RNS Number:9914M
Reece PLC
28 June 2000
CHAIRMAN'S STATEMENT
RESULTS
1999 was another difficult year for Reece PLC. During the year
the loss on ordinary activities before taxation and exceptional
costs was #1,197,000 compared with a loss of #1,408,000 in 1998.
The exceptional costs represent a high level of one-off costs,
covering certain irrecoverable lease costs of a former APP
property now not occupied by the Group, an accelerated write-down
of stock at Service (Engineers) following the introduction of
servo driven machines and the writing off of surplus manufacturing
equipment at APP. In addition the sale of the Cycles division at
below book value has been reflected in these accounts. In all
these exceptional costs amount to #504,000.
DISPOSAL
On 5 May 2000, Service (Engineers) PLC, our trading subsidiary,
sold the business and principal assets of the Cycles division to a
company owned by MJ Norris, our former Managing Director, and his
wife. These assets were sold for approximately #860,000 plus an
additional amount in respect of non-current trade debtors. If the
value of the net assets disposed of less #200,000 differs from
#860,000 in the completion accounts to be agreed between the
parties, then the consideration will be adjusted by an amount
equal to the difference. Part of the disposal proceeds have been
used to repay the term loan in full. The remaining proceeds
received to date have been applied to the working capital
requirements of the Group.
DIVIDEND
The directors do not recommend the payment of a dividend.
CHANGE OF DIRECTOR
On 5 August 1999, Steve Smith was appointed a non-executive
Director of Reece PLC. Steve is an employee of Britannia Group PLC
which remains our largest shareholder although it was taken over
by YJL plc early in 2000. Subsequently, Steve Smith resigned from
the Board on 23 June 2000 and on the same date Peter Gyllenhammar,
deputy chairman of YJL plc, was appointed a non-executive
Director. MJ Norris resigned on 5 May 2000.
REVIEW OF OPERATIONS
APP
#'000 1999 1998
Sales 2,788 3,104
Operating Profit before 63 220
exceptional costs
Sales revenues fell in 1999 despite a strong performance in export
markets. Performance in the UK suffered from intense competitive
pressure. Export sales continued to grow rapidly which partly
compensated for lower UK sales. However, throughout the year the
strength of sterling served to reduce the turnover and profit
margins on French sales which were invoiced in French Francs.
Cycles
#'000 1999 1998
Sales 5,274 5,973
Operating (Loss)/Profit before (403) 87
exceptional costs
Efforts to develop higher margin accessory business, whilst
maintaining sales of Probike cycles at reasonable margins, were
overshadowed by the extremely disappointing results from the
premier brand Univega cycles. The level of sales of Univega and
the subsequent profit margin were less than half those seen in
1998. Competition was fierce. Having produced inadequate and
deteriorating results with little prospect of significant recovery
as part of the Group, the Board decided to sell the business and
assets. After marketing the business, a company owned by the
former Managing Director, MJ Norris and his wife, made a
competitive offer and bought the business and assets.
Service (Engineers)
#'000 1999 1998
Sales 1,881 2,676
Operating (Loss) before (527) (185)
exceptional costs
1999 saw a further dramatic reduction in the demand for Service
(Engineers) range of ceramic tableware manufacturing and
decorating equipment both in the UK and overseas. World-wide
there is over-capacity in the production of domestic tableware for
the retail market which has restricted capital expenditure on new
plant and equipment. The slow pace of recovery in Europe and weak
European currencies depressed sales in the region
During the year the workforce was reduced by one-third to cut
costs. In addition, a re-organisation has improved our ability to
deliver customer specific plant and equipment required by the
European and American tableware and glassware manufacturers who
are now serving many specialist markets. Rapid market change has
necessitated the development of computer controlled servo driven
forming and decorating machines for the ceramic and glassware
industries. These machines meet our customers' demands for maximum
flexibility and minimum non-productive times by incorporating
rapid shape change-over. The new range of forming and decorating
equipment will be available during 2000.
FUTURE
APP has had a profitable start to the current year, during which
overseas sales have benefited from much reduced currency losses
compared with the same period last year. Prices remain under
intense pressure and APP will look for further cost reductions in
order to bring the operational cost base to a level no greater
than that of our principal competitors.
During the first five months of 2000, Service (Engineers) has seen
a marked improvement in its order book and has returned to profit
after experiencing substantial losses in the same period last
year. The new range of servo driven machines is making a positive
impact, whilst the prospect of certain large-scale contracts looks
brighter than it has for some time.
Prior to disposal on the 5 May 2000, the Cycles division continued
to trade at a substantial loss.
We are searching for a significant acquisition in order to create
a brighter future for shareholders. Should the discussions that
are taking place at present reach a satisfactory conclusion, the
Board hope to put forward proposals that would meet shareholders'
approval.
