RNS Number:2442B
Eurodis Electron PLC
27 July 2004
PRESS RELEASE
For release, 7.00 a.m. 27 July 2004
AUDITED RESULTS
for the year ended 31 May 2004
Euro Euro Sterling Sterling
2004 2003 2004 2003
(restated) (restated)
--------- --------- --------- ---------
Sales 328m 438m 225m 288m
Operating loss before non
recurring costs & exceptional
items and goodwill (22.9m) (5.5m) (15.7m) (3.6m)
Loss before tax, non recurring
costs & exceptional items,
goodwill and non operating
items (29.4m) (13.1m) (20.2m) (8.6m)
Non recurring costs &
exceptional items, goodwill
and non operating items (44.7m) (26.0m) (30.7m) (17.1m)
Loss before tax (74.1m) (39.1m) (50.9m) (25.7m)
Basic loss per ordinary share (18.13c) (20.52c) (12.45p) (13.48p)
Adjusted loss per ordinary
share (note 7) (7.41c) (7.49c) (5.09p) (4.92p)
Debt to equity ratio 1.1 2.3 1.1 2.3
Note: the prior year comparatives have been restated as explained in note 2 to
the results announcement.
HIGHLIGHTS
* Trading results were in line with market expectations.
* Results include EUR 44.7m non recurring costs & exceptional items, goodwill
and non operating items, which were expected from previous announcements.
* Customer service levels have been restored.
* Market outlook positive.
* Key ingredients in place to recover market share and profitability.
Commenting on the results and prospects, Doug Rogers, Chairman, said:
"The financial condition of the Group has been substantially improved by the GBP
56.8m (EUR 83.8m) raised from shareholders during the year and the refinancing
arrangements put in place, and this has enabled the business to return to
providing a high standard of service to its customers after a particularly
difficult year.
The trading results are in line with market expectations and, now that customer
service levels have been restored, the Board is confident that the Group has the
key ingredients in place to regain market share and return to profitability,
although the pace of this recovery remains difficult to predict."
For further information, please contact:
Eurodis Electron PLC
Doug Rogers, Non-Executive Chairman 01737 242 464
Steven Swayne, Chief Executive 01737 242 464
Peter Grant, Group Finance Director 01737 242 464
Bell Pottinger Financial
John Coles / Emily MacKay 020 7861 3232
OPERATING REVIEW
The financial condition of the Group has been substantially improved by the GBP
56.8m (EUR 83.8m) raised from shareholders during the year. This has enabled the
business to get back to providing good levels of service to its customers after
a particularly difficult year.
Results
The results for the year ended 31 May 2004 show sales of EUR 327.9m (2003: EUR
438.2m), the decrease of 25% reflecting the liquidity constraints which the
Group faced during the year prior to refinancing. Although almost all suppliers
were very supportive throughout these challenging times, with many extending
additional credit, the Group's normally high standard of service to customers
was sometimes disrupted due to product shortages, especially ahead of the
receipt of initial funds in September 2003. In the second half of the financial
year, whilst suppliers were paid in line with agreed terms, free stock levels
were temporarily lower than normal. Also, the Group faced increased levels of
competition, especially after the announcement of 8 December 2003 which
highlighted the intention to raise the further funds which were subsequently
received on 2/3 March 2004. These two factors led to a loss of market share in
the quarter ended 31 March 2004.
The gross profit margin (before exceptional items) was 16.0%, compared with
16.6% last year. The decrease in margin was largely due to the effect of actions
to conserve cash, including disposing of surplus inventory at discounted prices.
Operating expenses before non recurring costs & exceptional items and goodwill
for the year to 31 May 2004 were EUR 75.3m, 4% below the prior year (restated).
Additional cost reductions were implemented, as planned, in the second half of
the financial year and the implementation of Financial Reporting Standard 17
"Retirement Benefits" has resulted in some costs being moved from operating
expenses into finance costs. Overall, annual operating expenses are expected to
be approximately EUR 4m lower in 2004/05 when compared with 2003/04.
The Group's adjusted loss (before non recurring costs & exceptional items,
goodwill, non operating exceptional items and tax) for the year ended 31 May
2004 was EUR 29.4m compared with a loss of EUR 13.1m in the prior year
(restated). The result was due to the reduced sales only partially being offset
by cost reductions. The operating loss before non recurring costs & exceptional
items and goodwill was EUR 22.9m compared with a loss of EUR 5.5m in the prior
year (restated). The loss before tax was EUR 74.1m compared with EUR 39.1m
(restated) in the prior year.
Non Recurring Costs & Exceptional Items, Goodwill and Non Operating Items
Non recurring costs & exceptional items, goodwill and non operating items, which
were expected from previous announcements, totalled EUR 44.7m before tax. Of
this, EUR 30.7m were non cash items. The non recurring costs & exceptional items
totalled EUR 27.6m before tax (as analysed in note 5) of which EUR 13.6m were
non cash items. Operating non recurring costs comprise salary costs of EUR 1.4m
incurred in the period up to the earliest date that contract terminations could
be achieved. Operating exceptional items comprise EUR 4.0m of employee
termination payments, EUR 1.9m of vacant property lease costs, EUR 4.2m of debt
restructuring costs, EUR 6.5m write down in tangible fixed assets and EUR 7.1m
of additional stock provisions. In addition there has been EUR 2.5m exceptional
finance costs relating to debt restructuring facility fees. The write down in
fixed assets relates to assets which have become redundant following completion
of the centralisation of logistics in the Netherlands and the implementation of
the pan-European IT system which have enabled the Group to reduce its operating
expenses by a third over the past three years. The exceptional stock provision
was computed on the opening stock position based on an assessment during the
year of the likely realisable value of stock following the completion of the
centralisation of inventory and the likelihood of realising stock as part of the
Group's working capital reduction programme. Goodwill charges include
amortisation of EUR 1.2m and impairment costs of EUR 15.9m, the latter arising
following a review of the carrying value of Group businesses.
Prior Year Adjustments and Reclassifications
The Group's results for the year ended 31 May 2004 reflect the adoption of
Financial Reporting Standard 17 "Retirement Benefits" ("FRS 17") and Urgent
Issues Task Force Statement 38 "Accounting for ESOP Trusts". FRS 17, which has
replaced Statement of Standard Accounting Practice 24, has been adopted early,
since the accounting treatment of the pension liability and interest costs more
fairly reflects the nature of the Group's defined benefit pension schemes. The
prior year results have been restated to include these changes in accounting
policies and certain other changes as detailed in note 2.
Strategy
The Group's strategy is to regain market share whilst continuing to keep a tight
control of costs and working capital. The aim is to win more business from
existing customers as well as extending the customer base through leveraging the
Group's position as an attractive alternative to its larger competitors for
customers and suppliers. Having completed the centralisation of logistics and
implemented the pan-European IT system, the Group is well positioned to provide
a highly efficient and effective distribution service to the European
electronics industry.
Operational Efficiency
The Group has been substantially re-shaped over the past three years, with the
implementation of a pan-European IT system and concentration of logistics and
warehousing in a purpose built facility in the Netherlands. This advanced
logistics centre is one of the most technologically developed of its type and it
was gratifying that this was recognised when it was awarded the European Supply
Chain Excellence Award for its logistics capabilities in November 2003. This
award was made after independent assessments of a number of international
businesses in different industries. The Board believes that Eurodis has a
logistics capability second to none and this provides a strong platform for
regaining market share across Europe. In the period since the 2004 refinancing,
customer service levels have improved to those achieved before the cash
constraints affected the business.
The Group has reduced headcount (for continuing operations) from 1,278 at 31 May
2001 to 807 at 31 May 2003 and 679 at 31 May 2004.
