RNS Number:6630A
Brammer PLC
03 September 2002
2002 INTERIM RESULTS
CONTINUED FOCUS ON COSTS AND CASH
Brammer plc, the European industrial services group, today announces its results
for the six months ending 30 June 2002.
Highlights
2002 2002 2001 Change
After Before
exceptional exceptional
items items
Turnover #171.7m #191.7m -10%
Profit before tax, goodwill and interest #(0.8)m #6.9m #14.6m -53%
Profit before tax and goodwill #(3.0)m #4.8m #12.1m -61%
Movement in net funds #15.7m #(37.1)m +142%
Earnings per share before goodwill (7.2)p 8.3p 17.8p -53%
Dividend per share 1.5p 6.7p -78%
* Net cash inflow of #21.1m contributed to a #15.7m reduction in net debt
to #66.7m
* Decisive action taken to size the cost base with current revenues incurs
#7.7m exceptional charge
* Group sales fell 9% in continental Europe and 13% in the UK; Europe
accounted for 64% of group sales in the period
* Despite difficult market conditions with sales declining by 4%, BIS
continued to develop its pre-eminent market position in Europe, winning a number
of significant new pan-European contracts.
* With over 70% of its customers in technology sectors, Livingston
experienced its most difficult trading period with sales falling 22%. However,
the liquidation of excess inventory and cost control has reduced the financial
risk and supported strong cash flow
David Dunn, chairman, said:
"In BIS trading in the period since 30 June has stabilised and is just slightly
down on last year. Markets continue to be difficult and we expect to see the
normal seasonal reduction in demand in the second half. Nonetheless, we have
improved the fundamentals of the business and are well positioned to take
advantage of any upturn in market conditions.
In Livingston we expect trading conditions to remain extremely difficult
especially in the telecom sector. We believe the inventory is now sized
appropriately for the current level of turnover. The cost reductions already
made and those in process will ensure that this business will benefit when
capital expenditure in our customer base eventually recovers. The benefits of
the cost reduction programme in Livingston will improve profitability in 2003."
Enquiries: Brammer plc 020 7638 9571 (8.00am - 1.00pm)
0161 928 3363 (1.00pm - 4.30pm)
David Dunn, chairman
Ian Fraser, chief executive
Paul Thwaite, finance director
Issued by: Citigate Dewe Rogerson Ltd 020 7638 9571
Martin Jackson
Anthony Kennaway
BRAMMER plc
2002 INTERIM RESULTS
CHAIRMAN'S STATEMENT
Continued focus on costs and cash
As anticipated, this is turning out to be an extremely tough year. Whilst many
parts of our business, particularly in Brammer Industrial Services ("BIS") and
Livingston calibration, have produced pleasing results in difficult market
conditions, further deterioration has been evident in certain of Livingston's
markets as we enter the second half.
In the six months to 30 June 2002, group sales declined by 10% and group profit
before goodwill, exceptional items and interest was 53% lower than the first
half of 2001 at #6.9 million. Earnings per share before goodwill and
exceptional items declined by 53% to 8.3p.
Our focus on cash has enabled us to produce a net cash inflow of #21.1 million
which, offset by adverse exchange rates, helped reduce net debt by #15.7 million
to #66.7 million.
In order to protect profitability, we have taken decisive action to size our
cost base to match current revenues. Accordingly, we have taken an exceptional
charge of #7.7 million to cover the cost of this restructuring.
The board has declared a reduced interim dividend of 1.5p (2001 6.7p) which will
be paid on 7 November 2002 to shareholders on the register at the close of
business on 11 October 2002.
Brammer Industrial Services
Sales in BIS fell by 4% (3% on a sales per working day basis) and profit before
goodwill, exceptional items and interest fell by 31% to #5.5 million. These
results reflected difficult market conditions in all territories, particularly
in the first quarter. Sales of our core products, bearings and mechanical power
transmission, were down but we maintained growth of our newer products,
particularly fluid power.
