Preliminary Results

RNS Number : 4729M

LPA Group PLC

29 January 2009

 



LPA Group PLC 

Preliminary announcement of results for the year ended 30 September 2008

LPA Group plc ('LPA' or 'the Group'), the lighting, power and electronics system manufacturer and distributor, announces its results for the year ended 30 September 2008 together with new contracts. 

KEY POINTS

• Turnover down 9.4% to £15.08m (2007: £16.65m)    

• Profit before taxation of £382,000 (2007: £463,000)

• Diluted earnings per share of 3.24p (2007: 3.26p)

• Maintained final dividend of 0.40p increases total for the year to 0.90p (2007: 0.60p)

• Encouraging start to current financial year: 

- order for Inter-car Jumpers for PPP Project in Sydney Australia now confirmed at £2.7m;

- first order for £0.2m of LED lighting for cruise ships won;

- strong order book;

- more major orders expected.

• Strong cash flow, continued reduction in net debt

• Significant customer interest in new LED-based lighting products

• Results presented under IFRS for the first time - comparatives restated 

Peter Pollock, Chief Executive, commented: 

'The new financial year has started quietly. However, the Group has been very successful in winning new business which, in the current climate is very encouraging and we are well placed to win more business from export and UK transportation markets. The Government's commitment to investment in an expanded rail network could work to our advantage in what could otherwise be a challenging period. The weakness of Sterling is already assisting us in export markets. We will commence series delivery on at least seven new rail projects during this year, which, while they may not deliver much progress this financial year, underpin our positive view of the next three to four years. The long awaited factory load has arrived.'

29 January 2009

  ENQUIRIES:

LPA Group plc
Peter Pollock	Tel: [phone] or 01799 512844
Stephen Brett	Tel: [phone] or 01799 512860
Blomfield Corporate Finance	Tel: [phone]
Alan Mackenzie
Ben Jeynes
Religare Hichens, Harrison	Tel: [phone]
Alan Rooke
College Hill	Tel: [phone]
Gareth David

Chairman's Statement

Results

I am pleased to report that the Group has made steady progress and has delivered results broadly in line with expectation despite the widely reported worsening trading conditions. Obligatory adoption of the International Financial Reporting Standards (IFRS) for the first time means that the result for the period and that of the comparative are different to those that would have been reported previously. 

Sales fell £1.6m in the year to £15.1m and the profit before tax achieved was £382,000 compared to £463,000 in the previous period.  

Dividends

In addition to the interim dividend which was increased by 20% to 0.25p, a special dividend of 0.25p was paid to shareholders at the same time to celebrate the Group's Centenary. Given the banking crisis, the outcome of which it is difficult to predict, your Board consider it prudent to maintain rather than increase the final dividend at 0.40p, giving a total for the year of 0.90p (2007: 0.60p), up 50%.

Subject to approval by shareholders at the Annual General Meeting of the Company to be held at 12.00 noon on 20 March 2009, at the offices of College Hill Associates Limited, The Registry, Royal Mint Court, London, EC3N 4QN, the dividend will be paid on 27 March 2009, to shareholders registered at the close of business on 6 March 2009.

Board

John Goodger has retired from the Board after twelve years valued service. I would like to record my gratitude to John for his wise counsel and support for the Group throughout that period. Per Staehr joined the Board last year and as the senior independent non-executive director has the assumed chairmanship of the Audit and Remuneration Committees.

Employees

Our people remain our most valuable asset and once again, I take this opportunity to thank them for their continued support.

Saffron Walden property

During the year a long standing flaw in the title to the Saffron Walden property relating to the car park was rectified. This action had been planned for some time, but a change in the law allowed it to be accelerated. A potential constraint to the development value of the site has been eliminated. 

Outlook

Unsurprisingly, given the financial crisis, the new financial year has started quietly. However LPA has been very successful in winning new business which in the current climate is very encouraging. We will commence work on several large projects this year, which, while they may not contribute much progress this year, underpin the activity levels for the next three years. The Group is also well placed to win more business from UK and export rail markets. 

