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RNS Number:3118J
Martin International Holdings PLC
28 March 2003
MARTIN INTERNATIONAL HOLDINGS PLC
("Martin International", "the Company" or "the Group")
Preliminary Results for the year ended 31 December 2002
Martin International designs, manufactures and distributes underwear, lingerie,
knitwear, casualwear and nightwear from extensive production facilities both
overseas and in the UK and supplies major retailers in the UK and North America.
HIGHLIGHTS
* Significant increase in sales to Marks & Spencer and Mothercare
* Strong second half performance in both Light Sewing and Knitwear divisions
* Total Group turnover up 11% at #121.4m (2001: #108.9m)
* 50% increase in Group operating profit before exceptionals to #2.82m
(2001: #1.89m)
* Group operating profit after exceptionals increased to #2.00m (2001: #1.89m)
* Net assets per ordinary share at year end of 25p
Michael Kidd, Chairman, comments:
"It is encouraging to report that during the year the Group continued to
progress its recovery and has now started to see some benefit from the
restructuring already undertaken. There is every possibility that the Group can
achieve further progress in 2003 towards the recovery of an acceptable level of
profitability and an encouraging start has been made in the first quarter."
28 March 2003
ENQUIRIES:
Martin International Holdings PLC Tel: 01623 441100
Michael Kidd, Chairman
Lawrence Ward, Chief Executive Officer
David Sadler, Finance Director
College Hill Tel: 020 7457 2020
Gareth David Email: gareth.david@collegehill.com
Matthew Gregorowski Email: matthew.gregorowski@collegehill.com
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the year ended 31 December 2002
CHAIRMAN'S STATEMENT
It is encouraging to report that during the year the Group continued to progress
its recovery and has now started to see some benefit from the restructuring
already undertaken. The operating profit before exceptional items showed a
substantial increase from #1.89m to #2.82m with turnover 11% higher at #121.4m
(2001: #108.9m). After an interest charge of #1.81m, the profit, before tax,
exceptionals and impairment rose to #1.01m compared to #0.25m in 2001.
The market place last year remained extremely competitive and margins were also
affected by the weakness of sterling. This reflected in the Light Sewing
division's profitability which was similar to the previous year despite the
increase in turnover. The improvement in Group profitability arose principally
through the Knitwear division eliminating a trading loss following its
restoration as a key supplier to Marks & Spencer in this product category.
As anticipated in the Interim Statement, the Group performed strongly in the
second half year in both divisions.
During the year, the Group withdrew from several unprofitable customer accounts
and every effort was made to achieve maximum growth from the significant
opportunities available with our major customers. The success of this is
demonstrated by recording the increases of 35% in turnover with Marks & Spencer
and 70% with Mothercare.
Regrettably, despite all the progress, the Board has still felt it financially
prudent to recommend that no ordinary dividend be paid for the year.
Gearing has increased and this is due largely to the rise in working capital.
Part of this was required to support the significant expansion of business in
the fourth quarter and into 2003 and part to the carry over of certain
contracted stocks. It is anticipated that this trend should reverse in the
current year.
Net assets per ordinary share at the year end amounted to 25p per share and this
figure continues to be underpinned by the actual and potential development value
in the Group's surplus land and property in the UK. None of this has been
included in the quinquennial property revaluation, incorporated in the Accounts,
which generated a small surplus overall.
At the 31 December 2002 the Group had some 6,050 employees, 4,450 of whom were
based overseas and 1,600 in the UK. All have worked extremely hard on behalf of
the Group and I would like to thank them and my fellow directors for their
continuing commitment and support.
The restructuring of the Group will have to continue to ensure that it is
positioned effectively to achieve future growth and prosperity. This will, of
necessity, require the further transfer of business overseas from the UK but
such moves will ultimately generate a significant return on the costs involved.
Such action will ensure that the Group is positioned to be as cost effective as
possible and capable of providing its major customers with excellent product at
prices which are globally competitive without any compromise of quality
standards.
While the development of business in the UK, particularly with Marks & Spencer,
has been, and continues to be, most encouraging, progress in the US market has
been slower than anticipated following recent world events. However, serious
potential undoubtedly exists with certain major retailers in that country and
efforts to realise this are ongoing.
There is every possibility that the Group can achieve further progress in 2003
towards the recovery of an acceptable level of profitability and an encouraging
start has been made in the first quarter. Hopefully, current events in the
Middle East will be resolved in the reasonably short term and more stability
will return to the global scene. In such circumstances the Group should be well
placed to prosper.
