HYNS.L Regulatory News (HYNS)

2 Aug 2007 07:00

Haynes Publishing Group PLC02 August 2007 HAYNES PUBLISHING GROUP P.L.C. PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31 May 2007 Haynes Publishing Group P.L.C. is the worldwide market leader in the productionand sale of automotive and motorcycle repair manuals. Every Haynes manual is based on a complete vehicle or motorcycle strip-down andrebuild in our workshops, so that the instructions to our customers areinherently practical, accurate and easy to follow. The Haynes Group publishes many other DIY titles as well as an extensive arrayof books about motor sport, vehicles and general transport. Financial Highlights - Turnover on continuing operations of £29.2 million (2006: £30.6 million) - Operating profit on continuing operations of £7.2 million (2006: £8.9 million) - Profit before tax on continuing operations of £7.1 million (2006:£8.5 million) - Loss on discontinued operations of £2.9 million (2006: £0.2 million). - Basic earnings per share from continuing operations of 31.6 pence (2006: 35.2 pence) - Net funds of £6.5 million (2006: £3.1 million) - Final dividend of 10.0 pence per share, giving a total dividend of 15.5 pence per share (2006: 15.5 pence) Enquiries : Haynes Publishing Group P.L.C.John Haynes OBE, Chairman 01963 442009Eric Oakley, Group Chief Executive 01963 442009 Blue Oar Securities PlcJerry Keen 0207 448 4492Mike Coe 0117 933 0020 Cautionary Statement : This report contains certain forward-looking statements with regards thefinancial condition and results of the operations of Haynes Publishing GroupP.L.C. These statements and forecasts involve risk factors which are associatedwith, but are not exclusive to, the economic and business circumstancesoccurring from time to time in the countries and sectors in which the Groupoperates. These forward-looking statements are made only as at the date of thisannouncement. Nothing in this announcement should be construed as a profitforecast. Except as required by law, Haynes Publishing Group P.L.C. has noobligation to update the forward-looking statements or to correct anyinaccuracies therein. Chairman's Statement The year under review has been one of measured progress for the Haynes Group,where the reduction in pre-tax profits, to a large degree, masks the progressthat is being made to focus the Group on its core areas of strength and marketleading expertise. During the first half of the year, we experienced a decline in sales in both ourprincipal geographical markets albeit, in the US, the decline was largely as aresult of unusual buying patterns in the prior year, following a mid-year priceincrease. It is therefore, pleasing to report that the early signs ofimprovement we referred to in our half year statement continued into the secondhalf of the year. Sales in the US, during the second six months were 12% aheadof the prior period, bringing the US sales for the year, in local currency,broadly in line with the prior 12 month period. Also, during the early part ofthe year we were experiencing increasing raw material costs and higher utilitybills. Furthermore, as a Group with over 50% of our revenue generated in the US,we have been adversely impacted by the weakened US Dollar, particularly duringthe second half of the year, with the resultant downward impact on revenue andpre-tax profit being £1.5 million and £0.4 million respectively. Sales in our Haynes general publishing division continued to perform well endingthe year 23% up on the prior year aided by a strong and expanding new titleprogramme. As referred to in our half year statement, following a strategic review of underperforming areas of the business, the Group closed its French operation inNovember 2006 and this was followed by the disposal of Sutton Publishing Limitedin January 2007. The financial impact of the closure and disposal has left aone-off charge to this year's Group Income Statement of £2.9 million. Thisrestructuring places the Group on a stronger platform from which to develop andgrow the Haynes businesses, whilst ensuring that the strong cash generation ofthe underlying Haynes operations is channelled to those areas of the businesswhere the prospects for future earnings enhancement is greatest. Results summary Group revenue from continuing operations ended the year at £29.2 million, areduction of 5% against the prior year (2006: £30.6 million) while Groupoperating profit from continuing operations was £7.2 million, 19% lower than theprevious year (2006: £8.9 million). However, with strong cash generation leadingto higher interest receivable, the reduction in Group pre-tax profits fromcontinuing operations was 16% to £7.1 million (2006: £8.5m). The Group's effective tax rate, on attributable profits, was 27% (2006: 32%)leading to a basic earnings per share from continuing operations of 31.6 pence(2006: 35.2 pence). However, after taking into account the discontinuedoperations this fell to 13.6 pence (2006: 34.0 pence). Strategy & structure We entered the year under review with the aim of creating a platform that wouldallow the Haynes businesses to grow and develop and firmly establish the Groupas the global industry experts for the supply of automotive and motorcyclerepair, servicing and technical information. With the removal of the loss makingbusinesses from the Group and a balance