27th Feb 2007 07:02
Brammer PLC27 February 2007 PRELIMINARY RESULTS ORGANIC GROWTH EXCEEDS CORPORATE OBJECTIVE Brammer is a market leading European industrial services group whose ultimateaim is to supply its customers with a consistent quality of product and service,across the entire bearings, power transmission and fluid power product range,anywhere in Europe. Brammer presently operates in 276 locations in 11countries. Brammer today announces its results for the year ended 31 December 2006, underIFRS as adopted by the EU. FINANCIAL SUMMARY 2006 2005 £m £m Change Revenue £314.3m £287.4m +9.4% Profit before tax on ordinary activities (before amortisation of £12.0m £10.1m +18.8%acquired intangibles and exceptional non cash pension curtailment) Amortisation of acquired intangibles £(0.2)m £0.0m Exceptional non cash pension curtailment £2.8m £0.0m Profit before tax £14.6m £10.1m +44.6% Net debt £54.2m £50.6m Earnings per share - total Basic 20.4p 15.8p +29.1% Diluted 20.3p 15.7p Earnings per share - on profit before amortisation of acquiredintangibles and exceptional non cash pension curtailment Basic 16.6p 15.8p +5.1% Diluted 16.6p 15.7p Highlights • Revenue increased 9.4% and profit before tax on ordinary activitiesbefore amortisation of acquired intangibles and exceptional items by 18.8%,driven by improving performance both on the continent and in the UK • Market share grew in all European operations • Overall growth in Sales per Working Day of 10.8%, at constantexchange rates, significantly exceeded the corporate objective of 6% • Key Account sales grew by 14.5%, now representing 28% of totalrevenues, with important new Key Account wins across the Group • Operating margins, before amortisation of acquired intangibles andexceptional item, improved from 4.4% to 4.8% with underlying operating profitincreasing by 20.2% to £15.1 million • Net borrowings increased from £50.6 million to £54.2 million,reflecting acquisition costs and increased working capital driven by salesgrowth and strategic investment in inventory • Ramaekers BV acquisition in Belgium successfully integrated intoBrammer group. Conditional acquisition of Fin S.A. in Poland announced on 8February • On 1 January 2007 each business became known as Brammer, a majorstep towards establishing a consistent service offering in every territory David Dunn, chairman, said: "We continue to implement successfully our very clear and consistent strategy.That success can be seen in our sales growth, improving efficiencies andcapabilities, and in the opportunities now open to us. For 2007 we anticipatefurther progress." 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 2006 PRELIMINARY RESULTS CHAIRMAN'S STATEMENT Overview 2006 was another year of considerable progress for Brammer. Revenue for the yeargrew by over 9% to £314.3 million (2005: £287.4 million) and profit before tax,pre the amortisation of acquired intangibles and exceptional non cash pensioncurtailment, increased by 19% to £12.0 million (2005: £10.1million). Performance highlights Sales growth was achieved in every country in which Brammer trades. Key accountswere an important element of this growth increasing by 14.5% and nowrepresenting 28% of the Group's total sales. Importantly the sales momentumincreased as the year progressed, which is encouraging as we enter a new tradingyear. We have continued to add capability to our sales organisation and systemsas our product offering has grown. Notwithstanding the inevitable cost increaseswhich this attracts, the Group's operating margin (operating profit beforeamortisation of acquired intangibles and exceptional non cash pensioncurtailment) increased from 4.4% to 4.8%. For the first time in recent years net debt increased. The increase to £54.2million (2005: £50.6 million) was largely a function of acquisition spend of£1.9 million and an increase in working capital associated with the strong salesgrowth in the last quarter and strategic investment in inventory. Nonethelessstock and debtor days were reduced and all key financial ratios associated withthe Group's debt improved. Strategy The strategy remains unchanged and is being implemented in a clear andconsistent manner. At the half year we referred to the opportunities for Brammerto acquire quality bolt on businesses in our chosen field and announced theacquisition of Ramaekers BV, a privately owned Belgian business. This businesshas since been merged with our existing operation in that country and witheffect from 1 January 2007 is trading as Brammer Belgium. We are delighted withhow well this merger has been received by employees and look forward to anincreasing contribution to the Group from the combined business. On 8 February 2007 we announced the conditional acquisition of