RNS Number : 9004C
Metalrax Group PLC
08 September 2008
8 September 2008
Metalrax Group PLC
Announcement of Half Year Results for the six months to June 2008
Metalrax Group PLC ("Metalrax" or "the Group"), the niche supplier of specialist engineering and consumer durable products, today
announces its half year results for the six months to 30 June 2008.
Financial Highlights
Six months ended Six months ended
30 June 2008 30 June 2007 Increase/ (decrease)
�'000 �'000
Revenue 54,720 59,264 (7.7)%
Gross Margin (%) 30.5% 27.8% 2.7%
Operating profit before 1,990 2,016 (1.3)%
exceptional items* and
goodwill impairment
Loss for the period (5,254) (436) (1,105)%
Cash generated from/(used in) 4,411 (184) 2,497%
operations
Net debt 12,085 18,585 (35.0)%
Basic/Diluted Loss Per Share (4.38)p (0.36)p 1,117%
("EPS")
Adjusted EPS** 0.94p 1.61p (41.6)%
*See note 5
** See note 8
Operational Highlights
� Operating profit before exceptional items and goodwill impairment stable at �2.0m (2007: �2.0m) on reduced turnover of �54.7m (2007:
�59.3m). After exceptional items and goodwill impairment the Group has made a loss for the period of �5.3m (2007: �0.4m).
� Gross margins up 2.7% to 30.5% (2007: 27.8%) reflecting the Group*s progress in restructuring its portfolio to focus on higher margin
growth markets and various non-recurring revenues.
� Strategic progress in the first half included the acquisition of Post Glover LifeLink (*PGL*), the disposal of Bacol Fine Blanking and
the closure of Down & Francis.
� Cash generated from operations of �4.4m (2007: outflow �0.2m), reduced net debt at the half year to �12.1m (December 2007: �12.5m)
after the �3.2m cash acquisition of PGL and the purchase of fixed assets of �1.6m.
� Move to AIM in June 2008, enabling the more efficient and cost-effective execution of the Board*s future acquisition and disposal
strategy.
Commenting on the results, Andrew Richardson, Chief Executive, said:
"The Group's turnaround has and will continue to involve radical change. We have experienced management in place that is executing a
turnaround of a Group that was in long term profit decline. We will continue to dispose of under-performing businesses in poor market
positions; we will seek out businesses for acquisition in niche markets where our management can add value; and we will deliver organic
profit growth by continuing to strengthen the management of some of the existing attractive businesses in the Metalrax portfolio. In all
these respects, we have made progress this year."
Enquiries:
Metalrax Group PLC Tel: +44 (0) 121 433 3444
Andrew Richardson, Group Chief Executive
Michael Stock, Group Finance Director
Hogarth Partnership Limited Tel: +44 (0) 20 7357 9477
Rachel Hirst
Andrew Jaques
Anthony Arthur
Arden Partners Tel: +44(0) 20 7398 1637
Chris Fielding
Steve Douglas
Chairman's Statement
The Group continues its programme of transformational change under a new executive management team. In the first half of 2008 we made an
acquisition and exited two businesses, as well as rationalising and improving underlying operating performance in a number of businesses
despite a challenging market. In addition we made a number of important senior management changes.
During the first half of 2008, the Group delivered operating profits before exceptional items and goodwill impairment in line with
market expectations. This is a satisfactory outcome in the face of the increasingly difficult market conditions in which we operate. The
Group has taken appropriate action in response to those challenges.
Operating profit before exceptional items and goodwill impairment was �2.0 million (2007: �2.0 million). Following our exit from various
underperforming businesses sales showed a decline on the previous year, particularly in retail and construction markets. The gross margin at
30.5% (2007: 27.8%) reflected the higher margin profile of our newly acquired PGL business and various non-recurring revenues, which are
referred to in the Financial Review below.
Exceptional items during the period amounted to �1.8 million of cash costs. There was a non-cash goodwill impairment charge of �4.6
million associated with our underperforming operations. After exceptional items and goodwill impairment the Group has made a loss for the
period of �5.3 million (2007: �0.4 million).
We have made good progress on working capital management. Net debt was reduced to �12.1 million at 30 June 2008 (December 2007: �12.5
million), despite the �3.2 million PGL acquisition which was financed from our own cash resources.
While we believe it is not prudent to make a dividend payment at the half year, the Board remains confident that the Group is achieving
an underlying turnaround. As indicated in our trading update of 16 January 2008, the Group has resolved to implement a new, progressive and
sustainable policy, at an appropriate juncture, whereby future dividends will be covered between 2.0 and 2.5 times by its underlying
earnings.
