Half-year Report

RNS Number : 8689W
600 Group PLC
20 November 2017
 



The 600 Group PLC

 

Unaudited Interim Results for the six months ended 30 September 2017

 

The 600 Group PLC ("the Group"), the AIM listed distributor, designer and manufacturer of industrial products (AIM: SIXH), today announces its unaudited interim results for the six months ended 30 September 2017.

 

Highlights:                                          

 

•   Revenues were up 7% to £24.8m (FY 17 H1: £23.2m)

•   Underlying* operating profit up to £1.3m (FY17 H1: £1.2m)

•   Profit before tax up to £2.1m (FY 17: £1.4m)

•   Order books up 36% on the same time last year

•   Industrial laser division contribution increased to 59% of profits* from operations

•   ProPhotonix sale realised £1.5m and £1m profit

•   Equity raise of £1.12m before costs to eliminate working capital bank debt in the UK

•   Pension scheme in £12.2m technical provisions surplus

 

*from continuing operations, before special items.

 

Commenting today, Paul Dupee, Executive Chairman of the Group said:

 

"Market conditions have improved generally over the previous year and both our divisions have been able to increase revenues and have much improved order books.  These factors give us greater confidence going into the second half of our financial year and will be complemented by new product launches and an increasing focus on new sales activity in other geographical areas.

 

Whilst there remain a number of uncertain world events beyond our control which could affect our markets, the Board continues to believe that the process of leveraging our industry recognised brands such as Colchester, Harrison, Clausing, TYKMA and Electrox through new product developments and an increased worldwide distribution network will lead to continued revenue growth in the future."

   

 

Reconciliation of underlying profit before taxation:


26 Weeks ended

26 Weeks ended


30 September

1 October


2017

2016


£m

£m




Revenues

24.84

23.16

Cost of sales

(16.28)

(15.07)

Gross profit

8.56

8.09

Net operating costs

(7.29)

(6.86)

Underlying operating profit

1.27

1.23

Bank and loan note interest expense (net)

(0.44)

(0.48)

Underlying profit before tax

0.83

0.75




Other items:



Interest on pension surplus

0.66

0.75

ProPhotonix sale

0.97

-

Other Special items

(0.31)

(0.05)

Amortisation of shareholder loan costs

(0.09)

(0.08)


1.23

0.62







Reported profit before tax

2.06

1.37

 

 

 

More Information on the group can be viewed at: www.600group.com

 

Enquiries:


The 600 Group PLC

Tel: 01924 415000

Paul Dupee, Executive Chairman


Neil Carrick, Finance Director


Cadogan PR Limited

Tel: 020 7930 7006

Alex Walters

Tel: 07771 713608

FinnCap

Tel: 020 7600 1658

Tony Quirke/Mia Gardiner (Sales/Broking)


SPARK Advisory Partners Limited (NOMAD)


Matt Davis /  Miriam Greenwood

Tel: 020 3368 3553



The 600 Group Plc

Executive Chairman's Statement for the six months ended 30 September 2017

Overview

 

I am pleased to report that both of our Divisions have made progress in increasing revenues during the six month period ended 30 September 2017. Enquiry levels remain good and order books are up 36% overall on this time last year.

 

Revenue was up 7% at £24.8m against £23.2m in the previous half year and Group underlying operating profit increased to £1.3m (FY17 H1: £1.2m).

 

We have continued to invest in new people and new product developments to maintain our strategic goal of leveraging the strength of the Group's brands into niche markets worldwide and several new products are being launched for the second half of the financial year.

 

 

Results and dividend

 

Revenue was £24.8m (FY 17 H1: £23.2m) with net underlying operating profit (excluding special items) of £1.3m (FY17 H1: £1.2m).

 

After taking account of interest on bank borrowings and loan notes, the underlying Group pre-tax profit before special items was £0.8m (FY17 H1: £0.8m) and £2.1m (FY 17 H1: £1.4m ) after special items.

 

Special Items have been noted separately so that the underlying trading performance can be better understood. In the current period share option costs, the amortisation of intangible assets acquired, amortisation of loan note expenses and the pensions credit interest on the scheme surplus, which are non-cash costs, are included in special items.

 

In addition to these items a credit of £0.97m is included as a result of the sale of the Group's holding in ProPhotonix Ltd at the end of August.  Reorganisation and redundancy costs as a result of the finalisation of the integration of the TYKMA and Electrox businesses and costs incurred in restructuring the UK machine tools business are also included.

