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Investor Relations
RNS Number:8570J
Portmeirion Group PLC
17 March 2005
PORTMEIRION GROUP PLC
RESULTS FOR YEAR ENDED
31ST DECEMBER 2004
CHAIRMAN'S STATEMENT
Financial summary for the year
2004 2003
£000's £000's
Turnover 27,686 28,512
----------------------------- --------- -----------
Pre-tax (loss)/profit before operating exceptionals (398) 2,003
----------------------------- --------- -----------
Pre-tax (loss)/profit after operating exceptionals (1,591) 2,003
----------------------------- --------- -----------
Basic (loss)/earnings per share (10.99p) 12.54p
----------------------------- --------- -----------
Dividends per share 13.25p 13.25p
----------------------------- --------- -----------
Sales for the year were £27.686 million, 2.9% below the previous year. If Group
sales are compared on a like for like exchange rate, sales in 2004 were 0.5%
greater than the previous year.
The loss before taxation, and before operating exceptional items, of £0.398
million compares with a profit of £2.003 million for the previous year.
Operating exceptional asset write-downs of £1.193 million, arising from planned
reorganisation, bring the total loss for the year to £1.591 million.
The Board is recommending a final dividend of 9.95p bringing the total to 13.25p
for the year. This is unchanged from 2003.
Results for the Year
The major factors that caused the Group to fall into a modest loss before tax
and operating exceptionals were:
- A slight fall in annual sales, in a very challenging retail
environment.
- A further fall in the value of the US dollar, which has cost the
Group £0.5million in the year.
- A first full year contribution of £0.35 million to the Group's
defined benefit pension scheme, which was closed in 1999. This
contribution is now ongoing.
The operating exceptional non-cash costs of £1.193.million have been incurred
primarily as a result of the major reorganisation of the Group's manufacturing
and warehouse facilities, referred to in the announcement of 4th November 2004.
The Group has also included in this figure asset write-downs of £236k associated
with the planned closure of its Japanese subsidiary.
Sales in the UK were 1.7% lower than the previous year, in the face of intense
low-cost competition from product ranges sourced overseas. Some 1.5% of margin
had to be sacrificed to maintain this level of sales.
Sales in the US grew by 17%. This excellent improvement is, however, reduced to
6.6% when converted into sterling at the higher exchange rate. The improvement
in the US was mainly the result of the new lower priced PS Portmeirion Studio
ranges that accounted for some $2.0 million incremental sales. I believe we can
continue to make progress in the US with additional products designed in the US
specifically for their market. However, the weakened dollar continues to
undermine our efforts.
The Group's policy is to sell US dollars forward, since the US has traditionally
accounted for at least 35% of total sales. The Group sells up to 1 year in
advance, for between 70% and 80% of expected currency requirements. In 2003 the
average rate of conversion was $1.5199, in 2004 it was $1.6691 and for 2005 the
Group is hedged at $1.7848. This further fall in the value of the US dollar is
likely to cost a further £0.5 million of pre-tax profit this year.
Sales in all our other export markets were below the previous year. The most
significant was Korea, where, after several years of significant growth, sales
fell by 4.7%. However, I expect the Group's sales to return to growth in Korea
during 2005. The other major reduction in sales was in Italy, with a fall of
40%, due to a change of distributor in this market. Again, I expect sales to
increase this year in Italy.
Since the Group has maintained a strong balance sheet the Board has decided to
recommend that the dividend for the full year be maintained at 13.25p.
The Board believes that the Group must adapt evermore rapidly to the changes
that have so negatively affected the ceramic manufacturing industry in the UK.
Although the programme of product diversification over the last few years has
helped, UK manufactured ceramics still account for 80% of Group sales. In order
to return to healthy sales growth and profitability, the Board has embarked upon
a programme of major reorganisation.
Product Strategy
Under the PORTMEIRION brand, the Group will continue to develop lower-priced
ranges, sourced overseas, to meet the intense low-cost competition now
dominating the UK and US markets. The Group will continue to diversify into
complementary housewares, such as glassware, gifts and placemats. I expect
sourced products to increase from 20% to 50% of an increased sales level in the
next 3 years. Since most imported products are bought in US dollars, this has
the additional advantage of contributing to a natural hedge against a
fluctuating exchange rate.
The Group will continue to expand the very successful and well-established
classic ranges. Initiatives such as the freezer to oven cookware range, designed
in conjunction with Aga and decorated with classic Portmeirion designs, have
been a notable success in a difficult year.
Manufacturing & Warehouse Reorganisation
As announced on the 4th November 2004, the Group is reducing its UK
manufacturing, warehousing and distribution operations from 4 sites to 2, while
maintaining current production capacity.
Progress since the announcement has been good. The consolidation of the smaller
manufacturing site into the larger main site is underway, and I expect this move
to be completed during the first half of the year.
The Group currently operates from 2 warehouse sites. The plans to move to a new
purpose-built and larger warehouse early in 2006 with modern handling equipment
are well advanced.
The total expenditure, including capital, on the reorganisation, which will
result in the closure of 2 freehold sites, is planned to be under £1.0 million
in 2005. However, proceeds from the sale of the 2 sites are expected to exceed
this.
