REG - LPA Group PLC - Final Results
23/01/2025 07:00
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RNS Number : 3654U LPA Group PLC 23 January 2025
LPA Group plc
Final Results for the year ended 30 September 2024
LPA Group plc ("LPA", the "Company" or the "Group"), the innovation-led
engineering specialist in electronic and electro-mechanical components and
systems, is pleased to announce its Final Results for the year ended 30
September 2024.
Final Results key points:
· Order book reduced to £25.3m (2023: £31.6m)
· Order entry at £17.3m (2023: £25.5m)
· Revenue at £23.5m (2023: £21.7m)
· Underlying operating loss * of £0.2m (2023: £0.1m)
· Loss before tax of £0.6m (2023: profit £0.8m)
· Basic loss per share of 2.46p (2023: earnings per share of 6.52p)
· No proposed dividend (2023: 1p)
· Net debt at year end of £2.1m (2023: £1.2m)
(*) Operating Loss before Share Based Payments, Exceptional Items and in FY
2023 Negative Goodwill.
The year to 30 September 2024, included the following highlights and
operational developments.
· Successful acquisition and integration of Red Box International range
of ground power equipment, giving access to new markets including general
aviation and B2C sales.
· Highly successful implementation of new ERP system into both
manufacturing sites.
· Increased revenue from Aviation and Defence to 25% (previously 20% in
2023 and 13% in 2022).
· Refocussed global market expansion with the first international
office set up for the DACH market and reassessing the distributor partner
network for new and existing products around the world.
· And, post year-end, new CEO - started 2 January 2025.
Robert B Horvath - Chairman commented:
"During the year we started restructuring and resizing the business
including making management changes that will make us more agile moving
forward. Adjusted profit after tax for FY 2024 is in line with market
expectations as confirmed in the Company's year-end trading update
announcement of 22 November 2024. We reported an underlying loss before tax of
£0.2m, primarily as a result of the slippage of three major contracts which
as previously announced will continue to effect the business through 2025. The
planned growth thereafter is encouraging.
We have bought three major product lines in the last two years, the most
recent announced this week. Our reasoning remains to get more balance into
our factory workload, to increase added value and ultimately improve margin.
These will also help to rebalance volumes of activity which have most recently
been more skewed towards the second half of the year. Whilst we expect to
deliver a much stronger operating performance in the second half of the year
compared to the first half in 2025, we should see more even weighting in the
years thereafter.
Our order entry remains robust though it will naturally fluctuate as we
develop product lines and rebalance away from a high dependency on large
projects. Large projects are still targets for us and we secured some good
order wins post the year-end. The deep tube programme is a good example where
we are supporting the new investment in rolling stock for TfL's Piccadilly
Line and we anticipate the opportunity to support other deep tube lines as we
move through to 2030. We have invested in our sales teams especially for our
new product lines and we will continue to do this with our new power supply
acquisition.
On 2 January 2025 I was delighted to welcome our new CEO Dr Philo
Daniel-Tran into the business. Philo has a wealth of global experience
covering Europe, Asia and beyond and has worked in many of our sectors and
more. As I have commented before we must remain alive to global supply chain
issues and macro-economic factors as we are a global business selling into
many markets around the world including the USA. We will manage growth in line
with our capabilities and remain agile and responsive as our management teams
know this is our core strength.
Our gearing remains a modest 13.1% (2023: 7.7%) and our net asset value grew.
The (closed) defined benefit pension scheme remains in good shape and the
impact on our balance sheet of the Trust's investment policy has been positive
again this year. The pension retains in a healthy surplus.
We anticipate an overall operating profit in FY 2025 and will look to
re-establish our dividend distribution thereafter. The Board has confidence
in the prospects for the Group, supported by high quality customers, order
book, increasing visibility of sustainable new business and our overall
strategy and agility to diversify into other markets and grow."
For further information, please contact:
LPA Group plc Tel: +44 (0) 1799 512800
Robert B Horvath, Chairman www.lpa-group.com
Philo Daniel, Chief Executive Officer
Stuart Stanyard, Chief Financial Officer
Cavendish Capital Markets Limited (Nominated Adviser & Broker) Tel: +44 (0) 20 7220 0500
Corporate Finance
Ed Frisby / Isaac Hooper / Elysia Bough
Corporate Broking
Tim Redfern
Hudson Sandler (Financial PR) Tel: +44 (0) 20 7796 4133
Dan de Belder
Nick Moore
Francesca Rosser
Share and company information
The information contained within and on the LPA website is not an invitation
to invest in shares or other securities, or any other products or services or
otherwise deal in these or enter into a contract with LPA or any other
company. The information provided should not be relied upon in connection with
any investment decision. You should always seek appropriate professional
investment advice in relation to such.
The past performance of LPA or any other company referred to within or on the
Website cannot be relied upon as a guide to its future performance. The price
of shares and the income derived from them can go down as well as up and
investors may not recoup the amount originally invested. Any reference to any
product or service which has been or may be provided by LPA or any other
company does not amount to a promise that such product or service will be
available at any time. Changes to or improvements in such products or services
may be made at any time without notice.
Chairman's Statement
Introduction
I am delighted to welcome Philo Daniel-Tran as our new Chief Executive
Officer. Philo only joined us on the 2 January 2025 and accordingly it is
appropriate that I write the bulk of the commentary in this year's annual
report. I should like to thank Gordon Wakeford for his support during the last
6 months as he has undertaken some Executive responsibilities; notably
Chairing the Executive Management Board, working with the subsidiary Managing
Directors and helping to formulate the Business plans for the current year.
Gordon and I are supporting the handover process to Philo as she takes up her
responsibilities.
Overview
The Group prides itself in being an innovation led engineering specialist in
electric and electromechanical componentry. Much of its expertise also sits in
the software skills that underly much of what we do. To be innovative we need
to continually re-examine our markets and our customer's needs, we need to be
alert to change, and we need to be responsive in recognising the direction of
travel vis a vis our existing products. An essential criterion when recruiting
our new Chief Executive was to broaden our market penetration and enhance our
global customer relationships.
We have great manufacturing expertise in our two major facilities as well as a
highly responsive distribution company in Thatcham that imports product from
around the world and sells into our customers and others. Our model is founded
on engineering skills and manufacturing as well as the use of distribution
agreements that we in turn have with partners around the world for our
manufactured products. Our business is therefore highly dependent on keeping
LPA products at the forefront of our distributors' business plans. In the last
year we have invested in our sales force heavily and in our engagements with
our distribution network.
The result is an improved business, a steady growth in our new sales lines and
a vision for much profitable performance in the future. As I reported during
the year we have suffered in our UK market, which represents 59% of what we
sell, by slippage in the call off orders particularly in rail. We have major
programmes to deliver for TFL on the Central line and the Piccadilly line,
major projects on the refurbishment of the interconnector jumpers on the
trains and work to do on HS2. All these projects are challenging to plan a
business around when the ultimate customers themselves are challenged by their
own budget constraints.
