Dewhurst Group Plc

("Dewhurst" or the "Group")

Preliminary Results for the year ended 30 September 2023

Chairman's Statement

Results

Group sales for the year to 30 September 2023 marginally increased 0.7% to £58.0 million (2022: £57.6 million). Adjusted operating profit is lower but profit before tax has recovered from last year's result, which was affected by cyber attack remediation costs. Adjusted operating profit was £7.8 million (2022: £8.8 million before cyber attack remediation costs) and profit before tax was £8.1 million (2022: £7.2 million). Earnings per share increased 4.1% to 62.45p (2022: 60.00p).

Although reported sales were slightly up overall, the sales performance varied greatly across the divisions and companies. Transport and Highways grew 10% although there were swings within the division in that rail infrastructure work fell back while highways grew strongly. Keypad sales suffered a severe drop due to our main customer carrying out substantial destocking prior to a planned split of the company into two entities. The Lift division improved 4% with stronger sales in the UK and particularly North America, although this was offset by lower sales in Australia. This was the same pattern of change as the previous year. Currency movements had little impact on the reported sales overall. Although there were significant movements in currencies over the year, the average rates on our most used currencies varied by less than 5% with a weaker Australian dollar partially offset by a stronger US dollar.

We are proposing an increase in our final dividend of 0.75p, making a total increase of 1.00p for the year. If approved, this would result in a total dividend for 2023 of 15.75p per share which is 6.8% up on 2022.

Operations and People

The economic conditions over the past year of high levels of inflation and rapidly increasing interest rates have created a less stable and benign financial environment than we have all been used to. Against this volatile backdrop several of our companies have achieved record results and I would like to extend my thanks to our staff in these companies for their excellent contributions, as well as to our colleagues in other businesses who have faced their particular challenges with determination and resolve.

There is no question that the pandemic challenged our ability to maintain the communication and level of engagement with our staff we would have liked. In the aftermath of the pandemic and in common with many companies we saw employee turnover rates increase. John Bailey, in his new role as CEO, has introduced a number of initiatives which should assist us in our goal of growing employee satisfaction and improving retention. Having our staff fully engaged is fundamental to our ability to support our customers in the way we would like and to our overall performance as a business.

The rapid and escalating increases in costs of material and components have abated somewhat during this year. However the expiry of the last of our fixed energy contracts in the UK during the first half meant we have felt the full impact of energy cost escalation over the last twelve months. In addition, wage and salary costs have increased more this year than last to mitigate cost of living increases and to ensure we can recruit and retain the staff the business needs.

Investment

We have expended considerable management resources exploring opportunities to invest for growth this year. In June we announced agreement with Avire to take on their E-motive lift display brand, IP and products. These products will allow us to extend the range of Dewhurst Group branded products we can offer our customers. Our team has worked hard to set up manufacturing of the range; that is now underway and the products are available for our customers to order. The team and our suppliers have done a great job getting everything set up as quickly as possible. Our management and development of these products will be located in Singapore where a new subsidiary has been established.

We have invested more time, energy and funds in IT following 2022's cyber attack. No system is completely impervious, but we have worked hard to increase our resilience to any further attempt to compromise our systems. At the same time we have put additional investment into systems to improve our customer service and our own efficiency. An example of this is our continued development of A&A's E-commerce with the introduction of delivery tracking.

It is encouraging to be able to report the installation of solar panel systems at two more of the Group's properties during the year. More details are set out in the Sustainability report.

Outlook

Group sales have started the year slightly up on last year and in line with our expectations. Lift product demand in all regions currently seems to be holding up reasonably well. On keypads it appears our major customer has completed its de-stocking program and current demand seems a little more stable than the volatile demand last year. Highways and transport products should continue their steady improvement.

We are carefully monitoring cost increases at all companies and are now in a better position to respond more quickly to any increases that occur. Where possible contracts have been adjusted to allow for material cost changes, but there will still be some medium term contracts where prices are fixed.

Our key objective for the immediate future is to capitalise on the opportunities afforded by our acquisition of the E-motive display range. This means we will need to invest in engineering development of the products, in stock and in ensuring the manufacturing process is robust and meets our quality standards.

Our strong balance sheet allows the Group to continue to explore other opportunities to deploy its cash resources.   

Richard Dewhurst

Chairman

Strategic Report

Business Review

The Group's principal activity in the year continued to be the manufacture of electrical components and control equipment for industrial and commercial capital goods. The Group maintained its position as a speciality supplier of equipment to lift, transport and keypad sectors. A business review of the Group's operations is dealt with below in operating highlights, in the Chairman's statement and in the Financial review.

