RNS Number:7530T
Straight PLC
27 March 2007
27 March 2007
Straight plc
Preliminary Announcement for the year ended 31 December 2006
Highlights
* Turnover up by 14.3% from #24.3m to #27.8m
* Gross margins up from 16.8% to 18.3%
* Operating margins up from 5.5% to 5.7%
* Headline EBITDA up 10.3% to #2.3m
* Earnings per share up 14.5% to 9.5p
Commenting on the results, James Newman, Chairman, said
"2006 has been a year of development and change for the Group. Much has been
achieved during the last three years as a public company and the Board believes
2007 will be another year of growth as our new business structure and other new
initiatives begin to contribute."
Jonathan Straight, Chief Executive, added
"We move forward with a revitalised business model, strong markets for our core
products, many new products in the pipeline and environmental issues higher than
ever on the national and international agenda. The outlook is positive and, with
boundaries to expansion now removed, our growth can continue."
Contacts
Company: James Newman/Jonathan Straight - 0113 245 2244
Simon Mountford Communications: Simon Mountford - 01904 520162
Panmure Gordon: Andrew Godber/Katherine Roe - 0207 459 3600
The preliminary announcement was approved by the Board on 27 March 2007
Chairman's Statement
I am delighted to report further progress for the Group in a number of areas of
its business, in a year which has not been without its challenges.
Results
Turnover at #27.8 million was up 14% on 2005. Our new Garden Products division,
especially our water saving product range, showed substantially increased
turnover. Sales of waste and recycling containers were lower but more profitable
due to a focus away from bulk wheeled bin supplies. We also successfully
delivered a number of large orders in our Materials Handling division.
Overall, gross profit margins increased from 16.8% to 18.3% due to the improved
sales mix and introduction of a number of new products. This improvement in
margins would have been even higher but for almost #0.5m of one-off costs
incurred as the Group strove to maintain deliveries and customer service levels
during periods of unprecedented peak retail activity.
Despite having incurred these costs, operating profit for the year, before
goodwill amortisation and share option costs, was up by 15% to #1.9m. Profit
before tax was also up by 15% at #1.7m.
Dividend
During the year, the Board declared a dividend of 1.2p (2005: 1.0p) per share.
The Board has declared a further dividend of 2.7p (2005: 2.5p). This dividend
will be payable on 25 May 2007 to shareholders on the register at 27 April 2007.
Strategic developments
As a result of the issues faced by the Group during the year, a number of
strategic initiatives have been taken to create an improved business model that
is both flexible and scalable as the Group's markets and customer requirements
change.
Firstly, in view of the increased scale of our distribution and warehousing
requirements, the Group has agreed to outsource these activities to DHL, a world
leader in contract logistics. This agreement will provide additional capacity at
peak times as well as a more predictable cost base and the ability to benefit
from savings in future years.
Also, to be able to provide a more flexible service to our customers and to
better cope with managing demand, the major proportion of our contact centre
work has now been outsourced.
During the year we changed the relationship with our materials handling partner,
Rehrig Pacific, allowing both parties to pursue their own different
opportunities in this large market. Current joint contracts will continue to be
fulfilled by both parties over the next two years.
With the substantial growth in our retail and on-line sales during the last
year, a considerable amount of investment in a new IT platform has been made
which, coupled with the new outsourcing arrangements, will deliver the improved
performance, scalability and responsiveness, which was not always possible
throughout 2006.
Acquisitions
The Board is pleased to announce that it has acquired a 30% shareholding in
Tapmagic Limited for #35,000 since the end of 2006. Tapmagic has a unique
product range of water saving devices. The Group has been appointed exclusive UK
distributor for these products in its core markets and has an option to purchase
the remainder of the share capital in due course.
Board
In January, I was pleased to welcome Mark Halford to the Board as Operations
Director. Mark was previously General Manager at Polimoon, one of our key
blow-moulding partners, and has a wealth of experience in our industry. He
joined us in July 2006 and has overseen the transfer of our logistics operations
to DHL.
Tom Musgrove, who has been with the Company since 1996, has now stepped down
from the Board and currently leads our trade sales team.
