Interim Results

Alumasc Group PLC 08 February 2007 Thursday 8 February 2007 THE ALUMASC GROUP PLC - INTERIM ANNOUNCEMENT Alumasc (ALU.L), the premium building and engineering products group, announces a much improved first-half trading performance in respect of the half year to 31 December 2006 compared with the half year to 31 December 2005, with increased revenue and operating profit in both of the Group's divisions, Building Products and Engineering Products. FINANCIAL HIGHLIGHTS • Revenue increased by 26% to £75.1m from £59.4m. • Profit before tax on continuing operations increased by 34% to £3.6m from £2.7m on a like-for-like basis (excluding the £0.2m gain on a property disposal last year). • Earnings per share on continuing operations increased by 18.6% to 7.0p from 5.9p (an increase of 34.6% excluding the prior year property disposal gain). • Interim dividend per share is increased by 3.3% to 3.1p from 3.0p, payable on 5 April 2007 to shareholders on the register at the close of business on 9 March 2007. • Dividend cover increased to 2.3 times from 2.0 times. COMMERCIAL HIGHLIGHTS • The main drivers of first-half profitable growth were: - increased customer demand for specialist construction products, namely GATIC access covers and Slotdrain products; - focus on non-automotive diesel engine component supply at Alumasc Precision; and - a near trebling in worldwide zinc prices benefiting Brock Metal. • Alumasc's Building Products division increased revenue by 2.9% to £26.7m and grew operating profit by 2.4% to £2.6m, representing approximately 36% of group revenue and 63% of group operating profit. Revenue and profit growth were constrained by a lower level of building refurbishment work, particularly in the social housing sector, although there were good performances in Construction Products and in other niche businesses. • In Engineering Products, Precision Components grew first-half revenue from continuing operations by almost 30% to over £16.5m. Operating profit from continuing operations increased by more than 40% to £0.9m, further evidence of the strong recovery in this business since the loss of MG Rover in 2005. • Also in Engineering Products, Industrial Products reported a growth in revenue of £11.2m to £31.9m with first-half operating profit increasing to £0.6m from £0.1m, driven by an exceptional half year performance from Brock Metal, a producer of zinc and aluminium alloys. John McCall, Chairman, stated: "As has been the case in recent years, the Board expects that there will be a seasonal bias in favour of the Group's second-half results although, after this year's stronger first half, the bias is unlikely to be as marked as last year. We expect that second-half year trading conditions will be broadly similar to those in the first half and therefore the Board is optimistic that Alumasc will report another good full year result, particularly if the early signs of a recovery in social housing spend translate into higher activity levels as the year progresses. The Group continues actively to seek acquisitions for its Building Products Division" Presentation: Today, from 09:30am to 10:30am, a presentation to broker's analysts and private client investment advisers will be held at the offices of KBC Peel Hunt, 111 Old Broad Street, London EC2N 1PH. Enquiries: The Alumasc Group plc 01536 383844 Paul Hooper (Chief Executive) info@alumasc.co.uk Andrew Magson (Finance Director) Bankside Consultants Limited Charles Ponsonby 020 7367 8851 charles.ponsonby@bankside.com CHAIRMAN'S STATEMENT Overview Alumasc's first-half trading performance was much improved, with Group revenue up by 26% to £75.1 million and profit before tax on continuing operations up by over 34% to £3.6 million on a like-for-like basis (excluding the gain on a property disposal last year). Revenue and operating profit both increased compared with the prior period in each of the Group's divisions, Building Products and Engineering Products. The main drivers of this profitable growth were increased customer demand for Alumasc's specialist construction products, further success in the focus on non-automotive diesel engine component supply at Alumasc Precision and a near trebling in worldwide zinc prices benefiting Brock Metal. First-half earnings per share from continuing activities increased by 18.6% (or 34.6% excluding the prior year property gain) to 7.0p. In the absence of any discontinued operations in the first half of this year, overall Group earnings per share increased substantially from 2.8p to 7.0p. At the interim stage last year, the Group dividend was maintained at 3.0p per share, despite a 26% reduction in interim trading profit following the loss of MG Rover, Alumasc Precision's major customer, in 2005. As a consequence, interim dividend cover reduced to 2.0 