TIDMBRAM
RNS Number : 3489X
Brammer PLC
14 February 2012
14 February 2012
Brammer plc ("Brammer" or the "Group")
PRELIMINARY RESULTS
STRATEGY TO ADD VALUE to customers CONTINUES TO DRIVE STRONG
REVENUE AND PROFIT GROWTH
Brammer, the leading pan-European added value distributor of
industrial maintenance, repair and overhaul products, today
announces its preliminary results for the year ended 31 December
2011.
Financial Highlights
-- Total group revenue up 22.0% toGBP571.5 million (2010:
GBP468.4 million) driven by organic growth across all territories
totaling 16.4% and 5.6% by acquisition.
-- Profit before tax (pre amortisation and exceptional items)
increased by 40.8% to GBP29.0 million (2010: GBP20.6 million).
-- Operating profit (pre amortisation and exceptional items)
increased by 38.3% to GBP31.8 million (2010: GBP23.0 million), with
34.4% of the growth from organic business.
-- Operating margins (pre amortisation and exceptional items)
improved from 4.9% to a new high of 5.6%.
-- Continued strong cash inflow (pre exceptional items) of
GBP28.9 million (2010: GBP27.5 million) reflecting continued focus
on working capital control.
-- EPS (pre amortisation and exceptional items) increased by 42.4% to 19.8p (2010: 13.9p).
-- EPS (basic) increased by 29.2% to 16.8p (2010: 13.0p).
-- Dividend up 27.3% to 8.4p (2010: 6.6p) reflecting the Board's
confidence in the outlook for the business.
Operational Highlights
-- Acquisition of Buck & Hickman business on 30 September
2011, a top five operator in the fragmented UK tools & general
maintenance market, providing significant cross-selling
opportunities in the European market with existing customers.
Integration is proceeding to plan, with the market opportunity
significantly larger than our previous estimates.
-- Continued successful execution of organic growth strategy;
- Key Account sales per working day growth of 23.9%* with sales
now representing 40.2% of revenues (2010: 36.1%).
- Insite sales growth of 27.0%* with a net 48 new locations established.
- Organic non Key Account (excluding acquisitions) revenue grew
10.9%* driven by cross-selling initiatives.
- Utilities and Food and Drink revenues grew by 14.7% increasing
the group's resilience to any wider economic uncertainty in our
markets.
- Overall Brammer delivered GBP34.9 million of validated cost savings to our customers.
*at constant currency David Dunn, Chairman, said:
"We have continued to execute successfully our proven strategy
to exploit Brammer'sleadership position in the fragmented,
pan-European, EUR40 billion market that we address. The scale of
this market offers multiple growth opportunities as we invest in
quality products, people, systems, and marketing.
2012 will be another economically challenging year but early
trading has started well and we are deriving additional benefits
from the acquisition of Buck & Hickman. The Board is confident
that Brammer will make further significant progress during the
course of the current year."
Enquiries: Brammer plc 0207 796 4133 (8.00am - 1.00pm)
0161 902 5572 (1.00pm - 4.30pm)
David Dunn, chairman
Ian Fraser, chief executive
Paul Thwaite, finance director
Issued: Hudson Sandler 020 7796 4133
Andrew Hayes
Andrew Leach
Kate Hough
BRAMMER PLC
2011 PRELIMINARY RESULTS
CHAIRMAN'S STATEMENT
Overall
2011 was a highly successful and significant year for Brammer.
The group has produced substantially increased sales and profits,
acquired an exciting business in Buck & Hickman, and secured
new long term borrowing facilities on favourable terms. I believe
these achievements again demonstrate the consistent application of
our proven long term strategy and the strength of our management
team.
Results for 2011
Total sales for the year were GBP571.5 million ("m") which was
an increase of 22% over the prior year. Excluding a small exchange
rate benefit and a first time contribution from Buck & Hickman
of GBP26.5m for the final three months of the year, the organic
sales growth at constant exchange rates was 15.6%. Once again Key
Accounts were the principal growth driver with twelve new accounts
won in 2011. Sales growth in Key Accounts was 23.3%. Importantly,
the pipeline of new prospects remains strong and there is
considerable scope for further penetration of existing
accounts.
Gross margins were 30.3% which was slightly up on 2010
notwithstanding dilution of 0.3% from the lower margin Buck &
Hickman business. Sales, distribution, and administrative costs
totalled GBP144.7m including GBP6.0m from Buck & Hickman. On a
like for like basis (excluding Buck & Hickman and exceptional
items) at constant exchange ratesthis is 14.2% higher than last
year. Included in the total is a charge of non-cash costs related
to the anticipated vesting of management share options awarded in
2009 under the Performance Share Plan. This amounted to GBP3.1m. No
such charges were made in the previous two years as prior year
awards lapsed during the recession and its immediate aftermath.
The resulting operating profit (pre amortisation of acquired
intangibles and exceptional items) was up by 38.3% to GBP31.8m
(2010: GBP23.0m) representing a margin of 5.6% on sales (2010:
4.9%) On the same basis profit before tax was GBP29.0m, a 40.8%
improvement on last year's GBP20.6m. Exceptional items totalled
GBP3.2m (2010: GBPnil) most of which related to the acquisition of
Buck &Hickman with the balance being accounted for by some
minor restructuring in Europe. Earnings per share (pre amortisation
and exceptional items) were 19.8 pence compared to 13.9 pence in
2010, an increase of 42.4%. There was no dilution of earnings
associated with Buck & Hickmanwhich is being integrated to
plan.
Balance Sheet
Net debt at 31 December 2011 was GBP35.3m (2010: GBP36.7m). The
reduction in debt is after the payment of deferred consideration
for previous acquisitions of GBP1.8m and a net cash outflow of
GBP2.1m to part finance the purchase of Buck & Hickman. The
bulk of the Buck & Hickman consideration was covered by the
proceeds of a new issue of ordinary shares which raised GBP24.8m
net of costs.
As indicated in our interim review the group was pleased to
announce the completion in July of new banking facilities providing
up to EUR100m (GBP83.9m) of debt finance for a five year term.
Buck& Hickman
Brammer acquired Buck & Hickman, a leading UK distributor of
industrial products, at the end of September 2011. Prior to the
acquisition, Brammer already had a modest sized tools and general
maintenance product range which had been identified as an area of
major growth potential in the group's strategic planning. As a top
five UK supplier of tools and general maintenance productsBuck
& Hickmangives usthe opportunity to accelerate these growth
plans significantly, and we were delighted to acquire the
business.
Buck & Hickman is now in the process of being integrated
into the Brammer business. Considerable opportunities for the
combined business were identified prior to acquisition and these
have been reinforced in the immediate post acquisition period. We
are leveraging Buck & Hickman's expertise in tools and general
maintenanceinto many cross-selling initiatives with Brammer's
customer base. Our European network is opening up sales
opportunities for Buck& Hickman and a new European organisation
has been set up to focus on this major area of growth. The merging
of expertise, purchasing, and distribution networks will also
create future benefits for the group and consequently our customer
base. We are grateful to the management and employees of Buck &
Hickman for their enthusiasm and co-operation in bringing the two
businesses together.
Dividend
The interim dividend for 2011 was increased by 28.6% to 2.7
pence per share. Given the growth in earnings the Board is now
proposing a 26.7% increase in the final dividend to 5.7 pence per
share. Total dividends for 2011 would then amount to 8.4 pence per
share which is a 27.3% increase over the prior year. At this level
the total dividend would be covered 2.4 times by earnings.Subject
to shareholder approval, the final dividend will be paid on 3 July
2012 to shareholders on the register at close of business on 8 June
2012.
Board
After more than ten years as Chairman of Brammer I have decided
not to stand for re-election at the annual general meeting in May.
I am delighted to say that Bill Whiteley has agreed, subject to
re-election, to take over at that time. Bill joined Brammer's Board
as a non-executive director in July 2008 and we are fortunate to be
able to appoint someone of his quality and experience. Duncan
Magrath will join the Board as a non-executive director on 1 March
2012. We are delighted to welcome Duncan whose wide international
experience will be invaluable to the group.
It has been a privilege for me to serve as Chairman and I leave
the group in excellent shape. We have a sound and proven strategy,
a first class management team ably led by Ian Fraser and massive
opportunities for future growth.
