21st Jan 2005 07:00
LPA Group PLC21 January 2005 21 January 2005 PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 LPA Group Plc, the electrical and electronic equipment manufacturer anddistributor, announces a return to pre-tax profit of £143,000 (2003: loss of£208,000) for the year ended 30 September 2004. KEY POINTS TURNOVER INCREASED 7.7% TO £13.5m (2003: £12.6m) OPERATING PROFIT £337,000 ACHIEVED (2003: LOSS £97,000) PROFIT BEFORE TAX £143,000 ACHIEVED (2003: LOSS £208,000) EARNINGS PER SHARE BASIC 1.27p ACHIEVED (2003: LOSS 1.14p) ADJUSTED (before amortisation of 2.13p ACHIEVED (2003: LOSS 0.28p) goodwill) DIVIDENDS - INTERIM RESUMED AT 0.15p - FINAL INCREASED 20% TO 0.30p (2003: 0.25p) - TOTAL INCREASED 80% TO 0.45p (2003: 0.25p) GEARING REDUCED 15.4% TO 66.3% (2003: 81.7%) ORDERS INPUT UP 16% - CONTINUING DEMAND IN HOME AND EXPORT OPPORTUNITIES ORDER BOOK UP 47% STRONG CASH FLOW RAIL MARKET STABILISING AFTER RATIONALISATION, STRONG DEMAND FOR REFURBISHMENT OF METROS AND MAINLINE VEHICLES GOOD EXPORT OPPORTUNITIES IN EUROPE AND ASIA SOURCING OF COMPONENTS FROM LOW COST COUNTRIES INITIATED Peter Pollock, Chief Executive, commented "We must continue to increase orders received to drive the top line. We arebuilding stronger relationships with our main multinational customersinternationally which will support the long term. Short-term order growth hasbeen encouraging and we need to develop this further to smooth the impact oflarge infrequent rail contracts. Significant progress has been made on operational issues and these effortscontinue. Sales per employee and margins have increased. Globalisation in aerospace has reduced margins in that market and this is atrend which will affect all manufacturing in time. We have initiated procurementof components from low cost countries to reduce costs and ensure ourcompetitiveness. We continue to develop our technology. Improved trading conditions and reduced costs have continued to deliverprogress, which should continue this year." ENQUIRIES Peter Pollock LPA Group Plc 07881 626 123 or 01799 512 844 James Glancy Teather & Greenwood Limited 0207 426 9010 PRELIMINARY ANNOUNCEMENT YEAR ENDED 30 SEPTEMBER 2004 KEY FINANCIAL INFORMATION FINANCIAL HIGHLIGHTSFor the year ended 30 September 2004 2004 2003 £'000 £'000 Turnover 13,540 12,574 Operating profit / (loss) 337 (97) Profit / (loss) on ordinary activities before taxation 143 (208) Basic earnings / (loss) per share 1.27p (1.14p) Adjusted earnings / (loss) per share 2.13p (0.28p) Dividends per share 0.45p 0.25p Gearing 66.3% 81.7% CHAIRMAN'S STATEMENT Results I am pleased to report that after a long and difficult period the Group hasreturned to profit, albeit modestly. After a better start further progress wasmade in the second half, to give a profit before tax for the year of £143,000(2003: loss of £208,000). Basic earnings per share amounted to 1.27p, comparedwith a loss per share of 1.14p in the previous year. I am delighted that theseaccounts, together with the Chief Executives Review, present the most positiveoutlook for some time. Dividends Given the improved trading position the directors recommend the payment of anincreased final dividend of 0.30p (2003: 0.25p). This, together with the interimdividend of 0.15p, will make a total for the year of 0.45p per share (2003:0.25p), an increase of 80%. Subject to approval by shareholders at the AnnualGeneral Meeting of the Company to be held at 12.00 noon on 8 March 2005 at theoffices of Teather and Greenwood Limited, 15 St Botolph Street, London, EC3A7QR, the final dividend will be paid on 18 March 2005 to shareholders registeredat the close of business on 25 February 2005. Authority to allot shares and authority to buy shares The Agenda for the Annual General Meeting includes three resolutions relating tothe limited authority of the directors to allot shares, and for the Company tomake market purchases of its own shares: a. The first is a resolution to renew the authority of the directors to allot shares generally, as defined in section 80 of the Companies Act 1985; b. The second is a resolution to renew the authority of the directors to allot equity securities for cash without first offering them to existing shareholders, pursuant to section 95 of the Companies Act 1985; and c. The third is a resolution to permit the Company to make market purchases, as defined in section 163 of the Companies Act 1985, of its own shares. These authorities are part of the portfolio of powers commonly granted todirectors to ensure flexibility, should appropriate circumstances arise, toeither allot shares, or make purchases of the Company's own shares in the bestinterests of shareholders. Each authority will run through until the next AnnualGeneral Meeting. The directors have no present intention of using suchauthorities. Board Michael Edmonds, now 68, is retiring from the Board at the conclusion of theAnnual General Meeting. Michael was the Managing Director of Channel ElectricEquipment Limited and joined the Board in 1988 at the time that company wasacquired by the Group. The Board wish him well in the future. I am the director retiring by rotation at the