Information  X 
Enter a valid email address

Alumasc Group Plc (ALU)

  Print          Annual reports

Tuesday 11 September, 2001

Alumasc Group Plc

Final Results

Alumasc Group PLC
11 September 2001



                 THE ALUMASC GROUP plc - PRELIMINARY RESULTS



  * Alumasc, the high specification engineering and building products group,
    announces a profit on continuing activities reduced to £4.1 m (2000: £10.0
    m) on a turnover of £109 m (2000: £117 m) in the year ended 30 June 2001,
    reflecting the impact of the sale and restructuring of the Rover Group, of
    appalling weather conditions on UK construction during the winter months,
    and of a one-third decline in demand in the year from UK brewers.



  * Earnings per share from continuing activities were 8.3p (2000: 18.4p)
    and unchanged dividends per share of 8.5p are proposed, reflecting the
    Board's confidence in the efficacy of the recovery actions taken.



  * A modest second half recovery followed a very poor first half reported
    in February.



  * Plans to restore profitability have been put in place under the
    direction of Paul Hooper, who joined Alumasc as Group Managing Director in
    April 2001, following a vigorous review of the cost base, operating
    efficiency and product profitability of each business.



  * A major expansion programme for Alumasc Precision Limited is under way
    aiming to double the company in size over five years through a gradual
    expansion of its world class aluminium and zinc casting and machining
    services in order to supply new products to a growing international
    customer base.



  * During the year, 11% of the Company's opening issued share capital was
    acquired for cancellation and renewal of the Company's authority to
    purchase shares will be sought at the AGM.



  * John McCall, Chairman, stated 'Alumasc begins the new financial year
    having acted to reverse the trading set-backs of the financial year 2001,
    albeit with the prospect of weaker markets in the wake of the downturn in
    the US economy. The Board is determined that these actions will result in
    a continuing recovery in profitability, the restoration of satisfactory
    dividend cover, and a firm base on which to grow the Group's business and
    is encouraged by the strengthening order books with which the new
    financial year has begun.'



  * Paul Hooper added 'The robust end to the last financial year, combined
    with the strength of order books carried into the current year, gives
    encouragement.  Should the UK, in particular, not be severely affected by
    any potential global economic slowdown, the Group should move forward at a
    sustainable rate.'


Enquiries:

The Alumasc Group plc                                              01536-383844
  John McCall (Chairman)
  Paul Hooper (Group Managing Director)

Bankside Consultants Limited
  Charles Ponsonby                                                020-7444 4166



                             CHAIRMAN'S STATEMENT

Following the progress achieved in the previous year, trading in each of the
Group's divisions in the year under review was hit by market factors which are
discussed in the review sections of this report. The events surrounding the
sale and restructuring of the Rover Group and the impact of appalling weather
conditions on UK construction during the winter months are well documented but
the Group was also impacted by a severe decline in demand in the year from UK
brewers. As a result of these factors, the Group's turnover from continuing
operations fell by 7% from £117 million to £109 million with sales to the
brewery sector 33% lower.



The financial results for the year reflect a modest second half recovery from
the very poor first half reported in February, and the cost of actions taken
in consequence to restore the company's performance. The resulting profit
before tax from continuing operations of £4.1 million (2000: £10.0 million),
generating earnings per share of 8.3p (2000: 18.4p), was reduced to £3.0
million, equal to 5.8p earnings per share, by a capital and trading loss from
businesses sold during the year. The Group's cash position has moved from net
cash of £4.8 million at the start of the year to borrowings of £4.1 million at
the year end, equivalent to 13% of shareholders' funds, principally as a
result of active policies on share repurchasing and capital investment during
the year.



Business plans to restore profitability have been put in place following a
vigorous review of the cost base, operational efficiency and product
profitability of each business.



The Board is recommending an unchanged final dividend of 6.05p per share,
making a total of 8.5p per share for the year (2000: 8.5p) covered 1.03 times
by earnings from continuing activities, reflecting its confidence in the
efficacy of the recovery actions taken.



