Half-yearly Report
CEPS PLC (THE "GROUP" OR THE "COMPANY")
HALF-YEARLY UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
CHAIRMAN'S STATEMENT
Review of the period
After a steady start in the first quarter of 2011, trading across all our
businesses has declined through the second quarter and remains, at the time of
writing, challenging. This is in line with the picture across the UK and
Western Europe, with growth slowing, continuing reported high levels of
inflation and a major squeeze on consumer spending. Raw material price
inflation is only just beginning to show some signs of easing and all of our
businesses are still wrestling with the consequences of being unable to fully
pass on previous price increases.
Whilst overall revenue was unchanged from the first half of 2010, £7.9m in both
2010 and 2011, gross profit has continued to fall from £868,000 (11.0%) in the
first half of 2010 to £811,000 (10.3%) in 2011. This has been a continuing
theme now for the past 18 months, reflecting customer and consumer resistance
to raw material driven price increases and intensified competition. Our
operating costs have continued to be well controlled, but our operating profit
has fallen from £258,000 in 2010 to £162,000, with Group costs actually down on
2010 (£159,000 versus £169,000 in 2010).
After finance costs and provision for taxation, the profit for the period was £
54,000, down from £122,000 in the previous year. Earnings per share have fallen
to 0.11 pence per share (2010: 0.61 pence per share) once non-controlling
interests have been accounted for.
During this period the Group negotiated additional working capital facilities
to provide more flexible financing and this has enabled all acquisition
borrowings to be repaid in full (December 2010: £500,000).
Financial review
Referring to the cashflow statement, during these six months the Group has
generated cash from operating activities of £508,000 (2010: cash used £
274,000). Repayment of the acquisition bank loans and the capital element of
finance leases has absorbed £581,000 (2010 restated: £288,000), net capital
expenditure was £50,000 (2010: £59,000) and interest charges were £77,000
(2010: £81,000). This resulted in a net decrease in cash and cash equivalents
of £193,000 (2010 restated: £735,000).
The increase in the Group's invoice finance facilities during the period was £
347,000 (June 2011: £1,183,000; December 2010: £836,000) and these facilities
largely made possible the repayment of the acquisition debt mentioned above.
Net debt has, in total, been reduced to £2,428,000 (2010: £2,520,000) and
gearing to 41% (2010: 43%). Of net debt an amount of £460,000 (2010: £
1,114,000) of bank loans is secured against the assets of subsidiary companies
and with no recourse to the rest of the Group.
Group assets increased to £11,424,000 (2010: £11,301,000). Total equity has
been increased by 1.2% to £5,956,000 (2010: £5,887,000).
Operational review
1. Davies Odell
The investment of both time and money in the development of the Forcefield
brand continues with generally positive results. The dealer network across
Europe has continued to grow in both the motorcycle and ski/snowboard segments
of the market place, with some reported strong `sell-through' results from new
customers this spring/summer season. In the UK, whilst the motorcycle market,
with its associated clothing, looks to be declining, we have expanded our
dealer network. Forcefield sales overall are ahead of the previous year and
are, therefore, picking up market share. This remains an excellent time to
build enduring market presence for our product and brand.
In July, our Italian distributor DIX Motor Service Srl, reported that in a
highly technical comparative test conducted by EuroMoto, an Italian motorcycle
magazine, our Pro sub-4 back protector had scored a remarkable 10 out of 10.
This result substantially exceeded the score obtained by our much larger
Italian, German and American competitors such as Dainese, BMW and Spidi. Yet
again it demonstrates that we are supplying the technical market-leading
product, enabling us to sell to new distributors and dealers with great
confidence. Product development continues apace with a number of key
introductions scheduled for early 2012.
Our shoe repair and factoring business has seen some major pluses and minuses
by specific segment, but overall turnover was about at the level of the first
half of 2010. Margins have remained under pressure as a result of imported raw
material price inflation, some of which has necessarily been absorbed at the
cost of profit. The story is much the same in our matting business, with sales
quite strongly ahead of 2010, but, with pressure on input prices, margins are
down and overall achieved contribution is about level with 2010. The bright
spots here have been exports, particularly of cow-mats, and the protection
business in general where judo and gym mats have led the way.
2. Friedman's
Sales at Friedman's have grown by about 4%, although within this figure, some
sensible stock remnant clearance has taken place at lower margins. Overall
achieved margin is at about the same level as the first half of 2010, though
the further weakening of Sterling, especially against the Euro, has resulted in
some exchange losses. These have pushed the segmental result below the first
half of 2010, when there were considerable exchange rate gains.
