RNS Number:5131P
Litho Supplies PLC
09 September 2003
LITHO SUPPLIES Plc
Results for the six months ended 30 June 2003
HIGHLIGHTS
* Pretax profits before exceptionals of #0.81m (2002: #0.92m).
* Strong cash flow; bank balance of #1.88m (2002: overdraft of #1.79m).
* Recommending an increased interim dividend of 1.75p (1.5p) per share.
* Challenging market conditions continue but margins are holding up well.
* Focused on increasing margins, achieving lowering levels of working
capital and further reductions in costs to increase profits and
generate more cash.
Contacts:
Michael Hammond, Chief Executive Tel: 01332 873921
Gerry Mitchell, Financial Director Tel: 0117 9724455
CHAIRMAN'S INTERIM STATEMENT
Results for the six months ended 30 June 2003
The unaudited interim results for the six months ended 30th June 2003 show
pretax profits of #0.81m (#0.92m), after adding back #2.12m (#0.76m) of
exceptional charges incurred in the reorganisation of the business, #2.09m of
which relates to a provision for the Litho Supplies (UK) Limited Pension Fund.
This has had no cash flow impact on the interim results and is explained in
greater detail in the pension section below. The loss before tax after
exceptional items was #1.31m (profit of #0.15m). Sales for the six months ended
30 June 2003 were #24.05m (#28.67m), the reduction partly reflecting the closure
of the Belgian subsidiary in April 2002.
Basic earnings per share for the six months ended 30th June 2003 before
exceptional items are 2.43p (2.79p) and after exceptional charges are -4.37p
(-0.50p).
I am pleased to report continuing improvements in the reduction of stock levels
and debtor balances which, together with cost control, has resulted in a cash
balance at 30 June 2003 of #1.88m compared with an overdraft balance of #1.78m
at 30 June 2002, an improvement of #3.66m.
Trading conditions continue to be difficult, but in view of the improvement in
our cash position and the strength of our Balance Sheet with no bank overdraft
or long term borrowings, the Board is recommending an interim dividend of 1.75p
(1.5p) per share. This dividend will be paid on 31 October 2003 to shareholders
on the register as at 26 September 2003. The ex dividend date is 24 September
2003.
Consumables
UK consumable sales, which continue to represent the core activity of the
business, were #19.10m (#20.85m). The trend continues to reflect customers
moving away from analogue products to digital technology. Demand for our
customers' products remains low due to current economic conditions. Combined
with overcapacity in the printing industry, this has resulted in pressure on
both prices and margins for our customers and ourselves.
The change from analogue to digital technology is a continuing feature of our
market and it is not until the volume of the higher value digital consumables
outweighs the decline in analogue products that we will see a turnaround in
these figures.
An upturn in our consumables business is likely to occur as a result of a
general improvement in the UK economy and thence the advertising market which
will in turn start to improve the printing industry and its requirement for both
consumable supplies and equipment. We also expect to see some casualties
amongst our competitors which will reduce the overcapacity currently keeping
prices at a low level.
Within our consumables business, we have seen further growth in our Pressroom
division as a result of our investment in our technical support facilities. We
intend to continue to increase our market share in this area and devote more of
our resources to this part of the business.
Sales in our Packaging division remain flat, like others in this specific market
sector.
We have seen substantial growth from a small base in our wide format inkjet
consumables sales following a greater focus on this market. We expect this
growth to continue.
The figures being reported by our competitors suggest that we are faring better
than most of them during this difficult period and our margins are holding up
well.
From 1st July 2003 onwards we have been benefiting from a round of price
increases from two of our major suppliers. This increase, the first for several
years, will be passed on to customers and will contribute to the top line sales
in the second half.
It is also again encouraging to see a decline in both the number and value of
bad debts during the first half. Our credit management has done well to
minimise our exposure at this difficult time. However, I anticipate credit
conditions to continue to remain challenging in the second half of 2003.
Electronic equipment
UK sales of electronic equipment in the first half were #4.77m (#4.49m) which
was a creditable performance. The first half of last year had the benefit of
orders from the ten day international trade show IPEX 2002 held at the NEC in
Birmingham once every four years.
We had a successful exhibition in May 2003 at Northprint in Harrogate and took
orders to the value of #1.3m, all of which were delivered and installed by the
end of June.
As I stated in my last report, we have worked hard on the added value services
such as maintenance and technical support in relation to the sale of electronic
equipment and this has improved the margin being generated by the division.
