Final Results

Molins PLC 01 March 2006 1 March 2006 2005 PRELIMINARY ANNOUNCEMENT Molins PLC, the international specialist engineering company, announces its results for the year ended 31 December 2005. 2005 2004 Sales £121.4m £122.9m Underlying operating profit* £5.7m £2.3m Reorganisation costs and goodwill impairment £(8.4)m £(12.9)m Loss before tax £(3.3)m £(11.8)m Basic loss per share (21.9)p (61.1)p Underlying earnings per share* 19.1p 1.9p Cash generated from operations before reorganisation £13.2m £7.7m Net debt £19.0m £26.0m * Before net pension credit, reorganisation costs and goodwill impairment (see note 2) Note: All results are reported under International Financial Reporting Standards (IFRS). An analysis of the impact of adopting IFRS was published on 30 June 2005 and can be found on the Group's website at www.molins.com/corporate, or a copy can be obtained from the Company's registered office. • Significant improvement in underlying operating profit • Strong cash flows and debt reduction • Further reorganisation in the year and Sasib goodwill of £6.7m written down Peter Byrom, Chairman, commented: 'The Group returned to a more satisfactory level of underlying profitability, following the continued restructuring of the Tobacco Machinery division in 2005. Cash flow was strong in the year, with £13.2m generated from operating activities before reorganisation payments and net debt reducing by £7.0m to £19.0m. 'MTM's order book at the beginning of 2006 is a little higher than at the same time last year. The business continues to improve its operational performance, although this is against a background of a competitive market. Sasib's order book for original equipment is weak and actions are being taken to reduce costs, and it is expected that further reorganisation costs will be incurred in 2006. 'The Packaging Machinery division also faces competitive markets but is well placed to progress in the year, through a combination of sales opportunities and operational efficiency improvements. 'The Scientific Services division entered 2006 with an increased order book compared with 2005 and prospects for maintaining its improved performance are good.' Enquiries: Molins PLC Tel: 020 7638 9571 Peter Byrom, Chairman David Cowen, Group Finance Director Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571 Margaret George CHAIRMAN'S STATEMENT The Group returned to a more satisfactory level of underlying profitability, following the continued restructuring of the Tobacco Machinery division in 2005. Cash flow was strong in the year, with £13.2m generated from operating activities before reorganisation payments and net debt reducing by £7.0m to £19.0m. Group sales were at similar levels to the previous year at £121.4m (2004: £122.9m). Underlying operating profit (before net pension credit, reorganisation costs and goodwill impairment) was £5.7m (2004: £2.3m). After interest and taxation costs, underlying earnings per share was 19.1p (2004: 1.9p). MTM Sales in MTM, which comprises the businesses of the Tobacco Machinery division excluding Sasib, were £41.6m, down from £50.3m in 2004. The division had embarked on a significant restructuring of its business in 2004 following a sharp fall in orders for new and rebuild machinery. Having entered 2005 with a low order book the reduction in sales was anticipated. Restructuring continued in 2005 and further costs of £2.2m were incurred as the division looked to improve operational performance. Demand for spare parts and services, which account for the majority of the division's sales, was at similar levels to the previous year. Margins improved, reflecting the reduction in costs. Sales of new and rebuild machinery were sharply down in the year. The division entered 2005 with a reduced order book compared with the previous year, but even though demand for such machinery remained subdued through the year, the level of the order book at the end of the year had increased slightly. Consequent to the reorganisation, despite the reduction in sales, underlying operating profit of the division, excluding Sasib, improved to £2.4m (2004: £0.4m). Sasib The financial performance of Sasib continues to be disappointing. Sales in the year of £18.2m, supported by a reasonably strong order book at the beginning of the year, were significantly higher than the £11.5m in 2004. However, order intake for new machinery, which constitutes a larger proportion of Sasib's total sales compared with MTM, has been low. Performance was also affected by the frustration of a sale that Sasib was expecting to make at the end of the year, before the US customer filed for creditor protection under Chapter 11. Despite increased sales, the business still returned an operating loss of £0.6m, an improvement over the £2.3m loss in 2004. We continue to take actions to reduce costs, but the business and legislative environment within which Sasib operates is not conducive to quick and economic solutions. In view of its financial performance in the year and with poor current order prospects, the Board has decided that it can no longer support the carrying value of goodwill in the Group balance sheet and has provided against the whole amount of £6.7m. Packaging Machinery Performance in the Packaging Machinery division has been mixed. Sales declined in the year by 5% to £43.7m, reflecting continued weakness in the UK and European food packaging sectors in particular, and delays in the placement of some larger potential orders. Operating profit was also down at £1.3m (2004: £2.4m). Performance at Molins ITCM, Langenpac and Cerulean Packing was strong and these businesses are well placed to progress further as their growth strategies continue to develop. Langen Packaging in Canada suffered from a disappointing delay in orders but its development of robotic packaging solutions and