2009 Interim Results

28th Aug 2009 07:00



FROM CITIGATE DEWE ROGERSON FOR

PRESS RELEASE

  28 August 2009

2009 INTERIM RESULTS

STRATEGY CONTINUES TO PROVIDE RESILIENCE 

Brammer plc, the leading pan European added value technical distributor, today announces its results for the six months ended 30 June 2009.

FINANCIAL SUMMARY
	6 months to	6 months to
	30 June 2009	30 June 2008	Change
	£m	£m
Revenue	216.3	241.6	-10%
Operating profit (pre amortisation and exceptional items)	8.8	14.4	-39%
Profit before tax (pre amortisation and exceptional items)	6.0	11.4	-47%
(Loss) / profit before tax	(2.6)	11.0
Operating cash flow (pre exceptional items)	18.4	11.7	+57%
Net debt	(69.4)	(70.6)
Earnings per share	pence	pence
Basic - before amortisation and exceptional items	8.0	15.1	-47%
Basic	(3.3)	14.6
Diluted	(3.3)	14.4
Dividend	2.6	2.6

  Highlights

Overall revenue down by 10.5% but leading presence across Europe maintained.

Focus on key growth drivers enabled continued market share wins in most countries with even some overall growth managed in UK market where drivers most developed. 

Key Account sales grew by 9.4%, now representing 33% of total sales. Five new pan-European contracts were gained. The pipeline remains strong.

Brammer's leadership position still only represents around 3% of the market and the Company will continue to enjoy a sales performance which betters the market as consolidation continues.

Early actions taken resulting in an annualised reduction of around £15 million (13%) of the SDA cost base and inventory levels reduced by £31.1 million in total, equating to £20.6 million in constant currency terms, a reduction of 22%,

Operating profit (before amortisation and exceptional items) decreased to £8.8 million (2008: £14.4 million). 

Operating profit margin (before amortisation and exceptional items) declined to 4.1% (2008: 5.9%) reflecting reduced volumes, offset by increased gross margin percentage and significant operating cost reductions. 

Cash inflow from operating activities (before exceptional items) was strong at £18.4 million (2008: £11.7 million), being 209% of operating profit (before amortisation and exceptional items).

Net debt was £69.4 million (2008 year end: £84.0 million), after expenditure of £3.3 million on deferred consideration, £4.7 million on restructuring, and a beneficial £10.5 million exchange rate impact. 

EPS (before amortisation and exceptional items) reduced to 8.0p (2008: 15.1p).

Interim dividend unchanged at 2.6p per share.

David Dunn, Chairman, said:

"As we indicated in our July interim management statement there are signs of stability in the majority of territories, albeit at lower levels than a year ago and there does seem to be some rising confidence in the world's key economies that the worst has passed. For the remainder of the year we expect to see some modest increases in demand from recent levels, and also some benefit from new Key Account contract wins. In the prevailing environment the focus on costs and cash must remain a high priority. The Board continues to have full confidence in Brammer's business model, its strategy, and its excellent long term prospects for future growth."

 

Enquiries:	Brammer plc	020 7638 9571 (8.00am - 1.00pm)
		0161 902 5572 (1.00pm - 4.30pm)
	David Dunn, chairman
	Ian Fraser, chief executive
	Paul Thwaite, finance director
Issued:	Citigate Dewe Rogerson Ltd	020 7638 9571
	Martin Jackson
	Nicola Smith

 

 

 BRAMMER PLC

2009 INTERIM RESULTS

CHAIRMAN'S STATEMENT

Background

In my review of 2008, I indicated that the second half of that year and in particular the final two months had become increasingly challenging for Brammer. That period effectively saw the start of the recession for the group and, as anticipated and reported in our interim management statements on 19 May 2009 and most recently on 21 July, the first six months of 2009 have borne witness to some very difficult trading conditions.

Whilst endeavouring to maximise sales from the reduced business available the period has been dominated by a relentless focus on costs, working capital, and cash. These results demonstrate how management have reacted to the challenge presented and I commend the executive team for their efforts.

Trading

Reported first half sales at £216.3 million were 10.5% lower than in 2008, which included two additional working days. Sales per working day were therefore 8.5% lower. Stripping out the benefits of acquisitions and currency, sales per working day actually fell by 17.8%. The distribution of this fall is more fully explained in the Chief Executive's report but contained some excellent gains in the more resilient sectors such as Food and Drink and Utilities, being more than offset by substantial losses in Automotive, Metals, and Construction and Aggregates. Key Accounts have continued to increase their share of total sales.

With gross margins being broadly similar to last year, sales, distribution, and administration costs were reduced by over £6.0 million, at constant currency, in the period. This reduction incurred an exceptional charge of £8.0 million (of which £4.7 million was the cash cost paid) representing a swift payback and affecting approximately 10% of our staff. Interest costs were slightly below last year's level resulting in a group profit before intangibles amortisation, exceptional items, and tax of £6.0 million, compared with £11.4 million achieved last year.

As with costs much attention has been directed at working capital and cash. It is particularly pleasing to report a significant reduction in inventory which is now £31.1 million lower than at the beginning of the year, of which £10.5 million reduction is attributable to exchange movements. For some time the group has been developing its information technology strategy and it is good to see the benefits of this now coming through strongly in the management of our European inventories. Receivables reduced in line with sales, as did payables reflecting lower purchasing levels and accrual reductions.

