REG - Tandem Grp PLC - Final Results
27/03/2023 07:00
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RNS Number : 2284U Tandem Group PLC 27 March 2023
TANDEM GROUP PLC
(the "Company" or "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
The Board of Tandem Group plc (AIM: TND), designers, developers, distributors
and retailers of sports, leisure and mobility equipment, announces its results
for the year ended 31 December 2022.
Building for future growth in a challenging environment
Headlines
Ø Strong balance sheet
Ø Profitable year
Ø Dividend maintained at 6.57p
Ø New warehouse and out of Northampton and Felixstowe
Ø New retail shop
Ø Secured leading new licences
Ø Well managed stock levels
Ø Strong growth in acquiring new accounts across nationals and independents
For further information contact:
Enquiries:
Tandem Group plc
David Rock, Company Secretary
Telephone 0121 748 8075
Nominated Adviser and Broker
Cenkos Securities plc
Ben Jeynes / Dan Hodkinson - Corporate Finance
Russell Kerr / Michael Johnson - Sales
Telephone 020 7397 8900
Chairman's statement
Introduction
I am pleased to report that the Group has delivered another profitable year,
having ended FY22 with an even stronger balance sheet not withstanding FY22
having been a year of high inflationary pressures, increasing interest rates
and a cost of living crisis and hereby present the results for the year ended
31 December 2022.
Results
The net assets of the Group have increased by 18% from £22,739,000 at the
year ended 31 December 2021, to £26,788,000 at the year ended 31 December
2022. As in the previous year, the increase in net assets was aided by a
material improvement in the valuation of the defined benefit pension schemes
by £2,026,000, due largely to an increase in the interest rate on UK Gilts.
We were also very pleased with the revaluation of our warehouse properties in
Castle Bromwich resulting in an uplift in value of £2,189,000.
Group revenue for the year ended 31 December 2022 reduced to £26,683,000 from
£40,917,000 in the previous year as previously announced.
In the first half of the year Group revenue decreased by approximately 33%
with reductions in three of our four operating divisions. The exception was
toys, sports and leisure.
In the second half of the year there was a decrease of approximately 36% in
Group revenue mainly driven by continued challenging economic conditions.
Toys, Sports & Leisure
Revenue within our Toys, Sports & Leisure division reduced by
approximately 11% against the prior year, however, it remained ahead of the
year ended 31 December 2020. We were encouraged with the trend of sales in
December that were 26% ahead of the comparative period.
Bluey was the pre-school licence of 2022, showing the fastest property
progression of all similar licences, which was well received and listed by the
majority of our national accounts. We are also pleased to have significantly
grown our export sales and sales to toy specialist multiples.
Sales in our golf brands, were 30% behind the prior year, however, this
represented more than double the sales seen prior to COVID-19, in 2019.
eMobility
Turnover in our eMobility division comprising eBikes, eScooters, electric golf
trolleys and mobility scooters was down 46% overall for the year. However,
there were some encouraging signs in sales of eBikes in the run up to
Christmas which were 92% ahead in November and December against those in
November and December 2021. During 2022 we designed and developed in the UK an
exciting new range of eBikes under our recognisable Dawes and Claud Butler
brands which are due to launch in 2023.
Similarly, eScooter sales in November and December were 25% ahead of the
comparative period in the prior year.
Our new eMobility shop was opened in November ahead of schedule, and we have
also completed the launch of a dedicated website to eMobility,
www.electriclife.co.uk.
Bicycles
Sales continue to be challenging in both independent and national retailer
markets, as this division benefitted from unprecedented demand during COVID-19
lockdowns. Therefore, against the prior year, revenue decreased by
approximately 52%, however, we were again encouraged by the sales trend at the
end of the year, as in other divisions, with sales in Bicycles during December
2022 achieving their highest level in all of FY22.
We have continued to develop new and exciting ranges of children Falcon bikes,
and Squish has continued to grow in popularity having won several awards in
2022.
Home & Garden
Similar to Bicycles, revenue in our Home & Garden segment revenue was
approximately 55% below the comparative period, due to the exceptional success
seen during COVID-19 and as reductions in discretionary consumer spending
continued to impact sales. This was further influenced by significant
reductions in third party marketplace website sales overall.
The Group continues to invest in this segment, as demonstrated by the launch
of a new Jack Stonehouse website (www.jackstonehouse.com) in December 2022,
ahead of our expected launch date of January 2023. This rationalised the
distribution of our garden and leisure products from our 'Pro Rider Leisure'
and 'Garden Comforts' websites, providing future category authority and
operational efficiencies.
Group operating profit
We will not be alone in reporting that the operating environment remained
challenging. Group operating profit before exceptional costs, finance costs
and taxation decreased by 73% to £1,312,000 for the year ended 31 December
2022 compared to £4,939,000 for the year ended 31 December 2021. Gross margin
was only slightly behind at 29.2% against 29.5% in the prior year, and
operating expenses reduced from £7,112,000 in the prior period to £6,484,000
in the year to 31 December 2022.