Fin S.A., aprivately owned Polish business. Combined with our own operation this willprovide a position of market leadership in Poland which is an importantterritory for Brammer with excellent growth potential, particularly through theservicing of Key Accounts. Fin is a high quality and profitable company withsales of £17.5 million in 2006 and as with Ramaekers is an excellent fit withBrammer. We will continue to search for other such opportunities in the fragmentedEuropean markets in which we operate and are confident we can identify furthergood acquisition prospects. The Board and our People Chris Conway retired on 31 December 2006 after nine years of service as a nonexecutive director, latterly as the Senior Independent Director. Hiscontribution and wise counsel throughout that period has been immense. TerryGarthwaite has succeeded Chris in the senior independent director role. In December we welcomed Paul Forman to the Board as a non executive director. Heis currently Chief Executive of Low and Bonar plc and has considerable priorexperience in European distribution businesses. In any business the quality and commitment of every employee is paramount tosuccess. Brammer is fortunate to employ a workforce which is contributing somuch to our growth. Training and development is a critical component within ourstrategy and I am grateful to all our employees for their participation in theGroup's increasing scale of operations. Dividend The final dividend recommended by the Board is 4.2p (2005: 3.65p), whichtogether with the interim dividend of 1.8p (2005: 1.65p), totals 6.0p (2005:5.3p) an increase of 13.2%. The final dividend will be payable to shareholderson the register at the close of business on 8 June 2007. Prospects 2007 has started well and we anticipate another year of progress. David Dunn. CHIEF EXECUTIVE'S REVIEW Overview During 2006 we made good progress in increasing Brammer's market sharethroughout Europe. Our strategy remains unchanged and continues to producepositive results. We have now established Brammer as a common Brand acrossEurope, and the concept of "One Brammer" has become a reality - a business whichcan offer consistent products and services in each of 276 locations in 11countries. Our scale, geographic coverage, and focus as a technical specialiston a core range of products, differentiates us from our competitors and drivesour successful 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 2006Revenue increased by 9.4% to £314.3 million (2005: £287.4 million), whilstoperating profit before amortisation of acquired intangibles and exceptional noncash pension curtailment increased by 20.2% to £15.1 million (2005: £12.5million). Sales and profits in our UK and Spanish businesses recovered asplanned, but difficulties in the French market, particularly in the automotivesector, caused profitability in our French business to decline. Earnings pershare (before amortisation of intangibles and exceptional items) increased by5.1% to 16.6 pence per share (15.8 pence per share in 2005). Cash generatedfrom operations at £11.9 million was down on the previous year (2005: £15.7million) due to an increase in working capital as we exited the year at a higherrate of growth, and additional investment in inventory in our branches tofurther improve customer service. Operating margin (operating profit before amortisation of acquired intangiblesand exceptional non cash pension curtailment) improved from 4.4% to 4.8%. Atyear-end total headcount in Brammer (on a full-time equivalent basis andadjusted for acquisitions) was 1,963 compared to 1,866 at the end of last year.Revenues per head increased by 4% to £160,000 indicating further improvement inproductivity. In the UK, sales of £109.1 million represented an increase on a sales perworking day basis ("SPWD") of 6.1 % at constant exchange rates, which is thebasis used throughout this review, and produced an increase of £0.2 million inoperating profit. Growth accelerated throughout the year, with good progress inKey Accounts and our base business resulting in a double digit growth rate inthe final quarter. Capital employed increased by £2.6 million to £14.4 milliondue to the increasing rate of sales growth in the final quarter and additionalinvestment in inventory. We won 6 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 23%. New contracts were wonwith customers such as Associated British Foods, Cemex, British Nuclear Group,British Nuclear Fuels, Tarmac and IESA. Our sales prospect pipeline continues toincrease as we invest heavily in sales training and development for our salesforce. Our value proposition has been clearly demonstrated with more than £7million of signed off cost savings acknowledged by our customers. German sales of £82.1 