RNS No 2877k
FILOFAX GROUP PLC
2nd June 1998
Preliminary Results for the Year Ended 31 March 1998
Constant Exchange Rates
1997/98 1996/97 1997/98
#m #m % change #m % change
Continuing Operations:
Sales 37.7 37.9 (0.7%) 40.1 5.7%
Gross profit 20.5 20.8 (1.3%) 22.2 7.1%
Pre tax profit 6.1 5.7 7.0% 6.9 20.5%
Earnings per share
(pence) 15.0p 13.1p 14.5% 16.8p 28.2%
Dividend per share
(pence) 4.07p 3.70p 10.0% 4.07p 10.0%
Robin Field, Chief Executive, said:
"The ring binder organiser market remains buoyant and our position
within it pre-eminent. Both foreign exchange translation effects and
internal reorganisation have impacted results in the year under review
but the resilience of our core business and its strongly cash
generative nature are obvious."
For further information please contact:
Filofax Group plc
Robin Field, Chief Executive on 2 June 1998 Tel: 0171 253 2252
Chris Brace, Managing Director after 2 June 1998 Tel: 0171 432 3000
Michael Ball, Finance Director
Ludgate Communications Ltd
Terry Garrett
Carolyn St Aubyn Tel: 0171 253 2252
Preliminary Results for the Year Ended 31 March 1998
ANNUAL REVIEW
RESULTS & DIVIDEND
Group sales from the continuing business declined marginally to #37.7m
(1996/97: #37.9m) as a result of foreign exchange translation
differences. Had sales of our overseas subsidiaries been translated
at the rates used in the year to 31 March 1997, total sales would have
risen by 6% to #40.1m. Sales of our core Filofax brand at constant
exchange rates rose by 10% to #29.1m (#26.5m).
Pre-tax profit from continuing operations rose by 7% to #6.1m (#5.7m).
Excluding the effect of currency translation this figure would have
been #6.9m, representing an improvement of 21%.
On 1 April 1998 we announced the disposal of our greeting card
business, which, after accounting for all costs associated with this
sale, the original purchase costs, and trading to 31 March, resulted
in a loss of #7.0m.
The Company repurchased 2.3m shares in the first half of the year at
an average price of 141.3p and earnings per share from continuing
operations rose by 15% to 15.0p (13.1p).
There is every evidence that the worldwide market for ring binder
organisers remains buoyant and that the Filofax brand remains
pre-eminent within it. Against this background your Board has
recommended a 10% increase in the final dividend to 2.42p per share
(2.20p) to bring the total annual dividend to 4.07p (3.70p).
STRATEGY & MANAGEMENT
We announced on 10 November 1997 that we were embarking on a wide
ranging strategic review. As our subsequent announcement on 19
February disclosed, this included preliminary discussions with a
number of third parties to establish whether any major alliance might
improve shareholder wealth. After a thorough exploration of several
possibilities we have determined that there is no such opportunity in
the short term and these discussions have now been terminated.
Having completed our strategic review the Group is now clearly focused
on the ring binder organiser market, an area which continues to show
steady real growth, in which our core competence lies and in which we
have the world's strongest brand name.
As part of the re-focusing of the Group a number of changes have been
made. As announced on 1 April we have disposed of the business and
assets of Henry Ling and exited the greeting card market. We have
also declined renewal of a contract to manage a promotional catalogue
on behalf of British Telecom, a business acquired in 1995 with Topps
of England Ltd, which accounted for #1.0m of turnover at low margin
and which did not complement our core ring binder organiser business.
The remaining corporate and promotional business in the UK (accounting
for #1.5m of turnover in the year under review) has been restricted to
our core products in order to make better use of our manufacturing and
sales capability.
We have also initiated further strengthening and re-focusing of our UK
retail sales and marketing teams to ensure greater co-ordination
between our Filofax and Microfile brands. Finally, our Danish
business has been incorporated into our highly successful Swedish
subsidiary in order to take advantage of an increasingly homogenous
Scandinavian market.
