RNS Number:1302L
Straight PLC
18 April 2005
Straight plc
Preliminary Announcement for the year ended 31 December 2004 (unaudited)
Highlights:
* Turnover at #12.8 million - up 26%
* Pre tax profits at #711,000 - up 58%
* Earnings per share at 7.5p
* Adjusted earnings per share up from 4.9p to 7.5p
* Acquisition of Blackwall Limited
* Order book at record levels
Commenting on the results, James Newman, Chairman, said
"2004 has been another successful year for the Company. Considerable progress
has been made in improving margins on the trade side of the business. Looking
forward, once Blackwall has been fully integrated, the Company will continue to
look at further ways to expand its business activities."
Jonathan Straight, Chief Executive, added
"Through 2005, we expect to continue to grow organically and profitably in the
waste and recycling container market. We will capitalise on all retail
opportunities and maximise both up-selling to existing customers and
cross-selling through our trade activity. Finally, we plan to make significant
strides forward with our material handing division."
Contacts
Company: James Newman/Jonathan Straight - 0113 245 2244
Simon Mountford Communications: Simon Mountford - 01347 844844
Durlacher Limited: Matthew Robinson/Katherine Roe - 0207 459 3600
The preliminary announcement was approved by the Board on 18 April 2005
Chairman's Statement
2004 has been another successful year for the Company, this being its first full
year following admission to AIM in November 2003.
Results
Turnover for the year grew significantly by 26% to #12.8m. This growth was
achieved despite a disappointing performance from our retail sales campaigns.
Trade sales, however, remained buoyant throughout the year and the order book
going into 2005 was at record levels.
Considerable progress has also been made in improving margins on the trade side
of the business with more use of UK suppliers and the benefits starting to
accrue from the capital expenditure on new product tooling.
Profit before tax at #711,000 was 58% up on 2003's result, after absorbing a
full year's costs of being a listed company.
Dividend
In the year, the Board declared and paid an interim dividend of 0.8p per share.
On 17 January 2005 the Board declared a final dividend for the year 2004 of 1.6p
per share, making a total dividend for the year of 2.4p per share. This was in
line with the statement made in the Prospectus at the time of the flotation in
2003.
This final dividend is payable on 27 May 2005 to shareholders on the register at
7 January 2005.
Materials Handling Division
During the year, our materials handling division was developed in conjunction
with our long time US supplier, The Rehrig Pacific Company. Two experienced
sales personnel were recruited and are pursuing a number of exciting
opportunities in a market place which is significantly larger than our own but
has relatively few good UK suppliers.
The Board intends to expand this division, being both complementary and having a
similar business model, to the company's existing activities.
Acquisition of Blackwall and Share Placing
In December, the Board announced that it had successfully provisionally placed
3.8m new shares at 130p to fund the acquisition of Blackwall Limited ('
Blackwall'), a company also based in Leeds, carrying out similar activities to
your company. The total cost of the acquisition was #6.75 million.
Following shareholder approval of the placing and acquisition at an
Extraordinary General Meeting of the Company on 17 January 2005, the new shares
were admitted to AIM on l8 January 2005 and the acquisition completed on 19
January 2005.
I am pleased to report that the integration of the two businesses is proceeding
ahead of our expectations and that the combination of the Blackwall retail brand
name and Straight's high profile in trade and B2B activities has given the
Company a strong position in the market place for specialist waste containers.
Board and Employees
I would like to thank my Board colleagues for their support during a very busy
year and all employees for their time and efforts to overcome the many
challenges which inevitably arose in a business which has again grown
substantially for yet another year.
Outlook
Much has been achieved in 2004. Looking forward, once Blackwall has been fully
integrated, the Company will continue to look at further ways to expand its
business activities.
Recycling, and especially household recycling, is fast becoming part of the
fabric of UK society as it is already in many parts of Europe. The Government
continues to make funds available to our customers to expand existing and create
new recycling schemes. More funds and fiscal action are, however, still needed
in order to achieve the targets the Government has set itself.
The Company's unique position in being able to provide products and services in
this expanding market, should mean another year of organic growth in 2005
James H Newman
Chairman 18 April 2005
Chief Executive's Review
Floating Straight onto the AIM market at the end of 2003 was the single most
important event in the Company's history. In 2004 the challenge was to deliver
on the promises we had made at that time.