We anticipate that the current year result will be broadly in line with market expectations.
J R A Crabtree
Chairman
8 September 2008
Chief Executive's Review
Strategic Progress
In my first full period since taking over as Group Chief Executive I am able to give an informed impression of the position the Group
occupies today.
With the UK economy in a period of significant flux, it is an unfortunate fact that our prime markets, construction and retail, are
among the sectors worst affected by the global credit crunch.
In spite of the tougher economic climate, my strategy for the Group remains unchanged. This long-term strategy will enable us to develop
a group of specialist engineering businesses that achieves superior long-term return on investment and consistent organic profit growth.
These results will come from the supply of differentiated products and services into niche market sectors that can support profitable
growth. The goals I have outlined will be achieved by high calibre, dedicated people securing technology and intellectual property to
deliver superior customer solutions.
There is much to do in order to achieve the results that our strategy demands. The Group's turnaround has and will continue to involve
radical change. We have experienced management in place that is executing a turnaround of a Group that was in long term profit decline. We
will continue to dispose of under-performing businesses in poor market positions; we will seek out businesses for acquisition in niche
markets where our management can add value; and we will deliver organic profit growth by continuing to strengthen the management of some of
the existing attractive businesses in the Metalrax portfolio. In all these respects, we have made progress this year.
Summary of Principal Actions
To date my team has delivered: -
* Profit turnarounds at Welland Engineering Supplies and MRX Automotive.
* Increased organic profit growth at Cooper Coated Coil, RTA, Advanced Handling, Toolspec and Weston Body Hardware.
* A �1.6 million capital expenditure programme at Cooper Coated Coil, delivered in August 2008, that positions it as Europe's
leading non-stick pre-coat coil facility.
* Successful control of strong pressure to increase input prices, improvements in productivity and strong action on overheads in
many of our businesses.
* The acquisition, in January 2008, and successful integration of Post Glover Lifelink (PGL), which manufactures isolated electric
power systems and raceways. PGL is already contributing strong profits and is giving us a foothold in the healthcare sector.
* The successful disposal of Bacol Fine Blanking in February 2008. This automotive business incurred an operating loss after
exceptional items of �4.5 million in 2007.
* The closure of loss-making Down and Francis in June 2008. This structural steel business selling to the UK commercial construction
market incurred an operating loss after exceptional items of �2.4 million in 2007.
* The transfer of the Group's listing from the Main Market to AIM on 25 June 2008, which will lower compliance costs and enable the
more efficient and cost-effective execution of future acquisitions and disposals.
* The appointment of new Group Finance Director, Michael Stock and a new Non-Executive Director, Ian Paling. Michael Stock took on
the additional role of Company Secretary in August 2008.
* Timely financial management information is now produced routinely to high standards, using newly implemented and upgraded IT
systems.
Review of Business Operations
Consumer Durables
Revenues down 5.2% to �11.5 million (2007: �12.1 million).
Operating profit was down 40.9% to �0.4 million (2007: �0.6 million) due largely to the fact that our bakeware business did not perform
as strongly as usual at the beginning of 2008.
Our Consumer Durables business supplies a wide range of bakeware and kitchenware to the retail and commercial catering markets and
accounts and contributes 21% of Group revenues (2007:20%).
Our bakeware business has had a slower than expected start to the year, reflecting the more difficult retail market climate. However,
several management initiatives result in order intake rising towards the end of the year.
Overall, our technical product knowledge, brands, routes to market and international footprint give us a strong platform from which to
grow in this market.
Specialist Engineering
Revenues down 8.3% to �43.2 million (2007: �47.1 million).
Operating profit before exceptional items and goodwill impairment was up 16.5% to �1.6 million (2007 �1.4 million). Operating loss has
increased to �4.8 million (2007: �1.0m) as a result of the goodwill impairment in the period.
Specialist Engineering accounts for 79% of Group revenues (2007:80%). Our core operations supply niche products and services to the
healthcare and specialist automotive markets.
In the healthcare sector, PGL has met our expectations in its first five months in the Group. PGL, which is based in Kentucky, USA, is a
world leading manufacturer of isolated electrical power systems and electrical raceways for the medical, laboratory and educational sectors.
It is the number two supplier in each of its primary product markets. The acquisition reinforces our commitment to expand into international
markets and we are pleased with the successful integration of PGL which has already significantly enhanced our Specialist Engineering
division. We will continue to invest in the healthcare sector where the demographic drivers remain strong in spite of the macro-economic
conditions.
