Last checked at 17 Jun 2009 07:00
Chairman's Statement
Results and review
If ever there was a time that truly heralded the virtues of operating a contemporary diverse engineering group, this is it. The significant growth from our Defence division almost totally compensated for the negative impact that some four months of intensifying global recession inflicted on our two Industrial Engineering divisions - forgings and petrol station forecourt structures. This impressive achievement by 'Defence' not only enabled the Group to report a reasonably robust set of results against a backdrop of deteriorating economic conditions but also elevated 'Defence' to become the major constituent part of the Group, accounting for half of total revenue.
For the year ended 2 May 2009, Group profit before taxation amounted to £4.92m (2008-£5.29m) on revenue of £51.56m (2008-£53.86m). Earnings per share were 19.5p (2008-22.0p).
Net cash and short term deposits at the year-end remained positive and amounted to £8.23m (2008-£10.07m).
I highlighted the significant gains being achieved by 'Defence' in my interim statement and I am pleased to report that it continued to perform strongly in the second half with resulting full year revenue up by some 25% compared to the previous year, mainly reflecting higher sales to overseas naval end-users and shipbuilders.
This uplift in both revenue and profit from 'Defence' was particularly important at a time when 'Industrial Engineering' encountered the real severity of the global slowdown during the second half of the year. 'Industrial Engineering' order intake declined steeply in the second half of the year amid low industrial activity, market weakness and immense uncertainty. The effects spread progressively through the individual businesses and by the final quarter 'Industrial Engineering' was contending with austere trading conditions.
However, as part of our corporate risk assessment review earlier in the year, we had already determined that any reduction in customer demand in our specific markets throughout the world was the principal risk issue for the Group, most pertinent for 'Industrial Engineering' which operates on short lead time order books. Accordingly we were prepared to implement immediate and appropriate counter-measures in a timely manner to re-align costs with the sharp reduction in demand.
Whilst the eventuality was disappointing and seriously undermined our plans to take advantage of the many efficiency gains that were being attained, our long and well established in-house training, routines and investment programmes aimed at improving our effectiveness have continued unabated, with greater commitment and application from everyone.
Outlook
Clearly there is considerable value in the contribution that 'Defence' affords our diverse Group, bestowing growth, a long term order book and excellent cash flow visibility, especially in these recessionary and unpredictable times.
Substantial 'Defence' orders in hand at the year end have been boosted further lately, and amongst others, we have been awarded a four year contract by the UK Ministry of Defence to provide contractor logistic support, fleet wide, for their in-service MSI-DS 30mm naval gun systems. Elsewhere, in the global defence equipment market, we are encouraged by the number of very interesting opportunities that exist for us to win additional business.
Predicting how long 'Industrial Engineering' may have to endure depressed demand is difficult. Recovery may depend more upon there being a fundamental global spending upswing than any advantages purported to be offered by the perception of any sterling weakness. Notwithstanding, the Group has retained market share in the various markets that we serve and numerous opportunities to expand our positions are being exploited with a marked enthusiasm. The preservation of our broad spectrum of niche capabilities is important and currently any under-utilised plant and equipment is under a strict regime of upgrade/maintenance and care, but ready to be re-commissioned the instant there is an upturn anywhere in activity.
The positive counterbalance provided by 'Defence' should grant an element of protection to the Group until the economy and the global industrial engineering market sector in particular, recovers. Moreover, the Group will continue to benefit from being debt free and committed to the strategic importance of tight control of cash and working capital.
We will remain vigilant, focused on making positive, constructive decisions and taking actions to sharpen our operations and ensure that we are moving in the right direction, in order that we may position the Group to achieve long term success and profitable development once an economic recovery becomes firmly established.
The record of progressive growth for the Group may have stalled temporarily, but we have the confidence, experience and resources that will assist us to withstand the present difficulties.
