TIDMPTD
RNS Number : 2936H
Pittards PLC
24 March 2020
24 March 2020
Pittards plc
(" Pittards " or " the Group ")
Full year results for the year ended 31 December 2019
Pittards plc, the specialist producer of technically advanced
leather and luxury leather goods for retailers, manufacturers and
distributors today announces its results for the year ended 31
December 2019.
Highlights - Year ended 31(st) December 2019 :
-- Revenue GBP22.3m (2018: GBP28.5m)
-- Gross margin increased to 30.9% (2018: 25.1%)
-- PBT increased to GBP0.6 m (2018: GBP0.4m)
-- EBITDA increased to GBP2.0 m (2018: GBP1.8m)
-- Net assets GBP17.5 m (2018: GBP17.8m*restated for deferred tax)
-- Repeat orders from both interiors and big shoe markets
-- Further establishment of Ethiopia as a shoe manufacturer
Stephen Yapp, Chairman, commented: "We have come a long way this
year; achieving expectations despite weaker global demand and, in
entering the strategically important interiors and large shoe
markets, changing the shape of our business.
We are committed to optimising and growing our business with all
our customers and accordingly continually strive to create
innovative and high-quality products across all the markets we
operate in. Aligned with our strategic priorities, we are
delivering predominantly hide-related new products to a wider range
of customers, creating a more balanced portfolio.
We entered 2020 as a more diverse business, with improved
margins and increased flexible manufacturing facilities, which is
set to take full advantage of its markets. However, the outlook for
the current year is uncertain due to the impact of Coronavirus
(COVID-19) and has started with reduced demand whilst we the board
are acitvely monitoring the situation on a frequent and regular
basis, and have contingencies in place to address the evolving
situation.
Looking forward, the Board has actively been considering the
payment of dividends and commencement of a share buyback program.
This will be revisited once the current global uncertainties
connected to Coronavirus (COVID-19) are resolved sufficiently
".
For further information, please contact:
Pittards PLC - www.pittards.com
Stephen Yapp, Chairman +44 (0) 1935 474 321
Reg Hankey, CEO
Richard Briere, CFO
WH Ireland Limited - www.whirelandcb.com
Mike Coe, Chris Savidge - +44 (0) 117 945 3472
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those regulations
Chief Executive's statement
for the year ended 31 December 2019
During the year we achieved several milestones including
delivering new products to our existing customer base, entering new
markets and extending our manufacturing capabilities in
Ethiopia.
Highlights - Year ended 31 December 2019:
-- Revenue GBP22.3m (2018: GBP28.5m)
-- Gross margin increased to 30.9% (2018: 25.1%)
-- PBT increased to GBP0.6 m (2018: GBP0.4m)
-- EBITDA increased to GBP2.0 m (2018: GBP1.8m)
-- Net assets GBP17.5 m (2018: GBP17.8m *restated for deferred tax)
-- Repeat orders from both interiors and big shoe markets
-- Further establishment of Ethiopia as a shoe manufacturer
Performance review
As a result of continued weak global demand for leather and
related goods, revenue reduced to GBP 22.3m. The ratio of hides and
finished product to our core skins business changed significantly
from 48% to 60%. The change in shape of business, is aligned with
the strategic priorities of the business to achieve a more balanced
portfolio, specifically the inroads made in Ethiopia in shoe
production and sales, along with UK sales into automotive and
aviation.
Cost management was a key focus of the year in which extra
disciplines were introduced and there was a targeted headcount
reduction of over 400 employees. In addition, we benefited from
favourable raw material pricing and changed our buying protocols.
This has left us in a leaner but scalable position with a change of
focus and the appropriate expertise to meet specific clients'
requests. Consequently, the gross margin improved for the second
consecutive year to 30.9% (2018: 25.1%) and EBITDA increased to
GBP2.0m (2018: GBP1.8m) and PBT to GBP0.6m (2018: GBP0.4m).
Inventory increased to GBP17.3m, largely reflecting stock of
lower quality skins which amounted to GBP3.2m (2018: GBP2.8m) of
inventory. There was further pressure due to faster than expected
global weakening in demand for core business, bulk sampling, growth
in orders for new products, particularly shoe production in
Ethiopia and developing automotive channels. Our counter measures
included a substantial reduction in capacity by decreasing average
headcount to 1,224 (2018: 1,692). We are experiencing some low
material prices and have recalibrated our procurement. Finally, we
have access to opportunities to reduce partially processed stock
from Ethiopia and also reprocessing of existing leather
inventory.