Notwithstanding £8.0 million of expenditure relating to deferred consideration and exceptional items, net debt fell from the 2008 year end reported figure of £84.0 million to £69.4 million, helped by a £10.5 million currency movement. At that level Brammer is trading comfortably within its banking facilities and has operated within its covenant terms.

Strategy

Acquisitions have been off the agenda in the current period. Whilst remaining vigilant to opportunities the group has been focused on coping with the impact of the significantly reduced business activity across all of the European countries in which we trade. We have continued to implement our proven strategy and attract new Key Accounts and Insites, and I have already commented on the costs and systems aspects of the business.

This has been, and will continue to be, a difficult time for all of the people in Brammer. The Board have appreciated the commitment and flexibility shown by everyone, and the determination to support the group during this time.

Dividend

The interim dividend recommended by the Board is 2.6p per share which is unchanged from last year. This will be paid on 5 November 2009 to shareholders on the register at the close of business on 9 October 2009. 

Current Trading and Prospects

As we indicated in our July interim management statement there are signs of stability in the majority of territories, albeit at lower levels than a year ago and there does seem to be some rising confidence in the world's key economies that the worst has passed. For the remainder of the year we expect to see some modest increases in demand from recent levels, and also some benefit from new Key Account contract wins. In the prevailing environment the focus on costs and cash must remain a high priority. The Board continues to have full confidence in Brammer's business model, its strategy, and its excellent long term prospects for future growth.

David Dunn

28 August 2009 

CHIEF EXECUTIVE'S REVIEW

Overview

In the first half of 2009 we experienced the effects of the global downturn in all of our territories. Overall, we believe we continued to win market share by focusing on our key growth drivers of Key Accounts, attacking attractive market segments, developing our Insite base, and cross-selling. 

In the UK, our most mature business, and one where the Brammer growth drivers have been most developed, we managed some growth in a market where manufacturing output was down 13% over the last 12 months. In all other territories the magnitude of the economic downturn was greater than our ability to win market share and we experienced sales declines. It was necessary, therefore, to reduce the cost base substantially and early action was taken, resulting in an annualised cost reduction of around £15 million, or 13% of our sales, distribution and administration (SDA) cost base. In addition, we were able to realise the benefits of our earlier investments in systems and reduced our inventory levels by £31.1 million in total, which, after £10.5 million of reduction attributable to exchange movements, equates to £20.6 million in constant currency, a reduction of 22%, somewhat greater than the 18% reduction in sales in constant currency.

We have maintained our strong presence within Europe, and did not close any branches; our leadership position still only represents around 3% of the market, and the dynamics of the industry, combined with Brammer's growth strategy, means we will continue to enjoy a sales performance which betters the market as consolidation continues. We are well placed to benefit when the inevitable economic recovery occurs, but we are not planning for this (other than in particular market sectors) until well into 2010.

Operational Review

Brammer is the leading European supplier of technical components and related services to the maintenance, repair and operations (MRO) markets. In the first half of 2009 revenues decreased by 10.5% to £216.3 million (2008: £241.6 million), the gross profit margin in percentage terms improved slightly, and operating profit (before amortisation and exceptional items) decreased by 39% to £8.8 million (2008: £14.4 million). Operating margin (operating profit before amortisation and exceptional items) declined to 4.1% (2008: 5.9%). Cash generated from operating activities (before exceptional items) was £18.4 million (2008: £11.7 million) reflecting strong control of working capital, including a significant reduction in inventory levels. Return on capital employed (based on operating profit before amortisation and exceptional items) declined to 21.4% (2008: 30.7%).

In the UK, overall sales per working day ("SPWD"), including the contribution from the prior year acquisition CBS Rotary Power Motion ("CBS"), were up 0.7%, whilst organically SPWD declined by 2%. Gross margins were slightly down mainly due to product mix variations (higher growth in the new and lower margin product groups of fluid power and tools), and costs were carefully managed, resulting in operating profit growth of 11%. We continued to enjoy strong growth in fluid power (up 14%) and tools and general maintenance (up 7%). New contracts, renewals and extensions included Convatec, Cemex, Alcan, GKN, Heidelberg Hanson, Ideal Standard, Rexam, Thames Water, Wincanton and nuclear power station contracts with Magnox, Sellafield and Springfield. Key Accounts in the UK, representing over 50% of sales, grew by 3%. We won 11 new Insites and increased sales through our 53 full-time Insites by over 30%. Sales to all Insites (i.e. full time Insites and part-time Insites - those locations where we have several regular clinics with the customer's staff each week) grew by 27% and we now operate at 137 locations. Good progress was made in the important segments of Food and Drink, Paper and Packaging, and Water and Power generation, which more than offset declines in Automotive and Building and Construction. We successfully integrated the acquisition of CBS, and have achieved good results in the West Midlands region combining Brammer's legacy business with that of CBS.

In Germany SPWD on a constant currency basis declined by 30%, with significant declines in the automotive sector and manufacturing export companies. Despite significant operating cost reductions, and an improvement in gross margin, operating profit declined by 43%. Key Account revenues declined by 26%,with many sectors, such as Automotive and Engineering, declining by more than 40%. Good progress was made in Food and Drink (up 29%), Fast Moving Consumer Goods ("FMCG") (up 15%) and Utilities. New contracts won included Europart, Flamm, and Knorr-Bremse. The decline in mechanical power transmission ("MPT") was 10% less than the average, suggesting continued market share gains, and we introduced the tools and general maintenance product range. We won 3 Insites in the first half and now have 13 Insites in Germany with Insite sales in the first half of 2009 down 11%. 

