RNS Number:2985K
Wellington Holdings PLC
30 March 2005
For Immediate Release 30 March, 2005
WELLINGTON HOLDINGS PLC
Preliminary Results for the year ended 31 December, 2004
Sales up 9.4%;Operating Profit up 31.9%*;
Wellington Holdings plc., the manufacturer and distributor of specialist polymer
seals for engineering and industrial applications worldwide, today announces
preliminary results for the year ended 31st December 2004. Results show an
increase in turnover and operating profits,*whilst margins are at a record
14.8%.
Commenting on the Group's performance, Chairman, Brian Kent said: -
"We achieved excellent growth in virtually all our market segments, and this,
together with tight control of costs,has produced an impressive 32% increase in
operating profits."
Financial Highlights
2004 2003
Turnover #34m #31m
Operating Profit* #5m #3.8m
Profit before Tax #5.1m #1.9m
Earnings per share* 12.5p 9.6p
Dividend per share 7.0p 6.5p
Interest cover* 9.0x 5.6x
Margins at a record 14.8%*
Operating highlights:
1. Earnings per share* up 30%
2. Sales growth throughout our key market segments
3. Operating profit up 32%*
4. Gearing reduced from 113% to 25%
5. Completion of sale of Hampton site for #6.5m
* Before goodwill amortisation ,exceptional items and profit on sale of
property.
Commenting on the outlook, Mr. Kent added:
"The good order input of last year has continued into this new year and the
trading is on plan for the year to date. Assuming a continued strong energy
sector throughout the whole year, together with the implementation of our
present plans,this will lead to another year of satisfactory growth under the
leadership of our new Chief Executive Officer,Mr David Jones,appointed in
November 2004."
For Further information contact:
Brian Kent, Chairman 020 8941 3774
David Jones, Group Chief Executive 020 8941 3774
Philip Brady, BDO 020 8941 3774
or visit the Wellington website: - www.wellingtonholdings.com
Chairman's Statement
In 2004, we achieved excellent growth in virtually all our market segments
resulting in a 9.4% overall gain in sales to #33.9m (2003: #31m).
This, together with tight control of costs, has produced an impressive 32%
growth in operating profit to #5.0m before goodwill amortisation, exceptional
items and profit on sale of property. The sales and profit figures have taken
account of adverse currency movements, principally the US dollar, which have had
the effect of reducing them respectively by #2.0m and #0.3m.
Margins improved to a record 14.7% (12.2%) as operational gearing was enhanced
by the achievement of higher output levels in our plants.
In November we successfully completed the sale of our Hampton site for #6.5m
(book value #4.6m) which, after transaction costs and other pre-project costs
for our coming new development, led to a one-off net additional profit of #1.6m
and a #0.75m contribution to the profits.
Therefore, profit before tax showed a substantial rise to #5.1m from last year
of #1.9m.
As a result, E.P.S., before goodwill, exceptional items and profit on sale of
property, rose by 30% to 12.46p (9.57p) whilst basic earnings per share moved
from 5.84p in 2003 to 16.17p.
Markets
Our involvement in global energy markets, through our seals for oil and gas
wells, together with our special seals for longwall mining, has been a key
driver for increased volumes into our factories both in the USA and UK and
accounts for 31% of sales.
Volumes have been further enhanced by a strong market for construction and
off-highway vehicles which contributed 25% of our sales.
Finally, the automation market, accounting for 44% of sales, also performed
strongly as demand for hydraulic seals (the muscles of industry) grew during the
year, particularly in Germany and Australia.
We therefore experienced an excellent product mix in expanding markets which
confirmed our standing as a global supplier of key components to very demanding
applications.
Financial
Capital expenditure at #1.3m was slightly down on depreciation reflecting the
forthcoming Hampton site redevelopment and the increased capacity of recent
years.
The sale of the UK Hampton site transformed our borrowings and the net debt
position fell from #9.6m to #2.6m at the year end. Gearing is now a very modest
25% (113%). Interest cover is now 9x (5.6 last year) and operating cash flows
continue positive.
During 2005 and 2006, as previously announced, we are committed to expenditure
of the order of #3.5m on the new factory development. However, we do not expect
gearing to exceed 50% on completion of the project in early 2006.
International Accounting Standards
The Board has reviewed the potential impact of international accounting
standards on the Group's financial statements and at this stage does not
anticipate any material differences.
New Development
This project will transform our very old, inefficient network of buildings at
Hampton into a single, modern, high-efficiency factory and offices during this
year, 2005. After an initial rent-free year, the annual rental of our new
factory (fixed for 5 years) will be #590k which we expect to be more than
recovered by our lower interest costs and obvious efficiency savings in the new
streamlined layouts.
