TIDMTND
RNS Number : 2284U
Tandem Group PLC
27 March 2023
TANDEM GROUP PLC
(the "Company" or "Group")
PRELIMINARY RESULTS FOR THE YEARED 31 DECEMBER 2022
The Board of Tandem Group plc (AIM: TND), designers, developers,
distributors and retailers of sports, leisure and mobility
equipment, announces its results for the year ended 31 December
2022.
Building for future growth in a challenging environment
Headlines
Ø Strong balance sheet
Ø Profitable year
Ø Dividend maintained at 6.57p
Ø New warehouse and out of Northampton and Felixstowe
Ø New retail shop
Ø Secured leading new licences
Ø Well managed stock levels
Ø Strong growth in acquiring new accounts across nationals and
independents
For further information contact:
Enquiries:
Tandem Group plc
David Rock, Company Secretary
Telephone 0121 748 8075
Nominated Adviser and Broker
Cenkos Securities plc
Ben Jeynes / Dan Hodkinson - Corporate Finance
Russell Kerr / Michael Johnson - Sales
Telephone 020 7397 8900
Chairman's statement
Introduction
I am pleased to report that the Group has delivered another
profitable year, having ended FY22 with an even stronger balance
sheet not withstanding FY22 having been a year of high inflationary
pressures, increasing interest rates and a cost of living crisis
and hereby present the results for the year ended 31 December
2022.
Results
The net assets of the Group have increased by 18% from
GBP22,739,000 at the year ended 31 December 2021, to GBP26,788,000
at the year ended 31 December 2022. As in the previous year, the
increase in net assets was aided by a material improvement in the
valuation of the defined benefit pension schemes by GBP2,026,000,
due largely to an increase in the interest rate on UK Gilts. We
were also very pleased with the revaluation of our warehouse
properties in Castle Bromwich resulting in an uplift in value of
GBP2,189,000.
Group revenue for the year ended 31 December 2022 reduced to
GBP26,683,000 from GBP40,917,000 in the previous year as previously
announced.
In the first half of the year Group revenue decreased by
approximately 33% with reductions in three of our four operating
divisions. The exception was toys, sports and leisure.
In the second half of the year there was a decrease of
approximately 36% in Group revenue mainly driven by continued
challenging economic conditions.
Toys, Sports & Leisure
Revenue within our Toys, Sports & Leisure division reduced
by approximately 11% against the prior year, however, it remained
ahead of the year ended 31 December 2020. We were encouraged with
the trend of sales in December that were 26% ahead of the
comparative period.
Bluey was the pre-school licence of 2022, showing the fastest
property progression of all similar licences, which was well
received and listed by the majority of our national accounts. We
are also pleased to have significantly grown our export sales and
sales to toy specialist multiples.
Sales in our golf brands, were 30% behind the prior year,
however, this represented more than double the sales seen prior to
COVID-19, in 2019.
eMobility
Turnover in our eMobility division comprising eBikes, eScooters,
electric golf trolleys and mobility scooters was down 46% overall
for the year. However, there were some encouraging signs in sales
of eBikes in the run up to Christmas which were 92% ahead in
November and December against those in November and December 2021.
During 2022 we designed and developed in the UK an exciting new
range of eBikes under our recognisable Dawes and Claud Butler
brands which are due to launch in 2023.
Similarly, eScooter sales in November and December were 25%
ahead of the comparative period in the prior year.
Our new eMobility shop was opened in November ahead of schedule,
and we have also completed the launch of a dedicated website to
eMobility, www.electriclife.co.uk.
Bicycles
Sales continue to be challenging in both independent and
national retailer markets, as this division benefitted from
unprecedented demand during COVID-19 lockdowns. Therefore, against
the prior year, revenue decreased by approximately 52%, however, we
were again encouraged by the sales trend at the end of the year, as
in other divisions, with sales in Bicycles during December 2022
achieving their highest level in all of FY22.
We have continued to develop new and exciting ranges of children
Falcon bikes, and Squish has continued to grow in popularity having
won several awards in 2022.
Home & Garden
Similar to Bicycles, revenue in our Home & Garden segment
revenue was approximately 55% below the comparative period, due to
the exceptional success seen during COVID-19 and as reductions in
discretionary consumer spending continued to impact sales. This was
further influenced by significant reductions in third party
marketplace website sales overall.
The Group continues to invest in this segment, as demonstrated
by the launch of a new Jack Stonehouse website
(www.jackstonehouse.com) in December 2022, ahead of our expected
launch date of January 2023. This rationalised the distribution of
our garden and leisure products from our 'Pro Rider Leisure' and
'Garden Comforts' websites, providing future category authority and
operational efficiencies.
Group operating profit
We will not be alone in reporting that the operating environment
remained challenging. Group operating profit before exceptional
costs, finance costs and taxation decreased by 73% to GBP1,312,000
for the year ended 31 December 2022 compared to GBP4,939,000 for
the year ended 31 December 2021. Gross margin was only slightly
behind at 29.2% against 29.5% in the prior year, and operating
expenses reduced from GBP7,112,000 in the prior period to
GBP6,484,000 in the year to 31 December 2022.
