Preliminary Announcement

RNS Number : 0955D

Alumasc Group PLC

10 September 2008

 



Wednesday 10 September 2008

THE ALUMASC GROUP PLC - PRELIMINARY ANNOUNCEMENT

"STRONG TRADING RESULTS"

Alumasc (ALU.L), the UK-based supplier of premium building and precision engineering products, announces a year of significant progress for the Group in terms of both strategic development and financial performance, with an improved quality of earnings.

Financial Highlights

• Revenue from continuing operations increased by 21% to £125.8m, of which 17% was attributable to the full year benefit of the acquisition of Levolux on 1 May 2007 and of Blackdown on 31 March 2008

• Underlying† operating profit from continuing operations improved by £3.7m, or 49%, to £11.2m, with operating margins increasing from 7.3% to 8.9%

• Underlying† pre-tax profit from continuing operations increased by 52% to £9.6m. Underlying† earnings per share from continuing operations increased by 51% to 18.3p

• Reported pre-tax profit increased by 12% to £10.0m. Reported earnings per share increased by 15% to 20.3p. The 2007 profit included an exceptional contribution from Brock Metal, which was sold on 29 June 2007

• Full year dividends per share are raised by 3.1% to 10.0p

• Net debt at 30 June 2008 reduced by 28% to £9.4m

† underlying excludes property disposal gains and non-recurring restructuring and other 

costs

Commercial Highlights

• Two-thirds of group revenue and over 85% of group operating profit is now generated by the Building Products division. Well over half of Building Products' divisional revenue is derived from sustainable building products

• Building Products revenue increased by 40% to £83.5m (of which 11% was organic growth), whilst underlying operating profit improved by 54% to £10.7m (of which 17% was organic growth)

• Revenue from sustainable energy management products almost trebled to £35.5m and related operating profit more than quadrupled to £4.8m. Levolux, the UK leader in solar shading systems, had an excellent first full year in the group, whilst Blackdown, the green roof supplier, made a good start at Alumasc and contributed immediately to group earnings

• Revenue from sustainable water management products increased by 5% to £33.7m. Operating profit increased by 6%, at a slightly improved operating margin of 14.8% 

• Only 7% of group revenues are exposed to the new house building market - mainly the Timloc brand

• Engineering Products' divisional underlying operating profit remained stable at £1.7m despite revenues that were 3.7% lower at £42.3m

• Profit reduced at Alumasc Precision Components, but Dyson Diecastings had another good year and Alumasc Dispense's profits doubled

• The cumulative over-statement of profit and assets at Alumasc Precision Components, announced in the Interim Management Statement of 19 May, has been assessed at £2.5m, slightly below the most recent previous estimate, and the investigation is now complete. Robust and swift action has been taken to strengthen management and controls. The business remains profitable and opportunities for further profit improvement have been identified

John McCall, Chairman, stated "Alumasc performed strongly in 2008, demonstrating the benefits of realigning its business during the previous year towards markets with stronger prospects for growth.

The year to June 2008 ended on a strong note for Alumasc, reflecting growing demand for the group's products and their resilience in the face of some negative external factors such as rising material and energy costs.

Whilst it would be unrealistic to expect the industries served by Alumasc to be unaffected by the general economic situation, the group has purposefully positioned itself to benefit from areas where demand is expected to grow. As we enter the new financial year with a strong balance sheet and order books higher than a year ago, we remain confident in the group's ability to perform well".

Presentation:

Today, a presentation will be made to institutional broker's analysts and private client brokers by Paul Hooper (Chief Executive) and Andrew Magson (Group Finance Director), with John McCall (Chairman) in attendance. The meeting will commence at 9.30am and end at approximately 10.30am. It will be held at the offices of Bankside Consultants, 1 Frederick's Place, London EC2R 8AE (which is off Old Jewry, which itself runs between Cheapside and Gresham Street, approximately 200 yards from the Bank of England).

Enquiries:

The Alumasc Group plc	01536 383844
Paul Hooper (Chief Executive)
Andrew Magson (Group Finance Director)
Bankside Consultants Limited
Charles Ponsonby	020 7367 8851 [e-mail]

  Chairman's Statement

Overview

Alumasc performed strongly in 2007/08, demonstrating the benefits of realigning its business during the previous year towards markets with stronger prospects for growth.

In financial terms, its performance was ahead on all relevant criteria, including revenue from continuing operations 21.4% higher at £125.8 million (2007: £103.6 million) and underlying profit before tax1 of £9.6 million, 52% ahead on the same basis. The growth in revenue and profit arose in the group's core business areas, where long term growth prospects remain encouraging.

It is pleasing to report that total pre-tax profit of £10.0 million was also ahead of the prior year figure of £9.0 million, which included an exceptional contribution from Brock Metal, sold at the prior year end.

The drive into sustainable building products brought benefits from both acquisition and organic growth in the year and resulted in Building Products divisional revenue of £83.5 million and underlying operating profit1 of £10.7 million rising by 40% and 54% respectively.

The promising prospects for this sector are founded on a combination of economic and environmental considerations, which have been further enhanced by recent surges in the cost of energy.

Our Engineering Products division performed at a similar level to the prior year, with revenues of £42.3 million, 4% lower, and underlying operating profit1 unchanged at £1.7 million. As the year progressed, Alumasc Dispense showed the benefits of consolidating its business onto a single site. Alumasc Precision's performance was weaker than expected, with the wide range of new projects not fully replacing maturing automotive work. However, the growth of work with newer customers in the second half year provides confidence that the strategic advances of recent years will continue.

Following the increased dividend in the prior year, the Directors raised the interim dividend by 0.15p per share (4.8%) in April 2008. The Board is now recommending that the final dividend be increased by a further 0.15p per share to 6.75p, giving a total for the year of 10p per share (2007: 9.7p per share), an increase of 3.1%.

Development

Levolux, the UK's leading supplier of solar shading products, was acquired for £13.5 million in May 2007, adding significantly to the group's presence in the sustainable building products arena, and consistent with the Board's strategy to focus the group's business on high performance building and engineering activities. Levolux has performed superbly during its first full year within Alumasc, encouraging the group to continue its quest for organic and acquisition growth in this sector.

In March 2008, Alumasc acquired Blackdown Horticultural Consultants, a leading supplier of green roofs, for £2 million. Blackdown specialises in supplying lightweight roofs, which complement Alumasc's existing presence in the more intensive range of living roof systems, combining to form the UK's leading supplier of green roofs.

Three freehold properties were disposed of during the year. The site previously occupied by Alumasc Dispense prior to its relocation to Kettering was sold for £1.6 million, the former Copal warehouse was sold for £0.7 million, and the site occupied by Brock Metal, retained on the sale of that business in June 2007, was transferred as a special contribution to the group's pension funds at a value of £1.1 million.

Net debt reduced from £12.9 million at the start of the year to £9.4 million at the end, representing gearing of 30%. The group remains in a strong position to finance further development opportunities that may arise.

Board

Martin Rhodes resigned from the Board in June 2008. An exercise to align the Board's non-executive team more closely with its strategic direction is under way.

Prospects

The year to June 2008 ended on a strong note for Alumasc, reflecting growing demand for the group's products and their resilience in the face of some negative external factors such as rising material and energy costs.

