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Alumasc Group Plc (ALU)

  Print          Annual reports

Tuesday 10 September, 2002

Alumasc Group Plc

Final Results

Alumasc Group PLC
10 September 2002


  • Alumasc, the high specification Engineering and Building Products Group,
    announces a strong recovery from the depressed performance of the previous
    year arising from turnover growth in both divisions, improvements in
    operational efficiency and the absence of some one-off external factors.

  • Pre-tax profit at £7.5m compared with 2001's £3.0m on a reported basis and
    £4.1 m on a continuing basis, on turnover up 7.9% at £117.6 m.

  • Earnings per share increased by 80% to 14.9p from 2001's 8.3p on a
    continuing basis. Dividends per share totalling an unchanged 8.5p are
    proposed, with dividend cover increased to 1.8 times.

  • Net debt fell to £1.9 m, representing gearing of 5.4%, from £4.1 m,
    despite the turnover increase and capital expenditure of £6.3 m, £2.5 m
    above depreciation.

  • Engineering Products Division increased its profit to £4.3 m from £3.3 m
    on turnover up from £75.5 m to £82.7 m. Two of the precision component
    companies - Alumasc Precision and Dyson - increased their profits, and the
    two brewery related companies - Alumasc Grundy and Alumasc Dispense -
    performed particularly well.

  • The Building Products Division moved strongly ahead, with all three
    businesses - Alumasc Exterior Building Products, Alumasc Interior Building
    Products and Alumasc Construction Products - producing significantly
    improved results.  Divisional profit increased to £3.8 m from £1.7 m on
    turnover increased to £34.9m from £33.4 m

  • Paul Hooper, Group Managing Director since April 2001, stated "It is
    particularly encouraging to see the strength of the final quarter's
    performance where the full benefits of the actions taken earlier in the year
    are clearly seen. Continued firm action will help to counter the inevitable
    increases in externally driven costs such as pensions and insurance."

  • John McCall, Chairman, concluded "The recovery achieved in the past year
    places Alumasc in a strong position to build on our core strengths in
    premium engineering and building products."


A presentation to brokers' analysts and private client investment advisers will
be held at 11:00am today at Bankside Consultants, 123 Cannon Street, London,


The Alumasc Group plc                                           01536-383 844
 John McCall (Chairman)
 Paul Hooper (Group Managing Director)

Williams de Broe Plc                                            020-7588 7511
Clive Carver

Bankside Consultants Limited
 Charles Ponsonby                                               020-7444 4166

                              CHAIRMAN'S STATEMENT


I am pleased to report a strong recovery from the depressed performance of the
previous year.  The Group's profit before tax of £7.5 million (2001: £3.0
million) was £4.5 million ahead, with profits on the continuing activities ahead
by £3.4 million (85%) on turnover up £8.7 million (7.9%) at £117.6 million.

The increase in profit arises from turnover growth in both Engineering Products
and Building Products divisions, improvements in operational efficiency, and the
absence of some one-off external factors which depressed the previous year's

Earnings per share of 14.9p (2001: 8.3p from continuing activities) benefited
from the increased profit and the share buy-back activity of the previous year
but were reduced by the higher deferred tax charge arising under FRS19.


The directors are recommending an unchanged final dividend of 6.05p per share,
making a total of 8.5p per share for the year (2001: 8.5p) and a recovery to 1.8
times earnings cover.


Operating profit grew by 80% to £7.9 million, due to robust action to reduce the
cost base of our Building Products business and a recovery in activity among the
Engineering Division's brewery customers.  The increase in activity in the
Precision Components business should have added to this growth but was hit by
cost overruns in one of its three units, brought about by the high level of new
business introductions at a time of physical reconstruction.  Action has been
taken to improve this performance in line with the remainder of the division.

Tight control of working capital and a carefully phased investment programme
helped to reduce Group borrowings to £1.9 million at the year end, representing
gearing of 5.4%.