Outlook
With environmental issues still at the forefront of Government policy, its
agencies are still looking at ways to achieve its various recycling and energy
efficiency targets. Meeting these targets will remain difficult unless industry
and the consumer are both motivated and focused. As I said last year, the Group
is well placed to support this effort with creative solutions.
The new strategic initiatives taken during the year have significantly
strengthened the Group's capacity to grow and innovate without a downward effect
on margins and a number of new opportunities are being pursued to this end.
2006 has been a year of development and change for the Group. Much has been
achieved during the last three years as a public company and the Board believes
2007 will be another year of growth as our new business structure and other new
initiatives begin to contribute.
James H Newman
Chairman 27 March 2007
Chief Executive's Review
We started 2006 with a modest acquisition. The Cloudburst brand purchased from
Titan Environmental supplied a range of water butts and composting containers
and gave us access to new markets for our existing product range. What followed
was a period of unprecedented demand for water butts driven by water
restrictions in some parts of the country.
Our retail business expanded rapidly moving from sales of #0.2m in February 2006
up to #1.0m in March 2006, mainly driven by water butt sales, but also by
increased demand for composting containers. This put pressure on all parts of
our supply chain and we incurred additional costs in many areas of the business
such as customer care, in order to keep our affinity partners and retail
customers happy. The outsourcing decisions, taken late in 2006, which will make
the business more scalable and less vulnerable to demand spikes, have been well
received by trade and retail customers and our affinity partners.
Markets
Our core markets remain strong. Kerbside container sales have remained buoyant
with our financial performance much improved. We remain the key player in this
market in the UK. Profitability has been driven by good supplier management and
the introduction of niche products. For example, our Wheeled Bin Inner Caddy has
provided a unique solution for the collection of glass and paper in one
container. Initially developed at the request of a major city council, the
product is now generating interest and sales elsewhere.
Sales of home compost bins remained strong with WRAP being our biggest customer
running at 20% over its own forecast sales. We remain the largest supplier in
this market in the UK.
Water butt sales were exceptionally high both on the trade and retail sides of
the business. The Cloudburst acquisition was very well timed and allowed us to
place product into several major retailers. Performance in this market has
exceeded our expectations. Our own retail business was strong too, both with
water company clients and directly through our evengreener brand.
Our Materials Handling division showed healthy sales of #1.5m, significantly
more than in 2005. However, despite this groundbreaking achievement the
profitability of the contracts was not high and led to the change in our
relationship with Rehrig at the end of 2006. A benefit of this change was that
certain kerbside container moulds, owned by Rehrig and on which royalties were
paid, transferred into our ownership. This will improve our margins in the
future.
The number of our retail customers ordering on-line grew in 2006 by 300%.
Recognising the Internet as a means of generating further increased sales and
reducing processing costs, we are making strategic investments in this area and
extending Internet marketing disciplines to the trade side of the business.
New product development
Innovative new products are the lifeblood of our business and give us the
ability to earn higher margins than we achieve on our core ranges. Products such
as the Wheeled Bin Inner Caddy and the Kitchen Composter have made a significant
contribution in 2006. We have now introduced a formal process of managing this
area with a stream of new product launches scheduled for the coming year.
To tackle the increasing problem of chewing gum littering, we have become the
exclusive distributor of the Gummy Bin product to the local authority market.
This impressive product out performed all other similar containers in a recent
trial run by Defra.
We have also entered into an agreement with renowned designer Wayne Hemingway to
launch a range of environmental products initially focusing on consumer goods.
Prototypes of the first designs have already been produced.
Business re-alignment
Due to the rapid increase in retail sales in 2006 and the immense demands that
this put on the business, it was necessary to refine the business model quickly
and against a tide of ongoing high levels of activity. Change that might have
taken three years to introduce has been achieved in three months. Outsourcing
our logistics to DHL and most of our call centre activity allows us to focus on
our core competences.
A major investment in new retail software, fully integrated into DHL's systems,
means that the first human involvement in an order in many cases is the sticking
of an address label on a parcel. It is our challenge to drive as much business
of this type as possible. This B2B and retail e-commerce is not only our most
profitable area but also the most rapidly scalable.
Contract awards
As previously announced, WRAP has awarded us an estimated #2.6m of business for
2007. Other key successes include Birmingham City Council specifying our
kerbside boxes, our largest single order for this type of container.
