Half-yearly Report
CEPS PLC (THE "GROUP" OR THE "COMPANY")
HALF-YEARLY UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2009
CHAIRMAN'S STATEMENT
Review of the period
As anticipated in my statement with the annual report and accounts in April,
the first half of 2009 has seen the impact of the global recession upon our
trading performance.
Revenue across the Group is down 7.8% to £7.5m (2008: £8.1m) with the Davies
Odell business in particular feeling the brunt of sharp de-stocking by its
customers after a better than expected finish to 2008. In spite of Group costs
having been carefully restrained, operating profit has fallen overall by 38% to
£376,000 (2008: £611,000).
After finance costs and provision for taxation, the profit for the period was £
223,000 (2008: £400,000) and earnings per share basic and diluted have fallen
to 2.14p (2008: 4.15p).
Cash management through the period has been excellent, with total Group net
debt reduced from £2.92m to £2.06m. As a result, and with the Group still
satisfactorily profitable in extreme trading circumstances, gearing has fallen
from 57% at the year end to 38% at the end of June.
Financial review
In the six months to 30 June 2009 the Group has generated £801,000 of cash from
its operating activities (2008: £676,000) of which £418,000 (2008: £422,000)
has been used to repay bank loans and the capital element of hire purchase
agreements. With interest charges falling to £91,000 (2008: £125,000) and
capital expenditure held at £15,000 (2008: £21,000) a net amount of £252,000
has been added to cash and cash equivalents, taking the total from £532,000 at
the year end to £784,000 at 30 June 2009.
Group assets increased to £11,115,000 (2008: £10,960,000). Group borrowings,
including £1,247,000 (2008: £1,910,000) of bank loans secured against the
assets of subsidiary companies and with no recourse to the rest of the Group,
were reduced to £2,843,000 (2008: £3,398,000). Total equity has been increased
by 12.5% to £5,361,000 (2008: £4,765,000).
Operational review
1. Davies Odell
Davies Odell had a particularly difficult start to the year. Many of its
customers, reacting to the growing depth of the recession, implemented sizeable
stock reduction programmes. Sales in January and February, usually quite
buoyant months, were particularly poor. Replacement top-piece sales for ladies
stiletto heels have also begun to slow reflecting fashion trends, no doubt, but
also available discretionary spend.
Equally difficult has been sustaining sales and margin in the matting business.
Raised prices could not recover the margin effect of matting stock purchased at
a dollar exchange rate of approximately $1.45, compared with an exchange rate
of $1.95 a year previously. Overall sales are down about 30% but contribution
fell by only 18%, as business has been accepted more selectively.
The sales of Forcefield body armour have continued to grow at a rate in excess
of 10% year on year. Considerable effort and funding is going in to both the
re-development of ranges for launch in the Spring of 2010 and more particularly
the immediate sales effort. Across the whole of the Davies Odell operation
overheads have been controlled to 2008 levels and, despite the much reduced
margins, cash and bank debt have been well managed.
The segmental result at £60,000 (2008: £230,000) reflects the difficult
circumstances experienced in the first half year.
2. Friedman's
Friedman's has done a good job in the first half of 2009 in sustaining sales at
the level of the first half of the previous year. After the reduction in 2008
profit as a result of the year end euro exchange rate, improved profit margins
have been achieved in 2009 as sterling has recovered and price increases have
been successfully implemented.
Overheads have been tightly controlled and the segmental result has improved by
21% to £163,000 (2008: £135,000).
3. Sunline
Overall the Sunline performance has held up reasonably well, with the Solutions
business now beginning to deliver meaningful profitability. Overall turnover is
down 6.2%, with Solutions however showing an increase over our budgeted
expectations.
The Polywrap business has seen intensified competition as the recession has
taken hold. Margins and plant efficiency have come under considerable pressure
but the management and workforce have responded flexibly with short time
working, reduced shifts, and a concerted drive to maximise the profit on each
`job'. During the period several competitors have gone out of business and many
others appear to be accepting work at unworkable prices.
The Solutions business has both widened and deepened its customer base, and
managed to achieve much more stability in its capacity utilisation and hence
month-on-month profitability. Further investment in printing equipment has
recently been agreed to enable this to continue.
