REG - LPA Group PLC - Half-year Report

LPAAnnouncement

21/06/2018 07:05

RNS Number : 0569S
LPA Group PLC
21 June 2018
 


LPA GROUP PLC
Half-Yearly Report for the six months ended 31 March 2018
 
LPA Group PLC ("LPA" or the "Group"), the high reliability LED lighting and electro-mechanical system manufacturer and distributor, announces a strong performance for the six months to 31 March 2018, £1.8m of LED Lighting and power socket contracts from a new customer and board reorganisation.
 
KEY POINTS



·   


Revenue increased 28.9% to £13.93m (2017: £10.81m)




·   


Operating profit before exceptional items increased 45.4% to £1.122m (2017: £0.77m).




·   


Exceptional costs £111,000 (2017: £115,000 costs less £341,000 of property gain; net £226,000 gain)




·   


Profit before tax increased 1.1% to £987,000 (2016: £976,000)




·   


Diluted earnings per share decreased 0.30p to 6.51p (2017: 6.81p) due to increased profits chargeable to tax




·   


Interim dividend increased 0.05p to 1.10p (2017: 1.05p)




·   


Order entry decreased 43.4% to £8.40m (2017: £14.85m)




·   


Order book stands at £16m (2017: £22m)




·   


Gearing remains unchanged at 31.2% (2017: 31.6%) despite significant increases in working capital and plant and equipment



 
Michael Rusch, Chairman, comments:
 
"In my comments at the Annual General Meeting, I reported that output was at record levels and that this had been sustained during the first half. I am pleased to report that operating profits have also been at record levels and that this performance is continuing during the third quarter and should result in an outstanding result for the year. All parts of the Group are performing well.
However, as previously reported, the medium term maybe more challenging. Order entry in Electro-Mechanical and to a lesser extent in LED Lighting has not kept pace with sales and the Group order book has declined. Successive changes in Government procurement policy have impacted domestic supply chains for both new and refurbished trains and there is increased competition in our Asian markets. Nevertheless, we are rising to this challenge and have been selected for £1.8m of new LED Lighting and power socket export contracts for trains being imported to the UK, for delivery commencing in the next financial year.
Following the appointment of Chris Buckenham as Chief Financial Officer and Company Secretary in March 2018, we are continuing our board reorganisation. Paul Curtis, Managing Director of LPA Channel Electric Equipment Limited ("LPA Channel"), our highly successful distribution business is appointed Chief Operating Officer with effect from 1st October 2018, subject to standard due diligence. Paul was apprenticed at LPA Channel, achieved an MBA and had a successful spell as Sales and Marketing Director of LPA Connection Systems before returning to LPA Channel as Managing Director. At the same time, Peter Pollock, our Chief Executive will become Chairman in succession to me, while I become Group President, remaining a major shareholder and non-executive director. Len Porter remains Senior Non-Executive Director. Once these board appointments have bedded in, we expect to promote Paul to Chief Executive Officer and to appoint a further non-executive director. We shall be adopting the QCA Corporate Governance Code and a road map to compliance.
We have committed a further £1m to capital expenditure as a measure of our confidence in the future and we are increasing the interim dividend by 0.05p to 1.10p."
 
MICHAEL RUSCH - Chairman - 21 June 2018
ENQUIRIES:                                                                                Tel:



LPA Group plc








Peter Pollock, Chief Executive


 01799 512844




Chris Buckenham, Chief Financial Officer


 01799 512859














Cairn Financial (Nominated Adviser)


 020 7213 0880




James Caithie / Tony Rawlinson


















WH Ireland (Broker)


 0113 394 6600




Tim Feather / James Sinclair-Ford


















Instinctif Partners (PR Advisors)


020 7457 2020




Mark Garraway / Helen Tarbet







 
CHAIRMAN'S STATEMENT
In my comments to the Annual General Meeting, I reported that output was at record levels and that this had been sustained during the first half. I am pleased to report that operating profits have also been at record levels and that this performance is continuing during the third quarter and should result in an outstanding result for the year.
 
During the first half, Sales increased 29% to a record £13.9m (2017: £10.8m) reflecting the exceptionally strong order book at the start of the year and Operating Profit increased 45% to £1.1m, also a new record, (2017: £0.8m). Exceptional costs amounted to £0.1m (2017: Exceptional gain £0.2m). Profit before tax amounted to £0.99m (2017 £0.98m) and diluted earnings per share were 6.51p (2018: 6.81p). The dividend is increased by 0.05p to 1.10p. All parts of the Group are performing well.
 
