25th Nov 2009 07:00
|
For Immediate Release |
25 November 2009 |
Superglass Holdings Plc
("Superglass" or "Company" or "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 AUGUST 2009
Superglass is pleased to announce its preliminary results for the year ended 31 August 2009.
FINANCIAL HIGHLIGHTS
EBITA £6.6m (2008:£9.5m)
PBTA £5.0m (2008: £7.3m)
Business highly cash generative - Borrowings reduced by £2.4m - Cash Interest cover 6.2x (2008: 6.3x)
Final dividend of 0.5p per share, giving a total for the year of 1.5p (2008: 3.4p)
OPERATING HIGHLIGHTS
Board further strengthened with the appointment of David Gray as Non-executive Director
Increase in carbon saving related funding during the year - 20% increase in Carbon Emission Reduction Targets (CERT) - Announcement of the Community Energy Saving Programme (CESP)
Trading conditions expected to remain challenging but reduced input costs and new business initiatives are expected to improve margins
Tim Ross, Chairman commented: "Trading conditions are expected to remain challenging during 2010. The hard work and commitment shown by our staff and workforce have however provided us with a lower cost-base from which to move forward. Assisted by an anticipated reduction in input costs, a wider customer-base and continuing environmental initiatives, we enter the new financial year with a strong platform for recovery."
FOR FURTHER INFORMATION, PLEASE CONTACT
|
Superglass Holdings plc |
|
|
Alex McLeod, Chief Executive Tony Kirkbright, Chief Finance Officer |
01786 451 170 |
|
Buchanan Communications |
|
|
Diane Stewart/ Tim Anderson/ Carrie Clement |
0207 466 5000 |
|
Brewin Dolphin Investment Banking |
|
|
Andrew Kitchingman / Sean Wyndham-Quin |
0845 213 4730 |
CHAIRMAN'S STATEMENT
OVERVIEW OF THE YEAR
2009 was another challenging year for Superglass. Demand remained extremely subdued and competition for market share increased accordingly. Against this background, Superglass did well to achieve an EBITA of £6.6m. Although a marked reduction on the £9.5m achieved in the previous year, the result would have been worse without the cost reductions that were promptly implemented as the extent of the market deterioration became apparent. A number of new customer relationships were also developed as the year progressed which will bear fruit in the coming year.
A key initiative during the course of the year was the £1.3m CERT funded "SUPERDAD" Scheme, in conjunction with Scottish and Southern Energy. Funding was secured during the year and the scheme was launched in September 2009. This was the first of this kind of initiative, which took our competitors by surprise and opened up an entirely new route to market. DIY customers are now able to obtain discounted Superglass insulation through the independent builder's merchant sector and early indications suggest that the scheme is working well.
The Government also showed its continued commitment to energy efficiency with the the extension of the CERT program to 2012 and the introduction of the Community Energy Saving Programme (CESP). During the year, it also made a key change by ending the issue of carbon credits to utility companies that issue energy-efficient light bulbs by direct mail. It is widely believed that the companies will now need to increase their insulation initiatives to achieve their carbon-saving targets.
BOARD CHANGES
On 1 November, Alex McLeod took over as Chief Executive Officer, bringing with him a wealth of experience in the insulation industry. He has already demonstrated a number of fresh ideas and enthusiasm to drive Superglass forward. Alex's appointment followed John Smellie's decision to retire which we announced earlier this year. I would like to take this opportunity to thank John for his key contribution to the business over the last 24 years and wish him a long and happy retirement. John will facilitate the hand-over to Alex by remaining as a director until 31 December 2009.
During the year we further strengthened the Board with the appointment of David Gray as a non-Executive Director, whose breadth of experience in manufacturing is already proving highly valuable, complementing the existing areas of expertise on the Board.
DIVIDENDS
I am pleased to report that, the Board of Superglass has resolved to pay a final dividend of 0.5p per share, giving a total of 1.5p for the year. This reflects market and trading circumstances and support for the initiatives outlined in Alex's statement.
OUTLOOK
Trading conditions are expected to remain challenging during 2010. The hard work and commitment shown by our staff and workforce have however provided us with a much lower cost-base from which to move forward. Assisted by an anticipated reduction in input costs, a wider customer-base and continuing environmental initiatives, we enter the new financial year with a strong platform for recovery.
