Interim Results
September 10 2003 - 3:30AM
UK Regulatory
RNS Number:5874P
Royal Doulton PLC
10 September 2003
ROYAL DOULTON PLC
("Royal Doulton")
INTERIM RESULTS 2003
10th September 2003
The first half of 2003 saw a continuation of the market conditions experienced
throughout most of last year. Industry overcapacity continued to exert pressure
on prices and margins and consumers continued their value conscious purchasing
patterns. Against that background, Royal Doulton made good progress in the
re-organisation of its business. Costs were reduced, efficiencies were improved
and gross margins were maintained; cash was again well controlled despite
outflows from trading; and the bulk of the second major phase of restructuring
was completed on time and within budget. The forthcoming financial periods will
determine whether the extensive and costly changes that have been made will
enable Royal Doulton to compete more successfully than in the past.
Results
Sales for the first half of 2003 totalled #58.0m, compared with #69.7m in the
corresponding period last year, the difference arising from the impact of store
closures, withdrawal from certain uncommercial channels and general sales
decline in a period of slightly weaker consumer spending. Gross margin, which
fell last year, stabilised during the first six months after a weak start and
was 44% for the six month period. Costs again fell markedly, reflecting
measures taken earlier, and operating expenses at #32.5m were some 16% lower
than last year's first half.
The Group's operating loss was reduced slightly to #7.0 million. After one-off
profits on disposal of surplus assets of #2.8m and a broadly maintained interest
charge, the loss before tax was #4.9m, down from #7.7m for the corresponding
period last year.
Financial position
Group net debt at the end of last year was #11.0m. During the first half the
cash outflow from trading (before exceptionals) was #6.1m, offset by a reduction
in working capital (before exceptionals) of #5.3m and the cash proceeds from the
disposal of surplus assets of #6.1m. Restructuring absorbed #8.2m, capital
expenditure #0.3m, top up payments to the pension fund #2.0m and interest,
currency and taxation #0.6m. At the half year end, net debt was #16.8m.
Pensions
We have commented extensively on the group's pension fund and its impact on the
group since 1999, when substantial changes were made to Royal Doulton's main
scheme. Changes continue to affect the pension scheme and this half year has
seen further government announcements and extensive comments from the actuarial
profession on mortality rates. We are again reviewing the scheme and will
report further at the year end.
Outlook
Sales in the first two months of the second half continued the pattern apparent
in the first six months. Gross margin, which stabilised during the first half,
has shown some improvement, reflecting the increased proportion of sourced and
overseas manufactured goods, and costs have continued to reduce as planned.
The major structural changes have now been largely completed and some of the
four key measures in the business, underlying sales change, gross margin, costs
and cash from trading are showing more stability than has been the case. These
measures need to change from stability to improvement in order to take the group
to breakeven at the operating level, and evidence of that improvement in the
second half of 2003 will be crucial to the long term fortunes of the group.
Hamish Grossart
Chairman
Enquiries:
Wayne Nutbeen Group Chief Executive 01782 404040
Geoff Martin Group Finance Director 01782 404040
Lesley Allan Hudson Sandler 0207 796 4133
Wendy Baker Hudson Sandler 0207 796 4133
CONSOLIDATED PROFIT
& LOSS ACCOUNT
For the 6 months ended 30 June 2003
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
Notes (unaudited) (unaudited) (audited)
Turnover 58.0 69.7 138.0
Operating loss 2 (7.0) (7.9) (27.9)
Profit on disposals 4 2.8 1.0 4.2
Loss on ordinary activities before (4.2) (6.9) (23.7)
interest
Net interest payable and similar charges (0.7) (0.8) (1.5)
Loss on ordinary activities before (4.9) (7.7) (25.2)
taxation
Taxation - (0.3) (0.2)
Loss on ordinary activities after (4.9) (8.0) (25.4)
taxation
Equity minority interests - (0.1) (0.2)
Loss for the period (4.9) (8.1) (25.6)
Dividends - - -
Loss absorbed for the period (4.9) (8.1) (25.6)
Loss per share 5 (1.5p) (3.3p) (8.9p)
Diluted loss per share 5 (1.5p) (3.3p) (8.9p)
The above results are derived from continuing operations.
