RNS Number:1139J
Lambert Howarth Group PLC
29 August 2001
Wednesday 29 August 2001
LAMBERT HOWARTH GROUP p.l.c.
Interim Results
Summary
* Turnover increased to #65.6 million (2000: #59.2 million)
* Profit before tax, goodwill amortisation and exceptional items #2.2
million (2000: #4.5 million), reflecting the difficult trading environment
the group has experienced over the period
* The sale of the Safety Footwear business for #1.7 million and closure of
Global Homeware following a review of the under performing areas of the
business and the subsequent announcement of the closure of the General
Trade division
* Continued strong performance of Orient Sourcing Services
Commenting on the results, Robert Garfit, Chairman, said:
"These results reflect the difficult trading environment we have continued to
experience during the last six months. We have worked hard to review under
performing areas and the actions that we have taken mean that the group now
has improved focus and can concentrate solely on footwear, accessories and
soft textile home products alongside its newly acquired Orient Sourcing
Services business.
Furthermore, our newly founded Brands division is at an advanced stage with
its plans to establish a significant business within the fashion accessories
market. This is an area that represents a exciting opportunity for the group
moving forward."
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
The results for the first half year ended 30 June 2001 reflect the difficult
trading conditions the group has experienced over the period.
Turnover at #65.6 million was #6.3 million higher than for the comparable
period in 2000, which reflects the acquisition of Orient Sourcing Services.
Operating profit, before goodwill amortisation and exceptional items, was #2.9
million against #4.4 million last year.
Exceptional items, excluding goodwill adjustments, gave rise to a net charge
of #123,000 which represents the aggregate of the profits arising on the sale
of surplus properties, the loss on disposal of the Safety Footwear business
and the cost of closure of Global Homeware.
Profit on ordinary activities, before taxation, goodwill amortisation and
exceptional items, was #2.2 million compared to #4.5 million in the first half
of 2000. Earnings per share, calculated before goodwill amortisation and
exceptional items, were 6.7p against last year's figure of 14.8p.
The group's cash flow reflects the seasonality of the business, proceeds from
the Safety disposal and the benefit of stringent cash management.
In the light of the company's performance and the outlook for the remainder of
the year, the board has declared an interim dividend of 3p per share (4p per
share in 2000). The dividend will be paid on 10 December 2001 to shareholders
on the register at the close of business on 16 November 2001.
Operations
Trading conditions during the first half of the year have continued to be very
difficult with sales demand weak and sustained pressure on margins. The board
believes these conditions will continue through the remainder of the financial
year.
The board has continued with its review of the group's activities and
subsequently taken a number of actions to reduce costs, conserve cash and
improve the overall focus of the business. We have withdrawn from the non core
activities that no longer offer growth potential so that we can now
concentrate solely on footwear, accessories and soft textile home products.
Our newly acquired Orient Sourcing Services business is not affected by this
reorganisation.
In the first half of this year, the actions we have taken include the sale of
our Safety Footwear business for #1.7 million and closure of part of the
homeware division, Global Homeware. The exceptional cost for these actions,
excluding goodwill adjustments, was #953,000. These costs have been partially
offset by the sale of surplus properties which produced an exceptional gain of
#830,000. Since the half year end, we have announced on 27 July, the closure
of our General Trade Footwear division at an exceptional cost expected to be #
2.2 million. The withdrawal from these areas of business is releasing cash
resources for development of our core activities. The board does not
anticipate any further reorganisations within these divisions.
I am pleased to report that Orient Sourcing Services has performed well during
the first half and we expect a strong performance over the year. Given
Orient's positioning in the market place, its product range and sourcing
strength and the important new accounts developed in the UK in the first half
of this year, we are confident that the business can be expanded significantly
over the medium term. As part of our growth plans for this business, we are
exploring opportunities for expansion into mainland Europe.
Our newly founded Brands division is well advanced with its strategic plans to
establish a significant business within the fashion accessories market,
particularly aimed at the younger consumer where we have identified an
increasing demand for accessories which co-ordinate with premium fashion
clothing brands.
