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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Straight | LSE:STT | London | Ordinary Share | GB0033695486 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 77.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:7530T Straight PLC 27 March 2007 27 March 2007 Straight plc Preliminary Announcement for the year ended 31 December 2006 Highlights * Turnover up by 14.3% from #24.3m to #27.8m * Gross margins up from 16.8% to 18.3% * Operating margins up from 5.5% to 5.7% * Headline EBITDA up 10.3% to #2.3m * Earnings per share up 14.5% to 9.5p Commenting on the results, James Newman, Chairman, said "2006 has been a year of development and change for the Group. Much has been achieved during the last three years as a public company and the Board believes 2007 will be another year of growth as our new business structure and other new initiatives begin to contribute." Jonathan Straight, Chief Executive, added "We move forward with a revitalised business model, strong markets for our core products, many new products in the pipeline and environmental issues higher than ever on the national and international agenda. The outlook is positive and, with boundaries to expansion now removed, our growth can continue." Contacts Company: James Newman/Jonathan Straight - 0113 245 2244 Simon Mountford Communications: Simon Mountford - 01904 520162 Panmure Gordon: Andrew Godber/Katherine Roe - 0207 459 3600 The preliminary announcement was approved by the Board on 27 March 2007 Chairman's Statement I am delighted to report further progress for the Group in a number of areas of its business, in a year which has not been without its challenges. Results Turnover at #27.8 million was up 14% on 2005. Our new Garden Products division, especially our water saving product range, showed substantially increased turnover. Sales of waste and recycling containers were lower but more profitable due to a focus away from bulk wheeled bin supplies. We also successfully delivered a number of large orders in our Materials Handling division. Overall, gross profit margins increased from 16.8% to 18.3% due to the improved sales mix and introduction of a number of new products. This improvement in margins would have been even higher but for almost #0.5m of one-off costs incurred as the Group strove to maintain deliveries and customer service levels during periods of unprecedented peak retail activity. Despite having incurred these costs, operating profit for the year, before goodwill amortisation and share option costs, was up by 15% to #1.9m. Profit before tax was also up by 15% at #1.7m. Dividend During the year, the Board declared a dividend of 1.2p (2005: 1.0p) per share. The Board has declared a further dividend of 2.7p (2005: 2.5p). This dividend will be payable on 25 May 2007 to shareholders on the register at 27 April 2007. Strategic developments As a result of the issues faced by the Group during the year, a number of strategic initiatives have been taken to create an improved business model that is both flexible and scalable as the Group's markets and customer requirements change. Firstly, in view of the increased scale of our distribution and warehousing requirements, the Group has agreed to outsource these activities to DHL, a world leader in contract logistics. This agreement will provide additional capacity at peak times as well as a more predictable cost base and the ability to benefit from savings in future years. Also, to be able to provide a more flexible service to our customers and to better cope with managing demand, the major proportion of our contact centre work has now been outsourced. During the year we changed the relationship with our materials handling partner, Rehrig Pacific, allowing both parties to pursue their own different opportunities in this large market. Current joint contracts will continue to be fulfilled by both parties over the next two years. With the substantial growth in our retail and on-line sales during the last year, a considerable amount of investment in a new IT platform has been made which, coupled with the new outsourcing arrangements, will deliver the improved performance, scalability and responsiveness, which was not always possible throughout 2006. Acquisitions The Board is pleased to announce that it has acquired a 30% shareholding in Tapmagic Limited for #35,000 since the end of 2006. Tapmagic has a unique product range of water saving devices. The Group has been appointed exclusive UK distributor for these products in its core markets and has an option to purchase the remainder of the share capital in due course. Board In January, I was pleased to welcome Mark Halford to the Board as Operations Director. Mark was previously General Manager at Polimoon, one of our key blow-moulding partners, and has a wealth of experience