sheet free of gearing, management cannow clearly focus their efforts on: • developing new product initiatives from our extensive knowledgedatabase • identifying and expanding into new geographical markets for ourestablished core products • developing new platforms and formats to deliver content to the endconsumer • expanding the tried, tested and trusted Haynes philosophy and applyingit to other areas where a practical approach to DIY can add value. Work is currently under way in a number of these areas and I am confident thatwe will see both revenue and earnings enhancement flowing from the aboveinitiatives. However, we recognise that whilst organic growth has manyadvantages it is by its very nature a longer term strategy. Accordingly, theGroup will look to develop strategic partnerships and/or identify potentialacquisitions where there are operational or financial synergistic benefits indoing so and where there is a clear opportunity to enhance earnings. Post balance sheet event On 5 June 2007, the Board announced the acquisition of certain assets includingstock, work-in-progress, intellectual property, equipment and goodwill fromBookworks Pty Ltd, Rellim Pty Ltd, Motordata Pty Ltd and Stan H Earle Pty Ltdall private Australian companies in the book origination, printing anddistribution business, for a cash consideration of AUD 1.5 million(approximately £0.6 million). Since the acquisition we have purchased newfreehold premises in Sydney for a consideration of AUD 2.3 million (£0.9million) exclusive of taxes, which will enable all our Australian operations tobe centred under one roof. The Board believes this acquisition will allow further growth in the Australianmarket and provide additional opportunities for geographic market expansion. Dividends The Board is recommending a final dividend of 10.0p per share, giving a totaldividend for the year of 15.5p (2006: 15.5p). Subject to final approval byshareholders, the final dividend will be paid on 26 October 2007 to shareholderson the register at the close of business on 28 September 2007. The shares willbe declared ex-dividend on 26 September 2007. Corporate governance As Chairman of the Board I am committed to maintaining a governance frameworkwhich supports the vision and values of our business and which protects andenhances the interests of all our stakeholders. Corporate governance is an areaof activity which is constantly under review and we will continue to monitor allnew guidance to ensure that the principles that apply to our business areembraced in a timely and appropriate manner. Staff Firstly, following our recent acquisition in Australia I would like to welcomeour new employees in Sydney, Australia to the Haynes Group. Secondly, to all ourshareholders, customers and suppliers I would like to offer my gratitude foryour continued support during the year and finally but certainly not least, toall our employees a sincere thank you for your hard work and dedicationthroughout the year. With the Group restructuring earlier in the year and therecent acquisition in Australia, this has been a particularly busy time for anumber of you and I am confident that as a result of all your efforts we willsee the benefits accrue to the Group during the forthcoming financial year. Future prospects This second year of reduced profits needs to be placed in the context of risingutility bills and raw material costs which, in the UK, led to lower consumerspending resulting in our retail customer base tightening inventory controls.While in the US, significant increases in gasoline prices heavily impacteddisposable incomes causing consumers to defer repair projects. All of the aboveoccurred at a time when we have been experiencing a much weakened US Dollar.Nevertheless, with the Group generating strong cash flow, Senior Management ableto focus on core businesses and the US looking to develop the strategic benefitsanticipated from the recent acquisition of the Bookworks businesses, the Groupis well placed to increase revenue and earnings, however, we are cautious withregards the impact of the US Dollar exchange rate. John H Haynes, OBEExecutive Chairman1 August 2007 Group Chief Executive's Review Business overview The Haynes Group is the worldwide market leader in the supply of automotive andmotorcycle repair manuals. Each manual is based on a complete vehicle strip-downand rebuild in one of our workshops, so that the written and photographicinstructions for our customers is inherently practical and easy to follow. It isthe Haynes attention to detail and uncompromising approach to independent andtrustworthy instructional advice that has led to the Group achieving its globalmarket leading position. As well as our extensive range of automotive and motorcycle repair manuals, theGroup publishes an impressive list of practical, instructional and easy readingtitles aimed at those with an interest in motoring, motor sport as well as othertransport and general DIY related activities. In addition to the above, the UKand European operation also provides printing services for external customers. The Group has two primary geographical segments. Firstly, the UK and Europeanoperations, which are serviced from its head offices in Sparkford, Somerset andsecondly, the North American and Australia operation, which is responsible forthe US, Latin America and