Despite the trading set-backs, Alumasc has made further progress in re-shaping
the Company for future growth following the major restructuring of recent
years. Disposals of two non-core activities - the Crossland pressings business
and the remainder of Corofil Woodall - were concluded during the second half
of the year to enable a greater concentration on the Group's core activities.



The Board has endorsed a major expansion programme for Alumasc Precision
Limited aiming to double the Company in size over five years. This entails a
gradual expansion of its world class aluminium and zinc casting and machining
services in order to supply new products to a growing international customer
base.



Management development is the foundation for our future success and I am
delighted to welcome Paul Hooper and Martin Rhodes to the Board. Paul took up
the new role of Group Managing Director in April 2001, following his
successful earlier career with BTR, Williams and Rexam. Martin joined the
Board in February 2001 and has the principal responsibility for driving the
development of Alumasc Precision in his role of Managing Director of that
division.



Alumasc continued to employ an active policy of share repurchase during the
year, acquiring 11% of the Company's issued share capital for cancellation and
will seek to renew its authority at this year's AGM. The Board seeks to
operate this policy in the best interest of the Group's shareholders, giving
due consideration to such factors as the market for its shares, alternative
investment opportunities available to the Group, business conditions and the
Group's balance sheet ratios.



Alumasc begins the new financial year having acted to reverse the trading
set-backs of 2000/01, albeit with the possibility of weaker markets in the
wake of the downturn in the US economy. The Board is determined that these
actions will result in a continuing recovery in profitability, the restoration
of satisfactory dividend cover, and a firm base on which to grow the Group's
business and is encouraged by the strengthening order books with which the new
financial year has begun.





                       GROUP MANAGING DIRECTOR'S REVIEW

The Group strategy continues to focus on specialised solutions to meet
customer needs. The strong Alumasc brand names, innovative products and
reputation for servicing customers have continued to create growth
opportunities for both the engineering and the building products businesses.
Getting closer to customers, understanding their needs and contributing to
cost-effective solutions, often by being involved at a project's concept
stage, create a supply partner of choice. As customers increasingly look to
reduce the number of their suppliers, Alumasc is well positioned to benefit.



In order to grow successfully, it is, of course, important to operate as
efficiently as possible. Much effort continues to be made to simplify company
structures and to use state of the art manufacturing techniques to ensure that
profitable growth can occur. Operating businesses in a lean manner with a
continued emphasis on lowering overhead costs creates the opportunity to
generate new business. Such a philosophy allows success to breed success. At
the same time, the investment made in equipment and training ensures that the
Group is at the forefront of supplying innovative solutions, encouraging
customers to transfer more of their own in-house work to Alumasc. Creating the
reputation for handling complex manufacturing operations and supplying
complete solutions has been particularly beneficial to Alumasc Precision.



Much of the benefit of the above activity and investment did not manifest
itself during the year under review for a number of reasons, many of which are
believed to be non-recurring.



ENGINEERING PRODUCTS



Precision Components



As previously reported, the start of the financial year suffered a negative
impact with the temporary suspension of production at MG Rover's Longbridge
plant following the reorganisation of this, the division's largest, customer.
Simultaneously, Ford's purchase of Land Rover created some further supply
disruption whilst its Solihull facility was being reorganised in preparation
for the Freelander launch into North America. Although overall sales volumes
recovered in the second half year, it was not until the final couple of months
that these reached the planned recovery levels. In fact, the uplift in these
months was at a higher than anticipated level, albeit not adequate to make up
for the shortfalls from earlier in the year.



The Group continued to support investment into a major expansion programme
aimed at doubling the Precision Components' business in the medium term.
Consistent with this plan has been the investment in additional state of the
art diecasting and CNC machining equipment.



The Precision Components' management team continued to be very successful at
securing new business and the Company has, for instance, commenced supply as
one of only eight UK component suppliers to the newly opened BMW Hams Hall
engine plant. Another separate success has been the nomination for the supply
of components on the new Mini Cooper S, to be built at BMW's Oxford plant. The
benefits of these two new opportunities will accrue mainly in the new
financial year.