While it would be unrealistic to expect the industries served by Alumasc to be unaffected by the general economic situation, the group has purposefully positioned itself to benefit from areas where demand is expected to grow. As we enter the new financial year with a strong balance sheet and order books higher than a year ago, we remain confident in the group's ability to perform well.

John McCall

Chairman

1 A reconciliation between underlying operating profit and reported operating profit is given in the Group Chief Executive's Review, whilst a similar reconciliation of profit before tax is given in the Group Finance Director's Review. Prior year comparatives have been re-stated to reflect the adjustments at Alumasc Precision Components described within note 1 to the financial information in this announcement.

Business Review

Chief Executive's Operating Review

Note: all references to profit in this review refer to either underlying operating profit or underlying profit before tax, unless stated otherwise.  A reconciliation of underlying to reported operating profit is provided below. A reconciliation of underlying to reported profit before tax is given in the Group Finance Director's Review. Prior year comparators have been adjusted for the restatement of results at Alumasc Precision described within note 1 to the financial information contained in this announcement.

Reconciliation of Underlying to Reported Operating Profit: Continuing Operations
	2007/08	2006/07
	£'000	£'000
Underlying operating profit	11,233	7,545
Property disposal gains	1,240	637
Restructuring costs	(465)	-
Brand amortisation & fair value adjustments	(428)	(370)
Reported operating profit	11,580	7,812

Note: the allocation of property disposal gains, restructuring costs, brand amortisation and fair value adjustments to business segments is provided in note 2 to the financial information.

Overview

Strategy and Performance 

Following the strategic transformation of the group towards the end of the last financial year through the acquisition of Levolux, the UK's leading solar shading company, and the disposal of Brock Metal, 2007/08 was a year of significant progress for the group in terms of both strategic development and financial performance.

Alumasc's strategy of seeking superior shareholder returns by growing its core premium building and engineering product businesses, with particular focus on the development of the group's portfolio of sustainable building product businesses, led to both significantly better financial results and an improved quality of earnings during the year. Approximately two-thirds of group revenue and over 85% of group operating profit is now generated by the Building Products division. Well over half of this divisions' revenue is derived from sustainable building products, where we believe demand is growing faster than for the construction market as a whole. 

The group added to its portfolio of sustainable building products companies with the acquisition of Blackdown Horticultural Consultants ("Blackdown") on 31 March 2008 for a total purchase consideration of £2.0 million. When combined with Alumasc's existing green roof business under the ZinCo brand, this has given Alumasc the UK number 1 market position in the embryonic and rapidly expanding market for green roofs. 

Group revenues from continuing operations in the year to 30 June 2008 increased by 21.4% to £125.8 million, and underlying profit before tax rose by over 50% to £9.6 million, driven by acquisitions and the continued growth in demand for sustainable building products. Group operating margins improved from 7.3% to 8.9%.

Total group profit before tax, after gains from property disposals and exceptional costs and after including Brock Metal's pre-disposal profits in the prior year comparator, increased by nearly 12% to £10.0 million.

Alumasc Precision Components

The revelation of the cumulative over-statement of profit and assets by some £2.5 million at Alumasc Precision Components, announced in our interim management statement on 19 May 2008, was undoubtedly the low point of the year, and was particularly frustrating given the ongoing strong trading performances across the rest of the group. The investigation work is now complete. Robust and swift action was taken to strengthen general and financial management at Alumasc Precision Components, and more wide-ranging actions are ongoing to improve business systems and controls. The business remains profitable, and there are opportunities for further improvement, many of which have been identified and are being implemented by the management team.

Health and Safety

The group's number one priority continues to be to provide a safe place of work for employees, and health and safety remains the first agenda item for all subsidiary and group board meetings. Further details on the group's health, safety and environmental performance will be given in the Corporate and Social Responsibility section within the Annual Report.

Operating Review: Continuing Operations

Group revenues grew by 21.4% to £125.8 million. Of this growth, approximately 17% was attributable to the full year benefit of the acquisition of Levolux on 1 May 2007 and the acquisition of Blackdown on 31 March 2008. Good organic growth in the Building Products division due to growing demand for sustainable building products was largely offset by some contraction in the Engineering Products division where Alumasc Precision began the year with lower activity levels, as previously reported.

Group operating profit from continuing operations improved by £3.7 million, or 48.9%, to £11.2 million.

Group operating margins improved from 7.3% to 8.9% as a result of the change in mix caused by the addition of recent acquisitions into the group's portfolio of businesses and increased revenue and profitability across most of the Building Products division.

Building Products

Building Products Divisional Operating Performance
	2007/08	2006/07
Revenue (£'000's)	83,485	59,647
Underlying operating profit (£'000's)	10,720	6,960
Operating Margin	12.8%	11.7%

Divisional revenues grew by 40% to £83.5 million, with much of the growth driven by the acquisitions described previously. Organic revenue growth was also strong at 11%, with nearly all product brands within the division reporting good performances.

Divisional profits improved by 54% to £10.7 million. Organic profit growth was 17%, benefiting in particular from improved revenues and profitability in the MR Facades and Alumasc rainwater brands, and further export-led growth for Gatic engineered access covers and Gatic Slotdrain. 2007/08 was another record year for Timloc building products, which are sold mostly into the new-build housing sector. This was a particularly notable performance in view of more difficult conditions experienced in the housebuilding market as the year progressed.

The table below shows an analysis of divisional revenues by end user market segments. Of note are:

• The increased proportion of divisional revenues attributable to the new-build private commercial market, now 46%, compared with 42% last year, mainly due to the acquisition of Levolux. This has been a buoyant market in the last 12 months and current order books remain strong in this area.

• The relative importance to Alumasc of the new-build public non-residential sector market with many of the group's products used in major public buildings, particularly schools and hospitals. This was also a buoyant segment in 2007/08, and is expected to remain so in the current year given government funding commitments.

• The relative importance of the public housing repair and maintenance sector to the group, particularly through sales of MR exterior wall insulation products and Pendock profiles, used mainly to enclose exposed internal pipework.

• The low overall proportion, 11% of divisional revenues, exposed to the weakening new housebuilding market. Most of this relates to Timloc building products.

Building Products' divisional revenue in 2007/08 analysed by end-user market
Private commercial					46%
Public non-residential					11%
New housing					11%
Private industrial					7%
Public housing repair & maintenance					10%
Other repair and maintenance					15%
					100%
Source: Alumasc estimates

Following the acquisition of Levolux last year and the group's increased strategic focus on growing its sustainable building products businesses, divisional results have been further segmented this year (see note 2 to the financial information) into:

• sustainable building products, sub-divided into those products allowing customers to improve energy efficiency and manage water in the built environment;

• premium building products.

Details of the allocation of the group's brands to these segments are given in note 10 to the financial information.

Sustainable Building Products - Energy Management

Revenue from products that assist customers to manage energy use in buildings almost trebled to £35.5 million mainly as a result of the acquisition of Levolux in May 2007 and Blackdown in March 2008. Organic revenue growth was almost 40%, with growth in demand from public sector refurbishments, further penetration into new build applications for the MR Facades product range and another record year for Roof-Pro systems, which included a substantial contract at a retail development in the first-half.

Profits in this segment more than quadrupled to £4.8 million, attributable to both acquisition-led and organic sales volume growth. Organic growth, together with the inclusion of recent acquisitions in the profit mix, led to a 4.7 percentage point improvement in operating margins to 13.7%.

