7th Mar 2006 07:01
Hydro International PLC07 March 2006 HYDRO INTERNATIONAL plcCHAIRMAN'S STATEMENTYEAR ENDED 31 DECEMBER 2005 Highlights • Re-listing of Hydro on the Alternative Investment Market ("AIM") • Acquisition and integration of the Vexamus Group • Successful return on investment in US operation • Established HRD Technologies in the Republic of Ireland • Substantial growth in turnover and profit before tax PerformanceHydro has had an eventful and successful year. Turnover increased by almost 50%to £18.6 million with the existing Hydro business showing 8.1% growth and theacquisition of Vexamus adding £5 million of turnover in the 7 months that it hasbeen part of the Group. Profit before tax increased by 13% to £1.37 million. This was after a net£121,000 exceptional administration cost, comprising a £200,000 restructuringcharge to the Vexamus business and a £79,000 write back to profit following therevaluation of the Clevedon premises. Excluding the restructuring charge theVexamus business generated a profit before tax and interest of £51,000. The closing order book at 31 December 2005 was at a record high for the Group at£7.2 million (31 December 2004 - £2.5 million). Business Review Over the last year there have been significant developments to the Hydrobusiness, with the re-listing of the company on AIM in April, the substantialacquisition of the Vexamus Group in May and the establishment of a wholly ownedsubsidiary in the Republic of Ireland. The existing UK business has experienced good growth over the last two years inthis market sector, which is driven by regulations governing planning consentsfor stormwater control, storage and treatment. During the current year newproducts have been introduced including the Rainwater Harvesting system, whichcaptures stormwater for domestic re-use. The regulated wastewater market in England and Wales commenced its fourth assetmanagement programme ("AMP4") in April 2005. The focus of AMP4 will be oncapital maintenance and water quality improvements. The shift in productrequirements for this market has been met through the acquisition of the Vexamusbusiness, which allows Hydro to offer a complete range of primary, secondary andtertiary solutions to wastewater treatment. A number of significant orders werereceived in the last two months of the year, and these will be largelyrecognised as turnover during 2006. Since its acquisition at the end of May, the Vexamus business has beensubstantially restructured. The traditional activities of fabrication andinstallation have now been successfully outsourced in line with Hydro's businessmodel, and other significant cost savings introduced. The Vexamus integrationhas been overseen by Chris Williams (Hydro Europe Managing Director) and from 1January 2006 this business is trading under the Hydro International brand. The US operation has delivered an excellent year of growth. The turnover of £4.4million represents an almost 60% increase over the previous year, and theoperation has generated a profit before tax for the year of £404,000 (31December 2004 - loss of £48,000). This growth shows a return on the resource andinvestment put into the US sales and marketing operation over the last 18months. Stormwater product sales, which include the established products and anew product First Defense (launched at the end of 2004), show a 70% increase onthe previous year. Significant wastewater orders were announced in November andthese have assisted growth in the current year as well as contributing to theclosing order book. The establishment of the new Irish subsidiary, HRD Technologies, on 1 May 2005has been a considerable success. Hydro has been active in this market for anumber of years through a distributorship arrangement. The move to a subsidiarycompany has increased the pace of market development and the growth in ordersover the course of the year has been encouraging. Overseas, we have secured orders for plastic storage media and flow controls forPoland, grit separation devices for Egypt and Qatar, and stormwater qualityimprovement products for Korea. Dividend The Group has performed strongly in 2005 and the directors propose a finaldividend payment of 2.0 pence per share. This represents an increase over lastyear's 1.7 pence per share dividend and is consistent with the Board's intentionto continue with final dividend payments where such a distribution is consideredappropriate. The final dividend, subject to approval at the Annual GeneralMeeting on 19 May 2006, will be paid on 1 June 2006 to shareholders on theregister on 5 May 2006. Prospects In the UK, the strategic move to acquire Vexamus during 2005 will support thegroup's strength in the regulated water industry, whilst the existing businesscontinues its market leading position as a supplier of stormwater products. TheUS continues to offer a substantial range of opportunities, and the investmentover the last 18 months is now showing a return. The launch of the newstormwater filtration system in 2006 will expand the stormwater productofferings in the US and elsewhere. New geographical expansion into Ireland hasseen excellent initial returns and gives a sound base for expansion in thismarket. We believe these factors, together with other opportunities, willprovide