Given the difficulties, the segmental result has held up well at £425,000
(2008: £538,000).
Dividend
With the effect of the recession now firmly appearing in the Group's results,
we continue to believe it appropriate to conserve cash until a solid recovery
in profitability is well under way. As a result, the payment of a dividend is
not recommended at this stage.
Prospects
The considerable improvement in the Group's cash and net debt position leaves
it well placed to fund modest acquisitions when the availability of credit
improves. The Board continues to review investment opportunities, particularly
where valuations have adjusted to the current economic climate.
Trading in all the businesses has stabilised in the second quarter of the year,
from the poor levels seen in the first quarter. We anticipate no fundamental
improvement in this pattern for the second half of the year, as growth in
consumer spending only very tentatively returns across the globe.
We will continue to manage our cash and balance sheet with great care, building
further upon the position reported in this statement. These results verify the
confidence of the Board that the Group's management teams can continue to
outperform their respective competition in the most testing trading
circumstances of recent times.
Richard Organ
Chairman
21 September 2009
CEPS PLC
Consolidated statement of comprehensive income
Six months ended 30 June 2009
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2009 2008 2008
£'000 £'000 £'000
Revenue 7,503 8,140 16,796
Cost of sales (6,520) (6,861) (14,228)
Gross profit 983 1,279 2,568
Net operating expenses (607) (668) (1,420)
Operating profit 376 611 1,148
Analysis of operating profit
- Trading 512 785 1,514
- Group costs (136) (174) (366)
Finance costs (91) (125) (241)
Profit before tax 285 486 907
Taxation (62) (86) (193)
Profit for the period from 223 400 714
continuing operations
Other comprehensive income
Actuarial gain on defined benefit - - 59
pension plans
Other comprehensive income for the - - 59
period, net of tax
Total comprehensive income for the 223 400 773
period
Profit attributable to:
Equity holders of the Company 178 345 624
Minority interest 45 55 90
223 400 714
Total comprehensive income
attributable to:
Equity holders of the Company 178 345 683
Minority interest 45 55 90
223 400 773
Earnings per share
- basic and diluted 2.14p 4.15p 7.51p
CEPS PLC
Consolidated Balance Sheet
As at 30 June 2009
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2009 2008 2008
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 1,492 1,145 1,610
Intangible assets 4,819 4,748 4,826
Deferred tax asset - 45 -
6,311 5,938 6,436
Current assets
Inventory 1,692 1,481 1,795
Trade and other receivables 2,304 2,913 2,828
Deferred tax asset 24 73 24
Cash and cash equivalents 784 555 665
4,804 5,022 5,312
Total assets 11,115 10,960 11,748
Equity
Capital and reserves attributable to
equity holders of the Company
Called up share capital 416 416 416
Share premium 2,756 2,756 2,756
Profit and loss account 1,895 1,379 1,717
5,067 4,551 4,889
Minority interest in equity 294 214 249
Total equity 5,361 4,765 5,138
Liabilities
Non-current liabilities
Borrowings 1,436 1,659 1,751
Retirement benefit liabilities - 126 -
Provisions 55 55 55
1,491 1,840 1,806
Current liabilities
Borrowings 1,407 1,739 1,834
Trade and other payables 2,668 2,485 2,819
Current tax liabilities 188 131 151
4,263 4,355 4,804
Total liabilities 5,754 6,195 6,610
Total equity and liabilities 11,115 10,960 11,748
CEPS PLC
Consolidated Cash Flow Statement
Six months ended 30 June 2009
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2009 2008 2008
£'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations 801 676 1,388
Tax paid (25) - (16)
Interest paid (91) (125) (222)
Net cash generated from operations 685 551 1,150
Cash flow from investing activities
Purchase of property, plant and (15) (21) (78)
equipment
Disposal of property, plant and - - 11
equipment
Purchase of computer software and - - (1)
website development
Net cash used in investing activities (15) (21) (68)
Cash flow from financing activities
Repayment of bank loans (324) (347) (686)
Repayment of capital element of hire (94) (75) (240)
purchase agreements
Net cash used in financing activities (418) (422) (926)
Net increase in cash and cash 252 108 156
equivalents
Cash and cash equivalents at the 532 376 376
beginning of the period
Cash and cash equivalents at the end of 784 484 532
the period