Supplies through the Garden Products division were made through 2006 to Wickes
stores and additional products, including a new water butt, have been added for
2007.
Management and staff
I would like to thank my fellow Directors and colleagues for their unfaltering
support throughout the year. The achievements of all departments have been
exceptional. I would like to add my welcome to Mark Halford and to thank Tom
Musgrove for his contribution to the Board.
Outlook
We move forward with a revitalised business model, strong markets for our core
products, many new products in the pipeline and environmental issues higher than
ever on the national and international agenda. The outlook is positive and, with
boundaries to expansion now removed, our growth can continue.
Jonathan M Straight
Chief Executive 27 March 2007
Finance Director's Review
I am pleased to announce another record year of financial performance for the
Group.
Turnover and operating margins
The mix of waste and recycling containers sold in bulk in 2006 meant that
turnover to these trade customers fell by 12% to #13.1m although the associated
gross profit actually increased by 17% to #2.0m. This was the result of the
focus of our sales resource on the more lucrative products in our range.
Turnover in our Garden Products division, driven by retail sales including
waterbutts and the continued success of our relationship with WRAP, grew by 42%
to #13.2m. This unprecedented growth did result in unanticipated costs of almost
#0.5m as the business strove to cope with the demands of reaching the limit of
its capacity to produce product and the ability of its delivery crews to
deliver. Most of this cost was offset against the gross profit of this division,
which was #3.0m, up 24% on 2005.
The business further increased its fixed overhead base in 2006 with a rise in
operating expenses of 28% to #3.5m. This was driven by the strengthening of the
Group's management structure, with resource being added to sales, marketing and
product development and IT as the business sought to penetrate and develop
further its new and existing markets. After accounting for these costs, and the
costs associated with the unprecedented demand in the home and garden products
division, profit before tax grew by 15% to #1.7m.
Operating cashflow
Following the demand for garden products in 2006, substantial stocks of certain
key products were built up during the late autumn. The Board is confident that
this stock will ensure good customer service in another year of anticipated high
demand. In addition, the Group continued to use its surplus cash position to
take advantage of early settlement discounts with key suppliers, which used
#1.0m of working capital. In order to offset this outflow, considerable effort
was made to reduce the Group's debtors and as a result #0.5m of cash was
released despite the growth in turnover.
New products and innovations continue to be the Group's profit driver.
Consequently the Group doubled the capital sums it invested in new products and
IT in 2006 to #0.9m.
With the cash dividend paid increased to #0.4m, cash balances ended 2006 #0.1m
higher than at the beginning of the year.
Earnings per share
Basic earnings per share grew by 14% to 9.5p in the year, in line with the
growth in profit before tax. Due to the one-off costs highlighted above,
headline earnings per share were slightly reduced to 12.5p
Management of financial risk
The Group has continued to place surplus cash on deposit so that the maximum
return can be obtained consistent with its need to access the cash. The Group
has also maintained its policy of managing foreign exchange risk by purchasing
currency forward when it is notified that a contract bid has been successful and
foreign currency is required. The policy of rigorously credit checking all new
customers and chasing existing customers promptly has once again ensured that we
have avoided significant bad debts.
International Financial Reporting Standards (IFRS)
All AIM companies are exempt from preparing financial statements under IFRS
until 2007. Straight plc intends to implement IFRS during 2007 and the directors
are taking appropriate steps to ensure that as an AIM Group, Straight plc meets
this requirement.
Outlook
The increase in scalability in our business afforded by outsourcing non core
activities, and the focus of resources on new products and innovation will mean
further progress on earnings and cash generation in 2007.
James D Mellor
Finance Director and Company Secretary 27 March 2007
Summarised Consolidated Profit and Loss Account
For the year ended 31 December 2006
Total Total
2006 2005
restated
Note #'000 #'000
Turnover 2 27,836 24,343
Cost of sales 3 (22,731) (20,243)
_____ _____
Gross profit 5,105 4,100
Operating expenses 3 (3,527) (2,755)
_____ _____
Operating profit 1,578 1,345
Interest receivable 4 107 125
_____ _____
Profit on ordinary activities before taxation 2 1,685 1,470
Taxation 5 (610) (547)
_____ _____
Profit for the financial year 1,075 923
_____ _____
Basic earnings per share (p) 6 9.5 8.3
Diluted earnings per share (p) 6 9.2 8.1
All operations are continuing.
