RNS Number:2512R
Acertec PLC
01 April 2008
Embargoed until 0700 1 April 2008
Acertec plc
("Acertec", the "Group" or the "Company")
Preliminary audited results for the year ended 31 December 2007
Acertec plc, one of the UK's leading manufacturers of engineered steel products
for use in the automotive and construction markets, today announces its
preliminary audited results for the year ended 31 December 2007.
SUMMARY
Underlying trading results were broadly in line with expectations:
* Revenue from continuing operations increased by 5% to �322.9 million
(2006: �307.0 million).
* Strong growth in revenue at BRC, which increased by 18% to �196.7
million (2006: �166.2 million), was driven by strong construction markets
and by a good sales performance.
* As expected, revenues at Stadco decreased by 10% to �126.2 million
(2006: �140.8 million), owing to the absence of major engineering projects
associated with new vehicle model programmes and to lower sales volumes on
certain vehicle platforms.
* Operating profit from continuing operations, before amortisation and
exceptional items decreased by 4% from �14.9 million to �14.3 million.
* BRC's operating profit increased by 8% from �7.4 million to �8.0m.
* Stadco's operating profit decreased by 15% from �11.0 million to �9.3m.
* Central costs decreased by 14% from �3.5 million to �3.0m.
* Operating profit from continuing operations increased by 59% from �8.8m
to �14.0m.
* Net cash flow generated from operations was �11.1 million (2006: �16.8
million). Group net borrowings increased by �16.0 million in the year to
�64.1 million at 31 December 2007, mainly reflecting further investment in
BRC's capacity and efficiency, financing costs and a catch-up in German tax
payments. Borrowings in 2008 are expected to increase following the unwinding
of certain special steel purchase arrangements in BRC entered into in 2007.
* The Group has agreed an extension to its existing UK revolving credit
facility until 30 April 2009. Following the increase in debt levels, the
Board is seeking new medium term facilities as well as ways of reducing the
overall level of Group debt.
* No final dividend is being recommended by the Board (2006: 5p per
share).
* Although trading results were broadly in line with expectations, the
outcome for the year was overshadowed by the accounting misstatement in one
of the BRC operations, which was brought to shareholders' attention in early
September. This misstatement amounted to �5.0 million, with the effects
spread over the first half of 2007 and earlier years. All of the figures in
this statement fully reflect the adjustments required to correct this
accounting misstatement.
The discrepancy has been thoroughly addressed by the Board and by senior
management. Key aspects of this are:
* A full and independent investigation has been carried out by a
specialist law firm, Peters and Peters and by KPMG
* All the key accounting staff at the operation, except one, have now
changed
* KPMG has been appointed to provide internal audit services
* Changes to the financial controls are being made and this, combined with
the new internal audit function, will progressively strengthen the Group's
control environment
The key findings of our investigation remain broadly unchanged from our
preliminary findings and the steps we have taken and continue to take are
improving the Group's control environment.
Commenting on the results, James Kerr - Muir, Chairman, said:
"As leaders in their fields, BRC and Stadco are well placed to benefit from the
opportunities and to face the challenges that their respective markets bring.
Although 2007 has been a difficult year, we are moving into 2008 with an
improving control environment and with new senior management in certain key
positions.
Current trading in BRC is dominated by the exceptional increase in the price of
steel in world markets. Its effect on the supply chain and on demand is a
concern. However, BRC should make progress in 2008, based on its strong order
book and on good underlying demand in key infrastructure sectors.
Sales at Stadco have started the year well, although margins continue to be
under pressure. Whilst we do not expect 2008 to see progress at Stadco compared
with last year, the ground will be laid for improvement in 2009.
Overall, we expect that Acertec's underlying performance in 2008 will be similar
to that in 2007."
- Ends -
Enquiries:
Acertec plc 01789 403 070
John Sword, Chief Executive
Rod Holdsworth, Finance Director
Hawkpoint (Nominated Adviser) 020 7665 4500
David Renton
Weber Shandwick Financial 020 7067 0700
Nick Oborne, Rachel Martin, Charlie Hooper
Notes to Editors:
Acertec is one of the UK's leading manufacturers of engineered steel products
for use in the automotive and construction markets. The Company consists of two
divisions: Its BRC division is the UK's largest supplier of engineered steel
products (re-bar and mesh) used in concrete construction and Stadco is the UK's
largest supplier of body-in-white pressings and sub-assemblies to automotive
Original Equipment Manufacturers ("OEMs").
Further information about Acertec can be found on the website www.acertec.com.
Embargoed until 0700 1 April 2008
Acertec plc
("Acertec", the "Group" or the "Company")
Preliminary audited results for the year ended 31 December 2007
CHAIRMAN'S STATEMENT
Trading results
Underlying trading results for the year were broadly in line with expectations.
Revenue at BRC, the UK's leading supplier of steel reinforcement for concrete
construction, increased 18% in response to strong construction markets,
particularly in the first half of the year. As expected, given the low level of
new model programmes at its major customers, revenue at Stadco, the UK's largest
supplier of body-in-white pressings and sub-assemblies to automotive OEM's, was
10% lower against the previous year; its overall results were however slightly
better than we anticipated at the half year, due to the resolution of a
potential one-off bad debt problem.
Revenue from continuing operations increased by 5% to �322.9 million (2006:
�307.0 million). Operating profit from continuing operations, before
amortisation and exceptional items, decreased by 4% to �14.3 million (2006:
�14.9 million). Operating profit from continuing operations increased by 59% to
�14.0 million (2006: �8.8 million).
Net cash flow generated from operations was �11.1 million (2006: �16.8 million).
Group net borrowings increased by �16.0 million in the year to �64.1 million at
31 December 2007, mainly reflecting further investment in BRC's capacity and
efficiency, financing costs and a catch-up in German tax payments. Borrowings in
2008 are expected to increase owing to changes in the financing arrangements for
steel purchases in BRC.
Dividends
Having considered the cash absorbed by the Group in 2007, together with the need
to reduce debt and strengthen the balance sheet, the Board is not recommending
the payment of a final dividend.
Accounting misstatement
Although trading results were broadly in line with expectations, the outcome for
the year was overshadowed by the accounting misstatement in one of our BRC
operations, which we brought to shareholders' attention in early September. The
Board and our senior management have taken firm action to deal with the issues
arising from this misstatement. All of the figures in this statement fully
reflect the adjustments required to correct this misstatement.
People
Rod Holdsworth was appointed Interim Group Finance Director on 1 December 2007.
Rod has had wide experience at board level in the engineering and construction
sectors, most recently as Finance Director of Morrison plc where he assisted in
its successful turnaround. Rod, who is not a statutory director of Acertec,
replaced David Roache who left the Board on 31 December 2007.
Outlook
As leaders in their fields, BRC and Stadco are well placed to benefit from the
opportunities and to face the challenges in their markets. This year should see
BRC make continued progress, despite concerns relating to the effect of dramatic
increases in the price of steel at the start of the year. Meanwhile, Stadco is
responding to high levels of new project opportunities which should lead to an
improvement in 2009.
Overall, we expect that Acertec's underlying performance in 2008 will be similar
to that in 2007.
CHIEF EXECUTIVE'S REVIEW
Acertec's revenue from continuing operations increased by 5% to �322.9 million
(2006: �307.0 million). Operating profit from continuing operations, before
amortisation and exceptional items decreased by 4% to �14.3 million (2006: �14.9
million). Operating profit from continuing operations increased by 59% to �14.0
million (2006: �8.8 million).
BRC Division
BRC is engaged in the design, distribution, marketing and manufacture of a wide
range of steel reinforcement and related products for the construction industry.
The division operates in three sectors: Reinforcement and Specialty Products in
the UK and Ireland; and Reinforcement in Singapore.
Revenue increased by 18% to �196.7 million (2006: �166.2 million) and operating
profit, excluding amortisation and exceptionals, increased by 8% to �8.0
million (2006: �7.4 million). Operating profit increased by 93% to �8.7 million
(2006: �4.5 million). The revenue growth reflected both strong construction
markets and a good sales performance in most of BRC's operations. Approximately
8% of sales growth was a consequence of higher steel prices. Margins were
constrained by competitive pressures, particularly in the latter part of the
year.
BRC's principal business risks are in matching the supply and price of steel
with the demands of its customer base in the construction industry. Reinforcing
steel is a global commodity and market conditions are set internationally, not
in the UK. Although construction demand in the UK has enjoyed several years of
steady growth, it is historically a cyclical business, and is particularly
exposed to changes in the credit environment and to levels of government
expenditure, especially in infrastructure development.