Undoubtedly, future results will depend upon the degree and duration of this recession and whilst we are hopeful of an upturn, we are not anticipating that it will happen in the short term, so we are planning our business strategy based upon a continuing difficult market in the year ahead.
Accordingly, the Board recommends the payment of a maintained final dividend of 3.80p (2008 - 3.80p) making a total for the year of 4.50p (2008 - 4.50p).
Michael Bell
16 June 2009
| Group income statement | ||||||||
| For the 52 weeks ended 2nd May, 2009 |
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| 2009 | 2008 | |||||||
| Total | Total | |||||||
| £000 | £000 | |||||||
| Revenue | 51,559 | 53,861 | ||||||
| Cost of sales | (39,139) | (40,393) | ||||||
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| Gross profit | 12,420 | 13,468 | ||||||
| Distribution costs | (1,665) |
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| Administrative expenses |
| (6,442) | (7,184) | |||||
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| (8,107) | (8,965) | |||||||
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| Group trading profit | 4,313 | 4,503 | ||||||
| Finance revenue | 142 |
| 308 | |||||
| Finance costs |
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| Other finance revenue - pensions | 470 |
| 485 | |||||
| 606 | 785 | |||||||
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| Profit before taxation | 4,919 | 5,288 | ||||||
| Taxation | (1,401) | (1,355) | ||||||
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| Profit for the period attributable to equity holders of the parent | 3,518 | 3,933 | ||||||
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| Earnings per share: basic | 19.5p | 22.0p | ||||||
| diluted | 18.9p | 21.5p | ||||||
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| Group statement of recognised income and expense | ||||||||
| For the 52 weeks ended 2nd May, 2009 | ||||||||
| Group | Company | |||||||
| 2009 | 2008 | 2009 | 2008 | |||||
| Total | Total | Total | Total | |||||
| £000 | £000 | £000 | £000 | |||||
| Actuarial (losses)/gains on defined benefit pension scheme | (5,511) | 548 | (5,511) | 548 | ||||
| Current taxation on actuarial (losses)/gains on defined benefit pension scheme | 106 | - | 106 | - | ||||
| Deferred taxation on actuarial (losses)/gains on defined benefit pension scheme | 1,437 | (127) | 1,437 | (127) | ||||
| Exchange differences on retranslation of foreign operations | 158 | 120 | - | - | ||||
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| Net (expense)/income recognised directly in equity | (3,810) | 541 | (3,968) | 421 | ||||
| Profit attributable to equity holders of the parent | 3,518 | 3,933 | 3,453 | 3,769 | ||||
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| Total recognised income and expense for the period attributable to equity holders of the parent | (292) | 4,474 | (515) | 4,190 | ||||
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| The financial information set out above does not constitute the Company's statutory accounts for the periods ended 2nd May, 2009 or 3rd May, 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies, and those for 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 a statement under section 498 (2) or (3) of the Companies Act 2006. |
| The earnings per share is calculated by dividing the profit after taxation of £3,518,000 (2008 - £3,933,000) by the weighted average of 18,020,015 (2008 - 17,845,762) shares in issue in the year. |
| Copies of this announcement are available from the Company's registered office at MS INTERNATIONAL plc, Balby Carr Bank, Doncaster, DN4 8DH, England. The full Annual Report and Accounts will be posted to shareholders shortly and will be delivered to the Registrar of Companies after it has been laid before the Company in general meeting. |
| Dividend warrants will be posted on 31st July 2009 to members on the books of the Company at 3rd July, 2009. |
