Information  X 
Enter a valid email address

Heywood Williams Grp (HYWD)

  Print   

Thursday 27 August, 2009

Heywood Williams Grp

Half Year Results

RNS Number : 0589Y
Heywood Williams Group PLC
27 August 2009
 



27 August 2009



Heywood Williams Group PLC


Half Year Results for the Six Months ended 30 June 2009



Results


  • Revenues of £88.5 million (H1 2008: £116.3 million)


  • Operating loss (before amortisation and exceptional items) of £4.6 million (H1 2008: profit of £4.1 million)


  • Adjusted loss before tax, notional interest, amortisation and exceptional items was £6.5 million (H1 2008: profit of £1.9 million)


  • Exceptional items of £1.9 million, primarily in respect of severance and advisory fees associated with bank facility negotiations (H1 2008: nil)


  • Reported loss after tax of £9.5 million (H1 2008: profit of £0.9 million)


  • Working capital reduction of £6.3 million (H1 2008: increase of £4.0 million)


  • Cash outflow of £0.9 million (H1 2008: outflow of £4.6 million before acquisitions)


  • Closing net debt of £47.6 million (H1 2008: £49.8 million)



Robert Barr, Chief Executive, said:


'The Board believes that the Group will continue to face very difficult market conditions, at least for the remainder of 2009. The priorities for the Group remain to manage its balance sheet, maximise cash generation and implement a more appropriate long term capital structure.'


For further information, please contact:





Contacts:

Heywood Williams Group PLC

Robert Barr, Chief Executive

Mike Richards, Finance Director

Tel: 01422 328 850



Financial Dynamics 



Jon Simmons/Sophie Moate    

Tel: 020 7831 3113



 


2009 HALF YEARLY RESULTS


Heywood Williams continues to face very difficult market conditions due to major declines in residential housing markets worldwide. Sales in the first half of 2009 were down 24% compared to the same period in 2008. It is estimated that the residential housing markets that the Group operates in have declined, on average, by 40% since the second half of 2007. The Group has reduced headcount by over 35% in the same period. Net debt at the end of June 2009 was £47.6 million, which was better than expectations and £2.2 million less than June 2008, reflecting the Group's success at reducing working capital.


The key financial results for the first half of 2009 were:


  • Sales decreased by 24% to £88.5 million (2008: £116.3 million)

  • Operating loss (before amortisation and exceptional items) of £4.6 million (2008: profit of £4.1 million)

  • Adjusted loss before tax, notional interest, amortisation and exceptional items was £6.5 million (2008: profit of £1.9 million)

  • Exceptional items of £1.9 million were incurred, primarily in respect of severance and advisory fees associated with bank facility negotiations (2008: nil)

  • Reported loss after tax of £9.5 million (2008: profit of £0.9 million)

  • Working capital reduction of £6.3 million (2008: increase of £4.0 million)

  • Cash outflow of £0.9 million (2008: outflow of £4.6 million before acquisitions)

  • Closing net debt of £47.6 million (2008: £49.8 million)


The Group's key markets are currently exhibiting signs of fragile stability, but at levels 30% to 60% below those experienced in late 2007. Our management teams continue to work hard to outperform their markets. Market share gains have been achieved and significant cost reductions continue to be implemented to align the cost base with the tougher market conditions we are now facing. Headcount across the Group has been reduced by a further 14% since the end of 2008, which is in addition to the 24% reduction made during 2008.  


2009 Half Yearly Review of Operations


Group Overview


Heywood Williams is a solutions provider/specialist distributor of branded building products with a strong portfolio of its own brands.


The Group comprises of two Divisions, namely the Hardware Division which designs, sources and distributes architectural hardware to the UK and selective European markets and the North American Specialist Distribution Division which markets and distributes branded building products primarily to the manufactured housing and recreational vehicle markets. Approximately 80% of the Group's sales of branded building products are to customers in the residential new build and home improvement market segments across North America and Europe. The remainder of the Group's sales are split between door and window hardware for the UK commercial property market and branded building products for the recreational vehicle market in North America.


The Group's priority over the short and medium term is to manage its balance sheet and maximise cash generation in order to weather the current very difficult market conditions and be well positioned for the subsequent market upturn. The two key objectives for 2009 are:


  • To ensure that the Group continues to operate within its banking covenants and facilities, and

  • To implement a more appropriate long term capital structure for the Group.


Hardware Division: UK/Europe


The Hardware Division offers a broad range of hardware design and product solutions for housing developers, architectural ironmongers and window/conservatory fabricators. The Hardware Division has strong market leading positions in the UKIreland, Scandinavia and the Baltic States. The Division has some of the strongest brands in its respective markets, including Mila™, Carlisle Brass™ and Eurospec™.


