Preliminary Results
1 December 2011
Dewhurst PLC
("Dewhurst" or the "Group")
Preliminary Results for the year ended 30 September 2011
Chairman's Statement
Results
With the continued turbulent economic climate I am pleased to
be able to report sales at record levels and operating profit
before goodwill write-off also just ahead of last year's
record. Sales were up 12% to £41.5 million (2010: £37.0
million), operating profit before goodwill write-off was £4.9
million (2010: £4.9 million) and profit before tax was £4.3
million (2010: £4.8 million) after goodwill write-off.
Sales benefited from the first time contribution of Elevator
Research and Manufacturing (ERM) in the USA and JAS
Engineering (JAS) in Australia. We also saw improved sales
from Hong Kong. The lift market picked up over the summer and
we ended the year with stronger sales.
It has been a tough year in many respects and these results
are a real credit to the Group's employees, who have worked
hard to overcome the difficult conditions. My congratulations
and thanks to the whole team.
We have put in a huge amount of work over the year preparing our new headquarters and factory for occupation. Our plan is for a phased move during this December and January. We should be fully operational in the new premises by the end of January and our AGM will take place at the new site. This will be a good opportunity for shareholders to see the new facilities.
Acquisitions
During the year we acquired a controlling interest in ERM on
the basis of our agreement with the shareholders in July
2010. As a result the assets of the company are now
consolidated in the Group's results. The US market has not
been an easy one over the past year and so we have felt it
prudent to write down the goodwill on acquisition by £0.5
million. This is disappointing, but we still believe the
business has good long term prospects in the US market and
will prove a worthwhile investment when economic conditions
improve. In the meantime we have taken action to reduce fixed
costs at the company to lower its breakeven point.
Earlier in the year we also acquired JAS, a lift fixture
company based in Sydney. JAS builds on the market position we
have with ALC in Australia, but also allows us to expand the
range of sheet metal products and services we offer to
customers in New South Wales.
The more positive feel to the lift market that started in the
summer has continued through the autumn. Despite the
uncertain financial position in Europe we expect our UK and
main international markets to remain reasonable for the first
half after which they may tail off depending on the economic
environment.
Keypad sales are likely to rise due to a change in product
content, but margins will fall in percentage terms. Transport
demand remains weak due to Local Authority and Central
Government cutbacks. There will be costs this year due to the
premises move but we will be doing our best to minimise both
the costs and any disruption to our customers.
Review of Operations
Operating Highlights
We anticipated that this year would not see any real
improvement over the last financial year and that has been
the case. Although not all our markets were down, indeed
Australia and Canada were quite robust, trading conditions in
the UK and the USA were extremely tough. It is therefore
encouraging that towards the end of the year these markets,
particularly certain sectors in the UK, started to show some
signs of recovery.
Once again, all our employees across all companies have made
a significant contribution and we are very grateful to them
for their hard work and dedication.
This year has been another year of progress at Dewhurst UK
Manufacturing and although the company once again did not
show a profit, the losses were reduced on broadly flat
sales.
Our programme of continuous focus on quality and errors has
been very successful. The number of errors leaving the
factory gate has fallen dramatically over the last twelve
months. This helps support our image and reputation within
the lift industry. We have also focused hard on our on time
delivery and for the second year in a row we have achieved
above 95% on time delivery.
Last year's Annual Report spoke of the move to our new site
at Hampton Business Park. The move is now imminent and will
take place effectively over the Christmas period in December
2011. A great deal of hard work has taken place to get us
where we are now and even more activity will take place over
the next month as we complete the office and factory fit out
and carry out the actual move itself. Senior management have
been supported by a relatively small team led by Keith
Timberlake, Martin O'Neill and Steve Ward who have worked
tirelessly to ensure that the new building is set up for our
needs and that the move goes seamlessly. They have had to
work long hours, focus on intricate detail and remain calm at
all times, so that Dewhurst employees can look forward to
their future in the new location; we owe this team a great
debt of gratitude.
