Preliminary Results

RNS Number : 8080V

LPA Group PLC

19 January 2012

 



LPA GROUP PLC

Preliminary results for the year ended 30 September 2011

LPA Group plc ("LPA" or the "Group"), the LED lighting and electro-mechanical engineering group, announces a substantially improved performance for the year ended 30 September 2011.

KEY POINTS

·              Revenue up 17.7% to £17.3m (2010: £14.7m)

·              Profit before taxation £400,000 (2010: loss of £458,000)

·              Basic earnings per share 2.93p (2010: loss per share of 3.35p)

·              Final dividend increased 25% to 0.50p (2010: 0.40p), total for the year 0.90p (2010: 0.40p)

·              Gearing reduced to 27.1% (2010: 47.5%)

·              Sales of LED lighting increased 47% to £2.39m (2010: £1.63m)

·              Encouraging start for LPA Transport+

·              Year-end order book at £12.9m (2010: £15.4m)

·              Strong start to current financial year trading

Peter Pollock, Chief Executive, comments:

"Our performance has improved substantially and there is further to go. We have many exciting prospects, particularly in LED lighting which continues to grow rapidly. Our new turnkey service Transport+ has the potential to be a strong engine for growth. The current financial year promises to be exciting with further progress and the potential to realise value through the sale of and relocation from our Saffron Walden property."

 19 January 2012

 

ENQUIRIES:

LPA Group plc 

Peter Pollock, Chief Executive                                                      Tel: [phone] or 01799 512844

Steve Brett, Finance Director                                                       Tel: [phone] or 01799 512860

Cairn Financial Advisers LLP (Nominated Adviser)                 Tel: [phone]

Tony Rawlinson / Avi Robinson

XCAP Securities (Broker)                                                        Tel: [phone]

David Lawman / Adrian Kirk

College Hill (PR Adviser)                                                         Tel: [phone]

Gareth David

Chairman's Statement

 

Results

The welcome recovery from the difficulties experienced in the previous year has resulted in a set of substantially improved figures. Sales increased £2.6m to £17.3m (2010: £14.7m) resulting in an £858,000 turnaround in profit before tax, from a loss of £458,000 in 2010 to a profit of £400,000 in the reported year. Basic earnings per share likewise improved 6.28p, from a loss of 3.35p to earnings of 2.93p. Gearing fell from 47.5% to 27.1% and the order book at the end of the year amounted to £12.9m (2010: £15.4m).

Dividends

The interim dividend of 0.40p was restored and paid. Given the recovery achieved and good prospects in the current financial year your Board considers it appropriate to increase the final dividend by 25% to 0.50p (2010: 0.40p) giving a total for the year of 0.90p (2010: 0.40p). Subject to approval by shareholders at the annual general meeting, to be held at 12.00 noon on 1 March 2012 at the offices of College Hill Associates Limited, London, the final dividend will be paid on 23 March 2012, to shareholders registered at the close of business on 2 March 2012. 

Board and management

The Board has remained unchanged throughout the year. The Board invited Peter Pollock, whose contract was due to expire on 6 September 2011, to continue to serve the Company on similar terms until 6 September 2016 and I am delighted to announce that he has agreed to do so.

The executive team was strengthened during the year with new Managing Directors being appointed at each of the operating entities.

Employees

Whether surviving crisis or capitalising on opportunity, our employees are critical to the Group's success and have once again proved to be our most valuable asset.

Property

During the year we identified a suitable property into which to relocate our Saffron Walden activities. We have agreed terms for the acquisition of the property, subject to an acceptable outcome of due diligence.

We have also initiated discussions with the local planning authority to obtain permission for a change of use for our existing factory in Saffron Walden (from industrial to residential), with a view to submitting a planning application in the Spring.

Outlook

The current financial year has started strongly and we have a good order book providing a base load for delivery this year and next. Whilst the general uncertainty created by the financial problems facing the Eurozone is a concern, our policy has been to develop business relationships with train builders supplying the UK (based both at home and overseas) and to develop export markets in Asia and Australasia as well as Europe. LPA Transport+ will continue to promote our position as a provider of solutions to train operators and maintainers in the UK.  We are pursuing several major LED-based lighting opportunities, which we hope will contribute to the further rapid growth of the business.