 

The total profit attributable to shareholders of the Group for the financial period was £1.8m (FY17 H1: £1.1m), providing earnings of 1.75 pence per share (FY17 H1: 1.05 pence). The underlying earnings per share (excluding the pension interest and other special items) were 0.79p   (FY17 H1: 0.71p).

 

The Board continues to believe the retention of earnings to grow the businesses is the most appropriate use of available finance and accordingly do not recommend the payment of an interim dividend.

 

Operating activities

 

Machine tools and precision engineered components


FY18 H1

£m

FY17 H1

£m

Revenues

16.96

16.42

Operating profit*

0.76

0.93

Operating margin*

4.5%

5.7%

*from continuing operations, before special items.

 

Revenues in our North American business grew strongly by 6% as did those in Australia, up 11%. The UK business, however, failed to make headway against the previous year's first six months revenue but was up 7% on the second half trading in the year to March 2017, which bore the brunt of the uncertainty following the Brexit vote. The combination of weaker sales, particularly in the higher margin spares and service activities and higher import prices held the UK operation to break even trading during the period. A number of operational cost reduction initiatives are taking place led by the new UK managing director, Terry Allison, to improve net margins in the second half of the financial year together with the launch of new products to further stimulate sales growth. This weak performance held back the divisional operating profit despite the improvement in the US business during the period.

 

Quotation activity has remained good and all businesses are reporting stronger order books, with the division as a whole 70% up on the order books at this time last year. This continued improved activity gives us confidence going into the second half of the financial year and is in contrast to the previous year where the uncertainty following the Brexit vote and the effects of the US Presidential elections on US domestic confidence were key factors in a difficult trading period.

 

Product development has continued during the period with work on a US built lathe and the launch at the EMO trade show in Hannover in September of the Clausing CNC Millpwr. Work is also underway on the construction of the US built Kondia milling machine following the acquisition last year of the machine tools business of Kondia, formerly Spain's largest manufacturer of milling machines. The Group also acquired the worldwide supply of Kondia spares.

 

The introduction of the Clausing product range of saws, drills, mills and grinders into the UK, and European markets has proved successful and is a growing part of the product portfolio. These products are very often found alongside our Colchester and Harrison lathes in the many facilities we sell to and are a natural extension to our existing product range in these markets. These products represent about 40% of the total machine tools sold by our North American operation against only about 5% currently for UK and Europe.

 

Supply of machines from our new Indian partners has begun and additional product ranges are being developed together with their technical engineers.

The Australian operation has continued its recovery in both volumes and profitability and in addition has met with some success with sales to Thailand through our new distribution partner during the period.

 

 

Industrial Laser systems

 


FY18 H1

£m

FY17 H1

£m

 

Revenues

7.88

6.74

Operating profit*

1.11

0.89

Operating margin*

14.1%

13.2%

*from continuing operations, before special items.

 

 

 

Top line progress has been good during the period, up 17% on the same period last year and the consolidation of manufacturing onto one site in Ohio USA and revision of the supply chain during the previous year has ensured margins remain acceptable. This division now accounts for almost 60% of the trading profits generated by our businesses.

 

Quotation activity in this Division has also been strong and the order book at the end of September was up 18% on the same time last year.

 

We have invested in strengthening the management team during the period to provide greater depth and a strong base to support the future growth in the business.

 

The combined TYKMA Electrox business now has worldwide credibility and has secured repeat orders from a number of multi-national corporations in the period.

 

New products launched last year have become significant contributors to this businesses success and further new product developments are being launched over the coming months. Progress is also being made in export areas in Asia Pacific through a new international sales manager.

 

ProPhotonix

 

The Group disposed of its entire holding in ProPhotonix Ltd, the AIM listed laser diode and LED systems manufacturer and distributor, for £1.5m at the end of August 2017 realising a profit of £1m which is shown in special items. The proceeds were used to pay down UK senior debt with HSBC.

 

Equity issue

 

8.6m shares were issued to a number of institutional investors, which raised £1.12m before costs on 20 September 2017. The proceeds were used to pay down the remaining UK working capital borrowings. Our facilities have been maintained with HSBC to provide headroom for future growth.

