Final Results - Operating Profit Up 31%

Hill & Smith Holdings PLC 30 November 1999 PRELIMINARY RESULTS CONTINUED PROGRESS - REORGANISATION COMPLETE Hill & Smith Holdings PLC ('Hill & Smith' or the 'Group'), the Midlands-based engineering group, announces its preliminary results for the year ended 30 September 1999. Key Points: * Operating profit at £4.78 million (1998: £3.63 million) - up 31% * Pre-tax profit at £3.56 million (1998 restated: loss £1.57 million) * Turnover on continuing operations at £56.5 million * Earnings per share at IIMR level 7.01p (1998 restated: 3.46p) * Final dividend maintained at 2.1p per share * Operating cash flow per share at 22.47p (1998: 19.49p) * Net borrowings reduced to £4.43 million (1998: £11.26 million) * Berry Safety Systems acquired for £3 million - further appropriate acquisitions sought * Re-organisation complete - focus on organic growth David Winterbottom, Chairman, said: 'I am delighted to confirm to you that the situation I reported in my Interim Statement for the half year, outlining the progress achieved, has been sustained for the full trading year. Our operating profits for the year to 30 September 1999 increased by 31.7% to £4.78 million (1998: £3.63 million). We are, of course, now required to adopt the new financial reporting standard FRS12, to which I made reference at the half year. This changes the presentation of our full year accounts and has the effect of reducing the displayed profits on ordinary activities before tax to £3.56 million (1998: loss £1.57 million). 'The Board has continued to concentrate on cash management within the Group, operating cash flow per share was 22.47p, an increase on last year's 19.49p, and we achieved net borrowings of £4.43 million at the year end (1998: £11.26 million). This was after expending £3 million to acquire Berry Safety Systems Limited. 'The major reorganisation of the Group's businesses is now completed and the Board is concentrating on organic growth and the introduction of new products. Additionally, we continue to look for appropriate acquisitions in line with our core strategy. Mindful of the above and recognising the need to consolidate and build the good health of the Company, the Board is recommending a final dividend for the year of 2.1p per share (1998: 2.1p per share), making a total for the year of 4.2p per share (1998: 4.2p per share). 'Finally I come to current and future trading. Conditions continue to be difficult for the engineering sector. However, given the usual caveat about no further adverse change in economic conditions, I look forward to a satisfactory outcome to the current trading year.' For further information, please contact: Hill & Smith Holdings PLC Tel: 01902 357 910 David Winterbottom, Chairman David Grove, Deputy Chairman & Group Chief Executive Rawlings Financial PR Limited Tel: 01756 770 376 Catriona Valentine CHAIRMAN'S STATEMENT I am delighted to confirm to you that the situation I reported in my Interim Statement for the half year, outlining the progress achieved, has been sustained for the full trading year. Our operating profits for the year to 30 September 1999 increased by 31.7% to £4.78 million (1998: £3.63 million). We are, of course, now required to adopt the new financial reporting standard FRS12, to which I made reference at the half year. This changes the presentation of our full year accounts and has the effect of reducing the displayed profits on ordinary activities before tax to £3.56 million (1998: loss £1.57 million). These adjustments due to FRS12 must be confusing to the reader of the report and accounts, but net assets at September 1999 and earnings before exceptional items remain unaffected by these changes. The effect of the various adjustments is that the tax charge is 36% for the year and this leaves the IIMR EPS at 7.01p per share (1998: 3.46p per share). The Board has continued to concentrate on cash management within the Group, operating cash flow per share was 22.47p, an increase on last year's 19.49p, and we achieved net borrowings of £4.43 million at the year end (1998: £11.26 million). This was after expending £3 million to acquire Berry Safety Systems Limited. The major reorganisation of the Group's businesses is now completed and the Board is concentrating on organic growth and the introduction of new products. Additionally, we continue to look for appropriate acquisitions in