There remain a number of strategic and operating opportunities within
the ring binder organiser market, in particular in new product
development, which we intend to exploit. In order to help the company
achieve these objectives, certain changes in management
responsibilities are being introduced.
To allow me to concentrate on the opportunities available to us, my
focus, as Chief Executive, will become increasingly strategic. I will
continue to remain directly responsible for the Group marketing
function and for sales to those countries where we do not have our own
subsidiaries.
David Collischon, our non-executive Chairman, has asked to retire at
the Annual General Meeting on 16 July, having reached the age of 60.
David, who acquired the company in 1980 and brought it to the market
in 1987, is the founder of the brand as it is known today. Since my
appointment in 1990, he has served as non-executive Chairman and I am
pleased he has agreed to remain on the Board as a non-executive
director. Following the AGM I will assume the role of executive
Chairman.
Chris Brace, Group Finance Director and Company Secretary since May
1992, has been appointed Managing Director of the Group with effect
from 1 June 1998. This appointment reflects the increasingly
important role he has had in the running of the Company; in November
1992 he took over responsibility for Systems and Information
Technology, in 1993 he became responsible for Planning and Logistics
and in 1994 for Purchasing. In the spring of 1997 I asked him to take
personal control of our US subsidiary. Under his direction this
business has increased its profitability markedly. The Board has
every confidence that Chris will bring the same energy and
determination to his role as Managing Director.
I am also pleased to announce that Michael Ball, who has served as
Group Financial Controller since 1994, has been promoted to the role
of Group Finance Director and Company Secretary. While Chris Brace has
progressively assumed more operational responsibility, Michael has
been playing a larger part in the management of the Group than his
title suggested and is therefore well prepared for his new position.
Michael will be responsible for the management of all aspects of the
Group's finance function including Systems and Information Technology,
Treasury and Taxation.
UK
Our UK subsidiary, in its first year of autonomous operation,
experienced a slow start. The reorganisation announced in June 1997
involved a complete change in the staff responsible for order intake
and processing and therefore a steep learning curve for all concerned.
During the second half of the year not only have the benefits of
experience started to show through but a number of middle management
changes have strengthened the team.
Start up issues in the new subsidiary restricted overall sales, at
#16.7m, to only marginal growth over the previous year despite a
strongly improved product offering and continued healthy demand from
end users.
Sales through retail channels of both our Filofax and Microfile brands
together rose by 6% to #10.2m (#9.7m) but within this there was a
degree of deliberate withdrawal of the Filofax brand from lower
prestige outlets.
There is strong evidence to suggest actual sales from retailers to end
users enjoyed significantly higher growth than our results imply,
demonstrating a further fall in retailers' inventory.
A further strengthening of our UK retail sales management is planned
for this year, which, together with the operational improvements
referred to above, will give us a more secure platform for future
growth.
Our time management business under the Key Time and 'A' Time brands
showed modest 2% growth to #1.0m but suffered from a lack of clear
identity and focus. Since the year end a new strategy has been
adopted of marketing to both brands' customers under the unified name
of Filofax Time Management. This will give both customers and staff a
clearer and better known brand with which to identify but will involve
some transition costs. In the future it will offer the opportunity to
share certain products with the retail side of our business with
margin and inventory advantages.
The Drakes office stationery business had a difficult year with sales
falling by 13% to #1.6m (#1.8m). Although not essential to our core
organiser business, Drakes remains a strong contributor and an
excellent complementary sale into office product channels.
Since the acquisition of Topps of England Ltd in July 1995, we had
been responsible for the management of a promotional gift catalogue
for British Telecom plc. This was a business that had grown out of
the supply of organisers but increasingly had almost nothing to do
with our core business. It offered very much lower margins than our
average and few, if any, synergies with our core activities.
Accordingly, we have not renewed the contract for this business which
expired on 29 May. Since December 1997 we have, by mutual consent,
allowed the business to decline and consequently turnover, which had
been #0.9m in the year to 31 March 1997, reached only #0.8m in the
current year. We have not classified this as a discontinued
operation (a category that has been reserved exclusively for greeting
cards) and this will need to be taken into account when considering
1998/99 sales growth.
