HEATH (SAMUEL) & SONS PLC

Earnings Release • Jul 17, 2013

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RNS Number : 4496J

Heath(Samuel) & Sons PLC

17 July 2013

HEATH (Samuel) & SONS PLC

17th JULY 2013

PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST MARCH 2013

CHAIRMAN'S STATEMENT

During the long period I have been reporting on our annual results, the past trading year has been the most unpredictable.  This time last year business had improved quite a lot and I was able to be cautiously optimistic.  Then it all went backwards and at the interim stage looked bleak.  Fortunately at the end of February orders increased and we ended the year very well.

All this has resulted in a profit before taxation only fractionally up at £633,000 (2012: £632,000) on sales also slightly up at £10,083,000 (2012: £9,782,000). This however should be looked at together with an operating profit of £398,000 as against £556,000 in the previous year.

I feel that I should point out that for the financial year ending 31st March 2014, the introduction of the revised accounting standard in relation to Retirement Benefit Pension Schemes (IAS19 Employee Benefits) will have a significant effect on our profits reported in the Income Statement. At present, the finance cost is the company's best estimate of the expected return on the scheme assets, less the interest on the liabilities calculated using the discount rate for the period. The net finance cost will in future be calculated as the interest on the scheme deficit using the discount rate. In addition, the administration costs of the scheme, other than those relating to investment management, will need to be expensed as they are incurred. If the accounting standard had been adopted for the year ended 31st March 2013, the profit before tax would have been reduced by £183,000 to £450,000. The changes in the standard will not affect the overall deficit but merely reclassify the disclosure of the scheme's costs between the Income Statement and the Consolidated Statement of Comprehensive Income.

We continue to produce new lines at an ever increasing rate, the highlights being our Style Moderne bathroom taps and fittings and a new swing free door closer in our Perko range.  We also continue to invest in new plant and IT programmes to manage our increasingly wide range of products.

What then for the future?  You can imagine from what I have said above, that it is extremely difficult to predict. In view of our experiences last year we have budgeted cautiously.  Although trading was very satisfactory in April and May, orders have since tailed off.  There is scarcely a market, in which we sell, which does not have a problem.  Parts of the U.K. for example are still suffering badly.

Our assets remain strong and we therefore propose a same again final dividend of 6.25p per share, making a total of 11.75p for the year.

Sam Heath

Chairman

17th July 2013

For further information:

Samuel Heath & Sons Plc
John Park - Company Secretary	0121 772 2303
Zeus Capital Limited	0161 831 1512
Ross Andrews/Nick Cowles

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2013

	Note		2013		2012
			£000		£000
Continuing operations
Revenue			10,083		9,782
Cost of sales			(5,311)		(4,936)
Gross profit			4,772		4,846
Distribution costs			(2,870)		(2,840)
Administrative expenses			(1,504)		(1,450)
Operating profit			398		556
Gain on sale of financial assets			132		16
Finance income			640		594
Finance costs			(537)		(534)
Profit before taxation			633		632
Taxation	4		(78)		(117)
Profit for the year			555		515
Basic and diluted earnings per ordinary share	6		21.9p		20.3p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
			2013		2012
			£000		£000
Profit for year			555		515
Actuarial loss on defined benefit pension scheme			(1,743)		(1,712)
Deferred taxation on actuarial loss			372		365
(Loss)/gain on available for sale financial assets			(17)		28
Cash flow hedges			(3)		(2)
Other comprehensive income			(1,391)		(1,321)
Total comprehensive income for the year			(836)		(806)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2013

		2013 £000		2012 £000
Non current assets
Intangible assets		370		260
Property, plant and equipment		1,838		1,948
Deferred tax asset		986		696
		3,194		2,904
Current assets
Inventories		2,731		2,615
Trade and other receivables		1,909		1,873
Derivative financial instruments		1		-
Available for sale financial assets		1,400		1,540
Cash and cash equivalents		219		477
Total current assets		6,260		6,505
Total assets		9,454		9,409
Current liabilities
Trade and other payables		(949)		(1,092)
Derivative financial instruments		(4)		-
Current tax payable		(15)		(62)
Total current liabilities		(968)		(1,154)
Non current liabilities
Retirement benefit scheme		(4,290)		(2,901)
Deferred tax liability		(84)		(108)
Total non current liabilities		(4,374)		(3,009)
Total liabilities		(5,342)		(4,163)
Net assets		4,112		5,246
Equity
Called up share capital		254		254
Capital redemption reserve		109		109
Retained earnings		3,749		4,883
Equity shareholders' funds		4,112		5,246

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2013

	Share capital	Capital redemption reserve	Retained earnings	Total Equity
	£000	£000	£000	£000
Balance at 31st March 2011	254	109	5,987	6,350
Equity dividends paid	-	-	(298)	(298)
Profit for year	-	-	515	515
Other comprehensive income for the year	-	-	(1,321)	(1,321)
Balance at 31st March 2012	254	109	4,883	5,246
Equity dividends paid	-	-	(298)	(298)
Profit for year	-	-	555	555
Other comprehensive income for the year	-	-	(1,391)	(1,391)
Balance at 31st March 2013	254	109	3,749	4,112

