Preliminary results

ENSOR HOLDINGS PLC ("Ensor", the "Group" or the "Company") Preliminary results for the year ended 31 March 2013 CHAIRMAN'S STATEMENT * Operating profit: Up 66% to £2,427,000 * Earnings per share: Up 53% to 5.5p per share * Final dividend: Up 52% to 0.8p per share We have just completed what has been a more challenging year for the Group on anumber of fronts. The economy of the construction sector, which directlyaffects us, was largely static during the year, making trading more difficult.We also continued the exciting integration of our recent acquisition,Technocover Limited, into the Group. I am pleased to say however that theyear's outcome has been excellent and has continued the progress of previousyears. In January last year we acquired Technocover, a manufacturer of physicalsecurity products for the utilities sector. The company required refinancing,the introduction of financial controls and production disciplines to meet thedemands of a full order book. Senior management appointments have been madeduring the year and we are already seeing very promising returns from ourinvestment. Profitability has been in line with our forecasts and cash has beengenerated to benefit the Group. There continues to be work needed to maximiseour return from Technocover but we are pleased with progress to date. Our other companies have made good contributions to the results. Our roofingtools business has responded well to remaining within the Group and hasproduced a good result for the year. Our door manufacturing and door motorsbusinesses have performed very satisfactorily despite operating in difficultmarkets, including Ireland, and have introduced exciting new products andservices for the future. Our packaging operation has had a year of goodprogress and is sourcing greater volumes from China, enhancing margins. Theroofing and drainage building products business operates at the heart of thedifficult construction sector. With the introduction, however, of innovativeand technical new products, the business has had a satisfactory year. The Ensor office in China continues to provide an important link to our mainsuppliers and has had a very busy year maintaining the levels of supply andservice demanded by the Group. As much of what we sell is sourced in Europe and the Far East, we must beconstantly aware of the impact of exchange rates on our costs. Although we havebeen able to largely contain the effects of the weakened pound by forwardbuying of currency, we will be working hard this year to maintain our marginsin a competitive market. During the year we completed a successful enhanced transfer value exercise(ETV) with our deferred pension scheme members. This has significantly reducedour overall Group pension liabilities with over 60% of the deferred members -by number and by value as at 31 Mach 2012 - taking up our enhanced offer tomove their pension savings away from our scheme. This has been financed usingpension fund assets and about £750,000 of cash from the Group. Our subsidiary companies have generated positive cash flows on profitabletrading with careful working capital control. Despite significant investment inTechnocover, capital expenditure and the ETV exercise, our borrowings remainmodest and gearing is a very acceptable 23%. Since the year end we have exchanged contracts to sell our land holding inStockport. The sale, at a price which is a premium to the book value, isconditional upon planning permission being granted. The scheme is howeversupported by the Local Authority and completion of the sale is expected by theend of 2014. We continue to work to satisfy pre-planning formalities for ourBrackley site, but recent changes to planning legislation are slowing progress. We are proposing to pay a final dividend of 0.8p per share, making a totaldividend paid and proposed of 1.2p per share for the year - a 50% increase onlast year. This is in keeping with our desire to maintain dividend growth,where prudent. The final dividend will be payable on 9 August 2013, toshareholders registered on 28 June 2013. It has been said many times by wise heads that an organisation's success isbased on the talents of the people it employs. This could not be truer than atEnsor. I thank and appreciate all our talented men and women who have worked toproduce these very good results. K A Harrison TDChairman14 June 2013. BUSINESS REVIEW Operating results Ensor's acquisition of Technocover, in January 2012, has had a marked effect onthe Group result for the year, as we have consolidated a full year's tradingfor the first time. Whilst increasing our focus towards Building and Security Products, theacquisition has also served to diversify the Group's activities into subtlydifferent market areas - namely UK utilities. Nevertheless, the Group'sactivities remain significantly dependent upon the UK construction market,which continues to be challenging as restricted public spending and a generallack of confidence serve to hinder investment in both capital and refurbishmentprojects. On a like-for-like basis, excluding the businesses disposed of and