CSLT.L Regulatory News (CSLT)

20 Feb 2007 07:00

Cosalt PLC20 February 2007 Cosalt plc("Cosalt" or "the Group") Preliminary results for the 52 weeks ended 29 October 2006 Financial Highlights • Turnover of £124.00 million (2005: £117.64 million) • Profit before tax of £1.91 million (2005: loss of £841,000) • Earnings per share of 12.43p (2005: negative 6.58p) • Final dividend of 12.75p resulting in maintained dividend for the year of 18.75p Operational Highlights • Strong performance in Marine Safety • Appointment of Chief Executive • Strategy in place to create more focused Group and expand geographic footprint • EU market leader in marine safety following acquisition of Marine Safety Division of Bofort • Share placing raising £1.7 million to fund growth John Kelly, Chairman, commented: "The market for our Marine Safety services and products looks set to remain firmand we will benefit from ten months of accretive earnings from the Bofortacquisition. Holiday Homes is gaining momentum and we expect improved results inSchoolwear. We are not projecting any improvement in Protective Clothing as weundertake the necessary initiatives to get the business back in shape. "Our strategy is clear and focused. We will continue to manage cash carefullyand we are confident that the 2006/2007 year will demonstrate a second year ofmarked recovery in the Group's profitability." 20 February 2007 ENQUIRIES: Cosalt plc Tel: 020 7457 2020 (today)Per Jonsson, Chief Executive Tel: 01472 504504 (thereafter)Neil Carrick, Finance Director College Hill Tel: 020 7457 2020Matthew Gregorowski Email: matthew.gregorowski@collegehill.comMark Garraway Email: mark.garraway@collegehill.com CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT Introduction These financial statements reflect, for the first time, the InternationalFinancial Reporting Standard (IFRS) adopted in the EU and the prior periodinformation included in these results has been re-stated on a comparable basis. Group turnover for the 52 weeks to 29 October 2006 was £124.00 million, comparedwith £117.64 million for the 52 weeks ended 30 October 2005. Profit before taxwas £1.91 million (2005: loss of £841,000) after charging £1.21 million ofexceptional costs and after taking credit for £1.12 million of exceptionalproperty profit and revaluation. Earnings per share on continuing operationswere 12.43p (2005: negative 6.58p). These results reflect the continued strong performance in Marine Safety andearly stages of recovery in the trading of Holiday Homes, but disappointingresults from Protective Clothing (Cosalt:Ballyclare) as a result of the lowerthan anticipated order intake and delays in the planned move of the supply chainto the Far East. Dividends The Group's prospects are improving, recently reinforced by the acquisition, on27 December 2006, of the Marine Safety Division of the Bofort Group which hasstrategically important businesses in Germany, the Netherlands, Belgium andItaly. The Board is therefore pleased to recommend an unchanged final dividend of12.75p per ordinary share, resulting in the total dividend for the year beingmaintained at 18.75p. Group Strategy Our vision is to become a leading European supplier and through life manager ofcritical safety equipment for people exposed to hostile environments. This is abold undertaking that may require further acquisitions, which will be consideredaccording to a number of strict criteria. We have taken an important first steptowards delivering on our vision by acquiring the Marine Safety Division of theBofort Group. This acquisition complements our market leading UK marine safetybusiness and gives us an important presence in Rotterdam, Antwerp and Hamburg,three of the top ten ports worldwide, as well as in Italy's leading cruise shipports. Cosalt is now the market leader in marine safety servicing in the EU andwe are already working closely with the Bofort team to ensure that we maximisepotential synergies. Succession The transition of control from Bill Wood to Per Jonsson has been well managedand we will continue to benefit from Bill's 35 years of experience with theGroup through to his retirement from full-time employment on 31 December 2007. Following his appointment, Per has started actioning the strategic reviewundertaken during the year which will result in a more focussed business with awider geographical spread, both at home and abroad. Acquisition and Placing Subsequent to the year-end