We are determined to look at a more product-based business for the aftercare
and new projects so that we can keep the manufacturing units busy and the
fixed overhead absorbed into profitable work. During the year we acquired Red
Box Aviation and in January this year we acquired a power supply business to
supplement our own products. We have also reinvested in our Niphan product
range. By moving our model to a better balance between product and project
business our order books will look different going forward; but our risk
profile should improve. We have suffered from orders secured 4 or 5 years ago
which are only now coming into manufacture and while we had the ability to
index our costs the level of inflation we witnessed since winning this work
has impacted gross margins. Our order book at the end of the year is
comfortable, replacing most of what has been delivered this year, strengthened
by shorter term call off on aftercare product work rather than large new
projects.
It is also worth noting that as we plan with confidence for the future we have
been looking very hard at our efficiencies and productivity. To compete on a
global stage, as we do, we must invest and this year it was in a new ERP
system that now serves both of our manufacturing units and will help us
control and plan better. It will enable us to look at other ways we can get
efficiencies in procurement, contract management and better agility in pricing
of subcontract work for new customers. The new ERP system went live on 1
October 2024 and I commend our staff for the work they put in to make this
happen whilst still doing their day jobs. Giving our leaders better control of
our outputs; to know the cost of every process, to get it right on time first
time and to deliver a quality experience to our customers is what a good
business does to continuously improve.
LPA Connection Systems based in Saffron Walden has had a good year considering
it had over £2m of rail call off orders pushed back to October 2025. It was a
blow to their business planning and they have particularly worked hard on
their aviation markets to cover a large part of the set back. In the segment
information later in this report it is becoming clearer how much good work has
gone into rebalancing the business away from rail. The management team at
Connection Systems has only been with us for 2 years and I am pleased by the
energy, attitudes and cultural shift being made in the business.
LPA Lighting Systems in Normanton has an order book with a number of extant
lighting projects that were in development and secured 3 and 4 years ago and
in most cases deferred by 24 to 36 months. Our challenge in Normanton is to re
market ourselves to our key strengths of electrical engineering, software and
systems design. We will seek out other product lines for what is a first-class
electronic engineering design and manufacturing facility and part of the
reasons for the latest acquisition of power supply inverters is to redesign
their boards, enhance the product and to sell into wider markets.
LPA Channel Electric The completion of the executive team during the year has
seen the business restored back to its former pre-pandemic level and growing.
The prospects for the business are strong in aerospace, defence and for niche
industrial products. The business received its AS/EN9120 certification this
year.
We have increased our distributor partners across the globe, notably in
aviation. Our sales and marketing team continue to be busy at a number of
exhibitions in Europe and North America; a good example was a strong presence
at GSE Expo in Lisbon this year. We have recently been in India with our
distributors there as well as exploring low cost manufacturers for products we
could make more efficiently. We also attended Aero Friedrichshafen General
Aviation Show in Germany. There are encouraging conversations with potential
partners keen to work on our Red Box products globally.
The Group exports widely and this needs to be reflected in our stakeholder
relationships which must be proactive, long term, visible and embedded into
our corporate culture. We have stakeholders, in the wider sense, all over the
world and key that the exec team visit them and specifically our distributors
ensuring that LPA remains integral to their business plans; much of what we do
is solutions based and flows from personal interactions.
We are an innovative group and in order to remain so we must continually
strive to look for talented people and where possible recruit them, even if it
means buying their nascent business opportunities as part of their
recruitment. Our innovation committee is developing connections with academia,
having already established relationships with universities and colleges, and
this will continue. A current opportunity to work with the Institute for
Manufacture IfM - a Cambridge University programme, has led to young students
working with us on capacitor optimisation to support our aviation business
products. Another example is where 15 MPhil Industrial Systems students from
the IfM visited Saffron to talk innovation.
Being a small business we strive to get the balance right we are rebasing our
reward mechanisms to retain more moderate salaries and to increase the
performance related elements in our remuneration packages. We have a programme
of recruitment especially of apprentices and young engineers.
Shareholders and Investors
We want to communicate our long-term plans to deliver shareholder value in
line with our vision and mission and our continuing commitment to our
reputation. Therefore, the Board will continue to meet its key shareholders
where possible in person and work closely with its Brokers and advisers to
ensure regular and open dialogue.
Dividends and Pension Fund
The planned growth in our revenue will require working capital to fund higher
stock levels and increased diversification in our products and solutions. In
2024 we absorbed cash not least because of our small operating loss, some
capex and the exceptional items. The Bank facilities were renewed with our
Bankers and with profitability returning we will plan for a restoration of
some dividend in 2026.
Included in our Balance sheet is an asset representing the actuarial
valuation, as at 31 March 2024, and the consequent accounting adjustment, for
our (closed) defined benefit pension scheme. The rebalanced investment
portfolio put the scheme in a very strong position, and this is continuing. As
I am no longer chairman of the Trustees I can be more objective as your
chairman concerning the overall strategy of the scheme on our balance sheet;
including the timing of any exit way from the fund and when are we best placed
to consider the timing of a buyout process. The government are recognising
that there is work to do in this area and a number of discussion documents are
out for consultation in the public domain.
Employees
As I emphasise each year our people and our investment in them remains key to
our future success. Their skills alone are not enough without a commitment
to the style and corporate values that the Board are committed to promoting.
We are working hard on this and I know our new Chief Executive espouses these
values. We will see the impact of this in the coming years. The substantial
increase by the new Government in National Insurance was not budgeted in the
current year and so we will have to carefully ensure that whatever inflation
rises were planned can absorb this; the support of the senior management will
help us to do this as we move more to a reward-based culture based on results.
We pride ourselves on our engineering skills and our factory operations and
are committed to investment to maintain this capability. We do maintain
flexibility through use of agency and temporary contracts, but we have no
zero-hour contracts. The general health, and well-being of our employees
personally, cannot be underestimated. Senior management time on people
issues, managing our employee numbers and the cost base remains part of the
daily routine. Recruiting young people into a traditional engineering business
and more importantly its workspace is not easy; therefore, communication with
our staff, engagement with their aspirations and progressive investment in
their well-being will distinguish us.
We continue our communication programme including a comprehensive newsletter
to our employees, this is published twice a year. Induction programmes and the
Board's belief in instilling our corporate values and engagement remains a
priority.
I should like to thank all our employees, past and present, for their hard
work and diligence during 2024 and for their commitment to our future as we
start to look ahead at what I hope will be more encouraging times across our
worldwide markets.
Board
Board members' biographies and relevant experience are set out within Company
Information in the Annual Report which is published on the Group's website
www.lpa-group.com (http://www.lpa-group.com) .
Philo Daniel (CEO) heads up the Executive Team and together with the Group CFO
Stuart Stanyard are part of the group Board Executive Directors. Andrew
Jenner, as Senior Independent Director, and Chair of the Audit Committee has
been in post throughout the year under review as has Gordon Wakeford who is
chairman of our Remuneration Committee.