Sales in the first half of 2009 were £51.0 million (2008: £63.5 million) and the operating profit before amortisation and exceptional items was £0.2 million (2008: £4.7 million). Cash generation has been strong in the first half helped by a working capital reduction of £3.1 million.


Across our European markets, new build and home improvement activities were considerably reduced compared to the first half of 2008, due to the continuing combined effects of consumers being more cautious, coupled with a considerable reduction in the availability of finance. The first quarter of 2009 was particularly difficult. In the UK it is estimated that the overall hardware market fell 25% in the first quarter of 2009 compared to 2008, which in turn was down over 15% compared to 2007. The Irish building products market contracted by over 40% and the market in Scandinavia and the Baltics fell over 50% in the first quarter of 2009 compared to 2008. Fragile stability was the main feature of the markets we serve during the second quarter of 2009, albeit at levels significantly below the corresponding period in 2008.


Against this unprecedented market deterioration, our management teams across the UK and European businesses have worked hard to outperform the market and minimise the impact of the downturn. Market shares have increased, including winning new business with a number of major accounts and significant cost reductions have been implemented to align the cost base with the tougher market conditions we are now facing. Headcount has been reduced by a further 17% since the end of 2008, which is in addition to the 23% reduction made during 2008.


North American SPECIALIST Distribution Division: LaSalle Bristol


In North America, LaSalle Bristol is a leading specialist distributor of branded building products, with a particular focus on supplying floor coverings, plumbing products, lighting and air flow systems predominantly to the manufactured housing and recreational vehicle markets. LaSalle Bristol is the North American market leader in most of the product ranges it supplies.


The manufactured housing and recreational vehicle markets in North America essentially collapsed in the fourth quarter of 2008 and very low levels of market activity were experienced in the first quarter of 2009. In the first half of 2009 wholesale shipments of recreational vehicles declined 55% and manufactured housing production fell by 45% compared to the same period in 2008. The output of both industries hit unprecedented lows in the first quarter. The second quarter of 2009 has shown some modest seasonal improvement in both markets from the extremely low first quarter levels. Currently, the relevant trade associations anticipate that annual shipments in 2009 of both recreational vehicles and manufactured homes will be circa 50% down compared to two years ago.


LaSalle Bristol continues to outperform its competitors in an extremely difficult market. The LaSalle Bristol management team responded swiftly to the further downturn in the market by reducing costs early in the year, including a further headcount reduction of 9% since the end of 2008, which is in addition to the 28% reduction made during 2008. The team has been highly effective in generating cash by reducing stock levels quickly in response to reduced market demand while continuing to provide best in market customer service.


Sales were down 47% to $55.6 million (2008: $104.6 million). In sterling, revenue was down 29% to £37.5 million (2008: £52.8 million). LaSalle Bristol had an operating loss of £4.8 million after the allocation of Group costs compared to a loss of £0.6 million in the same period in 2008.


In January 2009, LaSalle Bristol successfully replaced a one year committed $6 million credit facility with a new three year asset based $10 million facility. This facility is exclusively for the use of LaSalle Bristol and hence the company has ring fenced financing for the next 3 years. The cash management actions taken by the team at LaSalle Bristol have resulted in the company being cash generative in the period despite the earnings loss. LaSalle Bristol was cash positive at the half year and has not yet utilised its new dedicated line of credit.


Group Funding


The Group's priority over the short and medium term is to manage its balance sheet and maximise cash generation in order to weather the current very difficult market conditions and be well positioned for the subsequent market upturn.  


The Group was pleased to announce in February 2009 that it had agreed new medium term funding arrangements for the period to June 2010 with its UK banking syndicate, involving a covenant package more suited to current market conditions. The arrangements with the UK banking syndicate include a requirement to work with the UK banking syndicate to establish a more appropriate long term capital structure for the Group. Under the agreement, a £4.5 million liability is triggered if a satisfactory structure is not implemented by 30 September 2009.  


Work in establishing an appropriate long term capital structure for the Group, which could result in a material dilution for existing holders of equity, is at an advanced stage. Following agreement with the UK banking syndicate, the timing for implementation of a satisfactory structure has been extended to 30 November 2009 to allow for regulatory steps to be completed. In the meantime, both Divisions are operating within the revised covenants and have sufficient facility headroom.


The Group's UK pension scheme deficit is valued at £11.0 million on an IAS 19 accounting basis at 30 June 2009. However, the triennial actuarial valuation, which has been brought forward in parallel with the work on the long term capital structure, has resulted in a deficit of £43.5 million on an actuarial funding basis as at 31 December 2008.


Implementation of the revised capital structure is conditional upon final agreement with the UK banking syndicate, followed by shareholder approval being obtained at a general meeting. Consequently, given that the above conditions currently prevail, this gives rise to uncertainty as to whether the proposed financial restructuring will be satisfactorily completed. However, on the basis that the proposed financial restructuring is satisfactorily completed, which is the Directors' expectation, the Directors are of the opinion that the going concern basis of accounting remains appropriate in preparing the Half Yearly Report.  