times continuing earnings. Following the recovery in profitability in the first half of this year, the Board has declared a 3.3% increase in the interim dividend from 3.0p per share to 3.1p per share, covered 2.3 times by earnings. Building Products Alumasc's Building Products division increased revenue by 2.9% to £26.7 million and grew operating profit by 2.4% to £2.6 million, representing approximately 36% of Group revenue and 63% of Group operating profit. First-half divisional return on sales was maintained at 9.8%. Divisional revenue and profit growth were constrained by a lower general level of building refurbishment work, particularly in the social housing sector where there were delays in funds being released by local authorities and housing associations under the Decent Homes Initiative, leading to lower sales of MR facade and Pendock casing products. Revenue rose by over 30% across Alumasc's Construction Products businesses, with strong demand experienced by Elkington Gatic for both specialist access covers and Slotdrain products. An increasing proportion of sales is now being made overseas. Within Alumasc Exterior Building Products (AEBP), sales of specialist waterproofing systems and green roof products grew by over 15%, and revenue from rainwater and drainage products grew by nearly 5%. The metal roofing business had a quieter first half, following lower sales to the major Fjaardal project in Iceland, which was substantially complete at the end of the last financial year. Both the MR facades business within AEBP and Alumasc Interior Building Products (AIBP) more generally suffered from the lower public housing refurbishment activity described above, leading to a reduction of 20% in the combined revenue of these businesses. Both have responded with cost reduction initiatives, including improved sourcing arrangements and lowering overhead costs. Roof-Pro, a provider of modern support systems that elevate building services such as air-conditioning and cooling units above the waterproofing layer on flat roofs thereby enabling lower maintenance and refurbishment costs, experienced improving activity levels as the first half progressed whilst strengthening its sales team during the period. Timloc had a good first half with revenue 12% ahead driven by growth in demand for cavity trays and roof and wall ventilation products, which are used in new homes. Engineering Products Precision Components First-half revenue from continuing operations grew by almost 30% at Alumasc Precision to over £16.5 million, further evidence of the strong recovery in this business since the loss of MG Rover in 2005. Operating profit from continuing operations increased by more than 40% to £0.9 million, with operating margins improving from 5.0% to 5.6%. Of the revenue growth, approximately one-third was attributable to the recovery of increased metal input costs (principally aluminium) from customers through increased selling prices. Management is focused on improving the efficiency of the manufacturing processes as many of the new customer projects won over the last eighteen months become more mature, and also sourcing bought-in components and materials more economically where possible. There have been particular successes in increasing sales of precision components to non-automotive diesel engine manufacturers such as Caterpillar, Perkins, Deutz and JCB with around two-thirds of sales now to the non-automotive sector and ongoing automotive sales focused on premium brand manufacturers such as Aston Martin and BMW. Industrial Products Alumasc's Industrial Products businesses reported a growth in revenue of £11.2 million to £31.9 million with first-half operating profit increasing to £0.6 million from £0.1 million driven by an exceptional half-year performance from Brock Metal, a producer of zinc and aluminium alloys. Some £10.0 million of the revenue growth was attributable to recovery of increased zinc costs following a near trebling of average year-on-year zinc prices caused by a worldwide shortage in supply. Brock has managed the tight zinc supply situation well by focusing on provision of quality service to core, long-standing customers. While the increased profitability is welcome, increased zinc prices have also led to higher working capital requirements, and a higher concentration of customer credit risk, both of which are being managed carefully. Worldwide spot zinc prices have now fallen from their peak in the Autumn, but remain significantly above prior year levels. Alumasc's other Industrial Products business, Alumasc Dispense, a supplier to the brewing industry, experienced weak first-half demand due to a down-turn in brewers' capital spend on point-of-sale dispense equipment. Finance The Group's net borrowings rose in the period from £3.4 million to £5.9 