TIDMACL
RNS Number : 1156Y
Acal PLC
27 November 2014
27 NOVEMBER 2014
ACAL plc
Interim results for the six months ended 30 September 2014
Strong growth in margins, EPS and dividend
Acal plc (LSE: ACL, "Acal" or "the Group"), a leading supplier
of customised electronics to industry, today announces its interim
results for the six months ended 30 September 2014.
H1 2014/15 H1 2013/14(2) Growth CER (4)
% Growth
%
------------ -------------- -------- --------
Revenue GBP120.9m GBP100.4m +20% +27%
--------
Underlying EBITDA(1) GBP6.9m GBP4.1m +68%
Underlying operating
profit(1) GBP5.5m GBP3.0m +83%
Underlying operating
margin (1) 4.5% 3.0% 1.5ppts
Underlying profit before
tax(1) GBP4.7m GBP2.6m +81%
Reported profit before GBP0.1m GBP2.7m n/a
tax*
Underlying diluted
EPS(1) 6.5p 4.8p(3) +35%
Interim dividend per
share 2.2p 1.8p(3) +22%
------------ -------------- --------
* After deducting exceptional costs, amortisation of acquired
intangibles and IAS19 pension charge. Exceptional costs are high
this period, principally due to the costs associated with the
acquisition of the Noratel Group. See page 10.
Highlights
-- New divisional structure - Custom Distribution and Design
& Manufacturing - reflecting the establishment of a more
differentiated electronics business following the Supply Chain
disposal and the acquisition of Noratel.
-- Strong growth driven by acquisitions and organic growth
o Sales up 27% CER(4) and up 3% on a like-for-like(5) basis
o Gross profit up 31% CER with a 1ppt increase in gross
margin
o Sales up 15% like-for-like in the higher-margin Design &
Manufacturing division(6)
-- Organic growth initiatives creating new opportunities
o Cross-selling and web programmes generated GBP1.6m in new
business
-- Significant progress made in Group KPIs
o Underlying operating margin up 1.5ppts to 4.5%
o Free cash flow of GBP7.5m in the last 12 months (89% of
underlying PBT for that period)
-- Acquisitions all performing well
o Noratel trading in line with expectations; synergy savings underway
o YEG successfully integrated into ABFi in April 2014
o RSG sales well ahead of last year
o GBP55m rights issue and GBP70m new banking facility to fund GBP69m acquisition of Noratel
-- Interim dividend up 22%
-- Business well positioned for future growth
o Leading market position in customised electronics
o Compelling long term organic drivers
o Fragmented market ideal for acquisitions with funding
available
Nick Jefferies, Group Chief Executive, commented:
"We remain focused on our strategy of building a differentiated,
higher-margin business in Europe and increasingly, internationally.
This strategy has delivered very good half year results, with
strong margin growth, underlying operating profit up 83% and
underlying EPS up 35%, against a challenging economic backdrop.
Particularly pleasing is the 15% like-for-like sales growth in our
higher-margin Design & Manufacturing business, albeit partly
offset by unchanged sales in Custom Distribution.
Noratel, which was acquired in July, has been a major
contributor to profit growth in this period and is generating new
cross-selling opportunities across the Group. With its 40-strong
design engineering team, high-quality manufacturing facilities and
broad range of customised products, it is an important step forward
in Acal's strategy of building technological expertise.
With a continuing robust order book, we remain on track to
deliver strong growth in underlying earnings per share for the year
in line with our expectations, despite the weaker economic
conditions. Additionally, we continue to be acquisitive with a
pipeline of opportunities underway."
For further information:-
Acal plc
Nick Jefferies - Group Chief Executive 01483 544
Simon Gibbins - Group Finance Director 500
Instinctif Partners
Mark Garraway
Helen Tarbet 020 7457 2020
Notes:
(1) 'Underlying Operating Profit', 'Underlying EBITDA',
'Underlying Operating Costs', 'Underlying Profit before Tax' and
'Underlying Diluted EPS' are non-IFRS financial measures used by
the Directors to assess the underlying performance of the Group.
These measures exclude discontinued operations, exceptional items,
amortisation of acquired intangible assets and an IAS19 pension
charge relating to a legacy defined benefit scheme. For further
information see Note 2 to the interim financial statements.
(2) Financial information for H1 2013/14 is for the continuing
business excluding the Supply Chain division which was treated as a
discontinued business for the year ended 31 March 2014. A
reconciliation of this data to the financial information reported
last year for H1 2013/14 is shown in note 14 to the interim
financial statements.
(3) The GBP55m rights issue, completed on 9 July 2014, led to an
increase in the number of pre-rights issue shares by the bonus
share factor of 1.3759 (see detail in note 14 to the interim
financial statements). Accordingly, historic data for earnings per
share and dividend per share have been adjusted by this factor.
(4) Growth rates at constant exchange rates ("CER"). Unless
stated, growth rates refer to the comparable prior year period. The
average sterling rate of exchange has strengthened 7% against the
Euro for this half year compared to the first half last year
(rising from EUR1.17 to EUR1.25), negatively affecting reported
sales and earnings for this period by around 5%. The average
sterling rate of exchange has strengthened 6% against the NOK since
the acquisition of Noratel (rising from NOK 10.0 to NOK 10.6.
(5) Like-for-like growth rates at CER exclude acquisitions
(Young Electronics Group ("YEG"), RSG Electronics Components GmbH
("RSG") and the Noratel Group ("Noratel") which were acquired on 30
August 2013, 2 December 2013 and 17 July 2014 respectively).
(6) The Group is now structured into two divisions: Custom
Distribution and Design & Manufacturing, as discussed in the
strategic, operational and financial review.
Notes to Editors:
Acal is a leading supplier of customised electronics to
industry. It designs, manufactures and distributes
customer-specific electronic products and solutions to 20,000
industrial manufacturers and is listed on the London Stock Exchange
(LSE: ACL).
Acal has two divisions: Custom Distribution and Design &
Manufacturing. The majority of its sales comes from products and
solutions which are either created uniquely for a customer or
sourced exclusively. Acal works across a range of technologies,
including Magnetics, Power and Communications..
Acal operates through the following wholly-owned businesses:
Acal BFi, Hectronic, MTC, Myrra, Noratel, RSG, Stortech 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 Spain, as well as in Asia (China, India,
Sri Lanka and South Korea), the US and South Africa.
Chairman's Statement
This is a strong set of results with the Group continuing to
deliver on its objectives.
Over the past six years, Acal has transformed itself into an
international supplier of differentiated, customised electronic
products. The Group has pursued a strategy of designing
sophisticated, customer-specific products and solutions, investing
in highly skilled engineers and building high-quality manufacturing
capabilities in order to drive higher-margin growth. This strategy
is delivering excellent results. The Group's acquisitions are
carefully selected and well integrated, whilst its organic growth
initiatives are ramping up and generating incremental sales.
In an industry which is being driven by increasing technological
complexity, Acal has built presence in a number of technologies, as
well as on an increasing international scale. Acal's market
proposition is unique, being the only business with a design,
manufacturing and custom distribution capability across Europe and
it is well positioned to consolidate and shape the currently
fragmented customised electronics industry.
Group Results
The Group's results for the half year reflect the significant
progress which has been made both organically and through
acquisitions, with a near doubling in underlying operating profits,
strong growth of 35% in underlying diuted earnings per share and a
1.5ppts increase in operating margin to 4.5%.
Group revenue for the half year was up 20% to GBP120.9m (+27%
CER) with underlying operating profit up 83% (+96% CER) to GBP5.5m
and underlying profit before tax up 81% (+96% CER) to GBP4.7m.
Reported profits have been affected by costs of GBP2.5m
associated with acquisitions, integrations, earn-outs and
associated funding. After these costs, other net exceptional costs
of GBP1.1m (principally associated with the integration of Acal BFi
web marketing into the main sales infrastructure), the amortisation
of acquired intangibles of GBP0.8m and an IAS19 legacy pension
charge of GBP0.2m, reported profit before tax was GBP0.1m.
Underlying diluted earnings per share were 6.5p, up 35% on last
year. After underlying adjustments, and including the effects of
taxation, there was a fully diluted loss per share under IFRS of
1.1p.
The Group has a strong balance sheet with net assets up since 31
March 2014 from GBP49m to GBP96m. Net debt was GBP14m at 30
September 2014 with a five year, syndicated banking facility of
GBP70m.
Acquisition of Noratel
On 17 July 2014, Acal completed the acquisition of the Noratel
Group, a designer and manufacturer of electromagnetic products, for
a cash-free/debt-free consideration of GBP69m (NOK 747m) including
completion adjustments. The acquisition was funded by a GBP55m
rights issue, consideration shares of NOK 8m (GBP0.7m) issued to
members of the Noratel management team at completion, and the
partial draw-down of the Group's new GBP70m syndicated banking
facility.
Since completion, Noratel has continued to perform well. It has
enhanced underlying earnings and is one of the core drivers behind
our growth in profitability this period, with an operating profit
contribution of GBP1.5m.
