RNS Announcement

RNS Number : 8019Z

Metalrax Group PLC

29 September 2009

Metalrax Group PLC

Interim Report - 2009

Financial Highlights - 26 weeks ended 5 July 2009

Results in brief

	2009	2009	2008	2008
	Continuing activities £'m	Total Group £m	Continuing activities £'m	Total Group £m
External revenues	30.0	31.4	34.9	54.7
Gross margins	2 2 .3 %	30.8%	23 .8%	30.5%
Operating (loss)/ profit before exceptional items* , share option costs and goodwill impairment	( 0 .6)	( 1 .4)	1.0	2 .1
( Loss )/profit before taxation	(2.6 )	(12.0 )	0.4	(4.9 )
(Loss)/earnings per 5p Ordinary share	(2.08 p)	(9. 92 p)	0.04p	(4.38p)
Adjusted earnings per 5p Ordinary share +	(0.63p)	(1.3 9 p)	0.05p	0.95p
Cash (used in)/g enerated from operating activities		(3.0)		4 .5
Net debt		1 5 .0		12. 1
Gearing		95.5 %		28.3 %
Dividends paid per 5p Ordinary share		nil		nil

* Exceptional items (note 5) are items of income and expenditure that, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to the understanding of the financial statements and where not to do so would distort the comparability of financial performance between periods.

+ see note 9.

Highlights

Continuing business sales reduced by 14% compared with the first half of 2008, mainly due to the economic downturn and difficult trading conditions
C ontinuing businesses recorded a n operating loss before exceptional items, share option costs and goodwill impairment of £0.6m (2008: profit £1.0m)
T hree businesses were discontinued in the 26 week period , including MRX Romania which was placed into Administration
Exceptional items , excluding share option costs and goodwill impairment, during the period amounted to £ 9.5 m (2008: £ 1.8 m) of which £0.4m were cash items
Refinancing is at an advanced stage of legal documentation, which when completed would result in facilities of up to £24.0m until September 2012

Chairman's Statement

The first half of 2009 proved to be challenging due to the depressed global economy impacting the markets in which Metalrax operates. The Group has focused on its strategic objectives of stopping losses and exiting non-core businesses and turning around and strengthening the strategic focus of existing core businesses. Significant progress has been made since the beginning of 2009 with three trading companies having been exited in the first half and three having been restructured to drive growth and operational efficiencies. T he Group has focused on cash management and cost reduction to support the ongoing business through this difficult trading period.

Results

Including discontinued businesses, t he Group delivered a 2009 first half operating loss before exceptional items, share option costs and goodwill impairment of £1.4m (2008: profit £2. 1 m ) which includes a loss of £0.8m (2008: profit £1.1m) from discontinued businesses. The continuing businesses recorded a n operating loss before exceptional items, share option costs and goodwill impairment of £0.6m (2008: profit £1 .0 m) reflecting difficult market conditions . However, the seasonality in some of the key businesses combined with the benefits of turnaround and cost cutting actions create a more positive outlook for the second half.

Reduced total group sales (including discontinued businesses) at £31.4m (2008: £54.7m) reflect s the number of business disposals in the period. C ontinuing business sales show a reduction of £4.9m compared with the first half of 2008, amounting to £30.0m in the first half of the current year. Whilst the Group has exited from high volume/low margin automotive manufacturing , we still have exposure to the severely impacted automotive markets through our Weston Body Hardware and Toolspec businesses which has had a material impact on their sales performance.

Exceptional items , excluding share option costs and goodwill impairment, during the period amounted to £ 9.5 m (2008: £ 1.8 m) of which £0.4m were cash items . Major exceptional items include the provision for impaired asset values of £ 7.2 m relating to our Romanian subsidiary which commenced insolvency proceedings in July , £0.9m relating to a sset impairments associated with the closure and disposal of business es and £0.7m relating to the devaluation of commercial property. In total for the period, commercial property was devalued by £3.5m, £2.8m of which was taken to the revaluation reserve and £0.7m charged to exceptional items. The Group delivered a loss after tax and exceptional items of £ 11.9m (2008: £5.3m) . Despite this loss, strong working capital management resulted in an increase in net debt of just £2.5m from £12.5m to £15 .0 m at the half year.

We anticipate that the current year result will be broadly in line with market expectations.

Dividend

The Group's policy is to make dividend payments that are covered between 2.0 and 2.5 times by its earnings. In light of the current economic conditions and the Group's performance in the first half, there will be no dividend payment in respect of the period ended 5 July 2009.

Board appointments

As announced earlier in the year, John Adcock stood down as Non-Executive Director following the 2009 Annual General Meeting. The Board would like to record its thanks to John for his contribution.

Refinancing

As previously announced, the Group is continuing with its refinancing discussions with its bankers. These discussions are at an advanced stage of legal documentation, but have yet to be finali s ed. When completed this would provide the Group with facilities of up to £24.0m until September 2012. I look forward to updating shareholders appropriately in due course. Further details on the Group's liquidity position and going concern are given in the Financial Review section below and note 2 to the condensed set of financial statements.

