IMMEDIATE RELEASE

2 September 2014

 

THE ALUMASC GROUP PLC - FULL YEAR RESULTS ANNOUNCEMENT

 

Alumasc (ALU.L), the premium building and engineering products group, announces results for the year ended 30 June 2014.

 

Financial summary

	Year to 30/6/14	Year to 30/6/13
Group revenues (£m)	113.4	116.8
Underlying profit before tax (£m) *	6.3	5.9
Reported profit before tax (£m)	5.1	2.8
Underlying earnings per share (pence) *	13.3	12.3
Basic earnings per share (pence)	11.3	5.3
Dividend per share (pence)	5.0	4.5

 

* Before brand amortisation charges of £0.3m (2012/13: £0.3m) and IAS19 (revised) pension costs of £0.9m (2012/13 £1.4m).  Also, 2012/13 underlying profit before tax was before restructuring and acquisition costs of £0.8m and an impairment charge of £0.6m.

 

Key points

 

·      Best profit performance for five years reflects underlying growth in revenues from Building Products at improved margins, offsetting non-repeat of prior year Kitimat and CESP project work; a halving of operating losses from Engineering Products; and lower interest costs due to a strong cash flow performance.

·      Building Products profit of £8.3m (2012/13: £8.4m) on revenue down 5% to £83.5m. Underlying revenues, excluding Kitimat and CESP projects, were 2% ahead, continuing the outperformance against the UK construction market over recent years. Strong performance from Rainwater & Drainage brands and Timloc. Roofing businesses returned to profit. Momentum is building in export markets for Solar Shading and Construction Products.

·      Engineering Products halved operatingloss to £0.2m on revenue up 5% to £31m.  Alumasc Precision Components is now broadly EBITDA break-even but, in view of a tough trading environment with large OEM customers, recovery back to operating profit will take longer than anticipated.  Dyson Diecastings had another record year with operating profits of over £1m, benefiting from a more diverse customer base in premium automotive and other industrial markets. 

·      Net debt of £7.7m at the year end, was unchanged on 30 June 2013, despite reversal of payments in advance on construction contracts, reflecting strong operating cash flows.  Average net debt for the year was the lowest since 2007.

·      Proposed final dividend of 2.8p, an increase of 12%, with the Board confirming its previous intention of growing future dividends in line with earnings.

 

Paul Hooper, Chief Executive, commented:

 

"…with the strength of Alumasc's niche market positions and management teams, and with our ongoing investment in innovation, new product development and increasing export sales opportunities, Alumasc is well positioned to further grow its building products activities and improve shareholder value from its Engineering Products division."

 

Enquiries:

 

The Alumasc Group plc	01536 383844
Paul Hooper (Chief Executive) Andrew Magson (Finance Director)
Glenmill Partners Limited	07771 758517

Simon Bloomfield

 

Strategic Report

 

Chairman's Statement

 

Results

 

Alumasc continued to build on the recovery of the prior year, growing underlying profit before tax to £6.3 million (2013: £5.9 million), the highest for five years and in line with our expectations. This reflects a continuing out-performance by the group's Building Products division against the background of modest growth in UK construction activity.

 

The growth in profit was matched by another strong cash performance. As a result, the Board is recommending a final dividend of 2.8 pence per share (2013: 2.5 pence), to give a total for the year of 5 pence (2013: 4.5 pence), an increase of 11%.

 

Trading

 

The underlying operating profit from our Building Products division of £8.3 million (2013: £8.4 million) was a good result in the light of market conditions and the greater contribution from major construction projects in the prior year. While the much publicised recovery in new-build housing was a welcome boost, the group's major commercial market place did little more than stabilise in the UK during the year and remains some 30% below the pre-recession level of 2008.

 

Our Engineering Products division reduced operating losses further, from £0.5 million in 2013 to £0.2 million in 2014, but failed to achieve the targeted return to profitability. This was despite another excellent performance by Dyson Diecastings and generally more favourable market demand. There was further progress in the recovery at Alumasc Precision Components, not least in its service to customers.

