Annual Results Announcement

RNS Number : 3825S

Alumasc Group PLC

09 September 2010

 



IMMEDIATE RELEASE	Thursday 9 September 2010

THE ALUMASC GROUP PLC - ANNUAL RESULTS ANNOUNCEMENT

"..emerging from recession a stronger business.."

Alumasc (ALU.L), the premium building and engineering products group, announces results for the year ended to 30 June 2010.

Financial Highlights

·    Group revenues of £93.0m (2008/09: £109.1m)

·    Underlying* PBT of £4.1m (2008/09: £5.2m)

·    Underlying* EPS of 7.9p (2008/09: 10.0p)

·    Reported PBT of £3.4m (2008/09: £1.8m)

·    Basic EPS of 6.2p (2008/09: 2.9p)

·    Strong cash flow performance - net debt reduced by £1m to £9.3m, gearing 33%

·    Substantially reduced pension deficit^† (2010 valuation: £11.4m; March 2007/8 valuation: £28.5m)

·    Dividend maintained at 10p per share

Commercial Highlights

·    Continued strategic focus on developing the sustainable Building Products business, including the introduction of selected product groups to overseas markets

·    Operating margin maintained at 6.1% as the result of Engineering Products recovery and £4.3m of fixed cost savings (taking total to £8.5m over the last two years) 

·    Building Products revenues reduced by 18% to £64.5m, reflecting impact of late cycle exposure; divisional order book of £15.9m up 6% on last year

·    Turnaround in the Engineering Products division: £1.3m underlying* operating profit (2008/09: £1.4m underlying* operating loss) following appointment of new management team at Alumasc Precision, cost savings and partial market recovery

·    Order books at 30 June 2010 34% ahead of the low point on 31 December 2009

*  excluding brand amortisation, restructuring costs and impairment charges
^†   based on triennial actuarial review
 
Paul Hooper, Chief Executive, commented:

"Following the robust performance of the group through the recent recession, we believe Alumasc is well positioned to continue to make progress through uncertain times. The group's balance sheet remains strong, the funding of our pension schemes has improved significantly and we have demonstrated our ability to control costs and cash. Our export sales strategies should bear fruit as the year progresses, and the Board has confidence in the exciting medium and longer term strategic potential of the group."

Presentation:

Today, a presentation will be made to institutions, broker's analysts and private client brokers by Paul Hooper (Chief Executive) and Andrew Magson (Finance Director), with John McCall (Chairman) in attendance. The meeting will commence at 9.30am and end at approximately 10.30am. It will be held at the offices of KBC Peel Hunt, 111 Old Broad Street, London, EC2N 1PH.

Enquiries:

The Alumasc Group plc	01536 383844
Paul Hooper (Chief Executive)	[e-mail]
Andrew Magson (Finance Director)
Bankside Consultants Limited	020 7367 8888
Simon Bloomfield or Rose Oddy

Chairman's statement

Two years have passed since the collapse of Lehman Brothers in September 2008.  The intervening two years have been an extraordinary period for business, particularly because the recession which followed was triggered not by an economic cycle - something with which those of us of a certain age are familiar - but by a financial crisis on a global scale, both unpredicted and unpredictable.

I suspect that Alumasc, as an industrial company, felt the impact of this recession more than most.  By the most simple measure, annual revenue fell by 30% between the Autumn of 2008 and the Spring of 2010, a daunting figure for any business with high levels of service and fixed costs.  Within this figure, our Engineering Division fell by an astonishing 45%, reflecting the catastrophic conditions which faced their OEM customers in world markets.

In response to these powerful external events, Alumasc took effective and frequently painful action to reduce the costs of running our businesses and to conserve cash in these difficult circumstances.  As a result, the company has remained soundly profitable, maintained its dividend, and actually generated cash in the most recent year.

I would like particularly to thank our employees, who have appreciated the challenges facing their businesses and have responded most positively.

Alumasc is not the same company it was before the recession.  It is a stronger company.  In addition to the lower cost base, customer relationships have been strengthened, management has been enhanced and internal controls and systems have been developed in anticipation of an expending and prosperous future.  The migration to activities with greater added value continues.

Have our markets been impaired?  It is too early to speak with certainty but we believe not.  Our industrial customers have overwhelmingly proved themselves to be winners in adversity and have ambitious future plans for their own products.  The position with regard to the UK building industry is more complex.  While there are signs of recovery in the commercial and private housing sectors, the public sector is undergoing much publicized reviews with reductions likely.  There will most likely be several paths to recovery in different sectors.  Our specific focus on sustainable building products should aid our own recovery.

In addition to being proactive in managing the downturn, we have continued to develop the business with a number of initiatives which we believe will augment the underlying recovery in our markets.  Foremost among these is the heightened activity in introducing selected product groups to overseas markets.  These exciting developments are covered more fully in the Chief Executive's Operating Review.

Turning to the specifics of the past year, its shape overall was as we anticipated: a strong recovery in our early cycle engineering business, contrasted with a further decline in the late cycle UK commercial building sector, which was exacerbated by the severe winter.  It is true to say that both these "events" exceeded our expectations at the start of the year, and the return to profitability by our engineering business was an outstanding achievement.  On balance, however, the declines experienced in our higher margin areas resulted in a lower profit overall for the year than was anticipated at the outset. 

The most important and visible leading indicators for our businesses are their order intake and the level of their order books.  There has been a steady rise in these in recent months, which has continued into the new financial year.  In the light of the improving outlook and the company's robust performance, the Board is recommending an unchanged final dividend.

John McCall
Chairman

Business Review

Chief Executive's Operating Review

Strategic development
Alumasc's strategy is to grow shareholder value through:

·    The development of our sustainable Building Products business, where we believe growth rates through the construction cycle will exceed UK industry averages, with significant additional potential from further growing export sales; and

·    Re-establishing value in the group's Precision Engineering business, building on its strong market positioning, technical expertise and the resurgence begun in the last eighteen months.

We believe that the group's Solar Shading, Construction Products and Precision Engineering businesses, which together represent over half of group revenues, each have the strategic potential to increase substantially in size over the medium term through a widening of their geographical presence and product ranges. We intend to grow the group's other businesses by supporting their ability to innovate and develop new product ranges, leveraging brand strength and market positions primarily in the UK market.

Steps taken in the current year to ensure that this significant growth potential is realised have been:

·    Further strengthening and renewing the leadership teams in certain of our building products businesses, ensuring that the new generation of senior managers each have a proven track record of success in growing and managing larger businesses in an international environment;

·    Investing further in sales and marketing resources to support international development, with particular focus on North America and the Middle East in both our Solar Shading and Construction Products businesses. Market research, and feedback from key specifiers such as architects and engineers, suggests our products are innovative and offer key performance benefits relative to competitors in those markets; and

·    Consolidating and further strengthening the new management team at Alumasc Precision, leading to significant improvements in performance and quality, evidenced by the achievement of a Supplier Quality Excellence Programme ("SQEP") award from Caterpillar and new work wins from both existing and new customers. 