Conversely, Stackright Building Systems has been particularly badly hit by the downturn in UK construction activity. In 2007 Stackright
contributed a �1.1m operating profit by manufacturing vandal-proof cabins for the construction rental sector, which has declined sharply in
the period. This business has suffered a fall in profits of �0.6m in the first half of 2008 to a loss of �0.1m, compared to the same period
in 2007.
Following our strategic review, we announced our intention to exit high volume, low margin automotive businesses.
However, our specialist automotive business, which caters primarily for off-highway vehicles, sport cars and the passenger car
after-market, enjoys strong long term growth drivers and significant barriers to entry. Our manufacturing processes include high quality
specialised die casting, complex tube manipulation, fabrication and assembly. Some of our products are physically large and often bespoke.
Our customers benefit from locally sourced manufacturing, high quality production and highly competent, experienced engineering resources.
The performance of some businesses in this division has been impacted by wider market conditions. However, we will continue to focus on
delivering organic growth through core businesses.
A motivated and committed team
I would like to acknowledge the passion, motivation and professionalism shown by our people in the face of considerable upheaval across
the Group and highly challenging market conditions. I am confident that the commitment and competencies of our team provide strong
foundations on which to build the future of the Metalrax Group.
Financial Review
Results
The operating profit before exceptional items and goodwill impairment in the first half of 2008 was maintained at �2.0 million (2007:
�2.0 million). After exceptional items and goodwill impairment the Group has made a loss for the period of �5.3 million (2007: �0.4
million). However, we took advantage of commercial opportunities in businesses now exited which will not recur in the second half. Without
this contribution from non-recurring trading items, our operating profit in the period would have been �0.8m lower in the Specialist
Engineering division.
Gross margin at 30.5% (2007: 27.8%) predominantly reflected the higher margin profile of our newly acquired PGL business and
non-recurring revenues relating to businesses now exited. We will continue to focus on higher margin activities and opportunities.
Exceptional items of �1.8 million included restructuring costs relating to the closure of Down and Francis, further provision for losses
on onerous contracts in MRX Romania, asset impairment at Welland and other reorganisation and restructuring costs consistent with 2007. A
�4.6 million non-cash impairment charge has been applied to the carrying value of goodwill related to Welland Engineering Supplies and
Stackright Building Systems.
Balance Sheet
Given the downward movement in the UK commercial property market in recent months the Board has revisited the property valuations at
December 2007 and has reduced their value by �2.5m. This amount (which is non-cash) has been offset against the revaluation reserve which
was created in December and does not therefore impact earnings. The balance sheet remains strong and unsecured.
Financing
Net debt was reduced to �12.1 million at 30 June 2008 (December 2007: �12.5 million), despite funding the �3.2 million PGL acquisition
from our cash resources. No property disposals were recorded in the first half. We have a robust working capital management programme which
has delivered good progress in this respect in the first half.
Dividend
For the reasons stated in the Chairman's statement we will not be making a dividend payment at the half year.
Financial Risks
The principal risks and uncertainties are unchanged from the Annual Report at 31 December 2007, being macro-economic climate and
competition, raw material input prices, treasury risk, and pension risk. Further detail is set out on page 15 of the Annual Report for the
year ended 31 December 2007.
Current Trading and Prospects
Sales volumes and order intake have shown signs of improvement since the end of the first half with the exception of those Specialist
Engineering businesses with the greatest exposure to the construction sector. Market conditions in both construction and retail are widely
expected to continue to deteriorate further through the remainder of 2008 and input prices of energy and steel are expected to rise further
as annual purchase contracts work through. However, we will continue to take strong management action to counter these challenges.
Taking into account the above the Board anticipates that the results for the year ending 31 December 2008 will be broadly in line with
market expectations.
Despite the challenging economic conditions, the Board believes that various initiatives and actions have been implemented that will
enable further recovery and growth of the Metalrax businesses beyond 2008.
