Interim Results
CEPS PLC
Interim results for the six months ended 30 June 2006
Chairman's Statement
Overview:
In the six months to 30 June 2006 the Group has seen profit levels very much in
line with the first half of the previous year. Turnover has risen steadily, but
margins have come under pressure, both from raw material costs and consumer
price resistance. Steps to redress this margin erosion have been taken, which
should bear fruit in the second half.
Both the main business units have completed highly satisfactory relocations to
streamline their activities. I referred in the Annual Report and Accounts for
2005 to the successful Friedman's move which has enabled customers to be shown
their full range of capabilities and encouraged further turnover growth.
At the end of June within Davies Odell, responsibility for all footwear related
activities was transferred, along with the associated stock, to Rushden. This
has enabled this business to more fully leverage its excellent customer
relations in this arena, and leaves the Kettering part of the business free to
concentrate on its various streams of matting business and to develop the new
product opportunities it has identified.
Excellent progress has been made to reduce net debt since the 2005 year-end,
with a reduction of £278,000 from £1,220,000 to £942,000. This has been
achieved through steady profitability, focused capital spending and careful
control of working capital.
Financial Review:
In the first half of 2006 the Group produced an operating profit slightly
behind the same period last year of £113,000 (2005, £131,000). This fall can
largely be attributed to a small reduction in Friedman's operating margin and
additional Group costs for pensions and legal fees. After a reduction in
interest payable to £52,000 (2005, £59,000) and taxation of £6,000 (2005, £nil)
the profit for the period, after minority interests, was £48,000 (2005, £
52,000). Earnings per share (fully diluted) were unchanged at 0.03p (2005,
0.03p).
Operational Review:
By comparison with the first half of 2005, Group sales rose by 9% to £3.53
million, but segmental profit, before Group costs, was down 4%, reflecting the
narrower margins encountered, particularly at Friedman's. Overall Group costs
were up by £10,000 over the previous year reflecting agreed additional
contributions to the pension scheme and some further legal costs related to the
hive-down of Davies Odell.
Davies Odell has had a better first half than 2005 with turnover up 5.2% and
segmental profit, before group costs, up by 37% to £118,000. In the matting
business emphasis has been placed on driving improved margins, notwithstanding
upward pressures from raw material and energy costs. I am pleased to report
margins have improved over 2005 and, with sales up by 5.0% and overheads
slightly down, operating profit is ahead of the corresponding half-year in
2005.
In the footwear business first half sales are up 5.4%, with a particularly
strong showing from all parts of the footwear repair sector. Here margins have
been eroded slightly as a result of sharp increases in raw material prices, but
steps have already been taken to mitigate the impact of these increases by
immediate price increases where possible. In consequence, operating profit is
unchanged from the first half of last year.
At Freidman's sales for the first half were up by 16% by comparison with the
five month period of the previous year but margins have fallen by about 2
percentage points, leaving segmental profit before group costs at £92,000
(2005, £132,000). The testing trading conditions encountered in the second half
of 2005 carried over into the first half of 2006. The lively new website,
www.friedmans.co.uk, has been launched and will be used as a vehicle to promote
the business more widely.
Dividend:
The Board is not recommending the payment of an interim dividend (2005, nil).
It is nevertheless committed to returning to the dividend list, and to paying a
growing dividend as part of investor's overall return from their investment.
Prospects:
The second half has started encouragingly at Davies Odell with sales levels
ahead of both last year and our internal budgets. Margins remain under pressure
but, with the steps taken to increase prices and mitigate costs, we expect to
see an improvement in profitability during the second half of 2006.
At Friedman's the steady turnover growth continues and we expect to see an
improving trend in margins as negotiated lycra material price reductions flow
through and the mix of business is more heavily orientated to bespoke products.
During the second half the new website will be made accessible in five further
languages enabling the continued growth of European distribution.
Taken together we expect to see a significant improvement in operating
profitability in the second half of 2006.
With regard to acquisitions, considerable efforts have gone into reviewing
suitable investments and the Board is hopeful of bringing an opportunity to
shareholders within the current year.
