RNS Number:7090Z
Waterline Group plc
05 July 2007
Waterline Group plc
("Waterline" or "the Group")
Results to 31 March 2007
Financial and corporate highlights for the year ended 31 March 2007
________________________________________________________________________________
The Board of Waterline Group Plc ("Waterline" or the "Group") one of the larger
suppliers to the fitted kitchen industry in the UK, announces its results for
the twelve month period to 31 March 2007, where it reports turnover, profit
before tax, basic EPS and net assets per share.
Financial Highlights
* Turnover up to #83.7m
* Profit before tax #1.7m (excluding one off costs #0.8m)
* Basic EPS down 56 per cent to 2.54p
* Net assets per share down by 0.5 per cent to 56.0p
* Net debt reduced from #4.2m to #4.1m
* No proposed dividend payment for the year
* Current trading remains challenging
Corporate Highlights
*Successful integration of Coolectric now completed
*Acquisition of Brian Donaldson Distribution on 1 October 2007
*Substantial investment in logistics operation
*Completion of the re-structuring of the Operating Board
*"Blue Book 14" the industry reference book to be launched in July 2007
Waterline provides a one-stop shop for top high street kitchen brands, supplying
retailers and builders merchants. Additional services that Waterline provides
to its customers - such as training, product advice, stock management and
logistics - sets the Group apart from the more conventional distributors in the
market.
WATERLINE GROUP PLC
Chairman's statement for the year ended 31 March 2007
I am pleased to report the Group's results for the year ending 31 March 2007.
This has been a year of continued integration and consolidation from the
Waterline team against a backdrop of a continually challenging refurbishment
sector. The Group has continued to grow its turnover focusing its efforts at the
mid to high end of the independent kitchen retailer channel. The sector's
principal growth area continues to be at the high end price points. During the
year considerable efforts were made with the aims to:
*Consolidate the Group as a one-stop trade supplier
*Complete the integration of the Coolectric "Liebherr" operation
*Expand our UK presence through the purchase of Brian Donaldson
Distribution Limited
*Continue our successful UK Road Show programme
*Develop our furniture portfolio with the introduction of "Sigma"
I am pleased to report good progress was made on all the above targets,
maintaining the Group's position as a key player in the sector.
Overall turnover for the Group has increased by 11.9% to #83.7m from #74.8m in
the previous year. The gross margin has increased to 24.8% in line with
expectations.
The Group's operating profit decreased by 15.4% to #1.62m compared with #1.98m
in the previous year. Profit before tax decreased by 35.3% to #0.87m whilst
basic earnings per share fell by 56% from 5.05p to 2.54. These results are lower
than those forecast at the time of the IPO due in part to the increased
logistical spend in the Coolectric business.
During the year there have been one-off costs for the compensation for loss of
office for two former operational board directors, a stock adjustment within
Coolectric, excess IT costs relating to the completion of certain projects and
excess logistical costs related to the Coolectric business. Due to the decrease
in profitability and the continuing requirement for investment the Board of
Directors do not propose a dividend this year.
Cash flow again continued to be strong with #3.2m generated from trading
operations. The Group's net debt position decreased slightly from #4.2 million
to #4.1 million although interest costs showed an increase as a result of higher
interest rates during the year. The acquisition of Brian Donaldson Distribution
Limited was financed from internal resources.
The Board is confident that the investments made during the year combined with
management changes and the acquisition of Brian Donaldson Distribution Limited
provide a platform for future growth notwithstanding somewhat less buoyant
trading conditions experienced during the early part of the current year.
I would like to thank all our customers and suppliers together with our own
dedicated teams for their support, commitment and enthusiasm during what has
been a challenging year.
Peter Dicks
Chairman
3 July 2007
WATERLINE GROUP PLC
Chief Executive's report for the year ended 31 March 2007
I am pleased to report that the Group has continued to increase market share
despite the year being dominated by a challenging market place. The details
relating to our financial performance are highlighted in the financial review,
following this report.
