Half Yearly Report

RNS Number : 8111W

MS International PLC

25 November 2010

 



MS INTERNATIONAL plc

Unaudited Interim Condensed

Group Financial Statements

30th October, 2010

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

I am delighted to report that the Group has made a most encouraging recovery, more than doubling the profit before exceptional gain and taxation, on revenue some 40% higher than that reported at the corresponding time last year.

For the half year ended 30th October 2010, a £2.56m (2009-£1.23m) profit before exceptional gain and taxation was realised on revenue of £25.34m (2009-£18.10m). Earnings per share excluding the exceptional gain more than doubled to 10.0p (2009- 4.7p).

This outcome is a positive step in restoring the Group's record of delivering the steady year-on-year upward trajectory in trading performance which was achieved before the economic downturn. Moreover, the latest performance surpasses the previous peak interim result, reported in November 2008.

The balance sheet remains robust with net cash and short term deposits of £4.02m (2009-£7.46m). The reduction primarily reflects the £4.50m cost in May of the acquisition of the half share in Global-MSI not previously owned as well as continued investment in other Group businesses.

Significantly, there has been an improving level of activity across the whole Group. 'Defence', with markets unhindered by the recession and the added benefit of a well-balanced order book, is leading the way with a performance that is relatively surging ahead. 'Forgings' markets are showing signs of a modest revival for the first time in two years although, coming from a very low level, the momentum to date has been insufficient to enable the division to achieve a break-even trading position. The markets of 'Petrol Station Structures' also remain comparatively subdued. Since becoming wholly owned by the Group, this division has been reorganised and the ensuing one-off costs have adversely affected these results. A more proficient 'Global-MSI' is emerging and as a consequence, has gained market share.

The Group order book at the end of October had escalated to another new record level entirely owing to 'Defence', enhanced by the award of a US$28.63m contract to provide 30mm naval weapon systems to the United States Naval Sea Systems Command in support of their own Foreign Military Sales requirements. Deliveries on that contract are phased to commence next May and extend through to December 2011.

'Defence' has a considerable production output scheduled for delivery and installation within the current financial year for domestic and overseas shipbuilders and navies. Subject to our customers maintaining these schedules, it would not be unrealistic to expect that a strong second half out-turn for 'Defence' should be possible. Moreover, should markets for 'Forgings' and 'Petrol Station Structures' continue their partial recovery and our market share similarly improve, this could bring added impetus to the Group's prospective trading performance. Thus, the Board is reasonably confident about the full year outlook but, notwithstanding the upsides, we remain sensitive to the fragility of the general economic situation and cautious of the many challenges that may still lie ahead.

Accordingly, the Board has declared an increase in the interim dividend per share to 1.0p (2009-0.7p)

Michael Bell                                                                                                                                   25th November, 2010

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 30 October, 2010 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 30 October, 2010 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, 2010

Interim Group income statement
							26 weeks ended 30th Oct., 2010					26 weeks ended 31st Oct., 2009
							Unaudited					Unaudited
				Notes			£000					£000
Products							16,311					7,344
Contracts							9,024					10,753
Revenue				5			25,335					18,097
Cost of sales							(17,546)					(13,222)
Gross profit							7,789					4,875
Distribution costs							(847)					(798)
Administrative expenses							(4,339)					(2,813)
Group trading profit				5			2,603					1,264
Finance revenue							9					4
Finance costs							(28)					(11)
Other finance costs- pension							(25)					(31)
Profit before taxation and exceptional gain							2,559					1,226
Exceptional gain				11			1,250					-
Profit before taxation							3,809					1,226
Taxation				6			(754)					(389)
Profit for the period attributable to equity holders of the parent							3,055					837
Earnings per share: basic and diluted				7			17.0p					4.7p
Adjusted earnings per share : basic and diluted				7			10.0p					4.7p
Interim Group statement of comprehensive income
							26 weeks ended 30th Oct., 2010					26 weeks ended 31st Oct., 2009
							Unaudited					Unaudited
							£000					£000
Actuarial losses on defined benefit pension scheme							(255)					(2,546)
Deferred taxation on actuarial losses on defined benefit pension scheme							72					713
Exchange  differences on retranslation of foreign operations							(19)					(18)
Net losses recognised directly in equity							(202)					(1,851)
Profit attributable to equity holders of the parent							3,055					837
Total comprehensive income and (expense) for the period attributable to equity holders of the parent							2,853					(1,014)
Interim Group balance sheet
					Notes		30th Oct., 2010			1st May, 2010
							Unaudited			Audited
ASSETS							£000			£000
Non-current assets
Property, plant and equipment					9		14,177			14,634
Intangible assets							5,042			172
Deferred income tax asset							-			118
							19,219			14,924
Current assets
Inventories							5,637			3,947
Trade and other receivables							13,269			10,134
Prepayments							1,948			1,675
Cash and short-term deposits					10		4,017			8,911
							24,871			24,667
TOTAL ASSETS							44,090			39,591
EQUITY AND LIABILITIES
Equity
Issued capital							1,840			1,840
Capital redemption reserve							901			901
Other reserves							2,815			1,565
Revaluation reserve							2,969			2,969
Special reserve							1,629			1,629
Currency translation reserve							162			181
Treasury shares							(391)			(391)
Retained earnings							11,907			10,279
Total Equity							21,832			18,973
Non-current liabilities
Deferred income tax liability							321			-
Defined benefit pension liability					12		4,628			4,548
							4,949			4,548
Current liabilities
Trade and other payables							16,433			15,408
Government grants							-			3
Income tax payable							876			659
							17,309			16,070
TOTAL EQUITY AND LIABILITIES							44,090			39,591

