Final Results

RNS Number : 3021G
API Group PLC
05 June 2013
 



 

 

Press Release

5 June 2013

 

 

API Group plc

 

("API" or the "Group")

 

Final Results

 

API Group plc (AIM:API), a leading manufacturer of specialist foils and packaging materials, announces its final results for the year ended 31 March 2013.

 

Financial Highlights

 

·  

Pre exceptional profit before tax increased 35% to £6.8m (2012: £5.1m).

·  

Diluted earnings per share (pre exceptional) up 36% to 8.7 pence (2012: 6.4 pence).

·  

Revenues marginally lower at £112.4m (2012: £113.9m).

·  

Pre exceptional operating profits ahead by 23% to £8.5m (2012: £6.9m).

·  

Exceptional costs of £1.0m for fees and expenses relating to formal sale process and reorganisation costs (2012: £nil).

·  

Cash generated from operations of £9.2m (2012: £10.4m).

·  

Intention to commence dividend payments after the next interim results in November.

·  

Net debt down further, to £2.6m (2012: £3.6m).

 

Operational Highlights

 

·  

Strong profits growth from Laminates and the two Foils businesses, partially offset by decline at Holographics.

·  

Cash generation and balance sheet strength supports capital expenditure to improve operational efficiencies and exploit growth opportunities.  Capital additions in 2013 of £5.1m (2012: £3.5m).

·  

Bulk shipments now commenced on major Laminates supply contract.  Continued build-up in volumes expected throughout the new financial year.

 


Commenting on the results, Richard Wright, Non-Executive Chairman of API Group plc, said:

"The Board is pleased to report another year of significant profit growth.  The Group's balance sheet strength and cash flow performance has started to provide significant flexibility for capital investment in growth projects and operational improvements and the resumption of dividend payments.

 

The Group has demonstrated resilience in the face of challenging economic circumstances and the Board remains confident in the prospect for further progress in the year ahead."

 

- Ends -

 

For further information:

API Group plc


Andrew Turner, Group Chief Executive

Tel: +44 (0) 1625 650 334

Chris Smith, Group Finance Director

www.apigroup.com

 

Numis Securities (Broker)


James Serjeant

Tel: +44 (0) 20 7260 1000


www.numis.com

 

Cairn Financial Advisers (Nominated Adviser)


Tony Rawlinson / Avi Robinson

Tel: +44 (0) 20 7148 7900


www.cairnfin.com

 

Media enquiries:

Abchurch


Henry Harrison-Topham / Quincy Allan

Tel: +44 (0) 20 7398 7710

quincy.allan@abchurch-group.com

www.abchurch-group.com

 

 

 

 

 

 



Chairman's Statement

I am pleased to report another year of significant progress for the Group, with increasing levels of profitability reflecting a culture of continuous improvement in the quality of our day-to-day operations and a consistent approach to seeking and converting those market opportunities where API can best create value for customers. 

 

After two years of strong organic growth, revenues for the 12 months to 31 March 2013 fell marginally, to £112.4m (2012: £113.9m).  Nevertheless, operating profit before exceptional items increased by 23% to £8.5m (2012: £6.9m), benefitting from an improved sales mix, lower average raw material prices and greater conversion efficiencies.  The Group's operating margin reached 7.5% compared to 6.0% for the previous year. 

 

The three largest business units, Laminates, Foils Europe and Foils Americas delivered a combined profit improvement of 43% or £3.1m, which was partly offset by a disappointing result at Holographics (£0.3m loss).  It is especially pleasing to note the substantial improvement in performance at Foils Europe following the decision 18 months ago to create a stand-alone management team for that business.  Despite the set-back at Holographics, the overall progress demonstrated in this year's results underlines the value of the Group's portfolio of businesses.  Not forgetting that Holographics had an excellent year in 2011/12, the Board expects a more resilient performance over the medium term as the investment programme currently underway strengthens its positioning in the growing security and authentication market.   

 

With reduced interest costs, profit before tax (pre-exceptional) grew 35% and diluted earnings per share increased 36% to 8.7 pence (2012: 6.4 pence).  The Group recorded exceptional costs of £1.0m (2012: £nil) comprising fees and expenses associated with the formal sale process and reorganisation costs in Foils Europe and Holographics.  After these costs, profit before tax increased 15% and diluted earnings per share by 17% to 7.5 pence per share.

 

The Group delivered another strong cash flow performance, despite significantly higher levels of capital expenditure resulting in year-end net debt decreasing by £1.0m to £2.6m.  Capital expenditure in the period increased from £3.5m to £5.1m, equating to 2.4x depreciation.  Whilst a number of projects are only partially complete, the Board remains confident that these investments represent an effective use of funds and will deliver significant benefit to earnings over the long term.

 

Dividend

The Board has recently undertaken a review of its dividend policy.  As previously indicated, cash generation and balance sheet strength have started to afford the Group greater flexibility in use of funds.  After a number of years of priority given to debt reduction, the Board has now adopted a policy of a balanced allocation of free cash flow between capital investment aimed at ensuring continued profit growth and returning a portion of funds to shareholders in the form of a regular and meaningful dividend. 

 

The Board has decided not to recommend a dividend at the forthcoming Annual General Meeting but is pleased to announce its intention, subject to the Group's financial performance at the time, to declare a dividend at the next set of interim results at the end of November 2013 and to pursue a progressive dividend policy thereafter.

 

Shareholders and formal sale process

Following representations from the Group's two leading shareholders in February 2012 and subsequent consultations with advisers and other shareholders, the Board initiated a formal sale process for the Group commencing September 2012.  After a comprehensive exercise and full consideration of the alternatives, the sale process was terminated in February 2013 after it became clear that the potential offers available were unlikely, in the view of the Board, to deliver best value to shareholders.  Costs of £0.5m were incurred during the financial year relating to this exercise.

 

Board and governance

There have been no changes to the composition of the Board since the last Annual Report.  The Board and its Committees have functioned well throughout the year, especially in overseeing the delivery of improved trading results concurrent with a thorough, albeit inconclusive, formal sale process. 

 

Our people

The continued commitment of the API workforce to the success of the business has been greatly appreciated by the Board, especially during a time of uncertainty about the future ownership of the Group.  I would like to thank all our employees for their contribution to the performance and development of the Group over the past twelve months.

 

Outlook

The outlook for the year ahead remains unchanged and the Board expects further progress in operating results with profits more weighted towards the second half as volumes build on the new Laminates supply contract and the recovery in Holographics gains strength.

 

Both Foils businesses are continuing to trade steadily, with management focused on operational improvements including targeted capacity additions and cost reduction initiatives.  In Laminates, growth from the new supply contract will provide resilience against some previously announced volume losses. Holographics is expected to benefit from new leadership and a strengthened proposition to customers, as the current investment programme progresses towards completion.  

