Unaudited results for year ended 31 December 2012

0700hrs 28 February 2013

Hayward Tyler Group plc

("Hayward Tyler", the "Group" or the "Company")

Unaudited results for the year ended 31 December 2012 incorporating the unaudited interim results for the six months ended

31 December 2012

Hayward Tyler Group plc (AIM: HAYT.L) (formerly Specialist Energy Group plc), the specialist engineering group, today announces its unaudited results for the year ended 31 December 2012. Hayward Tyler is a market leader in the design, manufacture and service of critical application pumps and motors for the power generation and oil and gas markets.

Financial Highlights:

§ Revenue ahead of prior year at £33.0 million (2011: £32.1 million);

§ Gross profit margin up to 34% (2011: 33%);

§ Trading EBITDA* ahead by 19% at £3.6 million (2011: £3.0 million);

§ Trading Profit before tax up 25% at £2.1 million (2011: £1.7 million);

§ Trading fully diluted earnings per share of 3.18 pence (2011: 3.63 pence);

§ Fully diluted earnings per share of 1.17 pence (2011: loss per share of 12.93 pence);

§ Net assets up 108% to £9.8 million (2011: £4.7 million);

§ Net debt at 31 December 2012 of £9.7 million (31 December 2011: £10.0 million);

§ Equity of £5.0 million raised from MBE Mineral Technologies Pte Limited ("MBE"), which together with new banking and borrowing arrangements of £14.0 million provides a much stronger balance sheet from which the Group can progress.

* adjusted for non-trading items being one-off restructuring costs (£1.0 million) offset by collection of doubtful debts (£0.2 million)

Business Highlights:

§ Order intake in 2012 was approximately 10% ahead of prior year at £34.5 million (2011: £31.6 million) including the Group's largest ever oil and gas related contract (£2.7 million) and a second syngas project (USD1.6 million);

§ Positive start to 2013 with further contract wins in January 2013 worth over £5 million;

§ New nuclear spares order won for USD3.7 million in February;

§ Hayward Tyler's Luton operations restructured and the Group head office closed, which together are expected to deliver annualised cost savings of around £1.0 million of which £0.5 million delivered in 2012;

§ Operational benefits of strategic sourcing relationship with MBE Cologne now fully introduced.

 Outlook and change of year end:

Since the start of 2013 the Company's momentum from the second half of 2012 has continued with further contract wins in January 2013 of over £5 million and a new nuclear spares order won for USD3.7 million (£2.3 million) in February. In addition, the Board has decided to change the Company's year end from 31 December to 31 March in order to align the year end with that of our largest shareholder, MBE, to enhance operational and financial planning, and to reduce the cyclicality of reporting between the first and second half of the calendar year. This change will be with immediate effect and therefore the Company intends to publish its audited consolidated accounts for the 15 month period to 31 March 2013 before 30 June 2013.

Ewan Lloyd-Baker, Chief Executive Officer, commented:

"We are delighted with the strong improvement in the performance of Hayward Tyler in the second half of 2012 and are pleased that this momentum is continuing into 2013. Despite the on-going issues in Europe, we are seeing clear signals of improving market conditions in both the US and Far East. We will continue working hard to develop these markets as well as improve operational efficiencies across our business."

Enquiries:

Section 1:

Chief Executive's Review

Introduction

It is encouraging to write that we ended the year in a much stronger position than we started it. I wrote at the half year that the Company had been through an eventful period and the second six-month period was no different. A combination of the restructuring of the main manufacturing operations in Luton, changes to the senior management team, a stronger financial structure and an improved external environment all contributed to the improvement in the operating performance and outlook. I am particularly grateful to our strategic investor, McNally Bharat ("MBE"), for their support both in terms of their investment but also as we work on the various operational and strategic initiatives, which the Board anticipates will underpin the future development and growth of the Company.

