RNS Number:7459C
Metalrax Group PLC
24 August 2007
24 August 2007
Metalrax Group PLC
("Metalrax", "the Company" or "the Group")
Interim Results for the six months ended 30 June 2007
Metalrax, the niche worldwide supplier of specialist steel products to the
automotive, engineering support services and housewares sectors, today announces
its interim results for the six months ended 30 June 2007.
Financial Results
*Revenues increased to #59.26m (2006: #57.91m)
*Operating profit, excluding exceptional items*, was #2.02m (2006: #1.96m)
*Profit before tax, excluding exceptional items*, was #1.59m (2006:
#1.82m)
*Loss before tax, including exceptional items*, was #0.77m (2006: profit
before tax, including exceptional items*, of #3.70m)
*Basic loss per share was 0.36p (2006: basic earnings per share of 2.53p)
*Interim dividend maintained at 1.65p per share (2006: 1.65p)
Operating Headlines
*Considerable progress with the Group's transformation
*Stabalising position at Bacol, after significant exceptional costs in
first half
*Andrew Richardson recruited as Chief Executive
*Completed the refurbishment of the first phase of the Romania facility
*Completed integration of Kenham Tools & Pressings into Bacol Industries
*Significant turnaround in the performance of the Housewares division
following reorganisation
Current Trading and Outlook
*Trading in line with revised expectations for the year as a whole
*Contracts exchanged for disposal of two properties generating #3.25
million in cash
* Exceptional items in 2007 comprise reorganisation costs including redundancy
but primarily excess production costs and carriage costs incurred post the
amalgamation of two businesses. In 2006 exceptional items comprised of
reorganisation costs, property profits and a discount on acquisition (see note
4).
Commenting on the results, John Crabtree, Chairman, said:
"Trading in the second half to date is in line with our revised expectations for
the year.
We still have much to do but we have taken actions to stabilise the Belsize
situation and to improve demand for the Engineering Support Services businesses.
We believe that the benefits of the Group transformation, the substantial
investment in the Romanian operation and the new coatings line will start to
come through, leading to a much improved performance in 2008 and thereafter."
For further information, please contact:
Metalrax Group PLC www.metalraxgroup.co.uk
---------------------------
Richard Arbuthnot, Chief Executive 0121 433 3444
Bill Kelly, Group Finance Director
Arbuthnot Securities 020 7012 2000
Ben Wells / Alasdair Younie
Smithfield
Katie Hunt/Reg Hoare/Will Swan 020 7360 4900
INTERIM RESULTS
CHAIRMAN'S STATEMENT
Introduction
Metalrax is a niche worldwide supplier of specialist steel products to the
automotive, engineering support services and housewares sectors, with operations
in the UK and Romania.
During the first half of 2007, considerable progress has been made with the
Group's transformation supported by capital investment of #3.4 million which
will improve efficiencies and reduce operating costs.
As previously reported, the Group's financial performance for the current year
has been impacted by the protracted integration of Belsize into Bacol Fine
Blanking and lower than usual demand for certain businesses in the Engineering
Support Services division, which has offset good performances across the rest of
the Group. Actions have been taken to address these specific situations which
are now stabilising as the second half progresses.
Strategy
Group strategy remains to focus Metalrax's businesses on niche markets where it
can secure strong positions through its specialist added value skills, whilst
optimising the use of its assets. This is being achieved through the ongoing
business transformation which, through both consolidation and acquisition, is
providing our core businesses with critical mass in their markets and releasing
surplus property for sale and surplus assets for use in the new facility in
Romania.
Results
Revenues for the six months ended 30 June 2007 increased to #59.26 million from
#57.91 million in the comparable period and there was an increase in operating
profit before exceptional items to #2.02 million from #1.96 million in the
corresponding period last year. Increased borrowings, however, raised interest
charges to #425,000 from #141,000 last year, resulting in profit before taxation
and exceptional items of #1.59 million down from #1.82 million in the comparable
period. The final result for the period includes exceptional costs of #2.36
million in 2007 compared to a net exceptional gain of #1.88 million in 2006.
Dividend
The Board has reviewed the levels of dividend being declared in the context of
both the reduced expectations for 2007 but also its continued confidence in the
longer term outlook for the Group and the cash that is expected to become
available from property disposals arising from the re-organisation process. As a
consequence, the Directors have decided that no change in current dividend
policy is required at this time. The Company is therefore declaring a maintained
interim dividend of 1.65 pence per share and the dividend will be payable on 26
October 2007 to shareholders on the register at the close of business on 5
October 2007.