The second new digital printer has recently been installed and commissioned,
and the full benefits of its output productivity and colour definition will
come through in 2012. In addition, both the Funki Fabrics and Friedman's
websites have been redesigned to enhance our customers' experience and to make
it easier to make online purchases. These websites are anticipated to be fully
operational by the end of September.
3. Sunline
The final transfer of both staff and equipment from Redditch to Loughborough
was concluded smoothly in March/April. The whole management team is to be
congratulated on the quality of planning and preparation with both people and
machinery, that has seen this exercise completed on time and within budget. The
challenge now is to grow the business from its single, consolidated base in
Loughborough.
Overall sales at Sunline have exceeded our budgeted expectations, though they
are down on the previous year by about 8%. Similarly the trading profit is well
ahead of our budgeted expectation and only about £30,000 below the previous
year. Margins here too are under pressure from the continuing excess capacity
in the market place and the circumspection of many of our clients in mass
mailing their customers.
Upon removal from Redditch, we have taken the opportunity to refurbish and
invest in our enclosing capacity, with the expectation that offering our
clients a more balanced and complete service for their mail requirements should
enable us to win more business. The outstanding acquisition loan balance of £
500,000 was repaid in full in February 2011 and a trade receivables backed
working capital facility was introduced.
Dividend
Cash conservation continues to remain the priority for the Group and a dividend
is not proposed at this stage.
Prospects
Whilst a number of potential acquisitions have been reviewed, against the
backcloth which has been set out elsewhere, finding a resilient business at the
right price is no easy matter.
Discussions are on-going with several potential acquisitions which it is hoped
will lead to a successful conclusion in the next period.
Our trading outlook remains very much subject to likely levels of consumer
expenditure. Recently the GDP growth forecast for the UK has been cut to nearer
1% in 2011, with a decline in consumer spending in the year a distinct
possibility. In these circumstances we can only grow at the expense of our
competitors or because the niche in which we operate is proofed in some way
against reduced consumer spending. Raw material and finished goods price
inflation appears to be beginning to abate, but customers and consumers alike
are very resistant to further price rises driven by the need to restore
margins.
At Davies Odell we do not anticipate any significant improvement in the trading
position in the second half, though we expect to further improve the sales and
market share gains in Forcefield products. Our efforts now must focus on
continuing to build a strong global dealer network supplied with a continuing
flow of technically superior body-armour products.
Friedman's appears to occupy a niche in the market which is well placed to
avoid lower levels of consumer spending. In the second half, margins
traditionally are somewhat stronger: our continued sourcing from Korea and
China and the introduction of the second digital printer should see us complete
2011 in good shape.
Sunline is now in a position to move forward strongly from its base on one
established site. The whole operation needs to become more efficient to ensure
it can win and deliver profitable business.
No stone can be left unturned at any of the Group's businesses in the pursuit
of additional margin from the strong flow of work we have from existing loyal
and potential clients. Of course, in no circumstances can this be at the
expense of the quality and service levels that our customers have come to
expect.
2011 is going to be a difficult year, that much is already certain. Nothing
that has happened since I last wrote to you suggests the market place will
provide any following wind. Consequently, all our businesses are engaged in
`making their own luck' whether it is Forcefield's continuing thrust to achieve
product excellence, Friedman's digital printing service or Sunline's efforts to
find more polywrap business via a better enclosing offering with it. I remain
confident that in the longer run our management teams will outperform their
local market competitors.
