IMMEDIATE RELEASE

2 February 2016

 

 

THE ALUMASC GROUP PLC - INTERIM RESULTS ANNOUNCEMENT

 

Alumasc (ALU.L), the premium building and engineering products group, announces interim results for the six months ended 31 December 2015.

 

Half year financial highlights
Half year to 31 December	2015	2014	% change
Continuing operations:
Order book at 31 December (£m)	27.4	19.2	+42%
Revenue (£m)	43.5	45.2	-4%
Underlying profit before tax (£m)*	4.0	3.7	+8%
Underlying earnings per share (pence)*	8.9	8.1	+10%
Profit before tax (£m)	3.2	2.9	+12%
Total group (including discontinued operations):
Basic earnings per share (pence)	7.6	6.6	+15%
Dividends per share (pence)	2.7	2.5	+8%
Net cash/(debt) at 31 December (£m)	0.5	(7.7)

 

^* Underlying profits and earnings per share from continuing operations are stated prior to the deduction of brand amortisation charges of £0.1 million (2014: £0.1 million) and IAS19 pension costs of £0.7 million (2014: £0.7 million).

 

Key points

·      Alumasc's strategy is to focus on premium Building Products & Solutions and the Board believes there are numerous exciting organic and synergistic growth opportunities to capitalise on Alumasc's market leading positions in niche segments.

·      In line with this strategic goal and further to last year's disposal of loss-making APC, the Board has initiated a process for the disposal of Dyson Diecastings, the group's last remaining Engineering Products business.

·      Excluding two exceptionally large projects (Kitimat and Chiswick Park) completed last year, Building Products achieved 4% growth in underlying revenues with operating margins up to 10.8%, enabling divisional operating profit to rise 3% to £4.7m. 

·      Building Products order books rose to £27.4m at 31 December 2015 (30 June 2015: £24.0m; 31 December 2014: £19.2m).  Most of the increase relates to Levolux and will benefit the group's 2016/17 financial year and beyond.

·      Solar Shading & Screening saw Levolux establish a sustainable and growing business in North America and its UK business is being expanded to supply bespoke balconies to prestigious housing and commercial developments. Levolux's order book increased 28% to £19.9m. Financial performance as expected with operating profit up 20% to £462k on sales down 7% to £7.6m.   

·      Roofing & Walling revenue down 12% to £18.4m, in part reflecting last year's Kitimat project. Performance earlier in the financial year was impacted by delays to refurbishment projects caused by short-term factors in the wider contractual chain. The reduction in Green Deal funding is being offset by developing new build business including the Alumasc Ventilated System.  Operating profit down 32% to £1.8m.  

·      Water Management operating profit up 64% to £1.9m on revenue up 8% to £14m with financial performance benefiting from the holistic approach to sales and customer service following the introduction of AWMS last July. Particularly strong performances came from Alumasc Rainwater and Gatic Slotdrain in domestic markets; new products (including Gatic Filcoten and Harmer SML Below Ground); and Gatic access covers, including some recovery of demand in South-East Asia.  Relocation to new site in Kettering delayed 6 to 12 months.

·      Housebuilding & Ancillary Products operating profit up 33% to £573k on revenue up 9% to £4.1m.  Timloc delivered another record first half performance and, in order to facilitate future growth, will relocate to new leased premises in the Goole area over the next 12 to 18 months.

 

Paul Hooper, Chief Executive, commented:

 

"Alumasc is pleased to announce earnings growth for the fourth consecutive first half year.

 

With the group expected to benefit from its normal seasonal trading bias in favour of the second half of the financial year, the Board's previous expectations for the group's full year performance remain unchanged.

 

Against a background of further UK growth in demand for premium building products for sustainable building, and with growing order books and continuing success in developing our overseas presence, Alumasc is well positioned to make further progress beyond this financial year."

 

Enquiries:

 

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

Simon Bloomfield

 

 

REVIEW OF INTERIM RESULTS

 

Overview and highlights

 

Alumasc is pleased to announce earnings growth for the fourth consecutive first half year:

 

·      Underlying earnings per share from continuing operations advanced by 10% to 8.9 pence per share (2014: 8.1 pence) and basic earnings per share grew by 15% to 7.6 pence (2014: 6.6 pence).