we completed the acquisition of the Marine SafetyDivision of Bofort Group for a consideration of €12 million in cash, which wasfunded from the Group's existing bank facilities. This business, headquarteredin Belgium, is involved in the supply, maintenance and testing of marine safetyequipment with operations in Belgium, the Netherlands, Germany and Italy. We also announced the successful Placing of 663,758 new ordinary shares of 25peach at a price of 256 pence per share, raising approximately £1.7 million. Theproceeds of the Placing were used to strengthen the Company's balance sheet andprovide the Company with greater flexibility in pursuing further acquisitionopportunities. Financing and Pensions We have continued to manage our cash well and gearing at the year-end was inline with management expectations at 45% (2005: 42%). This has increasedsubsequent to the year-end following the acquisition of Bofort. The Group's defined benefits pension scheme has been closed to future accrualfrom 31 December 2006, with active members being transferred into a stakeholderdefined contribution plan. Operational Review The Group consists of four distinct business streams: Marine Safety, ProtectiveClothing, Schoolwear and Holiday Homes. A summary of their performance is setout below. Marine Safety Turnover increased to £39.41 million (2005: £33.94 million) resulting in animproved operating profit of £2.56 million (2005: £2.02 million) pre exceptionalitems. The year finished strongly on the back of new legislation requiring every crewmember on commercial cargo vessels from 1 July 2006 to be equipped with animmersion suit. During the year we shipped over 60,000 immersion suitsthroughout the world giving us a leading global market share for this product.Although demand for immersion suits will be substantially less in 2007, ourbuoyant sales over the last two years will give us a regulatory inspection andservice opportunity every three years for customers who are geographically closeto our expanding service network. As an important by-product of the immersionsuit initiative, we have also captured a database of over 40,000 marine contactsacross the globe. We expect to benefit from this through the direct marketingof our comprehensive product and service offering via our integrated CRM system. Marine leisure sales had another record year with sales of the award winningCrewsaver brand of lifejackets and buoyancy aids, increasing market share inboth the UK and Europe despite a difficult trading environment. Additional regulations came into force on 1 July 2006 requiring that the annualinspection and service of lifeboats be performed by a certified third party andno longer the ship's own crew. This requirement is now the same as that forliferafts, our core marine safety business. We intend to expand our servicecapability to lifeboats where we expect strong demand in the next few years tocatch up with past neglect. Lifeboats rest on davits that also require annualinspection and we anticipate our experience in lifting and testing services willgive us a competitive advantage in this area. The acquisition of Bofort has given us access to a combined network of marinesafety businesses based in the key ports of Europe. Bofort's business ispredominantly service based providing us with an opportunity to increaseturnover and profits using our successful UK business model to sell a broadrange of products. We have just completed a record year for rope sales and thisactivity in particular will benefit from our expanded European network. InBofort we also have an expanding lifeboat service capability in the port ofAntwerp and a well established fire safety servicing business. Bofort'sbusiness expertise and experience in these two activities will be used todevelop opportunities in the other countries in which we now operate as well assupporting Cosalt's UK activities. Another important area of opportunity arising from the acquisition is theexpansion of management contracts for marine safety products, where servicesupport can now be offered to existing and new customers across the wholenetwork in the expanding shipping and cruise markets. Protective Clothing Turnover was £18.84 million (2005: £18.39 million) which resulted in anoperating loss of £496,000 (2005: profit of £572,000) pre exceptional items. Cosalt:Ballyclare has performed well below plan in the year due to poor pricingmanagement, an incomplete shift of