Half Yearly Report

RNS Number : 0952D

MS International PLC

26 November 2009

 



MS INTERNATIONAL plc

Unaudited Interim Condensed

Consolidated Financial Statements

31st October, 2009

MS INTERNATIONAL plc

EXECUTIVE DIRECTORS

Michael Bell

Michael O'Connell

David Pyle

NON EXECUTIVE

Roger Lane-Smith

SECRETARY

David Pyle

REGISTERED OFFICE

Balby Carr Bank

Doncaster

DN4 8DH

England

PRINCIPAL OPERATING DIVISIONS

Defence

Forgings

Petrol Station Superstructures

Chairman's Statement

When I reported upon the full year results to 2nd May 2009, I emphasised the virtues of MSI being a diverse engineering Group. The latest results, covering the six months to 31st October 2009, demonstrate those virtues in action during a period of exceptionally challenging recessionary trading conditions. Muted demand has weighed heavily on the performance of our 'Industrial Engineering' activities with a significant revenue reduction. In sharp contrast, 'Defence' continues to make admirable progress and has partly countered the pressures elsewhere.

The net effect of these varying trends for the half year was a profit before taxation of £1.23m (2008 - £2.45m) on revenue substantially lower at £18.10m (2008 - £27.23m). Earnings per share were 4.7p (2008 - 9.3p). Given market conditions, I believe that this is quite a resilient result.

Importantly, the balance sheet remains very strong, with net cash and short term deposits at a healthy £7.46m, a favourable figure when compared to the £8.23m reported at the year end.

'Defence' started the year with a very good order book and produced an impressive set of results in the latest six months generating cash and growing both revenue and profit. Of notable significance is the further building of the 'Defence' order book following an exciting influx of new contracts received during the period resulting in another record level of orders on hand at the end of October.

By contrast, our 'Industrial Engineering' businesses, which had entered the global recession at a very early stage in the cycle, experienced a testing time. Many of our established international customers continue to battle against extremely low global demand for their products, the market requirements for which have descended to levels not seen within the past decade. This clearly had an impact on our activities although it is encouraging to see that the petrol station superstructures business has seen a progressive recovery in activity after starting the year with a depleted number of construction contracts in hand.

There is a measure of considerable satisfaction in the fact that during these difficult economic times, the Group's forward order book is now at a new record level. We have a commendable cash position, costs are under control and monitored closely. Product and business development is ongoing and our manufacturing facilities, systems and capabilities are being constantly upgraded as appropriate in search of greater efficiencies.

Overall, I believe we are in good shape. 'Defence' continues to make remarkable progress and we have seen some signs of a pick up in the level of order intake across 'Industrial Engineering' even though one senses that realistically, owing to global economic conditions, we are still some way away from establishing a full recovery in that particular sector of our markets.

These factors considered, the Board has declared a maintained interim dividend of 0.70p (2008 - 0.70p).

Michael Bell,  25th  November 2009

Independent Review Report to MS INTERNATIONAL plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 31 October, 2009 which comprises the Interim Consolidated Income Statement, the Interim Statement of Comprehensive Income, the Interim Balance Sheet, the Interim Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 31 October, 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

Leeds

25th November, 2009

Interim consolidated income statement
				26 weeks ended 31st Oct., 2009		26 weeks ended 1st Nov., 2008
				Unaudited		Unaudited
		Notes		£000		£000
Products				7,344		19,218
Contracts				10,753		8,014
Revenue		5		18,097		27,232
Cost of sales				(13,222)		(20,478)
Gross profit				4,875		6,754
Selling and distribution costs				(798)		(937)
Administrative expenses				(2,813)		(3,727)
Group trading profit		5		1,264		2,090
Finance revenue				4		121
Finance costs				(11)		(4)
Other finance (costs)/revenue - pension				(31)		246
Profit before taxation				1,226		2,453
Income tax expense		6		(389)		(772)
Profit attributable to equity holders of the parent				837		1,681
Earnings per share
- basic				4.7p		9.3p
- diluted				4.5p		9.1p
Interim consolidated statement of comprehensive income
				26 weeks ended 31st Oct., 2009		26 weeks ended 1st Nov., 2008
				Unaudited		Unaudited
				£000		£000
Actuarial losses on defined benefit pension scheme				(2,546)		(3,298)
Deferred taxation on actuarial losses on defined benefit pension scheme				713		923
Currency translation differences on foreign investments				(18)		120
Net expense recognised directly in equity				(1,851)		(2,255)
Profit attributable to equity holders of the parent				837		1,681
Total comprehensive income for the period attributable to equity holders of the parent				(1,014)		(574)

