1997 Annual Report

Transcription

1997 Annual Report

Pittards plc Annual Report & Accounts 1997
Pittards plc produces technically advanced leather for many of the world’s
leading brands of gloves, shoes, luxury leathergoods and sports equipment.
Results in brief
Turnover
Profit on ordinary activities before interest
Interest - net
1997
1996
£'000
£'000
101,573
109,063
3,768
4,687
(1,137)
(1,054)
Profit before taxation
2,631
3,633
Net bank borrowings
10,437
9,907
Shareholders’ funds
24,602
23,305
Pence per share
Earnings per ordinary share
9.4
13.3
Dividend per ordinary share
3.5
3.25
99.3
93.3
Net assets per ordinary share
1
2
Chairman’s statement
making with the interim dividend of 1.0p
already paid, a total distribution for the year of
3.5p (1996: 3.25p). This is an increase of 7.6%
and the dividend is covered 2.7 times.
If approved by the shareholders the final
ordinary dividend will be paid on 15 May 1998
to shareholders on the register on 14 April 1998.
The Glove Leather Division had an excellent
Robert
Tomkinson
Chairman
year with increased demand from nearly all its
customers. Divisional turnover was 7% ahead
of last year and the bulk of this growth came
in export volumes, particularly of high
Following a particularly difficult second half
performance leather for major sports brands in
of 1997, I report the profits before tax for the
golf, baseball and American football.
year as £2.6m (1996: £3.6m). A solid
The increased level of production was achieved
improvement in profit by the Glove Leather
whilst completing the major investment
Division was more than offset by adverse
programme in new chemical processing
results in the Shoe & Leathergoods Division
technology. During the second half of the
flowing from harsh trading conditions.
year, we began to see the beneficial effects of
Group turnover for 1997 amounted to
£101.6m. The decline from the 1996 figure of
£109.1m is attributable to lower volume in
the Shoe & Leathergoods and the Raw
Materials Divisions.
Operating profits were £2.8m (1996: £4.7m)
and there was an exceptional gain of £0.9m
representing the profit on sales of surplus
property during the year. Interest costs were
similar to last year at £1.1m despite higher
interest rates. After tax and preference
dividends, earnings per share were 9.4p (1996:
13.3p). Bearing in mind the successful
completion of the programme to dispose of
surplus properties, the board is recommending
an unchanged final ordinary dividend of 2.5p
this investment in greater consistency of
production combined with lower chemical and
energy costs. We continue to invest in new
machinery in this division to maintain its
world market leadership.
At the beginning of the year the Shoe
& Leathergoods Division completed its
reorganisation on time, but as explained in the
interim statement, at greater cost than planned.
The expected overhead savings have been
export of a substantial number of unprocessed
achieved, but this has been masked by losses
sheepskins from the UK direct to overseas
attributable to the sharp decline in volume in
manufacturers. The result of these two factors
the second half which mainly flowed from a
has been a reduction in turnover and profits
general downturn in demand from
for this division.
international markets for shoes and
leathergoods and also from exchange rate
effects. The strong pound affected sales to our
overseas customers, and also influenced our
sales to certain UK customers who addressed
the competitive pressures in their domestic
and export markets by resourcing more of
their supplies from outside the UK. The
difficulties caused by reduced demand in the
second half of the year were exacerbated by a
decline in the quality of hides available to the
Group. We have developed a product range
for the current year that is more tolerant of
variations in hide quality. Nevertheless, to
achieve the quality of our output, we are
having to resource more hides from overseas
at greater cost.
Net bank borrowings at 31 December 1997
amounted to £10.4m (1996: £9.9m)
representing approximately 42% of
shareholders’ funds. We successfully concluded
the programme to sell our remaining surplus
properties during the year. We completed the
sale of three properties and received cash
proceeds totalling £0.6m. Conditional
contracts for the sale of the property at
Abingdon were exchanged in May 1997 for
£2.8m and the planning condition was
satisfied in December. The proceeds, which are
included in debtors in the balance sheet, were
received in January. Had they been received
by the year end the gearing would have been
31% which would have achieved the Group’s
medium term borrowing target set some
In the light of the substantial loss incurred in
the division in the second half of the year we
have changed the management and taken
measures to reduce costs. These have included
a reduction in manpower at all levels in the
division to reflect more closely the current
level of demand.
In the Raw Materials Division the volume of
skins coming forward for processing in our
factories has been at a considerably lower level
than in prior years. This has been due to two
major factors - the low volume of sheep
available for slaughter as farmers held them
back in the hope of better prices, and the
years ago.
I took over as Chairman from David
Macdonald in October 1997, having joined
the board in July 1997. I and my fellow
members of the board would like to pay
tribute to David for his leadership of the
company over the past twelve years.
3
4
Some of these years have been extremely
difficult and all the members of the board
have welcomed his advice and guidance;
we wish him well in his retirement in New
The Titleist Players Glove worn by Tiger
Woods is made of Pittards APL 300 leather.
Zealand. In April 1997 Aidan Creedon left the
company after nine years on the board.
W e thank him for his contribution during this
period. Robert Perkins, who joined the
company from our major customer, Clarks, in
faces up to the difficult task of pulling its
June 1996, took over the running of the Shoe
business back into profit. Initially, any
& Leathergoods Division in April 1997.
improvement in its performance is likely to be
In December 1997 he left the company to
as a result of greater operating efficiency
pursue other interests and Tony Marriott, who
rather than increased turnover. The Raw
had run the Glove Leather Division for the
Materials Division is only now seeing the
last seven years, was appointed Chief
benefit of some of the volume held back from
Executive of the Shoe & Leathergoods
last year. Whilst lower borrowings will reduce
Division. Reg Hankey, who had been Technical
our exposure to higher interest rates, the
Director of the Glove Leather Division for the
current relative strength of sterling and the
last seven years, took over as Chief Executive
generally unsettled economic climate around
of this division and joined the board in
the world suggest that 1998 will be a testing
January 1998. In addition to these changes,
year for us, especially in the first half.
we are planning to make further nonexecutive appointments to the board in the
coming months.
During a very difficult year the skills and
expertise of our staff have been tested to the
full but their dedication and hard work has
helped us achieve our service to our customers
Robert Tomkinson
and maintain our technical leadership.
Chairman
Against a background of considerable
11 March 1998
uncertainty in many of the markets where
our end products are sold, the Glove Leather
Division has made a confident start to the
new year whilst the Shoe & Leathergoods
Division, which is currently trading at a loss,
Operational and financial review
i t t a r d s is a strong and internationally
P
respected brand within the leather, glove,
shoe and leathergoods industries, and is
synonymous with innovative, high performance
leather. The Group’s strategy is to build on
the brand’s strength, and through clearly
focused research and advanced technology to
establish leading market positions for its
leathers that are clearly differentiated from
competing materials.
The strategic review undertaken during 1996
concluded that demand for luxury leathergoods
and high performance shoes and gloves will
continue to grow globally over the next ten
years, albeit subject to cyclical variations.
The Group is well placed to meet this growing
requirement for technically advanced leather
through its three market-orientated divisions.
Each division works closely with its customers,
many of whom are themselves market leaders,
and with key suppliers of raw material.
GLOVE LEATHER DIVISION
The division produces leather for some of the
world’s best known brands of sports and dress
gloves at its factory in Yeovil, Somerset.
88% of its sales are to export markets, an
achievement which was highly commended in
this year’s ‘Exporter of the Year’ Awards.
It enjoys a degree of insulation from the
strength of sterling in that a high proportion
of its sales, and virtually all its raw material
purchases, are denominated in US dollars.
A record volume of leather was sold by the
division during the year, a substantial
proportion of which was for sports gloves.
To the market leading Sta-Sof golf glove,
made exclusively from Pittards APL300 leather,
Foot-Joy have added the Spider glove.
Targeted at the younger golfer, it features
Pittards graphite-enhanced textured leather for
improved grip and greater durability.
The Titleist Players glove, worn by Tiger Woods
The importance of such supply chain
and featuring Pittards leather, also advanced in
partnerships will increase as the influence of
volume during the year. Sales to the Japanese
major global brands continues to grow.
market were given new impetus by the
introduction of a special extra thin golf glove
leather to Kasco.
