25th Feb 2008 07:01
Brammer PLC25 February 2008 25 February 2008 PRELIMINARY RESULTS Continued strong Growth in sales and profits Dividend up 20% Brammer, the market leading industrial services group today announces itsresults for the year ended 31 December 2007, under IFRS. Brammer's goal is to supply its customers with a consistent quality of productand service, across the entire bearings, power transmission and fluid powerproduct range, anywhere in Europe. Brammer presently operates in 325 locationsin 15 countries. FINANCIAL SUMMARY 2007 2006 £m £m Change Revenue £379.6m £314.3m +20.8% Profit before tax on ordinary activities (before amortisation and £15.4m £12.0m +28.3%exceptional item) Amortisation of acquired intangibles £(0.5)m £(0.2)m Exceptional non cash pension curtailment £0.0m £2.8m Profit before tax £14.9m £14.6m +2.1% Net debt £59.4m £54.2m Dividend 7.2p 6.0p +20% Earnings per share - total Basic 20.4p 20.4p Diluted 20.1p 20.3p Earnings per share - on profit before amortisation and exceptionalitem Basic 21.0p 16.6p +26.5% Diluted 20.8p 16.6p Highlights • Strong growth driven by improving performance and successfulacquisitions both in continental Europe and in the UK. No signs of slowdown inour markets. • Significant market share gains. • Overall organic growth in sales per working day of 13.6%, at constantexchange rates, significantly exceeded expectations. • Key Account sales grew by 26%, now representing 29% of total revenues,with important new key account wins across the Group. • Operating margins, before amortisation and exceptional item, improvedfrom 4.8% to 5.2% with underlying operating profit increasing by 31.8% to £19.9million (2006: £15.1 million). • Six acquisitions were completed during the year for a totalconsideration of £15.2 million including acquired debt, contributing£20.1million of sales to total revenues in 2007. All acquisitions meetingexpectations and being successfully integrated. • Net borrowings increased from £54.2 million to £59.4 million,reflecting acquisition costs, increased working capital driven by sales growthand a currency exchange effect of £5.2 million. At constant currency, net debtremained unchanged. • The acquisitions were funded by a successful share placing in April2007 which raised a net £15.3 million. David Dunn, chairman, said: "We continue to implement successfully our very clear and consistent strategy.That success can be seen in our sales and profitability growth, improvingefficiencies and capabilities, and in the opportunities now open to us. For2008 we anticipate further good progress across these areas. Reflecting theBoard's confidence in our prospects, we have recommended a 20% increase in thedividend." Enquiries: Brammer plc 020 7638 9571 (8.00am - 1.00pm) 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 PRELIMINARY RESULTS Chairman's Statement Summary 2007 was an outstanding year of progress and growth for Brammer. Sales grew by20.8% to £379.6 million, profit before tax on ordinary activities beforeamortisation and exceptional item increased by 28.3% to £15.4 million, and basicearnings per share, on profit before amortisation and exceptional item, improvedby 26.5% to 21.0 pence. These results were achieved through a combination oforganic and acquisitive growth, and reinforce the clear and consistent strategybeing pursued by the group. Trading Performance Of the £65m increase in sales £20m came from acquisitions and £45m from organicgrowth. Key Accounts were again an important factor and in 2007 these grew by26% compared to the 14.5% increase in 2006. Importantly, there continues to beexcellent momentum in key accounts as we enter 2008. As our scale and Europeanfootprint increases this area of growth will remain a key focus of our drive forgreater market share. The high growth rates achieved do nevertheless come with significant challengesto management. Our people have coped well with increasing pressures on systems,costs, and working capital as the successful drive for sales and market sharecontinues apace. Gross margins, notwithstanding changes in sales and productmix, at 30.4% were broadly in line with last year. The operating margin(operating profit, before amortisation and exceptional item, to sales) increasedto 5.2% compared to 4.8% in 2006, continuing the rising trend of recent years. Working capital days were similar to the levels of a year ago although theabsolute levels of working capital were significantly higher reflecting thesales growth. At the year end the reported net debt was £59.4 million comparedto £54.2 million last year. The placing of shares made with institutionalinvestors in April 2007 raised net funds of £15.3 million. As forecast at thetime, this amount was expended during the year on acquisitions. With theincreased cashflow from the improved operating result, the group's overall cashflow was broadly neutral. The £5.2 million increase in net debt resulted fromthe exchange impact of the recent strengthening in the euro as the group'sborrowings are principally denominated in euros. During the latter part of theyear the opportunity was taken to increase borrowing facilities on satisfactoryterms and Brammer now has approximately £120m of total committed facilitiesproviding headroom to fund further expansion. Strategy and Acquisitions The consistency of our strategy has been clear for a number of years; nothinghas changed nor is it intended to change. Strategy is regularly reviewed by theBoard but we believe the initiatives put in place some four years ago aredemonstrably bearing fruit, and the clear intention is to continue with more ofthe same. There are still many opportunities identified in our strategic planwhich will, when completed, benefit the group in the future. In recent times we have stepped up the acquisition programme and have identifiedmany prospects in the hugely fragmented European market in which we trade. In2007, six new businesses