The format of the profit and loss account has been simplified. The
reconciliation from turnover to operating loss is shown in note 2.
CONSOLIDATED
BALANCE SHEET
As at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
Note (unaudited) (unaudited) (audited)
Fixed assets:
Intangible assets 1.0 1.1 1.0
Tangible assets 21.6 33.4 23.4
Investments 0.2 0.2 0.2
22.8 34.7 24.6
Current assets:
Stocks 29.0 40.9 34.3
Debtors: amounts falling due after more 1.6 - 0.1
than one year
Debtors: amounts falling due within one 17.2 18.7 19.8
year
Assets held for resale - - 4.1
Cash at bank and in hand 3.0 3.9 5.0
50.8 63.5 63.3
Creditors: amounts falling due within one
year
Other (16.3) (18.9) (21.5)
Borrowings (0.9) (2.0) (1.8)
(17.2) (20.9) (23.3)
Net current assets 33.6 42.6 40.0
Total assets less current liabilities 56.4 77.3 64.6
Creditors: amounts falling due after more
than one year
Other (0.1) (0.2) (0.2)
Borrowings (18.9) (16.9) (14.2)
(19.0) (17.1) (14.4)
Provisions for liabilities and charges (6.4) (7.1) (15.5)
Net assets 31.0 53.1 34.7
Capital and reserves:
Called up share capital 85.6 85.6 85.6
Share premium account 50.1 50.1 50.1
Capital reserve 1.1 1.1 1.1
Profit and loss account (106.9) (84.8) (103.2)
Equity shareholders' funds 7 29.9 52.0 33.6
Equity minority interests 1.1 1.1 1.1
31.0 53.1 34.7
CONSOLIDATED CASH
FLOW STATEMENT
For the 6 months ended 30 June 2003
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
Note (unaudited) (unaudited) (audited)
Net cash outflow from operating activities 9 (11.0) (8.1) (10.0)
Return on investments and servicing of
finance:
Interest received - - 0.2
Interest paid (0.4) (0.9) (1.7)
Net cash outflow from returns on (0.4) (0.9) (1.5)
investments and servicing of finance
Taxation (0.5) (0.2) -
Capital expenditure and financial
investment:
Purchases of tangible fixed assets (0.3) (0.7) (2.5)
Disposal of assets 5.8 1.4 8.7
Purchase of rights on own shares for - (0.2) (0.2)
long-term incentive plan
Net cash inflow from capital expenditure 5.5 0.5 6.0
and financial investment
Acquisitions and disposals
Purchase of shares in Indonesian - (1.4) (1.4)
subsidiary
Balance of consideration from disposal of 0.3 - -
Caithness Glass Limited
Net cash inflow/(outflow) from 0.3 (1.4) (1.4)
acquisitions and disposals
Net cash outflow before financing (6.1) (10.1) (6.9)
Financing:
Issue of share capital net of costs - 18.7 18.7
Increase/(decrease) in borrowings 4.0 (10.5) (12.2)
Principal payment under finance leases - (0.1) (0.3)
Net cash inflow from financing 4.0 8.1 6.2
Decrease in cash during the period (2.1) (2.0) (0.7)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
For the 6 months ended 30 June 2003
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
(unaudited) (unaudited) (audited)
Decrease in cash in the period (2.1) (2.0) (0.7)
Cash (outflow)/inflow from debt and lease (4.0) 10.6 12.5
financing
Change in net debt resulting from cash flows (6.1) 8.6 11.8
Exchange differences 0.3 0.7 1.5
Movement in net debt in the period (5.8) 9.3 13.3
Opening net debt (11.0) (24.3) (24.3)
Closing net debt (16.8) (15.0) (11.0)
STATEMENT OF TOTAL
RECOGNISED GAINES
AND LOSSES
For the 6 months ended 30 June 2003
6 months to 30 June 6 months to 30 June Year to 31 December
2003 2002 2002
#'million #'million #'million
(unaudited) (unaudited) (audited)
Loss for the financial period (4.9) (8.1) (25.6)
Currency translation differences on foreign 1.2 (0.3) (1.2)
currency net investments
Total recognised gains and losses relating to (3.7) (8.4) (26.8)
the period
NOTES ON THE
RESULTS
For the 6 months ended 30 June 2003
1. Basis of preparation
The results for the six months ended 30 June 2003 have been prepared applying
the accounting policies described on pages 34 and 35 of the 2002 Annual Report,
and are neither audited nor reviewed. The results for the twelve months ended 31
December 2002 are in abbreviated form and have been extracted from the Annual
Report which has been filed with the Registrar of Companies. The auditors'
report on those accounts was unqualified.
