Interim Results
Molins PLC
30 August 2006
30 August 2006 FOR IMMEDIATE RELEASE
2006 INTERIM ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its
results for the period ended 30 June 2006.
6 months 12 months
6 months to 30 June to 31 Dec
to 30 June 2005 2005
2006 (restated) # (restated) #
Sales £45.8m £51.7m £103.2m
Underlying operating profit* £1.6m £2.8m £6.3m
Profit before tax - continuing operations £1.4m £0.8m £4.0m
Loss from discontinued operation £(10.0)m £(0.8)m £(7.6)m
Loss for the period £(9.0)m £(0.1)m £(4.0)m
Cash generated from operations before reorganisation -
continuing operations £5.4m £9.0m £14.5m
Net debt £16.3m £21.6m £19.0m
Underlying earnings per share* 4.6p 8.8p 24.3p
Basic loss per share (48.6)p (0.3)p (21.9)p
* Before net pension credit, reorganisation costs and discontinued operation
# Restated to exclude discontinued operation where appropriate
• Disposal of Sasib concluded
• Group order book ahead of last year
• Profits expected to be weighted towards the second half
• Lower sales of new and rebuild machinery in Tobacco Machinery
• Plans in hand for transfer of remaining Tobacco Machinery UK
manufacturing and assembly to Czech Republic
Peter Byrom, Chairman, commented:
'Performance in the first half was mixed, with a number of positive actions and
developments in the Packaging Machinery and Scientific Services divisions being
offset by lower activity levels in the Tobacco Machinery division. As we have
previously stated, we expect profit performance this year to be more heavily
weighted towards the second half with a number of customers requiring delivery
at the end of the year. We have sold Sasib in Italy and thereby eliminated a
source of continuing losses. In the second half of the year we will commence
the transfer of the remaining Tobacco Machinery manufacturing activities from
the UK to the Czech Republic.'
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
Performance in the first six months of the year was mixed, with a number of
positive actions and developments being offset by lower levels of activity in
the Tobacco Machinery division. As Sasib was sold in July its results have been
presented as a discontinued operation.
Group sales for continuing operations in the six months to 30 June 2006 were
£45.8m (2005: £51.7m) and underlying operating profit (which excludes net
pension credit and reorganisation costs) was £1.6m (2005: £2.8m). After
interest and taxation costs, underlying earnings per share was 4.6p (2005:
8.8p). Basic earnings per share for continuing operations was 5.4p (2005:
4.0p).
Sasib
Molins announced in May 2006 the decision either to sell or close Sasib and
subsequently the company was sold to an Italian engineering business, Paritel
S.p.A., on 28 July 2006. The total cash cost to Molins of this transaction was
£3.4m. The impact of the sale on the Group financial statements is to report a
special charge in the first half of the year of £8.5m (which includes the
write-off of the net assets of Sasib), aggregated with the trading loss of £1.5m
incurred by Sasib in the period to May 2006, making a total of £10.0m in respect
of the discontinued operation.
Tobacco Machinery
The division, excluding Sasib, reported sales of £16.8m (2005: £22.7m) and an
operating loss before reorganisation costs of £0.1m (2005: £1.4m profit).
The division entered the year with an order book which was slightly higher than
the previous year and at 30 June 2006 was also ahead of the same time last year.
Order intake for new and rebuild machinery and for upgrade and enhancement
kits was subdued, resulting in an overall order intake that was approximately
15% down on the previous year.
Having made good progress in improving profitability in 2005, the division fell
back to a near break-even position, with a number of low-margin contracts being
delivered in the first half of the year. The weighting of sales towards the
second half of the year will improve profitability, but overall profits are
expected to be below those of last year due to lower sales expectations.
The transfer of manufacturing activities from Saunderton has progressed well to
date and plans are in hand to move all the remaining production of parts and
manufacture and assembly of original equipment to the factory in Plzen. The
Saunderton facility will then specialise in sales, engineering support and
service, logistics, warehousing and distribution. Consultations with the
workforce are in progress on this next stage of reorganisation which will
involve a further sizable reduction in the number of people working at the
Saunderton site. The process is expected to be completed by the end of March
next year. In addition, a significant proportion of the infrastructure costs at
Saunderton will be reduced, the benefits of which will be delivered
progressively through 2007.
Packaging Machinery
Sales in the period were £19.8m (2005: £20.8m) and operating profit was £0.3m
(2005: £0.2m).
