Last checked at 6 Jun 2012 09:34
6 June 2012
CEPS PLC
("CEPS" or the "Company")
FINAL RESULTS
The Company is pleased to announce its audited final results for the year ended 31 December 2011.
CHAIRMAN'S STATEMENT (extract)
Review of the year
The trading environment across our main markets remained difficult in the second half of 2011, as many economies tottered on the edge of recession and the Eurozone debt crisis created global financial turbulence. Oil and commodity prices did not ease as anticipated, leaving input inflation well above expectations and consumer spending very subdued. Most of our markets in Western Europe have been subject to vigorous government austerity measures, and falling consumer spending in real terms.
Net revenues saw a significant fall in the second half of 2011 to £7.8m (2010 - £8.6m) after a first half where revenue was level with the previous year. Overall revenue was £15.6 million for the year (2010 - £16.5m) a drop of 5.5%, almost entirely accounted for by reduced turnover at Sunline. Operating margins have remained under pressure in all the businesses, with our trading profit falling from £811,000 in 2010 (4.9% of turnover) to £579,000 in 2011 (3.7% of turnover). However, Group costs have shown a welcome further reduction to £303,000 (2010 - £344,000).
Profit after tax from continuing operations was £90,000 for the year compared to £220,000 in 2010, with much of the variation accounted for by reducing operating margins. Within this figure a provision of £65,000 has been taken to reflect staff reorganisation costs in Davies Odell's matting business at Kettering. Earnings per share on a basic and diluted basis, after accounting for non-controlling interests, are 0.20p versus 2.10p in 2010.
Financial review
Despite the decline in profitability during the year the Group generated cash from operating activities of £939,000 (2010: £52,000). Repayment of the acquisition bank loans and the capital element of finance leases utilised £719,000 (2010: £694,000), net capital expenditure was £111,000 (2010: £34,000) and interest charges were £146,000 (2010: £149,000). This resulted in a net decrease in cash and cash equivalents of £75,000 (2010: £873,000).
The increase in the Group's invoice finance facilities over the period from £836,000 at the end of 2010 to £1,151,000 at the current year end made possible the repayment of the £500,000 acquisition bank loans that were outstanding at the beginning of 2011. As a result, net debt has been reduced to £2,206,000 (2010: £2,470,000) and gearing to 37% (2010: 42%).
Operational review
Davies Odell
Forcefield sales have continued to grow with continued new product and supply chain investment and significant progress has been made in sales through new European distributors. In the UK, through our established dealer network, sales increased, despite an overall 2.5% decline in the sales of new motorbikes and scooters.
Autumn 2011 was the first full season of ski/snowboard sales through retail outlets. The feedback is encouraging, with Forcefield products selling-through strongly. Sales to this market will not grow at the rate that motorcycle market sales probably will, but demonstrate that with proper targeting, substantial winter sales can be developed alongside our strong spring/summer profile.
Our shoe repair and factoring business has remained constant with turnover comparable to the previous year. The sheer variety of products and markets we supply here is strength in a difficult trading environment.
Matting sales have been growing steadily, but operating margins have been falling for some time. At the close of 2011 we decided to reorganise to reduce overheads and revitalise the business.A substantial provision has been made for these changes, but we expect to see renewed energy in product development and sales of matting.
Friedman's
Sales growth has been achieved in the year, with an overall 4.8% increase. This has been through the efforts of the team in Stockport to find both new designs to sell to existing customers and probably more importantly by finding new export customers.
A second digital printer is now fully commissioned, enabling the business to undertake larger volume bespoke orders. New designs which fully capitalise upon this capability have been presented to customers during the autumn trade shows and are beginning to deliver volume orders. Operating margins are broadly comparable with 2010.
Sunline
Sunline has had a difficult second half, after making good progress after the Redditch closure in the first half. The first half saw an 8.0% fall in turnover, but the second half has seen a sharp fall of about 24.1%. Direct mail volumes have declined due to rising mail costs and the pressure on clients' marketing budgets. The Redditch closure has been well managed and its costs should be contained within the provision set up at the end of 2010. Overheads and finance costs have been contained within budget, and below last year's levels.