Net debt remained at a similar level to half year at GBP9.6m as
the shape of the business necessitated increased debtor days and
working capital to support new business opportunities. As disclosed
in note 3,our banking facilities are to be renewed on similar terms
until March 2021, pending receipt of formal paperwork. Headroom on
facilites at year end was GBP2.6m.
Currency was favourable for 2019 although average rates were
little changed on 2018. The group has hedged between 50-70% of its
exposure to future dollar movements to March 2021, with an average
rate of $1.29.
Over the past two years we have invested GBP1.2m in machinery to
improve our efficiency and expand our skill set, particularly in
Ethiopia for shoe manufacturing. We are anticipating modest further
investment over the next twelve months at much reduced levels to
2019.
Performance measurement of all investments remain key and during
the year Return on Capital Employed (ROCE) was 4.2%. This has
decreased from 5.2% in 2018 as our closing debt position was higher
in 2019. However, we progressed closer to our target to deliver
returns ahead of our Weighted Average Cost of Capital of 4.9%.
Market view
Numerous specific global factors continued to impact the demand
for leather, principally China/US tarriffs, general economic
weakness, and more recently Coronavirus (COVID-19). Brexit fears
have also impeded a more orderly market. Overall the trend of
global demand over the past few years, for both finished hides and
skins, has been downward. Most recent figures covering 2019 show a
decline in value of 2.5% and 5% respectively. Over the period 2015
to 2018, finished hide volumes declined 12% and skins declined
26%.
Some of the markets we operate in are also experiencing
difficult trading conditions due to specific trends or factors.
Most notably the car industry, where global sales are predicted to
decrease by 5% compared to 2019. This is likely to be further
exacerbated by the slowdown in China caused by the Coronavirus
(COVID-19) outbreak. We anticipate demand picking up in the second
half of the year. The footwear market is experiencing the continued
popularity of athleisure styling which typically uses less leather,
with an increasing acceptance of synthetic fossil-fuel derived
materials as a substitute.
Notwithstanding the challenges faced by these industries,
interesting opportunities in these markets are presenting
themselves for bespoke, innovative and high performance products
together with the differentiated service and collaborative
relationship approach that we offer.
Operations
During the year we responded to the lower levels of volume in
our skin products and the need to increase our skill set in the
production of whole hides. A Chief Technical Officer was appointed,
the central team restructured and headcount in certain areas
reduced. Alongside better financial discipline across the business,
this has had the overall effect of lowering the Group's operating
costs whilst providing a better fit to support operations and
strengthen the divisional leadership.
Since its inception, the operations in Ethiopia have focused on
the production of work and dress gloves. This year was especially
challenging as volumes for work gloves signifcantly reduced and an
important customer changed a product to include more synthetic
material rather than leather. Alongside the production of shoe
leather for Vivobarefoot and Soul of Africa, we have demonstrated
our broader manufacturing capability in finished product. This has
been followed by increasingly sizeable orders and w hilst a lower
margin market, the volumes in question are starting to compensate
for the reduction in gloves and will be aggressively pursued as
part of our growth strategy.
As previously mentioned, skin volumes were down in the UK,
however whole hides production rose during 2019. This was largely
as a result of our first meaningful sales into the automotive
market. We remain convinced of the growth opportunities of the
interiors markets and are actively in dialogue with other
automotive and aviation manufacturers. A large shoe brand also
placed initial orders for delivery in the first quarter of 2020. A
number of further opportunities in both of these markets are
progressing.
As part of our strategy the business has been restructured to
two divisions in Ethiopia and the UK and the role of CTO
formalised. Following the diversification of the business and our
subsequent expansion of manufacturing capabilities, the Board have
decided that in recognition of their importance to the business,
Jon Loxston (CTO) and Tsedenia Mekbib (MD Ethiopia) will be
appointed Associate Directors of the PLC Board.
Sustainable business
With our manufacturing operations and global footprint, it is
important that we continue to run our business responsibly and
manage our environmental, social and governance responsibilities.
We take pride in the positive contribution we make for some of our
customers, staff and wider stakeholders. As an example of our
commitment to sustainable manufacturing, the Ethiopian tannery has
a sophisticated water treatment facility at the forefront of
managing waste responsibly. Furthermore, as part of a nationwide
reforestation initiative in Ethiopia, Pittards employees planted
7,000 trees in 2019.