Prospects
We have continued to execute successfully our provenstrategy to
exploit Brammer'sleadership position in the fragmented,
pan-European, EUR40 billion market that we address. The scale of
this market offers multiple growth opportunities as we invest in
quality products, people, systems, and marketing. 2012 will be
another economically challenging year but early trading has started
welland we are deriving additional benefits from Buck &
Hickman. The Board is confident that Brammer will make further
significant progress during the course of the current year.
David Dunn
14 February 2012 CHIEF EXECUTIVE'S REVIEW
Overview
In 2011 we continued to invest in and benefit from our growth
strategy focusedonKey Accounts, Product Range Extension, Insites
and segment based marketing, giving rise, once more, to growth
significantly ahead of the market. Our growth drivers have served
us well over the past eight years, and in 2011 our strategy
remained unchanged. Although our growth rate declined slightly
towards the end of the year due to increasingly challenging
comparators, we nevertheless exited 2011 with an organic growth
rate in December of 13.5%, measured in Sales Per Working Day at a
constant exchange rate ("SPWD"). We thus enter 2012 with good
growth momentum.
In 2011, we achieved an organic growth rate in SPWD of 15.9%. We
continued to invest in initiatives to grow in more defensive
segments such as Food and Drink, Fast Moving Consumer Goods
("FMCG"), and Utilities. Our Key Account developmentcontinued
unabated, and it became clear that our value and cost saving
propositions are becoming ever more important to bothexisting and
potential Key Account customers. We increased our investment in our
Insite programme increasing the number of sites by a net
forty-eight.Our Product Range Extension and cross-selling
initiativesgave us good growth in product lines such as Mechanical
Power Transmission, Fluid Power, and Tools and General Maintenance
products especially on the continent where we are significantly
under-represented in these product lines.
Finally, our scale, geographic coverage, and focus as a
technical specialist in a core range of products continues to
reinforce to our customers and potential customers alike that we
are a strong partner that adds real value to their business. Our
ability to provide a consistent quality of product and service
across the entire Bearings, Power Transmission, Fluid Power, and
Tools and General Maintenance product range in Europe remains
unparalleled.
Operational Review
Brammer is the leading European supplier of technical components
and related services to the MRO markets. In 2011, revenue increased
by 22.0% to GBP571.5 million (2010: GBP468.4 million), whilst
operating profit before amortisation and exceptional items
increased by 38.3% to GBP31.8 million (2010: GBP23.0 million).
Earnings per share (before amortisation and exceptional items)
increased by 42.4% to 19.8p pence per share (2010: 13.9 pence per
share). Cash generated from operations before outflows relating to
exceptional items was GBP28.9 million (2010: GBP27.5 million),
reflecting continued focus on working capital in a year of
growth.
Operating margin (before amortisation and exceptional items)
increased from 4.9% to 5.6%. Excluding Buck & Hickman, our
operating margin improved to 5.7%. Revenue per head was up 13% to
GBP221,000 (2010: GBP195,000) reflecting continued improvement in
productivity.
At 2011 management
rates (EUR1.20) Growth
Operating Operating Organic
External Revenue Profit* Profit* SPWD**
2011 2010 2011 2010 2011 2011
GBPm GBPm GBPm GBPm % %
UK 190.5 141.5 9.4 6.5 44.6% 16.8%
Germany 115.5 99.3 7.8 5.4 44.4% 16.1%
France 84.5 73.9 4.0 2.8 42.9% 14.2%
Spain 42.9 38.1 3.3 2.8 17.9% 12.3%
Benelux 49.2 43.5 2.6 2.5 4.0% 12.8%
Eastern
Europe 56.8 47.0 3.6 2.3 56.5% 21.0%
Other 17.7 15.8 0.2 0.2 - 13.2%
Total 557.1 459.1 30.9 22.5 37.3% 15.9%
--------- -------- ----- ----- ---------- --------
Exchange
effect*** 14.4 9.3 0.9 0.5 1.2%
--------- -------- ----- ----- ---------- --------
As reported 571.5 468.4 31.8 23.0 38.3%
========= ======== ===== ===== ========== ========
* operating profit before amortisation and exceptional items
** sales per working day
*** to reconcile results and analysis to actual exchange rates
for 2011 and 2010
UK (including Iceland)
Our largest operation, and the one where the Brammer development
strategy is most advanced, achieved organic SPWD growth of 16.8%,
and increased operating profit by 44.6% to GBP9.4 million,
including sales of GBP26.5 million and an operating profit
contribution of GBP0.9 million from Buck & Hickman. The growth
rate accelerated throughout the year.
Key Account sales grew by 22.4% in the year, and now represent
63% of turnover. Several new contracts were won with customers such
as EDF Energy, Tata Steel, BAE Systems and many others. Our value
proposition continues to be attractive to customers and we have
further honed our skills in delivering cost savings and adding
value for our customers. In 2011 we recorded 3,682 individual cost
savings for 1,325 customers, with a combined saving of more than
GBP20 million.
We opened 20 new full-time Insites and increased sales through
these Insites and part-time Insites (those locations where we have
several regular clinics with the customer's staff each week) by
24.5%. Six existing full-time Insites closed giving a net increase
of 14. We opened a new branch in Fort William and plan to open more
in the future. Brammer Iceland, established in Reykjavik in
December 2010, has performed well, with two significant Key
Accounts won and several other significant contract wins expected
in the current year in the Power Generation, Metals, and Food and
Drink sectors.
Finally, our cross-selling initiatives continued to be
successful with sales growth of 19.3% in our Fluid Power range and
28.9% in our Tools and General Maintenance range.
Germany
SPWD grew by 16.1%, with the growth rate declining in quarter
four (6.9%) due to tougher comparators and some slowing in the
Original Equipment Manufacturing ("OEM") segment of the market.
Operating profit improved by 44.4%. Our investment in Key Accounts
paid off with an increase in sales in this segment of 23.9%,
representing 25.9% of total sales. We won new contracts with
KolbenschmidtPierburg, Stora Enso, AGC Glass, Deutsche Rockwool,
Harsco and many others. No contracts were lost. We accelerated the
development of our value proposition and provided EUR11.6million of
savings to our Key Account customers.
Our continued investment in FluidPower generated healthy sales
growth of 27.5%, whilst our new investment in Tools and General
Maintenance Products resulted in growth of 69.3%. We established16
new Insites with total Insite sales growing 38.0%. Our focus on the
market segments of Food and Drink, Utilities, and Construction and
Aggregates resulted in several new contract wins and increased
market share; 136 customer events were held across Germany
addressing more than 1,600 MRO specialists from those segments,
raising the awareness of Brammer as a solution provider.
France
SPWD increased by 14.2%, with an exit rate of 12.1% in the
fourth quarter. Operating profit increased by 42.9%. Key Account
sales increased 19.1% and, including the Automotive segment, now
represent 49% of turnover. We delivered a total of 612 signed off
cost saving projects to our customers, representing EUR4.8 million
of savings. New contracts were won with Exide, Georgia-Pacific,
Rockwool, Albea, Bridgestone, Essilor and many others. We opened
nine new Insites bringing the total to 31, with revenue growth of
16.0%. The recently launched new product initiative of Tools and
General Maintenance and Personal Protection Equipment produced
sales growth of 32.7%. Fluid Power also continued to grow, with
sales up 25.6%, and now represents 15.4% of total sales. We
continued to focus our marketing activity on Food and Drink and
Utilities, with 56 customer events attracting 1,450 existing and
potential customers.
Spain
SPWD increased by 12.3%, though the exit rate of7.6% in the
fourth quarter was lower due to tougher comparators and some
slowdown in the OEM segment of our market. Operating profit
increased by 17.9%. Our Key Account revenues increased by 28.5%
(representing 31.2% of sales), and we won new contracts with
Harsco, Johnson Controls, Georgia-Pacific, Panrico, Delphi and many
others. We provided over EUR1.4 million of cost savings to our Key
Account customers. Seven newInsites were established, bringing the
total to 22, with Insite sales increasing by 46.3%. Our marketing
focus was on Food and Drink (up 13.3%), Automotive (up 16.4%),
Metals (up 87%) and Chemicals (up 42%). Forty-three customer
symposiums attracted 240 customers. Good progress was made in
Product Range Extension, with sales of the Tools and General
Maintenance range up 33.2%, and Fluid Power up 46.1%.