Levolux, the UK's leader in solar shading systems, had an excellent first full year in the group, with order books rising to record levels during the year and a strong order pipeline carried forward into the new year. The business continues to seek to expand export sales, particularly into Ireland and the USA. During the year the business introduced a new patented insulation fixing bracket that is designed to prevent heat transfer from external louvres into the building, thereby avoiding condensation. Major projects of note during the year were a further building at Chiswick Park in London, an office in Threadneedle Street in the City of London that incorporates photovoltaics into glass louvres and, in the USA, a headquarters building for The Royal Bank of Scotland, and work at the Harley Davidson Museum. 

Blackdown made a good start in Alumasc and contributed immediately to group earnings. The UK market for green roofs is fast expanding and Alumasc is supporting the realisation of this growth potential by investing in additional capacity and resources. Order books continue to grow.

Sustainable Building Products - Water Management

Revenue from products that manage water, both above and below ground level, increased by 4.6% to £33.7 million. Most brands in this segment had strong performances, although overall growth was constrained by lower revenues from Metal Roofs following the completion of the major Fjardaal contract in Iceland last year and lower activity levels at Elkington China following the completion of some major international airport contracts.

All other brands in this segment reported good growth. Of particular note was the widened distribution of Alumasc rainwater products through further agreements with merchants, the launch of the Linearis shower drain and the addition of Minislot and Facadeslot to the Gatic Slotdrain range. A high profile contract for Alumasc Heritage cast iron rainwater products was a major project at the newly refurbished St. Pancras International Station. Alumasc also supplied bespoke fascia and soffit products to the new roof being installed on the Centre Court at Wimbledon. Currency appreciation impacted the profitability of drainage and waterproofing brands where certain materials are imported from Europe, despite buoyant overall activity levels.

Both Gatic brands enjoyed another strong year, albeit more uneven domestic demand from airports and distribution centres and significant increases in cast iron and steel material costs impacted access covers and Slotdrain production respectively. Management was nonetheless successful in again delivering profitable growth through further development of export markets whilst recovering increased material costs through a combination of selling price rises, more cost effective sourcing and internal production efficiency gains. Significant successes in the early part of the year were contracts to supply over 10 kilometres of Slotdrain to Barcelona airport and a major contract for the supply of two thousand access covers to a Caribbean utilities project.

Profits in this segment increased by 5.6%, at slightly improved operating margins of 14.8%.

Premium Building Products

Revenue and profits were each a little lower than the prior year in this segment, largely due to a reduction in sales volumes at Scaffold and Construction Products as a result of lower demand from Ireland and start up costs associated with the in-house manufacture of Pendock profiles.

Pendock has responded to increased competition in the pre-formed plywood pipe boxing market in recent years by manufacturing in-house. This has allowed the business to establish a stable and more efficient cost base that is no longer dependent on imported product from Europe, thereby avoiding the impact of the appreciation of the Euro against Sterling during the year. Encouragingly, sales volumes, particularly into the social housing sector, improved in the second half of the year.

Timloc housebuilding products had a record year benefiting from widened geographical distribution and new product launches. A particular success was the cavity closer launched in the final quarter, with further growth from other new products such as gas barrier supports that have been introduced in recent years. Profitability also benefited from efficiency gains though recent investments in automation.

Engineering Products

Engineering Products' Divisional Operating Performance
	2007/08	2006/07
Revenue (£'000's)	42,323	43,954
Underlying operating profit (£'000's)	1,664	1,660
Operating Margin	3.9%	3.8%

Across the Engineering Products division, profits remained stable at £1.7 million compared with the prior year, despite revenues that were 3.7% lower at £42.3 million. Activity levels were down in the first half of the year at Alumasc Precision but Alumasc Dispense benefited both from improved demand and from efficiency gains in the second-half arising from the relocation of the business onto a single new site in Kettering at the beginning of the calendar year.

Alumasc Precision

Alumasc Precision's revenues were 5.8% lower than the prior year mainly due to two older established automotive projects coming to an end at the start of the year. New projects for Aston Martin, Caterpillar, Deutz, Siemens and Rotork began to ramp up in the second half year, resulting in final quarter sales ahead of the prior year. These projects will be complemented by new work commencing in 2008/09 with Jaguar and Land Rover for a suite of interior products. In addition, we will begin to supply components to a new customer within the Caterpillar group, based in Kiel, Germany, which produces large diesel engines used, for example, to power cruise liners. Despite the reduced levels of profitability at Alumasc Precision Components highlighted by the recent investigation, this business remains profitable and there is much potential for further improvement, which should be assisted by the anticipated growth in sales volumes described above and a lower overall level of new project start-up costs. Dyson Diecastings, the sister business to Alumasc Precision Components, was unaffected by the investigation and had another good year, recording improvements in both revenue and profits.

Alumasc Dispense

Alumasc Dispense had a much improved year during which profits doubled, benefiting from the success of its supply of countermounts, taps and decorated glasses to the drinks industry and a reduced cost base following the relocation of the business to one site in Kettering. A noteworthy success was the Beck's Vier condensation countermount used for a highly successful product launch that was rated by AC Nielsen On-Trade as the most successful draught launch of the decade. An exciting development for the business was winning a first soft drinks contract with Britvic for a condensation font featuring the Pepsi brand.

Prospects

Alumasc has begun the new financial year well with order books ahead of 12 months ago. Factors likely to affect performance in the remainder of the year are:

• Growth in demand for the group's sustainable building and engineering products

• The degree of growth or contraction in UK construction activity, particularly in new commercial and new public sector buildings

• The level of demand in the public sector refurbishment market, particularly exterior wall insulation for housing associations in Glasgow and the M62 corridor

• Progress in Alumasc's ambitions to grow export sales, particularly in the USA and Europe

• The extent to which recent rapid cost inflation on metals, energy, other oil-based materials and imports from the Euro-zone and the United States can be mitigated through selling price increases 

• Success in winning major building project work generally, including, in particular, work on the London Olympics

• The level of demand from OEM customers and new work wins at Alumasc Precision

• Business performance improvement plans at Alumasc Precision.

Overall, Alumasc is well positioned to meet the challenges that market conditions will bring in the remainder of the year.

Paul Hooper

Chief Executive

Business Review

Group Finance Director's Review

Note: Prior year comparatives throughout this report have been restated as a consequence of the prior year adjustment to Alumasc Precision's 2006/07 figures, as described within note 1 to the financial information contained in this announcement. 

Income statement summary and reconciliation of underlying to reported profit before tax
	2007/08			2006/07
	Continuing operations and total	Continuing operations	Discontinued operations	Total
	£'000	£'000	£'000	£'000
Revenue	125,808	103,601	59,803	163,404
Underlying profit before tax	9,642	6,334	2,351	8,685
Property disposal gains	1,240	637	-	637
Restructuring costs	(465)	-	-	-
Brand amortisation &  fair value adjustments	(428)	(370)	-	-
Reported profit before tax	9,989	6,601	2,351	8,952

Operating Profit

Group underlying operating profit from continuing operations in 2007/08 increased by £3.7 million to £11.2 million compared with the prior year. The increase arose mainly from the acquisition of Levolux, and continued organic growth across the Building Products division. Further details are given in the Chief Executive's Operating Review. Reported group operating profit from continuing operations was £11.6 million (2006/07: £7.8 million) benefiting from property disposal gains which more than offset the restructuring and other non-cash costs described below.