Group balance sheet
Following the construction of our new warehouse and revaluation of our
properties as a whole, property, plant and equipment increased from
£7,775,000 at 31 December 2021 to £14,700,000 at 31 December 2022.
The business has continued to control its levels of inventory throughout the
year, clearing ageing lines where required, leading to a significant reduction
in levels held at the year end to £4,757,000 compared to £8,064,000 in the
prior period.
The property project continued to affect the net cash position. Cash and
cash equivalents decreased to £3,288,000 at 31 December 2022 compared to
£6,367,000 at 31 December 2021, with the Group moving from a net cash
position as at 31 December 2021 of £2,326,000 to a net debt position of
£1,551,000 at 31 December 2022 due to the borrowing requirements to fund the
new warehouse build.
Further details of operational activities can be found in the Strategic
Review.
Dividend
In previous years it has always been the Board's intention to maintain the
progressive dividend as trading results and funds permit.
Due to the results of the Group, the Board is of view that the dividend will
instead be maintained this year.
We are therefore proposing to pay a final ordinary dividend of 6.57 pence per
share (year ended 31 December 2021 - 6.57 pence per share).
When combined with the interim dividend of 3.43 pence per share (year ended 31
December 2021 - 3.43 pence per share), this is a total dividend of 10.0 pence
for the year as it was in the year ended 31 December 2021.
Subject to shareholder approval at the Annual General Meeting to be held on 29
June 2023, the final dividend will be paid on or around 6 July 2023 to
shareholders on the share register as at 12 May 2023. The ex-dividend date
will be 11 May 2023.
In accordance with the provision that in any calendar year should dividend
payments exceed pension deficit contributions, an additional contribution,
equal to the excess, is paid into the scheme, an additional payment of
approximately £172,000 will be paid into the Tandem Group Pension Plan.
Employees
I would like to thank all colleagues for their dedication and effort in 2022.
The Company has introduced a number of initiatives recently, including a Group
wide discount scheme for colleagues and their families, and also access to a
discounted range of clean energy transportation products.
Leadership
Peter continues to bring a positive and dynamic perspective to the business
associated with a strong strategic vision and purpose, strengthening the team
in critical areas in order to achieve our long-term growth plans.
Outlook
2023 sales have begun slowly as expected, with an initial slowdown in our FOB
sales resulting from both an early Chinese New Year, and continued caution by
national retailers. We have also experienced a significant number of delays
with our goods passing through UK ports due to additional custom checks,
further impacting Q1 results.
Notwithstanding these headwinds, our balance sheet strength puts the Group in
a strong position financially and we are well positioned for the challenges
and uncertainties of the wider trading environment that we are being faced
with in the year ahead. Now that the warehouse is complete, Northampton and
Felixstowe have been vacated, and the new shop is open with a number of new
premium brands on board, we are well positioned for growth opportunities in
2023.
We have successfully secured a number of leading new licences which are
showing strong potential including Gabby's Doll House, Encanto, Sonic the
Hedgehog and Transformers. 2023 will see a much higher number of new films
compared to the very low levels during COVID-19.
With new accounts being a strategic focus area for the Group, we have
successfully opened 47 new Ben Sayers' accounts since September 2022, with
more than half of these opened in 2023. This will further enhance our national
brand presence.
Last year, we expanded our award-winning Squish brand proposition into
scooters, which has been well received by our customers since their recent
launch in January 2023. We plan to build on the success of Squish seen in 2022
through a wider distribution and social media channels.
In our eMobility segment, we continue to see exceptional results in our eBike
sales as people seek alternative means of transportation. Sales of eBikes have
had a very strong start to the year, resulting in sales to 20 March 2023 more
than three times those of the comparative period in 2022.
With our completed warehouse and further expanded account base, plans to
develop our existing product portfolio are in place through the distribution
of exciting premium third-party brands, Quella is a prime example.
Despite the slowdown in eScooter sales, we remain confident in the future of
eScooters and we are continuing to support their legislation and further
develop our range.
The new dedicated Electric Life shop and website Electriclife.co.uk are now up
and running and we are very pleased that they are performing ahead of
expectations for the Group.
The Group has had continued success in opening new accounts nationwide with
Independent Bike Dealers (IBDs) and national retailers alike. Since the
beginning of June 2022, we have opened 128 new accounts with IBDs. This will
allow for further growth, particularly through eBikes, for which we are seeing
increasing levels of proactive engagement by the independents and nationals
alike.
