Final Results
API Group PLC
06 December 2005
6 December 2005
API GROUP PLC
Preliminary Results for the year ended 30 September 2005
• Results in line with September trading statement.
• Continuing businesses produce satisfactory performance.
• Sales reduced by 5.3% to £105.6m and operating profit before goodwill
and exceptional items reduced to £3.3m (2004: £4.6m).
• Significant improvements achieved in Foils businesses in US and
Europe, but reduced performance in China.
• Performance of Laminates reduced compared with exceptional year in
2004.
• Material gains achieved in productivity and efficiency, but offset by
substantial increases in oil-related input costs such as utilities and
polyester.
• Group sales down 30.2% to £118.4m reflecting the impact of discontinued
businesses.
• Group operating profit before goodwill amortisation and exceptional items
improved to £1.8m (2004: £1.4m).
• Group operating profit after goodwill amortisation and exceptional items
improved to £0.5m (2004: loss £7.6m).
• Adjusted loss per share improved to 1.9p (2004: loss 5.7p).
• Metallised Paper and Converted Products divisions sold for cash
consideration of up to £13.0m, £9.8m of which was received during the
period.
• Strengthened financial position with net borrowings reduced to £6.7m
(2004: £10.5m), representing gearing of 21.6% (2004: 26.4%).
• Further progress expected in 2006.
Commenting on the results and future, Chairman David Hudd said:
'Although this has been a challenging year for API in many ways, much has been
accomplished. The Group is now focused on two profitable divisions which offer
good opportunities for growth, and we have made a number of strategic
investments. The poorly performing Metallised Paper and Converted Products
businesses have been sold and the balance sheet has been strengthened.
API is therefore entering the new financial year in a significantly stronger
position, both financially and operationally, than it has been in for many
years. The Group has strong positions in attractive markets with good
opportunities for growth and margin improvement. We are confident that further
progress will be made in 2006.'
Enquiries:
API Group plc 020 7831 3113
David Walton, Chief Executive
Financial Dynamics 020 7831 3113
Tim Spratt/Caroline Wells
EXTRACTS FROM CHAIRMAN'S STATEMENT
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
In recent years, the Group has faced considerable challenges as changes have
taken place in global markets for packaging and security products. Emerging
competition from the Far East and Eastern Europe and more sophisticated market
behaviour in Europe and the US have accelerated the pace of change and increased
pressure on margins. Some time ago, the Group recognised the need to critically
review the sectors and activities in which it operated and to reposition itself
in markets that offered good prospects for long-term growth and profitability.
As a consequence, earlier this year, we successfully completed the withdrawal
from non-core businesses, disposing of the Metallised Paper and Converted
Products divisions and realising proceeds of up to £13.0m. The Group is now
concentrated on its Foils and Laminates activities and has repositioned itself
as a focused provider of specialist packaging materials for premium-branded
goods, a sector which we believe offers good opportunities for growth and where
it has traditionally been possible to earn higher margins.
Shortly after the conclusion of this process, in January 2005, the Group
received an approach from Illinois Tool Works, Inc. ('ITW'), a large US-based
industrial conglomerate. This led to an announcement on 11 February that the
Board was in discussions regarding the possibility of a public offer being made
to acquire the Group. Detailed discussions were held with ITW, but those
discussions were terminated on 13 April 2005 and a period of uncertainty was put
behind us.
The Group's continuing operations performed well in the face of difficult market
conditions. Operating margins in Foils improved by 25% over the previous year
despite the dramatic rise in oil-based raw material and utility prices, the
impact of the restructuring of the Chinese tobacco industry and the slowdown in
Europe over the summer, with particularly good progress made in the US and in
the European holographic foil business. Although both sales and profits were
down in Laminates, this represented a return to normal activity following an
exceptional year in 2004 and the return on sales still compares favourably with
historical levels and industry averages.
Although Group sales for the year reduced by 30.2% to £118.4m, this was largely
as a result of the impact of discontinued businesses. Sales in our continuing
businesses reduced by 5.3% to £105.6m, due to weak demand in European markets
throughout the summer months and the downturn in China.
