RNS Number:1412Q
Yorkshire Group PLC
25 September 2003
Thursday 25 September 2003
YORKSHIRE GROUP PLC
2003 INTERIM RESULTS ANNOUNCEMENT
CHAIRMAN'S STATEMENT
Overview
Trading conditions in the six month period to 30th June 2003 continued to be
very difficult with relative stabilisation in Europe more than offset by adverse
conditions in America and Asia.
In the six month period to 30th June 2003 the operating loss after exceptional
items was #7.6m, on a turnover of #45.4m against an operating loss after
exceptional items of #4.7m on a turnover of #56.3m in the six month period to
30th June 2002. Despite these losses and the #3.2m of interest and similar
charges in the period, effective management of working capital restricted the
borrowings to #43.1m at 30th June 2003 against #40.2m at 31st December 2002.
Although the Group has made progress in its asset realization strategy through
the sale of peripheral assets, it has become clear that the best interests of
the Group and its stakeholders will be served by an operational and financial
restructuring which restores operational profitability to its core business and
ensures that the financial debt burden on this business is sustainable. Despite
the poor operating results in the first half of 2003, I have been encouraged by
the progress made this year towards the establishment of a profitable core
business and the level of support which the Group has enjoyed from its lenders.
Trading results
Group turnover in the six month period to 30th June 2003 of #45.4m compares with
#56.3m in the first half of 2002 and #47.5m in the second half of 2002.
The operating loss of #5.3m before exceptional items compares with an operating
loss of #1.8m in the first half of 2002. The European business made some
progress in difficult conditions with an operating loss of #3.1m before
exceptional items in the first half of 2003 against a loss of #3.8m in the
second half of 2002.
Exceptional items of #3.9m include #1.4m of business rationalisation costs
relating to the restructuring of the American business and #1.6m arising from
the termination of an interest swap agreement. The interest swap was agreed at
the time of the Crompton and Knowles acquisition in 1999, and the termination
was crystallised by the banks exercising their rights under the terms of swap
and rolling the amount payable into bank debt.
The ordinary interest expense of #1.6m (first half 2002 #1.7m) reflected the
fall in interest rates.
Loss per ordinary share before exceptional items was 14.3p (2002 7.0p loss per
ordinary share), and after exceptional items, 21.7p (2002 12.5p loss per
ordinary share). The directors are not declaring an interim dividend.
Net assets of the Group before minority interests at 30th June 2003 were #15.5m,
being 30p per ordinary share.
Europe
The reorganisation of the UK manufacturing base announced in January 2002 has
recently been completed, the objective being a highly efficient dyestuff
manufacturing plant at the Hunslet Road site in Leeds. The benefits began to
flow in the first half of 2003 but will not be fully seen until the fourth
quarter. We are continuing to seek further improvements in manufacturing
efficiency.
Having reduced the costs of the European manufacturing operation, Steve
Meredith, our recently appointed European MD is now focusing on a restructuring
of the division's sales and marketing operations and supply chain to increase
efficiencies, reduce working capital and enhance the levels of service we
provide to our customers. We anticipate further cost reductions will result
which will allow us to reduce the break even level of turnover for the European
business.
European turnover was #20.9m against #22.6m in the first half of 2002, a 7.6%
decline, against a decline of 20% in the first half of 2002 against 2001.
Americas
The US textile sector continues to be in severe economic decline with many high
profile companies in the manufacturing sector experiencing difficulties.
Reflecting this we saw a large decline in American turnover from #27.0m in the
first half of 2002 to #19.4m in the first half of 2003, although an element of
the sterling decline has arisen from movement in the #/$ exchange rate. This
compares with sales, at the time of the Crompton & Knowles acquisition, during
the first half of 2000 of #36.5m.
America showed an operating loss before exceptional costs of #0.3m in the first
half of 2003, against a profit of #1.5m in 2002 and a loss of #0.8m in the
second half of 2002.
There is little prospect of a short term upturn and we therefore implemented a
major restructuring in May to reduce capacity and our cost base. We have also
performed a strategic review, the first consequence of which was the recently
announced phased exit from our speciality chemicals business. Further details of
the review and its consequences will be provided in due course.
Asia Pacific
The Asia Pacific business began the year well but the SARS virus had a major
negative impact from April onwards. Given the ordering and manufacturing cycle
and lead times in the area the lack of travel in that period continues to have
an impact.
In response to the decline in sales we have cut overhead costs and outsourced
non core operations such as warehousing, moving the break even level of trading
significantly downwards.
Directors and employees
There have been further changes at Board level during 2003.
