TIDMMAN
RNS Number : 6719W
Manroy PLC
02 February 2012
2 February 2011
Manroy Plc
Preliminary announcement of audited results for year ended 30
September 2011
Manroy Plc ("Manroy" or the "Group") (AIM: MAN), the AIM quoted
leading UK machine gun manufacturer, announces its audited results
for the year ended 30 September 2011.
Manroy's shares were admitted to trading on AIM in December 2010
following the reverse takeover of Manroy Systems Limited ("Manroy
Systems") by the Company. The results set out below therefore
include only a nine month contribution from Manroy Systems.
Financial highlights
-- Trading business achieved profit before tax and non-recurring
acquisition costs of GBP2.8 million
-- Earnings per share of 18.0p in comparison to loss per share of 9.4p in 2010.
-- Gross margins improved to 37% in the year from 33% in the
acquired business in the comparable year.
-- Interim dividend of 1p paid, increased by further 1p final dividend proposed.
-- Raised GBP9 million gross through two share placings.
-- Capital base restructured, increasing distributable reserves by GBP12 million.
Operational highlights
-- Acquisition of Manroy Systems Ltd and re-admission of shares to trading on AIM
-- Acquisition of the business and assets of AEI Land Systems Ltd.
-- Acquisition of 49% of Manroy USA LLC ("MUSA"), following that
company's purchase of the business and assets of Sabre Defence
Industries LLC.
-- Reduced reliance in the acquired business on UK annual
revenue, reducing concentration from 93% in 2010 to 65% in
2011.
Andrew Blurton, Chairman of Manroy, commented: "The Group has
come a long way in a very short time and the Board is confident
that it will achieve its objective of becoming a highly regarded
defence contractor in its specialised fields. The Board is firmly
of the view that we have all the building blocks in place to
further develop and grow the business both internationally and in
the domestic market. While the current economic and political
climate makes us cautious, we are optimistic that, over the next
two years and thereafter, Manroy will continue to expand both here
and abroad."
For further information please contact:
Manroy Plc
Andrew Blurton , Chairman
Glyn Bottomley, Chief Executive Tel: 01252 874 177
Paul Carter, Finance Director
Canaccord Genuity Limited Tel: 020 7050 6500
Robert Finlay
Peter Stewart
Tavistock Communications Tel: 020 7920 3150
Baron Phillips
Simon Compton
Chairman's statement
This has been an eventful year of transformation for your
Company. The Company completed the acquisition of Manroy Systems
Limited financed by a GBP6.0 million share placing at 75p a share.
We changed our name from Hurlingham Plc to Manroy Plc and the
Company's shares were re-admitted to AIM. We also completed the
acquisition of AEI and a 49% interest in MUSA and raised a further
GBP3 million via a share placing at 95p per share. I am pleased to
report that this transformation has gone well.
Group revenue for the year ended 30 September 2011 amounted to
GBP7.9 million and produced a pre-tax profit of GBP2.2 million.
This was after recording GBP1.1 million of costs associated with
our successful corporate acquisitions, the AIM admission and the
fund raisings, GBP0.8 million of amortisation of intangible assets
from acquisitions and a credit amounting to GBP2.5 million of
negative goodwill. There are no directly comparable figures for the
previous period as the Hurlingham business within the Group was
effectively that of a cash shell. Earnings per share were 18p for
the year ended 30 September 2011, up from a loss of 9.4p per share
last year, and the earnings this year also reflect the increased
number of shares now in issue.
In light of these positive results for the year ended 30
September 2011, the Board is proposing a final dividend of 1p per
share payable to shareholders on the register on 10 February 2012,
excluding those shares issued in August 2011 which did not rank for
the dividend. This final dividend, together with the 1p per share
interim dividend already paid, takes the total to 2p per share for
the year and will be payable on 11 April 2012.
Shareholders should be aware that the Group's results only
include a nine month contribution from Manroy Systems since its
takeover was completed in December 2010, but we have also included
12 month information for Manroy Systems so that shareholders can
appreciate the full extent of our operations.
For the year ended 30 September 2011, Manroy Systems generated
total revenue of GBP11.0 million and produced GBP2.7 million of
pre-tax profits, against revenue of GBP12.3 million and pre-tax
profits of GBP2.8 million for the comparable year to 30 September
2010. Recognising the adverse economic backdrop throughout the
2010/11 financial year, this augurs well for the future. The
reduction in revenue in comparison to the previous year should be
viewed in the context of the unusual trading conditions in some of
Manroy's overseas markets. In particular, the "Arab Spring" brought
considerable and well documented unrest to parts of North Africa
and the Middle East. Its effect has been to slow the business
process as international and regional attention has understandably
been focussed on addressing the unrest in a co-ordinated and
constructive manner. Several large orders have been on hold for
some time, although we expect to secure these contracts together
with the necessary UK Government export licences over the course of
the current financial year. It is also important to highlight that
the Group has not lost any business in this region as a consequence
of the unrest.
In addition, the Group has never undertaken arms sales to any
embargoed countries and prides itself in being a key supplier to
the UK MoD for over 26 years. Manroy adheres strictly to UK
legislation concerning the sale of armaments and weapons to foreign
countries and governments and where the Group sells its products
overseas, such sales are undertaken in strict adherence to UK
Government export regulations and approvals, and are only
undertaken after all appropriate UK Government licences have been
granted.
The corporate activity already referred to was also aimed at
strengthening the Board and senior management team, and secured a
number of new contract wins. We have also increased distributable
reserves by GBP12 million following our capital reconstruction in
September 2011, with a further GBP1.4 million being allocated to
merger reserve.
As part of Manroy's growth plans we recognised the importance of
expanding the Board and the senior management team. In addition to
Glyn Bottomley and Paul Carter being appointed Chief Executive and
Finance Director respectively on completion of the acquisition of
Manroy Systems in December 2010, two non-executives - Gerry Clark
and Brian O'Donnell - joined the Board in February 2011. We are
pleased to have their additional expertise available to the Group.
Further key senior operational directors have also been appointed
demonstrating the Company's commitment to its ongoing
development.
In addition to the GBP6.0 million share placing in December
2010, we issued 2.1m shares in August 2011 to acquire a 49%
interest in Manroy USA LLC ("MUSA") and raised a further GBP3.0
million to fund our 49% share of the acquisition by MUSA of the
assets of Sabre Defence Industries. The importance of the MUSA
acquisition should not be under estimated as it gives the Group a
direct presence in the world's largest defence market.
Sabre was previously a direct competitor of MUSA. It
manufactured the M2 HMG, Quick Change Barrel kits and M2 parts and
had production capability for a range of M4, M5 and M16 rifles. In
addition there were $10.2 million (GBP6.3 million) of outstanding
US Department of Defense contracts within Sabre which are being
novated to MUSA. The increased business that will arise from the
novation together with forecast business volumes required a larger
production facility which MUSA completed through the acquisition of
new freehold premises in Spindale, North Carolina. Due to the
highly complex regulations associated with the MUSA business this
has necessitated a new application process for these novations
which is expected to complete in the first quarter of 2012 with the
commercial benefits starting to accrue in the current financial
year.
The other key acquisition completed during the year was the
business and assets of AEI, a UK based designer and producer of
weapon mounting systems, for an initial cash payment of GBP250,000,
together with a two year earn out to be paid from the profits
earned by the AEI business. This was a synergistic acquisition as
Manroy and AEI have a common customer base and have regularly
worked together to provide customers with complete solutions. AEI
also brought a highly sophisticated design capability to the Group,
which is already enabling Manroy to create tailor-made products for
certain customers at an enhanced profit margin.
While it has been an extremely active period corporately, I am
also pleased to report that the underlying business has also made
significant progress. The MoD continues to be Manroy's leading
customer but our reliance on it is lessening as new markets and
customers are being opened up by the Group. Already, revenue from
the MoD has been reduced from 93% of total orders in 2010 to 65%,
reflecting our broader customer base.
