RNS Number:8868P
Gibbs & Dandy PLC
12 March 2008
12 March 2008
Gibbs and Dandy plc
builders merchants
AUDITED RESULTS FOR THE YEAR TO
31 DECEMBER 2007
* Sales up 7% to �62.54m. Like for like sales up 5.4%
* Underlying operating profit* up by 9.1% to �4.40m (�4.03m)
* Pre-tax profit* up 10.8% to �4.47m (�4.03m)
* Earnings per share* up 13.3% to 31.4p (27.7p)
* Proposed final dividend of 10.0p giving total for year of 15.75p, (15p)
up 5.0%
* Sales in the first two months of 2008 have been 9.1% above last year and
on a like for like basis per trading day this represents an increase of
3.8%.
*before amortisation of intangibles, gain on sale of AHED shares and related tax
effect for EPS. Statutory operating profit �4.49m (2006: �4.03m), statutory
profit before tax �4.56m (2006: �4.03m), statutory EPS 32.0p (2006: 27.7p)
Enquiries:
Gibbs and Dandy plc
Michael Dandy Managing Director )
Amitabh Sharma Finance Director ) 01582 798 798
The Paddy Manning Company
Paddy Manning 020 7930 0777 (mobile 07803 183622)
2007 Review
Results
After two challenging years, Gibbs & Dandy plc produced a pleasing set of
results for 2007. Sales for the year to 31 December 2007 were �62.54m, an
increase of 7.0% as compared with 2006 and included a half year's contribution
from our new branch in Market Harborough which was acquired at the end of June
2007. Like for like sales grew by a respectable 5.4% although growth was lower
in the second half of the year. Despite the competitive market place, gross
margins were broadly unchanged.
Operating profit increased by 11.4% to �4.49m (2006:�4.03m), although this
included a one off gain of �0.12m representing the profit on our shareholding in
AHED Limited that was sold in January 2007. Excluding this gain and amortisation
of intangible assets (�23k), underlying operating profit increased by 9.1% to
�4.40m (2006:�4.03m) and profit before tax increased by 10.8% to �4.47m (2006:
�4.03m). A lower tax charge of 29.0% (2006:30.5%) meant that underlying earnings
per share increased by 13.3% to 31.4p (2006:27.7p). Cash generation continued to
be strong, with cash generated by operations increasing from �4.5m to �5.6m in
2007.
Dividends
In view of the improvement in profits, the Board is recommending to the annual
general meeting the payment of an increased final dividend for 2007 of 10p
giving a total dividend for 2007 of 15.75p (2006:15p). This dividend is covered
2 times by earnings for the year.
It is proposed that the final dividend will be paid on 12 May 2008 to
shareholders on the register at the close of business on 11 April 2008.
Financial key performance indicators
The table below shows the financial key performance indicators used by the
company to manage its business.
Table: Financial Key Performance Indicators Increase
2007 2006 %
Revenues (�'m) 62.54 58.42 7.0
Like for like revenues (�'m) 61.58 58.42 5.4
Gross margins (%) 28.9 28.6 1.2
Operating profit* (�'m) 4.40 4.03 9.1
Net operating margins* (%) 7.0 6.9 2.0
Earnings per share* (p) 31.4 27.7 13.3
Cash generated by operations (�'m) 5.60 4.53 23.7
Cash conversion** (%) 105.6 91.8 15.1
Stock turn 8.0 7.9 1.2
*excluding one off gain and amortisation of intangibles.
**operating cash/operating profit. Operating cash flow is cash generated by
operations less net capital expenditure. Operating profit before the AHED gain
and amortisation of intangible assets.
---------------------------------------------------
Group sales increased by 7.0% from �58.42m to �62.54m in 2007. The Group
acquired Carson Fletcher Timber Limited on 29 June 2007, a single site timber
merchant based in Market Harborough, Leicestershire. Excluding the contribution
from this branch, sales on a like for like basis increased by 5.4% in 2007.
As noted above, underlying operating profit increased by 9.1% to �4.40m (2006:
�4.03m). Net operating margins improved to 7.0% (2006:6.9%) on this basis. Net
interest receivable of �73,000 in 2007 compared to �3,000 in 2006.
Profit before tax, excluding the one off gain and amortisation of intangible
assets increased by 10.8% to �4.47m (2006:�4.03m). The Group's 2007 tax charge
(excluding the AHED related tax) was �1.29m (2006:�1.23m) representing a
reduction in the effective tax rate to 29.0% (2006:30.5%). This was due to a one
off deferred tax credit (�64k) arising from a change in the corporation tax rate
in the future.
The lower tax rate and higher profits (excluding the one off gain and intangible
assets) resulted in adjusted earnings per share (EPS) of 31.4p, 13.3% above 2006
(27.7p). The Board proposes an increase in the final dividend from 9.5p per
share to 10p per share. The interim dividend was 5.75p per share (2006:5.5p per
share) leaving the total dividend paid and proposed for the year of 15.75p per
share, an increase of 5% (2006:15p per share).
Adjusted EPS therefore covers the total dividend 2 times (2006:1.85 times). In
accordance with International Accounting Standards, the proposed dividend is not
accrued until it is approved by shareholders.
Review
2007 was a year of contrasting trading conditions. After a slow start sales
activity came to life with the warm weather in the spring and we were able to
report an increase in turnover of 6.4% for the first half compared with the
first six months of 2006.
Trading in the second half was more subdued and although sales for the year as a
whole increased by 7.0%, this was partly a reflection of having an additional
branch. Like for like turnover for 2007 was 5.4% above that for the previous
year which we believe to be a satisfactory performance. The effect of the
uncertainty in the financial services sector, rising interest rates and their
joint impact on the housing market and consumer confidence began to be felt
during the final quarter of the year.
Sales grew in virtually all product areas. Building materials and timber now
represent an increasing part of our business, the latter enhanced by our recent
acquisitions. Most parts of the market were active particularly the repair,
maintenance and improvement sector in which many of our customers operate.
Despite the more competitive market place our gross margins were broadly
unchanged. As always we continued to control our costs carefully although an
increase in bad debts reflected issues in the economy generally. The overall
costs were affected by having an additional branch for the second half of the
year.
In the early part of the year we completed a major customer survey and the
results of this indicated a high degree of loyalty from them to the company.
Nonetheless areas for improvement were identified and action has been taken as
we strive to offer our customers an unrivalled service.
Our planned expansion of the company continued with the acquisition of Carson
Fletcher Timber Limited, based in Market Harborough, Leicestershire on 29 June.
This is a single branch timber merchant and strengthens our position in the
South Midlands. Its turnover for the year ended 31 January 2007 was �1.87m and
the net consideration was �1.30m. We have now completed the integration of this
business as well as carrying out some improvements to the sales area. The
business traded satisfactorily during the second half of the year.
We completed a number of improvements at our Head Office and largest branch in
Luton including modernisation of office accommodation, a new garden landscape
design feature and the installation of additional storage facilities for an
enhanced range of timber products.
During the latter part of the year we completed a major refurbishment of the
sales area at Henley. This will provide easier access to products for our
customers and enable us to give an improved service in a modern and comfortable
sales environment. After some delays in the planning process we were able to
award the building contract for the development at Kettering during December.
Work on site has now started and it is due to be completed in the late summer.
This investment will enable us to operate more efficiently and extend the
product range to include a more comprehensive offering of building materials.
Financial review
Cash
The Group ended the year with �2.11m in cash (2006:�1.46m) despite spending a
net �1.3m on acquiring Carson Fletcher Timber Limited, following a very good
cash collection performance in 2007. Working capital (net current assets
excluding cash, corporation tax and investments) decreased, ending the year at
�6.14m (2006:�6.4m). This was despite the new branch at Market Harborough.
Stock levels increased from �4.7m to �5.0m mainly due to the new branch: stock
turn improved marginally from 7.9 to 8.0. Trade and other payables increased by
�0.8m for a number of reasons, most notably the new branch, a general increase
in level of activity over the last quarter, changes in timing of our VAT
payments and incentive accruals.
The strong cash performance was evident with �5.6m cash generated by operations
(2006:�4.5m). After deducting net capital expenditure of �0.95m, 'operating'
cash flow* was �4.65m (2006:�3.7m), representing an excellent cash conversion
ratio* of 106% (2006:92%). Cash conversion measures the amount of operating
profit that is converted into operating cash. This improvement is mainly due to
better collections and increased creditors.
The company had a larger cash balance than last year despite the Carson Fletcher
acquisition. This, together with working capital requirements throughout 2007,
contributed to the net interest receivable of �73,000 this year (2006:�3,000).
Net capital expenditure of �0.95m in 2007 was higher than last year (2006:
�0.83m) due to ongoing investment in the branch portfolio mentioned above. The
acquisition of Carson Fletcher resulted in payments, net of cash acquired, of
�1.3m.
Tax payments were slightly higher this year as two quarterly payments on account
were made for 2007.
* Operating cash/operating profit. Operating cash flow is cash generated by
operations less net capital expenditure. Operating profit before the AHED gain
and amortisation of intangible assets.
Pensions
The company has a defined benefit pension scheme (the Scheme) which was closed
to new members in 2001. At 31 December 2007, there was a gross IAS19 deficit of
�2.5m, compared to �2.8m at the end of 2006. After adjusting for deferred tax,
the net deficit represents �1.8m (2006:�2.0m), although the deferred tax rate
altered from 30% in 2006 to 28% this year.
Scheme membership and mortality tables have been updated, the latter reflecting
1992 medium cohort tables. These mortality tables indicate increased life
expectancy. This, together with an increase in the pension inflation assumption
(an increase to 3.4%) has led to an increase in Scheme liabilities. This has
been offset by an increase in the discount rate (now 6.0%) and an assumption
that employees will take some of their pension entitlement as a tax free cash
lump sum. The impact of all of these changes is that Scheme liabilities
increased from �16.7m to �16.8m at the end of 2007.
At the year end scheme assets were worth �14.3m (2006:�13.8m), reflecting the
increase in the equity markets over the course of 2007, although the equity
markets have fallen sharply since the end of the year.
The company has committed to pay �166k in 2008 and beyond to reduce the deficit.
This amount will be reviewed following the next triennial valuation due in 2008.
The Scheme has a statement of investment principles, which includes a statement
on socially responsible investments. The investment manager has discretion in
this regard and is asked to apply social, environmental and ethical
considerations when considering investments.
Pension management and governance is undertaken by pension trustees on behalf of
the members. The pension trustees are nominated by both the company and
employees. Training is provided for pension trustees by the company as and when
required and a training log is maintained.
Staff joining the company after 2001 are invited to join the company's defined
contribution scheme.
Balance sheet
The Group's property portfolio was independently valued on a market value basis
at 31 December 2007 by Daniel Watney, chartered surveyors. This took the form of
an interim valuation: the last full valuation was carried out at 30 June 2006.
The review indicated an increase in property values of �1.5m over book value of
�15.8m. This has been included in the financial statements with the revaluation
reserves adjusted accordingly. This revaluation, together with the �1.7m
transferred to profit and loss reserves, helped total equity to increase from
�22.3m to �25.3m at the end of 2007.
The Board
Our search for a suitable candidate to replace Julia Tyson has been put on hold
pending the outcome of the discussions mentioned below.
Possible offer
You will have received a copy of the announcement made on 15 February 2008 that
the Board was in early stage discussions which might lead to an offer for the
whole of the share capital of the company. We shall be making a further
announcement in due course.
