Print   

Lincat Group plc interim report for the half year to 28 June 2009

 

Lincat Group plc, the AIM-listed manufacturer of commercial catering appliances and bar equipment, announces its interim results to 28 June 2009.

Highlights

• Operating profit of £2.1m (2008: £2.8m) on turnover from continuing operations of £14.9m (2008: £16.3m)

• Basic EPS from continuing operations of 26.9p (2008: 34.4p)

• Interim dividend of 10.2p per share (2008: 10.2p)

• Net debt of £2.8m at period end (2 January 2009: £3.0m)

• Further £1.0m non-refundable deposit received after the period end against IMC's vacant Hertfordshire site

• Sale announced yesterday of Mercury, the Group's loss-making domestic appliance subsidiary.

Martin Craddock, Chairman:

'Our businesses have delivered a robust performance against a back-drop of lower demand and a highly competitive market-place. The improvement in sales between the first and second quarters is encouraging.'

Contacts      Martin Craddock, Chairman

                    Paul Bouscarle, Chief Executive

        Lincat Group plc

        01522 875555

27 August 2009

Chairman's statement

The results for the six months to 28 June 2009 demonstrate the ability of Lincat Group to trade strongly and profitability at a time of sharply falling demand. This robust performance allows us to maintain our interim dividend at 10.2p per share.

Financial results

In April I reported that sales for January and February 2009 were 18% lower than in 2008, whilst in my AGM statement in May I indicated that this figure had improved to 13%. I am therefore pleased to report that Group sales from continuing operations for the six months to 28 June 2009 were ultimately just 8% lower than the prior year, at £14.947m compared with £16.299m in 2008, indicating an element of recovery towards the end of the period. This recovery was led by Lincat Ltd, whose sales responded positively to a package of dealer incentives introduced in March.

The Group's gross margin fell from 51.6% to 49.7% as our businesses sought to maintain price competitiveness. In the current climate of depressed demand it is unrealistic to expect gross margins to be held without losing market share. Over time we would look to rebuild gross margins back to 50% but our priority now is to maintain volumes and to grow market share in particular against competitors with a high proportion of imported products, whose margins are being squeezed by the general weakness of sterling.

During the period employee numbers were reduced to reflect the lower level of sales, resulting in a one-off charge of £130k. Around the Group particular attention has been paid to cost monitoring and, where possible, cost reduction, although we have been careful to protect product development and marketing support for product launches. 

Operating profits for the period were 26% down at £2.113m (2008: £2.842m) as a result of lower turnover and a reduced gross margin. Whilst disappointing to report, I nevertheless commend our businesses for achieving a net operating margin of 14.1% during one of the toughest trading periods for many years. Net interest charges of £65k (2008: £266k) reflect lower levels of borrowings and lower interest rates. Repayment of the term loan taken out to part-finance the share buy-back of August 2007 remains ahead of schedule.

Basic earnings per share from continuing operations fell broadly in line with pre-tax profits from 34.4p to 26.9p, as there were no shares issued or cancelled in the period.

Dividend

As indicated earlier, the Board has declared an interim dividend of 10.2p, the same as in 2008, which will be paid on 9 October 2009 to all shareholders on the register at 18 September 2009.

IMC's Hertfordshire site

As previously announced, the terms for the sale of this vacated site were renegotiated in June and that a further £1.0m non-refundable deposit was received from the buyers in July of this year. The Group has now received a total of £3.0m in non-refundable deposits and will continue to retain title to the site until the balance of £4.5m, which is due on 16 December 2009, has been paid.

Disposal of Mercury

The Group's domestic appliance subsidiary, Mercury Appliances Ltd, was acquired on 25 August 2009 by Aga Rangemaster Group plc. Mercury had seen the sharpest sales decline of any Group company during the current downturn and recorded a pre-tax loss of £196k in the half year to 28 June 2009. The £425,000 proceeds of sale are expected to more than cover the costs of exit from this business.