A J Richardson
Group Chief Executive
8 September 2008
Financial Statements
Condensed consolidated income statement
six months ended 30 June 2008
Six months Six months Year ended
ended 30 ended 30 31 December
June 2008 June 2007 2007
Reviewed Reviewed Audited
Note �'000 �'000 �'000
Continuing operations
Revenue 4 54,720 59,264 118,647
Cost of sales (38,037) (42,802) (95,804)
Gross profit 16,683 16,462 22,843
Distribution expenses (3,409) (3,575) (7,092)
Administrative expenses (17,667) (13,232) (26,059)
Other operating income - - 1,472
Operating profit before exceptional 4 1,990 2,016 3,381
items and goodwill impairment
Exceptional items* 4, 5 (1,824) (2,361) (12,217)
Goodwill impairment 4, 11 (4,559) - -
Operating loss 4 (4,393) (345) (8,836)
Finance income - - -
Finance expense 6 (495) (425) (1,120)
Loss before taxation (4,888) (770) (9,956)
Taxation 7 (366) 334 2,970
Loss for the period 13 (5,254) (436) (6,986)
Loss for the period attributable to (5,254) (436) (6,986)
equity shareholders of the parent
Basic and diluted loss per share 8 (4.38)p (0.36)p (5.83)p
Declared dividend per share in 9 - 1.65 p 1.65p
respect of the period
*Exceptional items (note 5) are items of income and expenditure that, in the judgement of management, should be disclosed separately on
the basis that they are material, either by their nature or their size, to the understanding of the financial statements and where not to do
so would distort the comparability of the financial performance between periods.
Condensed consolidated balance sheet
as at 30 June 2008
30 June 30 June 2007Reviewed 31 December
2008Revi 2007Audited
ewed
Note �'000 �'000 �'000
Non-current assets
Goodwill 11 7,563 11,381 11,381
Other intangible assets 11 597 10 -
Property, plant and equipment 34,720 32,280 36,356
Deferred tax asset 1,333 885 1,609
44,213 44,556 49,346
Current assets
Inventories 13,865 17,412 13,176
Trade and other receivables 22,328 29,304 24,338
Current tax asset 561 - 274
Assets held for sale * properties and 3,863 2,999 3,557
equipment
Cash and cash equivalents - - -
40,617 49,715 41,345
Total assets 84,830 94,271 90,691
Current liabilities
Loan notes - (250) (250)
Bank borrowings (12,085) (18,085) (12,031)
Trade and other payables (23,358) (21,094) (22,344)
Current tax payable (442) - -
Provisions (645) - (384)
(36,530) (39,429) (35,009)
Non-current liabilities
Loan notes - (250) (250)
Employee benefits 16 (4,760) (3,159) (3,412)
Deferred tax liabilities (670) (1,986) (1,143)
Provisions (165) - (289)
(5,595) (5,395) (5,094)
Total liabilities (42,125) (44,824) (40,103)
Net assets 42,705 49,447 50,588
Equity
Share capital 12 5,995 5,995 5,995
Share premium account 13 2,732 2,732 2,732
Capital redemption reserves 13 274 274 274
Revaluation reserve 13 8,475 - 10,262
Other reserve 13 90 - 15
Retained earnings 13 25,139 40,446 31,310
Total equity 14 42,705 49,447 50,588
Condensed consolidated statement of recognised income and expense
Six months ended 30 June 2008
Six months Six months Year
ended ended ended
30 June 30 June 31
2008Reviewed 2007Reviewed Decembe
r
2007Aud
ited
�'000 �'000 �'000
(Devaluation)/revaluation of properties (2,493) - 11,667
Actuarial loss on defined benefit pension (1,348) - (572)
scheme
Tax on items taken directly to equity 1,084 (75) (1,320)
Exchange gain/(loss) 53 155 (41)
Net (expense)/income recognised directly (2,704) 80 9,734
in equity
Loss for the period (5,254) (436) (6,986)
Total recognised (expense)/income in (7,958) (356) 2,748
period
(Loss)/profit for the period attributable
to equity
shareholders of the parent (7,958) (356) 2,748
Condensed consolidated cash flow statement
six months ended 30 June 2008
Six months Six months ended Year
ended 30 June ended
30 June 2007Reviewed 31
2008Reviewed Decembe
r
2007Aud
ited
�'000 �'000 �'000
Operating loss from activities (4,393) (345) (8,836)
Depreciation 1,437 1,687 4,872
Amortisation of intangibles 6 40 50
Profit on sale of property - - (1,472)
Impairment losses 4,559 - 2,990
Share based payment expense 75 - 15
Exchange gain/(loss) 53 - (41)
(Increase)/decrease in (817) 656 4,891
inventories
Decrease/(increase) in trade and 2,561 (764) 4,099
other receivables
Increase/(decrease) in payables 793 (1,458) (432)
Increase in provisions 137 - 673
Decrease in pension scheme - - (319)
liabilities
Cash generated from/(used in) 4,411 (184) 6,490
operations
Interest paid (380) (374) (996)
Tax recovered/(paid) 350 (460) (810)
Net cash from/(used in) operating 4,381 (1,018) 4,684
activities
Investing activities
Purchase of property, plant and (1,560) (3,353) (6,019)
equipment
Proceeds from sale of property, 317 1,269 6,263
plant and equipment
Acquisition of subsidiary (3,624) (551) (549)
undertakings
Proceeds from sale of businesses 432 - -
Net cash used in investing (4,435) (2,635) (305)
activities
Financing activities
Equity dividends paid - (4,496) (6,474)
New bank borrowings 3,000 5,000 5,000
Repayment of bank borrowings (5,000) - -
Increase/(decrease) in bank 2,054 3,149 (2,905)
overdraft
Net cash from/(used in) financing 54 3,653 (4,379)
activities
Net increase in cash and cash - - -
equivalents
Cash and cash equivalents at - - -
beginning of period
Cash and cash equivalents at end - - -
of period
Notes to the condensed set of financial statements
six months ended 30 June 2008
1 General information
The company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Ardath Road, Kings
Norton, Birmingham, B38 9PN.
