Ms Intl. Regulatory News (MSI)

MS INTERNATIONAL plc

Unaudited Interim Condensed

Consolidated Financial Statements

31st October, 2009

MS INTERNATIONAL plc

EXECUTIVE DIRECTORS

Michael Bell

Michael O'Connell

David Pyle

NON EXECUTIVE

Roger Lane-Smith

SECRETARY

David Pyle

REGISTERED OFFICE

Balby Carr Bank

Doncaster

DN4 8DH

England

PRINCIPAL OPERATING DIVISIONS

Defence

Forgings

Petrol Station Superstructures

Chairman's Statement

When I reported upon the full year results to 2nd May 2009, I emphasised the virtues of MSI being a diverse engineering Group. The latest results, covering the six months to 31st October 2009, demonstrate those virtues in action during a period of exceptionally challenging recessionary trading conditions. Muted demand has weighed heavily on the performance of our 'Industrial Engineering' activities with a significant revenue reduction. In sharp contrast, 'Defence' continues to make admirable progress and has partly countered the pressures elsewhere. 

The net effect of these varying trends for the half year was a profit before taxation of £1.23m (2008 - £2.45m) on revenue substantially lower at £18.10m (2008 - £27.23m). Earnings per share were 4.7p (2008 - 9.3p). Given market conditions, I believe that this is quite a resilient result.

Importantly, the balance sheet remains very strong, with net cash and short term deposits at a healthy £7.46m, a favourable figure when compared to the £8.23m reported at the year end. 

'Defence' started the year with a very good order book and produced an impressive set of results in the latest six months generating cash and growing both revenue and profit. Of notable significance is the further building of the 'Defence' order book following an exciting influx of new contracts received during the period resulting in another record level of orders on hand at the end of October. 

By contrast, our 'Industrial Engineering' businesses, which had entered the global recession at a very early stage in the cycle, experienced a testing time. Many of our established international customers continue to battle against extremely low global demand for their products, the market requirements for which have descended to levels not seen within the past decade. This clearly had an impact on our activities although it is encouraging to see that the petrol station superstructures business has seen a progressive recovery in activity after starting the year with a depleted number of construction contracts in hand.

There is a measure of considerable satisfaction in the fact that during these difficult economic times, the Group's forward order book is now at a new record level. We have a commendable cash position, costs are under control and monitored closely. Product and business development is ongoing and our manufacturing facilities, systems and capabilities are being constantly upgraded as appropriate in search of greater efficiencies. 

Overall, I believe we are in good shape. 'Defence' continues to make remarkable progress and we have seen some signs of a pick up in the level of order intake across 'Industrial Engineering' even though one senses that realistically, owing to global economic conditions, we are still some way away from establishing a full recovery in that particular sector of our markets. 

These factors considered, the Board has declared a maintained interim dividend of 0.70p (2008 - 0.70p).

Michael Bell, 

25th  November 2009

Independent Review Report to MS INTERNATIONAL plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 31 October, 2009 which comprises the Interim Consolidated Income Statement, the Interim Statement of Comprehensive Income, the Interim Balance Sheet, the Interim Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. 

Directors' Responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

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

Our Responsibility

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

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, 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 Ireland) 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. 

Conclusion 

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 26 weeks ended 31 October, 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLP 

Leeds

25th November, 2009

Interim consolidated income statement

26 weeks ended 31st Oct., 2009

26 weeks ended 1st Nov., 2008

Unaudited

Unaudited

Notes

£000

£000

Products

7,344 

19,218 

Contracts

10,753 

8,014 

Revenue

5

18,097 

27,232 

Cost of sales

(13,222)

(20,478)

Gross profit

4,875 

6,754 

Selling and distribution costs

(798)

(937)

Administrative expenses

(2,813)

(3,727)

Group trading profit

5

1,264 

2,090 

Finance revenue

4 

121 

Finance costs

(11)

(4)

Other finance (costs)/revenue - pension

(31)

246 

Profit before taxation

1,226 

2,453 

Income tax expense

6

(389)

(772)

Profit attributable to equity holders of the parent

837 

1,681 

Earnings per share

- basic

4.7p

9.3p 

- diluted

4.5p

9.1p 

Interim consolidated statement of comprehensive income

26 weeks ended 31st Oct., 2009

26 weeks ended 1st Nov., 2008

Unaudited

Unaudited

£000

£000

Actuarial losses on defined benefit pension scheme

(2,546)

(3,298)

Deferred taxation on actuarial losses on defined benefit pension scheme

713 

923 

Currency translation differences on foreign investments

(18)

120 

Net expense recognised directly in equity

(1,851)

(2,255)

Profit attributable to equity holders of the parent

837 

1,681 

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

(1,014)