As we indicated in January, towards the end of 2007 we did see some softening in
the housing and commercial (office/retail/warehousing) sectors in the UK.
Underlying demand however remained firm in the infrastructure sectors,
particularly in transport (rail and road), power generation (oil, gas and
windpower), sports facilities (Olympics, football stadia), and in the public
sector (hospitals, schools).
An important part of BRC's strategy is to convert commodity reinforcement
products into engineered, added-value reinforcement solutions for its customers.
Good progress was made in this area in 2007, with a doubling in financial
contribution compared with 2006.
The early part of 2008 has seen exceptional increases in the price of steel
worldwide, driven by high demand in Asia (especially China) and in the
developing world. The price of reinforcing steel has risen by over 50% since
November 2007; BRC is working to manage the impact of these increases on the
supply chain and on demand.
After a strong first half of 2007, BRC's Specialty Products operations saw a
mixed second half of the year. Whilst the Company's geotechnical products
enjoyed strong demand, some of our other product sectors, particularly those,
such as masonry reinforcement, which are more closely related to housing, saw a
reduction in demand and more competitive market conditions which have persisted
in the early part of 2008. A new managing director has been appointed to this
business in early 2008, who will drive the next phase of development in our
Specialty Products activities.
BRC's joint venture in Ireland, BRC McMahon, enjoyed good sales growth following
the acquisition of Buchanan Wire Products in 2006. However, the construction
market in the Republic of Ireland, after several years of strong growth,
weakened in 2007, especially in the second half of the year and particularly in
the housing sector. This gave rise to an increasingly competitive market
environment and the company's margins were reduced compared with 2006. This well
managed business is expected to continue to perform well in today's difficult
market.
BRC Asia made further progress in widening its product range to provide a full
range of reinforcement solutions to the construction industry in Singapore. For
the first time, its sales of rebar based products, including heavy prefabricated
structures, exceeded the sales of its traditional mesh products. After a weak
start to the year, when the market was affected by shortages of sand and
aggregates, the second half of the year was strong, underpinned by the
increasingly buoyant construction industry in Singapore. BRC's joint venture
operation in China showed good sales growth, but margins were thin. We continue
to evaluate the strategic options for our investment in BRC Asia.
Although the impact of steel price increases and the turmoil in financial
markets are a concern, BRC expects to make progress in 2008, based on its strong
order book and on good underlying demand in key infrastructure sectors. The
capital expenditure programme, which extended through 2006 and 2007, has now
largely been completed, leaving BRC well placed to meet its objectives over the
next three years and to continue to develop a better mix of higher margin,
engineered products.
Stadco Division
Stadco is the UK's largest supplier of body-in-white pressings and
sub-assemblies to automotive OEMs, and is also a significant supplier of
sub-assemblies in Germany. Pressings and sub-assemblies are the components
which, when they are finally welded together by the OEM, make up a complete
unpainted car body.
Revenue in 2007 decreased by 10% to �126.2 million (2006: �140.8 million), and
operating profit, excluding amortisation and exceptional items, decreased by 15%
to �9.3 million (2006: �11.0 million). Operating profit decreased by 16% to �9.2
million (2006: �10.9 million).
Sales levels reflected an expected and substantial reduction in revenues from
engineering and tooling projects, associated with a low level of new model
programmes at Stadco's key customers; lower unit volumes on some vehicle models
that were entering a more mature phase of their life cycle; and a reduced
per-vehicle content on the new BMW Mini. Margins on new work reflected and will
this year continue to reflect the tough competitive environment in the UK as the
body-in-white sector adjusts to the market conditions following the demise of MG
Rover.
In the face of these factors we achieved substantial further cost reductions
following the restructuring of Stadco's UK operations, which included the
closure of two factories in 2006.
Stadco's operation in Germany showed improved results in 2007, on the back of
increased efficiency and other improvements.
Stadco's principal business risks are in the level of demand for its products
and in the level of sales revenue. It is a fixed asset intensive business and
consequently operational gearing is high. Demand is dependent upon the success
of its key OEM customers and of the vehicle platforms in which it is involved.
In the medium and longer term, Stadco is dependent upon the BIW outsourcing
policies of the major vehicle OEMs and upon its ability to win new business from
both existing and new customers.
Whilst the recently announced sale by Ford of its Jaguar Land Rover business has
caused uncertainty in the market, Stadco believes that this sale will have a
positive impact on future business prospects in both the short and longer term.
Stadco's major development in St. Petersburg, Russia, which is now being
undertaken as a 50/50 joint venture with Gestamp Automocion SL ("Gestamp"), is
making good progress. The construction phase is underway, with machinery
installation on course for the summer months. The factory is expected to be
completed and tested by the end of the year, ready for production to start at
the beginning of 2009. Initial funding of the investment is being provided by
Gestamp.
In 2008, Stadco expects to see some growth in revenue, helped by two new model
launches - in particular, the Ford Kuga in Germany which has been well received
by the market, and also the Jaguar XF in the UK, where Stadco has won modest
per-vehicle content. Margins, however, will continue to be under pressure.
I am pleased to report that requests for quotations for programmes to supply
parts on new vehicles and for projects which require high levels of programme
management and engineering support are running at their highest level for three
years. These enquiries include projects with customers not previously supplied
by Stadco. Increased demand for aluminium panels, driven by weight reduction
programmes, is expected to benefit Stadco which has particular expertise in this
sector and is by far the largest independent supplier in the UK.
Stadco will continue to concentrate on providing a full range of body-in-white
services to its automotive customers. These services include the manufacture of
pressings and sub-assemblies, the design and procurement of tooling, and whole
body design. Stadco will continue to seek opportunities to provide these
services in territories outside its traditional UK base.
Outlook
Although 2007 has been a difficult year, we are moving into 2008 with an
improving control environment and with new senior management in certain key
positions. Current trading in BRC is dominated by the exceptional increase in
the price of steel in world markets. Its effect on the supply chain and on
demand is a concern. However BRC should make progress in 2008, based on its
strong order book and on good underlying demand in key infrastructure sectors.
Sales at Stadco have started the year well, although margins continue to be
under pressure.
Overall, we expect that Acertec's underlying performance in 2008 will be similar
to that in 2007, with growth at BRC being offset at Stadco, although there will
be one-off costs relating to the refinancing of the Group's credit facilities.
In the medium term, Stadco expects to generate new business from the current
flow of prospects and for Russia to contribute operating profits from 2009. BRC
will benefit from some significant new contract wins for 2008 and should
continue to benefit from the pipeline of major projects in its core markets.
FINANCIAL REVIEW
* Revenue increased by 5% to �322.9 million (2006: �307.0 million)
* Operating profit from continuing operations, before amortisation and
exceptional items, decreased by 4% to �14.3 million (2006: �14.9 million).
Operating profit, including share of joint ventures, increased by 59% to
�14.0 million (2006: �8.8 million)
* Net cash flow generated from operations was �11.1 million (2006: �16.8
million). However, Group net borrowings increased by �16.0 million in the
year to �64.1 million at 31 December 2007, mainly reflecting further
investment in BRC's capacity and efficiency, financing costs and a catch-up
in German tax payments
* Profit before tax increased 42% to �8.8 million (2006: �6.2 million)
Taxation
The Group's tax charge was �4.2 million (2006: �4.0 million). The Group has
accumulated UK tax losses and the tax charge relates solely to overseas
earnings. The directors expect the effective tax rate to be at a similar level
in 2008.
Earnings per share
Basic and diluted earnings per share from continuing operations for the year to
31 December 2007 were 8.0p, this compares with earnings per share reported for
the year to 31 December 2006 of 6.2p based on a weighted share capital of
51,349,707 ordinary shares of 10p each.
Exceptional items
Operating exceptional charges of �0.2 million (2006: �4.9 million) comprise
costs relating to the investigation into the accounting misstatement (�0.6
million) and the retirement of the Group finance director (�0.3 million), offset
by profits on disposal of fixed assets (�0.7 million). The exceptional items for
2006 related to goodwill impairment (�1.9 million) and IPO costs (�3.1 million),
offset by profit on disposal of fixed assets (�0.1 million).
Interest
Finance costs for the year were �5.4 million (2006: �5.5 million) which included
�0.4 million of unmatched translation losses on foreign currency loans.
Dividends
The Directors are not recommending a final dividend. An interim dividend of 2.7p
was paid on 26 October 2007 for the year ended 31 December 2007.