Pacific Rim and operates from headquarters near LosAngeles, California. The US business has its production and principaldistribution operations in Nashville, Tennessee. There has also been a branchoperation of the US business based in Melbourne, Australia which is in theprocess of being merged into an enlarged operation following the acquisition ofthe Bookworks businesses and which will be relocated to Sydney. Each businesssegment has its own management structure and has full vehicle workshop andeditorial resources, book manufacturing facilities and sales and distributioncapabilities. Operating results overview Three years ago, when we were announcing a second year of record Group pre-taxprofits I started my review by thanking our employees for a job well done. Thisyear, we are looking back on a second year of reduced profitability. However,the hard work and dedication that will have been shown over the last two yearswill have been no less and arguably, given the difficult and often challengingmarket conditions, greater. I would therefore, like to start my review once moreby thanking our staff for their continued commitment. For various reasons the year has been quite difficult. Early in the year, in theUS, we saw the negative results of customers purchasing ahead of price increasesin the previous period and this led to a very slow start, which was exacerbatedby the deferral of repair and maintenance projects, as significant increases ingasoline prices reduced disposable incomes. There has also been some evidence ofa shift away from DIY to Do-It-For-Me (DIFM) among consumers and this has alsobeen noticed in segments other than automotive. There is little doubt that theincreased complexity of modern vehicles has caused many motorists to,mistakenly, perceive that Car DIY is now beyond them. But there also appears tobe something more, an almost generational preference for DIFM, despite theopportunities for significant savings. Furthermore, the economies in both ourkey geographic markets have seen levels of consumer spending adversely affected,for sometimes differing reasons. In the US, we have now seen two cycles ofrising gasoline prices dampening demand, only to recover slightly, as pricesfall in the lower driving periods (unfortunately these periods tend to be inseasons less conducive to DIY). Recent concerns over falling prices in thehousing sector, suggest that forecasts for the forthcoming year may be, at best,uncertain. Similarly, in the UK, consumer spending has been weak and higherinterest rates seem set to dampen market conditions. The impact of the weakerconsumer spending on our principal retail customer base has seen a move towardsa tighter control over inventory levels which in turn has had a knock-on impacton sales of our core product. Finally, the US Dollar, which has had a negativeimpact on profit for the past two years, declined further in 2006/7 and has hada marked impact on the results of the US business when translated into Sterling.The net impact of the above factors has led to a reduction in Group revenue fromcontinuing operations of 5% to £29.2 million (2006: £30.6 million). Thissomewhat exaggerates the underlying downturn in performance against the prioryear. There is a continuing need for us to educate our loyal customer base, as well asformer customers, that there remains much work that they can personallyaccomplish on their vehicles with ever increasing levels of saving. In the US,we enter the second year of a national print campaign designed to address thispoint and this will be supported in the coming year with a newly designedwebsite. This new website will contain video presentations of tasks which can be easilyundertaken by the average motorist with savings of substance. The website willalso, for the first time, feature a "chatroom" where our customers can exchangeinformation on how they were able to accomplish certain tasks. This approach isalso to be undertaken in the UK. Also, for the first time, the US business willbe accepting orders directly from the new website. In the US we will also be working hand-in-hand with the "Be Car Care Aware"consumer education program directed by the Automotive Aftermarket IndustryAssociation in order to put information before motorists which illustrate thetasks which can be accomplished, and many of these can still be done with ease. Clearly the Group is not well placed to have an influence on world economies orworldwide currency markets. However, we have been addressing the above issues.In the US, the process started in 2001 through the acquisition of Chilton andwas followed in 2002 with the purchase of Gregory's in Australia. These twoacquisitions firmly established Haynes as the worldwide market leader, inEnglish speaking territories, for the supply of automotive and motorcyclerepair, servicing and technical information. We firmly believe that as long asthere are cars and motorcycles on the road there will be a demand for theinformation we hold and by consolidating the supply of this information, our aimis to make Haynes the supplier of first choice, no matter where a customer islocated. In the UK and Europe, the acquisition of Sutton Publishing in March 2000 waspart of a strategy to help broaden the base of the UK business and at the sametime take advantage of the synergies afforded by the vertically integratednature