The group's sustainable building products strategy
In recent years, group strategy has been to increase focus on the development of a portfolio of modern and growing sustainable Building Products businesses, with the common themes of reducing or improving the efficiency of energy and water use in the built environment and providing products that reduce the life cycle cost of buildings. In addition, where possible, Alumasc offers products either manufactured or grown from sustainable or recyclable materials, including aluminium, sustainable hard and soft woods and high quality green roofing horticulture.

In view of the increasing global "green" agenda, with the built environment believed to create around 40% of man-made CO2 emissions, Alumasc believes its chosen areas of strategic focus should enable the achievement of growth rates through the construction cycle ahead of sector averages. This growth is already being driven by demand from both building owners and tenants, public planning policies and more stringent building regulations. However, we believe growth will increasingly be driven by simple economics as energy and clean water resources become more scarce and valuable, whilst at the same time technological advances improve the performance and efficiency of sustainable building solutions.

Health & Safety
The group's number one priority continues to be to provide a safe place of work for employees. It is pleasing to report a further improvement in the group's safety performance rate index (which is a measure of safety incidents relative to hours worked) to 3.7 in 2009/10 from 4.4 in 2008/09 and 9.4 two years ago. This illustrates the significant progress made in this area in recent years.

Performance Overview
	2009/10	2008/09	% Change
Revenue (£m)	93.0	109.1	-15
Underlying operating profit (£m)	5.6	6.7	-16
Operating margin (%)	6.1	6.1
Net financing costs (£m)	(1.5)	(1.5)
Underlying profit before tax (£m)	4.1	5.2	-21
Restructuring costs (£m)	(0.4)	(0.9)
Amortisation of brands and impairment (£m)	(0.3)	(2.5)
Profit before tax (£m)	3.4	1.8	87

Notwithstanding the exciting strategic potential of the group and the steps taken during the year to ensure these opportunities are realised over the medium term, the 2009/10 financial year was extremely challenging for Alumasc, with the impact of the wider economic recession on the Building Products division in particular leading to a contraction in overall group revenues by £16.1 million, or 14.8% to £93.0 million.

The effect of this on group profit was mitigated by the delivery of a further £4.3 million in fixed cost and efficiency savings across the group and a strong recovery in the performance of our Precision Engineering business during the year. The cost savings achieved exceeded internal expectations and have amounted to a substantial £8.5 million in total over the last two years, equivalent to 9% of group revenues. As a consequence, overall operating margins were retained at prior year levels of 6.1% and underlying profit before tax for the year was £4.1 million (2008/09: £5.2 million). Reported profit before tax, after brand amortisation and restructuring costs, improved to £3.4 million from £1.8 million in the prior year due to lower restructuring costs and the absence of any asset impairment charges in the current year.

Cash flow performance was again strong, with the group's investment in working capital being reduced at a faster rate than the reduction in revenues, and careful control was maintained over capital expenditure. The resulting cash flow generated from operations of £10.7 million was sufficient, despite the difficult trading conditions, not only to finance the group's pension funding obligations in full and pay an unchanged dividend to shareholders, but also to reduce the group's overall net borrowings by £1.0 million to £9.3 million at 30 June 2010.

Building Products Division

Building Products' Divisional Operating Performance
	2009/10	2008/09	% Change
Revenue (£m)	64.5	78.5	-18
Underlying operating profit (£m)	5.3	9.2	-42
Operating margin (%)	8.3	11.7
Restructuring costs (£m)	(0.2)	(0.4)
Amortisation of brands and impairment (£m)	(0.3)	(0.3)
Reported operating profit (£m)	4.8	8.5	-43

Following the record results in a number of Building Products businesses in the financial year to June 2009, with the impact of the economic recession not observed until the final quarter of that year, we anticipated that the financial year to 30 June 2010 would be more challenging for two reasons. Firstly, the new build commercial market is the group's largest end use market segment representing 44% of divisional sales. This typically lags the more general construction cycle, evidenced by large projects that were funded prior to the credit crunch in 2008 still being completed well into the first half of 2009. Secondly, many of our products are installed towards the end of the construction of a building, including solar shading, roofing and walling products, which together represented 52% of divisional sales. The Construction Products Association estimates that commercial new build activity levels reduced by 27% in the 2009 calendar year and is forecasting a further 19% reduction during the 2010 calendar year.

Against this background, divisional revenues reduced by 17.8% to £64.5 million and underlying operating profits were £5.3 million (2008/09: £9.2 million), despite management action taken to reduce fixed costs and improve efficiency, which improved profits by £2.1 million. Whilst some seasonal improvement in activity levels was observed towards the end of the financial year, the recovery in the second half was not as fast as we had anticipated. Although divisional order books began to improve again in January, the prolonged period of cold winter weather in the UK significantly hindered work at construction sites in the third quarter of the financial year. Thereafter, in common with many companies in our peer group, the impact of consequential delays continued through to the year end, exacerbated by ongoing general economic and UK political uncertainties.

Encouragingly, divisional order books amounted to £15.9 million at 30 June 2010, some 6% ahead of June 2009 and 20% ahead of the low point in December 2009.

Energy management
The group's energy management brands were the most affected by the recession, due to the relatively high concentration of sales to the new build commercial market sector. This segment also contains all the group's solar shading, roofing and walling products, installed late in the construction cycle. Segmental revenues were 26% lower at £33.6 million which led to a reduction in underlying operating profit to £1.9 million from £6.1 million in 2008/09. In view of the significant strategic growth potential in our solar shading and green roofing businesses in particular, where order books improved in the second half of the year, positive decisions were taken to protect the key people and know-how in these businesses pending market recovery, and to continue to invest in resources to support both UK and international market penetration and development. These decisions inevitably reduced short term profitability.

Solar shading
Levolux had a challenging year due to the general shortage of available work in the UK on high profile commercial buildings, with many larger developments either mothballed or unable to obtain funding in the period following the credit crunch two years ago. Nonetheless, Levolux showed great resilience throughout the year, remaining strongly profitable and cash generative, whilst continuing to invest in both product innovation and international development.

The first major solar shading project to incorporate photovoltaic cells into glass louvres was completed during the year for the Skipton Building Society. Work is being undertaken to enable customers to benefit from the government funded feed-in tariffs introduced in April in conjunction with such installations in future.

A light redirection system was developed and patented during the year. This system uses glass louvres as a means of refracting the natural light into buildings at the same time as providing shading, thereby reducing the costs of both artificial cooling and lighting, whilst also improving the environment for building occupiers.

In addition, the Triniti® bracket has been patented and launched.  This eliminates cold bridging (thereby reducing condensation), provides sound insulation and transfers loads safely back to the curtain walling structure.

A network of sales representatives was developed during the financial year in North America to develop export potential. In response to the strong level of enquiries subsequently received, a North American sales director was appointed in May. The North American specification bank now stands at over US$2 million, and contracts have recently been won at a hotel in New York and a building in the Bahamas. An international sales manager has been appointed to develop opportunities in the Middle Eastern market, a move that has been rewarded with an initial order for a large office project in Dubai.

Levolux's order books improved in the second half of the year, as some major new developments (both new build and fit-out) are starting to be funded once again, particularly in the London area. Orders have been received for a new building at Chiswick Park in West London and the Media Centre for the London Olympics.

