Half Yearly Report

PITTARDS PLC

(AIM: PTD)

Unaudited Interim Results for the six months ended 30 June 2012

Pittards Plc ("Pittards" or "the Company"), the specialist producer of technically advanced leather and luxury leather goods for sale to retailers, manufacturers and distributors, is pleased to announce its unaudited interim results for the six months ended 30 June 2012.

Summary

Stephen Boyd, Chairman of Pittards, commented:

"At our AGM in May we advised shareholders that as a result of the 150% tariff on crust leather exports imposed by the Ethiopian Government, we expected the company to achieve a breakeven position in the first half of 2012. I am pleased to report that we have succeeded with this objective against a tight timetable and our commitment to accelerate the realisation of the benefits from manufacturing more products in a low cost economy remains strong."

About Pittards:

Pittards is a global brand supplying premium leather and leather products, working with leading international brands, retailers and manufacturers. Our future strategy is founded upon product innovation, targeted marketing and efficient logistics, together with the development of new raw material sources

Chairman's Statement

At our AGM in May we advised shareholders that as a result of the 150% tariff on crust leather exports imposed by the Ethiopian Government, we expected the company to achieve a breakeven position in the first half of 2012. I am pleased to report that we have succeeded with this objective against a tight timetable and our commitment to accelerate the realisation of the benefits from manufacturing more products in a low cost economy remains strong.

The profit from operations of £0.1m (£1.3m in 2011) is after exceptional restructuring costs of £0.2m. These comprised redundancy costs at our Yeovil site reflecting the reduced need for leather operatives following the transfer of more sheepskin production to our tannery in Ethiopia. We noted previously that raw material prices had remained stubbornly high in Ethiopia. This situation prevailed throughout the first half but there are now signs of prices easing which should contribute to improved gross margins in the second half. Finance costs of £0.1m represent an improvement over £0.2m in 2011. In line with recent practice, the Directors decided to release a further £0.2m of previously unrecognised deferred taxation asset therefore there was no taxation charge for the period (2011: £0.4m tax credit).

Revenue of £18.3m represents a slight reduction from 2011 figure of £20.3m, although the dollar was slightly stronger in 2012, and our order book remained consistently high. The Ethiopian business faced into the challenges of shortages of raw material and delays to chemicals and machinery coming through Djibouti port (resulting from the introduction of a new multimodal system), and responded well hence delays to the move to finished production were minimized. At the Yeovil factory, as part of our back fill strategy, we have been adjusting to several new sources of raw material which performed slightly differently from the Ethiopian supplies to which we were accustomed, however we have now set up some robust supply chains accessing quality materials to better service our customers. Export sales represented 93% (2011: 94%) of sales and demand remains strong across all product sectors.

Net assets of £15.6m at the end of June 2012 represented a major increase over June 2011 (£12.2m) but a slight reduction from December 2011 (£16.0m) due in some measure to exchange rate movements.

Net borrowings at the period end of £6.2m were higher than 2011 figure of £4.0m. This reflected both higher skin prices noted earlier but also the increased value of stock in Ethiopia now being taken to the finished stage plus the carrying value of chemicals now needing to be duplicated at the two main sites. In addition there is now inventory at our PPM (Pittards Products Manufacturing) site in Addis Ababa where glove stocks are built up to fill whole containers for export. This is reflected in higher inventories at the period end of £15.4m (2011: £10.8m). Gearing of 40% (2011 - 31%) is therefore very creditable in the light of the extra working capital required.

Work with our lawyers to restructure our balance sheet to enable the payment of a dividend is progressing well and we expect to give notice of a General Meeting to seek approval for this change shortly.

The core elements of our business strategy are the ability to manufacture high quality leather and leather products in competitively costed environments, currently Ethiopia, the strengthening of the intellectual hub in Yeovil focused on innovation and design and the development of the brand into a consumer arena.

Our move into the retail of our finished products progressed with the formal opening of the Pittards Leather Centre a couple of weeks ago. The "Made in Britain" movement is gathering pace and our Daines and Hathaway brand is benefiting from it with the appointment of new overseas agents to cover Europe and Japan.

We were delighted to be able to play our part in the Olympics by assisting Peter Wilson, double trap shooting Gold Medallist, in personalising his shooting vest and by the manufacture for Nike of stylish athletes' kit bags. We also reinforced our close links to Ethiopia by providing specially designed leather jackets for their Olympic athletes and support team plus their team of four Paralympians which included Wondiye Fikre Indelbu who gained their first ever silver medal. 

During the Queen's Diamond Jubilee tour of the UK we were proud to present gloves to both Her Majesty the Queen and HRH the Duke of Edinburgh to represent Yeovil's glove making heritage.

Our glove making factory in Ethiopia, PPM, is becoming progressively more efficient as our expertise grows. We will complete our first dress glove orders in the next few months which represents the next step forward now that the manufacture of industrial gloves has been successfully established.

Our strategy for growth remains unchanged. The strength of the order book and relationships with key customers reassure us that despite global economic uncertainties we are well placed to take advantage of opportunities as they arise and to make best use of our growing manufacturing facilities.

SD Boyd - Chairman

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

for the six months ended 30 June 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the six months ended 30 June 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the six months ended 30 June 2012

CONSOLIDATED BALANCE SHEET (UNAUDITED)

as at 30 June 2012

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

for the six months ended 30 June 2012

NOTES (unaudited)

1. Administrative expenses - exceptional restructuring costs

The imposition of the crust tariff in December 2011 necessitated a redundancy exercise for production staff in early 2012, the cost of which totals £0.192m to date.

2. Earnings per share attributable to equity shareholders of the parent

In the period to 30 June 2012 options over nil (June 2011: 7,913,332) shares were exercised by certain directors and managers under the Matching Share Option Plan established in December 2009.

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year excluding the shares owned by the Pittards employee share ownership trust.

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by the shares issued under the Matching Share Option scheme. A calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

3. Taxation

4. Restatement

The result for the six months ended 30 June 2011 contains a reclassification of expenses between cost of sales and distribution and administrative expenses to bring it in line with the Group presentation for the year ended 31 December 2011. This has no impact on profit before tax.

The brought forward figures at 1 January 2011 in the Statement of changes in equity were amended in the accounts to 31 December 2011 to reflect the write-off of an old loan in our Ethiopian subsidiary.

5. Deferred taxation

The Group has recognized and unrecognised deferred tax assets in respect of temporary differences and losses. In accordance with the requirements of IAS12 the directors considered the potential utilisation of the deferred tax asset and have decided to recognise £0.176m of the deferred tax asset in the current period in view of the Group's continued profitability (£1.005m was recognised in the year ending 31 December 2011).

The analysis of the deferred tax assets is as follows:

6. Cash used in operations

7. Basis of preparation

The financial information contained in this interim statement has not been audited or reviewed by the Company's auditor and does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The directors approved and authorised this interim statement for issue on 19 September 2012. The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2011. Those accounts, upon which the auditor issued an unqualified opinion, have been delivered to the Registrar of Companies. The auditor's report did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Pittards plc is a public limited company incorporated and under the Companies Act 2006 in England. It is quoted on AIM.

These financial statements are presented in sterling as that is considered to be the functional currency of the primary economic environment in which the Group operates.

As permitted this interim report has been prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 "Interim Financial Reporting" therefore it is not fully in compliance with IFRS.

The report containing the interim financial information is to be sent direct to shareholders and is available on the Company's website, www.pittards.com. Copies of the report are available to the public from the registered office of Pittards plc. The address of the registered office is: Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA.