RNS Number:4647C
Brammer PLC
01 September 2004
FOR IMMEDIATE RELEASE 1 September 2004
2004 INTERIM RESULTS
A SOUND, GROWING & PROFITABLE BUSINESS
Brammer plc, the European industrial services group, today announces its results
for the six months ending 30 June 2004.
FINANCIAL SUMMARY
2004 2003
#m #m Change
Revised
Turnover 156.2 178.8 -13%
Profit / (loss) on ordinary activities before tax 0.8 (4.0) +121%
Profit before goodwill, exceptional items and tax 5.2 2.6 +101%
Movement in net debt 22.1 (4.5)
Net debt (57.7) (67.3)
Equity shareholders' funds 17.5 55.3
pence pence
Earnings per share
Basic (1.7) (6.0) +72%
Diluted (1.7) (6.0) +72%
Before amortisation of goodwill and exceptional items 7.5 4.4 +70%
Dividend per share 1.5 1.5 +0%
* Disposal of Livingston businesses and re-organisation of management
structure completed allowing management to focus on development and growth
of the BIS distribution business
* First half BIS revenues grew 2% overall with growth in continental Europe,
particularly France, Germany and the Netherlands, offsetting a weaker UK
* UK trading responded to management action during first quarter, with sales
improving steadily to return to modest year on year growth in sales per
working day by July
* Positive operating cash flow and planned reduction in working capital
contributed to lower net debt of #57.7 million. Operating cash flow is
expected to exceed operating profit for the foreseeable future
David Dunn, chairman, said:
"It is good to be able to report real progress in Brammer's fortunes. Brammer
has emerged from a difficult period with a sound, growing and profitable
business. As the pre-eminent pan-European supplier of essential components and
services to industry, it is management's priority to develop the growth
potential that this positioning bestows upon the group.
"Trading since the end of June has been satisfactory with European markets
relatively stable and continued growth in corporate account sales. In the UK
our business improved steadily throughout the first half returning to growth, as
measured by sales per working day, in July. The outlook for the second half is
therefore positive and in line with expectations."
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: Citigate Dewe Rogerson Ltd 020 7638 9571
Martin Jackson
Anthony Kennaway
BRAMMER PLC
2004 PRELIMINARY RESULTS
CHAIRMAN'S STATEMENT
The first six months
It is good to be able to report real progress in Brammer's fortunes in the first
six months of the year. Having completed the disposal of the Livingston
businesses our clear focus can now be upon the development and growth of the
Brammer distribution business.
Brammer's profit on ordinary activities before tax for the first half of this
year was #0.8 million which compares to a #4.0 million loss in the first half of
2003. The profit before goodwill and exceptional items for the first half of
2004, including operations now discontinued, was #5.2 million, double the #2.6
million achieved in the first half of 2003.
The chief executive's operating review provides a more detailed description of
trading but, in summary, the continuing business (Brammer Industrial Services
and central activities) contributed #5.1 million (2003 #5.3 million) on turnover
up 2% to #136.9 million, while the discontinued Livingston operation contributed
#1.6 million (2003 #0.9 million loss). There were exceptional costs of #3.2
million, largely related to the Livingston disposal, in addition to interest of
#1.6 million (2003 #1.8 million) and goodwill amortisation of #1.2 million (2003
#1.4 million). The overall profit before tax was #0.8 million (2003 #4.0
million loss). Basic earnings per share were a loss of 1.7p (2003 6.0p loss).
Adjusted earnings per share (before goodwill amortisation and exceptional items)
were 7.5p (2003 4.4p). Net debt fell from #79.7 million at 31 December 2003 to
#57.7 million.
Importantly, Brammer has emerged from a very difficult three year period with a
sound, growing and profitable business in which all of our stakeholders can look
to the future with confidence. Our strategy of concentrating on our
distribution business was laid out to shareholders in the 2003 annual report.
We stated at that time that we would, in particular, concentrate on expanding
our corporate account business in Europe and we have been encouraged by the
successes we have achieved to date with a number of large and important
customers.
Clearly the first six months have seen a significant amount of reorganisation.
Completion of the disposals has been complex and time consuming. The
reorganisation of the management structure to achieve a clearer overall focus
and shorter reporting lines has been, and will continue to be, a priority. As
ever the management of such organisational change cannot be underestimated. Two
executive directors, Jean-Marie Fink and David Hollywood, both retired during
this period and we are indebted to both of them for their important
contributions to the board and the growth of Brammer distribution. We welcomed
Terry Garthwaite in June as a non-executive director. Terry has substantial PLC
experience as a finance director and we look forward to his contribution in the
future.
The future
Brammer has become established as the pre-eminent pan-European supplier of
essential components and services to industry. Our priority is to develop the
potential and the considerable growth opportunity this positioning bestows on
the group. Whilst we continue to win new corporate accounts it is essential
that we work hard to improve the management capability, logistics and systems to
underpin and support our customers' needs. Investments of time and money will
be required to achieve these improvements.
Our chief executive, Ian Fraser, has now established his new senior management
team with the objective of achieving a greater integration and single sense of
overall purpose rather than simply managing operations on a purely geographic
and local basis. This is an important requirement if we, and our customers, are
to benefit from the powerful synergies that our pan-European business model
offers.
Current trading and dividend
Trading since the end of June has been satisfactory. European markets have been
relatively stable and our businesses have benefited from the growth in corporate
account sales. In the UK our business improved steadily throughout the first
half returning to growth, as measured by sales per working day, in July. The
outlook for the second half is therefore positive and in line with expectations.
The board has declared an unchanged interim dividend of 1.5p which will be paid
on the 4 November 2004 to shareholders on the register at the close of business
on 8 October 2004.
David Dunn
1 September 2004
CHIEF EXECUTIVE'S REVIEW
Overview
In the first half of 2004 we continued to strengthen the European market leading
position of Brammer Industrial Services ("BIS"). We also completed the disposal
of Livingston, selling the European calibration business to Air Liquide and the
rental businesses to the previous management. Free of the distractions of the
past, we are now able to concentrate on the exciting opportunities within BIS,
with lower borrowings and enhanced management focus.
Brammer Industrial Services
BIS is the leading European supplier of technical components and related
services to the maintenance, repair and operations ("MRO") markets. In the
first half revenues increased by 2% to #136.9 million, whilst operating profit
before goodwill, exceptional items and interest decreased by 3% to #5.1 million.
Profits improved on the continent but declined in the UK where, after a poor
first quarter, we are now seeing continuing improvement. Cash inflow from
operating activities in BIS was #3.8 million and net operating assets employed
reduced by #11.2 million to #52.4 million as we continued our planned reduction
in working capital, mainly achieved through an improvement in inventory turns.
In 2002 and 2003 operating cash flow exceeded operating profit by more than 60%
- continuing and improving the trend of the previous three years. We expect to
continue to produce more operating cash flow than operating profit in 2004 and
indeed over the next several years as we improve inventory turns through
managing our inventory on a European basis.
Operating margins remain unchanged in percentage terms despite price pressure in
the marketplace. At the end of the first half headcount in BIS was 1,778, which
was 44 lower than at the same time last year. Revenues per head increased by 9%
to #77,000 for the half year, following a 14% improvement last year.
In the UK, although revenues declined by 7% as weaker market conditions
continued into the first half, management actions in the first quarter
stabilised the business with like-for-like turnover increasing steadily through
the remainder of the first half. By July we had returned to modest year on year
growth as measured in sales per day. We worked hard on the cost base; six
branches were closed or merged with adjacent branches. Capital employed reduced
by #5.1 million (25%), due to improvements in inventory efficiency and the
provision by suppliers of a total of #2 million of service stock. We reduced
the number of Insites by exiting those which did not meet our profit targets and
carried out actions to improve the profitability of the remaining Insites. As a
result the total contribution from Insites increased by 11%. Several new
contracts were won with customers such as Yorkshire Water, Severn Trent Water
and Lafarge.