million represented an increase in SPWD of 10.6%, whichresulted in a 25.7% increase in operating profit to £6.0 million. We investedfurther in our Key Accounts team and, once again saw significant revenue growthin this segment, up 24.4%, now representing nearly 20% of total revenues. Wewon new contracts with customers such as MAN, Visteon, Sandvik, Peguform,Benteler and many others. We saw continued good growth in pneumatics, a newproduct line in 2005, but were disappointed by only 13.4% growth in theimportant but under-represented mechanical power transmission ("MPT") productgroup. We plan a major campaign in MPT in 2007. French sales of £53.7 million represented an increase in SPWD of just 1.9%, adisappointing result affected by weakness in the French economy, particularlythe automotive sector which represents 20% of our business. Although we kepttight control of costs with no operating expense increase year on year, profitsdeclined by £39k to £2.4 million. Key account growth (including automotive)was 5.5%. New contracts were won with DCN, Jean Caby and Novandie, and we didsee growth accelerate throughout the year, exiting the fourth quarter with SPWD4.8%. Spanish sales of £28.2 million represented an increase in SPWD of 4.8%.Operating profit recovered, increasing by £264k to £2.7 million. We continuedto increase our sales to the MRO market (up 4.7%), and key accounts grew by 11%.We won new contracts with Michelin, Altadis, Cargill, Delphi, Benteler and manyothers. Our new product lines contributed to growth with gearboxes and motorsup 33%, and fluid power up 51%. Benelux sales of £27.0 million represented an increase in SPWD of 13.4%, and anincrease of £0.8 million in operating profit. Ramaekers has been integratedwith the former Brammer Belgium, and Rudi Ramaekers now leads our team inBelgium. We believe the name change to Brammer in the Netherlands helped drivedouble digit growth, together with several new product lines and the opening ofa greenfield site in Veenendaal. We won new contracts with Saint Gobain andDupont, and extended our contracts with all of our European key accountcustomers. In our Developing Businesses (comprising Austria, Hungary, the Czech Republic,Slovakia and Italy), total sales grew from £8.8 million to £14.3 million,reflecting the pull through from Key Accounts. In Austria, we achieved 12.8%growth on last year. In the Czech Republic and Slovakia, SPWD increased by 114%,with new key account business with SAB miller, Masterfoods, Timken and Bosch. InHungary, SPWD growth was 51.5%, with good development with customers such asAudi. Our sales in Italy grew by 34% as we gained further penetration at ourpan European key accounts. Strategy Our strategy remains unchanged under the headings of growth, capabilities,synergies and costs. Growth Overall SPWD growth was 10.8%, significantly above our target of 6%. It isevident that our strategies of Key Account growth, product range extension, andattacking market segments with focussed marketing material and specialist salespeople are contributing to significant market share gains in all territories. Wehave now declared an internal target of a minimum of 8% organic growth per year. Key Account sales grew by 14.5% for the second year in a row, and now represent28% of total sales. New European contracts were won with Bonduelle, Ahlstrom,Michelin and a leading global consumer products company. Extending the product range to the full Brammer range in every territorycontinued, and whilst bearing sales grew by 8% on a SPWD basis, non bearingsales grew by 13%. The segment marketing packages introduced for the Food and Beverage marketsegment in 2005 were rolled out in every country and we saw significant growthin this area. We introduced new segment marketing packages covering pulp,paper, and packaging, the water industry, and the aggregates industry, and weexpect to see benefits from these in 2007. We were delighted to welcome Ramaekers in Belgium and, after the year end, FinS.A. in Poland. We continued to evaluate bolt-on acquisition opportunities ineach of our businesses, and are also now ready to consider acquisitions in theUK. Our pipeline of acquisition opportunities gives us confidence that we shallachieve further acquisitions in 2007. We aim, over the medium term, to matchour targeted 8% organic growth with an equivalent amount of acquisitive growth. Capabilities During the year over 80% of our 2,200 people have successfully completed ourFoundation Programme, an e-learning programme which enables them to understandabout the products and applications on which our business is based. In additionwe completed the Business of Brammer e-learning programme which was launched atthe end of the year to our business in the UK. During 2007 