REG - Pittards PLC - Final Results
24 March 2021
Pittards plc
("Pittards" or "the Group")
Full year results for the year ended 31 December 2020
Pittards plc, the specialist producer of technically advanced leather and luxury leather goods for retailers, manufacturers and distributors today announces its results for the year ended 31 December 2020.
Key performance indicators 2020
Second half
Full year
2020
2019
Change
2020
2019
£m
£m
£m
£m
£m
Revenue
8.6
10.2
(1.6)
15.2
22.3
Gross profit
2.1
3.3
(1.2)
3.2
6.9
Gross margin
24%
32%
-8%
21%
31%
Profit/(Loss) before tax
(0.0)
0.4
0.4
(2.3)
0.6
EBITDA
0.3
0.9
(0.6)
(1.1)
2.0
Net assets
13.9
17.5
(3.6)
13.9
17.5
Inventory
15.0
17.3
(2.3)
15.0
17.3
Net debt
10.1
9.6
(0.5)
10.1
9.6
Net debt adjusted for treasury shares held
9.7
9.6
(0.1)
9.7
9.6
Gearing
73.0%
54.7%
-18%
73.0%
55.0%
Staff numbers
1,096
1,224
Basic (loss)/earnings per share (in pence)
(17.7)
2.9
Net assets per share (in pence)
107.0
126.3
Stephen Yapp, Chairman, commented:
"We have entered 2021 stronger, with a more diverse and flexible business, ready to take full advantage of opportunities in our markets. It remains too early to judge how strong the recovery will be, but on balance, we see more reason to be positive that we can make further progress to build on the momentum of the second half of last year, starting the year with stronger demand from customers"
For further information, please contact:
Pittards PLC - www.pittards.com
Stephen Yapp, Chairman +44 (0) 1935 474 321
Reg Hankey, CEO
Richard Briere, CFO
WH Ireland Limited - www.whirelandcb.com
Mike Coe, Chris Savidge - +44 (0) 117 945 3472
This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those regulations
Chairman's statement
for the year ended 31 December 2020
A dominant feature of 2020 has been the COVID-19 pandemic, testing businesses both in terms of their underlying strength at the outset and their adaptability in responding to challenges as the year progressed.
I can report that Pittards has acquitted itself robustly against both these parameters, endorsing both the soundness of the strategies that we already had in place for developing our Group as the year began, and the honing of the business that we implemented as the year progressed.
We validated our strategic objectives by developing our relationships in the interiors market with regular orders from automotive and further established ourselves as a shoe manufacturer in Ethiopia, despite COVID-19 disruptions.
We mitigated some of our first half operating cash losses through inventory reduction, by optimising operations. This is testament to our heightened cost focus, whilst delivering transformational improvements due to the continued dedication of all Pittards employees, to whom I would like to express my gratitude in these challenging times.
The resilience of the Group was evidenced by a return to positive EBITDA during the second half of 2020 and our cash flow improved significantly during that period. Our re-shaped business is more agile and set for growth and the creation of longer-term value.
There were no changes to the Board during the year. The Board is confident in the business strategy and committed to its future success, with each Board member increasing their investment in Pittards by buying shares during the year. The Board's collective holding rose to 6.4% at the end of 2020 (2019: 3.2%).
In November 2020 we undertook a share buyback purchasing 0.9m shares into treasury.
Outlook
Aligned with our strategic priorities, we are delivering a broader range of products to more markets and creating a more balanced portfolio. We continue to invest in new technology, and we have planned increased capital investment compared to the previous year.
Dividend payments are considered an important future step and will be paid when covered by free cash flows.
We have entered 2021 stronger, with a more diverse and flexible business, ready to take full advantage of opportunities in our markets. It remains too early to judge how strong the recovery will be, but on balance, we see more reason to be positive that we can make further progress to build on the momentum of the second half of last year, starting the year with stronger demand from customers.
Stephen Yapp
Chairman
23 March 2021
Extract Chief Executive Officer's report
Highlights
· Order book opened 2021 stronger than the start of the previous 2 years
· Underlying margins improved on 2019
· Second half of 2020 break even and positive EBITDA
· Inventory reduced by £2.3m in 2020
· Repeat orders from both interiors and big shoe markets
· Reduced cost base by £2m, changed operating model
· Re-engineered production and extended our manufacturing capabilities in Ethiopia.