Alumasc Precision also won business from new major customers including
Filtronic in the telecommunications sector, and global systems manufacturers
such as Denso Marston and Garretts. Additionally, working with US owned
Perkins Engines has created opportunities at the parent company, Caterpillar,
with shipments anticipated to start in the new financial year.



Attracted by the product and service capability of this division, Giroflex
became a new customer in the year. A precision manufactured component began to
be supplied in the final quarter for inclusion on a range of very high
specification office chairs.



All Alumasc Precision's sites were upgraded in quality certification to QS
9000 during the year and this company will be the first in its field in the UK
to be recommended for registration of TS 16949.



The Company took the opportunity to consolidate one operating unit (Wrexham)
into a larger facility during the earlier part of the year, creating further
efficiency opportunities.



R & A G Crossland was sold in March 2001 and is treated as discontinued in the
Group's accounts. Crossland manufactures metal pressings mainly for the
automotive industry. Its sale has enabled Alumasc to focus on its principal
precision components' business, Alumasc Precision Limited.



Industrial Products



The UK brewing industry represents a major market for this division. Interbrew
S.A.'s acquisition of Bass Brewing during the year, followed by the
disinvestment order made by the Office of Fair Trading and its subsequent
overruling, has led to a long period of uncertainty. In the circumstances,
Alumasc Grundy and Alumasc Dispense (the former A G Standard) took actions to
lower their costs and to innovate successfully into associated products and
services such as display coolers. Several reasonably sized projects, which
were delayed during the year, are expected to materialise in the future. A
major development led to a new generation of taps which will benefit sales in
the new financial year.



Brock saw an overall increase in sale volumes of its zinc and aluminium
alloys, the effects of which balanced the impact of some erosion of margins
arising from both competitive pressures and fuel cost increases. Against a UK
background of over capacity, Brock's ongoing success reflects the efficiency
of its innovative alloying processes and the resolutely commercial approach
taken by its management.



The continued strength of sterling during the year had an impact on Bissell. A
new management team has already begun to reposition the business towards
value-added spring steel products and to improve operational efficiencies.
Customer focus is leading to new opportunities.



BUILDING PRODUCTS



Exterior Building Products



Alumasc Exterior Building Products had a challenging year, not least due to
the exceptionally poor weather conditions that prevailed during the winter
months. In addition, the squeeze on margins created by the competitive
environment which prevailed at such a time of low activity compounded the
situation. Sales increased in the final quarter of the year although at a
lower level than previously expected. Efforts have increasingly been made to
simplify this Company's business structure and to reduce substantially its
overheads. As part of this initiative, it has been announced that two
satellite manufacturing units will be closed. At the same time, the company is
reorganising itself to be more responsive to customers' requirements.



Alumasc Exterior Building Products has a premium product range and strong
brand names. These were strengthened during the year with the acquisition of
Armaseam, an aluminium standing seam roofing business and Alumasc now provides
the most comprehensive range of premium products in the UK for the roofing
sector.



A loss-making satellite operation which remained following the earlier
disposal of Corofil Woodall was sold in May 2001.



Interior Building Products



Alumasc Interior Building Products achieved a reasonable result, having a
strong final quarter following a change in most of its management team. In
addition to the accelerating generation of orders, the new team has set about
reducing overhead costs and implementing operational efficiencies. New
marketing campaigns and the rollout into other geographical and allied
marketplaces have widened the Pendock brand awareness and its unique offering
to satisfy customers' casing and enclosure requirements.



Actions taken in the final quarter of the year both to improve operational
efficiencies and to generate new business should create a strong platform for
2001/02.



