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CEPS PLC ("CEPS" OR THE "COMPANY") PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS FOR YEAR ENDED 31 DECEMBER 2008
Chairman's Statement (extract)
HIGHLIGHTS
* Group revenue up 9% to £16.8m (2007: £15.4m) * Operating profit up 21.5% to £1,148,000 (2007: £945,000) * EPS up 19% to 7.51p (2007: 6.32p) * Bank loans and hire purchase repaid £926,000 * Gearing reduced to 57% (2007: 74%) * Total equity increased 18% to £5.1m (2007: £4.4m)
Review of the period:
The robust performance of the Group noted at the half-year has continued strongly through the second half despite the very evident turmoil in the external environment.
Revenue from the businesses involved in the sale of goods (Davies Odell and Friedman's) increased by 10.7% to £9.1m (2007: £8.2m) and their segmental profit before depreciation was £689,000 (2007: £723,000). Revenue from the rendering of services, the Sunline business, was £7.7m (2007 from February: £7.2m) and the segmental profit before depreciation was £1.1m (2007 from February: £865,000).
Overall Group revenue increased by 9% to £16.8m (2007: £15.4m) and operating profit increased by 21.5% to £1,148,000 (2007: £945,000). After finance costs and provision for taxation the profit for the period was £714,000 (2007: £586,000).
Earnings per share, basic and diluted, for the year were up almost 19% at 7.51p (2007: 6.32p).
Financial review:
Cash generated from operations in the year was £1,388,000 (2007: £1,466,000) of which £926,000 (2007: £713,000) was used to repay bank loans and the capital element of hire purchase agreements. After finance costs, tax and capital expenditure, the net increase in cash for the year was £156,000 (2007: £494,000). Cash and cash equivalents at the year end were £532,000 (2007: £376,000).
Bank loans at the year end were lower than a year earlier by £686,000 at £1,571,000 (2007: £2,257,000). All of these loans were secured against the assets of subsidiary companies with no recourse to the rest of the Group (2007: £2,190,000).
Net debt, defined as total borrowings after deducting cash and cash equivalents, reduced by 10% to £2,920,000 (2007: £3,245,000) and total equity increased by 18% to £5,138,000 (2007: £4,365,000). Gearing has, in consequence, reduced to 57% (2007: 74%).
Operational review:1. Sale of Goods
Comprising Davies Odell and Friedman's, this division increased its revenue by 10.7% compared with the same period last year, but saw a small reduction in operating profit before depreciation, largely because of the impact of exchange rates at Friedman's.
Friedman's saw its revenue increase 10% and its market share grow steadily, with particular strength also in its export sales. Its profitability however has been seriously impacted by the weakness of sterling against the Euro. Most of its material purchases are made in this currency and it has not been able to pass all of its material price increases on to its recession-struck UK customers.
Davies Odell continued the strong performance evident in the first half. Overall revenue was up 10.8% and its operating profit rose even more strongly on the back of a strong margin mix within the sales achieved. All parts of the matting business had a particularly strong year, with exceptional sales of cowmats in the Irish Republic. The Forcefield product range continued to be widened, with an increasing number of UK retail and export distributor stockists. Despite the tough retail conditions in the UK, sales were ahead of 2007 and margins improved as the product sourcing settled down.
2. Rendering of services
This division, which comprises Sunline's Polywrapping and Lettershop businesses, has continued the progress noted at the half year. After taking account that the business was only acquired in February 2007, revenue this year is broadly in line with the previous year, but profitability has improved substantially.
Within the Polywrap business, revenue was slightly up, but more importantly gross margins were well up on the previous year. The new Sitma polywrapping line was installed in the summer, and by the final quarter was beginning to operate at full efficiency making an impact on contributions. In addition, overhead control in this business has been exemplary throughout the year.
The Lettershop business has made considerable progress in 2008. Both revenue and margins rose strongly through the year thanks to a wider range of capabilities and customers, enabling the factory to remain busy through many more months of the year. Modest capital expenditure has been made, but much of the credit for the outstanding result should go to the dedicated team at Redditch.
Dividend:
With the effect of the recession on consumer behaviour and on the Group remaining unpredictable, the Board has again decided that it is prudent to conserve cash. As a result, the payment of a dividend is not recommended at this stage.
