TIDMPTD
RNS Number : 4931A
Pittards PLC
30 September 2020
Pittards plc
("Pittards", the "Group" or the "Company" )
Interim results for the six months ended 30 June 2020
Pittards plc, the specialist producer of technically advanced
leather and luxury leather goods for retailers, manufacturers and
distributors, today announces its results for the six months ended
30 June 2020.
Key financials
-- Revenue for the first half GBP6.6m (H1 2019: GBP12.1m)
-- EBITDA negative GBP1.3m (H1 2019: GBP1.2m positive)
-- Loss before tax amounted to GBP2.3m (H1 2019: GBP0.2m profit)
-- Net assets were GBP14.6m (31 December 2019: GBP17.9m)
-- Gross margin was 17.1% (31 December 2019: 29.7%)
-- Group cash facilities headroom of GBP2.5m (GBP2.7m: 2019)
including CBILS completed July 2020
Stephen Yapp, Chairman, said: -
"Despite the disruption of the first half, we enter the second
half with renewed confidence and stability and with positive and
improving cash flows. Our strategy to enlarge our portfolio of
markets, products, improve quality of margin and lower our cost
base, is showing clear signs of delivering benefits to the
business. Over 14% of sales in the first half compared to 1.5% in
H1 2019 were from our new target markets, and overall sales have
consistently risen from May through to August. We are well
positioned to deliver positive operational cashflow in the second
half together with a reduction in net debt compared to the half
year."
Further enquiries:
Pittards plc
Stephen Yapp - Chairman
Reg Hankey - Chief Executive
Richard Briere - Group Finance Director 01527 830 630
WH Ireland (Nominated Adviser and www.whirelandcb.com
Broker)
Mike Coe / Chris Savidge (Corporate
Finance)
Jasper Berry (Corporate Broking) 0207 220 1666
CEO report
The impact of the global pandemic had a material effect on our
business in the first half, adversely affecting our short-term
sales revenue across our entire business. Over 90% of our sales are
exported, which exposes us to global demand, logistics and supply
chain effects. In response to this challenging environment we put
together a programme of change which prioritised the safety of our
people, customers, and cash. Our cash strategy has delivered
improvements in the areas of inventory, working capital and cost
control.
Key financials
-- Revenue for the first half GBP6.6m (H1 2019: GBP12.1m)
-- EBITDA negative GBP1.3m (H1 2019: GBP1.2m positive)
-- Loss before tax amounted to GBP2.3m (H1 2019: GBP0.2m profit)
-- Net assets were GBP14.6m (31 December 2019: GBP17.9m)
-- Gross margin was 17.1% (31 December 2019: 29.7%)
-- Group cash facilities headroom of GBP2.5m (GBP2.7m: 2019)
including CBILS completed July 2020
Operational and strategic update
The global nature of our business with over 90% of Group sales
outside of Europe and our core customer base having a higher
dependency on manufacturing facilities in South East Asia, exposed
us earlier to the turbulence brought about by the pandemic than a
UK centric business. As early as January activity was not following
an expected pattern and slowed from then on. This slow down
affected both our UK and Ethiopian businesses.
The lockdowns that followed around the world impacted on
consumer confidence and had a significant effect on first half
operations. The peak of our lockdown period was during April when
we furloughed 122 out of 175 total UK staff. There was no furlough
scheme in Ethiopia, although there were some measures available to
address cost in accordance with Ethiopian labour laws.
Sales in the first half to our core customers were 62% down on
the equivalent period last year, with the US market particularly
hard hit as the first half unfolded. Our factories, both in UK and
Ethiopia, remained open and delivered product to certain customers
who are key suppliers to COVID19 response services both in the UK
and overseas to ensure supplies were maintained. We switched our
finished goods manufacturing facilities to produce both face masks
and bags for scrubs.
The easing of lockdown restrictions between June and August
created a period of greater stability which resulted in a
significant increase in sales into our growth customers, in
particular automotive, shoe and speciality consumer goods. With a
more diversified portfolio, the shape of the business continues to
improve despite the impact of the COVID19 lockdown, which has
obscured the progress the Group is making.
In our markets the aviation market has been hardest hit with
sales yet to recover. We are making progress in the automotive
market and although some customers closed temporarily in the first
half, we have seen sales growth in the second half to date.
Military and support services sales also showed some recovery
leading into the second half.
