2011 Preliminary Results

RNS Number : 2137Y

Molins PLC

28 February 2012

 



 

28 February 2012                                                                                        FOR IMMEDIATE RELEASE

MOLINS PLC

("Molins" or the "Company", or the "Group")

2011 PRELIMINARY ANNOUNCEMENT

Molins, an international business providing high performance machinery & instrumentation and services & support for the production, packaging and analysis of consumer products, announces its preliminary results for the year ended 31 December 2011.

	2011		2010
Sales Underlying operating profit1 Underlying profit before tax2 Underlying earnings per share3 Dividends per share Net funds Statutory profit before tax Statutory profit for the period Basic earnings per share	£89.9m £4.5m £4.5m 18.3p 5.25p £7.1m £10.4m £7.1m 37.4p		£86.4m £3.7m £3.6m 13.9p 5.0p £9.0m £4.1m £2.9m 15.3p

¹ Before exceptional credit of £1.0m (2010: £1.6m charge)

² Before exceptional credit of £1.0m (2010: £1.6m charge) and net financing income on pension scheme balances of £4.9m (2010: £2.1m)

³ Before exceptional credit of £0.5m (2010: £1.2m charge) and net financing income on pension scheme balances of £3.1m (2010: £1.5m), all figures after tax

Highlights include:

•     25% increase in underlying profit before tax •     Net funds position remains strong

•     Strong order book entering 2012

•     Group continues to invest in its future in all divisions

•     Increase in final dividend to 2.75p per share, resulting in 5% increase in total dividend

Dick Hunter, Chief Executive, commented on performance and the Group's outlook:

"We are pleased with the performance of the Group in the year as a number of favourable trading opportunities contributed to growth in profitability.  Strategic progress continues to be made through the development of each division, with particular emphasis on the growth opportunities in Scientific Services.  The Group is well placed to develop over the medium-term."

Enquiries:	Molins PLC Dick Hunter, Chief Executive; David Cowen, Group Finance Director Collins Stewart Europe Ltd Matt Goode, Rishi Shah	Tel: [phone] Tel: [phone]
Issued by:	Citigate Dewe Rogerson Angharad Couch	Tel: [phone]

CHAIRMAN'S STATEMENT

I am pleased to report that the Group demonstrated good progress in the year.  Underlying profit before tax increased by 25% to £4.5m (2010: £3.6m) and sales increased by 4% to £89.9m (2010: £86.4m).  Underlying earnings per share increased by 32% to 18.3p (2010: 13.9p), reflecting both the improvement in trading performance as well as a more favourable tax position.  Basic earnings per share amounted to 37.4p (2010: 15.3p).  The Group ended 2011 with net funds at £7.1m (2010: £9.0m).

Progress towards achieving the strategic aims of the Group has been made within each of the operating divisions.  In Scientific Services considerable investment has been made as Arista Laboratories prepares itself for the anticipated increase in market demand when the impact of FDA regulation starts to take effect and Cerulean maintained its market-leading position.  The Tobacco Machinery division performed well in the year, with the efficiency of the logistics and manufacturing operations, together with a favourable product mix, contributing to a much improved level of profitability.  Although the Packaging Machinery division performed less well overall, order intake was strong across a wide-range of geographic markets.  The continued strategy of focused product development and key account management has positioned the division well, although we remain mindful of the economic environment and the particular market challenges faced by our UK custom machinery business.

The Group entered 2012 with a strong order book and we are confident that the Group is well placed to continue its strategic development.  The Group is focused on the organic growth of its businesses, through targeted product development, excellence in customer service and ongoing operational efficiency improvements; however we envisage this could be supported by acquisitive growth where appropriate.

Some particularly favourable trading opportunities and circumstances contributed to performance in 2011 being ahead of our initial expectations, and we are mindful of this in respect of performance expectations in the short-term, as well as the global economic environment in general.  The Group tends to perform more strongly in the second half of each year and this is expected to be particularly pronounced in 2012.

The Board is recommending increasing the final dividend to 2.75p, resulting in a 5% increase in the full year dividend to 5.25p (2010: 5.0p).

