REG - Pittards PLC - Half-year Report
19 September 2019
PITTARDS PLC
("Pittards" or "the Group")
Interim results for the six months ended 30 June 2019
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 months ended 30 June 2019.
Half year ended 30 June 2019
· Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)
· EBITDA £0.8m (H1 2018: £0.8m)
· Profit before tax increased to £0.2m (H1 2018: £0.1m)
· Net assets £18.5m (31 December 2018: £18.5m)
· Gross margin improved to 29.7% (31 December 2018: 25.1%)
· Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing
Stephen Yapp, Chairman commented: "The themes outlined in our 2018 annual report have continued into the first half of 2019; we have delivered a solid financial performance against ongoing fluctuations in global trading and made important progress to diversify our business.
"The improvement in profitability reflects the hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers, whilst taking further steps to create a more balanced portfolio.
"We enter the second half of the year with a good order book, lower cost base and improved margins. Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profit and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature."
For further information, please contact:
Pittards plc
Stephen Yapp, Chairman
Reg Hankey, CEO
Richard Briere
+44 (0) 1935 474 321
WH Ireland Limited
Mike Coe, Chris Savidge
+44 (0) 117 945 3470
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 SIX MONTHS ENDED 30 JUNE 2019
The first half of 2019 experienced a continuation of the themes outlined at the end of 2018; we delivered a solid financial performance against ongoing fluctuations in global trading and made further progress aligned with our strategic goals.
The improvement in profitability reflects the ongoing hard work to enhance operational efficiencies, investments to broaden our manufacturing capabilities and our focus on delivering a quality service to core customers whilst taking further steps to create a more balanced portfolio.
Half year ended 30 June 2019
§ Revenue decreased by 16% to £12.1m (H1 2018: £14.5m)
§ EBITDA £0.8m (H1 2018: £0.8m)
§ Profit before tax increased to £0.2m (H1 2018: £0.1m)
§ Net assets £18.5m (31 December 2018: £18.5m)
§ Gross margin improved to 29.7% (31 December 2018: 25.1%)
§ Strategic initiatives progressing well particularly in the interiors market and Ethiopian footwear manufacturing
Financial review
Revenue for the first half decreased 16% to £12.1m within both our UK and Ethiopian divisions as a result of a decrease in orders from our core customers and destocking within their supply chain.
Profit before tax for the first half was double the equivalent period last year at £0.2m, a pleasing result given the reduction in sales volumes.
Continuing the improvement from last year where they stood at 25.1% for the full year, gross margins rose significantly to 29.7% helped by lower headcount in production, reduced raw material prices and currency gains.
Our stock level increased by £0.4m to £16.7m, although this was £0.2m lower than at the same point two years ago, and our slower moving stock at £2.2m remained unchanged since the year end. Despite pressure from lower volumes, and short-term timing effects on key bulk orders, we are encouraged that new channels and product ranges coupled with the more typical volumes we anticipate, will make some inroads in the second half.
Net assets were unchanged at £18.5m (December 2018 £18.5m). Net debt was unchanged at £9.8m compared with the same time last year although it was up £2.1m on December 2018 due to timing differences in working capital during the summer. We anticipate these timing differences will reverse by year end.
The tax charge for the period was £0.05m due to profits in Ethiopia. Generally, the Group enjoys a favourable tax position with significant prior year tax losses unutilised and anticipates minimal tax payments for the year ahead.
Operational and strategic update
Persistent global uncertainty continued to impact customers in our existing and target markets in the first half of the year and consequently, volumes in both our UK and Ethiopia divisions were depressed. Against this backdrop, we have delivered a stable financial performance, and ensured that the quality of service was maintained for all customers.
In the UK Division, the automotive market is gaining traction; automotive customers have increased their orders on an incremental steady basis signifying that we are now establishing ourselves as a manufacturer of this specialist upholstery, where both our quality and price point are positioning us attractively for future growth.
The aviation markets are engaging with us directly and we are at various stages of the protracted sampling process with a number of potential customers. We have entered the bulk sampling stage with a big shoe provider and are actively in dialogue with others, again with our offering well placed to compete.
