Interim Results

RNS Number : 0037J

MS International PLC

27 November 2008

 



MS INTERNATIONAL plc

Unaudited Interim Condensed

Consolidated Financial Statements

1st November, 2008

MS INTERNATIONAL plc

EXECUTIVE DIRECTORS

Michael Bell

Michael O'Connell

David Pyle

NON EXECUTIVE

Roger Lane-Smith

SECRETARY

David Pyle

REGISTERED OFFICE

Balby Carr Bank

Doncaster

DN4 8DH

England

PRINCIPAL OPERATING DIVISIONS

Defence

Forgings

Petrol Station Superstructures

Chairman's Statement

The world changed in September and brought about an unprecedented and rapid downturn in the global business climate. As events unfolded we monitored our markets especially closely and, where needed, responded swiftly to any changing circumstances. We will continue to monitor the situation very closely, until we can see how markets are evolving with greater clarity.

I am pleased therefore, to report that notwithstanding the difficult macro economic environment, we continued to make good progress for the half year ended 1st November 2008. Profit before taxation increased by 11% to £2.45m (2007 - £2.21m) on revenue of £27.23m (2007 - £25.55m). Earnings per share were 9.3p (2007 - 9.2p).

The balance sheet remains strong with net cash and short term deposits at a healthy £5.11m as we utilised some of the advanced payments that were a constituent part of the £10.07m of cash reported at last year end. 

The Defence Division lifted production output significantly against the comparable period in order to meet the requirements of our national and international long term order book for naval gun systems. The upgraded and reorganised gun manufacturing facilities have come on stream to programme and in a very timely manner. The Forgings Division, which is particularly sensitive to the vagaries of a short lead-time order book, experienced a tightening in demand in the latter part of the period but responded positively and appropriately. The joint venture Petrol Station Superstructures Division endured reduced revenue throughout the majority of the six months, mainly owing to client programme delays and an accelerating weakening of the construction market.

Overall the Group's forward order book remains robust but clearly those parts of the business that operate on a short lead-time commercial basis have a much less predictable outlook and we must stay alert in order to respond speedily and effectively to the consequences of changing scenarios.

The Group has invested wisely and consistently in developing the quality and sustainability of the individual businesses. Those investments now place us in a strong position amongst our peer group to withstand the foreseeable effects of the downturn. Growth potential remains in some markets and there are some good prospects for us to do more business. In the meantime we will continue to work very hard to contain costs and maintain acceptable returns.

These factors considered the Board has declared a maintained interim dividend of 0.70p (2007 - 0.70p).

Michael Bell

27th November, 2008

Independent Review Report to MS INTERNATIONAL plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 1 November, 2008 which comprises the Interim Consolidated Income Statement, the Interim Statement of Recognised Income and Expense, the Interim Balance Sheet, the Interim Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 1 November, 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

Leeds

27th November, 2008

Interim consolidated income statement
				26 weeks ended 1st Nov., 2008		27 weeks ended 3rd Nov., 2007
				Unaudited		Unaudited
		Notes		£000		£000
Products				19,218		21,818
Contracts				8,014		3,727
Revenue		6		27,232		25,545
Cost of sales				(20,478)		(19,485)
Gross profit				6,754		6,060
Selling and distribution costs				(937)		(927)
Administrative expenses				(3,727)		(3,313)
Group trading profit		6		2,090		1,820
Finance revenue				121		142
Finance costs				(4)		(18)
Other finance revenue - pension				246		263
Profit before taxation				2,453		2,207
Income tax expense		5		(772)		(584)
Profit attributable to equity holders of the parent				1,681		1,623
Earnings per share
- basic				9.3p		9.2p
- diluted				9.1p		9.0p
Interim consolidated statement of recognised income and expense
				26 weeks ended 1st Nov., 2008		27 weeks ended 3rd Nov., 2007
				Unaudited		Unaudited
				£000		£000
Actuarial (losses)/gains on defined benefit pension scheme				(3,298)		467
Deferred taxation on actuarial (losses)/gains on defined pension scheme				923		(140)
Currency translation differences on foreign investments				120		(28)
Net (expense)/income recognised directly in equity				(2,255)		299
Profit attributable to equity holders of the parent				1,681		1,623
Total recognised income and expense for the period attributable to equity holders of the parent				(574)		1,922