·      These improved results were driven by continued profitable growth in Alumasc's water management and housebuilding products businesses, lower financing charges and the successful disposal of the loss making Alumasc Precision Components business in June 2015.

·      Cash remains well controlled and the group continues to be free of any net indebtedness. Net cash at 31 December 2015 was £0.5 million (30 June 2015: net cash of £0.9 million; 31 December 2014 net debt of £7.7 million).

·      Building products order books rose to £27.4 million at 31 December 2015 (30 June 2015: £24.0 million; 31 December 2014: £19.2 million). Most of the increase relates to Levolux and will benefit the group's 2016/17 financial year and beyond.

·      In view of all the above, the Board has decided to increase the interim dividend by 8% to 2.7 pence per share (2014: 2.5 pence).

 

Strategic development

 

The group's strategy for future growth is to position Alumasc as a focused supplier of premium building products and solutions, particularly those which add value in conserving and managing the scarce resources of energy and water in the built environment. The Board believes there are numerous exciting organic and synergistic growth opportunities which have been identified to capitalise on Alumasc's market leading positions in niche segments.

 

In line with this strategic goal, and further to the successful disposal of Alumasc Precision Components last summer, the Board has initiated a sale process for the group's last remaining Engineering Products business, Dyson Diecastings ("Dyson"). Accordingly, Dyson has been treated as a discontinued operation in this interim statement.

 

Operating Review

 

(a)   Continuing operations - Building products

 

UK demand for Alumasc's building products continues to grow. While headline divisional revenues were 4% lower than in the first half of the prior year at £43.5 million, order books grew from £24.0 million to £27.4 million in the period under review. We also continue to develop export markets. Reported revenues for the half year reflect the non-repeat of the two exceptionally large projects, Kitimat and Chiswick Park building 7 ("CP7"), that benefited the first half of the previous financial year, and delays to a number of projects in our roofing and walling business. When Kitimat and CP7 are excluded from prior period comparators, our remaining building products revenues were ahead on a like-for-like basis by around 4%.

 

Divisional operating margins improved to 10.8% compared to 10.1% in the first half of the last financial year, reflecting a combination of the resolution of the operational and capacity issues described in this report a year ago and the benefit of operational gearing following further growth in our water management and housebuilding products businesses. This enabled divisional operating profits to grow by 3% to £4.7 million.

 

Solar shading and screening

 

Levolux's principal achievements in the first half of the financial year were the delivery of a substantial increase in its order book, further establishing a sustainable and growing business in North America and developing an exciting business to supply bespoke balconies to prestigious housing and commercial developments. The order book grew from £15.6 million at 30 June 2015 to £19.9 million at 31 December 2015, and order intake over the last 12 months of £23.0 million has been higher than that ever previously achieved by the business and significantly higher than revenues over the last twelve months of £15.4 million. Some £11.4 million of the order book is expected to convert into revenue in the 2016/17 financial year and beyond, including the £3 million project announced in October to screen a power plant on the eastern seaboard of the USA, Levolux's largest order so far in North America. The developing balconies business is complementary to the existing solar shading and control business, building on Levolux's strengths of design, project management and delivery whilst leveraging existing sales channels and supply chains.

 

In the absence of work on any large projects in the period under review, Levolux's trading performance in the first half of this financial year was satisfactory, delivering slightly higher profits from slightly lower revenues when compared to the same period a year ago, reflecting good project execution and a higher number of project completions in the period under review. 

 

Roofing & walling

 

These businesses again performed strongly by historical standards. However, as expected, it was not possible to improve on last year's record results in the absence of a replacement for the large Kitimat smelter refurbishment contract in Canada.  Performance in the earlier part of the financial year was affected by delays to a number of refurbishment projects caused by short-term factors in the wider contractual chain beyond Alumasc's control. Alumasc Facades is also being impacted by lower housing refurbishment work in England and Wales as Green Deal funding comes to an end and therefore continues to develop its new build business. Specification banks for the recently launched Alumasc Ventilated System are promising and continue to grow.