Interim Group statement of  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 1st May, 2010			1,840		901		1,565		2,969		1,629		181		(391)		10,279		18,973
Profit for the period			-		-		-		-		-		-		-		3,055		3,055
Transfer							1,250										(1,250)		-
Other comprehensive loss			-		-		-		-		-		(19)		-		(183)		(202)
			1,840		901		2,815		2,969		1,629		162		(391)		11,901		21,826
Share based payments			-		-		-		-		-		-		-		6		6
At 30th October, 2010			1,840		901		2,815		2,969		1,629		162		(391)		11,907		21,832
			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)
			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

Interim Group cash flow statement
		26 weeks ended 30th Oct., 2010		26 weeks ended 31st Oct., 2009
		Unaudited		Unaudited
		£'000		£'000
Profit before Taxation		2,559		1,226
Adjustments to reconcile profit before taxation to net cash in flows from operating activities
Depreciation of property plant and equipment		823		809
Amortisation of intangible fixed assets		204		19
Finance Costs		44		38
Foreign exchange gains/(losses)		4		(35)
Government grant release		(3)		(6)
Share based payments		6		11
Increase in inventories		(2,626)		(311)
Increase in receivables		(2,466)		(3,923)
(Increase)/decrease in prepayments		(235)		71
Increase/(decrease) in payables		1,321		(2,049)
(Decrease)/increase in progress payments		(72)		4,975
Pension fund payments		(200)		(200)
Cash generated from operating activities		(641)		625
Interest paid		(19)		(7)
Taxation paid		(669)		(553)
Net cash flow from operating activities		(1,329)		65
Cash flows from investing activities
Purchase of shares in Global-MSI plc net of cash acquired		(3,532)		-
Purchase of property,  plant and equipment		(174)		(159)
Sale of property, plant and equipment		141		2
Net cash used in investing activities		(3,565)		(157)
Cash flows from financing activities
Dividend paid		-		(684)
Net cash flows used in financing activities		-		(684)
Movement in cash and cash equivalents		(4,894)		(776)
Opening cash and cash equivalents		8,911		8,234
Closing cash and cash equivalents		4,017		7,458

Notes to the interim Group 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 30th October, 2010 were authorised for issue in accordance with a resolution of the directors on 25th November, 2010.
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 2006. 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 1st May, 2010.
	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 1st May, 2010. The following standards, amendments and interpretations will be applied for the first time in the Group's statutory accounts for the year ended 30th April, 2011.
	IFRS 2 Amendment - Group Cash Settled Share Based Payment Transactions
	IFRS 3 Business Combinations (Revised January 2008)
	IAS 27 Consolidated and Separate Financial Statements (Revised January 2008)
	IAS 23 Borrowing Costs (Revised)
	IAS 39 Amendment Financial Instruments: Recognition and Management - Eligible Hedge Items
	The figures for the year ended 1st May, 2010 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 2006.
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 30th October, 2010 and 31st October, 2009.  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.  The Directors are of the opinion that seasonality does not significantly affect these results.
			Defence				Forgings				Petrol Station				Total
											Forecourt Structures
			2010		2009		2010		2009		2010		2009		2010		2009
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		15,610		11,639		5,966		4,325		3,759		2,133		25,335		18,097
	Total revenue		15,610		11,639		5,966		4,325		3,759		2,133		25,335		18,097
	Segment result		3,096		2,130		(292)		(944)		(201)		78		2,603		1,264
	Net finance expense														(44)		(38)
	Profit before exceptional gain														2,559		1,226
	Exceptional gain (note 11)														1,250		-
	Profit before taxation														3,809		1,226
	Taxation														(754)		(389)
	Profit for the period														3,055		837
	Segmental assets		29,617		21,442		6,036		7,342		8,437		2,228		44,090		31,012
	Unallocated assets														-		6,659
	Total assets														44,090		37,671
	Segmental liabilities		12,454		12,563		1,841		808		2,650		1,098		16,945		14,469
	Unallocated liabilities														5,313		5,389
	Total liabilities														22,258		19,858
	Capital expenditure		31		47		31		105		112		7
	Depreciation		152		150		427		454		118		78