The Market
In 2003, there was an upturn in the global semiconductor market, with worldwide
sales for the industry as a whole up 18.3% (measured in USD by the World
Semiconductor Trade Statistics). In Europe, the total market has shown single
digit growth from September 2003 onwards compared with the same month in the
prior year. In some cases products are on allocation - whereby suppliers ration
supplies - which in the past has tended to be a harbinger of price increases.
However, whilst prices in Asia have been rising strongly, this has brought those
prices more closely in line with those in Europe and has not yet led to
significant price inflation in Europe.
Customers and Suppliers
Following the fundraising, many customers have been responsive to placing more
business with Eurodis. In some cases this may take time, due to the timing of
renewal of annual contracts. Nevertheless, on the ground, the positive reception
is encouraging and a number of large contracts have been won since the
refinancing in March 2004.
The Group continues to be a very attractive outlet to its franchise partners by
providing sales focus by concentrating on a selected number of key franchises
with relatively few overlaps. Eurodis also continues to provide its franchise
partners and customers with a differentiated offering in a number of key
respects. The three technology centres are centres of excellence for wireless,
displays and embedded systems and plans to introduce a fourth centre are at an
advanced stage. These provide specialist advice to customers on key technologies
and help to speed up adoption of new technologies. The Group's skills in
offering specialist logistics solutions, such as pan-European shipment from the
advanced logistics centre, consolidation of customers' forecasts from several
locations and buffer stock management, continue to provide customers with
significant added value over and above plain vanilla distribution operations. In
addition, we are improving the processes for tracking business where production
transfers from Western Europe to Eastern Europe and the Far East, in conjunction
with our own operations in Eastern Europe and our alliance partner, World Peace
Group, in the Far East.
Key franchise partners have, in the main, been highly supportive of the Group.
However, as previously announced, a small number of franchises were terminated
in the year. The Group aims to extend the coverage of some existing franchises
which are not available to all Group companies and to add some additional
franchises which will complement the existing range of products. A number of
extensions and new franchises have been signed up in the last three months and
discussions are taking place with other suppliers about potential new franchises
that will provide sales growth opportunities once in place.
Working Capital
Substantial progress has been made in improving working capital utilisation in
the Group. In the short term, the priority has been to restore service levels
and inventory has been increased to support this. The longer term target remains
to bring the business into cash balance whereby supplier credit finances related
inventory and variable bank facilities finance any growth in debtors.
As at 31 May 2004, net debt was EUR 47.5m (2003: EUR 96.1m), giving a net debt
to equity ratio of 1.1 (2003: 2.3).
People
Great demands have been put on the whole Eurodis community during the year and
once again, they have responded magnificently. The loyalty of employees has
played a key role in helping Eurodis to retain many key customers and suppliers
and be in a position to rebuild its market. Local management has been
strengthened in a number of instances, including in Italy where the business has
been stabilised following a number of personnel changes.
Board
During the past twelve months significant changes have been made to strengthen
the Board. On 17 September 2003 Peter Grant replaced Mike Mason as Group Finance
Director, initially on an interim contract, later on a permanent basis. On 13
October 2003, Albert van der Wijk and Nick Jefferies were promoted to the Board
as Vice Presidents of Marketing and Sales respectively. On 14 November 2003,
Doug Rogers was appointed Non-Executive Chairman, replacing Robert Leigh who had
been Executive Chairman. On 5 February 2004 the Non-Executive Directors stepped
down and Barry Charles moved from being part time to Non-Executive Deputy
Chairman. On 7 June 2004, Bill Alexander was appointed a Non-Executive Director
and on 13 July 2004, Milton Guffogg also joined the Board as a Non-Executive
Director. Steve Swayne remains as Chief Executive. Together, this rejuvenated
Board is determined to tackle and solve the issues facing Eurodis and restore
its position in the market place.
Dividend Policy
As stated when the equity raising was announced on 5 February 2004, in the light
of the current financial performance and position of the Company, the Directors
will not be recommending any dividend in respect of the year ended 31 May 2004
or the payment of any dividends on the Preference Shares for the foreseeable
future. Longer term, the Directors intend to resume dividend payments once the
Group's financial condition is restored to a level where this would be prudent
and it could do so without breaching any of its banking covenants. The Company
has not paid the dividends on the Preference Shares which would normally have
been payable in April 2003, October 2003 and April 2004. The dividends due on
the Preference Shares accumulate at a rate of EUR 0.65m per half year and must
be paid before any payment of dividends to holders of Ordinary Shares.
Year End
As announced on 26 May 2004, the Company intends to change its year end to 30
September. Historically, the timetable for reporting the year's results has
fallen during a period when sales and visibility of earnings are both seasonally
low; reporting during November is expected to facilitate the Company's planning
and forecasting. To effect this change, there will be two sets of interim
results: the first will cover the six months ending 30 November 2004 and the
second will cover the four months ending 31 March 2005. Audited results will
then be announced for the sixteen month period to 30 September 2005 and the next
Annual Report and Accounts will cover this period.
Auditors
Having conducted a tender process involving three major accounting firms, the
Board has concluded that it would be in the interests of the shareholders to
appoint Grant Thornton as Group auditors and a resolution recommending the
appointment of Grant Thornton UK LLP as auditors to the Company will be proposed
at the forthcoming AGM, when PricewaterhouseCoopers LLP will not seek
reappointment.
Current Trading and Prospects
As stated in the pre-close announcement of 26 May 2004, sales had been affected
by the Group's working capital position, and some erosion of market share
occurred in the quarter ended 31 March 2004. The Group regained some share of
the distribution network of its two largest franchises in the quarter ended 30
June 2004.
Since the recent refinancing, the Directors believe that financial credibility
in the Group has been restored, progress has been made in regaining the
confidence of trading partners and customer service levels have been restored to
a high standard. As anticipated, additional inventory levels will enable the
Group to take advantage of a strengthening market.
The Group continues to aim to improve its operating margins but, in the short
term, recovery of market share remains a higher priority. Operating expenses
continue to be controlled tightly and the reorganisations which took place in
the year ended 31 May 2004 have further reduced the cost base of the business.
There are increasing signs of the market strengthening, though this continues to
be characterised more by supply allocation than by increases in prices in
Europe, and, as stated in the announcement of 26 May 2004, the Group's recovery
is starting from a lower market share than originally anticipated. Now that
customer service levels have been restored, the Board is confident that the
Group has the key ingredients in place to regain market share and return to
profitability, although the pace of this recovery remains difficult to predict.
FINANCIAL REVIEW
Euro Reporting
As in previous years, the euro is the predominant functional currency of the
Group and hence the Group results have been consolidated in euro. For comparison
with previous years, an unaudited Sterling pro-forma profit and loss account,
balance sheet and cash flow statement have been produced which can be found in
notes 16 to 18 of the results announcement.
Prior Year Adjustments and Reclassifications
The Group's results for the year ended 31 May 2004 reflect the adoption of
Financial Reporting Standard 17 "Retirement Benefits" ("FRS 17") and Urgent
Issues Task Force Abstract 38 "Accounting for ESOP Trusts" ("UITF 38"). FRS 17,
which has replaced Statement of Standard Accounting Practice 24, has been
adopted early since the accounting treatment of the pension liability and
interest costs more fairly reflect the nature of the Group's defined benefit
pension schemes. The prior year results have been restated and full details of
the impact on the Group results are detailed in note 2 to the results
announcement.
The presentation of certain assets and liabilities has been reviewed and a
number of amounts have been reclassified to reflect a clearer picture. The
financial statements have been updated to disclose unpaid preference dividends
as non equity interests within capital and reserves, to classify non returnable
proceeds for the Italian factoring facilities as debt repayable within one year
(these were previously treated as non-recourse factoring and deducted from gross
debtors in a linked presentation) and to disclose rebates due from trade
suppliers as netted off trade creditors rather than within debtors. None of
these reclassifications have an impact on net assets. Details of these
adjustments are given in note 2 to the results announcement.