Benelux
SPWD in the Benelux countries grew by 12.8%, with an exit rate
of 15.5% in the fourth quarter, whilst operating profit increased
by 4.0%. Key Account growth in Holland was 39.9% and in Belgium
10.8%. We won new contracts with Rockwool, Bosch Transmission
Technology, Monier, Georgia-Pacific, Nexans, Toyota, Hanson and
many others. In Holland our recent emphasis on Mechanical Power
Transmission producedsales growth of27.6% whilstFluid Power grew by
28.0%. We opened one new Insite in Belgium, increasing sales
through Insites by 22.7%, and a new Insite in Holland with sales
growth of 23.4%. Our focus on Food and Drink gave rise to 46%
growth in Holland,though sales grew by just 3% in Belgium due to
some significant one-off orders last year. The Food and
Drinksegment now represents11.5% of Benelux sales.
Eastern Europe
In our Eastern European businesses (comprising Poland, Hungary,
the Czech Republic and Slovakia), total SPWD grew by 21.0%, whilst
operating profit increased by 56.5%. In Poland, SPWD increased by
24.1%. Key Accountsonce again grew significantly, by 42%, and new
contracts were won with Delphi, Exide and Rockwool. In the Czech
Republic and Slovakia, SPWD increased by 12.9%. Key Accounts
increased by 7.5%, mainly due to one very large order from an
Automotive customer in 2010. Excluding this, Key Account sales grew
by 17.2%. We also opened our first two Insites during the year. In
Hungary, the SPWD growth was 44.1%, and new contracts were won with
Kraft Food, Daimler and Univer. We opened our first Insite in
Hungary during the year.
Other segments
In respect of the other segments, Austria, Ireland and Italy,
SPWD grew by 13.2%, whilst operating profit remained constant at
GBP0.2 million. In Austria SPWD were up 19.5%, in Italy, SPWD were
up 13.2% and in IrelandSPWD were up just 0.3%.
Strategy
Our strategy remains unchanged under the headings of Growth,
Capabilities, Synergies and Costs.
Growth
Overall organic SPWD revenue growth was 15.9%, significantly
better than the overall market. It is evident that our strategies
of attacking market segments with focused marketing material and
specialist sales people, growth through Key Accounts, the
development of Insites, and growth through cross-selling and
Product Range Extension are contributing to significant market
share gains in most territories.
We continued to focus on a market segmentation approach,
increasing our knowledge of customers' processes and selling to
their specific needs. In particular:
-- Food and Drink, a strong focus area for many of our
businesses and a key strategic segment for Brammer, grew by GBP8.5
million or 14.7%, to GBP66.2 million.
-- Pulp and Paper grew by 6.5% overall to GBP22.7 million.
-- Utilities grew by 14.7% to GBP18.9 million.
-- Continued recovery in Automotive and market share gains
resulted in sales growth of 31.7% to GBP54.4 million.
-- Metals grew by 30.6% to GBP66.2 million.
Key Account SPWD grew by 23.9%, close to our target of 25%, and
Key Accounts now represent 40.2% of total sales. Twelve new
European contracts were won, each with a minimum contract period of
three years, and ultimate potential annual revenues in excess of
GBP60.0 million. We continued to focus our business on more
defensive segments and increased our sales to the Food and Drink
segment by 17.5%, FMCG by 29.1%, and Chemical by 7.6%. We also saw
good recovery and market share gains in the more cyclical sectors
of Automotive (up 36.5%), Construction (up 13.5%), and Metals (up
35.7%). Our value proposition proved increasingly attractive to
customers and we provided 4,800 separate cost savings to our
customers worth over EUR41.8million.
We opened 64 new Insites, 31 full time and 33 part time, with
overall turnover growth of 27.0% to GBP93.6 million.16Insites were
closed due to customer factory closures or reduced demand, giving
rise to a net addition of 48Insitesin the year and a total of 270
Insitesat the year end.
Extending the product offering to reflect the full Brammer range
in every territory continued and whilst bearing sales grew by
11.6%, non bearing sales (excluding Buck & Hickman) rose 17.7%,
suggesting significant market share gains driven by growth of 28.7%
in Tools and Maintenance to GBP37.5 million and 24.0% growth in
Fluid Power to GBP91.4 million. Our cross-selling activities
continued to be significant in assisting base business growth.
Overall organic sales growth in 2011 at constant currency was
15.6%, which reflects 23.9% SPWD growth in Key Accounts
(representing 40.4% of organic sales) and 11.1% growth in the base
business (59.6% of organic sales). Base business growth in Fluid
Power was 19.5%, Tools and General Maintenance grew by 21.6%, and
Fasteners and Standard Parts by 16.1%.
Acquisitions
We acquired Buck & Hickman on 30 September. Trading in the
final quarter exceeded our expectations. This business has been a
key supplier of Tools and General Maintenance products to UK
industry for more than 180 years, and brings us great experience
and critical mass in a market which we now believe to be around
EUR25 billion. Whilst there are many synergies available in
integrating Brammer UK and Buck & Hickman, particularly in the
areas of property costs, product range and purchase pricing, we are
particularly excited by the opportunity to use the skillset
available to us in Buck & Hickman to cross-sell to existing
customers in continental Europe.
Capabilities
The focus of our people and organisational capability continues
to be on supporting our growth. To that end, our pan-European
marketing team are continuing to deployour new Market Segmentation
material across Europe, combined with training on how to use the
sector specific material and a continuous audit of the branch
network. We have also developed and launched a new sales training
programme considering best practice, our industry sector approach
and Brammer's value proposition.
Our sales team is continuing to develop the BrammerInsite
Operations Manual, localised into English, French, German and
Spanish. During 2011 we introduced an Insite training programme
designed to raise awareness of the prerequisite methods and
processes to identify, target and set up a new Insite. A European
InsiteManager was appointed during the year to manage the growth of
Insite services across all 16 countries.
In order to increase the focus on our extended product range and
strengthen our cross selling initiatives, we have recruited a
number of European Product Managers who are responsible for
developing and growing our business in Fluid Power, Power
Transmission and Tools and General Maintenance products.
We have developed a new website with e-commerce functionality,
aiming to increase customer conversions via an enhanced user
journey and easy to find call-to-action opportunities. The new site
features more interactive content including "Quick Tips video
clips" and we will be adding new clips and other content regularly
throughout 2012. Our e-commerce solution is already live in Poland,
Spain, France and Netherlands, and will be launched in the
remaining countries during 2012 and 2013.
Huge opportunities exist from energy saving in manufacturing or
process-driven organisations; a conservative estimate suggests that
over EUR13 billion is wasted across Europe by inefficient energy
consumption in the production process. Our key partner suppliers
are very supportive and last year we completed our research project
with the German Technical Fraunhofer Institute. Using our research
findings and methodology, we have developed a Brammer Energy
Savings Proposition identifying how we can help maximise energy
savings at our customers' plants. We have also appointed Energy
Saving Championsin each country to deliver the best-practice
approach to energy savings and to create local action plans to
promote and deliver our Energy Savings programme to customers.
In February 2011 we conducted our most extensive ever customer
satisfaction survey, involving 45-minute telephone interviews with
250 customers across Europe, and an online questionnaire sent to a
random sample of 10,000 of our 100,000 customers. This research
gave us unprecedented insight into our customers, helping us to
appreciate their current and future needs in detail, and assist us
with our strategic and operational planning.
During the year Brammer's Distributed Learning programme
("e-learning") was updated with new product training modules and
enhanced functionality to provide a better learning experience in
nine languages. This training is a key element of Brammer's
employee induction programme; and for critical, customer-facing
roles we are achieving 100% take-up of the two major foundation
programmes. Going forward, we will continue to work with our
suppliers to ensure our employees receive the best possible product
training.
From analysis of the 2011 internal employee survey, we have
developed regional and functional action plans to maintain and
enhance the excellent links between our strategy and our
personnel.
The Brammer European Council of employee representatives meets
annually in June. This forum facilitates communication between the
Works Councils and Employee Forums from each country in the group,
ensuring that the concerns and issues raised by our people can be
listened to and responded to.
Synergies
Our work on developing systems to allow us to view and manage
all of our inventory across Europe and hence to improve inventory
efficiency continued to produce pleasing results. Our Master Data
Management ("MDM") application now contains over five million part
numbers and over eight million technical features. The increasing
volume and completeness of the data held in MDM has supported a
5.3% increase in the volume of product traded internally using our
Brammer Inline platform. Brammer Inline now provides visibility of
stock across ten European countries, and fully integrated
electronic trading between Brammer country businesses. Our focus
has been on reducing order processing times and costs, and this
concept has been progressively extended to all internal warehouses
as well as suppliers' stocks. We have used MDM and Inline to form
the basis for our first pan-European webshop which has already been
rolled out in Spain, Poland and France, and will be completed
during 2012. This capability will allow us to increase our online
presence and develop new revenue streams in the online
environment.
