Preliminary Results

ENSOR HOLDINGS PLC - Preliminary Results

PR Newswire

London, June 9

10 June 2015

ENSOR HOLDINGS PLC

Preliminary results for the year ended 31 March 2015

CHAIRMAN’S STATEMENT

Sales up 18% to £36.1m

Operating profit up 84% to £3.4m

Earnings per share up 114% to 9.2p per share

Dividend up 27% to 1.9p per share

The Ensor Group has again made significant progress in the second half of our financial year, exceeding expectations when I reported to you at the time of our interim results. Total revenues have increased by 18% to £36.1m (2014: £30.6m) and our operating profits have increased by 84% to £3.4m (2014: £1.8m). The current year has started well and I am cautiously optimistic about the year ahead.

Technocover, our subsidiary which manufactures physical high security products for the Utilities sector has finished the year strongly. This year the company has completed large programmes of work particularly for the water industry, which is at the end of its current Asset Management Period (AMP). Nevertheless, the company carries a good forward order book into the new AMP period. We have invested substantially into new equipment on the Welshpool site, demonstrating our confidence in the business and markets that the company operates within.

Our company Ellard, which supplies electric motors, automation and accessories for doors and gates has greatly improved its position within its sector increasing its share of an expanding market. Investment into a graduate recruitment programme, new products and planned expansion of the premises occupied by Ellard, have been initiated in anticipation of continuing buoyant markets.

OSA supplies ready to install industrial sectional overhead doors, residential garage doors, rapid roll doors, steel hinged doors and repair materials to the same market as Ellard and has had a similarly progressive year. Good relationships with suppliers and customers and product advances continue to build on the solid foundations at OSA.

Our packaging and logistics consumables supplier, Wood’s Packaging has benefitted from a strong retail sector and competitive sourcing of products via our office in China. Generating robust profits supported by healthy cash flows, Wood’s continues to complement our security orientated businesses.

Ensor Building Products distributes specialist roofing and drainage products. Supplying the merchant trade and contractors, the company has seen growth in its market as the construction industry improves. Discussions have taken place with the company’s management for them to buy 100% of the shares of the business. The transaction is progressing and, if concluded, the sale should include an appropriate value for goodwill. This disposal further focuses the Group towards its physical security activities.

At the end of May this year, we completed, as anticipated, the sale of our land in the Stockport area. This realised a significant premium to the carrying value. During April this year we also sold, at a premium, our Woodville, Derbyshire site. As completion of these transactions occurred after the year end, the profit on the sales will be shown in next year’s figures. Additionally, I am able to report that we are expecting to be granted planning permission for a residential scheme at our Brackley site. This has been a long term project but we hope to report an outcome in due course.

I am pleased to again report that we are proposing to pay an increased net final dividend of 1.3p per share, making a total dividend paid and proposed of 1.9p per share for the year. This is a 27% increase on last year’s total dividends of 1.5p per share. The dividend will be paid in cash only, on 7 August 2015, to shareholders registered on 26 June 2015.The ex-dividend date will be 25 June 2015.

On 27 May 2015, we announced that we were launching a review of strategic options open to us to maximise value for shareholders including a potential sale of the Group. The process is at an early stage and further announcements will be made in due course.

Finally, I would like to once again thank everyone who works in all the different departments around our Group. Your contribution and sustained efforts are greatly appreciated and your interests are important to me. My thanks also to our shareholders, customers and suppliers for their continued support.

K A Harrison TD

Chairman

9 June 2015

 Strategic Report

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Operating results and future developments

Our Building & Security Products division experienced a strong year, with turnover almost 20% higher than the previous year. Operating profit increased by 95%, before allocation of holding company overhead. Most of the increase was contributed by Technocover, however profit growth in the division’s other businesses ranged between 40% and 108%, reflecting strong performances across the board.

As anticipated last year, Technocover benefitted from a surge in water company orders as Ofwat’s AMP5, asset management period, drew to a close in March 2015, resulting in a £4.6m rise in invoiced sales.

The gross margin was maintained and overheads were contained, meaning that the company contributed £1.1m more to the division’s result, than in the previous year. 

Although AMP5 has concluded, a carry-over of orders has resulted in an unusually strong order book to support the company’s results into the current year as the new AMP6 programme gets underway.

