RNS No 5219b
WATTS BLAKE BEARNE & CO PLC
30th September 1997
WATTS BLAKE BEARNE & COMPANY PLC
1997 INTERIM RESULTS ANNOUNCEMENT
#5.5m Pre-Tax Profits; Operating Margins Up; Outlook Positive
Watts Blake Bearne & Company PLC ("WBB"), the leading
international clay producer with operations in the UK,
Germany, Europe, the United States and Asia-Pacific, announces
its Interim Results for the six months ended June 1997.
Highlights of the results and extracts from the Chairman's
Statement and Chief Executive's Review of Operations are as
follows:
* Growth in sales and profits in the majority of the
operating units in local currency terms
* Turnover of #50.5m (#53.3m) influenced by translation in
Sterling
- UK #4.9m (#4.6m)
- Germany #8.5m (#8.6m)
- Rest of Europe #23.1m (#26.6m)
- North America #6.8m (#6.2m)
- Rest of World #7.2m (#7.2m)
* Operating Margin increases to 12.1% (11.7%)
* Pre-tax Profit of #5.5m (#5.5m)
* If last year's exchange rates had prevailed, Group sales
and profits would have been #4.5m and #0.5m greater through
translation effects alone
* Core UK division, WBB Devon Clays, main contributor to
profits-only 3% less than record level of 1996; 80% exported
from Devon
* German division considerably enhances profitability
* Continued improvement in US
* Net profit achieved by new Indonesian Company
* Indonesia quarry now in full production
* Interim dividend maintained at 4.4p per share.
Regarding Prospects and the Outlook, Chairman Michael Beckett
and Chief Executive Graham Lawson in their reports said:
"The Group continues to develop its international presence.
The Group is committed to developing a major operating
division in support of ceramic manufacture in the Asia-Pacific
region. We expect creditable operating performances for the
second half-year and we hope, too that Sterling's strength
will begin to moderate.
The second half has started well. Subject to unforeseen
circumstances, the Board is confident about the outcome for
the full year".
For further information contact:
Dr Graham Lawson, Chief Executive
Dr Michael Young, Finance Director
both on 0171 786 9600 until 4pm
thereafter on 01626 332 345
CHAIRMAN'S STATEMENT
Financial Performance
In common with all multinational companies, our strong
underlying trading performance is being masked through
translation of our overseas earnings into Sterling, which
stands at an uncomfortably high valuation especially compared
to most European currencies.
From a Group turnover, itself influenced by Sterling, of
#50.5m (#53.3m), I am pleased to report a pre-tax profit of
#5.5m, matching the same level in Sterling terms as achieved
in the first half of 1996. Our operating margin for the
period was 12.1%, compared to 11.7% in 1996.
In particular, our German Division deserves congratulation for
its prudent cost management, which has helped in difficult,
though improving, markets. This counteracts the relative
weakness of the Deutsche Mark which has fallen by 20% against
Sterling. Had last year's exchange rates prevailed, our Group
sales and profits would be recorded some #4.5m and #0.5m,
respectively, greater through translation effects alone.
The trends in the underlying Operating Divisions have been,
and remain, positive accepting that the Devon Clays Division
cannot be immune from the impact of Sterling's strength on its
substantial export trade.
Interim dividend
The interim dividend per Ordinary Share is maintained at 4.4p
per share.
Earnings per share
The earnings per share for the half-year is 15p compared to
15.7p reported in last year's Interim Statement. The latter
figure did not, however, fully recognise the effective tax
rate which was indicated subsequently by the full-year results
for 1996.
Balance sheet
Gearing for the first half is unchanged at 22%, against 27% at
the end of 1996.
Prospects
The Group continues to develop its international presence and
is researching a number of new business opportunities in
various parts of the world. In particular, negotiations for a
new Joint-Venture in China are at an advanced stage.
Notwithstanding the present economic difficulties effecting
South-East Asia, the new ventures in Indonesia and China
underline the Group's long-term commitment to developing a
major operating Division in support of ceramic manufacture in
the Asia-Pacific region as we continue to do in Europe and
America.