ESG
We have reported on our Group ESG commitments for a number of years now and we
are committed as we move forward to ensuring that we stay in the forefront of
best practice for a leading engineering company. We actively manage our
carbon footprint, support greener practices and manage waste in an
environmentally transparent way. We encourage good health and wellbeing in
our staff and drive safety, innovation, as well as inclusion and diversity
into our day-to-day activities.
Outlook
The Executive team have a clear vision and a solid order book to work with in
the current year, the underlying value in the balance sheet is strong.
Operating cash flow will need to increase to cope with increased working
capital requirements as turnover grows. The Board has a process for looking at
identified opportunities and enhancing capability in line with the strategy
and it will consider each one on its merits. The Group has undergone
significant change in its leadership and whilst there is a lag in profit
impact, there is discernible shift in momentum coming in the next year or so.
I am pleased to say that our outlook is strong with a bright future that will
be built on our innovation, capability and great customer relationships.
Robert B Horvath
Chairman
Business Model and Strategy
The LPA Group plc is a quoted Small and Medium-sized Enterprise (SME),
admitted to trading on the AIM market of the London Stock Exchange, and
industry classified in the Electronic and Electrical Equipment FTSE sector.
The Group is an innovation-led engineering specialist in electronic and
electro-mechanical components and systems, supplying markets operating within
high dependency, hostile and benign environments which focuses on the market
segments of rail, rail infrastructure, aviation (aircraft and infrastructure),
industrial markets and defence. These are viewed as stable / growth markets
both in the UK and globally. All Group activities serve the same markets (to
a greater or lesser extent), have a mutual dependence on transportation (which
accounts for more than two thirds of Group turnover), share resource and
frequently work on the same projects.
The Group has a reputation for innovation, providing cost effective solutions
to customers' problems which aim to improve reliability and reduce maintenance
and life cycle costs. Three distinct sites across the UK are operated,
namely:
LPA operations Market segment Products, solutions, and technologies
LPA Connection Systems Electro-mechanical systems · Hybrid / battery control boxes and systems
Light & Power House · Control panels & boxes
Shire Hill A designer and manufacturer of electro-mechanical systems and components to · Enclosures, fabrications, laser cut, form & weld
the rail, rail infrastructure, aerospace infrastructure and industrial
Saffron Walden markets. · Rail, aircraft, ship & industrial connectors
CB11 3AQ, UK · Shore supply systems
Tel: +44 (0)1799 512800 Provision of ground power to the aviation market. · Transport turnkey engineering and manufacturing services
· Provision of ground power equipment
Email: enquiries@lpa-connect.com
LPA Channel Electric Engineered component distribution · Circuit breakers
· Connectors
Bath Road High value, high level service distributor and added value solutions provider · Fans & motors
to the rail, aerospace aircraft and defence markets.
Thatcham · Relays & contactors
Berkshire · Switches
RG18 3ST, UK · USB charging units
Tel: +44 (0)1635 864866
Email: enquiries@lpa-channel.com
LPA Lighting Systems LED lighting and electronic systems · Electronic control systems
LPA House · Electronic monitoring systems
Ripley Drive A designer and manufacturer of LED lighting and electronic systems which serve · Fluorescent lamp Inverters
the rail and other high reliability markets.
Normanton · Complete rolling stock interior lighting systems
West Yorkshire · Rolling stock interior and exterior door status indication
systems
WF6 1QT, UK
· Rolling stock seat electronics solutions
Tel: +44 (0)1924 224100
Email: enquiries@lpa-light.com
Group revenues are derived from both large value projects and smaller value
routine orders with the route to market a combination of direct and indirect
for most products. Agents and distributors may be used, particularly in
overseas markets, although larger projects continue to require direct contact
in most cases.
A wide range of leading organisations form our customer base, including:
Alstom, Avanti, BAA, BAE Systems, CAF, Compin, CRRC, Downer EDI, First Group,
Grammer, Heathrow Airport, Hitachi, ITW GSE, Kinki Sharyo, Knorr Bremse,
Leonardo, Omer, Shanghai Pudong Airport, Siemens, SNCF, Stadler, Spirit
Aerospace, Taiwan Rolling Stock Company, Transport for London, Unipart Rail
and Wabtec.
It is our intention to strengthen the Group's position within the global
marketplace by growing our customer base, alongside the addition of new
products and the undertaking of selected strategic acquisitions. This is
underpinned by our Vision, Mission and Objectives as detailed below and the
business planning that we do each year.
Vision, Mission & Objectives (VMO)
Vision
· To be a market leading electronic / electro-mechanical engineering
group, supplying high quality components and systems to customers in safety
critical and challenging markets.
Mission
· Provide sustainable growth and returns to shareholders.
· Grow organically and by acquisition.
· Be our customers' first choice for products and services.
· Be an ethical and responsible employer.
Objectives
· Promote and build on the history and brand of LPA.
· Ensure all companies within the Group deliver 'best in class'
products and services.
· Focus on reducing dependency on the transportation market.
· Continuous innovation and product development.
· Improved sales channels for export.
· Targeted acquisitions to bring growth, technology, or access to
markets.
· Work together across the Group and maximise opportunities.
· Exploit Group capability and technology to create new products and
service new markets.
· Be an employer of choice.
Values and Culture
Investment in our people is paramount to our success and we have created clear
communication and development strategies to enhance skills and ensure that we
all understand and align to Group values, culture and best practice. This is
supported by the Board and Executive teams and demonstrated by their
visibility and accessibility across the Group.
Our core values are promoted throughout the Group. These are set out below and
published on our website www.lpa-group.com (http://www.lpa-group.com) .
LPA Core Values
· Leadership - you do not need to be in a position of power to lead in
what you do.
· Passion - love what you do, use it to drive both yourself and the
business forward.
· Accountability -whatever you do, own it and do it well.
· Continuous Product Improvement - staying ahead of the competition.
· Personal Growth - always seek to learn and improve.
· Diversity - everyone deserves a chance and a voice.
· Fun - yes, it is work, but it does not mean we cannot enjoy it!
· Innovation - technology is everything to us, look forward and push
the boundaries.
· Integrity - honesty and respect are key to who we are.
· Teamwork - work with your colleagues not against them.
Financial Review
Set out are the key drivers related to the business performance in the year
and position at 30 September 2024, together with explanation of the
financial Key Performance Indicators set out later.
2024 Summary
· Order entry lagged sales at £17.3m (2023: £25.5m) resulting in the
order book reducing to £25.3m (2023: £31.6m), a reduction of 19.9%;
· Revenue of £23.5m up 8.4% (2023: £21.7m) with LPA Connection
Systems revenues up £0.2m and LPA Channel Electric revenues up £1.7m, LPA
Lighting Systems down £0.1m
· Added Value reduced by 0.8% at 49.5% (2023: 50.3%) as a result of
product mix; and
· Gross margins 23.3% (2023: 22.6%), was slightly up due to cost
control
· Underlying operating loss of £0.2m (2023: loss of £0.1m)
· Loss before tax at £0.6m (2023: Profit £0.8m after credit for
negative goodwill of £0.9m)
· Net cash inflow from operating activities £1.3m (2023: £0.3m).