(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 30th October, 2010 and 31st October, 2009.  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
			2010		2009		2010		2009		2010		2009		2010		2009
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		17,317		15,721		4,681		1,188		3,337		1,188		25,335		18,097
	Assets		42,518		36,616		673		516		899		539		44,090		37,671
	Liabilities		22,231		19,739		14		59		13		60		22,258		19,858
	Capital expenditure		170		83		-		72		4		4		174		159

6	Income tax
	The major components of income tax expense in the consolidated income statement are:
					26 weeks ended 30th Oct., 2010		26 weeks ended 31st Oct., 2009
					Unaudited		Unaudited
					£'000		£'000
	Current income
	Current income tax charge				891		454
	Current tax				891		454
	Deferred income
	Relating to origination and reversal of temporary differences				(137)		(66)
	Adjustments in respect of prior years				-		1
	Deferred tax				(137)		(65)
	Income tax expense reported in the consolidated income statement				754		389
7	Earnings per share
	The calculation of basic and diluted earnings per share is based on:
	(a)	Profit for the period attributable to equity holders of the parent of £3,055,000 (2009 - £837,000);
	(b)	18,001,025 (2009 - 18,001,025) Ordinary shares, being the weighted average number of Ordinary shares in issue
	The calculation of basic and diluted adjusted earnings per share is based on:
	(a)	Profit for the period attributable to equity holders of the parent, excluding the exceptional gain, of £1,805,000 (2009 - £837,000);
	(b)	18,001,025 (2009 - 18,001,025) Ordinary shares, being the weighted average number of Ordinary shares in issue
8	Dividends paid and proposed
				26 weeks ended 30th Oct., 2010			26 weeks ended 31st Oct., 2009
				Unaudited			Unaudited
				£'000			£'000
	Declared and paid during the six month period
	Dividend on ordinary shares
	Final dividend for 2009 - 3.80p			-			684
	Proposed for approval
	Interim dividend for 2010 - 1.00p (2009 - 0.70p)			180			126
	Dividends warrants will be posted on 21st January, 2011 to those members registered on the books of the Company on 7th January, 2011.

9	Property, plant and equipment
	Acquisitions and disposals:
	During the twenty six weeks ended 30th October, 2010, the Group acquired assets with a cost of £174,000 (2009 - £159,000).
	Assets with a net book value of £141,000 were disposed of by the Group during the 26 weeks ended 30th October, 2010 (2009 - £2,000), resulting in no loss or gain on disposal (2009 -  £nil gain).
10	Cash and cash equivalents
	For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following:
				30th Oct., 2010				1st May, 2010
				Unaudited				Audited
				£'000				£'000
	Cash at bank and in hand			4,013				8,911
	Short term deposits			4				-
				4,017				8,911
11	Acquisitions
	On 28th May, 2010 the Group acquired for a consideration of £4,500,000 a further 50% of the shares of Global-MSI plc (GMSI), not previously owned by the Group, to give a total shareholding of 100% of the shares of GMSI.
	GMSI is involved in the design, manufacture and construction of petrol station superstructures and associate infrastructure products.  Until the 28th May, 2010, GMSI was included in the Group accounts as a joint venture using proportionate consolidation.
	As a result of this acquisition, the Group's previously held investment under proportionate consolidation has been provisionally remeasured, in accordance with IFRS3 "Business Combinations" (revised), as detailed in the table below to represent 100% of it's fair value on the date of acquisition resulting in a provisional gain of £1,250,000 recognised in the Group Income Statement.
	Book and fair values of the net assets acquired at the date of acquisition are as follows
						Book value			Provisional fair value to Group
						£'000			£'000
	Plant and equipment					686			686
	Inventories					164			164
	Receivables					1,338			1,338
	Prepayments					76			76
	Cash					1,936			1,936
	Payables					(1,588)			(1,588)
	Deferred tax liability					(10)			(596)
	Corporation tax liability					(76)			(76)
	Trade name					-			864
	Design database					-			1,370
	Customer relationships					-			1,020
	Order backlog					-			112
	Intangible assets					-			3,366
	Net Assets					2,526			5,306
	Goodwill arising on acquisition								1,707
	Provisional consideration								7,013
	The fair values on acquisition of GMSI are provisional due to the timing of the transaction, and are still under review by the Directors.
	If the combination had taken place at the beginning of the year the Group revenue would have been £25,631,000 and the Group trading profit would have been £2,583,000.

12	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 £200,000 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.
13	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 £8,255,640 at 30th October, 2010 (2009 - £7,407,508).
	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.

 

END

 

 

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