The market for rail vehicles has been cruel to the Group in recent years, but the government's commitment to investment in an expanded rail network, could work to the Group's advantage in what could otherwise be a challenging period. The weakness of Sterling has favourably impacted our competitiveness in export markets

Given the further reduction in net debt since the year end we are better placed than many to ride out what could be a harsh recession and to take advantage of any opportunities that creates. The 'LumiSeries' of LED-based energy saving lighting products, developed by the Group, is an exciting new opportunity.

MICHAEL RUSCH

Chairman

29 January 2009

Chief Executive's Review

Trading Results

The past year would have seen good progress made by the Group, but for the problems, previously reported, in our sheet metal fabrication activity which suffered from the decline in demand for domestic boilers. Local management was changed and the new direction aligns the activity much closer to LPA's focus on the transportation market in many of its forms. 

Despite this setback, rail vehicle and station refurbishment provided a steady flow of activity, as did aircraft ground support and aerospace and defence projects. Details of the financial performance are contained in the Chairman's Statement and the Financial Review. 

Markets

Our focus on the transportation market, particularly rail vehicles, seems to be offering the Group protection from some of the worst effects of the recession. Our order book is strong and expected to grow stronger, with a good base load running for at least the next three years. This forward view has been missing for the past six years since the UK rail vehicle capacity was restructured. After a quiet start, which has been largely due to the recession and the timing of projects, we shall be increasingly busy this year.

The UK Government has identified Rail as one of the areas for additional investment to stimulate the economy. The weakness of Sterling has significantly improved our competitiveness in export markets. 

We are delighted that the Turbostar Diesel Multiple Unit is to recommence production, which has resulted in an order for £1.5m. Turbostar is also a candidate for additional UK Government investment. 

We are also pleased that our long term efforts in Australia have been rewarded with an order for £2.7m for inter car jumpers. We are hopeful of more orders from this market.

Asia remains an important market with interest in both our electrical and our electronic and solid state (LED) lighting products.

Likewise our efforts in France have resulted in a number of orders for SNCF, French National Railways, and we expect to have further success in this market shortly. 

We hope to make inroads elsewhere in Europe, particularly in Germany. Our new solid state lighting products are generating significant interest and these may lead the way into this challenging market. 

The UK Government's decision to purchase additional vehicles for the West Coast Mainline, which will be finally assembled in Savigliano, Italy from components mainly sourced from the UK, gives us the opportunity to re-establish our relationships and references within Italy and elsewhere in Europe. 

We have won our first major marine order for solid state lighting for cruise liners being built in Finland. The marine market has always been a small but important market for our electrical connectors. It is particularly satisfying to extend our scope of supply in this market.

We remain a supplier to the world-wide aircraft ground support market, where our shore power supply connectors are in service in more than thirty countries. Most UK airports, including Heathrow, Manchester and Stansted use our products. The UK aerospace and defence industries continue to reward our commitment to these important markets. 

Strategy

Our objective remains to deliver shareholder value. Our continuing focus on the transportation market, particularly rail, seems to be being rewarded by the award of many significant contracts, which will underpin performance over the next three to four years. 

There are no plans to sell the Saffron Walden property in the present market conditions. Opportunities to migrate activities from the site to other locations will be taken as and when this makes economic sense. We have significantly reduced our footprint over the years and this policy will continue so as to minimise the damage to the business and distress to our employees when re-location becomes essential.

Structure and Costs

Apart from our sheet metal facility, where a reduction in costs has become essential, our structure and costs have been maintained closely in balance with the level of activity. We will endeavour to restrain costs as the level of activity increases during the coming year. Maintaining our capability to allow us to respond to the arriving upturn has been challenging. 

Design and Development

We have launched a range of energy saving solid state lighting products called LumiSeries utilising power Light Emitting Diodes (LEDs). This comprises LumiPanel, which replaces conventional fluorescent luminaires, LumiStrip, which replaces the conventional fluorescent tube within a luminaire, and LumiAd which is a derivative of LumiPanel which replaces conventional back lit advertising panels. The LumiSeries complements our range of LED spotlights, down lighters and reading lights. The launch market has been rail vehicles, but our LED products are already being sold to the marine and defence markets. 

Much of our design and development capacity is expended on integrating and modifying our products to suit bigger systems to satisfy customer requirements. This does not always lead to new discrete products but does facilitate the sale of our existing products and creates a long term spares business. Our products are highly reliable, so the business really is long term. 