its current prospects list support future progress. Sandiacre Rose Forgrove had a difficult year, with operational inefficiencies combined with strong pricing pressures leading to a significant loss. Action has been taken to improve this position, as we work to ensure the business makes the most of its strong market position. Scientific Services The Scientific Services businesses performed well in the year, with sales up 17% to £17.9m and operating profit increasing to £2.6m from £1.8m in the previous year. Growth was driven by Cerulean, with strong demand for its range of quality control instruments and smoking machines. The business also made good progress in the market introduction and acceptance of its new C(2) range of instruments, where demand is expected to increase progressively. Arista's performance was maintained at similar levels to the previous year, with a broadening customer base and range of testing capabilities compensating for the in-sourcing of work from some of its larger customers. Property A formal planning application for the development of commercial property on the Company's 26 acre site at Saunderton was made during the year. This first application was rejected towards the end of the year. We are working with our advisers to address the issues raised by Wycombe District Council before submitting either an appeal against the first decision or a second application. Dividend An interim dividend was not paid for the first half of the year, as the Group continued its reorganisation, and the Board is not recommending the payment of a final dividend. Outlook MTM's order book at the beginning of 2006 is a little higher than at the same time last year. The business continues to improve its operational performance, although this is against a background of a competitive market. Sasib's order book for original equipment is weak and actions are being taken to reduce costs, and it is expected that further reorganisation costs will be incurred in 2006. The Packaging Machinery division also faces competitive markets but is well placed to progress in the year, through a combination of sales opportunities and operational efficiency improvements. The Scientific Services division entered 2006 with an increased order book compared with 2005 and prospects for maintaining its improved performance are good. Peter Byrom Chairman 1 March 2006 OPERATING REVIEW TOBACCO MACHINERY Overall a significantly improved financial performance was delivered in 2005 following the successful implementation of a division-wide restructuring programme during 2004 and 2005. The division comprises the Molins Tobacco Machinery (MTM) and Sasib businesses. MTM has operations in the UK, Czech Republic, Singapore, Brazil, Paraguay and the USA, whilst Sasib operates from Bologna, Italy. It is structured to meet the needs of its customers wherever they are located. 2005 sales were £59.8m (MTM £41.6m and Sasib £18.2m), comprising sales of original equipment, rebuild machinery, spare parts and related services. Underlying operating profit was £1.8m, with MTM contributing £2.4m (2004: £0.4m) and Sasib recording a loss of £0.6m (2004: £2.3m loss). MTM A wide-ranging reorganisation of the MTM businesses, which commenced in 2004, was successfully continued in 2005. Significant cost savings have been achieved through simplification of the business structure and maintained focus on improving efficiencies and margins. Order intake overall was a little higher than in 2004. Market conditions remain uncertain, especially for original equipment and rebuild machinery, but continue to favour service-focused global suppliers such as MTM. MTM's sales were £41.6m in the year, down from £50.3m, which had been supported by a strong opening order book, in 2004. Order flow was not maintained in 2004 and this led to the extensive reorganisation of the division. The operational structure of MTM is now more closely matched with the ongoing expected level of sales; further opportunities for cost savings and efficiency improvements continue to be assessed. The EMEA regional sales team is based in the UK and services this wide geographical area through a combination of sales managers and engineers and also through industry-specific agents. Demand for original equipment remained low through the year, but increased for after-sales services, including spare parts, upgrade kits and other services. Following a slow first half, demand for rebuild equipment increased in the second half of the year. Molins Richmond in the USA performed strongly during the year, despite lower sales, with order intake and profitability ahead of the previous year. The North American market for the division's original and rebuild equipment remained soft, following a period of strong industry investment during 2002 and 2003. However, the business continues to offer a greatly valued 'onshore' service presence to all market sectors in North America, based around the supply of spare parts, upgrade kits, service and repair activities for Molins equipment. Molins Far East, based in Singapore, sells into the Asian markets, including China. Order intake increased by 16% over 2004, with the focus on satisfying the service needs of customers continuing to generate growth. The development of new upgrade kits for the large installed base of Molins machines in the region has also helped to drive sales growth. The dedicated spares and service operation based in Shanghai, China performed well during the year in a very competitive area of the market. The MTM operations in South America performed satisfactorily in 2005, despite the negative impact of the strengthening of the Brazilian real against the US dollar. This exchange rate movement has reduced the competitiveness of exports from Molins do Brasil to the US in particular, with a consequent impact on margins. It