acquired(being Lowland Ensor Doors and Technocover respectively), the Group resultsshowed a maintained operating profit in 2012/13, in line with our expectations. Sales reduced by less than 2% and remained reliable throughout the year. Asignificant element of the reduction was due to the continued focus onhigher-margin sales, which ensured that the gross profit margin was improvedfrom 24.2% to 24.6%, and the aggregate gross profit figure increasedyear-on-year. Margins have been maintained or improved across the group. This growth was mitigated by a modest increase in sales and administrativeoverheads. The year-on-year movement in total Group sales and operating profit (beforeexceptional administrative expenses), reflects the consolidation of twelvemonths' results from Technocover. Having experienced a period of distress prior to acquisition, the monthsfollowing acquisition presented challenges at Technocover to address a backlogof work and to manage customer expectations, in particular. Nevertheless, thecompany contributed continuously to group operating profits. Senior appointments were made to strengthen the finance and productionfacilities of the business, and essential capital and maintenance expenditurewas undertaken to enable the company to develop. There is still much to do at Technocover, but the business ended the year in asignificantly more capable condition than it was at acquisition. Group operating profit of £2,427,000 was £967,000 (66%) higher than last year. Discontinued activity and impairment of goodwill The 2012 Annual Report and Accounts anticipated the disposal of CMS ToolsLimited, which resulted in it being treated as a discontinued operation. Thesale of the business did not proceed and the 2012 results have been representedto include CMS within continuing operations. The discontinued operations also included an impairment loss of £1,014,000 inrespect of an impairment of the goodwill of CMS Tools Limited. UnderInternational Financial Reporting Standards previously recognised impairmentlosses cannot be reversed in subsequent years. Finance costs Finance costs comprise borrowing costs and an actuarial calculation reflectingthe net cost of financing the deficit in the Group's defined-benefit pensionscheme. The increase in total finance costs, from £165,000 to £295,000, principallyreflects the full-year impact of finance costs associated with the acquisitionof Technocover - its subsisting bank borrowings, Group bank borrowings assumedto acquire the business, and a notional charge on contingent consideration. The majority of Technocover's finance costs are attributable to an enhancedcollar arrangement, which was established in 2007. Whether the arrangement wasmis-sold by the company's bank at the time, is under consideration as part ofthe Financial Conduct Authority's review of such arrangements and a separateclaim lodged by the company. Cash flow and financial position Cash flow generated from operations of £2,133,000 (2012: (£795,000) absorbed)represents a strong performance, having been adversely affected by an increasein receivables, following particularly high sales at the year-end. Two notable factors contribute heavily in arriving at the net cash flow for theyear - loan repayments of £583,000 and payments of £778,000 in relation topension fund liability management. The loan repayments of £583,000 relate to a bank loan which was consolidated onthe acquisition of Technocover and which featured a bullet repayment of £250,000, in 2013. The balance of the loan, of £1,075,000, is payable byinstalments. Consolidated group borrowings stood at £2,101,000 at the year-end (2012: £2,713,000), representing gearing of 23% (2012: 34%). Commencing in April 2012, the Company promoted enhanced transfer value offersto all deferred members of the Ensor Group Pension Fund. By making such offers,we intended to contain future risks by reducing the size of the schememembership and hence reducing the unpredictability of future scheme costs andinvestment returns. The exercise was completed during the year, and the offer was accepted by 116out of 191 deferred members. The cost of enhancements and associated fees,totalling £778,000, was borne by the Company. Transfer values of £2,755,000were met by the scheme itself, representing 62% of the total transfer valuesattributable to deferred members. The carrying value of the transferred liabilities was such that a loss of £81,000 was crystallised in the accounts. The deficit has been reduced from £3.2m to £2.7m, but more importantly, the scheme liabilities have reduced from £5.7m to £3.0m. The Group's net assets have increased to £8.9m (2012: £8.0m), equivalent to 29pper share. Dividend The directors propose to pay a final dividend of 0.8p per share in respect ofthe financial year ended 31 March 2013 (2012: 0.525p). The final dividend willbe payable on 9 August 2013, to shareholders registered on 28 June 2013. Dividends of £280,000 were paid on ordinary shares during the year ended 31March 2013 (2012: £187,000). Dividends paid and proposed In respect of the year ended: 2013 2012 Interim dividend