Roofing & walling
The group's premium roofing brands performed resiliently when measured against the overall market contraction for commercial new build work. Gross margins were robust despite increasingly strong competition for work, albeit operating margins were affected by the lower volumes.

The MR exterior wall insulation brand benefited from a high proportion of sales made into the social housing refurbishment sector, where the Decent Homes Initiative continued to underpin demand, with the Community Energy Savings Plan opening up new opportunities moving into the new financial year.

Alumasc has invested in the senior management team to further strengthen this portfolio of brands, leveraging this by increased investment in sales, marketing and technical resources to communicate and differentiate our offering more effectively. The Firestone commercial single-ply waterproofing brand was added to strengthen the portfolio at the half year stage and initial progress has been encouraging, including a major project win for Caterpillar in Leicester, just prior to the year end.

Water management & other
The group's water management and other brands have shown a greater degree of stability through the recession, with a higher proportion of sales made to the infrastructure and refurbishment end use markets, which have proven to be relatively resilient. Moreover, the last twelve months have seen a welcome partial recovery in the new house building market, following a very difficult prior year. In the year to 30 June 2010, segmental revenues were just 6% lower than in the prior year at £30.9 million. After cost and efficiency savings of £0.7 million, underlying operating profit improved by 10% to £3.4 million, compared with £3.1 million in 2008/09.

Construction products
The group's Construction Products brands benefited from record sales volumes of Gatic access covers, buoyed by robust infrastructure markets both in the UK and internationally. Gatic Slotdrain benefited from improved export sales in Europe and, after experiencing some softness in UK demand earlier in the financial year caused by weak industrial and commercial markets, showed encouraging signs of recovery towards the end of the year. 

Commission sales representatives were put in place to develop export sales potential for Gatic Slotdrain in the USA, with a particular initial focus on the airport sector. Arrangements are also in place to have Slotdrain manufactured in the USA. Recently, an initial high profile order for Gatic Slotdrain was won at Minuit Plaza in New York.

Rainwater, drainage & other building products
The group's rainwater, drainage and other brands delivered improved performances, benefiting from robust refurbishment sector activity and some recovery in new house building demand. Towards the end of the year Alumasc rainwater products regained their preferred supplier status with Wolseley, and the Harmer drainage range was boosted by a new technically advanced range of shower drain products available either in aluminium or anti-microbial plastic. Pendock had an improved year with margins benefiting from becoming the first UK supplier in the UK pre-formed plywood casings market to achieve Forest Stewardship Council accreditation for its products. Timloc also recovered strongly, helped by an improved house building market, but also benefiting from the wider product range and distribution channels developed over the last few years, which have enabled growth in market share.

Engineering Products Division

Engineering Products' Divisional Operating Performance
	2009/10	2008/09	% Change
Revenue (£m)	29.4	31.7	-7
Underlying operating profit/(loss) (£m)	1.3	(1.4)	100+
Restructuring costs (£m)	(0.1)	(0.6)
Impairment charges (£m)	-	(2.1)
Reported operating profit/(loss) (£m)	1.2	(4.1)	100+

Although divisional revenues were 7% lower at £29.4 million, operating results were transformed from an underlying operating loss of £1.4 million in 2008/09 to an underlying operating profit of £1.3 million, largely due to the excellent turnaround at Alumasc Precision led by the new management team.

Alumasc Precision
Alumasc Precision's year began well, achieving the SQEP supplier quality award from Caterpillar. This facilitated new work wins not only with Caterpillar and Perkins, but also other major international OEM customers such as Deutz, later in the year. New projects, such as the work on aluminium substrates for the interior of the new Jaguar XJ series were successfully introduced and progressed well with further new work from Bentley, Bernard Actuators, Edwards High Vacuum and McLaren secured during the year. The strong actions taken to reduce costs quickly when the recession took hold last year had the effect of bringing the business back towards break even levels from the beginning of the 2009/10 financial year. This enabled the business to move more strongly into profit as customers began to re-stock, underlying demand improved steadily and more new work came on-stream in the second half of the year.

Alumasc Precision has recently established a subsidiary business in China to serve its international customer base directly in this market with product sourced through our existing local supplier.

Alumasc Dispense
Alumasc Dispense again experienced muted demand for its products as major brewers continued to restrict capital spend following industry consolidation two years ago. Sales momentum did show some improvement, which brought the business back into a modest profit towards the end of the financial year, assisted by sales of the Carlsberg Draughtmaster II beer dispensing system. At the beginning of the current financial year projects were secured to supply a global brewing company with countermounts for the international market and glassware to Magners cider.

Prospects
The group's order book momentum has been positive since December 2009.  Order intake in 2009/10 was 11.5% ahead of the prior year at £104.4 million and order books have increased by 34% since the half year. Whilst encouraging, the group's overall order book coverage is currently around five months, so we have limited visibility of the second half of the current financial year at this stage.

Based on a strong order book which provides a reasonable level of coverage for the current year as a whole, we expect Alumasc Precision to continue its recent resurgence, with potential to leverage spare production capacity and further improve operating efficiencies.

Order books are also growing in the Building Products Division, although uncertainties remain as to the strength of the UK economy generally and the impact of lower public spending.

Following the robust performance of the group through the recent recession, we believe Alumasc is well positioned to continue to make progress through uncertain times. The group's balance sheet remains strong, the funding of our pension schemes has improved significantly and we have demonstrated our ability to control costs and cash. Our export sales strategies should bear fruit as the year progresses, and the Board has confidence in the exciting medium and longer term strategic potential of the group.

Paul Hooper
Chief Executive

Business Review
Group Finance Director's Review

Key performance indicators
The group's key performance indicators (KPI's) are summarised in the table below.

	2009/10	2008/09	% Change
Safety Performance Index	3.7	4.4	15.9%
Order intake for the year (£m)	104.4	93.6	11.5%
Year end order book (£m)	35.5	28.2	26.1%
Group revenues (£m)	93.0	109.1	-14.8%
Operating margin (%)	6.1	6.1	-
Underlying PBT (£m)	4.1	5.2	-21.5%
Underlying earnings per share (pence)	7.9	10.0	-21.2%
Average trade working capital % sales	16.2	17.2	5.8%
Net cash inflow/(outflow) (£m)	1.0	(0.9)	n/a
Net debt (£m)	9.3	10.3	9.7%
Capital invested (£m)	45.5	50.1	-9.3%
Return on investment (post tax) (%)	8.2	8.9	-7.8%
Gearing (%)	33.5	33.5	-
Interest cover (times)	8.4	10.7	-21.5
Net debt/EBITDA (times)	1.1	1.1	-

Revenue and underlying profit before tax
Details of the group's trading performance are set out in the Chief Executive's Operating Review. Group revenues decreased by £16.1 million, or 14.8%, to £93.0 million, mainly due to the impact of the recession on the group's building product activities. Fixed cost savings and efficiencies amounting to £4.3 million were achieved in the year which ensured the group remained profitable and net cash generative. Underlying profit before tax was £4.1 million compared with £5.2 million in 2008/09.

Reported profit before tax, brand amortisation and non-recurring items
Reported profit before tax improved from £1.8 million to £3.4 million, with lower restructuring costs and the absence of impairment charges in the 2009/10 year more than offsetting the lower level of underlying profit.