The remainder of our UK activities comprises the direct corporate sale
of what was formerly a range of leather goods but is increasingly
restricted to the same sort of ring binder organisers that we offer
via retail channels. This provides useful incremental demand for our
Burgess Hill factory and an additional channel for standard product.
Sales rose by 8% to #1.5m (#1.4m).
CONTINENTAL EUROPEAN SUBSIDIARIES
The underlying performance in all Continental subsidiary markets was
encouraging. In particular, both Sweden and France showed strong
recovery from setbacks in the previous year. Our new products were
extremely well received and our product mix improved markedly.
Sweden remains our largest Continental subsidiary with sales of SEK
46m (#3.6m), 17% up on the SEK 39m (#3.5m) achieved in the prior year,
even before the consolidation of the recently formed Danish branch.
Swedish growth is flattered by comparison with a poor year in 1996/97
but compound annual growth across the last two years is over 10%.
Despite our commanding market share in Sweden, and the resilience the
brand has shown historically, there are signs of local moves towards
own label products which could impact sales and margins in the year
ahead.
Reported within the Swedish results are our small sales in Finland
where we enjoyed fast growth from the very small base established in
1996/97. Our strategy in this, as in all new markets, is to establish
a niche position as a highly desirable premium price product rather
than to push for immediate market share.
Sales in Denmark, which has since become a branch of our Swedish
subsidiary, moved ahead by just 3% in local currency to DKR 16.2m
(#1.5m) from DKR 15.7m (#1.7m) but, more importantly, we have begun
the essential process of merging our local brand, Systemplan, under
the worldwide Filofax banner. This will allow significant product
rationalisation and consequent margin enhancement in the future. As a
result of the sales improvement and strict cost containment our Danish
operation moved into a small local profit for the first time since
1993.
Our French subsidiary maintained the improvement achieved in the
second half of the previous year, lifting local sales by 9% to FFr
27.5m (#2.8m) from FFr 25.2m (#3.2m). The French market remains
highly competitive but the Filofax brand name is increasingly
recognised and has built up significant strength since we launched our
own local subsidiary in 1992.
Germany is still the fastest growing major market for our products in
Europe and, indeed, the world. Penetration levels are among the
lowest in Europe and this, assisted by our excellent brand
recognition, allowed us to grow local sales of the Filofax brand by
27% from DM 6.3m (#2.8m) to DM 8.0m (#2.7m). While some slowing of
sales growth must be expected as penetration increases, we
nevertheless look forward to a very strong year ahead.
Perhaps the clearest indication of the growth of the European
organiser market, and the strength of the Filofax brand within it, has
been the performance achieved in those Continental markets where we do
not have our own subsidiaries and sell through independent third party
distributors. Sales to these markets grew by 12% even though these
customers were very badly hit by the strength of Sterling, the only
currency in which we sell to them, and the consequent pressure on
their margins.
While this performance is perhaps flattered by a poor result in the
year to 31 March 1997, the trend line is clear with compound growth
from these markets of 10% p.a. over the four years since 1993/94.
USA
I drew attention last year to the complexity of the issues we face in
this large and competitive market, suggesting that our strategy should
be to limit expenditure and minimise risk. This resulted in a small
fall in sales in the first half. In the second half year to 31 March
1998, the improvement in our product offering and the stronger local
discipline that had been implemented, contributed to a reversal of the
first half decline and an overall annual sales increase of 6% in local
currency to $8.6m ($8.1m).
Combined with the stringent cost control of which I have previously
written, this produced a very marked improvement in the profitability
of our US operation. The US market offers great potential but the
highest risk of any in which we operate due to the cost of
distribution and the nature of competition. Our strategy is for
modest sales growth and strict cost containment. We have now re-
established our local subsidiary on a firm foundation from which we
can move ahead in the coming year.