The Directors will keep the level of dividend payments under continuing review.
Board Succession
On 16 July 2007, we were pleased to announce the recruitment of Andrew
Richardson as part of the succession planning for Richard Arbuthnot's intended
retirement. Andrew is currently Divisional Chief Executive of the Water & Asset
Monitoring business of Halma plc and has over 20 years of experience in
international manufacturing and automotive engineering. We can now confirm that
Andrew will join the Group, as Chief Executive, on 15th October 2007. Richard
Arbuthnot has agreed to continue in a role thereafter, which will make his
valuable experience available to the Group as appropriate.
Review by Division
Automotive
Whilst the protracted integration of the Belsize business into Bacol Fine
Blanking has impacted this division's performance overall, the other businesses
in the division have on the whole performed well.
We announced on 16 July 2007 that the difficulties in the integration of Belsize
continued. Following that announcement we have appointed new management and
opened a robust dialogue with customers who are currently being serviced on
unsustainable terms. This dialogue is resulting in some customers being phased
out as expected, whilst we have been able to agree to move a number to our lower
cost Romania facility, thus accelerating its capacity utilisation. We continue
to believe in our strategy to create the UK's largest single site fine blanking
operation, and one of the largest in Europe and are confident that we will
restore the business to an acceptable level of profitability in 2008, albeit
from a lower revenue base.
Elsewhere in the division, we have completed the refurbishment of the first
phase of the Romanian site which is now production ready and we are currently
undergoing quality standard approvals. We have been very encouraged by customer
responses to the new site as evidenced by an order book, which for 2008 already
exceeds #2 million.
During the period, we completed the integration of Kenham Tools & Pressings into
Bacol Industries and we have made substantial progress with the planned
relocation of Prescott Powell, having transferred over half of the production to
MRX Automotive in Smethwick, and the balance to Romania.
Engineering Support Services
We announced on 16 July 2007 that a number of businesses had simultaneously
experienced a slight weakening in demand in the latter part of the first half.
This has been due to both delays in gaining access to construction sites and to
deferred orders. However, having stepped up sales efforts to mitigate the
effects of this weakening demand we are already seeing improved performances in
line with our expectations.
Towards the end of 2007, we will have completed capital investment of over #1.5m
in the new coating line in Fabricote, which will create one of the most
efficient lines in the world, in preparation for the full consolidation of our
two coatings business during early 2008.
Our strategy to maximise cross selling is gaining momentum with the recent
launch of the brand initiative "MRX Support Services" which offers architects
and construction project managers a single sourcing option for cabins,
structural steelwork, mezzanine floors, staircases, atriums and storage.
Housewares
This division has achieved a significant turnaround in performance compared to
the same period last year. We have completed the majority of the plan to
downsize the bakeware business, G W International, into a smaller more
profitable business and this is already producing significant benefits. The
other two businesses in the division are also showing improvements.
Exceptional items
The major part of the exceptional costs of #2.36 million are those incurred at
Bacol Fine Blanking, caused by the integration of Belsize. No further costs will
be treated as exceptional after 31 August 2007, following the summer shut down.
There will, however, be further exceptional costs arising from three major
reorganisation projects still taking place during 2007, as follows:
* the transfer of the Prescott Powell business to MRX Automotive in
Smethwick and also to Romania.
* the expansion of the Fabricote high temperature coil coating line and
relocation of the business of Cooper Coated Coil to the enhanced single
site, and
* the completion of the GW International profit improvement plan which has
involved a significant downsizing of the business, relocation from part of
its existing site and redundancies.
Property Disposals
As part of the reorganisation process to date, we have been able to release
freehold properties for sale to offset the exceptional costs of the
reorganisation and provide cash for funding.
This first half's exceptional costs have not been offset by any property
profits. However, since 30 June 2007 we have exchanged contracts for the
disposal of two properties which will, on completion raise approximately #3.25
million in cash and produce an exceptional profit of around #0.9 million.
Cash Flow
Bank borrowings at 30 June 2007 stood at #18.1 million compared to #9.9 million
at 31 December 2006 and #8.8 million at 30 June 2006. The first half
traditionally reflects an outflow of funds, particularly with the payment of the
final dividend of #4.5m at the end of May resulting in the half year end
generally being at the peak of the cash borrowing cycle. Lower profitability and
the absence of property proceeds have contributed to the higher than expected
borrowings. With the property disposals referred to above and the seasonal
inflow of cash during the last quarter, borrowings at the end of the year will
be reduced from the current level.
