TIDMHTH
21 June 2010
Hartest Holdings Plc
(`Hartest', the `Group' or the `Company')
Preliminary Results for the year ended 31 March 2010
Hartest Holdings plc (AIM:HTH), the supplier of specialist instrumentation and
medical equipment, announces its Preliminary Results for the year ended 31 March 2010.
Financial Highlights
* Group revenue up 7% at GBP22.2 million (2009: GBP20.7 million)
* Group operating profit before non-recurring costs increased by GBP1.25 million
to GBP1.58 million (2009: GBP0.33 million)
* Profit before tax GBP1.01 million (2009: loss before tax GBP0.87 million)
* EPS increased to 8.1 pence per share (2009: loss per share 8.9 pence)
* EPS before non-recurring costs 12.8 pence per share (2009: 0.4 pence per share)
* Dividend restored and significantly increased from prior years at 4.0 pence
per share total (2009: Nil)
* Nil net debt position maintained
Business Highlights
* All business operations are now soundly based and profitable
* Instrumentation Division - all five Hartest Precision brands now operating
from a single site and delivering significant improvements in operating
efficiencies and cost savings. Agar Scientific successfully relocated to
new facility. Carnation Designs expanding rapidly
* Medical Services Division - significantly increased gross margins by
improving product mix and pricing
Geoff Spink, Chief Executive of Hartest commented:
"I am pleased to be able to deliver such a strong set of results, following a
year that presented many challenges for the Group. We are now able to apply
significant additional focus to our operations, and are well positioned for a
period of organic growth and development; a platform which creates numerous
opportunities."
Hartest Holdings plc Geoff Spink 01252 749 530
Westhouse Securities Tim Metcalfe / Martin Davison 020 7601 6100
Hansard Communications Kirsty Corcoran / Justine James 020 7245 1100
Business Review
Chairman's Statement
I was pleased to return to the Board on 10 May 2010, to take up my role of
Non-Executive Chairman, and I am now writing to shareholders to present the
results for 2010.
It is an exciting time to be back at Hartest which, after a few difficult
years, is now well positioned for a period of organic growth.
Results
The Group reacted in a timely manner to the many challenges that arose during
2008 and 2009, implementing a number of changes in operational structure and
staffing levels both in our subsidiaries and the parent company.
Group revenue for 2010 was GBP22.16 million (2009: GBP20.67 million) and operating
profit before non-recurring costs rose significantly to GBP1.58 million (2009: GBP
0.33 million).
Gross margins increased encouragingly in aggregate to 37.2% from 34.0%,
reflecting the initiatives taken by our respective management teams to improve
the effectiveness of our trading.
Operating expenses amounted to GBP6.67 million (2009: GBP6.70 million) although, in
addition, we incurred non-recurring costs totalling GBP0.49 million, comprising
planned expenditure (announced in last year's Annual Report) for business
relocations of GBP0.33 million, and special expenditure and special costs in
respect of the lengthy Offer Period amounting to GBP0.16 million (2009:
non-recurring costs GBP1.12 million).
Group profit before tax amounted to GBP1.01 million, a commendable turnaround
from the prior year figure of Group loss before tax of GBP0.87 million.
Cash resources remain very well controlled, and we end the period without any
net debt.
Dividend
The Group resumed dividend payments with an interim dividend of 0.67 pence per
share at the end of 2009. Dividends had been suspended in December 2008 to
conserve funds to finance the forthcoming subsidiary company relocations and in
recognition of the uncertain economic period ahead.
Recognising the improving fortunes of the Group, the Board is now pleased to
propose a final dividend of 3.33 pence per share which, if approved by members
in the Annual General Meeting, will be payable on 1 October 2010, to members
recorded on the Company's share register on 17 September 2010. This will
deliver a total dividend for the 2010 financial year amounting to 4.00 pence
per share (2009: Nil pence per share).
Our future policy will be to balance net cash earnings between dividends and
funds retained for growth in roughly equal proportions.