in our industry. He joined us in July 2006 and has overseen the transfer of our logistics operations to DHL. Tom Musgrove, who has been with the Company since 1996, has now stepped down from the Board and currently leads our trade sales team. Outlook With environmental issues still at the forefront of Government policy, its agencies are still looking at ways to achieve its various recycling and energy efficiency targets. Meeting these targets will remain difficult unless industry and the consumer are both motivated and focused. As I said last year, the Group is well placed to support this effort with creative solutions. The new strategic initiatives taken during the year have significantly strengthened the Group's capacity to grow and innovate without a downward effect on margins and a number of new opportunities are being pursued to this end. 2006 has been a year of development and change for the Group. Much has been achieved during the last three years as a public company and the Board believes 2007 will be another year of growth as our new business structure and other new initiatives begin to contribute. James H Newman Chairman 27 March 2007 Chief Executive's Review We started 2006 with a modest acquisition. The Cloudburst brand purchased from Titan Environmental supplied a range of water butts and composting containers and gave us access to new markets for our existing product range. What followed was a period of unprecedented demand for water butts driven by water restrictions in some parts of the country. Our retail business expanded rapidly moving from sales of #0.2m in February 2006 up to #1.0m in March 2006, mainly driven by water butt sales, but also by increased demand for composting containers. This put pressure on all parts of our supply chain and we incurred additional costs in many areas of the business such as customer care, in order to keep our affinity partners and retail customers happy. The outsourcing decisions, taken late in 2006, which will make the business more scalable and less vulnerable to demand spikes, have been well received by trade and retail customers and our affinity partners. Markets Our core markets remain strong. Kerbside container sales have remained buoyant with our financial performance much improved. We remain the key player in this market in the UK. Profitability has been driven by good supplier management and the introduction of niche products. For example, our Wheeled Bin Inner Caddy has provided a unique solution for the collection of glass and paper in one container. Initially developed at the request of a major city council, the product is now generating interest and sales elsewhere. Sales of home compost bins remained strong with WRAP being our biggest customer running at 20% over its own forecast sales. We remain the largest supplier in this market in the UK. Water butt sales were exceptionally high both on the trade and retail sides of the business. The Cloudburst acquisition was very well timed and allowed us to place product into several major retailers. Performance in this market has exceeded our expectations. Our own retail business was strong too, both with water company clients and directly through our evengreener brand. Our Materials Handling division showed healthy sales of #1.5m, significantly more than in 2005. However, despite this groundbreaking achievement the profitability of the contracts was not high and led to the change in our relationship with Rehrig at the end of 2006. A benefit of this change was that certain kerbside container moulds, owned by Rehrig and on which royalties were paid, transferred into our ownership. This will improve our margins in the future. The number of our retail customers ordering on-line grew in 2006 by 300%. Recognising the Internet as a means of generating further increased sales and reducing processing costs, we are making strategic investments in this area and extending Internet marketing disciplines to the trade side of the business. New product development Innovative new products are the lifeblood of our business and give us the ability to earn higher margins than we achieve on our core ranges. Products such as the Wheeled Bin Inner Caddy and the Kitchen Composter have made a significant contribution in 2006. We have now introduced a formal process of managing this area with a stream of new product launches scheduled for the coming year. To tackle the increasing problem of chewing gum littering, we have become the exclusive distributor of the Gummy Bin product to the local authority market. This impressive product out performed all other similar containers in a recent trial run by Defra. We have also entered into an agreement with renowned designer Wayne Hemingway to launch a range of environmental products initially focusing on consumer goods. Prototypes of the first designs have