Carbon fibre digital leather for baseball batters
Pearl lzumi Sirocco fleece gloves
incorporate Pittards WR100X leather palms
with embossed ‘iP’ logo.
gloves, launched towards the end of last year,
has helped to consolidate Franklin’s leading
position in major league baseball.
Graphite leather technology has been extended
into other sports areas, and into Pearl lzumi
Provided by Pearl lzumi/John Kelly Photography
cycle gloves in particular, while the Nike
football glove incorporating ‘Touch Down’
high-grip leather continues to dominate
American football.
7
Division, is vulnerable to the strength of
Pittards Challenge boat shoe leather is a direct
development of the Group’s involvement as
official shoe and glove leather supplier to the
1996-97 BT Global Challenge yacht race
sterling. In the first half year, demand was
strong, but progress was hampered by
production difficulties following the extension
of manufacturing facilities at Leeds towards
the end of 1996. Although the lower
overheads resulting from this investment have
reduced the division’s operational gearing, the
benefits were masked by the heavy initial costs
Useful advances were made in the branded
dress glove sector, particularly in Japan with
of training new recruits and bedding down
more than one hundred items of machinery.
Kenzo and YSL, and also with Courrèges,
In the second half, the division incurred
Balenciaga and Charles Jourdan.
significant losses as volumes fell away in the
face of high inventories at some customers,
The division received good supplies of hair
sheepskins at stable prices from its main
sources in Africa. New sources of raw material
and the substitution of cheaper imports at
others.
are being evaluated in order to support the
Sales of leather for sport shoes held up well.
planned growth in output. The division’s
The division is the exclusive supplier of upper
overseas technical development team works
and lining leather for Foot-Joy’s DryJoy golf
with suppliers to improve the quality and
shoes, the global market leader. The shoes have
consistency of their initial processing of the
a unique combination of Pittards WR 2000 TC
raw material.
upper leather and lining, which gives the
optimum balance between water repellency
The substantial investment in new computercontrolled chemical processing technology was
completed during the year, as was an extensive
reorganisation of the research and
development
facilities.
and breathability, without incorporating a
membrane. The leather is also used in the
recently launched soft spike range of premium
waterproof Foot-Joy golf shoes.
Sales of soccer leather - particularly to Puma -
SHOE AND LEATHERGOODS DIVISION
have been strong in the lead up to the 1998
W orld Cup. Volumes should grow in the
The division produces leather for shoe uppers,
leathergoods and saddlery at its factory in
Leeds, Yorkshire. About half its output is
exported.
1997 was an exceptionally difficult year for
the division, which, lacking the natural
currency hedge enjoyed by the Glove Leather
current year with the introduction of the
successor product to Soccer 2000, and also of
a product targeted at top amateur players.
9
10
One highlight was the successful launch of
Challenge boat shoe leather, a direct
development of the Group’s involvement in the
BT Global Challenge round the world yacht
race. This is the highest performance boat shoe
Puma King soccer shoes incorporate Puma’s
cell technology and Pittards WR100
Soccer 2000 lightweight sports leather.
leather available, and is incorporated in the
premium ranges of Timberland and Rockport
boat shoes, among others.
The year has been especially tough for
The fall in demand in the second half, and the
manufacturers of luxury leathergoods. Sluggish
strength of sterling, meant that the division
demand in Europe and Asia affected most
operated at a loss. To reduce costs in line with
market leaders and resulted in the build-up of
current demand, firm action has been taken,
inventories during the first half, followed by
including a significant reduction in manpower.
destocking in the second.
RAW MATERIALS DIVISION
Considerable investment was made in
technical development and innovation. The last
The division part processes hides and
year has shown once again the competitive
sheepskins from UK abattoirs at its two
advantage of leathers which are clearly
factories in Scotland, and sells them to leather
differentiated through performance benefits.
producers throughout the world.
Current development projects include a
revolutionary new tannage capable of
delivering substantial benefits to the sports
footwear market, and new lamination
techniques for leather to leather for saddlery,
and leather to other materials, including Lycra,
for a variety of end uses.
Sales of pickled and wet blue sheepskins for
nappa garment leather were reasonably good
in the early part of the year. Interest from
China, the dominant market for garment
leather, was initially strong, but rapidly fell
away, as did sales to Italy, Spain and Korea.
While sales for nappa remained low for most
The growing incidence of parasite damage on
of the year, the demand from Turkey and
UK hides also led to higher costs, as more
Poland for double face (unprocessed wool-on
expensive hides had to be purchased abroad in
sheepskins) was very strong.
order to meet customer requirements.
The division and its raw material suppliers are
investigating how the farming industry can be
influenced in the medium term to improve
cattle husbandry and, consequently, hide
quality. Meanwhile, a range of leathers has
been developed that is more tolerant of
variations in hide quality.
12
With reduced nappa demand and more than
rely only on hides and skins that are
60% of available sheepskins going to double
by-products of the meat, wool and dairy
face, throughput at the division’s factories fell
industries, and support humane methods
well below capacity. Raw material supplies
of farming, animal transportation
were restricted partly by the demand for
and slaughter.
double face, partly by the reluctance of
farmers to bring sheep forward in the face of
poor prices for meat.
While each division has its own environmental
management system, major common initiatives
are taken by a cross-divisional technical team
The full impact of the difficult conditions in
to ensure co-ordinated action and the
the sheepskin market was partially offset by a
exchange of experience and best practice.
solid contribution from the division’s wet blue
Originally the systems were set up to prepare
hide business.
the business for BS7750 accreditation but, by
ENVIRONMENTAL POLICY
aim at ISO14001. This is a quality standard for
1995, it was felt it was more appropriate to
an international environmental management
The Group is committed to:
system, which helps to reduce material usage
meet and better relevant environmental
and energy costs, as well as environmental
standards
impacts.
use waste and by-products in a creative
In December, the Glove Leather Division
and beneficial way, or, where this is
became one of the first leather manufacturers
impractical, ensure proper disposal and
monitoring
in the world to receive accreditation to
minimise the use of all materials, supplies
and energy. Wherever possible, use
renewable or recycleable materials and
ISO14001. It did so ahead of the Shoe &
Leathergoods Division, whose efforts have been
temporarily delayed by its recent
reorganisation.
components
maintain a research and development
activity aimed at more efficient and
environmentally more acceptable
technology
consider the environmental implications
of all investment proposals
Pittards is a supplier of leather to the Louis
Vuitton range of luxury leathergoods, much
of which features the distinctive ‘Epi’ print.
14
FINANCIAL REVIEW
Geographic spread of sales (£m)
Although all its manufacturing activities are in
the UK, Pittards is an international business.
Of its £101.6m sales in 1997, £61.8m (61%)
were to overseas markets of which more than
half went to the Far East. This puts the Group
among the top one hundred or so UK
exporters. Approximately 20% of the hides
and skins that the Group processes are
purchased from overseas. Two thirds of
Profit before tax (£m)
exports and the majority of imports are
denominated in currencies other than sterling
(mainly US dollars). While Group policy is to
hedge all transactions creating foreign
currency cash flows by using currency
accounts and forward contracts, nevertheless
variations in exchange rates and, more
particularly, a strong pound, can have a
substantial impact on the Group’s business.
Shareholders’
funds
(£m)
The increasing strength of sterling in the first
half of the year and its continued high level
in the second, especially in relation to EC
currencies, plus the financial problems in East
Asia, were significant factors in reducing the
Group’s operating profit to £2.8m from £4.7m
in the previous year, and have affected the
Shoe & Leathergoods Division’s performance
in particular.
There was an exceptional gain of £0.9m
remaining former tannery sites were sold, one
during the year, arising from the sale of
of them subject to planning permission.
surplus properties. All five of the Group’s
The cash generated by these sales amounted
to £0.6m during the year, with £2.8m before
expenses being received for the Abingdon site
in January.
Interest costs at £1.1m were similar to last
Dividends per share (pence)
year despite the five increases in interest rates
during the year. An 8% LIBOR cap, covering
approximately half the Group’s borrowings, is
in place through to mid-1999.
