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ROMAG HOLDINGS PLC

Preliminary results for the year to 30 September 2008

Romag Holdings plc, a specialist manufacturer of glass and plastic composites for renewable energy, security, transport and architectural applications, announces its preliminary results for the year to 30 September 2008.

10 December 2008

HIGHLIGHTS

 

• Group revenue increased by 93% to £33.6m (2007: £17.4m)

• Exports at 81% of total sales (2007: 42%)

• PowerGlaz products represented over 70% of total group sales

• Gross margin in line with directors' expectations at 22% (2007: 34%) following mix changes within PowerGlaz range and commissioning/training costs associated with new production lines

• Pre-tax profit increased by 35% to £3.7m (2007: £2.8m)

• Earnings per share increased by 13% to 5.1p (2007: 4.5p) following 'one off' increase of c£140,000 in deferred taxation arising from abolition of industrial buildings allowances

• Final dividend maintained at 0.75p per share, making 1.18p for the full year (2007: 1.15p)

• Commercial alliance established with Gulf International Trading Group of Dubai to exploit opportunities for Romag's products in Middle East

• Installation and commissioning completed of third and fourth PowerGlaz production lines

• Purchase of additional property, including capacity expansion land

Chairman, John Kennair, said

'2008 has been a highly successful year for Romag, driven largely by our PowerGlaz business which has continued to gather momentum and increased sales three-fold on last year. We successfully installed and commissioned our third and fourth production lines for PowerGlaz this summer and our photovoltaic products now account for more than 70% of total sales.

We made further good strides this year in increasing our international footprint as we signed a commercial alliance agreement with GITG in the Middle East and have had continued success selling PowerGlaz products into mainland Europe. Sales outside the UK now account for slightly more than 80% of total sales.

Outside the PowerGlaz business, we have completed a number of high profile projects this year including Terminal 5 at Heathrow and St Pancras Station in London, which utilise our architectural and security glass and really underline the excellent reputation we have in these markets among the UK's leading architects and constructors.

While there is undoubtedly an amount of uncertainty about the solar market in 2009 particularly in the early part of the year, the directors believe that Romag is well placed to take advantage of the medium term opportunities this market will offer.'

 

ENQUIRIES

Romag Holdings plc     Lyn Miles, Chief Executive  David Banks, Finance Director	Today only: 020 7554 1400  After today: 01207 500000
Arbuthnot Securities Limited Antonio Bossi     Tom Griffiths	Tel: 020 7012 2000
Gavin Anderson & Company Ken Cronin Michael Turner	Tel: 020 7554 1400

              

Note to editors:

 

Romag Holdings plc is a leading manufacturer of glass and plastic composites based in Consett, County Durham. Romag has developed a range of photovoltaic glass products (PowerGlaz) for use in the generation of renewable energy.

Romag also manufactures a wide range of products for the security, transport and architecture markets to protect people against a variety of risks and threats. Businesses using the group's high-impact glass products include BAA, Securicor, government departments, banks, building societies and train operators.

  CHAIRMAN'S STATEMENT

The feature in the year to 30th September 2008 has been the very substantial growth in sales of the group's PowerGlaz products into the solar market.

Results

Sales in the year to 30th September 2008 grew by 93% to £33.6m (2007: £17.4m). In line with directors' expectations, gross profit margins at 22% (2007: 34%) resulted in an increase in pre-tax profits of 35% to £3.7m (2007: £2.8m). Earnings per share increased by 13% to 5.1p (2007: 4.5p) which is after a one off charge of c£140,000 in deferred taxation arising from the abolition of industrial buildings allowances.

Trading

This has been a very successful year for the Group. The growth has been led by PowerGlaz where sales have more than trebled over last year and now represent over 70% of the Group's total sales.  

The reduction in gross margin is due to a change in product mix within the PowerGlaz range and the additional costs associated with the introduction in the summer of 2008 of two new production lines for PowerGlaz, including commissioning and new staff training.

PowerGlaz

A number of high profile projects incorporating building-integrated PowerGlaz have been completed in the UK including, in London, 150 Cheapside overlooking St. Paul's, the City Hall and The Insolvency Office. The growth in sales of PowerGlaz primarily into mainland Europe has led to exports becoming more than 80% of the group's total sales. There has been a strong movement in recent years in the European market to expand the production of power through use of renewables and the group has been in a position to take advantage of this expanding market.

