REG - Heath(Samuel) & Sons - Final Results
HEATH (SAMUEL) & SONS PLC
10th JULY 2020
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2020
CHAIRMAN'S STATEMENT
This statement will be very much in two halves. The first part will deal with the very successful past year's trading, and the second, and probably much more important for the future of the Company, the prospects for the next financial twelve months, which has potentially been thrown into chaos by the Coronavirus pandemic Covid-19.
Revenue at £13.887m was very similar to last year (2019: £13.893m) and profit before tax was £1.368m (2019: £1.181m) before exceptional items (last year's Exceptional cost of GMP Equalisation of £0.299m). These results were affected very little until the end of March, because we had a healthy order book. Then came the closures of the majority of our customers throughout the world. We have never closed the factory, having taken all the necessary safety measures quite correctly required by Law. However, because of the consequent drop in sales, we did then move to working with a skeleton staff. The Government help, especially through its furlough scheme in looking after our people who have been unable to work, has been invaluable to us. The result of this sharp downturn in activity will unsurprisingly have a devastating effect on our profitability in the current year. However, it would have been so much worse if we had not continued working as we did. I would like to thank all the people from top to bottom, who were involved with this. We ended 2019-20 with a strong balance sheet, and good liquidity evidenced by our strong cash balance, which has put us in good stead in the current financial year.
It is very difficult to know how the world will change after these events. Some of these changes could very much affect an organisation such as ours which has historically built its reputation with face-to-face meetings with its customers throughout the world and by exhibiting at trade exhibitions globally as well.
Output to the end of June was 37.6% down on the same period last year. Clearly there will be a significant loss on this figure. Extensive work has been done on a wide range of forecast scenarios for the current financial year. There has been input from all the Board on these figures, which has been much welcomed. What they all show is a large negative effect on cash flow, not helped by us continuing to fund the large deficit in our Pension Scheme, which I have previously discussed. With this in mind the Board does not believe that this is the correct time to pay a final dividend, even though our balance sheet is strong. We will revisit this decision at the time of the Interim announcement.
Sam Heath
Chairman
9th July 2020
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
For further information:
Samuel Heath & Sons Plc
Simon Latham - Company Secretary
+44 (0)121 766 4200
Cairn Financial Advisers LLP
+44 (0)20 7213 0880
James Caithie/Jo Turner
CONSOLIDATED INCOME STATEMENT
for the year ended 31st March 2020
Note
2020
2019
£000
£000
Revenue
3
13,887
13,893
Cost of sales
(6,798)
(7,125)
Gross profit
7,089
6,768
Selling and distribution costs
(3,543)
(3,474)
Administrative expenses
(2,012)
(1,915)
Operating profit a
1,534
1,379
Finance income
25
13
Finance cost
(191)
(211)
Profit before taxation and exceptional items
1,368
1,181
Exceptional item - GMP equalisation
7
-
(299)
Profit before taxation
1,368
882
Taxation
4
(299)
(144)
Profit for the year attributable to owners of the parent Company
1,069
738
Basic and diluted earnings per ordinary share
6
42.2p
29.1p
a Operating profit is calculated as profit before net finance costs, exceptional items and taxation.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st March 2020
2020
2019
£000
£000
Profit for the year
1,069
738
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension scheme
291
(933)
Deferred taxation on actuarial (gain)/loss
(55)
159
Deferred tax rate change
125
-
Revaluation of property, plant and equipment
182
-
Deferred taxation on revaluation of assets
(23)
-
520
(774)
Total comprehensive income for the year
1,589
(36)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31st MARCH 2020
2020
2019
£000
£000
Non-current assets
Intangible assets
151
82
Property, plant and equipment
3,635
3,210
Deferred tax asset
887
1,048
4,673
4,340
Current assets
Inventories
4,230
3,989
Trade and other receivables
2,370
2,286
Cash and cash equivalents
3,016
3,153
9,616
9,428
Total assets
14,289
13,768
Current liabilities
Trade and other payables
(1,868)
(1,789)
Right of use lease liabilities
(58)
-
Current tax payable
(79)
(171)
(2,005)
(1,960)
Non-current liabilities
Right of use lease liabilities
(46)
-
Retirement benefit scheme
(6,575)
(7,420)
(6,621)
(7,420)
Total liabilities
(8,626)
(9,380)
Net assets
5,663
4,388
Equity
Called up share capital
254
254
Capital redemption reserve
109
109
Revaluation reserve
1,349
1,277
Retained earnings
3,951
2,748
Equity shareholders' funds
5,663
4,388
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31st MARCH 2020
Share
capital
Capital redemption reserve
Revaluation reserve
Retained
earnings
Total
Equity
£000
£000
£000
£000
£000
Balance at 31st March 2018
254
109
1,357
3,018
4,738
Total transactions with owners
Equity dividends paid
-
-
-
(314)
(314)
Profit for the year
-
-
-
738
738
Reclassification of depreciation on revaluation
-
-
(80)
80
-
Other comprehensive income for the year
-
-
-
(774)
(774)
Total comprehensive income for the year
-
-
(80)
44
(36)
Balance at 31st March 2019
254
109
1,277
2,748
4,388
Total transactions with owners
Equity dividends paid
-
-
-
(314)
(314)
Profit for the year
-
-
-
1,069
1,069
Reclassification of depreciation on revaluation
(87)
87
-
Other comprehensive income for the year
-
-
159
361
520
Total comprehensive income for the year
-
-
72
1,517
1,589
Balance at 31st March 2020
254
109
1,349
3,951
5,663
CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31st MARCH 2020
2020
2019
£000
£000
Cash flow from operating activities
Profit for the year before taxation
1,368
882
Adjustments for:
Depreciation
405
348
Amortisation
16
27
Profit on disposal of property, plant and equipment
(3)
(16)
Net finance costs/(income)
(25)
17
Defined benefit pension scheme expenses
228
530
Contributions to defined benefit pension scheme
(783)
(516)
Operating cash flow before movements in working capital
1,206
1,272
Changes in working capital:
Increase in inventories
(241)
(59)
(Increase)/decrease in trade and other receivables
(84)
6
Increase in trade and other payables
79
310
Cash generated from operations
960
1,529
Taxation paid
(180)
(184)
Net cash from operating activities
780
1,345
Cash flows from investing activities
Payments to acquire property, plant and equipment
(502)
(239)
Proceeds from the sale of property, plant and equipment
14
35
Payments to acquire intangible assets
(85)
(23)
Finance (costs)/income
25
(17)
(548)
(244)
Cash flows from financing activities
Payment for right of use assets
(55)
-
Dividends paid
(314)
(314)
(369)
(314)
Net (decrease)/increase in cash and cash equivalents
(137)
787
Cash and cash equivalents at beginning of year
3,153
2,366
Cash and cash equivalents at end of year
3,016
3,153
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation
The Group has prepared its consolidated financial statements for the year ended 31st March 2020 in accordance with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied are consistent with those included in the financial statements of the Group for the year ended 31st March 2019 except for changes required on the adoption of IFRS 16 "Leases".
