TIDMACL
RNS Number : 1991H
Acal PLC
06 June 2017
7am, 6 June 2017
ACAL plc
Preliminary results for the year ended 31 March 2017
Strong second half, excellent cash flow and record order
book
Acal plc (LSE: ACL, "Acal" or "the Group"), a leading
international supplier of customised electronics to industry, today
announces its results for the year ended 31 March 2017.
FY FY Growth% CER(2)
2016/17 2015/16 Growth%
------------ ------------ -------- ---------
Revenue GBP338.2m GBP287.7m +18% +6%
Underlying operating
profit(1) GBP20.0m GBP16.3m +23% +5%
---------
Underlying profit
before tax(1) GBP17.2m GBP14.5m +19%
Underlying EPS(1) 19.2p 17.0p +13%
Reported profit
before tax* GBP4.8m GBP9.4m -49%
Reported fully
diluted EPS*
5.1p 10.9p -53%
Operating cash
flow(4) GBP27.1m GBP16.3m +66%
Full year dividend
per share 8.5p 8.05p +6%
* Includes the cost of the Group's previously announced
efficiency and cost reduction programme
Highlights
-- Sales & order growth accelerating through the second half
o Full year sales increased 18% (6% CER)
o Second half organic sales grew(3) 6%, and orders 7%
o Year-end order book up 22% CER, and 13% organically, at
GBP109m
-- Growing underlying operating profitability & increased efficiency
o Underlying operating profit up 23%
o Efficiency programme generates GBP4m annualised benefits
(GBP6.4m one-off costs)
-- Underlying earnings per share up 13%
-- Excellent operating cash flow(4) which increased by 66% to GBP27.1m
o Gearing reduced to 1.2x
-- Full year dividend increased by 6%
o Seventh consecutive year of increased dividend (+67%
overall)
-- Good operational progress in line with key strategic and performance targets
o Design & Manufacturing ("D&M") sales account for 52%
of Group revenue (FY 2015/16: 48%)
o Cross-selling sales growth of 53%
o International sales grow to 19% (FY 2015/16: 17%)
-- Variohm acquired in January 2017 and performing very well,
with first cross-selling design win achieved
-- Strong trading momentum continues in the new year
o Further good organic growth in Q1 sales and orders
o Developing acquisition opportunities
Nick Jefferies, Group Chief Executive, commented:
"As expected, the second half of the year saw accelerating
levels of organic growth in sales and orders, and excellent cash
flow. This strong momentum has continued into the new financial
year which we entered with an order book 22% higher at CER than the
prior year, and which is driving further good growth in this first
quarter as the order book converts into sales.
Our efficiency plan has been implemented, delivering GBP4m in
sustainable annual savings and at a better than anticipated cost of
implementation.
Variohm Group, acquired in January 2017, is performing very
well. Cross-selling activities are underway with a number of
exciting opportunities identified and our first design win has been
achieved, ahead of plan.
This is the seventh consecutive year in which the dividend has
increased - an increase of 67% in total, reflecting the
transformation of the Group over this period. In the last four
years alone, revenues have almost doubled and underlying operating
profits quadrupled. We plan to continue this strong rate of
progress through further organic growth and high quality
acquisitions over the next five years."
For further information please contact:
Acal plc 01483 544 500
Nick Jefferies - Group Chief Executive
Simon Gibbins - Group Finance Director
Instinctif Partners 020 7457 2020
Mark Garraway
Helen Tarbet
James Gray
Notes:
(1) 'Underlying Operating Profit', 'Underlying EBITDA',
'Underlying Operating Costs', 'Underlying Profit before Tax' and
'Underlying EPS' are non-IFRS financial measures used by the
Directors to assess the underlying performance of the Group. These
measures exclude exceptional costs of GBP6.9m, acquisition related
costs (including earnouts) of GBP1.2m, amortisation of acquired
intangible assets of GBP3.9m and the IAS19 pension charge relating
to a legacy defined benefit scheme of GBP0.4m; totalling GBP12.4m
for FY 2016/17. Equivalent adjustments within the FY 2015/16
underlying results totalled GBP5.1m. For further information see
note 5 of the attached summary financial statements
(2) Growth rates at constant exchange rates ("CER"). Unless
stated, growth rates refer to the comparable prior year period. The
average sterling rate of exchange weakened 13% against the Euro
compared with the average rate for last year (falling from EUR1.367
to EUR1.192), weakened 13% against the US Dollar and weakened 12%
against Nordic currencies on average.
(3) Organic growth for the Group is calculated at CER, including
the equivalent pre-acquisition periods of Flux, Contour and Plitron
which were acquired last financial year (on 5 November 2015, 7
January 2016 and 1 February 2016 respectively), and Variohm which
was acquired this financial year on 20 January 2017, and excluding
the sales from Acal BFi Spain which was closed in December
2016.
(4) Operating cash flow is defined as Underlying EBITDA adjusted
for the investment in, or release of, working capital and less the
cash cost of capital expenditure.
(5) The information contained within this announcement is deemed
by the Company to constitute inside information as stipulated under
the Market Abuse Regulation. Upon the publication of this
announcement via Regulatory Information Service, this inside
information is now considered to be in the public domain.
Notes to Editors:
About Acal plc
Acal is a leading international supplier of customised
electronics to industry. It designs, manufactures and distributes
customer-specific electronic products and solutions to 25,000
industrial manufacturers. Acal is listed on the London Stock
Exchange (LSE: ACL).
Acal has two divisions: Design & Manufacturing and Custom
Distribution. The majority of its sales come from products and
solutions which are created specifically for customers. Acal works
across a range of technologies, namely Communications &
Sensors, Power & Magnetics, Electromechanical & Cabling,
Microsystems, and Imaging & Photonics.
Acal operates through the following wholly-owned businesses:
Acal BFi, Contour, Flux, Foss, Hectronic, MTC, Myrra, Noratel,
Plitron, RSG, Stortech, Variohm and Vertec. It has operating
companies and manufacturing facilities in a number of markets
including the UK, Germany, France, the Nordic region, Benelux,
Italy, Poland and Slovakia as well as in Asia (China, India, South
Korea, Sri Lanka and Thailand), North America (the US and Canada)
and South Africa.
CHAIRMAN'S STATEMENT
In this, my first report as Chairman, I am pleased to report
that the Group has again delivered strong results in a year that
saw a strong second half preceded by a slower first half.
After twelve years as Chairman, Richard Moon retired on 31 March
2017. Richard led the Group's transformation into an international
designer, manufacturer and supplier of custom electronics with a
highly focused market proposition. During that time, the Group
completed 13 acquisitions, five non-core disposals, and has
delivered 18% CAGR underlying EPS growth in the last four years
along with a 67% increase in the dividend over the last seven
years.
I am delighted to take on the chairmanship of the Group and to
work with the Executive Team and Board colleagues to drive the
Group's strategy and growth plans forward. The strategy is both
clear and well established and underpins the success of the
business in recent years. The Board intends to build on these
achievements and, for my part, I believe my own commercial
experience will provide strategic support to the Executive Team as
they roll out their ongoing ambitious growth plans.
The Group delivered good growth in underlying earnings again
this year, despite weaker demand in the first half that reflected
wider economic uncertainties. Management was quick to respond,
implementing a Group-wide, efficiency and cost reduction programme
that has delivered sustainable savings and benefits for the years
ahead.
Acquisitions into our Design & Manufacturing division play
an important part in strengthening and developing the Group's
commercial offering and I am pleased to report that these are
performing well and contributing positively to the Group.
Strategy
The Group is becoming an international leader in customised
electronics, focusing on markets with sustained growth prospects,
driven by an increasing electronic content and where there is an
essential need for our products. The Group's product range is
highly differentiated with a significant proportion being either
partly or fully customised for specific customer applications.
With our key markets being worldwide, management continue to see
the opportunity to expand beyond Europe, as well as within Europe,
to create a growing global designer and manufacturer of
differentiated components and electronic products.
Group Results
Group sales for the year increased by 18% to GBP338.2m and by 6%
at constant exchange rates ("CER"), the difference reflecting the
translation benefit of Sterling weakness during the year.
Underlying operating profit, which excludes acquisition-related
costs, exceptional costs, amortisation of acquired intangibles and
the IAS19 legacy pension cost, increased by GBP3.7m to GBP20.0m (up
23% and up 5% CER) with underlying profit before tax increasing by
GBP2.7m to GBP17.2m (up 19%).
Underlying earnings per share for the year increased by 13% to
19.2p (up from 17.0p last year).
There were exceptional costs for the year of GBP6.9m mainly
related to the Group's efficiency programme announced in October
2016. Together with other underlying adjustments, profit before tax
for the year on a reported basis was GBP4.8m (FY 2015/16: GBP9.4m),
with fully diluted earnings per share of 5.1p (FY 2015/16:
10.9p).
Cash generation was very strong with operational cash flow that
increased 66%, reducing net debt at the year end to GBP30.0m,
resulting in a Group gearing ratio of 1.2 times (down from 1.7
times last year end) comfortably ahead of our target of 1.5 to 2.0
times.
Acquisition
In January this year, the Group acquired Variohm Holdings
Limited ("Variohm"), a UK based designer, manufacturer and
distributor of high quality sensors, switches and motion
measurement systems, for an initial cash consideration of GBP10.6m,
and contingent consideration of up to GBP1.85m payable in the year
ending 31 March 2019. This acquisition was funded by a placing of
new equity that raised GBP13.6m net of costs.
Variohm has significant alignment with our core technologies and
market focus and is performing very well. We are delighted to
welcome their employees into the Group.
On behalf of the Board, I would like to thank shareholders for
their support in funding this transaction.
Dividend
The Board is recommending an increase in the final dividend per
share of 6% to 6.05 pence per share, giving a full year dividend
per share of 8.5 pence, representing an increase of 6% for the year
and a cover against underlying earnings of 2.3 times. The final
dividend is payable on 28 July 2017 to shareholders registered on
16 June 2017. Since 2010, the annual dividend per share has risen
by 67% and the total dividend payment by over 250%.