The tax charge of £0.3m at 11%, of pre-tax
profit of £2.6m (1996: £0.5m - 13% of
£3.6m) mainly represents ACT written off on
the year’s preference and ordinary dividends.
The losses available to carry forward against
Earnings per share (pence]
future profits are approximately £4.2m.
The proposed total dividend for the year of
3.5p (1996 - 3.25p) is covered 2.7 times by
earnings per share of 9.4p (1996 - 13.3p).
The transfer to reserves of £1.3m (1996 £2.2m) brings shareholders’ funds to £24.6m
and net assets per ordinary share to 99.3p
(1996 - 93.3p).
Net bank borrowings were £10.4m at the end
of the year, including a term loan of £5.7m,
and represent 42% of shareholders’ funds.
£2.6m net of expenses and discounting costs
was received in respect of the sale of the
Abingdon site in January.
Capital expenditure during the year totalled
£4.4m and related to the completion of the
consolidation of Shoe & Leathergoods
production at Leeds, and the modernisation of
the Glove Leather processing and research
facilities in Yeovil. The investment was funded
largely by the proceeds from the sales of
surplus properties over the last two years.
15
16
Directors, officers and advisers
†*§ R C Tomkinson
MA, FCA, FCT Chairman, non-executive
*§ J W W Pittard
Managing
Director
Robert Tomkinson (56) joined the Group as a non executive
John Pittard (53) joined the Pittard Group in 1963.
director in July 1997 and was appointed Chairman in
He was appointed Group Managing Director in 1980.
October 1997. He is a non executive Deputy Chairman of
He is a non-executive director of the Shoe and Allied
Jardine Lloyd Thompson Group, non executive Chairman of
Trade Research Association and a member of the South
Hutchinson Smith and a member of the council of the
West Regional Council of the CBI
University of Buckingham. Until he retired in July 1997 he
was for 11 years Group Finance Director of
Electrocomponents, the major electronic and electrical
components distribution group.
R H Hankey
FSLTC, LCGI
A G Marriott
PhD, MSc, GPRI
Reg Hankey (42) was appointed Chief Executive of the
Tony Marriott (57) joined the board in 1990 and was
Glove Leather Division In December 1997, and joined the
Chief Executive of the Glove Leather Division until
board in January 1998. He jolned the Glove Leather
transferring to a similar role in the Shoe & Leathergoods
Division as Technical Director In 1990 from a similar
Division in December 1997. He joined the Group in 1978.
position within the leather industry. He IS a non-
He is President and a non-executive director of the
executive director of the British Leather Confederation.
British Leather Confederation.
†
Member of the audit committee
Registered office
*
Member of the remuneration committee
Sherborne Road, Yeovil, Somerset BA21 5BA
§
Member of the nomination committee
Financial advisers
SBC Warburg Dillon Read, 2 Finsbury Avenue,
London EC2M 2PA
J H Buckley
LLB. FCA, MCT
§* J A Fooks
JP. MA, FCA. Non-executive
John Buckley (50) was appointed Group Financial Director
John Fooks (64) became a non-executive director of
on joining the Group in 1986 from a similar role in the
Pittards in 1987. He joined the Garnar Booth Group in
food industry.
1970, became a director in 1972, and was appointed
Chief Executive of Garnar Booth in 1986. He is Chairman
of East Surrey Holdings and a non-executive director of
the Bradford Property Trust, Warner Estate Holdings and
the Water Companies (Pension Fund) Trustee Company.
R Paisley
Mrs J Williams
LLB, ACA. Company Secretary
Robert Paisley (57) joined the Garnar Booth group in 1959
Jill Williams (40) joined the Group as Finance and Planning
and was appointed a director in 1977. He was appointed
Manager in 1989. She was appointed Company Secretary
Chief Executive of the Raw Materials Division and to the
In 1991.
board in May 1997.
Auditors
Solicitors
Ernst & Young, Chartered Accountants, Becket House,
Allen & Overy, 1 New Change, London EC4M 9QQ
1 Lambeth Palace Road, London SE1 7EU
Stockbrokers
Registrars
SBC Warburg Dillon Read, 1 Finsbury Avenue,
Northern Registrars, Northern House, Penistone Road,
London EC2M 2PP
Fenay Bridge, Huddersfield HD8 0LA
17
18
Directors’ report
The directors submit their report together with the audited financial statements for the year ended 31 December 1997.
Principal activities
The principal activities of the Group are the production of technically advanced leather for sale to manufacturers and
distributors of shoes, gloves, luxury leathergoods and sports equipment, and the trading of hides and skins.
Results and dividends
Group results are summarised in the consolidated profit and loss account on page 27. For a review of operations and future
developments, see pages 7 to 15.
An interim ordinary dividend of 1.00p has been paid in respect of 1997 (1996 - 0.75p per share). The directors
recommend that a final ordinary dividend of 2.50p per share (1996 - 2.50p per share) amounting to £545,000 (1996 £544,000) be paid which, after preference dividends of £285,000, leaves a profit of £1,283,000 to be transferred to reserves.
Subject to approval at the Annual General Meeting, the final dividend will be paid on 15 May 1998 to shareholders on the
register at close of business on 14 April 1998.
Fixed assets
Changes in fixed assets during the year are summarised in the notes to the financial statements.
Completion on the surplus property at Odell took place as scheduled on 30 June 1997. Production at Welshpool Hide & Skin
was transferred to the Leeds factory during April and the property was sold on 18 July 1997. Completion took place on the
former fellmongery operated by Lederfabriek Roorda BV in the Netherlands on 23 December 1997. The planning conditions
to which the contract entered into on the Pavlova Leather Company factory were subject, were fulfilled on 23 December
1997, and completion took place on 27 January 1998. Contracts conditional on the obtaining of satisfactory planning
permission were exchanged on the former Odell, Wilson & Tilt property in Northampton on 7 November 1997.
Research and development
The Group recognises the importance of continuous product and process development in maintaining its reputation for
innovative high performance leathers. It works closely with both customers and suppliers to develop clearly differentiated
products using advanced technology.
Substantial interests
In addition to those disclosed under directors’ interests, the Company has been notified of the following interests under
section 211 Companies Act 1985 as at 11 March 1998:
Eaglet Investment Trust plc
1,238,884
(5.68%)
Fidelity International Ltd
2,119,800
(9.72%)
T R Smaller Companies Investment Trust plc
1,600,000
(7.34%)
Fleming Investment Management Ltd
3,550,000 (16.29%)
19
Directors’ report
Directors
The persons named on pages 16 and 17 are the present directors. R Paisley was appointed a director on 7 May 1997,
R C Tomkinson was appointed a director and chairman elect on 7 July 1997 and R H Hankey was appointed a director on
5 January 1998: they will offer themselves for election at the forthcoming Annual General Meeting. A G Marriott retires by
rotation and offers himself for re-election. A P M Creedon resigned from the board on 2 April 1997, R C Perkins was
appointed a director on 7 May 1997 and resigned on 16 December 1997 and D C Macdonald retired as director and
chairman on 30 September 1997. R H Hankey and A G Marriott have service contracts which require two years’ notice
of termination.
Directors’ interests
The directors at the end of the year and their interests in the shares of the Company were:
AT END OF YEAR
Ordinary Shares of 25p
AT BEGINNING OF YEAR OR DATE
OF APPOINTMENT IF LATER
Ordinary Shares of 25p
NonBeneficial
fully paid
J H Buckley
J A Fooks
12,000
-
beneficial
fully paid
200
Options
Beneficial
fully paid
Nonbeneficial
fully paid
Options
35,000
35,000
-
12,000
200
30,000
20,000
-
A G Marriott
10,000
5,000
-
50,000
10,000
-
50,000
R Paisley
12,015
-
35,000
12,015
-
35,000
J W W Pittard
390,061
R C Tomkinson
10,000
849,197
-
65,000
-
415,061
-
849,197
-
65,000
-
No changes took place in the interests of directors in the shares of the Company between 31 December 1997 and 11 March
1998. Details of directors’ interests in the restricted share plan can be found on page 22.
Annual General Meeting
A special resolution (number 5) will be proposed which will enable the directors to make rights issues, and to allot unissued
shares for cash otherwise than to existing shareholders up to a nominal amount of £272,470 (being 5 per cent of the
Company’s current issued share capital) as permitted by the London Stock Exchange regulations and Investment Protection
Committee guidelines until the 1999 Annual General Meeting. Other than the allotment of ordinary shares under the terms
of the Group’s various employee share option schemes, the directors have no present intention of exercising the authority to
allot further relevant securities.
