CORRECTION - Interim Results
The API GROUP PLC announcement released on 16/05/2002 under release number 431B has been retransmitted to facilitate display by third party Vendors
The full text below remains unchanged.
API GROUP PLC
INTERIM RESULTS FOR THE HALF YEAR ENDED MARCH 31, 2002
Results
* Sales of £88.0m (£91.3m), down 3.7%, reflecting weak demand across markets
* Group operating loss before goodwill amortisation and exceptional items of
£0.9m (£0.3m profit), but all three Divisions improved performance over
previous six month period when operating loss amounted to £3.2m
* Loss before interest and taxation of £1.6m (loss of £24.4m) with
exceptional items reduced to £0.5m (£24.1m)
* Adjusted loss per share of 7.9p (loss of 1.4p), no interim dividend is
proposed
* Positive cash flow leading to a reduction in net debt to £21.4m compared to
£23.7m at September 30, 2001
* Net assets per share of £1.89, gearing 33.4% (35.5% at September 30, 2001)
* Significant progress made in refocusing API and restoring operating
performance with positive momentum across the Group
* Full year performance will benefit from:
- favourable seasonal factors in second half;
- investment and rationalisation programmes undertaken in 2001;
- lower raw material prices.
Commenting on the results, Chairman, David Hudd said:
'Despite the difficult market conditions encountered during the first six
months, we have made good progress in restoring the performance and stability
of the Group. The prospects for the full year remain encouraging with an
improved performance expected in the second half, reflecting seasonal factors,
the ongoing realisation of benefits from recent investment, the rationalisation
programmes and favourable movements in raw material prices. These factors
should sustain the momentum the new management team has generated in the first
half. The Group continues to trade in line with our expectations.'
Enquiries:
Derek Ashley 01625 650334 Tim Spratt 020 7831 3113
Group Chief Director
Executive
API Group plc Financial Dynamics
David Walton 01625 650569 Olivia Pirovano 020 7831 3113
Group Finance Financial Dynamics
Director
API Group plc
CHAIRMAN'S INTERIM STATEMENT
INTERIM RESULTS FOR THE HALF YEAR ENDED MARCH 31, 2002
INTRODUCTION
The Group's products are used predominantly in specialised packaging
applications in the luxury goods, beverages, tobacco and other consumer goods
sectors. Weakened demand after uncertainty impacted markets following September
11 and continuing concerns over the prospect of recession in the UK adversely
affected performance during the six months ended March 31, 2002.
Despite the challenging trading conditions encountered during the first six
months, good progress has been made in restoring the performance and stability
of the Group. All three Divisions reported operating results better than those
achieved in the preceding six month period as the benefits from site
rationalisation, management reorganisation, cost reduction and capital
investment programmes undertaken in 2001 began to take effect.
The prospects for the full year remain encouraging with an improved performance
expected in the second half. Seasonal factors, the ongoing realisation of
benefits from recent investment, the rationalisation programmes undertaken in
2001, and favourable movements in raw material prices should sustain the
momentum the new management team has generated in the first half. The Group
continues to trade in line with our expectations.
REVIEW OF RESULTS
Across the Group sales were down 3.7% on the same period in 2001 due mainly to
the trading factors referred to above, but also in part due to the completion
of the Group's plant rationalisation and closure programme during 2001. Sales
in the UK fell by 5.1% and in the US by 10.8% while sales decreased marginally
in Europe and increased by 8.5% in the Rest of the World. Foils and Laminates,
whose products are used predominantly for decorative purposes by the luxury
goods and beverage sectors, were particularly affected in both markets and
experienced an overall sales decline of 5.1%.
In the six months to March 31, 2002, the Group incurred a loss before interest
and taxation of £1.6m (loss of £24.4m) after charging exceptional items of £
0.5m (£24.1m).
The loss from continuing operations before goodwill amortisation and
exceptional items was £0.9m (£0.3m profit). Although this represents a
deterioration compared with the same period in 2001, it is an improvement from
the loss of £3.2m incurred in the seasonally stronger six months ended
September 30, 2001, reflecting the benefits of the site rationalisation,
management reorganisation, cost reduction and capital investment programmes
implemented during 2001.