 

Whilst economic conditions remain challenging, the Group has proved resilient over recent years and the Board expects this to continue.  Management will continue the drive to increase operational efficiency and to ensure the Group's businesses are well positioned to take advantage of both specific growth opportunities as well as any general economic recovery.

 

 

Richard C Wright

Chairman

5 June 2013

 

  



Business Review

 

Group Operating Results

For the twelve months to March 2013, Group revenues were £112.4m; a decline of 1.3% on the previous year.   On a constant currency basis, revenues were ahead 0.3% and volumes increased 1.6% with the slight decline in average selling prices being primarily attributable to changes in sales mix between products and business units.

 

Despite slightly lower sales, Group pre-exceptional operating profits increased by 23% or £1.6m to £8.5m (2012: £6.9m) due to a higher margin sales mix and lower raw material costs.  The overall operating margin of 7.5% was 1.5% ahead of the previous year. 

 

At divisional level, three of the four businesses delivered improved operating profits, with particularly encouraging progress at Foils Europe (+£1.6m).  Profits at Foils Americas were ahead by £0.7m and Laminates delivered another strong performance (+£0.8m), whilst the weakness at Holographics reported at the interim stage continued in the second half to leave its full year operating profits lower by £1.9m. 

 

As in the previous year, second half profitability was weaker than the first half as Laminates activity fell back from extremely strong start and Holographics suffered a loss-making third quarter.  Nevertheless, a second half benefitting from a significantly increased contribution from Foils Europe and lower central costs was still 11% ahead of the same period last year. 

 

Laminates

Following two consecutive years of strong double digit growth, reported revenues at Laminates edged ahead just 0.6% to £55.2m (2012: £54.8m).  Excluding the impact of exchange rates, sales grew by 3.3% despite the absence of any expected incremental volume associated with the previously announced major new supply contract.  The underlying growth was driven by increased shipments of packaging material for health and beauty products whilst sales to the tobacco, alcoholic drinks and other sectors were broadly unchanged.  

 

Improved supply chain and raw material efficiencies plus a slightly richer sales mix contributed to an improved margin over material costs which translated, through flat operating costs, to a 14% increase in operating profit to £6.5m (2012: £5.7m) and an operating margin of 11.8% (2012: 10.4%).

 

Whilst progress on the new supply contract has been disappointingly slow, qualification of the new-specification material at customer packaging plants has now been completed and shipments have commenced. Volumes are expected to ramp up throughout the coming year.  In the meantime, the extra capacity afforded by the new laminator contributed significantly to the achievement of record volumes and profits at API Laminates in 2012/13.

 

Foils Europe

Foils Europe enjoyed a strong recovery in profitability after a challenging couple of years.  Despite reported revenues down by 7.3% (5.4% at constant exchange rates) at £27.0m (2012: £29.2m), operating profit of £2.0m was ahead £1.6m, delivering an operating margin of 7.3% (2012: 1.3%), including 9.2% for the second half.

 

Sales volumes were broadly flat year-on-year, with average selling prices lower due to product mix and some impact from exchange rates.  In Europe, weaker sales on the Continent were partly offset by growth in the UK and an encouraging start by the new sales and distribution hub in Poland which commenced operations in May 2012.  Shipments in the Asia Pacific region, accounting for approximately 15% of Foils Europe sales, were 5% lower due to reduced activity in New Zealand and Hong Kong. 

 

Foils Europe benefitted from the establishment of a stand-alone management team during 2012 and an increased focus on cost control and margin management.  Cost saving initiatives contributed an estimated £0.7m in the year, with the remaining profit improvement driven by lower raw material prices, more effective loading of the factory and a better sales mix. 

 

Foils Americas

Revenues at Foils Americas of £24.0m were 2.2% up the on prior year at actual exchange rates and 1.3% ahead at constant rates.  The business benefitted from a second straight year of growth in the metallic pigment sector and higher sales on holographic products, partly offset by a decline in pigment foil volumes.  The core US market for packaging and graphics foils remained flat offset by some encouraging progress on sales into South America.

 

Added value margins improved due to a more favourable sales mix and lower average material costs.  These factors more than compensated for higher administrative costs, bonus and incentive payments, and a charge to costs for sales made out of inventory.  As a result, full year profits rose 61% to £1.9m (2012: £1.2m) with an operating margin of 7.9% (2012: 5.0%). 

 

Holographics

The Holographics business experienced a marked reversal of fortunes in the reporting period.  Following a significant  improvement in profit in the previous year, the business returned a loss of £0.3m (2012: £1.6m profit) after the scheduled completion of a major joint project with Laminates was compounded by lower sales of other decorative products to sister companies within the Group and reduced shipments on a long-standing supply arrangement for brand protection holograms. 

 

Total revenues of £9.6m were down 26% (2012: £13.0m) with inter-company sales accounting for £2.8m of the shortfall.  Further progress was made in developing direct sales to customers in the security and authentication market following the significant growth achieved last year.  However, new business was insufficient to compensate for the reduction in orders on an established contract due to de-stocking ahead of the customer taking an increased proportion of the work in-house.  In response, operating costs were reduced by £0.5m but this was not enough to compensate for the fall in sales contribution in a business with relatively high gross margins and fixed costs.

 

The programme to strengthen API's proposition in the security and authentication market commenced with the upgrade of the Salford production facility, investment to provide additional product features and commencement of a joint venture for holographic origination.  The £1.6m of capital additions in the period represents approximately half of the total investment approved by the Board. 

 

Central costs

Central costs for the twelve months to March 2013 were £0.4m lower than the previous year, due primarily to reduced incentive payments and the non-recurrence of a number of one-off charges affecting the prior year.

 

Impairment

The Board considers that no impairments to goodwill or asset carrying values are necessary.

 

Exceptional items

Costs totalling £0.5m were incurred during the year in relation to the formal sale process initiated in September 2012.  In February 2013, the Board announced the termination of the process, having concluded that a sale of the Group was unlikely to gain sufficient recognition for the underlying value of the business or to deliver the best outcome for shareholders.

 

Other costs classified as exceptional relate primarily to reorganisation costs in both Foils Europe and Holographics.

 

Further details are provided in Note 3 to the financial statements.

 

Finance costs

For the twelve months ended 31 March 2013, net finance costs were down by £0.2m to £1.6m.  Finance costs associated with the Group's defined benefit pension plans increased £0.1m as a result of a higher levy by the UK Pension Protection Fund partly offset by lower investment management and advisory fees.  Financing costs relating to bank facilities reduced by £0.2m, predominantly due to lower average debt levels and the conclusion of an interest rate hedge on a portion of UK borrowings.  Further details are provided in Note 4 to the financial statements. 