 

Financial position

 

Net assets decreased in the six month period by £3.3m to £47.0m largely as a result of the pension asset decrease. Net assets excluding the effect of pension schemes (and associated taxation) increased by £1.1m to £17.9m as a result of net profit generation and the equity issue less the reduction of 7% in the value of our foreign  net assets on their re-translation into Sterling due to exchange rate movements.

 

Stock levels have increased due to the increased activity levels. In addition in order to provide customers with shorter lead times and to support the new product launches additional stockholding has been required which has increased working capital levels.

 

Despite this, net debt decreased significantly to £12.1m (March 2017 £13.7m) resulting in gearing of 26% (March 2017: 27%) as result of profitable trading, the sale of the ProPhotonix holding and the issue of equity.

 

 UK annual working capital facilities were renewed in September 2017 with HSBC to support the UK machine tool business and Bank of America renewed their annual working capital facilities for Clausing and TYKMA in the USA in November.

 

UK pension scheme

 

The accounting surplus on the UK pension scheme decreased during the period from £52.5m at 1 April 2017 to £45.7m as a result of changes in underlying assumptions and, most notably, the value of the schemes assets. Scheme assets are invested to largely match the scheme liabilities which are valued on gilt yields, as opposed to the yield on corporate bonds upon which the accounts valuation is based.

 

The funding position of the scheme using the much more prudent technical provisions basis for valuation in the latest triennial valuation at 31 March 2016 was a surplus of £2.2m. The actuarial valuation was formally signed off in October 2017 when the surplus had increased to £12.2m on a technical provisions basis. There continues to be no requirement for any cash funding from the Company and various options for the scheme are being investigated.

 

Outlook

 

Market conditions have improved generally over the previous year and both our divisions have been able to increase revenues and have much improved order books.  These factors give us greater confidence going into the second half of our financial year and will be complemented by new product launches and an increasing focus on new sales activity in other geographical areas.

 

Whilst there remain a number of uncertain world events beyond our control which could affect our markets, the Board continues to believe that the process of leveraging our industry recognised brands such as Colchester, Harrison, Clausing, TYKMA and Electrox through new product developments and an increased worldwide distribution network will lead to continued revenue growth in the future.

 

 

Paul Dupee

Executive Chairman

20 November 2017


Condensed consolidated income statement (unaudited)

For the 26 week period ended

30 September 2017


Before


After

Before


After

After



Special

Special

Special

Special

Special

Special

Special



Items

Items

Items

Items

Items

Items

Items



26 weeks

26 weeks

26 weeks

26 weeks

26 weeks

26 weeks

52 weeks



ended 30

ended 30

ended 30

ended

ended

ended

ended



September 

September  

September  

1 October

1 October

1 October

1 April



2017

2017

2017

2016

2016

2016

2017



£000

£000

£000

£000

£000

£000

£000


Continuing









Revenue

24,837

-

24,837

23,163

-

23,163

47,032


Cost of sales

(16,277)

-

(16,277)

(15,074)

-

(15,074)

(30,602)


Special Items in cost of sales

-

-

-

-

-

-

(118)


Gross profit

8,560

-

8,560

8,089

-

8,089

16,312


(7,290)

-

(7,290)

(6,855)

-

(6,855)

(13,365)


-

(307)

(307)

-

(49)

(49)

(53)


1,270

(307)

963

1,234

(49)

1,185

2,894

 


-

970

970

-

-

-

-










-

-

-

1

-

1

3


-

665

665

-

750

750

1,445


-

665

665

1

750

751

1,448


(442)

-

(442)

(479)

-

(479)

(946)


-

(91)

(91)

-

(82)

(82)

(168)


(442)

(91)

(533)

(479)

(82)

(561)

(1,114)










Profit before tax

828

1,237

2,065

756

619

1,375

3,228










Income tax charge

-

(233)

(233)

(20)

(264)

(284)

(1,169)


Profit for the period attributable to equity holders of the parent

828

1,004

1,832

736

355

1,091

2,059




















Basic earnings per share

0.79p

0.96p

1.75p

0.71p

0.34p

1.05p

1.97p











Diluted earnings per share

0.79p

0.95p

1.74p

0.71p

0.34p

1.05p

1.96p


 

 













 

 

Condensed consolidated statement of comprehensive income (unaudited)

For the 26 week period ended 30 September 2017

 