The MOMASSE demand forecasting and planning tool continued to be
implemented successfully across Brammer, allowing each country to
optimise stock levels and deliver higher levels of stock
availability for a lower investment in inventory. Good progress was
made in developing pan-European inventory plans for certain product
groups.
Inventory turns were maintained at 5.0 (based on quarter four
sales) despite pressure for increased stockholdingarising from the
acquisition of Buck & Hickman business, and the focus on
product range extension and cross-selling opportunities.
Costs
We continued to work on increasing our spend with a smaller
number of suppliers, and improving the level of marketing support,
pricing, and cooperation in the field received from those
suppliers. Organic gross marginimproved by 0.5% year on year to
30.6%.
We continued to focus on efficient use of our Sales Distribution
and Administrative expense (SDA). SDA at constant currency grew by
14.2% against a comparative sales growth of 15.6%. As a result we
enjoyed significant operating leverage, despite the fact that a
large part of the additional SDA investment was to drive additional
growth in Key Accounts, cross-selling and Insite development.
The future
Our European footprint and our specialisation in the field of
Bearings, Mechanical Power Transmission, Fluid Power and Tools and
General Maintenance products, is a strong platform upon which to
achieve further gains in market share in our fragmented market
place. We are now finding that many of our customers are seeking to
buy additional products from us, or accelerate contract
implementation, to achieve the cost savings available to them as
part of their contract with Brammer - and we have significantly
increased the rate at which we are able to deliver those
savings.
We have now enjoyed 31 consecutive months of sequential growth
since the low point inJune 2009. Our Key Account business remains
strong, cross-selling initiatives to both Key Accounts and the base
business are proceeding well and we expect to achieve healthy
double digit growth overall in 2012. Moreover, we will continue to
lead the consolidation of the European market in Bearings,
Mechanical Power Transmission, Fluid Power, and Tools and General
Maintenance products. As a result, we are increasingly confident
that our strategy will continue to give us growth substantially
greater than the market.
Ian R Fraser
14 February 2012 FINANCIAL REVIEW
Overview
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU).
Revenue
Revenue increased by 22.0%, of which continental Europe
accounted for 11.5% of the increase and UK the remaining 10.5%.
Revenue in continental Europe increased by 16.5% and in the UK by
34.6%. At constant exchange rates, revenue increased by 21.3%. This
equates to an increase in organic sales per working day of 15.9%,
with growth of15.2% in continental Europe and 16.8% in the UK.The
contribution to revenue from the acquisition of the UK based Buck
& Hickman business on 30 September 2011 was GBP26.5
million.
Gross profit
The gross profit for the year was GBP173.3 million (2010:
GBP141.1 million). Gross margins were maintained at around 30%.
Operating profit
Operating profit (before amortisation and exceptional items)
increased by GBP8.8 million to GBP31.8 million in 2011 from GBP23.0
million in 2010. Return on sales increased to 5.6% (2010:
4.9%).
Profit before tax
The profit before tax from continuing operations for the year
was GBP24.5 million (2010:GBP19.3 million). Profit before tax,
amortisation and exceptional items but after finance expense was
GBP29.0 million (2010: GBP20.6 million).
Earnings per share
Basic earnings per share increased by 3.8p from 13.0p to 16.8p
in 2011.Earnings per share, before amortisation and exceptional
items, increased by 42.4% from 13.9p in 2010 to 19.8p in 2011.
Return on operating capital employed
The return on operating capital employed, based on operating
profit before amortisation and exceptional items, was32.3% (2010:
31.0%) for the total group, reflecting the effect of the
acquisition during the year. Organic return on operating capital
employed increased from 31.0% to 38.1% principally reflecting the
improvement in underlying operating profit through increased
trading. Total return on operating capital employed, which is
lower, reflects the short three month post acquisition contribution
to underlying operating profit from Buck & Hickman.
Goodwill
Goodwill in the balance sheet stands at GBP89.5 million at the
end of the year (2010: GBP74.8 million), a net increase of GBP14.7
million. In 2011, goodwill increased by GBP8.1million in respect of
the acquisition of the Buck & Hickman business, and by GBP8.8
million reflecting the accrual for earn-out payments relating to
prior years' acquisitions; there was a GBP2.2 million decrease due
to exchange movements on goodwill held in foreign currencies.
Impairment reviews have been performed in accordance with IAS 36
and no impairment has been identified.
Trading during the year
Profit from operations before exceptional items, amortisation,
interest and tax ("underlying operating profit") increased by 38.3%
to GBP31.8 million (2010: GBP23.0 million), of which GBP15.4
million was delivered in the first half and GBP16.4 million in the
second half (see table below).
First half Second half Second half Full year
Organic Acquisition
GBPm GBPm GBPm GBPm
2011
Revenue 275.2 269.8 26.5 571.5
Underlying operating profit* 15.4 15.5 0.9 31.8
2010 GBPm GBPm GBPm GBPm
Revenue 230.0 238.4 - 468.4
Underlying operating profit* 11.0 12.0 - 23.0
* being profit from operations before exceptional items,
amortisation, interest and tax.
Both the first half and the second half enjoyed continued growth
compared to the prior year. For the first half, revenue increased
by GBP45.2 million and underlying operating profit by GBP4.4
million. For the second half, organic revenue increased by GBP31.4
million resulting in an increase in underlying operating profit of
GBP3.5 million, as slightly lower growth rates were
experiencedagainst more challenging comparators.
Exchange rates had a small favourable impact on the year's
results contributing less than 1.0% to the growth in both revenue
and underlying operating profit.
Exceptional items
The group completed the acquisition of the Buck & Hickman
business on 30 September 2011 for a consideration of GBP26.9
million. Acquisition costs of GBP0.5 million incurred, together
with GBP0.8 million of branch co-location costs and a GBP0.4
million charge for write-down of stock, being related costs
incurred up to 31 December 2011 in the first phases of integrating
the business with that of Brammer UK, have been recognised as
exceptional costs in the income statement. In addition a further
charge of GBP1.5 million, the majority of which relates to
restructuring actions taken in the wider group as first steps in
realising operational benefits from the acquisition, has also been
included in the total pre-tax operating exceptional charge of
GBP3.2 million.
There were no exceptional items in 2010.
Interest
The net interest charge for the year was GBP2.8 million (2010:
GBP2.4 million) which included a discount unwind charge on deferred
consideration of GBP0.1 million (2010: GBP0.2 million). Excluding
the discount unwind charge the effective interest rate on average
net borrowings was 4.5% (2010: 4.3%), reflecting the higher margins
payable on the new primary facility from July 2011.EBITDA before
exceptional items covers interest by 11.3 times (2010: 10.1
times).
Tax
The overall tax charge for the year of GBP6.2 million (2010:
GBP5.5 million) consisted of the current year charge. Current year
tax represents an effective tax rate of 25.4% which is lower than
the expected rate of 26.5% primarily as a result of a credit
arising from a release of tax contingent liabilities of GBP0.8
million, offset by adjustments arising from the differences in tax
rates across Europe of GBP0.1million, further recognition of tax
losses in the year of GBP0.3million and other permanent differences
of GBP0.1 million.
Cash flow
2011 2010
GBPm GBPm
------------------------------------------------------ ------- -------
Cash inflow from operating activities 28.2 26.1
Cash inflow from operating activities before
exceptional items 28.9 27.5
Cash outflow from exceptional items (0.7) (1.4)
------------------------------------------------------ ------- -------
Cash inflow from operating activities 28.2 26.1
------------------------------------------------------ ------- -------
Net capital expenditure (purchases net of disposals) (5.8) (3.3)
------- -------
Operational cash generation 22.4 22.8
Acquisitions (including net debt acquired) (26.9) -
Deferred consideration and earn out (1.8) (7.9)
Tax (4.1) (2.7)
Interest, dividends, pension obligations & other (13.6) (10.8)
Net proceeds from placing 24.8 -
Purchase of own shares (0.1) -
Net proceeds from issue of shares 0.1 0.1
------- -------
Decrease in net debt 0.8 1.5
Opening net debt (36.7) (39.9)
Exchange 0.6 1.7
Closing net debt* (35.3) (36.7)
======= =======
* total borrowings net of cash and cash equivalents.
