TIDMHYWD
RNS Number : 0589Y
Heywood Williams Group PLC
27 August 2009
27 August 2009
Heywood Williams Group PLC
Half Year Results for the Six Months ended 30 June 2009
Results
* Revenues of GBP88.5 million (H1 2008: GBP116.3 million)
* Operating loss (before amortisation and exceptional items) of GBP4.6 million (H1
2008: profit of GBP4.1 million)
* Adjusted loss before tax, notional interest, amortisation and exceptional items
was GBP6.5 million (H1 2008: profit of GBP1.9 million)
* Exceptional items of GBP1.9 million, primarily in respect of severance and
advisory fees associated with bank facility negotiations (H1 2008: nil)
* Reported loss after tax of GBP9.5 million (H1 2008: profit of GBP0.9 million)
* Working capital reduction of GBP6.3 million (H1 2008: increase of GBP4.0
million)
* Cash outflow of GBP0.9 million (H1 2008: outflow of GBP4.6 million before
acquisitions)
* Closing net debt of GBP47.6 million (H1 2008: GBP49.8 million)
Robert Barr, Chief Executive, said:
"The Board believes that the Group will continue to face very difficult market
conditions, at least for the remainder of 2009. The priorities for the Group
remain to manage its balance sheet, maximise cash generation and implement a
more appropriate long term capital structure."
For further information, please contact:
+------------+----------------------------------+--------------------------------+
| | | |
+------------+----------------------------------+--------------------------------+
| Contacts: | Heywood Williams Group PLC | Tel: 01422 328 850 |
| | Robert Barr, Chief Executive | |
| | Mike Richards, Finance Director | |
+------------+----------------------------------+--------------------------------+
| | Financial Dynamics | |
+------------+----------------------------------+--------------------------------+
| | Jon Simmons/Sophie Moate | Tel: 020 7831 3113 |
+------------+----------------------------------+--------------------------------+
2009 HALF YEARLY RESULTS
Heywood Williams continues to face very difficult market conditions due to major
declines in residential housing markets worldwide. Sales in the first half of
2009 were down 24% compared to the same period in 2008. It is estimated that the
residential housing markets that the Group operates in have declined, on
average, by 40% since the second half of 2007. The Group has reduced headcount
by over 35% in the same period. Net debt at the end of June 2009 was GBP47.6
million, which was better than expectations and GBP2.2 million less than June
2008, reflecting the Group's success at reducing working capital.
The key financial results for the first half of 2009 were:
* Sales decreased by 24% to GBP88.5 million (2008: GBP116.3 million)
* Operating loss (before amortisation and exceptional items) of GBP4.6 million
(2008: profit of GBP4.1 million)
* Adjusted loss before tax, notional interest, amortisation and exceptional items
was GBP6.5 million (2008: profit of GBP1.9 million)
* Exceptional items of GBP1.9 million were incurred, primarily in respect of
severance and advisory fees associated with bank facility negotiations (2008:
nil)
* Reported loss after tax of GBP9.5 million (2008: profit of GBP0.9 million)
* Working capital reduction of GBP6.3 million (2008: increase of GBP4.0 million)
* Cash outflow of GBP0.9 million (2008: outflow of GBP4.6 million before
acquisitions)
* Closing net debt of GBP47.6 million (2008: GBP49.8 million)
The Group's key markets are currently exhibiting signs of fragile stability, but
at levels 30% to 60% below those experienced in late 2007. Our management teams
continue to work hard to outperform their markets. Market share gains have been
achieved and significant cost reductions continue to be implemented to align the
cost base with the tougher market conditions we are now facing. Headcount across
the Group has been reduced by a further 14% since the end of 2008, which is in
addition to the 24% reduction made during 2008.
2009 Half Yearly Review of Operations
Group Overview
Heywood Williams is a solutions provider/specialist distributor of branded
building products with a strong portfolio of its own brands.
The Group comprises of two Divisions, namely the Hardware Division which
designs, sources and distributes architectural hardware to the UK and selective
European markets and the North American Specialist Distribution Division which
markets and distributes branded building products primarily to the manufactured
housing and recreational vehicle markets. Approximately 80% of the Group's sales
of branded building products are to customers in the residential new build and
home improvement market segments across North America and Europe. The remainder
of the Group's sales are split between door and window hardware for the UK
commercial property market and branded building products for the recreational
vehicle market in North America.
The Group's priority over the short and medium term is to manage its balance
sheet and maximise cash generation in order to weather the current very
difficult market conditions and be well positioned for the subsequent market
upturn. The two key objectives for 2009 are:
* To ensure that the Group continues to operate within its banking covenants and
facilities, and
* To implement a more appropriate long term capital structure for the Group.
Hardware Division: UK/Europe
The Hardware Division offers a broad range of hardware design and product
solutions for housing developers, architectural ironmongers and
window/conservatory fabricators. The Hardware Division has strong market leading
positions in the UK, Ireland, Scandinavia and the Baltic States. The Division
has some of the strongest brands in its respective markets, including Mila(TM),
Carlisle Brass(TM) and Eurospec(TM).
Sales in the first half of 2009 were GBP51.0 million (2008: GBP63.5 million) and
the operating profit before amortisation and exceptional items was GBP0.2
million (2008: GBP4.7 million). Cash generation has been strong in the first
half helped by a working capital reduction of GBP3.1 million.
Across our European markets, new build and home improvement activities were
considerably reduced compared to the first half of 2008, due to the continuing
combined effects of consumers being more cautious, coupled with a considerable
reduction in the availability of finance. The first quarter of 2009 was
particularly difficult. In the UK it is estimated that the overall hardware
market fell 25% in the first quarter of 2009 compared to 2008, which in turn was
down over 15% compared to 2007. The Irish building products market contracted by
over 40% and the market in Scandinavia and the Baltics fell over 50% in the
first quarter of 2009 compared to 2008. Fragile stability was the main feature
of the markets we serve during the second quarter of 2009, albeit at levels
significantly below the corresponding period in 2008.
Against this unprecedented market deterioration, our management teams across the
UK and European businesses have worked hard to outperform the market and
minimise the impact of the downturn. Market shares have increased, including
winning new business with a number of major accounts and significant cost
reductions have been implemented to align the cost base with the tougher market
conditions we are now facing. Headcount has been reduced by a further 17% since
the end of 2008, which is in addition to the 23% reduction made during 2008.
North American SPECIALIST Distribution Division: LaSalle Bristol
In North America, LaSalle Bristol is a leading specialist distributor of branded
building products, with a particular focus on supplying floor coverings,
plumbing products, lighting and air flow systems predominantly to the
manufactured housing and recreational vehicle markets. LaSalle Bristol is the
North American market leader in most of the product ranges it supplies.
The manufactured housing and recreational vehicle markets in North America
essentially collapsed in the fourth quarter of 2008 and very low levels of
market activity were experienced in the first quarter of 2009. In the first half
of 2009 wholesale shipments of recreational vehicles declined 55% and
manufactured housing production fell by 45% compared to the same period in 2008.