Exit from Supply Chain Division
On 2 June 2014, the Group completed the disposal of its non-core
UK enterprise services business for a net consideration of GBP5.3m
on completion. A further GBP0.3m of deferred consideration is
payable to Acal by 31 December 2014. As this disposal represented
the final part of the Group's Supply Chain division, this has been
treated for accounting purposes as a discontinued operation
consistent with the financial statements for the year ended 31
March 2014.
The disposal of the Supply Chain division was in line with
Acal's strategy to re-position the business from commoditised
distribution to higher margin products and solutions.
Dividend
Given the strong growth in underlying earnings per share in the
first half, our confidence in the Group's future prospects and the
desire to rebalance the interim and final dividend payments, the
Board has increased the interim dividend by 22% from 1.8p per share
to 2.2p per share. The Company maintains a progressive dividend
policy and, as of the end of last year, had increased its annual
dividend each year for the last four years by a total of 34% over
that period. The Board aims to achieve a cover of between two and
three times underlying earnings on an ongoing basis. The interim
dividend is payable on 16 January 2015 to shareholders registered
on 30 December 2014.
Board changes
It was announced last month that Graham Williams will be
retiring from the Board with effect from 31 December 2014, having
been a Non-Executive Director since December 2003 and Senior
Non-Executive Director since July 2013. On behalf of the Board, I
wish to thank Graham for his valuable contribution and wise counsel
during the last eleven years and wish him well in his
retirement.
With effect from 1 October 2014, Graham was succeeded in his
roles as Senior Non-Executive Director by Richard Brooman and as
Chair of the Remuneration Committee by Henrietta Marsh.
Summary
Acal continues to make good progress in building a business
based on differentiated products and solutions which generate
higher operating margins. The Group is growing its position in new
geographies, expanding its technology capability and is rapidly
establishing itself as a leading industrial customised electronics
company.
Richard Moon
Chairman
27 November 2014
Strategic, Operational and Financial Review
Group Strategy
In 2009, Acal adopted a new strategy which has since transformed
the Group from a UK distributor of commodity electronic components
into a leading international supplier of customised, value-added
electronic products and solutions to industry.
The Group operates in attractive end-markets which are driven by
the increasing pace of technology adoption, in many cases essential
for end-product innovation. We estimate our market to be worth in
the region of GBP12bn globally, of which Europe accounts for
GBP4bn, North America GBP6bn and Asia GBP2bn. Historically, the
growth of electronic hardware into industrial applications has
grown three times faster than GDP. With a proliferation of new
applications emerging, for example in medical markets and the
'Internet of Things' (the communication between devices and
objects), we expect our long term growth to continue at rates well
ahead of GDP.
The Group strategy comprises four elements:
1. Move up the electronics value chain - by focussing on
differentiated products with higher operating margins in design,
manufacturing and custom distribution.
2. Grow sales organically and well ahead of GDP - by acquiring
new customers via web marketing and realising operational
efficiencies from cross-selling and synergies between Group
companies.
3. Acquire businesses - which broaden and strengthen Acal's
technological expertise with complementary products, customers,
suppliers and geographies.
4. Develop sales internationally - by following existing
customers' international needs and then by developing local market
sales.
Following the acquisition of Noratel, we have raised our three
year target for underlying operating margin from 5% to a range of
6% to 7% (H1 2014/15: 4.5%).
Divisional results
During the period, new segmental reporting was introduced (being
Custom Distribution and Design & Manufacturing) to present a
clearer understanding of our performance.
The performance of these divisions and the Group for the
half-year ended 30 September 2014 is set out and reviewed
below:
H1 2014/15 H1 2013/14
---------------------------------- ---------------------------------- ---------
Underlying Underlying
Revenue operating Revenue operating
GBPm profit Margin GBPm profit Margin CER
(1) (1) Revenue
GBPm GBPm growth
---------- ----------- --------- ---------- ----------- --------- ---------
Custom Distribution 82.3 3.1 3.8% 78.0 2.8 3.6% 6%
Design & Manufacturing 38.6 4.6 11.9% 17.3 2.0 11.6% 123%
Unallocated
costs (2.2) (2.0)
---------- ----------- --------- ---------- ----------- --------- ---------
Total CER(2) 120.9 5.5 4.5% 95.3 2.8 2.9% 27%
---------
Reported FX
rate(3) 5.1 0.2
---------- ----------- --------- ---------- ----------- ---------
Total reported 120.9 5.5 4.5% 100.4 3.0 3.0%
---------- ----------- --------- ---------- ----------- ---------
1. Underlying operating profit excludes certain items (see note
2 to the interim financial statements).
2. Revenue and operating profit at CER with last year's results
translated at this year's average exchange rate.
3. The difference between reported results last year and the results at CER.
Custom Distribution division
The Custom Distribution division provides technically demanding,
customised electronic, photonic and medical products to the
industrial and medical markets, both from a range of high quality,
international suppliers (often on an exclusive basis) and from
Acal's Design & Manufacturing division. A high degree of
technical knowledge is required during the sales process, with
Acal's engineers helping industrial manufacturers solve their
design challenges. Acal is the only industrial electronics company
which can provide customer-specific products and solutions across
Europe.
The division comprises two businesses: Acal BFi, which supplies
industrial markets and Vertec, which supplies medical markets. Acal
BFi, which accounts for over 90% of divisional revenue, has a range
of complementary suppliers (including Acal's own Design &
Manufacturing businesses) and over 20,000 customers in five
technology areas: Communications & Sensors, Power &
Magnetics, Electromagnetics, Embedded Computers & Displays, and
Photonics & Imaging. The business operates across Europe, with
centralised warehousing, purchasing, finance, customer contact
management and web systems.
a) Financial performance
First half revenue increased by 6% CER to GBP82.3m, with
like-for-like sales remaining at the same level as last year.
Improving demand was seen across most territories, in particular
led by Germany and Italy. The UK distribution business continued to
remain weak, as reported in the second half of last year. This
business is in the process of being restructured (see paragraph (d)
below).
Underlying operating profit of GBP3.1m was GBP0.3m higher than
last year at CER, with underlying operating margins up 0.2ppts to
3.8%.
b) Growth initiatives
There are two key priorities for developing divisional
performance:
i) Organic growth initiatives
Organic growth initiatives generated GBP1.6m of new business
during the first-half, representing around 2% of revenue.
- Cross-selling
Cross-selling is an initiative to sell a broader range of
products (both Acal BFi's supplier products and those from Acal's
Design & Manufacturing businesses) to its existing customer
base. This generated incremental sales in the period, comprising
both an increasing range of product sales per technology area to
existing Acal BFi customers and increasing sales of products
between Acal sister companies.
- Website
Acal BFi's marketing website (www.acalbfi.com) has a
comprehensive display of customised solution capabilities and
approximately 100,000 products and variants at range and attribute
level detail. The website, which is operational in five languages,
provides a marketing platform from which to generate new
opportunities and acquire new customers.
The website has consistently grown visitor traffic and new
opportunities since being launched nearly two years ago. By
September2014, the website was achieving 54,000 visits per month,
with 12,000 new user registrations, from which we expect new
customers to continue to materialise. Quote volumes are growing
rapidly and we are now converting these into orders.
ii) Acquisitions
Custom Distribution businesses are acquired where there is the
opportunity to develop sales to a wider customer base, and perhaps
geographic region, and to achieve operating efficiencies through
full or partial integration. The acquisitions of BFi Optilas,
Compotron and most recently, YEG (see paragraph (c) below), were
all integrated into the business now known as Acal BFi.
c) Integration of YEG
YEG, a specialist distributor of electronic components,
solutions and services in the UK and Ireland, was acquired on 30
August 2013. The business was fully integrated into Acal BFi UK
during April 2014, delivering the planned operational savings and
creating appropriate levels of sustainable profitability, whilst
retaining and developing its commercial capabilities.
d) Development of Acal BFi sales & marketing
organisation
During the first half, following the successful integration of
YEG, a change to the Acal BFi UK sales and marketing organisation
was initiated, integrating the follow up of web-generated sales
opportunities into the established sales organisation. A similar
initiative was commenced in Germany. As was indicated at the time
of the web launch, the change enables the tailoring of sales
resource according to the size of customer and opportunity, moving
from a one-size-fits-all model to a more cost effective structure
suited to handling more medium-sized customers. Overall, costs in
the first half totalled GBP1.1m with a further GBP0.5m expected in
the second half.
Design & Manufacturing division
The Design & Manufacturing division supplies electronic
products which are principally either designed uniquely for a
customer or specifically modified from an existing product. The
products are mostly manufactured at one of our in-house
manufacturing facilities, or in some cases, by third parties. The
division has seven businesses which are aligned with the Group's
core technology areas, namely Noratel, Myrra and RSG (Power &
Magnetics); Compotron's design solutions business (Communication
and Sensors); Stortech and MTC (Electromechanical and Shielding);
and Hectronic (Embedded Systems and Displays). The division's
principal manufacturing facilities are in China, India, Sri Lanka
and Poland.
a) Financial performance
First half revenue increased by 123% CER to GBP38.6m, reflecting
the contribution from the recent acquisitions of Noratel and RSG.
