Last checked at 22 Apr 2010 07:00
22 April 2010 CEPS PLC ("CEPS" OR THE "COMPANY") PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS FOR YEAR ENDED 31 DECEMBER 2009
CHAIRMAN'S STATEMENT (extract)
HIGHLIGHTS
* Solid sales performance in a very challenging economic climate * Excellent operating cash generation at £1.3m (2008: £1.4m) * Net Debt reduced by £700,000 * Gearing reduced to 38% (2008: 57%) * Total equity increased 12% to £5.8m (2008: £5.1m)
Review of the year
In my last half yearly statement, I commented that business had stabilised in the second quarter, but that I anticipated no fundamental improvement in trading conditions in the second half. So it proved to be.
Overall Group revenue in 2009 fell to £15.9m (2008: £16.8m) with second half revenue falling only 3.2%. In all the business units, margins remained under pressure throughout the year, and even with excellent overhead control, the operating profit for the year fell by 37% to £722,000 (2008: £1,148,000).
Finance costs were much reduced at £146,000 (2008: £241,000) as a result of the repayment of debt finance in accordance with the Group's acquisition strategy and lower interest rates. The taxation charge has benefited from the recognition of a greater proportion of accumulated historical losses and for the year was a credit of £43,000 (2008: charge £193,000). After finance costs and provision for taxation, the profit for the period was £619,000 (2008: £ 714,000).
Careful management of cash continues to be a priority for the Group and at the year end net debt was reduced by 24% to £2.2m from £2.9m at the end of 2008. Gearing has, in consequence, been reduced to 38% (2008: 57%).
Financial review
Cash generated from operations for the year was £1.3m (2008: £1.4m). After finance costs, tax and capital expenditure, the net increase in cash for the year was £99,000 (2008: £156,000). Net cash and cash equivalents at the year end were £631,000 (2008: £532,000).
Bank loans at the year end were lower than a year earlier by £650,000 at £ 921,000 (2008: £1,571,000). All of these loans were non-recourse, secured only against the assets of the borrowing subsidiary companies.
Shareholder funds increased by 12% to £5.8m (2008: £5.1m).
The Group made an investment in 2005 in Friedman's that was financed by a bank loan of £1.1m. Over the period of our investment the company has been profitable, cash generative and in early 2010 has repaid its bank loan. The original agreement included an undertaking to increase management's stake in the business from 25% to 45%, subject to certain conditions. In recognition of the excellent results to date and in anticipation that the performance of the last five years will continue, the Board has decided it would give immediate effect to the share incentive. The consequent historic increase in the minority interest results in a charge against the Group profits for 2009 of £82,000.
Operational review
1. Davies Odell
After the particularly difficult start to the year, trading in the second half settled down, with revenue reduced by just over 8% when compared to the same period in the previous year.
Across the shoe components business there were a number of ups and downs, but overall turnover and margin were just above 2008. I am pleased to say that every opportunity was taken to secure extra business across our product portfolio, with sales of Vibram rubber soles, for example, up by over 70%. The shoe repair trade has been affected by the recession and sales of ladies stiletto heels have declined in the UK, but there is no significant shift in fashion and export sales were vibrant.
Our matting business had a particularly tough year with both raw material price increases and the strength of the US Dollar against Sterling conspiring to reduce both margin and turnover. Exports of cow mats fell by over 50%, particularly to Russia and to Ireland, driving a considerable margin shortfall. Sales of horse matting (largely in the UK) were also down and the only bright spot in this business was an increase in floor protection matting sales for gyms, judo and the like.
Within the personal protection business, Forcefield branded body armour sales were up by a healthy 23%, but this was offset by a reduction in component sales for equestrian body protectors and overall revenue was up a little over 3%. The new Forcefield Pro-Sub 4 back protector received CE approval in April 2009 and first sales commenced via our American distributor. This is the first back protector in the world that transmits less than 4 KiloNewtons of force in a fall creating for the first time the conditions to prevent cracked ribs. In September we took a record order from our Swedish customer for back protectors, old and new, to be delivered in December 2009 and January 2010, and in February 2010 the Pro-Sub 4 was voted Motorcycle News Product of the Year 2009. Along with all the other businesses purchasing product in US Dollars, Forcefield has seen huge pressure on margins from the exchange rate and much product engineering and sourcing work has been done to mitigate the impact.
The overall segmental result at £250,000 (2008: £509,000) shows just how debilitating the first quarter was, with some welcome recovery towards last year's levels in the second half.
2. Friedman's
Sales at Friedman's overall were down 6% at £3.0m (2008: £3.2m) with the second half somewhat weaker than the first. The improvement in the Euro exchange rate helped a good deal in the first half, but with further weakening of the Pound versus the Euro in the second half, margin and pricing pressures have re-emerged. This prompted much activity to seek out new and more cost-effective sources and investment in a digital fabric printer, enabling the future production of bespoke Friedman's designs in high margin short runs.
