Portmeirion : Preliminary Results for year ended 31 December 2016

Portmeirion Group PLC - PMP Final Results

Released 07:00 09-Mar-2017

RNS Number : 9282Y Portmeirion Group PLC 09 March 2017

• Eighth consecutive year of record Group revenue which increased by 11.7% to £76.7 million (2015: £68.7 million).

• EBITDA is level at £9.7 million (2015: £9.7 million).

• Profit before tax down by 9.7% to £7.8 million (2015: £8.6 million).

• Total dividends paid and proposed for 2016 increased by 7.5% to 32.25p (2015: 30.00p).

  Operational

• Completed £17.5 million acquisition of Wax Lyrical Limited, the UK's largest manufacturer of home fragrances.

• Received the Queen's Award for Enterprise in the category of International Trade, which recognises the Company's continuous growth in overseas sales and overall outstanding achievement in international trade over the last six years.

• Long-standing Group Finance Director, Brett Phillips, to retire from the Group in 2017.

• Appointed Michael Knapper as Operations Director and Moira MacDonald as Group Company Secretary.

Dick Steele, Non-executive Chairman commented:

"We are delighted to be reporting an eighth consecutive year of record revenue, notwithstanding the challenges faced by the Group during the period which have affected profits. Our core values of innovation, targeted product development and operational excellence remain unchanged, and we are pleased to report on the success experienced by the continued integration of Wax Lyrical. Trading in the first two months of the current year is ahead of the comparative period in 2016 on a like-for-like basis. The outlook for 2017 is positive and the issues experienced are being overcome by proactive management."

ENQUIRIES:

The year under review has been challenging for Portmeirion, largely because of factors external to the business. The United Kingdom referendum on EU membership which resulted in a leave vote in June 2016 and the presidential election in the United States in November 2016 were major uncertainties in our two largest markets; uncertainty leads to caution within business and for consumers, albeit the presidential elections are regular four yearly uncertainties. These uncertainties have not yet fully played out and we are vigilant as to any future effects on international trade. South Korea, our third largest market, continued to suffer economic problems particularly in demand for luxury products. Following a huge sales increase in India in 2015, the region unfortunately did not perform as well in 2016, and returning sales to prior high levels in India will take time. Despite these problems our diversified product range, supply base, wide market access and first class people enabled us to keep Portmeirion on a steady course.

Additionally, the strategic acquisition in the year of Wax Lyrical, the UK's largest manufacturer of home fragrances, provides us with excellent growth prospects.

The Board is recommending a final dividend of 25.25 pence per share bringing the total paid and proposed for the year to 32.25 pence per share, an increase of 7.5% over the total amounts paid in respect of 2015. This is a 5.6% increase over the final dividend for 2015.

The dividends paid and proposed for 2016 are covered 1.85 times by earnings (2015: 2.2 times). The Board continues to consider that a level of dividend being twice covered is an appropriate and sustainable level for the business, although it believes a marginal fall for the 2016 dividend cover below this guideline can be temporarily accommodated.

Over the last eight years we have increased our total dividends by 10.3% per annum compound. Our share price has grown by 430% per cent. since our flotation price of £1.80 in 1988, and our total dividends paid have amounted to £3.97 per share during that period. We have never cut or withheld our dividend as a listed company.

The Board is committed to a progressive dividend policy; we believe that this is what our shareholders expect of us. We aim to maintain a sustainable and fair level of dividend cover, having regard to the immediate past and our view forward, and to increase our dividends whenever our results, cash balances and prudent views of future prospects and business investment needs allow us so to do. Our policy is to increase the interim dividend each year by the same percentage as the final dividend of the preceding year, subject of course to prevailing conditions.

Revenues were £76.7 million for the year, an increase of 11.7% over the previous year (2015:

£68.7 million). This represents the eighth consecutive year of record revenues for the Group. At a constant US dollar exchange rate our revenue increase would have been lower at 6.5%. The

part year sales for Wax Lyrical consolidated within the total revenues of £76.7 million were

£10.4 million (2015: £nil), which represent 8 months of the financial year.

The United Kingdom became our largest market in 2016 due to the majority of Wax Lyrical's sales being in the United Kingdom. Excluding Wax Lyrical, sales in the United Kingdom from original Portmeirion businesses increased by 2.1% over 2015. Total United Kingdom sales were

£27.1 million in 2016 (2015: £17.9 million). We remain cautious about the effect on our sales of the United Kingdom leaving the EU although it may be some time before the actual effect is known.

The United States provided a revenue uplift of 8.7% in translated figures, which is equivalent to a decrease of 3.7% in local currency. There are hopeful signs in the United States that the economy remains on the upswing, but some doubt remains about how Government policy will affect importers.

Our own internet based sales in the UK and the US totalled £3.3 million in 2016, a 31.8% increase over 2015. This sales channel provides good margins and greater visibility of and contact with our end consumer, offering a great opportunity for growth.

Sales into South Korea fell by a further 21.2% in 2016 over 2015 to £9.7 million, meaning that on a two year basis our sales to South Korea have fallen by £5.4 million. We were hopeful at the end of 2015 that this market was stabilising for us, and we remain hopeful but chastened.

We are working closely with our exclusive distributor in South Korea to rebuild sales.

In 2015 our sales into India were £5.8 million, which we had planned to grow in 2016, however the performance of our Indian distributor was extremely disappointing, as we announced in July 2016, and despite immediate pro-active management sales in India in 2016 were £1.1 million.

Accordingly we have changed our distribution arrangements in India so as to target specific distribution channels. Despite the sales shortfalls in South Korea and India, we continued to increase total Group sales. Wax Lyrical was the most important contributor to this increase, supported by improved sales into Europe and some Asian markets such as Hong Kong and Taiwan.

We continue to be well served by our strategy of diversifying products, customers, geographic markets and routes to market. These strategies enable us to exploit opportunities as and when they appear and to mitigate shortfalls in other areas.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) were level with 2015 at £9.7 million. Profit before taxation was £7.8 million, a reduction of £0.8 million or 9.7% on the previous year. The difference in the proportions arises because of increased amortisation and depreciation as a consequence of the Wax Lyrical acquisition and a full year's depreciation of our new kiln.

Basic earnings per share decreased by 9.7% to 59.60 pence per share, while dividends have increased by 7.5%, with dividend cover remaining at a reasonable level, in the Board's opinion.