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Alumasc Group Plc (ALU)

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Thursday 10 September, 2009

Alumasc Group Plc

Annual Results Announcement

RNS Number : 8139Y
Alumasc Group PLC
10 September 2009
 

Thursday 10 September 2009 

THE ALUMASC GROUP PLC - ANNUAL RESULTS ANNOUNCEMENT

"a resilient performance"

Alumasc (ALU.L), the premium building and engineering products group, announces a resilient performance in the difficult circumstances of the year to 30 June 2009.

Financial Highlights

  • Revenue down 13% at £109.1m

  • Underlying* pre-tax profit 46% lower at £5.2m and underlying* EPS 45% lower at 10.0p

  • Reported PBT 82% down at £1.8m and basic EPS 86% down at 2.9p

  • Year end net debt up only £0.9m to £10.3m, gearing 33%, substantial unutilised committed banking facilities

  • Dividends per share maintained at 10.0p (covered 1.0x by underlying* earnings per share), with a final dividend per share of 6.75p proposed

  • £6m of annualised cost savings effected will give some flow-through benefit in the current year

 

Commercial Highlights

  • Building Products' underlying* operating profit reduced by 14% to £9.2m on revenue down 6% at £78.7m. The largest segment within the division, Energy Management, increased underlying* operating profit by 33% to £6.4m on revenue up 10% at £39.1m

  • Levolux, the UK's leading solar shading company, acquired in May 2007, delivered another outstanding performance and again reported record results

  • Sales of green roofs more than doubled, with ZinCo intensive green roofs having a record year and Blackdown Horticultural Consultants, acquired in March 2008, having a very successful first year in the group 

  • Engineering Products made an underlying* operating loss of £1.4m (2007/08: profit of £1.7m) on revenue down 29% at £31.7m

  • Alumasc Precision began the year well, benefiting from new work wins. However, demand from international OEM customers, which serve principally the non-automotive and premium automotive markets, reduced significantly in December. Swift management action has been taken to address this challenge


* excluding amortisation of brands, restructuring costs, impairment charges and property disposal gains

Paul Hooper, Chief Executive, stated "2008/09 was a challenging year for Alumasc, as worsening global economic conditions increasingly impacted the group's markets for niche building and engineering products. Nonetheless, the group's recent strategic development of a portfolio of modern, sustainable building product businesses, all of which have continued to perform well, underpinned a relatively resilient underlying performance for the year as a whole when compared with a number of our peers in the construction and building materials sector. 

Alumasc has begun the current financial year with trading continuing at similar levels to those observed towards the end of the 2008/09 financial year, albeit significantly lower than one year ago. 

Whilst any sort of forecasting in the current environment is not easy, on the basis of current order books and construction industry forecasts, we expect the new financial year to be more challenging than its predecessor for the Building Products division, with lower levels of commercial new build construction activity anticipated. We would expect the Engineering Products division to benefit from cost reduction actions already taken and the numerous business improvement and efficiency initiatives ongoing, particularly at Alumasc Precision, under the new management team. 

With its leading brands and market positions, continued careful management of cash resources and strong balance sheet, Alumasc remains well placed to manage through the rest of the recession, benefit from the opportunities that this will bring, and emerge a stronger group when economic conditions improve."

Presentation:

Today, a presentation will be made to institutions, broker's analysts and private client brokers by Paul Hooper (Chief Executive) and Andrew Magson (Finance Director), with John McCall (Chairman) in attendance. The meeting will commence at 9.00am and end at approximately 10.00am. It will be held at the offices of KBC Peel Hunt, 111 Old Broad StreetLondonEC2N 1PH.

Enquiries:

The Alumasc Group plc

01536 383844

  Paul Hooper (Chief Executive)

[email protected]

  Andrew Magson (Finance Director)




Bankside Consultants Limited


   Charles Ponsonby

020 7367 8851


[email protected]



  Rose Oddy

020 7367 8853


[email protected]



 


Chairman's statement 

The Business and Financial Reviews on the following pages of this report demonstrate that Alumasc has shown resilience in the difficult circumstances of the past year. Underlying1 profit before tax of £5.2 million and cash outflow of £0.9 million after necessary restructuring attest to this.

In the light of this performance and the group's strong balance sheet, the Board is recommending an unchanged final dividend of 6.75p per share, giving an unchanged total of 10p per share for the year as a whole, covered 1.0 times by underlying1 earnings.

Turning to the future, I have never attempted to make general economic forecasts and I certainly make no attempt to do so now. However, the Board closely observes developments in its own markets and makes judgments based on local trends, to the extent they may be visible. For industrial companies, the decline in activity from the end of 2008 until the Spring of 2009 was precipitate. Within this decline, destocking by OEMs was clearly a major factor, but also a finite factor. It appears that the destocking phase at least of the present recession has run its course. The severity of the decline, however, means that the degree to which activity picks up following this phase remains uncertain.

There also remains uncertainty as to the more cyclical aspects of the recession, with commercial construction and housebuilding obvious cases in point. It is positive that Alumasc's relative success in this downturn would appear to have benefitted from its strategic participation in the growing environmental dimension of construction activity, and its relatively minor exposure to housebuilding. To borrow a cliché that we all understand, however, we are not yet out of the woods.

While a maintained dividend is clearly of importance to shareholders, the Board has also remained focused on meeting the needs of the business and of our pensions obligations. Keeping this balance has been possible through a determined grip on costs and working capital, both of which have been tightly managed through the year. It is a matter of regret that, by the year end, we employed 187 fewer people and, for those still employed, there has been a freeze on earnings, with part-time working in some cases. I would like to thank all employees for co-operating so fully under the exceptional pressures of the past year.

I have felt for some time that our Board should reflect more closely the strategic direction in which we are taking the business. With this thought in mind, we appointed John Pilkington as an additional non-executive director in March. John brings to the Board the experience of a career in the construction industry, with such leading organisations as Arups,Tarmac/Carillion and Amey.

The events of the past year have clearly interrupted some of our development plans for the group. However, they have not given us cause to doubt our strategy for developing further in the exciting field of sustainable building products, while refining the excellence of our engineering services. Indeed, the significance of the greening of building techniques in combating the effects of climate change and rising energy costs continues to gain recognition. We are fortunate that we see opportunities for organic development in this market place, which are discussed in more detail in the business review that follows.

While commentators are split on the pace and timing of economic recovery in the UK and elsewhere, we would be wise to remain prepared for a range of scenarios. In all events, we will remain focused on maintaining our strong balance sheet, on meeting the needs of our customers and on preparing to grasp the opportunities that will arise for well positioned businesses in due course.

John McCall
Chairman

A reconciliation between underlying and reported profit before tax is given in the Group Finance Director's Review. 

Business Review

Chief Executive's Operating Review

Overview
2008/09 was a challenging year for Alumasc, as worsening global economic conditions increasingly impacted the group's markets for niche building and engineering products. Nonetheless, the group's recent strategic development of a portfolio of modern, sustainable building product businesses, all of which have continued to perform well, underpinned a relatively resilient underlying performance for the year as a whole when compared with a number of our peers in the construction and building materials sector.

Alumasc's strategy is to generate shareholder value by focusing on the sale of niche, premium building and engineering products into specialised markets. The group's products are increasingly specified by architects or engineers because they give particular performance benefits to customers and end-users. In Alumasc's chosen market niches, these specifications are often backed by building or environmental regulations designed to encourage lower energy use, and to promote the more efficient use, retention and recycling of water in the built environment. Examples are:

  • Levolux's UK market-leading solar shading products, which lower energy use in buildings whilst reducing glare and, in some cases, improving the utilisation of natural light for building occupants;


  • Blackdown and Zinco, which together give Alumasc leadership in the fast-expanding UK green roof market. Green roofs improve the insulation of buildings, whilst retaining water (thereby reducing run-off), as well as improving bio-diversity, mitigating the heat island effect in urban areas and, in some cases, providing an amenity;


  • market leading Alumasc and Gatic branded rainwater and drainage products, with Gatic Slotdrain in particular becoming increasingly specified in UK and export markets as a premium line drainage system allowing efficient removal of surface water in accordance with increasingly stringent regulations relating to water and storm water management and control; and


  • aluminium precision engineering components which facilitate weight reduction and lower energy use in combustion engines and other industrial applications. 


