29th Jan 2008 07:00
LPA Group PLC29 January 2008 PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 LPA Group PLC, the lighting, power and electronics system manufacturer anddistributor, announces a return to profit for the year to 30 September 2007 anda good start to the new financial year. KEY POINTS • Turnover up 21.2% to £16.65m (2006: £13.74m) • Profit before taxation of £298,000 (2006: loss of £143,000) • Adjusted earnings per share (before amortisation of goodwill) 2.91p (2006: loss 0.40p) • Proposed final dividend of 0.40p (2006: 0.35p) per share making a total for the year of 0.60p (2006: 0.50p) an increase of 20% • Reduction in gearing to 38.0% (2006: 38.8%); strong cash flow in current year • Property disposal could add significantly to shareholders' funds if activities can be economically relocated in the medium term • Continuing interest in LED lighting for defence, infrastructure and rail vehicles Peter Pollock, Chief Executive, commented "Pleasing progress has been made during 2007 in rebuilding the profitability ofthe Group. The current year has started strongly, but there are challenges whichneed to be overcome in the near term before the pick up in rail project work in2009. Orders expected to be placed during 2008, together with those already inhand, should see a significant increase in activity from 2009 through to 2011." 29 January 2008 ENQUIRIES Peter Pollock LPA Group Plc 07881 626123 or 01799 512844 Thilo Hoffman Landsbanki Securites 020 7426 9000 Gareth David College Hill Associates 020 7457 2020 Chairman's Statement Results I am pleased to report that, as anticipated in my interim statement, the Group'ssecond half performance, like that of the first, was strong, resulting inimproved sales for the year of £16.65m (2006: £13.74m), a profit before tax of£298,000 as compared to a previous year loss before tax of £143,000 and basicearnings per share of 2.07p (2006: loss of 1.26p). Dividends Given the good trading performance last year and a cash position which hascontinued to improve, your directors recommend an increased final dividend of0.40p (2006: 0.35p) per share, which together with the interim dividend of 0.20p(2006: 0.15p), will give a total for the year of 0.60p (2006: 0.50p), anincrease of 20%. The final dividend will be paid on 28 March 2008, to members onthe register at close on 7 March 2008, subject to receiving shareholder approvalat the annual general meeting to be held this year at the offices of CollegeHill Associates Limited, The Registry, Royal Mint Court, London, EC3N 4QN at 12noon on 11 March 2008. Board In my statement to you last year I indicated our intention to strengthen theBoard through the addition of at least one new non-executive director, and I amdelighted to report the appointment of Per Staehr, who joined the Board inDecember 2007. Per has held a number of senior appointments in the rail andtransportation industries and brings with him a wealth of relevant experience. John Goodger was due to retire at the conclusion of the forthcoming AnnualGeneral Meeting, however the Board has asked him to provide a period of overlapwith Per Staehr and he has agreed to remain on the Board until the end of thecurrent financial year. Employees Our people have, once again, proved to be our most valuable asset and havecontributed in many ways to the Group's progress during the year. I take thisopportunity to thank them for their continued support. Saffron Walden property The Board has been evaluating a possible sale of its freehold site at SaffronWalden, where there is potential to realise value by relocating manufacturingactivity and selling the site for residential re-development. The Boardsolicited and received a conditional offer of £2.2m for the site from a majorhouse builder, which is £1.7m higher than the current book value of £0.5m. TheBoard appointed King Sturge LLP, whose initial assessment of the site suggestedthat a value in excess of the offer could be realised, to help identify suitablealternative premises and to begin the formal marketing of the site. We areactively assessing costs, other issues, and options for relocation from thesite, in the medium term. Outlook The start to the current financial year has been strong but the second quarterwill be weaker. The continuing delay in the award of rail vehicle contracts hascreated a hiatus in the work load which will restrict progress during theremainder of this year. The Group will be dependent on its non projectactivities to sustain it, but happily these showed considerable growth duringlast year, which we hope will continue this year. The Group has already been selected for a number of projects for which,frustratingly, contracts have yet to be placed, but which taken with therecently announced new rail vehicle orders where the Group is an establishedsupplier, means that the Group remains well placed to receive a number of largecontracts during the current financial year. These, together with contractsalready on hand, should deliver growth during 2009 and sustain the load throughto 2011. I look forward to reporting further at the Annual General Meeting and in theInterim