Interim Results
MS International PLC
29 November 2007
MS INTERNATIONAL plc
Unaudited Interim Condensed
Consolidated Financial Statements
3rd November, 2007
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
PRINCIPAL OPERATING DIVISIONS
Defence
Forgings
Petrol Station Superstructures
Chairman's Statement
Last year's progressive growth trend has continued throughout the first six months of the current financial year
resulting in positive increases in both revenue and profits. Furthermore, I am very pleased to report that a number of
the new business prospects that I highlighted as emerging at the time of my year end statement, have since turned into
firm orders for the Group.
For the half year ended 3rd November, 2007, profit before taxation amounted to £2.21m (2006 - £1.98m) on revenue of
£25.55m (2006 - £22.88m). Earnings per share have risen to 9.2p (2006 - 8.1p).
The balance sheet remains strong with net cash and short term deposits marginally higher at £7.95m compared to £7.61m at
last year end.
We continue to experience strong levels of demand and during the period achieved a 27% uplift in the cumulative value of
the Group's phased forward order book to reach a new record high level.
This year in the defence division, there is a predominantly second half bias in terms of contract delivery schedules. We
have taken advantage of this to implement a major upgrading and reorganisation of the division's production facility.
The twofold objective is to enhance operational efficiency and throughput capacity, in order that we may meet the
opportunity of the forthcoming surge in sales output dictated by the division's order book as we enter the next calendar
year and beyond. Pleasingly, both the forgings and our joint venture petrol station superstructures divisions are
realising notable all round performance improvements following the fundamental completion of the current phases of
extensive investment and development programmes.
During the period, the Company purchased 200,000 MS INTERNATIONAL plc shares for cancellation at a total cost of
£375,000. In addition, I, together with my two executive directors, exercised options to purchase a total of 1,912,521
ordinary shares in the Company. It is our intention to hold these shares as long term investments.
Presently, there is good visibility with regard to the substance of the medium and longer term elements of the order
book and moreover there remains other identified new business prospects which are still open to be won. Nevertheless,
though quietly confident, we are sensitive to the importance of maintaining the current buoyant levels of short term
trading for the remainder of the financial year.
These matters considered the Board has declared an interim dividend of 0.70p (2006 - 0.60p).
Michael Bell
29th November, 2007
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 27 weeks ended 3 November, 2007 which comprises the Interim Consolidated Income Statement, the Interim
Statement of Recognised Income and Expense, 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 27 weeks ended 3 November, 2007 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
29 November, 2007
Interim Consolidated Income Statement
for the twenty seven weeks ended 3rd November, 2007
27 weeks ended 26 weeks ended
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
Notes £000 £000
Products 21,818 17,212
Contracts 3,727 5,666
Revenue 6 25,545 22,878
Cost of sales (19,485) (17,010)
Gross profit 6,060 5,868
Selling and distribution costs (927) (1,058)
Administrative expenses (3,313) (3,127)
Group trading profit 6 1,820 1,683
Finance revenue 142 112
Finance costs (18) (38)
Other finance revenue - pension 263 218
Profit before taxation 2,207 1,975
Income tax expense 5 (584) (633)
Profit attributable to equity holders of the parent 1,623 1,342
Earnings per share
- basic 9.2p 8.1p
- diluted 9.0p 7.8p
Interim Statement of Recognised Income and Expense
for the twenty seven weeks ended 3rd November, 2007
27 weeks ended 26 weeks ended
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
£000 £000
Actuarial gains/(losses) on defined benefit pension scheme 467 (970)
Deferred taxation on actuarial gains/(losses) on defined pension scheme (140) 291
Currency translation differences on foreign investments (28) (29)
Net income/(expense) recognised directly in equity 299 (708)
Profit attributable to equity holders of the parent 1,623 1,342
Total recognised income and expense for the period attributable
to equity holders of the parent 1,922 634
Interim Consolidated Balance Sheet
at 3rd November, 2007
Notes 3rd Nov., 28th April,
2007 2007
Unaudited Audited
ASSETS £000 £000
Non-current assets
Property, plant and equipment 7 15,609 14,676
Intangible assets 189 253
Pension asset 9 1,664 894
17,462 15,823
Current assets
Inventories 5,285 4,327
Trade and other receivables 7,106 7,288
Prepayments 2,111 2,109
Cash and short-term deposits 7,949 7,608
22,451 21,332
TOTAL ASSETS 39,913 37,155
EQUITY AND LIABILITIES
Equity
Issued capital 1,851 1,871
Capital redemption reserve 890 870
Other reserves 1,544 1,544
Revaluation reserve 2,942 2,942
Special reserve 1,629 1,629
Foreign reserve (179) (151)
Own shares (391) (738)
Retained earnings 9,750 8,719
Total Equity 18,036 16,686
Non-current liabilities
Finance leases - 4
Provisions 8 - 48
Government grants 22 28
Deferred tax liability 1,950 1,779
1,972 1,859
Current liabilities
Trade and other payables 19,294 18,060
Finance leases 7 7
Provisions 8 82 65
Government grants 13 13
Income tax payable 509 465