Given the group's well established sourcing capability, this represents a
significant opportunity for the group and is in line with our stated strategy
of becoming the leading and most comprehensive fashion accessory supplier in
the UK.
Strategy
The board is taking decisive action to correct the erosion of margins seen in
the first six months of the year given the speed of decline in our traditional
market sector which has been much faster than we could have anticipated at the
end of 2000.
We have referred in previous reports to our strategic objectives. We are
confident that a consolidated Global Footwear and Fast Forward operation will
continue to be successful, given the experience within its management team and
the quality sourcing structure which has been developed over many years.
The acquisition of Orient Sourcing Services last year established the second
leg within the group. The introduction of a Brands business which has a high
margin capability and operates within a discrete marketplace, brings an
exciting new dynamic to our activity and should provide a significant balance
to the group's profile.
Board Structure
Given that the board has now defined its future strategic objectives, I
consider that the board composition should change to better reflect the
requirements of the business.
With effect from today, I have become non-executive chairman and plan to stand
down following the next Annual General Meeting. Fred Vinton, previously a
non-executive director, has today been appointed non-executive deputy chairman
and will replace me as chairman following the Annual General Meeting.
Additionally, James Howarth, the longest serving member of the board and great
grandson of the founder of the group, will be standing down from the board
following the next Annual General Meeting but will continue as an executive to
assist in future technical projects within the group until the end of August
2002.
Outlook
Whilst it is disappointing to report a downturn in our profitability in the
first half year, sales have held up well albeit at the expense of margin.
Further actions are being taken to cut cost. We remain well placed to take
advantage of any upturn in demand by our major customers. The development of
new initiatives with Orient and the Brands division will provide a balance for
the group's activities.
The board is confident of its ability to steer the group through this
difficult phase in order to enhance performance in the future.
Robert Garfit
Chairman
29 August 2001
Lambert Howarth Group p.l.c.
Group Profit & Loss Account
for the six months to 30 June 2001
Unaudited Half Year to 30 June 2001
Before Goodwill Group Unaudited Audited
goodwill amortisation/ Profit Half Year Year
amortisation/ write-off & Loss 30 June 31
write-off 2000 December
2000
Notes #'000 #'000 #'000 #'000 #'000
Turnover
(including
share of joint
venture)
Continuing 59,481 - 59,481 51,020 115,780
operations
Discontinued 6,776 - 6,776 8,205 20,224
operations 1
Less share of (692) - (692) - (1,153)
turnover of
joint venture
Turnover 2 65,565 - 65,565 59,225 134,851
Operating
profit
Continuing 2,679 (1,828) 851 3,278 8,870
operations
Discontinued 214 - 214 344 964
operations
Operating 2 2,893 (1,828) 1,065 3,622 9,834
profit
Share of 6 - 6 - 17
operating
profit in
joint venture
Total
operating
profit: group 2,899 (1,828) 1,071 3,622 9,851
and share
of joint
venture
Profit on 3 830 - 830 - -
disposal of
surplus
properties
Loss on 3 (953) (5,493) 2 (6,446) - -
discontinuance
of businesses
Group net
interest
(payable) / (662) - (662) 134 (91)
receivable
(Loss) /
profit on
ordinary 2,114 (7,321) (5,207) 3,756 9,760
activities
before
taxation
Tax on (loss)
/ profit on
ordinary 4 (571) - (571) (1,406) (3,455)
activities
(Loss) / 1,543 (7,321) (5,778) 2,350 6,305
profit for the
financial
period
Dividends 5 (681) - (681) (847) (3,340)
Retained 862 (7,321) (6,459) 1,503 2,965
(loss) /
profit
(Loss) /
earnings per
share (pence)
Basic 6 (25.5) 11.1 29.7
Basic before
goodwill and
exceptional 6.7 14.8 37.0
items
Diluted 6 (24.7) 11.1 29.5
1 Discontinued operations include the business discontinued in the half year
to 30 June 2001 and that for which the decision to discontinue was taken
before 30 June 2001 and which will be discontinued in the period to 31
December 2001.