Richard Organ
Chairman
28 September 2006
CEPS PLC
Consolidated Profit and Loss Account
Six months ended 30 June 2006
Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Turnover 3,526 3,230 6,919
continuing operations
Operating profit 113 131 168
Analysis of operating profit
Continuing operations, trading 210 218 380
Continuing operations, Group costs (97) (87) (212)
Interest payable (52) (59) (115)
Profit on ordinary activities 61 72 53
before taxation
Taxation (6) - (6)
Profit after taxation 55 72 47
Minority interests (7) (20) (7)
Profit for the period 48 52 40
Dividends - - -
Retained profit for the period 48 52 40
Earnings per share 0.03p 0.03p 0.02 p
- basic 0.03p 0.03p 0.02 p
- diluted
Statement of total recognised
gains and losses
£'000 £'000 £'000
Profit for the period 48 52 40
Actuarial loss recognised in - - (272)
pension scheme
Movement on deferred tax relating - - 82
to pension scheme
Total recognised gains/(losses) 48 52 (150)
for the period
Prior year adjustment - (454) (318)
Total recognised profit/(losses) 48 (402) (468)
since last annual report
CEPS PLC
Consolidated Balance Sheet
As at 30 June 2006
Unaudited Audited
As at As at As at
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Net assets employed
Fixed Assets 1,489 1,502 1,529
Intangible 288 303 259
Tangible
1,777 1,805 1,788
Current assets :
Stocks 1,154 1,171 1,087
Debtors 1,304 1,267 1,428
Cash at bank and in hand 39 33 24
2,497 2,471 2,539
Creditors: amounts falling due (2,161) (1,951) (2,093)
within one year
Net current assets 336 520 446
Total assets less current 2,113 2,325 2,234
liabilities
Creditors : amounts falling due (745) (997) (878)
after more than one year
Provisions for liabilities and (36) (4) (42)
charges
Net assets excluding pension 1,332 1,324 1,314
liability
Pension liability (435) (433) (471)
Net assets including pension 897 891 843
liability
Capital and reserves
Called up share capital 178 178 178
Share premium 676 645 676
Profit and loss account (90) (72) (138)
Total equity shareholders' funds 764 751 716
Minority interests 133 140 127
Capital employed 897 891 843
CEPS PLC
Consolidated Cash Flow Statement
Six months ended 30 June 2006
Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Reconciliation of operating profit
to net cash flow from operating
activities
Operating profit 113 131 168
Depreciation and amortisation 91 78 170
charges
Difference between pension charge (36) - (53)
and cash contributions
Increase in stocks (67) (147) (63)
Decrease/(increase) in debtors 124 24 (120)
Increase/(decrease) in creditors 185 (86) 36
Net cash inflow from operating 410 - 138
activities
Cash Flow Statement
Net cash inflow from operating 410 - 138
activities
Returns on investments and (52) (59) (115)
servicing of
finance
Taxation - - (68)
Capital expenditure and financial (80) (35) (41)
investment
Acquisition - (1,563) (1,599)
278 (1,657) (1,685)
Financing (133) 1,288 1,197
Increase/(decrease) in cash 145 (369) (488)
Reconciliation of net cash flow to
movement in net debt
Increase/(decrease) in cash in the 145 (369) (488)
period
Cash decrease/(increase) 133 (560) (438)
from change in debt
Change in net debt 278 (929) (926)
Net debt at 1 January (1,220) (294) (294)
Net debt at period end (942) (1,223) (1,220)
Notes to the Financial Statements
1. Segmental analysis
Unaudited Friedman's Davies Odell Group
6 months to 30 June 2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 1,374 1,184 2,152 2,046 3,526 3,230
Segmental profit/ 92 132 118 86 210 218
(loss)
before Group costs
Group costs (97) (87)
Profit before interest 113 131
and taxation
Interest payable (52) (59)
Group profit before 61 72
taxation
Net assets 1,432 1,633 842 914 2,274 2,547
Pension liability (435) (433)
Unallocated net (942) (1,223)
liabilities
Total net assets 897 891
Audited Friedman's Davies Odell Group
Year ended 31 December £'000 £'000 £'000
2005
Turnover 2,410 4,509 6,919
Segmental profit 161 219 380
before Group costs
Group costs (212)
Profit before interest and 168
taxation
Interest payable (115)
Group profit before 53
taxation
Net assets 1,517 1,017 2,534
Pension liability (471)
Unallocated net (1,220)
liabilities
Total net assets 843
Friedman's converts and distributes specialist Lycra. The investment in
Friedman's was acquired on 25 January 2005.
Davies Odell manufactures and distributes protection equipment, matting and
footwear components.
2. Earnings per share
Basic earnings per share is calculated on the profit on ordinary activities
after taxation and minority interests of £48,000 (2005, £52,000) and on
178,191,426 (2005, 172,451,369) 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. In 2005 diluted earnings per share is calculated on 190,299,165
ordinary shares but in 2006 no adjustment is required because the fair value of
warrants was below the exercise price.
3. Reclassification of debtor backed working capital facilities
In 2005 the Group reviewed the accounting treatment of its debtor backed
working capital facilities and included them within creditors. The amount of
these facilities at 31 December 2005 was £416,000, at 30 June 2005 £410,000 and
at 31 December 2004 £271,000. These were previously included within bank
overdrafts and comparative figures have been restated.
4. Status of the financial information
The financial information has been prepared under the historical cost
convention and in accordance with the accounting policies disclosed in the 2005
Report and Accounts. The information does not constitute full accounts within
the meaning of the Companies Act 1985. The results for the half year to 30 June
2006 are unaudited. The abridged profit and loss account, balance sheet and
cash flow statement for the year ended 31 December 2005 were extracted from the
published accounts which received an unqualified audit report and which have
been delivered to the Registrar of Companies.
5. Distribution of the interim report
A copy of the interim report is being circulated to shareholders. Further
copies will be available to the public from the Company Secretary at the
company's registered address at 11 George Street, Bath BA1 2EH or from City
Financial Associates Limited, Pountney Hill House, 6 Laurence Pountney Hill,
London EC4R 0BL.
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