The move to Hampton Business Park also made us think long and
hard about the current structure of our UK business. The UK
lift industry was served by LiftStore out of two locations:
Flint where we make controllers and Hounslow where we supply
fixtures and loose components. The management team for
LiftStore has always been based in Flint and the management
of the Hounslow operation has always been problematic. Also,
customer feedback led us to believe that the brands we were
not using in the UK, Dewhurst and Thames Valley Controls,
were stronger than that of LiftStore. The move to Hampton was
a catalyst for addressing these issues and as a result the
activities of Dewhurst UK Manufacturing and LiftStore
Hounslow were merged. This means that Dewhurst UK
Manufacturing now supplies fixtures and lift components
throughout the UK as well as to Europe and the rest of the
world.
The LiftStore Flint operation has revived the Thames Valley
Controls name and their focus now is purely on controllers,
control systems and monitoring. The feedback from the market
to this significant change in our UK structure has been very
positive. It has also been well received internally.
We have not had any major new product launches this year but
we have worked hard on extending our existing product range.
We have introduced two new hall lanterns both of which appear
in pictures in this report. We have extended our offering on
pressel finishes so that customers can now choose any bespoke
finish for their pushbuttons.
On the keypad side of the business we have developed a very
neat 38 key keypad for a Canadian customer who manufactures
parking payment machines. This keypad allows people to enter
their licence plate, which is then printed on their parking
ticket.
This year began quite slowly for LiftStore as the UK lift
industry market did not show any signs of recovery. However
the second half of the year saw a significant improvement in
general market conditions. It is not easy to determine why
there has been such a marked improvement but our impression
is that work has been postponed over the last couple of years
and people are now in a situation where they cannot put off
these works any longer. We have seen this growth in both
private and local authority work during the year.
The Ethos Hall Call Destination System has been a major
development project for LiftStore for more than a year and
has absorbed a significant amount of resource. This year
following all the hard work to bring the product to market we
were delighted to win two major Ethos HCD projects. The
installation of the first of these projects is currently
underway and initial reactions from the customer are very
positive. The Ethos controller, which is the mainstay of the
LiftStore product range, continues to gain market share in
the UK and now has an excellent reputation amongst both
private and public users.
The Monitoring Division has had a steady year with good sales
throughout the year. Demand for their autodialler products
and monitoring systems continues to be reasonable. The CMS
Anywhere product that was launched a number of years ago and
allows customers to monitor their lifts from any PC over the
internet, has given our monitoring products new lease of
life. It provides customers with the flexibility they require
in today's world.
Local authority spending on bollards and road signage has
been held back throughout the year and this has made 2011 a
very challenging year. We have also seen an increasing number
of competitors enter the market for non-illuminated and solar
powered bollards. The sales team at TMP has nonetheless
worked hard and achieved a good level of sales in this
difficult market.
There has been a lot of emphasis placed on development work
and a number of new designs are currently in the pipeline.
The first of these is an improved design for our self
fronting bollard base, which will be launched very
shortly.
We exhibited two new sign lights at the Traffex exhibition
and these were well received. These are now moving to tooling
with a launch programmed for the second half of the financial
year. We have made the conscious decision to invest heavily
in new product development for TMP, with the aim of
increasing revenue and profit in the medium term.
Cortest has been successful in securing larger projects this
year particularly on Private Finance Initiative contracts
where we have provided non-destructive and electrical testing
services to some of the largest highways and electrical
contractors in the UK.
As a result our customer portfolio now includes several blue
chip companies as well as our traditional mix of Local
Authority and private customers. Much of our work has
remained oriented towards street lighting and street
furniture for highways and airports but we have also
completed Specialist Non-Destructive inspections for both the
Port of Dover and Bournemouth Pier, supporting our strategy
to extend our services further into the non-highways
arena.
Despite strong sales growth, margins remain under pressure as
we continue to invest in new equipment and people to drive
the business further forward in 2012.
Having completed its third full year of operation Dewhurst
Hungary has settled down and the team there operate quite
autonomously now.
They continue to face the same problems that we have always
faced in the keypad market, where there is constant focus on
price and margins are always under pressure. We have
completed some successful value engineering projects on a
number of products this year and the focus in the New Year
will be to extend such projects more widely.