Tim Ross
Chairman
25 November 2009
CHIEF EXECUTIVE OFFICER'S REPORT
INTRODUCTION
I am pleased to present my first preliminary results as Chief Executive Officer of Superglass following my appointment to that role on 1 November 2009.
The impact of the current unprecedented recession continued to make trading conditions challenging for Superglass. The Company has weathered the downturn well, continuing to generate cash and repay debt, through a cost reduction programme, the reduction of capital expenditure and the development of new trading relationships and marketing initiatives.
As Superglass' new Chief Executive Officer, I am encouraged by the opportunities for growth in the Company. My immediate plans are to conduct a strategic review of the business. I plan to communicate the outcome of my review more fully at the interim results announcement next year. Some key areas I have already identified to progress include sales development and the introduction of innovation processes to deliver new products and services. Whilst the timing of any recovery is not within our control, we are in a robust position through the strength of the business and the introduction of some immediate initiatives to benefit from sales growth from new channels and then an upturn as markets recover a more normal pattern. Further efficiency gains are possible and may require some modest capital investment.
RESULTS
EBITA £6.6m (2008: £9.5m)
Adjusted Earnings Per Share of 8.3p (2008: 11.3p)
Net Debt down £2.4m to £21.7m
Margins in the 1st half of the year were reduced by lower volumes and higher input costs. Volume decline accelerated in the 2nd half and selling prices came under greater pressure. Lower input costs, however, contributed to a modest increase in margins during the 2nd half of the year.
In response to these circumstances, management have been focused on reducing costs in all aspects of the business this year, the impact of which will flow through to 2009 /2010. Savings were made on waste disposal, raw materials and energy costs.
THE MARKET
During the year the insulation market was affected by two key factors; the full year effect of increased targets arising from the Government sponsored CERT programme and the continued decline in demand for new build private housing.
CARBON SAVING
The UK residential carbon savings market is driven primarily through long-term regulatory requirements imposed by the Government on the energy suppliers and electricity generators. CERT and the soon to be implemented CESP require suppliers and generators to invest in energy efficiency improvements in UK residential housing stock. The current targets require estimated annual expenditure in excess of £1bn.
The extension of CERT and the announcement of CESP is excellent news for Superglass, which is well placed to support delivery of two of the most effective and low cost energy efficiency solutions, namely cavity wall and loft insulation.
Key changes to CERT and CESP are as follows:
CERT
It is hoped that the future changes in targets are clarified and the provisions for carry over from CERT to future schemes is resolved quickly and certainly before the forthcoming general election.
CESP
CESP will involve the promotion of partnership schemes and bring together local authorities, energy suppliers and local communities to deliver improvements in energy efficiency. Up to 100 community schemes are planned benefiting around 90,000 homes and delivering savings of nearly 2.9m tonnes of CO2 reduction by December 2012.
The UK government continues to play a key and supportive role in driving demand for insulation to address the ever more pressing need to meet EU targets for reduced greenhouse gas emissions and targets linked to climate change. During the year we strengthened our links with the Scottish Parliament, discussing energy initiatives and building regulations and providing advice where appropriate.
HOUSING
The UK housing market remained difficult during the financial year. Recovery will be slow and start from historically low levels. Private house construction is forecast to be at its lowest level since 1992 and despite recent more encouraging statements from house builders it is acknowledged that the risk of rising unemployment and cut backs in government spending may yet have an adverse effect on any sustainable recovery. It is also suggested that some of the recent increase in activity reflects the restrained supply of new properties rather than pure demand pressure.
Additional government expenditure has been promised in the public housing sector and this is forecast to recover at a faster rate than the private sector, recovering strongly in 2010 and 2011.
REPAIR, MAINTENANCE AND IMPROVEMENT
The volume of repair and maintenance work, historically less volatile than most segments of our markets, has held up reasonably well. Future trends in this segment are, however, sensitive to activity levels in the housing market and trends in disposable income. Housing equity withdrawal boosted spending for some years prior to this recession. This is not expected to return in the immediate future.
