RNS Number:9436Z
Faupel PLC
21 June 2004
21st June 2004
FAUPEL PLC
PRELIMINARY RESULTS
"Return to operating profit
Bank debt reduced by over #1 million"
Faupel Plc, which imports quality textile goods mainly from China for sale to
leading retailers and wholesalers, has today announced preliminary results for
the year ended 31st March 2004.
KEY POINTS
* Pre-tax loss of #18,000 (2003: loss #875,000).
* Operating profit #232,000 (2003: loss #527,000).
* Bank debt, net of cash balances, reduced by #1 million to #2.27
million. Gearing down to 53%.
* Sale of Faupel House for #1.2 million. Successfully completed after
year end.
* Loss per share 0.1p (2003: loss per share 5.6p).
* The Board is not recommending a final dividend and no interim dividend
was paid in the year (2003: nil).
Commenting on the results David Newbigging, Chairman, said:
"Although we incurred a small pre-tax loss, we returned to operating profit and
made further improvements in the balance sheet. We believe that these trends
will continue"
Enquiries:
Faupel Plc
Laurence Mead, Chief Executive Tel: 01372 384100
James McClean, Finance Director
Buchanan Communications Ltd Tel: 020 7466 5000
Tim Thompson
Chairman's Statement
Results
The Group's consolidated loss before tax for the year ended 31st March 2004 was
#18,000 (2003: loss #875,000).
The profit and loss account did not show as much progress as had been hoped at
the start of the year, but the second half proved better than we expected when
we announced our interim results in December 2003. The most encouraging feature
of the year was the return to an operating profit of #232,000 (2003: loss of
#527,000), an improvement of #759,000.
We also saw further significant reductions in net debt, as outlined below, and
the completion of the sale of Faupel House after the year end for #1.2 million
will further improve this position.
Finance
During the year, and before the completion of the sale of Faupel House, our bank
debt net of cash balances reduced by #1,058,000, which in turn led to a
reduction in net interest cost of #98,000. Stock levels increased very slightly
(by #21,000) and trade debtors were reduced by #1,318,000. The improvement in
our balance sheet in the last three years has been significant, with net debt
down by #4.8 million and stock reduced by #4.5 million. This is a direct result
of management actions to improve the working capital position of the Group. The
close control of our balance sheet remains a key objective.
Dividend
Given the loss for the year, the Board is not recommending the payment of a
final dividend. No interim dividend was paid during the year.
Commercial Operations
Gross profit rose by #209,000 on turnover reduced by #1,363,000 (5%). It had
been clear that the declining margins that led to our losses of two years ago
could not be allowed to continue and we are making good progress in improving
margins. A key imperative continues to be to increase margins still further.
The falls in turnover over last year were in the Home Furnishings and Industrial
Products divisions, with Faupel Brands (our outdoor wear business) remaining
unchanged.
The decline in Home Furnishings turnover had been expected, but the result was
ahead of budget. Last year's turnover figures for our Champion garments range as
a whole included #445,000 from the now discontinued discount garments range. The
Industrial Products decline primarily related to the loss of sales of Airline
product following the loss of a major contract. This had been expected and
turnover was ahead of budget.
During the year the Group launched its new Proforce range of Faupel Safety
Products but this has got off to a slower start than expected. This is
disappointing and represents the area of the Group's business that particularly
failed to meet our own aspirations.
Chairman's Statement
Developments
During the year the Group initiated projects that should significantly improve
the Group's operations and the service we provide to our customers. Our IT and
software have been upgraded, all the Group's support teams have been moved into
modern open plan offices, certain functions have relocated to Manchester and the
Group's warehouses are being relocated to a refurbished facility in the West
Midlands. This should deliver better communications and allow for the
development of specialist teams for design, sales support, purchasing, shipping
and warehouse management.
In the Home Furnishings division, recent senior appointments have already
resulted in better design skills and new appointments in the sales team should
assist us in growing higher margin turnover. In addition, further pressure will
be brought to bear on our suppliers to reduce prices. In garments, the sales
force has been extended and new products complementary to our existing Champion
range of outdoor clothing are being launched. The Faupel Safety Products
division has taken delivery of its new product range. Although sales are taking
time to build to meaningful levels, the range is being well received by the
target market.
Strategy
Returning to profit remains our immediate aim. This will come mainly through the
organic growth of our existing businesses but we will continue to consider
acquisitions of a size that can take advantage of our China sourcing and
warehousing infrastructure.
