Ceps Regulatory News (CEPS)

26 Apr 2007 07:00

CEPS PLC Preliminary announcement of unaudited results for Year Ended 31 December 2006 Chairman's Statement (extract) Highlights

# Group turnover up 11.4% to ‚£7.7million

# Operating Profit up 82% to ‚£305,000

# Net debt decreased by 17% to ‚£1,015,000

# Earnings per share 0.19p (2005 0.02p)

# Sunline Direct Mail fundraising and acquisition completed February 2007

# Illustrative operating profit including Sunline acquisition ‚£1.0m before

goodwill amortisationOverview

During the current year the business improvements initiated in prior years havebeen reflected in the Group's performance. The existing businesses all sawsteady increases in turnover in the first half, with a surge in turnover duringthe second half of the year, especially at Davies Odell. Operating marginsstrengthened in the second half, as anticipated at the half year, as a resultof action taken on input costs, pricing and product specification.This resulted in a substantial increase in operating profit, after group costs,to ‚£305,000, an 82% improvement on the result for 2005. Both Friedman's andDavies Odell saw improved operating profits for the year and in the secondhalf, by comparison with the same period in 2005, Friedman's operating profitwas up by 203% and Davies Odell by 62%. Both businesses controlled their cashpositions, with the result that Group net debt (excluding invoice financeborrowings) fell by 17% from the level at the end of 2005.

2007 has started on a positive note with the successful completion of a ‚£2.4 million fundraising at 50p per share following a one for 50 share consolidation.

The proceeds of this fundraising were used to complete the reverse takeover ofSunline Direct Mail Limited (Sunline) in early February 2007 in which the Grouphas an 80% equity interest.

The consolidation of Sunline's profits into the Group's results for 2007 will have a significant impact as shown in the Sunline acquisition section below.

Financial reviewGroup operating profit for the year before amortisation of goodwill of ‚£80,000(2005, ‚£74,000) was ‚£385,000 (2005, ‚£242,000). After amortisation of goodwilland interest charges the Group profit before taxation increased to ‚£199,000(2005, ‚£53,000).The taxation credit for the year is ‚£158,000 (2005, charge ‚£6,000). Thisincludes a current year credit for deferred taxation of ‚£192,000 (2005, ‚£2,000)arising principally from the recognition of a proportion of the accumulation ofcapital allowances that the Group now expects to recover in the foreseeablefuture.

After tax and minority interests the retained profit for the year was ‚£346,000 (2005, ‚£40,000).

Earnings per share, basic and fully diluted, were 0.19p (2005, 0.02p) per share.

Net cash inflow from operating activities was ‚£450,000 (2005, ‚£138,000) and Group net debt decreased in the year by ‚£205,000 to ‚£1,015,000 (2005, ‚£ 1,220,000).

Group net assets at 31 December 2006, excluding the pension liability, increased to ‚£1,621,000 (2005, ‚£1,314,000) and total equity shareholders' funds increased by ‚£405,000 to ‚£1,121,000 (2005, ‚£716,000). The pension scheme liability reduced during the year by ‚£109,000 to ‚£362,000 (2005, ‚£471,000).

Operational ReviewGroup sales for 2006 increased by 11.4% to ‚£7.7 million, with a particularlystrong result from Davies Odell with an 11.9% increase to ‚£5,046,000 (2005, ‚£4,509,000). With this strong increase in turnover and improving margins in thesecond half, segmental profits before group costs rose by 35% to ‚£513,000(2005, ‚£380,000). Group costs were ‚£208,000 (2005, ‚£212,000).After successful relocation in the first half, Friedman's achieved a 10.5%growth in turnover for the year by comparison with the 11 months of ourownership in 2005. The second half was particularly strong with higher volumesof better margin bespoke lycra sales. This enabled the business to finish theyear with an 11.8% improvement in trading profit at ‚£180,000 (2005, ‚£161,000).Overall margins achieved are now in line with expectations at the time of theacquisition.

Davies Odell saw a strong increase in overall turnover in 2006, with a 17.5% increase to ‚£2,894,000 (2005, ‚£2,463,000) in the second half.