COVID-19 response
During the first quarter of 2020, alongside many other businesses, we were challenged with the sudden impact of COVID-19. As a global pandemic unfolded, this unusual situation affected our people, our customers and supply chains.
We implemented a new business plan that enabled a responsive approach to the challenges we faced and reviewed this on a weekly basis. The key pillars of this plan were focused on:-
· Safety of people - Implemented best practice in line with government advice as it evolved
· Customer support - Continued to supply and kept close dialogue
· Cash management - strict daily control
· Cost control - realignment of all costs
Performance review
Continued weak global demand for leather and related goods was a feature in the first half, with full year revenue at £15.2m (2019: £22.3). The impact of the first half was challenging operationally, given the sudden change in demand related to COVID-19.
During this challenging time our first priority was the safety of our employees. We quickly implemented changes in working practice in line with up to date government guidance throughout the year. We are fortunate to have quite large factories which enables us to implement socially distanced working practices.
Sales demand has become more fragmented but broader in markets we reach. The changing shape of the business is aligned with the strategic priorities to achieve a more balanced customer portfolio, specifically the inroads made in Ethiopia in shoe production and sales, along with UK interiors and key shoe accounts. These remain priority development markets for the Group. Sales to these markets grew to 22% of sales, up from 18% of sales in 2019 on a like for like basis.
Cost management was a key focus for the year, in which extra disciplines were introduced and there was a targeted headcount reduction which further reduced the cost base. This has left us leaner, but in a scalable position with the appropriate expertise to meet specific customer needs. We have expanded our design and production management functions, despite overall headcount reduction. Our key objective was to establish a much more resilient business at lower levels of activity and this was achieved.
Our reported gross margins include labour and fixed production costs, however our underlying margins comprised of sales less underlying variable material cost. Our underlying margins have continued to improve during 2020. Our reported gross margin was 21% (2019: 31%) and EBITDA fell to negative £1.1m (2019: positive £2.0m) and PBT to a loss of £2.3m (2019: £0.6m profit), although we returned to a profitable model during the second half of 2020, resulting in positive EBITDA for the second half as a whole.
Inventories reduced to £15.0m (2019: £17.3m), as our change in mix of business and operational improvements facilitated a more consistent and predictable pattern for managing down inventory. Our counter measures for operational costs continued to gather pace with headcount reducing to 1,096 (2019: 1,224). Raw material prices have broadly stabilised, and we have recalibrated our procurement accordingly.
Net debt at 31 December was £10.1m (2019: £9.7m). The shape of the business necessitated increased debtor days, whilst at the same time supporting our customers who took longer to pay. Despite this, we have actively sought to improve payment to suppliers and therefore we actually paid them 1 day faster on average than 2019.
Currency moved slightly against us for 2020 although average exchange rates were broadly unchanged on 2019. The Group aims to hedge between 40% to 60% of requirements, with an average rate of $1.34 to June 2022. The average rate in 2020 for the Group was $1.31, broadly unchanged on 2019. As a guide 10% change in US$ against GBP could impact profitability by £0.3m either positively or adversly. This risk is less pronounced than previous years, illustrating the diminished impact currency had on operating profits compared to recent years.
Over the past three years we have invested £1.2m in machinery to improve our efficiency and expand our capability, particularly in Ethiopia for shoe manufacturing, although we are not yet fully utilising this capacity. We are planning further capital investment of c£0.9m over the next twelve months, as we look to improve margins and operating efficiency, whilst anticipating growth in new markets.
As a result of COVID-19, our retail venues were forced to close and we decided not to renew our lease at Clarks Village, Somerset, and to focus more on digital channels which achieved increased sales this year.
Market view
Numerous global factors continued to impact the demand for leather, principally COVID-19 lockdowns, China/US tariffs and general economic weakness. Brexit has had little impact on the Group, by and large, and we don't anticipate this changing in the near term.
The trend of global demand over the past few years has been downward for both finished hides and skins. However, given the increase in consumer appetite for outdoor pursuits, including golf and endurance, it is likely we will see recovery in demand in our market segments when social restrictions ease.