MICHAEL H. KIDD
Chairman
28 March 2003
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the year ended 31 December 2002
OPERATING REVIEW
TRADING
In 2002, the Group's operating profit before exceptional items improved to
#2.82m, up some 50% on the previous year. A major factor in this performance was
the elimination of a loss in our Cooper & Roe Knitwear division, following its
reinstatement last year as a key supplier to Marks & Spencer. However, the
meaningful achievement of our Light Sewing operations, in at least maintaining
2001 overall performance and in recording a significant improvement in the
second half year, should not be lost in a world where all consumers, and
therefore retailers, are ever more demanding.
I am particularly pleased to report that in 2002 our business with Marks &
Spencer, the Group's largest customer, increased by over 35%, reflecting:
* our greater focus on this retailer based on the consistently held belief
that they would successfully re-emerge from the problems of the 1998-2001
period
* our strength in lingerie and nightwear product development
* an effective return to the knitwear supply base
* healthy Key Performance Indicator results based on our performance
* a closer working relationship with the new senior management team
Our business with Mothercare also increased substantially and, despite this
retailer's trading difficulties over the last two years, we firmly believe in
its future and its brand.
At the half-year, the Chairman stated that the Group should see progress in the
second half from a substantial increase in turnover. I am obviously pleased to
report that this was achieved, providing a much more stable platform from which
to aggressively create even better value in 2003. The sales performance in the
last quarter of the calendar year will always have a major impact on our annual
performance although we continue to deliberately target the creation and sale of
a greater proportion of merchandise which will be required throughout the year.
In view of the extremely competitive nature of "High Streets" worldwide, price
pressure from all customers is unlikely to disappear and it is therefore our
duty and obligation to structure our business accordingly. We have recently had
to announce the proposed closure of one of our two remaining UK light sewing
factories and whilst this is regrettable and adds to the continuing decline in
UK manufacturing, the shift to more cost effective manufacturing locations
overseas is inevitable. Our retail partners have to be able to compete and,
whilst many consumers maintain that they would ideally buy British, they also
want the best price for a quality product.
In the USA, our business last year with May Department Stores, Sears Roebuck and
Miss Elaine, not surprisingly, suffered some downturn but ongoing business from
at least two of these companies, together with new areas of opportunity, means
turnover from that country can be significantly increased over the next two
years.
STRATEGY, FUTURE DEVELOPMENTS & PROSPECTS
For our future development we will continue to focus, both in the UK and
overseas, only on those retailers who offer their consumers great quality, style
and value for money, not just low prices, and who understand working in
partnership.
Further changes in operational structures and manufacturing locations will
continue to be required in order to maximise efficiency and profitability in the
face of global competition. The strategy of expanding our overseas production
routes will continue and has picked up particular momentum in the last quarter,
courtesy of progress having been made in countries closer to the UK retail
market, viz., Morocco for intimate apparel; Romania and Turkey for both casual
and formal outerwear and Bulgaria for fully fashioned knitwear. Sourcing from
Third Parties, predominantly through genuine Joint Ventures, will become of
increasing importance, as exemplified by our relationship with Bogart Lingerie
in Hong Kong and China, and further new opportunities are now being created.
However, we will, continue with wholly owned enterprises where the market and/or
a targeted customer requires it for reasons of price structure and mutual
transparency.
Before strategy, structure and systems has to come people and product, and I
firmly believe that our passionate and very determined team will be able to
significantly enhance current sales without any material increase to the present
cost base, thus improving profitability.
The investment by, and ever improving strategic alliance with, Crystal
International, our largest shareholder, is helping the Group to exploit new
commercial opportunities both within and outside our current customer base, as
well as helping to drive down the cost of requisite machinery, fabrics and
components.
Our further progress with GAP and Banana Republic is encouraging and progress
will be assisted by the establishment of a new product development facility in
the Far East. We are now also working towards the establishment of volume
business with such esteemed retailers and brands as Fast Retail in Japan and
Nike in the Asia Pacific region.
The pending, and now actual, war in Iraq has not only undermined confidence in
the world stock markets, but has also introduced a degree of uncertainty into
our customers' forward requirements. In the interests of world peace, and
thereby greater stability, the sooner this situation is resolved, the better for
all concerned.
Good communications are vital in today's world and in this respect shareholders
and customers alike will obtain a much better understanding of our operating
structure, capabilities, mission statement and values through the new Company
website at www.martin-international.co.uk which will be launched by end April.