Results
The Group's loss before non recurring costs & exceptional items, goodwill, non
operating exceptional items and tax for the year ended 31 May 2004 was EUR 29.4m
compared with a loss of EUR 13.1m in the prior year (restated) for the
continuing operations. The result was due to the reduced sales only partially
being offset by cost reductions. Operating loss before non recurring costs &
exceptional items and goodwill was EUR 22.9m compared with a loss of EUR 5.5m in
the prior year (restated).
Operating expenses before non recurring costs & exceptional items and goodwill
for the year to 31 May 2004 at EUR 75.3m were 4% below the prior year (restated)
and in line with expectations due to a combination of tight control over
variable expenses and the savings from cost reduction actions. With a
significant part of the staff restructuring occurring in the latter half of the
financial year, the annual rate of operating expenses in the next full financial
year will be lower, notwithstanding unavoidable inflationary factors such as
mandatory pay increases in a number of countries.
Loss before tax after charging non recurring costs & exceptional items of EUR
27.6m and goodwill amortisation and impairment of EUR 17.1m was EUR 74.1m
compared with EUR 39.1m in the prior year (restated).
Interest
Net financing costs before exceptional items reduced by EUR 1.1m (restated)
during the year to EUR 6.5m. This is as a result of reduced borrowings from the
receipt of the net proceeds from the equity issues and reduced working capital
levels offset by the cash outflows from the losses for the year and a tax
payment relating to the disposal of a non core business in the year ended 31 May
2002. Finance costs include interest on pension liabilities of EUR 0.6m (2003:
EUR 0.6m restated) following the adoption of FRS 17 "Retirement Benefits".
Exceptional finance costs of EUR 2.5m relate to the debt restructuring which was
completed during the year.
Non Recurring Costs & Exceptional Items
Non recurring costs & exceptional items totalling EUR 27.6m before tax were
incurred in the year. These are explained in the Operating Review and analysed
in note 5.
Goodwill
Goodwill charges include impairment costs of EUR 15.9m following a review of the
carrying value of Group businesses after considering the expected future cash
flows. The impairment primarily relates to the write down in carrying value of
the acquisition of Eurodis Electronics AB in September 2000.
Taxation
The tax charge of EUR 0.2m is as a result of tax payable in Switzerland
partially offset by a credit for the release of a prior year deferred tax
provision. With the majority of countries incurring losses, there is no tax
charge. The tax payment in the year primarily relates to tax paid on the profit
on disposal of non core businesses in the year ended 31 May 2002. The Group has
significant unutilised tax losses which are carried forward for utilisation once
the relevant subsidiaries return to profitability. Until these losses are
utilised or expire, this is expected to keep the Group tax rate substantially
lower than would otherwise be the case.
Earnings and Dividends
The loss per share adjusted for non recurring costs & exceptional items, non
operating items and goodwill, was 7.41 cents compared with a loss of 7.49 cents
in the prior year restated for the adoption of FRS 17 and UITF 38 and the effect
of the two equity issues in the year. Details of these calculations are given in
note 7 to the results announcement. Basic loss per share was 18.13 cents
compared with a restated loss per share of 20.52 cents in the prior year.
As stated in the Operating Review, no ordinary dividend has been proposed and
the Company has not paid the dividends on the Preference Shares which would
ordinarily have been payable at a rate of EUR 0.65m each half year from April
2003 onwards. The dividends due on the Preference Shares accumulate and a
liability of EUR 2.1m is included as non equity interests in capital and
reserves in the Company's balance sheet as at 31 May 2004. The arrears of
preference dividends must be paid before any payment of dividends to holders of
Ordinary Shares.
Working Capital
Considerable progress was made in reducing working capital utilisation during
the year: gross inventories were reduced by EUR 11.5m and the proportion of
trade debtors overdue was brought down from 18.8% to 11.9% and these actions,
together with the refinancing, enabled trade creditors to be paid in accordance
with agreed credit terms. The Group's policy is to negotiate fair terms with its
trade suppliers and pay in accordance with those agreed terms. The longer term
target remains to bring the business into cash balance whereby supplier credit
finances related inventory and variable bank facilities finance any growth in
debtors. To underpin the recovery, inventory levels have been brought above the
target level in the short term. As at 31 May 2004, debtor days outstanding
amounted to 68 days (2003: 66 days), stock turns were 4.5 (2003: 4.9 turns) and
creditor days outstanding totalled 52 days (2003: 76 days).
Cash Flow
As at 31 May 2004 net debt was EUR 47.5m (2003: EUR 96.1m restated). The
reduction in debt reflects the net proceeds received from the two equity issues
of EUR 77.6m offset by outflows from operating activities, finance costs, tax
and fixed asset investments. The cash outflow, excluding cash outflows for non
recurring costs & exceptional items (including costs charged in the previous
financial year) of EUR 10.4m, one off tax payments of EUR 3.3m and acquisition
payments of EUR 0.2m, was EUR 15.0m.
Financial Position
Shareholders' funds increased by EUR 3.4m in the year to EUR 45.0m from the
restated opening shareholders' funds at 1 June 2003. The increase represents the
new share capital received, net of expenses, of EUR 77.6m from the two equity
issues offset by the loss for the financial year of EUR 74.3m, currency
translation differences on foreign currency net investments of EUR 0.9m and the
actuarial gain recognised on the pension schemes of EUR 1.0m.
Pensions
As noted above, the financial statements reflect the adoption in full of FRS 17.
This decision was based on the Board's belief that FRS 17 is most appropriate
given the Group's pension position and provides greater transparency. As a result
of the adoption of FRS 17, the accounts show a pension liability of EUR 10.9m
(2003: EUR 11.8m). The profit and loss account includes a pension charge for the
Group to operating loss of EUR 1.4m (2003: EUR 1.6m) and a charge to finance
costs of EUR 0.6m (2003: EUR 0.6m). The adoption of FRS 17 means that the
actuarial gain of EUR 1.0m (2003: loss of EUR 0.5m) in the schemes this year is
accounted for through the statement of Group total recognised gains and losses.
This gain represents the net reduction in liabilities arising due to actual
experience being different to the underlying assumptions employed in the
valuation.
International Financial Reporting Standards
In accordance with EU and UK law for listed groups, the Company will report
under International Financial Reporting Standards commencing with the year
ending 30 September 2006. Although all the applicable standards have not yet
been finalised we have started to examine the changes that will be needed and it
is intended to indicate the major areas of impact when reporting the results for
the sixteen month period ending on 30 September 2005.
Financial Services Authority Investigation
As stated in the listing particulars issued on 5 February 2004, the Company was
contacted by the Financial Services Authority ("FSA") and asked to provide
information in respect of the Company's working capital position. The FSA has
appointed investigators to consider the circumstances leading up to the
Company's announcements of 24 October 2003 and 8 December 2003.
Treasury Policies and Financial Risk Management
The Group maintains a centralised treasury function which acts within clearly
defined policies approved by the Board. These policies are designed to reduce
the financial risks faced by the Group relating to funding and liquidity,
interest rate, credit and currency exchange rate exposure.
Funding and Liquidity Risk
The Group is financed by a combination of local banking facilities and several
structured asset financing facilities. Structured asset financing facilities are
in place in the UK, Benelux, Germany, France and Sweden. The majority of the
structured asset financing facilities are committed facilities for greater than
one year and available facilities increase with the growth of the related assets
(inventories and debtors).
As at 31 May 2004 the Group's net debt of EUR 47.5m (2003: EUR 96.1m restated)
comprised borrowings of EUR 53.8m (2003: EUR 103.4m restated) partially offset
by cash at bank and in hand of EUR 6.3m (2003: EUR 7.3m).
