3rd May 2007 07:00
Tandem Group PLC03 May 2007 TANDEM GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2007 Chairman's statement Turnover for the year ended 31 January 2007 was £33,785,000 compared to£42,760,000 last year. There was a profit before taxation of £511,000 comparedto a loss last year of £2,157,000. Cycles Our cycle businesses enjoyed a good year with profitability well ahead of lastyear. Production in the UK ceased in June 2006 with all bicycles now beingspecified and designed in the UK and manufactured abroad under the supervisionof our own quality control team. Exceptional costs of £234,000 were incurred inclosing the production facilities but going forward significant overhead andworking capital savings will be made. Turnover in the cycle businesses was down on last year due to reduced sales tosome national retailers where margins are lower. Sales through our traditionalcustomer base of independent retailers and mail order increased followingadditional resources in sales and marketing. The Group's brands are shown at the front of the annual report. Sales of thepremier brands, Falcon, Claud Butler, and Dawes continue to expand. Sports, leisure and toys Sales of wheeled toys under Thomas the Tank Engine and Bob the Builder brandsperformed well. Snooker, pool and outdoor play products from the Pot Black andHedstrom ranges have been redesigned by the product development team at MVSports & Leisure. Customer reaction has been good and it is expected that theseproduct ranges will make a valuable contribution going forward. Sales from the UK operation were down on last year with increased competitionagainst some of our longer-established licences and cautious buying fromnational retailers. Turnover from our Hong Kong operation increased over lastyear. As it is expected that this trend will continue, synergies with our otherGroup companies are being developed to reduce our combined overhead base in theUK. New licences, which will be backed by a combination of television and cinemaexposure, have been secured including a wheeled toys range under theTransformers brand. Golf equipment Turnover at Ben Sayers was up on the previous year despite the decision towithdraw from low margin business. Sales to independent retailers and exportcontinue to grow as the customer base expands. A number of new and innovative products have been introduced in the 2007 productrange resulting in an increasing level of orders being received. Pensions The Group operates two pension schemes that have defined benefit liabilities.The two schemes had funds invested totalling £10.8 million at 31 January 2007compared with £10.6 million at 31 January 2006. Investment income and growthduring the year was £0.7 million. Pensions and transfer payments paid outtotalled £0.5 million, representing 4.5% of the funds invested at 31 January2007. The deficits in the schemes, before deducting the deferred tax asset,valued under Financial Reporting Standard 17 at 31 January 2007, totalled £2.1million compared to £3.0 million last year. The schemes are closed to new members. New employees can join the Group'sdefined contribution schemes, where no deficit can be incurred. In accordancewith the recommendation from the schemes' actuaries, the Company has to makepayments totalling £207,000 per annum to reduce the deficit of the schemes. Theschemes' actuaries have calculated the deficit using guidelines that thegovernment and Institute of Actuaries agree could well be inappropriate andwhich consequently are being withdrawn. Meanwhile we are obliged to make thesepayments which deplete funds available for investment to grow the business. In addition to the payments being made to reduce the deficit of the schemes theGroup is paying the schemes' administration costs and levies to the PensionProtection Fund. As well as the cost, a disproportionate amount of managementtime is spent dealing with matters relating to the pension schemes. In view ofthis, work is underway on a scheme to buy out certain members' benefits in orderto significantly reduce or eliminate the schemes' deficits. Employees We wish to thank all management and employees for their contribution inreturning the Group to profitability. There have been many changes in recentyears including the relocation of the Pot Black business and the closure ofbicycle production. Our staff have responded well to the challenges and we nowhave an established team of management and staff with the skills to take thebusiness forward. Current trading The year to 31 January 2007 has been a period of consolidation following theloss in the previous year. Bicycle production has been successfully outsourcedand the profitable products within the Pot Black and Hedstrom ranges are making an important contribution to the MV business. Overheads continue to be closely monitored and the focus is now on building sales. Resources have been concentrated in product development, sales and marketing. We have a wide portfolio of new andestablished products. The Group has performed well in the first quarter of the current financial year, with turnover up 15% on the previous year. Your Board is optimistic about the prospects for the rest of the financial year. Graham WaldronChairman3 May 