The adjusted loss per share was 7.9p (loss of 1.4p). No interim dividend is
proposed.
REVIEW OF OPERATIONS
Foils and Laminates
Operating profits before goodwill amortisation and exceptional costs declined
by £0.8m to £1.1m (£1.9m) on sales down 5.1% to £52.3m (£55.1m). Operating
profits in the previous six months to September 30, 2001 were £0.5m.
Operating profitability improved in the US Foils business, where new management
successfully began to stem previous losses. However, sales were adversely
affected by the loss of consumer confidence following the terrorist attacks in
September 2001.
Sales in the European Foils businesses were sharply down. This was due to a
combination of factors including reduced demand from producers of luxury
consumables, fear of recession in the UK and the deferral of orders by
customers in the Far East. In response, the Foils manufacturing activities were
concentrated in Livingston, leaving Salford focused on specialised security
products.
The Foils business in China continued to perform strongly, achieving sales
growth and maintaining margins in the face of increased competition from both
local and international competitors.
Laminates experienced difficult trading conditions as demand from luxury goods
and beverages sectors declined. However, this was offset by increased sales to
the tobacco sector and the business performed in line with expectations.
Metallised Paper
The operating loss before goodwill amortisation and exceptional items was
reduced to £0.5m (loss of £0.7m) on sales up 5.9% to £12.5m (£11.8m). The
operating loss in the previous six months to September 30, 2001 was £2.2m.
Performance during the period continued to be adversely affected by the
significant disruption associated with the consolidation of metallising
activity in Caerphilly. However, following the appointment of a new management
team in November, significant productivity gains have been achieved and waste
levels and operating costs have been reduced. A major reorganisation of working
practices during the period resulted in a 22% reduction in total headcount,
with no impact on production capacity. The benefits of this reorganisation are
already being realised and should be reflected in the results for the second
half.
Although sales order volume continues to be robust, 85% of sales are made into
Continental Europe and margins have remained under pressure.
Converted Products
Converted Products reported an operating loss of £0.1m (£0.5m profit) on sales
down by 5.2% to £23.1m (£24.4m). The operating loss in the previous six months
to September 30, 2001 was £0.3m.
Improvements in the Learoyd Packaging businesses (film based flexible
packaging) were offset by a disappointing performance from Tenza (self-adhesive
products) while Coated Products (siliconised release papers) maintained both
its sales and margins at 2001 levels.
The organisational changes made in the Learoyd businesses during 2001 are
beginning to take effect and productivity and performance gains are being
achieved. However, the ten-colour press and the new co-extrusion line, both
installed in 2001, have yet to generate the returns they are capable of.
Tenza experienced both volume and margin reductions in its domestic and export
labels businesses. Although costs have been reduced and productivity improved
where possible, a sustainable improvement is dependant upon more favourable
trading conditions. In addition, the highly seasonal demand for self-adhesive
book coverings was disappointing in the first half, however order intake for
the second half is above expectations.
FINANCE
Cash Flow
There was an operating cash inflow of £4.8m (£2.7m) in the period as improved
working capital management led to significantly lower levels of stock and
debtors more than offsetting the loss on trading.
Capital expenditure of £2.5m was in line with expectations and represented 0.6
times depreciation. The reduction in capital expenditure compared with prior
periods represents a return to normal levels of expenditure following
completion of the site rationalisation programme and investment in new
capacity. Expenditure will not exceed this level in the second half of the
year.
API's balance sheet remains strong, with shareholders' funds of £64.1m
equivalent to £1.89 per share. Net borrowings fell by £2.3m to £21.4m and
represented gearing of 33.4% at March 31, 2002, compared with 35.5% at
September 30, 2001.
The Group's interest charge fell slightly to £0.7m (£0.8m), reflecting the
impact of the reduction in UK base rates.
Exceptional Items
Exceptional items resulted in a net charge of £0.5m (£24.1m) and included:
£0.9m charge for further business restructuring, largely in the Foils and
Laminates and Metallising activities.
