Ms Intl. Regulatory News (MSI)

MS INTERNATIONAL plc

Unaudited Interim Condensed

Group Financial Statements

31st October, 2023

EXECUTIVE DIRECTORS

Michael Bell

Michael O'Connell

Nicholas Bell

NON-EXECUTIVE DIRECTORS

Roger Lane-Smith

David Hansell

COMPANY SECRETARY

Shelley Ashcroft

REGISTERED OFFICE

Balby Carr Bank

Doncaster

DN4 8DH

England

PRINCIPAL OPERATING DIVISIONS

 'Defence and Security'

 'Forgings'

 'Petrol Station Superstructures'

 'Corporate Branding'

Chairman's Statement

Introduction

In last June's annual Statement, I highlighted that we anticipated a significant upward step change in the development of the business that would bring additional rewards and success.

I am now delighted to confirm we have been awarded the first production order contracts with the US Navy to supply our 30mm naval gun. This significant development is complemented by a further contract to maintain and support those systems.

I first reported on our efforts to break into the US Navy market in my Chairman's Statement of 25th July 1988, when I stated, "The first unit built to suit the US Navy specific requirements awaits ships trials in the United States". It has been a long haul, but vision; persistence; determination and capability has resulted in success.

We have also delivered a significant contract relating to the first sales of our 'VSHORAD' land-based mobile counter-drone weapon system. This was the contract where the customer's delay in taking delivery - because of the war in Europe - negatively impacted last year's results.

Results

For the half year ended 31st October 2023 profit before tax increased substantially to £7.72m (2022 - £3.46m) on revenue of £57.02m (2022 - £42.03m).

Basic earnings per share were 35.9p (2022 - 17.4p).

The balance sheet is again much stronger with net cash at £50.05m (2022 - £23.88m), reflecting the valuable upturn in activity in our 'Defence and Security' businesses.

Prospects

'Defence and security'

We believe that the strong start to 2023/4 looks set to continue, with deliveries gaining pace against contracts to overseas customers, for both our naval gun and land-based counter-drone defence systems.

Also, deliveries against our US Navy contracts will commence later in the new year.

Moreover, we are particularly pleased and encouraged by the level of military 'land market' interest in 'VSHORAD' and the number of enquiries we are receiving from multiple sources as to its availability and potential supply. Our existing production facilities are capable of fulfilling our current firm orders. Additionally, the refurbishment and reorganisation of parts of our, once under-utilised, production facilities in Norwich continues. This programme, when complete, will better accommodate our prospective production requirements.

'Forgings'

The Forgings division remains a very efficient business and well positioned to continue serving its broad international customer base. We remain committed to assisting our customers through our multi continent contemporary fork-arm manufacturing facilities.

'Petrol Station Superstructures'

In September the UK Government announced a revised set of green policies including delaying the ban on the sale of new petrol and diesel vehicles by five years to 2035. The news reinvigorated many of our fuel dispensing UK customers, encouraging them to consider expanding and enhancing the quality of their stations to ensure they remain competitive. In the meantime, we look forward to an improvement in our eastern Europe market which is reviving after some hesitancy caused by the region's continuing war.

'Corporate Branding'

We perceive that we remain well placed in our focused market of providing installation, repair and maintenance within the specialist area of the branding for petrol stations.

Outlook

We believe that we have continued to enhance the performance of the Group's businesses and with considerable confidence, we look forward to delivering further progress across the Group.

In the light of these positive developments and new commercial relationships, all matters considered, the Board has declared an increased interim dividend per share of 3p (2022 - 2p) payable on 19th January 2024 to those shareholders on the register at close of business on 22nd December 2023, with the ex-dividend date being 21st December 2023.

Michael Bell 11th December 2023

MS INTERNATIONAL plc 

Michael Bell

Tel: 01302 322133

Shore Capital (Nominated Adviser and Broker)

Patrick Castle/Daniel Bush/Lucy Bowden

Tel: 020 7408 4090

Independent auditor's review report on Interim Financial Information to MS INTERNATIONAL Plc

Conclusion

We have reviewed the condensed set of financial statements in the half-yearly financial report MS INTERNATIONAL plc (the 'group') for the six months ended 31 October 2023 which comprises of Interim condensed consolidated income statement, Interim condensed consolidated statement of comprehensive income statement, Interim condensed consolidated statement of financial position, Interim consolidated statement of changes in equity, Interim consolidated cash flow statement and notes to the interim consolidated financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting'.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) (ISRE (UK)) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE (UK) 2410). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with UK adopted IFRSs. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

We have read the other information contained in the half-yearly financial report which comprises only the Chairman's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE UK, however future events or conditions may cause the entity to cease to continue as a going concern.

