Preliminary Results to 31 Dec 2009
22 April 2010
CEPS PLC ("CEPS" OR THE "COMPANY")
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS FOR
YEAR ENDED 31 DECEMBER 2009
CHAIRMAN'S STATEMENT (extract)
HIGHLIGHTS
* Solid sales performance in a very challenging economic climate
* Excellent operating cash generation at £1.3m (2008: £1.4m)
* Net Debt reduced by £700,000
* Gearing reduced to 38% (2008: 57%)
* Total equity increased 12% to £5.8m (2008: £5.1m)
Review of the year
In my last half yearly statement, I commented that business had stabilised in
the second quarter, but that I anticipated no fundamental improvement in
trading conditions in the second half. So it proved to be.
Overall Group revenue in 2009 fell to £15.9m (2008: £16.8m) with second half
revenue falling only 3.2%. In all the business units, margins remained under
pressure throughout the year, and even with excellent overhead control, the
operating profit for the year fell by 37% to £722,000 (2008: £1,148,000).
Finance costs were much reduced at £146,000 (2008: £241,000) as a result of the
repayment of debt finance in accordance with the Group's acquisition strategy
and lower interest rates. The taxation charge has benefited from the
recognition of a greater proportion of accumulated historical losses and for
the year was a credit of £43,000 (2008: charge £193,000). After finance costs
and provision for taxation, the profit for the period was £619,000 (2008: £
714,000).
Careful management of cash continues to be a priority for the Group and at the
year end net debt was reduced by 24% to £2.2m from £2.9m at the end of 2008.
Gearing has, in consequence, been reduced to 38% (2008: 57%).
Financial review
Cash generated from operations for the year was £1.3m (2008: £1.4m). After
finance costs, tax and capital expenditure, the net increase in cash for the
year was £99,000 (2008: £156,000). Net cash and cash equivalents at the year
end were £631,000 (2008: £532,000).
Bank loans at the year end were lower than a year earlier by £650,000 at £
921,000 (2008: £1,571,000). All of these loans were non-recourse, secured only
against the assets of the borrowing subsidiary companies.
Shareholder funds increased by 12% to £5.8m (2008: £5.1m).
The Group made an investment in 2005 in Friedman's that was financed by a bank
loan of £1.1m. Over the period of our investment the company has been
profitable, cash generative and in early 2010 has repaid its bank loan. The
original agreement included an undertaking to increase management's stake in
the business from 25% to 45%, subject to certain conditions. In recognition of
the excellent results to date and in anticipation that the performance of the
last five years will continue, the Board has decided it would give immediate
effect to the share incentive. The consequent historic increase in the minority
interest results in a charge against the Group profits for 2009 of £82,000.
Operational review
1. Davies Odell
After the particularly difficult start to the year, trading in the second half
settled down, with revenue reduced by just over 8% when compared to the same
period in the previous year.
Across the shoe components business there were a number of ups and downs, but
overall turnover and margin were just above 2008. I am pleased to say that
every opportunity was taken to secure extra business across our product
portfolio, with sales of Vibram rubber soles, for example, up by over 70%. The
shoe repair trade has been affected by the recession and sales of ladies
stiletto heels have declined in the UK, but there is no significant shift in
fashion and export sales were vibrant.
Our matting business had a particularly tough year with both raw material price
increases and the strength of the US Dollar against Sterling conspiring to
reduce both margin and turnover. Exports of cow mats fell by over 50%,
particularly to Russia and to Ireland, driving a considerable margin shortfall.
Sales of horse matting (largely in the UK) were also down and the only bright
spot in this business was an increase in floor protection matting sales for
gyms, judo and the like.
Within the personal protection business, Forcefield branded body armour sales
were up by a healthy 23%, but this was offset by a reduction in component sales
for equestrian body protectors and overall revenue was up a little over 3%. The
new Forcefield Pro-Sub 4 back protector received CE approval in April 2009 and
first sales commenced via our American distributor. This is the first back
protector in the world that transmits less than 4 KiloNewtons of force in a
fall creating for the first time the conditions to prevent cracked ribs. In
September we took a record order from our Swedish customer for back protectors,
old and new, to be delivered in December 2009 and January 2010, and in February
2010 the Pro-Sub 4 was voted Motorcycle News Product of the Year 2009. Along
with all the other businesses purchasing product in US Dollars, Forcefield has
seen huge pressure on margins from the exchange rate and much product
engineering and sourcing work has been done to mitigate the impact.
