Half-year Report

RNS Number : 1661C
LPA Group PLC
17 June 2021
 

LPA GROUP PLC

Interim unaudited results for the six months ended 31 March 2021

 

LPA Group Plc ("LPA" or the "Group"), the high reliability LED lighting, electronic and electro-mechanical system designer, and manufacturer, announces its results for the six months to 31 March 2021 and a record order book.

 

KEY POINTS

 

· Order book increased 6% to £26.2m (2020: £24.7m)

· Order entry at £13.0m (2020: £14.2m)

· Revenue £9.3m (2020: £10.8m)

· Underlying operating profit £0.15m (2020: £0.23m)

· Profit before tax £0.10m (2020: £0.19m)

· Basic earnings per share 1.67p (2020: 2.08p)

· Interim dividend nil (2020: nil)

· Net debt1 reduced to £1.77m (2020: £3.17m)

· Gearing1 reduced 47% to 13.5% (2020: 25.6%)

 

Paul Curtis, CEO, commented:

 

"Against a backdrop of both Covid-19 and Brexit, the Group has shown its strength and agility in dealing with delays experienced to projects across our markets, and maintained profit at near 2020 levels, despite a 14% reduction in revenue for the period.

 

The order book increased to record levels of £26.2m, featuring a mix of orders from both traditional customers and product lines, but importantly also featuring a c£5m contribution from new product developments and new customers.

 

The Group continues to focus on costs and cash retention, and development of our people and product ranges, ensuring it is strongly positioned for the future. It is envisaged that as world economic activity increases, the work that has been undertaken throughout the last year will put the Group in an excellent position to maximise the opportunities for growth and Group development that may arise."

 

Paul Curtis

CEO
16 June 2021

 

Notes: 1 excluding IFRS16 (operating) leases.  Including: Gearing reduced 45% to 14.8% (2020: 26.8%).  Net debt reduced to £1.95m (2020: £3.32m).

 

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

 

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

 

Enquires:

www.lpa-group.com

 

Tel:

 

 

 

 

 

LPA Group Plc

 

 

 

Peter Pollock

Chairman

 

01799 512844

Paul Curtis

CEO

 

01799 512858

Chris Buckenham

CFO

 

01799 512859

 

 

 

 

Cairn Financial Advisers

(Nominated Adviser)

 

020 7213 0880

James Caithie / Liam Murray

Ludovico Lazzaretti

 

 

 


 

finnCap

(Broker)

 

020 7220 0500

Ed Frisby / Tim Harper (Corporate Finance)

Tim Redfern / Charlotte Sutcliffe (ECM)

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

 

 

CHAIRMAN'S STATEMENT

 

In my AGM Trading Update I reported that we had been victims of our own success in managing our way through the impact of Covid-19 better than other parts of our customers' supply chains and that as a consequence, delivery of components we manufacture would be delayed into later periods. I am relieved to report that the situation appears to have stabilised and that the reality has been not much worse than our expectations. No business has been lost and the longer-term order book has strengthened, giving us continuing confidence that the business will recover throughout next year, returning to at least some normality.

 

Sales in the Covid-19 impacted first half fell 14% to £9.3m (2020: £10.8m) but strong management ensured that an underlying operating profit was maintained at £0.15m (2020: £0.23m), and profit before tax at £0.10m (2020: £0.19m). Basic Earnings Per Share amounted to 1.67p (2020: 2.08p). Although gearing has reduced 45% to 14.8% (2020: 26.8%), with cash equivalents at £1.3m (2020: £0.2m), it is considered prudent not to announce a dividend until trading conditions have normalised (2020: nil), however it is our intention to do so when conditions permit. Order entry fell 9% to £13.0m (2020: £14.2m) but the order book increased 6% to a new record level of £26.2m (2020: £24.7m).

 

As previously reported, project delays have been experienced across the Group. More positively, routine orders, being those up to c£50k in value, have held up relatively well.  The project pipeline remains remarkably robust.

