LPA : 2020 Half Yearly Report

LPA Group Plc

Interim Unaudited Group Results for the Six Months ended 31 March 2020

www.lpa-group.com

LPA Group Plc ("LPA" or the "Group"), the high reliability LED lighting and electro-mechanical system manufacturer and distributor, announces its results for the six months to 31 March 2020 and a near record order book.

Key points

• • Revenue increased 7% to £10.8m (2019: £10.1m)

• • Operating profit before exceptional items increased 28% to £0.23m (2019: £0.18m)

• • Profit before tax £0.2m (2019: Loss after exceptional item £0.2m)

• • Earnings per share 2.08p (2019: Loss 1.20p)

• • Interim dividend nil (2019: 1.10p)

• • Order book increased 29% to £24.7m (2019: £19.2m)

• • Order entry fell 8% to £14.2m (2019: £15.4m)

• • Gearing1 25.6% (2019: 22.0%)

Notes: 1 Gearing excludes IFRS16 right of use assets and liabilities. Inclusive 26.8%.

Paul Curtis, CEO, commented:

"Although Covid-19 has caused significant disruption to the first half of the financial year, we are pleased to show a 7% increase in sales, a 29% increase in order book and a return to profitability. Our sites are fully compliant with safe working guidelines and have remained open in support of our customers throughout the period. We continue to work with our excellent staff during this difficult time and thank them all for their efforts and dedication. The Group has significant opportunities to pursue, and, although customer demand remains fragile in some areas, confidence is slowly returning to the market and we look forward to increasing momentum over the coming 18 months."

Paul Curtis

CEO

19 June 2020

The Digital Future

The Group is embracing the digital era by moving its shareholder communication from paper to digital reports. These are available for download from our website (www.lpa-group.com). We will work with shareholders to facilitate this transition, providing only those who have requested a hard copy of our Interim Report with one.

Enquiries:

LPA Group Plc

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

Caution regarding forward looking statements

Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.

Peter Pollock	Chairman
Paul Curtis	CEO
Chris Buckenham	CFO
Cairn Financial Advisers	(Nominated Adviser)	020 7213 0880
James Caithie / Tony Rawlinson / Ludovico Lazzaretti
finnCap	(Broker)	020 7220 0500
Ed Frisby / Teddy Whiley (Corporate Finance)
Tim Redfern / Tim Harper (ECM & Sales)

07881 626123

01799 512858

01799 512859

In our Covid-19 trading update of 1 April 2020, we reported that several UK and export customers had suspended operations leading to reduced demand and activity across the Group. However, I am pleased to report that so far during this pandemic all three LPA Sites have remained open for business.

The safety of our people has been our paramount concern and we have carefully followed and implemented government guidelines on safe working. Where possible and practical, we have utilised the government economic support schemes to ameliorate the impact of the pandemic on the business. All sites have adopted flexible working practices, allowing employees to work from home where practical and furloughing where necessary. We have flexed our capacity to match, as closely as possible, extremely variable customer demand and project management requirements during the period.

Nevertheless, I am pleased to report an improved first half performance and that the factory load for the second half, coupled with continued careful matching of capacity to variable customer short term requirements, should deliver further progress.

Sales in the first half increased 7% to £10.8m (2019: £10.1m) despite the impact of non-Covid-19 related customer project delays. Operating profit increased to £0.23m (2019: £0.18m). Profit before tax amounted to £0.2m (2019: loss after exceptional item £0.2m). Earnings per share amounted to 2.08p (2019: loss 1.20p).

Order entry, at £14.2m, fell just short of the very strong levels achieved in the first half last year (2019: £15.4m) and the order book increased 29% to £24.7m (2019: £19.2m).

Gearing, which otherwise would have reduced substantially, increased marginally to 25.6% (2019:22%), due to a substantial late overdue remittance received just after the half year end in early April.

In response to the potential cash flow impact of the Covid-19 outbreak, the proposed final dividend resolution was not put to shareholders at the AGM and thus not paid to conserve cash resources. The current cash position is very sound and in other circumstances the board would probably have considered it appropriate to confirm their confidence in the future and their commitment to a progressive dividend policy by declaring an Interim Dividend. However, under current circumstances the board consider it sensible and prudent to defer any decision on dividends to later in the year.

Although Lighting Systems again suffered some project delays, significant orders, including the prestigious Siemens/ÖBB contract announced in January 2020, further reinforced our position as a global supplier in this market. Lighting Systems continues to invest in smart lighting products and has a near record order book. LPA Connection Systems also suffered significant project delays in the period, but strong order intake has also resulted in a near record order book.

