REG - Pittards PLC - Interim Results
Pittards plc
("Pittards", the "Group" or the "Company" )
Interim results for the six months ended 30 June 2021
("First Half" or "H1")
Positive trading momentum in First Half with improving order book
Continued growth in revenue and profitability
Interim Dividend declared
Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for retailers, manufacturers and distributors, today announces its results for the six month trading period ended 30 June 2021.
Commenting on the results, Chairman, Stephen Yapp, said:
"I am pleased to report that we are seeing gathering momentum in the Group's recovery. Profitability and cash flow for the First Half are in line with expectations and ahead of the second half of 2020. Our business model continues to evolve and during the period we invested £0.8m in new product equipment. The Group's entry into several new markets is showing positive returns.
As a measure of confidence in the improving performance and outlook for the business, the Directors are pleased to declare an interim dividend of 0.5p per share. We are looking forward to the next phase of profitable growth and reporting continued progress at the full year."
Highlights: Financial
· Group revenues up 46% to £9.7 million (H1 2020: £6.6 million)
· Gross margin of 28% (H1 2020: 17%)
· EBITDA of £0.8 million positive (H1 2020: (negative £1.3m)) an improvement of £2.1m
· Profit/(Loss) before taxation of £0.3 million (H1 2020: (£2.3 million Loss))
· Net debt at Period-end reduced to £10.0 million (H1 2020: £11.3 million)
· Earnings/Loss per share (basic) of 1.55 pence (H1 2020: (17.06 pence Loss))
· Interim Dividend declared of 0.5 pence per share (H1 2020: Nil)
Highlights: Operational
· Major capital investment of £0.8 million in new production equipment (now fully commissioned) to meet increasing demand
· Sales Order Book at highest level for two years.
· Increasingly diversified portfolio of products and markets; entry into several new markets showing positive returns
· Successful implementation of The DWP's "Kickstart" Scheme
· Ethiopian business showing increased activity in the finished products side with encouraging order book
· Launch of new Tri Protex antimicrobial leather
Commenting on the outlook for the Full Year, Reg Hankey, Chief Executive said:
"There have been clear signs of a continued recovery in sales since the half year, evidenced by a progressively improving order book. We continue to see more opportunity than risk in the "new normal" that is emerging from the pandemic. As we head towards the end of the year we can build on our existing, agile, cash generative business model that is able to sustain a programme of modest investment as well as consistent returns for shareholders."
Chief Executive Officer's report
Overview
We were able to grow both sales and order book during the First Half period and improve profitability. Over 84% of our sales are exported down from 89% in 2019, as growth accelerated in the UK market. The national lock down in January 2021 and Brexit, resulted in slower logistics (international shipping market), travel and consequently operating the business remained more challenging than normal during the First Half.
We invested heavily in new production equipment in the First Half, in response to a growing, broader production range and the need to balance labour costs and improve delivery performance. This investment (£0.8m) impacted operational progress in the First Half as machinery was procured and installed but leaves us well placed to meet increasing customer demand efficiently and effectively.
Our operations in Ethiopia have not escaped the impact of COVID-19 but have adopted best practice for infection control and safety. We progressed our ability to mass produce finished footwear and we have maintained operations as normal, throughout the First Half.
The group continues to adopt a strict cash management policy, which has delivered improvements in fixed costs, particularly administrative costs and to a lesser extent inventory, notwithstanding challenges within the shipping market.
Key performance indicators
2021
First half 2021 v Second half 2020
H1-2020
2021
2020
Change
Except where stated
£m
£m
%
£m
Revenue
9.7
8.6
12%
6.6
Gross profit
2.7
2.1
30%
1.1
Gross margin
28%
24%
4%
17%
Profit / (Loss) before tax
0.3
(0.0)
(2.3)
EBITDA
0.8
0.2
276%
(1.3)
Net assets
13.6
13.8
(1.8%)
14.6
Inventory
15.0
15.0
(0.4%)
16.9
Net debt
10.0
10.1
0.6%
11.3
Net debt adjusted for treasury shares held
9.5
9.7
1.6%
11.3
Gearing %
74.1%
73.2%
1.2%
77.4%
Staff numbers
1,125
1,096
3%
1,052
Basic earnings per share (in pence)
1.55
-
(17.06)
Net Asset value per share (in pence)
104.6
106.0
(1%)
112.7
Strategic and operational review
Sales in the First Half were £9.7m, up 12% on the second half of 2020 (H2 2020: £8.6m) and up 46% on the corresponding six month period last year (H1 2020: £6.6m). Sales are being underpinned by an improving order book, which is also providing greater forward visibility. Our core customer base is recovering at a steady pace. New growth markets continue to develop, principally, the shoe sector, although automotive and mass transit interiors have yet to recover.