19,905 18,610
TOTAL EQUITY AND LIABILITIES 39,913 37,155
Interim Consolidated Cash Flow Statement
for the twenty seven weeks ended 3rd November, 2007
27 weeks ended 26 weeks ended
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
£'000 £'000
Trading profit 1,820 1,683
Adjustments to reconcile trading profit to net cash in flows from operating
activities
Depreciation of property plant and equipment 645 507
Amortisation of intangible fixed assets 64 110
Foreign exchange losses (28) (29)
Government grant release (6) (6)
Provisions utilised (31) (33)
Pension charge 328 304
(Profit)/loss on sale of fixed assets (4) 8
(Increase)/decrease in inventories (465) 823
Decrease in receivables 182 1,288
Increase in prepayments (2) (843)
Decrease in payables (2,037) (714)
Increase/(decrease) in progress payments 2,778 (3,224)
Pension fund payments (368) (295)
Cash generated from operating activities 2,876 (421)
Interest received 124 74
Taxation paid (509) (710)
Net cash flow from operating activities 2,491 (1,057)
Cash flows from investing activities
Purchase of intangible fixed assets - (85)
Purchase of property, land and equipment (1,664) (1,247)
Sale of property, land and equipment 90 89
Net cash used in investing activities (1,574) (1,243)
Cash flows from financing activities
Purchase of own shares (375) -
Dividend paid (544) (364)
Share options exercised 347 -
Repayments of capital element of finance leases (4) (2)
Net cash flows used in financing activities (576) (366)
Movement in cash and cash equivalents 341 (2,666)
Opening cash and cash equivalents 7,608 5,907
Closing cash and cash equivalents 7,949 3,241
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 6.
The interim condensed consolidated financial statement of the Group for the twenty seven weeks ended 3rd
November, 2007 were authorised for issue in accordance with a resolution of the directors on 29th November,
2007.
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 240 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 28th April, 2007.
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 28 April, 2007. The following standards, amendments and interpretations will be applied for the first
time in the Group's statutory accounts for the year ended 3rd May, 2008.
- IFRS 7 Financial Instruments: Disclosures
- IFRIC 9 Reassessment of Embedded Derivatives
- IFRIC 10 Interim Financial Reporting and Impairment
The figures for the year ended 28th April, 2007 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
237(2) or (3) of the Companies Act 1985.
3 Cash and cash equivalents
For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of
the following:
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
£'000 £'000
Cash at bank and in hand 3,199 3,241
Short term deposits 4,750 -
7,949 3,241
4 Dividends paid and proposed
27 weeks ended 26 weeks ended
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
£'000 £'000
Declared and paid during the six month period
Dividend on ordinary shares
Final dividend for 2007 - 3.00p (2006 - 2.20p) 544 364
Proposed
for approval
Dividend on ordinary shares
Interim dividend for 2008 - 0.70p (2007 - 0.60p) 128 100
5 Income tax
The major components of income tax expense in the consolidated income
statement are:
27 weeks ended 26 weeks ended
3rd Nov., 2007 28th Oct., 2006
Unaudited Unaudited
£'000 £'000
Current income
Current income tax charge 567 633
Adjustments in respect of prior years (15) -
Current tax 552 633
Deferred income
Relating to origination and reversal of timing differences 145 -
Adjustments in respect of prior years (113) -
Deferred tax 32 -
Income tax expense reported in the consolidated income statement 584 633
6 Segment Information
(a) Primary reporting format - Divisional segments
The following table presents revenue and profit, regarding the Group's divisions for the periods ended 3rd November,
2007 and 28th October, 2006 and certain assets and liability information regarding the Group's divisions at 3rd
November, 2007 and 28th April, 2007. 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 Superstructures division is engaged
in the design and construction of petrol station superstructures.
Defence Forgings Petrol Station Total
Superstructures
2007 2006 2007 2006 2007 2006 2007 2006
Unaudited Unaudited
£000 £000 £000 £000 £000 £000 £000 £000
Revenue External 7,217 8,326 13,002 11,052 5,326 3,500 25,545 22,878
Inter-divisional - - - - - - - -
Total revenue 7,217 8,326 13,002 11,052 5,326 3,500 25,545 22,878
Segment result 118 950 1,236 732 466 1 1,820 1,683
Net finance revenue 387 292
Profit before taxation 2,207 1,975
Taxation (584) (633)
Profit for the period 1,623 1,342
Capital expenditure 810 46 627 389 61 119
Depreciation 53 60 368 282 91 67
3rd Nov., 28th April,
2007 2007
Segment assets and liabilities Unaudited Audited
Assets £000 £000
Defence 14,887 13,667
Forgings 11,853 11,120
Petrol Station Superstructures 3,732 3,251
30,472 28,038
Unallocated 9,441 9,117
Total assets 39,913 37,155
Liabilities
Defence 13,139 12,087
Forgings 4,164 4,345
Petrol Station Superstructures 1,898 1,849
19,201 18,281
Unallocated 2,676 2,188
Total liabilities 21,877 20,469
(b) Secondary reporting format - Geographical segments
The following table presents revenue and expenditure by geographical segment for the periods ended 3rd November, 2007
and 28th October, 2006 and certain assets and liabilities information by geographical segment at 3rd November, 2007 and
28th April, 2007. 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 the customers.