The company has its primary listing on the Alternative Investment Markets ("AIM") following its delisting from the London Stock Exchange
on 25 June 2008.
This condensed consolidated interim financial information was approved for issue on 8 September 2008.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 240 of the
Companies Act 1985. The full accounts of Metalrax Group plc for the year ended 31 December 2007, which received an unqualified report from
the auditors, and did not contain a statement under S.237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of
Companies.
The condensed consolidated interim financial information has been reviewed, not audited.
2 Basis of preparation
The condensed consolidated interim financial information for the six months ended 30 June 2008 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard 34 'Interim Financial
Reporting' (IAS 34) as adopted by the European Union.
The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year
ended 31 December 2007, which have been prepared in accordance with IFRS as adopted by the European Union.
3 Accounting policies
The condensed consolidated interim financial information has been prepared on the basis of the accounting policies expected to apply for
the financial year to 31 December 2008 applicable to the Group under IFRS. The IFRS and IFRIC interpretations as adopted by the European
Union that will be applicable at 31 December 2008, including those that will be applicable on an optional basis, are not known with
certainty at the time of preparing these interim financial statements. Thus the accounting policies adopted in these interim financial
statements may be subject to revision to reflect further IFRS, IFRIC interpretations and pronouncements issued between 8 September 2008 and
publication of the annual IFRS financial statements for the year ending 31 December 2008.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of properties.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain critical
accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the condensed
consolidated interim financial statements are disclosed within the Group's accounting policies as disclosed in the IFRS financial statements
for the year ended 31 December 2007.
The same accounting policies are followed in the condensed set of financial statements as applied in the Group's latest annual audited
financial statements, except for the following accounting policy on intangible assets which is new for the Group in 2008.
Intangible assets that are acquired on the acquisition of a business are stated at their fair value and are amortised over their useful
lives as follows:
Brands: indefinite
Beneficial customer contracts : 10 years
Computer software is stated at cost and is amortised over its useful life of 3 years.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year
beginning 1 January 2008, but are not currently relevant for the group.
IFRIC 11, 'IFRS 2 - Group and treasury share transactions'.
IFRIC 12, 'Service concession arrangements'.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year
beginning 1 January 2008 and have not been early adopted.
IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14, 'Segment
reporting', and requires a 'management approach' under which segment information is presented on the same basis as that used for internal
reporting purposes.
IFRS 2 (amendment), 'Share-based payment', effective for annual periods beginning on or after 1 January 2009. Management is assessing
the impact of changes to vesting conditions and cancellations on the Group's SAYE schemes.
IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements',
IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is
assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the group. The Group does not
have any joint ventures.
IAS 1 (amendment), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. Management
is in the process of developing proforma accounts under the revised disclosure requirements of this standard.
IAS 32 (amendment), 'Financial instruments: presentation', and consequential amendments to IAS 1, 'Presentation of financial
statements', effective for annual periods beginning on or after 1 January 2009. This is not currently relevant to the Group, as the Group
does not have any puttable instruments.
IFRIC 13, 'Customer loyalty programmes', effective for annual periods beginning on or after 1 July 2008. This is not relevant to the
Group.
IFRIC 14, 'IAS19 - The limit on a Defined Benefit Asset, minimum funding requirements and their interaction', effective for annual
periods beginning on or after 1 January 2008. This is not currently relevant to the Group as the Group does not have an IAS19 surplus.