In France SPWD on a constant currency basis declined by 18%, two percentage points better than the trade association performance, GIFEC. Gross margin declined by over 1% due to intense competitive pressure, and despite a significant cost reduction programme, operating profit declined by 59%. Key Account sales declined by just 7% with good performances from Food and Drink (up 7%, and now the largest sector) offsetting declines of 32% in Industrial Machinery and 27% in Metals. Sales to the Automotive sector declined by 32.5% and base MRO declined by 19%, roughly in line with the market. New contracts were won with Holcim, Cofely, Emin Leydier, and Rexam. We launched the tools and general maintenance product range, and expect this to benefit sales in the second half. 

In Spain SPWD on a constant currency basis declined by 25%, though we believe the market declined by over 30%. Gross margin declined by over 1% as competitors fought for volume, but costs were reduced significantly, resulting in an operating profit decline of 38%. Key Account sales declined by just 9%, as we developed our business with Valeo, Emcon Technologies and Amcor, and rolled out a new contract with the Sada-Nutreco group. Insite sales growth was an impressive 39%, the number of Insites having doubled to 12 over the last two years. We completed the introduction of the tools and general maintenance product range and expect this to contribute in the second half.

Within Benelux, the Netherlands SPWD on a constant currency basis were down 18%. We introduced 15 new product lines in the first half and expect these to generate additional growth in the second half, including further investments in the tools and general maintenance product range. In Belgium, SPWD in constant currency declined by 22%.

 

In our Developing Businesses, on a constant currency basis, overall SPWD increased by 20.0%. In Austria, SPWD declined by 19% whilst Food and Drink grew by 127%, and Pulp and Paper grew by 20%, offsetting a decline of 13% in Construction and Aggregates. In Italy we continued to develop our relationship with Key Accounts and grew SPWD by 19.2% organically (80% including the contribution from Tecnoforniture). 

Strategy

Growth

The overall SPWD decline was 8.5%, with a resilient performance from Key Accounts (up 9.4%, and now representing 33.4% of total revenues). We won new Key Account contracts with Coca-Cola Enterprises, Emcon Technologies, Invista and Rexam, and renewed contracts with Crown Cork, Eaton and GKN.

We continued to focus our energies on defensive market segments, and within the Key Account arena we saw continued growth in Food and Drink (up 38% and now our largest segment by a significant degree), Utilities (up 6%), FMCG (up 9%) offsetting declines in Metals (down 22%), Automotive (down 31%) and Construction and Aggregates (down 26%).

Costs/Synergies

We continued to develop closer relationships with strategic suppliers, and increased the concentration of spend with those suppliers, leading to both cost benefits and greater supplier marketing support.

Our Capital Employed Task Force ("CETF") was formed in 2008 in order to improve the management of our inventory on a European basis with the objective of increasing inventory turns and thereby reducing working capital. Implementation of Momasse, our best-practice demand forecasting and stock planning system continued. We were able to combine our three proprietary systems, Momasse, Brammer Inline, our intra-group trading system, and MDM, our master data management system giving a unique reference code to each part on a European basis, to achieve a much faster rate of stock reduction than would otherwise have been the case. As a result, we were able to reduce inventory by 22% at constant currency rates and inventory turns improved from 3.2 times at the end of 2008, to 3.7 times at the end of the first half, despite a significant reduction in sales levels. We are confident that inventory turns can continue to increase as we manage more of our inventory on a pan-European basis.

Our cost reduction programme which started towards the end of 2008, continued into the second quarter. Approximately 10% of our staff have left or will leave the business, and this, together with careful management of non-personnel costs and short-term working where available, has resulted in an annualised cost saving of over £15 million.,

Capability

A crucial component of our success as a service business is the skill and commitment of our employees 

located in over 300 locations in 16 countries. Our people have to maintain their understanding of the technical products that we sell as well as the applications within which they are used. As an MRO supplier we are constantly seeking ways to provide to our customers the products and services which will improve their production efficiency, reduce their overall cost of acquisition, and reduce their working capital. This requires extensive training which is provided for all our technical sales people via our suppliers, and through Brammer's own internal programmes.

We continue to roll out our bespoke Distributed Learning collateral. This suite of programmes is made available to our people in 8 languages electronically. In crucial customer facing areas of the business the goal is to achieve 100% take up of the two major foundation programmes, which explain the technical aspects of the product range and the fundamental way the business works.  Additional modules 

provide our specialists with an understanding of key processes in the area of managing Key Accounts and our Cost Savings approach, one of the core elements of our Value Proposition.

The future

Our strategy continues to prove to be effective. Whilst our overall sales are down, we believe we have continued to win market share. Our ability to achieve growth in market share in the UK, our most mature and largest business, is testimony to the success of our strategy, and we plan to continue investing in the Brammer strategic growth drivers in all areas to achieve a similar level of resilience throughout Europe. We have a strong presence within Europe upon which to build and believe that the continued application of our growth drivers will help us achieve growth levels significantly greater than the market for many years to come. Although we have substantially reduced our cost base, we have not diminished our branch network or customer service, nor have we reduced the emphasis on our proven approaches to winning market share. Accordingly, when the recovery occurs we will be well positioned to take significant advantage of the opportunities available.  

