TIDMLPA
RNS Number : 8012O
LPA Group PLC
03 February 2023
LPA GROUP PLC
LPA Group plc ("LPA", the "Company" or the "Group"), the high
reliability LED lighting, electronic and electro-mechanical system
designer and manufacture, announces its Preliminary Results for the
year to 30(th) September 2022.
Preliminary Results key points:
Financial
-- Order Entry at GBP19.7m (2021: GBP23.2m)
-- Order Book at GBP27.8m (2021: GBP27.4m)
-- Revenue GBP19.3m (2021: GBP18.3m)
-- Underlying Operating Loss* GBP0.23m (2021: (Loss) 0.27m)
-- Profit before Tax amounted to GBP1.07m (2021: (Loss) 0.39m)
-- Basic Earnings/(Loss) per share amounted to 8.99p (2021: (Loss) 0.17p)
-- No dividends declared or paid in 2022 or 2021
-- Gearing** reduced to 3.5% (2021: 11.9%)
*Operating Profit/(Loss) before Share Based Payments and
Exceptional Costs
** Net Debt as a percentage of Total Equity
The year to 30(th) September 2022, included the following
highlights and operational developments.
-- Record year for our new LED tube product with significant
orders from UK and worldwide customers. This is an important step
as we approach the September 2023 ban across the EU on the sale of
old technology fluorescent tubes.
-- Excellent year for new Plane Power range of products with
customers now including - Heathrow, Shanghai, Beijing, Copenhagen,
Melbourne, Auckland, Stockholm and Schiphol airports.
-- Appointment of first employee outside of the UK in support of
growth plans for the DACH region. This is an essential resource in
support of some of the biggest rolling stock customers in the
world.
-- Continued growth of distribution network to support growth
plans for both our electronic / lighting, and electro-mechanical
business divisions.
-- Successful delivery of the Viaggio Nightjet / ÖBB project,
which is the most technically advanced intelligent lighting system
ever undertaken by the Group. This is a flagship platform for the
customer with further follow-on orders expected.
Robert B Horvath - Chairman commented:
"The year to September 2022 was challenging however, we are
reporting a profit before tax of GBP1.1m; albeit heavily influenced
by exceptional items and a slower than expected first half.
Encouragingly the second half was much stronger than the first half
at the operating level although the business traditionally has a
stronger second half performance, not least because December is a
shorter trading month. Our order entry during the year was robust
and I am pleased to report that our order book remains resilient
with good opportunities for further growth currently in
negotiation.
During the year there was a strong emphasis on rebuilding
executive capability across the Group and specifically in the
operating companies. We have recruited well for our
electro-mechanical subsidiary and strengthened the senior
leadership team. We have more to do to ensure that we can deliver
our workload efficiently, but good progress has been made.
As I reported last year, we aimed to build up cash reserves
recognising that as we start to grow again following the last two
years of reduced turnover there will be pressure on working
capital. The vacant land that we had inherited and had no plans to
use was sold and realised GBP1.7m of cash which we are retaining in
the business to create capacity and give us the agility to respond
quickly to new business opportunities to enhance the product
range.
We are very alive to global supply chain issues that we and our
customers are experiencing which could delay our own ability to
deliver finished product. Additionally, where we supply to new
build projects, we are only a small part of our customer's overall
project, and it is this that often causes re-scheduling. In the
face of these headwinds we are concentrating on being more agile
and to keep higher stock levels as 'just in time' is not a viable
solution to our customers' often irregular demands and call offs.
The rebalancing of the business by working closer with our
customers in the aftercare market will support a more even
production flow and we continue to actively chase down these
revenue opportunities.
Our gearing fell to a modest 3.5% from 11.9% because of our
strong cash position, and our net asset value grew even after a
small reduction in the actuarial valuation of our (closed) defined
benefit pension scheme. The trustees of the defined benefit scheme
(of which I remain Chairman) sought to de-risk the scheme last year
and we have been fortunate with the resultant impact and resilience
of the Trust's investments given all that has happened in the
financial markets in 2022. The pension remains in a healthy
surplus.
We anticipate an overall return to operating profitability in FY
2023, with stronger recovery thereafter, and accordingly we expect
to resume dividend payments for this financial year. The Board has
confidence in the prospects for the Group, supported by our high
quality customers, growing order book, visibility of new business
and our overall strategy."
3(rd) February 2023
Enquires: www.lpa-group.com Tel:
------------------------------------ ------------------- --------------
LPA Group plc
Robert B Horvath Chairman 01799 512844
Paul Curtis CEO 01799 512858
finnCap NOMAD and Broker 020 7220 0500
Ed Frisby / Abigail Kelly
(Corporate Finance)
Tim Redfern / Charlotte Sutcliffe
(ECM)
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identi ed by their use of terms and phrases such as "believe",
"could", "should" "envisage", "estimate", "intend", "may", "plan",
"potentially", "expect", "will" or the negative of those,
variations or comparable expressions, including references to
assumptions. These forward looking statements are not based on
historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of
operations, performance, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
competitive advantages, business prospects and opportunities. Such
forward looking statements re ect the Directors' current beliefs
and assumptions and are based on information currently available to
the Directors.
Chairman's Statement
Overview
It has been a busy year for us as we rebuild the individual
business plans for the members of the Group that result directly
from our strategic planning exercise. These plans cover markets,
people, operations and facilities and will naturally morph as
opportunity and markets dictate.
We have long recognised the need to broaden our offering as some
of our operations have become too reliant on a few large customers.
A lot of our future project work whilst still robust continues to
suffer from re-scheduling by our customers and this was reflected
in our ability to cover our overhead in the first part of the year.
We managed the second half of the year in a more conservative way
and are actively pursuing projects that have more immediate
delivery times. In the second half we began to see the impact that
the aftercare markets for our customers could have on building
resilience into our overhead recovery and as a result, we returned
to profitability. We are set up well going forward and have ended
the year with a strong order book replacing most of what has been
delivered this year and at the time of writing it has grown still
further.
We have had a very good response to our customer and
relationship management programmes and we have signed up a number
of new distributor partners across the globe this year as well as
seeing Channel expand its distribution products here in the UK. It
was also very encouraging to see the end of pandemic restrictions
and to attend Innotrans in Berlin this year. We had a successful
event and it was heartening to gain the opportunity once again to
be face to face and enjoy open conversations with so many customers
that have been unable to travel.
The planning highlighted our need to recruit into a number of
key posts and some high calibre people have been appointed to take
the Group forward. The new Managing director for our
electro-mechanical systems operations commenced in August 2022 and
is now well in post. He and the team have recruited a new Technical
Engineering director and already we are seeing the impact on their
business plans. We have struggled to recruit an MD for our Channel
business and must go back and re-think the scope of how this
operation functions. Our new Group CFO, Stuart Stanyard, will join
the Board in March 2023 and will in place before the AGM. We have
recruited heavily into our Sales teams and into engineering
competency generally and this should impact the second half of the
current year and beyond. We have also been conscious that to
recruit this talent pool we need to rebase our reward mechanisms to
retain more moderate salaries and to increase the performance
related element of our remuneration packages.
As a market leading designer and manufacturer of high
reliability electronic, electro-mechanical components and systems,
we pride ourselves on our capabilities. Operationally, the
manufacturing facilities remain first class. We have upgraded some
of our machinery and tooling and we will look to broaden our
offering with a limited amount of Capex in the new year. We have
investment to make in our enterprise resource planning ("ERP")
which will only enhance our ability to manage productivity going
forward. The incidence of turnover in our staff who operate our
facilities has been manageable and throughout the last two years we
have sought to bring in apprentices and young engineers.
To ensure that we had plenty of working capital to carry us
through what is a difficult trading environment both in the UK and
in our export markets we sold some vacant land realising a
substantial GBP1.5m profit; the profit and cash are reflected in
these accounts. We are continuing to look to buy and re-invent
Chairman's statement (continued)
products from ours and other businesses that will enhance our
offering particularly in the aftercare market and having a strong
cash position will make us that much more agile to move
quickly.
Shareholders and Investors
We want to communicate our long-term plans to deliver
shareholder value in line with our vision and mission and our
continuing commitment to our reputation. Therefore, the Chairman
and the CEO will continue to meet key shareholders where possible
in person and work closely with its Brokers and Advisers to ensure
regular and open dialogue.
Importantly, we have stakeholders, in the wider sense, all over
the world and we have struggled in the last two years to see them.
The Group is in the business of long-term contracts and projects
that we export widely and this needs to be reflected in our
stakeholder relationships which must be proactive, long term,
visible and embedded into our corporate culture. Our staff need to
be able to travel and meet our customers first hand, as much of
what we do is solutions based and flows from these interactions. We
have now recruited our first senior employee who resides in our
DACH (Germany, Austria and Switzerland) market and we believe this
investment will only strengthen our relationships further.
Dividends and Pension Fund
No dividends were declared in 2021 and no interim or final
dividends have been declared in 2022. The Board believes in a
progressive dividend policy and so will keep the policy under
review, however, given the ongoing economic and market challenges,
we believe it continues to remain appropriate in the shorter term
to defer any resumption of the policy.
The LPA Industries Limited Defined Benefit Scheme was part of
the Deloitte Pensions Master Plan throughout the entire year under
review. This arrangement had included the transfer of the advisory
functions, administration and the pensioner payroll to Deloitte.
The total costs of this transition have been substantial as the
Scheme has necessarily been subject to a level of scrutiny and
audit to ensure that it can be prepared for an eventual exit to an
insurance provider. The costs of running the scheme have been borne
by the Company and this year amounted to GBP174,800 (2021:
GBP283,128 including GBP100,000 of Company contribution). The
rectification work is largely complete and subject to GMP
equalisation ongoing discussion we anticipate substantially reduced
costs going forward.
A full Actuarial valuation of the Scheme was carried out in
March 2021 which indicated the Scheme was at a healthy 121% funding
level. At 31 March 2022 an actuarial report indicated that this had
risen to 127% of the actuarial funding level. The benefit of the
change in investment strategy in January 2022, when the Trustees
having undertaken a review in 2021 agreed to lock in the gains and
de risk the scheme, has been beneficial. The key driver for the
then improved funding position has been the higher than assumed
returns on the Scheme's assets and the changes in financial
conditions which have reduced the liabilities. It is natural for
the Scheme's funding level to fluctuate over time reflecting
changes in the financial markets and this was apparent during the
last six months of the year under review especially sparked by the
mini- budget on 23 September 2022. Over the year to 30 September
2022 the Scheme's assets, which are with Legal & General
Investment Managers in LGIM funds, marginally outperformed the
benchmark return at -24.8% versus -25%.
Chairman's statement (continued)
The IAS19 actuarial surplus recognised at 30 September 2022 was
GBP2.5m (2021 restated: GBP2.6m). The Trustees, under advice, did
not seek any voluntary employer contributions during the year from
the Company (2021: GBP100,000). The IAS19 position shown in the
accounts reflects the impact of rising interest rates on the
present value of the Assets and the liability to pay pensions in
the future.
Employees
Our people and our investment in them is key to our future
success. Their skills alone are not enough without a commitment to
the style and corporate values that the Board are committed to
promoting. Our recently appointed subsidiary directors are fully
committed to these values and we will see the impact of this in the
coming years.
The general health, and well-being of our employees personally,
cannot be underestimated. We have had a number of retirements of
long-standing staff during the pandemic; but we are not alone in
this. Senior management time on people issues, managing our
employee numbers and the cost base is now part of daily routine.
Communication with our staff and progressive investment in their
well-being will distinguish us and we hope to persuade more
youngsters and apprentices to join an engineering group.
We pride ourselves on our engineering skills and our factory
operations and we are committed to keeping them intact to fulfil
our record order book. We do maintain flexibility through use of
agency and temporary contracts, but we have no zero-hour contracts
.
I should like to thank all our employees, past and present, for
their hard work and diligence during yet another challenging
year.
Board and Management
Board members' biographies and relevant experience are published
on the Group's website www.lpa-group.com .
Paul Curtis (CEO) heads up the Executive Team and we have
retained some interim support following the departure of Chris
Buckenham. We have secured a contract with our new Group Finance
Director who will join before the AGM. Andrew Jenner, as Senior
Independent Director, and Chair of the Audit Committee has been in
post throughout the year under review as has Gordon Wakeford who is
chairman of our Remuneration Committee.
We have started a broader communication programme including a
comprehensive newsletter to our Employees, this was published
shortly after the year end and will be updated every 6 months. The
Board's belief in instilling our corporate values, including
through induction and regular communication, remains a
priority.
Chairman's statement (continued)
Outlook
The Executive team have a strong order book to work with, a
solid balance sheet, positive cash flow and importantly a good
plan. It will take a little longer to see the impact of such a
significant change in the group's leadership and given the
gestation period for our engineers to turn opportunity into quality
engineered products we anticipate a strong second half to the
current financial year and thereafter. The Company has a bright
future built on our capabilities and great customer
relationships.
Robert B Horvath
Chairman
2(nd) February 2023
Business Model and Strategy
The Group is a quoted Small and Medium-sized Enterprise (SME)
listed in the Electronic and Electrical section of the Alternative
Investment Market (AIM) of the London Stock Exchange.
LPA is a market leading designer, manufacturer and supplier of
high reliability, LED based lighting, electronic systems,
electro-mechanical systems and a distributor of engineered
components supplying markets operating within high dependency,
hostile and benign environments which focuses on the market
segments of rail, rail infrastructure, aviation, airport
infrastructure and defence. These are viewed as stable / growth
markets both in the UK and globally. All Group activities serve the
same markets (to a greater or lesser extent), have a mutual
dependence on transportation (which accounts for more than two
thirds of Group turnover), share resource and frequently work on
the same projects.
The Group has a reputation for innovation, providing cost
effective solutions to customers' problems which aim to improve
reliability and reduce maintenance and life cycle costs. Three
distinct sites across the UK are operated, namely:
LPA operations Market segment Products, solutions, and
technologies
LPA Connection Electro-mechanical
Systems systems * Hybrid / battery control boxes and systems
Light & Power
House A designer and manufacturer
Shire Hill of electro-mechanical * Control panels & boxes
Saffron Walden systems and components
CB11 3AQ, UK to the rail, aircraft
Tel: +44 (0)1799 ground support and niche * Enclosures, fabrications, laser cut, form & weld
512800 industrial markets.