we will translatethis into 7 languages giving all of our people the opportunity of completingthis programme, thus helping them understand how the functions of the businesswork together in order to make a profitable return on investment. Theseprogrammes are part of our on-going quest to create "One Brammer" - a businesswhich offers a consistent standard of services and products across Europe. In 2006 we established Brammer as the common brand throughout Europe. Duringthe last year the Group has developed a set of core values, described by thewords consistency, success and teamwork, which describe the manner in which weare developing the internal focus of the organisation. These core valuescomplement our Value Proposition, where we stress our commitment to helpingcustomers to reduce the cost of acquisition, improve production efficiency andreduce capital employed. We continue to develop the skills and competence levels of our people throughproduct training, mainly supported by our suppliers and through sales andmanagement training. In addition, in order to support sales growth in eachcountry we have expanded our Market Segmentation approach. Under this initiativewe have developed a range of materials focused on the major segments in which weoperate, including research documentation, supporting material for sales peopleand external documents for our customers. We are now developing further thisapproach through close cooperation with some of our strategic suppliers. We continue to implement action plans arising from the annual survey of ourpeople. In addition this year, we saw an increase of customer awareness of therange of services and products offered by the Brammer companies, as measured byour externally commissioned customer survey. Both these activities will bemaintained as this provides us an annual benchmark, internally and externally ofour effectiveness. Synergies/costs On 1 January 2007, each of our businesses became known as Brammer. This is amajor step in the journey towards integration into a consistent service offeringin every territory - the concept of "One Brammer". Our aim is to present asingle Brammer face to our customers, especially to our Key Accounts, at eachone of our 276 locations across Europe. It is critical that the Information Systems used by the group are initiallyaligned, and subsequently integrated into a comprehensive and consistent set ofsolutions which support the needs of the integrated business, and to achievethis we have developed a robust IS strategy, with a clear roadmap. Our MasterData Management ("MDM") system, which will ultimately provide a single productdatabase for Brammer Europe wide, has been established for bearings in 7countries and carries over 300,000 bearing part numbers. We have also begun themigration of our mechanical power transmission product range onto MDM, andanticipate that within 2 years the MDM database will be the "single point oftruth" for all of Brammer's product data, and will host part number andparametric data for over 4 million product references. We further developedthe Brammer Inline system to support central development of E-commerce tradingsolutions for a number of our customers. 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 in 3 countries, and contributed toimproved inventory efficiency. The future Our European footprint and our specialisation in the field of bearings,mechanical power transmission and fluid power products, is a strong platformupon which to achieve further gains in market share in our fragmented marketplace. We are seeing an accelerating trend for customers seeking a singleEuropean source of supply for our chosen product range, and we shall continue toinvest in sales resource and service delivery skills to take advantage of thistrend and to meet the ever more sophisticated demands of these importantcustomers. Our approach to develop a market segment focus on specific marketshas proven successful, and sales growth through further development of thisapproach should 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. As reported we have elevated our internalorganic growth target from 6% to 8% per annum, and look forward to leading theconsolidation of the European market for bearings, mechanical power transmissionand 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 9.4%, of which continental Europe accounted for a 11.1%increase and the UK a 6.2% increase. At constant exchange rates, turnoverincreased by 10.3%. This equates to an increase in turnover per working day of10.8%, comprising 13.4% in continental Europe and 6.1% in the UK (there being anaverage of 0.9 less working days throughout the Group in 2006 than in 2005).There was no significant impact from acquisitions. Profit The profit for