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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| 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 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2020 to Jan 2025
TIDMSTT
RNS Number : 0286F
Straight PLC
17 April 2014
17 April 2014
Straight plc
Company number 2923140
Final Results
for the year ended 31 December 2013
Straight plc (AIM: STT), the recycling products and services group, is pleased to announce its Final Results for the year ended 31 December 2013.
Financial Highlights
-- Underlying operating profit* GBP0.82m (2012: loss of GBP0.24m)
-- Loss before tax GBP0.13m (2012: loss of GBP1.63m)
-- Group revenue GBP26.10m (2012: GBP27.82m)
-- Group gross margin increased to 27.8% (2012: 24.1%)
-- Group EBITDA**increased to GBP1.99m (2012: GBP0.75m)
-- Net debt GBP3.16m (2012: GBP3.14m)
-- Adjusted earnings per share 5.0p (2012: loss of 2.3p)
-- Basic loss per share 0.3p (2012: loss of 12.6p)
Operational Highlights
-- Launch of 3BoxStack (tm) with significant sales post period
-- Launch of Food Waste Inner Caddy with significant sales post period
-- Significant contract wins secured with Serco in Canterbury, Dumfries and Galloway Council and City of Salford
-- Four year framework agreement with YPO
-- Two year framework agreement with ESPO
* excludes the impact of non-recurring items, share scheme charges and amortisation of customer relationships and trademarks
**underlying operating profit excluding depreciation
Commenting on the results, James Newman, Chairman of Straight said:
"2013 has seen a significant improvement in the trading performance of the Group, which has maintained its market leading position.
"2014 has started well with a strong order book already in place. The Board is confident that it will be able to deliver further profitable growth over the coming year."
Chief Executive, Jonathan Straight added:
"At the end of 2012 I said that the foundations of recovery had been laid. At the end of 2013 it was apparent that this statement has proved to correct as a significant improvement has been delivered. The considerable momentum created through two years of restructuring is carrying us forward with confidence."
For further information: please contact:
Straight plc Jonathan Straight, Chief Executive Via Redleaf Polhill Redleaf Polhill straight@redleafpr.com Rebecca Sanders-Hewett Dwight Burden Jenny Bahr 0207 382 4730 Cenkos Securities Ivonne Cantu (Nomad) 0207 397 8980 Christian Hobart (Sales)
Notes for editors:
About Straight plc
-- Straight plc provides environmental products and services to both the UK market and overseas.
-- The Group is the UK's leading manufacturer and supplier of specialist kerbside recycling containers, as well as being a key supplier of a broad range of waste and recycling container solutions.
-- Founded in 1993 by the current Chief Executive, Jonathan Straight, the business has since supplied more than 25 million kerbside boxes, baskets and caddies to local authorities across the UK, securing its position as the industry leader.
-- The business operates through two divisions:
o The core Trade Business supplying products in bulk to local authorities, utilities, the waste industry, retailers and other businesses
o The Retail Business supplying a range of proprietary environmentally friendly consumer products directly to the public, often in partnership with a local authority or a utility.
-- Almost two thirds of the products the Group supplies are now produced in Straight's own factory.
-- Straight plc has established diverse overseas sales channels for its products, some of which are manufactured locally to their markets in North America and in Australia. Other markets are serviced from UK production.
-- Straight plc is a founding member of the Social Stock Exchange, an online portal to promote investment in businesses with social or environmental impacts.
Further information about the company and its products can be found at: www.straight.co.uk
Chairman's Statement
I am delighted to announce that the Group has returned to operational profitability, increased margins and significantly improved underlying EBITDA.
Trading performance
The Group made an underlying operating profit of GBP0.82m (2012: loss of GBP0.24m) from Group revenues of GBP26.10m (2012: GBP27.82m).
Overall Group gross margins increased from 24.1% to 27.8% in the year as a result of a full year contribution following the introduction of new working practices in the factory and the outsourcing of non-core business in 2012. Underlying profits in the manufacturing facility were transformed to GBP0.99m (2012: GBP0.03m). Much improved productivity helped lift Group underlying operating profit excluding share option costs, depreciation and amortisation by 53.4% to GBP1.99m (2012: GBP0.75m).
Net non-recurring costs of GBP0.51m were significantly lower than the GBP1.09m incurred in 2012.
The GBP0.51m in 2013 includes costs of GBP0.73m which includes the cost of replacing product supplied in 2011 and costs associated with refinancing the Group. These costs were offset by income of GBP0.22m which includes compensation in connection with the Group's head office lease and from the sale of the DIY business. As a consequence, after depreciation the Group recorded a small loss before tax of GBP0.13m (2012: loss of GBP1.45m).
Earnings per share
Adjusted* earnings per share were 5.0p (2012: loss of 2.3p). Basic loss per share was 0.3p (2012: loss of 12.6p).