Overview

Revenue in the second half of 2012 increased by 6% to £18.7 million (H2 2011: £17.7 million) as a result of the strong growth in Hayward Tyler's aftermarket business. As anticipated this second half performance helped grow revenues for the full year by 3% to £33.0 million (2011: £32.1 million). In revenue terms the proportion derived from the aftermarket peaked at almost 70% as it is anticipated that in future this weighting will reduce to a more even split given recent growth in the order intake for the Company's original equipment business.

Across the business, order intake in the second half of 2012 increased by 23% to £18.6 million (H2 2011: £15.1 million), which resulted in an order book of £21.0 million at 31 December 2012 (31 December 2011: £20.5 million). The higher order intake in the second half reflects the improving outlook in Hayward Tyler's end markets, particularly oil and gas and the developing markets of India and China. Noticeable highlights for the year included Hayward Tyler's largest ever oil and gas related contract valued at over £2.7 million and a further syngas project in South Korea valued at USD1.6 million (£1.0 million) both of which are due for delivery in 2013. The latter project is only the second of its type worldwide. Order intake for the full year ended at £34.5 million, a near 10% increase over that in 2011 (£31.6 million).

Manufacturing

Revenue from the manufacturing division in the second half of the year decreased by 21% to £5.4 million (H2 2011: £6.8 million), with the reduction reflecting the lower levels of new unit order intake in 2011. Despite the reduction in revenue in the second half of the year, the operating loss produced by manufacturing reduced by 80% to £0.1 million (H2 2011: £0.3 million) reflecting the significant operational changes made to the main facility in Luton as detailed below. For the full year revenue decreased by 22% to £10.1 million (2011: £12.9 million) whilst the operating loss increased by 73% to £1.7 million for the full year (2011: £1.0 million) reflecting the poor performance in the first half of 2012.

A key management focus was the restructuring of the main manufacturing facility at Luton during the first half of 2012. Two senior interim staff were appointed to lead a programme to restructure the Company's Luton operations and to develop the supply chain. The restructuring exercise led to a reduction in headcount of 32 people by the end of May 2012 across all departments, including the senior management team, representing around 15% of employees based at the Luton site. This restructuring project cost £1.0 million during the period under review but is expected to provide annualised savings of £1.0 million, of which £0.5 million was achieved in 2012.

Significant progress was made on supply chain initiatives to provide improved reliability and further cost savings. These initiatives included reducing the number of suppliers, increasing the strategic nature of the supplier relationships, achieving more consistent payment terms on the back of the stronger capital structure and the delivery of our first 'kit of parts' via our MBE Cologne based heavy machine shop partner. This investment in the management of the supply chain and a partnership approach with MBE Cologne is enabling Hayward Tyler to concentrate on its core strengths of technical and engineering expertise. Together with other projects such as tighter project management, including stronger commercial management, and a continuous improvement programme, these initiatives are expected to continue to provide a more flexible cost base for the Group and remove the unexpected contract levies and warranty costs, which have impacted the performance of this division negatively in the past.

Aftermarket

Aftermarket revenue in the second half of the year increased by 22% to £13.3 million (H2 2011: £10.9 million) driven by our business in the USA, particularly from the nuclear sector recovering from the lows post Fukushima, field services work and continued growth of our China based aftermarket operations. Segment 0perating profits in the second half from our aftermarket business increased by 26% to £3.3 million (H2 2011: £2.6 million). For the full year, revenue increased by 20% to £22.9 million (2011: £19.2 million) and operating profit increased by 41% to £6.2 million (2011: £4.4 million). The strong performance of the aftermarket business illustrates the benefit of having an installed base on which to provide a service offering.

Outlook

2012 was one of the most transformational years in the recent history of the Hayward Tyler business. The new financing arrangements secured during 2012 have substantially improved the financial security of the Group. The anticipated improvement in the second half performance is encouraging as the operational benefits from our relationship with MBE have started to improve the Company's profitability. The potential to further develop the relationship with MBE in its domestic market of India and to invest in new product development is particularly encouraging.

As we move towards the bicentenary celebrations of Hayward Tyler in 2015 the Board is looking to the future with increasing confidence and with a much stronger platform from which to develop.

Given the huge change experienced across the Group in 2012 I would like to thank all of our stakeholders but especially our employees for their diligence and determination.  