Chief Executive's Review

Strategic Progress

Last year I announced that the Group's strategic objectives were:

To stop the losses and exit non-core businesses ;
To turnaround and strengthen the strategic focus of existing core businesses ; and
To further progress the acquisition strategy on businesses in target growth sectors.

As I explained in my full year report, the current economic difficulties have not changed our strategy but have impacted our timing and tactics. In addition to focusing heavily on the first two objectives, we have carefully managed cash and focused on cost reductions. Whilst we have been constrained by economic circumstances in our ability to make acquisitions into strategic, niche, defensible sectors, progress has been made in re-focusing our existing businesses into attractive markets with these attributes.

We started 2009 with 17 businesses and we have vigorously focused on eliminating non-core and/or loss making businesses . As a result , the Group comprised 11 continuing businesses as at 5 July 2009 . We have subsequently sold Commercial Bearings bringing our total number of trading entities to 10 , creating a more manageable, higher quality G roup to take forward.

We are at the advanced stages of legal documentation to finalise our refinancing. W hen completed, w ith up to £24.0m of facilities in place, the Directors have a reasonable expectation that the Group would continue as a going concern for the foreseeable future, placing us in a strong er position to continue our strategic refocusing and the strengthening of the group. This is a crucial step in re-establishing Metalrax as a major force in the UK engineering sector.

Principal achievements

In 2009, we have achieved strong strategic momentum. Among our key achievements, we have:

Sold 2 non - core and loss making businesses (including Commercial Bearings which was sold after the half year) . These businesses had made a combined operating loss of £0.2m in the last financial year.
Stemmed the cash losses of approximately £0.1m per month associated with our Romanian subsidiary by commencing insolvency proceedings
Restructured 3 businesses to facilitate growth and operational improvements
Reduced central costs to £0.8m for the half year (2008: £1.4m)
Implemented group-wide management appraisal and objective setting processes

Review of B usiness O p eration s

Consumer Durables

Revenues d eclined 13. 0 % from continuing businesses to £10.0m (2008: 11.5m), operating loss before exceptional items, share option costs and goodwill impairment of £0.3m (2008: profit £0.5m).

Consumer D urables' businesses are market leaders in bakeware and kitchenware to the retail and commercial catering markets and account for c. 3 3 % of continuing Group turnover. 2009 has seen continued margin pressure resulting from the weakened Sterling and the impact of rising steel prices. We have restructured these trading units and the management of this group and expect the second half to benefit from these actions as well as the strong seasonality that has historically been seen.

Specialist Engineering

Revenues declined 15.0 % from continuing businesses to £19.9m (2008: 23.4m), operating profit before exceptional items, share option costs and goodwill impairment of £0.5m (2008: £1.9m).

The continuing Specialist Engineering division comprises eight businesses in a variety of sectors which together account for c. 6 7 % of continuing Group revenue.

In the medical sector, Post Glover Lifelink which supplies medical electrical and safety equipment continues to perform well and has strengthened its position by diversifying into overseas markets such as Asia Pacific and South America .

Whilst we have exited the high volume/low margin automotive sector, we are still exposed to the higher value-add, niche automotive sector by Weston Body Hardware and Toolspec. Both of these businesses have seen a substantial reduction in sales but the impact of this is being minimized by strong, proactive management and cost reduction. We believe that these businesses are well placed to benefit from the anticipated recovery in automotive markets and from the potential to grow market share as the competitive landscape within the wider automotive supplier base turns in our favour .

Despite a difficult market, Cooper Coated Coil, our specialist coatings business , has grown turnover in the first half although h igh steel prices and reduced yield on the paint line have impacted margins during the period . Management actions have been taken to improve yields .

Our People - a motivated and committed team

I would like to acknowledge the passion, motivation and professionalism demonstrated by the Group's people during what has been a challenging period. We have excellent people across the Group who have enabled us to achieve significant strategic change and progress . There is still much to do and I know we can achieve it together.

Financial Review

Results

The operating loss on continuing businesses before exceptional items, share option costs and goodwill impairment was £0.6m (2008: profit £1.0m). The decline in relative profitability is attributable to:

Sales decline of £4.9m reflecting the depressed global economy generally and specifically our residual exposure to the severely impacted automotive markets through Weston Body Hardware and Toolspec and the softening in our retail markets served by our Consumer Durables business;
Margin pressure from a weaker Sterling/US Dollar exchange rate on our purchases sourced from Far Eastern suppliers and from increases in steel prices. Gross margins decreased by 1.5 percentage points to 22.3% (2008: 23.8%).

Exceptional items of £9.5m (2008: 1.8m) relate primarily to the provision for impaired asset values at Hidrosib SA (£7.2m) following the application to put the company into administration in July 2009, the impairment of assets at BSC (Diecasting) and Commercial Bearings on disposal and the devaluation of commercial property. Of this £9.5m only c. £0.4m are cash items. These exceptional charges represent the continuation of our strategy to eliminate loss making businesses from our portfolio.

Given the operating losses at the half year in our Consumer Durables businesses and our view of trading prospects going forward, we have tested the carrying value of goodwill in this division. We have concluded that the value of goodwill in Samuel Groves business of £0.6m is impaired and we have provided for this in full. This provision is a non-cash item.