Some of our market segments have been harder hit by the pandemic, most notably the aviation and automotive industry, where global sales are down dramatically on 2019, although we continued to sell to them. Notwithstanding the challenges faced by these industries, we have been focused on innovation to deliver better technical performance and create sustainable products across a broader range of markets, including big shoe, interiors, military and equestrian.
Operations
During the year we responded to the lower levels of volume by challenging how we work. The supply chain has been supportive in realigning costs which has led to a lowering of the Group's operating costs, whilst providing a better fit to support operations. A key change to production was the recalibration of supply of performance leathers, with processing split between Ethiopia and the UK, to make full use of the technical strengths of both divisions.
We remain committed to the growth opportunities of the interiors markets and are actively in dialogue with automotive and aviation prospective customers. We have also launched a new fire retardant technology for the mass transit market. Our new Explorer Firebloc™ leather incorporates this technology and is aimed at the rail sector.
In Ethiopia, we have demonstrated our broader manufacturing capability in finished product and have increasing sales in footwear, alongside the production of shoe leather for Vivobarefoot and Soul of Africa, marking an important milestone. Further developing our finished product manufacturing in Ethiopia continues to be an important strategic goal for us.
Investing in the next generation of our team is an important part of our business. With this in mind, we have been approved for the UK Government's Kickstart scheme for 16-24 year olds. So far, we have recruited 13 kick start team members and we plan more.
Technical
Jon Loxston has taken on the role of Chief Technical Officer (CTO) to lead our solution driven approach to current and future customer needs.
Pittards HQ in Somerset is the intellectual hub of the Group. Research and development is carried out to create innovative technologies, processes and performance products. By way of example, in 2020 this led to the release of two new products:
Tri Protex® ; comprising 3 separate anti-microbial technologies bound together to form one synergistic umbrella technology. Pittards technologies MicrospikeTM and Microdefence® together with Micro-FreshTM, create a protective environment throughout the leather structure destroying microbials. Pittards Tri Protex® conforms to AATCC100, achieving 99.9% elimination of bacteria.
Pittards Explorer FireblocTM leather has been designed specifically for the management of heat and fire resistance where the highest performance upholstery leather is required on rail transport. Using advanced chemistry and innovative manufacturing techniques. Pittards has imparted high performance heat management, smoke, toxic emission control/suppression and fire resistance to upholstery leather which conforms to EN45545-2 2018, the European railway standard for fire safety.
We continue to invest in capital equipment which is targeted at improving production efficiency or reduces energy and water use. In 2020, we initiated the purchase of: a new vacuum drier, three dye drum vessels, a whole hide splitting machine and two shaving machines. Alongside this, our technical team routinely review our factory processes to improve overall efficiency in line with our sustainable approach to operations in general.
The world is being adversely affected by increased greenhouse gas emissions, deforestation and increased pollution and it recognised that the world's population must address these issues for the good of all. We understand that implementing and adhering to guidelines and regulations will contribute towards improving the global situation and we recognise the importance of this. Our customers expect compliance to international and their own standards concerning the environment, health and safety, quality and leather performance.
Pittards is ISO 14001:2015, major brand audited and REACH compliant. We are also ISO 9001:2015 compliant and Leather Working Group (LWG) Bronze Medal rated in the UK. We have long experience with customer Restricted Substance Lists (RSL) and Material Restricted Substance Lists (MRSL) and working within the ZDHC framework. We work with chemical partners that take a strategic approach to environmental impact.
Outlook for 2021
The global pandemic has had a big impact upon our business. Our resilience has enabled us to come through one of the most serious set of circumstances we are likely to face, and we have emerged a stronger business today than we were in 2019.
Looking forward to 2021, we have started the year with a better order book. Whilst some of this may have been from the need to refill the supply chains there are also signs of a general recovery in demand. In addition to our traditional markets, we are also well placed to respond to our new strategic market sectors of interiors (automotive, aviation and rail), larger shoe brands and shoe production in Ethiopia.
With a more efficient cost base we will be able to respond more positively to recovering demand in the global marketplace, and new capital projects being delivered will allow us to grow more capacity in a more efficient way.