million, driven by the impact on working capital of the substantial increase in revenue at Brock Metal described above and the Group's normal working capital cycle, including the payment of last year's final dividend. Management continues to focus on tight working capital control and efficient conversion of profit into cash. Following last year's higher full year capital investment spend of £5.3 million, capital expenditure requirements were lower in this year's first half, at just £1.7 million. Annualised first-half post tax return on average capital invested improved from 10.1% to 12.4%, well ahead of Alumasc's estimated cost of capital, driven by the increased level of profitability. The Group is also taking steps to dispose of surplus property wherever possible to reduce overall capital invested, while benefiting from utilisation of tax losses brought forward. Outlook As has been the case in recent years, the Board expects that there will be a seasonal bias in favour of the Group's second-half results although, after this year's stronger first half, the bias is unlikely to be as marked as last year. We expect that second-half year trading conditions will be broadly similar to those in the first half and therefore the Board is optimistic that Alumasc will report another good full year result, particularly if the early signs of a recovery in social housing spend translate into higher activity levels as the year progresses. The Group continues actively to seek acquisitions for its Building Products division. John McCall Chairman 8 February 2007 UNAUDITED CONSOLIDATED INCOME STATEMENT for the half year to 31 December 2006 Half year Year ended 31 December 30 June 2006 2005 2006 Notes £'000 £'000 £'000 Continuing operations Revenue 2 75,058 59,380 132,706 Cost of sales (59,158) (44,898) (99,757) Gross profit 15,900 14,482 32,949 Net operating expenses (11,777) (11,196) (23,979) Trading profit 2 4,123 3,286 8,970 Profit on disposal of property 242 242 Operating profit 4,123 3,528 9,212 Finance revenue 14 17 22 Finance costs (335) (252) (568) Other finance expense - pensions (200) (398) (786) Share of post tax profit in associates 2 - 30 23 Profit before taxation 3,602 2,925 7,903 Income tax expense 4 (1,124) (844) (2,408) Profit for the period from continuing 2,478 2,081 5,495 operations Discontinued operations Loss for the period from discontinued 3 - (1,103) (1,551) operations Profit for the period 2,478 978 3,944 Profit for the period attributable to: Equity holders of the parent 2,455 978 3,928 Minority interest 23 - 16 2,478 978 3,944 Pence Pence Pence Basic earnings per share - continuing operations 7.0 5.9 15.5 - discontinued operations - (3.1) (4.4) 6 7.0 2.8 11.1 Diluted earnings per share - continuing operations 6.9 5.9 15.5 - discontinued operations - (3.1) (4.4) 6 6.9 2.8 11.1 UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the half year to 31 December 2006 Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 As restated £'000 £'000 £'000 Income and expense recognised directly in equity Actuarial (loss)/ gain on defined (1,900) (3,249) 3,784 benefit pensions Movement in cash flow hedging position 7 (37) 1 Tax on items taken directly to or 569 727 (1,135) transferred from equity Net (expense)/ income recognised directly in (1,324) (2,559) 2,650 equity for the period Profit for the period 2,478 978 3,944 Total recognised income/ (expense) for the 1,154 (1,581) 6,594 period Attributable to: Equity holders of the parent 1,131 (1,581) 6,578 Minority interest 23 - 16 1,154 (1,581) 6,594 UNAUDITED CONSOLIDATED BALANCE SHEET at 31 December 2006 31 December 31 December 30 June 2006 2005 2006 As restated Notes £'000 £'000 £'000 Assets Non-current assets Property, plant and equipment 24,525 27,029 25,407 Goodwill 5,556 5,556 5,556 Other intangible assets 435 334 563 Investments in associates - 280 - Financial assets 34 17 34 Deferred tax assets 7,570 9,600 7,292 38,120 42,816 38,852 Current assets Inventories 13,823 13,371 14,626 Trade and other receivables 29,612 25,037 31,744 Cash and short term deposits - - 167 Derivative financial assets 295 564 1,346 43,730 38,972 47,883 Non-current assets classified as held for 2,377 - 1,618 sale Total assets 84,227 81,788 88,353 Liabilities Non-current liabilities Interest bearing loans and borrowings - (288) - Employee benefits payable (22,232) (29,329) (21,283) Provisions (344) (1,342) (430) Deferred tax liabilities (1,320) (1,236) (1,245) (23,896) (32,195) (22,958) Current liabilities Bank overdraft (5,650) (3,694) (2,817) Interest bearing loans and borrowings (289) (855) (722) Employee benefits payable (3,000) (2,670) (3,024) Trade and other payables (26,136) (24,292) (31,684) Provisions (812) - (962) Income tax payable (879) (257) (534) Derivative financial liabilities (288) (601) (1,333) (37,054) (32,369) (41,076) Total