In the year to 30 June 2009, almost two-thirds of group revenue (2007/08: 55%) and all of group operating profit (2007/08: 88%) was generated by the group's sustainable building products businesses, where revenues were similar to prior period levels at a time when UK construction activity reduced by approximately 10%. This performance is further evidence of the success of Alumasc's recent strategic focus on growing shareholder value though development of our leading positions in market niches for environmentally sustainable products that we believe will grow faster than the market as a whole through the economic cycle.


Performance Overview





2008/09

2007/08

% Change





Revenue (£m)

109.1

125.8

-13.3





Underlying operating profit (£m)

6.7

11.2

-40.4

Operating margin (%)

6.1

8.9






Net financing costs

(1.5)

(1.6)






Underlying profit before tax

5.2

9.6

-46.4





Restructuring costs (£m)

(0.9)

(0.4)


Amortisation of brands and impairment (£m)

(2.5)

(0.4)


Property disposal gains (£m)

-

1.2






Profit before tax (£m)

1.8

10.0

-81.9


Operating Performance

Group revenue was 13.3% lower in the year to 30 June 2009, mainly due to the significant downturn in demand from OEM customers in the Engineering Products division, which in some individual cases exceeded 50%. This began to impact just prior to the calendar year end as the global economy moved more clearly into recession. Despite the rapid management action taken to reduce costs by around £6 million on an annualised basis across all areas of the group impacted by the economic downturn, these measures were insufficient to offset fully the profit impact of the significant reduction in revenue.

As a consequence, the group's underlying operating profit reduced by just over 40% to £6.7 million. In addition to the impact of lower sales volumes partly mitigated by cost savings, the other main impact on profit performance for the year was the weakness of Sterling against the US Dollar and Euro which added around £1.2 million to the cost of imported products and materials. After slightly lower net financing costs, the reduction in underlying operating profit described above was also reflected in underlying profit before tax, which at £5.2 million was some 46% lower than reported in the prior year.

In the absence of any property disposal gains in 2008/09, after higher restructuring charges associated with cost reduction initiatives, and after amortisation and impairment charges mainly relating to the write-down in the value of capital invested in Alumasc Precision Components, explained below, the group's reported profit before tax was £1.8 million (2007/08: £10.0 million).

Despite the reduced level of profit, the group's cash performance remained robust, due to the high level of cash generated by the Building Products division in particular, and also management's tight control over capital expenditure and working capital. The group's overall cash out-flow for the year was restricted to £0.9 million, with net debt increasing as a consequence from £9.4 million to £10.3 million, which represented utilisation of only 52% of the group's committed banking facilities of £20 million. Gearing remained modest at 33.5% and the net cash interest cost was covered by underlying operating profit by a satisfactory 10.7 times.

Health and Safety

The group's number one priority continues to be to provide a safe place of work for employees, and health and safety remains the first agenda item for all subsidiary and group board meetings. The group's health and safety performance rate index improved significantly from 9.4 in 2007/08 to 4.4 in 2008/09. 


Building Products Division


Building Products' Divisional Operating Performance




2008/09

2007/08

% Change





Revenue (£m)

78.7

83.8

-6.1





Underlying operating profit (£m)

9.2

10.7

-14.1

Operating margin (%)

11.7

12.8






Restructuring costs (£m)

(0.4)

-


Amortisation of brands and impairment (£m)

(0.3)

(0.4)






Reported operating profit (£m)

8.5

10.3

-17.5


Divisional revenues remained ahead of prior period comparators until the final quarter of the financial year, with activity levels remaining healthy for infrastructure and public sector construction projects, and as new private sector commercial buildings mainly funded prior to the credit crunch were progressed to completion. However, despite the continued growth in a number of the group's sustainable building product businesses, the first signs of the anticipated slow down in spend in private sector new build commercial construction were observed in a more patchy demand profile towards the end of the financial year. This, when measured against strong comparators towards the end of the prior year, caused a reduction in full year divisional revenues by some 6% to £78.7 million. The lower revenues towards the end of the year, combined with the adverse currency exchange impact on profit which cost the division around £1.1 million on imported products, are the principal factors explaining the reduced divisional profitability for the year.

Sustainable building products
Within the division, revenues from sustainable building product activities were broadly unchanged at £68.8 million, representing 88% of divisional sales in the year (2007/08: 83%). Underlying profits reduced by 6% to £9.3 million, largely as a result of the currency translation effect described above. Excluding this, profits were ahead by 6%, a very good performance in view of market conditions. The group's strongest performing brands during the year were those that assist in managing energy use in buildings. In particular:

  • Levolux, the UK's leading solar shading company, acquired by Alumasc in May 2007, delivered another outstanding performance and again reported record results. Notable successes were the completion of a major project for the headquarters of a financial institution in the USA and winning an innovative project for another head office building in the UK that will for the first time incorporate solar panels in the shading system. This will make the shading system self-sufficient in energy use, as well as contributing to the reduction in the energy consumption of the building as a whole;


  • Green roof sales grew by 25% on a like-for-like basis, as the embryonic UK market for green roof systems continued to expand despite the difficult economic background. Alumasc's overall sales of green roofs more than doubled on the prior year, with Zinco intensive green roofs having a record year, but also reflecting the first full year contribution from Blackdown Horticultural Consultants, acquired in March 2008. Blackdown had a very successful first year in the group and completed two large, high profile projects in the second-half, the new bus garage being built for the 2012 Olympic Games at West Ham in London and the Snow Dome at Hemel Hempstead. Blackdown is also the UK's leader in the horticultural aspects of green roof systems, and benefits from being the UK's leading source of quality plant material in its sector; and

  • MR Façade systems, which mainly provide exterior wall insulation in social housing refurbishment projects, had another strong year, underpinned by UK government spending as part of the Decent Homes Initiative. The group continues to benefit from work on large projects in Glasgow and along the M62 corridor in particular.

Sustainable building products that assist in managing and controlling water delivered a resilient performance, but could not match the record achievements of the prior year due to a lower level of large export project sales and the slow down in commercial construction activity which impacted the Alumasc rainwater and drainage brands, in particular towards the end of the year. Nonetheless, notable successes during the year included:

  • buoyant sales of high performance Gatic access covers to the domestic and international infrastructure markets. UK sales of access covers reached record levels, boosted by work related to the Olympics;

  • continued high levels of Gatic Slotdrain sales, albeit below prior year record levels, with the more competitive UK exchange rate assisting increased penetration into European export markets more generally through the distribution agreement with Saint-Gobain, although no single export contract came close to matching the scale of the Barcelona airport project in the prior year; and

  •  increased sales of structural waterproofing products, typically Hydrotech, with demand often driven by specification as part of a Zinco green roof system.

Premium building products
Alumasc's premium building product brands experienced more challenging trading conditions in 2008/09, when compared with the sustainable building products brands. Despite revenues in this segment being over 30% down on the prior year, break-even was achieved. Both Timloc and Pendock brands were impacted by lower sales to the new house building market, where demand was low throughout the year, although there have been signs of modest improvement in recent months. Scaffold and Construction Products had a very quiet year, reflecting the lack of new building projects commencing in the period, exacerbated by merchant de-stocking. Costs have been reduced in these businesses as far as possible to align with the lower levels of activity. However, care has been taken to retain sufficient knowledge and flexibility necessary to continue to provide customers with a quality service and to benefit from recovery when it comes.