were acquired in Poland, Spain, France, Ireland, theCzech Republic and the UK for an aggregate consideration of £15.2 million(including net debt acquired). On a fully annualised basis these will add some£45m to Brammer's sales and will open up considerable synergies and marketingopportunities. There are very clear guidelines being followed on acquisitioncriteria and to date we are delighted with the 'fit' and benefits flow to thegroup. We intend to continue looking for further earnings and market enhancingbusinesses within Europe to add to our growing presence. People There have been no changes to the Board during 2007. We have continued todevelop our HR capability with a large variety of training and educationalmethods. I believe we have a first class management team in place and a skilledand committed workforce. I thank all of them for their efforts on behalf of thegroup in 2007 and congratulate them on their achievements. Dividend The final dividend recommended by the Board is 5.1p (2006 4.2p). This gives atotal of 7.2p for the year (2006 6.0p) which is an increase of 20.0%. The finaldividend will be payable on 4 July 2008 to shareholders on the register at theclose of business on 6 June 2008. Prospects We continue to implement successfully our very clear and consistent strategy.That success can be seen in our sales and profitability growth, improvingefficiencies and capabilities, and in the opportunities now open to us. For2008 we anticipate further good progress across these areas. David Dunn CHIEF EXECUTIVE'S REVIEW Overview During 2007 we made good progress in increasing Brammer's sales throughoutEurope, as we continued to be the leader in the consolidation of our chosenmarket. Our strategy remains unchanged and continues to produce positiveresults. We have now established Brammer as a common brand across Europe, andthe concept of "One Brammer" has become a reality - a business which can offerconsistent products and services in each of our 325 locations in 15 countries.Our scale, geographic coverage, and focus as a technical specialist on a corerange of products differentiates us from our competitors and drives oursuccessful European Key Account business. Our ultimate aim is to be thesupplier of choice for those customers wanting a consistent quality of productand service, across the entire bearings, power transmission and fluid powerproduct range, anywhere in Europe. Operational Review Brammer is the leading European supplier of technical components and relatedservices to the maintenance, repair and operations ("MRO") markets. In 2007revenue increased by 20.8% to £379.6 million (2006: £314.3 million), whilstoperating profit before amortisation and exceptional item increased by 31.8% to£19.9 million (2006: £15.1 million). Earnings per share (before amortisationand exceptional item) increased by 26.5% to 21.0 pence per share (2006: 16.6pence per share). Cash generated from operations increased by 40.0% to £16.7million, despite the high growth rate and associated working capitalrequirements. Sales and profits in our UK business increased significantly andhaving experienced difficulties in France in 2006 we have since returned to goodgrowth in sales and profits. Operating margin (operating profit before amortisation and exceptional item)improved from 4.8% to 5.2% benefiting from an increase in scale and continuedcost control. Revenues per head increased by 6% to £170,000 indicating a furtherimprovement in productivity. Summary table External Revenue Operating Profit* Organic SPWD Growth 2007 2006 2007 2006 2007 2006 £m £m £m £m % % UK 123.1 109.1 2.5 1.5 12.5% 6.1% Germany 96.2 82.1 7.2 6.0 17.4% 10.6% France 58.4 53.6 2.7 2.4 8.6% 1.9% Spain 34.0 28.2 3.3 2.7 6.7% 4.8% Benelux 35.0 27.0 2.6 2.0 25.7% 13.4% Other 32.9 14.3 1.6 0.5 15.5% 14.7% Total 379.6 314.3 19.9 15.1 13.6% 9.6% * operating profit before amortisation and exceptional item. In the UK, sales of £123.1 million represented an increase, on a sales perworking day basis ("SPWD"), of 12.5 % at constant exchange rates, which is thebasis used throughout this review, and produced an increase of £1 million inoperating profit, up 65% to £2.5 million. Growth was double digit in all 4quarters, despite a fairly flat market, showing clear evidence of significantmarket share gains. We opened 13 new Insites and increased sales throughInsites and part-time Insites (those locations where we have several regularclinics with the customer's staff each week) by 33.3%. New contracts were wonwith customers such as Hanson Building Products, Kronospan Ltd, Lafarge, TiniusOlsen, Mars UK, and Anglian Water Services. Key Account sales grew by 24.9%,and now represent 47% of sales. Our value proposition has been clearlydemonstrated with more than £15.1 million of documented, signed off cost savingsacknowledged by our customers. We established a new Insite for Alcoa at theirnew smelting plant in Iceland, placing 8 Brammer UK staff on site to support thecustomer. Mercia Engineering Supplies, acquired in June, has been successfullyintegrated. We opened a "Centre of Excellence" at our National DistributionCentre in Wolverhampton, creating a highly professional training and productdemonstration facility of over 600 square metres, showcasing the Brammercapability for our customers, suppliers and staff. Aware of our environmentalresponsibilities, over the last two years, we reduced in the UK the amount ofwaste sent to landfill by 56%, increased cardboard recycling by over 400%, andincreased wood sent for recycling by 55%. In a burgeoning market, German sales of £96.2 million represented an increase inSPWD of 17.4%, which resulted in a 19.5% increase in operating profit to £7.2million. Our earlier investments in Key Accounts continued to bear fruit, withsignificant revenue growth in this segment, up 40%, and now representing nearly25% of total revenues. We won new contracts with customers such as