Order intake has been encouraging, with an increase of 25% in the first six
months compared with the same period last year. The improved order flow has
been strongest from the non-food sector, with the food sector remaining quite
weak. The level of the order book was approximately 50% higher at 30 June 2006
than twelve months previously.
Despite the increase in orders, sales were a little lower in the first half of
the year, reflecting the timing of customer delivery requirements. Whilst at
low levels, profitability marginally improved.
The division continues to develop its product ranges, both in terms of
functionality and cost effectiveness. Langen and Langenpac have extended their
product range over the last eighteen months, with the development of the
cartoning machinery platform being well received and some orders already placed.
The move into robotic cartoning and end-of-line applications is also
progressing well and is accounting for a growing share of all sales. ITCM
continues to serve its customer base with solution-led engineering services and
associated production and packaging machinery. It also continues to extend its
range of customers. Performance at Sandiacre Rose Forgrove was less positive,
with order intake a little lower than the previous year and pricing pressure
continuing to affect financial performance. Improvement programmes are being
maintained in all of the businesses, both in terms of products and operational
effectiveness.
Scientific Services
Sales in the period were £9.2m (2005: £8.2m) and operating profit was £1.4m
(2005: £1.2m).
Sales in the division increased in the first half of the year, with Cerulean
benefiting from a strong opening order book and with sales growth at Arista.
There was a corresponding improvement in operating profit. However, order
intake at Cerulean has been slowing after the very strong performance in 2005.
This was partially offset by the increase in orders at Arista, where the
benefits from several long-term programmes to develop new services and customers
are being felt. Arista entered the second half of the year with a strong order
outlook.
Cerulean is continuing to focus on new product developments, with the C(2)
product line gaining market acceptance, other new products entering their launch
phase and new automation systems being developed.
Cash and equity
Group net debt at 30 June 2006 was £16.3m, compared with £19.0m at 31 December
2005.
Net cash flow from the continuing operating activities was £4.9m in the period,
after payments of £0.2m for reorganisation and £0.3m for taxation. Part of the
cash flow was generated from a further reduction of £2.1m in working capital,
following a reduction of £4.6m in 2005. Other cash outflows in the first half
of the year include net capital expenditure of £0.9m, development expenditure of
£1.1m, net interest paid of £0.5m and £0.6m in respect of Sasib's operating
activities. The impact of the sale of Sasib in the second half of the year will
be to increase net debt by £3.4m.
Group equity reduced in the period to £23.5m at 30 June 2006, compared with
£29.9m at 31 December 2005. The reduction arises mainly from the net loss in
the period of £9.0m (comprising £1.0m profit in respect of continuing operations
and £10.0m loss in respect of the discontinued operation), £0.6m unfavourable
exchange rate movements and a decrease in the pension schemes liabilities of
£3.3m (net of deferred tax).
Dividend
In view of the ongoing restructuring of the Tobacco Machinery division and the
costs associated with the sale of Sasib, the Board has decided not to pay an
interim dividend.
Pension valuations
An actuarial valuation of the Group's main defined benefit scheme is being
carried out as at 30 June 2006, although it will not be completed for a number
of months. This review will, inter alia, assess the latest mortality data and
its implications in respect of the valuation of the fund's liabilities.
Employer contributions into the UK pension fund commenced from 1 July 2006.
Property
Molins' first planning application for the development of commercial property on
the 26 acre site at Saunderton was made in the second half of 2005 and was
rejected by Wycombe District Council. A second application was made in August
2006, which addresses the issues raised by the Council from the first
application and the response is awaited.
Outlook
The Tobacco Machinery division is undertaking the next step in its fundamental
restructuring of the business, with the remaining assembly and machining
operations moving from Saunderton to the Czech Republic. This will result in a
reorganisation charge in the second half of the year. The physical moves are
not planned to be completed until the first months of 2007 allowing the business
to finish its current work-load at the Saunderton facility. Order intake has
been disappointing, especially for new and rebuild machinery, and trading
profits in the year are expected to be lower than in 2005.
The Packaging Machinery division is experiencing positive trends in its order
intake, which is expected to be reflected in an increase in sales in the second
half of the year and an improvement in profitability. Margins, though, are
under pressure, as Sandiacre Rose Forgrove continues to face difficult market
conditions and Langen's robotics and integration projects deliver lower margins,
as a higher proportion of the sales value comes from products bought-in from
business partners.