Interim consolidated balance sheet
		Notes		31st Oct., 2009		2nd May, 2009
				Unaudited		Audited
ASSETS				£000		£000
Non-current assets
Property, plant and equipment		8		15,179		15,810
Intangible assets				87		106
Deferred income tax asset				109		-
				15,375		15,916
Current assets
Inventories				3,674		3,989
Trade and other receivables				9,635		5,712
Prepayments				1,529		1,600
Cash and short-term deposits		9		7,458		8,234
				22,296		19,535
TOTAL ASSETS				37,671		35,451
EQUITY AND LIABILITIES
Equity
Issued capital				1,840		1,840
Capital redemption reserve				901		901
Other reserves				1,565		1,565
Revaluation reserve				2,969		2,969
Special reserve				1,629		1,629
Foreign reserve				109		127
Own shares				(391)		(391)
Retained earnings				9,191		10,860
Total Equity				17,813		19,500
Non-current liabilities
Government grants				-		3
Deferred income tax liability				-		610
Defined benefit pension liability		10		5,182		2,805
				5,182		3,418
Current liabilities
Trade and other payables				14,277		11,977
Government grants				10		13
Income tax payable				389		543
				14,676		12,533
TOTAL EQUITY AND LIABILITIES				37,671		35,451

Interim consolidated changes in equity
			Issued capital		Capital redemption reserve		Other reserves		Revaluation reserve		Special reserve		Foreign exchange reserve		Treasury shares		Retained earnings		Total Unaudited
			£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000
At 2nd May, 2009			1,840		901		1,565		2,969		1,629		127		(391)		10,860		19,500
Profit for the period			-		-		-		-		-		-		-		837		837
Other comprehensive loss			-		-		-		-		-		(18)		-		(1,833)		(1,851)
Total comprehensive income			1,840		901		1,565		2,969		1,629		109		(391)		9,864		18,486
Dividend paid			-		-		-		-		-		-		-		(684)		(684)
Share based payments			-		-		-		-		-		-		-		11		11
At 31st October, 2009			1,840		901		1,565		2,969		1,629		109		(391)		9,191		17,813
			Issued capital		Capital redemption reserve		Other reserves		Revaluation reserve		Special reserve		Foreign exchange reserve		Treasury shares		Retained earnings		Total Unaudited
			£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000
At 3rd May, 2008			1,845		896		1,565		2,969		1,629		(31)		(391)		12,131		20,613
Profit for the period			-		-		-		-		-		-		-		1,681		1,681
Other comprehensive profit/(loss)			-		-		-		-		-		120		-		(2,375)		(2,255)
Total comprehensive income			1,845		896		1,565		2,969		1,629		89		(391)		11,437		20,039
Dividend paid			-		-		-		-		-		-		-		(686)		(686)
Repurchase of shares			(5)		5		-		-		-		-		-		(100)		(100)
Share based payments			-		-		-		-		-		-		-		84		84
At 1st November, 2008			1,840		901		1,565		2,969		1,629		89		(391)		10,735		19,337

Interim consolidated cash flow statement
		26 weeks  ended 31st  Oct., 2009		26 weeks ended 1st Nov., 2008
		Unaudited		Unaudited
		£'000		£'000
Trading profit		1,264		2,090
Adjustments to reconcile trading profit to net cash in flows from operating activities
Depreciation of property plant and equipment		809		802
Amortisation of intangible fixed assets		19		51
Foreign exchange (losses)/gains		(35)		131
Government grant release		(6)		(7)
Share based payments		11		84
Profit on sale of fixed assets		-		(16)
(Increase)/decrease in inventories		(311)		417
Increase in receivables		(3,923)		(105)
Decrease in prepayments		71		602
Decrease in payables		(2,049)		(2,787)
Increase/(decrease) in progress payments		4,975		(3,918)
Pension fund payments		(200)		(198)
Cash generated from operating activities		625		(2,854)
Interest (paid)/received		(7)		117
Taxation paid		(553)		(724)
Net cash flow from operating activities		65		(3,461)
Cash flows from investing activities
Purchase of intangible fixed assets		-		(47)
Purchase of property, plant and equipment		(159)		(752)
Sale of property, plant and equipment		2		90
Net cash used in investing activities		(157)		(709)
Cash flows from financing activities
Purchase of own shares		-		(100)
Dividend paid		(684)		(686)
Repayments of capital element of finance leases		-		(4)
Net cash flows used in financing activities		(684)		(790)
Movement in cash and cash equivalents		(776)		(4,960)
Opening cash and cash equivalents		8,234		10,071
Closing cash and cash equivalents		7,458		5,111