liabilities (60,950) (64,564) (64,034) Net assets 23,277 17,224 24,319 Equity Called up share capital 4,412 4,412 4,412 Share premium 27,406 27,406 27,406 Other reserve 1,401 1,551 1,401 Capital redemption reserve 693 693 693 Capital reserve - own shares (133) (133) (133) Hedging reserve 8 (37) 1 Retained earnings (10,567) (16,696) (9,495) Equity attributable to equity holders of 23,220 17,196 24,285 the parent Minority interest 57 28 34 Total equity 8 23,277 17,224 24,319 CONSOLIDATED CASH FLOW STATEMENT for the half year ended 31 December 2006 Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 Notes £'000 £'000 £'000 Operating activities Operating profit from continuing 4,123 3,528 9,212 operations Adjustments for: Loss before taxation from discontinued - (1,441) (2,225) operations Depreciation 1,635 1,620 3,302 Gain on disposal of property, plant and (17) (244) (297) equipment Gain on sale of investments (32) (79) (78) Decrease/ (increase) in inventories 803 (1,347) (2,602) Decrease/ (increase) in receivables 2,138 5,017 (1,559) (Decrease)/ increase in trade and other (5,526) (2,039) 5,332 payables Movement in provisions (236) (41) 9 Movement in retirement benefit (1,175) (1,224) (2,272) obligations Cash generated from operations 1,713 3,750 8,822 Tax paid (413) (768) (1,264) Net cash inflow from operating activities 1,300 2,982 7,558 Investing activities Purchase of property, plant and equipment (1,635) (3,302) (4,953) Payments to acquire intangible fixed (34) - (390) assets Proceeds from sale of property, plant and 29 789 1,108 equipment Acquisition of subsidiary undertakings - (50) (50) net of cash acquired Proceeds from sale of business activities - 225 201 Proceeds from sale of investments 305 281 281 Net cash outflow from investing (1,335) (2,057) (3,803) activities Financing activities Net interest paid (321) (235) (546) Equity dividends paid (2,218) (2,216) (3,271) Repayment of amounts borrowed 7 (433) (410) (831) Proceeds from issue of share capital - 22 22 Net cash outflow from financing (2,972) (2,839) (4,626) activities Net decrease in cash and cash equivalents 7 (3,007) (1,914) (871) Cash and cash equivalents at beginning of (2,650) (1,780) (1,780) period Effect of foreign exchange rate changes 7 - 1 Cash and cash equivalents at end of (5,650) (3,694) (2,650) period NOTES ON THE UNAUDITED ACCOUNTS for the half year to 31 December 2006 1. Basis of preparation The interim consolidated accounts of The Alumasc Group plc and its subsidiaries have been prepared on the basis of International Financial Reporting Standards (IFRS), as adopted by the European Union, that are effective at 31 December 2006. The interim consolidated accounts have been prepared using the accounting policies set out in the statutory accounts for the financial year to 30 June 2006. The Group has not applied IAS 34: 'Interim Financial Reporting' which is not mandatory for UK groups. The interim consolidated accounts include comparative figures for the financial year ended 30 June 2006 which are an extract from the Group's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The relevant comparative financial information for the interim period to 31 December 2005, which was unaudited, has been restated to reflect a reclassification in the balance sheet of the fair value of forward metal price contracts from equity to financial liabilities following further analysis of these contracts at the year end. The impact is to decrease net assets and increase financial liabilities at 31 December 2005 by £0.6 million. The interim accounts for the half year ended 31 December 2006 are not statutory accounts; they have been neither audited nor reviewed by the Group's auditors. 2. Analysis of revenue and trading profit including associates Half year Half year 31 December 2006 31 December 2005 Total Total Continuing activities Revenue Profit Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 £'000 £'000 Building Products 26,651 2,602 25,898 2,541 25,898 2,541 Engineering Products - Precision Components 16,540 928 14,163 (796) 12,783 645 - Industrial Products 31,867 593 20,699 130 20,699 130 75,058 4,123 60,760 1,875 59,380 3,316 2. Analysis of revenue and trading profit including associates (continued) Year 30 June 2006 Total Continuing activities Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 Building Products 55,529 6,455 55,529 6,455 Engineering Products - Precision Components 30,245 (234) 28,587 1,991 - Industrial Products 48,590 547 48,590 547 134,364 6,768 132,706 8,993 3. Discontinued operations Discontinued operations in the prior periods comprise the closure of Copal Casting, a gravity aluminium diecasting manufacturer. The loss on closure comprises redundancy and other closure costs. Production ceased by the end of February 2006 and plant and