The Board aims to maintain a progressive dividend policy
together with long term dividend cover of between 2 to 3 times
underlying earnings.
Employees
The Group consists of 3,800 employees in 23 countries around the
world. The Board believes that by adopting an entrepreneurial and
decentralised operating environment, together with rigorous
planning, review, support and investment, the Group is able to
continue to foster an ambitious and successful culture.
On behalf of the Board, I would like to thank all our employees
for their commitment and hard work this year. Their dedication
remains essential in helping us to achieve our goals.
Summary
It is widely accepted that the ideal business growth plan is to
drive organic profit growth at a rate well ahead of inflation,
whilst adding carefully targeted, profitable acquisitions in
dynamic market sectors that bring product, geographic or management
capability to the business.
Acal has already established its pedigree in this regard with
our Executive Team.
There remain many exciting opportunities for the business and
with an ambitious Board and management team, we expect to see
further developments in the year ahead.
Malcolm Diamond MBE
Chairman
6 June 2017
OPERATING REVIEW
Overview
The Group's business is focused on identifying, creating and
supplying differentiated electronic product designs to high quality
customers that leads to repeating revenue. We have invested
significantly over recent years in leadership, sales, engineering
and customer support to build the quality of our revenue, and we
are seeing the results of this strategy with rising volumes,
increasing profits, strong cash flow and a strong order book. Acal
is well positioned for further growth in the year ahead.
This year saw a strong return to organic growth in the second
half following a slower first half. Second half sales benefitted
from rising demand in existing projects as well as higher numbers
of new customer project launches, resulting in Group organic sales
growth of 6%. Strong order intake over the same period led to a
year end order book that was 22% higher at CER than the prior year,
and 13% higher organically. This contrasted with the first half
where, despite a high level of new project wins over the previous
12 months, Group organic revenues reduced by 7% as a result of
lower customer sales volume amidst wider economic uncertainty.
Overall, including the acquisitions of Flux, Plitron, Contour
and Variohm, revenue increased by 18% on a reported basis (6% CER)
to GBP338.2m and orders increased by 21% (9% CER); a book to bill
ratio of 1.04.
Underlying operating profit increased to GBP20.0m, up 23% on
last year (5% CER), representing a 5.9% operating margin, an
increase of 0.2ppts on last year. Underlying EPS increased by 13%
to 19.2p.
Group Strategy
Acal designs, manufactures and supplies highly differentiated
electronic components and products.
Core to our value proposition is the understanding of our
customers' design challenges and how to design and manufacture
engineered products that meet their needs, which we then supply
over the life of the customer's production, typically five to seven
years.
In a highly fragmented market, there exists an opportunity to
consolidate suppliers offering a product range that is tailored to
meet the needs of the Group's common customer base (multinational,
large and mid-sized original equipment manufacturers (OEMs)) and
operating to uniformly high standards. Our four target markets
(transportation, medical, renewable energy and industrial
connectivity), are long term, international, growth markets driven
by excellent fundamentals where our customers depend upon Acal
products.
Our strategy comprises four elements:
1. Move up the value chain into higher margin products;
-- Continue building revenues in the Design & Manufacturing
("D&M") division where operating margins for our businesses are
higher (>10%);
-- Optimise performance in the Custom Distribution division to
achieve an operating margin of 5% and to develop cross-selling of
D&M division products;
2. Grow sales well ahead of GDP over the economic cycle;
-- Focus on structural growth markets where an essential need for Acal products exists;
3. Acquire high quality businesses that strengthen and develop the Group's commercial offering;
4. Internationalise the business by developing sales in North America and Asia.
The Group has made good progress again this year:
- The higher margin D&M division generated 52% of Group
sales (up from 48% last year), and 54% of Group sales when
annualised for acquisitions. Some 80% of Group underlying operating
profit contribution was delivered by the D&M division (up from
78% reported last year); importantly, customer concentration
remains low with no one customer accounting for more than 4% of
Group sales;
- Following restructuring during the year and strong organic
growth in the second half, operating margins in Custom Distribution
increased to 4.1% in the second half from 2.1% in the first
half;
- D&M cross-selling generated GBP4.6m of Group sales (up 53%
from GBP3.0m for last year, 35% CER);
- Variohm Holdings Ltd, a high quality sensors business, was
acquired in January 2017 and is performing very well;
- International sales now represent 19% of Group sales (up from 17% from last year).
Key Strategic and Performance Indicators
In November 2014, we set out our key strategic objectives for
the business as we move the Group further up the value chain. The
progress of the Group is measured through our key strategic
indicators ("KSIs"), while the financial performance of the
business is measured through our key performance indicators
("KPIs"). Our KSI targets are set for the mid-term being a 3 to 5
year period, while KPIs are 3 year targets.
Given the good progress in recent years and the level of growth
opportunities we see ahead, the Board increased each of the Group's
KSIs in November 2016. The target share of D&M sales was
increased to 75% from 65%; target underlying operating margin was
increased to 8.5% from 7%; and the sales target for
internationalising the business beyond Western Europe was increased
to 30% from 20%. Additionally, the Board has updated its KPIs to
better align with the Group's operational and financial
objectives.
Key Strategic Indicators ('KSIs')
FY14 FY15 FY FY
16 17 Target(2)
----- ----- ----- -----
1. Increase share
of Group revenue
from D&M(1) 18% 37% 48% 52% 75%
2. Increase underlying
operating margin 3.4% 4.9% 5.7% 5.9% 8.5%
3. Build sales
beyond Europe(1) 5% 12% 17% 19% 30%
(1) As a proportion of Group revenue
(2) Mid-term is a 3 to 5 year period
Key Performance Indicators ('KPIs')
FY14 FY15 FY FY 3 yr
16 17 target
(FY20)
-------- -------- -------- -------- ----------------
1. Sales growth
CER 17% 36% 14% 6%
Well
ahead
Organic 2% 3% 3%(1) -1% of GDP
(H2
6%)
2. Increase cross-selling GBP0.3m GBP0.9m GBP3.0m GBP4.6m GBP10m
p.a.
3. Underlying EPS
growth 20% 31% 10% 13% >10%
4. Dividend growth 10% 11% 6% 6% Progressive
5. ROCE(2) 15.2% 12.0% 11.6% 13.0% >15%
>85%
of underlying
6. Operating cash operating
flow(2) 100% 104% 100% 136% profit
(1) Percentage of ongoing sales
(2) Defined in Note 5 of the attached summary financial
statements
Divisional Results
Divisional and Group performances for the year ended 31 March
2017 are set out and reviewed below.
FY 2016/17 FY 2015/16 Revenue CER Organic
growth revenue revenue
growth growth
------------------------------ ------------------------------ -------- --------- ---------
Revenue Underlying Margin Revenue Underlying Margin
GBPm operating GBPm operating
profit(1) profit
GBPm (1)
GBPm
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
D&M 175.6 20.2 11.5% 137.6 16.5 12.0% 28% 14% -1%
Custom Distribution 162.6 5.2 3.2% 150.1 4.7 3.1% 8% -2% 0%
Unallocated
costs (5.4) (4.9)
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
Total 338.2 20.0 5.9% 287.7 16.3 5.7% 18% 6% -1%
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
(1) Underlying operating profit excludes acquisition-related
costs, exceptional costs, amortisation of acquired intangibles and
IAS19 pension costs.
With approximately 80% of Group sales in non-Sterling
currencies, the translation of Group results into Sterling has
benefited from its weakness following the UK's European Referendum
on 23 June 2016 ("Referendum"). So, while Group revenue grew 6%
CER, it rose 18% on a reported basis. Conversely, weaker Sterling
put pressure on UK import costs in the second half of the year
impacting UK margins, where approximately 90% of UK cost of goods
are non-Sterling.
Order Book
Orders grew strongly in the second half and at the year end the
order book reached a record high of GBP109m, an increase of 22% CER
(GBP20m) over last year. On an organic basis, the order book
increased by 13%.
The order book is driven by repeating revenues from existing
customer projects and the conversion of customer design wins from
new projects into orders. During the year, new project wins were
registered with a total estimated lifetime project value of GBP127m
over five years. We expect this to begin converting into orders
during the new financial year.
Approximately 90% of the order book is for delivery within
twelve months from the time of order, and it is this conversion
into sales which is driving the continued momentum in sales into
FY2017/18. The remainder of the order book is for delivery within a
further six months.
By working with high quality customers, we build an order book
that leads to stable and repeating revenues.
Design & Manufacturing ("D&M") Division
The D&M division designs, manufactures and supplies
electronic components and products for specific customer
requirements. Over 80% of the products are manufactured in-house,
the balance being manufactured by approved third party contractors.
The division's business units are aligned with the Group's core
technology areas, namely Power & Magnetics, Communication &
Sensors, Electromechanical & Cabling, and Microsystems. The
division's principal manufacturing facilities are in China, India,
Poland, Sri Lanka and Thailand.
FY 2016/17 FY 2015/16 Revenue CER Organic
growth revenue revenue
growth growth
------------------------------ ------------------------------ -------- --------- ---------
Revenue Underlying Margin Revenue Underlying Margin
GBPm operating GBPm operating
profit(1) profit
GBPm (1)
GBPm
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
H1 81.8 10.0 12.2% 65.9 7.7 11.7% 24% 13% -4%
H2 93.8 10.2 10.9% 71.7 8.8 12.3% 31% 15% 3%
Total 175.6 20.2 11.5% 137.6 16.5 12.0% 28% 14% -1%
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
(1) Underlying operating profit excludes acquisition-related
costs, exceptional costs, amortisation of acquired intangibles and
IAS19 pension costs.
Divisional revenue increased by 28% to GBP175.6m (FY 2015/16:
GBP137.6m). On a CER basis, sales increased by 14% driven by the
previous year's second half acquisitions of Flux, Contour and
Plitron and this year's acquisition of Variohm. In total,
acquisitions generated growth of 15%, with organic sales reducing
by 1%.