International Financial Reporting Standards
The Company adopted IFRS accounting standards during the year and reported on
the impact analysis, showing the effect of the material changes on the December
2006 financial statements, on 24 August 2007. There have been some changes to the
impact analysis since this announcement and the updated impact analysis is included
in note 11 to this announcement.
Accounting misstatement
On 5 September 2007, we announced that we had discovered a discrepancy in the
accounting for stock at one of the operations within BRC in the UK. An
independent investigation was carried out by specialist lawyers, Peters and
Peters, and by KPMG who reported that there had been a breakdown in control
within the BRC operation and that the accounts had been manipulated and
misstated over a period of more than two years. Key aspects of this are:
*The misstatement amounted to �5.0 million with �1.3 million affecting the
results for the first half of 2007 and �3.7 million affecting the results
for 2006 and earlier years
*All the key accounting staff at the operation, except one, have now
changed
*Changes to the financial controls are being made and this, combined with
a new internal audit function will progressively strengthen the Group's
control environment
The discrepancy has now been thoroughly addressed by the Board and by
management. The key findings of our investigation remained broadly unchanged
from our preliminary findings and the steps we have taken and continue to take
are improving the Group's control environment.
All of the figures in this statement fully reflect the adjustments required to
correct the accounting misstatement in BRC.
Key performance indicators (KPIs)
The Company's operations monitor KPIs on a monthly basis: non-financial measures
include appropriate product quality measures, customer service levels, and
operational productivity and efficiency. Financial KPIs include revenue, cash,
margins, operating costs, capital employed and economic value added. The
financial metrics are discussed within the Chief Executive's Review and the
Financial Review. The other metrics are measured at an operational level and
therefore it is not practicable to measure, or disclose, these metrics at a
group level.
Financial risk management
The Group's operations expose it to a variety of financial risks that include
the effects of changes in debt market prices, credit risk, liquidity risk and
interest rate risk. The Group has in place a risk management programme that
seeks to limit any adverse effects on the financial performance of the Company.
In view of the KPMG report into the accounting misstatement at BRC, external
consultants from KPMG have been appointed to document processes and to review
systems and controls in the BRC operation concerned. This will lead to a clear
action plan for implementation during 2008.
Treasury risk
The most significant treasury exposures faced by the Group are raising finance
and managing interest rate and currency positions. Clear parameters have been
established, including levels of authority, on the type and use of financial
instruments to manage these exposures. Transactions are only undertaken if they
relate to underlying exposures.
Interest rate cash flow risk
The Group is exposed to interest rate risk on short term floating rate
instruments. The Group is exposed predominantly to sterling, Singapore dollar
and Euro LIBOR interest rates on the floating rate debt.
Currency risk
The Group faces currency exposure on trading transactions undertaken by its
subsidiaries in foreign currencies. The Group coordinates the hedging of a
proportion of its transactional exposures by taking out forward foreign exchange
contracts, of usually less than six months duration, against its anticipated
known sales and purchases. The decision to hedge is influenced by the size of
exposure, the certainty of it arising, the trading and market position of the
subsidiary in which the exposure arises and the current exchange rate.
The Group's balance sheet translation exposure is managed by substantially
matching currency assets with currency borrowings. The Group has significant
borrowings denominated in Singapore dollars and Euros which are matched against
similarly denominated assets.
The policies of managing interest rate risk and currency exposure were
consistently applied during 2007.
Financial Instruments
The Group holds and utilises financial instruments in the management of its
operations. These comprise largely foreign exchange forward contracts. It is the
policy of the Group that no trading in financial instruments shall be
undertaken. The main risks from the Group's financial instruments relate to
foreign exchange risk. The board reviews and agrees policies for managing these
risks and the details are set out in note 1 to the financial statements.
Financing and cash flow
The Group operates in a multi currency environment and has set a policy for
managing and reporting the risks inherent in such an environment.
The Group's policy is to cover certain forward currency risks by way of simple
forward contracts. The major transaction currency exposures are to the Singapore
dollar and the Euro. The Company's balance sheet exposure to its investments
outside the UK is largely offset by borrowings in the currencies of the
underlying investments (Singapore dollar and Euro).
All businesses within the Group focus a great deal of attention on cash flow and
on the management of working capital. The Group operates a central treasury
function. All principal operating companies (with the exception of BRC Asia,
where funding is obtained locally) participate in a Group credit facility where
balances are offset daily for interest calculation purposes.
The Group monitors cash on a daily basis and operates a weekly cash forecasting
process involving senior financial and commercial managers. Actual and forecast
performance against bank covenants is measured on a monthly basis.
The Group's primary credit facility is provided by a syndicate of three banks
led by Barclays Bank plc. This facility was due to expire on 18 November 2008
and has recently been extended to 30 April 2009. Having secured the short term
financing of the business, discussions are taking place to arrange new medium
term facilities as well as to find ways of reducing the overall level of Group
debt.
Net cash flow generated from operations was �11.1 million (2006: �16.8 million).
Group net borrowings increased by �16.0 million in the year to �64.1 million at
31 December 2007, mainly reflecting further investment in BRC's capacity and
efficiency, financing costs and a catch-up in German tax payments. In the first
half of 2008 borrowings are expected to increase due to changes in the financing
arrangements for steel purchases in BRC.
�4.0 million (2006: �5.2 million) of bank and other interest was paid together
with tax payments of �7.5 million (2006: �0.3 million).
New capital expenditure in the year of �9.8 million (2006: �11.8 million)
included �5.6 million of expenditure for additional capacity and efficiency
improvements at BRC in the UK.
The depreciation charge in the year was �7.4 million (2006: �7.6 million).
Pensions
Cash contributions of �2.6 million (2006: �4.1 million) were paid into the
Group's two closed defined benefit pension schemes. The net deficit on these
schemes reduced to �12.6 million as at 31 December 2007 (31 December 2006: �16.9
million).
The Company is funding the deficit with the intention of eliminating it within
10 years.
Health and Safety
The Group operates formal assessment and reporting systems in respect of its
health, safety and environmental performance. There were no notifiable
environmental impacts or events at any Group site during the year.
Acertec continually aspires to improve its occupational health and safety
performance and to meet the changing needs of the business and regulatory
requirements.
This is achieved by:
* Setting objectives for health and safety performance and reviewing them
on a regular basis
* Providing and implementing risk control strategies for identified
hazards in the workplace
* Consulting with employees at all levels within the organisation
* Implementing robust hazard reporting, accident recording and
investigation procedures
* Providing and maintaining equipment that is safe to use
* Providing systems to ensure that materials and substances can be used,
handled, transported and stored safely
* Providing information, instruction, training and supervision as
appropriate in order to enable employees to carry out their activities
safely
* Appointing competent people to manage health and safety
The Board receives regular Health and Safety reports and the effectiveness of
the systems and procedures are reviewed annually.
All Acertec employees are responsible for working in a suitable manner in order
to ensure their own safety as well as that of their colleagues and others who
may be affected by their activities.
