Half-year Report

MS INTERNATIONAL plc

Unaudited Interim Condensed

Group Financial Statements

31st October 2024

EXECUTIVE DIRECTORS

Michael Bell

Michael O'Connell

Nicholas Bell

NON-EXECUTIVE DIRECTORS

Roger Lane-Smith

David Hansell

COMPANY SECRETARY

Shelley Ashcroft

REGISTERED OFFICE

Balby Carr Bank

Doncaster

DN4 8DH

England

PRINCIPAL OPERATING DIVISIONS

 'Defence and Security'

 'Forgings'

 'Petrol Station Superstructures'

 'Corporate Branding'

Chairman's Statement

Introduction

In my recent Chairman's Statements, I have highlighted the considerable progress we have achieved over the last few years. In the three years to April 2024 revenue increased by over 75 percent from £61.54m to £109.58m and pre-tax profits expanded almost ten-fold from £1.59m to £15.71m.

Today, I am pleased to report that the good progress continues and I remain even more optimistic about our ongoing performance and prospects than I was at this time last year.

The step change in the development of our 'Defence and Security' businesses has enabled us to engage in substantially larger international contracts, around the world, that extend over much longer periods and often involve phased delivery. 'Revenue is recognised as performance obligations are satisfied, which is when control of goods and services has transferred to the customer.' (Source: Accounting Policies page 35 MSI Annual Report 2024).

As a result of winning these larger contracts, a substantial amount of ongoing work in the first half will not be recognised as revenue until either later this year or in following years, when the goods and services have transferred to the customer.

Timing of revenue will, therefore, be an increasingly significant feature going forward and, indeed, it has impacted the results for the first half. Nevertheless, the Company is making remarkable advances, even if the half year results do not fully reflect this.

Results

For the half year ended 31st October 2024, profit before tax amounted to £8.77m (2023 - £7.72m) on revenue of £54.72m (2023 - £57.02m). Basic earnings per share were 39.8p (2023 - 35.9p).

The balance sheet remains strong with cash and cash equivalents of £32.02m (2023 - £50.05m).

Review of Divisions

'Defence and Security'

This division enjoyed another period of good progress as our excellent international reputation as a top-quality designer and producer of naval weapon systems continues to grow.

The company is now attaining a similar reputation in the much larger international land-based equipment section of the defence market. Our truck/trailer-based version of the MSI Paladin VSHORAD gun systems are now being utilised to protect strategic assets against the threats posed by Uncrewed Aircraft Systems. 

These product developments, together with our significant presence and exposure at major international defence equipment exhibitions, auger extremely well for the future performance of the division.

The significant upgrading and development of our production and administrative facilities at our key Norwich site should be completed within weeks. This positions us well to support our anticipated future levels of business.

The US operation continues to prosper with deliveries of gun systems from Norwich for ship fits in the US, for both the US Navy and US Foreign Military Sales projects. Concurrently we are developing and expanding the management and service support team, to ensure that we have the structure in place to support the predicted US ship fits. We are also making provision at our existing, substantial and contemporary property in Rock Hill, South Carolina, to accommodate our projected growth.

'Forgings'

Despite reduced global demand for forks, we have not only maintained market share but believe that we can make significant inroads into the market, particularly in the United States. We continue to make improvements in efficiencies and costs to maintain our competitiveness in this mature but important industry.

'Petrol Station Superstructures'

The strong performance demonstrated by the UK operations in the last financial year has continued. Activity remains at a high level for both new construction and ongoing station maintenance, resulting in an impressive order book.

Customer demand for modern replacement forecourt structures continues for both existing service stations and new large, multifuel developments on motorways and major trunk roads. Several high quality projects encompassing multifuel and catering services were completed in the half year.

As market leader, we are well positioned to benefit from the many exciting prospects that contemporary forecourt designs present, especially with our unique database of existing petrol station construction drawings and specifications.

By comparison, our Poland-based business (which serves Eastern and Northern European countries) has experienced a challenging time owing to an understandable serious lack of investment by the oil companies in maintaining and developing their businesses in that, currently, highly politically sensitive region. There are, however, positive signs of a revival in the construction of canopies for electric car charging stations in Western Mainland Europe.

