3rd Sep 2007 07:01
Brammer PLC03 September 2007 PRESS RELEASE 3 September 2007 2007 INTERIM RESULTS FURTHER REVENUE GROWTH, CONTINUED IMPROVEMENT IN PROFITABILITY AND MARKET SHARE Brammer plc, the European industrial services group, today announces its resultsfor the six months ended 30 June 2007. FINANCIAL SUMMARY 2007 2006 £m £m Change Revenue 181.8 157.5 15.4 % Operating profit (pre amortisation of acquired intangibles andexceptional item) 9.2 7.4 24.3 % Profit before tax (pre amortisation of acquired intangibles andexceptional item) 7.2 6.0 20.0 % Exceptional non cash pension curtailment - 2.8 Profit before tax 7.2 8.8 Net debt (53.7) (52.9) Earnings per share pence pence Basic - on profit before amortisation of acquired intangibles and exceptional item 10.2 8.7 17.2 % Basic 10.1 12.6 (19.8)% Diluted 10.0 12.6 (20.6)% Operating Highlights • Organic and acquisition sales growth further strengthens European market leading position. Brammer now established in nearly 300 locations in 15 countries • Overall sales per working day grew 17.2% including acquisitions, and 14.4% organically, representing significant market share gains across all territories • Key account sales grew by 24.5%, now representing 30.9% of total sales. Six new pan-European contracts were gained. The pipeline remains strong • Operating profit margin improved to 5.0% reflecting increased volumes and continued cost control • Acquisition of Fin, a privately owned Polish business gives Brammer a leading position in bearings and mechanical power transmission in that country. Additional acquisitions have been made in Czech Republic, UK and Ireland, and in Spain early in the second half • Successful share placing raising net funds of £15.3 million • Net debt at £53.7 million (2006: £52.9 million) with improved working capital ratios • EPS growth (on profit before amortisation of acquired intangibles and exceptional item) of 17.2% • Interim dividend of 2.1p up 16.7% (2006: 1.8p) David Dunn, chairman, said: "Further progress has been made with all elements of our strategy. Salesgrowth has again significantly exceeded market growth and we have made goodprogress in strengthening our capabilities. We have made five acquisitions andall are bedding in well. We are delighted to welcome Fin, ZPV, Rotate, Merciaand Boada to the 'One Brammer' family, further strengthening our position as theleading European supplier of bearings and mechanical power transmission (MPT)products. We will continue to acquire bolt-on businesses that fit our strictcriteria and increase our share of the highly fragmented European markets inwhich we operate. "Trading since the end of June has been strong and this encourages us to expectfurther good progress in the second half and for the year as a whole. "The Board has declared an increased interim dividend of 2.1p (2006: 1.8p). Thiswill be paid on 2 November 2007 to shareholders on the register at the close ofbusiness on 5 October 2007." Enquiries: Brammer plc 020 7638 9571 (8.00am - 11.30am) 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 2007 INTERIM RESULTS CHAIRMAN'S STATEMENT Overview I am delighted to report another strong set of results for Brammer. Sales in thefirst six months of 2007 totalled £181.8m (2006: £157.5m), an increase of 15.4%,whilst like for like sales, excluding acquisitions, were up 12.8%. Operatingprofit was £9.2m (2006: £7.4m) up 24.3%, profit before tax rose by 20% to £7.2m(2006: £6.0m) and basic earnings per share increased by 17% to 10.2p (all preamortisation and exceptionals - see footnote) . These results reflect acontinuation of the growth trend reported to shareholders in both February andMay at the time of the 2006 annual results and at the AGM respectively. Financial Performance The excellent sales growth in the period was spread across all of our tradingterritories. Key accounts were again a significant feature, growing by a further24.5% and now accounting for 30.9% of total sales. Pricing, as ever, hasremained highly competitive but notwithstanding changes in our geographic,customer, and product mix, gross margins were broadly in line with last year. Asa consequence the Group achieved an operating margin to sales of 5.0%, which wasan increase on the 2006 full year margin and above the equivalent 4.7% for sameperiod last year. Net borrowings at the end of June amounted to £53.7m. In April 2007 we raised£15.3m of new equity to assist in the financing of past and planned futureacquisitions. £9.8m (including acquired debt) was expended on new businesses inthe six months. A further £2.5m was spent on capital expenditure in the period(2006: £2.1m). Working capital also increased reflecting largely the additionalreceivables and stock requirements associated with the sales growth and recentlyacquired businesses. The retirement benefit liability at the end of June was £13.1m (2006: £21.7m), areduction of £12.1m in the liability from 31 December 2006 (£25.2m). Thisreduction reflects the higher discount rate used in the actuarial calculation offuture pension liabilities as a result of increases in corporate bond yields. Strategy and Acquisitions Brammer's strategy, focused on Growth, Capabilities, Costs and Synergiescontinues to be implemented consistently with progress made in all categories.Whilst