Dowding & Mills PLC

Interim Results
half year ended 29 February 2004
Statement by Executive Chairman, Tudor Davies

Introduction

I am pleased to report good progress resulting from the reorganisation that followed my appointment in November 2002.

The changes from last year have resulted in an improvement in profitability which, combined with our focus on cash generation, has considerably improved our borrowing position.

We have continued our reorganisation of the business and introduced changes to improve the deficit position of the defined benefit pension scheme.

The objective is to provide a more stable financial and operating base better suited to the continuing challenging trading conditions for the benefit of our shareholders and our employees.

Results

Turnover was 54.7 million (2003: 56.7 million).

Operating profit improved to 2.4 million (2003: operating loss 0.3 million).

Interest payable was 1.1 million (2003: 1.0 million), mainly resulting from the higher costs and fees for new banking facilities.

Profit before tax and exceptional charges was 1.3 million (2003: Loss 1.3 million).

Exceptional charges totalled 2.6 million (2003: 23.0 million) and primarily relate to the 2.9 million loss on disposal of our operations in Holland and Luxembourg.

Progress

In the UK profits have improved as a direct result of the cost reduction programme, and changes to working practices, introduced to respond to the continuing decline in UK manufacturing and the resulting lower volumes and prices.

The positive way both the UK management and employees have, in the main, responded to the change in these difficult times, is encouraging and fundamental to maintaining Dowding and Mills position as the leader in its field, and providing an effective service to our customers and a secure future for everyone.

In USA our businesses continue to perform well, generating cash and profits, whilst in Australia our businesses have experienced an improvement in trading and increased profitability.

Disposal

On 11 February 2004 we concluded a sale of our branches in Holland and Luxembourg to the management for a nominal sum of 1 Euro, but retained a 25% interest and ownership of their freehold properties. These businesses had been making losses for several years and in the period prior to disposal had incurred an operating loss of 0.2 million on turnover of 2.3 million.

Borrowings

The focus on reversing the trend of rising borrowings by improving profitability, strict control of working capital and capital expenditure has resulted in a significant improvement in cash generation. These measures combined with receipts from the sale of property of 1.0 million and currency translation benefit of 0.9 million have enabled a reduction in borrowings of 5.0 million to 31 million.

Pension

At the year end I reported upon the FRS17 pension fund deficit of 22 million. This deficit was a concern for both our employees and the company and needed a solution.

I am pleased that along with a positive approach from the Trustees we have been able to agree a level of funding that is affordable for the company and also provides satisfactory benefits for our employees in the future.

The annual cost to the company will as a result increase by approximately 0.5 million per annum with contributions commencing on 1 June this year.

Outlook

The second half has started slowly across most of our businesses although, in some parts of the UK there should be some pick up in activity in the last quarter from summer shut down work.

We continue to focus on cash generation and improvements in performance by creating a more flexible organisation better suited to responding to swings in demand and the changing needs of our customers.

Enquiries:

Tudor Davies, Chairman

Fiona Tooley

Dowding & Mills PLC

Citigate Dewe Rogerson

Tel: 0121 766 6161

Tel: 0121 455 8370
 

Mobile: 07785 703523

Dowding & Mills PLC
Interim Results
Unaudited Consolidated Profit and Loss Account
Half year ended 29 February 2004

 
Half year to 29/02/04		 (Note 1)
Half year to 28/02/03
14 months to 31/08/03

Before
Exceptional
Items
000

Exceptional
Items
000

Total
000

Before
Exceptional
Items
000

Exceptional
Items
000

Total
000

Before
Exceptional
Items
000

Exceptional
Items
000

Total
000

Turnover

54,684

-

54,684

56,714

-

56,714

137,389

-

137,389

Operating profit / (loss)

2,410

(2,609)

(199)

(289)

(22,989)

(23,278)

3,762

(31,133)

(27,371)

Net interest payable

(1,111)

-

(1,111)

(974)

-

(974)

(2,317)

-

(2,317)

Profit / (loss) on ordinary activities before tax

1,229

(2,609)

(1,310)

(1,263)

(22,989)

(24,252)

1,445

(31,133))

(29,688)

Tax on ordinary activities

(113)

-

(113)

286

2,398

2,684

(292)

2,606

2,314

Retained profit / (loss)

1,186

(2,609)

(1,423)

(977)

(20,591)

(21,568)

1,153

(28,527)

(27,374)

Earnings per share (EPS)

0.77p

(1.69)p

(0.92)p

(0.63)p

(13.37)p

(14.00)p

0.75p

(18.51)p

(17.76)p

Dowding & Mills PLC
Interim Results
Unaudited Balance Sheet
As at 29 February 2004

 


29/02/04
000

(Note 1)
28/02/03
000

(Note 1)
31/08/03
000

NET ASSETS EMPLOYED

      

Fixed assets:

      

Intangible assets

2,059

2,066

2,036

Tangible assets

31,561

38,597

34,652
 

33,620

40,663

36,688

Current assets:

      

Stock and work in progress

7,486

8,069

8,743

Debtors

20,004

24,829

25,702

Taxation receivable

238

-

101

Bank and cash balances

6,550

3,061

3,452
 

34,278

35,959

37,998

Creditors amounts falling due within one year:

      

Loans and overdrafts

(1,216)

(25,631)

(2,187)

Other creditors

(12,600)

(11,746)

(17,316)

Net current assets

20,462

(1,418)

18,495

Total assets less current liabilities

54,082

39,245

55,183

Creditors loans falling due after more than one year

(36,407)

(14,918)

(37,343)