paid 0.40p 0.275p Final dividend proposed 0.80p 0.525p ______ ______ 1.20p 0.800p ______ ______ Consolidated Income Statement for the year ended 31 March 2013 _____________________________________________________________________________ Re-presented 2013 2012 £'000 £'000 CONTINUING OPERATIONS Revenue 32,770 24,677 Cost of sales (24,234) (18,200) ______ ______ Gross profit 8,536 6,477 Administrative expenses (6,109) (5,017) Exceptional administrative expenses - - (1,014)impairment of goodwill Total administrative expenses (6,109) (6,031) ______ ______ Operating profit before exceptional 2,427 1,460administrative expenses Exceptional administrative expenses - - (1,014)impairment of goodwill Operating profit 2,427 446 Finance costs (295) (165) ______ ______ Profit before tax 2,132 281 Income tax expense (474) (209) ______ ______ Profit for the year attributable to equity 1,658 72shareholders of the parent company ______ ______ Earnings per share - basic and fully diluted 5.5p 0.3p ______ ______ Consolidated Statement of Comprehensive Income £'000 £'000 Profit for the year 1,658 72 Other comprehensive income: Actuarial loss (436) (286) Income tax relating to components of other 38 28comprehensive income Revaluation of land and buildings - 140 ______ ______ Total comprehensive income attributable to 1,260 (46)equity shareholders of the parent company ______ ______ Consolidated Statement of Financial Position at 31 March 2013 ______________________________________________________________________________________ 2013 2012 £'000 £'000 ASSETS Non-current assets Property, plant & equipment 6,901 6,753 Intangible assets 3,087 2,771 Deferred tax asset 632 806 ______ ______ Total non-current assets 10,620 10,330 ______ ______ Current assets Assets held for sale - 138 Assets of disposal group classified as held - 1,031for sale Inventories 3,109 3,005 Trade and other receivables 8,001 6,508 Cash and cash equivalents 298 - ______ ______ Total current assets 11,408 10,682 ______ ______ Total assets 22028 21,012 ______ ______ LIABILITIES Non-current liabilities Retirement benefit obligations (2,749) (3,223) Borrowings (810) (1,007) Other creditors (974) (897) Deferred tax (100) (65) ______ ______ Total non-current liabilities (4,633) (5,192) ______ ______ Current liabilities Borrowings (1,514) (1,706) Current income tax liabilities (312) (255) Liabilities of disposal group classified as - (223)held for sale Trade and other payables (6,631) (5,678) ______ ______ Total current liabilities (8,457) (7,862) ______ ______ Total liabilities (13,090) (13,054) ______ ______ NET ASSETS 8,938 7,958 ______ ______ EQUITY Share capital 3,062 3,062 Share premium 522 557 Treasury shares - (79) Revaluation reserve 140 140 Retained earnings 5,214 4,278 ______ ______ Total equity attributable to equity 8,938 7,958shareholders of the parent company ______ ______ The financial statements were approved by the Board and were authorised forissue on 14 June 2013. They were signed on its behalf by: A R Harrison ) DirectorsM A Chadwick ) Consolidated Statement of Changes in Equity for the year ended 31 March 2013 ____________________________________________________________________________ Attributable to equity shareholders of the parent company Issued Share Treasury Revaluation Retained Total Capital Premium Shares Reserve Earnings Equity £'000 £'000 £'000 £'000 £'000 £'000 Balance as at 1 April 2,945 470 - - 4,686 8,1012011 _____ _____ _____ _____ _____ _____ Profit for the year - - - - 72 72 Other comprehensiveincome: Actuarial loss - - - - (286) (286) Related deferred tax - - - - 28 28 Revaluation of land - - - 140 - 140and buildings _____ _____ _____ _____ _____ _____ Total comprehensive - - - 140 (186) (46)income for the year _____ _____ _____ _____ _____ _____ Issue of shares 117 35 - - - 152 Purchase of treasury - - (152) - - (152)shares Sale of treasury - 52 73 - (35) 90shares Dividends paid - - - - (187) (187) _____ _____ _____ _____ _____ _____ Total transactions 117 87 (79) - (222) (97)recognised directlyin equity _____ _____ _____ _____ _____ _____ Balance as at 31 3,062 557 (79) 140 4,278 7,958March 2012 _____ _____ _____ _____ _____ _____ Balance as at 1 April 3,062 557 (79) 140 4,278 7,9582012 _____ _____ _____ _____ _____ _____ Profit for the year - - - - 1,658 1,658 Other comprehensiveincome: Actuarial loss - - - - (436) (436) Related deferred tax - - - - 38 38 _____ _____ _____ _____ _____ _____ Total comprehensive - - - - 1,260 1,260income for the year _____ _____ _____ _____ _____ _____ Reclassification - (35) 79 - (44) - Dividends paid - - - - (280) (280) _____ _____ _____ _____ _____ _____ Total transactions - (35) 79 - (324) (280)recognised directlyin equity _____ _____ _____ _____ _____ _____ Balance at 31 March 3,062 522 - 140 5,214 8,9382013 _____ _____ _____ _____ _____ _____ Share premium The share premium account represents the consideration that has been receivedin excess of the nominal value of shares on issue of new ordinary sharecapital, less permitted expenses. Treasury shares The deduction from retained earnings in respect of treasury