REG - Tandem Grp PLC - Final Results
25/03/2024 07:00
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RNS Number : 0515I Tandem Group PLC 25 March 2024
TANDEM GROUP PLC
(the "Company" or "Group")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
The Board of Tandem Group plc (AIM: TND), designers, developers, distributors
and retailers of sports, leisure and mobility equipment, announces its audited
results for the year ended 31 December 2023 ("FY23").
Summary
· Group revenue in FY23 of £22.2 million (FY22: £26.7 million)
and loss before taxation of £1.2 million (FY22 profit before taxation: £0.9
million), in line with market expectations.
· Notwithstanding a 17% reduction in Group revenue, eMobility
continued to outperform, with the Group's eMobility segment revenues 44% ahead
of FY22 - driven by a significant increase in the sale of electric bikes and
electric golf trolleys.
· Gross profit of £6.0 million (FY22: £7.8 million) at a gross profit
margin of 27.0% (FY22: 29.2%), reflecting the prevailing trading environment
and a weakened Sterling value against the US Dollar and a particularly strong
gross margin in FY22 as a result of forward bought foreign exchange contracts
where gains were realised on exchange.
· As signalled at the time of the Company's interim results
published in September 2023, the Board will continue to not propose the
resumption of dividend payments until such time as the Company's profits
permit.
· Cash and cash equivalents of £0.4 million as at 31 December 2023 (31
December 2022: £3.3 million)
· Net assets at 31 December 2023 of £23.8 million (31 December
2022: £26.8 million)
· Net debt at 31 December 2023 of £3.6 million (31 December 2022:
£1.6 million)
· Amidst a difficult economic environment, there have been encouraging
signs. The Group has delivered resilient performance during a period in which
multiple industry participants have become highly distressed. The continued
success of our initiatives within eMobility and a strategic focus provide the
Board with confidence for the future.
For further information contact:
Enquiries:
Tandem Group plc
David Rock, Company Secretary
Telephone 0121 748 8075
Nominated Adviser and Broker
Cavendish Capital Markets Limited
Ben Jeynes / Dan Hodkinson - Corporate Finance
Michael Johnson / Charlie Combe - Sales and Equity Capital Markets
Telephone 020 7220 0500
Chairman's statement
Introduction
I hereby present the results of the Group for the year ended 31 December 2023,
a year which we have exited in a strong position despite the challenges we
faced in the year.
Results
The net assets of the Group have decreased by 11% from £26,788,000 at 31
December 2022, to £23,811,000 at 31 December 2023. Unlike in the previous
year, the decrease in net assets was partly as a result of a material
reduction in the valuation of the defined benefit pension schemes by
£666,000, due largely to a strengthening of mortality assumptions. The Group
also posted a net loss before tax for the year of £1,198,000, which is within
our previously guided range.
Group revenue for the year ended 31 December 2023 reduced to £22,242,000 from
£26,683,000 in the previous year.
In the first half of the year Group revenue decreased by approximately 24%
with reductions in three of our four operating divisions. The exception was
eMobility. In the second half of the year there was a decrease of
approximately 9% in Group revenue, where eMobility was again the only division
to outperform the prior year.
Toys, Sports & Leisure
Revenue in this division for 2023 was down on the prior year by approximately
32%. This was largely a result of the reduction of Freight on Board (FOB)
sales, as retailers entered 2023 with overstocks from 2022. Widespread reports
of tough trading conditions for retailers align with the suppression of sales
experienced by the Group, as businesses continue to navigate tough market
conditions.
In Golf turnover including electric golf trolleys (which form part of the
eMobility category) was 8% behind the prior year, however turnover from
electric golf trolleys more than doubled during the period.
eMobility
Part of our strategic focus continues to include eMobility products, and this
division has achieved an increase in turnover of 44% over the prior year.
This is being driven by a significant increase in the sale of electric bikes
and electric golf trolleys.
Our Electric Life shop and website have together made a significant
contribution to turnover. We have also introduced a number of premium brands
under new retail agreements such as Orbea, Whyte and Pure.
Bicycles
This division was again challenging across all customer types, from
independents to national retailers, resulting in a reduction in revenue
against the previous period.
