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Lincat Group plc

Preliminary results for the 12 months to 2 January 2009

Lincat Group plc ('the Group'), the AIM listed manufacturer of commercial catering appliances, bar equipment and domestic range cookers, announces its preliminary results for the twelve month period to 2 January 2009.

Note: The period ended 2 January 2009 is referred to as 'the year'. To aid year-on-year comparisons, the Group has provided pro-forma figures for the twelve month period to 31 December 2007, which formed part of an eighteen month reporting period, and it is these figures that are used in comparisons below.

Summary of the Group's performance and activities:

• Increase in Group sales from £34.5m to £34.7m

• Operating profit before exceptional items of £5.6m (2007: £6.0m), a return on sales of 16.1%

• Adjusted earnings per share* of 70.3p, an increase of 10% on 2007

• Final dividend of 18.8p proposed, giving a total dividend of 29.0p (2007: 28.0p)

• Strong result from Britannia following its move to new premises in December 2007

• Interim payments totalling £2.0m received against sale of IMC's redundant Hertfordshire site; balance of £5.5m receivable 30 June 2009

• Operating cash flow of £6.5m in the year

• Year end net debt of £2.9m, gearing of 31%

* Adjusted earnings per share is calculated from profit after tax, after adding back exceptional items and exceptional tax charges.

Commenting on the year's results, Martin Craddock, Chairman, said:

'In the context of a market that weakened markedly in the second half of the year, our operations have delivered another robust performance. Whilst we anticipate weak demand throughout 2009, our strong balance sheet and high level of cash generation puts us in a stronger position than many of our competitors.'

Contacts:
Lincat Group plc
Martin Craddock, Chairman	}	01522 875555
Paul Bouscarle, Chief Executive	}
Cenkos Securities plc Ivonne Cantu Jeremy Warner Allen	} }	0207 397 8980

  CHAIRMAN'S STATEMENT

As a result of the earlier change to our accounting reference date from 30 June to 31 December, this report covers the twelve month period from 1 January 2008 to 2 January 2009 and the eighteen month period from 1 July 2006 to 31 December 2007. To aid year-on-year comparisons, we also provide pro-forma information for the 2007 calendar year.

The progress of the Group can best be understood by comparing the period ended 2 January 2009 figures with the pro-forma unaudited figures for the 2007 calendar year, as laid out in the Financial & Operations Review below. All references hereafter are to those figures.

Given the background economic circumstances, the Group has delivered another strong result. Operating profit before exceptional items of £5.601m on turnover of £34.697m represents a robust 16.1% return on sales. Adjusted earnings per share, excluding exceptional items, were up 10.2% at 70.3p, following the buy-back of 26.75% of the Company's share capital by means of a tender offer in July 2007.

The outstanding result this year was delivered by Britannia, following the completion of a £1m public sector contract in the second half. Having moved in December 2007 from its former rented premises in Southam, Warwickshire, to refurbished freehold premises in nearby Leamington Spa, during 2008 Britannia grew its sales by 40%. Once again the Group's decision to invest in its existing businesses has been repaid with sales and profit growth.

IMC's Hertfordshire site

We have to date received two non-refundable deposits of £1m each towards a total of £7.5m payable by the purchaser of the site of IMC's former manufacturing facility in Croxley Green, Hertfordshire. The purchaser now has detailed planning approval for the residential development of the site and we expect completion to take place as scheduled following the payment by them of the final instalment of £5.5m on 30 June 2009. Unless and until that payment is made, ownership of the property continues to reside with the Group.

Dividend

In keeping with our long-standing progressive dividend policy, the Board is recommending a final dividend of 18.8p (2007: 18.2p), giving a total dividend for the year of 29.0p (2007: 28.0p), an increase of 3.6%. If approved by shareholders at the Company's AGM in May, the dividend will be paid on 29 May 2009 to shareholders on the register at the close of business on 1 May 2009.

Current trading

Trading conditions continue to be exceptionally challenging, with Group sales down 18% (or 11% when adjusted for working days) in the first two months of the year. We see little prospect of an early recovery in demand and have therefore put in place measures to both reduce our operating costs and to stimulate demand through pricing and value incentives offered to our dealers and end customers. Lincat Ltd, IMC and Mercury are all launching important new products during the course of the year but these cannot be expected to impact the overall level of sales until well into the second half.