 The charge to the statement of comprehensive income for brand amortisation was £0.3 million (2008/09: £0.3 million). Restructuring costs were £0.4 million (2008/09 £0.9 million). Restructuring costs have been higher than usual in the past two years because of the need to re-align the group's cost base to the lower trading activity levels during the recession. 

In the prior year there was a one-off non-cash charge of £2.2 million relating to impairment of property, plant and equipment mainly at Alumasc Precision.

Reconciliation of underlying to reported profit before tax
		2009/10	2008/09
		£m	£m
Underlying profit before tax		4.1	5.2
Restructuring costs		(0.4)	(0.9)
Brand amortisation		(0.3)	(0.3)
Impairment charges		-	(2.2)
Reported profit before tax		3.4	1.8

Tax
The underlying group effective tax rate of 30.4% was similar to the prior year. The difference between the effective tax rate and the UK statutory rate of 28% is explained by routine items of expenditure which are disallowable for tax purposes.

 After charging the non-recurring costs described above, the group's overall effective tax rate was 33.7%, a significant reduction compared with the unusually high rate of 41.2% in 2008/09 which was due to the one off impact of changes to tax relief for capital items such as industrial buildings.

The group's cash tax rate remained low reflecting the comparatively high level of pension deficit reduction payments made during the year relative to taxable profit.

Earnings per share
Underlying earnings per share were 7.9 pence, 21% lower than the prior year, broadly in line with the change in underlying profit before tax. Basic earnings per share more than doubled to 6.2 pence due to lower restructuring costs, the absence of any impairment charges in the current year and the lower effective tax rate.

Dividends
In view of the group's rising order books, strong strategic positioning and a further resilient cash flow performance in the year, the Board has proposed an unchanged final dividend of 6.75 pence per share, to be paid on 29 October 2010 to shareholders on the register on 1 October 2010. This will give an unchanged total dividend for the year of 10.0 pence per share.

Capital invested and return on investment
The group defines its capital invested as the sum of shareholders' funds, non-controlling interests, bank debt and the pension deficit (net of tax).

The group's average capital invested in the year decreased by £4.5 million to £47.8 million. Post tax return on average capital invested* reduced from 8.9% in 2008/09 to 8.2% in 2009/10, consistent with the lower level of underlying profitability.

Shareholders' funds and return on shareholders' funds
Shareholders' funds decreased from £30.8 million at 30 June 2009 to £27.7 million at 30 June 2010, mainly due to the net of tax actuarial loss on defined benefit pension schemes of £1.5 million and a reduction in retained earnings after payment of dividends of £1.4 million. Post-tax return on average shareholders' funds* reduced from 11.6% in 2008/09 to 9.6% in 2009/10, principally because of the lower level of underlying profitability.

* Return on investment and return on shareholders' funds are calculated using underlying profit figures.

Impairment Review
The Board conducted an impairment review which covered all assets that contribute to the goodwill figure on the group statement of financial position, together with any other assets where indicators of impairment existed. No assets were found to have been impaired.

Cash flow, working capital and capital expenditure

Summarised Cash Flow Statement
		2009/10	2008/09
		£m	£m
EBITDA1		8.5	10.0
Change in working capital		2.2	1.7
Operating cash flow		10.7	11.7
Capital expenditure		(0.8)	(2.1)
Pension deficit funding		(3.8)	(4.3)
Interest		(0.7)	(0.7)
Tax		(0.2)	(0.5)
Recurring free cash flow		5.2	4.1
Dividends		(3.6)	(3.6)
Restructuring and other one-off cash flows		(0.4)	(1.4)
Acquisitions		(0.2)	(0.1)
Property and asset disposal proceeds		-	0.1
Decrease/(increase) in net debt		1.0	(0.9)

¹  EBITDA: Underlying earnings before interest, tax, depreciation and amortisation

The group's cash flow statement is summarised above, and illustrates a strong cash flow performance, in view of the lower levels of underlying profitability. This was due to tight control over working capital and capital expenditure. The net cash inflow for the year was £1.0 million, leading to a reduction in net debt from £10.3 million to £9.3 million.

The group initiated a programme to improve working capital efficiency ahead of the recession, with the objective of reducing trade working capital as a percentage of sales. This KPI was incorporated into management bonus objectives at the beginning of the last financial year, a decision which has succeeded in placing increased focus on actions to achieve a structural reduction in cash tied up in working capital over time. Overall working capital reduced by £2.2 million in the year to 30 June 2010, and the rolling 12 month average trade working capital as a percentage of sales improved from 17.2% to 16.2%.  Capital expenditure of £0.8 million in the year was well below the level of the annual depreciation and non-brand amortisation charge of £2.8 million. The requirement for capital spend other than routine replacement of assets was low during the year, with most of the group's manufacturing operations having available spare capacity, because of prevailing economic conditions.

Whilst it is likely that capital spend will now begin to increase to support recovery and future growth, current plans are for spend to continue to run below the level of the annual depreciation and non-brand amortisation charge for the time being.

Capital structure and financing
The group's capital structure remained broadly unchanged during the year. Gearing at 30 June 2010 was unchanged on the prior year level of 33.5%.

 The group continues to have available a total of £20 million of committed banking facilities and a further £6 million of uncommitted overdraft facilities.

Based on net debt of £9.3 million at 30 June 2010, the group had utilised only 47% of its committed facilities and 36% of total banking facilities. In the 2009/10 financial year:

·    interest on borrowings was covered by underlying operating profit by 8.4 times. This compares with the group's banking covenant of a minimum of 3 times; and

·    the group's ratio of net debt to EBITDA was 1.1. This compares with the group's banking covenant of not more than 3 times.

Alumasc's current committed financing facilities expire in May 2012. Whilst at the time of writing this is 20 months away, constructive discussions have already commenced with relationship banks to facilitate an orderly refinancing of the group at the appropriate time.

Pensions
Following consultation with scheme members, the board decided to close the Alumasc Group Pension Scheme to future accrual in December. This became effective on 31 March 2010.

The group's overall pre-tax pension deficit measured under IAS19 decreased from £12.5 million at 30 June 2009 to £11.6 million at 30 June 2010, reflecting deficit reduction payments of £3.4 million made by the company, partly offset by actuarial losses mainly caused by a fall in the yield curve used to discount projected scheme liabilities to present values.

The triennial actuarial review of the group's two defined benefit schemes as at April 2010 is in the process of being finalised with the Pension Trustees. This shows a combined deficit of £11.4 million compared with £28.5 million three years ago. This significant reduction has arisen from the substantial contributions made by the company in the intervening period, and an improved actual and expected future investment performance, following changes made to the schemes' investment strategy, investment advisers and fund managers in February 2009.

The much improved funding position of the pension schemes has enabled the company to agree with the Pension Trustees a lower level of deficit contribution levels of £2.3 million per annum (on average), previously £3.4 million per annum, over a recovery period of 6 years.  This reduced level of funding becomes effective in September 2010.

