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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Brammer | LSE:BRAM | London | Ordinary Share | GB0001195089 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 164.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:3884Z
Brammer PLC
07 March 2006
PRESS RELEASE
PRELIMINARY RESULTS
ORGANIC GROWTH MEETS CORPORATE OBJECTIVE
Brammer is a market leading European industrial services group whose ultimate
aim is to supply its customers with a consistent quality of product and service,
across the entire bearings, power transmission and fluid power product range,
anywhere in Europe. Brammer presently operates in over 260 locations in 11
countries.
Brammer today announces its results for the year ended 31 December 2005, under
IFRS.
FINANCIAL SUMMARY
2005 2004
Restated
#m #m Change
Continuing operations
Turnover #287.4m #270.8m +6%
Profit before tax #10.1m #6.25m +62%
Net debt #50.6m #57.0m
Earnings per share pence pence
Basic 15.8p 7.9p +100%
Diluted 15.7p 7.9p
Highlights
* Revenues increased 6% and profit before tax by 62%, improving both
on the continent and in the UK
* Clear and simple strategy helps win market share in all European
operations
* Growth in Sales Per Working Day achieved the corporate objective of
6%, a target exceeded by France (6.7%), Germany (9.5%) and the Benelux
(10.5%)
* Key Account sales grew by 14.5% and now represent 26% of total revenues
* Operating margins improved from 3.3% to 4.4% despite price pressures, with
operating profit increasing by 40% to #12.5 million
* Revenues per head increased by 5% to #154,000, indicating a significant
improvement in productivity
* Important new Key Account wins across the Group
* Cash flow remained positive, net borrowings reduced from #57m to #50.6m.
This is the 4th consecutive year in which operating cash flow has
considerably exceeded operating profit.
David Dunn, chairman, said:
"We have successfully continued to implement our very clear and straightforward
strategy. That success can be seen in our sales growth, improving efficiencies
and capabilities, and in the opportunities now open to us. For 2006, although
we expect our markets to remain tough and competitive, we nonetheless anticipate
further good progress."
Enquiries: Brammer plc 020 7638 9571 (8.00am - 1.00pm)
0161 902 5572 (1.00pm - 4.30pm)
David Dunn, chairman
Ian Fraser, chief executive
Paul Thwaite, finance director
Issued: Citigate Dewe Rogerson Ltd 020 7638 9571
Martin Jackson
Anthony Kennaway
BRAMMER PLC
2005 PRELIMINARY RESULTS
CHAIRMAN'S STATEMENT
Overview
Accounts for the year ended 31 December 2005 including restated comparatives,
have, as is now required, been prepared in accordance with International
Financial Reporting Standards (IFRS). The main differences arising from the
change to IFRS from UK Generally Accepted Accounting Practice were described in
a press release issued on 24 August 2005 and were included in the 2005 Interim
Accounts. The 2005 Annual Report provides further explanation of these changes
in the notes to the financial statements.
The 2004 comparatives include the results of discontinued businesses on one line
in the Profit and Loss Account as required by IFRS. Subsequent comments in this
statement relate only to continuing businesses.
In summary, turnover increased by 6% to #287.4 million and profit before tax
rose from #6.25 million to #10.1million. Consequently basic earnings per share
increased from 7.9 pence to 15.8 pence. Net debt reduced again in the year from
#57 million to #50.6 million.
Overview of results
These were encouraging results and build on the positive momentum established
since the decision in 2004 to focus solely on Brammer's European distribution
businesses. Organic growth in sales per working day met our corporate objective
of 6%. All geographic territories increased sales and we have continued to win
large and important corporate account business across Europe. This is a key
element of our strategy for future growth and sales from these major accounts
increased by some 14.5% in the year, with many excellent prospects in the
pipeline. The chief executive's report will provide further details on this
performance but we were particularly pleased with the progress made in Germany,
France and the Benelux region in markets which were, for all territories, highly
challenging and competitive.
Strategy
We have successfully continued to implement our very clear and straightforward
strategy. I have referred to our sales growth above and customer surveys
reinforce our view that we have the correct approach, although there is still
much to do. The capability element of our strategy has also progressed in 2005.
The development and training of all of our people is a key consideration, and
again we have had a positive response from our staff surveys that we are on the
right track.
Good progress on systems, costs and synergies was also achieved. The "One
Brammer" programme is now established across all of our businesses with a clear
recognition that we are stronger together than as individual entities.
In the interim report, I referred to the opportunity to acquire quality bolt-on
acquisitions to add to our presence in Europe and improve our ability to serve
our pan European customers. This work continues and we have identified a number
of interesting opportunities. In September we welcomed MHBH, a bearings and
power transmission distributor based in the Czech Republic, to the Brammer
family. MHBH fits ideally with our acquisition profile and significantly
extends our cover in this area of Eastern Europe. We welcome them to our Group
and hope to be able to announce further progress on acquisitions in due course.
Board
At the time of our interim announcement, I welcomed Svante Adde to the Board as
a non-executive director. I also referred to the impending retirement of Kevin
Mellor. Kevin joined the Brammer Board in 1996 and has overseen much change in
the Group. His contribution throughout has been invaluable and we are
particularly indebted to him over the past few years as we have restructured.
He leaves Brammer in a position of strength and we thank him for his efforts on
our behalf and wish him well for the future. Chris Conway succeeds Kevin as the
Senior Independent Director and Svante Adde has assumed the Chairmanship of the
Remuneration Committee.
Dividend
The final dividend being recommended by the Board is 3.65p (2004 3.3p).
Combined with the interim of 1.65p, this gives a total of 5.3p (2004 4.8p) an
increase of 10.4%. The final dividend will be payable to shareholders on the
register at the close of business on 9 June 2006.
Prospects
In referring to our prospects for 2006, I am very aware and grateful to all our
people in producing a satisfactory outcome for 2005. Much hard work has gone
into this performance and, as in any service business, our people are of
paramount importance in any success we achieve.
For 2006, we expect our markets to remain tough and competitive. Nonetheless we
anticipate further good progress as we continue to implement our strategy for
profitable growth.
David M Dunn
7 March 2006
CHIEF EXECUTIVE'S REVIEW
Overview
During 2005 we further strengthened Brammer's market leading position in Europe.
Our strategy, outlined in my review last year, has continued to produce
pleasing results and is helping us win market share in all of our European
operations. We made considerable progress in the creation of "One Brammer" - a
business which can offer consistent products and services in each of 265
locations in 11 countries. This scale and coverage differentiates us from the
competition and drives our successful European Key Account business. Our
ultimate aim is to supply our customers a consistent quality of product and
service, across the entire bearings, power transmission and fluid power product
range, anywhere in Europe.
Operational Review
Brammer is the leading European supplier of technical components and related
services to the maintenance, repair and operations ("MRO") markets. In 2005
revenues from continuing operations increased by 6.1% to #287.4 million, whilst
operating profit increased by 40% to #12.5 million, despite challenges in the UK
and Spain. Earnings per share from continuing operations increased to 15.8
pence per share (7.9 pence per share in 2004). Turnover and profits improved
both on the continent and in the UK. Cash generated from operating activities
was #15.5 million. Net current assets(excluding acquisitions) reduced by #0.6
million compared to December 2004 as we continued our planned reduction in
working capital, mainly achieved through an improvement in inventory turns. In
each of the past 4 years we have produced considerably more operating cash flow
than operating profit.
Operating margin improved from 3.3% to 4.4% despite price pressure in the
marketplace. At year-end total headcount in Brammer (on a full-time equivalent
basis and adjusted for acquisitions) was 1,866 compared to 1,845 at the end of
last year. Revenues per head, for continuing operations increased by 5.0% to
#154,000 indicating significant improvement in productivity.