Sales of Computer to Plate and Digital Printing equipment remain strong, showing
confidence from our customer base to invest in their own businesses. The
strength of customer balance sheets has sometimes made financing the equipment
difficult, but we have been successful in finding innovative ways to overcome
funding issues for our customers.
Following a review of our business with Xerox, we have decided to invest jointly
with them in upgrading our showroom in Scotland and this will be completed
shortly. We expect this refurbishment to enhance our profile and ultimately
increase further our Digital Printing business in Scotland and the North of
England.
Pension commitments
In conjunction with changes to the company's pension arrangements and the
introduction of a new alternative defined contribution group personal pension
plan, the Board has made an exceptional provision of #2.09m for the shortfall on
the defined benefit Litho Supplies (UK) Limited Pension Scheme. The provision
has been charged to the Profit and Loss Account as an exceptional item and
provided in accordance with Statement of Standard Accounting Practice (SSAP)24.
The provision assumptions used are consistent with the SSAP24 disclosure note in
the audited accounts for the year ended 31 December 2002. In accordance with
actuarial calculations, the company is making additional monthly contributions
of #25,000 to fund the shortfall. Total additional contributions in the period
are #150,000 and these have been offset against the provision.
Reorganisation
Following the reorganisation programme which has been successfully implemented
over the last three years, we have concentrated our efforts over the last few
months in consolidating the business and making internal improvements,
particularly within our computer systems.
There remain opportunities ahead to make further improvements and these will be
effected as and when appropriate without risking any disruption which could
damage the business in either the short or long term.
Current trading
Whilst opportunities for sales growth in this difficult market will be sought
wherever possible, we continue to focus our energies on increasing margins,
achieving lower levels of working capital and further reductions in costs to
increase profits and generate more cash. As mentioned before, we are beginning
to benefit from price increases across a large range of consumable products
which should help in providing a similar trading outcome in the second half.
Our telesales division is making real progress with increases in both turnover
and profitability.
Our business solutions company Murodigital, which sells a range of digital mono
and colour multi function output devices to the corporate and education market,
continues to improve. Its exclusive document binding system, "Fastback", has a
new range of hardback covers which will provide further selling opportunities in
the corporate sector. The range of laminators and document finishing equipment,
with associated consumables, continues to find new buyers in the education
sector.
We believe that continuing difficult trading conditions may force some of our
competitors to consider leaving the market which could provide opportunities for
selective bolt-on acquisitions.
I should like to thank all our customers and suppliers for their continuing
support and particularly our employees for their loyalty and hard work, without
whom the very real progress which has been made in the past six months would not
have been possible.
B C Clark
Chairman
9 September 2003
LITHO SUPPLIES Plc
UNAUDITED GROUP PROFIT AND LOSS ACCOUNT
6 months Year
ended ended
6 months ended 30 June 31 Dec
30 June 2003 2002 2002
Before
Excep-tional Excep-tional
Costs Costs Total
#'000 #'000 #'000 #'000 #'000
Turnover
Continuing operations 24,053 - 24,053 26,351 51,476
Discontinued operations - - - 2,317 2,317
Total turnover 24,053 - 24,053 28,668 53,793
Cost of sales
Continuing operations 19,867 - 19,867 21,631 42,612
Discontinued operations - - - 1,882 1,882
19,867 - 19,867 23,513 44,494
Gross profit 4,186 - 4,186 5,155 9,299
Distribution costs
Continuing operations 1,177 - 1,177 1,340 2,595
Discontinued operations - - - 95 95
1,177 - 1,177 1,435 2,690
Administrative expenses
Continuing operations 2,195 2,119 4,314 3,131 4,573
Discontinued operations - - - 275 275
2,195 2,119 4,314 3,406 4,848
Operating profit/(loss)
Continuing operations 814 (2,119) (1,305) 249 1,696
Discontinued operations - - - 65 65
Total operating profit/(loss) 814 (2,119) (1,305) 314 1,761
Sale of fixed assets - - - - 251
Sale of business - - - - (711)
Closure of business - - - (19) (702)
Profit/(loss) before interest and
tax
814 (2,119) (1,305) 295 599
Interest receivable 1 - 1 - 3
Interest payable and similar
charges (6) - (6) (141) (207)
(5) - (5) (141) (204)
Profit/(loss) on ordinary
activities before taxation 809 (2,119) (1,310) 154 395
Tax on profit on ordinary