Avril Palmer-Baunack

Chairman

28 February 2012

OPERATING REVIEW

Scientific Services

The division, which comprises Cerulean and Arista Laboratories, delivered sales of £21.2m (2010: £20.9m) and operating profit of £1.9m (2010: £2.1m).

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

Order intake and sales at Cerulean were maintained at similar levels to the previous year.  Demand remained robust in Cerulean's largest market, China, where investment continues at relatively high levels.  Sales to the tobacco multinationals were at broadly similar levels to the previous year.  The business experienced a slight change in its product mix, with demand for machines that capture smoke constituents being particularly strong, to some extent as a result of impending increased regulation of tobacco products in the USA, offset by a small reduction in demand for instruments.  The aftermarket business continued to grow, as it has for a number of years.  It is apparent that competitive pricing pressures have increased, which the business is combating with continued focus on quality of service and operational efficiency initiatives.     

Cerulean is committed to the development of its products.  It continues to invest significant levels of resource into the enhancement of the current product range and is also focused on the widening of the product portfolio, both for the tobacco industry as well as for other markets.

Arista's sales in the year were a little higher than in the previous year, although profitability was lower, reflecting investment in the business' infrastructure.  A significant investment programme has been initiated in order to prepare the business for the impact of the US Food and Drug Administration (FDA) testing regime.  One part of this programme has been the development of testing methodologies for all analytes that are being considered by the FDA for regulatory testing, all of which Arista is now accredited for.  Additionally, investment has been made in personnel, including scientists, quality controllers and operational management, as well as in systems.  The impact of this has been to increase the cost base in the year but has positioned the business well to work with its customers when the required testing regime becomes clearer.  The business will be moving its US laboratory to larger leased premises, still in the Richmond area, in the second half of 2012. 

In addition to the opportunity that regulation by the FDA brings, the business is targeting greater market penetration in Europe and Asia, as well as medium-term entry into non-tobacco markets.

Cerulean's market has been strong for the last few years, and although there are no signs of a slow-down in demand currently we remain alert to the potential for a market softening and increased competitive pressures.  The FDA testing regime is expected to be finalised in 2012 and this is expected to result in significantly increased levels of market activity in the USA.  Arista is well positioned to benefit from this change in the market, some of which may arise in 2012.  The division operates to short order lead-times which can change its outlook quite quickly.

Packaging Machinery

The performance of the division was mixed in the year, with Langen Packaging Group continuing its trading improvement but ITCM suffering from low activity levels as the few relatively high value prospective orders did not materialise.  Sales increased by 5% to £34.6m (2010: £32.9m) and the division returned a reduced operating profit, before exceptional items, of £0.4m (2010: £1.0m).

The division comprises 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, ITCM, based in Coventry, UK, which provides innovative machinery and engineering solutions to packaging and processing needs and the smaller Cerulean Packing, based in Milton Keynes, UK, which supplies tube packing machinery.

Overall order intake was some 20% higher than in the previous year, with strong growth in both of the Langen Packaging Group businesses being only partly offset by reduced order intake at ITCM.  Cerulean Packing's order intake was at similar levels to the previous year.

Langen Packaging Group's strategy of widening its product range through development of new machines, whilst standardising its products, as well as its continuing focus on key account management, have all contributed to growth in its order intake.  The growth has been evident in both the established markets of North America and Europe, but also in Asia and Central & South America where the benefits of the business' growing relationships with customers and distributors have been evident.  Considerable focus has also been applied over the last few years on operational efficiencies, project management and risk assessment processes.  The continuing benefit of these programmes contributed to the business improving its gross profit margins and being able to establish a more consistent level of performance across its range of customer projects.  The performance of the business was impacted as a result of relatively low activity in the first half of the year, but as expected, and with much stronger activity in the second half, performance improved considerably in the later part of the year.  This led to a satisfactory improvement in performance in the year compared with that of the previous year.

ITCM entered the year with a few high value order prospects, the most significant of which did not proceed.  The consequence of this is that activity levels were low throughout the year, significantly impairing performance, following a relatively strong prior year.  Action is being taken to re-position this specialist business with the aim of developing a broader customer base and a smoother, more predictable level of performance.  Importantly, the business has retained its key skills and capabilities and remains well positioned to support and service its traditional key customers, as well as new customers as it develops its product and service ranges.