The new Jack Stonehouse website which consolidated some of our previous
websites into one is performing well and although sales are behind the
previous year, they are improving week on week. As more people return to the
workplace, there has been a need to refresh our product range, and later on
this year we will be launching new ranges across the Jack Stonehouse brand.
As part of our continuing strategic customer engagement, we are pleased that
from July 2022 to February 2023 our Social media community has seen double
digit growth with followers and engagement increasing across our core
accounts.
There has also been a transitioning of licences to our D2C offerings, due to
the challenges that FOB sales are currently presenting. We are therefore
bringing in more product domestically, which we are now well positioned to do
given the new warehouse. Furthermore, we have shortened lead times and reduced
our exposure to minimum order quantities through sourcing more items from
within Europe and the UK.
We are pleased that the new warehouse has now been completed, and our
Northampton and Felixstowe operations have been fully vacated meaning we are
now operating from the one site allowing us to benefit from operational
efficiencies.
The position moving further into 2023 is not going to be without its
challenges, however, the Group have now successfully completed a number of
significant projects as previously announced and believes it is extremely well
placed to take advantage of opportunities that arise. The Board remain
confident in the strategy of the Group.
S J Grant
Chairman
24 March 2023
Strategic report
Operating and Financial Review
Revenue
Group revenue for the year ended 31 December 2022 was £26,683,000 compared to
£40,917,000 in the prior year. As we have previously reported, revenue is
now split into four main segments.
2022 2021 2020
(£000s) (£000s) (£000s)
Toys, Sports & Leisure 14,758 16,492 14,372
eMobility 3,788 6,990 4,493
Bicycles 4,846 10,191 11,576
Home & Garden 3,291 7,244 6,615
26,683 40,917 37,056
Gross profit
Gross profit of £12,051,000 in 2021 decreased by 35.3% to £7,796,000 in
2022.
The gross profit margin percentage decreased marginally from 29.5% to 29.2%.
This reflects increases in supplier cost prices and inbound freight costs,
along with clearing out ageing stock, offset by the strength in Sterling
against the US Dollar. The Group has continued to work hard on negotiating
cost reductions.
Operating expenses
Group operating expenses decreased by 8.8% to £6,484,000 in the year (year
ended 31 December 2021 - £7,112,000). This was primarily driven by
reductions in employment costs, encompassing wages, agents' commission and
reductions in advertising expenses. This was partly offset by additional costs
in rent and rates following the need for additional third party storage
throughout the year.
Operating profit
Operating profit before exceptional costs was £1,312,000 for the year ended
31 December 2022 compared to £4,939,000 in the prior year.
Non-underlying items
Non-underlying items comprised:
· Exceptional costs of £223,000 (year ended 31 December 2021 -
£nil) in respect of employment and legal costs relating to the resignation of
the former Chief Executive, redundancy costs relating to the relocation of a
warehouse and distribution facility, and shunting costs relating to the same.
· Pension finance costs under IAS19 of £97,000 (year ended 31
December 2021 - £127,000); and
· A deferred tax charge of £139,000 (year ended 31 December 2021 -
£375,000) in respect of pension schemes.
Finance costs
Total net finance costs increased to £237,000 in the year ended 31 December
2022 compared to £207,000 in the year ended 31 December 2021.
There was an increase in total interest payable on bank loans, overdrafts,
hire purchase and invoice finance facilities from £63,000 in the prior year
to £136,000 in 2022 due to the increased borrowing to fund the new warehouse
construction.
Interest payable on lease arrangements was £4,000 compared to £17,000 in
2021.
Finance costs in respect of the pension schemes provided in line with IAS19
were £97,000 compared to £127,000 for the year ended 31 December 2021.
Taxation
The tax expense for the year ended 31 December 2022 was £178,000 compared to
£906,000 in the prior year.
The current tax credit, which comprised corporation tax from the overseas Hong
Kong operation, net of a refund provision for UK research and development, was
£77,000 (year ended 31 December 2021 - charge of £220,000).
There was a deferred tax charge of £255,000 compared to £686,000 in the
prior year as tax losses were utilised.
In the prior year, a tax charge in the Statement of Comprehensive Income was
expected due to a reduction in the actuarial losses on the pension schemes,
however due to the future tax rate change from 19% to 25%, it resulted in a
credit of £248,000. This year there was a charge of £214,000.
Net profit
Net profit for the year ended 31 December 2022, after non-underlying items,
finance costs and taxation charges were £674,000 compared to £3,826,000 for
the year ended 31 December 2021.
Adjusted EBITDA
Adjusted EBITDA was £1,475,000 for the year ended 31 December 2022, a
decrease of 72% compared to £5,199,000 in the prior year.
Capital expenditure
Total capital expenditure incurred during the year was £4,880,000 (year ended
31 December 2021 - £3,386,000). This was mainly in relation to the
construction of the new warehouse in Birmingham, construction of the new
showroom in Birmingham and expenditure on the new Enterprise Resource Planning
(ERP) system. Agreements of £410,000 were entered into prior to the year end
for warehouse completion related works.