shares results fromthe Company's acquisition of its own shares, at cost. Revaluation reserve The revaluation reserve represents the unrealised surplus arising on therevaluation of certain of the Group's freehold properties. Retained earnings The retained earnings reserve represents profits and losses retained in thecurrent and previous periods. Consolidated Cash Flow Statement for the year ended 31 March 2013 ______________________________________________________________________________________ 2013 2012 £'000 £'000 Net cash generated from/(used in) operations 2,133 (795)before pension exercise Pension fund enhanced transfer value exercise (778) - _______ _______ Net cash generated from/(used in) operations 1,355 (795) _______ _______ Cash flows from investing activities Proceeds from sale of property, plant and 53 88equipment Proceeds from disposal of assets held for 150 -sale Acquisition of property, plant and equipment (569) (293) _______ _______ Net cash used in investing activities (366) (205) _______ _______ Cash flows from financing activities Equity dividends paid (280) (187) Issue of shares - 152 Purchase of treasury shares - (152) Proceeds from sale of own shares - 90 Amounts repaid in respect of finance leases (22) (3) Loan repayments (583) (92) _______ _______ Net cash used in financing activities (885) (192) _______ _______ Net increase/(decrease) in cash and cash 104 (1,192)equivalents Opening cash and cash equivalents (1,055) 137 _______ _______ Closing cash and cash equivalents (951) (1,055) _______ _______ Accounting Policies and Notes to the Final Results for the year ended 31 March 2013______________________________________________________________________________________ 1. Basis of preparation The consolidated financial statements of Ensor Holdings PLC have been preparedin accordance with the Companies Act 2006 and International Financial ReportingStandards (IFRS) as adopted by the European Union in accordance with the rulesof the London Stock Exchange for companies trading securities on theAlternative Investment Market. The Group financial statements have beenprepared under the historical cost convention, as modified by the revaluationof land and buildings, and derivative financial instruments at fair valuethrough profit or loss. The principal accounting policies adopted by the Groupare set out below. 2. Basis of consolidation Where the Company has the power, either directly or indirectly, to govern thefinancial and operating policies of another entity so as to obtain benefitsfrom its activities, the entity is classified as a subsidiary. The consolidatedfinancial statements present the results of the Company and its subsidiaries("the Group") as if they formed one single entity. Intercompany transactionsand balances between Group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of businesscombinations using the acquisition method. In the consolidated balance sheet,the subsidiary's identifiable assets, liabilities and contingent liabilitiesare initially recognised at their fair values at the acquisition date. Theresults of acquired operations are included in the consolidated incomestatement from the date on which control is obtained. 3. Segmental analysis For management purposes, the Group's business activities are organised intobusiness units based on their products and services and have three primaryoperating 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; * Other - manufacture of rubber crumb and waste recycling. These segments are the basis on which information is reported to the GroupBoard. The segment result is the measure used for the purposes of resourceallocation and assessment and represents the operating profit of each segmentbefore exceptional operating costs, amortisation and impairment charges, othergains and losses, net finance costs and taxation. Details of the types of products and services from which each segment derivesits revenues are given above. The accounting policies applied in preparing the management information foreach of the reportable segments are the same as the Group's accountingpolicies. The Group's revenues and results by reportable segment for the year ended 31March 2013 are shown in the following table. Building & Packaging Other Unallocated Total Security Products External revenue 29,835 2,216 719 - 32,770 _____ _____ _____ _____ _____ Depreciation 480 23 32 - 535 _____ _____ _____ _____ _____ Operating profit 2,114 278 35 - 2,427 _____ _____ _____ Finance costs (295) (295) Income tax expense (474) (474) _____ _____ Profit for the year (769) 1,658 _____ _____ Total assets 17,257 950 742 3,079 22,028 _____ _____ _____ _____ _____ Total liabilities (6,681) (178) (56) (6,175) (13,090) _____ _____ _____ _____ _____ Capital expenditure 605 16 - 18 639 _____ _____ _____ _____ _____ The Group's revenues and results by reportable segment for the year ended 31March 2012 are shown in the following table. Acquisition Other Total Packag-ing Other Unallo-cated Total of Building Building Techno-cover & & Security Security Products Products External 2,850 18,793 21,643 2,199 835 - 