2010 Preliminary Announcement

RNS Number : 0268C

Molins PLC

01 March 2011

 



 

1 March 2011

2010 PRELIMINARY ANNOUNCEMENT

 

Molins PLC, the international specialist engineering company, announces its results for the year ended

31 December 2010.

	2010		2009
Sales Underlying operating profit* Profit before tax - continuing operations Profit for the period Underlying earnings per share§ Basic earnings per share Dividends per share Net cash from operating activities - continuing operations Net funds	£86.4m £3.7m £4.1m £2.9m 13.9p 15.3p 5.0p £9.2m £9.0m		£83.8m £3.5m £2.1m £1.1m 11.3p 5.8p 5.0p £8.0m £5.0m

* Continuing operations before exceptional charge of £1.6m (2009: £0.4m)

^§ Continuing operations before exceptional charge of £1.2m (2009: £0.4m) and net financing income on pension scheme balances of £1.5m (2009: £0.6m expense), all figures after tax

•     Increase of 6% in underlying earnings

•     Strong cash flows, resulting in net funds of £9.0m

•     Significant improvement in the valuation of the UK pension scheme

•     Final dividend maintained at 2.5p per share

•     Satisfactory levels of prospective projects under discussion

Dick Hunter, Chief Executive, commented:

"Following a strong final quarter the Group improved its underlying operating profit and generated good cash flows.  Performance in Packaging Machinery improved significantly in the year and Scientific Services continued to perform strongly.  Performance in Tobacco Machinery was lower than in the previous year and we have acted to reduce its cost base.  Although the economic environment remains uncertain and market conditions are challenging, we are cautiously optimistic about the future performance of the Group."

Enquiries:	Molins PLC Dick Hunter, Chief Executive; David Cowen, Group Finance Director	Tel: [phone]
Issued by:	Citigate Dewe Rogerson Kate Lehane	Tel: [phone]

CHAIRMAN'S STATEMENT

I am pleased to report, in this my first statement as Chairman, that the Group improved its underlying operating profit (continuing operations before exceptional items) in the year to £3.7m (2009: £3.5m), on slightly increased sales of £86.4m (2009: £83.8m).  Underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 13.9p (2009: 11.3p).  Basic earnings per share amounted to 15.3p (2009: 5.8p).  The Group ended 2010 with net funds of £9.0m (2009: £5.0m), with particularly strong levels of customer receipts in the final part of the year.

Demand in the Tobacco Machinery division was lower than expected at the beginning of last year, with strong competition taking place for all prospective machine orders, which led to further reorganisation in that division.  The Packaging Machinery division performed much more strongly, particularly in Europe, and the Scientific Services division continued to perform well.

Pension Schemes

The accounting valuation of the Group's UK pension scheme shows a surplus at the year end of £9.9m, a considerable improvement from the position at the end of 2009 (£11.4m deficit).  The Group also has three smaller pension funds in the USA with a combined deficit of £3.7m.  In line with many other pension schemes, the trustee of the UK scheme has decided that it is appropriate to use the CPI measure of inflation for certain future pension increases and this has been taken into account in the valuation.  The Company commenced paying monthly instalments of £0.1m to the scheme in respect of deficit funding in July 2010, as agreed following the June 2009 funding valuation. 

Board

Jonathan Azis decided to relinquish his role as non-executive director and Chairman in October 2010 to allow him to spend time on other activities, which led to my appointment in the same month.  In January 2011 Andrew Cripps left the Board and, as separately announced today, John Allkins has also stepped down from the Board.  I would like to thank them all for their contribution to the Group.  I am pleased to welcome to the Board two new non-executive directors.  John Davies joined in January 2011 and is Chair of the Remuneration Committee, and Phil Moorhouse, whose appointment was announced today, is the new Senior Independent Director and Chair of the Audit Committee.

Outlook and Dividends

The economic environment remains uncertain and market conditions are still challenging.  However, against this backdrop, the Group traded quite strongly towards the end of the year and entered 2011 with an order book only slightly lower than that of the year before, with satisfactory levels of prospective projects under discussion.  Given the size of orders in some of the businesses, the timing of orders considerably influences the level of activity across the Group and can have a major impact on the timing of sales and profits, and such timing may be influenced by political instability in some countries in which the Group trades. As in previous years, performance is likely to be significantly second half weighted.  We remain cautiously optimistic about the future performance of the Group.