 

Taxation

The income statement for the year to 31 March 2013 includes a nil net tax charge (2012: £0.1m).  Current taxation of £0.1m has been offset by a deferred tax credit of £0.1m. 

 

The Group's potential liability for corporation tax on profits continues to benefit from prior years accumulated tax losses in both the UK and USA and non-utilised UK capital allowances.  In the period, a deferred tax charge of £1.5m (2012: £1.3m) has been balanced by a deferred tax credit of £1.6m (2012: £1.3m) mostly from further recognition of historic tax losses in Foils Americas. 

 

A full reconciliation of the tax charge is shown in Note 5(d) to the financial statements.

 

The net deferred tax recognised in the Group's balance sheet increased during the year to £6.4m (2012: £4.9m) primarily as a result of an increase in the deferred tax assets related to the UK and US pension deficits (£1.0m) and US tax losses.

 

Remaining unrecognised tax losses at 31 March 2013 of £2.8m in the UK (2012: £4.2m) and $9.0m in the US (2012: $12.6m) are in addition to unclaimed capital allowances in the UK of £3.9m (2012: £5.4m).

 

Earnings per share

Diluted earnings per share grew 17% to 7.5p, compared to 6.4p for the year ending 31 March 2012.  Excluding exceptional items, diluted earnings per share of 8.7p represents a 36% increase on the prior year.

 

Shareholders' Funds

The Group's net assets increased to £22.9m at 31 March 2013 up 7.5% (£1.6m) on the position one year earlier.   

 

Cash flow and net debt

After allowing for pension and finance costs, net cash inflow from operating activities in the year to 31 March 2013 was £7.0m, compared to £7.9m for the prior year. 

 

As indicated in the interim results, the Board has approved a number of key capital projects which have been progressing towards completion.  Capital additions during the year amounted to £5.1m (2012: £3.5m), including residual payments on the new laminator at Poynton, refurbishment and enhancements at the Holographics site in Salford and expenditure on a new business IT system being progressively introduced in the Foils businesses.  In addition, an investment of £0.4m was made in the Czech joint venture origination company to fund the purchase of new equipment.  Depreciation for the year was £2.2m (2012: £2.4m). 

 

Working capital ended the year broadly in line with the position last year.  Working capital efficiency, measured by reference to trailing three month sales (annualised), was 8.2% compared to 7.9% at 31 March 2012.  Year-end inventory included £0.8m of additional raw material stock to support the ramp up of the new supply contract in Laminates.  The Group maintains a vigilant approach to the control of working capital within the constraints of commercial and operating pressures.

 

Consistent with the charge in the income statement, cash flow for interest expense reduced by £0.2m, to £0.6m.

 

Year-end net debt (financial liabilities excluding the fair value of derivatives, less cash) fell £1.0m compared to the position at 31 March 2012, to £2.6m.  As at 31 March 2013, the Group's debt cover ratio (net debt to trailing 12 month EBITDA) was down to 0.3x (2012: 0.4x), with gearing (net debt to shareholders funds) at 11% (2012: 17%).

 

The Group has continued to maintain its strong record of cash conversion which, given the reduced level of bank debt, is providing the Board with increased flexibility in the use of funds.  After a review of business plans and sensitivities, the Board has determined that a meaningful and sustainable dividend would be affordable out of future cash flows after providing for finance and pension costs and a continuation of capital investment at the current rate. 

 

Borrowings and liquidity

The Group policy is to ensure that banking facilities are adequate to support average debt levels and to provide flexibility to meet foreseeable peak borrowing requirements depending especially on the variation in working capital needs and the timing of capital expenditure.  Facilities are in place to independently finance the Group's main operations based in the UK and North America.

 

The Group's UK banking facilities are with Barclays Bank plc and were recently extended until July 2014.  Facilities at 31 March 2013 totalled £12.8m (2012: £16.5m) comprising: loans of £4.0m amortising over the term of the facility, a term loan of £3.8m repayable at the end of the facility agreement and a multi-option overdraft facility of £5.0m renewable in November 2013.  UK borrowings are secured against the Group's UK assets and are subject to quarterly financial covenant targets.

 

In North America, bank facilities are with Wells Fargo Bank and, following a recent review, are now in place to April 2015.  Facilities comprise $1.2m (2012: $1.5m) amortising loans and a $5.5m asset backed overdraft facility.  Borrowings are secured on working capital, plant and equipment and the Kansas property and are subject to quarterly covenant targets.

 

Foreign currency exchange rates

Exchange rates used for the translation of results and assets of US and Euro-zone based operations are shown below. 

 

Rate to £1

 US $

Euro

31 March 2013



Average

1.58

1.23

Closing

1.52

1.18

31 March 2012



Average

1.59

1.16

Closing

1.60

1.20

 

Pensions

The Group operates a number of pension schemes for the benefit of its past and current employees.  UK and US defined benefit pension plans, both of which are closed to future accrual, are accounted for under IAS 19.  At 31 March 2013 the Group's IAS 19 gross pension liability was assessed at £13.3m (2012: £8.6m).  When adjusting for the recognised deferred tax asset of £3.1m (2012: £2.1m), the net liability amounts to £10.2m (2012: £6.5m).

 

In the UK, the API Group plc Pension and Life Assurance Fund has approximately 1,520 pensioners and deferred members.  The fund has admitted no new members since October 2006 and the scheme was closed to future service accrual on 31 December 2008.  At 31 March 2013, the net liabilities of the fund were assessed at £12.3m (2012: £7.6m).  The discount rate, used to estimate the present value of scheme liabilities, was down again from the already historically low levels applying at March 2012.  The change in the discount rate from 4.85% to 4.30% resulted in an increase of £7.9m in calculated liabilities over the year.  Inflation assumptions also rose slightly adding a further £1.5m to the net liabilities whilst the fund's assets performed well, assisted by buoyant stock markets, returning double the assumed rate of 5.2% and narrowing the deficit by £3.9m.  In line with the 2011 agreement with the scheme Trustees, the fund received a deficit-reduction contribution from the Company of £0.7m (2012: £0.7m). 

 

The UK scheme's last triennial valuation was assessed on its position at 30 September 2010. The Trustees will commence the next valuation, as at 30 September 2013, later this year with a completion deadline of 31 December 2014.  The Company continues to pay all pension related administration fees on behalf of the Fund.

 

In 2004 the US defined benefit pension plan was closed to new entrants and future accrual.  Membership is approximately 170 current and past employees.  Details of the net deficit of £1.0m (2012: £1.1m) are included in Note 11 to the financial statements.  