SALES
Superglass has restructured to focus more heavily on the growing carbon saving market following the introduction of CERT. Revenue was £38.1m, down 7.3% on 2008. In the context of a reduction in construction of more than 20%, the shift in focus has offered some protection.
Contractors
Superglass made a significant shift into carbon saving (CERT) during the year, growing sales by 26%. Carbon saving related activity represented just over 50% of Superglass business in the year, up from 38% in 2007/08.
Distributors & Builders' Merchants
Sales through distributors and merchants declined 24% during 2008/09. Selling prices were under pressure during 2009, but remained broadly flat on 2008.
The decline in house-building activity hit all distributors badly resulting in a 32% fall in sales in this sector which has been partly offset by the development of new trading relationships, notably with the UK's leading specialist drylining and insulation distributor, Sheffield Insulations.
Superglass has a strong position with independent builders' merchants and this is expected to continue during 2010. Sales volumes in difficult trading conditions were up 2% on the previous year. These relationships have been built up over time and are based on our ability to provide smaller quantities of insulation and a flexible, excellent quality of service.
SUPERDAD
Superglass boosted its traditional routes of supply through insulation contractors with the introduction of a unique energy efficiency scheme to promote sales of loft insulation through the independent builders' merchant sector. Funding was secured during the year and the scheme was launched in September 2009. In the first of its kind for a UK manufacturer, Superglass secured £1.3m of funding from Scottish and Southern Energy ("SSE") to support the "SUPERDAD" scheme aimed at offering DIY customers discounted Superglass insulation though the builders merchant sector. In return for funding the scheme SSE receive carbon credits.
The scheme has generated significant interest among existing and potential Superglass customers. It provides an excellent opportunity for all our builders merchant customers to participate in the DIY energy efficiency market opening up their business to new customers and helping them to make a real contribution to the UK's ambitious zero carbon objectives in domestic dwellings. Early indications are very encouraging with participating branches increasing sales of insulation, from an initial low level. We are confident about the success of this initiative and believe that this scheme could be the first of many such initiatives.
OPERATIONS
Superglass prepared well for the current downturn by taking the following key actions:
ENVIRONMENT
Respect for the environment is a key value of Superglass and we work closely with the Scottish Environmental Protection Agency to ensure that the highest standards are maintained.
Waste glass bottles are the main raw material in the manufacture of our glasswool insulation and during the year we moved to 100% use of glass bottles, up from approximately 80%, which reduced our input costs. We estimate that some 35,000 tonnes of waste glass which would otherwise be sent to landfill is used in the manufacture of our products. The percentage of waste glass usage is one of the highest in the industry.
We also recycle waste glasswool as much as possible and less than 2% is sent to landfill. Our target is to reduce this to zero by the end of 2011. All process water is cleaned and recycled and rainwater is collected from the roof and used in our production processes.
OUTLOOK
Our key markets will remain challenging during 2010. Lack of clarity surrounding the extension of CERT related targets to 2012 is making it difficult to predict short-term demand and current volumes are lower than expected. The recently announced CESP scheme and the removal of lightbulbs from schemes will, however, have a positive impact on future demand. Outlook for new build housing, repair, maintenance and improvement will continue to be uncertain. This current financial year will be impacted positively by a reduction in input costs, in particular energy costs. I have commenced a strategic review of the business aimed at broadening Superglass' offering to a wider base of customers, efficiency improvement and maintaining our focus on cash generation and will report at the 2009/10 interim results more of my plans.
Alex McLeod
Chief Executive Officer
25 November 2009
FINANCE REVIEW
SALES
Total sales in the year fell by 7.3% to £38.1m. Improvements in CERT related sales and sales to builders' merchants did not offset reductions in specialist distribution and Eire, both of which have seen declining volumes arising from construction activity. Demand in Central Europe was similarly affected with volumes down on historic levels.
OPERATING PROFIT
EBITA fell from £9.5m in the period ended 31 August 2008 to £6.6m. Operating profit margins before amortisation reduced from 23% to 17.2% with increased energy costs accounting for almost 60% of the reduction; the contracts resulting in these raised costs have now expired. Reduced volumes adversely affected operational gearing, especially during the second half. Other cost reduction measures helped to partially offset these.
TAXATION
The effective tax charge for the Group is 30% (2008: 28%). The rate is higher than the standard rate of taxation of 28% due to disallowable expenditure incurred by the Group.