of our business. Whilst the acquisitions in the US have matched, if notexceeded expectations, the acquisition of Sutton Publishing proved to be lessbeneficial to the Group. We came to realise that whilst absorbing a great dealof management time, we were not seeing real progress to true profitability. Thiswas the principal factor in the decision to sell the Sutton's business earlierthis year. However, where we do have market leading expertise such as in the areas ofmotoring, motor sport, transport and practical DIY we have seen sales growthduring the past 12 months. Likewise, the Haynes licensing programme, whilststill in its infancy, is progressing well and during the second half of the yearwe were delighted to link up with Next, the leading high street clothesretailer, to produce a range of Haynes branded children's clothes and earlyindications are that sales of the new range have been well received by theconsumer. The price increases last year, in both our key territories, were necessary tocatch up with an accumulation of increases in raw material costs. However, wehave seen a further reduction in gross margin to 64.1% (2006: 67.8%) but bykeeping a tight control of our overheads, we have been able to partially offsetthis. Accordingly, Group operating profit from continuing operations ended theyear lower by 19% at £7.2 million (2006: £8.9 million). Also, during the year, the Group benefited from an improved Group cash positionand this led to an increase in interest receivable of £0.1 million. It isdisappointing, however, to note that much of this benefit was eroded by theimpact of the weak Dollar which had an adverse impact on Group pre-tax profitsof £0.4 million. The net impact of the above left the Group with a pre-taxprofit on continuing activities of £7.1 million, down 16% on the prior year(2006: £8.5 million). Following the closure of our operation in France and the disposal of SuttonPublishing there has been a one-off charge to the Group Income Statement of £2.9million, the details of which are provided in note 7. Segmental overview North America and Australia Sales revenue in the US during the first six months was significantly impactedby the unusual buying patterns in the previous year following a mid year priceincrease and ended the period, in local currency, 12% down on the prior period.However, we mentioned at the half year that we firmly believed this to be atiming issue and this was proven to be the case with sales during the second sixmonths 12% ahead of the prior period. In particular, sales of Haynes AutomotiveRepair Manuals in both the US and Australia ended the 12 month period ahead oflast year while US revenue overall, in local currency, ended the period broadlyin line with the prior year. However, as a result of the adverse currencymovements, after translation to Sterling, the shortfall was 10%. The new Haynes.com website will be launched at the beginning of August and willsignificantly improve the web presence of the US business. The site will beginto carry revenue producing advertising in due course. Following the repayment of the Chilton and Gregory's acquisition loans' cashgeneration from the US business has been very strong with our year-end cashbalance 66% ahead of the prior year. As a result we have seen interest incomeduring the year increase by nearly five times. However, as mentioned above, theweak US Dollar had a major impact on our results this year and with the averageexchange rate rising from $1.78 last year to $1.93 this financial year, anincrease of 8.4%, we have seen £0.4 million wiped from our pre-tax profits ontranslation to Sterling. The net impact of the above factors left the North American and Australiansegmental profit at $11.3 million (2006: $12.6 million) a reduction of 10%.However, after translation to Sterling, the segmental profit was £5.9 million(2006: £7.1 million), a reduction of 17%. United Kingdom and Europe • Automotive During the first six months of the financial year we experienced a decline inour core automotive repair manuals of 13% as key retail customers maintainedtight inventory controls. There were however, signs at the half year that saleswere improving and this trend continued with sales in the second half of theyear 4% ahead of the prior period with sales in the fourth quarter 8% ahead ofthe prior year. Although the net impact was for sales of owner workshop manualsto end the year 5% down on the prior 12 month period we are encouraged by recenttrends. Sales of Swedish Manuals continued to perform well and whilst not asstrong as during the first six months nevertheless, ended the period 2% ahead oflast year. The Haynes modifying range of titles, introduced five years ago tofollow the trend of younger drivers customising vehicles, saw further declinesand may be reaching the end of their lifecycle. Despite the increasing complexity of vehicles there are still many tasks thatcan be performed to maintain the vehicle. Towards the end of the year the UKbusiness increased its marketing resource to improve on our ability to get thismessage across to the many people in the UK who still work on cars or areinterested in doing so. As further recognition of market shifts, we have been developing a websitedesigned to make vehicle repair and maintenance information available toProfessional Mechanics and Installers. This