Interim consolidated balance sheet
		Notes		1st Nov., 2008		3rd May, 2008
				Unaudited		Audited
ASSETS				£000		£000
Non-current assets
Property, plant and equipment		7		15,972		16,101
Intangible assets				134		138
Pension asset		8		-		1,856
				16,106		18,095
Current assets
Inventories				5,036		5,104
Trade and other receivables				7,679		7,574
Prepayments				2,323		2,925
Cash and short-term deposits		3		5,111		10,071
				20,149		25,674
TOTAL ASSETS				36,255		43,769
EQUITY AND LIABILITIES
Equity
Issued capital				1,840		1,845
Capital redemption reserve				901		896
Other reserves				1,565		1,565
Revaluation reserve				2,969		2,969
Special reserve				1,629		1,629
Foreign reserve				89		(31)
Own shares				(391)		(391)
Retained earnings				10,735		12,131
Total Equity				19,337		20,613
Non-current liabilities
Government grants				9		16
Deferred tax liability				1,146		1,941
Pension liability		8		998		-
				2,153		1,957
Current liabilities
Trade and other payables				14,250		20,606
Finance leases				-		4
Government grants				13		13
Income tax payable				502		576
				14,765		21,199
TOTAL EQUITY AND LIABILITIES				36,255		43,769

Interim consolidated cash flow statement
		26 weeks ended 1st Nov., 2008		27 weeks ended 3rd Nov., 2007
		Unaudited		Unaudited
		£'000		£'000
Trading profit		2,090		1,820
Adjustments to reconcile trading profit to net cash in flows from operating activities
Depreciation of property plant and equipment		802		645
Amortisation of intangible fixed assets		51		64
Foreign exchange gains/(losses)		131		(28)
Government grant release		(7)		(6)
Provisions utilised		-		(31)
Pension charge		-		328
Share based payments		84		-
Profit on sale of fixed assets		16		(4)
Decrease/(increase) in inventories		417		(465)
(Increase)/decrease in receivables		(105)		182
Decrease/(increase) in prepayments		602		(2)
Decrease in payables		(2,787)		(2,037)
(Decrease)/increase in progress payments		(3,918)		2,778
Pension fund payments		(198)		(368)
Cash generated from operating activities		(2,822)		2,876
Interest received		117		124
Taxation paid		(724)		(509)
Net cash flow from operating activities		(3,429)		2,491
Cash flows from investing activities
Purchase of intangible fixed assets		(47)		-
Purchase of property, plant and equipment		(752)		(1,664)
Sale of property, plant and equipment		90		90
Net cash used in investing activities		(709)		(1,574)
Cash flows from financing activities
Purchase of own shares		(100)		(375)
Dividend paid		(686)		(544)
Share options exercised		-		347
Repayments of capital element of finance leases		(4)		(4)
Net cash flows used in financing activities		(790)		(576)
Movement in cash and cash equivalents		(4,960)		341
Opening cash and cash equivalents		10,071		7,608
Closing cash and cash equivalents		5,111		7,949

Notes to the interim consolidated financial statements

1    Corporate information

MS INTERNATIONAL plc is a public limited company incorporated in England and Wales. The Company's ordinary shares are traded on the London Stock Exchange. The principal activities of the Company and its subsidiaries ('the Group') are described in Note 6.

The interim condensed consolidated financial statement of the Group for the twenty six weeks ended 1st November, 2008 were authorised for issue in accordance with a resolution of the directors on 26th November, 2008.

2    Basis of preparation and accounting policies

The annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report which has not been audited has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union. 

The interim financial information has been reviewed by the Group's auditors, Ernst & Young LLP, their report is included on page 3. These interim financial statements do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 3rd May, 2008.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 3rd May, 2008. The following standards, amendments and interpretations will be applied for the first time in the Group's statutory accounts for the year ended 2nd May, 2009.

    - IFRS 1 and IAS 27 Amendment Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

    - IFRS 2 Amendment Vesting Conditions and Cancellations

    - IFRS 8 Operating Segments

    - IAS 1R Presentation of Financial Statements

    - IAS 23R Borrowing Costs

The figures for the year ended 3rd May, 2008 do not constitute the Group's statutory accounts for the period but have been extracted from the statutory accounts. The auditor's report on those accounts, which have been filed with the Registrar of Companies, was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act 1985.