Net debt decreased by GBP1.4 million from GBP36.7 million to
GBP35.3 million.At the year end, net debt/EBITDA stood at 1.0:1
times (2010: 1.4:1 times).
Net cash inflow from operating activities of GBP28.2 million
increased by GBP2.1 million from GBP26.1 million in 2010, which is
after GBP0.7 million outflow (2010: GBP1.4 million) associated with
exceptional items in the current year and provision utilisation in
2011 of exceptional items from prior years. This inflow enabled the
payment of GBP1.8 million of deferred consideration, GBP4.1 million
taxation payments, and GBP13.6 million for dividends, interest and
pension obligations. Net capital expenditure increased
substantially from GBP3.3 million to GBP5.8 million due to
increased investment in software development.
Average net borrowings in 2011 were GBP54.5 million compared to
GBP52.8 million in 2010, only slightly above last year because the
acquisition of Buck & Hickman for GBP26.9 million was largely
funded through a share placing, generating net proceeds of GBP24.8
million.
Pensions
The net pension liability relating to the defined benefit
pension schemes increased by GBP1.0 million to GBP16.8 million
(2010: GBP15.8 million). The principal factors contributing to this
increase were a GBP3.9 million actuarial loss on scheme assets
offset by GBP3.4 million of employer contributions.
The main financial assumptions used were a discount rate of 4.8%
(2010: 5.5%), a 3.0% (2010: 3.6%) rate of increase for pensions in
payment and a 2.4% (2010: 3.1%) rate of increase for pensions in
deferment. The main demographic assumptions used are broadly
unchanged. The charge recognised in the income statement decreased
by GBP0.5 million to GBP0.1 million (2010: GBP0.6 million)
reflectingan increase in the expected return on scheme assets
following the significant increase in scheme assets in the prior
year.
Financing and Covenants
In July 2011 the Company entered into a five year revolving
multicurrency credit finance facilitywhich provided for borrowings
of EUR100.0 million, replacing the previous facility which was due
to expire in February 2012.This facility can be drawn until it
expires on 30 June 2016. In addition to the revolving credit
facility, the Company also has GBP21.5 million of other available
financing facilities.The amount of finance available under this
revolving credit facility as at 31 December 2011 was EUR100.0
million (GBP83.9 million).
The new revolving credit facility requires, among other matters,
compliance with three financial covenant ratios. These requirements
are (1) consolidated total net borrowings shall not exceed 3.0
times consolidated EBITDA; (2) consolidated net worth shall be not
less than GBP50.0 million; (3) the ratio of consolidated EBITDA to
consolidated net interest payable shall not be less than 4.5:1; in
addition, the guarantor subsidiaries must account for more than 75%
of the group's total gross assets, turnover and pre-tax profit.
EBITDA is a measure of liquidity and is defined in the finance
facility. The Company has not breached these covenants throughout
the period to 31 December 2011, and current forecasts indicate
significant headroom for all covenants in the next twelve
months.
As at 31 December 2011 the Company had GBP46.4 million of
borrowings drawn under the revolving credit facility.
On 2 September 2011 the group announced a placing of 10,535,000
new ordinary shares at 240 pence per share with institutional
investors, representing approximately 9.9% of the total issued
share capital. Demand for the placing exceeded the offering by a
factor of two. The proceeds of this placing were used to fund the
purchase of the Buck & Hickman business which was completed on
30 September 2011.
Derivative Instruments and Risk Management
The Company has limited dealings in derivative instruments.
Derivatives used in hedging activities are considered risk
management tools and are not used for trading purposes. The Company
uses derivative instruments to manage exposure to fluctuations in
foreign currency exchange rates. The Company does not enter into
speculative currency transactions.
The Company uses foreign currency forward exchange contracts to
minimise currency exposure from expected future cash flows. These
contracts have not been designated as hedging instruments.
Group companies account in local currency and mostly trade
within their domestic market in their local currency. Investments
in overseas companies are hedged with debt in the same currency
thus minimising exchange risk on investments.
The group is not subject to material exposure from fixed price
contracts and has a track record of maintaining gross margin
irrespective of sales volumes thereby successfully pushing back
market pricing pressure to its suppliers.
Principal risks & uncertainties
The management of the business and the execution of the strategy
are subject to a number of risks and uncertainties.
Operational risks are assessed by Brammer subsidiaries. These
are reviewed with appropriate mitigation considered by Brammer
management. The Board reviews these assessments on a regular
basis.
A formal group-wide review of strategic risks is performed by
the Board. Appropriate processes and controls are also put in place
to monitor and mitigate these risks.
The principal risks affecting the group are as follows:
-- Slowdown of Industrial Activity
o The group's activities are almost entirely within the UK and
the Euro-zone which are geographical markets currently subject to
economic uncertainty. A continued deterioration in current economic
conditions may lead to a decline in demand within the industrial
base of these markets with an associated decline in demand in the
maintenance and original equipment markets which Brammer supplies.
The group has a well spread market and geographic presence and has
concentrated growth activities in defensive sectors such as food
and drink, utilities and fast moving consumer goods. The group has
also focused growth activities in larger Key Account customers who
have a wider global presence andare thereforelikely to prove more
resilient during any economic downturns in Europe and surrounding
areas. Economic conditions vary throughout the Euro-zone
andaccordingly a slowdown will have a different level of impact on
each country. The sales and purchasing activity for each business
unit is largely confined to its own geographical area which means
each business can react to variations in demand without
encountering issues associated with cross border sales and purchase
management. Also, in the extreme case of a breakup of the Euro,
currency issues would be minimised because purchases and saleswould
be largely in the same currency. The group has also demonstrated
the capability to reduce costs and to align the cost base in
response to market conditions.
-- Withdrawal of a Major Supplier
o Brammer is dependent on its key suppliers which it represents
in a multi-brand environment to Brammer's existing customer base.
The relationship with strategic suppliers is mutually dependant and
enhanced by our partnership approach to Key Accounts. Brammer is
continuing to secure additional support for its efforts to increase
market share and is confident any withdrawal could be sourced from
another supplier.
-- Loss of Major Customers
o A core part of the growth strategy for the group is a focus on
winning and maintaining those significant customers it views as Key
Accounts. The loss of significant numbers of Key Accounts would
have an adverse effect on turnover growth and an impact on other
strategic focus areas of cross-selling opportunities and Insite
development. As a distributor in a fragmented market Brammer
derives great benefits from its first class reputation as an
industry leader in its service offering to Key Accounts, which
could be potentially damaged with significant loss of major
customers. However, Brammer does not have dependency on any single
customer. Key Account customers arecarefully monitored by the
senior management team, who also document the acknowledged cost
savings achieved. Further growth in Key Accounts in the current
year suggests the template offering is proving attractive to a
profit conscious customer base.
-- Customers Relocating to Lower Cost Countries
o Brammer continues its strategy to grow its business
successfully by expanding in a fragmented market. Brammer's Eastern
European operations all reported growth throughout 2011. We will
continue to review suitable opportunities in this region as they
arise.
-- Loss of Infrastructure/Systems
o As with most large organisations that depend on Information
Technology (IT) for their day-to-day operations, there are disaster
recovery plans in place for the major countries where Brammer
operates. In these territories, there are overnight back up systems
in place which can be expected to mitigate the worst effects of
such disruption. Integration teams continually work to develop
group-wide solutions to business critical processes which provide
improved resilience against failure in the event that issues occur
in our operations. For Brammer, a quoted company which is a
distributor of product, these key processes are in the area of
stock and order management, sales and delivery management and
transactional record keeping, including financial books and
records.
-- Adverse Euro Exchange Rates
o Brammer reports its results in sterling however the group
trades significantly in euros. The current economic conditions
create uncertainty over the exchange rate between sterling and the
euro. Whilst there is a natural hedge between buying and selling
for the majority of our business the ultimate profitability is
expressed at the year's average exchange rate.
Financial & Capital Risks
o Following the successful rights issue in 2009 the group
reduced its level of external debt. Because the acquisition of Buck
& Hickman was financed primarily through a share placing, the
level of net debt has not increased materially.With the
renegotiated facility now in place until 2016, Brammer has
sufficient available resources to meet its foreseeable
requirements. The group has no fixed rate borrowings of greater
than six months nor does it have any fixed rate interest rate
swaps.
o The closed defined benefit scheme in the UK continues to be
subject to various financial risks, principally based around the
value of the current deficit in the scheme. The Company may be
required to make exceptional additional contributions outside the
scope of its current funding plan by The Pensions Regulator. During
2010 the group agreed a deficit funding plan with the trustees of
the scheme which provides for the group to make annual payments of
GBP2.8 million, indexed for inflation, in the years 2011 to 2023
inclusive.