Like-for-like revenues were up 15% with all businesses delivering
sales growth compared with last year, and with Noratel and RSG both
performing well since acquisition. This is an excellent performance
from a division which has been primarily established through
acquisitions over the last four years.
Underlying operating profit of GBP4.6m was GBP2.6m higher than
last year at CER with an underlying operating margin up 0.3ppts to
11.9%. Like-for-like profits were up 34%, with the balance
delivered from acquired companies, Noratel and RSG, of which
GBP1.5m was generated by Noratel.
Divisional sales were 32% of Group sales generating 60% of Group
profits (before unallocated costs).
b) Growth initiatives
The key priorities for developing organic performance within the
division are cross-selling and expansion into new territories. This
organic growth will be augmented by the Group's acquisition
strategy.
i) Cross-selling
The Design & Manufacturing businesses have fewer customers,
typically each supplying between 500 and 2,000 customers. The
cross-selling programme provides opportunities for sales expansion
in two ways. Firstly, by providing access to Acal BFi's 20,000
customers, and secondly by providing access to the existing
customers of the other Design & Manufacturing businesses. Both
of these provide an easier and lower risk way of expanding sales
into new customers than would be achievable for these businesses on
an independent basis.
As an example, following the acquisitions of Noratel and Myrra,
both businesses are developing sales opportunities in each other's
customer base, at the same time as developing new opportunities in
Acal BFi's customer base.
ii) New territories
With Acal's established network of operating companies across
Europe, we are able to expand the sales of Design &
Manufacturing businesses into new territories through our network.
For example, MTC, which sold only to customers in Germany when it
was acquired, now also sells in the Netherlands and Italy, and is
progressively developing its sales capabilities more widely.
iii) Acquisitions
Additionally, the Group sees significant value in acquiring
other complementary Design & Manufacturing businesses which
strengthen its position in each technology area and which allow it
to access new geographies. Customised electronics is a fragmented
market within which Acal is often seen by potential vendors as an
attractive acquirer. We enable these companies to continue to
develop within the Acal network, providing them with new growth
opportunities whilst retaining their entrepreneurial culture.
c) Acquisition of Noratel
Noratel has performed well since its acquisition on 17 July
2014, and as expected, has been enhancing to underlying earnings in
the period.
Cross-selling programmes are underway between the Group's three
magnetics businesses (Noratel, Myrra and Acal BFi Power &
Magnetics) with the first design opportunity already won.
Additionally, Myrra products have been included in a Noratel
customer contract with a global healthcare provider to supply
customised design products, which is expected to generate new
revenue in the years ahead.
Activities are also underway to realise operating efficiencies
across the Group. Purchasing synergies are expected with Noratel
and Myrra's combined buying power, and new Myrra production lines
are being considered within Noratel facilities.
d) Acquisition of RSG
RSG, the Frankfurt-based power solutions supplier acquired in
December 2013, is also performing well, delivering strong organic
sales growth for the period over the comparable pre-acquisition
period last year.
Group results
Underlying order growth
At a Group level, orders continued to grow in all territories
and businesses, other than the UK. Group orders were up 19% CER.
Like-for-like orders were down slightly when excluding a large
one-off order last year and up 4% excluding UK distribution. As at
30 September 2014, the backlog of orders for future delivery,
mainly covering the second half and next year, was GBP80m, up from
GBP60m a year ago.
Strong revenue growth
Group revenue for the first half was up 27% CER and up 20% at
reported rates (the difference reflecting the impact of sterling
strength since last year). Like-for-like revenue was up 3%, with
acquisitions (Noratel, YEG and RSG) contributing the additional
24%.
Healthy growth in gross margin
Gross margin was up 1.0ppts to 30.9%, with increases in both
divisions reflecting the Group's continued focus on higher value,
customised electronics. This is the Group's highest half yearly
gross margin, which has increased 4.6ppts in the last four years.
The increase has been delivered across all businesses.
Gross profit for the period was up 31% CER over last year. This
growth rate is higher than the corresponding revenue growth rate of
27%, due to the improved gross margin. Like-for-like growth in
gross profit was 5%.
Underlying operating costs
Group underlying operating costs increased by 24% CER,
reflecting the inclusion of the cost bases of acquired companies
since last year (Noratel and RSG). Like-for-like underlying
operating costs were up 3%, as the Group continues to manage its
cost base, of which 1% related to Custom Distribution, with the
balance being investment in the higher-growth Design &
Manufacturing division.
Significant improvements in Group operating profit and
margin
Group underlying operating profit for the period was GBP5.5m, up
GBP2.5m (+83%) on last year, delivering a Group underlying
operating margin of 4.5%, up 1.5ppts on last year. At CER, the
increase in underlying operating profit was GBP2.7m (+96%).
Reported Group operating profit for the year (after the
underlying adjustments discussed below) was GBP1.0m.
GBPm H1 2014/15 H1 2013/14
------------------------------ ------------------------------
Operating Finance Profit Operating Finance Profit
profit cost before profit cost before
tax tax
---------- -------- -------- ---------- -------- --------
Underlying 5.5 (0.8) 4.7 3.0 (0.4) 2.6
Underlying adjustments
Exceptional items (3.6) (3.6) 0.7 0.7
Amortisation of acquired
intangibles (0.8) (0.8) (0.4) (0.4)
IAS 19 pension cost (0.1) (0.1) (0.2) (0.1) (0.1) (0.2)
Reported 1.0 (0.9) 0.1 3.2 (0.5) 2.7
---------- -------- -------- ---------- -------- --------
Underlying adjustments
Underlying adjustments for the period comprise exceptional costs
of GBP3.6m (H1 2013/14: exceptional gain of GBP0.7m), the
amortisation of acquired intangibles of GBP0.8m (H1 2013/14:
GBP0.4m) and IAS19 legacy pension costs of GBP0.2m (H1 2013/14:
GBP0.2m).
Exceptional costs for the period of GBP3.6m comprise the costs
associated with the acquisition of Noratel of GBP2.0m, costs of
integrating YEG into Acal BFi of GBP0.3m, an accrual for earnout
payments for Myrra and Noratel of GBP0.2m, and costs associated
with the integration of Acal BFi web marketing into the main sales
infrastructure (mainly the UK and German businesses) of GBP1.1m. A
further GBP0.5m of costs relating to this restructuring are
expected in the second half. Further details can be found in note 4
to the interim financial statements.
The GBP0.4m increase in the amortisation charge since last year
relates to the amortisation of intangibles identified as part of
the acquisitions of Noratel and RSG. The equivalent charge for the
second half, including a full half year charge for Noratel, is
expected to be GBP1.1m.
Higher financing costs reflect partial debt funding of
Noratel
Net finance costs for the half year of GBP0.9m (H1 2013/14:
GBP0.5m) comprise underlying finance costs of GBP0.8m and an IAS 19
pension finance charge of GBP0.1m relating to the Group's legacy
defined benefit pension scheme.
Underlying finance costs consist of interest and facility fees
arising from the Group's banking facilities during the period.
Finance costs for the period were up GBP0.4m to GBP0.8m following
the partial debt funding of the Noratel acquisition. Included
within finance costs is the amortisation of the upfront arrangement
fees associated with the Group's new GBP70m syndicated banking
facility of approximately GBP0.2m per annum.
The IAS19 pension finance charge of GBP0.1m was in line with
last year's charge.
Underlying tax rate
The underlying effective tax rate for the first half was 23%.
This rate is higher than the underlying tax rate of 14% for the
first half of last year due mainly to the utilisation of certain
tax losses last year not available this year. Additionally, the
underlying tax rate of the Noratel Group is higher than the Acal
Group.
Overall, there was a reported tax charge of GBP0.7m on reported
profits of GBP0.1m reflecting the non-tax deductibility of certain
exceptional costs, in particular, the acquisition and fund raising
costs of Noratel.
Strong profit and earnings growth
Underlying profit before tax for the half year of GBP4.7m was up
GBP2.1m (+81%) on last year (H1 2013/14: GBP2.6m) and up 96% at
CER. With the higher underlying tax rate and the increased weighted
average number of shares (up 22% on last year, mainly arising from
the rights issue in July 2014), underlying diluted earnings per
share for the half year of 6.5 pence was up 35% on last year (H1
2013/14: 4.8 pence).
After the underlying adjustments discussed above, reported
profit before tax was GBP0.1m. With the impact of non tax
deductible exceptional costs, this becomes a reported loss per
share for the half year of 1.1 pence (H1 2013/14: diluted earnings
per share of 5.5 pence).
GBPm/p H1 2014/15 H1 2013/14
--------------- -------------
PBT EPS PBT EPS*
------ ------- ------ -----
Underlying 4.7 6.5p 2.6 4.8p
Underlying adjustments
Exceptional items (3.6) 0.7
Amortisation of acquired
intangibles (0.8) (0.4)
IAS 19 pension cost (0.2) (0.2)
Reported 0.1 (1.1p) 2.7 5.5p
------ ------- ------ -----
* EPS data for periods prior to the right issue adjusted by the
bonus share factor of 1.3759 (see note 14).
