REG - LPA Group PLC - Half-year Report

LPAAnnouncement

17/06/2021 07:05

RNS Number : 1661C
  
LPA Group PLC
  
17 June 2021
  
 

LPA GROUP PLC
Interim unaudited results for the six months ended 31 March 2021
 
LPA Group Plc ("LPA" or the "Group"), the high reliability LED lighting, electronic and electro-mechanical system designer, and manufacturer, announces its results for the six months to 31 March 2021 and a record order book.
 
KEY POINTS
 
·      Order book increased 6% to £26.2m (2020: £24.7m)
·      Order entry at £13.0m (2020: £14.2m)
·      Revenue £9.3m (2020: £10.8m)
·      Underlying operating profit £0.15m (2020: £0.23m)
·      Profit before tax £0.10m (2020: £0.19m)
·      Basic earnings per share 1.67p (2020: 2.08p)
·      Interim dividend nil (2020: nil)
·      Net debt1 reduced to £1.77m (2020: £3.17m)
·      Gearing1 reduced 47% to 13.5% (2020: 25.6%)
 
Paul Curtis, CEO, commented:
 
"Against a backdrop of both Covid-19 and Brexit, the Group has shown its strength and agility in dealing with delays experienced to projects across our markets, and maintained profit at near 2020 levels, despite a 14% reduction in revenue for the period.
 
The order book increased to record levels of £26.2m, featuring a mix of orders from both traditional customers and product lines, but importantly also featuring a c£5m contribution from new product developments and new customers.
 
The Group continues to focus on costs and cash retention, and development of our people and product ranges, ensuring it is strongly positioned for the future. It is envisaged that as world economic activity increases, the work that has been undertaken throughout the last year will put the Group in an excellent position to maximise the opportunities for growth and Group development that may arise."
 
Paul Curtis
CEO

16 June 2021
 
Notes: 1 excluding IFRS16 (operating) leases.  Including: Gearing reduced 45% to 14.8% (2020: 26.8%).  Net debt reduced to £1.95m (2020: £3.32m).
 
This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement. 
 
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.
 




Enquires:


www.lpa-group.com


 


Tel:


 




 


 


 


 




LPA Group Plc


 


 


 




Peter Pollock


Chairman


 


01799 512844




Paul Curtis


CEO


 


01799 512858




Chris Buckenham


CFO


 


01799 512859




 


 


 


 




Cairn Financial Advisers


(Nominated Adviser)


 


020 7213 0880




James Caithie / Liam Murray
Ludovico Lazzaretti
 


 


 




 




finnCap


(Broker)


 


020 7220 0500




Ed Frisby / Tim Harper (Corporate Finance)
Tim Redfern / Charlotte Sutcliffe (ECM)


 


 


 




 


 


 


 


 




 


 


 


 


 



 
 
 
 
 
 
 
 
 



 
 
 
CHAIRMAN'S STATEMENT 
 
In my AGM Trading Update I reported that we had been victims of our own success in managing our way through the impact of Covid-19 better than other parts of our customers' supply chains and that as a consequence, delivery of components we manufacture would be delayed into later periods. I am relieved to report that the situation appears to have stabilised and that the reality has been not much worse than our expectations. No business has been lost and the longer-term order book has strengthened, giving us continuing confidence that the business will recover throughout next year, returning to at least some normality.
 
Sales in the Covid-19 impacted first half fell 14% to £9.3m (2020: £10.8m) but strong management ensured that an underlying operating profit was maintained at £0.15m (2020: £0.23m), and profit before tax at £0.10m (2020: £0.19m). Basic Earnings Per Share amounted to 1.67p (2020: 2.08p). Although gearing has reduced 45% to 14.8% (2020: 26.8%), with cash equivalents at £1.3m (2020: £0.2m), it is considered prudent not to announce a dividend until trading conditions have normalised (2020: nil), however it is our intention to do so when conditions permit. Order entry fell 9% to £13.0m (2020: £14.2m) but the order book increased 6% to a new record level of £26.2m (2020: £24.7m).
 
As previously reported, project delays have been experienced across the Group. More positively, routine orders, being those up to c£50k in value, have held up relatively well.  The project pipeline remains remarkably robust.
 