Clearly the strategically important acquisition of MUSA will
play a large part in our ability to access the US market which is
the world's largest defence market. In addition to this, the
Group's increased product range, which now includes the 7.62mm GPMG
and weapons solutions through AEI, is increasingly attractive to a
wider customer market.
During the period under review we secured three significant MoD
contracts, including a five year GBP4.1 million blank ammunition
contract which we believe will lead to an expanded role in this
area of supply. The other two contracts were for a GBP1.6 million
spare parts order and a three year technical support programme. Our
business relations with the MoD are extremely good and we are in
continual dialogue with key procurement personnel which enable us
to work with the Ministry to ensure that future contracts continue
be sourced and fulfilled on budget.
Not only has the year under review been transformational for
Manroy it has also enabled the Group to develop and expand both its
product range and its customer base. As with any company embarking
on such expansion, there are some growing pains as certain elements
of the business take longer to commence full production than
planned, and also reflect the current market conditions and
prevailing political climate, both of which can affect the growth
of our business. Nevertheless, the Board is confident of the future
prospects of the Group.
I would also like to take this opportunity to thank all staff
across the Group for their contribution to a very busy and
rewarding year. We have the team in place to take the business
forwards and this puts the Group in a strong position as we
continue to expand its sphere of operations.
The Group has come a long way in a very short time and the Board
is confident that it will achieve its objective of becoming a
highly regarded defence contractor in its specialised fields. The
Board is firmly of the view that we have all the building blocks in
place to further develop and grow the business both internationally
and in the domestic market. While the current economic and
political climate makes us cautious, we are optimistic that, over
the next two years and thereafter, Manroy will continue to expand
both here and abroad.
Andrew Blurton
Chairman
2 February 2012
Chief Executive's Operating Review
Introduction
I am pleased to report on what has been a very eventful and
important year for Manroy. Our AIM flotation in December 2010
stands out as the key event during the last 12 months. Additionally
there have been a number of other significant developments
including the acquisition of Manroy Systems, the purchase of the
business and assets of AEI and, shortly before the year end,
completion of our US acquisition and its proposed re-location into
an expanded 105,000 sq ft property in Spindale, North Carolina.
At the time of the flotation we set out our intention to expand
the business and enhance the substantial opportunities that existed
as a result of our 26 year relationship with the UK MoD. Total new
orders from the MoD during the 2010/11 financial year of GBP6.5
million and the acquisitions of AEI and 49% of Manroy USA ("MUSA")
during this period, demonstrate the success of our strategy and
commitment to making the most of the AIM quote.
As a result of this activity, the foundations are in place for
significant potential expansion. There is also a greatly increased
opportunity to expand our product portfolio and broaden our
geographic reach. All these factors have enhanced the financial
standing of the Group whilst at the same time reducing the Group's
dependence on the UK MoD as its principal customer.
Review of operations
Whilst the acquisitions of AEI and MUSA have significantly
enhanced Manroy's future prospects, the original business of
manufacturing HMGs is set to continue in 2012 with a number of very
positive prospects expected to materialise during the first half of
the current financial year. Our relationship with the MoD remains
very strong, generating GBP6.6 million of revenue this financial
year, which equates to 61% of total revenue for the year ended 30
September 2011. This compares with 93% of revenue in 2010 and is in
line with our forecasts of easing dependency on the MoD.
The work we have undertaken over the last few years to develop
our export market is also beginning to reap real benefits. We
anticipate that in 2012 exports will account for 60% of revenue,
well up on the 2010-11 financial year. Manroy only deals with UK
Government approved countries and we are currently awaiting some
major bids to convert into confirmed orders for the current
financial year. However we continue to depend on UK Government
licence approvals which, of course, affect the timing of actual
sales. While certain areas have been affected by unrest and
economic austerity, new regions continue to be developed as part of
the ongoing plan to improve revenue generation for the Group.
The MoD, nevertheless, continues to be an important customer,
with Manroy contracted to provide ongoing support and spares
contracts for the HMG and further business with our HMG Blank
Firing System and ammunition. Additionally there are a number of
significant new tenders in our business area that will be released
by the MoD during the current year for which we will be tendering
that will potentially take us into new product areas.
While certain areas have been affected by unrest and economic
austerity, new regions continue to be developed as part of the
ongoing plan to improve revenue generation for the Group. We have
secured a number of important contract wins during 2011, including,
most recently, a GBP1.6 million agreement to supply the MoD with
spare parts for the HMG which commenced delivery towards the end of
the 2011 financial year and is continuing during 2012. The
extension of an existing contract to supply the MoD with blank
ammunition which is worth GBP4.1 million over five years commences
delivery in spring 2012. In addition to the MoD we have also
supplied products to a number of new export customers, including
Turkey, Poland, Belgium, Netherlands, Malaysia and Ireland.
Having recognised the potential worldwide market for the GPMG,
Manroy undertook the significant task of establishing this gun as a
Manroy product alongside the HMG. This included marketing to both
MoD and export customers, as well as establishing a technical team
to produce a product build standard and production method.
Substantial time and effort has been invested in this project as
part of our commitment to increasing our product range and thereby
expanding the capabilities of the Group. We see sales of the GPMG
as being an area of significant growth and we have undertaken
successful customer trials and tests during 2011, which have
resulted in a number of valuable tenders being submitted to export
customers. As a result of this business development work in the
export market we expect to be in serious production of the GPMG
during summer 2012. Consequently, we anticipate producing the GPMG
alongside the HMG and the work to undertake this is currently
underway.
In April 2011, Manroy acquired AEI which is a UK-based designer
and producer of weapon support systems, including turrets, gun
mounts, bespoke tow bars and systems for armoured vehicles. The
integration of the business and assets of AEI is now complete.
Importantly, AEI also provides Manroy with a precision
engineering design capability. The rationale for the acquisition
was further underpinned through approximately GBP2.0 million of
orders received towards the end of the 2011 financial year. The
addition of the AEI product range to Manroy's existing product
range allows Manroy to offer a complete system solution to
customers, which can include mountings and turrets in addition to
weapons. This valuable revenue stream is a central part of the
long-term vision for Manroy and is expected to make an important
and increasing contribution to growth over the coming years.
The other major corporate acquisition during the year was the
49% interest in MUSA which we completed in August 2011. The
acquisition became even more attractive following MUSA's purchase
of the business and assets of Sabre Defence Industries LLC
("Sabre") in March 2011 for approximately $6.0 million (GBP3.7
million). This purchase has advanced MUSA's development
significantly as it enhances the Group's penetration of the HMG
market in the US. MUSA now offers a significantly increased product
range which includes M2 receivers and bolts, M10 chargers, M2
barrel extensions, 7.62 minigun barrels, M2HB and QCB barrels, M16
A3 and A4 weapons and M4 weapons. Sabre derived most of its income
from the US DoD and MUSA now has the opportunity to further build
on this important relationship in the world's largest defence
market.
As we outlined at the time of our flotation in December 2010,
Manroy has an existing manufacturing agreement with General
Dynamics for the supply of certain parts for the HMG in the US.
This agreement has been further strengthened through the MUSA
acquisition and places the Group in a firm position to supply
General Dynamics, the main supplier of HMGs to the US DoD, which we
believe is planning to order approximately 35,000 new HMGs over the
next ten years.
The past six months have seen a re-structuring and streamlining
of MUSA to bring it in line with the Group's UK operations. In June
2011 MUSA was granted Small Business Accreditation (SBA) status by
the US Government. This is important as it allows MUSA to bid for
contracts that are 'set aside' for small businesses without
competition from large companies.