Alongside with its core gloving products, our Ethiopian operation has now established itself as a shoe manufacturer for Soul of Africa and Vivo Barefoot. Whilst a nascent market for us, it is growing on a steady basis. Accordingly, in the first half we invested in a new manufacturing production line, for which training is well progressed, and further modest investments are anticipated in the second half. Together with our own shoe manufacturing brand NTOTO, these products are helping to achieve our objective of a more balanced portfolio.
Board changes
As previously announced Richard Briere joined the Board as CFO on 19th March 2019.
Outlook
The outcome of Brexit remains uncertain and could lead to a short-term impact to the movement of products, the quantum or timing of which is too speculative to judge accurately. However, with 90% of the Group's sales outside Europe and dual manufacturing production in our UK and Ethiopia divisions, we are optimistic that whilst the lack of clarity persists any risk can be managed within our existing model.
We enter the second half of the year with a good order book, lower cost base and improved margins. Looking ahead, we are increasingly optimistic about the pipeline of opportunities within our core and targeted markets. Whilst this is set against an uncertain economic outlook, we expect the second half to be stronger than the first particularly in terms of profits and are confident our ongoing investment plans and strategy will deliver significant shareholder value as these fully mature.
CONSOLIDATED INCOME STATEMENT
for the SIX MONTHS ENDED 30 JuNE 2019
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
Note
£'000
£'000
£'000
Unaudited
Unaudited
Audited
Revenue
12,132
14,505
28,469
Cost of sales
(8,528)
(11,426)
(21,318)
Gross profit
3,604
3,079
7,151
Distribution costs
(1,119)
(1,070)
(2,209)
Administrative expenses
(1,975)
(1,578)
(3,950)
Profit from operations before finance costs
510
431
992
Finance costs
(286)
(344)
(647)
Finance income
-
9
9
Profit before taxation
224
96
354
Taxation
4
(53)
29
(2,283)
Profit for the period after taxation
171
125
(1,929)
Earnings per share
3
Basic
1.23p
0.90p
(13.91p)
Diluted
1.22p
0.90p
(13.76p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the SIX MONTHS Ended 30 JUNE 2019
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Unaudited
Unaudited
Audited
Profit for the period after taxation
171
125
(1,929)
Other comprehensive income
Items that will not be reclassified to profit or loss
Revaluation of land and buildings
-
-
219
Revaluation of land and buildings - unrealised exchange gain/(loss)
(47)
29
49
(47)
29
268
Items that may be subsequently reclassified to profit or loss
Unrealised exchange gain/(loss) on translation of overseas subsidiaries
(159)
172
389
Fair value losses on foreign currency cash flow hedges
(19)
-
(52)
(178)
172
337
Other comprehensive (loss)/income
(225)
201
605
Total comprehensive (loss)/income for the period
(54)
326
(1,324)
CONSOLIDATED statement of Changes in equity
for the six months ENDED 30 JUNE 2019
Note
Share capital
Share premium
Capital reserve
Shares held by ESOP
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
At 1 January 2018
6,944
2,984
6,475
(495)
131
-
(3,520)
1,813
5,432
19,764
Opening balance adjustment
-
-
-
-
-
-
-
-
(26)
(26)
At 1 January 2018 (restated)
6,944
2,984
6,475
(495)
131
-
(3,520)
1,813
5,406
19,738
Comprehensive income for the period
-
Profit for the period after taxation
-
-
-
-
-
-
-
-
125
125
Other comprehensive income
Unrealised exchange loss on translation of foreign subsidiaries
-
-
-
-
-
-
172
29
-
201
Total other comprehensive loss
-
-
-
-
-
-
172
29
-
201
Total comprehensive (loss)/income for the period
-
-
-
-
-
-
172
29
125
326
Share based payment expense
-
-
-
-
58
-
-
-
-
58
At 30 June 2018
6,944
2,984
6,475
(495)
189
-
(3,348)
1,842
5,531
20,122
Comprehensive income for the period
Profit for the period after taxation
-
-
-
-
-
-
-
-
(2,054)
(2,054)