Net Interest Charge

The group net interest charge increased year on-year by £0.4 million to £1.6 million, comprising interest on borrowings of £1.1 million and non-cash pension interest of £0.5 million. Of the increase, £0.3 million was in respect of interest on borrowings, arising from the funding of recent acquisitions almost entirely with debt. Net interest charged on borrowings was covered over 10 times by underlying operating profit.

Profit Before Tax

Group underlying profit before tax from continuing operations was £9.6 million in 2007/08, over 50% ahead of the prior year.

After including property disposal gains, restructuring costs, and the other non-cash costs described below, total reported group profit before tax from continuing operations of £10.0 million was also around 50% higher than the prior year.

When the profits of Brock Metal (the business sold by the group on 29 June 2007 and included within discontinued operations) are added into the prior year comparator, the total reported group profits of £10.0 million were almost 12% ahead of the prior year.

A reconciliation of underlying profit before tax from continuing operations of £9.6 million to total reported profit before tax of £10.0 million is shown in the table above. The main features are:

• A £1.2 million gain from property disposals, comprising £1.0 million on the sale of the former Alumasc Dispense property at Borehamwood for net cash proceeds of £1.6 million, and a £0.2 million gain on the contribution of the property being leased to Brock Metal into the group's defined benefit pension schemes at market value of £1.1 million.

• Restructuring costs of £0.5 million arising from the relocation of Alumasc Dispense onto one site in Kettering in December, and the costs arising from the investigation and subsequent changes to the management team at Alumasc Precision, described in the Chief Executive's Operating Review.

• Brand amortisation costs, and the post-acquisition reversal of non-cash fair value adjustments relating to inventories at Blackdown Horticultural Consultants ("Blackdown"), together £0.4 million.

Tax

The underlying group tax rate of 31.4% was slightly lower than the prior year reflecting the reduction in the UK corporation tax rate by 2% to 28% with effect from 6 April 2008, benefiting the last quarter of the group's financial year.

After the property disposal gains and one-off costs described above, the group's overall tax rate reduced to 26.6% (2006/07: 30.0%), as a result of the higher profits from property disposals in 2007/08 which are not taxable.

Earnings per share

Underlying earnings per share were 18.3 pence, some 51.2% ahead of the prior year, broadly inline with the increase in underlying profit before tax. Total reported earnings per share of 20.3 pence were 15.3% above the prior year, when the pre-disposal profits of Brock Metal are included in the comparator. This increase was greater than the increase in total profit before tax due to the lower overall tax rate.

Dividends

The Board has proposed a final dividend of 6.75 pence per share (2006/07: 6.6 pence), to be paid on 29 October 2008 to shareholders on the register on 3 October 2008. This will give a total dividend for the year of 10.0 pence per share (2006/07: 9.7 pence), an increase of 3.1%. The full year dividend is covered 1.8 times by underlying earnings from continuing operations.

Capital invested and return on investment

The group considers its capital invested to be the sum of shareholders' funds, minority interests, net debt and the net of tax pension deficit. The group's average capital invested in the year increased by around 10% to almost £56 million, reflecting the full year impact of the Levolux acquisition. Post-tax return on average capital invested1 improved from 13.2% in 2006/07 to 13.9% in 2007/08, mainly due to the improved operating margins described in the Chief Executive's Operating Review.

Shareholders' funds and return on shareholders' funds

Shareholders' funds decreased from £31.4 million at 30 June 2007 to £30.9 million at 30 June 2008, with the retained profits for the year of £3.8 million and new shares issued of £0.4 million more than offset by a post-tax actuarial loss of some £4.7 million relating to the IAS19 valuation of defined benefit pension obligations. Post-tax return on average shareholders' funds1 improved from 21.0% in 2006/07 to 21.3% in 2007/08.

1 Return on investment and return on shareholders' funds are calculated using underlying profit figures, and include Brock Metal's results in the prior year comparative

Impairment Review

The Board conducted an impairment review which covered all assets that contribute to the goodwill figure on the Group balance sheet, together with any other assets where indicators of impairment existed. No assets were found to have been impaired.

Summarised Cash Flow Statement
	2008	20072
	£m	£m
EBITDA1	14.1	13.8
Change in working capital	1.1	(2.8)
Operating cash flow	15.2	11.0
Capital expenditure	(2.5)	(3.0)
Pension deficit funding	(3.6)	(2.5)
Interest	(1.1)	(0.8)
Tax	(2.5)	(1.3)
Dividends	(3.6)	(3.3)
Free cash flow	1.9	0.1
Property disposal proceeds	2.3	2.4
Acquisitions (net of equity financing) 3	(3.0)	(11.2)
Cash flows from discontinued operations and other	2.3	(0.8)
Decrease/(increase) in net debt	3.5	(9.5)

1  EBITDA: Earnings before interest, tax, depreciation and amortisation.

2  Re-stated for prior period adjustments relating to Alumasc Precision.

3  Includes pre-acquisition tax payments relating to Levolux made in 2008.

Cash flow, working capital and capital expenditure

A summary of the Group cash flow statement is given above. The net cash inflow for the year was £3.5 million and consequently group net debt reduced from £12.9 million to £9.4 million.

Operating cash flows grew from £11.0 million in the prior year to £15.2 million, as a result of increased operating profits and a reduction in working capital following management action taken to improve the conversion of profits into cash.

Capital expenditure of £2.5 million in the year was below the annual depreciation charge of £3.4 million. Nonetheless, all major capital investment proposals from group businesses were approved. There were no particularly large projects of note, with most of the investment during the year supporting the new diesel engine projects at Alumasc Precision, further automation at Timloc and business systems improvements.

The acquisition of Blackdown was funded through the use of the group's committed borrowing facilities. The initial acquisition cost of £1.75 million was paid during the year, with further consideration of £0.25 million deferred pending achievement of certain financial targets relating to Blackdown's year ending 30 September 2008. The other main acquisition-related cash flow in 2007/08 was the settlement of a £1.0 million pre-acquisition tax liability relating to Levolux that had been funded by a reduction in the acquisition consideration paid for Levolux in the prior year.

The overall level of cash generation in the year was boosted by:

• property disposal proceeds amounting to some £2.3 million, relating to the former Alumasc Dispense property referred to previously and the sale of the former Copal warehouse in Birmingham for book value; and

• a net £1.9 million receipt arising from the agreement of completion accounts in the 2007/08 financial year relating to the disposal of Brock, and share issues totaling £0.4 million during the year.

Capital structure and financing

The group's capital structure remained broadly unchanged during the year, save for the £3.5million reduction in net debt through the overall cash in-flows for the year described above. Gearing at 30 June 2008 reduced to 30.3% compared with 41.1% on 30 June 2007.

The group retains the five year £15.0 million revolving credit facility drawn down in connection with the acquisition of Levolux in May 2007. These funds remain committed until 2012. The group has total available debt finance of £34.0 million, with the excess above the revolving credit facility available on overdraft. With net debt levels at £9.4 million on 30 June 2008, the group had almost £25 million in unutilised borrowing facilities at the year end. The group's balance sheet therefore remains strong, with capacity to finance further acquisitions in the Building Products division should attractive investment opportunities arise.