Dividend
As the Group has now returned to profitability, payment of a dividend will be reviewed in early 2015 in line with the Group's dividend policy. The Board is not proposing a dividend based on the 2013 results.
Business developments
The DIY business was sold in May 2013 for GBP0.15m in cash. This formed part of the acquisition of Dyro Holdings Limited and had previously been outsourced in 2012.
Board
I would like to thank both the Group's employees and my Board colleagues for their support, hard work and delivery of the significant operational improvements we have made during the year.
Refinancing
The Group entered into a new three year funding agreement in May 2013. The funding package, with a mixture of invoice discounting, plant and machinery finance and term loan finance facilities, will provide for the Group's working capital needs until 2016. The Group has been and remains compliant with all the financial covenants associated with these facilities. The largest element of the funding facilities is confidential invoice discounting, and as such headroom is directly dependent on invoiced sales. The Group has unwound significant stretched credit in recent months which has placed pressure on headroom whilst building stocks for the seasonally busy second quarter. The Group's funders and suppliers have continued to be supportive and the Board remains confident that this pressure will ease as the Group trades profitably into 2014.
Potential sale of the Company
On 14 February 2014, the Company announced that it had received an approach from One51 plc, an Irish trading company with interests in plastic moulded products and waste containers to acquire the business. The Board agreed to enter negotiations and due diligence is ongoing. The Company expects to make a further announcement on the progress of this transaction in the near future.
Outlook
2013 has seen a significant improvement in the trading performance of the Group, which has maintained its market leading position.
2014 has started well with a strong order book already in place. The Board is confident that it will be able to deliver further profitable growth over the coming year.
James Newman
Chairman
17 April 2014
* excludes the impact of non-recurring items, share scheme charges and amortisation of customer relationships and trademarks.
Chief Executive's Review
2013 has been a transformational year with the groundwork established in the previous year finally bearing fruit. Our turnover was slightly down, to GBP26.10m (2012: GBP27.82m) primarily due to the disposal of the DIY business. Gross margins increased to 27.8% (2012: 24.1%) and underlying operating profit grew substantially to GBP0.82m (2012: loss of GBP0.24m).
The loss making position in 2012 has been reversed with excellent factory productivity boosting margins and substantially increasing profits. The work to eradicate legacy issues and refinance the business, which commenced in 2012 has been seen through in 2013.
Trade business
Parts of the trade business displayed strong growth. Kitchen organics grew with a 40% increase in revenues and compostable liner sales grew by 23%. This growth was offset by reduced revenues in non-municipal markets, an issue which has been successfully addressed in recent months.
Municipal markets
Municipal revenues grew by 9.5% from GBP16.8m in 2012 to GBP18.4m. Market lead and market share were maintained with our local authority customers and their contractors. Significant contract wins were secured with Serco in Canterbury, Dumfries and Galloway Council and City of Salford. All of these contracts required different or multiple products and services, allowing us to demonstrate our ability to deliver from a broad range of products whilst managing complex logistics.
Non-municipal markets
Two main factors influenced the fall in revenues in the non municipal markets. As expected, the disposal of the DIY business contributed to the reduction in sales. In addition, sales of water butts were at normalised levels following the drought conditions in 2012 and as such are compared to an abnormally high level of sales in the prior year. To bolster this division, the sales effort has been restructured and there has been a positive start to 2014.
Retail business
Good progress was made with an increase in gross margins from 20.7% to 25.7%. Underlying operating profit grew by 29.8% to GBP0.27m (2012: GBP0.21m) despite the lower sales.
Manufacturing Operations
Much of the improvement in Group performance resulted from the complete transformation of the factory. Two years of operational improvements continue to yield tangible results. The new cellular structure, continental shift patterns and conveyor systems have been highly effective, with margins improving from 19.5% to 24.9%. Underlying operating profits also improved from GBP0.03m in 2012 to GBP0.99m in the current year.
Management and staff
I would like to thank my entire team for their continued hard work. They have been instrumental in the turnaround of the business and share my optimism for the future now that our vertical integration is complete.
Outlook
Since period end, we have delivered our first contract for the new Food Waste Inner Caddy to Bournemouth City Council and commenced larger scale deliveries of the 3BoxStack(R) product which enhances the source separation of recyclables. We have continued to build our order book and both order intake and factory outputs are exceeding budget.
At the end of 2012 I said that the foundations of recovery had been laid. At the end of 2013 it was apparent that this statement has proved to correct as a significant improvement has been delivered. The considerable momentum created through two years of restructuring is carrying us forward with confidence.
Jonathan Straight
Chief Executive
17 April 2014
Finance Director's Report
Review of the Business in 2013
The Group's principal activities during 2013 comprised
-- "Trade Commercial" business supplying container solutions for source separated waste to local authorities and waste management companies (municipal customers), community sector organisations and private sector businesses (non-municipal customers)
-- "Trade Manufacturing" business producing injection moulded and blow moulded products for the Trade and Retail businesses
-- "Retail" business supplying end users with a comprehensive range of environmentally friendly home and garden products, including compost bins and water butts, often through partnership with local councils and water companies.