Summary outlook
This was a year of delivery against clear strategic priorities.
As we strive to stay at the forefront of our industry for
innovation and quality, we have embraced the need to adapt our
business model and broadened our capabilities whilst evolving our
product offering.
Our competence in performance leather for gloving and footwear
markets continues to be important and presents opportunities. This
has been complemented by becoming proficient in finished shoe
manufacturing in Ethiopia and making inroads into the interiors
markets by increasing the use of whole hides across the
business.
Clearly, the global Coronavirus (COVID-19) pandemic will have an
effect on business volumes during 2020. The Group has substantial
inventories that can be utilised to support customers who may need
more flexible supplies if their logistics become strained.
Whilst recognising these external macro-economic factors, we are
starting to achieve a more stable portfolio across a broader range
of customers, together with opportunities that enable us to look
ahead positively when market conditions stabilise.
Reg Hankey
Chief Executive Officer
24 March 2020
Consolidated income statement for the year
ended 31 December 2019
Continuing operations Note 2019 2018
----- --------- ---------
GBP'000 GBP'000
----- --------- ---------
Revenue 22,301 28,469
----- --------- ---------
Cost of sales (15,404) (21,318)
----- --------- ---------
Gross profit 6,897 7,151
----- --------- ---------
Distribution costs (2,264) (2,209)
----- --------- ---------
Administrative expenses (3,456) (3,950)
----- --------- ---------
Profit from operations
before finance costs 1,177 992
----- --------- ---------
Finance costs (598) (647)
----- --------- ---------
Finance income - 9
----- --------- ---------
Profit before taxation 579 354
----- --------- ---------
Taxation (173) (2,283)
----- --------- ---------
Profit/(Loss) for the
year after taxation 406 (1,929)
----- --------- ---------
Earnings per share
----- --------- ---------
Basic 2 2.93p (13.91)p
----- --------- ---------
Diluted 2 2.90p (13.76)p
----- --------- ---------
Consolidated Balance sheets as at 31 December 2019
ASSETS 2019 2018
GBP'000 restated
(Note 4)
GBP'000
Non-current assets
--------- ----------
Property, plant and equipment 10,240 11,006
--------- ----------
Intangible assets 114 147
--------- ----------
Deferred income tax asset 100 0
--------- ----------
Total non-current assets 10,454 11,153
--------- ----------
Inventories 17,341 16,306
--------- ----------
Trade and other receivables 3,462 3,306
--------- ----------
Cash and cash equivalents 180 598
--------- ----------
Total current assets 20,983 20,210
--------- ----------
Total Assets 31,437 31,363
--------- ----------
LIABILITIES
--------- ----------
Current liabilities
--------- ----------
Trade and other payables (3,430) (4,350)
--------- ----------
Interest bearing loans, borrowings
and overdrafts (9,381) (7,756)
--------- ----------
Total current liabilities (12,811) (12,106)
--------- ----------
Non-current liabilities
--------- ----------
Deferred income tax liability (730) (810)
--------- ----------
Interest bearing loans, borrowings
and overdrafts (376) (566)
--------- ----------
Total non-current liabilities (1,106) (1,376)
--------- ----------
Total liabilities (13,917) (13,482)
--------- ----------
Net assets 17,520 17,881
--------- ----------
EQUITY
--------- ----------
Share capital 6,944 6,944
--------- ----------
Share premium 2,984 2,984
--------- ----------
Capital reserve 6,475 6,475
--------- ----------
Shares held by ESOP (495) (495)
--------- ----------
Share-based payment reserve 295 203
--------- ----------
Cash flow hedge reserve 287 (52)
--------- ----------
Translation reserve (4,062) (3,131)
--------- ----------
Revaluation reserve 1,166 1,433
--------- ----------
Retained earnings 3,926 3,520
--------- ----------
TOTAL EQUITY 17,520 17,881
--------- ----------
Statement of cashflows for the year ended 31 December 2019
Group Group
2019 2018
-------- --------
GBP'000 GBP'000
-------- --------
Cash flows from operating
activities
-------- --------
Cash (used in) / generated
from operations (493) 1,583
-------- --------
Tax paid (466) (11)
-------- --------
Interest paid (566) (634)
-------- --------
Net cash (used in) / generated
from operating activities (1,525) 938
-------- --------
Cash flows from investing
activities
-------- --------
Purchase of property, plant
and equipment (635) (588)
-------- --------
Purchases of intangible assets (30)