UK revenues fell by 4% on a sales per working day basis compared to first half
of 2001, which was particularly disappointing after our return to growth for
most of the second half of 2001. Nevertheless, we believe we increased our
market share, manufacturing production having decreased by 6%. We signed five
new Insites, bringing our total to 36 and also increased our corporate account
sales by 13%. New contracts were won at four major multi-nationals.
In Germany, revenues were down by 5% on a sales per working day basis compared
to the first half of 2001. Our October 2001 acquisition, Carl Fischer GmbH,
performed to expectation. Our national presence helped us win two major
multi-site contracts.
In France, sales declined 2% on a sales per working day basis compared to the
first half of 2001. Our success in launching pneumatics and our continued focus
on mechanical power transmission has helped offset weakness in bearings.
In Spain, sales grew by 13% on a sales per working day basis. The decline in
sales to small OEM's in the machine tool industry was offset by growth in MRO
sales to new customers. Rabinad, our Catalonian acquisition, performed to
expectation.
Despite difficult market conditions, BIS continued to develop its pre-eminent
market position in Europe and we believe increased market share. A number of
significant new pan-European contracts were won during the period. These
included contracts with a major chemical company covering 21 sites in the
Netherlands, UK, Germany, France and Spain, a German cement manufacturer,
covering 24 plants in Germany, the Netherlands, Belgium, Czech Republic, Poland,
Hungary and the UK, and a contract with a packaging company covering 60 plants
in France, Germany, Belgium, Poland, Spain and the UK, up to 11 of which will be
Insites. The total annual revenue associated with these three contracts will be
in excess of #3.0 million when fully implemented.
Since 1 October 2001, operating costs have been driven down further. Employee
costs represent approximately two thirds of our operating expenses. Excluding
acquisitions, headcount has already been reduced by 107 (5%) since 1 October
2001. Operating costs in the first half of 2002 were #0.5 million down on the
second half of 2001. Net operating assets excluding goodwill have been reduced
by #9.3 million since 30 June 2001.
In summary, we believe a reasonable sales performance has been achieved in
difficult market conditions. The cost base has been reduced, we have generated
cash and further strengthened the competitive position of the business in
Europe.
Livingston
The first half of 2002 has been the most difficult period in Livingston's
history. Over 70% of our customers are directly or indirectly involved in
telecoms, software development or Internet industries and we have suffered
significantly in an environment where prospects for stabilisation and recovery
in our customer base have receded over the period of the first half. Turnover
in the Livingston division is down 22% to #52.4 million and profit before
goodwill, exceptional items and interest was #1.4 million.
Given the current state of our markets and as stated at the time of our
preliminary results, the priority within Livingston has been the reduction of
financial risk by liquidating excess inventory and controlling costs.
In our calibration and measurement services business, we were able to offset
weakness in the telecom sector by winning new business in the aerospace,
defence, and other industrial electronics sectors. Revenues were down 2% to
#20.7 million.
Rental revenues in our computer products business declined 32% compared to the
first half of 2001, the largest declines occurring in the UK and Germany where
we reduced our exposure to lower margin contracts. Significant progress has
been made in realising cash from the excess rental inventory.
In our test equipment management services business, the continued problems in
the telecom sector resulted in a further decline in revenues in the second
quarter. As a result revenues fell 40% compared with the first half of 2001, as
the major equipment manufacturers reduced expenditure, or in cases such as
Global Crossing and KPN Qwest went into administration.
Cash flow in Livingston was further strengthened as we reduced net expenditure
in rental assets to #4.0 million (2001 #37.4 million) in line with current
demand.
In summary, our calibration business is stable, computer products is showing
some signs of recovery, whilst our test equipment business continues to operate
in extremely difficult and uncertain markets. We are taking action to further
reduce the cost base throughout Livingston.