2013 was a much improved year over 2012 in which the significant changes in the factory combined with satisfactory commercial performance yielding much improved operating profitability. Overall underlying operating profits rose from a loss of GBP0.24m to a profit of GBP0.82m. In the early part of the year the business decided to find an alternative source of funding to the facilities provided by Lloyds Bank. These were successfully refinanced on 31 May 2013 with a GBP5.62m facility including confidential invoice discounting, a plant and machinery backed loan and a cashflow loan. During the year the Group progressed its investment in two major new products which will assist it in continuing its margin improvement in 2014.
Revenue and operating margins
Trade Business
Underlying operating profits doubled to GBP1.98m (2012: GBP0.97m) from revenues which fell GBP0.89m to GBP23.29m (2012: GBP24.18m). The fall in revenues was principally due to the disposal of the DIY business in May 2013 which was inherited with the Dyro Holdings acquisition in 2010. The profit growth was driven by an increase in gross margins to 28.1% (2012: 24.6%) as well as a reduction in operating costs of GBP0.43m to GBP4.55m (2012: GBP4.98m). The improved gross margins are the consequence of the rationalisation of the factory carried out in 2012 in which continental shift patterns were introduced and the activity relating to the DIY business was outsourced. The full year effect of these improvements has been seen in 2013.
The Trade business did unwind a significant quality issue which arose from products supplied in 2011. An additional provision was made for this item in respect of further cash outflows required beyond 2013 to rectify the customer's position. This is the principal constituent of the net non-recurring items totaling GBP0.40m.
Retail Business
Underlying operating profits increased to GBP0.27m (2012: GBP0.21m). This increase was in spite of a fall in revenue to GBP2.81m (2012: GBP3.64m) and was driven by greatly improved margins as the business offset a large fall in water butt sales from the exceptional drought-driven 2012 levels by developing sales of high margin factored water saving products and its own Tapmagic range.
Central Overheads
Underlying central operating costs were flat at GBP1.43m (2012: GBP1.42m). The Group did incur GBP0.12m of net non recurring central costs which were principally connected with the early 2013 breaches of Lloyds banking covenants, the knock-on effect of this in professional charges and other costs and also the costs associated with refinancing the Group and were offset by the receipt of compensation in connection with the Group's head office lease.
Cashflow
Cash generated from operating activities fell to GBP0.79m (2012: GBP1.99m). This fall was attributable to the unwinding of stretched credit from suppliers from 2012 levels, higher sales levels at the end of 2013 when compared to 2012 and also the fact that 2012 benefitted from a tax refund of GBP0.17m. These large cash outflows were containable because of the greatly improved operating profitability of the Group and also a second consecutive year in which stocks were reduced.
Capital expenditure was reduced in 2013 to GBP0.31m (2012: GBP0.64m) and was focused on tooling for 2 new products. These are expected to deliver significant margin contributions in 2014.
As noted above the Group was refinanced during the year. The net cash outflow from financing activities including the repayment of old loans and hire purchase agreements and the new facility repayments was GBP0.41m (2012: GBP0.14m). All payments have been made on schedule and all financial covenants complied with.
Net debt
Net debt at the end of 2013 excluding deferred consideration was GBP3.16m (2012: GBP3.14m). The Group has and continues to meet all its financial liabilities on time. Including deferred consideration, net debt at the end of 2013 was GBP4.24m (2012: GBP4.39m).
Earnings per share
Adjusted earnings per share which excludes the impact of non-recurring items, share scheme charges and amortisation of customer relationships and trademarks, was 5.0p (2012: loss of 2.3p). Basic loss per share was 0.3p (2012: loss of 12.6p).
Principal risks and uncertainties facing the Group
The principal risk to the Group is its reliance on the support of its suppliers and supplier credit. In light of the trading results in 2012 and the availability of cash headroom supplier credit limits are on occasions restricted and consequently supplier relationships and payment patterns are very carefully monitored.
Debtor finance constitutes an important element of the Group's funding lines. Forecast short and longer term cash consumption and available debtor collateral are reviewed on a weekly basis by the Board which constantly monitors the Group's available headroom and cash resources.
The Group is reliant on key personnel, in particular the executive directors. These risks have been mitigated by appropriate remuneration packages, including share options and suitable keyman insurance.
As a supplier of plastic products, the Group has always closely monitored the movement in polymer prices. Now that the Group has brought much of its plastic moulding operations in house, it has the opportunity which was not previously available to it to directly manage its raw material consumption by maximising the use of recycled polymer within its products. This is the key way in which the risk posed by rising polymer prices is mitigated.
The Group is exposed to the impact of the current restrictions on public sector spending but continues to benefit from the Government's commitment to increasing recycling rates.
