RNS Number:4198A
SEP Industrial Holdings PLC
14 March 2001
On behalf of: SEP Industrial Holdings plc Date: 14 March 2001 Embargoed
until: 07:00am
Preliminary results for the year ended 30 September 2000
Highlights
* Disposal of Component Industries Limited, SEP Presstech Limited, Springfix
Linkages Limited and its subsidiaries
* Discussions with Integration Limited are continuing
* Following the acquisition of Integration the Group will concentrate on
current and proposed information technology investments and activities
* Group loss before taxation for the year ended 30 September 2000 #937,000
Tony Caplin, Chairman of SEP Industrial Holdings plc commented:
"Overall trading in the current year shows an improvement on that experienced
in the second half of the prior year.
Negotiations are continuing with Integration Limited and we hope to be in a
position to issue a circular to shareholders concerning the proposed acquisition
and related matters before long."
For further information contact:-
Tony Caplin
Non-Executive Chairman
SEP 020 7505 2330
Ruari McGirr
Brown Shipley & Co. Ltd 020 7282 3219
Adam Reynolds/Takki Sulaiman
Hansard Communications 020 7 735 9415
takki@hansardcommunications.com
www.hansardcommunications.com
Chairman's Statement
My first report to you as Chairman is made during a period of change for the
Group. The last year has seen a number of acquisitions and disposals. These,
together with further changes proposed and in negotiation, should leave SEP
refocused on information technology investments and activities.
Acquisitions and disposals
In his statement accompanying the Report and Accounts for the year ended 30
September 1999 in March last year, my predecessor, Barry Roberts, reported to
you that your Board was actively examining a number of options, including
acquisitions and disposals, to improve the performance of the Group.
In April 2000 the Group made an investment of #2 million for a 10%
shareholding in a computer software company, Quantiv Limited, and in May 2000
it acquired the IAS II fund management software business. IAS II has
subsequently been renamed Fund Management Services Limited. In May 2000 the
sale of the Group's presswork subsidiary, SEP Presstech Limited, was also
announced.
On 29 November 2000 we were pleased to announce that SEP had entered into a
letter of intent and exclusivity arrangement with Integration Limited with a
view to acquiring the entire issued share capital of Integration. Such an
acquisition would amount to a reverse takeover under the Listing Rules of the
UKLA and would be conditional upon shareholder approval. Consequently,
trading in the Company's shares was suspended at SEP's request.
Integration Limited was founded in 1992. Its business has been the
implementation of IT systems and solutions to enable companies to access the
latest software without any of the IT management difficulties. Integration
has a number of revenue channels including as an application service provider
(ASP) and a Value Added Reseller. Its ASP division iFuel, manages and
delivers applications and services through an internet-aware Managed Data
Centre. This enables Integration to meet the needs of highly mobile global
businesses that need flexibility from their IT. iFuel has recently won the
award of European ASP of the Year due to the quality of its services.
As part of the arrangements with Integration, SEP agreed to lend Integration
up to #1,000,000 for a period of up to one year, convertible into ordinary
shares in Integration on the occurrence of certain events. To help fund this
loan, on 29 November 2000 SEP placed 10,000,000 Ordinary Shares of 5p each at
8.75p per share with certain of its institutional shareholders to raise #
875,000.
It is anticipated that, following the acquisition of Integration, the Group
will concentrate solely on its current and proposed information technology
investments and activities. For this reason, SEP is disposing of its
remaining non-IT interests.
On 6 February 2001 the Company sold Springfix Linkages Limited and its
subsidiaries, including Midland Mechanical Developments Limited and Springfix
Linkages LLC. The consideration in respect of the transaction was #175,000.
#25,000 has already been received. The balance is due in equal tranches on
the first and second anniversaries of completion. Prior to the sale, SEP paid
#949,000 towards the bank overdraft of Springfix and waived intercompany debt
due from Springfix of #647,000.
On 13 March 2001 it was announced that the Company had entered into a
conditional agreement for the sale of the entire share capital of Component
Industries Limited to Component Industries Holdings Limited, a company of
which the majority shareholders are the executive directors of Component
Industries Limited. Component Industries Limited is the intermediate holding
company of the four Group subsidiaries which are involved in the '
just-in-time' supply of industrial consumables. The consideration for the
proposed disposal is #4.45 million of which #3.8 million is payable in cash on
completion, and #650,000 will be issued by way of zero rated, unsecured 2005
loan notes. Any non-trading intercompany debt outstanding will be repaid at
completion and deducted from the cash element of the consideration. The
proposed disposal is conditional on shareholder approval which will be sought
at an EGM to be held on 30 March 2001. Notice of the meeting and further
information on the proposed disposal is set out in a separate circular to
shareholders.