This year we have added two new connectors to our range. The Module 32 is a compact connector for use on rail vehicles which has already won orders. N27 is a derivative of N17, an aircraft ground power supply connector, with built in controls, which is eagerly awaited by our customers and for which we have already received enquiries. We have also developed the S4 fully screened contact for use with sensitive cables within our existing connector range. We plan further derivatives of this product. 

Prospects

We recognise that our business can be affected by the economy at large and sometimes major projects can be delayed and these factors have impacted during the first half of the current year. However significant orders are now in hand, with deliveries due to commence during this financial year, and there are strong prospects of further orders to be announced in the near future. Based on this and the interest expressed in our new energy saving technology the prospects are encouraging. 

PETER POLLOCK

Chief Executive

29 January 2009

Financial Review

Accounts preparation

The accounts have been prepared under the principles of International Financial Reporting Standards (IFRS) for the first time this year, as opposed to United Kingdom Generally Accepted Accounting Principles (UK GAAP) used in previous years. Comparative information has been restated in accordance with IFRS. For the Group the most significant change to its reported results is that goodwill is no longer routinely amortised over its remaining life, it is instead subject to an annual impairment review, with the effect that operating profits have been increased by circa £90,000. 

Financial performance

Sales fell by £1.57m (9.4%) from £16.65m in 2007 to £15.08m in the current year, with operating profit down £93,000 to £273,000 (2007: £366,000). In the first half of the year sales of £7.68m were £0.92m down on the corresponding period last year, and second half sales at £7.40m were £0.65m behind. Half yearly operating profits were similarly down, at £155,000 (2007: £165,000) for the first half and £118,000 (2007: £201,000) for the second. 

The sales decline was largely in lower added-value products which, together with reduced production overheads, led to an improvement in gross margins from 23.1% to 25.2%, and resulted in a gross profit for the year of £3.80m (2007: £3.85m). All other operating expenses less income were £38,000 above last year at £3.52m. Costs in the year included termination costs of £40,000 (2007: £57,000) and share option costs at £63,000 (2007: £18,000). The prior year included £47,000 in respect of tender offer defence costs. 

Within finance costs, interest on borrowings fell in the year to £172,000 (2007: £184,000) reflecting lower average borrowings and broadly comparable interest rates, and the interest cost on pension scheme liabilities rose to £481,000 (2007: £423,000) as a result of the higher discount rate applied. The return on pension scheme assets, included in finance income, was £753,000 (2007: £704,000) the consequence of both higher opening assets and higher expected long-term rates of return. 

The tax charge of £11,000 (2007: £97,000) was low and benefited from the utilisation of tax losses and a corporation tax repayment of £20,000. The establishment of further tax losses and the tax refund were the consequence of claims made under the research and development tax credit scheme in the period.  

Profit for the year was £371,000 (2007: £366,000) representing basic earnings per share of 3.25p (2007: 3.29p). 

Balance sheet

At the end of the year shareholders' funds were £4.86m (2007: £5.51m) giving a net asset value per ordinary share of 42.5p (2007: 48.5p). The tangible net asset value per share, calculated excluding goodwill and the net pension asset from the calculation was 28.4p (2007: 26.7p). 

Property, plant and equipment at 30 September was £2.19m (2007: £2.26m) of which property made up £0.84m and plant and equipment £1.35m. Additions, which remain focused in the areas of production and engineering, were £267,000 (2007: £487,000) and the depreciation charge for the year was £321,000 (2007: £322,000). The carrying value of the Group's freehold properties does not reflect any redevelopment upside. 

Net trading assets (defined as inventories plus trade and other receivables, less trade and other payables and provisions) were essentially unchanged at £2.88m (2007: £2.86m). 

Progress was again made in reducing net debt which fell from £2.09m to £1.84m over the year. Gearing was unchanged at 38%. 

Goodwill stands at £1.23m (2007: £1.23m) and largely relates to the Group's investment in Excil Electronics. There was no impairment charge in the year (2007: £nil). 