Group balance sheet
Following the construction of our new warehouse and revaluation
of our properties as a whole, property, plant and equipment
increased from GBP7,775,000 at 31 December 2021 to GBP14,700,000 at
31 December 2022.
The business has continued to control its levels of inventory
throughout the year, clearing ageing lines where required, leading
to a significant reduction in levels held at the year end to
GBP4,757,000 compared to GBP8,064,000 in the prior period.
The property project continued to affect the net cash position.
Cash and cash equivalents decreased to GBP3,288,000 at 31 December
2022 compared to GBP6,367,000 at 31 December 2021, with the Group
moving from a net cash position as at 31 December 2021 of
GBP2,326,000 to a net debt position of GBP1,551,000 at 31 December
2022 due to the borrowing requirements to fund the new warehouse
build.
Further details of operational activities can be found in the
Strategic Review.
Dividend
In previous years it has always been the Board's intention to
maintain the progressive dividend as trading results and funds
permit.
Due to the results of the Group, the Board is of view that the
dividend will instead be maintained this year.
We are therefore proposing to pay a final ordinary dividend of
6.57 pence per share (year ended 31 December 2021 - 6.57 pence per
share).
When combined with the interim dividend of 3.43 pence per share
(year ended 31 December 2021 - 3.43 pence per share), this is a
total dividend of 10.0 pence for the year as it was in the year
ended 31 December 2021.
Subject to shareholder approval at the Annual General Meeting to
be held on 29 June 2023, the final dividend will be paid on or
around 6 July 2023 to shareholders on the share register as at 12
May 2023. The ex-dividend date will be 11 May 2023.
In accordance with the provision that in any calendar year
should dividend payments exceed pension deficit contributions, an
additional contribution, equal to the excess, is paid into the
scheme, an additional payment of approximately GBP172,000 will be
paid into the Tandem Group Pension Plan.
Employees
I would like to thank all colleagues for their dedication and
effort in 2022. The Company has introduced a number of initiatives
recently, including a Group wide discount scheme for colleagues and
their families, and also access to a discounted range of clean
energy transportation products.
Leadership
Peter continues to bring a positive and dynamic perspective to
the business associated with a strong strategic vision and purpose,
strengthening the team in critical areas in order to achieve our
long-term growth plans.
Outlook
2023 sales have begun slowly as expected, with an initial
slowdown in our FOB sales resulting from both an early Chinese New
Year, and continued caution by national retailers. We have also
experienced a significant number of delays with our goods passing
through UK ports due to additional custom checks, further impacting
Q1 results.
Notwithstanding these headwinds, our balance sheet strength puts
the Group in a strong position financially and we are well
positioned for the challenges and uncertainties of the wider
trading environment that we are being faced with in the year ahead.
Now that the warehouse is complete, Northampton and Felixstowe have
been vacated, and the new shop is open with a number of new premium
brands on board, we are well positioned for growth opportunities in
2023.
We have successfully secured a number of leading new licences
which are showing strong potential including Gabby's Doll House,
Encanto, Sonic the Hedgehog and Transformers. 2023 will see a much
higher number of new films compared to the very low levels during
COVID-19.
With new accounts being a strategic focus area for the Group, we
have successfully opened 47 new Ben Sayers' accounts since
September 2022, with more than half of these opened in 2023. This
will further enhance our national brand presence.
Last year, we expanded our award-winning Squish brand
proposition into scooters, which has been well received by our
customers since their recent launch in January 2023. We plan to
build on the success of Squish seen in 2022 through a wider
distribution and social media channels.
In our eMobility segment, we continue to see exceptional results
in our eBike sales as people seek alternative means of
transportation. Sales of eBikes have had a very strong start to the
year, resulting in sales to 20 March 2023 more than three times
those of the comparative period in 2022.
With our completed warehouse and further expanded account base,
plans to develop our existing product portfolio are in place
through the distribution of exciting premium third-party brands,
Quella is a prime example.
Despite the slowdown in eScooter sales, we remain confident in
the future of eScooters and we are continuing to support their
legislation and further develop our range.
The new dedicated Electric Life shop and website
Electriclife.co.uk are now up and running and we are very pleased
that they are performing ahead of expectations for the Group.
The Group has had continued success in opening new accounts
nationwide with Independent Bike Dealers (IBDs) and national
retailers alike. Since the beginning of June 2022, we have opened
128 new accounts with IBDs. This will allow for further growth,
particularly through eBikes, for which we are seeing increasing
levels of proactive engagement by the independents and nationals
alike.
The new Jack Stonehouse website which consolidated some of our
previous websites into one is performing well and although sales
are behind the previous year, they are improving week on week. As
more people return to the workplace, there has been a need to
refresh our product range, and later on this year we will be
launching new ranges across the Jack Stonehouse brand.
As part of our continuing strategic customer engagement, we are
pleased that from July 2022 to February 2023 our Social media
community has seen double digit growth with followers and
engagement increasing across our core accounts.
There has also been a transitioning of licences to our D2C
offerings, due to the challenges that FOB sales are currently
presenting. We are therefore bringing in more product domestically,
which we are now well positioned to do given the new warehouse.