A combination of the impact of the recession and higher import costs caused by the weakness of Sterling led to an opportunity to purchase the brand and assets of Contour-Ply, a competitor of Pendock's in the pre-formed pipe boxing market. The deal was completed on 1 May for an initial consideration of £101,000. Manufacture has since been relocated to Alumasc Interior Building Products' factory in the UK. This acquisition allows Alumasc to offer customers a wider choice of products in this market niche. More recently, in line with the group's strategy of developing sustainable building products, Pendock has been further differentiated as the premium brand in this market following the award of FSC (Forest Stewardship Council) accreditation for its use of materials from sustainable sources.

Engineering Products Division

Engineering Products' Divisional Operating Performance




2008/09

2007/08

% Change





Revenue (£m)

31.7

44.3

-28.5





Underlying operating (loss)/profit (£m)

(1.4)

1.7

-100+





Restructuring costs (£m)

(0.6)

(0.5)


Impairment charges (£m)

(2.1)

-


Property disposal gains (£m)

-

1.0






Reported operating (loss)/profit (£m)

(4.1)

2.2

-100+


2008/09 was a very tough year for the Engineering Products division. Alumasc Precision suffered a significant reduction in demand from OEM customers towards the end of the first half which led to a reduction in second-half revenues by some 45% compared with one year ago. Demand at Alumasc Dispense fell sharply after a strong final quarter last year with brand investment cut, and in some cases frozen, by customers to conserve cash as a period of significant consolidation in the global brewing industry was followed immediately by the economic downturn.

Alumasc Precision
Alumasc Precision began the year well, benefiting from new work wins. However, demand from international OEM customers, which serve principally the non-automotive diesel and premium automotive markets, reduced significantly in December, which had a fundamental impact on the profitability of the business. Swift management action was taken at that time, and further action has been taken more recently, to re-align shift patterns, eliminate overtime, extend holidays and, regrettably, reduce numbers employed by over 30%. In May, agreement was reached with employees to move to a four day week over the quieter summer period. Whilst Dyson Diecastings has remained comfortably in profit, Alumasc Precision Components reported an operating loss for the year as a whole. In view of this, and relatively low levels of expected future utilisation of certain assets in that business caused by the significant reduction in volumes that we anticipate it will take some time to recover fully, the decision was taken to take an exceptional, non-cash impairment charge to reduce the carrying value of assets at Alumasc Precision Components under IAS36 by some £2.1 million.

Despite the difficult economic and market background, 2008/09 was a year of significant progress at Alumasc Precision. Some £6 million of new work has been won, including from Mak, a subsidiary of Caterpillar based in Germany, and Edwards High Vacuum, with additional work gained from a number of our established customers, Caterpillar in the USA, Rotork, Aston Martin and Deutz. Mak is a manufacturer of engines used in passenger ships. In addition, Dyson Diecastings has recently completed the tooling work for a suite of new interior components for Jaguar, and component production, which commenced recently, will benefit the new financial year. In addition to the new work won, levels of enquiries for potential new work are currently running at higher levels than seen for a number of years. We believe this reflects the financial strength of Alumasc compared with some competing component suppliers, and more favourable exchange rates increasing the competitiveness of potential export sales.

Warren Roberts, who was formerly the managing director of Mahle Powertrain, joined the business as managing director in February, and has since led a number of business improvement initiatives that are already yielding benefits in terms of quality, cost and efficiency. Alumasc Precision has recently been nominated to receive a bronze award for quality from Caterpillar, a major customer, and a project to introduce a new business-wide information and control system was completed successfully just after the year end.

Alumasc Dispense
Alumasc Dispense had a quiet year, due to the spend restrictions by major brewers on branding and point of sale equipment, as described above. Major projects in the year included an upgraded Carlsberg Draughtmaster system and a new ceramic font for Britvic. The latter represents a key success in Alumasc Dispense's strategy to diversify sales into the soft drinks market, using innovative designs and materials. The use of ceramics is a further example of Alumasc's strategy of seeking to incorporate sustainable and recyclable materials in its products, where feasible. Towards the end of the year, an innovative illuminated font system for cask beer was developed and is now being trialled by Wells and Youngs for its Bombardier brand.

Business Development
The group has taken a number of steps during the year to continue to develop the business and take advantage of opportunities that are arising from the recession. Initiatives, which we expect to be ongoing into the current year and beyond, include:

  • progress in development of opportunities to grow export sales, where market research suggests we have the ability to repeat UK successes with certain of our brands in North America and the Middle East. Current exchange rates are also helpful in this regard;

  • product innovation, with exciting new products in the Harmer and Gatic ranges under development and due to be launched in the current year;

  • further development of our leading position in the UK green roof market, a niche which continues to expand despite current economic pressures;

  • further development of partnership deals with key merchants and distributors to broaden routes to market; and

  • broadening Alumasc Precision's sales into wider industrial applications, including power generation, micro-electronics and actuators, and further growing sales by Alumasc Dispense into the soft drinks market.

Prospects
Alumasc has begun the current financial year with trading continuing at similar levels to those observed towards the end of the 2008/09 financial year, albeit significantly lower than one year ago. Factors likely to affect performance in the remainder of the year are:

  • the level of UK construction activity, particularly for new private commercial buildings, new public buildings, such as schools and hospitals, and demand from social housing refurbishment projects;

  • the level of demand from OEM customers in the Engineering Products division and extent of further new work wins at Alumasc Precision;

  • whether market share gains arise as customers look to consolidate their supplier base during the recession to increase security of supply and manage credit risks;

  • the speed and degree of success in Alumasc's ambitions to grow export sales of certain brands, particularly in the USA;

  • the level of success in winning major project work generally, including work related to the London Olympics in particular; and

  • whether or not there is a return to Alumasc's traditional bias towards stronger second half trading results, which will depend on prevailing market and economic conditions later in the year. 

Whilst any sort of forecasting in the current environment is not easy, on the basis of current order books and construction industry forecasts, we expect the new financial year to be more challenging than its predecessor for the Building Products division, with lower levels of commercial new build construction activity anticipated. We would expect the Engineering Products division to benefit from cost reduction actions already taken and the numerous business improvement and efficiency initiatives ongoing, particularly at Alumasc Precision under the new management team.

With its leading brands and market positions, continued careful management of cash resources and strong balance sheet, Alumasc remains well placed to manage through the rest of the recession, benefit from the opportunities that this will bring and emerge a stronger group when economic conditions improve.

Paul Hooper
Chief Executive


Business Review
Group Finance Director's Review

Underlying results
The group's operating and financial performance is explained in detail in the Chief Executive's Operating review. Group revenues decreased by 13.3% to £109.1 million (2007/08: £125.8 million) reflecting the impact of the economic recession on Alumasc and the Engineering Products division in particular. The revenue performance in the Building Products division was more robust, underpinned by continued growth in demand for sustainable building products, although demand for products used in new commercial buildings weakened towards the end of the year and new house building activity remained subdued throughout the year. The lower level of revenues, combined with the higher cost of certain imported materials due to the weakness of Sterling against the US Dollar and Euro more than offset management actions taken to reduce costs and improve efficiencies, which on an annualised basis will give substantial savings of around £6 million. These factors, when combined, resulted in underlying profit before tax reducing to £5.2 million, compared with £9.6 million in the prior year.