Directorate Changes
Following the restructuring of the Board in March 2009, Geoff Spink served as
Executive Chairman in addition to his Chief Executive responsibilities,
supported by David Kempton and Jan Holmstrom as Non-Executive Directors. On 10
May 2010, David Kempton resigned from the Board after eight years of valuable
service, and I was reappointed as a Non-Executive Director, also taking the
position as Chairman, in order to allow Geoff Spink to concentrate upon his
roles as Group Chief Executive, Acting Finance Director and Managing Director
of the Hartest Medical Division.
The Board particularly wishes to thank David Kempton for the significant
contribution that he made to the Group throughout his time on the Board,
especially during the challenges experienced during the last year or so.
Employees
I would like to extend my personal thanks to all of our employees, upon whose
dedication and hard work the Group relies. We are grateful for the commitment
they provide to our operations on a daily basis.
Prospects
The Group is soundly and broadly based with a solid balance sheet, tight
operating costs and no net debt. The current year has begun well, with order
books ahead of budget, and we benefit from enthusiastic and experienced
management teams. After some difficult years, we are well set for a period of
organic growth, from a platform which presents all sorts of opportunities.
David R Leeming
Chairman
21 June 2010
Business Review
OPERATIONAL AND FINANCIAL REVIEW
Overview
We are pleased to be able to report an excellent outcome for the last financial
year. Following the many challenges in the previous year that resulted from the
deterioration in the global economic climate and the volatility in worldwide
currency exchange rates, (particularly the weakening in the Pound Sterling
against the Dollar and the Euro), we reacted rapidly by maintaining stringent
cost controls, yet continuing with planned business developments including the
relocation of two of our operations. We are now deriving considerable benefit
from these intiatives. The individual circumstances in our separate business
operations are explained in the paragraphs that follow.
Overall, we operate in technically specialist markets world-wide with strong
positions in a number of niche markets, which keeps the business broad-based
and limits our exposure to any one sector. This strategy provides us with a
strong platform for the continuing development of the Group.
Instrumentation Division
The Instrumentation Division manufactures sells and distributes a range of
specialist instruments and supplies for use in testing, measurement,
performance improvement, and research around the world. Our brands cover:
* surface coatings - Sheen Instruments
* rubber testing - Wallace Instruments
* temperature measurement - ASL
* ophthalmic testing - Tinsley Ophthalmic and Henson
* underwater cable fault location and electrical impulse testing - Tinsley
Precision
* power management systems for specialist vehicles - Carnation Designs
* equipment and consumables for use with electron microscopes - Agar
Scientific.
The five operations of Sheen, Wallace, ASL, Tinsley Ophthalmic and Tinsley
Precision operate jointly within one company, Hartest Precision Instruments
Limited (`Hartest Precision'), and we have completed a number of initiatives to
unify the branding formerly operated by each separate business, without any
dilution to their individual identities. Hartest Precision is based at a
dedicated facility at Redhill, Surrey, having successfully moved from two
separate locations in South London in March 2009. Occupation of the single site
at Redhill has delivered significant improvements in operating efficiencies and
cost savings. Hartest Precision also has a profitable and expanding business in
Delhi, India.
Looking at the year under review, most Hartest Precision operations performed
well with particular successes scored by the underwater cable fault location
business of Tinsley Precision, and the ophthalmic testing instruments of
Tinsley Ophthalmic. On the other hand, Sheen and Wallace products experienced
reduced demand from the automotive and general industrial sectors due to lower
global economic activity and demand in these business areas, although we are
pleased to note an encouraging upturn in demand towards the end of the
financial year. The Hartest Precision business in India had a very good year,
supplying equipment predominantly to the India power generating business, and
delivering strong results.
Carnation Designs Limited (`Carnation') made very substantial progress during
the year in the marketing and sale of `genisys', the company's intelligent
programmable vehicle management system, which offers advantages to both end
users and converters of specialist vehicles. Demand was particularly strong in
the ambulance and vehicle recovery sectors, with very encouraging developments
in the police and local authority markets during the latter part of the year.
We had another positive year at Agar Scientific Limited (`Agar'), during which
the company relocated from its existing premises in Stansted, Essex, on the
termination of its lease, to newly constructed and dedicated premises close to
the previous address. The company also made significant progress with the
rationalisation and refocus of its product offerings and preparation of its
catalogue.