However, bikes including electric bike sales (which are part of the eMobility
category) increased on the prior year by 17%, against the backdrop of a market
reporting declines across the industry. Also, turnover from our lightweight
premium Squish bikes surpassed the prior year, as they continue to increase in
popularity.
Home & Garden
A continued reduction in discretionary consumer spending continued to be
widely reported in 2023, due to the ongoing cost of living crisis. This was
coupled with adverse weather impacts prevailing throughout 2023 which affected
both heating and cooling product sales. These factors contributed to a
reduction in turnover in this division by 27% against the prior year.
Group operating profit
As in the prior year, we will not be alone in reporting that the operating
environment remained challenging. Group operating loss before exceptional
costs, finance costs and taxation decreased to £768,000 for the year ended 31
December 2023 compared to a profit of £1,312,000 for the year ended 31
December 2022. Gross margin was 27.0% against 29.2% in the prior year as a
result of currency gains made on forward contracts in 2022, and an increase in
operating expenses from £6,484,000 in the prior period to £6,768,000 in the
year to 31 December 2023.
Group balance sheet
Following the completion of the construction of our new warehouse, property,
plant and equipment increased from £14,700,000 at 31 December 2022 to
£15,404,000 at 31 December 2023.
The business has continued to control its levels of inventory throughout the
year, ending the period in a good stock position with new, innovative products
being introduced, leading to a slight increase in levels held at the year end
to £5,161,000 compared to £4,757,000 in the prior period. This is still well
below the levels at the year ended 31 December 2021 where they were
£8,064,000.
The property project continued to affect the net cash position. Cash and
cash equivalents decreased to £447,000 at 31 December 2023 compared to
£3,288,000 at 31 December 2022, with the Group moving from a net debt
position as at 31 December 2022 of £1,551,000 to £3,568,000 at 31 December
2023 due to the losses incurred during the period and the final payments
required to complete the new warehouse project.
Since the year end, we are pleased that the Group has now entered into a new
five year bank facility with HSBC, which will refinance and replace all
existing loans with HSBC on drawdown, ensuring stability for our future plans
and growth.
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 no dividend should
be paid this year (year ended 31 December 2022 - 6.57 pence per share).
This will also assist to preserve cash 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 Tandem Group Pension Plan. For the year ended 31 December 2023, an
additional payment of approximately £188,000 was paid into the Tandem Group
Pension Plan. Due to no dividend for 2023, no additional payment would be
required during the year ending 31 December 2024.
Colleagues
Our colleagues continue to be a differentiator in building our future plans.
We have attracted new talent to an already strong team during the year to
support our strategy and growth opportunities.
Leadership
Peter continues to bring a positive and dynamic perspective to the business
associated with a strong strategic vision and purpose and has further
strengthened the team in critical areas in order to achieve our long-term
growth plans.
Outlook
Despite facing various challenges and uncertainties, we are pleased to report
that our sales for 2024 have commenced in line with our forecasts, marking a
promising start to the year.
As anticipated, our FOB sales are trailing behind the previous year's figures,
however domestic sales are exceeding prior year levels, demonstrating
resilience and adaptability in the face of ever-changing market conditions.
This outcome was well within our expectations, considering the strategic
shifts and market dynamics that we have been closely monitoring.
Furthermore, we have been proactive in managing the potential disruptions
arising from the developments in the Red Sea region. Despite the minimal
impact on our operations, we have built in measures to mitigate any adverse
effects, ensuring continuity and stability within our business operations.
Looking ahead, the strategic focus of the Group remains centred on innovation
and the introduction of new product lines across all sectors of our business.
Building upon the success of our existing offerings, we are committed to
enhancing our product portfolio to meet evolving consumer needs and
preferences.
We continue to expand our licensed toy range, which now features exciting new
additions such as licensed bumper cars, along with Rollacases tailored
specifically for children, which, with the booming holiday season approaching,
we anticipate that these products will be in strong demand. I am delighted to
announce that Disney's 'Stitch' brand has exceeded our expectations in 2023,
demonstrating remarkable popularity among consumers. The sales figures we
observed throughout 2023 reflect the strong affinity and enthusiasm for this
brand. Building on this success, we anticipate an even more promising
performance in 2024. We expect to release around 200 new products in the Toys,
Sports and Leisure division this year, excluding golf.