| Balance sheets | |||||||||
| At 2nd May, 2009 | |||||||||
| Group | Company | ||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||
| £'000 | £'000 | £'000 | £'000 | ||||||
| ASSETS | |||||||||
| Non-current assets | |||||||||
| Property, plant and equipment | 15,810 | 16,101 | 15,103 | 15,269 | |||||
| Intangible assets | 106 | 138 | 106 | 138 | |||||
| Investments in subsidiaries | - | - | 6,869 | 6,869 | |||||
| Investment in joint venture | - | - | 50 | 50 | |||||
| Defined benefit pension asset | - | 1,856 | - | 1,856 | |||||
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| 15,916 | 18,095 | 22,128 | 24,182 | ||||||
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| Current assets | |||||||||
| Inventories | 3,989 | 5,104 | 3,242 | 3,779 | |||||
| Trade and other receivables | 5,712 | 7,574 | 5,594 | 6,970 | |||||
| Prepayments | 1,600 | 2,925 | 1,528 | 2,846 | |||||
| Cash and short-term deposits | 8,234 | 10,071 | 7,027 | 9,209 | |||||
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| 19,535 | 25,674 | 17,391 | 22,804 | ||||||
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| TOTAL ASSETS | 35,451 | 43,769 | 39,519 | 46,986 | |||||
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| EQUITY AND LIABILITIES | |||||||||
| Equity | |||||||||
| Equity share capital | 1,840 | 1,845 | 1,840 | 1,845 | |||||
| Capital redemption reserve | 901 | 896 | 901 | 896 | |||||
| Other reserve | 1,565 | 1,565 | 1,565 | 1,565 | |||||
| Revaluation reserve | 2,969 | 2,969 | 2,969 | 2,969 | |||||
| Special reserve | 1,629 | 1,629 | 1,629 | 1,629 | |||||
| Currency translation reserve | 127 | (31) | - | - | |||||
| Treasury shares | (391) | (391) | (391) | (391) | |||||
| Retained earnings | 10,860 | 12,131 | 8,911 | 10,247 | |||||
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| 19,500 | 20,613 | 17,424 | 18,760 | ||||||
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| Non-current liabilities | |||||||||
| Defined benefit pension liability | 2,805 | - | 2,805 | - | |||||
| Government grants | 3 | 16 | 3 | 16 | |||||
| Deferred income tax liability | 610 | 1,941 | 617 | 1,920 | |||||
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| 3,418 | 1,957 | 3,425 | 1,936 | ||||||
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| Current liabilities | |||||||||
| Trade and other payables | 11,977 | 20,606 | 17,951 | 25,754 | |||||
| Finance leases | - | 4 | - | - | |||||
| Government grants | 13 | 13 | 13 | 13 | |||||
| Income tax payable | 543 | 576 | 706 | 523 | |||||
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| 12,533 | 21,199 | 18,670 | 26,290 | ||||||
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| TOTAL EQUITY AND LIABILITIES | 35,451 | 43,769 | 39,519 | 46,986 | |||||
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| Cash flow statements | ||||||||
| For the 52 weeks ended 2nd May, 2009 | Group | Company | ||||||
| 2009 | 2008 | 2009 | 2008 | |||||
| £000 | £000 | £000 | £000 | |||||
| Trading profit | 4,313 | 4,503 | 3,850 | 3,442 | ||||
| Adjustments to reconcile trading profit to net cash in flow from operating activities | ||||||||
| Depreciation charge | 1,704 | 1,412 | 1,463 | 1,169 | ||||
| Amortisation charge | 79 | 115 | 79 | 115 | ||||
| Diminution in value of subsidiaries | - | - | (1) | 2 | ||||
| Foreign exchange gains | 146 | 37 | 95 | 106 | ||||
| RSA grant release | (13) | (12) | (13) | (12) | ||||
| Share based payments | 90 | 205 | 90 | 205 | ||||
| Decrease/(increase) in inventories | 1,342 | (555) | 556 | (57) | ||||
| Decrease/(increase) in receivables | 1,862 | (286) | 1,376 | (96) | ||||
| Decrease/(increase) in prepayments | 1,325 | (816) | 1,318 | (821) | ||||
| (Decrease)/increase in payables | (3,332) | 771 | (2,719) | 600 | ||||
| (Decrease)/increase in progress payments | (5,524) | 1,553 | (5,103) | 1,150 | ||||
