REG - Heath(Samuel) & Sons - Final Results
21/07/2023 07:00
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RNS Number : 7215G Heath(Samuel) & Sons PLC 21 July 2023
HEATH (SAMUEL) & SONS PLC
21 JULY 2023
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2023 AND NOTICE OF AGM
CHAIR'S STATEMENT
As anticipated in the half year report, the second half proved to be more
difficult than the first half, with tightening market conditions adding to the
expected reductions in margins. However, given the uncertainties at the half
year, the overall result was better than we feared might be the case, also
taking into account that the previous year saw exceptional outperformance at
the profit level due to what we highlighted at the time to be unsustainably
low cost levels.
Total revenue for the year of £14.717m represented a 5% increase compared to
the prior year (2022: £14.015m). Operating profit for the year was £1.167m
(2022: £2.152m) and profit after tax £0.931m (2022: £1.472m).
The sales increase versus prior year occurred almost exclusively in the first
half, with sales decreasing in the second half compared to the first half
(£7.157m versus £7.560m). The USD exchange rate movement against Sterling
accounted for virtually all the increase. The order book held up reasonably
well during the year, but sales were held back by production difficulties
caused by machinery breakdowns and labour shortages.
As mentioned above, and in the half year report, profit margins have reduced
as the result of a number of factors. Machine breakdowns and maintenance have
been particularly disruptive, as some Computer Numerical Control (CNC) lathes
are coming to the end of their useful lives. Replacements have been ordered,
requiring new programming and tooling, but there are long lead times before
they can be fully commissioned. Shortages of skilled labour have also caused
delays and inefficiencies and, whilst the staffing situation has now improved,
new recruits require long training periods. Energy costs increased by £366k
(71%) year on year and general cost inflation also took its toll. The other
major cost increase arose from investment in sales and marketing resources:
selling and distribution costs increased by 22%, as a result of recruiting
more sales personnel, resuming attendance at international trade fairs, and
investing in new product development. The directors consider this investment
to be essential to secure the future health of the business.
The balance sheet continued to be robust, indeed more so than in the prior
year, with net assets increasing from £7.676m to £11.193m. The increase was
due to the reduction in the pension scheme deficit from £4.8min 2022 to
£0.5m in 2023 (calculated under IAS 19 rules), as a result of the increase in
interest rates and gilt yields. However, the most recent Actuarial Valuation
showed a deficit of £5.528m at 31 March 2022. The directors decided to ask
the scheme trustees to request an Annual Funding Update from the scheme
actuary as at 31 March 2023. This has been received and shows a deficit of
£1.030m.
Cash and cash equivalents decreased by £1.697m, from £4.410m to £2.717m.
Capital expenditure accounted for £1.163m, and mainly comprised the cost of
replacing production machinery. Also £311k was capitalised as product
development costs and £471k was spent increasing inventories as part of our
policy of securing supplies and avoiding supply chain disruption.
We have experienced some weakness in sales in the first quarter of the year to
31 March 2024. Anecdotal reports from our customers, both in the UK and North
America, indicate a marked downturn in their order books. We will need to wait
until after the usually quiet summer period to find out whether this is a
longer-term market issue. In any event, it seems unlikely that there will be
much good news on the macro-economic front, with the Bank of England
determined to raise interest rates and cool the economy down quickly. Growth
is slowing in the US market, although we currently have only a small market
presence and there are significant opportunities for us to increase our market
share.
The investment in new equipment will enable us to accelerate the cycle time
for getting new product ranges into the market. We have recently launched a
new range called 'The Forme Collection', which is generating much excitement
in our customer base. It combines a high quality, elegant design with more
efficient, lower cost production, and correspondingly lower price point, and
we are hopeful that this will assist in combatting any adverse market
conditions.
Much depends on the markets in 2023/24 and market conditions will not be
helpful at least for the first half, so we are expecting the order book to
decline and therefore some worsening in trading. We are still working through
historical orders. In the near term, production continues to be constrained by
the time it takes to bring new equipment up to speed and we are currently
having to work significant overtime to meet our order book. However, the
directors are hopeful that the actions they have been taking will give us a
fair chance of restoring growth in the second half year. I would like to
congratulate the executive management team for their pro-active approach in
meeting the challenges and also our loyal staff for working diligently to
provide an excellent service for our customers.
AR Buttanshaw
Chair
20 July 2023
DIVIDEND
The directors recommend the maintenance of the final dividend at 7.5626p per
share (2022: 7.5625p). The final dividend will be paid on 21 September 2023 to
shareholders on the register at the close of business on 4 August 2023. The
ex-dividend date for this payment is 3 August 2023.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement..