Now that the Group is engaged in proprietary manufacture, the risk posed to it in respect of customer warranty claims is increased. The Group has taken action to mitigate this risk by increasing its control over raw material processing and is strengthening its ISO 9001 procedures.
The Group's rigorously enforced approach to credit control once again ensured that no significant bad debts arose.
Review of key performance indicators
Hot Features
Premium
2013 2012 Change
-------------------------------- -------- -------- -------
GBP'000 GBP'000 %
-------------------------------- -------- -------- -------
Group revenue 26,097 27,822 -6
-------------------------------- -------- -------- -------
Gross profit 7,256 6,707 +6
-------------------------------- -------- -------- -------
Underlying EBITDA* 1,990 754 +153
-------------------------------- -------- -------- -------
Loss before tax (133) (1,629) N/A
-------------------------------- -------- -------- -------
Cash generated from operations 790 1,819 -43
-------------------------------- -------- -------- -------
Productivity index** 76.2% 64.3% +19
-------------------------------- -------- -------- -------
Energy consumption (KWH/Tonne) 896 1,040 -13
-------------------------------- -------- -------- -------
*EBITDA is defined as underlying operating profit excluding share option costs, amortisation and depreciation.
The increase in underlying EBITDA is attributable to much improved margins and lower overheads which were brought about following rationalisation in 2012.
The reduction in cash generated from operations is attributable to the unwind of stretched supplier credit and higher closing sales levels than in 2012. It had been funded by greatly reduced stocks and improved operating profitability.
**Productivity index is defined as standard production hours achieved/available production hours
The increase in productivity is attributable to the improved operational footprint implemented during 2012.
The reduction in energy consumed per tonne of material processed is attributable to the Group's general commitment to reducing its impact on the environment and follows the removal of a number of older and more energy consuming machines as part of its 2012 restructuring programme.
James Mellor
Finance Director
17 April 2014
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
2013 2012
Notes GBP000 GBP000
Revenue 2 26,097 27,822
Cost of sales (18,841) (21,115)
-------- --------
Gross profit 7,256 6,707
Operating costs excluding depreciation 2 (5,266) (5,953)
-------- --------
Underlying operating profit excluding
share option costs, depreciation
and amortisation 1,990 754
Depreciation (1,173) (998)
-------- --------
Underlying operating profit/(loss) 817 (244)
Share option costs 3 (19) (16)
Amortisation of customer relationships
and trademarks 3 (83) (83)
Non recurring income 5 224 -
Non-recurring items - increase in
deferred consideration over previous
estimate 5 - (477)
Non-recurring items - other expenses 5 (738) (611)
Finance costs 4 (334) (198)
Loss for the year before taxation 3 (133) (1,629)
Income tax credit 6 95 177
-------- --------
Loss for the year attributable to
the equity holders of the Company (38) (1,452)
======== ========
Earnings per share for profit attributable
to the equity holders of the company
during the year
Basic 7 (0.3)p (12.6)p
Diluted 7 (0.3)p (12.6)p
Adjusted basic 7 5.0p (2.3)p
Adjusted diluted 7 5.0p (2.3)p
Consolidated Balance Sheet
At 31 December 2013
2013 2012
GBP000 GBP000
Assets
Non current assets
Property, plant and equipment 6,679 7,493
Intangible assets 6,626 6,754
------- --------
13,305 14,247
------- --------
Current assets
Trade and other receivables 3,311 2,799
Inventories 1,147 2,121
Cash and cash equivalents 71 86
------- --------
4,529 5,006
------- --------
Total assets 17,834 19,253
------- --------
Liabilities
Current liabilities
Trade and other payables (6,272) (7,535)
Financial liabilities (905) (1,071)
Provisions (233) (243)
------- --------
(8,849
(7,410) )
------- --------
Non current liabilities
Trade and other payables (864) (1,070)
Financial liabilities (835) (490)
Deferred taxation (414) (514)
Provisions - -
------- --------
(2,113) (2,074)
------- --------
Total liabilities (9,523) (10,923)
------- --------
Net assets 8,311 8,330
======= ========
Capital and reserves
Issued share capital 119 119
Share premium 6,386 6,386
Merger reserve 744 744
Share option reserve 326 307
Profit and loss account 736 774
------- --------
Total equity 8,311 8,330
======= ========
Consolidated Statement of Changes in Equity
For the year ended 31 December 2013
Profit
Share premium Merger Share option and loss
Share capital account reserve reserve account Total equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January
2012 119 6,386 744 291 2,226 9,766
Loss and total
comprehensive
outgoings
for the year - - - - (1,452) (1,452)
Shared based
payments - - - 16 - 16
------------- ------------- -------- ------------ --------- ------------
At 31 December
2012 119 6,386 744 307 774 8,330
Loss and total
comprehensive
outgoings
for the year - - - - (38) (38)
Shared based
payments - - - 19 - 19
At 31 December
2013 119 6,386 744 326 736 8,311
============= ============= ======== ============ ========= ============
Consolidated Cash Flow Statement
For the year ended 31 December 2013
2013 2012
GBP000 GBP000
Cash flows from operating activities
Loss after taxation: (38) (1,452)
Adjustment for:
Depreciation 1,173 998
Loss/(profit) on sale of property, plant
and equipment 2 (32)