Results
The Group loss before taxation for the year ended 30 September 2000 was #
937,000 (1999: loss of #4,587,000) resulting in a loss per share of 1.00p
(1999: loss of 4.74p). The results are stated after exceptional charges for
asset writedowns of #383,000 (1999: #3,077,000).
The Group finished the year with net borrowings of #2,322,000 (1999: net cash
of #277,000). This change reflects the cost of acquisitions and investments
partly offset by the disposal of SEP Presstech, the sale of the freehold
office building at Godalming in November 1999 and of the Group's shareholding
in Widney plc, which realised a profit of #161,000.
Operating Review
The outcome for the year was disappointing, especially after the small profit
achieved in the first half. However, your Board is actively taking steps to
enhance shareholder value.
Overall operating profits at Component Industries increased by 12%. A strong
performance at Component Logistics was partly offset by reduced profits at
Diss Fasteners where demand fell.
The results of the Springfix Linkages group of companies were affected by poor
demand and the costs of implementing changes following the appointment of the
new managing director. #383,000 was provided for impairment in the value of
fixed assets.
A major restructuring was implemented in the second half of the year at Clyde
Fasteners, which had been incurring heavy losses following the decline in
sales and margins in its production for the standard fastener market. This
resulted in the withdrawal from manufacture of standard fasteners for stock
and the closure of the distribution warehouse in Birmingham. As a result the
workforce was halved to approximately 40.
The results at SEP Presstech in the period up to its sale reflected the
benefit of the reorganisation carried out during the previous year.
As expected at the time of the acquisition Fund Management Services made a
loss during the period, however prospects are encouraging.
Dividends
No dividend on the ordinary shares is proposed. The dividends of 0.9565p per
share on the preferred ordinary shares due in March and September were not
paid, although they have been provided for in the accounts in accordance with
standard accounting practice.
Current trading and prospects
Overall trading in the current year shows an improvement on that experienced
in the second half of the prior year. Fund Management Services is trading
profitably, and there is the prospect of some significant new business with a
major customer. The benefits of the reorganisation at Clyde Fasteners are
reducing losses, but the difficult trading conditions continued at Springfix
in the period up to its disposal. The result at Component Industries is in
line with budget but is down on the prior year reflecting the costs of the
move of Component Logistics to new premises.
Negotiations are continuing with Integration Limited and we hope to be in a
position to issue a circular to shareholders concerning the proposed
acquisition and related matters before long, at which point the Company will
seek to have the suspension of the shares lifted. It is intended that the
Annual General Meeting will be held immediately prior to an EGM concerning the
acquisition.
Tony Caplin
Chairman
13 March 2001
Consolidated Profit and Loss Account
For the year ended 30 September 2000
Notes
2000 1999
#'000 #'000
Turnover - ongoing 22,499 16,694
- acquisitions 654 -
23,153 16,694
- discontinued 5,620 10,140
28,773 26,834
Cost of sales (22,903) (22,640)
Gross profit 5,870 4,194
Other operating expenses (6,876) (8,663)
Operating loss
- ongoing (1,211) (3,574)
- acquisitions (118) -
(1,329) (3,574)
- discontinued 323 (895)
1 (1,006) (4,469)
Profit on sale of fixed assets - 275
Profit/(loss) on disposal of
subsidiaries before goodwill
previously written off 252 (880)
Release of provision for loss on - 880
disposal
Goodwill previously written off to (53) -
reserves
Profit on disposal of subsidiaries 2 199 -
Loss on ordinary activities before (807) (4,194)
interest
Interest payable (130) (393)
Loss on ordinary activities before (937) (4,587)
taxation
Tax credit on loss on ordinary 65 40
activities
Loss on ordinary activities after (872) (4,547)
taxation
Minority interest (6) (42)
Loss for the financial year (878) (4,589)
Dividends (non equity) (154) (154)
Retained loss for the year (1,032) (4,743)
Basic loss per ordinary share 3 (1.00)p (4.74)p
Consolidated Balance Sheet
As at 30 September 2000
Notes 2000 1999
#'000 #'000
Fixed assets
Tangible assets 1,815 25
Intangible assets 1,541 4,321
Investments 2,028 -
5,384 4,346
Current assets
Stocks 4,724 5,209
Property for resale 852 -
Debtors 5,564 4,954
Investments - 591
Cash at bank and in hand 218 2,923
11,358 13,677
Creditors:
Amounts falling due within one year (7,895) (7,775)
Net current assets 3,463 5,902
Total assets less current liabilities 8,847 10,248
Creditors:
Amounts falling due after more than one year (594) (953)
Provisions for liabilities and charges - (65)
8,253 9,230
Capital and reserves
Called up share capital 5,575 5,575
Share premium account - 14,551
Other reserves 407 253
Profit and loss account 2,271 (11,267)
Shareholders' funds (includes non-equity) 4,5 8,253 9,112
Equity minority interest - 118
8,253 9,230