RWE, SULO,Henkel, Alcan, Setech and many others. Our quality of service was recognised byRobert Bosch where we gained their European supplier of the year award, thefirst ever given to an indirect material supplier. We saw continued good growthin pneumatics, a new product line in 2006, up 52%, whilst the mechanical powertransmission ("MPT") product group grew by 20%. We established a team of 10technical sales and support engineers to grow our MPT business and expectfurther significant progress in 2008. Our 5 Insites performed well, with salesgrowth of 84%. We focused on the market segments of Food and Drink, Paper andPackaging, and Building Materials; 44 customer events were held across Germanyaddressing 660 MRO specialists from those segments. French sales of £58.4 million represented an increase in SPWD of 8.6%,accelerating throughout the year. Operating profit improved by 10% to £2.7million. Key Account sales growth accelerated throughout the year, growing by9.4%, and now representing 26% of turnover (38% including automotive). Newcontracts were won with Arjowiggins, Legrand, Aoste, KP1, Panavi, Pasquier, andSodiaal. In December we completed the acquisition of Centre Roulement, a £3.3million (€4.5 million) turnover business based in Clermont Ferrand. Spanish sales of £34.0 million represented an increase in SPWD of 6.7%.Operating profit grew by 21.5% to £3.3 million. Key Accounts grew by 12.9%, andnow represent 20% of sales. We opened 5 new Insites and won new contracts withTRW, Sara Lee, Ahlstrom, Helios, Precon, Cerabrick, and many others. In July wecompleted the acquisition of Boada in Catalonia for an initial consideration of£2.3 million, and are now the clear market leader in this important region ofSpain. Benelux sales of £35.0 million represented an increase in SPWD of 25.7%,accompanied by an increase of £0.6 million in operating profit to £2.6 million.We won new contracts with Thyssen Krupp, MBI, Dupont, ACG-Glaverbel and manyothers. We opened new branches in Luxembourg and Eindhoven, and developedrelationships with many new suppliers. In Poland, on a like for like basis, sales were up 8.0%, and we began theintegration of Fin into the Brammer group. We formed a new Key Account team andhad several successes with European Key Accounts. Several new Brammer supplierswere introduced, and we began to roll out the Brammer approach of segment basedmarketing. In our Developing Businesses (comprising Austria, Hungary, the Czech Republic,Slovakia, Italy and Ireland), total sales grew from £14.3 million to £20.3million, reflecting the pull through from Key Accounts, acquisitions, and goodorganic growth. In Austria, we achieved 7.3% growth on last year, as wedivested some low margin OEM (Original Equipment Manufacturers) business; MRO(Maintenance, Repair and Operations) sales grew by 19.6%. In the Czech Republicand Slovakia, SPWD increased by 16.4%, driven by Key Account growth of 56%. InHungary, SPWD growth was 17%, driven by Key Account growth and the introductionof several new product lines. Our sales in Italy grew by 26% as we gainedfurther penetration at our pan European Key Accounts. Our acquisition of Rotatein Ireland proceeded to plan, and we are already enjoying significant salesgrowth from Brammer Key Accounts, and new supplier introductions. Strategy Our strategy remains unchanged under the headings of growth, capabilities,synergies and costs. Growth Overall SPWD growth was 20.2%, with organic growth representing 13.6%,significantly above our target of 8%. It is evident that our strategies ofattacking market segments with focussed marketing material and specialist salespeople, growth through Key Accounts, the development of Insites, and growththrough cross-selling and product range extension are contributing tosignificant market share gains in all territories. We continued to focus on a market segmentation approach, increasing ourknowledge of customers' processes and selling to their specific needs.Throughout 2007 we saw some good results: • Overall, we saw growth of €19.6 million or 20.6% in our fourtargeted segments • In Food and Drink we grew across the group by nearly €5 million, or12.8%. • In Germany where we focused on Pulp and Paper we saw an increase ofover €1 million or 22.7%. • In Construction and Aggregates, a strong focus area for many of ourbusinesses, we saw excellent growth of 45.4% overall amounting to €11.4 million,with the UK growing by 83% off an already significant base, the Czech Republicgrowing by 62.5% and France growing by 24%. • In Utilities, a relativity new segment for many of our businesses,there was growth of 32%, helped by €1.4 million of growth in the UK. Key Account sales grew by 26%, and now represent 29% of total sales, slightlylower than that reported in the first half due to additional acquisitive growthwhere Key Accounts typically represent a smaller proportion of sales. NewEuropean contracts were won with Sara Lee, TRW, Alcan, Ahlstrom, Continental,Setech, and Bonduelle. We opened over 20 new Insites, with growth well in excess of 20% in several ofour territories. Extending the product range to the full Brammer range in every territorycontinued, and whilst bearing sales grew by 7.8% on a SPWD basis, non bearingsales grew by 17.3%. We had a busy year on acquisitions, welcoming 6 new companies to the Brammerfamily in Poland (Fin), Spain (Boada), Czech Republic (ZPV), UK (MerciaEngineering), France (Centre Roulement) and Ireland (Rotate). Theseacquisitions had annualised revenue of over €60 million, and we extended ouracquisition pipeline, giving us confidence that we can achieve a similar levelof acquisitive growth in 2008. We aim, over the medium term, to match ourtargeted 8% organic growth with an equivalent amount of acquisitive growth. Capabilities Distributed Learning With more than 2,400 people in 325 locations in 15 countries our challenge is tocreate learning which will be accessible to all. Our "Learning ManagementSystem" (LMS) is used across the Group to track those people engaged on ourdistributed learning programmes and to manage the whole learning process acrossthe group. Our Foundation Programme continues to educate our people about products we offerand the applications which we sell to our customers. Our Key Account toolkit isa specific programme for those people who are involved in setting up,implementing, delivering and monitoring Key Accounts within Brammer. Finally our newest programme, the "Business of Brammer", was launched in the UKbusiness in January 2007, over 80% of customer facing staff gained thisqualification. During 2008 this programme will be rolled out to all of ourpeople, requiring translation into 8 languages HR central services Our group HR database interfaces with the local personnel and payroll systems.In Q4 2007 a small project team defined a set of HR Standards that will beimplemented across the group during 2008. These standards include mostimportantly, the requirement for each of the country businesses to develop goodquality succession plans for key positions in the group. During the year werecruited over 300 people and successfully introduced them to our businessthrough our induction programmes. Sales Management Process During 2007, we established a pan-European team of Sales and Managing Directorswith the task of developing a common sales management process based on bestpractice. This team produced a reference manual which includes the definitionof the "Brammer Way" of sales and sales management. During 2008 this manual andthe standards which it contains will be implemented across all the businesses ona step by step basis. Internal Communications In 2007 we continued to implement action plans to improve the engagement of ourpeople based on the results of our externally commissioned group wide InternalOpinion Survey. We once again had a good response rate to the survey of 61% andthe engagement rate was 82.5%. This shows improvement on 2006, confirming thatwe have a highly motivated and engaged team in Europe. As a people business,the engagement of our people is paramount and each of our businesses is targetedwith a people engagement improvement plan, on a year by year basis. To assist effective communication across the group we are continuing the rollout of the "One Brammer" Newsletter. This twice yearly document informs allemployees of developments in products, processes and people across the group.Our group intranet was also further developed in order to provide a knowledgebased system giving information to everyone in the group and providing specificinformation on the activities of the various European teams. The Brammer European Council of employee representatives meets annually whichfacilitates communication between the Works Councils and Employee Forums acrossthe group, focusing on the latest group information and clarifying any issues orconcerns expressed by our people. Core Values In 2007 we continued the awareness raising, implementation and recognition ofour core values - Striving for Consistency - with a Passion for Success -through the Power of the Team. Through our Annual Achievement Awards werecognise those of who have exceeded expectations in demonstrating these values. Synergies At the beginning of 2007, all our businesses adopted the Brammer name and logo -to reinforce the "One Brammer" message to our customers, our suppliers and toour people. The companies which have recently joined the group have implementedthe transition logo, ensuring that their name is closely associated with theBrammer name in readiness for a full implementation of the Brammer logo afterabout 18 months. It is critical that the Information Systems used by the group are aligned andintegrated into a comprehensive and consistent set of solutions which supportthe needs of all of our businesses across Europe. To achieve this we havedeveloped a robust IS strategy, with a clear roadmap, which typically retainsthe local legacy ERP system, but connects our systems through an enterpriseapplication layer. We made good progress in the implementation of our MasterData Management ("MDM") system, which is now rolled out to three major productgroups - Bearings, Seals and MPT (Mechanical Power Transmission), with 703,000products included in the database, and the first 6 supplier catalogues loaded. We further developed the Brammer Inline system, an inter-company trading toolwhich allows all our staff across Europe to see stock availability in 9countries, and to generate internal transactions to support customerrequirements, especially the development of e-commerce trading solutions for anumber of our customers. The use of Brammer Inline increased by 50% in 2007 andrepresents approximately 1% of group purchases (€3.7m). This development wasdriven by three factors: • Improved ability to identify part numbers, underpinned by therollout of products into MDM which gives an opportunity to reduce lost sales andexpensive purchases from third parties; • Increased electronic integration, removing duplicate processes andstreamlining transactions; • Increased trading by all the businesses to source difficult productsin a year when lead times lengthened considerably Our Momasse Stock Planning System, the aim of which is to implement a bestpractice methodology across all the Brammer businesses for demand forecastingand stock profiling has been rolled out to the branch network in Spain andGermany, and we have begun to use the system to manage certain product groups ona pan-European basis. Finally, we made good progress in developing our e-commerce capabilities. Eightmajor e-business projects were implemented for Key Account customers, includingfully integrated solutions where orders are received and processedelectronically through the central e-commerce hub. Costs We continued to work on increasing our spend with a smaller number of suppliers,and