The output of both industries hit unprecedented lows in the first quarter. The
second quarter of 2009 has shown some modest seasonal improvement in both
markets from the extremely low first quarter levels. Currently, the relevant
trade associations anticipate that annual shipments in 2009 of both recreational
vehicles and manufactured homes will be circa 50% down compared to two years
ago.
LaSalle Bristol continues to outperform its competitors in an extremely
difficult market. The LaSalle Bristol management team responded swiftly to the
further downturn in the market by reducing costs early in the year, including a
further headcount reduction of 9% since the end of 2008, which is in addition to
the 28% reduction made during 2008. The team has been highly effective in
generating cash by reducing stock levels quickly in response to reduced market
demand while continuing to provide best in market customer service.
Sales were down 47% to $55.6 million (2008: $104.6 million). In sterling,
revenue was down 29% to GBP37.5 million (2008: GBP52.8 million). LaSalle Bristol
had an operating loss of GBP4.8 million after the allocation of Group costs
compared to a loss of GBP0.6 million in the same period in 2008.
In January 2009, LaSalle Bristol successfully replaced a one year committed $6
million credit facility with a new three year asset based $10 million facility.
This facility is exclusively for the use of LaSalle Bristol and hence the
company has ring fenced financing for the next 3 years. The cash management
actions taken by the team at LaSalle Bristol have resulted in the company being
cash generative in the period despite the earnings loss. LaSalle Bristol was
cash positive at the half year and has not yet utilised its new dedicated line
of credit.
Group Funding
The Group's priority over the short and medium term is to manage its balance
sheet and maximise cash generation in order to weather the current very
difficult market conditions and be well positioned for the subsequent market
upturn.
The Group was pleased to announce in February 2009 that it had agreed new medium
term funding arrangements for the period to June 2010 with its UK banking
syndicate, involving a covenant package more suited to current market
conditions. The arrangements with the UK banking syndicate include a requirement
to work with the UK banking syndicate to establish a more appropriate long term
capital structure for the Group. Under the agreement, a GBP4.5 million liability
is triggered if a satisfactory structure is not implemented by 30 September
2009.
Work in establishing an appropriate long term capital structure for the Group,
which could result in a material dilution for existing holders of equity, is at
an advanced stage. Following agreement with the UK banking syndicate, the timing
for implementation of a satisfactory structure has been extended to 30 November
2009 to allow for regulatory steps to be completed. In the meantime, both
Divisions are operating within the revised covenants and have sufficient
facility headroom.
The Group's UK pension scheme deficit is valued at GBP11.0 million on an IAS 19
accounting basis at 30 June 2009. However, the triennial actuarial valuation,
which has been brought forward in parallel with the work on the long term
capital structure, has resulted in a deficit of GBP43.5 million on an actuarial
funding basis as at 31 December 2008.
Implementation of the revised capital structure is conditional upon final
agreement with the UK banking syndicate, followed by shareholder approval being
obtained at a general meeting. Consequently, given that the above conditions
currently prevail, this gives rise to uncertainty as to whether the proposed
financial restructuring will be satisfactorily completed. However, on the basis
that the proposed financial restructuring is satisfactorily completed, which is
the Directors' expectation, the Directors are of the opinion that the going
concern basis of accounting remains appropriate in preparing the Half Yearly
Report.
Outlook
The Board believes that the Group will continue to face very difficult market
conditions, at least for the remainder of 2009. The priorities for the Group
remain to manage its balance sheet, maximise cash generation and implement a
more appropriate long term capital structure.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has inherent operational risks linked to its markets, customers,
suppliers, management of working capital, commodity and currency fluctuations;
and treasury risks in respect of foreign exchange, funding and liquidity,
interest rates and pension funding. These risks were set out in detail on pages
16 and 17 of the Heywood Williams Group PLC Annual Report and Accounts 2008 and
remain an accurate representation of the risks facing the Group today.
Particular areas of note are the on-going adverse economic environment, which
continues to create uncertainty in the markets in which the Group operates,
predominantly in respect of demand for the Group's products; the commodity and
currency fluctuations and funding and liquidity risks, which the Group continues
to manage whilst working to establish a revised long term capital structure for
the Group.
The Half Yearly Review of Operations section of this report provides more
commentary on the associated impact of these risks for the first half of the
year and the outlook for the foreseeable future.
FORWARD LOOKING STATEMENTS
Certain statements in this Half Yearly Report are forward looking. Although the
Group believes that the expectations reflected in these forward looking
statements are reasonable, it can give no assurance that these expectations will
prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward looking statements.
The Group undertakes no obligation to update any forward looking statements
whether as a result of new information, future events or otherwise.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that the consolidated half yearly financial information
has been prepared in accordance with IAS 34 as adopted by the European Union and
that the half yearly management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R, namely:
* An indication of important events that have occurred during the first six months
and their impact on the half yearly financial statements and a description of
the principal risks and uncertainties for the remaining six months of the
financial year; and
* Material related party transactions in the first six months and any material
changes in the related party transactions described in the last annual report.
The Directors of Heywood Williams Group PLC are listed in the Heywood Williams
Group PLC Annual Report and Accounts 2008.