Current trading

We are hopeful that the slow recovery seen in the second quarter will continue into the second half of the year but recognise the potentially fragile nature of any recovery. We shall, however, continue our investment in new products and will seek to build market share through organic growth.

Martin Craddock, Chairman

27 August 2009

  

CONDENSED CONSOLIDATED INCOME STATEMENT

		6 months	6 months	Year
		to 28/06/09	to 30/06/08	to 02/01/09
	Notes	£'000	£'000	£'000
Continuing Operations
Revenue	1	14,947	16,299	32,903
Cost of sales		(7,512)	(7,893)	(16,308)
Gross profit		7,435	8,406	16,595
Distribution costs		(2,301)	(2,740)	(5,214)
Administrative expenses		(1,445)	(1,296)	(2,525)
Other operating expenses		(1,576)	(1,528)	(3,143)
Operating profit		2,113	2,842	5,713
Finance income		-	3	8
Finance costs		(65)	(269)	(469)
Expected return on pension scheme assets		198	241	480
Interest on pension scheme liabilities		(198)	(195)	(388)
Profit before taxation		2,048	2,622	5,344
Taxation		(588)	(750)	(2,168)
Profit after tax from continuing operations		1,460	1,872	3,176
DISCONTINUED OPERATIONS
Profit after tax from discontinued operations	4	(164)	(61)	(90)
Profit for the period		1,296	1,811	3,086
Profit for the period attributable to equity shareholders		1,296	1,811	3,086
Earnings per share from continuing operations:
Basic	2	26.9p	34.4p	58.4p
Diluted	2	26.8p	34.4p	58.4p
Earnings per share from total operations:
Basic	2	23.8p	33.3p	56.8p
Diluted	2	23.8p	33.2p	56.7p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
Profit for the period	1,296	1,811	3,086
Other comprehensive income:
Actuarial losses on defined benefit pension scheme	(1,011)	(586)	(694)
Tax on the above	283	164	194
Other comprehensive income for the period, net of tax	(728)	(422)	(500)
Total comprehensive income for the period	568	1,389	2,586
Total comprehensive income for the period attributable to equity shareholders	568	1,389	2,586

  

CONDENSED CONSOLIDATED BALANCE SHEET

		As at	As at	As at
		28/06/09	30/06/08	02/01/09
	Notes	£'000	£'000	£'000
ASSETS
Non-current assets
Goodwill		693	693	693
Other intangible assets		100	159	124
Property, plant & equipment		8,874	9,088	9,157
Deferred tax asset		-	105	6
		9,667	10,045	9,980
Current assets
Inventories		3,431	3,940	3,930
Trade and other receivables		5,855	6,256	5,036
Cash and cash equivalents		430	344	732
		9,716	10,540	9,698
Non-current assets classified as held for sale	3	2,178	2,178	2,178
Total assets		21,561	22,763	21,856
LIABILITIES
Non-current liabilities
Bank loans		(2,652)	(5,074)	(3,042)
Retirement benefit obligation	5	(1,436)	(375)	(435)
Deferred tax liabilities		(576)	(342)	(928)
		(4,664)	(5,791)	(4,405)
Current liabilities
Trade and other payables		(4,086)	(4,759)	(4,098)
Current tax liabilities		(590)	(817)	(703)
Bank overdrafts and loans		(623)	(966)	(640)
Provisions		(352)	(467)	(354)
		(5,651)	(7,009)	(5,795)
Liabilities directly associated with non-current assets classified as held for sale
Non-refundable deposit on sale of property	3	(2,000)	(1,000)	(2,000)
Total liabilities		(12,315)	(13,800)	(12,200)
Net assets		9,246	8,963	9,656
Shareholders' equity
Issued share capital		543	543	543
Share premium account		2	2	2
Investment in own shares		(16)	(16)	(16)
Other reserves		874	874	874
Retained earnings		7,843	7,560	8,253
Total equity		9,246	8,963	9,656

  