manufacturing overseas and an overly complexbusiness model. We remain committed to this business because of its obvious fitwith our vision and its size advantage compared to its UK competitors. Wechanged leadership in October 2006, provided process redesign expertise andmerged the Cosalt:Ballyclare legal entity with our Marine Safety business on 31December 2006. Much work still has to be done but these measures will eliminateunnecessary structural duplication, will promote design and marketing synergieswith our Crewsaver life jacket business, and will facilitate the use of theEuropean footprint provided by the Bofort acquisition in terms of marketingprotective clothing. As a consequence of stock write-downs on unprofitable contracts alreadyterminated, the Group made an exceptional provision in October 2006 of £350,000.Further stock write-downs are anticipated in the current financial year butare likely to be offset by Group property revaluations. Schoolwear Turnover was £19.11 million (2005: £19.64 million) with operating profit of£1.04 million (2005: £1.09 million) pre exceptional items. The new management team which was put in place in May 2006 has reappraised itsactivities and has now set in train a number of improvements. Theseimprovements include better overseas procurement and logistics, a more proactivesales approach, better internal planning and teamwork giving an altogether moreactive customer-focussed operation. We expect better financial resultsemanating from these initiatives in the coming year. Holiday Homes Turnover increased to £46.64 million (2005: £45.67 million) resulting in anoperating profit of £187,000 (2005: loss of £1.19 million) pre exceptional items In a market that remains difficult we continue to improve the quality of ourproducts and gain market share. As reported last year we have reorganised ourproduction process along lean manufacturing principles and further efficiencyimprovements continue to be made. We have recently strengthened the managementteam with the appointment of an Operations Director thoroughly experienced inlean manufacturing. He has overseen the introduction of a Kanban supply systemand the multi-skilled work force can now provide small batches to suit thecurrent order profile. In the second half of the year we returned the business to profitabilityachieving an operating profit of £981,000 compared to a loss of £1.32 million inthe second half of the previous year. We draw further encouragement from thefact that our market leading Custom Homes business, which had a difficult yearin 2006, entered the 2007 season with a full order book through to the Spring. Outlook The market for our Safety & Protection services and products looks set to remainfirm and we will benefit from ten months of accretive earnings from the Bofortacquisition. Holiday Homes is gaining momentum and we expect improved resultsin Schoolwear. We are not projecting any improvement in Protective Clothing aswe undertake the necessary initiatives to get the business back in shape. Our strategy is clear and focussed. We will continue to manage cash carefullyand we are confident that the 2006/2007 year will demonstrate a second year ofmarked recovery in the Group's profitability. J A B Kelly P A JonssonChairman Chief Executive 20 February 2007 FINANCIAL REVIEW The results for the year to 29 October 2006 reflect an improved trading positionfor the Group, largely as a result of improvements in the Holiday Homes businessand strong trading in Marine Safety. Turnover increased by 5.4% from £117.64 million to £124.00 million and profitbefore taxation improved from a loss of £841,000 to a profit of £1.91 million. Exceptional costs The Group incurred £1.2 million of exceptional costs in the year. Redundancycosts as a result of management restructuring at Protective Clothing, Schoolwearand Holiday Homes amounted to £260,000. In Cosalt:Ballyclare and Banner,provisions for stock write downs in areas of business which strategically havebeen identified as unprofitable and will be exited, amounted to £450,000. Thechange from Group Managing Director to the new CEO took place in the year andthe cost of recruitment and compensation in relation to this amounted to£320,000. Further expenditure was incurred on the exit from an old leaseholdand on abortive sale costs which amounted to £152,000. Exceptional gains The Group had exceptional gains of £1.12 million in total. The Athertonpremises of