Leather goods exporter Pittards had to run to stand still in 2011 as the rising cost of raw materials nibbled away at profits.
Revenue from continuing operations in 2011 rose to £38.2m from £36.1m the year before, with demand from key customers remaining firm.
Profit before tax eased to £3.05m from £3.30m in 2010, but this is after adjustments to acquisition impairments of £0.6m in 2010 and £0.4m in 2011, so the overall trading out-turn was more or less the same.
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Earnings per share on a diluted basis dipped to 0.82p from 0.84p in 2010.
Net assets rose from £11.6m (restated) at the end of 2010 to £16.0m a year later, reflecting investment in property, plant and equipment - mainly in Ethiopia - as well as a substantial increase in inventory levels to accommodate the effect of the new crust (semi-processed) tariff in Ethiopia, which will potentially unwind in the first half of 2012.
Net borrowings of £4.9m rose from £3.0m (restated) at the end of 2010 due mainly to the increased holding of inventory at year end and are expected to reduce to more normal levels by the half year. The gearing ratio of 31% is in line with expectations (2010: 26% restated).
Pittards has commenced the process of restructuring its balance sheet to enable the payment of dividends in the future. It is the board's intention to complete the process during 2012, which will involve a general meeting of shareholders.
"Demand from customers is still strong and our increased production levels of both leather and finished products in a lower cost environment make us well placed to benefit from this, however, raw material prices remain stubbornly high which puts pressure on margins and we will need to continue to pass this price pressure down the supply chain," the company chairman, Stephen Boyd, said.
"The premium Pittards brand is growing in reach and influence as we explore new sectors and market opportunities globally for our leather and leather products," he added.
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