RNS Number:3766P
Omega International Group PLC
05 March 2008
Immediate Release 5 March 2008
OMEGA INTERNATIONAL GROUP PLC
PRELIMINARY RESULTS
Omega International Group PLC, a leading UK manufacturer of branded kitchen
furniture, today announces its preliminary results for the year ended 31
December 2007.
FINANCIAL HIGHLIGHTS
2007 2006
--- ------ ------
* Revenue + 19% �33.7m �28.3m
* Operating profit + 28% �8.0m �6.3m
* Pre tax profit + 27% �8.1m �6.4m
* Basic earnings per share + 26% 20.3p 16.1p
* Total ordinary dividends per share + 28% 3.2p 2.5p
* Net assets per share + 43% 92.3p 64.5p
*Final dividend of 2.3p per share proposed payable on 4 July 2008 to
shareholders recorded on the register on 6 June 2008, making a total of 3.2p
for the year (2006: 2.5p).
Commenting on the results Chairman, Bob Murray, said:
"Omega has had another excellent year in all respects and I am delighted to be
reporting these strong results today.
During 2007 we have focused on ensuring we have the right infrastructure in
place to double the size of the business by 2010. The third phase extension to
our freehold factory is now completed and this investment, along with our
continued strong financial performance, is a solid foundation for achieving this
target"
For further information, please contact:
Omega International Group plc: Tel: 01405 743 333
Francis Galvin: Group Chief Executive
Buchanan Communications: Tel: 020 7466 5000
Mark Edwards
Nicola Cronk e-mail: nicolac@buchanan.uk.com
Susanna Gale
Notes to editors:
The Group's core business is the design, manufacture and marketing of branded
kitchen furniture through three main brands: Sheraton, Omega and Chippendale.
These three brands are sold throughout the UK, mainly to independent retailers.
The Group's manufacturing, distribution and sales facilities are located in its
purpose built factory complex in Thorne, Doncaster, adjacent to the M18
motorway.
CHAIRMAN'S STATEMENT
Meeting objectives
I am delighted to report an excellent fourth full year's results as an AIM
listed company. Having realised our initial target at float of doubling pre tax
profit by 2006 ahead of schedule, we set our next objective to double the size
of the business by 2010. Full year 2007 actual results have laid a solid
foundation for achieving that objective.
Exceeding expectations
Sales for the year to 31 December 2007 grew by 19% to �33.7 million (2006: �28.3
million) during a period which some in the industry continued to regard as
testing.
We implemented a price increase in the first half of 2007 and this, combined
with firm management of costs and economies of scale enabled us to increase
operating margin to 23.9% (2006: 22.2%). This was achieved against a background
of rising interest rates, energy and material prices, and the much vaunted
'credit crunch'.
Operating profit rose by an impressive 28% to �8.0 million from �6.3 million and
earnings per share advanced 26% to 20.3p (2006: 16.1p).
Net cash inflow from activities increased by �2.8 million. After capital
expenditure of �3.3 million, corporation tax payments of �2.3 million, and
dividends of �0.7 million, along with proceeds from the issue of share capital
of �0.5 million, we ended the year with a strong cash balance of �3.8 million.
An independent revaluation of our freehold property was undertaken at the year
end valuing it at �20 million. This assisted in increasing assets per share by
43% to 92.3p (2006: 64.5p).
The group remains debt free.
Growing dividends
Given our strong results and the Board's confidence in the future of the
business, we propose to increase the level of ordinary dividend by 28% compared
with 2006. This results in a proposed final ordinary dividend of 2.3p a share
(2006: 1.8p) after payment of the interim ordinary dividend of 0.9p a share
(2006: 0.7p).
Board of Directors
Peter Walker was appointed a Non Executive Director in June 2007. He brings with
him a wealth of experience and provides support and guidance for the finance
function of the Group.
As announced on 4 January 2007 Martin Levitt, Finance Director, took early
retirement and left the Company on 30 June 2007 in order to pursue personal
interests abroad.
Growing the business
Our declared intention is to double the size of the business by 2010.
To facilitate this, construction of the 108,000 sq ft third phase extension to
our freehold production complex was completed on time, within budget and with
all disruption costs absorbed within these results. The factory complex now
covers 315,000 sq ft on 16.2 acres of freehold land.
Further investment in plant and machinery took place with the addition of state
of the art cutting, handling and drilling equipment providing us with the
benefit of the latest European technology as we increase our capacity for the
future.
Plant investment will continue throughout 2008 and will be funded from our own
cash resources.