* Rail, aircraft, ship & industrial connectors
* Shore supply systems
* Transport turnkey engineering and manufacturing
services
--------------------------------- -------------------------------------------------------------
Email: enquiries@lpa-connect.com
LPA Channel Engineered component
Electric distribution * Circuit breakers
Bath Road High value, high level
Thatcham service distributor * Connectors
Berkshire and added value solutions
RG18 3ST, UK provider to the rail
Tel: +44 (0)1635 and aerospace & defence * Fans & motors
864866 markets.
* Relays & contactors
* Switches
* USB charging units
--------------------------------- -------------------------------------------------------------
Email: enquiries@lpa-channel.com
LPA Lighting LED lighting and electronic
Systems systems * Electronic control systems
LPA House
Ripley Drive A designer and manufacturer
Normanton of LED lighting and * Electronic monitoring systems
West Yorkshire electronic systems which
WF6 1QT, UK serve the rail, infrastructure,
Tel: +44 (0)1924 and other high reliability * Fluorescent lamp Inverters
224100 markets
* Complete rolling stock interior lighting systems
* Rolling stock interior and exterior door status
indication systems
* Rolling stock seat electronics solutions
--------------------------------- -------------------------------------------------------------
Email: enquiries@lpa-light.com
Business Model and Strategy (continued)
Group revenues are derived from both large value projects and
smaller value routine orders with the route to market a combination
of direct and indirect for most products. Agents and distributors
may be used, particularly in overseas markets, although larger
projects continue to require direct contact in most cases.
A wide range of leading organisations form our customer base,
including: Alstom, Avanti, BAA, BAe Systems, CAF, Compin, CRRC,
Downer EDI, First Group, Grammer, Heathrow Airport, Hitachi, ITW
GSE, Kinki Sharyo, Knorr Bremse, Leonardo, Omer, Shanghai Pudong
Airport, Siemens, SNCF, Stadler, Spirit Aerospace, Taiwan Rolling
Stock Company, Transport for London, Unipart Rail and Wabtec .
It is our intention to strengthen the Group's position within
the global marketplace by growing our customer base, alongside the
addition of new products and the undertaking of selected strategic
acquisitions. This is underpinned by our Vision, Mission and
Objectives as detailed below and the business planning that we do
each year.
Vision, Mission & Objectives (VMO)
V ision
-- To be a market leading electronic / electro-mechanical
engineering Group, supplying high quality components and systems to
customers in safety critical and challenging markets.
M ission
-- Provide sustainable growth and returns to shareholders.
-- Grow organically and by acquisition.
-- Be our customers' first choice for products and services.
-- Be an ethical and responsible employer.
O bjectives
-- Promote and build on the history and brand of LPA.
-- Ensure all companies within the Group deliver 'best in class' products and services.
-- Focus on reducing dependency on the transportation market.
-- Continuous innovation and product development.
-- Improved sales channels for export.
-- Targeted acquisitions to bring growth, technology, or access to markets.
-- Work together across the Group and maximise opportunities.
-- Exploit Group capability and technology to create new products and service new markets.
-- Be an employer of choice.
Values and Culture
Investment in our people is paramount to our success and we have
created clear communication and development strategies to enhance
skills and ensure that we all understand and align to Group values,
culture and best practice. This is supported by the Board and
Executive teams and demonstrated by their visibility and
accessibility across the Group.
Our core values are promoted throughout the Group. These are set
out below and published on our website www.lpa-group.com .
Business Model and Strategy (continued)
LPA Core Values
-- L eadership - you do not need to be in a position of power to
lead in what you do.
-- P assion - love what you do, use it to drive both yourself
and the business forward.
-- A ccountability -whatever you do, own it and do it well.
-- Continuous Product Improvement - staying ahead of the
competition.
-- Personal Growth - always seek to learn and improve.
-- Diversity - everyone deserves a chance and a voice.
-- Fun - yes, it is work, but it does not mean we cannot enjoy
it!
-- Innovation - technology is everything to us, look forward and
push the boundaries.
-- Integrity - honesty and respect are key to who we are.
-- Teamwork - work with your colleagues not against them.
Chief Executive Officer's Review
Trading Results
An increase in activity during H2 ensured a positive trading
period but fell short of full recovery from the difficult trading
experienced during H1, resulting in an underlying operating loss
for the full year slightly ahead of prior year at GBP0.23m (2021:
Loss GBP0.27m). During the period, the successful sale of a piece
of unused land held by the Group, realised levels exceeding
expectations and raised a net profit of GBP1.51m, resulting in a
final PBT for the year of GBP1.07m (2021: Loss of GBP0.39m).
Even though there were several delayed project awards within the
period, orders slightly edged revenues, resulting in the orderbook
increasing marginally during the year and remaining at a solid
GBP27.7m (2021: GBP27.3m).
Added Value (AV) for the year remained broadly in line with
expectation at 49.1% (2021: 50.5%) but suffered from general
inflationary pressure and increasing material costs across all
sectors. This is an area being actively managed to ensure that
future revenues continue to remain at AV expectations.
2022 Summary
-- Order book increased to GBP27.7m (2021: GBP27.3m)
-- Order entry at GBP19.7m (2021: GBP23.2m)
-- Revenue at GBP19.3m (2021: GBP18.3m)
-- Underlying Operating Loss of GBP0.23m (2021: Loss GBP0.27m)
-- Profit before tax (including sale of land) at GBP1.07m (2021: Loss of GBP0.39m)
-- Net cash inflow from operating activities GBP0.1m (2021: GBP1.2m).
Markets
Aviation (aircraft) build programmes have remained steady for
the year with revenues resulting at expected levels. The Group
involvement is predominantly on the A350 and A220 aircraft and,
with both these aircraft programs intending to increase production
rates, it is forecast that the business in this area will increase
as we move through 2023 and beyond. Both these platforms enjoy
strong orderbooks, covering multiple customers, and are scheduled
to remain in production for many years.
With the rapid development of electric and other powertrain
technology there are several opportunities developing for a new
generation of flight vehicles. This is an area of much interest to
the Group and one where we have been subsequently focusing our
efforts. This is an industry in its infancy but is one where we are
looking to be successful over the coming years as it comes of
age.
Aviation (infrastructure) performed well in the year, with
revenues increasing 96% and orders increasing 68%, when compared to
2021 levels. Export at 81% was a strong feature within the revenue
number and demonstrates the importance of the improved sales
channels that are now in place for this segment. The key objective
of appointing distribution partners within all 1(st) tier targeted
countries is nearly complete and efforts are now ongoing in
expanding this further to include 2(nd) tier countries and beyond.
This expansion and management of our distribution network is an
essential strategic program and crucial to our vision of building a
robust worldwide sales network of which further developed products
can be promoted through.
Chief Executive Officer's Review (continued)
During the year the Group also launched the new Plane Power
cable carrying system. As with the Plane Power connectors, the
product was received well by our customer base and initial orders
for airports in the UK and Australia were received within the
period.
