8th Feb 2007 07:01
Alumasc Group PLC08 February 2007 Thursday 8 February 2007 THE ALUMASC GROUP PLC - INTERIM ANNOUNCEMENT Alumasc (ALU.L), the premium building and engineering products group, announcesa much improved first-half trading performance in respect of the half year to 31December 2006 compared with the half year to 31 December 2005, with increasedrevenue and operating profit in both of the Group's divisions, Building Productsand Engineering Products. FINANCIAL HIGHLIGHTS • Revenue increased by 26% to £75.1m from £59.4m. • Profit before tax on continuing operations increased by 34% to £3.6m from £2.7m on a like-for-like basis (excluding the £0.2m gain on a property disposal last year). • Earnings per share on continuing operations increased by 18.6% to 7.0p from 5.9p (an increase of 34.6% excluding the prior year property disposal gain). • Interim dividend per share is increased by 3.3% to 3.1p from 3.0p, payable on 5 April 2007 to shareholders on the register at the close of business on 9 March 2007. • Dividend cover increased to 2.3 times from 2.0 times. COMMERCIAL HIGHLIGHTS • The main drivers of first-half profitable growth were: - increased customer demand for specialist construction products, namely GATICaccess covers and Slotdrain products;- focus on non-automotive diesel engine component supply at Alumasc Precision;and- a near trebling in worldwide zinc prices benefiting Brock Metal. • Alumasc's Building Products division increased revenue by 2.9% to£26.7m and grew operating profit by 2.4% to £2.6m, representing approximately36% of group revenue and 63% of group operating profit. Revenue and profitgrowth were constrained by a lower level of building refurbishment work,particularly in the social housing sector, although there were good performancesin Construction Products and in other niche businesses. • In Engineering Products, Precision Components grew first-half revenuefrom continuing operations by almost 30% to over £16.5m. Operating profit fromcontinuing operations increased by more than 40% to £0.9m, further evidence ofthe strong recovery in this business since the loss of MG Rover in 2005. • Also in Engineering Products, Industrial Products reported a growth inrevenue of £11.2m to £31.9m with first-half operating profit increasing to £0.6mfrom £0.1m, driven by an exceptional half year performance from Brock Metal, aproducer of zinc and aluminium alloys. John McCall, Chairman, stated: "As has been the case in recent years, the Board expects that there will be aseasonal bias in favour of the Group's second-half results although, after thisyear's stronger first half, the bias is unlikely to be as marked as last year.We expect that second-half year trading conditions will be broadly similar tothose in the first half and therefore the Board is optimistic that Alumasc willreport another good full year result, particularly if the early signs of arecovery in social housing spend translate into higher activity levels as theyear progresses. The Group continues actively to seek acquisitions for its Building ProductsDivision" Presentation: Today, from 09:30am to 10:30am, a presentation to broker's analysts and privateclient investment advisers will be held at the offices of KBC Peel Hunt, 111 OldBroad Street, London EC2N 1PH. Enquiries: The Alumasc Group plc 01536 383844Paul Hooper (Chief Executive) [email protected] Magson (Finance Director) Bankside Consultants LimitedCharles Ponsonby 020 7367 8851 [email protected] CHAIRMAN'S STATEMENT Overview Alumasc's first-half trading performance was much improved, with Group revenueup by 26% to £75.1 million and profit before tax on continuing operations up byover 34% to £3.6 million on a like-for-like basis (excluding the gain on aproperty disposal last year). Revenue and operating profit both increasedcompared with the prior period in each of the Group's divisions, BuildingProducts and Engineering Products. The main drivers of this profitable growthwere increased customer demand for Alumasc's specialist construction products,further success in the focus on non-automotive diesel engine component supply atAlumasc Precision and a near trebling in worldwide zinc prices benefiting BrockMetal. First-half earnings per share from continuing activities increased by 18.6% (or34.6% excluding the prior year property gain) to 7.0p. In the absence of anydiscontinued operations in the first half of this year, overall Group earningsper share increased substantially from 2.8p to 7.0p. At the interim stage last year, the Group dividend was maintained at 3.0p pershare, despite a 26% reduction in interim trading profit following the loss ofMG Rover, Alumasc Precision's major customer, in 2005. As a consequence, interimdividend cover reduced to 2.0 times continuing earnings. Following the recoveryin profitability in the first