By comparison to 2023, H1 2024 revenues increased by 27.5% to £11.6m (2023:
£9.1m), delivering an underlying operating loss of £0.3m (2023: loss of
£0.6m). H2 revenues were adversely impacted due to new project delays and
delivered revenues of £11.9m (2023: £12.6m), representing a reduction of
5.5% of against H2 2023 sales. This resulted in an H2 underlying profit of
£0.1m (2023: profit of £0.5m).
Pre-exceptional distribution costs and administrative expenses increased by
11% to £5.7m (2023: £5.1m). The main contributors to this were the wider
economic cost pressures seen across the industry. Group employment costs
increased by £0.6m to £7.3m (2023: £6.7m). The increase was primarily due
to strengthening management teams at LPA Connection Systems and LPA Channel
Electric.
During the year no new share options were awarded to Directors. The
performance hurdles in relation to 125,000 share options issued in 2023 are
intended to be adjusted for them to remain attractive. A total cost of
£10k was attributed to these options in the accounts in line with current
assumptions and will be recognised over three years (2023: one award at an
exercise price of 50p subject to three increasingly targeted performance
hurdles which are related to earnings per share and market capitalisation).
Trading Performance
Markets
Aerospace (aircraft) was steady for the period with main manufacture build
rates remaining at similar levels to the prior year at 6 aircraft per month.
Aspirations for this programme are for a build rate of 10 aircraft per month
by the end of 2027. Similarly, the Airbus A220 programme has delivered 367
aircraft from a firm orderbook of 912 leaving a substantial level of product
to fulfil as Airbus increases build rates from 8 aircraft a month to 14. This
is a strong indication of work for the supply chain including LPA.
LPA is working closely with the emerging EVTOL markets, we are supporting the
delivery of new engineered solutions, focussing on driving down weight as well
as increasing power delivery from source to propulsion. Supporting and being
'designed in' to the prototypes will support growth for LPA products in the
coming years as they get formally certified and go in to production.
Aerospace (infrastructure) is the bedrock of our growth strategy and has
achieved an excellent year. The focus must remain on building the worldwide
sales channels and keeping product fresh and innovative. The Red Box
acquisition has enabled us to open new market channels and to keep
conversations fresh with our distributors and their customers. Overall order
entry significantly increasing by 70% and revenues subsequently increasing 57%
in the period. We worked hard to enhance the product range in 2022 and 2023,
and this continues to impress our customers and we are openly working in many
of the busiest airports around the world. Building on this success our
engineers will continue the development of the range and it is envisaged
further new products will be released in the coming year.
In support of this sector the Group participated in a number of key trade
shows including GSE Expo show in Lisbon, Aero Friedrichshafen (Europe's
biggest general aviation show) and a number of other Expos in support of our
distributors including HAL Heli-mART and the Dubai Airport Show. These
activities drive our marketing effort, as well as creating good interest for
individual product range, re-confirming our strategic intent for this market
segment and its ability to deliver tangible results.
Rail - aftercare has great potential as major newbuild programmes are delayed
and impact our production facilities. The "JUMPER" product line acquisition
acquired by LPA Connection Systems in 2023 has been smoothly integrated and
was planned to deliver significant output through a series of aftercare
schedules over the next 4 years. As we announced in 2024 these Schedules were
revised substantially for economic reasons and rebased over a longer period.
The acquisition has been a success and will prove to be a very valuable
product line in the medium to longer term and contribute for many years to
come.
The legislation across the EU banning the sale of fluorescent tubes from
September 2023 is a strong positive for us, driving much interest in our LED
retrofit alternative. A recent win for SNCF is a good example of this. LPA, in
preparation for this change, has been active in this area for the last few
years and, as such, enjoys good technical experience, active sales channels
and a good product offering aimed at serving this new requirement.
The legislation mandating the use of USB-C on all phones and portable devices
has also recently been agreed within the EU and UK, with all new devices
needing to adhere by the end of 2025. The Group has been a leader in design
and manufacture of USB-A charging solutions across the UK and European rail
market and is well placed to serve its customers requirements as they move to
update their vehicles in compliance with this new requirement.
As stated previously Newbuild projects in the UK have slowed as we await new
funding decisions and subsequent investment. It is pleasing however to see
some of the existing project wins finally moving into production and output
for 2026 and beyond and we will enjoy revenues from the prestigious Siemens
DTUP project initially for Piccadilly Line. The deep tube programme (DTUP) is
an important infrastructure programme for London that should extend into new
fleets for the Bakerloo and Central lines in the years to come. We are working
with the new Alstom TGV M as well as new generation projects across Europe
(Avelia Horizon platforms).
Export remains an important part of the Group's business at 41%. In
support of this we continue to build our sales channels globally and recently
successfully exhibited at Innotrans Berlin, a flagship event for our
marketplace, where we were able to meet most of our existing and as well as
potential partners from around the world.
Industrial market progression was mostly achieved through our Niphan range of
specialist electrical connectors, with considerable work undertaken to update
the approvals of this range and to re-establish contact with historical
customers. As such, the range saw enhanced revenues for the period and
further progress is expected as we move forward. LPA Channel Electric also
put in place the first foundations of its entry into the industrial
marketplace and will look to enhance this further in the coming year.
Niphan, although a niche range, continues to broaden its applicability to
modern engineering projects and has gained approvals in infrastructure that
over the coming years are expected to lead to modest increases in volume. This
is coupled with costing engineering work in supply chain to support margins
& capacity as volumes increase.
Macro-economic factors
During 2024, whilst we saw an improvement in the UK economy, we saw a
significant reduction in activity in our main market of Rail evidenced by a
reduction in our order intake of 20.9%. In addition, three major projects
across our two main businesses moved to the right. Whilst H1 was not affected
by these delays, H2 was heavily impacted. On the positive side our recent
acquisition of Red Box International was successfully integrated into our LPA
Connection Systems business and is now starting to meet its potential.
Inflation continues to become less of an issue with efforts to mitigate any
increases have been ongoing and where possible fed through to the market.
Added Value reduced slightly during the year and is broadly expected to remain
at this level as we move forward.
There has been some improvement in the supply chain and employment markets,
although the latter remains tight.
Exceptional Items and Negative Goodwill
Exceptional items in the year totalled a loss of £0.4m (2023: gain of
£0.8m). Key items comprised:
(i) Non-recurring costs relating to acquisitions of
£0.2m (2023: £nil)
(ii) Reorganisation costs / staff changes of £0.2m (2023:
£nil)
(iii) Negative goodwill following a fair value adjustment on
the acquisition of a product line and associated trade of £nil (2023: £0.9m)
(iv) Write off of obsolete inventory from discontinued product
line of £nil (2023: £0.1m).
