RNS No 5258v
LONGMEAD GROUP PLC
11th November 1998
PRELIMINARY RESULTS FOR YEAR ENDED 1 AUGUST 1998
CHAIRMAN'S STATEMENT
Trading Results
This is my first full year's report since the Company was
admitted to the Alternative Investment Market on 31
December 1997. For reasons that I have outlined below,
the year to 1 August 1998 has been challenging and, in
financial terms, the outturn for the year has been
disappointing with turnover falling to #4.05 million
(1997: #4.30 million) and profit before taxation down to
#301,000 (1997: #521,000). Earnings per share, adjusted
for the average number of shares in issue during the
year, fell to 7.7 pence (1997: 15.0 pence).
The poor trading performance has been brought about by a
number of factors:
. A significant down turn in sales to our major UK
retail customers in the final quarter of the year.
. In an effort to stimulate sales in the final quarter
a number of promotions at discounted prices were
undertaken which depressed margins.
. Export sales were adversely affected by the strength
of sterling.
. There was increased price competition from Far East
manufacturers which affected Balmoral porcelain sales
in particular.
. Manufacturing costs were higher than anticipated as a
result of certain technical problems with raw
materials (which have been resolved) and initial
difficulties in bringing new product ranges on
stream.
Bathroom accessories
Sales of bathroom accessories fell by about 5% compared
with the previous year. We made good progress in opening
a number of new major accounts but the benefit of this
was reduced by disappointing sales from established
customers, particularly in the last quarter. Our main
emphasis on product development has been in this area,
new ranges have been launched and product will be going
into a number of new outlets this month, including one
major D-I-Y chain. Increased emphasis is being placed on
free standing items where we believe there are excellent
opportunities for innovative designs.
Door furniture
This section of the business has been particularly
disappointing with sales in the year falling by nearly
10% compared with last year. Cheap foreign imports have
had a significant impact on sales.
A whole range of new designs has been developed
and these have recently been introduced. In order
to counteract the effect of cheap imports it is
essential that we invest in design and development
and further new products are planned for this
financial year.
Dividends
As a demonstration of the Board's continuing confidence
in the future, it is proposed to declare a final dividend
of 2.0 pence per share. This, together with the interim
dividend of 0.25 pence per share, produces a dividend for
the year of 2.25 pence. This is equivalent to an annual
dividend of 3.85 pence on the basis that the shares had
been held for a full year. Subject to shareholders'
approval, the dividend will be payable to holders of
ordinary shares on the register at 27 November 1998 and
will be paid on 27 January 1999.
Recent Developments
Over the last few months, your Board has taken a number
of steps to improve both turnover and margins. These
include:-
. The recruitment of a Senior Marketing Executive to
develop new products to complement the current
product ranges and to take the Company into new
markets. There will now be an accelerating programme
of new product development in order to broaden the
Company's customer base both in the UK and overseas.
. An increase in overseas activity. The Company
exhibited at the National Hardware Show in Chicago,
USA, in August 1998 and will be exhibiting at a major
international bathroom show in Frankfurt, Germany, in
March 1999. A range of new products was shown in
Chicago, which were well received, and we will have
many new developments for the Frankfurt Show.
Inevitably this type of activity takes time to
produce results but we are confident that it will
have a beneficial effect in the longer term.
. The reorganisation of production following the
resignation of the Production Director in September.
New production staff have been recruited resulting in
the strengthening of management and an improvement in
control.
. The acquisition of a small supplier of door knobs and
the transfer of its production to our factory in
Axminster. This will enable us to reduce costs and
compete more effectively with Far East manufacturers.
. Investment in new plant and equipment to enable us to
produce all products in house thereby reducing costs
and improving margins.
Acquisitions
The Company has been carrying out a programme over the
last nine months to identify suitable acquisitions. Many
targets have been examined but they have either not been
suitable or were too expensive. It is our intention to
continue to seek acquisitions consistent with the
following criteria:-
. To keep the Company focussed on either the ceramic
industry or the DIY industry.
. To exercise patience as it is felt that, in a
deteriorating economic climate, there may be "good
buys" over the next 12 months.
. Not to overpay or make the Company vulnerable by over
borrowing to fund acquisitions.
Balance sheet
Following the placing of 1.1 million shares at the end of
1997 our balance sheet is strong. Shareholders funds
have risen to nearly #3.5 million and our gearing, or
borrowing as a percentage of shareholders funds, has
fallen to 28% from 91% prior to the placing.
Future Prospects
Whilst 1998 was disappointing in terms of financial
results, the Board remains confident about the prospects
for the Company's longer term future. The present
outlook, however, is uncertain. The further fall in
interest rates will slow down the rate of economic
decline, particularly in manufacturing, but the main
requirement is a boost in consumer confidence. Retail
sales are being affected and this obviously impacts on
manufacturers' sales. To counteract the effect of this,
it is essential that we innovate and develop and this is
our clear intention. We anticipate that sales will
continue to be sluggish in the first half of our
financial year but it is hoped that the second half will
show a considerable improvement.
Finally, I would like to take this opportunity to thank
the management and staff of the Company for all their
hard work during the year.