Our customers in this sector have sustained their pressure on
product and process quality. This has meant that the team in
Hungary have had to further enhance their quality processes
and procedures towards the levels found in the auto
components industry. Operating at this level is very useful
for the Group as a whole and once we have established a
stable system in Hungary, we need to look at how we can use
this knowledge more widely in our other subsidiary
companies.
Demand for our keypad products has held up well and we have
shipped a significantly greater quantity of keypads in this
financial year.
We had another strong year of sales at Dupar and a reasonable
improvement in profits.
Dupar have continued the theme of the last few years with
further process improvements in their manufacturing plant to
streamline the labour intensive assembly of Car Operating
Panels. This has been quite successful, allowing them to
increase the flow of work through the plant. Dupar are
currently setting the benchmark for fixture production within
the Group and in the coming year we need to flow these
advances through to Dewhurst UK, ERM and ALC. We are tasking
our Group Operations Director with this job and we look
forward to seeing the benefits of this project.
We launched the new US91 Optic pushbutton in this financial
year. This is an upmarket product where the braille tag to
the side of the button is permanently illuminated. It has
been very well received by the market and has already been
installed in a number of prestigious sites across North
America.
We acquired a majority stake in ERM at the end of 2010. It
has been a difficult time to take on a new acquisition in the
United States and the Californian market, where ERM
predominantly operates, has been weak throughout 2011.
However all our acquisitions are long term ventures and the
opportunity to expand ERM out of California and to gain sales
from the Western half of the USA remains excellent.
There are two divisions within ERM. One side designs and
manufactures lift fixtures, making this business very similar
to Dupar Controls and ALC. ERM however have a second division
which designs and manufactures lift cars, doors and
entrances. The manufacture of lift cars is a complementary
business to fixtures and is a possible opportunity in other
markets.
Just after the end of the year we carried out some
organisational changes at ERM to put us in a stronger
position to move forward in the medium term.
ALC recorded slight growth in sales over the previous year.
The growth was due to strong sales of GAL and Hollister
Whitney products, which we started to distribute in 2010. The
team at ALC have done an excellent job in promoting these
products throughout Australia.
The fixture business has proved more difficult. The demand
for new lifts in Australia has reduced and although
modernisation work has increased quite substantially there
was still a contraction in our overall market.
Many of the components sold by Lift Material are aimed more
at the modernisation market than that for new lifts, and
Lift
Material have benefited from this swing in the market.
We continue to search for opportunities to extend our product
range and this year we have been successful in adding two new
product groups to our portfolio which should help us build
sales in the medium term.
We acquired JAS at the end of 2010. Their business is very
similar to that of ALC but they focus on smaller, shorter
lead time work and have a high level of flexibility. They are
also able to engineer and manufacture a wide range of bespoke
sheet metal fabrications for the industry.
They achieved a reasonable first year and the outlook for the
coming year looks promising.
Dewhurst Hong Kong have had a very good second year in
business. They have built up a reputation for good service
and prompt deliveries and this has allowed them to more than
double lift component sales.
There continues to be a lot of activity in Hong Kong which is
encouraging for the future.
Financial Review
Strong Results
We experienced two sides to the unsettled UK economy with
strong demand in the lift sector in the second half of the
year but poor demand throughout the year in the transport
sector as public sector spending cuts continued. Despite this
environment Dewhurst returned a strong performance on the
back of its lift and keypad products. Revenue increased 12.2%
from £37.0 million to £41.5 million whilst operating profit
before goodwill write down remained at £4.9 million.
The growth in revenue principally came from our acquisitions
in the year: JAS in Australia and ERM and Winter & Bain (W&B)
in America. With the current 'soft' US market, ERM and W&B
struggled to deliver the kind of returns required for the
long-term and this resulted in an impairment of £0.5 million
against goodwill at the year end.
ERM and W&B, being US corporations operating from the same premises and under common control, were merged into one legal organisation, ERM during May 2011. Dewhurst plc's controlling stakes in each company became a collective 80% holding of the combined business with the remaining 20% stake being held by ERM's General Manager. All acquisitions have successfully implemented our Group IT system and policies and procedures are being reviewed and harmonised.