Finance Costs
Within finance costs, the interest on borrowings increased to £0.16m (2023:
£0.13m). The weighted average interest rate increased by 1.2% from 6.1% to
7.3%. The Group's overdraft facility was utilised three times during the
year with an average balance of £100,000. The UK base rate remained
relatively stable during the year, reducing once from 5.25% to 5% in August
2024.
Profit Before Tax, Taxation and Earnings Per Share
After net finance income of £0.03m (2023: net income £0.05m) a loss before
tax of £0.6m was recorded (2023: profit before tax of £0.8m). A tax credit
of £0.3m (2023: £0.1m) is recognised, reporting a loss after tax of £0.3m
(2023: profit after tax £0.9m). This resulted in a basic loss per share of
2.46p (2023: earnings per share 6.52p).
The average UK corporation tax rate for the year was 25% (2023: 22%). The
main differences to the standard rate of corporation tax are due to losses and
R&D tax credits.
Treasury
The Group's treasury policy remained unchanged in the year.
Balance Sheet
· Gearing (net debt as a % of total equity) increased to 13.1% (2023:
7.7%) due to the recent acquisition and investment in a new ERP system;
· Net debt increased by £0.9m to £2.1m (2023: £1.2m);
· Working capital, as defined as inventory, trade & other
receivables less trade & other payables, reduced 7% to £5.3m (2023:
£5.7m); and
· Pension asset surplus recognised increased by 41% to £3.8m (2023:
£2.7m).
Shareholders' funds include Investment in Own Shares (Treasury Shares),
unchanged at £0.32m, representing ordinary shares held in the Company by the
LPA Group Plc Employee Benefit Trust ("EBT").
Intangible assets, which comprise goodwill related to the Group's investment
in Excil Electronics Ltd, the fair value of the intellectual property
purchased in the year of £0.8m (2023: £1.9m), capitalised development costs
and software purchases were £4.3m (2023: £3.2m). Additions in the year
increased to £0.7m (2023: £0.1m), mainly the result of the investment in the
new ERP system at the two main sites of £0.6m. After assessment for
impairment the goodwill on the Group's investment in Excil Electronics remains
unchanged at £1.1m. Development costs capitalised in the year, representing
the continued development of the Group's technologies and new product
development ("NPD"), were £0.1m (2023: £0.1m).
The net book value of property, plant and equipment as at 30 September 2024,
including right of use assets, totalled £5.5m (2023: £5.8m), of which
property represented £3.7m (2023: £3.8m), plant, equipment and motor
vehicles £1.8m (2023: £1.9m). Additions in the year were slightly down at
£0.4m (2023: £0.5m). Disposals in the year totalled £0.2m with a net book
value of £0.1m including right of use lease terminations (2023: £0.9m with a
net book value of £nil including right of use lease terminations). The
depreciation charge remained flat at £0.7m (2023: £0.7m).
Net Debt and Financing
The Group's main bank finance is a bank loan drawn down in 2024 at £2.5m and
repayable over 5 years. Repayments are quarterly over the term with a bullet
repayment in March 2029 of £2.0m (quarterly repayments calculated at draw
down on a 15-year repayment term). As at 30 September 2024 the amount
outstanding was £2.5m (2023: £1.9m). Interest is payable at base rate plus
2.25%.
Cash Flow
Net cash inflow from operating activities was £1.3m (2023: £0.3m) made up of
a trading cash inflow of £0.5m (2023: £0.7m) and a decrease in working
capital of £0.7m (2023: increase of £0.4m). Overall, there was a net
reduction in the Group's cash position of £0.5m (2023: £1.0m).
During the year £0.25m (2023: £0.25m) was spent on the balance of product
line acquisition and £0.55m (2023: £nil) was spent on the acquisition of Red
Box International with £0.55m deferred consideration split across the next
two years. A new ERP system was implemented with capitalised costs of £0.6m
(2023: £nil) and went live in October 2024. These will be depreciated over
5 years starting this financial year. There was no change in capital
expenditure outflows on property, plant and equipment £0.2m (2023: £0.2m),
excluding the ERP system and assets financed through lease arrangements.
Capitalised development expenditure amounted to £0.1m (2023: £0.1m),
primarily further product developments focused on smart lighting and
electronic systems, including rail seat electronics.
In the year new leasing arrangements led to right of use additions of £0.2m
(2023: £0.3m). Interest at 5.3% was charged on fixed rate borrowings (2023:
5.3%). Interest on the Group's overdraft facility is payable at base rate plus
2.0%. The facility was unutilised as at 30 September 2024 and 2023. The
composite interest rate across both borrowings and lease liabilities was 6.4%
(2023: 5.6%).
The bank loan was refinanced during the year at £2.5m for a further five-year
period on similar terms, a small reduction of £0.1m on the previous loan.
Excluding the repayment of the previous loan, capital loan repayments of
£0.2m were made in the year (2023: £0.2m). Outflows repaying the principal
elements of lease liabilities were £0.2m (2023: £0.4m). Interest payments
on borrowings amounted to £0.2m (2023: £0.2m).
Defined Benefit Pension Asset
The LPA Industries Limited Defined Benefit Scheme was part of the ISIO
(previously Deloitte Pensions Master Plan) throughout the entire year under
review. The costs of running the scheme have been shared between the Company
and the scheme. Costs borne by the Group this year amounted to £0.1m (2023:
£0.1m).
A full Actuarial valuation of the Scheme was carried out in March 2024 which
indicated the Scheme was at a healthy 133% funding level. The benefit of the
change in investment strategy in January 2022, when the Trustees having
undertaken a review in 2021 agreed to lock in the gains and de risk the
scheme, has been beneficial. The key driver for the then improved funding
position has been the higher than assumed returns on the Scheme's assets and
the changes in financial conditions which have reduced the liabilities. It is
natural for the Scheme's funding level to fluctuate over time reflecting
changes in the financial markets.
The Trustees, under advice, did not seek any voluntary employer contributions
during the year from the Group (2023: £Nil). The IAS 19 position reflects the
impact of rising interest rates on the present value of the liability to pay
pensions in the future.
Going Concern
In assessing going concern, the main considerations have been trading,
significant project delays and to a lesser extent inflationary pressures.
The Group continues to witness some price pressures from commodities,
utilities and wage inflation. These all pose risks to UK manufacturing
businesses.
In assessing the Group's going concern the directors also note that (i)
despite reporting a small underlying operating loss in the current year, the
Group is expected to return to profitability in 2025; (ii) has in place
adequate working capital facilities for its forecast needs and was cash
generative on an operational level through the 2024 financial year, with a
positive EBITDA and strong cash management; (iii) has a strong order book
with significant further opportunities in its market place; and (iv) has
proven adaptable in past periods of adversity, as again proven through the
2024 challenges. Therefore, the directors believe that it is well placed to
manage its business risks successfully.