-- Expected benefits from acquisitions may not be realised
o Part of the Brammer strategy is growth through selective
acquisitions. Acquisitions involve a number of risks related to the
performance of the acquired business and challenges arising from
integration. With the significant acquisition of Buck & Hickman
in the year these risks and potential challenges are clearly
present in the current year. Potential acquisitions are carefully
researched prior to any purchase and closely monitored by Brammer's
management subsequent to acquisition.Brammer has a track record of
successfully integrating acquired businesses with an established
integration plan and an experienced management team.
-- Loss of Key Employees
o The group regularly reviews its succession plan arrangements
to ensure that key managers are recognised and developed. The group
remains committed to a number of incentive schemes linked to the
group's results, which have been designed to retain key managers.
Industry benchmarking and the use of external assessments and
advisors form part of the recruitment process for key managers to
ensure high calibre recruits to key roles.
The board's nominations committeereviews the structure, size,
diversity and composition of the board and advises on succession
planning matters. This committee also retains external search and
selection consultants as appropriate.
Paul Thwaite
14 February 2012 Brammer Preliminary results announcement
Consolidated income statement for the year ended 31 December
2011
Year to Year to
31 December 31 December
2011 2010
Note GBPm GBPm
Continuing operations
Revenue 2 571.5 468.4
Cost of sales (398.2) (327.3)
Gross profit 173.3 141.1
---------------------------------- ----- ------------- -------------
Distribution costs (144.7) (118.1)
Amortisation of acquired
intangibles (1.3) (1.3)
Total sales, distribution
and administrative costs (146.0) (119.4)
---------------------------------- ----- ------------- -------------
Operating profit 2 27.3 21.7
Operating profit before
amortisation and exceptional
items 31.8 23.0
Amortisation of acquired
intangibles (1.3) (1.3)
Exceptional items 4 (3.2) -
------------- -------------
Operating profit 2 27.3 21.7
------------- -------------
Finance expense (2.9) (2.5)
Finance income 0.1 0.1
---------------------------------- ----- ------------- -------------
Profitbefore tax 24.5 19.3
Profit before tax before
amortisation and exceptional
items 29.0 20.6
Amortisation of acquired
intangibles (1.3) (1.3)
Exceptional items 4 (3.2) -
------------- -------------
Profit before tax 24.5 19.3
------------- -------------
Taxation (6.2) (5.5)
Profit for the year attributable
to equity shareholders 2 18.3 13.8
---------------------------------- ----- ------------- -------------
Earnings per share 3
Basic 16.8p 13.0p
Diluted 16.4p 13.0p
Earnings per share - pre
amortisation and exceptional
items 3
Basic 19.8p 13.9p
Diluted 19.3p 13.9p
---------------------------------- ----- ------------- -------------
Brammer
Consolidated statement of comprehensive income for the year
ended 31 December 2011
2011 2010
GBPm GBPm
Profit for the year 18.3 13.8
Other comprehensive income
Net exchange differences on translating foreign
operations (3.1) (1.0)
Actuarial(losses)/gains on pension schemes (4.2) 5.2
Other comprehensive(expense)/income for
the year, net of tax (7.3) 4.2
Total comprehensive incomefor the year 11.0 18.0
------ ------
Items in the statement above are disclosed net of tax. Brammer
Consolidated balance sheet as at 31 December 2011
2011 2010
Note GBPm GBPm
Assets
Non-current assets
Goodwill 89.5 74.8
Acquired intangible assets 3.8 5.3
Other intangible assets 8.0 4.9
Property, plant and equipment 13.8 11.0
Deferred tax assets 7.0 6.4
122.1 102.4
------------------------------------ ----- -------- --------
Current assets
Inventories 90.9 71.3
Trade and other receivables 114.8 81.4
Cash and cash equivalents 6 15.9 21.7
221.6 174.4
------------------------------------ ----- -------- --------
Liabilities
Current liabilities
Financial liabilities - borrowings 6 (3.4) (3.8)
Trade and other payables (128.9) (94.3)
Provisions (1.3) (0.7)
Deferred consideration (10.8) (8.0)
Current tax liabilities (5.0) (2.7)
(149.4) (109.5)
------------------------------------ ----- -------- --------
Net current assets 72.2 64.9
Non-current liabilities
Financial liabilities - borrowings 6 (47.8) (54.6)
Deferred tax liabilities (8.5) (9.7)
Provisions - (0.2)
Deferred consideration (3.6) -
Retirement benefit obligations (16.8) (15.8)
(76.7) (80.3)
------------------------------------ ----- -------- --------
Net assets 117.6 87.0
------------------------------------ ----- -------- --------
Shareholders' equity
Share capital 23.4 21.3
Share premium 18.2 18.1
Translation reserve 1.3 4.4
Retained earnings 74.7 43.2
Total equity 7 117.6 87.0
------------------------------------ ----- -------- --------
Brammer Consolidated statement of changes in equity for the year
ended 31 December 2011
Share Share Treasury Translation Retained
Capital Premium Shares reserve Earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2010 21.2 18.1 (0.2) 5.4 30.4 74.9
--------------------------------- -------- -------- --------- ------------ --------- ------
Profit for the year - - - - 13.8 13.8
Other comprehensive income - - - (1.0) 5.2 4.2
--------------------------------- -------- -------- --------- ------------ --------- ------
Total comprehensive income - - - (1.0) 19.0 18.0
--------------------------------- -------- -------- --------- ------------ --------- ------
Transactions with owners
Shares issued during the
year 0.1 - - - - 0.1
Dividends - - - - (6.0) (6.0)
--------------------------------- -------- -------- --------- ------------ --------- ------
Total transactions with
owners 0.1 - - - (6.0) (5.9)
--------------------------------- -------- -------- --------- ------------ --------- ------
Movement in year 0.1 - - (1.0) 13.0 12.1
--------------------------------- -------- -------- --------- ------------ --------- ------
At 31 December 2010 21.3 18.1 (0.2) 4.4 43.4 87.0
--------------------------------- -------- -------- --------- ------------ --------- ------
Profit for the year - - - - 18.3 18.3
Other comprehensive income - - - (3.1) (4.2) (7.3)
--------------------------------- -------- -------- --------- ------------ --------- ------
Total comprehensive income - - - (3.1) 14.1 11.0
--------------------------------- -------- -------- --------- ------------ --------- ------
Transactions with owners
Shares issued during the
year
placing* 2.1 - - - 22.7 24.8
other - 0.1 - - - 0.1
Purchase of own shares - - (0.1) - - (0.1)
Transfer on vesting of own
shares - - 0.1 - (0.1) -
Value of employee services - - - - 2.0 2.0
Tax credit on share performance
plans - - - - 0.7 0.7
Dividends - - - - (7.9) (7.9)
--------------------------------- -------- -------- --------- ------------ --------- ------
Total transactions with
owners 2.1 0.1 - - 17.4 19.6
--------------------------------- -------- -------- --------- ------------ --------- ------
Movement in year 2.1 0.1 - (3.1) 31.5 30.6
--------------------------------- -------- -------- --------- ------------ --------- ------
At 31 December 2011 23.4 18.2 (0.2) 1.3 74.9 117.6
--------------------------------- -------- -------- --------- ------------ --------- ------
*Ordinarily, the excess of the net proceeds over the nominal
value of the share capital issued would be credited to a
non-distributable share premium account. However, the placing
completed in September 2011 was effected through a structure which
resulted in the excess of the net proceeds over the nominal value
of the share capital being recognised within retained earnings
under section 612 of the Companies Act 2006.
