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Investor Relations
RNS Number:9276B
Portmeirion Group PLC
13 August 2004
PORTMEIRION GROUP PLC
RESULTS FOR 6 MONTHS ENDED
30 JUNE 2004
CHAIRMAN'S STATEMENT
Financial Highlights:-
First Half First Half Increase/
2004 2003 (Decrease)
£000's £000's %
Turnover 13,392 13,211 1.4
--------------------- --------- --------- ---------
(Loss)/Profit before tax (364) 506 (171.9)
--------------------- --------- --------- ---------
(Loss)/Earnings per share -
Basic (2.30p) 3.07p (174.9)
--------------------- --------- --------- ---------
Interim dividend per share 3.30p 3.30p -
--------------------- --------- --------- ---------
Results
Sales increased only by 1.4% compared to last year's in a very difficult first
half. The adverse dollar exchange rate, additional costs of pension fund
contributions and early production problems in respect of a new product range in
the first quarter resulted in a first half pre-tax loss of £364,000, compared
with a first half pre-tax profit of £506,000 last year.
Dividend
Given the strong balance sheet, the Board has decided to declare an unchanged
interim dividend of 3.30p payable on 1st October 2004, to shareholders on the
register on 17th September 2004.
Trading Performance
The improvement in Group sales has been slower than anticipated. Following the
sales decrease of 7.2% in 2003, sales in the first quarter of 2004 were 1% lower
than the same period in 2003. Sales in the second quarter then improved showing
a 3.6% increase over the equivalent period in 2003, and resulting in the first
half overall increase of 1.4%.
It is encouraging to report that sales in our US market have shown a major
improvement, being 22% ahead of last year in dollar terms. However, this
translates to a 14% increase when converted to sterling because of the weakened
dollar. Sales in the UK were 4% ahead of last year, but with higher than planned
levels of discounting in order to achieve this increase, resulting in reduced
gross margins during the 6 month period. Sales in Korea again showed good
progress, being 14% ahead of last year. However, sales to Europe and the rest of
the world all recorded significant reductions, and in total Group sales for the
6 months were below management's expectations.
Production margins were much improved in the second quarter of the 2004
financial year, following initial production problems with the introduction of a
new range in the first quarter. I expect production margins for the second half
to be stabilised at this improved level.
As reported in the Group trading statement made on 28th July 2004, these
factors, together with the previously reported additional costs of pension fund
contributions and the ongoing negative impact of exchange rates, have resulted
in the first half pre-tax loss. Consequently, the Board has lowered its
expectations as to the Group's trading performance for the full year to December
2004.
The ceramic tableware market continues to be fiercely competitive, with overall
selling price deflation in our main markets: - the UK and the US. Our response
in launching the lower priced imported Portmeirion Studio range has been
successful, and is contributing significantly to the improvement in US sales.
Portmeirion Studio ranges will continue to be expanded for both the US and the
UK markets, and represent a major opportunity to acquire incremental sales,
targeting new markets by producing Portmeirion designed products, manufactured
in lower cost countries. The focus will be to maintain production of our very
successful classic ranges in the UK. However, the emphasis will be on ensuring
that productivity is consistently improved.
In the light of current trading conditions and prospects, the Board has reviewed
its capital expenditure plans. The substantial capital expenditure planned over
the next three years, to build a new distribution centre and expanded
manufacturing facilities, will be significantly reduced. This will preserve the
Company's strong balance sheet and cash resources. The Group will go ahead with
the acquisition of a new distribution centre, essential for future development,
by leasing an appropriate building. The expenditure on internal equipment is
expected to be approximately £3.0 million.
Current Trading and Prospects
I expect trading conditions to remain difficult, and indeed sales in July were
below expectation, although the order book is encouraging. Sales and
profitability in the second half are normally greater than the first half, with
additional sales of gift products and glassware. August also sees the launch of
a superb new high specification range of cookware, designed and co-branded with
Aga. This range complements and fits the Aga cooker range, and will be retailed
in their stand-alone retail outlets, in addition to our regular distribution
outlets. This style of cookware will also be launched in the US as Portmeirion
"Fire and Ice". Our performance in the US is expected to continue its much
improved trend. However, I can only be cautious about prospects for the second
half of the year.