The second half has started well. Subject to unforeseen
circumstances, the Board is confident about the outcome for
the full year.
Michael Beckett
Chairman
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Currency
The impact of Sterling's strength is a significant issue that
we, like others, are having to manage in 1997. Much of the
impact is purely mathematical in that it merely results from
the calculation necessary to translate sales and profits
earned in overseas currencies into our reporting currency.
Were there a common European currency, this particular
distortion would be largely removed. The jury is still out,
however, on how the economic realities pertinent to a single
currency would impact on the financial health of citizens and
businesses in the European Union.
Operating Margin
I am pleased to record that the operating results underpinning
our Sterling figures are most encouraging and I comment below
on the performances of the main Divisions. In overall
Sterling terms our half-year operating profit of #6.lm is only
2% lower than in 1996 showing the benefit of cost management
measures taken earlier and currently throughout the Group and
to more innovative approaches being applied for securing new
business. Our operating margin for the six months to June
improved to 12.1% compared to 11.7% in 1996.
UK Division
Our core UK Division, WBB Devon Clays, remains the principal
contributor to Group profits. We export 80% of our production
from Devon and it is here that the strength of Sterling has an
economic, rather than translational, impact. Nevertheless, in
the first half WBB Devon Clays has achieved a profit only 3%
less than the record level of 1996, which underlines the value
of the material and service the Division provides. Management
is acutely aware that many of the Division's customers have
accepted effective price increases of 20% or more because of
the adverse parity of their currencies against Sterling.
German Division
Construction activity in Europe continues to be depressed and,
against this backdrop, our German Division has succeeded in
increasing sales by 4.5%. Through vigorous pursuit of its
cost management programme, the Division has considerably
enhanced profitability. The tight customer markets in Europe
lead to intensification of competition between the raw
material suppliers and we expect that this will result in
further consolidation within our industry in due course.
US Division
Sustained improvement is also strongly evidenced in our US
Division, United Clays. Management initiatives put in place
over a year ago are resulting in enhanced profitability in
what continues to be a competitive marketplace. Sales in the
first half were 17.5% higher than in 1996 and although
softening of both wall tile and sanitaryware demand is now a
feature of the market, Divisional management remains confident
they will achieve their planned result.
Pacific Clays Division
I turn now to our Pacific Clays Division, where our new
Indonesian operations, by July, had already established a
cumulative profit for the current year so far. The Indonesian
quarry is now in full production. Our associated company in
Thailand achieved sales and profits well ahead of their plan
at the end of June. The economic difficulties now being
experienced in Thailand will, however, exert an arresting
impact on growth in the second half, although management still
expect to meet their original forecast for the year as a
whole. I am excited that we expect a new business in China
soon to join the Division, which will increase our presence in
this important and rapidly growing market.
Ceramic Body Division
Following reduced sales to depressed markets, especially in
Germany, encouraging new business has now been secured by each
of the companies that make up our recently constituted Ceramic
Body Division. The Division, which comprises businesses in the
Netherlands, Germany and Portugal, has also increased its
profit contribution over last year by taking advantage of
production rationalisation and cost management opportunities.
Italy
With effect from 1st August this year, our Italian company,
WBB Italia Srl, has taken over the agency for WBB Devon Clays
in Italy alongside its existing agency for our German
Division. In line with this development, we are strengthening
its organisation and management in this important ceramic-
producing country. WBB Italia is also distributor for clays
from Donbas Clays JSC which has substantially increased its
supply of Ukrainian clays, the demand for which is
strengthening in Europe and beyond.
Outlook
In conclusion, the Group has seen growth in sales and profits
for the first half-year in the majority of its operating
units. This is disguised by translation into our reporting
currency, Sterling, which has strengthened at an exceptional
rate since 1996. We expect creditable operating performances
for the second half-year. We hope, too, that Sterling's
strength will begin to moderate.