Dividend
In the light of continuing economic uncertainty, the Board has decided that cash conservation must remain a priority. Consequently, a dividend is not proposed at this time, but the situation will be kept under review.
People
2011 proved to be very challenging year indeed, with the beginnings of a double-dip recession and continuing uncertainty across most consumer markets. Our staff have tirelessly confronted the business issues that have arisen and have entered 2012 with no illusions as to the challenges ahead. I thank them all for their application, persistence and ingenuity in such trying circumstances.
Prospects
As announced on 2 April 2012 CEPS acquired for £500,000 a 21.4% shareholding in a new company set up to acquire 100% of CEM Group Limited ("CEM Group"). CEPS financed this acquisition by the placing of 2,500,000 ordinary shares at 20p per share. CEM Group is the holding company for CEM Press Limited, a business founded 40 years ago which manufactures and distributes the sample booklets used in the marketing and sale of household fabrics and wall coverings.
The total consideration for CEM Group Limited was £2.2m, the balance of the transaction, including fees, being funded by loan notes of £460,000 and by £1.4m provided by a number of private individuals. The investment by these individuals was made under the Enterprise Investment Scheme.
It is the Board's intention over time, subject to price and availability, to increase the CEPS shareholding. In the meantime, CEPS will seek to identify similar opportunities in which to invest.
It is encouraging to note that all of our businesses have traded at satisfactory levels in the first quarter of 2012, and close to their respective budgets.
At Davies Odell, the re-structuring at Kettering is complete, and there are signs that the business has been unaffected by these upheavals. Forcefield sales growth continues. Overall our sales to shoe repair and manufacturing are meeting expectations.
Friedman's sales have exceeded the previous year throughout the first quarter and currency exchange rates have also been more favourable during this period.
At Sunline a number of initiatives are in hand to improve the processes and efficiency of our operations, given that margins are unlikely to improve. We have appointed a new Operations Director to oversee this change. There is considerable work to do to ensure adequate performance in 2012.
I remain cautious about the outlook for 2012 because none of the economic drivers seem likely to give us any help, so any improvement will only flow from the actions of our management teams.
Richard Organ
Chairman
6 June 2012
Enquiries:
CEPS PLC Peter Cook, Group MD |
+44 1225 483030
|
Cairn Financial Advisers LLP Tony Rawlinson / Avi Robinson |
+44 20 7148 7900 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2011
2011 | 2010 | |
£'000 | £'000 | |
Revenue (note 3) | 15,628 | 16,519 |
Cost of sales | (14,335) | (15,108) |
Gross profit | 1,293 | 1,411 |
Net operating expenses | (1,082) | (1,246) |
Operating profit | 211 | 165 |
Analysis of operating profit | ||
- Trading | 579 | 811 |
- Exceptional costs | (65) | (302) |
- Group costs | (303) | (344) |
211 | 165 | |
Net finance costs | (121) | (151) |
Profit before tax | 90 | 14 |
Taxation | - | 206 |
Profit for the year from continuing operations | 90 | 220 |
Other comprehensive income | ||
Actuarial loss on defined benefit pension plans | (97) | (83) |
Other comprehensive income for the year, net of tax | (97) | (83) |
Total comprehensive (loss)/ income for the year | (7) | 137 |
Profit after taxation attributable to: | ||
Owners of the parent | 17 | 175 |
Non-controlling interest | 73 | 45 |
90 | 220 | |
Total comprehensive (loss)/income attributable to: | ||
Owners of the parent | (80) | 92 |