'Corporate Branding'

The UK operation has very pleasingly continued to prosper, whilst our Netherlands/Germany business restructures to meet subdued market conditions in the petroleum business sector. Notwithstanding, it is satisfying to report that there has been a notable recent upturn in activity for our long, and well established, international 'way-finding' equipment installation and maintenance service business at international airports. Furthermore, we are also seeing some new and positive prospects arising from our offerings in the automotive sales sector of the branding market.

Outlook

I am most encouraged with the considerable progress that we continue to make across all the divisions. This is particularly pleasing in a year of uncertainty, in terms of the political change in many of the countries we serve and, of course, movements in both interest and exchange rates.

In my June 2024 statement, I also reported that '…we continue to review and evolve the future strategic priorities for MSI and the profile of the next generation of management'. I also referenced this in my comments at the AGM in July.

From 1st January 2025 the Board will change as follows. I will continue as Executive Chairman and Michael O'Connell, who has been with me for over 40 years, will become Managing Director. Shelley Ashcroft, Michael's former deputy in finance and the Company Secretary, will take over the role as Finance Director on 1st January 2025 and subject to the satisfactory completion of customary regulatory checks is expected to join the Board around the same time.

This management transition isn't complete, but these are the very first steps towards designing a Board for the future. Our review of the future strategic priorities of the business is nearly complete and I expect to update shareholders about this before the end of the financial year. 

This is an exciting time for MS INTERNATIONAL and all matters considered, the Board recommends the payment of an increased interim dividend per share of 5p (2023 - 3p). The dividend is expected to be paid on 17th January 2025 to those shareholders on the register at the close of business on 20th December 2024.

Michael Bell 5th December 2024

MS INTERNATIONAL plc 

Michael Bell

Tel: 01302 322133

Shore Capital (Nominated Adviser and Broker)

Patrick Castle/Daniel Bush/Lucy Bowden

Tel: 020 7408 4090

Independent auditor's review report on Interim Financial Information to MS INTERNATIONAL Plc

Conclusion

We have been engaged by MS INTERNATIONAL plc (the 'company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2024 which comprises the Interim condensed consolidated income statement, Interim condensed consolidated statement of comprehensive income, Interim condensed consolidated statement of financial position, Interim consolidated statement of changes in equity, Interim consolidated cash flow statement and Notes to the interim consolidated financial statements. We have read the other information contained in the half-yearly financial report which comprises only the Chairman's statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2024 is not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard (IAS) 34, 'Interim Financial Reporting' and the AIM rules for Companies.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by Financial Reporting Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with UK-adopted international accounting standards. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with UK- adopted International Accounting Standard 34, 'Interim Financial Reporting'.

We have read the other information contained in the half-yearly financial report which comprises only the Chairman's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE (UK), however future events or conditions may cause the entity to cease to continue as a going concern.

In our evaluation of the directors' conclusions, we considered the inherent risks associated with the group's business model including effects arising from macro-economic uncertainties such as high interest and inflation rates, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group's financial resources or ability to continue operations over the going concern period.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with UK-adopted International Accounting Standard (IAS) 34, 'Interim Financial Reporting' and the AIM rules for Companies.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report.

Our conclusion, including our Conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with ISRE (UK) 2410. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

Leeds

5th December 2024

Interim condensed consolidated income statement

Half-year to 31st October 2024

Half-year to 31st October 2023

unaudited

unaudited

Notes

£'000

£'000

Revenue

5/6

54,718

57,023

Cost of sales

(36,154)

(38,943)

Gross profit

18,564

18,080

Distribution costs

(2,102)

(2,303)

Administrative expenses

(9,226)

(7,441)

Derivative gains/(losses)

15

788

(731)

Operating profit

6

8,024

7,605

Finance income

748

204

Other finance costs - pension

-

(90)

Profit before taxation

8,772

7,719

Tax expense

7

(2,326)

(1,917)

Profit for the period attributable to equity holders of the parent

6,446

5,802

Basic earnings per share

8

39.8p

35.9p

Diluted earnings per share

8

38.3p

34.3p

Interim condensed consolidated statement of comprehensive income

Half-year to 31st October 2024

Half-year to 31st October 2023

unaudited

unaudited

Notes

£'000

£'000

Profit for the period attributable to equity holders of the parent

6,446

5,802

Exchange differences on retranslation of foreign operations

649

(43)

Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods

649

(43)

Remeasurement gains on defined benefit pension scheme

13

-

54

Deferred taxation on remeasurement of defined benefit pension scheme

-

(14)

Net other comprehensive income not being reclassified to profit or loss in subsequent periods

-

40

Total comprehensive income for the period attributable to equity holders of the parent

7,095

5,799

Interim condensed consolidated statement of financial position

Notes

31st October 2024

31st October 2023

30th April 2024

unaudited

unaudited

audited

ASSETS

£'000

£'000

£'000

Non-current assets

Property, plant and equipment

10

28,628

25,415

27,953

Right-of-use assets

11

560

968

760

Intangible assets

2,413

2,365

2,448

Deferred income tax asset

12

1,716

16

Derivative asset

15

293

-

309

31,906

30,464

31,486

Current assets

Inventories

37,506

16,940

25,250

Derivative asset

1,702

-

898

Trade and other receivables

21,785

27,578

28,304

Contract assets

7,211

3,374

100

Cash and cash equivalents

12

27,853

42,627

35,509

Restricted cash held in Escrow

12

4,170

7,426

7,170

100,227

97,945

97,231

TOTAL ASSETS

132,133

128,409

128,717

EQUITY AND LIABILITIES

Equity

Share capital

1,784

1,784

1,784

Capital redemption reserve

957

957

957

Other reserve

2,815

2,815

2,815

Revaluation reserve

9,923

9,923

9,923

Special reserve

1,629

1,629

1,629

Currency translation reserve

42

(363)

(607)

Treasury shares

(7,683)

(3,703)

(3,702)

Retained earnings

41,599

30,362

37,998

TOTAL EQUITY SHAREHOLDERS' FUNDS

51,066

43,404

50,797

Non-current liabilities

Defined benefit pension liability

13

-

3,577

-

Deferred income tax liability

3,190

2,941

3,132

Contract liabilities

7,477

19,148

10,019

Derivative liabilities

15

-

218

-

Lease liabilities

219

630

422

10,886

26,514

13,573

Current liabilities

Trade and other payables

17,063

19,291

21,349

Contract liabilities

52,740

38,303

42,616

Derivative liabilities

15

-

513

-

Lease liabilities

378

384

382

70,181

58,491

64,347

TOTAL EQUITY AND LIABILITIES

132,133

128,409

128,717

The interim condensed consolidated financial statements of the Group for the six months ended 31st October 2024 were authorised for issue in accordance with a resolution of the directors on 5th December 2024 and signed on their behalf by:

Michael O'Connell

Finance Director

Interim consolidated statement of changes in equity

Share capital

Capital redemption reserve

Other reserve

Revaluation reserve

Special reserve

Currency translation reserve

Treasury shares

Retained earnings

Total unaudited/ audited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30th April 2023

1,784

957

2,815

9,923

1,629

(320)

(2,381)

26,668

41,075

Profit for the period

- 

- 

- 

- 

- 

- 

- 

5,802

5,802

Other comprehensive (loss)/income

- 

- 

- 

- 

- 

(43)

- 

40

(3)

Equity settled share-based payment expense

- 

- 

- 

- 

- 

- 

- 

19

19

Purchase of own shares

- 

- 

- 

- 

- 

- 

(1,676)

- 

(1,676)

Exercise of share options

- 

- 

- 

- 

- 

- 

354

(44)

310

Dividend paid

- 

- 

- 

- 

- 

- 

- 

(2,123)

(2,123)

At 31st October 2023

1,784

957

2,815

9,923

1,629

(363)

(3,703)

30,362

43,404

Profit for the period

- 

- 

- 

- 

- 

- 

- 

5,698

5,698

Other comprehensive (loss)/income

- 

- 

- 

- 

- 

(244)

- 

2,413

2,169

Equity settled share-based payment expense

- 

- 

- 

- 

- 

- 

- 

46

46

Deferred tax on equity settled share-based payment expense

- 

- 

- 

- 

- 

- 

- 

(38)

(38)

Exercise of share options

- 

- 

- 

- 

- 

- 

1

4

5

Dividend paid

- 

- 

- 

- 

- 

- 

- 

(487)