The Board is recommending maintaining the final dividend at 2.5p, making a total of 5.0p for the year (2009: 5.0p).

Avril Palmer-Baunack

Chairman

1 March 2011

OPERATING REVIEW

Scientific Services

The division, which comprises Cerulean and Arista Laboratories, delivered another year of strong performance, although not quite at the levels of the previous year, with sales of £20.9m (2009: £22.0m) and operating profit of £2.1m (2009: £2.5m).

Cerulean is the market-leading supplier of quality control instruments and analytical smoke constituent capture machinery to the tobacco industry.  It is based in Milton Keynes, UK and is complemented by sales and service offices in a number of other key geographical areas in supporting its global customer base.

Order intake at Cerulean held up at higher levels than had been expected at the beginning of the year.  In total, orders were only a little lower than the high levels recorded in 2009, with demand from China remaining particularly robust in a market that generally continued to be quite buoyant.  Sales were maintained at similar levels to those of the previous year.  All geographic markets remained strong, as did demand for the whole product range, including another strong year in Cerulean's aftermarket business.  

A key factor in the maintenance of Cerulean's leading market position is its commitment to its development activities.  The business continues to invest significant levels of resource into the enhancement of the current product range as well as a widening of the portfolio.  Attention also continues to focus on the supply chain, both to procure goods and services more effectively and to counter specific threats to potential disruption to supply caused by difficult economic conditions.

Arista Laboratories, based in Richmond, USA and Kingston upon Thames, UK, is an independent tobacco and cigarette smoke constituent testing laboratory, for regulatory, research and product development purposes.  Its sales in the year were lower than in the previous year, and this impacted profitability, which was only partly mitigated by more efficient working practices.

As previously reported, legislation was passed in the USA in June 2009 placing the regulation of tobacco products with the US Food and Drug Administration (FDA).  The full consequences of this, in terms of the required testing regimes, is still uncertain, although much work is being carried out by various committees of the FDA as it develops its regulatory system.  In anticipation of this, Arista commenced an investment programme in its methods and process capabilities, which is mainly an investment in skilled labour resource, for those compounds that it expects will require testing but for which the testing methodology has to be developed.  It is expected that the development of these methods will continue during the first half of 2011.  The business is also investing in its laboratory quality systems, so that it is well placed to benefit from the change in this market as it develops. 

The consequence of the uncertainty of the future requirements is that there was weakness in demand for testing services in the USA, leading to reduced sales as customers deferred some of their testing requirements.  This general weakness is expected to continue into 2011, although there are some prospects of additional one-off orders to complement the current activity. 

Cerulean's market has remained strong for the last few years, and although it is to be expected that the market may become a little softer in the current year, it remains quite buoyant currently.  Short-term prospects at Arista remain similar to that of a year before.  Both businesses operate to short order lead-times which can change their outlook quite quickly.

Packaging Machinery

The division performed substantially better in the year.  Sales increased to £32.9m (2009: £25.8m) and the division returned an operating profit of £1.0m (2009: £1.9m loss, before exceptional items).

The division comprises ITCM, based in Coventry, UK, which provides innovative machinery and engineering solutions to packaging and processing needs, the Langen Packaging Group, based in Mississauga, Canada and in Wijchen, the Netherlands, which supplies highly automated product handling, cartoning and robotic end-of-line machinery and systems, and Cerulean Packing, based in Milton Keynes, UK, which supplies tube packing machinery.

Overall order intake was at similar levels to that of the previous year, which allowed the division to benefit from the higher order book that it entered 2010 with and also to maintain a similar level of order book at the end of the year for delivery in 2011.  Quotation activity has gradually increased and there appears to be signs of increased capital investment taking place, particularly in Europe, with increased opportunities in Asia and South America.

The performance of ITCM in the year was much improved.  Profitability in 2009 was significantly impacted by two projects that incurred cost over-runs and, although one of these projects incurred further costs in 2010 up until it was commissioned, the impact on performance in the year was much less than in the previous year.  Overall project control and performance has improved and the business successfully delivered a number of major projects and has good prospects for further orders from key customers.  With ITCM typically receiving a small number of relatively high value orders in a year, the timing of order intake is critical in terms of achieving effective utilisation of its capacity.  Prospects remain positive but with uncertainty in respect of timing.