However, as previously indicated, the medium term maybe more challenging. Order entry in Electro-Mechanical, and to a lesser extent in LED Lighting, has not kept pace with sales and while Distribution is doing well, the Group order book has declined. Government procurement policy has changed impacting domestic supply chains for both new and refurbished trains. The "long term through life" cost approach used on Cross Rail and London Overground, which favoured our reliable, long lived sustainable products has changed to one requiring only support for the franchise period, typically seven years. In addition, the procurement of 7000 new trains, significantly more than the running annual average of around 700 trains, has exceeded domestic capacity to supply, necessitating import from overseas train builders who are not yet existing customers, presenting us with the challenge of displacing existing suppliers to achieve orders.
 
The flood of new trains has meant the early retirement of some existing trains which would otherwise have required refurbishment and upgrade and provided us with more routine orders. This has particularly impacted Transport+. Some of our export markets, particularly Japan have suffered from increased competition from China and Korea in their export markets and this has presented us with additional challenges.
 
However, this scenario had been identified for some time and the Group has acted to mitigate it. We have pursued other export opportunities created by imported trains and have won £1.8m of orders for LED Lighting and power sockets from a new entrant to the UK market for delivery in the next financial year. We have identified other similar opportunities which we are pursuing. We have invested in new products development and in opening new markets.
 
We are investing £1m in processes and automation to reduce manufacturing costs.
 
We are continuing to follow a progressive dividend policy: the interim dividend will be increased by 0.05p to 1.10p (2017: 1.05p) which will be paid on 26 September 2018 to those shareholders registered at the close of business on 5 September 2018.
 
Following the appointment of Chris Buckenham as Chief Financial Officer and Company Secretary in March 2018, we are continuing our board reorganisation. Paul Curtis, Managing Director of LPA Channel Electric Equipment Limited, our highly successful distribution business is appointed Chief Operating Officer with effect from 1st October 2018. Paul was apprenticed at LPA Channel achieved an MBA and had a successful spell as Sales and Marketing Director of LPA Connection Systems before returning to LPA Channel as Managing Director. At the same time, Peter Pollock, our Chief Executive will become Chairman in succession to me, while I become Group President, remaining a major shareholder and Non-Executive Director. Len Porter remains Senior Non-Executive Director. Once these board appointments have bedded in, we expect to promote Paul to Chief Executive Officer and to appoint a further non-executive director.
 
We shall be adopting the QCA Corporate Governance Code and a road map to full compliance.
 
As previously reported the levels of sales and profits in the current year are exceptional and may be under pressure next year, but the funnel of opportunities, which leads to the pipeline of orders and order entry, is very encouraging. The Group is in robust shape and we look forward to the future with great confidence.
 
MICHAEL RUSCH
Chairman - 21 June 2018
 
 



CONSOLIDATED INCOME STATEMENT
















 


6 months to

 31 March 2018


6 months to

 31 March 2017


Year to

 30 Sept 2017








Unaudited


Unaudited


Audited








£000


£000


£000








 


 


 




 Revenue


                        13,929


                      10,807


                    22,482








 


 


 




 Operating profit before exceptional items


                          1,122


                           772


                      1,895




 Gain on sale of property


                                  -


                           341


                         341




 Relocation and other nonrecurring costs 


                            (111)


                          (115)


                       (268)








 


 


 




 Operating profit


                          1,012


                           998


                      1,968




 Finance costs


                              (43)


                            (32)


                         (75)




 Finance income


                               18


                             10


                           21








 


 


 




 Profit before tax 


                             987


                           976


                      1,914




 Taxation


                            (127)


                            (78)


                       (146)








 


 


 




 Profit for the period


                             860


                           898


                      1,768








 


 


 




Attributable to:






 


 




 - Equity holders of the parent


860


898


1,768








 


 


 




Earnings per share (see note 2)






 


 




 - Basic


6.95p


7.37p


14.40p




 - Diluted


6.51p


6.81p


13.42p



 
 
 



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME






 




 


6 months to

 31 March 2018


6 months

 to 31 March 2017


Year to

 30 Sept 2017








 Unaudited


 Unaudited


 Audited








 £000


 £000


 £000




Profit for the period


                             860


                           898


                      1,768








 