As at 31 May 2004, the Group had committed borrowings of EUR 25.4m (2003: EUR
15.3m) including EUR 17.0m (2003: EUR 15.3m) being greater than one year and EUR
8.4m (2003: nil) less than one year. Uncommitted borrowings were EUR 28.4m
(2003: EUR 88.1m). Of the committed borrowings, the amount under structured
asset financing facilities was EUR 13.7m (2003: nil), secured bank loans
totalled EUR 7.0m (2003: EUR 9.0m) and finance lease debt was EUR 4.7m (2003:
EUR 6.3m). Unused available funding facilities at 31 May 2004 were EUR 33.7m
(2003: EUR 15.0m) of which EUR 18.2m (2003: nil) expires after more than one
year. Committed facilities are subject to various banking covenants.
The Group's exposure to liquidity risk is reduced by maintaining a number of
banking relationships and having a spread of maturities on committed facilities.
Interest Rate Risk
The Group's treasury function actively monitors the Group's exposure to interest
rate risk. The Group has financed its activities primarily through variable bank
borrowings which can increase with asset growth. The Group borrows in the
desired currencies at floating rates of interest. Interest costs are, therefore,
dependent upon the funding requirements of the Group and the prevailing market
interest rates. Fixed rate funding is in place for specific assets such as
buildings, the warehouse automation system and certain computer equipment.
Foreign Exchange Risk
The principal trading currency within the Group is the euro but the Group
transacts in a number of currencies and is, therefore, exposed to foreign
currency exchange rate fluctuations. Group policy is to hedge all material
foreign currency trading transactions to mitigate transactional foreign exchange
risk. With the majority of the Group's assets now denominated in euro, primarily
due to the centralised purchasing and almost all inventory being held in the
Netherlands and the decision to report the Group results in euro, the foreign
exchange translation exposure to net operating assets is reduced. In some
instances, stock is purchased in the same currency in which it is sold, thereby
providing a natural hedge.
The Group regularly reviews its foreign exchange exposure of net tangible assets
and liabilities held in currencies other than euro. At 31 May 2004, there were
net assets of non-euro businesses of EUR 23.8m compared with net liabilities of
EUR 1.5m last year largely as a result of the equity proceeds received in
Sterling during the year. The Group does not hedge the effect of exchange rate
fluctuations on net assets.
Credit Risk
The Group manages the credit risk on customers by insuring the majority of its
receivables where possible and further by utilising appropriate credit scoring
and collection follow up processes both centrally and locally.
Financial Instruments
Financial assets are recognised when the Group has rights or other access to
economic benefits. Such assets consist of cash, equity instruments or a
contractual right to receive cash or another financial asset. Financial
liabilities are recognised when there is an obligation to transfer benefits and
that obligation is a contractual liability to deliver cash or another financial
asset. When these criteria no longer apply, a financial asset or liability is no
longer recognised.
If a legally enforceable right exists to set off recognised amounts of financial
assets and liabilities, which are determinable monetary amounts, and the Group
intends to settle on a net basis, the financial assets and liabilities are
offset.
Interest costs are charged against income in the year in which they are
incurred.
Where the fair value of an asset falls below its carrying value, any difference
is, in the case of tangible fixed assets, provided for if it is regarded that
impairment exists. In the case of current assets, provision is only made to the
extent that there is expected to be a lower net realisable value.
Derivative Financial Instruments
The Group uses derivative financial instruments to reduce exposure to foreign
exchange risk. The Group does not hold or issue derivative financial instruments
for speculative purposes.
For a forward foreign exchange contract to be treated as a hedge, the instrument
must be related to actual foreign currency assets or liabilities or to a
probable commitment. It must involve the same currency or similar currencies as
the hedged item and must also reduce the risk of foreign currency exchange
movements on the Group's results. Gains and losses arising on these contracts
are deferred and recognised in the profit and loss account, or as adjustments to
the carrying amount of fixed assets, only when the hedged transaction has itself
been reflected in the Group's financial statements. Forward foreign exchange
contracts are taken out by Group and local subsidiary undertakings. The Group
uses natural hedges to eliminate the requirement for all subsidiaries to have
external forward contracts.
If an instrument ceases to be accounted for as a hedge, for example because the
underlying hedged position is eliminated, the instrument is marked to market and
any resulting profit or loss recognised at that time.
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 May
2004
Before
goodwill, Goodwill
exceptional and non
items and Exceptional operating
non operating items items
items (note 5) (note 4) Total
Notes EUR'm EUR'm EUR'm EUR'm
Sales - continuing
operations 3 327.9 327.9
========== ======== ======== ========
Gross profit 3
Continuing operations 52.4 - - 52.4
- Non recurring costs 5 - (7.1) - (7.1)
---------- -------- -------- --------
52.4 (7.1) - 45.3
---------- -------- -------- --------
Operating expenses
Continuing operations (75.3) - (17.1) (92.4)
- Non recurring costs 5 (1.4) (16.6) - (18.0)
---------- -------- -------- --------
(76.7) (16.6) (17.1) (110.4)
---------- -------- -------- --------
Operating loss 3
Continuing operations (22.9) - (17.1) (40.0)
- Non recurring costs 5 (1.4) (23.7) - (25.1)
---------- -------- -------- --------
(24.3) (23.7) (17.1) (65.1)
Non operating items
Continuing operations
- Loss on disposal of
fixed assets - - - -
---------- -------- -------- --------
Loss on ordinary
activities
before interest (24.3) (23.7) (17.1) (65.1)
Net finance costs (6.5) (2.5) - (9.0)
---------- -------- -------- --------
Loss on ordinary
activities before
taxation
- Before non recurring
costs & exceptional
items,goodwill and non
operating items (29.4) - - (29.4)
- Non recurring costs &
exceptional items,
goodwill and non
operating items (1.4) (26.2) (17.1) (44.7)
---------- -------- -------- --------
Total loss on ordinary
activities before
taxation (30.8) (26.2) (17.1) (74.1)
Taxation (0.2) - - (0.2)
---------- -------- -------- --------
Loss for the financial
year (31.0) (26.2) (17.1) (74.3)
========== ======== ========
Preference dividends 6 (1.3)
--------
Retained loss for the
financial year (75.6)
========
Loss per ordinary share
of 1.5 cents 7
- on basic and diluted
earnings (18.13c)
- on adjusted earnings (7.41c)
========
GROUP PROFIT AND LOSS ACCOUNT (continued)
for the year ended 31 May
2003
Before
goodwill, Goodwill
exceptional and non
items and Exceptional operating
non operating items items
items (note 5) (note 4) Total
Notes EUR'm EUR'm EUR'm EUR'm
Sales - continuing
operations 3 438.2 438.2
========= ======== ======== ========
Gross profit 3
Continuing operations 72.9 - - 72.9
- Non recurring costs 5 (0.9) (4.8) - (5.7)
--------- -------- -------- --------
72.0 (4.8) - 67.2
--------- -------- -------- --------
Operating expenses
Continuing operations (78.4) - (1.1) (79.5)
- Non recurring costs 5 (7.8) (9.9) - (17.7)
--------- -------- -------- --------
(86.2) (9.9) (1.1) (97.2)
--------- -------- -------- --------
Operating loss 3
Continuing operations (5.5) - (1.1) (6.6)
- Non recurring costs 5 (8.7) (14.7) - (23.4)
--------- -------- -------- --------
(14.2) (14.7) (1.1) (30.0)
Non operating items
Continuing operations
- Loss on disposal of
fixed assets - - (1.5) (1.5)
--------- -------- -------- --------
Loss on ordinary
activities
before interest (14.2) (14.7) (2.6) (31.5)
Net finance costs (7.6) - - (7.6)
--------- -------- -------- --------
Loss on ordinary
activities before
taxation
- Before non recurring
costs & exceptional
items,goodwill and non
operating items (13.1) - - (13.1)
- Non recurring costs
& exceptional items,
goodwill and non
operating items (8.7) (14.7) (2.6) (26.0)
--------- -------- -------- --------
Total loss on
ordinary activities
before taxation (21.8) (14.7) (2.6) (39.1)
Taxation 0.3 0.4 - 0.7
--------- -------- -------- --------
Loss for the financial
year (21.5) (14.3) (2.6) (38.4)
========= ======== ========
Preference dividends 6 (1.3)
--------
Retained loss for the
financial year (39.7)
========
Loss per ordinary
share of 1.5 cents 7
- on basic and diluted
earnings (20.52c)
- on adjusted earnings (7.49c)
========
The prior year comparatives have been restated as per note 2.