Cash flows, working capital and net cash
Net cash inflow from operating activities before movements in working capital
for the year ended 31 December 2022 was £611,000 compared to £4,682,000 in
the year ended 31 December 2021.
Cash generated from operations was £1,395,000 compared to £2,239,000 last
year.
Net cash outflows from investing activities were £4,960,000 in 2022, against
£3,384,000 in the previous year due to the capital expenditure referred to
above.
There was a net cash inflow from financing activities of £555,000 in 2022,
which compared to an inflow of £1,479,000 in 2021. The net inflow was due
to new loans net of a reduction in invoice financing.
As a result of these movements the closing cash position at 31 December 2022
was £3,288,000 compared to £6,367,000 at 31 December 2021.
Net debt, comprising cash and cash equivalents less invoice financing
liabilities and borrowings, was £1,551,000 at 31 December 2022, compared to
net cash of £2,326,000 at the end of the previous year.
Dividends
A final dividend of 6.57 pence per share will be paid for the year ended 31
December 2022 subject to shareholder approval, which is at the same level as
the previous year.
Total dividends paid and proposed for the year ended 31 December 2022 of 10.00
pence per share (year ended 31 December 2021 - 10.00 pence per share) have
maintained at their previous level. As the total dividend will exceed the
deficit repair contributions paid to the Tandem Group Pension Plan, in
accordance with a previous agreement with the pension scheme trustees an
additional contribution equal to the excess of approximately £172,000, is
expected to be paid into the scheme.
The dividend cover ratio is 1.3 (year ended 31 December 2021 - 7.4).
Earnings per share
Basic earnings per share was 12.5 pence per share for the year ended 31
December 2022 compared to 73.8 pence per share in the year ended 31 December
2021. Diluted earnings per share was 12.3 pence per share compared to 70.1
pence per share in the prior year.
Product range review
As in the previous year, turnover has been split into four segments, Toys,
Sports & Leisure, eMobility, Bicycles, and Home & Garden.
Toy, Sports & Leisure
The Toys, Sports & Leisure business comprises character licenced products
which are mainly wheeled toys (excluding character bikes) and own brand sports
and leisure products, sold to both independent and national retailers.
Revenue in 2022 was down on the prior year, however, ahead of 2020. The
business has secured some exciting new licences for 2023 such as Gabby's
Dollhouse, Encanto, Sonic the Hedgehog and Transformers and remains focussed
on driving new business.
Our golf brand, Ben Sayers, continued to perform well, and although it was
behind on the prior year, it was still well ahead of 2019 figures.
eMobility
Our eMobility segment includes sales of electric scooters, bikes, golf
trolleys and mobility scooters.
Although turnover was down against the prior year, there were encouraging
signs towards the end of the year, particularly around eBikes and eScooters
which outperformed the prior period in the final months of the year.
The new dedicated Electric Life shop build was completed and the new
Electriclife.co.uk website is now live, with both making good contributions to
turnover.
This year we will release an exciting new range of eBikes designed in the UK,
under our established brands Dawes and Claud Butler. We are well placed to
benefit from the increasing shift to eBikes.
We are very pleased to have continued to grow our national independent bike
dealer network by 104 accounts from 1 June 2022 to the year end.
Bicycles
Revenue from the bicycle business includes both child and adult bicycles,
along with licensed character bikes, but excludes any electric bicycles.
This division continued to be challenging across all customer types, from
independents to national retailers, having benefitted from the high demand
seen during the COVID-19 years. These combined factors resulted in a reduction
in revenue against the previous period.
The Bicycle Association has published the Annual Market Data Report for 2022,
which shows bike sales may have reached their lowest level in two decades.
However, our lightweight children's bike brand, Squish has continued to grow
in popularity and won a number of awards in 2022. We have also continued to
design fresh and exciting ranges of children Falcon bikes.
Home & Garden
Our Home & Garden segment includes sales of outdoor living products and
homeware items, mostly sold from our online platform and third-party
marketplaces.
A reduction in discretionary consumer spending has been widely reported in
2022, following the cost of living crisis, coupled with unprecedented demand
seen during COVID-19 years, this division was behind the prior year.
Since its relaunch in December, our new consolidated Jack Stonehouse website
has gained some real efficiencies with site visits and organic sessions
doubling. Performance marketing and media spending has become more efficient
with our return on advertising improving over 50% over the 6 months to 31
December 2022, compared to the previous 6 months.
