RNS No 1264k
BRAMMER PLC
16th March 1999
1998 PRELIMINARY RESULTS
A YEAR OF STRATEGIC PROGRESS
Brammer plc, the European industrial services group, today announces
preliminary results for the year ended 31 December 1998.
Highlights
1998 1997 Increase
Turnover #238m #223m 7 %
Profit before interest #24.6m #30.7m (20)%
Profit before tax #23.9m #30.5m (22)%
Net cash inflow from operating #44.7m #40.1m 12 %
activities
Basic earnings per share 35.2p 45.8p (23)%
Dividend per share 17.8p 17.2p 4 %
. Fall in group profits was due entirely to a disappointing performance in
the UK
. Successful early action was taken to reduce BSL's costs and stock levels
and bring the business into line with market conditions
. European businesses produced record results with sales and profit before
interest up 26% and 48% respectively
. Livingston, the electronic equipment management business, increased
operating profits by 29% to a record #8.6 million
. Contract wins from KPN Telecom and Thomson CSF signify major
breakthrough in Europe for the outsourcing of the management inventory
of test equipment.
Commenting on current trading and prospects, Robert Ffoulkes-Jones, the
chairman, said:
"Both distribution and electronic equipment rental businesses now have their
own momentum and substantial growth opportunities. We continue to strengthen
each business through appropriate strategic investments.
"While 1999 will continue to pose challenges for BSL in the UK there are
early signs that the market decline may have bottomed. The benefits of
prompt action on costs and stock levels are beginning to be apparent. At
Livingston, we expect to continue making good progress as recently won
equipment management contracts get underway and further contracts are secured
later in the year.
"This early in the financial year, it is difficult to be more precise as to
the prospects for the period as a whole but I plan to give an update on
trading at our annual general meeting in May."
Enquiries: Brammer plc 0171 638 9571 (8 00am-1 00pm)
0161 928 3363 (1 00pm-4 30pm)
Robert Ffoulkes-Jones, Chairman
Ian Fraser, Chief executive
John Cumming, Finance director
Issued by: Citigate Dewe Rogerson Ltd 0171 638 9571
Martin Jackson
Duncan Murray
BRAMMER plc
1998 PRELIMINARY RESULTS
Results
Although 1998 was a disappointing year for Brammer, with profits down on the
previous year, it was also a year of important strategic progress throughout
the group. Both core businesses, distribution and electronic equipment
management, are now established as stand alone independent businesses with
their own market characteristics and critical mass. Both are also positioned
to achieve European leadership in business services key to the successful
performance of their customers.
Sales for the year increased by 7% to #238.4 million with profit before tax
down 22% to #23.9 million. Borrowings increased by #9.6 million reflecting
#31.3 million net investment in rental inventory.
The fall in profits was due to our performance in the UK. Here, the strong
pound adversely impacted on BSL s customer base, the UK's exporting and
manufacturing companies, causing demand for our products to fall as the year
progressed. Management took early and decisive action to reduce BSL s costs
and relatively high stock levels to bring the business into line with market
conditions. Softer sales prices and reduced spend with our suppliers
combined to put a squeeze on our margins.
In continental Europe, our businesses produced record results - sales were up
26% and profit before interest ahead 48%. Livingston, our electronic
equipment management business, was particularly strong with continental
European sales up 53% and profit before interest ahead 95%.
Distribution
Sales at #184.0 million were up 2% while operating profit of #16.0 million
was down by 33%. Virtually all the shortfall was due to our performance in
the UK.
We experienced good growth in sales and profits during the first third of the
year, but weakness in industrial markets in the UK became apparent in June.
UK market conditions, adversely affected by the strength of the pound,
worsened considerably in the final quarter and margins were under pressure.
As a result, we implemented a cost and stock reduction programme. BSL's UK
headcount ended the year 12% below its peak of June 1997 but the reduction in
our spend with suppliers together with softer sales prices combined to reduce
BSL's trading margins.
We continued our product development activity in the UK with the introduction
of a range of fluid power (pneumatic and hydraulic) products in April. This
introduction was supported by the formation of a central call centre of
industry and product experts. They can be called upon in a 3-way
conference call for advice when the customer is connected to one of our local
customer service centres. This strategy has been highly successful and fluid
power will make a significant contribution to our 1999 results.
Our investment in integrated supply has continued with BSL INSITE branches at
Pedigree Pet Foods and Rover. This concept establishes a BSL branch on the
customer s premises and provides rapid flexible service across a wide range
of products with access to the BSL network. We would expect to supply a
greater share of the customer s needs under such arrangements.