LPA Channel continued to trade very successfully. The order pipeline remains very strong and should lead to significant order entry in the second half. However, the impact of Covid-19 on the business has been a less clear picture in the medium and long term. The board has this matter under constant review and the executive team has been tasked with developing a flexible strategy in response. Planned Capital Expenditure is more modest than in recent years. However, our laser cutting facility has been substantially upgraded, increasing capacity and capability in response to increased customer demand. A loss on disposal of £62k on the old equipment was suffered in the first half.

The adoption of IFRS16 (leases) from 1 October 2019, added 1.2% to the adjusted gearing ratio of 26.8%. All property is freehold and only minor operating leases are held predominantly related to vehicles and office equipment. 'Right of Use Assets' added £0.16m to the Balance Sheet with an equal and opposite liability recognised. The net effect on the results in the period is less than £1k.

I am delighted to confirm that subsequent to the Annual General Meeting, Gordon Wakeford has joined the Board as Non-Executive Director. His experience as Head of Siemens Mobility UK and Chairman of both the Railway Industry Association and the Rail Supply Group, an industry partnership with government, will be invaluable to us.

I am also very pleased to welcome Jonathan Rowe as Managing Director of LPA Connection Systems. Jonathan has an Honours Degree in Engineering from the University of Cambridge and a wealth of experience in manufacturing and business development.

The current circumstances are challenging, but the Group has an excellent executive team, a very strong order book and a strong balance sheet with low gearing. We are in good condition to meet these challenges.

Peter Pollock

Chairman

19 June 2020

31 Mar 2020

6 months to

6 months to 31 Mar 2019

Unaudited

£000

Year to 30 Sept 2019

Unaudited

Audited

£000 £000

Revenue

Operating profit before exceptional items

Pension GMP and reorganisation costs

Operating profit / (loss)

Finance costs

Finance income

Profit / (loss) before tax

Taxation

Profit / (loss) for the period

Attributable to:

- Equity holders of the parent

Earnings per share (see note 4)

10,780

10,091 19,533

226 -

174 201

(364) (403)

226

(190) (202)

(60) 20

(43) (99)

34 64

186 70 256

(199) (237)

50 185

(149) (52)

256

(149) (52)

- Basic

2.08p 2.01p

(1.20p) (0.43p)

- Diluted

(1.20p) (0.43p)

31 Mar 2020

6 months to

6 months to 31 Mar 2019

Unaudited

£000

Year to 30 Sept 2019

Unaudited

Audited

£000 £000

Profit / (loss) for the period

Other comprehensive income

Actuarial (loss) / gain on pension scheme Tax on actuarial (loss) / gain

Other comprehensive income net of tax

Total comprehensive income for the period

256

(149) (52)

(240)

(516) 9

44

94 (7)

(196)

(422) 2

60

(571) (49)

As at	As at	As at
31 Mar 2020	31 Mar 2019	30 Sept 2019
Unaudited	Unaudited	Audited
£000	£000	£000
1,400	1,248	1,359
7,019	7,267	7,006
152	-	-
2,080	1,613	2,250
10,651	10,128	10,615
4,234	3,746	3,824
5,819	4,800	4,437
129	-	59
221	304	889
10,403	8,850	9,209
21,054	18,978	19,824
(4,806)	(3,602)	(3,839)
(422)	(355)	(2,805)
(81)	-	-
-	(283)	-
(5,309)	(4,240)	(6,644)
Non-current liabilities - Bank loans and other borrowings	(2,968)	(2,576)	(504)
(313)	(212)	(352)
- Right of use lease liabilities	(72)	-	-
(3,353)	(2,788)	(856)
(8,662)	(7,028)	(7,500)
12,392	11,950	12,324
1,266	1,261	1,266
(324)	(324)	(324)
708	688	708
90	123	82
230	230	230
10,422	9,972	10,362
12,392	11,950	12,324

Non-current assets

Current assetsTotal assets

Current liabilitiesTotal liabilities

• - Intangible assets

• - Property, plant and equipment

• - Right of use assets

• - Retirement benefits

• - Inventories

• - Trade and other receivables

• - Current tax receivable

• - Cash and cash equivalents

• - Trade and other payables

• - Bank loans and other borrowings

• - Right of use lease liabilities

• - Current tax payable

- Deferred tax liabilities

Net assets

Equity

• - Share capital

• - Investment in own shares

• - Share premium account

• - Un-issued shares reserve

• - Merger reserve

• - Retained earnings

Equity attributable to shareholders of the parent

6 months to	6 months to	Year to
31 Mar 2020	31 Mar 2019	30 Sept 2019
Unaudited	Unaudited	Audited
£000	£000	£000
Opening equity	12,324	12,711	12,711
Total comprehensive income	60	(571)	(49)
Transactions with owners:	- Dividends	-	(222)	(357)
- Proceeds from issue of shares	-	83	108
- Cost of investment in own shares	-	(110)	(110)
- Tax benefit on share-based payments	-	58	18
- Share-based payments	8	1	3
Closing equity	12,392	11,950	12,324