 

At the Group's New Jersey manufacturing facility in the US, current and past employees covered by union contracts are members of a union-managed, multi-employer defined benefit pension plan.  This scheme remains open and operates under the terms of the site's collective bargaining agreement.  In accordance with IAS 19, this scheme is accounted for as a defined contribution plan.

 

  

Group Income Statement

for the year ended 31 March 2013

 



Year ended

31 March

2013


Year ended

31 March

2012


Note

£'000


£'000

Revenue

2

112,426


113,935

Cost of sales


(84,179)


(87,149)

Gross profit


28,247


26,786

Distribution costs


(4,249)


(3,886)


(15,531)


(16,022)

Operating profit before exceptional items

2

8,467


6,878

Exceptional items

3

(1,029)


-

Operating profit


7,438


6,878






Finance revenue

4

10


13

Finance costs

4

(1,632)


(1,832)



(1,622)


(1,819)

Profit before taxation


5,816


5,059

Tax expense

5

(41)


(105)

Profit for the year


5,775


4,954






Earnings per share (pence)





Basic earnings per share on profit for the year

6

7.8


6.7

Underlying basic earnings per share on profit for the year

6

9.1


6.7

Diluted earnings per share on profit for the year

6

7.5


6.4

Underlying diluted earnings per share on profit for the year

6

8.7


6.4

 

All profits are attributable to equity holders of the Parent and relate to continuing operations

 

 


Group Statement of Comprehensive Income

for the year ended 31 March 2013

 



Year ended

31 March

2013


Year ended

31 March

2012



£'000


£'000

Profit for the year


5,775


4,954

Exchange differences on retranslation of foreign operations


703


(4)

Change in fair value of cash flow hedges


(639)


937

Actuarial (losses)/gains on defined benefit schemes


(5,493)


300


1,288


(419)

Other comprehensive income for the year, net of tax


(4,141)


814

Total comprehensive income for the period attributable to equity holders of the Parent


1,634


5,768

 



 

Group Balance Sheet

at 31 March 2013

 



31 March

2013


31 March

2012


Note

£'000


£'000

Assets





Non-current assets





Property, plant and equipment

7

21,313


17,936

Intangible assets - goodwill


5,188


5,188

Investment in joint venture interest

8

378


-

Trade and other receivables


-


32

Financial assets


152


-

Deferred tax assets

5

6,617


5,230



33,648


28,386

Current assets





Trade and other receivables


15,811


15,485

Inventories


12,864


12,237

Other financial assets


184


474

Cash and short-term deposits

9

6,189


10,068



35,048


38,264

Total assets

2

68,696


66,650






Liabilities





Current liabilities





Trade and other payables


22,428


22,261

Financial liabilities

10

3,766


4,522

Income tax payable


373


307



26,567


27,090

Non-current liabilities





Financial liabilities

10

5,574


9,237

Deferred tax liabilities

5

211


307

Provisions


66


76

Deficit on defined benefit pension schemes

11

13,349


8,618



19,200


18,238

Total liabilities


45,767


45,328

Net assets


22,929


21,322






Equity





Called up share capital


767


767

Share premium


7,136


7,136

Other reserves


8,816


8,816

Foreign exchange reserve


958


255

Retained profit


5,252


4,348

API Group shareholders' equity


22,929


21,322

 

 


Group Statement of Changes in Equity

for the year ended 31 March 2013


Equity

Share

capital

Share

premium

Other

reserves

Foreign

Exchange

reserve

Retained

earnings

Total

share-holders'

equity


£'000

£'000

£'000

£'000

£'000

£'000

At 1 April 2011

766

7,136

8,565

259

(1,433)

15,293

Profit for the year

-

-

-

-

4,954

4,954

Other comprehensive income:







Exchange differences on retranslation of foreign operations

-

-

-

(4)

-

(4)

Change in fair value of effective

cash flow hedges

-

-

-

-

937

937

Actuarial gains on defined benefit pension schemes

-

-

-

-

300

300

Tax on items relating to components of other comprehensive income

-

-

-

-

(419)

(419)

Total comprehensive income for the year

-

-

-

(4)

5,772

5,768

Issue of shares

1

-

-

-

-

1

Shares acquired by the Company

-

-

-

-

(1)

(1)

Shares acquired by Employee Benefit Trust

-

-

(11)

-

-

(11)

Transferred on exercise of share options

-

-

262

-

(262)

-

Share-based payments

-

-

-

-

185

185

Tax relating to items accounted for directly through equity

-

-

-

-

87

87

At 31 March 2012

767

7,136

8,816

255

4,348

21,322

Profit for the year

-

-

-

-

5,775

5,775

Other comprehensive income:







Exchange differences on retranslation of foreign operations

-

-

-

703

-

703

Change in fair value of effective

cash flow hedges

-

-

-

-

(639)

(639)

Actuarial losses on defined benefit pension schemes

-

-

-

-

(5,493)

(5,493)

Tax on items relating to components of other comprehensive income

-

-

-

-

1,288

1,288

Total comprehensive income for the year

-

-

-

703

931

1,634

Shares acquired by Employee Benefit Trust

-

-

(94)

-

-

(94)

Transferred on exercise of share options

-

-

94

-

(94)

-

Share-based payments

-

-

-

-

85

85

Tax relating to items accounted for directly through equity

-

-

-

-

(18)

(18)

At 31 March 2013

767

7,136

8,816

958

5,252

22,929


Group Cash Flow Statement

for the year ended 31 March 2013

 



Year ended

31 March

2013


Year ended

31 March

2012

 


Note

£'000


£'000

 

Operating activities





 

Group profit before tax


5,816


5,059

 

Adjustments to reconcile Group profit before tax to net cash flow from operating activities





 

Net finance costs


1,622


1,819

 

Depreciation of property, plant and equipment


2,173


2,368

 

Profit on disposal of property, plant and equipment


(5)


(2)

 

Movement in fair value foreign exchange contracts


(38)


(83)

 

Share-based payments


85


185

 

(Increase)/decrease in inventories


(361)


156

 

(Increase)/decrease in trade and other receivables


(101)


1,260

 

Increase/(decrease) in trade and other payables


68


(304)

 

Decrease in provisions


(10)


(9)

 

Cash generated from operations


9,249


10,449

 

Interest paid


(583)


(832)

 

Pension contributions and scheme expenses paid


(1,625)


(1,539)

 

Income taxes paid


(50)


(171)

 

Net cash flow from operating activities


6,991


7,907

 






 

Investing activities





 

Interest received


10


13

 

Purchase of property, plant and equipment


(5,296)


(2,736)

 

Investment in joint venture


(378)


-

 

Sale of property, plant and equipment


23


5

 