The Group continued to invest in the expansion of its Precision Components
operations, where the prospects for further growth remain encouraging.  The
disappointing profit performance of the Copal gravity diecasting unit, while
unconnected to the investment programme in high-pressure technology, led
nevertheless to a moderated level of spend in the year.  The Group's
undiminished commitment to development in this area will continue to be tempered
by the pace of its success in growing profit as well as output.


There has been considerable change in your Company's Board.  Keith Walden, an
executive director since the Company's foundation in 1986, retired in July and I
thank him on your behalf for 38 years of outstanding service to Alumasc. Debbie
Howard and Michael Reid have today retired as non-executive directors and I
thank them also for their contribution during a period of considerable change.
Richard Saville became a non-executive director in January 2002.  Your Board now
numbers eight, including three independent non-executives.


The advances of 2002 have been achieved in large part through the actions of our
management and employees.  We are determined to see this trend continue despite
the uncertain environment in which we operate.  Subject to further progress, it
remains the Board's intention to build on our core strengths in premium
engineering and building products.

John McCall
Chairman                                                       10 September 2002

                        GROUP MANAGING DIRECTOR'S REVIEW

I am pleased to be able to report a strong recovery in the Group's operations
during the year. Both the Engineering Products and Building Products divisions'
improved their performances against the prior year, resulting in an operating
profit of £7.9 million, an increase of £3.5 million (80%) on continuing
operations on turnover of £117.6 million (2001 : £109.0 million).

The recovery that took place was assisted by the 7.9% sales increase for the
Group's continuing businesses with each division and, in particular, the
precision engineering business, moving ahead. The setbacks of the prior year,
which had some impact on sales, did not recur.

The Business Improvement Plans which were carried out at the start of the year
created leaner, more simplified and responsive businesses, especially in the
Industrial and Building Product companies. Several companies were able to drive
significant increases in sales whilst simultaneously incurring lower costs than
the previous year. Efficiencies took place in both manufacturing and sales/
administration overhead areas. The Group's total headcount reduced despite the
increase in sales.

In addition to the strong focus on driving costs out of the businesses, there
has also been an emphasis on improving the service given to customers. Each
company's delivery and quality performances are being monitored and many
initiatives continue to increase customer satisfaction. Such initiatives are
being supported by the increasing use of market research to gain valuable
insights into the market place perception of each business and to allow
benchmarking to take place against competition.

Despite the increase in sales and the higher, phased investment in the Precision
Component businesses during the year, good control of working capital and
increased profits reduced the Group's borrowings to £1.9 million (5.4% gearing)
at the year end.

It is particularly encouraging to see the strength of the final quarter's
performance where the full benefits of the actions taken earlier in the year
were clearly seen.


The Engineering Products Division (comprising Precision Components and
Industrial Products) increased its profit by £1.0 million (31%) to £4.3 million
on sales which were £7.2 million (10%) ahead of the prior year at £82.7 million
on a continuing activities basis.

Alumasc Precision

The investment programme in new technology, improved efficiencies and sales
growth enabled two of the three Precision Components' businesses to grow their
profits in the year. However, the operational difficulties encountered,
particularly at Copal, reduced the profit by £0.4 million (-17%), versus the
prior year, to £1.9 million on turnover of £37.9 million (2001 : £32.0 million).

Increased activity for the Precision Component businesses resulted in a £5.9
million (19%) sales increase. Driving such a level of activity was the uplift in
activity from MG Rover and Land Rover resulting from the return to normal
production capacity at the MG Rover Longbridge plant, new product launches and
the entry into new markets, such as the Freelander launch into North America.
Sales of precision components to BMW for the new and innovative Valvetronic
engine, which powers certain models of the 3 Series vehicle, also exceeded
initial expectations. BMW's experience with the Group has led to the supply of
two components for the new Mini Cooper S which has been launched into Europe and
North America. The full volume from this activity will start to be seen next
year. In addition, the BMW customer relationship led to the supply of a Swingarm
for the newly launched, belt-driven, BMW F650CS motorcycle.