Annual General Meeting and ampleased to offer myself for re-election. Employees Obviously, our employees continue to be our most valuable resource without whomthe progress made this year could not have been achieved. Prospects We have made a sound start to the current financial year, and this issignificantly ahead of the corresponding period last year. Your board is hopefulof further progress during the year. Michael RuschChairman21 January 2005 CHIEF EXECUTIVE'S REVIEW Trading results 2004 was a year of progress which resulted in a return to pre-tax profit of£143,000 (2003: loss of £208,000). Sales increased by 8% to £13.5m and orderinput was up by 16% in the year. The net cash inflow, before financing, amountedto £564,000 (2003: £337,000) and gearing reduced 15.4% to 66.3%. The interimdividend was resumed and the final dividend increased. Markets The Group's products are used in many markets. The main ones are Rail (includingvehicle builders and refurbishment), Infrastructure and General Industrial(including ports, airports, the railway and telecommunications), and Aerospaceand Defence. UK Rail The Group has established itself as the leading supplier of auxiliary powersystems, inter-vehicle electrical connection systems and lighting systems forthe UK rail vehicle building and refurbishment industry. The Group also suppliesa range of components and subsystems for new-build, refurbishment andreliability improvement. After the chaos in Britain's railway industry, which has reigned during the lastfew years, some stability is returning. There continues to be rationalisation ofactivities following the restructuring of both Alstom Transport's and BombardierTransportation's facilities in the UK and Europe. However these are largely atidying up exercise. The future is clearer. Alstom Transport have ceased new build in the UK and will concentrate onrefurbishment and support of the West Coast mainline at their main facility inBirmingham. As a major supplier to Alstom Transport the Group will continue tosupport this activity. Bombardier Transportation has retrenched in to Derby, and has a long-term orderbook for new and refurbished Metro vehicles. They face a gap during 2006 and2007 before new build recommences and they have endeavoured to fill this gap byclosing peripheral sites and concentrating all refurbishment at Derby. TheGroup is a supplier on most of these refurbishment programmes, which means thatalthough life will not be easy, it will not be as difficult as in previousyears. The Group has already won or been selected for some of the longer-termprojects which recommence in 2007. Overseas Rail Whilst remaining UK based, the Group is using its position in the UK rail marketto build its presence internationally, and in particular is developing itsrelationships with Europe's 'big three', Alstom Transport, BombardierTransportation and Siemens. The Group is a supplier to all three in Europe, mainly for re-import to the UKbut also for re-export to other countries where performance criteria aresimilarly high, and is seeking to build on this base to access further Europeandomestic markets. The Group continues to work in Asia (where in recent years it has secured workin Australia, Hong Kong, Singapore and Japan) and is now actively pursuingopportunities in China and Taiwan. The Group has been a supplier to South Africafor many years. Infrastructure The Group manufactures and distributes a range of electrical cable managementproducts including connectors, cleats and clamps together with circuit breakers,relays and cable tray, which are used in the infrastructure generally. This is avast market but the Group has enjoyed some success in certain niches. The Group has been most successful in ground power systems, which supply powerto aircraft when stationery on the ground with the engines switched off. Groundpower supports the computers and air conditioning as well as other essentialaircraft systems. Ground power is supplied through harnesses and connectorsplugged in to the aircraft, and the harnesses, which can exceed 30 metres inlength, are managed and kept tidy in a 'crocodile'. The Group has a dominantposition in this market in the UK and has made progress in Europe, the MiddleEast, Africa and Asia. We are the main supplier to Heathrow and other BAAfacilities and to the Ministry of Defence. We will seek to continue to build onthis success. Aerospace and Defence Most military aerospace projects, such as Typhoon and JSF, are collaborativebetween nations and most civil projects are headquartered outside the UK, forexample Airbus, Boeing and Bombardier. Aerospace prime contractors operateglobally and increasingly suppliers' prices are negotiated centrally withreduced margins for distributors. Components are sourced through kitting agentsagainst framework agreements. The Group's sales to prime contractors areincreasingly being channelled through kitting agents. Major aerospace projects,both civil and military, will remain important to the Group but the market haschanged. The Group will continue to operate in the spares and subcontractmarket where its reputation for ingenuity and service allows it