The Group remain one of the UK's largest suppliers to the fitted kitchen sector
supplying products to over 8,000 retailers. No single customer represents more
than 2% of the Group's total turnover putting the Group in a very healthy
position as risk is spread right across the sector.
It is important that our customers view us as a "One Stop" shop able to provide
a highly efficient delivery service of all the best brands in our industry and
integral to their business. The Group seeks to manage the risk of losing
customers to competitors by ensuring local representation and maintaining strong
progressive relationships with them.
Acquisition of BDD Limited
During the year, the Group purchased BDD Limited, a competitor in the fitted
kitchen sector and supplier to contractors in Scotland. The acquisition
strengthened Waterline's market share in Scotland and has proven to be a wholly
complementary addition to the Group.
BDD Limited has now been integrated into the Waterline premises in Cumbernauld,
whilst we are currently refurbishing a neighbouring unit which will be a
showroom for both BDD and Waterline and give us additional storage space.
Logistics Updates
During the year, the Group re-branded its fleet under the "Hydra Logistics"
name. Hydra delivers all Group products maximising Waterline's delivery
capabilities; be it a trade, site or home delivery.
Whilst the 2005 Coolectric acquisition went smoothly, there was not the level of
expertise given to understanding the products wholly, which resulted in an
overspend in our logistics budget. Mistakes that were made resulted in changes
in personnel, with the appointment of a new Logistics Director, together with
new managers in transport and warehousing. The logistics operation is now run
more efficiently and provides the platform for the acquisition of further
companies in our sector in due course.
UK Road Show Programme
The Group's successful Road Show programme continued in April and May 2007
where, once again, over 2,000 trade customers attended over six weeks in six
stimulating and well situated locations throughout the UK. The Road Shows gave
the Group a much needed boost at a time when trading has become less buoyant due
to prevailing economic conditions.
Outlook
Waterline's manufacturers have continued to update their product ranges and the
Group shall be releasing the latest edition of its Blue Book - the industry
Bible - on 1 July 2007. The Blue Book 14 will continue to be the main reference
book in our sector and will ensure that Waterline is at the forefront of our
customers' attention.
WATERLINE GROUP PLC
Chief Executive's report for the year ended 31 March 2007
Continuing price changes, due to raw material increases against a backdrop of
interest rate hikes, have meant that the New Year has been slower than expected.
Whilst business continues to flourish at the very top end of our sector, the
middle market, due to these influences has partially eroded. Whilst the Group is
not dependent on new house build, it is important that refurbishment continues
to grow and whilst consumers still enjoy considerable equity in their
properties, we do not envisage a slow down in kitchen refurbishment.
Our customers recognise the level of service that all our Group companies
achieve and, more importantly, the quality of products offered. We are an
important cog in their supply chain and we continually aspire to offer a more
efficient and "best in class" service than they would expect from our
competitors. As a consequence the Group is also ensuring that the individual
businesses focus resources to the assist in improving and adapting the current
business continuity procedures and program. This will help to mitigate the risk
from any external factors that can lead to a business interruption.
The Board continues to recognise the importance of our teams in all our Group
companies. Staff have remained energetic and enthusiastic in delivering an
exemplary level of service, and the Group looks forward to maintaining our
position as the premier supplier in the independent kitchen retail sector.
Michael Lawrence
Chief Executive
3 July 2007
WATERLINE GROUP PLC
Financial review for the year ended 31 March 2007
Trading performance
The underlying turnover of the existing Group amounted to #82.9m, significantly
above the #74.8m recorded in the year ending 31 March 2006. In a very
challenging and competitive market place, this represents an excellent
performance and has led to an increase in market share for the existing Group
based on a static sector.
The acquisition and integration of the Coolectric business has brought with it a
number of challenges during the year. Primarily this has been the need to
re-assess and restructure the logistics and warehousing function in order to
improve effectiveness and efficiency for the future growth of the "Liebherr"
brand. The increase in the turnover for the Coolectric business to #10.9m (2006:
#5.5m) primarily relates to an additional five months turnover compared to 2006.