Non-controlling interest | 73 | 45 |
(7) | 137 | |
Earnings per share (note 4) | ||
- basic and diluted | 0.20p | 2.10p |
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2011
2011 | 2010 | |
£'000 | £'000 | |
Assets | ||
Non-current assets | ||
Property, plant and equipment | 1,172 | 1,376 |
Intangible fixed assets | 4,742 | 4,732 |
Deferred tax asset | 529 | 582 |
6,443 | 6,690 | |
Current assets | ||
Inventories | 1,908 | 1,993 |
Trade and other receivables | 2,342 | 2,704 |
Cash and cash equivalents | 157 | 282 |
4,407 | 4,979 | |
Total assets | 10,850 | 11,669 |
Equity | ||
Capital and reserves attributable to owners of the parent | ||
Called up share capital | 416 | 416 |
Share premium | 2,756 | 2,756 |
Retained earnings | 2,205 | 2,285 |
5,377 | 5,457 | |
Non-controlling interest | 518 | 445 |
Total equity | 5,895 | 5,902 |
Liabilities | ||
Non-current liabilities | ||
Borrowings | 524 | 777 |
Deferred tax liability | 106 | 171 |
Provisions for liabilities and charges | 55 | 155 |
685 | 1,103 | |
Current liabilities | ||
Borrowings | 1,839 | 1,975 |
Trade and other payables | 2,280 | 2,449 |
Current tax liabilities | 12 | 38 |
Provisions for liabilities and charges | 139 | 202 |
4,270 | 4,664 | |
Total liabilities | 4,955 | 5,767 |
Total equity and liabilities | 10,850 | 11,669 |
CONSOLIDATED STATEMENT OF CASHFLOWS
YEAR ENDED 31 DECEMBER 2011
2011 | 2010 | |
£'000 | £'000 | |
Cash flows from operating activities | ||
Cash generated from operations | 939 | 52 |
Tax paid | (38) | (48) |
Interest paid | (146) | (149) |
Net cash generated from/(used in) operations | 755 | (145) |
Cash flows from investing activities | ||
Purchase of property, plant and equipment | (130) | (66) |
Disposal of property, plant and equipment | 19 | 30 |
Interest received | - | 2 |
Net cash used in investing activities | (111) | (34) |
Cash flows from financing activities | ||
Repayment of borrowings | (500) | (421) |
Repayment of capital element of finance leases | (219) | (273) |
Net cash used in financing activities | (719) | (694) |
Net decrease in cash and cash equivalents | (75) | (873) |
Cash and cash equivalents at the beginning of the year | (242) | 631 |
Cash and cash equivalents at the end of the year | (317) | (242) |
Cash generated from operations
| ||
Profit before income tax | 90 | 14 |
Adjustments for: | ||
Depreciation and amortisation | 260 | 286 |
Loss/(profit) on disposal of property, plant and equipment | 43 | (14) |
Net finance cost | 121 | 151 |
Retirement benefit obligations | (72) | (69) |
Changes in working capital: | ||
Decrease/(increase) in inventories | 85 | (424) |
Decrease/(increase) in trade and other receivables | 362 | (82) |
Increase/(decrease) in trade and other payables | 146 | (112) |
(Decrease)/Increase in provisions | (96) | 302 |
Cash generated from operations | 939 | 52 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2011
Share capital | Share premium | Profit and loss account | Attributable to the owners of the parent | Non-controlling interest | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 January 2010 | 416 | 2,756 | 2,193 | 5,365 | 400 | 5,765 |
Actuarial loss | - | - | (83) | (83) | - | (83) |
Profit for the year | - | - | 175 | 175 | 45 | 220 |
Total comprehensive income for the year |
- |
- |
92 |
92 |
45 |
137 |
At 31 December 2010 |
416 |
2,756 |
2,285 |
5,457 |
445 |
5,902 |
Actuarial loss | - | - | (97) | (97) | - | (97) |
Profit for the year | - | - | 17 | 17 | 73 | 90 |
Total comprehensive(loss)/ income for the year |
- |
- |
(80) |
(80) |
73 |
(7) |
At 31 December 2011 |
416 |
2,756 |
2,205 |
5,377 |
518 |
5,895 |
Notes to the financial information
1. General information
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 12b George Street, Bath, BA1 2EH and the registered number of the company is 507461.