The Langen Packaging Group showed much progress in the year, with orders and sales ahead of the previous year, and profitability significantly improved.  The business demonstrated an improvement in its review and risk assessment processes, as well as its project management capabilities.  In addition work continued on its sourcing activities, as well as on its product improvement initiatives, each designed to improve project margins.  There was quite a marked difference between performance in Europe, which was strong, and in the Americas, where the continued strength of the Canadian dollar has impacted the business' competitive position.  The various improvement initiatives have helped to mitigate this to some degree.  There has been a strong emphasis on the development of key customer accounts, and the benefit of this is being seen through repeat orders, and has led to more opportunities and sales growth in emerging markets, particularly in Asia and South America.  The business continues its product development programme, which has led to a leading range of side and top load cartoners, robotic case-packers and palletisers.

Cerulean Packing, which forms a small part of the division, benefited from the improved prospects that it entered the year with and delivered increased sales and profit in the year.

The division has focused on the development of its customer contacts and improvement in its internal processes, as well as on the development of its product range.  The results of this helped the division deliver higher sales and a return to profitability.  The division is reliant on a number of relatively large prospective orders, the timing of which is important in the effective utilisation of resources.  Market conditions remain uncertain but there are encouraging signs of increasing customer activity.  The division entered 2011 with an order book at similar levels to that of a year before.

Tobacco Machinery

Sales were £32.6m in the year (2009: £36.0m) and operating profit, before exceptional items, was £0.6m  (2009: £2.9m).  The performance of the division was impacted by reduced activity for new and rebuild machinery, and a reduction in aftermarket sales, which included an adverse change in the favourable sales mix experienced in 2009.

The division designs, manufactures, markets and services specialist machinery for the tobacco industry and provides extensive aftermarket support to its customers.  The business is headquartered in its new leased premises in Princes Risborough, UK, having moved in June 2010 from its site of over 50 years in Saunderton.  The division's central engineering and logistics teams are located there, as is its main warehouse for spare parts.  It is also the base for the sales and service teams for Europe, Middle East and Africa.  Operations are also located in Richmond, USA and in Singapore, from where the North American and Asia Pacific regions are supported with sales and service teams and spare parts distribution.  South American markets are served from Curitiba, Brazil, which includes a full manufacturing capability.  The division's main machining and assembly operations are in Plzen, Czech Republic, which continues to expand its range of activities to include more work with the Packaging Machinery division.   

In the year, the phased delivery of a significant order, received in 2009, for Octave machines helped to increase the sales value of new machinery, but as anticipated profit margins on this contract were quite low, as the division developed its logistics and assembly operations for this newly developed machine.  Order intake and sales of other new machines were lower than had been planned due mainly to delayed purchase decisions, although orders improved a little towards the end of the year.  Similarly order intake for rebuild machinery in the key South American market was lower than had been expected at the beginning of the year, and this translated directly to reduced sales in the year.  Aftermarket sales, comprising spare parts, performance enhancement kits and service, reduced in the year, mainly reflecting the sales of some one-off equipment upgrade projects in the previous year.

As a result of reduced activity in the South American market as well as the continuing high wage cost increases, the division reduced the number of employees in its Brazilian operation by some 40%.  The operation carried out a full sourcing evaluation in the first half of the year with support from the UK logistics team, which, despite import tariffs, has allowed it to source some components more competitively from the facility in the Czech Republic and other third-party suppliers.  This action enables the business to maintain a full support and service capability to the customer base whilst reducing fixed costs.  The market in South America remains difficult with customers being cautious in terms of their investment plans.  Although a number of opportunities exist, timing remains uncertain and the cost base in this operation remains under review.  The division closed its small service office in Paraguay in the year, with its activity being taken on by the Brazilian operation.  As part of its ongoing commitment to improving the efficiency of the division, redundancies were also made in the UK operation at Princes Risborough, resulting in an overall divisional reduction in the year of about 20% at a cost of £1.6m before tax.

As a consequence of the reduced cost base and increased operational flexibility, together with an order book which is a little lower than it was twelve months previously but which benefits from improved margins, the division is well placed to improve on its performance in 2010, although the impact of political and economic instability in certain North African countries in particular may impact performance.  The principal product development focus remains on the Octave cigarette making machine, which has been well received in the market.