Property and IT
A valuation of the Castle Bromwich property, including the new warehouse, was
carried out by JLL Ltd in February 2023 in accordance with the RICS Valuation
- Global Standards (incorporating the International Valuation Standards) and
the UK national supplement (the "Red Book"). This valuation showed a
movement in gross carrying amount of £2,087,000 (£2,189,000 after
depreciation adjustment) which increased the total valuation, after allowing
for costs to complete the property to £13,762,000. The uplift of the
valuation is reflected through other comprehensive income in the year.
We are pleased to report that the construction of the new warehousing and
distribution facility has completed and we have now vacated Northampton and
Felixstowe. The new building has more than doubled the existing warehouse
capacity in Birmingham to approximately 160,000 square feet. Aside from the
financial returns of undertaking the project, there are significant commercial
and strategic benefits which we believe will enhance the Group and help to
maximise long term shareholder value.
As previously reported, we have received full planning permission for and have
completed the refurbishment of our onsite shop which was opened to the public
for sale of our electric powered products including scooters; bicycles; golf
trolleys and mobility scooters by West Midlands Mayor Andy Street, and Cycling
and Walking Commissioner Adam Tranter.
The Group have focussed on the warehouse and relocation projects this year as
they provided greater operational efficiencies and were beneficial to be in
place ahead of the new ERP and finance system. Therefore, the Group has
delayed the go-live to mid-year. This is still expected to improve
distribution efficiency as well as operational planning and management
reporting.
Pension schemes
The Group operates two defined benefit pension schemes with both schemes
closed to new members. There are no active members in either scheme.
The collective deficit of the schemes at 31 December 2022 reduced to £60,000
compared to £2,086,000 at 31 December 2021. Improved gilt rates were the
main driver for the reduction of the deficit with a discount rate of 4.8%
compared to 2.1% at 31 December 2021.
The pension schemes continue to utilise the Group's cash resources with
payments in respect of the schemes totalling £682,000 (year ended 31 December
2021 - £590,000). The total comprised deficit contributions of £550,000
and £101,000 in respect of Tandem and Casket schemes respectively (year ended
31 December 2021 - £449,000 and £101,000) and government levies and
administration costs of £31,000 (year ended 31 December 2021 - £40,000).
The latest triennial valuation date for the Casket scheme was 5 April 2022 and
the Tandem scheme 1 October 2022. The outcomes of the valuations will be
finalised in 2023.
The Board remain mindful that the recovery plans set following the 2019
triennial valuations for the Tandem scheme exceeds the Pension Regulator's
reported median length of 7 years. However, this continues to be justifiable
on the basis that the employer covenant is stronger and there is an agreed
provision that in any calendar year should dividend payments exceed deficit
contributions paid to the scheme, an additional contribution equal to the
excess will be made. As a consequence of the total dividend in the year
ended 31 December 2021, in 2022 the additional contribution made to the scheme
was £193,000. For the year ended 31 December 2022 this will lead to an
additional contribution of approximately £172,000 payable in 2023, subject to
shareholder approval of the proposed final 2022 dividend. The level of
contributions and length of recovery plans for both schemes will be
reconsidered following the outcome of the 2022 triennial valuations.
Employees
We currently employ 74 colleagues in the Group, they remain our most important
asset.
In addition to salary increases we have also introduced a Group wide cost
saving solution for colleagues and their families, along with access to a
discounted range of our clean energy transportation offerings.
Strategy
Our strategic objective is to grow our eMobility division more rapidly as the
sector continues to evolve, offering exciting new ranges and continuing to
grow our customer base; invest further in our direct-to-consumer offering
(particularly home & garden categories) through improved website marketing
and content, product innovation and stronger sourcing; whilst continuing to
generate strong and solid profits in our Toys, Sports & Leisure and
Bicycle divisions. We will achieve this by continuing to enter into new
licence agreements for the most successful character toy licences and to
develop new and interesting own brand product ranges which offer both quality
and value to the consumer.
The Chairman's statement provides an overview of the current outlook for the
Group in the forthcoming year.
Principal risks and uncertainties
The management of the business and the nature of the Group's strategy are
subject to a number of risks and uncertainties. The principal risks facing
the business are as follows:
Economic conditions
The current economic conditions in the UK are very challenging and this could
have a detrimental impact on the Group's turnover and performance.
Suppliers
In order to achieve competitively priced products the Group has outsourced
production, mainly to countries in Asia. Risks and uncertainties of this
strategy include management issues at the factories, the possibility of
changes in import duties, the potentially significant cost of freight and
shipping delays. We manage this risk by having a local office in Hong Kong
with a team that works closely with the factories and we develop contingency
plans should the need arise to make changes.
Fluctuations in currency exchange rates
A significant amount of the Group's purchases are made in US dollars. As a
Group, we are therefore exposed to foreign currency fluctuations. The Group
manages its foreign exchange risk with forward foreign exchange contracts and
has adopted formal hedge accounting. If these activities do not mitigate the
exposure, then the results and the financial condition of the Group may be
adversely affected.