 

Strategy

 

For a number of years, the strategy of Alumasc has been to optimise the performance of each business while seeking actively to grow our presence in the markets for sustainable building products. The financial crisis, still felt by many sectors of the UK economy after six years, has had an inevitable impact on our progress. Despite this, there are references elsewhere in this Strategic Report to the consistent management actions taken in recent years to develop and innovate our products and markets, while strengthening our management teams, and to the outperformance achieved as a result.

 

Against this backdrop, it is pleasing to observe a general improvement in the prospects for the large majority of our businesses.  This is a welcome development as the Board refreshes its appraisal of where the best opportunities lie for directing our resources in building value for shareholders and may lead to an acceleration and focusing of our strategy for growth, discussed in greater detail later in this review.

 

Board

 

Keith Walden, who stepped in to be Chairman of Alumasc Precision Limited two years ago, retires from the Board following the announcement of these results. I am immensely grateful to Keith for his support during this period and his continuing presence as a non-executive director of the Engineering division will be greatly appreciated.

 

I am delighted to announce the appointment of David Armfield to the Board of The Alumasc Group, with effect from 1 October 2014. David began his career as a solicitor at Wilde Sapte, moved to Lehman Brothers in its Investment Banking group in 1987 and later became a Partner at PwC, where he led their Industrial Corporate Finance Team. With his increasing specialisation in the emerging fields of the Cleantech Industry and Renewable Energy, David became a founding partner of Kinetix Corporate Finance LLP, established in 2010 to provide corporate finance services to businesses seeking to grow in these fields. I am certain that David's experience will be of great value to the group in the pursuit of its growth ambitions.

 

Prospects

 

There is evidence that the recovery in demand in the UK construction sector is becoming more widespread. In particular, the private commercial sector is forecast to grow steadily from its still diminished base. This will benefit the group and will hopefully be complemented by an equally steady growth in specification for our products in export markets. Against this background, it is reasonable to look for further progress in the coming year.

 

John McCall

Chairman

 

Chief Executive's Strategic and Performance Overview

 

Strategic overview

 

Alumasc's strategic priorities are to:

 

·    continue to invest in and grow our market leading portfolio of building products businesses, both organically and through acquisition; and

·    continue to improve shareholder value from the Engineering Products division. 

In the light of generally improving prospects, the Board is refreshing its appraisal of where Alumasc's best opportunities lie for directing our resources in building value for shareholders.  This may lead to further focusing of our strategy for growth as described in more detail in the pages that follow.

Key features of the business model for Alumasc's building products activities, which represent approximately 75% of group revenues, are:

·    strong positioning in sustainable building products markets which, combined with high quality management teams and a devolved operating model, is allowing us consistently to outperform growth rates in the UK construction market;

 

·    success in expanding our Building Products division through:

 

(a)  extending our international reach as evidenced by a growing underlying trend of export sales (in 2013/14, exports amounted to some 13% of divisional sales, with enquiries for export contracts at record levels at the year end); and

 

(b)  investing in innovation and new product development as described further in this statement;

 

·    we continue to invest in people and innovation to underpin delivery of the medium to longer term growth potential of our business.  The associated average annual charge absorbed within our operating profit over the last five years amounted to £0.6 million with a similar investment planned for our 2014/15 financial year.

Health and safety

The group's number one priority continues to be providing a safe place of work for our employees. Progress has been made during the year in ensuring our strong health and safety ethos is fully embedded throughout our businesses. Our principal health and safety KPI, the performance rate index, was 4.9 versus 3.5 in the previous year.  This increase was mainly due to a specific incident in the Engineering Products division which resulted in a number of days being lost earlier in the year. However the 2013/14 PRI result was better than two years ago and in previous years and is therefore consistent with the longer term trend of improvement in the group's health & safety performance over time. We were successful in increasing the reporting of near miss incidents throughout the group during the year and we are using this information to take action to prevent potential future accidents. We have also taken specific action to update and strengthen risk assessments, safe systems of work and training in those areas of our businesses judged to be those capable of causing the most serious accidents.  

