RNS Number:3372A
Lambert Howarth Group PLC
13 March 2001
13 March 2001
LAMBERT HOWARTH GROUP p.l.c.
Preliminary Results
Highlights
* Turnover increased by 12.7% to #134.9m (1999: #119.7m)
* Profit before tax and goodwill amortisation #11.3m (1999: #12.2m),
reflecting a highly competitive retail market place
* Earnings per share before goodwill 37.0p (1999: 56.7p), a consequence of
lower profits and the issue of shares following the acquisition of Fast
Forward Holdings Limited
* Successful integration of Fast Forward Holdings Limited
* Acquisition of Orient Sourcing Services Limited in December
* Proposed increase in the final dividend to 11.0p (1999: 10.5p) making
total for the year of 15.0p (1999: 14.5p)
Commenting on the results, Robert Garfit, Chairman, said:
"These results are a reflection of the difficult trading environment being
experienced on the high street. Sales have increased as a result of the
acquisition of Fast Forward Holdings Limited. The acquisition of Orient
Sourcing Services in December significantly extends our position in the supply
of homeware, soft furnishings and giftware."
For further information:
Lambert Howarth Group p.l.c. 020 7935 4880
Robert Garfit, Chairman
John Gibson, Group Finance Director
Financial Dynamics 020 7831 3113
Charlie Armitstead
CHAIRMAN'S STATEMENT
Results for the year to 31 December 2000
The results for the year to 31 December 2000 have been produced against the
background of a highly competitive retail market place for both Lambert
Howarth and our customers.
The acquisition of Orient Sourcing Services Limited was completed on 14
December 2000 and therefore, the effect on the results for the group was
minimal for the year, reflecting approximately two weeks of trading activity.
Turnover increased by 12.7% to #134.9 million from #119.7 million in the
previous year as a result of the acquisition of Fast Forward Holdings Limited
completed at the end of 1999.
Operating profit on continuing activities, before goodwill amortisation, was
#11.4 million against #12 million in 1999.
Profit on ordinary activities before tax and goodwill amortisation was #11.3
million compared with #12.2 million in the previous year as the group suffered
from pressure on its margins.
Earnings per share calculated before goodwill were 37.0p against 56.7p in
1999, a consequence of lower profits and the issue of shares following the
acquisition of Fast Forward Holdings Limited.
The board is proposing to increase the final divided to 11.0p a share (10.5p
per share in 1999) which, together with the interim dividend makes a total for
the year of 15.0p per share (14.5p per share in 1999). The final dividend will
be paid on 15 May 2001 to shareholders on the register on 17 April 2001.
The Board
On completion of the acquisition of Orient Sourcing Services Limited in
December 2000, we welcomed Simon Arora to the board. Simon's background in
strategic management and his experience in new market areas will be a valuable
asset for the group in the rapidly changing market for retail supply.
Tim Cooper resigned from the board on 31 December 2000. I would like to thank
Tim for his valuable contribution to the group over a number of years
particularly in the development of our international footwear sourcing
operations.
Acquisitions
It is pleasing to report that our Fast Forward accessories business has had a
successful year and is performing well, both in terms of profits and sales.
The integration of the two management teams within the Marks & Spencer
division has progressed smoothly.
The acquisition of Orient Sourcing Services is a significant step towards
balancing our customer profile and providing the group with a greater presence
within the homeware market sector. This acquisition also brings the benefit of
diversifying our supplier base.
Trading performance and future prospects
Sales through 2000 have held up well despite difficult trading in the high
street generally. However margins have been under pressure throughout the year
as retailers have reduced prices in an attempt to offset weak demand.
Although it is too early to predict at this time of the year the likely
outcome for 2001, the trading climate remains difficult. Management is
responding to this challenge in refocusing the group into those areas with
potential for further growth and superior returns for the business.
The board is confident that the group's strategic objective to establish
itself as a comprehensive accessory supplier within the UK market place will
deliver long-term shareholder value.
Robert Garfit
Chairman 13 March 2001
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
2000 has been a year with difficult trading conditions in a rapidly changing
market with fierce competition in the high street. Our performance reflects
these conditions, the benefits of the Fast Forward acquisition last year and
the developments in new areas of business for securing organic growth.
The group now has the capability to supply a comprehensive range of
accessories in a way which will excite the customer and, this will be achieved
by embracing the concept of creativity as the centre of our philosophy. We
have a strong belief that we must design, create and innovate for our target
customers to provide them with products which offer exceptional value. We must
be in touch with rapidly changing trends in styles and ensure we are up to
date with new developments in production techniques world-wide.
Acquisition
In December we acquired Orient Sourcing Services Limited. This was a major
strategic acquisition for the group and significantly extends our position in
the supply of homeware, soft furnishings and giftware.