REST OF THE WORLD
As in Europe, the strength of Sterling put severe pressure on our
third party distributors in the rest of the world. In the case of the
Far East and the Pacific Rim countries this pressure was, of course,
exacerbated by the turndown in the local economies and collapse in
consumer confidence following the currency crises in the third
quarter.
It is, again, eloquent testimony to the strength of our brand and the
resilience of the ring binder organiser market that sales to
distributors outside Europe grew by 7% at constant exchange rates.
Compound growth over the last four years for sales to these
distributors has exceeded 10% p.a.
THE FUTURE
The ring binder organiser market remains buoyant and our position
within it pre-eminent. Both foreign exchange translation effects and
internal reorganisation have impacted results in the year under review
but the resilience of our core business and its strongly cash
generative nature are obvious.
Having completed an exhaustive strategic review and implemented its
major conclusion, with a re-dedication to our core ring-binder
organiser business, we are ready to push ahead with further organic
growth. The senior management changes referred to earlier underpin
this commitment.
New product development remains a key focus and, whilst our 1997/98
range was a marked improvement on its predecessor, we believe that the
new ranges launched in March and August 1998 will prove the most
significant step forward in product since 1991.
The market background is positive, but we cannot expect growth to
resume at the rapid rate enjoyed in the turnaround phase from 1991 to
1995. Foreign exchange fluctuations can have a dramatic effect on
comparative performance; our Swedish subsidiary which has been a
powerful engine of growth faces particular challenges in the year
ahead; and French retail demand remains subject to political factors.
Enhancement of shareholder wealth is our underlying aim and it is with
this in mind that the programme of share repurchases which was
necessarily suspended during our strategic review will be resumed when
conditions are judged appropriate.
Consolidated Profit and Loss Account
Year Ended 31 March 1998
1998
------------------------------------------
Continuing Discontinued
Operations Operation Total
Note #'000 #'000 #'000
-------- -------- --------
Turnover 1 37,669 4,531 42,200
Cost of sales 17,184 3,659 20,843
-------- -------- --------
Gross profit 20,485 872 21,357
Administrative expenses 14,348 2,757 17,105
-------- -------- --------
Operating profit/(loss) 6,137 (1,885) 4,252
Loss on disposal of discontinued
operation 2 - (5,127) (5,127)
-------- -------- --------
Profit/(loss) on ordinary
activities before interest 6,137 (7,012) (875)
Net interest (payable)/
receivable (7) - (7)
-------- -------- --------
Profit/(loss) on ordinary
activities before taxation 6,130 (7,012) (882)
Taxation charge/(credit) 1,837 (297) 1,540
-------- -------- --------
Profit/(loss) on ordinary
activities after taxation 4,293 (6,715) (2,422)
-------- --------
Dividends 5 1,097
--------
Retained (loss)/profit
for the year (3,519)
========
Earnings/(loss)
per share 3 15.0p (8.4p)
======== ========
1997
--------------------------------------------
Continuing Discontinued
Operations Operation Total
Note #'000 #'000 #'000
-------- -------- --------
Turnover 1 37,916 5,686 43,602
Cost of sales 17,162 2,927 20,089
-------- -------- --------
Gross profit 20,754 2,759 23,513
Administrative expenses 15,070 2,545 17,615
-------- -------- --------
Operating profit/(loss) 5,684 214 5,898
Loss on disposal of discontinued
operation 2 - - -
-------- -------- --------
Profit/(loss) on ordinary
activities before interest 5,684 214 5,898
Net interest (payable)/
receivable 43 (26) 17
-------- -------- --------
Profit/(loss) on ordinary
activities before taxation 5,727 188 5,915
Taxation charge/(credit) 1,774 - 1,774
-------- -------- --------
Profit/(loss) on ordinary
activities after taxation 3,953 188 4,141
-------- --------
Dividends 5 1,118
--------
Retained (loss)/profit
for the year 3,023
========
Earnings/(loss)
per share 3 13.1p 13.7p
======== ========
The discontinued operation comprises the trade of Henry Ling & Son
(London) Limited which was sold on 31 March 1998. No Group overhead
has been attributed to the discontinued operation for the purposes of
the disclosures shown above.