£0.4m profit on disposal of the former Laminates site in Rochdale, whose
activities were consolidated into the Poynton facility during 2001.
Taxation
£0.3m of the £0.7m tax charge in the six months to March 31, 2002, relates to
deferred taxation and the remainder to taxation in respect of the Group's
Chinese business.
The Group has adopted FRS19, the new accounting standard requiring companies to
fully provide for deferred tax. The six months to March 31, 2001 and the year
to September 30, 2001 have been restated accordingly. The effect of the new
standard is to increase the deferred tax liability included in the balance
sheet by £2.7m, of which £2.4m relates to previous periods.
OUTLOOK
Trading conditions in the second half are expected to remain challenging for
all of the Group's activities. However, the benefits of site rationalisations
undertaken in 2001 are being realised and standards of productivity and
efficiency continue to improve across the Group.
API now has a clearly focused strategy for each of its businesses and new
management is working to further improve profitability and reduce debt. Much
has been achieved in the last six months and the prospects for further
improvement in the second half remain encouraging. The Group continues to trade
in line with our expectations.
GROUP PROFIT & LOSS ACCOUNT
for the six months ended 31 March 2002
__________________________________________________________________
6 months 6 months to 12 months
to to
31 March 31 March 30
September
2002 2001 2001
Restated Restated
£'000 £'000 £'000
Turnover 87,961 91,323 183,440
Operating Loss
Continuing operations before goodwill (872) 283 (2,901)
amortisation
Goodwill amortisation (226) (601) (846)
Continuing operations before (1,098) (318) (3,747)
exceptional items
Exceptional Items (930) (24,091) (24,564)
Total continuing operations (2,028) (24,409) (28,311)
Profit on disposal of land & 395 - 33
buildings
Loss on ordinary activities before
interest and
taxation (1,633) (24,409) (28,278)
Net interest (658) (762) (1,642)
Loss on ordinary activities before (2,291) (25,171) (29,920)
taxation
Taxation (650) 3,369 2,398
Loss on ordinary activities after (2,941) (21,802) (27,522)
taxation
Equity minority interests (455) (569) (984)
Loss attributable to shareholders (3,396) (22,371) (28,506)
Dividends - - -
Balance transferred from reserves (3,396) (22,371) (28,506)
pence pence pence
Earnings per ordinary 25p share
Basic and diluted (10.2) (67.3) (85.7)
Adjusted earnings per ordinary 25p
share (before
exceptional items and goodwill
amortisation)
Basic and diluted (7.9) (1.4) (12.1)
Dividend per ordinary share - - -
Basic weighted average number of 33,262,578 33,262,578 33,262,578
ordinary shares
GROUP BALANCE SHEET
at 31 March 2002
__________________________________________________________________
31 March 31 March 30
September
2002 2001 2001
Restated Restated
£'000 £'000 £'000
Fixed assets
Intangible assets 6,633 6,931 6,859
Tangible assets 64,314 64,940 66,054
Investments 435 852 435
71,382 72,723 73,348
Current assets
Stocks 21,303 27,950 23,189
Debtors 40,417 46,716 42,852
Short term investments - - 1,283
Cash at bank and in hand 7,642 9,394 7,088
69,362 84,060 74,412
Creditors: Amounts falling due within (64,608) (66,874) (69,482)
one year
Net current assets 4,754 17,186 4,930
Total assets less current liabilities 76,136 89,909 78,278
Creditors: Amounts falling due after
more than
one year (166) (284) (205)