The division has maintained its focus on the development of customer contacts and improvements in internal processes, as well as the continued development of its product range.  Encouragingly, despite difficult economic conditions, the division entered 2012 with a stronger order book than that of the year before and is expected to progress in the year.

Tobacco Machinery

Sales in the year increased by 5% to £34.1m (2010: £32.6m) and operating profit, before exceptional items, increased to £2.2m (2010: £0.6m).  The division benefited from strong sales of aftermarket products, as well as from an efficiently performing supply chain which benefited from favourable activity levels.

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 Princes Risborough, UK, where the division's central engineering and logistics teams are located, along with the main warehouse for spare parts.  It is also the base for the sales and service teams for Europe, Middle East and Africa.  South American markets are served from the facility in Curitiba, Brazil, which includes a full manufacturing capability.  Sales, service and distribution operations are located in Richmond, USA and in Singapore, from where the North American and Asia Pacific regions are supported.  Additionally the division is supported by a sales office in Moscow, Russia.  The division's main machining and assembly operation is in Plzen, Czech Republic, which also supports the Packaging Machinery division, as well as a number of non-tobacco industry related customers.

Sales of spare parts were up 10% on the previous year, which helped lift overall profit margins.  The increase arose mainly in the EMEA region where, despite some disruption within a number of countries where customers are based, demand was particularly strong as the lives of existing production lines were extended.  Aftermarket sales in the Asia Pacific region grew strongly, as the business supported a number of customers with particular productivity and product upgrade initiatives.  Spare parts sales to non-tobacco industry customers from the Czech Republic also grew as the business further developed this part of its operation.  This growth was offset a little in the South American region, as well as in North America, as customers consolidated their manufacturing facilities.

Both order intake and sales of new and rebuilt machinery stayed at broadly similar levels to the previous year.  The North American market was strong, with a range of equipment being supplied, and it was encouraging that activity in South America increased from a low level in the previous year, although this market remains fragile.  Further sales of the Octave making machine were made in the year and these machines are operating well in a number of customers' facilities.

The division participated at the TabExpo trade show in Prague in November 2011, alongside the Group's other businesses, Cerulean, ITCM and Arista Laboratories, that service the tobacco industry and its regulators.  This was combined with an exhibition in the division's Plzen facility, which was attended by many existing and prospective customers, and where the Alto making machine, which combines Octave technology with new features and produces cigarettes at 10,000 per minute, was exhibited for the first time.  The Alto development is in its final stages and the first machine is expected to be installed in a customer's factory later in 2012.

The division entered 2012 with a solid order book for all categories of products.  Prospects for new machinery orders are typically hard fought and it is apparent that competitive pressures are increasing, which the business continues to combat with its focused product development and commitment to excellence in the service and support of its customers.  The particularly strong product mix experienced in the year is not expected to be repeated in 2012 and therefore performance expectations are lower.  The division maintains its focus on operational excellence and the management of its cost base.        

FINANCIAL REVIEW

Underlying profit before tax increased by 25% to £4.5m (2010: £3.6m) and underlying earnings per share by 32% to 18.3p (2010: 13.9p), both measures being before exceptional items and net financing income on pension scheme balances.  Profit for the period was £7.1m (2010: £2.9m) and basic earnings per share amounted to 37.4p (2010: 15.3p).  Net funds at the end of the year were £7.1m (2010: £9.0m).

Operating Results

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

Group revenue increased by 4% to £89.9m (2010: £86.4m).  Sales in the Scientific Services division were £21.2m (2010: £20.9m) and operating profit was £1.9m (2010: £2.1m).  Packaging Machinery division sales increased to £34.6m (2010: £32.9m) and operating profit before exceptional items was £0.4m (2010: £1.0m).  Tobacco Machinery division sales were £34.1m (2010: £32.6m) and operating profit before exceptional items was £2.2m (2010: £0.6m). 