CONSOLIDATED STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 MARCH 2013

	Note	2013		2012
		£000		£000
Net cash inflow from operating activities	7	72		390
Cash flow from investing activities
Purchases of property, plant and equipment		(268)		(235)
Proceeds from sale of property, plant and equipment		6		46
Purchase of intangible assets		(117)		(60)
Purchase of available for sale financial assets		(421)		(465)
Proceeds from sale of available for sale financial assets		676		474
Interest received		92		72
Net cash outflow from investing activities		(32)		(168)
Net cash outflow from financing activities
Equity dividends paid	5	(298)		(298)
Net cash outflow from financing activities		(298)		(298)
Decrease in cash and cash equivalents		(258)		(76)
Cash and cash equivalents at beginning of period		477		553
Cash and cash equivalents at end of period		219		477

1          Adoption of new and revised Standards

The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1st April 2012. The adoption of the following IFRSs has not impacted upon the financial statements:

IFRS 3 - Business Combinations

IFRS 7 - Financial Instrument Disclosures

IFRS 7 - Amendments to IFRS7 Disclosures - Transfer of Financial Assets

IAS 12 - Deferred Tax: Recovery of Underlying Assets

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRS 10 - Consolidated Financial Statements

IFRS 11 - Joint Arrangements

IFRS 12 - Disclosure of Interests in Other Entities

IFRS 13 -  Fair Value Measurement

IAS 19 - Employee Benefits

IFRS 9 and IFRS 7 - Financial Instruments

IAS 32 - Financial Instruments (Presentation)

Amendments to IAS 1 - Presentation of items of Other Comprehensive Income

Improvements to IAS 2011

2          Accounting policies

Basis of preparation of preliminary financial information

The financial statements, upon which this financial information is based, have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS).

This financial information does not constitute the Company's statutory accounts as defined in Section 434 of the Companies Act 2006 and has been prepared on the basis of the accounting policies set out in the financial statements for the year ended 31 March 2013. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered in due course following the company's Annual General Meeting. The auditors have reported on the 2012 accounts and their report was unqualified, did not include references to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.  

The Annual Report and Financial Statements will be posted to shareholders shortly and thereafter will be available from the Company's registered office, and from the Company's website www.samuel-heath.com.

The financial statements have been prepared under the historical cost basis except for the valuation of Available for Sale Assets which have been revalued to market value. 

3          Critical accounting and key sources of estimation

Critical judgements in applying the entity's accounting policies

In the process of applying the entity's accounting policies, which are described above, the directors have made the following judgements that have the most significant effect on the amounts recognised in the financial statements.

Income taxes

The Group is subject to income taxes in the United Kingdom.  Judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The recoverable amounts of the Group's deferred tax assets have been determined based on the Board's estimates of future taxable profits and income and tax rates.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Valuation of intangible assets

Intangible assets are initially valued at their cost and then evaluated periodically for impairment. For purposes of valuation an intangible asset is considered impaired if its carrying value is less than the expected net cash flow from the asset.

Valuation of inventories

Determining the valuation of inventories requires an estimation of the obsolescence provision required to write down items to their realisable value.

Retirement benefit scheme deficit

The valuation of expected returns on assets and the present value of the liabilities of the scheme are determined by assumptions and estimates made by the directors based on the current information to hand.  Therefore amounts are open to fluctuations in the future due to unforeseen changes or additional factors that come to light following the year end.

4.             Income taxes

	2013 £000		2012 £000
Current taxes	20		67
Deferred taxes	58		50
Total income taxes	78		117

Corporation tax is calculated at 20% (2012: 26%) of the estimated assessable profit for the year.

Tax rate reconciliation

			2013 £000		2012 £000
	Profit for the year		633		632
	Corporation tax charge thereon at 20% (2012: 26%)		127		164
	Adjusted for the effects of:
	Depreciation in excess of capital allowances		7		13
	Marginal relief		-		(20)
	Prior year adjustments		1		1
	Research and development claim		(28)		(16)
	Capitalisation of research and development expenditure		(23)		(16)
	Loan relationships		(13)		10
	Other adjustments		7		(19)
	Total income taxes		78		117
	Effective tax rate		12.3%		18.5%

5.             Dividends

	2013		2012
	£ 000		£ 000
Final dividend for the year ended 31st March 2012 of 6.25 pence per share (2011: 6.25 pence per share)	158		158
Interim dividend for the year ended 31st March 2013 of 5.50 pence per share (2012: 5.50 pence per share)	140		140
	298		298

In addition to the dividends paid during the year the directors are recommending a final dividend for 2013 of 6.25 pence per share amounting to £158,000. The proposed final dividend is subject to approval at the Annual General Meeting (see note 8) and 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 £555,000 (2012: £515,000) by the average number of ordinary shares in issue during the year being 2,534,322 (2012: 2,534,322). The number of shares used in the calculation is the same for both basic and diluted earnings.

7.             Notes to the cash flow statement

	2013		2012
	£000		£000
Operating profit	398		556
Depreciation, amortisation and impairment	385		411
Gain on disposal of property, plant and equipment	(6)		(29)
Operating cash flows before movements in working capital	777		938
Increase in inventories	(116)		(68)
(Increase)/decrease in receivables	(29)		37
Decrease in payables	(143)		(74)
Pension contributions	(350)		(350)
Cash generated by operations	139		483
Income tax paid	(67)		(93)
Net cash flow from operating activities	72		390

Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

8.             Notice of annual general meeting

Notice is hereby given that the 2013 Annual General Meeting of the Company will be held at the registered office of the Company, Leopold Street, Birmingham, on 16th August 2013 at 12.00 noon. The final Ordinary Share dividend of 6.25 pence, if approved, will be payable on 23rd August 2013 to ordinary shareholders registered at close of business on 26th July 2013.

This information is provided by RNS

The company news service from the London Stock Exchange

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