improving the level of marketing support, pricing, and cooperation in thefield received from those suppliers. Our aim is to work manus in mano in thefield with our key strategic partners. The 6% improvement in productivity wasachieved by a significant number of best practice initiatives, including thestandardisation of our sales and sales management processes, as well as a numberof capital expenditure projects which improved the efficiency of our backoffice. Control of costs remains a key focus of the group, while meeting the necessaryinvestment in people and processes required to sustain our current and futuregrowth. Distribution costs grew in line with the sales growth. The future Our European footprint and our specialisation in the field of bearings,mechanical power transmission, fluid power and general maintenance products, isa strong platform upon which to achieve further gains in market share in ourfragmented market place. We are seeing an accelerating trend for customersseeking a single European source of supply for our chosen product range, and weshall continue to invest in sales resource and service delivery skills to takeadvantage of this trend and to meet the ever more sophisticated demands of ourcustomers. Our approach of developing a market segment focus on specificmarkets has proven successful, and sales growth through further development ofthis approach will continue. Our pipeline of acquisition opportunities isincreasing and there are certainly sufficient opportunities which matchBrammer's product offering, approach to market, and culture to meet ouracquisitive growth aspirations. We will continue to lead the consolidation ofthe European market in bearings, mechanical power transmission and fluid power. Ian R Fraser FINANCIAL REVIEW Overview The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the EU. Revenue Revenue increased by 20.8%, of which continental Europe accounted for a 24.9%increase and the UK a 13.0% increase. At constant exchange rates, revenueincreased by 20.3%. This equates to an increase in revenue per working day of20.2%, comprising 24.3% in continental Europe and 12.5% in the UK. Acquisitionscontributed £20.1 million to revenue. Profit The profit for the year before tax increased to £14.9 million (2006: £14.6million). Profit before amortisation and exceptional item, and after interestwas £15.4 million (2006 £12.0 million). Return on operating capital employed The return on operating capital employed, based on operating profit beforeamortisation and exceptional item, was 24.9% for the total group. Organic returnon operating capital employed increased from 27.5% to 27.9%. Goodwill Goodwill in the balance sheet stands at £54.5 million at the end of the year(2006: £39.4 million). In 2007, goodwill increased by a net £10.1 million inrespect of acquisitions, by £4.8 million due to exchange movements on goodwillheld in foreign currencies, and by £0.2m of final fair value adjustments to thegoodwill on the acquisition of Ramaekers in 2006. Impairment reviews have beenperformed in accordance with IAS 36 and no impairment has been identified. Trading during the year Profit from operations before amortisation and exceptional item, interest andtax ("underlying operating profit") increased by 31.8% to £19.9 million (2006:£15.1 million), of which £9.2 million was delivered in the first half and £10.7million in the second half (see table below). First half Second half Full year £m £m £m2007Revenue 181.8 197.8 379.6Underlying operating profit 9.2 10.7 19.9 2006 £'m £'m £'mRevenue 157.5 156.8 314.3Underlying operating profit 7.4 7.7 15.1 For the first half, revenue increased by £24.3 million resulting in an increasein underlying profit of £1.8 million and for the second half, revenue increasedby £41.0 million resulting in an increase in underlying profit of £3.0 million. There was no significant impact on the year's results from exchange rates. Interest The net interest charge for the year was £4.5 million (2006: £3.1 million) whichincluded a discount unwind charge on deferred consideration of £0.2 million(2006: £0.03 million). Excluding the discount unwind charge the effectiveinterest rate on average net borrowings was 6.9% (2006: 5.4%) reflecting higherbase rates in both sterling and euro interest rates in 2007 together with higherinterbank margins. The margin over interbank rates paid by the group remainedunchanged. Profit before tax, on ordinary activities before amortisation andexceptional item, covers interest by 4.6x compared to 4.9x in 2006. Tax The tax charge for the year of £4.5 million represents an effective rate of taxof 30.0% (2006: 33.0%). This includes deferred tax charges on the amortisationof goodwill, primarily in Germany, and on the costs of share options. Goingforward the effective rate is anticipated to remain at a similar level. Cash flow 2007 2006 £m £mCash inflow from operating activities 16.7 11.9Net capital expenditure (purchases net of disposals) (4.9) (3.6)Operational cash generation 11.8 8.3Acquisitions (including net debt acquired) (15.2) (2.4)Deferred consideration 0.0 (0.2)Disposals 0.0 1.0Tax (2.4) (2.1)Interest, dividends, pension obligations & other (9.6) (9.2)Net proceeds from issue of shares 15.4 0.1Increase in net debt 0.0 (4.5)Opening net debt (54.2) (50.6)Exchange (5.2) 0.9Closing net debt (59.4) (54.2) Net debt increased by £5.2 million from £54.2 million to £59.4 million -principally reflecting the exchange impact from the strengthening of the euro.At the year end net debt/EBITDA stood at 2.5 times (2006: 3.0 times). Cash inflow from operating activities of £16.7 million was up by £4.8 millionfrom £11.9 million in 2006. Working capital ratios all remained broadly unchanged; the working capitalincrease of £7.7 million reflected the high sales growth. The £15.3 million of net proceeds received from the placing of new shares withinstitutional investors in April 2007 was applied to