Balance Sheet

Given the continued downward movement in the UK commercial property market in recent months, the Board has revisited the property valuations at December 2008 and reduced their value by £3. 5m at 5 July 2009. This amount (which is non-cash) has been offset against the revaluation reserve to the extent a revaluation reserve exists, with the remaining balance of £0.7m being included in the income statement as exceptional items.

Subsequent to the period end, the Group disposed of the remaining property at Great Bridge Street for £0.4m. This has been classified as assets held for resale on the balance sheet.

The pension deficit has increased by £1.1m over the period to £4.1m, due to a reduction in the valuation of the plan's assets, reflecting the decline in the investment markets over this period.

Inventories and receivables have reduced by £7.2m since the beginning of the year. Part of this is attributable to businesses that were sold or closed in the period, but part is also due a continued focus on cash management through robust working capital programmes. Receivables across all continuing businesses having reduced by £3.9m (27.1%) since the beginning of the year.

Financing

The Group's borrowings increased from £12.5m at 31 December 2008 to £15.0m at the half year as a result of widespread weakness in the credit insurance market, the reduced asset values arising from the sale of discontinued operations and the trading losses referred to above. Borrowings are closely controlled and managed well within existing facilities.

The Group has committed bank facilities with HSBC, totaling £15.0m at 5 July 2009, of which approximately £9.0m has been drawn down. The Group also has uncommitted overdraft facilities with HSBC of £2.0m and with RBS of £14.0m, although the RBS facility was reduced to £7.0m following the renewal date in December 2008. Since that date, the overdraft facilities have continued to be provided by both banks on an informal basis whilst refinancing discussions involving secured facilities continue to progress.

We reported at the full year that negotiations with our bankers were significantly progressed. We can now report that detailed Heads of Agreement for facilities of up to £24.0m have been agreed by all parties (Company, Banks and Pension Scheme) and these have received full credit approval from the respective banks' credit teams. The process is now at an advanced stage of legal documentation.

Dividend

We are not proposing to make a dividend payment for the reasons stated in the Chairman's statement.

Financial Risks

The principal risks and uncertainties are unchanged from the Annual Report at 31 December 2008, being macro-economic climate and competition, raw material input prices, treasur y risk and pension risk. Further detail is set out on page 18 of the Annual report for the year ended 31 December 2008.

Current Trading and Prospects

The current e conomic conditions reaffirm the need for the Group's strategy of repositioning into g rowing, defensible niche sectors . V isibility of future trading levels still remains very limited in the current economic environment and, in the Directors' opinion there remains a wide range of potential outcomes for the Group in the current financial year. T rading began to show signs of improvement in March of this year and this trend has continued over the period. As a consequence, the Board would expect the Group's performance in the current year to be in line with current market expectations .

In the short-term, the priorit ies of the Board are to focus assiduously on cash conservation and cost reduction, creating the financial stability that will enable us to press ahead with our strategic plans.

Condensed consoli dated income statement

26 weeks ended 5 July 2009

		26 weeks ended 5 July 2009 Reviewed	Six months ended 30 June 2008 Reviewed	Year ended 31 December 2008 Audited
	Note	£'m	£'m	£'m
Continuing operations
Revenue	4	30.0	34.9	72.3
Cost of sales		(23.3)	(26.6)	(54.3)
Gross profit		6.7	8.3	18.0
Distribution expenses		(2.9)	(2.9)	(6.1)
Administrative expenses		(6.0)	(4.5)	(12.9)
Operating (loss)/profit before exceptional items , share option costs and goodwill impairment	4	(0.6)	1.0	2.0
Exceptional items*	4, 5	(0.9)	-	(2.0)
Goodwill impairment	4	(0.6)	-	(0.8)
Share based payments	4	(0.1)	(0.1)	(0.2)
Operating ( loss )/profit	4	(2.2)	0.9	(1.0)
Finance income	7	-	-	0.1
Finance expense	7	(0.4)	(0.5)	(0.9)
( Loss )/profit before taxation		(2.6)	0.4	(1.8)
Taxation	8	0.1	(0.4)	(0.9)
Loss after taxation		(2.5)	-	(2.7)
Discontinued activities	6	(9.4 )	(5.3)	(13.5)
Loss for the period		(11.9)	(5.3)	(16.2)
Loss for the period attributable to equity shareholders of the parent		(11.9)	(5.3)	(16.2)

Basic and diluted loss per share - Continuing - Discontinued	9 9 9	(9.92 ) (2.08 ) (7.84)	(4.38) 0.04 (4.42)	(13.55) (2.19 ) (11.36 )

*Exceptional items (note 5) are items of income and expenditure that, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to the understanding of the financial statements and where not to do so would distort the comparability of the financial performance between periods.