In September 2008, Romag strengthened its position in the Middle East by entering into an exclusive commercial alliance agreement with Gulf International Trading Group (GITG) in the United Arab Emirates. Romag and GITG co-sponsored a seminar held in Abu Dhabi on 'Climate Change and its Solutions' to raise awareness of the advantages of renewable energy in the Middle East. PowerGlaz is now being considered for a number of substantial projects in the region.

Security, Architectural and Transport

Demand in the group's other markets has held up well in the course of the past year where a number of high profile projects have been completed including St. Pancras Station, The Cabot Circus Shopping Development in Bristol, Imperial College London, Earls Court Station, Heathrow Terminal 5 and Gatwick Airport. Sales in the transport market have shown a small decline over last year, partly because a number of security vehicle projects in the Middle East have come to completion.  

Investment

Capital investment in the course of the year totalled £6.9m and included the following:

Property

The group was able to acquire the freehold of the remaining land and buildings on the northern section of the Leadgate Industrial Estate. There are clearly a number of advantages in the acquisition of the site, not least of which is the opportunity to expand manufacturing operations in the future.

Plant and equipment

The group installed and fully commissioned two new PowerGlaz production lines and associated equipment bringing the number of lines to four.  

Intangible assets

Intangible assets have increased as a result of payments to secure a further long term cell supply contract.

The group also expended £273,000 during the year on research and development to increase the product portfolio, particularly in the security and military theatres.  

Cash and Gearing

In July 2007 the group raised £7.3m of new capital by way of a share issue which reduced the gearing ratio to 26% at the start of this year. Following capital expenditure of £6.9m and an increase in working capital to support the growth of the business, group borrowings rose by only £6m giving gearing (being net debt divided by equity shareholders' funds) of 42% at 30th September 2008.

On 30th September 2008 the group had at its disposal cash balances and unused banking facilities of £6.2m.

Dividend

The directors recommend a final dividend of 0.75p (2007: 0.75p) per share payable on 6 March 2009 to shareholders on the register of members at 20 February 2009 which, following a dividend of 0.43p per share paid on 20 June 2008, will bring the total dividend for the year to 1.18p (2007: 1.15p) per share.

Outlook

The turmoil in the financial markets over the past eighteen months is now pushing most countries in the western industrial world into recession. However, it is the volatility in markets that make it difficult to evaluate how these events will impact on Romag's business in 2009.

Our past experience has been that in times of recession the security market has a tendency to grow, our transport sales remain fairly constant and the specialist architectural applications, because the installation of the glass is at the end of the building cycle, tend to be affected late into the recession. However, PowerGlaz now accounts for over 70% of our total sales and it is the current uncertainty in the solar market that makes forecasting difficult.

There is no doubt that with the actions that are being taken by various countries around the world, in particular North America, Europe and the Middle East, the growth in the solar industry will be very substantial in the medium term and Romag is now well positioned to take advantage of this growth. In addition, the UK Government has amended The Energy Bill to accommodate the introduction of a Feed-in Tariff for renewables. It is widely anticipated that this will be introduced in 2010 which should stimulate the photovoltaic market considerably in the UK.

Whilst there are uncertainties in the market, particularly in the early part of 2009, the directors are confident of the prospects of the group going forward.

JOHN M. KENNAIR, MBE

Chairman

10 December 2008

  

 

Consolidated income statement

for the year to 30 September 2008

	Notes	2008		2007
		Unaudited		Audited
		£'000		£'000
Group revenue		33,634		17,388
Cost of sales		26,299		11,463
Gross profit		7,335		5,925
Distribution costs		388		355
Administrative expenses		2,651		2,346
		3,039		2,701
Group trading profit		4,296		3,224
Other operating income		57		57
Group operating profit from continuing operations   Interest payable		4,353 619		3,281 510
Profit on ordinary activities before taxation		3,734		2,771
Tax expense	3	1,204		691
Profit for the year from continuing operations		2,530		2,080
Earnings per share:
Basic and diluted	5	5.1p		4.5p