The bank position has been well managed at Friedman's and its bank loan was fully repaid in early 2010. The overall segmental result for 2009 at £203,000 (2008: £180,000) was a 13% improvement on 2008.
3. Sunline
Within the Sunline business the trends identified at the half year have broadly continued through the second half. Revenue as a whole is down just 1% on 2008 at £7.6m (2008: £7.7m) with the Solutions business showing a 5% turnover increase over the previous year.
Competitive pressures continued to intensify in the polywrapping business throughout the year, bearing down on both margins and available volumes. The management team has managed to tread the fine line of securing necessary volumes, especially in the second half, without accepting unprofitable contracts. Many competitors did not do this: three of our direct competitors have gone into administration or receivership in the last twelve months, two since Christmas 2009. The workforce has continued to respond flexibly, and though profitability has suffered in 2009, we enter 2010 in a much stronger position.
The Solutions business at Redditch has had a busy and successful year, culminating in a profit substantially ahead of both its budget and the previous year. New laser printers have been installed and commissioned and are slowly gaining traction with the customers. The team at Solutions has worked very hard to deliver a record result and deserves our congratulations. In the last quarter of the year Solutions experienced a significant downturn in activity and this is proving somewhat difficult to replace in the current economic climate.
The segmental result at £913,000 (2008: £1,095,000) is 17% down on the previous year, but under the competitive circumstances must be regarded as a more than acceptable result.
Dividend
With the effect of the recession on consumer behaviour and a much weakened set of exchange rates against the Pound, the Board has again decided that it is prudent to conserve cash. As a result, the payment of a dividend is not recommended although the Board remains keen to do so as soon as conditions become favourable.
Prospects
The improvement in the Group's cash and net debt position continued through the second half of 2009, leaving it well placed to fund modest acquisitions subject only to the availability of bank finance. The Board continues to review suitable investment opportunities. However, in the current banking climate, it is unlikely the Group will be able to secure non-recourse cash flow based lending of the same magnitude as past acquisitions with which to make future investments.
The trading start to 2010 has been no better than satisfactory and many of the currency and competitive pressures experienced in 2009 have carried over. Consumer spending is only picking up slowly and has at times been severely buffeted by extreme weather, election uncertainty and a lack of confidence.
Both the Friedman's and Sunline businesses are showing modest improvement against a poor first quarter last year. In the Davies Odell business significant investment is being made to drive up both the UK and international sales of our excellent Forcefield body armour products. This will certainly restrain profitability over the short term. Overall I expect 2010 to be a difficult year for Group profitability, but the Board is convinced that its investment strategy will enhance sustainable profitability over the longer term.
In these circumstances, the directors and managers in the Group will focus on the basics of seeking to maximise profitable business, controlling our internal costs and managing our cash and balance sheet with care. From experience over the last two difficult years in particular, I remain confident that our management teams will more than match the performance of their competitors and will remain a force to be reckoned with.
Richard OrganChairman22 April 2010
For further information please visit the Company's website, www.cepsplc.com or contact:-
Peter Cook, Group Managing Director, CEPS PLC
Tel: 07788 752560
Antony Legge, Director, Astaire Securities
Tel: 020 7448 4400
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2009 (unaudited) (unaudited) 2009 2008 £'000 £'000 Revenue (note 3) 15,880 16,796 Cost of sales (13,968) (14,228) Gross profit 1,912 2,568 Net operating expenses (1,190) (1,420) Operating profit 722 1,148 Analysis of operating profit - Trading 1,086 1,514 - Group costs (282) (366) - Deemed loss arising on the increase in the (82) -minority interest 722 1,148 Finance costs (146) (241) Profit before tax 576 907 Taxation 43 (193) Profit for the year from continuing 619 714operations Other comprehensive income Actuarial (loss)/gain on defined benefit (74) 59pension plans Other comprehensive income for the year, net (74) 59of tax Total comprehensive income for the year 545 773 Profit attributable to: Owners of the parent 550 624 Minority interest 69 90 619 714 Total comprehensive income attributable to: Owners of the parent 476 683 Minority interest 69 90 545 773 Earnings per share (note 4) - basic and diluted 6.62p 7.51p CEPS PLCCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2009 (unaudited) (unaudited) 2009 2008 £'000 £'000 Assets Non-current assets Property, plant and equipment 1,548 1,610 Intangible assets 4,744 4,826 Deferred tax asset 164 24 6,456 6,460 Current assets Inventories 1,569 1,795 Trade and other receivables 2,622 2,828 Cash and cash equivalents 736 665 4,927 5,288 Total assets 11,383 11,748 Equity Capital and reserves attributable to owners of the parent Called up share capital 416 416 Share premium 2,756 2,756 Retained earnings 2,193 1,717 5,365 4,889 Minority interest in equity 400 249 Total equity 5,765 5,138 Liabilities Non-current liabilities Borrowings 1,346 1,751 Provisions 55 55 1,401 1,806 Current liabilities Borrowings 1,610 1,834 Trade and other payables 2,562 2,819 Current tax liabilities 45 151 4,217 4,804 Total liabilities 5,618 6,610 Total equity and liabilities 11,383 11,748CEPS PLC