DIVIDENDS
The proposed final ordinary dividend of 0.5p per share (2008:1.7p) is to be paid on 12 February to shareholders on the register at the close of business on 8 January. This will result in a full year dividend of 1.5p (2008: 3.4p). In deciding the level of future dividend payments the directors will take account of the profitability, cash generation and underlying growth of the business while seeking to maintain an appropriate level of dividend cover.
EARNINGS PER SHARE
Adjusted earnings per share (excluding amortisation of intangible assets) were 8.3p (2008: 11.3p). Basic earnings per share amounted to 0.8p (2008: 3.7p).
CASH & BORROWINGS
The Group continues to reduce debt. Net borrowings at 31 August 2009 were £21.7m (2008: £24.1m). Net cash generated from operating activities was £4.9m (2008: £6.9m), despite reduced operating profit. There has been considerable focus during the year on reducing stock levels and maintaining debtor collection. Capital expenditure was restricted to £0.7m and primarily directed towards safety and cost reduction projects. There were other cash outflows of £3.3m on term loan repayments and £1.6m in dividends. The Group continued to comfortably meet both its interest cover and debt financing covenants.
£5m of the debt is repayable in May 2014. The balance is repayable in equal quarterly instalments expiring in July 2014.
TREASURY AND FINANCIAL RISK MANAGEMENT
The Group aims to reduce financial risks wherever possible and ensure that it has sufficient liquidity to meet all foreseeable needs. Forward currency contracts in US Dollars are used to hedge foreign currency purchases of manufacturing consumables with the objective of minimising the effect of fluctuations in exchange rates on future transactions and cash flows.
To the extent that Group income denominated in Euros cannot be offset against raw material purchases, forward currency contracts in Euros are used. Separate bank accounts are held for all currencies in which trade is conducted, in order to facilitate the collection of debts and the management of currency positions.
The Group has entered an interest rate cap with its bankers, Clydesdale Bank, where the interest costs on borrowings of £7.5m are capped at 5.5 per cent. for the year ending 31 August 2010.
As part of the overall service package, Superglass provides credit to customers and as a result there is an associated risk that the customer may not be able to pay outstanding balances. Superglass has developed proven credit control procedures, which, together with cover provided by its credit insurer, minimise credit risk. For the year ended 31 August 2009 the bad debt expense amounted to 0.1% of sales (2008: nil), the majority of this was covered by insurance. During 2009 the availability of credit insurance from commercial insurers has been tightening and cover reduced, leading to enforcement of established credit procedures which could affect the trading relationships with some customers.
SHARE CAPITAL
The Company has only one class of share capital. The ordinary shares carry no right to fixed income, but holders are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets and there are no restrictions on the transfer of the Company's shares. During the period the Company complied fully with the requirements that apply to the Company's shares as a consequence of these shares being listed on The London Stock Exchange.
|
Financial KPIs |
2009 |
2008 |
|
Organic sales growth |
(7.3%) |
(6.6%) |
|
Operating profit margin |
5.7% |
12.3% |
|
Return on capital employed (profit after tax : net assets) |
14.8% |
53.0% |
|
Underlying earnings per share |
8.3p |
11.3p |
OPERATIONAL RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which could have an impact on the Group's performance, but are beyond its control. The Group closely monitor market trends and risks on an ongoing basis and are the focus of monthly management meetings where performance is measured against budget, forecast and prior year.
The key non financial risks and uncertainties facing the Group are as follows:
ECONOMIC CONDITIONS
The Group's products are sold into both the residential and commercial construction sectors. As a result it is exposed to movements in demand, which may arise from changes in Government policy and expenditure plans, general economic climate and individual business and consumer confidence. Over the past 12 months the Group has experienced weaker demand in these markets, which has had an impact on the results for the current year. Action has been taken to reduce manned production capacity to align with demand. Further action would be considered if volumes fell further.
INPUT PRICES
The Groups operating performance is impacted by the pricing and availability of its key inputs which include energy, recycled glass, resin, borax and polythene packaging some of which are themselves subject to volatile input cost influences. The Group looks to minimise the adverse effects of such movements in materials through strong long-term relationships with suppliers, forward purchasing, inventory management and multiple suppliers. The Group engages power consultants to assist in formulating a power purchasing strategy in order to minimise the effects of volatility. Flexible supply contracts have allowed the Group to forward purchase a major element of its power requirements for up to 24 months ahead.