Jim Perrie who joined the Group as interim Finance Director on 23rd January and
was appointed the Board on 3rd March has agreed to join the Group in the
permanent position of Chief Financial Officer from 1st October 2003, and one of
his responsibilities being the implementation of the changes resulting from the
strategic review of the American Operations.
Steve Meredith, who joined the Group as European Managing Director on 1st August
from Clariant where he was responsible for a number of European and worldwide
operations, will join the Board of Yorkshire Group plc from 1st October 2003.
The Board was pleased to welcome Malcolm Shilton to the Group as Company
Secretary with effect from 17th June.
The continuing financial difficulties which have been experienced by the company
during the first half of 2003 have placed a severe burden on all our employees.
The Board would like to acknowledge their tolerance and the support they have
given during this period.
Prospects
In Europe the benefits from our ongoing manufacturing improvements, the further
benefits we expect to gain from the restructuring of our sales and marketing
operations and the slowdown in the decline of turnover leave us cautiously
optimistic that we can restore the business to profitability in the medium term.
The American business continues to be impacted by the difficult economic
conditions in the US textile sector, and we can see little prospect of an
upturn. We will announce the results of our strategic review in due course.
Trading conditions in Asia Pacific continue to be difficult, however the
re-alignment of the cost base means that our business is sustainable at current
sales levels, and positions us for any growth in demand.
Asset realization strategy
As announced we have disposed of surplus property assets in Australia and the
USA and non core business units in Indonesia and the USA. We continue to review
all of the Groups assets and business streams for opportunities to reduce debts.
We are currently exploring a number of other alternative realizations and are
making slow but steady progress with these.
Pat Barrett
Chairman
25th September 2003
Enquiries:
Andrew Dick, Chief Executive Nick Denton
Jim Perrie, Finance Director Tom Leatherbarrow
Tel: 0113 244 3111 The Hogarth Partnership
Tel: 020 7357 9477
Mob: 07770 272 083
GROUP PROFIT AND LOSS ACCOUNT
for the half year ended 30th June 2003
Before First half First half Full year
Note Exceptional Exceptional 2003 2002 2002
items items
#'000 #'000 #'000 #'000 #'000
Turnover 2 45,430 - 45,430 56,277 103,799
Cost of 4 (36,216) (1,589) (37,805) (43,418) (94,092)
sales
--------- --------- -------- ------- -------
Gross 9,214 (1,589) 7,625 12,859 9,707
Profit
Other 4 (14,559) (1,447) (16,006) (17,570) (36,038)
operating
expenses
--------- --------- -------- ------- -------
Operating 3,4 (5,345) (3,036) (8,381) (4,711) (26,331)
loss
Exceptional 4 - 788 788 - -
income
--------- --------- -------- ------- -------
Operating (5,345) (2,248) (7,593) (4,711) (26,331)
loss before
interest
Net 4 (1,629) (1,604) (3,233) (1,651) (3,838)
interest
--------- --------- -------- ------- -------
Loss on (6,974) (3,852) (10,826) (6,362) (30,169)
ordinary --------- ---------
activities
before
taxation
Tax on loss 5 (504) (150) 208
on ordinary
activities
-------- ------- -------
Loss on (11,330) (6,512) (29,961)
ordinary
activities
after
taxation
Minority - (25) 30
interest -
equity
-------- ------- -------
Loss for the (11,330) (6,537) (29,931)
period
Dividends - - - -
on equity
shares
-------- ------- -------
Transfer from (11,330) (6,537) (29,931)
reserves -------- ------- -------
Basic & 6
diluted loss
per ordinary
share
- before (14.3) p (7.0) p (21.1) p
exceptional
items
- exceptional (7.4) p (5.5) p (36.1) p
items less
attributable
tax
-------- ------- -------
Basic & (21.7) p (12.5) p (57.2) p
diluted loss -------- ------- -------
per ordinary
share
The results in both years relate to continuing activities.
The notes at the end form part of these accounts.
GROUP BALANCE SHEET
at 30th June 2003
30th June 30th June 31st Dec
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Tangible assets 33,266 45,767 33,340
Investments 23 23 23
--------- --------- ---------
33,289 45,790 33,363
--------- --------- ---------
Current assets
Stocks 30,172 37,300 35,688
Debtors 20,763 28,302 21,780
Cash at bank and in hand 3,355 3,053 2,681
--------- --------- ---------
54,290 68,655 60,149
Current liabilities
Creditors - amounts falling due within one (67,044) (27,412) (62,924)
year
--------- --------- ---------
Net current (liabilities) / assets (12,754) 41,243 (2,775)
--------- --------- ---------
Total assets less current liabilities 20,535 87,033 30,588
Creditors-amounts falling due after more
than
one year - (31,856) -
Provisions for liabilities and charges (4,347) (5,728) (5,009)
--------- --------- ---------
Net assets 16,188 49,449 25,579
--------- --------- ---------
Capital and reserves:
Called up share capital 13,076 13,076 13,076
Share premium account 26,760 26,760 26,760
Revaluation reserve 550 550 550
Capital redemption reserve 300 300 300
Profit and loss account (25,142) 8,068 (15,717)
--------- --------- ---------
Equity shareholders' funds 15,544 48,754 24,969
Equity minority interest 644 695 610
--------- --------- ---------
Total capital employed 16,188 49,449 25,579
--------- --------- ---------
The notes at the end form part of these accounts.