A Strategic Review concluded that the Group should continue to pursue projects at home and abroad, but also seek to grow routine orders activity, currently c£8m per annum, aggressively, through product and market development organically or by acquisition.  Some examples of new initiatives currently being implemented include the launch of our new Plane Power range of aircraft ground power connectors, with enhanced features and ease of installation. We are also delighted to have agreed a new 10 year framework contract which will see us take over the business for supporting the inter-car connection systems on an additional 3,000 passenger carriages as part of our UK Rail General routine business. In addition, our lighting and electronic systems activity has expanded its offering to rail customers to include electronic seat control systems, to work alongside our reading light pods and power outlets for laptop and phone charging. In support of the increased product development underway, our sales force has been strengthened and efforts to expand our distribution network around the world are ongoing.
 
Concern for Environment, Social responsibility, and Governance ("ESG") is not new to us. Our logo and strapline 'long life reliability does not cost the earth' demonstrates our commitment to producing quality, reliable, long life products capable of delivering many years of service. Our LED Lighting, which was the first to be installed in a major worldwide passenger train fleet ten years ago, was designed to last up to twice as long as the competition. Before the Covid-19 disruption, we offered apprenticeships and engaged with the science departments of local schools and we organised charitable events to support local and national organisations, activities we intend to resume as soon as circumstances permit. Our 'Guiding Light Principle', published on our website and in our Annual Report sets out our commitment as does our adoption of the QCA Corporate Governance Code. We have few major energy consuming activities and most, if not all, of the byproducts of our operations are recycled. We design out waste. We are actively working to reduce our environmental footprint. 
 
I am delighted that Robert B Horvath has joined our board as Chairman elect to succeed me when I retire from the board in August.  Len Porter, our Senior Independent Director, will also leave the board later this year after 
seven years of valuable service. I am also delighted to report that Andrew Jenner BSc ACA will be joining the board in September as Non-Executive Director and Senior Independent Director designate.
 
The last 24 years have been immensely challenging and exciting. I leave the board in good hands; I have every confidence in the executive team to manage their way through the current challenges. We have a strong order book, a strong balance sheet and a clear strategy and we should have every confidence in the future.
 
 
 
Peter Pollock
Chairman
16 June 2021

 
 
CONSOLIDATED INCOME STATEMENT




 


6 months to


6 months to


Year to




 


31 Mar 21


31 Mar 20


30 Sept 20




 


Unaudited


Unaudited


Audited




 


£000


£000


£000




 


 


 


 




Revenue                                                              Note 4 


9,296


                  10,780 


20,711




Cost of sales


(7,185)


(8,368)


(16,017)




Gross profit


2,111


2,412


4,694




Distribution costs


(758)


(853)


(1,514)




Administrative expenses


(1,330)


(1,358)


(2,897)




Other operating income


111


25


333




 


 


 


 




Underlying operating profit 


154


                       234 


783




 


 


 


 




Share based payments


(11)


                       (8) 


(36)




Exceptional costs


(9)


-


(131)




 


 


 


 




Operating profit


134


                       226 


616




Finance income 


11


                         20 


41




Finance costs


(48)


(60)


(106)




Profit before tax  


97


                       186 


551




Taxation                                                           Note 2


109


                         70 


44




 


 


 


 




Profit for the period 


206


                       256 


595




Attributable to: 


 


 


 




- Equity holders of the parent


206


256


595




 


 


 


 




Earnings per share                                        Note 5


 


 


 




 - Basic


1.67p


2.08p


4.82p




 - Diluted


1.62p


2.01p


4.65p




 


 


 


 




 


 




CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


 




 


6 months to


6 months to


Year to




 


31 Mar 21


31 Mar 20


30 Sept 20




 


 Unaudited 


 Unaudited 


 Audited 




 


 £000 


 £000 


 £000 




Profit for the period


206


                       256 


595




 


 


 


 




Other comprehensive income


 


 


 




Actuarial gain / (loss) on pension scheme


399


                     (240)


(427)




Tax on actuarial gain / (loss)


(86)


                         44 


28




Other comprehensive income net of tax


313


                     (196)


(399)




 


 


 


 




Total comprehensive income for the period


519


                         60 


196




 


 


 


 




 


 


 


 




 


 


 


 




 


 


 


 




 


 


 


 




 


 


 


 




 


 


 
 


 




 
CONSOLIDATED BALANCE SHEET


 


 


 




 


As at 


As at 


As at 




31 Mar 21


31 Mar 20


30 Sept 20




Unaudited


Unaudited


Audited




£000


£000


£000




Non-current assets


 


 


 