to beappropriately rewarded. Despite the need for international collaboration on the large platform projects,the UK defence market is more fragmented and nationalistic and comprises manysubcontractors. This presents the Group with opportunities to supply componentsand systems, which we are exploiting. Structure and costs The sustained improvement in order entry and the improved presence of the Groupin its markets is testament to the success of the new unified sales andmarketing organisation. The new operations team has delivered improved customersatisfaction and is reducing lead times with improved margins. Shared resourcesin quality assurance and human resource management are working well. Progresshas been made in IT but further is required. Costs continue to be wellcontrolled. Design and development The Group's design and development activity has concentrated on new auxiliarypower systems, inter-car connection systems and lighting systems for the railvehicle market. Other developments include remote monitoring and control, andpower supply systems for infrastructure and Light Emitting Diode based lightingsystems for rail and defence applications. Industrial products rationalisationand cost reduction received attention. The Group joined the University ofCambridge Engineering Department's Institute for Manufacturing gaining access tothe Knowledge Transfer Programme and graduate and under graduate placementprogrammes. Some useful work has been done. Prospects The prospects for the Group are better than for several years. There are stillobstacles to growth, but the Group is better placed to overcome them. We lookforward to further progress in the current year. Peter PollockChief Executive 21 January 2005 FINANCIAL REVIEW Financial performance Results for the year were significantly ahead of 2003 with turnover increasingby £0.97m (7.7%) to £13.54m, on which an operating profit of £337,000 wasgenerated as compared to a loss of £97,000 last year. Although the majority ofthis improvement was seen in the first half - where sales of £6.74m were £0.82mup on the corresponding period last year and an operating profit of £136,000replaced a loss of £277,000 - the second half with sales of £6.80m and anoperating profit of £201,000 was also in advance of prior year (2003: sales of£6.65m, profit of £180,000). Overall the Group's gross margin improved by 0.5% from 27.0% to 27.5%. This wasprincipally the function of the increased sales volumes seen generally, althoughaerospace margins deteriorated and the higher year on year content of railproject work had an adverse impact. Total operating expenses at £3.39m werelower than the £3.49m last year, which had included £0.1m of first halfreorganisation costs. The net operating margin was 2.5% (2003: -0.8%) The year did not include any exceptional items (2003: exceptional credit of£106,000), interest costs fell to £194,000 (2003: £217,000) with lower averageborrowings offsetting the impact of higher interest rates, and the tax chargewas £4,000 (2003: tax credit of £84,000) being 2% of profit before tax andgoodwill amortisation, with the Group benefiting from the utilisation of itsbrought forward tax losses. Resultant earnings were £139,000 (2003: loss of £124,000) representing basicearnings per share of 1.27p (2003: loss of 1.14p). Adjusted earnings per share,which excludes goodwill amortisation from the calculation, was 2.13p (2003: lossof 0.28p). Including the recommended final dividend, total dividends for theyear were £49,000 (2003: £27,000), being 0.45p (2003: 0.25p) per share, which iscovered 2.8 times by basic earnings and 4.7 times by adjusted earnings. Shareholders funds increased from £3.98m to £4.07m. Cash flow Cash generated from operating activities was 2.4 times higher than last year at£948,000 (2003: £393,000) largely the result of stronger trading but includingalso a reduction in working capital. Capital expenditure was focused in production and engineering and increased to£171,000 in the year (0.4 times depreciation) reducing to net expenditure of£158,000 after asset disposals. This compares to net receipts of £317,000 lastyear, which included the sale of surplus properties. After interest costs of £183,000 (2003: £206,000), acquisition payments of £Nil(2003: £167,000), and dividends of £43,000 (2003: £Nil), net cash beforefinancing amounted to £564,000 (2003: £337,000). No refinancing was required in the year and after repayment of £441,000 (2003:£821,000) of existing debt, there was a net increase in the cash position of£123,000 (2003: decrease of £484,000). The Group maintains a good relationship with its banker and has negotiated therenewal of its existing facilities through to the end of November 2005 basedupon its budgeted projections. The renewal of facilities after this date is notforeseen as a problem. In the year the Group's net debt fell to £2.70m (2003:£3.25m), gearing fell to 66% (2003: 82%) and there were £0.7m (2003: £0.5m) ofundrawn committed facilities available to it. The main element of the Group'sdebt is funded through its term loan of £1.83m (2003: £2.14m) repayable over thenext six years. Treasury The Group's treasury