Medical Services Division
The Medical Services Division trades under the names of Qados and Cross
Technologies, acting as a distributor in the business areas of specialist
medical and healthcare equipment, in both the public and private sectors,
throughout the United Kingdom and Ireland. In addition to the sale of medical
equipment, the Division also has an active service and consumables operation,
and is engaged in the distribution of radiopharmaceuticals. Aiming to offer the
latest technology, it acts as distributor rather than manufacturer; and in the
nature of such a wide portfolio business, there are constant adjustments to
product offerings, and the Division both gains and loses franchises.
Throughout the year the Medical Services Division achieved significant progress
in increasing gross margins, both by improved product mix and also by
successfully overcoming the currency-based problems of the prior year when the
rapid and volatile hardening of the Dollar and Euro currencies against the
Pound Sterling caused serious difficulties.
Group Development
In recent years, we have stabilised the subsidiary businesses in the Group, and
each one now contributes profit and cash flow to our operations. As we move
forward, we are placing increased emphasis on the continuing development and
growth of our activities.
Financial Performance
Aggregate gross margins increased significantly across the Group totalling
37.2% compared with 34.0% in the prior year.
At the same time, operating expenses were kept under close control, and limited
to GBP6.67 million compared with GBP6.70 million in the previous year.
Within the Instrumentation Division, revenue increased by 10.9% to GBP15.38
million and operating profits before non-recurring costs increased by an
encouraging 78.5% to GBP1.71 million. In the Medical Services Division, revenue
held firm at GBP6.77 million compared to the prior year, but operating profits
before non-recurring costs increased to GBP0.39 million compared to a small
operating loss of GBP0.03 million. Across the Group, total operating profit
before non-recurring costs increased by a commendable GBP1.25 million to GBP1.58
million.
Non-recurring Costs
The planned relocations of Hartest Precision in March 2009 and Agar in July
2009 incurred non-recurring costs in line with expectations at GBP0.33 million.
Separately, a number of special costs totalling GBP0.16 million were incurred by
the Group with professional advisers during the extended Offer Period which was
imposed upon the Group between July 2009 and February 2010.
With all of these distractions behind us, the Group is now able to apply
significant additional focus towards operations and the development of the
businesses.
Financial Monitoring and Management
The Board reviews Group performance against budget on a monthly basis. The key
performance indicators regularly monitored by the Board include revenue, gross
margin and overhead expenditure trends at each Group company. Working capital
utilisation is also closely monitored by regular review of stock holding
periods and debtor / creditor days. Business prospects are assessed by
reviewing rolling three month forecasts and order book levels supported by
order intake trends.
Liquidity
We have maintained good control over cash flows during the year, and the
debt-free position at 31 March 2009 was restored by 31 March 2010, despite
significant planned cash outflows during the year in respect of net capital
expenditure amounting to GBP0.50 million, principally to finance the fit-out of
the new facilities for Agar at Stansted, and to fund the special and
non-recurring expenses incurred in 2009 and during 2010.
Reconciliation of Net Cash Flow to Movement in Net Cash / (`Net Debt')
2010 2009
GBP'000 GBP'000
Increase / (Reduction) in cash in the year 20 (155)
Cash flow from reduced debt and finance 76 76
leases
Change in net debt resulting from cash 96 (79)
flows
Net cash at the beginning of the year 11 90
Net cash at end of the year 107 11
Taxation and Earnings per Share
The taxation charge for the year is increased by a number of non-allowable
expenses, notably professional charges incurred in respect of the Offer Period
and by the effect of higher overseas taxation rates, but we have gained some
respite against these higher charges by crediting the benefit of tax losses
from prior years that had not previously been recognised.
Earnings Per Share (`EPS') for the year amounted to 8.1 pence per share,
compared with the loss per share of 8.9 pence per share in the comparative
period, whilst the EPS before non-recurring costs amounted to 12.8 pence per
share, compared with 0.4 pence per share in the comparative period.