Rail has seen some recovery during the period but is still
experiencing some frustrations and delays with project new build
schedules. This is however somewhat being offset by the expansion
of our sales network and the drive towards an increased product
offering. The aftercare market remains a key area for the Group and
is one where we are now starting to see some of the previously
stalled spending being released.
The expansion of our global sales network and the addition of a
dedicated LPA sales resource in the DACH market is progressing well
for our Lighting and Electronics business. This increased support
brings better market intelligence and offers a greater level of
service and support, which is being appreciated by both existing
and potential customers. This expanded coverage is essential for
our LED tube product which is receiving much interest as we
approach the September 2023 ban across the EU on the sale of old
technology fluorescent tubes. It is envisaged that this change in
legislation will create several opportunities for this product over
the current and coming years.
Work is also underway in the standardisation of our Rail
connector range with a view of targeting the Rail aftermarket
sector within countries other than the UK. As with our Lighting and
Electronics business, this will again rely on the development and
expansion of our sales channels in these regions. This is however
fast becoming a core skill and competence within the Group and is a
key development area receiving much focus.
Industrial market expansion is a somewhat new area for the Group
and will look to target niches such as infrastructure, marine and
energy. In support of this we have taken on new products at our
distribution business and strengthened our sales team within our
electro-mechanical business. These are the first steps into these
markets but are steps that we believe to be essential for growth
and the development of a diverse sales profile.
Operational Review
The transition of the business from a predominantly project
driven model to one that has a balance of projects and standard
products, serving multiple markets and countries, is firmly
underway. This is however a medium-term strategy and, as such, it
will take time before the benefits of this are truly realised.
In support of this vision, there has been much change within the
business units in relation to both process and people. The complete
refresh of our sales teams, in both our distribution business and
electro-mechanical business, is now complete, and coming up to
speed. Several other senior appointments across the Group have also
been concluded, which although impacting overhead costs, they are
essential in achieving the goals of growth that the business
has.
Our electro-mechanical business is well on its way to achieving
the aviation approval standard AS9100 and is now also targeting the
IS14001 certification in support of our environmental credentials.
Our distribution business will also start the journey to achieve
IS14001 in the coming year, which will result in all Group
companies being compliant of this important standard.
Chief Executive Officer's Review (continued)
O utlook
The Group has endured difficult trading over the last few years
due to dependence on a marketplace that was severely disrupted by
several global situations. During this period however much work has
been undertaken throughout the Group to ensure the foundations for
growth and the de-risking of our customer dependence are in place.
We expect to see progression as we move through the coming year and
look forward to a more stable and robust business for the
future.
Paul Curtis
Chief Executive Officer
2(nd) February 2023
Financial Review
Set out are the key drivers related to the business performance
in the year and position at 30 September 2022, together with
explanation of the financial Key Performance Indicators.
Trading Performance
Macro-economic factors
Although some improvement has been seen across our markets in
relation to clarity of customer requirements, the 2022 year
continued to see some frustration and delays to both order
placement and delivery schedules. Whilst H1 was heavily impacted by
these delays, H2 saw some improvement and an uplift in activity,
resulting in a profitable period, highlighting that once over a
certain level, a good level of return can be expected from the
business.
Inflation was and continues to be a battle, with cost of energy,
people and materials, all moving up beyond levels experienced
prior. Efforts to mitigate these increases have been ongoing and
where possible fed through to the market. Added Value remains
broadly inline with expectations and is expected to remain at this
level as we move forward.
Supply of material and components has also been problematic
within the period. Electronic components, in particular, have seen
the biggest disruption, with deliveries moving out to a 52 week
lead-time in some cases. The result of this causing delays to
shipments, considerable engineering time looking for alternatives
and, in some cases, cost increases as premiums paid for stock
availability from alternate suppliers.
As the business shapes itself for the future, employment has
been a key feature of the year. Uncertainty in the market, coupled
with a low unemployment rate, has made this somewhat difficult at
times. However, the year has seen good progress on this, and with a
few exceptions, the Group moves into the new year with a high
percentage of this change completed and plans for others in
place.
Headlines
-- Order entry slightly exceeded sales at GBP19.7m (2021:
GBP23.2m) resulting in a strong order book of GBP27.7m (2021:
GBP27.3m), an increase of 1.8%;
-- Revenue of GBP19.3m up 5.8% (2021: GBP18.3m) with
electro-mechanical systems revenues down GBP1.2m and engineered
component distribution down GBP0.1m, lighting and electronic
systems up GBP2.4m;
-- Added Value reduced by 1.4% at 49.1% (2021: 50.5%) through
cost pressures and the need to source alternative suppliers;
and
-- Gross margins 22.8% (2021: 20.3%), was up 2.5% primarily
because of product mix and some reduction in production overhead
costs.
By comparison to 2021, H1 2022 revenues decreased by 7.2% at
GBP8.6m (2021: GBP9.3m), delivering an underlying operating loss of
GBP568,000 (2021: profit of GBP154,000). H2 revenues were
anticipated to accelerate as customer production recovered from
delayed projects. H2 delivered revenues of GBP10.7m (2021:
GBP9.0m), representing an increase of 19.3% against H2 2021 sales.
This resulted in an H2 underlying profit of GBP342,000 (2021: loss
of GBP428,000).
Financial Review (continued)
Distribution costs and administrative expenses increased by 9.9%
to GBP4.6m (2021: GBP4.3m). The main contributors to this were the
wider economic cost pressures seen across the industry. Also, the
UK Government Covid support was withdrawn during 2021 leading to a
reduction in other operating income.
Group employment costs reduced by GBP100,000 to GBP6.21m (2021:
GBP6.32m) inclusive of exceptional costs, as outlined below.
Included are share based payments of GBP13,000 (2021: GBP28,000)
relating to the award of share options through the Group's Long
Term Incentive Plan, these calculated using the Black-Scholes
model.
Other operating income of GBP7,000 (2021: GBP217,000) reduced
due to support from CJRS grant receipts during 2021.
Exceptional Costs and Non-Underlying Items
Exceptional costs in the year totalled a gain of GBP1,323,000,
(2021: loss of GBP46,000). K ey items comprised:
(i) Sale of surplus land raising a net profit of GBP1,506,000 in 2022 (2021: GBPnil)
(ii) GBP10,000 dual running management costs (2021: GBP46,000).
These costs reflect extended crossover periods for appointments and
retirements for the Group's directors, a transition process which
commenced in 2017 and completed on 31 December 2021.
(iii) reorganisation costs in 2022 of GBP173,000 (2021: GBPnil)
- associated with cost base reductions.
Finance Costs and Income
Within finance costs, the interest on borrowings increased to
GBP88,000 (2021: GBP86,000). The weighted average interest rate
increased by 0.5% from 2.7% to 3.2%. There was no utilisation of
the Group's overdraft facility in the year. The UK base rate
increased 7 times throughout the year, increasing through the year
from 0.10% to 2.25%.
Profit before Tax, Taxation and Earnings Per Share
After net finance costs of GBP10,000 (2021: GBP39,000) a profit
before tax of GBP1,074,000 was recorded (2021: loss GBP387,000). A
tax credit of GBP111,000 (2021: GBP365,000) is recognised,
reporting a profit after tax of GBP1,185,000 (2021: loss of
GBP22,000). This resulted in a basic earnings per share of 8.99p
(2021: loss per share 0.17p).