COMPETITORS
The Group operates within a competitive environment and there is a risk to its results and financial performance by the actions of its competitors, including competitors' marketing strategies and product development. In recent months, competitive pressure has intensified due to contraction in the overall market size. This has led in some cases to lower margins. The Group looks to counter any such actions by ensuring a low cost manufacturing base, industry leading customer service and flexibility and working closely with customers on innovative sales schemes such as 'SUPERDAD'.
INFORMATION TECHNOLOGY ("IT")
The Group is reliant upon IT systems for operational and financial control, a lengthy failure or disruption could affect day to day operations. Dedicated IT support staff are employed together with external support services to monitor the IT systems, a robust continuity plan has been developed.
TRANSPORT AND FUEL PRICES
As all the Group's sales are delivered to customers, prolonged disruption of road transport systems or availability of vehicle fuel would result in reduced sales over the period covered. Additionally, a significant increase in vehicle fuel can affect profitability.
CUSTOMER CONCENTRATION
The reduction of sales into residential and commercial new build resulted in a greater proportion of sales being made into the residential carbon saving sector. Cavity blowing wool makes up 60% of the volume into this market and it must be supplied via an accredited system designer. The latter is responsible for providing an approved installation system to licensed installers and ensuring compliance with the system. As Superglass sell all their cavity blowing wool in the UK to a single customer under a solus agreement, there is a risk of over-reliance upon this customer. This risk is mitigated via a rolling two year notice period and a long relationship with the customer dating back to 1991. In order to reduce customer concentration, the management have grown the customer base and continue to seek sales growth in other areas and with schemes such as 'SUPERDAD' and diversification within the residential carbon saving market.
|
CONSOLIDATED INCOME STATEMENT
For the year ended 31 August 2009
|
Note
|
31 August
2009
£000
|
Restated
( see note 1)
31 August
2008
£000
|
|
|
Revenue
|
|
38,133
|
41,138
|
|
|
Cost of sales
|
|
(25,670)
|
(24,636)
|
|
|
|
|
|
|
|
|
Gross profit
|
|
12,463
|
16,502
|
|
|
Distribution expenses
|
|
(4,049)
|
(5,257)
|
|
|
Administrative expenses
|
|
(6,540)
|
(6,494)
|
|
|
Other operating income
|
|
299
|
307
|
|
|
Operating profit
Financial expenses
|
|
2,173
(1,540)
|
5,058 (2,106) |
|
|
|
|
|
|
|
|
Profit before tax
|
|
633
|
2,952
|
|
|
Taxation
|
2
|
(191)
|
(827)
|
|
|
|
|
|
|
|
|
Profit for the year attributable to equity holders of the parent
|
|
442
|
2,125
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
Basic earnings per share
|
3
|
0.8p
|
3.7p
|
|
|
Diluted earnings per share
|
3
|
0.8p
|
3.7p
|
|
|
CONSOLIDATED INCOME STATEMENT OF RECOGNISED INCOME
AND EXPENSE
For the year ended 31 August 2009
|
31 August
2009
£000
|
Restated
( see note 1)
31 August
2008
£000
|
|
Profit for the year
|
442
|
2,125
|
|
Total recognised income and expense for the year attributable to equity holders of the parent
|
442
|
2,125
|
|
CONSOLIDATED BALANCE SHEET
At 31 August 2009
|
Note
|
2009
|
2008
|
||
|
£000
|
£000
|
£000
|
£000
|
||
|
Non-current assets
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
15,043
|
|
15,844
|
|
Intangible assets
|
|
|
18,598
|
|
22,989
|