Solid Cash Position
Cash flow was once again very good with £4.0 million of cash
being generated from operations. Despite increased pension
contributions of £1.4m, two acquisitions totalling £1.8m
during the year and investment of £4.9m to date in the new
property the group still ended the year with cash and
short-term deposits at a very respectable £5.0 million. This
is aligned with the Group's philosophy of maintaining a
strong cash position together with minimal borrowing.
We started and finished the year with no borrowing but as a
precaution secured a £2m bank overdraft facility.
A more detailed analysis of the retirement benefit fund
assets and liabilities movements is reported in note 22 under
IAS 19, but this year has seen the scheme deficit increased
further from £8.1 million to £9.3 million. Although we closed
the scheme to future accrual from 1 October 2010 and paid
£1.4m into the scheme during the year this was more than
offset by the poor performance of equities in the last few
months of the year. The FTSE 100 index stood at 5,128 at 30
September 2011 compared to 5,549 a year ago.
The Group will continue to pay a fixed sum of £1.4 million
annually to reduce the defined benefit pension scheme deficit
and all recommendations made by the scheme's actuary to
eliminate the scheme deficit within an agreed timeframe have
been fully implemented.
The Group seeks to reduce or eliminate financial risk to
ensure sufficient liquidity is available to meet foreseeable
needs and to invest cash assets safely and profitably. The
policies and procedures operated are regularly reviewed and
approved by the board. By varying the duration of its fixed
and floating cash deposits, the Group maximises the return on
interest earned.
With just under a half of profit before tax earned and held
in foreign currencies the Group continues to hedge internally
where possible and to consider the need to use derivatives in
the form of foreign exchange contracts to manage its currency
risk, as reported in note 25.
Dividends are accounted for when paid or approved by
shareholders, and not when proposed, therefore the proposed
final dividend for 2011 has not been accrued at the balance
sheet date. The total dividend for 2011 of 6.69p per share,
up 5.2% against last year's 6.36p, is covered 5.1 times by
earnings. Total equity improved from £21.1 million to £21.8
million.
There was no change in the number of allotted shares during
the year.
For further details please contact:
Dewhurst Plc Tel: +44 (0) 208 607 7300
Jared Sinclair, Finance Director
Seymour Pierce Ltd (Nominated Adviser) Tel: +44 (0) 207 107
8000
Freddy Crossley / David Foreman (Corporate Finance) Paul
Jewell (Corporate Broking)
Consolidated income statement
For the year ended 30 September 2011
2011 2010 Continuing operations £(000) £(000) Revenue 41,487 36,975
Operating costs (37,063) (32,104)
Operating profit before goodwill write down 4,880 4,871
Goodwill write down (456) -
Share of (loss)/profit from associates (29) 6
Finance income 62 103
Finance costs (137) (153)
Tax on profit (1,428) (1,339)
Profit for the financial year 2,892 3,488
Attributable to:
Equity shareholders of the Company 2,924 3,488
Non-controlling interests (32) -
Consolidated statement of recognised income and expense
Net income/(expense) recognised directly in equity: 2011 2010 £(000) £(000)
Actuarial gains/(losses) on the defined benefit pension
scheme (2,423) (2,497) Exchange differences on translation of
foreign operations (41) 613
Tax on items taken directly to equity 640 528
Net income/(expense) recognised directly in equity in the
year (1,824) (1,356) Profit for the financial year 2,892
3,488
Attributable to:
Equity shareholders of the Company 1,071 2,132
Non-controlling interests (3) -
Consolidated balance sheet
At 30 September 2011
Non-current assets 2011 2010 £(000) £(000)
Goodwill 7,357 6,122
Other intangibles 158 184
Property, plant and equipment 9,581 4,609
Deferred tax asset 1,779 1,563
Investments in associates - 639
Inventories 4,269 4,009
Trade and other receivables 8,394 6,908
Current tax assets 203 111
Cash and cash equivalents 5,009 9,593
Trade and other payables 5,222 4,234
Short-term provisions 475 349
Retirement benefit obligation 9,299 8,068
Total liabilities 14,996 12,651 Net assets 21,754 21,087 Equity
Share capital 851 851