equipment was either sold externally or transferred to other Alumasc Precision businesses. The results of the discontinued operations that have been included in the consolidated income statement of the prior periods are as follows: Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Revenue - 1,380 1,658 Cost of sales - (1,995) (2,695) Gross profit - (615) (1,037) Net operating expenses - - (1,188) Loss before tax - (1,441) (2,225) Income tax expense - 338 674 Loss after taxation - (1,103) (1,551) The net cash flows attributable to discontinued operations are as follows: Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Operating cash flows (202) (1,193) (1,675) Investing cash flows - (10) 241 Net cash outflow (202) (1,203) (1,434) The cash flows relating to discontinued activities in the six months to 31 December 2006 all related to items that were provided for in the prior year financial statements. Therefore there is no impact on the current half year income statement. 4. Taxation Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Current tax - UK Corporation tax - continuing operations 758 735 1,809 - discontinued operations - (415) (674) 758 320 1,135 Amounts overprovided in previous years - - (41) Total current tax 758 320 1,094 Deferred tax - continuing operations 366 109 676 - discontinued operations - 77 - 366 186 676 Amounts overprovided in previous years - - (36) Total deferred 366 186 640 tax Tax charge in the income statement 1,124 506 1,734 The tax charge in the income statement is disclosed as follows: Income tax expense on continuing 1,124 844 2,408 operations Income tax credit on discontinued - (338) (674) operations 1,124 506 1,734 5. Dividends The directors approved an interim dividend per share of 3.1p (2005: 3.0p) which will be paid on 5 April 2007 to shareholders on the register at the close of business on 9 March 2007. In accordance with IFRS accounting requirements, as the dividend was approved after the balance sheet date, it has not been accrued in the interim consolidated financial statements. 6. Earnings per share Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period, after allowing for the exercise of outstanding share options. The underlying earnings per share figure is based on profit adjusted for gains or losses on disposal of property and on the same weighted average number of shares used in the basic earnings per share calculation above. The following sets out the income and share data used in the basic, diluted and underlying earnings per share calculations: Half year Half year Year 31 December 2006 31 December 2005 30 June 2006 Effect on EPS Effect on EPS Effect on EPS £'000 pence £'000 pence £'000 pence Total net profit attributable to equity holders of the parent 2,455 7.0 978 2.8 3,928 11.1 Loss attributable to equity holders of the parent - discontinued operations - - 1,103 3.1 1,551 4.4 Net profit attributable to equity holders of the parent - continuing operations 2,455 7.0 2,081 5.9 5,479 15.5 Less: Profit on property disposal net of tax - - (242) (0.7) (242) (0.7) Underlying earnings and EPS 2,455 7.0 1,839 5.2 5,237 14.8 31 December 31 December 30 June 2006 2005 2006 Restated 000's 000's 000's Basic weighted average number of 35,293 35,288 35,291 shares Dilutive potential ordinary shares - 66 140 59 employee share options Diluted weighted average number of 35,359 35,428 35,350 shares The basic weighted average number of shares for the prior period to 31 December 2005 has been revised from 35,483,000 to 35,288,000. The resulting comparative basic earnings per share remains unchanged but the diluted earnings per share increases by 0.1p. 7. Reconciliation of net cash flow to movement in net (debt) / cash Half year Half year Year 31 December 31 December 30 June 2006 2005 2006 £'000 £'000 £'000 Decrease in cash and cash equivalents in (3,007) (1,914) (871) the period Repayment of net debt 433 410 831 Change in net debt from cash flows in the (2,574) (1,504) (40) period Effect of foreign exchange rate changes 7 0 1 Net (debt)/ cash and cash equivalents at (3,372) (3,333) (3,333) start of period Net (debt)/ cash and cash equivalents at (5,939) (4,837) (3,372) end of period 8. Reconciliation of Changes in Total Equity For the half year to 31 December 2006 31 December 31 December 30 June 2006 2005 2006 As restated £'000 £'000 £'000 At beginning of period 24,319 21,002 21,002 Shares issued - 22 22 Net gains/ (losses) on cash flow hedges 7 (37) 1 Actuarial (loss)/ gain on defined benefit pensions net of tax (1,331) (2,522) 2,649 Dividends (2,218) (2,219) (3,281) Profit for the period 2,478 978 3,944 Share based payments 22 - (18) At end of period 23,277 17,224 24,319 This information is provided by RNS The company news service from the London Stock Exchange

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