Performance overview
	2013/14	2012/13
Revenue (£m)	113.4	116.8
Underlying operating profit (£m)	6.8	6.6
Underlying operating margin (%)	6.0	5.7
Net interest on borrowings (£m)	(0.5)	(0.7)
Underlying profit before tax (£m)	6.3	5.9
IAS19 (revised) pension interest, brand amortisation and non-recurring items (£m)	(1.2)	(3.1)
Profit before tax (£m)	5.1	2.8

The Board is pleased to report the group's highest annual profit for five years. Underlying profit before tax advanced to £6.3 million compared with £5.9 million last year and statutory profit before tax increased substantially to £5.1 million (2012/13: £2.8 million).

This result was underpinned by strong growth in our "early cycle" building products businesses as the UK construction market began to recover, particularly those businesses serving the house building and refurbishment markets, and by a reduction in operating losses in our Engineering Products division. Underlying profit before tax was also assisted by reduced bank interest costs, as Alumasc's average level of net borrowings was the lowest since the acquisition of Levolux in 2007. Statutory profit before tax benefited from lower non-recurring charges in 2013/14, as described further below.

Group revenues reduced to £113.4 million (2012/13: £116.8 million) mainly as a result of a lower level of activity on the significant £13 million aluminium smelter refurbishment project at Kitimat in Canada, where our works are now drawing towards completion, and the non-repeat of high prior year sales of insulated renders to Community Energy Savings Plan ("CESP") projects that ceased early in 2013. Excluding the impact of these projects, the remaining Building Products divisional revenues grew by 2%. Engineering Products revenues increased by 5% overall to £31.0 million (2012/13: £29.4 million), following customer de-stocking in the prior year.

Across the group, operating margins advanced by 0.3 percentage points compared to the prior financial year, mainly as a result of management action taken to eliminate prior year operating losses in our roofing business and to reduce operating losses in the Engineering Products division. Margins also benefited from successful execution of the large Kitimat project and from strong performances in our Rainwater, Drainage and Timloc businesses, described further in the review of operations below.  Together, this led to an improvement in Building Products' divisional underlying operating margins to 10.0% (2012/13: 9.5%).

The group's underlying operating profit increased to £6.8 million (2012/13: £6.6 million). In view of the lower Kitimat activity and revenues from Energy Company Obligation ("ECO") projects falling well short of prior year sales to CESP projects, the Building Products division performed well overall in almost matching prior year operating profits of £8.4 million, thereby achieving management's expectations set at the beginning of the financial year. Engineering Products divisional operating losses reduced from £0.5 million to £0.2 million, with another strong performance from Dyson Diecastings and the benefit from some additional direct sales in China.

Interest costs on borrowings reduced by £0.2 million to £0.5 million with average levels of net debt on a cleared funds basis reducing from £13.7 million in the prior financial year to £11.1 million in 2013/14.

The resultant group underlying profit before tax improved to £6.3 million (2012/13: £5.9 million).

A reconciliation of underlying to reported profit before tax is shown in the financial review below.

Reported profit before tax of £5.1 million was a significant improvement on the prior year's £2.8   million, mainly due to the non-repeat of £0.8 million of restructuring and acquisition costs and the £0.6 million impairment charge in the prior year.   

Group cash generation for the year was again strong with group EBITDA (earnings before interest, tax, depreciation and amortisation) amounting to £9.0 million. A more detailed review of the group's cash flow performance is provided in the financial review below.

Earnings per share

Underlying earnings per share improved from 12.3 pence in 2012/13 to 13.3 pence, reflecting the higher underlying profit before tax combined with a reduction in the underlying tax rate from 26% to 24%, broadly in line with the reduction in UK corporation tax rates. The average number of shares in issue was unchanged in the year.

Reported earnings per share more than doubled from 5.3 pence to 11.3 pence, again reflecting higher profit before tax at a reduced tax rate.