MUSA is also in the process of relocating to a Historically
Underutilised Business Zone (HUBZone) in Spindale North Carolina,
following information obtained from the US management team that
Scottsboro would be losing its beneficial HUBZone status. This
process will be completed during the second quarter of the current
financial year, thus underpinning operations in subsequent
financial periods. HUBZone status gives MUSA advantageous pricing
conditions when bidding for US Government contracts against
companies that are not located within a HUBZone. HUBZones are
geographic areas within the USA that have been identified by the US
Government as areas that require economic support, therefore there
are real commercial advantages offered by the US Government to
companies that are located therein.
MUSA is currently engaged in novating $10 million (GBP6.3
million) of contracts from the US DoD which were originally placed
with Sabre, with fulfilment planned to occur during 2012. As part
of the novation process, the related manufacturing machinery and
equipment has already been transferred from MUSA's and Sabre's
previous premises in Scottsboro and Nashville to the new facility
in Spindale, North Carolina, thereby permitting commencement of
production of initial product runs which can then be tested and
confirmed as part of the novation process.
With the high volume of corporate acquisitions in 2011 we
recognised the need to enhance the structure of the business to
meet our anticipated growth targets. As a result, we have
significantly restructured the organisation of the Group with the
introduction of new operational director roles in our trading
subsidiary (Sales, Technical & Operational) giving these
operational directors direct responsibilities for specific areas of
the business.
Strategy and outlook
Our financial year that ended on 30 September 2011 has been a
transformational time for Manroy. A considered programme of
expansion has been executed across the business creating a platform
for future growth. The Board recognises the significance of
ensuring that these important elements of expansion are integrated
fully into the Group and therefore there continues to be an
important period of consolidation following the three corporate
acquisitions and MUSA's move to its new premises.
The expansion of the AIM listed Group has significantly
increased profile and helped to attract new customers who
appreciate the additional transparency and status of a London
quoted company.
Whilst the MoD continues to be a key customer of the Group, and
with whom we continue to maintain an excellent relationship, we are
continuing to diversify the revenue stream through an expanded
product range, accessing new markets and deriving enhanced benefit
from our US operations.
The hard work of the past 12 months has underpinned our
profitable, cash generative business with a strong forward order
book. The management team is committed to the creation of a
scalable, precision engineering business that uses established
partners to underpin its investment proposition. Our first period
as a quoted company has been very encouraging and we look to the
future with confidence.
Glyn Bottomley
Chief Executive
2 February 2012
Financial Review
Key performance indicators monitored by the Board
The Board uses a number of key performance indicators ('KPIs')
to monitor Group performance against budgets and forecasts as well
as to measure progress against the Board's strategic objectives.
These are summarised below.
Comparative numbers in KPI analysis
With the quantity of corporate acquisitions during the 2010/11
financial year, and noting that the operations of the Group in the
previous year was that of a cash shell, the following financial
analysis comments on the comparatives of the Manroy Systems
sub-group. For completeness, the consolidated Group numbers for
Manroy Plc for the current year have also been shown.
Manroy Plc Manroy Systems
consolidated Ltd
------------------------- --------------------------------- -------------- ------------------
KPI Purpose of KPI 2011 2011 2010
------------------------- --------------------------------- -------------- -------- --------
GBP'000 GBP'000 GBP,000
------------------------- --------------------------------- -------------- -------- --------
A principal earnings driver
Revenue for the Group. 7,681 10,776 12,308
------------------------- --------------------------------- -------------- -------- --------
This is used to measure
the growth in expanding
Revenue outside our revenue over and above
the UK existing UK activity. 3,313 3,814 884
------------------------- --------------------------------- -------------- -------- --------
EBITDA affects cash and
EBITDA profitability. 800 2,900 3,233
------------------------- --------------------------------- -------------- -------- --------
Cash generation and investment
Cash (used / is an important indicator
invested) / generation of financial strength (576) (416) 404
------------------------- --------------------------------- -------------- -------- --------
% % %
------------------------- --------------------------------- -------------- -------- --------
To ensure revenue margin
Gross profit increase is matched to profits
margin generated. 37 36 33
------------------------- --------------------------------- -------------- -------- --------
To maintain and where possible
Net profit margin improve profit levels. 26 18 16
------------------------- --------------------------------- -------------- -------- --------
Revenue and market share
For the year ended September 2011 Manroy Systems recorded
revenue of GBP10.8 million (GBP12.3 million: 2010). The Board's
strategy is to increase the Group's market share in the export
market through an increased customer and product base.
The challenges posed in increasing export revenue are the
complexity of managing export regulations, variations in tender
processes and cultural factors across varied regions. The political
unrest across Asia and North Africa and the global economic climate
adversely affected sales generation throughout the year, reducing
revenue by 12% from the levels achieved in 2010.
The Group did not supply to countries where major levels of
unrest occurred in 2011. However, the effect of this unrest delayed
the grant of export licenses for other countries across these
regions. Regulation of licenses for the export of weapons is a
complicated and controlling item in the delivery of sales.
Manroy was highly successful with all major competitive export
tenders it handled during the year and the Board continues to
manage revenues performance with vigilance. While certain areas
have been affected by unrest and economic austerity, new regions
continue to be developed as part of the ongoing plan to improve
revenue generation for the Group.
Analysis of revenue generation during 2011
Manroy Plc Manroy Systems Limited
consolidated
------------------------------
Region 2011 % 2011 % 2010 %
GBP'000 GBP'000 GBP'000
United Kingdom 4,368 57 6,962 65 11,424 93
Europe 1,405 18 1,866 17 462 4
North America 43 1 83 1 177 1
South America - - - - 244 2
Asia and Australasia 1,865 24 1,865 17 1 -
7,681 100 10,776 100 12,308 100
====================== ============== ==== ======== ==== ======== ====
Manroy has enjoyed success in the UK market in recent years,
with a significant majority of its revenue being generated from the
UK MoD. Over the last three years, Manroy has increased revenues
activities in expanding the customer base for the export market.
2011 provides evidence that this strategy is successful with
revenues to export markets increasing from 7% of total revenue in
2010 to 35% on 2011. Revenue for 2012 is expected to continue along
this trend, further reducing the risks of customer
concentration.
During the year ended 30 September 2011, the increase in export
orders has originated from Europe, Asia and Australasia, with these
regions producing 34% of total revenue in 2011, up from 4% of total
revenue in 2010.
Maintaining gross profit margins at 33%
Gross margins increased to 36% in the year (2010: 33%)
reflecting the Board's tight control over costs, pricing
methodology and increased royalty income generated in the year.
Overheads and acquisition costs in Income Statement
Manroy Manroy Systems Limited
Plc consolidated
2011 2011 2010
GBP'000 GBP'000
Administrative expenses (1,188) (1,063) (959)
Corporate acquisition costs (1,097) (149) -
----------------------------- ------------------ ------------ -----------
Total (2,285) (1,212) (959)
============================= ================== ============ ===========
Administrative overheads increased by 11% in the year,
reflecting the increase in headcount following the acquisition of
AEI and other key appointments throughout the year.
During the year the Group completed three corporate
acquisitions, Manroy Systems in December 2010, AEI in April 2011
and Manroy USA in August 2011. Combined with these was the
Admission to dealing of the Company's shares on AIM and two share
placings during the year.