I am also pleased to announce the acquisition of freehold land adjacent to our
factory, which will take our total site area to 21 acres. This provides us with
the option to construct an additional 95,000 sq ft of factory space taking the
freehold production complex up to 410,000 sq ft as our growth plans require it.
Current trading is in line with expectations and the Directors are confident
that the product launches in the coming weeks and months, together with improved
distribution, will help us to achieve our growth targets and to deliver our
stated intentions.
On behalf of the Group, I would again like to thank all of our customers and
suppliers for their support, as well as our own talented team for their
professionalism, commitment and energy throughout the year.
BOB MURRAY CBE FCCA
CHAIRMAN
4 March 2008
BUSINESS REVIEW
Introduction
Omega designs, manufactures and markets quality kitchen furniture in the mid to
upper market segments. Its three kitchen brands, Sheraton, Omega and Chippendale
are distributed and sold through a national network of specialist kitchen
outlets, the majority of which are independent retailers.
We believe that the unbroken record of growth in turnover and pre tax profits
over the last decade has been founded on this proven and robust route to market.
The brands
Sheraton is our factory assembled, rigid kitchen brand, which is made to order
and aimed at the mid upper market. It was launched in 1996 and today it is one
of the most comprehensive kitchen ranges available. Dealers sell this range as a
bespoke option and we deliver on their behalf to the consumer's home on a two to
four week delivery schedule.
Our two ready to assemble kitchen brands, Omega and Chippendale, were launched
in 2001 and 2002 respectively and are aimed at the lower mid market upwards.
Given that complete kitchens are available from our stock within 24 hours and
can be delivered to the consumer or dealer showrooms within seven days, an
exceptionally efficient service is offered.
Factory expansion
During the first half of 2007 we completed the third phase of our factory
extension, consisting of an additional 108,000 sq ft taking the facility up to
315,000 sq ft, an increase in floor space of over 50%. This major project was
completed on time, within the approved capital expenditure budget and with
minimal disruption to our operations. All associated disruption overheads were
absorbed within these 2007 results. Our 16.2 acre freehold site is now developed
providing a significant increase in manufacturing capacity to support our medium
term growth plans.
Additional leading edge plant and machinery purchases in 2007 facilitated an
increase in capacity. In particular, a new angle plant has doubled our cutting
capacity, and automated materials handling equipment has been introduced with
the two-fold benefit of improving efficiency and increasing safety for
employees.
The installation of a second automated rigid assembly line in 2008 will allow us
to double output. Alongside this, we are installing bespoke drilling and
packaging machinery. All this new technology is due to be commissioned during
the first half of 2008.
A reorganisation of the warehouse and distribution facilities has been
successfully completed which will lead to increasing efficiency in this key area
of customer service.
Future expansion
We have exchanged contracts on the purchase of further freehold land adjacent to
our existing facilities, which will increase our total site area to 21 acres and
provide further expansion opportunities in due course. Indicative plans show
that the factory complex could potentially be increased by an additional 95,000
sq ft taking the freehold operation to 410,000 sq ft.
Investment in the dealer network
The Group continued with its investment in expanding and strengthening its
display base for all three existing brands by taking on new display dealers as
well as adding new kitchen range displays within existing outlets. We also
continued to increase our focus on new sales opportunities, particularly in the
South of England where historically our distribution has not been as
concentrated. This ongoing initiative is gaining sales momentum and is making an
ever-increasing contribution to the business.
Our continued success relies on our ability to cater to the needs of our dealer
base. These include a substantial profit margin, leading designs and extensive
choice, excellent value for money, a comprehensive home delivery service which
is on time first time, specialised training and support and a full after sales
service. We shall continue to focus on our ability to provide all of these in
order to maximise dealer loyalty and to grow repeat business.
New product development continues to be a key area of growth for the Group. Six
new kitchens were launched into the Sheraton brand and eight new kitchens into
the Omega and Chippendale brands in March 2007. Cutting-edge design helps to
improve yields per outlet as well as refreshing the mix of kitchens on display
nationally.
Omega continues to work closely with its displaying outlets, utilising its
enlarged national sales force to motivate an ever increasing number of dealers
and their staff, as well as constructing tailored marketing packages including
showroom layouts, staff training, CAD planning and quotations, product
promotions and support materials.
As part of our mission to offer the best service possible, a dealer forum took
place in September 2007 during which trade customers were encouraged to air
their views on everything from service to product packaging. This was the first
such forum Omega has run and it was a success for all parties. It was agreed
that the dealer's comments would be carefully considered as part of our future
development programme and that further dealer forums would be arranged.