(574)

Interim consolidated balance sheet

Notes

31st Oct., 2009

2nd May, 2009

Unaudited

Audited

ASSETS

£000

£000

Non-current assets

Property, plant and equipment

8

15,179 

15,810 

Intangible assets

87 

106 

Deferred income tax asset

109 

-

15,375 

15,916 

Current assets

Inventories

3,674 

3,989 

Trade and other receivables

9,635 

5,712 

Prepayments

1,529 

1,600 

Cash and short-term deposits

9

7,458 

8,234 

22,296 

19,535 

TOTAL ASSETS

37,671 

35,451 

EQUITY AND LIABILITIES

Equity

Issued capital

1,840 

1,840 

Capital redemption reserve

901 

901 

Other reserves

1,565 

1,565 

Revaluation reserve

2,969 

2,969 

Special reserve

1,629 

1,629 

Foreign reserve

109 

127 

Own shares

(391)

(391)

Retained earnings

9,191 

10,860 

Total Equity

17,813 

19,500 

Non-current liabilities

Government grants

-

3 

Deferred income tax liability

-

610 

Defined benefit pension liability

10

5,182 

2,805 

5,182 

3,418 

Current liabilities

Trade and other payables

14,277 

11,977 

Government grants

10 

13 

Income tax payable

389 

543 

14,676 

12,533 

TOTAL EQUITY AND LIABILITIES

37,671 

35,451 

Interim consolidated changes in equity

Issued capital

Capital redemption reserve

Other reserves

Revaluation reserve

Special reserve

Foreign exchange reserve

Treasury shares

Retained earnings

Total

Unaudited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 £'000 

 £'000 

At 2nd May, 2009

1,840

901

1,565

2,969

1,629

127

(391)

10,860

19,500

Profit for the period

-

-

-

-

-

-

-

837

837

Other comprehensive loss

-

-

-

-

-

(18)

-

(1,833)

(1,851)

Total comprehensive income

1,840

901

1,565

2,969

1,629

109

(391)

9,864

18,486

Dividend paid

-

-

-

-

-

-

-

(684)

(684)

Share based payments

-

-

-

-

-

-

-

11

11

At 31st October, 2009

1,840

901

1,565

2,969

1,629

109

(391)

9,191

17,813

Issued capital

Capital redemption reserve

Other reserves

Revaluation reserve

Special reserve

Foreign exchange reserve

Treasury shares

Retained earnings

Total

Unaudited

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 3rd May, 2008

1,845

896

1,565

2,969

1,629

(31)

(391)

12,131

20,613

Profit for the period

-

-

-

-

-

-

-

1,681

1,681

Other comprehensive profit/(loss)

-

-

-

-

-

120

-

(2,375)

(2,255)

Total comprehensive income

1,845

896

1,565

2,969

1,629

89

(391)

11,437

20,039

Dividend paid

-

-

-

-

-

-

-

(686)

(686)

Repurchase of shares

(5)

5

-

-

-

-

-

(100)

(100)

Share based payments

-

-

-

-

-

-

-

84

84

At 1st November, 2008

1,840

901

1,565

2,969

1,629

89

(391)

10,735

19,337

Interim consolidated cash flow statement

26 weeks 

ended 31st 

Oct., 2009

26 weeks ended 1st

Nov., 2008

Unaudited

Unaudited

£'000

£'000

Trading profit

1,264 

2,090 

Adjustments to reconcile trading profit to net cash in flows from operating activities

Depreciation of property plant and equipment

809 

802 

Amortisation of intangible fixed assets

19 

51 

Foreign exchange (losses)/gains

(35)

131 

Government grant release

(6)

(7)

Share based payments

11 

84 

Profit on sale of fixed assets

-

(16)

(Increase)/decrease in inventories

(311)

417 

Increase in receivables

(3,923)

(105)

Decrease in prepayments

71 

602 

Decrease in payables

(2,049)

(2,787)

Increase/(decrease) in progress payments

4,975 

(3,918)

Pension fund payments

(200)

(198)

Cash generated from operating activities

625 

(2,854)

Interest (paid)/received

(7)

117 

Taxation paid

(553)

(724)

Net cash flow from operating activities

65 

(3,461)

Cash flows from investing activities

Purchase of intangible fixed assets

-

(47)

Purchase of property, plant and equipment

(159)

(752)

Sale of property, plant and equipment

2 

90 

Net cash used in investing activities

(157)

(709)

Cash flows from financing activities

Purchase of own shares

-

(100)

Dividend paid

(684)

(686)

Repayments of capital element of finance leases

-

(4)

Net cash flows used in financing activities

(684)

(790)

Movement in cash and cash equivalents

(776)

(4,960)

Opening cash and cash equivalents

8,234 

10,071 

Closing cash and cash equivalents

7,458 

5,111 

Notes to the interim consolidated financial statements

1

Corporate information

MS INTERNATIONAL plc is a public limited company incorporated in England and Wales. The Company's ordinary shares are traded on the London Stock Exchange. The principal activities of the Company and its subsidiaries ("the Group") are described in Note 5.