(487)

At 30th April 2024

1,784

957

2,815

9,923

1,629

(607)

(3,702)

37,998

50,797

Profit for the period

- 

- 

- 

- 

- 

- 

- 

6,446

6,446

Other comprehensive income

- 

- 

- 

- 

- 

649

- 

- 

649

Equity settled share-based payment expense

- 

- 

- 

- 

- 

- 

- 

36

36

Deferred tax on equity settled share-based payment expense

- 

- 

- 

- 

- 

- 

- 

(9)

(9)

Purchase of own shares

- 

- 

- 

- 

- 

- 

(4,483)

- 

(4,483)

Exercise of share options

- 

- 

- 

- 

- 

- 

502

(169)

333

Dividend paid

- 

- 

- 

- 

- 

- 

- 

(2,703)

(2,703)

At 31st October 2024

1,784

957

2,815

9,923

1,629

42

(7,683)

41,599

51,066

Interim consolidated cash flow statement

Half-year to 31st October 2024

Half-year to 31st October 2023

unaudited

unaudited

£'000

£'000

Profit before taxation

8,772

7,719

Adjustments to reconcile profit before taxation to cash generated from operating activates:

Depreciation charge of owned and right-of-use assets

1,232

1,024

Amortisation charge

45

31

Profit on disposal of property, plant and equipment

(121)

(148)

Net finance income

(748)

(114)

Equity settled share-based payment expense

36

19

Foreign exchange gains

266

202

(Increase)/decrease in inventories

(12,379)

7,853

Decrease/(increase) in receivables

670

(21,598)

(Increase)/decrease in derivatives

(788)

731

(Decrease)/increase in payables

(3,698)

4,257

Increase in contract liabilities

8,545

42,255

Pension fund deficit reduction payments

- 

(675)

Cash generated from operating activities

1,832

41,556

Net interest received

761

224

Taxation paid

(4,301)

(2,279)

Net cash (outflow)/inflow from operating activities

(1,708)

39,501

Investing activities

Purchase of property, plant and equipment

(1,974)

(1,168)

Proceeds on disposal of property, plant and equipment

173

149

Decrease/(increase) in restricted cash held in Escrow maturing in more than 90 days

3,000

(4,509)

Net cash inflow/(outflow) from investing activities

1,199

(5,528)

Financing activities

Buy back of own shares

(4,483)

(1,676)

Proceeds from exercise of employee share options

333

310

Lease payments

(198)

(206)

Dividend paid

(2,703)

(2,123)

Net cash outflow from financing activities

(7,051)

(3,695)

(Decrease)/increase in cash and cash equivalents

(7,560)

30,278

Opening cash and cash equivalents

35,509

12,336

Exchange differences on cash and cash equivalents

(96)

13

Closing cash and cash equivalents

27,853

42,627

Notes to the interim consolidated financial statements

1. Corporate information

MS INTERNATIONAL plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the Alternative Investment Market (AIM) market of the London Stock Exchange. The principal activities of the Company and its subsidiaries ("the Group") are the design, manufacture, construction, and servicing of a range of engineering products and structures. These activities are grouped into the following divisions:

'Defence and Security' - design, manufacture, and service of defence equipment.

'Forging' - manufacture of fork-arms and open die forgings.

'Petrol Station Superstructures' - design, manufacture, construction, and maintenance of petrol station superstructures.

'Corporate Branding' - design, manufacture, installation, and service of corporate brandings, including media facades, way-

finding signage, public illumination, creative lighting solutions, and the complete appearance of petrol station superstructures

and forecourts.

2. Basis of preparation and accounting policies

The consolidated condensed interim financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting". They do not include all the information and disclosures required in annual financial statements, and should therefore be read in conjunction with the Group's Annual Report for the year ended 30th April 2024 and any public announcements made by MS INTERNATIONAL plc during the interim reporting period. The financial statements for the year ended 30th April 2024 have been filed with the Registrar of Companies. The auditor's report on these financial statements was unmodified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The interim financial information has been reviewed but not audited by the Group's auditor, Grant Thornton UK LLP. The interim financial information does not constitute full financial information within the meaning of section 434 of the Companies Act 2006. The auditor's report is included on pages 4-5.