service would be fee-based and wouldbe populated in large part with information which we already possess butsupplemented by further information produced specially for professionals.Testing of a "Beta" version of the site will begin in the UK this month and itis anticipated that it will roll out in that market by the end of the calendaryear. If successful in the UK market it would be relatively straightforward tointroduce a similar product in Australia, where our recent acquisition comeswith much of the data that would be needed to populate the site. In addition to the above, we also plan to place revenue producing advertising onthe UK website during the coming year. • General Publishing Sales in the Haynes Book Division have performed well with like for like salesincreases in the second, third and fourth quarters against the prior year. As aresult, sales of the division ended the year 23% ahead of last year. Sales ofthe Official F1 and MotoGP season reviews once again feature in our top 10selling titles, as did our extremely popular title on Michael Schumacher andbooks on great British motorcycle racing legends Barry Sheene and John Reynolds.We were also very pleased by sales of the new Top Trumps series with 'TopTrumps: Dr Who' ending the year as the division's third top selling title. The net impact of the above factors led to an increase in UK & European revenueon continuing operations of 6% to £11.8 million (2006: £11.1 million). However,following a reduction in higher margin automotive revenue, segmental profitsfell to £1.1 million (2006: £1.8 million). Taxation The charge to taxation on continuing operations for the year was £1.9 million(2006: £2.8 million). The lower charge reflects the reduction in Group pre-taxprofit as well as certain tax deductions in relation to the discontinuedoperations and a prior year tax credit in the US. As a result of these factorsthe effective tax rate for the year on continuing activities was lower at 27%(2006: 32%) Net debt and cash flows The Haynes Group balance sheet is ungeared and the business is generating strongcash flow. During the year, the cash generated from continuing operations was£7.9 million (2006: £8.4 million) and represented 110% of Group operating profitfrom continuing operations (2006: 95%). During the year the Group sold its interest in Sutton Publishing for a cashconsideration of £3.0 million, which net of selling costs, enhanced the Group'snet funds position by £2.8 million. With higher interest receivable, lowercapital expenditure and lower deferred consideration, cash and cash equivalentsmore than doubled to £6.5 million (2006: £3.1 million). Treasury management & procedures The Group's treasury policies remain in line with those highlighted last yearand are designed to reduce and minimise financial risk and ensure sufficientliquidity for the Group's future needs. The Group operates strict controls overall treasury transactions including dual signatories and appropriateauthorisation limits. The Group's principal financial instruments comprise bankloans and overdrafts, lease financing arrangements and cash. The main purpose ofthese instruments is to finance the Group's working capital requirements as wellas funding its capital expenditure programmes. No trading in financialinstruments is undertaken. The main currency exposure results from trading transactions between ouroperating businesses and with our global customer base. Approximately 57% (2006:52%) of our revenue streams are derived in US Dollars, 36% (2006: 37%) insterling and the balance coming from a mix of currencies across our operatingentities. We should not ignore the fact that there is a partial offset tocurrency rates by virtue of the fact that much product for Europe ismanufactured in the US. Pensions The Group has a number of different retirement programmes in the countrieswithin which it operates. The principal pension programmes are a contributorydefined benefit scheme in the UK and a non-contributory defined benefit plan inthe US. This is the second full year of reporting under International AccountingStandard (IAS) 19 governing pensions and we have experienced a high degree ofvolatility in the size of the deficit we have reported in our Group balancesheet. This is best illustrated in our UK scheme where in May 2006 we reported adeficit of £6.5 million. This increased by £3.3 million to £9.8 million inNovember 2006, an increase of 51%, as our UK scheme actuaries updated theirmortality tables used to assess the scheme's liabilities. We are now reporting the position for our financial year ended 31 May 2007 andwe find the deficit has fallen by £3.7 million to £6.1 million, a reduction of38%, as two of the principal assumptions used in the calculation namely, thediscount rate and the expected return on scheme assets have moved in a positivedirection since the last valuation. The high degree of volatility we have experienced in our last three reportsserves to demonstrate how difficult it is for management and the readers of ouraccounts to assess the financial performance of the Scheme and the resultantimpact on the Group's reported results. Group Outlook We are aware that the trends for motoring-related DIY have been on the declinein recent years, particularly in the UK. This comes during a time when, in theWestern world, we have seen disposable