 

Consolidated statement of recognised income and expense

for the year to 30 September 2008

	2008 Unaudited £000		2007 Audited £000
Income and expense recognised directly in equity
Gain on cash flow hedges	1,132		-
Deferred tax on hedging reserve	(317)		-
Tax recognised directly in equity	-		15
Net income recognised directly in equity	815		15
Profit for the period	2,530		2,080
Total recognised income and expense for the period	3,345		2,095
Attributable to: Equity holders of the parent	3,345		2,095

 

	2008 £000		2007 £000
Assets Non-current assets
Property, plant and equipment	26,219		23,632
Intangible assets	4,527		2,746
Financial assets	745		-
Deferred tax assets	38		796
	31,529		27,174
Current assets	8,031		6,056
Inventories	11,958		10,291
Trade and other receivables	387		-
Financial assets	1,204		407
Cash	21,580		16,754
Total assets	53,109		43,928
Equity and liabilities Current liabilities
Trade and other payables	1,407		2,541
Financial liabilities	1,055		1,446
Corporation tax	705		-
Government grants	57		57
	3,224		4,044
Non-current liabilities
Financial liabilities	13,825		6,642
Government grants	38		95
Deferred tax liabilities	3,344		3,286
	17,207		10,023
Total liabilities	20,431		14,067
Net assets	32,678		29,861
Capital and reserves
Equity share capital	12,505		12,505
Share premium	10,924		10,924
Merger reserve	406		406
Hedging reserve	815		-
Retained earnings	8,028		6,026
Equity shareholders’ funds	32,678		29,861

Consolidated statement of cash flows

for the year to 30 September 2008

 

		2008		2007
	Notes	Unaudited		Audited
		£000		£000
Operating activities
Profit for the year		2,530		2,080
Adjustments to reconcile profit for the year to net cash inflow from operating activities
Tax on continuing operations		1,204		691
Net finance costs		619		510
Depreciation of property, plant and equipment		2,382		1,758
Amortisation of intangible assets		153		101
Share-based payment charge		62		-
Loss on disposal of fixed assets		5		-
Increase in inventories		(1,975)		(1,953)
Increase in trade and other receivables		(1,667)		(3,011)
Decrease)/increase in trade and other payables		(1,121)		1,407
Movement in provisions - deferred government grants		(57)		(57)
Cash generated from operations		2,135		1,526
Income taxes paid		-		-
Net cash flow from operating activities		2,135		1,526
Investing activities
Payments to acquire property, plant and equipment		(4,694)		(6,883)
Payments to acquire intangible assets		(1,934)		(2,606)
Net cash flow from investing activities		(6,628)		(9,489)
Financing activities
Interest paid		(488)		(378)
Interest element of hire purchase payments		(144)		(85)
Dividends paid to equity shareholders of the parent company		(590)		(477)
Share issue costs		-		(402)
Proceeds from share issues		-		7,747
New borrowings		7,281		5,883
Repayment of borrowings		(89)		(1,500)
Decrease in advances by invoice discounting company		-		(1,065)
Advance from hire purchase company		-		1,000
Repayment of capital element of hire purchase contracts		(680)		(522)
Net cash flow from financing activities		5,290		10,201
Increase in cash and cash equivalents		797		2,238
Cash and cash equivalents at beginning of year	6	407		(1,831)
Cash and cash equivalents at the year end	6	1,204		407

 

 

  NOTES

1. Basis of preparation

The preliminary results have been prepared under the historical cost convention and in accordance with applicable accounting standards.

The group is required to adopt International Financial Reporting Standards (IFRS) with effect from 1 October 2006. These preliminary results represent the group's first prepared in accordance with IRFS. The group's first IFRS Annual Report and Financial Statements will be mailed to shareholders shortly.

Previously, the group reported under United Kingdom Generally Accepted Accounting Principles (UK GAAP). Detailed reconciliations, showing the impact of transition to IFRS, are reported in a separate document, which is available on our website www.romag.co.uk.

2. Basis of consolidation

The group results consolidate the accounts of Romag Holdings plc and all its subsidiary undertakings drawn up to 30 September 2008.