Key performance indicators
The Group's key performance indicators include sales growth year on year, gross
and operating margin rates and service delivery. Sales growth and margins are
discussed further below.
The delivery service performance indicator of the number of kitchens delivered
complete on time, first time averaged 97% (2006: 97%) for the year.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group are those that are
typical for a design led manufacturing company operating solely in the UK from a
single site. These are fire and flood risk for the factory, retention of the
customer base, a stable technological infrastructure, continued access to raw
materials and the availability of an appropriately skilled workforce. Management
considers that it has in place appropriate measures to mitigate these risks.
Employee, environmental and social issues
Since opening our factory at Thorne, Doncaster in 1996, the Group has created
over 250 new jobs for the local economy. The average number employed rose to 253
in 2007 from 217 in 2006. By 31 December 2007, employment had risen to 260
positions. Most of our staff live locally and we see the creation of good
quality employment with appropriate rewards, job growth opportunities, training
and advancement potential, as an important social contribution to the area
around our factory.
As part of our ongoing commitment to developing the skills of our workforce,
many of our employees have undergone NVQ level 2 training in Business
Improvement Techniques.
Our modern premises and machinery allow us to limit our environmental impact
with electricity and gas costs together amounting to less than 1% of sales in
2007. We continually monitor and upgrade our dust extraction equipment enabling
us to provide a safe, clean working environment for our employees.
Purchasing practices and procedures include a focus on recyclable packaging and
an appropriate timber sourcing policy. Our policies are set out in more detail
on our website www.omegaplc.co.uk
Trends and future performance
The Group continues with its successful formula into 2008, targeting additional
new display outlets and further strengthening the existing display network.
In addition, 13 new kitchens are being launched into the Sheraton brand in April
2008 bringing the total offer to 70. The Omega and Chippendale brands will each
see a further five kitchens being added in June, bringing their total combined
offer to 46 kitchens.
We believe that the quality of our business model combined with our management
expertise and modest existing market share will allow us to continue with our
growth plans even if overall market growth is constrained.
Omega PLC Board of Directors
The Board of Directors of Omega PLC (the Group's trading subsidiary), which was
formed two years ago, is now well established, is working effectively and
assisting the Group in meeting its performance targets.
Trading
Revenue grew by 19% to �33.7 million in 2007 (2006: �28.3 million). Increased
sales together with improved cost controls allowed gross margin to reach 51% up
from 50% in 2006. Similarly operating margins improved to 24% (2006: 22%) whilst
net interest income in 2007 allowed pre tax profit to rise to �8.1 million
(2006: �6.4 million) representing a margin of over 24% (2006: 23%).
Over the last five years, the average annual compound growth rates in revenue,
operating profit and pre tax profits were 17%, 30% and 32% respectively.
Despite the impact of rising interest rates, energy and material prices, the
Group has been able to negate much of this recent pricing pressure by improving
terms through both re-sourcing and by generating incremental business. We have
announced price increases of 5% on our brands. Sheraton increases will take
effect from 1 April 2008, whilst Omega and Chippendale prices will increase from
1 June 2008. Our competitors' prices were raised much earlier and in many
instances by a higher percentage, positioning our brands attractively within the
market.
Cash flow
Conversion of profits into operating cash flows was again impressive with the
net cash inflows from operating activities, before tax payments, exceeding the
level of operating profits, at �8.5 million (2006: �6.2 million). Capital
expenditure increased to �3.3 million (2006: �2.5 million), representing the
culmination of the extension to our factory facilities and the introduction of
new production equipment. Corporation tax payments at �2.3 million (2006: �2.4
million) reflected two quarterly payments as well as the final payment for 2006.
Dividend payments were �0.7 million (2006: �2.7 million), leaving a year end
cash balance of �3.8 million (2006: �1.1 million).
Balance sheet
Our balance sheet remains exceptionally strong and we remained debt free at the
end of 2007. Net assets per share are now 92.3p, compared with 64.5p a year ago,
assisted by the revaluation of our freehold property at �20 million.
Treasury
The Group maintains cash in bank accounts bearing variable rates of interest.
Money market deposits are made if these generate better returns.
An unsecured overdraft facility of �1.5 million is available to the Group.
Approximately 45% of the Group's purchases of material are made in Euros. It is
the Group's policy to purchase Euros using forward options when rates are
favourable, though this hedging policy usually covers less than the next year's
purchases. The responsibility of hedging is delegated to the Operations Director
working in conjunction with the Finance Director of Omega PLC.