Outlook


The Board believes that the Group will continue to face very difficult market conditions, at least for the remainder of 2009. The priorities for the Group remain to manage its balance sheet, maximise cash generation and implement a more appropriate long term capital structure.  


PRINCIPAL RISKS AND UNCERTAINTIES

The Group has inherent operational risks linked to its markets, customers, suppliers, management of working capital, commodity and currency fluctuations; and treasury risks in respect of foreign exchange, funding and liquidity, interest rates and pension funding. These risks were set out in detail on pages 16 and 17 of the Heywood Williams Group PLC Annual Report and Accounts 2008 and remain an accurate representation of the risks facing the Group today. Particular areas of note are the on-going adverse economic environment, which continues to create uncertainty in the markets in which the Group operates, predominantly in respect of demand for the Group's products; the commodity and currency fluctuations and funding and liquidity risks, which the Group continues to manage whilst working to establish a revised long term capital structure for the Group.

The Half Yearly Review of Operations section of this report provides more commentary on the associated impact of these risks for the first half of the year and the outlook for the foreseeable future.


FORWARD LOOKING STATEMENTS


Certain statements in this Half Yearly Report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements.


The Group undertakes no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.


STATEMENT OF DIRECTORS' RESPONSIBILITIES


The Directors confirm that the consolidated half yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the half yearly management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:


  • An indication of important events that have occurred during the first six months and their impact on the half yearly financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and


  • Material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.


The Directors of Heywood Williams Group PLC are listed in the Heywood Williams Group PLC Annual Report and Accounts 2008.

Signed on 27 August 2009 on behalf of the Board by:





ROBERT BARR                        MIKE RICHARDS

CHIEF EXECUTIVE                   FINANCE DIRECTOR


 

CONSOLIDATED income STATEMENT

Six months ended 30 JuNE 2009



Note

Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

Continuing operations





Revenue

2

88.5

116.3

219.2

Costs and overheads excluding exceptional items


(93.7)

(112.8)

(217.9)

Operating (LOSS)/profit before exceptional items

2

(5.2)

3.5

1.3

Operating exceptional items

3

(1.5)

-

(1.6)

Operating (LOSS)/profit


(6.7)

3.5

(0.3)

Share of post tax loss of associates


(0.1)

(0.1)

(0.3)

Impairment of associate


-

-

(0.3)

Finance costs

4

(2.9)

(2.8)

(6.9)

Finance income

4

0.1

0.8

1.6

(LOSS)/Profit before taxation


(9.6)

1.4

(6.2)

Taxation

 5

0.1

(0.5)

(0.8)

(LOSS)/Profit for the period attributable to equity holders of the parent company


(9.5)

0.9

(7.0)


(LOSSES)/Earnings per ordinary share for (LOSS)/profit attributable to ordinary equity holders of the parent company

6




Basic


(11.2p)

1.0p

(8.3p)

Basic, excluding exceptional items


(9.0p)

1.0p

(5.1p)

Diluted


(11.2p)

1.0p

(8.3p)

Diluted, excluding exceptional items


(9.0p)

1.0p

(5.1p)




 

 



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 30 JuNE 2009



Note

Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

(Loss)/profit for the period


(9.5)

0.9

(7.0)






Exchange differences on translation of foreign operations


(9.5)

1.1

22.8

Gain/(loss) on a hedge of net investment taken to equity


5.3

(0.5)

(12.5)

(Loss)/gain on cash flow hedges

7

(1.4)

(0.1)

0.8

Gain/(loss) on interest rate hedge


0.1

0.2

(0.4)

Actuarial loss on defined benefit pension plans

7

(1.1)

(1.2)

(7.1)

OTHER COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD NET OF TAX


(6.6)

(0.5)

3.6

TOTAL comprehensive (loss)/profit for the period net of tax


(16.1)

0.4

(3.4)


 




CONSOLIDATED STATEMENT OF financial position

as at 30 june 2009



Note

Half year 2009
£m

Half year 2008
£m

Full year 2008
 £m

Assets





Non-current assets





Property, plant and equipment


14.7

15.4

16.3

Intangible assets


44.6

45.7

45.2

Investments accounted for using the equity method


1.7

2.1

1.8

Deferred income tax asset


4.9

2.9

4.8



65.9

66.1

68.1

Current assets





Inventories


35.5

47.6

47.5

Trade and other receivables


24.9

31.8

24.2

Financial assets

9

-

0.8

9.1

Income tax receivable


0.1

-

1.2

Cash at bank and in hand


5.5

4.2

5.4



66.0

84.4

87.4

Total assets


131.9

150.5

155.5

Equity and liabilities





Equity attributable to equity holders of the parent company



Called up share capital


17.0

17.0

17.0

Other reserves


5.7

0.7

11.3

Retained earnings


0.2

24.6

10.5

Own shares


(0.1)

