2 Feb 2010 07:00
Cosalt plc
("Cosalt" or "the Group")
A year of consolidation and firm foundations for future development
Preliminary results for the 53 weeks ended 1 November 2009
Cosalt, www.cosalt.com, the leading provider of critical safety equipment and services for the Offshore Oil & Gas and Marine industries, announces its full year results for the 53 weeks to 1 November 2009.
Summary Results (From Continuing Operations)
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| 2009 | 2008 |
| Revenue |
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| Offshore | £44.23m | £41.85m |
| Marine | £63.60m | £63.16m |
| Total | £107.83m | £105.01m |
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| Operating profit* |
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| Offshore | £5.32m | £8.34m |
| Marine | £4.86m | £2.09m |
| Head Office Costs | £(1.61)m | £(0.93)m |
| Total | £8.57m | £9.50m |
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| Profit before tax* | £5.49m | £7.23m |
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| Earnings per share* | 4.20p | 7.71p |
*Figures before special items relating to gains and losses on disposal of surplus properties and revaluation of investment properties, amortisation of acquisition intangibles, and exceptional costs relating to reorganisation, redundancy, re-banking, abortive acquisitions and share based payment and LTIP costs.
Strategic & Operational Highlights
Key objectives met for restructuring the business:
·; Schoolwear and Holiday Homes businesses exited
·; Group's long-term capital structure addressed with the raising of £17 million net
·; A greater focus on executing our core strategy
Ongoing market focus:
·; Products and Services Portfolio extended
·; Long term resilience of business model underpinned by regulatory drivers
·; Number of key contracts won and extended including:
o A three year contract extension with PSN worth £18 million
o A three year contract win with BP worth £1.5 million per annum
o A three year contract with Subsea7 in Norway
Other Actions:
·; Reduction in net debt to £18.6 million (2008 £26.8 million)
·; Pension scheme issues being addressed
·; Annualised cost savings of £3 million already implemented; further action being taken in 2010
David Ross, Chairman of Cosalt, commented:
"Last year was one of consolidation for our core businesses. As a result of our fundraising in August we have established a stable platform from which to take the business forward. The Group continues to make progress towards its strategic objective of becoming a specialist provider of critical safety equipment and services for the Offshore and Marine industries."
2 February 2010
ENQUIRIES:
| Cosalt plc | Tel: 020 7457 2020 (Today) |
| Mark Lejman, Chief Executive | Tel: 01472 504 504 (Thereafter) |
| Mike Reynolds, Finance Director |
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| College Hill | Tel: 020 7457 2020 |
| Adam Aljewicz |
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| Mark Garraway |
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CHAIRMAN'S STATEMENT
Overview
I am pleased to report that, the Group continues to make progress towards its strategic objectives of becoming a specialist provider of critical safety equipment and services for the Offshore and Marine industries.
In August we announced a placing and fundraising to raise, £17 million, net of expenses, which has provided the Group with financial stability and security to conduct its business and enable us to pursue our strategy.
Since our exit from the Holiday Homes business in November 2008, we have focussed on our core activities and aim to establish Cosalt over the longer-term in the international Offshore and Marine sectors. Given the geographical proximity between our European branch network and recent franchise awards for the Offshore renewable energy sector we are hopeful we can offer our existing services into this growing Offshore activity.
In May, the Company entered into an agreement with Bridon International Limited, a major specialist wire rope manufacturer, to develop and expand its Aberdeen based activity serving the UK North Sea Offshore Sector. Since the year end we have alsosecured a number of key contracts in both the Offshore and Marine divisions. The Group's development will continue to be driven primarily by organic growth across both divisions where there remains scope for us to increase our market share.
Results & Financing
As previously reported, conditions in the Group's markets became more difficult over the course of 2009. In the Oil and Gas sectors, the falling oil prices at the beginning of 2009 prompted customers to defer spending. Similarly in the Marine sector, port activity and the volume of container traffic (particularly in Northern Europe) reduced. Market conditions in both the Offshore and Marine sectors in the first half of 2010 continue to prove challenging.
