Braime (T.F.& J.H.) - Annual Results for year ended 31 December 2018
29/04/2019 07:00
RNS Number : 2963X
Braime (T.F.& J.H.) (Hldgs) PLC
29 April 2019
T.F. & J.H. BRAIME (HOLDINGS) P.L.C.
("Braime" or the "Company" and with its subsidiaries the "Group")
ANNUAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2018
At a meeting of the directors held today, the accounts for the year ended 31st December 2018 were submitted and approved by the directors. The accounts statement is as follows:
Chairman's statement
Review of the year
I am delighted to report that the Group's sales revenue increased in 2018 by 13.6% to £35.7m from £31.4m in 2017 and the profit from operations increased to £3.2m, compared to £2.3m last year. After adjusting for finance income and expenses, the profit before tax is £3.0m. Deducting tax of £0.8m, the profit after tax is £2.2m, well ahead of last year's result of £1.6m.
Unusually, all parts of the Group individually enjoyed a successful year and this, alongside other factors, such as favourable exchange rates and the strength of the US market combined to produce what is a record result. As a group, we continue to benefit from our long-term strategy of investment in continually developing new products and new markets.
Further detail and analysis of our financial result, and consideration of the major challenges and risks currently facing the Company, can be found in the Group Strategic Report.
Without wishing to deflect from the extremely positive result in 2018, it is necessary to add a note of caution. While our budget for 2019, prepared at the end of last year, shows continuing growth, we are now seeing early signs of a slow-down in activity. The general consensus is that Europe is entering a period of, at best, an economic slow-down and, at worst, a recession. The Chinese economy, long a major driver of growth and a major contributor to our 2018 result, has begun to slow considerably; some of our markets in agriculture, for example both in Australia and South America, were severely hit by drought last year, resulting in a reduction in investment in handling and storage and we have fears that the US agro market may well be negatively affected by the current trade war with China.
In spite of these factors the underlying strength of the Group remains and we intend to continue with our long-term strategy of investing our funds in improving production, developing new products and extending our distribution.
Dividends
In October 2018, we paid an increased dividend of 3.50p (October 2017- 3.10p). On the basis of our full 2018 result, the directors have decided to also increase the 2nd interim dividend to 8.00p, (May 2017 - 7.10p), which will be paid on the 17th May 2019 to the holders of Ordinary and 'A' Ordinary shares on the register on 10th May 2019. Taken together, the overall dividend paid on the 2018 results will be 11.50p, compared to the 10.20p paid in 2017, an increase of 12.75%. The directors remain committed to increasing the dividends paid to shareholders to reflect improvements in the long- term performance of the Group, while balancing the need to support the ongoing investments in plant, facilities, and products, on which such growth depends.
Capex
In 2018, the Group invested £1.8m in plant and equipment (compared to £0.7m in 2017) and this is commented on further in the Group Strategic Report. We plan to make further major investments in the current year in both the manufacturing of presswork for our external customers and in the manufacture of the material handling components for our subsidiaries for distribution to their customers worldwide. We believe the successful future for both parts of the business depend on continuing to achieve improvements in our productivity.
Braime Pressings Limited
This is the direct successor to the original business founded in 1888. The Company specialises in deep drawn presswork, originally supplied to a very wide range of industries but now concentrated on the automotive sector. This provides the volume necessary to enable investment in the dedicated equipment necessary to remaining competitive, but volume which comes at a price. Pricing is subject to the constant pressure of "cost downs" which are a reality in the automotive industry. Survival is through continual process improvements achieved by teamwork and investment. 2018 saw an increase in volume and reductions in overhead costs to maintain profit.
4B material handling division
This division, based originally solely in the UK is now made up of a number of overseas subsidiaries, all of which enjoyed growth both in terms of sales and profitability in 2018. The division opened a new subsidiary, 4B China, to exploit the opportunity identified to sell our niche products in a rapidly developing agro-industrial market. China has now also become a major exporter of grain handling and storage equipment, including becoming a new manufacturing base for many of our existing OEM customers elsewhere who have now also located manufacturing in China. As well as extending our distribution globally, we continue to develop new innovative product designed to solve specific niche problems which we have identified in the bulk material handling industry. We continue to concentrate on creating products which are true to the division's logo "better by design".