2007 Consolidated profit and loss account ______________________________________________________________ Year ended 31 January 2007 Year ended 31 January 2006 Before Exceptional After Before Exceptional After exceptional items and exceptional exceptional items and exceptional items and goodwill items and items and goodwill items and goodwill amortisation goodwill goodwill amortisation goodwill amortisation amortisation amortisation amortisation £'000 £'000 £'000 £'000 £'000 £'000Turnover 33,785 33,785 42,760 42,760Cost of sales (23,132) (23,132) (30,819) (30,819) ________ ________ ________ ________ Gross profit 10,653 10,653 11,941 11,941 ________ ________ ________ ________ Net operatingexpenses (9,462) (234) (9,696) (11,715) (1,382) (13,097)Goodwill amortisationand impairment (175) (175) (640) (640) ________ ________ ________ ________ ________ ________ Total operatingexpenses (9,462) (409) (9,871) (11,715) (2,022) (13,737) ________ ________ ________ ________ ________ ________ Operating profit/(loss) 1,191 (409) 782 226 (2,022) (1,796)Finance charges (271) (361) ________ ________ ________ ________ ________ ________ Profit/(loss)on ordinaryactivities before taxation 511 (2,157) Tax credit/(charge)onprofit/(loss)on ordinaryactivities 285 (152) ________ ________ Profit/(loss)on ordinaryactivities after taxationtransferred to/(from)reserves 796 (2,309) ________ ________ Earnings/(loss)per share Pence Pence Basic and diluted 2.12 (6.14) All figures relate to continuing operations. Consolidated balance sheet ______________________________________________________________ At 31 January 2007 2007 2006 £'000 £'000Fixed assetsIntangible assets 2,502 2,677Tangible assets 403 563 ________ ________ 2,905 3,240 ________ ________ Current assetsStocks 5,676 5,664Debtors 6,135 5,527Cash at bank and in hand 551 2,426 ________ ________ 12,362 13,617 Creditors - amounts falling due within one year (8,855) (11,076) ________ ________ Net current assets 3,507 2,541 ________ ________ Net assets before pension schemes' deficits 6,412 5,781 Pension schemes' deficits (1,496) (2,839) ________ ________ Net assets after pension schemes' deficits 4,916 2,942 ________ ________ Capital and reservesCalled up share capital 1,503 1,503Share premium account 5,258 5,258Merger reserve 1,036 1,036Other reserves 1,453 1,426Profit and loss account (4,334) (6,281) ________ ________ Shareholders' funds 4,916 2,942 ________ ________ Statement of movements on reserves ______________________________________________________________ Year ended 31 January 2007 Share Merger Other Profit Total premium reserve reserves and loss account account Restated £'000 £'000 £'000 £'000 £'000 Balance at 1 February2006 5,258 1,036 1,426 (6,281) 1,439Profit for the year - - - 796 796Re-translation ofoverseas subsidiaries - - - (70) (70)Actuarial gains onpension schemes - - - 1,221 1,221Share-based payments - - 27 - 27 _______ _______ _______ _______ _______Balance at 31 January2007 5,258 1,036 1,453 (4,334) 3,413 _______ _______ _______ _______ _______ Reconciliation of movements in shareholders' funds ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Profit/(loss) for the year 796 (2,309)Re-translation of overseas subsidiaries (70) 38Actuarial gain/(loss) on pension schemes including relateddeferred tax asset 1,221 (910)Share-based payments 27 - _______ _______ Net addition/(deduction) to shareholders' funds 1,974 (3,181)Opening shareholders' funds 2,942 6,123 _______ _______ Closing shareholders' funds 4,916 2,942 _______ _______ Statement of total recognised gains and losses ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Profit/(loss) for the year 796 (2,309)Re-translation of overseas subsidiaries (70) 38Actuarial gain/(loss) on pension schemes including relateddeferred tax asset 1,221 (910)Share-based payments 27 - _______ _______ Total recognised gains and losses since the last annualreport 1,974 (3,181) _______ _______ Consolidated cash flow statement ______________________________________________________________ Year ended 31 January 2007 2007 2006 £'000 £'000 Net cash (outflow)/inflow from operating activities (1,455) 1,046 _______ _______ Returns on investments and servicing of financeInterest paid (271) (358)Interest element of hire purchase rentals - (3) _______ _______ Net cash outflow from returns on investments andservicing of finance (271) (361) _______ _______ Taxation (85) (43) _______ _______ Capital expenditurePurchase of tangible fixed assets (94) (119)Sale of tangible fixed assets 31 49 _______ _______ Net cash outflow from capital expenditure (63) (70) _______ _______ Net cash (outflow)/inflow before financing (1,874) 572 _______ _______ FinancingRepayments of amounts borrowed - (980)Capital element of hire purchase rentals (1) (21) _______ _______ Net cash outflow from financing (1) (1,001) _______ _______ Decrease in cash (1,875) (429) _______ _______ Notes to consolidated cash flow statement 1. Reconciliation of operating profit/(loss) to net cash (outflow)/inflow from operating activities 2007 2006 £'000 £'000 Operating profit/(loss) 782 (1,796)Depreciation charges 173 307Provision for impairment/amortisation of goodwill 175 640Loss on sale of tangible fixed assets 48 119(Increase)/decrease in