GROUP BALANCE SHEET
as at 31 May
2004 2003
(restated)
Notes EUR'm EUR'm
Fixed assets
Intangible assets: Goodwill 3.5 20.4
Tangible assets 33.9 45.3
Investments 0.2 0.2
--------- ---------
37.6 65.9
--------- ---------
Current assets
Stocks 56.4 73.3
Debtors 78.7 102.2
Cash at bank and in hand 6.3 7.3
--------- ---------
141.4 182.8
--------- ---------
Creditors - Amounts falling due within one year
Finance debt 8 (39.6) (91.0)
Other creditors (64.6) (87.3)
--------- ---------
(104.2) (178.3)
--------- ---------
--------- ---------
Net current assets 37.2 4.5
--------- ---------
Total assets less current liabilities 74.8 70.4
Creditors - Amounts falling due after more than one
year
Finance debt 8 (14.2) (12.4)
Provision for liabilities and charges (4.7) (4.6)
--------- ---------
Net assets excluding pension liabilities 55.9 53.4
Pension liabilities (10.9) (11.8)
--------- ---------
Net assets including pension liabilities 45.0 41.6
========= =========
Capital and reserves
Called up share capital 35.9 34.3
Share premium account 159.9 106.7
Share capital redemption reserve 23.0 0.2
Unpaid preference dividends 2.1 0.8
Reserve for own shares (0.5) (0.5)
Profit and loss account (175.4) (99.9)
--------- ---------
Shareholders' funds* 45.0 41.6
========= =========
* Shareholders' funds are represented by:
Equity interests 21.2 19.1
Non equity interests 23.8 22.5
--------- ---------
45.0 41.6
========= =========
The prior year comparatives have been restated as per note 2.
GROUP CASH FLOW STATEMENT
for the year ended 31 May
2004 2003
(restated)
EUR'm EUR'm EUR'm EUR'm
Net cash flow from operating activities
(note 9) (15.3) 4.5
Returns on investments and servicing of
finance
Net interest paid (8.0) (6.5)
Interest element of finance lease payments (0.4) (0.5)
Dividends paid on non equity shares - (0.7)
-------- --------
Net cash outflow from returns on
investments and servicing of finance (8.4) (7.7)
Taxation
UK corporation and overseas tax paid (3.3) (3.5)
Capital expenditure and investments
Purchase of tangible fixed assets (2.3) (11.9)
Proceeds from disposal of fixed asset
investments - 0.9
Proceeds from disposal of tangible fixed
assets 0.6 0.3
-------- --------
Net cash outflow from capital expenditure
and investments (1.7) (10.7)
Acquisitions and disposals
Net outflow on acquisitions (0.2) (1.7)
Equity dividends paid - (3.0)
-------- -------
Cash outflow before financing (28.9) (22.1)
Financing (note 10) 48.0 (7.1)
-------- -------
Increase/(decrease) in cash (note 11) 19.1 (29.2)
======== =======
The prior year comparatives have been restated as per note 2.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 May
2004 2003
(restated)
EUR'm EUR'm
Loss for the financial year (74.3) (38.4)
Actuarial gain/(loss) recognised on the pension schemes 1.0 (0.5)
Currency translation differences on foreign currency net
investments (0.9) (1.1)
--------- ---------
Total recognised gains and losses for the year (74.2) (40.0)
=========
Prior year adjustment (note 2) (0.6)
---------
Total recognised gains and losses since last annual
report (74.8)
=========
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 May
2004 2003
(restated)
EUR'm EUR'm
Loss for the financial year (74.3) (38.4)
Preference dividends (1.3) (1.3)
--------- ---------
Retained loss for the financial year (75.6) (39.7)
Currency translation differences on foreign currency net
investments (0.9) (1.1)
Actuarial gain/(loss) recognised on the pension schemes 1.0 (0.5)
New share capital issued (net of expenses) 77.6 -
Unpaid preference dividends 1.3 0.8
--------- ---------
Net increase/(reduction) in shareholders' funds 3.4 (40.5)
Opening shareholders' funds as previously stated 41.9 83.0
Restatement for unpaid preference dividends (note 2) 0.8 -
Prior year adjustment for investment in own shares
(note 2) (0.1) (0.5)
Prior year adjustment for pensions (note 2) (1.0) (0.4)
--------- ---------
Opening shareholders' funds as restated 41.6 82.1
--------- ---------
Closing shareholders' funds 45.0 41.6
========= =========
1 ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial statements are prepared in accordance with applicable accounting
standards, all of which have been applied consistently throughout the period and
the preceding year, with the exception of the adoption of FRS 17 and UITF 38 in
the year mentioned below.
The financial information in this announcement has been prepared on a going
concern basis, which assumes that the Company will continue in operational
existence for the foreseeable future.
The Company has adopted Financial Reporting Standard 17, "Retirement Benefits"
in full and Urgent Issues Task Force Abstract 38 "Accounting for ESOP trusts" in
the financial statements. Further information including the impact on the
results for the year ended 31 May 2004 and prior year restatement of
comparatives are discussed in further detail in note 2.
Except as noted above, the financial statements have been prepared on the basis
of the accounting policies set out in the Group's published accounts for the
year ended 31 May 2003.
2 PRIOR YEAR ADJUSTMENTS AND BALANCE SHEET RECLASSIFICATIONS
Prior Year Adjustments
1) Investment in own shares
The Group has adopted UITF 38 in these financial statements. The adoption of
UITF 38 has had the following impact on the Group financial statements:
2004 2003
EUR'm EUR'm
Decrease in retained loss 0.1 0.4
Decrease in shareholders' funds - (0.1)
======= =======
2) Pensions
The Group has adopted FRS 17 in full in these financial statements. The full
adoption of FRS 17 has had the following impact on the financial statements:
2004 2003
EUR'm EUR'm
Decrease in operating loss before non recurring costs 0.8 0.5
Increase in finance costs (0.6) (0.6)
--------- ---------
Decrease / (increase) in retained loss 0.2 (0.1)
========= =========
Decrease in shareholders' funds (0.2) (1.0)
========= =========
The impact of the prior year adjustment on the shareholders' funds at 31 May
2003 represents the reversal of the SSAP 24 pension provision as at 31 May 2003
of EUR 10.8m and the inclusion of the FRS 17 pension liability of EUR 11.8m,
adjusted for the inclusion of agents retirement cost provision in Italy
previously disclosed in other creditors. The impact of the prior year adjustment
on the profit and loss account for the year ended 31 May 2003 represents the
reversal of the SSAP 24 net pension charges of EUR 1.0m and the inclusion of net
pension charges under FRS 17 of EUR 1.1m adjusted to include agents retirement
cost provision.
The impact on shareholders' funds at 31 May 2004 and the profit and loss account
for the year ended 31 May 2004 represents the difference in the actuarial
position following adoption of FRS 17 and the position which would have been
reported had SSAP 24 continued to be applied on the same basis as at 31 May
2003.
Balance Sheet Reclassifications
Apart from the prior year adjustments noted above there have also been the
following balance sheet reclassifications:
1) Debtors: linked presentation
The balance sheet at 31 May 2003 has been restated following a review of all the
Group's banking arrangements for both non-recourse and recourse factored debts.