For further information:
Samuel Heath & Sons Plc
Simon Latham - Company Secretary +44 (0)121 766 4200
Cairn Financial Advisers LLP +44 (0)20 7213 0880
James Caithie/Jo Turner
________________________ CONSOLIDATED INCOME
STATEMENT_________________________
for the year ended 31 March 2023
2023 2022
Note
£000 £000
Revenue 3 14,717 14,015
Cost of sales (7,950) (6,975)
Gross profit 6,767 7,040
Selling and distribution costs (3,556) (2,917)
Administrative expenses (2,097) (1,986)
Other operating income 53 15
2,152
Operating profit 1,167
Finance income 34 10
Finance cost (133) (132)
2,030
Profit before taxation 1,068
Taxation 4 (137) (558)
Profit for the year attributable to owners of the Parent Company 1,472
931
Basic and diluted earnings per ordinary share 6 36.7p 58.1p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2023
2022
£000 £000
Profit for the year 931 1,472
Items that will not be reclassified to profit or loss:
Actuarial gain on defined benefit pension scheme 3,588 693
Deferred taxation on actuarial gain (891) (173)
Deferred tax rate change - 381
Revaluation of property, plant and equipment 293 -
Deferred Tax on revaluation (73) -
2,917 901
Total comprehensive income for the year 3,848 2,373
___________________________STATEMENTS OF FINANCIAL
POSITION_____________________
31 March 2023
Group
2023 2022
£000 £000
Non-current assets
Intangible assets 691 442
Property, plant and equipment 4,754 3,670
Investments - -
Deferred tax assets - 425
5,445 4,537
Current assets
Inventories 4,387 3,916
Trade and other receivables 1,629 1,836
Current tax receivable 37 -
Amounts owed by group undertakings
- -
Cash and cash equivalents 2,717 4,410
8,770 10,162
Total assets 14,215 14,699
Current liabilities
Trade and other payables (1,644) (1,982)
Amounts owed to group undertakings - -
Lease liabilities (62) (62)
Deferred tax liability (723) -
Current tax payable - (13)
(2,429) (2,057)
Non-current liabilities
Lease liabilities (56) (129)
Retirement benefit scheme (537) (4,837)
(593) (4,966)
Total liabilities (3,022) (7,023)
Net assets 11,193 7,676
Equity
Called up share capital 254 254
Capital redemption reserve 109 109
Revaluation reserve 1,220 1,186
Retained earnings 9,610 6,127
Total equity attributable to owners of the Parent Company 11,193 7,676
_________________ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
__________________
for the year ended 31 March 2023
Attributable to owners of the Parent Company
Share Capital redemption reserve Revaluation reserve Retained Total
capital Earnings Equity
£000 £000 £000 £000 £000
Balance at 31 March 2021 254 109 1,267 3,987 5,617
Equity dividends paid - - - (314) (314)
Profit for the year - - - 1,472 1,472
Reclassification of depreciation on revaluation - - (81) 81 -
Other comprehensive income for the year - - - 901 901
Total comprehensive income for the year - - (81) 2,454 2,372
Balance at 31 March 2022 254 109 1,186 6,127 7,676
Total transactions with owners
Equity dividends paid - - - (331) (331)
Profit for the year - - - 931 931
Reclassification of depreciation on revaluation - - (81) 81 -
Other comprehensive income for the year - - 115 2,802 2,917
Total comprehensive income for the year - - 34 3,814 3,848
Balance at 31 March 2023 254 109 1,220 9,610 11,193
-
-
-
(314)
(314)
Profit for the year
-
-
-
1,472
1,472
Reclassification of depreciation on revaluation
-
-
(81)
81
-
Other comprehensive income for the year
-
-
-
901
901
Total comprehensive income for the year
-
-
(81)
2,454
2,372
Balance at 31 March 2022
254
109
1,186
6,127
7,676
Total transactions with owners
Equity dividends paid
-
-
-
(331)
(331)
Profit for the year
-
-
-
931
931
Reclassification of depreciation on revaluation
-
-
(81)
81
-
Other comprehensive income for the year
-
-
115
2,802
2,917
Total comprehensive income for the year
-
-
34
3,814
3,848
Balance at 31 March 2023
254
109
1,220
9,610
11,193
___________________________STATEMENTS OF CASHFLOWS
_____________________________
for the year ended 31 March 2023
Group
2023 2022
£000 £000
Cash flow from operating activities
Profit for the year before taxation 1,068 2,030
Adjustments for:
Depreciation 401 359
Amortisation 107 50
Loss on disposal of property, plant and equipment 41 4
Net finance costs (34) (12)
Defined benefit pension scheme expenses 166 170
Contributions to defined benefit pension scheme (877) (1,036)
Operating cash flows before movements in working capital 872 1,565
Changes in working capital:
(Increase) in inventories (471) (234)
Decrease in trade and other receivables 170 272
(Decrease)/increase in trade and other payables (338) 195
Cash generated from operations 233 1,798
Taxation paid - -
Net cash generated from operating activities 233 1,798
Cash flows used in investing activities
Payments to acquire property, plant and equipment (1,167) (444)
Proceeds from the sale of property, plant and equipment 41 11
Payments to acquire intangible assets (357) (306)
Net finance income 34 12
(1,449) (727)
Cash flows from financing activities
Lease payments (58) (46)
Dividends paid (331) (314)
CBILS Loan received - 950
CBILS Loan repaid - (950)
(389) (360)
Net (decrease)/increase in cash and cash equivalents (1,605) 711
Cash and cash equivalents at beginning of year 4,410 3,682
Effect of exchange rate differences on cash and cash equivalents (88) 17
Cash and cash equivalents at end of year 2,717 4,410
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation
The Group has prepared its consolidated financial statements for the year
ended 31 March 2023 in accordance with UK-adopted International Accounting
Standards. The accounting policies applied are consistent with those included
in the financial statements of the Group for the year ended 31 March 2022.