Internal Control and Information Systems
Further progress has been made to strengthen internal controls during the year with the group's internal audit programme, introduced three years ago and refreshed annually, having become embedded in routine management process. An increasingly important driver of recent improvements in information and control has been the upgrade of business systems. The group is now approaching the half way point in a strategy to achieve improved, integrated business systems across the group, with data processing being consolidated around a few key centres of excellence. This initiative should significantly enhance the group's systems infrastructure to support future business growth, whilst also improving information flows, standards of internal control and data processing efficiency.

Andrew Magson
Group Finance Director

Responsibility Statement

We confirm that to the best of our knowledge:

(a)  the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the group and the company; and

(b)  the Directors' report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that the group face.

Paul Hooper                                                   Andrew Magson
Chief Executive                                     Group Finance Director

The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the year ended 30 June 2010 which will be despatched to shareholders on or around 24 September 2010 and will be available at www.alumasc.co.uk. Accordingly the responsibility statement makes reference to the financial statements of the company and the group and to the relevant narratives appearing in that annual report and accounts rather than the contents of this announcement.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year to 30 June 2010

		2009/10				2008/09
		Before non-recurring items and brand amortisation	Non-recurring items and brand amortisation	Total		Before non-recurring items and brand amortisation	Non-recurring  items and brand amortisation	Total
	Notes	£'000	£'000	£,000		£'000	£'000	£'000
Revenue	4	92,972	-	92,972		109,088	-	109,088
Cost of sales		(62,573)	-	(62,573)		(73,337)	-	(73,337)
Cost of sales - impairment charges	5	-	-	-		-	(2,176)	(2,176)
Gross profit		30,399	-	30,399		35,751	(2,176)	33,575
Net operating expenses
Net operating expenses before non-recurring items and brand amortisation		(24,754)	-	(24,754)		(29,053)	-	(29,053)
Brand amortisation	5	-	(315)	(315)		-	(252)	(252)
Restructuring costs	5	-	(368)	(368)		-	(940)	(940)
Net operating expenses		(24,754)	(683)	(25,437)		(29,053)	(1,192)	(30,245)
Operating profit		5,645	(683)	4,962		6,698	(3,368)	3,330
Finance income		3,926	-	3,926		4,424	-	4,424
Finance expenses		(5,510)	-	(5,510)		(5,950)	-	(5,950)
Profit before taxation		4,061	(683)	3,378		5,172	(3,368)	1,804
Tax expense	6	(1,235)	97	(1,138)		(1,572)	828	(744)
Profit for the year		2,826	(586)	2,240		3,600	(2,540)	1,060
Other comprehensive income
Actuarial (loss)/gain on defined benefit pensions				(2,058)				3,938
Effective portion of changes in fair value of cash flow hedges				(79)				(501)
Exchange differences on retranslation of foreign operations				12				63
Tax on items taken directly to or transferred from equity				598				(974)
Other comprehensive income for the year, net of tax				(1,527)				2,526
Total comprehensive income for the year, net of tax				713				3,586
Total comprehensive income for the year attributable to:
Equity holders of the parent				703				3,551
Non-controlling interest				10				35
				713				3,586
Profit for the year attributable to:
Equity holders of the parent				2,234				1,052
Non-controlling interest				6				8
				2,240				1,060
Earnings per share				Pence				Pence
-  Basic	8			6.2				2.9
-  Diluted	8			6.2				2.9

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2010
	Notes	2010	2010	2009	2009
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		15,131		16,704
Goodwill		16,888		16,888
Other intangible assets		4,003		4,538
Financial asset investments		17		17
Deferred tax assets	6	3,255		3,501
			39,294		41,648
Current assets
Inventories		11,649		12,524
Biological assets		372		341
Trade and other receivables		21,280		19,474
Cash and cash equivalents		5,622		1,019
Income tax receivable		35		161
Derivative financial assets		1		25
			38,959		33,544
Total assets			78,253		75,192
Liabilities
Non-current liabilities
Interest bearing loans and borrowings		(14,939)		(11,331)
Employee benefits payable		(11,626)		(12,504)
Provisions		(339)		(499)
Deferred tax liabilities	6	(1,853)		(1,905)
			(28,757)		(26,239)
Current liabilities
Interest bearing loans and borrowings		-		(6)
Trade and other payables		(20,967)		(17,657)
Provisions		(213)		-
Derivative financial liabilities		(540)		(461)
			(21,720)		(18,124)
Total liabilities			(50,477)		(44,363)
Net Assets			27,776		30,829
Equity
Called up share capital	9	4,517		4,517
Share premium	9	445		452
Revaluation reserve	9	-		951
Capital reserve - own shares	9	(369)		(178)
Hedging reserve	9	(389)		(332)
Foreign currency reserve	9	45		37
Profit and loss account reserve		23,494		25,349
Equity attributable to equity holders of the parent			27,743		30,796
Non-controlling interest			33		33
Total equity			27,776		30,829

CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2010
		2009/10	2008/09
		£'000	£'000
Operating activities
Operating profit		4,962	3,330
Adjustments for:
Depreciation		2,402	3,004
Amortisation		729	541
Impairments		-	2,176
Loss/(gain) on disposal of property, plant and equipment		3	(49)
Decrease in inventories		876	329
Increase in biological assets		(31)	(210)
(Increase)/decrease in receivables		(1,805)	10,290
Increase/(decrease) in trade and other payables		3,323	(8,627)
Movement in provisions		53	(448)
Movement in retirement benefit obligations		(3,844)	(4,276)
Share based payments		44	20
Cash generated from continuing operations		6,712	6,080
Tax paid		(219)	(454)
Net cash inflow from operating activities		6,493	5,626
Investing activities
Purchase of property, plant and equipment		(707)	(1,727)
Payments to acquire intangible fixed assets		(139)	(430)
Proceeds from sales of plant and equipment		36	51
Proceeds from sales of other intangible assets		-	73
Acquisition of subsidiary undertakings		(200)	-
Acquisition of brand		-	(126)
Interest received		22	149
Net cash outflow from investing activities		(968)	(2,010)
Financing activities
Interest paid		(663)	(854)
Equity dividends paid		(3,602)	(3,607)
Equity dividends paid to non-controlling interests		(10)	(24)
Draw down/(repayment) of amounts borrowed		4,994	(5,017)
Purchase of own shares		(191)	(124)
(Repayment of)/proceeds from refund of share issue costs		(7)	69
Net cash inflow/(outflow) from financing activities		521	(9,557)
Net increase/(decrease) in cash and cash equivalents		6,026	(5,941)
Cash and cash equivalents brought forward		(405)	5,529
Effect of foreign exchange rate changes		1	7
Cash and cash equivalents carried forward		5,622	(405)
Cash and cash equivalents comprise:
Cash and cash equivalents		5,622	1,019
Bank overdrafts		-	(1,424)
		5,622	(405)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2010
	Share	Share	Revaluation	Capital reserve -	Hedging	Foreign currency	Profit and loss account		Non-controlling	Total
	capital	premium	reserve	own shares	reserve	reserve	reserve	Total	interest	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2008	4,517	383	1,101	(106)	40	1	24,951	30,887	22	30,909
Profit for the period	-	-	-	-	-	-	1,052	1,052	8	1,060
Exchange differences on retranslation of foreign operations	-	-	-	-	-	36	-	36	27	63
Net loss on cash flow hedges	-	-	-	-	(501)	-	-	(501)	-	(501)
Tax on derivative financial liability	-	-	-	-	129	-	-	129	-	129
Actuarial gain on defined benefit pensions, net of tax	-	-	-	-	-	-	2,835	2,835	-	2,835
Excess depreciation on previously revalued assets	-	-	(150)	-	-	-	150	-	-	-
Share premium costs refund	-	69	-	-	-	-	-	69	-	69
Acquisition of own shares	-	-	-	(124)	-	-	-	(124)	-	(124)
Vesting of own shares	-	-	-	52	-	-	(52)	-	-	-
Dividends	-	-	-	-	-	-	(3,607)	(3,607)	(24)	(3,631)
Share based payments	-	-	-	-	-	-	20	20	-	20
At 1 July 2009	4,517	452	951	(178)	(332)	37	25,349	30,796	33	30,829
Profit for the period	-	-	-	-	-	-	2,234	2,234	6	2,240
Exchange differences on retranslation of foreign operations	-	-	-	-	-	8	-	8	4	12
Net loss on cash flow hedges	-	-	-	-	(79)	-	-	(79)	-	(79)
Tax on derivative financial liability	-	-	-	-	22	-	-	22	-	22
Actuarial loss on defined benefit pensions, net of tax	-	-	-	-	-	-	(1,482)	(1,482)	-	(1,482)
Reserves transfer	-	-	(951)	-	-	-	951	-	-	-
Share premium costs refund	-	(7)	-	-	-	-	-	(7)	-	(7)
Acquisition of own shares	-	-	-	(191)	-	-	-	(191)	-	(191)
Dividends	-	-	-	-	-	-	(3,602)	(3,602)	(10)	(3,612)
Share based payments	-	-	-	-	-	-	44	44	-	44
At 30 June 2010	4,517	445	-	(369)	(389)	45	23,494	27,743	33	27,776