Our commitment to our sustainable and responsible supply chains is well established and we will continue to build upon our continuous improvement culture.
The successful development of Explorer FireblocTM for the mass transit market and Tri Protex® antimicrobial technology, demonstrates our market led innovation, with more developments to come.
Our employees have come through many challenges during 2020. By working together and evolving our working practices we will continue to develop our flexible approach allowing agile responses to our customer's needs.
Although there are still some unpredictable macro-economic factors, and some inflationary cost pressures our confidence is growing as we build a more balanced business with a broader range of customers.
Cash management will remain a key focus and we believe opportunities currently still outweigh risks to build on our 2020 second half performance.
Reg Hankey
Chief Executive Officer
23 March 2021
Extract of Chief Financial Officer's report
Financial review
Reduced revenue at £15.2m (2019: £22.3m), arising from the periods of substantial disruption earlier in the year, inevitably led to Group gross profit falling to £3.2m (2019: £6.9m). This obscured the better mix of business and lower raw material cost, which bodes well for underlying margins. We expect to resume the improving trend of gross margins from 2019, underpinned by the low-cost facility in Ethiopia, improved operational efficiency and broader product range.
Cost savings were a key feature of 2020, with annual cost savings heading into 2021 compared to 2019 of £2m. 2021 will benefit from our newly aligned cost base, whilst 2020 benefitted from furlough support of £0.6m. Furlough support had minimal impact on the second half of 2020 at £0.1m, as there were no furlough claims in November or December and no material further claims for support are planned for 2021. We are not reliant on any form of cash deferment or subsidy at this time.
We are addressing inventory control, through lowering capacity and adapting our processing model with Ethiopia, broadening the portfolio into 2020 and improving quality control. Our slow-moving inventory fell to £2.8m (£3.2m:2019), and we have addressed capacity and new channels to aid a reduction of core skin inventory.
Overall inventory levels have fallen to £15.0m (2019: £17.3m), and we are confident we will build on this progress in 2021, as our newly aligned capacity plan and business model should facilitate further de-stocking in 2021.
Apart from inventory, working capital has been adversely affected by the changing shape of the business. Credit terms to new markets and customer mix has resulted in a modest increase in debtor days. We have supported the supply chain with faster payment in 2020 compared to 2019.
We were encouraged to achieve net debt at £10.1m (£9.6m: 2019), after the peak earlier in the year of £11.5m, considering that we have also funded treasury shares worth £0.4m, with our share buyback during Q4-2020. This was a robust cash performance, with a £1.6m improvement in net debt since the half of 2020 on a like for like basis, and to preserve debt within £0.1m of 2019 allowing for treasury shares.
One of the Group's key financial measures is gearing. Our gearing rose to 73% in 2020 but we remain committed to manage down gearing to sustainably below 70%.
During the year, Return on Capital Employed (ROCE) was negative, decreasing from 4.2% positive in 2019. On an ongoing basis, our Return On Investment (ROI) is recovering positively and we are targeting to deliver our near term objective of returns above our Weighted Average Cost of Capital (WACC) which fell to 3.8% in 2020 (2019: 4.9%).
End of year position
Net assets have decreased from £17.5m to £13.9m, mainly due to the loss in the first half of the year and the devaluation of Ethiopian BIRR.
The Group is actively seeking to mitigate foreign exchange risk as far as practical. Due to economic uncertainty, we eased the hedging strategy in 2020 by lowering cover to 40% and extending cover to June 2022. Sales proportionally in GBP increased during 2020 assisting in lowering currency risk to £0.3m annual impact on PBT, for every 10% move in US$.
Total net debt (including lease obligations and overdrafts) increased to £10.1m as of 31 December 2020. Our headroom on Group facilities improved however to £3.3m (£2.6m: 2019). Allowing for own share purchases into treasury of £0.4m, our like for like debt was £9.7m net debt as at 31 December 2020 (2019: £9.6m net debt) when we did not have treasury shares. The UK business achieved positive free cashflow (excluding CAPEX) for the year, helped by falling inventory and improving EBITDA, marking a significant change in operating performance.