Furthermore, we have shortened lead times and reduced our exposure
to minimum order quantities through sourcing more items from within
Europe and the UK.
We are pleased that the new warehouse has now been completed,
and our Northampton and Felixstowe operations have been fully
vacated meaning we are now operating from the one site allowing us
to benefit from operational efficiencies.
The position moving further into 2023 is not going to be without
its challenges, however, the Group have now successfully completed
a number of significant projects as previously announced and
believes it is extremely well placed to take advantage of
opportunities that arise. The Board remain confident in the
strategy of the Group.
S J Grant
Chairman
24 March 2023
Strategic report
Operating and Financial Review
Revenue
Group revenue for the year ended 31 December 2022 was
GBP26,683,000 compared to GBP40,917,000 in the prior year. As we
have previously reported, revenue is now split into four main
segments.
2022 2021 2020
(GBP000s) (GBP000s) (GBP000s)
Toys, Sports & Leisure 14,758 16,492 14,372
eMobility 3,788 6,990 4,493
Bicycles 4,846 10,191 11,576
Home & Garden 3,291 7,244 6,615
---------- ---------- ----------
26,683 40,917 37,056
========== ========== ==========
Gross profit
Gross profit of GBP12,051,000 in 2021 decreased by 35.3% to
GBP7,796,000 in 2022.
The gross profit margin percentage decreased marginally from
29.5% to 29.2%. This reflects increases in supplier cost prices and
inbound freight costs, along with clearing out ageing stock, offset
by the strength in Sterling against the US Dollar. The Group has
continued to work hard on negotiating cost reductions.
Operating expenses
Group operating expenses decreased by 8.8% to GBP6,484,000 in
the year (year ended 31 December 2021 - GBP7,112,000). This was
primarily driven by reductions in employment costs, encompassing
wages, agents' commission and reductions in advertising expenses.
This was partly offset by additional costs in rent and rates
following the need for additional third party storage throughout
the year.
Operating profit
Operating profit before exceptional costs was GBP1,312,000 for
the year ended 31 December 2022 compared to GBP4,939,000 in the
prior year.
Non-underlying items
Non-underlying items comprised:
-- Exceptional costs of GBP223,000 (year ended 31 December 2021
- GBPnil) in respect of employment and legal costs relating to the
resignation of the former Chief Executive, redundancy costs
relating to the relocation of a warehouse and distribution
facility, and shunting costs relating to the same.
-- Pension finance costs under IAS19 of GBP97,000 (year ended 31
December 2021 - GBP127,000); and
-- A deferred tax charge of GBP139,000 (year ended 31 December
2021 - GBP375,000) in respect of pension schemes.
Finance costs
Total net finance costs increased to GBP237,000 in the year
ended 31 December 2022 compared to GBP207,000 in the year ended 31
December 2021.
There was an increase in total interest payable on bank loans,
overdrafts, hire purchase and invoice finance facilities from
GBP63,000 in the prior year to GBP136,000 in 2022 due to the
increased borrowing to fund the new warehouse construction.
Interest payable on lease arrangements was GBP4,000 compared to
GBP17,000 in 2021.
Finance costs in respect of the pension schemes provided in line
with IAS19 were GBP97,000 compared to GBP127,000 for the year ended
31 December 2021.
Taxation
The tax expense for the year ended 31 December 2022 was
GBP178,000 compared to GBP906,000 in the prior year.
The current tax credit, which comprised corporation tax from the
overseas Hong Kong operation, net of a refund provision for UK
research and development, was GBP77,000 (year ended 31 December
2021 - charge of GBP220,000).
There was a deferred tax charge of GBP255,000 compared to
GBP686,000 in the prior year as tax losses were utilised.
In the prior year, a tax charge in the Statement of
Comprehensive Income was expected due to a reduction in the
actuarial losses on the pension schemes, however due to the future
tax rate change from 19% to 25%, it resulted in a credit of
GBP248,000. This year there was a charge of GBP214,000.
Net profit
Net profit for the year ended 31 December 2022, after
non-underlying items, finance costs and taxation charges were
GBP674,000 compared to GBP3,826,000 for the year ended 31 December
2021.
Adjusted EBITDA
Adjusted EBITDA was GBP1,475,000 for the year ended 31 December
2022, a decrease of 72% compared to GBP5,199,000 in the prior
year.
Capital expenditure
Total capital expenditure incurred during the year was
GBP4,880,000 (year ended 31 December 2021 - GBP3,386,000). This was
mainly in relation to the construction of the new warehouse in
Birmingham, construction of the new showroom in Birmingham and
expenditure on the new Enterprise Resource Planning (ERP) system.
Agreements of GBP410,000 were entered into prior to the year end
for warehouse completion related works.
Cash flows, working capital and net cash
Net cash inflow from operating activities before movements in
working capital for the year ended 31 December 2022 was GBP611,000
compared to GBP4,682,000 in the year ended 31 December 2021.
Cash generated from operations was GBP1,395,000 compared to
GBP2,239,000 last year.
Net cash outflows from investing activities were GBP4,960,000 in
2022, against GBP3,384,000 in the previous year due to the capital
expenditure referred to above.