has also impacted the competitiveness of customers' exports of regionally produced cigarettes, which has led to pricing pressure and in some areas a reduction in demand for spare parts. Good demand for rebuild equipment has been maintained as the business continues to deliver high quality and price competitive machinery to the market. MTM's operation based in Saunderton, UK, continued to develop as the central engineering and logistics hub of the MTM division. On-site manufacturing activity has been focused on some of the division's critical machining and assembly operations, where such key skills remain essential in meeting the service needs of customers. All other manufacturing activities have been either transferred to the division's operation in Plzen, Czech Republic or sourced from third party suppliers. The smooth transfer of all rebuild machinery assembly from the division's former specialist rebuild operation, closed at the beginning of 2005, was a major achievement in the year. The operation in Plzen, Czech Republic, which supplies the division with manufactured parts and assembled machines, has grown strongly during 2005. Further development of the business will result in other types of Molins machinery being assembled there in 2006. Additional capital investment is planned in order to increase the range of machining activities that can be undertaken on site. The main focus of the division's engineering activities remains on the development of upgrade and enhancement kits for the existing Molins machine base. These kits enable our customers to minimise their level of capital spend and enable MTM to prolong the life of its large installed machine base within the cigarette making industry. Sasib Sasib delivered an improved performance over 2004 following reorganisation of the business during early 2005, but despite this still returned an operating loss. The business continues to experience weak and irregular demand for its range of original and rebuild equipment, which is typically a larger proportion of its total sales compared with MTM. The ability of Sasib to flex cost structures within the Italian business environment has proved difficult, both in terms of speed of implementation and cost. Further opportunities for improving the cost base of the business continue to be explored. Sales in 2005 were considerably higher than in 2004, at £18.2m compared with £11.5m, but were supported by a strong opening order book. Order intake during 2005 for original and rebuild equipment was considerably lower than in the previous year, although demand for spare parts increased. Sasib offers a limited range of new equipment to the market and operates in a very competitive area. The business is active in marketing its capability to provide customised packing solutions to customers. These typically involve specially designed, small batch run packs, for which Sasib's engineering concepts are well suited. Summary The reorganisation initiatives undertaken in 2004 and through into 2005 have had a positive impact on financial performance across the division. The MTM business will continue to make incremental improvements in the way it operates. Market conditions remain uncertain but the business is well positioned to continue to react to the changing needs of customers through its international structure, service focus and strong reputation within the industry. Further reorganisation of Sasib is likely to be required during 2006 in view of the ongoing weak demand for its products. PACKAGING MACHINERY The Molins Packaging Machinery (MPM) division delivered sales of £43.7m in the year, compared with £45.8m in the previous year. Underlying operating profit fell to £1.3m (2004: £2.4m), reflecting mixed performances from the different businesses in the division. Market conditions varied by sector and geography. The food sector, to which the division has a high exposure, remained weak in the UK and Europe but improved in North America. The other sectors that the division serves, which include pharmaceuticals, personal care and consumer durables, were generally more buoyant, but customer decision-making cycles remained long. Investment by customers continues to be driven by two imperatives; cost reduction and packaging innovation to differentiate products from the competition. To meet these two typically conflicting market requirements, the division is pursuing a dual strategy: maximising the use of standardised machinery to deliver high quality and proven machines at excellent value for the customer; and providing strong engineering and custom machinery build capability, to deliver both innovative and high performance machinery and packaging lines to each customer's distinct requirements. To deliver packaging innovation and cost reductions, the division has a continuing programme of investment to update and broaden its product range, with a focus on high performance, effective cost engineering and flexible, modular structures. This includes a growing use of robotics and other standardised specialist machines sourced from our supply partners. The division increasingly uses low cost sources for parts and assembly. It also continues to invest in engineering and machinery build capabilities, with improvements in computer aided design tools, project management and supplier management. The drive for cost reduction leads customers to consider both the capital cost and overall in-service operational effectiveness of each project. All of the division's businesses have a strong focus on delivering high-value product lifetime solutions, based on robustness of product design and manufacture. The division also supports its customer base by continuously enhancing after-sales services and improving spare parts availability. These areas are being strengthened with more staff and dedicated engineering