the high growth rate is evident there are challenges to control costs,increase our physical and human capabilities, and extract maximum synergies frombest practice and acquisitions. These results, I believe, bear out thecontinuing success of the Group's strategy. In previous reports to shareholders we have referred to our desire to acquirenew businesses within the fragmented European markets we serve. In May wecompleted the acquisition of Fin in Poland. This business, with annual sales of£17.5m in 2006, adds a significant presence for Brammer in that country and weare very pleased to have acquired such a high quality business. In addition wehave acquired smaller but nonetheless important businesses in the UK, Ireland,and the Czech Republic. In July 2007 we announced the acquisition of Boada, a leading specialistdistributor in Catalonia with 2006 annual sales of £7.8m. This extends Brammer'sfootprint in Spain and gives us clear market leadership in that country. Weshall continue to look for further opportunities in Europe and are confidentthat all of the newly acquired businesses will enhance our strategic marketposition and earnings in the first full year of ownership. Dividend The interim dividend recommended by the Board is 2.1p an increase of 16.7% overlast year. This will be paid on 2 November to shareholders on the register atthe close of business on 5 October 2007. Prospects We have been encouraged by the results for the first half of 2007. Growth todate in the second half continues to underpin the Board's confidence that 2007will be another year of good progress. David Dunn 3 September 2007 Footnote:Throughout the Chairman's statement and the Chief Executive's Review referencesto operating profit, operating margin, profit before tax and earnings per shareare all on the basis of excluding amortisation of acquired intangibles and the2006 exceptional non cash pension curtailment. CHIEF EXECUTIVE'S REVIEW Overview In the first half of 2007 we made significant progress in strengtheningBrammer's market leading position in Europe. We concentrated on theimplementation of our now familiar strategy under the drivers of Growth,Capabilities, Costs, and Synergies, and continued to progress the concept of "One Brammer" - a business which can offer consistent products and services ineach of nearly 300 locations in 15 countries. We improved our ability todeliver to our customers a consistent quality of service across the entirebearings, power transmission and fluid power product range anywhere in Europe.Brammer already has a strong presence within Europe but our existing leadershipposition still only represents around 3% of the market, with growth levelssignificantly greater than market growth available for many years to come Operational Review Brammer is the leading European supplier of technical components and relatedservices to the maintenance, repair and operations ("MRO") markets. In thefirst half of 2007 revenues increased by 15.4% to £181.8 million, whilstoperating profit increased by 24.3% to £9.2 million. Profits improved both onthe continent and in the UK. Operating margin improved to 5.0% (2006: 4.7%)benefiting from higher volumes and continued cost control. At the end of the first half, total headcount in Brammer (on a full-timeequivalent basis and adjusted for acquisitions) was 2,126 compared to 1,963 atthe end of last year. Revenues per head increased by 9.7% to £86,000 for thehalf year compared with the second half of last year, indicating continuingimprovement in productivity. In the UK, the momentum gained during last year continued, with revenues on asales per working day basis ("SPWD") up by 11.5%. Contracts won last yearcontributed significantly to further market share gains in the first half, and asignificant number of new contracts came on stream, including Ball Packaging,Alcan and Hanson Aggregates. We increased sales through Insites and part-timeInsites (those locations where we have several regular clinics with thecustomer's staff each week) by 26.9% now operating at 129 locations. Customerlocations where we have contracted to provide either full or part-time regularon site support, or where we provide a consigned stock solution to the site,grew by 20%, now representing 28% of sales. Development in our key accountbusiness was particularly pleasing, with growth in this segment of 22.3%,accounting for 46.1% of total sales. Good progress was made in the importantsegments of cement and aggregates, building products, packaging, utilities andenergy, where our segment focused marketing approach is bearing fruit. In Germany SPWD grew by 17.1%, well ahead of the market. Excellent progress wasmade on key accounts, with revenues in this segment up 39.9%, now representing23.1% of turnover. New contracts won included RWE, SULO, Henkel and Alcan, andexcellent progress was made in developing business from those contracts won in2006. We were delighted to receive the global supplier of the year award fromRobert Bosch, recognition of the value we provided since the start of ourpan-European contract last year. Good progress was made in filling out theproduct range, with pneumatics up 58%, gearbox sales up over 100%, linear motionsales up 17.3% and mechanical power transmission ("MPT") up 16.3%. We developeda