Results for the year ended 30 September 2011
Manroy Manroy Systems
Plc consolidated
2011 2011 2010
GBP'000 GBP'000 GBP'000
Trade revenues 7,681 10,776 12,308
Royalties and other income 289 267 -
--------------------------------------- ------------------ --------- ---------
Total revenue 7,970 11,043 12,308
Gross margin 2,971 3,982 4,063
37% 36% 33%
Profit before tax and non-recurring
acquisition costs 3,318 2,820 2,804
Profit before tax after non-recurring
acquisition costs 2,221 2,671 2,804
Profit after tax 2,049 2,011 2,018
======================================= ================== ========= =========
Net profit margin (after tax) 26% 18% 16%
Earnings per share
The earnings per share figures have been calculated as
follows:-
Basic earnings per share
Year ended Year ended
30 September 30 September
2011 2010
Profit/(loss) per Consolidated Income
Statement GBP'000 2,049 (274)
Weighted average number of shares in
issue during the year '000 11,389 2,907
Earnings/(loss) per share Pence 18.0 (9.4)
--------------------------------------- --------- -------------- --------------
Diluted earnings per share Year ended Year ended
30 September 30 September
2011 2010
Profit/(loss) per Consolidated Income
Statement GBP'000 2,049 (274)
Diluted weighted average number of
shares in issue during year '000 11,711 3,145
Diluted earnings (loss) per share Pence 17.5 (8.7)
--------------------------------------- --------- -------------- --------------
Dividends
An interim dividend of 1p per share was paid on 15 July 2011. In
light of the positive results for the year ended 30 September 2011,
the Board has also proposed a final dividend of 1p per share
payable to shareholders on the register on 10 February 2012,
excluding those shares issued in August 2011 which did not rank for
this dividend. This is subject to approval by Shareholders at the
Annual General Meeting to be held on 4 April 2012 and thereafter
would be payable on 11 April 2012.
Corporate acquisitions
Manroy Systems
In December 2010, the Company acquired the entire issued share
capital of Manroy Systems for approximately GBP3.1 million. This
was satisfied by the issue of 2,081,632 ordinary shares at 75 pence
per share to Glyn Bottomley, in respect of his holding of 51 per
cent. of the issued share capital of Manroy Systems, and the
payment in cash of a total of GBP1.5 million to Madeleine and Roy
Swainbank in respect of their joint holding of 49 per cent. of the
issued share capital of Manroy Systems. In addition, the Company
repaid the deferred consideration and shareholder loans (plus
accrued interest) due to Madeleine and Roy Swainbank amounting, in
aggregate, to approximately GBP4.7 million which was satisfied from
the net proceeds of a new share issue of 8,000,000 ordinary shares
at 75 pence per share, issued on 22 and 23 December 2010.
AEI Land Systems (AEI)
Integration of the business and assets of AEI was completed
during the second half of this financial year. Following its
acquisition, AEI has received MoD and export orders with a value of
over GBP2 million. This includes a GBP0.6 million MoD order for the
further supply of lightweight tow bars which were delivered during
the first quarter of the 2011/12 financial year, with an option by
the MoD for further deliveries over a three year period.
In addition to generating a valuable order pipeline, this
acquisition also brought an improved development and design
capability to the Group, which is expected by the Board to enhance
the Group's product offering.
Manroy USA LLC
Manroy USA LLC is 49% owned by the Group and is accounted for as
an Associated Company. Accordingly, Manroy USA's results are
included in the Consolidated Income Statement as the Group's 49%
share of its profit after tax. For the short period of the Group's
ownership between completion on 23 August and the 30 September 2011
year end, Manroy USA recorded a loss attributable to the Group's
interest of GBP115,000.
Following Manroy USA's acquisition of the assets of Sabre, MUSA
also began the complicated task of novating $10 million (GBP6.3
million) in outstanding US DoD contracts from Sabre to MUSA. It is
a critical success factor for Manroy USA to be in the most
strategically advantageous position to win the larger contract
income from the US defence market. The physical location,
nationality of ownership, size and location of workforce are all
important in achieving this.
In the US, the Historically Underutilized Business Zones
("HUBZone") Empowerment Contracting programme was enacted to
encourage economic development in HUBZones. This is in line with
the efforts of both the Federal Government and Congress in the US
to promote economic development and employment growth in distressed
areas by providing access to more federal contracting
opportunities. The US Small Business Administration (the "SBA")
regulates and implements the HUBZone programme. During the second
half of the 2011 calendar year, MUSA applied for, and after a
lengthy and successful process, obtained full SBA status.
The benefits for HUBZone certified companies include:
-- Competitive and sole source contracting.
-- 10% price evaluation preference in full and open contract
competitions, as well as subcontracting opportunities. This
essentially results in a HUBZone contractor's quoted price being
automatically discounted by 10% against those from businesses
without such status for the purposes of awarding contracts, though
the full price is paid on sale.
The US Federal Government has a goal of awarding 3% in value of
all federal prime contracts to HUBZone certified small business
concerns.
The table below demonstrates the qualification criteria for the
programme and the achievements of MUSA.
HUBZone qualification criteria Manroy USA Qualification
----------------------------------------------- ----------------- --------------
The company must be a small business by SBA Awarded June P
standards. 2011
----------------------------------------------- ----------------- --------------
The company must be owned and controlled 51% owned P
at least 51% by U.S. citizens, or a community by US citizen
development corporation, an agricultural
cooperative, or an Indian tribe.
----------------------------------------------- ----------------- --------------
The company's principal office must be located Spindale, P
within a HUBZone. North Carolina
----------------------------------------------- ----------------- --------------
At least 35% of the company's employees must Main management P
reside in a HUBZone. team relocating
and hiring
in HUBZone
area
----------------------------------------------- ----------------- --------------
Manroy USA is now registered as a small business with the SBA
and is working towards becoming a HUBZone certified business.
Manroy USA was originally located in Scottsboro, Alabama but during
the year the management team was advised that this area was at risk
of losing its HUBZone certified status; in addition Nashville (the
then location of Sabre) was not in a HUBZone. The Board also
considered that the facilities held by Manroy USA in these regions
were not of sufficient size and were too distant from each other to
be long term beneficial assets to match MUSA's plans for the
future. It was also not possible to fulfil the $10 million (GBP6.3
million) of DoD contracts from either of these facilities on a
permanent basis, and therefore relocation to a new long term base
of manufacture was required.
With the decision to move production facilities to Spindale it
was also decided to sell MUSA's original facility in Scottsboro to
contribute towards the capital expenditure required for the move
once a sale had been concluded. At 30 September 2011, the Group's
50% interest in this property is held in current assets at
GBP144,000 as a property held for sale.
Strategy of Manroy USA inclusive of Sabre
The acquisition of the business and assets of Sabre also
included an extensive barrel manufacturing capability that can be
used by the Group to continue supplying existing customers of Sabre
as well as those of Manroy. This provides excellent opportunities
to utilise existing plant and machinery within the Group to secure
continuity of supply and quality for our core customers without the
reliance of external contractors.
The Directors believe that there are only two qualified barrel
manufacturers in the United States for the supply of the M2 HMG to
the US DoD. The first is General Dynamics, with whom Manroy USA
already has a manufacturing agreement, and the second is Sabre,
whose business is now part of Manroy USA. The board of Manroy USA
believes that the US DoD has a requirement for approximately 10,000
M2 HMG barrels each year, of which approximately half were supplied
by Sabre prior to July 2010.
The purchase also included the opportunity to complete and
deliver $10.2 million (GBP6.3 million) of contracts from the US DoD
previously awarded to Sabre, subject to novation of these contracts
to MUSA. The novation of these contracts is being undertaken as
part of the HUBZone and contract accreditation process, together
with the move to Spindale, North Carolina, referred to above.
Whilst the MUSA management team remain confident of a successful
novation of the DoD contracts, this requires first article
inspection of the new premises and detailed operational and
manufacturing checks by other US Government agencies before
novation can be completed and manufacture for these contracts can
commence.
This strategic move, while delaying novation of the DoD
contracts, has produced a greatly improved facility with benefits
of full HUBZone status that the Board is confident will underpin
the future success of Manroy USA in its areas of activity.
Intangible assets
The Group is required to value intangible assets acquired in
corporate acquisitions and to amortise them over their useful
economic lives. The three types of asset acquired were:
Manroy Systems
(i) Trademarks valued at GBP548,000, amortised over six years
(ii) Customer relationships valued at GBP6,871,000, amortised over 10 years
(iii) Developed technology / know how valued at GBP1,684,000, amortised over six years.
Manroy USA
(i) Patents valued at $171,000 (GBP105,000), amortised over 15 years
(ii) Customer relationships valued at $7,411,000 (GBP4,583,000) amortised over 15 years.