us with a platform to make further progress in 2006. StaffI would like to thank all of the Hydro team for the considerable progressachieved in 2005 and congratulate them for delivering such a commendable resultin Hydro International's 25th year of operations. Roger LockwoodChairman 7 March 2006Preliminary ResultsConsolidated Profit and Loss AccountYear ended 31 December 2005 -------------------------- ------ ---------- ----------- Note Unaudited Audited 2005 2004 (restated) £000 £000-------------------------- ------ ---------- -----------Turnover 13,455 12,450Existing operations 5,185 -Acquisitions-------------------------- ------ ---------- -----------Total turnover - continuing activities 18,640 12,450-------------------------- ------ ---------- ----------- Gross profit 6,526 5,236-------------------------- ------ ---------- -----------Administrative expenses (5,095) (4,111)Administrative expenses before exceptional (200) -itemsExceptional restructuring expense 79 -Exceptional gain on revaluation of building-------------------------- ------ ---------- -----------Total administrative expenses (5,216) (4,111)-------------------------- ------ ---------- -----------Operating profit/(loss) 1,459 1,125Existing operations (149) -Acquisitions-------------------------- ------ ---------- -----------Total operating profit - continuing activities 1,310 1,125Net interest receivable 60 87-------------------------- ------ ---------- -----------Profit on ordinary 1,370 1,212activities before taxationTaxation (400) (375)-------------------------- ------ ---------- -----------Profit for the financial year 970 837-------------------------- ------ ---------- -----------Earnings per ordinary share (3) 7.02p 6.08pDiluted earnings per ordinary share (3) 6.88p 5.92p-------------------------- ------ ---------- ----------- Hydro International plc Statement of Total Recognised Gains and LossesYear ended 31 December 2005 Unaudited Audited 2005 2004 £000 £000-------------------------------- ---------- ----------Profit for the period 970 837Unrealised surplus on revaluation of 671 -freehold land and buildings 16 (10)Currency translation differences on foreign currency netinvestments ---------- ------------------------------------------Total recognised gains and losses 1,657 827-------------------------------- ---------- ---------- Reconciliation of Movements in Group Shareholders' FundsYear ended 31 December 2005 Unaudited Audited 2005 2004 £000 £000-------------------------------- ---------- ----------Opening shareholders' funds (as previously stated) 3,768 3,146Prior year adjustment (see note 2) 235 206-------------------------------- ---------- ----------Opening shareholders' funds (as restated) 4,003 3,352-------------------------------- ---------- ----------Total recognised gains and losses 1,657 827Dividend (235) (206)Proceeds from issue of new shares 46 30-------------------------------- ---------- ----------Net increase in shareholders' funds 1,468 651-------------------------------- ---------- ----------Closing shareholders' funds 5,471 4,003-------------------------------- ---------- ---------- Note of Group historical cost profits and lossesYear ended 31 December 2005 Unaudited Audited 2005 2004 £000 £000-------------------------------- ---------- ----------Reported profit on ordinary activities before taxation 1,370 1,212Difference between an historical cost depreciationcharge and the actual depreciation charge for the year 32 --------------------------------- ---------- ----------Historical cost profit on ordinary activities beforetaxation 1,402 1,212-------------------------------- ---------- ---------- Consolidated Balance Sheet31 December 2005 Unaudited Audited 2005 2004 £000 (restated) £000-------------------------------- ---------- ----------Fixed assets 90 126Intangible assets 1,399 -Goodwill 2,275 643Tangible assets-------------------------------- ---------- ---------- 3,764 769-------------------------------- ---------- ----------Current assets 612 165Stocks and work in progress 6,620 2,914Debtors - 1,215Investments - short term deposits 1,703 1,424Cash and short term deposits-------------------------------- ---------- ---------- 8,935 5,718Creditors: amounts falling due within one year (6,742) (2,474)-------------------------------- ---------- ----------Net current assets 2,193 3,244Total assets less current liabilities 5,957 4,013 Creditors: amounts falling due after more than one year (486) (10)-------------------------------- ---------- ----------Net assets 5,471 4,003-------------------------------- ---------- ---------- Capital and reserves 696 690Share capital 890 850Share premium account 639 -Revaluation reserve 3,246 2,463Profit and loss account-------------------------------- ---------- ----------Total equity shareholders' funds 5,471 4,003-------------------------------- ---------- ---------- Consolidated Cash Flow Statement Year ended 31 December 2005 ------------------------ ------------- ----------- Note Unaudited Audited 2005 2004 £000 £000Net cash inflow from 57 1,246operating activities (4)Equity dividends paid (235) (206)Return on investment and servicing 65 85of financeTaxation - corporation tax paid (282) (512)------------------------ ------------- -----------Capital expenditure