Signed on 27 August 2009 on behalf of the Board by:
ROBERT BARR MIKE RICHARDS
CHIEF EXECUTIVE FINANCE DIRECTOR
CONSOLIDATED income STATEMENT
Six months ended 30 JuNE 2009
+----------------------------------------------+------+----------+----------+----------+
| | Note | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+----------------------------------------------+------+----------+----------+----------+
| Continuing operations | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Revenue | 2 | 88.5 | 116.3 | 219.2 |
+----------------------------------------------+------+----------+----------+----------+
| Costs and overheads excluding exceptional | | (93.7) | (112.8) | (217.9) |
| items | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Operating (LOSS)/profit before exceptional | 2 | (5.2) | 3.5 | 1.3 |
| items | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Operating exceptional items | 3 | (1.5) | - | (1.6) |
+----------------------------------------------+------+----------+----------+----------+
| Operating (LOSS)/profit | | (6.7) | 3.5 | (0.3) |
+----------------------------------------------+------+----------+----------+----------+
| Share of post tax loss of associates | | (0.1) | (0.1) | (0.3) |
+----------------------------------------------+------+----------+----------+----------+
| Impairment of associate | | - | - | (0.3) |
+----------------------------------------------+------+----------+----------+----------+
| Finance costs | 4 | (2.9) | (2.8) | (6.9) |
+----------------------------------------------+------+----------+----------+----------+
| Finance income | 4 | 0.1 | 0.8 | 1.6 |
+----------------------------------------------+------+----------+----------+----------+
| (LOSS)/Profit before taxation | | (9.6) | 1.4 | (6.2) |
+----------------------------------------------+------+----------+----------+----------+
| Taxation | 5 | 0.1 | (0.5) | (0.8) |
+----------------------------------------------+------+----------+----------+----------+
| (LOSS)/Profit for the period attributable to | | (9.5) | 0.9 | (7.0) |
| equity holders of the parent company | | | | |
+----------------------------------------------+------+----------+----------+----------+
| (LOSSES)/Earnings per ordinary share for | 6 | | | |
| (LOSS)/profit attributable to ordinary | | | | |
| equity holders of the parent company | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Basic | | (11.2p) | 1.0p | (8.3p) |
+----------------------------------------------+------+----------+----------+----------+
| Basic, excluding exceptional items | | (9.0p) | 1.0p | (5.1p) |
+----------------------------------------------+------+----------+----------+----------+
| Diluted | | (11.2p) | 1.0p | (8.3p) |
+----------------------------------------------+------+----------+----------+----------+
| Diluted, excluding exceptional items | | (9.0p) | 1.0p | (5.1p) |
+----------------------------------------------+------+----------+----------+----------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 JuNE 2009
+----------------------------------------------+------+---------+---------+---------+
| | Note | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+----------------------------------------------+------+---------+---------+---------+
| (Loss)/profit for the period | | (9.5) | 0.9 | (7.0) |
+----------------------------------------------+------+---------+---------+---------+
| | | | | |
+----------------------------------------------+------+---------+---------+---------+
| Exchange differences on translation of | | (9.5) | 1.1 | 22.8 |
| foreign operations | | | | |
+----------------------------------------------+------+---------+---------+---------+
| Gain/(loss) on a hedge of net investment | | 5.3 | (0.5) | (12.5) |
| taken to equity | | | | |
+----------------------------------------------+------+---------+---------+---------+
| (Loss)/gain on cash flow hedges | 7 | (1.4) | (0.1) | 0.8 |
+----------------------------------------------+------+---------+---------+---------+
| Gain/(loss) on interest rate hedge | | 0.1 | 0.2 | (0.4) |
+----------------------------------------------+------+---------+---------+---------+
| Actuarial loss on defined benefit pension | 7 | (1.1) | (1.2) | (7.1) |
| plans | | | | |
+----------------------------------------------+------+---------+---------+---------+
| OTHER COMPREHENSIVE (LOSS)/PROFIT FOR THE | | (6.6) | (0.5) | 3.6 |
| PERIOD NET OF TAX | | | | |
+----------------------------------------------+------+---------+---------+---------+
| TOTAL comprehensive (loss)/profit for the | | (16.1) | 0.4 | (3.4) |
| period net of tax | | | | |
+----------------------------------------------+------+---------+---------+---------+
CONSOLIDATED STATEMENT OF financial position
as at 30 june 2009
+----------------------------------------------+------+----------+----------+----------+
| | Note | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+----------------------------------------------+------+----------+----------+----------+
| Assets | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Non-current assets | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Property, plant and equipment | | 14.7 | 15.4 | 16.3 |
+----------------------------------------------+------+----------+----------+----------+
| Intangible assets | | 44.6 | 45.7 | 45.2 |
+----------------------------------------------+------+----------+----------+----------+
| Investments accounted for using the equity | | 1.7 | 2.1 | 1.8 |
| method | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Deferred income tax asset | | 4.9 | 2.9 | 4.8 |
+----------------------------------------------+------+----------+----------+----------+
| | | 65.9 | 66.1 | 68.1 |
+----------------------------------------------+------+----------+----------+----------+
| Current assets | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Inventories | | 35.5 | 47.6 | 47.5 |
+----------------------------------------------+------+----------+----------+----------+
| Trade and other receivables | | 24.9 | 31.8 | 24.2 |
+----------------------------------------------+------+----------+----------+----------+
| Financial assets | 9 | - | 0.8 | 9.1 |
+----------------------------------------------+------+----------+----------+----------+
| Income tax receivable | | 0.1 | - | 1.2 |
+----------------------------------------------+------+----------+----------+----------+
| Cash at bank and in hand | | 5.5 | 4.2 | 5.4 |
+----------------------------------------------+------+----------+----------+----------+
| | | 66.0 | 84.4 | 87.4 |
+----------------------------------------------+------+----------+----------+----------+
| Total assets | | 131.9 | 150.5 | 155.5 |
+----------------------------------------------+------+----------+----------+----------+
| Equity and liabilities | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Equity attributable to equity holders of the parent company | | |
+----------------------------------------------------------------+----------+----------+
| Called up share capital | | 17.0 | 17.0 | 17.0 |
+----------------------------------------------+------+----------+----------+----------+
| Other reserves | | 5.7 | 0.7 | 11.3 |
+----------------------------------------------+------+----------+----------+----------+
| Retained earnings | | 0.2 | 24.6 | 10.5 |
+----------------------------------------------+------+----------+----------+----------+
| Own shares | | (0.1) | (0.1) | (0.1) |
+----------------------------------------------+------+----------+----------+----------+
| | | 22.8 | 42.2 | 38.7 |
+----------------------------------------------+------+----------+----------+----------+
| Non current liabilities | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Defined benefit pensions deficit | 10 | 15.5 | 7.0 | 14.5 |
+----------------------------------------------+------+----------+----------+----------+
| Provisions | | 6.4 | 6.8 | 7.0 |
+----------------------------------------------+------+----------+----------+----------+
| Financial liabilities | 11 | 40.0 | 40.1 | 36.8 |
+----------------------------------------------+------+----------+----------+----------+
| Deferred income tax liabilities | | 5.3 | 5.4 | 5.7 |
+----------------------------------------------+------+----------+----------+----------+
| | | 67.2 | 59.3 | 64.0 |
+----------------------------------------------+------+----------+----------+----------+
| Current liabilities | | | | |
+----------------------------------------------+------+----------+----------+----------+
| Financial liabilities | 11 | 14.2 | 14.6 | 23.6 |
+----------------------------------------------+------+----------+----------+----------+
| Trade and other payables | | 24.9 | 31.1 | 26.2 |
+----------------------------------------------+------+----------+----------+----------+
| Provisions | | 1.9 | 1.7 | 2.0 |
+----------------------------------------------+------+----------+----------+----------+
| Income tax payable | | 0.9 | 1.6 | 1.0 |
+----------------------------------------------+------+----------+----------+----------+
| | | 41.9 | 49.0 | 52.8 |
+----------------------------------------------+------+----------+----------+----------+
| Total equity and liabilities | | 131.9 | 150.5 | 155.5 |
+----------------------------------------------+------+----------+----------+----------+