incomes increase, the population growingolder and vehicles becoming more complex with a growing perception that vehiclesare too difficult to work on. However, we believe our market leading expertiseplaces the Group in a strong position to take advantage of shifting worlddemographics and a changing global market place. We believe our market leading position throughout the English speaking worldprovides us with a unique opportunity to become a major world wide supplier forall automotive and motorcycle repair, servicing and technical information. Theprocess of positioning the Group to achieve this longer term goal is alreadyunderway. With key customers in both our geographical markets reporting improved tradingand embarking on new store opening programmes we enter the new financial yearwithout some of the negatives that were in place a year ago. In our general publishing business we will look to build on the success of thisyear's publishing programme. Our editorial commissioning team already have anincreased new title programme in place for the coming year and the focus ofmanagement will be on extending the publishing programme as well as identifyingnew areas where Haynes can apply their trustworthy and practical step-by-stepapproach to DIY. We will also focus our attention on content and the delivery of that content tothe end consumer. We are aware that the market place is increasingly demandingcontent through multi media channels and we need to ensure that Haynes is ableto securely deliver its content in the consumer's choice of format. In North America and Australia management will be quickly looking to integratethe recent acquisition of the Bookworks businesses in Sydney, Australia to takeadvantage of both the financial and operational synergies which are expected toflow from combining the Australian businesses. In summary, the Group is financially strong and strategically well placed tobuild on the restructuring of the prior 12 months. The process of refocusing theGroup and making sure the structures in place match the needs of the changingglobal market place will continue and management will seek to identify strategicacquisitions or partnerships where it makes commercial sense to do so and wheresuch opportunities arise. Eric OakleyGroup Chief Executive1 August 2007 Consolidated Income Statement (unaudited) Year Ended Year Ended 31 May 2007 31 May 2006 £'000 £'000Continuing operationsRevenue (note 2) 29,202 30,572Cost of sales (10,498) (9,830)Gross profit 18,704 20,742Other operating income 53 40Distribution costs (7,437) (7,115)Administrative expenses (4,169) (4,814)Operating profit 7,151 8,853Finance income (note 4) 1,104 804Finance costs (note 5) (1,174) (1,127) Profit before taxation 7,081 8,530Taxation (note 6) (1,913) (2,772) Profit for the period from continuing operations 5,168 5,758 Discontinued operationsLoss for the period from discontinued operations (note 7) (2,946) (194) Profit for the period attributable to the equity holders of the parent 2,222 5,564 Earnings per share from continuing operations - pence * (note 8) - On basic earnings 31.6 35.2 Loss per share from discontinued operations - pence * (note 8) - On basic earnings (18.0) (1.2) Earnings per share from all operations - pence * (note 8) - On basic earnings 13.6 34.0 * As there were no potentially dilutive shares in issue on either of theCompany's two classes of shares during the periods under review, no separatediluted earnings per share has been shown. Consolidated Statement of Recognised Income and Expense (unaudited) Year Ended Year Ended 31 May 2007 31 May 2006 £000 £000 Exchange differences on translation of foreign operations (940) (569)Actuarial gains on retirement benefit obligation 1,393 1,048Deferred tax on retirement benefit obligation (510) (327)Net (expense)/income recognised directly in equity (57) 152 Profit for the financial period 2,222 5,564 Total recognised income for the financial period 2,165 5,716 Consolidated Balance Sheet (unaudited) Year Ended Year Ended 31 May 2007 31 May 2006 £'000 £'000Non-current assetsProperty, plant and equipment 6,763 7,209Goodwill 4,359 6,055Deferred tax assets 2,802 3,482 13,924 16,746Current assetsInventories 10,810 13,371Trade and other receivables 9,801 10,961Cash and cash equivalents 6,478 4,854Total current assets 27,089 29,186 Total assets 41,013 45,932 Current liabilitiesTrade and other payables (3,857) (4,248)Current tax liabilities (879) (1,486)Bank overdrafts - (1,777)Total current liabilities (4,736) (7,511) Non-current liabilitiesOther creditors (135) (214)Deferred tax liabilities (384) (472)Retirement benefit obligation (note 12) (6,909) (8,517)Total non-current liabilities (7,428) (9,203) Total liabilities (12,164) (16,714) Net assets 28,849 29,218 Equity (note 13)Share capital 3,270 3,270Share premium 638 638Foreign currency translation reserve (1,342) (402)Retained earnings 26,283 25,712Total equity 28,849 29,218 Consolidated Cash Flow Statement (unaudited) Year Ended Year Ended 31 May 2007 31 May 2006 £'000 £'000 Net cash generated from operating activities - Continuing operations (note 10) 7,889 8,433 - Discontinued operations (note 10) (583) (686) Cash generated by operations 7,306 7,747 Tax paid (2,505) (2,485) Interest received 161 33 Interest paid (29) (14) Retirement benefit obligation (332) (164) Net cash generated from