Protective Clothing were disposed of in the first half of the yearrealising a profit of £280,000 and generating cash of £1.1 million. Therevaluation of investment properties resulted in an uplift in value of £835,000which was included within operating profit in accordance with IAS 40. Interest and borrowings The Group's interest charge reduced by almost 13% reflecting strong workingcapital control particularly in the peak months in the Holiday Homes business.Group gearing at the year end was almost unchanged at 45% compared to 42% lastyear. Whilst cash generation before working capital changes showed a markedimprovement of nearly £2 million there was an increase in debtors at HolidayHomes reflecting a strong start to the 2007 model sales and also at MarineSafety as a result of significant immersion suit sales in response to thelegislative change effective from 1 July 2006. There were also increases indebtors at Protective Clothing and Schoolwear due to seasonal trading patterns.Most of the increase in debtors was offset by increased creditors. Stocksincreased by approximately £1 million, mainly immersion suits, to cover salesinto the current financial year. Cash expended as a result of provisions madeat the end of the last financial year amounted to £1 million and representedprincipally redundancy costs on restructuring. Capital expenditure at £1.9million was partially matched by £1.4 million cash received on property andasset disposals. The net effect of these movements was that overall borrowingsremaining relatively unchanged at £13.3 million compared to £12.8 million lastyear. The Group borrowings increased by approximately £8 million on the purchase ofBofort on 27 December 2006 partially offset by a share placing which raised £1.7million. Taxation The overall effective rate of taxation is low at 14% due to the availability ofcapital losses brought forward and indexation on the majority of the propertyrealisations and revaluations. Shareholders' returns The basic earnings per share for the year were 12.43p compared to negative 6.58plast year. Due to the adoption of IFRS accounting the dividends included in the accountsrepresent the final dividend from last year and the interim dividend paid duringthe year. The Board is recommending an unchanged final dividend of 12.75pwhich, if approved at the Annual General Meeting, will be paid on 4 April 2007. Balance sheet The Group Net Assets have reduced in the year by £1.16 million principally dueto dividend payments in the year being greater than the retained earnings anddue to movements on the hedging reserve in respect of forward currency contractswhich have been offset by the slight reduction in the deficit on the Cosalt plcRetirement Benefit Plan. Retirement Benefits The adoption of IAS 19 has not had a significant effect on the Group accounts asit is similar in its application to FRS 17 which the Group adopted last year.The net deficit has reduced slightly at the year-end by £367,000 due to positiveinvestment movements and a slightly higher gilt yield which reduces the value ofliabilities. The net deficit after allowance for deferred taxation was £9.2million. The main Group scheme was closed to future accrual on 31 December 2006 andcurrent members were offered a defined contribution stakeholder arrangement inreturn. Whilst the effect of this will reduce the potential volatility forfuture service cost the issues associated with past service remain and the Groupcontinues to make an annual cash injection of £1.12 million increasing each yearat the rate of inflation to eliminate the Plan's deficit. Consolidated income statement for the fifty-two weeks ended 29 October 2006 52 weeks ended 52 weeks ended 29 October 2006 30 October 2005 £000 £000 Revenue 123,995 117,645 Operating profit before exceptional gains and costs and 3,294 2,491revaluation of investment propertiesRedundancy, reorganisation and impairment (1,209) (1,853)Profit on disposal of surplus properties 284 -Gain on revaluation of investment properties 835 - Operating profit 3,204 638 Financial income 85 40 Financing costs (1,375) (1,519) Profit/(loss) before taxation 1,914 (841) Income tax (expense)/credit (263) 88 Profit/(loss) from continuing operations 1,651 (753) Loss on sale and post tax loss of discontinued business (117) -Profit/(loss) for the financial period attributable to the 1,651 (870)equity holders of the parent Earnings per ordinary shareBasic (total) 12.43p (6.58p)Diluted (total) 12.40p (6.58p)Basic (continuing operations) 12.43p (5.70p)Diluted (continuing operations) 12.40p (5.70p) Dividend per ordinary sharePaid in the year 18.75p 18.75pArising in respect of the year (paid) 6.00p 6.00p Consolidated balance sheet as at 29 October 2006 As at 29 October 2006 As at 30 October 2005 £000 £000ASSETSNon- current assetsIntangible assets - goodwill 3,268 3,267Intangible assets - other 1,319 1,421Investment properties 2,062 1,281Property plant and equipment 12,906 14,338Investments 1,000 1,000Deferred tax assets 4,060 4,146 24,615 25,453Current assetsInventories 21,216 20,181Trade and other receivables 31,809 23,436Cash and cash equivalents 151 232 53,176 43,849 Total assets 77,791 69,302 LIABILITIESNon-current liabilitiesInterest bearing loans and borrowings 801 2,155Deferred tax liabilities 655 824Deferred Government grants 52 66Provisions 146 290Retirement benefit obligations 13,179 13,546 14,833 16,881 Current liabilitiesBank overdrafts 5,473 6,234Interest bearing loans and borrowings 7,174 4,677Corporation tax payable 760 114Provisions 392 1,283Trade and other payables 28,741 18,834Other financial liabilities 297 - 42,837 31,142 Total liabilities 57,670 48,023 Net assets 20,121 21,279 EQUITYShare capital 3,322 3,369Share premium account 4,573 4,547Other reserves 1,148 1,148Hedging reserve (292) -Retained earnings 11,370 12,215 Total equity attributable to equity holders of the 20,121 21,279parent Consolidated statement of recognised income and expensefor the fifty-two weeks ended 29 October 2006 52 weeks ended 52 weeks ended 29 October 2006 30 October 2005 £000 £000 Effective portion of changes in fair value of cash flow hedges (408) -net of recyclingActuarial losses on defined benefit scheme (45) (2,356)Taxation on items taken directly to equity 14 707 Net expense recognised directly in equity (439) (1,649) Profit/(loss) for the financial period attributable to the 1,651 (870)equity shareholders of the parent Total recognised income and expense 1,212 (2,519) Effect of change in accounting policy (2005: not restated) Effect of adoption of IAS32 and IAS39, net of tax,on 30 October 2005Share capital (50) -Hedging reserve 116 -Retained earnings (13) - 53 - 1,265 (2,519) Consolidated cash flow statement for the fifty-two weeks ended 29 October 2006 52 weeks ended 52 weeks ended 29 October 2006 30 October 2005 £000 £000Cash flows from operationsProfit/(loss) for the period 1,651 (870) Adjustments for:Income tax expense 263 (88)Depreciation 2,304 1,923Amortisation of intangible assets 298 232Deferred government grants released (14) (84)Net finance costs 1,290 1,479Share based payment charge 25 17Property gains (1,119) -Pension contributions in excess of charge (412) (406)Loss on disposal of discontinued operations - 72Operating profit of discontinued operations - 62 Cash flow before changes in working capital and provisions 4,286 2,337(Increase)/decrease in inventories (1,035) 4,923(Increase)/decrease in trade and other receivables (8,421) 6,176Increase/(decrease) in trade and other payables 9,946 (9,311)(Decrease)/increase in provisions (1,039) 515 Net cash from operations 3,737 4,640Interest received 85 40Interest paid (1,327) (1,551)Interest element of finance lease rentals (30) (52)Dividends paid on preference shares (4) (4)Income tax received/(paid) 313 (140) Net cash from operating activities 2,774 2,933 Cash flows from investing activitiesAcquisitions of subsidiaries (net of cash acquired) - (772)Disposal of subsidiaries (net of cash disposed) - 2,344Proceeds from sale of property, plant and equipment 1,444 84Purchase of property, plant and equipment (1,738) (1,738)Purchase of intangible assets - software (196) (910) Net cash from/(used) in investing activities (490) (992) Cash flows from financing activitiesDividends paid to shareholders (2,490) (2,489)Finance lease principal payments (345) (338)Exercise of share options 30 -Repayment of bank borrowing (1,702) (2,220) Net cash used in financing activities (4,507) (5,047)Net decrease in cash and cash equivalents (2,223) (3,106)Cash and cash equivalents at beginning of period (8,444) (5,338) Cash and cash equivalents at end of period (10,667) (8,444) Cash 151 232Overdrafts (5,473) (6,234)Factoring advances (5,345) (2,442) Cash and cash equivalents (10,667) (8,444) COSALT PLC PRELIMINARY RESULTS FOR THE FIFTY-TWO WEEKS ENDED 29 OCTOBER 2006 Notes to the Accounts 1) The financial information