activities 279 (636) (357) 237 363
Profit/(loss) on ordinary
activities after taxation 530 (1,483) (953) (83) 32
Equity minority interests - - - (25) (25)
Profit/(loss) attributable to
members of the parent company 530 (1,483) (953) (108) 7
Dividends on equity shares 381 - 381 327 654
Retained (loss)/profit for the
period 149 (1,483) (1,334) (435) (647)
Earnings per share - basic 2.43p (4.37)p (0.50)p 0.03p
- diluted 2.43p (4.37)p (0.50)p 0.03p
Dividends per share 1.75p 1.50p 3.00p
UNAUDITED GROUP BALANCE SHEET
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 574 630 600
Tangible assets 562 993 603
1,136 1,623 1,203
Current assets
Stocks 7,346 8,686 7,788
Debtors 14,460 16,840 14,617
Cash at bank and in hand 1,884 3 204
23,690 25,529 22,609
Creditors: amounts falling due within one year 11,394 14,888 11,054
Net current assets 12,296 10,641 11,555
Total assets less current liabilities 13,432 12,264 12,758
Provisions for liabilities and charges 2,008 - -
Net assets 11,424 12,264 12,758
Capital and reserves
Called up share capital 2,179 2,179 2,179
Share premium account 13,420 13,420 13,420
Capital redemption reserve 461 461 461
Profit and loss account (4,636) (3,796) (3,302)
Equity shareholders' funds 11,424 12,264 12,758
UNAUDITED GROUP CASH FLOW STATEMENT
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
Net cash inflow from operating activities 2,171 3,530 5,728
Returns on investments and servicing of finance
Interest received 1 - 3
Interest paid (15) (151) (218)
Net cash outflow from returns on investments and
servicing of finance (14) (151) (215)
Taxation
Corporation tax paid (152) (155) (604)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (59) (40) (92)
Receipts from the sale of tangible fixed assets 11 28 602
Net cash inflow/(outflow) from capital expenditure and
financial investment (48) (12) 510
Acquisitions and disposals 50 909 1,017
Equity dividends paid (327) (327) (654)
Increase in cash in the period 1,680 3,794 5,782
UNAUDITED GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
(Loss)/profit attributable to members of the parent (953) (108) 7
undertaking
Goodwill previously written off to reserves - 56 -
Exchange difference on retranslation of net assets of - (1) (1)
subsidiary undertakings
Total recognised gains and losses relating to the
period (953) (53) 6
RECONCILIATION OF SHAREHOLDERS' FUNDS
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
Total recognised gains and losses (953) (53) 6
Dividends (381) (327) (654)
Goodwill reinstated on sale of subsidiary - - 762
Total movement during the period (1,334) (380) 114
Shareholders' funds at start of period 12,758 12,644 12,644
Shareholders' funds at end of period 11,424 12,264 12,758
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
Net funds/(debt) at 1 January 204 (5,578) (5,578)
Increase in cash 1,680 3,794 5,782
Net funds/(debt) at end of period 1,884 (1,784) 204
Cash at bank and in hand 1,884 3 204
Bank overdrafts - (1,787) -
1,884 (1,784) 204
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2003 2002 2002
#'000 #'000 #'000
Operating profit/(loss) (1,305) 314 1,761
Amortisation of goodwill 26 631 71
Depreciation 92 178 297
Profit on sale of fixed assets (3) - -
Decrease in debtors 754 446 2,728
Decrease in stocks 442 296 1,194
Increase/(decrease) in creditors 157 1,665 (230)
Increase in provision for pension costs 2,008 - -
Exceptional non-operating costs - - (93)
Net cash inflow from operating activities 2,171 3,530 5,728
NOTES:
1. The earnings per share have been calculated by dividing the profit/(loss)
attributable to the members of the parent undertaking by the number of ordinary
shares in issue during the period. The number of shares in issue as at 30 June
2002 and 2003 was 21.79 million.
2. The financial information in this interim statement for the six months
ended 30 June 2003 and the comparative figures for the six months ended 30 June
2002 do not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The financial information for the full preceding year is
based on the statutory accounts for the financial year ended 31 December 2002.
Those accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
3. The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
31 December 2002.
4. Changes have been made to the Company's pension arrangements during the
six month period ended 30 June 2003. As a result, a provision of #2.09m has
been established on the Company's balance sheet at 1 January 2003. This
reflects the deficiency on the defined benefit Litho Supplies (UK) Limited
Pension Scheme disclosed by the actuarial valuation as at 31 March 2002
(measured on the assumptions outlined in the accounts for the year to 31
December 2002), which has been updated to 31 December 2002 with interest and to
allow for the Company's special contributions of #25,000 a month.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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