line with our core strategy. Mindful of the above and recognising the need to consolidate and build the good health of the Company, the Board is recommending a final dividend for the year of 2.1p per share (1998: 2.1p per share), making a total for the year of 4.2p per share (1998: 4.2p per share). At the AGM in March, Mr John Silk retired from the Board and following the shareholders' approval, John was appointed Life President of the Company - a position which he will hold with distinction. Mr David Grove, following the AGM, was confirmed as Deputy Chairman and Group Chief Executive. Our systems have been checked and cleared for Year 2000 compatibility, although our operations are not highly microprocessor dependent. Contingency plans are in place to ensure that senior management are available to make any urgent decisions in the first days of the new year. May I thank all employees for their sustained efforts and success through yet another year of change. Our greatest asset is our people and we must never forget that in dictating how we deal with corporate situations from time to time. Finally I come to current and future trading. Conditions continue to be difficult for the engineering sector. However, given the usual caveat about no further adverse change in economic conditions, I look forward to a satisfactory outcome to the current trading year. David S Winterbottom Chairman 30 November 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 September 1999 1999 1999 1999 1998 1998 1998 Continu Discont Total Contin Discont Total ing inued uing inued Restated £000 £000 £000 £000 £000 £000 Turnover - continuing 55,651 5,435 61,086 55,811 20,686 76,497 - acquisitions 854 - 854 - - - ------- ------- ------- ------- ------- ------- 56,505 5,435 61,940 55,811 20,686 76,497 Cost of sales (40,350) (4,389) (44,739) (39,742) (16,871) (56,613) ------- ------- ------- ------- ------- ------- Gross Profit 16,155 1,046 17,201 16,069 3,815 19,884 Distribution cost (2,583) (343) (2,926) (2,268) (1,226) (3,494) Administrative expenses (8,752) (745) (9,497) (9,593) (3,169) (12,762) ------- ------- ------- ------- ------- ------- Operating profit/(loss):- Excluding acquisitions and exceptional items 4,644 (42) 4,602 4,428 (580) 3,848 Acquisitions 176 - 176 - - - Exceptional items - - - (220) - (220) Operating profit/(loss) 4,820 (42) 4,778 4,208 (580) 3,628 Profit on sale of property - - - 153 - 153 Loss on sale of net net assets - (925) (925) - (2,116) (2,116) Related goodwill - 386 386 - (2,187) (2,187) Less 1997 provision - - - - 400 400 Loss on sale of businesses - (539) (539) - (3,903) (3,903) ------- ------- ------- ------- ------- ------- Profit/(loss) on ordinary activities before interest 4,820 (581) 4,239 4,361 (4,483) (122) Interest payable (677) (1,444) ------- ------- Profit/(loss) on ordinary activities before tax 3,562 (1,566) Taxation (note 1) (1,269) (378) ------- ------- Profit/(loss) for the financial year 2,293 (1,944) Dividends (1,635) (1,661) ------- ------- Retained profit/(deficit) for the year 658 (3,605) ======= ======= Earnings per share: (note 2) FRS 3 Basic 5.82p (4.92)p Diluted 5.81p (4.92)p IIMR 7.01p 3.46p CONSOLIDATED BALANCE SHEET As at 30 September 1999 1999 1998 Restated £000 £000 Fixed assets Intangible assets - goodwill 2,826 - Tangible assets 17,054 24,093 Investments 1,400 - ------- ------- 21,280 24,093 Current assets Property held for realisation 906 460 Stocks 6,624 9,614 Debtors 14,841 18,739 Cash at bank and in hand 1,291 23 ------- ------- 23,662 28,836 Creditors (amounts due within one year) (18,488) (23,200) ------- ------- Net current assets 5,174 5,636 ------- ------- Total assets less current liabilities 26,454 29,729 Creditors (amounts due after one year) (2,843) (5,245) Provision for liabilities and charges (531) (901) ------- ------- Net assets 23,080 23,583 ======= ======= Capital and reserves Called up share capital 9,734 9,890 Share premium (note 3a) 133 133 Revaluation reserves (note 3b) 1,907 2,290 Capital redemption service (note 3c) 156 - Profit and loss account (note 3d) 11,150 11,270 ------- ------- Equity shareholders' funds 23,080 23,583 ======= ======= Net assets per share 59.28p 59.61p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 30 September 1999 1999 1998 Restated £000 £000 Profit/(loss) for the financial year 2,293 (1,944) Revaluation deficit (373) (1,164) Exchange differences 4 7 ------- ------- Total recognised gains and losses relating to the year 1,924 (3,101) ======= Prior year adjustment 900 ------- Total gains and loss recognised since last annual report 2,824 ======= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 1999 1998 Restated £000 £000 Profit/(loss) for the financial year 2,293 (1,944) Dividends (1,635) (1,661) ------- ------- 658 (3,605) New share capital subscribed - 46 Revaluation deficit (373) (1,164) Exchange differences 4 7 Goodwill taken to profit and loss account on disposal (386) 2,187 Purchase of own shares (406) - ------- ------- Net movement in shareholders' funds (503) (2,529) Opening shareholders' funds (originally £22,683,000 restated for prior year adjustment £900,000) 23,583 26,112 ------- ------- Closing shareholders' funds 23,080 23,583 ======= ======= Prior year adjustment - Change of Accounting Policy The implementation of Financial Reporting Standard 12: provisions, contingent liabilities and contingent assets has required the Directors to amend the Group's accounting policy in respect of certain of the provisions made at 30 September 1998. £900,000 out of the provisions for loss on disposal of subsidiaries originally made at 30 September 1998 have been released and the actual loss is shown as an exceptional item in the twelve months to 30 September 1999. Comparative figures have been restated accordingly. There is no effect on closing shareholders' funds. Apart from this change, the accounting policies are consistent with those adopted in last year's financial statements. CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September 1999 1999 1998 £000 £000 £000 £000 Net cash inflow from operating activities (note 4) 8,851 7,703 Returns on investments and servicing of finance Interest received 14 223 Interest paid (635) (1,608) Interest element of finance lease rental payments (56) (677) (59) (1,444) ------- ------- Taxation Corporation tax paid (748) (462) Capital expenditure Purchase of tangible fixed assets (1,987) (3,927) Sale of tangible fixed assets 3,728 1,122 Sale of property held for realisation 444 2,185 - (2,805) ------- ------- Acquisitions and disposals Sale of businesses net of costs of disposal (note 5a) (377) 2,518 Purchase of business (note 5b) (1,175) (1,552) - 2,518 ------- ------- Equity dividends paid (831) (1,659) ------- ------- Cash inflow before financing 7,228 3,851 Financing Issue of share capital - 46 Capital element of finance lease rental payments net of advances 189 (278) Repayment of loans (1,608) (3,224) Purchase of own shares (406) (1,825) - (3,456) ------- ------- ------- ------- Increase in cash 5,403 395 ======= ======= Reconciliation of net cash flow to movement in net debt Movement in cash 5,403 395 Decrease in debt and lease financing 1,419 3,502 ------- ------- Changes in net debt from cash flows 6,822 3,897 New finance leases - (12) ------- ------- Movement in net debt in year 6,822 3,885 Net debt as at 30 September 1998 (11,255) (15,140) ------- ------- Net debt as at 30 September 1999 (note 6) (4,433) (11,255) ======= ======= NOTES TO THE ACCOUNTS 1 Taxation on (loss)/profit on ordinary activities 1999 1998 £000 £000 UK corporation tax at 30.5% (1998: 31%) 1,118 330 Deferred taxation (29) 103 Adjustments relating to an earlier year Corporation tax 180 (55) ------ ------ 1,269 378 ====== ====== The tax charge includes relief of £70,000 (1998: £439,000) relating to non operating exceptional items. 2 Earnings per share The FRS3 basic earnings per share is arrived at by dividing the profit after tax of £2.293m (1998: restated loss £1.944m) by 39,389,495 shares (1998: 39,518,286), being the weighted average number of ordinary shares in issue during the year. The FRS3 diluted earnings per share is arrived at by adjusting for share options. The IIMR earnings per share is arrived at by dividing the operating profit less interest and tax of £2.762m (1998: £1.367m) by 39,389,495 shares (1998: 39,518,286), being the weighted average number of ordinary shares in issue during the year. 3 Reserves 1999 1998 £000 £000 (a) Share premium At 30 September 1998 133 108 Premium on shares issued - 25 ------- ------- At 30 September 1999 133 133 ======= ======= (b) Revaluation reserve At 30 September 1998 2,290 Transfer to profit and loss account (10) Revaluation deficit (373) ------- At 30 September 1999 1,907 ======= (c) Capital redemption reserve At 30 