There was a net cash inflow from financing activities of
GBP555,000 in 2022, which compared to an inflow of GBP1,479,000 in
2021. The net inflow was due to new loans net of a reduction in
invoice financing.
As a result of these movements the closing cash position at 31
December 2022 was GBP3,288,000 compared to GBP6,367,000 at 31
December 2021.
Net debt, comprising cash and cash equivalents less invoice
financing liabilities and borrowings, was GBP1,551,000 at 31
December 2022, compared to net cash of GBP2,326,000 at the end of
the previous year.
Dividends
A final dividend of 6.57 pence per share will be paid for the
year ended 31 December 2022 subject to shareholder approval, which
is at the same level as the previous year.
Total dividends paid and proposed for the year ended 31 December
2022 of 10.00 pence per share (year ended 31 December 2021 - 10.00
pence per share) have maintained at their previous level. As the
total dividend will exceed the deficit repair contributions paid to
the Tandem Group Pension Plan, in accordance with a previous
agreement with the pension scheme trustees an additional
contribution equal to the excess of approximately GBP172,000, is
expected to be paid into the scheme.
The dividend cover ratio is 1.3 (year ended 31 December 2021 -
7.4).
Earnings per share
Basic earnings per share was 12.5 pence per share for the year
ended 31 December 2022 compared to 73.8 pence per share in the year
ended 31 December 2021. Diluted earnings per share was 12.3 pence
per share compared to 70.1 pence per share in the prior year.
Product range review
As in the previous year, turnover has been split into four
segments, Toys, Sports & Leisure, eMobility, Bicycles, and Home
& Garden.
Toy, Sports & Leisure
The Toys, Sports & Leisure business comprises character
licenced products which are mainly wheeled toys (excluding
character bikes) and own brand sports and leisure products, sold to
both independent and national retailers.
Revenue in 2022 was down on the prior year, however, ahead of
2020. The business has secured some exciting new licences for 2023
such as Gabby's Dollhouse, Encanto, Sonic the Hedgehog and
Transformers and remains focussed on driving new business.
Our golf brand, Ben Sayers, continued to perform well, and
although it was behind on the prior year, it was still well ahead
of 2019 figures.
eMobility
Our eMobility segment includes sales of electric scooters,
bikes, golf trolleys and mobility scooters.
Although turnover was down against the prior year, there were
encouraging signs towards the end of the year, particularly around
eBikes and eScooters which outperformed the prior period in the
final months of the year.
The new dedicated Electric Life shop build was completed and the
new Electriclife.co.uk website is now live, with both making good
contributions to turnover.
This year we will release an exciting new range of eBikes
designed in the UK, under our established brands Dawes and Claud
Butler. We are well placed to benefit from the increasing shift to
eBikes.
We are very pleased to have continued to grow our national
independent bike dealer network by 104 accounts from 1 June 2022 to
the year end.
Bicycles
Revenue from the bicycle business includes both child and adult
bicycles, along with licensed character bikes, but excludes any
electric bicycles.
This division continued to be challenging across all customer
types, from independents to national retailers, having benefitted
from the high demand seen during the COVID-19 years. These combined
factors resulted in a reduction in revenue against the previous
period.
The Bicycle Association has published the Annual Market Data
Report for 2022, which shows bike sales may have reached their
lowest level in two decades. However, our lightweight children's
bike brand, Squish has continued to grow in popularity and won a
number of awards in 2022. We have also continued to design fresh
and exciting ranges of children Falcon bikes.
Home & Garden
Our Home & Garden segment includes sales of outdoor living
products and homeware items, mostly sold from our online platform
and third-party marketplaces.
A reduction in discretionary consumer spending has been widely
reported in 2022, following the cost of living crisis, coupled with
unprecedented demand seen during COVID-19 years, this division was
behind the prior year.
Since its relaunch in December, our new consolidated Jack
Stonehouse website has gained some real efficiencies with site
visits and organic sessions doubling. Performance marketing and
media spending has become more efficient with our return on
advertising improving over 50% over the 6 months to 31 December
2022, compared to the previous 6 months.
Property and IT
A valuation of the Castle Bromwich property, including the new
warehouse, was carried out by JLL Ltd in February 2023 in
accordance with the RICS Valuation - Global Standards
(incorporating the International Valuation Standards) and the UK
national supplement (the "Red Book"). This valuation showed a
movement in gross carrying amount of GBP2,087,000 (GBP2,189,000
after depreciation adjustment) which increased the total valuation,
after allowing for costs to complete the property to GBP13,762,000.
The uplift of the valuation is reflected through other
comprehensive income in the year.
We are pleased to report that the construction of the new
warehousing and distribution facility has completed and we have now
vacated Northampton and Felixstowe. The new building has more than
doubled the existing warehouse capacity in Birmingham to
approximately 160,000 square feet. Aside from the financial returns
of undertaking the project, there are significant commercial and
strategic benefits which we believe will enhance the Group and help
to maximise long term shareholder value.
As previously reported, we have received full planning
permission for and have completed the refurbishment of our onsite
shop which was opened to the public for sale of our electric
powered products including scooters; bicycles; golf trolleys and
mobility scooters by West Midlands Mayor Andy Street, and Cycling
and Walking Commissioner Adam Tranter.