Within the same operating segment, Ellard also performed well, benefitting from continued growth in market share and a key supply agreement securing exclusive rights to supply certain products within the UK. The company’s turnover increased by £1m and margins held firm resulting in a 42% increase in operating profit.

OSA Door Parts, also within the Building & Security Products division, experienced another year of healthy growth in turnover and margin and a 40% increase in operating profit.

The fourth member of the same division, Ensor Building Products, saw a constructive reduction in turnover, as a continued focus on higher margin products underlay a 108% operating profit increase.

Negotiations have taken place with the company’s management in the months leading up to the date of this report to agree a sale of the business to the management, and the transaction is progressing.

Our Packaging business, Wood’s Packaging, also performed well, achieving a 21% increase in turnover and an additional £124,000 of operating profit, after allocation of holding company overhead.

Overall, sales growth of £5.6m and tight control over margins resulted in a year-on-year increase in operating profit of £1.5m for the group.

Finance costs

Finance costs comprise bank loan and overdraft interest, the financing cost on the defined benefit pension scheme and unwinding of the discount on the deferred consideration payable on the acquisition of Technocover.

We recognised a credit of £198,000 during the year in respect of an interest hedge on a bank loan, which had been the subject of a mis-selling claim. As a result of this, loan interest has reduced by the annual cost of the hedge as well as by the ongoing reduction in the outstanding balance, which is being paid in instalments up to January 2017.

The interest cost of the pension fund has reduced from £112,000 to £89,000.

The deferred consideration on the acquisition of Technocover of £1m was paid earlier than had previously been anticipated, resulting in an accelerated finance cost in the year of £22,000.

Income tax

The tax charge of £654,000 represents 19.6% of operating profit, varying from the main UK corporation tax rate of 21% principally as a result of a prior year overprovision.

Cash flow and financial position

Cashflows generated from operations before changes in working capital amounted to £3.9m. However, increases in receivables and inventories and reductions in payables eliminated much of this surplus. 

These working capital changes have been particularly influenced by:

a very strong finish to the year, reflected in the £2.6m increase in trade receivables which are not past due

investments in inventories at Ellard in relation to new products, and elsewhere to service higher sales levels

accelerated payment for foreign supplies to secure improved costs

A significant element of this increase is expected to unwind in the first half of the current year.

Operating cashflows also include contributions of £617,000 to the group’s defined benefit pension scheme. Normal contributions of £301,000 were supplemented by payments of £250,000 in respect of severing subsidiary company obligations and £66,000 in respect of liability-reducing member transfers from the scheme.

After payment of corporation tax, net cash generated from operations totalled £184,000.

The group's property at Normanton, occupied by a former subsidiary, CMS Tools Limited, was sold in September 2014 for £600,000 and other assets sales totalled £139,000.

Technocover invested significantly in its production and distribution infrastructure, and combined with other investment around the group, capital expenditure totalled £746,000.

After allowing for the advanced payment of the deferred consideration of £1m, referred to above, dividends of £479,000 and loan repayments, the group’s cash position decreased by £1.6m during the year.

Net assets have increased by 19% to £11.5m.

Disposals after the year end

On 1 April 2015, the whole of our operation at Woodville, Derbyshire, including the Waste Transfer Facility and freehold land and buildings, was disposed of for £1.8m in cash.

On 1 June 2015, the freehold property at Stockport was sold to a residential property developer for £1.3m. The property had previously been occupied by the group’s rubber crumb recycling business, which was sold in January 2014.

Both properties are classified as held-for-sale in the balance sheet.

Dividend

The directors propose to pay a final dividend of 1.3p per share in respect of the financial year ended 31 March 2015 (2014: 1.0p). Dividends of £479,000 were paid on ordinary shares during the year ended 31 March 2015 (2014: £389,000).

Consolidated Income Statement

for the year ended 31 March 2015

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Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

at 31 March 2015

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The financial statements were approved by the board and were authorised for issue on 9 June 2015. They were signed on its behalf by:

A R Harrison )

M A Chadwick )

Consolidated Statement of Changes in Equity

for the year ended 31 March 2015

Attributable to equity shareholders of the parent company

Share premium

The share premium account represents the consideration that has been received in excess of the nominal value of shares on issue of new ordinary share capital, less permitted expenses.