Key Performance Indicators

The Directors believe that the key financial performance indicators relevant to the Group are earnings per share, adjusted operating profit, profit before tax and return on equity. The key non-financial performance indicators relevant to the Group are on-time deliveries to our customers and those relating to our sustainability commitments.

Operating Highlights

The transition in leadership was well planned and executed and continues to be well supported. The first year has seen significant progress in many of our key objectives.

We have developed our mission, vision and values as well as seeking to engender a positive mindset amongst our global leadership teams as we position the Group for growth.

Conditions in the markets in which we operate have in general have been relatively stable despite the turbulent geopolitical and economic backdrop.  However there have been particular challenges in both our Keypads market and our Australian lift interior businesses which have distorted an otherwise positive performance with several business registering record results.

We have focussed heavily this year on People, IT and operational efficiencies as we seek to improve our business resilience and position the Group and our individual businesses for growth. Our first ever companywide staff survey was conducted towards the end of the financial year and the results shared with the leadership teams across all our businesses.

We have identified the key areas for improvement which, along with the results of our survey, will help shape our People strategy.

Although there has been a reduction in the volume and level of cost increases during the latter half of the year, price pressure remains a constant threat. We have worked hard to mitigate the impact through various initiatives including increasing prices more promptly in response to cost increases as and when market conditions allow.  The improvement in our operational efficiency has helped reduce our costs whilst enhancing our competitive advantage. We remain committed to our Customer First philosophy and continue to strive to provide the most reliable and efficient service possible to our customers.

We secured the exclusive rights to the E-Motive brand and range of displays and position indicators toward the end of the financial year and the team have worked incredibly hard in setting up our new entity based in Singapore. This is an exciting opportunity for Dewhurst Group and one that will require us to invest further in several areas of the business in order to meet our growth objectives.

Despite the challenges of a geographically diverse Group it has been my pleasure to meet all of our people in person throughout this year and I would like to join the Chairman in thanking them all for their hard work and support during the year.

UNITED KINGDOM

Dewhurst Limited

The fall in sales and profit versus last year is partly attributable to a drop off in demand for keypad and rail products but also the timing of a price increase which pulled forward demand and profit from 2023 into 2022.

The appointment of Nick George as Operations Director has brought greater focus to our manufacturing processes and procedures, but our commercial resource was stretched in the second half of the financial year as a result of taking on the E-Motive brand. Inevitably this has slowed our progression on operational efficiencies.

We have moved to address this with the appointment of a new Commercial Manager at the start of the new financial year. This appointment has allowed Peter Dewhurst to take on direct responsibility for our Displays business as well as continue in his current role as Commercial Director for Dewhurst.

Despite these challenges lift fixtures performed strongly with some prestigious projects being secured which demanded some hugely impressive designs and finishes.

We have continued our commitment to reduce the environmental impact of our manufacturing processes and have been able to increase the proportion of recycled plastic in our mouldings whilst maintaining quality and performance.

The launch of our XR pushbutton range which offers improved resistance to chemical attack has been well received as has the introduction of our new Weatherproof buttons which were launched during the year. Further product launches are planned for 2024.

At the beginning of the financial year Nigel Green our hugely experienced and valued production planning manager sadly passed away. Nigel's untimely passing, a few years short of retirement, was a shock to everyone within the Group. 

Traffic Management Products (TMP)

Despite the continued uncertainty around local authority spending, sales showed a significant improvement on the previous year.

Given that there has been very little spending activity since the first phase of the Government's Active Travel Fund trial cycle schemes some two years ago it was pleasing to see all product sectors perform strongly.

Traffic bollards continue to attract strong demand both in the UK and export markets. Signlights, in particular, saw strong growth in the year supported, in part, by our continued focus on sustainability.  We have extended the use of bio-polymers on certain product ranges and are seeing more attention being paid to our ESG credentials by main contractors and local authorities.

Good progress has also been made on our operational efficiencies which has helped streamline our manufacturing operation and is facilitating the cross skilling of our production team.

A&A Electrical Distributors (A&A)

Following the successful transition of senior leadership at the beginning of the financial year A&A saw both sales and margin growth.

The latest tranche of continuous improvement initiatives throughout all areas of the business focussed attention on increased efficiency and customer service which in turn has improved profitability. 

A&A have continued to progress their sustainability commitments, reducing waste and their overall impact on the environment. A&A achieved ISO14001 accreditation during the year.