Group operating profit before goodwill amortisation and exceptional items
improved to £1.8m (£1.4m). The loss before tax was £17.0m (£23.8m), although
this was after charging exceptional items of £16.0m (£14.5m) in connection with
the disposal of discontinued businesses. Of this, £14.1m (£14.4m) related to
non-cash items. The Group's net borrowings reduced to £6.7m (£10.5m)
representing gearing of 21.6% (26.4%). Net assets per share, excluding
intangibles, were 89p (118p). The Board is not proposing a dividend.
At the next Annual General Meeting, to be held on 1 February 2006, I will be
retiring from the Board, having served as a Director for seven years. Richard
Wright, who joined the Board as a Director in 2001, has considerable experience
of the Group and is currently our Senior Non-Executive Director. Richard will
replace me as Non-Executive Chairman and I wish him, David Walton our Chief
Executive and the Group every success.
This has been a challenging year for the Group in many different ways.
Notwithstanding this, much has been accomplished and the Board of Directors
would like to thank our employees who through their hard work, commitment and
professionalism have made a major contribution to the Group's performance. I am
pleased to say that we have entered the new financial year with the Group in a
significantly stronger position, both financially and operationally, than it has
been for many years. API is now focused on its core activities, has a clear and
deliverable business strategy and is well positioned to deliver further profit
improvement and sales growth.
EXTRACTS FROM CHIEF EXECUTIVE'S REVIEW
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005
As a manufacturer of specialised packaging and security products for the
tobacco, drinks, luxury and consumer goods markets, the Group has faced
considerable challenges in recent years. Rapidly evolving markets, more
sophisticated customer purchasing behaviour and emerging threats from
manufacturers in Eastern Europe and the Far East have all lead to significant
changes in the competitive landscape, eroding profitability in several of the
Group's businesses. As a result of these changes, it became necessary to
critically review not only the current performance of the Group's activities but
also to consider their long-term prospects and future viability and to make
major and clear decisions regarding the future direction of the Group.
During the year, the Group disposed of its Metallised Paper division and the
remaining businesses in its Converted Products division for cash consideration
of up to £13.0m. The Metallised Paper business had been heavily loss-making for
many years and changes in the competitive environment meant that the prospects
for return to profitability in the short to medium term were not good. The
Converted Products businesses were involved in the manufacture of specialised
plastic products for which the markets were becoming increasingly commoditised,
more competitive and less profitable.
The Group is now concentrated on its core Foils and Laminates activities and has
successfully repositioned itself as a focused supplier of reflective,
metallic-finished and laminated products for use in the packaging of premium
branded goods. Geographically, we have a strong presence in the US, Europe and
the Far East. In future, we will be pursuing a strategy which is based upon
strengthening our sales, marketing and distribution capabilities in key markets
and sectors, enhancing the technical performance, quality and consistency of our
product range, driving down manufacturing costs through process improvement and
sourcing an increasing proportion of the products which we sell from lower cost
economies.
During 2005, we have been working successfully on a number of key initiatives:
• Diversification into higher margin markets - While tobacco and drinks will
remain amongst the most important markets for the Group's products, we have
made good progress in accelerating the rate of diversification into sectors
such as luxury goods, consumer products and pharmaceuticals where higher
margins can be obtained.
• Establishment of a broader distribution base within Europe - We recently
acquired a key distributor in the strategically important German market and
are actively looking for opportunities to expand coverage in other key
geographical markets.
• Improving service levels - We recently reorganised and strengthened our
sales and technical capabilities throughout the Group and are already seeing
improvements in levels of customer satisfaction.
• Enhancing the technical performance of our products - During 2005, our
product development group has been working hard to strengthen our product
offering. We have initiated a programme of revisions and upgrades to
popular, well-established products and during 2005 launched a number of
significant new product ranges, particularly in the area of metallics where
we have struggled to remain competitive in recent years.
• Reducing production costs - Our facilities in Europe and the US are
utilising continuous improvement methodologies, such as six-sigma, 5S and
LEAN to drive down manufacturing costs and improve quality levels. We are
supporting these initiatives with appropriate capital investment.