Prospects
The outlook for the economy generally and for our sector in particular is very
difficult to predict but most commentators are forecasting a reduction in
economic growth as compared with 2007. It is difficult to gauge the overall
impact of this on our business or how long these conditions may last.
However, sales in the first two months of 2008 have been 9.1% above last year
and on a like for like basis per trading day this represents an increase of
3.8%. January was slow but sales picked up over February, which was ahead of
last year.
Christopher Roshier Michael Dandy
Chairman Managing Director
11 March 2008
AUDITED CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
Note 2007 2006
�'000 �'000
Revenue 3,4 62,538 58,423
Cost of sales (44,449) (41,728)
--------- ---------
Gross profit 18,089 16,695
--------- ---------
Other income 219 103
Distribution costs (10,819) (10,262)
Administrative expenses (2,998) (2,505)
--------- ---------
Operating profit 4,491 4,031
Investment income 3 75 16
Finance costs (2) (13)
--------- ---------
Profit before tax 4,564 4,034
Tax 5 (1,323) (1,229)
--------- ---------
Profit for the period 3,241 2,805
--------- ---------
Earnings per share - basic and diluted 32.0p 27.7p
--------- ---------
All operations are continuing
All of the profit is attributable to the equity holders of the parent
AUDITED CONSOLIDATED BALANCE SHEET
At 31 December 2007
Note 2007 2006
�'000 �'000
Non-current assets
Goodwill 2,616 1,724
Other intangible assets 258 -
Property, plant and equipment 19,949 18,331
Available for sale investments 3 3
--------- ---------
22,826 20,058
--------- ---------
Current assets
Available for sale investments - 129
Inventories 4,971 4,659
Trade and other receivables 7,929 7,630
Cash and cash equivalents 2,114 1,461
--------- ---------
15,014 13,879
Total assets 37,840 33,937
--------- ---------
Current liabilities
Trade and other payables 6,754 5,912
Current tax liabilities 509 431
Obligations under finance leases 6 10
--------- ---------
7,269 6,353
--------- ---------
Net current assets 7,745 7,526
--------- ---------
Non-current liabilities
Retirement benefit obligations 7 2,482 2,837
Deferred tax 2,741 2,406
Obligations under finance leases - 3
--------- ---------
5,223 5,246
--------- ---------
Net assets 25,348 22,338
--------- ---------
Equity
Share capital 1,012 1,012
Revaluation reserve 6,562 5,392
Fair value reserve - 81
Retained earnings 17,774 15,853
--------- ---------
Total equity 25,348 22,338
--------- ---------
AUDITED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007
Note 2007 2006
�'000 �'000
Net cash from operating activities 8 4,329 3,247
Investing activities
Purchase of property, plant and equipment (971) (846)
Proceeds on disposal of property, plant and 17 19
equipment
Proceeds on disposal of available for sale 129 -
investment
Acquisitions (net of cash acquired) (1,295) (79)
--------- ---------
Net cash used in investing activities (2,120) (906)
--------- ---------
Financing activities
Dividends paid (1,543) (1,518)
Repayment of obligations under finance leases (13) (14)
--------- ---------
Net cash used in financing activities (1,556) (1,532)
--------- ---------
Net increase in cash and cash equivalents 653 809
Cash and cash equivalents at beginning of year 1,461 652
--------- ---------
Cash and cash equivalents at end of year 2,114 1,461
--------- ---------
AUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2007
2007 2006
�'000 �'000
Actuarial gains on defined benefit pension scheme 263 510
Tax on actuarial gains on defined benefit pension scheme (79) (153)
Gains on revaluation of properties 1,484 2,028
Deferred tax charge on revalued property (401) (571)
Change in value of available for sale investments (116) 116
Tax on change in value of available for sale investments 35 (35)
Deferred tax release on change in UK tax rate 126 -
--------- --------
Net income recognised directly in equity 1,312 1,895
Profit for the period 3,241 2,805
--------- --------
Total recognised income and expense for the period 4,553 4,700
--------- --------
All of the income is attributable to the equity holders of the parent
Notes:
1. The financial information in this preliminary announcement does not
constitute the Company's statutory accounts for the periods ended 31 December
2007 or 31 December 2006 but is derived from those accounts.