In our evaluation of the directors' conclusions, we considered the inherent risks associated with the group's business model including effects arising from macro-economic uncertainties such as high interest rates and the cost of living crisis, we assessed and challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might affect the group's financial resources or ability to continue operations over the going concern period.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

Our responsibility is to express a conclusion to the company on the condensed set of financial statements in the half-yearly financial report based on our review.

Our conclusion, including our Conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report.

Use of our report

This report is made solely to the company, as a body, in accordance with ISRE (UK) 2410. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company as a body, for our review work, for this report, or for the conclusion we have formed.

Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

Sheffield

11th December 2023

Interim condensed consolidated income statement

Half-year to 31st October, 2023

Half-year to 31st October, 2022

unaudited

unaudited

Notes

£'000

£'000

Revenue

5/6

57,023

42,025

Cost of sales

(38,943)

(30,095)

Gross profit

18,080

11,930

Distribution costs

(2,303)

(1,815)

Administrative expenses

(7,441)

(6,522)

Derivative losses

15

(731)

-

Operating profit

6

7,605

3,593

Finance income/(costs)

204

(70)

Other finance costs - pension

(90)

(63)

Profit before taxation

7,719

3,460

Tax expense

7

(1,917)

(689)

Profit for the period attributable to equity holders of the parent

5,802

2,771

Basic earnings per share

8

35.9p

17.4p

Diluted earnings per share

8

34.3p

16.8p

Interim condensed consolidated statement of comprehensive income

Half-year to 31st October, 2023

Half-year to 31st October, 2022

unaudited

unaudited

Notes

£'000

£'000

Profit for the period attributable to equity holders of the parent

5,802

2,771

Exchange differences on retranslation of foreign operations

(43)

57

Net other comprehensive (loss)/income to be reclassified to profit or loss in subsequent periods

(43)

57

Remeasurement gains/(losses) on defined benefit pension scheme

13

54

(8)

Deferred taxation on remeasurement of defined benefit pension scheme

(14)

2

Net other comprehensive income/(loss) not being reclassified to profit or loss in subsequent periods

40

(6)

Total comprehensive income for the period attributable to equity holders of the parent

5,799

2,822

Interim condensed consolidated statement of financial position

Notes

31st October, 2023

31st October, 2022

30th April, 2023

unaudited

unaudited

audited

ASSETS

£'000

£'000

£'000

Non-current assets

Property, plant and equipment

10

25,415

25,076

24,886

Right-of-use assets

11

968

1,328

1,162

Intangible assets

2,365

2,896

2,396

Investment in joint venture

-

35

-

Deferred income tax asset

1,716

1,373

1,677

30,464

30,708

30,121

Current assets

Inventories

16,940

17,003

24,764

Trade and other receivables

27,578

11,095

9,031

Contract assets

3,374

1,450

144

Cash and cash equivalents

12

42,627

23,363

12,336

Restricted cash held in Escrow

12

7,426

519

2,917

97,945

53,430

49,192

TOTAL ASSETS

128,409

84,138

79,313

EQUITY AND LIABILITIES

Equity

Share capital

1,784

1,784

1,784

Capital redemption reserve

957

957

957

Other reserve

2,815

2,815

2,815

Revaluation reserve

9,923

9,923

9,923

Special reserve

1,629

1,629

1,629

Currency translation reserve

(363)

(360)

(320)

Treasury shares

(3,703)

(2,789)

(2,381)

Retained earnings

30,362

26,242

26,668

TOTAL EQUITY SHAREHOLDERS' FUNDS

43,404

40,201

41,075

Non-current liabilities

Defined benefit pension liability

13

3,577

4,341

4,216

Deferred income tax liability

2,941

2,547

2,943

Contract liabilities

19,148

-

-

Derivative financial instruments

15

218

-

-

Lease liabilities

630

1,003

829

26,514

7,891

7,988

Current liabilities

Trade and other payables

19,291

15,070

15,286

Contract liabilities

38,303

20,610

14,585

Derivative financial instruments

15

513

-

-

Lease liabilities

384

366

379

58,491

36,046

30,250

TOTAL EQUITY AND LIABILITIES

128,409

84,138

79,313

The interim condensed consolidated financial statements of the Group for the six months ended 31st October, 2023 were authorised for issue in accordance with a resolution of the directors on 11th December, 2023 and signed on their behalf by:

Michael O'Connell

Finance Director

Interim consolidated statement of changes in equity

Share capital

Capital redemption reserve

Other reserve

Revaluation reserve

Special reserve

Currency translation reserve

Treasury shares

Retained earnings

Total unaudited/ audited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30th April, 2022