• Strategic sourcing initiatives - We have begun the relocation and
significant expansion of our foil manufacturing business in China, which
will supply an increasing proportion of the products sold in Europe and the
US. In addition, we are collaborating with a number of manufacturers of
foils and laminates in the US and Japan to broaden our product offering,
particularly in the areas of specialised holographic products and foil
products suitable for application to plastic substrates.
Each of these initiatives will continue to be a key focus in 2006 as we seek to
strengthen and expand our presence in our chosen markets. In the last year our
total capital expenditure was £4.8m (2004: £3.4m).
OPERATING RESULTS
The key financial data for the year ended 30 September 2005 is as follows:
• Sales reduced by 30.2% to £118.4m, while operating profit before goodwill
amortisation and exceptional items improved to £1.8m (£1.4m), due
principally to the disposal of the Metallised Paper and Converted Products
divisions during the year.
• The Group's operating profit after goodwill amortisation and exceptional
items improved significantly to a profit of £0.5m compared with a loss of
£7.6m in the previous year.
Continuing Businesses
Sales from continuing businesses reduced by 5.3% to £105.6m and operating profit
before goodwill amortisation and exceptional items reduced to £3.3m (£4.6m) due
to the following factors:
• Return to normal levels of activity in the Laminates business, following
an exceptional year in 2004.
• Reduction in demand for holographic foil in China due to restructuring of
the domestic tobacco industry.
• General slowdown and reduction in demand in European consumer packaging
markets during the summer months.
• The failure of a major UK customer.
Sales declined by 4.5% to £40.5m in the United Kingdom and by 5.1% to £26.5m in
Continental Europe. Following a first half in which sales were 2.6% higher than
the previous year and in which Foils and Laminates both performed well, we
experienced a marked slowdown during the second half of the year - as we
reported in a trading update in September. Demand from manufacturers of
premium-packaging products was sluggish throughout Europe, affecting both Foils
and Laminates. There was also disruption to the European foils distribution
network due to competitor activity which adversely affected sales in southern
Europe, particularly in Spain and Italy.
Sales in the US declined by 11.0% to £22.2m, but as reported at the half year,
this was due to the non-recurrence of one-off contracts for Laminates which had
boosted sales in the prior year. The Group's US foils business continued to
perform well during the year, achieving underlying sales growth of 3.5%.
Sales increased by 1.3% to £16.4m in the Rest of the World as good growth in
Asia-Pacific, India, Russia and other emerging markets offset the reduction in
tobacco-related sales in China.
Operating profit before goodwill amortisation and exceptional items reduced to
£3.3m (£4.6m). The Foils and Laminates businesses generated operating profits of
£5.5m (£6.8m), representing a return on sales of 5.2% (6.1%), while central
costs remained stable at £2.2m. The reduction in operating profits was due
principally to the return to normal activity in Laminates and lower earnings
from the sale of holographic foils to the Chinese tobacco industry. In contrast,
the US foils business continued to improve steadily, returning to healthy levels
of profitability for the first time in many years, and operating profits nearly
doubled in the European foils businesses.
Discontinued Businesses
The Group disposed of its heavily loss-making Metallised Paper division in
December 2004 and the remnants of its Converted Products division in January
2005, realising total proceeds of up to £13.0m, of which £9.8m was received
prior to the year end. A decision has also been taken to discontinue the
loss-making Chromagem holographic design business, which is based in the US.
The operating loss before goodwill amortisation and exceptional items of the
discontinued businesses was £1.5m (loss £3.1m) on sales of £12.8m (£58.1m). The
performance of both the Metallised Paper and Converted Products divisions had
deteriorated significantly during the periods prior to their sale.
REVIEW OF CONTINUING OPERATIONS
Foils
The Group's foils businesses produce a range of reflective and holographic,
metallic-finished products used by international manufacturers of packaging for
premium branded goods. The Group has a significant share of the market for
metallic and pigment foils in the luxury, consumer products, pharmaceutical and
tobacco sectors and has a highly regarded holographic capability. The Foils
business is a worldwide operation with manufacturing sites in North America,
Europe and China, and sales and distribution facilities in each of its key
markets.