Creditor payment policy
The Group does not follow a particular code for the payment of suppliers. It is the Group’s policy in respect of major
suppliers to settle terms of payment when the terms of each transaction are agreed, to ensure the supplier is made aware of
the terms of payment and to abide by the terms of payment. For small local suppliers the policy is to pay within 45 days of
invoice and for other suppliers to pay within 60 days. Trade creditors at the year end represented 40 days’ purchases.
20
Directors’ report
Charitable donations
During the financial year the Group made contributions to UK charitable organisations of £16,315. No political donations
were made during the year.
Employment of disabled persons
Every consideration is given to the employment, training and career development of the disabled and those who have
become disabled during employment, having regard to their particular aptitudes and abilities.
Employee consultation
The Group recognises the need for good communications with employees and places great importance on employee
involvement. Joint consultative committees have been active for many years and management training lays emphasis on the
skills and attitudes required for clear communications and consultation.
Matters of particular interest or importance are communicated to all employees through special briefing meetings.
Auditors
Ernst & Young have expressed their willingness to continue in office and a resolution for their re-appointment will be
proposed at the forthcoming Annual General Meeting.
By order of the board
J Williams, Secretary
11 March 1998
Report of the remuneration committee
The remuneration committee which is composed of the two non-executive directors and the group managing director,
submits its report for the year ended 31 December 1997. The remuneration committee determines the remuneration of
executive directors and senior executives of the Company. The group managing director is not present when his own salary
is being discussed. The remuneration of non-executive directors is determined by the full board.
Policy
The salaries of executive directors are determined after a review, normally carried out annually, of the performance of the
individual. The committee seeks to reward directors competitively and on the broad principle that their remuneration
package should be based around the median remuneration and benefits enjoyed by senior managers of manufacturing
businesses of comparable size. For guidance the committee uses specific job matched remuneration surveys published by
employee benefit consultants. The committee has given full consideration to Section B of the best practice provisions
annexed to the Listing Rules.
Bonus
Up to 31 December 1995 the executive directors participated in the Company’s staff profit sharing bonus scheme.
Under that scheme, annual bonuses, which are not pensionable, are calculated by reference to formulae based on divisional
pre-tax profit, wages and turnover, and are normally paid in March. The bonuses paid in 1996, and Included in the table of
directors’ remuneration in last year’s remuneration committee report, were in respect of the Company’s and divisions’
performances in 1995.
From 1 January 1996, the executive directors have participated in the Pittards senior executive reward plan. The plan is
administered by the remuneration committee and is made up of two parts: the Pittards senior executive bonus plan and the
Pittards restricted share plan. For 1996, the committee set individual performance criteria governing the calculation of the
bonuses payable to the executive directors for that year. At the end of the year, the committee reviewed the performance of
the individual against the criteria and calculated the amount of bonus which each participant earned during that year. For
1997, the committee reverted to formulae based on divisional and group pre-tax profit, return on capital, wages and
turnover. The bonuses for 1997 set out in the table of directors’ remuneration below, are those which were earned in respect
of 1997 but not paid until March 1998. The 1996 comparatives have been restated to include the bonus earned in 1996
rather than the bonus paid in that year.
Participants may elect to receive their bonus in cash. If no such election is made, the participant’s bonus is divided into
three parts. Two thirds of the bonus is paid in cash with the participant’s March salary. The remaining third of the bonus
will be paid in the form of awarded shares through the restricted share plan. The participant will receive further shares
(‘matching shares’) to match the shares he is paid as part of his bonus, again through the restricted share plan. These
matching shares will usually be given on a two for one basis.
The money that is to be used to purchase Pittards plc shares under the restricted share plan is paid to the trustees of the
Pittards employee share ownership trust. The trustees hold the shares for a restricted period of up to five years. The number
of shares which actually vest is determined by the Company’s performance during the restricted period. Matching shares
will only vest if the following performance conditions determined by the committee are satisfied:
•
the Company’s earnings per share must increase by at least 10% per annum compound over the restricted period; and
•
the Company’s return on assets must have reached at least 15% in one year of the restricted period; and
•
the Company’s total net cash flow over the restricted period must be positive.
The relevant figures included in the report and accounts for each year will be used to determine whether the performance
conditions have been achieved.
21
22
If the first condition set out above has not been satisfied at the end of the restricted period, the restricted period will
be extended for up to two more years. If that performance condition has not been satisfied by the end of the fifth year
after the shares were awarded the matching shares will lapse and will be forfeit. The awarded shares will vest with the
participant at the end of the restricted period.
The awards under the Pittards senior executive reward plan were made by the remuneration committee, in respect of 1997.
at their meeting on 9 March 1998. The amounts awarded under the bonus scheme, and due for payment at the end of
March 1998, and the amounts to be paid over to the trustees of the Pittards employee share ownership trust for the
purchase of awarded shares and matching shares under the restricted share plan and the number of shares held by the
trustees relating to the 1996 awards were as follows:
Bonus
Restricted share plan
1997
J H Buckley
A G Marriott
J W W Pittard
1996 - Held by trustees
1997
Cash
Awarded shares
Matching shares
Awarded shares
Matching shares
£’000
£’000
£’000
Number of shares
Number of shares
4
4
-
7,514
15,027
19
2
-
6,734
5
3
5
10,086
13,469
20,171
The non-executive directors do not participate in the staff profit sharing bonus scheme or in the senior executive
reward plan.
Directors’ remuneration
Salary
Bonus including
Compensation for
1997
1996
awarded shares
loss of office
Total
Total
£’000
£’000
£’000
£’000
£’000
70
5
-
81
92
A P M Creedon
20
2
6
-
52
103
A G Marriott
67
7
93
R Paisley
45
3
19
-
30
-
48
86
-
R C Perkins
J W W Pittard
41
98
6
8
8
35
-
82
114
125
J A Fooks
17
-
-
-
17
15
D C Macdonald
R C Tomkinson
43
24
-
-
-
43
24
50
-
554
471
and fees
Benefits
£’000
J H Buckley
Executive
-
-
Non-executive
Total
Directors’ pensions
Pension benefits earned by directors during the year and the accumulated total accrued pension at 31 December 1997 were
as follows:
lncrease in
Transfer value
Total accrued
accrued pension
of increase
pension at year end
£’000
£’000
£’000
J H Buckley
2
21
25
A P M Creedon
1
3
21
A G Marriott
3
27
20
R Paisley
R C Perkins
2
-
20
-
30
-
J W W Pittard
3
13
43
23
The pension entitlement shown is that which would be paid annually on retirement based on service to the end of the year
or date of resignation. The increase in accrued pension during the year excludes any increase for inflation. The transfer
value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11 less directors’
contributions. R C Perkins was a director for seven months and left the Company before the end of the year. On leaving he
took a refund of his own contributions to the pension scheme less statutory deductions.
Share options
Executive directors and other senior executives throughout the Group hold options under the Pittards senior executive share
option scheme established in May 1986. Invitations to subscribe for options are made at the discretion of the remuneration
committee and are intended to encourage wider share ownership amongst employees. No invitations were issued to
directors during the year. The Pittards senior executive share option scheme came to an end in May 1996.
Share options granted to executive directors under the scheme are summarised as follows:
Number of
Number of
Exercise
price
Exercisable
from
Exercisable
to
options at
options at
31 Dec 96
31 Dec 97
J H Buckley
61p
10.05.94
10.05.2001
35,000
35,000
A G Marriott
61p
10.05.94
10.05.2001
50,000
50,000
R Paisley
62p
12.04.99
12.04.2006
35,000
35,000
J W W Pittard
61p
10.05.94
10.05.2001
65,000
65,000
The mid market price of the shares at 31 December 1997 was 55p and the range during the year was 53.5p to 103p.