 

Water Management

 

Alumasc's water management businesses grew both revenues and profits strongly, including benefiting from the more holistic approach to sales and customer service following the introduction of the Alumasc Water Management Solutions ("AWMS") umbrella brand last July. In particular, there were strong performances from Alumasc Rainwater and a much better first half than last year in domestic markets for Gatic Slotdrain. New products introduced during the period, including Gatic Filcoten and Harmer SML Below Ground, performed well and these should continue to gain traction.  In addition, Gatic's access covers business performed well, including some recovery of demand in South-East Asia.

 

Plans to relocate Alumasc's rainwater & drainage businesses to a new site in the Kettering area have been delayed by 6 to 12 months due to issues with the initially preferred relocation site. A number of alternative options are being evaluated.

 

Housebuilding & ancillary products

 

Timloc delivered another record first half performance, benefiting from growing demand, an expanding product range and operational efficiencies. Further new products that will enable us to leverage existing sales channels are being planned for launch later in the year. As part of previously announced plans to facilitate future growth, Timloc will relocate to new leased premises in the Goole area over the next 12 to 18 months.

 

(b)   Discontinued operation - Dyson Diecastings

 

This was a difficult period for UK based die-casters supplying international OEMs in automotive and off highway diesel markets, characterised by slowing growth rates in developing markets, impacting the construction and mining equipment sub-sectors in particular and resulting in significant customer de-stocking. Against this background, Dyson, with its diversified customer base and focus on precision engineered, smaller die-cast and machined parts for niche applications, performed relatively well, with half year revenues down by 11% to £3.5 million and operating profits lower by £0.1 million at £0.2 million. The recently strengthened management team continues to develop opportunities for new work, whilst improving operational efficiencies.

 

In view of the success of Alumasc's strategy to increase its focus on building products activities over recent years and the successful sale last year of Alumasc Precision Components, Dyson's sister business, the Board believes that Dyson's future would be better served under different ownership. Accordingly, this business is now being actively marketed for sale. 

 

Cash flow, pensions and balance sheet

 

Cash management in Alumasc continues to be a key area of focus, and the group ended 2015 with net cash resources of £0.5 million (30 June 2014: net cash of £0.9 million; 31 December 2014: net debt of £7.7 million). There was a modest net cash outflow of £0.5 million in the six months to 31 December 2015 reflecting some investment in working capital to support anticipated growth and the purchase of £0.4 million of Alumasc shares by the group's employee share trust. Capital expenditure of £0.8 million in the period related mainly to routine replacement of assets and the completion of work on new business systems at Levolux and Timloc, both of which were successfully introduced in the period. The lower average level of net debt experienced in the half year under review resulted in a reduction in the group's interest costs on borrowings to £0.1 million from £0.3 million in the first six months of the prior financial year.  Given the delay to the investment in the new Kettering property described above, the group is now unlikely to incur any significant net indebtedness for another 12 months.

 

The group's pension deficit measured for accounting purposes under IAS19 was £19.5 million at 31 December 2015, an improvement on the 30 June 2015 position of £20.9 million mainly due to lower long term inflation expectations. The deficit remains high by historical standards due to continued low discount rates that are used to discount future pension payments into present values. The company's current obligations to make deficit funding contributions to its legacy defined benefit pension schemes will be re-assessed following the forthcoming triennial valuation due in March 2016.

 

There have been no significant changes to the group's balance sheet in the period under review. Shareholders' funds increased over the six months to 31 December 2015 to £17.3 million from £15.9 million at 30 June 2015, mainly reflecting retained post tax profits.

 

Outlook

 

With the group expected to benefit from its normal seasonal trading bias in favour of the second half of the financial year, the Board's previous expectations for the group's full year performance remain unchanged.

 

More broadly, against a background of further UK growth in demand for premium building products for sustainable building, and with growing order books and continuing success in developing our overseas presence, Alumasc is well positioned to make further progress beyond this financial year.

 

Paul Hooper, Chief Executive

2 February 2016