UK sales of #103.1 million represented an increase on a sales per working day
basis ("SPWD") of 0.9%, and produced an increase of #1.6 million in operating
profit despite market conditions worsening in the second half. Capital employed
continued to be well managed, and reduced by #2.5 million (17.4%), due to
improvements in inventory efficiency and further service stock provided by
suppliers. We increased sales through Insites and part-time insites (those
locations where we have several regular clinics with the customer's staff each
week) by 5.3%. Customer locations where we have contracted to provide on site
support, or where we provide a consigned stock solution to the site, now
represent 26% of our revenues in the UK. Several new contracts were won with
customers such as Marshalls, Alcoa, Abbott Laboratories, Kelda Water, Innovene,
Marley Eternit and Cemex. In addition, further investment in our regional and
national sales teams has resulted in an extensive pipeline of opportunities,
which is now significantly ahead of the same time last year. Actions taken to
address areas for improvement identified by our staff survey in 2004 have
delivered significant increases in morale and motivation of our staff, and we
saw a good improvement in the results of the employee survey carried out towards
the end of 2005.
German sales of #76.1 million represented an increase in SPWD of 9.5%, and,
together with a tight control of costs, resulted in an increase of #1.3 million
in operating profit. By comparison, VTH, the technical distributors' trade
association reported market underlying growth of 3.4%. We increased investment
in our Key Accounts team and made excellent progress, with revenues in this
segment up 37.9%, now representing 17.1% of our business in Germany. Our
pneumatics contract with Volkswagen across six locations continued to exceed our
expectations and we enjoyed good development with our contracts with GKN and
Smurfit. We saw good growth in pneumatics, a new product line in 2005, and the
important but underrepresented mechanical power transmission product group grew
by 23%. Headcount increased by 7 to 398 and productivity as measured by sales
per head increased by 8.5% compared with 2004.
French sales of #53.5 million represented an increase in SPWD of 6.7%, resulting
in an increase of #0.5 million in operating profit. The continued growth in Key
Accounts and Insites, and new product introduction, particularly pneumatics,
combined with tight control of costs, contributed to this improved result. We
increased our investment in Key Accounts and revenues in this segment grew by
11.1% now representing 34.2% of our business in France. New contracts were won
with Veolia, Lyonnaise des Eaux, Balthazard and Nexans. Base business grew by
4.5%, well in excess of the market, which was reported to have grown by just 2%.
Several initiatives were introduced to improve capital employed which resulted
in a reduction in average capital employed of 11%
Spanish sales of #27.4 million represented an increase in SPWD of 3.9%.
Operating profit however fell by #0.5 million. We continued to increase our
sales to the MRO market (up 5.8%) reducing further our exposure to the more
cyclical original equipment manufacturers ("OEM") marketplace (up only 0.6%).
At the end of 2004 we made considerable SDA investment in both marketing and our
branch network in order to improve our growth prospects. This investment,
though successful in starting to accelerate top line growth, did not produce a
positive return in 2005 and as a result operating profit in Spain declined by
17%. We expect our investment to result in increased sales growth and a complete
recovery in profits in 2006. Key Account sales in 2005 grew by 24%, but still
represent only 13.8% of Spanish revenues, up from 11.3% in 2004. We won new
contracts with Italcementi, Damm, Mercadona, Danone, Uralita and Bridgestone,
and further extended our existing business with Bosch, Smurfit, GKN, Crown,
Repsol and Pepsi. New product introductions contributed to growth with
pneumatics up 95%, seals up 17% and linear motion up 23%.
Benelux sales of #22.8 million represented an increase in SPWD of 10.5%, and an
increase of #0.2 million in operating profit with good growth in MRO sales
contributing to yet further improvement in the gross profit margin. Several new
contracts were won including Nedtrain, Kamps Bakery, Gazelle and Cabot. We
introduced pneumatics and extended our supplier base across the majority of our
product range.
In our Developing Businesses (comprising Austria, Hungary, the Czech Republic,
Slovakia and Italy), total sales grew from #4.7 million to #8.8 million, #2.0
million of this growth being represented by the acquisition of MHBH. In
Austria, we completed the integration of our two companies under one management
team, achieving significant operating improvements in the process. The combined
businesses achieved 6.7% growth on last year. In the Czech Republic, our major
task was to plan and implement the integration of MHBH with our existing
business. We have already made significant inroads in the introduction of new
Key Accounts to our enlarged Czech business. In Hungary, considerable progress
has been made through the achievement of authorisation from Key Suppliers such
as Norgren, Gates Schneeberger, Schaeffler and SKF enabling us to approach with
more confidence the Key Accounts which are present in the country. SPWD grew by
18.2% Our start-up in Italy was successful having developed business with
several Key Accounts including Eaton Corporation and GKN.
Strategy
We continued to implement our clear strategy under the headings of
growth,synergies,capabilities and costs.
Growth
Overall SPWD growth was 6%, in line with our declared strategy. We gained market
share in all territories. Key Account sales grew by 14.5%, in line with our
internal objectives. Sales to our contracted European customers grew by 27.8%
and, in total, Key Accounts represented 26% of our revenues. Additional
investment has been made in our Key Account teams in every territory as well as
in the centre to accelerate development of this important segment of our
business and maintain high levels of service to this sophisticated customer
base. Segmented marketing packages were introduced for the Food and Beverage
market segment, and we have begun work on the pulp, paper, and packaging segment
where we are already very strong. We continued to evaluate bolt-on acquisition
opportunities in each of our businesses on the continent and in new territories.
We aim, over the medium term, to match our targeted 6% organic growth with an
equivalent amount of acquisitive growth.
Synergies/costs
Brammer is made up from the acquisition, over a period of years, of a number of
well-run single country-based companies. Each has its own portfolio of
information systems covering the main business needs. However these systems are
different in each country, have been run independently and do not naturally
communicate.
Our corporate strategy is to move from "co-operation" between companies to "
integration" - the concept of "One Brammer". This will involve presenting a
single Brammer face to our customers, especially to our Key Accounts. Our
initial work was on the brand and Brammer is now in the names of all our
businesses across Europe. By 2007, all of our businesses will be united under
one brand. We plan to fully integrate our "back office" activities in such
areas as stock planning and stock purchasing. To underpin this, we need to
identify a set of best practice business processes, which we can adopt
universally, and which will ensure consistently high quality in all aspects of
our work, across Europe.
It is critical that the Information Systems used by the group are initially "
aligned", and subsequently "integrated" into a comprehensive and consistent set
of solutions which support the needs of the integrated business, and to achieve
this we have developed a robust IS strategy, with a roadmap which describes a
way forward for the next 2 and 5 years.
Over the next 2 years we will continue to develop our Master Data Management
system, with the aim of creating a single product database for Brammer Europe
wide. Over 2005 our Brammer Inline system underwent a major functionality
upgrade.
We are developing a Brammer Stock Planning System, the aim of which is to
implement a best practice methodology across all the Brammer businesses for
demand forecasting and stock profiling. We are also working on a Business
Process Analysis Project which will ensure that, where it makes sense, the
practices applied in each company are optimised and follow a consistent approach
allowing us to improve our performances and customer satisfaction.
Finally, we are reducing the number of ERP systems across the Group. We have
already seen the implementation of SAP in Austria to replace their local IT
system and we plan further system consolidations in the future
Capabilities
With more than 2000 people in over 260 locations in 11 countries our challenge
is to create learning which will be accessible to all. We have done this through
the creation of the Foundation Programme, an e-learning programme developed to
inform all of our staff about Brammer and what products we offer. This has been
made available to all of our staff in six languages and currently over 70% of
our people have completed the programme across the Group, significantly
improving the technical knowledge of our people.
In 2005 we began investment in a major new Distributed Learning Programme to
provide a "commercial complement" to the Foundation Programme. The aim of this
programme - "The Business of Brammer" - is to enhance the commercial skills of
our people - how we make money. It includes modules on selling our products and
services, making our deals profitable, keeping our costs under control and the
fundamentals of business finance. We will use the programme to provide an
illustration of the relationship between Brammer and its customers. As is the
case with the Foundation Programme the Business of Brammer will be translated
into all our languages and will be available to all.