The goals set out on flotation were to expand the business by developing new
products and increase market penetration through the creative use of the funds
raised. In addition, we were tasked with building a strong management structure
to allow for growth and develop a system of sharing our success across the
entire team. Finally, it was necessary to seek out suitable companies for
acquisition in order to build on our own organic growth.
I am pleased to advise that in many respects these goals have been met. A series
of product launches and an increase in our overall marketing activity has
resulted in a substantial increase in turnover. Key appointments have
strengthened the management structure and helped to build a strong and dynamic
team. The culmination of our work through 2004 was the acquisition of Blackwall,
long considered our biggest rival. This was concluded earlier this year.
Waste and recycling container business
During 2004, we maintained our lead in the kerbside box market and consolidated
our position as a key supplier of wheeled bins. Innovation in containers for
organic waste, bulk sales of home composters and strong sales of our systems for
workplace recycling also contributed. Sales in this sector rose 37% from #8.3m
to #11.4m.
Home and garden products business
Our business supplying home composters and water butts failed to make the
predicted contribution through 2004 with sales of #1.4m, falling from #1.9m
achieved in 2003. Although poor weather led to a flat season for the sector in
general, our retail catalogue came out too late in the year to make a real
impact. Bulk sales to WRAP also replaced some of the retail activity we may
have achieved ourselves.
I am pleased to advise that the 2005 catalogue is already being distributed and
is being favourably received.
Materials handling division
Working on the same model as our core activity, the launch of our materials
handling division, in partnership with The Rehrig Pacific Company, a world
leader in this field, demonstrates a commitment to a long term growth strategy.
The appointment of two specialised and experienced sales people has allowed
tremendous headway to be made.
Whilst this market sector only made a small contribution in 2004, we will
shortly be commencing production of a new range of distribution containers and
hope to make a number of contract announcements in the coming weeks and months.
Acquisitions
Despite a growing market, we felt that competitive pressures were likely to
continue to restrict progress. There was general agreement amongst the board
that a quantum leap was needed in order to propel the Company forward.
In the last few years, we have established ourselves as the lead player in the
kerbside container market and second in the home composter market. Blackwall was
the clear leader in home composters, and recently had made substantial in-roads
into the growing kerbside containers market. Furthermore, we both were running
water conservation campaigns with UK water companies.
The case for making the acquisition was compelling. It would give us the lead in
all of our specialist niche markets and would be significantly earnings
enhancing. Their existing UK supplier base was an attractive proposition in
order to increase our own domestic production and provide a platform for our
future expansion. Their well developed retail business also appeared a perfect
fit with our own. Finally, a strong middle management team running the business
provided the resource to expand the combined operation.
To date, we have fully combined the retail side of both businesses with the
consolidation of our contact centres and carrier networks. A major investment in
IT is now allowing the remaining elements to be integrated. The market has been
generally well disposed to this move, especially due to the sense of continuity
afforded by the continued involvement of the former Blackwall directors as
consultants to the business.
Contract awards
Significant contract awards in the latter half of 2004 included an #820,000
award from Kettering Borough Council in kerbside boxes, wheeled bins and home
delivery services and a #608,000 contract to supply Somerset's councils with
kerbside containers for organic waste along with our newly-designed kitchen
caddy developed in conjunction with them.
A second #1m contract to supply wheeled bins to Northampton Borough Council will
help to drive turnover forward in 2005.
At the close of 2004, our order book was at a record level. Combined with the
Blackwall order book, we entered 2005 with #9m of business to fulfill.
Management and employees
In April 2004, James Mellor was promoted from Financial Controller to Finance
Director, a role which he has since fulfilled with dedication and attention to
detail. Of particular note has been his focus on cashflow, which has transformed
the financial health of the business.
Appointments were made in the logistics, sales and marketing departments.
With the acquisition of Blackwall, we have gained five key middle-mangers, who
have been successfully integrated into the new enlarged structure.
Outlook
Through 2005, we expect to continue to grow organically and profitably in the
waste and recycling container market. We will capitalise on all retail
opportunities and maximise both up-selling to existing customers and
cross-selling through our trade activity. Finally, we plan to make significant
strides forward with our material handing division.
As always, our success is also due to the sterling efforts of my colleagues on
the board and all of our staff throughout the organisation.
We look forward to 2005 with confidence, as the leader of a growing market,
which will allow us to deliver added value to our shareholders.
Jonathan M Straight
Chief Executive 18 April 2005
Finance Director's Review
I am pleased to report that the increase in activity enjoyed by the Company in
2003 has been enjoyed once again in 2004, with overall sales 26% higher. The
Company has achieved this growth whilst improving margins and releasing cash
from working capital.