Foil sales decreased by 4.3% compared with the previous year. Approximately two
thirds of the reduction occurred in China, where restructuring of the domestic
tobacco industry adversely affected demand for high margin holographic foils,
while the remainder occurred in Europe where market conditions were challenging
in the second half of the year. The US foils business performed well, increasing
underlying sales by 3.5% despite strong domestic competition.
Operating margins improved by more than 20% compared with the previous year
despite significant increases in raw material costs and notwithstanding the
deterioration that occurred in China. Raw material costs are closely linked to
the oil price and we experienced considerable increases in these and utility
costs during the year. While it has proven difficult to recover increases
through higher pricing due to competitive pressure, the work which has been done
to improve process efficiency has yielded benefits and profits were up
considerably in both the US and European businesses.
The Chinese foils business experienced a difficult year in 2005. Consolidation
of the domestic tobacco industry significantly reduced demand for high-margin
holographic foils and the resulting over-capacity in the market led to fierce
price competition that eroded margins on holographic products generally. While
we responded aggressively with improved quality and competitive pricing, market
conditions remain tough. In contrast, good progress has been made in domestic
markets for general-purpose graphics foil. Sales growth in excess of 10% has
been achieved in these markets and many innovative new products have been
developed and successfully launched. Export sales also increased substantially,
with significant volumes now sold into new markets such as India and Russia,
together with an increase in export sales throughout the Asia-Pacific region
generally. Additionally, the European foils business now imports a high
proportion of its graphics foil range from China and bulk shipments to the US
have just commenced.
In Europe, the holographic foil business based in Salford performed strongly. A
new management team has been in place since mid-2004 and during this time
quality standards and productivity have been steadily improving. These efforts
have been rewarded with strong sales growth and significant improvement in
margins.
In contrast, the graphics and pigment foils business based in Livingston had a
difficult year. Price pressure and increased competition adversely impacted
sales in the first half, the business then suffered from the general slowdown in
the packaging sector experienced during the summer months and the situation was
further exacerbated by Boxstar Limited, one of its major customers, being put
into administration in September 2005. The management team was strengthened
earlier this year and much has been done to address deficiencies in the product
range and improve manufacturing productivity. These efforts were reflected in
some improvement in profitability during the current year, but more importantly
a solid foundation has been laid for further progress in 2006.
The US foils business continued with its focus on improving productivity and
efficiency and maintained its steady upward trend in performance, returning to
profitability for the first time in several years. Increases in raw material and
utility costs were successfully absorbed through more effective purchasing,
reduced waste and price increases. Good progress has been made in reorganising
manufacturing and the sales strategy has delivered growth in a number of key
product areas.
While we will continue to maintain the strong, national identities of each of
our foils businesses, there are good opportunities for our Foils division as an
increasingly international, integrated, world-wide business. Development is
therefore underway in a number of areas in support of this strategy including
the following:
• During the year, we commenced a programme of phased capital investment
which will see new metallising and embossing capacity come on stream in 2006
in the US and Europe.
• We have begun the process of rationalising our product range and
consolidating manufacture of each product into a single location. This will
enable us to realise economies of scale in manufacturing and improve product
quality and consistency.
• We continue to progress the relocation of our Chinese facility. We have
recently purchased land and expect construction of a new facility to
commence during 2006. In addition to improving our capabilities in China,
this project will provide us with the opportunity to manufacture large
quantities of high-quality graphic foils at low-cost and should
significantly improve our ability to compete effectively in the US and
European markets.
• A number of new products targeted at the volume market in Europe and the
US and manufactured in China were launched during the latter stages of 2005
and these are performing ahead of expectations.
• We recently completed the acquisition of a key distributor in Germany and
are actively looking to expand our presence in a number of other key
markets.
We continue to believe that the foils business offers good opportunities for
growth and that further margin improvement is achievable.