Working capital
Working capital of GBP41.8m at 30 September 2014 was 14.6% of
first half annualised sales. This ratio comprises:
i) Working capital of Acal (excluding Noratel) at 10.6% of
annualised sales (down from 13.0% reported for the first half last
year), mainly driven by an improvement in trade debtors outstanding
at 30 September to 54 days.
ii) Working capital of Noratel at 25.4% of annualised sales.
This compares favourably with a working capital ratio of 27% for
its year ended 31 December 2013 as reported at the time of the
acquisition.
The combined Group ratio of 14.6% is marginally below the 15%
ratio reported at the time of the acquisition, based on the
proforma Group balance sheet including Noratel.
Healthy annualised free cash flow continues
The Group had net debt of GBP14.0m at 30 September 2014,
compared to net cash at 31 March 2014 of GBP2.3m, the difference
primarily relating to the partial debt funding of the Noratel
acquisition:
H1
2014/15
---------
Net cash at 31 March 2014 2.3
Cash flow from continuing
operations (below) (14.8)
Cash flow from discontinued
operations (0.5)
Foreign exchange impact (1.0)
Net debt at 30 Sept 2014 (14.0)
---------
Cash flow for continuing operations for the period is summarised
as follows:
Last
12
GBPm H1 2014/15 H1 2013/14 Months
----------- ----------- --------
Underlying profit
before tax 4.7 2.6 8.4
Interest and non
cash items* 2.2 1.5 3.2
----------- ----------- --------
Underlying EBITDA 6.9 4.1 11.6
Working capital (1.9) (1.9) (0.3)
Capital expenditure (1.3) (0.6) (2.0)
----------- ----------- --------
Operating cash flow 3.7 1.6 9.9
Interest (0.7) (0.4) (1.0)
Taxation (1.2) (0.5) (1.4)
----------- --------
Free cash flow 1.8 0.7 7.5
Acquisitions/disposals (63.2) (10.4) (65.2)
Net equity proceeds 52.7 - 52.7
Exceptional payments (3.3) (1.9) (4.3)
Legacy pension (0.7) (0.7) (1.5)
Dividends (2.1) (1.9) (2.9)
Net cash outflow
in the period (14.8) (14.2) (13.8)
----------- ----------- --------
* This comprises finance charges of GBP0.8m and key non-cash
items (depreciation, amortisation and share based payments) of
GBP1.4m.
EBITDA of GBP6.9m was 68% higher than last year. As with last
year, GBP1.9m was invested in working capital (excluding
exceptionals in working capital of GBP0.3m), principally in
inventory to support planned increased second half demand. Capital
expenditure at GBP1.3m was GBP0.7m higher than last year,
reflecting investment in line expansions in our Design &
Manufacturing division, mainly in Noratel and Myrra.
Operating cash flow of GBP3.7m was GBP2.1m higher than last
year. The increase in tax cash cost reflects the acquisition of
Noratel, while the increase in financing costs reflects its partial
debt funding.
Free cash flow for the half year, totalling GBP1.8m, was GBP1.1m
higher than last year. Typically, the Group benefits from greater
free cash generation in the second half of the year (subject to
working capital requirements) with the second half of last year
generating GBP5.7m of free cash flow. Free cash flow for the last
12 months was GBP7.5m, being 89% of underlying profit before tax
profit earned in the same period.
Net acquisition costs of GBP63.2m reflect the cost of acquiring
Noratel, offset by net proceeds received from the sale of the
Enterprise business. Net equity proceeds, raised for the purpose of
acquiring Noratel, totalled GBP52.7m (being GBP55.1m gross proceeds
less associated costs).
Exceptional cash payments in the period totalled GBP3.3m
relating mainly to the costs of acquiring Noratel, YEG integration
costs and ABFi UK and German restructuring. A further GBP1.2m of
exceptional cash payments are expected in the second half.
Increased committed funding
In June 2014, the Group put in place a five year syndicated
banking facility of GBP70m. In addition to providing part of the
funding for the Noratel acquisition, it also refinanced the Group's
local working capital facilities of around GBP20m (mainly invoice
discounting) and provided working capital for the Noratel Group.
These facilities are partly used to fund inter-month outflows of
working capital. Such outflows resulted in a net average debt
balance of GBP20m across the period following the acquisition of
Noratel in July 2014.
With net debt at 30 September of GBP14.0m, the net debt to
EBITDA ratio at that date is below 1.0 (including pre-acquisition
EBITDA of Noratel and RSG).
Net assets rise on equity issue
Net assets of GBP96.2m at 30 September 2014 were GBP47.7m higher
than at the end of the last financial year (31 March 2014:
GBP48.5m), primarily related to the net equity fund raising of
GBP53.5m to partially fund the acquisition of Noratel. The movement
in net assets is summarised below:
GBPm H1 2014/15
-----------
Net assets at 31 March
2014 48.5
Net equity funding 53.5
Net loss after tax (0.6)
Share based payments
(inc tax) 0.3
Dividend paid (2.1)
Loss on defined benefit
scheme (0.9)
Currency net assets -
translation impact (2.5)
Net assets at 30 Sep
2014 96.2
-----------
Risks and uncertainties
The principal risks faced by the Group are detailed on pages 20
to 22 of the Group's Annual Report for year ended 31 March 2014, a
copy of which is available on the Group's website:
www.acalplc.co.uk. These include but are not limited to: the
economic environment, particularly within Europe; performance of
acquired companies, including the recent major acquisition of the
Noratel Group, major business disruption, exposure to adverse
foreign currency movements, technological change, regulatory
environment, cyber security, international trade risk, obligations
in respect of a legacy defined benefit pension scheme, loss of key
personnel and operational risks.
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, with its
strong balance sheet and committed banking facility of GBP70m at
the end of the period.
Outlook
With a continuing robust order book, we remain on track to
deliver strong growth in underlying earnings per share for the year
in line with our expectations, despite the weaker economic
conditions. Additionally, we continue to be acquisitive with a
pipeline of opportunities underway.
Nick Jefferies
Group Chief Executive
Simon Gibbins
Group Finance Director
27 November 2014
Condensed consolidated income statement
for the six months ended 30 September
2014
Unaudited Unaudited*
six months six months Audited
ended ended year
30 Sept 30 Sept ended
2014 2013 31 Mar 2014
notes GBPm GBPm GBPm
Continuing operations
Revenue 3 120.9 100.4 211.6
Cost of sales (83.5) (70.4) (148.6)
--------------------------------------------- -------- -------------- ------------- --------------
Gross profit 37.4 30.0 63.0
Selling and distribution costs (19.6) (17.8) (36.5)
Administrative expenses (including
exceptional items) (16.8) (9.0) (21.3)
Operating profit 3 1.0 3.2 5.2
Finance revenue 0.1 0.1 0.2
Finance costs (1.0) (0.6) (1.2)
Profit before tax 0.1 2.7 4.2
Tax expense 7 (0.7) (0.2) (0.5)
(Loss)/profit for the period
from continuing operations (0.6) 2.5 3.7
--------------------------------------------- -------- -------------- ------------- --------------
Discontinued operations
Profit/(loss) for the period
from discontinued operations 6 - 0.5 (2.4)
(Loss)/profit for the period (0.6) 3.0 1.3
--------------------------------------------- -------- -------------- ------------- --------------
(Loss)/earnings per share**
Basic (continuing operations) 9 (1.1)p 5.8p 8.6p
Diluted (continuing operations) 9 (1.1)p 5.5p 8.1p
Basic 9 (1.1)p 7.0p 3.0p
Diluted 9 (1.1)p 6.6p 2.8p
--------------------------------------------- -------- -------------- ------------- --------------
Supplementary income statement
information
Unaudited Unaudited* Audited
six months six months year
Underlying Performance Measure Notes ended ended ended
30 Sept 30 Sept 31 Mar 2014
Continuing operations 2014 2013 GBPm
GBPm GBPm
Operating profit 3 1.0 3.2 5.2
Add: Exceptional items 4 3.6 (0.7) 0.7
Amortisation of acquired intangible
assets 0.8 0.4 1.0
IAS 19 pension administrative
charge 0.1 0.1 0.2
--------------------------------------------- -------- -------------- ------------- --------------
Underlying operating profit 5.5 3.0 7.1
--------------------------------------------- -------- -------------- ------------- --------------
Profit before tax 0.1 2.7 4.2
Add: Exceptional items 4 3.6 (0.7) 0.7
Amortisation of acquired intangible
assets 0.8 0.4 1.0
Total IAS 19 pension charge 0.2 0.2 0.4
Underlying profit before tax 4.7 2.6 6.3
--------------------------------------------- -------- -------------- ------------- --------------
Underlying earnings per share**
Basic 9 6.9p 5.1p 12.5p
Diluted 9 6.5p 4.8p 11.8p
*Restated for discontinued operations (note 6).