Future Prospects

Group order books began to rise again in the final quarter of the financial year driven by an uplift in orders for building products. This trend has continued to date in the current financial year. External industry forecasts for UK construction activity are for further recovery and growth.

Against this background, with the strength of Alumasc's niche market positions and management teams, and with our ongoing investment in innovation, new product development and increasing export sales opportunities, Alumasc is well positioned to further grow its building products activities and improve shareholder value from its Engineering Products division.

Dividends

In view of the improved group results for the year and strong cash generation, the Board is proposing an increased final dividend of 2.8 pence per share (2012/13: 2.5 pence), to be paid on 5 November 2014 to shareholders on the register on 10 October 2014. This would give a total dividend for the year of 5.0 pence per share (2012/13: 4.5 pence). More broadly, the Board confirms its previous intention to grow the dividend in conjunction with future earnings growth, having regard to the cash required to invest in the business to support delivery of the group's strategic growth potential and its pension scheme funding commitments.

Review of operations

Building Products division

 

The performance of the division in the year benefited from:

·    strategic actions taken by our management teams to grow market share through the introduction of new products and services and the penetration of export markets; and

·    the initial stages of a broader recovery in UK construction activity which benefited our Rainwater, Drainage and House Building Products business segment, in particular, during the year.

Solar Shading and Screening

With UK new build commercial construction levels still over 30% below their peak in 2008, Levolux had a relatively quiet year, particularly outside London. In preparation for the anticipated upturn in activity, the opportunity was taken to consolidate certain management functions in the UK, strengthen regional sales teams and invest further to develop the significant international potential we see for this business. Levolux's largest construction project during the year was to supply and install a sophisticated solar shading system incorporating photovoltaic panels to a high profile non-commercial building in central London. Our works on this project were originally expected to be complete in April. However, delays beyond our control have resulted in completion moving to Autumn 2014. This major project will be followed later in the 2014/15 financial year by another multi-million pound, high profile project at Chiswick Park in West London. Levolux's strategy to grow export sales, particularly in North America, the Middle East and France, began to gain traction with enquiry levels and order books for export projects going into the current financial year reaching new record levels.

Roofing and Walling

Our roofing business had a much improved year with its strategy of increased penetration of refurbishment markets, spearheaded by the resurgent Euroroof waterproofing brand and growing sales in London and the South East being rewarded by a double digit percentage growth in year on year revenues and the elimination of prior year operating losses. The group's smaller roofing brands, Blackdown and Roof-Pro, were successfully integrated into the wider roofing business, yielding both revenue and cost synergies. Blackdown Greenroofs had a much better year, including the successful delivery of two very large projects: the SSE Hydro Arena in Glasgow ahead of the Commonwealth Games, and Greenwich University. Towards the end of the year, a new lower cost and more generic roofing services support system, Surefoot, was launched targeting simpler roofing applications. This will broaden the product range and complement the bespoke Roof-Pro Systems solution. Enquiry levels and order books were strong across our roofing brands as we entered the current financial year. This included some work that had been delayed, again beyond our control, from the final quarter of the 2013/14 financial year.

The £13 million project to supply roofing and walling products to the Kitimat smelter refurbishment in Canada has been a great success and a significant project for the group over the last two years. Alumasc's original project was substantially complete by the financial year end. However, further work was won last Spring, which is now anticipated to extend our involvement on site until early 2015.

Our walling business, Alumasc Insulated Renders, performed with great resilience and delivered another strong performance, despite a volatile and unpredictable market background where government and energy company funding for exterior wall insulation projects was reduced following the Chancellor's Autumn statement in 2013. The impact was that revenues from ECO-funded schemes during the year neither attained the levels originally anticipated nor came close to matching prior year revenues from the predecessor CESP programme. In these circumstances, our existing strategy of diversifying sales away from those areas reliant on government funding proved to be sound. Opportunities in the commercial new build market were exploited and were assisted by the launch of the new Alumasc Base Coat product and the Alumasc Vented System which helped us to win work in refurbishing and improving the insulation of timber-framed and pre-fabricated homes.