We anticipate that 2009 will see a fall in Group sales and earnings. However our strong balance sheet and high level of cash generation will enable us to continue developing our product ranges and expanding our market reach through this difficult trading period, leaving us well positioned to grow sales and earnings as and when our markets recover.

Martin Craddock

Chairman

  FINANCIAL AND OPERATIONS REVIEW

As indicated in the Chairman's Statement above, this review will compare pro-forma figures for the calendar 12 months to 2 January 2009 and 31 December 2007. 

Pro-forma consolidated income statement ('unaudited')    

For the year ended	2 January	31 December
	2009 £'000	2007 £'000
Continuing operations
Revenue	34,697	34,494
Cost of sales	(17,271)	(17,126)
	----------	----------
Gross profit	17,426	17,368
Other operating expenses	(11,825)	(12,095)
	----------	----------
Operating profit before exceptional items	5,601	5,955
Exceptional items	-	(682)
	----------	----------
Operating profit	5,601	5,273
Net interest payable	(479)	(195)
Other finance income: pensions	92	71
	----------	----------
Profit before taxation	5,214	5,149
Taxation	(1,393)	(1,661)
Exceptional deferred tax charge on disallowed IBA's	(735)	-
Total taxation	(2,128)	(1,661)
	----------	----------
Profit for the year attributable to shareholders	3,086	3,488
	=====	=====
Adjusted earnings per share*	70.3p	63.8p
Basic earnings per share	56.8p	54.4p

* Adjusted earnings per share is calculated from profit after tax, after adding back exceptional items and exceptional tax charges.

Pro-forma cash flow statement ('unaudited')

Net cash from operating activities	6,470	4,169
Net cash from investing activities	1,096	(1,668)
Net cash used in financing activities	(5,897)	(5,621)
	----------	----------
Increase/(decrease) in cash and cash equivalents	1,669	(3,120)
	=====	=====

  Financial

Group sales for the year totalled £34.7m, a small increase on the 2007 figure of £34.5m. Market conditions started to soften in the second quarter of 2008 and weakened further in the second half of the year. In general we are seeing the sharpest reductions in demand amongst private sector customers, with stronger levels of demand from public sector budget-holders.

The whole of the Group's sales growth in the second six months was accounted for by Britannia, as the impact of the economic slow down was felt in both the commercial and consumer environments. At £3.358m Britannia's sales were just over double the figure of two years ago, a result that owes much to the commitment and professionalism of the management and staff of that business. During that period the Group has also invested in the business, through the Heydal acquisition in March 2007 and the purchase of its Leamington Spa facility in late 2007.

Our gross margin for the year held up well at 50.2%, despite rising raw material prices through most of the year. Once again labour costs fell both as a percentage of sales and in absolute terms. We continue to upgrade manufacturing plant at each site where an economic case can be made and this continues to deliver cost advantages in each of the Group's factories.

Operating profit of £5.601m compares with £5.955m in 2007, a fall of 6%, which should be seen in the context of exceptionally tough market conditions for much of the year. A return on sales of 16.1% represents a commendable result for our businesses in the circumstances.

During the year we continued to repay ahead of schedule the term loan taken out to part-fund the share buy-back in 2007. Net interest charges of £276k in the first half of the year fell to £203k in the second half. 

The year saw exceptionally strong cash flow and a fall in net debt from £9.018m at 31 December 2007 to £2.950m at 2 January 2009. In addition to the £2m non-refundable deposits received against IMC's vacated Hertfordshire site, there were significant reductions in inventories (down £499k) and trade receivables (down £1.416m). There were neither acquisitions nor property purchases during the year; net capital expenditure amounted to £912k, slightly below the annual depreciation charge of £1.045m.

Year-end end debt was £2.950m, giving gearing of 31%. It should be noted that the final instalment of £5.5m for the IMC site is receivable on 30 June 2009.

Operations

During 2008 our businesses continued to develop and, in several cases, prosper. Both IMC (marginally) and Britannia (substantially) grew their operating profits; Lincat Ltd, which is more exposed to the private sector of the market than either IMC or Britannia, saw turnover fall by 1% with a consequent decline in operating profit. Half of Lincat Ltd's sales decline was accounted for by lower internal sales to Mercury, which itself had to contend with a sharp downturn in demand for its domestic range cookers. We envisage this weakness in consumer demand is likely to last throughout 2009, although new product launches later in the year should then start to stimulate Mercury's sales.