The overall turnover for the Group in comparison to 2006 has increased from
#74.8m to #83.7m, representing an increase of 11.9 per cent. The acquisition of
Brian Donaldson Distribution on 1 October 2006 has contributed approximately
#0.8m of the overall total. Against a background of increased competition and
rising costs, the Group has achieved a gross margin of 24.8 per cent which is in
line with the expected performance for 2006.
The profit before tax for the Group of #0.87m includes the exceptional costs
outlined below. The Group has incurred significant non recurring one-off costs
during the year. The most significant of these are the compensation for loss of
office for two former directors and a stock adjustment within Coolectric in
total amounting to #390,000. In addition, the Group has also suffered excess IT
costs relating to the completion of certain projects and leases amounting to
#66,000. Finally there have also been additional costs in the year relating to
Health and Safety improvements, customer promotions, legislative interest
penalties and the share based payment charge of #75,000.
As a result of the reduced profitability of the Group, basic earnings per share
decreased by 56 per cent to 2.54p per share. The Group Board is therefore unable
to recommend the payment of a final dividend for the year ended 31 March 2007.
Balance sheet
The Group's US based investments have been revalued during 2007. Consequently
the book value of the foreign investments has increased by #23,000 to #39,000.
Cash flow for the Group has again continued to be strong with #3.2m generated
from trading operations. The cost of servicing the finance required by the Group
has increased as a consequence of the increase in interest rates during the
year. Even in the light of this and higher tax payments, than in previous years,
the strong cash flow has allowed the Group to pay a maiden dividend of 2.75p,
while also acquiring Brian Donaldson Distribution Limited for #0.5m.
In addition to the above, the Group has also marginally decreased its net debt
position from #4.2m to #4.1m at 31 March 2007. Net assets per share have
marginally decreased to 56.0p (2006 : 56.5p).
Treasury
Any surplus cash is held in deposit accounts which have variable interest rates.
Where the money market deposits offer better returns, the Treasury Supervisor
seeks to maximise these opportunities.
Steven Steel FCCA
Chief Financial Officer
3 July 2007
WATERLINE GROUP PLC
Consolidated profit and loss account for the year ended 31 March 2007
Continuing operations
Acquisitions Total Total
Note 2007 2007 2007 2006
# # # #
Turnover 2 82,909,926 828,172 83,738,098 74,805,533
Cost of sales 62,402,018 581,171 62,983,189 57,221,026
________ ________ _________ _________
Gross profit 20,507,908 247,001 20,754,909 17,584,507
Distribution costs 6,676,869 68,442 6,745,311 4,881,113
Administrative expenses 12,238,573 149,353 12,387,926 10,716,013
________ _________ _________ _________
Operating profit 1,592,466 29,206 1,621,672 1,987,381
Other interest and receivable
similar income 11,178 32,048
Interest payable and similar charges (761,701) (673,168)
_________ _________
Profit on ordinary activities before taxation 871,149 1,346,261
Taxation on profit on ordinary activities 3 538,109 714,663
_________ _________
Profit for the financial year 333,040 631,598
========= =========
Earnings per share
Basic (pence per share) 5 2.54 5.05
Diluted (pence per share) 5 2.51 4.99
========= =========
All amounts relate to continuing activities.
The notes form part of these financial statements.