1,784

957

2,815

9,923

1,629

(417)

(2,789)

24,673

38,575

Profit for the period

- 

- 

- 

- 

- 

- 

- 

2,771

2,771

Other comprehensive income/(loss)

- 

- 

- 

- 

- 

57

- 

(6)

51

Dividend paid

- 

- 

- 

- 

- 

- 

- 

(1,196)

(1,196)

At 31st October, 2022

1,784

957

2,815

9,923

1,629

(360)

(2,789)

26,242

40,201

Profit for the period

- 

- 

- 

- 

- 

- 

- 

1,344

1,344

Other comprehensive income/(loss)

- 

- 

- 

- 

- 

40

- 

(272)

(232)

Share option expense

- 

- 

- 

- 

- 

- 

- 

86

86

Exercise of share options

- 

- 

- 

- 

- 

- 

408

(408)

- 

Dividend paid

- 

- 

- 

- 

- 

- 

- 

(324)

(324)

At 30th April, 2023

1,784

957

2,815

9,923

1,629

(320)

(2,381)

26,668

41,075

Profit for the period

- 

- 

- 

- 

- 

- 

- 

5,802

5,802

Other comprehensive (loss)/income

- 

- 

- 

- 

- 

(43)

- 

40

(3)

Dividend paid (note 9)

- 

- 

- 

- 

- 

- 

- 

(2,123)

(2,123)

Share option expense

- 

- 

- 

- 

- 

- 

- 

19

19

Purchase of own shares

- 

- 

- 

- 

- 

- 

(1,676)

- 

(1,676)

Exercise of share options

- 

- 

- 

- 

- 

- 

354

(44)

310

At 31st October, 2023

1,784

957

2,815

9,923

1,629

(363)

(3,703)

30,362

43,404

Interim consolidated cash flow statement

Half-year to 31st October, 2023

Half-year to 31st October, 2022

unaudited

unaudited

£'000

£'000

Profit before taxation

7,719

3,460

Adjustments to reconcile profit before taxation to cash generated from operating activates:

Depreciation charge of owned and right-of-use assets

1,024

968

Amortisation charge

31

119

Profit on disposal of property, plant and equipment

(148)

(37)

Net finance (income)/costs

(114)

133

Share option expense

19

- 

Foreign exchange gains/(losses)

202

(111)

Decrease/(increase) in inventories

7,853

(491)

(Increase)/decrease in receivables

(21,598)

2,219

Increase/(decrease) in payables

4,257

(606)

Increase in derivatives

731

-

Increase in contract liabilities

42,255

1,543

Pension fund deficit reduction payments

(675)

(450)

Cash generated from operating activities

41,556

6,747

Net interest received/(paid)

224

(43)

Taxation paid

(2,279)

(78)

Net cash inflow from operating activities

39,501

6,626

Investing activities

Purchase of property, plant and equipment

(1,168)

(879)

Proceeds on disposal of property, plant and equipment

149

91

(Increase)/decrease in restricted cash held in Escrow maturing in more than 90 days

(4,509)

639

Net cash outflow from investing activities

(5,528)

(149)

Financing activities

Buy back of own shares

(1,676)

- 

Proceeds from exercise of employee share options

310

- 

Lease payments

(206)

(207)

Dividend paid

(2,123)

(1,196)

Net cash outflow from financing activities

(3,695)

(1,403)

Increase in cash and cash equivalents

30,278

5,074

Opening cash and cash equivalents

12,336

18,092

Exchange differences on cash and cash equivalents

13

197

Closing cash and cash equivalents

42,627

23,363

Notes to the interim consolidated financial statements

1. Corporate information

MS INTERNATIONAL plc is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the Alternative Investment Market (AIM) market of the London Stock Exchange. The principal activities of the Company and its subsidiaries ("the Group") are the design, manufacture, construction, and servicing of a range of engineering products and structures. These activities are grouped into the following divisions:

'Defence and Security' - design, manufacture, and service of defence equipment.

'Forging' - manufacture of fork-arms and open die forgings.

'Petrol Station Superstructures' - design, manufacture, construction, and maintenance of petrol station superstructures.

'Corporate Branding' - design, manufacture, installation, and service of corporate brandings, including media facades, way-

finding signage, public illumination, creative lighting solutions, and the complete appearance of petrol station superstructures

and forecourts.

2. Basis of preparation and accounting policies

The consolidated condensed interim financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" in conformity with the requirements of the Companies Act 2006. They do not include all the information and disclosures required in annual financial statements in accordance with UK adopted International Accounting Standards, and should therefore be read in conjunction with the Group's Annual Report for the year ended 30th April, 2023 and any public announcements made by MS INTERNATIONAL plc during the interim reporting period. The financial statements for the year ended 30th April, 2023 have been filed with the Registrar of Companies. The auditor's report on these financial statements was unmodified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.