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30th June 2003
First half First half Full year
2003 2002 2002
Note #'000 #'000 #'000
Net cash (outflow) / inflow 7 (1,831) 1,638 (1,338)
from operating activities
Returns on investments and
servicing of finance
Interest received - 46 58
Interest paid (1,714) (1,464) (3,160)
--------- --------- --------
(1,714) (1,418) (3,102)
--------- --------- --------
Taxation
Taxation received 65 169 1,090
Taxation paid (130) (176) (760)
--------- --------- --------
(65) (7) 330
--------- --------- --------
Capital expenditure and
financial investment
Purchase of tangible fixed (1,418) (1,876) (4,571)
assets
Sale of tangible fixed assets 1,787 103 516
--------- --------- --------
369 (1,773) (4,055)
--------- --------- --------
Acquisitions and disposals - 66 -
Financing
New bank loans 2,171 5,219 3,715
Repayment of loans - (2,793) (2,715)
--------- --------- --------
2,171 2,426 1,000
--------- --------- --------
--------- --------- --------
(Decrease) / increase in cash (1,070) 932 (7,165)
in the period --------- --------- --------
The notes at the end form part of these accounts.
OTHER FINANCIAL STATEMENTS
for the half year ended 30th June 2003
First half First half Full year
2003 2002 2002
#'000 #'000 #'000
Statement of total recognised gains and
losses
Loss for the financial period (11,330) (6,537) (29,931)
Currency translation differences on
foreign currency
net investments 1,905 1,178 787
-------- -------- ---------
Total gains and losses recognised in (9,425) (5,359) (29,144)
the period -------- -------- ---------
Historical cost profits
There is no material difference between
historical cost profits and those
reported in the profit and loss
account.
Reconciliation of movements in
shareholders' funds
Loss for the financial period (11,330) (6,537) (29,931)
Currency translation differences on
foreign currency
net investments 1,905 1,178 787
-------- -------- ---------
Net decrease in shareholders' funds in (9,425) (5,359) (29,144)
the period
Opening shareholders' funds 24,969 54,113 54,113
-------- -------- ---------
Closing shareholders' funds 15,544 48,754 24,969
-------- -------- ---------
The notes at the end form part of these accounts.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Preparation of interim financial statements
The interim financial statements, which have not been audited or reviewed by
the auditors, have been prepared on the basis of the accounting policies set
out in the Group's 2002 statutory accounts.The change in accounting policiy
for deferred tax following the adoption of FRS 19, Deferred tax, had no impact
on the Group accounts due to the availability of surplus tax losses brought
forward. The statements were approved by the Board of Directors on 24th
September 2003. The financial information set out above does not comprise
statutory accounts within the meaning of the Companies Act 1985.
The abridged financial information for 2002 is based on the statutory
accounts for that year, on which the auditors have given an unqualified report
under S235 of the Companies Act 1985 which did not contain a statement under
S237 (2) or (3) of the Act, and which have been filied with the Registrar of
Companies.
2. Turnover
Turnover represents sales by Group companies to third parties.
