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DJ US MidCap Total Stock Market | DOWI:DWM | Dow Jones Indices | Index |
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RNS Number:2940J Dowding & Mills PLC 27 March 2003 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Thursday, 27 March 2003 IMMEDIATE RELEASE Dowding & Mills PLC Interim Results half year ended 31 December 2002 Statement by Executive Chairman, Tudor Davies Introduction I was appointed Chairman of Dowding & Mills PLC ("the Group" or "the Company") immediately following the Board changes at the Annual General Meeting on 29 November 2002. Subsequent to my appointment, I conducted an initial financial and operational review of the Group's businesses. A combination of market conditions, together with the need for exceptional charges to reflect a more prudent view of the carrying value of the Group's assets and re-organisation costs arising from the review, prompted our announcement on 20 December 2002. This announcement informed the Stock Exchange that the Board did not believe it would be appropriate for the Company to pay a dividend in respect of year ending 30 June 2003 and would be preserving its resources in order to facilitate a strategic re-organisation of the Group's activities. Board Changes Doug Rogers was appointed Deputy Chairman on 31 August 2002 and Peter Guest was appointed as a Non-Executive Director on 31 January 2003. Doug Rogers and Peter Guest have provided valuable assistance with the re-organisation of the Group, and the Board has decided to appoint Peter Guest as Managing Director with effect from 1 April 2003. His extensive commercial and technical experience in this industry is invaluable to his fellow Directors and the Company as the Board completes the review and implements change. Brian Gibbon resigned on 14 November 2002. Stuart Moberley, David Sankey and Henk Hammendorp decided not to seek re-election at the Annual General Meeting on 29 November 2002. Martyn Habgood resigned on 29 November 2002. Roger Feaviour resigned on 31 January 2003. Results For the half year to 31 December 2002, turnover was relatively unchanged at #61.5 million (2001: #62 million) with the Group remaining profitable at the operating level with profits of #2.0 million (2001: #4.7 million) in the period. However, this result reflects a decline in margins and an increase in overheads due to higher insurance costs and additional contributions to pensions. Profit before tax and exceptional items was #1.0 million (2001: #3.7 million), and exceptional items totalled #22.8 million (2001: #1.7 million), resulting in a loss after taxation of #19.9 million (2001: profit of #1.3 million). Details of the exceptional charge and a prior year adjustment are given in the notes to the Interim Report. The cash outflow for the period amounted to some #3.4 million, of which #1.6 million related to capital expenditure committed prior to the Board changes, and #1.2 million to the cost of the 2002 financial year final dividend. Strategic Review The previous growth strategy to become an International Engineering Services Group, and the accompanying high levels of spend on re-organisation, acquisitions, complex computer systems, and capital projects, has been financed from borrowings without a corresponding increase in returns, directly impacting on value to shareholders. continued... The focus now is to reverse the trend of rising borrowings through strict control of working capital, and capital expenditure. Cash generation is a priority with the emphasis firmly on restoring value for shareholders by ensuring profits earned are turned into cash, and borrowings reduced. Our initial review of the Group businesses identified the need for an exceptional charge of #22.8 million which in the main has no cash effect, but is necessary to write down goodwill and tangible assets to a carrying value more commensurate with the return they can generate or the estimated realisable value, particularly where re-organisation is anticipated. Due to the geographical spread and number of businesses involved (50 operating units in the U.K., Holland, Luxembourg, U.S.A. and Australia), the review will be an on-going process for several months. Re-organisation The initial review of the U.K. operations has identified a considerable number of issues, and action has been taken to improve the structure of the Group and the reporting lines to management. At the branch level, satisfactory returns are being made in most cases, but overhead costs were disproportionate at the regional and central functions. In January we commenced a cost down programme to improve the profitability of the Group, involving the reduction of staff at all levels within the Group's Central and Regional support functions. This action has re-aligned the responsibility for the local area business to the Branch Managers which will speed up decision making and allow management teams more control over their resources. In February we reviewed the structure, productivity efficiencies and profitability of the under-performing businesses within the UK Branch network. We have closed three of our Electronics branches, and there has been a reduction in personnel throughout the Engineering Services network. In total, 