The best thing a company can do is deliver on its commitments and if it can
achieve this aim then all interested parties will justifiably have confidence
and trust for the future. We will continue to learn through experience, to
benchmark ourselves against the best in the industry and as always try to 'punch
above our weight'.
I make no apology for reminding our shareholders and customers that they can be
confident we will continue to operate ethically in respecting the Social
Compliance codes and policies of all countries in which we operate. At the same
time, we are committed to a process of continual improvement where the welfare
and treatment of our employees is concerned and will continue to provide a
working environment that we can be proud of and one that will benefit our people
and the local community.
There has been an encouraging start to the current year and though testing times
undoubtedly lie ahead I have every confidence that further progress can be made
in the current year and beyond.
LAWRENCE B. WARD
Chief Executive Officer
28 March 2003
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the year ended 31 December 2002
FINANCIAL REVIEW
TRADING RESULTS
Overall, Group turnover increased by 11% from #108.9m to #121.4m and total
operating profit, before exceptional items, increased by some 50% from #1.89m to
#2.82m. Group operating profit after exceptionals increased from #1.89m to
#2.00m
In the Light Sewing division turnover increased by 6% from #98.0m to #104.0m but
operating profit before exceptional items was impacted by both exchange rates
and global competition and increased only marginally from #2.75m to #2.80m.
Turnover in the Knitwear division increased from #10.9m to #17.4m and with
benefit from the higher activity levels, there was an improved trading
performance with an operating profit of #0.03m against a loss of #0.86m in 2001.
Net interest payable was #1.81m (2001: #1.63m) with increased working capital
levels leading to higher borrowings, particularly in the second half year.
RESTRUCTURING COSTS
Restructuring costs during the year amounted to #0.68m. Manufacturing
operations in Macau were closed in November at a cost of #0.30m, with production
transferred to our factory in China. In the UK, costs of #0.38m were incurred
in the reorganisation of light sewing operations and a reduction of sewing
capacity.
TAXATION AND EARNINGS
The taxation charge for the year of #0.25m related wholly to the Group's
overseas operations.
With the overseas operations based in areas of low corporate tax rates and
taxable profits in the UK sheltered by some #10.0m of tax losses being carried
forward, the Group's effective rate of tax should remain low for the foreseeable
future.
The loss per share was 0.8p (2001: 0.5p).
CAPITAL EXPENDITURE
Capital expenditure amounted to #1.06m (2001: #1.61m) and was below the
depreciation charge for the year of #2.75m (2001: #2.52m)
The expenditure was funded from internal resources and comprised mainly sewing
plant overseas and computer equipment in the UK.
Planned investment in 2003 will again be below the depreciation charge for the
year.
CASH FLOW AND BALANCE SHEET
With higher turnover, particularly in the last quarter of the year, there were
increases in the year end levels of stocks and debtors and total working capital
increased by some #2.66m. There was some carry forward at the year end of
finished goods originally contracted for delivery in 2002, which will now be
called in the current year, and stock levels are targeted to reduce during 2003.
After allowing for the increase in working capital and the repayment in finance
leases of #0.99m, net bank borrowings at the year end increased by #2.59m to
#14.70m and net debt increased from #13.86m to #16.95m.
The Group's freehold and long leasehold properties were professionally revalued
as at 31 December 2002 and although in total the overall surplus was #0.25m,
certain overseas properties were valued at below their original cost and an
impairment of #0.15m was charged against the operating profit for the year.
Exchange rate movements relating to the translation of overseas assets from
local currency to sterling impacted adversely on year end net asset value by
some #1.84m. Allowing for this adjustment, shareholders' funds were #20.6m and
net assets per ordinary share were 25p.
PREFERENCE SHARES
The remaining preference shares held by GE Capital Investments and totalling
#1.5m were redeemed at par on 31 December 2002. Redemption was financed by an
unsecured loan of US$2.4m from Crystal International which is due for redemption
in December 2003.
Mr. SCY Ling, a director of the Company, is the holder of 4 million 8.25%
cumulative redeemable preference shares of US$1 each and, although full or
partial redemption may be requested on various dates between 30 June 2003 and 1
January 2005, Mr. Ling has confirmed that no redemption will be requested prior
to 1 April 2004.
SURPLUS PROPERTIES
In September 2002, shareholders were informed that the recommendation for the
granting of outline planning consent for residential development of the site in
Ruddington, Nottinghamshire had been referred to the Government Office for
approval. This has now been received and, following the recent signing of a
Section 106 Agreement, outline planning consent for the site was confirmed in
February.