Pensions

The group's overall pre-tax pension deficit measured under IAS19 increased from £17.6 million at 30 June 2007 to £19.8 million at 30 June 2008. Despite increased cash and property contributions from the company of £5.3 million in the year, the increased deficit arose because of falling equity values in the investment portfolio and the impact of increased longevity expectations on projected pension liabilities. The increased deficit at 30 June 2008 will adversely impact the non-cash pension interest charge in the group's accounts in the current financial year to 30 June 2009.

The triennial actuarial valuation at 30 April 2007 of the Benjamin Priest Group pension scheme concluded that the deficit was £10.2 million compared with £11.2 million in the previous review. Pension deficit reduction contributions and investment gains in the intervening three year period had been largely offset by the impact of improved longevity assumptions. The actuarial review of the Alumasc Group pension scheme at 30 April 2008 is currently taking place.

Internal Control

The group's approach to internal control is described in the Statement of Corporate Governance in the Annual Report. In view of the growth in the Building Products division and the changing nature of some of the risks the group faces, the Board decided over a year ago to increase the level of both internal and external resource allocated to internal control and audit activities to provide further assurance on the effectiveness of the group's internal control systems. Concerns raised by internal audit work at Alumasc Precision Components during the year culminated in the investigation into that business and the revelation of the overstatement of profits and assets described in note 1 of the financial information contained in this announcement. All other operations within the group have independent accounting and control systems from those at Alumasc Precision Components, and were unaffected. However, as a prudent measure, the Board decided to extend the scope of the external audit at the 30 June 2008 period end close, and a further increase in the level of internal audit work is planned across the group in the current year.

Andrew Magson 

Group Finance Director

Consolidated Income Statement

For the year ended 30 June 2008

		2008	2007
			Restated
	Notes	£'000	£'000
Continuing operations
Revenue	2	125,808	103,601
Cost of sales		(84,145)	(72,740)
Gross profit		41,663	30,861
Selling and distribution costs		(15,049)	(11,927)
Administrative expenses		(16,274)	(11,759)
		10,340	7,175
Profit on disposal of property	3	1,240	637
Operating profit	2	11,580	7,812
Finance revenue		159	72
Finance costs		(1,249)	(883)
Other finance expense - pensions		(501)	(400)
Profit before taxation	2	9,989	6,601
Tax expense	6	(2,656)	(1,888)
Profit for the year from continuing operations		7,333	4,713
Discontinued operations
Profit after taxation for the year from discontinued operations		-	1,553
Profit for the year		7,333	6,266
Profit for the year attributable to:
Equity holders of the parent		7,315	6,231
Minority interest		18	35
		7,333	6,266
		Pence	Pence
Basic earnings per share
- continuing operations		20.3	13.2
- discontinued operations		-	4.4
	5	20.3	17.6
Diluted earnings per share
- continuing operations		20.2	13.2
- discontinued operations		-	4.4
	5	20.2	17.6

Consolidated Statement of Recognised Income and Expense

For the year ended 30 June 2008

		2008	2007
			Restated
		£'000	£'000
Income and expense recognised directly in equity
Actuarial (loss)/gain on defined benefit pensions		(6,557)	4,676
Movement in cash flow hedging position		(60)	99
Exchange differences on retranslation of foreign operations		7	(6)
Tax on items taken directly to or transferred from equity		1,836	(1,754)
Net (loss)/income recognised directly in equity for the year		(4,774)	3,015
Profit for the year		7,333	6,266
Total recognised income for the year		2,559	9,281
Attributable to:
Equity holders of the parent		2,541	9,246
Minority interest		18	35
		2,559	9,281

Consolidated Balance Sheet

At 30 June 2008

	Note	2008	2008	2007	2007
				Restated	Restated
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		20,078		22,877
Goodwill	7	16,788		15,637
Other intangible assets		4,496		4,171
Financial assets		17		17
Deferred tax assets	6	5,549		4,917
			46,928		47,619
Current assets
Inventories		13,060		12,793
Trade and other receivables		29,790		28,878
Cash and short term deposits		5,529		4,814
Derivative financial assets		48		106
			48,427		46,591
Non-current assets classified as held for sale			-		678
Total assets			95,355		94,888
Liabilities
Non-current liabilities
Interest bearing loans and borrowings		(14,881)		(14,873)
Employee benefits payable		(19,818)		(17,561)
Provisions		(781)		(775)
Deferred tax liabilities	6	(2,291)		(2,316)
			(37,771)		(35,525)
Current liabilities
Bank overdraft		-		(2,837)
Interest bearing loans and borrowings		(15)		(12)
Trade and other payables		(26,307)		(22,737)
Provisions		(116)		(214)
Income tax payable		(237)		(2,133)
			(26,675)		(27,933)
Total liabilities			(64,446)		(63,458)
Net Assets			30,909		31,430
Equity
Called up share capital	8	4,517		4,479
Share premium	8	383		-
Other reserve	8	1,101		1,251
Capital reserve - own shares	8	(106)		(133)
Hedging reserve	8	40		100
Foreign currency reserve	8	1		(6)
Profit and loss account reserve	8	24,951		25,701
Equity attributable to  equity holders of the parent			30,887		31,392
Minority interest	8		22		38
Total equity			30,909		31,430

Consolidated Cash Flow Statement

For the year ended 30 June 2008

		2008	2007
			Restated
	Notes	£'000	£'000
Operating activities
Operating profit from continuing operations		11,580	7,812
Adjustments for:
Depreciation		3,427	3,433
Amortisation		399	207
Impairments		-	469
Gain on disposal of property, plant and equipment		(1,259)	(1,039)
Gain on sale of investments		-	(32)
Decrease in inventories		194	517
Increase in receivables		(2,412)	(855)
Increase/(decrease) in trade and other payables		3,392	(1,483)
Movement in provisions		(92)	(779)
Movement in retirement benefit obligations		(3,651)	(2,470)
Share based payments		8	-
Cash generated from continuing operations		11,586	5,780
Profit before taxation from discontinued operations		-	2,351
Depreciation		-	579
Movement in working capital from discontinued operations		1,204	(9,295)
Cash generated from discontinued operations	9	1,204	(6,365)
Tax paid		(2,451)	(1,339)
Tax payments settling liabilities of subsidiaries on acquisition		(1,004)	-
Net cash inflow/(outflow) from operating activities		9,335	(1,924)
Investing activities
Purchase of property, plant and equipment		(2,124)	(2,716)
Payments to acquire intangible fixed assets		(379)	(353)
Proceeds from sales of plant and equipment		1,651	2,424
Proceeds from the sale of non-current property  assets classified as held for sale		678	-
Acquisition of subsidiary undertakings net of cash acquired		(2,039)	(12,432)
Proceeds from sale of business activities	9	710	8,150
Proceeds from sale of investments		-	305
Interest received		159	72
Net cash outflow investing activities		(1,344)	(4,550)
Financing activities
Interest paid		(1,268)	(883)
Equity dividends paid	4	(3,550)	(3,309)
Equity dividends paid to minority interests		(34)	(31)
New borrowings (net of arrangement fees)		-	14,860
Repayment of amounts borrowed		(14)	(725)
Proceeds from issue of share capital		421	1,195
Net cash (outflow)/inflow from financing activities		(4,445)	11,107
Net increase in cash and cash equivalents		3,546	4,633
Cash and cash equivalents brought forward		1,977	(2,650)
Effect of foreign exchange rate changes		6	(6)
Cash and cash equivalents carried forward		5,529	1,977
Cash and cash equivalents comprise:
Cash and short term deposits		5,529	4,814
Bank overdrafts		-	(2,837)
		5,529	1,977

Notes

1    Basis of Preparation

The preliminary results for the year ended 30 June 2008 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

The financial information in the preliminary statement of results does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the "Act"). The financial information for the year ended 30 June 2008 has been extracted from the statutory accounts on which an unqualified audit opinion has been issued. Statutory accounts for the year ended 30 June 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The financial statements, and this preliminary statement, of The Alumasc Group plc (the Group) for the year ended 30 June 2008 were authorised for issue by the Board of Directors on 10 September 2008 and the balance sheet was signed on behalf of the Board by Paul Hooper and Andrew Magson.  