Summarised Consolidated Cashflow Statement
For the year ended 30 September 2000
2000 1999
#'000 #'000 #'000 #'000
Net cash (outflow)/ inflow from operating
activities
Operating loss including exceptional costs (1,006) (4,469)
Profit on sale of fixed assets (14) (9)
Depreciation, asset impairment and amortisation 1,201 3,110
Profit on disposal of current asset investment (161) -
Net movement in working capital (332) 4,486
Provision against current asset investment - 36
(312) 3,154
Returns on investments and servicing of finance
Net interest paid (130) (643)
Minority dividends paid (39) (31)
Dividends paid to preferred ordinary - (156)
shareholders
(169) (830)
Taxation paid - (2,919)
Capital expenditure and financial investment
Purchase of tangible fixed assets (321) (556)
Purchase of trade investment (2,028) -
Purchase of intangible assets - (10)
Sale of tangible fixed assets 340 3,105
Purchase of current asset investments - (193)
Sale of current asset investments 752 -
(1,257) 2,346
Acquisitions and disposals
Sale of business of subsidiary undertakings 787 14,363
Net cash disposed of with subsidiary (59) -
undertakings
Purchase of subsidiary undertakings (2,100) -
(1,372) 14,363
Equity dividends paid - (494)
Cash (outflow)/inflow before financing (3,110) 15,620
Financing activities
Issue of shares - 26
Net financing from capital element of hire (317) (704)
purchase and finance leases
Net repayment of bank loans (385) (1,516)
(702) (2,194)
Net cash (outflow)/inflow (3,812) 13,426
Notes to the Preliminary Results
1. The operating loss is after charging asset write-downs of #
383,000 (1999: #3,077,000) following reviews of the carrying value of assets
carried out as a result of the difficult trading conditions being experienced
within certain of the manufacturing businesses.
2. The profit on disposal of subsidiaries arises from the sale of
SEP Presstech, which was sold on 2 May 2000 to European Commercial Holdings
Limited ("ECH"). ECH is the holding company of European Commercial Pressings
Limited ("ECP"). ECP and Presstech were placed in administration in July
2000. As a result neither the deferred consideration of #200,000 payable to
SEP in May 2001 nor a similar amount expected to be received following
agreement of completion accounts will be received. In the prior year there
was a loss of #880,000 on the sale of the Wholesale Distribution Division in
October 1998 which was offset by the release of the provision for loss on
disposal of #880,000.
3. Loss per share has been calculated on the result for the
financial year after deducting preferred ordinary dividends of #154,000 (1999:
#154,000) on 103,421,952 shares (1999: 100,047,252 shares) being the weighted
average number of ordinary shares in issue during the year. There is no
difference between the basic loss per share and the diluted loss per share.
4. Under FRS4 the Preferred Ordinary Shares are defined as
non-equity shares as they are currently entitled to a fixed dividend, but have
the same rights in all other respects. Non Equity Shareholders' funds are #
635,000 (1999: #2,251,000).
5. The reconciliation of movements on shareholders' funds is:
2000 1999
#'000 #'000
Loss for the financial year (878) (4,589)
Dividends (154) (154)
(1,032) (4,743)
Other recognised gains and losses
Exchange loss (34) (18)
Preferred dividend transferred to other reserve 154 77
Write back of goodwill on disposal 53 -
New share capital subscribed (less expenses) - 143
Other - (42)
Net deduction from Shareholders' funds (859) (4,583)
Opening Shareholders' funds 9,112 13,695
Closing Shareholders' funds 8,253 9,112
6. The Group's net (debt)/cash comprised:
2000 1999
#'000 #'000
Bank loans and overdrafts (2,024) (1,386)
Finance leases and hire purchase (516) (1,260)
Cash at bank and in hand 218 2,923
(2,322) 277
7. The exceptional item in the results for the year ended 30
September 1999 represents a profit on disposal of fixed assets of #275,000 on
the sale of the Group's freehold interest in Tyburn Trading Estate, which was
completed in August 1999.
8. The financial information set out above does not constitute
the Group's statutory accounts for the years ended 30 September 1999 and 2000
but is derived from those accounts. This announcement has been prepared on
the basis of the accounting policies stated in the previous year's accounts.
Statutory accounts for the year ended 30 September 1999 have been delivered,
and for the year ended 30 September 2000 will be delivered, to the Registrar
of Companies. The auditors' report on the financial statements for the year
ended 30 September 2000 is unqualified. The auditors' report in respect of
the year ended 30 September 1999 is unqualified in respect of the balance
sheet at that date and the results for the year then ended, but contains a
statement that in view of the qualification of the 1998 accounts the
comparative figures may not be comparable. In this regard alone in respect of
the 1999 accounts the auditors had not received all the information and
explanations they considered necessary for the purposes of their audit.
Copies of this announcement are available from the Company's registered
office: Fourth Floor, Churchill House, 142 Old Street, London EC1V 9BW.
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