WATERLINE GROUP PLC
Consolidated statement of total recognised gains and losses and reconciliation
of movements in shareholders' funds for the year ended 31 March 2007
2007 2006
# #
Statement of total recognised gains and losses
Profit for the financial year 333,040 631,598
Unrealised surplus on revaluation of investments/properties 23,100 405,670
Currency translation differences on foreign currency
net investments (140,786) 92,519
________ ________
Total recognised gains and losses for the year 215,354 1,129,787
======== ========
Reconciliation of movements in shareholders' funds
Group Group Company Company
2007 2006 2007 2006
# # # #
Profit/(loss) for the year 333,040 631,598 1,316,423 (413,154)
Dividend (360,628) - (360,628) -
Issue of shares - 2,000,000 - 2,000,000
Cost of share issue - (192,044) - (192,044)
Share based payment 75,743 183,774 75,743 183,774
Other net recognised gains and losses (117,686) 498,189 - -
________ ________ ________ ________
(69,531) 3,121,517 1,031,538 1,578,576
Opening shareholders' funds 7,413,217 4,291,700 1,582,704 4,128
________ ________ ________ ________
Closing shareholders' funds 7,343,686 7,413,217 2,614,242 1,582,704
======== ======== ======== ========
The notes form part of these financial statements.
WATERLINE GROUP PLC
Consolidated balance sheet at 31 March 2007
2007 2007 2006 2006
# # # #
Fixed assets
Intangible assets 1,489,338 1,157,519
Tangible assets 6,833,443 6,955,359
Investments 38,930 18,707
_________ _________
8,361,711 8,131,585
Current assets
Stocks 10,526,199 9,541,907
Debtors 12,919,033 13,246,264
Cash at bank and in hand 368,903 405,637
_________ _________
23,814,135 23,193,808
Creditors: amounts falling due
within one year (22,799,330) (21,249,959)
_________ _________
Net current assets 1,014,805 1,943,849
_________ _________
Total assets less current liabilities 9,376,516 10,075,434
Creditors: amounts falling due
after more than one year (1,798,737) (2,413,706)
Provision for liabilities and charges (234,093) (248,511)
_________ _________
7,343,686 7,413,217
========= =========
Capital and reserves
Called up share capital 65,568 65,568
Share premium account 1,796,052 1,796,052
Share option reserve 259,517 183,774
Revaluation reserve 509,213 495,926
Merger reserve 55,926 55,926
Profit and loss account 4,657,410 4,815,971
_________ _________
Shareholders' funds 7,343,686 7,413,217
========= =========
The financial statements were approved and authorised for issue by the Board on
3 July 2007
M W Lawrence S J Steel
Director Director
The notes form part of these financial statements.
WATERLINE GROUP PLC
Company balance sheet at 31 March 2007
2007 2007 2006 2006
# # # #
Fixed assets
Investments 1,189,541 1,189,541
Current assets
Debtors 1,429,228 308,063
Cash at bank and in hand 8,660 96,994
_________ _________
1,437,888 405,057
Creditors: amounts falling due
within one year (13,187) (11,894)
_________ _________
Net current assets 1,424,701 393,163
________ _________
Total assets less current liabilities 2,614,242 1,582,704
======== =========
Capital and reserves
Called up share capital 65,568 65,568
Share premium account 1,796,052 1,796,052
Share option reserve 259,517 183,774
Profit and loss account 493,105 (462,690)
________ ________
Shareholders' funds 2,614,242 1,582,704
======== ========
The financial statements were approved and authorised for issue by the Board on
3 July 2007
M W Lawrence S J Steel
Director Director
The notes form part of these financial statements.
WATERLINE GROUP PLC
Consolidated cash flow statement for the year ended 31 March 2007
Note 2007 2007 2006 2006
# # # #
Net cash inflow from operating
activities 7 3,159,027 3,023,878
Returns on investments and
servicing of finance
Interest received 11,178 32,048
Interest paid (707,840) (626,681)
Interest element of finance lease
rental payments (53,861) (46,487)
________ ________
Net cash outflow from returns on
investments and servicing of finance (750,523) (641,120)
Taxation
UK corporation tax paid (806,862) (512,677)
Overseas tax (paid)/refunded (95,394) 18,378
________ ________
(902,256) (494,299)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (515,177) (540,478)
Sale of tangible fixed assets 165,577 146,601
________ ________
(349,600) (393,877)
Acquisitions and disposals
Acquisition of subsidiary (221,100) (1,185,412)
Cash acquired with subsidiary (50,960) 443,737
________ ________
(272,060) (741,675)
Dividends paid (360,628) -
________ ________
Cash inflow before use of financing 523,960 752,907
Financing
Issue of ordinary shares (net of issue costs) - 1,807,902
Bank loan repayments 8 (225,710) (758,022)
Capital element of finance lease
rental payments 8 (580,476) (510,203)
________ ________
(806,186) 539,677
________ ________
(Decrease)/increase in cash 8,9 (282,226) 1,292,584
======== ========
� �
The notes on pages 16 to 37 form part of these financial statements.