Sales at Roulement Service in France developed well following a management
re-organisation in the Spring. Our commercial initiative to develop market
share in the Ile de France, utilising extensive IT developments and supplying
direct from our Nozay national distribution centre, made good progress
resulting in a significant increase in market share. This Paris Plan will
continue through 1999 and will improve our competitive position in this
important market.
In Spain, Rodamientos USA opened two new branches at Alicante and Logrono,
relocated the Pamplona branch and upgraded our Madrid branch. Sales were
ahead by 4% but profitability decreased as we continued to invest in IT
developments and range extension. The enterprise-wide MOVEX IT system went
live in December and will provide better stock control and management
information.
In November 1998, we acquired a 25% holding in Sociedade de Rolamentos
S.D.R., Portugal s leading company in our field, with an option to buy the
balance. Early indications are that Rolamentos has a strong base upon which
we can build a national distribution company in Portugal as an integral part
of our European distribution strategy.
Our quest to improve efficiency and productivity was supported by a
significant investment in IT. Each UK service centre has access to our
European product database which contains the full technical details of over
60,000 products. This technology facilitates product definition and
selection and provides rapid access to detailed product specifications. This
system will be expanded to include the majority of our range and will
ultimately be rolled out across Europe.
BSL Engineering had a difficult year in tough markets with an overall
reduction in sales of 2%. The main BSL Engineering office was re-located to
a new purpose built facility near Manchester. We continue to develop value
added services for customers and to extend the product range.
Electronic equipment management
Revenue in 1998 of #54.3 million was up 29% and operating profit was at a
record level of #8.6 million, some 29% ahead of 1997 with the
telecommunications sector particularly strong. Our three continental
European businesses broke records for revenue and operating profit, ahead of
1997 by 53% and 95% respectively.
We have now achieved critical mass in each of the major countries where we do
business. Our strategy of positioning ourselves as a business, independent
of any one manufacturer, able to provide a cradle to grave range of
computer and test and measurement services across Europe is bringing us
competitive advantage.
We have identified a matrix of four distinct businesses across Europe. The
first business, being that upon which Livingston was founded, is test and
measurement equipment rental. This operation, which provides equipment on
short term rental to a wide array of industries, including
telecommunications, has the greatest penetration in the well developed UK and
French markets. Significant opportunities exist for growth in Germany and
Benelux as these markets develop.
Our second business which was started in the early 1990 s is that of short
term computer (work stations and servers) rental. We now represent all the
major platform suppliers throughout Europe and provide short term rental
services to a large customer base including financial institutions, software
houses, consultants and telecommunications and defence companies. This
business is well developed in Holland and Germany and the second half saw
significant recovery in the UK as management changes took effect. The French
market offers further growth opportunities.
A third business was developed in the mid 1990's from our computer rental
business. This operation, which provides for the management of computer
equipment inventories for major customers, utilises several of Livingston's
core competencies. We have forged strong links with all the major platform
suppliers and many of the major software houses. We now manage Sun's
demonstration stocks in many European countries, Silicon Graphics
demonstration stock in Germany, France and the UK, and IBM's demonstration
stocks in Germany. This service ensures that the IT manufacturers
representatives can be assured of delivery of the right machine, loaded with
the correct software to the right location on time, a true value added
outsourcing service. A similar service is provided to the independent
software vendors (often in partnership with a platform supplier). Major
customers include Parametric in Germany and Oracle in the UK. Our computer
management business is most developed in Germany, is growing rapidly in the
UK, and has excellent further growth opportunities in France and Holland.
Major progress was made in our fourth and more recent business - test and
measurement equipment management services. Our customers outsource to us the
total management of their instrumentation test equipment and we provide a
service which includes all of Livingston s core skills including product
sourcing, rental, calibration and repair, tracking and management services,
technical support, and eventual disposal. Our contract with KPN Telecom was
the first of its kind throughout Europe and we have recently announced a five
year agreement, subject to regulatory approval, with Thomson CSF expected to
be worth #66 million providing all of the above management services
throughout France for an estimated 80,000 items of equipment. These
contracts are service driven and do not require significant investment in
rental equipment. This type of service is attracting interest from a number
of defence and telecommunication companies across Europe and we expect to
make further announcements of contract wins during 1999.
Dividends
Our confidence in the future of the group leads us to recommend an increased
final dividend of 11.8p which, if approved, will be paid on 1 July 1999 to
shareholders on the register at 26 March 1999. The total dividend for the
year of 17.8p per share is 3.5% higher than the previous year and is covered
twice by our earnings.