stocks (12) 2,830(Increase)/decrease in debtors (262) 2,095Decrease in creditors (2,268) (3,024)Adjustment for pension funding and share-based payments (91) (125) _______ _______ Net cash (outflow)/inflow from operating activities (1,455) 1,046 _______ _______ 2. Reconciliation of net cash outflow to movement in net funds 2007 2006 £'000 £'000 Decrease in cash (1,875) (429)Cash to repay finance leases and hire purchase contracts 1 21Bank loan - 900Other loans - 80 _______ _______ Changes in net funds resulting from cash flows (1,874) 572Net funds at 1 February 2,425 1,853 _______ _______ Net funds at 31 January 551 2,425 _______ _______ 3. Analysis of net funds At Cash flow At 1 February 31 January 2006 2007 £'000 £'000 £'000 Cash at bank and in hand 2,426 (1,875) 551Hire purchase creditors (1) 1 - ________ ________ ________ Net funds 2,425 (1,874) 551 ________ ________ ________ Notes to the preliminary results 1. The financial information set out in this preliminary announcementdoes not constitute statutory accounts as defined in section 240 of theCompanies Act 1985. The consolidated balance sheet at 31 January 2007, theconsolidated profit and loss account, the statement of movements on reserves,the reconciliation of movements in shareholders' funds, the statement ofrecognised gains and losses, the consolidated cash flow statement and theassociated notes for the year then ended have been extracted from the Group'sfinancial statements upon which the auditor's opinion is unqualified and doesnot include any statement under Section 237 of the Companies Act 1985. Thestatutory accounts for the year ended 31 January 2007 will be delivered to theRegistrar of Companies following the Group's Annual General Meeting. The financial statements have been prepared under the historical cost conventionand in accordance with applicable United Kingdom accounting standards. Theprincipal accounting policies of the Group are set out in the Group's 2006annual report and financial statements with the following addition: Share-based payments Following the introduction of FRS 20 the Group's accounting policy relating toshare-based payments has altered and is set out below. All share-based payment arrangements arising after 7 November 2002 arerecognised in the consolidated financial statements. The Group operatesequity-settled share-based remuneration plans for remuneration of its employees.Options are issued by the parent to the employees of its subsidiaries. As such,the charge for the share-based remuneration is recognised in the subsidiarycompany profit and loss account with no charge being borne in the ultimateparent profit and loss account. All employee services received in exchange forthe grant of any share-based remuneration are measured at their fair values.These are indirectly determined by reference to the fair value of the shareoptions awarded. Their value is appraised at the grant date and excludes theimpact of any non-market vesting conditions (for example, profitability andsales growth targets). All share-based remuneration is ultimately recognised as an expense in profit orloss with a corresponding credit to the share-based payment reserve, net ofdeferred tax where applicable. If vesting periods or other vesting conditionsapply, the expense is allocated over the vesting period, based on the bestavailable estimate of the number of share options expected to vest. Non-marketvesting conditions are included in assumptions about the number of options thatare expected to become exercisable. Estimates are subsequently revised if thereis any indication that the number of share options expected to vest differs fromprevious estimates. No adjustment is made to the expense recognised in priorperiods if fewer share options ultimately are exercised than originallyestimated. Upon exercise of share options, the proceeds received net of any directlyattributable transaction costs up to the nominal value of the shares issued areallocated to share capital with any excess being recorded as share premium. This change in accounting policy has resulted in a decrease to the profit beforetaxation of £27,000 for the year ended 31 January 2007, with no material impactfor the prior year. This change has not resulted in any increase or decrease innet assets. 2. No dividend on the ordinary shares is being proposed (2006 - £nil). 3. Earnings per share 2007 2006 £'000 £'000 Profit/(loss) for the year used for basicand diluted earnings per share calculation 796 (2,309) _______ _______ Number NumberWeighted average number of ordinary sharesin issue during the year used for basic anddiluted earnings per share calculation 37,584,412 37,584,412 _______ _______ Earnings/(loss) per share Pence PenceBasic and diluted 2.12 (6.14) _______ _______ The calculation of the basic and diluted earnings per share is based on theprofit/(loss) on ordinary activities after tax and on the weighted averagenumber of ordinary shares in issue during the year. 4. The annual report and accounts will be posted to shareholders shortly. 5. The Annual General Meeting will be held at 11:00 a.m. on 14 June 2007at Eversheds LLP, 1 Royal Standard Place, Nottingham NG1 6FZ. 3 May 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tandem Group