Furthermore, we are proud to introduce our new proprietary product brand,
MoVe, which we anticipate will resonate strongly with our customer base. We
have also developed and introduced a new children's scooter brand 'Squishles',
a brand-new concept across both licensed and non-licensed wheeled toys, the
range combines the latest trend in squishy plush with practical onboard
scooter storage.
As we look to continue building on the number of national retailer accounts we
serve, we have recently onboarded 3 of Britain's best loved national retailers
in the toy division. We expect these accounts to significantly contribute to
domestic turnover in 2024.
In our eMobility segment, we continue to witness strong results, particularly
in the sales of eBikes, reflecting a significant shift in consumer preferences
towards sustainable and alternative modes of transportation. The demand for
eBikes continues to grow, resulting in a remarkable start to the year with
turnover 65% higher compared to the same period last year.
We are excited to announce the launch of new ranges of both mechanical and
electric bikes under our own brands such as Dawes, Claud Butler and Falcon in
2024, including 10 new electric bikes, 12 new hybrid bikes, 6 new mountain
bikes, 7 new children's Squish bikes and 8 new children's bikes. Building on
the positive reception of our Wrath and Spire electric bikes introduced in
2023, these new additions will further expand our offerings and cater to a
wider range of customers seeking innovative and sustainable transportation
solutions.
Sales of our lightweight children's bike brand, Squish, are significantly
ahead against the equivalent period in 2023. Additionally, we are proud to
unveil a new range of balance bikes, which aligns with our commitment to
providing high-quality, safe, and enjoyable cycling experiences for young
riders, fostering a lifelong love for cycling from an early age.
We are delighted to be partnering with premium brands Orbea, Whyte, Pure,
Cannondale and Gocycle. These partnerships have strengthened our market
position and expanded our reach to a wider customer base, enabling us to
capitalise on the growing demand for electric bicycles in our retail
proposition.
Furthermore, our integrated approach through our Electric Life shop and
website has proven to be highly effective in driving sales growth. The
seamless synergy between our physical retail presence and online platform has
facilitated greater accessibility and convenience for customers such as the
facility of being able to offer test rides, contributing significantly to the
accelerated sales of electric bikes.
In our Home and Garden we are excited to introduce a fresh range of around 40
products already for this year including awnings, garden furniture, and home
products such as innovative ceiling fans and air coolers. These new additions
demonstrate our dedication to offering the latest trends and innovative
solutions for enhancing outdoor and indoor living spaces, providing our
customers with stylish and functional options to elevate their living
environments.
Looking ahead into the remainder of 2024, we maintain a cautiously optimistic
outlook on our position within the market. We are encouraged by the increasing
positive indicators suggesting a recovery within the retail industry, coupled
with favourable factors such as budget changes that will potentially put more
disposable income in the hands of consumers. Additionally, the expected
decline in interest rates later in the year bodes well for stimulating
economic activity.
As we move forward, the Group is firmly positioned to capitalise on emerging
opportunities and leverage our strengths to drive sustained growth. The Board
maintains confidence in the strategic direction of the Group, grounded in our
commitment to innovation, customer-centricity, and operational excellence.
S J Grant
Chairman
22 March 2024
Strategic report
Operating and Financial Review
Revenue
Group revenue for the year ended 31 December 2023 was £22,242,000 compared to
£26,683,000 in the prior year. As we have previously reported, revenue is
split into four main segments.
2023 2022 2021
(£000s) (£000s) (£000s)
Toys, Sports & Leisure 10,107 14,758 16,492
eMobility 5,452 3,788 6,990
Bicycles 4,266 4,846 10,191
Home & Garden 2,417 3,291 7,244
22,242 26,683 40,917
Gross profit
Gross profit of £7,796,000 in 2022 decreased by 23.0% to £6,000,000 in
2023.
The gross profit margin percentage decreased from 29.2% to 27.0%. This was
mainly as a result of a challenging trading environment and a weakened
Sterling value against the US Dollar. In 2022, the margin benefitted from
forward bought foreign exchange contracts where gains were realised on
exchange. The Group has again continued to work hard on negotiating cost
reductions.