CONSOLIDATED STATEMENT OF changes in equity
Six months ended 30 JUNE 2009
+-------------------------------------+------+---------+----------+----------+--------+--------+
| | Note | Share | Foreign | Retained | Own | Total |
| | | capital | exchange | earnings | shares | GBPm |
| | | GBPm | GBPm | GBPm | GBPm | |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| At 1 January 2008 | | 17.0 | 0.2 | 24.5 | (0.1) | 41.6 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Loss for the period | | - | - | (7.0) | - | (7.0) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Exchange fluctuations: | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Translation of foreign operations | | - | 22.8 | - | - | 22.8 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Hedge of net investment | | - | (12.5) | - | - | (12.5) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Cash flow hedges | 7 | - | 0.8 | - | - | 0.8 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Loss on interest rate hedge | | - | - | (0.4) | - | (0.4) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Actuarial loss on defined benefit | 7 | - | - | (7.1) | - | (7.1) |
| pension plans | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Employee share options | | - | - | 0.5 | - | 0.5 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| At 1 January 2009 | | 17.0 | 11.3 | 10.5 | (0.1) | 38.7 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Loss for the period | | - | - | (9.5) | - | (9.5) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Exchange fluctuations: | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Translation of foreign operations | | - | (9.5) | - | - | (9.5) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Hedge of net investment | | - | 5.3 | - | - | 5.3 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Cash flow hedges | 7 | - | (1.4) | - | - | (1.4) |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Gain on interest rate hedge | | - | - | 0.1 | - | 0.1 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Actuarial loss on defined benefit | 7 | - | - | (1.1) | - | (1.1) |
| pension plans | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| Employee share options | | - | - | 0.2 | - | 0.2 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
| At 30 June 2009 | | 17.0 | 5.7 | 0.2 | (0.1) | 22.8 |
+-------------------------------------+------+---------+----------+----------+--------+--------+
Six months ended 30 JUNE 2008
+-------------------------------------+------+---------+----------+----------+--------+-------+
| | Note | Share | Foreign | Retained | Own | Total |
| | | capital | exchange | earnings | shares | GBPm |
| | | GBPm | GBPm | GBPm | GBPm | |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| At 1 January 2008 | | 17.0 | 0.2 | 24.5 | (0.1) | 41.6 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Gain for the period | | - | - | 0.9 | - | 0.9 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Exchange fluctuations: | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Translation of foreign operations | | - | 1.1 | - | - | 1.1 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Hedge of net investment | | - | (0.5) | - | - | (0.5) |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Cash flow hedges | 7 | - | (0.1) | - | - | (0.1) |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Gain on interest rate hedge | | - | - | 0.2 | - | 0.2 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Actuarial loss on defined benefit | 7 | - | - | (1.2) | - | (1.2) |
| pension plans | | | | | | |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| Employee share options | | - | - | 0.2 | - | 0.2 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
| At 30 June 2008 | | 17.0 | 0.7 | 24.6 | (0.1) | 42.2 |
+-------------------------------------+------+---------+----------+----------+--------+-------+
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 JUNE 2009
+----------------------------------------------+---+--+--+--+--+------+----------+----------+
| | Note | Half year | Half | Full |
| | | 2009 | year | year |
| | | GBPm | 2008 | 2008 |
| | | | GBPm | GBPm |
+----------------------------------------------+------+---------------+----------+----------+
| Cash flows from operating activities | | | | |
+----------------------------------------------+------+---------------+----------+----------+
| Cash generated/(absorbed) by operations | 12 | 1.3 | (0.5) | 5.5 |
+----------------------------------------------+------+---------------+----------+----------+
| Net income tax received/(paid) | | 0.8 | (0.1) | (0.5) |
+----------------------------------------------+------+---------------+----------+----------+
| Net cash flow from operating activities | | 2.1 | (0.6) | 5.0 |
+----------------------------------------------+------+---------------+----------+----------+
| Investing activities | | | | |
+----------------------------------------------+------+---------------+----------+----------+
| Interest received | | 0.1 | 0.5 | 0.8 |
+----------------------------------------------+------+---------------+----------+----------+
| Dividends received from associates | | - | 0.1 | 0.1 |
+----------------------------------------------+------+---------------+----------+----------+
| Purchase of intangible assets | | - | (0.1) | (0.2) |
+----------------------------------------------+------+---------------+----------+----------+
| Purchase of property, plant and equipment | | (0.2) | (0.4) | (0.9) |
+----------------------------------------------+------+---------------+----------+----------+
| Disposal of property, plant and equipment | | 0.1 | - | - |
+----------------------------------------------+------+---------------+----------+----------+
| Acquisition of subsidiaries | 14 | - | (0.3) | (0.4) |
+----------------------------------------------+------+---------------+----------+----------+
| Forward exchange hedging contracts | | - | (1.4) | (1.4) |
+----------------------------------------------+------+---------------+----------+----------+
| Net cash flow from investing activities | | - | (1.6) | (2.0) |
+----------------------------------------------+------+---------------+----------+----------+
| Financing activities | | | | |
+----------------------------------------------+------+---------------+----------+----------+
| Interest paid | | (1.8) | (2.8) | (5.6) |
+----------------------------------------------+------+---------------+----------+----------+
| Exceptional financing items | | (0.9) | - | (0.2) |
+----------------------------------------------+------+---------------+----------+----------+
| Additional borrowings | | 1.3 | 9.0 | 7.3 |
+----------------------------------------------+------+---------------+----------+----------+
| Repayment of borrowings | | - | - | (0.1) |
+----------------------------------------------+------+---------------+----------+----------+
| Payment of deferred consideration | 14 | - | (8.0) | (8.0) |
+----------------------------------------------+------+---------------+----------+----------+
| Net cash flow from financing activities | | (1.4) | (1.8) | (6.6) |
+----------------------------------------------+------+---------------+----------+----------+
| Net movement in cash and cash equivalents | | 0.7 | (4.0) | (3.6) |
+----------------------------------------------+------+---------------+----------+----------+
| Cash and cash equivalents at the beginning | | 5.4 | 7.6 | 7.6 |
| of the period | | | | |
+----------------------------------------------+------+---------------+----------+----------+
| Exchange fluctuations | | (0.6) | 0.1 | 1.4 |
+----------------------------------------------+------+---------------+----------+----------+
| Cash and cash equivalents at the end of the period | | 5.5 | 3.7 | 5.4 |
+-----------------------------------------------------------+--+------+----------+----------+
| | | | | |
+----------------------------------------------+------+---------------+----------+----------+
| Reconciliation of net movement in cash and cash equivalents to movements in | |
| net debt | |
+--------------------------------------------------------------------------------+----------+
| Net movement in cash and cash equivalents | | 0.7 | (4.0) | (3.6) |
+----------------------------------------------+------+---------------+----------+----------+
| Net movement in debt | 13 | (1.3) | (9.0) | (7.2) |
+----------------------------------------------+------+---------------+----------+----------+
| Movement in net debt resulting from cash flows | | (0.6) | (13.0) | (10.8) |
+--------------------------------------------------+-----+------------+----------+----------+
| Exchange fluctuations | | (0.3) | 0.1 | 1.0 |
+----------------------------------------------+------+---------------+----------+----------+
| Movement in net debt | | (0.9) | (12.9) | (9.8) |
+----------------------------------------------+------+---------------+----------+----------+
| Opening net debt | | (46.7) | (36.9) | (36.9) |
+----------------------------------------------+------+---------------+----------+----------+
| Closing net debt | | (47.6) | (49.8) | (46.7) |
+----------------------------------------------+---+--+--+--+--+------+----------+----------+
notes to the financial statements
1 Accounting policies and general information
The Half Yearly Report was approved for issue on 27 August 2009.