CONSOLIDATED STATEMENT OF CASHFLOWS
YEAR ENDED 31 DECEMBER 2009 (unaudited) (unaudited) 2009 2008 £'000 £'000 Cash flow from operating activities Cash generated from operations 1,326 1,388 Tax paid (202) (16) Interest paid (126) (222) Net cash generated from operations 998 1,150 Cash flow from investing activities Purchase of property, plant and equipment (62) (78) Disposal of property, plant and equipment 3 11 Purchase of computer software and website - (1)development Net cash used in investing activities (59) (68) Cash flow from financing activities Repayment of bank loans (650) (686)
Repayment of capital element of hire purchase (190) (240) agreements
Net cash used in financing activities (840) (926) Net increase in cash and cash equivalents 99 156 Cash and cash equivalents at the beginning of 532 376the year Cash and cash equivalents at the end of the 631 532year Cash flows from operating activities The reconciliation of operating profit to cash flows from operating activities is as follows: Operating profit for the year 722 1,148 Adjustments for: Depreciation and amortisation charge 285 275 Loss on disposal of property, plant and 9 23equipment Increase in minority interest 82 - Difference between pension charge and cash (74) (80)contribution Operating profit before changes in working 1,024 1,366capital and provisions Decrease/(increase) in inventory 226 (404) Decrease in trade and other receivables 206 323 (Decrease)/increase in trade and other (130) 103payables, including trade receivables backed working capital facilities Cash generated from operations 1,326 1,388
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED 31 DECEMBER 2009 Share Share Profit Attributable Minority Total capital premium and loss to the interest account owners of the parent £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 416 2,756 1,034 4,206 159 4,3652008 (unaudited) Actuarial gain - - 59 59 - 59 Profit for the - - 624 624 90 714year Total - - 683 683 90 773comprehensive income for the year At 31 December 416 2,756 1,717 4,889 249 5,1382008 (unaudited) Actuarial loss - - (74) (74) - (74) Profit for the - - 550 550 69 619year Total - - 476 476 69 545comprehensive income for the year Increase in - - - - 82 82minority interest charged against profit for the year At 31 December 416 2,756 2,193 5,365 400 5,7652009 (unaudited)
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 11 George Street, Bath, BA1 2EH and the registered number of the company is 507461.
The Company has its primary listing on AIM.
2. 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 2009.
The preliminary results were approved by the Board of Directors on 22 April 2010. The preliminary results do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.
All periods presented are unaudited.
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 £15,880,000 revenue £ 13,823,000 is derived from UK customers.
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.
The 2008 results have, where necessary, been restated to comply with the adoption of IFRS 8.
i) Results by segmentYear ended 31 December 2009 Davies Friedman's Sunline CEPS Group Odell (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2009 2009 2009 2009 2009 £'000 £'000 £'000 £'000 £'000 Revenue 5,296 2,993 7,591 - 15,880 Segmental result 250 203 913 - 1,366(EBITDA) Depreciation charge (30) (30) (220) - (280) Group costs - - - (282) (282) Increase in minority - - - (82) (82)interest Interest expenses (3) (10) (134) 1 (146) Profit/(loss) before 217 163 559 (363) 576taxation Taxation 161 (19) (128) 29 43 Profit/(loss) for the 378 144 431 (334) 619year
i) Results by segment (continued)
Year ended 31 December 2008
Davies Friedman's Sunline CEPS Group Odell (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2008 2008 2008 2008 2008 £'000 £'000 £'000 £'000 £'000 Revenue 5,942 3,175 7,679 - 16,796 Segmental result 509 180 1,095 - 1,784(EBITDA) Depreciation charge (49) (32) (189) - (270) Group costs - - - (366) (366) Interest expenses (37) (34) (171) 1 (241) Profit/(loss) before 423 114 735 (365) 907taxation Taxation (90) (6) (153) 56 (193) Profit/(loss) for the 333 108 582 (309) 714year
ii) Assets and liabilities by segment
As at 31 December Segment assets Segment liabilities Segment net assets (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 CEPS Group 114 103 (67) (24) 47 79 Davies Odell 2,332 2,240 (1,043) (1,165) 1,289 1,075 Friedman's 2,853 3,203 (1,694) (2,153) 1,159 1,050 Sunline 6,084 6,202 (2,814) (3,268) 3,270 2,934 Total - Group 11,383 11,748 (5,618) (6,610) 5,765 5,138 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 £550,000 (2008: £624,000) and on 8,314,297 (2008: 8,314,249) 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 year because the fair value of warrants was below the exercise price.
5. Distribution of the Annual Report
A copy of the Annual Report and Financial Statements, together with a notice of the Annual General Meeting, will be sent to all shareholders on 5 May 2010. 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 and from the Group website, www.cepsplc.com.
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