The new factory and offices will occupy 88,000 square feet compared with 130,000
square feet now and will be laid out to optimise material flows and high
productivity. Clearance of the site to be developed is almost complete and the
new build will begin in the next month.
Corporate Governance
The changing role of Chris Wilkins, after his 2 years excellent and vital role
of CEO, to that of 'non-executive mentor' to David Jones will further strengthen
the continuity of leadership at this critical time in the company's development.
The Board has three non-executive directors having over 10 years' service and
technically they do not therefore meet the requirements of the new code. It is
our intention in the coming year to review these appointments and, in some
cases, seek replacements.
The effectiveness and knowledge of the present board are high and we will be
reluctant to implement too rapid a change simply for purposes of code adherence.
Pension Fund
We have addressed the issue of the Pension Fund deficit, in co-operation with
the Scheme Trustees, in the already closed defined benefit section and managed
to reduce the FRS 17 deficit by #1.0m from #2.9m (after deferred tax credits) to
#1.9m now.
A significant part of this reduction has been obtained by buying out some 18% of
our deferred pensioners, who have now transferred to other schemes, thereby
removing both the mortality and investment risk of these.
Our total annual contribution paid into the two UK pension schemes is #437k and
the number of members in the UK is 150.
Dividend
The Board has decided to recommend an increased dividend of 4.6p per share to be
paid on 31 May 2005 to shareholders on the register at close of business on 22
April 2005, making 7.0p for the year (2003: 6.5p).
Employees
We have a strong, lean, management team worldwide many of whom have long service
within the Group, and other more recent appointments bring new talent and
industry experience to our business. We are grateful for their present and
future efforts and excellent performance.
Without the involvement of all our employees worldwide, these outstanding
results would not be possible and we continue to appreciate their commitment to
meeting the challenges before them in an ever-changing world.
Future
The good order input of last year has continued into this new year and the
trading is on plan for the year to date.
Assuming a continued strong energy sector throughout the whole year, together
with the implementation of our present plans, this will lead to another year of
satisfactory growth under the leadership of our new Chief Executive Officer, Mr.
David Jones, appointed in November 2004.
Preliminary Offer
As announced in our press release on 14 March 2005, we are in an offer period
which may or may not lead to the purchase of the company at a price in the range
of 180p - 185p per share.
Shareholders and customers may rest assured we are continuing with our key
projects as planned and all members of the management team are committed to the
business plan for 2005.
B.H. Kent
Chairman
Consolidated profit and loss account
For the year ended 31 December 2004
2004 2004 2003 2003
#000 #000 #000 #000
Turnover 33,937 31,001
Cost of sales (19,188) (18,313)
----------- -----------
Gross profit 14,749 12,688
Distribution costs (3,604) (3,389)
Administrative expenses (7,131) (6,704)
----------- -----------
Operating profit before
goodwill amortisation 5,008 3,795
and exceptional costs
Goodwill amortisation (146) (147)
Exceptional costs (848) (1,053)
---------- -----------
Operating profit 4,014 2,595
Profit on sale of 1,594
property
Interest receivable -
Interest payable and (557) (682)
similar charges
---------- ----------
Profit on ordinary 5,051 1,913
activities before
taxation
Tax on profit on ordinary (1,197) (527)
activities
---------- ----------
Profit on ordinary
activities after taxation 3,854 1,386
and for the financial
year
Dividend paid and (1,676) (1,545)
proposed
-------- --------
Retained profit /(loss) 2,178 (159)
for the year
Earnings per share
Basic 16.17p 5.84p
Basic pro-forma 12.46p 9.57p
Diluted 16.01p 5.80p
-------- --------
Consolidated statement of total recognised gains and losses
For the year ended 31 December 2004
2004 2003
#000 #000
Profit for the financial year 3,854 1,386
Curency translation differences on foreign currency net
investments (264) 279
-------- --------
Total gains and losses recognised since last annual 3,590 1,665
report ======== ========
Consolidated balance sheet
at 31 December 2004
2004 2004 2003 2003
#000 #000 #000 #000
Fixed assets
Intangible assets 2,316 2,299
Tangible assets 5,461 10,364
-------- --------
Current assets 7,777 12,663
Stocks 5,136 4,922
Debtors 6,139 5,853
Cash at bank 1,731 961
-------- --------
13,006 11,736
Creditors: amounts falling due (6,729) (8,877)
within one year
-------- --------
Net current assets 6,277 2,859
-------- --------
Total assets less current 14,054 15,522
liabilities
Creditors: amounts falling due after
more than one (3,221) (6,640)
year
Provisions for liabilities and (341) (369)
charges
-------- --------
Net assets 10,492 8,513
======== ========