Construction Products



Alumasc Construction Products suffered from the delay of several UK projects,
mainly due to the previously mentioned prevailing weather conditions. A lack
of airport work also impacted upon Gatic covers and Slotdrain sales.
Meanwhile, export sales showed encouraging growth and culminated in the award
of a large contract for the Terminal 9 container port at Tsing Yi Island in
Hong Kong. The work will be phased across the next two years. This latest
success adds to the Company's growing list of high profile achievements in the
region that include the supply of products to the new Hong Kong airport at
Chek Lap Kok, the River Trade container terminal at Tuen Mun, new airports in
Macao and Kuala Lumpur as well as additional works associated with the
continued development of Changi airport in Singapore.

A new lightweight aluminium inspection cover was launched under the Halliday
brand name in response to particular Health and Safety and Environmental
regulations.



Scaffold and Construction Products successfully began to source components
from South East Asia to enable it to grow the sales of its expanded range of
support products.



Overall, actions taken in the final quarter to improve operational
efficiencies combined with the strongest order book for several years give
encouragement for 2001/02.



Leonardo



The Group continued to incur development costs in Leonardo, the Group's 70%
owned building products internet search engine.  In addition, the Group has
taken the opportunity to write off the goodwill associated with this
investment.  Leonardo has been relaunched early in the new financial year in a
much faster and more user-friendly format.  This will be accompanied by a
wider range of web services. The Company has targeted to break even in the
second half of the new financial year.



PROSPECTS



In order to improve upon the disappointing performance of the past financial
year, the Group is increasingly focused on improving the structure and
operational efficiency of its individual businesses in combination with an
emphasis on bringing innovative and cost-effective solutions to customers.
Business improvement plans, including analyses of cost structures and product
profitability, have been produced by each operating company. Actions from
these plans have continued into the new financial year. Once targeted growth
has been consistently achieved, consideration will be given to augmenting the
Group's performance with closely targeted bolt-on acquisitions that leverage
market strengths.



The robust end to the last financial year, combined with the strength of order
books carried into the forthcoming year, gives encouragement. Should the UK,
in particular, not be severely affected by any potential global economic
slowdown, the Group should move forward at a sustainable rate.



                               FINANCIAL REVIEW

RESULT



Profits before tax from continuing activities fell to £4.1 million (2000: £
10.0 million) on turnover down from £117 million to £109 million for the
reasons explained in the Group Managing Director's Review, a disappointing
result after the significant improvement of the previous year. The severity of
the turnover decline, and our belief that a part of the decline was likely to
reverse in the current financial year, meant that costs could not be reduced
sufficiently to maintain gross margin levels, resulting in a 2.6% drop in
gross margin.



The Group has carried out a thorough review of its cost base, operational
efficiency and product profitability, and has developed business improvement
plans to support profit increases in the current year.  The result includes £
0.6 million of provisions for redundancy and closure costs of some satellite
operations as the Group acted to reduce costs.



Trading improved steadily during the second half, giving further encouragement
to hopes for better prospects for 2001/02.



EARNINGS AND TAX



Earnings per share from continuing activities were 8.3p (2000: 18.4p) after a
tax charge of  26.8% (2000: 27.3%).



DIVIDEND



The directors are recommending an unchanged final dividend of 6.05p per share
after an unchanged interim dividend bringing the year's total to 8.5p (2000:
8.5p), covered 1.03 times by earnings from continuing activities, an
indication of their confidence in the prospects for a recovery in the current
year. The Board is committed to restoring satisfactory dividend cover.



ACQUISITIONS AND DISPOSALS



Armaseam, an aluminium standing seam roofing business, was acquired during the
year for £0.3 million and incorporated into Alumasc Exterior Building
Products, thus extending its product range.



Two businesses were sold during the second half of the year; proceeds of
disposal amount to £1.8 million, of which £0.6 million was deferred until the
following year. Combined trading losses and losses on disposals amounted to 
£1.0  million (2000: £0.6 million profit) before tax.



BALANCE SHEET



Shareholders' funds decreased to £32.3 million (2000:  £38.8 million)
primarily as a result of the repurchase of 4.3 million shares for cancellation.



