Writtle half year report and dividend announcement
I am pleased to report on our first half performance. As you will see from the review of trading below, some of our businesses have felt the effects of an economic downturn in the period, while others maintained their upward trajectory. Our portfolio of profitable businesses and strong balance sheet continue to provide comfort as we face further uncertain times.
RESULTS AND DIVIDENDS
Turnover increased to £33.84m (2021: £31.46m) but headline profit before tax reduced to £1.17m (2021: £1.98m). Overall, the increase in turnover was offset by higher costs, particularly staff costs, after the withdrawal of government Covid reliefs that were in place throughout the prior period. With exceptional gains and losses netting off to a £0.03m profit this year (2021: exceptional profit £0.60m) profit
before tax was £0.83m (2021: £2.22m).
Net cash at 30 June 2022 was £8.95m (2021: £11.87m) following dividend payments of over £4.5m in the period.
An interim dividend of 7.00p (2021: 6.75p) per share will be paid on 31 October 2022 to shareholders on the register on 8 September 2022. We would normally consider a further distribution given our substantial cash balances but in light of the widely reported economic headwinds, and any acquisition opportunities that might present, we have decided to keep our cash reserves in place.
REVIEW OF TRADING
The performance of our three business groups is shown on page 8 of this report.
Our Innovation businesses were once again the strongest performers in the first half, with turnover and profit increasing over prior year. All three of our Innovation agencies, Epoch, Seymourpowell and The Team performed ahead of budget as clients continued to be drawn to their creative reputations, and their expertise in digital transformation, product and brand experiences and employee engagement.
Our Implementation business, Branded, had a more difficult first half with turnover and profit reduced. Anticipating a recession, some clients postponed discretionary spend on new product launches and marketing campaigns, at the same time as applying downward pressure to pricing. Margins were impacted but no major clients were lost as Branded continued to deliver a high quality service. Following some restructuring the second half is showing better signs, but we remain cautious.
Our Instore businesses saw contrasting fortunes. Fero goes from strength to strength and produced record turnover and profit, building on its excellent recovery in 2021. Investment has been made in machinery upgrades and improvements to its premises and we look forward to a further seasonal uplift in the second half. Arken suffered from a postponement to a major retail client’s new product rollout and recorded an unwelcome loss. The delayed rollout is now under way and Arken is expected to return to profitability. As manufacturers with large premises and workforces, Arken and Fero are most affected by inflationary cost increases in labour, materials and energy, and management teams are acutely aware of the need to recover these increases.
I referred in the last annual report to our exploratory talks with brokers over an IPO but stock market conditions for smaller quoted companies have worsened considerably in recent months. We have therefore decided to wait until conditions improve and we have weathered any impending recession. We are also taking a cautious approach to acquisitions, pausing a number of discussions. We are most likely to invest in our existing businesses in the coming months unless the recession presents attractive turnaround prospects. It is a good time to have a strong balance sheet and be holding substantial cash balances.
Our profitability is usually second half weighted and this year should be no exception. Despite the challenges presented by an uncertain economic and political landscape, I expect our excellent management teams will deliver another satisfactory year for Writtle.
8 September 2022