-------- --------
Net cash used in investing
activities (665) (588)
-------- --------
Cash flows from financing
activities
-------- --------
Proceeds from borrowings 804
-------- --------
Repayment of bank loans (1,061) (1,304)
-------- --------
New lease obligations 200 41
-------- --------
Repayment of lease obligations (171) (85)
-------- --------
Net cash used in financing
activities (228) (1,348)
-------- --------
(Decrease)/increase in cash
and cash equivalents (2,418) (998)
-------- --------
Cash and cash equivalents
at beginning of the year (3,695) (2,698)
-------- --------
Exchange (losses) / gains
on cash and cash equivalents (19) 1
-------- --------
Cash and cash equivalents
at end of the year (6,133) (3,695)
-------- --------
Statement of changes in equity for the year ended 31 December
2019
Consolidated Statement of Changes in Equity
for the period Share Share Capital Shares Share-based Cash Translation Revaluations Retained Total
ended 31 capital premium reserve held by payment flow reserve reserve earnings
December 2019 ESOP reserve hedge
reserve
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
As at 1 January
2018 as
previously
reported 6,944 2,984 6,475 (495) 131 0 (3,520) 1,813 5,406 19,738
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Prior year
restatement (648) (648)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
As at 1 January
2018 restated 6,944 2,984 6,475 (495) 131 0 (3,520) 1,165 5,406 19,090
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Comprehensive
income/(loss)
for the year:
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Loss for the
period after
taxation 0 0 0 0 0 0 0 0 (1,929) (1,929)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Other
comprehensive
income/(loss):
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Gain on the
revaluation of
buildings 0 0 0 0 0 0 0 219 0 219
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Unrealised
exchange
gain/(loss) on
translation of
foreign
subsidiaries 0 0 0 0 0 0 389 49 0 438
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Fair value
losses on
foreign
currency cash
flow hedges 0 0 0 0 0 (52) 0 0 0 (52)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Total other
comprehensive
income/(loss) 0 0 0 0 0 (52) 389 268 0 605
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Total
comprehensive
income/(loss)
for the year 0 0 0 0 0 (52) 389 268 (1,929) (1,324)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Share-based
payment
expense 0 0 0 0 72 0 0 0 43 115
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
At 1 January
2019 restated 6,944 2,984 6,475 (495) 203 (52) (3,131) 1,433 3,520 17,881
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Comprehensive
income/(loss)
for the year:
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Profit for the
period after
taxation 0 0 0 0 0 0 0 0 406 406
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Other
comprehensive
income/(loss):
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Gain on the
revaluation of
buildings 0 0 0 0 0 0 0 139 139
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Unrealised
exchange
gain/(loss) on
translation of
foreign
subsidiaries 0 0 0 0 0 0 (931) (406) (1,337)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Fair value
losses on
foreign
currency cash
flow hedges 0 0 0 0 0 339 0 0 0 339
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Total other
comprehensive
income/(loss) 0 0 0 0 0 339 (931) (267) 0 (859)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Total
comprehensive
income/(loss)
for the year 0 0 0 0 0 339 (931) (267) 406 (453)
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
Share-based
payment
expense 0 0 0 0 92 0 0 0 0 92
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
At 31 December
2019 6,944 2,984 6,475 (495) 295 287 (4,062) 1,166 3,926 17,520
-------- -------- ------------- -------- ------------ -------- ------------ ------------- --------- --------
This preliminary announcement, with extracts from our full
report was approved by the board of directors and authorised for
issue on 24(th) March with extracts of notes to the accounts below
.
1. Basis of preparation
The consolidated financial statements have been prepared on a
going concern basis and in accordance with International Financial
Reporting Standards ("IFRS") including International Accounting
Standards ("IAS") and IFRS Interpretations Committee ("IFRS IC")
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under accounting standards as
adopted for use in the EU.