Following this review, the Italian factoring facilities, previously disclosed as
non-returnable proceeds and deducted from gross debtors, have been classified as
bank loans included in finance debt repayable in less than one year. The
Directors consider that the revised disclosure complies technically with the
presentation required under FRS 5 "Reporting the Substance of Transactions" for
these factored debts but note that the commercial substance of these debts is
non-recourse. This presentation does not impact shareholders' funds.
2) Unpaid preference dividends
The balance sheet at 31 May 2003 has been restated to disclose unpaid preference
dividends of EUR 2.1m (2003: EUR 0.8m), previously included in other creditors,
as non equity interests, included in capital and reserves.
3) Rebates due from suppliers
Rebates due from suppliers of EUR 3.8m (2003: EUR 5.0m) have been shown
separately in creditors due in less than one year as a reduction in the gross
creditors payable to reflect the legal right of set off and the intention to
settle net. In prior years these were shown in prepayments.
3 ANALYSIS OF RESULTS
Eurodis Electron PLC is a pan-European distributor of electronic components and
associated products with operations in eighteen European countries. The analysis
of sales by geographical origin for continuing operations is as follows:
2004 2003
EUR'm EUR'm
United Kingdom 40.2 55.0
Rest of European Union 250.6 333.8
Other 37.1 49.4
----------- -----------
327.9 438.2
=========== ===========
Sales to countries outside Europe were EUR 5.6m for the year ended 31 May 2004
(2003: EUR 8.1m).
In the opinion of the Directors, further segmental information would be
seriously prejudicial to the interests of the Group.
Set out below is an analysis of results including non recurring costs &
exceptional items and goodwill:
2004 2003
(restated)
EUR'm EUR'm
Continuing operations
Sales 327.9 438.2
Cost of sales (282.6) (371.0)
----------- -----------
Gross profit 45.3 67.2
Distribution costs (82.4) (84.1)
Administrative expenses (28.0) (13.1)
----------- -----------
Operating loss (65.1) (30.0)
=========== ===========
Goodwill amortisation of EUR 1.2m (2003: EUR 1.1m) and goodwill impairment of
EUR 15.9m have been included in administrative expenses.
Operating exceptional items of EUR 23.7m (2003: EUR 14.7m) have been included
in: cost of sales EUR 7.1m (2003: EUR 4.8m); distribution costs EUR 12.4m (2003:
EUR 5.8m); and administrative expenses EUR 4.2m (2003: EUR 4.1m).
4 GOODWILL AND NON OPERATING ITEMS
The Group results include charges for:
2004 2003
(restated)
EUR'm EUR'm
Operating loss - continuing operations
Goodwill amortisation 1.2 1.1
Goodwill impairment 15.9 -
----------- ------------
17.1 1.1
Non operating items - continuing operations
Loss on disposal of fixed assets - 1.5
----------- ------------
17.1 2.6
=========== ============
Following the trading performance of the Group over the year, a review of the
carrying value of goodwill was undertaken. As a result, goodwill impairment
includes the write off of goodwill to carrying value, primarily relating to the
acquisition of Eurodis Electronics AB in September 2000. The impairment has been
calculated using a discount rate of 13.6% over a ten year period.
5 NON RECURRING COSTS & EXCEPTIONAL ITEMS
The Group results include charges for:
2004 2003
(restated)
EUR'm EUR'm
Operating loss - continuing operations
Ordinary items
Restructuring non recurring costs 1.4 8.7
Exceptional items
Restructuring costs 5.9 9.1
Debt restructuring costs (excluding finance
issue costs) 4.2 0.8
Write down of tangible fixed assets 6.5 -
Stock provision 7.1 4.8
----------- ------------
23.7 14.7
----------- ------------
Operating loss non recurring costs 25.1 23.4
Finance issue costs - exceptional items 2.5 -
----------- ------------
Total non recurring costs 27.6 23.4
Taxation credit on non recurring costs & exceptional
items - (0.8)
----------- ------------
27.6 22.6
=========== ============
Non recurring restructuring ordinary costs comprise EUR 1.4m of salary costs
incurred in the period up to the earliest date that contract terminations could
be achieved.
Operating exceptional items of EUR 23.7m comprise EUR 4.0m of termination
payments, EUR 1.9m of property lease costs, EUR 4.2m of debt restructuring costs
(not classified as exceptional finance costs), EUR 6.5m write down of tangible
fixed assets and EUR 7.1m of additional stock provisions computed on the opening
stock position arising from the assessment during the year of the likely
realisable value of stock following completion of the centralisation of
inventory and the degree of success of realising stock as part of the Group's
working capital reduction programme. Total debt restructuring costs were EUR
6.7m.
The completion of the centralisation of logistics in the Netherlands and the
implementation of a pan-European IT system has given rise to the write down of a
number of fixed assets which have become redundant. The write down of these
assets is EUR 6.5m.
In the prior year ended 31 May 2003, exceptional stock provision of EUR 4.8m
related to franchise terminations.
6 DIVIDENDS
No final ordinary dividend has been declared (2003: nil). Preference dividends
of EUR 1.3m (2003: EUR 1.3m) have been charged to the profit and loss account in
the year to 31 May 2004.
Preference dividends of EUR 2.1m (2003: EUR 0.8m) are unpaid at 31 May 2004.
Preference dividends will continue to be charged to the profit and loss account
unless the shares are converted or cancelled until payment is made. The arrears
of preference dividends must be paid before any payment of dividends to holders
of Ordinary Shares.
7 LOSS PER ORDINARY SHARE
Basic loss per ordinary share
Basic loss per share is calculated on the basis of the weighted average of
417,097,034 (2003: 193,491,534) ordinary shares in issue, excluding those held
in the Eurodis Electron PLC Share Ownership Plan which are treated as cancelled,
and the retained loss for the financial year, of EUR 75.6m (2003: EUR 39.7m
restated).
Weighted average number of shares
The prior year weighted average number of shares in issue has been recalculated
for the current year equity issues as per FRS 14. The adjustment helps provide a
true comparative by including the bonus element* of the current year equity
issues from which there is deemed to be no corresponding change in resources.
No.
Shares in issue 1 June 2002 77,234,292
Adjustment for bonus element of shares issued in September 2003 14,715,685
Adjustment for bonus element of shares issued in March 2004 101,541,557
-----------
Revised prior year weighted average number of ordinary shares in
issue 193,491,534
===========
The current year weighted average number of ordinary shares in issue is
calculated as follows:
No. No.
Shares in issue 1 June 2003 77,234,292
Adjustment for bonus element of shares issued in
September 2003 14,715,685
Adjustment for bonus element of shares issued in
March 2004 101,541,557
-----------
Revised number of ordinary shares in issue prior to
September 2003 193,491,534
Weighted based on 96 days of 366 50,751,878
Shares in issue 1 June 2003 77,234,292
Issue of shares September 2003 89,159,739
Adjustment for bonus element of shares issued in
March 2004 101,541,557
-----------
Revised number of ordinary shares in issue post
September 2003 equity issue 267,935,588
Weighted based on 179 days of 366 131,039,536
Shares in issue 1 June 2003 77,234,292
Issue of shares September 2003 89,159,739
Issue of shares March 2004 780,000,000
-----------
Revised number of ordinary shares in issue post
March 2004 equity issue 946,394,031
Weighted based on 91 days of 366 235,305,620
-----------
Weighted average number of ordinary shares in issue 417,097,034
===========
* Bonus element represents the theoretical number of free shares that have been
issued to Shareholders, to compensate them for loss of value on their original
holding prior to the equity issues, based on the remainder of the equity issues
being made at the theoretical market price immediately after the equity issues.
The free shares element of the equity issues does not have an impact on the
income generating resources of the business after the equity issues, so
therefore including these free shares in the current year earnings per share but
not in the prior year calculation would give a misleading comparison.
Adjusted loss per ordinary share
Adjusted loss per share is shown by reference to earnings before goodwill, non
recurring costs & exceptional items, non operating items and related tax.
