Interim Results

MOLINS PLC 6 September 1999 1999 INTERIM RESULTS Molins PLC, the international specialist engineering company, announces its results for the six months ended 30 June 1999. 1999 1998 Half Half Year Year £m £m Turnover 59.1 101.4 Operating profit before exceptional items 1.9 5.0 Profit/(loss) before taxation 2.0 (11.3) Net cash/(borrowings) 9.6 (13.7) Earnings/(loss) per share 3.7p (43.0)p Dividend per share 2.5p 6.5p Peter Byrom, Chairman, commented: 'These results are in line with our expectations. The packaging machinery businesses are developing well. The tobacco machinery business is undergoing radical restructuring in response to very low levels of original equipment demand and the consolidation and rationalisation of the major international cigarette manufacturers. This process is not complete and we are taking actions to improve the return on capital employed in the tobacco machinery business.' Enquiries: Peter Byrom, Chairman Molins PLC Tel: 0171 638 9571 Peter Grant, Chief Executive Issued by: Margaret George Citigate Dewe Rogerson Tel: 0171 638 9571 CHAIRMAN'S STATEMENT The Packaging Machinery division achieved growth in orders, sales and profits. The tobacco machinery business faces a difficult international market as a result of the consolidation and restructuring of the cigarette manufacturers around the world. Six months turnover (continuing operations) 1999 1998 £m £m Tobacco Machinery 35.8 52.2 -31.4% Packaging Machinery 23.3 19.6 +18.9% _________ _________ 59.1 71.8 -17.7% _________ _________ Tobacco Machinery Demand for tobacco machinery has declined by more than 60% over the last three years. The cost base of the Tobacco Machinery division has already been reduced by some £50 million per annum at a one-off cost of £35 million. The numbers employed will be about 800 at the end of this year compared with 2,000 in June 1997. Internationally the demand for original equipment is very low and in recent months the company has experienced a reduction in spares demand from certain customers which themselves are undergoing consolidation and rationalisation. Restructuring is continuing within the provisions already made. The transfer of the spares business from Peterborough to Saunderton was effected at the end of last year and integration into the Saunderton site has been a major focus in the first half. Work is in progress to improve manufacturing efficiencies at Saunderton. Key technical skills have been retained to ensure that Molins is in a position to take advantage of any upturn in demand. We are developing the aftermarket opportunities arising from the substantial installed base of Molins machinery throughout the world. Molins intends to play a key role working in partnership with its customers to prolong the life and enhance the performance of existing machinery, supported by continuing product development. We are focused on providing our customers with world class quality and service from our spares and service operations and are re-organising our management structure and strengthening the management team to achieve this. Packaging Machinery The increase in sales mainly reflects higher shipments at Langen and Langenpac. The senior management teams of both Langen and Langenpac have been strengthened in the first half of this year. Both companies have full order books for the remainder of the year and Langen won a major contract with a pharmaceutical group for delivery next year. Sandiacre continued to show good growth in North America but sales were slightly down overall due to lower activity in Europe. Molins Food Machinery and the International Technology Centre continued to make progress with customer-funded, innovative teabag machinery projects. Operating results Operating profits of the Packaging Machinery division increased from £1.4 million to £1.8 million (up 28%). Operating profits of the Tobacco Machinery division declined from £3.0 million to £0.1 million. Group profit before tax was £2.0 million, compared with £3.9 million (before exceptional items) for continuing operations in the first half of last year. Earnings per share were 3.7p compared with 8.1p (before exceptional items) last year. Shareholders' funds and cash Group shareholders' funds were £71.7 million at 30 June 1999 (1998: £67.1 million) compared with £70.4 million at 31 December 1998. Net cash amounted