1          basis of preparation

The annual results announcement for the year ended 30 June 2010 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

The financial information included within this announcement does not constitute the company's statutory accounts for the years ended 30 June 2010 or 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (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 in respect of the accounts for 2009 or 2010.

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Business Review.  The group has £26 million of banking facilities, of which £20 million is committed until May 2012.  At 30 June 2010 the group's net indebtedness was £9.3 million.

On the basis of the group's financing facilities and current financial plans and sensitivity analyses, the Board is satisfied that the group has adequate resources to continue in operational existence for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the financial statements.

2          judgements and estimates

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and valuation of intangible assets and goodwill and the measurement and valuation of defined benefit pension obligations.  The measurement of intangible assets other than goodwill on a business combination involves estimation of future cash flows and the selection of a suitable discount rate.  The group determines whether goodwill is impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated.  This involves estimation of future cash flows and choosing a suitable discount rate.  Measurement of defined benefit pension obligations requires estimation of future changes in inflation, as well as mortality rates, the expected return on assets and the selection of a suitable discount rate.

The group may from time to time become involved in legal action which could give rise to contingent assets or liabilities.  The group accounts for these under IAS 37 and will only accrue costs when it is probable that there will be a transfer of economic benefits based on independent legal advice and the Directors' judgement. 

Revenue recognised on construction contracts is determined by the assessment of completion stage of each contract.  The requirement for Directors' judgement is limited due to the involvement of quantity surveyors during the assessment process.

3          risks and uncertainties

Alumasc's portfolio of niche businesses generate sales in a variety of building and construction, and industrial markets.  This reduces the group's exposure to any one end-market segment or single third party. The group's major risks are:

UK and global economy
Alumasc's principal operations are based in the UK, and the majority of the group's sales are made to UK customers, with the remainder mostly to customers in the USA and Europe. Any significant change in UK economic conditions government policy, or regulations (including the European Union)  in these locations and particularly those that impact the building, construction, vehicle manufacturing and brewing sectors could affect Alumasc's future revenues and profits.

Customers
Certain of the group's businesses derive a significant proportion of their revenues from individual key customers. The management teams of these businesses and group management, where appropriate, maintain regular contact with all key customers to manage and develop these important business relationships. Whilst the loss of any key customer could have a significant impact on the performance of an individual business within the group, it is unlikely to have as material an impact on the group as a whole.

People
The loss of key management and employees could impact operating performance through loss of know-how.  These risks are mitigated as far as possible through succession planning for key executives, teamwork and ensuring that key individuals are appropriately motivated and incentivised.

Innovation and competition
Alumasc encourages an entrepreneurial and innovative approach from its business and management teams as the group's performance is dependent on niche, differentiated products, systems and solutions. Insufficient innovation, particularly relating to competitors could result in loss of competitive advantage.

Product quality
The reputation of Alumasc products and brands could be impacted by significant product quality issues. The group's quality control procedures are designed to ensure that own-manufactured products and, where applicable, bought-in products perform to specification, provided they have been correctly installed. In circumstances where the group installs its own products, careful project management processes seek to ensure that any potential issues are pro-actively identified, managed and resolved on-site as far as possible. Residual risks are, where possible, insured. Based on past experience, it is not considered likely that quality claims on any individual product or contract would be fundamental to the group's performance as a whole.

Supply chain
The loss or failure of key suppliers, or the prolonged loss of a major manufacturing site within Alumasc could impact ability to deliver to customer expectations. The increase over the last few years in Alumasc's raw materials, components or sub-assemblies that are being sourced from the Far East, whilst reducing costs, has introduced additional supply chain risks that are being carefully managed by senior personnel within each business.

Credit risk
As global economic conditions have become more challenging, credit risks have increased.  Credit risks are monitored carefully in all group businesses, including at  monthly board meetings and , in certain specific cases where judged cost-effective, these risks are insured.  The group has a wide range of customers reflecting the variety of end user markets served and this mitigates the group's exposure to any one end-market segment or single third party. 

Foreign exchange rate risk
The group is exposed to movements in foreign exchange rates, particularly in relation to purchases and sales made in Euros and US Dollars.  These risks are mitigated wherever possible by internal hedging between businesses and external forward foreign exchange contracts.  Such hedging can only protect the group against relatively short-term volatility in exchange rates and not against more structural changes to the relative strength of these currencies against Sterling.

Interest rate risk
The group has exposure to interest rate risk, aspiring principally on changes in sterling interest rates.  In order to manage this risk, the group has entered into interest rate swap and cap transactions to hedge £10 million of group borrowings, with the objective of ensuring that the majority of the group's net indebtedness at any time is protected against interest rates rising above the level fixed by hedging instruments. These hedges are expected to be effective.

Liquidity risk
The group has £20 million of committed banking facilities which expire in May 2012.  These facilities are more than double the level of the group's net indebtedness at 30 June 2010.  In addition, the group has a further £6 million of committed overdraft facilities.  The Board believes these facilities are sufficient to meet the group's funding requirements for the foreseeable future. 

Acquisitions 
An important part of the group's growth strategy is to acquire niche building product businesses, where we consider these will increase shareholder value. Poor execution of this strategy or poor management after acquisition could, conversely, erode value.  All acquisitions are approved by the group's main board. Senior management from both Alumasc Group and operating businesses, as appropriate to each case, are involved in all key aspects of acquisition execution and post acquisition management. In most cases, Alumasc seeks to retain key staff within acquired businesses and develop their responsibilities within the group.   