Exceptional Items

The Group has reported a net exceptional credit in the year of £1.0m before tax, which comprises aggregate credits of £1.4m arising from actions taken in the Group's pension schemes (see Pension Schemes section for more detail), net of costs of £0.4m in respect of reorganisations within the Tobacco Machinery division (£0.2m) and Packaging Machinery division (£0.2m).  A charge in 2010 of £1.6m before tax was incurred in respect of reorganisation costs within the Tobacco Machinery division.

Interest and Taxation

Net interest income was £4.9m (2010: £2.0m).  Included within net interest is net financing income on pension scheme balances of £4.9m (2010: £2.1m), which is explained in the Pension Schemes section.  The tax charge on underlying profits (before exceptional items and net financing income/expense on pension scheme balances) was £1.0m, an effective rate of 22% (2010: 28%).  The total taxation charge on the Group's profit before tax was £3.3m (2010: £1.2m), an effective rate of 32% (2010: 29%).

Dividends

The Board is recommending an increase in the final dividend to 2.75p per ordinary share which, together with the interim dividend of 2.5p paid in October 2011, results in a total dividend of 5.25p per ordinary share in respect of 2011 (2010: 5.0p per ordinary share).  The dividend will be paid on 11 May 2012 to shareholders registered at the close of business on 20 April 2012.

Cash, Treasury and Funding Activities

Group net funds were £7.1m at the end of the year (2010: £9.0m).  Net cash inflow from operating activities was £3.8m (2010: £9.2m), which was after an outflow arising from an increase in working capital of £1.2m (2010: £3.8m inflow), payments of £0.7m (2010: £1.0m) in respect of reorganisations, pension payments of £2.2m (2010: £1.2m) and net taxation payments of £0.8m (2010: £0.7m).  Capital expenditure of £2.3m (2010: £2.2m) and capitalised product development expenditure of £2.3m (2010: £1.5m) were invested in the year.  The sale of plant and equipment returned cash receipts of £0.1m (2010: £0.2m).  Net interest was £nil (2010: £0.1m expense) and dividends of £1.0m (2010: £1.0m) were paid in the year.

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.  New secured, committed borrowing facilities were entered into on a bilateral basis in November 2011 with Lloyds TSB Bank plc and Santander UK plc of £11.0m in aggregate.  These facilities are committed until November 2015 and are subject to covenants covering leverage, interest cover, tangible net worth and capital expenditure and are both sterling and multi‑currency denominated.  Additionally, ancillary facilities are in place with these banks, covering bonds, indemnities and guarantees.    The Group is operating well within its covenant levels.  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 as its basis of accounting for pension costs.  The 2011 accounting valuation of the UK scheme's assets and liabilities was undertaken as at 31 December 2011 based on the detailed funding valuation work carried out as at 30 June 2009, updated to reflect conditions existing at the 2011 year end and to reflect the specific requirements of IAS 19.  The smaller US defined benefit schemes were valued as at 31 December 2011, using actuarial data as of 1 January 2011, updated for conditions existing at the year end.  Under IAS 19 the Group has elected to recognise all actuarial gains and losses outside of the income statement.

The IAS 19 valuation of the UK scheme resulted in a net surplus at the year end of £1.6m (2010: £9.9m), before tax.  The value of the scheme's assets at 31 December 2011 was £322.5m (2010: £328.6m) and the value of the scheme's liabilities was £320.9m (2010: £318.7m), before tax.  The main cause of the reduction in the value of the net surplus was that the investment return on the scheme's assets was lower than expected, reflecting the difficult conditions in the investment markets.  The interest rate used to calculate the value of the scheme's liabilities, which is based on AA rated corporate bond yields, fell considerably in the year from 5.4% to 4.7%, but the adverse effect of this movement was largely offset by a reduction in expected future inflation rates.

The accounting valuations of the US pension schemes showed an aggregated netdeficit of £5.0m (2010: £3.7m), all amounts being before tax, with total assets of £15.0m (2010: £14.5m).

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 from July 2010 with an estimated recovery period of nine years.  The deficit recovery plan is scheduled to be formally reassessed following the next scheme specific funding valuation as at 30 June 2012.