2 Goodwill previously written off against reserves.
Lambert Howarth Group p.l.c.
Group Balance Sheet
as at 30 June 2001
Unaudited Unaudited Audited
30 June 30 June 31 December
2001 2000 2000
Notes #'000 #'000 #'000
Fixed assets
Intangible assets 32,992 14,810 34,820
Tangible assets 11,386 7,755 13,091
Investments 335 215 216
44,713 22,780 48,127
Stocks 27,075 20,040 21,772
Debtors 13,260 6,828 14,553
Cash at bank and in hand 3,395 7,784 7,665
Bank overdrafts (82) (1,538) (241)
Creditors falling due within one year 7 (27,457) (13,198) (26,851)
Net current assets 16,191 19,916 16,898
Total assets less current liabilities 60,904 42,696 65,025
Creditors falling due after more than
one year 7 (14,348) (2,153) (17,561)
Provisions for liabilities and charges (171) (174) (171)
Net assets 46,385 40,369 47,293
Capital and reserves
Share capital 2,269 2,116 2,264
Deferred shares 2,500 2,500
Contingent shares 750 750
Share premium 685 779 634
Merger and other reserves 20,224 18,012 20,224
Profit and loss account 19,957 19,462 20,921
Equity shareholders' funds 8 46,385 40,369 47,293
Lambert Howarth Group p.l.c.
Group Cash Flow
for the six months to 30 June 2001
Unaudited Unaudited Audited
Half Year Half Year Year
30 June 30 June 31 December
2001 2000 2000
#'000 #'000 #'000
Net cash flow from operating activities 323 (6,148) 2,815
Returns on investments & servicing of
finance
- Interest received 101 212 311
- Interest paid (220) (17) (228)
(119) 195 83
Taxation (1,488) (1,450) (4,875)
Capital expenditure and financial
investment 3,170 (763) (4,703)
Acquisitions
- Investment in associate (113) - -
- Purchase of subsidiary undertakings (447) - (244)
- Net cash acquired with subsidiary
undertaking - - 734
(560) - 490
Equity dividends paid (2,493) (2,220) (3,067)
Net cash outflow before financing (1,167) (10,386) (9,257)
Financing
- Issue of ordinary share capital 56 20 70
- Loan note deposit made (3,000) - -
- Hire purchase repayments - (3) (4)
(2,944) 17 66
Decrease in cash in the period (4,111) (10,369) (9,191)
Lambert Howarth Group p.l.c.
Group Cash Flow continued
for the six months to 30 June 2001
Unaudited Unaudited Audited
Half Year Half Year Year
30 June 30 June 31 December
2001 2000 2000
#'000 #'000 #'000
Reconciliation of net cash flow to
movement in net (debt) / funds
Decrease in cash in the period (4,111) (10,369) (9,191)
Hire purchase repayments - 3 4
Change in net debt resulting from cash
flows (4,111) (10,366) (9,187)
Loan notes cancelled - - 1,000
Loan notes issued as consideration for
acquisition - - (20,000)
Loan note deposit made 3,000 - -
Deferred consideration for acquisition - - (2,250)
Movement in net debt in the period (1,111) (10,366) (30,437)
Net (debt) / funds at the beginning of
the period (15,626) 14,811 14,811
Net (debt) / funds at the end of the
period (16,737) 4,445 (15,626)
Analysis of group net (debt) / funds
Cash at bank 3,395 7,784 7,665
Bank overdrafts (82) (1,538) (241)
Loan notes (17,800) (1,800) (20,800)
Hire purchase obligations - (1) -
Deferred consideration (2,250) - (2,250)
Net (debt) / funds (16,737) 4,445 (15,626)
Reconciliation of operating profit to
net cash flow from operating
activities
Operating profit 1,071 3,622 9,851
Amortisation of goodwill 1,828 780 1,558
Depreciation 416 365 903
(Profit ) / loss on disposal of fixed
assets 47 (35) (41)
Deferred income - grants (44) (46) (134)
Movement in stocks (6,190) (1,559) 73
Movement in debtors 556 395 (2,760)
Movement in creditors 2,639 (9,670) (6,635)
Net cash flow from operating
activities 323 (6,148) 2,815
Lambert Howarth Group p.l.c.