Operating margins
Gross margin has increased from 12.1% in 2003 to 15.3% in 2004. This improvement
is attributable to improved management of large contracts following the
strengthening of the project team, increased UK manufacture which has reduced
carriage inwards costs and a close monitoring of overheads.
Operating margin has increased from 4.3% to 5.0%. This improvement has been
achieved after accounting for the year on year cost increases of over #200,000
incurred directly as a result of becoming a listed company in late 2003.
The Company looks forward with confidence to consolidating its supplier base
with that of Blackwall in 2005 in order to further maximise cost reduction
opportunities.
Operating cashflow
During a year of substantially increased turnover, I am pleased to report that
we have been able to considerably reduce the amount of cash tied up in working
capital. A particular focus on debtors, following a newly introduced and
disciplined approach to cash collection, has resulted in a #1.3m reduction in
trade debtors.
Cash generated from operating activities was #1.5m, up from #0.2m in 2003.
Capital expenditure
The Company invested #280,000 in tooling and IT during the year. This trend
will continue as the Company develops its strategy of maintaining control of
products and margins by tool ownership and innovative design, and a desire to
offer best service through investment in IT infrastructure.
Earnings per share
Basic earnings per share were 7.5p (2003: 23.6p).
Adjusted earnings per share, reported as though all shares issued at 31 December
2003 had been in issue for the whole of 2003 and 2004, has increased by 53% from
4.9p to 7.5p.
Outlook
Overall, the Company remains both profitable and cash generative and, as a
combined business with Blackwall in 2005, I am confident that this pattern will
continue.
James D Mellor
Finance Director and Company Secretary l8 April 2005
Summarised Profit and Loss Account
For the year ended 31 December 2004 (unaudited)
2004 2003
Note #'000 #'000
Turnover 2 12,807 10,180
Cost of sales 3 (10,850) (8,947)
_____ _____
Gross profit 1,957 1,233
Operating expenses 3 (1,319) (798)
_____ _____
Operating profit 638 435
Interest receivable 4 73 16
_____ _____
Profit on ordinary activities before taxation 2 711 451
Taxation 5 (192) (113)
_____ _____
Profit for the financial year 519 338
Dividends 6 (166) -
_____ _____
Profit retained and transferred to reserves 353 338
_____ _____
Basic earnings per share (p) 7 7.5 23.6
Diluted earnings per share (p) 7 7.3 23.5
All operations are continuing.
There were no recognised gains or losses other than the profit for the financial
year.
Summarised Balance Sheet
At 31 December 2004 (unaudited)
2004 2003
#'000 #'000
Fixed assets
Tangible fixed assets 460 290
Investments - -
_____ _____
460 290
Current assets
Stocks 312 199
Debtors 2,055 3,303
Cash at bank and in hand 2,915 1,758
_____ _____
5,282 5,260
Creditors: amounts falling due within one year (3,120) (3,267)
_____ _____
Net current assets 2,162 1,993
Total assets less current liabilities 2,622 2,283
Provisions for liabilities and charges (17) (14)
_____ _____
Net assets 2,605 2,269
_____ _____
Capital and reserves
Called up share capital 69 69
Share premium account 1,158 1,175
Profit and loss account 1,378 1,025
_____ _____
Equity shareholders' funds 2,605 2,269
_____ _____
Summarised Cash Flow Statement
For the year ended 31 December 2004 (unaudited)
2004 2003
Note #'000 #'000
Net cash inflow from operating activities 8 1,550 203
_____ _____
Returns on investments and servicing of finance
Interest received 58 16
_____ _____
Net cash inflow from returns on investments
and servicing of finance 58 16
Taxation (99) (61)
Capital expenditure
Purchase of tangible fixed assets (280) (267)
Disposal of tangible fixed assets 1 -
_____ _____
Net cash outflow from capital expenditure (279) (267)
_____ _____
Equity dividends (56) -
Management of liquid resources
Purchase of short term deposits (1,500) -
_____ _____
Net cash (outflow) before financing (326) (109)
Financing
Issue of share capital - 1,524
Costs of share issue (17) (289)
_____ _____
Net cash (outflow)/inflow from financing (17) 1,235
_____ _____
(Decrease)/increase in cash (343) 1,126
_____ _____
Notes to the Preliminary Announcement
For the year ended 31 December 2004 (un-audited)
1. Basis of preparation
The preliminary announcement has been prepared under the historic cost
convention in accordance with applicable accounting standards. The
principal accounting policies of the Company have remained unchanged from
those set out in the Company's 2003 Financial Statements.