Over the last two years we have invested £1.2m in capital programmes to enhance operating capability and efficiency. We plan increased capital spend in 2021, of circa £0.9m across the Group after a pause during 2020, but these spends will be carefully targeted with short payback, operational efficiencies and growth prospects.
Consolidated Income Statement
For the year ended 31 December 2020
2020
2019
Note
£'000
£'000
Continuing operations
Revenue
2
15,233
22,301
Cost of sales
(12,059)
(15,404)
Gross profit
3,174
6,897
Distribution costs
(1,632)
(2,264)
Currency (losses)/gains expensed
(48)
250
Administrative expenses
(3,268)
(3,706)
(Loss)/profit before operations and finance costs
(1,774)
1,177
Finance costs
(508)
(598)
(Loss)/profit before taxation
(2,282)
579
Taxation
3
(144)
(173)
(Loss)/profit after taxation
(2,426)
406
Earnings per share
Basic
4
(17.67)p
2.93p
Diluted
4
(17.67)p
2.90p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020
2019
£'000
£'000
(Loss)/profit for the year after taxation
(2,426)
406
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Revaluation of land and buildings - net of deferred tax
508
139
Retranslation of land and buildings - unrealised exchange (loss)
(575)
(406)
(67)
(267)
Items that may subsequently be reclassified to profit or loss
Unrealised exchange (loss) on translation of overseas subsidiaries
(860)
(931)
Fair value gain on foreign currency cash flow hedges
6
339
(854)
(592)
Other comprehensive (loss)
(921)
(859)
Total comprehensive (loss) for the year
(3,347)
(453)
Balance sheets
Group
As at 31 December 2020
2020
2019
Note
£'000
£'000
Assets
Non-current assets
Property, plant, and equipment
9,599
10,240
Intangible assets
75
114
Deferred income tax asset
100
100
Total non-current assets
9,774
10,454
Current assets
Inventories
15,021
17,341
Trade and other receivables
2,848
3,462
Cash and cash equivalents
85
180
Total current assets
17,954
20,983
Total assets
27,728
31,437
Liabilities
Current liabilities
Trade and other payables
2,863
3,430
Interest bearing loans, borrowings, and overdrafts
5
6,909
9,381
Total current liabilities
9,772
12,811
Non-current liabilities
Deferred income tax liability
804
730
Interest bearing loans, borrowings, and overdrafts
6
3,294
376
Total non-current liabilities
4,098
1,106
Total liabilities
13,870
13,917
Net assets
13,858
17,520
Equity
Share capital
6,944
6,944
Share premium
2,984
2,984
Capital reserve
6,475
6,475
Own shares reserve
7
(850)
(495)
Share based payment reserve
47
295
Cash flow hedge reserve
293
287
Translation reserve
(4,922)
(4,062)
Revaluation reserve
1,099
1,166
Retained earnings
1,788
3,926
Total equity
13,858
17,520
Richard Briere - Chief Financial Officer
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
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
Note
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
As at 1 January 2019
6,944
2,984
6,475
(495)
203
(52)
(3,131)
1,433
3,520
17,881
Comprehensive income/(loss) for the year:
Profit for the year after taxation
-
-
-
-
-
-
-
-
406
406
Other comprehensive income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
139
-
139
Unrealised exchange gain/(loss) on translation of foreign subsidiaries
-
-
-
-
-
-
(931)
(406)
-
(1,337)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
339
-
-
-
339
Total other comprehensive income/(loss)
-
-
-
-
-
339
(931)
(267)
-
(859)
Total comprehensive income/(loss) for the year
-
-
-
-
-
339
(931)
(267)
406
(453)
Share-based payment expense
-
-
-
-
92
-
-
-
-
92
As at 1 January 2020
6,944
2,984
6,475
(495)
295
287
(4,062)
1,166
3,926
17,520
Comprehensive income/(loss) for the year:
Loss for the year after taxation
-
-
-
-
-
-
-
-
(2,426)
(2,426)
Other comprehensive income/(loss):
Gain on the revaluation of buildings
-
-
-
-
-
-
-
508
-
508
Unrealised exchange gain/(loss) on translation of foreign subsidiaries
-
-
-
-
-
-
(860)
(575)
-
(1,435)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
6
-
-
-
6
Total other comprehensive income/(loss)
-
-
-
-
-
6
(860)
(67)
-
(921)
Total comprehensive income/(loss) for the year
-
-
-
-
-
6
(860)
(67)
