Ms Intl. Regulatory News (MSI)

Chairman's Statement

Results and review

The Group has sustained its revenues and achieved a robust profit margin despite having endured a most unfavourable backdrop of defence spending cuts and protracted global recession.

From the outset, we made it clear that in the year to April 2013 the Group could not match the record profit returns of the previous twelve months. Considering the nature of the three Divisions' businesses and the current weak state of some markets in which they operate, particularly within the defence equipment sector which is renowned for being quite lumpy, we are truly pleased with the Group's overall performance, believing it to be a very healthy result in the current environment.

Profit before taxation for the 12 months ended 27th April, 2013 amounted to £5.01m (2012 - £8.39m) on revenue of £54.49m (2012 - £55.95m). Earnings per share were 24.4p (2012 - 34.8p).

Net cash and short term deposits at the year-end increased by a very impressive 34%, attaining a new record high of £13.45m (2012 - £10.04m).

'Defence', the largest division and accounting for over half of Group revenue, had to contend with the increasing severity and uncertainty of budget constrained customers in both domestic and export markets throughout the year. Delays in the receipt of anticipated orders and shortfalls in the eventual requirements coupled with the deferral of prospective orders were the prime reasons that negated the anticipated improvement in the final quarter. In response we realigned the Division's cost base in the closing months of the year, initiating a series of cost saving measures, which included reducing the head count, to bring the business into line with the prevailing lower levels of activity.

'Forgings' international markets were, in the main, restrained, reflecting customers' low activity and continuing lack of confidence in any real and sustainable upturn in growth. The UK, European and most international markets were at very best flat-lining throughout the period. In the Americas, where we have manufacturing plants in South Carolina and Sao Paulo, our push to boost more local production content and drive for greater efficiencies brought about some encouraging outcomes.

'Petrol Station Superstructures' once again successfully raised both revenue and profit, buoyed by a good mix of new station developments and upgrades to existing forecourts. A very positive, innovative approach to design, the unique utilisation of materials and construction techniques assisted growth in market share for the UK based operation. The Polish operation, with markets throughout central and south eastern Europe, performed well, but experienced some progressive general tightening in activity reflecting a decline in economic conditions across those parts of Europe.

Board

David Pyle, who has been with the Group for over 40 years, stepped down as an executive director on 27th April 2013 and has been appointed a non-executive director. I am very pleased that we will retain his expertise within the Board.

Outlook

Realistically, we are not anticipating the current year being any easier than last year. That said, we will seek to take advantage of the excellent reputations and market positions that the Group's three Divisions have built over many years across international markets. Furthermore, our very strong balance sheet and long term orientation and strategy should enable us to face the year ahead with some good measure of assurance and self-reliance.

'Defence' still has a substantial pipeline of new business prospects, most notably from customers where the Division already enjoys a laudable reputation and high degree of product recognition and acceptance. Although in the short term, there may be little improvement in the freeing up of national and some international defence budgets, it is equally likely that the strategic and capability concerns of governments will in many instances intensify and not diminish. The Division's cost structure has already been reduced to one aligned with a prudently perceived level of future business activity. This situation will be closely monitored and modified as required to meet any changes in expectations. In the meantime, maintaining high standards of marketing, advancing product development programmes, commendable 'in service' support of equipment and general efficiency improvements will be paramount. For the longer term, preserving the on-going co-operation and goodwill of the UK MoD as a constructive and supportive launch customer for new products and export sales will be most important.

'Forgings' focuses on the manufacture of fork-arms, with lifting capacities ranging from 1 tonne up to 150 tonnes supplied to global original equipment manufacturers for fitting to fork-lift trucks, construction, agricultural and quarrying machines. These markets are under pressure and we anticipate they will remain subdued over the next twelve months as many customers, seeking a competitive advantage, continue to consolidate or relocate parts of their operations closer to end user markets. Conversely, there is a positive and growing trend of 're-shoring' component supply as the international competiveness of local supply is restored. Such dynamics and their outcomes can be most relevant to the success of our own operations.

'Petrol Station Superstructures' year ahead appears quite promising as the Division builds on recent successes in expanding the customer base and the high quality performance ratings being achieved by 'on time' construction operations. There are numerous changes taking place in the petrol retailing market, notably the growth in market share being taken by supermarket chains with new locations and the expansion of independent retailing groups which are procuring individual sites or parts of estates from some of the leading oil companies. In Poland and eastern Europe, recent major road building programmes have resulted in a paucity of petrol station facilities on these roads to service the redirected traffic volumes. As further approvals become available for the required new developments, the Division is well placed to take advantage of the opportunities.

As I stated earlier, we are not anticipating that the coming year will be any easier for us. The outlook may be uncertain but our Divisions are in good shape with excellent market positions, manufacturing facilities, committed employees and the Group's balance sheet is particularly strong.

Our strategy is based upon the belief that maintaining reasonable and acceptable levels of profitability across the three Divisions emanates from an unending commitment to invest wisely in support of 'in-house' product development programmes, the upgrading of production equipment to ensure efficiency and striving for the relentless and constant improvement in everything we do. Our commitment to this policy is absolute.

The Board recommends the payment of a maintained final dividend of 6.5p per share (2012 - 6.5p) making a total for the year of 8.0p per share (2012 - 8.0p).

Michael Bell

4th June 2013