Conde nsed consolidated balance sheet

As at 5 July 2009

		5 July 200 9 Reviewed	30 June 2008 Reviewed	3 1 December 2008 Audited
	Note	£'m	£'m	£'m
Non-current assets
Goodwill		7.0	7.6	7.6
Other intangible assets		0.6	0.6	0.6
Property , plant and equipment		21.1	34.7	33.8
Deferred tax asset		1.8	1.3	1.4
		30.5	44.2	43.4
Current assets
Inventories		9.6	13.9	11.1
Trade and other receivables		12.8	22.3	18.5
Current tax asset		-	0.6	-
Assets held for sale - properties and equipment		0.4	3.8	0.8
		22.8	40.6	30.4
Total assets		53.3	84.8	73.8
Current liabilities
Bank borrowings		(15.0)	(12.1 )	(12.5)
Trade and other payables		(15.0)	(23.4 )	(22.6)
Current tax payable		(0.1)	(0.4 )	(0.3)
Provisions		(0.5)	(0.6 )	(0.7)
		(30.6)	(36.5 )	(36.1)
Non-current liabilities
Employee benefits	11	(4.1)	(4.8 )	(3.0)
Deferred tax liabilities		(1.8)	(0.6 )	(2.3)
Provisions		(1.2)	(0.2 )	(1.2)
		(7.1)	(5.6 )	(6.5)
Total liabilities		(37.7)	(42.1 )	(42.6)
Net assets		15.6	42.7	31.2
Equity
S hare capital	10	6.0	6.0	6.0
Share premium account		2.7	2.7	2.7
Capital redemption reserves		0.3	0.3	0.3
Revaluation reserve		3.9	8.5	6.3
Other reserve		0.3	0.1	0.2
Retained earnings		2.4	25.1	15.7
Total equity		15.6	42.7	31.2

Condensed consolidated statement of comprehensive income

26 weeks ended 5 July 2009

	26 weeks ended 5 July 200 9 Reviewed		Six months ended 30 June 2008 Reviewed		Year ended 3 1 December 2008 Audited
	£'m	£'m		£'m
Loss for the period	(11. 9 )	(5.3)		(16.2)
Loss on property valuation Actuarial (loss)/gain on defined benefit pension scheme Exchange differences	(2.8 ) (1.1) (0.6)	(2.5) (1.4) 0.1		(4.0) 0.3 0.4
Tax relating to components of other comprehensive income	0. 7	1.1		(0.1)
Other comprehensive income for the period	( 15.7 )	(8.0)		(19.6)
Total comprehensive income for the period	(15.7 )	(8.0)		(19.6)
A ttributable to equity shareholders of the parent	(15.7 )	(8.0)		(19.6)

Condensed consolidated statement of changes in equity

26 weeks ended 5 July 2009

Share Capital

£'m

Share Premium

Account

£'m

Revaluation Reserve

£'m

Other Reserve

£'m

Capital Redemption reserve

£'m

Retained Earnings

£'m

Total

£'m

Loss for the period

(11. 9 )

Losses on property revaluation

(2.8)

Exchange differences

(0.6)

Actuarial loss on defined benefit pension schemes

(1.1)

Tax relating to components of other comprehensive income

0.4

0.3

0.7

Total comprehensive income for the period

(2.4)

(13. 3 )

(15. 7 )

Credit to equity for equity-settled share option cost s

0.1

Balance at 1 January 2009

6.0

2.7

6.3

0.2

0.3

15.7

31.2

Balance at 5 July 2009 (Unaudited)

6.0

2.7

3.9

0.3

2. 4

15. 6

Condensed consolidated statement of changes in equity (continued)

Six month ended 30 June 2008

Share Capital

£'m

Share Premium

Account

£'m

Revaluation Reserve

£'m

Other Reserve

£'m

Capital Redemption reserve

£'m

Retained Earnings

£'m

Total

£'m

Loss for the period

(5.3)

Losses on property revaluation

(2.5)

Exchange differences

0.1

A ctuarial loss on defined benefit pension schemes

(1.4)

(1. 4 )

Tax relating to components of other comprehensive income

0.7

0.4

1.1

Total comprehensive income for the period

(1.8)

(6.2)

(8.0)

Credit to equity for equity-settled share option cost s

0.1

Balance at 1 January 2008

6.0

2.7

10.3

0.3

31.3

50.6

Balance at 30 June 2008 (Unaudited)

6.0

2.7

8.5

0.1

0.3

25.1

42.7

Condensed consolidated statement of changes in equity (continued)

Year ended 31 December 2008

Share Capital

£'m

Share Premium

Account

£'m

Revaluation Reserve

£'m

Other Reserve

£'m

Capital Redemption reserve

£'m

Retained Earnings

£'m

Total

£'m

Loss for the period

(16.2)

Losses on property revaluation

(4.6)

Exchange differences

0.4

Actuarial loss on defined benefit pension schemes

0.3

Tax relating to components of other comprehensive income

0.6

( 0.1 )

0. 5

Total comprehensive income for the period

(4.0)

(15.6)

(19.6)

Credit to equity for equity-settled share option cost s

0.2

Balance at 1 January 2008

6.0

2.7

10.3

0.3

31.3

50.6

Balance at 31 December 2008 (Audited)