We expect to make further significant progress this year.

Michael Rusch

Chairman

19 January 2012

Chief Executive's Review

Trading results

The period under review benefited from deliveries delayed from the previous year, although some of these were at lower margins than we would normally expect. Nevertheless the Group recovered well from the difficulties created by the re-scheduling of approximately £2.3m of activity from the previous year to later periods.

Sales, profits, earnings per share, dividends and gearing all improved and the Group is in a much stronger position to deal with the current uncertainties caused by the financial difficulties facing the Eurozone.

Although the order book fell during the year this did not take account of the full value of projects won. Routine orders were relatively robust.

Our LED-based lighting was selected, and initial orders received, for the Gorgon Gas field project in Australia, and further orders have already been won in the current financial year. We were particularly pleased to be selected to supply LED-based lighting for Siemens' new Inspiro Metro train for Warsaw. We hope that Inspiro will be selected for other cities and that this will lead to further orders. LED lighting sales grew 47% during the year to £2.39m and the many prospects we have generated give us added confidence about the future growth of this business.

Our electro-mechanical business performed well, with good demand for our electrical connectors and the successful supply of train battery rafts on two major projects. We were delighted to win two new orders from Taiwan during calendar year 2011 for our inter-car electrical connectors: these will be supplied on both the Electric Multiple Unit 800 trains and the Tilting Train being built by Taiwan Rolling Stock Corporation and Nippon Sharyo from Japan. We are very pleased with the start that LPA Transport+ has made and we have great expectations for this new turnkey service offering.

Our distribution business delivered an improved performance and is currently working hard on a number of opportunities to develop its activities in aerospace and defence as well as the railway sector.

Details of the financial performance are contained in the Chairman's Statement and the Financial Review.

Markets

The global rail transport market continues to expand rapidly as does manufacturing capacity to satisfy it. Whilst the UK Government has announced new rail vehicle contracts, these have yet to be confirmed as orders.

We endeavour to build relationships with all train builders supplying the UK market, so that we can establish ourselves as suppliers on their new trains, for example Siemens' Inspiro. We also supply Alstom in Italy for the new trains it is building for the UK West Coast Mainline and Alstom in France for SNCF. We have supplied Hitachi with lighting for the Javelin High Speed Train operating in Kent and also for the Dubai and Sentosa Monorail projects. We supplied Bombardier in the UK for Turbostar Diesel Multiple Units and Victoria Line Upgrade. LPA Transport+ will help to secure our position in the after sales support of trains in the UK.

The relatively small size of the UK market and its volatile demand has necessitated that we develop markets outside UK and indeed Europe. We have won very significant orders in Asia and Australasia and we continue to pursue opportunities in these regions.

We compete in a global market and often find ourselves challenged by low cost country sourcing. However our commitment to quality and long life reliability, which results in lower whole life cost, is often a deciding factor in our favour.

The world-wide aircraft ground power supply connector market and the UK defence and aerospace markets remain very important to us.

Design and development

We have added a number of variants of LumiMatrix to our LumiSeries range of energy saving LED-based lighting products. LumiMatrix has evolved into what can best be described as a light engine, which can be configured in almost any shape based on square modules, using power LEDs for industrial applications and chip LEDs for commercial or domestic applications.

Electro-mechanical design and development activity has produced a new connector and electrical contacts which can manage Cat5 data transmission, essential for CCTV and Video on trains.

Chief Executive's Review (continued)

Structure and costs

A major challenge over the coming months will be the acquisition of alternative accommodation for our Saffron Walden business and obtaining planning permission for a change of use for the present factory so that it may be sold for residential development. We are undertaking due diligence on the purchase of a factory in Saffron Walden, on which we have agreed terms and we are working hard on the planning application for, as well as discussing the sale of, the factory we currently occupy. We shall then have the challenge of managing the refurbishment of the acquired factory and relocating the business to it. This exercise will allow us to reduce the cost base of our electro-mechanical business.