Tax reflects the UK corporation tax rate of 19.0% (2021: 19.0%).
The tax credit recognised is largely the consequence of recognition
of tax losses and tax credits on qualifying R&D
expenditure.
Treasury
The Group's treasury policy remained unchanged in the year.
Financial Review (continued)
Balance Sheet
Shareholders' funds increased by GBP1.0m (7.0%) in the year to
GBP14.8m (2021: GBP13.7m), including:
-- profit for the year of GBP1.2m;
-- a decrease in the defined benefit pension asset recognised of
GBP0.1m (2021: increase of GBP1.3m); and
-- an increase in ordinary share capital of GBP3,000 following
exercise of share options and issue of 35,000 new shares with a
share premium recognised of GBP14,000 (2021: share capital
GBP79,000, share premium GBP221,000).
This has resulted in an increase to the net asset value per
ordinary share to 109.4p (2021: 102.0p). Adjusted net asset value
per share (calculated excluding goodwill and the pension asset) was
82.6p (2021: 74.4p).
-- Gearing (net debt as a % of total equity) reduced to 3.5%
(2021: 11.9%) assisted by the cash proceeds from the sale of
land;
-- net debt decreasing by 68% to GBP0.52m (2021: GBP1.63m);
-- working capital, as defined as inventory, trade & other
receivables less trade & other payables, increasing 9.6% to
GBP5.08m (2021: GBP4.63m); and
-- pension asset surplus recognised reducing by 3.6% to GBP2.47m (2021: GBP2.56m).
Shareholders' funds include Investment in Own Shares (Treasury
Shares), unchanged at GBP0.32m, representing ordinary shares held
in the Company by the LPA Group Plc Employee Benefit Trust
("EBT").
I ntangible assets, which comprise goodwill related to the
Group's investment in Excil Electronics Ltd, capitalised
development costs and software purchases were GBP1,473,000 (2021:
GBP1,405,000). After assessment for impairment the goodwill remains
unchanged at GBP1,149,000. Development costs capitalised in the
year, representing the continued development of the Group's
technologies and new product development ("NPD"), were GBP163,000
(2021: GBP167,000). There were no Capitalised development assets
written off in the year (2021: loss of GBP53,000).
The net book value of property, plant and equipment as at 30
September 2022, including Right of Use Assets, totalled
GBP5,985,000 (2021: GBP6,433,000), of which property represented
GBP3,913,000 (2021: GBP4,115,000), plant, equipment and motor
vehicles GBP2,072,000 (2021: GBP2,318,000). Additions in the year
increased following the low level in the previous year of capital
investment, at GBP419,000 (2021: GBP215,000). Disposals in the year
totalled GBP1,666,000 with a net book value of GBP170,000 including
sale of surplus land and Right of Use lease terminations (2021:
GBP368,000 with a net book value of GBP9,000). The depreciation
charge reduced 7.7%. reflecting prior levels of investment at
GBP699,000 (2021: GBP757,000) .
Net trading assets (defined as inventories plus trade and other
receivables, plus current tax and less trade and other payables)
were 9.3% higher at GBP5,119,000 (2021: GBP4,688,000),
predominantly through higher activity at the end of the year
increasing the level of debtors.
Financial Review (continued)
Net Debt and Financing
The Group's main bank finance is a bank loan drawn down in 2019
at GBP2.6m and repayable over 5 years. Repayments are quarterly
over the term with a bullet repayment in March 2024 of GBP1.8m
(quarterly repayments calculated at draw down on a 15 year
repayment term). As at 30(th) September 2022 the amount outstanding
was GBP2.1m (2021: GBP2.3m). Interest is payable at base rate plus
2.25%.
Cash Flow
Net cash inflow from operating activities was GBP77,000 (2021:
GBP1,189,000) made up of a trading cash inflow of GBP395,000 (2021:
GBP601,000); an increase in working capital of GBP612,000 (2021
decrease: GBP594,000); tax refunds of GBP159,000 (2021: GBP77,000)
and voluntary defined benefit pension contributions of GBPNil
(2021: GBP83,000). Overall, there was a net increase in the Group's
cash position of GBP841,000 (2021: GBP513,000), which included
GBP17,000 receipts from the exercise of share options (2021:
GBP300,000).
Capital expenditure outflows on property, plant and equipment
reduced to GBP88,000 (2021: GBP100,000), excluding assets financed
through lease arrangements. Capitalised development expenditure
amounted to GBP163,000 (2021: GBP167,000), including expenditure to
develop a new range of aircraft ground power support products and
further product developments focused on smart lighting and
electronic systems, including rail seat electronics. The Group also
benefitted from the sale of surplus land raising GBP1,666,000.
In the year new leasing arrangements led to right of use
additions of GBP331,000 (2021: GBP115,000). Interest at 3.7% was
charged on fixed rate borrowings (2021: 3.6%). Interest on the
Group's overdraft facility is payable at base rate plus 2.0%. The
facility was unutilised as at 30 September 2022 and 2021. The
composite interest rate across both borrowings and lease
liabilities was 3.1% (2021: 2.7%).
Capital loan repayments of GBP190,000 were made in the year
(2021: GBP187,000). Outflows repaying the principal elements of
lease liabilities were GBP390,000 (2021: GBP420,000). Interest
payments on borrowings amounted to GBP88,000 (2021: GBP86,000).
The Group's dividend policy was paused in 2020 as a safeguard to
secure cash reserves through the economic downturn and supply
issues, this continuing through 2022 with no distributions.
Defined Benefit Pension Asset
The LPA Industries Limited Defined Benefit Scheme was part of
the Deloitte Pensions Master Plan throughout the entire year under
review. This arrangement had included the transfer of the advisory
functions, administration and the pensioner payroll to Deloitte.
The total costs of this transition have been substantial as the
Scheme has necessarily been subject to a level of scrutiny and
audit to ensure that it can be prepared for an eventual exit to an
insurance provider. The costs of running the scheme have been borne
by the Group and this year amounted to GBP174,800 (2021: GBP283,128
including GBP100,000 of Group contribution). The rectification work
is largely complete and subject to GMP equalisation ongoing
discussion, we anticipate substantially reduced costs going
forward.
A full Actuarial valuation of the Scheme was carried out in
March 2021 which indicated the Scheme was at a healthy 121% funding
level. At 31 March 2022 an actuarial report indicated that this had
risen to 127% of the actuarial funding level. The result of the
change in investment strategy in January 2022, when the
Financial Review (continued)
Trustees having undertaken a review in 2021 agreed to lock in
the gains and de risk the scheme, has been beneficial. The key
driver for the then improved funding position has been the higher
than assumed returns on the Scheme's assets and the changes in
financial conditions which have reduced the liabilities. It is
natural for the Scheme's funding level to fluctuate over time
reflecting changes in the financial markets and this was apparent
during the last six months of the year under review especially
sparked by the mini-budget on 23 September 2022. Over the year to
30 September 2022 the Scheme's assets, which are with Legal &
General Investment Managers in LGIM funds marginally outperformed
the benchmark return at -24.8% versus -25%.