Consolidated income statement
for the year ended 31 December 2007
Note 2007 2006
�'m �'m
--------------------------------------------------------------------------------
Revenue 2 322.9 307.0
Operating costs (310.8) (300.0)
--------------------------------------------------------------------------------
Operating profit 12.1 7.0
Share of profit of joint ventures 1.9 1.8
--------------------------------------------------------------------------------
Operating profit: Group and share of joint ventures 14.0 8.8
--------------------------------------------------------------------------------
Analysed as:
Operating profit before amortisation of
intangibles and exceptional items 2 14.3 14.9
Goodwill impairment 3 - (1.9)
Cost of stock investigation 3 (0.6) -
Compensation for loss of office 3 (0.3) -
Amortisation of intangibles (0.1) (1.2)
Profit on sale of investments 3 0.4 -
IPO costs 3 - (3.1)
Profit on disposal of fixed assets in joint venture 3 0.3 0.1
--------------------------------------------------------------------------------
Finance costs (5.4) (5.5)
Finance income before exceptional items 0.2 0.7
Finance income - exceptional - 2.2
--------------------------------------------------------------------------------
Net finance costs 4 (5.2) (2.6)
--------------------------------------------------------------------------------
Profit before tax 8.8 6.2
Taxation 5 (4.2) (4.0)
--------------------------------------------------------------------------------
Profit for the year from continuing operations 4.6 2.2
Loss from discontinued operations - (5.0)
--------------------------------------------------------------------------------
Profit/(loss) for the year 4.6 (2.8)
--------------------------------------------------------------------------------
2007 2006
�'m �'m
--------------------------------------------------------------------------------
Profit/(loss) attributable to:
Minority interest 0.5 0.2
Equity shareholders of the company 4.1 (3.0)
--------------------------------------------------------------------------------
4.6 (2.8)
--------------------------------------------------------------------------------
Earnings per share for profit attributable to the equity holders of the company
during the year (expressed in pence per share)
2007 2006
Note pence pence
--------------------------------------------------------------------------------
Basic and diluted 8 8.0 (9.3)
--------------------------------------------------------------------------------
Earnings per share for profit from continuing operations attributable to the
equity holders of the company during the year (expressed in pence per share)
2007 2006
Note pence pence
--------------------------------------------------------------------------------
Basic and diluted 8 8.0 6.2
--------------------------------------------------------------------------------
Consolidated Statement of Changes in Equity for the year ended 31 December 2007
Note 2007 2006
�'m �'m
------------------------------------------------------------------------------------
Profit/(loss) for the year: 4.1 (3.0)
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Actuarial gain recognised on retirement benefit obligations 1.5 -
Deferred tax relating to actuarial gain on
retirement benefit obligations (0.4) -
Cost of share options in issue 0.4 0.4
Subsidiary share options exercised by minority interest (0.1) -
Foreign exchange translation differences taken to reserves (0.3) (0.5)
Dividends paid 6 (4.0) -
New equity issued - 53.3
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Net (decrease)/increase in shareholders' equity (2.9) 53.2
Opening shareholders' equity 17.4 (32.8)
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Closing shareholders' equity 18.6 17.4
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Consolidated balance sheet
as at 31 December 2007
Note 2007 2006
�'m �'m
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Assets
Non-current assets
Goodwill 15.3 15.3
Intangible assets 0.2 0.2
Property, plant & equipment 74.4 70.6
Investments in joint ventures 4.5 4.0
Available for sale financial assets 0.1 0.2
Deferred income tax assets 7 6.4 7.6
Trade and other receivables 0.3 0.3
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101.2 98.2
Current assets
Inventories 32.2 25.5
Trade and other receivables 50.0 45.9
Cash and cash equivalents 27.7 20.0
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109.9 91.4
Liabilities
Current liabilities
Borrowings (90.2) (9.6)
Trade and other payables (74.6) (69.7)
Derivative financial instruments (0.1) -
Current income tax liabilities (1.7) (6.3)
Provisions for other liabilities and charges (1.7) (2.1)
-------------------------------------------------------------------------------
(168.3) (87.7)
-------------------------------------------------------------------------------
Net current (liabilities)/assets (58.4) 3.7
-------------------------------------------------------------------------------
Non-current liabilities
Borrowings (1.6) (58.5)
Deferred income tax liabilities 7 (5.3) (5.2)
Trade and other payables (0.1) (0.1)
Retirement benefit obligations (12.6) (16.9)
-------------------------------------------------------------------------------
(19.6) (80.7)
-------------------------------------------------------------------------------
Net assets 23.2 21.2
-------------------------------------------------------------------------------
Capital and reserves attributable to equity holders
of the company
Called up share capital 5.1 5.1
Share premium account 48.7 48.7
Other reserve 1.0 1.0
Share option reserve 1.1 0.8
Foreign exchange reserve (0.8) (0.5)
Retained earnings (36.5) (37.7)
-------------------------------------------------------------------------------
Total shareholders' equity 18.6 17.4
Equity minority interests 4.6 3.8
-------------------------------------------------------------------------------
Total equity 23.2 21.2
-------------------------------------------------------------------------------
Approved by the Board on 31 March 2008 and signed on its behalf by
Director
Consolidated cash flow statement
for the year ended 31 December 2007
Note 2007 2006
�'m �'m
-----------------------------------------------------------------------------
Cash flows from operating activities
Cash generated from operations 9 11.1 16.8
Interest paid (4.0) (5.2)
Interest received - 0.1
Income tax paid (7.5) (0.3)
-----------------------------------------------------------------------------
Net cash (used in)/generated from
operating activities (0.4) 11.4
-----------------------------------------------------------------------------
Purchases of property, plant and equipment (9.8) (11.8)
Proceeds from sale of property, plant and
equipment - 0.3
Proceeds from disposal of subsidiaries,
net of cash disposed - 13.2
Acquisition of subsidiary, net of cash acquired - (1.3)
Proceeds from sale of investments 0.5 -
Dividends received from joint venture 1.4 1.3
-----------------------------------------------------------------------------
Net cash (used in)/generated from investing
activities (7.9) 1.7
-----------------------------------------------------------------------------
Net proceeds of IPO - 53.3
Proceeds from borrowings 15.1 22.9
Issue costs paid - (0.4)
Repayment of borrowings (12.1) (91.3)
Dividends paid to company's shareholders (4.0) -
Dividends paid to minority interests (0.3) (0.1)
-----------------------------------------------------------------------------
Net cash used in financing activities (1.3) (15.6)
-----------------------------------------------------------------------------
Net decrease in cash in the year (9.6) (2.5)
Cash, cash equivalents and bank overdrafts
at beginning of year 15.8 18.3
-----------------------------------------------------------------------------
Cash, cash equivalents and bank overdrafts
at end of year 6.2 15.8
-----------------------------------------------------------------------------
Notes to the preliminary financial results
for the year ended 31 December 2007
1 Accounting policies
The principal activities of the Group are, through the BRC business, the
manufacture and supply of concrete reinforcement and related products to the
construction industry and, through the Stadco business, the manufacture of steel
and aluminium pressings and sub-assemblies for the automotive manufacturing
industry.
Basis of preparation
The 2007 consolidated financial statements are the first financial statements
prepared by Acertec plc in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC
interpretations and the Companies Act 1985 applicable to Companies reporting
under IFRS. Reconciliations and descriptions of the effect of the transition
from UK GAAP to IFRS on the Group's equity and its net income are given in note 11.
On 5 September 2007, it was announced that a discrepancy had been discovered in
the accounting for stock at one of the operations of BRC Limited. Since then, an
investigation into the discrepancy has been carried out. The results of the
investigation show a discrepancy of �5.0m arising from the overstatement of
stock accounts and an underestimate of accruals. Of the discrepancy, it is
estimated that �1.3m relates to the current year ended 31 December 2007 (tax
impact �0.4m), �1.8m relates to the year ended 31 December 2006 (tax impact
�0.5m) and �1.9m to the year ended 31 December 2005 (tax impact �0.6m). An
adjustment has been made for the prior period error in the UK GAAP to IFRS
reconciliations in note 11.
The consolidated financial statements have been prepared under the historical
cost convention.
2 Segmental analysis
a) Primary reporting format - business segments
At 31 December 2007, the group is organised on a worldwide basis into two main
business segments.
BRC division - the manufacture and supply of concrete reinforcement and related
products to the construction industry.
Stadco division - the manufacture of steel and aluminium pressings and
sub-assemblies for the automotive manufacturing industry.
In addition to these two main business segments, the Group incurs central costs
associated with the management and governance of Acertec plc. These costs
include items such as head office staff costs, pension costs and legal and
professional fees which are to the benefit of the Group as a whole.
Included within the BRC division are the joint venture businesses, BRC McMahon
Reinforcements Limited (Ireland) and Anhui BRC & Masteel Weldmesh Co Limited
(China).
The segment results for the year ended 31 December 2007 are as follows:
Continuing operations BRC Stadco
division division Central Total
�m �m �m �m
--------------------------------------------------------------------------------------
Revenue 196.7 126.2 - 322.9
Operating costs before goodwill
amortisation and exceptional items (190.3) (116.9) (3.0) (310.2)
--------------------------------------------------------------------------------------
Operating profit/(loss)
before goodwill amortisation
and exceptional items 6.4 9.3 (3.0) 12.7
Share of profit of joint ventures
before exceptional items 1.6 - - 1.6
--------------------------------------------------------------------------------------
Operating profit/(loss)
before goodwill amortisation
and exceptional items: Group
and share of joint ventures 8.0 9.3 (3.0) 14.3
Goodwill impairment - - - -
Cost of stock investigation - - (0.6) (0.6)
Compensation for loss of office - - (0.3) (0.3)
Amortisation of intangibles - (0.1) - (0.1)
Profit on sale of investments 0.4 - - 0.4
Profit on disposal of fixed
assets in joint venture 0.3 - - 0.3
--------------------------------------------------------------------------------------
Operating profit/(loss):
Group and share of joint ventures 8.7 9.2 (3.9) 14.0
Finance costs (5.4)
Finance income before
exceptional items 0.2
--------------------------------------------------------------------------------------
Net finance costs (5.2)
--------------------------------------------------------------------------------------
Profit before tax 8.8
Taxation (4.2)
--------------------------------------------------------------------------------------
Profit for the year from
continuing operations 4.6
--------------------------------------------------------------------------------------
There are no discontinued operations during the year ended 31 December 2007.