Our Key Accounts Toolkit has now been rolled out across the Group. As a result
we can ensure that for delivery of service and product to key accounts our
people and processes are consistent across all of our operations, a requirement
especially important to our growing number of multi-location pan-European Key
Accounts.
In 2005 we continued to implement action plans to improve the engagement of our
people based on the results of our externally commissioned Employee Opinion
Survey. We have seen continued improvements in all of the targeted areas.
Especially encouraging is the improvement in the Engagement Matrix which saw the
percentage of our people who are disaffected fall from 7% to 5% and the percent
of those who are engaged rising from 79% to 83%. We will continue to aim for
improvements in the survey this year by creating action plans in each country
across the Group.
The future
We have a strong presence within Europe upon which to build and are confident we
can achieve further gains in market share in our fragmented market place. The
trend for customers to seek a single European source of supply for our chosen
product range is increasing, and we shall continue to invest to take advantage
of this trend. The excellent cash flow generated by the business should
continue for the foreseeable future, and provides the funding for bolt-on
acquisitions. As previously stated, our growth targets are to achieve 6% organic
top line growth, and to match this with acquisitive growth from bolt-on
acquisitions over the longer term.
Ian R Fraser
7 March 2006
FINANCIAL REVIEW
Overview
The financial statements, including restated comparatives have been prepared in
accordance with International Financial Reporting Standards (IFRS). The
principal differences arising from the transition to IFRS from UK Generally
Accepted Accounting Practice were set out in a press release dated 24 August
2005 and details are also included in the notes to these financial statements.
As required under IFRS, the results of discontinued businesses are reported on
one line in the Profit and Loss account. As the discontinued activities ceased
in the first half of 2004, all further comments from hereon refer to continuing
businesses unless otherwise stated.
Turnover
Turnover increased by 6.1%, of which continental Europe accounted for a 9.8%
increase and the UK a level performance. At constant exchange rates, turnover
increased by 4.8%. This equates to an increase in turnover per working day of
6.2%, comprising 9.4% in continental Europe and 0.9% in the UK (there being an
average of 1.5 less working days throughout the Group in 2005 than in 2004).
Profit
The profit for the year from continuing operations before tax increased to #10.1
million (2004 #6.2 million). Profit before exceptional items and after interest
was #10.1 million (2004 #7.1 million).
Goodwill
Goodwill in the balance sheet stands at #39.0 million at the end of the year
(2004 #37.4 million). In 2005, goodwill increased by #2.6 million in respect of
acquisitions and decreased by #1.0 million due to exchange movements on goodwill
held in foreign currencies.
Trading during the year
Profit from continuing operations before exceptional items, interest and tax ("
underlying profit") increased by 28.9% to #12.5 million (2004 #9.7 million), of
which #6.6 million was delivered in the first half and #5.9 million in the
second half (see table below), reflecting the number of working days available.
Continuing operations
First half Second half Full year
#'m #'m #'m
2005
Turnover 145.5 141.9 287.4
Underlying profit 6.6 5.9 12.5
2004 #'m #'m #'m
Turnover 136.9 133.9 270.8
Underlying profit 4.8 4.9 9.7
For the first half, turnover increased by #8.6 million resulting in an increase
in underlying profit of #1.8 million and for the second half, turnover increased
by #8.0 million resulting in an increase in underlying profit of #1.0 million.
The second half comparison is affected by the acquisition of MHBH (September
2005). There is no material impact from exchange rates.
Interest
The net interest charge for the year of #2.5 million (2004 #2.6 million)
represents an effective interest rate on average net borrowings of 4.4% (2004
4.2%). Our profit before interest, exceptional items and tax covers interest by
5.1x compared to 3.7x in 2004.
Tax
The tax charge for the year of #2.5 million represents an effective rate of tax
of 25.1% (2004 39.1%). It has been reduced this year by a prior year credit for
tax losses not previously recognised and the IAS 12 allowance for the costs of
share options. Going forward the tax rate is likely to return to a more
normalised level.
Cash flow
Cash flow (total business)
2005 2004
Total Continued Dis-continued
#m #m #m #m
Cash inflow from operating activities 15.5 18.7 12.7 6.0
Net capital expenditure (purchases net of disposals) (2.8) (6.2) (1.8) (4.4)
Operational cash generation 12.7 12.5 10.9 1.6
Acquisitions (2.0) (0.1)
Deferred consideration (2.7) (4.1)
Disposals 4.5 18.6
Exchange 1.3 (2.4)
Tax (2.2) 2.8
Interest, dividends & other (5.2) (4.6)
Reduction in net debt 6.4 22.7
Opening net debt (57.0) (79.7)
Closing net debt (50.6) (57.0)
In 2004, the cash inflow from continuing businesses was #12.7 million with net
capital expenditure of #1.8 million resulting in an operational cash generation
from continuing businesses of #10.9 million. The operational cash generation of
#12.7 million in 2005 is therefore an increase of 16.5% on a comparable basis.
Net debt decreased by #6.4 million from #57.0 million to #50.6 million.
Cash inflow from operating activities of #15.5 million (including a working
capital increase of #0.1 million) was reduced by #2.8 million of net purchases
of tangible fixed assets and reduced by a payout of #2.0 million for MHBH and of
#2.7million for deferred consideration, primarily relating to the German
subsidiary, offset by the repayment of loans from Livingston of #4.5 million.
Average net borrowings in 2005 were #55.3 million compared to #62.7 million in
2004.
Treasury
The Group does not enter into speculative currency transactions.
The companies in the Group account in their local currency, principally either
sterling or euros and mostly trade within their domestic markets in their local
currency. Where companies trade into export markets, this is generally at the
behest of domestic customers who trade globally.
Net operating assets and financing by currency at 31 December 2005 were as
illustrated on page 11.
Net operating
assets Financing Net assets employed
#'m #'m #'m
Sterling (15.5) (1.9) (17.4)
Euro 61.3 (48.7) 12.6
Other 5.9 5.9
51.7 (50.6) 1.1
Included in net operating assets is a pension fund liability under IFRS
primarily relating to the UK scheme of #33.7 million (#23.6 million net of
deferred tax) which in 2004 was #32.4 million (#22.6 million net of deferred
tax). The small adverse movement is explained by a strong performance in the UK
scheme investments being more than offset by an increase in liabilities. The
increase in liabilities results from a reduction in the discount rate caused by
a decrease in corporate bond yields. With effect from 1 March 2006, the UK
scheme was closed to future accrual. The company paid #1.5 million in 2005 by
way of contributions to close the deficit and has currently agreed to pay #1.4
million per annum in each of the years 2006 to 2017 (inclusive). A full funding
valuation of the scheme is being carried out from 1 January 2006.
Overall therefore, at 31 December 2005, #61.3 million of the Group's net
operating assets were held in euros, #15.5 million of net liabilities in
sterling and #5.9 million net assets in other currencies. Net worth is #1.1
million (2004 # (3.1) million).
The directors consider the Group to have adequate resources to continue
operations for the foreseeable future and therefore continue to use the going
concern basis in the preparation of the financial statements.
We will continue to focus on generating cash to enable us to expand operations
in Europe, organically and by acquisition.
Earnings per share
Basic earnings per share were 15.8p (2004 1.8p). Earnings per share from
continuing operations increased from 7.9p in 2004 to 15.8p in 2005.