Persimmon Homes are to submit an application for detailed planning consent in
the near future and once this has been approved, then negotiations regarding the
share of enhanced value due to the Company can be finalised
Also, there has been a continuing dialogue with Derbyshire Dales District
Council regarding the site near Matlock, Derbyshire and the detailed planning
application for residential development of the redundant dyehouse site of
approximately 10 acres is due to be considered shortly by the Planning
Committee.
POST BALANCE SHEET EVENT
On 20 March 2003, the proposed closure of the sewing factory at Lucknow Drive,
Sutton-in-Ashfield was announced. A period of consultation with Union officials
is underway but in the event of closure then redundancy and termination costs
are likely to amount to some #0.65m.
TREASURY
Group treasury operations are managed centrally, with the primary objective of
ensuring that adequate cost effective funding arrangements are maintained to
finance current and planned future activities and to manage foreign exchange and
interest rate exposure. The principal currency exposure arises from the import
of overseas production and where appropriate the currency flows are hedged by
the use of forward contracts.
It is Group policy not to hedge the translation of profits earned by overseas
subsidiaries. Where practicable, Group net assets overseas are partially hedged
by local currency borrowings.
DAVID J SADLER
Finance Director
28 March 2003
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year Ended 31 December 2002
GROUP PROFIT AND LOSS ACCOUNT
2002 2001
#'000 #'000
Turnover
Continuing operations - Light sewing 104,006 98,013
- Knitwear 17,396 10,908
121,402 108,921
Operating profit before exceptional items
Continuing operations - Light sewing 2,796 2,745
- Knitwear 28 (860)
2,824 1,885
Restructuring costs (675) -
Losses on revaluation of property (151) -
Operating profit 1,998 1,885
Impairment of investment in own shares (112) -
Profit before interest 1,886 1,885
Interest (1,814) (1,631)
Profit before taxation 72 254
Taxation (251) (193)
(Loss) / profit after taxation (179) 61
Minority interest (61) (37)
(Loss) / profit for the year (240) 24
Preference share dividends (331) (352)
Retained loss attributable to ordinary shareholders (571) (328)
Loss per ordinary share (0.8p) (0.5p)
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for Year Ended 31 December 2002
NOTES TO GROUP PROFIT AND LOSS ACCOUNT
Geographical Analysis
2002 2001
Origin Turnover Operating Net assets Turnover Operating Net assets
profit profit
#'000 #'000 #'000 #'000 #'000 #'000
United Kingdom 110,520 259 17,811 93,121 451 18,047
Overseas 54,404 1,739 20,368 50,486 1,434 20,586
164,924 1,998 38,179 143,607 1,885 38,633
Inter-Company turnover from (43,522) (34,686)
overseas to the United Kingdom
Net debt (16,954) (13,856)
Minority interests (615) (667)
121,402 1,998 108,921 1,885
Shareholders' funds 20,610 24,110
Interest
Interest comprises net bank interest of #1,740,000 (2001: #1,453,000) and
finance lease interest of #74,000 (2001: #178,000).
Average exchange rate
The average Hong Kong Dollar exchange rate used to translate overseas results
was HK $11.71 - #1.0 (2001: HK$11.23 - #1.0). The year end Hong Kong Dollar
exchange rate used to translate the closing balance sheet was HK$12.55 - #1.0
(2001: HK$11.35 - #1.0).
Taxation
The charge comprises provisions for overseas taxation of #251,000.
Earnings per share
The calculation of earnings per share is based on the loss attributable to
ordinary shareholders of #0.57 million (2001: #0.33 million) and on the weighted
average of 72.28 million (2001: 72.28 million) ordinary shares in issue during
the year. The 1.00m ordinary shares held by the trustees of the Employees Share
Trust, upon which dividends are waived, are excluded from this calculation.
Dividends
The directors do not recommend the payment of an ordinary dividend (2001: #nil).
