Tandem Group PLC released its annual results earlier this morning and said the figures for its cycles and accessories activities in the first quarter of the current year are ahead year-on-year despite the inclement weather in early spring and the foot and mouth crisis.
The group reported healthy results for the year to Jan 31 showing profits well ahead of the previous period. Pretax profit was £1.66m compared with just £71,000 on turnover of £26.m, up from £21.2m.
Basic earnings per share before goodwill amortisation were 1.21 pence, up from 0.01 pence.
Chairman Graham Waldron said that Falcon continues to produce solid returns in a highly competitive market and both the group’s acquisitions, Pot Black and Two Wheel Trading (acquired on 28 September 2000 for an aggregate consideration of £1,938,000, including costs), have responded well to joining the fold.
Having established a firm position in the sports and leisure equipment market, the group now has a solid base from which to expand, he said. Further acquisitions in this sector are being sought and a number of opportunities have been identified
already, he said.
This refers, in part, to the widely expected acquisition of Dawes by Tandem.
"However, we will take a cautious approach to ensure the successful trend we have developed continues," said Waldron.
Waldron said the group was delighted to have been awarded a prestigious mountain bike contract with BMW. He said discussions continue with BMW about increasing volumes later in the year which he said should translate into higher turnover and improved gross margin for this range.
In 1997 the group had a turnover of £60.9m but made a pre-tax loss of £3.37. Some of the group’s businesses were then sold – including horse race courses – in order to pay down the debt and keep the group solvent.
In 1998 the losses reduced to £2.22m but shot up to £5.82 in 1999.
In the year to January 2001, turnover at Tandem increased by 25 percent and the bank debt was reduced by over £5m.
Waldron said:
"After several years of downscaling, I am pleased to report that we have made significant and profitable progress this year in our quest to become a broadly based sports and leisure equipment group.
"Despite the inclement weather in early spring and the Foot and Mouth
situation, the results for our cycles and accessories businesses in the first quarter were ahead of last year.
“Turnover of the Group’s bicycle business, Falcon, grew in line with
expectations. Unit sales of bicycles increased over the previous year but a strong demand for lower priced products saw a fall in average unit prices. However, tight control of costs and an improved product range enabled Falcon’s profits to be ahead of last year.
“The division includes the results of Two Wheel Trading for the last four months of the financial year, which traditionally is a loss making period for that business. Investment has been made in strengthening the sales operation to take advantage of a number of opportunities that have become available as a result of Two Wheel Trading joining the Group.”
“Two Wheel Trading has successfully secured new distributorships for branded accessories, including Tioga, a well known and heavily marketed mountain bike brand in the USA, with a good brand recognition in the UK. The strategy of consolidating distribution through the wholesale sector and expanding the retail division is working well. The sales team has been strengthened and the
marketing of major brands improved.
“The synergies between Falcon and Two Wheel Trading will lead to further reductions in cost and expansion of the customer base.”
Consolidated profit and loss account
Year ended 31 January 2001
2001 2000
£’000 £’000 £’000 £’000
Turnover
Continuing operations 22,112 21,181
Acquisitions 4,355 –
Discontinued operations 33 45
26,500 21,226
Cost of sales (19,840) (16,159)
Gross profit 6,660 5,067
Net operating expenses (5,883) (4,460)
Operating profit
Continuing operations 439 365
Acquisitions 334 –
Discontinued operations (274) 66
– release/utilisation of prior year 317 176
provision
Amortisation of goodwill (39) –
Total operating profit 777 607
Exceptional profit on disposal of – 59
fixed assets
Profit on ordinary activities before interest 777 666
Net interest payable and similar credits 885 (595)
/(charges)
Profit on ordinary activities before taxation 1,662 71
Tax on profit on ordinary activities – 3/4
Profit on ordinary activities after taxation 1,662 71
Non equity minority interests (65) (65)
Profit for the financial year transferred to reserves 1,597 6
Earnings per share Pence Pence
Basic
Before goodwill amortisation 1.21 0.01
After goodwill amortisation 1.18 0.01
Diluted
Before goodwill amortisation 1.16 0.01
After goodwill amortisation 1.13 0.01
Consolidated balance sheet
At 31 January 2001
2001 2000
£’000 £’000
Fixed assets
Tangible assets 1,514 1,103
Intangible assets 2,260 –
3,774 1,103
Current assets
Stocks 6,010 3,806
Assets for resale – 586
Debtors 4,187 3,015
10,197 7,407