There were no recognised gains or losses other than the profit for the financial
year.
Summarised Balance Sheets
At 31 December 2006
Group Company Group Company
restated restated
2006 2006 2005 2005
#'000 #'000 #'000 #'000
Fixed assets
Intangible 5,294 85 5,490 -
Tangible 1,333 1,333 882 882
Investments - 6,911 - 6,902
____ ____ ____ ____
6,627 8,329 6,372 7,784
Current assets
Stocks 1,181 1,181 415 415
Debtors 5,057 5,057 5,489 5,489
Cash at bank and in hand 2,126 2,126 2,036 2,036
____ ____ ____ ____
8,364 8,364 7,940 7,940
Creditors: amounts falling due within
one year (5,208) (7,134) (5,364) (7,290)
____ ____ ____ ____
Net current assets 3,156 1,230 2,576 650
Total assets less current liabilities 9,783 9,559 8,948 8,434
Provisions for liabilities and charges (35) (35) (37) (37)
____ ____ ____ ____
Net assets 9,748 9,524 8,911 8,397
____ ____ ____ ____
Capital and reserves
Called up share capital 115 115 113 113
Share premium account 5,953 5,953 5,827 5,827
Merger reserve 744 744 744 744
Share option reserve 87 87 56 56
Profit and loss account 2,849 2,625 2,171 1,657
____ ____ ____ ____
Equity shareholders' funds 9,748 9,524 8,911 8,397
____ ____ ____ ____
Summarised Consolidated Cash Flow Statement
For the year ended 31 December 2006
2006 2005
Note #'000 #'000
Net cash inflow/(outflow) from operating activities 7 1,711 (160)
_____ _____
Returns on investments and servicing of finance 107 125
Interest received _____ _____
Net cash inflow from returns on investments and
servicing of finance 107 125
Taxation (540) (514)
Capital expenditure
Purchase of intangible fixed assets (93) -
Purchase of tangible fixed assets (801) (457)
Disposal of tangible fixed assets - 4
_____ _____
Net cash outflow from capital expenditure (894) (453)
Net cash outflow from acquisitions - (4,362)
Equity dividends (422) (222)
Management of liquid resources
Disposal of short term deposits 1,500 -
_____ _____
Net cash inflow/(outflow) before financing 1,462 (5,586)
Financing
Issue of share capital 128 5,000
Costs of share issue - (293)
_____ _____
Net cash inflow/(outflow) from financing 128 4,707
_____ _____
Increase/(decrease) in cash 8 1,590 (879)
_____ _____
Notes to the Preliminary Announcement
For the year ended 31 December 2006
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 Group have remained unchanged from the previous year
except that FRS20, "Share Based Payments", has been adopted. Prior period
figures have been restated as appropriate.
2. Turnover and gross profit
The turnover and profit on ordinary activities before taxation are attributable
to the principal activities of the Group. The turnover and gross profits
attributable to the principal activities are set out below.
Gross Gross
Turnover profit Turnover profit
2006 2006 2005 2005
#'000 #'000 #'000 #'000
Waste and recycling containers 13,073 1,979 14,799 1,695
Home and garden products 13,214 2,971 9,322 2,401
Materials Handling 1,549 155 222 4
_____ _____ _____ _____
27,836 5,105 24,343 4,100
_____ _____ _____ _____
It is not possible to separate the profit before tax or net assets of these
operating segments.
The profit on ordinary activities before taxation is stated after the costs
below.