Non-recurring items and profit before tax
The overall net charge in the group income statement for non-recurring items was £3.4 million (2007/08 net credit of £0.4 million), reflecting:

  • increased restructuring costs associated with cost reduction initiatives, £0.9 million (2007/08: £0.4 million);

  • non-cash impairment charges of £2.2 million, almost all of which related to Alumasc Precision Components, explained further below (2007/08: £nil);

  • the absence of any property disposal gains in 2008/09 (2007/08: £1.2 million); and

  • brand amortisation of £0.3 million (2007/08: £0.4 million, including acquisition accounting adjustments).

After charging brand amortisation and a higher level of non-recurring costs, reported profit before tax reduced to £1.8 million (2007/08: £10.0 million). 

Reconciliation of underlying to reported profit before tax





2008/09

2007/08



£m

£m





Underlying profit before tax


5.2

9.6

  Impairment charges


(2.2)

-

  Restructuring costs


(0.9)

(0.4)

  Property disposal gains


-

1.2

  Brand amortisation1


(0.3)

(0.4)





Reported profit before tax 


1.8

10.0


1  Brand amortisation includes a £250,000 acquisition accounting adjustment in 2007/08


Analysis of performance by half year
An analysis of performance by half year is set out below. This illustrates the extent to which the economic recession impacted the second half of the 2008/09 financial year.


6 months to December

6 months to June


2008/09

2007/08

%

2008/09

2007/08

%


£m

£m

change

£m

£m

change

Revenue







  Building Products

42.7

40.3

6.1

36.0

43.5

-17.5

  Engineering Products

18.8

20.4

-7.7

12.9

23.9

-46.2

  Intercompany

(0.8)

(0.8)


(0.5)

(1.5)










60.7

59.9

1.4

48.4

65.9

-26.7








Underlying operating profit


-

-




  Building Products

5.2

4.8

7.0

4.0

5.9

-31.4

  Engineering Products

(0.3)

0.3

-100+

(1.1)

1.4

-100+

  Unallocated

(0.6)

(0.7)


(0.5)

(0.5)










4.3

4.4

-2.2

2.4

6.8

-65.4


Tax

The underlying group tax rate of 30.4% was around 1 percentage point lower than in the prior year reflecting the current year impact of the reduction in the UK corporation tax rate to 28% with effect from 6 April 2008. 

After charging the non-recurring costs described above, the group's overall tax rate increased to 41.2% (2007/08: 26.6%) mainly due to the one-off impact of the abolition of industrial buildings allowances and the benefit in the prior year of gains on property disposals which were tax-free.

Earnings per share
Underlying earnings per share were 10.0 pence, some 45% lower than the prior year, broadly in line with the decrease in underlying profit before tax. Total reported earnings per share of 2.9 pence were 86% below the prior year reflecting the lower underlying level of profit, the greater level of non-recurring charges and the higher overall tax rate, described above.

Dividends
The Board has proposed an unchanged final dividend of 6.75 pence per share, to be paid on 30 October 2009 to shareholders on the register on 2 October 2009. This will give an unchanged total dividend for the year of 10.0 pence per share. The full year dividend is covered 1.0 times by underlying earnings.

Capital invested and return on investment
The group defines its capital invested as the sum of shareholders' funds, minority interests, bank debt and the (net of tax) pension deficit. The group's average capital invested in the year decreased slightly to around £52 million. Post-tax return on average capital invested1 reduced from 13.9% in 2007/08 to 8.9% in 2008/09, consistent with the lower level of profitability.

Shareholders' funds and return on shareholders' funds
Shareholders' funds decreased marginally from £30.9 million at 30 June 2008 to £30.8 million at 30 June 2009, with the post-tax actuarial gain reported on defined benefit pension obligations of £2.8 million not quite offsetting an adverse movement on retained earnings after payment of dividends. Post-tax return on average shareholders' funds1 reduced from 21.3% in 2007/08 to 11.6% in 2008/09, again consistent with the lower level of profitability.

1 Return on investment and return on shareholders' funds are calculated using underlying profit figures.

Impairment review
The Board conducted an impairment review which covered all assets that contribute to the goodwill figure on the group balance sheet, together with any other assets where indicators of impairment existed. In view of the losses incurred during the year at Alumasc Precision Components, and a review of future expected cash flows in that business, it was concluded that a one-off, non-cash impairment charge of £1.9 million should be booked under IAS36 at the year end. Taken together with other more minor write-downs of assets recognised at the interim stage in this and one other group business, the total impairment charge for the year was £2.2 million. Further details of the impairment review are given in note 4 to the financial information contained in this announcement.

Summarised Cash Flow Statement





2008/09

2007/08



£m

£m





EBITDA1


10.0

14.8

Change in working capital


1.7

0.8

Operating cash flow


11.7

15.6





Capital expenditure


(2.1)

(2.5)

Pension deficit funding


(4.3)

(3.6)

Interest


(0.7)

(1.1)

Tax


(0.5)

(2.5)

Recurring free cash flow


4.1

5.9





Dividends


(3.6)

(3.6)

Restructuring and other one-off cash flows


(1.4)

-

Acquisitions


(0.1)

(3.0)

Property and asset disposal proceeds


0.1

2.3

Discontinued operations


-

1.9





(Increase)/decrease in net debt


(0.9)

3.5


1  EBITDA: Earnings before interest, tax, depreciation, amortisation, property disposal gains and restructuring costs.

Cash flow, working capital and capital expenditure

The net cash out-flow for the year was £0.9 million, and consequently group net debt increased from £9.4 million to £10.3 million. When non-recurring cash flows such as restructuring costs are added back, the group's underlying net cash flow after dividends for the year was broadly neutral. This was a robust performance given the reduced level of profit.

Operating cash flows (excluding non-recurring items) reduced from £15.6 million in the prior year to £11.7 million, with reduced operating profits partially offset by lower levels of working capital as revenues and costs reduced.

Capital expenditure of £2.1 million in the year was below the level of annual depreciation and amortisation of £3.3 million (excluding amortisation of acquired brands), despite all major capital investment proposals from group businesses being approved. The largest capital projects during the year were an essential factory roof refurbishment at Alumasc Precision Components, investments related to the new work won by Dyson Diecastings for Jaguar, and two significant business systems improvement projects.

Capital structure and financing
The group's capital structure remained broadly unchanged during the year. Gearing at 30 June 2009 increased to 33.5% compared with 30.3% on 30 June 2008.

In view of the reduced general availability of credit in the financial markets following the turbulence of the last two years, the group has managed its liquidity position carefully. Overdraft facilities with each of the group's two relationship banks were renewed in November, and in June some £5 million of uncommitted overdraft facilities were converted to committed facilities. The group now has a total of £20 million of committed facilities which do not expire until May 2012, with a further £6 million of uncommitted overdraft facilities.

Based on net debt of £10.3 million at 30 June 2009, the group had utilised only 52% of its committed facilities and 40% of its total banking facilities. In the 2008/09 financial year:

  • interest on borrowings was covered 10.7 times by underlying operating profit. This compares with the group's banking covenant of a minimum of 3 times; and

  • the group's ratio of net debt to EBITDA was just above one. This compares with the group's banking covenant of not more than 3 times.

Based on current budgets and forecasts, the group expects to continue to operate within its banking facilities and banking covenants for the foreseeable future.

Pensions
The group's overall pre-tax pension deficit measured under IAS19 decreased from £19.8 million at 30 June 2008 to £12.5 million at 30 June 2009, reflecting contributions of £4.8 million made by the group during the year and actuarial gains arising mainly from an increase in corporate bond yields which are used to discount future pension liabilities to present values. The increase in contributions made by the group during the year follows the conclusion of the actuarial review of The Alumasc Group Pension Scheme, which included recognition of the expected increased longevity of scheme members.