Ian Fraser

28 August 2009

STATEMENT OF DIRECTORS' RESPONSIBILITIES 

The directors confirm that this consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Financial Reporting' as endorsed and adopted by the EU and that;

the interim management report includes a fair review of the information required by:

a)	DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b)	DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the 2008 Annual Report.

On behalf of the Board

D Dunn

Chairman 

P Thwaite

Finance director 

28 August 2009

Brammer CONSOLIDATED INCOME STATEMENT

		6 months to	6 months to	Year to
		30 June 2009	30 June 2008	31 Dec 2008
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Continuing operations
Revenue	2	216,325	241,611	478,409
Cost of sales		(150,889)	(169,162)	(334,728)
Gross profit		65,436	72,449	143,681
Distribution costs		(56,610)	(58,079)	(117,528)
Amortisation of acquired intangibles		(594)	(385)	(848)
Exceptional items	3	(8,006)	-	-
Total distribution costs		(65,210)	(58,464)	(118,376)
Operating profit	2	226	13,985	25,305
Operating profit before amortisation and exceptional items		8,826	14,370	26,153
Amortisation of acquired intangibles		(594)	(385)	(848)
Exceptional items		(8,006)	-	-
Operating profit		226	13,985	25,305
Finance expense		(2,840)	(3,013)	(6,534)
Finance income		55	64	118
(Loss) / profit before tax		(2,559)	11,036	18,889
Taxation	4	782	(3,312)	(5,925)
(Loss) / profit for the period attributable to equity shareholders		(1,777)	7,724	12,964
Earnings per share - total
Basic	5	(3.3)p	14.6p	24.5p
Diluted	5	(3.3)p	14.4p	24.1p
Earnings per share - on profit before amortisation and exceptional items
Basic	5	8.0p	15.1p	25.7p
Diluted	5	8.0p	15.0p	25.3p

  

Brammer CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	6 months to	6 months to	Year to
	30 June 2009	30 June 2008	31 Dec 2008
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
(Loss)/profit for the period	(1,777)	7,724	12,964
Other comprehensive income
Net exchange differences on translating foreign operations	(5,725)	3,296	8,209
Actuarial losses on pension schemes	(8,057)	(11,492)	(1,480)
Deferred tax on actuarial losses on pension schemes	2,267	3,235	418
Excess tax on share option schemes	-	35	-
Other comprehensive (expense)/income for the period	(11,515)	(4,926)	7,147
Total comprehensive (expense)/income for the period	(13,292)	2,798	20,111

Brammer CONSOLIDATED BALANCE SHEET 

		30 June 2009	30 June 2008	31 Dec 2008
		(unaudited)	(unaudited)	(audited)
	Notes	£’000	£’000	£’000
Assets
Non-current assets
Goodwill	6	72,626	69,816	83,419
Acquired intangible assets	6	7,156	4,585	5,320
Other intangible assets	6	4,686	4,973	4,888
Property, plant and equipment	7	13,563	14,190	16,190
Investment in associate		167	167	167
Deferred tax assets		5,990	7,236	3,722
		104,188	100,967	113,706
Current assets
Inventories		71,976	73,639	103,113
Trade and other receivables		73,841	99,919	93,938
Cash and cash equivalents	8	30,615	18,861	21,715
		176,432	192,419	218,766
Liabilities
Current liabilities
Financial liabilities - borrowings	8	(6,399)	(18,567)	(7,693)
Trade and other payables		(83,666)	(101,880)	(116,386)
Deferred consideration		(9,169)	(6,413)	(8,340)
Current tax liabilities		(2,556)	(5,190)	(3,939)
		(101,790)	(132,050)	(136,358)
Net current assets		74,642	60,369	82,408
Non-current liabilities
Financial liabilities - borrowings	8	(93,584)	(70,868)	(97,971)
Deferred tax liabilities		(7,815)	(6,377)	(8,067)
Provisions		(3,962)	(841)	(1,030)
Deferred consideration		(9,830)	(15,200)	(16,623)
Retirement benefit obligations	9	(20,547)	(24,633)	(13,333)
		(135,738)	(117,919)	(137,024)
Net assets		43,092	43,417	59,090
Shareholders’ equity
Share capital	10	10,629	10,587	10,590
Share premium		18,092	18,089	18,092
Translation reserve		4,286	5,098	10,011
Retained earnings		10,085	9,643	20,397
Total equity		43,092	43,417	59,090

 