The Group have focussed on the warehouse and relocation projects
this year as they provided greater operational efficiencies and
were beneficial to be in place ahead of the new ERP and finance
system. Therefore, the Group has delayed the go-live to mid-year.
This is still expected to improve distribution efficiency as well
as operational planning and management reporting.
Pension schemes
The Group operates two defined benefit pension schemes with both
schemes closed to new members. There are no active members in
either scheme.
The collective deficit of the schemes at 31 December 2022
reduced to GBP60,000 compared to GBP2,086,000 at 31 December 2021.
Improved gilt rates were the main driver for the reduction of the
deficit with a discount rate of 4.8% compared to 2.1% at 31
December 2021.
The pension schemes continue to utilise the Group's cash
resources with payments in respect of the schemes totalling
GBP682,000 (year ended 31 December 2021 - GBP590,000). The total
comprised deficit contributions of GBP550,000 and GBP101,000 in
respect of Tandem and Casket schemes respectively (year ended 31
December 2021 - GBP449,000 and GBP101,000) and government levies
and administration costs of GBP31,000 (year ended 31 December 2021
- GBP40,000).
The latest triennial valuation date for the Casket scheme was 5
April 2022 and the Tandem scheme 1 October 2022. The outcomes of
the valuations will be finalised in 2023.
The Board remain mindful that the recovery plans set following
the 2019 triennial valuations for the Tandem scheme exceeds the
Pension Regulator's reported median length of 7 years. However,
this continues to be justifiable on the basis that the employer
covenant is stronger and there is an agreed provision that in any
calendar year should dividend payments exceed deficit contributions
paid to the scheme, an additional contribution equal to the excess
will be made. As a consequence of the total dividend in the year
ended 31 December 2021, in 2022 the additional contribution made to
the scheme was GBP193,000. For the year ended 31 December 2022 this
will lead to an additional contribution of approximately GBP172,000
payable in 2023, subject to shareholder approval of the proposed
final 2022 dividend. The level of contributions and length of
recovery plans for both schemes will be reconsidered following the
outcome of the 2022 triennial valuations.
Employees
We currently employ 74 colleagues in the Group, they remain our
most important asset.
In addition to salary increases we have also introduced a Group
wide cost saving solution for colleagues and their families, along
with access to a discounted range of our clean energy
transportation offerings.
Strategy
Our strategic objective is to grow our eMobility division more
rapidly as the sector continues to evolve, offering exciting new
ranges and continuing to grow our customer base; invest further in
our direct-to-consumer offering (particularly home & garden
categories) through improved website marketing and content, product
innovation and stronger sourcing; whilst continuing to generate
strong and solid profits in our Toys, Sports & Leisure and
Bicycle divisions. We will achieve this by continuing to enter into
new licence agreements for the most successful character toy
licences and to develop new and interesting own brand product
ranges which offer both quality and value to the consumer.
The Chairman's statement provides an overview of the current
outlook for the Group in the forthcoming year.
Principal risks and uncertainties
The management of the business and the nature of the Group's
strategy are subject to a number of risks and uncertainties. The
principal risks facing the business are as follows:
Economic conditions
The current economic conditions in the UK are very challenging
and this could have a detrimental impact on the Group's turnover
and performance.
Suppliers
In order to achieve competitively priced products the Group has
outsourced production, mainly to countries in Asia. Risks and
uncertainties of this strategy include management issues at the
factories, the possibility of changes in import duties, the
potentially significant cost of freight and shipping delays. We
manage this risk by having a local office in Hong Kong with a team
that works closely with the factories and we develop contingency
plans should the need arise to make changes.
Fluctuations in currency exchange rates
A significant amount of the Group's purchases are made in US
dollars. As a Group, we are therefore exposed to foreign currency
fluctuations. The Group manages its foreign exchange risk with
forward foreign exchange contracts and has adopted formal hedge
accounting. If these activities do not mitigate the exposure, then
the results and the financial condition of the Group may be
adversely affected.
Interest rates
The Group has taken on additional borrowings to fund the
purchase of land and construction of the warehouse. If interest
rates increase, this could have an impact on the Group's finance
costs. However, the Group has entered into an interest rate cap
mechanism for GBP3 million of borrowings capped at 2%.
Licences
A number of the Group's brands are used under licence from
global licensors. The licences are generally for between two and
three years. If the licences are not renewed the Group would have
to seek alternative licences in order to avoid a reduction in
revenue.
Competition
The companies in the Group operate in highly competitive
markets. As a result there is constant pressure on margins and the
additional risk of being unable to meet customers' expectations.
Policies of supply chain management and product development are in
place to mitigate such risks.
Volatility in financial markets may require further cash
contributions to our pension fund
The Group has commitments under defined benefit pension schemes.
The Group is obliged to make contributions to the schemes based on
actuarial valuations, which in turn are based on long-term
assumptions to calculate scheme liabilities. Volatility of the
financial markets can also affect the value of the assets in the
schemes. This may lead to a requirement to increase the cash
contributed by the Group to the schemes. If the Group is required
to make significant additional contributions, the financial
position of the Group may be materially affected with a significant
reduction in operating cash flows. In turn, this may adversely
impact future developments of the business.