(0.1)

(0.1)



22.8

42.2

38.7

Non current liabilities





Defined benefit pensions deficit

10

15.5

7.0

14.5

Provisions


6.4

6.8

7.0

Financial liabilities

11

40.0

40.1

36.8

Deferred income tax liabilities


5.3

5.4

5.7



67.2

59.3

64.0

Current liabilities





Financial liabilities

11

14.2

14.6

23.6

Trade and other payables


24.9

31.1

26.2

Provisions


1.9

1.7

2.0

Income tax payable


0.9

1.6

1.0



41.9

49.0

52.8

Total equity and liabilities


131.9

150.5

155.5



CONSOLIDATED STATEMENT OF changes in equity

Six months ended 30 JUNE 2009




Note

Share capital
£m

Foreign exchange £m

Retained earnings £m

Own shares
£m

Total
£m

At 1 January 2008


17.0

0.2

24.5

(0.1)

41.6

Loss for the period


-

-

(7.0)

-

(7.0)

Exchange fluctuations:







  Translation of foreign operations


-

22.8

-

-

22.8

  Hedge of net investment


-

(12.5)

-

-

(12.5)

  Cash flow hedges

7

-

0.8

-

-

0.8

Loss on interest rate hedge


-

-

(0.4)

-

(0.4)

Actuarial loss on defined benefit pension plans

7

-

-

(7.1)

-

(7.1)

Employee share options


-

-

0.5

-

0.5

At 1 January 2009


17.0

11.3

10.5

(0.1)

38.7

Loss for the period


-

-

(9.5)

-

(9.5)

Exchange fluctuations:







  Translation of foreign operations


-

(9.5)

-

-

(9.5)

  Hedge of net investment


-

5.3

-

-

5.3

  Cash flow hedges

7

-

(1.4)

-

-

(1.4)

Gain on interest rate hedge


-

-

0.1

-

0.1

Actuarial loss on defined benefit pension plans

7

-

-

(1.1)

-

(1.1)

Employee share options


-

-

0.2

-

0.2

At 30 June 2009


17.0

5.7

0.2

(0.1)

22.8


Six months ended 30 JUNE 2008


Note

Share capital
£m

Foreign exchange £m

Retained earnings £m

Own shares
£m

Total
£m

At 1 January 2008


17.0

0.2

24.5

(0.1)

41.6

Gain for the period


-

-

0.9

-

0.9

Exchange fluctuations:







  Translation of foreign operations


-

1.1

-

-

1.1

  Hedge of net investment


-

(0.5)

-

-

(0.5)

  Cash flow hedges

7

-

(0.1)

-

-

(0.1)

Gain on interest rate hedge


-

-

0.2

-

0.2

Actuarial loss on defined benefit pension plans

7

-

-

(1.2)

-

(1.2)

Employee share options


-

-

0.2

-

0.2

At 30 June 2008


17.0

0.7

24.6

(0.1)

42.2



CONSOLIDATED CASH FLOW STATEMENT

Six months ended 30 JUNE 2009




Note

Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

Cash flows from operating activities





Cash generated/(absorbed) by operations

12

1.3

(0.5)

5.5

Net income tax received/(paid)


0.8

(0.1)

(0.5)

Net cash flow from operating activities


2.1

(0.6)

5.0

Investing activities





Interest received


0.1

0.5

0.8

Dividends received from associates


-

0.1

0.1

Purchase of intangible assets


-

(0.1)

(0.2)

Purchase of property, plant and equipment


(0.2)

(0.4)

(0.9)

Disposal of property, plant and equipment


0.1

-

-

Acquisition of subsidiaries

14

-

(0.3)

(0.4)

Forward exchange hedging contracts


-

(1.4)

(1.4)

Net cash flow from investing activities


-

(1.6)

(2.0)

Financing activities





Interest paid


(1.8)

(2.8)

(5.6)

Exceptional financing items


(0.9)

-

(0.2)

Additional borrowings


1.3

9.0

7.3

Repayment of borrowings


-

-

(0.1)

Payment of deferred consideration

14

-

(8.0)

(8.0)

Net cash flow from financing activities


(1.4)

(1.8)

(6.6)

Net movement in cash and cash equivalents


0.7

(4.0)

(3.6)

Cash and cash equivalents at the beginning of the period


5.4

7.6

7.6

Exchange fluctuations


(0.6)

0.1

1.4

Cash and cash equivalents at the end of the period


5.5

3.7

5.4






Reconciliation of net movement in cash and cash equivalents to movements in net debt


Net movement in cash and cash equivalents


0.7

(4.0)

(3.6)

Net movement in debt

13

(1.3)

(9.0)

(7.2)

Movement in net debt resulting from cash flows


(0.6)

(13.0)

(10.8)

Exchange fluctuations


(0.3)

0.1

1.0

Movement in net debt


(0.9)

(12.9)

(9.8)

Opening net debt


(46.7)

(36.9)

(36.9)

Closing net debt


(47.6)

(49.8)

(46.7)




notes to the financial statements

1 Accounting policies and general information

The Half Yearly Report was approved for issue on 27 August 2009.