half of this year, the Board has declared a 3.3%increase in the interim dividend from 3.0p per share to 3.1p per share, covered2.3 times by earnings. Building Products Alumasc's Building Products division increased revenue by 2.9% to £26.7 millionand grew operating profit by 2.4% to £2.6 million, representing approximately36% of Group revenue and 63% of Group operating profit. First-half divisionalreturn on sales was maintained at 9.8%. Divisional revenue and profit growthwere constrained by a lower general level of building refurbishment work,particularly in the social housing sector where there were delays in funds beingreleased by local authorities and housing associations under the Decent HomesInitiative, leading to lower sales of MR facade and Pendock casing products. Revenue rose by over 30% across Alumasc's Construction Products businesses, withstrong demand experienced by Elkington Gatic for both specialist access coversand Slotdrain products. An increasing proportion of sales is now being madeoverseas. Within Alumasc Exterior Building Products (AEBP), sales of specialistwaterproofing systems and green roof products grew by over 15%, and revenue fromrainwater and drainage products grew by nearly 5%. The metal roofing businesshad a quieter first half, following lower sales to the major Fjaardal project inIceland, which was substantially complete at the end of the last financial year.Both the MR facades business within AEBP and Alumasc Interior Building Products(AIBP) more generally suffered from the lower public housing refurbishmentactivity described above, leading to a reduction of 20% in the combined revenueof these businesses. Both have responded with cost reduction initiatives,including improved sourcing arrangements and lowering overhead costs. Roof-Pro, a provider of modern support systems that elevate building servicessuch as air-conditioning and cooling units above the waterproofing layer on flatroofs thereby enabling lower maintenance and refurbishment costs, experiencedimproving activity levels as the first half progressed whilst strengthening itssales team during the period. Timloc had a good first half with revenue 12%ahead driven by growth in demand for cavity trays and roof and wall ventilationproducts, which are used in new homes. Engineering Products Precision Components First-half revenue from continuing operations grew by almost 30% at AlumascPrecision to over £16.5 million, further evidence of the strong recovery in thisbusiness since the loss of MG Rover in 2005. Operating profit from continuingoperations increased by more than 40% to £0.9 million, with operating marginsimproving from 5.0% to 5.6%. Of the revenue growth, approximately one-third wasattributable to the recovery of increased metal input costs (principallyaluminium) from customers through increased selling prices. Management isfocused on improving the efficiency of the manufacturing processes as many ofthe new customer projects won over the last eighteen months become more mature,and also sourcing bought-in components and materials more economically wherepossible. There have been particular successes in increasing sales of precisioncomponents to non-automotive diesel engine manufacturers such as Caterpillar,Perkins, Deutz and JCB with around two-thirds of sales now to the non-automotivesector and ongoing automotive sales focused on premium brand manufacturers suchas Aston Martin and BMW. Industrial Products Alumasc's Industrial Products businesses reported a growth in revenue of £11.2million to £31.9 million with first-half operating profit increasing to £0.6million from £0.1 million driven by an exceptional half-year performance fromBrock Metal, a producer of zinc and aluminium alloys. Some £10.0 million of therevenue growth was attributable to recovery of increased zinc costs following anear trebling of average year-on-year zinc prices caused by a worldwide shortagein supply. Brock has managed the tight zinc supply situation well by focusing onprovision of quality service to core, long-standing customers. While theincreased profitability is welcome, increased zinc prices have also led tohigher working capital requirements, and a higher concentration of customercredit risk, both of which are being managed carefully. Worldwide spot zincprices have now fallen from their peak in the Autumn, but remain significantlyabove prior year levels. Alumasc's other Industrial Products business, Alumasc Dispense, a supplier tothe brewing industry, experienced weak first-half demand due to a down-turn inbrewers' capital spend on point-of-sale dispense equipment. Finance The Group's net borrowings rose in the period from £3.4 million to £5.9 million,driven by the impact on working capital of the substantial increase in revenueat Brock Metal described above and the Group's normal working