Amortisation 131 173
Sale of DIY business included within non (114) -
recurring items
Taxation credit expense recognised in income
statement (95) (177)
Net finance costs 334 198
Share option costs recognised in income
statement 19 16
Decrease in inventories 973 878
(Increase)/decrease in trade and other receivables (496) 1,174
(Decrease)/increase in trade and other payables (1,089) 354
Decrease in provisions (10) (311)
--------- --------
Cash generated from operations 790 1,819
Income tax repaid - 170
--------- --------
Net cash from operating activities 790 1,989
--------- --------
Cash flows from investing activities
Net proceeds from sales of DIY business 114 -
Payments of deferred consideration (208) -
Purchase of intangibles (3) (89)
Purchase of property, plant and equipment (308) (642)
Proceeds from sale of equipment 13 53
--------- --------
Net cash used in investing activities (392) (678)
Cash flows from financing activities
Net cash (repaid to)/received from debtor
facilities (171) 1,663
Interest paid (355) (198)
Proceeds from borrowings 1,639 -
Repayment of borrowings (726) (750)
Repayment of hire purchase contracts (800) (857)
--------- --------
Net cash flow from financing activities (413) (142)
--------- --------
(Decrease)/increase in cash and cash equivalents (15) 1,169
Cash and cash equivalents at beginning of
period 86 (1,083)
--------- --------
Cash and cash equivalents at end of period 71 86
--------- --------
Notes to the Announcement of Final Results
For the year ended 31 December 2013
1. Basis of preparation
The Final Results comprise those of Straight plc and its subsidiaries for the year ended 31 December 2013. The Final Results announcement has been prepared on the basis of the accounting policies as set out in the statutory accounts for 2012 and in accordance with applicable International Financial Reporting Standards as adopted by the EU and applied in accordance with the Companies Act 2006.
During 2013 the Group has adopted IFRS13 "Fair Value Measurement" which has only impacted disclosures in the Financial Statements and has not resulted in a restatement of comparatives.
The statement of comprehensive income comparatives have been re-stated to show underlying operating profit excluding share option costs, depreciation and goodwill amortisation "EBITDA" as this is a key performance measure for the Group.
Going Concern
The financial statements have been prepared on a going concern basis, which assumes that the Group has sufficient resources to enable it to continue operating and to meet its liabilities as they fall due. The directors believe the going concern assumption to be appropriate for the reasons as set out below.
In assessing the Group's ability to operate within, and comply with the terms of its invoice discounting facility and other financing facilities in the foreseeable future, the directors have taken into consideration the Group's financial projections and current trading performance. These financial projections show continued progress in trading profits and cash flow further to the improvements made in 2013. For the avoidance of doubt, these forecasts do not take into account any actions the potential bidder, One51 plc, may have planned for the business should their bid be successful.
The Group has to comply with key financial covenants and operating conditions, measured each month, the most significant of which are achieving the specified levels of:
Financial covenants
-- The fixed charge cover ratio (FCCR), being 6 months rolling earnings before interest , tax, amortisation and depreciation, less unfunded capital expenditure over scheduled debt amortisation and borrowing costs
Operational covenants
-- Accounts receivable turn, being the comparison of closing monthly debtors compared with cash collections
-- Dilutions, being the value of credit notes and similar items expressed as a percentage of the value of the notified debtors ledger
The directors believe that the Group will continue to comply with the specified conditions on accounts receivable turn and dilutions if they maintain their current controls and procedures.
However, the Directors are aware of material uncertainties facing the business, in particular in relation to short term cash requirements which have arisen through a period of sales levels below forecasts and an unwind of previously extended payment terms with certain creditors. As a consequence the short term cash requirements are tight and cash resources need to be managed carefully on a daily basis.
These uncertainties are as follows:
-- The Group is dependent on the support of its creditors in accepting extended credit terms in order to manage its short term cash requirements. Any withdrawal of this supplier support will adversely impact the Group's ability to manage cash resources on a daily basis.
-- As with any invoice discounting facility, the level of cash headroom available is directly related to sales levels. Elements of the Group's business are seasonal in nature and sales levels can fluctuate from month to month. Furthermore, the level of daily sales, and timing of sales invoices during the day, can vary and as such can significantly impact the availability of funds. The availability of funds is affected by the daily variations in sales and therefore any short term reduction in sales adversely impacts the ability to raise funds against these sales.
These uncertainties may result in the Group's inability to both operate within its financing facilities and to meet liabilities as they fall due.