detailed plan to grow our MPT range, recruiting 9 specialists across Germany,and expect growth in this important product range to accelerate in the remainderof 2007. We now have 5 Insites in Germany, with sales in the first half of£1.5m, up 72.6% on the same period last year. In France SPWD were up 7.9% in a flat market. We increased focus on theautomotive sector, and sales in this important sector representing over 20% ofour French revenues grew by 10.7%. Growth in industrial key accounts wasslightly disappointing at 9.1%, affected by several of our customers closingplants and migrating to Eastern Europe, where we were able to establish supplypositions. Base MRO business grew by 6.9%. New contracts were won withLegrand, Sodiaal, Panavi, KP1 and Roullier. We found the market in the firsthalf increasingly competitive and gross margins declined under strong pricepressure. As a result, operating profit declined by 26.9% to £0.8 million. In Spain SPWD grew 6.5%. We continued to increase our sales to the MRO market(up 5.7%), whilst key account sales grew by 8.8%. We won new contracts with SaraLee, TRW, Danone, Cerabrick, Helios, and Precon. We carried out a majormarketing campaign to develop Insites, and have contracts for 5 to start in thesecond half of 2007. New product introductions contributed to growth with fluidpower up 19.4% . Within Benelux, the Netherlands SPWD were up 16.8%, with good growth in allareas of the business. Operating profit grew by 14.8%, as we recognised the needto invest in additional sales and service resource to support continued growth.We introduced 16 new product lines in the first half and expect these togenerate additional growth in the second half. In Belgium SPWD grew by 114%,but on a like for like basis were only marginally up. The integration ofBrammer Belgium and Ramaekers proceeded well, and we now have an established "One Brammer" team in Belgium. We welcomed Fin into the Brammer family in May and were delighted with theopportunities that we have identified, as well as Fin's progress in the firsthalf; on a like for like basis, sales were up 11.8%. The integration process hasstarted well. In our Developing Businesses, overall SPWD increased by 49.6%, and totalrevenues were £9.2 million, up from £7.1 million last year. In Austria, SPWDgrew 20.6%. In the Czech Republic we benefited from key account growth, withSPWD up 19.5%. In Hungary, excellent progress continued with new productintroductions and key accounts, resulting in SPWD growth of 26.5%. In Italy wecontinued to develop our relationship with key accounts and grew SPWD by 28.2%. Strategy Growth • Overall SPWD growth was 17.2%, whilst organic growth on a SPWD basis was 14.4%. Organically, bearings growth was 8.9% and non-bearings growth was 18.0% as new product introduction and more intensive cross-selling took place in all territories. • The consistent focus of the businesses on market segmentation is beginning to achieve some excellent results. Across the Group, it has led to increased sales in the utilities segment of 27% and in the construction and aggregates segment of 30%. • Key account sales grew by 24.5%, accelerating throughout the half year. Key account sales now represent 30.9% (2006: 26.5%) of total revenues. We won new pan-European or multi-country contracts with TRW, Sara Lee, Bonduelle, Ahlstrom, Continental and Alcan, and have an extensive pipeline of opportunities for the second half. • We have succeeded in completing 5 acquisitions so far and seek to complete further acquisitions in the second half. Acquisitive revenues to date total £34.0 million on an annualised basis. Our acquisition pipeline remains strong and we see continuing opportunities to develop further candidates for acquisition. 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. • All existing Brammer companies dropped their previous name and became known as Brammer on 1 January 2007. We believe that this branding is having a profound effect on the engagement of our people, the relationship with our suppliers, and the message to our customers in the marketplace, and significantly enhances our ability to achieve the pan European "One Brammer" approach. All acquisitions begin to associate the Brammer name with their own in the early months of integration. Capability • As the Group has approximately 2,400 people in nearly 300 locations in 15 countries our continuing challenge is to facilitate learning which is accessible and meaningful to all. This is done through product training supplied locally by our suppliers, through sales and management training offered by external and internal trainers, and through our own specifically developed learning programmes. • Our distributed learning programmes are now well established and take the form of major business related courses focused on the key processes of the business. The Foundation Programme introduces our products and services and is an essential programme for all people joining the Group. In addition our newest programme, the Business of Brammer offers an in depth understanding of the functions and processes of the Group. This second major programme has been successfully launched at the beginning of the year in the UK business with a take up rate of 80%. This programme is now being introduced