Graham Lawson
Chief Executive
GROUP TRADING RESULTS
Six months ended Year to
30.06.97 30.06.96 31.12.96
#'000 #'000 #'000
Turnover
United Kingdom 4,904 4,620 9,020
Germany 8,478 8,610 19,901
Rest of Europe 23,140 26,610 47,861
North America 6,801 6,249 12,238
Rest of World 7,200 7,227 13,911
------------- ------------- -------------
50,523 53,316 102,931
Operating Costs (44,417) (47,087) (90,751)
------------- ------------- -------------
Operating Profit 6,106 6,229 12,180
Net Interest (638) (761) (1,470)
------------- ------------- -------------
Profit on
Ordinary
Activities 5,468 5,468 10,710
before
Taxation
Tax on Profit on
Ordinary (2,297) (2,188) (4,611)
Activities
------------- ------------- -------------
Profit on
Ordinary
Activities after 3,171 3,280 6,099
Taxation
Minority (24) 13 9
Interests
Dividends (926) (924) (3,403)
(provisional)
------------- ------------- -------------
Balance Retained 2,221 2,369 2,705
------------- ------------- -------------
Earnings per
Ordinary Share 15.0p 15.7p 29.1p
Dividend per
Ordinary Share 4.4p 4.4p 16.2p
GROUP BALANCE SHEET SUMMARY
30.06.97 30.06.96 31.12.96
#'000 #'000 #'000
Fixed Assets
Intangible assets 30 26 35
Tangible assets 84,142 91,175 88,916
Investments 1,401 1,520 1,279
------------- ------------- -------------
85,573 92,721 90,230
------------- ------------- -------------
Current Assets
Stocks 7,482 7,367 8,349
Trade Debtors 21,817 23,225 18,867
Other Debtors 2,947 4,216 3,691
Investments 14 14 14
Cash at bank and 10,490 9,596 6,248
in hand
------------- ------------- -------------
42,750 44,418 37,169
------------- ------------- -------------
Creditors
Amounts falling
due
within one year
Borrowings (5,398) (5,000) (7,996)
Other Creditors (16,302) (18,390) (15,802)
------------- ------------- -------------
Net Current 21,050 21,028 13,371
Assets
------------- ------------- -------------
Total assets less
current 106,623 113,749 103,601
liabilities
Creditors
Amounts falling
due within one
year
Borrowings (21,844) (22,405) (18,808)
Other Creditors (176) (492) (186)
Provisions for
liabilities and (8,811) (10,275) (8,803)
charges
------------- ------------- -------------
Total Net Assets 75,792 80,577 75,804
------------- ------------- -------------
Capital and
Reserves 5,389 5,383 5,384
Called up share
capital
Reserves 70,119 74,909 70,139
------------- ------------- -------------
Total 75,508 80,292 75,523
Shareholders'
funds
Minority 284 285 281
interests
------------- ------------ -------------
75,792 80,577 75,804
------------- ------------- -------------
Net Borrowings 16,752 17,809 20,556
As a percentage
of shareholders' 22% 22% 27%
funds
NOTES ON THE FINANCIAL STATEMENTS
1. The dividend will be payable on 21 November 1997 to
shareholders on the Register at the close of business on 10
October 1997.
2. Earnings per share are based on the profits after
taxation attributable to Ordinary shareholders. They are
calculated on 21.006.232 shares (1996 - 20.946.845) being the
average number of shares in issue during the period.
3. Foreign currency exchange rates used to translate the
trading results:
Average rates Deutschmark US Dollar
Half year 1997 2.77 1.63
Half year 1996 2.30 1.53
Full year 1996 2.38 1.57
Were the average exchange rates extant for the half-year in
1996 applicable to the half-year in 1997, turnover would
have been approximately #55m and profit before taxation,
approximately #6m.
4. The Interim Results are unaudited. The financial
information does not amount to full accounts within the
meaning of Section 240 of the Companies Act 1985 (as
amended). Full accounts for the year to 31 December 1996
with an unqualified audit report have been filed with the
Registrar of companies.
Further copies of the Interim Statement are available
from:
The Company Secretary
WATTS BLAKE BEARNE & CO PLC
Park House, Courtenay Park, Newton Abbot TQ12 4PS
Telephone: +44 (0) 1626 332345 Fax: +44 (0) 1626 332344
END
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