operation activities 4,601 5,117 Investing activities Disposal of subsidiary 2,780 - Closure of operation (141) - Proceeds on disposal of property, plant and equipment - 9 Purchases of property, plant and equipment (500) (671) Acquisition costs - deferred consideration (208) (307) Sale of investments - 2 Net cash used in investing activities 1,931 (967) Financing activities Dividends paid (2,534) (2,453) Net cash used in financing activities (2,534) (2,453) Net increase in cash and cash equivalents 3,998 1,697 Cash and cash equivalents at beginning of year 3,077 1,772 Effect of foreign exchange rate changes (597) (392) Cash and cash equivalents at end of period 6,478 3,077 Notes to the Interim Results 1. Basis of accounting The Group financial statements have been prepared and approved by the directorsin accordance with International Financial Reporting Standards (IFRS's) asadopted by the European Union and as such comply with Article 4 of the EU IASRegulation. The accounting policies used to prepare this preliminary announcement areconsistent with those applied in the 2006 consolidated financial statements.These accounting policies have been applied consistently in respect of the Groupentities. The Group financial statements are presented in sterling, with all valuesrounded to the nearest thousand pounds (£'000) except as indicated otherwise. 2. Revenue Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000Turnover by geographical destination on continuing operations :United Kingdom 9,510 8,838Rest of Europe 2,054 2,089United States of America 15,213 16,949Rest of World 2,425 2,696Total consolidated turnover 29,202 30,572 3. Segmental analysis For management purposes, the Group is currently organised into two geographicaloperating segments. These geographical segments are the basis on which the Groupreports its primary segment information. The principal activities of the two primary segments are as follows :- • The origination, production and sale of automotive repair manuals inthe UK and Europe • The origination, production and sale of automotive repair manuals inNorth America and Australia Analysis of results by geographical segment : 31 May 31 May 31 May 31 May 2007 2007 2006 2006 £000 £000 £000 £000Revenue - continuing operationsUS - External 17,447 17,447 19,431 19,431US - Inter-segmental * 849 352 18,296 19,783 UK - External 11,755 11,755 11,141 11,141UK - Inter-segmental * 231 245 11,986 11,386 Total revenue 29,202 30,572 *Inter -segmental sales are charged at the prevailing market rates 31 May 31 May 2007 2006 £000 £000Result - continuing operationsUS - Segmental profit 5,865 7,081UK - Segmental profit 1,086 1,756 6,951 8,837Unallocated head office expense less 200 16incomeFinance income 1,104 804Finance costs (1,174) (1,127) Consolidated before taxation 7,081 8,530Taxation (1,913) (2,772)Profit for the period from continuing 5,168 5,758operationsLoss for the period on discontinued (2,946) (194)operations Profit for the period attributable to 2,222 5,564equity holders of the parent 4. Finance income Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000 Interest receivable on bank deposits 161 33Expected return on pension scheme assets 943 771 1,104 804 5. Finance costs Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000 Interest payable on bank loans and overdrafts 29 14Interest charge on pension scheme liabilities 1,170 1,123 1,199 1,137Less: Amounts included from discontinued operations (25) (10) 1,174 1,127 6. Taxation Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000Analysis of charge during the period :Current tax - UK corporation tax on profits for the period 1,105 1,413 - Foreign tax 2,042 2,645 - Double tax relief (965) (961) - Adjustments in respect of prior periods (283) (3) 1,899 3,094Deferred tax - Origination and reversal of temporary differences 14 (322) 1,913 2,772 7. Discontinued operations Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000 Revenue 2,600 3,605Cost of sales (1,533) (2,014)Gross profit 1,067 1,591Distribution costs (891) (1,339)Administrative expenses (276) (436)Operating loss (100) (184)Finance costs (25) (10)Loss before taxation (125) (194)Taxation - -Loss for the period (125) (194) Costs of terminating French operations (533) -Loss on disposal of subsidiary (2,288) - (2,946) (194) 8. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing :- Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000Earnings :Profit after tax - continuing operations 5,168 5,758Profit after tax - discontinued operations (2,946) (194)Profit after tax - all operations 2,222 5,564 No. No.Number of shares :Weighted average number of shares 16,351,540 16,351,540 As at 31 May 2007 and 31 May 2006 there were no potentially dilutive shares inissue on either of the Company's two classes of shares. Accordingly, there is nodifference between the weighted average number of shares used in the basic anddiluted earnings per share calculation. 