The directors continue to develop its strong working relationship with its
bank that provides for the funding and working capital facilities. Should
there be additional significant delays in our project-based work then there
are actions available to management to mitigate any cash need. Note the
covenant test was removed for this year end. We expect that if required the
bank would remain supportive and a suitable agreement would be reached to
provide the Group with sufficient financing. The current loan facility was
extended for a further 5 years in March 2024 on the same terms.
After making enquiries including but not limited to compiling updated
forecasts; sensitivities; and expectations, reviewing liabilities and risks
and following confirmation of ongoing support from the Group's bank, the
directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
Stuart Stanyard
Chief Financial Officer
Key Performance Indicators
The Group uses the following key performance indicators to assess the
progression in its business: factors affecting them are discussed in the
Chairman's Statement and the Financial Review.
KPI Basis of measurement 2024 2023
Health & Safety
Riddors · reportable incidents of disease or danger occurrences None None
Accidents · events that cause impact, damage or injury involving a person or 10 21
infrastructure, which are not a Riddor
Near misses · events that occurred which have not caused an Accident (1) 156 126
Financial
Orders to revenue · orders for the year expressed as a multiple of revenue as a measure 0.73 1.18
of prospective growth
Order entry · order intake confirmed £17.3m £25.5m
Order book · the measure of opening order book, plus order entry, less revenue £25.3m £31.6m
Revenue growth · increase year-on-year as a percentage of prior year 8.4% 12.4%
Added value · the margin generated on revenue after deduction of material costs but 49.5% 50.3%
before other costs of sale and conversion
Gross margin · as a percentage of revenue 23.3% 22.6%
Profitability · underlying operating (loss) as a return on trading activities to (1.0%) (0.3%)
revenue
Cash generation · net decrease in cash and cash equivalents before financing activities (£0.4m) (£0.3m)
Gearing · the measure of net debt being borrowings and lease liabilities less 13.1% 7.7%
cash balances, to net assets
(1) As per best practice and a reinvigorated Health and Safety process, a
high number of near misses indicates an open culture of reporting possible
accidents which can be appropriately actioned.
Consolidated Income Statement
For the year ended 30 September 2024
2024 2023
Note £000 £000
Revenue 2 23,546 21,712
Cost of Sales (18,068) (16,646)
Cost of Sales- Exceptional Items 3 - (152)
Gross Profit 5,478 4,914
Distribution Costs (2,424) (1,910)
Administrative Expenses (3,304) (3,238)
Administrative Expenses-Exceptional Items 3 (376) -
Negative Goodwill 7 - 941
Underlying Operating Loss (246) (69)
Share Based Payments (4) (13)
Negative Goodwill 7 - 941
Exceptional Items 3 (376) (152)
Operating (Loss) / Profit 3 (626) 707
Finance Income 225 201
Finance Costs (192) (149)
(Loss)/Profit Before Tax (593) 759
Taxation 4 268 100
(Loss)/Profit for the Year (325) 859
Attributable to:
- Equity Holders of the Parent (325) 859
(Loss)/Earnings per Share 5
Basic (2.46)p 6.52p
Diluted (2.46)p 6.51p
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2024
2024 2023
£000 £000
(Loss)/Profit for the Year (325) 859
Other Comprehensive Income
Items that will not be reclassified to profit or loss:
Actuarial Gain on Pension Scheme 767 198
Restriction of Pension Assets 183 (113)
Other Comprehensive Income 950 85
Total Comprehensive Income for the Year 625 944
Attributable to:
- Equity Holders of the Parent 625 944
Consolidated Balance Sheet
At 30 September 2024
2024 2023
£000 £000
Non-Current Assets
Intangible Assets 4,317 3,156
Tangible Assets 5,018 5,083
Right of Use Assets 518 672
Retirement Benefits 3,782 2,683
13,635 11,594
Current Assets
Inventories 5,749 4,303
Trade and Other Receivables 5,389 5,870
Derivative Asset 80 28
Current Tax Receivable 34 30
Cash and Cash Equivalents 715 1,202
11,967 11,433
Total Assets 25,602 23,027
Current Liabilities
Bank Loan (96) (1,949)
Lease Liabilities (203) (214)
Trade and Other Payables (6,110) (4,743)
(6,409) (6,906)
Non-Current Liabilities
Bank Loan (2,359) -
Trade and Other Payables (275) -
Deferred Tax Liabilities (155) (165)
Lease Liabilities (175) (243)
(2,964) (408)
Total Liabilities (9,373) (7,314)
Net Assets 16,229 15,713
Equity
Share Capital 1,351 1,348
Investment in Own Shares (324) (324)
Share Premium Account 959 943
Share Based Payment Reserve 62 62
Merger Reserve 230 230
Retained Earnings 13,951 13,454
Equity Attributable to Shareholders of The Parent 16,229 15,713
Consolidated Statement of Changes in Equity
For the year ended 30 September 2024
Share Capital Investment in Own Shares Share Premium Account Share Based Payment Reserve Merger Retained Earnings Total
Reserve
2024 £000 £000 £000 £000 £000 £000 £000
At 1 October 2023 1,348 (324) 943 62 230 13,454 15,713
Loss for the Year - - - - - (325) (325)
Other Comprehensive Income - - - - - 950 950
Total Comprehensive Income - - - - - 625 625
- - - 4 - - 4
Share Based Payments
Dividends - - - - - (132) (132)
Transfer on Exercise of Share Options - - - (4) - 4 -
Proceeds from Issue of Shares 3 - 16 - - - 19
Transactions with Owners 3 - 16 - - (128) (109)
At 30 September 2024 1,351 (324) 959 62 230 13,951 16,229
Share Capital Investment in Own Shares Share Premium Account Share Based Payment Reserve Merger Retained Earnings Total
Reserve
2023 £000 £000 £000 £000 £000 £000 £000
At 1 October 2022 1,348 (324) 943 49 230 12,510 14,756
Profit for the Year - - - - - 859 859
Other Comprehensive Income - - - - - 85 85
Total Comprehensive Income - - - - - 944 944
Share Based Payments - - - 13 - - 13
Transactions with Owners - - - 13 - - 13
At 30 September 2023 1,348 (324) 943 62 230 13,454 15,713
Consolidated Cash Flow Statement
For the year ended 30 September 2024
2024 2023
£000 £000
(Loss)/Profit Before Tax (593) 759
Finance Costs 192 149
Finance Income (225) (201)
Operating (Loss)/Profit (626) 707
Adjustments for:
Amortisation of Intangible Assets 346 192
Depreciation of Tangible Assets 547 404
Depreciation of Right of Use Assets 193 285
Loss on Sale of Plant and Equipment 80 4
Negative Goodwill - (941)
Equity Settled Share Based Payments 4 13
Operating cash flow before movements in working capital 544 664
Movements in Working Capital:
(Increase)/Decrease in Inventories (986) 264
Decrease/(Increase) in Trade and Other Receivables 511 (775)
Increase in Trade and Other Payables 1,138 87
Cash generated from operations 1,207 240