policy, which operates within approved Board guidelines andhas not changed since 2003, seeks to ensure that adequate financial resourcesare available for the development of the Group's business whilst managing itsforeign currency, interest rate, and liquidity risks. Operations are financed through a mixture of retained profits and bankborrowings with short-term flexibility achieved through the use of overdraftfacilities. Only 12% of sales (2003: 17%) are to overseas customers and the Group has notfound it necessary to seek local finance. The Group has transactional currencyexposure arising from normal trading activity. Such exposure arises from salesor purchases in currencies other than sterling, the functional currency of theGroup. The Group hedges the foreign currency risk associated with significantfuture sales and purchases using forward exchange contracts. Experience to dateis that any un-hedged exposure has not led to major exchange gains or losses. Interest rates are managed through a mixture of fixed and floating rateborrowings. 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 Director 21 January 2005 LPA GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 30 September 2004 2004 2003 £'000 £'000 Turnover: continuing operations 13,540 12,574 Cost of sales (9,815) (9,181) Gross profit 3,725 3,393 Net operating expenses (3,388) (3,490) Operating profit / (loss): continuing operations 337 (97) Profit on sale of tangible fixed assets - 106 Profit on ordinary activities before interest 337 9 Net interest payable and similar charges (194) (217) Profit / (loss) on ordinary activities before taxation 143 (208) Tax on profit / (loss) on ordinary activities (4) 84 Profit / (loss) on ordinary activities after taxation 139 (124) Dividends on equity shares (49) (27) Transfer to / (from) reserves 90 (151) Earnings per shareBasic 1.27p (1.14p)Diluted 1.27p (1.14p)Adjusted (before amortisation of goodwill) 2.13p (0.28p) LPA GROUP PLC CONSOLIDATED BALANCE SHEETAt 30 September 2004 2004 2003 £'000 £'000Fixed assets Intangible assets 1,420 1,513Tangible assets 2,388 2,651 3,808 4,164 Current assetsStocks 2,491 2,647Debtors 2,806 2,895Cash at bank and in hand 3 3 5,300 5,545Creditors: Amounts falling due within one year (3,460) (3,707) Net current assets 1,840 1,838 Total assets less current liabilities 5,648 6,002 Creditors: Amounts falling due after more than one year (1,575) (2,011) Provisions for liabilities and charges (5) (13) Net assets 4,068 3,978 Capital and reservesCalled up share capital 1,090 1,090Share premium account 254 254Revaluation reserve 314 316Merger reserve 230 230Profit and loss account 2,180 2,088 Equity shareholders' funds 4,068 3,978 LPA GROUP PLC CONSOLIDATED CASH FLOW STATEMENTFor the year ended 30 September 2004 2004 2003 £'000 £'000 Net cash inflow from operating activities 948 393 Returns on investments and servicing of financeInterest paid (162) (174)Interest element of hire purchase and finance lease payments (24) (32)Interest receivable 3 - (183) (206) Taxation - - Capital expenditurePayments to acquire tangible fixed assets (171) (72)Receipt from sale and leaseback arrangement - 85Receipts from disposal of properties - 298Receipts from sale of other fixed assets 13 6 (158) 317 Acquisitions - (167)Purchase of subsidiary undertakings Equity dividends paid (43) - Net cash flow before financing 564 337 FinancingRepayment of loans (306) (661)Capital element of hire purchase and finance lease payments (135) (160) (441) (821) Increase / (decrease) in cash 123 (484) LPA GROUP PLC NOTES 1 - EARNINGS PER SHARE The calculation of earnings per share is based upon the profit after tax of£139,000 (2003: loss after tax of £124,000) and the weighted average number ofordinary shares in issue during the year of 10,903m (2003: 10,903m). Theweighted number of ordinary shares diluted for the effect of outstanding shareoption was 10.979m (2003: 10.903m). Adjusted earnings per share, which isdisclosed to reflect the underlying performance of the Company, has beencalculated on a profit of £232,000 (2003: loss of £31,000) being the profit /(loss) after tax for the year before the amortisation of goodwill. Details areas follows: £'000 2004 Diluted £'000 2003 Diluted Basic Pence Basic Pence Pence Per Pence Per Per share Per share share share Basic earnings 139 1.27 1.27 (124) (1.14) (1.14)Amortisation of goodwill 93 0.86 0.84 93 0.86 0.86 Adjusted earnings 232 2.13 2.11 (31) (0.28) (0.28) 2 - ACQUISITION COSTS Current year acquisition cash flows comprise deferred consideration of £Nil(2003: £167,000). 3 - INFORMATION The preceding information does not constitute the Company's statutory accountsfor the years ended 30 September 2004 or 30 September 2003 but is derived fromthose accounts. The 2004 accounts will be posted to shareholders on 11 February2005 and will be available from the Company Secretary, LPA Group Plc, DebdenRoad, Saffron Walden, Essex, CB11 4AN, shortly thereafter. Statutory accountsfor 2003 have been delivered to the Registrar of Companies, and those for 2004will 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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