The substantially increased activity across the division has not been without
its challenges with the recovery in demand from established customers, combined
with increasing demand from new customers, creating some cost overruns
particularly on project start ups. The gravity diecasting component plant,
Copal, was particularly affected during a period of reconstruction. Robust
action was taken in the second half year, including management changes to
address these issues. The benefits of this action began to be seen in the final
quarter and further actions are being taken to bring this company back into

Sales outside the automotive area were buoyant and it is pleasing to report
increasing activity through companies such as Perkins Engines where our
Company's reputation will lead to the start-up of precision component sales to
its parent company, Caterpillar, in the USA. Other new customers have included
Filtronic where tight tolerance precision components for electronics
applications have given a lower cost solution. Business also grew with Philips
Lighting's Luminaires Division and Dyson Diecastings received this customer's
supplier of the year award in 2001. The precision component businesses will
continue to develop into non-automotive markets.

Industrial Products

The industrial products companies increased their profit by £1.4 million (148%)
to £2.4 million on sales which increased by £1.3 million (3%) to £44.8 million.

The two brewery equipment companies achieved much improved results. Alumasc
Grundy supplied greater volumes of containers, partly linked to the stability
brought about by Interbrew's divestment of Carling Brewers to Coors Brewery
Company.  However, this consolidation is likely to reduce demand substantially
for these products in the future. Alumasc Dispense received significantly
increased orders for its branded dispense products from Coors and other
customers with well known brands such as Carlsberg and Kronenbourg. This growth
was achieved whilst holding overheads at the prior year levels.

Brock Metals maintained its strong performance despite a weakening industrial
environment for its diecasting alloys which led to intense competitive activity
towards the year end.

Bissell undertook a significant restructure which strengthened its final quarter
results, bringing the Company back towards breakeven. This followed the
increasing challenge presented by lower cost imported spring products.


The Building Products Division increased its profit by £2.0 million (118%) to
£3.7 million on sales which were £1.4 million (4%) ahead of the prior year at
£34.9 million. All three Building Products businesses delivered significantly
improved results.

Alumasc Exterior Building Products

Alumasc Exterior Building Products reduced its cost base aggressively whilst
growing sales. Its Business Improvement Plan resulted in the closure of three
satellite manufacturing operations. Sales were driven forward with a focus on
the core products of this business. One project success of note was the supply
of a premium roofing system for the new BMW-owned Rolls Royce factory built at
Goodwood. This features a 40,000 square metre environmentally friendly green
roof, one of the largest in Europe, blending harmoniously into the local

Alumasc Exterior Building Products has placed much emphasis on the "On Time In
Full (OTIF)" delivery performance given to customers. Market research carried
out with current and potential customers has also helped to identify ways of
improving customer service.

Alumasc Interior Building Products

Alumasc Interior Building Products had a very good year following restructuring
activity combined with new marketing initiatives that increased sales.

After a detailed analysis, manufacturing efficiencies and product profitability
actions helped to grow the gross margin, and overhead costs were held at the
prior year's level despite higher sales. Included within several new product and
market launches was the roll-out of a new range of Pendock-branded column
casings supported by a highly commended, Leonardo designed, website
( incorporating the facility to download CAD drawings.

Alumasc Construction Products

Restructuring actions combined with new marketing activity produced an excellent
result on increasing sales at Alumasc Construction Products. The business
succeeded in improving its gross margin and reducing its overheads through
product re-engineering and other actions taken from its Business Improvement

An opportunity was identified to broaden the market for Slotdrain during the
year and a successful marketing campaign delivered a 59% sales increase for this

Elkington China had a successful year and was closely involved in the Hong Kong
Terminal 9 Container project, some of the benefits of which will also be seen in
the new financial year.

Scaffold and Construction Products recovered in the second half year from the
earlier impact of the receivership of its largest customer. It was also helped
by the further sourcing of products from overseas.


Leonardo re-focused itself as a web design company at the start of the year. It
has produced several, favourably commented upon, web designs for both Alumasc
and external clients. It moved into a small profit in the final quarter and
achieved a substantial improvement on its prior year loss of £0.6 million (which
included a non-recurring £0.3 million goodwill write-off).