Group turnover from continuing operations for the year was £107.8 million (2008: £105.0 million), a 2.8% increase.
Headline operating profit from continuing activities was £8.6 million (2008: £9.5 million) while corresponding headline earnings per share were 4.2p (2008: 7.71p). Statutory loss for the period was £2.6 million (2008:£24.8 million) with corresponding loss per share of 2.93p (2008: Loss 32.52p)
Following the approval of the Placing and Open Offer and Firm Placing at the General Meeting on 1 September 2009, the Group received net proceeds of £17 million which enabled it to reduce net indebtedness and achieve a more stable, long term funding structure. The strengthened financial position of the Company will facilitate the long term implementation of the Group's strategy. Net debt at November 2009 stood at £18.6 million (2008: £26.8 million).
The Company issued 180,000,000 New Ordinary Shares through the Placing and Open Offer and 198,000,000 New Ordinary Shares through the Firm Placing at a price of five pence per New Ordinary Share.
We continue to manage our cost base down and cash management remains a priority. We have implemented a cost reduction programme across the Group which delivered net savings of approximately £1 million during the last financial year and annualised savings of £3 million. In addition to this, further cost cutting is being implemented in 2010.
Dividend
The Board has concluded that the current priority must be to conserve cash, and maintain a robust financial base from which to pursue the Group's strategy and increase shareholder value. Accordingly, it is not recommending a final dividend be paid. The Board will continue to review its dividend policy on a regular basis, and will take account of the trading and strategic priorities, in considering the level of future dividends.
Pensions
The Group's defined benefits pension scheme was closed to future accrual on 31 December 2006 and active members were transferred into a stakeholder defined contribution plan. The deficit in the pension scheme according to International Accounting Standards has risen to £11.8. million (2008: £6.3 million), largely as a result of falling bond yields. Addressing the pension deficit is of primary importance for the Group.
Board & Management
During the course of the year we have made three new additions to the Board. Calum Melville, currently responsible for our Offshore division, joined the Board as an Executive Director. We also appointed two new non executive directors. Maurice White is a mechanical engineer with a wealth of experience in the Oil and Gas Industry, and Simon Gilbert who has worked in a number of operational and investing roles and is a Managing Partner with Hanover Investments. I was re-appointed as Chairman, replacing David Hobdey who stepped down from the Board in November 2009. John Kelly, who was Chairman of the Group between 2005 and 2008 retired in January 2010 after 22 years with the Group. On behalf of everyone at Cosalt I would like to thank David and John for the contribution they have made to the Group.
Current Trading & Outlook
Last year was one of consolidation for our core businesses and above all, we established a strong platform from which to develop the business. The Group is now focused on building its core critical safety equipment and services activities. We continue to make progress in establishing Cosalt as a specialist provider of critical safety equipment and services for the Offshore and Marine industries.
The market environment continues to be challenging as our customers delay investment decisions. However, we have taken action to reduce costs in response to the resulting lower revenues. Importantly, we have been successful in renewing and winning a number of new contracts which will contribute to an improvement in trading in the second half of the year.
David Ross
Chairman
2 February 2010
CHIEF EXECUTIVE'S REVIEW
Strategy
I am pleased to report that we continue to benefit from the implementation of our strategy to become a specialist provider of critical safety equipment and services for the highly regulated Offshore and Marine Industries.
Through our two core divisions, Offshore (Oil and Gas) and Marine (Commercial & Cruise), the Company has developed a reputation for quality and reliability, and we have made great strides in targeting companies in highly regulated industries overseen by national governments and a common international platform. We work closely with advisory regulators such as the International Maritime Organisation (IMO).
Globally, the Offshore and Marine sectors we serve have an annual worth of approximately £4.5 billion and £1 billion respectively. Working within the frameworks of these markets is expected to underpin the Company's growth prospects going forward.
We are building a high quality blue-chip customer base and focusing on larger operators who are increasingly wishing to work with fewer contractors on a longer-term partnership basis, in order to meet their global needs. In meeting our customers' needs with their own development plans we are broadening our existing product range.