Geoff Spink
Chief Executive
21 June 2010
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2010
2010 2009
GBP'000 GBP'000
Revenue 22,156 20,671
Cost of sales (13,911) (13,635)
Gross profit (excluding non-recurring costs) 8,245 7,036
Operating expenses
Operating expenses excluding non-recurring costs (6,667) (6,702)
Operating profit before non-recurring costs 1,578 334
Non-recurring costs (490) (1,117)
Total operating expenses (7,157) (7,819)
Operating profit/(loss) after non-recurring costs 1,088 (783)
Finance income 4 12
Finance costs (84) (94)
Net financing cost (80) (82)
Profit/(loss) before tax 1,008 (865)
Income tax expense (308) 103
Profit/(loss) for the year 700 (762)
Other comprehensive incomefor the year
Exchange differences on translating foreign operations 55 34
Write-back of revaluation reserve - (81)
Other comprehensive income for the year 55 (47)
Total comprehensive income/(expense)for the year 755 (809)
Profit/(loss)attributable to:
Equity shareholders of Hartest Holdings Plc 700 (762)
Total comprehensive income/(expense)attributable to:
Equity shareholders of Hartest Holdings plc 755 (809)
Earnings/(Loss) per share (pence):
- basic 8.13 (8.85)
- diluted 7.53 (8.85)
Dividends declared and paid in the year (GBP'000) 58 86
Consolidated Statement of Changes in Equity
For the year ended 31 March 2010
Other Foreign
Share Share distributable Revaluation exchange Retained
capital premium reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 2,097 2,928 151 81 - 3,704 8,961
April 2008
Total - - - (81) 34 (762) (809)
comprehensive
expense for the
period
Employee - - 10 - - - 10
share-based
compensation
Dividend paid - - - - - (86) (86)
At 31 March 2009 2,097 2,928 161 - 34 2,856 8,076
Total - - - - 55 700 700
comprehensive
income for the
period
Employee - - 10 - - - 10
share-based
compensation
Dividend paid - - - - - (58) (58)
At 31 March 2010 2,097 2,928 171 - 89 3,498 8,783
Consolidated Statement of Financial Position
At 31 March 2010
2010 2009
GBP'000 GBP'000
Assets
Non-current assets
Goodwill and intangible assets 4,065 4,061
Property, plant and equipment 1,089 833
Deferred income tax asset 194 141
5,348 5,035
Current assets
Asset classified as held for resale 750 750
Inventories 3,346 3,042
Trade and other receivables 5,481 4,489
Cash and cash equivalents 430 410
10,007 8,691
Total assets 15,355 13,726
Capital and reserves
Share capital 2,097 2,097
Share premium 2,928 2,928
Retained earnings 3,498 2,856
Other reserve 260 195
Total equity attributable to the Company's equity 8,783 8,076
holders
Liabilities
Non-current liabilities
Borrowings 247 323
Deferred income tax liabilities 26 20
Provisions 206 239
479 582
Current liabilities
Trade and other payables 5,666 4,861
Current income tax liabilities 351 131
Borrowings 76 76
6,093 5,068
Total liabilities 6,572 5,650
Total equity and liabilities 15,355 13,726
Consolidated Cash Flow Statement
For the year end 31 March 2010
2010 2009
GBP'000 GBP'000
Profit/(loss) before taxation 1,008 (865)
Adjustments for:
Net finance cost 80 82
Depreciation 243 384
Amortisation of intangible assets 80 75
Share-based payments cost 10 10
Profit on sale of fixed assets - (8)
(Increase)/Decrease in inventory (304) 813
(Increase)/Decrease in trade and other receivables (1,028) 141
Increase/(Decrease) in trade and other payables 806 (167)
(Decrease)/Increase in provisions (33) 239
Net cash generated from operating activities before interest 862 704
and tax
Interest paid (84) (98)
Income tax paid (100) (204)
Net cash generated from operating activities 678 402
Cash flows from investing activities
Purchases of property, plant and equipment (`PPE') (524) (411)
Proceeds from sale of PPE 25 21
Purchases of intangible assets (98) (53)
Proceeds from sale of intangible assets 14 -
Interest received 4 12
Net cash employed in investing activities (579) (431)
Cash flows from financing activities
Repayments of borrowings (76) (76)
Equity dividends paid (58) (86)
Net cash employed in financing activities (134) (162)
Effect of exchange rate fluctuation on foreign balances 55 36
Net increase/(decrease) in cash and cash equivalents and bank 20 (155)
overdrafts
Cash, cash equivalents and bank overdrafts at beginning of 410 565
year
Cash, cash equivalents and bank overdrafts at end of year* 430 410
* Cash and cash equivalents at 31 March 2010 comprises cash balances of GBP
430,000 (2009: GBP410,000) and bank overdraft balances of GBPnil (2009: GBPnil).