The First Half closed with a positive sales order book, ahead of the start of the year and the highest for two years. Golf, defence, cycling, speciality endurance gloves and sports in general continued to recover.
Underlying margins have maintained their positive momentum, despite a weaker dollar and rising material prices. We anticipate margins will now stabilise following significant investment in people and production equipment. With a more diversified portfolio of products and markets, the balance of the business continues to improve as we successfully manage the relationship between cost control and expanding our capabilities, whilst maintaining the quality of our offering.
Innovation remains central to what we do. We launched at the end of December a new Tri Protex antimicrobial leather and are developing a further product line for advanced fire-retardant leather into Rail applications.
Dividend
The board is also pleased to announce the Company's return to the Dividend List. As a measure of its confidence in the improving performance and outlook for the business, the Directors are declaring an interim dividend of 0.5p per share. The interim dividend will be paid by 25 November 2021 to shareholders on the register at close of business on 29 October 2021. The shares will go ex-dividend on 28 October 2021.
Outlook
There have been clear signs of a continued recovery in sales since the half year, evidenced with a progressively improving order book. We are cautiously optimistic that the positive sales trend will continue for the remainder of the year.
Our management of cash in the First Half of the year gives us confidence to pay the interim dividend and that we can continue to progress well in the second half and improve our profitability.
Our Ethiopian business is showing increased activity in the finished product side and has recovered some ground from earlier in the year, with an encouraging order book to fulfil in the second half.
We see more opportunity than risk in the "new normal" that is emerging from the pandemic. As we head towards the end of the year, we can build on our existing agile, cash generative business model, that is able to sustain a programme of modest investment, as well as consistent returns to attract and retain a long term investor base.
Chief Financial Officer's report
Overview
Key financial metrics were in line with our expectations. Recovery of demand was assisted by the Department for Work and Pensions (DWP) 'Kickstart Scheme'. This enabled us to address a rising order book, as we were able to increase our headcount above 2020 levels. Our re-shaped cost base enabled us to access sustained fixed cost reduction. In addition, our capital investment programme of £0.8m in plant equipment, principally a Vacuum Dryer and Hide Splitter for our key production volume resulted in our largest six monthly spend (excluding buildings) in over eight years. This investment has sowed the seeds for the second half and beyond to improve efficiency.
Profitability
Profit before tax in the First Half amounted to £0.3m, an improvement of £0.3m over the "breakeven" result for the second half of 2020. This was mostly due to increases in volume and margins combined with tight cost control. Gross margins rose to 28% (second half 2020: 24%) as capacity increased. Pure variable material margin ( defined as sales less variable material costs) have eased at the start of the second half, with raw material prices now weighing on our pure variable margins. However, production investment and a better mix of business is expected to offset these effects to maintain our overall gross margins, along with higher production levels.
Financial support and banking facilities
We have made final furlough claims of £3k to the end of February 2021, and a repayment of £34k in March, resulting in a net repayment of £31k of furlough during the first quarter of 2021, meaning we were financial independent of furlough since October 2020. No further furlough claims were made or are planned for 2021. We have established a team of 14 Kickstart staff, receiving funding from Kickstart (DWP) of £0.1m during the First Half. Our Coronavirus Business Interruption Loan Scheme (CBILS) of £1m, is repayable over five years and has reverted to commercial terms, with repayments made monthly through to 2026. We have not sought a new source of CBILS funding or any extension but have extended our standard bank facilities by £0.5m, to support First Half capital investment through a five year asset finance facility which was put in place during the First Half.
Cost control and productivity
Headcount has stabilised at 1,125 as at 30 June 2021, a rise from our 2020 year end, marking a return to recruitment to enable our capacity to respond to an increased level of demand as our markets recover. It is pleasing to report the successful implementation of the DWP's Kickstart Scheme which has lowered the average age of staff by seven years and rebalanced the shape of our production and sales-centric staff. Administrative staff now represent just four per cent of the total headcount, compared to eight per cent in 2019. We experienced increased haulage costs in the first half, due to delays and shortages in international shipping logistics.