FINANCIAL REVIEW

Profit in the period was £2.9m (2009: £1.1m).  Underlying operating profit (continuing operations before exceptional items) increased to £3.7m (2009: £3.5m) and underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 13.9p (2009: 11.3p). Basic earnings per share (continuing operations) amounted to 15.3p (2009: 6.3p).  Net funds at the end of the year increased to £9.0m (2009: £5.0m), helped by an unusually high level of customer receipts in the last part of the year.

Operating Results

The trading performance of the Group is discussed in the Operating review.

Group revenue was £86.4m, compared with £83.8m in 2009.  Sales in the Scientific Services division were £20.9m (2009: £22.0m) and operating profit was £2.1m (2009: £2.5m).  Sales increased to £32.9m in the Packaging Machinery division (2009: £25.8m) and operating profit increased to £1.0m (2009: £1.9m loss, before exceptional items).  Tobacco Machinery division sales were £32.6m (2009: £36.0m) and operating profit before exceptional items was £0.6m (2009: £2.9m). 

Exceptional Items

The Group incurred exceptional charges in the year of £1.6m before tax in respect of reorganisations within the Tobacco Machinery division.  A net charge in 2009 of £0.4m was incurred which comprised reorganisation costs of £0.7m, net of profit in respect of property of £0.3m.

Interest and Taxation

Net interest income was £2.0m (2009: £1.0m net interest expense).  Included within net interest is net financing income on pension scheme balances of £2.1m (2009: £0.9m net financing expense), which is explained in the Pension Schemes section below.  The tax charge on underlying profits (continuing operations before exceptional items and net financing income/expense on pension scheme balances) was £1.0m, an effective rate of 28% (2009: 35%).  The total taxation charge on the Group's profit before tax on continuing operations was £1.2m (2009: £0.9m), an effective rate of 29% (2009: 43%).

Earnings per Share

Basic earnings per share amounted to 15.3p (2009: 5.8p).  Basic earnings per share for continuing operations amounted to 15.3p (2009: 6.3p) and underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 13.9p (2009: 11.3p).

Dividends

The Board is recommending a final dividend of 2.5p per ordinary share which, together with the interim dividend of 2.5p paid in October 2010, results in a total dividend of 5.0p per ordinary share in respect of 2010 (2009: 5.0p per ordinary share).  The dividend will be paid on 20 May 2011 to shareholders registered at the close of business on 26 April 2011.

Cash, Treasury and Funding Activities

Group net funds were £9.0m at the end of the year (2009: £5.0m).  Net cash inflow from operating activities was £9.2m (2009: £8.0m), which benefited from a positive working capital movement of £3.8m (2009: £2.7m) and is after payments of £1.0m (2009: £1.2m) in respect of reorganisations and net taxation payments of £0.7m  (2009: £0.2m).  Receipts from customers were stronger than expected at the end of the year as a number of customers made payments to the Group earlier than they were contractually required to.  Capital expenditure of £2.2m (2009: £1.6m), which includes £1.2m in respect of the capital cost of relocating from the Tobacco Machinery division's former UK site at Saunderton, consequent to the sale of the site in 2008, and capitalised product development expenditure of £1.5m (2009: £1.1m) were incurred in the year.  Non-capital payments totalling £0.5m were also made in the year arising from the relocation of the Tobacco Machinery division's UK site.  The sale of surplus plant and equipment returned cash receipts of £0.2m.  In 2009 the Group received £0.5m in respect of the sale in 2008 of the site at Saunderton and £1.0m from the sale in 2009 of property in the Netherlands.  Net interest of £0.1m (2009: £0.1m) and dividends of £1.0m (2009: £1.0m) were also paid in the year.  The net cash outflow in respect of discontinued businesses that were sold in 2006 was £0.1m (2009: £0.4m).

There were no significant changes during the year in the financial risks, principally currency risks and interest rate movements, to which the business is exposed and the Group treasury policy has remained unchanged.  The Group does not trade in financial instruments and enters into derivatives (principally forward foreign exchange contracts) solely for the purpose of minimising currency exposures on sales or purchases in other than the functional currencies of its various operations.