Other comprehensive income
Gain on the revaluation of buildings
-
-
-
-
-
-
-
219
-
219
Unrealised exchange loss on translation of foreign subsidiaries
-
-
-
-
-
-
217
20
-
237
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
(52)
-
-
-
(52)
Total other comprehensive expense
-
-
-
-
-
(52)
217
239
-
404
Total comprehensive (loss)/income for the period
-
-
-
-
-
(52)
217
239
(2,054)
(1,650)
Share based payment expense
-
-
-
-
14
-
-
-
43
57
At 31 December 2018
6,944
2,984
6,475
(495)
203
(52)
(3,131)
2,081
3,520
18,529
Comprehensive income for the period
Profit for the period after taxation
-
-
-
-
-
-
-
-
171
171
Other comprehensive income
Unrealised exchange gain on translation of foreign subsidiaries
-
-
-
-
-
-
(164)
(47)
-
(211)
Fair value losses on foreign currency cash flow hedges
-
-
-
-
-
(19)
-
-
-
(19)
Total other comprehensive income
-
-
-
-
-
(19)
(164)
(47)
-
(230)
Total comprehensive income for the period
-
-
-
-
-
(19)
(164)
(47)
171
(59)
Share based payment expense
-
-
-
-
42
-
-
-
-
42
At 30 June 2019
6,944
2,984
6,475
(495)
245
(71)
(3,295)
2,034
3,691
18,512
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2019
30-Jun-19
30-Jun-18
31-Dec-18
Note
£'000
£'000
£'000
Unaudited
Unaudited
Audited
ASSETS
Non-current assets
Property, plant and equipment
10,970
10,760
11,006
Intangible assets
121
178
147
Deferred income tax asset
5
-
1,967
-
Total non-current assets
11,091
12,905
11,153
Current assets
Inventories
16,749
15,701
16,306
Trade and other receivables
4,695
4,682
3,306
Cash and cash equivalents
367
91
598
Current income tax recoverable
-
-
-
Total current assets
21,811
20,474
20,210
Total assets
32,902
33,379
31,363
LIABILITIES
Current liabilities
Trade and other payables
(4,069)
(3,261)
(4,350)
Interest bearing loans, borrowings and overdrafts
(8,491)
(7,609)
(7,756)
Total current liabilities
(12,560)
(10,870)
(12,106)
Non-current liabilities
Deferred income tax liability
5
(49)
(154)
(162)
Interest bearing loans, borrowings and overdrafts
(1,781)
(2,233)
(566)
Total non-current liabilities
(1,830)
(2,387)
(728)
Total liabilities
(14,390)
(13,257)
(12,834)
Net assets
18,512
20,122
18,529
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 by ESOP
(495)
(495)
(495)
Share based payment reserve
245
189
203
Cash flow hedge reserve
(71)
-
(52)
Translation reserve
(3,295)
(3,348)
(3,131)
Revaluation reserve
2,034
1,842
2,081
Retained earnings
3,691
5,531
3,520
Total equity
18,512
20,122
18,529
CONSOLIDATED STATEMENT of cash flows
for the SIX MONTHS ended 30 JUNE 2019
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
Note
£'000
£'000
£'000
Unaudited
Unaudited
Audited
Cash flows from operating activities
Cash (used in)/generated from operations
6
(814)
(1,107)
1,583
Tax paid
(350)
(26)
(11)
Interest paid
(254)
(330)
(634)
Net cash (used in)/generated from operating activities
(1,418)
(1,463)
938
Cash flows from investing activities
Purchases of property, plant and equipment
(491)
(245)
(588)
Purchases of intangible assets
-
-
-
Net cash used in investing activities
(491)
(245)
(588)
Cash flows from financing activities
Proceeds from borrowings
809
1
-
Repayment of bank loans
(472)
(662)
(1,304)
New finance lease obligations
200
41
41
Repayment of obligations under finance leases
(90)
(41)
(85)
Net cash used in financing activities
447
(661)
(1,348)
(Decrease)/increase in cash and cash equivalents
(1,462)
(2,369)
(998)
Cash and cash equivalents at beginning of period
(3,695)
(2,698)
(2,698)
Exchange gains on cash and cash equivalents
(3)
-
1
Cash and cash equivalents at end of period
(5,160)
(5,067)
(3,695)
NOTES TO THE CONSOLIDATED ACCOUNTS (UNAUDITED)
1. Basis of preparation
The financial information set out in the interim statements for the six months ended 30 June 2019 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 2018. 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 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 interim statement for issue on 19 September 2019.