The Scientific Services division is well placed to sustain its progress, with
Arista expected to perform strongly, compensating for a softening in Cerulean's
performance.
Peter Byrom
Chairman
30 August 2006
Consolidated income statement
6 months to 30 June 2006 6 months to 30 June 2005
Before Before
reorganisation Reorganisation reorganisation Reorganisation Total
Total costs (restated)
Continuing operations costs costs (restated) costs
Notes £m £m £m £m £m £m
(note 4) (note 4)
Revenue 3 45.8 - 45.8 51.7 - 51.7
Operating profit/(loss) 3, 4, 6 2.0 (0.1) 1.9 2.9 (2.0) 0.9
Profit on closure of associate 5 - - - - 0.5 0.5
2.0 (0.1) 1.9 2.9 (1.5) 1.4
Profit/(loss) before financing
costs
Financial income 0.1 - 0.1 0.1 - 0.1
Financial expenses (0.6) - (0.6) (0.7) - (0.7)
Net financing costs (0.5) - (0.5) (0.6) - (0.6)
Profit/(loss) before tax 1.5 (0.1) 1.4 2.3 (1.5) 0.8
Taxation (0.4) - (0.4) (0.6) 0.5 (0.1)
Profit/(loss) for the period 1.1 (0.1) 1.0 1.7 (1.0) 0.7
Discontinued operation
Loss from discontinued operation 11 (10.0) - (10.0) (0.8) - (0.8)
Profit/(loss) for the period (8.9) (0.1) (9.0) 0.9 (1.0) (0.1)
Basic earnings/(loss)
per ordinary share 7 (48.6)p (0.3)p
Diluted earnings/(loss)
per ordinary share (48.6)p (0.3)p
Continuing operations
Basic earnings
per ordinary share 7 5.4p 4.0p
Diluted earnings
per ordinary share 5.0p 3.7p
Consolidated income statement (continued)
12 months to 31 December 2005
Before
reorganisation Goodwill Reorganisation Total
costs impairment costs (restated)
Continuing operations (restated) (restated)
Notes £m (restated) £m £m
£m (note 4)
Revenue 3 103.2 - - 103.2
Operating profit/(loss) 3, 4, 6 6.8 - (2.3) 4.5
Profit on closure of associate 5 - - 0.5 0.5
6.8 - (1.8) 5.0
Profit/(loss) before financing costs
Financial income 0.3 - - 0.3
Financial expenses (1.3) - - (1.3)
Net financing costs (1.0) - - (1.0)
Profit/(loss) before tax 5.8 - (1.8) 4.0
Taxation (0.9) - 0.5 (0.4)
Profit/(loss) for the period 4.9 - (1.3) 3.6
Discontinued operation
Loss from discontinued operation 11 (1.0) (6.7) 0.1 (7.6)
Profit/(loss) for the period 3.9 (6.7) (1.2) (4.0)
Basic earnings/(loss)
per ordinary share 7 (21.9)p
Diluted earnings/(loss)
per ordinary share (21.9)p
Continuing operations
Basic earnings
per ordinary share 7
19.2p
Diluted earnings
per ordinary share
17.9p
Consolidated balance sheet
30 June 30 June 31 Dec
2006 2005 2005
Notes £m £m £m
Non-current assets
Intangible assets 13.8 19.4 13.5
Property, plant and equipment 26.4 29.0 28.7
Trade and other receivables 0.6 0.9 1.2
Employee benefits - 1.5 -
Deferred tax assets 3.8 6.0 5.4
44.6 56.8 48.8
Current assets
Inventories 20.9 30.9 27.2
Trade and other receivables 19.7 23.9 22.6
Taxation receivable 0.1 1.2 0.2
Cash and cash equivalents 1.8 4.8 2.8
Assets classified as held for sale 11 10.2 - -
52.7 60.8 52.8
Current liabilities
Bank overdrafts (0.3) (1.5) (1.9)
Interest-bearing loans and borrowings (3.0) (6.0) (2.4)
Trade and other payables (25.1) (29.4) (25.6)
Taxation payable (0.8) (1.1) (0.9)
Provisions (1.5) (4.0) (2.2)
Liabilities classified as held for sale 11 (14.5) - -
(45.2) (42.0) (33.0)
Net current assets 7.5 18.8 19.8
Total assets less current liabilities 52.1 75.6 68.6
Non-current liabilities
Interest-bearing loans and borrowings (14.8) (18.9) (17.5)
Trade and other payables (0.2) (0.1) (0.2)
Employee benefits 8 (9.5) (20.4) (16.9)
Deferred tax liabilities (4.1) (4.3) (4.1)
(28.6) (43.7) (38.7)
Net assets 23.5 31.9 29.9
Equity
Issued capital 5.0 5.0 5.0
Share premium 26.0 26.0 26.0
Reserves 4.2 1.8 4.8