In France revenues increased by 5% as the investment made last year in new
product introduction and Insites began to take effect. This growth, together
with the effect of last year's cost reduction measures, helped increase
operating profit by 24%. We increased our Insites from 10 to 13 and revenues
through Insites increased by 26% compared with the first half of last year.
In Germany revenues grew by 5%, whilst margin improvement and the effect of
earlier cost reductions helped increase operating profit by 55% compared with
last year. Good progress was made on corporate accounts, with revenues in this
segment up 16%. We won a significant pneumatics contract with Volkswagen
across six locations with expected annual revenues approaching #2 million.
Further headcount reductions of 5 to 388 resulted in productivity improvement as
measured by sales per head of 6%.
In Spain revenues grew 2%. We continued to increase our sales to the MRO market
(up 8%) reducing further our exposure to the more cyclical original equipment
manufacturers ("OEM") marketplace (down 8%). We have now shed the low margin
OEM business as planned and do not expect further decline.
In the Netherlands revenues were up 5%, with good growth in MRO sales
contributing to a 3 percentage point improvement in the gross profit margin.
Several new contracts were won including Smurfit and Kamp's bakery. A new
branch was opened at Spankeren.
Strategy
We continued to implement our clear strategy
Growth
* We seek to build customer relationships with those major European groups
who are focusing on supplier rationalisation and want to establish a single
source of supply across Europe. The trend of customers to require a single
European supply is increasing. We are in a strong competitive position to
benefit from this trend. Revenues through our contracted European accounts
grew 18%. In addition the two new contracts with Smurfit and GKN will bring
additional revenues, when fully implemented, of around Euro11 million per
annum. We have significantly strengthened our corporate account business
development team.
* We have now built teams in each country which will seek Insite and added
value opportunities at our customers.
* We continue to refine our marketing approach to present as the national
and European expert in each of the most attractive market segments in our
industry.
* We are constantly vigilant to identify attractive acquisition candidates
which will bolt on to our existing operations.
Costs
* We have appointed a European purchasing director whose task will be to
build strong relationships with our suppliers. We are concentrating our
purchases with a smaller number of suppliers, thereby gaining product price
improvements as well as enhanced supplier marketing support in the field.
* We have embarked on a programme to identify and roll out best practice in
all of our operations, continuing our quest to improve productivity and
reduce costs as a percentage of revenues.
Capability
* We launched an on-line learning programme to all of our people in 9
countries. Already over 50% of our staff have started this programme, which
we expect to help significantly improve our technical and selling skills.
* We continue to evolve our system of Key Performance Indicators which will
lead to best practices being introduced in each branch, and a more
homogeneous level of service in each territory, with resultant productivity
improvements.
* Our corporate account toolkit is now being used in all territories to win
new business and add value to existing customer relationships.
* We have appointed a European IT director whose task will be to develop an
integrated IT strategy across all of our operations.
The future
We continue to have a strong presence within Europe on which to build and can
anticipate gains in market share in an otherwise fragmented market place.
Efforts to extend our leadership position and to achieve synergy benefits are
already beginning to bring benefits. The excellent cash flow generated by the
business should continue for the foreseeable future. Several initiatives are
underway which will result in the utilising of inventory on a pan-European
basis. We can be confident that operating cash flow will exceed profit for some
time to come.