and financial (87) (120)investment (219) -Acquisitions (231) -Purchase of subsidiary undertakingNet overdrafts acquired with subsidiary------------------------ ------------- -----------Cash (outflow)/inflow before management of liquidresources and financing (930) 493Management of liquid resources - 1,215 385Net decrease in short term depositsNet debt financing cash outflow (5) (68) (4)Proceeds from issue of new shares 46 30------------------------ ------------- -----------Increase in cash in period 263 904------------------------ ------------- ----------- Notes to the Preliminary Announcement 1. Basis of preparation The preliminary announcement has been drawn up using the accounting policies asset out in the financial statements covering the year ended 31 December 2004subject to the adoption of FRS 21 Post balance sheet events and the revaluationof freehold properties. The financial information for the year ended 31 December2004 is an abridged version of the Group's accounts which received anunqualified auditors' report and did not contain a statement under s237(2) or(3) of the Companies Act 1985 and have been filed with the Registrar ofCompanies. 2. Prior year adjustment The effect of adopting FRS 21, and therefore recognising dividends in the periodduring which they were approved, has increased the retained profit for the yearended 31 December 2005 and the year ended 31 December 2004 by nil and £29,000respectively. The net assets at 31 December 2005 and 31 December 2004 haveincreased by nil and £235,000 respectively. If FRS 21 had not been adopted, theretained profit for the year ended 31 December 2005 and the net assets wouldhave been £278,593 lower, due to the proposed dividend of 2 pence per sharereferred to in the post balance sheet event note 7 below. 3. Earnings per share Earnings per ordinary share are based on profit on ordinary activities aftertaxation, divided by a weighted average of 13,822,588 (2004 - 13,765,176) sharesin issue during the year. The diluted earnings per share are calculated afterthe inclusion of share options and the weighted average of ordinary shares usedin the calculation is 14,102,794 (2004 - 14,152,872). 4. Reconciliation of the operating profit to net cash inflow from operating activities Unaudited Audited 2005 2004 £000 £000------------------------- ----------- -----------Operating profit 1,310 1,125Depreciation charges 219 134Amortisation of intangible assets 36 24Amortisation of goodwill 56 -Profit on reversal of permanent diminution (79) -(Increase)/decrease in stocks (131) 111(Increase)/decrease in debtors (1,988) 201Increase/(Decrease) in creditors 634 (349)------------------------- ----------- -----------Net cash inflow from operating activities 57 1,246------------------------- ----------- ----------- 5. Reconciliation of net cash flow to movement in net funds Unaudited Audited 2005 2004 £000 £000----------------------------- ---------- -----------Increase in cash for the period 263 904Cash outflow from movements in short term deposits (1,215) (385)Cash outflow from reduction in debt 68 4----------------------------- ---------- -----------Change in net funds resulting from cash flows ( 884) 523New finance leases (12) (7)Loans acquired with subsidiary (573) -Translation differences 16 (10)----------------------------- ---------- -----------Movement in net funds in the period (1,453) 506Net funds at start of period 2,623 2,117----------------------------- ---------- -----------Net funds at end of period 1,170 2,623----------------------------- ---------- ----------- 6. In relation to the acquisition of Vexamus continuing operations for the period to 31 December 2005 includes cost of sales of £4,185,000, gross profit of £1,000,000, administrative expenses of £949,000 and an exceptional restructuring expense of £200,000. 7. Post balance sheet event Subsequent to the year end the directors have recommended a dividend of 2.0pence per share to be paid, totalling to £278,593 (2004 - 1.7 pence per share,totalling £234,641). 8. Status of information The financial information set out above is unaudited and does not amount to fullaccounts for the purposes of Section 240 of the Companies Act 1985. The accountsto year ended 31 December 2005 are not yet audited but will be finalised on thebasis of the results included in this announcement. The profit and loss accountand cash flow statement for the year to 31 December 2004 and the balance sheetas at that date represent an abridged version of the audited accounts of theGroup which have been filed with the Registrar of Companies. The auditorsreported on the accounts for the year ended 31 December 2004. Their report wasunqualified and did not contain statements under Section 237(2) or (3) of theCompanies Act 1985. Full audited accounts of Hydro International plc for the twelve months ended 31December 2005 will be dispatched to shareholders within the next 21 days andcopies will be available from the Company's registered office at ShearwaterHouse, Clevedon Hall Estate, Victoria Road, Clevedon, BS21 7RD from 28 March2005. The audited accounts will be delivered to the Registrar of Companiesfollowing the Annual General Meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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