The anticipated reduction in operating costs will be approximately £0.5 million
per annum, with full effect from 2006.
This reorganisation will ensure that the Group improves productivity in
manufacturing, warehousing and distribution, so as to meet the increasing
competitive challenges.
Management Structure
The reorganisation has resulted in a modest reduction in the size of the
management team and workforce. However, I believe there is a major opportunity
to increase sales to non-US export markets, which have suffered a decline in the
last few years. To this end the Group has appointed a new Sales Director, Export
Sales Manager, and Marketing Manager. I am confident that this new team will
have a positive impact in existing markets, and in opening up new markets, such
as China and Russia.
Current Trading & Prospects
I expect 2005 to be a year of radical repositioning of the Company, which will
result in less dependence on UK ceramic manufacturing in the future.
Sales so far in 2005 are slightly below the same period of 2004, and I think it
is unrealistic to expect significant sales growth this year given the
challenging environment we face. With improved efficiencies and tight cost
control, I do believe the Group can bring about a significant improvement in
performance.
With new, targeted product ranges and the bulk of the reorganisation completed,
I expect significant progress from 2006 onward.
I would like to thank the management team and the whole workforce for their
contribution in 2004, in meeting the challenges of a difficult year, and in
helping to reposition the Group to meet the challenges we face.
Arthur Ralley
Chairman
16 March 2005
For further information please contact:
Arthur Ralley, Chairman
Brett Phillips, Group Finance Director
Tel: (01782) 744 721
PORTMEIRION GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31st December 2004
Before Operating
exceptional exceptional
items items Total Total
2004 2004 2004 2003
£000's £000's £000's £000's
Turnover - continuing
operations 3 27,686 - 27,686 28,512
Raw materials and operating
costs (28,418) (1,193) (29,611) (26,665)
------- ------- ------- -------
Operating (loss)/profit -
continuing operations (732) (1,193) (1,925) 1,847
Share of profit of associated
undertakings 145 - 145 216
Interest receivable and
similar income 211 - 211 174
Interest payable and
similar (22) - (22) -
charges
Impairment of investment in
associated undertaking - - - (234)
------- ------- ------- -------
(Loss)/profit on ordinary
activities before taxation (398) (1,193) (1,591) 2,003
Taxation on (loss)/profit on
ordinary activities 454 (697)
------- -------
(Loss)/profit on ordinary
activities after taxation
being the (loss)/profit for
the financial year (1,137) 1,306
Dividends paid and proposed (1,371) (1,381)
------- -------
Retained loss for the
financial year (2,508) (75)
======= =======
(Loss)/earnings per share 4 (10.99p) 12.54p
======= =======
Diluted (loss)/earnings per
share 4 (10.99p) 12.53p
======= =======
Dividends per share 5 13.25p 13.25p
======= =======
See notes
PORTMEIRION GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 31st December 2004
2004 2003
£000's £000's £000's £000's
Fixed assets
Tangible assets 6,279 7,872
Investments 1,544 1,460
------- -------
7,823 9,332
Current assets
Stocks 6,054 6,775
Debtors 5,926 4,868
Cash at bank and in hand 4,859 7,228
------- -------
16,839 18,871
Creditors: amounts falling due
within one year (3,680) (3,932)
------- -------
Net current assets 13,159 14,939
------- -------
Total assets less current
liabilities 20,982 24,271
Provisions for liabilities and
charges (19) (307)
------- -------
Net assets 20,963 23,964
======= =======
Capital and reserves
Called up share capital 521 521
Share premium account 4,580 4,580
Treasury shares (202) -
Profit and loss account 16,064 18,863
------- -------
Equity shareholders' funds 20,963 23,964
======= =======
PORTMEIRION GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31st December 2004
2004 2003
Notes £000's £000's
Cash inflow from operating activities 7 48 1,852
Returns on investments and servicing
of finance 8 171 173
Taxation (604) (431)
Capital expenditure and financial
investment 8 (414) (697)
Equity dividends paid (1,368) (1,381)
------- -------
Cash outflow before use of liquid
resources and financing (2,167) (484)
Management of liquid resources 2,560 420
Financing 8 (202) 34
------- -------
Increase/(decrease) in cash in the year 6 191 (30)
======= =======
Reconciliation of net cash flow to movement in net funds
2004 2003
£000's £000's
Increase/(decrease) in cash in the year 191 (30)
Cash inflow from decrease in liquid
resources (2,560) (420)
Net funds at 1st January 7,228 7,678
------- -------
Net funds at 31st December 4,859 7,228
======= =======
PORTMEIRION GROUP PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31st December 2004
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2004 2003
£000's £000's
(Loss)/profit for the financial year (1,137) 1,306
Currency translation differences (291) (342)
------- -------
Total recognised gains and losses for
the financial year (1,428) 964
======= =======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2004 2003
£000's £000's
(Loss)/profit for the financial year (1,137) 1,306
Dividends (1,371) (1,381)
Currency translation differences (291) (342)
Shares issued under employee share schemes - 34
Purchase of treasury shares (202) -
------- -------
Net reduction to shareholders' funds (3,001) (383)
Opening shareholders' funds 23,964 24,347
------- -------
Closing shareholders' funds 20,963 23,964
======= =======
PORTMEIRION GROUP PLC
NOTES
1. The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st December 2004 and 2003 but is
derived from those accounts. Statutory accounts for 2003, which have been
delivered to the Registrar of Companies, contain an unqualified audit
opinion and did not contain a statement under Section 237(2) or (3) of the
Companies Act 1985. Statutory accounts for the year ended 31st December
2004 on which the auditors have given an unqualified opinion and do not
contain a statement under Section 237(2) or (3) of the Companies Act 1985
will be delivered to the Registrar of Companies in due course. This
announcement was approved by the Board of Directors on 16th March 2005.