Ian Fraser
1 September 2004
Brammer CONSOLIDATED PROFIT AND LOSS ACCOUNT
the unaudited group results for the six months
Six months to Six months to Full year
30 June 2004 30 June 2003 2003
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
Continuing businesses 136,876 133,873 262,512
Discontinued businesses 19,305 44,931 86,960
Total turnover 156,181 178,804 349,472
Cost of sales (107,703) (121,017) (237,128)
Exceptional items - (1,958) (25,178)
Total cost of sales (107,703) (122,975) (262,306)
Gross profit 48,478 55,829 87,166
Selling and logistics expenses (27,812) (34,623) (68,064)
Exceptional items - (1,032) (1,147)
Total selling and logistics expenses (27,812) (35,655) (69,211)
Administrative expenses before (13,865) (18,955) (33,949)
amortisation of goodwill
Exceptional items (274) (2,215) (6,955)
(14,139) (21,170) (40,904)
Amortisation of goodwill (1,188) (1,365) (2,950)
Total administrative expenses (15,327) (22,535) (43,854)
Operating profit / (loss)
Continuing businesses 4,021 4,147 5,233
Discontinued businesses 1,318 (6,508) (31,132)
Total operating profit / (loss) after 5,339 (2,361) (25,899)
exceptional items
Loss on disposal of discontinued (2,901) - -
operations
Share of associates' operating (loss) (35) 174 149
/ profit
Amortisation of goodwill in (1) (17) (10)
associates
Profit / (loss) on ordinary 2,402 (2,204) (25,760)
activities before interest
Net interest (1,556) (1,787) (3,471)
Profit / (loss) before goodwill,
exceptional items and interest
Continuing businesses 5,128 5,306 9,663
Discontinued businesses 1,638 (923) 817
6,766 4,383 10,480
Interest (1,556) (1,787) (3,471)
Profit before goodwill and 5,210 2,596 7,009
exceptional items
Goodwill (1,189) (1,382) (2,960)
Exceptional items (3,175) (5,205) (33,280)
Profit / (loss) on ordinary 846 (3,991) (29,231)
activities before tax
Tax (1,636) 1,143 (7,086)
Loss on ordinary activities after tax (790) (2,848) (36,317)
Dividends (718) (716) (2,117)
Retained loss for the period (1,508) (3,564) (38,434)
Earnings per share
Basic (1.7)p (6.0)p (75.9)p
Diluted (1.7)p (6.0)p (75.9)p
Basic before goodwill, amortisation 7.5p 4.4p 11.8p
and exceptional items
Dividend per share 1.5p 1.5p 4.5p
Brammer CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
the unaudited group statement for the six months
Six months to Six months to Full year
30 June 2004 30 June 2003 2003
Revised Revised
#'000 #'000 #'000
Loss for the period (790) (2,848) (36,317)
Exchange differences on foreign currency net investments (1,245) 454 7
Total recognised gains and losses for the period (2,035) (2,394) (36,310)
Brammer CONSOLIDATED BALANCE SHEET
the unaudited group financial position as at 30 June 2004
30 June 30 June 31 December
2004 2003 2003
Revised
#'000 #'000 #'000
Fixed assets
Intangible assets 33,346 49,701 49,569
Tangible assets Rental inventory - 30,827 4,547
Other fixed assets 11,629 19,966 19,236
Investments Associates 461 97 478
45,436 100,591 73,830
Current assets
Stock 45,109 50,550 51,018
Debtors 56,105 84,434 70,961
Cash and deposits 9,241 7,879 12,740
110,455 142,863 134,719
Creditors - due within one year (82,371) (110,367) (118,465)
Net current assets 28,084 32,496 16,254
Total assets less current liabilities 73,520 133,087 90,084
Creditors - due after more than one year (52,879) (74,294) (64,224)
Provisions for liabilities and charges (3,142) (3,452) (5,707)
Net assets employed 17,499 55,341 20,153
Capital and reserves
Called up share capital 9,573 9,573 9,573
Share premium account 3,552 3,552 3,552
Profit and loss account 4,374 42,216 7,028