Statement. Michael RuschChairman29 January 2008 Chief Executive's Review Trading Order entry increased by 7.5% in the year to £15.18m despite continued delay inthe placing of project orders for which the Group has already been selected.Sales also increased, by 21.2% to £16.65m, which was the driver behind theimproved activity throughout the year, however the low rail project order intakemeant that total orders fell behind sales for the first time in five years. Theconsequent weakness in the rail contract load meant that sales for the currentyear were likely to fall below those for last year, and in anticipation of this,the cost base was reduced in September. Markets Despite the increase in service related activities such as sub-contract anddistribution, the Group's main market remains the supply of components andsystems for rail (including new vehicle build and refurbishment) in the UK,Europe and Asia. Other markets, including aerospace and defence, infrastructureand general industrial, continue to grow in importance and reduce the Group'sdependence on long term contracts. Rail The Group remains the leading UK-based designer and manufacturer of inter-railvehicle electrical connection systems and has supplied an important firstcontract in Asia. The Group also holds a world class position in LED's forillumination applications, originally developed for rail vehicle interiors butincreasingly used for other markets and applications. Finally the Groupcontinues to be the UK's leading designer, integrator and supplier of auxiliarybattery power systems, a position which has been enhanced by a secondappointment as distributor of batteries for train use, and which now allows theGroup to offer both Lead Acid Gel and NiCad battery solutions for new build andservice replacement applications. Following a period of unprecedented demand for new rail vehicles the UK remains,for the second year in succession, in consolidation mode. The number of newtrains being built remains depressed and attention has been directed torefurbishment of surface stock. There has been some demand for new Electrostarvehicles, where the Group has only limited involvement, and the Group has madeinitial supplies of lighting and shore supply for Javelin (the new High SpeedChannel Tunnel Rail Link vehicle). Orders for Turbostar, where the Group is well represented, have now beenannounced and contracts should be awarded this year. Likewise various impasseswhich have delayed the placing of orders for new West Coast Mainline vehiclescould be resolved in the relatively near future which could lead to significantcontracts for the Group. The delays however mean that the hiatus in work load islikely to be longer than expected, extending through the rest of 2008, but whichwill be followed by a period of higher activity starting with the Victoria Lineupgrade at the end of 2008 and which should extend through to 2011 and quiteprobably beyond. The Group is also pursuing current opportunities in Australia,which have an earlier planned start date and which are likely also to runthrough till 2011. The Group is beginning to enjoy more success in the rail infrastructure market,albeit from a small base and with a narrow product offering which we aregradually expanding. Aerospace and Defence This market remains important to the Group, where we concentrate on thesubcontract and the spares market, which offer more opportunities than largepan-national collaborative projects with long gestation periods. The UK defencemarket remains fragmented which gives us opportunities to use ourcustomer-focussed service approach successfully. Infrastructure and General Industrial The Group remains a leading player in the global market, excluding the US, foraircraft Ground Power connectors and cables which provide power for aircraft, onthe ground with engines switched off, to run essential services. We are dominantin the UK, but compete against European and US competitors in export markets.These products are used for both civil and military applications. The Group manufactures a range of electrical connection products, for which theLondon Underground station upgrades are an exciting market, albeit subject todelays as a consequence of the Metronet insolvency. The Group's metal forming activities have continued to prosper and grow. Theirhigh quality, service and ability to produce short production runs arerecognised and have resulted in them acquiring more customers. Chief Executive's Review (continued) Strategy Having restored financial stability management remain focussed on deliveringshareholder value and sustaining the Group's profitability in future. The opportunity to realise the development potential of the Saffron Walden sitehas been grasped and strategies to maximise this potential at minimum cost tothe business are being followed. Whilst recognising their importance, it is nevertheless a goal of the Group toreduce its dependence on large long term contracts. Much of last year's growthwas achieved in activities outside of rail vehicle projects with new products inlighting and aircraft ground power supply, together with growth in ourservice-led