The Group will now be focusing on repositioning its activities. It will continue
to develop and diversify its product range, based on excellent design and
quality and it will take advantage of manufacturing sources wherever appropriate
around the world, in order to win new business in new markets. The Board also
expects to strengthen the Group's management team by introducing appropriate
expertise where necessary.
While this repositioning takes place, the Group will plan its investments so as
to protect its strong balance sheet and, so far as possible, maintain dividends.
A Ralley
Chairman
12th August 2004
INDEPENDENT REVIEW REPORT
TO PORTMEIRION GROUP PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2004 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement, the statement of total recognised gains and losses, the
reconciliation of movements in shareholders' funds and related notes 1 to 9. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Birmingham
12 August 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Notes Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
Turnover - continuing operations 6 13,392 13,211 28,512
Raw materials and operating costs (13,915) (12,885) (26,665)
--------- --------- ---------
Operating (loss)/profit -
continuing operations (523) 326 1,847
Share of profit of associated
undertakings 71 87 216
Interest receivable and similar
income 110 93 174
Impairment of investment in
associated undertaking - - (234)
Interest payable and similar
charges (22) - -
--------- --------- ---------
(Loss)/profit on ordinary
activities before taxation (364) 506 2,003
Taxation on (loss)/profit on
ordinary activities 124 (187) (697)
--------- --------- ---------
(Loss)/profit for the period (240) 319 1,306
Dividends (344) (344) (1,381)
--------- --------- ---------
Retained loss for the period (584) (25) (75)
========= ========= =========
(Loss)/earnings per share 4 (2.30p) 3.07p 12.54p
========= ========= =========
Diluted (loss)/earnings per share 4 (2.30p) 3.06p 12.53p
========= ========= =========
Dividend per share 5 3.30p 3.30p 13.25p
========= ========= =========
See notes below
CONSOLIDATED BALANCE SHEET
As at 30.6.04 As at 30.6.03 As at 31.12.03
£000's £000's £000's £000's £000's £000's
Fixed assets
Tangible assets 7,618 7,984 7,872
Investments 1,476 1,632 1,460
------- ------- -------
9,094 9,616 9,332
Current assets
Stocks 6,962 7,104 6,775
Debtors 5,721 5,265 4,868
Cash at bank and in hand 5,123 6,142 7,228
------- ------- -------
17,806 18,511 18,871
Creditors: amounts
falling due within one
year (3,439) (3,548) (3,932)
------- ------- -------
Net current assets 14,367 14,963 14,939
------- ------- -------
Total assets less
current liabilities 23,461 24,579 24,271
Provisions for
liabilities and charges (310) (162) (307)
------- ------- -------
Net assets 23,151 24,417 23,964
======= ======= =======
Capital and reserves
Called up share capital 521 521 521
Share premium account 4,580 4,580 4,580
Treasury shares (202) - -
Profit and loss account 18,252 19,316 18,863
------- ------- -------
Equity shareholders'
funds 23,151 24,417 23,964
======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT
Notes Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
Cash flow from operating activities 8 (446) (244) 1,852
Returns on investments and
servicing of finance 9 73 99 173
Taxation (249) (176) (431)
Capital expenditure and financial
investments 9 (245) (214) (697)
Equity dividends paid (1,036) (1,035) (1,381)
--------- --------- ---------
Cash outflow before use of liquid (1,903) (1,570) (484)
resources and financing
Management of liquid resources 2,435 1,155 420
Financing 9 (202) 34 34
--------- --------- ---------
Increase/(decrease) in cash in the
period 330 (381) (30)
========= ========= =========
Note to consolidated cash flow
statement:
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash in the
period 330 (381) (30)
Cash inflow from decrease in liquid
resources (2,435) (1,155) (420)
Net funds at 1st January 7,228 7,678 7,678
--------- --------- ---------
Net funds at period end 7 5,123 6,142 7,228
========= ========= =========
See notes below
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
(Loss)/profit for the period (240) 319 1,306
Currency translation differences (27) 61 (342)
--------- --------- ---------
Total recognised gains and losses for
the period (267) 380 964
========= ========= =========
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
(Loss)/profit for the period (240) 319 1,306
Dividends (344) (344) (1,381)
Currency translation differences (27) 61 (342)
Shares issued under employee share
schemes - 34 34
Purchase of treasury shares (202) - -
--------- --------- ---------
Net (reduction)/addition to
shareholders' funds (813) 70 (383)
Opening shareholders' funds 23,964 24,347 24,347
--------- --------- ---------
Closing shareholders' funds 23,151 24,417 23,964
========= ========= =========
NOTES
1. The consolidated profit and loss account for the six months ended 30 June
2004, the consolidated balance sheet at that date, the consolidated cash flow
statement, the statement of total recognised gains and losses, the
reconciliation of movements in shareholders' funds and the notes to the
financial information, have been reviewed by the auditors but not audited. The
consolidated profit and loss account for the six months ended 30 June 2003 and
the consolidated balance sheet at that date have also been reviewed by the
auditors but not audited.