|
|
|
|
|
|
|
|
|
|
|
33,641
|
|
38,833
|
|
Current assets
|
|
|
|
|
|
|
Inventories
|
|
1,981
|
|
3,293
|
|
|
Trade and other receivables
|
|
2,612
|
|
3,490
|
|
|
Derivative financial instruments
|
|
—
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
|
4,593
|
|
6,984
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
38,234
|
|
45,817
|
|
Current liabilities
|
|
|
|
|
|
|
Other interest-bearing loans and borrowings
|
|
4,133
|
|
3,400
|
|
|
Trade and other payables
|
|
7,762
|
|
10,087
|
|
|
Deferred government grants
|
|
193
|
|
193
|
|
|
Income tax payable
|
|
1,375
|
|
1,861
|
|
|
|
|
|
|
|
|
|
|
|
|
13,463
|
|
15,541
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Other interest-bearing loans and borrowings
|
|
17,563
|
|
20,730
|
|
|
Deferred government grants
|
|
145
|
|
339
|
|
|
Deferred tax
|
|
4,072
|
|
5,196
|
|
|
|
|
|
|
|
|
|
|
|
|
21,780
|
|
26,265
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
35,243
|
|
41,806
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
2,991
|
|
4,011
|
|
Equity attributable to equity holders of the parent
|
|
|
|
|
|
|
Share capital
|
|
|
583
|
|
583
|
|
Share premium
|
|
|
1,108
|
|
1,108
|
|
Retained earnings
|
|
|
1,300
|
|
2,320
|
|
Total equity
|
|
|
2,991
|
|
4,011
|
These financial statements were approved by the Board of Directors on 25 November 2009 and were signed on its behalf by:
Tim Ross Tony Kirkbright
Chairman Finance Director
|
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 August 2009
|
|
31 August
2009
£000
|
Restated
(see note 1)
31 August
2008
£000
|
|
Cash flows from operating activities
|
|
|
|
|
Profit for the year
|
|
442
|
2,125
|
|
Adjustments for:
|
|
|
|
|
Depreciation and amortisation
|
|
5,974
|
6,453
|
|
Net financial expense
|
|
1,540
|
2,106
|
|
Taxation
|
|
191
|
827
|
|
Equity settled share-based payment transactions
|
|
102
|
110
|
|
Cash from operating activities before changes in working capital and provisions
|
|
8,249
|
11,621
|
|
Decrease/(increase) in inventories
|
|
1,312
|
(205)
|
|
Decrease in trade and other receivables
|
|
878
|
624
|
|
Decrease in trade, other payables and deferred government grants
|
|
(2,439)
|
(1,492)
|
|
Cash generated from the operations
|
|
8,000
|
10,548
|
|
Interest paid
|
|
(1,325)
|
(1,849)
|
|
Tax paid
|
|
(1,801)
|
(1,783)
|
|
Net cash from operating activities
|
|
4,874
|
6,916
|
|
Cash flows from investing activities
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
(719)
|
(2,315)
|
|
Net cash used in investing activities
|
|
(719)
|
(2,315)
|
|
Cash flows from financing activities
|
|
|
|
|
Purchase of own shares
|
|
—
|
(564)
|
|
Repayment of borrowings
|
|
(3,285)
|
(3,285)
|
|
Payment of finance lease liabilities
|
|
(18)
|
(1)
|
|
Dividends paid
|
|
(1,564)
|
(985)
|
|
Net cash absorbed by financing activities
|
|
(4,867)
|
(4,835)
|
|
Net decrease in cash and cash equivalents
|
|
(712)
|
(234)
|
|
Cash and cash equivalents at beginning of year
|
|
(100)
|
134
|
|
Cash and cash equivalents at end of year
|
|
(812)
|
(100)
|
1. Accounting Policies
Superglass Holdings Plc ("the Company") is a company domiciled and incorporated in the United Kingdom. The accounts were approved by the Board on 25 November 2009.
Statement of compliance
The consolidated financial statements have been prepared in accordance with IFRS (including International Financial Reporting Interpretations Committee (IFRIC) interpretations) as adopted by the EU ("adopted IFRS"). The Company has elected to prepare its parent company financial statements in accordance with UK GAAP.
