REG - Tandem Grp PLC - AGM Statement

TandemAnnouncement

26/06/2024 07:00

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RNS Number : 8506T  Tandem Group PLC  26 June 2024

Tandem Group plc

(the 'Group' or 'Company')

AGM Trading Statement

 

Tandem Group plc (AIM: TND), designers, developers, distributors and retailers
of sports, leisure and mobility equipment, announces that at the Annual
General Meeting of the Company to be held today, the Company's Chairman, Steve
Grant, will make the following statement, with the Board maintaining its
expectations that the Group will achieve market expectations of performance
for the full year.

 

Trading

We are pleased to report that the Group remains on track to achieve market
expectations of performance for the full financial year ended 31 December
2024. However, we continue to navigate a challenging environment marked by
increasing freight costs which have more than trebled in recent months, driven
by the ongoing conflict in the Red Sea. Additionally, we have experienced some
of the wettest seasonal weather on record, further impacting consumer demand.
Moreover, high interest rates have persisted longer than anticipated,
restricting consumer spending power and presenting another layer of complexity
to our market dynamics. Despite these headwinds, our commitment to strategic
planning and the Group's resilience continues to position us favourably for
the remainder of the year.

 

Our Freight-On-Board (FOB) sales to date this year are behind those of the
prior year, however, this decline was anticipated. Encouragingly, we are now
observing a return of retailer confidence, with a noticeable increase in FOB
orders being placed in recent months. This uplift in demand aligns with our
expectations and positions us optimistically for improved performance in the
latter part of the year.

 

At 31 May 2024, our current sales position overall is marginally ahead of the
prior year at 3%. The Group has been focusing heavily on introducing newness
to our product range, ensuring that our offerings align with current trends
and maintain a high level of innovation.

 

This strategic focus has borne fruit, particularly in our Toys, Sports, and
Leisure division, which has performed well in the domestic market. Despite the
earlier mentioned FOB performance, this division is outperforming the prior
year by approximately 22%. This strong performance is a testament to our
commitment to delivering quality and on-trend products that resonate with
consumers.

 

In Golf, we are pleased to report that despite the challenges of poor weather,
turnover including electric golf trolleys (which form part of the eMobility
category) was 14% ahead of the prior year.

 

The bike market continues to present challenges, with the bike season being
delayed due to poor weather conditions and high levels of excess stock in the
market. Despite these hurdles, our Bicycles division has shown resilience,
with sales increasing by 9% to the end of May compared to the same period last
year. A standout performer in this division is our range of lightweight
children's bikes under the Squish brand, which has seen an impressive 21%
improvement over the prior year. This growth highlights the strong appeal and
quality of our products, even in a tough market environment.

 

In our eMobility division, sales to the end of May are down 15% compared to
the prior year. This decline is primarily attributed to an exceptionally high
volume of distributor bike sales during the March to May period last year. It
is important to note that last year, eBike sales tripled in 2023 compared to
the same period in 2022, creating a high benchmark for comparison. Despite the
current year-on-year decrease, the underlying demand for eBikes remains
robust, and we are confident in the long-term growth potential of this
division.

 

We are closely monitoring the evolving regulatory landscape for eScooters.
Recently, Ireland has legalised eScooters, and we are hopeful that the UK will
follow suit. However, it is uncertain that this issue will be prioritised by
UK Government in the immediate aftermath of a UK General Election. Despite
this, we continue to support legislation that would establish clear legal
guidelines and regulations for electric scooters. Our Group is well-positioned
and ready to seize market opportunities as soon as regulatory clarity is
achieved.

 

In our Home and Garden division, sales have decreased by 19% to the end of May
compared to the same period last year. As previously mentioned, the weather
has played a significant role in this downturn, with average rainfall
increasing by 36% compared to the prior year up to the end of May.
Additionally, a warmer-than-usual start to the year adversely impacted our
sales of heating products. Despite these challenging conditions, we remain
committed to investing in this division by introducing innovative and on-trend
products.

 

Outlook

 

Looking ahead, we anticipate prevailing challenges to persist due to the
significant rises in freight costs resulting from the ongoing conflict in the
Red Sea. Vessels are now navigating around the Cape of Good Hope as an
alternative route, leading to extended shipping times and a shortage of
containers. This situation further inflates shipping costs, which could defer
our FOB sales as customers reassess their shipping cost considerations. The
Group is working diligently to mitigate these effects.