across our Continental businesses in eight different languages, including Polish for the first time. • In addition to these major programmes we also have modular programmes which introduce the key competences of Brammer to our sales people. These include our Key Account Toolkit module, which focuses on the processes required when implementing a key account contract and our Cost Savings module, which assists our sales people in understanding the fundamental importance of the company Value Proposition. The future Our strategy continues to prove to be effective. We have achieved significantmarket share gains in the first half of 2007, through growth in our targetedmarket segments, in the area of key accounts, and through effectivecross-selling. In addition, the share placing we made in the first half of 2007has helped fund significant acquisitive growth. We anticipate, givensatisfactory cashflow, being able to complete further acquisitions from a strongpipeline of opportunities matching our clearly defined requirements. We have a strong presence within Europe upon which to build and believe thatgrowth levels significantly greater than the market growth will continue to beavailable to us for many years to come. Ian Fraser 3 September 2007 Brammer CONSOLIDATED INTERIM INCOME STATEMENT Six months to Six months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Continuing operationsRevenue (note 2) 181,751 157,466 314,345Cost of sales (126,874) (109,547) (218,359) Gross profit 54,877 47,919 95,986 Distribution costs (45,726) (40,519) (80,907)Amortisation of acquired intangibles (85) (86) (202)Exceptional non cash pension curtailment (note 3) - 2,811 2,811 Total distribution costs (45,811) (37,794) (78,298) Operating profit (note 2) 9,066 10,125 17,688 Operating profit before amortisation of acquired 9,151 7,400 15,079intangibles and exceptional non cash pensioncurtailmentAmortisation of acquired intangibles (85) (86) (202)Exceptional non cash pension curtailment - 2,811 2,811Operating profit 9,066 10,125 17,688 Finance expense (1,983) (1,369) (3,184)Finance income 67 13 88 Profit before tax 7,150 8,769 14,592 Taxation (note 4) (2,145) (2,720) (4,818) Profit for the period attributable to equity shareholders 5,005 6,049 9,774 Earnings per share - total (note 5)Basic 10.1p 12.6p 20.4pDiluted 10.0p 12.6p 20.3p Earnings per share - on profit before amortisation ofacquired intangibles and exceptional item (note 5)Basic 10.2p 8.7p 16.6pDiluted 10.2p 8.6p 16.6p The notes on pages 12 to 20 form part of these interim financial statements. Brammer CONSOLIDATED INTERIM STATEMENT OF RECOGNISED INCOME AND EXPENSE Six months to Six months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the period 5,005 6,049 9,774 Net exchange differences on translating foreign operations (197) 104 (583)Actuarial gains on pension schemes 10,982 8,858 4,772Deferred tax on actuarial gains on pension schemes (3,292) (2,682) (1,432)Excess tax on share option schemes 422 118 379 Net gains not recognised in income statement 7,915 6,398 3,136 Total recognised income and expense 12,920 12,447 12,910 The notes on pages 12 to 20 form part of these interim financial statements. Brammer CONSOLIDATED INTERIM BALANCE SHEET 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000AssetsNon-current assetsGoodwill 47,056 43,673 39,426Acquired intangible assets 1,120 581 1,227Other intangible assets 4,450 3,102 4,184Property, plant and equipment 12,263 10,984 10,105Deferred tax assets 4,514 8,865 8,336 69,403 67,205 63,278 Current assetsInventories 54,289 44,773 49,710Trade and other receivables 74,753 60,541 57,708Cash and cash equivalents 5,251 9,956 8,798 134,293 115,270 116,216LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (14,822) (12,287) (18,536)Trade and other payables (74,163) (68,173) (66,900)Deferred consideration (270) (358) -Current tax liabilities (3,894) (3,727) (3,229) (93,149) (84,545) (88,665) Net current assets 41,144 30,725 27,551 Non-current liabilitiesFinancial liabilities - borrowings (44,158) (50,559) (44,438)Deferred tax liabilities (4,284) (5,002) (4,321)Provisions (837) (2,290) (850)Deferred consideration (9,235) (6,362) (3,735)Retirement benefit obligations (13,133) (21,683) (25,211) (71,647) (85,896) (78,555) Net assets 38,900 12,034 12,274 Shareholders' equityShare capital 10,569 9,573 9,585Share premium 17,985 3,552 3,628Translation reserve (1,321) (437) (1,124)Retained earnings 11,667 (654) 185 Total equity 38,900 12,034 12,274 The notes on pages 12 to 20 form part of these interim financial statements. Brammer CONSOLIDATED INTERIM CASH FLOW STATEMENT Six months to Six months to Year to 30 June 2007 30 June 2006 31 Dec 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Retained profit 5,005 6,049 9,774Tax charge 2,145 2,720 4,818Depreciation of tangible and intangible assets 1,657 1,390 3,062Share options - value of employee services 583 428 791Gain on sale of property, plant and equipment (5) (29) (383)Net financing expense 1,916 1,356 3,096 Movement in working capital (11,057) (4,474) (9,215) Cash generated from operating activities 244 7,440 11,943Interest received 67 22 88Interest paid (1,378) (1,396) (2,870)Tax paid (526) (1,149) (2,132)Pension obligations (1,096) (3,185) (3,743) Net cash (used in)/generated from