Financial overview
Group sales fell by 10% to #171.7million, reflecting a fall of 9% in continental
Europe and 13% in the UK. Our sales split is now 64% (2001 63%) from the
continent and 36% (2001 37%) from the UK. In BIS sales fell by 4% to #119.3
million and Livingston turnover declined by 22% to #52.4 million.
In consequence the profit before tax, goodwill and exceptional items was down
61% at #4.8 million. Earnings per share before goodwill and exceptional items
declined by 53% to 8.3p per share. In BIS, profit before goodwill, exceptional
items and interest fell by 31% to #5.5 million and in Livingston by 79% to #1.4
million.
In Livingston, investment in new rental assets reduced by #36.2 million to #13.4
million (#4.0 million net of disposals). Both BIS and Livingston reduced trade
working capital and were strongly cash generative in the period.
As a result in the downturn in sales in our rental business and in accordance
with accounting standard FRS 11, an exceptional impairment provision of #22.7
million was charged to the accounts in 2001. During the first half of 2002,
#11.1 million of impairment provisions were used. The remaining provisions
will be used mainly to cover the cost of setting aside surplus assets.
In the six month period to 30 June 2002, #7.7 million has been charged to the
accounts as an exceptional restructuring item., #2.0 million relating to BIS and
#5.7 million in respect of Livingston. The majority of the cost relates to
redundancy charges. Annualised savings of approximately #4.5 million are
expected to accrue from the programme, BIS returns being #1.2 million and
Livingston #3.3 million.
Current trading
In BIS trading in the period since 30 June has stabilised and is just slightly
down on last year. Markets continue to be difficult and we expect to see the
normal seasonal reduction in demand in the second half. Nonetheless, we have
improved the fundamentals of the business and are well positioned to take
advantage of any upturn in market conditions.
In Livingston we expect trading conditions to remain extremely difficult
especially in the telecom sector. We believe the inventory is now sized
appropriately for the current level of turnover. The cost reductions already
made and those in process will ensure that this business will benefit when
capital expenditure in our customer base eventually recovers. The benefits of
the cost reduction programme in Livingston will improve profitability in 2003.
David Dunn
Chairman
3 September 2002
Brammer CONSOLIDATED PROFIT AND LOSS ACCOUNT
the unaudited group results for the six months
Six months Full year
to 30 June
Six months to 30 June 2002 2001 2001
Before Exceptional Total Restated Total
exceptional items presentation
items
#'000 #'000 #'000 #'000 #'000
Turnover 171,690 - 171,690 191,739 372,284
Cost of sales, including an exceptional (110,000) (1,026) (111,026) (121,959) (260,116)
charge of #22.7m for the full year 2001
Gross profit 61,690 (1,026) 60,664 69,780 112,168
Selling and logistics expenses (36,033) (3,793) (39,826) (35,844) (73,152)
Administrative expenses
Before amortisation of goodwill (19,066) (2,920) (21,986) (19,638) (37,946)
Amortisation of goodwill (1,192) - (1,192) (1,136) (2,335)
Total administrative expenses (20,258) (2,920) (23,178) (20,774) (40,281)
Operating (loss) / profit 5,399 (7,739) (2,340) 13,162 (1,265)
Loss on termination of operations - - - - (1,000)
Share of associates' operating profit 300 - 300 287 606
Amortisation of goodwill in associates (30) - (30) (30) (61)
(Loss) / profit on ordinary activities 5,669 (7,739) (2,070) 13,419 (1,720)
before interest
Net interest (2,116) (2,457) (5,097)
Profit before goodwill, exceptional items 6,891 14,585 24,402
and interest
Goodwill (1,222) (1,166) (2,396)
Exceptional items (7,739) - (23,726)
Interest (2,116) (2,457) (5,097)
(Loss) / profit on ordinary activities (4,186) 10,962 (6,817)
before tax
Tax 757 (3,638) (19)
(Loss) / profit on ordinary activities (3,429) 7,324 (6,836)
after tax
Dividends (718) (3,207) (9,253)
Retained (loss) / profit for the period (4,147) 4,117 (16,089)
Earnings per share
Basic before goodwill, amortisation and 8.3p 17.8p 28.1p
exceptional items
Basic (7.2)p 15.3p (14.3)p
Diluted (7.2)p 14.3p (14.3)p
Dividend per share 1.5p 6.7p 19.3p
The above results for the current and previous years relate entirely to continuing operations.
