07 April 2010

 

Norman Hay plc

 

Unaudited preliminary results for the year ended 31 December 2009

 

 

Norman Hay plc today announces preliminary results for the year ended

31 December 2009.

 

 

FINANCIAL HIGHLIGHTS

 

·      Continued profitability in difficult conditions

 

·      Pre-tax profits £865,000 (2008: £2.4m)

 

·      Revenue £26.2m (2008: £27m)

·      Increased dividend for the year of 4.3p (2008: 4.0p)

·      International Revenues 51% (2008: 48%)

 

CHAIRMAN'S STATEMENT   

 

I am delighted to announce that, following a challenging first half, the Norman Hay Group saw a significant recovery in the second half of 2009.

 

We view our pre-tax profit for the year as an extremely satisfactory result.

 

Our full year result includes profit on the disposal of the remaining wet processing operations on our Coventry City Centre site, as reported in our interim statement. This is a profit on sale of £862,000 on a deferred consideration basis, after taking into account the direct costs of the disposal.

 

The cost reduction programme we undertook in the first half of 2009 mitigated the effects of a downturn in global trading. Additionally, revenue in the second half rose by 11% compared to the first half.

 

Our exposure to the economic downturn in the UK was limited by the international diversification of our product-led businesses. In addition, our automotive sealants and construction chemicals companies now generate the majority of their business overseas, as will the engineering business in 2010 and 2011.

 

Our surface coatings division, in which most business units are UK-based, requires its operations to be sited geographically close to its customers because of the sub-contract nature of its business. It has therefore been significantly affected by the severe downturn in UK manufacturing.

 

However, we have successfully won business from competitors who have struggled in the recent financial climate. 

 

Also, following the successful example of our overseas product based divisions, we are in the process of building an international market for our sub-contract coatings businesses with operations recently opening up and developing in Malaysia, Australia and mainland China.

 

Dividends

 

A second interim dividend for the year of 2.3p, announced on 2 March 2010, was paid to Shareholders on 26 March 2010 in place of a final dividend for the year, making the total for the full year 4.3p  (2008: 4.0p).

 

It is intended that future dividend payments will be paid in line with the normal dividend schedule.

 

Business Overview

 

 

"Ultraseal" - Automotive Sealants

 

Despite the challenges facing the global automotive industry, Ultraseal International was the largest contributor to Group profits during the year.

 

The main effect of the downturn in general for this sector was the cancellation or delay of major projects. This resulted in a very low order book for capital equipment, although consumable sealant sales were affected to a lesser degree.

 

Despite this, the business still managed to trade profitably in the first half of the year and saw an excellent recovery in the second half as demand began to recover in the USA.  Chinese automotive manufacturing returned to significant levels production, which is particularly positive for our operation in Shanghai.

 

We expect these trends to continue in 2010.

 

 

"Armourcote" - Surface Coatings

         

Overall, the second half of 2009 was less profitable than the first half as a result of weakened demand from the oil & gas sector as many major projects were delayed.

 

Our Hi-Tech Coatings operation in Perth, Western Australia, reported a small loss for the year. This was primarily due to the costs associated with a management restructure in 2009 and trading in the first quarter of 2010 has been encouraging.

 

Our operation in Port Klang, Malaysia, which we opened in late 2007, has seen a great improvement year on year, and is expected to benefit significantly from any return to new levels of capital investment in the oil extraction industries in that region.

 

Both our Australian and Malaysian coating facilities are now accredited to ISO 9001/2008 and ISO 14001, which are important factors in our relationship with multinational suppliers to the oil & gas industry.

 

In most instances, we are the preferred supplier of advanced surface coatings used by the oil & gas industry to protect the sophisticated drilling, production and transmission equipment utilised to harvest hydrocarbons from all over the world in the harshest of conditions and extremes of climate.

 

Our automotive surface coatings business in the UK also suffered in the downturn. Despite having centralised all zinc and alloy electroplating on to one site in Coventry during 2008, the conditions in UK manufacturing proved to be so severe that we continued to suffer significant operating losses in the business.

 

We undertook a significant restructure and cost reduction programme at our Coventry operation in 2009 and the unit is trading significantly better than this time last year.

 

ASTEC Dalian in Eastern China performed well and profitably in 2009. The future for this business looks promising, on the back of a recovering US automotive market and the continuing expansion of the Chinese domestic automotive market.

 

 

 

"TAM International" - Construction Chemicals

 

We have made significant progress in developing our construction chemicals business in the three years that we have controlled TAM.

 

During that time, we have built it into a well-respected brand leader in construction chemicals and broadened its potential market place with the creation of a Tunnelling & Mining division. This now supplies our niche products to many of the major underground projects in the regions where we already have sales or manufacturing operations.