Construction Products

Gatic had a strong year in the UK market, including the completion of a large project at the London Gateway port development, enabling the business to perform well overall.  This was despite the absence of any large projects in the Far East that had contributed to the record prior year. The year benefited from recent investments in new product development, with impressive growth in sales of the ProSlot product launched last year. A new grated drainage system is now developed and tested, and will be ready for launch in the USA later in 2014. International sales were somewhat muted during the year with little activity in the Southern European markets, where Gatic Slotdrain has a strong market positioning, and a temporary lull in project activity at ports and airports in our Far Eastern markets. However, there are increasing early signs of success for Gatic Slotdrain in the USA, with order intake improving towards the end of the financial year and we are now seeing a number of opportunities to win work in the Middle East. After the financial year end, a multi million US dollar project was secured at Doha port.

Our scaffolding and safety equipment business, SCP, had an excellent year, leveraging more buoyant UK construction market activity through a widened product range including ladders, beams, scaffold gates, scaffold sheeting and netting, and also a broadening of routes to market including on-line sales.

Rainwater, Drainage and House Building Products

This business segment recorded an underlying operating profit of over £3 million, representing a year on year increase in profit of over 50%. This success was attributable to a combination of management's successful execution of strategic growth plans including new product launches, broadening of routes to market (including the successful acquisition of Rainclear Systems in December 2012) and the uplift in new house building activity in the UK.

Alumasc Rainwater achieved success in exploiting new sales opportunities for contemporary and bespoke products, including the Skyline range and supporting this with shorter lead times, in part enabled by a more flexible manufacturing and fabrication operation at our factory near Kettering. The product offering was further enhanced by the launch of the new AX gutter range earlier in the financial year and also steel rainwater products added to the product range following the acquisition of Rainclear. Rainclear itself had a highly successful first full year in the group and exceeded all its post-acquisition earn out targets. This business is now poised for greater success including further development of its on-line offering.

The Harmer drainage brand continued its recent resurgence and is now starting to benefit from the launch of a new floor drainage range during the year including the addition of stainless steel products intended to exploit sales opportunities in clean room environments, such as catering. The performance of this business was further enhanced by success in a number of school and hospital projects, where SML products were specified.

Timloc, our house building products business, had yet another record performance with actions taken by the management team over recent years, including strengthening the sales team, particularly in London and the South East and an improved marketing and sales focus enabling us to leverage the recovery in UK house building activity and maximise other channel opportunities.  Investments in tooling, factory capacity and new product development are being made to enable Timloc to further enhance its reputation for excellent customer service to meet the forecast increased construction market demand.

Pendock, the group's pre-formed plywood casing business, also had a successful year growing revenues and profit and further enhancing operational efficiencies, an achievement which is of great credit to the local management team.

Engineering Products Division

Divisional revenues grew by 5% to £31.0 million and divisional operating losses were more than halved to £0.2 million compared with the prior year.  In addition, the division delivered a positive cash flow performance in the year.  The division comprises two businesses, Alumasc Precision Components ("APC") and Dyson Diecastings.

A key focus of the group in the last two years has been to recover profitability at APC. Investments have been made to strengthen management and in new plant and equipment, whilst eliminating loss making and peripheral work, to enable us to deliver better quality and service to customers, thereby improving operational efficiency and returns to shareholders. Considerable progress has been made and the improvement in customer service and quality in the last twelve months has been a particular highlight. However, the business continues to face margin pressures as our large OEM customers strive to achieve their own business objectives in a highly competitive marketplace during a period when Sterling strengthened. Therefore, whilst APC has recently been operating at around EBITDA breakeven levels, it is taking longer than previously anticipated to return to positive operating profits.

Dyson Diecastings remains an excellent business with a strong engineering, design and tool room capability. 2013/14 was another impressive year for Dyson, in which operating profits of over £1 million were recorded. Dyson has a broader customer base, with a greater range of end use applications for its products than is the case at APC. It offers smaller components, where the quality and finish of the part can be a key differentiator.