Today, Cosalt is predominantly a European operator but as our markets improve and our customers seek to extend their geographic reach then we will have the opportunity to support them in their expansion through the provision of products and services.
Not only are we looking to expand our product and service offering but, due to the fragmented nature of the industry, we are also looking for opportunities to identify and make selective value enhancing moves to bolster our business portfolio. In addition, we intend to expand our businesses into emerging markets wherever they fit in with our core areas of expertise.
Operations
Cosalt Offshore
Cosalt Offshore reported turnover of £44.3 million (2008: £41.8 million) and operating profit before special items of £5.3 million (2008: £8.3 million) for the year.
Cosalt Offshore operates out of three sites - Aberdeen, Stavanger and Lowestoft - and this gives us a pan-North Sea network of service and rigging centres. The division supplies, inspects, tests, maintains and manages a wide range of safety equipment from portable lifting equipment to lifeboats and liferafts. We also supply and service powered hand tools, Drager gas detection and breathing apparatus, working at height equipment and provide inspections on offshore fixed platforms and portable rigs.
We have experienced difficult trading conditions in the North Sea Oil and Gas sector over the past 12 months, with most clients tightening their investment commitments, particularly on capital expenditure projects. We have introduced new services to our client base such as wire rope and lifeboat services and this is going some way to make up for the shortfall in traditional business.
The division has been awarded a number of contracts including a three-year contract with BP, worth up to £4.5 million a year, to supply all lifting equipment to BP and its subcontractors in the North Sea. We have also secured a three-year extension to our existing contract with CNR for lifting and inspection services in the North Sea and a one-year contract for crane inspection services with Subsea7 in Norway. We have also agreed a three year contract extension with PSN, our largest customer, worth up £18 million to supply lifting and tooling equipment in the North Sea. Group revenue increased in the year as a result of a full year's trading of the Norwegian acquisition. Margins were however, impacted as drilling projects were curtailed.
We launched Funis Veritas, a wire rope integrity management system, which complements our new business with Bridon International and includes the supply of specialist wire ropes. The initial response to this system, which monitors and controls the through-life integrity of large wire ropes, has been very positive with orders for both the management system and wires already in place.
Market conditions in 2010 are expected to continue to be challenging, however our product and service offering should give us an advantage over our competitors to secure new contracts in 2010, whilst cost reductions will form an important factor in maintaining profitability.
Cosalt Marine
The Marine Division delivered turnover of £63.6million (2008: £63.2 million) and operating profit before special items of £4.9 million (2008: £2.1 million) through a number of significant contract wins and contract renewals.
The division, which comprises four main business units, namely UK Marine, Continental Marine, Crewsaver and Workwear, has a particular focus on regulated and legislated safety.
Cosalt Marine secured and extended major contracts within all business areas including Netherlands MOD, UK MOD lifejackets and buoyancy aids, further cruise vessel lifejacket and liferaft hire contracts, a two year extension with Network Rail for hi-visibility workwear, and a three year contract with Babcock Rail for hi-visibility workwear. Additionally, the division won several other new contracts within the marine and industrial sectors that have excellent potential for further development.
During the year we launched several key new products in the marine sector including Crewsader designed inherent and inflatable lifejackets. The recently introduced Sea-Crewsader lifejacket achieved particular success in the North Sea offshore market and the new Premier 2010 lifejacket aimed at the cruise and ferry market won a Safety at Sea innovation award. This product was introduced to the market with advanced orders in line with the Board's expectations. In the coming year, Crewsader is launching a new range of Crewfit 190N single and twin chamber inflatable lifejackets. These products have already been well received by both customers and distributors.
Our Workwear business has developed a number of new products including hi-visibility clothing for use on the UK rail network and Police public order clothing. It is currently working on a number of key competitive tenders including several major fire clothing fully managed service contracts, and we are looking to develop our product range offering across all business sectors. In particular, we are aiming to expand our lifeboat and fire equipment servicing on the continent and our existing liferaft hire contracts. We are also looking to secure the supply of new safety equipment to the cruise and ferry market with our new product designs and proven service model, we are well placed to secure further new business.
