Ceramco Posts Excellent Result
Ceramco has posted an excellent result for the year to 31 March 2000, the third year in a row.
Both Bendon and New Zealand China Clays performed very strongly to record an operating profit on an earnings before interest, tax (EBIT) basis of $10.261 million, an increase of $3.912 million on last year - a rise of 61.6%. Bendon's EBIT rose by 53%.
Revenue rose for Bendon to $77.859 million from $73.722 million, a rise of 5.6%, and for New Zealand China Clays to $15.468 million from $12.674 million, a rise of 22%.
"We're very pleased with what are excellent results. They are a testament to the strong management disciplines and management teams we have in place in both businesses," Mr Parton said.
"The results reflect the hard decisions made during the year. In particular, to cease manufacturing Bendon products in New Zealand and source all our garments from overseas suppliers.
"This incurred one-off costs of $9 million. Those costs, along with trading losses of $687,000 and a loss of $1.1m incurred on the sale of Microsilica NZ, turned this result into a loss for the Corporation of $1.43 million.
"The financial indications show that our decision to close manufacturing in New Zealand was correct, and the costs will quickly be recouped through increased future profitability.
"We see that $9 million as an investment in progress. It opens up real opportunities related to the cost and quality of our garments. It ensures we can respond flexibly to the dynamic markets in which we operate. It ensures Bendon can not only retain its share of the New Zealand market, and continue to grow in the Australian market, but can take on the world," Mr Parton said.
For more information:
Chairman, Ceramco Corporation
Phone: (09) 379-1204; (021) 904-614
CERAMCO CORPORATION LIMITED
ADDITIONAL INFORMATION FOR THE YEAR END 31 MARCH 2000
The Chairman of Ceramco Corporation today announced to the Company's Special Meeting that the annual result for the year ended 31 March 2000 showed very positive operating performances from both Bendon and New Zealand China Clays.
Each of the companies performed strongly to enable the Group to post an EBIT result of $10.261 million for the year. This is a significant improvement over last year's EBIT of $6.349 million - an increase of $3.912 million or a rise of 61.6%.
Revenues rose for Bendon to $77.859 million from $73.722 million - 5.6% - and for New Zealand China Clays to $15.468 million from $12.674 million - a rise of 22.0%.
Non-recurring costs and losses from discontinued operations, generally related to the previously announced closure of Bendon manufacturing facilities and to losses from the now disposed of Microsilica business. They totalled $11.153 million.
After interest costs and taxation, the net deficit for the Corporation was $1.431 million, compared to a net deficit in 1999 of $1.504 million.
A summary of the contribution for each of the Company's divisions is outlined below:
2000 1999 Continuing Businesses:
Apparel 6.213 4.071
Minerals 4.761 2.892
Corporate & Investing (0.713) (0.614)
Operating earnings from continuing activities (EBIT) b/f non-recurring items and taxation 10.261 6.349 Less: Interest cost (0.259) (0.176)
10.002 6.173 Less: non recurring:
Discontinued operations (1.806) (5.522)
Apparel (9.009) -
Minerals - -
Corporate & Investing (0.338) (0.587)
Total non-recurring (11.153) (6.109)
(Deficiency)/Surplus Before Taxation (1.151) 0.064 Less: Taxation Charge (0.280) (1.568)
Net (Loss) for the Period After Tax ($1.431) ($1.504)
Bendon continued the improvement shown at the half year, with EBIT up 52.6% on last year with an increase in revenue of $4.137 million.
The EBIT figures for the last three years of $2.555 in y/e 1998, $4.071 in y/e 1999 and $6.213 in y/e 2000 shows a very positive trend for the business.
Strong revenue growth in Australia continued with an increase of 16.2% year on year, totalling $43.537 million in the current period against $37.482 million in 1999.
Retail activity in New Zealand fluctuated over the period, with positive growth in the first half of the year but a decrease (5.3%) in sales for the whole year. Notwithstanding that, we retained a 50% share in the intimate apparel markets.
We expect even greater market presence and strong brand promotion will result in increased sales in the coming year, following the acquisition of eight stores from the former Bennett & Bain chain.
Bendon continues to reduce operating costs and to improve margins while at the same time maintaining high standards for its product range, both in terms of quality and style.
The Company announced to the NZ Stock Exchange on 20 October 1999 that it intended to close the manufacturing operations of Bendon in New Zealand. This plan was implemented and the final plant closed on 31 March 2000. The overall costs of closure were $9.009 million and are included in the non-recurring costs noted above.
Bendon will now source all its product offshore and this restructuring will ensure the ability of Bendon to compete in a global market place.
At the half year New Zealand China Clays' revenues had increased by 14.9% over the corresponding period last year. By year end this increase was 22.0%. The corresponding EBIT increase to $4.761 million from $2.892 was most satisfactory.