Assets and currency
At the end of the First Half, net assets stood at £13.6m (December 2020: £13.9m), the small reduction due entirely to the devaluation of the Ethiopian BIRR on foreign subsidiary net assets. Net debt improved modestly by £0.1m to £10.0m (£10.1m: 31 December 2020), despite significant investment in production equipment amounting to £0.8m. We continue to hedge the US dollar to balance currency risks and have some cover through to March 2023. Currency gains in the period were £0.2m due to the dollar being much weaker on average than our hedged position. The dollar to GBP exchange rate has since recovered to trade in line with our average hedged cover at $1.364. Facilities headroom at the half year, of £2.8m (31 December 2020: £3.3m).
Energy costs
In light of recent volatility in the energy markets, we confirm that we have adequate hedging in place for energy contracts through to September 2022, and these contracts are included in our forecasts. The financial stability of our suppliers are satisfactory and therefore the price instability in the wholesale gas market will not materially impact the group during 2021.
Working capital
Inventory levels reduced slightly to £14.97m (31 December 2020: £15.02m) at the half year. Logistics, including getting product in and out the business, remain challenging as we had much higher levels of inventory in transit, masking the steady progress achieved in reducing older stock. Our current inventory levels are the lowest for nine years. Due to longer shipping times and challenge getting shipping slots we estimate that inventory was increased by £0.6m.
Our supplier average payment days rose to 64 days at the end of June (2020: 59 days). Our customer average days to pay rose also to 66 days (H1 2020: 61 days). The increase in debtor days was mostly almost entirely to a change in mix of customers.
Gearing
Our gearing was slightly higher at 74.1% (2020: 73.2%), due entirely to the devaluation of the Ethiopian BIRR affecting the net asset value of our Ethiopian businesses, otherwise gearing would have improved to 72.6%. The devaluation lowers the future operating costs relating to the supply of skins into the UK making up circa half our production volume.
Share buybacks
In July the company announced a share buyback program to enable market purchases to continue to build a sufficient level to meet existing LTIP obligations. To date the company has purchased 40,000 shares taking our treasury shareholding to 974,210, shares resulting in our current market value of our treasury shares being £613,752 based on the closing price on the 22 Sept 2021.
Second half of 2021
Our order book is sufficient to cover the remaining budgeted sales through to the end of the year. The stability of margins, a leaner cost base, our hedging strategy, new equipment and a re-energised team together give us greater confidence in the predictability of future earnings.
Consolidated Income Statement
Six months ended
Six months ended
Year ended
for the six months ended 30 June 2021
30/06/2021
30/06/2020
31/12/2020
Unaudited
Unaudited
Audited
Note
£'000
£'000
£'000
Revenue
9,659
6,627
15,233
Cost of sales
(6,965)
(5,495)
(12,059)
Gross profit
2,694
1,132
3,174
Distribution costs
(804)
(882)
(1,632)
Currency gains / (losses)
195
(356)
(48)
Administrative expenses
(1,582)
(1,884)
(3,268)
Profit / (Loss) before operations and finance costs
503
(1,990)
(1,774)
Finance costs
(239)
(262)
(508)
Profit / (Loss) before taxation
264
(2,252)
(2,282)
Taxation
3
(63)
(114)
(144)
Profit / (Loss) after taxation
201
(2,366)
(2,426)
Earnings per share
2
Basic
1.55p
(17.06)p
(17.67)p
Diluted
1.55p
(17.06)p
(17.67)p
Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2021
Six months ended
Six months ended
Year ended
30/06/2021
30/06/2020
31/12/2020
Unaudited
Unaudited
Audited
£'000
£'000
£'000
Profit / (Loss) for the period after taxation
201
(2,366)
(2,426)
Other comprehensive (expense)/income
Revaluation of land and buildings
185
-
508
Revaluation of land and buildings - unrealised exchange (loss)
(372)
(58)
(575)
(187)
(58)
(67)
Unrealised exchange (loss) on translation of overseas subsidiaries
(254)
(96)
(860)
Fair value (losses) on foreign currency cash flow hedges
(84)
(481)
6
(338)
(577)
(854)
Other comprehensive (loss)
(525)
(635)
(921)
Total comprehensive (loss) for the period
(324)
(3,001)
(3,347)
Consolidated balance sheet
Six months ended
Six months ended
Year ended
as at 30 June 2021
30/06/2021
30/06/2020
31/12/2020
Unaudited
Unaudited
Audited
Note
£'000
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
9,796
9,929
9,599
Intangible assets
72
81
75
Deferred income tax asset
4
100
100
100
Total non-current assets
9,968
10,110
9,774
Current assets
Inventories
14,966
16,877
15,021
Trade and other receivables
3,111
2,843
2,848
Cash and cash equivalents
161
99
85
Total current assets
18,238
19,819
17,954
Total assets