The operating loss for the discontinued operation for the year to 31
March 1998 includes the write down of assets to the value attributed
by the acquirer on disposal.
Statement of Total Recognised Gains and Losses
Year Ended 31 March 1998
1998 1997
#'000 #'000
-------- --------
(Loss)/profit on ordinary activities
after taxation (2,422) 4,141
Exchange differences (59) 161
-------- --------
Total recognised gains and losses for the year (2,481) 4,302
======== ========
Consolidated Balance Sheet
At 31 March 1998
1998 1997
#'000 #'000
-------- --------
Tangible fixed assets 2,215 2,276
-------- --------
Stocks 6,397 7,395
Debtors 5,121 5,421
Cash at bank and in hand 5,942 7,393
-------- --------
Total current assets 17,460 20,209
Creditors: amounts falling due within one year 9,189 9,869
-------- --------
Net current assets 8,271 10,340
-------- --------
Net assets 10,486 12,616
======== ========
Capital and reserves
Called up share capital 1,407 1,510
Share premium account 474 223
Capital redemption reserve 115 -
Other reserves 809 1,045
Profit and loss account 7,681 9,838
-------- --------
Equity shareholders' funds 10,486 12,616
======== ========
Consolidated Cash Flow Statement
For the Year Ended 31 March 1998
1998 1997
#'000 #'000
-------- --------
Net cash inflow from operating activities
Continuing operations 6,384 7,577
Discontinued operation 22 (565)
-------- --------
Net cash inflow from operating activities 6,406 7,012
-------- --------
Returns on investments and servicing of finance
Interest received 326 459
Interest paid (313) (456)
Interest element of finance lease repayments (11) (22)
Net cash inflow/(outflow) from returns on -------- --------
investments and servicing of finance 2 (19)
-------- --------
Taxation
Corporation tax paid (1,645) (1,738)
Advance corporation tax paid (719) (253)
-------- --------
Taxation paid (2,364) (1,991)
-------- --------
Capital expenditure
Purchase of tangible fixed assets (943) (445)
Sale of tangible fixed assets 52 70
-------- --------
Net cash outflow for capital expenditure (891) (375)
-------- --------
Acquisitions and disposals
Purchase of unincorporated business (122) -
-------- --------
Net cash outflow from
acquisitions and disposals (122) -
-------- --------
Equity dividends paid (1,081) (1,056)
-------- --------
Net cash inflow before financing 1,950 3,571
-------- --------
Financing
Issue of ordinary shares (net of issue costs) 80 41
Purchase of own shares (3,287) -
Capital element of finance lease repayments (98) (131)
Repayment of loans - (248)
-------- --------
Net cash outflow from financing (3,305) (338)
-------- --------
(Decrease)/increase in cash (1,355) 3,233
======== ========
Notes:
1. Segmental Analysis of Sales
The Group operates in a single business segment. All turnover
relates to the sale of consumer products. An analysis of turnover
by location of customer is shown below together with growth in
sterling and the underlying growth at constant exchange rates.
Constant Exchange Rates
-----------------------
1998 1997 1998
#'000 #'000 % #'000 %
Inc/(Dec) Inc/(Dec)
------- ------- --------- ------- ---------
United Kingdom 16,706 16,691 0.1% 16,706 0.1%
Nordic subsidiaries 5,050 5,124 (1.4)% 5,751 12.2%
France 2,807 3,208 (12.5)% 3,495 8.9%
Germany 2,726 3,069 (11.2)% 3,573 16.4%
USA 5,186 5,070 2.3% 5,355 5.6%
Overseas third party
distributors 5,194 4,754 9.3% 5,216 9.7%
Total continuing ------- ------- ------- ------- -------
operations 37,669 37,916 (0.7)% 40,096 5.7%
======= ======= ======= ======= =======
Discontinued
operation - Ling's 4,531 5,686 (20.3)% 4,531 (20.3)%
------- ------- ------- ------- -------
Group turnover 42,200 43,602 (3.2)% 44,627 2.4%
======= ======= ======= ======= =======
References to constant exchange rate growth in the Annual Review
and Segmental Analysis represent growth over the year to 31 March
1997 excluding the effects of changes in Sterling exchange rates.