E Lloyd-Baker

Chief Executive Officer

28 February 2013

Finance Review

Basis of reporting

The Group financial statements in this report have been prepared in accordance with International Financial Reporting Standards ("IFRSs"). To provide clarity to the results they have been analysed between trading and non-trading where trading represents the underlying business performance and non-trading includes movements in provisions against receivables where collectability is in doubt due to political uncertainty, the one-off costs of restructuring, refinancing costs and the fair valuing of derivative contracts.

This statement is split into two sections. Section 1 addresses the results for the year ended 31 December 2012. Section 2 sets out the results for the six months ended 31 December 2012, which the Company is required to provide under the AIM rules.

Results overview

Revenue for the year was £33.0 million (2011: £32.1 million). Gross profit margin increased to 34% (2011: 33%), driven by the aftermarket division, which delivered an overall trading profit before tax of £2.1 million (2011: £1.7 million). The trading EBITDA (earnings before interest, tax, depreciation and amortisation adjusted for a non-trading loss of £0.7 million) for the period was £3.6 million (2011: £3.0 million).

The Group is exposed to the US Dollar through its operating business in the USA and from UK exports to China. On a constant exchange rate* basis revenue and profit before tax in 2011 would have been higher by £0.2 million and £0.1 million respectively.

There was a non-trading operating loss of less than £0.8 million in the year (2011: loss of £3.6 million), which relates to the cost of restructuring of the Luton operations (£1.0 million), which is expected to provide annualised savings of around £1.0 million, offset by a reduction in the provision for doubtful debts (£0.2 million) as a result of collections. This provision was established at 31 December 2011 with a value of £0.8 million against receivables from jurisdictions where, due to political uncertainty, the collectability of part or all of the receivables was in doubt.

Trading finance costs represent underlying interest payable of £0.7 million (2011: £0.6 million) and non-trading finance costs were £0.5 million (2011: £0.1 million), which relate to one-off costs associated with the re-banking process. In line with the requirements of IFRSs, further re-banking costs of £0.2 million are held on balance sheet and are being amortised over the life of the loans (6 years) to which they relate. Gains and losses relating to movements in fair values of derivatives are recorded in the income statement. The derivatives were terminated as part of the re-banking process at a cost lower than their carrying value, which gave rise to a gain of £0.5 million in the year (2011: loss of £1.1 million).

There is a trading tax charge for the year of £0.8 million (2011: £0.4 million), which represents tax payable on profits in the USA. There is a non-trading tax charge of £47,000 (2011: £1.1 million), which represents the loss of the deferred tax asset associated with the derivatives that were terminated (£0.8 million) offset by an increase in the deferred tax asset relating to losses (£0.7 million).

There was a trading profit for the year of £1.3 million (2011: £1.3 million), which delivered a trading fully diluted earnings per share of 3.18 pence (2011: 3.63 pence). The total profit for the year was £0.5 million (2011: loss of £4.6 million), which delivered a fully diluted earnings per share of 1.17 pence (2011: loss of 12.93 pence).

 Statement of financial position

Total equity increased by £5.1 million in 2012 mainly as a result of equity proceeds net of costs (£4.5 million), profit for the year (£0.5 million), net decrease in the pension deficit (£0.4 million) and movement on the foreign currency translation reserve (£0.3 million). Year end net debt was £9.7 million (2011: £10.0 million).

Pensions

Within the UK the Group operates a defined benefit plan, with benefits linked to final salary, and a defined contribution plan. With effect from 1 June 2003 the defined benefit plan was closed to accruals and new UK employees offered membership of the defined contribution plan. The majority of UK employees are members of one of these arrangements.

A full actuarial valuation of the defined benefit plan is produced every three years (the last one being as at 1 January 2011 with a revised valuation due to be completed no later than 31 March 2015), however, a valuation is prepared annually to 31 December for the purposes of the annual report by independent qualified actuaries. The net obligation at 31 December 2012 was £1.8 million (2011: £2.5 million).

Further comment on pensions is given in note 9 to these financial statements. 