Intangible assets


1,409


1,400


1,386




Tangible assets


5,350


5,767


5,546




Right of use assets


1,318


1,404


1,438




Retirement benefits


2,424


2,080


1,964




 


10,501


10,651


10,334




Current assets


 


 


 




Inventories


4,069


4,234


3,968




Trade and other receivables


4,369


5,819


5,447




Current tax receivable


77


129


30




Cash and cash equivalents


1,285


221


845




 


9,800


10,403


10,290




Total assets


20,301


21,054


20,624




 


 


 


 




Current liabilities


 


 


 




Bank loan


(189)


                    (129)


(188)




Lease liabilities


(374)


                      (374)


(406)




Trade and other payables


(3,541)


                (4,806)


(4,193)




 


(4,104)


                  (5,309)


(4,787)




Non-current liabilities


 


 


 




Bank loan


(2,220)


                 (2,372)


(2,313)




Lease liabilities


(449)


                      (668)


(584)




Deferred tax liabilities


(415)


                    (313)


(389)




 


(3,084)


                  (3,353)


(3,286)




Total liabilities


(7,188)


                 (8,662)


(8,073)




 


 


 


 




Net assets


13,113


12,392


12,551




 


 


 


 




Equity


 


 


 




Share capital


1,276


1,266


1,266




Investment in own shares


(324)


                   (324)


(324)




Share premium account


730


708


708




Share-based payment reserve


129


90


118




Merger reserve


230


230


230




Retained earnings


11,072


10,422


10,553




 


 


 


 




Equity attributable to shareholders of the parent


13,113


12,392


12,551




 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


 




 


6 months to


6 months to


Year to




 


31 Mar 21


31 Mar 20


30 Sept 20




 


Unaudited


Unaudited


Audited




 


£000


£000


£000




 


 


 


 




Opening equity 


12,551


                 12,324 


12,324




Total comprehensive income 


519


                         60 


196




Transactions with owners: 


 


 


 




Proceeds from issue of shares 


32


                           - 


-




Share-based payments 


11


                           8 


36




Tax benefit on share-based payments 


-


                           - 


(5)




Closing equity


13,113


12,392


12,551




 


 


 


 




 


 


 


 




CONSOLIDATED CASH FLOW STATEMENT


 


 


 




 


6 months to


6 months to


Year to




 


31 Mar 21


31 Mar 20


30 Sept 20




 


Unaudited


Unaudited


Audited




 


£000


£000


£000




Profit before tax


97


                       186 


551




Finance costs


48


                         60 


106




Finance income


(11)


                       (20)


(41)




Operating profit


134


                       226 


616




 


 


 


 




Adjustments for:


 


 


 




Amortisation of intangible assets


47


                         43 


95




Depreciation of tangible assets


256


251 


494




Depreciation of right of use assets


138


116


241




(Gain) / loss on sale of tangible assets


(5)


                         61 


61




Equity settled share based payments


11


                           8 


36




 


581


                       705 


1,543




Movements in working capital:


 


 


 




(Increase) in inventories


(101)


                     (410)


(144)




Decrease / (Increase) in trade and other receivables


1,060


                  (1,381)


(902)




(Decrease) / Increase in trade and other payables


(627)


                       968 


245




 


 


 


 




Cash generated from operations


913


                     (118)


742




 


 


 


 




Income taxes received


-


                           2 


131




Defined benefit pension contributions


(50)


                       (50)


(100)




 


 


 


 




Net cash from operating activities


863


                     (166)


773




 


 


 


 




Purchase of software


(16)


(8)


(16)




Purchase of tangible assets


(40)


                     (109)


(156)




Proceeds from sale of tangible assets


5


                           6 


6




Capitalised development expenditure


(52)


                       (76)


(100)




 


 


 


 




Net cash (used) in investing activities


(103)


                     (187)


(266)




 


 


 


 




Repayment of bank loans


(92)


                     (122)


(84)




Principal elements of lease liabilities


(212)


                     (176)


(367)




Interest paid


(48)


                       (17)


(100)




Proceeds from issue of shares


32


                           - 


-




 


 


 


 




Net cash (used) in financing activities


(320)


                     (315)


(551)




Net increase / (decrease) in cash and cash equivalents


440


                     (668)


(44)




Cash and cash equivalents at start of the period


845


                       889 


889




Cash and cash equivalents at end of the period


1,285


                       221 


845




 


 


 


 




Cash and cash equivalents in current assets


1,285


221


845




Cash and cash equivalents at the end of the period


1,285


221


845




 
 