The Half Yearly Report does not comprise statutory accounts within the meaning
of Section 434 of the Companies Act 2006. Statutory accounts for the year ended
31 December 2008 were approved by the Board of Directors on 4 March 2009 and
delivered to the Registrar of Companies. The Independent Auditors' Report on
those accounts was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under Section 237 of the Companies Act 1985.
The Group has chosen not to subject the Half Yearly Report to an independent
review or audit.
Basis of preparation
The Half Yearly Report for the six months ended 30 June 2009 has been prepared
in accordance with the Disclosure and Transparency Rules of the Financial
Services Authority and with IAS 34 "Interim Financial Reporting", as adopted by
the European Union.
The Half Yearly Report does not include all of the information and disclosure
required in the annual financial statements, and should be read in conjunction
with the Group's annual financial statements as at 31 December 2008.
GOING CONCERN
The Group is currently in the advanced stages of developing a proposed revised
capital structure for the Group and the deadline for its implementation has been
extended by the Group's UK banking syndicate to 30 November 2009 to allow for
regulatory steps to be completed. The proposed revised capital structure is
designed to provide the Group with the appropriate cash and debt resources to
trade through adverse economic conditions, to the extent that they are
reasonably foreseeable.
Implementation of a revised capital structure would be conditional upon final
agreement with the UK banking syndicate, followed by shareholder approval being
obtained at a general meeting. If agreement is reached with the UK banking
syndicate, shareholder approval is obtained and subsequently a financial
restructuring is satisfactorily completed, which is the Directors' expectation,
the Directors are of the opinion that, after taking into account the available
committed facilities following the proposed restructuring, the Group will have
sufficient working capital for its requirements for at least twelve months from
the date of this Half Yearly Report. This assertion is based on detailed
financial forecasts prepared by management and reviewed and approved by the
Board.
In the event that the proposed revised capital structure is not implemented and
subsequently alternate funding sources cannot be secured, the Group forecasts
that it would not have sufficient working capital for its requirements for at
least twelve months from the date of this Half Yearly Report. This possibility
represents a material uncertainty as to the appropriateness of the going concern
basis for preparing the Half Yearly Report. If this basis was no longer
appropriate then significant adjustments to the financial information would be
required, which would include writing down the carrying value of the assets to
their recoverable amounts and providing for any further liabilities that may
arise.
The requirement to finalise the revised capital structure proposals with the UK
banking syndicate and the outcome of any subsequent shareholder vote currently
gives rise to a material uncertainty as to whether the proposed capital
restructuring will be satisfactorily completed. However, on the basis that the
proposed capital restructuring is satisfactorily completed, which is the
Directors' expectation, the Directors are of the opinion that the going concern
basis of accounting remains appropriate in preparing the Half Yearly Report.
1 Accounting policies and general information (continued)
Significant accounting policies
Except as described below, the accounting policies adopted in the preparation of
the Half Yearly Report are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 31 December 2008 and
disclosed therein.
Taxes on income in the interim periods are accrued using the tax rate that would
be applicable to expected total annual earnings.
The following new standards and amendments to standards or interpretations are
mandatory for the first time for the financial year beginning 1 January 2009,
but have had no material impact to the Group:
INTERNATIONAL ACCOUNTING STANDARDS (IAS/FRS)
+-------------------+----------------------------------------------------------------+
| |
+------------------------------------------------------------------------------------+
| Annual | Annual Improvements to IFRS |
| Improvements | |
+-------------------+----------------------------------------------------------------+
| IFRS 2 | Amendment to IFRS 2 - Vesting Conditions and Cancellations |
+-------------------+----------------------------------------------------------------+
| IFRS 5 | Non-current Assets Held for Sale and Discontinued Operations |
+-------------------+----------------------------------------------------------------+
| IFRS 7 | Financial Instruments: Disclosures |
+-------------------+----------------------------------------------------------------+
| IFRS 8 | Operating Segments |
+-------------------+----------------------------------------------------------------+
| IAS 1 (Revised) | Presentation of Financial Statements |
+-------------------+----------------------------------------------------------------+
| IAS 8 | Accounting policies, Change in Accounting Estimates and Errors |
+-------------------+----------------------------------------------------------------+
| IAS 10 | Events after the Reporting Period |
+-------------------+----------------------------------------------------------------+
| IAS 16 | Property, Plant and Equipment |
+-------------------+----------------------------------------------------------------+
| IAS 18 | Revenue |
+-------------------+----------------------------------------------------------------+
| IAS 19 | Employee Benefits |
+-------------------+----------------------------------------------------------------+
| IAS 20 | Accounting for Government Grants and Disclosures of Government |
| | Assistance |
+-------------------+----------------------------------------------------------------+
| IAS 23 (Revised) | Borrowing Costs |
+-------------------+----------------------------------------------------------------+
| IAS 27 | Consolidated and Separate Financial Statements |
+-------------------+----------------------------------------------------------------+
| IAS 28 | Investment in Associates |
+-------------------+----------------------------------------------------------------+
| IAS 31 | Interest in Joint Ventures |
+-------------------+----------------------------------------------------------------+
| IAS 32 & IAS 1 | Amendment - Puttable Financial Instruments and Obligations |
| | Arising on Liquidation |
+-------------------+----------------------------------------------------------------+
| IAS 34 | Interim Financial Reporting |
+-------------------+----------------------------------------------------------------+
| IAS 36 | Impairment of Assets |
+-------------------+----------------------------------------------------------------+
| IAS 38 | Intangible Assets: Expenditure on Advertising and Promotional |
| | Activities |
+-------------------+----------------------------------------------------------------+
| IAS 39 | Financial Instruments: Recognition and Measurement |
+-------------------+----------------------------------------------------------------+
IFRIC
+-------------------+----------------------------------------------------------------+
| IFRIC 9 and IAS | Reassessment of Embedded Derivatives |
| 39 | |
+-------------------+----------------------------------------------------------------+
| IFRIC 13 | Customer Loyalty Programmes |
+-------------------+----------------------------------------------------------------+
| IFRIC 15 | Agreements for the Construction of Real Estate |
+-------------------+----------------------------------------------------------------+
| IFRIC 16 | Hedges of a Net Investment in a Foreign Operation |
+-------------------+----------------------------------------------------------------+
2 segment information
For management purposes, the Group continues to be organised into two continuing
operating divisions - Hardware: UK/Europe and North American Specialist
Distribution: LaSalle Bristol. These divisions are the basis upon which the
Group reports its on-going primary segment information.
Principal activities are as follows:
Hardware: UK/EUROPE
The Hardware Division is the market leading specialist distributor of
architectural hardware and door panels to the UK, Irish and certain other
European markets.
NORTH AMERICAN SPECIALIST DISTRIBUTION: LaSalle Bristol
LaSalle Bristol is the market leading specialist distributor of branded building
products to the North American manufactured housing, recreational vehicle and
modular housing markets.