Operating expenses
Group operating expenses increased by 4.4% to £6,768,000 in the year (year
ended 31 December 2022 - £6,484,000). This was driven by increases in
depreciation costs following the completion of the new warehouse build, and
increases in advertising expenses. This was partly offset by a reduction of
costs in rent and rates following the end for need of additional third party
storage and the rental of the Northampton premises.
Operating result
Operating loss before exceptional costs was £768,000 for the year ended 31
December 2023 compared to an operating profit of £1,312,000 in the prior
year.
Non-underlying items
Non-underlying items comprised:
· Exceptional costs of £103,000 (year ended 31 December 2022 -
£223,000) in respect of employment costs relating to the resignation of the
former Supply Chain and E-Commerce Director, and shunting costs relating to
the relocation of a warehouse and distribution facility.
· Pension finance costs under IAS19 of £73,000 (year ended 31
December 2022 - £97,000); and
· A deferred tax charge of £130,000 (year ended 31 December 2022 -
£139,000) in respect of pension schemes.
Finance costs
Total net finance costs increased to £327,000 in the year ended 31 December
2023 compared to £237,000 in the year ended 31 December 2022.
There was an increase in total interest payable on bank loans, overdrafts,
hire purchase and invoice finance facilities from £144,000 in the prior year
to £324,000 in 2023 due to the increased borrowing to fund the new warehouse
construction. This was offset by an increase in the income received for the
interest rate hedge from £8,000 in 2022 to £70,000 in 2023.
Interest payable on lease arrangements was £nil compared to £4,000 in 2022.
Finance costs in respect of the pension schemes provided in line with IAS19
were £73,000 compared to £97,000 for the year ended 31 December 2022.
Taxation
The tax expense for the year ended 31 December 2023 was £39,000 compared to
£178,000 in the prior year.
The current tax credit, which comprised corporation tax from the overseas Hong
Kong operation, net of a refund of the corporation tax charge in 2022, was
£155,000 (year ended 31 December 2022 - £77,000).
There was a deferred tax charge of £194,000 compared to £255,000 in the
prior year.
Net loss/profit
Net loss for the year ended 31 December 2023, after non-underlying items,
finance costs and taxation charges was £1,237,000 compared to a profit of
£674,000 for the year ended 31 December 2022.
Adjusted EBITDA
Adjusted EBITDA (Earnings Before Interest, Taxation, Depreciation,
Amortisation and Exceptional Costs) was (£461,000) for the year ended 31
December 2023, compared to £1,475,000 in the prior year.
Capital expenditure
Total expenditure on property, plant and equipment incurred during the year
was £985,000 (year ended 31 December 2022 - £4,880,000). This was mainly in
relation to the construction of the new warehouse in Birmingham and new
racking within that facility.
Cash flows, working capital and net cash
Net cash outflow from operating activities before movements in working capital
for the year ended 31 December 2023 was £1,146,000 compared to an inflow of
£611,000 in the year ended 31 December 2022.
Cash outflow from operations was £358,000 compared to cash generated of
£1,395,000 last year.
Net cash outflows from investing activities were £1,009,000 in 2023, against
£4,960,000 in the previous year due to the capital expenditure referred to
above.
There was a net cash outflow from financing activities of £1,170,000 in 2023,
which compared to an inflow of £555,000 in 2022. The net outflow was mainly
due to loan repayments in 2023, with new loans received in 2022.
As a result of these movements the closing cash position at 31 December 2023
was £447,000 compared to £3,288,000 at 31 December 2022.
Net debt, comprising cash and cash equivalents less invoice financing
liabilities and borrowings, was £3,568,000 at 31 December 2023, compared to
£1,551,000 at the end of the previous year.
Dividends
Due to the current year results, no final dividend will be paid for the year
ended 31 December 2023 (year ended 31 December 2022 - 6.57 pence per share).