activities in sub contract and distribution. The reduction in manufacturing costs through outsourcing to low cost countriescontinues. It is an objective of the Group to position its products at the higher end ofthe technology spectrum. LED lighting products occupy such a position and havelarge growth potential. The Group's LED technology was initially developed forthe rail and defence markets, but it has wider application and an LEDreplacement for the Halogen MR16 20 watt filament lamp was recently launched.This LED replacement consumes about 20 per cent of the energy, while deliveringabout ten per cent more light output than its halogen equivalent, and has a lifeof up to 15 years. Pre-production quantities will be available in March, withvolume production following. Our continuing commitment to quality, reliability and low life-cycle cost is nowreflected in our new logo with its recycling theme and strap line 'Long LifeReliability does not cost the earth'. This is part of an effort to combat thelowest cost initial purchasing philosophy, which sources cheap products of lessthan optimal quality, and which often leads to more frequent replacement, moremaintenance and higher whole life costs. In particular it accords with the UKand European rail industry where, the drive is towards a sustainable railwaywhich will be environmentally-friendly and lower cost. There is strong interestin both our range of LED lighting products, which have easily recognisable greencredentials, but also in our inter-car connection equipment, with its highdensity, compact, lightweight and long life characteristics. Growth opportunities, both organic and through acquisition where appropriate,are pursued. Structure and costs The Group structure is reviewed and adjusted as appropriate to meet marketrequirements. In the year key appointments made included a managing director atExcil Electronics, where focus on the LED lighting market development isessential, and a sales director at Niphan Systems. As noted above operatingcosts were reduced at the end of the year. Design and development Effort has been applied to the standardisation of product to facilitate fastertendering, larger batch sizes and low cost country sourcing, and there has beenmore focus on the development of proprietary products. LED lighting products arein demand and we need to do more to satisfy the market requirements. There hasbeen a high level of tendering associated with major rail projects. The Grouphas developed a new plug and socket for use on roadside light columns, where inthe event of impact the electrical connection is automatically broken renderingthe lamp standard safe. Peter PollockChief Executive29 January 2008 Financial Review Financial performance Results for the year were significantly ahead of 2006 with turnover increasingby £2.91m (21.2%) to £16.65m generating an operating profit of £278,000 ascompared to a loss of £205,000 last year. Whilst the majority of thisimprovement was seen in the first half of the year - where sales of £8.60m were£1.93m up on the corresponding period last year and an operating profit of£128,000 replaced a loss of £181,000 - the second half with sales of £8.05m andan operating profit of £150,000 was also in advance of prior year (2006: salesof £7.07m, loss of £24,000). The improved sales performance was seen across all Group activities. There was amodest increase in gross margin, from 22.8% to 23.2%, which was mitigated bygrowth being largely in lower added-value products, but benefited from a smalleryear-on-year fall in the labour and overhead content of stock. Total operatingexpenses at £3.58m were £238,000 above last year, the increase largely volumerelated. Costs in the year included £47,000 in respect of tender offer defencecosts and termination costs of £57,000 (2006: £83,000). As a consequence anoperating profit of £278,000 resulted, compared to an operating loss of £205,000last year. Interest costs were in line with prior year at £184,000 (2006: £181,000)reflecting lower average borrowings but higher interest rates, but with a lowernet pension return of £204,000 (2006: 243,000) net finance income fell to£20,000 (2006: £62,000). The tax charge in the period was £68,000 (2006: credit£6,000). The profit after tax was £230,000 (2006: loss of £137,000) representing basicearnings per share of 2.07p (2006: loss per share of 1.26p). The adjustedearnings per share, which excludes goodwill amortisation from the calculation,was 2.91p (2006: loss of 0.40p). Balance sheet At the end of the year shareholders' funds were £5.50m (2006: £5.72m) giving anet asset value per ordinary share of 48.3p (2006: 52.5p). The tangible net asset value per share, which excludes goodwill and pensionasset, was 27.4p (2006: 25.2p). Goodwill included in the balance sheet largely relates to the investment inExcil Electronics. The pension asset included in the balance sheet fell in the year by £498,000 to£1.25m (2006: £1.74m). The change comprised an actuarial loss of £570,000recognised in the statement of recognised gains and losses (being the net ofactuarial assumption changes and a restriction on the amount