The segment results for the year ended 31 December 2006 are as follows:
Continuing operations BRC Stadco
division division Central Total
�m �m �m �m
--------------------------------------------------------------------------------------
Revenue 166.2 140.8 - 307.0
Operating costs before goodwill
amortisation and exceptional items (160.6) (129.8) (3.5) (293.9)
--------------------------------------------------------------------------------------
Operating profit/(loss)
before goodwill amortisation
and exceptional items 5.6 11.0 (3.5) 13.1
Share of profit of joint ventures
before exceptional items 1.8 - - 1.8
--------------------------------------------------------------------------------------
Operating profit/(loss)
before goodwill amortisation
and exceptional items: Group
and share of joint ventures 7.4 11.0 (3.5) 14.9
Goodwill impairment (1.9) - - (1.9)
Amortisation of intangibles (1.1) (0.1) - (1.2)
IPO costs - - (3.1) (3.1)
Profit on disposal of fixed assets 0.1 - - 0.1
--------------------------------------------------------------------------------------
Operating profit/(loss):
Group and share of joint ventures 4.5 10.9 (6.6) 8.8
Finance costs (5.5)
Finance income before
exceptional items 0.7
Finance income - exceptional 2.2
--------------------------------------------------------------------------------------
Net finance costs (2.6)
--------------------------------------------------------------------------------------
Profit before tax 6.2
Taxation (4.0)
--------------------------------------------------------------------------------------
Profit for the year from
continuing operations 2.2
--------------------------------------------------------------------------------------
Discontinued operations Stadco Wire
division division Total
�m �m �m
--------------------------------------------------------------------------------------
Revenue 4.1 20.6 24.7
Operating costs (4.8) (24.9) (29.7)
--------------------------------------------------------------------------------------
Loss for the year from
discontinued operations (0.7) (4.3) (5.0)
--------------------------------------------------------------------------------------
The loss for the year from discontinued operations includes normal operating
losses of �0.7m in relation to the Stadco division disposed and �0.4m in
relation to the Wire division disposed. The loss for the year from discontinued
operations includes a loss of �nil in relation to the Stadco division disposed
and �3.9m in relation to the Wire division disposed. There was no tax charge/
credit on the loss for the year from discontinued operations.
Other segmental items included in the income statement are as follows:
Year ended 31 December 2007 Year ended 31 December 2006
BRC Stadco BRC Stadco
division division Central Group division division Central Group
�'m �'m �'m �'m �'m �'m �'m �'m
----------------------------------------------------------------------------------------------
Depreciation 1.8 5.6 - 7.4 1.5 6.1 - 7.6
Amortisation - 0.1 - 0.1 1.1 0.1 - 1.2
Reversal of
inventory impairment - 0.1 - 0.1 - 0.1 - 0.1
Exceptional costs (note 3) - - 0.3 0.3 1.8 - 3.1 4.9
----------------------------------------------------------------------------------------------
Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would also be available to unrelated third
parties.
Segmental assets consist primarily of property, plant and equipment, goodwill,
investments in associates and joint ventures, inventories, trade and other
receivables and cash and cash equivalents. Unallocated assets comprise deferred
taxation, available for sale financial assets, other financial assets at fair
value through profit and loss and derivatives held for trading or designated as
hedges or borrowings.
Segmental liabilities comprise operating liabilities (including derivatives
designated as hedges or future commercial transactions). Unallocated liabilities
comprise items such as taxation and borrowings including related hedging
derivatives.
Capital expenditure comprises additions to property, plant and equipment and
intangible assets.
The segment assets and liabilities at 31 December 2007 and capital expenditure
for the year then ended are as follows:
Business segment
BRC Stadco Unallocated Group
�'m �'m �'m �'m
-------------------------------------------------------------------------------------
Assets 87.9 83.7 35.0 206.6
Investments accounted for using
equity method 4.5 - - 4.5
-------------------------------------------------------------------------------------
Total assets 92.4 83.7 35.0 211.1
-------------------------------------------------------------------------------------
Liabilities (53.4) (32.8) (101.7) (187.9)
-------------------------------------------------------------------------------------
Capital expenditure 6.2 3.6 0.1 9.9
-------------------------------------------------------------------------------------
Segmental assets and liabilities are reconciled to entity assets and liabilities as follows:
Assets Liabilities
�'m �'m
-------------------------------------------------------------------------------------
Segmental assets/(liabilities) 176.1 (86.2)
Unallocated:
Deferred tax 6.4 (5.3)
Current tax - (1.7)
Cash and cash equivalents 27.7 -
Current borrowings - (90.2)
Non-current borrowings - (1.6)
Central assets / liabilities 0.9 (2.9)
-------------------------------------------------------------------------------------
Total 211.1 (187.9)
-------------------------------------------------------------------------------------
Central assets and liabilities include central tax assets and liabilities, and
liabilities in respect of central operating costs.
The segment assets and liabilities at 31 December 2006 and capital expenditure
for the year ended are as follows:
Business segment
BRC Stadco Unallocated Group
�'m �'m �'m �'m
-------------------------------------------------------------------------------------
Assets 74.1 83.3 28.2 185.6
Investments accounted for
using equity method 4.0 - - 4.0
-------------------------------------------------------------------------------------
Total assets 78.1 83.3 28.2 189.6
-------------------------------------------------------------------------------------
Liabilities (43.2) (42.2) (83.0) (168.4)
-------------------------------------------------------------------------------------
Capital expenditure 11.1 4.1 - 15.2
-------------------------------------------------------------------------------------
Central assets and liabilities include central tax assets and liabilities, and
liabilities in respect of central operating costs
Capital expenditure relating to BRC includes �3.1m of additions resulting from
acquisitions through business combinations.
Segmental assets and liabilities are reconciled to entity assets and liabilities
as follows:
Assets Liabilities
�'m �'m
-------------------------------------------------------------------------------------
Segmental assets/(liabilities) 161.4 (85.4)
Unallocated:
Deferred tax 7.6 (5.2)
Current tax - (6.4)
Cash and cash equivalents 20.0 -
Current borrowings - (9.6)
Non-current borrowings - (58.5)
Central assets / liabilities 0.6 (3.3)
-------------------------------------------------------------------------------------
Total 189.6 (168.4)
-------------------------------------------------------------------------------------
b) Secondary reporting format - geographical segments
The Group's two business segments operate in three main areas, even though they
are managed on a world wide basis.
The home country of the company, which is also the main operating company is the
UK. The areas of operation are principally the manufacture and supply of
concrete reinforcement and related products to the construction industry in the
UK, Ireland and Singapore and the manufacture of steel and aluminium pressings
and sub-assembles for the automotive manufacturing industry in the UK and
Germany.
The group's revenue is generated mainly within the UK, Europe and Singapore.
2007 2006
�'m �'m
--------------------------------------------------------------
UK 242.6 237.7
Europe 35.4 34.1
Singapore 43.1 34.4
Other countries 1.8 0.8
--------------------------------------------------------------
322.9 307.0
--------------------------------------------------------------
Revenue is allocated based on the country in which the customer is located.
Total assets 2007 2006
�'m �'m
--------------------------------------------------------------
UK 145.8 135.8
Europe 22.4 22.1
Singapore 37.3 27.7
Other countries 1.1 -
Joint ventures 4.5 4.0
--------------------------------------------------------------
211.1 189.6
--------------------------------------------------------------
Total assets are allocated based on where the assets are located.
Capital expenditure 2007 2006
�'m �'m
--------------------------------------------------------------
UK 7.1 12.1
Europe 1.3 0.3
Singapore 0.7 2.5
Other countries 0.8 0.3
--------------------------------------------------------------
Total 9.9 15.2
--------------------------------------------------------------
Capital expenditure is allocated based on where the assets are located.