resources to reduce lead-times. The success of this strategy is demonstrated by the large number of repeat sales to the division's major relationship customers. Molins ITCM, based in Coventry, UK, develops innovative solutions and associated production and packaging machinery for its customers. The business had another strong year of sales and profits and delivered a large number of major machine programmes to customers in the pharmaceutical and FMCG sectors. As a result, the business established further its reputation as a key technology partner with these multinational customers. ITCM delivers innovation in product concepts and design of packaging lines. It has helped customers to achieve record levels of throughput and cost efficiencies by supplying unique, high performance production machinery. The number of blue-chip customers has increased during the year and the business continues to invest in its employees and infrastructure in anticipation of another year of strong performance. To support the division's strategy of extending its service capabilities, we have opened a new business unit of ITCM in Atlanta, Georgia. We believe there is a substantial market for engineering services in the packaging industry. The drivers are the trend by larger customers to downsize and outsource their internal project engineering and by smaller businesses to require assistance for one-off projects. The business provides a range of services to help customers plan and implement capital projects and to manage capital assets. Langen and Langenpac, based respectively in Mississauga, Ontario and Wijchen, the Netherlands, serve the markets for highly automated product handling and cartoning machinery in North America and Europe respectively. The businesses supply standard machines and infeeds, custom engineered solutions and complete turnkey installations, as required by their customers. This year has seen a continuation of the growth in the use of robotics for automated infeeds and material handling and in providing end-of-line carton, case and pallet packing solutions. The Chinook cartoner, the division's platform high speed and high specification horizontal cartoning range, continued to gain market share. This product line is being extended to provide a wide range of value propositions. Good progress has been made in the year in establishing a strong position in the supply of top-load cartoning applications. The performance of Langenpac in 2005 was particularly noteworthy, with record sales and improved profit margins. Activity levels at Langen were less strong than in the previous year, with capital approvals in North America continuing to be slow and a further decline in the Canadian to US dollar exchange rate impacting its profit performance. Both businesses, however, ended the year with higher order books than they carried into 2005. Sandiacre Rose Forgrove, based in Nottingham, UK, and Lancaster, Pennsylvania, had a difficult year. The business primarily serves the food sector and sales were down in all markets, except North America. Price competition continues to be strong in all geographic areas, which is compounded further in North America by a relatively weak US dollar. There has been a continuing programme of cost and overhead reductions and productivity improvements across the business since 2004. Progress has taken longer than expected although, importantly, service performance has improved through the year as the business focuses on ensuring customers are well supported. The consequence of the pricing pressures and operational inefficiencies has been a particularly disappointing financial performance. The management team has now been strengthened, including a new Managing Director being appointed. New investments have been made in the products, production and information systems. An improved performance is expected in 2006. Cerulean Packing, supplying tube packing machinery from its base in Milton Keynes, UK, had a particularly good year. The business delivered strong sales and profits and enters 2006 with an increased order book. The business is extending its product range, assisted by its sister companies within MPM. Summary The division closed the year with order books at similar levels to those at the end of 2004. There are a significant number of active projects where investment decisions have been delayed as customers seek capital approvals, but we remain optimistic that a number of these orders will be placed. With these potential projects and with our continued investment in improving product lines, service capability and cost effectiveness, we expect the division's performance to improve in 2006. We continue to evaluate new alliance and acquisition opportunities consistent with our focused sales and profit growth strategy. SCIENTIFIC SERVICES The Scientific Services division, which comprises Cerulean and Arista Laboratories, performed strongly in the year. Sales increased by 17% to £17.9m (2004: £15.3m) and operating profit improved to £2.6m (2004: £1.8m). The strong pressure on profit margins continued in the year but was more than off-set by the increase in sales. Cerulean, based in Milton Keynes, UK, is the market-leading supplier of quality control instruments and analytical smoke constituent capture machinery to the tobacco industry, independent laboratories and government bodies. The business sells throughout the world, supported by a network of fifteen sales and service offices located in the major economic and industrial centres. Sales growth was achieved in most major geographic areas, with a particularly marked increase in Asia, as customers increased their investment in quality control and process improvement equipment for the production area. Product innovation continues to be a major driver of sales growth for the business and helps to set it apart