** Prior period earnings per share (basic and diluted) restated
to reflect the bonus element of the rights issue (note 14).
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2014
Unaudited Unaudited*
six months six months Audited
ended ended year
30 Sept 30 Sept ended
2014 2013 31 Mar 2014
GBPm GBPm GBPm
--------------------------------------------- ------------ ------------- -------------
(Loss)/profit for the period (0.6) 3.0 1.3
--------------------------------------------- ------------ ------------- -------------
Other comprehensive income:
Items that will not be subsequently
reclassified to profit or loss:
Re-measurement loss on defined benefit
pension scheme (0.9) (0.5) (1.1)
Deferred tax relating to defined benefit
pension scheme - 0.2 0.1
--------------------------------------------- ------------ ------------- -------------
(0.9) (0.3) (1.0)
--------------------------------------------- ------------ ------------- -------------
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on translation
of foreign subsidiaries (2.5) (1.0) (1.8)
Other comprehensive income for the
period, net of tax (3.4) (1.3) (2.8)
--------------------------------------------- ------------ ------------- -------------
Total comprehensive income for the
period, net of tax (4.0) 1.7 (1.5)
--------------------------------------------- ------------ ------------- -------------
*Restated for discontinued operations (note 6).
Condensed consolidated statement of financial position
at 30 September 2014
Unaudited Unaudited Audited
at 30 Sept at 30 Sept at 31 March
notes 2014 2013 2014
GBPm GBPm GBPm
------------------------------------- -------- ------------ ------------ -------------
Non-current assets
Property, plant and equipment 13.8 4.0 3.5
Intangible assets - goodwill 50.3 25.7 21.2
Intangible assets - other 18.7 3.7 4.3
Deferred tax assets 4.9 3.8 4.1
------------------------------------- -------- ------------ ------------ -------------
87.7 37.2 33.1
------------------------------------- -------- ------------ ------------ -------------
Current assets
Inventories 35.1 19.2 19.4
Trade and other receivables 58.1 45.4 48.3
Cash and cash equivalents 11 16.2 12.4 18.1
------------------------------------- -------- ------------ ------------ -------------
109.4 77.0 85.8
------------------------------------- -------- ------------ ------------ -------------
Assets in disposal group classified
as held for sale - 4.7 6.9
Total assets 197.1 118.9 125.8
Current liabilities
Trade and other payables (50.1) (38.8) (45.7)
Other financial liabilities 11 (9.9) (4.6) (6.8)
Current tax liabilities (2.8) (3.1) (2.7)
Provisions (2.9) (1.2) (1.7)
------------------------------------- -------- ------------ ------------ -------------
(65.7) (47.7) (56.9)
------------------------------------- -------- ------------ ------------ -------------
Non-current liabilities
Other financial liabilities 11 (20.3) (9.6) (9.5)
Pension liability (7.0) (6.2) (6.5)
Provisions (2.0) (1.8) (2.0)
Deferred tax liabilities (5.9) (0.9) (1.0)
(35.2) (18.5) (19.0)
------------------------------------- -------- ------------ ------------ -------------
Liabilities in disposal group
classified as held for sale - (1.0) (1.4)
Total liabilities (100.9) (67.2) (77.3)
------------------------------------- -------- ------------ ------------ -------------
Net assets 96.2 51.7 48.5
------------------------------------- -------- ------------ ------------ -------------
Equity
Share capital 3.1 1.6 1.6
Share premium account 92.7 40.7 40.7
Other reserve - - -
Merger reserve 3.0 3.0 3.0
Currency translation reserve (2.3) 1.0 0.2
Retained earnings (0.3) 5.4 3.0
Total equity 96.2 51.7 48.5
------------------------------------- -------- ------------ ------------ -------------
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2014
Share Share Other Merger Currency Retained Total
capital premium reserve reserve translation earnings equity
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2014 1.6 40.7 - 3.0 0.2 3.0 48.5
Profit for the period - - - - - (0.6) (0.6)
Other comprehensive
income - - - - (2.5) (0.9) (3.4)
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
Total comprehensive
income - - - - (2.5) (1.5) (4.0)
Share-based payments - - - - - 0.3 0.3
Dividends - - - - - (2.1) (2.1)
Shares issued 1.5 54.4 - - - - 55.9
Share issue costs - (2.4) - - - - (2.4)
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
At 30 September 2014
- unaudited 3.1 92.7 - 3.0 (2.3) (0.3) 96.2
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
At 1 April 2013 1.6 40.7 5.5 3.0 2.0 (1.3) 51.5
Profit for the period - - - - - 3.0 3.0
Other comprehensive
income - - - - (1.0) (0.3) (1.3)
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
Total comprehensive
income - - - - (1.0) 2.7 1.7
Share-based payments - - - - - 0.4 0.4
Dividends - - - - - (1.9) (1.9)
Transfer of other
reserve - - (5.5) - - 5.5 -
At 30 September 2013
- unaudited 1.6 40.7 - 3.0 1.0 5.4 51.7
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
At 1 April 2013 1.6 40.7 5.5 3.0 2.0 (1.3) 51.5
Profit for the period - - - - - 1.3 1.3
Other comprehensive
income - - - - (1.8) (1.0) (2.8)
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
Total comprehensive
income - - - - (1.8) 0.3 (1.5)
Share-based payments - - - - - 1.2 1.2
Dividends - - - - - (2.7) (2.7)
Transfer of other
reserve - - (5.5) - - 5.5 -
At 31 March 2014
- audited 1.6 40.7 - 3.0 0.2 3.0 48.5
----------------------- ---------- ---------- ---------- ---------- -------------- ----------- ---------
On 5 June 2014, the Company announced a proposed 1 for 1 rights
issue of 31,332,127 shares at 176 pence per share to raise
approximately GBP55.1 million (before transaction costs). The
rights issue shares went ex-rights on 24 June 2014 and were fully
paid and commenced trading on 9 July 2014.
On 17 July 2014, the Company issued 384,966 shares
("Consideration Shares") to the management sellers of the Noratel
Group in connection with the Noratel Group's acquisition. The total
number of shares in issue following the rights issue and the issue
of the Consideration Shares are 63,049,220 shares.
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 GBP2.4m
related to the issue of shares have been debited to the share
premium account.
Condensed consolidated statement of cash flows
for the six months ended 30 September 2014
Unaudited Unaudited
six months six months Audited
ended ended year
30 Sept 30 Sept ended
2014 2013 31 Mar 2014
Notes GBPm GBPm GBPm
--------------------------------------------- ------ ------------ ------------ -------------
Net cash (outflow)/inflow from operating
activities 10 (1.2) (0.7) 4.1
Cash flows from investing activities
Acquisitions of shares in subsidiaries
and businesses (34.0) (10.4) (12.5)
Proceeds from the disposal of Supply
Chain businesses (net of costs) 5.0 - 3.3
Purchase of property, plant and equipment (1.2) (0.4) (0.7)
Purchase of intangible assets - software (0.1) (0.2) (0.7)
Interest received 0.1 0.1 0.2
Net cash used in investing activities (30.2) (10.9) (10.4)
--------------------------------------------- ------ ------------ ------------ -------------
Cash flows from financing activities
Net proceeds from the issue of shares 52.7 - -
Proceeds from borrowings 20.5 8.1 8.0
Repayment of borrowings (44.4) (0.4) (0.8)
Dividends paid (2.1) (1.9) (2.7)
Net cash from financing activities 26.7 5.8 4.5
--------------------------------------------- ------ ------------ ------------ -------------
Net decrease in cash and cash equivalents (4.7) (5.8) (1.8)
Cash and cash equivalents at beginning
of period 11.9 14.4 14.4
Net foreign exchange differences (0.5) (0.4) (0.7)
--------------------------------------------- ------ ------------ ------------ -------------
Cash and cash equivalents at end
of period 6.7 8.2 11.9
--------------------------------------------- ------ ------------ ------------ -------------
Reconciliation to cash and cash equivalents
in the condensed consolidated statement
of financial position
Cash and cash equivalents shown above 6.7 8.2 11.9
Add bank overdrafts 9.5 4.2 6.7
Less: cash held for sale in disposal
group - - (0.5)
--------------------------------------------- ------ ------------ ------------ -------------
Cash and cash equivalents in the
condensed consolidated statement
of financial position 16.2 12.4 18.1
--------------------------------------------- ------ ------------ ------------ -------------
Further information on the condensed consolidated statement of
cash flows is provided in note 11.
Notes to the interim condensed consolidated financial
statements
for the six months ended 30 September 2014
1. Corporate information
Acal plc ("the Company") is incorporated and domiciled in
England and Wales. The Company's shares are traded on the London
Stock Exchange. The interim condensed consolidated financial
statements consolidate the financial statements of Acal plc and
entities controlled by the Company (collectively referred to as
"the Group").
The interim condensed consolidated financial statements for the
six months ended 30 September 2014 were approved by the Board of
Directors for issue on 27 November 2014. They do not constitute
statutory accounts within the meaning of Section 434 of the
Companies Act 2006, and are unaudited.