The IAS19 actuarial surplus recognised at 30 September 2022 was
GBP2.5m (2021 restated: GBP2.6m). This is after restricting the
asset recognised by a tax deduction of 35% which is applied to any
refund from a UK pension scheme. This change in accounting for the
surplus in the year has been recognised as a prior year
adjustment.
The Trustees, under advice, did not seek any voluntary employer
contributions during the year from the Group (2021: GBP100,000).
The IAS 19 position reflects the impact of rising interest rates on
the present value of the Assets and the liability to pay pensions
in the future.
Paul Curtis
Chief Executive Officer
2(nd) February 2023
Key Performance Indicators
The Group uses the following key performance indicators to
assess the progression in its business: factors affecting them are
discussed in the Chairman's Statement, the Chief Executive
Officers' Review and the Financial Review.
KPI Basis of measurement 2022 2021
---------------------------------------------------------------
Health
& Safety
Riddors None None
* reportable incidents of disease or danger occurrences
* events that cause impact, damage or injury involving
Accidents a person or infrastructure, which are not a Riddor 25 13
* events that occurred which have not caused an
Near misses Accident 21 15
Financial
Orders to * orders for the year expressed as a multiple of
revenue revenue as a measure of prospective growth 1.02 1.27
Order entry GBP19.7m GBP23.2m
* order intake confirmed
Order book GBP27.7m GBP27.3m
* the measure of opening order book, plus order entry,
less revenue
Revenue * increase/(decrease) year-on-year as a percentage of
growth prior year 5.8% (11.8%)
* the margin generated on revenue after deduction of
material costs but before other costs of sale and
Added value conversion 49.1% 50.5%
Gross margin * as a percentage of revenue 22.8% 20.3%
* underlying operating (loss) as a return on trading
Profitability activities to revenue (1.2%) (1.5%)
Cash generation GBP1.5m GBP0.9m
* net increase in cash and cash equivalents before
financing activities
* the measure of net debt being borrowings and lease
Gearing liabilities less cash balances, to net assets 3.5% 11.9%
This year's comparative of accidents reflects increased level of
activities at the end of covid restrictions and a greater emphasis
on the reporting within the factories.
Consolidated Income Statement
For the year ended 30 September 2022
Restated
2022 2021
Note GBP000 GBP000
Continuing operations
Revenue 2 19,325 18,265
Cost of Sales (14,925) (14,558)
Gross Profit 4,400 3,707
Distribution Costs (1,781) (1,562)
Administrative Expenses (2,865) (2,664)
Administrative Expenses-Exceptional Items 3 1,323 (46)
Other Operating Income 3 7 217
Underlying Operating (Loss) (226) (274)
Share Based Payments 3 (13) (28)
Exceptional Items 3 1,323 (46)
Operating Profit/(Loss) 3 1,084 (348)
Finance Income 78 47
Finance Costs (88) (86)
Profit/(Loss)Before Tax 1,074 (387)
Taxation 4 111 365
Profit/(Loss)for the Year 1,185 (22)
========= =========
Attributable to:
- Equity Holders of the Parent 1,185 (22)
Earnings/(Loss) per Share
Basic 8.99p (0.17)p
Diluted 8.99p (0.17)p
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2022
Restated
2022 2021
GBP000 GBP000
Profit/(Loss) for the Year 1,185 (22)
------- ---------
Other Comprehensive Income
Items that will not be reclassified
to profit or loss:
Actuarial (loss)/gain on pension scheme (219) 1,849
Restriction of pension assets 49 (693)
Other Comprehensive Income (170) 1,156
------- ---------
Total Comprehensive Income for the
Year 1,015 1,134
======= =========
Attributable to:
- Equity Holders of the Parent 1,015 1,134
Consolidated Balance Sheet
At 30 September 2022
Restated Restated
Co No: 00686429 2022 2021 2020
GBP000 GBP000 GBP000
Non-Current Assets
Intangible Assets 1,473 1,405 1,386
Tangible Assets 4,774 5,188 5,546
Right of Use Assets 1,211 1,245 1,438
Retirement Benefits 2,471 2,563 1,277
Deferred Tax Assets 229 263 -
10,158 10,664 9,647
-------- --------- ---------
Current Assets
Inventories 4,567 4,702 3,968
Trade and Other Receivables 5,095 4,111 5,447
Current Tax Receivable 41 55 30
Cash and Cash Equivalents 2,199 1,358 845
-------- --------- ---------
11,902 10,226 10,290
-------- --------- ---------
Total Assets 22,060 20,890 19,937
-------- --------- ---------
Current Liabilities
Bank Loan (190) (191) (188)
Lease Liabilities (356) (323) (406)
Trade and Other Payables (4,584) (4,180) (4,193)
(5,130) (4,694) (4,787)
-------- --------- ---------
Non-Current Liabilities
Bank Loan (1,934) (2,123) (2,313)
Lease Liabilities (240) (354) (584)
Deferred Tax Liabilities - - (16)
-------- --------- ---------
(2,174) (2,477) (2,913)
-------- --------- ---------
Total Liabilities (7,304) (7,171) (7,700)
-------- --------- ---------
Net Assets 14,756 13,719 12,237
======== ========= =========
Equity
Share Capital 1,348 1,345 1,266
Investment in Own Shares (324) (324) (324)
Share Premium Account 943 929 708
Share Based Payment Reserve 49 60 118
Merger Reserve 230 230 230
Retained Earnings 12,510 11,479 10,239
-------- --------- ---------
Equity Attributable to Shareholders
of The Parent 14,756 13,719 12,237
======== ========= =========
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Investment Share Share
Share in Own Premium Based Payment Merger Retained
Capital Shares Account Reserve Reserve Earnings Total
2022 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2021* 1,345 (324) 929 60 230 11,479 13,719
--------- ----------- --------- ------------------ --------- ---------- -------
Profit for the Year - - - - - 1,185 1,185
Other Comprehensive
Income - - - - - (170) (170)
Total Comprehensive
Income - - - - - 1,015 1,015
--------- ----------- --------- ------------------ --------- ---------- -------
Proceeds from issue
of shares 3 - 14 - - - 17
Share based payments - - - 13 - - 13
Tax on share-based payments - - - - - (8) (8)
Transfer on exercise
of
share options - - - (24) - 24 -
--------- ----------- --------- ------------------ --------- ---------- -------
Transactions with Owners 3 - 14 (11) - 16 22
--------- ----------- --------- ------------------ --------- ---------- -------
At 30 September 2022 1,348 (324) 943 49 230 12,510 14,756
========= =========== ========= ================== ========= ========== =======
* restated - see note
1
Investment Share Share
Share in Own Premium Based Payment Merger Retained
Capital Shares Account Reserve Reserve Earnings Total
2021 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2020* 1,266 (324) 708 118 230 10,239 12,237
--------- ----------- --------- ------------------ --------- ---------- -------
(Loss) for the Year* - - - - - (22) (22)
Other Comprehensive
Income* - - - - - 1,156 1,156
Total Comprehensive
Income* - - - - - 1,134 1,134
--------- ----------- --------- ------------------ --------- ---------- -------
Proceeds from issue
of shares 79 - 221 - - - 300
Share based payments - - - 28 - - 28
Tax on share-based payments - - - - - 20 20
Transfer on exercise
of
share options - - - (86) - 86 -