Segment results on these primary segments are presented below:
Continuing operations
+----------------------------------------------------+----------+----------+----------+
| | Half | Half | Full |
| | year | year | year |
| | 2009 | 2008 | 2008 |
| | GBPm | GBPm | GBPm |
+----------------------------------------------------+----------+----------+----------+
| Revenue | | | |
+----------------------------------------------------+----------+----------+----------+
| Hardware | 51.0 | 63.5 | 120.1 |
+----------------------------------------------------+----------+----------+----------+
| LaSalle Bristol | 37.5 | 52.8 | 99.1 |
+----------------------------------------------------+----------+----------+----------+
| Continuing external revenue | 88.5 | 116.3 | 219.2 |
+----------------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------------+----------+----------+----------+
| Operating (LOSS)/profit before exceptional items | | | |
+----------------------------------------------------+----------+----------+----------+
| Hardware | (0.4) | 4.1 | 4.4 |
+----------------------------------------------------+----------+----------+----------+
| LaSalle Bristol | (4.8) | (0.6) | (3.1) |
+----------------------------------------------------+----------+----------+----------+
| Operating (loss)/profit | (5.2) | 3.5 | 1.3 |
+----------------------------------------------------+----------+----------+----------+
There has been no change to the basis of segmentation or to the basis of
measurement of segment profit and loss since the last Annual Report. Management
monitors the operating results of its business units separately for the purpose
of making decisions about resource allocation and performance assessment, in
accordance with the provisions of IFRS 8 "Operating Segments".
Segment performance is evaluated based on operating profit or loss, after
charges for amortisation of intangible brands and patents in relation to the
Carlisle Brass and Avenco acquisitions. Included within Hardware operating
(loss)/profit as shown above is GBP0.6m of amortisation charges in this respect
(H1 2008: GBP0.6m; FY 2008: GBP1.2m).
Group financing (including finance costs and income), investing activities
(including associates) and income taxes are managed on a group basis and are not
allocated to operating segments.
3 Exceptional items
Exceptional items comprise:
+--------------------------------------------------+----------+----------+----------+
| | Half | Half | Full |
| | year | year | year |
| | 2009 | 2008 | 2008 |
| | GBPm | GBPm | GBPm |
+--------------------------------------------------+----------+----------+----------+
| Restructuring costs: | | | |
+--------------------------------------------------+----------+----------+----------+
| Severance | (0.5) | - | (0.8) |
+--------------------------------------------------+----------+----------+----------+
| Plant closures | - | - | (1.0) |
+--------------------------------------------------+----------+----------+----------+
| | (0.5) | - | (1.8) |
+--------------------------------------------------+----------+----------+----------+
| Advisory fees associated with bank facility | (0.6) | - | (0.3) |
| negotiations | | | |
+--------------------------------------------------+----------+----------+----------+
| Claim settlement | (0.4) | - | - |
+--------------------------------------------------+----------+----------+----------+
| Pension curtailment | - | - | 0.5 |
+--------------------------------------------------+----------+----------+----------+
| Operating exceptional items | (1.5) | - | (1.6) |
+--------------------------------------------------+----------+----------+----------+
| Exceptional costs included within finance costs | (0.4) | - | (1.1) |
| (note 4) | | | |
+--------------------------------------------------+----------+----------+----------+
| Total exceptional items | (1.9) | - | (2.7) |
+--------------------------------------------------+----------+----------+----------+
The Group has implemented a number of cost cutting measures during 2008 and 2009
which involved significant headcount reductions and, in doing so, GBP0.5m of
severance costs were incurred in the first half of 2009, all of which were
expended in the period. In the year ended 31 December 2008 severance costs
amounted to GBP0.8m, of which GBP0.7m was expended in that year and GBP0.1m
carried forward in provisions and expended in the first half of 2009. No such
severance costs were incurred in the first half of 2008. All headcount
reductions were announced prior to the period end in which they were charged.
Plant closure costs in the prior year include GBP0.8m in relation to the closure
of the Group's sole remaining UK hardware manufacturing plant, which was
announced in December 2008 and GBP0.2m in relation to fixed asset tooling and
stock impairment charges caused by the closure of Interconsulting SRL, an
associate business. The GBP0.8m of plant closure costs included a GBP0.3m
surplus property provision to cover costs over the remainder of the lease period
of the business premises, GBP0.2m for severance costs, GBP0.1m for professional
advisory costs and GBP0.2m in respect of balance sheet impairment. Of these
closure costs GBP0.3m remain within provisions at 30 June 2009 (H1 2008: GBPnil;
FY 2008: GBP0.6m).
The Group has incurred professional advisory costs of GBP0.6m and bank advisory
costs and fees of GBP0.4m during the period in respect of work to date on
establishing an appropriate long term capital structure for the Group. In the
second half of 2008 similar such costs were incurred in respect of UK bank
facility negotiations and covenant waivers (professional advisory costs: H1
2008: GBPnil; FY 2008: GBP0.3m, bank advisory costs and fees: H1 2008: GBPnil;
FY 2008: GBP1.1m).
An historical dispute relating to a former subsidiary has been resolved and
settled since the period end, resulting in an exceptional charge of GBP0.4m.
The prior year pension curtailment credit was a one off benefit which arose as
LaSalle Bristol management revised the funded plan benefits of the US scheme at
the end of 2008, whereby benefits will no longer be subject to inflationary
increases.
Each of the above transactions are treated as exceptional since they are
infrequent and material in nature. As such, the amounts earned or charged in any
given year is not indicative of a trend in financial performance.
4 Finance costs and income
+--------------------------------------------------+----------+----------+----------+
| | Half | Half | Full |
| | year | year | year |
| | 2009 | 2008 | 2008 |
| | GBPm | GBPm | GBPm |
+--------------------------------------------------+----------+----------+----------+
| finance costs | | | |
+--------------------------------------------------+----------+----------+----------+
| Bank loans and overdrafts | (1.8) | (2.1) | (4.5) |
+--------------------------------------------------+----------+----------+----------+
| Notional interest relating to discounting of | - | (0.2) | (0.3) |
| provisions | | | |
+--------------------------------------------------+----------+----------+----------+
| Notional interest relating to discounting of | - | (0.1) | (0.2) |
| deferred consideration | | | |
+--------------------------------------------------+----------+----------+----------+
| Notional interest relating to defined benefit | (0.6) | - | - |
| obligations | | | |
+--------------------------------------------------+----------+----------+----------+
| Amounts payable on foreign exchange contracts | (0.1) | (0.3) | (0.8) |
+--------------------------------------------------+----------+----------+----------+
| Other | - | (0.1) | - |
+--------------------------------------------------+----------+----------+----------+
| | (2.5) | (2.8) | (5.8) |
+--------------------------------------------------+----------+----------+----------+
| Exceptional finance costs (note 3) | (0.4) | - | (1.1) |
+--------------------------------------------------+----------+----------+----------+
| | (2.9) | (2.8) | (6.9) |
+--------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------+----------+----------+----------+
| finance income | | | |
+--------------------------------------------------+----------+----------+----------+
| Notional interest relating to defined benefit | - | 0.4 | 0.8 |
| obligations | | | |
+--------------------------------------------------+----------+----------+----------+
| Amounts receivable on foreign exchange contracts | 0.1 | 0.4 | 0.8 |
+--------------------------------------------------+----------+----------+----------+
| | 0.1 | 0.8 | 1.6 |
+--------------------------------------------------+----------+----------+----------+
5 Tax
Income tax credit/(expense) is recognised based on management's best estimate of
the weighted average annual income tax rate expected for the full financial
year. The tax rate used for the half year is a credit of 1.1% and is based upon
the current estimate of the average annual tax rate for the year ending 31
December 2009 (H1 2008: 35.7%; FY 2008: 12.9%) with only a small proportion of
the losses in the period available for corporation tax relief.