4 Segmental information
The Group has been reorganised into two divisions - Specialist Engineering and Consumer Durables - from 1 January 2008. The principal
activities of the two divisions are as follows:
Specialist Engineering - a variety of precision manufacturing activities that incorporate value adding technology for unique
applications in the healthcare, niche automotive, high quality metal finishing and construction markets. This division is further analysed
to show Construction & Infrastructure and Specialist Applications & Technology for internal reporting purposes.
Consumer Durables - manufactures and markets bakeware and associated ranges of kitchen accessories to both the retail and commercial
markets in the UK and abroad.
Revenue represents amounts derived from the sale of specialist products which fall within the Group's ordinary activities after
deduction of trade discounts and value added tax. The primary segment is based on the activities and markets to which the individual
operating business units serve and an analysis of external revenue and operating (loss)/profit are shown below:
a) Segmental analysis by operating activity:
6 months to 30 June 2008
Specialist Engineering Consumer
Durables Reviewed Group Total
Reviewed
Specialist Applications & Technology Reviewed Total Reviewed
Construction &
Infrastructure
Reviewed
�'000 �'000 �'000
�'000 �'000
Revenue from external 21,594 21,619 43,213
11,507 54,720
customers
Operating profit 6292.9% 9924.6% 1,6213.8%
3693.2% 1,9903.6%
before exceptional
items and goodwill
impairment
Exceptional items (1,711) (113) (1,824)
- (1,824)
Goodwill impairment (986) (3,573) (4,559)
- (4,559)
Operating (loss)/profit (2,068) (2,694) (4,762)
369 (4,393)
Finance expense
(495)
Loss before taxation
(4,888)
Taxation
(366)
Loss after taxation
(5,254)
a) Segmental analysis by operating activity (continued):
6 months to 30 June 2007
Specialist Engineering Consumer Durables Group Total
Reviewed Reviewed
Specialist Total
Construction & Applications & Reviewed
Infrastructure Technology Reviewed
Reviewed
�'000 �'000 �'000 �'000
�'000
Revenue from external 25,698 21,427 47,125 12,139
59,264
customers
Operating profit before 135 1,257 1,392 624
2,016
exceptional items 0.5% 5.9% 3.0% 5.1%
3.4%
Exceptional items (2,008) (353) (2,361) -
(2,361)
Operating (loss)/profit (1,873) 904 (969) 624
(345)
Finance expense
(425)
Loss before taxation
(770)
Taxation
334
Loss after taxation
(436)
Intra-group revenue between business units of �3.3 million (six months to 30 June 2007: �3.5 million) has been excluded from the above
analysis.
Central costs of �1.4 million (six months to 30 June 2007: �0.7 million) have been allocated to operating profit before exceptional items
and
goodwill impairment based on the number of operating businesses in each segment.
b) Segmental analysis by geographic destination
Six months Six months Year
ended ended ended 31
30 June 30 June December
2008 2007 2007
Reviewed Reviewed Reviewed
Revenue by geographical destination: �'000 �'000 �'000
United Kingdom 37,860 42,173 88,622
Rest of Europe 12,532 13,980 22,617
North America 2,709 1,404 2,712
Rest of World 1,619 1,707 4,696
Total revenues from external customers 54,720 59,264 118,647
5 Exceptional items
Six months Six months Year
ended ended ended 31
30 June 30 June December
2008 2007 2007
Reviewed Reviewed Audited
�'000 �'000 �'000
Profit on sale of property - - 1,472
Reorganisation/restructuring costs (1,824) (2,361) (9,571)
Losses on long term contracts - - (1,941)
Provisions for stock write-downs - - (2,177)
(1,824) (2,361) (12,217)
Reorganisation/restructuring costs incurred in the period relate to the closure of Down and Francis in May 2008 (�0.4m), losses on
onerous contracts in MRX Romania (�0.5m), assets impairment at Welland Engineering Supplies (�0.1 million) and other reorganisation and
restructuring costs at parent company, Metalrax Bordesley Green, MRX Automotive, and Stackright Building Systems, totaling �0.8 million.
This disclosure is consistent with the year end accounts for 2007.
6 Finance expense
Six months Six months Year
ended ended ended 31
30 June 30 June December
2008 2007 2007
Reviewed Reviewed Audited
�'000 �'000 �'000
Interest payable on bank loans and 414 425 1,025
overdrafts
Net finance cost of defined benefit 81 - 95
pension schemes
Finance expense 495 425 1,120
7 Income tax charge/(credit)
Six months Six months Year
ended ended ended 31
30 June 30 June December
2008 2007 2007 Audited
Reviewed Reviewed
�'000 �'000 �'000
Current tax charge/(credit) 332 (255) -
Prior period adjustments to tax (637) - (4)
Deferred tax charge/(credit) 671 (79) (2,966)
Income tax expense/(credit) 366 (334) (2,970)
The current income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected
for the full financial year. Current tax for the interim period is charged at 31%.