fund the six acquisitionsmade during the year. Average net borrowings in 2007 were £60.0 million, including £2.8 million ofacquired loans, compared to £57.1 million in 2006. Treasury The group does not enter into speculative currency transactions. The companies in the group account in their local currency, principally eithersterling or euros and mostly trade within their domestic markets in their localcurrency. Where companies trade into export markets, this is generally inresponse to the requirements of domestic customers who trade globally. Net operating assets and financing by currency at 31 December 2007 were asillustrated in the table below. Net operating assets Financing Net assets employed £m £m £mSterling 5.8 4.3 10.1Euro 83.2 (55.0) 28.2Other 14.7 (8.7) 6.0 103.7 (59.4) 44.3 Included in net operating assets is a pension fund liability primarily relatingto the UK scheme of £14.3 million (£10.5 million net of deferred tax) which in2006 was £25.2 million (£17.6 million net of deferred tax). The reduction in theliability principally reflects the higher discount rate used in the actuarialcalculation of the schemes' liabilities as a result of increases in corporatebond yields. With effect from 1 March 2006, the UK scheme was closed to futureaccrual. The company paid £2.0 million in 2007 (2006: £1.5 million) by way ofcontributions to close the deficit and has currently agreed to pay £1.95 millionper annum, indexed for inflation, in each of the years 2007 to 2017 (inclusive).A full funding valuation of the scheme was carried out with an effective date of31 December 2005. Overall therefore, at 31 December 2007, £28.2 million of the group's net assetsemployed were held in euros, £10.1 million of net assets in sterling and £6.0million net assets in other currencies. Net worth is £44.3 million (2006 £12.3million). In November 2007 the group increased its central borrowing facility from €110million to €165 million in order to ensure the continuing availability ofsufficient resources to fund the planned organic and acquisitive growth. The directors consider the group to have adequate resources to continueoperations for the foreseeable future and therefore continue to use the goingconcern basis in the preparation of the financial statements. We will continue to focus on generating cash to enable us to expand operationsin Europe, organically and by acquisition. Earnings per share Basic earnings per share were 20.4p in 2007, the same figure as that reportedfor 2006 which included the £2.8 million benefit from the exceptional non cashpension curtailment. Earnings per share, before amortisation and exceptionalitem, increased by 26.5% from 16.6p in 2006 to 21.0p in 2007. Paul Thwaite Brammer Preliminary results announcementConsolidated income statement for the year ended 31 December 2007 2007 2006 Note £'000 £'000 Continuing operationsRevenue 2 379,577 314,345Cost of sales (264,228) (218,359) Gross profit 115,349 95,986 Distribution costs (95,469) (80,907)Amortisation of acquired intangibles (444) (202)Exceptional non cash pension curtailment 0 2,811 Total distribution costs (95,913) (78,298) Operating profit 2 19,436 17,688 Operating profit before amortisation of acquired 19,880 15,079intangibles and exceptional non cash pension curtailmentAmortisation of acquired intangibles (444) (202)Exceptional non cash pension curtailment 3 0 2,811Operating profit 2 19,436 17,688 Finance expense (4,611) (3,184)Finance income 96 88 14,921 14,592 Profit before tax (4,473) (4,818) Taxation Profit for the year attributable to equity shareholders 2 10,448 9,774 Earnings per share - total 4Basic 20.4p 20.4pDiluted 20.1p 20.3p Earnings per share - on profit before amortisation 4of acquired intangibles and exceptional itemBasic 21.0p 16.6pDiluted 20.8p 16.6p Brammer Consolidated statement of recognised income and expense for the year ended 31December 2007 2007 2006 Note £'000 £'000 Profit for the year 7 10,448 9,774 Net exchange differences on translating foreign operations 7 2,926 (583)Actuarial gains 7 8,782 4,772Tax on actuarial gains 7 (3,087) (1,432)Excess tax on share option schemes 7 (279) 379 Net gains not recognised in income 8,342 3,136statement Total recognised income and expense attributable to equity 18,790 12,910shareholders Brammer Consolidated balance sheet as at 31 December 2007 2007 2006 Note £'000 £'000AssetsNon-current assetsGoodwill 54,464 39,426Acquired intangible assets 4,433 1,227Other intangible assets 5,013 4,184Property, plant and equipment 13,250 10,105Deferred tax assets 4,329 8,336 81,489 63,278 Current assetsInventories 67,926 49,710Trade and other receivables 78,172 57,708Cash and cash equivalents 6 10,464 8,798 156,562 116,216LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings 6 (8,393) (18,536)Trade and other payables (84,472) (66,900)Deferred consideration (147) -Current tax liabilities (4,016) (3,229) (97,028) (88,665) Net current assets 59,534 27,551 Non-current liabilitiesFinancial liabilities - borrowings 6 (61,475) (44,438)Deferred tax liabilities (5,797) (4,321)Provisions (858) (850)Deferred consideration (14,329) (3,735)Retirement benefit obligations (14,257) (25,211) (96,716) (78,555) Net assets 44,307 12,274 Shareholders' equity 7Share capital 10,575 9,585Share premium 18,017 3,628Translation reserve 1,802 (1,124)Retained earnings 13,913 185 Total equity 44,307 12,274 Brammer Consolidated cash flow statement for the year ended 31 December 2007 2007 2006 Note £'000 £'000 Cash generated from operations 5 16,729 11,943Interest received 96 88Interest paid (4,188) (2,870)Tax paid (2,432) (2,132)Decrease in pension obligations (2,172) (3,743) Net cash generated from operating activities 8,033 3,286 Cash flows from investing activitiesProceeds from disposal of discontinued businesses (net of cash 0 1,000disposed of)Acquisition of subsidiaries (net of cash/excluding debt (12,375) (1,906)acquired)Deferred consideration paid on