Britannia's strong performance following its factory move in December 2007 has been particularly pleasing. During the year it delivered on-time and on-budget an exceptionally large and complex contract, whilst continuing to supply its regular client base. Sales of Heydal ventilated ceilings - a single-product business acquired in March 2007 that complements Britannia's core product range - continue to grow strongly.

In its second full year since its move to Wrexham, IMC once again delivered an exceptionally strong operating result, albeit on sales that were 3% below those of the prior year. Experience gained from previous economic downturns shows that UK demand for IMC's bar products falls disproportionately in such times and this was the case in 2008. Offsetting successes included further growth in exports, which now represent 39% of IMC's turnover, and rising sales of the company's award-winning food waste composting systems.

Lincat Ltd continues to develop its profile and contacts in the UK public sector. New products launched in the early part of the year and the efforts of a dedicated business development manager are starting to deliver results. However, public sector buyers are typically loyal to long-standing suppliers so progress in penetrating this market tends to be slow and gradual.

These results were achieved by our operations in the face of exceptional challenges during the latter part of 2008; we recognise that trading in 2009 is likely to be tougher still. Our companies will be required to manage their resources at a time of sharply falling demand and historically low levels of confidence amongst the end users of our equipment. Each company within the Group is responding to the situation in a way that reflects its own particular market position. We have never chased market share as an end in itself but in the context of decreased demand we shall consider all available methods to sustain our production volumes.

Whilst looking to eliminate avoidable costs, it is and shall remain the Group's policy to invest in the future through improving and extending our product offering. Important new products will be launched during 2009 and it is our intention to maintain investment in research and development at current levels. Our higher than average operating margins, strong cash generation and minimal gearing give the Group a significant commercial advantage during a downturn that could well threaten the survival of weaker competitors.

Paul Bouscarle

Chief Executive

  CONSOLIDATED INCOME STATEMENT

For the year ended 2 January 2009

	Note	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
CONTINUING OPERATIONS
Revenue	1	34,697	49,986
Costs of sales		(17,271)	(25,172)
		----------	----------
Gross profit		17,426	24,814
Distribution costs		(5,765)	(7,853)
Administrative expenses		(2,911)	(4,074)
Exceptional items	2	-	(979)
Total administrative expenses		(2,911)	(5,053)
Other operating expenses		(3,149)	(4,828)
		----------	----------
Operating profit before exceptional items		5,601	8,059
Exceptional items	2	-	(979)
		----------	----------
Operating profit		5,601	7,080
Finance income	3	8	216
Finance costs	3	(487)	(364)
Expected return on pension scheme assets		480	668
Interest on pension scheme liabilities		(388)	(561)
		----------	----------
Profit before taxation		5,214	7,039
Taxation		(1,393)	(2,245)
Exceptional item: deferred tax charge on withdrawal of IBA's	2	(735)	-
Total taxation	4	(2,128)	(2,245)
		----------	----------
Profit for the year attributable to shareholders		3,086	4,794
		=====	=====
Earnings per share
Basic	5	56.8p	72.1p
Diluted	5	56.7p	71.8p

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 2 January 2009

	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
Actuarial (losses)/gains on defined benefit pension scheme	(694)	812
Tax on items taken directly to equity	194	(227)
	----------	----------
Net (loss)/income recognised directly in equity	(500)	585
Profit for the period attributable to shareholders	3,086	4,794
	----------	----------
Total recognised income and expense for the period	2,586	5,379
	=====	=====