 

A Strategic Review concluded that the Group should continue to pursue projects at home and abroad, but also seek to grow routine orders activity, currently c£8m per annum, aggressively, through product and market development organically or by acquisition.  Some examples of new initiatives currently being implemented include the launch of our new Plane Power range of aircraft ground power connectors, with enhanced features and ease of installation. We are also delighted to have agreed a new 10 year framework contract which will see us take over the business for supporting the inter-car connection systems on an additional 3,000 passenger carriages as part of our UK Rail General routine business. In addition, our lighting and electronic systems activity has expanded its offering to rail customers to include electronic seat control systems, to work alongside our reading light pods and power outlets for laptop and phone charging. In support of the increased product development underway, our sales force has been strengthened and efforts to expand our distribution network around the world are ongoing.

 

Concern for Environment, Social responsibility, and Governance ("ESG") is not new to us. Our logo and strapline 'long life reliability does not cost the earth' demonstrates our commitment to producing quality, reliable, long life products capable of delivering many years of service. Our LED Lighting, which was the first to be installed in a major worldwide passenger train fleet ten years ago, was designed to last up to twice as long as the competition. Before the Covid-19 disruption, we offered apprenticeships and engaged with the science departments of local schools and we organised charitable events to support local and national organisations, activities we intend to resume as soon as circumstances permit. Our 'Guiding Light Principle', published on our website and in our Annual Report sets out our commitment as does our adoption of the QCA Corporate Governance Code. We have few major energy consuming activities and most, if not all, of the byproducts of our operations are recycled. We design out waste. We are actively working to reduce our environmental footprint.

 

I am delighted that Robert B Horvath has joined our board as Chairman elect to succeed me when I retire from the board in August.  Len Porter, our Senior Independent Director, will also leave the board later this year after

seven years of valuable service. I am also delighted to report that Andrew Jenner BSc ACA will be joining the board in September as Non-Executive Director and Senior Independent Director designate.

 

The last 24 years have been immensely challenging and exciting. I leave the board in good hands; I have every confidence in the executive team to manage their way through the current challenges. We have a strong order book, a strong balance sheet and a clear strategy and we should have every confidence in the future.

 

 

 

Peter Pollock

Chairman

16 June 2021
 

 

CONSOLIDATED INCOME STATEMENT

 

6 months to

6 months to

Year to

 

31 Mar 21

31 Mar 20

30 Sept 20

 

Unaudited

Unaudited

Audited

 

£000

£000

£000

 

 

 

 

Revenue   Note 4

9,296

  10,780

20,711

Cost of sales

(7,185)

(8,368)

(16,017)

Gross profit

2,111

2,412

4,694

Distribution costs

(758)

(853)

(1,514)

Administrative expenses

(1,330)

(1,358)

(2,897)

Other operating income

111

25

333

 

 

 

 

Underlying operating profit

154

  234

783

 

 

 

 

Share based payments

(11)

  (8)

(36)

Exceptional costs

-

(131)

 

 

 

 

Operating profit

134

  226

616

Finance income

11

  20

41

Finance costs

(48)

(60)

(106)

Profit before tax 

97

  186

551

Taxation   Note 2

109

  70

44

 

 

 

 

Profit for the period

206

  256

595

Attributable to:

 

 

 

- Equity holders of the parent

206

256

595

 

 

 

 

Earnings per share   Note 5

 

 

 

 - Basic

1.67p

2.08p

4.82p

 - Diluted

1.62p

2.01p

4.65p

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

6 months to

6 months to

Year to

 

31 Mar 21

31 Mar 20

30 Sept 20

 

 Unaudited

 Unaudited

 Audited

 

 000

 000

 000

Profit for the period

206

  256

595

 

 

 

 

Other comprehensive income

 

 

 

Actuarial gain / (loss) on pension scheme

399

  (240)

(427)

Tax on actuarial gain / (loss)

(86)

  44

28

Other comprehensive income net of tax

313

  (196)

(399)

 

 

 

 

Total comprehensive income for the period

519

  60

196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEET

 

 

 

 

As at

As at

As at

31 Mar 21

31 Mar 20

30 Sept 20

Unaudited

Unaudited

Audited

£000

£000

£000

Non-current assets

 

 

 

Intangible assets

1,409

1,400

1,386

Tangible assets

5,350

5,767

5,546

Right of use assets

1,318

1,404

1,438

Retirement benefits

2,424

2,080

1,964

 

10,501

10,651

10,334

Current assets

 

 

 

Inventories

4,069

4,234

3,968

Trade and other receivables

4,369

5,819

5,447

Current tax receivable

77

129

30

Cash and cash equivalents

1,285

221

845

 