The consideration for Orient Sourcing Services Limited, excluding acquisition
costs was #25 million, to be increased to a maximum of #35 million subject to
the achievement of profit targets over a two year period to December 2002. The
purchase price was satisfied by the issue of 1,436,781 ordinary shares in
Lambert Howarth Group p.l.c., valued at #2.5 million, #20 million in
guaranteed loan notes with a further #2.5 million of consideration to be
satisfied sixteen months after completion by issue of further ordinary shares.
The earn out would be met by the issue of unsecured loan notes for three
quarters of the value and the remainder in ordinary shares.
The acquisition represents an important step towards our declared objective of
becoming one of the UK's most comprehensive accessory suppliers. At the same
time, it will give a better balance to our customer profile and greater
exposure to the growth area of homeware. Orient also brings to the group
further strengths in sourcing products internationally.
Orient's product range comprises soft furnishings, home accessories and
giftware. Orient is currently developing a decorative lighting range and also
a bathroom accessories line. We expect to expand the business by offering an
integrated range of products to existing customers and by leveraging our
strong market reputation to open new retail accounts.
Operations Review
Our operational structure, established on product lines, has been strengthened
and reorganised during the year to provide benefit in the future development
of the group. The integration of Fast Forward has now been completed following
the relocation to new London offices in Manchester Square, which will improve
the responsiveness within our business.
My commentary on our performance in the year has been presented by product
areas.
Accessories
The accessories business performed well in 2000 with sales higher on an annual
basis than in 1999, providing increased profits. The benefits of investment in
new areas and the programme of product development in the creation of new
lines has underlined this success. Sales for 2001 are ahead of 2000 and we
expect a further expansion of this operation.
Footwear
Our largest operation, which supplies footwear to Marks & Spencer, has
experienced a tough year and revenue and profits declined. We have
restructured the team both in operational management and in the areas of
design and development. We are confident that 2001 will benefit from this
action.
Our general footwear business, which supplies to other retail outlets, has
achieved further sales growth in the year. We have established an improved
supply base enabling us to offer more diversity in our products. New
opportunities to further extend our product range have been identified with
encouragement from our customers. We have identified opportunities for
expansion and I am pleased to report that the trials have proved popular.
The safety footwear business has operated in adverse market conditions
throughout the year. Initiatives taken to strengthen the sales team and
increase the proportion of branded lines have ensured we have retained
business in the face of strong competition.
Homeware
Our homeware business increased its sales and profitability compared to last
year. We offer a comprehensive range of home accessories which include
ceramics, glassware and textile ranges of bedding, cushions and curtains. The
acquisition of Orient with its range of products and existing customers will
transform the profile of this division, giving us the potential for becoming
the most significant home accessory supplier in the country.
Branded
Our business in licensed footwear and branded lines is actively being
established with a number of high level initiatives being pursued by our team
led by Jo Newton, a former director of Debenhams. We have identified this
market as an important part of our strategy for organic growth with potential
to create product recognition thereby attracting a wider customer base.
People
We have a highly focused, talented and hard working team, all of whom have
adapted well to the changes undergone by our business in the past year and I
thank them on behalf of the board.
G T Hogarth 13 March 2001
Chief Executive
AUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2000
2000 1999
#'000 #'000
Turnover (including share of joint ventures)
Continuing operations 135,931 119,439
Acquisitions 73 -
136,004 119,439
Discontinued operations - 736
136,004 120,175
Less: share of turnover of joint ventures (1,153) (479)
Turnover 134,851 119,696
Cost of sales (101,343) (87,273)
Gross profit 33,508 32,423
Net operating expenses (23,674) (20,616)
Operating profit
Continuing operations - before goodwill 11,512 11,911
amortisation
Goodwill amortisation (1,474) (170)
10,038 11,741
Acquisitions (after #84,000 goodwill amortisation) (204) -
9,834 11,741
Discontinued operations - 66
Group operating profit 9,834 11,807
Share of operating profit in joint ventures 17 114
Total operating profit: group and share of joint 9,851 11,921
ventures
Group interest (payable)/receivable (91) 124
Profit on ordinary activities before taxation
- before goodwill amortisation 11,318 12,215
- goodwill amortisation (1,558) (170)