2. Basis of preparation and accounting policies
The interim condensed consolidated financial statements for the
six months to 30 September 2014 have been prepared in accordance
with the Disclosure and Transparency Rules (DTR) of the Financial
Services Authority and IAS 34 'Interim Financial Reporting' as
adopted by the European Union. They do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements for the year ended 31 March 2014, which
were prepared in accordance with IFRS as adopted by the European
Union.
The results for the year ended 31 March 2014 are based on
audited statutory financial statements prepared in accordance with
IFRS as adopted by the European Union. These financial statements
were filed with the Registrar of Companies and contain a report of
the auditor, which does not contain a statement under section 498
of the Companies Act 2006 and was unqualified. The consolidated
financial statements of the Group for the year ended 31 March 2014
("FY14 Annual Accounts") are available on request from the
Company's registered office or on its website.
After making 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 financial statements.
The principal accounting policies adopted in the preparation of
these interim condensed consolidated financial statements are
included in the consolidated financial statements for the year
ended 31 March 2014. All other accounting policies have been
consistently applied to all periods presented. The significant
estimates and judgements made by management in preparing the
financial information were consistent with those applied to the
consolidated financial statements for the year ended 31 March
2014.
Underlying Performance Measures
The Group uses a number of alternative non Generally Accepted
Accounting Practice ("non-GAAP") financial measures which are not
defined within IFRS. The Directors use these measures in order to
assess the underlying operational performance of the Group and as
such, these measures are important and should be considered
alongside the IFRS measures. The following non-GAAP measures are
referred to in these interim condensed consolidated financial
statements.
Underlying operating profit
"Underlying operating profit" is defined as operating profit
from continuing operations excluding exceptional costs, IAS 19
pension costs relating to the Group's legacy defined benefit
pension scheme and amortisation of acquired intangible assets.
Underlying profit before tax
"Underlying profit before tax" is defined as profit before tax
from continuing operations excluding exceptional costs, IAS 19
pension costs relating to the Group's legacy defined benefit
pension scheme and amortisation of acquired intangible assets.
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 the total of
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.
Underlying EBITDA
"Underlying EBITDA" is defined as underlying operating profit
with depreciation, amortisation and equity settled share based
payments expense added back.
Free cash flow
"Free cash flow" is defined as net cash flow before exceptional
items, payments to the legacy pension fund, dividend payments, net
proceeds from equity fund raising, the cost of acquisitions and
proceeds of disposals.
Return on trading capital employed
"ROTCE" is defined as underlying operating profit as a
percentage of net operating assets. Net operating assets are
defined as tangible and intangible assets (excluding goodwill) plus
working capital.
3. Segmental reporting
During the year the Group completed the disposal of its Supply
Chain Division with the sale of its last remaining business (the
"Enterprise Business"). As the sale of the Enterprise Business was
committed before the FY14 year end, the Supply Chain division was
disclosed as a discontinued business for accounting purposes and
not disclosed as a reported segment in the FY14 Annual Accounts.
The Electronics segment was the only reported operating
segment.
As a result of the disposal of the Supply Chain division and the
major acquisition of Noratel, the Group has reviewed its internal
reporting to the Chief Operating Decision Maker (CODM - identified
as the Board) and in line with the Group's stated strategy in the
FY14 Annual Accounts, has organised its businesses into two
divisions, Custom Distribution and Design & Manufacturing.
-- The Custom Distribution division provides technically
demanding, customised electronic, photonic and medical products to
the industrial market, from a range of high-quality, international
suppliers (often on an exclusive basis) and from Acal's Design
& Manufacturing division.
-- The Design & Manufacturing division supplies electronic
products which are principally either designed uniquely for a
customer or specifically modified from an existing product. The
products are mostly manufactured at one of the in-house
manufacturing facilities, or in some cases contracted out to third
parties.
Management monitors the operating results of its reportable
operating segments 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.
Six months to 30 September 2014 - unaudited
Custom Design Total operations
Distribution & Manufacturing Unallocated GBPm
GBPm GBPm GBPm
Revenue 82.3 38.6 - 120.9
------------------------------------ -------------- ----------------- -------------- -----------------
Underlying operating profit/(loss) 3.1 4.6 (2.2) 5.5
Exceptional items - acquisition
and related integration
costs (0.3) (2.2) - (2.5)
Exceptional items - restructuring
costs (1.1) - - (1.1)
Amortisation of acquired
intangible assets (0.2) (0.6) - (0.8)
IAS 19 pension administration
costs - - (0.1) (0.1)
Operating profit/(loss) 1.5 1.8 (2.3) 1.0
------------------------------------ -------------- ----------------- -------------- -----------------
Six months to 30 September 2013 - unaudited*
Custom Design Total operations
Distribution & Manufacturing Unallocated GBPm
GBPm GBPm GBPm
Revenue 82.1 18.3 - 100.4
------------------------------------ -------------- ----------------- -------------- -----------------
Underlying operating profit/(loss) 2.9 2.1 (2.0) 3.0
Exceptional items - acquisition
and related integration
costs (0.1) (0.7) - (0.8)
Exceptional items - gain
on acquisition of YEG 1.5 - - 1.5
Amortisation of acquired
intangible assets (0.2) (0.2) - (0.4)
IAS 19 pension administration
costs - - (0.1) (0.1)
------------------------------------ -------------- ----------------- -------------- -----------------
Operating profit/(loss) 4.1 1.2 (2.1) 3.2
------------------------------------ -------------- ----------------- -------------- -----------------
*Restated for discontinued operations (note 6)
Year to 31 March 2014 - audited
Custom Design Total operations
Distribution & Manufacturing Unallocated GBPm
GBPm GBPm GBPm
Revenue 173.1 38.5 - 211.6
------------------------------------ -------------- ----------------- -------------- -----------------
Underlying operating profit/(loss) 6.8 4.6 (4.3) 7.1
Exceptional items - acquisition
and related integration
costs (0.6) (1.1) - (1.7)
Exceptional items - restructuring
costs (0.5) - - (0.5)
Exceptional items - gain
on acquisition of YEG 1.5 - - 1.5
Amortisation of acquired
intangible assets (0.5) (0.5) - (1.0)
IAS 19 pension administration
costs - - (0.2) (0.2)
Operating profit/(loss) 6.7 3.0 (4.5) 5.2
------------------------------------ -------------- ----------------- -------------- -----------------
4. Exceptional items
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
Administrative expenses:
Acquisition and related integration
costs (2.5) (0.8) (1.7)
Restructuring costs (1.1) - (0.5)
Gain on acquisition of YEG - 1.5 1.5
------------------------------------------ ------------ ------------------------- --------
Net exceptional (costs)/credit included
in administrative expenses (3.6) 0.7 (0.7)
Tax impact of exceptional (costs)/credit 0.1 - -
------------------------------------------ ------------ ------------------------- --------
Exceptional (costs)/credit after
tax (3.5) 0.7 (0.7)
------------------------------------------ ------------ ------------------------- --------
The majority of the acquisition and related integration costs
relates to the acquisition of the Noratel Group. GBP0.3m relates to
the completion of the integration of the YEG business into Acal
BFi.
The restructuring costs relate principally to the integration of
Acal BFi web marketing into the main sales infrastructure and
relate mainly to staff redundancy costs.
Details of exceptional items in relation to the full year
results for the year ending 31 March 2014 were provided in note 6
on page 73 of the FY14 Annual Accounts.
5. Business Acquisitions
On 17 July 2014, the Group completed the acquisition of 100% of
the share capital and voting equity interests of Trafo Holding AS
("Trafo" or "the Noratel Group" or "Noratel"), for a cash
consideration GBP35.6m (NOK369m) and consideration shares in Acal
Plc with a fair value of GBP0.8m (NOK8m).
In addition, as part of the purchase negotiations, the Company
has put in place an earn-out arrangement for Noratel's management
team based on the financial performance of the Noratel Group over
the three year period to 31 March 2017 worth up to a maximum of
NOK12m. The earn-out of GBP0.1m attributable to the half year has
been recognised as an expense in the condensed consolidated income
statement, and presented as an exceptional item.
The cash consideration and related acquisition expenses were met
from the proceeds of a rights issue with a net receipt of GBP52.7m
(after expenses). At the same time, the Group entered into a new
committed syndicated loan facility of GBP70m (replacing existing
committed working capital facilities of approximately GBP20m). On
the acquisition date, this new facility was used to refinance part
of Noratel's existing long term debt and its working capital
facilities.
The Noratel Group is a global designer and manufacturer of
electromagnetic products, specifically of low, medium and high
power transformers and chokes. Noratel has a broad customer base in
Europe, Asia and increasingly in North America, and has become a
preferred supplier to leading international OEMs in various
markets. It has a well established position supplying the
industrial, renewable energy, medical and oil and gas sectors.
