TIDMTND
RNS Number : 4099C
Tandem Group PLC
10 February 2020
Tandem Group plc
(the "Company" or "Group")
TRADING UPDATE AND BOARD CHANGES
Tandem Group plc (AIM: TND), designers, developers, distributors
and retailers of sports, leisure and mobility equipment, announces
a trading update ahead of its annual results for the year ended 31
December 2019 which are due to be announced in March 2020.
Trading and operations
As we reported in our interim results announcement, revenue in
the first half of the year increased by approximately 27% as a
result of strong performances from both licensed and own brand
properties.
Although the rate of growth in the second half of 2019 did not
match the exceptional levels achieved in the first half it was
nevertheless close to 15% ahead of the same period in the prior
year. The sustained periods of wet weather across many parts of the
country in the late Autumn period and macro uncertainties hindered
the excellent progress earlier in the year.
However, overall it was a strong year for the Group. Despite a
third year in a row of decline in the toy industry with reported
outdoor toy sales declining by almost 10%, Group revenue for the
full year ended 31 December 2019 increased by nearly 20% to GBP38.8
million. Group profit before tax is expected to be well ahead of
the prior year.
Revenue from the toys business was considerably ahead of the
prior year. In licensed wheeled toy categories, L.O.L Surprise!
delivered another excellent result. The impact of the new Disney
contract was also significant with Frozen II, Spider-Man, Disney
Princess and Toy Story all making important contributions. In other
licences, Peppa Pig, Paw Patrol and Batman remained strong.
In own brand portfolios, we continued to develop our U-Move
scooter range which delivered revenue growth of 85%. Ben Sayers
finished the year over 20% ahead of the prior year which was
encouraging. Most other brands including Hedstrom, Wired,
Kickmaster and Stunted were in line or slightly ahead of the prior
year.
Feedback from this year's London Toy Fair to the new MV Sports
& Leisure ranges, where we showcased all of our products for
2020 and a new range of lithium electric scooters, was
excellent.
Overall total revenue from the bicycle businesses was down in
2019 compared to 2018. However, revenue from our Squish bicycle
range sold to independent bicycle dealers grew by 33% in the
year.
Claud Butler revenue was similar to the prior year although
Dawes was behind. There was partly a substitution effect of
consumers switching from traditional Dawes kids bikes to
lightweight Squish but this was at a higher average selling
price.
It was a more challenging year for our corporate bicycles range
which, although positively contributed to profitability, was behind
the prior year.
Despite a strong first quarter, revenue in our direct to
consumer business, Expressco Direct, was slightly behind the
previous year. A combination of garden and outdoor leisure products
performing behind expectation and the increasingly competitive
online retail environment which impacted on margins and slowed down
the previous progress that had been made.
Notwithstanding this, there was significant growth in mobility
and home electrical products and the successful introduction of a
Christmas range.
Group operating expenses increased by approximately 11% in the
year as a result of the growth in revenue and increased marketing
costs in relation to new licences. Efforts continued to be made to
streamline operating costs where possible.
As a result of the strong trading performance it was a year of
further cash generation which helped to strengthen the balance
sheet position further.
Pension scheme and dividend payments
We are aware of recent comments with regards to dividend
payments made by the Company and deficit contributions to the
Tandem Group Pension Plan. For clarity, following the 2016
triennial valuation, the recovery plan signed by the Trustees and
the Company and agreed with The Pensions Regulator included a
provision that in any calendar year dividend payments would not
exceed deficit contributions.
As previously stated, it remains the Board's objective to
operate a progressive dividend policy and to increase the dividend
as trading results and funds permit. Negotiations of the 2019
triennial valuation recovery plan between the Trustees and the
Company are at an early stage. Initial recovery plan illustrations
indicate that given, in particular, the mortality experience in the
scheme, additional deficit contributions may be required. The Board
will continue to update shareholders as the situation develops.
Outlook
2020 has started more slowly for the Group. Although we sold to
National retailers strongly in 2019, we are aware that some of our
major customers have carried stock forward into this year which
will impact on their ability to re-buy.
We are, however, confident that we have secured all of the major
wheeled toy licences and have identified new product opportunities
with own brands which we continue to develop.
We expect to continue the growth of our Squish lightweight
children's bicycles range as we look to take greater market
share.
In our online business we continue to focus on existing ranges
whilst not losing the ability to be opportunistic and take
advantage of new products that we identify. We remain very aware of
the ongoing channel shift to online sales.