Profit on ordinary activities before taxation 9,760 12,045
Tax on profit on ordinary activities (3,455) (3,839)
Profit for the financial year 6,305 8,206
Dividends (3,340) (2,783)
Retained profit for the financial year 2,965 5,423
Earnings per share
Basic 29.7p 55.5p
Goodwill amortisation 7.3p 1.2p
Basic before goodwill amortisation 37.0p 56.7p
Diluted 29.5p 55.1p
AUDITED CONSOLIDATED BALANCE SHEET
at 31 December 2000
2000 1999
#'000 #'000
Fixed assets
Intangible assets 34,820 15,590
Tangible assets 13,091 7,145
Investments in joint ventures
Share of gross assets 1,124 449
Share of gross liabilities (1,014) (340)
110 109
Other investments 106 106
216 215
48,127 22,950
Current assets
Stocks 21,772 18,481
Debtors 14,553 7,359
Cash at bank and in hand 7,665 17,501
43,990 43,341
Creditors: amounts falling due within one year 27,092 24,927
Net current assets 16,898 18,414
Total assets less current liabilities 65,025 41,364
Creditors: amounts falling due after more than one 17,561 2,344
year
Provisions for liabilities and charges 171 174
Net assets 47,293 38,846
Financed by
Capital and reserves
Called up share capital 2,264 2,115
Deferred shares 2,500 -
Contingent shares 750 -
Share premium account 634 760
Merger and other reserves 20,224 18,012
Profit and loss account 20,921 17,959
Equity shareholders' funds 47,293 38,846
AUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2000
2000 1999
#'000 #'000
Net cash inflow from operating activities 2,815 14,880
Returns on investments and servicing of finance
Interest received 311 193
Interest paid (228) (59)
83 134
Taxation (4,875) (2,554)
Capital expenditure and financial investment (4,703) (46)
Acquisitions
Purchase of subsidiary undertakings (244) (1,900)
Net cash/(overdrafts) acquired with subsidiary undertakings 734 (2,724)
490 (4,624)
Equity dividends paid (3,067) (1,857)
Cash (outflows)/inflows before financing (9,257) 5,933
Financing
Issue of ordinary share capital 70 147
Expenses of share issue for acquisition - (318)
Hire purchase repayments (4) (27)
66 (198)
(Decrease)/increase in cash in the year (9,191) 5,735
Notes
1. Basic earnings per share has been calculated by dividing the profit for the
financial year by 21,227,890 (1999: 14,780,124) being the weighted average
number of 10p ordinary shares in issue during the year ended 31 December 2000.
For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares.
The weighted average number of shares used in this calculation for 2000 is
21,361,795 (1999: 14,904,337 shares).
Supplementary basic earnings per share has been calculated to exclude the
effect of goodwill amortisation. The adjusted numbers provide a more
meaningful view of the group's underlying operating performance.
2. The figures included in this preliminary announcement are extracted from
the audited financial statements which will shortly be issued to shareholders.
The figures do not constitute statutory accounts within the meaning of Section
240 (5) Companies Act 1985.
3. Acquisition of Orient Sourcing Services Limited
On 14 December 2000, the Group acquired the entire share capital of Orient
Sourcing Services Limited. The principal activity of Orient is the design,
import and distribution of soft furnishings, housewares and giftware to the
retail trade.
The maximum consideration payable is #35 million. #22,500,000 was paid on
completion of the acquisition, satisfied by the issue of 1,436,781 new
ordinary shares and #20,000,000 in Guaranteed Loan Notes. Ordinary shares to
the value of #2,500,000 will be issued 16 months after the completion date,
and a further amount (up to a maximum of #10,000,000) will become payable on 1
April 2003 if certain performance targets relating to Orient's profit on
ordinary activities before taxation for each of the two calendar years 2001
and 2002 are achieved. This additional consideration will equal twice the
amount by which the profit on ordinary activities before taxation exceeds #
5,400,000 in 2001, plus twice the amount by which the profit on ordinary
activities before taxation in 2002 exceeds that achieved in 2001. The
additional consideration is subject to an overall maximum of #10,000,000. 75%
of the additional consideration will be satisfied by the issue of Unsecured
Loan Notes, and 25% by the issue of new ordinary shares.
The book and provisional fair values of the assets and liabilities acquired in
the transaction were as follows:
Book Revaluation Provisional Fair
Value Value
#'000 #'000 #'000
Fixed assets 1,927 - 1,927
Stocks 3,364 - 3,364
Debtors 5,166 (627) 4,539
Cash 734 - 734
Creditors (3,974) 161 (3,813)
Provision for liabilities (9) - (9)
and charges
Net assets acquired 7,208 (466) 6,742
Shares issued 2,356
Loan notes issued 20,000
Deferred and contingent 5,500
consideration
Total consideration 27,856
Cost of acquisition 691
28,547
Goodwill 21,805
The goodwill arising from this acquisition is being amortised on a
straight-line basis over ten years. The amortisation charged to the profit and
loss account for 2000 amounts to #84,000.
The revaluation is a provision against trade debtors to reflect the current
estimate of their recoverability together with associated tax relief.
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