The aggregate pension service cost charged to operating profit was £1.1m (2010: £1.2m), before actions in the year which resulted in past service credits and before curtailment credits/costs.  In the year an offer was made to certain pensioner members of the UK scheme to exchange part of their entitlement to future increases to their pension payments for an immediate, but non-increasing, uplift to their current pension payments.  The offer was accepted by some of the members.  This resulted in a reduction in past service obligations of £0.6m.  In the USA, the one scheme which was still open to active membership was closed to future accrual in September 2011, which has resulted in a reduction in past service obligations of £0.8m.  The aggregate credit of £1.4m from these two actions has been credited to operating profit, but disclosed separately as other operating income within exceptional items.  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 £nil in the year (2010: £0.7m).  Net financing income in respect of the schemes was £4.9m (2010: £2.1m), comprising expected return on scheme assets of £22.4m (2010: £21.0m) and interest on obligations of £17.5m (2010: £18.9m).  As a result of the changes in the values of the schemes' assets and liabilities since the beginning of 2011 and the changes in the expected return on assets and discount rates, the Group expects to report net financing income (before tax) on pension scheme balances in 2012 of approximately £4m.

During the year the Company made payments to the UK defined benefit scheme of £0.5m for the regular cost of benefits, £1.2m in respect of the deficit recovery plan and £0.2m in respect of curtailment costs arising from actions in 2010 (in respect of which a further £0.3m is expected to be paid in 2012).  Payments of £0.5m were made to the US schemes in the year, the majority of which was in relation to the funding of the aggregate deficit.

Equity

Group equity at 31 December 2011 was £41.0m (2010: £47.1m).  The movement arises from profit for the period of £7.1m, equity‑settled share‑based transactions of £0.1m and tax on items recorded directly in equity of £0.1m, less currency translation losses on foreign currency net investments of £1.1m, actuarial losses in respect of the Group's defined benefit schemes of £10.9m, movements on the fair value of cash flow hedges of £0.4m and dividend payments of £1.0m, all figures net of tax where applicable.

CONSOLIDATED INCOME STATEMENT

		2011				2010
	Notes	Before exceptional items £m	Exceptional items (note 3)  £m	Total £m		Before exceptional items £m	Exceptional items (note 3) £m	Total £m
Revenue Cost of sales	2	89.9 (63.2)	- (0.3)	89.9 (63.5)		86.4 (62.8)	- (0.3)	86.4 (63.1)
Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses		26.7 0.1 (8.3) (13.5) (0.5)	(0.3) 1.4 - (0.1) -	26.4 1.5 (8.3) (13.6) (0.5)		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)
Operating profit	2, 4	4.5	1.0	5.5		3.7	(1.6)	2.1
Financial income Financial expenses		22.6 (17.7)	- -	22.6 (17.7)		21.1 (19.1)	- -	21.1 (19.1)
Net financing income	4	4.9	-	4.9		2.0	-	2.0
Profit before tax Taxation		9.4 (2.8)	1.0 (0.5)	10.4 (3.3)		5.7 (1.6)	(1.6) 0.4	4.1 (1.2)
Profit for the period		6.6	0.5	7.1		4.1	(1.2)	2.9
Basic earnings per ordinary share Diluted earnings per ordinary share	5			37.4p 36.2p				15.3p 15.0p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		2011 £m		2010 £m
Profit for the period		7.1		2.9
Other comprehensive income/(expense) Currency translation movements arising on foreign currency net investments Effective portion of changes in fair value of cash flow hedges Net changes in fair value of cash flow hedges transferred to profit or loss Actuarial (losses)/gains Tax on items in other comprehensive income/(expense)		(1.1) - (0.5) (17.0) 6.2		0.9 0.4 (0.6) 19.4 (6.1)
Other comprehensive income/(expense) for the period		(12.4)		14.0
Total comprehensive income/(expense) for the period		(5.3)		16.9

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 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
Balance at 1 January 2011	5.0	26.0	5.3	3.9	0.3	6.6	47.1
Profit for the period Other comprehensive expense for the period	- -	- -	- (1.1)	- -	- (0.4)	7.1 (10.9)	7.1 (12.4)
Total comprehensive expense for the period	-	-	(1.1)	-	(0.4)	(3.8)	(5.3)
Dividends to shareholders Equity-settled share-based transactions Tax on items recorded directly in equity	- - -	- - -	- - -	- - -	- - -	(1.0) 0.1 0.1	(1.0) 0.1 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.8)	(0.8)
Balance at 31 December 2011	5.0	26.0	4.2	3.9	(0.1)	2.0	41.0