6.0

2.7

6.3

0.2

0.3

15.7

31.2

Condensed consolidated cash flow statement

26 weeks ended 5 July 2009

	26 weeks ended 5 July 200 9 Reviewed	Six months ended 30 June 2008 Reviewed	Year ended 3 1 December 2008 Audited
	£'m	£'m	£'m
Operating loss from activities	(11.6)	(4.4)	(14.5)
Depreciation	0.9	1.4	2.5
Impairment of property	0.7	-	0.3
Impairment losses	8.4	4.6	10.4
Share option costs	0.1	0.1	0.2
Exchange gain/(loss)	0.5	0.1	(0.7)
De crease /(increase) in inventories	1.1	(0.8 )	1.9
De crease in trade and other receivables	5.2	2.5	4.6
(Decrease)/increase in payables	(7.5)	0.8	(0.4)
(Decrease)/increase in provisions	(0.2)	0. 1	1.3
Other non-cash movements	-	-	(0.4)
Cash generated (used in)/from operations	(2.4)	4. 4	5.2
Interest paid	(0.4)	(0 .4 )	(0.9)
Tax (paid)/recovered	(0.2)	0.4	1.2
Net c ash (used in)/ from operating activities	(3.0)	4 .4	5.5
Investing activities
Purchase of property, plant and equipment	(0.5)	(1.6 )	(3.4)
Proceeds from sale of property, plant and equipment	0.8	0. 3	0.4
Acquisition of subsidiary undertakings	-	(3. 6)	(3.6)
Proceeds from sale of businesses	0.2	0. 4	0.6
Net cash from/(used in) investing activities	0.5	(4.5 )	(6.0)
Financing activities
Equity dividends paid	-	-	-
New bank borrowings	-	3. 0	3.0
Repayment of bank borrowings	-	(5 . 0)	(5.0)
Increase in bank overdraft	2.5	2.1	2.5
Net cash from financing activities	2.5	0.1	0.5
Net increase in cash and cash equivalents	-	-	-
C ash and cash equivalents at beginning of period	-	-	-
C ash and cash equivalents at end of period	-	-	-

Notes to the condensed set of financial statements

26 weeks ended 5 July 2009

1 General information

The company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Ardath Road, Kings Norton, Birmingham, B38 9PN.

The company has its primary listing on the Alternative Investment Markets ("AIM") following its delisting from the London Stock Exchange on 25 June 2008.

This condensed consolidated interim financial informat ion was approved for issue on 29 September 2009 .

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 435 of the Compani es Act 2006 (Prior period: section 240 of the Companies Act 1985 ) . The full accounts of Metalrax Group plc for the year ended 31 December 2008 , which received an unqualified report from the auditors but did contain an emphasis of matter paragraph regarding going concern , and did not contain a statement under S.237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies.

The condensed consolidated interim financial information has been reviewed, not audited.

2 Basis of preparation

The condensed consolidated interim financial information for the 26 weeks ended 5 July 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union.

The condensed set of consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008 , which have been prepared in accordance with IFRS as adopted by the European Union.

The condensed consolidated financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future. The Group is continuing with its re-financing discussions with its bankers . W hilst the refinancing is at an advanced stage of legal documentation, the process has yet to be finalised. Whilst the refinancing discussions are in progress, the current overdraft facilities have continued to be provided by the Company's bankers on an informal basis.

The Board has concluded that the ongoing negotiations with its bankers represents a material uncertainty that casts significant doubt upon the Group's ability to continue as a going concern. However, after considering the uncertaint y described above the Board has a reasonable expectation that the Group will be successful in obtaining the necessary funding and for this reason believes it is appropriate to continue to adopt the going concern basis in preparing the condensed set of financial statements. The set of condensed financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

3 Accounting policies

The condensed consolidated in terim financial information has been prepared on the basis of the accounting policies expected to apply for the financial year to 31 Decem ber 2009 applicable to the Group under IFRS. The IFRS and IFRIC interpretations as adopted by the European Union that will b e applicable at 31 December 2009 , including those that will be applicable on an optional basis, are not known with certainty at the time of preparing these interim financial statements. Thus the accounting policies adopted in these interim financial statements may be subject to revision to reflect further IFRS, IFRIC interpretations and pronouncements issued between 29 September 2009 and publication of the annual IFRS financial statements for the year ending 31 December 2009 .

The financial statements have been prepared under the historical cost convention as modified by the revaluation of properties.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the condensed consolidated interim financial statements are disclosed within the Group's accounting policies as disclosed in the IFRS financial statements for the year ended 31 December 2008.

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except for as described below.

Changes in accounting policy

In the current financial year, the Group has adopted International Financial Reporting Standard 8 "Operating Segments" and International Accounting Standard 1 "Presentation of Financial Statements" (revised 2007).

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 "Segment Reporting") required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach, with the Group's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, the segmental information required by IAS 34 which is included in note 4 below is presented in accordance with IFRS 8.

IAS 1(revised) requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of comprehensive income. As a result, a condensed consolidated statement of changes in equity has been included in the primary statements, showing changes in each component of equity for each period presented.

The Group's method of internal reporting has changed from being based on calendar months, to a 13 week quarter basis (termed 4-4-5 accounting). This interim reporting period is therefore 26 weeks ended 5 July 2009.