Organic growth levels reflect a slower first half, where organic
revenue reduced by 4%. This was a result of generally lower
customer demand levels amidst widespread macroeconomic uncertainty,
which led to lower capital expenditure and delayed investment
programmes in end markets.
As expected, second half revenues accelerated in the fourth
quarter following a number of customers' new product launches and
increasing volume demand across most markets. This resulted in
organic revenue growth for the second half of 3% and order growth
of 3%. Orders for the division were up 14% CER compared with last
year, with a book to bill for the year of 1.05 (H1: 1.03; H2
1.07).
Divisional revenue was 52% of Group revenue (FY 2015/16: 48%),
and 54% when annualised for acquisitions. This represents further
good progress towards our mid-term divisional target for D&M to
reach 75% of Group revenue.
As part of the Group's ongoing focus on efficiency improvements,
a Group-wide efficiency and cost reduction programme was
implemented during the year. In the D&M division, this led, in
the first half of the year, to the closure of three production
sites in the Nordic region, with manufacture being transferred to
other existing, lower cost facilities, and the further integration
of purchasing and production processes in the division. The cost of
this efficiency programme was GBP1.6m and is included in
exceptional costs.
Underlying D&M operating profit for the year of GBP20.2m was
GBP3.7m higher than last year (FY 2015/16: GBP16.5m) and up GBP1.9m
CER (+10%). The underlying operating margin for the year of 11.5%
was 0.5ppts lower than last year mainly due to the weakness in
Sterling impacting purchase pricing in the second half, with second
half operating margins being 1.4ppts lower. Overall, the division
generated 80% of the Group's profit contribution from 52% of Group
sales.
As with previous years, a number of operational investments are
underway, which include expanding magnetics production capacity in
China, expanding electromagnetic shielding production capacity in
South Korea and expanding fibre optic production capacity in
Slovakia. Capital expenditure remains within historic levels.
Variohm
In January 2017, the Group acquired Variohm Holdings Limited, a
UK based designer, manufacturer and distributor of highly
differentiated sensors, switches and motion measurement systems to
industrial customers in the UK, Europe and North America, via its
three main brands, Variohm, Herga and Heason. Its key markets are
consistent with Acal's key markets including medical,
transportation and industrial, and collectively account for two
thirds of Variohm sales.
Variohm was acquired for an initial cash consideration of
GBP10.6m and generated revenue for its year ended 30 April 2016
(its final year before acquisition) of GBP19.4m generating a
pre-tax profit of GBP1.6m. Additionally, a contingent cash
consideration of up to a maximum of GBP1.85 million is payable in
the year ending 31 March 2019, subject to the satisfaction of
certain conditions and growth targets during the year ending 31
March 2018. Since acquisition, Variohm has performed very well.
We expect the business to benefit from access to Acal's broader,
international customer base, to create new revenue opportunities
from cross-selling across the Group. Cross-selling activities are
already underway and since the year end, the first design win was
achieved, ahead of plan.
Custom Distribution Division
The Custom Distribution division provides technically demanding
customised electronic, photonic and medical products to the
industrial, medical and healthcare markets, both from a range of
high quality international suppliers (often on an exclusive basis)
and from Acal's D&M division. A high degree of technical
knowledge is required during the sales process, with Acal's
engineers helping original equipment manufacturers solve their
design challenges. Acal is the only industrial electronics business
which provides such a comprehensive range of customer-specific
products and solutions across Europe. The division comprises two
businesses, Acal BFi and Vertec.
The customer engagement, sales and support process in Acal BFi
is similar to that of the D&M division, the difference being
that the products sold are manufactured by a third party supplier,
rather than by Acal.
Acal BFi supplies industrial markets and accounts for the
majority of Custom Distribution revenue. It supplies products from
a selected group of manufacturers (including Acal's own D&M
businesses) to over 20,000 customers in five technology areas:
Communications & Sensors, Power & Magnetics,
Electromechanical & Cabling, Microsystems, and Imaging &
Photonics. The business operates across Europe, with centralised
warehousing, purchasing, finance, customer contact management and
IT systems. Vertec supplies exclusively-sourced medical imaging and
radiotherapy products into medical and healthcare markets in the UK
and South Africa.
FY 2016/17 FY 2015/16 Revenue CER Organic
growth revenue revenue
growth growth
------------------------------ ------------------------------ -------- --------- ---------
Revenue Underlying Margin Revenue Underlying Margin
GBPm operating GBPm operating
profit(1) profit
GBPm (1)
GBPm
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
H1 74.9 1.6 2.1% 76.3 2.6 3.4% -2% -10% -10%
H2 87.7 3.6 4.1% 73.8 2.1 2.8% 19% 6% 9%
Total 162.6 5.2 3.2% 150.1 4.7 3.1% 8% -2% 0%
-------- ----------- ------- -------- ----------- ------- -------- --------- ---------
(1) Underlying operating profit excludes acquisition-related
costs, exceptional costs, amortisation of acquired intangibles and
IAS19 pension costs.
Divisional revenue for the year was 8% higher at GBP162.6m (FY
2015/16: GBP150.1m), and in line with last year organically. As
with the D&M division, a strong second half saw a return to
organic growth of 9% offsetting a slower first half.
The weaker first half reflected strong prior year comparators,
some loss of momentum during the re-structuring programme discussed
below, as well as weak market conditions throughout Europe. Second
half sales growth resumed, a result of improved commercial focus
following the implementation of a regional sales-led structure and
improving market conditions.
Orders for the division were up 6% (CER) compared with the prior
year and second half orders increased by 11%. Book to bill for the
year was 1.02 (H1: 1.01; H2 1.03).
Underlying operating profit for the year of GBP5.2m was up
GBP0.5m on last year (down GBP0.4m CER). Second half underlying
operating profit was up GBP1.5m year-on-year. The underlying
operating margin was 3.2%, 0.1ppt ahead of last year, with a second
half margin of 4.1%. The divisional mid-term target is for an
operating margin of 5%.
The efficiency programme implemented during the year included
the regionalisation of sales operations around Europe, a reduction
in management headcount, closure of the Spanish operation and a
reduction of administrative costs. The cost of this efficiency
programme was GBP4.8m and is included within exceptional costs.
Target Markets
Our serviceable market is estimated to be worth GBP20bn
internationally, representing the niche electronic components
market, and in itself representing less than 10% of the total
global electronic components market. Needless to say, there remain
numerous opportunities for growth across a wide range of markets
and applications. Acal identifies customer opportunities where we
can create a differentiated, engineered product solution, avoiding
products that are more susceptible to commoditisation and price
pressure.
In particular, the Group focuses on four target markets, which
account for around half of Group turnover: transportation, medical,
renewable energy and industrial connectivity. These are expected to
drive the Group's organic revenue well ahead of GDP over the
economic cycle and create acquisition opportunities. Growth in
these markets is driven by increasing electronic content in
products, and by global macro trends such as a growing middle class
population, an expanding transport infrastructure, an ageing
affluent population and the increasing need for renewable sources
of energy.
i) Transportation
Transport markets are growing around the world, driven by
increasing demand and falling costs, whether it be rail, air or
automotive. The electronics content is rising, for instance to add
convenience features, or for safety or security. For example, IC
Insights, a leading electronic market research company, expects
integrated circuit sales, a proxy for electronic content, into the
automotive market to rise by a CAGR of 10.4% between 2015 and
2020.
ii) Medical
This market is driven by the increasing use of technology in
diagnosing, monitoring and controlling medical conditions, as well
as an increasingly affluent and ageing global population which
nowadays accounts for the majority of healthcare spending in
developed economies. As an example, a recent report by IC Insights
forecasts the sales of electronics into medical applications to
rise by a CAGR of 7.3% between 2015 and 2020.
iii) Renewable Energy
The combination of increased need for electricity, reducing
acceptance of nuclear and coal as sources, and falling costs all
favour the demand for renewable energy. So much so, that the
International Energy Agency expects renewable electricity
generation to outpace all other sources and surpass coal as the
largest power source by around 2030, and to account for 50% of the
additional energy created by then.
iv) Industrial Connectivity
Technology is creating opportunities for connectivity
everywhere, and becoming increasingly important in industry. A
recent report by leading research firm MarketsandMarkets expects
the overall market size for global machine-to-machine connections
to rise by 11.6% CAGR between 2015 and 2020.
Cross-selling
For acquired businesses, cross-selling provides new customer and
geographic opportunities as a straightforward route to expanding
organic growth opportunities. For businesses already within the
Acal Group, cross-selling expands the sales opportunity by widening
the range of products that can be supplied to existing customers.
In both cases, cross-selling creates stronger customer
relationships.
Having achieved its overall target last year of exceeding 5% of
Group revenues (when including cross-selling within Acal BFi), the
focus of our new strategic target is now on cross-selling D&M
products between Group companies. This initiative generated sales
of GBP4.6m (1.4% of revenues), an increase of 53% over last year
(35% CER).
Acquisitions
Acquisitions build complementary product and/or geographic
capability supplying common markets and customers, and create
future organic growth opportunities.
We acquire businesses that are successful, profitable and
growing in our existing and adjacent technology areas. For example,
by acquiring Variohm we have added to our existing range of
temperature and pressure sensors and expanded our range to include
load sensors, switching and sensor systems. The businesses operate
in markets with good growth prospects and long term growth drivers
similar to Acal's focus markets.
Often the businesses are led by entrepreneurial managers who
wish to remain with the business following acquisition. We
encourage this, as it helps to retain a successful, entrepreneurial
culture.
As such, Acal operates a decentralised structure, with business
units operating to agreed business plans. We develop the
performance of the business and support growth investment
requirements. Depending upon the circumstances of an acquisition,
we add value in some or all of the following areas:
- Internationalising sales channels and expanding the customer
base, including via Group cross-selling initiatives;
- Developing and expanding the product range;
- Investing in management capability ('scaling up') and succession planning;
- Capital investment in manufacturing & infrastructure;
- Enabling growth with existing large customers as a consequence
of the larger Group balance sheet;
- Improving manufacturing efficiency, such as by combining
purchasing scale and process efficiencies;
- Infrastructure efficiency, such as warehousing and freight;
- Finance and administrative support, such as treasury, banking,
legal, pension, tax & insurance, risk & control; and
- Expanding the business through further acquisitions.