 

Alongside growing sales into Europe, the Group is also exploring investment
opportunities to acquire companies that can complement our existing
operations, enhancing our strategic growth. As previously announced, since the
year-end, we are pleased that the Group has secured a new five-year bank
facility with HSBC. This facility refinanced and replaced all existing loans
with HSBC upon drawdown, ensuring financial stability for our future plans and
growth initiatives.

 

We remain focused on driving down supply costs with our Far East suppliers to
maintain our margin levels. Our commitment to sourcing innovative products and
investing in newness continues to ensure that customers have a fresh and
exciting range of products to choose from.

 

We are pleased with the progress we have made with our new proprietary product
brand, MoVe, which is becoming increasingly popular with our customer base.
Additionally, our newly developed children's scooter brand, Squishles, which
is a brand-new concept in both licensed and non-licensed wheeled toys,
combining the latest trend in squishy plush with practical onboard scooter
storage, are seeing strong orders.

 

Our sales in licensed products remain robust, with strong performances from
Spider-Man, Bluey, Stitch and Sonic. We are excited to launch new ranges of
toys, including licensed bumper cars and Rollacases, which we anticipate will
be hugely popular with our customers.

 

In Golf, we are pleased to be introducing a new range of affordable package
sets under our Pro Rider brand. We expect this initiative to further boost
sales for entry-level golfers, providing them with high-quality equipment at
accessible prices.

 

We are introducing a new range of electric bikes to complement our already
strong offering in this segment. We expect eBike sales to continue to grow,
effectively replacing the ever-diminishing demand for traditional mechanical
bikes. We have recently added renowned brands such as Cannondale, Gocycle, and
Tern to our range of bike brands which are available both in-store and online.
Additionally, we continue to proudly grow our partnership with Bikeability
with our Squish bikes, allowing us to be involved in helping children learn to
ride a bike.

 

We are optimistic about the prospects for our Home and Garden division. We
have previously announced the introduction of new ranges of garden furniture,
ceiling fans, awnings, and air coolers, and we expect these products to become
increasingly popular as we move into the summer months. These new additions
are designed to meet the evolving needs of our customers and to capitalise on
the warmer weather, driving sales and enhancing our market position.

 

We are in the process of agreeing rental of space and 3PL services for part of
our new warehouse. This supports our plans for optimal utilisation of capacity
within our warehouse facilities.

 

In summary, despite the challenges presented by increased freight costs,
adverse weather conditions, and high interest rates, the Board remains
confident in the Group's ability to meet market expectations. We will continue
to invest in new products and innovation, ensuring that our offerings stay
fresh and aligned with market trends. Additionally, we are committed to
forging new partnerships with customers to drive growth and expand our market
presence. The strategic initiatives and investments we have outlined, position
us well to navigate the current environment and capitalise on future
opportunities.

 

 

This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.

 

Enquiries:

Tandem Group plc

Peter Kimberley, Chief Executive

David Rock, Company Secretary

Telephone 0121 748 8075

 

Nominated Adviser

Cavendish Capital Markets Limited

Ben Jeynes / Dan Hodkinson - Corporate Finance

Michael Johnson / Charlie Combe - Sales and Equity Capital Markets

Telephone 020 7220 0500

 

26 June 2024

 

 

 

Forward-Looking Statements

 

Certain statements made in this announcement are forward-looking statements.
These forward-looking statements are not historical facts but rather are based
on the Company's current expectations, estimates, and projections about its
industry; its beliefs; and assumptions. Words such as 'anticipates,'
'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known
and unknown risks, uncertainties, and other factors, some of which are beyond
the Company's control, are difficult to predict, and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. The Company cautions security holders and
prospective security holders not to place undue reliance on these
forward-looking statements, which reflect the view of the Company only as of
the date of this announcement. The forward-looking statements made in this
announcement relate only to events as of the date on which the statements are
made. The Company will not undertake any obligation to release publicly any
revisions or updates to these forward-looking statements to reflect events,
circumstances, or unanticipated events occurring after the date of this
announcement except as required by law or by any appropriate regulatory
authority.

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