--------- ----------- --------- ------------------ --------- ---------- -------
Transactions with owners 79 - 221 (58) - 106 348
--------- ----------- --------- ------------------ --------- ---------- -------
At 30 September 2021 1,345 (324) 929 60 230 11,479 13,719
========= =========== ========= ================== ========= ========== =======
Consolidated Cash Flow Statement
For the year ended 30 September 2022
2022 2021
GBP000 GBP000
Profit/(Loss) Before Tax 1,074 (387)
Finance Costs 88 86
Finance Income (78) (47)
Operating Profit/(Loss) 1,084 (348)
Adjustments for:
Amortisation of Intangible Assets 95 111
Depreciation of Tangible Assets 497 484
Depreciation of Right of Use Assets 202 273
Profit on sale of Land/Plant and Equipment (1,496) -
Loss on disposal of Intangible Assets - 53
Equity Settled Share Based Payments 13 28
Operating cash flow before movements
in working capital 395 601
Movements in Working Capital:
Decrease/(Increase) in Inventories 135 (734)
(Increase)/Decrease in Trade and Other
Receivables (984) 1,336
Increase/(Decrease) in Trade and Other
Payables 372 (8)
Cash generated from operations (82) 1,195
Income Taxes Received 159 77
Defined Benefit Pension Contributions
less settlements - (83)
Net cash inflow from operating activities 77 1,189
-------- -------
Purchase of Software - (16)
Purchase of Property, Plant & Equipment (88) (100)
Proceeds from Sale of Property, Plant 1,666 -
and Equipment
Expenditure on Capitalised Development
Costs (163) (167)
Net cash inflow/(outflow) from investing
activities 1,415 (283)
-------- -------
Repayment of Bank Loan (190) (187)
Principal elements of Lease Liabilities (390) (420)
Interest Paid (88) (86)
Proceeds from Issue of Share Capital 17 300
Net cash outflow from financing activities (651) (393)
-------- -------
Net increase in Cash and Cash Equivalents 841 513
Cash and Cash Equivalents at start
of the year 1,358 845
-------- -------
Cash and Cash Equivalents at end
of the year 2,199 1,358
======== =======
Reconciliation of cash and cash equivalents
Cash and Cash Equivalents in Current
Assets 2,199 1,358
======== =======
Consolidated Cash Flow Statement (continued)
For the year ended 30 September 2022
Net Debt
An analysis of the change in net debt is shown below:
Cash and
Bank Loan Lease Liabilities Cash Equivalents Net Debt
GBP000 GBP000 GBP000 GBP000
At 1 October 2021 2,314 677 (1,358) 1,633
New Lease Obligations - 309 - 309
Interest Costs 64 24 - 88
Repayment of Borrowings/Lease
Liabilities (254) (414) 668 -
Other Cash (Generated) - - (1,509) (1,509)
At 30 September 2022 2,124 596 (2,199) 521
========== ================== ================== =========
Cash and
Bank Loan Lease Liabilities Cash Equivalents Net Debt
GBP000 GBP000 GBP000 GBP000
At 1 October 2020 2,501 990 (845) 2,646
New Lease Obligations - 107 - 107
Interest Costs 57 30 (1) 86
Repayment of Borrowings/Lease
Liabilities (244) (450) 694 -
Other Cash (Generated) - - (1,206) (1,206)
At 30 September 2021 2,314 677 (1,358) 1,633
========== ================== ================== =========
Notes
1 Information
In accordance with Section 435 of the Companies Act 2006, the
Group confirms that the financial information for the years ended
30 September 2022 and 2021 are derived from the Group's audited
financial statements and that these are not statutory accounts and,
as such, do not contain all information required to be disclosed in
the financial statements prepared in accordance with UK-adopted
International Accounting Standards. The statutory accounts for the
year ended 30 September 2021 have been delivered to the Registrar
of Companies. The statutory accounts for the year ended 30
September 2022 have been audited and approved but have not yet been
filed. The Group's audited financial statements for the year ended
30 September 2022 received an unqualified audit opinion and the
auditor's report contained no statement under section 498(2) or
498(3) of the Companies Act 2006. The financial information
contained within this full year results statement was approved and
authorised for issue by the Board on 2 February 2023.
The 2022 accounts, together with notice of the Annual General
Meeting, are expected to be posted to shareholders on 27 February
2023 and will be available from the LPA website ( www.lpa-group.com
) from 15(th) February 2023. They will also be available from the
Group Finance Director, LPA Group Plc, Light & Power House,
Shire Hill, Saffron Walden, CB11 3AQ.
The Group financial statements have been prepared under the
historical cost convention and under the basis of going concern.
The principal accounting policies adopted are consistent with those
disclosed in the financial statements for the year ended 30
September 2021.
The prior year accounts have been restated to restrict the
pension scheme asset by 35% tax which is netted off the amounts
that would be refunded. Given no further taxes will be payable by
the Group, the deferred tax provision held in relation to the
pension scheme has also been reversed. There is no change in the
profit before tax reported for the year ended 30 September 2022 as
a result of this change however the net assets have reduced by
GBP380,000.
2 Operating Segments
All of the Group's operations and activities are based in, and
its assets located in, the United Kingdom. The CODM does not review
segmental assets and liabilities by segment and therefore no
reconciliations are disclosed. For management purposes the Group
comprises three product groups (in accordance with IFRS 8) -
electro-mechanical, lighting & electronics and engineered
component distribution (which collectively design, manufacture and
market industrial electrical and electronic products) - less
corporate costs, which operate across three market segments - Rail;
Aerospace & Defence and Other. It is on this basis that the
board of directors assess Group performance. The split is as
follows:
2022 2021
GBP000 GBP000
Electro-mechanical systems 6,533 7,761
Engineered component distribution 3,342 3,410
Lighting & Electronics systems 9,450 7,094
Operational Revenue 19,325 18,265
======= =======
2022 2021
GBP000 GBP000
Revenue recognised over time 97 788
Revenue recognised at a point in time 19,228 17,477
19,325 18,265
======= =======
All revenue originates in the UK. An analysis by geographical
markets and market segments is given below:
2022 2021
Rail 72% 77%
Aerospace and Defence 13% 10%
Other 15% 13%
100% 100%
======= =======
2022 2021
GBP000 GBP000
United Kingdom 12,649 12,618
Rest of Europe 4,607 3,500
Rest of World 2,069 2,147
19,325 18,265
======= =======
One individual customer (2021: three) represented more than 10%
of Group revenue, combined totalling 23% (2021: 38%).
2 Operating segments (continued)
2022 2021
GBP000 GBP000
Operational Profit 768 652
Corporate Costs (994) (926)
Underlying Operating (Loss) (226) (274)
======= =======
Corporate costs and operational profit are shown excluding
charges levied to subsidiary entities by LPA Group Plc relating to
management charges and where the property is held by LPA Group Plc,
property rent which combined totalled GBP594,000 (2021:
GBP426,000).