People
All those who work for Faupel have had to embrace a number of major projects and
the inevitable changes these bring. All concerned have shown a high level of
commitment and the service to our customers has not suffered to any degree in
the process. I thank all our staff for their willing support, for their
enthusiasm and for their loyalty.
Prospects
Although we incurred a small pre-tax loss, we returned to operating profit and
made further improvements in the balance sheet. We believe that these trends
will continue.
David Newbigging
Chairman
21st June 2004
Chief Executive's Report
The financial year ended 31st March 2004 was another year of progress in the
transformation of Faupel. We are no longer the trading Group of old, we are
becoming a brand ownership company, a Group with comprehensive customer service
at its heart. Set against that, we did not achieve the levels of profit that we
had hoped for, and that was a disappointment. I am however pleased to be able to
report that we did make an operating profit, and that we are well positioned for
the coming twelve months. Our disappointing pre-tax results were due to the
lower than anticipated sales, something we have clear plans to overcome in the
next 12 months. Our order book is by definition, short-term in nature, but
customer feedback from our larger accounts and sales reports from our sales
teams are positive.
It has been an active year and work that had to be done to transform Faupel was
more comprehensive than might have been apparent from the outside. The result
for the year was achieved after absorbing significant costs relating to the
Group's continuing modernisation.
In the year we relocated our Manchester staff to a new city centre office and
the Group's accounting and shipping functions were relocated from Surrey to
Manchester. In addition the design team for Faupel Home Furnishings (FHF) were
relocated to Manchester, giving FHF a centre of operations that was lacking in
the past. All of the costs of this were absorbed into the results for the year
ended 31st March 2004. In Manchester, Faupel now has a new modern, open plan
environment, which has already made for significantly improved communications
between the commercial teams. The year also saw us contract to sell Faupel
House, our freehold property in Thames Ditton, Surrey. Subsequent to the year
end, that transaction was successfully completed and the sum of #1.225 million
received. Our head office relocated to smaller, leasehold premises in
Leatherhead, Surrey at the end of April, which will service our immediate needs.
Some of the proceeds from the sale of Faupel House will be used to cover the
cost of setting up new warehouse facilities in the West Midlands. Where we
previously had four individual units on a trading estate, with all of the
attendant inefficiencies this entails, we have, subsequent to the year-end,
relocated into a single building 4 miles away. The new facility combines 3,000
sq ft of offices and 70,000 sq ft of warehousing located near West Bromwich.
This will obviously cause some disruption but we are looking forward to
significantly improved product distribution, and the opportunity to grow our
business organically and possibly by acquisitions, as referred to by the
Chairman in his statement. The balance of the proceeds from the sale of Faupel
House will be used to further reduce bank debt.
Even before the receipt of the proceeds from the sale of Faupel House the
year-end bank debt (net of cash balances) was reduced to #2,270,000; the lowest
year end figure for over 10 years. On the basis that we have not made a profit
for the last three years, this improvement has clearly come from better
management of stock and debtors, coupled with an overall reduction of turnover.
Shareholders should be aware, however, that it is unlikely that we will continue
to see significant further falls in the net debt position from these sources, as
we are now running the Group on a much leaner basis than previously. We have
been well supported by our banks in the past two years, and have strengthened
our relationships with them through some difficult times.
Chief Executive's Report
While turnover was down 5%, as a result of our focus on improving margins, the
gross profit in sterling terms was up 3% (#209,000) on last year. In percentage
terms the margin at 26% was more than two percentage points better than last
year; and the highest it has been for over 5 years. The Group has been through
three very turbulent years and although many challenges lie ahead, we are
clearly better positioned to face those challenges than we have been in the two
years I have been with Faupel. I firmly believe that we have a clearer focus and
a more robust structure than at any time in the past ten years.
In my first Chief Executive's report two years ago, I made mention of the loyal
and hardworking staff that we have, and I am pleased to report that we continue
to get great support from within Faupel. The burden placed upon people in the
last two years should not be underestimated and, although we have had some
departures, the business has a clearer organization chart with more of the right
people in the right posts than previously. With most of the restructuring work
now complete we have started to recruit new people within the Group,
particularly on the sales and brand management side, where we are looking to
grow the business.