Equity shareholders' funds 17,499 55,341 20,153
Brammer CONSOLIDATED CASH FLOW STATEMENT
the unaudited group cash flow for the six months
Six months to Six months to Full year
30 June 2004 30 June 2003 2003
Revised Revised
#'000 #'000 #'000
Profit / (loss) on ordinary activities before interest 2,402 (2,204) (25,760)
Accrued element of exceptional items - 3,018 2,474
Depreciation and impairment of tangible fixed assets 1,462 13,887 45,450
Amortisation of goodwill 1,189 1,382 2,960
Amortisation of owned shares 128 64 193
5,181 16,147 25,317
Share of associate's operating profit 35 (174) (149)
Loss on sale of investment 2,901 - -
Loss / (profit) on sale of fixed assets 1,040 170 (1,422)
9,157 16,143 23,746
Movement in working capital 635 (3,768) 5,631
Net cash inflow from operating activities 9,792 12,375 29,377
Returns on investments and servicing of finance
Interest received 92 57 126
Interest paid (1,768) (1,760) (3,479)
(1,676) (1,703) (3,353)
Tax received / (paid) 1,491 (189) (567)
Capital expenditure
Purchase of tangible fixed assets (8,050) (12,276) (23,758)
Sale of tangible fixed assets 2,537 6,357 14,848
(5,513) (5,919) (8,910)
Acquisitions and disposals
Purchase of subsidiaries and businesses - - (59)
Net cash acquired - - 213
- - 154
Investment in associated undertaking (44) (98) (520)
Deferred consideration paid (2,074) - (20,729)
(2,118) (98) (21,095)
Disposal of interest in associated undertaking - 378 377
Disposal of interest in subsidiaries 24,103 - -
Net cash sold (6,781) (37) (37)
15,204 243 (20,755)
Equity dividends paid - 2 (2,117)
Net cash inflow / (outflow) before management of liquid 19,298 4,809 (6,325)
resources and financing
Management of liquid resources
Deposits 431 439 (2,091)
Financing
(Repayment of loans) / new loans taken out (16,913) (7,367) 5,607
Capital element of finance leases (482) (75) (158)
Purchase of own shares (29) (771) (771)
(17,424) (8,213) 4,678
Increase / (decrease) in cash 2,305 (2,965) (3,738)
Brammer NOTES TO THE ACCOUNTS
1 COMPARATIVE RESULTS
Comparative figures for the year ended 31 December 2003 are taken from the
company's statutory accounts which have been delivered to the Registrar of
Companies with an unqualified audit report. Copies of the 2003 annual
report and the 2004 interim report are available on the company's web site
(www.brammer.plc.uk).
2 SEGMENTAL ANALYSIS
Six months ended 30 June
The business analysis of turnover, profit / (loss) before tax and net
assets employed is as follows
Brammer
Industrial Services Livingston Total
2004 2003 2004 2003 2004 2003
Revised Revised Revised
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 136,876 133,873 19,305 44,931 156,181 178,804
Profit / (loss) before goodwill, 5,128 5,306 1,638 (923) 6,766 4,383
exceptional items and interest
Goodwill (988) (1,001) (201) (381) (1,189) (1,382)
Exceptional items (155) - (3,020) (5,205) (3,175) (5,205)
Profit / (loss) before interest 3,985 4,305 (1,583) (6,509) 2,402 (2,204)
Interest (1,556) (1,787)
Profit / (loss) before tax 846 (3,991)
Net operating assets excluding 52,378 63,565 - 35,217 52,378 98,782
goodwill
Capitalised goodwill 33,346 36,622 - 13,079 33,346 49,701
Deferred consideration (4,981) (23,888) - (3,183) (4,981) (27,071)
Net operating assets 80,743 76,299 - 45,113 80,743 121,412
Net debt (57,655) (67,266)
Dividends (2,154) (2,154)
Net tax (3,435) 3,349
Net assets employed 17,499 55,341
In 2004 all the on-going costs incurred by the central functions have been
allocated to Brammer Industrial Services. The comparatives for 2003 have been
revised accordingly.