 


 




Other comprehensive income / (expense)






 


 




Items that will not be reclassified to profit or loss


                                  -


                                -


                              -




Actuarial gain / (loss) on pension scheme


                            (396)


                           294


                         349




Tax on actuarial gain / (loss)


                               65


                            (57)


                         (77)




Other comprehensive income / (expense) net of tax


                            (331)


                           237


                         272








 


 


 




Total comprehensive income for the period


                             529


                        1,135


                      2,040




Attributable to:






 


 




 - Equity holders of the parent


                             529


                        1,135


                      2,040







 
 



CONSOLIDATED BALANCE SHEET




















As at


As at


As at




31 March 18


31 March 17


30 Sept 17




Unaudited


Unaudited


Audited




£000


£000


£000




Non-current assets






 


 




Intangible assets


1,187


1,190


1,185




Property, plant and equipment


6,843


6,686


6,851




Retirement benefits


983


1,195


1,311








9,013


9,071


9,347








 


 


 




Current assets






 


 




Inventories


4,821


3,593


4,417




Trade and other receivables


6,041


4,721


5,054




Cash and cash equivalents


44


138


119








10,905


8,452


9,590








 


 


 




Total assets


19,917


17,523


18,937






















Current liabilities






 


 




Bank overdraft


                            (817)


                          (640)


                       (216)




Bank loans and other borrowings


                            (251)


                          (265)


                       (277)




Current tax payable


                            (188)


                          (199)


                         (64)




Trade and other payables


                         (4,947)


                       (4,061)


                    (4,969)








                         (6,203)


                       (5,165)


                    (5,526)








 


 


 




Non-current liabilities






 


 




Bank loans and other borrowings


                         (2,420)


                       (2,327)


                    (2,379)




Deferred tax liabilities


                            (159)


                          (251)


                       (221)




Other payables


                              (90)


                                -


                         (90)








                         (2,669)


                       (2,578)


                    (2,690)








 


 


 




Total liabilities


(8,871)


(7,743)


(8,216)








 


 


 




 
















Net assets


11,046


9,780


10,721








 


 


 




Equity






 


 




Share capital


1,238


1,231


1,238




Share premium account


628


610


628




Un-issued shares reserve


134


183


134




Merger reserve


230


230


230




Retained earnings


8,816


7,526


8,491






















Equity attributable to shareholders of the parent


11,046


9,780


10,721



 
 



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY






 




 


6 months to

 31 March 2018


6 months to

 31 March 2017


Year to

 30 Sept 2017








Unaudited


Unaudited


Audited








£000


£000


£000








 


 


 




 Opening equity


                        10,721


                        8,689


                      8,689








 


 


 




 Total comprehensive income


                             529


                        1,135


                      2,040








 


 


 




 Transactions with owners:






 


 




 Dividends


                            (204)


                          (185)


                       (315)




 Proceeds from issue of shares


                                  -


                          141


                        166




 Tax benefit on share based payments


                                  -


                                -


                        141






















 Closing equity


                        11,046


                        9,780


                    10,721



 



 



CONSOLIDATED CASH FLOW STATEMENT




















6 months to

 31 March 2018


6 months to

31 March 2017


Year to

 30 Sept 2017








Unaudited


Unaudited


Audited








£000


£000


£000




Profit before tax


                             987


                           976


                      1,914




Finance costs


                               43


                             32


                           75




Finance income


                              (18)


                            (10)


                         (21)




Operating profit


                          1,012


                           998


                      1,968




Adjustments for:






 


 




Depreciation


                             319


                           230


                         543




Amortisation of intangible assets


                                 6


                             17


                           36




(Gain) on sale of property, plant and equipment


                                (8)


                          (341)


                       (321)




Loan arrangement fees


                                  -


                               4


                             4








                          1,329


                           908


                      2,230




Movements in working capital:






 


 




Change in inventories


                            (404)


                          (563)


                    (1,387)




Change in trade and other receivables


                            (987)


                            (43)


                       (376)




Change in trade and other payables


                              (22)


                           259


                      1,237




Cash generated from operations


                              (83)


                           561


                      1,704




Income taxes paid


                                  -


                                -


                       (112)




Retirement benefits


                              (50)


                            (50)


                       (100)




Net cash from operating activities


                            (133)