Current trading and prospects
Both businesses now have their own momentum and substantial growth
opportunities. However 1999 will continue to pose challenges for BSL in the
UK, although there are early signs that the decline may have bottomed. As
for Livingston, we expect to make good progress as equipment management
contracts get underway. This early in the financial year it is difficult to
be more precise as to the prospects for the period as a whole but the
chairman plans to give an update on trading at our annual general meeting in
May.
Consolidated profit and loss account for the year
ended 31 December 1998
The group 1998 1997
Notes #'000 #'000
Turnover 1 238,369 223,055
Cost of sales (150,572) (135,287)
------------ -----------
Gross profit 87,797 87,768
Distribution costs (43,409) (39,280)
Administrative expenses (20,861) (18,683)
----------- -----------
Operating profit 23,527 29,805
Share of associate's operating loss (7) -
Profit on sale of fixed assets 1,050 911
----------- ----------
Profit on ordinary activities 1 24,570 30,716
before interest
Net interest (635) (216)
----------- ----------
Profit on ordinary activities 1 23,935 30,500
before tax
Tax (7,380) (9,098)
----------- ----------
Profit on ordinary activities after 16,555 21,402
tax
Dividends 5 (8,393) (8,037)
----------- ----------
Profit for the year retained in the 8,162 13,365
business ----------- ----------
Earnings per share 2
Basic 35.2p 45.8p
Diluted 35.1p 45.1p
Dividend per share 5 17.8p 17.2p
During 1998 the group consisted of only continuing businesses. There is no
material difference between the results as disclosed above and the results on
an unmodified historic cost basis.
Consolidated cash flow statement for the year ended 31 December 1998
The group 1998 1997
#'000 #'000
Operating profit 23,527 29,805
Depreciation of tangible fixed assets 21,732 15,637
----------- ----------
45,259 45,442
----------- ----------
Movement in working capital
Stock 5,493 (5,590)
Debtors 411 (7,189)
Creditors (6,480) 7,389
---------- ---------
(576) (5,390)
---------- ----------
Net cash inflow from operating 44,683 40,052
activities ---------- ----------
Returns on investments and servicing
of finance
Interest received 799 690
Interest paid (1,359) (1,053)
---------- ----------
(560) (363)
---------- ----------
Tax paid (8,388) (10,243)
---------- ----------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (47,692) (32,342)
Sale of tangible fixed assets 12,074 7,178
---------- ----------
(35,618) (25,164)
----------- ----------
Acquisitions and disposals
Purchase of subsidiaries and - (2,719)
businesses
Purchase of investment in associate (421) -
Net cash acquired - (43)
----------- ----------
(421) (2,762)
Deferred consideration (855) (1,343)
----------- ----------
(1,276) (4,105)
----------- ----------
Equity dividends paid (6,405) (6,762)
----------- ----------
Net cash outflow before management of
liquid resources and financing (7,564) (6,585)
----------- ----------
Management of liquid resources
Deposits 690 (2,650)
----------- ----------
Financing
Share options 236 825
SAYE scheme 68 220
Loans less than one year (454) (288)
Loans greater than one year 12,344 6,464
Finance leases (143) (199)
----------- ----------
12,051 7,022
----------- ----------
Increase / (decrease) in cash 5,177 (2,213)
Cash outflow from decrease in debt and (12,437) (3,327)
lease financing ----------- ----------
(7,260) (5,540)
New finance leases - (51)
Exchange movements (2,301) 2,530
----------- ----------
Movement in net funds (9,561) (3,061)
Net funds at 31 December 1997 (3,487) (426)
----------- ----------
Net funds at 31 December 1998 (13,048) (3,487)
----------- ----------
Notes
1 Turnover, profit and net assets
The business analysis of turnover, profit before tax and net assets employed
is as follows
Turnover Profit before tax
1998 1997 1997 1998 1997
Proforma Proforma
# 000 # 000 # 000 # 000 # 000
Distribution - 184,028 184,141 180,980 16,018 24,206
Group
Distribution - - - - (7) -
Associate
Electronic
equipment
management 54,341 43,659 42,075 8,559 6,900
---------- --------- ---------- ---------- ---------
238,369 227,800 223,055 24,570 31,106
Financing - - - (635) (226)
---------- ---------- ---------- ---------- ---------
238,369 227,800 223,055 23,935 30,880
---------- ---------- ---------- ---------- ---------
Net assets employed
1997 1998 1997 1997
Proforma
# 000 # 000 # 000 # 000
Distribution - Group 24,057 51,470 48,037 47,018
Distribution - Associate - 414 - -
Electronic equipment
management 6,659 40,678 28,986 27,815
-------- ---------- ---------- ---------
30,716 92,562 77,023 74,833
Financing (216) (26,268) (20,779) (19,053)
-------- ---------- ---------- ---------
30,500 66,294 56,244 55,780
-------- ---------- ---------- ---------
Financing represents interest, net funds, capitalised goodwill, dividends and
tax payable, all of which relate to the group as a whole and cannot
meaningfully be allocated between different business sectors.