Notes to the Interim Report
1. Basis of preparation
The interim financial information for the six months ended 30 June 2001 has
not been audited and does not constitute statutory accounts within the meaning
of Section 240 of the Companies Act 1985. It has been prepared on the basis
of the accounting policies set out in the group's 2000 statutory accounts.
The financial information relating to the year ended 31 December 2000 is
abridged from the group's published accounts for that period which have been
filed with the Registrar of Companies and on which the company's auditors gave
an unqualified report under Section 235 of the Companies Act 1985 and which
did not contain a statement under Section 237 (2) or (3) of the Act.
The interim report for the six months to 30 June 2000 was published on 22
August 2000 and the accounts for the year to 31 December 2000 were published
on 13 March 2001.
2. Class of business analysis
The group is engaged in design, resourcing and distribution of consumer
products to major retailers. In reporting our activities, the directors
consider that the business constitutes a single class.
3. Exceptional items
(a) Profit on disposal of surplus properties
A number of surplus properties have been disposed of during the period
generating an exceptional profit on disposal of #830,000.
The anticipated tax payable on this exceptional item is #73,000.
(b) Loss on discontinuance of businesses
Costs Goodwill Total Loss
#'000 #'000 #'000
Loss on sale of Safety Footwear business 503 326 829
Loss on discontinuance of Homeware business 450 5,167 5,617
953 5,493 6,446
These losses include the write off of goodwill previously written off against
reverses of #326,000 and #5,167,000 on the Safety and Homeware businesses
respectively.
The anticipated tax relief on this exceptional item is #212,000.
4. Taxation
Taxation for the half year to 30 June 2001 has been provided at the average
rate estimated to be applicable for the full year of 31%.
Net tax relief attributable to the exceptional items amounts to #139,000.
5. Dividends
An interim dividend of 3.00p per share (2000: 4.00p) which will absorb #
680,815 (2000: #846,545) has been declared and will be paid on 10 December
2001 to members on the register at the close of business on 16 November 2001.
6. Earnings per share
The earnings per share has been calculated by dividing the result for the
period by the average number of shares in issue during the period of
22,690,830 shares (2000: 21,152,538 shares).
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The group has only one category of dilutive potential ordinary
shares: those share options granted to employees where the exercise price is
less than the average market price of the company's ordinary shares during the
period.
7. Creditors
Creditors falling due within one year include loan notes #6 million (June
2000: #nil, December 2000: #6 million).
Creditors falling due after more than one year include loan notes #11.8
million (June 2000: #1.8 million, December 2000: #14.8 million).
8. Reconciliation of movements in equity shareholders' funds
#'000
Loss for the period (5,778)
Dividends (681)
New shares issued including share premium 56
Exchange difference arising on consolidation 2
Goodwill previously written off through reserves 5,493
Net movement in equity shareholders' funds (908)
Equity shareholders' funds at 1 January 2001 47,293
Equity shareholders' funds at 30 June 2001 46,385
9. Post balance sheet events
On the 27 July 2001 the company announced the closure of its General Trade
business as part of the review of its stated strategy and in response to
current trading conditions. The effect of this will be an exceptional cost in
the region of #2.2 million before any associated tax relief to be reported in
the accounts for the year ending 31 December 2001.
10. This report has been sent to all shareholders. Further copies will
be available to shareholders and members of the public from the company's
registered office at 86 Gloucester Place, London W1U 6HP. Telephone number
020 7935 4880.
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