No options were granted to directors, and no options were exercised by directors during the year or in the period between
31 December 1997 and 11 March 1998.
Incentive warrants
The Company operates an incentive warrant scheme. Grants of incentive warrants have been made under the terms of the
scheme to D C Macdonald, who resigned as a director on 30 September 1997, as set out below:
Exercisable
Exercisable
from
Number of units
at 31 December 1996 & 1997
Base price
10,000
110p
25.03.1991
25.03.1998
35,000
78p
03.04.1995
03.04.2002
to
When an incentive warrant is exercised, the Company is required to pay an incentive amount equal to the amount by which
the Company’s share price at the exercise date exceeds the base price of the incentive warrant unit, for each incentive
warrant unit in respect of which the exercise is made. The incentive warrants may, at the discretion of the board, be
exercised up to twelve months after leaving the Company’s service.
Service agreements
J H Buckley, A G Marriott and J W W Pittard hold service contracts requiring two years’ notice of termination. There are no
current plans to reduce the notice period as it is in line with the market, and the Company applies the principle of
mitigation to any payment of compensation on termination.
On behalf of the board
R C Tomkinson
Chairman of the remuneration committee
11 March 1998
24
Corporate governance
The board supports the principles of corporate governance outlined in the Code of Best Practice set out in the Report of the
Committee on the Financial Aspects of Corporate Governance (the Cadbury Committee). The Company has been in
compliance with the Code throughout the year, except where indicated below.
Non-executive
directors
There are two experienced non-executive directors on the board. Robert Tomkinson has been appointed for a term of three
years, whereas John Fooks has not been appointed for a specified term (paragraph 2.3 of the Code) but, in common with
other directors, is subject to retirement every three years in accordance with the articles of association of the Company.
Committees
The board has appointed an audit committee, a remuneration committee and a nomination committee each with a formal
constitution. David Macdonald, until his resignation on 30 September 1997, Robert Tomkinson, following his appointment
on 7 July 1997, and John Fooks, the non-executive directors of the Company during the year, were members of the audit
and remuneration committees. John Pittard, group managing director, is a member of the remuneration committee and,
with Robert Tomkinson, a member of the nomination committee. As there were only two non-executive directors on the
board for most of the year, the Company has been unable to comply fully with paragraph 4.3 of the Code which
recommends that the audit committee should comprise at least three non-executive directors.
Section A of the best practice provisions annexed to the Listing Rules recommends that the remuneration committee is
comprised only of non-executive directors. The non-executive directors who represent a majority on the remuneration
committee and one of whom must be the chairman of the committee, benefit from the advice of the group managing
director concerning the other executive directors. Decisions on remuneration are made by those who do not benefit
personally from their recommendations. The group managing director is not present when his own salary is being discussed.
Internal financial control
The board of directors is responsible for the Group’s system of internal financial control. By their nature such control
systems can only provide reasonable, but not absolute, assurance against material misstatement or loss. An organisational
structure has been established with clear operating procedures, lines of responsibility and delegated authority. In particular,
there are established procedures for:
•
business planning and budgeting and for monitoring performance against budget
•
capital investment including appraisal, authorisation, monitoring and post investment review
financial reporting and variance analysis.
•
The board meets regularly and, in accordance with a schedule of matters reserved for its approval, considers these areas,
together with other significant business risks and issues.
The operation of the system of internal financial control is monitored in a number of ways:
a programme of procedural tests is carried out by internal audit, involving at least one set of tests in at least one
operating unit of each division during the course of a year. A full report is made by the internal auditor on each
•
operating unit tested, to the audit committee
signed representations are provided to the audit committee by senior management in each unit concerning the
operation of internal financial controls within their area of responsibility
•
consideration is given to the matters raised in the external auditor’s management letter.
The board has reviewed the effectiveness of the systems of internal financial control in operation during the financial
year through the monitoring processes set out above.
Going concern
After making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis
in preparing the accounts.
Report by the auditors to Pittards plc on corporate governance matters
In addition to our audit of the financial statements we have reviewed the directors’ statements on page 24 on the
Company’s compliance with the paragraphs of the Cadbury Code of Best Practice specified for our review by the London
Stock Exchange and their adoption of the going concern basis in preparing the accounts. The objective of our review is to
draw attention to any non-compliance with Listing Rules 12.43 (j) and 12.43 (v).
We carried out our review in accordance with guidance issued by the Auditing Practices Board, and assessed whether the
directors’ statements on going concern and internal financial control are consistent with the information of which we are
aware from our audit. The guidance does not require us to perform the additional work necessary to, and we do not, express
any opinion on the effectiveness of either the Group’s system of internal financial control or the Company’s corporate
governance procedures nor on the ability of the Group to continue in operational existence.
Opinion
With respect to the directors’ statements on internal financial control and going concern on page 24 in our opinion the
directors have provided the disclosures required by the Listing Rules referred to above and such statements are consistent
with the information of which we are aware from our audit work on the accounts.
Based on enquiry of certain directors and officers of the Company, and examination of relevant documents, in our opinion
the directors’ statement on page 24 appropriately reflects the extent of the Company’s compliance with the other
paragraphs of the Code specified for our review by Listing Rule 12.43 (j).
Ernst & Young
Chartered Accountants
London
11 March 1998
Statement of directors’ responsibilities in relation to financial statements
The following statement, which should be read in conjunction with the auditors’ statement of auditors’ responsibilities set
out on page 26 is made with a view to distinguishing for shareholders the respective responsibilities of the directors and of
the auditors in relation to the financial statements.
The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit
or loss for the financial year.
Following discussions with the auditors, the directors consider that in preparing the financial statements (on pages 27 to
41) which are on the going concern basis, the Company has used appropriate accounting policies, consistently applied and
supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been
followed.
The directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable
accuracy the financial position of the Company and which enable them to ensure that the financial statements comply with
the Companies Act 1985.
The directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
25
26
Report of the auditors to the members of Pittards plc
We have audited the financial statements on pages 27 to 41 which have been prepared under the historical cost convention
as modified by the revaluation of freehold property and on the basis of accounting policies set out on pages 31 and 32.
Respective responsibilities of directors and auditors
As described on page 25, the Company’s directors are responsible for the preparation of the financial statements. This
responsibility includes selecting suitable accounting policies and then applying them consistently, and although the
directors have discussed the appropriateness of the accounting policies with us, it is solely their responsibility to select the
accounting policies to be applied in the preparation of the financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements as prepared by the directors, and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and of the Group as
at 31 December 1997 and of the profit of the Group for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
Ernst & Young
Chartered Accountants
Registered Auditor, London
11 March 1998
27
Consolidated profit and loss account
for the year ended 31 December 1997
Turnover
1997
1996
Note
£’000
£'000
2.3
101,573
109,063
(88,868)
(94,192)
Gross profit
12.705
14,871
Distribution costs
(4,306)
(4,661)
Administrative expenses
(5,531)
(5,523)
2,868
4,687
900
-
3,768
4,687
Cost of sales
Operating profit
4
Profit on sale of fixed assets
Profit on ordinary activities
before interest
Interest receivable
5
Interest payable
6
-
50
(1,137)
(1,104)
2,631
3,633
before taxation
Taxation
8
(300)
(474)
2,331
after taxation
Dividends - equity and non-equity
9
Transfer to reserves
(1,048)
3,159
(992)
1,283
2,167
Earnings per share
- net basis
10
9.4p
13.3p
- nil basis
10
10.3p
14.1p
There were no discontinued activities in 1997 or 1996. Accordingly the above results relate to continuing operations.
A statement of the movement on reserves can be found in note 21.
The notes on pages 31 to 41 form part of these financial statements.