Total dividends paid and proposed for the year ended 31 December 2023 are nil
pence per share (year ended 31 December 2022 - 10.00 pence per share). As
the total dividend will not exceed the deficit repair contributions paid to
the Tandem Group Pension Plan, in accordance with a previous agreement with
the pension scheme trustees, there will be no requirement to pay an additional
contribution equal to the excess into the scheme.
The dividend cover ratio is not applicable for the year ended 31 December 2023
(year ended 31 December 2022 - 1.3).
(Loss)/earnings per share
Basic loss per share was 22.6 pence per share for the year ended 31 December
2023 compared to a basic earnings per share of 12.5 pence per share in the
year ended 31 December 2022. Diluted loss per share was 22.6 pence per share
compared to a diluted earnings per share of12.3 pence per share in the prior
year.
Product range overview
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 this division has seen a decline of approximately 32% in 2023
compared to the previous year. This decrease was primarily attributed to a
reduction in Freight on Board (FOB) sales, as retailers began the year with
excess inventory from 2022. The prevalent reports of challenging trading
conditions within the retail sector were in line with the downturn in sales
experienced by the Group, reflecting the broader market challenges faced by
businesses in navigating these tough market conditions.
In our Golf brands, overall turnover, including electric golf trolleys falling
under the eMobility category, reduced by 8% compared to the prior year.
However, the turnover from electric golf trolleys more than doubled during the
period, showcasing notable growth within this specific product category.
eMobility
Our eMobility includes sales of electric scooters, bikes, golf trolleys and
mobility scooters.
Our strategic focus on eMobility products remains, and we are pleased to
announce a significant increase in turnover of 44% over the previous year
within this division. This growth is primarily driven by a substantial
increase in the sales of electric bikes and electric golf trolleys.
We are excited to unveil more new and innovative ranges of eBikes, designed in
the UK and marketed under our established brands Dawes and Claud Butler. With
the continued rise in demand for eBikes, we are well positioned to capitalise
on this trend and further enhance our market presence in the eMobility sector.
The combined efforts of our Electric Life shop and website have played a
pivotal role in driving this increased turnover. Through these platforms,
alongside our own brands and products we have successfully introduced several
premium brands under new retail agreements, including Orbea, Whyte, and Pure,
which have resonated strongly with our customer base.
Bicycles
Revenue from the bicycle business includes both child and adult bicycles,
along with licensed character bikes, but excludes any electric bicycles.
Once again, this division presented challenges across various customer
segments, spanning from independent retailers to national chains, leading to a
decline in revenue compared to the previous period.
However, amidst a market grappling with declines, there was a notable 17%
increase in bike sales, including electric bikes categorised under eMobility.
This growth stands out against the backdrop of an industry facing downward
trends. Additionally, turnover from our lightweight premium Squish bikes
exceeded the previous year's figures, reflecting their growing popularity.
Furthermore, amidst market challenges, we have seen some of our competitors in
this segment face notable setbacks, with some exiting the market entirely or
encountering financial distress leading to administration. In light of these
developments, we will seek opportunities presented, leveraging our strengths
to further solidify our position within the industry.
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.
Throughout 2023, there was a trend of diminishing discretionary consumer
spending, largely attributed to the cost of living crisis. Additionally,
adverse weather conditions persisted, adversely affecting sales of heating and
cooling products. These combined factors resulted in a 27% decrease in
turnover within this division compared to the prior year.
Despite these challenges, our commitment to innovation and product development
remains steadfast. We continue to focus on introducing new and compelling
offerings into this segment, ensuring we stay responsive to evolving consumer
needs and market dynamics.
Property
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 was used to
revalue the property as at 31 December 2022. The Directors are of the opinion
that the value after costs to complete the property incurred during the year
is correctly reflected in the accounts at £14,299,000.
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 2023 increased to
£726,000 compared to £60,000 at 31 December 2022. Whilst gilt yields were
unchanged at 4.8%, a strengthening of the mortality assumptions was the driver
of the increase in the deficit.
The pension schemes continued to utilise the Group's cash resources with
payments in respect of the schemes totalling £723,000 (year ended 31 December
2022 - £682,000). The total comprised deficit contributions of £563,000
and £34,000 in respect of the Tandem and Casket schemes respectively (year
ended 31 December 2022 - £550,000 and £101,000) and government levies and
administration costs of £126,000 (year ended 31 December 2022 - £31,000).