Rest
Europe North America of the World Total
2007 2006 2007 2006 2007 2006 2007 2006
Unaudited Unaudited
£000 £000 £000 £000 £000 £000 £000 £000
Revenue
External 20,377 16,153 1,944 2,418 3,224 4,307 25,545 22,878
Inter-divisional - - - - - - - -
Total revenue 20,377 16,153 1,944 2,418 3,224 4,307 25,545 22,878
Capital
expenditure 1,658 1,237 2 10 4 - 1,664 1,247
3rd 28th 3rd Nov., 28th 3rd Nov., 28th 3rd Nov., 28th April,
Nov., April, 2007 April, 2007 April, 2007 2007
2007 2007 2007 2007
Unaudited Audited
Assets 37,792 35,035 1,224 1,432 897 688 39,913 37,155
Liabilities 21,734 20,302 130 105 13 62 21,877 20,469
7 Property, plant and equipment
Acquisitions and disposals
During the twenty seven weeks ended 3rd November, 2007, the Group acquired assets with a cost of £1,664,000
(2006 - £1,247,000).
Assets with a net book value of £86,000 were disposed of by the Group during the 27 weeks ended 3rd November,
2007 (2006 - £97,000), resulting in a net gain on disposal of £4,000 (2006 - loss of £8,000).
8 Provisions
3rd Nov., 28th Oct.,
2007 2006
Unaudited Unaudited
Opening balance (113) (179)
Utilised 31 33
(82) (146)
The provision is an onerous lease provision which will be utilised over the next year.
9 Pensions plans
The Company operates an employee defined benefit scheme called the MS International plc Retirement and Death
Benefits Scheme ('the Scheme'). IAS19 requires disclosure of certain information about the Scheme as follows:
• The employer operates a defined contribution pension scheme. Until 6th 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, 2005 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 2006, the employer has paid
80,000 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 through the
Statement of Recognised Income and Expense.
10 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 £5,404,952 at 3rd November, 2007 (2006 - £972,204).
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.
11 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 £667,000 (2006 - £353,000)
Sales of goods and services £510,000 (2006 - £172,000)
The following balances relating to the above transactions are included in the consolidated balance sheet as at 3rd
November, 2007.
Amounts owed by joint venture £8,000 (2006 - £7,000)
Amounts owed to joint venture £56,000 (2006 - £45,000)
The following transactions took place, during the period, between the Company and other subsidiaries in the Group.
Sales of goods and services £1,525,000 (2006 - £1,834,000)
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.
12 Financial instruments
At 3rd November, 2007 the Group held forward exchange contracts over currency to the value of 957,000 Euro designated as
hedges of expected future purchases from suppliers in Europe.
13 Reconciliation of Movement in Equity
Issued Capital Other Revaluation Special Foreign Own Retained Total
capital redemption reserves reserve reserve exchange shares earnings
reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 29th April, 2006 1,871 870 1,544 2,942 1,629 (93) (738) 5,082 13,107
Total recognised
income and expense
for the period - - - - - (29) - 663 634
Dividend paid - - - - - - - (364) (364)
At 28th October, 2006 1,871 870 1,544 2,942 1,629 (122) (738) 5,381 13,377
Total recognised
income and expense
for the period - - - - - (29) - 3,438 3,409
Dividend paid - - - - - - - (100) (100)
At 28th April, 2007 1,871 870 1,544 2,942 1,629 (151) (738) 8,719 16,686
Total recognised
income and expense
for the period - - - - - (28) - 1,950 1,922
Dividend paid - - - - - - - (544) (544)
Repurchase of shares (20) 20 - - - - - (375) (375)
Exercise of options - - - - - - 347 - 347
At 3rd November, 2007 1,851 890 1,544 2,942 1,629 (179) (391) 9,750 18,036
14 Principal Risks and Uncertainties
The principal risks and uncertainties which could impact the Group's long term performance remain those
detailed in note 2 of the Report of the Directors in the Group's 2007 Annual Report and Financial Statements,
a copy of which is available at Balby Carr Bank, Doncaster DN4 8DH. The Chairman's Statement includes a
commentary of the primary uncertainties affecting the Group for the remaining 6 months of the year.
15 Statement of Directors' Responsibilities
The directors 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.
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