Staff
In 2018 the Company passed its 130th anniversary and in February of this current year we were proud to be awarded by the Yorkshire Society a commemorative plaque celebrating our 130 years of "Engineering Excellence". This gave us an opportunity to involve all our staff in celebrating this considerable achievement, an achievement which is the direct result of the hard work and loyalty of our current staff and the generations before them.
We rely on the contribution, ideas, enthusiasm and teamwork of our staff to prosper in an ever more challenging global business environment and I would like to take this opportunity to thank everyone for their hard work.
Brexit
This is a subject we would all like to avoid, whatever our individual views. To adapt a phrase - any decision would have been better than no decision. After a clear, if contentious decision, we have been let down by our politicians of all parties. As a major exporter, we have wasted time, energy and money trying to help ourselves and our customers mitigate against the unknown. Business needs a clear decision and strong leadership.
Change of name
At the AGM we are proposing to the shareholders that the name of the Company is changed from T.F. & J.H. Braime (Holdings) P.L.C. to Braime Group PLC.
We continue to have enormous respect for the achievement of the founder, Tom Braime, and of his younger brother, Harry Braime, my grandfather, both young engineers and entrepreneurs. Together they built this Company from nothing but their own ambition, ingenuity, drive and work ethic. However, the directors now believe that the name Braime Group PLC better reflects the activities and ambitions of today's global company.
Summary and outlook
2018 was a record year however we are cautious about the possible effects of the current deteriorating economic situation in general, and specifically so in our particular markets.
Nevertheless long-term, while we will always face both risks and challenges - in particular our exposure to significant currency fluctuations - the pursuit of a clear strategy of continuously investing in improving productivity, developing new products and extending our market reach, continues to open up further opportunities for growth.
Nicholas Braime, Chairman
26th April 2019
For further information please contact:
T.F. & J.H. Braime (Holdings) P.L.C.
Nicholas Braime/Cielo Cartwright
0113 245 7491
W. H. Ireland Limited
Katy Mitchell/Nick Prowting
0113 394 6628
The directors present their strategic report of the Company and the Group for the year ended 31st December 2018.
Principal activities
The principal activities of the Group during the year under review was the manufacture of deep drawn metal presswork and the distribution of material handling components and monitoring equipment. Manufacturing activity is delivered through the Group's subsidiary Braime Pressings Limited and the distribution activity through the Group's 4B division.
Braime Pressings specialises in metal presswork, including deep drawing, multi-stage progression and transfer presswork. Founded in 1888, the business has over 130 years of manufacturing experience. The metal presswork segment operates across several industries including the automotive sector and supplies external as well as group customers.
The material handling components subsidiaries are industry leaders in developing high quality, innovative and dependable material handling components for the agricultural and industrial sectors. They provide a range of complementary products including elevator buckets, elevator and conveyor belting, elevator bolts and belt fasteners, forged chain, level monitors and sensors and controllers for monitoring safety and providing preventative maintenance systems which facilitate handling and minimise the risk of explosion in hazardous areas. The subsidiaries in the 4B division have operations in the Americas, Europe, Asia, Australia and Africa and export to over fifty countries.
Performance highlights
For the year ended 31st December 2018, the Group generated revenue of £35.7m, up £4.3m from prior year. Profit from operations was £3.2m, up £0.9m from prior year. EBITDA was £4.0m. At 31st December 2018, the Group had net assets of £13.3m.
Cash flow
Inventories increased by £1.4m and trade receivables by £0.4m reflecting the increased sales activity. These calls on working capital were partly offset by an increase in our trade payables of £0.3m. In total the business generated funds from operations of £2.4m net of the movement in working capital (2017 - £1.5m). After the payment of other financial costs and the dividend, the cash balance (net of overdraft) was £1.5m, an increase of £0.5m from prior year.
Bank facilities
The Group's operating banking facilities are renewed annually. The arrangements with HSBC provide sufficient headroom to the Group and have allowed us to make the necessary investments in the year. As part of our contingency planning for Brexit, we have held discussions with our bankers and have received confirmation of a temporary increase in headroom beyond our current limits, to help fund our pre-Brexit strategy of building enhanced stock levels as the additional needs arise.