The overall turnaround, which came after a period of declining sales, was the result of New Zealand China Clays strong focus on customers' requirements and the development of innovative ceramic systems.
However, while the return to increasing profitability is very pleasing, New Zealand China Clays continues to operate in an environment where the globalisation of clay and mineral markets has created large international companies which can dominate clay markets.
As a small niche player, New Zealand China Clays will find it increasingly more difficult to compete. This has led your Directors to re-evaluate the future of New Zealand China Clays as part of the Ceramco Group. As shareholders are aware, the Board is seeking shareholder approval for the sale of New Zealand China Clays Ltd to Mircal, a subsidiary of French Industrial Mining Company, Imerys, for $41.0 million.
During the year, the Microsilica operation continued to struggle to achieve its potential. The business and its assets were disposed of in February 2000. The effect of the disposal, and the company's trading operations to the date of sale, are included in the cost of discontinued activities as noted above.
The Corporate office has focused on investing, funding, property matters, Ceramco's activities as a listed entity, and the finalisation of previous Group activities. An EBIT loss of $713,000 was incurred this financial year (loss $614,000 1999) together with non-recurring losses on the sale of surplus properties and the settlement of a long outstanding legal claim.
During the first six months of the year the Company completed a share buy back programme, repurchasing a further 1,547,180 shares at a cost of $2.279 million.
During the year, 135,000 options to acquire shares were exercised by staff members, resulting in the Company's issued capital being 40,443,809 ordinary shares as at 31 March 2000.
The balance sheet shows a strong position, with shareholders' funds totalling $46.964 million (1999 $52.529 million) and an equity ratio of 79.7% (78.9%). Total assets are $58.955 million ($66.616 million last year).
An interim dividend of 5.0 cents per share non-imputed was paid to shareholders on 23rd December 1999. Since that time however, as noted above, significant costs were incurred in closing the Bendon manufacturing and disposing of the Microsilica operation and these non-recurring costs gave the corporation an overall loss for the year. In addition, there has been the announced proposals of the sale of New Zealand China Clays, a capital repayment programme, the future growth of Bendon, together with a further restructuring of the overall Ceramco Group.
Given all these factors, your Directors have decided to defer consideration of a dividend until a point closer to the time of the Annual General Meeting.
Notwithstanding all the changes which are occurring, the Directors believe it is still appropriate to maintain Ceramco's current policy of paying dividends equating to 75% of normalised tax paid profits, subject to the capital requirements of the businesses within the Group and borrowing covenants with its bankers.
ANNUAL GENERAL MEETING
The Annual General Meeting of Shareholders will be held at the Ellerslie Convention Centre (Guineas Room), 80-100 Ascot Avenue, Greenlane at 10.30 am on 7th August 2000.
In the Notice of Meeting for the Special Meeting of Shareholders on 1 June 2000, the Board noted the following points in respect of the outlook for the business. They remain a fair summary: * It is the intention of the Directors to continue to aggressively grow the Bendon business in the domestic markets of Australia and New Zealand. Plans are also underway to take the business into European markets, and details of those plans will be disclosed over the coming months. Preparatory work has also started on Bendon's e-Commerce strategy. * Further funds could be required for the expansion of Bendon and various funding alternatives, including debt financing, will be explored. * The Directors anticipate that the level of profitability achieved by Bendon in the past financial year will be exceeded in the year ending 31 March 2001. The budget for that year (before costs associated with offshore expansion and after taking up costs relating to its listed company status) is for operating earnings before non-recurring items, interest and taxation of $7.9m. * The current Group includes the residual companies of a formerly large and complex conglomerate. Many of these companies are now dormant but there are associated assets and liabilities. In order to distribute further surplus funds to shareholders in a tax efficient manner (in addition to the proposed return of capital) it is anticipated all the current Group companies except for the Bendon companies will be liquidated in an orderly fashion. * It is anticipated that shareholders will ultimately receive a mixture of cash, and shares in the Bendon operating company. However, liquidation will take between 18 to 24 months to complete. * Liquidation of the surplus companies will crystallise certain liabilities (such as tax on prior earnings of overseas subsidiaries) which would not otherwise be incurred by an ongoing business. The Directors believe that it is prudent to recognise those liabilities, together with all other costs of liquidation in connection with the termination of the Group's previous activities. These liabilities, which will be funded from part of the proceeds of the New Zealand China Clays sale, are estimated to be approximately $9.0 million and the cost of recognising them will be reflected in the accounts for the six months ended 30 September 2000. * From that date onwards, the profits of the Group will be those of Bendon alone, and shareholders will have a clear understanding of how their investment is performing.
I M Parton