Adjusted earnings per share is presented as the Directors consider that this
gives valuable additional information about the underlying performance of the
Group and is calculated as follows:
2004 2003
(restated)
EUR'm EUR'm
Loss for the financial year (74.3) (38.4)
Goodwill amortisation and impairment (note 4) 17.1 1.1
Non operating items (note 4) - 1.5
Non recurring costs & exceptional items (note 5) 27.6 23.4
Taxation credit on non recurring costs & exceptional
items (note 5) - (0.8)
-------- ---------
(29.6) (13.2)
Preference dividends (1.3) (1.3)
-------- ---------
Loss before goodwill, non recurring costs & exceptional
items and non operating items (30.9) (14.5)
======== =========
Adjusted earnings per share (7.41c) (7.49c)
======== =========
8 FINANCE DEBT
2004 2003
(restated)
EUR'm EUR'm
Bank loans and overdrafts 49.1 97.1
Finance leases 4.7 6.3
-------- ---------
53.8 103.4
======== =========
Analysis of maturity of debt: 2004 2003
(restated)
EUR'm EUR'm
-------- ---------
In one year or less, or on demand 39.6 91.0
In more than one year but not more than two years 5.4 3.0
In more than two years but not more than five years 6.6 7.2
In more than five years 2.2 2.2
-------- ---------
53.8 103.4
======== =========
The finance debt for 31 May 2003 has been restated to disclose the Italian
factored debts, previously disclosed as non-returnable proceeds and deducted
from gross debtors in a linked presentation, as bank loans included in finance
debt repayable in less than one year.
Funding of the Group is currently provided through local facilities and
structured asset finance facilities which cover the U.K., Germany, France,
Sweden and Benelux. These facilities are secured by a floating charge over the
receivables and inventory of the various companies.
Bank overdrafts of EUR 24.4m (2003: EUR 45.0m) are repayable on demand. At 31
May 2004, there were secured bank loans and overdrafts of EUR 25.7m (2003: EUR
67.9m). Of these, EUR 18.7m (2003: EUR 58.9m) are secured by floating charges
over the assets of the various companies.
A long term bank loan of EUR 7.0m (2003: EUR 9.0m) secured on the assets of the
advanced logistics centre is funded on fixed rate financing of 4.85%.
Finance leases are secured against the assets concerned at a fixed rate. The
weighted average fixed interest rate implicit in the finance leases is 7.5%
(2003: 7.4%).
The Group borrowings analysed between committed and uncommitted facilities are
as follows:
2004
Committed Uncommitted Total
EUR'm EUR'm EUR'm
Short term borrowing
Variable with debtors 8.4 19.8 28.2
Bank overdrafts - 8.6 8.6
-------- --------- ---------
Total short term 8.4 28.4 36.8
Long term borrowing
Variable with debtors 0.7 - 0.7
Variable with stock 4.6 - 4.6
Bank loans 7.0 - 7.0
Finance leases 4.7 - 4.7
-------- --------- ---------
Total long term 17.0 - 17.0
-------- --------- ---------
Total borrowing 25.4 28.4 53.8
======== ========= =========
2003
Committed Uncommitted Total
EUR'm EUR'm EUR'm
Short term borrowing
Variable with debtors - 49.5 49.5
Variable with stock - 7.3 7.3
Bank overdrafts - 31.3 31.3
-------- --------- ---------
Total short term - 88.1 88.1
Long term borrowing
Bank loans 9.0 - 9.0
Finance leases 6.3 - 6.3
-------- --------- ---------
Total long term 15.3 - 15.3
-------- --------- ---------
Total borrowing 15.3 88.1 103.4
======== ========= =========
Of the long term borrowing analysed above, EUR 2.8m (2003: EUR 2.9m) is
repayable in less than one year.
9 RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING
ACTIVITIES
2004 2003
(restated)
EUR'm EUR'm
Operating loss (65.1) (30.0)
Depreciation 5.8 6.6
Exceptional write down of fixed assets 6.5 -
Goodwill amortisation and impairment 17.1 1.1
Profit on disposal of fixed assets - (0.1)
Difference between pension charge and cash contributions (0.5) 0.1
Decrease in stock 16.9 18.0
Decrease in debtors 27.3 33.0
Decrease in creditors (23.8) (26.2)
Increase in provisions 0.5 2.0
--------- ---------
Net cash flow from operating activities (15.3) 4.5
========= =========
Included within the cash flow from operating activities is a cash outflow on non
recurring costs of EUR 7.9m (2003: EUR 9.1m).
10 ANALYSIS OF CASH FLOW FROM FINANCING
2004 2003
(restated)
EUR'm EUR'm
Decrease in bank loans (27.8) (6.0)
Capital element of finance lease rental payments (1.8) (1.1)
--------- ---------
Cash outflow from decrease in debt (29.6) (7.1)
Cash inflow from issue of new shares 83.8 -
Cash outflow from expenses of share issues (6.2) -
--------- ---------
Net cash inflow/(outflow) from financing activities 48.0 (7.1)
========= =========
11 RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT
2004 2003
(restated)
EUR'm EUR'm
Increase/(decrease) in cash in the period 19.1 (29.2)
Decrease in finance leases 1.8 1.1
Decrease in bank loans 27.8 6.0
--------- ---------
Decrease/(increase) in net debt from cash flows 48.7 (22.1)
New finance leases (0.1) -
Currency translation differences - 1.4
--------- ---------
Decrease/(increase) in net debt in the year 48.6 (20.7)
Opening net debt (96.1) (75.4)
--------- ---------
Closing net debt (47.5) (96.1)
========= =========
12 ANALYSIS OF NET DEBT
At 1
June Other Currency At 31
2003 Cash non cash translation May
(restated) flow movements differences 2004
EUR'm EUR'm EUR'm EUR'm EUR'm
Cash at bank and
in hand 7.3 (1.5) - 0.5 6.3
Overdrafts (45.0) 20.6 - - (24.4)
------- -------- -------- -------- ---------
(37.7) 19.1 - 0.5 (18.1)
Hire purchase and
finance leases (6.3) 1.8 (0.1) (0.1) (4.7)
Bank loans (52.1) 27.8 - (0.4) (24.7)
------- -------- -------- -------- ---------
Net debt (96.1) 48.7 (0.1) - (47.5)
======= ======== ======== ======== =========
13 EXCHANGE RATES
The Group's predominant functional currency is the euro. The principal exchange
rates used in the preparation of the euro financial statements are as follows:
2004 Average 2003 Average 2004 Closing 2003 Closing
Sterling 0.6867 0.6569 0.6660 0.7179
Swiss franc 1.5516 1.4745 1.5318 1.5318
Swedish krona 9.1433 9.1566 9.1041 9.1364
------- ------- ------- -------
14 RELATED PARTY TRANSACTIONS
In the financial year ended 31 May 2004, the employment contracts of Mr. Robert
Leigh (Executive Chairman) and Mr. Michael Mason (Executive Director, Vice
President Finance) were terminated by agreement. The total cost of these
terminations was EUR 0.4m for Mr. Leigh and EUR 0.3m for Mr. Mason with the
majority of the payments being made on a monthly basis. At 31 May 2004 there
were EUR 0.2m and EUR 0.1m respectively outstanding to be paid on the contracts.
15 FINANCIAL INFORMATION
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 May 2004 or 2003. The
financial information for the year ended 31 May 2003 is derived from the
statutory accounts for that year, which have been delivered to the Registrar of
Companies. The statutory accounts for the year ended 31 May 2004, which were
approved by the Directors on 27 July 2004, will be delivered to the Registrar of
Companies in due course. The auditors reported on the accounts for the years
ended 31 May 2003 and 2004; their report was unqualified and did not contain a
statement under s237 (2) or (3) Companies Act 1985.