The information in this preliminary statement has been extracted
from the audited financial statements for the years ended 31
December 2019 and 2018 and as such, does not constitute statutory
accounts within the meaning of s434 of the Companies Act 2006. A
full annual report for the year ended 31 December 2018 on which the
auditor has issued an unqualified audit report, has been delivered
to the Registrar of Companies. The Group's annual report for 2019,
on which the auditors have issued an unqualified audit report, will
be delivered to the Registrar of Companies in due course. No
statement has been made by the auditor under Section 498(2) or (3)
of the Companies Act 2006 in respect of either of these sets of
accounts.
2. Earnings per ordinary share
2019 2018
GBP'000 GBP'000
-------- ---------
Analysis of the profit in the year:
-------- ---------
(Loss)/profit for the year 406 (1,929)
-------- ---------
Weighted average number of ordinary
shares in issue (excluding the
shares owned by the Pittards Employee
Share Ownership Trust)
-------- ---------
'000s '000s
-------- ---------
Basic 13,870 13,870
-------- ---------
Diluted 14,001 14,023
-------- ---------
Basic earnings per ordinary 50p
share 2.93p (13.91p)
-------- ---------
Diluted earnings per ordinary 50p
share 2.90p (13.76p)
-------- ---------
3. Taxation
In accordance with the requirements of IAS12, the directors
considered the potential utilisation of the deferred tax asset and
have taken a prudent view to recognise a GBP0.1m asset (2018:
de-recognised GBP1.9m). This has no effect on the Group's operating
performance, cash, debt or the Group's outlook, which remains
unchanged.
4. Going concern
The Group and Company meet their day to day working capital
requirements through their bank facilities. The banking
relationship with Lloyds Bank remains strong. Since the year end
our expiring banking facilities have been subject to discussions on
their revision and renewal; agreement has been reached and formal
paperwork is in the process of being prepared for the period ended
31 March 2021. In the light of the ongoing COVID-19 challenges the
Board has sensitised its forecasts and projections for the next 12
months to take account of possible changes in trading performance
in order to determine when and to what extent additional measures
may be necessary. Sensitivity analysis has been performed to
reflect a reduction in demand of up to 40% to August, with an
ongoing reduction of 10% for the following seven months to March
2021. The model also takes into account accessible savings.
Notwithstanding the recovery of our order book in March 2020, if
the current crisis is more severe or prolonged than in our model,
there could be a material uncertainty about the ability of the
business to continue as a going concern and, therefore, the Board
will maintain a close eye on performance to identify whether any
further action becomes necessary to protect the business. Based on
the above and information available to the Board at the date of
approval, the Group and Company continue to adopt the going concern
basis in preparing these financial statements.
5. Prior year restatement
Deferred tax, amounting to GBP0.648m, in relation to the
temporary timing difference caused by the revaluation of buildings
in Ethiopia, was incorrectly omitted from the net assets of the
group at 1 January 2018. As a result the opening reserves at 1
January 2018 have been restated along with the deferred tax
provision. There has been no impact on the previously reported
consolidated income statement.
6. Cash generated from operations
Group Company
2019 2018 2019 2018
-------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Profit/ (loss) before taxation 579 354 (311) (476)
-------- -------- -------- --------
Adjustments for:
-------- -------- -------- --------
Depreciation of property, plant and equipment 780 705 357 324
-------- -------- -------- --------
Amortisation 63 62 63 62
-------- -------- -------- --------
Bank and other interest charges 596 638 227 198
-------- -------- -------- --------
Share-based payment expense 92 115 92 115
-------- -------- -------- --------
Other non-cash items in Income Statement (275) 194 26 0
-------- -------- -------- --------
Operating casg flows before movement
in working capital 1,835 2,068 454 223
-------- -------- -------- --------
Movements in working capital (excluding
exchange differences on consolidation):
-------- -------- -------- --------
Increase in inventories (1,980) (710) (1,739) (705)
-------- -------- -------- --------
(Increase) / decrease in receivables (383) 792 234 614
-------- -------- -------- --------
Increase/ (decrease) in payables 35 (567) 50 (443)
-------- -------- -------- --------
Cash generated (used in) / generated
from operations (493) 1,583 (1,001) (311)
-------- -------- -------- --------
Additional information
Copies of the full 2019 Annual Report will be available on the
company's website within 5 working days at www.pittards.com .
Further copies may be obtained by contacting the Company
Secretary at Pittards plc, Sherborne Road, Yeovil, Somerset, BA21
5BA.
The annual general meeting is to be held at the registered
office on 14 May 2020 at 12pm.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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