Share premium account 157 157
Capital redemption reserve 286 286
Translation reserve 2,059 2,089
Retained earnings 18,252 17,704
Non-controlling interests 149 - Total equity 21,754 21,087
Consolidated cash flow statement
For the year ended 30 September 2011
Cash flows from operating activities 2011 £(000)2010
£(000)
Operating profit 4,424 4,871
Goodwill write down 456 - Depreciation and amortisation 812
680
Additional (income)/costs to pension scheme (1,313) (654)
Exchange adjustments (208) 23 (Profit)/loss on disposal of
property, plant and equipment (4) (2)
Increase/(decrease) in trade and other payables 191 (306)
Increase/(decrease) in provisions 126 (9) Cash generated from
operations 4,012 4,746
Interest paid (16) -
Income tax paid (1,095) (1,262)
Acquisition of subsidiary undertakings (869) - Acquisition of
business and assets (907) - Acquisition of associate
undertakings - (667) Proceeds from sale of property, plant
and equipment 7 75
Purchase of property, plant and equipment (5,124) (484)
Development costs capitalised (129) (38) Interest received 61
103
Dividends paid (551) (524)
Net cash used in financing activities (551) (524) Net increase/(decrease) in cash and cash equivalents (4,611) 1,949
Cash and cash equivalents at beginning of year 9,593
7,476
Exchange adjustments on cash and cash equivalents 27 168
Notes
1. AGM, results and dividends
The trading profit for the year, after taxation, amounted to
£2,892k (2010: £3,488k).
A final dividend on the Ordinary and 'A' non-voting ordinary
shares of 4.46p per share (2010: 4.24p) for the financial
year ended
30 September 2011 will be proposed at the Annual General
Meeting (AGM) to be held on 26 January 2012. If approved,
this dividend will be paid on 14 February 2012 to members on
the register at 13 January 2012.
An interim dividend of 2.23p per share (2010: 2.12p) was paid
on 30 August 2011.
For basic and diluted earnings per share 8,511,398
8,511,398
The calculation of basic and diluted earnings per share is
based on the profit for the financial year of £2,892,223 and
on
8,511,398 Ordinary 10p and 'A' non-voting ordinary 10p
shares, being the weighted average number of shares in issue
throughout the financial year.
2010 final paid of 4.24p (2009: 4.04p) (361) (344)
2011 interim paid of 2.23p (2010: 2.12p) (190) (180)
The final proposed dividend is based on 3,309,200 Ordinary
10p shares and 5,202,198 'A' non-voting ordinary 10p shares,
being the latest number of shares in issue. The directors are
proposing a final dividend of 4.46p (2010: 4.24p) per share,
totalling £380k (2010: £361k). This dividend has not been
accrued at the balance sheet date.
The financial information set out above does not constitute
the company's statutory accounts for the years ended 30
September
2011 or 2010. Statutory accounts for 2010, have been
delivered to the Registrar of Companies. The statutory
accounts for 2011 which are prepared under IFRS as adopted by
the EU will be delivered to the Registrar of Companies
following the company's annual general meeting.
The preliminary statement of results has been reviewed by and
agreed with the Company's auditor, Chantrey Vellacott DFK
LLP, who have indicated that they will be giving an
unqualified opinion in their report on the statutory
financial statements for
2011. The auditor has also reported on the 2010 accounts.
Their report was unqualified, did not include references to
any matters to which the auditor drew attention to by way of
emphasis without qualifying the opinion and did not contain a
statement under section 498 of the Companies Act 2006.
Dewhurst plc has prepared its consolidated and company
financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
European Union (EU) from 1 October 2005. The group and
company financial statements have been prepared in accordance
with those parts of the Companies Act 2006 that are
applicable to companies adopting IFRS. The company is
registered and incorporated in the United Kingdom; and quoted
on AIM.
It is expected that the audited Report and Accounts for the
year ended 30 September 2011 will be sent to shareholders and
will also be available on the Company's website www.dewhurst.co.ukon 22 December 2011.
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Preliminary Results for the year ended 30 September 2011 |