The pension asset included in the balance sheet, net of deferred tax, fell in the year by £0.87m to £0.38m (2007: £1.25m). The change comprised an actuarial loss of £0.99m recognised in the statement of recognised income and expense, less £38,000 credited to the income statement and £81,000 of contributions received. The actuarial loss resulted from a lower than expected asset return of £1.32m (as a result of the fall in equity values), plus the impact of changes to demographic and financial assumptions of £0.78m (largely assumed longer mortality), less the release of the previously unrecoverable part of the surplus of £1.11m. 

Cash flow

Cash generated from operations was marginally improved in the year at £725,000 (2007: £697,000) and after a tax receipt of £20,000 (2007: £Nil) net cash from operating activities amounted to £745,000 (2007: £697,000). 

Capital expenditure fell to £81,000 (2007: £156,000) reducing to net expenditure of £54,000 (2007: £147,000) after asset disposals. Interest received on short term deposits in the year was £9,000 (2007: £Nil). 

In the year debt repayments were £383,000 (2007: £340,000), there were no bank loan draw downs (2007: £600,000), and interest payments on borrowings were reduced to £161,000 (2007: £173,000). With £10,000 (2007: £156,000) received from the exercise of share options and dividend payments of £103,000 (2007: £61,000), there was an overall net increase in the cash position of £63,000 (2007: £732,000). 

Net debt

An analysis of the change in net debt is shown below: 

	Bank loan	Finance lease obligations	Cash and cash equivalents	Net debt
	£'000	£'000	£'000	£'000
At 1 October 2007	1,498	388	205	2,091
Cash generated	-	-	(446)	(446)
Repayment of borrowings	(291)	(92)	383	-
New finance lease obligations	-	186	-	186
Other non-cash items	11	-	-	11
At 30 September 2008	1,218	482	142	1,842

The bank loan is repayable in 17 quarterly instalments of £73,000 the last being in October 2012, the finance lease obligations are repayable over the next five years, and the bank overdraft of £0.47m (2007: £0.21m) is repayable on demand. At the year-end the Group was holding cash of £0.33m (2007: £nil) and had £0.67m (2007: £0.97m) of un-drawn overdraft facilities available to it. 

Subsequent to the year end the Group has re-negotiated its working capital facilities through to mid November 2009. These total £1.3m and provide for an overdraft limit of £1.0m, a guarantee limit of £0.1m, and a forward exchange contract facility limit of £0.2m. This compares to the former facility which included the overdraft, guarantee, and forward exchange contract components within a single limit of £1.25m. Interest is payable on the new overdraft facility at 2.25% over base rate (previously 1.50% over base) and a 1.125% charge is made against the unutilised part of the facility, where previously no such charge applied. The Group does not at present anticipate difficulties in renewing its working capital facilities beyond November 2009. 

Treasury

The Group's treasury policy operates within approved Board guidelines and has not changed since 2007. It seeks to ensure that adequate financial resources are available for the development of the Group's business whilst managing its foreign currency, interest rate, liquidity and credit risks. 

STEPHEN BRETT

Finance Director

29 January 2009

Consolidated Income Statement

For the year ended 30 September 2008

		2008	2007
	Note	£'000	£'000
Revenue		15,082	16,650
Cost of sales		(11,285)	(12,798)
Gross profit		3,797	3,852
Distribution costs		(1,339)	(1,309)
Administrative expenses		(2,185)	(2,179)
Other operating income		-	2
Operating profit		273	366
Finance costs		(653)	(607)
Finance income		762	704
Profit before tax		382	463
Taxation		(11)	(97)
Profit for the year		371	366
Earnings per share	1
Basic		3.25p	3.29p
Diluted		3.24p	3.26p

All activities are continuing.

Consolidated Statement of Recognised Income and Expense

For the year ended 30 September 2008

		2008	2007
		£'000	£'000
Cash flow hedges:
Gains taken to equity		22	-
Transferred to profit for the period		(28)	-
Tax on cash flow hedges		2	-
Actuarial loss on pension scheme		(1,369)	(923)
Tax on actuarial loss		383	321
Net loss recognised directly in equity		(990)	(602)
Profit for the year		371	366
Total recognised expense		(619)	(236)

