Final Results

RNS Number : 0084U

MS International PLC

17 June 2009

 



Chairman's Statement

Results and review

If ever there was a time that truly heralded the virtues of operating a contemporary diverse engineering group, this is it. The significant growth from our Defence division almost totally compensated for the negative impact that some four months of intensifying global recession inflicted on our two Industrial Engineering divisions - forgings and petrol station forecourt structures. This impressive achievement by 'Defence' not only enabled the Group to report a reasonably robust set of results against a backdrop of deteriorating economic conditions but also elevated 'Defence' to become the major constituent part of the Group, accounting for half of total revenue.  

For the year ended 2 May 2009, Group profit before taxation amounted to £4.92m (2008-£5.29m) on revenue of £51.56m (2008-£53.86m). Earnings per share were 19.5p (2008-22.0p).

Net cash and short term deposits at the year-end remained positive and amounted to £8.23m (2008-£10.07m).

I highlighted the significant gains being achieved by 'Defence' in my interim statement and I am pleased to report that it continued to perform strongly in the second half with resulting full year revenue up by some 25% compared to the previous year, mainly reflecting higher sales to overseas naval end-users and shipbuilders.  

This uplift in both revenue and profit from 'Defence' was particularly important at a time when 'Industrial Engineering' encountered the real severity of the global slowdown during the second half of the year. 'Industrial Engineering' order intake declined steeply in the second half of the year amid low industrial activity, market weakness and immense uncertainty. The effects spread progressively through the individual businesses and by the final quarter 'Industrial Engineering' was contending with austere trading conditions.

However, as part of our corporate risk assessment review earlier in the year, we had already determined that any reduction in customer demand in our specific markets throughout the world was the principal risk issue for the Group, most pertinent for 'Industrial Engineering' which operates on short lead time order books. Accordingly we were prepared to implement immediate and appropriate counter-measures in a timely manner to re-align costs with the sharp reduction in demand.

Whilst the eventuality was disappointing and seriously undermined our plans to take advantage of the many efficiency gains that were being attained, our long and well established in-house training, routines and investment programmes aimed at improving our effectiveness have continued unabated, with greater commitment and application from everyone.

Outlook

Clearly there is considerable value in the contribution that 'Defence' affords our diverse Group, bestowing growth, a long term order book and excellent cash flow visibility, especially in these recessionary and unpredictable times.

Substantial 'Defence' orders in hand at the year end have been boosted further lately, and amongst others, we have been awarded a four year contract by the UK Ministry of Defence to provide contractor logistic support, fleet wide, for their in-service MSI-DS 30mm naval gun systems. Elsewhere, in the global defence equipment market, we are encouraged by the number of very interesting opportunities that exist for us to win additional business. 

Predicting how long 'Industrial Engineering' may have to endure depressed demand is difficult. Recovery may depend more upon there being a fundamental global spending upswing than any advantages purported to be offered by the perception of any sterling weakness. Notwithstanding, the Group has retained market share in the various markets that we serve and numerous opportunities to expand our positions are being exploited with a marked enthusiasm. The preservation of our broad spectrum of niche capabilities is important and currently any under-utilised plant and equipment is under a strict regime of upgrade/maintenance and care, but ready to be re-commissioned the instant there is an upturn anywhere in activity.

The positive counterbalance provided by 'Defence' should grant an element of protection to the Group until the economy and the global industrial engineering market sector in particular, recovers. Moreover, the Group will continue to benefit from being debt free and committed to the strategic importance of tight control of cash and working capital.  

We will remain vigilant, focused on making positive, constructive decisions and taking actions to sharpen our operations and ensure that we are moving in the right direction, in order that we may position the Group to achieve long term success and profitable development once an economic recovery becomes firmly established. 

The record of progressive growth for the Group may have stalled temporarily, but we have the confidence, experience and resources that will assist us to withstand the present difficulties.

Undoubtedly, future results will depend upon the degree and duration of this recession and whilst we are hopeful of an upturn, we are not anticipating that it will happen in the short term, so we are planning our business strategy based upon a continuing difficult market in the year ahead.

Accordingly, the Board recommends the payment of a maintained final dividend of 3.80p (2008 - 3.80p) making a total for the year of 4.50p (2008 - 4.50p).  