Intangible assets in the US are being amortised over a longer
period than those in the UK Group, which reflects the expectation
of longer future economic benefits to be generated from these
assets.
These valuations together with the tangible assets and
liabilities of the businesses acquired resulted in negative
goodwill of GBP2,460,000 arising on the two acquisitions, which has
been credited to the Income Statement for the year ended 30
September 2011. This arose as follows:
2011
GBP'000
Negative goodwill arising on acquisition of 100% of Manroy
Systems 1,609
Negative goodwill arising on acquisition of 49% interest
in Manroy USA 851
------------------------------------------------------------ ---------
Credit to Income Statement 2,460
============================================================ =========
Further detail on these acquisitions and the negative goodwill
arising is included in notes 6.1 and 8.1 to the preliminary
announcement.
Summary
The Group has achieved many goals during the year ended 30
September 2011. We completed three corporate acquisitions, the
Company's shares have been admitted to trading on AIM, the
Company's distributable reserves have been increased by GBP12
million by restructuring our share capital and we have enhanced our
available banking facilities. In parallel to this, the Board has
maintained Manroy's underlying profitable, cash generative
business.
These results are an excellent outcome in a year affected by a
deteriorating economic climate and political unrest in key markets
for our business. Our first period as a quoted company has been
very encouraging and we look to the future with confidence as the
hard work of the past 12 months provides a strong foundation for
our continued financial growth.
P. J. Carter
Finance Director
2 February 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2011
Notes Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Revenue
Trade revenues 2 7,681 -
Royalties and other income 289 -
---------------------------------------- ------- -------------- --------------
Total revenue 7,970 -
Cost of operations (4,999) -
Gross profit 2,971 -
Administrative expenses (1,188) (153)
Corporate acquisition costs 3 (1,097) (130)
Negative goodwill 2,460 -
Amortisation of intangible assets (794) -
Results from operating activities 2,352 (283)
Finance income 15 9
Finance expenses (65) -
Movement in fair value of interest 34 -
rate swaps
Profit / (loss) before income from
Associated Company 2,336 (274)
Share of results of Associated Company 8.3 (115) -
Profit / (loss) before tax 2,221 (274)
Tax 4 (172) -
Profit after tax 2,049 (274)
Exchange movement on translation of 158 -
investment in Associated Company
---------------------------------------- ------- -------------- --------------
Total comprehensive income for the
period 2,207 (274)
======================================== ======= ============== ==============
Earnings per share
Basic 18.0p (9.4p)
Diluted 17.5p (8.7p)
========= ====== =======
CONSOLIDATED STATEMENT OF FINANCIAL 30 September 30 September
POSITION 2011 2010
REGISTERED NUMBER: 2451413 Notes
GBP'000 GBP'000
------------------------------------- ------ ------------- -------------
Non-current assets
Goodwill 7.1 303 -
Intangible assets 9 8,499 -
Property, plant and equipment 10 401 -
Interest in Associated Company 8.3 4,630 -
------------------------------------- ------ ------------- -------------
13,833 -
------------------------------------- ------ ------------- -------------
Current assets
Inventories 2,097 -
Trade and other receivables 5,133 480
Asset held for sale 144 -
Cash and cash equivalents 847 1,423
------------------------------------- ------ ------------- -------------
8,221 1,903
-------------------------------------
Total assets 22,054 1,903
------------------------------------- ------ ------------- -------------
Current liabilities
Borrowings 11 (700) -
Obligations under finance leases (24) -
Current tax liability (172) -
Trade and other payables (2,541) (419)
(3,437) (419)
------------------------------------- ------ ------------- -------------
Non-current liabilities
Borrowings 11 (699) -
Obligations under finance leases (18) -
Deferred tax 12 (2,283) -
------------------------------------- ------ ------------- -------------
(3,000) -
------------------------------------- ------ ------------- -------------
Total liabilities (6,437) (419)
------------------------------------- ------ ------------- -------------
Net assets 15,617 1,484
===================================== ====== ============= =============
Equity
Share capital 910 2,179
Share premium account 295 331
Other reserves 1,674 -
Retained earnings 12,738 (1,026)
Total equity 15,617 1,484
===================================== ====== ============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2011
Share Share Capital Merger Special Exchange Retained Total
capital premium redemption reserve reserve movement earnings equity
account account reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- ----------- -------- -------- --------- --------- -------
At 30 September 2009 2,179 331 - - - - (752) 1,758
Total comprehensive income for
the year - - - - - - (274) (274)
---------------------------------- -------- -------- ----------- -------- -------- --------- --------- -------
At 30 September 2010 2,179 331 - - - - (1,026) 1,484
Capital reorganisation (2,034) - 2,034 - - - -
New shares issued in the year 765 10,434 - 1,457 - - - 12,656
Share issue costs - (600) - - - - - (600)
Cancellation of share premium
account and capital redemption
reserve - (9,870) (2,034) - 59 - 11,845 -
Exchange movement on translation
of foreign operations - - - 158 - 158
Profit after tax for the year
ended 30 September 2011 - - - - - - 2,049 2,049
Dividends paid in the year (note
5) - - - - - - (130) (130)
---------------------------------- -------- -------- ----------- -------- -------- --------- --------- -------
At 30 September 2011 910 295 - 1,457* 59* 158* 12,738 15,617
================================== ======== ======== =========== ======== ======== ========= ========= =======
* = Disclosed as Other reserves totalling GBP1,674,000 in the
consolidated statement of financial position at 30 September
2011
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 September 2011
Year ended Year ended
30 September 30 September
2011 2010
Note GBP'000 GBP'000
------------------------------------------ ------ -------------- --------------
Profit / (loss) for the year 2,049 (274)
Adjustments:
Finance expense 65 (9)
Finance income (15) -
Tax expense 172 -
Negative goodwill (2,460) -
Amortisation of intangible assets 794 -
Share of results of Associated 115 -
Company
Unrecognised exchange movements (2) -
Movement in fair value of interest (34) -
rate swaps
Depreciation of property, plant 113 -
and equipment
------------------------------------------ ------ -------------- --------------
Cash flows from operations before
changes in
working capital 797 (283)
(Increase) / Decrease in inventory (441) -
Decrease in trade and other receivables (411) 1
(Decrease) / increase in trade
and other payables (750) 99
-------------------------------------------------- -------------- --------------
Cash generated from/(used in) operations (805) (183)
Interest received 15 9
Interest paid (65) -
Tax paid (336) (7)
-------------------------------------------------- -------------- --------------
Net cash used in operating activities (1,191) (181)
-------------------------------------------------- -------------- --------------
Cashflows from investing activities
Investment in development of products (190) -
Acquisition of Manroy Systems Limited (1,500) -
Acquisition of business and assets (250) -
of AEI
Acquisition of 49% interest in (1,670) -
Manroy USA
Loans made to Manroy USA (816) -
Cash acquired on purchase of Manroy 1,971 -
Systems and AEI
Purchase of property, plant and (224) -
equipment
------------------------------------------ ------ -------------- --------------
Net cash used in investing activities (2,679) -
------------------------------------------ ------ -------------- --------------
Cashflows from financing activities
Issue of new ordinary shares 9,000 -
Costs incurred on issue of shares (602) (184)
Purchase of own shares - (13)
Repayment of finance leases (35) -
Dividends paid (130) -
Repayments of bank loans (223) -
Repayment of shareholder and other (4,716) -
loans
Net cash generated from/(used in)
financing activities 3,294 (197)
-------------------------------------------------- -------------- --------------
Net cash and cash equivalents used
in year (576) (378)
Opening cash and cash equivalents 1,423 1,801
Closing cash and cash equivalents 847 1,423
-------------------------------------------------- -------------- --------------
Notes to the preliminary announcement
1. Basis of preparation
Manroy Plc is a Company incorporated and domiciled in the United
Kingdom. The address of the Company's registered office is 6
Lakeside Business Park, Swan Lane, Sandhurst, Berkshire GU47 9DN.