set out above does not constitute the Company'sstatutory accounts for the 52 weeks ended 29 October 2006 or 52 weeks ended 30October 2005 but is derived from those accounts. Statutory Accounts for 2005have been delivered to the Registrar of Companies, and those for 2006 will bedelivered following the Company's Annual General Meeting. The Auditors havereported on those accounts; their reports were unqualified and did not containstatements under Section 237(2) or (3) of the Companies Act 1985. Full accountsfor Cosalt plc for the period ended 29 October 2006 will be sent to shareholdersduring February 2007 and will be available after that time from the CompanySecretary, Cosalt plc, Fish Dock Road, Grimsby, North East Lincolnshire DN313NW. Copies of this announcement are available from the same address and boththe accounts and this announcement will be available on the Company's websitewww.cosalt.plc.uk Analysis by business segment 2) The Group is organised into four main business segments: Marine Safety,Protective Clothing, Schoolwear and Holiday Homes. 52 weeks ended 29 October 2006 Marine Protective Schoolwear Holiday Head Office/ Continuing Discontinued Total Safety Clothing Homes * unallocated Activities Activities £000 £000 £000 £000 £000 £000 £000 £000 Revenue 39,407 18,840 19,112 46,636 - 123,995 - 123,995 Operating profit/(loss) 2,559 (496) 1,044 187 - 3,294 - 3,294before exceptionalitems and gain onrevaluationsReorganisation, - (460) (195) (82) (472) (1,209) - (1,209)redundancy andimpairmentSurplus on property - 284 - - - 284 - 284disposalsGain on revaluations - - - - 835 835 - 835 Operating profit/(loss) 2,559 (672) 849 105 363 3,204 - 3,204Total assets 20,256 15,598 11,149 26,834 9,445 83,282 - 83,282Total liabilities (11,514) (6,404) (3,660) (15,730) (25,853) (63,161) - (63,161) Total net assets 8,742 9,194 7,489 11,104 (16,408) 20,121 - 20,121Capital expenditure 451 548 533 300 99 1,931 - 1,931Depreciation 410 1,182 201 377 134 2,304 - 2,304 52 weeks ended 30 October 2005 Marine Protective Schoolwear Holiday Head Office/ Continuing Discontinued Total Safety Clothing Homes * unallocated Activities Activities £000 £000 £000 £000 £000 £000 £000 £000 Revenue 33,944 18,390 19,642 45,669 - 117,645 1,364 119,009 Operating profit/(loss) 2,016 572 1,089 (1,186) - 2,491 62 2,553before exceptionalitemsReorganisation, (300) (179) (450) (924) - (1,853) - (1,853)redundancy andimpairment Operating profit/(loss) 1,716 393 639 (2,110) - 638 62 700Total assets 17,102 12,657 10,414 22,058 11,635 73,866 - 73,866Total liabilities (9,089) (4,124) (4,121) (10,145) (25,108) (52,587) - (52,587) Total net assets 8,013 8,533 6,293 11,913 (13,473) 21,279 - 21,279Capital expenditure 513 120 281 152 709 1,775 - 1,775Depreciation 363 886 136 369 143 1,897 26 1,923 *unallocated assets and liabilities principally represent investment properties,taxation, dividends and pension plan liability 3) Basic earnings per share amounts are calculated by dividing the profitattributable to equity holders of the parent by the weighted average number ofordinary shares in issue during the year. Diluted earnings per share amounts are calculated by dividing the profitattributable to equity holders of the parent by the weighted average number ofordinary shares in issue during the year (adjusted for the effects ofpotentially dilutive options). The Group has only one category of dilutive potential ordinary shares which isthat of share options granted to employees. Those options which have anexercise price which is less than the daily average mid-market price of theCompany's ordinary shares during the year are considered dilutive. 2006 2005 Basic Potentially Diluted Basic Potentially Diluted dilutive dilutive share options share optionsProfit (£000)Continuing operations 1,651 - 1,651 (753) - (753)Discontinuing operations - - - (117) - (117) Total 1,651 - 1,651 (870) - (870) Weighted average number of 13,279 33 13,312 13,275 55 13,330shares (thousands) Earnings per share (pence) Continuing operations 12.43 (0.03) 12.40 (5.70) - (5.70)Discontinuing operations - - - (0.88) - (0.88) Total 12.43 (0.03) 12.40 (6.58) - (6.58) 4) A final dividend of 12.75p per share is proposed and if approved will bepayable on 4 April 2007 to shareholders on the register as at 9 March 2007,absorbing £1.74 million. 5) This preliminary announcement was approved by the Board on 19 February 2007. 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