  CONSOLIDATED BALANCE SHEET

At 2 January 2009

	Note	2 January 2009 £'000	31 December 2007 £'000
ASSETS
Non-current assets
Goodwill		693	693
Other intangible assets		124	158
Property, plant and equipment		9,157	9,199
Retirement benefit surplus		-	164
Deferred tax asset		6	-
		----------	----------
		9,980	10,214
		----------	----------
Current assets
Inventories		3,930	4,429
Trade and other receivables		5,036	6,634
Cash and cash equivalents		732	73
		----------	----------
		9,698	11,136
		----------	----------
Non-current assets classified as held for sale	6	2,178	2,178
		----------	----------
Total assets		21,856	23,528
		=====	=====
LIABILITIES
Non-current liabilities
Bank loans		(3,042)	(6,884)
Retirement benefit obligation		(435)	-
Deferred tax liabilities		(928)	(447)
		----------	----------
		(4,405)	(7,331)
		----------	----------
Current liabilities
Trade and other payables		(4,098)	(4,221)
Current tax liabilities		(703)	(801)
Bank overdrafts and loans		(640)	(2,207)
Provisions		(354)	(468)
		----------	----------
		(5,795)	(7,697)
		----------	----------
Liabilities directly associated with non-current assets classified as held for sale
Non-refundable deposit on sale of property	6	(2,000)	-
Total liabilities		(12,200)	(15,028)
		----------	----------
Net assets		9,656	8,500
		=====	=====
Shareholders' equity
Issued share capital	7	543	543
Share premium account	7	2	2
Investment in own shares	7	(16)	(16)
Other reserves	7	874	874
Retained earnings	7	8,253	7,097
		----------	----------
Total equity		9,656	8,500
		=====	=====

  CONSOLIDATED CASH FLOW STATEMENT

For the year ended 2 January 2009

	Note	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
Net cash inflow from operating activities	8	6,470	4,868
Investing activities
Interest received		8	215
Disposal proceeds of property, plant and equipment		34	107
Non-refundable deposit on sale of property classified as assets held for sale	6	2,000	-
Purchase of intangible assets		(35)	(83)
Purchases of property, plant and equipment		(876)	(2,226)
Expenditure on product development		(35)	-
Acquisition of subsidiary		-	(346)
		----------	----------
Net cash released by/(used in) investing activities		1,096	(2,333)
		----------	----------
Financing activities
Dividends paid		(1,498)	(2,136)
Purchase of share capital		-	(13,000)
Repayment of borrowings		(4,399)	(1,419)
Proceeds on issue of shares		-	346
New bank loans raised		-	9,500
		----------	----------
Net cash from financing activities		(5,897)	(6,709)
		----------	----------
Increase/(decrease) in cash and cash equivalents		1,669	(4,174)
Cash and cash equivalents at beginning of the period		(937)	3,237
		----------	----------
Cash and cash equivalents at the end of the period		732	(937)
		=====	=====

  Notes to the consolidated financial statements

For the year ended 2 January 2009

1.	Segmental information
For management purposes, the Group is currently organised into four continuing operating units in line with its statutory entities. These entities are the basis on which the Group reports its primary segmental information.

Business segment	Year to 2 January 2009			18 months to 31 December 2007
	Revenue £'000	Profit £'000	Margin %	Revenue £'000	Profit £'000	Margin %
Lincat	20,644	3,418	16.6	30,543	5,982	19.6
IMC	9,713	2,272	23.4	14,410	2,080	14.4
Mercury	1,794	(112)	(6.2)	3,266	46	1.4
Britannia	3,358	495	14.7	3,232	77	2.4
Inter-segment sales	(812)	-		(1,465)	-
	----------	----------		----------	----------
Continuing operations	34,697	6,073		49,986	8,185
Central costs	-	(472)		-	(1,105)
Net finance costs	-	(387)		-	(41)
Taxation	-	(2,128)		-	(2,245)
	----------	----------		----------	----------
Total for the period	34,697	3,086		49,986	4,794
	=====	=====		=====	=====

Geographical segments

The Group's operations are all located in the United Kingdom.

	Revenue by destination
	Year to 2 January 2009	18 months to 31 December 2007
	£'000	£'000
United Kingdom	29,286	42,476
Rest of Europe	3,670	5,183
North America	20	89
Rest of World	1,721	2,238
	----------	----------
Total	34,697	49,986
	=====	=====

2.	Exceptional items

	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
IMC relocation costs	-	466
Britannia onerous lease costs	-	83
Tender offer costs	-	430
	----------	----------
Total exceptional items	-	979
	=====	=====

IMC relocation costs relate to the relocation of its factory from Hertfordshire to the new site in Wrexham. Britannia onerous lease costs relate to the relocation from Britannia's leasehold site in Southam to freehold premises in Leamington Spa. The tender offer costs relate to the costs of the tender offer, the capital reduction, the transfer from the Official List to AIM and the introduction of the Long-Term Incentive Plan and Employee Benefit Trust. An exceptional deferred tax charge of £735,000 was incurred in the year ended 2 January 2009 as a result of the withdrawal of industrial building allowances ('IBA's') at the last tax budget.