Prospects:
The Board continues to review investment opportunities but believe that valuations do not as yet adequately reflect the current uncertain economic outlook.
The trading start to 2009 has been difficult. The background is well documented now. The recession has well and truly arrived since I wrote the Half-yearly Report in September last year. Consumer spending remains unpredictable not only in the UK, but across many of our global markets. Access to credit, both commercial and private, has further deteriorated and the exchange rate of sterling against both the US$ and the Euro has remained weak.
Much of the trading uncertainty we anticipated in the second half of 2008 is only now manifesting itself. In these circumstances the Group will manage its cash and balance sheet with great care and seek every opportunity to maximise profit and control costs. As ever I am confident that our management teams will more than match the performance of their immediate competition, but I am expecting overall that 2009 will prove a difficult year for the Group.
Richard OrganChairman23 April 2009CEPS PLCCONSOLIDATED INCOME STATEMENTYEAR ENDED 31 DECEMBER 2008 (unaudited) (unaudited) 2008 2007 £'000 £'000 Revenue (note 2) 16,796 15,394 Cost of sales (14,228) (13,102) Gross profit 2,568 2,292 Distribution expenses (359) (366) Administration expenses (1,061) (981) Operating profit 1,148 945 Analysis of operating profit - Trading 1,514 1,324 - Abortive acquisition costs - (71) - Group costs (366) (308) Finance costs (241) (271) Profit before tax 907 674 Taxation (note 3) (193) (88) Profit for the year 714 586 Attributable to: Equity holders of the Company 624 491 Minority interest 90 95 714 586 Earnings per share (note 4) - basic and diluted 7.51p 6.32p Consolidated Statement of Recognised Income & Expense (unaudited) (unaudited) 2008 2007 £'000 £'000 Fair value gains, net of tax 59 196 - Actuarial gain on retirement benefit obligations Net income recognised directly in equity 59 196 Profit for the year 714 586 Total recognised income for the year 773 782 Attributable to: Equity holders of the Company 683 687 Minority interest 90 95 773 782CEPS PLCCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2008 (unaudited) (unaudited) 2008 2007 £'000 £'000 Assets Non-current assets Property, plant and equipment 1,610 1,239 Intangible assets 4,826 4,751 Deferred tax asset - 45 6,436 6,035 Current assets Inventory 1,795 1,391 Trade and other receivables 2,828 3,151 Deferred tax asset 24 73 Cash and cash equivalents 665 383 5,312 4,998 Total assets 11,748 11,033 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 416 416 Share premium 2,756 2,756 Profit and loss account 1,717 1,034 4,889 4,206 Minority interest in equity 249 159 Total equity 5,138 4,365 Liabilities Non-current liabilities Borrowings 1,751 2,138 Retirement benefit liabilities - 162 Provisions for liabilities and charges 55 55 1,806 2,355 Current liabilities Borrowings 1,834 1,490 Trade and other payables 2,819 2,778 Current tax liabilities 151 45 4,804 4,313 Total liabilities 6,610 6,668 Total equity and liabilities 11,748 11,033CEPS PLCCONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 DECEMBER 2008 (unaudited) (unaudited) 2008 2007 £'000 £'000 Cash flows from operating activities Cash generated from operations 1,388 1,466 Tax paid (16) (237) Interest paid (222) (254) Net cash generated from operating activities 1,150 975 Cash flow from investing activities Purchase of property, plant and equipment (78) (67) Disposal of property, plant and equipment 11 - Purchase of computer software and website (1) (49)development Purchase of subsidiary undertakings net of cash - (3,940)acquired Payment of deferred consideration - (30) Net cash used in investing activities (68) (4,086) Cash flow from financing activities Proceeds from issue of Ordinary share capital - 2,318 Proceeds from new bank loans - 2,000 Repayment of bank loans (686) (604) Repayment of capital element of hire purchase (240) (109)agreements Net cash (used in)/generated from financing (926) 3,605activities Net increase in cash and cash equivalents 156 494 Cash and cash equivalents at the beginning of the 376 (118)year Cash and cash equivalents at the end of the year 532 376 Cash flows from operating activities The reconciliation of operating profit to cash flows from operating activities is as follows: Operating profit for the year 1,148 945 Adjustments for: Depreciation and amortisation charge 275 264 Loss on disposal of property, plant and equipment 23 - Difference between pension charge and cash (80) (76)contribution Operating profit before changes in working capital 1,366 1,133and provisions Movement in provisions - (27) Increase in inventories (404) (3) Decrease in trade and other receivables 323 164 Increase in trade and other payables, including 103 199trade receivables backed working capital facilities Cash generated from operations 1,388 1,466 Cash and cash equivalents Cash at bank and in hand 665 383 Bank overdrafts repayable on demand (133) (7) 532 376
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
These unaudited preliminary results have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS") and interpretations in issue at 31 December 2008.