Acquisition performance
Over the last six years, ten businesses have been acquired in
the D&M division at a cost of GBP129m. On a weighted average
basis, revenues of the acquired businesses have grown organically
by 4% per annum (organically at CER) and operating profits by 6%
per annum since acquisition. We measure acquisition return on
investment ("ROI") as the current year operating profit
attributable to each business over the acquisition costs (including
earn outs, expenses and integration costs).
Overall, our FY2016/17 acquisition ROI was 16%. The Group, which
has a weighted average cost of capital of c.10%, targets an ROI of
15% for acquisitions. During the year, six businesses exceeded
target ROI with a range of 17% to 44%, mostly the result of several
years' profitable growth from businesses acquired in earlier years.
While two smaller businesses performed below our expectations,
following changes, they are expected to improve in the year
ahead.
Acquisition case study - MTC GmbH
MTC, based in Dillingen, Germany was acquired in October 2011
and is a good example of how we develop and invest in businesses
following acquisition. At the time of acquisition, MTC manufactured
a range of electromagnetic shielding products.
Since acquisition, organic revenue has grown 15% CER per annum,
and operating profits 20% CER per annum. Operating margin has
increased from 15% to 20%. Furthermore, the following have been
achieved:
- Appointed a new Managing Director as successor to retiring vendor;
- Doubled the number of active customers;
- More than doubled the product range;
- Enlarged the organisation - headcount increasing by 40%;
- Increased sales into target markets from 30% to 55%;
- Introduced new sales territories;
- Established cross-selling, which now accounts for 9% of revenue;
- Moved to new larger offices; and
- Invested in additional production capacity in Asia.
The strong, local management team have embraced the market
opportunity and the investment capability that Acal brought to the
business to deliver strong results. The business has excellent
growth prospects ahead.
Group Priorities for the Year Ahead
Our priority for the year ahead is to deliver further good
growth in earnings, through:
1. Further organic sales growth;
2. Optimising efficiency;
-- Further production efficiencies through smarter working practices
-- Delivering benefits from the regional sales leadership structure
-- Continued growth in cross-selling
3. Integrating the Variohm acquisition;
-- Organic growth
-- Establish cross-selling
4. Further value enhancing acquisitions.
Summary and Outlook
As expected, the second half of the year saw accelerating levels
of organic growth in sales and orders, and excellent cash flow.
This strong momentum has continued into the new financial year
which we entered with an order book 22% higher at CER than the
prior year, and which is driving further good growth in this first
quarter as the order book converts into sales.
Our efficiency plan has been implemented, delivering GBP4m in
sustainable annual savings and at a better than anticipated cost of
implementation.
Variohm Group, acquired in January 2017, is performing very
well. Cross-selling activities are underway with a number of
exciting opportunities identified and our first design win has been
achieved, ahead of plan.
This is the seventh consecutive year in which the dividend has
increased, an increase of 67% in total, reflecting the
transformation of the Group over this period. In the last four
years alone, revenues have almost doubled and underlying operating
profits quadrupled. We plan to continue this strong rate of
progression through further organic growth and high quality
acquisitions over the next five years.
Nick Jefferies
Group Chief Executive
6 June 2017
FINANCE REVIEW
Orders and Revenue
Group revenue for the year increased by 18% over last year to
GBP338.2m, and by 6% CER, the difference reflecting the translation
benefit of Sterling weakness since last year. While organic revenue
was 1% lower, the acquisitions of Flux, Contour and Plitron last
year, and Variohm this year, less the closure of the Spanish
distribution business, contributed an additional 7% growth in
revenues.
H1 H2
FY FY % % %
GBPm 2016/17 2015/16
--------- --------- ---- ---- ----
Reported revenue 338.2 287.7 18% 10% 23%
FX translation
impact 32.8
--------- --------- ---- ---- ----
Underlying revenue
(CER) 338.2 320.5 6% 1% 11%
Acquisitions/closures (3.2) 16.6
Organic revenue 335.0 337.1 -1% -7% 6%
--------- --------- ---- ---- ----
Group orders increased by 9% CER with a book to bill ratio of
1.04 (H1: 1.02, H2: 1.05). Organically, orders were up 3% for the
year, reducing 1% in the first half and growing 7% in the second
half.
With approximately 80% of Group sales in non-Sterling
currencies, the translation of Group results into Sterling has
benefited from its weakness following the UK's European Referendum.
Sterling declined by 13% on average against the Euro in the year
compared with last year, by 13% on average against the US Dollar
and by 12% against Nordic currencies on average.
Gross Profit and Margin
Gross profit for the year increased by 20% over last year. This
growth rate is higher than the corresponding revenue growth rate
due to further improvements in gross margin for the year, which
increased 0.6ppts to 32.8% (FY 2015/16: 32.2%), although growth was
limited by Sterling weakness in the year.
Sterling weakness which followed the Referendum put pressure on
UK import costs in the second half of the year, impacting UK gross
margins. Approximately 20% of Group revenues are from UK
subsidiaries where around 90% of cost of goods are non-Sterling,
mainly US Dollar. Sterling declined by 13% on average against the
US Dollar in the year and by 16% in the second half compared with
the second half last year. The Group continued with its active
hedging policy, which hedges transactions from the point of order
through to payment. Whilst this protected gross margins in the
first half, second half gross margins were impacted as new order
hedging was contracted at the stronger US Dollar rates such that
the gross margin on organic sales was down 0.5ppts for the
year.
Despite the currency pressures, this remains the Group's highest
annual gross margin and has increased by nearly 7ppts in the last
eight years, a reflection of the increasingly differentiated nature
of our products and sustainability of the business.
Underlying Operating Costs
During the year an efficiency and cost reduction programme was
implemented to remove GBP4m (4.4%) of Group underlying operating
costs on an annualised basis. Of this, GBP1.7m of savings were
achieved this year and the remainder will flow through next year as
the full annualised benefit is realised. The cost of implementing
these changes was GBP6.4m, lower than originally anticipated
(GBP8m).
In the D&M division, the programme involved the closure of
three small Nordic production sites and the further integration of
purchasing and production processes. In the Custom Distribution
division, it included the regionalisation of sales operations, a
reduction in management headcount, the closure of the Spanish
business and a reduction in administrative costs whilst maintaining
customer and sales focus.
As a result of this programme, underlying operating costs in the
year reduced by 1% organically, excluding the impact of
acquisitions. Including the cost bases of companies acquired over
the last two years (Flux, Contour, Plitron and Variohm), and as
adjusted for the closure of our Spanish business, Group underlying
operating costs increased by 6% CER.
Overall reported costs were up 27% as detailed below.
FY
GBPm FY 2016/17 2015/16 %
----------- --------- ----
Organic costs 90.0 90.6 -1%
Closure/(acquisitions) 1.0 (4.8)
----------- --------- ----
Underlying costs
(CER) 91.0 85.8 6%
FX translation (9.5)
Underlying adjustments
Exceptional costs 6.9 0.2
Acquisition-related
costs 1.2 1.6
Amortisation of
acquired intangibles 3.9 2.8
IAS 19 pension
administration
cost 0.3 0.3
----------- --------- ----
Reported costs 103.3 81.2 27%
----------- --------- ----
FY
GBPm FY 2016/17 2015/16
----------- ---------
Selling and distribution
costs 49.4 43.4
Administrative
expenses 41.6 32.9
Underlying adjustments 12.3 4.9
----------- ---------
Reported costs 103.3 81.2
----------- ---------
Selling and distribution costs, and administrative expenses, are
higher than last year, due to the inclusion of operating costs of
the recently acquired businesses, together with the translation
impact arising from the weaker Sterling during the year. Underlying
adjustments, which are included in the financial statements within
administrative expenses, are discussed below.
Group Operating Profit and Margin
Group underlying operating profit for the year was GBP20.0m, up
GBP3.7m (+23%) on last year, and up 5% CER, delivering a Group
underlying operating margin of 5.9%, up 0.2ppts on last year (H1:
5.6%, H2: 6.2%).
Reported Group operating profit for the year (after accounting
for the underlying adjustments discussed below) was GBP7.7m,
compared with GBP11.4m last year. The GBP3.7m decrease primarily
reflects the impact of exceptional costs this year of GBP6.9m.
These related to the Group's efficiency and cost reduction
programme of GBP6.4m together with integration costs of GBP0.5m,
more than offsetting the increase in underlying profitability.
GBPm FY 2016/17 FY 2015/16
------------------------------ ------------------------------
Operating Finance Profit Operating Finance Profit
profit cost before profit cost before
tax tax
---------- -------- -------- ---------- -------- --------
Underlying 20.0 (2.8) 17.2 16.3 (1.8) 14.5
Underlying adjustments
Exceptional costs (6.9) - (6.9) (0.2) - (0.2)
Acquisition-related
costs (1.2) - (1.2) (1.6) (1.6)
Amortisation of
acquired intangibles (3.9) - (3.9) (2.8) - (2.8)
IAS 19 pension
cost (0.3) (0.1) (0.4) (0.3) (0.2) (0.5)
Reported 7.7 (2.9) 4.8 11.4 (2.0) 9.4
---------- -------- -------- ---------- -------- --------
Underlying Adjustments
Underlying adjustments for the year comprise exceptional
restructuring and integration costs of GBP6.9m (FY 2015/16:
GBP0.2m), acquisition-related costs of GBP1.2m (FY 2015/16:
GBP1.6m), the amortisation of acquired intangibles of GBP3.9m (FY
2015/16: GBP2.8m) and the IAS19 legacy pension cost of GBP0.4m (FY
2015/16: GBP0.5m).
Exceptional costs for the year comprise GBP6.4m related to the
Group's efficiency and cost reduction programme detailed above and
GBP0.5m related to the integration of Flux into the D&M
division. Acquisition-related costs of GBP1.2m comprised earn-out
accruals of GBP0.9m and costs related to the acquisition of Variohm
in January 2017 of GBP0.3m.