                                  

26 weeks

26 weeks

52 weeks


 Ended

 Ended

Ended


30 September

1 October

1 April


2017

2016

2017


£000

£000

£000

Profit for the period

1,832

1,091

2,059

Other comprehensive (expense)/income:

Items that will not be reclassified to the Income Statement:




Re-measurement of the net defined benefit asset

(7,528)

(7,816)

8,367

Deferred taxation

2,635

2,736

(2,928)

Total items that will not be reclassified to the Income Statement:

(4,893)

(5,080)

5.439

Items that are or may in the future be reclassified to the Income Statement:




Fair value adjustment of ProPhotonix investment

-

606

1,157

Release of available for sale reserve on ProPhotonix disposal

(1,128)

-

-

Revaluation of property

154

-

-

Foreign exchange translation differences

(356)

629

705

Total items that are or may be reclassified subsequently to the Income Statement:

(1,330)

1,235

1,862

Other comprehensive (expense)/income for the period, net of income tax

(6,223)

(3,845)

7,301

Total comprehensive (expense)/income for the period

(4,391)

(2,754)

9,360

 

 

 

Condensed consolidated statement of financial position (unaudited)

As at 30 September 2017

 

 


 

 


As at

As at

As at

 


30 September

1 October

1 April

 


2017

2016

2017

 


£000

£000

£000

 

Non-current assets




 

Property, plant and equipment

3,283

3,430

3,732

 

Goodwill

7,144

7,144

7,144

 

Other Intangible assets

271

325

305

 

Investments

-

1,102

1,653

 

Employee benefits

44,665

33,743

51,469

 

Deferred tax assets

3,789

4,008

3,486

 


59,152

49,752

67,789

 

Current assets




 

Inventories

13,604

12,471

12,737

 

Trade and other receivables

7,206

8,014

7,444

 

Cash and cash equivalents

495

945

1,081

 


21,305

21,430

21,262

 

Total assets

80,457

71,182

89,051

 

Non-current liabilities




 

Loans and other borrowings

(8,972)

(9,430)

(9,234)

 

Deferred tax liability

(15,901)

(12,074)

(18,216)

 


(24,873)

(21,504)

(27,450)

 

Current liabilities




 

Trade and other payables

(4,795)

(5,221)

(5,436)

 

Income tax payable

-

(61)

-

 

Provisions

(201)

(428)

(389)

 

Loans and other borrowings

(3,633)

(5,853)

(5,508)

 


(8,629)

(11,563)

(11,333)

 

Total liabilities

(33,502)

(33,067)

(38,783)

 

Net assets

46,955

38,115

50,268

 

 

Shareholders' equity




 

Called-up share capital

1,130

1,044

1,044

 

Share premium account

1,990

1,013

1,013

 

Revaluation reserve

791

1,273

637

 

Available for sale reserve

-

(45)

506

 

Equity reserve

139

139

139

 

Translation reserve

2,099

2,343

2,466

 

Retained earnings

40,806

32,348

44,463

 

Total equity

46,955

38,115

50,268

 

 

 

Condensed consolidated statement of changes in equity (unaudited)









As at 30 September 2017

Called up

share

Share

premium

 

Revaluation

Available for sale

 

Translation

 

Equity

 

Retained



capital

account

reserve

reserve

reserve

reserve

earnings

Total


£000

£000

£000

£000

£000

£000

£000

£000

At 2 April 2016

1,044

1,013

1,273

(651)

1,714

139

36,308

40,840

Profit for the period

-

-

-

-

-

-

1,091

1,091

Other comprehensive income:









Foreign currency translation

-

-

-

-

629

-

-

629

Re-measurement of the net defined benefit assets

-

-

-

-

-

-

(7,816)

(7,816)

Fair value adjustment of investments

-

-

-

606

-

-

-

606

Deferred tax

-

-

-

-

-

-

2,736

2,736

Total comprehensive income

-

-

-

606

629

-

(3,989)

(2,754)

Transactions with owners:









Credit for share-based payments

-

-

-

-

-

-

29

29

Total transactions with owners

-

-

-

-

-

-

29

29

At 1 October  2016

1,044

1,013

1,273

(45)

2,343

139

32,348

38,115

Profit for the period

-

-

-

-

-

-

968

968

Other comprehensive income:









Foreign currency translation

-

-

75

-

123

-

(122)

76

Re-measurement of the net defined benefit assets

-

-

-

-

-

-

16,183

16,183

Fair value adjustment of investments

-

-

-

551

-

-

-

551

Transfer on revalued properties

-

-

(711)

-

-

-

711

-

Deferred tax

-

-

-

-

-

-

(5,664)

(5,664)

Total comprehensive income

-

-

(636)

551

123

-

12,076

12,114

Transactions with owners:









Credit for share-based payments

-

-

-

-

-

-

39

39

Total transactions with owners

-

-

-

-

-

-

39

39

At 1 April 2017

1,044

1,013

637

506

2,466

139

44,463

50,268

Profit for the period

-

-

-

-

-

-

1,832

1,832

Other comprehensive income:









Foreign currency translation

-

-

-

(367)

-

11

(356)

Re-measurement of the net defined benefit assets

-

-

-

-

-

-

(7,528)

 

(7,528)

Revaluation of property

-

-

154

-

-

-

-

154

ProPhotonix adjustment

-

-

-

622

-

-

(622)

-

ProPhotonix disposal

-

-

-

(1,128)

-

-

-

(1,128)

Deferred tax

-

-

-

-

-

-

2,635

2,635

Total comprehensive income

-

-

154

(506)

(367)

-

(3,672)

(4,391)

Transactions with owners:









Share capital subscribed for

86

977

-

-

-

-

-

1,063

Credit for share-based payments

-

-

-

-

-

-

15

15

Total transactions with owners

86

997

-

-

-

-

15

1,078

At 30 September 2017

1,130

1,990

791

-

2,099

139

40,806

46,955


Condensed consolidated cash flow statement (unaudited)

For the 26 week period ended 30 September 2017





26 weeks

26 weeks

52 weeks


ended

ended

ended


30 September

1 October

1 April


2017

2016

2017


£000

£000

£000

Cash flows from operating activities




Profit for the period

1,832

1,091

2,059

Adjustments for:




Amortisation

26

28

58

Depreciation

226

220

452

Pension credit

-

-

(647)

Net financial income

(132)

(190)

(334)

Other special items

292

-

750

ProPhotonix profit

(970)

-

-

Equity share option expense

15

29

68

Income tax expense

233

284

1,169

Operating cash flow before changes in working capital and provisions

1,522

1,462

3,575

(Increase) /decrease in trade and other receivables

(93)

(884)

(150)

(increase)/decrease in inventories

(1,454)

(516)

(1,404)

 (Decrease) in trade and other payables

(426)

(1,681)

(1,260)

Employee benefit contributions

(60)

-

(120)

Restructuring and redundancy expenditure

(50)

-

(541)

Cash generated from/(used in) operations

(561)

(1,619)

100

Interest paid

(442)

(479)

(946)

Income tax paid

-

-

88

Net cash flows from operating activities

(1,003)

(2,098)

(758)

Cash flows from investing activities




Interest received

-

1

3

Proceeds from sale of property, plant and equipment

-

2,100

2,090

Proceeds from sale of ProPhotonix

1,518

-

-

Purchase of property, plant and equipment

(198)

(298)

(490)

Development expenditure capitalised

(6)

(4)

(22)

Net cash from investing activities

1,314

1,799

1,581

Cash flows from financing activities




Net proceeds from issue of ordinary shares

1,064

-

-

Proceeds from/(Net repayment of) external borrowing

(1,882)

184

(439)

Net finance lease expenditure

(29)

(43)

(93)

Net cash flows from financing activities

(847)

141

(532)

Net increase/(decrease) in cash and cash equivalents

(536)

108

291

Cash and cash equivalents at the beginning of the period

1,081

765

765

Effect of exchange rate fluctuations on cash held

(50)

72

25

Cash and cash equivalents at the end of the period

495

945

1,081


 

Notes relating to the condensed consolidated financial statements

For the 26-week period ended 30 September 2017

 

1.  BASIS OF PREPARATION

The 600 Group PLC (the "Company") is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on the AIM Market of the London Stock Exchange. The Consolidated Interim Financial Statements of the Company for the 26 week period ended 30 September 2017 comprise the Company and its subsidiaries (together referred to as the "Group").