2. New standards
The Group has adopted IFRS 16 Leases from 1 January 2019, using the modified retrospective method. Applying this method, the comparative information for the 2018 fiscal year has not been restated.
At 1 January 2019, the Group recognised right-of-use assets of £200k and lease liabilities of £200k. The Group has decided not to apply the new guidance to leases whose term will end within twelve months of the date of initial application. In such cases, the leases will be accounted for as short-term leases and the lease payments associated with them will be recognised as an expense from short-term leases. The following reconciliation to the opening balance for the lease liabilities as at 1 January 2019 is based upon the operating lease obligations as at 31 December 2018:
Consolidated
01-Jan-19
£'000
Operating lease obligations at 31 December 2018
260
Minimum lease payments (notional amount) on finance lease liabilities at 31 December 2018
200
Relief option for short-term leases
(3)
Relief option for leases of low-value assets
(25)
Other
(26)
Gross lease liabilities at 31 December 2018
406
Discounting
(13)
Lease liabilities at 1 January 2019
393
Present value of finance lease liabilities as at 31 December 2018
(193)
Additional lease liabilities as a result of the initial application of IFRS 16 as at 1 January 2019
200
The lease liabilities were discounted at the borrowing rate as at 1 January 2019. The weighted average discount rate was 6.63%.
3. Earnings per Ordinary Share
a) Basic
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.
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Profit for the period after taxation
171
125
(1,929)
'000s
'000s
'000s
Weighted average number of ordinary shares in issue
13,870
13,870
13,870
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by the shares issued under the 2017 Save As You Earn (SAYE) scheme.
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Profit for the period after taxation
171
125
(1,929)
'000s
'000s
'000s
Weighted average number of ordinary shares in issue
14,025
13,879
14,023
4. Taxation
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Analysis of the charge in the period
The charge based on the profit for the period comprises:
Corporation tax on profit for the year
-
-
263
Foreign tax on profit for the period
90
15
89
Foreign tax related to prior years
75
9
10
Total current tax
165
24
362
Deferred tax
Origination and reversal of temporary differences
(112)
(53)
26
Impact of change in UK tax rate
-
-
(6)
Derecognition of deferred tax asset
-
-
1,901
Total deferred tax
(112)
(53)
1,921
Income tax (credit)/charge
53
(29)
2,283
5. Deferred taxation
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Deferred tax asset
-
1,967
-
Deferred tax liabilities
(49)
(154)
(162)
Deferred tax asset (net)
(49)
1,813
(162)
The Group has unrecognised deferred tax assets of £1.9m.
6. Cash (used in)/generated from operations
Six months ended
Six months ended
Year ended
30-Jun-19
30-Jun-18
31-Dec-18
£'000
£'000
£'000
Profit before taxation
224
96
354
Adjustments for:
Depreciation of property, plant and equipment
357
339
705
Amortisation of intangibles
26
31
62
Bank and other interest charges
286
335
638
Share based payment expense
42
58
115
Other non-cash items in Income Statement
165
125
194
Operating cash flows before movement in working capital
1,100
984
2,068
Movements in working capital (excluding exchange differences on consolidation):
(Increase)/decrease in inventories
(581)
(275)
(710)
(Increase)/decrease in receivables
(1,377)
(620)
792
(Decrease)/increase in payables
44
(1,196)
(567)
Cash (used in)/generated from operations
(814)
(1,107)
1,583
7. Availability of interim report
The interim report will be available on the Company's website www.pittards.com.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR GGUQWBUPBGAR
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