The Board is focused on short term cashflow and manages cash on a daily basis, identifying restrictions of cashflow ahead of time. This allows action to be taken, such as agreeing extended credit with suppliers and closely managing its supplier payments. The business is seasonal in nature and sales are lower in the 1(st) quarter of the year at a time when stock levels are increased for anticipated sales in the 2(nd) and 3(rd) quarter. As a consequence cash resources tend to be tight during this early part of the year.
Other uncertainties include compliance with the FCCR covenant. Key to compliance with the FCCR covenant is achieving the level of sales and margin at or close to those shown in the financial projections. The facility level and the associated FCCR covenant contain headroom that allow for some variations in trading performance when compared to financial projections. However, it is in the nature of such financial projections that their achievement represents an uncertainty when assessing going concern and in particular the fact that elements of the Group's business are seasonal in nature and that there can be fluctuations in sales levels from month to month.
The Board has applied sensitivities to both sales and margins in the financial projections to assess the decrease in sales and margins that might trigger a covenant breach and therefore a default on the financing agreement. It has also applied sensitivities to projected funding requirements and collateral levels so that any narrowing of headroom can be identified. If the FCCR covenant is breached, the lender has the right to demand immediate repayment, and in the case of a breach of operating conditions the lender the right to restrict the level of borrowing available.
The board has also considered the mitigating actions it could take should trading performance deteriorate to a level that threatened to lead to a breach of covenants. These would include a reduction in capital expenditure which does not have an impact on short term revenue projections, a reduction in the level of direct labour to match any reduced level of trading, and potential reductions in central overheads, mostly staff costs.
In light of the difficulties in forecasting sales and margins, and potential difficulties in applying mitigating actions in a timely fashion to ensure cash is managed with the available headroom and compliance with the FCCR covenant , these represent material uncertainties which may cast significant doubt over the ability of the Group to continue as a going concern.
However, having considered the financial projections, the financial covenants and operating conditions, the sensitivity to deterioration in trading below the financial projections and the actions available to management in mitigating those sensitivities, the Board has concluded that there is a reasonable expectation that the Group has sufficient liquidity and capital resources to meet its obligations in the normal course of business for the foreseeable future. For this reason, the Board continues to adopt the going concern basis in preparing the consolidated financial statements.
2. Segmental reporting
The operating results are attributable to the principal activities. The chief operating decision maker (CODM) is the board of executive directors. The CODM monitors the performance of the Trade Commercial and Retail segments separately from the Manufacturing segment.
Trade Trade Central
Commercial Trade Mfg Adjustment Total Trade overhead
2013 2013 2013 2013 Retail 2013 2013 Total 2013
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
External sales 23,287 - - 23,287 2,810 - 26,097
Inter-segment
sales - 13,881 (13,881) - - - -
------------- ----------- ------------- ------------- ------------- ------------- ------------
Total revenue 23,287 13,881 (13,881) 23,287 2,810 - 26,097
============= =========== ============= ============= ============= ============= ============
Gross profit 3,083 3,452 - 6,535 721 - 7,256
Operating
costs
excluding
depreciation (1,379) (2,000) - (3,379) (455) (1,432) (5,266)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Underlying
operating
profit
excluding
depreciation 1,704 1,452 - 3,156 266 (1,432) 1,990
Depreciation (716) (457) - (1,173) - - (1,173)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Underlying
operating
profit 988 995 - 1,983 266 (1,432) 817
Share option
costs - - - - - (19) (19)
Amortisation
of customer
relationships
and
trademarks - - - - - (83) (83)
Non recurring
income 61 61 163 224
Non recurring
items (458) - - (458) - (280) (738)
Finance costs (291) (43) - (334) - - (334)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Profit/(loss)
before
taxation 300 952 - 1,252 266 (1,651) (133)
============= =========== ============= ============= ============= ============= ============
Trade Trade Central
Commercial Trade Mfg Adjustment Total Trade overhead
2012 2012 2012 2012 Retail 2012 2012 Total 2012
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
External sales 24,178 - - 24,178 3,644 - 27,822
Inter-segment
sales - 12,901 (12,901) - - - -
------------- ----------- ------------- ------------- ------------- ------------- ------------
Total revenue 24,178 12,901 (12,901) 24,178 3,644 - 27,822
============= =========== ============= ============= ============= ============= ============
Gross profit 3,442 2,510 - 5,952 755 - 6,707
Operating
costs
excluding
depreciation (1,922) (2,064) - (3,986) (550) (1,417) (5,953)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Underlying
operating
profit
excluding
depreciation 1,520 446 - 1,966 205 (1,417) 754
Depreciation (586) (412) - (998) - - (998)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Underlying
operating
profit/(loss) 934 34 - 968 205 (1,417) (244)
Share option
costs - - - - - (16) (16)
Amortisation
of customer
relationships
and
trademarks - - - - - (83) (83)
Non recurring
items -
increase in
deferred
consideration - - - - - (477) (477)
Non recurring
items - other (91) (309) - (400) - (211) (611)
Finance costs (143) (55) - (198) - - (198)
------------- ----------- ------------- ------------- ------------- ------------- ------------
Profit/(loss)
before
taxation 700 (330) - 370 205 (2,204) (1,629)
============= =========== ============= ============= ============= ============= ============
All the revenue for Trade Manufacturing is from Trade Commercial. This inter-segment trading is eliminated upon consolidation.