8 Loss per ordinary share
The basic and diluted loss per share are calculated based on the loss for the period and the adjusted earnings per share is calculated
based on an adjusted profit after tax as calculated below. The weighted average number of shares used in the basic and diluted loss per
share calculation is 119,897,298 (June and December 2007: 119,897,298).
Six months Six months Year
ended ended ended 31
30 June 30 June December
2008 2007 2007
Reviewed Reviewed Audited
�'000 �'000 �'000
Loss for the period (5,254) (436) (6,986)
Add back exceptional items 1,824 2,361 12,217
Add back goodwill impairment 4,559 - -
Adjusted profit after tax 1,129 1,925 5,231
Basic and diluted loss per ordinary (4.38) (0.36) (5.83)
share (pence per share)
Adjusted basic profit per ordinary 0.94 1.61 4.36
share (pence per share)
There is no dilution in the loss per share calculation at the 30 June 2008.
9 Dividends
An interim dividend has not been declared for this period (six months ended 30 June 2007: 1.65pps). There was no final dividend paid
during the period ended 30 June 2008 in respect of the financial period to 31 December 2007 (six months ended 30 June 2007: 3.75pps in
respect of the financial period to 31 December 2006).
10 Acquisitions
On 25 January 2008, Metalrax Holdings Inc. a wholly owned subsidiary of the Group, acquired the entire share capital of Post Glover
Lifelink Inc. ("PGL") for a total cash consideration of �3,229,000. PGL is based in Erlanger, KY, USA and is involved in the manufacture
of isolated electrical power systems and electrical raceways for the medical, laboratory and education sectors. The transaction was
accounted for by the purchase method of accounting.
PGL contributed an operating profit of �333,000 on revenues of �1,671,000 in the period from acquisition to 30 June 2008. If PGL had
been part of the Group since 31 December 2007, it would have generated an operating profit of �417,000 on revenues of �2,021,000 for the
period to 30 June 2008. PGL has operated as within the Specialist Applications and Technology sub-division.
A provisional assessment of the goodwill and other intangibles arising on the acquisition is shown below. Fair value of assets acquired
is disclosed as "provisional" on the basis that the fair values have been determined using information available to management as at interim
reporting. Additional information may become available resulting in a change to the fair values within 12 months from the acquisition date,
with any adjustments arising recorded against the initial acquisition entry.
Book values Provisional fair values Reviewed
Reviewed �'000
�'000
Intangibles - 603
Property, plant and equipment 597 1,222
Inventories 304 304
Trade and other receivables 551 551
Cash and cash equivalents 80 80
Trade and other payables (522) (522)
1,010 2,238
Goodwill arising on 991
acquisition
Total consideration (including 3,229
professional fees)
Satisfied by:
Cash 3,043
Directly attributable costs 186
Total consideration 3,229
Intangibles assets acquired comprise brands of �286,000, beneficial customer contracts of �302,000 and capitalised software costs of
�15,000. The PGL property was revalued on acquisition at $2,122,000 (�1,076,000).
�'000
Net cash outflow arising on acquisition:
Cash consideration 3,229
Cash and cash equivalents acquired (80)
3,149
In addition to the above, deferred consideration was paid in the period in respected of the acquisitions of Advanced Quality Solutions
Limited and Stackright Building Systems Limited of �225,000 and �250,000, respectively.
11 Goodwill and other intangibles
Goodwill Reviewed Other intangibles Reviewed Total intangibles Reviewed
�'000 �'000 �'000
Cost
As at 1 January 2008 11,381 - 11,381
Additions (see note 10) 991 603 1,594
Adjustments to prior period (250) - (250)
acquisition
As at 30 June 2008 12,122 603 12,725
Amortisation
As at 1 January 2008 - - -
Charge for the period - 6 6
Impairment 4,559 - 4,559
As at 30 June 2008 4,559 6 4,565
Net book value
At 30 June 2008 - Reviewed 7,563 597 8,160
At 31 December 2007 - Audited 11,381 - 11,381
The goodwill arising on the acquisition of Stackright Building Systems Limited has been adjusted following a reduction of �250,000 to
the loan notes payable on this acquisition.