6 (LOSSES)/Earnings per share
Basic (losses)/earnings per share amounts are calculated by dividing net
(loss)/profit for the period attributable to ordinary equity holders of the
parent company by the weighted average number of ordinary shares outstanding
during the period.
Diluted (losses)/earnings per share amounts are calculated by dividing the net
(loss)/profit for the period attributable to ordinary equity holders of the
parent company by the weighted average number of ordinary shares outstanding
during the period, plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential ordinary shares
into ordinary shares.
6 (LOSSES)/Earnings per share (continued)
The calculation of the basic and diluted (losses)/earnings per share is based on
the following data:
+----------------------------+------------------------+----------+----------+----------+
| | | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+----------------------------+------------------------+----------+----------+----------+
| (LOSSES)/Earnings | | | | |
+----------------------------+------------------------+----------+----------+----------+
| (Losses)/earnings | | (9.5) | 0.9 | (7.0) |
| attributable to members of | | | | |
| the parent company | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Adjusted for exceptional | | 1.9 | - | 2.7 |
| items | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Adjusted (losses)/earnings | | (7.6) | 0.9 | (4.3) |
+----------------------------+------------------------+----------+----------+----------+
| | | | | |
+----------------------------+------------------------+----------+----------+----------+
| | | Number | Number | Number |
| | | '000 | '000 | '000 |
+----------------------------+------------------------+----------+----------+----------+
| Number of shares | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Weighted average number of | - basic | 84,792 | 84,726 | 84,749 |
| ordinary shares | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Effect of dilutive | - Performance Share | - | 3,847 | - |
| potential ordinary shares | Plan | | | |
+----------------------------+------------------------+----------+----------+----------+
| Weighted average number of | - diluted | 84,792 | 88,573 | 84,749 |
| ordinary shares | | | | |
+----------------------------+------------------------+----------+----------+----------+
When share options under the savings related and executive schemes are not
dilutive in the period they are not included in the calculation of
(losses)/earnings per share. These could potentially be dilutive in the future.
In order to provide a comparable measure of the underlying performance of the
Group, the adjusted (losses)/earnings per share figure excludes the effect of
exceptional items, net of related taxation.
Adjustments for exceptional items are analysed below:
+----------------------------+------------------------+----------+----------+----------+
| | | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+----------------------------+------------------------+----------+----------+----------+
| | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Operating exceptional | | (1.5) | - | (1.6) |
| items | | | | |
+----------------------------+------------------------+----------+----------+----------+
| Financing exceptional | | (0.4) | - | (1.1) |
| items | | | | |
+----------------------------+------------------------+----------+----------+----------+
| | | (1.9) | - | (2.7) |
+----------------------------+------------------------+----------+----------+----------+
7 components of other comprehensive income
+--------------------------------------------------+----------+----------+----------+
| | Half | Half | Full |
| | year | year | year |
| | 2009 | 2008 | 2008 |
| | GBPm | GBPm | GBPm |
+--------------------------------------------------+----------+----------+----------+
| Cash flow hedges: | | | |
+--------------------------------------------------+----------+----------+----------+
| (Loss)/gain arising in the | (1.5) | (0.1) | 0.9 |
| period | | | |
+--------------------------------------------------+----------+----------+----------+
| Less amounts transferred to | 0.1 | - | (0.1) |
| profit or loss | | | |
+--------------------------------------------------+----------+----------+----------+
| | (1.4) | (0.1) | 0.8 |
+--------------------------------------------------+----------+----------+----------+
| Defined benefit pension plans: | | | |
+--------------------------------------------------+----------+----------+----------+
| Actuarial loss on defined | (1.5) | (1.7) | (10.3) |
| benefit pension plans | | | |
+--------------------------------------------------+----------+----------+----------+
| Less deferred tax on | 0.4 | 0.5 | 3.2 |
| actuarial loss | | | |
+--------------------------------------------------+----------+----------+----------+
| | (1.1) | (1.2) | (7.1) |
+--------------------------------------------------+----------+----------+----------+
The GBP4.2m net loss recognised on translation of foreign operations and
associated hedging contracts (H1 2008: gain GBP0.6m; FY 2008: gain GBP10.3m) has
arisen primarily due to the weakening of the US Dollar during the first half of
the year, which has served to partially reverse the gains recognised during
2008. The losses arising on cash flow hedges give rise to a deferred tax asset,
which has not been recognised as it is not considered to be recoverable.
8 impairments
Goodwill is tested for impairment annually (as at 31 December) and, when
circumstances indicate, the carrying value may be impaired. The Group considers
the relationship between its market capitalisation and its book value, among
other factors, when reviewing for indicators for impairment. As at 30 June 2009,
the market capitalisation of the Group was below the book value of its equity,
indicating a potential impairment of goodwill. In addition the Group continues
to face very difficult market conditions due to major declines in residential
housing markets worldwide, as detailed in the half yearly review of operations.
A material uncertainty has been noted with respect to the going concern basis
for accounting, but the Directors are of the opinion that the going concern
basis for accounting remains appropriate in preparing the Half Yearly Report.
The forecasts reviewed for impairment purposes assume that the proposed revised
capital structure is satisfactorily implemented.
The Group's impairment test for goodwill, brand names and patents is based on
value in use calculations of the Carlisle Brass Group cash-generating unit.
These calculations use operating cash flow projections based upon latest
forecasts for the remainder of 2009 and strategic plan forecasts for the
subsequent four years to December 2013.
The 2009 forecast has been prepared by local management and reviewed by the
Board and is based upon actual results for the six months ended June 2009 plus
forecasts for the second half of the year. The forecasts are based upon actual
activity run rates achieved in the first half of 2009, together with the full
year effect of price increases and cost reductions already implemented.