4 Segmental information

The Group has two divisions - Specialist Engineering and Consumer Durables, under IAS14 in the annual report for the year ended 31 December 2008.These segments are consistent with information reported to the Group's Chief Executive for the purpose of resource allocation and performance assessment. As a result, the Group's reportable segments under IFRS8 are the same as those under IAS14. The principal activities of the two divisions are as follows:

Specialist Engineering - a variety of precision manufacturing activities that incorporate value adding technology for unique applications in the medical, specialist metal coating and premium automotive sectors .

Consumer Durables - manufactures and markets bakeware and associated ranges of kitchen accessories to both the retail and commercial markets in the UK and abroad.

a) Segment revenues and results:

26 weeks to 5 July 2009

	Continuing businesses
	Specialist Engineering	Cons umer Durables	Central Services	Total Group	Discontinued Businesses	Total Group
	£' m	£' m	£' m	£' m	£' m	£' m
Total revenues	21.6	10.0	0.1	31.7	1.6	33.3
Inter-segment revenues	(1.7)	-	-	(1.7)	(0.2)	(1.9)
Revenue from external customers	19.9	10.0	0.1	30.0	1.4	31.4

Operating profit /(loss) before exceptional items, share option costs and goodwill impairment	0.5	(0.3)	(0.8)	(0.6)	(0.8)	(1.4)

Exceptional items Share option costs	(0.8) -	(0.1) -	- (0.1)	(0.9) (0.1)	(8.6) -	(9.5) (0.1)
Goodwill impairment	-	(0.6)	-	(0.6)	-	(0.6)
Operating los s	(0.3)	(1.0)	(0.9)	(2.2)	(9.4)	(11.6)


Finance expense (net)				(0.4)	-	(0.4)
Loss before taxation				(2.6)	(9.4)	(12.0)
Taxation				0. 1	-	0. 1
Loss after taxation				(2. 5 )	(9.4)	(11. 9 )

4 Segmental information (continued)

a) Segment revenues and results (continued):

6 months to 30 June 2008

	Continuing businesses
	Specialist Engineering	Cons umer Durables	Central Services	Total Group	Discontinued Businesses	Total Group
	£' m	£' m	£' m	£' m	£' m	£' m
Total revenues	25.3	11.5	0.2	37.0	20.7	57.7
Inter-segment revenues	(1.9)	-	(0.2)	(2.1)	(0.9)	(3.0)
Revenue from external customers	23.4	11.5	-	34.9	19.8	54.7

Operating profit /(loss) before exceptional items, share option costs and goodwill impairment	1.9	0.5	(1.4)	1.0	1.1	2.1

Exceptional items Share option costs	- -	- -	- (0.1)	- (0.1)	(1.8) -	(1.8) (0.1)
Goodwill impairment	-	-	-	-	(4.6)	(4.6)
Operating profit/(loss)	1.9	0.5	(1.5)	0.9	(5.3)	(4.4)


Finance expense (net)				(0.5)	-	(0.5)
Profit/(l oss ) before taxation				0.4	(5.3)	(4.9)
Taxation				(0.4)	-	(0.4)
Loss after taxation				-	(5.3)	(5.3)

Year ended 31 December 2008	Continuing businesses
	Specialist Engineering	Cons umer Durables	Central Services	Total Group	Discontinued Businesses	Total Group
	£' m	£' m	£' m	£' m	£' m	£' m
Total revenues	51.5	25.9	0.4	77.8	33.8	111.6
Inter-segment revenues	(4.7)	(0.4)	(0.4)	(5.5)	(1.3)	(6.8)
Revenue from external customers	46.8	25.5	-	72.3	32.5	104.8

Operating profit /(loss) before exceptional items, share option costs and goodwill impairment	3.8	1.5	(3.3)	2.0	1.1	3.1

Exceptional items Share option costs	(0.4) -	(1.0) -	(0.6) (0.2)	(2.0) (0.2)	(9.9) -	(11.9) (0.2)
Goodwill impairment	(0.8)	-	-	(0.8)	(4.7)	(5.5)
Operating profit/ (loss)	2.6	0.5	(4.1)	(1.0)	(13.5)	(14.5)


Finance expense (net)				(0.8)	-	(0.8)
Loss before taxation				(1.8)	(13.5)	(15.3)
Taxation				(0.9)	-	(0.9)
Loss after taxation				(2.7)	(13.5)	(16.2)

4 Segmental information (continued)

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements . Segment result represents the profit or loss achieved by each segment without allocation of share option costs , central administration costs including directors' salaries, investment revenue and finance costs, and income tax expense.

b) Segment assets/(liabilities)


	5 July 2009 £'m	30 June 2008 £'m	31 December 2008 £'m
Specialist Engineering	19.8	27.2	27.2
Consumer Durables	15.8	16.8	1 6.2
Central Services	(0.6)	(0.7)	(2.5)
Discontinued Businesses	(0.2)	15.4	7.0

Total segment net assets	34.8	58. 7	4 7.9
Unallocated liabilities	(19. 2 )	(16.0 )	(1 6. 7)
Consolidated total assets	15. 6	42.7	31.2

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception other financial assets (except for trade and other receivables) and tax assets. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments.