Cash flows from operating activities
The reconciliation of operating profit
to cash flows from operating activities
is as follows:
Operating profit for the period 376 611 1,148
Adjustments for:
Depreciation and amortisation charge 140 118 275
Loss on disposal of property, plant and - - 23
equipment
Difference between pension charge and (27) (36) (80)
cash contribution
Operating profit before changes in 489 693 1,366
working capital and provisions
Decrease/(increase) in inventory 103 (90) (404)
Decrease in trade and other receivables 524 238 323
(Decrease)/increase in trade and other (315) (165) 103
payables, including trade receivables
backed working capital facilities
Cash generated from operations 801 676 1,388
Cash and cash equivalents
Cash at bank and in hand 784 555 665
Bank overdrafts repayable on demand - (71) (133)
784 484 532
CEPS PLC
Consolidated statement of changes in shareholders' equity
Six months ended 30 June 2009
Share Share Profit and Minority Total
capital premium loss interest
account
£'000 £'000 £'000 £'000 £'000
At 1 January 2008 416 2,756 1,034 159 4,365
(audited)
Profit for the period - - 345 55 400
Total comprehensive - - 345 55 400
income for the period
At 30 June 2008 416 2,756 1,379 214 4,765
(unaudited)
Actuarial gain - - 59 - 59
Profit for the period - - 279 35 314
Total comprehensive - - 338 35 373
income for the period
At 31 December 2008 416 2,756 1,717 249 5,138
(audited)
Profit for the period - - 178 45 223
Total comprehensive - - 178 45 223
income for the period
At 30 June 2009 416 2,756 1,895 294 5,361
(unaudited)
General information
The Company is a limited liability company incorporated and domiciled in the
UK. The address of its registered office is 11 George Street, Bath, BA1 2EH and
the registered number of the company is 507461.
The Company has its primary listing on AIM.
This condensed consolidated half-yearly financial information was approved for
issue on 21 September 2009.
This condensed consolidated half-yearly financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2008 were approved by the
Board of directors on 29 April 2009 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
This condensed consolidated half-yearly financial information has not been
reviewed or audited.
Basis of preparation
This condensed consolidated half-yearly financial information for the six
months ended 30 June 2009 has been prepared in accordance with IAS 34, `Interim
financial reporting' as adopted by the European Union. The condensed
consolidated half-yearly financial information should be read in conjunction
with the annual financial statements for the year ended 31 December 2008, which
have been prepared in accordance with IFRSs as adopted by the European Union.
Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the annual financial statements for the year ended 31 December 2008,
as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual earnings.
The following IFRS became effective from 1 January 2009 and have been adopted
within this report and the comparatives, where applicable, restated:
* IFRS 8, `Operating segments'.
* IAS 1 (revised), `Presentation of Financial Statements'.
The following IFRS, amendments and interpretations have not been adopted by the
Group in this report, as they are not deemed to be relevant:
* Amendments to IAS 23, `Borrowing costs'
* IFRS 3 (revised), `Business Combinations'
* IAS 27 (revised), `Consolidated and Separate Financial Statements'
* Amendments to IFRS 2, `Share-based Payments'
* Amendments to IAS 39, `Financial Instruments: Recognition and Measurement'
Notes to the financial information
1. Segmental analysis
All activities are classed as continuing.
The chief operating decision maker of the Group is its Board. Each operating
segment regularly reports its performance to the Board which, based on those
reports, allocates resources to and assesses the performance of those operating
segments.
Operating segments and their principal activities are as follows:
* Davies Odell, the manufacture and distribution of protection equipment,
matting and footwear components
* Friedman's, the conversion and distribution of specialist Lycra
* Sunline, a supplier of services to the direct mail market
The United Kingdom is the main country of operation from which the Group
derives its revenue and operating profit and is the principal location of the
assets of the Group. The Group information provided below therefore also
represents the geographical segmental analysis.