Bank borrowings at 30 June 2007 reflect a gearing level of 36% with interest
costs covered (before exceptional items) nearly five times.
Pensions
An interim IAS19 review of the Group's principal defined benefit scheme as at 30
June 2007 has been completed. As a full review has not been carried out the
results cannot be considered definitive. However, the review does indicate a
further material reduction in the scheme's deficit and we anticipate, subject to
changes in stock market conditions, being able to record another reduction in
the scheme's deficit as at 31 December 2007.
Advisers
We are pleased to announce that we have appointed N M Rothschild & Sons to act
as our formal financial advisers on corporate matters.
Current Trading & Outlook
Trading in the second half to date is in line with our revised expectations for
the year.
We still have much to do but we have taken actions to stabilise the Belsize
situation and to improve demand for the Engineering Support Services businesses.
We believe that the benefits of the Group transformation, the substantial
investment in the Romanian operation and the new coatings line will start to
come through, leading to a much improved performance in 2008 and thereafter.
J R A Crabtree
Chairman
24 August 2007
Consolidated income statement
Six months ended 30th June 2007
Six Months ended Six Months ended Twelve Months ended
30th June 2007 Unaudited 30th June 2006 Unaudited 31st December 2006 Audited
Before Before Before
except- Except- except- Except- except- Except-
ional ional ional ional ional ional
items items* Total items Items* Total items Items* Total
Notes #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Revenue 2 59,264 - 59,264 57,914 - 57,914 120,233 - 120,233
------- ------- ------ ------- ------- ------ ------- ------- -------
Trading profit/
(loss) 2,016 (2,361) (345) 1,965 (439) 1,526 7,007 (2,286) 4,721
Other operating
income - - - - 2,318 2,318 - 1,878 1,878
------- ------- ------ ------- ------- ------ ------- ------- -------
Operating profit/
(loss) 3 2,016 (2,361) (345) 1,965 1,879 3,844 7,007 (408) 6,599
Finance income - - - - - - 6 - 6
Finance costs (425) - (425) (141) - (141) (511) - (511)
------- ------- ------ ------- ------- ------ ------- ------- -------
Profit/ (Loss)
before taxation 1,591 (2,361) (770) 1,824 1,879 3,703 6,502 (408) 6,094
------- ------- ------- ------- ------- -------
Income tax credit/
(expense) 5 334 (670) (1,497)
------ ------ ------
(Loss)/Profit
for the period (436) 3,033 4,597
------ ------ ------
(Loss)/Earnings
per share: 6
Basic and diluted
(loss)/ earnings
per share (0.36p) 2.53p 3.83p
Dividend paid per
ordinary share 7 3.75p 3.75p 5.40p
* Exceptional items in 2007 comprise reorganisation costs including redundancy
but primarily excess production costs and carriage costs incurred post the
amalgamation of two businesses. In 2006 exceptional items comprised of
reorganisation costs, property profits and a discount on acquisition (see note
4).
Consolidated Statement of recognised income and expense
Six months ended 30th June 2007
2007 2006 2006
Six months Six months Twelve months
Ended Ended Ended
30th June 30th June 31st December
Unaudited Unaudited Audited
#'000 #'000 #'000
Actuarial gain on defined benefit
scheme - - 2,441
Tax on items taken directly to equity (75) - (733)
Exchange gains 155 - -
--------- --------- -----------
Net income recognised directly in
equity 80 - 1,708
(Loss)/Profit for the period (436) 3,033 4,597
--------- --------- -----------
Total recognised (expense)/income for
the period (356) 3,033 6,305
--------- --------- -----------
Attributable to:
--------- --------- -----------
Equity holders of the parent (356) 3,033 6,305
--------- --------- -----------
Consolidated Balance Sheet
30th June 2007
Notes 2007 2006 2006
30th June 30th June 31st December
Unaudited Unaudited Audited
#'000 #'000 #'000
Assets
Goodwill 11,381 11,215 11,356
Other intangible assets 10 90 50
Property, plant and equipment 32,280 33,136 33,158
Deferred tax asset 885 1,744 948
------ --------- -------- ---------
Total non-current assets 44,556 46,185 45,512
------ --------- -------- ---------
Inventories 17,412 19,879 18,068
Trade and other receivables 29,304 27,751 29,099
Assets held for sale 2,999 1,728 1,063
------ --------- -------- ---------
Total current assets 49,715 49,358 48,230
------ --------- -------- ---------
------ --------- -------- ---------
Total assets 94,271 95,543 93,742
------ --------- -------- ---------
Liabilities
Loan notes 250 550 250
Trade and other payables 21,094 23,661 22,930
Current tax payable - 992 540
Bank overdrafts and loans 18,085 8,829 9,936
------ --------- -------- ---------
Total current liabilities 39,429 34,032 33,656
------ --------- -------- ---------
Loan notes 250 500 500
Employee benefits 3,159 5,814 3,159
Deferred tax liabilities 1,986 2,192 2,128
------ --------- -------- ---------
Total non-current liabilities 5,395 8,506 5,787
------ --------- -------- ---------