capital cycle,including the payment of last year's final dividend. Management continues tofocus on tight working capital control and efficient conversion of profit intocash. Following last year's higher full year capital investment spend of £5.3 million,capital expenditure requirements were lower in this year's first half, at just£1.7 million. Annualised first-half post tax return on average capital invested improved from10.1% to 12.4%, well ahead of Alumasc's estimated cost of capital, driven by theincreased level of profitability. The Group is also taking steps to dispose ofsurplus property wherever possible to reduce overall capital invested, whilebenefiting from utilisation of tax losses brought forward. Outlook As has been the case in recent years, the Board expects that there will be aseasonal bias in favour of the Group's second-half results although, after thisyear's stronger first half, the bias is unlikely to be as marked as last year.We expect that second-half year trading conditions will be broadly similar tothose in the first half and therefore the Board is optimistic that Alumasc willreport another good full year result, particularly if the early signs of arecovery in social housing spend translate into higher activity levels as theyear progresses. The Group continues actively to seek acquisitions for its Building Productsdivision. John McCallChairman 8 February 2007 UNAUDITED CONSOLIDATED INCOME STATEMENT for the half year to 31 December 2006 Half year Year ended 31 December 30 June 2006 2005 2006 Notes £'000 £'000 £'000Continuing operations Revenue 2 75,058 59,380 132,706Cost of sales (59,158) (44,898) (99,757)Gross profit 15,900 14,482 32,949Net operating expenses (11,777) (11,196) (23,979)Trading profit 2 4,123 3,286 8,970Profit on disposal of property 242 242Operating profit 4,123 3,528 9,212 Finance revenue 14 17 22Finance costs (335) (252) (568)Other finance expense - pensions (200) (398) (786)Share of post tax profit in associates 2 - 30 23 Profit before taxation 3,602 2,925 7,903Income tax expense 4 (1,124) (844) (2,408)Profit for the period from continuing 2,478 2,081 5,495operations Discontinued operations Loss for the period from discontinued 3 - (1,103) (1,551)operations Profit for the period 2,478 978 3,944 Profit for the period attributable to:Equity holders of the parent 2,455 978 3,928Minority interest 23 - 16 2,478 978 3,944 Pence Pence PenceBasic earnings per share- continuing operations 7.0 5.9 15.5- discontinued operations - (3.1) (4.4) 6 7.0 2.8 11.1 Diluted earnings per share- continuing operations 6.9 5.9 15.5- discontinued operations - (3.1) (4.4) 6 6.9 2.8 11.1 UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the half year to 31 December 2006 Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 As restated £'000 £'000 £'000 Income and expense recognised directlyin equity Actuarial (loss)/ gain on defined (1,900) (3,249) 3,784benefit pensions Movement in cash flow hedging position 7 (37) 1 Tax on items taken directly to or 569 727 (1,135)transferred from equity Net (expense)/ income recognised directly in (1,324) (2,559) 2,650equityfor the periodProfit for the period 2,478 978 3,944 Total recognised income/ (expense) for the 1,154 (1,581) 6,594period Attributable to:Equity holders of the parent 1,131 (1,581) 6,578Minority interest 23 - 16 1,154 (1,581) 6,594 UNAUDITED CONSOLIDATED BALANCE SHEET at 31 December 2006 31 December 31 December 30 June 2006 2005 2006 As restated Notes £'000 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 24,525 27,029 25,407Goodwill 5,556 5,556 5,556Other intangible assets 435 334 563Investments in associates - 280 -Financial assets 34 17 34Deferred tax assets 7,570 9,600 7,292 38,120 42,816 38,852Current assetsInventories 13,823 13,371 14,626Trade and other receivables 29,612 25,037 31,744Cash and short term deposits - - 167Derivative financial assets 295 564 1,346 43,730 38,972 47,883Non-current assets classified as held for 2,377 - 1,618saleTotal assets 84,227 81,788 88,353LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings - (288) -Employee benefits payable (22,232) (29,329) (21,283)Provisions (344) (1,342) (430)Deferred tax liabilities (1,320) (1,236) (1,245) (23,896) (32,195) (22,958)Current liabilitiesBank overdraft (5,650) (3,694) (2,817)Interest bearing loans and borrowings (289) (855) (722)Employee benefits payable (3,000) (2,670) (3,024)Trade and other payables (26,136) (24,292) (31,684)Provisions (812) - (962)Income tax payable (879) (257) (534)Derivative financial liabilities (288) (601) (1,333) (37,054) (32,369) (41,076)Total liabilities (60,950) (64,564) (64,034) Net assets 23,277 17,224 24,319EquityCalled up share capital 4,412 4,412 4,412Share premium 27,406 27,406 27,406Other reserve 1,401 1,551 1,401Capital redemption reserve 693 693 693Capital reserve - own shares (133) (133) (133)Hedging reserve 8 (37) 1Retained earnings (10,567) (16,696) (9,495)Equity attributable to equity holders of 23,220 17,196 24,285the parentMinority interest 57 28 34Total equity 8 23,277 17,224 24,319 CONSOLIDATED CASH FLOW STATEMENT for the half year ended 31 December 2006 Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 Notes £'000 £'000 £'000Operating activitiesOperating profit from continuing 4,123 3,528 9,212operationsAdjustments for:Loss before taxation from discontinued - (1,441) (2,225)operationsDepreciation 1,635 1,620 3,302Gain on disposal of property, plant and (17) (244) (297)equipmentGain on sale of investments (32) (79) (78)Decrease/ (increase) in inventories 803 (1,347) (2,602)Decrease/ (increase) in receivables 2,138 5,017 (1,559)(Decrease)/ increase in trade and other (5,526) (2,039) 5,332payablesMovement in provisions (236) (41) 9Movement in retirement benefit (1,175) (1,224) (2,272)obligations Cash generated from operations 1,713 3,750 8,822Tax paid (413) (768) (1,264) Net cash inflow from operating activities 1,300 2,982 7,558 Investing activitiesPurchase of property, plant and equipment (1,635) (3,302) (4,953)Payments to acquire intangible fixed (34) - (390)assetsProceeds from sale of property, plant and 29 789 1,108equipmentAcquisition of subsidiary undertakings - (50) (50)net of cash acquiredProceeds from sale of business activities - 225 201Proceeds from sale of investments 305 281 281 Net cash outflow from investing (1,335) (2,057) (3,803)activities Financing activitiesNet interest paid (321) (235) (546)Equity dividends paid (2,218) (2,216) (3,271)Repayment of amounts borrowed 7 (433) (410) (831)Proceeds from issue of share capital - 22 22 Net cash outflow from financing (2,972) (2,839) (4,626)activities Net decrease in cash and cash equivalents 7 (3,007) (1,914) (871) Cash and cash equivalents at beginning of (2,650) (1,780) (1,780)periodEffect of foreign exchange rate changes 7 - 1 Cash and cash equivalents at end of (5,650) (3,694) (2,650)period NOTES ON THE UNAUDITED ACCOUNTS for the half year to 31 December 2006 1. Basis of preparation The interim consolidated accounts of The Alumasc Group plc and its subsidiarieshave been prepared on the basis of International Financial Reporting Standards(IFRS), as adopted by the European Union, that are effective at 31 December2006. The interim consolidated accounts have been prepared using the accountingpolicies set out in the statutory accounts for the financial year to 30 June2006. The Group has not applied IAS 34: 'Interim Financial Reporting' which isnot mandatory for UK groups. The interim consolidated accounts include comparative figures for the financialyear ended 30 June 2006 which are an extract from the Group's statutory accountsfor that financial year. Those accounts have been reported on by the Company'sauditors and delivered to the Registrar of Companies. The report of the auditorswas unqualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. The relevant comparative financial information for the interim period to 31December 2005, which was unaudited, has been restated to reflect areclassification in the balance sheet of the fair value of forward metal pricecontracts from equity to financial liabilities following further analysis ofthese contracts at the year end. The impact is to decrease net assets andincrease financial liabilities at 31 December 2005 by £0.6 million. The interim accounts for the half year ended 31 December 2006 are not statutoryaccounts; they have been neither audited nor reviewed by the Group's auditors. 2. Analysis of revenue and trading profit including associates Half year Half year 31 December 2006 31 December 2005 Total Total Continuing activities Revenue Profit Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 £'000 £'000 Building Products 26,651 2,602 25,898 2,541 25,898 2,541 Engineering Products- Precision Components 16,540 928 14,163 (796) 12,783 645- Industrial Products 31,867 593 20,699 130 20,699 130 75,058 4,123 60,760 1,875 59,380 3,316 2. Analysis of revenue and trading profit including associates (continued) Year 30 June 2006 Total Continuing activities Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 Building Products 55,529 6,455 55,529 6,455 Engineering Products- Precision Components 30,245 (234) 28,587 1,991- Industrial Products 48,590 547 48,590 547 134,364 6,768 132,706 8,993 3. Discontinued operationsDiscontinued operations in the prior periods comprise the closure of CopalCasting, a gravity aluminium diecasting manufacturer. The loss on closurecomprises redundancy and other closure costs. Production ceased by the end ofFebruary 2006 and plant and equipment was either sold externally or transferredto other Alumasc Precision businesses. The results of the discontinued operations that have been included in