Half-yearly Report

CEPS PLC (THE "GROUP" OR THE "COMPANY") HALF-YEARLY UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009 CHAIRMAN'S STATEMENT Review of the period As anticipated in my statement with the annual report and accounts in April, the first half of 2009 has seen the impact of the global recession upon our trading performance. Revenue across the Group is down 7.8% to Â£7.5m (2008: Â£8.1m) with the Davies Odell business in particular feeling the brunt of sharp de-stocking by its customers after a better than expected finish to 2008. In spite of Group costs having been carefully restrained, operating profit has fallen overall by 38% to Â£376,000 (2008: Â£611,000). After finance costs and provision for taxation, the profit for the period was Â£ 223,000 (2008: Â£400,000) and earnings per share basic and diluted have fallen to 2.14p (2008: 4.15p). Cash management through the period has been excellent, with total Group net debt reduced from Â£2.92m to Â£2.06m. As a result, and with the Group still satisfactorily profitable in extreme trading circumstances, gearing has fallen from 57% at the year end to 38% at the end of June. Financial review In the six months to 30 June 2009 the Group has generated Â£801,000 of cash from its operating activities (2008: Â£676,000) of which Â£418,000 (2008: Â£422,000) has been used to repay bank loans and the capital element of hire purchase agreements. With interest charges falling to Â£91,000 (2008: Â£125,000) and capital expenditure held at Â£15,000 (2008: Â£21,000) a net amount of Â£252,000 has been added to cash and cash equivalents, taking the total from Â£532,000 at the year end to Â£784,000 at 30 June 2009. Group assets increased to Â£11,115,000 (2008: Â£10,960,000). Group borrowings, including Â£1,247,000 (2008: Â£1,910,000) of bank loans secured against the assets of subsidiary companies and with no recourse to the rest of the Group, were reduced to Â£2,843,000 (2008: Â£3,398,000). Total equity has been increased by 12.5% to Â£5,361,000 (2008: Â£4,765,000). Operational review 1. Davies Odell Davies Odell had a particularly difficult start to the year. Many of its customers, reacting to the growing depth of the recession, implemented sizeable stock reduction programmes. Sales in January and February, usually quite buoyant months, were particularly poor. Replacement top-piece sales for ladies stiletto heels have also begun to slow reflecting fashion trends, no doubt, but also available discretionary spend. Equally difficult has been sustaining sales and margin in the matting business. Raised prices could not recover the margin effect of matting stock purchased at a dollar exchange rate of approximately $1.45, compared with an exchange rate of $1.95 a year previously. Overall sales are down about 30% but contribution fell by only 18%, as business has been accepted more selectively. The sales of Forcefield body armour have continued to grow at a rate in excess of 10% year on year. Considerable effort and funding is going in to both the re-development of ranges for launch in the Spring of 2010 and more particularly the immediate sales effort. Across the whole of the Davies Odell operation overheads have been controlled to 2008 levels and, despite the much reduced margins, cash and bank debt have been well managed. The segmental result at Â£60,000 (2008: Â£230,000) reflects the difficult circumstances experienced in the first half year. 2. Friedman's Friedman's has done a good job in the first half of 2009 in sustaining sales at the level of the first half of the previous year. After the reduction in 2008 profit as a result of the year end euro exchange rate, improved profit margins have been achieved in 2009 as sterling has recovered and price increases have been successfully implemented. Overheads have been tightly controlled and the segmental result has improved by 21% to Â£163,000 (2008: Â£135,000). 3. Sunline Overall the Sunline performance has held up reasonably well, with the Solutions business now beginning to deliver meaningful profitability. Overall turnover is down 6.2%, with Solutions however showing an increase over our budgeted expectations. The Polywrap business has seen intensified competition as the recession has taken hold. Margins and plant efficiency have come under considerable pressure but the management and workforce have responded flexibly with short time working, reduced shifts, and a concerted drive to maximise the profit on each `job'. During the period several competitors have gone out of business and many others appear to be accepting work at unworkable prices. The Solutions business has both widened and deepened its customer base, and managed to achieve much more stability in its capacity utilisation and hence month-on-month profitability. Further investment in printing equipment has recently been agreed to enable this to continue. Given the difficulties, the segmental result has held up well at Â£425,000 (2008: Â£538,000). Dividend With the effect of the recession now firmly appearing in the Group's results, we continue to believe it appropriate to conserve cash until a solid recovery in profitability is well under way. As a result, the payment of a dividend is not recommended at this stage. Prospects The considerable improvement in the Group's cash and net debt position leaves it well placed to fund modest acquisitions when the availability of credit improves. The Board continues to review investment opportunities, particularly where valuations have adjusted to the current economic climate. Trading in all the businesses has stabilised in the second quarter of the year, from the poor levels seen in the