Our LED-based lighting business is growing rapidly and we will be increasing capacity through the addition of an additional surface mount machine and upgrading facilities at our Normanton factory.

Our website has been upgraded.

Strategy

We remain committed to delivering shareholder value over the medium term. The Government spending review has been largely positive towards the rail market in the UK. The strength of sterling versus other currencies in export markets will be an important influence on our customers and the uncertainty in the Eurozone is a concern we seek to mitigate by exporting to Asia and Australasia. As promised, we have continued to reduce our exposure to the sub-contract market, which remains volatile, and have focussed more resource on the after-market for our products through the development of LPA Transport+.

Peter Pollock

Chief Executive

19 January 2012

 

 

 

Financial Review

 

Accounts preparation

The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS).

Financial performance

Revenue in the current year increased by £2.6m (17.7%) to £17.32m (2010: £14.72m) and produced an operating profit of £434,000 (2010: loss of £371,000) an advance of £805,000.

In the first half of the year sales of £8.44m (2010: £6.93m) were achieved generating an operating profit of £209,000 (2010: loss of £297,000) with sales and profits up on prior year by £1.51m and £506,000 respectively. The second half result saw further improvement with sales of £8.88m and an operating profit of £225,000 bettering both the first half and the corresponding period last year (2010: sales of £7.79m, loss of £74,000).

The majority of the sales growth was rail project driven and benefitted from the project delays seen in the previous year. This together with a 0.3% improvement in gross margin, to 23.4% (2010: 23.1%), resulted in a gross profit of £4.06m (2010: £3.40m). Other operating expenses were £0.15m below last year at £3.62m (2010: £3.77m): costs in the year included termination costs of £41,000 (2010: £82,000) and share option costs at £3,000 (2010: £47,000).

Within finance costs interest on borrowings fell to £77,000 (2010: £94,000), with comparable interest rates but lower average borrowings, and the interest cost on pension scheme liabilities was slightly lower at £562,000 (2010: £582,000). Finance income, which comprises the return on pension scheme assets, was higher at £605,000 (2010: £589,000).

With a tax charge of £65,000 (2010: credit of £75,000) the profit for the year was £335,000 (2010: loss of £383,000) representing basic earnings per share of 2.93p (2010: loss of 3.35p).

Balance sheet

At the end of the year shareholders' funds were £4.29m (2010: £3.96m) giving a net asset value per ordinary share of 37.5p (2010: 34.6p). The tangible net asset value per share, calculated excluding intangible assets and the net pension liability from the calculation, was 25.9p (2010: 24.7p).

Property, plant and equipment at 30 September was £1.66m (2010: £1.79m) of which property made up £0.80m and plant and equipment £0.86m. Net additions, which remain focused in the areas of production and engineering, were £143,000 (2010: £83,000) and the depreciation charge for the year was £276,000 (2010: £323,000). 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, provisions and current tax) decreased to £2.43m (2010: £2.84m), benefitting from lower project related inventories at the year end. 

Net debt fell £0.72m over the year to £1.16m and gearing was significantly improved at 27.1% (2010: 47.5%).

Intangible assets which total £1.32m (2010: £1.33m) comprise goodwill and capitalised development costs. Goodwill was unchanged at £1.23m (2010: £1.23m) and largely relates to the Group's investment in Excil Electronics: there was no impairment charge in the year (2010: £nil). Capitalised development costs at the end of the year were £89,000 (2010: £96,000) and relate to the development of LED lighting products. 

The pension liability included in the balance sheet at the end of the previous year of £276,000 reduced to £nil. The change comprised an actuarial gain of £804,000 (2010: loss of £148,000) recognised in the statement of comprehensive income, an income statement credit of £43,000 (2010: £7,000) together with contributions received of £100,000 (2010: £nil): this gave rise to an actuarial surplus of £671,000 which, not being considered recoverable, was restricted to £nil with the £671,000 restriction being taken through the statement of comprehensive income.