NET BORROWINGS AND CASH FLOW



A net cash position of £4.8 million at the beginning of the year moved to net
debt of £4.1 million at the end of the year, as the reduced earnings were
absorbed by tax and dividend payments, leaving £5.8 million of share purchases
and the £1.5 million excess of capital expenditure over depreciation to be
funded by bank borrowings. In addition, shares purchased in June 2000 were
paid for in July 2000, explaining the main part of the £0.9 million (2000: £
3.3 million) increase in working capital;  the £0.8 million cost of those
shares was held as a creditor at the end of the previous year. All remaining
loan notes and fixed borrowing amounting to £0.8 million were redeemed during
the year. Cash flow included £1.2 million (2000: £4.6 million) inflow from
disposal of businesses.



Gearing at 30 June 2001 was 12.6% (2000: nil). The balance sheet position
remains healthy, and the Group intends to utilise its strength to support a
continuing programme of investment during the coming year.



Interest costs increased marginally in the year as the decrease in net cash
exceeded the improvement of the previous year, but the cost benefited from
rate reductions. The net interest cost remains higher than might have been
expected from reported borrowing, illustrating the use of the overdraft
facility to finance the normal monthly trading cycle.



CAPITAL EXPENDITURE



Capital expenditure during the year amounted to £5.1 million (2000: £3.9
million) compared with depreciation of £3.6 million (2000: £4.0 million).
Capital expenditure included £3.1 million (2000: £2.2 million) in respect of
Alumasc Precision where the Group sees excellent opportunities for organic
growth supported by appropriate investment.



PURCHASE OF OWN SHARES



The Group has purchased a total of  4.3 million shares for cancellation during
the year  at an average price of £1.34 per share (2000: 1.2 million shares at
an average price of £1.11 per share). This is the second year in which the
Group has pursued an active share repurchasing programme, and brings the total
repurchases to date to 5.5 million shares equivalent to 13.7% of issued
capital as at 30 June 1999 at a cost of £7.1 million.



APPLICATION OF NEW ACCOUNTING POLICIES



The Group has complied with the transitional disclosure requirements of FRS 17
(retirement benefits).



                     CONSOLIDATED PROFIT AND LOSS ACCOUNT
                       for the year ended 30 June 2001


                                    2001                            2000

                 Continuing Discontinued         Continuing Discontinued
                 activities   activities   Total activities   activities   Total
                       £000         £000    £000       £000         £000    £000

  Turnover          108,987        7,607 116,594    117,463       18,577 136,040
  Cost of sales      82,861        6,644  89,505     86,293       15,007 101,300
  
  Gross profit       26,126          963  27,089     31,170        3,570  34,740

  Selling and         9,103          559   9,662      9,043        1,216  10,259
  distribution
  costs
  
  Administrative     12,651          886  13,537     12,014        2,193  14,207
  expenses
  
  Operating           4,372        (482)   3,890     10,113          161  10,274
  profit/(loss)

  Share of operating      8            -       8        111            -     111
  profit in associates
  
  Loss)/profit on
  sale of business
  activities              -        (562)   (562)          -          426     426
           
  Interest receivable    72            -      72         58            -      58
  
  Interest payable    (400)            -   (400)      (329)            -   (329)
  
  Profit/(loss) on
  ordinary activities
  before taxation     4,052      (1,044)   3,008      9,953          587  10,540
  
  Taxation            1,085        (157)     928      2,714          243   2,957
  charge/(credit)
  
  Profit/(loss) on
  ordinary activities
  after taxation      2,967        (887)   2,080      7,239          344   7,583
 
  Equity                 65            -      65        145            -     145
  minority interest
  
  Profit/(loss) for
  the financial year
  attributable
  to the members
  of the parent       
  company             3,032        (887)   2,145      7,384          344   7,728
  
  Dividends           2,948            -   2,948      3,323            -   3,323
  
  Retained
  (loss)/profit
  for the
  financial year         84        (887)   (803)      4,061          344   4,405
  
  Earnings per
  share and diluted
  earnings per         
  share (see note 1)   8.3p       (2.5p)    5.8p      18.4p         0.9p   19.3p





                 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES



There are no recognised gains or losses in the year ended 30 June 2001 other
than the profits attributable to shareholders of the Company of £2,145,000
(2000:  £7,728,000).