Paul Thwaite
7 March 2006
Brammer Preliminary results announcement
Group results for the year ended 31 December 2005
2005 2004
Restated
Note #'000 #'000
Continuing operations
Revenue 2 287,390 270,786
Cost of sales (198,588) (189,337)
Gross profit 88,802 81,449
Distribution costs (76,260) (71,639)
Exceptional distribution costs 5 - (850)
Total distribution costs (76,260) (72,489)
Operating profit 2 12,542 8,960
Finance expense (2,683) (2,956)
Finance income 225 339
Share of associate's loss after tax - (96)
10,084
Profit before tax 6,247
(2,535)
Taxation (2,443)
Profit for the year from continuing operations 2 7,549 3,804
Discontinued operations
Loss for the year from discontinued operations 4 - (2,954)
Profit for the year attributable to equity shareholders 7,549 850
Earnings per share - total 3
Basic 15.8p 1.8p
Diluted 15.7p 1.8p
Earnings per share - continuing operations 3
Basic 15.8p 7.9p
Diluted 15.7p 7.9p
Brammer
Group statement of recognised income and expense for the year ended 31 December
2005
2005 2004
Note #'000 #'000
Profit for the year 8 7,549 850
Net exchange differences on translating foreign operations 8 (663) 122
Actuarial losses 8 (1,595) (2,305)
Tax on actuarial losses 8 508 710
Value of employee services 8 623 226
Tax on share options 8 40 -
Net losses not recognised in income (1,087) (1,247)
statement
Total recognised income and expense 6,462 (397)
Brammer Consolidated balance sheet as at 31 December 2005
2005 2004
Restated
Note #'000 #'000
Assets
Non-current assets
Goodwill 39,009 37,394
Intangible assets 2,559 1,367
Property, plant and equipment 9,944 10,557
Deferred tax assets 12,480 10,813
63,992 60,131
Current assets
Inventories 44,341 45,862
Trade and other receivables 51,175 55,520
Cash and cash equivalents 7 9,445 8,320
104,961 109,702
Liabilities
Current liabilities
Financial liabilities - borrowings 7 (10,991) (13,564)
Trade and other payables (61,639) (65,217)
Deferred consideration (375) (2,762)
Current tax liabilities (2,965) (2,696)
(75,970) (84,239)
Net current assets 28,991 25,463
Non-current liabilities
Financial liabilities - borrowings 7 (49,106) (51,797)
Deferred tax liabilities (4,863) (3,643)
Provisions (1,979) (637)
Deferred consideration (2,241) (199)
Retirement benefit obligations 6 (33,726) (32,389)
(91,915) (88,665)
Net assets / (liabilities) 1,068 (3,071)
Shareholders' equity 8
Share capital 9,573 9,573
Share premium 3,552 3,552
Translation reserve (541) 122
Retained earnings (11,516) (16,318)
Total equity 1,068 (3,071)
Brammer Consolidated cash flow statement for the year ended 31 December 2005
2005 2004
Restated
#'000 #'000
Retained profit 7,549 850
Tax charge (including discontinued operations) 2,535 2,833
Depreciation of tangible and intangible assets 2,437 2,806
Share options - value of employee services 623 226
Share of associate's loss - 96
Loss on sale of business - 5,502
Loss on sale of property, plant and equipment 7 1,040
Financing expense 2,458 2,617
Movement in working capital 135 3,628
Pension obligations (258) (888)
Cash generated from operating activities 15,486 18,710
Interest received 208 336
Interest paid (2,945) (2,843)
Tax (paid)/received (2,165) 2,795
Net cash generated from operating activities 10,584 18,998
Cash flows from investing activities
Proceeds from disposal of discontinued businesses (net of cash 4,500 18,650
disposed of)
Acquisition of subsidiaries (net of cash acquired) (1,986) (144)
Deferred consideration paid on prior acquisitions (2,674) (4,061)
Proceeds from sale of property, plant and equipment 225 2,564
Purchase of property, plant and equipment (1,975) (8,442)
Purchase of software (987) (318)
Net cash (used in) /generated from investing activities (2,897) 8,249
Cash flows from financing activities
Repayment of loans (4,104) (24,803)
Finance lease principal payments (73) (533)
Dividends paid to shareholders (2,323) (2,117)
Purchase of own shares - (187)
Net cash used in financing activities (6,500) (27,640)
Net increase / (decrease) in cash and cash equivalents 1,187 (393)
Exchange gains and losses on cash and cash equivalents (257) (438)
Cash and cash equivalents at beginning of period 7,804 8,635
Net cash at end of period 8,734 7,804
Cash and cash equivalents 9,445 8,320
Overdrafts (711) (516)
Net cash at end of period 8,734 7,804
Brammer Accounting policies
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
Basis of preparation
This preliminary announcement is unaudited and does not comprise statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
From 1 January 2005, Brammer PLC is required to prepare its consolidated
financial statements in accordance with International Financial Reporting
Standards (IFRS) endorsed by the European Union. Reconciliations and
descriptions of the effect of the transition from UK GAAP to IFRS on the Group's
equity and its income statement are provided in an attachment to this
announcement.
This preliminary announcement has been prepared in accordance with International
Financial Reporting Standards and IFRIC interpretations and with those parts of
the Companies Act, 1985 applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost convention. A
summary of the more important group accounting policies is set out below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, events or actions, actual results ultimately may differ
from those estimates.
When preparing the Group's IFRS balance sheet at 1 January 2004 the following
optional exemptions from full retrospective application of IFRS accounting
policies have been adopted:
* The Group has taken the option under IAS 19 revised, whereby, the
accumulated actuarial gains and losses in respect of employee defined
benefit plans have been recognised in full through reserves as opposed to
using the corridor approach
* Business combinations prior to 1 January 2004 have not been restated
on an IFRS basis
* IFRS 2 has not been applied to equity instruments granted before
7 November 2002
* Previously accumulated translation differences on net investments
overseas have been set to zero at 1 January 2004
* The group has adopted IAS32 and IAS39 from 1 January 2005
Group accounting
Subsidiaries are those entities which the Group has an interest of more than one
half of the voting rights or otherwise has power to govern the financial and
operating policies. The existence and effect of potential voting rights that are
presently exercisable or presently convertible are considered when assessing
whether the Group controls another entity.
Subsidiaries are consolidated from the date on which control is transferred to
the Group and are no longer consolidated from the date that control ceases. The
purchase method of accounting is used to account for the acquisition of
subsidiaries. Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised losses are also
eliminated unless cost cannot be recovered. Where necessary, the accounting
policies of subsidiaries have been changed in order to ensure consistency with
the policies adopted by the Group.
Investments in associates are accounted for by the equity method of accounting.
Under this method the company's share of the post-acquisition profits or losses
of associates is recognised in the income statement and its share of
post-acquisition movements in reserves is recognised in reserves. The
cumulative post-acquisition movements are adjusted against the cost of the
investment. Associates are entities over which the Group generally has between
20% and 50% of the voting rights, or over which the Group has significant
influence, but which it does not control. Unrealised gains on transactions
between the Group and its associates are eliminated to the extent of the Group's
interest in the associates; unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. The
Group's investment in associates includes goodwill. When the Group's share of
losses in an associate equals or exceeds its interest in the associate, the
Group does not recognise further losses, unless the Group has incurred
obligations or made payments on behalf of the associates.
The exemption under IFRS 1 which allows IFRS 3 to be applied prospectively from
the date of transition, has been taken. Business combinations recognised before
the date of transition have therefore not been restated.
Foreign currency translation
Measurement currency
Items included in the financial statements of each entity in the Group are
measured using the currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity ("the measurement
currency"). The consolidated financial statements are presented in sterling,
which is the measurement currency of the parent.
Transactions and balances
Foreign currency transactions are translated into the measurement currency using
the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement.
Group companies
Income statements and cash flows of foreign entities are translated into the
Group's measurement currency at average exchange rates for the year and their
balance sheets are translated at the exchange rates ruling at the period end.