 

Paul Hooper

Chief Executive

Financial Review

Financial KPI's

The group's financial KPIs are summarised in the table below, together with comment on their year on year evolution.

Financial KPI	2013/14	2012/13	Comment/explanation
Year end group order books (£m)	36.8	44.0	Building Products order books began to grow again in Q4 2013/14. Year end order book schedules for Alumasc Precision Components were some 20% lower.
Group revenues (£m)	113.4	116.8	Non-repeat of some Kitimat and CESP project revenues in 2013/14
Underlying operating margin %	6.0	5.7	Improvement driven  mainly by elimination of prior year losses in Roofing activities and reduced losses in Engineering Products
Underlying Profit Before Tax (£m)	6.3	5.9	Growth in operating profit, reduced bank interest charges
Underlying Earnings Per Share (pence)	13.3	12.3	Growth in underlying profit before tax, lower underlying group tax rate
Average trade working capital % sales - excluding Kitimat	12.2	12.1	No significant change following a substantial reduction over recent years
Net cash inflow (£m)	-	5.5	Significant payments in advance on constructions contracts, including Kitimat, received in 2012/13 reversed in 2013/14
Year end net debt (£m)	7.7	7.7	Neutral net cash flow for the 2013/14 year
Year end shareholders' funds (£m)	17.0	22.4	Reduced due to a higher IAS19 pension deficit in 2013/14
Return on investment (post-tax) (%)	13.4	12.2	ROI grew in conjunction with improved operating profit on similar levels of capital invested
Underlying EBITDA interest cover (times) - banking covenant > 4 times	17.2	12.0	Improved mainly due to lower bank interest costs
Net debt/underlying EBITDA (times) - banking covenant	1.0	1.0	No material change

Cash flow and net debt

The group's cash flow performance is summarised in the table below. Year end net debt of £7.7 million remained unchanged when compared to the prior year end, but the average level of net debt during the year improved by £2.6 million and was the lowest since the acquisition of Levolux in 2007.

Cash generation was strong with group EBITDA reaching £9 million for the second year in succession. Tight control was maintained over working capital with the net investment in working capital required to finance higher sales during the year (excluding Kitimat) amounting to £0.4 million. Average trade working capital as a percentage of sales (excluding Kitimat) remained broadly stable at 12.2%.

Capital expenditure of £1.5 million was just ahead of prior year levels. Investments were made to expand capacity in businesses where we are experiencing strongest growth, in particular Alumasc Rainwater, Harmer Drainage, Timloc and Gatic, together with more routine replacement of assets across the group.  In addition, the group continues to invest in business systems to improve management information, operational efficiency, and the robustness of processes and controls across the group. Capital spend was below the level of the annual charge for depreciation and non-brand amortisation of £2.2 million, as investment at APC was focused on areas necessary to support the turnaround in view of the ongoing operating losses in that business. 

Summarised Cash Flow Statement
			2013/14	2012/13
			£m	£m
EBITDA*			9.0	9.2
Underlying change in working capital			(0.4)	1.7
Cash received in advance of profit recognised on construction contracts			(1.1)	1.8
Operating cash flow			7.5	12.7
Capital expenditure			(1.5)	(1.4)
Pension deficit & scheme expenses funding			(2.4)	(2.3)
Interest			(0.5)	(0.7)
Tax			(1.1)	(0.3)
Dividends			(1.7)	(1.1)
Reorganisation costs			-	(0.9)
Acquisitions, disposals & other			(0.3)	(0.5)
Reduction in net debt			-	5.5

 

^*  EBITDA: Underlying earnings before interest, tax, depreciation and amortisation.