The Coronavirus outbreak in the Far East appears to be a
significant threat. A number of factories have not returned to work
after Chinese New Year. The restriction on travel imposed by the
Chinese authorities is hindering the movement of raw materials and
labour throughout China. This has already delayed the production of
orders and made it difficult for our QA/QC inspections to take
place. Further, the welfare of our staff is paramount and we will
not put them at undue risk of infection until we have greater
clarity of the situation.
Board changes
The Company today announces that, following a long and
successful career with the Group, Mervyn Keene has notified the
Board of his intention to retire as Non-Executive Chairman and step
down as a Director with effect from 31 July 2020.
After 30 years with the business, Steve Grant has also informed
the Board of his intention to step down from his role as CEO. Steve
has indicated his desire to remain with the Group and accordingly
will take up the position of Non-Executive Chairman from 1 August
2020.
Although the Board are fully aware of corporate governance best
practice, the Board believe that Steve will exercise independent
and diligent oversight over the Company coupled with robust support
from the other two independent non-executive directors. It is the
Board's view that maintaining both continuity and the wealth of
industry specific knowledge and experience that Steve has will be a
great asset to the Company.
Jim Shears, currently Group Finance Director, will take up the
position of Chief Executive Officer at the same time. As a result,
we plan to recruit additional resource in the finance
department.
Jim will also become Joint Managing Director of the Company's
trading subsidiary MV Sports & Leisure Limited with Group
Commercial Director, Phil Ratcliffe, who will also retain his sales
and marketing responsibilities for the business.
Commenting on his plans, Chairman Mervyn Keene stated "I have
decided to stand down as Chairman of the Group.
I would like to thank our customers, suppliers and most
importantly our wonderful staff for their support during my tenure.
The Group has outperformed many of its peers as a result of our
dedicated and experienced team. It is essential to the future of
the Group that these employees are retained and sufficiently
rewarded and motivated to deal with the many issues that we are
facing.
When I was appointed Non-Executive Chairman the share price was
110.5p. Today as I announce my intention to step down the price is
205p per share. Despite this, it is disappointing that internet
posters, who often hide behind absurd pseudonyms, continue to type
inaccurate statements and offensive remarks. There are an
irritating few of these keyboard warriors who have no commercial
experience but think that they could run the Group better.
Our industry, like others, can be volatile with no guarantee of
year to year growth. As I said earlier the biggest asset that the
shareholders have is our people. They are highly respected by our
customers and suppliers and as such are critical to the health and
stability of the business going forward.
Steve Grant will take over from me and Jim Shears from him. This
will give us perfect continuity. Steve has indicated that he wants
to step down as CEO but fortunately has agreed to stay on as
Non-Executive Chairman. In my opinion this is perfect and far
better than him being a consultant.
Following these changes, I know that the future will be in safe
hands.
As I move on to other opportunities I know that, providing
shareholders understand that we have a great team running the
business and let them get on with it, all will benefit."
Steve Grant said "I am stepping down with the Company in great
shape for the future. The balance sheet is strengthening every year
and I leave a great team of dedicated, loyal and talented employees
who are very capable of taking the business forward over the coming
years."
Jim Shears commented "I am delighted to accept the role of Chief
Executive Officer at an exciting time in the Company's development.
We have an excellent team of skilled and committed employees and
some great brands. I am thrilled to be leading the next stage of
the Company's journey."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (MAR).
Enquiries:
Tandem Group plc
Steve Grant, Chief Executive Officer
Jim Shears, Group Finance Director and Company Secretary
Telephone 0121 748 8075
Nominated Adviser
Cairn Financial Advisers LLP
Tony Rawlinson
James Caithie
Telephone 020 7213 0880
10 February 2020
Forward-Looking Statements
Certain statements made in this announcement are forward-looking
statements. These forward-looking statements are not historical
facts but rather are based on the Company's current expectations,
estimates, and projections about its industry; its beliefs; and
assumptions. Words such as 'anticipates,' 'expects,' 'intends,'
'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions
are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and other factors, some
of which are beyond the Company's control, are difficult to
predict, and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.
The Company cautions security holders and prospective security
holders not to place undue reliance on these forward-looking
statements, which reflect the view of the Company only as of the
date of this announcement. The forward-looking statements made in
this announcement relate only to events as of the date on which the
statements are made. The Company will not undertake any obligation
to release publicly any revisions or updates to these
forward-looking statements to reflect events, circumstances, or
unanticipated events occurring after the date of this announcement
except as required by law or by any appropriate regulatory
authority.
This information is provided by RNS, the news service of the
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END
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