In the Davies matting business, turnover exceeded both budget and the previousyear by some way, largely as result of strong orders for Cowmats. Howevermargins were a little below expectation, though overall profitability exceededour plan. The focus achieved on the matting business as a result of themid-year reorganisation has provided the impetus to develop a number of newproducts, which will be launched in the first half of 2007. The Odell business had a strong year both in its core footwear componentoperations and for its protection products. Sales of men's leather heeltop-pieces and stiletto top-pieces for ladies shoe repairs both continuedstrongly, and the steady recovery of turnover in the Phillips footwear repairbusiness continued. Margins have been well managed, despite the major buffetingfrom energy and raw material prices.The protection business has moved forward strongly with Forcefield body armourproducts at the forefront. Sales were up 30% year-on-year as the product rangewas expanded from just the top-rated back protector to include protectiveundershirts, shorts and pants, and limb protectors. Further new products areready to launch in 2007, and the recently recruited Sales Manager is makingsubstantial progress with extended UK distribution for the Forcefield range. Sunline acquisition

Included within the table below are the results of Sunline Direct Mail Limited for the fifteen month period to 31st January 2007.

Sunline Direct Mail ‚£'000 Turnover 8,935 Cost of sales (5,767) Gross profit 3,168 Net operating expenses (2,343) Operating profit 825

The figures set out above are expressed before any goodwill amortisation.

Had the Group consolidated these results on a pro rata basis for a twelve monthperiod the Group would have reported operating profits before goodwill of ‚£1.0million on turnover of ‚£14.8 million for the current year.

Dividend

The Board is not recommending the payment of a final dividend for 2006 (2005,nil). It is nevertheless committed to returning to the dividend list, and topaying a growing dividend as part of investors' overall return from theirinvestment.Prospects

From a trading perspective 2007 has started well, with all the businesses seeing turnover increases with stable margins. Friedman's is seeing steady turnover growth driven by increasing European orders and the recently negotiated sole rights to distribute a specialist Italian crepe lycra.

At Davies Odell the turnover growth in the second half of last year has carriedover into the first half of 2007. In particular, the benefits of thesignificant investment in product development and sales personnel for ourForcefield body armour range are coming through in strong orders, improving UKand Overseas distribution, and a flow of positive press comment about ourproducts. Shoe repair sales remain buoyant but may well ease through the yearas fashion changes.

It is encouraging to note that Sunline is currently busy and has a solid order book for the coming summer months.

Identifying suitable acquisitions remains one of our key objectives for 2007.There remains a funding gap in the market and several promising targets havealready been reviewed. The evidence of improving results from the existingcompanies, the significant impact of the Sunline acquisition on the 2007results and the widened shareholder base will enable us to raise sufficientfunds for attractive opportunities at the appropriate time.The Board has been encouraged by the trading performance of the Group so farthis year and is optimistic about the outcome for 2007. The company is now indiscussions with a number of companies that fit the investment criteria of CEPSand would be hopeful that a similarly attractive transaction to Sunline will beachieved this year.Richard OrganChairman 26 April 2007 CEPS PLC Consolidated Profit and Loss Account Year ended 31 December 2006 2006 2005 (unaudited) Note ‚£'000 ‚£'000 Turnover, continuing operations 3 7,709 6,919 Cost of sales (6,584) (5,869) Gross profit 1,125 1,050 Net operating expenses (820) (882)

Operating profit, continuing operations 3 305 168

Analysis of operating profit trading 593 454 amortisation of goodwill (80) (74) group costs (208) (212) Interest payable (106) (115) Profit on ordinary activities before taxation 199 53 Taxation 158 (6)

Profit on ordinary activities after taxation 4 357 47

Minority interests (11) (7) Profit for the year 346 40 Dividends - - Retained profit for the year 346 40 Earnings per share basic 5 0.19p 0.02p diluted 5 0.19p 0.02p Consolidated Statement of Total Recognised Gains and Losses Year ended 31 December 2006 2006 2005 (unaudited) ‚£'000 ‚£'000 Profit for the year 346 40 Actuarial gain/(loss) recognised in pension scheme 85 (272)