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share capital	Share premium	Investment in own shares	Other reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2008	543	2	(16)	874	7,097	8,500
Total comprehensive income for the period	-	-	-	-	1,389	1,389
Credit to equity for share-based payments	-	-	-	-	34	34
Dividends paid	-	-	-	-	(960)	(960)
At 30 June 2008	543	2	(16)	874	7,560	8,963
Total comprehensive income for the period	-	-	-	-	1,197	1,197
Credit to equity for share-based payments	-	-	-	-	34	34
Dividends paid	-	-	-	-	(538)	(538)
At 2 January 2009	543	2	(16)	874	8,253	9,656
Total comprehensive income for the period	-	-	-	-	568	568
Credit to equity for share-based payments	-	-	-	-	14	14
Dividends paid	-	-	-	-	(992)	(992)
At 28 June 2009	543	2	(16)	874	7,843	9,246

  

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		6 months	6 months	Year
		to 28/06/09	to 30/06/08	to 02/01/09
	Notes	£'000	£'000	£'000
Net cash from operating activities	6	1,426	3,665	6,470
Investing activities
Interest received		-	1	8
Disposal proceeds of property, plant & equipment		46	22	34
Non-refundable deposit on sale of property	3	-	1,000	2,000
Purchase of intangible assets		(3)	(21)	(35)
Purchases of property, plant & equipment		(347)	(379)	(876)
Expenditure on product development		(25)	-	(35)
Net cash (used in)/released by investing activities		(329)	623	1,096
Financing activities
Dividends paid		(992)	(960)	(1,498)
Repayment of borrowings		(407)	(2,047)	(4,399)
Net cash used in financing activities		(1,399)	(3,007)	(5,897)
(Decrease)/increase in cash and cash equivalents		(302)	1,281	1,669
Cash and cash equivalents at beginning of the period		732	(937)	(937)
Cash and cash equivalents at end of the period		430	344	732
Cash and cash equivalents
Cash in hand and at bank		430	344	732

 

BASIS OF PREPARATION AND ACCOUNTING POLICES

Basis of preparation

Lincat Group plc, a Public Limited Company, is incorporated and domiciled in the United Kingdom. 

The interim financial statements for the period ended 28 June 2009 (including the comparatives for the period ended 30 June 2008 and the year ended 2 January 2009) were approved by the board of directors on 26 August 2009. Under the Security Regulations Act of the EU, amendments to the financial statements are not permitted after they have been approved.

It should be noted that accounting estimates and assumptions are used in the preparation of the interim financial information. Although these estimates are based on management's best knowledge and judgment of current events, actual results may ultimately differ from those estimates.  

The interim financial information contained within this report does not constitute statutory accounts as defined in the Companies Act 2006. The full accounts for the year ended 2 January 2009 received an unqualified report from the auditors and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

Accounting policies

This interim financial report has been prepared under the historical cost convention. The principal accounting policies and methods of computation adopted to prepare the interim financial information are consistent with those detailed in the 2008 financial statements except for the first time adoption of IAS 1 'Presentation of Financial Statements (Revised 2007)' and IFRS 8 'Operating Segments'.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group but does give rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however some items that were recognised directly in equity are now recognised in 'Other comprehensive income'. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'. The adoption of IFRS8 has not required a change to the presentation of the segments disclosed in the interim financial statements. 

The Group's other accounting policies have been applied consistently throughout the Group for the purposes of preparation of this report.

  

Notes to the consolidated financial statements

 

1. Segmental information

Business segment - revenue

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
Lincat - commercial catering equipment	8,948	10,331	19,832
IMC - bar equipment and kitchen machinery	4,643	4,877	9,713
Britannia - kitchen ventilation systems	1,356	1,091	3,358
Continuing operations	14,947	16,299	32,903

Business segment - profit

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
Lincat	1,294	1,918	3,418
IMC	861	1,142	2,272
Britannia	219	17	495
Continuing operations	2,374	3,077	6,185
Central costs	(261)	(235)	(472)
Net finance costs	(65)	(220)	(369)
Taxation	(588)	(750)	(2,168)
Discontinued operations	(164)	(61)	(90)
Profit for the period	1,296	1,811	3,086