Between June and August sales into our new target markets
accounted for 26% of sales, compared to 14% in the first half. We
have also seen some positive order trends in golf, defence, cycling
and speciality endurance gloves and indeed sports in general, as
our core existing customers show signs of recovery, with sales
orders up since the half year.
We have continued to work on developing our innovation product
portfolio, including our new Tri Protex antimicrobial leather and a
further product line for fire-retardant leather in to Rail
applications, for which trials are ongoing.
Financial update
Severe disruption due to COVID19 dominated the first half, with
significantly reduced activity and production volumes falling far
below normal levels. In response, we have been recalibrating our
business, including a re-shaping of the cost base which is expected
to be finalised before the end of the year.
The loss before tax in the first half amounted to GBP2.3m loss
(2019: GBP0.2m profit), which was entirely due to reduction in
volumes although the impact was partially offset by cost
reductions.
Gross margins fell to 17.1% (H1 2019: 29.7%). However, pure
variable material margins continued to improve due to a better mix
of business and lower input costs. We have recalibrated our
capacity for new volumes and aim to achieve improved reported
margins in the second half of 2020, this has already been visible
in both July and August, with gross variable margins also
improving.
We have reduced Group headcount from 1740 at the beginning of
2019, to 1052 as at 30 June 2020, whilst preserving our capacity to
respond to an increased level of demand as markets recover. This
has been facilitated by the investment in automation in recent
years, new technology, people, and more flexible working
arrangements.
Administrative costs fell during the period helped by all
Directors and senior staff participating in a salary sacrifice
arrangement. We continue to hedge the US dollar to balance currency
risks. Currency losses in the period were GBP0.4m with a
corresponding gain within revenue.
At the period end net assets fell to GBP14.6m (December 2019:
GBP17.5m). Net debt was up by GBP1.4m to GBP11.3m (GBP9.9m: 31
December 2019) with most of the increase occurring during the
period to April. Net debt has since reduced and at the end of
August stood at GBP10.9m.
During the first half the Group refinanced the UK mortgage with
Lloyds, which was previously GBP1.20m to GBP1.75m. It also secured
a new GBP1m CBILS (Coronavirus Business Interruption Loan) loan,
repayable over six years. This was agreed in June and formally
signed and drawn down in July. Our cash headroom has been
maintained at similar levels to December 2019, at GBP2.5m (2019:
GBP2.6m). The profile of our debt has improved as long-term debt
has increased to GBP2.0m from GBP0.4m at the last year end.
Overall stock has been reduced by GBP0.5m to GBP16.8m at the
half year. This reduction has continued into the second half with
inventory falling at the end of August falling to GBP16.3m. Our
supplier average payment days fell to 57 days at the end of June
(H1 2019: 59 days), assisting our supply chain management. Our
customer average days to pay rose to 69 days (H1 2019: 55 days).
The increase in debtor days was mostly due to a change in mix of
customers. Over 80% of customer accounts are still credit
insured.
During the UK national lockdown, we furloughed 122 staff, but
this number fell consistently from May to stand at 27 staff at the
end of September. In what has been a successful programme, we
sought to bring staff back as soon as we could. The furlough scheme
enabled the business to both preserve jobs and recalibrate its cost
base, creating the time and space to reshape our approach to the
new norm. The impact of furlough payments on our second half
profitability and cashflow will be limited.
Outlook
There are clear signs of a modest recovery in our sales revenue
during Q3, along with a progressively improving order book. We are
cautiously optimistic that the positive trend since May will
continue for the remainder of the year, however, it remains too
early to judge the sustainability and scale of further
recovery.
Our management of cash in the first half and our success in
putting in place a new working model, which is sustainable at much
reduced volumes, will benefit the second half. Both July and August
have traded with positive cashflow and EBITDA.
Our Ethiopian business shows increased activity in the finished
product side and has recovered some ground from earlier in the
year, with an encouraging order bank to fulfil in the second half.
We have been changing our approach to our traditional tanning
business, however because the restrictions of COVID19 were applied
much later in the year, there remains work to recalibrate our
Ethiopian tanning business to profitability, and good progress has
been made.
We are mindful of the continued threat of COVID19 restrictions
to business operations. In response to the evolving uncertainty in
March, a going concern statement was issued in our 2019 annual
report. Given the performance this year, and following a recovery
in performance as restrictions eased, the Directors do not believe
there are any new circumstances that cast any further doubt on the
Group's ability to continue as a going concern.