Interest rates
The Group has taken on additional borrowings to fund the purchase of land and
construction of the warehouse. If interest rates increase, this could have an
impact on the Group's finance costs. However, the Group has entered into an
interest rate cap mechanism for £3 million of borrowings capped at 2%.
Licences
A number of the Group's brands are used under licence from global licensors.
The licences are generally for between two and three years. If the licences
are not renewed the Group would have to seek alternative licences in order to
avoid a reduction in revenue.
Competition
The companies in the Group operate in highly competitive markets. As a
result there is constant pressure on margins and the additional risk of being
unable to meet customers' expectations. Policies of supply chain management
and product development are in place to mitigate such risks.
Volatility in financial markets may require further cash contributions to our
pension fund
The Group has commitments under defined benefit pension schemes. The Group is
obliged to make contributions to the schemes based on actuarial valuations,
which in turn are based on long-term assumptions to calculate scheme
liabilities. Volatility of the financial markets can also affect the value of
the assets in the schemes. This may lead to a requirement to increase the cash
contributed by the Group to the schemes. If the Group is required to make
significant additional contributions, the financial position of the Group may
be materially affected with a significant reduction in operating cash flows.
In turn, this may adversely impact future developments of the business.
Financial risks
The main risks arising from the Group's financial instruments are interest
rates, liquidity, credit and foreign currency. The Board reviews and agrees
policies for managing each
of these risks.
P Kimberley
Chief Executive Officer
24 March 2023
Consolidated income statement
31 December 2022 31 December 2021
Before non-underlying items Non-underlying items After non-underlying items Before non-underlying items Non-underlying items After non-underlying items
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 3 26,683 - 26,683 40,917 - 40,917
Cost of sales (18,887) - (18,887) (28,866) - (28,866)
Gross profit 7,796 - 7,796 12,051 - 12,051
Operating expenses (6,484) - (6,484) (7,112) - (7,112)
Operating profit before exceptional costs 1,312 - 1,312 4,939 - 4,939
Exceptional costs - (223) (223) - - -
Operating profit 1,312 (223) 1,089 4,939 - 4,939
Finance costs (140) (97) (237) (80) (127) (207)
Profit before taxation 1,172 (320) 852 4,859 (127) 4,732
Tax expense (39) (139) (178) (531) (375) (906)
Net profit for the year 1,133 (459) 674 4,328 (502) 3,826
Earnings per share 4 Pence Pence
Basic 12.5 73.8
Diluted 12.3 70.1
Consolidated statement of comprehensive income
31 December 2022 31 December 2021
£'000 £'000
Net profit for the year 674 3,826
Other comprehensive income:
Items that will be reclassified subsequently to profit and loss:
Foreign exchange differences on translation of foreign operations 96 6
Cashflow hedging contracts 540 236
Items that will not be reclassified subsequently to profit or loss:
Revaluation of property, plant and equipment 2,189 -
Actuarial gain on pension schemes 1,472 1,648
Movement in pension schemes' deferred tax provision (214) 248
Other comprehensive profit for the year, net of tax 4,083 2,138
Total comprehensive income for the year attributable to equity shareholders 4,757 5,964
Consolidated balance sheet
31 December 2022 31 December 2021
£'000 £'000
Non current assets
Intangible fixed assets 5,525 5,454
Property, plant and equipment 14,700 7,775
Deferred taxation 854 1,323
21,079 14,552
Current assets
Inventories 4,757 8,064
Trade and other receivables 6,633 10,243
Derivative financial asset held at fair value 279 225
Cash and cash equivalents 3,288 6,367
14,957 24,899
Total assets 36,036 39,451
Current liabilities
Trade and other payables (4,200) (10,333)
Borrowings (1,085) (2,010)
Current tax liabilities (149) (252)
(5,434) (12,595)
Non current liabilities
Borrowings (3,754) (2,031)
Pension schemes' deficit (60) (2,086)
(3,814) (4,117)
Total liabilities (9,248) (16,712)
Net assets 26,788 22,739
Equity
Share capital 1,503 1,503
Shares held in treasury (137) (192)
Share premium 716 474
Other reserves 7,303 4,964
Profit and loss account 17,403 15,990
Total equity 26,788 22,739
Consolidated statement of changes in equity
Share capital Shares held in treasury Share premium Cash flow hedge reserve Merger reserve Capital redemption reserve Revaluation reserve Translation reserve Profit and loss account Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 1,503 (240) 315 (410) 1,036 1,427 1,671 599 10,707 16,608
Net profit for the year - - - - - - - - 3,826 3,826
Re-translation of overseas subsidiaries - - - - - - - 6 - 6
Forward contracts - - - 236 - - - - - 236
Net actuarial gain on pension schemes - - - - - - - - 1,896 1,896
Total comprehensive income for the year attributable to equity shareholders - - - 236 - - - 6 5,722 5,964
Exercise of share options - 48 159 - - - - - - 207
