Final Results
28 August 2003 - 7:54PM
UK Regulatory
RNS Number:1539P
Dunham-Bush (Europe) PLC
28 August 2003
DUNHAM-BUSH (EUROPE) PLC
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 30 APRIL 2003
CHAIRMAN'S STATEMENT
Operating Results
As shareholders will have already surmised, the year ended 30 April 2003
produced difficult trading conditions for the Group. Our sales were reduced to
just under #9 million from #11.1 million in the previous year. The latter
included a large, low-margin sale of packaged chillers which was not repeated in
2003. Sales were also badly affected by the changing priorities in important
sectors of our markets. For example, we had expected substantial orders for
heating equipment from the education sector but schools spent less of their
resources on their buildings as they were forced to plug gaps in their salary
budgets due to increased social security costs. We also noted a marked
reluctance on the part of many clients to proceed with construction projects
because of the general uncertainty created by the global political and economic
situation.
However, the damage caused by reduced sales was partially offset by a
considerably better product mix which produced a gross profit margin of 26.3%
(2002: 24%). Hence, despite a 19% fall in sales, we experienced a reduction of
only 4% in gross profit.
Administrative expenses were burdened by #103,000 of costs which had not
occurred in the previous year, relating to the write-off of abortive merger
costs and a legal action in Germany. These non-recurring expenses masked
management's continued success in reducing overheads. Whilst we did not incur
the cost of a property revaluation in 2003, neither could we include any
exceptional credit from this source.
Although net interest charges improved against the previous year, this was more
than offset by the loss on the sale of the Santric business.
Change of Control
As announced on 8 August 2003, a memorandum of understanding has been signed
which, if implemented, will lead to a transfer of control of the Company to
European Industrial Acquisition Corporation of Delaware, USA ("EIAC"). The
Company's existing majority shareholder, Dunham-Bush (Malaysia) Bhd ("DBM") is
refocusing its efforts in the cooling sector and is pleased with this strategic
alliance with EIAC which will continue the Dunham-Bush marque in the European
heating market.
Subject to exchange of definitive agreements, which are now being prepared, and
satisfaction of the conditions thereof, EIAC will ultimately own approximately
61% of the enlarged share capital of the Company. Part of this arrangement will
lead to a considerable reduction in the liabilities of the Group by way of the
conversion of current inter-company debt into equity.
EIAC is an affiliate of American Industrial Acquisition Corporation ("AIAC"), a
private equity company which owns and actively manages a portfolio of
manufacturing businesses in the USA and Canada. It is the intention of AIAC to
expand its industrial interests in Europe.
Your Board has, for the past several years, been seeking consolidating or
expansionary alliances in our markets. Although negotiations had taken place
over a considerable period of time, none of them came to fruition and none had
ever reached a stage at which an announcement could be made. The Directors are
confident that this proposed deal is in the best interests of shareholders,
staff, customers and suppliers.
A further announcement will be made as soon as possible.
Dunham-Bush Retirement Benefits Plan
I wrote at some length on this matter in my statement last year and at the
interim stage announced that we intended to terminate the defined benefits
scheme (the "Pension Plan"). Since then, we have studied the matter further and
have appointed the financial services division of Walker, Crips, Weddle, Beck
plc ("WCWB") as our new advisers, with Scottish Life providing administration
and actuarial services.
We will not now be terminating the Pension Plan, as we believe that we will be
able to fund the plan deficit, over time, as a result of the considerable
reduction in costs which have been negotiated with Scottish Life by WCWB. The
Pension Plan remains closed to new members.
This is good news for our loyal employees but we will continue to keep the
overall situation in this complicated area under close review.
Staff and Associates
Assuming that our negotiations with EIAC come to fruition, the Group will enter
a new era. We have no doubt that our staff will give the same loyalty and
service to the new controlling shareholder as they have in the past and we thank
them wholeheartedly for their efforts. For our advisers and our colleague
companies in the supply chain, we thank them for their service and their custom.
Freddie Pang Hock Cheng
Chairman
28 August 2003
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 APRIL 2003
Unaudited 2002
2003 #'000
#'000
Turnover
8,947 11,053
Cost of sales (6,598) (8,400)
Gross profit 2,349 2,653
Distribution costs (1,237) (1,498)
Administrative expenses -other (1,224) (1,226)
Administrative expenses - exceptional - 386
Operating (loss)/profit (112) 315
Loss on disposal of discontinued operations (44) -
Net interest (262) (284)
(Loss)/profit on ordinary activities before taxation (418) 31
Tax on (loss)/profit on ordinary activities - -
(Loss)/profit for the financial year transferred
(from)/to reserves (418) 31
Basic earnings per share (see Note 3) (1.01)p 0.08p
Diluted earnings per share (see Note 3) - 0.07p
All of the activities of the Company are classed as continuing.
The Company has no recognised gains or losses other than the results for the
year as set out above.
GROUP BALANCE SHEET
AT 30 APRIL 2003
Unaudited 2002
2003 #'000
#'000
Fixed assets
Intangible assets 38 100
Tangible assets 3,406 3,522
3,444 3,622
Current assets
Stocks 1,109 1,581
Debtors 1,631 1,920
Cash at bank and in hand 1 4
2,741 3,505
Creditors: amounts falling due within one year (7,218) (7,716)
Net current liabilities (4,477) (4,211)
Total assets less current liabilities (1,033) (589)
Creditors: amounts falling due after more than one year (54) (80)
(1,087) (669)
Capital and reserves
Called up share capital 1,032 1,032
Share premium account 2,893 2,893
Profit and loss account (5,012) (4,594)
Shareholders' funds (1,087) (669)
GROUP CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 APRIL 2003
Unaudited 2002
2003 #'000
#'000
Net cash inflow from operating activities
Returns on investments and servicing of finance
Interest received 14 8
Interest paid (272) (285)
Interest element of finance leases (5) (7)
Net cash outflow from returns on investments and
servicing of finance (263) (284)
Taxation
- (7)
Capital expenditure and financial investment
Payments to acquire intangible fixed assets - (9)
Payments to acquire tangible fixed assets (52) (17)
Receipts from sale of fixed assets - 9
Net cash outflow from capital expenditure and
financial investment (52) (17)
Acquisitions and disposals
Income from disposal of trade and assets of Santric Limited 47 -
Financing
Capital element of finance lease rentals (26) (65)
Receipts from borrowings (227) 58
Net cash outflow from financing (253) (7)
Increase/(decrease) in cash 203 (196)
NOTES
1 - Basis of Preparation
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards, as modified for the
revaluation of freehold property.
The principal accounting policies of the Group have remained unchanged from the
previous year.
2 - Going Concern
The Directors have carefully considered the funding requirements of the Group
for the foreseeable future. The existing facilities comprise arrangements with
HSBC, which are due for renewal in October 2003 and are substantially backed by
a guarantee provided by Dunham-Bush (Malaysia) Bhd and the security of the
freehold property. There are additional facilities arranged with GE Capital,
secured on six months' notice on the other fixed and current assets of the
Group. On the basis of the budgets that have been prepared and the assumption
that the existing facilities will remain in place, the Group will have adequate
resources to continue in operational existence for the foreseeable future and,
accordingly, the accounts have been prepared on a going concern basis. The
Directors have considered alternative sources of funding that they could pursue
with a view to securing the long-term future of the Group and in this context
have entered into the memorandum of understanding referred to in the Chairman's
Statement.
3 - Earnings per share
The calculation of basic earnings per ordinary share is based on a loss of
#418,000 (2002: profit #31,000) and on 41,288,627 (2002: 41,288,627) ordinary
shares, being the number of ordinary shares in issue during the period.
The calculation of diluted earnings per share in 2002 is based on the basic
earnings per share, adjusted to allow for the issue of shares on the assumed
conversion of all dilutive options, being 45,498,343 ordinary shares. As there
was a loss in 2003, the question of dilution does not arise in that year.
4 - Publication of non-statutory accounts
The financial information set out in this preliminary statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. Statutory accounts for the year ended 30 April 2002 have been delivered to
the Registrar of Companies. The summarised balance sheet at 30 April 2003, the
summarised profit and loss account and cash flow statement for the year then
ended and the associated notes have been extracted from the Group's financial
statements. Those financial statements have not yet been delivered to the
Registrar of Companies nor have the auditors reported on them.
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