Brammer Consolidated cash flow statement for the year ended 31
December 2011
2011 2010
Note GBPm GBPm
Cash generated from operations 5 28.2 26.1
Interest received 0.1 -
Interest paid (2.5) (2.2)
Tax paid (4.1) (2.7)
Funding of pension schemesless income statement
charge (3.3) (2.6)
Cash generated from operating activities 18.4 18.6
--------------------------------------------------- ----- ------- -------
Cash generated from operating activities
before exceptional items 19.1 20.0
Cash outflow from exceptional items (0.7) (1.4)
--------------------------------------------------- ----- ------- -------
Cash generated from operating activities 18.4 18.6
--------------------------------------------------- ----- ------- -------
Cash flows from investing activities
Acquisition of businesses (net of cashacquired) (26.9) -
Deferred consideration paid on prior acquisitions (1.8) (7.6)
Earn out paid on prior period acquisitions - (0.3)
Proceeds from sale of property, plant and
equipment 0.5 0.2
Purchase of property, plant and equipment (3.0) (1.9)
Additions to other intangible assets (3.3) (1.6)
Net cash used in investing activities (34.5) (11.2)
--------------------------------------------------- ----- ------- -------
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital 0.1 0.1
Net proceeds from placing 24.8 -
Repayment of loans under old financing (56.1) -
facility
Net drawdown/(repayment) of other loans 50.6 (11.4)
Net (repayment)/issue of finance leases (0.1) 0.1
Dividends paid to shareholders (7.9) (6.0)
Purchase of own shares (0.1) -
Net cash generated/(absorbed) fromfinancing
activities 11.3 (17.2)
--------------------------------------------------- ----- ------- -------
Net decrease in cash and cash equivalents (4.8) (9.8)
Exchange gains and losses on cash and cash
equivalents (0.6) (0.6)
Net cash at beginning of year 21.0 31.4
Net cash at end of year 15.6 21.0
--------------------------------------------------- ----- ------- -------
Cash and cash equivalents 15.9 21.7
Overdrafts (0.3) (0.7)
Net cash at end of year 15.6 21.0
--------------------------------------------------- ----- ------- -------
Brammer Accounting policies
General information
Brammer plc is a company incorporated and domiciled in the UK,
and listed on the London Stock Exchange. The address of the
registered office is disclosed in note 8.
The principal accounting policies adopted in the preparation of
these consolidated financial statements are unchanged from those
applied in the preparation of the 2010 statements, and will be set
out in full in the 2011 published financial statements. These
policies have been consistently applied to all the years
presented.
Basis of preparation
This preliminary announcement does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006.
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU), IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared
under the historical cost convention.
Accounting policies
No standards have been early adopted by the group. The
implications for the group of new standards, amendments to
standards or interpretations which are mandatory for the first time
for the financial year ended 31 December 2011 are summarised
below.
New standards, amendments to standards or interpretations
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year beginning 1 January 2011. They are not relevant or do not have
a material effect on the group's financial statements and are as
follows:
Standard or interpretation Content Applicable for financial
years beginning on
or after
--------------------------- -------------------------- -------------------------
Amendment: IAS 24* Related party disclosures 1 January 2011
--------------------------- -------------------------- -------------------------
IFRIC 14, IAS 19* Prepayments of a minimum 1 January 2011
funding requirement
--------------------------- -------------------------- -------------------------
IFRIC 19* Extinguishing financial 1 July 2010
liabilities with equity
investments
--------------------------- -------------------------- -------------------------
IAS 32* Classification of rights 1 February 2010
issues
--------------------------- -------------------------- -------------------------
Annual improvements Various 1 January 2011
to IFRSs (issued 2010)*
--------------------------- -------------------------- -------------------------
Standards, amendments and interpretations which have been issued
but are not yet effective, and in some cases have not yet been
endorsed by the EU, are as follows:
Standard or interpretation Content Applicable for financial
years beginning on
or after
--------------------------- ------------------------- -------------------------
IFRS 9* Financial instruments: 1 January 2013
Classification and
measurement
--------------------------- ------------------------- -------------------------
Amendment: IAS 12* Income Taxes 1 January 2012
--------------------------- ------------------------- -------------------------
IFRS 10 Consolidated financial 1 January 2013
statements
--------------------------- ------------------------- -------------------------
IFRS 11* Joint arrangements 1 January 2013
--------------------------- ------------------------- -------------------------
IFRS 12* Disclosures of Interests 1 January 2013
in Other Entities
--------------------------- ------------------------- -------------------------
IFRS 13* Fair Value Measurement 1 January 2013
--------------------------- ------------------------- -------------------------
IAS 19R (revised 2011) Employee benefits 1 January 2013
--------------------------- ------------------------- -------------------------
*These standards are not expected to be relevant to the group
IAS 19R - Employee benefits - is likely to have a significant
impact on future financial statements when it is adopted. Under IAS
19R the interest cost on the defined benefit obligation, and the
expected rate of return on plan assets, will be replaced with a net
interest charge that is calculated by applying the discount rate to
the net defined benefit liability. With effect from 1 January 2013
this is likely to result in a higher charge being recognised in the
income statement. Management is currently assessing the impact of
the new requirements.
Brammer notes to the accounts
1. COMPARATIVE RESULTS
Comparative figures for the year ended 31 December 2010 are
taken from the company's statutory accounts which have been
delivered to the Registrar of Companies with an unqualified audit
report. Copies of the 2010 annual report and the 2011 interim
report are available on the company's website
(www.brammer.biz).
2. SEGMENTAL ANALYSIS
The Board has been identified as the chief operating
decision-maker. The Board reviews the group's internal reporting as
the basis for assessing performance and allocating resources.
Management has determined the operating segments based on these
reports. The group is primarily controlled on a country by country
basis, in line with the legal structure, and accordingly the
operating segments are unchanged from those previously
reported.
The group's internal reporting is primarily based on performance
reports run at 'management' exchange rates - exchange rates which
are set at the beginning of each year. For 2011 the primary
management rate used was EUR1.20 : GBP1.
Accordingly the segment information below is shown at the
'management' exchange rates with the exchange effect being a
reconciling item between the segment results and the totals
reported in the financial statements at actual average exchange
rates. The management rate applies to income statement, balance
sheet and cash flows.
The Board assesses the performance of the operating segments
based on their underlying operating profit, which comprises profit
before interest and taxation, excluding amortisation of acquired
intangibles and non-recurring or exceptional items such as
restructuring costs and impairments when the impairment is the
result of an isolated, non-recurring event.
Segment assets include property, plant and equipment, other
intangible assets, inventories, and trade and other receivables.
All inter-segmental trading is on an arms-length basis.