Exchange differences arising from the translation of the net investment in
foreign entities and of borrowings designated as hedges of such investments are
taken to shareholders' equity where the hedging criteria are met. The exemption
under IFRS 1, allowing these exchange differences to be reset to zero on
adoption of IFRS has been utilised. When a foreign entity is sold, these
exchange differences are recognised in the income statement as part of the gain
or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Property, plant and equipment
All property, plant and equipment are stated at historical cost less
depreciation. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its
intended use. Finance costs are not included.
Depreciation is calculated on the straight-line method to write off the cost of
each asset to their residual values over their estimated useful lives as
follows:
Freehold buildings Individually estimated subject to a maximum of 50 years.
Leasehold properties The term of the lease subject to a maximum of 50 years.
Plant and equipment 10 years
Computers and similar office equipment 3-7 years
Motor cars 4 years
Commercial vehicles 3 years
Land is not depreciated
Where the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying
amount and are included in operating profit.
Repairs and maintenance are charged to the income statement during the financial
period in which they are incurred. The cost of major renovations is included in
the carrying amount of the asset when it is probable that future economic
benefits in excess of the originally assessed standard of performance of the
existing asset will flow to the Group. Major renovations are depreciated over
the remaining useful life of the related asset.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net assets of the acquired subsidiary/associate at
the date of acquisition. Goodwill on acquisition of subsidiaries occurring on
or after 1 January 1998 is included in intangible assets. Goodwill on
acquisitions of associates occurring on or after 1 January 1998 is included in
investments in associates. Goodwill on acquisitions that occurred prior to 1
January 1998 has been charged in full to retained earnings in shareholders'
equity; such goodwill has not been retrospectively capitalised.
Prior to 1 January 2004, (the date of transition to IFRS) goodwill was amortised
over its estimated useful life; such amortisation ceasing on 31 December 2003.
Goodwill is subject to impairment review, both annually and when there are
indicators that the carrying value may not be recoverable. A write down is made
if the carrying amount exceeds the recoverable amount.
Computer software
Cost associated with maintaining computer software programmes are recognised as
an expense as incurred. Costs that are directly associated with identifiable
software systems operated by the Group and will probably generate economic
benefits exceeding costs beyond one year, are recognised as intangible assets.
Direct costs include staff costs of the software development team and an
appropriate portion of relevant overheads.
Expenditure which enhances or extends the performance of identifiable software
systems beyond their original specifications is recognised as a capital
improvement and added to the original cost of the software. Computer software
development costs recognised as assets are amortised using the straight-line
method over their useful lives, not exceeding a period of 7 years.
Impairment of long life assets
Property, plant and equipment and other non-current assets, including goodwill
and intangible assets are reviewed on an annual basis to determine whether
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. If any such indication exists, the recoverable
amount of the asset is estimated as either the higher of the asset's net selling
price or value in use; the resultant impairment (the amount by which the
carrying amount of the asset exceeds its recoverable amount) is recognised as a
charge in the consolidated income statement.
The value in use is calculated as the present value of estimated future cash
flows expected to result from the use of assets and their eventual disposal
proceeds. In order to calculate the present value of estimated future cash flows
the Group uses a discount rate based on the Group's estimated weighted average
cost of capital, together with any risk premium determined appropriate.
Estimated future cash flows used in the impairment calculation represent
management's best view of the likely future market conditions and current
decisions on the use of each asset or asset group.
For the purpose of assessing impairment, assets are grouped at the lowest levels
at which there are separately identifiable cash flows.
Finance leases where the group is the lessee
Leases of property, plant and equipment where the Group is subject to
substantially all the risks and rewards of ownership, are classified as finance
leases. Finance leases are capitalised at the inception of the lease at the
lower of the fair value of the leased property or the present value of the
minimum lease payments. Each lease payment is allocated between the liability
and finance charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance charges, are
included in other payables. The interest element of the finance cost is charged
to the income statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance leases is
depreciated over the shorter of the useful life of the asset or the lease term.
Leases where a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
Incentives received are recorded as deferred income and spread over the term of
the lease on a straight line basis.
Where reference is made in the report and financial statements to finance
leases, this includes hire purchase agreements.
Inventories
Inventories are stated at the lower of cost, determined on a weighted average
cost formula, or net realisable value. Cost of inventory represents material
and a proportion of procurement overheads. Provisions are made for slow moving
and obsolete items. Net realisable value is the estimated selling price in the
ordinary course of business, less selling expenses.
Trade receivables
Trade receivables are carried at original invoice amount less provision made for
impairment of these receivables. A provision for impairment of trade
receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of
receivables. The amount of the provision is the difference between the carrying
amount and the directors' best estimate of the amount recoverable.
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the
purpose of the cash flow statement, cash and cash equivalents comprise cash on
hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank
overdrafts. Bank overdrafts are included within borrowings in current
liabilities on the balance sheet.
Deferred consideration
The amounts recognised for deferred consideration are the directors' best
estimates of the actual amounts which will be payable.
Employee benefits
Defined Contribution schemes
A defined contribution plan is a pension plan under which the group pays fixed
contributions into a separate entity (a fund) and will have no legal or
constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees benefits relating to employee service in
the current and prior periods. Contributions are charged to the profit and loss
account in the year in which they arise.
Defined Benefit schemes
A defined benefit plan is a pension plan that defines an amount of pension
benefit to be provided, usually as a function of one or more factors such as
age, years of service or compensation.
The operating and financing costs of such plans are recognised separately in the
income statement; service costs are spread systematically over the lives of
employees and financing costs are recognised in the periods in which they arise.
Finance costs are included in distribution costs.
The liability in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet date less the fair value
of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The present value
of the defined benefit obligation is determined by the estimated future cash
outflows using interest rates of government securities, which have terms to
maturity approximating the terms of the related liability.
The amendments to IAS 19 issued by the IASB allowing actuarial gains or losses
to be taken directly to reserves, as is required under FRS 17 'Retirement
Benefits', are effective for accounting periods commencing on or after 1 January
2006, with earlier adoption encouraged by the IASB. Brammer has adopted these
amended provisions from 1 January 2004 (the date of transition).
Curtailment gains in respect of discontinued operations are recognised in the
income statement in the year of disposal.
Termination Benefits
Termination benefits are payable whenever an employee's employment is terminated
before the normal retirement date or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminate the employment of
current employees according to a detailed formal plan without possibility of
withdrawal or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after
balance sheet date are discounted to present value.
Profit sharing and bonus plans
Liabilities for profit sharing and bonus plans are expected to be settled within
12 months and are measured at the amounts expected to be paid when they are
settled.
Share-based payments
The fair values of employee share option and share performance plans are
calculated using the Black-Scholes model. In accordance with IFRS 2, '
Share-based Payments' the resulting cost is charged to the income statement over
the vesting period of the options. The value of the charge is adjusted to
reflect expected and actual levels of options vesting for changes in non market
vesting criteria.
Treasury shares
The cost of the purchase of own shares are taken directly to reserves and are
disclosed in the "treasury shares" reserve.
Borrowings
Borrowings are recognised as the proceeds received, net of transaction costs
incurred, which are then amortised over the expected life of the facility.
Deferred income taxes
Deferred income tax is provided in full, using the balance sheet liability
method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. Currently
enacted tax rates are used in the determination of deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.
No deferred tax asset or liability is recognised in respect of temporary
differences associated with investments in subsidiaries, branches, associates
and joint ventures, where the Group is able to control the timing of reversal of
the temporary differences and it is probable that the temporary differences will
not reverse in the foreseeable future.
Provisions
Provisions are recognised when the group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation, and a reliable estimate of
the amount can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain.
Provisions are measured at the best estimate of the amount to be spent and are
discounted where material.
Revenue recognition
Revenue comprises the invoiced value for the sale of goods and services net of
value-added tax, rebates and discounts, and after eliminating sales within the
Group. Revenue from the sale of goods is recognised when significant risks and
rewards of ownership of the goods are transferred to the buyer, which is usually
on dispatch.