to £9.6 million compared with £10.9 million at 31 December 1998. The net cash inflow from operating activities in the first half was £0.1 million (1998: outflow £1.3 million), after disbursing £3.9 million (1998: £3.5 million) in respect of exceptional restructuring costs charged against profits last year. At the Annual General Meeting shareholders approved a resolution giving the Company authority to purchase up to 10% of its own share capital. During the first half year a total of 200,000 shares (0.56% of the shares in issue) were purchased by the Company for cancellation, at an average cost of 126.5p per share. Post balance sheet event On 26 August 1999 the Group entered into an agreement with its former business, Langston, which was sold in 1998, to accept early repayment, at a discount, of the subordinated loan note which formed part of the proceeds of sale. At the same time a number of other Langston related assets have been realised and various obligations have been discharged. These transactions have an overall cash benefit to the Group of some £4.0 million, of which £2.5 million has since been received. Dividend The directors have declared an interim dividend of 2.5p per ordinary share (1998:6.5p), the reduction being in line with the reduced level of final dividend declared in March this year and the stated intention to redress the balance between the interim and final dividends. The interim dividend will be payable on 28 October 1999 to shareholders on the register on 24 September 1999 and is covered 1.5 times by earnings. Board The Board was pleased to announce on 4 May 1999 the appointment of Dr Amar Sabberwal as a non-executive director. A former director of T&N plc, Dr Sabberwal brings a wealth of international experience in manufacturing industry. Outlook Given the very low levels of demand for original equipment and the softening in demand for spares in recent months, it will be a challenge for the Tobacco Machinery division to achieve a result in the second half of 1999 which is any better than that achieved in the first half. The benefits of the actions now being taken in the Tobacco Machinery division to improve manufacturing efficiencies and the return on capital employed will be seen progressively but will have little impact on the financial results this year. In the medium term, the actions being taken to reposition the tobacco machinery business to serve its aftermarket are expected to restore growth, even if demand for original equipment remains at a low ebb for some time. The flow of orders for the Packaging Machinery division continues to be encouraging and the division is expected to show good progress in 1999 compared with last year. Peter Byrom Chairman 6 September 1999 Group profit and loss account 6 months to 30 June 1998 6 months Before to 30 June exceptional Exceptional 1999 items items Total Note £m £m £m £m Turnover - Continuing operations 59.1 71.8 - 71.8 - Discontinued operations - 29.6 - 29.6 ----- ----- ----- ----- 1 59.1 101.4 - 101.4 ===== ===== ===== ===== Operating profit/(loss) - Continuing operations 1.9 4.4 (16.0) (11.6) - Discontinued operations - 0.6 - 0.6 ----- ----- ----- ----- 1.9 5.0 (16.0) (11.0) Profit on sale of discontinued operations - - 0.2 0.2 Net interest receivable/(payable) 0.1 (0.5) - (0.5) ----- ----- ----- ----- Profit/(loss)on ordinary activities before taxation 2.0 4.5 (15.8) (11.3) Taxation (0.7) (1.6) (2.4) (4.0) ----- ----- ----- ----- Profit/(loss) for the period 1.3 2.9 (18.2) (15.3) Dividends (including non-equity) 8&9 (0.9) (2.3) - (2.3) ----- ----- ----- ----- Retained profit/(loss) for the period 0.4 0.6 (18.2) (17.6) ===== ===== ===== ===== Earnings/(loss) per ordinary share 7 3.7p 8.1p (51.1)p (43.0)p ----- ----- ----- ----- Dividend per ordinary share 9 2.5p 6.5p - 6.5p ----- ----- ----- ----- 12 months to 31 December 1998 Before exceptional Exceptional items items Total Note £m £m £m Turnover - Continuing operations 140.6 - 140.6 - Discontinued operations 29.6 - 29.6 ----- ----- ----- 1 170.2 - 170.2 ===== ===== ===== Operating profit/(loss) - Continuing operations 8.5 (16.0) (7.5) - Discontinued operations 0.6 - 0.6 ----- ----- ----- 9.1 (16.0) (6.9) Profit on sale of discontinued operations - 0.2 0.2 Net interest receivable/(payable) 0.1 - 0.1 ----- ----- ----- Profit/(loss) on ordinary activities before taxation 9.2 (15.8) (6.6) Taxation (3.4) (2.9) (6.3) ----- ----- ----- Profit/(loss) for the period 5.8 (18.7) (12.9) Dividends (including non-equity) 8 & 9 (2.9) - (2.9) ----- ----- ----- Retained profit/(loss) for the period 2.9 (18.7) (15.8) ===== ===== ===== Earnings/(loss) per ordinary share 7 16.3p (52.5)p (36.2)p ----- ----- ----- Dividend per ordinary share 9 8.0p - 8.0p ----- ----- ----- Group balance sheet 30 30 31 June June Dec 1999 1998 1998 £m £m £m Fixed assets Tangible assets 28.9 30.3 29.4 Investments 1.9 2.1 1.9 ----- ----- ----- 30.8 32.4 31.3 ===== ===== ===== Current assets Stocks 35.1 42.2 38.1 Debtors - due within one year 36.1 50.1 36.9 Debtors - due after more than one year 19.9 18.1 18.8 Business sale proceeds - cash - 24.4 - Cash at bank and in hand 11.8 3.2 13.7 ----- ----- ----- 102.9 138.0 107.5 Creditors - amounts falling due within one year Borrowings (1.8) (6.5) (2.4) Other creditors (53.1) (64.4) (55.4) Proposed dividend (0.9) (2.3) (0.5) ----- ----- ----- (55.8) (73.2) (58.3) ----- ----- ----- Net current assets 47.1 64.8 49.2 ----- ----- ----- Total assets less current liabilities 77.9 97.2 80.5 Creditors - amounts falling due after more than one year Borrowings (0.4) (10.4) (0.4) Other creditors (0.3) (0.3) (0.3) ----- ----- ----- (0.7) (10.7) (0.7) Provisions for liabilities and charges (5.5) (19.2) (9.2) ----- ----- ----- Net assets 71.7 67.3 70.6 ===== ===== ===== Capital and reserves Called up share capital 9.7 9.8 9.8 Share premium account 25.6 25.6 25.6 Capital redemption reserve 0.1 - - Revaluation reserve 17.8 16.1 17.7 Profit and loss account 18.5 15.6 17.3 ----- ----- ----- Shareholders' funds (including non-equity interests) 71.7 67.1 70.4 Minority interests - 0.2 0.2 ----- ----- ----- 71.7 67.3 70.6 ===== ===== ===== Net assets per share 200p 186p 196p Group cash flow statement 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Net cash inflow/(outflow) from operating activities 0.1 (1.3) 5.6 Returns on investments and servicing of finance Net interest received/(paid) 0.1 (0.6) (0.2) ----- ----- ----- Net cash inflow/(outflow) for returns on investments and servicing of finance 0.1 (0.6) (0.2) Taxation (0.7) (1.4) (6.0) Capital expenditure (net of sale proceeds) (0.4) 0.2 0.3 Acquisitions and disposals Investment in joint venture - (0.3) (0.3) Sale of businesses 0.2 - 24.4 ----- ----- ----- Net cash inflow/(outflow) for acquisitions and disposals 0.2 (0.3) 24.1 Equity dividends paid (0.6) (3.0) (5.4) ----- ----- ----- Net cash (outflow)/inflow before management of liquid resources and financing (1.3) (6.4) 18.4 Management of liquid resources 2.5 - (4.6) Financing Issue of ordinary share capital - 0.1 0.1 Redemption of ordinary share capital (0.1) - - Decrease in loans and finance lease obligations - (0.4) (14.6) ----- ----- ----- Net cash outflow from financing (0.1) (0.3) (14.5) ----- ----- ----- Increase/(decrease) in cash in the period 1.1 (6.7) (0.7) ===== ===== ===== Closing net funds/(debt) 9.6 (13.7) 10.9 ===== ===== ===== Reconciliation of operating profit/(loss) to net cash flow from operating activities 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Operating profit/(loss) 1.9 (11.0) (6.9) Depreciation 1.7 3.4 5.8 Movements in restructuring and rationalisation provisions New provisions created - 16.0 16.0 Cash movements (3.9) (3.5) (10.1) Working capital movements 0.4 (6.2) 0.8 ----- ----- ----- Net cash inflow/(outflow) from operating activities 0.1 (1.3) 5.6 ===== ===== ===== Reconciliation of net cash flow to movement in net funds/(debt) 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Increase/(decrease) in cash in the period 1.1 (6.7) (0.7) Cash (inflow)/outflow from movement in liquid resources (2.5) - 4.6 Cash outflow from decrease in debt and lease financing - 0.4 14.6 ----- ----- ----- Change in net funds/(debt) resulting from cash flows (1.4) (6.3) 18.5 Translation difference 0.1 (0.1) (0.3) ----- ----- ----- Movement in net funds/(debt) in the period (1.3) (6.4) 18.2 Opening net funds/(debt) 10.9 (7.3) (7.3) ----- ----- ----- Closing net funds/(debt) 9.6 (13.7) 10.9 ===== ===== ===== Reconciliation of movements in shareholders funds 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m Profit/(loss) for the period 1.3 (15.3) (12.9) Dividends (0.9) (2.3) (2.9) ----- ----- ----- Retained profit/(loss) for the period 0.4 (17.6) (15.8) Property revaluation - - 1.4 Goodwill adjustment on sale of business - 1.9 1.9 Issue of ordinary share capital - 0.1 0.1 Redemption of ordinary share capital (0.3) - - Other recognised gains and losses for the period 1.2 (0.1) - ----- ----- ----- Net increase/(decrease) in shareholders' funds 1.3 (15.7) (12.4) Opening shareholders' funds 70.4 82.8 82.8 ----- ----- ----- Closing shareholders' funds 71.7 67.1 70.4 ===== ===== ===== Notes 1.Segmental analysis Turnover 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m By activity Continuing operations Tobacco Machinery 35.8 52.2 100.2 Packaging Machinery 23.3 19.6 40.4 ----- ----- ----- 59.1 71.8 140.6 Discontinued operations - 29.6 29.6 ----- ----- ----- 59.1 101.4 170.2 Exceptional items - - - ----- ----- ----- 59.1 101.4 170.2 ===== ===== ===== 1.Segmental analysis Operating profit/(loss) 6 months to 6 months to 12 months to 30 June 30 June 31 Dec 1999 1998 1998 £m £m £m By activity Continuing operations Tobacco Machinery 0.1 3.0 6.4 Packaging Machinery 1.8 1.4 2.1 ----- ----- ----- 1.9 4.4 8.5 Discontinued operations - 0.6 0.6 ----- ----- ----- 1.9 5.0 9.1 Exceptional items - (16.0) (16.0) ----- ----- ----- 1.9 (11.0) (6.9) ===== ===== ===== 2. At 30 June 1999, provisions for liabilities and charges include £5.0m (December 1998: £8.9m, June 1998 £16.0m) in respect of restructuring and rationalisation of the Tobacco Machinery division. 3. Post balance sheet event On 26 August 1999 the Group entered into an agreement with its former business, Langston, which was sold in 1998, to accept early repayment, at a discount, of the subordinated loan note which formed part of the proceeds of sale. At the same time a number of other Langston related assets have been realised and various obligations have been discharged. These transactions have an overall cash benefit to the Group of some £4.0 million, of which £2.5 million has already been received. 4. The results for the full year 1998 have been extracted from the Group's full accounts for that year which included an unqualified audit report and have been filed with the Registrar of Companies. 5. The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 1998 statutory accounts. In the half year results and the balance sheet at 30 June 1999 FRS 12 and 14 have been adopted. 6. The financial information for the half year has not been audited, although the auditors have carried out a review. 7. Earnings per ordinary share are based upon the profit after taxation less the preference dividend and on a weighted average of 35,571,549 shares in issue during the period (1998:35,571,021). 8. The preference dividend payable on 30 June 1999 amounted to £27,000 (1998:£18,900). 9. The cost of the interim dividend of 2.5p per ordinary share for the six months to 30 June 1999 will amount to £0.9m. 10. Year 2000 The Company has established a comprehensive Group-wide programme to ensure that with reasonable certainty: a) all products currently supplied by Group companies have been tested and are year 2000 compliant when operated as designed and specified; b) all material management information systems are, or will be in reasonable time, year 2000 compliant; c) key suppliers have demonstrated their own commitment to continuity of supply of goods and services and have given reasonable assurances concerning compliance of products. Progress in implementation is regularly reported to the Board, and such progress is considered to be satisfactory. However, given the unique nature and complexity of the problem it is not possible for any organisation to be certain that there will be no year 2000 disruption, even if its own systems are compliant in all material respects. A number of the Group's business systems have been upgraded which, as well as dealing with year 2000 compliance, will also have the benefit of increased functionality and efficiency. Total expenditure in the six months ended 30 June 1999, relating at least in part to year 2000 compliance, amounted to £1.1m (full year 1998:£1.3m, first half year 1998:£0.7m) of which £0.6m (full year 1998:£0.6m, first half year 1998:£0.3m) represents capital expenditure. 11. The average US dollar exchange rate for the period to 30 June 1999 was US$1.61(1998:US$1.65) and the rate at 30 June 1999 was US$1.58 (1998:US$1.67). The rate at 31 December 1998 was US$1.66.

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