CEPS PLC

Annual Report • May 15, 2014

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RNS Number : 1464H

CEPS PLC

15 May 2014

CEPS PLC

("CEPS" OR THE "COMPANY")

FINAL RESULTS

The Board of CEPS is pleased to announce its final results for the year ended 31 December 2013.

CHAIRMAN'S STATEMENT (extract)

Review of the period

Good progress has been made in 2013.

Trading conditions in the UK and some export markets at last began to show signs of improvement and the depreciation of the Pound, so damaging to our input costs, was reversed somewhat in the latter part of the year. The recovery and revitalisation of Sunline has proceeded well, creating an environment where we are confident in investing for the future.

Group revenue rose 4% to £15.6m (2012: £15.1m) and operating profit advanced by 49% to £348,000 (2012: £233,000 before exceptionals) with markedly different results across the companies.

As noted at the half year, Davies Odell's lack of profit has continued to disappoint, as sales growth has stalled and been outpaced by costs. Sunline's strong recovery has continued into 2014, and Friedman's has had an outstanding year with strong sales and margin growth.  Group costs were slightly higher at £331,000, compared to the previous year's total of £313,000, due to the one-off professional costs associated with the share consolidation that was approved by shareholders in June 2013.

Profit before tax has increased to £261,000 from £117,000, before exceptional costs in 2012, and post-tax profits have increased to £181,000 from £19,000, excluding the exceptional impairment charge in 2012.  The loss per share on a basic and diluted basis, after accounting for non-controlling interests, is 0.15p which compares to last year's loss per share of 40.36p, adjusted for the effects of the share consolidation.

On 10 June 2013 shareholder approval was given for the reorganisation of the Company's share capital.  As a result, the number of shareholders was reduced from 1,051 to a more manageable 185 and the nominal value of the shares was increased from 5p to 10p.  The number of shares in issue has halved from 10,814,310 to 5,407,155.  As detailed in the circular dated 8 May 2013, a small amount was donated to charities selected by the directors.

Financial Review

In light of the impairment provision against goodwill attributable to Sunline of £2.5m that was made in last year's accounts, it was very encouraging to see such an improvement in the company's performance during 2013.  Indeed, the annual impairment test that was undertaken in 2013 showed that Sunline had recovered a significant amount of the value that was written-off in 2012.  However, accounting standards preclude the reinstatement of this amount.   

Capital expenditure on plant and machinery amounted to £91,000 in the year and included a third digital printer at Friedman's.  More capital investment is planned across all companies in 2014 to meet growing demand for the Group's products and to improve operational efficiencies.

The level of Group debt fell for the third year in a row, in line with management's expectations.  At the end of 2013 net debt was £1.7m compared to £1.8m at the previous year end and gearing was 45% (2012: 48%). 

A further £186,000 of 9% Guaranteed Loan Stock was repaid to the Company by Friedman's in the year, leaving £89,000 to be repaid in 2014.  This was in addition to the £55,000 dividend paid by Friedman's to the Company in April 2013.  

During the year the Group generated cash from operating activities of £532,000 (2012: £443,000).  After net capital and intangible expenditure of £13,000 (2012: £27,000), the repayment of the capital element of finance leases of £163,000 (2102: £243,000), the dividend paid to the non-controlling interest of £45,000 (2012: £nil), income tax paid of £146,000 (2012: £11,000) and interest charges of £128,000 (2002: £137,000), cash and cash equivalents increased by £37,000 (2012: £8,000). 

Operational Review

Davies Odell

The results at Davies Odell are disappointing. At the half-year the business was profitable, but in the second half, as sales faded badly in the final quarter, the business became loss-making. Sales declined by 4.6% in the year from £5.7m in 2012 to £5.5m, whilst the cost base had been built in anticipation of increased activity. For the year as a whole, growth in Forcefield slowed to 7.2%, down from 31.8% in the previous year, shoe component sales were flat and matting sales continued to fall. Gross profit margins before direct overheads fell from 34.4% to 33.9% as a result of our inability to pass on adverse exchange rate movements. EBITDA was negative £69,000, a big drop from the £163,000 positive in 2012.

In January 2014 action was taken to reduce the cost base, improve the forecasting of forward sales and to inject more urgency into new product development and sales effort.  A new laser cutter has been delivered, enabling expansion of profitable leather and ethylene-vinyl acetate cutting activities. The business will be monitored very closely for the expected improvements in 2014.