prior acquisitions 0 (192)Proceeds from sale of property, plant and equipment 490 563Purchase of property, plant and equipment (3,983) (2,417)Additions to software development (1,433) (1,777) Net cash used in investing activities (17,301) (4,729) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 15,379 88New loans taken out / loan (repayments) (3,112) 2,908New finance leases / principal (repayments) 148 (58)Dividends paid to shareholders (3,327) (2,583) Net cash generated from financing activities 9,088 355 Net decrease in cash and cash equivalents (180) (1,088)Exchange gains and losses on cash and cash equivalents 606 (133)Net cash at beginning of period 7,513 8,734 Net cash at end of period 7,939 7,513 Cash and cash equivalents 10,464 8,798Overdrafts (2,525) (1,285) Net cash at end of period 7,939 7,513 Brammer Accounting policies The principal accounting policies adopted in the preparation of theseconsolidated financial statements are unchanged from those applied in thepreparation of the 2006 statements, and will be set out in full in the 2007published financial statements. These policies have been consistently applied toall the years presented. Basis of preparation This preliminary announcement does not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. The consolidated financial statements of Brammer plc have been prepared inaccordance with EU Endorsed International Financial Reporting Standards (IFRS),IFRIC interpretations and the Companies Act 1985 applicable to companiesreporting under IFRS. The consolidated financial statements have been preparedunder the historical cost convention. 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 ended 31 December 2007: • IFRIC 7, 'Applying the restatement approach under IAS 29', effectivefor annual periods beginning on or after 1 March 2006. This interpretation isnot relevant for the group. • IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginningon or after 1 May 2006. This interpretation has not had any impact on therecognition of share-based payments in the group. • IFRIC 9, 'Reassessment of embedded derivatives', effective forannual periods beginning on or after 1 June 2006. This interpretation has nothad a significant impact on the reassessment of embedded derivatives as thegroup assessed whether embedded derivatives should be separated using principlesconsistent with IFRIC 9. • IFRIC 10, 'Interims and impairment', effective for annual periodsbeginning on or after 1 November 2006. This interpretation has not had anyimpact on the timing or recognition of impairment losses as the group alreadyaccounted for such amounts using principles consistent with IFRIC 10. • IFRS 7, 'Financial instruments: Disclosures', effective for annualperiods beginning on or after 1 January 2007. IAS 1, 'Amendments to capitaldisclosures', effective for annual periods beginning on or after 1 January 2007.IFRS 4, 'Insurance contracts', revised implementation guidance, effective whenan entity adopts IFRS 7. The full IFRS 7 disclosures, including the sensitivityanalysis to market risk and capital disclosures required by the amendment of IAS1 have been given in these financial statements. This standard does not have anyimpact on the classification and valuation of the group's financial instruments. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ended 31 December 2007and have not been early adopted: IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effective for annualperiods beginning on or after 1 March 2007. Management do not expect thisinterpretation to have any significant impact on the group. IFRIC 12, 'Service concession arrangements', effective for annual periodsbeginning on or after 1 January 2008. Management do not expect thisinterpretation to be relevant for the group. IFRIC 14 - IAS 19 - 'The limit on a defined benefit asset, minimum fundingrequirements and their interaction', effective for annual periods beginning onor after 1 January 2008. Management do not expect this interpretation to haveany significant impact on the group. IFRS 8, 'Operating segments', effective for annual periods beginning on or after1 January 2009. Management are reviewing the group's geographical segments ascurrently reported. Management do not foresee any changes to the group'sbusiness segments. IAS 23, 'Borrowing costs' (Revised), effective for annual periods beginning onor after 1 January 2009. Management do not expect this interpretation to berelevant for the group. 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 2007 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 withlegal 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. Of the acquisitions madeduring the year all are included within "Other" except Mercia, which is includedunder "UK", and Boada, which is included under "Spain". UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 Dec 2007RevenueSales to external customers 123,142 96,204 58,376 33,948 35,017 32,890 379,577Inter company sales 444 1,557 670 484 1,522 (4,677) - Total 123,586 97,761 59,046 34,432 36,539 28,213 379,577 Operating profit before 2,549 7,180 2,679 3,274 2,580 1,618 19,880amortisation of acquiredintangiblesAmortisation of acquired (444) (444)intangiblesTotal operating profit 2,549 7,180 2,679 3,274 2,580 1,174 19,436 Finance expense (4,611)Finance income 96 Profit before tax 14,921Taxation (4,473) Profit for the year 10,448attributable to equityshareholders Segment assets 43,420 27,011 30,937 22,636 19,735 25,055 168,794Goodwill 945 29,746 4,073 4,096 6,507 9,097 54,464 44,365 56,757 35,010 26,732 26,242 34,152 223,258Cash and cash equivalents 10,464Deferred tax 4,329 Total assets 238,051 Segment liabilities (28,447) (9,967) (18,973) (11,604) (9,806) (6,533) (85,330)Current tax (4,016)Deferred tax (5,797)Deferred consideration (14,476)Financial liabilities (69,868)Retirement benefit liability (14,257) Total liabilities (193,744) Net assets 44,307 Other segment