Net cash flow from investing activities


(5,641)


(2,718)

 

 





 

Financing activities





 

Proceeds from share issues


-


1

 

Purchase of shares by the Company


-


(1)

 

Purchase of shares by Employee Benefit Trust


(94)


(11)

 

New borrowings


-


1,913

 

Repayment of borrowings


(4,148)


(996)

 

Net cash flow from financing activities


(4,242)


906

 






 

(Decrease)/increase in cash and cash equivalents


(2,892)


6,095

 

Effect of exchange rates on cash and cash equivalents


25


8

 

Cash and cash equivalents at the beginning of the year

8

8,822


2,719

 

Cash and cash equivalents at the end of the year

8

5,955


8,822

 

 

The presentation of the Group Cash Flow Statement has been changed from previous years.  Interest is now included in net cash flow from operating activities instead of net cash from financing activities.  The impact of this is to reduce net cash flow from operating activities by £583,000 (2012: £832,000) and to increase net cash flow from financing activities by the same amounts.  The Directors consider the revised presentation to better reflect the underlying nature of the cash flows and are in accordance with internal management reporting.






Notes to the Consolidated Financial Statements

 

1. Preparation of financial statements

 

Authorisation of financial statements

The Group's financial statements for the year ended 31 March 2013 were authorised for issue by the Board of Directors on 4 June 2013 and the balance sheet was signed on the Board's behalf by Andrew Turner, Group Chief Executive.

 

API Group plc is a public company incorporated and domiciled in England and Wales.  The Company's ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange.

 

Publication of abridged accounts

The preliminary announcement figures for the year ended 31 March 2013 and the comparative figures for the year ended 31 March 2012 are an abridged version of the Group's statutory accounts which carry an unmodified audit report.  They do not constitute statutory accounts within the meaning of sections 434 to 436 of the Companies Act 2006 and no statutory accounts have yet been filed with the Registrar of Companies for the year ended 31 March 2013. Statutory accounts for the year ended 31 March 2012 have been filed with the Registrar of Companies.  The auditor's report on these accounts was unqualified and did not contain an emphasis of matter, nor did it contain a statement under section 498 of the Companies Act 2006.  The statutory accounts for the year ended 31 March 2013 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

 

The Annual Report and Accounts for the year ended 31 March 2013 will be posted to shareholders by 18 June 2013 prior to the Annual General Meeting on 11 July 2013.  Copies of the Annual Report and Accounts will be available to members of the public from 18 June 2013 at the Group's registered office at Second Avenue, Poynton Industrial Estate, Poynton, Cheshire SK12 1ND.

 

Basis of preparation and statement of compliance with IFRS

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2013 and applied in accordance with the Companies Act 2006.  The Group has applied optional exemptions available to it under IFRS 1.

 

The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

 

Going concern

The Directors are satisfied, on the basis of the Group's latest financial projections and facilities available, that the Group has adequate financial resources to continue to operate for the foreseeable future.  The Directors therefore continue to adopt the going concern basis in preparing these financial statements.

 

Accounting policies

The principal accounting policies which apply in preparing the financial statements for the year ended 31 March 2013 are consistent with those disclosed in the Group's audited accounts for the year ended 31 March 2012.

 

 



2. Segmental analysis

The Group produces monthly management information to enable the Board, including the Group Chief Executive, to monitor the financial performance of its constituent parts.  This information is analysed by business unit.

 

 

 

Revenue



Year ended

31 March

2013


Year ended

31 March

2012



£'000


£'000

Total revenue by origin





Laminates


55,163


54,823

Foils Europe


27,021


29,158

Foils Americas


23,972


23,446

Holographics


9,646


13,015



115,802


120,442






Inter-segmental revenue





Laminates


2


93

Foils Europe


757


980

Foils Americas


556


566

Holographics


2,061


4,868



3,376


6,507






External revenue by origin





Laminates


55,161


54,730

Foils Europe


26,264


28,178

Foils Americas


23,416


22,880

Holographics


7,585


8,147

Segment revenue


112,426


113,935

 

External revenue by destination





UK


28,655


37,778

Rest of Europe


55,606


48,243

Americas


21,318


21,105

Asia Pacific


6,553


6,062

Africa


294


747

Segment revenue


112,426


113,935

 

All revenue is derived from the sale of goods.



Segment result


Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Operating profit before exceptional items




Laminates

6,515


5,704

Foils Europe

1,984


389

Foils Americas

1,893


1,173

Holographics

(275)


1,615

Segment result

10,117


8,881

Central costs

(1,650)


(2,003)

Total operating profit before exceptional items

8,467


6,878

 

Central costs comprise primarily of salaries, other employment costs and corporate advisory fees relating to the central management of the Group.

 


Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Assets




Laminates

13,550


13,276

Foils Europe

17,889


17,082

Foils Americas

14,544


13,552

Holographics

8,719


6,915

Segment asset

54,702


50,825

Unallocated:




Deferred tax assets

6,617


5,230

Cash and short-term deposits

6,189


10,068

Other

1,188


527

Total assets

68,696


66,650

 

 

3. Exceptional items

 


Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Restructuring of operating businesses

(488)


-

Fees associated with the formal sale process

(541)


-


(1,029)


-

 

Restructuring of operating businesses relates primarily to redundancy and other costs associated with business restructuring in the Foils Europe and Holographics businesses.

 

 

4. Finance revenue and finance costs

 


Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Finance revenue




Interest receivable on bank and other short-term deposits

2


3

Other interest receivable

8


10


10


13

Finance costs




Interest payable on bank loans and overdrafts

(804)


(1,045)

Other interest payable

(17)


(49)

Finance cost in respect of defined benefit pension plans

(811)

(738)

 

(1,632)


(1,832)

 

Included within interest payable on bank overdrafts and loans is £235,000 (2012: £250,000) relating to the amortisation of fees and expenses incurred in obtaining bank facilities.