Income Taxes Received 47 45
Net cash inflow from operating activities 1,254 285
Purchase of Product Line (Note 7) (250) (250)
Purchase of Business Net of Cash Acquired (Note 8) (503) -
Purchase of Property, Plant & Equipment (218) (196)
Expenditure on Intangible Assets (615) -
Expenditure on Capitalised Development Costs (63) (120)
Net cash outflow from investing activities (1,649) (566)
Repayment of Bank Loan (2,046) (175)
New Bank Loan 2,500 -
Principal Elements of Lease Liabilities (241) (392)
Interest Paid (192) (149)
Dividend Paid (132) -
Proceeds from Issue of Share Capital 19 -
Net cash outflow from financing activities (92) (716)
Net Decrease in Cash and Cash Equivalents (487) (997)
Cash and Cash Equivalents at Start of the Year 1,202 2,199
Cash and Cash Equivalents at End of the Year 715 1,202
Consolidated Cash Flow Statement (continued)
For the year ended 30 September 2024
Net Debt
An analysis of the change in net debt is shown below:
Bank Loan Lease Liabilities Cash and Cash Equivalents Net Debt
£000 £000 £000 £000
At 1 October 2023 1,949 457 (1,202) 1,204
New Bank loan / Lease Obligations 2,500 162 - 2,662
Acquired borrowings / (cash) 52 - (47) 5
Interest Costs 162 30 - 192
Repayment of Borrowings/Lease Liabilities (2,208) (271) 2,479 -
Other Cash Generated - - (1,945) (1,945)
At 30 September 2024 2,455 378 (715) 2,118
Bank Loan Lease Liabilities Cash and Cash Equivalents Net Debt
£000 £000 £000 £000
At 1 October 2022 2,124 596 (2,199) 521
New Lease Obligations - 253 - 253
Interest Costs 131 18 - 149
Repayment of Borrowings/Lease Liabilities (306) (410) 716 -
Other Cash Expenditure - - 281 281
At 30 September 2023 1,949 457 (1,202) 1,204
Notes
1. Information
In accordance with Section 435 of the Companies Act 2006, the Group confirms
that the financial information for the years ended 30 September 2024 and 2023
are derived from the Group's financial statements and that these are not
statutory accounts and , as such, do not contain all information required to
be disclosed in the financial statements in accordance with UK adopted
International Accounting Standards. The statutory accounts for the year
ended 30 September 2023 have been delivered to the Register of Companies.
The statutory accounts for the year ended 30 September 2024 have been audited
and approved but have not been filed. The Group's audited financial
statements for the year ended 30 September 2024 received an unqualified audit
opinion and the auditor's report contained no statement under section 498(2)
or 498(3) of the Companies Act 2006. The financial information contained
within this full year results statement was approved and authorised for issue
by the Board on 22 January 2025.
The 2024 accounts, together with notice of the Annual General Meeting, are
expected to be posted to shareholders on 14 February 2025 and will be
available from the LPA website (www.lpa-group.com (http://www.lpa-group.com) )
from 15 February 2025. They will be available from the Company Secretary,
LPA Group Plc, Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ.
The Group financial statements have been prepared under the historical cost
convention and under the basis of going concern. The principal accounting
policies adopted are consistent with those disclosed in the financial
statements for the year ended 30 September 2023.
2. Operating Segments
All of the Group's operations and activities are based in, and its assets
located in, the United Kingdom. The CODM does not review segmental assets and
liabilities by segment and therefore no reconciliations are disclosed. For
management purposes the Group comprises three divisions / product groups (in
accordance with IFRS 8) - LPA Connection Systems (electro-mechanical), LPA
Lighting Systems (lighting & electronics) and LPA Channel Electric
(engineered component distribution), which collectively design, manufacture
and market industrial electrical and electronic products. They operate
across three market segments - Rail; Aerospace & Defence and Other. It is
on this basis that the board of directors assess Group performance.
All revenue originates in the UK. An analysis by geographical markets and
market segments is given below:
2024 2023
£000 £000
LPA Connection Systems 8,620 8,393
LPA Channel Electric 5,800 4,070
LPA Lighting Systems 9,126 9,249
23,546 21,712
2024 2023
£000 £000
Revenue Recognised Over Time 86 166
Revenue Recognised at a Point in Time 23,460 21,546
23,546 21,712
All revenue originates in the UK. An analysis by geographical markets and
market segments is given below:
2024 2023
Rail 69% 75%
Aerospace and Defence 25% 20%
Other 6% 5%
100% 100%
2024 2023
£000 £000
United Kingdom 13,843 13,266
Rest of Europe 6,390 5,598
Rest of World 3,313 2,848
23,546 21,712
One customer (2023: one) represented more than 10% of Group revenue, at 17%
(2023: 24%) of revenue.
3. Operating (Loss)/Profit
2024 2023
Exceptional Items £000 £000
Write-off of Obsolete Inventory - 152
Acquisition Costs 190 -
Reorganisation Costs/Staff Changes 186 -
376 152
Acquisition costs of £190,000 primarily relate to the non-recurring costs of
the Red Box Int Holdings Limited acquisition in January 2024, as note 8, and
cover legal, severance and move costs.
Reorganisation costs / staff changes of £186,000 in 2024 relate to a loss of
office payment and recruitment costs for a successor.
Write-off of obsolete inventory cost in 2023 relates to a review of inventory
held in LPA Connection Systems which was no longer able to be sold due to
relating to a discontinued product line.
4. Taxation
2024 2023
A. Recognised in The Income Statement £000 £000
Current Tax Expense
UK Corporation Tax (34) (30)
Adjustment in Respect of Prior Years (17) (151)
(51) (181)
Deferred Taxation
Origination and Reversal of Temporary Differences (33) 81
Adjustment in Respect of Prior Years (184) -
(217) 81
Total Corporation Tax Credit (268) (100)
2024 2023
B. Reconciliation of Effective Tax Rate £000 £000
(Loss)/ Profit Before Tax (593) 759
Tax at The Average UK Corporation Tax Rate of 25% (2023: 22%) (148) 167
Effects of:
- Tax Rate Change - 21
- Enhanced Deduction for Qualifying R&D Expenditure (39) (48)
- Losses Surrendered 85 55
- Prior Period Adjustments (201) (151)
- Non-Taxable Negative Goodwill - (192)
- Losses Not Recognised 9 48
- Other Differences 26 -
Total Income Tax Credit (268) (100)
5. (Loss)/Earnings Per Share
The calculation of (loss)/earnings per share is based upon the loss for the
year of £325,000 (2023: profit of £859,000) and the weighted average number
of ordinary shares in issue during the year of 13.503m (2023: 13.483m) less
investment in own shares of 0.3m (2023: 0.3m), of 13.203m (2023: 13.183m).