The overall segmental result at £250,000 (2008: £509,000) shows just how
debilitating the first quarter was, with some welcome recovery towards last
year's levels in the second half.
2. Friedman's
Sales at Friedman's overall were down 6% at £3.0m (2008: £3.2m) with the second
half somewhat weaker than the first. The improvement in the Euro exchange rate
helped a good deal in the first half, but with further weakening of the Pound
versus the Euro in the second half, margin and pricing pressures have
re-emerged. This prompted much activity to seek out new and more cost-effective
sources and investment in a digital fabric printer, enabling the future
production of bespoke Friedman's designs in high margin short runs.
The bank position has been well managed at Friedman's and its bank loan was
fully repaid in early 2010. The overall segmental result for 2009 at £203,000
(2008: £180,000) was a 13% improvement on 2008.
3. Sunline
Within the Sunline business the trends identified at the half year have broadly
continued through the second half. Revenue as a whole is down just 1% on 2008
at £7.6m (2008: £7.7m) with the Solutions business showing a 5% turnover
increase over the previous year.
Competitive pressures continued to intensify in the polywrapping business
throughout the year, bearing down on both margins and available volumes. The
management team has managed to tread the fine line of securing necessary
volumes, especially in the second half, without accepting unprofitable
contracts. Many competitors did not do this: three of our direct competitors
have gone into administration or receivership in the last twelve months, two
since Christmas 2009. The workforce has continued to respond flexibly, and
though profitability has suffered in 2009, we enter 2010 in a much stronger
position.
The Solutions business at Redditch has had a busy and successful year,
culminating in a profit substantially ahead of both its budget and the previous
year. New laser printers have been installed and commissioned and are slowly
gaining traction with the customers. The team at Solutions has worked very hard
to deliver a record result and deserves our congratulations. In the last
quarter of the year Solutions experienced a significant downturn in activity
and this is proving somewhat difficult to replace in the current economic
climate.
The segmental result at £913,000 (2008: £1,095,000) is 17% down on the previous
year, but under the competitive circumstances must be regarded as a more than
acceptable result.
Dividend
With the effect of the recession on consumer behaviour and a much weakened set
of exchange rates against the Pound, the Board has again decided that it is
prudent to conserve cash. As a result, the payment of a dividend is not
recommended although the Board remains keen to do so as soon as conditions
become favourable.
Prospects
The improvement in the Group's cash and net debt position continued through the
second half of 2009, leaving it well placed to fund modest acquisitions subject
only to the availability of bank finance. The Board continues to review
suitable investment opportunities. However, in the current banking climate, it
is unlikely the Group will be able to secure non-recourse cash flow based
lending of the same magnitude as past acquisitions with which to make future
investments.
The trading start to 2010 has been no better than satisfactory and many of the
currency and competitive pressures experienced in 2009 have carried over.
Consumer spending is only picking up slowly and has at times been severely
buffeted by extreme weather, election uncertainty and a lack of confidence.
Both the Friedman's and Sunline businesses are showing modest improvement
against a poor first quarter last year. In the Davies Odell business
significant investment is being made to drive up both the UK and international
sales of our excellent Forcefield body armour products. This will certainly
restrain profitability over the short term. Overall I expect 2010 to be a
difficult year for Group profitability, but the Board is convinced that its
investment strategy will enhance sustainable profitability over the longer
term.
In these circumstances, the directors and managers in the Group will focus on
the basics of seeking to maximise profitable business, controlling our internal
costs and managing our cash and balance sheet with care. From experience over
the last two difficult years in particular, I remain confident that our
management teams will more than match the performance of their competitors and
will remain a force to be reckoned with.
