CEPS PLC

Earnings Release • Apr 25, 2013

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RNS Number : 1724D

CEPS PLC

25 April 2013

25 April 2013

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 2012.

CHAIRMAN'S STATEMENT (extract)

Review of the year

After the positive start to the year, the second half's trading has proved every bit as challenging as I feared. The economy in the UK has once again hit 'slow gear' and across our consumer markets in Europe the position is, if anything, worse. The weakening of the Pound against both the Euro and the Dollar in the latter part of the year has exerted downward margin pressure once again on many of our imported products.

Against this backdrop CEPS as a whole saw revenues fall by 3.6% to £15.1m (2011: £15.6m) with the bulk of the decrease arising in the second half. Courtesy of an outstanding performance at Friedman's, operating profits for the year, pre impairment charge, are up 10.4% at £233,000 (2011: £211,000). Group costs show a marginal increase to £313,000 (2011: £303,000).  Overall this has resulted in a small increase in profit before impairment charge and tax to £117,000 (2011: £90,000), though the success of Friedman's has attracted a substantial tax charge, leaving a small post-tax profit of £19,000, excluding impairment charge, (2011: £90,000) for the year as a whole.  The loss per share on a basic and diluted basis, after accounting for non-controlling interests and before impairment charge, is 0.53p compared to earnings per share of 0.20p in 2011.

Financial Review

As a result of the annual review of the carrying value of goodwill we have made an impairment provision against the goodwill attributable to Sunline of £2.5m, the details of which are set out below.  The impairment is not a cash item, is exceptional in nature and has been included within administrative expenses.  It has the effect, when combined with the trading performance explained above, of producing an operating loss of £2.3m, a post-tax loss of £2.5m and a loss per share of 20.18p.  As discussed below, rigorous plans have been implemented to improve the performance at Sunline.

The historical trend for debt reduction has continued with net debt falling from £2.2m at the end of 2011 to £1.8m.  Gearing, when calculated excluding the impact of the impairment adjustment, is 29% (2011: 37%), but 48% when the adjustment is taken into account.

In addition, due to the strong performance at Friedman's and the resulting cash generation, £132,000 of 9% Guaranteed Loan Stock was repaid to the Company in 2012, leaving a balance to pay of £276,000. 

During the year the Group generated cash from operating activities of £443,000 (2011: £939,000).  After net capital expenditure of £27,000 (2011: £111,000), the investment in CEM Press Holdings that was made in April and financed by the placing of 2.5m new ordinary shares, the repayment of the capital element of finance leases of £243,000 (2011: £219,000) and interest charges of £137,000 (2011: £146,000), cash and cash equivalents increased marginally by £8,000 (2011: decrease of £75,000). 

Operational Review

1.   Davies Odell

Davies Odell continues to pursue the clear plan formulated some two years ago. Sales growth with the Forcefield brand continues apace (up 31.7% on 2011) with the addition of new dealers in Europe and the USA, numerous well-engineered product launches and successful entry into the snow/ski market via well-known UK retailers. Sales of new motorcycles and related apparel are down across Europe, but our sales continue to grow strongly into 2013.

As ever some sectors of our shoe component sales are down and some up, but overall sales are up about 4.9% on the year, with the leather heel unit assembly and Phillips brand sales showing substantial increases. Margins here have been under pressure of late due to currency movements. A new sales executive has been recruited to develop further the potential in these niche markets, particularly with the buoyant UK men's shoe manufacturers.

Our matting business has struggled to retain some of its better margin sales to the cow and horse mat markets, whilst the low-margin business in both has been terminated. Only the protection matting business has remained buoyant. Overall, sales of these products are down substantially.

2. Friedman's

Friedman's has had an outstanding year. Its two digital printers and associated bespoke design capability has enabled the company to increase sales by 11.0% to £3.7m (2011: £3.3m) and to transform the margins it can generate. Indeed sales growth accelerated to an 11.7% increase on the previous year in the second half. Overall EBITDA rose by 43.5% and the sales increase has carried over into 2013.

3. Sunline

In contrast to Friedman's, Sunline continues to suffer from the increasing fragmentation and competitiveness of its core polywrapping and lettershop activities. Sales fell for a second year to £5.7m (2011: £6.4m) although the rate of decline was considerably less in the second half. There is overcapacity now in these markets and margins across them are under severe pressure.  Sunline's are no exception with EBITDA more than halved to £162,000 (2011: £403,000).