Reconciliation of underlying to reported profit before tax
		2013/14	2012/13
		£m	£m
Underlying profit before tax		6.3	5.9
IAS19 (revised) pension costs		(0.9)	(1.4)
Brand amortisation		(0.3)	(0.3)
Restructuring & acquisition costs		-	(0.8)
Impairment charge		-	(0.6)
Reported profit before tax		5.1	2.8

 

Pensions

 

The group concluded negotiations with the Pension Trustees with regard to the 2013 triennial actuarial valuation of the group's two defined benefit pension schemes, both of which are closed to future accrual. The result of this review was largely as anticipated at the time of our interim report. In view of the significant reduction in gilt yields used to discount pension liabilities to present values in the period between the previous triennial review in March 2010 and the latest review in March 2013, and their partial subsequent recovery, the Trustees allowed the use of average yields in the period January to March 2014 in determining the level of pension deficit to be used for recovery plan purposes. This resulted in a deficit of £26.3 million (2010: £11.5 million). In view of the increase, the company agreed to raise annual cash contributions to the schemes from £2.0 million pa to £2.5 million pa with effect from 1 July 2014. The consequential deficit recovery plan period increased to thirteen years and seven months from 1 July 2014. In addition, the company will continue to meet pension fund scheme running expenses, including the payment of the annual Pension Protection Fund levy which, together, typically amount to circa £0.5 million pa.

 

Meanwhile, the group's pension deficit calculated under IAS19 conventions for accounting purposes increased during the year to £17.9 million (30 June 2013: £10.1 million). This reflects the reduction in AA corporate bond yields which are used to discount future pension liabilities to present values under IAS19's methodology, where each 10 basis point change in yields impacts the present value of the group's pension liabilities (up or down) by £1.4 million.

 

The reduction in the risk premium between corporate bond and gilt yields during our 2013/14 financial year is the main reason why the present value of pension liabilities for accounting purposes increased under IAS19 whilst those for triennial review purposes reduced during the year.

 

With effect from 1 July 2014, all group employees based in the UK who had qualifying earnings within the bands set out in the relevant legislation now participate in a defined contribution workplace pension scheme unless they have opted not to do so.  

 

Capital structure, capital invested and shareholders' funds

 

The group defines its capital invested as the sum of shareholders' funds, bank debt and the pensions deficit (net of tax).

 

Capital invested remained broadly stable during the year at just under £40 million. Post tax returns on investment continued to grow in line with group operating profits from 12.2% in 2012/13 to 13.4% in 2013/14.

 

Period end shareholders' funds reduced from £22.4 million a year ago to £17.0 million, largely as a result of the increased pension deficit calculated under IAS19, described above.

 

The group's balance sheet remains strong, with around £10 million of headroom between drawn debt and committed banking facilities at the year end, that could be used to finance acquisitions in the Building Products division should suitable opportunities arise at the right price.

 

Going concern

 

The Board's assessment of going concern is set out in note 1 to this statement.

 

Impairment reviews

 

The Board conducted impairment reviews covering all assets that contributed to the goodwill figure on the group balance sheet at the financial year end, together with any other assets where indicators of impairment existed. No impairments were identified. Further information on the impairment reviews is given in the Audit Committee Report within the group's annual report.

 

Business risk and internal control

 

A summary of the group's principal risks and mitigating controls is set out later in this statement.

 

As evidenced by the results of internal and external audits, the group's internal financial controls strengthened further during the year.

 

Work is ongoing to improve day to day inventory control and to refine costings in the Engineering Products businesses, but risks to the balance sheet and reported financial results are mitigated by full monthly stock takes.

 

 

Andrew Magson

Group Finance Director

 

Responsibility Statement

We confirm that to the best of our knowledge:

(a)  the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the group and the company; and

(b)  the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that the group faces.

 

Paul Hooper                                                   Andrew Magson
Chief Executive                                     Group Finance Director

 

The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the year ended 30 June 2014 which will be despatched to shareholders on or around 1 October 2014 and will be available at www.alumasc.co.uk. Accordingly the responsibility statement makes reference to the financial statements of the company and the group and to the relevant narratives appearing in that annual report and accounts rather than the contents of this announcement.