Summary
The Group enters the new financial year with continued confidence and optimism,
despite the current economic uncertainty, having laid the foundations for
enhanced growth in volumes, quality and margins. The future is positive and
exciting.
We are grateful for the support and commitment of all stakeholders and we look
forward to delivering further success in the year ahead.
F Galvin N Winfield
Chief Executive Operations Director
----------------- ---------------------
4 March 2008
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
Notes Audited Audited
-------- --------
2007 2006
-------- --------
�'000 �'000
-------- --------
Revenue 2 33,650 28,273
Cost of sales (16,629) (14,023)
-------- --------
Gross profit 17,021 14,250
Other operating expenses (8,975) (7,976)
-------- --------
Operating profit 8,046 6,274
Finance income - bank 49 140
Finance costs - bank (6) -
-------- --------
46 140
-------- --------
Profit before income tax 8,089 6,414
Income tax expense 3 (2,401) (1,937)
-------- --------
Profit for the financial year 5,688 4,477
======== ========
Earnings per share (pence) 5
Basic 20.3 16.1
Diluted 20.2 16.0
-------- --------
All results presented above arise from continuing operations and are wholly
attributable to the equity shareholders of the company.
There is no material difference between reported and historical cost profits and
losses.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENENSE FOR THE YEAR ENDED 31
DECEMBER 2007
Audited Audited
2007 2006
�'000 �'000
Profit for the financial year 5,688 4,477
Deferred tax on share-based payments (240) 203
Deferred tax on revaluation of freehold land and buildings (877) (96)
Remeasurement of deferred tax charge for change in UK tax
rate 250 -
-------- --------
Unrealised surplus on revaluation 3,221 -
of freehold land and buildings
-------- --------
Total recognised income for the year 8,042 4,584
======== ========
BALANCE SHEET AT 31 DECEMBER 2007
Note Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Non-current assets
Intangible assets 135 124
Property, plant and equipment 22,969 17,743
------- -------
23,104 17,867
------- -------
Current assets
Inventories 4,546 3,642
Trade and other receivables 5,192 5,126
Cash and cash equivalents 3,804 1,051
------- -------
13,542 9,819
------- -------
Total assets 36,646 27,686
------- -------
Liabilities
Non-current liabilities
Other non-current liabilities 25 51
Deferred income tax liabilities 3,604 2,647
------- -------
3,629 2,698
------- -------
Current liabilities
Trade and other payables 6,216 6,089
Current income tax liabilities 722 997
------- -------
6,938 7,086
------- -------
Total liabilities 10,567 9,784
------- -------
Net assets 26,079 17,902
======= =======
Equity
Ordinary shares 2,824 2,776
Share premium account 2,058 1,563
Other reserves 10,963 8,390
Retained earnings 10,234 5,173
------- -------
Total equity 6 26,079 17,902
======= =======
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
Notes Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Cash flows from operating activities
Cash generated from operations 7 8,476 6,202
Interest received 42 142
Interest paid (6) -
Income tax paid (2,299) (2,375)
-------- --------
Net cash inflow from operating activities 6,213 3,969
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (3,328) (2,540)
Proceeds from sale of property, plant and
equipment 19 3
-------- --------
Net cash used in investing activities (3,309) (2,537)
-------- --------
Cash flows from financing activities
Proceeds from issue of ordinary shares 543 -
Equity dividends paid to shareholders (694) (2,721)
-------- --------
Net cash used in financing activities (151) (2,721)
-------- --------
Net increase/(decrease) in cash in the year 2,753 (1,289)
Cash and cash equivalents at 1 January 1,051 2,340
-------- --------
Cash and cash equivalents at end of the year 3,804 1,051
======== ========
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
1. BASIS OF PREPARATION
The preliminary announcement for the year ended 31December 2007 has been
prepared, for the first time, on the basis of International Financial Reporting
Standards ("IFRS") adopted for use in the European Union. In preparing the
Group's 2007 annual financial statement, management has amended certain
accounting, valuation and consolidation methods applied in the 2006 UK GAAP
financial statements to comply with IFRS. The comparative figures in respect of
2006 were restated to reflect these adjustments. The financial information
included in this announcement has been extracted from the audited financial
statements for the years ended 31 December 2007 and 2006. The content of this
announcement has been agreed with the Company's auditors.