Pensions
Alumasc has mitigated some of the risks associated with its two defined benefit pension schemes in recent years by closing the schemes to future accrual and working with the Pension Trustees to substantially reduce the overall level of the funding deficit. Nonetheless, the group's pension obligations remain material and  the future levels of funding  required will be  affected by changes in demographic, capital market and regulatory factors over time, many of which are beyond the group's control. These factors, and developments in the pensions industry more generally, are closely monitored by management and its advisors in order that the group can continue to reduce its pension deficit over time, without this in any way affecting the management of the group's trading operations.

4          segmental analysis

The group has adopted IFRS 8 "Operating Segments" for the first time this financial year.  This accounting standard requires that the segmentation of results follows the group's internal management reporting structure and this has resulted in a more detailed segmental analysis compared to the previous year, which was based on the nature and end-use of the products. The adoption of the standard has resulted in brands previously included within the Premium Building Products segment now being included within the Water Management & Other segment to reflect the reporting line to the Chief Executive, being the chief operating decision maker.

The Chief Executive reviews internal management reports on a monthly basis, with performance being measured based on underlying segmental operating profit as disclosed below.  Performance is measured on this basis as management believes this information is the most relevant when evaluating the impact of strategic decisions.

Inter-segment transactions are entered into applying normal commercial terms that would be available to third parties.  Segment results, assets and liabilities include those items directly attributable to a segment.  Unallocated assets comprise cash, deferred tax assets, income tax recoverable and corporate assets that cannot be allocated on a reasonable basis.  Unallocated liabilities comprise borrowings, employee benefit obligations, deferred tax liabilities, income tax payable and corporate liabilities that cannot be allocated on a reasonable basis to a reportable segment. 

Analysis by Reportable Segment 2009/10

	Revenue								Capital expenditure
	External	Inter-segment	Total		Segmental Result		Segment Assets	Segment Liabilities	Property, Plant& Equipment	Other Intangible Assets	Depreciation	Amortisation
	£'000	£'000	£'000		£'000		£'000	£'000	£'000	£'000	£'000	£'000
Solar Shading	16,517	-	16,517		1,729		17,546	(3,434)	135	-	94	173
Roofing & Walling	17,119	-	17,119		209		11,774	(4,026)	275	10	178	129
Energy Management	33,636	-	33,636		1,938		29,320	(7,460)	410	10	272	302
Construction Products	11,473	-	11,473		2,171		5,692	(1,573)	149	3	173	5
Rainwater, Drainage & Other	19,330	89	19,419		1,242		12,815	(4,275)	205	26	678	274
Water Management & Other	30,803	89	30,892		3,413		18,507	(5,848)	354	29	851	279
Building Products	64,439	89	64,528		5,351		47,827	(13,308)	754	39	1,123	581
Alumasc Precision	23,049	905	23,954		1,311		18,083	(6,198)	103	100	1,107	132
Alumasc Dispense	5,484	-	5,484		(50)		2,555	(1,175)	-	-	136	14
Engineering Products	28,533	905	29,438		1,261		20,638	(7,373)	103	100	1,243	146
Elimination / Unallocated costs	-	(994)	(994)		(967)		9,788	(29,796)	1	55	36	2
Total	92,972	-	92,972		5,645		78,253	(50,477)	868	194	2,402	729

Reconciliation between Segmental Result and Operating Profit

					£'000
Segmental Result					5,645
Brand amortisation					(315)
Restructuring costs					(368)
Operating Profit					4,962

Analysis by Reportable Segment 2008/09

	Revenue								Capital expenditure
	External	Inter-segment	Total		Segmental Result		Segment Assets	Segment Liabilities	Property, Plant& Equipment	Other Intangible Assets	Depreciation	Amortisation
	£'000	£'000	£'000		£'000		£'000	£'000	£'000	£'000	£'000	£'000
Solar Shading	23,606	-	23,606		4,916		18,749	(4,057)	66	14	83	174
Roofing & Walling	21,891	20	21,911		1,178		12,313	(4,009)	127	59	182	111
Energy Management	45,497	20	45,517		6,094		31,062	(8,066)	193	73	265	285
Construction Products	13,028	-	13,028		2,476		6,570	(1,534)	126	1	193	13
Rainwater, Drainage & Other	19,962	11	19,973		640		13,142	(3,957)	430	411	699	162
Water Management & Other	32,990	11	33,001		3,116		19,712	(5,491)	556	412	892	175
Building Products	78,487	31	78,518		9,210		50,774	(13,557)	749	485	1,157	460
Alumasc Precision	23,025	1,102	24,127		(1,503)		15,878	(2,995)	1,007	144	1,609	45
Alumasc Dispense	7,576	-	7,576		54		3,033	(963)	47	27	145	36
Engineering Products	30,601	1,102	31,703		(1,449)		18,911	(3,958)	1,054	171	1,754	81
Elimination / Unallocated costs	-	(1,133)	(1,133)		(1,063)		5,507	(26,848)	5	-	93	-
Total	109,088	-	109,088		6,698		75,192	(44,363)	1,808	656	3,004	541

Reconciliation between Segmental Result and Operating Profit

					£'000
Segmental Result					6,698
Brand amortisation					(252)
Restructuring costs					(940)
Impairment charges					(2,176)
Operating Profit					3,330

Analysis by geographical segment 2009/10

	United	Rest of	Europe -	Rest of
	Kingdom	Europe - EU	Non EU	World	Total
	£'000	£'000	£'000	£'000	£'000
Sales to external customers	77,835	7,799	472	6,866	92,972
Segment non-current assets	36,038	-	-	1	36,039

Analysis by geographical segment 2008/09

	United	Rest of	Europe -	Rest of
	Kingdom	Europe - EU	Non EU	World	Total
	£'000	£'000	£'000	£'000	£'000
Sales to external customers	91,317	9,888	287	7,596	109,088
Segment non-current assets	38,146	-	-	1	38,147

Segment revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer.  The analyses of segment non-current assets are based upon location of the assets.

5          non-recurring items and amortisation

	2009/10	2008/09
	£'000	£'000
Brand amortisation	315	252
Restructuring costs	368	940
Cost of sales - impairment charges	-	2,176
	683	3,368

Restructuring costs relate to restructuring and redundancy costs in both years, including costs associated with the closure of the Alumasc Group Pension Scheme during 2009/10. 

During the prior year an impairment review was performed at Alumasc Precision Components as the business reported an operating loss in the year.  The result of the review led to a write down in property, plant and equipment of £2,096,000.  For the purpose of the impairment testing in the prior year, the recoverable amount of the cash generating unit was based on value in use calculations.  The value in use was derived from discounted management cash flow forecasts for the business, based on budgets and strategic plans covering a five year period.  A pre-tax discount rate of 11.6% was used.  The growth rate used to extrapolate the cash flows beyond this period was 1%.  A 1% change in the discount rate used would have resulted in approximately a £1m change in the value of the impairment.  A 0.5% change in the growth rate used to extrapolate the cash flows beyond the five year period would have resulted in the impairment changing by £300,000. In addition, an impairment charge of £80,000 was recognised in the prior year in connection with plant and machinery relating to the Armaseam brand within the Building Products division.