The Half Yearly Report does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2008 were approved by the Board of Directors on 4 March 2009 and delivered to the Registrar of Companies. The Independent Auditors' Report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985. The Group has chosen not to subject the Half Yearly Report to an independent review or audit.

Basis of preparation

The Half Yearly Report for the six months ended 30 June 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting', as adopted by the European Union.

The Half Yearly Report does not include all of the information and disclosure required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2008.

GOING CONCERN

The Group is currently in the advanced stages of developing a proposed revised capital structure for the Group and the deadline for its implementation has been extended by the Group's UK banking syndicate to 30 November 2009 to allow for regulatory steps to be completed. The proposed revised capital structure is designed to provide the Group with the appropriate cash and debt resources to trade through adverse economic conditions, to the extent that they are reasonably foreseeable.

Implementation of a revised capital structure would be conditional upon final agreement with the UK banking syndicate, followed by shareholder approval being obtained at a general meeting. If agreement is reached with the UK banking syndicate, shareholder approval is obtained and subsequently a financial restructuring is satisfactorily completed, which is the Directors' expectation, the Directors are of the opinion that, after taking into account the available committed facilities following the proposed restructuring, the Group will have sufficient working capital for its requirements for at least twelve months from the date of this Half Yearly Report. This assertion is based on detailed financial forecasts prepared by management and reviewed and approved by the Board.

In the event that the proposed revised capital structure is not implemented and subsequently alternate funding sources cannot be secured, the Group forecasts that it would not have sufficient working capital for its requirements for at least twelve months from the date of this Half Yearly Report. This possibility represents a material uncertainty as to the appropriateness of the going concern basis for preparing the Half Yearly Report. If this basis was no longer appropriate then significant adjustments to the financial information would be required, which would include writing down the carrying value of the assets to their recoverable amounts and providing for any further liabilities that may arise.

The requirement to finalise the revised capital structure proposals with the UK banking syndicate and the outcome of any subsequent shareholder vote currently gives rise to a material uncertainty as to whether the proposed capital restructuring will be satisfactorily completed. However, on the basis that the proposed capital restructuring is satisfactorily completed, which is the Directors' expectation, the Directors are of the opinion that the going concern basis of accounting remains appropriate in preparing the Half Yearly Report. 

  1 Accounting policies and general information (continued)

Significant accounting policies

Except as described below, the accounting policies adopted in the preparation of the Half Yearly Report are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2008 and disclosed therein.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but have had no material impact to the Group:

INTERNATIONAL ACCOUNTING STANDARDS (IAS/FRS)


Annual Improvements

Annual Improvements to IFRS

IFRS 2

Amendment to IFRS 2 - Vesting Conditions and Cancellations

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

IFRS 7

Financial Instruments: Disclosures

IFRS 8

Operating Segments

IAS 1 (Revised)

Presentation of Financial Statements

IAS 8

Accounting policies, Change in Accounting Estimates and Errors

IAS 10

Events after the Reporting Period

IAS 16

Property, Plant and Equipment

IAS 18

Revenue

IAS 19

Employee Benefits

IAS 20

Accounting for Government Grants and Disclosures of Government Assistance

IAS 23 (Revised)

Borrowing Costs

IAS 27

Consolidated and Separate Financial Statements

IAS 28

Investment in Associates

IAS 31

Interest in Joint Ventures

IAS 32 & IAS 1

Amendment - Puttable Financial Instruments and Obligations Arising on Liquidation

IAS 34

Interim Financial Reporting

IAS 36

Impairment of Assets

IAS 38

Intangible Assets: Expenditure on Advertising and Promotional Activities

IAS 39

Financial Instruments: Recognition and Measurement


IFRIC


IFRIC 9 and IAS 39

Reassessment of Embedded Derivatives 

IFRIC 13

Customer Loyalty Programmes

IFRIC 15

Agreements for the Construction of Real Estate

IFRIC 16

Hedges of a Net Investment in a Foreign Operation

  2 segment information

For management purposes, the Group continues to be organised into two continuing operating divisions - Hardware: UK/Europe and North American Specialist Distribution: LaSalle Bristol. These divisions are the basis upon which the Group reports its on-going primary segment information.

Principal activities are as follows:

Hardware: UK/EUROPE

The Hardware Division is the market leading specialist distributor of architectural hardware and door panels to the UK, Irish and certain other European markets.

NORTH AMERICAN SPECIALIST DISTRIBUTION: LaSalle Bristol

LaSalle Bristol is the market leading specialist distributor of branded building products to the North American manufactured housing, recreational vehicle and modular housing markets.