already been produced. Business re-alignment Due to the rapid increase in retail sales in 2006 and the immense demands that this put on the business, it was necessary to refine the business model quickly and against a tide of ongoing high levels of activity. Change that might have taken three years to introduce has been achieved in three months. Outsourcing our logistics to DHL and most of our call centre activity allows us to focus on our core competences. A major investment in new retail software, fully integrated into DHL's systems, means that the first human involvement in an order in many cases is the sticking of an address label on a parcel. It is our challenge to drive as much business of this type as possible. This B2B and retail e-commerce is not only our most profitable area but also the most rapidly scalable. Contract awards As previously announced, WRAP has awarded us an estimated #2.6m of business for 2007. Other key successes include Birmingham City Council specifying our kerbside boxes, our largest single order for this type of container. Supplies through the Garden Products division were made through 2006 to Wickes stores and additional products, including a new water butt, have been added for 2007. Management and staff I would like to thank my fellow Directors and colleagues for their unfaltering support throughout the year. The achievements of all departments have been exceptional. I would like to add my welcome to Mark Halford and to thank Tom Musgrove for his contribution to the Board. Outlook We move forward with a revitalised business model, strong markets for our core products, many new products in the pipeline and environmental issues higher than ever on the national and international agenda. The outlook is positive and, with boundaries to expansion now removed, our growth can continue. Jonathan M Straight Chief Executive 27 March 2007 Finance Director's Review I am pleased to announce another record year of financial performance for the Group. Turnover and operating margins The mix of waste and recycling containers sold in bulk in 2006 meant that turnover to these trade customers fell by 12% to #13.1m although the associated gross profit actually increased by 17% to #2.0m. This was the result of the focus of our sales resource on the more lucrative products in our range. Turnover in our Garden Products division, driven by retail sales including waterbutts and the continued success of our relationship with WRAP, grew by 42% to #13.2m. This unprecedented growth did result in unanticipated costs of almost #0.5m as the business strove to cope with the demands of reaching the limit of its capacity to produce product and the ability of its delivery crews to deliver. Most of this cost was offset against the gross profit of this division, which was #3.0m, up 24% on 2005. The business further increased its fixed overhead base in 2006 with a rise in operating expenses of 28% to #3.5m. This was driven by the strengthening of the Group's management structure, with resource being added to sales, marketing and product development and IT as the business sought to penetrate and develop further its new and existing markets. After accounting for these costs, and the costs associated with the unprecedented demand in the home and garden products division, profit before tax grew by 15% to #1.7m. Operating cashflow Following the demand for garden products in 2006, substantial stocks of certain key products were built up during the late autumn. The Board is confident that this stock will ensure good customer service in another year of anticipated high demand. In addition, the Group continued to use its surplus cash position to take advantage of early settlement discounts with key suppliers, which used #1.0m of working capital. In order to offset this outflow, considerable effort was made to reduce the Group's debtors and as a result #0.5m of cash was released despite the growth in turnover. New products and innovations continue to be the Group's profit driver. Consequently the Group doubled the capital sums it invested in new products and IT in 2006 to #0.9m. With the cash dividend paid increased to #0.4m, cash balances ended 2006 #0.1m higher than at the beginning of the year. Earnings per share Basic earnings per share grew by 14% to 9.5p in the year, in line with the growth in profit before tax. Due to the one-off costs highlighted above, headline earnings per share were slightly reduced to 12.5p Management of financial risk The Group has continued to place surplus cash on deposit so that the maximum return can be obtained consistent with its need to access the cash. The Group has also maintained its policy of managing foreign exchange risk by purchasing currency forward when it is notified that a contract bid has been successful and foreign currency is required. The policy of rigorously