This half yearly financial report is the condensed consolidated financial information of the Group for the 26 week period ended 30 September 2017. The Condensed Consolidated Half-yearly Financial Statements do not constitute statutory financial statements and do not include all the information and disclosures required for full annual financial statements. The Condensed Consolidated Half-yearly Financial Statements were approved by the Board on 20 November 2017.

 

The comparative figures for the financial year ended 1 April 2017 are not the Group's statutory accounts for that financial year.  Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies.  The report of the auditors was (i) unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The half yearly results for the current and comparative period are neither audited nor reviewed by the Company's auditors.

 

As noted in the Basis of preparation accounting policy in the Group's Financial Statements for 1 April 2017 the Group refinanced in August 2016 with HSBC PLC who provided a package of facilities to support the working capital of the UK machine tools division and a term loan secured on the remaining UK freehold site totaling £4.95m. These facilities have been maintained although as a result of the sale of the ProPhotonix holding and the equity raise during the period are largely undrawn. Overseas bank finance in place is a mixture of term and revolving facilities with the earliest review in August 2018. The Group has issued £8.5m of 8% loan notes with maturity in February 2020.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of these facilities.

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 have continued to adopt the going concern basis in the preparation of this half yearly financial report.

 

2. SIGNIFICANT ACCOUNTING POLICIES

The Condensed Consolidated Financial Statements in this half yearly financial report for the 26 week period ended 30 September 2017 have been prepared using accounting policies and methods of computation consistent with those set out in The 600 Group PLC's Annual Report and Financial Statements for the 52 week period ended 1 April 2017.

 

In preparing the condensed financial statements, management is required to make accounting assumptions and estimates. The assumptions and estimation methods were consistent with those applied to the Annual Report and Financial Statements for the 52 week period ended 1 April 2017.

 

3. SEGMENT ANALYSIS

IFRS 8 - "Operating Segments" requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.  The chief operating decision maker has been identified as the Executive Directors.  The Executive Directors review the Group's internal reporting in order to assess performance and allocate resources.

 

The Executive Directors consider there to be two continuing operating segments being machine tools and precision engineered Components and industrial laser systems.

The Executive Directors assess the performance of the operating segments based on a measure of operating profit/(loss).  This measurement basis excludes the effects of Special Items from the operating segments. Head Office and unallocated represent central functions and costs.

 

The following is an analysis of the Group's revenue and results by reportable segment:

 

 


Continuing

26 Weeks ended 30 September 2017

Machine

Tools

& Precision

Engineered

Components

Industrial

Laser

Systems

Head Office

& unallocated

Total

Segmental analysis of revenue

£000

£000

£000

£000

Total revenue

16,961

7,876

-

24,837






Operating profit/(loss) pre special items

760

1,110

(600)

1,270

 Special items

(111)

(162)

(34)

(307)

Operating profit/(loss)

649

948

(634)

963

 

 





Other segmental information:





Reportable segment assets

26,474

7,501

46,482

80,457

Reportable segment liabilities

(21,576)

(3,619)

(8,307)

(33,502)

Intangible & Property, plant and equipment  additions

39

165

-

204

Depreciation and amortisation

136

97

19

252











 

 

 

3. SEGMENT ANALYSIS (continued)


Continuing

26 Weeks ended 1 October 2016

Machine

Tools

& Precision

Engineered

Components

Industrial

 Laser

Systems

Head Office

& unallocated

Total

Segmental analysis of revenue

£000

£000

£000

£000

Total revenue

16,423

6,740

-

23,163






Operating profit/(loss) pre- special items

923

893

(582)

1,234

Special items

-

-

(49)

(49)

Operating profit/(loss)

923

893

(631)

1,185

 

 





Other segmental information:





Reportable segment assets

28,547

8,403

34,232

71,182

Reportable segment liabilities

(20,494)

(4,129)

(8,444)

(33,067)

Intangible & Property, plant and equipment  additions

34

267

-

301

Depreciation and amortisation

155

93

-

248

 

 

 


Continuing

52-weeks ended 1 April 2017

Machine Tools

& Precision

Engineered

Components

Industrial Laser

Systems

Head Office

& unallocated

Total

Segmental analysis of revenue

£000

£000

£000

£000

 

Total revenue per statutory accounts

14,608

-

47,032






Operating Profit/(loss) before special Items

2,059

1,993

(987)

3,065






Special Items

691

(671)

(191)

