05 February 2009

Interim Announcement

"a robust first-half trading performance"

Alumasc (ALU.L), the UK-based supplier of premium building and engineering products, announces a robust first-half trading performance in the six months to 31 December 2008, driven by continued profitable growth in the group's sustainable building products businesses against a backdrop of general economic and market conditions that became increasingly challenging as the period progressed.

Financial Highlights

  • Revenue grew by 1% to £60.7m.
  • Underlying(1) pre-tax profit of £3.5m fell just 3% short of the strong interim figure last year (2007: £3.6m) and underlying(1) earnings per share were little changed at 6.8p (2007: 7.0p).
  • The reported pre-tax profit was £2.7m (2007: £4.4m, benefiting from a property disposal gain of £1.0m) and basic earnings per share were 4.8p (2007: 8.7p).
  • An unchanged dividend per share of 3.25p is declared.
  • The £1.4m increase in net debt in the period, taking net debt to £10.8m (gearing of 37%), was consistent with Alumasc's usual first-half experience and some £2.0m better than internal expectations set at the beginning of the year.

Commercial Highlights

  • Building Products revenue grew by 6% to £42.7m and underlying(1) operating profit increased by 7% to £5.2m. Operating margins remained healthy at 12.1%, a little ahead of prior-year levels.
  • Sustainable building products activities generated close to two-thirds of the group's first-half revenue, achieving growth rates well-above UK construction market averages and delivering superior returns on both sales and capital invested.
  • Within this category, Levolux, the UK's leading solar shading company, which was acquired in May 2007, delivered an outstanding first-half performance and continues to win high-profile and innovative project work.
  • Engineering Products revenue totalled £18.8m (2007 £20.4m) and underlying operating losses were £0.3m (2007: underlying operating profit of £0.3m).
  • Engineering Products revenue and profit had both been ahead of prior period comparators at the end of the first quarter.

Chairman's Statement

Alumasc delivered a robust first-half trading performance, driven by continued profitable growth in the group's sustainable building product businesses against a background of general economic and market conditions that became increasingly challenging as the period progressed.

In the six months to 31 December 2008, group revenue grew by 1% to £60.7 million. Underlying profit before tax(1) of £3.5 million (stated prior to restructuring costs, brand amortisation and impairment charges) fell just 3% short of the strong interim result of £3.6 million last year(2), mainly due to significantly lower profitability experienced in the Engineering Products division in the last few weeks of the period. Reported profit before tax was £2.7 million (2007: £4.4 million(2)). This is stated after charging exceptional restructuring costs of £0.4 million, mostly incurred in December as management reduced the ongoing cost base of those businesses experiencing weakened demand, and non-cash impairment charges of £0.4 million. The prior year period's reported profit before tax had benefited from a property disposal gain of £1.0 million.

Underlying earnings per share(1) were 6.8 pence (2007: 7.0 pence(2)) and basic earnings per share were 4.8 pence (2007: 8.7 pence(2)). The Board has declared an unchanged interim dividend of 3.25p per share.

The group's sustainable building product activities, which are used by customers in managing energy and water in the built environment, generated close to two-thirds of the group's first-half revenues, achieving growth rates well above UK construction market averages and delivering superior returns on both sales and capital invested. Revenues and underlying profits increased by 14% and 16% respectively to £37.7 million and £5.2 million, at operating margins of almost 14%, after absorbing an adverse currency translation impact of some £0.5 million. Revenue growth also exceeded 10% on a like-for-like basis, after excluding the benefit of the Blackdown Horticultural Consultants green roof business acquired in March 2008.

Levolux, the UK's leading solar shading company, which was acquired in May 2007, delivered an outstanding first-half performance and continues to win high profile and innovative project work, including photovoltaic cells incorporated into the shading system, allowing the solar energy captured to be re-used in the building. Green roofs are now the fastest growing product group within Alumasc's portfolio, with order intake continuing to increase in this still embryonic market niche. As part of this, Blackdown is settling down well in the group following its acquisition last year, and has won important projects at the Olympic coach station in east London and the Snow Dome in Hemel Hempstead.