of surplusrecognised), £39,000 charged to the profit and loss account, less £111,000 ofcontributions received. Cash flow and debt Cash generated from operating activities increased in the year to £697,000(2006: £648,000) with the improved profit performance, largely offset by theaffect of a small increase in working capital during the year as compared to alarge decrease in the previous year. Capital expenditure which remains focused in production and engineering roseslightly to £156,000 (2006: £143,000) reducing to net expenditure of £147,000(2006: £137,000) after asset disposals. After payments of interest £173,000(2006: £171,000), tax £Nil (2006: £8,000), and dividends £61,000 (2006:£55,000), the net cash inflow before financing amounted to £316,000 (2006:£277,000). In the year cash benefited by £600,000 from the negotiation of an increase inthe term loan facility, £156,000 was received from the exercise of shareoptions, and debt repayments of £340,000 (2006: £385,000) were made such thatthere was a net increase in the cash position of £732,000 (2006: decrease of£108,000). In the year net debt fell to £2.09m (2006: £2.22m), gearing fell to 38% (2006:39%) and at the year-end there were £1.0m (2006: £0.7m) of un-drawn committedfacilities available to the Group. Financial Review (continued) Treasury The Group's treasury policy, which operates within approved Board guidelines andhas not changed since 2006, seeks to ensure that adequate financial resourcesare available for the development of the Group's business whilst managing itsforeign currency, interest rate, liquidity and credit risks. The Group's principal financial instruments comprise sterling bank loans andoverdrafts, and obligations under hire purchase contracts together with tradedebtors and trade creditors that arise directly from its operations. The mainrisks arising from the Group's financial instruments can be analysed as follows: Currency risk - the Group has transactional currency exposure arising fromnormal trading activity. Such exposure arises from sales or purchases incurrencies other than sterling, the functional currency of the Group. The Grouphedges the foreign currency risk associated with sales and purchases usingforward exchange contracts. Experience to date is that any un-hedged exposurehas not led to major exchange gains or losses. The main foreign currencies inwhich the Group operates are the euro and the US dollar. Interest rate risk - the only financial liabilities of the Group which aresubject to interest charges are bank loans and overdrafts (floating rateliabilities which bear interest at market rates) and obligations under hirepurchase contracts (fixed rate liabilities which bear interest at the negotiatedmarket rate prevailing at the time the commitment is made). The directorsmonitor the overall level of borrowings and interest costs to limit any adverseeffects on financial performance of the Group. Liquidity risk - the Group's policy has been to ensure continuity of fundingthrough acquiring an element of its fixed assets under hire purchase agreements,and arranging funding for its operations through medium-term bank loans withshort-term flexibility achieved through the use of overdraft facilities. Credit risk - the Group's credit risk is primarily attributable to its tradedebtors. Credit risk is managed by monitoring the aggregate amount and durationof exposure to any one customer depending upon their credit rating. The amountspresented in the balance sheet are net of allowances for doubtful debts,estimated by the Group's management based on prior experience and theirassessment of the current economic environment. The Group does not trade in derivatives or make speculative hedges. Going concern The directors have a reasonable expectation that the Group has adequateresources to continue in operational existence for the foreseeable future andtherefore the accounts have been prepared on a going concern basis. Stephen BrettFinance Director29 January 2008 Consolidated Profit and Loss Account For the year ended 30 September 2007 2007 2006 £'000 £'000 Turnover 16,650 13,737 Cost of sales (12,792) (10,600) Gross profit 3,858 3,137 Net operating expenses (3,580) (3,342) Operating profit / (loss) 278 (205) Net finance income 20 62 Profit / (loss) on ordinary activities before taxation 298 (143) Tax on profit / (loss) on ordinary activities (68) 6 Profit / (loss) on ordinary activities after taxation 230 (137) Earnings / (loss) per shareBasic 2.07p (1.26p)Diluted 2.05p (1.26p) All activities are continuing. Statement of Total Recognised Gains and Losses For the year ended 30 September 2007 2007 2006 £'000 £'000 Profit / (loss) after tax for the year 230 (137) Actuarial (loss) / gain recognised in the pension scheme (872) 144Deferred tax attributable to actuarial loss/gain 302 (43) Total recognised losses (340) (36) Consolidated Note of Historical Cost Profits and Losses For the year ended 30 September 2007 In both the current and the preceding financial year, there is no materialdifference between the profit before taxation and the profit after taxation asshown in the profit and loss account and