The GBP1.1m increase in the amortisation charge since last year
relates to the amortisation of intangibles identified as part of
the acquisitions of Flux, Contour and Plitron last year and Variohm
this year. The total annualised amortisation cost for next year is
expected to be around GBP4.6m.
Financing Costs
Group finance costs of GBP2.9m (FY 2015/16: GBP2.0m), comprised
underlying finance costs (being interest and facility fees arising
from the Group's banking and pooling facilities), together with an
IAS19 pension finance charge.
Underlying finance costs for the year were GBP2.8m and were up
GBP1.0m from last year due mainly to the debt funding of the Flux,
Contour and Plitron acquisitions during the second half of last
year. Included within finance costs is the amortisation of the
upfront arrangement fees associated with the Group's syndicated
banking facility of approximately GBP0.3m per annum.
The IAS19 pension finance cost for the year was GBP0.1m compared
with GBP0.2m last year.
Underlying Tax Rate
The underlying effective tax rate for the year was 24%. This was
2ppts higher than last year's rate (FY 2015/16: 22%) due mainly to
the profit mix shifting towards higher tax territories.
The overall effective tax rate of 27% was higher than the
underlying effective tax rate of 24% mainly due to no tax relief
being recognised for exceptional costs (within underlying
adjustments) in countries with unrecognised tax losses.
Profit Before Tax and EPS
Underlying profit before tax for the year was GBP17.2m, an
increase of GBP2.7m (19%) compared with last year. This increase,
offset partly by the increased underlying effective tax rate for
the year and the increased equity base following the equity placing
in January 2017, resulted in underlying diluted earnings per share
for the year of 19.2p, up 13% on last year.
After the underlying adjustments discussed above, reported
profit before tax was GBP4.8m, GBP4.6m below last year, with
reported fully diluted earnings per share of 5.1p compared with
10.9p last year.
GBPm FY 2016/17 FY 2015/16
-------------- --------------
PBT EPS PBT EPS
------ ------ ------ ------
Underlying 17.2 19.2p 14.5 17.0p
Underlying adjustments
Exceptional costs (6.9) (0.2)
Acquisition-related
costs (1.2) (1.6)
Amortisation of
acquired intangibles (3.9) (2.8)
IAS 19 pension
cost (0.4) (0.5)
Reported 4.8 5.1p 9.4 10.9p
------ ------ ------ ------
Working Capital
Working capital at 31 March 2017 was GBP55.5m, equivalent to 15%
of annualised final quarter sales at CER. This compares with
working capital of GBP53.2m at 31 March 2016, being 17% of last
year's annualised final quarter sales at CER. Continued tight
management of working capital has seen this ratio reduce. The
D&M division has 19% working capital as a percentage of sales
(2ppts better than last year), compared with 9% in Custom
Distribution (3ppts better than last year) because of higher
inventory requirements in D&M (raw material and finished
goods). Improvements in working capital in Custom Distribution
reflected improvements in debtor days and stock turns.
Group trade debtor and trade creditor days outstanding at 31
March 2017 were both lower than last year at 51 days (down 5 days)
and 57 days (down 5 days) respectively, with the measure similar in
both divisions. Group inventory turns were also better at 5.7 times
(up 0.3 turns), with turns of 9.9 times in Custom Distribution and
3.9 times in D&M.
ROCE (return on capital employed, as defined in note 5 to the
attached summary financial statements) for the year was 13.0%, up
1.4ppts on last year. Our three year target is to achieve a ROCE of
at least 15%.
Cash Flow
Net debt at 31 March 2017 was GBP30.0m, compared with GBP38.1m
at 31 March 2016. The impact of foreign exchange on net debt
balances in the year was only GBP0.2m.
FY FY
2016/17 2015/16
--------- ---------
Net debt at 1 April (38.1) (19.0)
Free cash flow (see
table below) 21.3 10.2
Acquisition-related
cash flow (13.8) (20.8)
Equity issuance 13.6 -
Exceptional payments (6.4) (1.4)
Legacy pension (1.6) (1.6)
Dividends (5.2) (4.9)
Foreign exchange impact 0.2 (0.6)
Net debt at 31 March (30.0) (38.1)
--------- ---------
Net acquisition cash flows of GBP13.8m comprise a GBP10.6m
upfront outflow for the acquisition of Variohm in January 2017,
GBP1.0m of acquired debt on acquisition, associated acquisition
costs of GBP0.3m and the cash cost of earn-out payments made in the
period of GBP1.9m. Cash payments of exceptional items for the year
totalled GBP6.4m (including payments of prior year accruals) and
related mainly to the Group's efficiency and cost reduction
programme. Further exceptional cash costs of GBP1m are expected
next year as this year's accrued costs are paid.
Dividend payments increased by GBP0.3m to GBP5.2m following the
6% increase of last year's dividend. The Group will continue to
review the level of future dividend growth in relation to its
policy of long term dividend cover of 2 to 3 times underlying
earnings per share.
Operating cash flow and free cash flow (see definitions in note
5 to the summary financial statements) for the year compared with
last year are shown below.
FY
GBPm 2016/17 FY 2015/16
--------- -----------
Underlying profit
before tax 17.2 14.5
Finance costs 2.8 1.8
Non-cash items* 4.5 3.5
--------- -----------
Underlying EBITDA 24.5 19.8
Working capital 5.9 (1.2)
Capital expenditure (3.3) (2.3)
--------- -----------
Operating cash
flow 27.1 16.3
Finance costs (2.8) (1.8)
Taxation (3.0) (4.3)
-----------
Free cash flow 21.3 10.2
--------- -----------
* Non-cash items comprise depreciation (GBP3.0m), amortisation
(GBP0.7m), loss on disposal (GBP0.2m) and share based payments
(GBP0.6m)
Underlying EBITDA of GBP24.5m was 24% higher than last year.
GBP5.9m was released from working capital as the Group finished the
year strongly. Capital expenditure at GBP3.3m was GBP1.0m higher
than last year with increased investment in the D&M division,
in particular new production lines in Noratel and Myrra, plus a
full year's capital expenditure for businesses acquired last year.
Tax payments were GBP1.3m lower than last year due to the use of
tax losses brought forward, together with tax receipts from prior
years following the conclusion of certain tax audits; further tax
repayments are not expected next year.
Operating cash flow of GBP27.1m was GBP10.8m higher than last
year (up 66%) and represented 136% of underlying operating profit,
comparing very favourably with our target of 85%. Free cash flow
(after finance costs and taxation) was GBP21.3m, which was GBP11.1m
higher than last year (up 109%) and 163% of underlying profit after
tax, again comparing very favourably with our target of 90%.
Banking Facilities
During July 2016, the Group increased its syndicated banking
facility from GBP90m to GBP120m and extended the remaining term of
the facility by two years out to five years ending in July 2021. In
addition, the Group has a GBP30m accordion facility which it can
use to extend the total facility up to GBP150m. The syndicated
facility is available both for acquisitions and for working capital
purposes.
With net debt at 31 March 2017 of GBP30.0m, the Group's gearing
ratio (being net debt divided by underlying EBITDA, annualised for
acquisitions) was 1.2 times (2015/16: 1.7 times), better than our
target range of 1.5 to 2.0 times.
While the working capital performance was particularly strong at
the year end, the average net debt balance since the acquisition of
Variohm in January 2017 was GBP36m.
Balance Sheet
Net assets of GBP123.8m at 31 March 2017 were GBP21.9m higher
than at the end of the last financial year (31 March 2016:
GBP101.9m). The increase primarily relates to the equity placing in
January 2017 together with translation gains on currency net assets
due to the weakness in Sterling since last year, offset by the
payment of dividends. The movement in net assets is summarised as
follows:
GBPm FY 2016/17
-----------
Net assets at 31
March 2016 101.9
Net profit after
tax 3.5
Equity placing (net
of issue costs) 13.6
Dividend paid (5.2)
Currency net assets
- translation impact 11.4
Loss on defined
benefit scheme (inc
tax) (1.7)
Share based payments
(inc tax) 0.3
Net assets at 31
March 2017 123.8
-----------
The Group's IAS19 pension liability, associated with its legacy
defined benefit pension scheme, increased during the year by
GBP1.1m to GBP6.0m at 31 March 2017. At the half year, the
liability had risen to GBP8.2m following a sharp fall in gilt and
corporate bond rates, particularly following the UK's European
Referendum. However, a subsequent increase in gilt and corporate
bond rates in the second half reduced the liability to the level
reported.
Together with an associated deferred tax liability of GBP0.4m
(31 March 2016: GBP0.7m), the Group's overall pension liability
increased from GBP5.6m at 31 March 2016 to GBP6.4m at 31 March
2017. An annual cash payment of GBP1.6m was made this year.
Payments are growing by 3% each year, in accordance with the plan
agreed with the pension Trustee in 2009, until 2022. The next
triennial valuation will be at 31 March 2018.
Risks and Uncertainties
The principal risks faced by the Group will be covered in more
detail in the Group's Annual Report, due to be published later this
month. These risks include but are not limited to: the economic
environment, particularly within Europe; the impact arising from
the UK's decision to leave the European Union; the performance of
acquired companies; loss of major customers or suppliers;
technological change; major business disruption; cyber security;
liquidity and debt covenants; exposure to adverse foreign currency
movements; obligations in respect of a legacy defined benefit
pension scheme; and loss of key personnel.
Acal's risk management processes cover identification, impact
assessment, likely occurrence and mitigation actions. Some level of
risk, however, will always be present. The Group is well positioned
to manage such risks and uncertainties, if they arise, given its
strong balance sheet and committed banking facility of GBP120m at
the end of the year.