Interest income is recognised on a time proportion basis, taking account of the
principal outstanding and the effective rate over the period of maturity, when
it is determined that such income will accrue to the Group. Dividends are
recognised when the right to receive payment is established.
Dividends
The final dividend is recognised in the Group's financial statements in the
period in which it is approved by the Group's shareholders. The interim dividend
is recognised when paid.
Segment reporting
Geographical segments provide products or services within a particular economic
environment that is subject to risks and returns that are different from those
of components operating in other economic environments. Business segments
provide products or services that are subject to risks and returns that are
different from those of other business segments.
Corporate costs are allocated to segments on the basis of external turnover.
Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in
presentation in the current year.
BRAMMER FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market risk
(including foreign exchange price risk), credit risk, liquidity risk, cash flow
and interest rate risk. The Group's overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group's financial performance.
Risk management is carried out by a central treasury department (Group Treasury)
under policies approved by the Board of Directors. Group Treasury identifies,
evaluates and hedges financial risks in close co-operation with the Group's
operating units. The Board provides written principles for overall risk
management, as well as written policies covering specific areas, such as foreign
exchange risk, interest-rate risk, credit risk, use of non-derivative financial
instruments, and investing excess liquidity.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from currency exposures, primarily with respect to the Euro and the UK
pound. Foreign exchange risk arises primarily from recognised assets and
liabilities and net investments in foreign operations. The Group has several
investments in foreign operations, whose net assets are exposed to foreign
currency translation risk. Currency exposure arising from the net assets of the
Group's foreign operations is managed primarily through borrowings denominated
in the relevant foreign currencies.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in
place to ensure that sales of products are made to customers with an appropriate
credit history.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the
availability of funding through an adequate amount of committed credit
facilities. Group treasury aims to maintain flexibility in funding by keeping
committed credit lines available.
Cash flow and interest rate risk
The Group's income and operating cash flows are substantially independent of
changes in market interest rates. The Group's cash flow interest rate risk
arises from long-term borrowings. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk. Borrowings issued at fixed rates expose
the Group to fair value interest rate risk. Due to the benign state of the
interest rate environment the Group does not enter into fixed rate borrowings of
greater than six months nor enter into floating to fixed rate interest rate
swaps. Instead the Group minimises effective interest rates using cash pooling
and tight management of working capital.
Accounting for hedging activities
The Group documents at the inception of the transaction the relationship between
the hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking hedging transactions. The Group also
documents its assessment, both at hedge inception and on an on-going basis, of
whether the hedging instruments that are used are highly effective. Where the
Group hedges net investments in foreign entities through currency borrowings,
gains or losses on the borrowings are recognised in equity. The gains or losses
relating to the ineffective portion are recognised immediately in the income
statement.
Brammer NOTES TO THE ACCOUNTS
1 COMPARATIVE RESULTS
Comparative figures for the year ended 31 December 2004 are taken from the
company's statutory accounts (as adjusted to comply with the new IFRS
regulations) which have been delivered to the Registrar of Companies with an
unqualified audit report. Copies of the 2004 annual report and the 2005 interim
report are available on the company's web site (www.brammer.biz).
2 SEGMENTAL ANALYSIS
Continuing operations
Continuing operations represent the Brammer distribution business which is a
separately identifiable segment. The Group is primarily controlled on a country
by country basis in line with legal structure of the group. Segment assets
include property, plant and equipment, intangible assets,inventories, and trade
and other receivables. Segment liabilities comprise trade and other payables,
and provisions. All inter-segmental trading is at an arms-length basis.
UK France Germany Spain Benelux Other Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Year ended 31 Dec 2005
Revenue
Sales to external customers 102,738 53,217 75,030 26,937 20,671 8,797 287,390
Inter company sales 328 311 1,094 419 2,132 (4,284) -
Total 103,066 53,528 76,124 27,356 22,803 4,513 287,390
Operating profit 1,336 2,474 4,780 2,430 1,233 289 12,542
Finance expense (2,683)
Finance income 225
Profit before tax 10,084
Taxation (2,535)
Profit for the year 7,549
attributable to equity
shareholders
Segment assets 33,409 24,403 20,632 13,633 10,523 5,419 108,019
Goodwill - 2,217 27,845 1,288 3,865 3,794 39,009
33,409 26,620 48,477 14,921 14,388 9,213 147,028
Cash and cash equivalents 9,445
Deferred tax 12,480
Total assets 168,953
Segment liabilities (21,509) (15,648) (8,490) (9,969) (5,190) (2,812) (63,618)
Corporation tax (2,965)
Deferred tax (4,863)
Deferred consideration (2,616)
Financial liabilities (60,097)
Retirement benefit liability (33,726)
Total liabilities (167,885)
Net assets 1,068
Other segment items
Capital expenditure:
- intangible assets - 3 - - - 984 987
- property, plant & 914 148 114 360 142 297 1,975
equipment
Amortisation/depreciation
- intangible assets - (3) (208) - - (164) (375)
- property, plant & (1,129) (291) (149) (190) (193) (110) (2,062)
equipment
Trade receivables impairment
- (203) - - (6) - (209)
2 SEGMENTAL ANALYSIS(Continued)
UK France Germany Spain Benelux Other Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Year ended 31 Dec 2004
Continuing operations
Revenue
Sales to external customers 102,671 49,808 67,976 25,742 19,880 4,709 270,786
Inter company sales 271 301 1,232 358 1,771 (3,933) -
Total 102,942 50,109 69,208 26,100 21,651 776 270,786
Operating (loss)/ profit (247) 1,969 3,445 2,919 1,002 (128) 8,960
Finance expense (2,956)
Finance income 339
Share of associate's loss - - - - - (96) (96)
after tax
Profit before tax 6,247
Taxation (2,443)
Profit for the year 3,804
Discontinued operations
Revenue
Sales to external customers 2,657 10,074 3,901 1,038 1,674 (39) 19,305
Inter company sales 219 320 313 - 36 (888) -
Total 2,876 10,394 4,214 1,038 1,710 (927) 19,305
Operating profit/(loss)
before exceptionals 2,439 216 (687) (229) (199) 98 1,638
Exceptional pension income 1,300
Loss on sale of subsidiary
net tangible assets (5,502)
Loss before tax (2,564)
Taxation (390)
Loss for the year (2,954)
Net profit attributable to
shareholders 850
Segment assets 35,596 24,345 21,317 13,120 11,027 7,901 113,306
Goodwill - 2,282 28,652 1,656 3,696 1,108 37,394
35,596 26,627 49,969 14,776 14,723 9,009 150,700
Cash and cash equivalents 8,320
Deferred tax 10,813
Total assets 169,833
Segment liabilities (22,815) (15,980) (9,996) (8,541) (6,118) (2,404) (65,854)
Corporation tax (2,696)
Deferred tax (3,643)
Deferred consideration (2,961)
Financial liabilities (65,361)
Retirement benefit liability (32,389)
Total liabilities (172,904)
Net liabilities (3,071)
Other segment items
Continuing operations
Capital expenditure:
- intangible assets - - - - - 232 232
- property, plant & 1,247 128 87 160 151 56 1,829
equipment
Amortisation/depreciation
- intangible assets (122) - (125) - - (15) (262)
- property, plant & (1,665) (245) (255) (185) (96) (321) (2,767)
equipment
Trade receivables impairment (264) (63) (162) (33) (84) (28) (634)
Discontinued operations
Capital expenditure 881 930 2,795 950 375 6 5,937
Depreciation - release of
impairment provision 223 - - - - - 223
3 EARNINGS PER SHARE
2005
Earnings per share
Earnings Basic Diluted
#'000
Weighted average number of shares in issue ('000) 47,865 48,083
Total - all continuing operations
Profit for the financial year 7,549 15.8p 15.7p
Earnings 15.8p 15.7p
2004
Earnings per share
Earnings Basic Diluted
#'000
Weighted average number of shares in issue ('000) 47,865 47,931
Total
Profit for the financial year (continuing and discontinued) 850 1.8p 1.8p
Exceptional items 850
Loss on sale of subsidiary net tangible assets (note 4) 5,502
Exceptional pension income (note 4) (1,300)
Tax on exceptional pension income 390
Earnings before exceptional items and loss on discontinued operations 6,292 13.1p 13.1p
Continuing operations
Profit for the financial year 3,804 7.9p 7.9p
Exceptional items 850
Tax on exceptional items (251)
Earnings before exceptional items 4,403 9.2p 9.2p
4 DISCONTINUED OPERATIONS
2005 2004
#'000 Restated
#'000
Revenue - 19,305
Cost of sales - (11,710)
Gross profit - 7,595
Distribution costs - (5,957)
Profit before tax and exceptionals - 1,638
Exceptional pension income - 1,300
Loss on sale of subsidiary net tangible assets - (5,502)
Loss before tax - (2,564)
Taxation - (390)
Loss for the year - (2,954)
5. EXCEPTIONAL DISTRIBUTION COSTS
The prior year exceptional distribution costs of #850,000 resulted from action
to re-size overheads, particularly for central functions, following the sale of
the Livingston businesses
6 PENSIONS
The valuations used for IAS 19 disclosures have been based on the most recent actuarial valuation at 1
January 2003 updated by KPMG to take account of the requirements of IAS 19 in order to assess the
liabilities of each of the schemes at 31 December 2005. Assets are stated at their market value at 31
December 2005.