2006 2005
restated
#'000 #'000
Depreciation of owned assets 386 256
Goodwill amortisation 289 289
Operating lease rentals - land and buildings 97 119
Auditors' remuneration - audit services 20 20
Auditors' remuneration - review of interim financial
statements 3 3
Share based payments 56 38
3. Cost of sales and operating expenses
2006 2005
restated
#'000 #'000
Cost of sales 22,731 20,243
______ _____
Operating expenses
Distribution costs 1,931 1,397
Administrative expenses 1,596 1,358
______ _____
3,527 2,755
______ _____
4. Interest receivable
2006 2005
restated
#'000 #'000
On bank deposits 39 56
Short term deposits 68 69
107 125
5. Taxation
2006 2005
restated
#'000 #'000
Corporation tax at an average rate of 30% (2005: 30%) 605 535
Under/(over) provision in prior years 7 (11)
_____ _____
612 524
Deferred tax (2) 23
_____ _____
610 547
_____ _____
Analysis of current tax charge
Profit on ordinary activities before tax 1,685 1,508
_____ _____
Profit on ordinary activities multiplied by standard rate of
Corporation tax in the UK (30%) (2005: 30%) 506 452
Expenses not deductible for tax purposes 114 88
Capital allowances in excess of depreciation (15) (5)
Marginal relief - -
Under/(over) provision in respect of prior years 7 (11)
_____ _____
612 524
_____ _____
6. Earnings per share
Basic and diluted earnings per share
Basic earnings per share are calculated on the basis of profit for the financial
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 in the year
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 2006.
2006 2005
Weighted Weighted
average average
Earnings number Per share Earnings number Per share
#'000 of shares pence #'000 of shares pence
Basic
earnings
attributable
to ordinary 1,075 11,349,878 9.5 923 11,096,585 8.3
shareholders
Dilutive
effect of
share - 328,481 (0.3) - 303,771 (0.2)
options
_____ _________ ____ ____ ________ ____
Diluted
earnings per
share 1,075 11,678,359 9.2 923 11,400,356 8.1
Headline earnings per share
Headline earnings per share is calculated on the basis of the headline profit
for the year, defined as the profit for the financial year before the
amortisation of goodwill, share option costs and reorganisation costs, divided
by the weighted average number of shares in issue in the year of 11,348,878. The
headline earnings per share reflects the Group's recurring trading
profitability. The comparative is calculated by reference to the weighted
average number of shares in issue in 2005 of 11,096,585. One-off costs of around
#0.5m have not been adjusted below.
2006 2005
Number Number
Earnings of shares Per share Earnings of share Per share
#'000 in issue pence #'000 in issue pence
Headline
earnings
attributable
to ordinary
shareholders 1,420 11,349,878 12.5 1,403 11,096,585 12.6
Dilutive
effect of
share - 328,481 (0.3) - 303,771 (0.3)
options
Diluted
headline
earnings per
share 1,420 11,678,359 12.2 1,403 11,400,356 12.3
7. Reconciliation of operating profit to net cash flow from operating
activities
Group Group
2006 2005
#'000 #'000
Operating profit 1,578 1,345
Depreciation 386 256
Profit on sale of tangible fixed assets (111) (4)
Goodwill amortisation 289 289
Share option costs 56 38
(Increase)/decrease in stocks (766) 115
Decrease/(increase) in debtors 508 (2,320)
Decrease)/increase in creditors (229) 121
_____ _____
Net cash inflow/(outflow) from operating activities 1,711 (160)
_____ _____
8. Reconciliation of net cash flow to movement in net funds
2006 2005
#'000 #'000
Increase/(decrease) in cash in the year 1,590 (879)
Disposal of short term deposits (1,500) -
Net funds at 1 January 2,036 2,915
Net funds at 31 December 2,126 2,036
_____ _____
9. Post balance sheet events
On 27 February 2007, the Group acquired a 30% stake in Tapmagic Limited for
consideration of #35,000 in cash.
On 27 March 2007, the Company declared a dividend of 2.7p per share. This will
be paid on 25 May 2007 to all shareholders on the register at 27 April 2007.
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 sheets at 31 December 2006, summarised consolidated
profit and loss account, summarised consolidated cash flow statement and
associated notes for the year then ended, have been extracted from the Group's
financial statements upon which the auditors opinion is unqualified and does not
include any statement under section 237 of the Companies Act 1985. Those
financial statements have not yet been delivered to the Registrar.
11. Annual General Meeting
The Annual General Meeting of the Company will be held in Leeds on Tuesday 26
June 2007. 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
FR VQLFLDXBLBBF
Straight Plc (LSE:STT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Straight Plc (LSE:STT)
Historical Stock Chart
From Jul 2023 to Jul 2024