The preliminary announcement of the Company for the year ended 30
September 2011 comprise the Company and the subsidiaries (together
referred to as the "Group"). The preliminary announcement for the
year ended 30 September 2011 has been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("Adopted IFRS").
This announcement has been prepared on the basis of the
accounting policies adopted by Manroy Plc for the year ended 30
September 2011.These policies have been applied consistently in all
material respects in the preparation of these results unless
otherwise stated.
This preliminary announcement has been prepared on a going
concern basis and on a historical cost basis as modified by the
valuation of certain assets and liabilities. This preliminary
announcement is presented in UK Sterling, which is the Company's
functional currency. All financial information has been rounded to
the nearest thousand pounds.
2. Segmental information
The information provided to the Chief Executive, as the
principal decision maker of the Board, for the purpose of resource
allocation and assessment of segment performance undertaken by the
Group is the supply of guns and spares. There is only one overseas
asset being the Group's net interest in its Associated Company
Manroy USA. The Group's ongoing strategy is to increase the revenue
penetration into the export market which is demonstrated in the
below table:
Region Year ended 30 % Year ended %
September 2011 30 September
GBP'000 2010
GBP'000
United Kingdom 4,368 57 11,424 93
Europe 1,405 18 462 4
North America 43 1 177 1
South America - - 244 2
Asia and Australasia 1,865 24 1 -
7,681 100 12,308 100
====================== ================ ==== ============== ====
During the year ended 30 September 2011 revenue of GBP6,622,000
was made to the Group's largest customer (2010: GBP11,220,000).
The comparative is for the full year of Manroy Systems Ltd for
the year ended 30 September 2010.
3. Corporate acquisition costs
Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Cost incurred in acquiring Manroy
Systems Limited (632) (130)
Cost incurred in acquiring business (149) -
and assets of AEI Land Systems Limited
Cost incurred acquiring 49% interest (316) -
in Manroy USA LLC
----------------------------------------- -------------- --------------
(1,097) (130)
========================================= ============== ==============
.
4. Tax charge
Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Current tax charge (383) -
Deferred tax credit (note 12) 211 -
------------------------------ -------------- --------------
Tax expense for the year (172) -
============================== ============== ==============
Taxation has been calculated by applying the standard corporate
tax rates ruling in the operating territories of the Group. The
difference between the total current tax shown above and the amount
calculated by applying the standard rates of corporation tax to the
profit before tax is as follows:
Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Profit / (loss) before tax 2,221 (274)
============================================== ============== ==============
Tax on profit at an average rate of
27% (600) -
Factors affecting charge:-
Negative goodwill on Manroy Systems
not taxable 435 -
Capital allowances in excess of depreciation 3 -
Income from US subsidiary 133 -
Allowances for non-trade loan relationships 45
Amortisation of intangible assets (214) -
Losses carried forward (20) -
Acquisition costs and other expenditure (165) -
disallowed for taxation purposes
Current tax expense for the year (383) -
============================================== ============== ==============
5. Dividends
An interim dividend of 1p per share, amounting to GBP130,000,
was paid on 15 July 2011. In light of the positive results for the
year ended 30 September 2011, the Board has also proposed a final
dividend of 1p per share, payable to shareholders on the register
on 10 February 2012, excluding those shares issued in August 2011
which did not rank for this dividend. The final dividend is subject
to approval by Shareholders at the Annual General Meeting to be
held on 4 April 2012 and has therefore not been included as a
liability in this preliminary announcement. After approval, the
final dividend is expected to be paid on 11 April 2012.
Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Interim dividend paid for the year (130) -
ended 30 September 2011 of 1p per
share
Proposed final dividend for the year (130) -
ended 30 September 2011 of 1p per
share
------------------------------------- -------------- --------------
(260) -
===================================== ============== ==============
6. Acquisition of Manroy Systems
6.1 Negative goodwill arising on acquisition of Manroy
Systems
On 23 December 2010, Manroy completed the acquisition of Manroy
Systems for GBP3,061,000. Negative goodwill arose on this
acquisition as follows:
Purchase price Year ended
30 September
2011
GBP'000
Cash paid in accordance with the terms
of acquisition agreement 1,500
2,081,632 ordinary shares issued at
75p per share 1,561
---------------------------------------- --------------
Cost of acquisition 3,061
Adjusted net assets of Manroy Systems
Limited on acquisition (note 6.2) (4,670)
Negative goodwill credited to Income
Statement (1,609)
======================================== ==============
The fair values of assets acquired from Manroy Systems at the
date of acquisition were formally reviewed at the year end which
has increased the negative goodwill reported in the half yearly
financial report by GBP258,000.
6.2 Net assets of Manroy Systems at acquisition
At acquisition
on 23 December
2010
GBP'000
--------------------------------------------------- ----------------
Non-current assets
Trademarks 548
Customer relationships 6,871
Developed technology / Know how 1,684
Property, plant and equipment 211
9,314
--------------------------------------------------- ----------------
Current assets
Inventories 1,546
Trade and other receivables 3,304
Cash and cash equivalents 1,874
--------------------------------------------------- ----------------
6,724
--------------------------------------------------- ----------------
Total assets 16,038
--------------------------------------------------- ----------------
Current liabilities
Bank loans (700)
Finance leases (43)
Derivative financial instruments (34)
Trade and other payables (2,544)
--------------------------------------------------- ----------------
(3,321)
--------------------------------------------------- ----------------
Non-current liabilities
Bank loans (922)
Finance leases (34)
Other payables (4,716)
Deferred tax (2,375)
(8,047)
Total liabilities (11,368)
--------------------------------------------------- ----------------
Net assets at acquisition 4,670
=================================================== ================
The net assets of Manroy Systems were adjusted on acquisition to
restate the goodwill figure of GBP6,538,000 into its component
parts of trademarks, customer relationships and developed
technology totalling GBP9,103,000. In relation to these intangible
assets, a deferred tax liability of GBP2,367,000 was also provided.
These combined elements had an effect of increasing net assets of
Manroy Systems at acquisition by GBP198,000.
6.3 Manroy Systems consolidated income statement
From date of acquisition on 23 December 2010 to 30 September
2011.
GBP'000
Revenue 7,944
Cost of sales (4,999)
Gross profit 2,945
Administrative expenses (734)
Corporate acquisition costs (149)
----------------------------------- --------
2,062
Results from operating activities
Finance income 13
Finance expense (65)
Profit before taxation 2,010
Taxation (379)
----------------------------------- --------
Profit for the period 1,631
=================================== ========
6.4 Manroy Systems Limited consolidated income statements
The below is the consolidated results for Manroy Systems Ltd and
its wholly owned subsidiary Manroy Engineering Ltd.
Year ended Year ended
30 September 30 September
2011 2010
GBP'000 GBP'000
Revenue 11,043 12,308
Cost of sales (7,061) (8,245)
Gross profit 3,982 4,063
Administrative expenses (1,064) (959)
Corporate acquisition costs (149) -
----------------------------------- -------------- --------------
Results from operating activities 2,769 3,104
Net finance expense (98) (300)
Profit before taxation 2,671 2,804
Taxation (660) (786)
----------------------------------- -------------- --------------
Profit for the year 2,011 2,018
=================================== ============== ==============
7. Acquisition of business and assets of AEI
7.1 Goodwill arising on acquisition of business and assets of AEI
The Group completed the acquisition of the business and assets
of AEI on 1 April 2011. Goodwill arose on this acquisition as
follows:
Year ended
30 September
2011
GBP'000
Cash paid on acquisition 250
Deferred royalty consideration 291
------------------------------------------------ ------
Total cost of acquisition 541
Less net fair value of net assets of
the business and assets of AEI at acquisition (238)
Carrying amount at 30 September 2011 303
================================================ ======
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units that are expected to
benefit from that business combination. The carrying amount of
goodwill had been allocated to Manroy Engineering Limited, the
Company's wholly owned subsidiary.