Taxation
Tax charge for the year was £0.8m, with an effective rate of tax of 26% (2017 - 28%). The effective rate is above the standard UK tax rate of 19.00% (2017 - 19.25%) due to the blending effect of the different rates of tax applied by each of the countries in which the Group operates, in particular, our operations in the US. In any financial year the effective rate will depend on the mix of countries in which profits are made, however the Group continues to review its tax profile to minimise the impact.
Capital expenditure
In 2018, the Group invested £1.8m (2017 - £0.7m) in plant and equipment. A significant proportion of this was our new manufacturing facilities in the USA, which will substantially enhance our in-house capabilities. Other major investments relate to installation of robotics machinery in the UK, in line with our strategy to improve efficiency and quality through automation. During 2019, the Group plans to make further tactical investments in key equipment to maximise productivity and we have the headroom within our current banking facilities to do so.
Balance sheet
Net assets of the Group have increased to £13.3m (2017 - £11.0m). This is due to the strong profit performance in the year. A foreign exchange gain of £0.2m (2017 - loss of £0.5m) was recorded on the re-translation of the net assets of the overseas operations, which has increased retained earnings in the year.
Principal exchange rates
The Group reports its results in sterling, its presentational currency. The Group operates in five other currencies and the principal exchange rates in use during the year and as at 31st December 2018 are shown in the table below. During the year the sterling weakened against many of the currencies in which we operate and consequently the Group's reserves increased by £0.2m from gains in foreign currency translations.
| Currency | Symbol | Average rate Full year 2018 | Average rate Full year 2017 | Closing rate 31st Dec 2018 | Closing rate 31st Dec 2017 |
| Australian Dollar | AUD | 1.787 | 1.692 | 1.809 | 1.728 |
| Chinese Renminbi (Yuan) | CNY | 8.700 | - | 8.676 | - |
| Euro | EUR | 1.130 | 1.143 | 1.115 | 1.127 |
| South African Rand | ZAR | 17.627 | 17.134 | 18.364 | 16.631 |
| Thai Baht | THB | 42.962 | 44.031 | 41.301 | 44.016 |
| United States Dollar | USD | 1.332 | 1.303 | 1.277 | 1.351 |
| Key performance indicator | Note | 2018 | 2017 |
| Turnover growth | 1 | 13.6% | 10.7% |
| Gross margin | 2 | 48.4% | 46.4% |
| Operating profit | 3 | £3.24m | £2.34m |
| Stock days | 4 | 141 days | 136 days |
| Debtor days | 5 | 56 days | 58 days |
| 2018 | 2017 | |
| £'000 | £'000 | |
| Revenue | 35,718 | 31,449 |
| Changes in inventories of finished goods and work in progress | 1,229 | 114 |
| Raw materials and consumables used | (19,677) | (16,955) |
| Employee benefits costs | (8,300) | (7,449) |
| Depreciation and amortisation expense | (788) | (803) |
| Other expenses | (4,940) | (4,015) |
| Profit from operations | 3,242 | 2,341 |
| Finance expense | (227) | (143) |
| Finance income | 2 | 3 |
| Profit before tax | 3,017 | 2,201 |
| Tax expense | (788) | (621) |
| Profit for the year | 2,229 | 1,580 |
| Profit attributable to: | ||
| Owners of the parent | 2,178 | 1,719 |
| Non-controlling interests | 51 | (139) |
| 2,229 | 1,580 | |
| Basic and diluted earnings per share | 154.79p | 109.73p |
| 2018 | 2017 | |
| £'000 | £'000 | |
| Profit for the year | 2,229 | 1,580 |
| Items that will not be reclassified subsequently to profit or loss | ||