Retained earnings (11.7) (0.9) (5.9)
Total equity 10 23.5 31.9 29.9
Consolidated statement of cash flows 6 months 12 months
6 months to 30 June to 31 Dec
to 30 June 2005 2005
2006 (restated) (restated)
Notes £m £m £m
Continuing operations
Operating activities
Operating profit 1.9 0.9 4.5
Reorganisation costs included in operating profit 0.1 2.0 2.3
Amortisation 0.6 0.5 0.9
Depreciation 1.2 1.2 2.4
Other non-cash items (0.5) - (0.2)
Working capital movements:
- (Increase)/decrease in inventories (0.8) 4.8 6.6
- (Increase)/decrease in trade and other receivables (0.1) 1.5 1.5
- Increase/(decrease) in trade and other payables 3.3 (1.8) (3.2)
- Decrease in provisions (0.3) (0.1) (0.3)
Cash generated from operations before reorganisation 5.4 9.0 14.5
Reorganisation costs paid (0.2) (1.8) (3.2)
Cash generated from operations 5.2 7.2 11.3
Taxation (paid)/received (0.3) 0.2 0.7
Net cash from operating activities 4.9 7.4 12.0
Investing activities
Proceeds from sale of plant and equipment 0.3 0.1 0.3
Net proceeds from closure of associate - 0.5 0.5
Acquisition of property, plant and equipment (1.2) (0.6) (1.4)
Development expenditure (1.1) (0.4) (1.5)
Net cash from investing activities (2.0) (0.4) (2.1)
Financing activities
Issue of new shares - 0.1 0.1
Interest received 0.1 0.2 0.3
Interest paid (0.6) (0.6) (1.3)
Decrease in borrowings (0.7) (4.2) (9.5)
Net cash from financing activities (1.2) (4.5) (10.4)
Discontinued operation
Net cash from operating activities (0.6) (2.9) (2.2)
Net cash from investing activities - - 0.1
Net cash from financing activities (0.5) (0.4) (0.8)
Net cash from discontinued operation 11 (1.1) (3.3) (2.9)
Net increase/(decrease) in cash and cash equivalents 9 0.6 (0.8) (3.4)
Cash and cash equivalents at 1 January 0.9 4.2 4.2
Effect of exchange rate fluctuations on cash held - (0.1) 0.1
Cash and cash equivalents at period end 1.5 3.3 0.9
Consolidated statement of recognised income and expense
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2006 2005 2005
£m £m £m
Currency translation movements arising on foreign
currency net investments (0.6) 1.4 1.9
Actuarial gains 3.3 1.2 2.4
Net income recognised directly in equity 2.7 2.6 4.3
(9.0) (0.1) (4.0)
Loss for the period
(6.3) 2.5 0.3
Total recognised income and expense for the period
Notes to interim announcement
1. The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2005 financial statements.
The results for the full year 2005 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.
2. The financial statements for the half year ended June 2006 have not
been audited, although the auditor has carried out an independent review.
3. Segmental analysis
Business segments
Revenue Operating profit/(loss)
6 months 6 months 12 months 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec to 30 June to 30 June to 31 Dec
Continuing operations 2006 2005 2005 2006 2005 2005
(restated) (restated) (restated) (restated)
£m £m £m £m £m £m
Tobacco Machinery 16.8 22.7 41.6 (0.1) 1.4 2.4
Packaging Machinery 19.8 20.8 43.7 0.3 0.2 1.3
Scientific Services 9.2 8.2 17.9 1.4 1.2 2.6
45.8 51.7 103.2
Underlying operating profit
before net pension credit and
reorganisation costs 1.6 2.8 6.3
Reorganisation costs (before
profit on closure of associate) (0.1) (2.0) (2.3)
Net pension credit (excluding
curtailment costs) 0.4 0.1 0.5
Operating profit 1.9 0.9 4.5
4. The reorganisation costs (before profit on closure of associate) relate to
the restructuring of the Tobacco Machinery division and comprise redundancy
and other restructuring costs.
