30th Mar 2006 07:00
Armour Group PLC30 March 2006 Armour Group Plc Interim Results for the six months ended 28 February 2006 CHAIRMAN'S STATEMENT RESULTS AND DIVIDEND The Group's results for the six months to 28 February 2006 have been mixed, withgood growth in Armour Home Electronics being overshadowed by a slowdown inArmour Automotive. Sales in the six months to 28 February 2006 were £18.5 million (28 February2005: £17.6 million). Operating profit before amortisation of goodwill, interestand tax was £1.7 million (28 February 2005: £2.0 million). Basic underlyingearnings per share were 2.1p (28 February 2005: 2.4p). The Board is not recommending an interim dividend. ACQUISITION On 3 February 2006, the Group acquired Alphason Designs Limited ("Alphason").Alphason is the UK's market leader in the design, manufacture and distributionof specialist furniture for audio visual entertainment equipment, which ispredominantly marketed under the Alphason brand. It has very strong andestablished distribution channels across the whole of the UK consumerelectronics market serving over 2,500 retail outlets. Taken together with ourexisting customer base, the Group will have unprecedented access into the UK'sretail consumer electronics market. Alphason will continue to be run as aseparate operating unit within the products business of the Armour HomeElectronics division. Consideration The initial consideration of £10 million was paid on completion, £9.5 million incash and £0.5 million in new ordinary shares in the Group. At completionAlphason had £3.7 million of net cash on its balance sheet, which is for thebenefit of the Group. If Alphason meets certain challenging profit targets, a deferred considerationpayment of up to £10 million will be payable, primarily in cash, twelve monthsafter completion. There will be a further £0.75 million payable in the second 12 months subject toAlphason achieving an operating profit in excess of £3 million. Placing To fund the initial consideration, 12 million new ordinary shares in the Groupwere placed at 50p per share raising £5.8 million net of expenses. OPERATIONS Armour Automotive Armour Automotive has continued to experience challenging market conditions inthe first six months. In the non-retail channel, the slowdown in the wider automotive market has beensignificant with orders deferred or scaled back which has affected sales ofAutoleads, RM Audio and Veba. However, we do expect to see some improvement inthe second half of the year with deliveries scheduled to BMW following their£400,000 order in January 2006 and further repeat business with our other OEMcustomers. We continue to pursue a number of new OEM opportunities that cover a range ofproducts from in-car radio, CD and DVD players to complex connectivity solutionsfor the navigation market. We are confident that we are well positioned tosecure such new business, the difficulty at the current time is in predictingthe timing of the customer's requirements. In the retail market our sales are in line with last year, though margins havecome under pressure. Mutant continues to perform well with further new productsfrom the range being listed with Halfords and Motorworld. There is also gooddemand for the Autoleads range of MP3 adapter leads, which enable portabledigital music players to plug directly into the in-car entertainment system, andthe Veba range of reversing sensors. Both these product ranges are sellingthrough both the retail and non-retail channels with customers ranging from thesmall independents through to large vehicle distributors, such as Arnold Clark. We have increased our investment in new product development focusing onin-vehicle connectivity solutions. The next generation of adapter leads that arebeing designed will interface with CANbus, a serial communication system that isincreasingly being incorporated into many new motor vehicles. New productsscheduled for launch in the second half of the year include new ranges ofintelligent interconnect leads for the in-car mobile phone and navigationmarkets. Armour Home Electronics Armour Home Electronics has had a good six months with like for like salesgrowth in both our domestic and export markets as well as across all the keyproduct categories. In addition, we completed the acquisition of Alphason andour services business opened its new showroom in Hampstead. Products There has been strong sales growth in the core proprietary brands of QED cables,Systemline multiroom and Soundstyle furniture. Of the third party brands, thetwo newcomers, being Universal Electronics' Nevo remote control and Audica'sspeakers, have both had an encouraging first six months. Sales of Systemline Modular, our multi-room entertainment system, haveout-performed our expectations. The adoption of the system by new home buildersas part of their build programme, either as an option or as a standard fit, isongoing. Of the top ten home builders in the UK who account for approximately45% of all new home builds, nine have now adopted Systemline Modular and offerit as their preferred