The Group maintains bank facilities appropriate to its expected needs.  In the UK, at 31 December 2010 these comprised secured, committed borrowing facilities with Lloyds TSB Bank plc and Fortis Bank SA/NV of £11.1m.  These facilities, which are committed until December 2012, are subject to covenants covering leverage, interest cover and tangible net worth, and are both sterling and multi‑currency denominated.  The Group is operating well within its covenant levels.  Additionally, the Group maintains a committed facility overseas of £3.2m, denominated in US dollars, which expires in July 2011.  Short‑term overdrafts and borrowings are utilised in certain parts of the Group to meet local cash requirements and these are typically denominated in local currencies.  Foreign currency borrowings are used to hedge investments in overseas subsidiaries where appropriate.

Pension Schemes

The Group has adopted IAS 19 (revised) as its basis of accounting for pension costs.  The 2010 accounting valuation of the UK scheme's assets and liabilities was undertaken as at 31 December 2010 based on the detailed funding valuation work carried out as at 30 June 2009, updated to reflect conditions existing at the 2010 year end and to reflect the specific requirements of IAS 19 (revised).  The smaller US defined benefit schemes were valued as at 31 December 2010, using actuarial data as of 1 January 2010, updated for conditions existing at the year end.  Under IAS 19 (revised) the Group has elected to recognise all actuarial gains and losses outside of the income statement.

The IAS 19 (revised) valuation of the UK scheme showed an improvement in the year.  The net surplus at 31 December 2010 was £9.9m (2009: £11.4m deficit), before tax.  The value of the scheme's assets at 31 December 2010 was £328.6m (2009: £313.0m) and the value of the scheme's liabilities was £318.7m (2009: £324.4m), before tax.  The value of the liabilities was favourably impacted by the decision of the scheme's trustee to use the CPI measure of inflation for certain future pension increases.  The beneficial impact of this was £20.6m (before tax) which has been accounted for as an assumption change and recognised through the statements of comprehensive income.

The accounting valuations of the US pension schemes showed an aggregated netdeficit of £3.7m (2009: £3.1m), all amounts being before tax, with total assets of £14.5m (2009: £13.5m).

The last scheme specific funding valuation of the Group's UK defined benefit scheme, which was carried out as at 30 June 2009, showed a funding level of 96% of liabilities, which represented a deficit of £12.1m.  The solvency position of the fund at that date, which reflects the scheme's position if it was wound up, showed a funding level of 60%.  Valuations are extremely sensitive to a number of factors outside the control of the Group, including discount rates.  The trustee of the scheme and the Company agreed a deficit recovery plan, which commits the Company to paying to the scheme £1.2m per annum, in monthly instalments, which commenced July 2010.  The deficit recovery period is estimated to be nine years, which is scheduled to be formally reassessed as at 30 June 2012.  The valuation and deficit recovery plan was submitted to the Pensions Regulator for its review early in the year, in accordance with the standard process for all such valuations.  On request, in the middle of 2010, the trustee of the scheme provided the Pensions Regulator with some ancillary documents in respect of the valuation, which it followed up with some queries in February 2011.

The aggregate pension service cost, before curtailment costs, charged to operating profit was £1.2m (2009: £1.0m).  Curtailment costs, which arise on the redundancy of certain members of the UK scheme and are reported as a reorganisation cost within exceptional items, were £0.7m (2009: £0.1m).  Net financing income in respect of the schemes was £2.1m (2009: £0.9m expense), comprising expected return on scheme assets of £21.0m (2009: £17.7m) and interest on obligations of £18.9m (2009: £18.6m).  As a result of the increase in the value of the schemes' assets since the beginning of 2010 and the change in the value of the schemes' liabilities and discount rate, the Group expects to report net financing income (before tax) on pension scheme balances in 2011 of around £5m, which compares to £2.1m in 2010.

During the year the Company made payments to the UK defined benefit scheme of £0.6m for the regular cost of benefits and £0.6m in respect of the deficit recovery plan.  In 2011, in addition to the payments for the regular cost of benefits and the deficit recovery plan, the Company also expects to make payments in respect of the 2010 curtailment costs.  Only negligible payments were made to the US schemes in the year.