(171)

Group profit/(loss) from operations

2,750

1,322

(1,178)

                2,894

Other segmental information:





Reportable segment assets

29,120

7,638

52,293

89,051

Reportable segment liabilities

(26,538)

(3,772)

(8,473)

(38,783)

Intangible & Property, plant and equipment additions

115

397

-

512

Depreciation and amortisation

295

215

-

510

 

 





4. SPECIAL ITEMS

In order for users of the financial statements to better understand the underlying performance of the Group the Board have separately disclosed transactions which by virtue of their size or incidence, are considered to be one off in nature. In addition the charge for share based payments, amortisation of intangible assets acquired and non cash pension transactions have also been separately identified.

Special items include acquisition costs, gains and losses on the sale of properties, investments and assets, exceptional costs relating to reorganisation, redundancy and restructuring, legal disputes and inventory, asset and intangibles.

 


30 September     2017

1 October

2016

1 April

2017


£000

£000

£000

Items included in operating profit:




Stock write-offs

-

-

(118)

Pension credit

-

-

647

Refinancing costs

-

-

(54)

Reorganisation ,restructuring and redundancy costs

(273)

-

(622)

Profit on sale of property

-

-

114

Acquisition costs

-

-

(29)

Share option costs

(15)

(29)

(68)

Amortisation of intangible assets acquired

(19)

(20)

(41)


(307)

(49)

(171)





Items included in financial (income)/expense:




Pensions interest on surplus

665

750

1,445

Amortisation of loan note expenses

(91)

(82)

(168)


574

668

1,277

Profit on ProPhotonix sale

970

-

-

 

5. Financial income and expensE


30 September   2017

1 October

2016

1 April

2017


£000

£000

£000

Interest income

-

1

3

Interest on Pension surplus

665

750

1,445

Financial income

665

751

1,448

Bank overdraft and loan interest

(98)

(133)

(173)

Loan note interest

(340)

(340)

(761)

Finance charges on finance leases

(4)

(6)

(12)

Amortisation of loan note costs

(91)

(82)

(168)

Financial expense

(533)

(561)

(1,114)

 

6. Taxation


30 September

2017

1 October

2016

1 April

2016


£000

£000

£000

Current tax:




Corporation tax at 19% (2016: 20%):

-

-

-

Overseas taxation:




- current period

-

(20)

-

Total current tax charge

-

(20)

-

Deferred taxation:




- current period

(233)

(264)

(695)

- prior period

-

-

(474)

Total deferred taxation charge

(233)

(264)

(1,169)

Taxation charged to the income statement

(233)

(284)

(1,169)

 

 

 

7. Earnings per share

The calculation of the basic earnings per share of 1.75p (2016:  1.05p) is based on the earnings for the financial period attributable to the Parent Company's shareholders of a profit of £1,832,000 (2016 £1,091,000) and on the weighted average number of shares in issue during the period of 104,831,330 (2016: 104,357,957). At 30 September 2017, there were 6,650,000 (2016: 6,650,000) potentially dilutive shares on option and 43,950,000 (2016: 43,950,000) share warrants exercisable at 20p. The weighted average effect of these as at 30 September 2017 was 716,915 shares (2016: nil) giving a diluted earnings per share of 1.74p (2016: 1.05p).

 

.


30 September

2017

1 October

2016

1 April

2017

Weighted average number of shares

Shares

Shares

Shares

Issued shares at start of period

104, 357,957

104, 357,957

104, 357,957

Effect of shares issued in the period

473,373

-

-

Weighted average number of shares at end of period

104,831,330

104,357,957

104,357,957

 

 

 

 


30 September 2017

1 October

2016

1 April

2017


£000

£000

£000

Underlying earnings




Total post tax earnings

1,832

1,091

2,059

Share option costs

15

29

68

Pensions Interest

(665)

(750)

(1,445)

Amortisation of Shareholder loan expenses

91

82

168

Pensions credit

-

-

(647)

Amortisation of intangible assets acquired

19

20

41

Other special items

273

-

709

Profit on sale of ProPhotonix

(970)

-

-

Associated taxation on special items

233

264

1,287

Underlying earnings before tax

828

756

2,240

Underlying earnings after tax

828

736

2,122

 