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year ended 31 December 2002
GROUP BALANCE SHEET AS AT 31 DECEMBER 2002
2002 2001
#'000 #'000
Fixed Assets
Tangible assets 19,480 22,189
Investments 100 212
19,580 22,401
Current Assets
Stocks 25,093 18,902
Debtors 12,071 10,798
Properties held for disposal 1,108 993
Cash at bank and in hand 1,433 991
39,705 31,684
Current liabilities
Creditors: amounts falling due within one year (20,292) (15,485)
Bank borrowings and loans (17,635) (13,106)
Net current assets 1,778 3,093
Total assets less current liabilities 21,358 25,494
Creditors: amounts falling due after more than one year (133) (717)
Net assets 21,225 24,777
Capital and reserves
Share capital (including non-equity interests) 16,939 18,695
Reserves 3,671 5,415
20,610 24,110
Minority interests 615 667
21,225 24,777
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year ended 31 December 2002
GROUP CASH FLOW STATEMENT
Year ended 31 December 2002 2001
#'000 #'000 #'000 #'000
Operating profit 1,998 1,885
Impairment of investment in own shares (112) -
Depreciation and adjustments on disposals 2,749 2,518
(Increase) / decrease in stocks (6,191) 1,070
(Increase) / decrease in debtors (1,273) 812
(Increase) / decrease in properties held for (115) 1,600
disposal
Increase in creditors 4,027 192
Net cash inflow from operating activities 1,083 8,077
Servicing of finance
Bank and loan interest paid (1,751) (1,583)
Interest received 14 41
Finance lease interest paid (74) (178)
Dividends paid on non-equity shares (415) (395)
(2,226) (2,115)
Taxation paid (45) (355)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,055) (1,608)
Receipts from sales of tangible fixed assets 260 113
(795) (1,495)
Cash (outflow) / inflow before financing (1,983) 4,112
Financing
Redemption of preference shares (1,500) (750)
Short term loan 1,500 -
Capital element of finance lease payments (989) (1,409)
(989) (2,159)
(Decrease) / increase in cash (2,972) 1,953
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year ended 31 December 2002
RECONCILIATION OF CASH FLOWS TO NET DEBT
2002 2001
#'000 #'000
(Decrease) / increase in cash in the year (2,972) 1,953
Short term loan received (1,500) -
Repayments of lease financing 989 1,409
Change in net debt from cash flows (3,483) 3,362
Translation differences 385 (154)
Movement in net debt in the year (3,098) 3,208
Net debt at 1 January (13,856) (17,064)
Net debt at 31 December (16,954) (13,856)
ANALYSIS OF NET DEBT
31 Dec 2001 Cash Flow Exchange 31 Dec 2002
movement
#'000 #'000 #'000 #'000
Cash at bank and in hand 991 547 (105) 1,433
Bank overdrafts (13,106) (3,519) 490 (16,135)
(2,972)
Debt due within one year - (1,500) - (1,500)
Finance leases (1,741) 989 - (752)
Total net debt (13,856) (3,483) 385 (16,954)
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year ended 31 December 2002
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2002 2001
#'000 #'000
(Loss) / profit attributable to shareholders (240) 24
Currency translation differences (1,836) (150)
Total recognised gains and losses (2,076) (126)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2002 2001
#'000 #'000
(Loss) / profit attributable to shareholders (240) 24
Dividends (331) (352)
(571) (328)
Revaluation of property 407 -
Redemption of preference shares (1,500) (750)
Currency translation differences (1,836) (150)
Net movement in shareholders' funds (3,500) (1,228)
Shareholders' funds at 1 January 24,110 25,338
Shareholders' funds at 31 December 20,610 24,110
Being:
Equity 18,126 19,870
Non-equity 2,484 4,240
MARTIN INTERNATIONAL HOLDINGS PLC
Preliminary Results for the Year ended 31 December 2002
Report and Accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts within the meaning of section 240 of the Companies
Act 1985. Statutory accounts for the year ended 31 December 2001 upon which the
Company's auditors gave an unqualified opinion, and which did not contain a
statement under section 237 (2) or (3) of the Companies Act 1985, have been
delivered to the Registrar of Companies. The Group's Annual Report for 2002
will be posted to shareholders in late April 2003, but the results were, as is
customary, discussed with the auditors prior to making this announcement. The
auditors have confirmed to the Board that they expect to give an unqualified
report on the accounts incorporating these results and the 2002 Annual Report
will in due course be filed with the Registrar of Companies.
The Annual General Meeting will be held on Friday, 6 June 2003.
Copies of this Preliminary Announcement may be obtained from:
The Company Secretary
Martin International Holdings PLC
Orchard Way
Calladine Park
Sutton-in-Ashfield
Nottinghamshire
NG17 1GX
Telephone: (01623) 441100 Fax: (01623) 787500
E-Mail: admin@martin-international.co.uk
This statement will also be available from our web site:
http://www.martin-international.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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