Constant exchange rate numbers are calculated by retranslating the
current year results of overseas subsidiaries and significant
foreign currency denominated earnings of UK companies into Sterling
assuming that monthly exchange rates remained unchanged from those
used for translation in 1997. During the year to 31 March 1997
certain foreign currency denominated earnings streams were
translated at hedged rates. No similar hedges were in place for
the year to 31 March 1998.
2. Disposal of Discontinued Operation
On 31 March 1998, the Group disposed of the business and net
trading assets of Henry Ling & Son (London) Limited for an initial
consideration of #0.5m. The results attributable to this business
have been treated as a discontinued operation in the year to 31
March 1998 and prior year figures have been restated accordingly.
The loss on disposal of #5,127,000 includes reinstatement of
#4,777,000 of goodwill originally written off to reserves on
acquisition; the balance of #350,000 represents creditors and
accruals arising in respect of the disposal. The write down of net
trading assets to the value shown in the acquirer's proposed
completion balance sheet has been included within the operating
loss for the year to 31 March 1998 for the discontinued operation.
As the business was sold on 31 March 1998, and the acquirer
prepared the accounts as at that date, it was not practical to
distinguish between the underlying trading results and the write
downs of assets to the values shown in the completion balance
sheet.
3. Earnings per Share
The calculation of earnings per share is based on the loss after
taxation of #2,422,000 (1996/97: profit #4,141,000) divided by the
weighted average number of shares in issue during the period of
28,686,688 (1996/97: 30,175,171).
An alternative measure of earnings per share, based only on
continuing operations, has also been presented as the directors
believe this is a more appropriate measure of the underlying
performance of the Group. This has been calculated as follows:
1998 1997
#'000 #'000
------- -------
(Loss)/profit on ordinary activities
after taxation (2,422) 4,141
Add: Loss on disposal of the
discontinued operation 5,127 -
Add: Operating loss/(profit)
attributable to the discontinued
operation 1,885 (188)
Less: Taxation credit attributable to
the discontinued operation (297) -
------- -------
Profit on ordinary activities after
taxation from continuing operations 4,293 3,953
------- -------
Earnings per share (pence) from
continuing operations 15.0p 13.1p
======= =======
4. Acquisition
The Group acquired the goodwill, intellectual property and
customer lists of 'A' Time, an unincorporated business, on 24 June
1997 for a total consideration of #119,000 plus related expenses
of #3,000. Previously, the Group traded using the 'A' Time name
under a licence agreement.
5. Dividend per Share
The recommended final dividend, together with the interim dividend
already paid, makes a total dividend for the year of 4.07 pence
per ordinary share, compared with 3.70 pence per ordinary
share for the year to 31 March 1997. The final dividend will be
paid on 30 October 1998 to shareholders on the register on
2 October 1998.
6. Annual Report and Annual General Meeting
The above Profit and Loss Account, Balance Sheet and Cash Flow
Statement are an abridged statement of the full Group Accounts
for the years ended 31 March 1998 and 31 March 1997 on which
unqualified reports were issued by our auditors, Binder Hamlyn,
and which did not include a statement under Sections 237(2) or 237(3)
of the Companies Act 1985. The accounts for 1997 have been filed
with the Registrar of Companies and the 1998 accounts will be filed
in due course.
Copies of the Annual Report and Accounts for the Group will be sent
to all shareholders on 16 June 1998 by first-class post.
Additional copies will be available from: Filofax Group plc,
7/12 Noel Street, London W1V 4NE.
The Annual General Meeting of Filofax Group plc will be held at
Filofax Centre, 21 Conduit Street, London W1R 9TB on 16 July 1998 at
11.00am.
END
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