from its competitors in the industry. Cerulean has continued to invest heavily in its product lines and product development capabilities. This was recognised during the year when Cerulean was presented with the Institute of Mechanical Engineers Manufacturing Excellence award for Product Innovation. Sales of the industry leading SM 450 smoking machine have been strong as this machine has become the recognised standard linear machine for the testing of cigarettes. The business has also extended the machine's range of smoking tests with the inclusion of variants for side-stream smoke, cigar and research and development smoking. In addition, a rotary smoking machine has been developed and will be available for delivery in 2006. Sales of quality control instrumentation have also been strong. The established QTM range of instruments has retained its market leading position for laboratory and production testing. Good progress has been made on establishing the new C (2) range of instruments in the market. Extensive customer trials have been undertaken as a result of which the product has been enhanced further. Shipments of this revised version of the product started in 2005 and sales are expected to grow in 2006 as the complete range of variants become available for at-line testing, hopper feeding and laboratory analysis. The business has continued to focus on its operational excellence programme to improve customer satisfaction and efficiency. The use of lean manufacturing techniques is being extended and the business has an embedded continuous improvement culture. Arista Laboratories, based in Richmond, Virginia and Kingston upon Thames, UK, is dedicated to meeting the need for testing, through independent, specialist, high quality analysis of tobacco and cigarette smoke constituents for regulatory, research and product development purposes. After a difficult start to the year, Arista saw a steady improvement in its performance. It successfully increased its sales in new business areas but continued to see a decline in traditional areas where customers have been in-sourcing and margins have been under competitive pressure. A new toxicological testing service has been successfully launched, resulting in a good level of sales. Growth has also come from the newly regulated tests for ignition propensity. Arista has developed an agrochemical residue identification testing service and this is expected to contribute to sales in 2006. Arista markets its services worldwide through its laboratory teams in the US and the UK and also with the support of the Tobacco Machinery division's international sales network. It is the only specialist laboratory of its kind with this global reach which is expected to yield further benefits in the future as tobacco regulations are tightened across the world. The division is well placed to maintain performance in 2006. FINANCIAL REVIEW Group underlying operating profit (which excludes net pension credit, reorganisation costs and goodwill impairment) for the year was £5.7m, up from £2.3m in 2004 on similar sales. In addition, the Group benefited from a net pension credit in respect of ongoing benefits of £0.5m, and incurred reorganisation costs within the Tobacco Machinery division of £2.2m before tax credits (2004: £11.3m) and a £6.7m impairment of purchased goodwill relating to Sasib. Underlying earnings per share was 19.1p (2004: 1.9p). The basic loss per share was 21.9p (2004: 61.1p). International Financial Reporting Standards In line with other UK listed companies, the Group has adopted International Financial Reporting Standards (IFRS) for its 2005 reporting as required by European Union regulations. All information, including prior year figures, has been restated accordingly. The Company issued a comprehensive analysis of the impact of IFRS on the reported results of the Group for 2004 on 30 June 2005. One of the main impacts of adopting IFRS on the Group arises from the change in pension accounting. Under SSAP 24 Accounting for pension costs, changes to actuarial gains and losses were amortised over the expected average remaining service lives of current employees. Under IFRS (IAS 19 (revised) Employee benefits), the fair value of the schemes' net liabilities at the end of the year are shown on the balance sheet, with any actuarial gains or losses being charged to reserves through the statement of recognised income and expense (SORIE). This resulted in a decrease to equity of £29.8m after deferred tax at 31 December 2004. Other changes to equity at 31 December 2004 as a consequence of adopting IFRS, include the capitalisation of certain product development costs of £2.2m and an increase of £4.6m in the book value of land and buildings, both amounts being net of deferred tax. Operating results The trading performance of the Group is discussed in the Operating review. Group revenue at £121.4m was at similar levels to the previous year (2004: £122.9m). Tobacco Machinery division sales, including those of Sasib, were £59.8m (2004: £61.8m). Underlying operating profit of the MTM businesses, excluding Sasib, recovered to £2.4m (2004: £0.4m). Sasib incurred an underlying operating loss of £0.6m (2004: £2.3m loss). The Packaging Machinery division sales were £43.7m (2004: £45.8m) and the division's operating profit was £1.3m (2004: £2.4m). Scientific Services sales increased by 17% to £17.9m (2004: £15.3m) and operating profit increased to £2.6m from £1.8m. Goodwill impairment Following a review of the future order prospects for Sasib, and the continued difficulties in returning this business to profitability, the carrying value of goodwill capitalised on the purchase of the business of £6.7m has been provided against in full. Reorganisation costs The Tobacco Machinery division continued its reorganisation which commenced in 2004, incurring costs of £2.2m in 2005. These comprised redundancy costs, including related pension costs, in the UK and Brazil of £1.5m, other UK related reorganisation costs of £0.3m and an additional inventory provision of £0.4m, reflecting the impact of rationalising the product range of the Group's South American operations in line with the rest of the division. Payments of £4.1m were made in the year in respect of this reorganisation and the completion of the programme announced in 2004. During the year proceeds of £0.5m were received following the closure in 2004 and subsequent liquidation of the Company's 48% investment in Kunming Molins Tobacco Machinery Company. Interest and taxation Net interest expense in 2005 was £1.1m (2004: £1.2m). The taxation charge in the year was £0.7m (2004: credit £0.8m), comprising a charge of £1.2m in respect of profit before reorganisation costs (2004: £0.7m) and a net credit of £0.5m in relation to the reorganisation costs (2004: £1.5m). The effective tax rate in the year, excluding the impact of reorganisation costs, was 24% which benefited from a number of credits that will not recur. Earnings per share Underlying earnings per share (before net pension credit, reorganisation costs and goodwill impairment) was 19.1p (2004: 1.9p). Basic and diluted loss per share was 21.9p (2004: 61.1p). Dividend An interim dividend was not paid and the Board is not recommending a final dividend. Cash, treasury and funding activities The Group's net debt position improved in 2005 and amounted to £19.0m (2004: £26.0m) at the year end. Net cash inflow from operations before reorganisation costs was £13.2m (2004: £7.7m), reflecting the improved profitability of the Group and a reduction in working capital of £3.2m. Payments made in respect of the Tobacco Machinery reorganisation in the year were £4.1m (2004: £3.5m) and £0.5m was received from the closure of the Kunming Molins company (2004: £0.2m). There were net tax receipts of £0.7m (2004: net payments £0.8m). Net expenditure on property, plant and equipment was £1.0m (2004: £3.4m) and product development expenditure was £1.5m (2004: £1.2m). Net interest payments were £1.1m (2004: £1.2m). 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 exchange contracts) solely for the purpose of minimising currency exposures on sales or purchases not in the functional currencies of its various operations. The Group maintains bank facilities appropriate to its expected needs. These include secured, committed facilities with its two principal UK bankers, amounting to £26m at 31 December 2005, which will reduce by £5m over a two year period in line with the terms of the facility agreed early in 2005. The balance of the commitment of £21m expires on 31 July 2008. The committed facilities are subject to covenants covering earnings and cash flow levels and are denominated in both sterling and other currencies. In addition, the Group maintains committed facilities with overseas banks of £5.7m. Short-term overdrafts and borrowings are utilised around 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 valuations The Group's main defined benefit scheme is in the UK. The last formal actuarial valuation of the fund was carried out as at 30 June 2003, updated to reflect conditions at 1 January 2004. This showed that a surplus in excess of three years' worth of employer's contributions existed at that date and the fund's trustee and the Company agreed that the employer's contribution holiday would continue to 30 June 2006 at which time the next triennial valuation will take place. The Group also maintains a defined benefit scheme in the US. The Group adopted IAS 19 (revised) Employee benefits in 2005 as its basis of accounting for pension costs, as part of its IFRS implementation. For accounting purposes, valuations of the UK fund assets and liabilities have been undertaken at 31 December 2005 and at prior years for the purpose of restatement under IFRS, based on the 2003 valuation with its assumptions updated to reflect assumptions existing at each balance sheet date. Under IAS 19 (revised) the Company has elected to recognise all actuarial gains and losses outside of the income statement. The net pension credit arising from the UK and US funds in 2005 was £0.1m (2004: £1.4m cost), which comprises a £0.5m net credit (2004: £nil) in respect of ongoing benefits, less curtailment costs of £0.4m (2004: £1.4m) arising from redundancies in the year. The IAS 19 (revised) valuation of the UK pension fund at 31 December 2005 showed a net deficit of £14.3m, a reduction of £5.4m in the year, before deferred tax. The deficit in the US fund at the end of the year was £0.3m (2004: £1.4m surplus), before deferred tax. Equity Group equity at 31 December 2005 was £29.9m (2004: £29.2m). The increase arises from the £4.0m loss for the year, offset by a £2.4m net actuarial gain arising on the Group's net pension liabilities, issue of new shares of £0.1m, favourable exchange movements on the net assets of overseas operations of £1.9m and a net £0.3m increase in reserves arising from accounting for the Group's long-term incentive plan. David Cowen Group Finance Director 1 March 2006 Consolidated income statement 2005 2004 Before goodwill impairment Before Goodwill Reorg. reorg. Reorg. and reorg. impairment costs Total costs costs Total £m £m £m £m £m Notes costs £m (note 4) (note 4) £m (note 3) Revenue 2 121.4 - - 121.4 122.9 - 122.9 Cost of sales (85.8) - (1.2) (87.0) (92.5) (7.2) (99.7) Gross profit/(loss) 35.6 - (1.2) 34.4 30.4 (7.2) 23.2 Other operating 0.3 - - 0.3 0.1 - 0.1 income (9.8) - (0.2) (10.0) (8.4) (0.3) (8.7) Distribution expenses (18.7) - (0.3) (19.0) (18.2) (2.4) (20.6) Administrative (1.2) (6.7) (0.5) (8.4) (1.6) (1.4) (3.0) expenses Other operating expenses Operating profit/ 2, 6 6.2 (6.7) (2.2) (2.7) 2.3 (11.3) (9.0) (loss) Profit/(loss) on