| Provisions utilised | - | (113) | - | (113) | ||||
| Pension fund | (380) | 71 | (380) | 71 | ||||
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| Cash generated from operating activities | 1,612 | 6,885 | 611 | 5,761 | ||||
| Interest received | 136 | 300 | 126 | 277 | ||||
| Taxation paid | (1,219) | (1,165) | (914) | (812) | ||||
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| Net cash inflow/(outflow) from operating activities | 529 | 6,020 | (177) | 5,226 | ||||
| Investing activities | ||||||||
| Purchase of property , plant and equipment | (1,506) | (2,838) | (1,397) | (2,687) | ||||
| Purchase of intangible assets | (47) | - | (47) |
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| Sale of property, plant and equipment | 102 |
| 88 |
| 100 |
| 86 | |
| Dividends received from joint venture | - |
| - |
| 250 |
| 500 | |
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| Net cash from investing activities | (1,451) | (2,750) | (1,094) | (2,101) | ||||
| Financing activities | ||||||||
| Purchase of own shares | - | (308) | - |
| (308) | |||
| Repurchase of shares | (99) | (477) |
| (99) |
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| Share options exercised | - |
| 655 |
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| 655 | |
| Dividends paid | (812) |
| (670) |
| (812) | (670) | ||
| Repayments of capital element of finance leases | (4) | (7) | - |
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| Net cash flow from financing activities | (915) | (807) | (911) | (800) | ||||
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| (Decrease)/increase in cash and cash equivalents | (1,837) | 2,463 | (2,182) | 2,325 | ||||
| Opening cash and cash equivalents | 10,071 | 7,608 | 9,209 | 6,884 | ||||
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| Closing cash and cash equivalents | 8,234 | 10,071 | 7,027 | 9,209 | ||||
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| Reconciliation of movement in equity | |||||||||||||||||||
| Capital | Currency | ||||||||||||||||||
| Issued | redemption | Other | Revaluation | Special | translation | Treasury | Retained | ||||||||||||
| capital | reserve | reserve | reserve | reserve | reserve | shares | earnings | Total | |||||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||||||
| (a) Group | |||||||||||||||||||
| At 28th April, 2007 | 1,871 | 870 | 1,544 | 2,942 | 1,629 | (151) | (738) | 8,719 | 16,686 | ||||||||||
| Total recognised income and expense for the year | - | - | - | - | - | 120 | - | 4,354 | 4,474 | ||||||||||
| Dividends paid | - | - | - | - | - | - | - | (670) | (670) | ||||||||||
| Repurchase of shares | (26) | 26 | - | - | - | - | - | (477) | (477) | ||||||||||
| Change in taxation rate | - | - | 21 | 27 | - | - | - | - | 48 | ||||||||||
| Share options | - | - | - | - | - | - | 205 | 205 | |||||||||||
| Exercise of share options | - | - | - | - | - | - | 655 | - | 655 | ||||||||||
| Purchase of own shares | - | - | - | - | - | - | (308) | - | (308) | ||||||||||
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| At 3rd May, 2008 | 1,845 | 896 | 1,565 | 2,969 | 1,629 | (31) | (391) | 12,131 | 20,613 | ||||||||||
| Total recognised income and expense for the year | - | - | - | - | - | 158 | - | (450) | (292) | ||||||||||
| Dividends paid | - | - | - | - | - | - | - | (812) | (812) | ||||||||||
| Repurchase of shares | (5) | 5 | - | - | - | - | - | (99) | (99) | ||||||||||
| Share options | - | - | - | - | - | - | - | 90 | 90 | ||||||||||
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| At 2nd May, 2009 | 1,840 | 901 | 1,565 | 2,969 | 1,629 | 127 | (391) | 10,860 | 19,500 | ||||||||||
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| (b) Company | |||||||||||||||||||
| At 28th April, 2007 | 1,871 | 870 | 1,544 | 2,942 | 1,629 | - | (738) | 6,999 | 15,117 | ||||||||||
| Total recognised income and expense for the year | - | - | - | - | - | - | - | 4,190 | 4,190 | ||||||||||
