Interim Results

RNS Number:2429Q
Stoddard International PLC
26 September 2003


                          Stoddard International PLC


                     Interim results for the six months
                               ended 30 June 2003

                                                               26 September 2003

CHAIRMAN'S STATEMENT

Introduction

The first half of 2003 has been a difficult trading period with both internal
and external factors affecting performance. As intimated in the 2002 annual
report, 2003 has been the second year of major structural change with associated
short-term disruption, inefficiencies and expense.  In particularly tough market
conditions we have substantially progressed the relocation of all our facilities
on to the one site in Kilmarnock.   This ambitious project will be completed by
the end of the year.

Throughout the period trading across most of our markets has been demanding.
This has been attributable to the continuing general fall in demand for woven
Axminster products and the particular withdrawal of certain of these products
from our portfolio.  The reduction of sales of Axminster accounted for the
entire sales decline in the period, with sales of all other products growing by
6%.  Sales have also been affected by the disruption associated with relocating
to one factory and distribution difficulties in April and May.  These problems
are now substantially behind us.

Our customers, employees and other stakeholders have remained supportive of the
changes we are making in our business and we are grateful for their
understanding during this difficult and lengthy transitional period.

Turnover at #14.3m was 12% down against the equivalent period last year
resulting in an operating loss of #1.6m (2002 - #0.4m loss) before exceptional
items, in line with our expectations. Around half of this deterioration (#0.6m)
was attributable to an increased cost of pensions.  Net exceptional costs
including full provision for the remaining redundancies arising from the
restructuring were #0.5m (2002 - #0.3m). Interest charges were similar to the
comparable period at #0.5m. The loss before tax including exceptional items
increased to #2.6m (2002 - #1.2m).  The directors do not propose a dividend.

Net debt increased by #4.6m in the period to #17.2m as a result of continuing
losses, seasonal working capital requirements and the costs of restructuring.
Your board expects cash receipts from the disposal of properties will
significantly reduce this debt in the short-term and our banks remain
supportive.

Retail

Our UK business that includes the Stoddard and Louis de Poortere brands reported
sales of #12.0m down 11% from last year.  The depressed carpet market and the
decline in relatively expensive traditional Axminster products in particular
have continued. Internal problems during the transition and in particular,
commissioning our high speed looms also contributed.  All carpet manufacturing
is now fully operational in Kilmarnock and our service is improving.

In the same period, Colortec patterned tufted sales increased by 80% and we
continue to develop this area.  Sales of our Louis de Poortere products were up
19% following recent product launches.  However these improvements were unable
to compensate for the downturn in our woven Axminster performance. While heavily
patterned carpets have suffered more than plain and textured in recent years,
minimal contemporary designs have been relatively successful and our distinctive
programme, properly branded and priced, has been well received in the market.
This programme is being further developed.

We expect that recently refreshed twist ranges and generally improving service
levels across our retail products will result in an improvement in our retail
sales.

Contract/Export

Sales were 16% down against the equivalent period in 2002 at #2.4m despite an
improvement in USA and Europe where sales grew by 18% and 27% respectively.
Sales in the UK however were down 33%.  Markets remain difficult but there are
pleasing developments in the hospitality sector particularly with the
development of Colortec tufted technology. In those markets where we are a small
player we do expect results to show sizeable swings between trading periods and
to be more patchy and unpredictable.

Operations

All carpet manufacturing is now operational in Kilmarnock. The spinning mill
will be fully relocated and dye works commissioned to plan in November. The Head
Office relocation is underway and will be completed in stages before the
year-end.   Extensive training has been necessary for the workforce and is
ongoing.   Overall employment levels by the end of the year will be around 500,
which is a reduction of 250 over the past two years.

Wool prices have stabilised however energy costs and related by-products such as
nylon have increased. The variable quality of some external yarn supplies has
caused service problems particularly when trying to increase stockholding prior
to machinery being decommissioned and relocated to Kilmarnock. This has led to
the loss of some customer orders, as we have been unable to achieve acceptable
delivery timescales, which has understandably strained relationships.