The financial information contained in this preliminary announcement does not
constitute the Group's statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The annual report and financial statements for the year ended 31 March 2023
were approved by the Board of Directors on 20 July 2023 along with this
preliminary announcement. The annual report and financial statements will
be delivered to the Registrar of Companies after the Annual General Meeting.
The statutory accounts of Samuel Heath & Sons PLC for the year ended 31
March 2022 have been delivered to the Registrar of Companies. The auditor's
reports on the statutory accounts for the years ended 31 March 2023 and 31
March 2022 were unqualified and did not contain a statement under section 498
of the Companies Act 2006.
2. Critical accounting and key sources of estimation
Critical accounting estimates, assumptions and judgements
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates and assumptions will, by definition, seldom
equal the related actual results. The Group has evaluated the estimates and
assumptions that have been made in relation to the carrying amounts of assets
and liabilities in these financial statements.
The key accounting judgements and sources of estimation uncertainty with a
significant risk of causing a material adjustment to assets and liabilities in
the next 12 months include the following:
Pensions - movements in equity markets, interest rates and life expectancy
could materially affect the level of surpluses and deficits in the defined
benefit pension scheme.
Valuation of property, plant and equipment - the Group reviews the value,
useful economic lives and residual values attributed to assets on an on-going
basis to ensure they are appropriate. Changes in market value, economic lives
or residual values could impact the carrying value and charges to the income
statement in future periods.
Provisions - using information available at the balance sheet date, the
Directors make judgements based on experience on the level of provision
required against assets, including inventory where the provision is reviewed
against expected future stock usage, the stock provision at year end was
£2.512m (2022: £2.211m).
Research and development - the Group reviews the projects worked on during the
year and capitalises the costs of those projects deemed to generate profits in
future years, £311,000 was capitalised in the year (2022: £276,000). The
Company takes full advantage of available taxation support.
Deferred tax assets - deferred tax assets are recognised to the extent that it
is probable that taxable profit will be available against which the losses can
be utilised. Management judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon the likely timing and
level of future taxable profits.
3. Revenue by geographic market
2023 2022
£000 £000
Overseas 7,276 6,687
UK 7,441 7,328
14,717 14,015
4. Income taxes
2023 2022
£000 £000
Current taxes:
Current year - 32
Adjustments in respect of prior periods (41) 2
(41) 34
Deferred taxes:
Origination and reversal of temporary differences 211 348
Change in tax rate - 152
Adjustments in respect of prior periods (33) 24
178 524
Total income taxes 137 558
Corporation tax is calculated at 19% (2021: 19%) of the estimated assessable
profit for the year.
Tax reconciliation
2023 2022
£000 £000
Profit for the year 1,068 2,030
Corporation tax charge thereon at 19% (2022: 19%) 203 386
Adjusted for the effects of:
Prior year adjustments (73) 26
Research and development claim - (68)
Changes in tax rates 68 152
Revaluation (73) -
Other adjustments 12 62
Total income taxes 137 558
5. Dividends
2023 2022
£000 £000
Final dividend for the year ended 31 March 2022 of 7.5625 pence per share 192 175
(2021: 6.875 pence per share)
139
Interim dividend for the year ended 31st March 2023 of 5.50 pence per share 139
(2022: 5.50 pence per share)
331 314
The directors are recommending a final dividend for 2023 of 7.5625 pence per
share amounting to £192,000. The proposed final dividend is subject to
approval at the Annual General Meeting and hence has not been included as a
liability in these accounts.
6. Earnings per share
The basic and diluted earnings per share are calculated by dividing the
relevant profit after taxation of £931,000 (2022: £1,472,000) by the average
number of ordinary shares in issue during the year being 2,534,322 (2022:
2,534,322). The number of shares used in the calculation is the same for both
basic and diluted earnings.
7. Exceptional items
There were no exceptional costs for 2023.
8. Notice of annual general meeting
Notice is hereby given that the 2023 Annual General Meeting of the Company
will be held at the registered office of the Company, Leopold Street,
Birmingham, on 7 September 2023 at 12.00 noon.
9. Posting of accounts
The report and accounts are being posted to shareholders today where
requested, and are available on the Company's website, at
www.samuel-heath.com/investor-relations
(http://www.samuel-heath.com/investor-relations) .
Note:
Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not a guarantee of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.
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