28
Consolidated statement of total recognised gains and losses
Profit on ordinary activities after taxation
Unrealised deficit on revaluation of redundant freehold land and buildings
Exchange difference on retranslation of net assets of subsidiary undertakings
Total recognised gains relating to the year
1997
1996
£'000
£'000
2,331
3,159
-
(106)
(10)
2,321
6
3,059
Reconciliation of group shareholders’ funds
Total recognised gains
Dividends
1997
1996
£'000
£'000
2,321
3,059
(1 ,048)
(992)
Other movements
New shares issued
24
46
Total movements during the year
1,297
2,113
Shareholders’ funds at 1 January
23,305
21,192
Shareholders’ funds at 31 December
24,602
23,305
29
Balance sheets
Group
Company
1997
1996
1997
1996
£'000
£'000
£'000
Note
£'000
Fixed assets
Tangible fixed assets
11
19,521
-
118
12
19,892
-
47
Investments in subsidiary undertakings
3,368
3,368
19.892
19.521
3.415
3,486
Current assets
-
Stocks
13
14,678
17,610
-
Debtors
14
12,204
21,931
22,105
Investments
15
33
10,871
-
33
46
107
5
6
26.961
28.588
21,969
22.111
Cash at bank and in hand
Creditors - amounts falling due within one year
Bank loans and overdrafts
16
Trade creditors
Other creditors
17
Net current assets
Total assets less current liabilities
Creditors - amounts falling due after more than one year
18
Provisions for liabilities and charges
19
(6,005)
(5,564) (6,005)
(5,557)
(6,756)
(8,928)
(6)
(5,273) (2,027)
(2,550)
(4,722)
(17,483)
(I9,765)
9,478
8,823
13,931
13,924
29,370
28,344
17,346
17,410
(4,522)
(225)
(8,038)
(80)
(4,596) (4,522)
(422)
(8,187)
-
(4,596)
-
24,623
23,326
12,824
12,814
Capital and reserves
Called up share capital
20
8,449
8,440
8,449
8,440
Share premium account
21
3,619
3,604
3,619
Revaluation reserve
21
4,702
4,771
-
3,604
-
Capital reserve
21
6,464
6,464
-
Profit and loss account
21
1,368
26
756
770
24,602
23,305
21
21
12,824
-
12,814
-
24,623
23,326
12,824
12,814
Shareholders’ funds (including £3,000,000 attributable
to non-equity interests)
Minority interest - non-equity
Approved by the board of directors on 11 March 1998.
J H Buckley
Group Financial Director
-
30
Consolidated statement of cash flows
Net cash inflow from operating activities
1997
1996
Note
£’000
£’000
22a
5,546
4,627
-
50
Returns on investments and servicing of finance
Interest received
(1,245)
Interest paid
(863)
(22)
(22)
(285)
(285)
(1,552)
(1,120)
(286)
(157)
(1)
(1)
(287)
(158)
Sale of tangible fixed assets
(49)
(4,210)
846
(5,443)
517
Net cash outflow from capital expenditure and financial investment
(3,413)
(4,926)
Equity dividends paid
(762)
(488)
Net cash outflow before financing
(468)
(2,065)
Interest element of finance lease rental repayments
Preference dividends paid
Net cash outflow from returns on investments and servicing of finance
Taxation
UK corporation tax paid
Overseas tax paid
Tax paid
Capital expenditure and financial investment
Purchase of matching shares under restricted share plan
Purchase of tangible fixed assets
Financing
24
New shares issued
46
Repayment of term loans
Capital element of finance lease rental repayments
(250)
(102)
(2,550)
(102)
Net cash outflow from financing
(328)
(2,606)
Decrease in cash
(796)
(4,671)
(796)
250
(4,671)
2,550
Reconciliation of net cash flow to movement in net debt
Decrease in cash
Repayment of term loans
102
Capital element of finance lease repayments
Movement in net debt resulting from cash flows
22b
Exchange difference
22b
Movement in net debt
102
(444)
16
(2,019)
52
(1,967)
Net debt at 1 January
22b
(428)
(10,155)
Net debt at 31 December
22b
(10,583) (10,155)
(8,188)
Notes to the accounts
1
Accounting
policies
(a) Accounting convention
The financial statements are prepared under the historical cost convention modified by the revaluation of freehold property
and in accordance with applicable accounting standards.
(b) Basis of consolidation
The Group financial statements consolidate the accounts of Pittards plc and all its subsidiary undertakings made up to 31
December each year. No profit and loss account is presented for Pittards plc as provided by S.230 of the Companies Act 1985.
(c) Goodwill
Goodwill represents the excess of the cost of the investment in subsidiary undertakings over the fair value of their net
separable assets on acquisition. It is charged directly to reserves on acquisition.
(d) Depreciation
Depreciation of tangible fixed assets is provided at the following annual rates, based on cost or valuation less estimated
residual value based on prices prevailing at the date of acquisition or revaluation, to write off each asset evenly over the term
of its useful life:
Freehold buildings
1.25 - 2%
Plant, machinery and motor vehicles
10 - 25%
No depreciation is provided in respect of freehold land.
(e) Stocks and work in progress
Stocks and work in progress are valued at the lower of cost and net realisable value. Raw materials are valued at purchase
cost on a first in first out basis or at net realisable value if lower. The cost of certain stages of work in progress and finished
goods is calculated by reference to selling price, less the appropriate margin for profit and the costs of selling expenses,
administrative expenses and process costs to completion.
(f) Research and development
Research and development expenditure is written off as incurred, except that development expenditure incurred on a specific
project is carried forward when its future recoverability can be foreseen with reasonable assurance. Any expenditure carried
forward is amortised in line with anticipated sales from the related project.
(g) Deferred taxation
Deferred taxation is provided on the liability method on all timing differences to the extent that they are expected to reverse
in the future without being replaced, calculated at the rate at which it is estimated that tax will be payable.
(h) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All
differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings, to the
extent that they are used to provide a hedge against firm foreign currency sales orders, which are carried forward and
realised at the date of the sale.
(i) Leasing and hire purchase commitments
Assets obtained under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over
their useful lives.
The interest element of the rental obligation is charged to profit and loss account over the period of the lease and represents
a constant proportion of the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight line basis over the term of the lease.
31
32
1
Accounting policies (continued)
(j) Pensions
The expected cost of the Group’s pension schemes is charged to the profit and loss account over the service lives of the
relevant employees.
2
Turnover
Turnover represents the amount derived from the provision of goods and services which fall within the Group’s ordinary
activities stated net of value added tax.
3
Analysis of turnover
Turnover, all of which is derived from the Group’s principal activities,
analysed by geographical market:
United Kingdom
33
7
Employees
1997
1996
The average number of persons, including directors,
employed during the year is analysed as follows:
Number of employees
826
951
Sales and distribution
44
44
Administration/directors
93
97
963
1,092
£’000
£’000
Wages and salaries
16,996
17,238
Social security costs
1,293
1,405
Other pension costs
1,130
1,268
19,419
19,911
Production
Costs in respect of these employees:
Details of directors’ remuneration for each director, compensation for loss of office, long term incentive payments, pension
entitlements and share options are included on pages 21 to 23.
8
£’000
£’000
-
Deferred taxation
-
Overseas taxation
-
Taxation
The charge based on the profit for the year comprises:
UK corporation tax
225
248
Irrecoverable advance corporation tax
262
Advance corporation tax written back
(62)
-
99
-
300
474
£’000
£’000
Corporation tax underprovided in previous years
The tax charge has been reduced due to the availability of tax relief on the property disposals in the year.
9
Dividends
Equity interest:
Ordinary interim paid 1.00p per share (1996 - 0.75p)
218
163
Ordinary final proposed 2.50p per share (1996 - 2.50p)
545
544
Total ordinary 3.50p per share (1996 - 3.25p)
763
707
285
285
1,048
992
Non-equity interest:
Preference payable 30 June and 31 December
34
10
Earnings per ordinary share
Earnings per ordinary share are based on the profit on ordinary activities after taxation and preference dividends of
£2,046,000 (1996 - £2,874,000) and the average number of shares in issue of 21,783,942 (1996 - 21,687,852).
Earnings per share on the nil distribution basis are calculated after adding back irrecoverable advance corporation tax
relating to ordinary dividends amounting to £191,000 (1996 - £177,000).