3 Exceptional items
2007 2006
�'m �'m
------------------------------------------------------------------------
Goodwill impairment - (1.9)
Cost of stock investigation (0.6) -
Compensation for loss of office (0.3) -
Profit on sale of investments 0.4 -
IPO costs - (3.1)
Profit on disposal of fixed assets in joint venture 0.3 0.1
------------------------------------------------------------------------
(0.2) (4.9)
------------------------------------------------------------------------
Exceptional interest receivable (note 3) - 2.2
------------------------------------------------------------------------
Goodwill impairment
The Group recognised �1.9m goodwill arising out of the acquisition of Capital
Structures plc in January 2006. The Group conducted a full impairment review of
the goodwill relating to Capital Structures plc at 31 December 2006 as required
by IAS 36. As a result, the Group considered it appropriate to fully impair the
�1.9m goodwill relating to Capital Structures plc in the period to 31 December
2006 (related tax credit �nil).
Cost of stock investigation
Following the discovery of a significant stock discrepancy at one of the
operations of BRC in the UK, an investigation into the discrepancy was conducted
by accountants (KPMG LLP) and independent lawyers (Peters and Peters). The cost
of the investigation was �0.6m (related tax credit �0.2m).
Compensation for loss of office
David Roache retired as Finance Director of Acertec plc on 31 December 2007. The
Group incurred a cost of �0.3m (related tax credit �0.1m) in meeting its
obligations under the terms of the employment contract.
Profit on sale of investments
During the year, a profit of �0.4m (related tax charge �nil), (2006: �nil) was
realised on the sale of investments in the subsidiary company, BRC Asia Limited.
Costs in relation to IPO
On 16 May 2006, bonuses of �3.1m (tax impact: �nil) were paid to management as a
result of the IPO.
Profit on disposal of fixed assets
During the year, a profit of �0.3m (related tax charge nil), (2006: �0.1m,
related tax credit �nil) was realised on the disposal of fixed assets in the
joint venture company, BRC McMahon Reinforcements Limited.
4 Financial income and costs
2007 2006
�'m �'m
--------------------------------------------------------------------
Finance expense
Bank loans and overdrafts 4.2 3.1
Other loans - 1.8
Finance leases 0.2 0.2
Ineffectiveness of net investment hedges 0.4 -
Other finance costs 0.6 0.4
--------------------------------------------------------------------
5.4 5.5
Finance income
Ineffectiveness on net investment hedges - (0.6)
Other finance income (0.2) (0.1)
--------------------------------------------------------------------
(0.2) (0.7)
--------------------------------------------------------------------
Net finance costs - before exceptional items 5.2 4.8
Finance income - exceptional - (2.2)
--------------------------------------------------------------------
Net finance costs 5.2 2.6
--------------------------------------------------------------------
The exceptional items relate to the redemption premium on management loan notes
that were issued to certain members of management. The provision for the premium
was based on the value of the underlying businesses and was payable in the event
of a sale of, or on the employee leaving, the business. Prior to the IPO, during
2006, the remaining management loan notes were repaid at par (�0.3m) and
cancelled with the agreement of the loan note holders, resulting in a decrease
in the redemption premium of �2.2m in the year.
Other finance costs includes amortisation of bank arrangement fees of �0.4m
(2006: �0.4m) in relation to the Group's re-financing in November 2005, �0.2m
finance costs in relation to unwinding of discounts on financial instruments
(2006: �nil), and other finance income of �0.2m (2006: �0.1m) which relate to
the Group pension schemes.
5 Income tax expense
(a) Analysis of income tax expense in the year
2007 2006
�'m �'m
----------------------------------------------------------------------------
Current tax 3.2 1.9
Deferred tax 0.9 1.2
Origination and reversal of temporary differences - 0.9
Impact of change in UK tax rate 0.1 -
----------------------------------------------------------------------------
4.2 4.0
----------------------------------------------------------------------------
The tax assessed for the year is higher (2006:higher) than the standard rate of
corporation tax in the UK (30%).
The tax on the group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
2007 2006
�'m �'m
----------------------------------------------------------------------------
Profit before tax 8.8 6.2
----------------------------------------------------------------------------
Tax calculated at domestic tax rates applicable to
profits in the respective countries 2.6 1.7
Effects of:
Expenses not deductible for tax purposes 0.2 2.0
Deferred tax origination and reversal of timing differences - 0.9
Deferred tax not provided 2.4 -
Adjustments to deferred tax in respect of prior years (0.5) -
Adjustments to current tax in respect of prior years (0.6) (0.6)
Remeasurement of deferred tax due to change in UK tax rate 0.1 -
----------------------------------------------------------------------------
Tax charge 4.2 4.0
----------------------------------------------------------------------------
During the year, as a result of the change in UK Corporation Tax rates which
will be effective from 1 April 2008, deferred tax balances have been remeasured.
Deferred tax relating to temporary differences which are expected to reverse
prior to 1 April 2008 is measured at 30% and deferred tax relating to temporary
differences expected to reverse after 1 April 2008 is measured at the tax rate
of 28% as these are the tax rates that will apply on reversal.
The weighted average applicable tax rate was 48% (2006: 25%).
6 Dividends
During 2007, a final dividend of �2.6m (5 pence per ordinary share) was paid in
respect of 2006, and an interim dividend for 2007 of �1.4m (2.7 pence per
ordinary share) was paid. No interim dividend for 2006 or final dividend for
2005 was paid during 2006. The Directors do not recommend the payment of a final
dividend in respect of the year ended 31 December 2007.
7 Deferred income tax
Deferred income tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes relate to the same fiscal authority. The
offset amounts are as follows:
2007 2006
�'m �'m
----------------------------------------------------------------------------
Deferred income tax assets:
- Deferred income tax assets to be recovered after
more than 12 months 6.4 7.6
- Deferred income tax asset to be recovered within
12 months - -
----------------------------------------------------------------------------
6.4 7.6
----------------------------------------------------------------------------
Deferred income tax liabilities:
- Deferred income tax liability to be recovered
after more than 12 months 5.3 5.2
- Deferred income tax liability to be recovered
within 12 months - -
----------------------------------------------------------------------------
5.3 5.2
----------------------------------------------------------------------------
The gross movement on the deferred income tax account is as follows:
2007 2006
�'m �'m
----------------------------------------------------------------------------
Beginning of year 2.4 3.6
Exchange differences - -
Income statement charge (0.9) (1.2)
Tax charged directly to equity (0.4) -
----------------------------------------------------------------------------
End of year 1.1 2.4
----------------------------------------------------------------------------
The movement in deferred income tax assets and liabilities during the year,
without taking into consideration the offsetting of balances within the same tax
jurisdiction, is as follows:
Accelerated
tax
depreciation Other Total
Deferred income tax assets �'m �'m �'m
----------------------------------------------------------------------------
At 1 January 2006 - 10.6 10.6
Charged/(credited) to the income statement - (3.0) (3.0)
Charged directly to equity - - -
Exchange differences - - -
----------------------------------------------------------------------------
At 31 December 2006 - 7.6 7.6
----------------------------------------------------------------------------
Charged/(credited) to the income statement 1.1 (1.9) (0.8)
Charged directly to equity - (0.4) (0.4)
Exchange differences - - -
----------------------------------------------------------------------------
At 31 December 2007 1.1 5.3 6.4
----------------------------------------------------------------------------
Accelerated
tax
depreciation Other Total
Deferred income tax liabilities �'m �'m �'m
----------------------------------------------------------------------------
At 1 January 2006 1.7 5.3 7.0
Charged/(credited) to the income statement (0.9) (0.9) (1.8)
Charged directly to equity - - -
Exchange differences - - -
----------------------------------------------------------------------------
At 31 December 2006 0.8 4.4 5.2
----------------------------------------------------------------------------
Charged/(credited) to the income statement 0.2 (0.1) 0.1
Charged directly to equity - - -
Exchange differences - - -
----------------------------------------------------------------------------
At 31 December 2007 1.0 4.3 5.3
----------------------------------------------------------------------------
The deferred income tax charged to equity during the year is as follows:
2007 2006
�'m �'m
----------------------------------------------------------------------------
Share option scheme - -
Tax on actuarial gain/(loss) on retirement benefits scheme (0.4) -
Impact of change in UK tax rate on deferred tax - -
----------------------------------------------------------------------------
(0.4) -
----------------------------------------------------------------------------
Deferred income tax assets are recognised for tax loss carry-forwards to the
extent that the realisation of the related tax benefit through the future
taxable profits is probable. The group did not recognise deferred income tax
assets of �6.5m (2006: �4.6m) in respect of losses amounting to �23.2m (2006:
�15.3m) that can be carried forward against future taxable income.
8 Earnings per share
Basic earnings/(loss) per share for profit/(loss) attributable to equity holders
of the company
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the company by the weighted average number of ordinary shares
in issue during the period.