2. The comparative figures for the financial year ended 31 December 2003 are not
the Group's statutory accounts for that year. Those accounts have been reported
on by the Group's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain a statement under
Section 237(2) or (3) of the Companies Act 1985.
3. This Interim Statement has been prepared in accordance with the accounting
policies set out in the Group's 2003 Report and Accounts.
4. The earnings per share are calculated on a loss of £240,000 (2003 - earnings
of £319,000) and the weighted average number of Ordinary shares of 10,421,230
(2003 - 10,406,114) in issue during the period. As the effect of share options
is anti-dilutive for the six months ended 30 June 2004, the anti-dilutive share
options have been excluded from the calculation of diluted weighted average
number of Ordinary shares. The diluted earnings per share under FRS 14 for the
six months ended 30 June 2003 are calculated on earnings of £319,000 and a
weighted average number of Ordinary shares in issue adjusted to assume
conversion of all dilutive potential Ordinary Shares which is 10,409,295.
5. A dividend of 3.3p (2003 - 3.3p) per Ordinary share will be paid on 1 October
2004 to shareholders on the register on 17 September 2004.
6. Turnover by destination
Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
United Kingdom 5,552 5,337 12,055
North America 4,728 4,255 9,920
European Union 730 1,402 1,873
Far East 2,196 1,938 4,099
Rest of the World 186 279 565
--------- --------- ---------
13,392 13,211 28,512
========= ========= =========
7. Analysis of net funds
As at As at As at
30.6.04 30.6.03 31.12.03
£000's £000's £000's
Cash in hand, at bank 1,494 813 1,164
Short term money market deposits 3,629 5,329 6,064
--------- --------- ---------
Total 5,123 6,142 7,228
========= ========= =========
8. Reconciliation of operating profit to operating cash flows
Six Six Year
Months Months
to to to
30.6.04 30.6.03 31.12.03
£000's £000's £000's
Operating (loss)/profit (523) 326 1,847
Depreciation 494 487 950
Exchange gain/(loss) 13 11 (305)
(Profit)/loss on sale of tangible
fixed assets (2) (30) 35
Increase in stocks (187) (909) (580)
(Increase)/decrease in debtors (563) 415 611
Increase/(decrease) in creditors 322 (544) (706)
--------- --------- ---------
Net cash (outflow)/inflow from
operating activities (446) (244) 1,852
========= ========= =========
All of the above relate to continuing
operations.
9. Analysis of cash flows for headings netted in the cash flow statement
Six Months Six Months Year
to 30.6.04 to 30.6.03 to 31.12.03
£000's £000's £000's £000's £000's £000's
Returns on investments and
servicing of finance
Interest received 95 99 173
Interest paid (22) - -
------- ------- -------
Net cash inflow from returns
on
investments and
servicing of finance 73 99 173
======= ======= =======
Capital expenditure and
financial investments
Purchase of tangible
fixed assets (262) (285) (801)
Sale of tangible fixed
assets 17 71 104
------- ------- -------
Net cash outflow for capital
expenditure
and financial
investments (245) (214) (697)
======= ======= =======
Financing
Issue of Ordinary shares under
share
option schemes - 34 34
Purchase of treasury
shares (202) - -
------- ------- -------
Net cash (outflow)/
inflow from financing (202) 34 34
======= ======= =======
For further information please contact Arthur Ralley (Chairman), Brett Phillips
(Finance Director) on:
01782 744721.
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