This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

23 February 2023

PITTARDS PLC

("Pittards", "Company" or "the Group")

Trading Update

Pittards plc (AIM : PTD), the specialist producer of technically advanced leather and luxury leather goods for retailers, manufacturers and distributors, announces a trading update in respect of its financial results for the year ended 31 December 2022 ("FY2022"), the full results of which are expected to be announced during April 2023.

End of year summary

The majority of 2022 showed a steady recovery from the COVID years.  However, the latter part of the year was affected by a number of factors which have had an impact on the performance for the end of the year, and whilst the Group generated an EBITDA for the year, its profit before tax will fall short of market expectations.

Following the UK mini budget in September 2022, the GBP weakened dramatically over a very short period.  This significant one-off event had a progressive impact on our UK business due to the $US overdraft and maturing hedges, which had to be unwound with a net negative effect of c£1.5m on cash.  US dollar revenues make up a high proportion of sales and the Group's hedging strategy involves a combination of forward $US hedges and a $US overdraft, which is aimed at allowing the business time to adjust selling prices and costs in the event of a change in the value of the GBP.  

Sales were weaker in the last quarter of the year.  This was in part a result of customers destocking prior to Christmas and an early Chinese New Year.  This market circumstance has continued into the first months of 2023.  However, our order book remains stable. 

UK inventory was reduced throughout the year by c2m sq ft as a result of a planned unwinding of strategic post COVID stock, to off-set supply chain challenges.  However, the replacement cost of new stock has increased as a result of inflationary pressures, in particular transport and energy increases. As a result, the overall value of Group stocks increased.

Our net debt at the year-end stood at c£11.9m (H1 was £11.2m).

In accordance with our strategy, our businesses in Ethiopia have successfully focused upon more local sales and finished products, including shoes and gloves.  An important political event has been the signing of the Peace Treaty on 2 November 2022, between the Government of Ethiopia and the Tigray People's Liberation Front, leading to a cessation of hostilities. Our businesses had remained open throughout the conflict, but this peace deal allows a return to more normalized trading.

As a consequence of a high inflationary environment in Ethiopia we have undertaken a revaluation of our assets there, subsequently we have revalued our assets across the Group.  This will result in a significant uplift to our assets. 

Forward outlook

There remains some uncertainty around sales volumes and inflationary pressures for 2023, along with some continued supply chain challenges.  However, we anticipate that the financial impact of any lower sales volumes will be partially mitigated both by the lowering of the Group's cost base and the continuing weakness of GBP.

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