Laminates
The Laminates business produces a range of laminated paperboard products used by
international packaging manufacturers in the construction of cartons and boxes
for premium branded goods. Often such products incorporate a metallic or
holographic finish and consequently there are opportunities for synergies with
the Group's foils business. API has a significant share of the tobacco, drinks
and luxury products markets and a developing presence in the consumer products
and pharmaceuticals sectors. Based in the UK, Laminates serves principally the
UK and Western European market.
The division enjoyed an exceptional year in 2004 due to the high volume of
promotional work associated with product launches by major tobacco companies.
This led to significant one-off projects in the US and Far-East and also
increased sales in Europe. In 2005, the mix of business returned to normal and
consequently there was a decline in profitability, although the overall return
on sales continued to compare favourably with that achieved in previous years
and with industry averages.
Although sales and margins were both below the levels achieved during 2004,
Laminates performed well during the year in the face of often difficult market
conditions. Sales in the traditional tobacco, drinks and health and beauty
sectors remained strong, although there was considerable pressure on margins,
particularly in the UK, and good progress was made in new product areas such as
food, pharmaceutical and personal care. Like the European foils business,
Laminates suffered badly from the general slowdown experienced during the summer
months and was impacted by the collapse of Boxstar Limited. The situation was
further exacerbated by industrial action over the summer months at a number of
Finnish paper and board manufacturers, which adversely affected the supply of
paperboard and impacted our ability to fulfil orders during the seasonally
busier final quarter of the year.
Although the tobacco and drinks sectors in the UK and Western Europe will
continue to be of fundamental importance to Laminates for the foreseeable
future, we believe that the most attractive opportunities for development lie in
markets such as luxury goods, pharmaceuticals, personal care and food products
where we already have a growing presence. The sales force and technical group
has recently been reorganised and strengthened and will increasingly focus on
developing these markets. During 2006, we will bring on stream sheet-fed
lamination capability to enable us to become more responsive and flexible and
better service customers in both traditional and new sectors. During the period,
we also successfully implemented Oracle, the Group's new ERP system, and this is
already beginning to yield financial benefits.
We continue to believe that there are opportunities to leverage our position as
one of Europe's leading manufacturers of laminated products to achieve growth in
both sales and profits. We recognise that the Laminates business is heavily
focused on traditional markets and we are examining a number of options for
expanding our geographical presence within Europe and for penetration into the
attractive US and Far Eastern markets.
PROSPECTS
Although trading conditions are expected to remain tough in most of the Group's
markets, we are confident of achieving further improvement in 2006. The US and
Chinese foils businesses are expected to continue to improve steadily and the
European foils business is positioned for growth and margin improvement
following the successful launch of a number of new products, increasing
availability of competitively priced products from China and recent expansion of
the distribution base. While conditions for Laminates remain more challenging,
we are optimistic that the recent reorganisation of the sales and technical
teams and the capital investment in sheet-fed laminating capacity will deliver
benefits during 2006.
The Group is now repositioned as a focused supplier of reflective,
metallic-finished and laminated products for use in the packaging of premium
branded goods, with a strong presence in the US, Europe and the Far East. We
have made a number of strategic investments during 2005 that are already
delivering benefits to the Group and we will continue to invest in the expansion
and development of the Foils and Laminates businesses. The Board believes that
the Group has strong positions in attractive markets with good opportunities for
growth and margin improvement and remains confident that further progress will
be made in 2006.