The interim condensed consolidated financial statement of the Group for the twenty six weeks ended 31st October, 2009 were authorised for issue in accordance with a resolution of the directors on 25th November, 2009.

2

Basis of preparation and accounting policies

The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report which has not been audited has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union. 

The interim financial information has been reviewed by the Group's auditors, Ernst & Young LLP, their report is included on page 3. These interim financial statements do not constitute statutory financial statements within the meaning of section 435 of the Companies Act 1985. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 2nd May, 2009.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 2nd May, 2009. The following standards, amendments and interpretations will be applied for the first time in the Group's statutory accounts for the year ended 1st May, 2010.

- IFRS 1 and IAS 27 Amendment Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

- IFRS 2 Amendment Vesting Conditions and Cancellations

- IFRS 7 Financial Instruments: Disclosures

- IFRS 8 Operating Segments

- IAS 1R Presentation of Financial Statements

- IAS 23R Borrowing Costs

- IAS 39 Amendment Financial Instruments: Recognition and Management - Eligible Hedge Items

The figures for the year ended 2nd May, 2009 do not constitute the Group's statutory accounts for the period but have been extracted from the statutory accounts. The auditor's report on those accounts, which have been filed with the Registrar of Companies, was unqualified and did not contain any statement under section 498(2) or (3) of the Companies Act 1985.

3

Principal risks and uncertainties

The principal risk and uncertainties facing the Group relate to levels of customer demand for the Group's products and services. Customer demand is driven mainly by general economic conditions but also by pricing, product quality and delivery performance of MS INTERNATIONAL plc and in comparison with our competitors. Sterling exchange rates against other currencies can influence pricing.

The Group has considerable financial resources together with long term contracts with a number of customers. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully despite the current uncertain economic outlook.

After making enquiries the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

4

Statement of directors' responsibilities

The directors as listed on page 1 confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, which includes information required on material transactions with related parties and changes since the last annual report.

5

Segment information

(a)

Primary reporting format - Divisional segments

The following table presents revenue and profit and certain assets and liability information regarding the Group's divisions for the periods ended 31st October, 2009 and 1st November, 2008. The reporting format is determined by the differences in manufacture and services provided by the Group. The Defence division is engaged in the design, manufacture and service of defence equipment. The Forgings division is engaged in the manufacture of forgings. The Petrol Station Forecourt Structures division is engaged in the design and construction of petrol station forecourt structures.

Defence

Forgings

Petrol Station

Total

Forecourt Structures

2009

2008

2009

2008

2009

2008

2009

2008

Unaudited

Unaudited

£000

£000

£000

£000

£000

£000

£000

£000

Revenue

External

11,639 

10,971 

4,325 

12,021 

2,133 

4,240 

18,097 

27,232 

Total revenue

11,639 

10,971 

4,325 

12,021 

2,133 

4,240 

18,097 

27,232 

Segment result

2,130 

1,177 

(944)

1,003 

78 

(90)

1,264 

2,090 

Net finance (expense)/ revenue

(38)

363 

Profit before taxation

1,226 

2,453 

Taxation

(389)

(772)

Profit for the period

837 

1,681 

Segmental assets

21,442 

12,963 

7,342 

11,193 

2,228 

3,275 

31,012 

27,431 

Unallocated assets

6,659 

8,824 

Total assets

37,671 

36,255 

Segmental liabilities

12,563 

9,668 

808 

3,116 

1,098 

1,452 

14,469 

14,236 

Unallocated liabilities

5,389 

2,682 

Total liabilities

19,858 

16,918 

Capital expenditure

47 

116 

105 

236 

7 

76 

Depreciation

150 

136 

454 

435 

78 

93 

(b)

Secondary reporting format - Geographical segments

The following table presents revenue and expenditure and certain assets and liabilities information by geographical segment for the periods ended 31st October, 2009 and 1st November, 2008. The Group's geographical segments are based on the location of the Group's assets. Revenue from external customers is based on the geographical location of its customers.

Europe

North America

Rest of the World

Total

2009

2008

2009

2008

2009

2008

2009

2008

Unaudited

Unaudited

£000

£000

£000

£000

£000

£000

£000

£000

Revenue

External

15,721 

23,067 

1,188 

2,050 

1,188 

2,115 

18,097 

27,232 

Assets

36,812 

35,036 

516 

845