9,800

10,403

10,290

Total assets

20,301

21,054

20,624

 

 

 

 

Current liabilities

 

 

 

Bank loan

(189)

  (129)

(188)

Lease liabilities

(374)

  (374)

(406)

Trade and other payables

(3,541)

  (4,806)

(4,193)

 

(4,104)

  (5,309)

(4,787)

Non-current liabilities

 

 

 

Bank loan

(2,220)

  (2,372)

(2,313)

Lease liabilities

(449)

  (668)

(584)

Deferred tax liabilities

(415)

  (313)

(389)

 

(3,084)

  (3,353)

(3,286)

Total liabilities

(7,188)

  (8,662)

(8,073)

 

 

 

 

Net assets

13,113

12,392

12,551

 

 

 

 

Equity

 

 

 

Share capital

1,276

1,266

1,266

Investment in own shares

(324)

  (324)

(324)

Share premium account

730

708

708

Share-based payment reserve

129

90

118

Merger reserve

230

230

230

Retained earnings

11,072

10,422

10,553

 

 

 

 

Equity attributable to shareholders of the parent

13,113

12,392

12,551

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

6 months to

6 months to

Year to

 

31 Mar 21

31 Mar 20

30 Sept 20

 

Unaudited

Unaudited

Audited

 

£000

£000

£000

 

 

 

 

Opening equity

12,551

  12,324

12,324

Total comprehensive income

519

  60

196

Transactions with owners:

 

 

 

Proceeds from issue of shares

32

  -

-

Share-based payments

11

  8

36

Tax benefit on share-based payments

-

  -

(5)

Closing equity

13,113

12,392

12,551

 

 

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

 

 

 

 

6 months to

6 months to

Year to

 

31 Mar 21

31 Mar 20

30 Sept 20

 

Unaudited

Unaudited

Audited

 

£000

£000

£000

Profit before tax

97

  186

551

Finance costs

48

  60

106

Finance income

(11)

  (20)

(41)

Operating profit

134

  226

616

 

 

 

 

Adjustments for:

 

 

 

Amortisation of intangible assets

47

  43

95

Depreciation of tangible assets

256

251

494

Depreciation of right of use assets

138

116

241

(Gain) / loss on sale of tangible assets

(5)

  61

61

Equity settled share based payments

11

  8

36

 

581

  705

1,543

Movements in working capital:

 

 

 

(Increase) in inventories

(101)

  (410)

(144)

Decrease / (Increase) in trade and other receivables

1,060

  (1,381)

(902)

(Decrease) / Increase in trade and other payables

(627)

  968

245

 

 

 

 

Cash generated from operations

913

  (118)

742

 

 

 

 

Income taxes received

-

  2

131

Defined benefit pension contributions

(50)

  (50)

(100)

 

 

 

 

Net cash from operating activities

863

  (166)

773

 

 

 

 

Purchase of software

(16)

(8)

(16)

Purchase of tangible assets

(40)

  (109)

(156)

Proceeds from sale of tangible assets

5

  6

6

Capitalised development expenditure

(52)

  (76)

(100)

 

 

 

 

Net cash (used) in investing activities

(103)

  (187)

(266)

 

 

 

 

Repayment of bank loans

(92)

  (122)

(84)

Principal elements of lease liabilities

(212)

  (176)

(367)

Interest paid

(48)

  (17)

(100)

Proceeds from issue of shares

32

  -

-

 

 

 

 

Net cash (used) in financing activities

(320)

  (315)

(551)

Net increase / (decrease) in cash and cash equivalents

440

  (668)

(44)

Cash and cash equivalents at start of the period

845

  889

889

Cash and cash equivalents at end of the period

1,285

  221

845

 

 

 

 

Cash and cash equivalents in current assets

1,285

221

845

Cash and cash equivalents at the end of the period

1,285

221

845

 

 

 

 

 

NET DEBT

 

An analysis of the change in net debt is shown below:

 

 

 

 

 

Bank loans

Lease obligations

Cash and cash equivalents

Net debt

£000

£000

£000

£000

At 1 October 2020

  2,501

  990

  (845)

  2,646

New lease obligations & lease modifications

-  -

  45

 -

  45

Repayment of borrowings /  lease liabilities

  (92)

  (212)

  304

  -

Cash absorbed

  -

  -

  (744)

  (744)

At 31 March 2021

  2,409

  823

  (1,285)

  1,947

 

 

 

Notes to the financial statements

 

Note 1  BASIS OF PREPARATION

 

These interim financial statements are for the six months ended 31 March 2021.  They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 September 2020, which have been filed at Companies House with an unmodified audit report.