The geographic analysis of turnover, profit / (loss) before interest and net
operating assets is as follows
United Kingdom Other Europe Total
2004 2003 2004 2003 2004 2003
Revised Revised Revised
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 54,459 63,054 101,722 115,750 156,181 178,804
Profit before goodwill, exceptional 4,905 1,734 1,861 2,649 6,766 4,383
items and interest
Goodwill - - (1,189) (1,382) (1,189) (1,382)
Exceptional items (3,020) (524) (155) (4,681) (3,175) (5,205)
Profit / (loss) before interest 1,885 1,210 517 (3,414) 2,402 (2,204)
Net operating assets excluding 17,477 36,157 34,901 62,625 52,378 98,782
goodwill
Capitalised goodwill - - 33,346 49,701 33,346 49,701
Deferred consideration - - (4,981) (27,071) (4,981) (27,071)
Net operating assets 17,477 36,157 63,266 85,255 80,743 121,412
3 ACQUISITIONS AND DISPOSALS
On 15 March 2004 the group announced that it had reached agreement to sell
its equipment rental and UK calibration businesses (the "Livingston Rental
Business") to De Facto 1059 Limited ("De Facto"), a buy-out vehicle owned,
inter alia, by Mel Porter (a former director), for a contracted
consideration of #12,375,000. #6,875,000 was paid on completion, #3,000,000
will be payable in April 2005 and the balance of #2,500,000 payable in
September 2005. Further amounts will be payable in the future conditional
upon the sale of certain rental inventory by De Facto, up to a maximum of
#2,800,000. The sale completed on 31 March 2004.
Following completion the group retained a 24.9% stake in De Facto which De
Facto will have the right to redeem at a price of between #500,000 and
#2,000,000 depending upon the date of the actual repayment of the
#2,500,000 deferred cash payment.
The disposal of Livingston's continental calibration businesses also
completed on 31 March 2004. After adjustments for debt and cash the
proceeds received were Euro28,962,000 with a further Euro2,038,000 to be received
before 31 December 2004.
The results of both businesses have been reported as discontinued
businesses in the profit and loss account. During the year the discontinued
businesses contributed #5,977,000 to the group's cash inflow from operating
activities, paid #453,000 in respect of interest, received #1,942,000 in
respect of taxation and utilised #4,501,000 for net capital expenditure.
4 EARNINGS PER SHARE
2004 2003
Weighted Weighted
average Earnings/ average Earnings/
number (losses) number (losses)
Earnings of shares per share Earnings of shares per share
#'000 '000 pence #'000 '000 pence
Profit for the financial year 3,574 2,112
before exceptional items and
amortisation of goodwill
Average number of shares in issue 47,865 7.5 47,865 4.4
Exceptional items (3,175) (6.7) (5,205) (10.9)
Taxation adjustment on - - 1,627 3.4
exceptional items
Amortisation of goodwill (1,188) (2.5) (1,365) (2.9)
Amortisation of goodwill - (1) - (17) -
associates
Profit for the financial year (790) (1.7) (2,848) (6.0)
Average number of shares in issue - 47,865 (1.7) 47,865 (6.0)
5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Six months to Six months to Full year
30 June 2004 30 June 2003 2003
#'000 #'000 #'000
Increase / (decrease) in cash 2,305 (2,965) (3,738)
Cash movement from increase / (decrease) in debt and 16,964 7,003 (3,358)
lease financing and liquid resources
19,269 4,038 (7,096)
New finance leases - (89) (87)
Loans sold / (acquired) 271 (3,238) (3,074)
Exchange movements 2,524 (5,227) (6,712)
Movement in net debt 22,064 (4,516) (16,969)
Net debt at 31 December 2003 (79,719) (62,750) (62,750)
Net debt at 30 June 2004 (57,655) (67,266) (79,719)
6 BASIS OF ACCOUNTING
The interim financial statements have been prepared on the basis of the
accounting policies set out in the group's 2003 statutory accounts. The
interim financial statements were approved on 25 August 2004 by a duly
appointed and authorised committee of the board and are neither audited nor
reviewed by the auditors.
7 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.
8 INTERIM DIVIDEND
Relevant dates concerning the payment of the interim dividend are
Record date 8 October 2004
Payment date 4 November 2004
This information is provided by RNS
The company news service from the London Stock Exchange
END
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