IFRS 16 brings operating leases onto the statement of financial position. The Group has used the modified retrospective transition approach on adoption of IFRS 16 Leases, where the initial right of use asset values recognised on property leases of £159k are equal to the present value of the future lease payments as at the date of transition (1 April 2019). The adoption of IFRS 16 did not have a material impact on the Group's consolidated results or financial position.
The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The annual report and financial statements for the year ended 31st March 2020 were approved by the Board of Directors on 9th July 2020 along with this preliminary announcement. The annual report and financial statements will be delivered to the Registrar of Companies after the Annual General Meeting.
The statutory accounts of Samuel Heath & Sons PLC for the year ended 31 March 2019 have been delivered to the Registrar of Companies. The auditor's reports on the statutory accounts for the years ended 31st March 2020 and 31st March 2019 were unqualified and did not contain a statement under section 498 of the Companies Act 2006.
2. Critical accounting and key sources of estimation
Critical accounting estimates, assumptions and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The Group has evaluated the estimates and assumptions that have been made in relation to the carrying amounts of assets and liabilities in these financial statements.
The key accounting judgements and sources of estimation uncertainty with a significant risk of causing a material adjustment to assets and liabilities in the next 12 months include the following:
Pensions - movements in equity markets, interest rates and life expectancy could materially affect the level of surpluses and deficits in the defined benefit pension scheme.
Valuation of property, plant and equipment - the Group reviews the value, useful economic lives and residual values attributed to assets on an on-going basis to ensure they are appropriate. Changes in market value, economic lives or residual values could impact the carrying value and charges to the income statement in future periods.
Provisions - using information available at the balance sheet date, the Directors make judgements based on experience on the level of provision required against assets, including inventory and trade receivables. Further information received after the balance sheet date may impact the level of provision required.
Deferred tax assets - deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits.
3. Revenue by geographic market
2020
£000
2019
£000
Overseas
5,969
6,027
Home
7,918
7,866
13,887
13,893
4. Income taxes
2020
£000
2019
£000
Current taxes:
Current year
81
169
Adjustments in respect of prior periods
11
11
92
180
Deferred taxes:
Origination and reversal of temporary differences
174
(36)
Change in tax rate
8
-
Adjustments in respect of prior period
25
-
207
(36)
Total income taxes
299
144
Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the year.
Tax reconciliation
2020
£000
2019
£000
Profit for the year
1,368
882
Corporation tax charge thereon at 19% (2018: 19%)
260
168
Adjusted for the effects of:
Prior year adjustments
36
11
Research and development claim
(21)
(7)
Changes in tax rates
8
-
Other adjustments
16
(28)
Total income taxes
299
144
Effective tax rate
21.9%
16.3%
5. Dividends
2020
2019
£000
£000
Final dividend for the year ended 31st March 2019 of 6.875 pence per share (2018: 6.875 pence per share)
174
174
Interim dividend for the year ended 31st March 2020 of 5.50 pence per share (2019: 5.50 pence per share)
139
139
313
313
The directors do not recommend a final dividend for this year, in view of the uncertainty resulting from the coronavirus pandemic.
6. Earnings per share
The basic and diluted earnings per share are calculated by dividing the relevant profit after taxation of £1,069,000 (2019: £738,000) by the average number of ordinary shares in issue during the year being 2,534,322. The number of shares used in the calculation is the same for both basic and diluted earnings.
7. Exceptional item
In 2019, the business recognised the past service cost resulting from Guaranteed Minimum Pension (GMP) equalisation as an exceptional item on the basis that it is a one off cost of substance arising from a legal case during the financial year.
GMP equalisation is the recognition that during the 1990s benefits accrued differently for men and women based on their then different retirement ages.
8. Notice of annual general meeting
Notice is hereby given that the 2020 Annual General Meeting of the Company will be held at the registered office of the Company, Leopold Street, Birmingham, on 7th August 2020 at 12.00 noon.
The Board is monitoring closely the current UK Government guidance on public gatherings and meetings, and in light of this the Company will proceed with the AGM with the minimum quorum of shareholders present to conduct business. Any shareholders who try to attend on the day unfortunately will be refused entry. The Board recognises the importance of the AGM to Shareholders and would encourage any wishing to vote to do so by proxy.
9. Posting of accounts
The report and accounts are being posted to shareholders today where requested, and are available on the Company's website, at www.samuel-heath.com/investor-relations.
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.ENDFR SSSFDUESSEEW
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