Equity

Group equity at 31 December 2010 was £47.1m (2009: £31.3m).  The movement arises from profit for the period of £2.9m, currency translation gains on foreign currency net investments of £0.9m, actuarial gains, net of tax, in respect of the Group's defined benefit schemes of £13.3m, less movements on the fair value of cash flow hedges of £0.2m, dividend payments of £1.0m and equity‑settled share‑based transactions of £0.1m.

CONSOLIDATED INCOME STATEMENT

		2010				2009
	Notes	Before exceptional items £m	Exceptional items £m (note 3)	Total £m		Before exceptional items £m	Exceptional items £m (note 3)	Total £m
Continuing operations Revenue Cost of sales	2	86.4 (62.8)	- (0.3)	86.4 (63.1)		83.8 (59.7)	- (0.2)	83.8 (59.9)
Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses		23.6 0.1 (6.9) (12.5) (0.6)	(0.3) - (0.2) (0.4) (0.7)	23.3 0.1 (7.1) (12.9) (1.3)		24.1 - (7.2) (13.0) (0.4)	(0.2) 0.4 (0.1) (0.3) (0.2)	23.9 0.4 (7.3) (13.3) (0.6)
Operating profit	2, 4	3.7	(1.6)	2.1		3.5	(0.4)	3.1
Financial income Financial expenses		21.1 (19.1)	- -	21.1 (19.1)		17.8 (18.8)	- -	17.8 (18.8)
Net financing income/(expense)	4	2.0	-	2.0		(1.0)	-	(1.0)
Profit before tax Taxation		5.7 (1.6)	(1.6) 0.4	4.1 (1.2)		2.5 (0.9)	(0.4) -	2.1 (0.9)
Profit from continuing operations		4.1	(1.2)	2.9		1.6	(0.4)	1.2
Discontinued operations
Loss from discontinued operations	10	-	-	-		(0.1)	-	(0.1)
Profit for the period		4.1	(1.2)	2.9		1.5	(0.4)	1.1
Basic earnings per ordinary share Diluted earnings per ordinary share	5			15.3p 15.0p				5.8p 5.8p
Continuing operations Basic earnings per ordinary share Diluted earnings per ordinary share	5			15.3p 15.0p				6.3p 6.3p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		2010 £m		2009 £m
Profit for the period		2.9		1.1
Other comprehensive income/(expense) Currency translation movements arising on foreign currency net investments		0.9		-
Effective portion of changes in fair value of cash flow hedges		0.4		0.7
Net changes in fair value of cash flow hedges transferred to profit or loss		(0.6)		(0.1)
Actuarial gains/(losses)		19.4		(13.2)
Tax on items in other comprehensive income/(expense)		(6.1)		3.8
Other comprehensive income/(expense) for the period		14.0		(8.8)
Total comprehensive income/(expense) for the period		16.9		(7.7)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital £m	Share premium £m	Translation reserve £m	Capital redemption reserve £m	Hedging reserve £m	Retained earnings £m	Total equity £m
Balance at 1 January 2009	5.0	26.0	4.4	3.9	-	0.9	40.2
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- -	- -	- 0.5	1.1 (9.3)	1.1 (8.8)
Total comprehensive income/(expense) for the period	-	-	-	-	0.5	(8.2)	(7.7)
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(1.0) (0.2)	(1.0) (0.2)
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(1.2)	(1.2)
Balance at 31 December 2009	5.0	26.0	4.4	3.9	0.5	(8.5)	31.3
Balance at 1 January 2010	5.0	26.0	4.4	3.9	0.5	(8.5)	31.3
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- 0.9	- -	- (0.2)	2.9 13.3	2.9 14.0
Total comprehensive income/(expense) for the period	-	-	0.9	-	(0.2)	16.2	16.9
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(1.0) (0.1)	(1.0) (0.1)
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(1.1)	(1.1)
Balance at 31 December 2010	5.0	26.0	5.3	3.9	0.3	6.6	47.1

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	2010 £m		2009 (restated) £m (note 6)
Non-current assets Intangible assets Property, plant and equipment Employee benefits Deferred tax assets	7	13.8 10.5 9.9 1.9		14.1 10.2 - 4.0
		36.1		28.3
Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents		15.6 15.6 - 13.8		18.1 17.6 0.1 10.2
		45.0		46.0
Current liabilities Trade and other payables Current tax liabilities Provisions		(19.0) (0.8) (1.3)		(20.5) (0.8) (1.9)
		(21.1)		(23.2)
Net current assets		23.9		22.8
Total assets less current liabilities		60.0		51.1
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Deferred tax liabilities	7	(4.8) (3.7) (4.4)		(5.2) (14.5) (0.1)
		(12.9)		(19.8)
Net assets	2	47.1		31.3
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 9.5 6.6		5.0 26.0 8.8 (8.5)
Total equity		47.1		31.3

CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	2010 £m		2009 £m
Continuing operations Operating activities Operating profit Exceptional items included in operating profit Amortisation Impairment charge Depreciation Profit on sale of property, plant and machinery Pension service costs Other non-cash items Pension payments Working capital movements:   - decrease/(increase) in inventories   - decrease in trade and other receivables   - decrease in trade and other payables		2.1 1.6 1.5 0.3 1.8 (0.1) 1.2 (0.1) (1.2) 3.4 2.2 (1.8)		3.1 0.4 1.3 0.1 1.8 - 1.0 (0.2) (0.8) (0.7) 5.0 (1.6)
Cash generated from operations before reorganisation   Reorganisation costs paid	3	10.9  (1.0)		9.4  (1.2)
Cash generated from operations   Taxation paid		9.9 (0.7)		8.2 (0.2)
Net cash from operating activities		9.2		8.0
Investing activities Interest received Net (non-capital payments)/proceeds arising from sale of Saunderton site Proceeds from sale of other property, plant and equipment Acquisition of property, plant and equipment Development expenditure		0.1 (0.5) 0.2 (2.2) (1.5)		0.1 0.5 1.1 (1.6) (1.1)
Net cash from investing activities		(3.9)		(1.0)
Financing activities Interest paid Repayment of term loans Net decrease against revolving facilities Dividends paid		(0.2) - (0.5) (1.0)		(0.2) (0.2) (2.0) (1.0)
Net cash from financing activities		(1.7)		(3.4)
Discontinued operations Net cash from investing activities		(0.1)		(0.4)
Net cash from discontinued operations		(0.1)		(0.4)
Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held	8	3.5 10.2 0.1		3.2 6.9 0.1
Cash and cash equivalents at period end		13.8		10.2

NOTES TO PRELIMINARY ANNOUNCEMENT

1.      The Group's accounts have been prepared in accordance with International Accounting Standards and International Financial Reporting Standards that were effective at 31 December 2010 and adopted by the EU.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009.  Statutory accounts for 2009 have been delivered to the Registrar of Companies.  The auditors have reported on the 2010 and 2009 statutory accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

2.      Operating segments

         Segment information

	Scientific Services				Packaging Machinery				Tobacco Machinery				Total
	2010 £m		2009 £m		2010 £m		2009 £m		2010 £m		2009 £m		2010 £m		2009 £m
Revenue  - continuing operations	20.9		22.0		32.9		25.8		32.6		36.0		86.4		83.8
Underlying segment operating profit/(loss) before exceptional items	2.1		2.5		1.0		(1.9)		0.6		2.9		3.7		3.5
Exceptional items	-		-		-		(0.1)		(1.6)		(0.3)		(1.6)		(0.4)
Segment operating profit/(loss)	2.1		2.5		1.0		(2.0)		(1.0)		2.6		2.1		3.1
Net financing income/(expense)													2.0		(1.0)
Profit before tax Taxation													4.1 (1.2)		2.1 (0.9)
Profit from continuing operations													2.9		1.2
Discontinued operations Loss from discontinued operations													-		(0.1)
Profit for the period													2.9		1.1
Segment assets Segment liabilities	8.6 (4.2)		8.7 (4.0)		15.6 (8.7)		16.7 (9.7)		22.9 (8.7)		26.5 (9.7)		47.1 (21.6)		51.9 (23.4)
Segment net assets  - continuing operations	4.4		4.7		6.9		7.0		14.2		16.8		25.5		28.5
Net liabilities  - discontinued operations													(0.1)		(0.2)
Unallocated net assets													21.7		3.0
Total net assets													47.1		31.3

Geographical information

	Revenue (by location of customer)
	2010 £m		2010 %		2009 £m		2009 %
Continuing operations
United Kingdom United States of America Europe (excl. UK) Americas (excl. USA) Africa Asia	11.4 13.6 12.9 14.4 11.4 22.7		13 16 15 17 13 26		7.1 16.7 15.7 12.8 7.3 24.2		8 20 19 15 9 29
	86.4		100		83.8		100

3.      The exceptional charge of £1.6m relates to reorganisations carried out during the year within the Tobacco Machinery division and includes curtailment costs of £0.7m relating to the UK pension scheme that are expected to be paid in 2011.  Cash payments in respect of reorganisation costs of £1.0m were made in the year, including £0.9m in relation to the reorganisations carried out in the Tobacco Machinery division.  In addition payments of £0.5m were made in relation to the relocation of the tobacco machinery business previously based at Saunderton, UK.