Richard Organ
Chairman
22 April 2010
For further information please visit the Company's website, www.cepsplc.com or
contact:-
Peter Cook, Group Managing Director, CEPS PLC
Tel: 07788 752560
Antony Legge, Director, Astaire Securities
Tel: 020 7448 4400
CEPS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2009
(unaudited) (unaudited)
2009 2008
£'000 £'000
Revenue (note 3) 15,880 16,796
Cost of sales (13,968) (14,228)
Gross profit 1,912 2,568
Net operating expenses (1,190) (1,420)
Operating profit 722 1,148
Analysis of operating profit
- Trading 1,086 1,514
- Group costs (282) (366)
- Deemed loss arising on the increase in the (82) -
minority
interest
722 1,148
Finance costs (146) (241)
Profit before tax 576 907
Taxation 43 (193)
Profit for the year from continuing 619 714
operations
Other comprehensive income
Actuarial (loss)/gain on defined benefit (74) 59
pension plans
Other comprehensive income for the year, net (74) 59
of tax
Total comprehensive income for the year 545 773
Profit attributable to:
Owners of the parent 550 624
Minority interest 69 90
619 714
Total comprehensive income attributable to:
Owners of the parent 476 683
Minority interest 69 90
545 773
Earnings per share (note 4)
- basic and diluted 6.62p 7.51p
CEPS PLC
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2009
(unaudited) (unaudited)
2009 2008
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 1,548 1,610
Intangible assets 4,744 4,826
Deferred tax asset 164 24
6,456 6,460
Current assets
Inventories 1,569 1,795
Trade and other receivables 2,622 2,828
Cash and cash equivalents 736 665
4,927 5,288
Total assets 11,383 11,748
Equity
Capital and reserves attributable to owners
of the parent
Called up share capital 416 416
Share premium 2,756 2,756
Retained earnings 2,193 1,717
5,365 4,889
Minority interest in equity 400 249
Total equity 5,765 5,138
Liabilities
Non-current liabilities
Borrowings 1,346 1,751
Provisions 55 55
1,401 1,806
Current liabilities
Borrowings 1,610 1,834
Trade and other payables 2,562 2,819
Current tax liabilities 45 151
4,217 4,804
Total liabilities 5,618 6,610
Total equity and liabilities 11,383 11,748
CEPS PLC
CONSOLIDATED STATEMENT OF CASHFLOWS
YEAR ENDED 31 DECEMBER 2009
(unaudited) (unaudited)
2009 2008
£'000 £'000
Cash flow from operating activities
Cash generated from operations 1,326 1,388
Tax paid (202) (16)
Interest paid (126) (222)
Net cash generated from operations 998 1,150
Cash flow from investing activities
Purchase of property, plant and equipment (62) (78)
Disposal of property, plant and equipment 3 11
Purchase of computer software and website - (1)
development
Net cash used in investing activities (59) (68)
Cash flow from financing activities
Repayment of bank loans (650) (686)
Repayment of capital element of hire purchase (190) (240)
agreements
Net cash used in financing activities (840) (926)
Net increase in cash and cash equivalents 99 156
Cash and cash equivalents at the beginning of 532 376
the year
Cash and cash equivalents at the end of the 631 532
year
Cash flows from operating activities
The reconciliation of operating profit to
cash flows from operating activities is as
follows:
Operating profit for the year 722 1,148
Adjustments for:
Depreciation and amortisation charge 285 275
Loss on disposal of property, plant and 9 23
equipment
Increase in minority interest 82 -
Difference between pension charge and cash (74) (80)
contribution
Operating profit before changes in working 1,024 1,366
capital and provisions
Decrease/(increase) in inventory 226 (404)
Decrease in trade and other receivables 206 323
(Decrease)/increase in trade and other (130) 103
payables, including trade receivables backed
working capital facilities
Cash generated from operations 1,326 1,388
CEPS PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED 31 DECEMBER 2009
Share Share Profit Attributable Minority Total
capital premium and loss to the interest
account owners of
the parent
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 416 2,756 1,034 4,206 159 4,365
2008 (unaudited)
Actuarial gain - - 59 59 - 59
Profit for the - - 624 624 90 714
year
Total - - 683 683 90 773
comprehensive
income for the
year
At 31 December 416 2,756 1,717 4,889 249 5,138
2008 (unaudited)
Actuarial loss - - (74) (74) - (74)
Profit for the - - 550 550 69 619
year
Total - - 476 476 69 545
comprehensive
income for the
year
Increase in - - - - 82 82
minority
interest charged
against profit
for the year
At 31 December 416 2,756 2,193 5,365 400 5,765
2009 (unaudited)
Notes to the financial information
1. General information
The Company is a limited liability company incorporated and domiciled in the
UK. The address of its registered office is 11 George Street, Bath, BA1 2EH and
the registered number of the company is 507461.