In view of the relatively high and increasing cost of defined benefit pension obligations for the group, and the increasing market, demographic and regulatory risks that these arrangements have experienced recently and remain exposed to in the future, consultations have commenced with the remaining active members of The Alumasc Group Pension Scheme with regard to a proposal by the company to close the scheme to future accrual. The Benjamin Priest Group Pension Scheme already has no active members.


Auditors
In accordance with good corporate governance practice, during the year the Board decided to conduct a periodic review of the group's external audit arrangements and placed the audit out to tender. Having seen presentations from four tendering firms, including the previous auditor, Ernst & Young LLP, it was decided to appoint KPMG Audit Plc as auditors. A resolution to ratify this appointment is to be proposed at the forthcoming Annual General Meeting.

Internal control
In view of the growth in the Building Products division and the changing nature of some of the risks the group faces, the Board decided two years ago to increase the level of both internal and external resource allocated to internal control and audit activities to provide further assurance on the effectiveness of the group's internal control systems. Significant progress has been made in the current year, including the completion of the first formal full year's programme of internal audits led by the Group Financial Controller and the successful implementation of two new business systems, at Alumasc Exterior Building Products and Alumasc Precision Components. The group intends to further leverage and build on these successes in the current financial year.

Andrew Magson
Group Finance Director


Responsibility Statement

We confirm that to the best of our knowledge:

(a)  the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the group and the Company; and

(b)  the Directors' report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that the group face.

Paul Hooper                    Andrew Magson
Chief Executive                Group Finance Director

The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the year ended 30 June 2009 which will be despatched to shareholders on or around 25 September 2009 and will be available at www.alumasc.co.uk. Accordingly the responsibility statement makes reference to the financial statements of the Company and the group and to the relevant narratives appearing in that annual report and accounts rather than the contents of this announcement.




CONSOLIDATED INCOME STATEMENT





For the year ended 30 June 2009












2008/09


2007/08



Before 

non-recurring items and brand amortisation


Non-recurring items and brand amortisation




Total


Before

non-recurring items and brand amortisation 


Non-recurring

 items and brand amortisation




Total


Notes

£'000

£'000

£,000


£'000

£'000

£'000










Revenue


109,088

-

109,088


125,808

-

125,808

Cost of sales


(73,337)

-

(73,337)


(84,145)

-

(84,145)

Cost of sales - Impairment charges

4

-

(2,176)

(2,176)


-

-

-

Gross profit


35,751

(2,176)

33,575


41,663

-

41,663










Net operating expenses before non-recurring items and brand amortisation


(29,053)

-

(29,053)


(30,430)

-

(30,430)

Brand amortisation and fair value adjustments

4

-

(252)

(252)


-

(428)

(428)

Profit on disposal of property

4

-

-

-


-

1,240

1,240

Restructuring costs

4

-

(940)

(940)


-

(465)

(465)

Net operating expenses


(29,053)

(1,192)

(30,245)


(30,430)

347

(30,083)










Operating profit

3

6,698

(3,368)

3,330


11,233

347

11,580










Finance income


4,424

-

4,424


4,480

-

4,480

Finance expenses


(5,950)

-

(5,950)


(6,071)

-

(6,071)

Profit before taxation


5,172

(3,368)

1,804


9,642

347

9,989










Tax expense

5

(1,572)

828

(744)


(3,032)

376

(2,656)










Profit for the year


3,600

(2,540)

1,060


6,610

723

7,333










Profit for the year attributable to:









Equity holders of the parent




1,052




7,315

Minority interest




8




18





1,060




7,333














Pence




Pence

Earnings per share









- Basic

7



2.9




20.3










- Diluted

7



2.9




20.2


CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 30 June 2009





2008/09

2007/08



£'000

£'000

Income and expense recognised directly in equity








Actuarial gain/(loss) on defined benefit pensions


3,938

(6,557)

Movement in cash flow hedging position


(501)

(60)

Exchange differences on retranslation of foreign operations


63

7

Tax on items taken directly to or transferred from equity


(974)

1,836





Net income/(loss) recognised directly in equity for the year


2,526

(4,774)





Profit for the year


1,060

7,333





Total recognised income for the year

 


3,586

2,559





Attributable to:




Equity holders of the parent


3,551

2,541

Minority interest


35

18



3,586

2,559















CONSOLIDATED BALANCE SHEET






At 30 June 2009



















Note

2009

2009

2008

2008



£'000

£'000

£'000

£'000

Assets






Non-current assets






Property, plant and equipment


16,704


20,078


Goodwill


16,888


16,888


Other intangible assets


4,538


4,496


Financial assets


17


17


Deferred tax assets

5

3,501


5,549





41,648


47,028







Current assets






Inventories


12,524


12,929


Biological assets


341


131


Trade and other receivables


19,474


29,740


Cash and short term deposits


1,019


5,529


Income tax receivable


161


-


Derivative financial assets


25


48





33,544


48,377







Total assets



75,192


95,405







Liabilities






Non -current liabilities






Interest bearing loans and borrowings


(11,331)


(14,881)


Employee benefits payable


(12,504)


(19,818)


Provisions


(499)


(831)


Deferred tax liabilities

5

(1,905)


(2,291)





(26,239)


(37,821)

Current liabilities






Interest bearing loans and borrowings


(6)


(15)


Trade and other payables


(17,657)


(26,307)


Provisions


-


(116)


Income tax payable


-


(237)


Derivative financial liabilities


(461)


-





(18,124)


(26,675)







Total liabilities



(44,363)


(64,496)







Net Assets



30,829


30,909







Equity






Called up share capital

8

4,517


4,517


Share premium

8

452


383


Revaluation reserve

8

951


1,101


Capital reserve - own shares

8

(178)


(106)


Hedging reserve

8

(332)


40


Foreign currency reserve

8

37


1


Profit and loss account reserve

8

25,349


24,951








Equity attributable to 

equity holders of the parent



30,796


30,887

Minority interest

8


33


22

Total equity



30,829


30,909


CONSOLIDATED CASH FLOW STATEMENT




For the year ended 30 June 2009










2008/09

2007/08



£'000

£'000

Operating activities




Operating profit


3,330

11,580

Adjustments for:




Depreciation 


3,004

3,427

Amortisation


541

399

Impairments


2,176

-

Gain on disposal of property, plant and equipment


(49)

(1,259)

Decrease in inventories


329

325

Increase in biological assets


(210)

(131)

Decrease/(increase) in receivables


10,290

(2,412)

(Decrease)/increase in trade and other payables


(8,627)

3,392

Movement in provisions


(448)

(92)

Movement in retirement benefit obligations


(4,276)

(3,651)

Share based payments 


20

8

Cash generated from continuing operations


6,080

11,586





Movement in working capital from discontinued operations


-

1,204

Cash generated from discontinued operations


-

1,204





Tax paid


(454)

(2,451)

Tax payments settling liabilities of subsidiaries on acquisition


-

(1,004)

Net cash inflow from operating activities


5,626

9,335





Investing activities




Purchase of property, plant and equipment


(1,727)

(2,124)

Payments to acquire intangible fixed assets


(430)

(379)

Proceeds from sales of plant and equipment


51

1,651

Proceeds from sales of other intangible assets


73

-

Proceeds from the sale of non-current assets classified as held for sale


-

678

Acquisition of subsidiary undertakings net of cash acquired


-

(2,039)

Acquisition of brand


(126)

-

Proceeds from sale of business activities


-

710

Interest received


149

159

Net cash outflow investing activities


(2,010)

(1,344)





Financing activities




Interest paid


(854)

(1,268)

Equity dividends paid


(3,607)

(3,550)

Equity dividends paid to minority interests


(24)

(34)

Repayment of amounts borrowed


(5,017)

(14)

Purchase of own shares


(124)

-

Proceeds from issue of share capital


-

421

Proceeds from refund of share issue costs


69

-

Net cash outflow from financing activities


(9,557)

(4,445)









Net (decrease)/increase in cash and cash equivalents


(5,941)

3,546





Cash and cash equivalents brought forward


5,529

1,977

Effect of foreign exchange rate changes


7

6

Cash and cash equivalents carried forward


(405)

5,529





Cash and cash equivalents comprise:




Cash and short term deposits


1,019

5,529

Bank overdrafts


(1,424)

-



(405)

5,529


1    basis of preparation

The annual results announcement for the year ended 30 June 2009 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.