The accounting policies are consistent with those applied in the financial statements of the Annual Report for year ended 30th April 2024. The Group has not early adopted any standard, interpretation, or amendment that has been issued but is not yet effective.

The assets and liabilities of the overseas subsidiaries are translated into the presentational currency of the Group at the rate of exchange ruling at the statement of financial position date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity.

3. Principal risks and uncertainties

The principal risks and uncertainties facing the Group for the remaining six months of the financial year are discussed below. Further details of the Group's risks and uncertainties can be found on page 8 of the Annual Report for the year ended 30th April 2024, which is available from MS INTERNATIONAL plc's website: www.msiplc.com.

One of the Group's principal risks and uncertainties continues to be the impact of inflationary pressures upon both trading and profitability. Rising raw material and energy prices have increased the cost base of all divisions. Where possible cost increases are passed to the customer, however, in doing so there is uncertainty with regards to any potential impact on the level of customer demand.

Given the increasing demand for the Group's products, specifically in the 'Defence and Security' division, increased capacity is required to satisfy customers' requirements. Significant investment in the Norwich facility has taken place, and continues to take place, in order to meet these higher levels of trading. Managing the increase in production capacity comes with both risks and challenges, both internally within the division and externally within the wider supply chain.

The risk that foreign exchange fluctuations will impact the Group's performance has increased significantly over the past year as a number of international contracts in the 'Defence and Security' division are now denominated in USD. This created a large unhedged currency exposure within the Group and as a result, management have taken steps to mitigate this risk by taking out various forward contracts (note 15).

4. Going concern

The condensed interim financial statements included in this report have been prepared on a going concern basis. Forecasts have been made up to 30th April 2026, which the Directors believe to be a reasonable expectation based on the information available at the time of signing these accounts. The forecasts have been assessed for the impact of potential sensitivities, including a 10% fall in the forecasted Group revenue and a 10% increase in materials prices. In all scenarios, the Group has sufficient headroom to meet its liabilities as they fall due.

In addition, management have carried out reverse stress tests to 30th April 2026 under various scenarios, all of which are considered implausible by management. In all tested scenarios, the Group would continue as a going concern for at least the next 12 months.

As a result, in making the going concern assessment the Directors believe there to be no material uncertainties that could cast significant doubt on the Group's ability to continue operating as a going concern. The Group has sufficient financial resources with a healthy order book to continue operating for the foreseeable future, being at least to 30th April 2026. As a result, the Directors continue to adopt the going concern basis of accounting in preparation of this report.

5. Revenue

The Group's revenue disaggregated by pattern of revenue recognition is as follows:

 6. Segment information

The following table presents segmental revenue and operating profit/(loss) as well as segmental assets and liabilities of the Group's divisions for the half-year periods ended 31st October 2024 and 31st October 2023. The reporting format is determined by the differences in manufacture and services provided by the divisional segments within the Group.

'Defence and Security'

'Forgings'

'Petrol Station Superstructures'

'Corporate Branding'

Total

2024

2023

2024

2023

2024

2023

2024

2023

2024

2023

unaudited

unaudited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Segmental revenue

Segment revenue

35,261

33,508

7,664

9,454

7,382

8,555

4,687

5,584

54,994

57,101

Intercompany revenue from other segments

- 

- 

- 

- 

(99)

(8)

(177)

(70)

(276)

(78)

External revenue

35,261

33,508

7,664

9,454

7,283

8,547

4,510

5,514

54,718

57,023

Segment result

Operating profit/(loss)

6,664

5,741

344

681

996

1,285

20

(102)

8,024

7,605

Net finance income

748

114

Profit before taxation

8,772

7,719

Tax expense

(2,326)

(1,917)

Profit for the period

6,446

5,802

Segmental assets

Assets attributable to segments

81,684

79,724

6,314

7,357

12,571

12,586

3,462

5,261

104,031

104,928

Unallocated assets*

28,102

23,481

Total assets

132,133

128,409

Segmental liabilities

Liabilities attributable to segments

67,541

68,203

1,668

2,212

4,903

4,683

1,619

2,167

75,731

77,265

Unallocated liabilities*

5,336

7,740

Total liabilities

81,067

85,005