The direct mail market has evolved such that greater emphasis is now being placed on electronic methods of communication rather than traditional paper based mailings.  Sales and margins have been falling for two years and profitability has declined considerably.  This has resulted in the need for an impairment charge of £2.5m. 

4. CEM Press

This is the first year that I have reported upon CEPS' minority involvement in C.E.M. Press, in which CEPS acquired a 21.4% stake in April 2012. Overall sales were in line with budget for 2012 at £3.0m, but increasing margin pressures in the second half substantially dented the budgeted EBITDA. One source of this was the introduction of increased production capacity by a competitor and associated price cutting.  Steps have been taken in 2013 to restore margins by improving production efficiency.  In the financial statements we have recognised our share of post-acquisition, post-tax profits of £18,000.  

Dividend

Debt reduction remains a priority for the Group and a dividend is not proposed at this stage.

People

The teams in all our businesses have continued to confront the substantial challenges current trading presents.  The Board acknowledges their diligence and hard work in these difficult circumstances and should like to thank them for their continued application in 2012 and through into 2013.  Only our talented teams will find a way forward with innovative new products and processes.

Prospects

The priority for the Board is to ensure Sunline's fortunes are turned around. At the heart of this is the recognition that margins need to improve and that a combination of wage reductions and productivity increases are expected to be the way the core polywrap business will recover and flourish. Action on both these fronts is well underway.  In addition, the business recognises that it must find new, more profitable streams of business that utilise the company's accumulated skills and knowledge.

The investment in Davies Odell's Forcefield brand is beginning to bear fruit, but we continue to push for improved performance in this company.

Overall I remain very cautious about our trading prospects: we are only making substantial progress where our products are highly innovative and market-changing.

Richard Organ

Chairman

24 April 2013

Enquiries:

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 2012

	2012	2011
	£'000	£'000
Revenue (note 3)	15,068	15,628
Cost of sales	(13,574)	(14,335)
Gross profit	1,494	1,293
Net operating expenses	(3,761)	(1,082)
Operating (loss)/profit	(2,267)	211
Analysis of operating (loss)/profit
- Trading	546	579
- Exceptional costs (note 3)	(2,500)	(65)
- Group costs	(313)	(303)
	(2,267)	211
Finance income	3	25
Finance costs	(137)	(146)
Share of profit of associate	18	-
(Loss)/profit before tax	(2,383)	90
Taxation	(98)	-
(Loss)/profit for the year from continuing operations	(2,481)	90
Other comprehensive income
Actuarial loss on defined benefit pension plans	(83)	(97)
Other comprehensive income for the year, net of tax	(83)	(97)
Total comprehensive loss for the year	(2,564)	(7)
(Loss)/profit after taxation attributable to:
Owners of the parent	(2,054)	17
Non-controlling interest	(427)	73
	(2,481)	90
Total comprehensive (loss)/income attributable to:
Owners of the parent	(2,137)	(80)
Non-controlling interest	(427)	73
	(2,564)	(7)
(Loss)/earnings per share (note 4)
- basic and diluted	(20.18)p	0.20p

CEPS PLC

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2012

	2012	2011
	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	1,048	1,172
Intangible fixed assets	2,232	4,742
Investment in associate	518	-
Deferred tax asset	505	529
	4,303	6,443
Current assets
Inventories	1,944	1,908
Trade and other receivables	2,235	2,342
Cash and cash equivalents (excluding bank overdrafts)	56	157
	4,235	4,407
Total assets	8,538	10,850
Equity
Capital and reserves attributable to owners of the parent
Share capital	541	416
Share premium	3,114	2,756
Retained earnings	68	2,205
	3,723	5,377
Non-controlling interest	91	518
Total equity	3,814	5,895
Liabilities
Non-current liabilities
Borrowings	435	524
Deferred tax liability	80	106
Provisions for liabilities and charges	55	55
	570	685
Current liabilities
Borrowings	1,433	1,839
Trade and other payables	2,604	2,280
Current tax liabilities	101	12
Provisions for liabilities and charges	16	139
	4,154	4,270
Total liabilities	4,724	4,955
Total equity and liabilities	8,538	10,850