Richard Organ
Chairman
19 September 2011
Peter Cook, Group Managing Director, CEPS PLC
Tel: 07788 752560
Tony Rawlinson, Partner, Cairn Financial Advisers LLP
Tel: 020 7148 7900
CEPS PLC
Consolidated Statement of Comprehensive Income
Six months ended 30 June 2011
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
Revenue 7,853 7,917 16,519
Cost of sales (7,042) (7,049) (15,108)
Gross profit 811 868 1,411
Net operating expenses (649) (610) (1,246)
Operating profit 162 258 165
Analysis of operating profit
Trading 321 427 811
Exceptional costs - - (302)
Group costs (159) (169) (344)
162 258 165
Finance costs (77) (81) (151)
Profit before tax 85 177 14
Taxation (31) (55) 206
Profit for the period from 54 122 220
continuing operations
Other comprehensive income
Actuarial loss on defined benefit - - (83)
pension plans
Other comprehensive loss for the - - (83)
period, net of tax
Total comprehensive income for the 54 122 137
period
Profit attributable to:
Owners of the parent 9 51 175
Non-controlling interest 45 71 45
54 122 220
Total comprehensive income
attributable to:
Owners of the parent 9 51 92
Non-controlling interest 45 71 45
54 122 137
Earnings per share
basic and diluted 0.11p 0.61p 2.10p
CEPS PLC
Consolidated Balance Sheet
As at 30 June 2011
Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 1,303 1,471 1,376
Intangible fixed assets 4,728 4,738 4,732
Deferred tax asset 582 164 582
6,613 6,373 6,690
Current assets
Inventories 2,078 1,836 1,993
Trade and other receivables 2,652 2,714 2,704
Cash and cash equivalents 81 378 282
4,811 4,928 4,979
Total assets 11,424 11,301 11,669
Equity
Capital and reserves attributable to
owners of the parent
Called up share capital 416 416 416
Share premium 2,756 2,756 2,756
Retained earnings 2,294 2,244 2,285
5,466 5,416 5,457
Non-controlling interest 490 471 445
Total equity 5,956 5,887 5,902
Liabilities
Non-current liabilities
Borrowings 595 1,082 777
Deferred tax liability 171 - 171
Provisions for liabilities and charges 55 55 155
821 1,137 1,103
Current liabilities
Borrowings 1,914 1,816 1,975
Trade and other payables 2,551 2,394 2,449
Current tax liabilities 76 67 38
Provisions for liabilities and charges 106 - 202
4,647 4,277 4,664
Total liabilities 5,468 5,414 5,767
Total equity and liabilities 11,424 11,301 11,669
CEPS PLC
Consolidated Statement of Cashflows
Six months ended 30 June 2011
Restated
Unaudited unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from/(used in) operations 508 (274) 52
Tax received/(paid) 7 (33) (48)
Interest paid (77) (81) (149)
Net cash generated from/(used in) 438 (388) (145)
operations
Cash flows from investing activities
Purchase of property, plant and (125) (59) (66)
equipment
Disposal of property, plant and 75 - 30
equipment
Interest received - - 2
Net cash used in investing activities (50) (59) (34)
Cash flows from financing activities
Repayment of bank loans (500) (221) (421)
Repayment of capital element of finance (81) (67) (273)
leases
Net cash used in financing activities (581) (288) (694)
Net decrease in cash and cash (193) (735) (873)
equivalents
Cash and cash equivalents at the (242) 631 631
beginning of the period
Cash and cash equivalents at the end of (435) (104) (242)
the period
Cash generated from operations
The reconciliation of operating profit
to cash flows from operating activities
is as follows:
Profit before income tax 85 177 14
Adjustments for:
Depreciation and amortisation 126 142 286
Profit on disposal of property, plant - - (14)
and equipment
Net finance costs 77 81 151
Difference between pension charge and (35) (33) (69)
cash contribution
Operating profit before changes in 253 367 368
working capital and provisions
Increase in inventories (85) (267) (424)
Decrease/(increase) in trade and other 52 (92) (82)
receivables
Increase/(decrease) in trade and other 449 (282) (112)
payables, including trade receivables
backed working capital facilities
(Decrease)/increase in provisions (161) - 302
Cash generated from/(used in) operations 508 (274) 52
Cash and cash equivalents
Cash at bank and in hand 81 378 282
Bank overdrafts repayable on demand (516) (482) (524)
(435) (104) (242)
CEPS PLC
Consolidated Statement of Changes in Shareholders' Equity
Six months ended 30 June 2011
Share Share Profit Attributable Non-controlling Total
capital premium and loss to the interest
account owners of
the parent
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 416 2,756 2,193 5,365 400 5,765
2010 (audited)
Profit for the - - 51 51 71 122
period
Total - - 51 51 71 122
comprehensive
income for the
period
At 30 June 2010 416 2,756 2,244 5,416 471 5,887
(unaudited)
Actuarial loss - - (83) (83) - (83)
Profit for the - - 124 124 (26) 98
period
Total - - 41 41 (26) 15
comprehensive
income for the
period
At 31 December 416 2,756 2,285 5,457 445 5,902
2010 (audited)
Profit for the - - 9 9 45 54
period
Total - - 9 9 45 54
comprehensive
income for the
period
At 30 June 2011 416 2,756 2,294 5,466 490 5,956
(unaudited)
General information
The Company is a limited liability company incorporated and domiciled in the
UK. The address of its registered office is 12b 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 19 September 2011.
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 2010 were approved by the
Board of directors on 3 May 2011 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 2011 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 2010, which
have been prepared in accordance with IFRSs as adopted by the European Union.
The Consolidated Statement of Cashflows for the six months ended 30 June 2010
has been restated to reclassify import loans within cash and cash equivalents
rather than within borrowings. The effect of this has been to increase the net
cash used in financing activities by £414,000 and to decrease cash and cash
equivalents at the end of the period by the same amount.