Brammer CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share	Share	Treasury	Translation	Retained
	Capital	Premium	Shares	reserve	Earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2008	10,575	18,017	(53)	1,802	13,966	44,307
Profit for the period	-	-	-	-	7,724	7,724
Other comprehensive income	-	-	-	3,296	(8,222)	(4,926)
Shares issued during the period	12	72	-	-	-	84
Purchase of own shares	-	-	(1,768)	-	-	(1,768)
Transfer on vesting of own shares	-	-	1,746	-	(1,746)	-
Current tax on shares vesting	-	-	-	-	35	35
Deferred tax on shares vesting	-	-	-	-	(35)	(35)
Value of employee services	-	-	-	-	685	685
Dividends	-	-	-	-	(2,689)	(2,689)
Movement in period	12	72	(22)	3,296	(4,248)	(890)
At 30 June 2008	10,587	18,089	(75)	5,098	9,718	43,417
Profit for the period	-	-	-	-	5,240	5,240
Other comprehensive income	-	-	-	4,913	7,160	12,073
Shares issued during the period	3	3	-	-	-	6
Purchase of own shares	-	-	(552)	-	-	(552)
Value of employee services	-	-	-	-	280	280
Dividends	-	-	-	-	(1,374)	(1,374)
Movement in period	3	3	(552)	4,913	11,306	15,673
At 31 December 2008	10,590	18,092	(627)	10,011	21,024	59,090
Loss for the period	-	-	-	-	(1,777)	(1,777)
Other comprehensive income	-	-	-	(5,725)	(5,790)	(11,515)
Shares issued during the period	39	-	-	-	-	39
Purchase of own shares	-	-	(181)	-	-	(181)
Transfer on vesting of own shares	-	-	665	-	(665)	-
Value of employee services	-	-	-	-	137	137
Dividends	-	-	-	-	(2,701)	(2,701)
Movement in period	39	-	484	(5,725)	(10,796)	(15,998)
At 30 June 2009	10,629	18,092	(143)	4,286	10,228	43,092

Brammer CONSOLIDATED CASH FLOW STATEMENT

	6 months to	6 months to	Year to
	30 June 2009	30 June 2008	31 Dec 2008
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
(Loss) / profit for the period	(1,777)	7,724	12,964
Tax (credit) / charge	(782)	3,312	5,925
Depreciation of tangible and intangible assets	2,952	2,608	5,655
Share options - value of employee services	137	685	965
Gain on sale of property, plant and equipment	(99)	(18)	(363)
Net financing expense	2,785	2,949	6,416
Movement in working capital	10,491	(5,594)	(2,347)
Cash generated from operating activities	13,707	11,666	29,215
Cash generated from operating activities before exceptional items	18,428	11,666	29,215
Cash outflow from exceptional items	(4,721)	-	-
Cash generated from operating activities	13,707	11,666	29,215
Interest received	55	64	118
Interest paid	(3,903)	(2,620)	(4,042)
Tax paid	(817)	(1,606)	(4,178)
Pension obligations	(794)	(1,056)	(2,600)
Net cash generated from operating activities	8,248	6,448	18,513
Cash flows from investing activities
Acquisition of subsidiaries (net of cash/excluding debt acquired)	-	(5,916)	(8,253)
Investment in associate	-	(167)	(167)
Deferred consideration paid on prior acquisitions	(3,278)	(1,404)	(1,424)
Proceeds from sale of property, plant and equipment	498	159	483
Purchase of property, plant and equipment	(987)	(1,463)	(3,801)
Additions to software development	(270)	(415)	(1,041)
Net cash used in investing activities	(4,037)	(9,206)	(14,203)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital	39	84	90
New loans taken out	8,652	12,104	11,433
Finance lease principal payments	(19)	(38)	(101)
Dividends paid to shareholders	-	-	(4,063)
Purchase of own shares	(181)	(1,768)	(2,320)
Net cash generated from financing activities	8,491	10,382	5,039
Net increase in cash and cash equivalents	12,702	7,624	9,349
Exchange gains and losses on cash and cash equivalents	(2,440)	273	898
Cash and cash equivalents at beginning of period	18,186	7,939	7,939
Net cash at end of period	28,448	15,836	18,186
Cash and cash equivalents	30,615	18,861	21,715
Overdrafts	(2,167)	(3,025)	(3,529)
Net cash at end of period	28,448	15,836	18,186

Brammer NOTES TO THE INTERIM FINANCIAL INFORMATION

1 STATUS OF INTERIM REPORT AND ACCOUNTING POLICIES

General information

Brammer plc is a company incorporated and domiciled in the UK, and listed on the London Stock Exchange.

This consolidated interim financial information was approved for issue by a duly appointed and authorised committee of the Board on 28 August 2009.

This consolidated interim financial information for the six months ended 30 June 2009 does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2008 were approved by the Board on 23 February 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The consolidated financial statements of the group for the year ended 31 December 2008 are available from the company's registered office or website (www.brammer.biz).

This consolidated interim financial information is unaudited. 

Basis of preparation

This consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting" as adopted by the EU. The consolidated interim condensed financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008 which have been prepared in accordance with IFRSs as adopted by the EU.

The financial information is presented in pounds sterling and has been prepared on the historical cost basis. 

The directors confirm that they have a reasonable expectation that the group has adequate resources to enable it to continue in existence for the foreseeable future and, accordingly, the consolidated interim financial information has been prepared on a going concern basis. In forming its opinion as to going concern, the Board prepares a cashflow forecast based upon its assumptions as to trading and taking into account the banking facilities available to the group. The Board also models a number of alternative scenarios, taking account of business variables and key risks and uncertainties, and maintains under continuous review the capital structure of the group and the financing options available to the group.

Accounting policies

Except as described below, the principal accounting policies adopted in the preparation of this interim financial information are included in the consolidated financial statements for the year ended 31 December 2008. These policies have been consistently applied to all the periods presented.