Brammer CONSOLIDATED BALANCE SHEET
the unaudited group financial position as at 30 June 2002
30 June 30 June 31 December
2002 2001 2001
#'000 #'000 #'000
Fixed assets
Intangible assets 43,998 43,753 44,924
Tangible assets Rental inventory 51,556 92,864 59,430
Other fixed assets 20,347 21,390 21,222
Investment in associates 1,889 1,845 1,979
117,790 159,852 127,555
Current assets
Stock 44,433 45,073 45,877
Debtors 81,716 81,570 76,896
Cash and deposits 9,487 9,294 10,576
135,636 135,937 133,349
Creditors - due within one year (109,203) (113,031) (95,211)
Net current assets 26,433 22,906 38,138
Total assets less current liabilities 144,223 182,758 165,693
Creditors - due after more than one year (70,265) (82,973) (87,283)
Provisions for liabilities and charges - (1,696) -
Net assets employed 73,958 98,089 78,410
Capital and reserves
Called up share capital 9,573 9,573 9,573
Share premium account 3,552 3,551 3,552
Shares to be issued 14,977 14,346 14,977
Profit and loss account 45,856 70,619 50,308
Shareholders' equity 73,958 98,089 78,410
Brammer CONSOLIDATED CASH FLOW STATEMENT
the unaudited group cash flow for the six months
Six months to Full year
30 June 2002 30 June 2001 2001
Total Total Total
#'000 #'000 #'000
(Loss) / profit on ordinary activities before interest (2,070) 13,419 (1,720)
Accrued element of exceptional items 7,346 - -
Depreciation and impairment of tangible fixed assets 18,805 26,608 74,663
Amortisation of goodwill 1,222 1,166 2,396
25,303 41,193 75,339
Associates (300) (287) (606)
Profit on sale of fixed assets (862) (1,668) (1,357)
Earnings before interest, tax, depreciation
and amortisation 24,141 39,238 73,376
Movement in working capital excluding accrued element
of exceptional items 429 (5,489) (3,154)
Net cash inflow from operating activities 24,570 33,749 70,222
Returns on investments and servicing of finance
Interest received 85 244 411
Interest paid (2,245) (2,713) (4,982)
(2,160) (2,469) (4,571)
Tax received / (paid) 4,455 (5,328) (10,985)
Capital expenditure
Purchase of tangible fixed assets (17,852) (52,834) (84,674)
Sale of tangible fixed assets 12,760 12,125 22,548
(5,092) (40,709) (62,126)
Acquisitions and disposals
Purchase of subsidiaries and businesses (79) (16,755) (18,489)
Net cash acquired 148 124 (8,441)
69 (16,631) (26,930)
Deferred consideration paid (735) - (1,047)
(666) (16,631) (27,977)
Equity dividends paid - (1) (9,236)
Net cash inflow / (outflow) before management of liquid 21,107 (31,389) (44,673)
resources and financing
Management of liquid resources
Deposits (111) 4,060 14,075
Financing
Shares issued - 455 455
(Repayment of loans) / new loans taken out (11,940) 15,111 22,479
Capital element of finance leases (66) (21) (98)
(12,006) 15,545 22,836
Increase / (decrease) in cash 8,990 (11,784) (7,762)
Brammer NOTES TO THE ACCOUNTS
1 COMPARATIVE RESULTS
Comparative figures for the year ended 31 December 2001 are taken from the
company's statutory accounts which have been delivered to the Registrar of
Companies with an unqualified audit report. The 2001 annual report is available
on the company's web site (www.brammer.plc.uk). The 2002 interim report will be
available after it has been sent to shareholders.