--------- -------- ---------
Total liabilities 44,824 42,538 39,443
------ --------- -------- ---------
------ --------- -------- ---------
Net assets 49,447 53,005 54,299
------ --------- -------- ---------
Equity
Share capital 5,995 5,995 5,995
Share premium account 2,732 2,732 2,732
Capital redemption reserve 274 274 274
Retained earnings 40,446 44,004 45,298
------ --------- -------- ---------
Total equity 9 49,447 53,005 54,299
------ --------- -------- ---------
Consolidated Cash Flow Statement
Six months to 30th June 2007
2007 2006 2006
Six months Six months Twelve months
Ended Ended Ended
30th June 30th June 31st December
Notes Unaudited Unaudited Audited
#'000 #'000 #'000
Operating activities
Cash (used in) / generated from
operations 8 (184) (390) 5,089
Interest received - - 6
Interest paid (374) (141) (511)
Income taxes paid (460) (605) (1,882)
------ -------- ---------- ----------
Net cash (used in) / generated
from operating activities (1,018) (1,136) 2,702
------ -------- ---------- ----------
Investing activities
Purchase of property, plant and
equipment (3,353) (1,361) (3,241)
Proceeds from sale of property,
plant and equipment 1,269 1,143 1,746
Acquisition of businesses (551) (5,692) (6,692)
------ -------- ---------- ----------
Net cash used in investing
activities (2,635) (5,910) (8,187)
------ -------- ---------- ----------
Financing activities
Equity dividends paid (4,496) (4,496) (6,474)
Repayment of borrowings - - (690)
New bank loans raised 5,000 - 5,000
Increase in bank overdraft 3,149 8,829 4,936
------ -------- ---------- ----------
Net cash from financing activities 3,653 4,333 2,772
------ -------- ---------- ----------
Net decrease in cash and cash
equivalents - (2,713) (2,713)
Cash and cash equivalents at
beginning of year - 2,713 2,713
------ -------- ---------- ----------
Cash and cash equivalents at
end of year - - -
------ -------- ---------- ----------
Notes to the interim results
Six months to 30th June 2007
1. Basis of preparation
The accounting policies used in the interim financial statements are consistent
with those that the Directors intend to use in the annual financial statements.
The interim financial statements are unaudited and do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
statutory accounts for the year ended 31st December 2006 have been delivered to
the Registrar of Companies. The auditors opinion in those accounts was
unqualified and did not contain a statement made under Section 237(2) or Section
237(3) of the Companies Act 1985. The interim report for 2007 is unaudited but
has been reviewed by the auditors and their report to the company is set out
below. The interim report in respect of 2006 was also unaudited but was reviewed
by the auditors.
These interim financial statements were approved by Board of Directors on 24th
August 2007.
2. Revenue analysis by geographical destination and activity
2007 2006 2006
Six months Six months Twelve months
Ended Ended Ended
30th June 30th June 31st December
Unaudited Unaudited Audited
#'000 #'000 #'000
United Kingdom 42,173 43,307 92,201
Rest of Europe 13,980 11,102 21,153
North America 1,404 1,459 2,252
Rest of World 1,707 2,046 4,627
--------- --------- ----------
59,264 57,914 120,233
--------- --------- ----------
Automotive 22,148 21,884 42,471
Engineering Support Services 26,795 26,163 54,175
Housewares 12,158 12,415 27,640
Intra-group (1,837) (2,548) (4,053)
--------- --------- ----------
59,264 57,914 120,233
--------- --------- ----------
3. Segmental analysis by activity
Six months ended 30th June 2007 Six months ended 30th June 2006 Twelve months ended 31st December
Unaudited Unaudited 2006 Audited
Operating Before Exceptional Total Before Exceptional Total Before Exceptional Total
profit/ Exceptional Items Exceptional Items Exceptional Items
(loss) Items Items Items
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Automotive 932 (1,982) (1,050) 850 926 1,776 2,226 (1,184) 1,042
Engineering
Support Services 442 (26) 416 1,378 (10) 1,368 3,465 (90) 3,375
Housewares 642 (353) 289 (263) 963 700 1,316 866 2,182
------- -------- ------ -------- -------- ------ -------- ------- -----
2,016 (2,361) (345) 1,965 1,879 3,844 7,007 (408) 6,599
------- -------- ------ -------- -------- ------ -------- ------- -----
4. Exceptional Items
2007 2006 2006
Six months Six months Twelve months
Ended Ended Ended
30th June 30th June 31st December
Unaudited Unaudited Audited
#'000 #'000 #'000
Profit on sale of property - 1,043 1,026
Discount on acquisition - 1,275 852
Reorganisation costs (including
redundancies) (2,361) (439) (2,286)
--------- --------- ----------
(2,361) 1,879 (408)
--------- --------- ----------
Exceptional items in 2007 comprise reorganisation costs including redundancy but
primarily excess production costs and carriage costs incurred post the
amalgamation of two businesses. In 2006 exceptional items comprised of
reorganisation costs, property profits and a discount on acquisition.