Segment results on these primary segments are presented below:

Continuing operations


Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

Revenue




Hardware

51.0

63.5

120.1

LaSalle Bristol

37.5

52.8

99.1

Continuing external revenue

88.5

116.3

219.2





Operating (LOSS)/profit before exceptional items




Hardware

(0.4)

4.1

4.4

LaSalle Bristol

(4.8)

(0.6)

(3.1)

Operating (loss)/profit

(5.2)

3.5

1.3

There has been no change to the basis of segmentation or to the basis of measurement of segment profit and loss since the last Annual Report. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment, in accordance with the provisions of IFRS 8 'Operating Segments'.

Segment performance is evaluated based on operating profit or loss, after charges for amortisation of intangible brands and patents in relation to the Carlisle Brass and Avenco acquisitions. Included within Hardware operating (loss)/profit as shown above is £0.6m of amortisation charges in this respect (H1 2008: £0.6m; FY 2008: £1.2m).

Group financing (including finance costs and income), investing activities (including associates) and income taxes are managed on a group basis and are not allocated to operating segments.



  3 Exceptional items

Exceptional items comprise:



Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

Restructuring costs:




Severance

(0.5)

-

(0.8)

Plant closures

-

-

(1.0)


(0.5)

-

(1.8)

Advisory fees associated with bank facility negotiations

(0.6)

-

(0.3)

Claim settlement

(0.4)

-

-

Pension curtailment

-

-

0.5

Operating exceptional items

(1.5)

-

(1.6)

Exceptional costs included within finance costs (note 4)

(0.4)

-

(1.1)

Total exceptional items

(1.9)

-

(2.7)


The Group has implemented a number of cost cutting measures during 2008 and 2009 which involved significant headcount reductions and, in doing so, £0.5m of severance costs were incurred in the first half of 2009, all of which were expended in the period. In the year ended 31 December 2008 severance costs amounted to £0.8m, of which £0.7m was expended in that year and £0.1m carried forward in provisions and expended in the first half of 2009. No such severance costs were incurred in the first half of 2008. All headcount reductions were announced prior to the period end in which they were charged. 

Plant closure costs in the prior year include £0.8m in relation to the closure of the Group's sole remaining UK hardware manufacturing plant, which was announced in December 2008 and £0.2m in relation to fixed asset tooling and stock impairment charges caused by the closure of Interconsulting SRL, an associate business. The £0.8m of plant closure costs included a £0.3m surplus property provision to cover costs over the remainder of the lease period of the business premises, £0.2m for severance costs, £0.1m for professional advisory costs and £0.2m in respect of balance sheet impairment. Of these closure costs £0.3m remain within provisions at 30 June 2009 (H1 2008: £nil; FY 2008: £0.6m). 

The Group has incurred professional advisory costs of £0.6m and bank advisory costs and fees of £0.4m during the period in respect of work to date on establishing an appropriate long term capital structure for the Group. In the second half of 2008 similar such costs were incurred in respect of UK bank facility negotiations and covenant waivers (professional advisory costs: H1 2008: £nil; FY 2008: £0.3m, bank advisory costs and fees: H1 2008: £nil; FY 2008: £1.1m).

An historical dispute relating to a former subsidiary has been resolved and settled since the period end, resulting in an exceptional charge of £0.4m.

The prior year pension curtailment credit was a one off benefit which arose as LaSalle Bristol management revised the funded plan benefits of the US scheme at the end of 2008, whereby benefits will no longer be subject to inflationary increases. 

Each of the above transactions are treated as exceptional since they are infrequent and material in nature. As such, the amounts earned or charged in any given year is not indicative of a trend in financial performance.

  4 Finance costs and income


Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

finance costs




Bank loans and overdrafts

(1.8)

(2.1)

(4.5)

Notional interest relating to discounting of provisions

-

(0.2)

(0.3)

Notional interest relating to discounting of deferred consideration

-

(0.1)

(0.2)

Notional interest relating to defined benefit obligations

(0.6)

-

 -

Amounts payable on foreign exchange contracts

(0.1)

(0.3)

(0.8)

Other

-

(0.1)

-


(2.5)

(2.8)

(5.8)

Exceptional finance costs (note 3)

(0.4)

-

(1.1)


(2.9)

(2.8)

(6.9)





finance income




Notional interest relating to defined benefit obligations

-

0.4

0.8

Amounts receivable on foreign exchange contracts

0.1

0.4

0.8


0.1

0.8

1.6


5 Tax

Income tax credit/(expense) is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The tax rate used for the half year is a credit of 1.1% and is based upon the current estimate of the average annual tax rate for the year ending 31 December 2009 (H1 2008: 35.7%; FY 2008: 12.9%) with only a small proportion of the losses in the period available for corporation tax relief.