3	Cash and cash equivalents
	For the purpose of the interim consolidated cash flow statement, cash and cash equivalents are comprised of the following:
						1st Nov., 2008				3rd May, 2008
						Unaudited				Audited
						£'000				£'000
	Cash at bank and in hand					3,545				2,452
	Short term deposits					1,566				7,619
						5,111				10,071
4	Dividends paid and proposed
						26 weeks ended 1st Nov., 2008				27 weeks ended 3rd Nov., 2007
						Unaudited				Unaudited
						£'000				£'000
	Declared and paid during the six month period
	Dividend on ordinary shares
	Final dividend for 2008 - 3.80p (2007 - 3.00p)					686				544
	Proposed for approval
	Interim dividend for 2009 - 0.70p (2008 - 0.70p)					126				128
	Dividends warrants will be posted on 26th January, 2009 to those members registered on the books of the Company on 2nd January, 2009.
5	Income tax
	The major components of income tax expense in the consolidated income statement are:
					26 weeks ended 1st Nov., 2008					27 weeks ended 3rd Nov., 2007
					Unaudited					Unaudited
					£'000					£'000
	Current income
	Current income tax charge				699					567
	Adjustments in respect of prior years				-					(15)
	Current tax				699					552
	Deferred income
	Relating to origination and reversal of temporary differences				73					145
	Adjustments in respect of prior years				-					(113)
	Deferred tax				73					32
	Income tax expense reported in the consolidated income statement				772					584

6.	Segment information
(a)	Primary reporting format - Divisional segments
	The following table presents revenue and profit and certain assets and liability information regarding the Group's divisions for the periods ended 1st November, 2008 and 3rd November, 2007. The reporting format is determined by the differences in manufacture and services provided by the Group. The Defence division is engaged in the design, manufacture and service of defence equipment. The Forgings division is engaged in the manufacture of forgings. The Petrol Station Forecourt Structures division is engaged in the design and construction of petrol station forecourt structures.
			Defence				Forgings				Petrol Station				Total
											Forecourt Structures
			2008		2007		2008		2007		2008		2007		2008		2007
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		10,971		7,217		12,021		13,002		4,240		5,326		27,232		25,545
	Inter-divisional		-		-		-		-		-		-		-		-
	Total revenue		10,971		7,217		12,021		13,002		4,240		5,326		27,232		25,545
	Segment result		1,177		118		1,003		1,236		(90)		466		2,090		1,820
	Net finance revenue														363		387
	Profit before taxation														2,453		2,207
	Taxation														(772)		(584)
	Profit for the period														1,681		1,623
	Segmental assets		12,963		14,887		11,193		11,853		3,275		3,732		27,431		30,472
	Unallocated assets														8,824		9,441
	Total assets														36,255		39,913
	Segmental liabilities		9,668		13,139		3,116		4,164		1,452		1,898		14,236		19,201
	Unallocated liabilities														2,682		2,676
	Total liabilities														16,918		21,877
	Capital expenditure		116		810		236		627		76		61
	Depreciation		136		53		435		368		93		91
(b)	Secondary report format - Geographical segment
	The following table presents revenue and expenditure and certain assets and liabilities information by geographical segment for the periods ended 1st November, 2008 and 3rd November, 2007. The Group's geographical segments are based on the location of the Group's assets. Revenue from external customers is based on the geographical location of its customers.
			Europe				North America				Rest of the World				Total
			2008		2007		2008		2007		2008		2007		2008		2007
															Unaudited		Unaudited
			£000		£000		£000		£000		£000		£000		£000		£000
	Revenue
	External		23,067		20,377		2,050		1,944		2,115		3,224		27,232		25,545
	Assets		35,036		37,792		845		1,224		374		897		36,255		39,913
	Liabilities		16,731		21,734		151		130		36		13		16,918		21,877
	Capital expenditure		743		1,658		-		2		9		4		752		1,664