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Profit/(loss) attributable to equity
holders of the company (�m) 4.1 (3.0)
Weighted average number
of shares in issue 51,349,707 32,225,256
Basic earnings/(loss) per share (pence
per share) 8.0 (9.3)
----------------------------------------------------------------------------
Basic earnings per share for profit for the period from continuing operations
Basic earnings per share is calculated by dividing the profit for the period
from continuing operations by the weighted average number of ordinary shares in
issue during the period.
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Profit for the period from continuing
operations (�m) 4.1 2.0
Weighted average number
of shares in issue 51,349,707 32,225,256
Basic earnings per share
from continuing operations
(pence per share) 8.0 6.2
----------------------------------------------------------------------------
Basic loss per share for loss for the period from discontinued operations
Basic loss per share is calculated by dividing the loss for the period from
discontinued operations by the weighted average number of ordinary shares in
issue during the period.
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Loss for the period from
discontinued operations (�m) - (5.0)
Weighted average number
of shares in issue 51,349,707 32,225,256
Basic loss per share
from discontinued
operations (pence per share) - (15.5)
----------------------------------------------------------------------------
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The company has one category of dilutive potential
ordinary shares: share options. A calculation is performed to determine the
number of shares that could have been acquired at fair value (determined as the
average annual market share price of the company's shares) based on the monetary
value of the subscription rights attached to outstanding share options. The
number of shares calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the share options.
Options are dilutive at the profit from continuing operations level and so in
accordance with IAS33, have been treated as dilutive for the purposes of
calculating diluted earnings per share.
The diluted earnings per share have been calculated on the following earnings
and weighted average number of shares in issue:
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Profit/(loss) attributable to equity
holders of the company (�m) 4.1 (3.0)
----------------------------------------------------------------------------
Weighted average number
of ordinary shares in issue 51,349,707 32,225,256
Adjustment for share options
- share options 4,852 45,377
----------------------------------------------------------------------------
Weighted average number
of ordinary shares for
diluted earnings per share 51,354,559 32,270,633
----------------------------------------------------------------------------
Diluted earnings/(loss)
per share (pence per share) 8.0 (9.3)
----------------------------------------------------------------------------
Diluted earnings per share - continuing operations
The diluted earnings per share have been calculated on the following earnings
and weighted average number of shares in issue:
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Profit for the period
from continuing operations (�m) 4.1 2.0
----------------------------------------------------------------------------
Weighted average number
of ordinary shares in issue 51,349,707 32,225,256
Adjustment for share options
- share options 4,852 45,377
----------------------------------------------------------------------------
Weighted average number
of ordinary shares for
diluted earnings per share 51,354,559 32,270,633
----------------------------------------------------------------------------
Diluted earnings per
share (pence per share) 8.0 6.2
----------------------------------------------------------------------------
Diluted earnings per share - discontinued operations
The diluted earnings per share have been calculated on the following earnings
and weighted average number of shares in issue:
Year Year
ended 31 ended 31
December December
2007 2006
----------------------------------------------------------------------------
Loss for the period from
discontinued operations (�m) - (5.0)
----------------------------------------------------------------------------
Weighted average number
of ordinary shares in issue 51,349,707 32,225,256
Adjustment for share options
- share options - 45,377
----------------------------------------------------------------------------
Weighted average number
of ordinary shares for
diluted earnings per share 51,349,707 32,270,633
----------------------------------------------------------------------------
Diluted earnings per
share (pence per share) - (15.5)
----------------------------------------------------------------------------
9 Cash generated from operations
2007 2006
�'m �'m
----------------------------------------------------------------------------
Operating profit excluding share of joint ventures 12.1 7.0
Depreciation charge 7.4 7.6
Impairment of goodwill - 1.9
Amortisation of intangibles 0.1 1.2
Profit on sale of investments (0.4) -
Difference between pension service cost and
cash contributions (2.6) (4.1)
Other non-cash changes 0.4 0.4
Changes in working capital (excluding
the effects of exchange differences on
consolidation)
- Inventories (6.7) (5.9)
- Trade and other receivables (4.1) (4.8)
- Trade and other payables 4.9 13.5
----------------------------------------------------------------------------
Cash generated from operations 11.1 16.8
----------------------------------------------------------------------------
Included within the above cash flows are the following cash flows relating to
discontinued operations: net cash flow generated from operating activities �nil
(2006: �3.1m), net cash used in investing activities �nil (2006: �0.6m outflow).
Other non-cash changes are the movements in the share option reserve in the
year.
10 Events after the balance sheet date
Further to the reduction in the corporation tax rate announced in the recent
Budget, deferred tax reversing after 1 April 2008 will be recognised at a rate
of 28% as opposed to the existing rate of 30%. This will result in a reduction
in the deferred tax liability and a corresponding credit to the profit and loss
account. The impact is not expected to be material.
On 31 March 2008, Acertec plc entered into an agreement with Barclays Bank plc
to extend its existing UK revolving credit facility until 30 April 2009.
11 Reconciliation of net assets and profit under UK GAAP to IFRS
The Group reported under UK GAAP in its previously published financial
statements for the year ended 31 December 2006. The analysis below shows a
reconciliation of net assets and profit as reported under UK GAAP as at 31
December 2006 to the revised net assets and profit under IFRS as reported in
this financial information.
Reconciliation of net assets at 1 January 2006
Note �m
--------
Net assets as reported under UK GAAP (21.8)
Negative goodwill elimination d 3.0
Provision for loss on disposal groups a (3.1)
Holiday pay accrual h (0.1)
IFRS tax g (5.2)
Prior year error - stock error in BRC i (1.9)
--------
Net assets as reported under IFRS (29.1)
--------
Reconciliation of profit for the year ended 31 December 2006
Note �m
--------
Profit on ordinary activities before interest and
taxation reported under UK GAAP 4.5
Disposal groups a 7.6
Goodwill amortisation d (2.0)
Reduced depreciation f 0.5
Prior year error - stock error in BRC i (1.8)
--------
Operating profit: Group and share of joint
ventures under IFRS 8.8
--------
Reconciliation of profit for the year ended 31 December 2006
Note �m
--------
Loss on ordinary activities after taxation for the period
reported under UK GAAP (2.7)
Disposal groups a 7.6
Goodwill amortisation d (1.8)
Reduced depreciation f 0.5
IFRS tax g 0.7
Prior year error - stock error in BRC i (1.8)
Change in accounting policy in 2007 - Net investment hedge j (0.3)
--------
Profit for the year from continuing operations
reported under IFRS 2.2
--------
Reconciliation of consolidated balance sheet and equity at 31 December 2006
Effect of
transition to
UKGAAP IFRS Total
Note �m �m �m
--------------------------------------------------------------------------------------------------
ASSETS
Non-current assets
Goodwill d 16.6 (1.3) 15.3
Negative goodwill d (2.0) 2.0 -
Intangible assets e - 0.2 0.2
Property, plant & equipment f 70.3 0.3 70.6
Investments in joint ventures 4.0 - 4.0
Available for sale financial assets 0.2 - 0.2
Deferred income tax assets g 1.8 5.8 7.6
Trade and other receivables 0.3 - 0.3
--------------------------------------------------------------------------------------------------
91.2 7.0 98.2
Current assets
Inventories i 28.5 (3.0) 25.5
Trade and other receivables 45.9 - 45.9
Cash and cash equivalents 20.0 - 20.0
--------------------------------------------------------------------------------------------------
94.4 (3.0) 91.4
LIABILITIES
Current liabilities
Borrowings (9.6) - (9.6)
Trade and other payables h,i (68.9) (0.8) (69.7)
Current income tax liabilities (6.3) - (6.3)
Provisions for other liabilities and charges (2.1) - (2.1)
--------------------------------------------------------------------------------------------------
(86.9) (0.8) (87.7)
--------------------------------------------------------------------------------------------------
Net current assets 7.5 (3.8) 3.7
--------------------------------------------------------------------------------------------------
Non-current liabilities
Borrowings (58.5) - (58.5)
Deferred income tax liabilities g - (5.2) (5.2)
Trade and other payables (0.1) - (0.1)
Retirement benefit obligations g (11.8) (5.1) (16.9)
--------------------------------------------------------------------------------------------------
(70.4) (10.3) (80.7)
--------------------------------------------------------------------------------------------------
Net assets 28.3 (7.1) 21.2
==================================================================================================
Capital and reserves attributable to equity
holders of the company
Called up share capital 5.1 - 5.1
Share premium account 48.7 - 48.7
Other reserve 1.0 - 1.0
Share option reserve 0.8 - 0.8
Foreign exchange reserve j (0.8) 0.3 (0.5)