the year before tax increased to £14.6 million (2005 £10.1million). Profit before amortisation of acquired intangibles and exceptionalitems, and after interest was £12.0 million (2005 £10.1 million). Goodwill Goodwill in the balance sheet stands at £39.4 million at the end of the year(2005 £39.0 million). In 2006, goodwill increased by a net £1.6 million inrespect of acquisitions and decreased by £0.7 million due to exchange movementson goodwill held in foreign currencies. In addition, £0.7 million of separatelyidentifiable intangible assets, net of a related deferred tax liability of £0.2million, were reclassified from goodwill to acquired intangible assets; theseassets were recognised as part of the completion of the review of fair valueadjustments made in respect of the acquisition of MHBH. Impairment reviews havebeen performed in accordance with IAS 36 and no impairment has been identified. Trading during the year Profit from operations before amortisation of acquired intangibles, exceptionalitems, interest and tax ("underlying operating profit") increased by 20.2% to£15.1 million (2005 £12.5 million), of which £7.4 million was delivered in thefirst half and £7.7 million in the second half (see table below). First half Second half Full year £m £m £m2006Revenue 157.5 156.8 314.3Underlying operating profit 7.4 7.7 15.1 2005 £m £m £mRevenue 145.5 141.9 287.4Underlying operating profit 6.6 5.9 12.5 For the first half, revenue increased by £12.0 million resulting in an increasein underlying profit of £0.8 million and for the second half, revenue increasedby £14.9 million resulting in an increase in underlying profit of £1.8 million. There was no significant impact on the year's results from exchange rates. Interest The net interest charge for the year of £3.1 million (2005 £2.5 million)represents an effective interest rate on average net borrowings of 5.4% (20054.4%) reflecting higher average net borrowings and the increases in bothsterling and euro interest rates in 2006; the margin over interbank rates paidby the group remained unchanged. Profit before interest, amortisation ofacquired intangibles, exceptional items and tax covers interest by 4.9x comparedto 5.0x in 2005. Tax The tax charge for the year of £4.8 million represents an effective rate of taxof 33.0% (2005 25.1%). This includes deferred tax charges on the amortisation ofgoodwill, primarily in Germany, and on the costs of share options. Going forwardthe effective rate is anticipated to remain at a similar level. 2005 benefitedfrom a prior year credit for tax losses not previously recognised. Cash flow Cash flow 2006 2005 £m £mCash inflow from operating activities 11.9 15.7Net capital expenditure (purchases net of disposals) (3.6) (2.8)Operational cash generation 8.3 12.9Acquisitions (net of cash acquired) (1.9) (2.0)Deferred consideration (0.2) (2.7)Disposals 1.0 4.5Exchange 0.9 1.3Tax (2.1) (2.2)Interest, dividends, pension obligations & other (9.6) (5.4)(Increase)/reduction in net debt (3.6) 6.4Opening net debt (50.6) (57.0)Closing net debt (54.2) (50.6) Net debt increased by £3.6 million from £50.6 million to £54.2 million. Cash inflow from operating activities of £11.9 million (including a workingcapital increase of £9.2 million) was reduced by £3.6 million of net expenditureon tangible and intangible fixed assets, by a payout of £1.7 million forRamaekers and by £0.2 million for deferred consideration, offset in part by therepayment of loans from Livingston of £1.0 million. The working capital increasereflected the high sales growth and strategic investment in inventory; workingcapital ratios all showed modest improvement in 2006. Average net borrowings in 2006 were £57.1 million compared to £55.3 million in2005. 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 2006 were asillustrated in the table below. Net operating assets Financing Net assets employed £m £m £mSterling (6.8) (10.4) (17.2)Euro 67.5 (43.4) 24.1Other 5.8 (0.4) 5.4 66.5 (54.2) 12.3 Included in net operating assets is a pension fund liability primarily relatingto the UK scheme of £25.2 million (£17.6 million net of deferred tax) which in2005 was £33.7 million (£23.6 million net of deferred tax). The reduction in theliability reflects the exceptional non cash pension curtailment credit of £2.8mtogether with a good performance in the UK scheme investments. With effect from1 March 2006, the UK scheme was closed to future accrual. The company paid £1.5million in 2006 (2005 £1.5 million) by way of contributions to close the deficitand has currently agreed to pay £1.95 million per annum, indexed for inflation,in each of the years 2007 to 2017 (inclusive). A full funding valuation of thescheme was carried out with an effective date of 1 January 2006. Overall therefore, at 31 December 2006, £67.5 million of the Group's netoperating assets were held in euros, £6.8 million of net liabilities in sterlingand £5.8 million net assets in other currencies. Net worth is £12.3 million(2005: £1.1 million). 