 

These interim financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 . These financial statements have been prepared under the historical cost convention with the exception of certain items which are measured at fair value.

 

These interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 30 September 2020.  The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements and are expected to be followed throughout the year ending 30 September 2021.

 

Note 2  Summary of Significant Accounting Policies

 

Use of judgements and estimates

 

In preparing these interim financial statements management is required to make judgements on the application of the Group's accounting policies and make estimates about the future.  Actual results may differ from these assumptions.  The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the consolidated financial statements for the year ended 30 September 2020.

 

Deferred taxation

 

In the 2021 Spring Budget, the UK Government announced that UK corporation tax rates will increase from 19% to 25% from April 2023.  This change is expected to be confirmed as statute ahead of year end 30 September 2021, at which point deferred tax rates will be increased to 25%, other than on specific assets and liabilities identified as crystallising prior to April 2023.  In accordance with recognised guidance, deferred tax rates are unchanged at 19% within these interim financial statements.

 

Trading losses of £0.29m, previously excluded as an asset, have been recognised as the Directors believe there is reasonable expectation of these being utilised in the future.  Unrecognised losses carried forward total £0.83m (2020: £1.12m).

 

New standards and interpretation adopted by the Group

 

There has been no impact of new standards and interpretations adopted in the period.

 

 

 

 

 

 

Note 3  GOING CONCERN

 

There remain uncertainties due to the Covid-19 pandemic which continues to make forecasting more difficult.

 

The Group's business activities and the factors likely to affect its future performance together with the Group's treasury policy, its approach to the management of financial risk, and its exposure to liquidity and credit risks are outlined fully in the Annual Report & Accounts 2020, which details Covid-19 impacts commencing March 2020.

 

In assessing going concern the Directors note that whilst current economic conditions create uncertainty, with a particular focus on the Covid-19 pandemic the Group: (i) has traded profitably in the current period and is expected to continue to do so in the near term; (ii) has in place adequate working capital facilities for its forecast needs; (iii) has a strong current order book with significant further opportunities in its market place; and (iv) has proven adaptable in past periods of adversity.  Therefore, the Directors believe that it is well placed to manage its business risks successfully.

 

Covid-19 continues to impact whilst post-Brexit impacts have given rise to increased distribution costs, input price pressures are a combination of both factors.  Customers worldwide remain operational however significant rail project delays have arisen in the period that could not have been foreseen.  The Directors have assessed these and sensitised forecasts accordingly.

 

The UK's Covid-19 Job Retention Scheme (extended to at least 30 September 2021) has been utilised by the Group in the period to provide further support to manage resources through workflow fluctuation and short notice deferrals on delivery schedules.

 

Having assessed all aspects of the business and the likely effectiveness of mitigating actions that the Directors would consider undertaking or have undertaken, the going concern basis has been adopted in preparing these interim financial statements.  Actions taken include both cost reductions and a proactive policy of cash retention achieved in part through the UK Government's Job Retention Scheme grants, and the non-declaration of dividends through this period.

 

In reaching this conclusion, the Directors, after making enquiries, inclusive but not limited to updated forecasts and expectations, liabilities and risks and ongoing support from the Group's bank, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

Note 4  Operating Segments

 

All of the Group's operations and activities are based in, and its assets located in, the United Kingdom.  For management purposes the Group comprises three product groups (in accordance with IFRS 8) - electro-mechanical, lighting & electronics and distribution (which collectively design, manufacture and market industrial electrical and electronic products) - less centre costs, which operate across three market segments - Rail; Aerospace & Defence, Industrial & Other. It is on this basis that the Board of Directors assess Group performance. The split is as follows:

 

 

6 months to

6 months to

Year to

31 Mar 21

31 Mar 20

30 Sept 20

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

Electro-mechanical

4,520

4,653

9,195

Lighting & electronics

3,172

3,514

7,087

Distribution

1,604

2,613

4,429

Operational Revenue

9,296

10,780

20,711

 