credit checking all new customers and chasing existing customers promptly has once again ensured that we have avoided significant bad debts. International Financial Reporting Standards (IFRS) All AIM companies are exempt from preparing financial statements under IFRS until 2007. Straight plc intends to implement IFRS during 2007 and the directors are taking appropriate steps to ensure that as an AIM Group, Straight plc meets this requirement. Outlook The increase in scalability in our business afforded by outsourcing non core activities, and the focus of resources on new products and innovation will mean further progress on earnings and cash generation in 2007. James D Mellor Finance Director and Company Secretary 27 March 2007 Summarised Consolidated Profit and Loss Account For the year ended 31 December 2006 Total Total 2006 2005 restated Note #'000 #'000 Turnover 2 27,836 24,343 Cost of sales 3 (22,731) (20,243) _____ _____ Gross profit 5,105 4,100 Operating expenses 3 (3,527) (2,755) _____ _____ Operating profit 1,578 1,345 Interest receivable 4 107 125 _____ _____ Profit on ordinary activities before taxation 2 1,685 1,470 Taxation 5 (610) (547) _____ _____ Profit for the financial year 1,075 923 _____ _____ Basic earnings per share (p) 6 9.5 8.3 Diluted earnings per share (p) 6 9.2 8.1 All operations are continuing. There were no recognised gains or losses other than the profit for the financial year. Summarised Balance Sheets At 31 December 2006 Group Company Group Company restated restated 2006 2006 2005 2005 #'000 #'000 #'000 #'000 Fixed assets Intangible 5,294 85 5,490 - Tangible 1,333 1,333 882 882 Investments - 6,911 - 6,902 ____ ____ ____ ____ 6,627 8,329 6,372 7,784 Current assets Stocks 1,181 1,181 415 415 Debtors 5,057 5,057 5,489 5,489 Cash at bank and in hand 2,126 2,126 2,036 2,036 ____ ____ ____ ____ 8,364 8,364 7,940 7,940 Creditors: amounts falling due within one year (5,208) (7,134) (5,364) (7,290) ____ ____ ____ ____ Net current assets 3,156 1,230 2,576 650 Total assets less current liabilities 9,783 9,559 8,948 8,434 Provisions for liabilities and charges (35) (35) (37) (37) ____ ____ ____ ____ Net assets 9,748 9,524 8,911 8,397 ____ ____ ____ ____ Capital and reserves Called up share capital 115 115 113 113 Share premium account 5,953 5,953 5,827 5,827 Merger reserve 744 744 744 744 Share option reserve 87 87 56 56 Profit and loss account 2,849 2,625 2,171 1,657 ____ ____ ____ ____ Equity shareholders' funds 9,748 9,524 8,911 8,397 ____ ____ ____ ____ Summarised Consolidated Cash Flow Statement For the year ended 31 December 2006 2006 2005 Note #'000 #'000 Net cash inflow/(outflow) from operating activities 7 1,711 (160) _____ _____ Returns on investments and servicing of finance 107 125 Interest received _____ _____ Net cash inflow from returns on investments and servicing of finance 107 125 Taxation (540) (514) Capital expenditure Purchase of intangible fixed assets (93) - Purchase of tangible fixed assets (801) (457) Disposal of tangible fixed assets - 4 _____ _____ Net cash outflow from capital expenditure (894) (453) Net cash outflow from acquisitions - (4,362) Equity dividends (422) (222) Management of liquid resources Disposal of short term deposits 1,500 - _____ _____ Net cash inflow/(outflow) before financing 1,462 (5,586) Financing Issue of share capital 128 5,000 Costs of share issue - (293) _____ _____ Net cash inflow/(outflow) from financing 128 4,707 _____ _____ Increase/(decrease) in cash 8 1,590 (879) _____ _____ Notes to the Preliminary Announcement For the year ended 31 December 2006 1. Basis of preparation The preliminary announcement has been prepared under the historic cost convention in accordance with applicable accounting standards. The principal accounting policies of the Group have remained unchanged from the previous year except that FRS20, "Share Based Payments", has been adopted. Prior period figures have been restated as appropriate. 2. Turnover and gross profit The turnover and profit on ordinary activities before taxation are attributable to the principal activities of the Group. The turnover and gross profits attributable to the principal activities are set out below. Gross Gross Turnover profit Turnover profit 2006 2006 2005 2005 #'000 #'000 #'000 #'000 Waste and recycling containers 13,073 1,979 14,799 1,695 Home and garden products 13,214 2,971 9,322 2,401 Materials Handling 1,549 155 222 4 _____ _____ _____ _____ 27,836 5,105 24,343 4,100 _____ _____ _____ _____ It is not possible to separate the profit before tax or net assets of these operating segments. The profit on ordinary activities before taxation is stated after the costs below. 