The Company has its primary listing on AIM.
2. Basis of preparation
These unaudited preliminary results have been prepared under the historical
cost convention and in accordance with International Financial Reporting
Standards ("IFRS") and interpretations in issue at 31 December 2009.
The preliminary results were approved by the Board of Directors on 22 April
2010. The preliminary results do not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006.
All periods presented are unaudited.
3. Segmental analysis
All activities are classed as continuing.
The chief operating decision maker of the Group is its Board. Each operating
segment regularly reports its performance to the Board which, based on those
reports, allocates resources to and assesses the performance of those operating
segments.
Operating segments and their principal activities are as follows:
* Davies Odell, the manufacture and distribution of protection equipment,
matting and footwear components
* Friedman's, the conversion and distribution of specialist Lycra
* Sunline, a supplier of services to the direct mail market
The United Kingdom is the main country of operation from which the Group
derives its revenue and operating profit and is the principal location of the
assets of the Group. The Group information provided below, therefore, also
represents the geographical segmental analysis. Of the £15,880,000 revenue £
13,823,000 is derived from UK customers.
The Board assesses the performance of each operating segment by a measure of
adjusted earnings before interest, tax, Group costs, depreciation and
amortisation (EBITDA). Other information provided to the Board is measured in a
manner consistent with that in the financial statements.
The 2008 results have, where necessary, been restated to comply with the
adoption of IFRS 8.
i) Results by segment
Year ended 31 December 2009
Davies Friedman's Sunline CEPS Group
Odell
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
2009 2009 2009 2009 2009
£'000 £'000 £'000 £'000 £'000
Revenue 5,296 2,993 7,591 - 15,880
Segmental result 250 203 913 - 1,366
(EBITDA)
Depreciation charge (30) (30) (220) - (280)
Group costs - - - (282) (282)
Increase in minority - - - (82) (82)
interest
Interest expenses (3) (10) (134) 1 (146)
Profit/(loss) before 217 163 559 (363) 576
taxation
Taxation 161 (19) (128) 29 43
Profit/(loss) for the 378 144 431 (334) 619
year
i) Results by segment (continued)
Year ended 31 December 2008
Davies Friedman's Sunline CEPS Group
Odell
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
2008 2008 2008 2008 2008
£'000 £'000 £'000 £'000 £'000
Revenue 5,942 3,175 7,679 - 16,796
Segmental result 509 180 1,095 - 1,784
(EBITDA)
Depreciation charge (49) (32) (189) - (270)
Group costs - - - (366) (366)
Interest expenses (37) (34) (171) 1 (241)
Profit/(loss) before 423 114 735 (365) 907
taxation
Taxation (90) (6) (153) 56 (193)
Profit/(loss) for the 333 108 582 (309) 714
year
ii) Assets and liabilities by segment
As at 31 December
Segment assets Segment liabilities Segment net assets
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
2009 2008 2009 2008 2009 2008
£'000 £'000 £'000 £'000 £'000 £'000
CEPS Group 114 103 (67) (24) 47 79
Davies Odell 2,332 2,240 (1,043) (1,165) 1,289 1,075
Friedman's 2,853 3,203 (1,694) (2,153) 1,159 1,050
Sunline 6,084 6,202 (2,814) (3,268) 3,270 2,934
Total - Group 11,383 11,748 (5,618) (6,610) 5,765 5,138
4. Earnings per share
Basic earnings per share is calculated on the profit after taxation for the
year attributable to equity holders of the Company of £550,000 (2008: £624,000)
and on 8,314,297 (2008: 8,314,249) ordinary shares, being the weighted number
in issue during the year.
Diluted earnings per share is calculated on the weighted number of ordinary
shares in issue adjusted to reflect the potential effect of the exercise of
share warrants. No adjustment is required in either year because the fair value
of warrants was below the exercise price.
5. Distribution of the Annual Report
A copy of the Annual Report and Financial Statements, together with a notice of
the Annual General Meeting, will be sent to all shareholders on 5 May 2010.
Further copies will be available to the public from the Company Secretary at
the Company's registered address at 11 George Street, Bath BA1 2EH and from the
Group website, www.cepsplc.com.
Friday, 17th May 2024
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