(2,426)
(3,347)
Share-based payment expense
-
-
-
-
40
-
-
-
-
40
Purchase of own ordinary shares
-
-
-
(355)
-
-
-
-
-
(355)
LTIP lapsed transferred 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
Statement of cashflows
For the year ended 31 December 2020
Group
2020
2019
Note
£'000
£'000
Cash flows from operating activities
Cash generated from operations
8
549
(492)
Tax paid
16
(466)
Interest paid
(489)
(566)
Net cash generated/(used in) from operating activities
76
(1,524)
Cash flows from investing activities
Purchases of property, plant, and equipment
(252)
(635)
Purchases of intangible assets
(12)
(30)
Net cash (used) in investing activities
(264)
(665)
Cash flows from financing activities
Proceeds from borrowings
3,334
804
Repayment of bank loans
(1,951)
(1,061)
New finance lease obligations
-
200
Repayment of obligations under finance leases
(71)
(171)
Purchase of own ordinary shares
(355)
-
Net cash generated/(used) in financing activities
957
(228)
Increase/(decrease) in cash and cash equivalents
769
(2,417)
Cash and cash equivalents at beginning of year
(6,131)
(3,695)
Exchange gains/(losses) on cash and cash equivalents
285
(19)
Cash and cash equivalents at end of year
(5,077)
(6,131)
1. Basis of preparation
The consolidated financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") including International Accounting Standards ("IAS") and IFRS Interpretations Committee ("IFRS IC") interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under accounting standards as adopted for use in the EU.
The information in this preliminary statement has been extracted from the audited financial statements for the years ended 31 December 2020 and 2019 and as such, does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. A full annual report for the year ended 31 December 2019 on which the auditor has issued an unqualified audit report, has been delivered to the Registrar of Companies. The Group's annual report for 2020, on which the auditors have issued an unqualified audit report, will be delivered to the Registrar of Companies in due course. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts.
2. Geographical analysis of revenue (based on the customer's country of domicile)
2020
UK
Ethiopia
Total
Division
Division
Total
£'000
£'000
£'000
UK
1,995
141
2,136
Europe
1,172
458
1,630
North America
97
34
131
Far East and Rest of World
10,187
1,149
11,336
13,451
1,782
15,233
2019
UK
Ethiopia
Total
Division
Division
Total
£'000
£'000
£'000
UK
1,842
295
2,137
Europe
1,879
-
1,879
North America
165
989
1,154
Far East and Rest of World
15,964
1,167
17,131
19,850
2,451
22,301
3. Taxation
2020
2019
£'000
£'000
(b) Factors affecting the tax charge for the year
(Loss)/profit on ordinary activities before tax
(2,282)
579
Tax calculated at domestic tax rates applicable to profits in the respective countries
(579)
137
Taxable losses not recognised
575
-
Foreign tax related to prior years1
64
159
Expenses not deductible for tax purposes2
102
283
Allowable tax deductions3
(81)
(183)
Profits/(losses) generated
(107)
Deferred tax impact on property valuation
(10)
-
Foreign tax paid
88
45
Double tax relief
(15)
(19)
Utilisation of losses
(142)
Total tax charge for the year
144
173
1 Foreign tax in prior years relates to a historic tax charge imposed on ETSC.
2 Expenses not deductible for tax purposes largely relate to depreciation, for which capital allowances are received.
3 Allowable tax deductions relate to capital allowances received.
(c) Factors that may affect future tax charges
The Finance Act 2016 which was enacted on 15 September 2016 included legislation to reduce the main rate of corporation tax to 17% from 1 April 2020. This change has since been cancelled and the main rate of corporation tax remains at 19%. All UK deferred tax assets have been measured using the rate in place at the time they expect to be realised or settled.
4. 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 owned by the Pittards employee share ownership trust, less also the shares not carrying voting or dividend rights, held in treasury under own share reserve.