multi-room entertainment system in one or more of theirregions. The home builders typically offer the system as an option with thehouse purchase, though there are an increasing number of new home builds thatare including the system as standard, particularly with the smaller regionalhome builders. There are now over 850 standard fit builds scheduled over thenext 12 months. In the first six months of the year we have launched a number of new productsincluding the new Goldring range of headphones, QED's highly successful HDMIinterconnect, the Systemline learning remote control and most recently, the QAcoustics speaker range. Our programme of product innovation and developmentcontinues apace, with three new Myryad products scheduled for launch in the next6 months as well as the Systemline Modular touchscreen keypad and music soundserver. Services Our custom install service business is performing well and in line with ourexpectations. The value of both our order book and outstanding proposals is atrecord levels and the conversion rate from proposal to order is above last year.The business extended its operations in February 2006 opening a new Hi-Endshowroom in Hampstead. The initial indications are encouraging for the newshowroom with a number of orders already placed. OUTLOOK Market conditions are challenging, particularly in our automotive business wherewe do not expect conditions to improve significantly in the near term. Our homedivision is performing well and we believe that this will continue, enhanced bythe recent acquisition of Alphason and the opportunities presented by theforthcoming football World Cup. The Group has a well balanced portfolio ofproducts, brands and target markets, with both divisions making a healthy returnon sales. This gives the Group a good platform for future growth. Bob Morton Chairman 30 March 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS TO 28 FEBRUARY 2006 ---------- ---------- ---------- Notes Six months to Re-presented* Re-presented* 28 February Six months to Twelve months to 2006 28 February 31 August (Unaudited) 2005 2005 £000 (Unaudited) (Audited) £000 £000 ---------- ---------- ----------Turnover Continuing operations 17,570 17,610 35,452Acquisitions 3 961 - - ---------- ---------- ---------- 2 18,531 17,610 35,452 ========== ========== ==========Operating profitContinuing operations 1,525 2,020 4,267Acquisitions 3 191 - - ---------- ---------- ----------Operating profitbefore amortisation ofgoodwill 1,716 2,020 4,267Amortisation ofgoodwill (451) (399) (808) ---------- ---------- ----------Profit on ordinaryactivities beforeinterest 1,265 1,621 3,459 ---------- ---------- ----------Net interest (235) (225) (470) ---------- ---------- ----------Profit on ordinaryactivities beforetaxation 1,030 1,396 2,989 Taxation on profit onordinary activities 4 (324) (534) (864) ---------- ---------- ----------Profit for thefinancial period 5 706 862 2,125 ========== ========== ========== Earnings per ordinaryshare 7Basic 1.3p 1.6p 4.0pDiluted 1.2p 1.5p 3.8p ========== ========== ========== * See Note 1 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS TO 28 FEBRUARY 2006 ---------- ---------- ---------- Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ---------- ---------- ----------Profit for the financialperiod 706 862 2,125 Currency translationdifferences on foreign - (1) (2)currency net investments ---------- ---------- ---------- Total recognised gains and lossesrelatingto the financial period 706 861 2,123 ========== ========== ========== CONSOLIDATED BALANCE SHEET AT 28 FEBRUARY 2006 ---------- ---------- ---------- Notes 28 February 28 February Restated* 2006 2005 31 August (Unaudited) (Unaudited) 2005 £000 £000 (Audited) £000 ---------- ---------- ----------Fixed assetsIntangible assets 24,741 14,742 14,533Tangible assets 2,188 1,869 1,714 ---------- ---------- ---------- 26,929 16,611 16,247 ========== ========== ========== Current assetsStocks 10,400 6,309 7,648Debtors 8,309 6,273 6,937Cash at bank and in hand 86 85 116 ---------- ---------- ---------- 18,795 12,667 14,701 ========== ========== ==========Creditors: Amounts falling duewithin one yearCreditors (12,801) (5,423) (6,882)Borrowings (2,216) (3,538) (2,553) ---------- ---------- ---------- (15,017) (8,961) (9,435) ========== ========== ==========Net current assets 3,778 3,706 5,266 ========== ========== ==========Total assets less currentliabilities 30,707 20,317 21,513 ========== ========== ==========Creditors: Amounts falling dueafter more than one yearCreditors (877) (192) (192)Borrowings (4,180) (2,777) (2,502) ---------- ---------- ---------- (5,057) (2,969) (2,694) ---------- ---------- ----------Net assets 25,650 17,348 18,819 ========== ========== ========== Capital and reservesCalled up share capital 6,841 5,374 5,482Share premium account 8,496 3,760 3,861Other reserves 871 444 444Profit and Loss Account 9,642 7,970 9,232Share trust reserve (200) (200) (200) ---------- ---------- ----------Equity shareholders' funds 5 25,650 17,348 18,819 ========== ========== ========== * See