The provisional fair value of the identifiable assets and
liabilities of the Noratel Group at the date of acquisition
were:
Provisional
fair value
recognised
at acquisition
GBPm
Property, plant and equipment 9.9
Intangible assets - other 15.1
Deferred tax asset (non-current) 0.5
Inventories 16.8
Trade and other receivables 14.9
Cash and cash equivalents 1.6
Trade and other payables (11.9)
Other financial liabilities (current) (34.5)
Current tax liabilities (0.3)
Provisions (current) (1.5)
Deferred tax liabilities (non-current) (4.9)
------------------------------------------ ----------------
Total identifiable net assets 5.7
Provisional goodwill arising on
acquisition 30.7
----------------
Total investment 36.4
----------------
Discharged by
Cash 35.6
Shares 0.8
----------------
36.4
----------------
Included in the GBP30.7m of goodwill recognised above are
certain intangible assets that cannot be individually separated and
reliably measured from the acquiree, due to their nature. These
include the value of expected operational benefits. 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 35.6
Transaction costs of the acquisition (included
in operating cash flows) 2.0
Cash acquired (1.6)
Net debt acquired (included in cash flows
from investing activities) 34.5
-------------------------------------------------- ------
70.5
------------------------------------------------ ------
The long term debt of GBP34.5m debt acquired on acquisition was
settled, on completion, partly from the proceeds of the rights
issue and partly refinanced with the Group's debt facility.
6. Discontinued Operations
On 2 June 2014, the Company completed the disposal of its
enterprise services business (the "Enterprise Business"), the last
remaining business within its Supply Chain Division. The disposal
of the Enterprise business was a related party transaction and
received shareholder approval on 2 June 2014. At 31 March 2014, the
Enterprise Business was classified as a disposal group held for
sale.
The disposal involved the sale of the Group's UK subsidiary,
Acal Enterprise Solutions Limited ("AES"), to Agilita Holdings
Limited, in which the management team of AES participated, for a
cash consideration of GBP6.0m, of which GBP0.3m was deferred, at
the purchasers' option, until no later than 31 December 2014.
The disposal generated a loss of GBP0.1m, which is summarised
below:
GBPm
Net cash consideration 6.0
Net assets disposed of (5.7)
Transaction costs (0.4)
Loss on disposal (0.1)
-------------------------- ------
Consideration received
GBPm
Net upfront cash consideration received 5.7
Deferred consideration 0.3
Net cash consideration received 6.0
------------------------------------------- --------
Net assets disposed of
GBPm
Property, plant and equipment 0.3
Intangible assets - goodwill 2.4
Intangible assets - other 0.1
Inventories 1.9
Trade and other receivables 1.5
Cash 0.3
Trade and other payables (0.8)
Net assets disposed of 5.7
--------------------------------- ----------------------
Net cash inflow on disposal
GBPm
Upfront cash consideration 5.7
Cash disposed (0.3)
Transaction costs (0.4)
Net cash inflow on disposal 5.0
------------------------------- ------
The disposal of the Enterprise Business was in addition to the
disposal of the European Parts business and the UK Parts business
in the year ending 31 March 2014 and year ending 31 March 2013
respectively. With the Enterprise Business being the last remaining
company in the Supply Chain Division, the Division has been
accounted for as a discontinued business for the current and prior
year.
The results of the Supply Chain Division for the year and the
prior year are presented below:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ --------
Revenue 1.1 13.0 17.9
Expenses (including exceptional
items) (1.0) (12.4) (16.7)
-------------------------------------------- ------------ ------------ --------
Operating profit 0.1 0.6 1.2
Impairment loss recognised on the
re-measurement to fair value less
costs of disposal* - - (3.3)
Loss on disposal of business (0.1) - (0.2)
-------------------------------------------- ------------ ------------ --------
Profit/(loss) before tax from discontinued
operations - 0.6 (2.3)
Tax expense - (0.1) (0.1)
-------------------------------------------- ------------ ------------ --------
Profit/(loss) for the year from
discontinued operations - 0.5 (2.4)
-------------------------------------------- ------------ ------------ --------
*Following the classification of the Enterprise Business as a
held for sale disposal group at 31 March 2014, a write-down of
GBP3.3m on goodwill allocated to the Enterprise Business was
recognised on 31 March 2014 to reduce the carrying value to fair
value less costs of disposal.
Cash flows relating to discontinued operations
At At At
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
------------------------------------------- --------- --------- --------
Net cash (outflows)/inflows from
operating activities (0.2) 0.7 1.0
Net cash outflows from investing
activities - - (0.1)
Net increase in cash and cash equivalents (0.2) 0.7 0.9
------------------------------------------- --------- --------- --------
7. Taxation
The underlying tax charge for the period was GBP1.1m (H1
2013/14: GBP0.4m) giving an underlying effective tax rate on
underlying profit before tax of 23% (2013: 14%). The underlying
effective tax rate is higher than the UK tax rate of 21% due to the
tax rates of the territories in which the Group operates being
generally higher than the UK rate.
The tax credit in respect of the underlying adjustments
(exceptional items of GBP0.1m, the amortisation of acquired
intangible assets of GBP0.2m and the legacy defined benefit pension
scheme charge of GBP0.1m) was GBP0.4m (H1 2013/14: GBP0.2m). This
gives an overall tax charge for the period of GBP0.7m (H1 2013/14:
GBP0.2m).
8. Dividends
The Directors have declared an interim dividend of 2.2 pence per
share (H1 2013/14: 1.8 pence) payable on 16 January 2015 to
shareholders on the register at 30 December 2014. The dividend for
H1 2013/14 has been restated from 2.5 pence to 1.8 pence to reflect
the bonus issue of the rights issue. Refer to note 14 for more
details.
In accordance with IAS 10, this dividend has not been reflected
in the interim results. The cash cost of the interim dividend will
be GBP1.4m (2013: GBP0.8m).
9. Earnings per share
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
(Loss)/profit for the period attributable
to equity holders of the parent:
Continuing operations (0.6) 2.5 3.7
Discontinued operations - 0.5 (2.4)
------------------------------------------- ------------ ------------ -----------
(Loss)/profit for the period (0.6) 3.0 1.3
------------------------------------------- ------------ ------------ -----------
No No No
Weighted average number of shares
for basic earnings per share* 52,243,199 43,059,851 43,084,582
Effect of dilution - share options* 3,379,834 2,443,227 2,825,423
------------------------------------------- ------------ ------------ -----------
Adjusted weighted average number
of shares for diluted earnings per
share 55,623,033 45,503,078 45,910,005
------------------------------------------- ------------ ------------ -----------
Earnings per share from continuing
operations - basic (1.1)p 5.8p 8.6p
Earnings per share from continuing
operations - diluted (1.1)p 5.5p 8.1p
Earnings per share - basic (1.1)p 7.0p 3.0p
Earnings per share - diluted (1.1)p 6.6p 2.8p
------------------------------------------- ------------ ------------ -----------
*Prior period number of shares (basic and diluted) restated to
reflect the bonus element of the rights issue. See note 14 for
details.
At the period end, there were 3.6 million ordinary share options
in issue that could potentially dilute earnings per share in the
future, of which 3.4 million are currently dilutive (30 September
2013: 3.3 million in issue and 2.4 million dilutive, 31 March 2014:
3.0 million in issue and 2.8 million dilutive).
Based on the current number of ordinary shares in issue, the
weighted average number of shares for basic earnings per share for
the second half will be 63.05 million shares. With the weighted
average number of shares for basic earnings per share for the first
half being 52.24 million shares, the weighted average number of
shares for basic earnings per share for the full year would be
57.65 million.
Underlying earnings per share
Underlying earnings per share are calculated as follows:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
(Loss)/profit for the period on
continuing operations (0.6) 2.5 3.7
Exceptional items 3.6 (0.7) 0.7
Amortisation of acquired intangible
assets 0.8 0.4 1.0
IAS 19 pension costs 0.2 0.2 0.4
Tax effects of exceptional items,
amortisation of acquired intangible
assets and IAS 19 pension costs (0.4) (0.2) (0.4)
Underlying profit for the period
on continuing operations 3.6 2.2 5.4
-------------------------------------- ------------ ------------ -----------
No No No
Weighted average number of shares
for basic earnings per share* 52,243,199 43,059,851 43,084,582
Effect of dilution - share options* 3,379,834 2,443,227 2,825,423
-------------------------------------- ------------ ------------ -----------
Adjusted weighted average number
of shares for diluted earnings per
share 55,623,033 45,503,078 45,910,005
-------------------------------------- ------------ ------------ -----------
Underlying earnings per share -
basic 6.9p 5.1p 12.5p
Underlying earnings per share -
diluted 6.5p 4.8p 11.8p
-------------------------------------- ------------ ------------ -----------
*Prior period number of shares (basic and diluted) restated to
reflect the bonus element of the rights issue. See note 14 for
details.