operating activities (2,689) 1,732 3,286 Cash flows from investing activitiesProceeds from disposal of subsidiaries (net of cash disposed - 1,000 1,000of)Acquisition of subsidiaries (net of cash/excluding debt (7,362) (1,947) (1,906)acquired)Deferred consideration paid on prior acquisitions - (154) (192)Proceeds from sale of property, plant and equipment 32 79 563Purchase of property, plant and equipment (2,033) (1,455) (2,417)Additions to software development (470) (709) (1,777) Net cash used in investing activities (9,833) (3,186) (4,729) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 15,341 - 88Net (repayment)/issue of loans (6,505) 2,051 2,908Finance lease principal payments (6) (16) (58)Dividends paid to shareholders - - (2,583) Net cash generated from financing activities 8,830 2,035 355 Net (decrease)/increase in cash and cash equivalents (3,692) 581 (1,088)Exchange gains and losses on cash and cash equivalents (10) 37 (133)Cash and cash equivalents at beginning of period 7,513 8,734 8,734 Net cash at end of period 3,811 9,352 7,513 Cash and cash equivalents 5,251 9,956 8,798Overdrafts (1,440) (604) (1,285) Net cash at end of period 3,811 9,352 7,513 The notes on pages 12 to 20 form part of these interim financial statements. Brammer ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these interimfinancial statements are included in the financial statements for the year ended31 December 2006. These policies have been consistently applied to all theperiods presented. No standards have been early adopted by the group. The implications for thegroup of new standards, amendments to standards or interpretations which aremandatory for the first time for the financial year ending 31 December 2007, aresummarised in note 14 to these financial statements. Basis of preparation The interim financial statements of Brammer PLC for the half year period ended30 June 2007 are unaudited and do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. This interim financial information for the half year ended 30 June 2007 has beenprepared in accordance with the Listing Rules of the Financial ServicesAuthority and with IAS 34, "Interim financial reporting" as adopted by the EU.The interim condensed financial report should be read in conjunction with theannual financial statements for the year ended 31 December 2006 which have beenprepared in accordance with IFRS as adopted by the EU. The financial statements have been prepared under the historical costconvention. Accounting estimates and judgements The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amount of income, expense, assets and liabilities. Thesignificant estimates and judgements made by management were consistent withthose applied to the consolidated financial statements for the year ended 31December 2006. Brammer NOTES TO THE ACCOUNTS 1 COMPARATIVE RESULTS Comparative figures for the year ended 31 December 2006 are taken from thecompany's statutory accounts which have been delivered to the Registrar ofCompanies with an unqualified audit report. Copies of the 2006 annual report andthe 2006 interim report are available on the company's web site(www.brammer.biz). 2 SEGMENTAL ANALYSIS The group is primarily controlled on a country by country basis in line with thelegal structure of the group. Segment assets include property, plant andequipment, intangible assets, inventories, and trade and other receivables.Segment liabilities comprise trade and other payables, and provisions. Allinter-segmental trading is at an arms-length basis. UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Six months ended 30 June2007RevenueSales to external customers 60,269 47,819 28,464 15,581 17,098 12,520 181,751Inter company sales 149 810 301 205 784 (2,249) - Total 60,418 48,629 28,765 15,786 17,882 10,271 181,751 Operating profit beforeamortisationof acquired intangibles 1,777 3,515 804 1,545 1,333 177 9,151Amortisation of acquiredintangibles (85) (85) Total operating profit 1,777 3,515 804 1,545 1,333 92 9,066 Finance expense (1,983)Finance income 67 Profit before tax 7,150Tax (2,145) Profit for the year 5,005 Segment assets 42,124 24,259 26,471 16,551 17,098 20,372 146,875Goodwill 761 27,264 2,171 1,261 5,919 9,680 47,056 42,885 51,523 28,642 17,812 23,017 30,052 193,931Cash 5,251Deferred tax 4,514 Total assets 203,696 Segment liabilities (24,230) (8,564) (15,497) (10,577) (7,292) (6,622) (72,782)Current tax (3,894)Deferred tax (4,284)Dividends (2,218)Deferred consideration (9,505)Financial liabilities (58,980)Retirement benefit (13,133)obligations Total liabilities (164,796) Net assets 38,900 Other segment itemsCapital expenditure 1,161 33 142 136 456 575 2,503Depreciation and (591) (190) (117) (127) (193) (439) (1,657)amortisation 2 SEGMENTAL ANALYSIS (continued) UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Six months ended 30 June2006RevenueSales to external customers 54,123 41,835 27,279 14,953 12,170 7,106 157,466Inter company sales 120 556 132 174 3,130 (4,112) - Total 54,243 42,391 27,411 15,127 15,300 2,994 157,466 Operating profit beforeexceptional non cash pensioncurtailment 893 2,859 1,100 1,462 1,145 (59) 7,400Amortisation of acquiredintangibles (86) (86)Exceptional non cash pensioncurtailment 2,811 2,811 Total operating profit 893 2,859 1,100 1,462 