6          Tax expense

(a.) Tax on profit on ordinary activities

Tax charged in the statement of comprehensive income	2009/10	2008/09
	£'000	£'000
Current tax:
UK corporation tax	399	338
Amounts over provided in previous years	(53)	(282)
Total current tax	346	56
Deferred tax:
Origination and reversal of temporary differences	645	567
Tax under provided in previous years	147	121
Total deferred tax	792	688
Total tax expense	1,138	744
Tax recognised in other comprehensive income
Deferred tax:
Actuarial (losses)/gains on pension schemes	(576)	1,103
Cash flow hedge	(22)	(129)
Tax (credited)/charged to other comprehensive income	(598)	974
Total tax charge in the statement of comprehensive income	540	1,718

(b.) Reconciliation of the total tax charge

The total tax rate applicable to the tax expense shown in the statement of total comprehensive income of 33.7% is higher than (2008/09: 41.2% was higher than) the standard rate of corporation tax in the UK of 28% (2008/09: 28%).  The differences are reconciled below:

	2009/10	2008/09
	£'000	£'000
Profit before taxation	3,378	1,804
Current tax at the UK standard rate of  28% (2008/09: 28%)	946	505
Expenses not deductible for tax purposes	98	125
Tax effect of share options	-	(7)
Deferred tax arising on abolition of Industrial Buildings Allowances	-	282
Tax over provided in previous years - corporation tax	(53)	(282)
Tax under provided in previous years - deferred tax	147	121
	1,138	744

(c.) Unrecognised tax losses

The group has agreed tax capital losses in the UK amounting to £21 million (2009: £21million) that relate to prior years.  Under current legislation these losses are available for offset against future chargeable gains.  A deferred tax asset has not been recognised in respect of these losses, as they do not meet the criteria for recognition.

Deferred tax on revaluation gains on land and buildings that are available for offset against capital losses amount to £1 million (2009: £1 million).  After this offset net capital losses carried forward amount to £20 million (2009: £20 million).  The capital losses are able to be carried forward indefinitely.

(d.) Deferred tax

A reconciliation of the movement in deferred tax during the year is as follows:

	Accelerated	Short term				Total	Pension
	capital	temporary				Deferred	Deferred
	allowances	differences	Brands	Losses	Hedging	Liability	Asset
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2008	1,209	24	930	(129)	(129)	1,905	(3,501)
(Credited)/charged to statement of comprehensive income - current year	(180)	4	(67)	66	-	(177)	822
Charged/(credited to statement of comprehensive income - prior year	84	-	-	63	-	147	-
(Credited)/charged to equity	121	121	121	121	121	121	121
At 1 July 2009	1,209	24	930	(129)	(129)	1,905	(3,501)
(Credited)/charged to statement of comprehensive income - current year	(180)	4	(67)	66	-	(177)	822
Charged to statement of comprehensive income - prior year	84	-	-	63	-	147	-
Credited to equity	-	-	-	-	(22)	(22)	(576)
At 30 June 2010	1,113	28	863	-	(151)	1,853	(3,255)

Deferred tax assets and liabilities are presented as non-current in the consolidated statement of financial position. 

Deferred tax assets have been recognised where it is probable that they will be recovered.  Deferred tax assets of £5.9 million (2009: £5.9million) have not been recognised in respect of tax capital losses of £21 million (2009: £21 million).

The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate will reduce from 28% to 24% over a period of 4 years from 2011.  The first reduction in the UK corporation tax rate from 28% to 27% was substantively enacted on 20th July 2010 and will be effective from 1 April 2011. This will reduce the company's future current tax charge accordingly.  If the rate change from 28% to 27% had been substantively enacted on or before the statement of financial position sheet date it would have had the effect of reducing the net deferred tax asset recognised at that date by £50,000.

7          dividends

	2009/10	2008/09
	£'000	£'000
Interim dividend for 2010 of 3.25p paid on 1 April 2010	1,170	-
Final dividend for 2009 of 6.75p paid on 30 October 2009	2,432	-
Interim dividend for 2009 of 3.25p paid on 7 April 2009	-	1,170
Final dividend for 2008 of 6.75p paid on 29 October 2008	-	2,437
	3,602	3,607

A final dividend of £2,416,000, 6.75p  per equity share, has been proposed for 2010, payable on 29 October 2010.  In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.

8          earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period.  Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period, after allowing for the exercise of outstanding share options.  

The following sets out the income and share data used in the basic and diluted earnings per share calculations:

	2009/10	2008/09
	£'000	£'000
Net profit attributable to equity holders of the parent	2,234	1,052
	000s	000s
Basic weighted average number of shares	35,918	36,023
Dilutive potential ordinary shares - employee share options	95	-
	36,013	36,023

Calculation of underlying earnings per share:

	2009/10	2008/09
	£'000	£'000
Profit before taxation	3,378	1,804
Add back brand amortisation	315	252
Add back restructuring costs	368	940
Add back impairment charges	-	2,176
	4,061	5,172
Tax at underlying group tax rate of 30.4% (2008/09: 30.4%)	(1,235)	(1,572)
Underlying earnings	2,826	3,600
Basic weighted average number of shares	35,918	36,023
Underlying earnings per share	7.9p	10.0p

9          movements in equity

Share capital and share premium

The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the company's equity share capital net of issue costs.  Following an enquiry by HMRC during the year, £7,000 of the £69,000 refunded in 2008/09 in respect of previously incurred share issue costs was repaid. 

Capital reserve - own shares
The capital reserve - own shares relates to 335,171 (2009: 135,171) ordinary own shares held by the company.  The market value of shares at 30 June 2010 was £350,253 (2009: £120,000).  These are held to help satisfy the exercise of awards under the company's Long Term Incentive Plans.  A Trust holds the shares in its name and shares are awarded to employees on request by the company.  The company bears the expenses of the Trust.

Hedging reserve
This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Foreign currency reserve
This foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Revaluation reserve
This reserve was created when, under IFRS transitional provisions, the group elected to bring in previous valuations of freehold and long leasehold land and buildings at a valuation frozen under FRS 15.  During the year the revaluation reserve balance of £951,000 was transferred to the profit and loss account reserve to reflect freehold and long leasehold land and buildings being carried forward at deemed cost.

10        Related party disclosure

The group's principal subsidiaries are listed below:

Principal subsidiaries	Principal activity	Country of incorporation	% of ordinary shares  and votes held
			2010	2009
Alumasc Precision Limited	Engineering products	England	100	100
Alumasc Exterior Building Products Limited	Building products	England	100	100
Alumasc Limited	Engineering and building products	England	100	100
Levolux Limited and Levolux AT Limited	Building products	England	100	100
Blackdown Horticultural Consultants Limited	Building products	England	100	100
Elkington China Limited	Building products	Hong Kong	70	70

Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made at arms-length market prices.  Outstanding balances at the year end are unsecured and settlement occurs in cash.  There have been no guarantees provided or received for any related party receivables.

Transactions with other related parties

Key management personnel are determined as the Directors of The Alumasc Group plc.  There were no transactions with Directors during the year.

 

END

 

 

FR LLFSEAVITIII