5. Tax
Tax for the interim period is credited at 43.3% (six months to 30 June 2006:
18.1% charge). The best estimate of the weighted average annual rate for the
full financial year to 31 December 2007 is 29.4%. The UK tax rate will reduce
from 30% to 28% on 1 April 2008 which has resulted in a reduction in the Group
deferred tax liability by #79,000.
6. (Loss)/Earning per share
The basic and diluted loss per share are calculated on the loss for the year.
The number of shares used in the calculation is 119,897,298 (2006: 119,897,298).
7. Dividends
The dividend paid in the six months ended 30th June 2007 was the final divided
for 2006 of 3.75 pence per ordinary share (total #4,496,000) paid on 25th May
2007.
The directors recommend the payment of an interim dividend of 1.65 pence per
share (total #1,978,000) to shareholders registered on the 5th October 2007 to
be paid on 26th October 2007.
8. Cash flow from operating activities
2007 2006 2006
Six months Six months Twelve months
Ended Ended Ended
30th June 30th June 31st December
Unaudited Unaudited Audited
#'000 #'000 #'000
Reconciliation of operating (loss)/
profit to net cash flow from
operating activities
Continuing operations
Operating (loss)/profit (345) 3,844 6,599
Depreciation (net of disposals
including exceptional items) 1,687 1,685 3,428
Profit on sale of property - (1,043) (1,026)
Discount on acquisition - (1,275) (852)
Amortisation of intangibles 40 40 80
Decrease/(Increase) in inventory 656 (1,758) 53
Increase in trade and other
receivables (764) (1,716) (3,054)
(Decrease)/Increase in payables (1,458) (167) 78
Decrease in non-current liabilities - - (217)
-------- -------- ----------
Cash (used in) / generated from
continuing operations (184) (390) 5,089
-------- -------- ----------
9. Movement in equity
Share Share Capital Retained Total
Capital Premium Redemption Earnings Equity
Reserve
#'000 #'000 #'000 #'000 #'000
At 1st January 2007 5,995 2,732 274 45,298 54,299
Total recognised
(expense) / income for
the period - - - (356) (356)
Dividends paid (note 7) - - - (4,496) (4,496)
------- -------- --------- -------- --------
At 30th June 2007 5,995 2,732 274 40,446 49,447
------- -------- --------- -------- --------
10 Announcement of results
These results were announced to the London Stock Exchange on 24th August 2007.
Further copies are available from the Company Secretary, Metalrax Group PLC,
Ardath Road, Kings Norton, Birmingham, B38 9PN or via the Group's website,
www.metalraxgroup.co.uk.
Independent review report to Metalrax Group PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30th June 2007 which comprises the consolidated income
statement, the consolidated balance sheet, the consolidated statement of
recognised income and expense, the consolidated cash flow statement and related
notes 1 to 10. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatement or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purposes. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company for our review work, for this report, or for the conclusions we have
formed.
Directors' responsibility
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Service Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests on controls and verification of assets,
liabilities and transactions. It is substantially less in scope than audit
performed in accordance with International Standards on Auditing (UK and Ireland
) and therefore provides a lower level or assurance than an audit. Accordingly,
we do not express an audit opinion on the financial information.
Review conclusion
On the basis or our review we are not aware of any material modifications that
should made to the financial information as presented for the six months ended
30th June 2007.
DELOITTE & TOUCHE LLP
Chartered Accountants
Four Brindleyplace
Birmingham
24 August 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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