This preliminary announcement does not constitute the Group's statutory accounts
within the meaning of Section 240 of the Companies Act 1985. The Group's 2007
Annual Report and Financial Statements, on which the Company's auditors,
PricewaterhouseCoopers LLP, have given an unqualified opinion in accordance with
Section 235 of the Companies Act 1985, are to be delivered to the Registrar of
Companies. The Group's 2006 accounts, which contain an unqualified audit report,
have been filed with the Registrar of Companies. Copies of the Group's 2007
Annual Report and Financial Statements will be posted to all shareholders during
March 2008.
2. REVENUE
Revenue, operating profits and net assets are derived from within the United
Kingdom and are from the Group's principal activity of the manufacture and
marketing of branded consumer products.
3. INCOME TAX EXPENSE
a) Analysis of charge in year
Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Current tax
UK corporation tax on profit for the year 2,340 1,984
Adjustment for prior years (29) (4)
-------- --------
2,311 1,980
-------- --------
Deferred tax
Deferred tax at 30% 95 (51)
Impact of change in UK tax rate (7) -
Adjustment for prior years 2 8
-------- --------
90 (43)
-------- --------
Income tax expense 2,401 1,937
======== ========
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
3. TAX ON PROFIT ON ORDINARY ACTIVITIES (continued)
b) Factors affecting tax charge for the year
The Income tax expense assessed for the year differs from the standard rate of
30% as set out below:
Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Profit on ordinary activities before taxation 8,089 6,414
------- --------
Profit on ordinary activities multiplied by the 2,427 1,924
standard rate of corporation tax in the
UK of 30% (2006 - 30%)
Expenses not deductible for tax purposes 23 24
Impact of small companies and marginal rate of tax (15) (15)
Adjustments for prior years (27) 4
Remeasurement of deferred tax for change in UK tax rate (7) -
------- --------
2,401 1,937
======= ========
During the year as a result of the change in UK corporation tax rates, which
will be effective from 1 April 2008, deferred tax balances have been remeasured.
Deferred tax relating to temporary timing differences have been measured at 30%
or 28% depending on the date at which the difference is expected to reverse.
c) Factors that may affect future current tax charges
Future tax charges are expected to approximate to profit multiplied by the
standard rate of corporation tax.
4. DIVIDENDS
Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Equity
- Final dividend of 1.3p per share for 2005 - 361
- Special dividend of 8.0p per share in 2006 - 2,221
- Interim dividend of 0.7p per share for 2006 - 194
- Final dividend of 1.8p per share for 2006 500 -
- Interim dividend of 0.9p per share for 2007 254 -
------- --------
Total Dividends 754 2,776
======= ========
The Directors have proposed a final dividend of 2.3p per share payable on 4 July
2008, making a total of 3.2p per share for 2007 (2006: 2.5p per share).
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
5. EARNINGS PER SHARE (continued)
Audited Audited
--------- ---------
2007 2006
------ ------
Earnings per share
Basic 20.3p 16.1p
Diluted 20.2p 16.0p
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of shares in issue during
each period.
Diluted earnings per share reflect the adjustment of the weighted average number
of ordinary shares in issue to assume conversion of all dilutive potential
ordinary shares, being certain outstanding share options.
Weighted average number of shares:
Audited Audited
--------- ---------
2007 2006
------ ------
For basic earnings per share 28,001,307 27,761,150
Share options dilution 95,913 291,157
--------- --------
For diluted earnings per share 28,097,220 28,052,307
========= ========
6.EQUITY
Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Profit for the financial year 5,688 4,477
Ordinary and special dividends (754) (2,776)
Share option expense 59 68
Tax on exercise of share options 287 -
Issue of share capital 543 -
Revaluation of freehold land and buildings 3,221 -
Deferred tax movement (1,117) 107
Remeasurement of deferred tax for change in UK tax rate 250 -
------- -------
Net addition to equity shareholders' funds 8,177 1,876
At 1 January 17,902 16,026
------- -------
At 31 December 26,079 17,902
======= =======
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
7. CASH GENERATED FROM OPERATIONS
Audited Audited
--------- ---------
2007 2006
------ ------
�'000 �'000
Operating profit 8,046 6,274
Adjusted for:
Depreciation and amortisation 566 578
Loss/(profit) on disposal of property, plant and equipment 17 (2)
Share option expense 59 68
Grant released from deferred income (27) (26)
Changes in working capital:
Increase in inventories (904) (622)
Increase in trade and other receivables (187) (778)
Increase in trade and other payables 906 710
------- --------
Cash generated from operations 8,476 6,202
======= ========
This information is provided by RNS
The company news service from the London Stock Exchange
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