R E W Newman
11 November 1998
CONSOLIDATED PROFIT AND LOSS ACCOUNT
52 weeks ended 1 August 1998
1998 1997
# #
TURNOVER
- continuing operations 4,045,897 3,324,802
- acquisitions - 976,574
---------- ---------
4,045,897 4,301,376
Cost of sales (2,715,977)(2,767,323)
---------- ----------
Gross profit 1,329,920 1,534,053
Distribution costs (481,411) (511,001)
Administrative expenses (403,609) (349,116)
---------- ---------
Operating profit
- continuing operations 444,900 581,246
- acquisitions - 92,690
---------- ---------
Total operating profit 444,900 673,936
Interest receivable and
similar income 9,089 3,350
Interest payable and similar
charges (152,561) (155,860)
---------- ---------
PROFIT ON ORDINARY
ACTIVITIES
BEFORE TAXATION 301,428 521,426
Tax on profit on ordinary
activities (60,910) (147,600)
---------- ---------
PROFIT ON ORDINARY
ACTIVITIES
AFTER TAXATION 240,518 373,826
Dividends paid and proposed (81,211) (49,816)
---------- ---------
RETAINED PROFIT FOR THE 159,307 324,010
FINANCIAL YEAR ======= =======
EARNINGS PER ORDINARY SHARE 7.65p 15.01p
======= =======
CONSOLIDATED BALANCE SHEET
1 August 1998
1998 1997
# #
FIXED ASSETS
Tangible assets 2,602,859 2,646,498
CURRENT ASSETS
Stocks and work in progress 1,844,290 1,457,578
Debtors 897,143 966,797
Cash at bank and in hand 29,922 734
--------- ---------
2,771,335 2,425,109
--------- ---------
CREDITORS: amounts falling due (1,016,098)(1,540,074)
within one year
--------- ---------
NET CURRENT ASSETS 1,755,257 885,035
--------- ---------
TOTAL ASSETS LESS CURRENT 4,358,116 3,351,533
LIABILITIES
CREDITORS: amounts falling due
after more than
one year (810,777)(1,439,257)
PROVISIONS FOR LIABILITIES
AND CHARGES (67,900) (58,900)
--------- ---------
3,479,439 2,033,376
========= =========
CAPITAL AND RESERVES
Called up share capital 360,939 249,078
Share premium account 1,224,824 49,929
Revaluation reserve 296,885 301,957
Profit and loss account 1,596,791 1,432,412
--------- ---------
TOTAL EQUITY SHAREHOLDERS' FUNDS 3,479,439 2,033,376
========== =========
CONSOLIDATED CASH FLOW STATEMENT
52 weeks ended 1 August 1998
1998 1997
# #
Net cash inflow from operating 270,889 474,578
activities
------- --------
Returns on investments and servicing
of finance
Interest received 8,965 4,272
Interest paid (150,617) (138,175)
Interest element of finance lease (11,037) (8,172)
rentals
------- --------
(152,689) (142,075)
------- --------
Taxation
Corporation tax paid (277,520) (47,729)
-------- --------
Capital and expenditure and
financial investment
Purchase of tangible fixed assets (121,556) (675,190)
Proceeds from sale of tangible fixed 25,145 44,818
assets
------- --------
(96,411) (630,372)
------- --------
Acquisitions
Purchase of subsidiary - (637,346)
Net loans acquired - (40,765)
------- ---------
- (678,111)
------- --------
Equity dividends paid (101,103) (7,552)
------- ---------
Net cash outflow before financing (356,834)(1,031,261)
------- ----------
Financing
Issue of ordinary share capital 1,504,350
Expenses of issue of ordinary share (217,594) -
capital
Capital element of finance lease (68,919) (59,110)
rentals
New loans - 1,040,000
Loans repaid (650,000) (165,853)
------- ---------
Net cash inflow from financing 567,837 815,037
------- ---------
Increase/(decrease) in cash 211,003 (216,224)
======= =======
1. EARNINGS PER ORDINARY SHARE
The calculation of the earnings per share is based on the
weighted average number of shares in issue during the
financial year of 3,144,016 (1997 - 2,490,780) and on the
profits attributable to ordinary shareholders of #240,518
(1997 - #373,826).
2. DIVIDENDS
1998 1997
# #
Interim paid 0.25p per ordinary 9,023 -
share (1997 - nil)
Final proposed 2p per ordinary 72,188 49,816
share (1997 - 2p)
------- -------
81,211 49,816
====== ======
The financial information on the Group set out
above does not constitute statutory accounts
within the meaning of section 240 of the Companies
Act 1985. The results for the year to 1 August
1998 are based on the audited consolidated
financial statements of The Longmead Group plc
which have been reported on by the auditors. The
report of the auditors was unqualified and did not
contain a statement under Section 237, Companies
Act 1985.
Copies of the 1998 Report and Accounts will be
sent to shareholders in due course. Further
copies will be available from the registered
office of The Longmead Group plc, Millwey
Industrial Estate, Axminster, Devon, EX13 5HU and
from the Company's nominated adviser, Smith &
Williamson at 1 Riding House Street, London, W1A 3AS.
END
FR AAROKWSKAAAA
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