                           511


                      1,492




Purchase of property, plant and equipment


                            (173)


                       (1,354)


                    (1,643)




Proceeds from sale of property, plant and equipment


                                 8


                           524


                         525




Capitalised development expenditure


                                (8)


                            (13)


                         (27)




Net cash (used in) / from investing activities


                            (173)


                          (843)


                    (1,145)




Drawdown of bank loans


                                  -


                           500


                         500




Repayment of bank loans


                              (98)


                          (603)


                       (702)




Repayment of obligations under finance leases


                              (53)


                            (27)


                         (81)




Interest paid


                              (15)


                              (7)


                         (23)




Proceeds from issue of share capital


                                  -


                           141


                         166




Dividends paid


                            (204)


                          (185)


                       (315)




Net cash (used in) / from financing activities


                            (370)


                          (181)


                       (455)




Net (decrease) / increase in cash and cash equivalents


                            (676)


                          (513)


                       (108)




Cash and cash equivalents at start of the period


                              (97)


                             11


                           11




Cash and cash equivalents at end of the period


                            (773)


                          (502)


                         (97)



 
 
 
 



Reconciliation of cash and cash equivalents






 


 




 


6 months to

 31 March 2018


6 months to

 31 March 2017


Year to

 30 Sept 2017








Unaudited


Unaudited


Audited








£000


£000


£000








 


 


 




Cash and cash equivalents in current assets


                               44


                           138


                         119




Bank overdraft in current liabilities


                            (817)


                          (640)


                       (216)




Cash and cash equivalents at end of the period


                            (773)


                          (502)


                         (97)



 
 
 
NOTES
 
1 - BASIS OF PREPARATION
 
These interim consolidated financial statements are for the six months ended 31 March 2018. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group, for the year ended 30 September 2017.
 
They have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and applicable law (IFRS) and in accordance with the provisions of the Companies Act 2006 applicable to companies applying IFRS. These financial statements have been prepared under the historical cost convention with the exception of certain items which are measured at fair value.
 
These consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 30 September 2017.  The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements and are expected to be followed throughout the year ending 30 September 2018.
 
2 - EARNINGS PER SHARE
 
The calculations of earnings per share are based upon the profit after tax attributable to ordinary equity shareholders and the weighted average number of ordinary shares in issue during the period. Details are as follows:
 







6 months to

 31 March 2018


6 months to

 31 March 2017


Year to

 30 Sept 2017




Unaudited


Unaudited


Audited








 


 


 




Profit for the period - £000


                             860


                           898


                      1,768








 


 


 




Weighted average number of ordinary shares in issue during the period (million)






 


 




12.377


12.186


12.276




Dilutive effect of share options


0.831


0.995


0.903




Number of shares for diluted earnings per share


13.208


13.181


13.179








 


 


 




Basic earnings per share


6.95p


7.37p


14.40p




Diluted earnings per share


6.51p


6.81p


13.42p



 
 




 
 
3 - ANALYSIS OF NET DEBT
 







Bank loans


Finance lease obligations


Cash and cash equivalents


Net debt




£000


£000


£000


£000




At 1 October 2017


                2,311


                        345


                           97


                2,753




New finance lease obligations


                         -


                        138


 -


                   138




Draw down of bank loans


                         -


                             -


                             -


                        -




Interest and arrangement fees


                      28


                             -


 -


                      28




Repayment of borrowings


                  (98)


                        (53)


                         151


                        -




Cash absorbed


                         -


                             -


                         525


                   525




At 31 March 2018


                2,241


                        430


                         773


                3,444



 
 
4 - INFORMATION
 
LPA Group plc is the Group's ultimate parent company.  It is incorporated in England and Wales and domiciled in the UK.  The address of LPA Group plc's registered office, which is also its principal place of business, is Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ.  LPA Group plc's shares are quoted on the AIM market of the London Stock Exchange.
 
LPA Group plc's consolidated interim financial statements are presented in Pounds Sterling (£000), which is also the functional currency of the parent company. These consolidated interim financial statements have been approved for issue by the Board of Directors on 21 June 2018.  The financial information for the year ended 30 September 2017 set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 30 September 2017 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.
 
Summarised copies of this Interim Report are being sent to shareholders.  Copies are also available from the Company's registered office address as above, or are available on the Company's website (www.lpa-group.com).
 




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