Share based payments - - - - - - - - 33 33
Reclassified to cost of inventory - - - 399 - - - - - 399
Dividends paid - - - - - - - - (472) (472)
Total transactions with owners - 48 159 399 - - - - (439) 167
At 1 January 2022 1,503 (192) 474 225 1,036 1,427 1,671 605 15,990 22,739
Net profit for the year - - - - - - - - 674 674
Re-translation of overseas subsidiaries - - - - - - - 96 - 96
Revaluation of property - - - - - - 2,189 - - 2,189
Forward contracts - - - 540 - - - - - 540
Net actuarial gain on pension schemes - - - - - - - - 1,258 1,258
Total comprehensive income for the year attributable to equity shareholders - - - 540 - - 2,189 96 1,932 4,757
Share based payments - - - - - - - - 21 21
Reclassified to cost of inventory - - - (486) - - - - - (486)
Exercise of share options - 55 242 - - - - - - 297
Dividends paid - - - - - - - - (540) (540)
Total transactions with owners - 55 242 (486) - - - - (519) (708)
At 31 December 2022 1,503 (137) 716 279 1,036 1,427 3,860 701 17,403 26,788
Consolidated cash flow statement
31 December 2022 31 December 2021
£'000 £'000
Cash flows from operating activities
Net profit for the year 674 3,826
Adjustments:
Depreciation of property, plant and equipment 141 230
Amortisation of intangible fixed assets 22 30
Profit on sale of property, plant and equipment (11) -
Contribution to defined benefit pension plans (651) (550)
Finance costs 237 207
Tax expense 178 906
Share based payments 21 33
Net cash flow from operating activities before movements in working capital 611 4,682
Change in inventories 3,307 (3,552)
Change in trade and other receivables 3,610 (272)
Change in trade and other payables (6,133) 1,381
Cash generated from operations 1,395 2,239
Interest paid (139) (80)
Tax (paid) / received (26) 31
Net cash flows from operating activities 1,230 2,190
Cash flows from investing activities
Purchases of intangible fixed assets (93) (3)
Purchases of property, plant and equipment (4,880) (3,386)
Sale of property, plant and equipment 13 5
Net cash flows from investing activities (4,960) (3,384)
Cash flows from financing activities
New loans / loan repayments 2,013 1,463
Finance lease repayments (54) (199)
Movement in invoice financing (1,161) 480
Exercise of share options 297 207
Dividends paid (540) (472)
Net cash flows from financing activities 555 1,479
Net change in cash and cash equivalents (3,175) 285
Cash and cash equivalents at beginning of year 6,367 6,076
Effect of foreign exchange rate changes 96 6
Cash and cash equivalents at end of year 3,288 6,367
Notes to the preliminary results
1. General information
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. The Consolidated income statement, the Consolidated statement of
comprehensive income, the Consolidated balance sheet at 31 December 2022, the
Consolidated statement of changes in equity, the Consolidated cash flow
statement and the associated notes for the period then ended have been
extracted from the Group's financial statements upon which the auditor's
opinion is unqualified and does not include any statement under section 498 of
the Companies Act 2006. The statutory accounts for the year ended 31
December 2022 will be delivered to the Registrar of Companies following the
Group's Annual General Meeting.
2. Basis of preparation
The consolidated financial statements of the Group have been prepared under
the historical cost convention and in accordance with UK adopted international
accounting standards. The principal accounting policies adopted by the Group,
which remain unchanged, are set out in the statutory financial statements for
the year ended 31 December 2022.
Non-underlying items
Non-underlying items are material items which arise from unusual non-recurring
or non-trading events. They are disclosed in aggregate on the Consolidated
income statement where in the opinion of the Directors such disclosure is
necessary in order to fairly present the results for the period.
Non-underlying items comprise exceptional costs, the finance cost and deferred
tax related to the Group's pension schemes calculated in accordance with IAS19
and the impact of the movement in respect of the ineffective proportion of the
hedge.
Key areas of estimation uncertainty
Impairment of goodwill
The annual impairment assessment in respect of goodwill requires estimates of
the value in use of cash generating units to which goodwill has been allocated
to be calculated. As a result, estimates of future cash flows are required,
together with an appropriate discount factor for the purpose of determining
the present value of those cash flows.
Financial instruments valuation
Derivatives are used to minimise the impact of foreign exchange and interest
rate fluctuations on the Group. An asset or liability is recognised
representing the fair value of the instruments in place at the year end. The
fair value is calculated using certain estimates and valuation models by
reference to significant inputs including; implied volatilities in foreign
currency and interest rates and historical movements in foreign currency
exchange and interest rates.