2. Operating exceptional items
A review of the Group's cost base and profitability has led to the
decision to consolidate manufacturing onto one site in Stoke-on-Trent and
to close down the Group's subsidiary in Japan and two retail outlets in
the UK. The resultant write-down of fixed assets and stocks has been
included in operating costs but has been treated as exceptional. These
exceptional costs are:
2004 2003
£000's £000's
Write down of fixed assets 977 -
Write down of stocks 216 -
------- -------
1,193 -
======= =======
3. Turnover by destination
2004 2003
£000's £000's
United Kingdom 11,848 12,055
North America 10,256 9,920
European Union 1,338 1,873
Far East 3,913 4,099
Rest of the World 331 565
------- -------
27,686 28,512
======= =======
4. (Loss)/earnings per share
Basic
The basic (loss)/earnings per share are calculated by dividing the loss
after taxation of £1,137,000 (2003 - profits of £1,306,000) by the
weighted average number of Ordinary shares in issue during the year of
10,350,192 (2003 - 10,414,918).
Diluted
The diluted (loss)/earnings per share is calculated in accordance with
Financial Reporting Standard 14 (FRS 14). This calculation uses a weighted
average number of Ordinary shares in issue adjusted to assume conversion
of all dilutive potential Ordinary shares and is shown below:
2004 2003
Weighted Loss Weighted Earnings
Loss Number of per Share Earnings Number of per Share
£ Shares (Pence) £ Shares (Pence)
Basic (loss)/earnings per share (1,137,000) 10,350,192 (10.99) 1,306,000 10,414,918 12.54
Effect of dilutive securities:
employee share options - - - - 6,000 -
-------- ------- ------- ------- -------- -------
Diluted (loss)/earnings
per share (1,137,000) 10,350,192 (10.99) 1,306,000 10,420,918 12.53
======== ======= ======= ======= ======== =======
FRS 14 requires presentation of diluted earnings per share when a company could be
called upon to issue shares that would decrease net profit or increase net loss per
share. For a loss making company with outstanding share options, net loss per share
would only be increased by the exercise of out-of-the-money options. Since it seems
inappropriate to assume that option holders would act irrationally and there are no
other diluting future share issues, diluted loss per share equals basic loss per
share.
5. Dividends
The Directors propose the payment of a final dividend of 9.95p (2003 - 9.95p) per
Ordinary share on 20th May 2005 to shareholders on the register on 29th April
2005.
6. Analysis of net
funds
At 1st Cash At 31st
January 2004 flow December 2004
£000's £000's £000's
Cash in hand, at bank 1,164 191 1,355
Short term money market deposits 6,064 (2,560) 3,504
-------- -------- ----------
Total 7,228 (2,369) 4,859
======== ======== ==========
Short term money market deposits include deposits of up to 30 days maturity and are included within
cash in the Group's balance sheet.
7. Reconciliation of operating (loss)/profit to operating cash
flows
2004 2003
£000's £000's
Operating (loss)/profit (1,925) 1,847
Depreciation 987 950
Impairment of tangible fixed assets - operating 977 -
exceptional
Exchange loss (248) (305)
(Profit)/loss on sale of tangible fixed (3) 35
assets
Decrease/(increase) in stocks 721 (580)
(Increase)/decrease in debtors (441) 611
Decrease in creditors (20) (706)
------- -------
Net cash inflow from operating 48 1,852
activities ======= =======
All of the above relate to continuing
operations.
8. Analysis of cash flows for headings netted in the cash flow
statement
2004 2003
£000's £000's
Returns on investments and servicing of
finance
Interest received 193 173
Interest paid (22) -
------- -------
Net cash inflow from returns on
investments and servicing of finance 171 173
======= ========
Capital expenditure and financial
investment
Purchase of tangible fixed assets (437) (801)
Sale of tangible fixed assets 23 104
------- -------
Net cash outflow for capital
expenditure
and financial investments (414) (697)
======= ========
Financing
Issue of Ordinary shares under share - 34
option schemes
Purchase of treasury shares (202) -
------- -------
Net cash (outflow)/inflow from (202) 34
financing ======= ========
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| Portmeirion Group PLC Registered in England No. 124842 REGISTERED OFFICE Portmeirion Group PLC London Road Stoke-on-Trent Staffordshire England ST4 7QQ |
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