Leather producer’s profits double despite revenue fall
Aston Martin supplier increases dividends by 10% on back of rise
BRIDGE of Weir-based Scottish Leather Group raised its dividend payments by 10 per cent in the past financial year after a flight to quality saw its profits more than double to £7.8 million.
The business, which supplies leather to the aviation and automotive industries and whose clients include Aston Martin, British Airways and Stagecoach, paid a total dividend for the year to the end of March of 17p per share, up from 15.5p the previous year.
The increased payment came after the group’s pre-tax profits rose from £3.2m to £7.8m despite turnover for the year falling from £140.2m to £128.6m.
Company secretary Ronald Brown said: “Better trading circumstance during the year and a strong focus on the core activities of the group have contributed to improved levels of gross margin and operating profit.
“These have been achieved in conjunction with a reduction in turnover brought about by the elimination of low margin and less profitable lines of business.
“These actions together with the improvement in overall profitability have also significantly benefitted net cash inflow resulting in a much stronger year-end cash position.”
The results come after the business saw profits slump in the year to March 2015 after what Mr Brown said at the time were “challenging trading conditions”.
In particular, he said that “gross margins remained under pressure due to continued high raw hide prices”.
While the 2015/16 results cover the period before the UK voted to leave the European Union and sterling subsequently slumped, Mr Brown said in a note to the company’s accounts that foreign currency exchange was one of the “principal risks and uncertainties facing the business”.
“The group monitors closely short, medium and long term exchange rates and in addition to utilising a natural hedge where available has a policy of hedging against currency fluctuations relating to forecast transactions for up to 24 months ahead on a rolling basis in respect of major currency exposures,” he said.
In terms of staff costs, the group paid a total of £17.1m in wages and salaries to its 599 staff, which translates to an average salary for the year of around £28,500.
Its six directors – chairman Jonathan Muirhead, chief financial officer Ian Lundie, chief executive Iain McFadyen, James Davidson, James Lang and Karen Marshall – shared a remuneration pot of £911,000, which equates to an average remuneration package of just over £150,000.
In addition, £26,000 was paid into a defined contribution pension scheme for one director, with a further £177,000 in final-salary savings being contributed for the other five.
The group operates two final salary pension schemes for its employees and incurred expenses across the two of £1.2m for 2015/16. That was £913,000 a year earlier.
The group also operates a defined contribution scheme, into which it paid £569,000 in 2015/16. This will be its main employee retirement fund from now on, with both final salary schemes closing to future accruals at the end of March.
“Contributions to the schemes are made by the company and up from group based on the advice of the actuary with the objective of eliminating the overall deficit during the remaining working lives of the members of the schemes,” a note in the group’s accounts said.
“Following consultation with the members it has been decided to cease accruals to both defined benefit schemes as of 31 March 2016.
“The effect on future contributions [from the company], asset allocation and liabilities has been assessed and the objective of eliminating the overall deficit remains valid.”
At the end of the year the group, which is made up of two tanneries, two leather finishing plants and a services and technology company, had £22.8m in cash, up from £9m at the end of the 2014/15 financial year.
The businesses in the group are Bridge of Weir Leather Company, NCT Leather, WJ&W Lang, Andrew Muirhead & Son and SLG Technology.
The oldest of the five is Andrew Muirhead & Son, which is based in Glasgow and was established in 1840.