We currently see more opportunity than risk in the new normal
that is emerging. We are encouraged by the cash generation since
the half year and the corresponding reduction in net debt. We
anticipate a more agile, cash generative business model, as we head
towards the end of the year.
Six Six
Consolidated Income months months Year
Statement ended ended ended
for the six months
ended 30 June 2020 30/06/2020 30/06/2019 31/12/2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
--------------------------------- ----- ----------- ----------- -----------
Revenue 6,627 12,132 22,301
Cost of sales (5,495) (8,528) (15,404)
------------------------------------- ----- ----------- ----------- -----------
Gross profit 1,132 3,604 6,897
Distribution costs (882) (1,119) (2,264)
Currency (losses)
/ gains (356) 9 92
Administrative expenses (1,884) (1,984) (3,548)
------------------------------------- ----- ----------- ----------- -----------
(Loss)/profit before operations
and finance costs (1,990) 510 1,177
Finance costs (262) (286) (598)
------------------------------------- ----- ----------- ----------- -----------
(Loss)/profit before
taxation (2,252) 224 579
Taxation 3 (114) (53) (173)
------------------------------------- ----- ----------- ----------- -----------
(Loss)/profit after
taxation (2,366) 171 406
------------------------------------- ----- ----------- ----------- -----------
Earnings per share 2
------------------------------------- ----- ----------- ----------- -----------
Basic (17.06p) 1.23p 2.93p
Diluted (17.06p) 1.22p 2.90p
Consolidated Statement of Comprehensive
Income
for the six months ended 30
June 2020
Six Six
months months Year
ended ended ended
30/06/2020 30/06/2019 31/12/2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ----------- -----------
(Loss)/profit for the
period after taxation (2,366) 171 406
Other comprehensive (expense)/income
Revaluation of land
and buildings - - 139
Revaluation of land and buildings
- unrealised exchange (loss) (58) (47) (406)
---------------------------------------------- ----------- ----------- -----------
(58) (47) (267)
Unrealised exchange (loss) on translation
of overseas subsidiaries (96) (164) (931)
Fair value (losses) on foreign
currency cash flow hedges (481) (19) 339
--------------------------------------------- ----------- ----------- -----------
(577) (183) (592)
Other comprehensive
(loss) (635) (230) (859)
Total comprehensive (loss) for
the period (3,001) (59) (453)
--------------------------------------------- ----------- ----------- -----------
Six Six
Consolidated balance months months Year
sheet ended ended ended
as at 30 June 2020 30/06/2020 30/06/2019 31/12/2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------- ----------- -----------
Assets
Non-current assets
Property, plant and
equipment 9,929 10,970 10,240
Intangible assets 81 121 114
Deferred income tax
asset 3 100 - 100
----------------------------------- ----- ----------- ----------- -----------
Total non-current assets 10,110 11,091 10,454
Current assets
Inventories 16,877 16,749 17,341
Trade and other receivables 2,843 4,695 3,462
Cash and cash equivalents 99 367 180
----------------------------------- ----- ----------- ----------- -----------
Total current assets 19,819 21,811 20,983
Total assets 29,929 32,902 31,437
Liabilities
Current liabilities
Trade and other payables 3,302 4,069 3,430
Interest bearing loans,
borrowings and overdrafts 9,345 8,491 9,381
----------------------------------- ----- ----------- ----------- -----------
Total current liabilities 12,647 12,560 12,811
Non-current liabilities
Deferred income tax
liability 3 709 697 730
Interest bearing loans,
borrowings and overdrafts 2,015 1,781 376
----------------------------------- ----- ----------- ----------- -----------
Total non-current liabilities 2,724 2,478 1,106
Total liabilities 15,371 15,038 13,917
Net assets 14,558 17,864 17,520
----------------------------------- ----- ----------- ----------- -----------
Equity
Share capital 6,944 6,944 6,944
Share premium 2,984 2,984 2,984
Capital reserve 6,475 6,475 6,475
Shares held by ESOP (495) (495) (495)
Share based payment
reserve 334 245 295
Cash flow hedge reserve (194) (71) 287
Translation reserve (4,158) (3,295) (4,062)
Revaluation reserve 1,108 1,386 1,166
Retained earnings 1,560 3,691 3,926
----------------------------------- ----- ----------- ----------- -----------
Total equity 14,558 17,864 17,520
----------------------------------- ----- ----------- ----------- -----------
Consolidated Statement of Changes
in Equity
for the six months ended
30 June 2020
Shares Share Cash
held based flow
Share Share Capital by payment hedge Translation Revaluation Retained Total
Note capital premium Reserve ESOP reserve reserve reserve reserve Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
As at
01/01/2019 6 6,944 2,984 6,475 (495) 203 (52) (3,131) 1,433 3,520 17,881
Comprehensive income/(loss) for the period:
-------------------------------------------------------------------------------------------------------------------------------------
Profit for the
period after
taxation - - - - - - - - 171 171
Other comprehensive income/(loss):
Unrealised
exchange
gain/(loss) on
translation of
foreign
subsidiaries - - - - - - (164) (47) - (211)
Fair value
losses
on foreign
currency
cash flow
hedges - - - - - (19) - - - (19)
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Total other
comprehensive
income/(loss) - - - - - (19) (164) (47) - (230)
Total
comprehensive
income/(loss)
for
the year - - - - - (19) (164) (47) 171 (59)
Share-based
payment
expense - - - - 42 - - - - 42
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
As at 30 June
2019 6,944 2,984 6,475 (495) 245 (71) (3,295) 1,386 3,691 17,864
Comprehensive income/(loss) for the period:
-------------------------------------------------------------------------------------------------------------------------------------
Profit for the
period after
taxation - - - - - - - - 235 235
Other
comprehensive
income/(loss):
Gain on the
revaluation
of buildings - - - - - - - 139 - 139
Unrealised
exchange
gain/(loss) on
translation of
foreign
subsidiaries - - - - - - (767) (359) - (1,126)
Fair value
losses
on foreign
currency
cash flow
hedges - - - - - 358 - - - 358
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Total other
comprehensive
income/(loss) - - - - - 358 (767) (220) - (629)
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Total
comprehensive
(loss) for the
year - - - - - 358 (767) (220) 235 (394)
Share-based
payment
expense - - - - 50 - - - - 50
As at 31
December
2019 6,944 2,984 6,475 (495) 295 287 (4,062) 1,166 3,926 17,520
Comprehensive income/(loss) for the year:
-------------------------------------------------------------------------------------------------------------------------------------
Loss for the
period
after taxation - - - - - - - - (2,366) (2,366)
Other
comprehensive
income/(loss):
Gain on the
revaluation
of buildings - - - - - - - - - -
Unrealised
exchange
gain/(loss) on
translation of
foreign
subsidiaries - - - - - - (96) (58) - (154)
Fair value
losses
on foreign
currency
cash flow
hedges - - - - - (481) - - - (481)
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Total other
comprehensive
income/(loss) - - - - - (481) (96) (58) - (635)
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Total
comprehensive
income/(loss)
for
the period - - - - - (481) (96) (58) (2,366) (3,001)
Share-based
payment
expense - - - - 39 - - - - 39
As at 30 June
2020 6,944 2,984 6,475 (495) 334 (194) (4,158) 1,108 1,560 14,558
---------------- ----- -------- --------- -------- -------- -------- -------- ------------ ------------ --------- --------
Six Six
months months Year
Statement of cashflows ended ended ended
for the period ended
30 June 2020 30/06/2020 30/06/2019 31/12/2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ----------- ----------- -----------
Cash flows from operating
activities
Cash (used in)/generated
from operations 5 (558) (814) (492)
Tax (paid) (154) (350) (466)
Interest (paid) (238) (254) (566)
------------------------------------ ----- ----------- ----------- -----------
Net cash (used in) / generated
from operating activities (950) (1,418) (1,524)
Cash flows from
investing activities
Purchases of property,
plant and equipment (141) (491) (635)
Purchases of intangible
assets - - (30)
------------------------------------ ----- ----------- ----------- -----------
Net cash (used) in
investing activities (141) (491) (665)
Cash flows from financing
activities
Proceeds from borrowings 1,750 809 804
Repayment of bank
loans (1,170) (472) (1,061)
New finance lease
obligations - 200 200
Repayment of obligations
under finance leases (65) (90) (171)
---------------------------------- ----- ----------- ----------- -----------
Net cash generated / (used)
in financing activities 515 447 (228)
---------------------------------- ----- ----------- ----------- -----------
(Decrease) in cash
and cash equivalents (576) (1,462) (2,417)
Cash and cash equivalents
at beginning of period (6,131) (3,695) (3,695)
Exchange gains on cash and
cash equivalents 106 (3) (19)
---------------------------------- ----- ----------- ----------- -----------
Cash and cash equivalents
at end of period (6,601) (5,160) (6,131)
---------------------------------- ----- ----------- ----------- -----------
Note 1 - Basis of preparation
The financial information set out in the interim statements for
the six months ended 30 June 2020 and the comparative figures are
unaudited and do not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. As permitted, this interim
report has been prepared in accordance with UK AIM listing rules
and not in accordance with IAS 34 Interim Financial Reporting,
therefore it is not fully in compliance with International
Financial Reporting Standards (IFRS).