3 Operating Profit/(Loss)
The following items have been charged in arriving at Operating
profit/(loss)/profit.
2022 2021
A. Component costs in arriving at Operating GBP000 GBP000
Profit/(Loss)
Materials (to Added Value) 9,831 9,036
Production Overhead & Direct Labour 5,094 5,522
Cost of Sales 14,925 14,558
Selling & Distribution Costs 1,781 1,562
Administrative Expenses 2,865 2,664
Administration Expenses - Exceptional Items (1,323) (46)
Other Operating Income (7) (217)
======== =======
2022 2021
B. Expenses/(credits) by nature within Underlying GBP000 GBP000
Operating Loss
Amortisation of Intangible Assets 95 111
Depreciation of Tangible Assets 497 484
Depreciation of Right of Use Assets 202 273
Loss on Disposal of Assets 10 53
Lease Rentals / Short Term Hire Charges
- Plant, Equipment & Motor Vehicles 22 16
Foreign Exchange (Gain)/Loss
Other Operating Income: (62) 96
- Covid-19 Job Retention Scheme grants (CJRS) (7) (217)
Fees Payable to The Company's Auditor:
- For the Audit of The Company's Annual Accounts 49 22
- The Audit of The Company's Subsidiaries
Pursuant to Legislation 84 71
======== =======
2022 2021
C. Within Exceptional Costs GBP000 GBP000
Sale of land (1,506) -
Reorganisation costs / staff changes 173 -
Dual running management costs 10 46
-------- -------
(1,323) 46
======== =======
Sale of land relates to the disposal of a piece of surplus land
that was valued on the books at GBP160,000 and realised a net gain
of GBP1,506,000 during the year (2021: GBPnil).
Reorganisation costs / staff changes of GBP173,000 in 2022
relate to a Group wide cost base review and loss of office payment.
(2021: GBPnil).
Dual running costs of GBP10,000 (2021: GBP46,000) relate to an
extended crossover between the appointment and retirement of Board
Directors related to the board rejuvenation process commenced in
2018, and concluded on 31 December 2021.
4 Taxation
Restated
2022 2021
A. Recognised in The Income Statement GBP000 GBP000
Current Tax Expense
UK Corporation Tax (65) (4)
Adjustment in Respect of Prior Years (80) (46)
------- ---------
(145) (50)
Deferred Taxation
Net Origination and (Recognition) / Reversal
of
Temporary Differences 34 (244)
Net Change as a Result of Rate Increase - (71)
Total Corporation Tax (Credit) (111) (365)
======= =========
2022 2021
B. Reconciliation of Effective Tax Rate GBP000 GBP000
Profit/(loss) Before Tax 1,074 (387)
======= =========
Tax at The UK Corporation Tax Rate of
19% (2021: 19%) 204 (74)
Effects of:
- Tax Rate Change - (71)
- Enhanced Deduction for Qualifying
R&D Expenditure (102) (80)
- Prior Period Adjustments (80) (46)
- Prior Period Losses Recognised (71) (55)
- Other Differences (62) (39)
Total Income Tax Credit (111) (365)
======= =========
2022 2021
C. Current and Deferred Tax Recognised GBP000 GBP000
Directly in Equity
Tax Charge/(Credit) Arising on Share
Options 8 (20)
======= =========
5 Earnings/(Loss) Per Share
The calculation of earnings per share is based upon the profit
for the year of GBP1,185,000 (2021 restated: loss GBP22,000) and
the weighted average number of ordinary shares in issue during the
year of 13.472m (2021: 12.89m) less investment in own shares of
0.3m (2021: 0.3m), of 13.172m (2021: 12.59m).
2022 2021
--------------------------------------------------------- -------------------------------------
Weighted Weighted Loss
Average Earnings Average Per
No of Per (Loss) No of Share
Earnings Shares Share - restated Shares - restated
--------- --------- --------- ------------ --------- ------------
GBP000 Million Pence GBP000 Million Pence
--------- --------- --------- ------------ --------- ------------
Basic Earnings/(Loss)
Per Share 1,185 13.172 8.99 (22) 12.590 (0.17)
Effect of Share Options - 0.007 - - - -
Diluted Earnings/(Loss)
Per Share 1,185 13.179 8.99 (22) 12.590 (0.17)
========= ========= ========= ============ ========= ============
Diluted earnings per share has been calculated for the year
ended 30 September 2022 as the Group reported a profit (2021: the
loss was considered anti-dilutive and was ignored for the
calculation). Basic earnings per share for the year ended 30
September 2021 has been restated (see note 1). The impact of the
restatement has reduced loss per share by 0.10 pence.
6 Going Concern
In assessing going concern, including impacts of supply chain
shortages and inflationary pressures seen latterly, the directors
note that current economic conditions are continuing to create
uncertainty. Such uncertainties have and continue to make
forecasting extremely challenging, with these multiple factors
causing delivery schedule delays.
In assessing the Group's going concern the directors also note
that (i) despite reporting an underlying operating loss in the
current year and anticipating a challenging start to the 2023 year,
the Group is expected to return to profitability in the near term;
(ii) has in place adequate working capital facilities for its
forecast needs and was cash generative through the 2022 financial
year, with a positive EBITDA and strong cash management, benefiting
from the sale of the surplus land; (iii) has a strong order book
with significant further opportunities in its market place; and
(iv) has proven adaptable in past periods of adversity, as again
proven through the 2022 challenges. Therefore, the directors
believe that it is well placed to manage its business risks
successfully.
Supply chain delays now widely seen, aligned with price
pressures in the supply chain, covering commodities, utilities and
wage inflation all pose risks to UK manufacturing businesses.
Offsetting these, on-shoring opportunities and the supply chain
delays and shortages themselves offer new opportunities to the
Group to assist offset some of the project delays.
The directors recognise that the ongoing support of its bank is
a key feature to the Group's success which provides for the funding
and working capital facilities. We maintain good relationships with
our bank and our current facility is in place until March 2024
before which discussions should lead to renewal as the bank remains
supportive of our business model.
After making enquiries including but not limited to compiling
updated forecasts; sensitivities; and expectations, reviewing
liabilities and risks and following confirmation of ongoing support
from the Group's bank, the directors have a reasonable expectation
that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the
annual report and accounts.
7 Annual General Meeting
The annual general meeting is to be held at 12:00 noon on
Thursday 23 March 2023 at the offices of finnCap, 1 Bartholomew
Close, London, EC1A 7BL. Special business includes four resolutions
which relate to share capital:
1. an ordinary resolution to renew the authority of the directors to allot shares generally.
2. is a special resolution to give power to the directors to
allot equity securities for cash without first offering them to
existing shareholders.
3. is a special resolution to permit the Company to make market purchases of its own shares.
4. is an ordinary resolution to increase the Company's
authorised share capital to GBP2,500,000 divided into 25,000,000
ordinary shares of 10 pence each.
Of the four resolutions, the first three are part of the
portfolio of powers commonly granted to directors to ensure
flexibility, should appropriate circumstances arise, to either
allot shares, or make purchases of the Company's own shares in the
best interests of shareholders. Each authority will run through
until the next annual general meeting.
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END
FR BRGDDUUGDGXD
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