their historical cost equivalent. Reconciliation of Movements in Shareholders' Funds For the year ended 30 September 2007 2007 2006 £'000 £'000 Opening equity shareholders' funds 5,723 5,814 Profit / (loss) for the financial year 230 (137)Actuarial (loss) / gain recognised in the pension scheme (570) 101Dividends (61) (55)Issue of shares 156 -Fair value of share options granted 18 - Closing equity shareholders' funds 5,496 5,723 Consolidated Balance SheetAt 30 September 2007 2007 2006 £'000 £'000 Fixed assetsIntangible assets 1,140 1,234Tangible assets 2,256 2,100 3,396 3,334Current assetsStocks 2,448 2,632Debtors 3,274 3,114Cash at bank and in hand 3 4 5,725 5,750Creditors: Amounts falling due within one year (3,319) (4,143) Net current assets 2,406 1,607 Total assets less current liabilities 5,802 4,941Creditors: Amounts falling due after more than one year (1,520) (956)Provisions for liabilities (31) (5) Net assets excluding pension asset 4,251 3,980Pension asset 1,245 1,743 Net assets 5,496 5,723 Capital and reservesCalled up share capital 1,137 1,090Share premium account 363 254Un-issued shares reserve 18 -Revaluation reserve 311 313Merger reserve 230 230Profit and loss reserve 3,437 3,836 Total equity shareholders' funds 5,496 5,723 Consolidated Cash Flow StatementFor the year ended 30 September 2007 2007 2006 £'000 £'000Net cash inflow from operating activities 697 648 Returns on investments and servicing of financeInterest paid (163) (163)Interest element of hire purchase payments (10) (8) (173) (171) Taxation - (8) Capital expenditurePayments to acquire tangible fixed assets (156) (143)Receipts from sale of other fixed assets 9 6 (147) (137) Equity dividends paid to shareholders (61) (55) Net cash inflow before financing 316 277 FinancingIncrease in share capital 156 -Increase in term loan 600 -Repayment of loans (294) (305)Capital element of hire purchase payments (46) (80) 416 (385) Increase / (decrease) in cash 732 (108) Notes 1 - EARNINGS PER SHARE The calculation of earnings per share is based upon the profit after tax of£230,000 (2006: loss of £137,000) and the weighted average number of ordinaryshares in issue during the year of 11.125m (2006: 10.903m). The weighted averagenumber of ordinary shares diluted for the effect of outstanding share optionswas 11.226m (2006: 10.903). Adjusted earnings per share, which is disclosed toreflect the underlying performance of the Company, has been calculated on aprofit of £324,000 (2006: loss of £44,000) being the profit after tax for theyear before the amortisation of goodwill. Details are as follows: 2007 2006 Basic Diluted Basic Diluted pence pence pence pence per per per per £'000 share share £'000 share share Basic earnings 230 2.07 2.05 (137) (1.26) (1.26)Amortisation of goodwill 94 0.84 0.84 93 0.86 0.86 ______ ______ ______ ______ ______ ______ Adjusted earnings 324 2.91 2.89 (44) (0.40) (0.40) ______ ______ ______ ______ ______ ______ 2 - CHANGES IN ACCOUNTING POLICY Share based payments The Group's accounting policies are unchanged compared to last year apart fromthe adoption of FRS20 "Share Based Payments". The cost of share based payments,where employees receive share options, is determined by reference to the fairvalue at the date of grant. The cost is recognised in the profit and lossaccount over the vesting period. Comparative figures have not been restated asthere is not a material impact on either net assets at September 2006 orearnings in the year to September 2006 arising from the adoption of FRS20. 3 - INFORMATION The preceding information does not constitute the Company's statutory accountsfor the years ended 30 September 2007 or 30 September 2006 but is derived fromthose accounts. The 2007 accounts will be posted to shareholders on 15 February2008 and will be available from the Company Secretary, LPA Group Plc, DebdenRoad, Saffron Walden, Essex, CB11 4AN, shortly thereafter. Statutory accountsfor 2006 have been delivered to the Registrar of Companies, and those for 2007will be delivered following the Annual General Meeting. The auditors havereported on these accounts and their reports were unqualified and did notcontain statements under section 237(2) or (3) of the Companies Act 1985. The Chairman's Statement, the Chief Executive's Review and the Financial Reviewincluded in this preliminary announcement form part of the business reviewincluded in the 2007 accounts. The business review and other content of thispreliminary announcement have been prepared solely for the shareholders of theCompany as a body. To the extent permitted by law the Company, its directors,officers and employees disclaim liability to any other persons in respect of theinformation contained in this preliminary announcement. Sections may includestatements containing risks and uncertainties facing the Group, and otherforward-looking statements, which by their nature involve uncertainty sincefuture events and circumstances can cause results and developments to differmaterially from those anticipated. The Company undertakes no obligation toupdate any forward-looking statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Lpa