6 (LOSSES)/Earnings per share

Basic (losses)/earnings per share amounts are calculated by dividing net (loss)/profit for the period attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the period.

Diluted (losses)/earnings per share amounts are calculated by dividing the net (loss)/profit for the period attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the period, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 

  6 (LOSSES)/Earnings per share (continued)

The calculation of the basic and diluted (losses)/earnings per share is based on the following data:



Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

(LOSSES)/Earnings





(Losses)/earnings attributable to members of the parent company


(9.5)

0.9

(7.0)

Adjusted for exceptional items


1.9

-

2.7

Adjusted (losses)/earnings


(7.6)

0.9

(4.3)








Number
'000

Number 
'000

Number
'000

Number of shares





Weighted average number of ordinary shares 

- basic

84,792

84,726

84,749

Effect of dilutive potential ordinary shares 

- Performance Share Plan

-

3,847

-

Weighted average number of ordinary shares

- diluted

84,792

88,573

84,749

When share options under the savings related and executive schemes are not dilutive in the period they are not included in the calculation of (losses)/earnings per share. These could potentially be dilutive in the future. 

In order to provide a comparable measure of the underlying performance of the Group, the adjusted (losses)/earnings per share figure excludes the effect of exceptional items, net of related taxation.

Adjustments for exceptional items are analysed below:



Half year 2009
£m

Half year 2008
£m

Full year 2008
£m






Operating exceptional items


(1.5)

-

(1.6)

Financing exceptional items


(0.4)

-

(1.1)



(1.9)

-

(2.7)


  7 components of other comprehensive income



Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

Cash flow hedges:




(Loss)/gain arising in the period

(1.5)

(0.1)

0.9

Less amounts transferred to profit or loss

0.1

-

(0.1)


(1.4)

(0.1)

0.8

Defined benefit pension plans:




Actuarial loss on defined benefit pension plans

(1.5)

(1.7)

(10.3)

Less deferred tax on actuarial loss

0.4

0.5

3.2


(1.1)

(1.2)

(7.1)

The £4.2m net loss recognised on translation of foreign operations and associated hedging contracts (H1 2008: gain £0.6m; FY 2008: gain £10.3m) has arisen primarily due to the weakening of the US Dollar during the first half of the year, which has served to partially reverse the gains recognised during 2008. The losses arising on cash flow hedges give rise to a deferred tax asset, which has not been recognised as it is not considered to be recoverable.


8 impairments

Goodwill is tested for impairment annually (as at 31 December) and, when circumstances indicate, the carrying value may be impaired. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators for impairment. As at 30 June 2009, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of goodwill. In addition the Group continues to face very difficult market conditions due to major declines in residential housing markets worldwide, as detailed in the half yearly review of operations. A material uncertainty has been noted with respect to the going concern basis for accounting, but the Directors are of the opinion that the going concern basis for accounting remains appropriate in preparing the Half Yearly Report. The forecasts reviewed for impairment purposes assume that the proposed revised capital structure is satisfactorily implemented.

The Group's impairment test for goodwill, brand names and patents is based on value in use calculations of the Carlisle Brass Group cash-generating unit. These calculations use operating cash flow projections based upon latest forecasts for the remainder of 2009 and strategic plan forecasts for the subsequent four years to December 2013.

The 2009 forecast has been prepared by local management and reviewed by the Board and is based upon actual results for the six months ended June 2009 plus forecasts for the second half of the year. The forecasts are based upon actual activity run rates achieved in the first half of 2009, together with the full year effect of price increases and cost reductions already implemented.

The strategic plan forecasts have been prepared by group management in consultation with the senior management of Carlisle Brass Group. The key assumptions for these forecasts are those regarding market activity, which is forecast to make a gradual recovery over the four year period, returning to 75% of 2007 activity levels by 2013 (2008: 100%), with revenue increasing by 7% per annum on average (2008: 9% per annum), gross margin and depreciation, which are forecast to be maintained at similar rates to 2009, and capital spend, which as a proportion of depreciation is forecast to increase over the four year period to 2013 to coincide with the increased market activity. Working capital changes have been calculated based upon historic ratios of working capital movements to sales activity.

  8 impairments (continued)

After the strategic plan forecast period, no further growth in revenue and profit has been assumed based on a prudent view of long term growth rates. All cash flows are discounted back to present value using a discount rate of 15% (2008: 15%), which is a reasonable assessment of the weighted average cost of capital of the Group.

The key assumptions are sensitive to factors such as market trends but management believes that no reasonable possible change in any of the above key assumptions would cause the carrying value of the Carlisle Brass Group to exceed its recoverable amount.

Based on the above criteria, no impairment issues were identified in the period.