The financial information included within this announcement does not constitute the company's statutory accounts for the years ended 30 June 2009 or 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 in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Business Review. At 30 June 2009, the group had £26 million (2008: £34 million) of banking facilities, of which £20 million (2008: £15 million) was committed. The group's net debt at 30 June 2009 was £10.3 million (2008: £9.4 million) equivalent to 52% (2008: 63%) of committed debt facilities and 40% (2008: 28%) of total debt facilities. The unutilised element of the group's facilities at 30 June 2009 was £14.6 million (2008: £19 million).

On the basis of the group's financing facilities and current financial plans and sensitivity analyses, the Board is satisfied that the group has adequate resources to continue in operational existence for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the financial statements.

2    principal risks and uncertainties

Alumasc's portfolio of niche businesses generate sales in a variety of building and construction, and industrial markets. This reduces the group's exposure to any one end-market segment or single third party. The group's major risks are:

UK and Global Economy 
All of Alumasc's operations are based in the UK, and the majority of the group's sales are made to UK customers, with the remainder mostly to customers in the USA and Europe. Any significant change in economic conditions in these locations and particularly those that impact the building, construction, vehicle manufacturing and brewing sectors could affect Alumasc's future revenues and profits.

Customers
Certain of the group's businesses derive a significant proportion of their revenues from key customers. The management teams of these businesses and group management, where appropriate, maintain regular contact with all key customers to manage and develop these important business relationships. Whilst the loss of any key customer could have a significant impact on the performance of an individual business within the group, it is unlikely to have as material an impact on the group as a whole. 

People
The loss of key management and employees could impact operating performance through loss of know-how. These risks are mitigated as far as possible through succession planning for key executives, teamwork and ensuring that key individuals are appropriately motivated and incentivised.

Supply chain
The loss or failure of key suppliers, or the prolonged loss of a major manufacturing site within Alumasc, could impact our ability to deliver to customer expectations. The increase over the last few years in Alumasc's raw materials, components or sub-assemblies that are being sourced from the Far East, whilst reducing costs, has introduced additional supply chain risks that are being carefully managed by senior personnel within each business.

2    risks and uncertainties (continued)

Credit risk
As global economic conditions have become more challenging, credit risks have increased. Credit risks are monitored carefully in all group businesses, including at monthly board meetings and, in certain specific cases where judged cost-effective, these risks are insured. The group has a wide range of customers reflecting the variety of end user markets served and this mitigates the group's exposure to any one end-market segment or single third party. The group does make some significant sales to customer segments reported in the media during the year to be under pressure in current economic circumstances, including US and 
UK car manufacturers and UK house builders.

Foreign exchange rate risk
The group is exposed to movements in foreign exchange rates, particularly in relation to purchases made in Euros and US Dollars. These risks are mitigated wherever possible by internal hedging between group businesses and external forward foreign exchange contracts. Such hedging can only protect the group against relatively short-term volatility in exchange rates and not against more structural changes to the relative strength of these currencies against 
Sterling. The group's recent results have been impacted adversely by the recent appreciation of the Euro and US Dollar against Sterling and would continue to be impacted, when compared to last year, should prevailing rates not recover.

Liquidity risk
The group has £20 million of committed banking facilities which expire in May 2012. These facilities are almost double the level of the group's indebtedness at 30 June 2009. In addition, the group has a further £6 million of committed overdraft facilities. The Board believes these facilities are sufficient to meet the group's funding requirements for the foreseeable future.  

Product Quality
The reputation of Alumasc products and brands could be impacted by significant product quality issues. The group's quality control procedures are designed to ensure that own-manufactured products and, where applicable, bought-in products perform to specification, provided they have been correctly installed. In circumstances where the group installs its own products, careful project management processes seek to ensure that any potential issues are pro-actively identified, managed and resolved on-site as far as possible. Residual risks are, where possible, insured. Based on past experience, it is not considered likely that quality claims on any individual product or contract would be fundamental to the group's performance as a whole. 

Acquisitions  
An important part of the group's growth strategy is to acquire niche building product businesses, where we consider these will increase shareholder value. Poor execution of this strategy or poor management after acquisition could, conversely, erode value. All acquisitions are approved by the group's main board. Senior management from both group and operating businesses, as appropriate to each case, are involved in all key aspects of acquisition execution and post acquisition management. In most cases, Alumasc seeks to retain key staff within acquired businesses and develop their responsibilities within the group.  

Pensions
The group has a relatively significant pension deficit, which is being carefully managed and reduced over a number of years through funding plans agreed with the Pension Trustees. The value of the group's pension obligations and the consequential impact on the future levels of funding that will be required are affected by changes in demographic, capital market and regulatory factors over time, many of which are beyond the group's control. These factors, and developments in the pensions industry more generally, are closely monitored by management and its advisors in order that the group can continue to reduce its pension deficit over time, without this in any way affecting the management of the group's trading operations.

3    segmental analysis

Segment information is presented in respect of the group's business segments. The primary format, business segments, is based on the group's management and internal reporting structure. The allocation of the group's brands to business segments is shown in note 10 and a description of each segment's activities and brands is given within the Chief Executive's Operating Review.


Inter-segment transactions are entered into applying normal commercial terms that would be available to third parties. Segment results, assets and liabilities include those items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets comprise deferred tax assets, income tax recoverable and corporate assets that cannot be allocated on a reasonable basis. Unallocated liabilities comprise borrowings, employee benefit obligations, deferred tax liabilities, income tax payable and corporate liabilities that cannot be allocated on a reasonable basis to a business segment.  


3    segmental analysis (continued)

Business Segments


Analysis by business segment 2008/09 

 

 

 

 

 

 



 


Sustainable:

Sustainable:

Premium 

Building

 

 

Engineering





Energy 

Water

Building 

Products

Precision 

Alumasc

Products

Unallocated




Management

Management

Products

Total

Components

Dispense

Total

Items

Elimination

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000


 

 

 

 

 

 

 



 

Sales to external customers 

38,938

29,743

9,806

78,487

23,025

7,576

30,601

-

-

109,088

Inter-segment revenue

126

32

11

169

1,102

-

1,102

-

(1,271)

-


39,064

29,775

9,817

78,656

24,127

7,576

31,703

-

(1,271)

109,088












Underlying segmental operating profit

6,430

2,830

(50)

9,210

(1,503)

54

(1,449)

(1,063)


6,698

Cost of sales - Impairment charges

-

(80)

-

(80)

(2,096)

-

(2,096)

-


(2,176)

Brand amortisation 

(240)

-

(12)

(252)

-

-

-

-


(252)

Restructuring costs

(81)

(230)

(72)

(383)

(550)

(7)

(557)

-


(940)

Segment operating result

6,109

2,520

(134)

8,495

(4,149)

47

(4,102)

(1,063)


3,330

Finance revenue










4,424

Finance costs










(5,950)

Profit before tax










1,804

Tax










(744)

Profit after tax










1,060























 

 

 

 

 

 

 


 


 

Segment assets

26,221

17,977

8,087

52,285

15,658

3,527

19,185

3,722


75,192












Segment liabilities

(4,768)

(6,223)

(2,566)

(13,557)