There continue to be good opportunities to improve the profitability of all the
Group's companies through more efficiency improvements combined with driving
further increases in sales. Success is leading to further success with the
increasing portfolio of well known customers and strong brands helping to
attract a similar profile of new business.

Whilst consolidation in the Brewing industry is likely to reduce demand for our
container products, there exist good prospects for further progress in the core
Precision Components and Building Products businesses.

Paul Hooper
Group Managing Director                                        10 September 2002

                                FINANCIAL REVIEW


Group profit before tax rose from £3.0 million to £7.5 million, and profit
before tax on continuing activities rose 85% to £7.5 million (2001: £4.1
million) on turnover up 7.9% to £117.6 million (2001: £109.0 million).  The
strong profit recovery was driven by the impact of the Business Improvement
Plans carried through at the beginning of the year, and the non-recurrence of
specific external factors which impacted profits in the previous year.  In
particular, the Business Improvement Plans led to a sales increase,
manufacturing efficiencies and cost decreases which produced an overall £2.7
million increase in gross margins and a £0.8 million decrease in overheads.


Earnings per share were 14.9p (2001: earnings from continuing activities 8.3p),
up 80% on the previous year.

The effective tax rate increased to 30.1% (2001: tax rate on continuing
activities 26.8%). The rate was reduced by 1.8 percentage points (2001: 0.4
percentage points) because of tax overprovided in previous years, and increased
by 5.1 percentage points because of the implementation of FRS19 (deferred tax
accounting).  The effect of FRS19 on the previous year was insignificant; thus
neither net assets at 30 June 2001 nor profit after tax for the year to 30 June
2001 have been adjusted.


Shareholders' funds increased to £34.5 million (2001: £32.3 million) as a result
of the retention of £2.3 million of earnings after tax and dividend.


The Group is strongly cash generative, with cash inflow from operating
activities of £12.3 million (2001: £6.3 million). The increase derives from
increased profits and improved working capital controls despite the increased

Net borrowings fell to £1.9 million (2001: £4.1 million), improving gearing to
5.4 % (2001: 12.6%) despite capital expenditure of £6.3 million (2001: £5.2
million), £2.5 million higher than depreciation.

Interest costs increased to £0.5 million (2001: £0.3 million) mainly because of
the full year effect of the £5.8 million spent on acquiring shares for
cancellation in the previous year.  The net interest cost remains higher than
might be expected from reported net borrowings, illustrating the use of the
overdraft facility to finance the normal monthly trading cycle.


In view of the historically low interest rates available during the year, the
Group addressed the interest rate risk by taking up £3.9 million of fixed rate
asset-backed borrowing repayable over five years at an average rate of 5.9%.

The Group has not compromised the completeness of its insurance cover despite
the sharp increase in costs it suffered during the year (in common with UK
industry generally). Insurance costs will be further increased on a full year
basis this year.


The Group introduced FRS19 Deferred Tax Accounting during the year.


An actuarial report as at 6 April 2001 on one of the Group's two final salary
pension schemes (both closed to new members since October 1999) has indicated a
worsening of the scheme's deficit to £4.9 million; related provisions of £1.3
million are held in the Group's accounts at 30 June 2002. The increased deficit
led to an increase in costs in the year which, coupled with the National
Insurance increases effective from April 2003, will further increase employment
costs in the current year. FRS17 Transitional Pension Disclosures indicates a
substantial change in the position (as defined by the FRS17 conventions) since
the previous year following the deterioration in the stock market at 30 June
2002 and an increase in the actuarial value of liabilities, illustrating the
volatility which can be expected from the new standard.  Full implementation of
FRS17 is expected to be deferred by the Accounting Standards Board.


Overall the Group has significantly strengthened its position as a result of
focused management action during the year.

