Final Results

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