Simon Gibbins
Group Finance Director
6 June 2017
Consolidated income statement
for the year ended 31 March
2017
2017 2016
notes GBPm GBPm
Revenue 6 338.2 287.7
Cost of sales (227.2) (195.1)
-------------------------------------------------- ------ -------- --------
Gross profit 111.0 92.6
Selling and distribution
costs (49.4) (43.4)
Administrative expenses
(including exceptional items) (53.9) (37.8)
Operating profit 7.7 11.4
Finance revenue 0.2 0.3
Finance costs (3.1) (2.3)
Profit before tax 4.8 9.4
Tax expense (1.3) (2.2)
-------------------------------------------------- ------ -------- --------
Profit for the year 3.5 7.2
-------------------------------------------------- ------ -------- --------
Earnings per share 9
Basic 5.3p 11.4p
Diluted 5.1p 10.9p
Supplementary income statement
information
--------
2017 2016
Underlying Performance Measure GBPm GBPm
Operating profit 7.7 11.4
Add back: Exceptional items 6.9 0.2
Acquisition costs 1.2 1.6
Amortisation of acquired
intangible assets 3.9 2.8
IAS 19 pension administrative
charge 0.3 0.3
-------------------------------------------------- ------ -------- --------
Underlying operating profit 7 20.0 16.3
-------------------------------------------------- ------ -------- --------
Profit before tax 4.8 9.4
Add back: Exceptional items 6.9 0.2
Acquisition costs 1.2 1.6
Amortisation of acquired
intangible assets 3.9 2.8
Total IAS 19 pension charge 0.4 0.5
-------------------------------------------------- ------ -------- --------
Underlying profit before
tax 7 17.2 14.5
-------------------------------------------------- ------ -------- --------
Underlying earnings per
share 9
Basic 20.0p 17.9p
Diluted 19.2p 17.0p
Consolidated statement of comprehensive income
for the year ended 31 March 2017
2017 2016
notes GBPm GBPm
------------------------------------- ------- ------- ------
Profit for the year 3.5 7.2
---------------------------------------------- ------- ------
Other comprehensive income:
Items that will not be subsequently
reclassified to profit or loss:
Actuarial (loss)/gain on defined
benefit pension scheme (2.0) 0.7
Deferred tax credit/(charge)
relating to defined benefit
pension scheme 0.3 (0.2)
(1.7) 0.5
--------------------------------------------- ------- ------
Items that may be subsequently
reclassified to profit or loss:
Exchange differences on translation
of foreign subsidiaries 11.4 3.4
Effective portion of changes
in fair value of cash flow hedges - (0.7)
---------------------------------------------- ------- ------
11.4 2.7
Other comprehensive profit for
the year, net of tax 9.7 3.2
Total comprehensive profit for
the year, net of tax 13.2 10.4
---------------------------------------------- ------- ------
Consolidated statement of financial position
at 31 March 2017
2017 2016
notes GBPm GBPm
------------------------------- ------ -------- --------
Non-current assets
Property, plant and equipment 16.0 14.7
Intangible assets - goodwill 13 72.6 63.6
Intangible assets - other 28.1 24.6
Deferred tax assets 5.5 5.5
------------------------------- ------ -------- --------
122.2 108.4
------------------------------- ------ -------- --------
Current assets
Inventories 50.1 42.9
Trade and other receivables 77.3 65.5
Cash and cash equivalents 22.2 19.9
------------------------------- ------ -------- --------
149.6 128.3
------------------------------- ------ -------- --------
Total assets 271.8 236.7
------------------------------- ------ -------- --------
Current liabilities
Trade and other payables (71.9) (55.2)
Other financial liabilities (1.3) (0.8)
Current tax liabilities (2.6) (2.7)
Provisions (2.6) (3.0)
------------------------------- ------ -------- --------
(78.4) (61.7)
------------------------------- ------ -------- --------
Non-current liabilities
Other financial liabilities (50.9) (57.2)
Pension liability 15 (6.4) (5.6)
Provisions (5.8) (3.5)
Deferred tax liabilities (6.5) (6.8)
(69.6) (73.1)
------------------------------- ------ -------- --------
Total liabilities (148.0) (134.8)
------------------------------- ------ -------- --------
Net assets 123.8 101.9
------------------------------- ------ -------- --------
Equity
Share capital 14 3.5 3.2
Share premium 108.9 95.6
Merger reserve 3.0 3.0
Currency translation reserve 7.0 (4.4)
Retained earnings 1.4 4.5
------------------------------- ------ -------- --------
Total equity 123.8 101.9
------------------------------- ------ -------- --------
These financial statements were approved by the Board of
Directors on 6 June 2017 and signed on its behalf by:
N J Jefferies S M Gibbins
Group Chief Executive Group Finance Director
Consolidated statement of changes in equity
for the year ended 31 March 2017
Attributable to equity holders of the Company
-----------------------------------------------------------------------------------------------------
Currency
Share Share Merger translation Retained Total
capital premium reserve reserve earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2015 3.1 92.7 3.0 (7.8) 1.7 92.7
Profit for the
year - - - - 7.2 7.2
Other comprehensive
loss - - - 3.4 (0.2) 3.2
---------- ---------- --------- --------------- ----------- --------
Total comprehensive
loss - - - 3.4 7.0 10.4
Shares issued (note14) 0.1 2.9 - - - 3.0
Share-based payments
including tax - - - - 0.7 0.7
Dividends (note
8) - - - - (4.9) (4.9)
At 31 March 2016 3.2 95.6 3.0 (4.4) 4.5 101.9
Profit for the
year - - - - 3.5 3.5
Other comprehensive
income - - - 11.4 (1.7) 9.7
---------- ---------- --------- --------------- ----------- --------
Total comprehensive
income - - - 11.4 1.8 13.2
Shares issued (note
14) 0.3 13.3 - - - 13.6
Share-based payments
including tax - - - - 0.3 0.3
Dividends (note
8) - - - - (5.2) (5.2)
At 31 March 2017 3.5 108.9 3.0 7.0 1.4 123.8
------------------------- ---------- ---------- --------- --------------- ----------- --------
On 20 January 2017, the Company issued 6,418,308 new Ordinary
shares to new and existing shareholders through an equity placing.
The terms of the issue were fixed through a placing agreement, with
an issue price of 220 pence per share. The net proceeds were
GBP13.6m, being gross proceeds on issue of GBP14.1m less directly
attributable expenses of GBP0.5m.
The difference between the nominal value of the shares issued
and the gross proceeds has been credited to the share premium
account. The directly attributable transaction costs of GBP0.5m
related to the issue of shares have been debited to the share
premium account.
The new shares issued rank pari passu in all respects with the
existing shares issued, including the right to receive all
dividends and other distributions declared, made or paid on the
existing Ordinary shares.
Consolidated statement of cash flows
for the year ended 31 March 2017
2017 2016
notes GBPm GBPm
-------------------------------------- ------ ------- -------
Net cash flow from operating
activities 12 14.5 8.2
Investing activities
Acquisition of shares in
subsidiaries (net of cash/(debt)
acquired) (11.6) (19.9)
Acquisition related contingent
consideration (0.3) -
Purchase of property, plant
and equipment (2.8) (1.6)
Purchase of intangible assets
- software (0.6) (0.7)
Proceeds from disposal of
property plant and equipment 0.1 0.1
Interest received 0.2 0.3
Net cash used in investing
activities (15.0) (21.8)
-------------------------------------- ------ ------- -------
Financing activities
Net proceeds from the issue
of shares 14 13.6 -
Proceeds from borrowings - 9.9
Repayment of borrowings (9.2) -
Dividends paid (5.2) (4.9)
Net cash from financing activities (0.8) 5.0
-------------------------------------- ------ ------- -------
Net decrease in cash and
cash equivalents (1.3) (8.6)
Cash and cash equivalents
at 1 April 19.2 26.6
Effect of exchange rate fluctuations 3.1 1.2
-------------------------------------- ------ ------- -------
Cash and cash equivalents
at 31 March 21.0 19.2
-------------------------------------- ------ ------- -------
Reconciliation to cash and
cash equivalents in the consolidated
statement of financial position
Cash and cash equivalents
shown above 21.0 19.2
Add back: bank overdrafts 1.2 0.7
Cash and cash equivalents
presented in current assets
in the consolidated statement
of financial position 22.2 19.9
---------------------------------------- ----- -----
1. Publication of non-statutory accounts
The preliminary results were authorised for issue by the Board
of Directors on 6 June 2017. The financial information set out
above does not constitute the Company's statutory accounts for the
years ended 31 March 2017 or 2016, but is derived from those
accounts. Statutory accounts for 2016 have been delivered to the
Registrar of Companies whereas those for 2017 will be delivered
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified and did
not contain a statement under section 237 (2) or (3) of the
Companies Act 2006.
2. Basis of preparation
The financial information in this statement is prepared in
accordance with International Financial Reporting Standards (IFRS),
as adopted for use in the European Union and as applied in
accordance with the provisions of the Companies Act 2006.
3. Going concern
The Group's business activities, together with factors which may
adversely impact its future development, performance and position,
are set out in the Operating Review. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities
are described in the Finance Review.
The Group has significant financial resources, well established
distribution contracts with a number of suppliers and a broad and
stable customer base. As a consequence, the Directors believe that
the Group is well placed to manage its principal risks and
uncertainties successfully.
The Group's forecasts and projections, taking account of the
sensitivity analysis of changes in trading performance, show that
the Group is well placed to operate within the level of its current
committed facilities for the foreseeable future.
After making due enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
4. Accounting Policies
The accounting policies adopted are consistent with those of the
previous financial year.
5. Underlying Performance Measures
These financial statements include underlying performance
measures that are not prepared in accordance with IFRS. These
underlying performance measures have been selected by management to
assist them in making operating decisions because they represent
the underlying operating performance of the Group and facilitate
internal comparisons of performance over time.
Underlying performance measures are presented in these financial
statements as management believe they provide investors with a
means of evaluating performance of the Group on a consistent basis,
similar to the way in which management evaluates performance, that
is not otherwise apparent on an IFRS basis, given that certain
strategic, non-recurring, infrequent or non-cash items that
management does not believe are indicative of the underlying
operating performance of the Group are included when preparing
financial measures under IFRS. The Directors consider there to be
the following underlying performance measures:
Underlying operating profit
"Underlying operating profit" is defined as operating profit
excluding acquisition costs, exceptional items, amortisation of
acquired intangible assets and the IAS19 pension administration
charge relating to the Group's legacy defined benefit pension
scheme.