5 Exceptional items

	26 weeks ended 5 July 200 9 Reviewed	Six months ended 30 June 2008 Reviewed	Ye ar ended 31 December 2008 Audit ed
	£'m	£'m	£'m

Reorganisation/restructuring costs	0.4	1.3	4.4
Provision for Hidrosib SA losses	0.3	0.5	0.5
Impairment of assets	8.1	-	5.3
Onerous lease costs	-	-	1.4
Property devaluations	0.7	-	0.3
Total e xceptional items	9 . 5	1.8	11.9
Goodwill impairment	0.6	4.6	5.5
IFRS2 share option costs	0.1	0.1	0.2
Total	10.2	6.5	17.6

Impairment of assets incurred in the period relate to Hidrosib SA, which was put into administration in July 2009 (£7.2 m), and asset impairment s at Commercial Bearings (£0.5m ) and BSC Diecasting (£0.4m) prior to disposal.

£0.9m of the total exceptional items of £9.5m relate to continuing activities (six months to June 2008: £nil).

6 Discontinued operations

The Group has undertaken a review of its underperforming businesses and has taken actions to close or sell those businesses in the period and beyond . The businesses that are no longer part of the Group are:

BSC (Diecasting)

Hidrosib SA

Commercial Bearings

Sold

Administration

Sold

30 April 2009

2 July 2009

24 July 2009

T hese businesses have been presented as discontinued operations in the income statement on the basis that irreversible management decisions were taken in the period, and the communications to interested parties, including the employees and creditors of the businesses involved, were completed in the period. Management is of the view that this presentation of information enables the users of the financial statements to understand the financial effects of these operations no longer being part of the Group.

6 Discontinued activities (continued)

	26 weeks ended 5 July 2009 £'m	Six months ended 30 June 2008 £'m	Year ended 31 December 2008 £'m

Revenue	1.4	19.8	32.5
Cost of sales	(1.7)	(16.3)	( 27.9 )
Gross (loss)/p rofit	(0.3)	3.5	4.6
Administrative expenses	(0.5)	(2.4)	(3.5)
Exceptional costs	(8.6)	(1.8)	(9.9)
Goodwill impairment	-	(4.6)	(4.7)
Loss before tax of discontinued operations	(9.4)	(5.3)	(13.5)
Attributable tax expense	-	-	-
Loss after tax of discontinued items	(9.4)	(5.3)	(13.5)
Pre tax loss of disposal group	-	-	-
Taxation	-	-	-
After tax loss of disposal group	(9.4)	(5.3)	(13.5)
Loss for the period from discontinued operations	(9.4)	(5.3)	(13.5)

During the period management undertook a review of each of the business to identify underperforming businesses. The assets of these businesses were written down to net recoverable value during the period and therefore none of the businesses that were sold generated a profit or loss on disposal. At the period end the assets remaining in the balance sheet relating to the closed businesses have been written down to the recoverable value.

The effect of discontinued operations on segment results is disclosed in note 4 . Central costs that would previously have been allocated to these closed or disposed businesses have not been allocated in the results presented on the basis that these costs remain part of the Central Services.

7 Finance expense (net)

	26 weeks ended 5 July 200 9 Reviewed	Six months ended 30 June 2008 Reviewed	Ye ar ended 31 December 2008 Audite d
	£'m	£'m	£'m
Interest received on overpaid taxation	-	-	(0.1)
Interest payable on bank loans and overdrafts	0.2	0. 4	0.7
Net finance cost of defined benefit pension schemes	0.2	0.1	0.2
Net finance expense	0.4	0. 5	0.8

8 Income tax (credit)/charge

	26 weeks ended 5 July 200 9 Reviewed		Six Months Ended 30 June 2008 Reviewed	Ye ar Ended 31 December 2008 Audit ed
	£'m	£'m		£'m
Current tax (credit)/charge	0.1	0. 3		0.2
Prior period adjustments to tax	-	( 0. 6)		(0.8)
Deferred tax (credit)/charge	(0.2)	0.7		1.5
Income tax (credit)/charge	(0.1)	0.4		0.9

9 (Loss)/earnings per ordinary share

The basic and diluted (loss)/earnings per share are calculated based on the (loss)/profit for the period and the adjusted (loss)/earnings per share is calculated based on an adjusted (loss)/profit after tax as calculated below . The weighted average number of shares used in the basic and diluted loss per share calculation i s 119,897,298 (30 June and 31 December 2008: 119,897, 298) .