Retained earnings (30.3) (7.4) (37.7)
--------------------------------------------------------------------------------------------------
Total shareholders' equity 24.5 (7.1) 17.4
Equity minority interests 3.8 - 3.8
--------------------------------------------------------------------------------------------------
Total equity 28.3 (7.1) 21.2
==================================================================================================
Reconciliation of consolidated income statement for the year ended 31 December 2006
Effect
of
transition
to
UKGAAP IFRS Total
Note �m �m �m
------------------------------------------------------------------------------------------------------------------
Revenue a 331.7 (24.7) 307.0
Operating costs (323.3) 23.3 (300.0)
------------------------------------------------------------------------------------------------------------------
Operating profit a,b,c,f,i 8.4 (1.4) 7.0
Share of profit of joint ventures 1.8 - 1.8
------------------------------------------------------------------------------------------------------------------
Operating profit: Group and share of joint ventures 10.2 (1.4) 8.8
------------------------------------------------------------------------------------------------------------------
Analysed as:
Operating profit before goodwill amortisation and exceptional
items - continuing operations f,i 16.2 (1.3) 14.9
Operating profit before goodwill amortisation and exceptional
items - discontinued operations a (1.8) 1.8 -
Goodwill amortisation/impairment c,d,e (1.1) (0.8) (1.9)
Amortisation of intangibles c - (1.2) (1.2)
IPO costs (3.1) - (3.1)
Profit on disposal of fixed assets b - 0.1 0.1
------------------------------------------------------------------------------------------------------------------
Loss on disposal of operations - discontinued operations a (5.8) 5.8 -
Profit on disposal of fixed assets b 0.1 (0.1) -
------------------------------------------------------------------------------------------------------------------
Profit before interest 4.5 4.3 8.8
Finance costs (5.5) - (5.5)
Finance income before exceptional items j 1.0 (0.3) 0.7
Finance income - exceptional 2.2 - 2.2
------------------------------------------------------------------------------------------------------------------
Net finance costs (2.3) (0.3) (2.6)
------------------------------------------------------------------------------------------------------------------
Profit before tax 2.2 4.0 6.2
Taxation c,g (4.9) 0.9 (4.0)
------------------------------------------------------------------------------------------------------------------
(Loss)/profit for the year from continuing operations (2.7) 4.9 2.2
Loss from discontinued operations a - (5.0) (5.0)
------------------------------------------------------------------------------------------------------------------
Loss after tax (2.7) (0.1) (2.8)
Minority interests (0.2) - (0.2)
------------------------------------------------------------------------------------------------------------------
Loss for the year (2.9) (0.1) (3.0)
------------------------------------------------------------------------------------------------------------------
Explanation of reconciling differences between UKGAAP and IFRS
a IFRS 5 requires the identification of disposal groups whose carrying amount is
to be recovered primarily from a sale transaction rather than through continuing
use. To demonstrate that the carrying amount will be recovered primarily through
a sale transaction, the disposal group must be immediately available for sale in
its present condition and its sale must be highly probable. Disposal groups that
meet the conditions to be classified as held for sale should be measured at the
lower of their carrying amount and fair value less costs to sell with
depreciation on such assets ceasing at the point of reclassification.
Discontinued operations are presented as a single line in the income statement
representing the post-tax profit or loss for the period. Turnover and costs in
the consolidated income statement will therefore only relate to continuing
operations.
The Group has made the assessment that the subsidiary companies, Carrington Wire
Limited and Stadco Birmingham Pressings Limited, which were both sold in April
2006, met the criteria for reclassification as disposal groups at 1 January
2006.
As a result, at 1 January 2006 the assets and associated liabilities of those
companies have been reclassified as held for sale and remeasured to fair value
at that date less costs to sell. No depreciation has been charged on those
assets in 2006.
b IFRS requires all operating expenditure to be recognised within operating
profit, therefore the Group has reclassified �0.1m in respect of profit on
disposal of fixed assets from exceptional costs to operating costs.
c Under IFRS, the Group has recognised �1.9m of goodwill and �0.9m of intangible
assets arising out of the acquisition of Capital Structures plc in January 2006.
The intangible assets, which relate largely to the value of the order book, will
be amortised on a systematic basis that reflects the expected pattern of
economic benefits over a period which is expected to be 1 year. An associated
deferred tax liability of �0.2m has also been recognised in relation to the
intangible assets.
The Group has conducted a full impairment review of the goodwill relating to
Capital Structures plc at 31 December 2006 as required by IAS 36. As a result,
the Group considers it appropriate to fully impair the goodwill relating to
Capital Structures plc in the period to 31 December 2006.
d The adoption of IFRS 3 and IAS 36 has resulted in the Group ceasing annual
goodwill amortisation from 1 January 2006. As a result, the UKGAAP amortisation
charge of �1.1m have been reversed in arriving at the Group's 2006 IFRS profit
for the year.
Negative goodwill of �(0.3)m is credited to retained earnings at 1 January 2006
as IFRS does not allow the capitalisation of negative goodwill.
e Computer software that is not an integral part of the related hardware is
classified as an intangible asset under IFRS, whereas such assets were
classified as tangible under UK GAAP. Reclassifications of �0.2m have been made
at 1 January 2006 and at 31 December 2006.
f Under IAS 16, the useful lives and residual values of property, plant and
equipment should be reviewed at least each year end and revised where
expectations are significantly different from previous estimates. The
depreciation charge should then be adjusted for current and future periods. The
residual value of an item of property, plant and equipment is based on the
estimated amount that an entity would currently obtain from the asset's
disposal, less estimated selling costs, if the asset were already of the age and
in the condition expected at the end of its useful life. Thus, residual values
take account of changes in prices up to the balance sheet date, whereas UK GAAP
requires consideration of prices prevailing at the date of acquisition.
The Group has reviewed the useful lives and residual values of property, plant
and equipment under IFRS 5 with the result that the depreciation charge in 2006
is �0.5m lower under IFRS compared to UKGAAP.
g Deferred tax under UK GAAP was provided on all timing differences that had
originated but not reversed at the balance sheet date. Timing differences arise
when gains and losses are included in tax computations in a later or earlier
period from that in which they appear in the Group's financial statements.
IAS 12 has a balance sheet focused approach. The standard requires that full
provision be made for all taxable temporary differences except those arising on
goodwill. A temporary difference is the difference between carrying amount of an
asset or liability in the balance sheet and its associated tax base. A temporary
difference is a taxable difference if it will give rise to taxable amounts in
the future when the asset or liability is settled.
Deferred tax liabilities and assets are classified as non-current irrespective
of the expected timing of the reversal of the underlying taxable temporary
difference. Current tax assets and liabilities are shown separately on the face
of the balance sheet.
Under IAS 12, additional deferred tax liabilities of �4.5m have been recognised
at 31 December 2006.The principal impact has been to recognise deferred tax on
all property not qualifying for capital allowances (�1.0m) and on rolled over
capital gains liabilities (�2.7m).
Under IAS 12, deferred tax assets relating to the pension deficit are no longer
netted off against the pension deficit, but are instead shown within deferred
tax balances. Deferred tax relating to the pension deficit was �5.1m at 31
December 2006 and �8.0m at 1 January 2006.
h IAS 19 requires the Group to recognise in full liabilities in relation to
employee benefits. As at 1 January and 31 December 2006, the Group has
recognised an additional �0.1m of liabilities for holiday pay.
i On 5 September 2007, the Group announced that it had discovered a discrepancy
in the accounting for stock at one of the divisions of BRC in the UK, An
investigation into the discrepancy has been conducted, its results show a total
discrepancy of �3.7m arising from an overstatement of inventories by �3.0m and
an understatement of accruals by �0.7m. Of the total discrepancy, �1.8m relates
to the year ended 31 December 2006, (tax impact �0.5m), and �1.9m to the year
ended 31 December 2005 (tax impact �0.6m).
j On 1 January 2006, the Group adopted hedge accounting under IFRS and
designated a proportion of the Group's Euro and Singapore denominated borrowings
as a hedge of the net investment in the Group's German and Singapore
subsidiaries. In the year ended 31 December 2006, the effective hedge of �0.3m
on translation of the borrowing to currency at the balance sheet date is
recognised in translation reserves in shareholders' equity.
12 Preliminary results
The Group's financial statements for the year ended 31 December 2007 have been
audited and an unqualified audit opinion has been issued on the financial
statements. These preliminary results are extracted from those audited financial
statements, althogh these results do not constitute statutory accounts under the
definition of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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