The interim financial information has been reviewed but not audited by the Group's auditor, Grant Thornton UK LLP. The interim financial information does not constitute full financial information within the meaning of section 434 of the Companies Act 2006. The auditor's report is included on page 4.

The accounting policies are consistent with those applied in the financial statements of the Annual Report for year ended 30th April, 2023, with the exception of a new policy for Derivative Financial Instruments, as detailed below. The Group has not early adopted any standard, interpretation, or amendment that has been issued but is not yet effective.

Derivative financial instruments are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured at their fair value including remeasurement at the reporting date. The Group has decided not to apply hedge accounting with respect to forward exchange contracts and as a result changes in the fair values are recognised immediately within the Consolidated income statement within the Derivative gains or losses line.

The assets and liabilities of the overseas subsidiaries are translated into the presentational currency of the Group at the rate of exchange ruling at the statement of financial position date and their income statements are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to a separate component of equity.

3. Principal risks and uncertainties

The principal risks and uncertainties facing the Group for the remaining six months of the financial year are discussed below. Further details of the Group's risks and uncertainties can be found on page 8 of the Annual Report for the year ended 30th April, 2023, which is available from MS INTERNATIONAL plc's website: www.msiplc.com

One of the Group's principal risks and uncertainties continues to be the impact of inflationary pressures upon both trading and profitability. Rising raw material and energy prices have increased the cost base of all divisions. Where possible cost increases are passed to the customer, however, in doing so there is uncertainty with regards to any potential impact on the level of customer demand.

During the interim period, the risk that foreign exchange fluctuations will impact the Group's performance has increased significantly. A number of international contracts in the 'Defence and Security' division are denominated in USD, which created a large unhedged currency exposure within the Group. As a result, management have taken steps to mitigate this risk by taking out various forward contracts (note 15).

4. Going concern

The condensed interim financial statements included in this report have been prepared on a going concern basis. Forecasts have been made up to 31st December, 2024, which the Directors believe to be a reasonable expectation based on the information available at the time of signing these accounts. The forecasts have been assessed for the impact of potential sensitivities, including a 10% fall in the forecasted Group revenue and a 10% increase in materials prices. In all scenarios, the Group has sufficient headroom to meet its liabilities as they fall due.

In addition, management have carried out reverse stress tests to 31st December, 2024 under various scenarios, all of which are considered implausible by management. In all tested scenarios, the Group would continue as a going concern for at least 12 months from the date of signing.

As a result, in making the going concern assessment the Directors believe there to be no material uncertainties that could cast significant doubt on the Group's ability to continue operating as a going concern. The Group has sufficient financial resources with a healthy orderbook to continue operating for the foreseeable future, being at least to 31st December, 2024. As a result, the Directors continue to adopt the going concern basis of accounting in preparation of this report.

5. Revenue

The Group's revenue disaggregated by pattern of revenue recognition is as follows:

 6. Segment information

The following table presents segmental revenue and operating profit/(loss) as well as segmental assets and liabilities of the Group's divisions for the half-year periods ended 31st October, 2023 and 31st October, 2022. The reporting format is determined by the differences in manufacture and services provided by the divisional segments within the Group.

'Defence and Security'

'Forgings'

'Petrol Station Superstructures'

'Corporate Branding'

Total

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

unaudited

unaudited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Segmental revenue

Segment revenue

33,508

13,956

9,454

12,516

8,555

9,057

5,584

6,835

57,101

42,364

Intercompany revenue from other segments

- 

- 

- 

- 

(8)

(275)

(70)

(64)

(78)

(339)

External revenue

33,508

13,956

9,454

12,516

8,547

8,782

5,514

6,771

57,023

42,025

Segment result

Operating profit/(loss)

5,741

(188)

681

2,759

1,285

1,339

(102)

(317)

7,605

3,593

Net finance income/(expense)

114

(133)

Profit before taxation

7,719

3,460

Tax expense

(1,917)

(689)

Profit for the period

5,802

2,771

Segmental assets

Assets attributable to segments

79,724

33,088

7,357

8,186

12,586

11,226

5,261

7,941

104,928

60,441

Unallocated assets*

23,481

23,697

Total assets

128,409

84,138

Segmental liabilities

Liabilities attributable to segments

68,203

24,913

2,212

2,762

4,683

4,313

2,167

3,510

77,265

35,498

Unallocated liabilities*

7,740

8,439

Total liabilities

85,005

43,937

Other segmental information

Capital expenditure

780

452

194

116

131