With that in mind, I believe that all three divisions should make a positive
contribution in the coming financial year and all three have solid management
teams with specific targets that they have been involved in setting. Combining
three previously separate divisions into Faupel Home Furnishings has been a
solid step, the benefits of which will be felt in the coming twelve months. I
have attended a significant number of customer sales meetings and I can report a
new perception of Faupel in the minds of our major accounts. Our new focus on
high quality design, and a renewed awareness of our wide-ranging strengths in
China, places us amongst those companies able to offer price-competitive,
leading-edge design to the home textiles market, itself a growing market.
Within our Industrial Products division the launch of Faupel's own "Proforce"
brand has been a key event. We have had a very slow start, partly as a result of
the SARS outbreak in China last summer, and some of the shortfall in the group's
sales last year was due to this. The growth in sales we are looking for in
Personal Protective Equipment (PPE) this year is also demanding, given that we
are still in the start-up phase, but our products are leading-edge and our
business model offers something new to the independent wholesalers of PPE
product. Our management team at Proforce is well proven and over the next 18
months we look forward to establishing an important and well respected brand in
the PPE market.
The Champion outdoor wear brand continues its rejuvenation after the closure of
the Rivers Edge discount garment business 18 months ago and we are expecting
growth in turnover in the coming year. In the year to 31st March 2004 sales were
up and margins were strong. A new Spring/Summer range launched for this year is
making a good impact in the market and the new Autumn/Winter 2004 catalogue has
already been posted to customers. We will be further strengthening the
management team within this division's nightwear business in the coming twelve
months.
The Chairman has made reference to our improved IT systems and this has been
another area of significant focus and progress over the year. Our group
functions in areas such as sales administration and telesales have markedly
improved and we are now able to offer both better service to our customers and
better prospects to our staff. The challenge is to deliver a return to
shareholders and the entire Faupel team is fully focused on this goal.
Chief Executive's Report
The financial year 2003/04 was another solid twelve months of progress for
Faupel, unspectacular in terms of profits, but very significant in terms of our
turnaround process. The financial results also confirm the continuation of the
positive trend established over the last 18 months. Our challenge is to now grow
the business for sustainable profit in the future.
Laurence Mead
Group Chief Executive
21st June 2004
Consolidated Profit and Loss Account
for the year ended 31 March 2004
Notes 2004 2003
#'000 #'000
Turnover 3 24,892 26,255
Cost of sales (18,435) (20,007)
Gross profit 6,457 6,248
Distribution costs (3,815) (4,210)
Administration expenses (2,410) (2,565)
Operating profit/(loss) 3 232 (527)
Interest receivable 27 30
Interest payable (277) (378)
Loss on ordinary activities
before taxation (18) (875)
Tax on loss on ordinary activities - -
Loss on ordinary activities
after taxation and for the financial year (18) (875)
Loss per ordinary share, basic and diluted 4 (0.1p) (5.6p)
Consolidated Balance Sheet
at 31 March 2004
2004 2003
Note #'000 #'000
Fixed assets
Tangible assets 5 334 1,556
Current assets
Stock 3,428 3,407
Debtors 3,613 4,938
Proceeds due on the sale of Faupel House 5 1,225 -
Total Debtors 4,838 4,938
Cash at bank and in hand 1,384 1,072
9,650 9,417
Creditors: amounts falling due within one year 6 (5,445) (6,416)
Net current assets 4,205 3,001
Total assets less current liabilities 4,539 4,557
Provisions for liabilities and charges 7 (250) (250)
Net assets 4,289 4,307
Capital and reserves
Called up share capital 785 785
Share premium account 2,882 2,882
Revaluation reserve - 674
Other reserve 93 93
Profit and loss account 529 (127)
Equity shareholders' funds 4,289 4,307
Consolidated Cash Flow Statement
for the year ended 31 March 2004
2004 2003
Notes #'000 #'000
Cash inflow from operating activities 8 1,380 1,328
Returns on investments and servicing of finance 9 (197) (348)
Taxation 4 (6)
Capital expenditure and financial investment 9 (129) (15)
Cash inflow before management of liquid resources and
financing 1,058 959
Management of liquid resources 9 (746) (1,356)
Financing 9 - -
Increase/(decrease) in cash in the year 312 (397)
Reconciliation of net cash flow to movement in cash
2004 2003
#'000 #'000
Increase/(decrease) in cash in the year 312 (397)
Cash at beginning of year 1,072 1,469
Cash at end of year 1,384 1,072
Consolidated Cash Flow Statement
for the year ended 31 March 2004 (continued)
Reconciliation of net cash flow to movement in net bank debt
2004 2003
#'000 #'000
Bills of exchange at beginning of year (4,400) (5,756)
Cash at beginning of year 1,072 1,469
Bank debt net of cash at beginning of year (3,328) (4,287)
Management of liquid resources 746 1,356
Increase/(decrease) in cash in the year 312 (397)
Reduction in bank debt net of cash 1,058 959
Bills of exchange at end of year (3,654) (4,400)
Cash at end of year 1,384 1,072
Bank debt net of cash at end of year (2,270) (3,328)
Notes:
1. The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31st March 2004 or 2003. The
financial information for 2004 and 2003 is derived from the statutory financial
statements for those years. The statutory financial statements for 2003 have
been delivered to the Registrar of Companies. The statutory accounts for 2004
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The Group's auditors, KPMG Audit Plc, have reported on the
2004 and 2003 financial statements. Their reports were unqualified and did not
contain a statement under 237(2) or (3) of the Companies Act 1985.