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	2011 £m		2010 £m
Non-current assets Intangible assets Property, plant and equipment Employee benefits Deferred tax assets	6	14.9 10.5 1.6 2.9		13.8 10.5 9.9 1.9
		29.9		36.1
Current assets Inventories Trade and other receivables Cash and cash equivalents		15.9 20.9 12.3		15.6 15.6 13.8
		49.1		45.0
Current liabilities Trade and other payables Current tax liabilities Provisions		(24.1) (1.0) (1.4)		(19.0) (0.8) (1.3)
		(26.5)		(21.1)
Net current assets		22.6		23.9
Total assets less current liabilities		52.5		60.0
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Deferred tax liabilities	6	(5.2) (5.0) (1.3)		(4.8) (3.7) (4.4)
		(11.5)		(12.9)
Net assets	2	41.0		47.1
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 8.0 2.0		5.0 26.0 9.5 6.6
Total equity		41.0		47.1

CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	2011 £m		2010 £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:   - (increase)/decrease in inventories   - (increase)/decrease in trade and other receivables   - increase/(decrease) in trade and other payables   - increase in provisions		5.5 (1.0) 1.2 0.1 1.8 (0.1) 1.1 0.1 (2.2) (0.7) (6.0) 5.3 0.2		2.1 1.6 1.5 0.3 1.8 (0.1) 1.2 (0.1) (1.2) 3.4 2.2 (1.8) -
Cash generated from operations before reorganisation   Reorganisation costs paid	3	5.3 (0.7)		10.9 (1.0)
Cash generated from operations   Taxation paid		4.6 (0.8)		9.9 (0.7)
Net cash from operating activities		3.8		9.2
Investing activities Interest received Net non-capital payments arising from sale of Saunderton site Proceeds from sale of other property, plant and equipment Acquisition of property, plant and equipment Capitalised development expenditure		0.2 - 0.1 (2.3) (2.3)		0.1 (0.5) 0.2 (2.2) (1.5)
Net cash from investing activities		(4.3)		(3.9)
Financing activities Interest paid Net increase/(decrease) against revolving facilities Dividends paid		(0.2)  0.4 (1.0)		(0.2)  (0.5) (1.0)
Net cash from financing activities		(0.8)		(1.7)
Discontinued operations Net cash from investing activities		-		(0.1)
Net cash from discontinued operations		-		(0.1)
Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held	7	(1.3) 13.8 (0.2)		3.5 10.2 0.1
Cash and cash equivalents at  31 December		12.3		13.8

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 2011 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 2011 or 2010.  Statutory accounts for 2010 have been delivered to the Registrar of Companies.  The auditors have reported on the 2011 and 2010 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
	2011 £m		2010 £m		2011 £m		2010 £m		2011 £m		2010 £m		2011 £m		2010 £m
Revenue	21.2		20.9		34.6		32.9		34.1		32.6		89.9		86.4
Underlying segment operating profit before exceptional items Segment exceptional items	1.9 -		2.1 -		0.4 (0.2)		1.0 -		2.2  (0.2)		0.6 (1.6)		4.5 (0.4)		3.7 (1.6)
Segment operating profit/(loss)	1.9		2.1		0.2		1.0		2.0		(1.0)		4.1		2.1
Unallocated exceptional items - pension credits													1.4		-
Operating profit Net financing income													5.5 4.9		2.1 2.0
Profit before tax Taxation													10.4 (3.3)		4.1 (1.2)
Profit for the period													7.1		2.9
Segment assets Segment liabilities	10.1 (4.8)		8.6 (4.2)		20.7 (12.5)		15.6 (8.7)		23.9 (9.7)		22.9 (8.7)		54.7 (27.0)		47.1 (21.6)
Segment net assets  - continuing operations	5.3		4.4		8.2		6.9		14.2		14.2		27.7		25.5
Net liabilities  - discontinued operations Unallocated net assets													(0.1) 13.4		(0.1) 21.7
Total net assets													41.0		47.1