All revenue originates in the UK.  An analysis by geographical markets and market segments is given below:

 

6 months to

6 months to

Year to

31 Mar 21

31 Mar 20

30 Sept 20

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

Rail

77%

  74%

77%

Aerospace & Defence

7%

15%

12%

Industrial & Other

16%

11%

11%

 

100%

100%

100%

 

United Kingdom

70%

  62%

70%

Rest of Europe

18%

26%

20%

Rest of the World

12%

12%

10%

 

100%

100%

100%

 

Note 5  EARNINGS PER SHARE

 

The calculations of earnings per share are based upon the profit after tax attributable to ordinary equity shareholders and the weighted average number of ordinary shares in issue during the period.  Diluted earnings per share are based on the weighted average number of ordinary shares and share options in issue during in the period.

 

Details are as follows:

 

6 months to

6 months to

Year to

31 Mar 21

31 Mar 20

30 Sept 20

Unaudited

Unaudited

Audited

 

 

 

 

Profit for the period - £000

206

  256

595

Weighted average number of ordinary shares in issue during the period (million)

 

 

 

12.378

12.358

12.358

Dilutive effect of share options (million)

0.392

0.391

0.442

Number of shares for diluted earnings per share (million)

12.770

12.749

12.800

 

 

 

 

Basic earnings per share

1.67p

2.08p

4.82p

Diluted earnings per share

1.62p

2.01p

4.65p

 

 

Note 6  INFORMATION

 

LPA Group Plc is the Group's ultimate parent company.  It is incorporated in England and Wales and domiciled in the UK, Company Number 686429.  The address of LPA Group Plc's registered office, which is also its principal place of business, is Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK.  LPA Group Plc's shares are quoted on the AIM market of the London Stock Exchange.

 

LPA Group Plc's consolidated interim financial statements are presented in Pounds Sterling (£000), which is also the functional currency of the parent company. These interim financial statements have been approved for issue by the Board of Directors on 16 June 2021.  The financial information for the year ended 30 September 2020 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 30 September 2020 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unmodified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

 

Copies of this Interim Report are being sent to shareholders who have requested to receive a hard copy.  Copies are available on the Company's website ( www.lpa-group.com ), by request from the Company's Registrar, or the Company's registered office, address as above.

 

Shareholders are encouraged to visit our website where useful links and assistance have been provided including our Registrars to assist utilisation of digital channels and receipt of future dividends and our Brokers who provide market guidance, further details including "The Digital future" document published by the Group on 5 July 2019 can be found at www.lpa-group.com/investor-information/share-information .

 

 

 

Note 7  COMPANY INFORMATION

 

Company contacts

 

Directors

Peter Pollock   Chairman
Paul Curtis   CEO
Chris Buckenham  CFO
Robert B Horvath   NED (Chair elect)
Len Porter   Senior NED
Gordon Wakeford   NED
 

Secretary

Chris Buckenham

Registered Office

Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK

Registered Number

00686429

Website

www.lpa-group.com

 

 

Nominated Adviser

Cairn Financial Advisers LLP
62-63 Cheapside

London

EC2V 6AX

 

Broker

finnCap

1 Bartholomew Close

London

EC1A 7BL

Auditors

RSM UK Audit LLP

2nd Floor, North Wing East

City House, Hills Road

Cambridge 

CB2 1RE

 

Bankers

 

Barclays Bank Plc

PO Box 885, Mortlock House

Vision Park, Histon

Cambridge

CB24 9DE

Registrars

 

Link Group

10th Floor

Central Square

29 Wellington Street

Leeds LS1 4DL

 

Solicitors

Eversheds Sutherland (International) LLP

115 Colmore Row

Birmingham

B3 3AL

 

Trading subsidiaries
 

LPA Group Plc headquarters is situated at, and all LPA Group entities have their registered address at, Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK .

 

Trading addresses:
LPA Group entities operate as distinct businesses through appointed Executive Teams.


Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK

LPA Industries Ltd / Haswell Engineers Ltd - trading as LPA Connection Systems

 

LPA House, Ripley Drive, Normanton, West Yorkshire, WF6 1QT, UK

Excil Electronics Ltd - trading as LPA Lighting Systems

 

Bath Road, Thatcham, Berkshire, RG18 3ST, UK

Channel Electric Equipment Ltd - trading as LPA Channel Electric

 

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