Michael Bell

16 June 2009

Group income statement
For the 52 weeks ended 2nd May, 2009
						2009		2008
						Total		Total
						£000		£000
Revenue						51,559		53,861
Cost of sales						(39,139)		(40,393)
Gross profit						12,420		13,468
Distribution costs						(1,665)		(1,781)
Administrative expenses						(6,442)		(7,184)
						(8,107)		(8,965)
Group trading profit						4,313		4,503
Finance revenue						142		308
Finance costs						(6)		(8)
Other finance revenue - pensions						470		485
						606		785
Profit before taxation						4,919		5,288
Taxation						(1,401)		(1,355)
Profit for the period attributable to equity holders of the parent						3,518		3,933
Earnings per share: basic						19.5p		22.0p
diluted						18.9p		21.5p
Group statement of recognised income and expense
For the 52 weeks ended 2nd May, 2009
		Group				Company
		2009		2008		2009		2008
		Total		Total		Total		Total
		£000		£000		£000		£000
Actuarial (losses)/gains on defined benefit pension scheme		(5,511)		548		(5,511)		548
Current taxation on actuarial (losses)/gains on defined benefit pension scheme		106		-		106		-
Deferred taxation on actuarial (losses)/gains on defined benefit pension scheme		1,437		(127)		1,437		(127)
Exchange differences on retranslation of foreign operations		158		120		-		-
Net (expense)/income recognised directly in equity		(3,810)		541		(3,968)		421
Profit attributable to equity holders of the parent		3,518		3,933		3,453		3,769
Total recognised income and expense for the period attributable to equity holders of the parent		(292)		4,474		(515)		4,190

The financial information set out above does not constitute the Company's statutory accounts for the periods ended 2nd May, 2009 or 3rd May, 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies, and those for 2009 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The earnings per share is calculated by dividing the profit after taxation of £3,518,000 (2008 - £3,933,000) by the weighted average of 18,020,015 (2008 - 17,845,762) shares in issue in the year.

Copies of this announcement are available from the Company's registered office at MS INTERNATIONAL plc, Balby Carr Bank, Doncaster, DN4 8DH, England. The full Annual Report and Accounts will be posted to shareholders shortly and will be delivered to the Registrar of Companies after it has been laid before the Company in general meeting.

Dividend warrants will be posted on 31st July 2009 to members on the books of the Company at 3rd July, 2009.

Balance sheets
At 2nd May, 2009
			Group				Company
			2009		2008		2009		2008
			£'000		£'000		£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment			15,810		16,101		15,103		15,269
Intangible assets			106		138		106		138
Investments in subsidiaries			-		-		6,869		6,869
Investment in joint venture			-		-		50		50
Defined benefit pension asset			-		1,856		-		1,856
			15,916		18,095		22,128		24,182
Current assets
Inventories			3,989		5,104		3,242		3,779
Trade and other receivables			5,712		7,574		5,594		6,970
Prepayments			1,600		2,925		1,528		2,846
Cash and short-term deposits			8,234		10,071		7,027		9,209
			19,535		25,674		17,391		22,804
TOTAL ASSETS			35,451		43,769		39,519		46,986
EQUITY AND LIABILITIES
Equity
Equity share capital			1,840		1,845		1,840		1,845
Capital redemption reserve			901		896		901		896
Other reserve			1,565		1,565		1,565		1,565
Revaluation reserve			2,969		2,969		2,969		2,969
Special reserve			1,629		1,629		1,629		1,629
Currency translation reserve			127		(31)		-		-
Treasury shares			(391)		(391)		(391)		(391)
Retained earnings			10,860		12,131		8,911		10,247
			19,500		20,613		17,424		18,760
Non-current liabilities
Defined benefit pension liability			2,805		-		2,805		-
Government grants			3		16		3		16
Deferred income tax liability			610		1,941		617		1,920
			3,418		1,957		3,425		1,936
Current liabilities
Trade and other payables			11,977		20,606		17,951		25,754
Finance leases			-		4		-		-
Government grants			13		13		13		13
Income tax payable			543		576		706		523
			12,533		21,199		18,670		26,290
TOTAL EQUITY AND LIABILITIES			35,451		43,769		39,519		46,986

Cash flow statements
For the 52 weeks ended 2nd May, 2009		Group				Company
		2009		2008		2009		2008
		£000		£000		£000		£000
Trading profit		4,313		4,503		3,850		3,442
Adjustments to reconcile trading profit to net cash in flow from operating activities
Depreciation charge		1,704		1,412		1,463		1,169
Amortisation charge		79		115		79		115
Diminution in value of subsidiaries		-		-		(1)		2
Foreign exchange gains		146		37		95		106
RSA grant release		(13)		(12)		(13)		(12)
Share based payments		90		205		90		205
Decrease/(increase) in inventories		1,342		(555)		556		(57)
Decrease/(increase) in receivables		1,862		(286)		1,376		(96)
Decrease/(increase) in prepayments		1,325		(816)		1,318		(821)
(Decrease)/increase in payables		(3,332)		771		(2,719)		600
(Decrease)/increase in progress payments		(5,524)		1,553		(5,103)		1,150
Provisions utilised		-		(113)		-		(113)
Pension fund		(380)		71		(380)		71
Cash generated from operating activities		1,612		6,885		611		5,761
Interest received		136		300		126		277
Taxation paid		(1,219)		(1,165)		(914)		(812)
Net cash inflow/(outflow) from operating activities		529		6,020		(177)		5,226
Investing activities
Purchase of property , plant and equipment		(1,506)		(2,838)		(1,397)		(2,687)
Purchase of intangible assets		(47)		-		(47)		-
Sale of property, plant and equipment		102		88		100		86
Dividends received from joint venture		-		-		250		500
Net cash from investing activities		(1,451)		(2,750)		(1,094)		(2,101)
Financing activities
Purchase of own shares		-		(308)		-		(308)
Repurchase of shares		(99)		(477)		(99)		(477)
Share options exercised		-		655		-		655
Dividends paid		(812)		(670)		(812)		(670)
Repayments of capital element of finance leases		(4)		(7)		-		-
Net cash flow from financing activities		(915)		(807)		(911)		(800)
(Decrease)/increase in cash and cash equivalents		(1,837)		2,463		(2,182)		2,325
Opening cash and cash equivalents		10,071		7,608		9,209		6,884
Closing cash and cash equivalents		8,234		10,071		7,027		9,209