Earnings per share
2020
2019
Weighted average number of ordinary shares in issue
Basic
000s
13,733
13,870
Weighted average number of ordinary shares in issue
Diluted
000s
13,789
14,001
Basic (loss)/earnings per ordinary 50p share
pence
(17.67)p
2.93p
Diluted (loss)/earnings per ordinary 50p share
pence
(17.67)p
2.90p
Reconciliation of shares used as denominator for earnings per share
Shares in issue all year
13,870
13,870
Less weighted average own shares held in treasury for 2 of the 12 months of 2020
(137)
-
Average number of shares used to calculate earnings per share
13,733
13,870
5. Interest-bearing loans, borrowings, and overdrafts - current
Group
2020
2019
£'000
£'000
Secured:
Overdrafts
5,162
6,313
Loans
1,698
2,897
Obligations under finance leases
49
171
6,909
9,381
The Company's overdraft and loan facilities are provided by Lloyds Bank. During the year, the mortgage facility of £1.1m was replaced with a new facility of £1.75m, with annual repayments of £0.2m and full repayment in May 2025. In addition, a 6-year Coronavirus business interruption loan for £1m was put in place with repayment not due until 2026 with the first year interest free
6. Interest-bearing loans, borrowings, and overdrafts - non-current
Group
2020
2019
£'000
£'000
Secured:
Loans
3,288
326
Obligations under finance leases
6
50
3,294
376
Repayable as follows:-
1-5 Years
3,194
376
After more than 5 years
100
-
3,294
376
The fair value of the Group's loan and overdraft facilities is materially the same as book value, and the secured facilities are supported by fixed and floating charges over the assets of the Group, principally property, plant and equipment, inventory, and receivables.
7. Reserves
The share premium account represents the difference between the issue price and the nominal value of shares issued. The capital reserve relates to goodwill arising on previous acquisitions written off directly to reserves.
The Pittards' Employee Share Ownership trust holds Pittards' plc ordinary shares to meet potential obligations under the restricted share plan scheme. Shares are held in trust until such time as they may be transferred to employees in accordance with the terms of the scheme. There are no further awards in the scheme which could vest in the participants. At 31 December 2020, the trust held 19,026, 50p shares (2019 19,026) with a market value at that date of £8,942 (2019: £13,604).
Own shares reserve comprises
Group
2020
2019
£'000
£'000
ESOP
495
495
Ordinary own shares held in treasury
355
-
850
495
During November 2020, £355,000 of own ordinary shares (AIM:PTD) at 38p were acquired into treasury and are held under own share reserve.
The share-based payment reserve represents the fair value of the entitlement to shares awarded under the 2017 SAYE scheme and the 2016 Long Term Incentive Plan.
The cash flow hedge reserve represents the fair value of forward currency contracts held under hedge accounting at the end of the year.
The translation reserve represents the cumulative net unrealised exchange loss arising from the translation of overseas subsidiaries.
The revaluation reserve represents the revaluation of the buildings at Yeovil, ETSC, PPM and GS undertaken annually.
The retained earnings reserve represents all other net gains and losses, and transactions with owners including dividends, not recognised elsewhere.
8. Cash generated from / (used in) operations
Group
2020
2019
£'000
£'000
(Loss)/ profit before taxation
(2,282)
579
Adjustments for:
Depreciation of property, plant, and equipment
616
780
Amortisation of intangibles
51
63
Bank and other interest charges
489
596
Share based payment expense
40
92
Other non-cash items in Income Statement
1,302
(275)
Operating cash flows before movement in working capital
216
1,835
Movements in working capital (excluding exchange differences on consolidation):
-
Decrease / (Increase) in inventories
513
(1,980)
Decrease / (Increase) in receivables
501
(383)
(Decrease) / Increase in payables
(681)
36
Cash generated /(used in) from operations
549
(492)
Additional information
· Copies of the full 2020 Annual Report will be available on the company's website within 7 working days at www.pittards.com.
· Further copies may be obtained by contacting the Company Secretary at Pittards plc, Sherborne Road, Yeovil, Somerset, BA21 5BA.
The annual general meeting is to be held at the registered office on 14 May 2021 at 12pm.
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