Ms Intl. Regulatory News (MSI)

Chairman's Statement

Results and review

The Group has continued to prosper, with a twenty-five per cent uplift of pre-tax profit on revenue marginally higher than the prior year.

Profit before taxation for the 12 months ended 28th April, 2012 amounted to £8.39m (2011 - £6.68m) on revenue of £55.95m (2011 - £54.20m). Earnings per share were 34.8p (2011 - 30.6p).

Net cash and short term deposits at the year-end were £10.04m (2011 - £9.88m).

These record results are in line with our expectations, displaying a strong trading performance across all three divisions - 'Defence'; 'Forgings' and 'Petrol Station Superstructures' - and maintaining our upward trend in annual results. 'Defence', understandably, was not immune to the unfavourable effects of the well-chronicled budget constraints of national governments. Conversely and most pleasingly, the 'Forgings' and the 'Petrol Station Superstructures' divisions both experienced a progressive upturn in monthly order intake during the course of the year. 

'Defence' - the Group's largest division - produced another sterling performance lifting profitability handsomely on revenue lower than the prior year. Frustratingly, the time-line from customer enquiry to the placing of orders became increasingly protracted. As a consequence, the usual pattern and level of order inflow was uncomfortably interrupted, particularly in the domestic market. A positive highlight however, was that all deliveries to customers including each phase of the delivery critical and now completed US Navy contract for our 30mm naval gun systems, were completed in line with customer requirements.

'Forgings' generated a highly commendable result with a recovery in revenue, profitability and cash generation. This was a welcome and very pleasing upturn, following the recession influenced break-even performance of the prior year. We undertook further development of our manufacturing facilities across the board in the UK, Brazil and the United States. Importantly, the expansion of our non - UK facilities sealed a more emphatic 'local element' to our marketing perspective, which was instrumental in generating additional business.

'Petrol Station Superstructures' operations, based in both the UK and Poland have made laudable progress since becoming a wholly owned entity of the Group in May 2010. A more competitive, robust and proficient business approach, in a recovering market, enabled the division to gain market share, particularly in Eastern Europe. The UK operation provides structures to major international oil companies, dealer groups and supermarket chains in parts of Western Europe and as a recognised all-round high quality provider, is becoming the supplier of choice. The Polish business serves customers in its growing domestic market and that of other east European countries. To better support these markets and harness other business opportunities, we purchased a combined manufacturing and office facility on the outskirts of Krakow, in December 2011, replacing outgrown rented office space in the city.

Outlook

As always, we are looking forward with enthusiasm to the current year despite the escalating, political and macro-economic uncertainty. For the long term, we remain optimistic, in the firm belief that by developing and investing in the individual businesses, we are driving the right strategy to sustain the Group's growth.

'Defence' - we expect very little in the way of growth this year, in what is clearly a financially constrained, revenue flat line, industry-wide defence market. Nevertheless, marketing information confirms that despite the order delays, the many constituents of our mounting prospects list remain in place, with nothing knowingly cancelled or lost to competitors. Inevitably, customer programme delays are leading to a substantial build-up of potential business still to be awarded. Yet, interestingly since the year end, we are comforted by having received the highest level of monthly order intake for some considerable time. Gratifyingly, the expanding fleet of MSI naval gun systems on ships around the world provides an increasing level of regular in-service maintenance and support work for the business. 'In house' research and development programmes continue apace in anticipation of future market requirements. Notably, major orders in hand for delivery within the current financial year will have a distinct customer specified second half year revenue bias, which will be evident in the Group's first half/second half revenue profile. 

'Forgings' - is emerging from the global recession with a new degree of confidence. It is better equipped, more efficient and consequently more competitive. The customary short lead-time nature of the division's order books necessitates a sensitive and perceptive monitoring of regional global market variations. Presently, industrial engineering markets across continents are extremely uneven in activity, unpredictable and clearly susceptible to the prevailing and unsettling European economic conundrum. That said, the evolving new structure of the division's businesses should provide the flexibility to enable a pro-active response to any fluctuations in demand.

'Petrol Station Superstructures' - the development and construction of new large multi-function service station sites and the refurbishment and upgrade of existing facilities continues. The contemporary site typically comprises undercover car and separate HGV multi-pump fuel dispensaries, car valeting facilities and the escalating development of the retail shop/mini-market. Such filling stations can be a stand-alone road-side unit or alternatively the integral part of a supermarket complex. The division has attained a highly creditable reputation in the market for the design, manufacture, erection and refurbishment of all such forecourt structures. We are committed to build on that reputation and as the market leader focus on developing innovative ideas for the efficient and aesthetically pleasing construction of these structures.

Whilst cautious about the current constrained level of defence spending, to be sure, at some stage, it is inevitable that the dam will burst on our 'Defence' prospect-list. An encouraging sign is that a string of current and proposed global naval ship building projects - all fully funded - are, at last, being taken forward after a series of delays. 'Forgings', is in dynamic form, capable of competitively accommodating any further rise in activity and 'Petrol Station Superstructures' stands before a wealth of opportunity.

The prognosis for the world economy and particularly that of Europe is of grave concern. The lack of political resolve affects much that we try to achieve and in common with so many others, we are striving against a persistent and variable headwind. We must and will, maintain our prudent approach to managing and steering the Group for the long term interests of shareholders and not just the immediate future. Corporate focus remains on creating excellence in everything we do for there is no room for complacency in these highly competitive and tight markets that we serve.

Looking to the coming year the balance sheet is strong, the businesses are in very good shape and we expect to demonstrate further progress although as mentioned earlier, we anticipate a pronounced second half bias in revenue.

Accordingly, the Board recommends the payment of an increased final dividend of 6.5p per share (2011 - 5.5p) making a total for the year of 8.0p (2011 - 6.5p).

Michael Bell

13th June 2012