Acquisition costs are attributable costs in connection with
business combinations and include contingent consideration where it
is treated as an expense and movement in contingent consideration
where it is treated as purchase price.
Underlying EBITDA
"Underlying EBITDA" is defined as underlying operating profit
with depreciation, amortisation and equity settled share-based
payment expense added back.
Underlying profit before tax
"Underlying profit before tax" is defined as profit before tax
excluding acquisition costs, exceptional items, amortisation of
acquired intangible assets and the total IAS19 pension charge
relating to the Group's legacy defined benefit pension scheme.
Underlying effective tax rate
"Underlying effective tax rate" is defined as the effective tax
rate on underlying profit before tax.
Underlying earnings per share
"Underlying earnings per share" is calculated as underlying
profit before tax reduced by the underlying effective tax rate,
divided by the weighted average number of ordinary shares (for
diluted earnings per share purposes) in issue during the
period.
Operating cash flow
"Operating cash flow" is defined as Underlying EBITDA adjusted
for the investment in, or release of, working capital and less the
cash cost of capital expenditure.
Free cash flow
"Free cash flow" is defined as net cash flow before the
payment/receipt of acquisition costs, exceptional items, payments
to the legacy defined benefit pension scheme, dividend payments,
net proceeds from equity fund raising, the cost of acquisitions and
proceeds from business disposals.
Return Capital Employed ("ROCE")
"ROCE" is defined as underlying operating profit as a percentage
of net assets (including goodwill) plus net debt.
Organic basis
Reference to 'organic' basis included in the Chairman's
Statement, Operating Review and Finance Review of the Strategic
Report means at constant exchange rates ("CER"), including the
equivalent pre-acquisition periods of Flux, Contour and Plitron
which were acquired last year, and Variohm, which was acquired this
year and excluding the sales of Acal BFi Spain which was closed in
December 2016.
6. Operating segment information
The Group organises its businesses into two divisions, Design
& Manufacturing and Custom Distribution.
-- The Design & Manufacturing division manufactures custom
electronic products that are uniquely designed or modified from a
standard product for a specific customer requirement. The products
are manufactured at one of our in-house manufacturing facilities
or, in a few cases, by third party contractors.
-- The Custom Distribution division provides technically
demanding, customised electronic, photonic and medical products to
the industrial, medical and healthcare markets, both from a range
of high-quality, international suppliers (often on an exclusive
basis) and from Acal's Design & Manufacturing division.
These two divisions have been assessed as the reportable
operating segments of the Group. Within each reportable operating
segment are aggregated businesses units with similar
characteristics such as the method of acquiring products for sale
(manufacturing versus distribution), the nature of customers and
products, risk profile and economic characteristics.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is
reported and evaluated based on operating profit or loss earned by
each segment without allocation of central administration costs
including directors' salaries, investment revenue and finance
costs, and income tax expense.
Segment revenue and results
Design Custom
& Manufacturing Distribution Unallocated Total
2017 GBPm GBPm GBPm GBPm
-------------------------- ----------------- -------------- -------------- --------
Revenue 175.6 162.6 - 338.2
-------------------------- ----------------- -------------- -------------- --------
Result
Underlying operating
profit/(loss) 20.2 5.2 (5.4) 20.0
Exceptional items (2.1) (4.8) - (6.9)
Acquisition costs (1.2) - - (1.2)
Amortisation of acquired
intangible assets (3.9) - - (3.9)
IAS 19 pension charge - - (0.3) (0.3)
-------------------------- ----------------- -------------- -------------- --------
Operating profit/(loss) 13.0 0.4 (5.7) 7.7
-------------------------- ----------------- -------------- -------------- --------
Design Custom
& Manufacturing Distribution Unallocated Total
2016 GBPm GBPm GBPm GBPm
-------------------------- ----------------- --------------- -------------- --------
Revenue 137.6 150.1 - 287.7
-------------------------- ----------------- --------------- -------------- --------
Result
Underlying operating
profit/(loss) 16.5 4.7 (4.9) 16.3
Exceptional items - (0.2) - (0.2)
Acquisition costs (1.6) - - (1.6)
Amortisation of acquired
intangible assets (2.5) (0.3) - (2.8)
IAS 19 pension charge - - (0.3) (0.3)
-------------------------- ----------------- --------------- -------------- --------
Operating profit/(loss) 12.4 4.2 (5.2) 11.4
-------------------------- ----------------- --------------- -------------- --------
7. Underlying profit before tax
2017 2016*
GBPm GBPm
Profit before tax 4.8 9.4
Add back: Exceptional items (a) 6.9 0.2
Acquisition costs (b) 1.2 1.6
Amortisation of acquired
intangible assets (c) 3.9 2.8
Total IAS 19 pension charge (d) 0.4 0.5
------------------------------------------------ --------------- ------- --------
Underlying profit before
tax 17.2 14.5
----------------------------------------------------------------- ------- --------
*The presentation of underlying adjustments includes acquisition
costs which were included in exceptional items in the prior year.
The prior year presentation has been amended accordingly. The Group
believes this presentation better reflects one of its strategies
which is to continue to grow through business acquisitions.
The tax impact of the underlying profit adjustments above is a
credit of GBP2.8m (2016: GBP1.0m).
a) Restructuring costs relating to Acal BFi totalling GBP4.8m,
included the closure of the Spanish business, management headcount
reduction and integration of the purchasing department.
Restructuring in the Noratel Group totalling GBP1.6m included
closure of three smaller Noratel production sites, with the
production being transferred to other existing production
facilities. GBP0.5m costs relate to acquisition related integration
in Flux.
Last year, Acal BFi restructuring costs were GBP0.2m, which
related to the termination of the UK Managing Director.
b) GBP0.3m costs incurred in relation to the acquisition of
Variohm (2016: GBP1.0m costs incurred mainly in relation to the
acquisitions of Flux, Contour and Plitron).
A GBP0.9m charge was provided for contingent consideration
relating to the acquisitions of the Noratel Group, Foss and
Contour. Last year a GBP0.6m charge was provided for the contingent
consideration relating to the acquisition of the Myrra Group and
Contour.
c) Amortisation charge for intangible assets recognised for business combinations.
d) Pension costs related to the Group's legacy defined benefit pension scheme.
8. Dividends
Dividends recognised in equity as distributions
to equity holders in the year:
2017 2016
GBPm GBPm
------------------------------------- ------ ------
Equity dividends on ordinary
shares:
Final dividend for the year ended
31 March 2016 of 5.72p (2015:
5.4p) 3.7 3.4
Interim dividend for the year
ended 31 March 2017 of 2.45p
(2016: 2.33p) 1.5 1.5
------------------------------------- ------ ------
Total amounts recognised as equity
distributions during the year 5.2 4.9
------------------------------------- ------ ------
2017 2016
Proposed for approval at AGM: GBPm GBPm
Equity dividends on ordinary
shares:
Final dividend for the year ended
31 March 2017 of 6.05p (2016:
5.72p) 4.3 3.7
----------------------------------- ------ ------
Summary
Dividends per share declared
in respect of the year 8.50p 8.05p
Dividends per share paid
in the year 8.17p 7.73p
Dividends paid in the year GBP5.2m GBP4.9m
------------------------------- -------- --------
9. Earnings per share
Basic earnings per share is calculated by dividing the net
profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share is the basic earnings per share after
allowing for the dilutive effect of the conversion into ordinary
shares of the weighted average number of options outstanding during
the year.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2017 2016
GBPm GBPm
Profit for the year attributable
to equity holders of the parent: 3.5 7.2
No No
Weighted average number of shares
for basic earnings per share 65,427,064 63,304,752
Effect of dilution - share options 2,790,308 3,008,388
------------------------------------- ----------- -----------
Adjusted weighted average number
of shares for diluted earnings per
share 68,217,372 66,313,140
------------------------------------- ----------- -----------
Basic earnings per share 5.3p 11.4p
Diluted earnings per share 5.1p 10.9p
------------------------------------- ----------- -----------
Underlying earnings per share is calculated as follows:
2017 2016
GBPm GBPm
Net profit for the year 3.5 7.2
Exceptional items 6.9 0.2
Acquisition costs 1.2 1.6
Amortisation of acquired intangible
assets 3.9 2.8
IAS 19 pension charge 0.4 0.5
Tax effect of the above (2.8) (1.0)
Underlying earnings 13.1 11.3
------------------------------------- ----------- -----------
No No
Weighted average number of shares
for basic earnings per share 65,427,064 63,304,752
Effect of dilution - share options 2,790,308 3,008,388
------------------------------------- ----------- -----------
Adjusted weighted average number
of shares for diluted earnings per
share 68,217,372 66,313,140
------------------------------------- ----------- -----------
Underlying basic earnings per share 20.0p 17.9p
Underlying diluted earnings per
share 19.2p 17.0p
------------------------------------- ----------- -----------
At the year end, there were 4,847,184 ordinary share options in
issue that could potentially dilute underlying earnings per share
in the future, of which 2,790,308 are currently dilutive (2016:
4,587,098 in issue and 3,008,388 dilutive).
10. Business combinations
On 20 January 2017, the Group completed the acquisition of 100%
of the share capital and voting equity interests of Variohm
Holdings Limited ("Variohm"), for a cash consideration of GBP10.6m.
In addition a contingent consideration of GBP0.5m is payable in
July 2018, subject to certain conditions and a maximum contingent
consideration of up to GBP1.35m also payable in July 2018, subject
to Variohm achieving agreed performance targets. The fair value of
the contingent consideration at the acquisition date was estimated
to be GBP1.6m.
Variohm owns 100% of the share capital and voting equity
interests of Ixthus Instrumentation Limited, Heason Technology
Limited, Herga Technology Limited and Variohm-Eurosensor Limited,
all based in the UK. Variohm, is a designer, manufacturer and
distributor of electronic sensors and switches.