Friedman's

Friedman's has had another outstanding year. Sales continued to grow at £3.9m

(2012: £3.7m), up 5.1% but, more impressively, gross profit margin before direct overheads grew from 34.7% to 36.3%. At the heart of this success has been the capability to customise fabric design using our digital design and printing equipment, resulting in both extra sales and better margins. Three digital printers are now installed and fully operational providing welcome extra capacity for this business.

EBITDA improved another 31.6% on the outstanding result for 2012, from £452,000 to £595,000, with overheads well contained. 

Sunline

Sunline has managed to sustain the improvement in operating performance outlined at the half year. The changes to operating practices settled down in the busy second half and, just as importantly, the sales growth was forthcoming enabling efficiency improvements to be achieved. More emphasis has been placed on selecting new customers who can gain the most from our range of services and identifying further services to sell to existing clients, thus maximising the profit earned from each customer. Overall, sales rose 11.1% and gross profit margin before direct overheads increased from 35.8% to 39.3%. EBITDA rose very substantially to £371,000 (2012: £162,000 before exceptional impairment charge).

CEM Press

CEM Press's performance remained flat when compared to the previous year with sales of £3.1m (2012: £3.0m) and gross profit margin before direct overheads of 39.8% (2012: 39.9%).  EBITDA was £285,000 (2012: £305,000).  These financial statements include our share of £36,000 (2012: £18,000) of its full year's post-tax profit. 

Steps have been taken in 2014 to strengthen the management team and new factory space has been acquired, which will enable production efficiencies to be made when it becomes operational later in the year.

Dividend

Investment in our underlying businesses is a priority for the Group and a dividend is not proposed at this stage.

People

All our business teams have worked hard in 2013 and we thank them for their efforts.

What is clear from the Sunline experience in the last two years is that confronting difficulties and market change head-on with new ways of working and new products is the key to revival. Sunline continues to show the way and we are confident that Davies Odell will now follow its example.

Prospects

Progress continues to be made at Sunline: the improved efficiency will be further embedded by substantial investment in new polywrap equipment in the first half of 2014. This should be fully operational for the busy second half of the year. In addition, work on new lines of business continues apace and I expect to be able to report positively by the half-year. This is all in marked contrast to Sunline's position two years ago and a credit to its resolute management team.

I expect Friedman's to continue to deliver a strong profit stream in 2014.

As noted earlier, steps have been taken at Davies Odell to both reduce costs and improve the flow of new product to enable sales to grow. With the steady improvement in the economic outlook, opportunities certainly exist for Forcefield to flourish and for our shoe component business to supply innovative and better margin products. The initial signs in 2014 are encouraging, but will need to be sustained over a long period.

There is no doubt that the trading environment is improving both in the UK and our key markets. The outlook for the Group should improve upon 2013 provided current momentum at Davies Odell can be sustained.

Richard Organ

Chairman

14 May 2014

Peter Cook, Group Managing Director, CEPS PLC

Tel: 01225 483030

Tony Rawlinson / Avi Robinson, Cairn Financial Advisers LLP

Tel:  020 7148 7900

CEPS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 DECEMBER 2013

	2013	2012
	£'000	£'000
Revenue (note 3)	15,624	15,068
Cost of sales	(14,019)	(13,574)
Gross profit	1,605	1,494
Net operating expenses	(1,257)	(3,761)
Operating profit/(loss)	348	(2,267)
Analysis of operating profit/(loss)
- Trading	679	546
- Exceptional costs (note 3)	-	(2,500)
- Group costs	(331)	(313)
	348	(2,267)
Finance income	5	3
Finance costs	(128)	(137)
Share of profit of associate	36	18
Profit/(loss) before tax	261	(2,383)
Taxation	(80)	(98)
Profit/(loss) for the year from continuing operations	181	(2,481)
Other comprehensive loss: Items that will not be reclassified to profit or loss
Actuarial loss on defined benefit pension plans	(85)	(83)
Items that may be subsequently reclassified to profit or loss	-	-
Other comprehensive income for the year, net of tax	(85)	(83)
Total comprehensive income/(loss) for the year	96	(2,564)
Profit/(loss) attributable to:
Owners of the parent	(8)	(2,054)
Non-controlling interest	189	(427)
	181	(2,481)
Total comprehensive income/(loss) attributable to:
Owners of the parent	(93)	(2,137)
Non-controlling interest	189	(427)
	96	(2,564)
Loss per share (note 4)
- basic and diluted	(0.15)p	(40.36)p*