First half First half Full year
2003 2002 2002
#'000 #'000 #'000
Geographical destination
analysis of Group turnover
Continental Europe 17,581 19,177 34,282
Asia 4,640 6,727 11,948
Australasia 698 640 1,381
North and South America 19,214 27,150 48,724
Africa and the Middle East 1,586 933 2,067
------ ------- ------
43,719 54,627 98,402
U.K. 1,711 1,650 5,397
------ ------- ------
Total turnover 45,430 56,277 103,799
------ ------- ------
Divisional analysis of Group turnover
Europe 20,916 22,642 42,626
Asia Pacific 5,144 6,613 12,653
Americas 19,370 27,022 48,520
------ ------ -------
45,430 56,277 103,799
------ ------ -------
3. Divisional analysis of Group operating loss
Before
Exceptional Exceptional First half First half Full year
items items 2003 2002 2002
#'000 #'000 #'000 #'000 #'000
Europe (3,108) - (3,108) (5,499) (12,126)
Asia Pacific (1,048) - (1,048) 132 (1,381)
Americas (264) (1,434) (1,698) 1,515 706
Group (925) (1,602) (2,527) (859) (2,336)
services --------- --------- ------ ------- -------
(5,345) (3,036) (8,381) (4,711) (15,137)
Amortisation - - - - (11,194)
and impairment --------- --------- ------ ------- -------
review
Operating (5,345) (3,036) (8,381) (4,711) (26,331)
loss --------- --------- ------ ------- -------
4. Exceptional Americas Corporate Total First half Full year
items costs first half 2002 2002
2003
#'000 #'000 #'000 #'000 #'000
Fixed asset - - - (200) -
write downs
Impairment - 1,000 1,000 - 11,194
review
Stock 589 - 589 260 2,257
provisions
Business - - - 1,723 1,493
rationalisation --------- --------- ------ ------- -------
costs
Charged as cost 589 1,000 1,589 1,783 14,944
of sales --------- --------- ------ ------- -------
Bad debt - - - - 157
provisions
Business 845 602 1,447 1,100 3,282
rationalisation --------- --------- ------ ------- -------
costs
Charged as 845 602 1,447 1,100 3,439
other operating --------- --------- ------ ------- -------
expenses
Sale of land - (116) (116) - -
(Supertram)
Profit on - (672) (672) - -
disposal of --------- --------- ------ ------- -------
Australian
property
Charged as - (788) (788) - -
exceptional --------- --------- ------ ------- -------
income
Termination of - 1,604 1,604 - -
interest swap
Unamortised - - - - 506
issue costs on --------- --------- ------ ------- -------
1999 $40.5m
loan
Charged as - 1,604 1,604 - 506
interest --------- --------- ------ ------- -------
payable and
similar
charges
--------- --------- ------ ------- -------
Total 1,434 2,418 3,852 2,883 18,889
--------- --------- ------ ------- -------
5. Tax on loss on ordinary First half First half Full year
activities
2003 2002 2002
#'000 #'000 #'000
UK corporation tax
Current tax on income for the - - -
period
Adjustments in respect of prior - - (72)
periods ------------ ------------- ------------
- - (72)
Overseas tax
Current tax on income for the 504 150 (112)
period
Adjustments in respect of prior - - (58)
periods ------------ ------------- ------------
Total current tax 504 150 (242)
------------ ------------- ------------
Deferred tax:
Origination and reversal of - - 34
timing differences ------------ ------------- ------------
- - 34
------------ ------------- ------------
Total tax charged 504 150 (208)
------------ ------------- ------------
6. Earnings per ordinary share
Losses used in the earnings per
share calculation are as
follows:
Loss for the financial year (11,330) (6,537) (29,931)
Exceptional items (less 3,852 2,884 18,889
attributable tax) ------------ ------------- ------------
Loss before exceptionals (7,478) (3,653) (11,042)
------------ ------------- ------------
Weighted average number of 52,303,337 52,303,337 52,303,337
shares
Diluted earnings per share have
been calculated for 2003 and
2002 under FRS 14 and no
dilution arises in either
period.
7. Reconciliation of operating loss First half First half Full year
to net cash (outflow)/inflow from
operating activities
2003 2002 2002
#'000 #'000 #'000
Operating loss on ordinary (7,593) (4,711) (26,331)
activities before interest
Fundamental reorganisation costs (3,394) (2,452) (3,470)
paid
Depreciation of tangible fixed 1,625 1,854 3,662
assets
Impairment review - - 11,194
Stock writedown 589 (200) 2,257
Profit on sale of fixed assets (715) (41) (97)
Decrease in stock 4,843 5,507 3,758
Decrease/ (increase) in debtors 1,753 (2,829) 2,365
Increase in creditors 292 2,448 2,309
Net increase in provisions 769 2,062 3,015
------------ ------------ ------------
Net cash (outflow)/inflow from (1,831) 1,638 (1,338)
operating activities ------------ ------------ ------------
8. Reconcilation of net cash
(outflow) / inflow to movement in
net debt
(Decrease)/ increase in cash in (1,070) 932 (7,165)
the period
Cash inflow from increase in (2,171) (2,426) (1,000)
debt ------------ ------------ ------------
Change in net debt resulting from (3,241) (1,494) (8,165)
cash flows
Translation differences 301 1,542 2,756
------------ ------------ ------------
Movement in net debt in the (2,940) 48 (5,409)
period
Opening net debt (40,195) (34,786) (34,786)
------------ ------------ ------------
Closing net debt (43,135) (34,738) (40,195)
------------ ------------ ------------
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END
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