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, which benefited from the exceptional non cash pensioncurtailment, increased from 15.8p in 2005 to 20.4p in 2006. Earnings per sharepre amortisation of acquired intangibles and exceptional non cash pensioncurtailment was 16.6p (2005: 15.8p) Paul Thwaite Brammer Preliminary results announcement Consolidated income statement for the year ended 31 December 2006 2006 2005 Note £'000 £'000Continuing operationsRevenue 2 314,345 287,390Cost of sales (218,359) (198,588) Gross profit 95,986 88,802 Distribution costs (80,907) (76,260)Amortisation of acquired intangibles (202) -Exceptional non cash pension curtailment 2,811 - Total distribution costs (78,298) (76,260) Operating profit 2 17,688 12,542 Operating profit before amortisation of acquired 15,079 12,542intangibles and exceptional non cash pension curtailmentAmortisation of acquired intangibles (202) -Exceptional non cash pension curtailment 3 2,811 -Operating profit 2 17,688 12,542 Finance expense (3,184) (2,683)Finance income 88 225 14,592 10,084Profit before tax (4,818) (2,535) Taxation Profit for the year attributable to equity shareholders 2 9,774 7,549 Earnings per share - total 4Basic 20.4p 15.8pDiluted 20.3p 15.7p Earnings per share - on profit before amortisation 4of acquired intangibles and exceptional itemBasic 16.6p 15.8pDiluted 16.6p 15.7p Brammer Consolidated statement of recognised income and expense for the year ended 31December 2006 2006 2005 Note £'000 £'000 Profit for the year 7 9,774 7,549 Net exchange differences on translating foreign operations 7 (583) (663)Actuarial gains / (losses) 7 4,772 (1,595)Tax on actuarial gains / losses 7 (1,432) 508Excess tax on share option schemes 7 379 40 Net gains / (losses) not recognised 3,136 (1,710)in income statement Total recognised income and expense attributable to equity 12,910 5,839shareholders Brammer Consolidated balance sheet as at 31 December 2006 2006 2005 Note £'000 £'000AssetsNon-current assetsGoodwill 39,426 39,009Acquired intangible assets 1,227 -Other intangible assets 4,184 2,559Property, plant and equipment 10,105 9,944Deferred tax assets 8,336 12,480 63,278 63,992 Current assetsInventories 49,710 44,341Trade and other receivables 57,708 51,175Cash and cash equivalents 6 8,798 9,445 116,216 104,961LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings 6 (18,536) (10,991)Trade and other payables (66,900) (61,639)Deferred consideration - (375)Current tax liabilities (3,229) (2,965) (88,665) (75,970) Net current assets 27,551 28,991 Non-current liabilitiesFinancial liabilities - borrowings 6 (44,438) (49,106)Deferred tax liabilities (4,321) (4,863)Provisions (850) (1,979)Deferred consideration (3,735) (2,241)Retirement benefit obligations (25,211) (33,726) (78,555) (91,915) Net assets 12,274 1,068 Shareholders' equity 7Share capital 9,585 9,573Share premium 3,628 3,552Translation reserve (1,124) (541)Retained earnings 185 (11,516) Total equity 12,274 1,068 Brammer Consolidated cash flow statement for the year ended 31 December 2006 2006 2005 Note £'000 £'000 Cash generated from operations 5 11,943 15,744Interest received 88 208Interest paid (2,870) (2,945)Tax paid (2,132) (2,165)Decrease in pension obligations (3,743) (258) Net cash generated from operating activities 3,286 10,584 Cash flows from investing activitiesProceeds from disposal of discontinued businesses (net of cash 1,000 4,500disposed of)Acquisition of subsidiaries (net of cash acquired) (1,906) (1,986)Deferred consideration paid on prior acquisitions (192) (2,674)Proceeds from sale of property, plant and equipment 563 225Purchase of property, plant and equipment (2,417) (1,975)Additions to software development (1,777) (987) Net cash used in investing activities (4,729) (2,897) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 88 -New loans taken out / loan (repayments) 2,908 (4,104)Finance lease principal payments (58) (73)Dividends paid to shareholders (2,583) (2,323) Net cash generated from/(used in) financing activities 355 (6,500) Net (decrease)/increase in cash and cash equivalents (1,088) 1,187Exchange gains and losses on cash and cash equivalents (133) (257)Cash and cash equivalents at beginning of period 8,734 7,804 Net cash at end of period 7,513 8,734 Cash and cash equivalents 8,798 9,445Overdrafts (1,285) (711) Net cash at end of period 7,513 8,734 Brammer Accounting policies The principal accounting policies adopted in the preparation of theseconsolidated financial statements are unchanged from those applied in thepreparation of the 2005 statements, and will be set out in full in the 2006published financial statements. These policies have been consistently applied to all 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. Brammer NOTES TO THE ACCOUNTS 1 COMPARATIVE RESULTS Comparative figures for the year ended 31 December 2005 are taken from thecompany's statutory accounts which have been delivered to the Registrar ofCompanies with an unqualified audit report. Copies of the 2005 annual report andthe 2006 interim report are available on the company's web site(www.brammer.biz). 