5. The profit on closure of associate relates to the receipt of loan/capital
repayments in 2005, following the net write off of the investment in the
Kunming Molins company in China in 2004.
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 30 June 2006. The net pension credit for the 6
months to 30 June 2006 was £0.4m and a cost for the 6 months to 30 June
2005 of £0.4m (curtailment costs of £0.5m less £0.1m net credit).
7. Earnings/(loss) per ordinary share is based upon the profit/(loss) for the
period and on a weighted average of 18,542,562 shares in issue during the
period (30 June 2005: 18,319,586). Underlying earnings per ordinary share,
which is calculated on continuing operations before net pension credit and
reorganisation costs (net of taxation impact), was 4.6p for the 6 months to
30 June 2006 (6 months to 30 June 2005: 8.8p; 12 months to 31 December
2005: 24.3p).
Basic loss per ordinary share for the discontinued operation was 54.0p for
the 6 months to 30 June 2006 (6 months to 30 June 2005: 4.3p; 12 months to
31 December 2005: 41.1p).
8. Employee benefits include the net pension liability of the UK defined
benefit pension scheme of £8.0m (31 December 2005: £14.3m) and the net
pension liability of the US defined benefit pension scheme of £1.5m (31
December 2005: £0.3m), all figures before deferred tax.
9. Reconciliation of net cash flow to movement in net debt
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2006 2005 2005
£m £m £m
Increase/(decrease) in cash and cash equivalents 0.6 (0.8) (3.4)
Cash inflow from movement in borrowings and finance leases 1.2 4.6 10.2
Change in net debt resulting from cash flows 1.8 3.8 6.8
Net debt classified as held for sale at period end 0.9 - -
Translation movements - 0.6 0.2
Movement in net debt in the period 2.7 4.4 7.0
Opening net debt (19.0) (26.0) (26.0)
Closing net debt (16.3) (21.6) (19.0)
Analysis of net debt
Cash and cash equivalents - current assets 1.8 4.8 2.8
Bank overdrafts - current liabilities (0.3) (1.5) (1.9)
Interest-bearing loans and borrowings - current liabilities (3.0) (6.0) (2.4)
Interest-bearing loans and borrowings - non-current liabilities (14.8) (18.9) (17.5)
Closing net debt (16.3) (21.6) (19.0)
10. Reconciliation of movements in equity
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2006 2005 2005
£m £m £m
Opening equity 29.9 29.2 29.2
Loss for the period (9.0) (0.1) (4.0)
Currency translation movements arising on foreign
currency net investments (0.6) 1.4 1.9
Issue of new shares - 0.1 0.1
Actuarial gains 3.3 1.2 2.4
Equity-settled share-based transactions (LTIP) (0.1) 0.1 0.3
Net (decrease)/increase in equity (6.4) 2.7 0.7
Closing equity 23.5 31.9 29.9
11. The Group announced on 24 May 2006 its intention to either sell or close
its Italian subsidiary Sasib S.p.A., part of the Tobacco Machinery
division. At the balance sheet date a sale was highly probable and
therefore in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations the assets and liabilities of Sasib have been
classified as held for sale in the Group balance sheet. Sasib was
subsequently sold on 28 July 2006.
The assets and liabilities of Sasib at 30 June 2006 are shown at fair
value, less costs to sell the company, and the results and cash flows of
Sasib have been shown as a discontinued operation in the income statement
and consolidated statement of cash flows. The comparative figures in the
income statement and consolidated statement of cash flows have been
restated to show the results and cash flows of the discontinued operation
separately from continuing operations.
Sasib S.p.A. was sold on 28 July 2006 for a nominal consideration. The
discontinued operation incurred a loss of £10.0m in the 6 months to 30 June
2006, which includes a loss after tax of £1.5m incurred in the period to
May 2006, plus a loss of £8.5m arising from the transaction which comprises
the write-off of the net assets of Sasib, cash injected into the business
following the announcement to sell or close, costs of disposal and
provisions made against Sasib-related inventories held elsewhere within the
Group.
The net liabilities classified as held for sale in the balance sheet at 30
June 2006 were £4.3m (assets: £10.2m; liabilities £14.5m), which includes a
provision for transaction expenses and further cash injections made
subsequent to the balance sheet date.
12. The Interim Report will be sent to all shareholders in September 2006 and
additional copies will be available from the Company's registered office at
11 Tanners Drive, Blakelands, Milton Keynes, MK14 5LU.
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