Underlying Earnings Per Share

0.79p

0.71p

2.15p





8. RECONCILIATION OF NET CASH FLOW TO NET DEBT


30 September

2017

1 October

2016

1 April

2017


£000

£000

£000

Increase/(decrease) in cash and cash equivalents

(536)

233

291

(decrease)/Increase in debt and finance leases

1,911

168

532

(decrease)/Increase in net debt from cash flows

1,375

401

823

Net debt at beginning of period

(13,661)

(13,886)

(13,886)

Loan costs amortisation and adjustments

(91)

(82)

(168)

Exchange effects on net funds

267

(771)

(430)

Net debt at end of period

(12,110)

(14,338)

(13,661)

 

9. Analysis of net DEBT


At

Exchange/




At


1 April

Reserve




30 September


2017

movement


Other

Cash flows

2017


£000

£000


£000

£000

£000

Cash at bank and in hand

981

(50)


-

(536)

395

Short term deposits (included within cash and cash equivalents on the balance sheet)

100

-


-

-

100


1,081

(50)


-

(536)

495

Debt due within one year

(5,427)

243


-

1,603

(3,581)

Debt due after one year

(1,277)

67


-

279

(931)

Loan Notes due after one year

(7,867)

-


(91)

-

(7,958)

Finance leases

(171)

7


-

29

(135)

Total

(13,661)

267


(91)

1,375

(12,110)

 

10. Employee benefits

The Group has defined benefit pension schemes in the UK and USA. The assets of these schemes are held in separate trustee-administered funds. In addition, the Group operates a retirement healthcare benefit scheme for certain of its retired employees in the USA, which is also treated as a defined benefit scheme. The principal scheme is the UK defined benefit pension plan.

 

The UK scheme was closed to future accrual of benefits at 31 March 2013.  The latest actuarial valuation of the UK scheme to 31 March 2016 was signed in October 2017 at which time there was an estimated surplus of £12.2m based on the prudent Technical Provisions basis of valuation. Consequently there continues to be no requirement for any cash funding from the Company and various options for the scheme are being investigated.

 

 

Value of UK and USA scheme assets and liabilities for the purposes of IAS 19

 

 

30 September

2017

1 October

2016

1 April

2017


£000

£000

£000

Opening Fair value of schemes assets

245,367

220,208

220,208

Experience adjustments in the period

(12,991)

30,900

25,159

Closing Fair value of schemes assets

232,376

251,108

245,367





Opening present value of schemes liabilities

193,898

179,271

179,271

Experience adjustments in the period

(6,187)

37,906

14,627

Closing present value of schemes liabilities

187,711

217,177

193,898





Surplus recognised under IAS 19

44,665

33,931

51,469

 

 

 

The principal assumptions used for the purpose of the IAS 19 valuation for the UK scheme compared to the 2017 year end were as follows:


30 September

2017

1 April

2017


UK scheme

UK scheme


% p.a.

% p.a.

Inflation under RPI

3.25

3.25

Inflation under CPI

2.15

2.15

Rate of increase to pensions in payment - LPI 5%

3.15

3.15

Discount rate for scheme liabilities and return on assets

2.65

2.55

 

 

11. FAIR VALUE

 

The group considers that the carrying amount of the following financial assets and financial liabilities are

a reasonable approximation of their fair value:

 

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Loans and other borrowings

 

 

 

 

12. Disposal of ProPhotonix

 

The Group disposed of its entire holding in ProPhotonix Limited on 31 August 2017. The shareholding was originally acquired in a share swap with institutional investors in August 2014 when 4.925m shares were issued in exchange for 26.3% of ProPhotonix. Proceeds of £1.5m gross were received which was used to reduce the UK senior debt with HSBC.

 

On disposal management identified that a write down of the carrying amount of the investment that occurred in 2015 should have been recognised in the consolidated income statement rather than the available for sale reserve. As a result an amount of £622,000 has been transferred from retained earnings to the available for sale reserve. The revised available for sale carrying amount has then been recycled as part of the profit on disposal of £970,000.  

 

13. Principal Risks and Uncertainties

 

The principal risks and uncertainties affecting the Group remain those set out in the 2017 Annual Report. Those which are most likely to impact the performance of the Group in the remaining period of the current financial year are the exposure to increased input costs, the dependence on a relatively small number of key vendors in the supply chain and a downturn in its customers' end markets particularly in North America and Europe.

 

 

 


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