The latest triennial valuation date for the Tandem scheme was 1 October 2022
and the Casket scheme 5 April 2022.
The Tandem scheme 1 October 2022 triennial valuation was finalised in November
2023 and showed a deficit of £2,774,000 (1 October 2019-£3,553,000). The
deficit reduced due to a significant increase in the gilt rate offset by a
strengthening of the assumptions, particularly in respect of the discount
rate, to reflect the significant maturity of the scheme. A schedule of
contributions has been put in place such that the deficit will be eliminated
by September 2028. Contributions for the year to 30 September 2024 will be
£388,962, increasing year on year up to £530,524 by the year to 30 September
2028. In addition, all the expenses of the scheme will be paid by the Group.
There is an agreed provision that in any calendar year should dividend
payments by the Company exceed the deficit contributions paid an additional
contribution equal to the excess will be made. As a consequence an additional
contribution of £188,000, included in the total contributions above, was paid
on 30 September 2023, in relation to the 2022 dividends.
The Casket scheme 5 April 2022 triennial valuation was finalised in April 2023
and showed a surplus of £109,000 (5 April 2019-deficit of £314,000). The
surplus has arisen due to the significant increase in the gilt rate leading to
an increase in the discount rate assumed. As a consequence, no further
contributions are payable to the scheme. The Group will contribute up to
£20,000 of scheme expenses per annum.
Colleagues
We currently employ 72 colleagues in the Group, they are still our most
important asset.
We continue to offer 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 and 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 whilst also sourcing ranges from
UK and Europe.
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
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 on a depreciating basis 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 Group operates 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
22 March 2024
Consolidated income statement
31 December 2023 31 December 2022
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 22,242 - 22,242 26,683 - 26,683
Cost of sales (16,242) - (16,242) (18,887) - (18,887)
Gross profit 6,000 - 6,000 7,796 - 7,796
Operating expenses (6,768) - (6,768) (6,484) - (6,484)
Operating (loss)/profit before exceptional costs (768) - (768) 1,312 - 1,312
Exceptional costs - (103) (103) - (223) (223)
Operating (loss)/profit (768) (103) (871) 1,312 (223) 1,089
Finance costs (254) (73) (327) (140) (97) (237)
(Loss)/profit before taxation (1,022) (176) (1,198) 1,172 (320) 852
Tax expense 91 (130) (39) (39) (139) (178)
Net (loss)/profit for the year (931) (306) (1,237) 1,133 (459) 674
(Loss)/earnings per share 4 Pence Pence
Basic (22.6) 12.5
Diluted (22.6) 12.3
Consolidated statement of comprehensive income
31 December 2023 31 December 2022
£'000 £'000
Net (loss)/profit for the year (1,237) 674
Other comprehensive income:
Items that will be reclassified subsequently to profit and loss:
Foreign exchange differences on translation of foreign operations (48) 96
Cashflow hedging contracts (179) 540
Items that will not be reclassified subsequently to profit or loss:
Revaluation of property, plant and equipment - 2,189
Actuarial (loss)/gain on pension schemes (1,190) 1,472
Movement in pension schemes' deferred tax provision 3 (214)
Other comprehensive (loss)/profit for the year, net of tax (1,414) 4,083
Total comprehensive (expense)/income for the year attributable to equity (2,651) 4,757
shareholders
Consolidated balance sheet
31 December 2023 31 December 2022
£'000 £'000
Non current assets
Intangible fixed assets 5,527 5,525
Property, plant and equipment 15,404 14,700
Deferred taxation 663 854
21,594 21,079
Current assets
Inventories 5,161 4,757
Trade and other receivables 5,176 6,633
Derivative financial asset held at fair value 173 279
Current tax assets 10 -
Cash and cash equivalents 447 3,288
10,967 14,957
Total assets 32,561 36,036
Current liabilities
Trade and other payables (3,935) (4,200)
Borrowings (4,015) (1,085)
Derivative financial liability held at fair value (74) -
Current tax liabilities - (149)
(8,024) (5,434)
Non current liabilities
Borrowings - (3,754)
Pension schemes' deficit (726) (60)
(726) (3,814)
Total liabilities (8,750) (9,248)