first quarter. We anticipate no fundamental improvement in this pattern for the second half of the year, as growth in consumer spending only very tentatively returns across the globe. We will continue to manage our cash and balance sheet with great care, building further upon the position reported in this statement. These results verify the confidence of the Board that the Group's management teams can continue to outperform their respective competition in the most testing trading circumstances of recent times. Richard Organ Chairman 21 September 2009 CEPS PLC Consolidated statement of comprehensive income Six months ended 30 June 2009 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2009 2008 2008 Â£'000 Â£'000 Â£'000 Revenue 7,503 8,140 16,796 Cost of sales (6,520) (6,861) (14,228) Gross profit 983 1,279 2,568 Net operating expenses (607) (668) (1,420) Operating profit 376 611 1,148 Analysis of operating profit - Trading 512 785 1,514 - Group costs (136) (174) (366) Finance costs (91) (125) (241) Profit before tax 285 486 907 Taxation (62) (86) (193) Profit for the period from 223 400 714 continuing operations Other comprehensive income Actuarial gain on defined benefit - - 59 pension plans Other comprehensive income for the - - 59 period, net of tax Total comprehensive income for the 223 400 773 period Profit attributable to: Equity holders of the Company 178 345 624 Minority interest 45 55 90 223 400 714 Total comprehensive income attributable to: Equity holders of the Company 178 345 683 Minority interest 45 55 90 223 400 773 Earnings per share - basic and diluted 2.14p 4.15p 7.51p CEPS PLC Consolidated Balance Sheet As at 30 June 2009 Unaudited Unaudited Audited as at as at as at 30 June 30 June 31 December 2009 2008 2008 Â£'000 Â£'000 Â£'000 Assets Non-current assets Property, plant and equipment 1,492 1,145 1,610 Intangible assets 4,819 4,748 4,826 Deferred tax asset - 45 - 6,311 5,938 6,436 Current assets Inventory 1,692 1,481 1,795 Trade and other receivables 2,304 2,913 2,828 Deferred tax asset 24 73 24 Cash and cash equivalents 784 555 665 4,804 5,022 5,312 Total assets 11,115 10,960 11,748 Equity Capital and reserves attributable to equity holders of the Company Called up share capital 416 416 416 Share premium 2,756 2,756 2,756 Profit and loss account 1,895 1,379 1,717 5,067 4,551 4,889 Minority interest in equity 294 214 249 Total equity 5,361 4,765 5,138 Liabilities Non-current liabilities Borrowings 1,436 1,659 1,751 Retirement benefit liabilities - 126 - Provisions 55 55 55 1,491 1,840 1,806 Current liabilities Borrowings 1,407 1,739 1,834 Trade and other payables 2,668 2,485 2,819 Current tax liabilities 188 131 151 4,263 4,355 4,804 Total liabilities 5,754 6,195 6,610 Total equity and liabilities 11,115 10,960 11,748 CEPS PLC Consolidated Cash Flow Statement Six months ended 30 June 2009 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 June 30 June 31 December 2009 2008 2008 Â£'000 Â£'000 Â£'000 Cash flow from operating activities Cash generated from operations 801 676 1,388 Tax paid (25) - (16) Interest paid (91) (125) (222) Net cash generated from operations 685 551 1,150 Cash flow from investing activities Purchase of property, plant and (15) (21) (78) equipment Disposal of property, plant and - - 11 equipment Purchase of computer software and - - (1) website development Net cash used in investing activities (15) (21) (68) Cash flow from financing activities Repayment of bank loans (324) (347) (686) Repayment of capital element of hire (94) (75) (240) purchase agreements Net cash used in financing activities (418) (422) (926) Net increase in cash and cash 252 108 156 equivalents Cash and cash equivalents at the 532 376 376 beginning of the period Cash and cash equivalents at the end of 784 484 532 the period Cash flows from operating activities The reconciliation of operating profit to cash flows from operating activities is as follows: Operating profit for the period 376 611 1,148 Adjustments for: Depreciation and amortisation charge 140 118 275 Loss on disposal of property, plant and - - 23 equipment Difference between pension charge and (27) (36) (80) cash contribution Operating profit before changes in 489 693 1,366 working capital and provisions Decrease/(increase) in inventory 103 (90) (404) Decrease in trade and other receivables 524 238 323 (Decrease)/increase in trade and other (315) (165) 103 payables, including trade receivables backed working capital facilities Cash generated from operations 801 676 1,388 Cash and cash equivalents Cash at bank and in hand 784 555 665 Bank overdrafts repayable on demand - (71) (133) 784 484 532 CEPS PLC Consolidated statement of changes in shareholders' equity Six months ended 30 June 2009 Share Share Profit and Minority Total capital premium loss interest account Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2008 416 2,756 1,034 159 4,365 (audited) Profit for the period - - 345 55 400 Total comprehensive - - 345 55 400 income for the period At 30 June 2008 416 2,756 1,379 214 4,765 (unaudited) Actuarial gain - - 59 - 59 Profit for the period - - 279 35 314 Total comprehensive - - 338 35 373 income for the period At 31 December 2008 416 2,756 1,717 249 5,138 (audited) Profit for the period - - 178 45 223 Total comprehensive - - 178 45 223 income for the period At 30 June 2009 416 2,756 1,895 294 5,361 (unaudited) General information The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 11 George Street, Bath, BA1 2EH and the registered number of the company is 507461. The Company has its primary listing on AIM. This condensed consolidated half-yearly financial information was approved for issue on 