Property disposal programme

In June outline planning consent for residential development was granted for the
majority of the Elderslie site and we will shortly convene an EGM to approve the
disposal of this part of the site for proceeds in excess of #6m to be paid over
the next few months.  However planning consent was refused on the remainder of
the site and this is currently subject to a planning appeal due to be heard in
November.

We expect to receive the balance of the proceeds from Safeway amounting to
approximately #3m once we vacate the Mill Street site in Kilmarnock and the
necessary final consents are obtained.

Prospects

Structural change continues in the European carpet sector and with markets
generally depressed, over-capacity in the industry continues. We continue to
pursue our strategy which we believe best serves our stakeholders' interests.

We anticipate the difficult trading conditions to continue into 2004 and trading
losses will continue to be borne for the balance of 2003.  By the year-end the
restructuring exercise will be complete and the benefits of operating from a
single integrated site will be realised from the New Year.  We therefore look
forward to 2004 with greater confidence free of the major upheaval of recent
years.  In particular we will return management focus towards delivering
improved customer service and introduce a number of exciting product
initiatives.

We believe we will then be well placed to take advantage of the opportunities
that we see and be better equipped to deal with uncertain market conditions.  We
will continue to work closely with our strategic partners towards strengthening
our position as a leading player in the UK carpet industry.

Alan Scott
Chairman
26 September 2003


Enquiries:

Alan Lawson, Chief Executive  Tel: [phone]
Michael Stewart, Finance Director



PROFIT & LOSS ACCOUNT
SIX MONTHS ENDED 30 JUNE 2003

                                        Unaudited     Unaudited        Audited
                                       six months    six months           year
                                            ended         ended          ended
                                          30 June       30 June    31 December
                                             2003          2002           2002
                                             #000          #000           #000

Turnover                                   14,338        16,379         32,301

Operating loss before
exceptional items                          (1,572)         (441)        (2,209)
Operating exceptional        Note 3          (527)         (254)        (1,938)
items

Operating loss               Note 4        (2,099)         (695)        (4,147)

Net interest payable                         (510)         (464)          (923)
Loss on ordinary activities
before taxation                            (2,609)       (1,159)        (5,070)

Taxation                                        -             -              -
Loss on ordinary activities
after taxation                             (2,609)       (1,159)        (5,070)

Accrued preference                            (62)          (62)          (125)
dividends

Retained loss for the                      (2,671)       (1,221)        (5,195)
period

Basic and diluted loss per                   (4.0)p        (1.7)p         (7.8)p
ordinary share



BALANCE SHEET
AT 30 JUNE 2003

                                         Unaudited    Unaudited        Audited
                                           30 June      30 June    31 December
                                              2003         2002           2002
                                              #000         #000           #000

Fixed Assets
Tangible assets                             14,081       14,958         14,361

Current Assets
Stocks                                       8,616       10,741          8,050
Debtors                                     12,709       12,046         11,859
Cash at bank and in hand                       130           94            237
                                            21,455       22,881         20,146

Creditors: amounts falling due within      (22,103)     (18,323)       (18,341)
one year
Net current assets                            (648)       4,558          1,805

Total assets less current liabilities       13,433       19,516         16,166

Creditors: amounts falling due
after more than one year                    (3,991)      (3,346)        (3,814)

Provisions for liabilities and                (549)         (60)          (508)
charges

Accruals and deferred income
Deferred government grants                  (1,112)      (1,684)        (1,392)

Net assets                                   7,781       14,426         10,452

Capital and reserves
Called up share capital                      8,430        8,430          8,430
Reserves                                      (649)       5,996          2,022

Shareholders' funds                          7,781       14,426         10,452



CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2003

                                        Unaudited     Unaudited        Audited
                                       six months    six months           year
                                            ended         ended          ended
                                          30 June       30 June    31 December
                                             2003          2002           2002
                                             #000          #000           #000

Net cash outflow from        
continuing activities        Note 5        (4,030)       (2,407)        (2,820)             
                             
Returns on investments and
servicing of finance
Net interest paid                            (404)         (359)          (691)
Interest paid under finance                  (106)         (106)          (233)
lease and hire purchase
agreements                                   (510)         (465)          (924)