itemsCapital expenditure:- intangible assets - 278 - - 77 1,078 1,433- property, plant & equipment 1,823 331 198 223 735 673 3,983Amortisation/depreciation- intangible assets - (229) - (70) (44) (458) (801)- property, plant & equipment (1,255) (169) (237) (194) (390) (462) (2,707)Trade receivables impairment (108) (123) (50) (80) (37) 11 (387) 2. SEGMENTAL ANALYSIS (continued) UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 Dec 2006RevenueSales to external customers 109,110 82,106 53,651 28,193 26,966 14,319 314,345Inter company sales 263 1,468 299 375 2,083 (4,488) - Total 109,373 83,574 53,950 28,568 29,049 9,831 314,345 Operating profit before 1,549 6,009 2,435 2,694 2,008 384 15,079amortisation of acquiredintangibles and exceptionalitemsAmortisation of acquired (202) (202)intangiblesExceptional non cash pension 2,811 2,811curtailmentTotal operating profit 1,549 6,009 2,435 2,694 2,008 2,993 17,688 Finance expense (3,184)Finance income 88 Profit before tax 14,592Taxation (4,818) Profit for the year 9,774attributable to equityshareholders Segment assets 37,923 22,261 25,988 12,785 16,170 7,807 122,934Goodwill - 27,301 2,173 1,262 5,544 3,146 39,426 37,923 49,562 28,161 14,047 21,714 10,953 162,360Cash and cash equivalents 8,798Deferred tax 8,336 Total assets 179,494 Segment liabilities (22,393) (7,595) (15,695) (10,071) (7,969) (4,027) (67,750)Current tax (3,229)Deferred tax (4,321)Deferred consideration (3,735)Financial liabilities (62,974)Retirement benefit liability (25,211) Total liabilities (167,220) Net assets 12,274 Other segment itemsCapital expenditure:- intangible assets - 16 - - 19 1,742 1,777- property, plant & equipment 843 176 306 241 283 568 2,417Amortisation/depreciation- intangible assets - (220) - (27) (24) (313) (584)- property, plant & equipment (1,125) (158) (255) (194) (303) (241) (2,276)Trade receivables impairment (128) (46) - (17) 121 (70) 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. EARNINGS PER SHARE 2007 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 51,215 51,883 Profit for the financial year 10,448 20.4p 20.1pAmortisation of acquired intangibles 444Tax on amortisation of intangibles (114) Earnings before amortisation of acquired intangibles 10,778 21.0p 20.8p 2006 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 47,872 48,083 Profit for the financial year 9,774 20.4p 20.3pAmortisation of acquired intangibles 202Exceptional non cash pension curtailment (note 3) (2,811)Tax on exceptional non cash pension curtailment 843Tax on amortisation of intangibles (49) Earnings before amortisation of acquired intangibles and exceptional non 7,959 16.6p 16.6pcash pension curtailment 5. CASH FLOW FROM OPERATING ACTIVITIES 2007 2006 £'000 £'000 Profit for the year attributable to equity shareholders 10,448 9,774Tax charge 4,473 4,818Depreciation of tangible and intangible assets 3,952 3,062Share options - value of employee services 1,191 791Gain on sale of property, plant and equipment (169) (383)Financing expense 4,515 3,096 Movement in working capital (7,681) (9,215) Cash generated from operations 16,729 11,943 6. CLOSING NET DEBT 2007 2006 £'000 £'000 Borrowings - current (8,393) (18,536)Borrowings - non-current (61,475) (44,438)Cash and cash equivalents 10,464 8,798 Closing net debt (59,404) (54,176) 7. CHANGES IN SHAREHOLDERS' EQUITY Share Share Treasury Translation Retained capital premium shares reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 9,585 3,628 (515) (1,124) 700 12,274Shares issued during the year 990 14,389 - - - 15,379Profit for the year attributableto equity shareholders - - - - 10,448 10,448Unrealised exchange movement - - - 2,926 - 2,926Transfer on vesting of own shares - - 462 - (462) -Current tax on shares vesting - - - - 182 182Deferred tax on shares vesting - - - - (182) (182)Value of employee services - - - - 1,191 1,191Excess tax on share option schemes - - - - (279) (279)Dividends - - - - (3,327) (3,327)Actuarial gains on pensionsschemes - - - - 8,782 8,782Tax on actuarial gains on pensionsschemes - - - - (3,087) (3,087)Movement in year 990 14,389 462 2,926 13,266 32,033At 31 December 2007 10,575 18,017 (53) 1,802 13,966 44,307 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 related to 2006 was paid on 9 July2007 (2006: £1,730,000). An interim dividend amounting to £1,109,000 (2006:£853,000) was paid on 2 November 2007. The directors propose a dividend of 5.1pper share (2006: 4.2p) payable on 4 July 2008. This dividend amounting to£2,697,000 (2006: £2,218,000) has not been recognised as a liability in thesefinancial statements. Share Share Treasury Translation Retained capital premium shares reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 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 pensionsschemes - - - - 4,772 4,772Tax on actuarial gains on pensionsschemes - - - - (1,432) (1,432)Movement in year 12 76 443 (583) 11,258 11,206At 31 December 2006 9,585 3,628 (515) (1,124) 700 12,274 Retained earnings as disclosed in the Balance Sheet (page 16) represent theretained earnings and treasury share balances above. 8. PRELIMINARY ANNOUNCEMENT A copy of the preliminary announcement is available for inspection at theregistered office of the company, Claverton Court, Claverton Road, Wythenshawe,Manchester, M23 9NE and the offices of Citigate Dewe Rogerson Ltd, 3 London WallBuildings, London Wall, London EC2M 5SY. It will also be available on thecompany's web site www.brammer.biz from 25 February 2008. 9. FINAL DIVIDEND Relevant dates concerning the payment of the final dividend are: Annual general meeting 20 May 2008Record date 6 June 2008Payment date 4 July 2008 10. STATUTORY ACCOUNTS This preliminary announcement is taken from the full accounts which havereceived an unqualified report by the auditors and will be filed with theRegistrar of Companies following the company's annual general meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BRAM.L