Notes to the interim consolidated financial statements
1	Corporate information
	MS INTERNATIONAL plc is a public limited company incorporated in England and Wales. The Company's ordinary shares are traded on the London Stock Exchange. The principal activities of the Company and its subsidiaries ("the Group") are described in Note 5.
	The interim condensed consolidated financial statement of the Group for the twenty six weeks ended 31st October, 2009 were authorised for issue in accordance with a resolution of the directors on 25th November, 2009.
2	Basis of preparation and accounting policies
	The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report which has not been audited has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
	The interim financial information has been reviewed by the Group's auditors, Ernst & Young LLP, their report is included on page 3. These interim financial statements do not constitute statutory financial statements within the meaning of section 435 of the Companies Act 1985. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 2nd May, 2009.
	The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 2nd May, 2009. The following standards, amendments and interpretations will be applied for the first time in the Group's statutory accounts for the year ended 1st May, 2010.
	- IFRS 1 and IAS 27 Amendment Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
	- IFRS 2 Amendment Vesting Conditions and Cancellations
	- IFRS 7 Financial Instruments: Disclosures
	- IFRS 8 Operating Segments
	- IAS 1R Presentation of Financial Statements
	- IAS 23R Borrowing Costs
	- IAS 39 Amendment Financial Instruments: Recognition and Management - Eligible Hedge Items
	The figures for the year ended 2nd May, 2009 do not constitute the Group's statutory accounts for the period but have been extracted from the statutory accounts. The auditor's report on those accounts, which have been filed with the Registrar of Companies, was unqualified and did not contain any statement under section 498(2) or (3) of the Companies Act 1985.
3	Principal risks and uncertainties
	The principal risk and uncertainties facing the Group relate to levels of customer demand for the Group's products and services. Customer demand is driven mainly by general economic conditions but also by pricing, product quality and delivery performance of MS INTERNATIONAL plc and in comparison with our competitors. Sterling exchange rates against other currencies can influence pricing.
	The Group has considerable financial resources together with long term contracts with a number of customers. As a consequence, the Directors believe that the Group is well placed to manage its business risk successfully despite the current uncertain economic outlook.
	After making enquiries the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

4	Statement of directors' responsibilities
	The directors as listed on page 1 confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, which includes information required on material transactions with related parties and changes since the last annual report.

5	Segment information
(a)	Primary reporting format - Divisional segments
	The following table presents revenue and profit and certain assets and liability information regarding the Group's divisions for the periods ended 31st October, 2009 and 1st November, 2008. The reporting format is determined by the differences in manufacture and services provided by the Group. The Defence division is engaged in the design, manufacture and service of defence equipment. The Forgings division is engaged in the manufacture of forgings. The Petrol Station Forecourt Structures division is engaged in the design and construction of petrol station forecourt structures.
			Defence				Forgings				Petrol Station				Total
											Forecourt Structures
			2009		2008		2009		2008		2009		2008		2009		2008
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		11,639		10,971		4,325		12,021		2,133		4,240		18,097		27,232
	Total revenue		11,639		10,971		4,325		12,021		2,133		4,240		18,097		27,232
	Segment result		2,130		1,177		(944)		1,003		78		(90)		1,264		2,090
	Net finance (expense)/ revenue														(38)		363
	Profit before taxation														1,226		2,453
	Taxation														(389)		(772)
	Profit for the period														837		1,681
	Segmental assets		21,442		12,963		7,342		11,193		2,228		3,275		31,012		27,431
	Unallocated assets														6,659		8,824
	Total assets														37,671		36,255
	Segmental liabilities		12,563		9,668		808		3,116		1,098		1,452		14,469		14,236
	Unallocated liabilities														5,389		2,682
	Total liabilities														19,858		16,918
	Capital expenditure		47		116		105		236		7		76
	Depreciation		150		136		454		435		78		93