7	Property, plant and equipment
	Acquisitions and disposals
	During the twenty six weeks ended 1st November, 2008, the Group acquired assets with a cost of £752,000 (2007 - £1,664,000).
	Assets with a net book value of £74,000 were disposed of by the Group during the 26 weeks ended 1st November, 2008 (2007 - £86,000), resulting in a net gain on disposal of £16,000 (2007 - £4,000).
8	Pensions plans
	The Company operates an employee defined benefit scheme called the MS International plc Retirement and Death Benefits Scheme ('the Scheme'). IAS19 requires disclosure of certain information about the Scheme as follows:
	●	Until 6th April, 1997, the Scheme provided defined benefits and these liabilities remain in respect of service prior to 6th April, 1997. From 6th April, 1997 the Scheme provided future service benefits on a defined contribution basis. From 1st June 2007 defined contribution future service benefits are provided by a Group Personal Pension Plan, outside the Scheme.
	●	The last formal valuation of the Scheme was performed at 5th April, 2005 by a professionally qualified actuary. The results of a formal revaluation of the Scheme at 5th April, 2008 by a professionally qualified actuary are awaiting completion.
	●	The employer has paid £158,000 to the scheme, for life assurance premiums and other Scheme expenses. In addition, from April 2006, the employer has paid £80,000 per annum to the defined benefit section of the scheme. Defined contributions of £163,000 have been paid to the Group Personal Pension Plan.
	●	As a result of significant fluctuations in financial markets, the Company has updated pension assumptions as at 1st November 2008. As result the net pension surplus of £1,856,000 at the beginning of the period has moved to a net pension deficit of £998,000 principally due to falls in equity markets being partly offset by an increase in the discount rate used.
	The Company's policy for recognising actuarial gains and losses is to recognise them immediately through the Statement of Recognised Income and Expense.
9	Commitments and contingencies
	The Company is contingently liable in respect of guarantees, indemnities and performance bonds given in the ordinary course of business amounting to £5,419,848 at 1st November, 2008 (2007 - £5,404,952).
	In the opinion of the directors, no material loss will arise in connection with the above matters.
	The Group and certain of its subsidiary undertakings are parties to legal actions and claims which have arisen in the normal course of business. The results of actions and claims cannot be forecast with certainty, but the directors believe that they will be concluded without any material effect on the net assets of the Group.

10	Related party transactions
	The following transactions took place, during the period, between the Group and Global-MSI plc, a company in which the Group holds a 50% interest.
	Purchases of goods and services £442,000 (2007 - £667,000)
	Sales of goods and services £86,000 (2007 - £510,000)
	The following balances relating to the above transactions are included in the consolidated balance sheet as at 1st November, 2008.
	Amounts owed by joint venture £9,000 (2007 - £8,000)
	Amounts owed to joint venture £40,000 (2007 - £56,000)
	The following transactions took place, during the period, between the Company and other subsidiaries in the Group.
	Sales of goods and services £1,368,000 (2007 - £1,525,000)
	Sales and purchases between related parties are made at normal market prices. Terms and conditions for transactions with subsidiaries and the joint venture are unsecured and interest free. Balances are placed on inter-company accounts with no specified credit period.
11	Reconciliation of movement in equity
			Issued capital				Capital redemption reserve				Other reserves				Revaluation reserve				Special reserve				Foreign exchange reserve				Treasury shares				Retained earnings				Total
			£'000				£'000				£'000				£'000				£'000				£'000				£'000				£'000				£'000
	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 period		-				-				-				-				-				(28)				-				1,950				1,922
	Dividend paid		-				-				-				-				-				-				-				(544)				(544)
	Repurchase of shares		(20)				20				-				-				-				-				-				(375)				(375)
	Exercise of share options		-				-				-				-				-				-				347				-				347
	At 3rd November, 2007		1,851				890				1,544				2,942				1,629				(179)				(391)				9,750				18,036
	Total recognised income and expense for the period		-				-				-				-				-				148				-				2,404				2,552
	Dividend paid		-				-				-				-				-				-				-				(126)				(126)
	Repurchase of shares		(6)				6				-				-				-				-				-				(102)				(102)
	Change in taxation rate		-				-				21				27				-				-				-				-				48
	Share based payments		-				-				-				-				-				-				-				205				205
	Exercise of share options		-				-				-				-				-				-				308				-				308
	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 period		-				-				-				-				-				120				-				(694)				(574)
	Dividend paid		-				-				-				-				-				-				-				(686)				(686)
	Repurchase of shares		(5)				5				-				-				-				-				-				(100)				(100)
	Share based payments		-				-				-				-				-				-				-				84				84
	At 1st November, 2008		1,840				901				1,565				2,969				1,629				89				(391)				10,735				19,337
12	Principal risks and uncertainties
	There are a number of risks and uncertainties facing the Group in the remaining 26 weeks of the financial year. These are considered to be:
	The level of customer demand in our specific markets throughout the world. Not only does this have an obvious impact on MS INTERNATIONAL plc but also on our competitors in those markets. Levels of customer demand are also influenced by sterling exchange rates against other currencies.
13	Statement of directors' responsibilities
	The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

 

END

 

 

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