The financial information for the full preceding year is
extracted from the statutory accounts for the financial year ended
31 December 2019. Those accounts, upon which the auditor issued an
unqualified opinion, have been delivered to the Registrar of
Companies. The auditor's report did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
These financial statements are presented in sterling, being the
functional currency of the primary economic environment in which
the Group operates.
Note 2 - Earnings
per share
Basic earnings per share is calculated by dividing the profit attributable
to equity holders of the company by the weighted average number of ordinary
shares in issue during the year excluding the shares owned by the Pittards
employee share ownership trust.
Six Six
a) Basic earnings per months months Year
share ended ended ended
30/06/20 30/06/19 31/12/19
Earnings per share Unaudited Unaudited Audited
------------------------- ------------ ------------ ------------
Basic (17.06p) 1.23p 2.93p
Weighted average number
of ordinary shares
in issue 13,870,000 13,870,000 13,870,000
b) Diluted earnings
per share
Six Six
months months Year
ended ended ended
30/06/20 30/06/19 31/12/19
Earnings per share Unaudited Unaudited Audited
------------------------- ------------ ------------ ------------
Diluted (17.06p) 1.22p 2.89p
Weighted average number
of ordinary shares
in issue 14,001,000 14,025,000 14,025,000
Six Six
months months Year
Note 3 - Taxation ended ended ended
30/06/20 30/06/19 31/12/19
Unaudited Unaudited Audited
-------------------------------- ---------- ---------- ---------
Analysis of the charge
in the period
The charge based on the profit
for the period comprises:
Corporation tax on
profit for the year - - 200
Foreign tax on profit
for the period 114 90 41
Foreign tax related
to prior years - 75 144
-------------------------------------- ---------- ---------- ---------
Total current tax 114 165 385
Deferred tax
Origination and reversal
of temporary differences - (112) (212)
-------------------------------------- ---------- ---------- ---------
Total deferred tax - (112) (212)
Income tax charge 114 53 173
-------------------------------------- ---------- ---------- ---------
Six Six
months months Year
Note 4 - Deferred taxation ended ended ended
30/06/20 30/06/19 31/12/19
Unaudited Unaudited Audited
---------------------------- ---------- ---------- ---------
Deferred tax asset 100 - 100
Deferred tax (liabilities) (709) (697) (730)
---------------------------------- ---------- ---------- ---------
Deferred tax (liabilities)
- net (609) (697) (630)
---------------------------------- ---------- ---------- ---------
Six Six
Note 5 - (Cash Used) / months months Year
Generated in operations ended ended ended
30/06/2020 30/06/2019 31/12/2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- -----------
(Loss)/ profit before
taxation (2,252) 224 579
Adjustments for:
Depreciation of property,
plant and equipment 337 357 780
Amortisation of intangibles 38 26 63
Bank and other interest
charges 262 286 596
Share based payment
expense 39 42 92
Other non-cash items
in Income Statement 319 165 (275)
------------------------------------------------ ----------- ----------- -----------
Operating cash flows before
movement in working capital (1,257) 1,100 1,835
Movements in working capital (excluding
exchange differences on consolidation): -
Decrease / (Increase)
in inventories 240 (581) (1,980)
Reduction / (Increase)
in receivables 784 (1,377) (383)
(Reduction) / Increase
in payables (325) 44 36
------------------------------------------------ ----------- ----------- -----------
Cash (used) in operations (558) (814) (492)
------------------------------------------------ ----------- ----------- -----------
Note 6 - Prior year restatement reported in 2019 accounts
Deferred tax, amounting to GBP0.648m, in relation to the
temporary timing difference caused by the revaluation of buildings
in Ethiopia, was previously not recognised 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. This was corrected in the 2019
Annual Report and there have been no subsequent prior year
restatements.
Note 7 - Availability
of interim report
The interim report will be available at the Groups website, at www.pittards.com,
in accordance with AIM rule 20.
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IR GZGZLVLLGGZM
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