theconsolidated income statement of the prior periods are as follows: Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Revenue - 1,380 1,658Cost of sales - (1,995) (2,695)Gross profit - (615) (1,037)Net operating expenses - - (1,188)Loss before tax - (1,441) (2,225)Income tax expense - 338 674Loss after taxation - (1,103) (1,551) The net cash flows attributable to discontinued operations are asfollows: Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Operating cash flows (202) (1,193) (1,675)Investing cash flows - (10) 241Net cash outflow (202) (1,203) (1,434) The cash flows relating to discontinued activities in the six months to 31December 2006 all related to items that were provided for in the prior yearfinancial statements. Therefore there is no impact on the current half yearincome statement. 4. Taxation Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Current tax - UK Corporationtax - continuing operations 758 735 1,809 - discontinued operations - (415) (674) 758 320 1,135Amounts overprovided in previous years - - (41)Total current tax 758 320 1,094 Deferred tax - continuing operations 366 109 676 - discontinued operations - 77 - 366 186 676Amounts overprovided in previous years - - (36)Total deferred 366 186 640tax Tax charge in the income statement 1,124 506 1,734 The tax charge in the income statement is disclosed as follows: Income tax expense on continuing 1,124 844 2,408operationsIncome tax credit on discontinued - (338) (674)operations 1,124 506 1,734 5. DividendsThe directors approved an interim dividend per share of 3.1p (2005: 3.0p) whichwill be paid on 5 April 2007 to shareholders on the register at the close ofbusiness on 9 March 2007. In accordance with IFRS accounting requirements, asthe dividend was approved after the balance sheet date, it has not been accruedin the interim consolidated financial statements. 6. Earnings per shareBasic earnings per share is calculated by dividing the net profit for the periodattributable to ordinary equity shareholders of the parent by the weightedaverage number of ordinary shares in issue during the period. Diluted earnings per share is calculated by dividing the net profit attributableto ordinary equity shareholders of the parent by the weighted average number ofordinary shares in issue during the period, after allowing for the exercise ofoutstanding share options. The underlying earnings per share figure is based on profit adjusted for gainsor losses on disposal of property and on the same weighted average number ofshares used in the basic earnings per share calculation above. The following sets out the income and share data used in the basic, diluted andunderlying earnings per share calculations: Half year Half year Year 31 December 2006 31 December 2005 30 June 2006 Effect on EPS Effect on EPS Effect on EPS £'000 pence £'000 pence £'000 pence Total net profitattributable to equityholders of the parent 2,455 7.0 978 2.8 3,928 11.1Loss attributable toequity holders ofthe parent - discontinued operations - - 1,103 3.1 1,551 4.4 Net profit attributable toequity holdersof the parent - continuing operations 2,455 7.0 2,081 5.9 5,479 15.5 Less: Profit on property disposal netof tax - - (242) (0.7) (242) (0.7)Underlying earnings and EPS 2,455 7.0 1,839 5.2 5,237 14.8 31 December 31 December 30 June 2006 2005 2006 Restated 000's 000's 000's Basic weighted average number of 35,293 35,288 35,291sharesDilutive potential ordinary shares - 66 140 59employee share optionsDiluted weighted average number of 35,359 35,428 35,350shares The basic weighted average number of shares for the prior period to 31 December 2005has been revised from 35,483,000 to 35,288,000. The resulting comparative basicearnings per share remains unchanged but the diluted earnings per share increases by0.1p. 7. Reconciliation of net cash flow to movement in net (debt)/ cash Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Decrease in cash and cash equivalents in (3,007) (1,914) (871)the periodRepayment of net debt 433 410 831Change in net debt from cash flows in the (2,574) (1,504) (40)periodEffect of foreign exchange rate changes 7 0 1Net (debt)/ cash and cash equivalents at (3,372) (3,333) (3,333)start of periodNet (debt)/ cash and cash equivalents at (5,939) (4,837) (3,372)end of period 8. Reconciliation of Changes in Total EquityFor the half year to 31 December 2006 31 December 31 December 30 June 2006 2005 2006 As restated £'000 £'000 £'000 At beginning of period 24,319 21,002 21,002Shares issued - 22 22Net gains/ (losses) on cash flow hedges 7 (37) 1Actuarial (loss)/ gain on definedbenefitpensions net of tax (1,331) (2,522) 2,649Dividends (2,218) (2,219) (3,281)Profit for the period 2,478 978 3,944Share based payments 22 - (18) At end of period 23,277 17,224 24,319 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Alumasc Group