GROUP PROFIT & LOSS ACCOUNT
for the year ended 30 September 2005
___________________________________________________________________________________________________________________
2005 2004
£'000 £'000
Group Turnover
Continuing operations 105,570 111,442
Discontinued operations 12,780 58,103
118,350 169,545
Operating profit/(loss)
Before goodwill amortisation and exceptional items
Continuing operations 3,271 4,554
Discontinued operations (1,520) (3,136)
1,751 1,418
Goodwill amortisation
Continuing operations (407) (406)
Discontinued operations - (44)
(407) (450)
After goodwill amortisation but before exceptional items
Continuing operations 2,864 4,148
Discontinued operations (1,520) (3,180)
1,344 968
Exceptional items
Continuing operations (430) (1,657)
Discontinued operations (454) (6,904)
(884) (8,561)
Group operating profit / (loss)
Continuing operations 2,434 2,491
Discontinued operations (1,974) (10,084)
460 (7,593)
Share of operating loss in joint venture (55) (91)
Total operating profit / (loss): group and share of joint venture 405 (7,684)
Loss on disposal of discontinued operations
Before goodwill (8,120) (100)
Goodwill previously charged to reserves (7,917) (14,365)
(16,037) (14,465)
Loss on ordinary activities before interest and taxation
Continuing operations 2,434 2,491
Discontinued operations (18,066) (24,640)
(15,632) (22,149)
Net interest (1,407) (1,696)
Loss on ordinary activities before taxation (17,039) (23,845)
Taxation (338) (559)
Loss on ordinary activities after taxation (17,377) (24,404)
Equity minority interests (574) (982)
Loss attributable to shareholders (17,951) (25,386)
Dividends - -
Balance transferred from reserves (17,951) (25,386)
Basic and fully diluted loss per share (53.6) (76.3)
Adjusted loss per share (before goodwill amortisation and exceptional items) (1.9) (5.7)
GROUP BALANCE SHEET
as at 30 September 2005
___________________________________________________________________________________________________________________
2005 2005 2004 2004
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 5,818 5,516
Tangible assets 28,692 38,579
Investment in joint venture
Share of gross assets - 626
Share of gross liabilities - - (136) 490
34,510 44,585
Current assets
Stocks 12,869 16,957
Debtors 20,677 34,918
Cash at bank and in hand 10,396 11,719
43,942 63,594
Creditors - amounts falling due within one year (25,668) (41,251)
Net current assets 18,274 22,343
Total assets less current liabilities 52,784 66,928
Creditors - amounts falling due after more than one year (14,980) (19,712)
Provisions for liabilities and charges (1,367) (1,499)
Accruals and deferred income - (323)
Net assets 36,437 45,394
Share capital and reserves
Called up share capital 8,592 8,463
Share premium account 211 -
Revaluation reserve 1,866 2,886
Capital redemption reserve 549 549
Merger reserve - 14,365
ESOP reserve (251) (2,513)
Profit and loss account 20,010 16,135
Shareholders' funds 30,977 39,885
Equity minority interests 5,460 5,509
36,437 45,394
GROUP CASH FLOW STATEMENT
for the year ended 30 September 2005
___________________________________________________________________________________________________________________
2005 2004
£'000 £'000
Reconciliation of operating loss to net cash inflow from operating activities
Group operating profit / (loss) 460 (7,593)
Amortisation and depreciation less government grants 4,607 6,852
Impairment charge against tangible fixed assets 212 6,665
Loss / (profit) on disposal of fixed assets, other than land & buildings 149 (1)
Increase in stocks (892) (287)
Decrease / (increase) in debtors 6,043 (2,000)
(Decrease) / increase in creditors (6,424) 490
Decrease in provisions (590) (90)
Net cash inflow from operating activities 3,565 4,036
Cash outflow of £672,000 (2004: £1,896,000) resulted from operating exceptional items incurred during the year
2005 2005 2004 2004
£'000 £'000 £'000 £'000
Cash flow statement
Net cash inflow from operating activities 3,565 4,036
Returns on investment and servicing of finance
Interest paid (1,483) (1,410)
Interest received 117 73
Dividends paid to minority interests (788) (2,154) (790) (2,127)
Taxation
UK - 18
Overseas (563) (563) (680) (662)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (4,806) (3,393)
Receipts from sales of tangible fixed assets 50 216