The statutory accounts have been delivered to the Registrar of Companies in respect of the year ended 30 June 2007 and the Auditors of the Company made a report thereon under Section 235 of the Act. That report was an unqualified report and did not contain a statement under Section 237(2) or (3) of the Act.

Profit re-statement

The results of internal audit work and an independent accountants' investigation during the year revealed an overstatement in prior years in the accounting records of profit before tax, and consequently inventories and other assets within Alumasc Precision that totalled £1,116,000.  £940,000 of this adjustment related to the 2006/07 financial year, with £176,000 relating to 2005/06. The adjustment impacts the Precision Engineering reporting segment within the Engineering Products division. No other reporting segments were affected. An adjustment with the related tax effect, as set out below, has been made to restate 2006/07 and the prior year.

	2007	2006
	£'000	£'000
Increase in cost of sales	940	176
Decrease in corporation tax charge	(282)	(53)
Decrease in profit	658	123
Decrease in work in progress	745	176
Decrease in trade and other receivables	38	-
Increase in trade and other payables	157	-
Decrease in corporation tax liability	(282)	(53)
	658	123
Decrease in equity	658	123

The effect on the basic and diluted earnings per share as a result of these restatements is to reduce the previously disclosed amounts by 1.9p and 1.8p respectively in 2007 and 0.3p for both in 2006.

2    Segmental Analysis

Segment information is presented in respect of the group's business segments. The primary format, business segments, is based on the group's management and internal reporting structure. The allocation of the group's brands to business segments is shown in note 10 and a description of each segment's activities and products is given within the Chief Executive's Operating Review.

Inter-segment transactions are entered into applying normal commercial terms that would be available to third parties. Segment results, assets and liabilities include those items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets comprise deferred tax assets and corporate assets that cannot be allocated on a reasonable basis. Unallocated liabilities comprise borrowings, employee benefit obligations, deferred tax liabilities, income tax payable and corporate liabilities that cannot be allocated on a reasonable basis to a business segment. The presentation of results by business segments has been revised during the year to reflect the evolution in the group's business and management structure. Central and other unallocated costs are no longer allocated to the business segments, resulting in the prior year comparative and the discontinued operations result being restated.

Business Segments

Analysis by business segment 2008
			Sustainable:	Sustainable:	Premium	Building			Engineering		Continuing
			Energy	Water	Building	Products	Precision	Alumasc	Products		Operations
			Management	Management	Products	Total	Engineering	Dispense	Total	Elimination	Total
			£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers			35,477	33,737	14,271	83,485	30,369	11,954	42,323		125,808
Inter-segment revenue			-	314	-	314	1,994	-	1,994	(2,308)	-
			35,477	34,051	14,271	83,799	32,363	11,954	44,317	(2,308)	125,808
Underlying segmental operating profit			4,849	4,984	887	10,720	1,002	662	1,664		12,384
Brand amortisation  & fair value adjustments			(428)	-	-	(428)	-	-	-		(428)
Restructuring costs			-	-	-	-	(315)	(150)	(465)		(465)
Segmental property disposal gains			-	-	-	-	-	990	990		990
Segment operating result			4,421	4,984	887	10,292	687	1,502	2,189		12,481
Unallocated costs											(1,151)
Unallocated property disposal gains											250
Operating profit											11,580
Finance revenue											159
Finance costs											(1,249)
Other finance expense - pensions											(501)
Profit before tax											9,989
Tax											(2,656)
Profit after tax											7,333

Restructuring costs of £465,000 arise from the relocation of Alumasc Dispense onto one site, £150,000, and the investigation and subsequent changes to the management team at Alumasc Precision, £315,000.

Analysis by business segment 2007 (restated)
	Sustainable:	Sustainable:	Premium	Building					Continuing
	Energy	Water	Building	Products	Precision	Alumasc	Engineering		Operations	Discontinued
	Management	Management	Products	Total	Engineering	Dispense	Products	Elimination	Total	Operations	Elimination	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	12,958	32,250	14,439	59,647	32,252	11,702	43,954		103,601	59,803	-	163,404
Inter-segment revenue	-	32	-	32	1,611	-	1,611	(1,643)	-	1,963	(1,963)	-
	12,958	32,282	14,439	59,679	33,863	11,702	45,565	(1,643)	103,601	61,766	(1,963)	163,404
Underlying segmental operating profit	1,170	4,719	1,071	6,960	1,330	330	1,660		8,620	2,351		10,971
Brand amortisation  & fair value adjustments	(370)	-	-	(370)	-	-	-		(370)	-		(370)
Segment operating result	800	4,719	1,071	6,590	1,330	330	1,660		8,250	2,351		10,601
Unallocated costs									(1,075)	-		(1,075)
Unallocated property disposal gains									637	-		637
Operating profit									7,812	2,351		10,163
Finance revenue									72	-		72
Finance costs									(883)	-		(883)
Other finance expense - pensions									(400)	-		(400)
Profit before tax									6,601	2,351		8,952
Tax									(1,888)	(798)		(2,686)
Profit after tax									4,713	1,553		6,266

Analysis by geographical segment 2008

	United Kingdom	Rest of Europe  - EU	Europe -  Non EU	Rest of World	Continuing  operations and  total
	£'000	£'000	£'000	£'000	£'000
Sales to external customers	103,509	12,790	2,144	7,365	125,808

Analysis by geographical segment 2007 (restated)

	United Kingdom	Rest of Europe  - EU	Europe  - Non EU	Rest of World	Continuing operations	Discontinued operations	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Sales to external customers	81,413	11,947	1,632	8,609	103,601	59,803	163,404

Segment revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer.  

Sales to external customers by discontinued operations in 2007 amounted to £30,673,000 in the UK, £24,055,000 in the rest of Europe within the EU, £4,367,000 in non-EU parts of Europe and £708,000 in the rest of the world.

3    Profit on disposal of property

Profit on disposal of property comprises:

	2008	2007
	£'000	£'000
Profit on sale of Borehamwood freehold property	990	-
Profit on transfer of Cannock freehold property	250	-
Profit on sale of Walsall freehold property	-	991
Impairment of Handsworth long leasehold property prior to sale	-	(354)
	1,240	637

The profit on the Cannock freehold property arose from the contribution of the property into the group's defined benefit pension schemes at market value.