1,145 2,666 10,125 Finance expense (1,369)Finance income 13 Profit before tax 8,769Tax (2,720) Profit for the year 6,049 Segment assets 36,398 22,544 24,012 14,118 15,213 7,696 119,981Goodwill - 27,998 2,229 1,295 8,922 3,229 43,673 36,398 50,542 26,241 15,413 24,135 10,925 163,654Cash 9,956Deferred tax 8,865 Total assets 182,475 Segment liabilities (23,006) (8,680) (15,005) (11,052) (7,335) (3,655) (68,733)Current tax (3,727)Deferred tax (5,002)Dividends (1,730)Deferred consideration (6,720)Financial liabilities (62,846)Retirement benefit (21,683)obligations Total liabilities (170,441) Net assets 12,034 Other segment itemsCapital expenditure 589 68 65 147 128 1,167 2,164Depreciation and (559) (179) (109) (99) (107) (337) (1,390)amortisation 3 EXCEPTIONAL NON CASH PENSION CURTAILMENT The exceptional non cash pension curtailment in 2006 comprised the curtailmentgain of £2,811,000 which reflected the impact of closing the defined benefitsection of the Brammer Services Limited Retirement Benefits Scheme to futureaccrual with effect from 1 March 2006. 4 INCOME TAXES Income tax expense is recognised based on management's best estimate of theweighted average annual income tax rate expected for the full financial year.The estimated average annual tax rate used for 2007 is 30% (the estimated taxrate for the first half year of 2006 was 31%). 5 EARNINGS PER SHARE Half year 2007 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 49,572 49,882 Total - all continuing operationsProfit for the period 5,005 10.1p 10.0pAmortisation of acquired intangibles 85Tax on amortisation of acquired intangibles (25) Earnings before amortisation of acquired intangibles 5,065 10.2p 10.2p The number of shares in issue has increased following the placing of 4,795,000shares on 23 April, as detailed in note 8 on page 17. Half year 2006 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 47,865 48,182 Total - all continuing operationsProfit for the period 6,049 12.6p 12.6pAmortisation of acquired intangibles 86Exceptional non cash pension curtailment (2,811)Tax on exceptional non cash pension curtailment 843Tax on amortisation of acquired intangibles (26) Earnings before amortisation of acquired intangibles and exceptional non 4,141 8.7p 8.6pcash pension curtailment Full year 2006 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 47,872 48,083 Total - all continuing operationsProfit for the financial year 9,774 20.4p 20.3pAmortisation of acquired intangibles 202Exceptional non cash pension curtailment (2,811)Tax on exceptional item 843Tax on amortisation of acquired intangibles (49) Earnings before amortisation of acquired intangibles and exceptional non 7,959 16.6p 16.6pcash pension curtailment 6 PENSIONS The valuations used for IAS 19 disclosures have been based on the most recent actuarial valuation at 31December 2005 updated by KPMG LLP to take account of the requirements of IAS 19 in order to assess theliabilities of each of the schemes at 30 June 2007. Assets are stated at their market value at 30 June2007. The financial assumptions used to calculate the liabilitiesunder IAS 19 are: UK Six months to Six months to Year to 31 Dec 30 June 2007 30 June 2006 2006Inflation rate 3.20% 2.90% 3.00%Rate of increase in salaries * n/a 2.90% n/aRate of increase of pensions in payment 3.20% 2.90% 3.00%Rate of increase for deferred pensioners 3.20% 2.90% 3.00%Discount rate 5.70% 5.40% 5.00%* limited to inflation increase only following curtailment. Netherlands Six months to Six months to Year to 31 Dec 30 June 2007 30 June 2006 2006Inflation rate 2.10% 2.00% 2.00%Rate of increase in salaries 3.10% 3.00% 3.00%Rate of increase of pensions in payment 2.10% 2.00% 2.00%Rate of increase for deferred pensioners 2.10% 2.00% 2.00%Discount rate 5.20% 4.80% 4.50% The amounts recognised in the balance sheet are determined asfollows: 30 June 2007 30 June 2006 31 Dec 2006 £m £m £mPresent value of defined benefit obligations 91.0 92.1 100.0Fair value of plan assets (77.9) (70.4) (74.8) Net liability recognised in the balance sheet 13.1 21.7 25.2 The amounts recognised in the income statement are as follows: Six months to Six months to Year to 31 Dec 30 June 2007 30 June 2006 2006 £m £m £mCurrent service cost 0.1 0.4 0.5Interest cost 2.5 2.4 4.9Expected return on plan assets (2.5) (2.2) (4.4) 0.1 0.6 1.0 On-going pension expense included within distribution costsCurtailment gain shown as exceptional non cash pension - (2.8) (2.8)curtailment Total pension expense/(income) 0.1 (2.2) (1.8) Analysis of the movement in the balance sheet net liability Six months to Six months to Year to 31 Dec 30 June 2007 30 June 2006 2006 £m £m £mOpening 25.2 33.7 33.7On-going expense as above 0.1 0.6 1.0Employer contributions (1.2) (1.0) (1.9)Actuarial gains recognised in the 'SORIE' (11.0) (8.8) (4.8)Curtailment gain as above - (2.8) (2.8) Closing 13.1 21.7 25.2 The on-going pension expense has been included in distribution costs. The actual return on plan assets was£3.1m (2006: £0.2m). The retirement benefit liability at the end of June was £13.1m (2006:£21.7m), areduction of £12.1m in the liability from 31 December 2006 (£25.2m). This reduction reflects the higherdiscount rate used in the actuarial calculation of future pension liabilities as a result of increases incorporate bond yields. 