 

The business performed better in the second half of the year, although not all locations are yet profitable at the operating level. This is a result of major infrastructure projects being delayed in Hong Kong and Taiwan and difficult economic conditions continuing to prevail in the UK.

 

Australia was less affected by the global economic slump and this, coupled with strengthening the management team, saw the TAM Australia business return to profitability in the year.

 

 

 

"Norman Hay Engineering" - Chemical Engineering

 

Following a strong performance in 2009 with continuing profitability, the year ended with a record order book which will provide significant growth for the business during 2010 and 2011.

 

As a manufacturer of bespoke process plants, primarily for the aerospace and automotive markets, our chemical engineering group combines elements of both service-related and product-led businesses.

 

As such, we have been able to develop the business internationally, with the majority of plant installations in the next two years being outside of the UK - the latest of our businesses to benefit from our expansion into international markets.

 

During 2009, we were awarded a number of significant overseas contracts:-

 

·      In March we were selected to supply and install a large Repair and Overhaul facility for aircraft landing gear in Saudi Arabia.

 

·      In May we secured a major contract in Turkey for an NDT booth system to carry out dye penetrant application and inspection at the critical stage in the repair and overhaul of aircraft engines.

 

·      In December we were proud to be awarded our largest ever single contract - an order from Rolls-Royce for process plant and equipment to be installed in Singapore during 2011.

 

 

 

Staff

 

I would like to pay tribute to all of our Group staff, who have been operating under significant pressure while our businesses have been adjusting to changing world economic conditions.

 

Their professionalism, dedication and flexibility has been instrumental in recovering the Group's operating profitability in a short period of time.

 

 

 

Outlook

 

In last year's annual statement, I said that our efforts were being carefully targeted at our most significant sales opportunities.

 

TAM International, our construction chemicals division, has been working closely in 2009 with Normet International who are manufacturers of specialist underground construction machinery.

 

The synergies between TAM and Normet have worked well and the joint co-operation has led to a Euro 6.2 million machinery deal in Hong Kong, along with the supply of the construction chemicals. A similar deal has also been arranged in Taiwan and we plan to build further on this successful partnership in other markets.

 

We are particularly pleased with the progress and prospects for our Ultraseal and Armourcote businesses as the market in mainland China continues to pick up.

 

I expect that the Group's trading performance will continue to improve and will be further enhanced as the world economy returns to growth.

 

 

Peter L Hay

Chairman

7 April 2010

 

 

Further information:

 

Nick Ogden

Group Financial Controller

Norman Hay plc

Tel: +44 (0) 24 7622 9373

 

David Haggie / Juliet Tilley

Haggie Financial

Tel: +44 (0)20 7417 8989

 

Unaudited statement of comprehensive income for the year ended 31 December 2009
			2009	2008
			£000	£000
Revenue			26,200	27,001
Cost of sales			-17,446	-17,175
Gross profit			8,754	9,826
Distribution costs			-1,064	-1,036
Administrative expenses			-7,692	-6,857
Other income			71	497
Profit on disposal of operation			862	-
Profit from operations			931	2,430
Finance income			40	139
Finance costs			-106	-206
Profit before taxation			865	2,363
Taxation			-96	-810
Profit after taxation			769	1,553
Other comprehensive income for the year, after tax
Exchange differences on translation of foreign operations			-140	723
Deferred tax on items taken directly to equity			-27	4
Other comprehensive income for the year, net of tax			-167	727
Total comprehensive income for the year			602	2,280
Profit attributable to:
Owners of the parent			925	1,562
Minority interest			-156	-9
			769	1,553
Total comprehensive income attributable to:
Owners of the parent			750	2,302
Minority interest			-148	-22
			602	2,280
Earnings per share
Basic earnings per share			6.4p	10.7p
Diluted earnings per share			6.3p	10.4p

 

 

 

 

 

Unaudited Statement of Financial Position at 31 December 2009
				2009		2008
				£'000	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets				2,981		2,952
Property, plant and equipment				5,702		5,837
Investments				26		26
Other receivables				858		-
Total non-current assets					9,567		8,815
Current assets
Inventories				2,510		2,846
Trade and other receivables				8,555		7,206
Cash and cash equivalents				1,160		1,015
Total current assets					12,225		11,067
Total assets					21,792		19,882
Liabilities
Current liabilities
Financial liabilities				529		512
Trade and other payables				7,402		4,380
Provisions				99		114
Current tax liabilities				18		653
Total current liabilities					8,048		5,659
Non-current liabilities
Financial liabilities				1,460		2,000
Trade and other payables				-		21
Deferred tax liabilities				481		422
Total non-current liabilities					1,941		2,443
Total liabilities					9,989		8,102
Net assets					11,803		11,780
Equity
Share capital					1,481		1,481
Share premium account					1,254		1,254
Capital redemption reserve					94		94
Other reserves					766		766
Reserve for own shares					(322)		(322)
Share scheme reserve					43		43
Foreign exchange reserve					624		772
Retained earnings					7,688		7,372
Equity attributable to equity holders of
the parent company					11,628		11,460
Minority interest					175		320
Total equity					11,803		11,780