Payments to acquire investments - (4,756) (490) (3,667)
Acquisitions and disposals
Sale of subsidiary undertakings 8,057 2,119
Net (cash) / overdrafts disposed of with subsidiary (24) 219
undertakings
Acquisition (1,069) 6,964 (43) 2,295
Net cash flow before management of liquid resources and
financing 3,056 (125)
Management of liquid resources - 1,335
Financing
(Decrease) / increase in short term borrowing (575) 1,775
Decrease in long term borrowing (4,735) (200)
Issue of ordinary share capital 340 -
Cash received from ESOP trust 347 -
Increase in cash in the period (1,567) 2,785
Exchange movement 244 (462)
Balance sheet movement in net cash (1,323) 2,323
GROUP CASH FLOW STATEMENT
for the year ended 30 September 2005
___________________________________________________________________________________________________________________
Notes to the cash flow 2004 Cash Acquisition Exchange Other 2005
statement flow non-cash
movements
£'000 £'000 £'000 £'000 £'000 £'000
A. Analysis of net debt
Cash at bank and in hand 11,719 (1,567) - 244 - 10,396
Short term borrowing (2,575) 575 (102) - - (2,102)
Long term borrowing (19,679) 4,735 - - (36) (14,980)
Net debt (10,535) 3,743 (102) 244 (36) (6,686)
2005 2004
£'000 £'000
B. Reconciliation of net cash flow to movement in net debt
(Decrease) / increase in cash (1,567) 2,785
Decrease in short term investments - (1,335)
Decrease / (increase) in short term borrowing 575 (1,775)
Decrease in long term borrowing 4,735 200
Change in net debt resulting from cash flows 3,743 (125)
Exchange movement 244 (552)
Loans assumed on acquisition (102) -
Other (36) (37)
Movement in net debt 3,849 (714)
Net debt at start of period (10,535) (9,821)
Net debt at end of period (6,686) (10,535)
OTHER STATEMENTS
for the year ended 30 September 2005
___________________________________________________________________________________________________________________
2005 2004
£'000 £'000
Statement of total recognised gains and losses
Loss for the financial year excluding share of losses of joint venture (17,896) (25,295)
Share of joint venture's losses for the year (55) (91)
Loss attributable to shareholders (17,951) (25,386)
Currency translation differences on foreign currency net investments 439 (1,503)
Total recognised gains and losses relating to the year (17,512) (26,889)
Prior year adjustment - (435)
Total gains and losses recognised since previous annual report and accounts (17,512) (27,324)
2005 2004
£'000 £'000
Reconciliation of movements in shareholders' funds
Loss attributable to shareholders (17,951) (25,386)
New shares issued net of costs 340 -
Exercise of share options to acquire shares held by the ESOP trust 347 -
Goodwill reinstated on sale of a subsidiary 7,917 14,365
Currency translation differences on foreign currency net investments 439 (1,503)
Net deduction from shareholders' funds (8,908) (12,524)
Opening shareholders' funds 39,885 52,409
Closing shareholders' funds 30,977 39,885
NOTES
SEGMENTAL ANALYSIS
Analysis of turnover by destination 2005 2005 2004 2004
£'000 £'000 £'000 £'000
United Kingdom
Continuing operations 40,460 42,375
Discontinued operations 6,024 46,484 24,965 67,340
Continental Europe
Continuing operations 26,516 27,933
Discontinued operations 5,474 31,990 29,189 57,122
Americas
Continuing operations 22,205 24,952
Discontinued operations 181 22,386 719 25,671
Rest of World
Continuing operations 16,389 16,182
Discontinued operations 1,101 17,490 3,230 19,412
118,350 169,545
Analysis by origin Turnover Profit/(loss) before Net operating assets
interest and tax
2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom - continuing 71,342 75,080 1,663 2,340 16,950 34,282
United Kingdom - discontinued 12,631 57,714 (1,213) (2,778) - -
83,973 132,794 450 (438) 16,950 34,282
Continental Europe - continuing 871 1,008 112 166 290 -
Americas - continuing 21,873 21,817 430 (200) 11,844 11,512
Americas - discontinued 143 389 (307) (358) - -
22,016 22,206 123 (558) 11,844 11,512
Rest of World - continuing 11,484 13,537 1,066 2,248 6,487 6,383
Rest of World - discontinued 6 - - - - -
11,490 13,537 1,066 2,248 6,487 6,383
118,350 169,545 1,751 1,418 35,571 52,177
Share of joint venture - - (55) (91) - -
Exceptional items and goodwill - (17,328) -
amortisation
- (23,476) -
Non operating assets - - - - 866 (6,783)