3. Tax

(a) Tax on profit on ordinary activities

The tax charge for the year is made up as follows:

			2008		2007
			Unaudited		Audited
			£'000		£'000
Current income tax UK corporation tax Deferred tax			705		20
Origination and reversal of timing differences			359		742
Impact of changes in tax rates and legislation on opening liability			140		(71)
Total deferred tax			499		671
Tax charge in the income statement			1,204		691

                                                                                                                     =======                ========    

(b) Reconciliation of total tax charge

The tax expense in the income statement for the year is higher than the standard rate of corporation tax in the UK of 29% (2007: 30%). The difference is reconciled below.

 

		2008		2007
		Unaudited		Audited
		£’000		£’000
Accounting profit before income tax		3,734		2,771
Accounting profit multiplied by UK standard rate of corporation tax of 29% (2007: 30%)		1,083		831
Expenses not deductible for tax purposes		32		7
Depreciation on non-qualifying items		19		10
Research and development enhanced tax reliefs		(35)		(33)
Differences in tax rates		(33)		(53)
Tax (over)/underprovided in previous years		(14)		47
Reduction in deferred tax resulting from reduction in tax rate		-		(118)
Increase in deferred tax resulting from change in legislation on industrial buildings		152		-
Total current tax		1,204		691

 

                                                                                                                                  =======                   ========

  NOTES (continued)

4. Dividends

The directors recommend a final dividend of 0.75p per share, payable on 6 March 2009 to shareholders on the register at 20 February 2009.

In order to comply with the requirements of International Accounting Standard 10, Events after the balance sheet date, dividends are included in the accounting period in which the dividend is approved for payment. Consequently, the final dividend referred to above has not been included in these results.

Dividends were:

	2008	2007
	Unaudited	Audited
	£'000	£'000
Final dividend 0.65p per share paid on 2 March 2007	-	296
Interim dividend 0.4p per share paid on 22 June 2007	-	181
Final dividend 0.75p per share paid on 29 February 2008	375	-
Interim dividend 0.43p per share paid on 20 June 2008	215	-
	----	----
	590	477
	═════	═════

5. Earnings per share

The calculation of basic earnings per share is based on earnings of £2,530,000 (2007: £2,080,000) and 50,019,813 (2007: 46,329,874) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

The diluted earnings per share is based on the same earnings and on 50,040,899 (2007: 46,360,859) ordinary shares, the difference from the basic calculation being the inclusion of a weighted average of 21,086 (2007: 30,985) dilutive ordinary shares under share option schemes.

6. Note to the consolidated statement of cash flows

Analysis of changes in net debt

	At 1 October 2007 Audited £'000	Cash flow Unaudited £'000	Other movements Unaudited £'000	At 30 September 2008 Unaudited £'000
Cash balances/(overdraft)	407	797	-	1,204
Bank loans due within one year	-	(377)	-	(377)
Bank loans due after one year	(5,883)	(6,815)	-	(12,698)
Hire purchase contracts	(1,205)	680	(1,280)	(1,805)
Advance from hire purchase company	(1,000)	-	1,000	-
	(7,681)	(5,715)	(280)	(13,676)

Trade bills, previously included in net debt, are now included in trade and other payables, a treatment which the directors believe gives a fairer representation of the group's financial instruments. The 2007 comparatives have been re-stated to reflect this treatment. At 30 September 2008, outstanding trade bills amounted to £508,000 (2007: £716,000).

7. Report and financial statements

The above financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The audit report is yet to be signed. The audited accounts will be mailed to shareholders shortly and will be available from the registered office at Lope Hill Road, Leadgate Industrial Estate, Lope Hill, Consett, County Durham, DH8 7RS or from the company's website at www.romag.co.uk.

The comparative financial information has been extracted from the IFRS Transition Document, available on the company's website at www.romag.co.uk.

 

8. Annual general meeting

It is intended that the annual general meeting will take place at the company's offices at Leadgate Industrial Estate, Leadgate, County Durham, DH8 7RS, on Thursday, 12 February 2009, at 2.00 p.m. Notice of the annual general meeting will be sent to shareholders with the financial statements.

ENDFR UKVWRWSRURAA