The provisional fair value of the identifiable assets and
liabilities of Variohm at the date of acquisition were as
follows:
Provisional
fair value
recognised
at acquisition
GBPm
------------------------------- ----------------
Property, plant and equipment 0.5
Intangible assets - customer
relationships 4.4
Inventories 3.0
Trade and other receivables 3.3
Net debt (1.0)
Trade and other payables (2.3)
Current tax liabilities (0.4)
Provisions (current) (0.1)
Deferred tax liabilities
(non-current) (0.8)
Provisions (non-current) (0.1)
--------------------------------- ----------------
Total identifiable net
assets 6.5
Provisional goodwill arising
on acquisition 5.8
----------------
Total investment 12.3
----------------
Discharged by
Cash 10.6
Purchase price adjustment 0.1
Contingent consideration 1.6
12.3
----------------
The fair value of the trade receivables is equal to their gross
amounts. It is expected that the full contractual amounts of the
trade receivables can be collected.
Included in the GBP5.8m of goodwill recognised above are certain
intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. None of
the goodwill recognised is expected to be deductible for corporate
tax purposes.
Net cash outflows in respect of the acquisition comprise:
Total
GBPm
Cash consideration 10.6
Transaction costs of the acquisition
(included in cash flows from operating
activities) 0.3
Net debt acquired 1.0
11.9
----------------------------------------- ------
11. Movements in cash and net debt
Year to 31 March 2017
31 March Foreign 31 March
2016 Cash exchange 2017
GBPm flow GBPm GBPm
GBPm
Cash at bank and in
hand 19.9 (1.2) 3.5 22.2
Bank overdrafts (0.7) (0.1) (0.4) (1.2)
--------------------------- --------- ------- ---------- ---------
Cash and cash equivalents 19.2 (1.3) 3.1 21.0
--------------------------- --------- ------- ---------- ---------
Bank loans under one
year (0.1) 0.4 (0.4) (0.1)
Bank loans over one
year (57.2) 8.8 (2.5) (50.9)
--------------------------- --------- ------- ---------- ---------
Total loan capital (57.3) 9.2 (2.9) (51.0)
--------------------------- --------- ------- ---------- ---------
Net debt (38.1) 7.9 0.2 (30.0)
--------------------------- --------- ------- ---------- ---------
Bank loans over one year above include GBP50.8m (2016: GBP56.8m)
drawn down against the Group's revolving credit facility.
Year to 31 March 2016
31 March Foreign 31 March
2015 Cash exchange 2016
GBPm flow GBPm GBPm
GBPm
Cash at bank and in
hand 26.7 (8.4) 1.6 19.9
Bank overdrafts (0.1) (0.2) (0.4) (0.7)
--------------------------- --------- ------- ---------- ---------
Cash and cash equivalents 26.6 (8.6) 1.2 19.2
--------------------------- --------- ------- ---------- ---------
Bank loans under one
year (0.1) 0.2 (0.2) (0.1)
Bank loans over one
year (45.5) (10.1) (1.6) (57.2)
--------------------------- --------- ------- ---------- ---------
Total loan capital (45.6) (9.9) (1.8) (57.3)
--------------------------- --------- ------- ---------- ---------
Net debt (19.0) (18.5) (0.6) (38.1)
--------------------------- --------- ------- ---------- ---------
Supplementary information to the statement of
cash flows
Underlying Performance Measure
2017 2016
Continuing operations GBPm GBPm
Increase/(decrease) in net
cash 7.9 (18.5)
Add: Business combinations 13.8 20.8
Exceptional cash flow 6.4 1.4
Legacy pension scheme funding 1.6 1.6
Dividends paid 5.2 4.9
Less: Net proceeds from share (13.6) -
issue
Free cash flow 21.3 10.2
----------------------------------------- ------- -------
Net finance costs 2.8 1.8
Taxation 3.0 4.3
----------------------------------------- ------- -------
Operating cash flow 27.1 16.3
----------------------------------------- ------- -------
12. Reconciliation of cash flows from operating activities
2017 2016
GBPm GBPm
-------------------------------------- -------- ------
Profit for the year 3.5 7.2
Tax expense 1.3 2.2
Net finance costs 2.9 2.0
Depreciation of property,
plant and equipment 3.0 2.2
Amortisation of intangible
assets - other 4.6 3.4
Loss on disposal of property, 0.2 -
plant and equipment
Acquisition related contingent (1.6) -
consideration
Change in provisions 1.4 (0.5)
Pension scheme funding (1.6) (1.6)
IAS 19 pension administration
charge 0.3 0.3
Equity-settled share-based
payment expense 0.6 0.7
---------------------------------------- -------- ------
Operating cash flows before
changes in working capital 14.6 15.9
(Increase)/decrease in inventories (0.1) 1.7
(Increase)/decrease in trade
and other receivables (3.8) 3.4
Increase/(decrease) in trade
and other payables 9.8 (6.4)
---------------------------------------- -------- ------
Decrease/(increase) in working
capital 5.9 (1.3)
---------------------------------------- -------- ------
Cash generated from operations 20.5 14.6
Interest paid (3.0) (2.1)
Income taxes paid (3.0) (4.3)
---------------------------------------- -------- ------
Net cash flow from operating
activities 14.5 8.2
---------------------------------------- -------- ------
13. Intangible assets - goodwill
Cost GBPm
At 1 April 2015 88.4
Arising from business combinations 10.6
Exchange adjustments 1.4
At 31 March 2016 100.4
Arising from business combinations 4.3
Exchange adjustments 4.7
At 31 March 2017 109.4
------------------------------------ -------
Impairment GBPm
At 31 March 2016 and 31 March 2017 (36.8)
------------------------------------ -------
Net book value at 31 March 2017 72.6
------------------------------------ -------
Net book value at 31 March 2016 63.6
------------------------------------ -------
The carrying value of goodwill is analysed as follows:
2017 2016
GBPm GBPm
Custom Distribution
Acal BFi UK 3.3 3.3
Compotron 5.1 4.7
Medical 0.6 0.6
Design & Manufacturing
Stortech 3.6 3.6
Hectronic 0.6 0.6
MTC 2.0 2.0
Myrra 5.1 4.7
RSG 1.2 1.1
Noratel 30.1 27.1
Foss 5.7 5.2
Flux 0.6 0.6
Contour 7.7 9.0
Plitron 1.2 1.1
Variohm 5.8 -
72.6 63.6
------------------------ ------ ------
The movement in goodwill compared to prior year relates to the
movement in foreign exchange with the exception of Variohm which
was acquired during the year and Contour, Plitron and Flux where
the provisional fair value of acquired net assets was finalised
during the year.
14. Share capital
Allotted, called 2017 2017 2016 2016
up and fully paid Number GBPm Number GBPm
--------------------- ----------- ------ ----------- ------
Ordinary shares
of 5p each 70,680,974 3.5 64,212,568 3.2
--------------------- ----------- ------ ----------- ------
On 20 January 2017, the Company issued 6,418,308 new Ordinary
shares to new and existing shareholders through an equity placing.
The terms of the issue were fixed through a placing agreement, with
an issue price of 220 pence per share. The net proceeds were
GBP13.6m, being gross proceeds on issue of GBP14.1m less directly
attributable expenses of GBP0.5m.
The difference between the nominal value of the shares issued
and the gross proceeds has been credited to the share premium
account. The directly attributable transaction costs of GBP0.5m
related to the issue of shares have been debited to the share
premium account.
The new shares issued rank pari passu in all respects with the
existing shares issued, including the right to receive all
dividends and other distributions declared, made or paid on the
existing Ordinary shares.
During the year to 31 March 2017, 50,098 share options were
exercised by employees under the terms of the various share option
schemes (2016: 82,928).
15. Pensions
The pension liability relates to the Sedgemoor Group Pension
Fund, which was brought into the Group on the acquisition of the
Sedgemoor Group in 1999. The fund, which is a defined benefit
scheme, is operated as a 'paid up' pension scheme with only
pensioners and deferred members.
Based upon the results of the triennial funding valuation at 31
March 2015, the Sedgemoor Scheme's Trustees agreed with Sedgemoor
Limited on behalf of the participating employers to continue the
participating employers' contributions under the deficit recovery
plan agreed at the previous valuation at 31 March 2012. This
required contributions of GBP1.6m p.a. increasing by 3% each April
payable over the period to 31 March 2022.
The results of the triennial funding valuation as at 31 March
2015 were updated to the accounting date by an independent
qualified actuary in accordance with IAS 19.
The pension liability at 31 March 2017 was GBP6.0m (2016:
GBP4.9m) and the total pension charge was GBP0.4m (2016: GBP0.5m).
Additionally, a related deferred tax liability of GBP0.4m (2016:
GBP0.7m) is included in the pension liability, resulting in total
liability of GBP6.4m (2015: GBP5.6m)
16. Events after the reporting date
Dividend
A final dividend of 6.05p per share (2016: 5.72p), amounting to
a dividend of GBP4.3m (2016: GBP3.7m) and bringing the total
dividend for the year to 8.50p (2016: 8.05p), was declared by the
Board on 30 May 2017. The Acal plc financial statements do not
reflect this dividend.
17. Exchange rates
The profit and loss accounts of overseas subsidiaries are
translated into sterling at average rates of exchange for the year
and consolidated statement of financial positions are translated at
year end rates. The main currencies are the US Dollar and the Euro.
Details of the exchange rates used are as follows:
Year to 31 Year to 31
March 2017 March 2016
Closing Average Closing Average
rate rate rate rate
US Dollar 1.2496 1.3096 1.4383 1.5081
Euro 1.1689 1.1921 1.2633 1.3665
18. Annual Report and Accounts
The Annual Report and Accounts will be mailed to shareholders
and made available on the Company's website (www.acalplc.co.uk) on
or before 23 June 2017. Copies will also be available at the
Company's registered office: 2 Chancellor Court, Occam Road, Surrey
Research Park, Guildford, GU2 7AH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UVRBRBSANRAR
(END) Dow Jones Newswires
June 06, 2017 02:00 ET (06:00 GMT)