In Marine, whilst shipping activity is still low, this is, in part, compensated by increased demand for Crewsader branded products and some signs of renewed activity on UK lifting projects.
The actions which are being taken to align the cost base with current trading conditions will support the profitability of the Company in anticipation of an upturn in market activity.
Summary
We have achieved a number of key objectives over the past 12 months, in particular exiting from the Company's legacy businesses; strengthened the Group's management team; focussed our long-term strategy; and addressed the Group's optimal long-term financing structure.
Although there is still much to do, we are now a more streamlined business, with a much improved capital structure and despite the challenging market conditions we can look to the future with momentum in our chosen market sectors. We are now well positioned to implement the next phase of our strategic development and I look forward to reporting on further progress in due course.
Mark Lejman
Chief Executive
2 February 2010
Consolidated income statement
for the 53 weeks ended 1 November 2009
|
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| Before |
| After | Before |
| After |
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|
| special items | Special items* | special items | special items | Special items* | special items |
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| 53 weeks ended 53 weeks ended 53 weeks ended | 52 weeks ended | 52 weeks ended | 52 weeks ended | ||
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| 1 Nov 2009 | 1 Nov 2009 | 1 Nov 2009 | 26 Oct 2008 | 26 Oct 2008 | 26 Oct 2008 |
|
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Revenue |
| 107,827 |
| 107,827 | 105,007 | - | 105,007 |
| Operating profit |
| 8,568 | (7,086) | 1,482 | 9,498 | (5,025) | 4,473 |
| Financial income |
| 18 | - | 18 | 89 | - | 101 |
| Financing costs |
| (3,092) | (1,758) | (4,850) | (2,354) | (718) | (3,072) |
| Profit (Loss) before taxation |
| 5,494 | (8,844) | (3,350) | 7,233 | (5,743) | 1,490 |
| Income tax (expenses) / credit |
| (1,785) | 2,548 | 763 | (1,347) | 476 | (871) |
| Profit/(loss) from |
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|
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| continuing operations |
| 3,709 | (6,296) | (2,587) | 5,886 | (5,267) | 619 |
| Post-tax (loss) of |
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| discontinued operations |
| - | - | - | (25,461) | - | (25,461) |
| Profit (Loss) for the financial period |
| 3,709 | (6,296) | (2,587) | (19,575) | (5,267) | (24,842) |
| Earnings per share - total operations |
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| Basic |
| 4.20p |
| (2.93p) | (25.62)p | - | (32.52)p |
| Diluted |
| 4.17p |
| (2.93p) | (25.62)p | - | (32.52)p |
| Earnings per share - continuing operations |
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| |
| Basic |
| 4.20p |
| (2.93p) | 7.71p | - | 0.81p |
| Diluted |
| 4.17p |
| (2.93p) | 7.70p | - | 0.81p |
* Special items relate to gains and losses on disposal of surplus properties and revaluation of investment properties, amortisation of acquisition intangibles, and exceptional costs relating to reorganisation, redundancy, re-banking, abortive acquisitions and share based payment and LTIP costs.