At 30 September 2011 the value in use of goodwill was determined
by discounting future cash flows from continuing use of the cash
generating unit. This is based on projected cash flows to 30
September 2012 and further projections to 30 September 2022 to
produce a 10 year cash flow model. A nil growth assumption has been
applied to cash flows from the end of year 3. A pre-tax discount
rate of 10 per cent. was applied to resultant cash flows to
determine value in use at 30 September 2011. The impairment review
at 30 September 2011 supported the value in use of the goodwill and
accordingly goodwill has been retained at a value of GBP303,000 in
this preliminary announcement.
Deferred consideration is payable on the acquisition of the
business and assets of AEI for two years from the date of
acquisition. This was calculated based on forecast revenues at the
time of acquisition, at the highest rate payable of 7 per cent. of
AEI related revenue and provided in this preliminary announcement.
If actual revenue generated matches forecast revenue then the full
deferred consideration will be covered by the provisions already
made. If revenues fall below the expected revenues then the
deferred consideration would be over provided and any residual
balance would be credited the income statement at the end of the
two year period. If the revenues exceed expectations then higher
profit levels would have been generated and the additional deferred
consideration in excess of the deferred consideration provided
would be charged to the income statement against the higher profit
levels as it arose.
7.2 AEI Income Statement
From date of acquisition on 1 April 2011 to 30 September
2011.
GBP'000
Revenue 440
Cost of sales (306)
Gross profit 134
Administrative expenses (162)
Results from operating activities (28)
Net finance expense -
Profit before taxation (28)
Taxation -
----------------------------------- --------
Loss for the period (28)
=================================== ========
8. Investment in Associated Company
In August 2011, the Group acquired a 49% interest in Manroy USA
through a newly formed US subsidiary, Manroy USA Holdings Inc.
8.1 Negative goodwill arising on acquisition of interest in
Associated Company
GBP'000 Year ended
30 September
2011
GBP'000
Consideration shares
Market value of 2,049,069 consideration
shares issued in August 2011 2,095
Repayment of loan from Caledonian
Heritable to MUSA to purchase business
and assets of Sabre 1,670
Total consideration for 49% holding
in Manroy USA 3,765
Less 49% Group share of net assets
of Associated Company at acquisition
(note 8.2) 4,586
Less 50% interest in MUSA property
in Alabama 139
-----------------
(4,725)
-------------------------------------------- ----------------- --------------
Negative goodwill arising on acquisition (960)
Less deferred tax liability on intangible
assets 119
-------------------------------------------- ----------------- --------------
Negative goodwill arising on acquisition (841)
Foreign exchange movement (10)
(851)
============================================ ================= ==============
8.2 Net assets of Manroy USA at acquisition
At acquisition
on
23 August
2011
GBP'000
Non-current assets
Intangible assets 4,688
Property, plant and equipment 2,504
7,192
--------------------------------------------------- ---------------
Current assets
Inventories 2,199
Trade and other receivables 449
Cash and cash equivalents 71
--------------------------------------------------- ---------------
2,719
--------------------------------------------------- ---------------
Total assets 9,911
--------------------------------------------------- ---------------
Current liabilities
Trade and other payables (241)
--------------------------------------------------- ---------------
(241)
--------------------------------------------------- ---------------
Non-current liabilities
Bank loans (309)
(309)
Total liabilities (550)
--------------------------------------------------- ---------------
Net assets at acquisition 9,361
=================================================== ===============
49% Group share of net assets at acquisition 4,586
=================================================== ===============
8.3 Investment in Associated Company
Share of assets at acquisition (note 8.2) 4,586
Results for the period from acquisition on 23
August 2011 to 30 September 2011 (115)
Exchange movements on translation at year end 159
----------------------------------------------- ------
At 30 September 2011 4,630
=============================================== ======
9. Intangible assets
Trademarks Customer Developed Product Total
relationships technology development
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 30 September - - - - -
2010
Manroy Systems
acquisition 548 6,871 1,684 - 9,103
Additions in the
year - - - 190 190
-------------------------- ----------- --------------- ------------ ------------- --------
At 30 September
2011 548 6,871 1,684 190 9,293
-------------------------- ----------- --------------- ------------ ------------- --------
Accumulated amortisation
At 30 September - - - - -
2010
Charge for the
year 68 515 211 - 794
-------------------------- ----------- --------------- ------------ ------------- --------
At 30 September
2011 68 515 211 - 794
-------------------------- ----------- --------------- ------------ ------------- --------
Net book value
at 30 September
2011 480 6,356 1,473 190 8,499
========================== =========== =============== ============ ============= ========
All intangible assets arose as a result of corporate
acquisitions undertaken during the year, except for product
development costs which were internally generated and incurred
against specific projects
10. Property, plant and equipment
Property Leasehold improvements Plant and equipment Motor vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2009 and 30 - - - - -
September 2010
Acquisition of Manroy Systems - 53 157 1 211
Acquisition of assets from AEI - - 77 2 79
Assets acquired through MUSA
acquisition 144 - - - 144
Reclassified as held for sale (144) - - - (144)
Additions at cost - 70 136 18 224
--------------------------------- --------- ----------------------- -------------------- --------------- --------
At 30 September 2011 - 123 370 21 514
--------------------------------- --------- ----------------------- -------------------- --------------- --------
Accumulated depreciation
At 1 October 2009 and 30 - - - - -
September 2010
Charge for the year - 10 99 4 113
--------------------------------- --------- ----------------------- -------------------- --------------- --------
At 30 September 2011 - 10 99 4 113
--------------------------------- --------- ----------------------- -------------------- --------------- --------
Net book value at 30 September
2011 - 113 271 17 401
================================= ========= ======================= ==================== =============== ========
Net book value at 30 September - - - - -
2010
================================= ========= ======================= ==================== =============== ========
11. Bank loans
30 September 30 September
2011 2010
GBP'000 GBP'000
Current
Due within one year or on demand (Secured) 700 -
-
Non-current
Repayable within two to five years 699 -
(Secured)
1,399 -
=========================================== ============= =============
In April 2008, the Group entered into a 5 year loan facility
with the Royal Bank of Scotland for GBP3.5 million. Capital was
repaid at a rate of GBP58,000 per month. Interest was charged at a
rate of 2.5% per annum over base, with GBP2 million of the loan
swapped at a base rate of 5.4% per annum. On 30 September 2011 the
balance of this loan totalling GBP1.2 million was repaid through
the utilisation of a new loan facility provided by Barclays Bank.
The new loan facility is a GBP1.4 million two year facility with
capital repaid at the same rate of GBP58,000 per month at an
interest rate of 2.5 per cent per annum above LIBOR. As part of
this agreement, Manroy Engineering Limited granted a debenture
supported by fixed and floating charges over its assets and an
unsecured guarantee was provided by Manroy Plc.
12. Deferred tax
The movement on deferred tax asset arose as follows:
30 September 30 September
2011 2010
GBP'000 GBP'000
At beginning of the year - -
Arising on intangible assets acquired 2,375 -
in Manroy Systems
Arising on intangible assets acquired
in Manroy USA 119
2,494 -
Credited to tax charge in income statement (211) -
(note 4)
2,283 -
============================================ ============= =============
Deferred tax has been provided at acquisition because
amortisation of intangible assets is non-deductable for corporation
tax purposes. Accordingly, the deferred tax of GBP2,494,000
recorded on the acquisition of Manroy Systems and Manroy USA is
being amortised against the Group's corporation tax charge in
parallel to the amortisation of intangible assets acquired.