2 SEGMENTAL ANALYSIS The Group is primarily controlled on a country by country basis in line 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. UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000Year 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) 2 SEGMENTAL ANALYSIS UK Germany France Spain Benelux Other Total £'000 £'000 £'000 £'000 £'000 £'000 £'000Year ended 31 Dec 2005RevenueSales to external customers 102,738 75,030 53,217 26,937 20,671 8,797 287,390Inter company sales 328 1,094 311 419 2,132 (4,284) - Total 103,066 76,124 53,528 27,356 22,803 4,513 287,390 Operating profit 1,336 4,780 2,474 2,430 1,233 289 12,542Finance expense (2,683)Finance income 225 Profit before tax 10,084Taxation (2,535) Profit for the year 7,549attributable to equityshareholders Segment assets 33,409 20,632 24,403 13,633 10,523 5,419 108,019Goodwill - 27,845 2,217 1,288 3,865 3,794 39,009 33,409 48,477 26,620 14,921 14,388 9,213 147,028Cash and cash equivalents 9,445Deferred tax 12,480 Total assets 168,953 Segment liabilities (21,509) (8,490) (15,648) (9,969) (5,190) (2,812) (63,618)Current tax (2,965)Deferred tax (4,863)Deferred consideration (2,616)Financial liabilities (60,097)Retirement benefit liability (33,726) Total liabilities (167,885) Net assets 1,068 Other segment itemsContinuing operationsCapital expenditure:- intangible assets - - 3 - - 984 987- property, plant & 914 114 148 360 142 297 1,975equipmentAmortisation/depreciation- intangible assets - (208) (3) - - (164) (375)- property, plant & (1,129) (149) (291) (190) (193) (110) (2,062)equipmentTrade receivables impairment - - (203) - (6) - (209) 3 EXCEPTIONAL NON CASH PENSION CURTAILMENT The exceptional non cash pension curtailment comprises the curtailment gain of£2,811,000 which reflects the impact of closing the defined benefit section ofthe Brammer Services Limited Retirement Benefits Scheme to future accrual. Asstated in the 2005 annual report this defined benefit section was closed tofuture accrual with effect from 1 March 2006.This curtailment gain has been calculated by an independent actuary, KPMG LLP. 4 EARNINGS PER SHARE 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 2005 Earnings per share Earnings Basic Diluted £'000Weighted average number of shares in issue ('000) 47,865 48,083 Profit for the financial year 7,549 15.8p 15.7p Earnings 7,549 15.8p 15.7p 5 CASH FLOW FROM OPERATING ACTIVITIES 2006 2005 £'000 £'000 Profit for the year attributable to equity shareholders 9,774 7,549Tax charge 4,818 2,535Depreciation of tangible and intangible assets 3,062 2,437Share options - value of employee services 791 623(Gain)/loss on sale of property, plant and equipment (383) 7Financing expense 3,096 2,458 Movement in working capital (9,215) 135 Cash generated from operations 11,943 15,744 6 CLOSING NET DEBT 2006 2005 £'000 £'000 Borrowings - current (18,536) (10,991)Borrowings - non-current (44,438) (49,106)Cash and cash equivalents 8,798 9,445 Closing net debt (54,176) (50,652) 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 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)Share options - Value of employeeservices - - - - 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 period 12 76 443 (583) 11,258 11,206At 31 December 2006 9,585 3,628 (515) (1,124) 700 12,274 At 1 January 2005 9,573 3,552 (958) 122 (15,360) (3,071)Profit for the year attributableto equity shareholders - - - - 7,549 7,549Unrealised exchange movement - - - (663) - (663)Share options - Value of employee - - - - 623 623servicesExcess tax on share option schemes - - - - 40 40Dividends - - - - (2,323) (2,323)Actuarial losses on pensionsschemes - - - - (1,595) (1,595)Tax on actuarial losses onpensions schemes - - - - 508 508Movement in period - - - (663) 4,802 4,139At 31 December 2005 9,573 3,552 (958) (541) (10,558) 1,068 Retained earnings as disclosed in the Balance Sheet (page 14) 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 27 February 2007. 9 FINAL DIVIDEND Relevant dates concerning the payment of the final dividend are Annual general meeting 22 May 2007 Record date 8 June 2007 Payment date 9 July 2007 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