	26 weeks ended 5 July 200 9 Reviewed	Six months ended 30 June 2008 Reviewed	Year ended 31 December 2008 Audit ed
	£'m	£'m	£'m
Loss for the period	(11.9)	(5.3 )	(16.2)
Add back exceptional items	9.5	1.8	11.9
Add back share option costs	0.1	0.1	0.2
Add back goodwill impairment	0.6	4.6	5.5
Adjusted (loss)/profit after tax	(1.7)	1.2	1.4
Basic and diluted loss per 5p ordinary share (pence per share)	(9.92 )	(4.38)	(13.55)
Adjusted basic (loss)/ profit per 5p ordinary share (pence per share)	(1.39 )	0.95	1.10

( Loss )/earnings per ordinary share for Continuing operations

	26 weeks ended 5 July 200 9 Reviewed		Six months ended 30 June 2008 Reviewed	Year ended 31 December 2008 Audit ed
	£'m	£'m		£'m
(Loss)/profit for the period	(2.5 )	-		( 2.7 )
Add back exceptional items	0.9	-		2. 0
Add back share option costs	0. 1	0.1		0.2
Add back goodwill impairment	0.6	-		0.8
Adjusted (loss)/profit after tax	(0.9 )	0.1		0. 3
Basic and diluted ( loss )/earnings per 5p ordinary share (pence per share)	(2.08 )	0.04		(2.19 )
Adjusted basic (loss)/ profit per 5p ordinary share (pence per share)	(0.63 )	0.05		0. 53

9 Loss per ordinary share (continued)

There is no dilution in the loss per share calculation at 5 July 2009 . Diluted earnings per share needs to be disclosed when a Company could be called upon to issue shares that would decrease net profit or increase net loss per share. It would be inappropriate to assume that option holders would act irrationally in exercising out- of-the-money options when the Company has made a loss and therefore the existing options have no dil utive effect in the current period . Since there are no other diluting future share issues, diluted (loss)/earning per share equals basic (loss)/earnin g per share for the current period. T here were no po tential diluting future shares in the previous year or period.

10 Share capital

	5 July 2009 Reviewed	30 June 2008 Reviewed	31 December 2008 Audited
	£'m	£'m	£'m
Authorised
140,000,000 ( 2008 : 140,000,000) ordinary shares of 5p each	7.0	7 .0	7.0
Called up, issued and fully paid
119,897,298 ( 2008 : 119,897,298) ordinary shares of 5p each	6.0	6.0	6.0

11 Pensions

The valuation of the Group's pension scheme obligation has been updated using an IAS19 valuation as at 5 July 2009, to reflect current market discount rates, current market values of investment and actual investment returns. The amounts included in the balance sheet arising from the Group's pension obligations in respect of defined benefit schemes are as follows:

	5 July 200 9 Reviewed	30 June 2008 Reviewed	3 1December 2008 Audited
	£'m	£'m	£'m
Total market value of plan assets	10.3	14.0	11.5
Present value of scheme liabilities	(14.4)	(18 .8 )	(14.5)
Pension scheme liability	(4.1)	(4 .8 )	(3.0)

The major as sumptions used by the Actuary were:

	5 July 200 9 Reviewed	30 June 2008 Reviewed	31December 2008 Audited
	%	%	%
Inflation	3.4	4.0	3.1
Rate of increase in salaries	3.4	4.0	3.6
Pension increases, subject to LPI	3.4	4.0	3.1
Discount rate	6.2	6.4	6.5
Return on plan assets	4.7	5.9	4.7

12 Related party transactions

All intra-group transactions have been eliminated on consolidation at 5 July 2009. There have been no other related party transactions in the period from 1 January 2009 to 29 September 2009.

13 Post balance sheet events

Subsequent to the period end, the Group disposed of the trade and assets of Commercial Bearings for £0.1m and the remaining property at Great Bridge Street , West Bromwich for £0.4m. Th e Property has been classified as assets held for resale on the balance sheet.

INDEPENDENT REVIEW REPORT TO METALRAX GROUP PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 5 July 2009 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of comprehensive income, the condensed consolidated cash flow statement and related notes 1 to 13 . We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 " Review of Interim Financial Information Performed by the Independent Auditor of the Entity " issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 " Review of Interim Financial Information Performed by the Independent Auditor of the Entity " issued by the Auditing Practices Board for use in the United Kingdom . A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 5 July 2009 is not prepared, in all materia l respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange .

Emphasis of matter - Going Concern

In forming our review opinion on the condensed set of financial statements, which is not qualified, we have considered the adequacy of the disclosure made in note 2 (see above) to the condensed set of financial statements concerning the Group's ability to continue as a going concern.

The group is in the process of re-negotiating its banking facilities with its current providers. The se conditions, along with the matters explained in note 2 to the condensed set of financial statements, indicate the existence of a material uncertainty that may cast doubt about the Group's ability to continue as a going concern. The condensed set of financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Deloitte LLP

Chartered Accountants and Statutory Auditors

Birmingham, UK

29 September 2009

Statement of directors' responsibilities
26 weeks ended 5 July 2009

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 ' Interim Financial Reporting ' ;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (i ndication of important event s during the first six months and description of pr incipal risks and uncertainties for the remaining 26 weeks of the year) ; and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' t ransactions and changes therein) .

The directors of Metalrax Group plc are listed in the Metalrax Group plc Annual Report for 31 December 2008 .

By order of the Board

A J Richardson	M J Stock
Chief Executive Officer	Group Finance Director

29 September 2009	29 September 2009

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR SEDFMASUSEIU