4    Dividends

	2008	2007
	£'000	£'000
Interim dividend for 2008 of 3.25p paid on 7 April 2008	1,172	-
Final dividend for 2007 of 6.6p paid on 31 October 2007	2,378	-
Interim dividend for 2007 of 3.1p paid on 10 April 2007	-	1,091
Final dividend for 2006 of 6.3p paid on 2 November 2006	-	2,218
	3,550	3,309

A final dividend per equity share of 6.75p has been proposed for 2008, payable on 29 October 2008. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.

5  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 following sets out the income and share data used in the basic and diluted earnings per share calculations:

	2008	2007
		Restated
	£'000	£'000
Net profit attributable to equity holders of the parent - continuing operations	7,315	4,678
Profit attributable to equity holders of the parent - discontinued operations	-	1,553
	7,315	6,231
	000s	000s
Basic weighted average number of shares	36,063	35,371
Dilutive potential ordinary shares - employee share options	63	118
	36,126	35,489

Reconciliation to underlying earnings per share:

	2008	2007
		Restated
	£'000	£'000
Continuing operations:
Profit before taxation	9,989	6,601
less profit on property sales	(1,240)	(637)
add back acquisition accounting adjustments and brand amortisation	428	370
add back restructuring costs	465	-
	9,642	6,334
Tax at underlying group tax rate of 31.4% (2007: 32.7%)	(3,032)	(2,069)
Underlying earnings	6,610	4,265
Underlying earnings per share	18.3p	12.1p

The underlying earnings per share figure is based on profit adjusted for profit on disposal of property, acquisition accounting adjustments and amortisation of brands, and restructuring costs, and on the same weighted average number of shares as used in the basic earnings per share calculation above. The directors consider that this measure provides an additional indicator of the underlying performance of the group.

Excluded from the calculation of fully diluted number of shares are the LTIP awards that are not dilutive at 30 June 2008 but could be dilutive in the future.

6    Tax expense

(a)  Tax on profit on ordinary activities

Tax charged in the income statement

	2008	2007
		Restated
	£'000	£'000
Current tax:
UK corporation tax - continuing operations	1,581	1,318
- discontinued operations	-	798
UK corporation tax	1,581	2,116
Amounts overprovided in previous years	-	(128)
Total current tax	1,581	1,988
Deferred tax:
Origination and reversal of temporary differences	1,125	721
Tax (over)/under provided in previous years	(50)	74
Rate change adjustment	-	(97)
Total deferred tax	1,075	698
Tax charge in the income statement	2,656	2,686
The tax charged in the income statement is disclosed as follows:
Income tax expense on continuing activities	2,656	1,888
Income tax expense on discontinued activities	-	798
	2,656	2,686

Tax relating to items (credited)/charged to equity
Deferred tax:
Actuarial gains and losses on pension schemes	(1,836)	1,403
Rate change adjustment on above	-	351
Tax (credited)/charged in the statement of  recognised income and expense	(1,836)	1,754

(b)  Reconciliation of the total tax charge

The tax expense in the income statement is less than (2007: equates to) the standard rate of corporation tax in the UK of 29.5% (2007: 30%). The differences are reconciled below:

	2008	2007
		Restated
	£'000	£'000
Profit from continuing operations before tax	9,989	6,601
Profit before tax from discontinued operations	-	2,351
Accounting profit before income tax	9,989	8,952
Accounting profit multiplied by the UK standard rate of  corporation tax of 29.5% (2007: 30%)	2,947	2,686
Expenses not deductible for tax purposes	186	192
Impairment of long leasehold property	-	106
Other differences	-	71
Profit on disposal of property	(366)	(297)
Profit on disposal of investment	-	(10)
Tax overprovided in previous years - corporation tax	-	(128)
Tax (over)/under provided in previous years - deferred tax	(50)	74
Sale of property - residue of IBAs	-	89
Rate change adjustment	(61)	(97)
	2,656	2,686

Total tax expense is recorded in the income statement at an effective tax rate of 26.6% (2007: 30.0%)

(c)  Unrecognised tax losses

The group has agreed tax capital losses in the UK amounting to £21million (2007: £21million) that relate to prior years, and under current legislation these losses are available for offset against future chargeable gains. A deferred tax asset has not been recognised in respect of these losses, as they do not meet the criteria for recognition.

Revaluation gains on land and buildings that are available for offset against capital losses amount to £6.5 million (2007: £6.5 million). After this offset net capital losses carried forward amount to £14.5 million (2007: £14.5 million). The capital losses are able to carried forward indefinitely.

(d)  Deferred tax

The deferred tax included in the balance sheet is as follows:

	Liability				Asset
	Accelerated capital allowances	Short term timing differences	Brands	Total	Pension
	£'000	£'000	£'000	£'000	£'000
At 1 July 2007	1,505	(153)	964	2,316	(4,917)
Charged/(credited) to the income statement - current year	(49)	20	(50)	(79)	1,204
Charged/(credited) to the income statement - prior year	24	(60)	(14)	(50)	-
Charged/(credited) to equity	-	-	-	-	(1,836)
Acquisition of subsidiary undertaking	1	6	97	104	-
At 30 June 2008	1,481	(187)	997	2,291	(5,549)

Deferred tax assets and liabilities are presented as non-current in the consolidated balance sheet.  

Deferred tax assets have been recognised where it is probable that they will be recovered. Deferred tax assets of £5.9 million (2007: £6.3 million) have not been recognised in respect of tax capital losses of £21 million (2007: £21 million).

(e)  Post balance sheet events

The legislation in the Finance Act 2008 to abolish industrial buildings allowances (IBAs) received Royal Assent on 21 July 2008.  As such, an adjustment will be required in the 30 June 2009 accounts to increase the deferred tax liability in respect of assets qualifying for IBAs. The estimated impact is a £330,000 tax charge to the income statement to increase the deferred tax liabilities.

7    Goodwill and business combinations

		2008	2007
		£'000	£'000
			Restated
Cost:
At 1 July		15,735	5,556
Acquisition of Levolux		-	10,179
Acquisition of Blackdown		1,151	-
At 30 June		16,886	15,735
Impairment:
At 1 July		98	-
Impairment of Armaseam goodwill		-	98
At 30 June		98	98
Net book value at 30 June		16,788	15,637
Net book value at 1 July		15,580	5,556

Goodwill acquired through acquisitions has been allocated to cash generating units for impairment testing as set out below:

		2008	2007
		£'000	£'000
Building products:
Roof-Pro		3,194	3,194
Timloc		2,264	2,264
Levolux		10,179	10,179
Blackdown		1,151	-
At 30 June		16,788	15,637

At the time of signing the June 2007 accounts, the fair value exercise in relation to Levolux was only provisionally complete. During the year, fair value adjustments were finalised and, as a result, warranty provisions at the date of acquisition were reduced by £350,000, accruals in respect of taxation fees were increased by £57,000 and a deferred tax liability in respect of brands of £964,000 was introduced. 

Business combinations

Blackdown Horticultural Consultants Limited

On 31 March 2008 the group acquired 100% of the ordinary shares of Blackdown Horticultural Consultants Limited ("Blackdown"). The investment in Blackdown has been included in the group's balance sheet at its fair value at the date of acquisition.