Peter Knapton
Chairman
27 June 2000
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 1999
1999 1998
Notes #'000 #'000 #'000 #'000
Turnover
- continuing operations 9,943 11,753
- discontinued operations - 2,565
------ ------
9,943 14,318
------ -------
Cost of sales (7,802) (10,579)
Exceptional cost of sales (230) -
(1) (8,032) (10,579)
------ -------
Gross profit 1,911 3,739
Selling and distribution (1,389) (2,141)
expenses
Administrative expenses (1,884) (2,312)
Exceptional costs (1) (274) (232)
------ ------
(2,158) (2,544)
------ -------
Total expenses (3,547) (4,685)
------ -------
Operating loss
- continuing operations (1,636) (411)
- discontinued operations - (535)
------ ------
(1,636) (946)
Loss on sale of discontinued - (600)
operations
------ -------
(1,636) (1,546)
Net interest payable (65) (94)
------ -------
Loss on ordinary activities (1,701) (1,640)
before taxation
Taxation (2) - -
------ -------
Deficit for the financial year (1,701) (1,640)
------ -------
Basic loss per Ordinary 1p (3) (0.96p) (0.93p)
share
Diluted loss per Ordinary 1p (3) (0.96p) (0.93p)
share
Adjusted (loss) earnings per (3)
Ordinary 1p share (0.68p) (0.15p)
______ _______
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
As at 31 December 1999
31 December 31 December
1999 1998
Group Company Group Company
#'000 #'000 #'000 #'000
Fixed Assets
Tangible assets 996 - 1,295 -
Investments - 650 - 3,204
----- ------ ------ ------
996 650 1,295 3,204
----- ------ ------ ------
Current Assets
Stocks 2,494 - 3,061 -
Debtors 1,910 2,407 2,667 4,141
Cash at bank and in hand 101 - 224 -
----- ------ ------ ------
4,505 2,407 5,952 4,141
Creditors - Amounts falling (2,844) (600) (2,833) (608)
due within one year
----- ------ ------ ------
Net current assets 1,661 1,807 3,119 3,533
----- ------ ------ ------
Total assets less current 2,657 2,457 4,414 6,737
liabilities
Creditors - Amounts falling
due after more than one year (119) - (175) -
----- ------ ------ ------
Net assets 2,538 2,457 4,239 6,737
----- ------ ------ ------
Capital and reserves
- Called up share capital 6,921 6,921 6,921 6,921
- Share premium account 2,547 2,547 2,547 2,547
- Profit and loss account (6,930) (7,011) (5,229) (2,731)
Equity shareholders' funds (2,613) (2,694) (912) 1,586
Non-equity shareholders' 5,151 5,151 5,151 5,151
funds
------ ------ ------ ------
Total shareholders' funds 2,538 2,457 4,239 6,737
------ ------ ------ ------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 1999
1999 1998
#'000 #'000 #'000 #'000
Net cash inflow from operating 101 1,318
activities
Returns on investments and servicing of
finance
Interest paid on bank loan and overdraft (34) (84)
Interest element of hire purchase and (31) (23)
finance lease payments -
Other income 13
----- -----
(65) (94)
Taxation
UK Corporation tax paid - -
Capital expenditure and financial
investment
Payments to acquire tangible fixed (82) (202)
assets
Proceeds from sales of tangible fixed 14 69
assets
----- -----
(68) (133)
Acquisitions and disposals
Proceeds from disposal of the Fastener - 200
division
------ ------
Cash (outflow) inflow before financing (32) 1,291
Financing
Capital element of hire purchase
and finance lease rental (152) (230)
payments
Bank loan repayments (167) (167)
----- -----
(319) (397)
------ ------
(Decrease)/ Increase in cash (351) 894
------ ------
1 EXCEPTIONAL COSTS
The exceptional costs incurred in the year, related to:
1999 1998
#'000 #'000
Stock write-off 230 -
Fixed Assets write down 167 -
Trade Debtors write-off 50 -
Ceramic equipment division restructuring costs - 67
Onerous lease costs 57 165
------ ------
504 232
------ ------
2 TAXATION
No tax charge arises in the year due to trading losses (1998 -
#nil).
There are tax losses amounting to approximately #800,000 (1998 -
#800,000) which are available for offset against future taxable
profits arising in certain businesses.
3 LOSS PER ORDINARY SHARE
(a) The basic loss per Ordinary 1p share is calculated on the
deficit for the year of #1,701,000 (1998 - #1,640,000) and on
177,054,416 (1998 - 177,054,416) Ordinary 1p shares being the
weighted average number of Ordinary 1p shares in issue during the
year.
The diluted loss per share is the same as the basic loss per share
for both years as the share options outstanding at the end of both
years are not dilutive.
(c) The loss per Ordinary 1p share figure has also been presented
to eliminate the effects of discontinued operations and
exceptional items. This presentation, calculated on the basis of
the weighted average number of Ordinary 1p shares in issue, shows
the loss per Ordinary 1p share that is attributable to the normal
trading activities of the Group. The reconciliation between the
two figures is as follows:
1999 1998 1999 1998
#'000 #'000 P P
Deficit for the basic loss per
Ordinary 1p share calculation (l,701) (1,640) (0.96) (0.93)
Operating loss from
discontinued operations - 535 - 0.30
Loss on sale of discontinued
operations - 600 - 0.34
Exceptional costs
504 232 0.28 0.14
------- ------ ------ ------
Adjusted loss per Ordinary 1p
share (1,197) (273) (0.68) (0.15)
------- ------ ------ ------
PRELIMINARY STATEMENT
This preliminary statement is not the Company's statutory
accounts. The statutory accounts for the year ended 31 December
1998 have been delivered to the Registrar of Companies and have
received an audit report which was unqualified and did not contain
statements under s237 (2) or (3) of the Companies Act 1985. The
statutory accounts for the year ended 31 December 1999 have not
yet been approved, audited or filed.
END
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