3.	Finance income and finance costs

	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
Finance income:
Interest receivable on short term deposits	8	216
Finance costs:
Interest payable on bank loans and overdrafts	(487)	(364)

4.

Taxation

	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
Basic	1,393	2.245
Deferred tax charge due to withdrawal of IBA's	735	-
	----------	----------
	2,128	2,245
	======	======

5.	Earnings per share

	Year to 2 January 2009 £'000	18 months to 31 December 2007 £'000
Earnings
From continuing operations	3,086	4,794
Exceptional items	-	979
Tax on exceptional items	-	(165)
Deferred tax adjustment due to withdrawal of IBA's	735	-
	----------	----------
Adjusted earnings	3,821	5,608
	=====	=====
Average number of shares during year ('000)
For basic earnings per share	5,434	6,646
Dilutive effect of Sharesave Scheme options	8	29
	----------	----------
For diluted earnings per share	5,442	6,675
	=====	=====
Earnings per share
Adjusted:
Basic	70.3p	84.4p
Diluted	70.2p	84.0p
From continuing operations:
Basic	56.8p	72.1p
Diluted	56.7p	71.8p

  

6.	Assets held for sale
		2 January 2009 £'000	31 December 2007 £'000
IMC's Hertfordshire freehold property		2,178	2,178
Non-refundable deposit on sale of property		(2,000)	-
		----------	----------
Total		178	2,178
		=====	=====

The unconditional exchange of contracts for the sale of IMC's vacant site took place on 11 April 2008 for £7.5m. A non-refundable deposit of £1.0m was received on exchange with a further £1.0m received on 30 September 2008. The balance of £5.5m is due to be received on the completion date of 30 June 2009.

7.	Changes in shareholders equity
The movements in reserves are set out below.

	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Investment in own shares £'000	Other reserve £'000	Retained earnings £'000	Total £'000
At 1 July 2006	710	1,067	254	-	874	14,904	17,809
Tender offer	(193)	-	193	-	-	(13,000)	(13,000)
Share issue	26	336	-	(16)	-	-	346
Capital reduction	-	(1,401)	(447)	-	-	1,848	-
Dividends paid	-	-	-	-	-	(2,136)	(2,136)
Total recognised income
and expense for the year	-	-	-	-	-	5,379	5,379
Credit to equity for share-
based payments	-	-	-	-	-	102	102
	----------	----------	----------	----------	----------	----------	----------
At 31 December 2007	543	2	-	(16)	874	7,097	8,500
Dividends paid	-	-	-	-	-	(1,498)	(1,498)
Total recognised income
and expense for the year	-	-	-	-	-	2,586	2,586
Credit to equity for share-
based payments	-	-	-	-	-	68	68
	----------	----------	----------	----------	----------	----------	----------
At 2 January 2009	543	2	-	(16)	874	8,253	9,656
	=====	=====	=====	=====	=====	=====	=====

8.	Consolidated cash flow statement: reconciliation of operating profit to net cash inflow from operating activities
		Year to  2 January 2009 £'000	18 months to 31 December 2007 £'000
Operating profit from continuing activities		5,601	7,080
Amortisation of intangible assets		97	109
Depreciation		948	1,342
Loss/(profit) on disposal of tangible fixed assets		44	(72)
Share based payments		68	102
(Decrease)/increase in provisions		(114)	(706)
Decrease/(increase) in inventories		499	(240)
Decrease/(increase) in trade and other receivables		1,603	(163)
Decrease in trade and other payables		(282)	(537)
		----------	----------
Cash generated by operations		8,464	6,915
Interest paid		(437)	(361)
Corporation tax paid		(1,557)	(1,686)
		----------	----------
Net cash from operating activities		6,470	4,868
		=====	=====

9.     Basis of preparation

This preliminary report, which has been agreed with the auditors, was approved by the Board on 1 April 2009. The financial information set out above does not constitute statutory accounts within the meaning of section 40 of the Companies Act 1985. Statutory accounts will be sent to shareholders shortly.

The statutory accounts for the period ended 31 December 2007, which have been delivered to the Registrar of Companies, carry an unqualified report by the auditors and do not contain a statement under Section 237 (2) or section 237 (3) of the Companies Act 1985.

ENDFR EASLFEEKNEFE