No standards have been early adopted by the group. The implications for the group of new standards, amendments to standards or interpretations which are mandatory for the first time for the financial year ending 31 December 2009 are summarised below.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

New standards, amendments to standards or interpretations 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009:

IAS 1 (revised), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009, has resulted in the Statement of Recognised Income and Expense being renamed the Statement of Comprehensive Income and the introduction of the Statement of Changes in Equity as a primary statement. The interim financial statements have been prepared under the revised disclosure requirements. IAS 1 (revised) has no impact on the group's net cash flows, financial position, total comprehensive income or earnings per share.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

The group has chosen to present two statements, an income statement and a statement of comprehensive income.

IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board. 

IFRIC 16, 'Hedges of a net investment in a foreign operation'. This has not had any impact on the group.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but are not currently relevant for the group:

IFRIC 13, 'Customer loyalty programmes'.

IFRIC 15, 'Agreements for the construction of real estate'.

IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:

IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the group.

IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the group, as it has not made any non-cash distributions.

IFRIC 18, 'Transfers of assets from customers', effective for transfers of assets received on or after 1 July 2009. This is not relevant to the group, as it has not received any assets from customers.

Accounting estimates and judgements

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of income, expense, assets and liabilities. The significant estimates and judgements made by management were consistent with those applied to the consolidated financial statements for the year ended 31 December 2008. 

 

Risks and uncertainties

The principal strategic level risks and uncertainties affecting the group remain those set out on pages 18 and 19 in the 2008 Annual Report. 

The chairman's statement and chief executive's review in this interim report include comments on the outlook for the remaining six months of the financial year.

Forward-looking statements

This interim report contains forward-looking statements. Although the group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements.

The group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

2 SEGMENTAL ANALYSIS

The Board has been identified as the chief operating decision-maker. The Board reviews the group's internal reporting as the basis for assessing performance and allocating resources. Management has determined the operating segments based on these reports. The group is primarily controlled on a country by country basis, in line with the legal structure, and accordingly the operating segments are unchanged from those previously reported, except for the inclusion of Eastern Europe which is now recognised as a reportable operating segment because it has attained the levels warranting disclosure. 

 

The group's internal reporting is primarily based on performance reports run at 'management' exchange rates - exchange rates which are set at the beginning of each year.

Accordingly the segment information below is shown at the 'management' exchange rates with the exchange effect being a reconciling item between the segment results and the totals reported in the financial statements. 

The Board assesses the performance of the operating segments based on their underlying operating profit, which comprises profit before interest and taxation, excluding amortisation of acquired intangibles and non-recurring or exceptional items such as restructuring costs and impairments when the impairment is the result of an isolated, non-recurring event. 

Segment assets include property, plant and equipment, software development, inventories, and trade and other receivables. All inter-segmental trading is at an arms-length basis.

	UK	Germany	France	Spain	Benelux	Eastern Europe	Other operating segments	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30 June 2009
Revenue
Total revenue	65,864	44,385	31,626	17,219	19,655	21,183	6,540	206,472
Inter company sales	(966)	(1,249)	(367)	(568)	(777)	(201)	(98)	(4,226)
Sales to external customers	64,898	43,136	31,259	16,651	18,878	20,982	6,442	202,246
Exchange effect								14,079
Total sales to external customers								216,325
Underlying operating profit	2,442	2,381	601	1,160	773	1,370	(221)	8,506
Exchange effect								320
Total underlying operating profit								8,826
Amortisation of acquired intangibles								(594)
Exceptional items								(8,006)
Total operating profit								226
Finance expense								(2,840)
Finance income								55
Loss before tax								(2,559)
Tax								782
Loss for the period								(1,777)
Segment assets	43,274	25,123	21,919	16,209	19,981	22,267	10,729	159,502
Exchange effect								4,564
Total segment assets								164,066
Goodwill								72,626
Acquired intangibles								7,156
Investment in associate								167
Cash								30,615
Deferred tax								5,990
Total assets								280,620
Other segment items
Capital expenditure	230	90	46	115	350	146	221	1,198
Exchange effect								59
Total capital expenditure								1,257
Depreciation and amortisation	(989)	(174)	(171)	(251)	(290)	(446)	(477)	(2,798)
Exchange effect								(154)
Total depreciation and amortisation								(2,952)

  

	UK	Germany	France	Spain	Benelux	Eastern Europe	Other operating segments	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30 June 2008
Revenue
Total revenue	66,482	56,795	34,189	20,201	21,572	19,342	4,940	223,521
Inter company sales	(354)	(859)	(343)	(286)	(944)	(97)	(98)	(2,981)
Sales to external customers	66,128	55,936	33,846	19,915	20,628	19,245	4,842	220,540
Exchange effect								21,071
Total sales to external customers								241,611
Underlying operating profit	2,201	4,177	1,480	1,871	1,648	1,414	(65)	12,726
Exchange effect								1,644
Total underlying operating profit								14,370
Amortisation of acquired intangibles								(385)
Total operating profit								13,985
Finance expense								(3,013)
Finance income								64
Profit before tax								11,036
Tax								(3,312)
Profit for the period								7,724
Segment assets	43,407	26,795	29,816	21,168	19,296	18,164	12,028	170,674
Exchange effect								22,047
Total segment assets								192,721
Goodwill								69,816
Acquired intangibles								4,585
Investment in associate								167
Cash								18,861
Deferred tax								7,236
Total assets								293,386
Other segment items
Capital expenditure	522	170	73	110	207	86	542	1,710
Exchange effect								168
Total capital expenditure								1,878
Depreciation and amortisation	(690)	(195)	(119)	(211)	(252)	(435)	(491)	(2,393)
Exchange effect								(215)
Total depreciation and amortisation								(2,608)

3 EXCEPTIONAL ITEMS

The exceptional charge of £8.0 million comprises the costs of restructuring the group's operations to respond to the difficult conditions in the group's markets. The restructuring costs principally relate to the termination of employment.