 

 

5. Taxation

 

a) Tax (expense)/credit in the income statement





Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Current income tax




UK corporation tax

(75)


-

Overseas tax - current year expense

(80)


(101)

      - adjustments in respect of prior years


(19)

Total current income tax expense


(120)

 

Deferred tax




Origination and reversal of temporary differences




- defined benefit pension plan

(195)


(209)

- tax losses and other short-term differences

588


(174)

- capital allowances

(275)


448

- effect of change in tax rate


(50)

Total deferred tax credit


15





Total tax expense in the income statement


(105)

 

(b) Tax credit/(expense) on items accounted for through other comprehensive income





Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Deferred tax




Actuarial gains and losses on defined pension schemes

1,318


(78)

Change in fair value of effective cash flow hedges

151


(94)

Effect of change in tax rate

(181)


(247)


1,288


(419)

 

(c) Tax (expense)/credit on items accounted for directly through equity





Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Deferred tax




Share-based payments

(18)


87

 



(d) Reconciliation of the total tax charge

 

The tax rate in the income statement for the year is lower than the standard rate of corporation tax in the UK of 24% (2012: 26%).  The differences are reconciled below:

 


Year ended

31 March

2013


Year ended

31 March

2012


£'000


£'000

Accounting profit before tax

5,816


5,059





Accounting profit multiplied by the UK standard rate of corporation tax of 24% (2012: 26%)

1,396


1,315

Adjustments to tax charge in respect of prior period

(81)


19

Adjustments in respect of foreign tax rates

55


22

Increase in deferred tax asset recognised on losses and capital allowances

(1,595)


(1,346)

Losses for which deferred tax is not recognised

94


43

Other temporary differences for which deferred tax is not recognised

(33)


(90)

Effect of change in tax rate

4


50

Expenses not deductible for tax purposes

201


92

Total tax expense reported in the income statement

41


105

 

(e) Unrecognised tax losses

 

The Group has unrecognised tax losses arising in the UK of £2,819,000 (2012: £4,246,000) that are available and may be offset against future taxable profits of those businesses in which the losses arose.  The UK tax Group also has unrecognised capital allowances of £3,857,000 (2012: £5,442,000) available to offset against future taxable profits at the rate of 18% (2012: 18%) a year on a reducing balance basis.  The Group has unrecognised US federal tax losses carried forward of $8,963,000 (2012: $12,584,000), which are available for offset against future profits for a period of between 10 and 18 years.

 

(f) Deferred tax

 

The deferred tax included in the balance sheet is analysed as follows:

 


31 March

2013


31 March

2012


£'000


£'000

Deferred tax liability




Revaluation of fixed assets

(211)


(220)

Fair value of cash flow hedges

-


(87)


(211)


(307)

 





Deferred tax asset




Defined benefit pension plans

3,070


2,068

Tax losses

2,376


1,736

Capital allowances

941


1,258

Fair value of cash flow hedges

64


-

Share-based payments

166


168


6,617


5,230

 

A reduction in the UK corporation tax from 24% to 23% with effect from 1 April 2013 was substantively enacted on 3 July 2012.  The effect of this rate reduction creates a reduction in the net deferred tax asset which has been included in the figures shown above.  The UK Government also proposed changes to further reduce the main rate of corporation tax to 21% in the year commencing 1 April 2014 and 20% in the year commencing 1 April 2015.  The overall effect of the further reductions from 23% to 20%, if these applied to the total deferred tax balances at 31 March 2013 would be to reduce the net deferred tax asset by approximately £589,000.  These changes will also reduce the Group's current tax charge for future years accordingly.

 

 

6. Earnings per ordinary share

Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.

 

Earnings used to calculate adjusted basic and diluted earnings per share exclude exceptional items, net of tax.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:

 

 

Year ended

31 March

2013

Year ended

31 March

2012


£'000

£'000

Net profit attributable to equity holders of the Parent

5,775

4,954

Adjustments to arrive at underlying earnings:



Exceptional items

1,029

-

Tax credit on exceptional items

(103)

-

Underlying earnings

6,701

4,954

 



 

Year ended

31 March

2013

Year ended

31 March

2012

 

No

No

Basic weighted average number of ordinary shares

73,748,730

73,655,895

Dilutive effect of employee share options and contingent shares

3,600,787

3,972,039

Diluted weighted average number of ordinary shares

77,349,517

77,627,934

 

The basic weighted average number of shares excludes the 3,000,000 shares owned by the API Group plc No.2 Employee Benefit Trust (2012: 3,000,000).  These contingent shares are included in the diluted weighted average number of shares.

 

On 2 May 2013, 47,250 share options were exercised.  This does not have an effect on the earnings per share figures disclosed below.  There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

 

Earnings per ordinary share

 

Year ended

31 March

2013


Year ended

31 March

2012

 

pence


pence

Basic earnings per share

7.8


6.7

Underlying basic earnings per share

9.1


6.7

Diluted earnings per share

7.5


6.4

Underlying diluted earnings per share

8.7


6.4

 

 



7. Property, plant and equipment


Freehold

land

Freehold

buildings

Long

leasehold

land and

buildings

Plant

and

machinery

Office

and IT

equipment

Total


£'000

£'000

£'000

£'000

£'000

£'000

Cost







At 1 April 2011

2,158

7,677

1,693

46,828

6,560

64,916

Additions

-

-

-

3,230

258

3,488

Disposals

-

-

-

(565)

(145)

(710)

Foreign currency adjustment

6

23

-

6

(8)

27

At 31 March 2012

2,164

7,700

1,693

49,499

6,665

67,721

Additions

-

1,419

283

1,661

1,780

5,143

Disposals

-

-

-

(974)

(371)

(1,345)

Foreign currency adjustment

99

364

-

720

151

1,334

At 31 March 2013

2,263

9,483

1,976

50,906

8,225

72,853

 







Depreciation







At 1 April 2011

-

2,990

866

39,382

4,874

48,112

Provided during the year

-

203

57

1,636

471

2,367

Disposals

-

-

-

(561)

(145)

(706)

Foreign currency adjustment

-

13

-

3

(4)

12

At 31 March 2012

-

3,206

923

40,460

5,196

49,785

Provided during the year

-

206

61

1,387

519

2,173

Disposals

-

-

-

(966)

(361)

(1,327)

Foreign currency adjustment

-

223

-

577

109

909

At 31 March 2013

-

3,635

984

41,458

5,463

51,540

 







Net book value at 31 March 2013

2,263

5,848

992

9,448

2,762

21,313

 







Net book value at 31 March 2012

2,164

4,494

770

9,039

1,469

17,936

 







Net book value at 31 March 2011

2,158

4,687

827

7,446

1,686

16,804

 



Construction work-in-progress

Included in the cost of property, plant and equipment is £1,751,000 (2012: £2,878,000; 2011: £168,000) relating to construction work-in-progress.

 

Commitments

Amounts contracted in respect of property, plant and equipment (including construction work-in-progress) amounted to £404,000 (2012: £1,969,000).

 

Security

The Group's UK borrowings of £7,754,000 (2012: £11,514,000) are secured by fixed and floating charges on the UK assets of the Group including fixed assets to the value of £12,668,000 (2012: £10,076,000).  The US loans of £777,000 (2012: £887,000) are pledged against property, plant and equipment to the value of £5,400,000 (2012: £5,598,000).