Restatement of comparative figures
The Group has adopted FRS5 Application Note G 'Revenue Recognition' and
so discounts are now classified as a deduction from turnover, having been
previously classified as cost of sales. In addition, the comparative figures
have been amended to reflect the current treatment of certain costs as overheads
rather than cost of sales.
2. It is anticipated that the report and financial statements will be posted
to shareholders on 26th July 2004. The Annual General Meeting will be held on
1st September 2004.
3. Turnover and operating profit/(loss)
2004 2003
2004 2003 Operating Operating
Sales Sales Profit/(loss) Profit/(loss)
(as restated)
#'000 #'000 #'000 #'000
Business sector analysis
Home Furnishings 18,698 19,600 1,210 1,050
Garments 2,693 2,710 153 (61)
Industrial Products 3,501 3,945 2 125
Central admin costs - - (1,074) (1,264)
-------- -------- -------- --------
Before one-off, non-recurring items 24,892 26,255 291 (150)
--------- ------- ------- -------
Charge for dilapidations - (250)
on warehouse leases
Loss on sale of investment - (27)
Impairment of freehold property - (100)
Cost incurred on aborted acquisitions (59) -
-------- --------
Operating profit/(loss) 232 (527)
-------- --------
The loss on sale of investment and impairment of freehold property are
attributable to central administration costs. The charge for dilapidations on
the warehouse leases cannot be allocated to segments on any reasonable basis as
the warehouses concerned have been used for a number of purposes over the lease
period.
Notes (continued):
4. Loss per ordinary share
Loss per share is based on the Group loss after taxation of #18,000 (2003: loss
#875,000) and the weighted average number of ordinary shares in issue during the
year of 15,709,447 (2003:15,709,447).
Diluted loss per share, calculated in accordance with FRS 14, is unchanged from
the basic loss per share.
5. Faupel House, the Company's freehold property, was sold on an
unconditional basis during the year for a profit of #19,000 over book value.
The transaction was successfully completed on 1st June 2004 and so the proceeds
of the transaction (#1.225m) have been included within current assets.
6. Creditors include #3,654,000 (2003: #4,400,000) of bills of exchange
payable to banks.
7. Provisions for liabilities and charges relates to the dilapidations
charges due on the termination of operating leases on warehouses. These
liabilities crystallised after the year end.
8. Cash flow from operating activities
Reconciliation of operating profit/(loss) to operating cash flow
2004 2003
#'000 #'000
Operating profit/(loss) 232 (527)
Profit on disposal of freehold property (19) -
Depreciation 126 165
Impairment of fixed assets 19 100
Loss on sale of investment - 27
(Increase)/decrease in stocks (21) 855
Decrease/(increase) in debtors 1,325 (119)
(Decrease)/increase in creditors (282) 577
Increase in provisions for liabilities and charges - 250
Net cash inflow from operating activities 1,380 1,328
Notes (continued):
9. Analysis of cash flows for headings netted in the cash flow statement
2004 2003
#'000 #'000
Returns on investments and servicing of finance
Interest received 27 30
Interest paid (224) (378)
Net cash outflow for returns on investments and servicing
of finance (197) (348)
Capital expenditure and financial investment
Purchase of tangible fixed assets (129) (73)
Proceeds from sale of investment - 58
Net cash outflow for capital expenditure
and financial investment (129) (15)
Management of liquid resources
Decrease in bills of exchange payable to banks (746) (1,356)
Net cash outflow from
management of liquid resources (746) (1,356)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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