Geographical segment - revenue

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
United Kingdom	12,360	13,438	27,507
Rest of Europe	1,759	1,970	3,658
North America	11	19	20
Rest of World	817	872	1,718
Continuing operations	14,947	16,299	32,903

  

2. Earnings per share

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
Earnings
From continuing operations	1,460	1,872	3,176
From discontinued operations	(164)	(61)	(90)
From total operations	1,296	1,811	3,086
Average number of shares during year	'000	'000	'000
For basic earnings per share	5,434	5,434	5,434
Dilutive effect of Sharesave Scheme options	7	15	8
For diluted earnings per share	5,441	5,449	5,442
Earnings per share from continuing operations
Basic	26.9p	34.4p	58.4p
Diluted	26.8p	34.4p	58.4p
Earnings per share from total operations
Basic	23.8p	33.3p	56.8p
Diluted	23.8p	33.2p	56.7p

3. Assets held for sale

	As at	As at	As at
	28/06/09	30/06/08	02/01/09
	£'000	£'000	£'000
IMC's Hertfordshire freehold property	2,178	2,178	2,178
Non-refundable deposit on sale of property	(2,000)	(1,000)	(2,000)
	178	1,178	178

On 11 April 2008, the directors entered into an unconditional contract for the sale of IMC's vacant Hertfordshire site for £7.5m. As at 28 June 2009, non-refundable deposits of £2m had been received.  Following a renegotiation of the terms of the contract, another non-refundable deposit of £1m was received on 6 July 2009 with the balance of £4.5m receivable on completion at 16 December 2009.

  

4. Discontinued operations

Following a strategic review, the Group decided to seek a buyer for its domestic appliance business, Mercury Appliances. This disposal was completed on 25 August 2009. The results of Mercury Appliances, which have been shown as discontinued operations in the condensed consolidated income statement, were as follows:

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/09/09
	£'000	£'000	£'000
Revenue	696	891	1,794
Expenses	(892)	(976)	(1,924)
Loss before tax	(196)	(85)	(130)
Tax	32	24	40
Loss after tax attributable to discontinued operations	(164)	(61)	(90)

Mercury contributed the following to the Group's cash flows:

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/09/09
	£'000	£'000	£'000
Operating activities	(127)	(62)	34
Investing activities	(2)	(15)	(15)

5. Retirement benefit obligation

	As at	As at	As at
	28/06/09	30/06/08	02/01/09
	£'000	£'000	£'000
Gross (deficit)/surplus at beginning of period	(435)	164	164
Contributions	32	31	63
Current service cost	(22)	(30)	(60)
Finance income	-	46	92
Actuarial loss	(1,011)	(586)	(694)
Gross deficit at end of the period	(1,436)	(375)	(435)
Deferred tax asset	402	105	122
Net deficit	(1,034)	(270)	(313)

The defined benefit scheme was reviewed by a qualified actuary as at 28 June 2009. The principal assumptions were:

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
Retail price inflation	3.2%	3.9%	2.6%
Discount rate	6.2%	6.7%	6.5%
Pension increases in payment	3.1%	3.6%	2.6%
General salary increases	3.2%	3.9%	2.6%

  

6. Net cash from operating activities

	6 months	6 months	Year
	to 28/06/09	to 30/06/08	to 02/01/09
	£'000	£'000	£'000
Operating profit from continuing operations	2,113	2,842	5,713
Operating loss from discontinued operations	(193)	(75)	(112)
Adjustments for:
Depreciation and amortisation	542	506	1,089
Share based payments	14	34	68
Decrease in provisions	(2)	(1)	(114)
Decrease in inventories	499	489	499
(Increase)/decrease in receivables	(809)	380	1,603
Increase/(decrease) in trade and other payables	73	495	(282)
Cash generated by operations	2,237	4,670	8,464
Interest paid	(78)	(248)	(437)
Corporation tax paid	(733)	(757)	(1,557)
Net cash from operating activities	1,426	3,665	6,470

ENDIR ILFISTIIRFIA