7 CLOSING NET DEBT At 30 June 2007 At 30 June 2006 At 31 Dec 2006 £'000 £'000 £'000 Borrowings - current (14,822) (12,287) (18,536)Borrowings - non-current (44,158) (50,559) (44,438)Cash and cash equivalents 5,251 9,956 8,798 Closing net debt (53,729) (52,890) (54,176) Reconciliation of net cash flow to movement in net debt Six months to Six months to Year to 31 Dec 30 June 2007 30 June 2006 2006 £'000 £'000 £'000 Net (decrease)/increase in cash (3,692) 581 (1,088)Debt and leases 6,511 (2,035) (2,850) 2,819 (1,454) (3,938)Loans acquired (2,433) (509) (509)Exchange 61 (275) 923Movement in net debt 447 (2,238) (3,524)Opening net debt (54,176) (50,652) (50,652)Closing net debt (53,729) (52,890) (54,176) 8 CHANGES IN SHAREHOLDERS' EQUITY Share Share Treasury Translation Retained capital premium Shares reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000For the period ended 30 June 2007At 1 January 9,585 3,628 (515) (1,124) 700 12,274Shares issued during the period 984 14,357 - - - 15,341Profit for the period attributable to equity shareholders - - - - 5,005 5,005Unrealised exchange movement - - - (197) - (197)Transfer on vesting of own shares - - 462 - (462) -Current tax on shares vesting - - - - 278 278Deferred tax on shares vesting - - - - (278) (278)Value of employee services - - - - 583 583Excess tax on share option schemes - - - - 422 422Dividends - - - - (2,218) (2,218)Actuarial gains on pension schemes - - - - 10,982 10,982Tax on actuarial gains on pension - - - - (3,292) (3,292)schemesMovement in period 984 14,357 462 (197) 11,020 26,626At 30 June 10,569 17,985 (53) (1,321) 11,720 38,900 Placing On 23 April the company issued 4,795,000 new ordinary shares at 330 pence pershare through a placing with institutional investors, representing approximately9.9% of the total issued share capital. Proceeds before commissions and expenseswere £15.8m. The placing shares rank pari passu in all respects with theexisting issued shares. Dividends A dividend, amounting to £2,218,000, which relates to 2006 was paid on 9 July2007 (2006: £1,730,000). In addition, the directors propose an interim dividendof 2.1p per share (2006: 1.8p per share) payable on 2 November 2007 toshareholders who are on the register at 5 October 2007. This interim dividend,amounting to £1,110,000 (2006: £853,000) has not been recognised as a liabilityin these interim financial statements. 8 CHANGES IN SHAREHOLDERS' EQUITY (continued) Share Share Treasury Translation Retained capital premium Shares reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000For the period ended 30 June 2006At 1 January 9,573 3,552 (958) (541) (10,558) 1,068Profit for the period attributableto equity shareholders - - - - 6,049 6,049Unrealised exchange movement - - - 104 - 104Transfer on vesting of own shares - - 443 - (443) -Tax on shares vesting - - - - (179) (179)Value of employee services - - - - 428 428Excess tax on share option schemes - - - - 118 118Dividends - - - - (1,730) (1,730)Actuarial gains on pension schemes - - - - 8,858 8,858Tax on actuarial gains on pension - - - - (2,682) (2,682)schemesMovement in period - - 443 104 10,419 10,966At 30 June 9,573 3,552 (515) (437) (139) 12,034 For the year ended 31 December2006At 1 January 9,573 3,552 (958) (541) (10,558) 1,068Shares issued during the year 12 76 - - - 88Profit for the year attributableto equity shareholders - - - - 9,774 9,774Unrealised exchange movement - - - (583) - (583)Transfer on vesting of own shares - - 443 - (443) -Current tax on shares vesting - - - - 179 179Deferred tax on shares vesting - - - - (179) (179)Value of employee services - - - - 791 791Excess tax on share option schemes - - - - 379 379Dividends - - - - (2,583) (2,583)Actuarial gains on pension schemes - - - - 4,772 4,772Tax on actuarial gains on pension - - - - (1,432) (1,432)schemesMovement in period 12 76 443 (583) 11,258 11,206At 31 December 9,585 3,628 (515) (1,124) 700 12,274 Retained earnings as disclosed in the Balance Sheet page 10 represent theretained earnings and treasury share balances above. 9 ACQUISITIONS Following clearance by the Polish competition authorities the group completedthe purchase of 51% of the Fin group on 23 May 2007 for a consideration of £5.1million in cash. The second stage will be the purchase, by 2012 of the remaining49% for a consideration in the range £4.7 million to £14.1 million. The acquisition has been accounted for as a single transaction as, under theterms of the sale and purchase agreement, the group is entitled to the fulleconomic benefits associated with 100% ownership of the business. As the date of completion was close to the half year end the assets acquired areincluded at their carrying values which are deemed to be the provisional fairvalues at the balance sheet date. The exercise to separately identify acquiredintangible assets will be undertaken in advance of the year-end. The residual excess over the net assets acquired is recognised as goodwill inthe financial statements. Provisional fair values £'000Property, plant and equipment 1,426Inventories 4,237Receivables 3,328Payables (2,337)Taxation - current (67)Cash and cash equivalents 120Loans (2,371) Total 4,336 Net assets acquired 4,336Goodwill 5,152Consideration to be wholly satisfied in cash (including