2006 2005 restated #'000 #'000 Depreciation of owned assets 386 256 Goodwill amortisation 289 289 Operating lease rentals - land and buildings 97 119 Auditors' remuneration - audit services 20 20 Auditors' remuneration - review of interim financial statements 3 3 Share based payments 56 38 3. Cost of sales and operating expenses 2006 2005 restated #'000 #'000 Cost of sales 22,731 20,243 ______ _____ Operating expenses Distribution costs 1,931 1,397 Administrative expenses 1,596 1,358 ______ _____ 3,527 2,755 ______ _____ 4. Interest receivable 2006 2005 restated #'000 #'000 On bank deposits 39 56 Short term deposits 68 69 107 125 5. Taxation 2006 2005 restated #'000 #'000 Corporation tax at an average rate of 30% (2005: 30%) 605 535 Under/(over) provision in prior years 7 (11) _____ _____ 612 524 Deferred tax (2) 23 _____ _____ 610 547 _____ _____ Analysis of current tax charge Profit on ordinary activities before tax 1,685 1,508 _____ _____ Profit on ordinary activities multiplied by standard rate of Corporation tax in the UK (30%) (2005: 30%) 506 452 Expenses not deductible for tax purposes 114 88 Capital allowances in excess of depreciation (15) (5) Marginal relief - - Under/(over) provision in respect of prior years 7 (11) _____ _____ 612 524 _____ _____ 6. Earnings per share Basic and diluted earnings per share Basic earnings per share are calculated on the basis of profit for the financial year after tax divided by the weighted average number of shares in issue for the year. Diluted earnings per share are calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue in the year plus the weighted average number of shares which would be issued if all the options granted were exercised. All options were dilutive at 31 December 2006. 2006 2005 Weighted Weighted average average Earnings number Per share Earnings number Per share #'000 of shares pence #'000 of shares pence Basic earnings attributable to ordinary 1,075 11,349,878 9.5 923 11,096,585 8.3 shareholders Dilutive effect of share - 328,481 (0.3) - 303,771 (0.2) options _____ _________ ____ ____ ________ ____ Diluted earnings per share 1,075 11,678,359 9.2 923 11,400,356 8.1 Headline earnings per share Headline earnings per share is calculated on the basis of the headline profit for the year, defined as the profit for the financial year before the amortisation of goodwill, share option costs and reorganisation costs, divided by the weighted average number of shares in issue in the year of 11,348,878. The headline earnings per share reflects the Group's recurring trading profitability. The comparative is calculated by reference to the weighted average number of shares in issue in 2005 of 11,096,585. One-off costs of around #0.5m have not been adjusted below. 2006 2005 Number Number Earnings of shares Per share Earnings of share Per share #'000 in issue pence #'000 in issue pence Headline earnings attributable to ordinary shareholders 1,420 11,349,878 12.5 1,403 11,096,585 12.6 Dilutive effect of share - 328,481 (0.3) - 303,771 (0.3) options Diluted headline earnings per share 1,420 11,678,359 12.2 1,403 11,400,356 12.3 7. Reconciliation of operating profit to net cash flow from operating activities Group Group 2006 2005 #'000 #'000 Operating profit 1,578 1,345 Depreciation 386 256 Profit on sale of tangible fixed assets (111) (4) Goodwill amortisation 289 289 Share option costs 56 38 (Increase)/decrease in stocks (766) 115 Decrease/(increase) in debtors 508 (2,320) Decrease)/increase in creditors (229) 121 _____ _____ Net cash inflow/(outflow) from operating activities 1,711 (160) _____ _____ 8. Reconciliation of net cash flow to movement in net funds 2006 2005 #'000 #'000 Increase/(decrease) in cash in the year 1,590 (879) Disposal of short term deposits (1,500) - Net funds at 1 January 2,036 2,915 Net funds at 31 December 2,126 2,036 _____ _____ 9. Post balance sheet events On 27 February 2007, the Group acquired a 30% stake in Tapmagic Limited for consideration of #35,000 in cash. On 27 March 2007, the Company declared a dividend of 2.7p per share. This will be paid on 25 May 2007 to all shareholders on the register at 27 April 2007. 10. Publication of non statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The summarised balance sheets at 31 December 2006, summarised consolidated profit and loss account, summarised consolidated cash flow statement and associated notes for the year then ended, have been extracted from the Group's financial statements upon which the auditors opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985. Those financial statements have not yet been delivered to the Registrar. 11. Annual General Meeting The Annual General Meeting of the Company will be held in Leeds on Tuesday 26 June 2007. Full details will be included in the published Annual Report and Financial Statements which will be sent to shareholders in due course. This information is provided by RNS The company news service from the London Stock Exchange END FR VQLFLDXBLBBF
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