Provisions for liabilities and charges (3684) (8,370) (3,766)
Accruals and deferred income (887) (232) (1,007)
71,399 81,023 73,300
Minority interests (7,311) (7,485) (6,630)
64,088 73,538 66,670
Share capital and reserves
Called up share capital 8,463 8,463 8,463
Share premium account 50,563 50,563 50,563
Revaluation reserve 2,892 2,616 2,616
Capital redemption reserve 549 549 549
Profit and loss account 1,621 11,347 4,479
64,088 73,538 66,670
GROUP CASH FLOW STATEMENT
for the six months ended 31 March 2002
__________________________________________________________________
6 months to 6 months to 12 months
to
31 March 31 March 30
September
2001 2001 2001
£'000 £'000 £'000
Reconciliation of operating loss to net
cash
inflow from operating activities
Operating loss (2,028) (24,409) (28,311)
Amortisation and depreciation less 4,315 4,178 8,058
government grants
Impairment charge against intangible - 12,906 12,850
assets
Impairment charge against tangible
fixed assets and
investments - 1,276 1,693
Loss on replacement of fixed assets 80 71 161
Decrease in stocks 2,164 2,804 7,302
Decrease in debtors 3,262 6,649 9,182
Decrease in creditors (2,639) (2,073) (1,326)
(Decrease)/increase in provisions (352) 1,273 (2,837)
Net cash inflow from operating 4,802 2,675 6,772
activities
Cash flow statement
Net cash inflow from operating 4,802 2,675 6,772
activities
Returns on investments and servicing of (658) (1,240) (3,132)
finance
Taxation 539 (125) (808)
Capital expenditure and financial (2,535) (7,129) (11,501)
investment
Acquisitions and disposals (54) (69) (139)
Equity dividends paid - (2,874) (2,874)
Net cash inflow/(outflow) before use of
liquid
resources and financing 2,094 (8,762) (11,682)
Management of liquid resources 1,314 - (1,283)
Financing (1,815) 7,680 12,055
Increase/(decrease) in cash in the 1,593 (1,082) (910)
period
Exchange movement 207 234 12
Balance sheet movement in net cash 1,800 (848) (898)
Reconciliation of net cash flow to
movement
in net debt
Increase/(decrease) in cash 1,593 (1,082) (910)
(Decrease)/increase in short term (1,314) - 1,283
investments
Decrease/(increase) in short term 1,815 (7,680) (12,055)
borrowing
Change in net debt resulting from cash 2,094 (8,762) (11,682)
flows
Exchange differences 171 234 51
Movement in net debt 2,265 (8,528) (11,631)
Net debt at start of period (23,673) (12,042) (12,042)
Net debt at end of period (21,408) (20,570) (23,673)
OTHER STATEMENTS
__________________________________________________________________
6 months to 6 months 12 months
to to
31 March 31 March 30
September
2002 2001 2001
Restated Restated
£'000 £'000 £'000
Statement of total recognised gains and
losses
Loss attributable to shareholders (3,396) (22,371) (28,506)
Currency translation differences on
foreign currency
net investments 814 1,266 533
Total recognised gains and losses (2,582) (21,105) (27,973)
relating to the period
Prior year adjustment (2,400)
Total gains and losses recognised since
previous annual
report (4,982)
Reconciliation of movements in
shareholders'
funds
Loss attributable to shareholders (3,396) (22,371) (28,506)
Currency translation differences on
foreign currency
net investments 814 1,266 533
Net deduction from shareholders' funds (2,582) (21,105) (27,973)
Opening shareholders' funds 66,670 94,643 94,643
Closing shareholders' funds 64,088 73,538 66,670
The prior year adjustment on implementation of Financial Reporting Standard 19
reduced opening shareholders' funds
by £2,400,000 (£4,400,000).