Financial risks
The main risks arising from the Group's financial instruments
are interest rates, liquidity, credit and foreign currency. The
Board reviews and agrees policies for managing each
of these risks.
P Kimberley
Chief Executive Officer
24 March 2023
Consolidated income statement
31 December 2022 31 December 2021
Before After Before After
non-underlying Non-underlying non-underlying non-underlying Non-underlying non-underlying
items items items items items items
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 26,683 - 26,683 40,917 - 40,917
Cost of
sales (18,887) - (18,887) (28,866) - (28,866)
--------------- --------------- --------------- --------------- --------------- ---------------
Gross profit 7,796 - 7,796 12,051 - 12,051
Operating
expenses (6,484) - (6,484) (7,112) - (7,112)
--------------- --------------- --------------- --------------- --------------- ---------------
Operating
profit
before
exceptional
costs 1,312 - 1,312 4,939 - 4,939
Exceptional
costs - (223) (223) - - -
--------------- --------------- --------------- --------------- --------------- ---------------
Operating
profit 1,312 (223) 1,089 4,939 - 4,939
Finance
costs (140) (97) (237) (80) (127) (207)
--------------- --------------- --------------- --------------- --------------- ---------------
Profit
before
taxation 1,172 (320) 852 4,859 (127) 4,732
Tax expense (39) (139) (178) (531) (375) (906)
--------------- --------------- --------------- --------------- --------------- ---------------
Net profit
for the
year 1,133 (459) 674 4,328 (502) 3,826
=============== =============== =============== =============== =============== ===============
Earnings per 4 Pence Pence
share
Basic 12.5 73.8
=============== ===============
Diluted 12.3 70.1
--------------- ---------------
Consolidated statement of comprehensive income
31 December 31 December
2022 2021
GBP'000 GBP'000
Net profit for the year 674 3,826
Other comprehensive income:
Items that will be reclassified subsequently
to profit and loss:
Foreign exchange differences on translation
of foreign operations 96 6
Cashflow hedging contracts 540 236
Items that will not be reclassified subsequently
to profit or loss:
Revaluation of property, plant and 2,189 -
equipment
Actuarial gain on pension schemes 1,472 1,648
Movement in pension schemes' deferred
tax provision (214) 248
------------ ------------
Other comprehensive profit for the year,
net of tax 4,083 2,138
------------ ------------
Total comprehensive income for the year
attributable to equity shareholders 4,757 5,964
============ ============
Consolidated balance sheet
31 December 31 December
2022 2021
GBP'000 GBP'000
Non current assets
Intangible fixed assets 5,525 5,454
Property, plant and equipment 14,700 7,775
Deferred taxation 854 1,323
------------ ------------
21,079 14,552
------------ ------------
Current assets
Inventories 4,757 8,064
Trade and other receivables 6,633 10,243
Derivative financial asset held at fair
value 279 225
Cash and cash equivalents 3,288 6,367
------------ ------------
14,957 24,899
Total assets 36,036 39,451
------------ ------------
Current liabilities
Trade and other payables (4,200) (10,333)
Borrowings (1,085) (2,010)
Current tax liabilities (149) (252)
------------ ------------
(5,434) (12,595)
Non current liabilities
Borrowings (3,754) (2,031)
Pension schemes' deficit (60) (2,086)
------------ ------------
(3,814) (4,117)
Total liabilities (9,248) (16,712)
------------ ------------
Net assets 26,788 22,739
============ ============
Equity
Share capital 1,503 1,503
Shares held in treasury (137) (192)
Share premium 716 474
Other reserves 7,303 4,964
Profit and loss account 17,403 15,990
------------ ------------
Total equity 26,788 22,739
============ ============
Consolidated statement of changes in equity
Shares Cash Profit
held flow Capital and
Share in Share hedge Merger redemption Revaluation Translation loss
capital treasury premium reserve reserve reserve reserve reserve account Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
At 1 January
2021 1,503 (240) 315 (410) 1,036 1,427 1,671 599 10,707 16,608
Net profit
for the year - - - - - - - - 3,826 3,826
Re-translation
of overseas
subsidiaries - - - - - - - 6 - 6
Forward
contracts - - - 236 - - - - - 236
Net actuarial
gain on
pension
schemes - - - - - - - - 1,896 1,896
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
Total
comprehensive
income for
the year
attributable
to equity
shareholders - - - 236 - - - 6 5,722 5,964
Exercise
of share
options - 48 159 - - - - - - 207
Share based
payments - - - - - - - - 33 33
Reclassified
to cost of
inventory - - - 399 - - - - - 399
Dividends
paid - - - - - - - - (472) (472)
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
Total
transactions
with owners - 48 159 399 - - - - (439) 167
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
At 1 January
2022 1,503 (192) 474 225 1,036 1,427 1,671 605 15,990 22,739
Net profit
for the year - - - - - - - - 674 674
Re-translation
of overseas
subsidiaries - - - - - - - 96 - 96
Revaluation
of property - - - - - - 2,189 - - 2,189
Forward
contracts - - - 540 - - - - - 540
Net actuarial
gain on
pension
schemes - - - - - - - - 1,258 1,258
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
Total
comprehensive
income for
the year
attributable
to equity
shareholders - - - 540 - - 2,189 96 1,932 4,757
Share based
payments - - - - - - - - 21 21
Reclassified
to cost of
inventory - - - (486) - - - - - (486)
Exercise
of share
options - 55 242 - - - - - - 297
Dividends
paid - - - - - - - - (540) (540)
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
Total
transactions
with owners - 55 242 (486) - - - - (519) (708)
-------- --------- -------- -------- -------- ----------- ------------ ------------ -------- --------