Depreciation of GBP716,000 (2012: GBP586,000) and amortisation of software of GBP3,000 (2012: GBP44,000) has been included within the operating costs of the Trade Commercial Business.
Depreciation of GBPnil (2012: GBPnil) and amortisation of intangible assets of GBP24,000 (2012: GBP27,000) has been included within the operating costs of the Retail Business. Depreciation of GBP457,000 (2012: GBP412,000) and amortisation of intangible assets of GBP21,000 (2012: GBP19,000) has been included within the operating costs of the Trade Manufacturing Business.
The central costs which include the head office establishment costs, the Board, the listing costs and a number of other administrative costs have not been allocated between the operating segments of the business.
The table below gives a breakdown of Group revenue by geographical region, based on the location of the customer.
2013 2012
GBP000 GBP000
UK 24,788 26,293
Europe 655 982
North America 293 291
Australasia and Asia 266 256
Africa 95 -
-------- --------
Total revenue 26,097 27,822
======== ========
3. Loss before tax
Loss before tax is stated after the costs below.
2013 2012
GBP000 GBP000
Depreciation 1,173 998
Amortisation of customer relationships and
trademarks 83 83
Amortisation of computer software 48 90
Write down of finished goods 25 60
Operating lease rentals - land and buildings 352 352
Operating lease rentals - motor vehicles 69 67
Share-based payments 19 16
The write down against finished goods stocks relates to product lines which have been discontinued.
Share option costs and the amortisation of customer relationships and trademarks have been excluded from underlying operating profit as they relate to corporate development activity. The impact of this change is to increase underlying profit by GBP102,000 (2012: GBP99,000).
4. Operating costs
2013 2012
GBP000 GBP000
Distribution costs 3,062 3,563
Administrative expenses 2,204 2,390
Depreciation 1,173 998
------ ------
Operating costs 6,439 6,951
====== ======
Finance costs 2013 2012
GBP000 GBP000
Bank, loan and debtor finance interest 237 135
Hire purchase agreements 38 63
Loss on extinguishment of financial liabilities 27 -
Unwind of discounting on deferred consideration
liability 32 -
------ ------
Finance costs 334 198
====== ======
5. Non-recurring items
Non-recurring items are those items of financial performance that the directors consider should be separately disclosed to assist in understanding trading and financial performance achieved by the Group, so as to facilitate comparison with prior periods and to help assessment of trends in financial performance.
Non-recurring items are analysed below.
2013 2012
GBP000 GBP000
Non recurring income
Gain on disposal of DIY business (61) -
Compensation in connection with property
lease break (163) -
------ ------
(224) -
------ ------
Non recurring expenses
Increase in deferred consideration - 477
Costs attributable to reorganisation of financing
facilities 280 202
Costs attributable to the outsourcing of
non-core products - 67
Increase in provision for Dyro Holdings pre-acquisition
warranty costs 25 23
Costs attributable to head count reduction - 319
Costs incurred in connection with failure
of acquired tooling 433 -
738 1,088
------ ------
Net non-recurring income/expense 514 1,088
====== ======
Costs attributable to reorganisation of financing facilities- Following the breach of banking covenants in 2012 the Group commenced a review of its banking and financing arrangements. As a result of the breaches of covenants and the availability of funding headroom the Group incurred costs associated with its review of its finance facilities, securing the new financing facilities and one-off costs in relation to circumstances arising from this lack of cash facilities. New facilities were secured on 31 May 2013.
Costs attributable to the outsourcing of non-core products - During the second quarter of 2012 the Group sought to reduce the labour base of its factory. In order to successfully achieve this it was necessary to outsource the production of non-core products. This enabled the Group to arrange its operations into a cellular structure focussed around its core product lines.
Increase in provision for Dyro Holdings pre-acquisition warranty costs
Management's estimate for the final costs of pre-acquisition warranty costs has been increased by GBP25,000 as the quantity of replacement product required exceeded original expectations, of which GBP7,000 was incurred during the year leaving a provision of GBP18,000.
Increase in deferred consideration
In February 2013 the Board reached agreement with the vendors of Dyro Holdings Limited regarding the deferred consideration element of its acquisition. Under the terms of the revised agreement, a balance of GBP1.45m is being paid in monthly installments over a period of five years which commenced in March 2013. The GBP477,000 charge in the prior year represents the increase in the liability as a result of this agreement.
Costs attributable to head count reduction - Costs of GBP319,000 were incurred in 2012 which primarily related to redundancy costs.