NOTES
__________________________________________________________________
Segmental Analysis
6 months to 6 months to 12 months
to
31 March 31 March 30
September
2002 2001 2001
£'000 £'000 £'000
Analysis of turnover by destination
United Kingdom 37,413 39,431 81,930
Continental Europe 26,058 26,515 51,046
Americas 14,083 15,788 30,870
Rest of World 10,407 9,589 19,594
87,961 91,323 183,440
Analysis of turnover by origin
United Kingdom 64,658 66,933 138,192
Continental Europe 1,212 1,471 2,580
Americas 14,870 15,700 29,853
Rest of World 7,221 7,219 12,815
87,961 91,323 183,440
Analysis of loss before interest and
tax by origin
United Kingdom (1,350) 307 (983)
Continental Europe 87 137 87
Americas (850) (1,603) (4,590)
Rest of World 1,241 1,442 2,585
(872) 283 (2,901)
Exceptional items and goodwill (761) (24,692) (25,377)
amortisation
(1,633) (24,409) (28,278)
Analysis of turnover by activity
Foils & laminates 52,323 55,103 111,229
Metallised paper 12,492 11,801 24,377
Converted products 23,146 24,419 47,834
87,961 91,323 183,440
Analysis of loss before interest and
tax by activity
Foils & laminates 1,118 1,875 2,382
Metallised paper (539) (715) (2,872)
Converted products (61) 492 197
Corporate costs (1,390) (1,369) (2,608)
(872) 283 (2,901)
Exceptional items and goodwill (761) (24,692) (25,377)
amortisation
(1,633) (24,409) (28,278)
NOTES
__________________________________________________________________
Operating Loss
6 months to 6 months to 12 months
to
31 March 31 March 30
September
2002 2001 2001
£'000 £'000 £'000
Exceptional items charged against
operating loss comprise
Restructuring of operating 780 10,538 10,650
businesses
Impairment of intangible assets - 12,906 12,850
Provision against own shares held - 647 1,064
in ESOP
Other 150 - -
930 24,091 24,564
Earnings per share
6 months to 6 months to 12 months to
31 March 2002 31 March 2001 30 September
2001
Restated Restated
pence £'000 pence £'000 pence £'000
Earnings per share are based
on
Loss attributable to (10.2) (3,396) (67.3) (22,371) (85.7) (28,506)
Shareholders
Add exceptional items 1.6 535 72.4 24,091 73.7 24,531
Add goodwill amortisation 0.7 226 1.8 601 2.6 846
Less tax relief - - (8.3) (2,769) (2.7) (900)
Adjusted loss attributable to (7.9) (2,635) (1.4) (448) (12.1) (4,029)
shareholders
Basic weighted average number
of ordinary
shares 33,262,578 33,262,578 33,262,578
The weighted average number of shares excludes 588,000 shares owned by the API
Group plc No. 2 Benefit Trust.
Taxation
The Group adopted Financial Reporting Standard (FRS) 19 'Deferred Taxation', on
1st October 2001. The implementation of FRS 19 has resulted in a prior year
adjustment. The restated comparative figures for the six months to 31 March
2001 and the 12 months to 30 September 2001 are set out below.
6 months to 6 months to 12 months
to
31 March 31 March 30
September
2002 2001 2001
Restated Restated
£'000 £'000 £'000
Taxation charge/(credit)
Taxation charge/(credit) before 380 (1,869) (398)
adoption of FRS 19
Effect of adopting FRS19 270 (1,500) (2,000)
650 (3,369) (2,398)
Provisions for liabilities and
charges
Provisions for liabilities and
charges before
adoption of FRS 19 1,014 5,470 1,366
Effect of adopting FRS19 2,670 2,900 2,400
3,684 8,370 3,766
Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 30 September 2001 with the exception of the implementation of FRS 19 -
`Deferred Tax'.
Publication of non-statutory accounts
The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The financial information for the full preceding year is
based on the statutory accounts for the financial year ended 30 September 2001.
Those accounts, upon which the auditors issued an unqualified opinion, have
been delivered to the Registrar of Companies.
INDEPENDENT REVIEW REPORT
To API Group plc
__________________________________________________________________
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 March 2002 which comprises Group Profit and Loss
Account, Group Balance Sheet, Cash Flow Statement, Statement of Total
Recognised Gains and Losses, Reconciliation of Shareholders' Funds and related
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Director's responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in the preceding annual accounts except where any changes,
and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 `Review of interim financial information' issued by the Auditing
Practices Board for use in the United Kingdom. A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2002.
Ernst & Young LLP
Manchester
16 May 2002
INTERIM STATEMENT
The interim statement is being mailed to shareholders on 24 May 2002 and will
be available at the company's registered office, Second Avenue, Poynton
Industrial Estate, Poynton, Stockport, Cheshire, SK12 1ND.
10
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