11
Company
Group
Tangible fixed assets
Freehold
Plant
Plant
land &
machinery &
machinery &
buildings
motor vehicles
Total
motor vehicles
Cost or valuation
£’000
£’000
£’000
£’000
At 1 January 1997
13,287
18,235
31,522
820
(26)
-
-
Exchange adjustment
(26)
Additions
527
3,828
4,355
8
Disposals
(2,728)
(1,104)
(3,832)
(30)
At 31 December 1997
11,060
20,959
32,019
798
At 1 January 1997
933
11,068
12,001
702
Charge for year
130
1,235
1,365
79
74
-
74
-
Depreciation
Provision for permanent diminution in value
Disposals
(243)
(1,070)
(1,313)
(30)
894
11,233
12,127
751
At 31 December 1997
10,166
9,726
19,892
47
At 31 December 1996
12,354
7,167
19,521
118
At 31 December 1997
Net book value
Group
1997
1996
The amounts shown at cost or valuation of tangible fixed assets comprise:
£’000
£’000
24,258
21,281
7,761
10,241
32,019
31,522
cost
Valuation
11
Tangible fixed assets (continued)
The majority of the Group’s properties were professionally valued as at 31 December 1990 at their open market value for
existing use by King Sturge & Co, Chartered Surveyors. The directors are advised that there is no material difference
between these values and the current open market value for existing use. The valuation of redundant properties is reviewed
annually by the directors and is adjusted to reflect their current open market values for alternative use. The historical cost
of freehold properties included at valuation is as follows:
Cost
Depreciation
1997
1996
£’000
£000
5,361
9,018
(668)
4,693
(1,312)
7,706
Included in plant and machinery are leased assets and assets being acquired under hire purchase agreements with a net book
value of £231,000 (1996 - £276,000).
12
Investments in subsidiary undertakings
Cost
£’000
£’000
At 1 January and 31 December
6,290
6,290
2,922
3,069
-
(147)
At 31 December
2,922
2,922
Net book value
3,368
3,368
Provision
At 1 January
Released during the year
The principal trading subsidiary undertakings are as follows:
Principal activities
Directly owned:
Pittards Group Limited
Leather production, fellmongering and trading in hides and skins
Owned through subsidiary undertaking:
Booth & Co (England) Limited
Trading in hides and skins
Pittards plc holds either directly or indirectly all the issued share capital and voting rights of its principal trading
subsidiary undertakings.
35
36
13
1997
1996
£’000
£’000
4,298
6,370
Work in progress
6,617
8,303
Finished goods
3,763
2,937
14,678
17,610
Stocks
Raw material and sundry stocks
The replacement cost of stocks is not considered to be materially different to the balance sheet value.
14
Company
1997
1996
1997
1996
£'000
£'000
£'000
£'000
Trade debtors
7,003
7,379
-
Other debtors
4,598
2,345
603
1,147
532
-
785
-
-
-
21,399
21,320
12,204
10,871
21,931
22,105
£’000
£’000
£’000
£’000
33
-
33
-
Prepayments and accrued income
Amounts owed by group undertakings
15
Group
Debtors
Investments
Own shares (held under restricted share plan)
The Pittards employee share ownership trust holds Pittards plc ordinary shares to meet potential obligations under the
restricted share plan scheme. Shares are held in trust until such time as they may be transferred to employees in
accordance with the terms of the scheme, details of which are given on pages 21 and 22.
The Group recognises the cost of the scheme through an annual amortisation charge based on management’s estimate of the
likely level of vesting of shares, apportioned over the period of service to which the award relates. At 31 December 1997 the
trust held a total of 73,001 shares (1996 - nil) with a market value at that date of £40,000 (1996 - £ nil).
16
Bank loans and overdrafts
The bank loans and overdrafts are secured by way of a fixed and floating charge over the assets of the Company and its
principal trading subsidiary undertakings. The Company has cross guarantee arrangements in respect of bank lending with
certain of its subsidiary undertakings.
37
17
1997
1996
1997
1996
£'000
£'000
£'000
£'000
250
Advance corporation tax
227
213
Taxation and social security
730
463
348
Accruals
18
Company
Group
Other creditors
159
2,151
2,633
242
376
Other creditors
967
1,318
790
1,119
Proposed dividends
545
544
545
544
Obligations under finance leases and hire purchase contracts
102
102
102
102
4,722
5,273
2,027
2,550
Company
Group
Creditors - amounts falling due after more than one year
1997
1996
1997
1996
£'000
£'000
£'000
£'000
4,478
4,450
4,478
4,450
44
146
44
146
4,522
4,596
4,522
4,596
Between one and two years
2,000
2,000
2,000
2,000
Between two and five years
2,478
2,450
2,478
2,450
4.478
4.450
4,478
4,450
Between one and two years
44
102
44
102
Between two and five years
-
44
-
44
44
146
44
146
Bank loans
Obligations under finance leases and hire purchase contracts
The terms of repayment of the above loans are:
The obligations under finance leases are:
38
19
Provisions for liabilities and charges
Provisions for
closure and
reorganisation
Deferred
Group
At 1 January 1997
Utilised
At 31 December 1997
taxation
costs
Total
£’000
£’000
£’000
225
197
422
-
(197)
(197)
225
-
225
Deferred taxation
Group
Group
Company
Provided
Not provided
Not provided
Deferred taxation is made up as follows:
Capital allowances in advance of depreciation
Revaluation surplus and rolled over gains
Taxation losses
Other timing differences
Less: advance corporation tax
1997
1996
1997
1996
1997
1996
£’000
£’000
£'000
£'000
£'000
£'000
1,572
1,390
256
-
1,458
-
(13)
1,575
(26)
-
(16)
-
(1,020)
(277)
(216)
(277)
(216)
73
(145)
(309)
(352)
(309)
(352)
541
225
1,128
994
(612)
(584)
(1,826)
(1,887)
(1,546)
(1,608)
(698)
(893)
(2,158)
(2,192)
(1,104)
(316)
225
225
20 Share capital
1997 and 1996
Authorised:
Non-equity interests - cumulative preference shares (9.5%) of £1 each
Equity interests - ordinary shares of 25p each
Number
£’000
3,000,000
3,000
27,500,000
6,875
9,875
1997
1996
1997
1996
Number
Number
£’000
£’000
3,000,000 3,000,000
3,000
3,000
21,797,638 21,760,174
5,449
5,440
8,449
8,440
Allotted, called up and fully paid:
Non-equity interests - cumulative preference shares (9.5%) of £1 each
Equity interests - ordinary shares of 25p each
39
20
Share capital (continued)
On 23 April 1997 20,000 ordinary shares were issued at 61p per share, and on 23 May 1997 10,000 shares were issued at 61p
per share, both for cash on exercises of share options under the executive share option scheme.
On 16 June 1997 6,531 ordinary shares were issued at 90p per share and on 11 August 1997 933 shares were issued at 90p
per share, all for cash on exercises of share options under the savings related share option scheme.
The preference shares are non-voting unless their dividend is more than six months in arrears. On a winding-up they rank in
priority to the ordinary shares and are entitled to repayment at par plus a premium which is calculated as the greater of (i)
5p and (ii) a sum equal to the excess over par of the average daily market valuation during the preceding six months.
The Company has granted options to certain directors and senior executives, of which the following remain exercisable:
Number of ordinary shares of 25p each
Exercise price
Exercise period
265,000
61p
10 May 1994 to 10 May 2001
314,200
62p
12 April 1999 to 12 April 2006
On 13 June 1997 the Company granted options to employees under the savings related share option scheme over 510,582
ordinary shares of 25p each, at 82p per share, of which 493,599 remain exercisable. These options may be exercised wholly or
in part after 3 years from the date of an employee joining the scheme.
21
Reserves
Share
Profit
premium
Revaluation
Capital
& loss
account
reserve
reserve
account
Total
Group
£'000
£’000
£’000
£’000
£’000
At 1 January 1997
3,604
4,771
6,464
26
14,865
Exchange difference on retranslation of subsidiary undertakings
-
-
-
(10)
(10)
Reserve transfer
-
(69)
-
69
-
Retained profit for the year
-
-
-
1,283
Premium on issue of shares
15
-
-
1,283
-
3,619
4,702
6,464
1,368
16,153
3,604
-
4,374
-
-
770
-
-
-
(14)
-
(14)
15
3,619
-
-
756
At 31 December 1997
15
Company
At 1 January 1997
Retained loss for the year
Premium on issue of shares
At 31 December 1997
15
4,375
The profit for the year dealt with in the accounts of the parent company amounts to £1,034,000 (1996 - £1,053,000).