2024 2023
(Loss) Weighted Earnings Earnings Weighted Earnings Per Share
Average Per Average
No of Shares Share No of Shares
£000 '000 Pence £000 '000 Pence
Basic (Loss)/Earnings Per Share (325) 13,203 (2.46) 859 13,183 6.52
Effect of Share Options - - 21 (0.01)
Diluted (Loss)/Earnings Per Share (325) 13,203 (2.46) 859 13,204 6.51
Basic and diluted earnings per share are equal for the year ended to 30
September 2024, since where a loss is incurred the effect of outstanding share
options is considered anti-dilutive and is excluded for the purpose of the
diluted loss per share calculation.
6. Going Concern
In assessing going concern, the main considerations have been trading,
significant project delays and to a lesser extent inflationary pressures.
The Group continues to witness some price pressures from commodities,
utilities and wage inflation. These all pose risks to UK manufacturing
businesses.
In assessing the Group's going concern the directors also note that (i)
despite reporting a small underlying operating loss in the current year, the
Group is expected to return to profitability in 2025; (ii) has in place
adequate working capital facilities for its forecast needs and was cash
generative on an operational level through the 2024 financial year, with a
positive EBITDA and strong cash management; (iii) has a strong order book
with significant further opportunities in its market place; and (iv) has
proven adaptable in past periods of adversity, as again proven through the
2024 challenges. Therefore, the directors believe that it is well placed to
manage its business risks successfully.
The directors continue to develop its strong working relationship with its
bank that provides for the funding and working capital facilities. Should
there be additional significant delays in our project-based work then there
are actions available to management to mitigate any cash need. Note the
covenant test was removed for this year end. We expect that if required the
bank would remain supportive and a suitable agreement would be reached to
provide the Group with sufficient financing. The current bank loan facility
was extended for a further 5 years in March 2024 on the same terms.
After making enquiries including but not limited to compiling updated
forecasts; sensitivities; and expectations, reviewing liabilities and risks
and following confirmation of ongoing support from the Group's bank, the
directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
7. Purchase of Product Line
The Group purchased trade and the intellectual property relating to a
competitor's product line on 24 March 2023. The book value of assets
acquired was £nil and a valuation exercise was performed using the relief
from royalty method to determine the fair value of the intellectual property
acquired. The fair value of assets acquired along with the related deferred
tax adjustment is as follows:
Fair value
£000
Intangible Assets - Intellectual Property 1,754
Deferred Tax Liability on Intangible Asset Uplift (313)
1,441
Cash Consideration (500)
Negative Goodwill 941
The cost of the acquisition was £500,000, the residual £250,000 was paid
during the year (2023: £250,000) outstanding. The negative goodwill arose
as the competitor would have had to undertake major investment to support the
long -term viability of the product line.
The acquisition contributed £1,478,000 to revenues and delivered profit in
line with expectations in the year to 30 September 2023.
8. Purchase of Business
0n 4 January 2024, the Group acquired 100% of the issued share capital of Red
Box Int Holdings Limited.
Red Box is a leading UK manufacturer of aviation ground power equipment with
global reach and an established presence in the USA market. The acquisition
will provide a strong addition to LPA Connection Systems, the Group's Saffron
Walden-based division, that designs, manufactures and supplies high quality
specialist products for the aviation, rail, and infrastructure markets. This
acquisition supports our long-term growth strategy whilst also lessening the
Group's dependence on rail projects.
4 January 2024 Book Value 4 January 2024 Fair Value
£000 £000
Adjustments
£000
Assets and Liabilities Acquired
Intangible Assets - 829 829
Tangible Assets 221 (64) 157
Inventories 657 (197) 460
Trade and Other Receivables 58 (28) 30
Cash 47 - 47
Trade and Other Payables (164) - (164)
Bank Loan (52) - (52)
Deferred Tax on Intangible Assets - (207) (207)
Net Assets Acquired 767 333 1,100
Consideration
Cash 550
Deferred Consideration < 1 year 275
Deferred Consideration > 1 year 275
1,100
The value of intangible assets has been derived from the new technology that
the acquisition brings to the group and that this will open up new markets.
The intellectual property rights have been recognised since it is both
probable that there will be future economic benefits and the cost of the
assets can be measured reliably.
The book value of tangible assets was adjusted to take account of depreciation
in 2023 not in the book value on acquisition.
The fair value of acquired trade receivables and other receivables was
adjusted for proforma invoices. No provision was required for gross
contractable trade receivables.
The book value of inventory was adjusted for missing inventory £98,000 and
alignment with the Group's inventory stock provisioning policy £99,000.
Acquisition- related costs have been expensed as exceptional items in note
3.
Red Box contributed £800,000 revenue and a small loss to the Group's loss for
the period between the date of acquisition and 30 September 2024. If Red Box
had been part of the Group for the full financial year, there would have been
an additional £400,000 revenue and a small loss.
9.Post Balance Sheet Event
Purchase of Business
The Group has reached agreement with Eaton Electrical Products Limited to
acquire Eaton's Powertron business. The Acquisition includes the UK trading
division and assets, including its small manufacturing capability. This
results in the group acquiring fixed assets, current assets and liabilities,
the employment of approximately 20 members of staff, and the business
including worldwide rights to brands and product designs. The consideration
for the Acquisition is in the form of LPA, taking on the obligation to settle
lease dilapidation obligations expected to be due in 2026 estimated at
£200,000, taking on liability for any customer product warranty claims capped
at in total £150,000, and a cash payment to the seller currently estimated at
c.£17,000 calculated with reference to net working capital as at 31 January
2025.
The acquisition is complementary to a number of power supply products the
Group currently manufacturers for the rail industry and will provide a strong
addition to LPA Channel Electric, the Group's Thatcham-based division, that
distributes engineered components. This acquisition supports our long-term
growth strategy of buying core products.
Revenues for the year ended 31 December 2023 were £2.1m, with a loss before
tax of £77,000. Net assets are currently estimated at £565,000 (calculation
excludes any accrual for lease dilapidation obligations).
10. Annual General Meeting
The annual general meeting is to be held at 12:00 noon on Wednesday 19 March
2025 at the offices of LPA Group Plc (the "Company") will be held at the
offices of LPA Group PLC, LPA House, Ripley Drive, Normanton, West Yorkshire,
WF6 1QT. The following resolutions are proposed:
Routine Business
1) To receive the accounts for the year ended 30 September 2024,
together with the reports of the directors and the auditors thereon.
2) To re-elect as a director Andrew Jenner who retires by rotation, in
accordance with the Company's Articles of Association.
3) To re-appoint as a director Philo Daniel-Tran in accordance with the
Company's Articles of Association.
4) To re-appoint RSM UK Audit LLP as auditors to the Company, to hold
office until the end of the next general meeting at which accounts are laid
before the Company, and to authorise the directors to fix the auditors'
remuneration.
Special Business
5) To authorise the directors to allot shares (as defined in section 551
of the Companies Act 2006) in the Company.
6) To authorise the Company to make market purchases (as defined in
section 693(4) of Companies Act) of its own shares.
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