David Sowerby
Group Finance Director                                         10 September 2002

                        for the year ended 30 June 2002

                                    Notes                2002                           2001
                                                                 Continuing     Discontinued
                                                                 activities       activities       Total
                                                         £000          £000             £000        £000

Turnover                                1             117,647       108,987            7,607     116,594
Cost of sales                                          88,810        82,861            6,644      89,505
                                                     ________        ______          _______      ______
Gross profit                                           28,837        26,126              963      27,089

Selling and distribution                                8,776         9,103              559       9,662
Administrative expenses                                12,184        12,651              886      13,537
                                                     ________        ______          _______      ______
Operating profit/(loss)                                 7,877         4,372            (482)       3,890

Share of operating profit in                               60             8                -           8
Loss on sale of business
activities                                                  -             -            (562)       (562)
Interest receivable                                        48            72                -          72
Interest payable                                        (508)         (400)                -       (400)
                                                      _______        ______         ________      ______
Profit/(loss) on ordinary
before taxation                                         7,477         4,052          (1,044)       3,008
Taxation charge/(credit)                                2,254         1,085            (157)         928
                                                     ________        ______         ________      ______
Profit/(loss) on ordinary
activities after taxation
                                                        5,223         2,967            (887)       2,080
Equity minority interest                                 (24)            65                -          65
                                                     ________        ______          _______      ______
Profit/(loss) for the financial
attributable to shareholders                            5,199         3,032            (887)       2,145
Dividends                                               2,948         2,948                -       2,948
                                                     ________        ______         ________      ______
Retained profit/(loss) for
financial year                                          2,251            84            (887)       (803)
                                                     ________        ______         ________      ______
Earnings per share and                  2               14.9p          8.3p           (2.5p)        5.8p
diluted earnings per share
                                                     ________        ______         ________      ______


There are no recognised gains or losses in the year ended 30 June 2002 other
than the profits attributable to shareholders of the Company of £5,199,000
(2001:  £2,145,000).

                           CONSOLIDATED BALANCE SHEET
                                at 30 June 2002

                                                                                 2002              2001
                                                                                 £000              £000
Fixed assets
Intangible assets                                                                  66                74
Tangible assets                                                                31,425            29,120
Investments                                                                       468               432
                                                                            _________          ________
                                                                               31,959            29,626
                                                                            _________          ________

Current assets
Stocks                                                                         11,997            10,896
Debtors                                                                        21,939            23,579
Cash at bank and in hand                                                        2,231                 -
                                                                             ________          ________
                                                                               36,167            34,475
                                                                             ________          ________

Creditors: amounts falling due within one year
Trade and other creditors                                                      24,572            25,893
Taxation                                                                        1,410               495
Proposed dividend                                                               2,098             2,098
                                                                             ________           _______
                                                                               28,080            28,486
                                                                             ________           _______
Net current assets                                                              8,087             5,989
                                                                             ________           _______

Total assets less current liabilities                                          40,046            35,615
Creditors: amounts falling due after more than one year                         4,831             2,794
Provisions for liabilities and charges                                            598               451
Equity minority interest                                                          112               114
                                                                             ________          ________
Net assets                                                                     34,505            32,256
                                                                             ________          ________

Capital and reserves
Called up share capital                                                         4,352             4,352
Share premium                                                                  26,907            26,907
Revaluation reserve                                                             2,021             2,168
Capital redemption reserve                                                        693               693
Profit and loss account                                                           532           (1,864)
                                                                              _______           _______
Equity shareholders' funds                                                     34,505            32,256
                                                                              _______           _______

                        for the year ended 30 June 2002

                                                                             2002             2001
                                                                             £000             £000
                                                                         ________         ________
Net cash inflow from operating activities                                  12,271            6,307
                                                                         ________         ________

Returns on investments and servicing of finance
Interest received                                                              48               72
Interest paid                                                               (432)            (400)
Interest element of lease/ hire purchase payments                            (76)                -
                                                                            _____            _____
Net cash outflow from returns on investments and servicing of finance       (460)            (328)
                                                                            _____            _____

UK corporation tax paid                                                     (938)          (2,325)
                                                                           ______          _______