 

 

8. Investment in joint venture

 

During the year, the Group acquired a 50% interest in a newly formed company, API Optix s.r.o. ("APIO").  The Group has also advanced loans to APIO that will be converted to equity.  The total investment is as follows:

 


31 March

2013


31 March

2012


£'000


£'000

Investment in equity capital

3


-

Loan receivable

375


-

 

378


-

 

The Group's interests in the assets and liabilities of the joint venture are as follows:

 


31 March

2013


31 March

2012


£'000


£'000

Non-current assets

24


-

Current assets

168


-

Current liabilities

(189)


-

 

3


-

 

APIO acts as a service company for the joint venture shareholders and its revenue represents only the recharge of costs incurred.  Net income is £nil, accordingly there is no separate disclosure of the Group's share of results in the Income Statement.

 

Under the joint venture agreement, the Group is committed to inject further funds of approximately £500,000.

 



9. Cash and cash equivalents

 

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following:

 


31 March

2013


31 March

2012


£'000


£'000

Short-term deposits

4,500


6,000

Cash at bank and in hand

1,689


4,068

Cash and short-term deposits

6,189


10,068

Bank overdrafts (Note 17)

(234)


(1,246)

 

5,955


8,822

 

Cash at bank and on deposit are held at major banks with high quality credit ratings.  The maximum exposure to credit risk is represented by their respective carrying values.

 

 

10. Financial liabilities





31 March

2013


31 March

2012


£'000


£'000

Current




Bank overdrafts

234


1,246

Current instalments due on bank loans

2,957


3,196

Interest rate swaps

16


80

Forward foreign exchange contracts

559


-

 

3,766


4,522

 




Non-current




Non-current instalments due on bank loans

5,574


9,205

Interest rate swaps

-


32

 

5,574


9,237

 

 

Bank loans

Bank loans comprise the following:





31 March

2013


31 March

2012


£'000


£'000

Term loans (UK)

7,754


11,514

Term loans (US)

777


887

 

8,531


12,401

Less: current instalments due on bank loans

(2,957)


(3,196)

 

5,574


9,205

 

The Group's banking facilities comprise:

 

UK facilities

The Group's lending arrangements in the UK are with Barclays Bank plc.  In December 2012, agreement was reached to extend these facilities for a further year to July 2014.  At 31 March 2013, UK facilities comprised term loans of £4.0m repayable between April 2013 and July 2014 (2012: £7.7m repayable between April 2012 and July 2013) and a term loan of £3.8m repayable in July 2014 (2012: £3.8m repayable in July 2013).  In addition there is a multi-option overdraft facility of £5.0m (2012: £5.0m).  Interest cost for the period averaged 3.1% (2012: 3.4%) above LIBOR for term loans and 2.9% (2012: 3.3%) above Base Rate for the overdraft.  At 31 March 2013, the total debt under committed and revolving facilities was subject to three quarterly financial covenant targets reflecting the financial performance of the Group excluding the impact of the Foils Americas business unit.  Covenants are for Debt Cover, Senior Interest Cover and Tangible Net Worth.  At 31 March 2013, Debt Cover, the ratio of net debt to 12 month trailing EBITDA, was 0.3x (2012: 0.3x) and this and all other covenant ratios were comfortably within targets.

 

US facilities

The US facilities are with Wells Fargo Bank.  In March 2013, agreement was reached to extend these facilities for a further period to April 2015.  At 31 March 2013 they comprised amortising loans of $1.2m repayable between April 2013 and April 2015 (2012: $1.5m repayable between April 2012 and October 2013) and a revolving credit facility of up to $5.5m (2012: $5.5m), depending on the level of working capital.  Interest cost for the period averaged 4.5% (2012: 4.5%) above LIBOR for the term loans and 3.8% (2012: 3.8%) above LIBOR for the credit facility.  The total debt outstanding is subject to a quarterly covenant obligation relating to Fixed Costs Cover.  During the year to 31 March 2013 the US business met all its covenant obligations.  The US facilities are secured on working capital to the value of £5,861,000 (2012: £5,823,000).

 

 

11. Pensions and other post-retirement benefits

 

The Group operates a number of pension schemes.  Current UK employees participate in a defined contribution scheme.  Overseas employees participate in a variety of different pension arrangements of the defined contribution type and are funded in accordance with local practice.  A non-contributory scheme is operated for members of the North New Jersey Teamsters 11 Union employed at the Company's site in Rahway, New Jersey.  This scheme is a multi-employer defined benefit scheme which is accounted for as a defined contribution scheme, as the information available from the scheme administrators is insufficient for it to be accounted for as a defined benefit scheme.  Under the rules of the scheme the employer is not liable for any deficit of the scheme unless it withdraws from the scheme.

 

In the UK, a defined benefit pension scheme, the API Group Pension and Life Assurance Scheme, was closed to future accrual in December 2008.  This was a funded pension scheme for the Company and its UK subsidiaries providing benefits based on final pensionable earnings, funded by the payment of contributions to a separately administered trust fund.  A second defined benefit scheme, operated in the US, the API Foils, Inc. North American Pension Plan, is also closed to future accrual.

 

The assets and liabilities of the defined benefit schemes are:

 

At 31 March 2013


United

Kingdom


United

States


Total


£'000


£'000


£'000

Equities

39,200


987


40,187

Bonds

22,075


986


23,061

Hedge funds

10,605


-


10,605

Property

6,677


82


6,759

Cash

-


-


-

Fair value of scheme assets

78,557


2,055


80,612

Present value of scheme liabilities

(90,880)


(3,081)


(93,961)

Net pension liability

(12,323)


(1,026)


(13,349)

 






 



At 31 March 2012


United

Kingdom


United

States


Total


£'000


£'000


£'000

Equities

34,508


778


35,286

Bonds

21,174


920


22,094

Hedge funds

10,624


-


10,624

Property

-


71


71

Cash

6,960


-


6,960

Fair value of scheme assets

73,266


1,769


75,035

Present value of scheme liabilities

(80,821)


(2,832)


(83,653)

Net pension liability

(7,555)


(1,063)


(8,618)

 

The amounts recognised in the Group Income Statement and Group Statement of Comprehensive Income for the year are as follows:

 

Year ended 31 March 2013


United

Kingdom


United

States


Total


£'000


£'000


£'000

Recognised in the Income Statement






Recognised in arriving at operating profit

-


-


-

Expected return on scheme assets

3,860


122


3,982

Interest cost on scheme liabilities

(3,842)


(126)


(3,968)

Scheme expenses borne by employers

(825)


-


(825)

Other finance cost

(807)


(4)


(811)

 






Taken to the Statement of Comprehensive Income






Actual return on scheme assets

7,792


172


7,964

Less: expected return on scheme assets

(3,860)


(122)


(3,982)

 