An analysis of the provisional fair value of the Blackdown net assets acquired and the fair value of the consideration paid is set out below:

Net assets at date of acquisition:

	Book value	Fair value adjustments	Fair value to group
	£'000	£'000	£'000
Property, plant and equipment	56	(10)	46
Brands arising on acquisition	-	345	345
Inventories	211	250	461
Trade and other receivables	506	-	506
Bank overdraft	(32)	-	(32)
Trade and other payables	(213)	-	(213)
Obligations under hire purchase agreements	(7)	-	(7)
Income tax payable	(138)	85	(53)
Deferred tax liabilities	(7)	(97)	(104)
Net assets	_________ 376	________ 573	______________ 949
Goodwill arising on acquisition			1,151
			2,100
Satisfied by:
Cash purchase consideration			1,750
Deferred consideration			250
Enterprise value			2,000
Costs associated with the acquisition settled in cash			100
			2,100

£250,000 is the maximum amount of deferred consideration payable within 12 months of the balance sheet date and is management's best estimate of the amount likely to be paid.

From the date of acquisition to 30 June 2008 (three months), Blackdown reported a profit of £77,000 which, after the acquisition accounting adjustments related to the reversal of the fair value adjustment in respect of profit in inventory at the date of acquisition, £250,000, and brand amortisation, £10,000, resulted in a net loss under IFRS3 conventions of £183,000.

If the combination had taken place at the beginning of the year, 1 July 2007, the revenue for the group from continuing operations would have been £127,175,000 and the profit for the year (after tax) from continuing operations would have been £7,648,000. In the three month period since acquisition, Blackdown contributed £58,000 to the group's net operating cash flows.

Included in the £1,151,000 of goodwill recognised above are certain intangible assets that cannot be individually, separately and reliably measured from the acquiree due to their nature. These items include the value of the directors, management and workforce. 

8    Reconciliation of net movements in equity

	Share	Share	Other	Capital redemption	Capital reserve -	Hedging	Foreign currency	Profit  and loss	Minority	Total
	Capital	Premium	Reserve	Reserve	Own shares	Reserve	Reserve	Reserve	Interest	Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2006	4,412	27,406	1,401	693	(133)	1	-	(9,495)	34	24,319
Impact of prior years' adjustments	-	-	-	-	-	-	-	(123)	-	(123)
At 1 July 2006, as restated	4,412	27,406	1,401	693	(133)	1	-	(9,618)	34	24,196
New shares issued	67	1,128	-	-	-	-	-	-	-	1,195
Excess depreciation on previously revalued assets	-	-	(150)	-	-	-	-	150	-	-
Capital reorganisation	-	(28,534)	-	(693)	-	-	-	29,227	-	-
Net gains on cash flow hedges	-	-	-	-	-	99	-	-	-	99
Exchange differences on retranslation of foreign operations	-	-	-	-	-	-	(6)	-	-	(6)
Actuarial gain on defined benefit pensions net of tax	-	-	-	-	-	-	-	2,922	-	2,922
Dividends	-	-	-	-	-	-	-	(3,309)	(31)	(3,340)
Profit for the period	-	-	-	-	-	-	-	6,231	35	6,266
Share based payments	-	-	-	-	-	-	-	98	-	98
At 1 July 2007, as restated	4,479	-	1,251	-	(133)	100	(6)	25,701	38	31,430
New shares issued	38	383	-	-	-	-	-	-	-	421
Excess depreciation on previously revalued assets	-	-	(150)	-	-	-	-	150	-	-
Net loss on cash flow hedges	-	-	-	-	-	(60)	-	-	-	(60)
Vesting of own shares	-	-	-	-	27	-	-	(27)	-	-
Exchange differences on retranslation of foreign operations	-	-	-	-	-	-	7	-	-	7
Actuarial loss on defined benefit pensions net of tax	-	-	-	-	-	-	-	(4,721)	-	(4,721)
Dividends	-	-	-	-	-	-	-	(3,550)	(34)	(3,584)
Profit for the period	-	-	-	-	-	-	-	7,315	18	7,333
Share based payments	-	-	-	-	-	-	-	8	-	8
Tax on share options	-	-	-	-	-	-	-	75	-	75
At 30 June 2008	4,517	383	1,101	-	(106)	40	1	24,951	22	30,909

Share capital and share premium

The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the company's equity share capital net of issue costs.

Other reserve
The other reserve is an asset revaluation reserve.

Capital reserve - own shares
The capital reserve - own shares relates to 69,000 (2007: 91,000) ordinary own shares held by the company. The market value of shares at 30 June 2008 was £121,000 (2007: £207,000). These are held to help satisfy the exercise of awards under the company's Long Term Incentive Plan. A Trust holds the shares in its name and shares are awarded to employees on request by the company. The company bears the expenses of the Trust.

Hedging reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Foreign currency reserve
This foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries

9    Notes to the cash flow statement

(i)  Cash flows relating to discontinued operations

	2008	2007
		Restated
	£'000	£'000
Operating activities:
Profit before taxation from discontinued operations	-	2,351
Depreciation	-	579
Working capital movements:
Inventories	-	(1,325)
Receivables	1,330	(4,035)
Trade and other payables	(126)	(3,248)
	1,204	(8,608)
Cash flows in relation Copal costs of discontinuance	-	(687)
Cash flows from operating activities	1,204	(6,365)
Investing activities:
Gross proceeds on sale of business activities	-	8,897
Receivable relating to completion accounts adjustment	710	(747)
Cash flows from investing activities	710	8,150
Cash flows from discontinued operations	1,914	1,785

(ii)  Movement in net borrowings

	Cash and		Finance
	bank overdrafts	Bank loans	leases and secured loans	Net borrowings
	£'000	£'000	£'000	£'000
At 1 July 2007	1,977	(14,860)	(25)	(12,908)
Cash flow movements	3,546	-	14	3,560
Acquisition of subsidiary undertakings	-	-	(7)	(7)
Non-cash movements	-	(18)	-	(18)
Effect of foreign exchange  rate changes	6	-	-	6
At 30 June 2008	5,529	(14,878)	(18)	(9,367)
At 1 July 2006	(2,650)	-	(722)	(3,372)
New borrowings  (net of arrangement fees)	-	(14,860)	-	(14,860)
Acquisition of subsidiary undertakings	-	-	(28)	(28)
Cash flow movements	4,633	-	725	5,358
Effect of foreign exchange  rate changes	(6)	-	-	(6)
At 30 June 2007	1,977	(14,860)	(25)	(12,908)

10    Segmental allocation of major applications and brands

Sustainable building products - Energy management	Sustainable building products - Energy management
Solar Shading	Engineered Access Covers
Levolux	Elkington Gatic
Insulation	Roofing & Waterproofing
MR Facades	Derbigum
	Hydrotech
Green Roofs	Armaseam
Blackdown Horticultural Consultants
Zinco	Rainwater & Drainage
	Gatic Slotdrain
Roofing Serivices Support Systems	Alumasc
Roof-Pro	Harmer
	SML
Premium building products	Engineering products
Interior Casing Systems	Precision Engineering
Pendock	Alumasc Precision Components
	Dyson Diecastings
Housebuilding Products
Timloc	Drinks Dispensing
	Alumasc Dispense
Scaffolding
Scaffold and Construction Products

 

END

 

 

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