Of the £8.0 million charge, £4.7 million had been paid in the period and a provision of £3.3 million has been recognised in these financial statements representing the estimated costs which the group is committed to incur, after 30 June, in respect of specified employees who had been notified by 30 June of the intention to terminate their contracts of employment. 

4 TAXATION

The charge for taxation is recognised based on management's best estimate of the weighted average annual corporate tax rate expected for the full financial year. The estimated average annual tax rate used for 2009 is 30.6% (the estimated tax rate for the first half year of 2008 was 30%).

5 EARNINGS PER SHARE

	Half year 2009
		Earnings per share
	Earnings	Basic	Diluted
	£'000
Weighted average number of shares in issue ('000)		53,045	53,408
Total - all continuing operations
Loss for the period	(1,777)	(3.3)p	(3.3)p
Amortisation of acquired intangibles	594
Exceptional items	8,006
Tax on exceptional items	(2,426)
Tax on amortisation of acquired intangibles	(137)
Earnings before amortisation and exceptional items	4,260	8.0p	8.0p

	Half year 2008
		Earnings per share
	Earnings	Basic	Diluted
	£'000
Weighted average number of shares in issue ('000)		52,899	53,500
Total - all continuing operations
Profit for the period	7,724	14.6p	14.4p
Amortisation of acquired intangibles	385
Tax on amortisation of acquired intangibles	(96)
Earnings before amortisation of acquired intangibles	8,013	15.1p	15.0p

	Full year 2008
		Earnings per share
	Earnings	Basic	Diluted
	£'000
Weighted average number of shares in issue ('000)		52,921	53,835
Total - all continuing operations
Profit for the financial year	12,964	24.5p	24.1p
Amortisation of acquired intangibles	848
Tax on amortisation of acquired intangibles	(204)
Earnings before amortisation of acquired intangibles	13,608	25.7p	25.3p

6 INTANGIBLE ASSETS

	Goodwill	Acquired  intangibles	Software  Development
	£'000	£'000	£'000
Cost
At 1 January 2009	83,419	7,133	11,400
Exchange adjustments	(9,426)	(978)	(854)
Additions	771	-	270
Reclassifications	(2,138)	3,160	173
At 30 June 2009	72,626	9,315	10,989

Amortisation
At 1 January 2009	-	1,813	6,512
Exchange adjustments	-	(248)	(783)
Charge for the period	-	594	574
At 30 June 2009	-	2,159	6,303

Net book value
At 30 June 2009	72,626	7,156	4,686
At 31 December 2008	83,419	5,320	4,888

Additions to goodwill reflect the fair value adjustments made during the period following a final review of the acquisitions of CBS Rotary Power Motion and Tecnoforniture made in 2008. 

The reclassification from goodwill to acquired intangibles reflects the separately identifiable intangible assets recognised from the acquisitions of CBS Rotary Power Motion and Tecnoforniture.

7 PROPERTY, PLANT AND EQUIPMENT

	Land and  Buildings	Equipment	Total
	£'000	£'000	£'000
Cost
At 1 January 2009	14,220	35,414	49,634
Exchange adjustments	(859)	(2,450)	(3,309)
Additions	172	815	987
Reclassifications	-	(173)	(173)
Disposals	(229)	(609)	(838)
At 30 June 2009	13,304	32,997	46,301

Depreciation
At 1 January 2009	6,755	26,689	33,444
Exchange adjustments	(292)	(1,759)	(2,051)
Charge for the period	320	1,464	1,784
Disposals	(93)	(346)	(439)
At 30 June 2009	6,690	26,048	32,738

Net book value
At 30 June 2009	6,614	6,949	13,563
At 31 December 2008	7,465	8,725	16,190

8 CLOSING NET DEBT

	At 30 June 2009	At 30 June 2008	At 31 Dec 2008
	£'000	£'000	£'000
Borrowings - current - overdrafts	(2,167)	(3,025)	(3,529)
Borrowings - current portion of long term loans	(4,232)	(15,542)	(4,164)
Borrowings - non-current	(93,584)	(70,868)	(97,971)
Cash and cash equivalents	30,615	18,861	21,715
Closing net debt	(69,368)	(70,574)	(83,949)
Reconciliation of net cash flow to movement in net debt
	6 months to  30 June 2009	6 months to  30 June 2008	Year to  31 Dec 2008
	£'000	£'000	£'000
Net increase in cash and cash equivalents	12,702	7,624	9,349
Net (increase) in borrowings	(8,633)	(12,066)	(11,332)
	4,069	(4,442)	(1,983)
Exchange	10,512	(6,728)	(22,562)
Movement in net debt	14,581	(11,170)	(24,545)
Opening net debt	(83,949)	(59,404)	(59,404)
Closing net debt	(69,368)	(70,574)	(83,949)

 

9 PENSIONS 

The valuations used for IAS 19 disclosures have been based on the most recent actuarial valuation at 31 December 2005 updated by KPMG LLP to take account of the requirements of IAS 19 in order to assess the liabilities of each of the schemes at 30 June 2009. Assets are stated at their market value at 30 June 2009. A full funding valuation of the UK scheme is being carried out with an effective date of 31 December 2008.