9 FINANCIAL ASSETS

As at 31 December 2008 financial assets comprised foreign currency hedging contracts with a fair value of £9.1m (HY 2008: £0.8m). The fair value of foreign currency hedging contracts as at 30 June 2009 was £nil, primarily as a result of the timing of the execution of these contracts in relation to the period end. The fair value of such hedging contracts and the movement thereon is offset by equal and opposite contracts, which are included within financial liabilities.


10 Defined benefit pensionS deficit

The defined benefit pensions deficit has increased by £1.0m since 31 December 2008, with a £2.1m increase in the deficit of the UK scheme, partially offset by a £1.1m reduction in the deficit of the US schemes. The latter reduction is due to a weaker US Dollar exchange rate and higher bond yields. The increase in deficit in the UK scheme is due to a combination of the impact of a reduction in asset values, higher inflation and revisions to mortality assumptions, which have more than offset the favourable effect of a small increase in bond yields.

The key changes to the UK scheme assumptions from those used previously are the rate of price inflation at 3.50% (H1 2008: 4.10%; FY 2008: 3.00%), the rate of pension increases at 3.50% (H1 2008: 4.10%; FY 2008: 3.0%) and the discount rate at 6.30% (H1 2008: 6.70%; FY 2008: 6.25%). With regard to the US schemes, the only significant change to assumptions is the discount rate for the unfunded, non-qualified plan at 4.50% (H1 2008: 4.50%; FY 2008: 2.69%).


11  Financial liabilities

Included within financial liabilities are bank loans and overdrafts of £53.1m (H1 2008: £54.0m; FY 2008: £52.1m), interest rate hedges of £0.4m (H1 2008: £nil; FY 2008: £0.4m) and forward currency hedges of £0.7m (H1 2008: £0.7m; FY 2008: £7.9m). The movement in fair value of forward currency hedges is linked to the movement in financial assets, see note 9.


  12 CASH GENERATED FROM OPERATIONS




Half year 2009
£m

Half year 2008
£m

Full year 2008
£m

(LOSS)/PROFIT BEFORE TAXATION


(9.6)

1.4

(6.2)

Adjustments for:





  

Net finance cost


2.8

2.0

4.2


Share of post tax loss of associates


0.1

0.1

0.6


Operating exceptional items


1.5

-

2.7


Depreciation of property, plant and equipment


0.9

0.9

1.9


Amortisation of intangibles


0.6

0.7

1.2


Profit on disposal of property, plant and equipment


(0.1)

-

-


Employee share options


0.2

0.2

0.5


Pension payment in excess of service costs


(0.4)

(1.6)

(3.2)


Provisions charged (excluding exceptional provisions)


-

-

0.2


Net outflow in respect of provisions


(0.3)

(0.2)

(0.7)


Net outflow in respect of operating exceptional provisions


(0.7)

-

(0.7)

Working capital movements:






Decrease/(increase) in inventories


8.6

(1.7)

6.2


(Increase)/decrease in receivables


(2.3)

(2.4)

7.9


Increase/(decrease) in payables


-

0.1

(9.1)

CASH GENERATED/(absorbed) by OPERATIONS


1.3

(0.5)

5.5


13 MOVEMENT IN NET DEBT

The increase in net debt of £1.3m represents an increase in the amounts drawn down on the Group's short term bank facilities, full details of which can be found in note 28 of the 2008 Annual Report and Accounts.


14 Acquisitions

Avenco Group

On 27 August 2007 the Group acquired 100% of the issued share capital of Avenco Limited with its two principal operating companies, Locks & Hardware Limited and Balmar Limited, which are leading suppliers of architectural hardware in the Republic of Ireland ('ROI') and are exclusive suppliers of Heywood Williams' Carlisle Brass Group products in the ROI. 

During the year ended 31 December 2008, the final £0.3m of consideration was paid to the vendor of Avenco (H1 2008: £0.3m) and the remaining £0.1m accrued in respect of acquisition costs was also expended (H1 2008: £nil). 

No further amounts were expended on costs related to the Avenco acquisition during 2009.

  14 Acquisitions (continued)

Carlisle Brass Group

On 3 October 2006 the Group acquired 100% of the issued share capital of Carlisle Brass, a UK based designer and specialist distributor of architectural hardware, and APC China, a manufacturing business based in Hangzhou, China. 

During the six month period ended 30 June 2008, deferred consideration of £8.0m became payable to the vendor of Carlisle Brass. This was originally recorded at fair value of £7.2m as at the acquisition date using a discount rate of 7%.

No further amounts were expended on costs related to the Carlisle Brass acquisition in the current or prior year.

 

15 Related Party Transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. There are no material changes in the related party transactions described in the last Annual Report.


16 HALF YEARLY Report

The Half Yearly Report will be posted to shareholders during September 2009 and copies will also be available at the Company's registered office at Brindley House, Premier Way, Lowfields Business Park, Elland, West Yorkshire HX5 9HF or on the Company's website www.heywoodwilliams.com.




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

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