Gain on disposal of DIY business - the DIY business was a proprietary plastic shelving business whose manufacturing had been outsourced during 2012 resulting in considerable factory labour savings. In May 2013 the tooling associated with this business along with its goodwill and customer relationships was sold to Garland Products Limited. Consideration received on the sale was GBP156,000 and GBP41,000 costs were incurred in connection with the sale. Taking into account net assets disposed of, the net gain on this transaction was GBP61,000. The DIY business is and has been included the Trade Commercial business segment.
Compensation in connection with property lease break - the Group's head office lease had a break clause during 2012 and the Group enlisted professional advice in order to optimise its position. The advice given resulted in the Group's position being compromised and as a consequence the Group received compensation of GBP163,000.
Costs incurred in connection with the failure of acquired tooling- Faults in the tooling purchased in 2010 and the consequent failure of the products supplied to a customer in 2011 from the tooling resulted in a significant product replacement programme with this customer. Total estimated costs associated with this replacement, net of settlements received from the supplier under the terms of a settlement agreement, amount to GBP433,000 which includes a provision of GBP209,000 at 31 December 2013.
6. Taxation
2013 2012
GBP000 GBP000
Corporation tax on profits - -
Under provision in prior years 5 -
Losses carried back to 2012 - -
------ ------
Current tax 5 -
Deferred tax current year 30 (285)
Change in deferred tax rate (63) (48)
Under provision of deferred tax in the prior
year (67) 156
------ ------
Income tax credit (95) (177)
====== ======
2013 2012
Analysis of total tax charge GBP000 GBP000
Loss before taxation (133) (1,629)
------ -------
Loss multiplied by average standard rate
in the year of Corporation tax in the UK
(23.25%) (2012 - 24.5%) (31) (399)
Expenses not deductible for tax purposes 65 110
Deferred tax rate change (63) (48)
Deferred tax on share options - 4
(Over)/under provision in respect of prior
periods (66) 156
------ -------
(95) (177)
====== =======
Change in Corporation Tax rate
As at 31 December 2013 the UK corporation tax rate was 23%. Rate reductions to 21% from 1 April 2014 and to 20% from 1 April 2015 were substantively enacted by 31 December 2013. The deferred tax at 31 December 2013 has been provided at 20% on the basis that the deferred tax likely to unwind before 1 April 2015 is immaterial.
7. Earnings per share
Basic earnings per share are calculated on the basis of profit or loss 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 loss 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 potentially dilutive options granted were exercised.
2013 2012
Weighted Weighted
average average
number Per share number Per share
Earnings of shares pence Earnings of shares pence
GBP000 GBP000
Basic & Diluted
earnings
attributable
to ordinary
shareholders (38) 11,499,294 (0.3) (1,452) 11,499,294 (12.6)
Adjusted earnings per share
Adjusted earnings per share are calculated on the basis of adjusted loss for the year after tax (see below), divided by the weighted average number of shares in issue in the year. The comparative is calculated by reference to the weighted average number of shares in issue in 2012.
2013 2012
Weighted Weighted
average average
number Per share number Per share
Earnings of shares pence Earnings of shares pence
GBP000 GBP000
Adjusted
earnings
attributable
to ordinary
shareholders 578 11,499,294 5.0 (265) 11,499,294 (2.3)
Basic and
diluted earnings
per share 578 11,499,294 5.0 (265) 11,499,294 (2.3)
======== ========== ========= ======== ========== =========
2013 2012
GBP000 GBP000
Loss for the year attributable to the equity holders of the Company (38) (1,452)
Non-recurring items 514 1,088
Share based payment charges 19 16
Amortisation of customer relationships and trademarks 83 83
Adjusted earnings attributable to ordinary shareholders 578 (265)
====== =======
8. Publication of non statutory accounts
These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Statement of Comprehensive Income, Consolidated Balance sheet at 31 December 2013, Consolidated Statement of Changes in Equity, Consolidated Cash Flow statement and selected notes for the year then ended have been extracted from the Group's audited financial statements for 2013 and audited financial statements for 2012. The audited financial information contained within the Final Results announcement for the year ended 31 December 2013 was approved by the Board on 17 April 2014. The report of the auditors on the 2013 Financial Statements is unqualified and includes an emphasis of matter on going concern. The 2012 Financial Statements were approved by the Board of directors on 28 June 2013 and delivered to the Registrar of Companies. The report of the auditors on those Financial Statements was unqualified but did include an emphasis of matter on going concern. It did not include a statement under Section 498 of the Companies Act 2006.
9. Post Balance Sheet Events
On 14 February 2014, the Company announced that it had received an approach from One51 plc, an Irish trading company with interests in plastic moulded products and waste containers to acquire the business. The Board agreed to enter negotiations and due diligence is ongoing. The Company expects to make a further announcement on the progress of this transaction in the near future.
10. Annual General Meeting
The Annual General Meeting of the Company will be held in Leeds on 20 May 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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