WATERLINE GROUP PLC
Notes forming part of the financial statements for the year ended 31 March 2007
1 Basis of preparation
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of land and buildings and fixed asset
investments, and in accordance with applicable accounting standards.
2 Segmental analysis
Analysis of group�s principal
activity by geographical market:
Turnover Profit before tax Net assets
2007 2006 2007 2006 2007 2006
# # # # # #
Turnover by origin and destination
United Kingdom 78,530,837 69,010,726 553,521 1,030,834 5,562,670 5,671,537
United States of America 5,207,261 5,794,807 317,628 315,427 1,781,016 1,741,680
_______ _______ _______ _______ _______ _______
83,738,098 74,805,533 871,149 1,346,261 7,343,686 7,413,217
_______ _______ _______ _______ _______ _______
3 Taxation on profit from ordinary activities
2007 2007 2006 2006
# # # #
UK corporation tax
UK corporation tax on profits of the year 422,994 607,203
Adjustments in respect of previous periods - 5,521
_______ 422,994 _______ 612,724
Foreign tax
Current tax on foreign income for the year 142,586 86,624
_______ _______
Total current tax 565,580 699,348
2007 2007 2006 2006
# # # #
Total current tax b/fwd 565,580 699,348
Deferred tax
Origination and reversal of timing differences (27,471) 15,315
_______ _______
Taxation on profit on ordinary activities 538,109 714,663
_______ _______
WATERLINE GROUP PLC
Notes forming part of the financial statements for the year ended 31 March 2007
3 Taxation on profit from ordinary activities (continued)
The tax assessed for the period is higher than the standard rate of corporation
tax in the UK. The differences are explained below:
2007 2006
# #
Profit on ordinary activities before taxation 871,149 1,346,261
���������������� ======= ========
Profit on ordinary activities at the standard rate of corporation tax
In the UK 30% (2006 � 30%) 261,344 403,878
Effects of:
Expenses not deductible for tax purposes 220,959 238,729
Excess of depreciation for the period over capital allowances 28,872 14,278
Goodwill amortisation 22,734 18,291
Higher tax rates on overseas earnings 39,550 18,651
Lower tax rates on UK earnings (873) -
Adjustment re tax charge in respect of prior period - 5,521
Utilisation of tax losses brought forward (7,006) -
________ ________
565,580 699,348
======== ========
� �
4 Dividends
The final dividend paid of 2.75p per ordinary shares, in respect of the year
ended 31 March 2006, amounted to #360,628. No dividend has been proposed for the
year ended 31 March 2007.
5 Earnings per share
2007 2006
# #
Numerator
Earnings used for calculation of basic and diluted EPS 333,040 631,598
_______ _______
Number Number
Denominator
Weighted average number of shares used in basic EPS 13,113,752 12,518,514
Weighted average number of share options 181,094 145,131
_______ _______
Weighted average number of shares used in diluted EPS 13,294,846 12,663,645
_______ _______
The weighted average number of shares used in the diluted earnings per share
calculation assumes the conversion of all dilutive potential ordinary shares,
being certain outstanding share options. There were 563,677 anti-dilutive
options held at 31 March 2007.
WATERLINE GROUP PLC
Notes forming part of the financial statements for the year ended 31 March 2007
6 Acquisitions
Acquisition of Brian Donaldson Distribution Limited
On 1 October 2006 the group acquired Brian Donaldson Distribution Limited
for #502,500 paid by cash.