The Board assesses the performance of each operating segment by a measure of
adjusted earnings before interest, tax and group costs. Other information
provided to the Board is measured in a manner consistent with that in the
financial statements.
The 2008 results have, where necessary, been restated to comply with the new
accounting standards.
i) Results by segment
Unaudited 6 months to 30 June 2009
Davies Friedman's Sunline Group
Odell
2009 2009 2009 2009
£'000 £'000 £'000 £'000
Revenue 2,349 1,628 3,526 7,503
Segmental result (EBITDAE) 60 163 425 648
Depreciation charge (15) (14) (107) (136)
Group costs (136)
Interest expenses (91)
Profit before taxation 285
Taxation (62)
Profit for the period 223
Unaudited 6 months to 30 June 2008
Davies Friedman's Sunline Group
Odell
2008 2008 2008 2008
£'000 £'000 £'000 £'000
Revenue 2,734 1,646 3,760 8,140
Segmental result (EBITDAE) 230 135 538 903
Depreciation charge (23) (17) (78) (118)
Group costs (174)
Interest expenses (125)
Profit before taxation 486
Taxation (86)
Profit for the period 400
ii) Assets and liabilities by segment
Unaudited as at 30 June
Segment assets Segment liabilities Segment net assets
2009 2008 2009 2008 2009 2008
£'000 £'000 £'000 £'000 £'000 £'000
CEPS Group 110 133 (43) (72) 67 61
Davies Odell 1,906 2,014 (862) (1,028) 1,044 986
Friedman's 2,932 3,054 (1,580) (2,062) 1,352 992
Sunline 6,167 5,759 (3,269) (3,033) 2,898 2,726
Total - Group 11,115 10,960 (5,754) (6,195) 5,361 4,765
2. Earnings per share
Basic earnings per share is calculated on the profit after taxation for the
period attributable to equity holders of the Company of £178,000 (2008, £
345,000) and on 8,314,308 (2008, 8,314,233) ordinary shares, being the weighted
number in issue during the period.
Diluted earnings per share is calculated on the weighted number of ordinary
shares in issue adjusted to reflect the potential effect of the exercise of
share warrants. No adjustment is required in either period because the fair
value of warrants was below the exercise price.
3. Net debt and gearing
Gearing ratios at 30 June 2009 and 31 December 2008 are as follows:
30 June 31 December
2008
2009
£'000 £'000
Total borrowings 2,843 3,585
Less: cash and cash equivalents (784) (665)
Net debt 2,059 2,920
Total equity 5,361 5,138
Gearing ratio 38% 57%
4. AIM Compliance Committee
In accordance with AIM Rule 31 the Company is required to have in place
sufficient procedures, resources and controls to enable its compliance with the
AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its
compliance with the AIM Rules whenever appropriate and take that advice into
account; provide the Company's Nomad with any information it requests in order
for the Nomad to carry out its responsibilities under the AIM Rules for
Companies and the AIM Rules for Nominated Advisers; ensure that each of the
Company's directors accepts full responsibility, collectively and individually,
for compliance with the AIM Rules; and ensure that each director discloses
without delay all information which the Company needs in order to comply with
AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that
information is known to the director or could with reasonable diligence be
ascertained by the director.
In order to ensure that these obligations are being discharged, the Board has
established a committee of the Board (the "AIM Committee"), chaired by Richard
Organ, a non-executive director of the Company.
Having reviewed relevant Board papers, and met with the Company's Executive
Board and the Nomad to ensure that such is the case, the AIM Committee is
satisfied that the Company's obligations under AIM Rule 31 have been satisfied
during the period under review.
5. Distribution of the Half-Yearly Report
Copies of the Half-Yearly Report will be available to the public from the
Company website, www.cepsplc.com, and from the Company Secretary at the
Company's registered address at 11 George Street, Bath BA1 2EH.
For further information please contact:-
Peter Cook, Group Managing Director
CEPS PLC
Tel: 07788 752560
Lindsay Mair, Nominated Adviser
Astaire Securities plc
Tel: 020 7448 4400
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