(2,995)

(963)

(3,958)

(26,848)


(44,363)












Other segment information











Capital and acquisition expenditure: 











 Property, plant and equipment

148

313

288

749

1,007

47

1,054

5


1,808

 Goodwill

-

-

-

-

-

-

-

-


-

 Other intangible assets

15

232

238

485

144

27

171

-


656

Depreciation  

137

664

356

1,157

1,609

145

1,754

93


3,004

Amortisation of intangible assets

247

166

47

460

45

36

81

-


541


3    segmental analysis (continued)

Business Segments


Analysis by business segment 2007/08 

 

 

 

 

 

 



 


 

 

 

 

 

 


 


 


Sustainable:

Sustainable:

Premium 

Building

 

 

Engineering





Energy 

Water

Building 

Products

Precision 

Alumasc

Products

Unallocated




Management

Management

Products

Total

Components

Dispense

Total

Items

Elimination

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000


 

 

 

 

 

 

 



 

Sales to external customers 

35,477

33,737

14,271

83,485

30,369

11,954

42,323

-

-

125,808

Inter-segment revenue

-

314

-

314

1,994

-

1,994

-

(2,308)

-


35,477

34,051

14,271

83,799

32,363

11,954

44,317

-

(2,308)

125,808












Underlying segmental operating profit

4,849

4,984

887

10,720

1,002

662

1,664

(1,151)


11,233

Brand amortisation 

(178)

 - 

 - 

(178)

 - 

 - 

 - 

-


(178)

Fair value adjustments

(250)

-

-

(250)

-

-

-

-


(250)

Restructuring costs

-

-

-

-

(315)

(150)

(465)

-


(465)

Property disposal gains 

 - 

 - 

 - 

 - 

-

990

990

250


1,240

Segment operating result

4,421

4,984

887

10,292

687

1,502

2,189

(901)


11,580

Finance revenue

 

 

 

 

 

 

 



4,480

Finance costs

 

 

 

 

 

 

 



(6,071)

Profit before tax

 

 

 

 

 

 

 



9,989

Tax

 

 

 

 

 

 


 


(2,656)

Profit after tax

 

 

 

 

 

 

 



7,333

 

 

 

 

 

 

 


 


 

Segment assets

28,022

24,724

8,961

61,707

24,204

5,948

30,152

3,546


95,405


 

 

 

 

 

 


 


 

Segment liabilities

(5,961)

(9,511)

(2,964)

(18,436)

(6,025)

(2,211)

(8,236)

(37,824)


(64,496)


 

 

 

 

 

 


 


 

Other segment information

 

 

 

 

 

 

 



 

Capital and acquisition expenditure: 

 

 

 

 

 

 

 



 

 Property, plant and equipment

 222 

 617 

 450 

1,289

 560

 321 

 881 

-


2,170

 Goodwill

1,251

 - 

 - 

1,251

 - 

 - 

-

 - 


1,251

 Other intangible assets

 345 

 238 

 19 

602

 121 

 1 

 122 

-


724

Depreciation  

 110 

 722 

 388 

1,220

 1,987 

 220 

 2,207 

-


3,427

Amortisation of intangible assets

 188 

 109 

 48 

345

 42 

 12 

 54 

-


399


3    segmental analysis (continued)

Analysis by geographical segment 2008/09


United

Rest of

Europe - 

Rest of



Kingdom

Europe - EU

Non EU

World

Total


£'000

£'000

£'000

£'000

£'000







Sales to external customers

91,317

9,888

287

7,596

109,088







Segment assets

71,445

-

-

25

71,470

Unallocated assets





3,722






75,192







Capital and acquisition expenditure:






Property, plant and equipment

1,808

-

-

-

1,808

Goodwill

-

-

-

-

-

Other intangible assets

656

-

-

-

656


Analysis by geographical segment 2007/08


United

Rest of

Europe - 

Rest of



Kingdom

Europe - EU

Non EU

World

Total


£'000

£'000

£'000

£'000

£'000







Sales to external customers

103,509

12,790

2,144

7,365

125,808







Segment assets

91,786

-

-

73

91,859

Unallocated assets





3,546






95,405







Capital and acquisition expenditure:






Property, plant and equipment

2,170

-

-

-

2,170

Goodwill

1,251

-

-

-

1,251

Other intangible assets

724

-

-

-

724


Segment revenue by geographical segment represents revenue from external customers based upon the geographical location of the customer. The analyses of segment assets and capital expenditure are based upon location of the assets.


4    non-recurring items and amortisation

Non-recurring items and amortisation comprise:


2008/09

2007/08


£'000

£'000




Cost of sales - Impairment charges 

2,176

-

Brand amortisation and fair value adjustments

252

428

Profit on disposal of property

-

(1,240)

Restructuring costs

940

465


3,368

(347)


During the year an impairment review was performed at Alumasc Precision Components as the business reported an operating loss in the year. The result of the reviews led to a write down in property, plant and equipment of £2,096,000. For the purpose of impairment testing, the recoverable amount of the cash generating unit was based on value in use calculations. The value in use was derived from discounted management cash flow forecasts for the business, based on budgets and strategic plans covering a five year period. A pre-tax discount rate of 11.6% (2008: 10%) was used. The growth rate used to extrapolate the cash flows beyond this period is 1% (2008: 1%). A 1% change in the discount rate used would result in approximately a £1m change in the value of the impairment. A 0.5% change in the growth rate used to extrapolate the cash flows beyond the five year period would result in the impairment changing by £300,000.


In addition an impairment charge of £80,000 was recognised in connection with plant and machinery relating to the Armaseam brand within the Building Products division.


4    non-recurring items and amortisation (continued)

Restructuring costs relate to redundancy costs in both 2008/09 and 2007/08.  


In the prior year, the group made a profit of £1,240,000 disposing of properties in Borehamwood and Cannock. The profit on the Cannock freehold property of £250,000 arose from the contribution of the property into the group's defined benefit pension schemes at market value.


5    Tax expense

  • Tax on profit on ordinary activities

Tax charged in the income statement


2008/09

2007/08


£'000

£'000

Current tax:



UK corporation tax

338

1,581

Amounts overprovided in previous years

(282)

-

Total current tax

56

1,581




Deferred tax:



Origination and reversal of temporary differences

567

1,125

Tax under/(over) provided in previous years

121

(50)

Total deferred tax

688

1,075




Tax charge in the income statement

744

2,656





Tax relating to items charged/(credited) to equity



Deferred tax:



Actuarial gains/(losses) on pension schemes

1,103

(1,836)

Cash flow hedge

(129)

-

Tax charged/(credited) in the statement of recognised income and expense

974

(1,836)


  • Reconciliation of the total tax charge


The total tax rate in the income statement of 41.2% is higher than (2007/08: 26.6% was less than) the standard rate of corporation tax in the UK of 28% (2007/08: 29.5%). The differences are reconciled below:



2008/09

2007/08


£'000

£'000




Profit before taxation

1,804

9,989




Current tax at the UK standard rate of 

 28% (2007/08: 29.5%)

505

2,947

Expenses not deductible for tax purposes

125

186

Tax effect of share options

(7)

-

Deferred tax arising on abolition of Industrial Buildings Allowances

282

-

Profit on disposal of property

-

(366)

Tax overprovided in previous years - corporation tax

(282)

-

Tax under/(over)provided in previous years - deferred tax

121

(50)

Rate change adjustment

-

(61)


744

2,656

 

 

5.   Tax expense (continued)

Unrecognised tax losses


The group has agreed tax capital losses in the UK amounting to £21million (2008: £21million) that relate to prior years, and under current legislation these losses are available for offset against future chargeable gains. A deferred tax asset has not been recognised in respect of these losses, as they do not meet the criteria for recognition.