The exceptional net charge of £0.4m in 2009 included costs of £0.7m related to reorganisations carried out during the year within the Tobacco Machinery division and the Packaging Machinery division, and costs of £0.1m in relation to the preparation for the relocation of the tobacco machinery business at Saunderton.  In addition, profit of £0.4m on the sale of a property in the Netherlands was realised in 2009.  Cash payments in respect of reorganisation costs of £1.2m were made in 2009, including a payment of £0.6m to the UK pension scheme in respect of redundancies carried out in 2008 and 2009.

4.      The Group accounts for pensions under IAS 19 (revised) Employee benefits.  The 2010 accounting valuation of the UK fund's assets and liabilities was undertaken as at 31 December 2010 based on the detailed funding valuation work of the UK defined benefit scheme carried out as at 30 June 2009, updated to reflect actual experience and conditions at 31 December 2010 and to reflect the specific requirements of IAS 19 (revised).  Operating profit includes pension costs of £1.9m (2009: £1.1m), comprising current service costs of £1.2m (2009: £1.0m) in respect of ongoing benefits and curtailment costs of £0.7m (2009: £0.1m) arising from redundancies in the year.  Net financing income/(expense) includes the expected return on pension scheme assets of £21.0m (2009: £17.7m) and the interest cost on pension scheme obligations of £18.9m (2009: £18.6m).

5.      Basic earnings per ordinary share is based upon the profit for the period of £2.9m (2009: £1.1m) and on a weighted average of 18,968,324 shares in issue during the year (2009: 18,968,324).  The weighted average number of shares excludes shares held by the employee trust in respect of the Company's long-term incentive arrangements.  Basic earnings per ordinary share on continuing operations is based upon the profit from continuing operations of £2.9m (2009: £1.2m) and the weighted average number of ordinary shares as shown above. 

Underlying earnings per ordinary share amounted to 13.9p for the year (2009: 11.3p) and is based on underlying profit for the period of £2.6m (2009: £2.2m), which is calculated on profit from continuing operations before exceptional items and net financing income/expense on pension scheme balances.

6.      Property, plant and equipment at 31 December 2009 has been restated to include £0.5m relating to a lease premium that was previously accounted for as an operating lease.  This lease has been reassessed as a finance lease in accordance with the amendment to IAS 17 Leases and the carrying value of £0.5m reclassified from other receivables to property, plant and equipment.

7.      Employee benefits include the net pension surplus of the UK defined benefit pension scheme of £9.9m (2009: £11.4m liability) and the net pension liability of the US defined benefit pension schemes of £3.7m (2009: £3.1m), all figures before tax.

8.      Reconciliation of net cash flow to movement in net funds/(debt)

		2010 £m		2009 £m
Net increase in cash and cash equivalents Cash inflow from movement in borrowings		3.5 0.5		3.2 2.2
Movement in net funds/(debt) in the period Opening net funds/(debt)		4.0 5.0		5.4 (0.4)
Closing net funds		9.0		5.0

9.      Analysis of net funds

		2010 £m		2009 £m
Cash and cash equivalents - current assets Interest-bearing loans and borrowings - non-current liabilities		13.8 (4.8)		10.2 (5.2)
Closing net funds		9.0		5.0

10.    Discontinued operations

The loss from discontinued operations of £0.1m in 2009 comprises aggregate charges of £0.2m in respect of a dilapidations claim on a former Group site in Nottingham and a third-party claim that relates to a former Group business but for which Molins retains responsibility, net of a tax credit of £0.1m.

11.    The Annual Report and Accounts will be sent to all shareholders in March 2011 and additional copies will be available on the Group's website at www.molins.com, or from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY.

 

END

 

 

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