2. Basis of preparation
This announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2011 and comprises the Company and its subsidiaries. The consolidated financial statements were authorised for issuance on 6 June 2012. These financial results do not comprise statutory accounts for the year ended 31 December 2011 within the meaning of Section 434 of the Companies Act 2006. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2011 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2010 and 31 December 2011 were unqualified and do not contain statements under s498(2) or (3) Companies Act 2006.
This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.
3. Segmental analysis
All activities are classed as continuing.
The chief operating decision maker of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments.
Operating segments and their principal activities are as follows:
- Davies Odell, the manufacture and distribution of protection equipment, matting and footwear components
- Friedman's, the conversion and distribution of specialist Lycra
- Sunline, a supplier of services to the direct mail market
The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets of the Group. The Group information provided below, therefore, also represents the geographical segmental analysis. Of the £15,628,000 (2010: £16,519,000) revenue £12,940,000 (2010: £14,123,000) is derived from UK customers with the remaining £2,688,000 (2010: £2,396,000) being derived from a number of overseas countries, none of which is material in isolation.
The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation (EBITDA). Other information provided to the Board is measured in a manner consistent with that in the financial statements.
i) Results by segment
Year ended 31 December 2011
Davies Odell | Friedman's | Sunline | Group | |
2011 | 2011 | 2011 | 2011 | |
£'000 | £'000 | £'000 | £'000 | |
Revenue | 5,946 | 3,305 | 6,377 | 15,628 |
Segmental result (EBITDA) before exceptional costs | 121 | 315 | 403 | 839 |
Exceptional costs | (65) | - | - | (65) |
Segmental result (EBITDA) after exceptional costs | 56 | 315 | 403 | 774 |
Depreciation and amortisation charge | (260) | |||
Group costs | (303) | |||
Interest expenses | (121) | |||
Profit before taxation | 90 | |||
Taxation | - | |||
Profit for the year |
| 90 |
ii) Results by segment (continued)
Year ended 31 December 2010
Davies Odell | Friedman's | Sunline | Group | |
2010 | 2010 | 2010 | 2010 | |
£'000 | £'000 | £'000 | £'000 | |
Revenue | 5,734 | 3,154 | 7,631 | 16,519 |
Segmental result (EBITDA) | 138 | 334 | 619 | 1,091 |
Exceptional costs | - | - | (302) | (302) |
Segmental result (EBITDA) after exceptional costs | 138 | 334 | 317 | 789 |
Depreciation and amortisation charge | (280) | |||
Group costs | (344) | |||
Interest expenses | (151) | |||
Profit before taxation | 14 | |||
Taxation | 206 | |||
Profit for the year |
| 220 |
ii) Assets and liabilities by segment
As at 31 December
Segment assets | Segment liabilities | Segment net assets | ||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
CEPS Group | 146 | 85 | (74) | (118) | 72 | (33) |
Davies Odell | 2,537 | 3,018 | (1,247) | (1,676) | 1,290 | 1,342 |
Friedman's | 3,077 | 2,832 | (1,514) | (1,471) | 1,563 | 1,361 |
Sunline | 5,090 | 5,734 | (2,120) | (2,502) | 2,970 | 3,232 |
Total - Group |
10,850 |
11,669 | (4,955) | (5,767) | 5,895 | 5,902 |
4. Earnings per share
Basic earnings per share is calculated on the profit after taxation for the year attributable to equity holders of the Company of £17,000 (2010: £175,000) and on 8,314,310 (2010: 8,314,310) ordinary shares, being the weighted number in issue during the year.
Diluted earnings per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of share warrants and options. No adjustment is required in either year because the fair value of warrants and options was below the exercise price. The warrants lapsed unexercised on 20 April 2010 and the share options lapsed unexercised on 21 May 2012.
5. Distribution of the Report & Accounts
A copy of the 2011 Report & Accounts, together with a notice of the Annual General Meeting, will be sent to all shareholders on 6 June 2012. Further copies will be available to the public from the Company Secretary at the Company's registered address at 12b George Street, Bath BA1 2EH and from the Group website, www.cepsplc.com.