118,350 169,545 (15,632) (22,149) 36,437 45,394
NOTES (cont'd)
__________________________________________________________________________________________________________________
Analysis by activity Turnover Profit/(loss) before Net operating assets
interest and tax
2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000
Continuing - Foils & Laminates 105,570 111,442 5,502 6,774 35,571 36,927
Continuing - Central costs - - (2,231) (2,220) - -
105,570 111,442 3,271 4,554 35,571 36,927
Discontinued - Metallised Paper 3,340 22,959 (693) (2,679) - 2,476
Discontinued - Converted Products 9,297 34,755 (520) (99) - 12,774
Discontinued - Chromagem 143 389 (307) (358) - -
12,780 58,103 (1,520) (3,136) - 15,250
118,350 169,545 1,751 1,418 35,571 52,177
Share of joint venture - - (55) (91) - -
Exceptional items and goodwill -
amortisation
- (17,328) (23,476) - -
Non operating assets - - - - 866 (6,783)
118,350 169,545 (15,632) (22,149) 36,437 45,394
OPERATING LOSS 2005 2004
£'000 £'000
Exceptional items charged against operating loss comprise
Restructuring of operating businesses 672 1,896
Impairment of tangible assets 212 6,665
884 8,561
EARNINGS PER SHARE 2005 2004
pence £'000 pence £'000
Earnings per share are based on
Loss attributable to shareholders (53.6) (17,951) (76.3) (25,386)
Add exceptional items 2.6 884 25.7 8,561
Add goodwill amortisation 1.2 407 1.4 450
Add loss on disposal of discontinued operations 47.9 16,037 43.5 14,465
Adjusted loss attributable to ordinary shareholders (1.9) (623) (5.7) (1,910)
Basic weighted average number of ordinary shares 33,468,246 33,262,578
BASIS OF PREPARATION
The accounts have been prepared on the basis of the accounting policies set out
in the Group's Annual Report and Accounts for the year ended 30 September 2004.
PUBLICATION OF ABRIDGED ACCOUNTS
The preliminary announcement figures for the year ended 30 September 2005 and
the comparative figures for the year ended 30 September 2004 are an abridged
version of the Group's statutory accounts which carry an unqualified audit
report and do not contain a statement under S237 (2) or (3) of the Companies Act
1985. The Group's audited statutory accounts for the year ended 30 September
2005 will be filed in due course with the Registrar of Companies. The Group's
audited statutory accounts for the year ended 30 September 2004 have been filed
with the Registrar of Companies.
The Annual Report and Accounts for the year ended 30 September 2005 will be
posted to shareholders by 3 January 2006 prior to the Annual General Meeting on
1 February 2006. Copies of the Annual Report and Accounts will be available to
members of the public from 4 January 2006 at the Group's registered office at
Second Avenue, Poynton Industrial Estate, Poynton, Cheshire SK12 1ND.
CONTINGENT LIABILITIES
The consideration for the sale of the Converted Products Division includes a
deferred element totalling £2.0 million. It is payable in January 2007 and,
should the purchaser default, it is guaranteed by an independent insurance
company. A potential claim has recently been received from the purchasers of the
Converted Products Division, Tri-Q Limited which may affect the recoverability
of £750,000 of the deferred consideration. The Directors consider that any claim
will be unsuccessful and will robustly defend any legal action. Legal advice
obtained indicates that a successful outcome is probable and consequently, no
provision against the recoverability of the deferred consideration has been made
in the accounts.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
The accounts for the six months ending 31 March 2006 will be prepared under
International Financial Reporting Standards (IFRS). Had the accounts for the
year ended 30 September 2005 been prepared using these standards, the reported
loss after taxation would have been £0.4 million lower and shareholders' equity
at 30 September 2005, which under UK GAAP was £31.0 million would have been
£22.8 million. The reduction in shareholders' equity relates mainly to a change
in the method of accounting for the deficit on the Group's defined benefit
pension scheme. The decrease in the reported loss after taxation results
principally from ceasing to amortise goodwill.
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