closure of associate 5 - - 0.5 0.5 - (1.6) (1.6) Profit/(loss) before financing costs 6.2 (6.7) (1.7) (2.2) 2.3 (12.9) (10.6) Financial income 0.4 - - 0.4 0.3 - 0.3 Financial expenses (1.5) - - (1.5) (1.5) - (1.5) Net financing costs (1.1) - - (1.1) (1.2) - (1.2) Profit/(loss) before tax 5.1 (6.7) (1.7) (3.3) 1.1 (12.9) (11.8) Taxation (1.2) - 0.5 (0.7) (0.7) 1.5 0.8 Profit/(loss) for the 3.9 (6.7) (1.2) (4.0) 0.4 (11.4) (11.0) period Basic earnings/(loss) per ordinary share 7 (21.9)p (61.1)p Diluted earnings/ (loss) per ordinary (21.9)p (61.1)p share Consolidated balance sheet 2005 2004 Notes £m £m Non-current assets Intangible assets 13.5 19.6 Property, plant and equipment 28.7 29.7 Trade and other receivables 1.2 1.0 Employee benefits 8 - 1.4 Deferred tax assets 5.4 6.8 48.8 58.5 Current assets Inventories 27.2 35.2 Trade and other receivables 22.6 25.5 Taxation receivable 0.2 1.9 Cash and cash equivalents 2.8 5.1 52.8 67.7 Current liabilities Bank overdrafts (1.9) (0.9) Interest-bearing loans and borrowings (2.4) (0.8) Trade and other payables (25.6) (32.4) Taxation payable (0.9) (0.9) Provisions (2.2) (5.4) (33.0) (40.4) Net current assets 19.8 27.3 Total assets less current liabilities 68.6 85.8 Non-current liabilities Interest-bearing loans and borrowings (17.5) (29.4) Trade and other payables (0.2) - Employee benefits 8 (16.9) (22.6) Deferred tax liabilities (4.1) (4.6) (38.7) (56.6) Net assets 2 29.9 29.2 Equity Issued capital 5.0 5.0 Share premium 26.0 25.9 Reserves 4.8 2.9 Retained earnings (5.9) (4.6) Total equity 29.9 29.2 Consolidated statement of cash flows 2005 2004 Note £m £m Cash flows from operating activities Loss for the period (4.0) (11.0) Reorganisation costs included in operating loss for the period 2.2 11.3 Amortisation 0.9 0.8 Goodwill impairment 6.7 - Depreciation 2.7 2.9 Interest income (0.4) (0.3) Interest expense 1.5 1.5 Profit on sale of plant and equipment (0.1) - (Profit)/loss on closure of associate (0.5) 1.6 Equity-settled share-based transactions (LTIP) 0.3 0.2 Taxation expense/(credit) 0.7 (0.8) Other movements - (0.1) Working capital movements: - Decrease in inventories 8.1 1.2 - Decrease in trade and other receivables 3.7 12.7 - Decrease in trade and other payables (7.1) (12.4) - (Decrease)/increase in provisions and employee benefits (1.5) 0.1 Cash generated from operations before reorganisation 13.2 7.7 Reorganisation costs paid (4.1) (3.5) Cash generated from operations 9.1 4.2 Taxation received/(paid) 0.7 (0.8) Net cash from operating activities 9.8 3.4 Cash flows from investing activities Proceeds from sale of plant and equipment 0.4 0.4 Net proceeds from closure of associate 0.5 0.2 Acquisition of property, plant and equipment (1.4) (3.8) Development expenditure (1.5) (1.2) Net cash from investing activities (2.0) (4.4) Cash flows from financing activities Issue of new shares 0.1 - Interest received 0.4 0.4 Interest paid (1.5) (1.6) (Decrease)/increase in borrowings (10.1) 2.9 Payment of finance leases (0.1) - Dividends paid - (1.4) Net cash from financing activities (11.2) 0.3 Net decrease in cash and cash equivalents 9 (3.4) (0.7) Cash and cash equivalents at 1 January 4.2 4.9 Effect of exchange rate fluctuations on cash held 0.1 - Cash and cash equivalents at period end 0.9 4.2 Consolidated statement of recognised income and expense 2005 2004 £m £m Currency translation movements arising on foreign currency net investments 1.9 (1.0) Actuarial gains 2.4 2.5 Net income recognised directly in equity 4.3 1.5 (4.0) (11.0) Loss for the period 0.3 (9.5) Total recognised income and expense for the period Notes to preliminary announcement 1. The attached financial statements are the Group's first financial statements following the adoption of International Financial Reporting Standards (IFRS). They have been prepared in accordance with IFRS adopted for use in the EU ('adopted IFRS') in accordance with EU law (IAS Regulation EC 1606/2002). On 30 June 2005 the Company published a report which included a set of restated IFRS compliant 2004 financial statements (excluding notes), together with a restatement of the Group's accounting policies under IFRS. The report also included an analysis of the impact of adopting IFRS from 1 January 2004 on the income statement for the period ending 31 December 2004 and on the balance sheet at that date. This report can be found on the Group's website at www.molins.com/corporate or a copy can be obtained from the Company's registered office. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2005 or 2004. Statutory accounts for 2004, which were prepared under UK GAAP, have been delivered to the registrar of companies, and those for 2005, prepared under accounting standards adopted by the EU, will be delivered following the Company's Annual General Meeting. The auditors have reported on those 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 237 (2) or (3) of the Companies Act 1985. 2. Segmental analysis Business segments Tobacco Packaging Scientific Machinery Machinery Services Total 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m Revenue 59.8 61.8 43.7 45.8 17.9 15.3 121.4 122.9 Underlying segment operating profit/ (loss) before net pension credit, reorganisation costs and goodwill impairment 1.8 (1.9) 1.3 2.4 2.6 1.8 5.7 2.3 Goodwill impairment (6.7) - - - - - (6.7) - Reorganisation costs (before profit/ (loss) on closure of associate) (2.2) (11.3) - - - - (2.2) (11.3) Segment operating profit/(loss) before net pension credit (7.1) (13.2) 1.3 2.4 2.6 1.8 (3.2) (9.0) Net pension credit (ex. curtailment 0.5 - costs) Operating loss (2.7) (9.0) Profit/(loss) on closure of associate 0.5 (1.6) Net financing costs (1.1) (1.2) Taxation (0.7) 0.8 Loss for the period (4.0) (11.0) Segment net assets 36.2 44.9 11.2 10.2 15.5 15.2 62.9 70.3 Unallocated net liabilities (33.0) (41.1) (including net debt and pension liabilities) Total net assets 29.9 29.2 Geographical segments Revenue Segment net assets (by destination of goods) (by location of assets) 2005 2005 2004 2004 2005 2004 £m % £m % £m £m United Kingdom 13.9 11 18.5 15 43.9 45.4 Continental Europe 22.4 18 21.8 18 6.3 12.0 North America 31.0 26 34.1 28 10.9 11.6 Asia 26.6 22 27.9 23 0.5 0.8 Africa 18.4 15 13.4 11 - - Rest of the world 9.1 8 7.2 5 1.3 0.5 121.4 100 122.9 100 62.9 70.3 3. The impairment charge of £6.7m for the period relates to the impairment in full of the carrying value of the purchased goodwill of Sasib S.p.A. following a review of its order prospects at December 2005. 