160 employees have either left the Company or are going through a redundancy consultation process. Whilst these actions are regrettable for all those employees affected by the re-structuring programme, it has been necessary to ensure that, in these difficult and challenging times, we remain competitive and continue to deliver the best possible service levels to our customers. Outlook The ongoing plan is to improve profitability and cash generation in order to reduce borrowings and improve shareholder value. With depreciation and amortisation running at an annualised level in the region of #4.0 million, and the emphasis on strict control of costs, capital expenditure and working capital, the Group is expected to reduce borrowings once the re-organisation is complete. The Board is committed to building on the market leading position that Dowding & Mills has in the industry, and although in the short-term the effects of the re-organisation and weaknesses in the economy will impact on the second half, the benefits are expected to flow through later in 2003. Enquiries: Tudor Davies, Chairman Fiona Tooley Graeme Cull Dowding & Mills PLC Citigate Dewe Rogerson Arbuthnot Securities Tel: 0121 766 6161 Tel: 0121 455 8370 Tel: 020 7002 4600 Mobile: 07785 703523 Mobile: 07976 228397 Dowding & Mills PLC Interim Results Unaudited Consolidated Profit and Loss Account Half year ended 31 December 2002 Restated Half year to 31/12/02 Half year to 31/12/01 Before Before Exceptional Exceptional Exceptional Exceptional Items Items Total Items Items Total #'000 #'000 #'000 #'000 #'000 #'000 Turnover 61,530 - 61,530 62,014 - 62,014 Operating profit 2,002 (22,846) (20,844) 4,736 (1,713) 3,023 Net interest payable (998) - (998) (1,029) - (1,029) Profit on ordinary activities before tax 1,004 (22,846) (21,842) 3,707 (1,713) 1,994 Tax on ordinary activities (394) 2,355 1,961 (1,233) 565 (668) Profit on ordinary activities after tax 610 (20,491) (19,881) 2,474 (1,148) 1,326 Minority interests - - - - - - Profit for the period 610 (20,491) (19,881) 2,474 (1,148) 1,326 Dividends - - - (1,233) - (1,233) Retained profit 610 (20,491) (19,881) 1,241 (1,148) 93 Earnings per share (EPS) 0.40 (13.30) (12.90) 1.61 (0.75) 0.86 EPS before amortisation of goodwill 0.58 (8.87) (8.29) 1.83 (0.75) 1.08 Dividend per share 0.00 0.80 Dowding & Mills PLC Interim Results Unaudited Consolidated Profit and Loss Account Half year ended 31 December 2002 Restated Full year to 30/06/02 Before Exceptional Exceptional Items Items Total #'000 #'000 #'000 Turnover 121,983 - 121,983 Operating profit 7,577 (7,058) 519 Net interest payable (1,938) - (1,938) Profit on ordinary activities before tax 5,639 (7,058) (1,419) Tax on ordinary activities (1,744) 1,456 (288) Profit on ordinary activities after tax 3,895 (5,602) (1,707) Minority interests (9) - (9) Profit for the period 3,886 (5,602) (1,716) Dividends (2,466) - (2,466) Retained profit 1,420 (5,602) (4,182) Earnings per share (EPS) 2.53 (3.64) (1.11) EPS before amortisation of goodwill 2.89 (2.46) 0.43 Dividend per share 1.60 Dowding & Mills PLC Interim Results Unaudited Balance Sheet As at 31 December 2002 (Note 1) (Note 1) Restated Restated 31/12/02 31/12/01 30/06/02 #'000 #'000 #'000 NET ASSETS EMPLOYED Fixed assets: Intangible assets 2,087 11,229 9,201 Tangible assets 39,309 44,776 45,166 41,396 56,005 54,367 Current assets Stock and work in progress 8,088 13,592 13,414 Debtors 27,896 33,216 29,868 Bank and cash balances 1,894 2,903 3,416 37,878 49,711 46,698 Creditors - amounts falling due within one year: Loans and overdrafts (16,143) (11,026) (12,192) Other creditors (16,582) (20,582) (20,020) Net current assets 5,153 18,103 14,486 Total assets less current liabilities 46,549 74,108 68,853 Creditors - loans falling due after more than one year (20,959) (24,184) (23,068) Provisions for liabilities and charges (4,523) (3,355) (3,741) Net assets 21,067 46,569 42,044 REPRESENTED BY Shareholders' funds: Share capital 15,410 15,410 15,410 Reserves 5,657 30,879 26,360 21,067 46,289 41,770 Minority interests - 280 274 21,067 46,569 42,044 Dowding & Mills PLC Interim Results Summarised Unaudited Cash Flow Statement Half year ended 31 December 2002 Half year to Half year to Full year to 31/12/02 31/12/01 30/06/02 #'000 #'000 #'000 Net cash inflow from operating activities (see note 5) 1,650 4,474 11,389 Net interest paid (983) (1,052) (2,041) Dividends paid (1,233) (2,404) (3,637) Taxation paid (860) (723) (1,524) Net capital expenditure (1,609) (1,515) (4,869) Acquisition/disposal of businesses (273) - - Financing (79) 3,425 2,340 (Decrease)/increase in cash and cash equivalents (3,387) 2,205 1,658 Unaudited Reconciliation of Net Cash Flow to Movement in Net Debt Half year to Half year to Full year to 31/12/02 31/12/01 30/06/02 #'000 #'000 #'000 Increase/(decrease) in cash in the period (3,387) 2,205 1,658 Cash inflow/(outflow) from movement in debt 79 (3,425) (2,340) (3,308) (1,220) (682) Other non-cash items: Translation difference (56) (1) (77) Movement in net debt in the period (3,364) (1,221) (759) Opening net debt (31,844) (31,085) (31,085) Closing net debt (35,208) (32,306) (31,844) Statement of Total Recognised Gains and Losses Restated Restated Half year to Half year to Full year to 31/12/02 31/12/01 