 
 
 
NET DEBT
 
An analysis of the change in net debt is shown below:




 


 


 


 


 




Bank loans


Lease obligations


Cash and cash equivalents


Net debt




£000


£000


£000


£000




At 1 October 2020


         2,501 


                    990 


                    (845)


            2,646 




New lease obligations & lease modifications


-                       - 


                    45 


 - 


               45 




Repayment of borrowings /  lease liabilities


          (92)


                  (212)


                       304 


                     - 




Cash absorbed


                 - 


                         - 


                     (744) 


             (744)




At 31 March 2021


        2,409


                    823 


             (1,285)


            1,947




 
 
 




Notes to the financial statements




 
Note 1         BASIS OF PREPARATION
 
These interim financial statements are for the six months ended 31 March 2021.  They do not include all 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 2020, which have been filed at Companies House with an unmodified audit report.
 
These interim financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. These financial statements have been prepared under the historical cost convention with the exception of certain items which are measured at fair value. 
 
These 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 2020.  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 2021.
 
Note 2         Summary of Significant Accounting Policies
 
Use of judgements and estimates
 
In preparing these interim financial statements management is required to make judgements on the application of the Group's accounting policies and make estimates about the future.  Actual results may differ from these assumptions.  The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the consolidated financial statements for the year ended 30 September 2020.
 
Deferred taxation
 
In the 2021 Spring Budget, the UK Government announced that UK corporation tax rates will increase from 19% to 25% from April 2023.  This change is expected to be confirmed as statute ahead of year end 30 September 2021, at which point deferred tax rates will be increased to 25%, other than on specific assets and liabilities identified as crystallising prior to April 2023.  In accordance with recognised guidance, deferred tax rates are unchanged at 19% within these interim financial statements.
 
Trading losses of £0.29m, previously excluded as an asset, have been recognised as the Directors believe there is reasonable expectation of these being utilised in the future.  Unrecognised losses carried forward total £0.83m (2020: £1.12m).
 
New standards and interpretation adopted by the Group
 
There has been no impact of new standards and interpretations adopted in the period.
 
 
 
 
 
 
Note 3         GOING CONCERN
 
There remain uncertainties due to the Covid-19 pandemic which continues to make forecasting more difficult.
 
The Group's business activities and the factors likely to affect its future performance together with the Group's treasury policy, its approach to the management of financial risk, and its exposure to liquidity and credit risks are outlined fully in the Annual Report & Accounts 2020, which details Covid-19 impacts commencing March 2020.
 
In assessing going concern the Directors note that whilst current economic conditions create uncertainty, with a particular focus on the Covid-19 pandemic the Group: (i) has traded profitably in the current period and is expected to continue to do so in the near term; (ii) has in place adequate working capital facilities for its forecast needs; (iii) has a strong current order book with significant further opportunities in its market place; and (iv) has proven adaptable in past periods of adversity.  Therefore, the Directors believe that it is well placed to manage its business risks successfully.
 
Covid-19 continues to impact whilst post-Brexit impacts have given rise to increased distribution costs, input price pressures are a combination of both factors.  Customers worldwide remain operational however significant rail project delays have arisen in the period that could not have been foreseen.  The Directors have assessed these and sensitised forecasts accordingly.
 
The UK's Covid-19 Job Retention Scheme (extended to at least 30 September 2021) has been utilised by the Group in the period to provide further support to manage resources through workflow fluctuation and short notice deferrals on delivery schedules.
 
Having assessed all aspects of the business and the likely effectiveness of mitigating actions that the Directors would consider undertaking or have undertaken, the going concern basis has been adopted in preparing these interim financial statements.  Actions taken include both cost reductions and a proactive policy of cash retention achieved in part through the UK Government's Job Retention Scheme grants, and the non-declaration of dividends through this period.
 