Taxation                                        -             -              -

Capital expenditure and
financial investment
Payments to acquire                          (300)       (1,245)        (1,619)
tangible assets
Net proceeds received from                      -         2,570          2,570
exceptional property
disposal
Receipts from sales of                        198            46            212
tangible assets
Government grant received                       -           850            850

                                             (102)        2,221          2,013

Net cash outflow before                    (4,642)         (651)        (1,731)
financing

Financing
New term loan                                 500             -          1,000
Capital element of finance                   (313)         (438)          (745)
lease rental payments

Decrease in cash in the                    (4,455)       (1,089)        (1,476)
period



RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
FOR THE SIX MONTHS ENDED 30 JUNE 2003

                                        Unaudited     Unaudited         Audited
                                       six months    six months            year
                                            ended         ended           ended
                                          30 June       30 June     31 December
                                             2003          2002            2002
                                             #000          #000            #000

Decrease in cash                           (4,455)       (1,089)         (1,476)
New term loan                                (500)            -          (1,000)
Cash outflow from decrease in lease           313           438             745
financing

Change in net debt resulting from          (4,642)         (651)         (1,731)
cash outflows

Net debt at beginning of the              (12,580)      (10,849)        (10,849)
period

Net debt at end of the period             (17,222)      (11,500)        (12,580)


Notes to the Accounts
     
1.   Basis of Preparation

     The Interim reports for the six months ended 30 June 2003 and 30 June 2002 
     are unaudited, but have been prepared on the basis of accounting policies 
     expected to be adopted in the annual accounts for the year ended 31 
     December 2003.  These are consistent with those set out in the audited 
     accounts for the year ended 31 December 2002.  The results for the year 
     ended 31 December 2002 are an abridged version of the Company's full 
     accounts which carried an unqualified auditors' report, and which did not 
     contain a statement under either section 237(2) or section 237(3) of the 
     Companies Act 1985.  The full accounts have been filed with the Registrar 
     of Companies.
     
2.   Loss per Share

     The loss per ordinary share has been calculated by dividing the loss
     attributable to ordinary shareholders, after deferred preference dividends, 
     by the average number of shares in issue during the period.
     
3.   Operating Exceptional Items

                               six months        six months               year
                                    ended             ended              ended
                                  30 June           30 June        31 December
                                     2003              2002               2002
                                     #000              #000               #000

     Redundancy costs                 490               369              1,203
     Disposal of surplus assets      (189)             (115)              (154)
     Other relocation costs           226                 -                889
                                      527               254              1,938

     
4.   Net Operating Expenses

                                six months       six months               year
                                     ended            ended              ended
                                   30 June          30 June        31 December
                                      2003             2002               2002
                                      #000             #000               #000
                                                   Restated

     Selling & distribution costs    3,295            3,356              6,636
     Administrative expenses           928              641              1,420
     Other operating income           (599)            (119)              (205)
                                     3,624            3,878              7,851


     Administrative expenses in the 2002 interim results above are restated to
     reflect the release of deferred government grants against cost of sales 
     rather than administrative expenses.  As the grant was received in relation 
     to the purchase of plant and machinery it is considered more appropriate to 
     classify the amortisation of this grant income to cost of sales where the 
     depreciation has been reflected.  The adjustment is a  #0.3m reduction in 
     cost of sales and a similar increase in administrative expenses.


Notes to the Accounts (Continued)

     
5.   Reconciliation of Operating Loss to Operating Cash Flow

                                       six months    six months           year
                                            ended         ended          ended
                                          30 June       30 June    31 December
                                             2003          2002           2002
                                             #000          #000           #000
     
     Operating loss before exceptionals    (1,572)         (441)        (2,209)
     Depreciation charges                     571           576          1,159
     Government grant release                (280)         (265)          (557)
                                        
     (Increase)/Decrease in working        (2,098)       (1,908)            40
     capital

     Cash outflow from operating           (3,379)       (2,038)        (1,567)
     activities before exceptionals
     Cash outflow related to exceptional     (651)         (369)        (1,253)
     items

     Net cash outflow from continuing      (4,030)       (2,407)        (2,820)
     activities



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