Geographical information

	Revenue (by location of customer)
	2011 £m		2011 %		2010 £m		2010 %
United Kingdom United States of America Europe (excl. UK) Americas (excl. USA) Africa Asia	6.8 14.1 19.0 12.5 8.2 29.3		8 16 21 14 9 32		11.4 13.6 12.9 14.4 11.4 22.7		13 16 15 17 13 26
	89.9		100		86.4		100

3.      The net exceptional credit of £1.0m in the year comprises credits of £1.4m in respect of the Group's pension schemes in the UK and US and costs of £0.4m relating to reorganisations carried out during the year within the Packaging Machinery and Tobacco Machinery divisions.  The exceptional credits of £1.4m comprise a curtailment credit of £0.8m following the closure during the year of the remaining US pension scheme that was open to future accrual, and a past service credit of £0.6m on the UK pension scheme resulting from the offer, and acceptance by some pensioner members, to exchange part of their entitlement to future increases to their pension payments for an immediate, but non-increasing, uplift to their current pension payments.  The aggregate credit of £1.4m from these two actions has been credited to operating profit, but disclosed separately as other operating income within exceptional items.  Cash payments in respect of reorganisation costs of £0.7m were made in the year, including £0.2m in respect of curtailment costs arising in 2010 (in respect of which a further £0.3m is expected to be paid in 2012).

The exceptional charge of £1.6m in 2010 relates to reorganisations carried out during 2010 within the Tobacco Machinery division and includes curtailment costs of £0.7m relating to the UK pension scheme.  Cash payments in respect of reorganisation costs of £1.0m were made in the year ended 31 December 2010, including £0.9m in relation to the reorganisations carried out in the Tobacco Machinery division.  In addition, non-capital payments of £0.5m were made in 2010 in relation to the relocation of the tobacco machinery business previously based at Saunderton, UK.

4.      The Group accounts for pensions under IAS 19 Employee benefits.  The 2011 accounting valuation of the UK fund's assets and liabilities was undertaken as at 31 December 2011 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 2011 and to reflect the specific requirements of IAS 19.  Operating profit includes a net pension credit of £0.3m (2010: £1.9m cost), comprising current service costs of £1.1m (2010: £1.2m) in respect of ongoing benefits and a credit of £1.4m comprising a curtailment credit of £0.8m relating to one of the US pension schemes and a past service credit of £0.6m in respect of the UK pension scheme (2010: £0.7m curtailment cost arising from redundancies in 2010).  Net financing income includes the expected return on pension scheme assets of £22.4m (2010: £21.0m) and the interest cost on pension scheme obligations of £17.5m (2010: £18.9m).

5.      Basic earnings per ordinary share is based upon the profit for the period of £7.1m (2010: £2.9m) and on a weighted average of 18,968,324 shares in issue during the year (2010: 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. 

Underlying earnings per ordinary share amounted to 18.3p for the year (2010: 13.9p) and is based on underlying profit for the period of £3.5m (2010: £2.6m), which is calculated on profit before exceptional items and net financing income on pension scheme balances.

6.      Employee benefits include the net pension surplus of the UK defined benefit pension scheme of £1.6m (2010: £9.9m) and the net pension liability of the US defined benefit pension schemes of £5.0m (2010: £3.7m), all figures before tax.

7.      Reconciliation of net cash flow to movement in net funds

		2011 £m		2010 £m
Net (decrease)/increase in cash and cash equivalents Cash inflow from movement in borrowings		(1.3) (0.4)		3.5 0.5
Change in net funds resulting from cash flows Translation movements		(1.7) (0.2)		4.0 -
Movement in net funds in the period Opening net funds		(1.9) 9.0		4.0 5.0
Closing net funds		7.1		9.0

8.      Analysis of net funds

		2011 £m		2010 £m
Cash and cash equivalents - current assets Interest-bearing loans and borrowings - non-current liabilities		12.3 (5.2)		13.8 (4.8)
Closing net funds		7.1		9.0

9.      The Annual Report and Accounts will be sent to all shareholders in March 2012 and 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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