Consolidated balance sheet
as at 1 November 2009
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| As at |
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| As at |
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| 1 Nov 09 | 26 Oct 08 |
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| £000 | £000 |
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| ASSETS |
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| Non-current assets |
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| Intangible assets - goodwill |
| 34,581 | 33,059 |
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| Intangible assets - customer contracts and relationships |
| 16,226 | 18,429 |
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| Intangible assets - computer software |
| 1,100 | 894 |
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| Investment properties |
| 3,540 | 3,100 |
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| Property plant and equipment |
| 9,402 | 9,580 |
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| Investments |
| 350 | 2,728 |
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| Deferred tax assets |
| 4,477 | 2,588 |
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| 69,676 | 70,378 |
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| Current assets |
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| Inventories |
| 18,887 | 19,384 |
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| Trade and other receivables |
| 22,300 | 27,400 |
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| Corporation tax recoverable |
| 1,976 | - |
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| Derivative financial assets |
| 35 | 622 |
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| Cash and cash equivalents |
| 1,493 | 2,171 |
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| 44,691 | 49,577 |
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| Total assets |
| 114,367 | 119,955 |
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| LIABILITIES |
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| Non-current liabilities |
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| Interest bearing loans and borrowings |
| 16,253 | 27,616 |
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| Deferred tax liabilities |
| 4,559 | 5,166 |
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| Deferred Government grants |
| 6 | 7 |
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| Provisions |
| - | 73 |
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| Retirement benefit obligations |
| 11,759 | 6,280 |
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| 32,577 | 39,142 |
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| Current liabilities |
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| Interest bearing loans and borrowings |
| 3,869 | 1,373 |
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| Corporation tax payable |
| 1,601 | 1,363 |
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| Provisions |
| 177 | 42 |
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| Trade and other payables |
| 25,721 | 40,099 |
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| Derivative financial liabilities |
| 1,018 | 381 |
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| 32,386 | 43,258 |
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| Total liabilities |
| 64,963 | 82,400 |
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| Net assets |
| 49,404 | 37,555 |
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| EQUITY |
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| Share capital |
| 10,336 | 6,587 |
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| Share premium account |
| 48,115 | 34,558 |
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| Merger reserve |
| 7,586 | 7,586 |
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| Other reserves |
| 1,148 | 1,148 |
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| Translation reserve |
| 2,669 | 857 |
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| Hedging reserve |
| (983) | 241 |
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| Retained earnings |
| (19,467) | (13,422) |
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| Total equity attributable to equity holders of the parent |
| 49,404 | 37,555 |
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Consolidated cash flow statement
for the 53 weeks ended 1 November 2009
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| 53 weeks | 52 weeks |
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| ended | ended |
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| 1 Nov 09 | 26 Oct 08 |
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| £000 | £000 |
| Cash flows from operations |
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| (Loss) for the period | (2,587) | (24,842) |
| Adjustments for: |
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| Income tax expense | (763) | (945) |
| Depreciation | 2,213 | 4,931 |
| Amortisation of intangible assets | 3,768 | 2,691 |
| Deferred government grants released | (1) | (14) |
| Net finance costs | 4,832 | 2,983 |
| Share based payment charge/(credit) | 56 | (28) |
| Investment property Losses | 335 | 800 |
| Pension contributions in excess of charge | (1200) | (680) |
| Loss on disposal of property, plant and equipment | (49) | 2,579 |
| Loss on disposal of subsidiary undertakings | - | 9,161 |
| Cash flow before changes in working capital and provisions | 6,702 | (3,364) |
| (Increase)/decrease in inventories | 497 | (3,330) |
| Decrease in trade and other receivables | 5,100 | 1,696 |
| (Decrease)/increase in trade and other payables | (14,378) | 6,687 |
| Increase in provisions | (62) | 2,735 |
| Net cash from operations | (2,017) | 4,424 |
| Interest received | 179 | 161 |
| Interest paid | (4,335) | (2,748) |
| Interest element of finance lease rentals | (55) | (31) |
| Dividends paid on preference shares | (4) | (4) |
| Income tax | (2038) | (1,261) |
| Net cash from operating activities | (8,270) | 541 |
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| Cash flows from investing activities |
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| Acquisition of subsidiaries net of cash acquired | - | (11,198) |
| Proceeds from sale of subsidiary undertakings | 1,896 | 2,000 |
| Sale of investments | 150 | 250 |
| Proceeds from sale of property, plant and equipment | 1,104 | 48 |
| Purchase of property, plant and equipment | (2,488) | (4,100) |
| Purchase of intangible assets - software | (665) | (416) |
| Net cash outflow in investing activities | (3) | (13,416) |
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| Cash flows from financing activities |
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| Dividends paid to Shareholders | - | (2,462) |
| Finance lease principal payments | (447) | (534) |
| Exercise of share options and share placings | 17,330 | 2,901 |
| New loan | 36,920 | 27,171 |
| Repayment of bank borrowings | (46,366) | (980) |
| Net cash from financing activities | 7,437 | 26,096 |
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| Net increase/(decrease) in cash and cash equivalents | (836) | 13,221 |
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| Cash and cash equivalents at beginning of period | 2,171 | (11,179) |
| Effects of exchange rate fluctuations on cash held | 158 | 129 |
| Cash and cash equivalents at end of period | 1,493 | 2,171 |
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| Cash | 1,493 | 2,171 |
| Overdrafts | - | - |
| Cash and cash equivalents | 1,493 | 2,171 |
Notes to financial statements
1 Significant accounting policies
Cosalt plc (the 'Company') is a company domiciled in England. The Consolidated financial statements of the Company for the year ended 1 November 2009 comprise the Company and its subsidiaries (together referred to as the 'Group'). The Parent Company financial statements present information about the Company as a separate entity and not about its Group.