The strategic plan forecasts have been prepared by group management in
consultation with the senior management of Carlisle Brass Group. The key
assumptions for these forecasts are those regarding market activity, which is
forecast to make a gradual recovery over the four year period, returning to 75%
of 2007 activity levels by 2013 (2008: 100%), with revenue increasing by 7% per
annum on average (2008: 9% per annum), gross margin and depreciation, which are
forecast to be maintained at similar rates to 2009, and capital spend, which as
a proportion of depreciation is forecast to increase over the four year period
to 2013 to coincide with the increased market activity. Working capital changes
have been calculated based upon historic ratios of working capital movements to
sales activity.
8 impairments (continued)
After the strategic plan forecast period, no further growth in revenue and
profit has been assumed based on a prudent view of long term growth rates. All
cash flows are discounted back to present value using a discount rate of 15%
(2008: 15%), which is a reasonable assessment of the weighted average cost of
capital of the Group.
The key assumptions are sensitive to factors such as market trends but
management believes that no reasonable possible change in any of the above key
assumptions would cause the carrying value of the Carlisle Brass Group to exceed
its recoverable amount.
Based on the above criteria, no impairment issues were identified in the period.
9 FINANCIAL ASSETS
As at 31 December 2008 financial assets comprised foreign currency hedging
contracts with a fair value of GBP9.1m (HY 2008: GBP0.8m). The fair value of
foreign currency hedging contracts as at 30 June 2009 was GBPnil, primarily as a
result of the timing of the execution of these contracts in relation to the
period end. The fair value of such hedging contracts and the movement thereon is
offset by equal and opposite contracts, which are included within financial
liabilities.
10 Defined benefit pensionS deficit
The defined benefit pensions deficit has increased by GBP1.0m since 31 December
2008, with a GBP2.1m increase in the deficit of the UK scheme, partially offset
by a GBP1.1m reduction in the deficit of the US schemes. The latter reduction is
due to a weaker US Dollar exchange rate and higher bond yields. The increase in
deficit in the UK scheme is due to a combination of the impact of a reduction in
asset values, higher inflation and revisions to mortality assumptions, which
have more than offset the favourable effect of a small increase in bond yields.
The key changes to the UK scheme assumptions from those used previously are the
rate of price inflation at 3.50% (H1 2008: 4.10%; FY 2008: 3.00%), the rate of
pension increases at 3.50% (H1 2008: 4.10%; FY 2008: 3.0%) and the discount rate
at 6.30% (H1 2008: 6.70%; FY 2008: 6.25%). With regard to the US schemes, the
only significant change to assumptions is the discount rate for the unfunded,
non-qualified plan at 4.50% (H1 2008: 4.50%; FY 2008: 2.69%).
11 Financial liabilities
Included within financial liabilities are bank loans and overdrafts of GBP53.1m
(H1 2008: GBP54.0m; FY 2008: GBP52.1m), interest rate hedges of GBP0.4m (H1
2008: GBPnil; FY 2008: GBP0.4m) and forward currency hedges of GBP0.7m (H1 2008:
GBP0.7m; FY 2008: GBP7.9m). The movement in fair value of forward currency
hedges is linked to the movement in financial assets, see note 9.
12 CASH GENERATED FROM OPERATIONS
+---+-------------------------------------------+++---+----------+----------+----------+
| | | Half | Half | Full |
| | | year | year | year |
| | | 2009 | 2008 | 2008 |
| | | GBPm | GBPm | GBPm |
+-----------------------------------------------+-----+----------+----------+----------+
| (LOSS)/PROFIT BEFORE TAXATION | | (9.6) | 1.4 | (6.2) |
+-----------------------------------------------+-----+----------+----------+----------+
| Adjustments for: | | | | |
+-----------------------------------------------+-----+----------+----------+----------+
| | Net finance cost | | 2.8 | 2.0 | 4.2 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Share of post tax loss of associates | | 0.1 | 0.1 | 0.6 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Operating exceptional items | | 1.5 | - | 2.7 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Depreciation of property, plant and | | 0.9 | 0.9 | 1.9 |
| | equipment | | | | |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Amortisation of intangibles | | 0.6 | 0.7 | 1.2 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Profit on disposal of property, plant and | | (0.1) | - | - |
| | equipment | | | | |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Employee share options | | 0.2 | 0.2 | 0.5 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Pension payment in excess of service | | (0.4) | (1.6) | (3.2) |
| | costs | | | | |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Provisions charged (excluding exceptional | | - | - | 0.2 |
| | provisions) | | | | |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Net outflow in respect of provisions | | (0.3) | (0.2) | (0.7) |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Net outflow in respect of operating | | (0.7) | - | (0.7) |
| | exceptional provisions | | | | |
+---+---------------------------------------------+---+----------+----------+----------+
| Working capital movements: | | | | |
+-----------------------------------------------+-----+----------+----------+----------+
| | Decrease/(increase) in inventories | | 8.6 | (1.7) | 6.2 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | (Increase)/decrease in receivables | | (2.3) | (2.4) | 7.9 |
+---+-------------------------------------------+-----+----------+----------+----------+
| | Increase/(decrease) in payables | | - | 0.1 | (9.1) |
+---+-------------------------------------------+-----+----------+----------+----------+
| CASH GENERATED/(absorbed) by OPERATIONS | | 1.3 | (0.5) | 5.5 |
+---+-------------------------------------------+++---+----------+----------+----------+
13 MOVEMENT IN NET DEBT
The increase in net debt of GBP1.3m represents an increase in the amounts drawn
down on the Group's short term bank facilities, full details of which can be
found in note 28 of the 2008 Annual Report and Accounts.
14 Acquisitions
Avenco Group
On 27 August 2007 the Group acquired 100% of the issued share capital of Avenco
Limited with its two principal operating companies, Locks & Hardware Limited and
Balmar Limited, which are leading suppliers of architectural hardware in the
Republic of Ireland ("ROI") and are exclusive suppliers of Heywood Williams'
Carlisle Brass Group products in the ROI.
During the year ended 31 December 2008, the final GBP0.3m of consideration was
paid to the vendor of Avenco (H1 2008: GBP0.3m) and the remaining GBP0.1m
accrued in respect of acquisition costs was also expended (H1 2008: GBPnil).
No further amounts were expended on costs related to the Avenco acquisition
during 2009.
14 Acquisitions (continued)
Carlisle Brass Group
On 3 October 2006 the Group acquired 100% of the issued share capital of
Carlisle Brass, a UK based designer and specialist distributor of architectural
hardware, and APC China, a manufacturing business based in Hangzhou, China.
During the six month period ended 30 June 2008, deferred consideration of
GBP8.0m became payable to the vendor of Carlisle Brass. This was originally
recorded at fair value of GBP7.2m as at the acquisition date using a discount
rate of 7%.
No further amounts were expended on costs related to the Carlisle Brass
acquisition in the current or prior year.
15 Related Party Transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation. There are no material changes in
the related party transactions described in the last Annual Report.
16 HALF YEARLY Report
The Half Yearly Report will be posted to shareholders during September 2009 and
copies will also be available at the Company's registered office at Brindley
House, Premier Way, Lowfields Business Park, Elland, West Yorkshire HX5 9HF or
on the Company's website www.heywoodwilliams.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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