The actuarial gain of £804,000 (2010: loss of £148,000) principally resulted from changes in the financial assumptions adopted of £1,132,000 (2010: loss of £798,000), less a worse than expected asset return of £323,000 (2010: gain of £432,000) and an experience loss on liabilities of £5,000 (2010: gain of £218,000). The financial assumption changes and resultant actuarial gains of £1,132,000 comprised increased mortality at £574,000, lower inflation at £388,000 and an increase in the discount rate at £170,000.

Cash flow

The much improved trading performance combined with lower levels of working capital at the year end resulted in £1,140,000 of cash generated from operations (2010: cash absorption of £185,000). With tax receipts of £18,000 (2010: paid £36,000) and pension contributions of £100,000 (2010: £nil) net cash absorbed from operating activities was £1,058,000 (2010: absorption of £221,000).

Capital expenditure increased to £144,000 (2010: £83,000), asset disposal proceeds were £6,000 (2010: £1,000) and development expenditure capitalised in the year amounted to £31,000 (2010: £42,000).

Debt repayments were in line with last year at £408,000 (2010: £408,000), interest payments on borrowings fell to £77,000 (2010: £86,000) but dividend payments, following the reinstatement of the interim dividend, were higher at £92,000 (2010: £46,000).

Overall there was a net increase in the cash position of £312,000 (2010: decrease of £885,000).

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 2010	655	253	976	1,884
Cash generated	-	-	(720)	(720)
Repayment of borrowings	(291)	(117)	408	-
At 30 September 2011	364	136	664	1,164

The bank loan is repayable in 5 quarterly instalments of £73,000 the last being in October 2012, the finance lease obligations are repayable over the next two years, and the bank overdraft of £0.67m (2010: £0.98m) is repayable on demand. At the year-end the Group was holding minimal cash and had £1.84m (2010: £1.02m) of un-drawn overdraft facilities available to it.

Subsequent to the year end the Group has re-negotiated its working capital facilities through to the end of January 2013. These total £2.7m (previously £3.2m) and provide for an overdraft limit of £2.0m (previously: £2.5m) and unchanged guarantee and forward exchange contract facility limits of £0.6m and £0.1m respectively. Interest payable on the overdraft facility is unchanged at 2.5% over the prevailing base rate.

In addition term loan finance has been negotiated which would allow, subject to the satisfactory outcome of due diligence, the Group to purchase alternative premises in Saffron Walden.

Treasury

The Group's treasury policy operates within approved Board guidelines and has not changed since 2010. 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

19 January 2012

Consolidated Income Statement

For the year ended 30 September 2011

		2011	2010
	Note	£'000	£'000
Revenue		17,322	14,716
Cost of sales		(13,265)	(11,315)
Gross profit		4,057	3,401
Distribution costs		(1,374)	(1,488)
Administrative expenses		(2,249)	(2,284)
Operating profit / (loss)		434	(371)
Finance costs		(639)	(676)
Finance income		605	589
Profit / (loss) before tax		400	(458)
Taxation		(65)	75
Profit / (loss) for the year		335	(383)
Earnings / (loss) per share	1
Basic		2.93p	(3.35p)
Diluted		2.92p	(3.35p)

All activities are continuing.

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2011

		2011	2010
		£'000	£'000
Profit / (loss) for the year		335	(383)
Cash flow hedges:
Losses taken to equity		(5)	(10)
Transferred to profit / (loss) for the period		15	(13)
Tax on cash flow hedges		(3)	8
Actuarial gain / (loss) on pension scheme		133	(148)
Tax on actuarial gain / (loss)		(58)	41
Other comprehensive income / (expense) net of tax		82	(122)
Total comprehensive income / (expense) for the year		417	(505)
Attributable to:
- Equity shareholders of the parent		417	(505)