Capital and reserves
Called up share capital 2,386 2,377
Share premium account 3,270 3,214
Capital redemption reserve 1,569 1,569
Profit and loss account 3,267 1,353
-------- --------
Equity shareholders' funds 10,492 8,513
======== ========
Consolidated cash flow statement
For the year ended 31 December 2004
2004 2004 2003 2003
#000 #000 #000 #000
Net cash inflow from continuing
operating 5,096 3,263
activities
Returns on investments and servicing
of finance
Interest received -
Interest paid (540) (668)
Finance lease interest paid (17) (14)
-------- --------
Net cash outflow from returns on
investment and (557) (682)
servicing of finance
Taxation
Tax paid - UK 56 (137)
- Overseas (1,083) (310)
-------- --------
Tax paid (1,027) (447)
Capital expenditure and financial
investment
Sale of fixed assets 6,259
Acquisition consideration (207) -
Purchase of concessions, licenses (52) (43)
and patents
Purchase of tangible fixed assets (1,231) (1,115)
-------- --------
Net cash inflow/(outflow) from
capital expenditure 4,769 (1,158)
and financial investment
Equity dividends paid (1,601) (1,542)
-------- --------
Net cash (outflow)/inflow before 6,680 (566)
financing
Financing
Share capital issued 65 46
Increase in borrowings - -
Repayment of amounts borrowed (2,801) (417)
Capital element of finance lease (191) (248)
rental payments
-------- --------
Net cash (outflow)/inflow from (2,927) (619)
financing
-------- --------
(Decrease)/increase in cash in the 3,753 (1,185)
year ======== ========
Reconciliation of net cash flow to movement in net debt
For the year ended 31 December 2004
2004 2004 2003 2003
#000 #000 #000 #000
(Decrease)/increase in cash in the 3,753 (1,185)
year
Cash outflow/ (inflow) from debt and 2,992 665
lease financing
-------- --------
Change in net debt resulting from 6,745 (520)
cash flow
Translation difference 276 784
Net debt at beginning of year (9,624) (9,888)
-------- --------
Net debt at end of year (2,603) (9,624)
======== ========
Reconciliation of operating profit to net cash inflow from operating activities
2004 2003
#000 #000
Operating profit 4,014 2,595
Depreciation and amortisation 1,468 1,483
(Increase) in stocks (160) (460)
(Increase) in debtors (286) (611)
Increase/(Decrease) in creditors 60 256
Movement in provisions - -
-------- --------
Net cash inflow from operating activities 5,096 3,263
======== ========
Notes:
1. The report and accounts have been prepared under the accounting policies
set out in the last annual report. The financial information set out above
does not constitute the company's statutory accounts for the years ended
31 December 2004 or 2003. The financial information for 2003 is derived
from the statutory accounts for 2003 which have been delivered to the
Registrar of Companies. The auditors have reported on the 2003 accounts;
their report was unqualified and did not contain a statement under Section
237(2) or (3) of the Companies Act 1985. The statutory accounts for 2004
will be finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's Annual General Meeting.
2. The exceptional costs of #848,000 in 2004 relate to the revenue costs of
the Hallite Hampton site redevelopment project already notified to
shareholders which will continue into 2005. The exceptional costs in 2003
relate to the combining of the Hallite Sales Unit in Fort Wayne, Indiana,
into a Fluid Power Centre based in Detroit, and senior management severance
costs to produce a flatter top management structure and compensation for
resignation of Wellington Main Board Directors.
3. During the year the company sold its freehold site at Hampton, Middlesex,
for #6.5m, and a profit after transaction costs of #1,594,000.
4. The final ordinary dividend of 4.6p net per share will be paid on 31 May
2005 to shareholders registered on 22 April 2005 subject to share-holders'
approval at the Annual General Meeting to be held on 19 May 2005. An
interim dividend of 2.4p net was paid on 30 November 2004.
5. Earnings per share have been calculated by reference to the average number
of ordinary shares of 10p each in issue in the period being 23,834,034 and
on the profit after taxation.
6. The pro-forma earnings per share is calculated after eliminating the
goodwill amortisation, the exceptional costs and profit on sale of property
and the tax effects thereon. The directors believe that the earnings per
share calculated by adjusting for the above gives a more meaningful
indication of the Group's underlying performance.
7. In the period the company issued 95,000 ordinary shares of 10p each arising
from an exercise of share options at exercise prices between 62.5p and 85p.
This resulted in an increase in shareholder funds of #65,086.
8. It is expected that the Annual Report and Accounts will be posted to
shareholders not later than 27 April 2005. Further copies may be obtained
upon request from the Company Secretary at 130 Oldfield Road, Hampton,
Middlesex TW12 2HT, and can be viewed on the company's website:
www.wellingtonholdings.com
This information is provided by RNS
The company news service from the London Stock Exchange
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