13. Related party transactions
On 3 December 2010, the Company entered into an acquisition
agreement with Manroy Systems Limited, pursuant to which Glyn
Bottomley agreed to sell his entire issued share capital of Manroy
Systems Ltd to the Company for 2,068,633 Ordinary Shares at 75
pence per share. Under the acquisition agreement, Glyn Bottomley
has given warranties to the Company regarding the Manroy Systems
Limited and Manroy Engineering Limited, including warranties
relating to ownership of assets, their statutory accounts,
litigation and disputes, current contracts, intellectual property
rights, taxation and employees. Liability under these warranties is
subject to a maximum liability of GBP1.5 million. Claims made by
the Company under the warranties (other than taxation) must be made
within two years from 23 December 2010 and claims made by the
Company in respect of taxation must be made within seven years
following 23 December 2010. Further details can be found in the
Admission Document dated 3 December 2010.
On 3 December 2010, the Company entered into the Relationship
Agreement with Glyn Bottomley, Caledonian Heritable Limited and
Surinder Rajput (the "Concert Party Members"). Under this
agreement, the Concert Party Members undertook to the Company to
use their reasonable endeavours to ensure that the Group is able at
all times to carry on its business independently and that any
transactions between any of them with the Group are on an arm's
length basis and on normal commercial terms. The Relationship
Agreement will continue in force for so long as the Ordinary Shares
are admitted to AIM and the Concert Party Members are deemed to
control the Group under the terms of the City Code or the Articles
of the Company.
On 3 December 2010, the Company entered into Lock-In and Orderly
Market Agreements with the Concert Party Members. Under these
agreements, the Concert Party Members each agreed not to offer,
dispose of, or agree to offer or otherwise dispose of directly or
indirectly, conditionally or unconditionally, whether for
consideration or not, any of the Company's Shares in which they are
legally or beneficially entitled to until 23 December 2011 (the
"Restricted Period") which period has now expired. Each of the
Concert Party Members also agreed under the Lock-In and Orderly
Market Agreements that for a period of one year following expiry of
the Restricted Period, they will not dispose of more than half of
their respective shareholdings in the Company. Any dealing in this
subsequent period is subject to the Company's code of dealing, the
consent of the Company and the consent of the Company's Nominated
Adviser, and any disposals can only be only made through the
Company's brokers. No such dealings have been undertaken by any
Concert Party Member between the date of the agreement and the date
of this report.
On 25 June 2009, the Company entered an agreement with
Caledonian Heritable to pay an introductory fee of GBP45,000
relating to the acquisition of Manroy Systems which was settled
following completion of that acquisition.
On 1 April 2011, the Company acquired the business and assets of
AEI, a company owned equally between Glyn Bottomley and Caledonian
Heritable Limited for GBP250,000, payable in cash, together with an
earn out at the lower of 7 per cent. of AEI related turnover and 50
per cent. of profit after tax generated from the acquired assets of
the AEI business for two years from the date of acquisition which
has been provided in this preliminary announcement. If actual
revenue generated matches forecast revenue then the full deferred
consideration will be covered by the provisions already made. If
revenues fall below the expected revenues then the deferred
consideration would be over provided and any residual balance would
be credited the income statement at the end of the two year period.
If the revenues exceed expectations then higher profit levels would
have been generated and the additional deferred consideration in
excess of the deferred consideration provided would be charged to
the income statement against the higher profit levels as it arose.
During the year ended 30 September 2011, the Group incurred costs
of sale of GBP38,000 and earned management fee income of GBP24,000
(shown within royalties and other income) from AEI, arising from
the management services agreement between Manroy and AEI. This
agreement was cancelled at no cost to the Group at the date of
acquisition of the business and assets of AEI by the Company in
April 2011.
In August 2011, 2,049,069 shares were issued to Caledonian
Heritable Limited at 75 pence per share in accordance with the
Group's acquisition of a 49% interest in Manroy USA. Further
details of this issue were set out in the circular to shareholders
dated 25 July 2011. These shares ranked pari passu in all respects
with the then issued Ordinary Shares, except that they did not rank
for any final dividend recommended by the Company in respect of the
year ended 30 September 2011. In addition, the Group paid interest
of GBP169,000 on the loan provided by Caledonian Heritable to MUSA
to acquire the business and assets of Sabre.
During the year ended 30 September 2011, the Group has accrued
sales consultancy fees of GBP279,000 to Surinder Rajput relating to
export sales generated during the year.
Apart from these contracts and the service contracts and letters
of engagement between the Directors and the Company, no contract
existed during the financial year in relation to the Group's
business in which any Director was interested.
GLOSSARY OF TERMS AND DEFINITIONS
In this preliminary announcement, unless the context otherwise
requires or provides, the expressions set out below bear the
following meanings:
"Admission Document" the admission document published by the
Company on 3 December 2010
------------------------ ------------------------------------------------
"AEI" AEI Land Systems Limited, a company controlled
by Glyn Bottomley and Caledonian Heritable
Limited and whose business and assets were
acquired by the Company in 2011
------------------------ ------------------------------------------------
"AIM" the market of that name operated by the
London Stock Exchange
------------------------ ------------------------------------------------
"Board" or "Directors" the directors of Manroy
------------------------ ------------------------------------------------
"City Code" The City Code on Takeovers and Mergers
------------------------ ------------------------------------------------
"Companies Act" the Companies Act 2006, as amended from
time to time
------------------------ ------------------------------------------------
"Company" or "Manroy" Manroy Plc
------------------------ ------------------------------------------------
"Concert Party" Glyn Bottomley, Caledonian Heritable Limited,
Paul Carter, and Surinder Rajput (each
of them being "a member of the Concert
Party"), all of whom are regarded for the
purposes of the City Code as acting in
concert (as defined in the City Code)
------------------------ ------------------------------------------------
"EBITDA" Earnings before interest, tax, depreciation
and amortisation.
------------------------ ------------------------------------------------
"Form of Proxy" the form of proxy which accompanies this
document for use by Shareholders in connection
with the Annual General Meeting
------------------------ ------------------------------------------------
"Group" the Company and its subsidiaries as at
the date of this document
------------------------ ------------------------------------------------
"General Dynamics" General Dynamics Armament and Technical
Products Inc., a company incorporated in
the United States of America
------------------------ ------------------------------------------------
"LIBOR" The rate at which each bank submits must
be formed from that bank's perception of
its cost of funds in the interbank market
------------------------ ------------------------------------------------
"London Stock Exchange" London Stock Exchange Plc
------------------------ ------------------------------------------------
"M2 HMG" 12.7mm M2 Heavy Machine Gun, Manroy's principal
revenue generating product
------------------------ ------------------------------------------------
"Manroy USA" or Manroy USA LLC, a partnership incorporated
"MUSA" in the United States of America, with 510
units of membership owned by John Buckner
and 490 units of membership owned by the
Group
------------------------ ------------------------------------------------
"MoD" the UK Ministry of Defence
------------------------ ------------------------------------------------
"Novation" the act of either replacing an obligation
to perform with a new obligation, or replacing
a party to an agreement with a new party.
------------------------ ------------------------------------------------
"Ordinary Shares" ordinary shares of 5 pence each in the
or "Shares" capital of the Company
------------------------ ------------------------------------------------
"Panel" The Panel on Takeovers and Mergers
------------------------ ------------------------------------------------
"QCB" Quick change barrel
------------------------ ------------------------------------------------
"Sabre" Sabre Defense Industries LLC and Sabre
Defense Holdings LLC, the business and
assets of which were acquired by MUSA in
2011
------------------------ ------------------------------------------------
"Section 5" Section 5 of the Firearms Act, under which
storage and production of firearms is required
to be licensed annually by the UK Government
------------------------ ------------------------------------------------
"Shareholders" persons who are registered holders of Ordinary
Shares from time to time
------------------------ ------------------------------------------------
"US DoD" United States Department of Defense
------------------------ ------------------------------------------------
The exchange rate used for the acquisition of the Group's
interest in MUSA on 23 August 2011 was $1.6173 = GBP1. Transactions
during the year were translated at an average exchange rate of
$1.5987 = GBP1. Assets and liabilities held at 30 September 2011
were translated at $1.5625= GBP1.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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