Movement on deferred tax relating to pension scheme (26) 82

Total recognised gains/(losses) for the year 405 (150) CEPS PLC Group Balance Sheet 31 December 2006 2006 2005 (unaudited) ‚£'000 ‚£'000 Fixed assets Intangible 1,449 1,529 Tangible 279 259 1,728 1,788 Current assets Stocks 1,324 1,087 Debtors 2,011 1,428 Cash at bank and in hand 35 24 3,370 2,539 Creditors: amounts falling due within one year (2,852) (2,093) Net current assets 518 446 Total assets less current liabilities 2,246

2,234

Creditors: amounts falling due after more than one year (593) (878)

Provisions for liabilities and charges (32)

(42)

Net assets excluding pension liability 1,621 1,314 Pension liability (362) (471)

Net assets including pension liability 1,259

843 Capital and reserves Called up share capital 178 178 Share premium 676 676 Profit and loss account 267 (138)

Total equity shareholders' funds 1,121

716 Minority interests 138 127 Capital employed 1,259 843 CEPS PLC Consolidated Cash Flow Statement Year ended 31 December 2006 2006 2005 (unaudited) ‚£'000 ‚£'000

Reconciliation of operating profit to net cash flow from operating activities Operating profit 305 168 Depreciation and amortisation charges 190 170 Difference between pension charge and cash contributions (71) (53) Increase in stocks (237) (63) Increase in debtors (382) (120) Increase in creditors 653 36 Movement in provisions for liabilities and charges (8) - Net cash inflow from operating activities 450 138

Cash flow statement

Net cash inflow from operating activities 450 138 Returns on investments and servicing of finance (106) (115) Taxation 10 (68) Capital expenditure and financial investment (89) (41) Acquisition (20) (1,599) 245 (1,685) Financing (266) 1,197 Decrease in cash (21) (488)

Reconciliation of net cash flow to movement in net debt

Decrease in cash (21) (488)

Cash decrease/(increase) from change in debt and finance lease obligations

266 (438) New finance lease obligations (40) - Change in net debt 205 (926) Net debt at 1 January (1,220) (294) Net debt at 31 December (1,015) (1,220)

Analysis of changes in net debt

at 1 Jan cash non cash at 31 Dec 2006 flows flows 2006 (unaudited) (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 ‚£'000 Cash at bank and in hand 24 11 - 35 Overdrafts (121) (32) - (153) (97) (21) - (118) Debt due within one year (245) 262 (312) (295) Debt due after one year (878) - 312 (566) Finance lease obligations - 4 (40) (36) (1,220) 245 (40) (1,015) CEPS PLC 31 December 2006 Notes to the Preliminary announcement 1. Basis of preparation The unaudited financial information contained in this preliminary announcementdoes not comprise statutory accounts within the meaning of Section 240 of theCompanies Act 2005.The figures in this preliminary announcement have been prepared under generallyaccepted accounting policies in the United Kingdom. The accounting policiesadopted are those set out in the Annual Report & Accounts for the year ended 31December 2005 which includes the unqualified report of the independent auditorsand which have been filed with the Registrar of Companies.

2. Changes in accounting Policy

The group has adopted Financial Reporting Standard 20 'Share Based Payments' inthe financial statements. The adoption of the standard has not affected theresults as the share options were granted before 7 November 2002.

The directors have also considered the requirements of the other UK Financial Reporting Standards which apply to the Group for the first time in 2006 and have concluded that they do not impact the Group's financial statements.