Reconciliation of movement in equity
					Capital								Currency
			Issued		redemption		Other		Revaluation		Special		translation		Treasury		Retained
			capital		reserve		reserve		reserve		reserve		reserve		shares		earnings		Total
			£000		£000		£000		£000		£000		£000		£000		£000		£000
(a) Group
At 28th April, 2007			1,871		870		1,544		2,942		1,629		(151)		(738)		8,719		16,686
Total recognised income and expense for the year			-		-		-		-		-		120		-		4,354		4,474
Dividends paid			-		-		-		-		-		-		-		(670)		(670)
Repurchase of shares			(26)		26		-		-		-		-		-		(477)		(477)
Change in taxation rate			-		-		21		27		-		-		-		-		48
Share options			-		-		-		-		-		-				205		205
Exercise of share options			-		-		-		-		-		-		655		-		655
Purchase of own shares			-		-		-		-		-		-		(308)		-		(308)
At 3rd May, 2008			1,845		896		1,565		2,969		1,629		(31)		(391)		12,131		20,613
Total recognised income and expense for the year			-		-		-		-		-		158		-		(450)		(292)
Dividends paid			-		-		-		-		-		-		-		(812)		(812)
Repurchase of shares			(5)		5		-		-		-		-		-		(99)		(99)
Share options			-		-		-		-		-		-		-		90		90
At 2nd May, 2009			1,840		901		1,565		2,969		1,629		127		(391)		10,860		19,500
(b) Company
At 28th April, 2007			1,871		870		1,544		2,942		1,629		-		(738)		6,999		15,117
Total recognised income and expense for the year			-		-		-		-		-		-		-		4,190		4,190
Dividends paid			-		-		-		-		-		-		-		(670)		(670)
Repurchase of shares			(26)		26		-				-		-		-		(477)		(477)
Change in taxation rate			-		-		21		27		-		-		-		-		48
Share options			-		-		-		-		-		-		-		205		205
Exercise of share options			-		-		-		-		-		-		655		-		655
Purchase of own shares			-		-		-		-		-		-		(308)		-		(308)
At 3rd May, 2008			1,845		896		1,565		2,969		1,629		-		(391)		10,247		18,760
Total recognised income and expense for the year			-		-		-		-		-		-		-		(515)		(515)
Dividends paid			-		-		-		-		-		-		-		(812)		(812)
Repurchase of shares			(5)		5		-		-		-		-		-		(99)		(99)
Share options			-		-		-		-		-		-		-		90		90
At 2nd May, 2009			1,840		901		1,565		2,969		1,629		-		(391)		8,911		17,424

(1)

Share Capital

The balance classified as share capital includes the nominal value on issue of the Company's equity share capital, comprising 10p Ordinary shares.

(2)

Capital redemption reserve

The balance classified as capital redemption reserve represents the nominal value of issued share capital of the Company, repurchased.

(3)

Other reserve

This is the revaluation reserve previously arising under UK GAAP which is now part of non-distributable retained reserves. This also includes the impact of the change in related deferred tax due to the change in corporation tax (30% to 28%).

(4)

Revaluation reserve

The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same assets previously recognised in equity. This also includes the impact of the change in related deferred tax due to the change in corporation tax (30% to 28%).

(5)

Special reserve

The balance classified as special reserve represents the share premium on the issue of the Company's equity share capital.

(6)

Currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign operations.

(7)

Treasury Shares

During 1991 the Company established an Employee Share Ownership Trust ('ESOT'). The trustee of the ESOT is Appleby Trust (Jersey) Ltd, an independent company registered in Jersey. The ESOT provides for the issue of options over Ordinary shares in the Company to Group employees, including executive directors, at the discretion of the Remuneration Committee.

The trust has purchased an aggregate 395,048 Ordinary shares, which represents 2.1% of the issued share capital of the Company at an aggregate cost of £391,000. The market value of the shares at 2nd May, 2009 was £401,000. The Company has made payments of £Nil (2008 - £Nil) into the ESOT bank accounts during the period. No options over shares (2008 - 374,000) have been granted during the period. Details of the outstanding share options for Directors are included in the Directors' Remuneration Report.

The assets, liabilities, income and costs of the ESOT have been incorporated into the Company's financial statements. Total ESOT costs charged to the income statement in the period amounts to £3,000 (2008 - £9,000). During the period no options were exercised (2008 - 1,912,521) and no shares were purchased (2008 - 153,500).

 

END

 

 

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