28,206
29,929
27,728
Liabilities
Current liabilities
Trade and other payables
3,690
3,302
2,863
Interest bearing loans, borrowings and overdrafts
7,489
9,345
6,909
Total current liabilities
11,179
12,647
9,772
Non-current liabilities
Deferred income tax liability
3
758
709
804
Interest bearing loans, borrowings and overdrafts
2,714
2,015
3,294
Total non-current liabilities
3,472
2,724
4,098
Total liabilities
14,651
15,371
13,870
Net assets
13,555
14,558
13,858
Equity
Share capital
6,944
6,944
6,944
Share premium
2,984
2,984
2,984
Capital reserve
6,475
6,475
6,475
Shares held in treasury / ESOP
(355)
(495)
(850)
Share based payment reserve
59
334
47
Cash flow hedge reserve
209
(194)
293
Translation reserve
(5,176)
(4,158)
(4,922)
Revaluation reserve
912
1,108
1,099
Retained earnings
1,503
1,560
1,788
Total equity
13,555
14,558
13,858
Consolidated Statement of Changes in Equity
for the six months ended 30 June 2021
Note
Share capital
Share premium
Capital Reserve
Own share reserve
Share based payment reserve
Cash flow hedge reserve
Translation reserve
Revaluation reserve
Retained Earnings
Total Equity
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
As at 01/01/2020
6,944
2,984
6,475
(495)
295
287
(4,062)
1,166
3,926
17,520
Comprehensive income/(loss) for the period
Profit for the period after taxation
-
-
-
-
-
-
-
-
(2,366)
(2,366)
Other comprehensive income/(loss):
Unrealised exchange gain/(loss) on translation of foreign subsidiaries
-
-
-
-
-
-
(96)
(58)
-
(154)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
(481)
-
-
-
(481)
Total other comprehensive income/(loss)
-
-
-
-
-
(481)
(96)
(58)
-
(635)
Total comprehensive income/(loss) for the period
-
-
-
-
-
(481)
(96)
(58)
(2,366)
(3,001)
Share-based payment expense
-
-
-
-
39
-
-
-
-
39
As at 30 June 2020
6,944
2,984
6,475
(495)
334
(194)
(4,158)
1,108
1,560
14,558
Comprehensive income/(loss) for the period:
Loss for the period after taxation
-
-
-
-
-
-
-
-
(60)
(60)
Other comprehensive income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
508
-
508
Unrealised exchange gain/(loss) on translation of foreign subsidiaries
-
-
-
-
-
-
(764)
(517)
-
(1,281)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
487
-
-
-
487
Total other comprehensive income/(loss)
-
-
-
-
-
487
(764)
(9)
-
(286)
Total comprehensive (loss) for the year
-
-
-
-
-
487
(764)
(9)
(60)
(346)
Share-based payment expense
-
-
-
-
1
-
-
-
-
1
Purchase of own shares
(355)
(355)
LTIP lapsed to reserves
(288)
288
-
As at 31 December 2020
6,944
2,984
6,475
(850)
47
293
(4,922)
1,099
1,788
13,858
Comprehensive income/(loss) for the period:
Profit for the period after taxation
-
-
-
-
-
-
-
-
201
201
Other comprehensive income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
185
-
185
Unrealised exchange gain/(loss) on translation of foreign subsidiaries
-
-
-
-
-
-
(254)
(372)
-
(626)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
(84)
-
-
-
(84)
Total other comprehensive (loss)
-
-
-
-
-
(84)
(254)
(187)
-
(525)
Total comprehensive (loss) for the period
-
-
-
-
-
(84)
(254)
(187)
201
(324)
Share-based payment expense
-
-
-
-
12
-
-
-
-
12
ESOP Scheme closure
-
-
-
495
-
-
-
-
(486)
9
As at 30 June 2021
6,944
2,984
6,475
(355)
59
209
(5,176)
912
1,503
13,555
Statement of cashflows
Six months ended
Six months ended
Year ended
for the period ended 30 June 2021
30/06/2021
30/06/2020
31/12/2020
Unaudited
Unaudited
Audited
Note
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from / (used in) operations
5
978
(558)
549
Tax (paid)
(83)
(154)
16
Interest (paid)
(256)
(238)
(489)
Net cash generated from / (used in) operating activities
639
(950)
76
Cash flows from investing activities
Purchases of property, plant and equipment
(828)
(141)
(252)
Purchases of intangible assets
(12)
-
(12)
Proceeds from sale of plant
44
Net cash (used) in investing activities
(796)
(141)
(264)
Cash flows from financing activities
Proceeds from borrowings
-
1,750
3,334
Repayment of bank loans
(481)
(1,170)
(1,951)
Repayment of obligations under finance leases
(21)
(65)
(71)
Purchase of own ordinary shares
-
-
(355)
Net cash (used) / generated in financing activities
(502)
515
957
(Decrease) / Increase in cash and cash equivalents
(659)
(576)
769
Cash and cash equivalents at beginning of year
(5,077)
(6,131)
(6,131)
Exchange gains/(losses) on cash and cash equivalents
41
106
285
Cash and cash equivalents at end of period
(5,695)
(6,601)
(5,077)
Note 1 - Basis of preparation
The financial information set out in the interim statements for the six months ended 30 June 2021 and the comparative figures are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. As permitted, this interim report has been prepared in accordance with UK AIM listing rules and not in accordance with IAS 34 Interim Financial Reporting, therefore it is not fully in compliance with International Financial Reporting Standards (IFRS).