2. Turnover and profit on ordinary activities before taxation
The profit on ordinary activities before taxation is stated after the costs
stated below (except for those costs relating to the share issue).
2004 2003
#'000 #'000
Depreciation of owned assets 108 37
Operating lease rentals 62 62
Auditors' remuneration - audit services 13 13
Auditors' remuneration - other services 2 41
3. Cost of sales and operating expenses
2004 2003
#'000 #'000
Cost of sales 10,850 8,947
Operating expenses
Distribution costs 442 360
Administrative expenses 877 438
_____ _____
1,319 798
_____ _____
4. Interest receivable
2004 2003
#'000 #'000
On bank deposits 55 16
Short term deposits 18 -
_____ _____
73 16
_____ _____
5. Taxation
2004 2003
#'000 #'000
Corporation tax at an average rate of 27% (2003: 23%) 189 99
Deferred tax 3 14
_____ _____
192 113
_____ _____
Analysis of current tax charge
Profit on ordinary activities before tax 711 451
_____ _____
Profit on ordinary activities multiplied by
standard rate of Corporation tax in the UK
(30%) (2003: 30%) 213 135
Expenses not deductible for tax purposes 7 17
Capital allowances in excess of depreciation (9) (24)
Marginal relief (22) (29)
_____ _____
189 99
_____ _____
6. Dividends
2004 2003
#'000 #'000
Equity dividends
Interim dividend of 0.8p per share paid 10
December 2004 56 -
Final declared dividend of 1.6p per share 110 -
_____ _____
166 -
_____ _____
The final dividend is payable on 27 May 2005 to all shareholders who were on the
register of members at 7 January 2005.
7. Earnings per share
Basic and diluted earnings per share
Basic earnings per share are calculated on the basis of profit for the year
after tax divided by the weighted average number of shares in issue for the
year.
Diluted earnings per share are calculated on the basis of profit for the
year after tax divided by the weighted average number of shares in issue
for 2004 plus the weighted average number of shares which would be issued
if all the options granted were exercised.
All options were dilutive at 31 December 2004.
7. Earnings per share (continued)
2004 2003
Weighted Weighted
Earnings average no. Per share Earnings average no. Per share
#'000 of shares pence #'000 of shares pence
Basic earnings attributable
to ordinary shareholders 519 6,903,750 7.5 338 1,431,733 23.6
Dilutive effect of securities
options - 159,512 (0.2) - 3,758 (0.1)
_____ ________ ____ ____ ________ ____
Diluted earnings per share 519 7,063,262 7.3 338 1,435,491 23.5
_____ ________ ____ ____ ________ ____
Adjusted earnings per share
In order to improve comparability with 2003, we have calculated adjusted
earnings per share as if all shares issued at 31 December 2003 had been in issue
throughout that year.
2004 2003
No. No.
Earnings of shares Per share Earnings of share Per share
#'000 in issue pence #'000 in issue pence
Basic earnings attributable
to ordinary shareholders 519 6,903,750 7.5 338 6,903,750 4.9
____ ________ ___ ____ ________ ___
8. Reconciliation of operating profit to net cash flow from operating
activities
2004 2003
#'000 #'000
Operating profit 638 435
Depreciation 108 37
Loss on sale of tangible fixed assets 1 -
Increase in stocks (113) (4)
Decrease/(increase) in debtors 1,263 (1,835)
(Decrease)/increase in creditors (347) 1,570
_____ _____
1,550 203
_____ _____
9. Reconciliation of net cash flow to movement in net funds
2004 2003
#'000 #'000
(Decrease)/increase in cash in the year (343) 1,126
Purchase of short term deposits 1,500 -
Net funds at 1 January 1,758 632
_____ _____
Net funds at 31 December 2,915 1,758
_____ _____
10. Publication of non statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies
Act 1985.
The summarised balance sheet at 31 December 2004, the summarised profit and
loss account, summarised cash flow statement and associated notes for the
year then ended, have been extracted from the Company's financial
statements. Those financial statements have not yet been delivered to the
Registrar, nor have the auditors reported on them.
11. Annual General Meeting
The Annual General Meeting of the Company will be held in Leeds on Monday 4
July 2005. Full details will be included in the published Annual Report
and Financial Statements which will be sent to shareholders in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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