The financial assumptions used to calculate the liabilities under IAS 19
are
UK
2005 2004
Inflation rate 2.90% 2.80%
Rate of increase in salaries 4.15% 4.30%
Rate of increase of pensions in payment 2.90% 2.80%
Rate of increase for deferred pensioners 2.90% 2.80%
Discount rate 4.85% 5.30%
Netherlands
2005 2004
Inflation rate 2.00% 2.00%
Rate of increase in salaries 3.00% 3.00%
Rate of increase of pensions in payment 2.00% 2.00%
Rate of increase for deferred pensioners 2.00% 2.00%
Discount rate 4.00% 4.75%
The amounts recognised in the balance sheet are determined as follows:
2005 2004
#m #m
Present value of funded obligations 103.5 89.6
Fair value of plan assets (69.8) (57.2)
Net liability recognised in the balance sheet 33.7 32.4
The amounts recognised in the income statement are as follows
2005 2004
#m #m
Current service cost 1.6 1.9
Interest cost 4.7 4.4
Expected return on plan assets (4.1) (4.0)
On-going pension expense 2.2 2.3
Settlement/Curtailment gain on discontinued operations - (1.3)
Total pension expense 2.2 1.0
6 PENSIONS (Continued)
Analysis of the movement in the balance sheet liability
2005 2004
#m #m
Opening 32.4 31.0
Exchange adjustments (0.1) 0.0
Fair value adjustments in Holland - 0.5
Total expense as above 2.2 1.0
Employer contributions (2.4) (2.4)
Actuarial gain/loss recognised as a reserves movement 1.6 2.3
Closing 33.7 32.4
Reconciliation of defined benefit obligation
2005 2004
#m #m
Opening 89.6 81.8
Exchange adjustments (0.1) -
Fair value adjustments in Holland - 1.3
Service cost 1.6 1.9
Interest cost 4.7 4.4
Employee contributions 0.5 0.5
Loss on defined benefit obligation 10.2 2.6
Actual benefit payments (3.0) (1.6)
Settlement/Curtailment - (1.3)
Closing 103.5 89.6
Reconciliation of bid value of assets
2005 2004
#m #m
Opening (57.2) (50.8)
Fair value adjustments in Holland - (0.8)
Expected return on assets (4.1) (4.0)
Gain on assets (8.6) (0.3)
Employer contributions (2.4) (2.4)
Employee contributions (0.5) (0.5)
Actual benefit payments 3.0 1.6
Closing (69.8) (57.2)
The on-going pension expense has been included in distribution costs. The actual return on plan assets was
#12.9m (2004:#4.2m)
7 CLOSING NET DEBT
2005 2004
#'000 #'000
Borrowings - current (10,991) (13,564)
Borrowings - non-current (49,106) (51,797)
Cash and cash equivalents 9,445 8,320
Closing net debt (50,652) (57,041)
8 CHANGES IN SHAREHOLDERS' EQUITY
Share Share Treasury Translation Retained
capital premium shares reserve earnings Total
#'000 #'000 #'000 #'000 #'000 #'000
For the year ended 31 December
2005
At 1 January 2005 restated 9,573 3,552 (958) 122 (15,360) (3,071)
Profit for the year attributable
to equity shareholders - - - - 7,549 7,549
Unrealised exchange movement - - - (663) - (663)
Share options - Value of employee
services - - - - 623 623
Tax on share options - - - - 40 40
Dividends - - - - (2,323) (2,323)
Actuarial gains on pensions
schemes - - - - (1,595) (1,595)
Tax on actuarial gains on pensions
schemes - - - - 508 508
Movement in period - - - (663) 4,802 4,139
At 31 December 2005 9,573 3,552 (958) (541) (10,558) 1,068
For the year ended 31 December
2004 restated
At 1 January 2004 9,573 3,552 (771) - (12,724) (370)
Profit for the year attributable
to equity shareholders - - - - 850 850
Unrealised exchange movement - - - 122 - 122
Acquisition of own shares - - (187) - - (187)
Share options - Value of employee - - - - 226 226
services
Dividends - - - - (2,117) (2,117)
Actuarial losses on pensions
schemes - - - - (2,305) (2,305)
Tax on actuarial losses on
pensions schemes - - - - 710 710
Movement in period - - (187) 122 (2,636) (2,701)
At 31 December 2004 9,573 3,552 (958) 122 (15,360) (3,071)
Retained earnings as disclosed in the Balance Sheet (page 14) represent the
retained earnings and treasury share balances above.
9 RECONCILIATION OF NET LIABILITIES AND PROFIT UNDER UK GAAP TO IFRS
The reconciliations, as required by IFRS 1, are set out below.