Capital expenditure and financial investment
Purchase of tangible fixed assets                                         (4,487)          (5,052)
Proceeds from sale of tangible fixed assets                                   226              547
                                                                          _______          _______
                                                                          (4,261)          (4,505)
                                                                          _______          _______

Acquisitions and disposals
Proceeds/ deferred consideration from sale of business activities             379            1,220
Purchase of subsidiary undertaking                                              -              (6)
Purchase of business activities                                                 -            (314)
                                                                           ______           ______
                                                                              379              900
                                                                           ______           ______

Equity dividends paid                                                     (2,948)          (3,208)
                                                                          _______          _______

Cash inflow/(outflow) before use of liquid resources and                    4,043          (3,159)
                                                                           ______          _______

Repurchase of ordinary share capital                                            -          (5,752)
Repayment of amounts borrowed                                               (116)            (784)
Increase in medium term secured borrowings and lease/hire                   2,054                -
purchase financing
                                                                          _______          _______
                                                                            1,938          (6,536)
                                                                          _______          _______

Increase/(decrease) in cash in the year                                     5,981          (9,695)
                                                                       ____________    ___________



Turnover comprises the invoice value of goods and services supplied by the Group
exclusive of VAT and intra-group transactions.

Turnover and profit/(loss) on ordinary activities before taxation attributable
to each of the classes of activity of the Group are as follows:

Segmental analysis

                                2002                                 2001
                                                   Continuing  Continuing
                                                   activities  activities     Total    Total
                            Turnover   Profit        turnover      profit  turnover   profit
                                £000     £000            £000        £000      £000     £000

Engineering products          82,663    4,261          75,466       3,252    81,202    3,332
Building products             34,862    3,692          33,442       1,690    35,313    1,128
Leonardo                         122     (76)              79       (570)        79    (570)
                             _______    _____         _______      ______   _______    _____
                             117,647    7,877         108,987       4,372   116,594    3,890
Loss on sale of business
activities                                  -                           -              (562)
Share of operating profit
in associates                              60                           8                  8
Net interest                            (460)                       (328)              (328)
                                        _____                       _____              _____
                                        7,477                       4,052              3,008
                                        _____                       _____           _____

The Leonardo loss for the prior year includes an amount of £318,000 relating to
the directors' assessment of the impairment of goodwill.

Geographical analysis

All business operations are located in the United Kingdom and all turnover is
generated there with the exception of Elkington China Limited, based in Hong
Kong, whose turnover is not significant.

Turnover by destination is as follows:
                                                                      2002           2001         2001
                                                                               activities        Total
                                                                      £000           £000         £000
United Kingdom                                                     104,416         94,659      101,105
Europe  - EU                                                        10,346         11,514       12,534
- Non EU                                                               746            179          287
Other                                                                2,139          2,635        2,668
                                                                  ________       ________      _______
                                                                   117,647        108,987      116,594
                                                                  ________       ________      _______


     Both the earnings per share and the diluted earnings per share are based on 
     the profit after tax attributable to shareholders for the financial year of
     £5,199,000 (2001: £2,145,000). Earnings per share is based on the weighted
     average number of ordinary shares in issue during the year ended 30 June 
     2002 of 34,816,788 (2001: 36,718,322). Diluted earnings per share is based 
     on the weighted average number of ordinary shares in issue during the year, 
     after allowing for the exercise of outstanding share options, of 34,852,456 
     (2001: 36,718,322).


     The above financial information is derived from the statutory accounts for 
     the years ended 30 June 2002 and 30 June 2001, 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 2001 have been filed with the 
     Registrar of Companies and the accounts for the year ended 30 June 2002 
     will be filed in due course.

     Copies of the Annual Report and Accounts will be posted to all shareholders 
     on 16 September 2002.  Copies will be available from the Company Secretary, 
     The Alumasc Group plc, Burton Latimer, Kettering, Northamptonshire, NN15 
     5JP, and can be viewed on, from 17 September 2002.

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

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