Elsewhere, demand remained strong for Gatic branded products, underpinned by domestic and international infrastructure projects, whilst demand for Alumasc branded rainwater systems, MR façades and Pendock profiles all benefited from ongoing high levels of UK government expenditure on public buildings and social housing refurbishment projects.

Engineering Products

There have been no significant changes to the group's balance sheet since 30 June 2008. Net assets at 31 December 2008 were £29.5 million (30 June 2008: £30.9 million).

The group's cash flow performance in the six months to 31 December was robust. Although there was an increase in net debt of £1.4 million in the period, consistent with Alumasc's usual first half experience, this performance was some £2 million better than internal expectations set at the beginning of the year as a result of strong control over capital expenditure and working capital. Net borrowings increased from £9.4 million at 30 June 2008 to £10.8 million at 31 December 2008. Gearing at 31 December 2008 was 37% and cash interest costs for the period were covered over 10 times by underlying operating profits. Group overdraft facilities of £11 million were renewed at the end of November for a further year, supplementing the group's £15 million revolving credit facility which remains committed until 2012. Together, these facilities are more than double the level of net debt at 31 December 2008. The group's pre-tax pension deficit at 31 December 2008 of £18.4 million, as measured under IAS19, was £1.4 million lower than that at the year end, as company contributions exceeded the impact of changes in investment values and expected pension liabilities.

Underlying annualised post-tax return on investment advanced to 11.3% (2007: 10.9%) due to a small reduction in overall capital invested.

In view of the recent volatility in economic and market conditions, an update on the business risk review provided in the last annual report is given in note 3. Seasonality is not expected to have a significant impact on performance trends in this financial year.

Prospects

The Board believes that medium and long term prospects for the group's core Building Products' activities remain strong, particularly for sustainable building products. However, these activities are not immune to current economic and market conditions. Divisional profits are being impacted by Sterling's weakness and could be further affected should demand for new commercial buildings weaken in 2009, as is being anticipated by some industry commentators. Nonetheless, current order books for the division remain healthy, albeit below the levels seen six months ago.

The significant downturn in demand from OEM customers that impacted results in the Engineering Products division just prior to the calendar year end has continued into the new calendar year and costs have been reduced accordingly.

In summary, the Board's expectations for the current year are unchanged from those given in the group's trading update of 19 December 2008. The group's cash flow performance continues to be robust and the group's balance sheet remains strong. Alumasc is well placed to manage through current economic uncertainties and take advantage of opportunities.

John McCall Chairman 5 February 2009

John McCall, Chairman, stated:

“The Board believes that medium and long term prospects for the group’s core Building Products’ activities remain strong, particularly for sustainable building products. However, these activities are not immune to current economic and market conditions. Divisional profits are being impacted by Sterling’s weakness and could be further affected should demand for new commercial buildings weaken in 2009, as is being anticipated by some industry commentators. Nonetheless, current order books for the division remain healthy, albeit below the levels seen six months ago.

The significant downturn in demand from OEM customers that impacted results in the Engineering Products division just prior to the calendar year end has continued into the new calendar year and costs have been reduced accordingly.

In summary, the Board’s expectations for the current year are unchanged from those given in the group’s trading update of 19 December 2008. The group’s cash flow performance continues to be robust and the group’s balance sheet remains strong. Alumasc is well placed to manage through current economic uncertainties and take advantage of opportunities.”

Notes

(1): Underlying operating profit, underlying profit before tax and underlying earnings per share are stated prior to the deduction of restructuring costs of £0.4 million (2007: £0.15 million), brand amortisation charges of £0.1 million (2007: £0.1 million), asset impairment charges of £0.4 million (2007: £ nil) and property disposal gains of £nil (2007: £1.0 million).

(2): Prior period information has been restated to reflect adjustments to Alumasc Precision Components’ prior year comparatives (see note 1).