The financial assumptions used to calculate the liabilities under IAS 19 are:

	UK
	6 months to  30 June 2009	6 months to  30 June 2008	Year to  31 Dec 2008
Inflation rate	3.55%	4.05%	2.95%
Rate of increase of pensions in payment	3.55%	4.05%	2.95%
Rate of increase for deferred pensioners	3.55%	4.05%	2.95%
Discount rate	6.45%	6.20%	6.40%
	Netherlands
	6 months to  30 June 2009	6 months to  30 June 2008	Year to  31 Dec 2008
Inflation rate	2.00%	2.70%	2.00%
Rate of increase in salaries	3.00%	3.70%	3.00%
Rate of increase of pensions in payment	2.00%	2.70%	2.00%
Rate of increase for deferred pensioners	2.00%	2.70%	2.00%
Discount rate	6.20%	6.70%	5.80%
The amounts recognised in the balance sheet are determined as follows:
	30 June 2009	30 June 2008	31 Dec 2008
	£m	£m	£m
Present value of defined benefit obligations	89.9	101.3	81.0
Fair value of plan assets	(69.3)	(76.7)	(67.7)
Net liability recognised in the balance sheet	20.6	24.6	13.3
The amounts recognised in the income statement are as follows:
	6 months to  30 June 2009	6 months to  30 June 2008	Year to  31 Dec 2008
	£m	£m	£m
Current service cost	0.1	0.1	0.2
Interest cost	2.5	2.7	5.4
Expected return on plan assets	(2.0)	(2.7)	(5.5)
Total pension expense included within distribution costs	0.6	0.1	0.1
Analysis of the movement in the balance sheet net liability
	6 months to  30 June 2009	6 months to   30 June 2008	Year to  31 Dec 2008
	£m	£m	£m
Opening	13.3	14.3	14.3
Exchange adjustments	-	-	0.1
On-going expense as above	0.6	0.1	0.1
Employer contributions	(1.4)	(1.3)	(2.7)
Actuarial losses recognised as a reserves movement	8.1	11.5	1.5
Closing	20.6	24.6	13.3

The pension expense has been included in distribution costs. The actual return on plan assets was £1.9m (2008: £5.2m negative return). The retirement benefit liability at the end of June was £20.6m (2008: £24.6m), an increase of £7.3m in the liability from 31 December 2008 (£13.3m). This increase reflects the impact of the higher price inflation rate used in the actuarial calculation of future pension liabilities.

10 SHARE CAPITAL AND RESERVES

Purchase of own shares

During the period the company purchased 365,207 of its own shares of 20p each, representing 0.7% of the issued share capital of the company as at 30 June 2009, through the Brammer plc Employee Share Ownership Trust ("the Trust") for an aggregate consideration of £181,027, which has been deducted from shareholders' equity. The Trust holds the shares in order to satisfy vestings under the company's performance share plans and share matching plans. During the period 540,299 shares were transferred to directors and senior managers to meet vestings under these plans.

At 30 June 2009 the Trust held a total 176,443 shares in the company in order to meet part of the company's liabilities under the company's performance share plans and share matching plans. The Trust deed contains a dividend waiver provision in respect of these shares.

Ordinary shares issued 

During the period the Trust subscribed for 194,672 ordinary 20p shares at par, which were duly issued fully paid.

No options were exercised during the period under the group's employee share option schemes. 

The number of ordinary 20p shares in issue at 30 June 2009 was 53,142,794 (30 June 2008: 52,939,122; 31 December 2008: 52,948,122).

Dividends

A dividend, amounting to £2,701,000, which relates to 2008, was paid on 2 July 2009 (2008: £2,689,000). In addition, the directors propose an interim dividend of 2.6p per share (2008: 2.6p per share) payable on 5 November 2009 to shareholders who are on the register at 9 October 2009. This interim dividend, amounting to £1,380,000 (2008: £1,374,000) has not been recognised as a liability in these interim financial statements. 

11 RELATED PARTY TRANSACTIONS

Other than the remuneration of executive and non-executive directors, there were no related party transactions during the period. 

12 INTERIM REPORT

A copy of the interim report is available for inspection at the registered office of the company, Claverton Court, Claverton Road, Wythenshawe, Manchester, M23 9NE and the offices of Citigate Dewe Rogerson Ltd, 3 London Wall Buildings, London Wall, London EC2M 5SY.

Current regulations permit the company not to send copies of its interim results to shareholders. Accordingly the 2009 interim results published on 28 August 2009 will not be sent to shareholders. The 2009 interim results and other information about Brammer are available on the company's website at www.brammer.biz. 

13 INTERIM DIVIDEND

Relevant dates concerning the payment of the interim dividend are

Record date	9 October 2009
Payment date	5 November 2009

ENDIR UBUBRKSRWUAR

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Related Shares:

BRAM.L