Our E-Commerce platform is now being used by many customers as well as our own Internal Sales Engineers (ISE) which is helping to accelerate uptake.  Further development has seen the launch of A&A's driver delivery app which automatically maps the most efficient delivery route. The proof of delivery and associated delivery information is immediately uploaded to the Ecommerce platform allowing customers prompt access to the information.

There are further enhancements currently being trialled, which we expect to launch during 2024.  The continued investment in technology has supported significant operational efficiency improvements some of which are now being trialled at Lift Material.

As a result of the landline telephone network switch from analogue to digital technology (Voice over Internet Protocol: VoIP), A&A have introduced GSM gateways to their range and have seen strong sales. These products facilitate the transmission of lift emergency call and text messages over the mobile phone network. New product development and range extension remains a key part of A&A's strategy.

EUROPE

Dewhurst Hungary

Following somewhat of a resurgence in the use of cash following the pandemic, sales were significantly impacted by our major customer's restructuring of their business into two separately traded entities of digital commerce and ATMs as well as a significant change in their manufacturing locations.  As a result we have restructured our business to reflect the reduced demand for ATMs whilst exploring additional manufacturing opportunities.

NORTH AMERICA

Dupar Controls

Despite supply and lead time challenges within our supply chain we have seen further strong sales and profit growth at Dupar resulting in a second consecutive year of record sales and profit.

The move to our new facility a little over 18 months ago provided the opportunity to implement a new layout and new workflows, but is pleasing to see the team continue to drive improvement whilst managing the increased demand.

At the end of the financial year, we took delivery of our latest new machine, an automatic stud welder. The equipment has now been commissioned and the transition from manual stud welding, where possible, is underway. 

Recruitment continues to be a challenge at Dupar. This has been somewhat offset by the process efficiency improvements, but remains a key area of focus. 

Elevator Research & Manufacturing (ERM)

Our continued focus on process controls, margin improvement and customer engagement at ERM helped to deliver a double-digit sales increase as well as a significant improvement in profitability. 

Having sustained our position within our immediate market we are now seeking to expand our success within the wider California market which will be supported by our celebration of ERM's 60^th anniversary in 2024. 

AUSTRALIA & ASIA

Australian Lift Components (ALC)

Sales grew marginally at ALC although market conditions have remained challenging. The lack of new projects and the continued drive by the major lift companies to procure product through their own factories has reduced our available market.

We have been successful in winning some projects for special material, but we need to improve our market share by the introduction of new products and positive differentiation.

P&R Lift Cars (P&R)

Performance at P&R fell for a second year running fuelled in part by fewer new projects but also as a result of increased competition. As a consequence price pressure has had a significant impact and remains a key challenge.

During the second half of the year we saw positive signs of increasing activity and managed to secure some decent orders.  Whilst it is difficult to manage the peaks and troughs it is important that we continue to make improvements in our operational efficiency as we seek to build better resilience and competitive advantage.

Lift Material

A third consecutive year of record sales and profit as a result of strong product sales and service work across all product sectors.  We have worked hard on both customer and supplier engagement throughout the year which has provided further opportunities to extend Lift Material's product range as well as increased sales opportunities.

We have made significant improvements in our reduction and reuse of packaging waste and the installation of solar panels on our roof will help offset increased energy costs as well as meeting our sustainability objectives.  The focus remains on continuing to improve our operational efficiency to support profitable sales growth.

Dual

We replaced the Managing Director at Dual at the start of the financial year and developed a plan to make the business more sustainable for the long term. Sales, as expected, were lower than last year's record. Profit, although lower than the previous year, exceeded expectation as we undertook the necessary improvements throughout the business.

We successfully recruited into the key roles with the team working incredibly hard throughout the year to meet both customer requirements as well as our improvement objectives. The transformation across all areas of Dual has improved efficiency, safety, accountability and morale. With increased project opportunities secured in recent months we are well positioned to deliver improved profitability as a result.

Dewhurst Hong Kong

Once again, Dewhurst Hong Kong achieved double digit sales and profit growth setting a new record for the year.  The easing of travel restrictions during the second half of the year has allowed Feona Lai to visit customers as well as attend the Dewhurst Group forum in October. I have also been able to visit the team in the Hong Kong and thank them for their continued hard work in person.

The success of the business has been built on the sales of our pushbutton range and selected distributed products. The introduction of a new rope gripper is awaiting approval by the relevant authority in Hong Kong and we shall consider the addition of new product ranges without detracting from our focus on our core pushbutton sales.