| Net pension remeasurement gain on post employment benefits | 76 | 45 |
| Items that may be reclassified subsequently to profit or loss | ||
| Foreign exchange gains/(losses) on re-translation of overseas operations | 206 | (472) |
| Other comprehensive income for the year | 282 | (427) |
| Total comprehensive income for the year | 2,511 | 1,153 |
| Total comprehensive income attributable to: | ||
| Owners of the parent | 2,481 | 1,299 |
| Non-controlling interests | 30 | (146) |
| 2,511 | 1,153 |
| 2018 | 2017 | |
| £'000 | £'000 | |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 6,232 | 5,238 |
| Intangible assets | 61 | 58 |
| Total non-current assets | 6,293 | 5,296 |
| Current assets | ||
| Inventories | 7,872 | 6,431 |
| Trade and other receivables | 6,820 | 5,911 |
| Cash and cash equivalents | 2,313 | 1,145 |
| Total current assets | 17,005 | 13,487 |
| Total assets | 23,298 | 18,783 |
| Liabilities | ||
| Current liabilities | ||
| Bank overdraft | 832 | 164 |
| Trade and other payables | 5,493 | 4,391 |
| Other financial liabilities | 1,870 | 1,983 |
| Corporation tax liability | 249 | 195 |
| Total current liabilities | 8,444 | 6,733 |
| Non-current liabilities | ||
| Financial liabilities | 1,256 | 988 |
| Deferred income tax liability | 265 | 87 |
| Total non-current liabilities | 1,521 | 1,075 |
| Total liabilities | 9,965 | 7,808 |
| Total net assets | 13,333 | 10,975 |
| Share capital | 360 | 360 |
| Capital reserve | 257 | 257 |
| Foreign exchange reserve | 301 | 74 |
| Retained earnings | 12,734 | 10,633 |
| Total equity attributable to the shareholders of the parent | 13,652 | 11,324 |
| Non-controlling interests | (319) | (349) |
| Total equity | 13,333 | 10,975 |
| 2018 | 2017 | |
| £'000 | £'000 | |
| Operating activities | ||
| Net profit | 2,229 | 1,580 |
| Adjustments for: | ||
| Depreciation and amortisation | 788 | 803 |
| Foreign exchange gains/(losses) | 158 | (443) |
| Finance income | (2) | (3) |
| Finance expense | 227 | 143 |
| Loss on sale of land and buildings, plant, machinery and motor vehicles | 15 | 4 |
| Adjustment in respect of defined benefits scheme | 158 | 45 |
| Income tax expense | 788 | 621 |
| Income taxes paid | (871) | (617) |
| 1,261 | 553 | |
| Operating profit before changes in working capital and provisions | 3,490 | 2,133 |
| Increase in trade and other receivables | (580) | (698) |
| Increase in inventories | (1,441) | (312) |
| Increase in trade and other payables | 977 | 356 |
| (1,044) | (654) | |
| Cash generated from operations | 2,446 | 1,479 |
| Investing activities | ||
| Purchases of property, plant, machinery and motor vehicles and intangible assets | (1,767) | (618) |
| Sale of land and buildings, plant, machinery and motor vehicles | 32 | 14 |
| Interest received | 2 | 3 |
| (1,733) | (601) | |
| Financing activities | ||
| Proceeds from long term borrowings | 792 | 165 |
| Loan financing repayments | - | 52 |
| Repayment of borrowings | (349) | (329) |
| Repayment of hire purchase creditors | (276) | (247) |
| Interest paid | (227) | (143) |
| Dividends paid | (153) | (137) |
| (213) | (639) | |
| Increase in cash and cash equivalents | 500 | 239 |
| Cash and cash equivalents, beginning of period | 981 | 742 |
| Cash and cash equivalents, end of period | 1,481 | 981 |
| Share Capital | Capital Reserve | Foreign Exchange Reserve | Retained Earnings | Total | Non- Controlling Interests | Total Equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1st January 2017 | 360 | 257 | 539 | 9,006 | 10,162 | (203) | 9,959 |
| Comprehensive income | |||||||