Consolidated Balance Sheet

At 30 September 2011

		2011	2010
		£'000	£'000
Non-current assets
Intangible assets		1,323	1,330
Property, plant and equipment		1,658	1,791
Deferred tax assets		46	218
		3,027	3,339
Current assets
Inventories		2,157	2,473
Trade and other receivables		3,049	3,405
Current tax receivable		-	18
Cash and cash equivalents		6	5
		5,212	5,901
Total assets		8,239	9,240
Current liabilities
Bank overdraft		(670)	(981)
Bank loans and other borrowings		(392)	(407)
Current tax payable		(8)	-
Trade and other payables		(2,740)	(3,027)
		(3,810)	(4,415)
Non-current liabilities
Bank loans and other borrowings		(108)	(501)
Provisions		(5)	(5)
Retirement benefits		-	(276)
Deferred tax liabilities		-	(54)
Other payables		(24)	(25)
		(137)	(861)
Total liabilities		(3,947)	(5,276)
Net assets		4,292	3,964
Equity
Share capital		1,145	1,145
Share premium account		365	365
Un-issued shares reserve		195	192
Revaluation reserve		307	308
Merger reserve		230	230
Retained earnings		2,050	1,724
Equity attributable to shareholders of the parent		4,292	3,964

 

 Consolidated Cash Flow Statement

For the year ended 30 September 2011

		2011	2010
		£'000	£'000
Profit / (loss) for the year		335	(383)
Finance costs		639	676
Finance income		(605)	(589)
Income tax		65	(75)
Operating profit / (loss)		434	(371)
Adjustments for:
Depreciation		276	323
Amortisation of intangible assets		38	5
Gain on sale of property, plant and equipment		(5)	(1)
Non-cash charge for equity-settled share-based payments		3	47
		746	3
Movements in working capital:
Change in inventories		316	22
Change in trade and other receivables		356	(610)
Change in trade and other payables		(278)	400
Cash generated from operations		1,140	(185)
Income tax received / (paid)		18	(36)
Retirement benefits (pension contributions)		(100)	-
Net cash from operating activities		1,058	(221)
Purchase of property, plant and equipment		(144)	(83)
Proceeds from sale of property, plant and equipment		6	1
Capitalised development costs		(31)	(42)
Net cash from investing activities		(169)	(124)
Repayment of bank loans		(291)	(291)
Repayment of obligations under finance leases		(117)	(117)
Interest paid		(77)	(86)
Dividends paid		(92)	(46)
Net cash from financing activities		(577)	(540)
Net increase / (decrease) in cash and cash equivalents		312	(885)
Cash and cash equivalents at start of the year		(976)	(91)
Cash and cash equivalents at end of the year		(664)	(976)
		2011	2010
Reconciliation of cash and cash equivalents		£'000	£'000
Cash and cash equivalents in current assets		6	5
Bank overdraft in current liabilities		(670)	(981)
Cash and cash equivalents at end of the year		(664)	(976)

 

 

Notes

1 - EARNINGS / (LOSS) PER SHARE

The calculation of earnings per share is based upon the profit for the year of £335,000 (2010: loss of £383,000) and the weighted average number of ordinary shares in issue during the year of 11.448m (2010: 11.448m). The weighted average number of ordinary shares diluted for the effect of outstanding share options was 11.457m. Due to losses in the previous year no dilution arose and diluted earnings per share was therefore shown as the same as basic earnings per share.

		2011			2010
	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	335	11.448	2.93	(383)	11.448	(3.35)
Effect of share options	-	0.009	(0.01)	-	-	-
Diluted earnings per share	335	11.457	2.92	(383)	11.448	(3.35)

2 - INFORMATION

The preceding information does not constitute the Company's statutory accounts for the years ended 30 September 2011 or 30 September 2010 but is derived from those accounts. The 2011 accounts will be posted to shareholders on 6 February 2012 and will be available from the Company Secretary, LPA Group Plc, Debden Road, Saffron Walden, Essex, CB11 4AN and on LPA's website (www.lpa-group.com), shortly thereafter. Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 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 the Companies Act.

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 2011 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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