The cumulative amount of goodwill written off at 31 December 1997 is £93,000 (1996-£93,000) in respect of subsidiary
undertakings still within the Group. No disclosure is being made for the cumulative goodwill written off in respect of
undertakings acquired prior to 1 January 1989 because, in the opinion of the directors, the information cannot be obtained
without unreasonable expense.
40
22
1997
Notes to the cashflow statement
1996
(a) Reconciliation of operating profit to net cash inflow from operating activities
£000
£’000
Operating profit
2,868
4,687
Utilisation of provision
(197)
Depreciation charges
1,164
16
-
Amortisation of matching shares under restricted share plan
Profit on sale of tangible fixed assets
Decrease (increase) in debtors
(Decrease) increase in creditors
Net cash inflow from operating activities
Cash at bank and in hand
1,423
(44)
888
5,546
4,627
at 3 I December
1997
Cash
Exchange
Other non-
1997
flows
difference
cash changes
£’000
£’000
£’000
107
(495)
(2,699)
at 1 January
(77)
16
£’000
-
-
-
(4,783)
28
(1,222)
(28)
(4,478)
Overdraft
(4,064)
(719)
Debt due within one year
(1,500)
250
Debt due after more than one year
(4,450)
-
(248)
102
-
(10,155)
(444)
16
Finance leases
(247)
(162)
2,932
Decrease (increase) in stocks
(b) Analysis of changes in net debt
(1,326)
1,365
£’000
46
-
(146)
(10,583)
(c) Cash flows relating to non-operating exceptional items
Capital expenditure and financial investment cash flows include £665,OOO from the sale of tangible fixed assets (1996 - £nil).
23
Pension arrangements
The Group operates a number of pension schemes. The two major schemes were of the defined benefit type and these were
merged on 1 April 1991. The assets of the scheme are held in a separate trustee administered fund.
The total pension cost for the Group was £1,130,000 (1996 - £1,268,000). This has been assessed in accordance with the
advice of a qualified actuary using the projected unit method. The latest actuarial assessment of the main scheme was made
on 6 April 1997. The assumptions which have the most significant effect on the results of the valuation are those relating to
the rate of return on investments and rates of increase in salaries and pensions. It was assumed that the investment return
would be 9% per annum and that salary increases would average 7% per annum. Pensions have been assumed to increase at
the rate of 5% on the excess over the guaranteed minimum pension. Dividend income for the equity portion of the portfolio
has been assumed to increase at 4.5% per annum.
At the date of the latest actuarial valuation, the market value of the assets was £35,772,000 and the scheme had an
estimated surplus of £162,000. The actuarial value of the assets was sufficient to cover 100% of the value of the benefits
that had accrued to members.
At 31 December 1997 there was a creditor in the balance sheet of £776,000 (1996 - £817,000)
41
24
Financial commitments
Authorised future capital expenditure amounted to:
Contracted
Group
1997
1996
£'000
£'000
109
1,450
The annual commitment under non-cancellable operating leases, was as follows:
Leases expiring:
within one year
between two and five years
thereafter
All of the above relates to plant and machinery.
20
7
130
70
30
30
180
107
42
Five year review
1997
1996
1995
1994
1993
£'000
£'000
£'000
£'000
£'000
101,573
109,063
103,009
112,985
90,619
-
-
6,954
8,333
23,947
101,573
109,063
109,963
121.318
114,566
61%
61%
51%
54%
57%
3,768
4,687
3,185
4,051
4,013
-
-
(2,281)
(351)
(9,247)
Total
3,768
4,687
904
3,700
(5,234)
Profit(loss) on ordinary activities before taxation
2,631
3,633
(522)
2,156
(6,807)
Profit(loss) on ordinary activities after taxation
2,331
3,159
(592)
1,856
(7,293)
Preference
285
285
285
285
285
Ordinary
763
707
325
434
217
24,602
23,305
21,192
22,385
21,247
Earnings(loss) per ordinary share
9.4p
13.3p
(4.0p)
7.2p
(35.0p)
Dividends per ordinary share (gross)
4.4p
4.1p
1.9p
2.5p
1.3p
Year ended 31 December
Turnover
Continuing operations
Discontinued operations
Total
Percentage outside United Kingdom
Profit(loss) on ordinary activities before interest
Continuing operations
Discontinued operations
Dividends:
Shareholders’ funds
Financial calendar
6 May 1998
Annual General Meeting
Payment of final dividend for 1997 to shareholders registered on 14 April 1998
15 May 1998
(ex dividend date 6 April 1998)
September 1998
Announcement of half year results for 1998
Payment of interim dividend for 1998 to shareholders registered on 2 October 1998
2 November 1998
(ex dividend date 28 September 1998)
March 1999
Announcement of 1998 results
Analysis of shareholders
at 31 December 1997
Ordinary shares:
Number of
Number of
holders
% held
shares held
% held
1,672
98.41
8,747,566
40.13
10
0.59
4,039,392
18.53
Banks and nominee companies
7
0.41
459,427
2.11
Pension funds
7
0.41
7,891,952
36.21
Insurance companies
3
0.18
659,301
3.02
1,699
100.00
21,797,638
100.00
Size of holding:
Up to 999 shares
716
42.14
284,141
1.30
1,000 to 9,999 shares
779
45.85
2,266,610
10.40
10,000 to 49,999 shares
155
9.12
2,942,793
13.50
50,000 shares and over
49
2.89
16,304,094
74.80
1,699
100.00
21,797,638
100.00
Category:
Individuals
Trust and investment companies
43
44
Notice of meeting
Notice is hereby given that the 89th Annual General Meeting of Pittards plc will be held at the registered office at 12 noon
on Wednesday, 6 May 1998 for the following purposes:
Ordinary resolutions
1
To receive the annual statement of accounts for the Year ended 31 December 1997 and the directors’ and auditors’
reports thereon.
2 To declare a dividend.
3
To elect the following directors appointed since the last AGM:
(i)
Mr R Paisley
(ii)
Mr R C Tomkinson
(iii)
Mr R H Hankey
and to re-elect the following director retiring by rotation:
(iv)
4
Dr A G Marriott
To appoint the auditors and to authorise the directors to determine their remuneration.
Special resolution
5
To consider and, if thought fit, resolve that:
(i) The directors be given power to allot for cash equity securities (as defined for the purposes of Section 89 of the
Companies Act 1985) pursuant to the general authority conferred on them under Section 80 of that Act as if Section
89(1) of that Act did not apply to the allotment but this power shall be limited:
(a) to the allotment of equity securities in connection with an offer or issue to or in favour of ordinary shareholders
on the register on a date fixed by the directors where the equity securities respectively attributable to the interests
of all those shareholders are proportionate (as nearly as practicable) to the respective numbers of ordinary shares
held by them on that date but the directors may make such exclusions or other arrangements as they consider
expedient in relation to fractional entitlements, legal or practical problems under the laws in any territory or the
requirements of any relevant regulatory body or stock exchange; and
(b) to the allotment (other than under (a) above) of equity securities having, in the case of relevant shares (as
defined for the purposes of Section 89), a nominal amount not exceeding in aggregate £272,470;
(ii) this power shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of
this resolution and the Company may, before this power expires, make an offer or agreement which would or might
require equity securities to be allotted after it expires.
By order of the board
J Williams, Secretary
Yeovil, Somerset
11 March 1998
NOTE: A member entitled to attend and vote at the above meeting may appoint a proxy, who need not be a member, to attend and vote instead of
him/her. The register of directors’ holdings and copies of directors’ contracts of service will be available for inspection at the registered office of the
Company during the usual business hours from the date of this notice until the date of the Annual General Meeting and at the place of the Annual
General Meeting from at least fifteen minutes prior to and until the conclusion of the meeting.

1997 Annual Report

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