3. Turnover and segmental analysis

The United Kingdom is the source of turnover and operating profit and theprincipal location of the net assets of the Group. The directors consider thatthe Group operates in two business segments serving various markets. Turnover,segmental profit before Group costs and net assets are analysed as follows:Segment of activity Friedman's Davies Odell Group 2006 2005 2006 2005 2006 2005 (unaudited) (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Turnover 2,663 2,410 5,046 4,509 7,709 6,919 Segmental profit before amortisation of goodwill 260 235 333 219 593 454 Amortisation of goodwill (80) (74) - - (80) (74) Segmental profit before Group costs 180 161 333 219 513 380 Group costs (208) (212) Profit before interest and taxation 305 168 Interest payable (106) (115) Group profit before taxation 199 53 Net assets 1,395 1,517 1,150 1,017 2,545 2,534 Pension liability (362) (471) Unallocated net liabilities (1,015) (1,220) CEPS Group assets 91 - Total net assets 1,259 843

The investment in Friedman's was acquired on 25 January 2005. Friedman's converts and distributes specialist Lycra.

Davies Odell manufactures and distributes protection equipment, matting and footwear components.

Geographical analysis of turnover by destination 2006 2005

(unaudited) ‚£'000 ‚£'000 United Kingdom 5,780 5,504 Rest of Europe 1,589 1,198 The Americas 156 89 Australasia 2 6 Far East 103 78 Africa 79 44 7,709 6,919 4. Taxation

The charge for taxation on the profit for the year is analysed as follows:

2006 2005 (unaudited) ‚£'000 ‚£'000 UK corporation tax on profits of the year 25

22

Tax repaid in respect of prior periods -

(14) Total current tax 25 8 Deferred tax: Current year credit (192) (2) Prior year charge 9 - Total deferred tax (183) (2) Tax (credit)/charge on profit on ordinary activities (158)

6

The current year credit for deferred taxation arises principally from the recognition of a proportion of the accumulation of capital allowances that the Group now expects to recover in the foreseeable future.

5. Earnings per share

Basic earnings per share is calculated on the profit on ordinary activities after taxation and minority interests of ‚£346,000 (2005, ‚£40,000) and on 178,191,426 (2005, 175,344,987) ordinary shares, being the weighted number in issue during the year.

Diluted earnings per share is calculated on the weighted average number ofordinary shares in issue adjusted to reflect the potential effect of theexercise of share warrants. In 2005 diluted earnings per share is calculated on183,199,908 ordinary shares but in 2006 no adjustment is required because thefair value of warrants and share options was below the exercise price.

6. Post balance sheet events

In February 2007 the company, through Sunline Direct Mail (Holdings) Limited(SDMH), acquired the entire issued share capital of Sunline Direct Mail Limited(SDM), a supplier of poly wrapping and associated services to the direct mailmarket, for an initial consideration of ‚£3,800,000. The company acquired 80% ofSDMH, the remaining 20% being owned by the managing director of SDM.For the 15 months ended 31 January 2007 the turnover of SDM was ‚£8,935,000 andthe operating profit before goodwill amortisation ‚£825,000. After goodwillamortisation of ‚£55,000 and interest receivable of ‚£19,000 the profit beforetaxation was ‚£789,000. Net assets at the same date were ‚£2,496,000.The initial consideration was satisfied by a cash payment of ‚£3,450,000 and theissue of shares and loan notes in SDMH to the value of ‚£350,000. The cashpayment was funded by non-recourse bank finance of ‚£2,000,000 and subscriptionsby the company of ‚£80,000 for equity, ‚£520,000 for preference shares and ‚£850,000 for loan stock. Deferred consideration of up to a maximum of ‚£500,000will be payable dependent on the future trading performance of SDM.On 12 February 2007 shareholders approved a share consolidation on the ratio of50 existing ordinary shares of 0.1p each for one new ordinary share of 5p eachand a placing to raise ‚£2,375,000 before expenses of ‚£650,000 by the issue of4,750,000 placing shares at 50p per share (equivalent to 1p per share prior tothe share consolidation). The proceeds were used to acquire a majority interestin SDMH and to strengthen the group's balance sheet. The investors includedmembers of the concert party detailed in the circular sent to shareholders on11 January 2007.7. The Annual Report and Financial Statements will be sent to all shareholders.Further copies will be available to the public from the Company Secretary atthe company's registered office, 11 George Street, Bath BA1 2EH.

For further information contact:

Peter Cook, CEPS PLC 07779 644680

City Financial Associates Ltd 020 70907800