The preliminary results were approved by the Board of Directors on 23 April 2009. The preliminary results do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
All periods presented are unaudited.
2. Segmental analysis
All activities are classed as continuing.
a) Primary reporting format - Business segments
The Group is managed in two principal business segments, with each segment operating in a defined business sector.
i) Results by segment
Year ended 31 December 2008
Sale of goods Rendering of services Group (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2008 2007 2008 2007 2008 2007 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 9,117 8,239 7,679 7,155 16,796 15,394 Segmental result 689 723 1,095 865 1,784 1,588 Depreciation (81) (111) (189) (153) (270) (264)charge Abortive - (71)acquisition costs Group costs (366) (308) Operating profit 1,148 945 Interest (241) (271)expenses Profit before 907 674taxation Taxation (193) (88) Profit for the 714 586year
ii) Assets and liabilities by segment
As at 31 December 2008
Segment assets Segment liabilities Segment net assets (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2008 2007 2008 2007 2008 2007 £'000 £'000 £'000 £'000 £'000 £'000 CEPS Group 103 83 (24) (72) 79 11 Sale of goods 5,443 5,082 (3,318) (3,130) 2,125 1,952 Rendering of 6,202 5,868 (3,268) (3,466) 2,934 2,402services Total - Group 11,748 11,033 (6,610) (6,668) 5,138 4,365
iii) Non-cash expenses and capital expenditure
Other than as stated above there were no significant non-cash expenses.
Year ended 31 December Capital expenditure (unaudited) (unaudited) 2008 2007 £'000 £'000 CEPS Group - 17 Sale of goods 44 145 Rendering of services 710 102 Total - Group 754 264
b) Secondary reporting format - Geographical segments
The United Kingdom is the source of turnover, operating profit and is the principal location of the assets of the Group. The Group information provided above therefore represents the geographical segmental analysis.
3. Taxation
The charge for taxation on the profit for the year is analysed as follows:
2008 2007 (unaudited) (unaudited) £'000 £'000 Current tax UK corporation tax on profits of the year at 28.5% 127 123(2007, 30%) Tax repaid in respect of prior periods (5) (34) Total current tax 122 89 Deferred tax Current year charge/(credit) to the income statement 76 (59) Prior year (5) 58 Total deferred tax 71 (1) Total tax charge/(credit) 193 88 Deferred tax charge to the statement of recognised 23 83income and expense
4. Earnings per share
Basic earnings per share is calculated on the profit for the year after taxation attributable to equity holders of the Company of £624,000 (2007: £491,000) and on 8,314,249 (2007: 7,767,435) 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. No adjustment is required in either period because the fair value of warrants was below the exercise price.
5. AIM compliance committee
In accordance with AIM Rule 31 the Company is required to have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its compliance with the AIM Rules whenever appropriate and take that advice into account; provide the Company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers; ensure that each of the Company's directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director.
In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the "AIM Committee"), chaired by Richard Organ, a non-executive director of the Company.
Having reviewed relevant Board papers, and met with the Company's Executive Board and the Nomad to ensure that such is the case, the AIM Committee is satisfied that the Company's obligations under AIM Rule 31 have been satisfied during the year under review.
6. Distribution of the Annual Report
A copy of the Annual Report and Financial Statements will be sent to all shareholders on or around 6 May 2009 and its provision will be announced. Further copies will be available to the public from the Company Secretary at the Company's registered address at 11 George Street, Bath BA1 2EH or from the Group website, www.cepsplc.com.
For further information please visit the Company's website, www.cepsplc.com or contact:
CEPS PLCPeter CookTel: 07788 752560Dowgate Capital Advisers LimitedAaron Smyth / Tony RawlinsonTel: 020 7492 4777
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