,090
Loss/(profit) on
disposal of fixed assets 133 - (74)
Decrease/(increase)
in stock 1,126 (1,949) (4,529)
(Increase)/decrease
in debtors (1,675) (2,644) 4,828
(Decrease)/increase
in creditors (1,890) (2,022) 2,232
________ ________ ________
4,448 1,855 19,842
Cash outflow from
exceptional items (1,203) (2,828) (3,589)
________ ________ ________
Net cash inflow/(outflow)
from operating activities 3,245 (973) 16,253
Returns on investment and
servicing of finance (2,315) (2,199) (4,686)
Taxation (644) (394) (3,477)
Capital expenditure (2,525) (2,907) (4,539)
Acquisitions and disposals (244) (192) 646
Financing - (increase)/
decrease in debt (3,736) (967) 33,446
________ ________ ________
(Decrease)/increase
in cash in the period (6,219) (7,632) 37,643
________ ________ ________
Reconciliation to net debt
(Decrease)/increase
in cash in the period (6,219) (7,632) 37,643
Cash outflow/(inflow)
from decrease/(increase)
in debt and lease financing 3,736 967 (33,446)
________ ________ ________
Change in net debt
resulting from cash flows (2,483) (6,665) 4,197
Translation difference (1,799) 924 1,987
________ ________ ________
Movement in net debt
in the period (4,282) (5,741) 6,184
Opening net debt (35,456) (41,640) (41,640)
________ ________ ________
Closing net debt (39,738) (47,381) (35,456)
________ ________ ________
Turnover & Segmental Analysis
Unaudited Unaudited Audited
6 months to 6 months to year to
2/10/98 3/10/97 3/4/98
#000 #000 #000
Turnover
Turnover by destination:
Sales to third parties
United Kingdom 20,889 22,889 46,337
Continental Europe 36,725 38,271 85,748
Rest of the World 15,748 20,305 38,252
________ ________ ________
73,362 81,465 170,337
======= ======= =======
Turnover by origin:
United Kingdom 35,348 42,563 86,073
Continental Europe 37,806 35,194 82,289
Rest of the World 19,364 27,447 53,297
________ ________ ________
92,518 105,204 221,659
======= ======= =======
Inter-segment sales:
United Kingdom 4,034 5,698 12,109
Continental Europe 10,969 10,749 26,100
Rest of the World 4,153 7,292 13,113
________ ________ ________
19,156 23,739 51,322
======= ======= =======
Sales to Third parties:
United Kingdom 31,314 36,865 73,964
Continental Europe 26,837 24,445 56,189
Rest of the World 15,211 20,155 40,184
________ ________ ________
73,362 81,465 170,337
======= ======= =======
Notes
1 Consolidated profit & loss account (before FRS12 adjustment)
Unaudited Unaudited
6 months to 6 months to Year to
2/10/98 3/10/97 3/4/98
#000 #000 #000
Turnover:
Continuing operations 73,362 80,380 168,371
Discontinued operations - 1,085 1,966
________ ________ ________
73,362 81,465 170,337
Cost of sales (46,458) (52,841) (110,465)
________ ________ ________
Gross profit 26,904 28,624 59,872
Distribution costs (14,465) (14,837) (34,518)
Administrative expenses (7,686) (7,350) (13,314)
________ ________ ________
(22,151) (22,187) (47,832)
________ ________ ________
4,753 6,437 12,040
Other operating expenditure (1,564) (1,812) (1,745)
________ ________ ________
Operating profit:
Continuing operations 3,189 4,412 9,935
Discontinued operations - 213 360
3,189 4,625 10,295
Exceptional items:
Discontinued
- profit on sale of operation - - 569
Bank interest receivable 37 126 603
Interest payable (2,308) (2,556) (5,297)
________ ________ ________
(2,271) (2,430) (4,694)
________ ________ ________
Profit on ordinary
activities before taxation 918 2,195 6,170
Tax on ordinary activities (358) (549) (2,191)
________ ________ ________
Profit attributable
to members
of the parent company 560 1,646 3,979
Earnings per share 1.3 p 3.7 p 9.0 p
Fully diluted
earnings per share 1.3 p 3.7 p 9.0 p
Notes continued
2 Due to the implementation of FRS12, (Provisions and
Contingencies), the financial statements in respect of
the previous year have been restated by way of a prior
year adjustment. The impact on the results for the
current period is immaterial.
3 The interim financial statements are unaudited and do not
constitute full accounts within the meaning of the
Companies Act 1995. Figures for the financial year to 3
April 1998 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.
4 Except for the effects of the implementation of FRS 12
explained in Note 1 above the financial statements have
been prepared on the basis of the accounting policies set
out in the Group's 1998 statutory accounts.
5 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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