At 31 December
2022 1,503 (137) 716 279 1,036 1,427 3,860 701 17,403 26,788
======== ========= ======== ======== ======== =========== ============ ============ ======== ========
Consolidated cash flow statement
31 December 31 December
2022 2021
GBP'000 GBP'000
Cash flows from operating activities
Net profit for the year 674 3,826
Adjustments:
Depreciation of property, plant and equipment 141 230
Amortisation of intangible fixed assets 22 30
Profit on sale of property, plant and equipment (11) -
Contribution to defined benefit pension
plans (651) (550)
Finance costs 237 207
Tax expense 178 906
Share based payments 21 33
------------ ------------
Net cash flow from operating activities
before movements in working capital 611 4,682
Change in inventories 3,307 (3,552)
Change in trade and other receivables 3,610 (272)
Change in trade and other payables (6,133) 1,381
------------ ------------
Cash generated from operations 1,395 2,239
Interest paid (139) (80)
Tax (paid) / received (26) 31
------------ ------------
Net cash flows from operating activities 1,230 2,190
------------ ------------
Cash flows from investing activities
Purchases of intangible fixed assets (93) (3)
Purchases of property, plant and equipment (4,880) (3,386)
Sale of property, plant and equipment 13 5
------------ ------------
Net cash flows from investing activities (4,960) (3,384)
------------ ------------
Cash flows from financing activities
New loans / loan repayments 2,013 1,463
Finance lease repayments (54) (199)
Movement in invoice financing (1,161) 480
Exercise of share options 297 207
Dividends paid (540) (472)
------------ ------------
Net cash flows from financing activities 555 1,479
------------ ------------
Net change in cash and cash equivalents (3,175) 285
Cash and cash equivalents at beginning
of year 6,367 6,076
Effect of foreign exchange rate changes 96 6
------------ ------------
Cash and cash equivalents at end of year 3,288 6,367
------------ ------------
Notes to the preliminary results
1. General information
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. The Consolidated income
statement, the Consolidated statement of comprehensive income, the
Consolidated balance sheet at 31 December 2022, the Consolidated
statement of changes in equity, the Consolidated cash flow
statement and the associated notes for the period then ended have
been extracted from the Group's financial statements upon which the
auditor's opinion is unqualified and does not include any statement
under section 498 of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2022 will be delivered to the
Registrar of Companies following the Group's Annual General
Meeting.
2. Basis of preparation
The consolidated financial statements of the Group have been
prepared under the historical cost convention and in accordance
with UK adopted international accounting standards. The principal
accounting policies adopted by the Group, which remain unchanged,
are set out in the statutory financial statements for the year
ended 31 December 2022.
Non-underlying items
Non-underlying items are material items which arise from unusual
non-recurring or non-trading events. They are disclosed in
aggregate on the Consolidated income statement where in the opinion
of the Directors such disclosure is necessary in order to fairly
present the results for the period. Non-underlying items comprise
exceptional costs, the finance cost and deferred tax related to the
Group's pension schemes calculated in accordance with IAS19 and the
impact of the movement in respect of the ineffective proportion of
the hedge.
Key areas of estimation uncertainty
Impairment of goodwill
The annual impairment assessment in respect of goodwill requires
estimates of the value in use of cash generating units to which
goodwill has been allocated to be calculated. As a result,
estimates of future cash flows are required, together with an
appropriate discount factor for the purpose of determining the
present value of those cash flows.
Financial instruments valuation
Derivatives are used to minimise the impact of foreign exchange
and interest rate fluctuations on the Group. An asset or liability
is recognised representing the fair value of the instruments in
place at the year end. The fair value is calculated using certain
estimates and valuation models by reference to significant inputs
including; implied volatilities in foreign currency and interest
rates and historical movements in foreign currency exchange and
interest rates.
Pension scheme valuation
The liabilities in respect of defined benefit pension schemes
are calculated by qualified actuaries and reviewed by the Group,
but are necessarily based on subjective assumptions. The principal
uncertainties relate to the estimation of the discount rate, life
expectancies of scheme members, future investment yields and
general market conditions for factors such as inflation and
interest rates. Profits and losses in relation to changes in
actuarial assumptions are taken directly to reserves and therefore
do not impact on the profitability of the business, but the changes
do impact on net assets.
Inventory provisioning
The Group reviews the net realisable value of and demand for its
inventory on an ongoing basis to ensure recorded inventory is
stated at the lower of cost or net realisable value. Factors that
could impact estimated demand and selling prices are the timing and
success of future technological innovations, competitor actions,
suppliers prices and economic trends. If total inventory losses
differ, the Group's consolidated net income in the year would have
improved or declined, depending upon whether the actual results
were better or worse than expected.