                          CONSOLIDATED BALANCE SHEET
                                at 30 June 2001


                                                                  2001     2000
                                                                  £000     £000
    Fixed assets
    Intangible assets                                               74      356
    Tangible assets                                             29,120   28,490
    Investments                                                    432      451
                                                                29,626   29,297

    Current assets
    Stocks                                                      10,896   11,744
    Debtors                                                     23,579   28,821
    Cash at bank and in hand                                         -    5,623
                                                                34,475   46,188

    Creditors: amounts falling due within one year
    Trade and other creditors                                   25,893   28,527
    Taxation                                                       495    1,899
    Proposed dividend                                            2,098    2,358
                                                                28,486   32,784
    Net current assets                                           5,989   13,404

    Total assets less current liabilities                       35,615   42,701
    Creditors: amounts falling due after more than one year      2,794    3,433
    Provisions for liabilities and charges                         451      228
    Equity minority interest                                       114      224
    Net assets                                                  32,256   38,816

    Capital and reserves
    Called up share capital                                      4,352    4,889
    Share premium                                               26,907   26,907
    Revaluation reserve                                          2,168    2,271
    Capital redemption reserve                                     693      156
    Profit and loss account                                    (1,864)    4,593
    Equity shareholders' funds                                  32,256   38,816






                       CONSOLIDATED CASH FLOW STATEMENT
                       for the year ended 30 June 2001


                                                                   2001    2000
                                                                   £000    £000
   Net cash inflow from operating activities                      6,307  10,213

   Returns on investments and servicing of finance
   Interest received                                                 72      58
   Interest paid                                                  (400)   (328)
   Interest element of finance lease payments                         -     (1)
   Net cash outflow from returns on investments and servicing of  (328)   (271)
   finance

   Taxation
   UK corporation tax paid                                      (2,325) (1,951)

   Capital expenditure and financial investment
   Purchase of tangible fixed assets                            (5,052) (3,919)
   Proceeds from sale of tangible fixed assets                      547     149
   Proceeds from sale of investments                                  -     441
                                                                (4,505) (3,329)

   Acquisitions and disposals
   Proceeds from sale of business activities                      1,220   4,604
   Purchase of subsidiary undertaking                               (6)   (802)
   Net cash acquired with subsidiary undertaking                      -     750
   Purchase of business activities                                (314)       -
                                                                    900   4,552

   Equity dividends paid                                        (3,208) (3,405)

   Cash (outflow)/inflow before use of liquid resources and     (3,159)   5,809
   financing

   Financing
   Issue of ordinary share capital                                    -      18
   Repurchase of ordinary share capital                         (5,752)   (562)
   Repayment of amounts borrowed                                  (784)   (125)
   Capital element of finance lease payments                          -    (38)
                                                                (6,536)   (707)

   (Decrease)/increase in cash in the year                      (9,695)   5,102




                                    NOTES



1                  EARNINGS PER SHARE

Both the earnings per share and the diluted earnings per share are based on
the profit after tax and minority interest for the financial year of £
2,145,000 (2000: £7,728,000) and on the weighted average number of ordinary
shares in issue during the year ended 30 June 2001 of 36,718,322 (2000:
40,008,259).


2                  AUDITED ACCOUNTS

The above financial information is derived from the statutory accounts for the
year ended 30 June 2001 and 30 June 2000, on both of which the auditors have
issued an unqualified opinion.

The information does not constitute statutory accounts as defined in Section
240 of the Companies Act 1985.

The accounts for the year ended 30 June 2000 have been filed with the
Registrar of Companies; those for the year ended 30 June 2001 will be filed in
due course.

Copies of the Annual Report and Accounts will be posted to all shareholders.
Copies will be available from the Company Secretary, The Alumasc Group plc,
Burton Latimer, Northamptonshire NN15 5JP.

a d v e r t i s e m e n t