CEPS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2012

	2012	2011
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	443	939
Income tax paid	(11)	(38)
Interest paid	(137)	(146)
Net cash generated from operations	295	755
Cash flows from investing activities
Purchase of property, plant and equipment	(35)	(130)
Investment in associate	(500)	-
Disposal of property, plant and equipment	8	19
Net cash used in investing activities	(527)	(111)
Cash flows from financing activities
Proceeds from issue of shares net of related costs	483	-
Repayment of borrowings	-	(500)
Repayment of capital element of finance leases	(243)	(219)
Net cash  generated from/(used in) financing activities	240	(719)
Net increase/(decrease) in cash and cash equivalents	8	(75)
Cash and cash equivalents at the beginning of the year	(317)	(242)
Cash and cash equivalents at the end of the year	(309)	(317)
Cash generated from operations
(Loss)/profit before income tax	(2,383)	90
Adjustments for:
Depreciation and amortisation	231	260
Impairment charge	2,500	-
Profit of associate	(18)	-
Loss on disposal of property, plant and equipment	7	43
Net finance cost	134	121
Retirement benefit obligations	(80)	(72)
Changes in working capital:
(Increase)/decrease in inventories	(36)	85
Decrease in trade and other receivables	107	362
Increase in trade and other payables	104	146
Decrease in provisions	(123)	(96)
Cash generated from operations	443	939

CEPS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2012

	Called up share capital	Share premium	Retained earnings	Attributable to the owners of the parent	Non-controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2011	416	2,756	2,285	5,457	445	5,902
Actuarial loss	-	-	(97)	(97)	-	(97)
Profit for the year	-	-	17	17	73	90
Total comprehensive (loss)/ income for the year	-	-	(80)	(80)	73	(7)
At 31 December 2011	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	-	500	-	500
Cost of shares issues	-	(17)	-	(17)	-	(17)
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

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 2012 and comprises the Company and its subsidiaries.  The consolidated financial statements were authorised for issuance on 24 April 2013. These financial results do not comprise statutory accounts for the year ended 31 December 2012 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 2011 or 2012 within the meaning of Section 434 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the company's Annual General Meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2011 and 31 December 2012 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 (loss)/profit 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 £15,068,000 (2011: £15,628,000) revenue £12,730,000 (2011: £12,940,000) is derived from UK customers with the remaining £2,338,000 (2011: £2,688,000) 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 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)     Results by segment (continued)

Year ended 31 December 2011

	Davies Odell	Friedman's	Sunline	Total
	2011	2011	2011	2011
	£'000	£'000	£'000	£'000
Revenue	5,946	3,305	6,377	15,628
Segmental result (EBITDA)	121	315	403	839
Exceptional costs	(65)	-	-	(65)
Segmental result (EBITDA) after exceptional costs	56	315	403	774
Depreciation and amortisation charge				(260)
Group costs				(303)
Net finance costs				(121)
Profit before taxation				90
Taxation				-
Profit for the year				90

ii)     Assets and liabilities by segment

As at 31 December

	Segment assets		Segment liabilities		Segment net assets
	2012	2011	2012	2011	2012	2011
	£'000	£'000	£'000	£'000	£'000	£'000
CEPS Group	646	146	(77)	(74)	569	72
Davies Odell	2,417	2,537	(1,166)	(1,247)	1,251	1,290
Friedman's	2,902	3,077	(1,223)	(1,514)	1,679	1,563
Sunline	2,573	5,090	(2,258)	(2,120)	315	2,970
Total - Group	8,538	10,850	(4,724)	(4,955)	3,814	5,895

4.    (Loss)/earnings per share

Basic (loss)/earnings per share is calculated on the loss after taxation for the year attributable to equity holders of the Company of £2,054,000 (2011: profit £17,000) and on 10,179,064 (2011: 8,314,310) ordinary shares, being the weighted number in issue during the year.

Diluted (loss)/earnings per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of share warrants and options. No adjustment is required in either year because the fair value of options was below the exercise price.  The share options lapsed unexercised on 21 May 2011. 

5.    Distribution of the Report & Accounts & Notice of AGM

A copy of the 2012 Report & Accounts, together with a notice of the Company's annual general meeting to be held at 11:30 a.m. on 10 June 2013 at Engineers' House, The Promenade, Clifton Down, Bristol BS8 3NB, will be sent to all shareholders on 8 May 2013. 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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