2. Operating Loss
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
Notes (unaudited) (unaudited) (audited)
Turnover 58.0 69.7 138.0
Cost of sales 3 (32.5) (38.7) (87.1)
Gross profit 25.5 31.0 50.9
Net operating expenses 3 (32.5) (38.9) (78.8)
Operating loss (7.0) (7.9) (27.9)
3. Exceptionals
Cost of sales operating exceptionals of #1.4m comprises the release of a #1.7m
stock provision relating to the sale of obsolete and slow moving stock, offset
by #0.3m of redundancy costs; net operating expenses exceptionals of #0.6m is in
respect of redundancies and other restructuring costs.
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
(unaudited) (unaudited) (audited)
Cost of sales 1.4 2.2 (8.2)
Net operating expenses (0.6) (0.4) (5.0)
Net interest payable and similar charges - (0.3) (0.4)
Total exceptional credits / (costs) 0.8 1.5 (13.6)
4. Profit on Disposals
This receipt relates to the sale of land, buildings and plant at the Baddeley
Green site. Of the #6.5m consideration for the Baddeley Green site #1.5m is
deferred consideration, which will be received no later than 30 June 2005.
5. Loss per share and diluted loss per share
The calculation of loss per share and diluted loss per share is based on:
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
Loss for the financial period #4.9m #8.1m #25.6m
Normal weighted average number of shares in 328.3m 244.1m 286.9m
issue
Diluted weighted average number of shares in 328.3m 244.1m 286.9m
issue
6. Post-balance sheet event
On 1 July 2003 Royal Doulton Plc sold its 50% interest in China Millers for a
cash consideration of #0.7m, which resulted in a profit of #0.1m on the
transaction.
In addition, a 5-year supply agreement was signed with the purchaser for the
supply of certain raw materials to the manufacturing sites of the group.
7. Reconciliation of movement in group equity shareholders' funds
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
(unaudited) (unaudited) (audited)
Opening shareholders' funds 33.6 41.7 41.7
Loss for the financial period (4.9) (8.1) (25.6)
New capital issued - 2.5 2.5
Share premium on new shares issued (net of - 16.2 16.2
expenses)
Other recognised gains and losses relating 1.2 (0.3) (1.2)
to the period
Net movement in shareholders' funds (3.7) 10.3 (8.1)
Closing shareholders' funds 29.9 52.0 33.6
8. Dividends
The directors have not declared an interim dividend (2002 none).
9. Reconciliation of operating loss to operating cash flows
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#'million #'million #'million
(unaudited) (unaudited) (audited)
Operating Loss (7.0) (7.9) (27.9)
Depreciation and amortisation 1.7 2.5 5.5
Outflow from trading (5.3) (5.4) (22.4)
Payment of fundamental restructuring costs - - (0.1)
Loss on sale of fixed assets - (0.1) -
Stock decrease 5.6 2.1 7.9
Debtors decrease 2.9 4.0 2.1
Creditors (decrease)/increase (14.2) (8.7) 2.5
(11.0) (8.1) (10.0)
Included within the reduction in creditors is a #7.3m payment of exceptional
costs which was provided for in 2002 and a #2m contribution into the defined
benefit section of the UK pension scheme (Royal Doulton Pension Plan).
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