4. The reorganisation costs of £2.2m (2004: £11.3m) (before profit/(loss) on closure of associate) relate to the restructuring of the Tobacco Machinery division and comprise costs of £1.5m (2004: £6.8m) relating to redundancy costs, including related pension costs, in the UK and Brazil, other reorganisation costs of £0.3m, an additional £0.4m (2004: £1.7m) relating to inventory provisions, and in 2004, £2.8m relating to the suspension of the development of the Sasib Fenix packing machine. 5. The profit/(loss) on closure of associate relates to the net write off of the investment in the Kunming Molins company in China in 2004 and receipt of loan/capital repayments in 2004 and 2005, following its closure and subsequent liquidation. 6. The Group accounts for pensions under IAS 19 (revised) Employee benefits. A formal valuation of the UK pension fund was carried out at 30 June 2003 and its assumptions have been applied in the financial statements, updated to reflect conditions at 31 December 2005. Operating profit includes a net pension credit of £0.1m (2004: £1.4m cost), comprising a £0.5m net credit (2004: £nil) in respect of ongoing benefits, less curtailment costs of £0.4m (2004: £1.4m) arising from redundancies in the year. The £0.5m net credit in respect of ongoing benefits comprises current service costs of £3.1m, interest on the pension obligations of £17.2m, offset by the expected return on the schemes' assets of £20.8m. 7. Earnings/(loss) per ordinary share is based upon the loss for the period of £4.0m (2004: £11.0m) and on a weighted average of 18,429,551 shares in issue during the year (2004: 18,023,181). Underlying earnings per ordinary share, which is calculated before net pension credit, reorganisation costs and goodwill impairment, was 19.1p for the year (2004: 1.9p). 8. Employee benefits include the net pension liabilities of the UK defined benefit pension scheme of £14.3m (31 December 2004: £19.7m) and the US defined pension scheme of £0.3m (31 December 2004: £1.4m surplus), all figures before deferred tax. 9. Reconciliation of net cash flow to movement in net debt 2005 2004 £m £m Decrease in cash and cash equivalents (3.4) (0.7) Cash inflow/(outflow) from movement in borrowings and finance leases 10.2 (2.9) Change in net debt resulting from cash flows 6.8 (3.6) Translation movements 0.2 - Movement in net debt in the period 7.0 (3.6) Opening net debt (26.0) (22.4) Closing net debt (19.0) (26.0) 10. Analysis of net debt 2005 2004 £m £m Cash and cash equivalents - current assets 2.8 5.1 Bank overdrafts - current liabilities (1.9) (0.9) Interest-bearing loans and borrowings - current liabilities (2.4) (0.8) Interest-bearing loans and borrowings - non-current (17.5) (29.4) liabilities (19.0) (26.0) Closing net debt 11. On adoption of IFRS, the opening book value of the Group's equity declined by £22.3m: £m Equity at 1 January 2005 (as previously reported under UK GAAP) 51.5 Adjustments on adoption of IFRS (22.3) _____ Equity at 1 January 2005 (as restated) 29.2 The following table explains the reduction of £22.3m in the book value of the Group's equity as at 1 January 2005. £m Pension liability - IAS 19 (revised) Employee benefits, requires any surplus or deficit in the 29.8 fair value of the Group's pension schemes assets over their liabilities to be recognised in the balance sheet. Research and development costs - IAS 38 Intangible assets, requires development costs which meet (2.2) certain criteria to be capitalised. Property valuation - IFRS 1 First-time adoption of IFRS, permits certain properties to be brought (4.6) onto the balance sheet at their open market value where this is deemed to be their fair value. Preference shares - IAS 32 Financial instruments: disclosure and presentation, requires that 0.9 preference shares with an obligation to transfer economic benefits are treated as financial liabilities (debt) and not as capital (equity). Other employee liabilities - IAS 19 (revised), requires all employee benefits to be accrued for (0.3) over the period in which employee services are rendered and that any long-term liabilities are measured at their net present value. Goodwill amortisation - IFRS 3 Business combinations, requires that purchased goodwill be subject (0.9) to an annual impairment review only and not amortised. Goodwill translation - IAS 21 The effects of changes in foreign exchange rates, requires foreign (0.2) denominated goodwill to be retranslated at the balance sheet date. Deferred tax - IAS 12 Income taxes, requires deferred tax to be provided on all temporary (0.2) differences between accounting and tax book values, including the requirement to account for the tax effect of any future property disposals. The financial impact of IAS 12 is included in the adjustments above where appropriate. _____ 22.3 12. The Annual Report and Accounts will be sent to all shareholders in March 2006 and additional copies will be available from the Company's registered office at 11 Tanners Drive, Blakelands, Milton Keynes, MK14 5LU. This information is provided by RNS The company news service from the London Stock Exchange

Companies

MPAC Group (MPAC)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today