September 1998 - Purchase of 625,000 shares 156 ------- At 30 September 1999 156 ------- (d) Profit and loss account At 30 September 1998 11,270 12,626 Profit/(loss) for the year 658 (3,605) Goodwill on disposal (386) 2,187 Exchange difference 4 7 Transfer from revaluation reserve 10 55 Purchase of own shares (406) - ------- ------- At 30 September 1999 11,150 11,270 ======= ======= 4 Reconciliation of operating profit to net cash inflows from operating activities 1999 1998 £000 £000 Operating profit 4,778 3,628 Depreciation 1,922 2,097 Stock 2,259 2,864 Debtors 1,639 (935) Creditors (1,496) 1,286 Provisions (104) 198 Reorganisation costs (147) (1,435) ------- ------- 8,851 7,703 ======= ======= Operating cash flow per share 22.47p 19.49p 5(a) Effect of disposal of businesses 1999 1998 £000 £000 Sale of forging interests and Tipton Steel Tangible fixed assets 2,186 1,249 Stocks 877 2,086 Debtors 2,348 2,648 Bank overdraft 168 (486) Creditors (1,830) (2,588) Taxation (4) (97) Deferred tax (90) (9) ------- ------- Net assets 3,655 2,803 Loss on disposals (925) (771) ------- ------- Consideration received 2,730 2,032 ======= ======= Satisfied by: Cash proceeds less costs of disposal (209) 2,032 Fixed asset investments 1,400 - Offset against purchase of Berry Systems 1,539 - ------- ------- 2,730 2,032 ======= ======= Net cash (outflow)/inflow Net cash proceeds (209) 2,032 Disposal of (cash)/bank overdraft (168) 486 ------- ------- Cash (outflow)/inflow (377) 2,518 ======= ======= 5(b) Effect of acquisition of business 1999 £000 Acquisition of Berry Safety Systems Tangible fixed assets 13 Stocks 146 Debtors 395 Cash at bank 3,470 Creditors (440) Taxation (286) ------- Net assets 3,298 Goodwill on acquisition 2,886 ------- Consideration paid 6,184 ======= Satisfied by: Cash 4,645 Net proceeds from sale of forges 1,539 ------- 6,184 ======= Net cash outflow Consideration 6,184 Acquisition of cash at bank (3,470) ------- Net consideration 2,714 Net proceeds from sale of forges (1,539) ------- Cash outflow 1,175 ======= 5(c) Major non-cash transactions Consideration for the purchase of Berry Safety Systems Limited on 12 May 1999 was satisfied in part by the proceeds from the sale of the Group's forging companies, amounting to £2,539,000 less the Group's investment of £1,000,000, comprising shares in and loans to the purchaser. Proceeds from the sale of Tipton Steel Stockholders Limited on 28 May 1999 were satisfied in part by the Group's investment of £400,000, comprising preference shares in and loans to the purchaser. 6 Analysis of net debt Other 1999 Cashflow non-cash 1998 £000 £000 £000 £000 Cash at bank and in hand 1,291 1,268 - 23 Bank overdrafts - 4,135 - (4,135) ------- ------- ------- ------- 1,291 5,403 - (4,112) ======= ======= ======= ======= Debt due after one year (2,375) - 2,500 (4,875) Debt due within one year (2,500) 1,608 (2,500) (1,608) Finance leases (849) (189) - (660) ------- ------- ------- ------- (5,724) 1,419 - (7,143) ======= ======= ======= ======= (4,433) 6,822 - (11,255) ======= ======= ======= ======= 7 a) The proposed final dividend will be paid on 7 April 2000 to shareholders on the register on 11 February 2000 (ex-dividend date 7 February 2000). b) The financial information set out in this preliminary announcement does not constitute the company's statutory accounts for the years ended 30 September 1998 or 1999. Statutory accounts for 1998 have been delivered to the Registrar of Companies and those for 1999 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. c) The Annual Report will be posted to shareholders on 11 February 2000 and will be available from the registered office at Springvale Industrial & Business Park, Bilston, West Midlands, WV14 0QL. d) The Annual General Meeting will be held at The Copthorne Hotel, Level Street, Brierley Hill, at 12:00 noon on Thursday 23 March 2000 - PLEASE NOTE AMENDED DATE. e) Financial Calendar: Preliminary Announcement of results to 30 September 1999 30 November 1999 Annual General Meeting 23 March 2000 Payment of proposed Final Dividend 7 April 2000 Interim Results Announcement May 2000 Payment of Interim Dividend October 2000 Preliminary Announcement of results to 30 September 2000 November 2000 8 This Preliminary Announcement of results for the year ended 30 September 1999 was approved by the Directors on 30 November 1999.

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