deferred 9,488consideration pre-discounting of £5.0 million) The outflow of cash and cash equivalents on the acquisition of Fin is calculatedas follows: £'000Cash consideration 5,131Expenses and related costs 260Cash acquired (120) Total 5,271 During the period the group also completed the following acquisitions: i) on 22 March the purchase of 51% of Rotate Ltd, a company based in Dublin inthe Republic of Ireland for an initial payment of €794,000. The maximum totalconsideration will be €3.0 million. ii) on 13 June the purchase of 52% of ZPV group s.r.o, a company based in theCzech Republic, for an initial payment of £0.9 million. The maximum totalconsideration will be £2.7 million. iii) on 19 June the purchase of the entire share capital of Mercia EngineeringSupplies Limited, a company based in the Midlands in the UK for an initialpayment of £0.6 million. The maximum total consideration will be £0.8 million. The results of operations for the group, as if the above acquisitions had beenmade at the beginning of the year are as follows: £'000Revenue 190,803Profit after tax 5,537 This information is not necessarily indicative of the results of operations thatwould have occurred had the acquisitions been made at the beginning of theperiod presented or the future results of the combined operations. A final review of the fair value adjustments in respect of the acquisition ofRamaekers NV was completed during the first half of the year. As a result ofthis review adjustments have been made to increase goodwill by £134,000. 10 POST BALANCE SHEET EVENT On 6 July the group announced the purchase of 51% of Boada Industrial S.A., acompany based in the Catalonia region of Spain, for an initial payment of £2.3million. The second stage will be the purchase, in 2011, of the remaining 49%for a consideration in the range £0.8 million to £2.2 million. Boada is one of the leading Catalonian specialist industrial services businessesand had net sales of £7.8 million in the year to 31 December 2006. 11 BASIS OF ACCOUNTING The interim financial statements have been prepared on the basis of theaccounting policies set out above. The interim financial statements wereapproved on 3 September 2007 by a duly appointed and authorised committee of theboard and are not audited by the auditors. 12 INTERIM ANNOUNCEMENT A copy of the interim announcement is available for inspection at the registeredoffice 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, and will be posted to shareholders. 13 INTERIM DIVIDEND Relevant dates concerning the payment of the interim dividend are Record date 5 October 2007 Payment date 2 November 2007 14 NEW STANDARDS, AMENDMENTS TO STANDARDS OR INTERPRETATIONS The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year ending 31 December 2007: • IFRIC 7, 'Applying the restatement approach under IAS 29', effective for annual periods beginning on or after 1 March 2006. This interpretation is not relevant for the group. • IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginning on or after 1 May 2006. This interpretation has not had any impact on the recognition of share-based payments in the group. • IFRIC 9, 'Reassessment of embedded derivatives', effective for annual periods beginning on or after 1 June 2006. This interpretation has not had a significant impact on the reassessment of embedded derivatives as the group assessed whether embedded derivatives should be separated using principles consistent with IFRIC 9. • IFRIC 10, 'Interims and impairment', effective for annual periods beginning on or after 1 November 2006. This interpretation has not had any impact on the timing or recognition of impairment losses as the group already accounted for such amounts using principles consistent with IFRIC 10. • IFRS 7, 'Financial instruments: Disclosures', effective for annual periods beginning on or after 1 January 2007. IAS 1, 'Amendments to capital disclosures', effective for annual periods beginning on or after 1 January 2007. IFRS 4, 'Insurance contracts', revised implementation guidance, effective when an entity adopts IFRS 7. As this interim report contains only condensed financial statements, and as there are no material financial instrument related transactions in the period, full IFRS 7 disclosures are not required at this stage. The full IFRS 7 disclosures, including the sensitivity analysis to market risk and capital disclosures required by the amendment of IAS 1, will be given in the annual financial statements. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ending 31 December2007 and have not been early adopted: • IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effective for annual periods beginning on or after 1 March 2007. Management do not expect this interpretation to have any significant impact on the group. • IFRIC 12, 'Service concession arrangements', effective for annual periods beginning on or after 1 January 2008. Management do not expect this interpretation to be relevant for the group. • IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009, subject to EU endorsement. Management are reviewing the group's geographical segments as currently reported. Management do not foresee any changes to the group's business segments. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BRAM.L