The directors have reviewed the carrying value of goodwill on the balance sheet at 30 June 2008. The goodwill previously acquired in
respect of Welland Engineering Supplies Limited and Stackright Building Systems Limited has been impaired following an assessment of the
future profitability and cash flows generated by these operating businesses.
12 Share capital
30 June 31 December
30 June 2007 2007
2008 Reviewed Audited
Reviewed
�'000 �'000 �'000
Authorised
140,000,000 (2007: 7,000 7,000 7,000
140,000,000) ordinary shares
of 5p each
Called up, issued and fully
paid
119,897,298 (2007: 5,995 5,995 5,995
119,897,298) ordinary shares
of 5p each
13 Reserves
Share Capital redemption Revaluation reserve Other reserves Retained earnings Total
premi reserve
um
accou
nt
�'000 �'000 �'000 �'000 �'000 �'000
At 1 January 2008 - Audited 2,732 274 10,262 15 31,310 44,593
Loss for the period - - - - (5,254) (5,254)
Devaluation in period - - (2,493) - - (2,493)
Movement in defined benefit - - - - (1,348) (1,348)
pension scheme
Tax on movement in items taken - - 706 - 378 1,084
directly to reserves
Exchange gain on translation - - - - 53 53
of foreign operations
Share based payments - - - 75 - 75
At 30 June 2008 - Reviewed 2,732 274 8,475 90 25,139 36,710
14 Movement in equity
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
Reviewed Reviewed Audited
�'000 �'000 �'000
Opening equity 50,588 54,299 54,299
Loss for the period (5,254) (436) (6,986)
Dividends - (4,496) (6,474)
Share-based payment 75 - 15
(Devaluation)/revaluation of (2,493) - 11,667
properties
Actuarial loss on defined benefit (1,348) - (572)
pension scheme
Movement on deferred tax relating 1,084 (75) (1,320)
to items taken direct to reserves
Exchange gain/(loss) on translation 53 155 (41)
of foreign operations
Closing equity 42,705 49,447 50,588
15 Reconciliation of net cash flow to movement in net debt
Six months Six months Year
ended ended ended31
30 June 30 June December
2008Reviewed 2007Reviewed 2007Audited
�'000 �'000 �'000
New bank loans (3,000) (5,000) (5,000)
Repayment of bank loans 5,000 - -
(Increase) /decrease in bank (2,054) (3,149) 2,905
overdrafts
Loan notes 500 250 250
Movement in net debt in the period 446 (7,899) (1,845)
Net debt at beginning of period (12,531) (10,686) (10,686)
Net debt at end of period (12,085) (18,585) (12,531)
16 Pensions
The valuation of the Group*s pension scheme obligation has been updated using an IAS19 valuation as at 30 June 2008, to reflect current
market discount rates, current market values of investment and actual investment returns. The amounts included in the balance sheet arising
from the Group's pension obligations in respect of defined benefit schemes are as follows:
30 June 30 June 31 December
2008Revi 2007Revi 2007Audited
ewed ewed
�'000 �'000 �'000
Total market value of plan assets 14,031 16,464 16,448
Present value of scheme liabilities (18,791) (19,623) (19,860)
Pension scheme liability (4,760) (3,159) (3,412)
The major assumptions used by the Actuary were:
30 June 30 June 31 December 2007Audited
2008Rev 2007Rev
iewed iewed
% % %
Inflation 4.0 3.1 3.4
Rate of increase in salaries 4.0 3.6 3.9
Pension increases, subject to LPI 4.0 3.1 3.4
Discount rate 6.4 5.1 5.7
Return on plan assets 5.9 5.6 5.9
17 Related party transactions
All intra-group transactions have been eliminated on consolidation at 30 June 2008. There have been no other related party transactions
in the period from 1 January 2008 to 8 September 2008.
Independent review report to Metalrax Group PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 30 June 2008 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the
condensed consolidated statement of recognised income and expense, the condensed consolidated cash flow statement and related notes 1 to 17.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements 2410 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 purpose. 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' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
8 September 2008
Birmingham, UK
Statement of directors' responsibilities
six months ended 30 June 2008
The directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as
adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR
4.2.8, namely:
* an indication of important events that have occurred during the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
* material related-party transactions in the first six months and any material changes in the related-party transactions described
in the last annual report.
The directors of Metalrax Group plc are listed in the Metalrax Group plc Annual Report for 31 December 2007.
By order of the Board
A J Richardson M J Stock
Chief Executive Officer Finance Director
8 September 2008 8 September 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LRMATMMMMBTP
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