Basis of preparation
The financial statements are prepared on the historical cost basis except for intangible assets acquired in a business combination and derivative financial instruments, which are stated at their fair values. The consolidated financial statements are presented in Pounds Sterling which is the Company's presentational and functional currency. The financial statements have been prepared on the going concern basis, the Directors considered all factors likely to influence its future performance and financial position, including cash flows, borrowing facilities and the risks and uncertainties relating to its business activities. The key factors considered by the Directors were:-
the implications of the challenging economic environment and weakened levels of demand
the impact of upward price pressure on input prices;
the ability of the Group to maintain its frequency of trade receivables and the credit risk associated with these balances;
the competitive environment in which the Group operates
the potential actions that could be taken in the event that revenues are worse than expected, in order to protect cash flows and operating profit
the finance facilities available and banking covenants, at the year end the Group had access to £5.2m undrawn overdraft facility.
Indication from the bank that the overdraft facility will be renewed at the forthcoming annual review in February 2010.
The preparation of financial statements in conformity with adopted IFRS requires the Directors to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.
Restatement of certain prior year comparatives
Following discussion with the Financial Reporting Review Panel concerning the company's accounts for the year ended 31 August 2008, the company has chosen to restate the comparatives for the year ended 31 August 2008 to reflect the adjustment to prior years deferred tax in respect of the change in the UK corporation tax from 30% to 28%. This has the effect of increasing the charge to taxation and reducing the profit for the year ended 31 August 2008 by £354,000 and of reducing the charge to tax and increasing profit for the year ended 31 August 2007 by £354,000.
2. Taxation
Recognised in the income statement
|
2009 £000 |
2008 £000 |
|
|
Current tax expense |
||
|
Current year |
1,376 |
2,167 |
|
Adjustments for prior years |
(61) |
(66) |
|
1,315 |
2,101 |
|
|
Deferred tax expense |
||
|
Origination and reversal of temporary differences |
(1,191) |
(1,274) |
|
Adjustment in respect of prior years |
67 |
- |
|
(1,124) |
(1,274) |
|
|
Total tax in income statement |
191 |
827 |
Reconciliation of effective tax rate
|
Restated (see note 1) |
||||
|
% |
2009 £000 |
% |
2008 £000 |
|
|
Profit before tax |
633 |
2,952 |
||
|
Tax using the UK corporation tax rate of 28% (2008: 28%) |
28 |
177 |
28 |
827 |
|
Non-deductible expenses |
1 |
8 |
1 |
29 |
|
Adjustments in respect of prior years |
1 |
6 |
(2) |
(66) |
|
Effect of 30% tax rate for part of year |
- |
- |
1 |
37 |
|
Total tax in income statement |
30 |
191 |
28 |
827 |
3. Earnings per share
The calculation of basic earnings per share and underlying earnings per share is based on the profit attributable to ordinary shareholders as follows:
|
2009 |
2008 |
|||
|
Basic |
Adjusted |
Basic |
Adjusted |
|
|
Earnings (£000) |
442 |
442 |
2,125* |
2,125* |
|
Adjusted for: Amortisation of intangibles that attract no tax deduction |
- |
4,393 |
- |
4,393 |
|
442 |
4,835 |
2,125 |
6,518 |
|
|
Number of shares at start of period |
58,333,333 |
58,333,333 |
58,333,333 |
58,333,333 |
|
Effects of other shares issued and redeemed |
(395,000) |
(395,000) |
(191,353) |
(191,353) |
|
Weighted average number of shares |
57,938,333 |
57,938,333 |
58,141,980 |
58,141,980 |
|
Weighted average number of diluted shares |
57,938,333 |
57,938,333 |
58,141,980 |
58,141,980 |
|
Earnings per share |
0.8p |
8.3p |
3.7p |
11.3p |
|
Earnings per share as reported in 2008 financial statements (note1 restatement of comparatives) |
4.2p |
11.8p |
||
|
Diluted earnings per share |
0.8p |
8.3p |
3.7p |
11.3p |
|
Diluted earnings per share as reported in 2008 financial statements (note 1 restatement of comparatives) |
4.2p |
11.8p |
||
|
*Earnings restated for the effect of deferred tax adjustment as per note 1 |
||||
4. Status of accounts
The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 August 2009 or 31 August 2008 but is derived from those accounts. Statutory accounts for the year ended 31 August 2008 have been delivered to the Registrar of Companies, and those for the year ended 31 August 2009 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 495, 496 or 497of the Companies Act 2006.
These results were approved by the Board of Directors on 25 November 2009.
Related Shares:
SPGH.L