RECONCILIATION OF NET LIABILITIES
31 Dec 2004 1 Jan 2004
Notes #'000 #'000
Net assets as reported under UK GAAP 16,345 20,153
Reversal of accrued dividend A 1,580 1,436
Pension deficit not previously recognised B (31,585) (30,971)
Full recognition of deferred tax on pension B 9,499 9,489
deficit
Reverse SSAP 24 debtor C (1,549) (682)
Reverse deferred tax on SSAP 24 debtor C 461 205
Reverse amortisation of goodwill D 2,292 -
Additional write off of goodwill on E (201) -
disposal
Exchange adjustments F 87 -
Net liabilities as reported under IFRS (3,071) (370)
RECONCILIATION OF PROFIT BEFORE FINANCE COSTS
Year to
31 Dec 2004
Notes #'000
Continuing businesses
Total UK GAAP profit before interest 6,173
UK GAAP loss on sale of businesses 2,833
UK GAAP discontinued businesses operating (1,437)
profit
UK GAAP continuing operations profit before 7,569
interest
Pensions B (735)
Reversal of amortisation of goodwill D 2,091
Associate's interest K (4)
Costs of share options G (57)
Profit before finance costs as reported 8,864
under IFRS
RECONCILIATION OF (LOSS)/ PROFIT FOR THE YEAR
Year to
31 Dec 2004
Notes #'000
Loss for the period as reported under UK (1,369)
GAAP
Pensions B/C (735)
Reversal of amortisation of goodwill D 2,292
Costs of share options G (57)
Tax H (173)
Exceptional pension income B 1,300
Exceptional write off of goodwill on E (201)
disposal
Exchange recycled on disposal F (2,468)
Reversal of accrued dividend A 2,261
Profit for the period as reported under 850
IFRS
10 RECONCILIATION OF EQUITY FROM UK GAAP TO IFRS AT
31 December 2004 1 January 2004
Effects Effects
UK of move UK of move
GAAP to IFRS IFRS GAAP to IFRS IFRS
Notes #'000 #'000 #'000 #'000 #'000 #'000
Fixed assets
Goodwill D / E 35,216 2,178 37,394 49,569 - 49,569
Intangible assets I - 1,367 1,367 - 2,663 2,663
Property, plant and I 11,924 (1,367) 10,557 23,783 (2,663) 21,120
equipment
Investment in associate D - - - 478 - 478
Deferred tax assets H - 10,813 10,813 - 9,489 9,489
47,140 12,991 60,131 73,830 9,489 83,319
Current assets
Inventories 45,862 - 45,862 51,018 - 51,018
Trade and other 55,520 - 55,520 70,279 - 70,279
receivables
Retirement benefits C 1,549 (1,549) - 682 (682) -
Cash and cash 8,320 - 8,320 12,740 - 12,740
equivalents
111,251 (1,549) 109,702 134,719 (682) 134,037
Current liabilities
Financial liabilities (13,564) - (13,564) (28,583) - (28,583)
Trade and other payables (66,021) 804 (65,217) (80,386) - (80,386)
Dividend A (1,580) 1,580 - (1,436) 1,436 -
Deferred consideration (2,762) - (2,762) (6,818) - (6,818)
Corporation tax (2,696) - (2,696) (1,242) - (1,242)
liabilities
(86,623) 2,384 (84,239) (118,465) 1,436 (117,029)
Non-current liabilities
Financial liabilities (51,797) - (51,797) (63,876) - (63,876)
Deferred tax liabilities H (2,790) (853) (3,643) (3,233) 205 (3,028)
Provisions (637) - (637) (2,474) - (2,474)
Deferred consideration (199) - (199) (348) - (348)
Retirement benefit B - (32,389) (32,389) - (30,971) (30,971)
obligation
(55,423) (33,242) (88,665) (69,931) (30,766) (100,697)
Net assets employed 16,345 (19,416) (3,071) 20,153 (20,523) (370)
Shareholders' equity
Ordinary shares 9,573 - 9,573 9,573 - 9,573
Share premium 3,552 - 3,552 3,552 - 3,552
Other reserves G - 384 384 - 158 158
Translation reserve J - 122 122 - - -
Retained earnings 3,220 (19,922) (16,702) 7,028 (20,681) (13,653)
Total equity 16,345 (19,416) (3,071) 20,153 (20,523) (370)
11 RECONCILIATION OF PROFIT BEFORE TAX FROM UK GAAP TO IFRS
31 December 2004
Effects
UK of move
GAAP to IFRS IFRS
Notes #'000 #'000 #'000
Continuing operations
Revenue 270,786 - 270,786
Cost of sales (189,337) - (189,337)
Gross profit 81,449 - 81,449
Distribution costs before amortisation of B/G (70,847) (792) (71,639)
goodwill
Amortisation of goodwill D (2,089) 2,089 -
Exceptional (850) - (850)
Total distribution costs (73,786) 1,297 (72,489)
Operating profit 7,663 1,297 8,960
Financing costs (2,621) 4 (2,617)
Share of associate's operating profit D (94) (2) (96)
4,948 1,299 6,247
Discontinued operations
Profit before tax E 1,437 201 1,638
Exceptional pension income B 1,300 1,300
Loss on sale of discontinued businesses E/F (2,833) (2,669) (5,502)
Profit before tax 3,552 131 3,683
Reconciliation of the cash flow statement from UK GAAP to IFRS
Income taxes paid during the year ended 2004 are classified as part of operating
cash flows under IFRS, but were included in a separate category of tax cash flow
under UK GAAP. Cash and cash equivalents include short term deposits under IFRS,
whilst under UK GAAP the same has been included in the management of liquid
resources category. There are no other material differences between the cash
flow statement presented under IFRS and the cash flow statement presented under
UK GAAP.
12 NOTES TO RECONCILIATIONS FROM UK GAAP TO IFRS
A Under IFRS the interim dividend is recognised on the date of payment
and the final dividend is recognised on the date of the annual general
meeting when it is approved. This adjustment reflects the effect of the timing
adjustment resulting from this change. Dividends are no longer presented in the
profit and loss account and are instead shown as a deduction from reserves.
B The full net pension liability is recognised for the first time according to
the calculation rules of IAS 19 in respect of the UK and Dutch Schemes
(previously disclosed under FRS 17). The results of these adjustments are
disclosed further in note 6 to these accounts. In the case of the Dutch Scheme,
an accrual for the pension liability at the date of acquisition of the KNS group
of #804,000 had already been recognised under UK GAAP and shown within trade and
other payables. When added together with the total IFRS pension adjustment at 31
December 2004 of #31,585,000, this results in a balance sheet value of
#32,389,000 at 31 December 2004.. The excess of the ongoing charge under IAS 19
over the SSAP 24 charge in the six months ended 31 December 2004 of #350,000
represents an IAS 19 charge of #1,105,000 less a SSAP 24 charge of #755,000.
Full deferred tax is recognised on all pension adjustments. As a result of the
disposal of the Livingston Group, a gain on curtailment of #1,300,000 arose in
the pension scheme under IAS 19. This has been recorded as an exceptional item
within discontinued operations.
C As the full net pension liability is now recognised under IAS 19, the previous
SSAP 24 debtor has been written off and the associated deferred tax liability
reversed.
D Under IFRS goodwill is no longer amortised but, instead, is subject to
impairment tests. The group has established that no impairment is required in
relation to any of its goodwill. This adjustment reverses the previous goodwill
charge under UK GAAP.
E As a result of goodwill no longer being amortised under IFRS, the carrying
value of the Livingston group at the date of disposal was increased by this
write-back of goodwill, consequently increasing the loss on sale of the
Livingston group.
F Exchange adjustments result from IFRS adjustments denominated in foreign
currencies (principally the Euro) in respect of the recycling of the exchange on
the disposal of the Livingston Group (#2,468,000), Goodwill and the Dutch
pension scheme.
G Under UK GAAP, shares owned by the group were held in reserves and
a charge made in respect of the cost of the related share options. Under IFRS a
charge is made to the profit and loss account in respect of all share options to
reflect the value of employee services provided in each period. This is
calculated using the "Black-Scholes" model. This adjustment reflects the
difference between these two valuation methods. The "Black-Scholes" charge for
the year ended 31 December 2004 was #226,000 compared with an amortisation
charge of #169,000. The "Black-Scholes" cost is charged to the profit and loss
account and credited to other reserves.
H The taxation charge has been adjusted to fully reflect deferred tax movements
on the adjustments related to pensions. In the year to December 2004, the
deferred tax assets and liabilities have been grossed up where no legal right of
set-off exists.
I Specialist software previously reported within tangible assets has been
re-classified as an intangible asset.
J Under IFRS the group's unrealised exchange movements arising since the date of
transition to IFRS are reported separately in the "translation reserve". Under
UK GAAP all unrealised exchange movement were charged/credited to the profit and
loss account reserve.
K Under IFRS the interest arising from associates is treated as part of the
share of profits of the associate whereas under UK GAAP this was part of
interest.
13 FINAL DIVIDEND
Relevant dates concerning the payment of the final dividend are
Annual general meeting 25 May 2006
Record date 9 June 2006
Payment date 10 July 2006
14 STATUTORY ACCOUNTS
This unaudited preliminary announcement is not the statutory accounts. The
statutory accounts for the year ended 31 December 2005 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the company's annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR ILFITVSIRIIR
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