Pension scheme valuation
The liabilities in respect of defined benefit pension schemes are calculated
by qualified actuaries and reviewed by the Group, but are necessarily based on
subjective assumptions. The principal uncertainties relate to the estimation
of the discount rate, life expectancies of scheme members, future investment
yields and general market conditions for factors such as inflation and
interest rates. Profits and losses in relation to changes in actuarial
assumptions are taken directly to reserves and therefore do not impact on the
profitability of the business, but the changes do impact on net assets.
Inventory provisioning
The Group reviews the net realisable value of and demand for its inventory on
an ongoing basis to ensure recorded inventory is stated at the lower of cost
or net realisable value. Factors that could impact estimated demand and
selling prices are the timing and success of future technological innovations,
competitor actions, suppliers prices and economic trends. If total inventory
losses differ, the Group's consolidated net income in the year would have
improved or declined, depending upon whether the actual results were better or
worse than expected.
Bad debt provision
At each reporting period, the Directors review outstanding debts and determine
appropriate provision levels. The recovery of certain debts is dependent on
the individual circumstances of customers. At the year end there are a
number of debts which remain outstanding past their due date, which the
Directors believe to be recoverable.
Intangible asset valuation
In attributing value to intangible assets arising on acquisition, management
has made certain assumptions in terms of cash flows attributable to
intellectual property and customer relationships. The key assumptions relate
to the trading performance of the acquired business, royalty rates applied in
the royalty relief calculation and discount rates applied to calculate the
present value of future cash flows. The Directors consider the resulting
valuation to be a reasonable approximation as to the value of the intangibles
acquired.
Freehold property revaluation
In ascertaining an accurate estimate of the value of freehold property, the
Directors utilise the latest professional valuation conducted along with
available information on local property value movements since the valuation
date.
Key judgements
Going Concern
The accounts are prepared on the going concern basis.
The Group has cash reserves and finance facilities available and the Board
continually monitor a rolling cashflow forecast for the business as a whole.
Given the Group's low fixed cost base and the facilities available to it, the
Board therefore considers the Group will continue to be able to meet its
liabilities as they fall due.
On that basis, the Directors are confident that they will be able to manage
the business in such a way that it will continue to operate and trade for at
least 12 months from the date of the signing of the accounts and have
therefore prepared these financial statements on a going concern basis.
Deferred tax assets
In determining the deferred tax asset to be recognised the Directors carefully
review the recoverability of these assets on a prudent basis and reach a
judgement based on the best available information. Estimates and judgements
used in the financial statements are based on historical experience and other
assumptions that the Directors and management consider reasonable and are
consistent with the Group's latest budgeted forecasts where applicable.
Judgements are based on the information available at each balance sheet
date. Although these estimates are based on the best information available
to the Directors, actual results may ultimately differ from those
estimates.
Cash flow hedging
In determining the proportion of forward foreign exchange contracts that are
effective hedges against currency fluctuations, the Directors produce detailed
forward forecasts to carefully determine the requirements of a particular
foreign currency to match future planned supplier payments.
In determining the proportion of the interest rate hedge contracts that are
effective against base interest rate fluctuations, the Directors measure the
level of borrowing against the remaining value of the contracts.
3. Segmental analysis
Due to the integration of a number of functions across the Group it is not
possible to accurately report operating segments in full, turnover has been
analysed into four key segments being Toys, Sports & Leisure, eMobility,
Bicycles and Home & Garden.
2022 2021
(£000s) (£000s)
Toys, Sports & Leisure 14,758 16,492
eMobility 3,788 6,990
Bicycles 4,846 10,191
Home & Garden 3,291 7,244
26,683 40,917
4. Earnings per share
The calculation of earnings per share is based on the net profit and ordinary
shares in issue during the year as follows:
31 December 2022 31 December 2021
£'000 £'000
Net profit for the year 674 3,826
Weighted average shares in issue (excluding shares held in treasury) used for 5,375,128 5,187,776
basic earnings per share
Weighted average dilutive shares under option 100,733 267,988
Average number of shares used for diluted earnings per share 5,475,861 5,455,764
Pence Pence
Basic earnings per share 12.5 73.8
Diluted earnings per share 12.3 70.1
5. Dividend
The Directors are proposing a final dividend of 6.57 pence per ordinary share
(year ended 31 December 2021 - 6.57 pence per share) payable to shareholders
on the register on 12 May 2023 and will be paid on or around 6 July 2023.
6. Annual report and accounts and final results presentation
The annual report and accounts will be posted to shareholders shortly and,
along with the final results presentation, will be available on the Company's
website, www.tandemgroup.co.uk (http://www.tandemgroup.co.uk) .
7. Annual General Meeting
The Annual General Meeting will be held at 11:00 on 29 June 2023 at 35
Tameside Drive, Castle Bromwich, Birmingham, B35 7AG.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
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