9. Dividends Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000Amounts recognised as distributions to equity holders : Final dividend for the year ended 31 May 2006 of 10.0 pence per share 1,635 1,554(2005: 9.5 pence per share) Interim dividend for the year ended 31 May 2007 of 5.5 pence per share 899 899(2006: 5.5 pence per share) 2,534 2,453 Proposed final dividend for the year-ended 31 May 2007 of 10.0 pence per 1,635share (2006: 10.0 pence per share) The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting to be held on 18 October 2007 and has not been included as aliability in these financial statements. Subject to final approval by shareholders the final dividend will paid on 26October 2007 to shareholders on the register at the close of business on 28September 2007. The shares will be declared ex-dividend on 26 September 2007. 10. Cash flow analysis Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000Cash flows from operating activities - continuing Profit after tax 5,168 5,758 Adjusted for :Income tax expense 1,913 2,772Interest payable and similar charges 4 4Interest receivable (161) (33)IAS 19 pension current service cost less contributions 227 352Operating profit 7,151 8,853Depreciation on property, plant and equipment 735 759Gain on disposal of property, plant and equipment - 5 7,886 9,617Changes in working capital :(Increase)/decrease in inventories (215) (690)(Increase)/decrease in receivables 526 (53)Increase/(decrease) in payables (308) (441) 7,889 8,433Cash flows from operating activities - discontinuing Loss after tax (2,946) (194) Adjusted for :Interest payable and similar charges 25 10Loss on disposal of subsidiary 2,288 -Closure of operation 533 -Operating loss (100) (184)Depreciation on property, plant and equipment 22 47Gain/(loss) on disposal of property, plant and equipment - (5) (78) (142)Changes in working capital :(Increase)/decrease in inventories (235) (457)(Increase)/decrease in receivables (280) (11)Increase/(decrease) in payables 10 (76) (583) (686) 11. Analysis of the changes in net funds As at As at 1 June Exchange 31 May 2006 Cash flow movements 2007 £'000 £'000 £'000 £'000 Cash at bank and in hand 4,854 2,221 (597) 6,478Bank overdrafts (1,777) 1,777 - - 3,077 3,998 (597) 6,478 12. Retirement Benefit Obligation The Group operates a number of different retirement programmes in the countrieswithin which it operates. The principal pension programmes are a contributorydefined benefit scheme in the UK and a non contributory defined benefit plan inthe US. The assets of all schemes are held independently of the Group and itssubsidiaries. As at 31 May 2007 the financial position of the two defined benefit schemes havebeen updated by qualified independent actuaries in line with the requirements ofIAS 19 and the combined movements on the two schemes are shown below :- Year Ended Year Ended 31 May 31 May 2007 2006 £000 £000 Consolidated retirement benefit obligation at beginning of period (8,517) (9,438) Movement in the period :- Total expenses charged in the income statement (1,330) (1,412)- Contributions paid 1,435 1,224- Actuarial gain taken directly to reserves 1,393 1,048- Foreign currency exchange rates 110 61 Consolidated retirement benefit obligation at end of period (6,909) (8,517) 13. Consolidated Statement of Changes in Equity Foreign exchange Share Share translation Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 Balance at 1 June 2005 3,270 638 167 21,880 25,955 Profit for the period - - - 5,564 5,564 Currency translation adjustments - - (569) - (569) Retirement benefit obligations, net of tax - - - 721 721 Dividends - - - (2,453) (2,453) Balance at 1 June 2006 3,270 638 (402) 25,712 29,218 Profit for the period - - - 2,222 2,222 Currency translation adjustments - - (940) - (940) Retirement benefit obligations, net of tax - - - 883 883 Dividends - - - (2,534) (2,534) Balance at 31 May 2007 3,270 638 (1,342) 26,283 28,849 14. Other information The financial information set out above does not constitute the Group'sstatutory accounts within the meaning of section 240 of the Companies Act 1985.The 2007 figures are based on unaudited accounts for the year ended 31 May 2007.The statutory accounts will be finalised on the basis of the financialinformation presented by the directors in the preliminary announcement and willbe delivered to the Registrar of Companies following the company's annualgeneral meeting. The auditors do not expect to issue a qualified report or forthe audit report to contain any matters to which they draw attention to withoutqualifying their report. The 2006 comparatives are derived from the statutory accounts for the year ended31 May 2006 which have been delivered to the Registrar of Companies and receivedan unqualified audit report, did not include references to any matters to whichthe auditors drew attention by way of emphasis without qualifying their reportand did not contain a statement under the Companies Act 1985, s 237(2) or (3). The preliminary announcement has been approved by the Board of Directors andauthorised for issue on 1 August 2007. The Directors Report and audited accounts for the financial year ended 31 May2007 will be posted to shareholders on 17 August 2007 and delivered to theRegistrar of Companies following the Annual General Meeting which will be heldon 18 October 2007. This preliminary announcement is not being posted toshareholders, but is available on the UK web site http://www.haynes.co.uk/investor. Copies of the Directors' report and audited accounts can be obtained from: TheGroup Company Secretary, Haynes Publishing Group P.L.C., Sparkford, Near Yeovil,Somerset BA22 7JJ (telephone 01963 440635). This information is provided by RNS The company news service from the London Stock Exchange