10. Reconciliation of cash flow from operating activities
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2014 2013 2014
GBPm GBPm GBPm
------------------------------------------ ------------ ------------ --------
(Loss)/profit from continuing operations (0.6) 2.5 3.7
Profit/(loss) from discontinued
operations - 0.5 (2.4)
(Loss)/profit for the period (0.6) 3.0 1.3
Taxation expense 0.7 0.3 0.6
Net finance costs 0.9 0.5 1.0
Gain on acquisition - (1.5) (1.5)
Impairment of goodwill - - 3.3
Depreciation of property, plant
and equipment 0.9 0.6 1.1
Amortisation of intangible assets
- other 1.0 0.6 1.3
Movement in provisions 0.1 (0.4) (0.2)
Loss on disposal of business 0.1 - 0.2
Pension scheme funding (0.7) (0.7) (1.5)
IAS 19 pension administration charge 0.1 0.1 0.2
Equity-settled share based payment
expense 0.3 0.3 0.6
------------------------------------------ ------------ ------------ --------
Operating cash flows before changes
in working capital 2.8 2.8 6.4
------------------------------------------ ------------ ------------ --------
Decrease in inventories 0.9 2.4 0.8
Decrease/(increase) in trade and
other receivables 4.2 2.1 (3.9)
(Decrease)/increase in trade and
other payables (7.1) (7.0) 2.7
------------------------------------------ ------------ ------------ --------
Increase in working capital (2.0) (2.5) (0.4)
------------------------------------------ ------------ ------------ --------
Cash generated from operations 0.8 0.3 6.0
Interest paid (0.9) (0.5) (1.0)
Net income taxes paid (1.1) (0.5) (0.9)
------------------------------------------ ------------ ------------ --------
Net cash (outflow)/inflow from
operating activities (1.2) (0.7) 4.1
------------------------------------------ ------------ ------------ --------
11. Closing net debt
At At
30 Sept 30 Sept At
2014 2013 31 Mar 2014
GBPm GBPm GBPm
----------------------------------- --------- --------- -------------
Borrowings - current - overdrafts (9.5) (4.2) (6.7)
Borrowings - current portion of
long term debt (0.4) (0.4) (0.1)
Borrowings - non current (20.3) (9.6) (9.5)
Cash and cash equivalents 16.2 12.4 18.6*
----------------------------------- --------- --------- -------------
Closing net (debt)/cash (14.0) (1.8) 2.3
----------------------------------- --------- --------- -------------
*includes GBP0.5m cash included in assets held for sale
Reconciliation of movement in cash and net debt
Six months Six months
ended ended Year
30 Sept 30 Sept ended
2014 2013 31 Mar 2014
GBPm GBPm GBPm
------------------------------------------ ----------- ----------- -------------
Net decrease in cash and cash
equivalents (4.7) (5.8) (1.8)
Debt acquired with acquisition (34.5) - -
of the Noratel Group
Proceeds from borrowings (20.5) (8.1) (8.0)
Repayment of borrowings 44.4 0.4 0.8
------------------------------------------ ----------- ----------- -------------
Decrease in net cash before translation
differences (15.3) (13.5) (9.0)
Translation differences (1.0) (0.1) (0.5)
------------------------------------------ ----------- ----------- -------------
Decrease in net cash (16.3) (13.6) (9.5)
Net cash at beginning of the period 2.3 11.8 11.8
------------------------------------------ ----------- ----------- -------------
Net (debt)/cash at end of the
period (14.0) (1.8) 2.3
------------------------------------------ ----------- ----------- -------------
Supplementary information to the
statement of cash flows
Six months Six months
ended ended Year
30 Sept 30 Sept ended
2014 2013 31 Mar 2014
Underlying Performance Measure GBPm GBPm GBPm
Decrease in net cash before translation
differences (15.3) (13.5) (9.0)
Add: Business acquisitions 68.5 10.4 12.5
Exceptional cash flow 3.3 1.9 2.9
Legacy pension scheme funding 0.7 0.7 1.5
Dividends paid 2.1 1.9 2.7
Less: Net proceeds from share -
issue (52.7) -
Net cash flow from discontinued
operations (4.8) (0.7) (4.2)
Free cash flow from continuing
operations 1.8 0.7 6.4
------------------------------------------ ----------- ----------- -------------
12. Pension liability
The acquisition of the Sedgemoor Group in June 1999 included a
defined benefit pension scheme, the Sedgemoor Group Pension Fund
('the Sedgemoor Scheme'). The Sedgemoor Scheme, which is funded by
the Company, provides retirement benefits based on final
pensionable salary. Its assets are held in a separate
trustee-administered fund. Following the acquisition of the
Sedgemoor Group, the Sedgemoor Scheme was closed to new members.
Shortly thereafter, employees were given the opportunity to join
the Acal pension scheme and future service benefits ceased to
accrue to members under the Sedgemoor Scheme. Contributions to the
Sedgemoor Scheme are determined in accordance with the advice of
independent, professionally qualified actuaries.
During the period, the financial position of the Sedgemoor
Scheme has been updated in line with changes in actuarial
assumptions and cash contributions made to the scheme. The
valuation used for IAS 19 disclosures has been based on the most
recent valuation at 31 March 2014 updated to take account of the
requirements of IAS 19 in order to assess the liabilities of the
scheme as at 30 September 2014.
The IAS 19 defined benefit pension scheme liability at 30
September 2014 was GBP6.2m (31 March 2014: GBP5.7m). Together with
a deferred tax liability of GBP0.8m (31 March 2014: GBP0.8m) in
relation to a funding surplus under IAS 19 based on the agreed
funding plan, pension liabilities totalled GBP7.0m (31 March 2014:
GBP6.5m).
13. Exchange rates
The profit and loss accounts of overseas subsidiaries are
translated into sterling at the average rates of exchange for the
period and the consolidated statement of financial positions are
translated at period end rates. The main currencies are the US
dollar and the Euro. Details of the exchange rates used are as
follows:
Six months ended Six months ended Year ended 31 March
30 Sept 2014 30 Sept 2013 2014
----------- ------------------- ------------------- ----------------------
Closing Average Closing Average Closing Average
rate rate rate rate rate rate
US dollar 1.6188 1.6744 1.6150 1.5430 1.6648 1.5904
Euro 1.2865 1.2440 1.1961 1.1734 1.2074 1.1862
----------- --------- -------- --------- -------- ---------- ----------
14. Restatement of prior period earnings per share and dividends per share
On 5 June 2014, the Company announced a proposed 1 for 1 rights
issue of 31,332,127 shares at 176 pence per share to raise
approximately GBP55.1m (before transaction costs). The rights issue
shares went ex-rights on 24 June 2014 and were fully paid and
commenced trading on 9 July 2014. As a result of the rights issue,
the prior period number of shares (basic and diluted) have been
restated to reflect the bonus element of the rights issue
representing an increase of 1.3759. A reconciliation between the
reported and restated earnings per share from continuing operations
and dividend per share for the period ended 30 September 2013 and
31 March 2014 is set out below:
Six months to 30 September 2013
Discontinued Continuing
Reported operations operations
GBPm GBPm GBPm
------------------------------- --------- ------------- ------------
Revenue 113.4 (13.0) 100.4
Gross Profit 34.1 (4.1) 30.0
Underlying costs (30.3) 3.3 (27.0)
------------------------------- --------- ------------- ------------
Underlying operating profit 3.8 (0.8) 3.0
Net finance costs (0.4) - (0.4)
------------------------------- --------- ------------- ------------
Underlying profit before tax 3.4 (0.8) 2.6
Taxation (0.5) 0.1 (0.4)
------------------------------- --------- ------------- ------------
Underlying profit after tax 2.9 (0.7) 2.2
------------------------------- --------- ------------- ------------
Underlying adjustments (0.1) 0.2 0.1
Tax on underlying adjustments 0.2 - 0.2
Profit after tax 3.0 (0.5) 2.5
------------------------------- --------- ------------- ------------
Restated
Continuing continuing
Reported operations operations
Weighted average number of shares
- basic 31,296,077 31,296,077 43,059,851
- diluted 33,071,825 33,071,825 45,503,078
Underlying earnings per share
- basic 9.3p 7.0p 5.1p
- diluted 8.8p 6.7p 4.8p
Earnings per share
- basic 9.6p 8.0p 5.8p
- diluted 9.1p 7.6p 5.5p
Dividend per share 2.5p 2.5p 1.8p
----------------------------------- ----------- ------------ ------------
Year to 31 March 2014
GBPm
----------------------------------- ----------- -----------
Underlying profit after tax 5.4
Profit after tax 3.7
Reported Restated
Weighted average number of shares No No
- basic 31,314,052 43,084,582
- diluted 33,367,581 45,910,005
----------------------------------- ----------- -----------
Underlying earnings per share
- basic 17.2p 12.5p
- diluted 16.2p 11.8p
Earnings per share
- basic 11.8p 8.6p
- diluted 11.1p 8.1p
Dividend per share 9.4p 6.8p
----------------------------------- ----------- -----------
15. Interim Report
A copy of the interim report will be available for inspection at
the Company's registered office:
2 Chancellor Court, Occam Road, Surrey Research Park, Guildford,
GU2 7AH.
Current regulations permit the Company not to send copies of its
interim results to shareholders. Accordingly the 2014 interim
results published on 27 November 2014 will not be sent to
shareholders. The 2014 interim results and other information about
Acal plc are available on the Company's website at
www.acalplc.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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