3,932


50


3,982

Other actuarial gains and losses

(9,418)


(57)


(9,475)

Actuarial gains and losses recognised in the Statement of Comprehensive Income

(5,486)


(7)


(5,493)

 

Year ended 31 March 2012


United

Kingdom


United

States


Total


£'000


£'000


£'000

Recognised in the Income Statement






Recognised in arriving at operating profit

-


-


-

Expected return on scheme assets

4,397


119


4,516

Interest cost on scheme liabilities

(4,351)


(119)


(4,470)

Scheme expenses borne by employers

(784)


-


(784)

Other finance cost

(738)


-


(738)

Taken to the Statement of Comprehensive Income






Actual return on scheme assets

4,641


56


4,697

Less: expected return on scheme assets

(4,397)


(119)


(4,516)

 

244


(63)


181

Other actuarial gains and losses

485


(366)


119

Actuarial gains and losses recognised in the Statement of Comprehensive Income

729


(429)


300



The major assumptions used in determining the value of the defined benefit schemes are disclosed below.

 

 

United Kingdom


United States

 


31

March


31

March


31

March


31

March

 


2013


2012


2013


2012

 


%


%


%


%

 

Rate of increase in pensions in payment

2.35


2.20





 

Rate of increase to deferred pensions

2.35


2.20





 

Inflation

2.35


2.20


3.00


3.00

 

Discount rate

4.30


4.85


4.25


4.50

 

Expected rates of return on scheme assets

5.18


5.20


6.75


6.75

 

Equities

5.75


6.05





 

Bonds

3.50


4.00





 

Hedge funds

5.75


6.05





 

Property

5.75


6.05





 

Post-retirement mortality (in years):








Current pensioners at 65 - male

20.3


20.3





Current pensioners at 65 - female

22.3


22.3





Future pensioners at 65 - male

22.0


22.0





Future pensioners at 65 - female

24.3


24.3





 

These assumptions have been selected after consultation with the Group's UK pension advisors, KPMG LLP and the Group's US actuaries, Prudential Retirement.

 

The rate of increase in pensions and the inflation rate assumptions in the UK are based on statistics published by the Bank of England for long-term estimates of the Retail Price Index ("RPI").  At 31 March 2013, the relevant inflation rate based on the RPI for the duration of the UK Scheme was 2.35% (2012: 3.20%).  The statutory basis of indexation used by the Scheme is based on the Consumer Price Index ("CPI").  It is estimated that long-term CPI is approximately 1.0% (2012: 1.0%) lower than the RPI.  A 0.1% variation in the inflation rate would result in a change in the present value of the scheme liabilities of approximately £1.0m (2012: £0.9m).

 

The discount rate for the UK scheme has been set by reference to the iBoxx AA corporate bond 15-year index.  The rate has been modified to take account of the duration of the scheme, which is approximately 18 years.  A 0.1% variation in the discount rate would result in a change in the present value of the scheme liabilities of approximately £1.6m (2012: £1.4m).

 

In the UK, the mortality assumptions for both the current and previous years are based on nationally published tables using 130% of the S1P*A YoB CMI 2009 model with 1.25% long-term rate of improvement.  In the US, mortality assumptions are in accordance with the IRS Static Mortality tables for the relevant year.

 

Scheme assets are stated at their market values at the respective balance sheet dates and overall expected rates of return are established by applying published brokers' forecasts to each category of scheme assets.

 

Following closure of the UK Scheme to future accrual, the Group has agreed to make contributions up to 2019 in order to make up the funding shortfall.  The agreed contributions for the year ended 31 March 2014 are £700,000.



 

Changes in the present value of the defined benefit obligations are analysed as follows:

 


United

Kingdom


United

States


Total


£'000


£'000


£'000

At 1 April 2011

79,843


2,484


82,327

Interest cost

4,351


119


4,470

Benefits paid

(2,888)


(146)


(3,034)

Actuarial gains and losses

(485)


366


(119)

Foreign currency differences

-


9


9

At 31 March 2012

80,821


2,832


83,653

Interest cost

3,842


126


3,968

Benefits paid

(3,201)


(86)


(3,287)

Actuarial gains and losses

9,418


57


9,475

Foreign currency differences

-


152


152

At 31 March 2013

90,880


3,081


93,961

 

Changes in the fair value of the defined benefit assets are analysed as follows:

 


United

Kingdom


United

States


Total


£'000


£'000


£'000

At 1 April 2011

70,813


1,795


72,608

Expected return on plan assets

4,397


119


4,516

Employer contributions

700


58


758

Benefits paid

(2,888)


(146)


(3,034)

Actuarial gains and losses

244


(63)


181

Foreign currency differences

-


6


6

At 31 March 2012

73,266


1,769


75,035

Expected return on plan assets

3,860


122


3,982

Employer contributions

700


100


800

Benefits paid

(3,201)


(86)


(3,287)

Actuarial gains and losses

3,932


50


3,982

Foreign currency differences

-


100


100

At 31 March 2013

78,557


2,055


80,612

 

History of experience gains and losses:

 


Year

ended

31 March

2013

Year

ended

31

March

2012

Year

ended

31

March

2011

Year

ended

31

March

2010

Year

ended

31

March

2009


£'000

£'000

£'000

£'000

£'000

United Kingdom






Fair value of scheme assets

78,557

73,266

70,813

68,142

55,312

Present value of defined benefit obligation

(90,880)

(80,821)

(79,843)

(83,863)

(61,630)

Deficit in the scheme

(12,323)

(7,555)

(9,030)

(15,721)

(6,318)

Experience adjustments arising on plan liabilities

-

7,033

-

(100)

395

Experience adjustments arising on plan assets

3,932

244

687

12,772

(11,289)



 

United States






Fair value of scheme assets

2,055

1,769

1,795

1,779

1,447

Present value of defined benefit obligation

(3,081)

(2,832)

(2,484)

(2,464)

(2,210)

Deficit in the scheme

(1,026)

(1,063)

(689)

(685)

(763)

Experience adjustments arising on plan liabilities

19

40

(5)

(74)

24

Experience adjustments arising on plan assets

50

(63)

35

298

(536)

 

The cumulative amount of actuarial losses recognised since 1 October 2004 in the Group Statement of Comprehensive Income is £5,072,000 (2012: gains of £421,000).  The Directors are unable to determine how much of the pension scheme deficit recognised on transition to IFRS and taken directly to equity of £13,099,000 is attributable to actuarial gains and losses since inception of those schemes.  Consequently, the Directors are unable to determine the amount of actuarial gains and losses that would have been recognised in the Group Statement of Comprehensive Income before 1 October 2004.

 

- Ends -

 

 

 

 

 

 

 


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