(b)	Secondary reporting format - Geographical segments
	The following table presents revenue and expenditure and certain assets and liabilities information by geographical segment for the periods ended 31st October, 2009 and 1st November, 2008. The Group's geographical segments are based on the location of the Group's assets. Revenue from external customers is based on the geographical location of its customers.
			Europe				North America				Rest of the World				Total
			2009		2008		2009		2008		2009		2008		2009		2008
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		15,721		23,067		1,188		2,050		1,188		2,115		18,097		27,232
	Assets		36,812		35,036		516		845		539		374		37,867		36,255
	Liabilities		19,739		16,731		59		151		60		36		19,858		16,918
	Capital expenditure		83		743		72		-		4		9		159		752

6	Income tax
	The major components of income tax expense in the consolidated income statement are:
				26 weeks ended 31st Oct., 2009		26 weeks ended 1st Nov., 2008
				Unaudited		Unaudited
				£'000		£'000
	Current income
	Current income tax charge			454		699
	Current tax			454		699
	Deferred income
	Relating to origination and reversal of temporary differences			(66)		73
	Adjustments in respect of prior years			1		-
	Deferred tax			(65)		73
	Income tax expense reported in the consolidated income statement			389		772
7		Dividends paid and proposed
				26 weeks ended 31st Oct., 2009		26 weeks ended 1st Nov., 2008
				Unaudited		Unaudited
				£'000		£'000
		Declared and paid during the six month period
		Dividend on ordinary shares
		Final dividend for 2009 - 3.80p (2008 - 3.80p)		684		686
		Proposed for approval
		Interim dividend for 2009 - 0.70p (2008 - 0.70p)		126		126
		Dividends warrants will be posted on 25th January, 2010 to those members registered on the books of the Company on 4th January, 2010.
8	Property, plant and equipment
	Acquisitions and disposals
	During the twenty six weeks ended 31st October, 2009, the Group acquired assets with a cost of £159,000 (2008 - £752,000).
	Assets with a net book value of £2,000 were disposed of by the Group during the 26 weeks ended 31st October, 2009 (2008 - £74,000), resulting in no loss or gain on disposal (2008 - £16,000 gain).
9	Cash and cash equivalents
	For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following:
				31st Oct., 2009			2nd May, 2009
				Unaudited			Audited
				£'000			£'000
		Cash at bank and in hand		7,454			8,234
		Short term deposits		4			-
				7,458			8,234

10

Pension liability

The Company operates an employee pension scheme called the MS International plc Retirement and Death Benefits Scheme ("the Scheme"). IAS19 requires disclosure of certain information about the Scheme as follows:

*

Until 5th April, 1997, the Scheme provided defined benefits and these liabilities remain in respect of service prior to 6th April, 1997. From 6th April, 1997 the Scheme provides future service benefits on a defined contribution basis.

*

The last formal valuation of the Scheme was performed at 5th April, 2008 by a professionally qualified actuary.

*

Members have paid contributions at a rate in line with the Scheme's documentation over the accounting period.

*

The employer has paid members contributions to the defined contributions section of the Scheme, life assurance premiums and other Scheme expenses. In addition, from April 2009, the employer has paid £100,000 per annum to the defined benefit section of the scheme.

The Company's policy for recognising actuarial gains and losses is to recognise them immediately in the Statement of Comprehensive Income.

11

Commitments and contingencies

The Company is contingently liable in respect of guarantees, indemnities and performance bonds given in the ordinary course of business amounting to £7,407,508 at 31st October, 2009 (2008 - £5,419,848).

In the opinion of the directors, no material loss will arise in connection with the above matters.

The Group and certain of its subsidiary undertakings are parties to legal actions and claims which have arisen in the normal course of business. The results of actions and claims cannot be forecast with certainty, but the directors believe that they will be concluded without any material effect on the net assets of the Group.

12

Related party transactions

The following transactions took place, during the period, between the Group and Global-MSI plc, a company in which the Group holds a 50% interest.

Purchases of goods and services £9,000 (2008 - £86,000)

Sales of goods and services £160,000 (2008 - £442,000)

The following balances relating to the above transactions are included in the consolidated balance sheet as at 1st November, 2008.

Amounts owed by joint venture £15,000 (2008 - £9,000)

Amounts owed to joint venture £1,000 (2008 - £40,000)

The following transactions took place, during the period, between the Company and other subsidiaries in the Group.

Sales of goods and services £742,000 (2008 - £1,368,000)

Sales and purchases between related parties are made at normal market prices. Terms and conditions for transactions with subsidiaries and the joint venture are unsecured and interest free. Balances are placed on inter-company accounts with no specified credit period.

 

END

 

 

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