A marked drop in operating margins helped push down annual pre-tax profits by 59% at CEPS, the Bath-based diversified industrial group whose products span body armour to swimwear.
Net revenues at the group, which emerged from the refinancing of Bristol footwear firm Dinkie Heel eight years ago, edged down by 9.3% to £7.8m – all of the decline coming in the second half after a first half when revenues were level with the previous year.
Chairman Richard Organ said: “Most of our markets in Western Europe have been subject to vigorous government austerity measures, and falling consumer spending in real terms.”
Overall revenue for the year to December 31 was £15.6m, a drop of 5.5% on 2010, almost entirely accounted for by reduced turnover at its Leicestershire-based Sunline integrated direct mail business.
Trading profit fell from £811,000 in 2010 (4.9% of turnover) to £579,000 last year (3.7% of turnover). However, there was a further reduction in group costs from £344,000 to £303,000.
Pre-tax profits were £90,000.
The group describes itself as a diverse industrial services company combining the benefits of the financial structuring of private equity investment “with the entrepreneurial drive and flair of incentivised management teams within an AIM investment”. The company is seeking to acquire two to three new businesses annually.
CEPS’ Northamptonshire-based Davies Odell business – the original part of the group when it formed in 2004 – designs, sells and distributes body armour products, matting products and a range of footwear repair products mainly for the equestrian, motorcycle, ski and snowboarding markets.
Footwear products mainly consist of heel leather components for specialist quality shoe manufacturers which are imported from the Far East for sale in the UK and Europe. Mr Organ said sales had continued to grow with continued new product and supply chain investment and significant progress had been made in sales through new European distributors. In the UK, through David Odell's established dealer network, sales increased, despite an overall 2.5% decline in the sales of new motorbikes and scooters.
Sales at its Friedman's business – a Cheshire-based specialist textile importer, converter and distributor of material, primarily to swimwear and dancewear manufacturers – grew by 4.8%.
Mr Organ said this was “through the efforts of the team in Stockport to find both new designs to sell to existing customers and probably more importantly by finding new export customers”.
Sunline had a difficult second half after making good progress following closure of its Redditch operation in the first half when there had been an 8% fall in turnover.
However, Mr Organ said it suffered an even sharper fall of about 24.1% in the second half as direct mail volumes had declined due to rising mail costs and the pressure on clients' marketing budgets.
Sunline provides collation, personalisation, wrapping and mailing of predominantly paper-based direct mail along with laser printing with several added-value services, including data processing management, dynamic inline stitching as well as guillotine and folding and envelope enclosing.
Mr Organ said it was encouraging that all the group's businesses had traded at satisfactory levels in the first quarter of 2012, and close to their respective budgets.
However, he added: "I remain cautious about the outlook for 2012 because none of the economic drivers seem likely to give us any help, so any improvement will only flow from the actions of our management teams."