| Dividends paid | - | - | - | - | - | - | - | (670) | (670) | ||||||||||
| Repurchase of shares | (26) | 26 | - | - | - | - | (477) | (477) | |||||||||||
| Change in taxation rate | - | - | 21 | 27 | - | - | - | - | 48 | ||||||||||
| Share options | - | - | - | - | - | - | - | 205 | 205 | ||||||||||
| Exercise of share options | - | - | - | - | - | - | 655 | - | 655 | ||||||||||
| Purchase of own shares | - | - | - | - | - | - | (308) | - | (308) | ||||||||||
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| At 3rd May, 2008 | 1,845 | 896 | 1,565 | 2,969 | 1,629 | - | (391) | 10,247 | 18,760 | ||||||||||
| Total recognised income and expense for the year | - | - | - | - | - | - | - | (515) | (515) | ||||||||||
| Dividends paid | - | - | - | - | - | - | - | (812) | (812) | ||||||||||
| Repurchase of shares | (5) | 5 | - | - | - | - | - | (99) | (99) | ||||||||||
| Share options | - | - | - | - | - | - | - | 90 | 90 | ||||||||||
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| At 2nd May, 2009 | 1,840 | 901 | 1,565 | 2,969 | 1,629 | - | (391) | 8,911 | 17,424 | ||||||||||
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| (1) | Share Capital | |||||||||||||||||||||||||||||||
| The balance classified as share capital includes the nominal value on issue of the Company's equity share capital, comprising 10p Ordinary shares. | ||||||||||||||||||||||||||||||||
| (2) | Capital redemption reserve | |||||||||||||||||||||||||||||||
| The balance classified as capital redemption reserve represents the nominal value of issued share capital of the Company, repurchased. | ||||||||||||||||||||||||||||||||
| (3) | Other reserve | ||||||||||||||||||
| This is the revaluation reserve previously arising under UK GAAP which is now part of non-distributable retained reserves. This also includes the impact of the change in related deferred tax due to the change in corporation tax (30% to 28%). | |||||||||||||||||||
| (4) | Revaluation reserve | ||||||||||||||||||
| The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same assets previously recognised in equity. This also includes the impact of the change in related deferred tax due to the change in corporation tax (30% to 28%). | |||||||||||||||||||
| (5) | Special reserve | ||||||||||||||||||
| The balance classified as special reserve represents the share premium on the issue of the Company's equity share capital. | |||||||||||||||||||
| (6) | Currency translation reserve | ||||||||||||||||||
| The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations. | |||||||||||||||||||
| (7) | Treasury Shares | ||||||||||||||||||
| During 1991 the Company established an Employee Share Ownership Trust ("ESOT"). The trustee of the ESOT is Appleby Trust (Jersey) Ltd, an independent company registered in Jersey. The ESOT provides for the issue of options over Ordinary shares in the Company to Group employees, including executive directors, at the discretion of the Remuneration Committee. | |||||||||||||||||||
| The trust has purchased an aggregate 395,048 Ordinary shares, which represents 2.1% of the issued share capital of the Company at an aggregate cost of £391,000. The market value of the shares at 2nd May, 2009 was £401,000. The Company has made payments of £Nil (2008 - £Nil) into the ESOT bank accounts during the period. No options over shares (2008 - 374,000) have been granted during the period. Details of the outstanding share options for Directors are included in the Directors' Remuneration Report. | |||||||||||||||||||
| The assets, liabilities, income and costs of the ESOT have been incorporated into the Company's financial statements. Total ESOT costs charged to the income statement in the period amounts to £3,000 (2008 - £9,000). During the period no options were exercised (2008 - 1,912,521) and no shares were purchased (2008 - 153,500). | |||||||||||||||||||
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