Letts profits halved as diary maker admits tough trading will continue

LETTS Filofax, the Dalkeith-based diary maker that has been in talks with potential buyers, saw profits halved during the 12 months to January amid the third consecutive year of “very tough trading” for the business.

FLB Group, parent company of Letts Filofax global operations, turned in a pre-tax profit of £2.1 million, down from £4.2m previously. Sales slipped by 5 per cent to £52.9m.

Notes to the accounts highlight that, as of the end of March, directors had not renewed a £13m credit facility due to expire at the end of January next year. Without that facility, Letts said there was “significant doubt” whether the company could continue as a going concern.

“Nevertheless, the directors have a reasonable expectation that the company has adequate available funds to meet its forecast cash requirements and meet all banking covenant requirements for at least the next 12 months from the date of approval of these financial accounts,” the group said.

“The consolidated group continues to be a consistently profit-making business, demonstrably generating a cash surplus after the service of debt, and the directors believe it will continue to be so for the 2012-13 financial year.”

Chief executive Gordon Presly was in board meetings in London yesterday and unavailable to comment.

However, in a statement accompanying the accounts, he noted that raw material costs were continuing to rise while sales were expected to remain flat.

“We have taken several senior managers out of the cost equation and have a number of structural cost saving measures being evaluated on the basis that the top line group sales level is going to be difficult to grow significantly over the next couple of years,” Presly said.

The Scotsman revealed in September that Letts was in talks that could lead to another change of ownership for the 216-year-old company. Presly confirmed at the time that Phoenix Equity Partners, the London-based venture capital group which took a 50 per cent stake in Letts in March 2006, was looking to exit the business by the first quarter of next year.

French stationery company Exacompta Clairefontaine is known to have held discussions with the Scottish business. In 
addition to sounding out potential trade buyers, Letts is also looking at other ways to re-
finance its operations.

Phoenix and the Letts management team – including Presly and ten others – paid £45m to take control of the business from Dunedin Capital Partners five years ago. Edinburgh-based Dunedin initially invested in Letts in 2000, taking a 74 per cent stake in a £17m management buy-out from Bemrose Corporation.

The company exports to more than 75 countries and has nine international subsidiaries spanning Europe, the Far East and North America. It recently repatriated production of about half a million books from China to Dalkeith, where roughly 300 of its nearly 500 global staff are employed.