Dewhurst Singapore

Dewhurst Singapore is the newest addition to Dewhurst Group having secured the exclusive rights to the E-Motive brand with its range of displays and position indicators towards the end of the financial year.

We have worked quickly to set up our new entity based in Singapore. Despite the challenges faced with scaling up new manufacturing and administration facilities we have made good progress. The addition of this new business supports our global growth objectives and our commitment to supplying our customers with innovative quality products.

John Bailey

Chief Executive Officer

Financial Review

Trading Results

The Group continued its upward trend with a modest 0.7% increase in total sales to £58.0 million (2022: £57.6 million).  Lift sales overall increased 4% due to strong UK and North America sales for a second year running at A&A and Dupar Controls, along with double digit growth in lift distribution sales at Lift Material and Dewhurst Hong Kong. These increases were offset by a tough year in Australian lift interiors, particularly at P&R who continued to experience construction project delays, outside of their control. It is pleasing to see these projects now starting. Dual who delivered a record year of interior sales in 2022, returned to more normal levels. Transport sales increased 10% through TMP delivering award winning ESG products and great service but unfortunately Keypad demand continues to fluctuate and whilst seeing a 16% increase last year, we reported a 37% decrease in sales in 2023.

With increasing inflation impacting labour costs throughout the year it was pleasing to see the hard work in procurement deliver a 1.8% direct material cost reduction across the Group. Overall operating profit increased 6.2% to £7.8 million (2022: £7.3 million) and profit before taxation increased 12.8% to £8.1 million (2022: £7.2 million).

Adjusted operating profit decreased by 12.1% to £7.8 million (2022: £8.8 million before cyber attack remediation costs).

Although a significant proportion of the Group's revenue and profits are generated and held in foreign currency, the foreign exchange retranslation impact on the reporting performance of the Group this year decreased both like-for-like revenue and profit before tax by under 1% (2022: an increase of 2% each).

Strong Cash Position

The subsidiaries continued to trade throughout 2023 without the need for Group cash support, and paid dividends back to Group totalling £7.9 million. £6.4 million of this cash was generated from operating activities during the year and as a result Group cash is strong. Further details can be seen from the consolidated cash flow statement.

During the year, the Group spent £0.8 million on the purchase of property, plant and equipment and the first of two £0.4 million payments to secure the exclusive rights to the E-Motive brand and all products within the E-Motive range. The second £0.4 million payment will be made in January 2024.

The Group started and ended the year without any bank borrowings. The cash balance at year end was £24.4 million, up £2.6 million from £21.8 million in 2022.

Pension Scheme Deficit

The Company paid a total of £1.6 million deficit reduction contributions into the pension scheme this year and despite this the scheme deficit still increased by £0.3 million to £2.1 million (2022: £1.8 million).

The main reason for the increase was an underperformance of the pension scheme assets, which was partially offset by the liability discount rate increasing from 5.25% to 5.50% at the year-end and increased mortality rates. Recent increases in mortality rates were initially associated with Covid-19, but unfortunately these are now being sustained primarily due to other causes. As a result the changes are being reflected in actuarial rates for future expectations of life expectancy.

All recommendations made by the scheme's actuary to eliminate the scheme deficit within an agreed timeframe have been fully implemented.

Capital Management And Treasury Policy

The Group defines capital as total equity plus net debt. The objective is to maintain a strong and efficient capital base to support the Group's strategic objectives, provide optimal returns for shareholders and safeguard the Group's assets and status as a going concern. The Group is not subject to externally imposed capital requirements and the Group's philosophy is to have minimal or no borrowing where possible.

The Group seeks to reduce or eliminate financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The policies and procedures operated are regularly reviewed and approved by the Board. By varying the duration of its fixed and floating cash deposits, the Group maximises the return on interest earned.

The Group continues to hedge foreign currencies internally where possible and did not use derivatives during the year in the form of foreign exchange contracts to manage its currency risk.

Dividends

The Board is proposing a final dividend of 11.00p (2022: 10.25p). If approved, this would be paid on 26 February 2024 and would result in a total dividend for 2023 of 15.75p per share which is 6.8% up on 2022 and is covered 4.1 times by earnings.  The dividend would be paid to members on the register at 19 January 2024 (ex-dividend 18 January 2024). Dividends are accounted for when paid or approved by shareholders, and not when proposed, therefore the proposed final dividend for 2023 has not been accrued at the end of the reporting period.

Jared Sinclair

Chief Financial Officer