| Profit | - | - | - | 1,719 | 1,719 | (139) | 1,580 |
| Other comprehensive income | |||||||
| Net pension remeasurement gain recognised directly in equity | - | - | - | 45 | 45 | - | 45 |
| Foreign exchange losses on re-translation of overseas subsidiaries consolidated operations | - | - | (465) | - | (465) | (7) | (472) |
| Total other comprehensive income | - | - | (465) | 45 | (420) | (7) | (427) |
| Total comprehensive income | - | - | (465) | 1,764 | 1,299 | (146) | 1,153 |
| Transactions with owners | |||||||
| Dividends | - | - | - | (137) | (137) | - | (137) |
| Total transactions with owners | - | - | - | (137) | (137) | - | (137) |
| Balance at 1st January 2018 | 360 | 257 | 74 | 10,633 | 11,324 | (349) | 10,975 |
| Comprehensive income | |||||||
| Profit | - | - | - | 2,178 | 2,178 | 51 | 2,229 |
| Other comprehensive income | |||||||
| Net pension remeasurement gain recognised directly in equity | - | - | - | 76 | 76 | - | 76 |
| Foreign exchange gains on re-translation of overseas subsidiaries consolidated operations | - | - | 227 | - | 227 | (21) | 206 |
| Total other comprehensive income | - | - | 227 | 76 | 303 | (21) | 282 |
| Total comprehensive income | - | - | 227 | 2,254 | 2,481 | 30 | 2,511 |
| Transactions with owners | |||||||
| Dividends | - | - | - | (153) | (153) | - | (153) |
| Total transactions with owners | - | - | - | (153) | (153) | - | (153) |
| Balance at 31st December 2018 | 360 | 257 | 301 | 12,734 | 13,652 | (319) | 13,333 |
| Dividends paid | 2018 | 2017 |
| £'000 | £'000 | |
| Equity shares | ||
| Ordinary shares | ||
| Interim of 7.10p (2017 - 6.40p) per share paid on 18th May 2018 | 34 | 31 |
| Interim of 3.50p (2017 - 3.10p) per share paid on 19th October 2018 | 17 | 15 |
| 51 | 46 | |
| 'A' Ordinary shares | ||
| Interim of 7.10p (2017 - 6.40p) per share paid on 18th May 2018 | 68 | 61 |
| Interim of 3.50p (2017 - 3.10p) per share paid on 19th October 2018 | 34 | 30 |
| 102 | 91 | |
| Total dividends paid | 153 | 137 |
| Central | Manufacturing | Distribution | Total | |
| 2018 | 2018 | 2018 | 2018 | |
| £'000 | £'000 | £'000 | £'000 | |
| Revenue | ||||
| External | - | 4,291 | 31,427 | 35,718 |
| Inter Company | 695 | 3,891 | 6,452 | 11,038 |
| Total | 695 | 8,182 | 37,879 | 46,756 |
| Profit | ||||
| EBITDA | 387 | 187 | 3,456 | 4,030 |
| Finance costs | (116) | (36) | (75) | (227) |
| Finance income | - | - | 2 | 2 |
| Depreciation and amortisation | (464) | - | (324) | (788) |
| Tax expense | (19) | (55) | (714) | (788) |
| Profit/(loss) for the period | (212) | 96 | 2,345 | 2,229 |
| Assets | ||||
| Total assets | 5,009 | 3,202 | 15,087 | 23,298 |
| Additions to non current assets | 650 | - | 1,149 | 1,799 |
| Liabilities | ||||
| Total liabilities | 3,713 | 2,127 | 4,125 | 9,965 |
| Central | Manufacturing | Distribution | Total | |
| 2017 | 2017 | 2017 | 2017 | |
| £'000 | £'000 | £'000 | £'000 | |
| Revenue | ||||
| External | - | 4,150 | 27,299 | 31,449 |
| Inter Company | 706 | 3,211 | 5,172 | 9,089 |
| Total | 706 | 7,361 | 32,471 | 40,538 |
| Profit | ||||
| EBITDA | 393 | 146 | 2,605 | 3,144 |
| Finance costs | (92) | (23) | (28) | (143) |
| Finance income | 1 | 1 | 1 | 3 |
| Depreciation | (465) | - | (338) | (803) |
| Tax expense | (20) | (8) | (593) | (621) |
| (Loss)/profit for the period | (183) | 116 | 1,647 | 1,580 |
| Assets | ||||
| Total assets | 4,593 | 2,397 | 11,793 | 18,783 |
| Additions to non current assets | 490 | - | 222 | 712 |
| Liabilities | ||||
| Total liabilities | 1,742 | 3,664 | 2,402 | 7,808 |