Bad debt provision
At each reporting period, the Directors review outstanding debts
and determine appropriate provision levels. The recovery of certain
debts is dependent on the individual circumstances of customers. At
the year end there are a number of debts which remain outstanding
past their due date, which the Directors believe to be
recoverable.
Intangible asset valuation
In attributing value to intangible assets arising on
acquisition, management has made certain assumptions in terms of
cash flows attributable to intellectual property and customer
relationships. The key assumptions relate to the trading
performance of the acquired business, royalty rates applied in the
royalty relief calculation and discount rates applied to calculate
the present value of future cash flows. The Directors consider the
resulting valuation to be a reasonable approximation as to the
value of the intangibles acquired.
Freehold property revaluation
In ascertaining an accurate estimate of the value of freehold
property, the Directors utilise the latest professional valuation
conducted along with available information on local property value
movements since the valuation date.
Key judgements
Going Concern
The accounts are prepared on the going concern basis.
The Group has cash reserves and finance facilities available and
the Board continually monitor a rolling cashflow forecast for the
business as a whole. Given the Group's low fixed cost base and the
facilities available to it, the Board therefore considers the Group
will continue to be able to meet its liabilities as they fall
due.
On that basis, the Directors are confident that they will be
able to manage the business in such a way that it will continue to
operate and trade for at least 12 months from the date of the
signing of the accounts and have therefore prepared these financial
statements on a going concern basis.
Deferred tax assets
In determining the deferred tax asset to be recognised the
Directors carefully review the recoverability of these assets on a
prudent basis and reach a judgement based on the best available
information. Estimates and judgements used in the financial
statements are based on historical experience and other assumptions
that the Directors and management consider reasonable and are
consistent with the Group's latest budgeted forecasts where
applicable. Judgements are based on the information available at
each balance sheet date. Although these estimates are based on the
best information available to the Directors, actual results may
ultimately differ from those estimates.
Cash flow hedging
In determining the proportion of forward foreign exchange
contracts that are effective hedges against currency fluctuations,
the Directors produce detailed forward forecasts to carefully
determine the requirements of a particular foreign currency to
match future planned supplier payments.
In determining the proportion of the interest rate hedge
contracts that are effective against base interest rate
fluctuations, the Directors measure the level of borrowing against
the remaining value of the contracts.
3. Segmental analysis
Due to the integration of a number of functions across the Group
it is not possible to accurately report operating segments in full,
turnover has been analysed into four key segments being Toys,
Sports & Leisure, eMobility, Bicycles and Home &
Garden.
2022 2021
(GBP000s) (GBP000s)
Toys, Sports & Leisure 14,758 16,492
eMobility 3,788 6,990
Bicycles 4,846 10,191
Home & Garden 3,291 7,244
---------- ----------
26,683 40,917
========== ==========
4. Earnings per share
The calculation of earnings per share is based on the net profit
and ordinary shares in issue during the year as follows:
31 December 31 December
2022 2021
GBP'000 GBP'000
Net profit for the year 674 3,826
======================= =======================
Weighted average shares in issue (excluding
shares held in treasury) used for basic earnings
per share 5,375,128 5,187,776
Weighted average dilutive shares under option 100,733 267,988
Average number of shares used for diluted earnings
per share 5,475,861 5,455,764
======================= =======================
Pence Pence
Basic earnings per share 12.5 73.8
======================= =======================
Diluted earnings per share 12.3 70.1
======================= =======================
5. Dividend
The Directors are proposing a final dividend of 6.57 pence per
ordinary share (year ended 31 December 2021 - 6.57 pence per share)
payable to shareholders on the register on 12 May 2023 and will be
paid on or around 6 July 2023.
6. Annual report and accounts and final results presentation
The annual report and accounts will be posted to shareholders
shortly and, along with the final results presentation, will be
available on the Company's website, www.tandemgroup.co.uk .
7. Annual General Meeting
The Annual General Meeting will be held at 11:00 on 29 June 2023
at 35 Tameside Drive, Castle Bromwich, Birmingham, B35 7AG.
This announcement contains inside information for the purposes
of the UK Market Abuse Regulation and the Directors of the Company
are responsible for the release of this announcement.
Forward-Looking Statements
Certain statements made in this announcement are forward-looking
statements. These forward-looking statements are not historical
facts but rather are based on the Company's current expectations,
estimates, and projections about its industry; its beliefs; and
assumptions. Words such as 'anticipates,' 'expects,' 'intends,'
'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions
are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and other factors, some
of which are beyond the Company's control, are difficult to
predict, and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.
The Company cautions security holders and prospective security
holders not to place undue reliance on these forward-looking
statements, which reflect the view of the Company only as of the
date of this announcement. The forward-looking statements made in
this announcement relate only to events as of the date on which the
statements are made. The Company will not undertake any obligation
to release publicly any revisions or updates to these
forward-looking statements to reflect events, circumstances, or
unanticipated events occurring after the date of this announcement
except as required by law or by any appropriate regulatory
authority.
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END
FR DZGZFFVFGFZM
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