The financial statements were authorised for issue by the Directors on 2 February 2010.
2 Segment reporting
The Group is organised into two main business segments: Marine and Offshore.
The primary segment reporting format is determined to be Business as the Group's risks and returns are predominantly affected by differences in the products and services provided by these different activities.
The operating business segments are organised and managed separately.
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| 53 weeks ended 1 Nov 09 Continuing operations |
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| Marine | Offshore | Head Office/ unallocated | Total |
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| £000 | £000 | £000 | £000 |
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| Revenue |
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| 63,603 | 44,224 | - | 107,827 |
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| Operating profit/(loss) before |
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| 4,860 | 5,317 | (1,609) | 8,568 |
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| special items |
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| Special items |
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| (1,682) | (963) | (4,441) | (7,086) |
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| Operating profit /(loss) |
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| 3,178 | 4,354 | (6,050) | 1,482 |
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| Total assets |
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| 45,830 | 62,850 | 5,687 | 114,367 |
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| Total liabilities |
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| (13,515) | (14,750) | (36,698) | (64,963) |
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| Total net assets |
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| 32,315 | 48,100 | (31,011) | 49,404 |
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| Capital expenditure |
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| 2,179 | 760 | 56 | 2,995 |
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| Depreciation |
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| 1,447 | 750 | 65 | 2,262 |
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| Amortisation of intangible assets |
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| 1,680 | 2,082 | 6 | 3,768 |
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| Continuing operations | 52 weeks ended 26 Oct 2008 Discontinuing operations |
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| Head office/ |
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| Holiday |
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| Marine | Offshore | unallocated | Total | Schoolwear | Homes | Total |
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| £000 | £000 | £000 | £000 | £000 | £000 | £000 |
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| Revenue | 63,161 | 41,846 | - | 105,007 | 5,958 | 37,148 | 148,113 |
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| Operating profit/(loss) |
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| before special items | 2,095 | 8,336 | (933) | 9,498 | (2,552) | (14,940) | (7,994) |
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| Special items | (455) | (150) | (4,420) | (5,025) | - | - | (5,025) |
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| Operating profit /(loss) | 1,640 | 8,186 | (5,353) | 4,473 | (2,552) | (14,940) | (13,019) |
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| Total assets | 36,230 | 29,526 | 52,490 | 118,246 | - | - | 118,246 |
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| Total liabilities | (22,999) | (11,608) | (46,131) | (80,738) | - | - | (80,738) |
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| Total net assets | 13,231 | 17,918 | 6,359 | 37,508 | - | - | 37,508 |
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| Capital expenditure | 1,532 | 1,560 | 188 | 3,280 | 12 | 808 | 4,100 |
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| Depreciation | 1,762 | 927 | 117 | 2,806 | 102 | 2,023 | 4,931 |
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| Amortisation of intangible assets | 1,388 | 1,206 | 7 | 2,601 | 26 | 64 | 2,691 |
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| * Unallocated assets and liabilities principally represent investment properties, taxation, dividends, and pension scheme liability. |
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The financial information set out above does not constitute the Company's consolidated statutory accounts for the periods ended 1 November 2009 or 26 October 2008 but is derived from those accounts. Statutory accounts for the 52 weeks ended 26 October 2008 have been delivered to the Registrar of Companies, and those for the 53 weeks ended 1 November 2009 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 498 (2) or (3) (2008 -Section 237 (2) or (3) of the Companies Act 2006 (2008 - Companies Act 1985).