UK Germany France Spain Benelux Eastern Other Total
Europe operating
segments
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Year ended 31
December 2011
Continuing operations
Revenue
Total revenue 193.4 118.7 85.5 43.8 50.9 56.9 18.0 567.2
Inter company
sales (2.9) (3.2) (1.0) (0.9) (1.7) (0.1) (0.3) (10.1)
Sales to external
customers 190.5 115.5 84.5 42.9 49.2 56.8 17.7 557.1
Exchange effect 14.4
-------
Total sales to
external customers 571.5
-------
Underlying operating
profit 9.4 7.8 4.0 3.3 2.6 3.6 0.2 30.9
Exchange effect 0.9
-------
Total underlying
operating profit 31.8
Amortisation of
acquired intangibles (1.3)
Exceptional items (3.2)
Total operating
profit 27.3
Finance expense (2.9)
Finance income 0.1
Profit before
tax 24.5
Tax (6.2)
Profit for the
year 18.3
----------------------- ------ -------- ------- ------ -------- -------- ----------- -------
Segment assets 93.2 27.8 31.1 15.3 22.3 28.5 8.7 226.9
Exchange effect 0.6
-------
227.5
Goodwill 89.5
Acquired intangibles 3.8
Cash 15.9
Deferred tax 7.0
Total assets 343.7
----------------------- ------ -------- ------- ------ -------- -------- ----------- -------
2. SEGMENTAL ANALYSIS (continued)
UK Germany France Spain Benelux Eastern Other Total
Europe operating
segments
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Other segment
items
Continuing operations
Capital expenditure
- intangible assets 0.1 0.1 0.2 0.1 0.3 - 2.5 3.3
- property , plant
and equipment 1.0 0.2 0.2 0.4 0.4 0.6 0.1 2.9
Exchange effect 0.1
-------
Total capital
expenditure 6.3
-------
Amortisation/depreciation
- intangible assets (0.1) (0.1) - (0.1) (0.1) - (1.2) (1.6)
- property, plant
and equipment (0.9) (0.2) (0.3) (0.3) (0.4) (0.4) (0.3) (2.8)
Exchange effect -
-------
Total amortisation/depreciation (4.4)
-------
UK Germany France Spain Benelux Eastern Other Total
Europe operating
segments
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Year ended 31
December 2010
Continuing operations
Revenue
Total revenue 144.0 102.2 75.1 39.0 45.1 47.3 16.4 469.1
Inter company
sales (2.5) (2.9) (1.2) (0.9) (1.6) (0.3) (0.6) (10.0)
Sales to external
customers 141.5 99.3 73.9 38.1 43.5 47.0 15.8 459.1
Exchange effect 9.3
-------
Total sales to
external customers 468.4
-------
Underlying operating
profit 6.5 5.4 2.8 2.8 2.5 2.3 0.2 22.5
Exchange effect 0.5
-------
Total underlying
operating profit 23.0
Amortisation of
acquired intangibles (1.3)
Total operating
profit 21.7
Finance expense (2.5)
Finance income 0.1
Profit before
tax 19.3
Tax (5.5)
Profit for the
year 13.8
--------------------------------- ------ -------- ------- ------ -------- -------- ----------- -------
Segment assets 43.8 24.6 27.0 16.5 21.4 23.6 7.9 164.8
Exchange effect 3.8
-------
168.6
Goodwill 74.8
Acquired intangibles 5.3
Cash 21.7
Deferred tax 6.4
Total assets 276.8
--------------------------------- ------ -------- ------- ------ -------- -------- ----------- -------
Other segment
items
Continuing operations
Capital expenditure
- intangible assets - 0.1 - - 0.1 - 1.3 1.5
- property , plant
and equipment 0.2 0.2 0.6 0.1 0.1 0.4 0.3 1.9
Exchange effect 0.1
-------
Total capital
expenditure 3.5
-------
Amortisation/depreciation
- intangible assets - - (0.1) - (0.1) - (0.9) (1.1)
- property, plant
and equipment (1.1) (0.2) (0.3) (0.4) (0.4) (0.4) (0.3) (3.1)
Exchange effect (0.1)
-------
Total amortisation/depreciation (4.3)
-------
The table below details the 'management rate' used and the
actual exchange rates used for the primary exchange rate of
Sterling to Euro for the year and the comparative year
2011 2010
Management rate EUR1.20 EUR1.20
Actual average rate EUR1.152 EUR1.165
Year end rate EUR1.192 EUR1.167
3. EARNINGS PER SHARE
2011
-----------------------------
Earnings per
share
------------------
Earnings Basic Diluted
GBPm
Weighted average number of shares in issue
('000) 109,019 111,759
Total
Profit for the financial year 18.3 16.8p 16.4p
Amortisation of acquired intangibles 1.3
Exceptional items 3.2
Tax on exceptional items (0.9)
Tax on amortisation of acquired intangibles (0.3)
Earnings before amortisation of acquired
intangibles and exceptional items 21.6 19.8p 19.3p
--------------------------------------------- --------- -------- --------
The weighted average number of shares in the year reflects the
impact of shares issued as a result of the placing on 7 September
2011 (10,535,000 ordinary shares issued).
2010
-----------------------------
Earnings per
share
------------------
Earnings Basic Diluted
GBPm
Weighted average number of shares in issue
('000) 106,290 106,290
Total
Profit for the financial year 13.8 13.0p 13.0p
Amortisation of acquired intangibles 1.3
Tax on amortisation of acquired intangibles (0.3)
Earnings before amortisation of acquired
intangibles 14.8 13.9p 13.9p
--------------------------------------------- --------- -------- --------
4. EXCEPTIONAL ITEMS
Following the acquisition of the Buck & Hickman business on
30 September 2011 the following related charges have been incurred
and are considered to be exceptional items:
-a programme has been announced of co-locating branches in those
areas in the UK where Buck & Hickman and Brammer UK each have a
branch in close proximity to one another. In some locations both
businesses will relocate to one new branch in order to operate
efficiently. Accordingly, a provision has been established for
these branch co-location costs. The principal elements of these
charges will be costs incurred in the early termination of existing
leases together with the costs of refurbishing existing and new
premises. -the profile and levels of stockholding in Brammer's
tools & general maintenance product portfolio has been reviewed
to identify brands and product lines no longer considered core to
the combined business's future trading strategy with these stocks
being written down to their estimated net realisable value; -a
reorganisation of certain senior sales management roles to focus on
extending the group's sales of tools & general maintenance
products across Europe. This includes the cost of settling
employment contracts and other related social benefit charges.
Acquisition costs of GBP0.5million were incurred which are also
included as an exceptional cost.
GBPm
Included in operating profit
Branch co-location costs 0.8
Acquisition costs 0.5
Stock written down 0.4
Headcount and other related costs 1.5
Total exceptional items 3.2 `
----------------------------------- -----
There were no exceptional items in 2010.
5. CASH FLOW FROM OPERATING ACTIVITIES
2011 2010
GBPm GBPm
Profit for the year attributable to
equity shareholders 18.3 13.8
Tax charge 6.2 5.5
Depreciation of tangible and intangible
assets 5.7 5.6
Share options - value of employee 2.0 -
services
Gain on sale of property, plant and (0.3) -
equipment
Financing expense 2.8 2.4
Movement in working capital (excluding
the effect of exchange movements and
fair value adjustments) (6.5) (1.2)
Cash generated from operations after
exceptional items 28.2 26.1
------ ------
6. CLOSING NET DEBT
2011 2010
GBPm GBPm
Borrowings - current (3.4) (3.8)
Borrowings - non-current (47.8) (54.6)
Cash and cash equivalents 15.9 21.7
Closing net debt (35.3) (36.7)
------- -------
7. CHANGES IN SHAREHOLDERS' EQUITY
The statement of changes in shareholders equity is shown as a
primary statement.
Placing
On 7 September 2011 the company issued 10,535,000 new ordinary
shares at 240 pence per share through a placing with institutional
investors, representing approximately 9.9% of the total issued
share capital. Net proceeds were GBP24.8 million, being gross
proceeds on issue of GBP25.3 million less expenses of GBP0.5
million.
Ordinarily, the excess of the net proceeds over the nominal
value of the share capital issued would be credited to a
non-distributable share premium account. However, the placing was
effected through a structure which resulted in the excess of the
net proceeds over the nominal value of the share capital being
recognised within retained earnings under section 612 of the
Companies Act 2006.
The placing shares rank paripassu in all respects with the
existing issued shares.
Purchase of own shares
During the year the company acquired 75,447 of its own shares of
20p each through the Brammer plc Employee Share Ownership Trust
("the Trust"). The total amount paid to acquire the shares was
GBP122,982 which has been deducted from shareholders' equity.
The shares are held by the Trust to meet vestings under the
group's performance share plans and share matching plans.
Tranches of these plans vested during the period and 88,567
shares were transferred to directors and senior managers in order
to meet vestings under these plans.
At 31 December 2011 the Trust held a total of 208,121 shares in
the company in order to meet part of the company's liabilities
under the performance share plans and share matching plans. The
Trust deed contains a waiver provision in respect of these
shares.
The number of ordinary 20p shares in issue at 31 December 2011
was 116,944,074 (31 December 2010: 106,361,185).
Dividends
A dividend, amounting to GBP4.8 million, which related to 2010
was paid on 5 July 2011(2010: GBP3.8 million). An interim dividend
amounting to GBP3.1 million(2010: GBP2.2 million) was paid on 4
November 2011. The directors propose a final dividend of 5.7p per
share (2010: 4.5p) payable on 3 July 2012. This final dividend
amounting to GBP6.7 million (2010: GBP4.8 million) has not been
recognised as a liability in these financial statements.
Retained earnings as disclosed in the Balance Sheet above
represent the retained earnings and treasury share balances
above.
8. PRELIMINARY ANNOUNCEMENT
A copy of the preliminary announcement is available for
inspection at the registered office of the company, Claverton
Court, Claverton Road, Wythenshawe, Manchester, M23 9NE and the
offices of HudsonSandler Limited, 29 Cloth Fair, London, EC1A7NN.
It will also be available on the company's website www.brammer.biz
from 14 February 2012.
9. FINAL DIVIDEND
Relevant dates concerning the payment of the final dividend
are:
Annual general meeting 17 May 2012
Record date 8 June 2012
Payment date 3 July 2012
10. STATUTORY ACCOUNTS
This preliminary announcement is taken from the full audited
statutory accounts which will be filed with the Registrar of
Companies following the company's annual general meeting. The
statutory accounts have received an unqualified report by the
auditors and do not contain any statements under section 498 (2) or
(3) of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TJMBTMBBBTMT
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