Revaluation reserve

The revaluation reserve represents the unrealised surplus arising on the revaluation of certain of the group’s freehold properties.

Retained earnings

The retained earnings reserve represents profits and losses retained in the current and previous periods.

Consolidated Cash Flow Statement

for the year ended 31 March 2015

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Accounting Policies and Notes to the Financial Statements

for the year ended 31 March 2015 ______________________________________________________________________________________

1. Basis of preparationThe consolidated financial statements of Ensor Holdings PLC have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS) as adopted by the European Union in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. The group financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, and derivative financial instruments at fair value through profit or loss. The principal accounting policies adopted by the group are set out below.

2. Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present:

power over the investee

exposure to variable returns from the investee, and

the ability of the investor to use its power to affect those variable returns.

Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

the size of the company’s voting rights relative to both the size and dispersion of other parties who hold voting rights

substantive potential voting rights held by the company and by other parties

other contractual arrangements

historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

3. Segmental analysis

For management purposes, the group’s business activities are organised into business units based on their products and services and have three primary operating segments as follows:

Building and Security Products – manufacture, marketing, supply and distribution of building materials, security access products and access control equipment;

Packaging – marketing and distribution of packaging materials;

These segments are the basis on which information is reported to the group board. The segment result is the measure used for the purposes of resource allocation and assessment and represents the operating profit of each segment before exceptional operating costs, amortisation and impairment charges, other gains and losses, net finance costs and taxation.

Details of the types of products and services from which each segment derives its revenues are given above.

The accounting policies applied in preparing the management information for each of the reportable segments are the same as the group’s accounting policies.

The group’s revenues and results by reportable segment for the year ended 31 March 2015 are shown in the following table. 

The group’s revenues and results by reportable segment for the year ended 31 March 2014 are shown in the following table. 

Head office costs are apportioned to the segments on the basis of earnings.

The group operates almost exclusively in one geographical segment, being the United Kingdom. Turnover to customers located outside the United Kingdom accounted for less than 10% of total group turnover and has therefore not been separately disclosed.

Revenue from a single customer did not exceed more than 10% of turnover during the current or prior reporting periods.

4. Discontinued operations

CMS Tools Limited was sold on 14 February 2014 and the operation was classified as discontinued in the prior year. 

The results of the discontinued operations were as follows:

The net assets of the subsidiary at the date of disposal were as follows:

Cash flows from discontinued operations

On 2 January 2014, the business and assets of SRC Limited were sold as a going concern. The business has not been classified as a discontinued operation because it is not considered to have been a separate major line of business.

The waste transfer facility and surrounding land and buildings at Woodville, Derbyshire, were disposed of on 1 April 2015. Again, the waste transfer facility has not been classified as a discontinued operation because it is not considered to have been a separate major line of business, and so its trade and net assets of £50,000 remain in the “other” operating segment for 2015. However the land and buildings, with a carrying value of £1,689,000, are classified as held for sale in the balance sheet. The combined operation and surrounding land and buildings realised £1,825,000.

Agreement has been reached to sell the business and assets of Ensor Building Products Limited to management following negotiations during the months leading up to the balance sheet date. The operation has not been classified as discontinued because it does not represent a major line of business.

5. Earnings per share

The calculation of earnings per share for the period is based on the profit for the period divided by the weighted average number of ordinary shares in issue, being 29,895,976 (2014: 29,963,373). 

6. Cash flow generated from operations

7. Other information

The financial information set out in this preliminary announcement of results does not constitute the company’s statutory accounts for the years ended 31 March 2015 or 31 March 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar and those for 2015 will be delivered following the company’s Annual General Meeting. The Independent Auditors have reported on these accounts. Their reports were unqualified and did not contain a statement under section 498 of the Companies Act 2006.

The Annual General Meeting of the company will be held at the company’s registered office, Ellard House, Floats Road, Manchester M23 9WB at 10.00 a.m. on Monday 20 July 2015.

The Report and Accounts will be sent to shareholders and be available from the company’s website at www.ensor.co.uk shortly. Additional copies of the Annual Report and of this statement will be available at the company’s registered office.

Enquiries:

Ensor Holdings PLCRoger Harrison/Marcus Chadwick0161 945 5953

Westhouse Securities LimitedRobert Finlay020 7601 6100