Statutory Accounts for 2006 have been delivered to the Registrar of Companies
and those for 2007 will be delivered following the Company's annual general
meeting. The auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 237 (2) or (3) of the Companies
Act 1985.
The preliminary announcement has been prepared on the basis of the Group's
accounting policies. These are set out in its Annual Report and Accounts for the
year ended 31 December 2006 which is available on the Group's website (
www.gibbsanddandy.com). As of 1 January 2007 various new standards and
interpretations apply to financial statements prepared in accordance with IFRS.
However, these have affected only detailed disclosures in the Group's financial
statements.
2. Earnings per share have been calculated on earnings of �3.241m (2006:
�2.805m). Adjusted earnings per share has been calculated on earnings of �3.176m
(2006:�2.805m) after adjusting for amortisation of intangibles (�23k), AHED gain
(net of related tax) of �88k. The basic and diluted weighted average number of
shares used was 10,119,820 (2006:10,119,820).
3. Revenue
2007 2006
�'000 �'000
An analysis of the Group's revenue is as follows:
Sale of goods 62,538 58,423
Other income:
Property rental income 103 103
Investment income 75 16
------- --------
62,716 58,542
------- --------
4. Business and geographical segments
The Group's business relates to one activity being that of builders merchants
wholly within the United Kingdom.
5. Tax
2007 2006
�'000 �'000
Current tax 1,384 1,181
Deferred tax (61) 48
------- --------
Total 1,323 1,229
------- --------
6. Dividends
2007 2006
�'000 �'000
Amounts recognised as distributions to equity holders in the
year:
Final dividend for the year ended 31 December 2006 of 9.5p
(2005:9.5p) 961 961
Interim dividend for the year ended 31 December 2007 of 5.75p 582 557
(2006:5.5p)
------- --------
1,543 1,518
------- --------
Proposed final dividend for the year ended 31 December 2007
of 10.0p (2006:9.5p) 1,012 961
------- --------
The proposed final dividend is subject to approval by shareholders at the annual
general meeting and has not been included as a liability in these financial
statements.
7. Retirement benefit obligations
The amount included in the balance sheet arising from the Group's obligation in
respect of its defined
benefit scheme is as follows:
2007 2006
�'000 �'000
Fair value of scheme assets 14,293 13,840
Present value of scheme liabilities (16,775) (16,677)
-------- -------
Scheme deficit (2,482) (2,837)
Related deferred tax asset 695 851
-------- -------
Net pension liability (1,787) (1,986)
-------- -------
8. Reconciliation of profit before tax to net cash from operating activities
2007 2006
�'000 �'000
Operating activities
Profit before tax 4,564 4,034
Adjustments for:
Amortisation of intangible assets 23 -
Depreciation of property, plant and equipment 871 813
Gain on disposal of property, plant and equipment (5) (9)
Gain on disposal of available for sale investments (116) -
Interest paid 2 13
Interest received (75) (16)
-------- -------
Operating cash flows before movements in working capital 5,264 4,835
(Increase)/decrease in inventories (149) 45
Decrease/(increase) in receivables 32 (141)
Increase/(decrease) in payables 452 (212)
-------- -------
Cash generated by operations 5,599 4,527
Income taxes paid (1,342) (1,281)
Interest received (net) 72 1
-------- -------
Net cash from operating activities 4,329 3,247
-------- -------
9. FINANCIAL CALENDAR
Record date for final dividend 2007 11 April 2008
Annual General Meeting and Interim management statement 24 April 2008
Payment of final dividend 12 May 2008
Interim report for 2008 August 2008
Interim dividend for 2008 September 2008
Interim management statement November 2008
Announcement of preliminary results for 2008 March 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
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