*The loss per share for the year ended 31 December 2012 has been restated to reflect the share consolidation in the year

CEPS PLC

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2013

	2013	2012
	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	1,004	1,048
Intangible assets	2,241	2,232
Investment in associate	554	518
Deferred tax asset	453	505
	4,252	4,303
Current assets
Inventories	1,709	1,944
Trade and other receivables	2,436	2,235
Cash and cash equivalents (excluding bank overdrafts)	145	56
	4,290	4,235
Total assets	8,542	8,538
Equity
Capital and reserves attributable to owners of the parent
Share capital	541	541
Share premium	3,114	3,114
Retained earnings	(25)	68
	3,630	3,723
Non-controlling interest in equity	235	91
Total equity	3,865	3,814
Liabilities
Non-current liabilities
Borrowings	510	435
Deferred tax liability	30	80
Provisions for liabilities and charges	55	55
	595	570
Current liabilities
Borrowings	1,380	1,433
Trade and other payables	2,655	2,604
Current tax liabilities	33	101
Provisions for liabilities and charges	14	16
	4,082	4,154
Total liabilities	4,677	4,724
Total equity and liabilities	8,542	8,538

CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2013

	2013	2012
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	532	443
Income tax paid	(146)	(11)
Interest paid	(128)	(137)
Net cash generated from operations	258	295
Cash flows from investing activities
Purchase of property, plant and equipment	(23)	(35)
Purchase of intangibles	(15)
Investment in associate	-	(500)
Disposal of property, plant and equipment	25	8
Net cash used in investing activities	(13)	(527)
Cash flows from financing activities
Proceeds from placing net of related costs	-	483
Dividend paid to non-controlling interest	(45)	-
Repayment of capital element of finance leases	(163)	(243)
Net cash (used in)/generated from financing activities	(208)	240
Net increase/(decrease) in cash and cash equivalents	37	8
Cash and cash equivalents at the beginning of the year	(309)	(317)
Cash and cash equivalents at the end of the year	(272)	(309)
Cash generated from operations
Profit/(loss) before income tax	261	(2,383)
Adjustments for:
Depreciation and amortisation	218	231
Impairment of goodwill	-	2,500
Profit of associate	(36)	(18)
Loss on disposal of property, plant and equipment	6	7
Net finance costs	123	134
Retirement benefit obligations	(80)	(80)
Changes in working capital:
Decrease/(increase) in inventories	235	(36)
(Increase)/decrease in trade and other receivables	(201)	107
Increase in trade and other payables	8	104
Decrease in provisions	(2)	(123)
Cash generated from operations	532	443

CEPS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2013

	Share capital	Share premium	Retained earnings	Attributable to  owners of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2012	416	2,756	2,205	5,377	518	5,895
Actuarial loss	-	-	(83)	(83)	-	(83)
Loss for the year	-	-	(2,054)	(2,054)	(427)	(2,481)
Total comprehensive loss for the year	-	-	(2,137)	(2,137)	(427)	(2,564)
Proceeds from shares issued	125 -	375 (17)	- -	500 (17)	- -	500 (17)
Cost of shares issued
Total contribution by owners of the parent recognised in equity	125	358	-	483	-	483
At 31 December 2012	541	3,114	68	3,723	91	3,814
Actuarial loss	- -	- -	(85) (8)	(85) (8)	- 189	(85) 181
(Loss)/profit for the year
Total comprehensive (loss)/income for the year	-	-	(93)	(93)	189	96
Dividend paid to non-controlling interest	-	-	-	-	(45)	(45)
Total distributions recognised directly in equity	-	-	-	-	(45)	(45)
At 31 December 2013	541	3,114	(25)	3,630	235	3,865

Notes to the financial information

1.         General information

The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is 12b George Street, Bath, BA1 2EH and the registered number of the company is 507461.

2.         Basis of preparation

This announcement is an extract from the consolidated financial statements of the Company for the year ended 31 December 2013 and comprises the Company and its subsidiaries.  The consolidated financial statements were authorised for issuance on 14 May 2014. These financial results do not comprise statutory accounts for the year ended 31 December 2013 within the meaning of Section 434 of the Companies Act 2006. The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2013 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2012 and 31 December 2013 were unqualified and do not contain statements  under s498(2) or (3) Companies Act 2006.

This financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Certain statements in this announcement constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, amongst other factors, changing economic, financial, business or other market conditions.  These and other factors could adversely affect the outcome and financial effects of the plans and events described in this announcement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this announcement should be construed as a profit forecast.

3.    Segmental analysis

The chief operating decision maker of the Group is its Board. Each operating segment regularly reports its performance to the Board which, based on those reports, allocates resources to and assesses the performance of those operating segments.

Operating segments and their principal activities are as follows:

-     Davies Odell, the manufacture and distribution of protection equipment, matting and footwear components

-     Friedman's, the conversion and distribution of specialist Lycra

-     Sunline, a supplier of services to the direct mail market

-     Group costs, costs incurred at Head Office level to support the activities of the Group

The United Kingdom is the main country of operation from which the Group derives its revenue and operating profit/(loss) and is the principal location of the assets and liabilities of the Group.  The Group information provided below, therefore, also represents the geographical segmental analysis.  Of the £15,624,000 (2012: £15,068,000) revenue £13,301,000 (2012: £12,730,000) is derived from UK customers with the remaining £2,323,000 (2012: £2,338,000) being derived from a number of overseas countries, none of which is material in isolation.

The Board assesses the performance of each operating segment by a measure of adjusted earnings before interest, tax, Group costs, depreciation and amortisation (EBITDA).  Other information provided to the Board is measured in a manner consistent with that in the financial statements.

i)     Results by segment

Year ended 31 December 2013

	Davies Odell	Friedman's	Sunline	Total
	2013	2013	2013	2013
	£'000	£'000	£'000	£'000
Revenue	5,452	3,855	6,317	15,624
Segmental result (EBITDA)	(69)	595	371	897
Depreciation and amortisation charge				(218)
Group costs				(331)
Net finance costs				(123)
Share of profit of associate				36
Profit before taxation				261
Taxation				(80)
Profit for the year				181

ii)     Results by segment (continued)

Year ended 31 December 2012

	Davies Odell	Friedman's	Sunline	Total
	2012	2012	2012	2012
	£'000	£'000	£'000	£'000
Revenue	5,714	3,668	5,686	15,068
Segmental result (EBITDA) before exceptional costs	163	452	162	777
Exceptional costs - impairment charge	-	-	(2,500)	(2,500)
Segmental result (EBITDA) after exceptional costs	163	452	(2,338)	(1,723)
Depreciation and amortisation charge				(231)
Group costs				(313)
Net finance costs				(134)
Share of profit of associate				18
Loss before taxation				(2,383)
Taxation				(98)
Loss for the year				(2,481)

ii)     Assets and liabilities by segment

As at 31 December

	Segment assets		Segment liabilities		Segment net assets
	2013	2012	2013	2012	2013	2012
	£'000	£'000	£'000	£'000	£'000	£'000
CEPS Group	707	646	(118)	(77)	589	569
Davies Odell	2,139	2,417	(1,188)	(1,166)	951	1,251
Friedman's	2,990	2,902	(1,170)	(1,223)	1,820	1,679
Sunline	2,706	2,573	(2,201)	(2,258)	505	315
Total - Group	8,542	8,538	(4,677)	(4,724)	3,865	3,814

4.    Loss per share

Basic loss per share is calculated on the loss for the year after taxation attributable to owners of the Company of £8,000  (2012: loss £2,054,000) and on 5,407,155 (2012: restated 5,089,532) ordinary shares, being the weighted number in issue during the year.  The number of ordinary shares for the year ended 31 December 2012 has been restated to reflect the share consolidation in the year.

Diluted loss per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of options. No adjustment is required in either year because the fair value of options was below the exercise price. 

5.    Distribution of the Annual Report and Notice of AGM

A copy of the 2013 Annual Report, together with a notice of the Company's Annual General Meeting to be held at 11:30 a.m. on Monday 23 June 2014 at 12B George Street, Bath BA1 2EH, will be sent to all shareholders on Wednesday 21 May 2014. Further copies will be available to the public from the Company Secretary at the Company's registered address at 12b George Street, Bath BA1 2EH and from the Group website, www.cepsplc.com.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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