Creditors – amounts falling due within one year
Bank overdraft 4,175 9,351
Other creditors 7,724 3,513
11,899 12,864
Net current liabilities (1,702) (5,457)
Total assets less current liabilities 2,072 (4,354)
Creditors – amounts falling due after more than 50 22
one year
Provisions for liabilities and charges 129 446
Net assets/(liabilities) 1,893 (4,822)
Capital and reserves
Called up share capital 9,046 4,703
Share premium account 5,040 4,280
Capital reserve 406 406
Profit and loss account (13,739) (15,394)
Equity shareholders’ funds/(deficit) 753 (6,005)
Non-equity minority interests 1,140 1,183
1,893 (4,822)
Statement of movements on reserves
Year ended 31 January 2001
Share Profit
Premium Capital and
loss
Account Reserve Account Total
£’000 £’000 £’000 £’000
The Group
Balance at 1 February 2000 4,280 406 (15,394) (10,708)
Profit retained for the year – – 1,597 1,597
Non equity dividends waived – – 58 58
Net premium arising on issue 760 – – 760
of shares
Balance at 31 January 2001 5,040 406 (13,739) (8,293)
Consolidated cash flow statement
Year ended 31 January 2001
Notes 2001 2000
£’000 £’000
Net cash inflow from operating activities A 3,064 2,365
Returns on investments and servicing of finance
Interest paid (842) (961)
Interest element of hire purchase rentals (4) (7)
Bank fees paid (398) –
Net cash outflow from returns on investments and servicing (1,244) (968)
of finance
Taxation – –
Capital expenditure
Purchase of tangible fixed assets (74) (80)
Sale of tangible fixed assets 8 4,574
Sale of assets held for resale 349 –
Net cash inflow from capital expenditure 283 4,494
Acquisitions
Purchase of subsidiary undertakings (1,305) –
Net debt of subsidiary undertakings acquired (2,212) –
Purchase of subsidiary company preference shares (15) –
Net cash outflow from acquisitions (3,532) –
Net cash (outflow)/inflow before financing (1,429) 5,891
Financing
Ordinary shares issue 4,580 –
Expenses incurred in issue of ordinary shares (489) –
Capital element of hire purchase rentals (25) (76)
Net cash inflow/(outflow) from financing 4,066 (76)
Increase in cash B & C 2,637 5,815
Notes to consolidated cash flow statement
A. Reconciliation of operating profit to net cash inflow from
operating activities
2001 2000
£’000 £’000
Operating profit 777 607
Depreciation charges 298 246
Amortisation of goodwill 39 –
Profit on sale of tangible fixed assets (4) (2)
Loss on sale of assets held for resale 237 –
Decrease in stocks 141 2,436
Decrease in debtors 467 1,509
Decrease/(increase) in assets held for resale – (586)
Tangible fixed assets transferred to assets held for – 79
resale
Increase/(decrease) in creditors 1,426 (1,596)
Release of provisions:
– continuing activities – (152)
– discontinued activities (317) (176)
Net cash inflow from operating activities 3,064 2,365
B. Reconciliation of net cash inflow to movement in
net debt
£’000
Increase in cash 2,637
Cash to repay finance leases and hire purchase 25
contracts
Changes in net debt resulting from cash flows 2,662
Other non-cash changes 2,539
Lease and hire purchase obligations acquired with (42)
purchase of businesses
Movement in net debt in the year 5,159
Net debt at 1 February 2000 (9,374)
Net debt at 31 January 2001 (4,215)
C. Analysis
of net debt
At Cash Non-cash Acquired lease At
flow obligations
1 February movement 31 January
2000 2001
£’000 £’000 £’000 £’000 £’000
Bank (9,351) 2,637 2,539 – (4,175)
overdraft
Hire (23) 25 – (42) (40)
purchase
creditors
(9,374) 2,662 2,539 (42) (4,215)
Notes to the preliminary results
1. This preliminary announcement is not the company’s statutory accounts
but extracts therefrom. Statutory accounts dealing with the financial period
ended 31 January 2000 have been delivered to the Registrar of Companies,
however, statutory accounts dealing with the financial year ended 31 January
2001 have not yet been delivered.
2. In the audit report to the 31 January 2000 annual financial
statements the auditors emphasised the fact that the Company met its day to
day working capital requirements through certain overdraft facilities, which
were repayable on demand. The audit report did not contain a statements under
s237 (2) or (3) Companies Act 1985.
3. Net interest payable and similar charges/(credits) is analysed as
follows:
2001 2000
£’000 £’000
Interest payable on bank loans and overdrafts 842 961
Interest payable on hire purchase creditors 4 7
Foreign exchange gain on bank loan – (373)
Bank debt written off (2,160) –
Bank fees 429 –
(885) 595
4. The statutory accounts for the year ended 31 January 2001 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the registrar of
companies following the company’s annual general meeting.
5. The calculation of basic earnings per share is based on profits of £
1,597,000 (2000 – £6,000) and on an average of 135,685,534 (2000 – 94,069,754)
ordinary shares in issue during the year. Diluted earnings per share is after
taking into consideration share options which gives an average of 140,927,456
(2000 – 94,535,509) ordinary shares.