30/06/02 #'000 #'000 #'000 (Loss)/profit for the period (19,881) 1,326 (1,716) Currency translation differences on overseas investments (821) (436) (680) Total recognised gains and losses for the period (20,702) 890 (2,396) Prior year adjustment (as explained in note 1) (1,028) - - Total gains and losses recognised since last annual report (21,730) 890 (2,396) Dowding & Mills PLC Interim Results Notes 1. With the exception of the accounting policy for turnover, the accounting policies used to complete the Interim Report are consistent with those used to complete the Group Accounts for the year ended 30 June 2002. The figures for the year ended 30 June 2002 and for the half year to 31 December 2001 have been restated to reflect this change in accounting policy. Following the results of the financial and operational reviews referred to in the Chairman's statement and, in particular, the need to reflect a more prudent view in light of current market conditions, the Directors are of the opinion that the revised accounting policy for turnover is more appropriate than the previous policy. The effect of this change in the 6 months to December 2002 was to increase turnover by #2.0 million from #59.5 million to #61.5 million, increase operating profits by #0.7million from #1.3 million to #2.0 million, and, as at 31 December 2002, decrease net assets by #0.8 million from #21.9 million to #21.1 million. The revised policy is as follows: Group turnover represents the net amounts invoiced to customers for goods and services supplied in respect of ordinary activities, excluding intra-Group transactions and value added tax. In addition, the long term contacts policy, in accordance with SSAP 9, is to recognise turnover in line with an estimation of contract completeness. The figures for the year ended 30 June 2002 are an abridged statement of the full Group Accounts for that year which have been delivered to the Registrar of Companies and on which the auditors have made an unqualified report. 2. Earnings per share are calculated on losses of #19,881,000 (restated 2001: earnings of #1,326,000) and on a weighted average of 154,095,548 (2001: 154,095,548) ordinary shares in issue. The earnings per share before exceptional items is calculated on attributable earnings of #610,000 (restated 2001: #2,474,000) and on a weighted average of 154,095,548 (2001: 154,095,548) ordinary shares in issue. 3. Exceptional costs charged in the period amount to #22,846,000:- #'000 Reorganisation 2,047 Impairment of goodwill 6,827 Impairment of fixed assets 4,840 Changes in accounting estimates 7,731 Provision for onerous leases 1,401 Total 22,846 Reorganisation The reorganisation of the business has continued throughout the period, including the Board changes in November 2002. The cost includes settlement of the former Directors' contracts, a number of redundancies at management level and other costs involved in restructuring the branch network. Impairment of goodwill The Board reviewed the carrying values of the goodwill in the light of the current trading performance and future intentions for the relevant businesses and have provided against the carrying value of the goodwill accordingly. continued... Impairment of fixed assets The Board has reviewed the carrying values and useful economic lives of certain fixed assets as required by FRS11 and has concluded that in certain instances impairment provision is required. Changes in accounting estimates The new Board has performed an in-depth review of the working capital of the Group and concluded that additional provisions are appropriate in the light of current and expected future trading. The valuation of stock, work in progress and debtors has been adjusted accordingly. Provision for onerous leases The branch restructuring programme has left the Group with a number of properties which are either empty or not being fully utilised by the Group. Efforts are made to sub-let these properties, but where a contract has not been signed, provision has been made for the present obligation under these leases on a discounted basis. 4. The currency translation differences arise because of the different rates of exchange used at the end of each respective period. 5. Reconciliation of operating profit to net cash inflow from operating activities Restated Restated Half year to Half year to Full year to 31/12/02 31/12/01 30/06/02 #'000 #'000 #'000 Pre exceptional operating profit 2,002 4,736 7,577 Exceptional costs (22,846) (1,713) (7,058) Operating profit (20,844) 3,023 519 Depreciation charge 2,176 2,549 5,400 Impairment of fixed assets 4,352 - - Amortisation of goodwill 266 336 558 Impairment of goodwill 6,841 - 1,808 Loss/(profit) on sale of tangible fixed assets 21 (248) (183) (Increase)/decrease in working capital 8,040 (780) 3,303 Increase/(decrease) in provisions for liabilities and charges 798 (406) (16) Net cash inflow from operating activities 1,650 4,474 11,389 6. This interim report is being sent by post to all registered shareholders. Additional copies are available from the Company's Registered Office: Camp Hill, Birmingham, B12 OJJ. This information is provided by RNS The company news service from the London Stock Exchange END IR JRMITMMBTBFJ
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