24,677revenue _____ _____ _____ _____ _____ _____ _____ Depreciation 54 199 253 19 37 - 309 _____ _____ _____ _____ _____ _____ _____ Operating 189 952 1,141 255 64 - 1,460profit _____ _____ _____ _____ _____ Finance costs (165) (165) Income tax (209) (209)expense Impairment of (1,014) (1,014)goodwill _____ _____ Profit for the (1,388) 72year _____ _____ Total assets 5,963 9,987 15,950 1,019 801 3,242 21,012 _____ _____ _____ _____ _____ _____ _____ Total (4,224) (1,831) (6,055) (103) (55) (6,841) (13,054)liabilities _____ _____ _____ _____ _____ _____ _____ Capital 49 137 186 3 9 95 293expenditure _____ _____ _____ _____ _____ _____ _____ Head office costs are apportioned to the segments on the basis of earnings. The Group operates almost exclusively in one geographical segment, being theUnited Kingdom. Turnover to customers located outside the United Kingdomaccounted for less than 10% of total Group turnover and has therefore not beenseparately disclosed. Revenue from a single customer did not exceed more than 10% of turnover duringthe current or prior reporting periods. 4. Exceptional item - goodwill impairment charge At 31 March 2012 there was an agreement in place for the sale of a subsidiarybusiness, CMS Tools, to the management of the company. The sale was consideredto be highly probable and so, in accordance with IFRS, the operation wastreated as held for sale in the Statement of Financial Position at that date.The impairment review in respect of the goodwill in this business had resultedin an impairment charge of £1,014,000. The result of the operation, includingthe impairment of goodwill, was treated as a discontinued operation in theIncome Statement for the year ended 31 March 2012. Subsequently, the sale did not proceed and in accordance with IFRS, theoperation is no longer treated as held for sale. The Income Statement for theyear ended 31 March 2012 has been re-presented, with the result of the companynow included in continuing operations and the impairment charge has beenincluded as an exceptional item. Under International Financial Reporting Standards previously recognisedimpairment losses cannot be reversed in subsequent years. 5. Earnings per share Basic and fully diluted Earnings before exceptional administrative expenses 5.5p 3.6p Exceptional administrative expenses - impairment of - (3.3p)goodwill ______ ______ Total earnings per share 5.5p 0.3p ______ ______ The calculation of earnings per share for the period is based on the profit forthe period divided by the weighted average number of ordinary shares in issue,being 30,295,976 (2012: 29,888,168). The fully diluted loss per share is basedupon the weighted average of 30,378,246 shares (2012: 30,002,190). The dilutionis due to subsisting share options. The weighted average number of shares for the basic and fully diluted earningsper share calculation can be reconciled as follows: 2013 2012 No. No. Weighted average number of shares in issue 30,295,976 29,888,168 Weighted average number of dilutive shares arising 82,270 114,022from subsisting share options _______ ______ Weighted average number of shares for fully 30,378,246 30,002,190diluted calculation ______ _ _____ 6. Cash flow generated from operations 2013 2012 £'000 £'000 Cash flows from operating activities Profit for the year attributable to equity 1,658 72shareholders Impairment of goodwill of discontinued - 1,014operation Depreciation charge 535 309 Finance costs 295 165 Income tax expense 474 209 Profit on disposal of property, plant & (14) (38)equipment Profit on disposal of asset held for sale (12) - Amortisation of intangible asset 34 - Charge in respect of enhanced transfer 81 -exercise _______ _______ Operating cash flow before changes in 3,051 1,731working capital Decrease/(increase) in inventories 112 (462) (Increase)/decrease in receivables (1,112) 268 Increase/(decrease) in payables 443 (2,064) _______ _______ Cash generated from/(used in) operations 2,494 (527) Interest paid (191) (164) Income taxes paid (170) (104) _______ _______ Net cash generated from/(used in) 2,133 (795)operations _______ _______ 7. Other information The financial information set out in this preliminary announcement of resultsdoes not constitute the Company's statutory accounts for the years ended 31March 2013 or 31 March 2012 but is derived from those accounts. Statutoryaccounts for 2012 have been delivered to the Registrar and those for 2013 willbe delivered following the Company's Annual General Meeting. The IndependentAuditors have reported on these accounts. Their reports were unqualified anddid 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'sregistered office, Ellard House, Dallimore Road, Manchester M23 9NX at 10.00a.m. on Monday 22 July 2013. The Report and Accounts will be sent to shareholders and be available from theCompany's website at www.ensor.co.uk shortly. Additional copies of the AnnualReport and of this statement will be available at the Company's registeredoffice. Enquiries: Ensor Holdings PLCRoger Harrison/Marcus Chadwick0161 945 5953 Westhouse Securities LimitedRichard Baty/Paul Gillam020 7601 6100