Consolidated Balance Sheet

At 30 September 2008

		2008	2007
		£'000	£'000
Non-current assets
Intangible assets		1,234	1,234
Property, plant and equipment		2,191	2,256
Retirement benefits		525	1,729
Deferred tax assets		120	141
		4,070	5,360
Current assets
Inventories		2,194	2,448
Trade and other receivables		3,174	3,274
Cash and cash equivalents		330	3
		5,698	5,725
Total assets		9,768	11,085
Current liabilities
Bank overdraft		(472)	(208)
Bank loans and other borrowings		(392)	(366)
Trade and other payables		(2,458)	(2,856)
		(3,322)	(3,430)
Non-current liabilities
Bank loans and other borrowings		(1,308)	(1,520)
Provisions		(5)	(5)
Deferred tax liabilities		(246)	(621)
Other payables		(27)	-
		(1,586)	(2,146)
Total liabilities		(4,908)	(5,576)
Net assets		4,860	5,509
Capital and reserves
Share capital		1,145	1,137
Share premium account		365	363
Un-issued shares reserve		81	18
Revaluation reserve		310	311
Merger reserve		230	230
Retained earnings		2,729	3,450
Total equity		4,860	5,509

Consolidated Cash Flow Statement

For the year ended 30 September 2008

		2008	2007
		£'000	£'000
Profit for the year		371	366
Finance costs		653	607
Finance income		(762)	(704)
Income tax expense		11	97
Operating profit		273	366
Adjustments for:
Depreciation		321	322
Gain on sale of property, plant and equipment		(16)	-
Derivative financial instruments		(3)	6
Non-cash charge for equity-settled share-based payments		63	18
Retirement benefits		107	93
		745	805
Movements in working capital:
Change in inventories		254	184
Change in trade and other receivables		100	(163)
Change in trade and other payables		(374)	(129)
Cash generated from operations		725	697
Income tax received		20	-
Net cash from operating activities		745	697
Purchase of property, plant and equipment		(81)	(156)
Proceeds from sale of property, plant and equipment		27	9
Interest received		9	-
Net cash from investing activities		(45)	(147)
Repayment of bank loans		(291)	(294)
Repayment of obligations under finance leases		(92)	(46)
Drawdown of bank loans		-	600
Interest paid		(161)	(173)
Proceeds from issue of share capital		10	156
Dividends paid		(103)	(61)
Net cash from financing activities		(637)	182
Net increase in cash and cash equivalents		63	732
Cash and cash equivalents at start of the year		(205)	(937)
Cash and cash equivalents at end of the year		(142)	(205)

Notes

1 - EARNINGS PER SHARE

The calculation of earnings per share is based upon the profit for the year of £371,000 (2007: £366,000) and the weighted average number of ordinary shares in issue during the year of 11.419m (2007: 11.125m). The weighted average number of ordinary shares diluted for the effect of outstanding share options was 11.465m (2007: 11.226m). 

		2008			2007
	Earnings	Weighted average number of shares	Earnings per share	Earnings	Weighted average number of shares	Earnings per share
	£'000	Million	Pence	£'000	Million	Pence
Basic earnings per share	371	11.419	3.25	366	11.125	3.29
Effect of share options	-	0.046	(0.01)	-	0.101	(0.03)
Diluted earnings per share	371	11.465	3.24	366	11.226	3.26

2 - INFORMATION

The preceding information does not constitute the Company's statutory accounts for the years ended 30 September 2008 or 30 September 2007 but is derived from those accounts. The 2008 accounts will be posted to shareholders on 20 February 2009 and will be available from the Company Secretary, LPA Group Plc, Debden Road, Saffron Walden, Essex, CB11 4AN, shortly thereafter. Statutory accounts for 2007 have been delivered to the Registrar of Companies, and those for 2008 will be delivered following the Annual General Meeting. The auditors have reported on these accounts and their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 

The Chairman's Statement, the Chief Executive's Review, and the Financial Review included in this preliminary announcement form part of the business review included in the 2008 accounts. The business review and other content of this preliminary announcement have been prepared solely for the shareholders of the Company as a body. To the extent permitted by law the Company, its directors, officers and employees disclaim liability to any other persons in respect of the information contained in this preliminary announcement. Sections may include statements containing risks and uncertainties facing the Group, and other forward-looking statements, which by their nature involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The Company undertakes no obligation to update any forward-looking statements. 

 

END

 

 

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