N Flanagan

Chief Financial Officer

28 February 2013

* constant exchange rate is calculated by rebasing prior year figures at current year rates 

Section 1:

Consolidated unaudited results for year ended 31 December 2012

Consolidated income statement

* Anti-dilutive where there is a loss, therefore loss per share does not increase

Consolidated statement of financial position

Consolidated cash flow statement

Section 2

Consolidated second interim income statement for the period ended 31 December 2012

* Anti-dilutive where there is a loss, therefore loss per share does not increase

Consolidated second interim statement of financial position

Consolidated second interim statement of comprehensive income

Consolidated second interim statement of changes in equity

Consolidated second interim cash flow statement

Section 2

Notes to the second interim financial statements

1. General Information

The consolidated financial statements of Hayward Tyler Group plc (formerly Specialist Energy Group plc) are presented in Pounds Sterling (£), which is also the functional currency of the ultimate parent company.

Established in 1815 in the UK, Hayward Tyler designs, manufactures and services a comprehensive range of fluid filled electric motors and pumps. These units are custom designed to meet the most demanding of applications and environments. Focused on the power generation (conventional and nuclear), oil & gas (topside and deep subsea) and industrial markets, Hayward Tyler is a market leader in its technology solutions. Furthermore, Hayward Tyler supplies and services a range of mission critical motors and pumps for the Royal Navy submarine fleet in the UK. Hayward Tyler also undertakes service, overhaul and upgrading of third party motor and pump equipment across all sectors.

In addition to the head office in Luton, England, Hayward Tyler has manufacturing and service support facilities in Kunshan (China), in Delhi (India), in East Kilbride (Scotland) and in Vermont (USA). These facilities and staff provide cover 24 hours 7 days a week for maintenance, overhaul and repair.

2. Basis of preparation

These unaudited condensed consolidated second interim financial statements of Hayward Tyler Group plc are for the six months ended 31 December 2012. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of Specialist Energy Group plc for the year ended 31 December 2011. The financial information for the year ended 31 December 2011 set out in these second interim consolidated financial statements does not constitute statutory accounts as defined in the Companies Act 1931 to 2004. The Group's statutory financial statements for the year ended 31 December 2011 have been filed with the Companies Registry. The auditor's report on those financial statements was unqualified and did not contain a statement under section 15.4 of the Isle of Man Companies Act 1982.

3. Accounting policies

The condensed second interim consolidated financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2011.

4. Segmental reporting

Management currently identifies the Group's two service lines, Manufacturing and Aftermarket, as operating segments.

The activities undertaken by the Manufacturing segment include the manufacture of pumps and motors. The activities of the Aftermarket division include the servicing of, and provision of spares for, a wide range of pumps and motors.

The measurement policies the Group uses for segment reporting are the same as those used in its financial statements, except that:

- post-employment benefit expenses;

- expenses relating to share-based payments; and

- research costs relating to new business activities

are not included in arriving at the operating profit of the operating segments. In addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. The measurement methods used to determine reported segment profit or loss are consistently applied. No asymmetrical allocations have been applied between segments.

Segmental information can be analysed as follows for the reporting periods under review:

The Group's revenues from external customers and its non-current assets (other than goodwill and deferred tax assets) are divided into the following geographical areas:

Revenues from external customers in the Group's domicile, United Kingdom, as well as its major market the USA have been identified on the basis of the customers' geographical location. Non-current assets are allocated based on their physical location.

5. Trading EBITDA

The trading earnings before interest, tax, depreciation and amortisation is as follows:

6. Finance costs

Finance charges of £459,000 (H2 2011: £27,000) represent non-trading expenses and relate to one-off costs associated with the re-banking process that completed in August 2012. The loss arising on fair valuing of derivative contracts relate to the termination of the derivative contracts as part of the re-banking process.

7. Earnings per share

The calculation of the basic earnings per share is based on the profit attributable to the shareholders divided by the weighted average number of ordinary shares of the Company in issue during the period.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

* Anti-dilutive where there is a loss, therefore loss per share does not increase.

8. Tax