Deferred tax on revaluation gains on land and buildings that are available for offset against capital losses amount to £1 million (2008 restated: £1 million). After this offset net capital losses carried forward amount to £20 million (2008 restated: £20 million). The capital losses are able to carried forward indefinitely.


    • Deferred tax


A reconciliation of the movement in deferred tax during the year is as follows:



Accelerated

Short term







capital

temporary







allowances

differences

Brands

Losses

Hedging

Total

Pension


£'000

£'000

£'000

£'000

£'000

£'000

£'000









At 1 July 2008

1,481

(187)

997

-

-

2,291

(5,549)









(Credited)/charged to the income statement - current year

(490)

179

(67)

-

-

(378)

945

Charged/(credited) to the income statement - prior year

218

32

-

(129)

-

121

-

(Credited)/charged to equity

-

-

-

-

(129)

(129)

1,103









At 30 June 2009

1,209

24

930

(129)

(129)

1,905

(3,501)


Deferred tax assets and liabilities are presented as non-current in the consolidated balance sheet. Deferred tax assets have been recognised where it is probable that they will be recovered. Deferred tax assets of £5.9 million (2008: £5.9million) have not been recognised in respect of tax capital losses of £21million (2008: £21million).

 

6.  Dividends


2008/09

2007/08


£'000

£'000




Interim dividend for 2009 of 3.25p paid on 7 April 2009  

1,170

-

Final dividend for 2008 of 6.75p paid on 29 October 2008

2,437

-

Interim dividend for 2008 of 3.25p paid on 7 April 2008 

-

1,172

Final dividend for 2007 of 6.6p paid on 31 October 2007

-

2,378


3,607

3,550




A final dividend per equity share of 6.75p has been proposed for 2009, payable on 30 October 2009. In accordance with IFRS accounting requirements this dividend has not been accrued in these consolidated financial statements.

 

7.   Earnings per share

Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the period, after allowing for the exercise of outstanding share options. The following sets out the income and share data used in the basic and diluted earnings per share calculations:



2008/09

2007/08


£'000

£'000




Net profit attributable to equity holders of the parent

1,052

7,315





000s

000s




Basic weighted average number of shares

36,023

36,063

Dilutive potential ordinary shares - employee share options

-

63


36,023

36,126


Reconciliation to underlying earnings per share:



2008/09

2007/08


£'000

£'000




Profit before taxation

1,804

9,989

less profit on property sale

-

(1,240)

add back acquisition accounting adjustments and brand amortisation

252

428

add back restructuring costs

940

465

add back impairment charges

2,176

-


5,172

9,642




Tax at underlying group tax rate of 30.4% (2007/08: 31.4%)

(1,572)

(3,032)




Underlying earnings

3,600

6,610




Underlying earnings per share

10.0p

18.3p



8    Reconciliation of net movements in equity


Share

Share


Revaluation

Capital reserve - 


Hedging

Foreign currency

Profit 

and loss

Minority

Total


capital

premium

reserve

own shares

reserve

reserve

reserve

interest

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











At 1 July 2007,

4,479

-

1,251

(133)

100

(6)

25,701

38

31,430

New shares issued

38

383

-

-

-

-

-

-

421

Excess depreciation on previously revalued assets

-

-

(150)

-

-

-

150

-

-

Net loss on cash flow hedges

-

-

-

-

(60)

-

-

-

(60)

Vesting of own shares

-

-

-

27

-

-

(27)

-

-

Exchange differences on retranslation of foreign operations

-

-

-

-

-

7

-

-

7

Actuarial loss on defined benefit pensions net of tax

-

-

-

-

-

-

(4,721)

-

(4,721)

Dividends

-

-

-

-

-

-

(3,550)

(34)

(3,584)

Profit for the period

-

-

-

-

-

-

7,315

18

7,333

Share based payments

-

-

-

-

-

-

8

-

8

Tax on share options

-

-

-

-

-

-

75

-

75

At 1 July 2008

4,517

383

1,101

(106)

40

1

24,951

22

30,909











Share premium costs refund

-

69

-

-

-

-

-

-

69

Excess depreciation on previously revalued assets

-

-

(150)

-

-

-

150

-

-

Net loss on cash flow hedges

-

-

-

-

(501)

-

-

-

(501)

Vesting of own shares

-

-

-

52

-

-

(52)

-

-

Acquisition of own shares

-

-

-

(124)

-

-

-

-

(124)

Exchange differences on retranslation of foreign operations

-

-

-

-

-

36

-

27

63

Actuarial gain on defined benefit pensions net of tax

-

-

-

-

-

-

2,835

-

2,835

Dividends

-

-

-

-

-

-

(3,607)

(24)

(3,631)

Profit for the period

-

-

-

-

-

-

1,052

8

1,060

Share based payments

-

-

-

-

-

-

20

-

20

Tax on derivative financial liability

-

-

-

-

129

-

-

-

129

At 30 June 2009

4,517

452

951

(178)

(332)

37

25,349

33

30,829


8    Reconciliation of net movements in equity (continued)

Share capital and share premium

The balances classified as share capital and share premium are the proceeds of the nominal value and premium value respectively on issue of the company's equity share capital net of issue costs. During the year there was a refund of VAT on previously incurred share issue costs of £69,000.

Capital reserve - own shares
The capital reserve - own shares relates to 135,171 (2008: 68,526) ordinary own shares held by the company. The market value of shares at 30 June 2009 was £120,000 (2008: £121,000). These are held to help satisfy the exercise of awards under the company's Long Term Incentive Plans. A Trust holds the shares in its name and shares are awarded to employees on request by the company. The company bears the expenses of the Trust.

Hedging reserve
This reserve records the post-tax portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

Foreign currency reserve
This foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Revaluation reserve
This reserve was created when, under IFRS transitional provisions, the group elected to bring in previous valuations of freehold and long leasehold land and buildings at a valuation frozen under FRS 15. The £150,000 (2008: £150,000) movement between the revaluation reserve and profit and loss reserve relates to the excess depreciation on the revaluation uplift realised during the period.

9    Related party disclosure    

The group's principal subsidiaries are listed below:


Principal subsidiaries

Principal activity

Country of incorporation

% of ordinary shares

 and votes held




2009

2008











Alumasc Precision Limited

Engineering products

England

100

100

Alumasc Exterior 

Building Products Limited

Building products

England

100

100

Alumasc Limited

Engineering and building products

England

100

100

Levolux Limited and 

Levolux AT Limited

Building products

England

100

100

Blackdown Horticultural 

Consultants Limited

Building products

England

100

100

Elkington China Limited

Building products

Hong Kong

70

70


Terms and conditions of transactions with related parties

Sales to and purchases from related parties are made at arms-length market prices. Outstanding balances at the year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables.


Transactions with other related parties

Key management personnel are determined as the Directors of The Alumasc Group plc. There were no transactions with Directors during the year.



10    Segmental allocation of major applications and brands

Sustainable building products -

Energy management

Sustainable building products -

Energy management



Solar Shading

Engineered Access Covers

Levolux

Elkington Gatic



Insulation

Roofing & Waterproofing

MR Facades

Derbigum


Hydrotech

Green Roofs

Armaseam

Blackdown Horticultural Consultants 


Zinco

Rainwater & Drainage


Gatic Slotdrain

Roofing Serivices Support Systems

Alumasc

Roof-Pro

Harmer


SML



Premium building products

Engineering products



Interior Casing Systems

Precision Engineering

Pendock

Alumasc Precision Components


Dyson Diecastings

Housebuilding Products


Timloc

Drinks Dispensing


Alumasc Dispense

Scaffolding


Scaffold and Construction Products








This information is provided by RNS
The company news service from the London Stock Exchange
 
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