16 PRO FORMA GROUP PROFIT AND LOSS ACCOUNT IN STERLING (unaudited)
for the year ended 31 May
2004
Before
goodwill,
exceptional Goodwill
items and non and non
operating Exceptional operating
items items Items Total
GBP'm GBP'm GBP'm GBP'm
Sales - continuing operations 225.2 225.2
========== ======== ======== ========
Gross profit
Continuing operations 36.0 - - 36.0
- Non recurring costs - (4.9) - (4.9)
---------- -------- -------- --------
36.0 (4.9) - 31.1
---------- -------- -------- --------
Operating expenses
Continuing operations (51.7) - (11.7) (63.4)
- Non recurring costs (1.0) (11.4) - (12.4)
---------- -------- -------- --------
(52.7) (11.4) (11.7) (75.8)
---------- -------- -------- --------
Operating loss
Continuing operations (15.7) - (11.7) (27.4)
- Non recurring costs (1.0) (16.3) - (17.3)
---------- -------- -------- --------
(16.7) (16.3) (11.7) (44.7)
Non operating items
Continuing operations
- Loss on disposal of fixed
assets - - - -
---------- -------- -------- --------
Loss on ordinary activities
before interest (16.7) (16.3) (11.7) (44.7)
Net finance costs (4.5) (1.7) - (6.2)
---------- -------- -------- --------
Loss on ordinary activities
before taxation
- Before non recurring costs &
exceptional items, goodwill and
non operating items (20.2) - - (20.2)
- Non recurring costs &
exceptional items, goodwill and
non operating items (1.0) (18.0) (11.7) (30.7)
---------- -------- -------- --------
Total loss on ordinary
activities before taxation (21.2) (18.0) (11.7) (50.9)
Taxation (0.1) - - (0.1)
---------- -------- -------- --------
Loss for the financial year (21.3) (18.0) (11.7) (51.0)
========== ======== ========
Preference dividends (0.9)
--------
Retained loss for the financial
year (51.9)
========
Loss per ordinary share of 1
pence
- on basic and diluted earnings (12.45p)
- on adjusted earnings (5.09p)
========
16 PRO FORMA GROUP PROFIT AND LOSS ACCOUNT IN STERLING (unaudited) (continued)
for the year ended 31 May
2003
Before
goodwill,
exceptional Goodwill
items and non and non
operating Exceptional operating
items items Items Total
GBP'm GBP'm GBP'm GBP'm
Sales - continuing
operations 287.9 287.9
========= ======== ======== ========
Gross profit
Continuing operations 47.9 - - 47.9
- Non recurring costs (0.6) (3.2) - (3.8)
--------- -------- -------- --------
47.3 (3.2) - 44.1
--------- -------- -------- --------
Operating expenses
Continuing operations (51.5) - (0.7) (52.2)
- Non recurring costs (5.1) (6.5) - (11.6)
--------- -------- -------- --------
(56.6) (6.5) (0.7) (63.8)
--------- -------- -------- --------
Operating loss
Continuing operations (3.6) - (0.7) (4.3)
- Non recurring costs (5.7) (9.7) - (15.4)
--------- -------- -------- --------
(9.3) (9.7) (0.7) (19.7)
Non operating items
Continuing operations
- Loss on disposal of
fixed assets - - (1.0) (1.0)
--------- -------- -------- --------
Loss on ordinary
activities before interest (9.3) (9.7) (1.7) (20.7)
Net finance costs (5.0) - - (5.0)
--------- -------- -------- --------
Loss on ordinary activities
before taxation
- Before non recurring
costs & exceptional items,
goodwill and non operating
items (8.6) - - (8.6)
- Non recurring costs &
exceptional items,
goodwill and non operating
items (5.7) (9.7) (1.7) (17.1)
--------- -------- -------- --------
Total loss on ordinary
activities before taxation (14.3) (9.7) (1.7) (25.7)
Taxation 0.2 0.3 - 0.5
--------- -------- -------- --------
Loss for the financial
year (14.1) (9.4) (1.7) (25.2)
========= ======== ========
Preference dividends (0.9)
--------
Retained loss for the
financial year (26.1)
========
Loss per ordinary share of 1
pence
- on basic and diluted
earnings (13.48p)
- on adjusted earnings (4.92p)
========
The pro forma Group profit and loss account in Sterling has been calculated
using a weighted average exchange rate of 1EUR: GBP 0.6867 (2003: GBP 0.6569).
The comparatives for 2003 have been restated as explained in note 2 to the
results announcement.
17 PRO FORMA GROUP BALANCE SHEET IN STERLING (unaudited)
as at 31 May
2004 2003
(restated)
GBP'm GBP'm
Fixed assets
Intangible assets: Goodwill 2.3 14.6
Tangible assets 22.6 32.5
Investments 0.1 0.1
--------- ---------
25.0 47.2
--------- ---------
Current assets
Stocks 37.6 52.6
Debtors 52.5 73.4
Cash at bank and in hand 4.2 5.2
--------- ---------
94.3 131.2
--------- ---------
Creditors - Amounts falling due within one year
Finance debt (26.4) (65.3)
Other creditors (43.0) (62.7)
--------- ---------
(69.4) (128.0)
--------- ---------
--------- ---------
Net current assets 24.9 3.2
--------- ---------
Total assets less current liabilities 49.9 50.4
Creditors - Amounts falling due after more than one
year
Finance debt (9.5) (8.9)
Provision for liabilities and charges (3.1) (3.3)
--------- ---------
Net assets excluding pension liabilities 37.3 38.2
Pension liabilities (7.3) (8.5)
--------- ---------
Net assets including pension liabilities 30.0 29.7
========= =========
Capital and reserves
Called up share capital 22.8 21.1
Share premium account 101.4 65.5
Share capital redemption reserve 15.1 0.1
Unpaid preference dividends 1.5 0.6
Reserve for own shares (0.4) (0.4)
Profit and loss account (110.4) (57.2)
--------- ---------
Shareholders' funds* 30.0 29.7
========= =========
* Shareholders' funds are represented by:
Equity interests 15.2 15.8
Non-equity interests 14.8 13.9
--------- ---------
30.0 29.7
========= =========
The pro forma Group balance sheet in Sterling has been calculated using the
closing exchange rate at 31 May 2004 of 1EUR: GBP 0.6660 (2003: GBP 0.7179)
except for called up share capital, share premium account and share capital
redemption reserve which have been fixed in Sterling. The comparatives for 2003
have been restated as explained in note 2 to the results announcement.
18 PRO FORMA GROUP CASH FLOW STATEMENT IN STERLING (unaudited)
for the year ended 31 May
2004 2003
(restated)
GBP'm GBP'm GBP'm GBP'm
Net cash flow from operating activities (10.5) 3.0
Returns on investments and servicing of
finance
Net interest paid (5.5) (4.3)
Interest element of finance lease payments (0.3) (0.3)
Dividends paid on non equity shares - (0.5)
-------- --------
Net cash outflow from returns on
investments and servicing of finance (5.8) (5.1)
Taxation
UK corporation and overseas tax paid (2.3) (2.3)
Capital expenditure and investments
Purchase of tangible fixed assets (1.6) (7.8)
Proceeds from disposal of fixed asset
investments - 0.6
Proceeds from disposal of tangible fixed
assets 0.4 0.2
-------- --------
Net cash outflow from capital expenditure
and investments (1.2) (7.0)
Acquisitions and disposals
Net outflow on acquisitions (0.1) (1.1)
Equity dividends paid - (2.0)
-------- --------
Cash outflow before financing (19.9) (14.5)
Financing 33.0 (4.7)
-------- --------
Increase/(decrease) in cash 13.1 (19.2)
======== ========
The pro forma Group cash flow statement in Sterling has been calculated using a
weighted average exchange rate of 1EUR: GBP 0.6867 (2003: GBP 0.6569). The
comparatives for 2003 have been restated as explained in note 2 to the results
announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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