2 SEGMENTAL ANALYSIS
Six months ended 30 June
The business analysis of turnover, (loss) / profit before tax and net assets
employed is as follows
Brammer
Industrial Services Livingston Total
2002 2001 2002 2001 2002 2001
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 119,282 124,591 52,408 67,148 171,690 191,739
Profit before goodwill, exceptional 5,482 7,890 1,409 6,695 6,891 14,585
items and interest
Exceptional items (2,002) - (5,737) - (7,739) -
Goodwill (883) (822) (339) (344) (1,222) (1,166)
(Loss) / profit before interest 2,597 7,068 (4,667) 6,351 (2,070) 13,419
Interest (2,116) (2,457)
(Loss) / profit before tax (4,186) 10,962
Net operating assets excluding 58,126 67,470 45,921 77,873 104,047 145,343
goodwill
Capitalised goodwill 31,788 30,728 12,210 13,025 43,998 43,753
Net operating assets 89,914 98,198 58,131 90,898 148,045 189,096
Net debt (66,663) (75,296)
Dividends (6,749) (9,222)
Net tax (675) (6,489)
Net assets employed 73,958 98,089
The geographic analysis of turnover, (loss) / profit before interest and net
operating assets is as follows
United Kingdom Other Europe Total
2002 2001 2002 2001 2002 2001
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 62,214 71,597 109,476 120,142 171,690 191,739
Profit before goodwill, exceptional 4,167 4,270 2,724 10,315 6,891 14,585
items and interest
Exceptional items (1,926) - (5,813) - (7,739) -
Goodwill - - (1,222) (1,166) (1,222) (1,166)
Profit / (loss) before interest 2,241 4,270 (4,311) 9,149 (2,070) 13,419
Net operating assets excluding 30,013 54,222 74,034 91,121 104,047 145,343
goodwill
Capitalised goodwill - - 43,998 43,753 43,998 43,753
Net operating assets 30,013 54,222 118,032 134,874 148,045 189,096
3 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months to Full year
30 June 2002 30 June 2001 2001
Total Total Total
#'000 #'000 #'000
Increase / (decrease) in cash 8,990 (11,784) (7,762)
Cash movement from increase / (decrease) in debt and lease 12,117 (19,150) (36,456)
financing and liquid resources
21,107 (30,934) (44,218)
New finance leases - - (180)
Loans acquired - (8,774) (1,394)
Exchange movements (5,449) 2,602 1,661
Movement in net debt 15,658 (37,106) (44,131)
Net debt at 31 December 2001 (82,321) (38,190) (38,190)
Net debt at 30 June 2002 (66,663) (75,296) (82,321)
4 BASIS OF ACCOUNTING
The interim financial statements have been prepared on the basis of the
accounting policies set out in the group's 2001 statutory accounts, except for
the adoption of Financial Reporting Standard 19 'Deferred tax' and the change in
accounting policy in respect of the capitalisation of ERP system costs that will
be written off over 7 years. The impact of these changes is not material to
prior year comparatives but the change in policy on ERP systems has the impact
of capitalising #1.3 million of cost before depreciation as at 30 June 2002,
spread equally between the two divisions.
The interim financial statements were approved on 3 September 2002 by a duly
appointed and authorised committee of the board and are neither audited nor
reviewed by the auditors.
5 INTERIM ANNOUNCEMENT
A copy of the interim announcement is available for inspection at the registered
office of the company, Station House, Stamford New Road, Altrincham, Cheshire
WA14 1EP and the offices of Citigate Dewe Rogerson Ltd, 3 London Wall Buildings,
London Wall, London EC2M 5SY, and will be posted to shareholders.
6 INTERIM DIVIDEND
Relevant dates concerning the payment of the interim dividend are
Record date 11 October 2002
Payment date 7 November 2002
This information is provided by RNS
The company news service from the London Stock Exchange
END
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