Accounting policies
The accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2010, as described in those
annual financial statements. Where new standards, or amendments to existing
standards, have become effective during the year there has been no material
impact on the results of the Group.
Principal risks and uncertainties
The Group set out in its 2010 Annual Report and Financial Statements the
principal risks and uncertainties that could impact on its performance; these
remain unchanged since the Annual Report was published. The main area of
potential risk and uncertainty over the remainder of the financial year centres
on the sales and profit impact from the economic conditions and fluctuations in
foreign exchange rates. For further consideration see the Operational Review in
the Chairman's Statement.
Certain statements within this report are forward looking. The expectations
reflected in these statements are considered reasonable. However, no assurance
can be given that they are correct. As these statements involve risks and
uncertainties the actual results may differ materially from those expressed or
implied by these statements.
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. Of the £7,853,000 revenue, £
6,633,000 is derived from UK customers.
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.
i) Results by segment
Unaudited 6 months to 30 June 2011
Davies Friedman's Sunline Group
Odell
£'000 £'000 £'000 £'000
Revenue 2,748 1,762 3,343 7,853
Segmental result (EBITDA) 24 154 270 448
Depreciation charge (20) (17) (90) (127)
Group costs (159)
Interest expenses (77)
Profit before taxation 85
Taxation (31)
Profit for the period 54
Unaudited 6 months to 30 June 2010
Davies Friedman's Sunline Group
Odell
£'000 £'000 £'000 £'000
Revenue 2,591 1,691 3,635 7,917
Segmental result (EBITDA) 25 230 311 566
Depreciation charge (17) (18) (104) (139)
Group costs (169)
Interest expenses (81)
Profit before taxation 177
Taxation (55)
Profit for the period 122
ii) Assets and liabilities by segment
Unaudited as at 30 June
Segment assets Segment liabilities Segment net assets
2011 2010 2011 2010 2011 2010
£'000 £'000 £'000 £'000 £'000 £'000
CEPS Group 112 88 (64) (80) 48 8
Davies Odell 2,720 2,363 (1,395) (1,153) 1,325 1,210
Friedman's 3,120 3,003 (1,522) (1,483) 1,598 1,520
Sunline 5,472 5,847 (2,487) (2,698) 2,985 3,149
Total - Group 11,424 11,301 (5,468) (5,414) 5,956 5,887
2. Earnings per share
Basic earnings per share are calculated on the profit after taxation for the
period attributable to equity holders of the Company of £9,000 (2010: £51,000)
and on 8,314,310 (2010: 8,314,310) ordinary shares, being the weighted number
in issue during the period.
Diluted earnings per share are calculated on the weighted number of ordinary
shares in issue adjusted to reflect the potential effect of the exercise of
share options. No adjustment is required in either period because the fair
value of the options was below the exercise price.
3. Net debt and gearing
Gearing ratios at 30 June 2011, 30 June 2010 and 31 December 2010 are as
follows:
30 June 30 June 31 December
2010 2010
2011
£'000 £'000 £'000
Total borrowings 2,509 2,898 2,752
Less: cash and cash equivalents (81) (378) (282)
Net debt 2,428 2,520 2,470
Total equity 5,956 5,887 5,902
Gearing ratio 41% 43% 42%
4. Related-party transactions
The Group has no material transactions with related parties which might
reasonably be
expected to influence decisions made by users of these financial statements.
During the period the Company entered into the following transactions with its
subsidiaries:
Davies Odell Sunline Direct Signature
Limited Mail Limited Fabrics
Limited
£' 000 £' 000
£' 000
Receipt of preference share dividend
- 2011 - 39 -
- 2010 - 39 -
Receipt of loan note interest
- 2011 - 63 18
- 2010 - 63 18
Receipt of management charge income
- 2011 - 8 6
- 2010 - 8 6
5. Property, plant and equipment
During the early part of 2011 the Group incurred capital expenditure of £80,000
as a result of the improvements made to Sunline's Loughborough site and in
April 2011 the Group acquired a digital printer to enhance its design
capabilities at a cost of £35,000.
6. 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.
Statement of directors' responsibilityThe directors confirm that, to the best of
their knowledge, these condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 as adopted by the European Union. The
interim management report includes a fair review of the information required by
DTR 4.2.7R and DTR 4.2.8R, namely:
* an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
* material related-party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last Annual Report.
A list of current directors is maintained on the CEPS PLC Group website:
www.cepsplc.com.
By order of the Board
P G Cook
Group Managing Director
19 September 2011
Friday, 10th January 2025
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