Net assets 23,811 26,788
Equity
Share capital 1,503 1,503
Shares held in treasury (135) (137)
Share premium 729 716
Other reserves 7,076 7,303
Profit and loss account 14,638 17,403
Total equity 23,811 26,788
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 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
Exercise of share options - 55 242 - - - - - - 297
Share based payments - - - - - - - - 21 21
Reclassified to cost of inventory - - - (486) - - - - - (486)
Dividends paid - - - - - - - - (540) (540)
Total transactions with owners - 55 242 (486) - - - - (519) (708)
At 1 January 2023 1,503 (137) 716 279 1,036 1,427 3,860 701 17,403 26,788
Net loss for the year - - - - - - - - (1,237) (1,237)
Re-translation of overseas subsidiaries - - - - - - - (48) - (48)
Forward contracts - - - (179) - - - - - (179)
Net actuarial loss on pension schemes - - - - - - - - (1,187) (1,187)
Total comprehensive income for the year attributable to equity shareholders - - - (179) - - - (48) (2,424) (2,651)
Exercise of share options - 2 13 - - - - - - 15
Share based payments - - - - - - - - 20 20
Dividends paid - - - - - - - - (361) (361)
Total transactions with owners - 2 13 (179) - - - - (341) (326)
At 31 December 2023 1,503 (135) 729 100 1,036 1,427 3,860 653 14,638 23,811
Consolidated cash flow statement
31 December 2023 31 December 2022
£'000 £'000
Cash flows from operating activities
Net (loss)/profit for the year (1,237) 674
Adjustments:
Depreciation of property, plant and equipment 272 141
Amortisation of intangible fixed assets 35 22
Profit on sale of property, plant and equipment (5) (11)
Contribution to defined benefit pension plans (597) (651)
Finance costs 327 237
Tax expense 39 178
Share based payments 20 21
Net cash flow from operating activities before movements in working capital (1,146) 611
Change in inventories (404) 3,307
Change in trade and other receivables 1,457 3,610
Change in trade and other payables (265) (6,133)
Cash (used in)/generated from operations (358) 1,395
Interest paid (254) (139)
Tax paid (2) (26)
Net cash flows from operating activities (614) 1,230
Cash flows from investing activities
Purchases of intangible fixed assets (37) (93)
Purchases of property, plant and equipment (985) (4,880)
Sale of property, plant and equipment 13 13
Net cash flows from investing activities (1,009) (4,960)
Cash flows from financing activities
Loan repayments / new loans (500) 2,013
Finance lease repayments - (54)
Movement in invoice financing (324) (1,161)
Exercise of share options 15 297
Dividends paid (361) (540)
Net cash flows from financing activities (1,170) 555
Net change in cash and cash equivalents (2,793) (3,175)
Cash and cash equivalents at beginning of year 3,288 6,367
Effect of foreign exchange rate changes (48) 96
Cash and cash equivalents at end of year 447 3,288
Notes to the results
1. General information
The financial information set out in this 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 2023, 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 2023 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 2023.
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 financial statements 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 financial statements 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.
2023 2022
(£000s) (£000s)
Toys, Sports & Leisure 10,107 14,758
eMobility 5,452 3,788
Bicycles 4,266 4,846
Home & Garden 2,417 3,291
22,242 26,683
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 2023 31 December 2022
£'000 £'000
Net (loss)/profit for the year (1,237) 674
Weighted average shares in issue (excluding shares held in treasury) used for 5,470,829 5,375,128
basic earnings per share
Weighted average dilutive shares under option 41,217 100,733
Average number of shares used for diluted earnings per share 5,512,046 5,475,861
Pence Pence
Basic (loss)/earnings per share (22.6) 12.5
Diluted (loss)/earnings per share (22.6) 12.3
The impact on the loss per share of the share options for the year ended 31
December 2023 is anti-dilutive.
5. Dividend
Due to the current year results, no final dividend will be paid for the year
ended 31 December 2023 (year ended 31 December 2022 - 6.57 pence per share).
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 26 June 2024 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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