The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 December 2020. Those accounts, upon which the auditor issued an unqualified opinion, have been delivered to the Registrar of Companies. The auditor's report did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
These financial statements have been prepared using the same accounting policies and methods of computation as the most recent statutory accounts for the
financial year ended 31 December 2020.
These financial statements are presented in sterling, being the functional currency of the primary economic environment in which the Group operates. Pittards plc is a public limited company incorporated and domiciled under the Companies Act 2006 in England. It is quoted on the Alternative Investment Market ("AIM"). The directors approved and authorised the
The directors approved and authorised the interim statement for issue on 29 September 2021.
Note 2 - Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding the shares held in treasury.
a) Basic earnings per share
Six months ended
Six months ended
Year ended
30/06/21
30/06/20
31/12/20
Earnings per share
Unaudited
Unaudited
Audited
Basic
1.55p
(17.06p)
(17.67p)
Weighted average number of ordinary shares in issue '000
12,954
13,870
13,733
b) Diluted earnings per share
Six months ended
Six months ended
Year ended
30/06/21
30/06/20
31/12/20
Earnings per share
Unaudited
Unaudited
Audited
Diluted
1.55p
(17.06p)
(17.67p)
Weighted average number of ordinary shares in issue '000
12,954
14,001
13,789
Note 3 - Taxation
Six months ended
Six months ended
Year ended
30/06/21
30/06/20
31/12/20
Unaudited
Unaudited
Audited
Analysis of the charge in the period
The charge based on the profit for the period comprises:
Foreign tax on profit for the period
63
114
79
Foreign tax related to prior years
-
-
65
Total current tax
63
114
144
Note 4 Deferred taxation
Six months ended
Six months ended
Year ended
30/06/21
30/06/20
31/12/20
Unaudited
Unaudited
Audited
Deferred tax asset
100
100
100
Deferred tax (liabilities)
(758)
(709)
(804)
Deferred tax (liabilities) - net
(658)
(609)
(704)
Note 5 - Cash Generated / (Used) in operations
Six months ended
Six months ended
Year ended
30/06/2021
30/06/2020
31/12/2020
Unaudited
Unaudited
Audited
£'000
£'000
£'000
Profit / (Loss) before taxation
264
(2,252)
(2,282)
Adjustments for:
Depreciation of property, plant and equipment
234
337
616
Amortisation of intangibles
15
38
51
Bank and other interest charges
256
262
489
Share based payment expense
12
39
40
Other non-cash items in Income Statement
(135)
319
1,302
Operating cash flows before movement in working capital
646
(1,257)
216
Movements in working capital (excluding exchange differences on consolidation):
(Increase) / Decrease in inventories
(91)
240
513
(Increase) / Reduction in receivables
(378)
784
501
Increase / (Reduction) in payables
801
(325)
(681)
Cash generated / (used) in operations
978
(558)
549
Note 6 - Availability of interim report
The interim report will be available at the Group's website, at www.pittards.com, in accordance with AIM rule 20.
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
For further information, please contact:
Pittards plc
www.pittards.com
Stephen Yapp, Chairman
Reg Hankey, CEO
Richard Briere, CFO
+44 (0) 1935 474 321
WH Ireland Limited
www.whirelandcb.com
Mike Coe, Sarah Mather
+44 (0) 117 945 3470
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