 

 

 

 

 

Unaudited consolidated cashflow statement for the year ended 31 December 2009
												2009	2008
Cashflows from operating activities												£000	£000
Profit from operations												931	2,430
Release of negative goodwill												-	(231)
Depreciation												655	566
Impairment of goodwill												15	-
Loss/(profit) on sale of property, plant and equipment												16	(378)
Share option charge												-	17
Decrease/(increase) in inventories												304	(614)
(Increase)/decrease in receivables												(2,105)	886
Increase/(decrease) in payables												2,697	(721)
Exchange movements on working capital												76	-
Increase/(decrease) in provisions												15	(28)
Cash generated from operations												2,604	1,927
Finance income												40	139
Finance costs												(106)	(206)
Tax paid												(690)	(781)
Net cash generated from operating activities												1,848	1,079
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired												8	(210)
Expenditure on intangible assets												(49)	-
Purchase of property, plant and equipment												(452)	(1,030)
Proceeds of disposal of property, plant and equipment												16	691
Net cash used in investing activities												(477)	(549)
Cash flows from financing activities
Dividends paid to shareholders												(582)	(669)
Payments for purchase of share capital in subsidiary												-	(26)
Net proceeds from issue of share capital to minority shareholders												3	197
Finance lease repayment												(76)	(59)
New loans raised												265	303
Repayment of loans												(698)	(214)
Net cash used in financing activities												(1,088)	(468)
Net increase in cash and cash equivalents												283	62
Cash and cash equivalents at the beginning of the year												827	541
Effects of foreign exchange changes												-120	224
Cash and cash equivalents at the end of the year												990	827
Unaudited statement of changes in equity for the year ended 31 December 2009
				Share capital	Share premium account		Capital redemption reserve		Other non-distributable reserve	Reserve for own shares	Share scheme reserve	Foreign exchange reserve	Retained earnings	Total	Minority interest	Total equity
				£000	£000		£000		£000	£000	£000	£000	£000	£000	£000	£000
At 1 January 2008				1,481	1,254		94		766	-322	26	36	6,475	9,810	171	9,981
Share scheme charge											17			17		17
Minority interest in subsidiary incorporated														0	197	197
Minority interest in subsidiary acquired														0	-26	-26
Dividends paid in year													-669	-669	0	-669
Total comprehensive income for the year												736	1,566	2,302	-22	2,280
				1,481	1,254		94		766	-322	43	772	7,372	11,460	320	11,780
At 1 January 2009
Minority interest in subsidiary shares issued during the year															3	3
Dividends paid in year													-582	-582		-582
Total comprehensive income for the year												-148	898	750	-148	602
				1,481	1,254		94		766	-322	43	624	7,688	11,628	175	11,803

 

 

 

 

Notes:

 

1.     The calculation of basic earnings per share is based on the profit of £925,000 (2008: £1,562,000) and on  14,546,000 weighted average ordinary shares (2008: 14,546,000) in issue. The calculation of diluted earnings per share is based on 14,588,000 (2008: 15,053,000) shares in issue.

 

2.     The consideration receivable for the disposal of the operation has been calculated as the total of the expected annual amounts receivable from the purchaser discounted at an appropriate rate. The expected annual amounts receivable are based on a percentage of the sales of the purchaser.  The other receivables of £858,000 included within total non-current assets in the Statement of Financial Position is the long term receivable element of the disposal. The utilisation of capital losses brought forward means that no taxation is payable on the profit on disposal. There is no set termination date for this agreement.

 

3.     The cash and cash equivalents shown in the cashflow statement comprises cash and cash equivalents

and bank overdrafts.

 

4.     The financial information set out above has been prepared in accordance with the recognition and measurement principles of IFRS as endorsed for use in the European Union, using the accounting policies that were set out in the Group's Financial Statements for the year ended 31 December 2008. 

 

5.     The financial information set out above does not constitute the company's statutory accounts for 2008 or 2009. Statutory accounts for the year 31 December 2008 have been reported on by the Independent Auditors.  The Independent Auditors' Report on the Annual Report and Financial Statements for 2008 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 237(2) or 237(3) of the Companies Act 1985.

Statutory accounts for the year ended 31 December 2008 have been filed with the Registrar of Companies.  The results for 2009 are unaudited. Statutory accounts for the year ended 31 December 2009 will be finalised based on the information presented in this announcement.  The statutory accounts for the year ended 31 December 2009 will be delivered to the Registrar.  The Auditors have consented to the release of this preliminary statement.