The proforma figures for 1997, which are unaudited, represent the group's
results for 1997 translated at the rates of exchange which ruled as at 31
December 1998.
The geographic analysis of turnover, profit before interest and net operating
assets is as follows
Turnover Profit before interest
1998 1997 1997 1998 1997
Proforma Proforma
# 000 # 000 # 000 # 000 # 000
United Kingdom 146,694 150,515 150,515 12,866 22,806
Other Europe - 91,675 77,285 72,540 11,711 8,300
Group
Other Europe - - - - (7) -
Associate --------- ---------- ---------- ---------- ---------
238,369 227,800 223,055 24,570 31,106
--------- ---------- ---------- ---------- ---------
Net operating assets
1997 1998 1997 1997
Proforma
# 000 # 000 # 000 # 000
United Kingdom 22,806 45,901 43,569 43,569
Other Europe - Group 7,910 46,247 33,454 31,264
Other Europe - Associate - 414 - -
---------- --------- ---------- ---------
30,716 92,562 77,023 74,833
---------- --------- ---------- ---------
Turnover to third parties by destination is not materially different to
turnover by origin.
Net operating assets excludes net funds, capitalised goodwill, dividends and
tax payable, all of which relate to the group as a whole and cannot
meaningfully be allocated between different geographic sectors.
2 Earnings per share
1998 1997
# 000 # 000
Earnings after tax 16,555 21,402
---------- ---------
Numbers Numbers
Average number of shares in issue 47,030 46,692
(basic)
Share options outstanding 136 687
Deferred consideration shares - 81
outstanding ----------- ----------
Average number of shares in issue 47,166 47,460
(diluted) ----------- ----------
3 Acquisitions
On 18 November 1998, the group acquired a 25% stake in Sociedade de
Rolamentos S.D.R. S.A. ( Rolamentos ). The acquisition has been accounted for
as an associated undertaking as the group has a significant, but not
dominant, influence over the running of the company. The purchase price was
#421,000 based on the group s share of Rolamentos net assets at the date of
acquisition of #331,000 and expenses of #90,000. The carrying value of
#414,000 represents the purchase price less the group s share of the pre-tax
loss earned from acquisition to 31 December 1998 of #7,000.
On 31 December 1998, in partnership with KPN Telecom, the group formed a
Dutch registered company, Livingston Calibration B.V., which immediately
acquired the calibration related assets and business of KPN Telecom. KPN
Telecom owns 60% of Livingston Calibration B.V. and the group owns 40% with
an agreement to purchase the remaining 60% over a three year period. As the
group has full management control of Livingston Calibration B.V., the company
has been consolidated as a full subsidiary with deferred consideration
entries relating to the remaining 60%.
4 Balance sheet highlights
1998 1997
# 000 # 000
Goodwill 1,574 -
Fixed assets 60,367 42,914
Other working capital 32,195 31,919
Tax (9,223) (10,152)
Net (borrowings) / cash balances (13,048) (3,487)
Dividends (5,571) (5,414)
Financed by ------------- ------------
Shareholders equity 66,294 55,780
------------- ------------
5 Dividend
Relevant dates concerning the payment of the final dividend are
Record date 26 March 1999
Annual general meeting 25 May 1999
Payment date 1 July 1999
6 Comparative results
The profit and loss account for the year to 31 December 1997 is an extract
from the published accounts of the group. The published accounts in original
form have been delivered to the Registrar of Companies with an unqualified
audit report.
7 Preliminary announcement
A copy of the preliminary announcement is available for inspection at the
registered office of the company, 1 Tabley Court, Victoria Street,
Altrincham, Cheshire WA14 1EZ and the offices of Citigate Dewe Rogerson
Limited, 3 London Wall Buildings, London Wall, London EC2M 5SY.
END
FR ALLVDVSIELAA
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