Notes to the Consolidated Financial Statements
1. Basis of Preparation
The financial information presented in this Preliminary Announcement is
extracted from, and is consistent with, the Group's audited financial
statements for the year ended 31 March 2010. The financial information
contained in this announcement does not constitute statutory accounts within
the meaning of Section 435 of the Companies Act 2006 in respect of the 2010
accounts or Section 240 (3) of the Companies Act 1985 in respect of the 2009
accounts. The financial statements for the year ended 31 March 2010 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. The auditors' report on those financial statements is unqualified and
does not contain any statement under Section 498 of the Companies Act 2006.
The Group's audited financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards as
adopted by the EU ("Adopted IFRSs").
2. Segmental Information
At 31 March 2010 the Group is organised into two main primary business
segments:
* Instrumentation - the Instrumentation Division manufactures, sells and
distributes a
range of specialist instruments and supplies for use in testing, measurement,
performance improvement and research around the world.
* Medical Services - the Medical Services Division acts as a distributor of
equipment in the
business areas of medical treatment and healthcare.
The segment results for the year ended 31 March 2010 are as follows:
Medical Central
Instrumentation Services costs Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 15,383 6,773 - 22,156
Operating profit segment result 1,706 387 (515) 1,578
before non-recurring costs
Non-recurring costs (329) - (161) (490)
Finance cost - net (55) (9) (16) (80)
Profit/(loss) before income tax 1,322 378 (692) 1,008
Segmented operating assets 10,437 4,398 520 15,355
Total operating assets 10,437 4,398 520 15,355
Segmented operating liabilities (4,168) (2,161) (243) (6,572)
Total operating liabilities (4,168) (2,161) (243) (6,572)
Capital additions 541 81 - 622
Depreciation, amortisation and 275 48 - 323
impairment
Geographical analysis for the year ended 31 March 2010
United Europe India Rest of Total
Kingdom World
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from external customers 12,763 3,256 1,767 4,370 22,156
by location of customer
Notes to the Consolidated Financial Statements (continued)
Segmental Information (continued)
Comparative figures for the year ended 31 March 2009
Medical Central
Instrumentation Services costs Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 13,870 6,801 - 20,671
Operating profit/(loss) segment 959 (31) (594) 334
result before non-recurring costs
Non-recurring costs (621) (215) (281) (1,117)
Finance cost - net (49) (14) (19) (82)
Profit/(loss) before income tax 289 (260) (894) (865)
Segmented operating assets 9,012 4,114 600 13,726
Total operating assets 9,012 4,114 600 13,726
Segmented operating liabilities (3,181) (2,390) (79) (5,650)
Total operating liabilities (3,181) (2,390) (79) (5,650)
Capital additions 418 46 - 464
Depreciation, amortisation and 375 84 - 459
impairment
Write back of revaluation reserve 81 - - 81
Geographical analysis for the year ended 31 March 2009
United Europe India Rest of Total
Kingdom World
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from external customers 11,760 3,421 1,259 4,231 20,671
by location of customer
Non-recurring costs
2010 2009
GBP'000 GBP'000
Relocation of operations 329 562
Restructuring - Group - 138
costs:
- Other - 273
Impairment in value of property held for disposal - 98
Write-off of abortive transaction costs 161 46
Total non-recurring costs 490 1,117
Two of the Company's subsidiaries relocated during 2009 and 2010. In addition,
during the year, the Company incurred costs in relation to the Offer Period as
detailed in the Chairman's Statement and Operational and Financial Review. All
of these costs have been classified as non-recurring in accordance with the
Group's policy on such costs.
-- Ends --
END
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