Provisions for liabilities and charges

(3,169)

(4,201)

(2,900)

Net assets

14,506

20,126

14,940

REPRESENTED BY

      

Shareholders funds:

      

Share capital

15,410

15,410

15,410

Reserves

(904)

4,716

(470)
 

14,506

20,126

14,940

Dowding & Mills PLC
Interim Results
Summarised Unaudited Cash Flow Statement
Half year ended 29 February 2004

 


Half year to
29/02/04
000

(Note 1)
Half year to
28/02/03
000

(Note 1)
14 months to
31/08/03
000

Net cash inflow from operating activities (see note 5)

4,787

3,026

1,919

Net interest paid

(914)

(974)

(2,102)

Taxation paid

(303)

(158)

(484)

Net capital expenditure

559

(1,016)

(1,969)

Acquisition/disposal of businesses

(67)

(273)

(264)

Dividends paid

-

(1,233)

(1,233)

Financing

(352)

(82)

9,121

Increase/(decrease) in cash and cash equivalents

3,710

(710)

4,988

Unaudited Reconciliation of Net Cash Flow to Movement in Net Debt

 


Half year to
29/02/04
000

(Note 1)
Half year to
28/02/03
000

(Note 1)
14 months to
31/08/03
000

Increase/(decrease) in cash in the period

3,710

(710)

4,988

Cash inflow/(outflow) from movement in debt

352

82

(9,121)
 

4,062

(628)

(4,133)

Other non-cash items:

      

Translation difference

942

(56)

(101)

Movement in net debt in the period

5,004

(684)

(4,234)

Net debt at 1 September 2003

(36,078)

(36,806)

(31,844)

Net Debt at 29 February 2004

(31,074)

(37,490)

(36,078)

Statement of Total Recognised Gains and Losses

 


Half year to
29/02/04
000

(Note 1)
Half year to
28/02/03
000

(Note 1)
14 months to
31/08/03
000

(Loss) for the period

(1,423)

(21,568)

(27,374)

Currency translation differences on overseas investments

(406)

(821)

544

Total recognised gains and losses for the period

(1,829)

(22,389)

(26,830)

Prior year adjustment (as explained in note 1)

1,583

(1,028)

(1,341)

Total gains and losses recognised since last annual report

(246)

(23,417)

(28,171)

Dowding & Mills PLC
Interim Results

Notes

1. The accounting policies used to complete the Interim Report are consistent with those used to complete the Group Accounts for the 14 month period ended 31 August 2003.

The figures for the 14 month period ended 31 August 2003 are an abridged statement of the full Group Accounts for that period which have been delivered to the Register of Companies and on which the auditors have made an unqualified report.

As a result of the change in accounting reference date last year to 31 August, the prior year comparative results have been adjusted to show a comparable period.

2. Earnings per share are calculated on losses of 1,423,000 (2003: losses of 21,568,000) and on a weighted average of 154,095,548 (2003: 154,095,548) ordinary shares in issue.

The earnings per share before exceptional items is calculated on attributable earnings of 1,186,000 (2003: losses of 977,000) and on a weighted average of 154,095,548 (2003: 154,095,548) ordinary shares in issue.

3. Exceptional costs charged in the period amount to 2,609,000:-

 

000

Loss on disposal of operations

(2,914)

Debt recovery

233

Reorganisation

(365)

Profit on property disposals

437

Total

(2,609)

Loss on disposal of operations

During the period the Group has disposed of its three operations in Holland and Luxembourg (the Continental European businesses) to a new company, AGW Benelux Holdings BV (AGW). The management team of Dowding & Mills' Continental European businesses has acquired a 75% interest in AGW for €1, with the Group retaining a 25% interest.

The loss is calculated as follows:-

 

000

Net liabilities of operations disposed of

827

Disposal costs

(230)

Profit on disposal

597

Provision against loans

(2,009)

Exceptional loss before write-off of goodwill

(1,412)

Goodwill previously written off to reserves

(1,583)

Negative goodwill

81

Loss on disposal of operations

(2,914)

As required by FRS 10 - Goodwill and intangible assets, the goodwill previously written off to reserves in respect of the Continental European businesses has been transferred to the profit and loss account.

Debt recovery
This represents recovery of a trade debt previously provided for.

Reorganisation
The reorganisation of the business has continued throughout the period. This charge relates to costs involved in restructuring the branch network.

Profit on property disposals
As part of the ongoing business reorganisation, a number of vacant properties have been disposed of for consideration in excess of their net book value.

4. The currency translation differences arise because of the different rates of exchange used at the end of each respective period.

5. Reconciliation of operating profit to net cash inflow from operating activities

 


Half year to
29/02/04
000

(Note 1)
Half year to
28/02/03
000


14 months to
31/08/03
000

Pre-exceptional operating profit/(loss)

2,410

(289)

3,761

Exceptional costs

(2,609)

(22,989)

(31,133)

Operating profit

(199)

(23,278)

(27,372)

Depreciation charge

1,572

2,196

5,150

Impairment of fixed assets

262

4,352

7,281

Amortisation of goodwill

59

190

360

Impairment of goodwill

-

6,841

6,827

(Profit) / loss on sale of tangible fixed assets

(471)

21

132

Loss on disposal of operations

2,914

-

-

Decrease in working capital

174

12,231

7,713

Increase in provisions for liabilities and charges

476

473

1,828

Net cash inflow from operating activities

4,787

3,026

1,919

6. The interim report is being sent by post to all registered shareholders. Additional copies are available from the Company's Registered Office: Camp Hill, Birmingham, B12 0JJ.

 

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