21 September 2009. This condensed consolidated half-yearly financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2008 were approved by the Board of directors on 29 April 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. This condensed consolidated half-yearly financial information has not been reviewed or audited. Basis of preparation This condensed consolidated half-yearly financial information for the six months ended 30 June 2009 has been prepared in accordance with IAS 34, `Interim financial reporting' as adopted by the European Union. The condensed consolidated half-yearly financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with IFRSs as adopted by the European Union. Accounting policies Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings. The following IFRS became effective from 1 January 2009 and have been adopted within this report and the comparatives, where applicable, restated: * IFRS 8, `Operating segments'. * IAS 1 (revised), `Presentation of Financial Statements'. The following IFRS, amendments and interpretations have not been adopted by the Group in this report, as they are not deemed to be relevant: * Amendments to IAS 23, `Borrowing costs' * IFRS 3 (revised), `Business Combinations' * IAS 27 (revised), `Consolidated and Separate Financial Statements' * Amendments to IFRS 2, `Share-based Payments' * Amendments to IAS 39, `Financial Instruments: Recognition and Measurement' Notes to the financial information 1. Segmental analysis All activities are classed as continuing. The chief operating decision maker of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments. Operating segments and their principal activities are as follows: * Davies Odell, the manufacture and distribution of protection equipment, matting and footwear components * Friedman's, the conversion and distribution of specialist Lycra * Sunline, a supplier of services to the direct mail market The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit and is the principal location of the assets of the Group. The Group information provided below therefore also represents the geographical segmental analysis. The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax and group costs. Other information provided to the Board is measured in a manner consistent with that in the financial statements. The 2008 results have, where necessary, been restated to comply with the new accounting standards. i) Results by segment Unaudited 6 months to 30 June 2009 Davies Friedman's Sunline Group Odell 2009 2009 2009 2009 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 2,349 1,628 3,526 7,503 Segmental result (EBITDAE) 60 163 425 648 Depreciation charge (15) (14) (107) (136) Group costs (136) Interest expenses (91) Profit before taxation 285 Taxation (62) Profit for the period 223 Unaudited 6 months to 30 June 2008 Davies Friedman's Sunline Group Odell 2008 2008 2008 2008 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 2,734 1,646 3,760 8,140 Segmental result (EBITDAE) 230 135 538 903 Depreciation charge (23) (17) (78) (118) Group costs (174) Interest expenses (125) Profit before taxation 486 Taxation (86) Profit for the period 400 ii) Assets and liabilities by segment Unaudited as at 30 June Segment assets Segment liabilities Segment net assets 2009 2008 2009 2008 2009 2008 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 CEPS Group 110 133 (43) (72) 67 61 Davies Odell 1,906 2,014 (862) (1,028) 1,044 986 Friedman's 2,932 3,054 (1,580) (2,062) 1,352 992 Sunline 6,167 5,759 (3,269) (3,033) 2,898 2,726 Total - Group 11,115 10,960 (5,754) (6,195) 5,361 4,765 2. Earnings per share Basic earnings per share is calculated on the profit after taxation for the period attributable to equity holders of the Company of Â£178,000 (2008, Â£ 345,000) and on 8,314,308 (2008, 8,314,233) ordinary shares, being the weighted number in issue during the period. Diluted earnings per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of share warrants. No adjustment is required in either period because the fair value of warrants was below the exercise price. 3. Net debt and gearing Gearing ratios at 30 June 2009 and 31 December 2008 are as follows: 30 June 31 December 2008 2009 Â£'000 Â£'000 Total borrowings 2,843 3,585 Less: cash and cash equivalents (784) (665) Net debt 2,059 2,920 Total equity 5,361 5,138 Gearing ratio 38% 57% 4. AIM Compliance Committee In accordance with AIM Rule 31 the Company is required to have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its compliance with the AIM Rules whenever appropriate and take that advice into account; provide the Company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers; ensure that each of the Company's directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director. In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the "AIM Committee"), chaired by Richard Organ, a non-executive director of the Company. Having reviewed relevant Board papers, and met with the Company's Executive Board and the Nomad to ensure that such is the case, the AIM Committee is satisfied that the Company's obligations under AIM Rule 31 have been satisfied during the period under review. 5. Distribution of the Half-Yearly Report Copies of the Half-Yearly Report will be available to the public from the Company website, www.cepsplc.com, and from the Company Secretary at the Company's registered address at 11 George Street, Bath BA1 2EH. For further information please contact:- Peter Cook, Group Managing Director CEPS PLC Tel: 07788 752560 Lindsay Mair, Nominated Adviser Astaire Securities plc Tel: 020 7448 4400

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