Note 1 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS TO 28 FEBRUARY 2006 ----------- ---------- ---------- Notes Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ----------- ---------- ---------- Net cash inflowfrom operatingactivities 6(a) 29 1,465 3,650 Returns on investment andservicing of financeInterest received 10 8 12Interest paid (242) (161) (395)Bank loanarrangement costs (125) (13) (13)Interest element offinance leaserentals (6) (4) (9) ----------- ---------- ----------Net cash outflow from returnson investmentand servicing offinance (363) (170) (405) Corporate taxationpaid (132) (922) (1,427) Capital expenditure andfinancial investment Payments to acquiretangible fixedassets (339) (477) (885)Sale of tangiblefixed assets 22 65 127 ----------- ---------- ----------Net cash outflowfrom capitalexpenditure (317) (412) (758)and financial investment Acquisitions and disposalsPurchase ofsubsidiaryundertakings (9,840) (3,590) (3,587)Net cash acquiredwith subsidiaryundertakings 3,659 140 142 ----------- ---------- ----------Net cash outflow fromacquisitionsand disposals (6,181) (3,450) (3,445)Dividend paid (296) (237) (237) =========== ========== ========== Net cash outflowbefore financing (7,260) (3,726) (2,622) FinancingIssue of ordinaryshare capital 5,892 70 279New bank loans 5,000 - -Repayment of bankloans (3,143) (285) (571)Capital element offinance leaserental repayments (17) (24) (35) =========== ========== ==========Net cashinflow/(outflow)from financing 7,732 (239) (327) =========== ========== ==========Net cash inflow/(outflow)after financing, beingtheincrease/(decrease)in cash in theperiod 6(b) 472 (3,965) (2,949) =========== ========== ========== NOTES TO THE FINANCIAL STATEMENTS 1. BASIS OF PREPARATION The interim financial statements have been prepared on the basis of accountingpolicies consistent with those set out in the Group's Annual Report andfinancial statements for the twelve months to 31 August 2005, except that duringthe period the Group has adopted FRS 21: Events after the Balance Sheet Date andFRS 22: Earnings per Share. Under FRS 21, dividends are only recognised in the period in which a bindingobligation for payment arises. Consequently, dividends declared after the balance sheet date are no longeraccrued but are appropriated from reserves in the period the declaration takesplace. The prior year comparative figures have been restated to reflect theadoption of FRS 21 and the effect is set out in note 5: Reconciliation ofMovement in Equity Shareholders' Funds. The Consolidated Profit and Loss Accounthas been re-presented to reflect the appropriation of dividends from equityshareholders' funds. Implementation of FRS 21 has had no effect on the Consolidated Balance Sheet asat 28 February 2005. However, the Consolidated Balance Sheet as at 31 August2005 has been restated to remove the £296,000 dividend accrual declared at theAnnual General Meeting on 9 December 2005. Consequently, at 31 August 2005,equity shareholders' funds are increased, and creditors falling due within oneyear are decreased, by £296,000 from the figures previously reported. Thisdividend of £296,000 has been appropriated from shareholders' funds during thesix month period to 28 February 2006. FRS 22 relates to the calculation of earnings per share but this has had nomaterial impact on the results. The results of the Group for the six months to 28 February 2006, and thecomparative figures for the six months to 28 February 2005, are unaudited. Thefinancial information contained herein does not constitute statutory accountswithin the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the twelve months to 31 August 2005, which wereapproved by the shareholders at the Annual General Meeting and which have beendelivered to the Registrar of Companies, carry an unqualified Auditor's Report.They do not contain a statement under Section 237(2) or 237(3) of the CompaniesAct 1985. 2. TURNOVER ----------- ----------- ----------- Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ----------- ----------- -----------Group sales by business segmentArmour Automotive 7,674 8,842 18,213Armour Home Electronics 10,857 8,768 17,239 ----------- ----------- ----------- 18,531 17,610 35,452 =========== =========== ===========Group sales by country of operationUnited Kingdom 18,348 17,416 34,984Sweden 381 324 811Inter-area eliminations (198) (130) (343) ----------- ----------- ----------- 18,531 17,610 35,452 =========== =========== ===========Group sales by country ofdestinationUnited Kingdom 15,023 13,828 27,753Rest of Europe 2,651 3,298 6,498Rest of world 857 484 1,201 ----------- ----------- ----------- 18,531 17,610 35,452 =========== =========== =========== 3. ACQUISITIONS On 3 February 2006, the Group acquired Alphason Designs Limited, the UK's brand leading specialist designer and supplier of audio visual furniture to the consumer electronics market. 4. TAXATION ON PROFIT ON ORDINARY ACTIVITIES The taxation charge for the six months to 28 February 2006 is based on theeffective taxation rate, which is estimated will apply to earnings for the fullyear. 5. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS ----------- ----------- ----------- Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ----------- ----------- -----------Profit for the financialperiod 706 862 2,125Dividend (296) (237) (237) ----------- ----------- -----------Profit for the financialperiod retained 410 625 1,888New share capitalsubscribed (net of issueexpenses) 5,892 70 279Ordinary shares issued asconsideration foracquisitions 529 - -Currency translation differences onforeigncurrency investments - (1) (2) ----------- ----------- -----------Net movement in equityshareholders' funds 6,831 694 2,165 ----------- ----------- -----------Opening equityshareholders' funds 18,819 16,417 16,417Prior year adjustment (Note1) - 237 237 ----------- ----------- -----------Opening equityshareholders' fundsrestated 18,819 16,654 16,654 =========== =========== ===========Closing equityshareholders' funds 25,650 17,348 18,819 =========== =========== =========== 6(a). RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES ----------- ----------- ----------- Six months to Six months to Twelve months to 28 February 29 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ----------- ----------- ----------- Operating profit 1,265 1,621 3,459Depreciation of tangiblefixed assets 404 379 792Amortisation of goodwill 451 399 808(Increase)/decrease instocks (1,099) 178 (1,320)Decrease in debtors 1,382 1,184 341Decrease in creditors (2,374) (2,289) (503)(Profit)/loss on disposalof tangible fixed assets - (7) 73 ----------- ----------- -----------Net cash inflow fromoperating activities 29 1,465 3,650 =========== =========== =========== 6(b). RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT ----------- ----------- ----------- Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited) £000 £000 £000 ----------- ----------- -----------Increase/(decrease) in cash 472 (3,965) (2,949)New bank loans (5,000) - -Repayment of bank loans 3,143 285 571Cash outflow from financeleases 17 24 35 ----------- ----------- -----------Change in net debtresulting from cash flows (1,368) (3,656) (2,343)New finance leases (114) (1) (2)Bank loan arrangement costs 125 13 13Bank loan arrangement costsexpensed (14) (20) (39)Exchange adjustments - - (2) ----------- ----------- -----------Movement in net debt in theperiod (1,371) (3,664) (2,373)Opening net debt (4,939) (2,566) (2,566) =========== =========== ===========Closing net debt (6,310) (6,230) (4,939) =========== =========== =========== 6(c). ANALYSIS OF NET DEBT MOVEMENT --------- -------- --------- -------- -------- 31 August Cash Other non-cash Acquisitions 28 February 2005 Flow changes £000 2006 £000 £000 £000 £000 --------- -------- --------- -------- --------Cash 116 (30) - - 86Overdraft (1,986) 502 - - (1,484) --------- -------- --------- -------- -------- (1,870) 472 - - (1,398) --------- -------- --------- -------- --------Loans: Duewithin oneyear (555) 215 (330) - (670)Loans: Dueafter morethan one year (2,502) (2,072) 441 - (4,133)Finance leases (12) 17 - (114) (109) --------- -------- --------- -------- --------Net debt (4,939) (1,368) 111 (114) (6,310) ========= ======== ========= ======== ======== 7. EARNINGS PER ORDINARY SHARE Basic earnings per share is calculated using the weighted average number ofshares in issue during the period of 55,789,760 (28 February 2005: 52,638,710and 31 August 2005: 52,981,021). Underlying earnings per share is also shown calculated by reference to earningsbefore amortisation of goodwill. The Directors consider that this informationgives a useful additional indication of underlying performance. Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited)Basic earnings perordinary £000 p £000 p £000 pshare ------- ------- ------- ------- ------- ------- Profit for the financialperiod 706 1.3 862 1.6 2,125 4.0Amortisation of goodwill 451 0.8 399 0.8 808 1.5 ------- ------- ------- ------- ------- -------Underlying earnings 1,157 2.1 1,261 2.4 2,933 5.5 ======= ======= ======= ======= ======= ======= Diluted earnings per share is calculated with reference to 57,477,692 (28February 2005: 56,037,243 and 31 August 2005: 55,747,383) ordinary shares. Six months to Six months to Twelve months to 28 February 28 February 31 August 2006 2005 2005 (Unaudited) (Unaudited) (Audited)Diluted earnings perordinary share £000 p £000 p £000 p ------- ------- ------- ------- ------- -------Profit for the financialperiod 706 1.2 862 1.5 2,125 3.8Amortisation of goodwill 451 0.8 399 0.8 808 1.5 ------- ------- ------- ------- ------- -------Underlying earnings 1,157 2.0 1,261 2.3 2,933 5.3 ======= ======= ======= ======= ======= ======= 8. COPIES OF INTERIM REPORT Copies of this interim report are being sent to shareholders and will also bemade available upon request to members of the public at the Company's RegisteredOffice, Lonsdale House, 7-9 Lonsdale Gardens, Tunbridge Wells, Kent TN1 1NU. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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