In reaching this conclusion, the Directors, after making enquiries, inclusive but not limited to updated forecasts and expectations, liabilities and risks and ongoing support from the Group's bank, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
 
Note 4         Operating Segments
 
All of the Group's operations and activities are based in, and its assets located in, the United Kingdom.  For management purposes the Group comprises three product groups (in accordance with IFRS 8) - electro-mechanical, lighting & electronics and distribution (which collectively design, manufacture and market industrial electrical and electronic products) - less centre costs, which operate across three market segments - Rail; Aerospace & Defence, Industrial & Other. It is on this basis that the Board of Directors assess Group performance. The split is as follows:
 




 


6 months to


6 months to


Year to




31 Mar 21


31 Mar 20


30 Sept 20




Unaudited
 


Unaudited
 


Audited
 




 


 


 


 




Electro-mechanical


4,520


4,653


9,195




Lighting & electronics


3,172


3,514


7,087




Distribution


1,604


2,613


4,429




Operational Revenue


9,296


10,780


20,711




 
All revenue originates in the UK.  An analysis by geographical markets and market segments is given below: 




 


6 months to


6 months to


Year to




31 Mar 21


31 Mar 20


30 Sept 20




Unaudited
 


Unaudited
 


Audited
 




 


 


 


 




Rail


77%


                     74%


77%




Aerospace & Defence


7%


15%


12%




Industrial & Other


16%


11%


11%




 


100%


100%


100%




 




United Kingdom


70%


                     62%


70%




Rest of Europe


18%


26%


20%




Rest of the World


12%


12%


10%




 


100%


100%


100%




 
Note 5        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.  Diluted earnings per share are based on the weighted average number of ordinary shares and share options in issue during in the period.
 
Details are as follows:




 


6 months to


6 months to


Year to




31 Mar 21


31 Mar 20


30 Sept 20




Unaudited


Unaudited


Audited




 


 


 


 




Profit for the period - £000


206


                      256 


595




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


 


 


 




12.378


12.358


12.358




Dilutive effect of share options (million)


0.392


0.391


0.442




Number of shares for diluted earnings per share (million)


12.770


12.749


12.800




 


 


 


 




Basic earnings per share


1.67p


2.08p


4.82p




Diluted earnings per share


1.62p


2.01p


4.65p




 
 
Note 6        INFORMATION
 
LPA Group Plc is the Group's ultimate parent company.  It is incorporated in England and Wales and domiciled in the UK, Company Number 686429.  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, UK.  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 interim financial statements have been approved for issue by the Board of Directors on 16 June 2021.  The financial information for the year ended 30 September 2020 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 2020 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unmodified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006. 
 
Copies of this Interim Report are being sent to shareholders who have requested to receive a hard copy.  Copies are available on the Company's website (www.lpa-group.com), by request from the Company's Registrar, or the Company's registered office, address as above.
 
Shareholders are encouraged to visit our website where useful links and assistance have been provided including our Registrars to assist utilisation of digital channels and receipt of future dividends and our Brokers who provide market guidance, further details including "The Digital future" document published by the Group on 5 July 2019 can be found at www.lpa-group.com/investor-information/share-information .
 
 
 
Note 7        COMPANY INFORMATION
 
Company contacts
 




Directors


Peter Pollock                 Chairman

Paul Curtis                     CEO

Chris Buckenham         CFO

Robert B Horvath         NED (Chair elect)

Len Porter                      Senior NED

Gordon Wakeford        NED

 




Secretary


Chris Buckenham 




Registered Office


Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK




Registered Number


00686429




Website


www.lpa-group.com


 


 




Nominated Adviser


Cairn Financial Advisers LLP

62-63 Cheapside
London
EC2V 6AX
 


Broker


finnCap
1 Bartholomew Close
London 
EC1A 7BL




Auditors


RSM UK Audit LLP
2nd Floor, North Wing East 
City House, Hills Road
Cambridge  
CB2 1RE
 


Bankers
 


Barclays Bank Plc 
PO Box 885, Mortlock House
Vision Park, Histon
Cambridge
CB24 9DE




Registrars
 


Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
 


Solicitors


Eversheds Sutherland (International) LLP
115 Colmore Row
Birmingham
B3 3AL




 
Trading subsidiaries

 
LPA Group Plc headquarters is situated at, and all LPA Group entities have their registered address at, Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK.
 
Trading addresses:

LPA Group entities operate as distinct businesses through appointed Executive Teams.


Light & Power House, Shire Hill, Saffron Walden, CB11 3AQ, UK
LPA Industries Ltd / Haswell Engineers Ltd - trading as LPA Connection Systems
 
LPA House, Ripley Drive, Normanton, West Yorkshire, WF6 1QT, UK
Excil Electronics Ltd - trading as LPA Lighting Systems
 
Bath Road, Thatcham, Berkshire, RG18 3ST, UK
Channel Electric Equipment Ltd - trading as LPA Channel Electric
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
  END
 
 
IR EAPKKFSSFEFA