In calculating the goodwill arising on acquisition, the fair value of net assets
of Brian Donaldson Distribution Limited has been assessed and no adjustments
from book value were made. The net assets of Brian Donaldson Distribution
Limited at 1 October 2006 are set out below.
Fixed Assets #
Tangibles 33,851
Current Assets
Stock 183,597
Debtors 280,806
Cash 2,872
________
Total assets 501,126
Creditors 407,144
________
Net Assets 93,982
���������������� #
Cash consideration 221,100
Deferred consideration 281,400
Net assets acquired (93,982)
________
Goodwill arising on acquisition (note 12) 408,518
========
�
WATERLINE GROUP PLC
Notes forming part of the financial statements for the year ended 31 March 2007
6 Acquisitions (continued)
The results of Brian Donaldson Distribution Limited prior to its acquisition
were as follows:
Profit and loss account 1 January Year ended
2006 to 30 31 December
September 2006 2005
# #
Turnover 1,389,599 1,683,871
________ ________
Operating profit 68,477 45,274
Net interest (11,413) (14,451)
_______ _______
Profit on ordinary activities before taxation 57,064 30,823
Taxation on profit from ordinary activities - -
_______ _______
Profit for the period 57,064 30,823
======= =======
Cash flows #
Cash consideration as above 221,100
Cash acquired (50,960)
________
Net outflow of cash 272,060
========
�
7 Reconciliation of operating profit to net cash inflow from operating activities
2007 2006
# #
Operating profit 1,621,672 1,987,381
Depreciation 917,769 765,243
Amortisation 76,298 61,520
Loss on sale of fixed assets 63,108 92,438
Currency translation differences (117,911) 77,525
(Increase) in stocks (800,694) (298,613)
Decrease/(increase) in debtors 606,272 (39,284)
Increase in creditors 716,770 193,894
________ ________
3,083,284 2,840,104
Share based payment charges 75,743 183,774
________ ________
Net cash inflow from operating activities 3,159,027 3,023,878
���������������� ======== ========
�
WATERLINE GROUP PLC
Notes forming part of the financial statements for the year ended 31 March 2007
8 Reconciliation of net cash inflow to movement in net debt
2007 2007 2006 2006
# # # #
Decrease/(increase) in cash in the year (282,226) 1,292,584
Cash movements relating to debt 225,710 758,022
Capital element of hire purchase and
finance lease rentals 580,476 510,203
________ _________
Change in net debt resulting from cash flows 523,960 2,560,809
New finance leases (506,023) (732,423)
________ ________
Movement in net debt in the year 17,937 1,828,386
Opening net debt (4,174,041) (6,002,427)
________ ________
Closing net debt (4,156,104) (4,174,041)
���������������� ======== ========
�
9 Analysis of net debt
At Other At
1 April Cash non-cash 31 March
2006 flow changes 2007
# # # #
Cash in hand and at bank 405,637 (36,734) - 368,903
Bank overdrafts (1,471,338) (245,492) - (1,716,830)
________ ________ ________ ________
(1,065,701) (282,226) - (1,347,927)
Debt due within one year (284,391) 225,710 (558,505) (617,186)
Debt due after one year (2,150,683) - 558,505 (1,592,178)
Obligations under finance leases (673,266) 580,476 (506,023) (598,813)
________ ________ ________ ________
Total (4,174,041) 523,960 (506,023) (4,156,104)
======== ======== ======== ========
� � � �
The financial information set out above does not constitute the Company�s
statutory accounts for the years ended 31 March 2007 or 2006, but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered following the
Company�s annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under s.237(2) or
(3) Companies Act 1985.
Further enquiries:
Waterline Group plc
Michael Lawrence, Chief Executive Officer Tel: 01908 219 777
Daniel Stewart & Company plc
Lindsay Mair Tel: 020 7776 6577
Bishopsgate Communications Ltd
Dominic Barretto Tel: 020 7562 3350
This information is provided by RNS
The company news service from the London Stock Exchange
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