Final Results

Avon Rubber PLC 30 November 2006 Avon Rubber p.l.c. Strictly embargoed until 07:00 30 November 2006 Preliminary results for the year ended 30 September 2006 30 Sept 30 Sept 2006 2005 Â£Millions Â£Millions ___________ ___________ GROUP* Revenue 230.8 239.7 Operating profit/(loss) 1.6 (2.0) Operating profit before exceptional items 3.0 6.2 CONTINUING OPERATIONS Revenue 65.0 46.9 Operating loss (2.5) (3.2) Operating loss before exceptional items (2.0) (1.9) DISCONTINUED OPERATIONS Revenue 165.8 192.8 Operating profit for the year 4.1 1.2 Operating profit for the year before exceptional items 5.0 8.1 LOSS PER SHARE: Basic (68.9)p (19.1)p Continuing operations (20.9)p (21.9)p DIVIDENDS PER SHARE 8.5p 8.5p *The Group figures are non statutory items which have been reconciled to the Income Statement within Note 2. â€¢ Year of significant strategic change â€¢ Group now focusing on respiratory protection, dairy, aerosol gaskets and engineered fabrications â€¢ Revenue on continuing operations up 39% â€¢ Net debt reduced to Â£1.1 million â€¢ Dividend maintained â€¢ Results prepared under International Financial Reporting Standards (IFRS) Commenting on the results, Terry Stead, Chief Executive said: 'The last eighteen months has been a period of significant strategic change for the Group. Having disposed of our Automotive business and closed or restructured other loss making activities, we are now focused on the opportunities in respiratory protection, dairy, aerosol gaskets and engineered fabrications. Our position in respiratory protection has been strengthened by the acquisition of ISI, the launch of the new escape hood and the transfer into production of the new M50 range of respirators and their associated filters for the US government. In the UK we are seeing the benefits of the cost reduction measures taken last year. We are also experiencing increased demand for our legacy respiratory protection products and our new escape hood. In North America both our dairy and engineered fabrications businesses continue to perform well. Since the year end the overall performance from our continuing operations is improving and we expect significant growth from the North American respiratory protection business. The Board is confident that the strategic changes that have been made have laid the foundation for a period of exciting and profitable growth for the Group.' For further enquiries, please contact: Avon Rubber p.l.c Terry Stead, Chief Executive 020 7067 0700 Peter Slabbert, Group Finance Director (until 2.00pm) From 1 December 01225 896 831 Weber Shandwick | Square Mile Richard Hews 020 7067 0700 Rachel Taylor Hannah Marwood An analyst meeting will be held at 09:15 for 09:30 am this morning at the offices of Weber Shandwick Square Mile, Fox Court, 14 Gray's Inn Road, London,WC1X 8WS. NOTES TO EDITORS: Avon Rubber p.l.c. is an international polymer engineering group adding value through material, manufacturing and industry sector expertise. The Group is currently capitalised at approximately Â£45 million. AVON RUBBER p.l.c. PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 INTRODUCTION We have completed a major strategic restructuring during the year. We sold our Automotive business, finalised the restructuring at our Hampton Park West facility and completed the disposal of Avon Zatec. This repositions the Group in our chosen markets of respiratory protection, dairy, aerosol gaskets and engineered fabrications where we believe the opportunities exist for us to benefit from higher margin growth and sustainable earnings. Trading was disappointing during the year, particularly in the second half. Having announced the Automotive disposal in May, the delayed August completion date meant that we incurred losses associated with customer shutdown periods of July/August without the benefit of normally improved trading in September. Interest costs were also higher due to the delayed completion. The short-term improvements expected at the half year from our respiratory protection business were not realised as originally planned. This was through a combination of market factors and the inherent uncertainties associated with the introduction and approval of new safety critical products in a demanding regulatory environment, where a large proportion of our sales are now to military users or other governmental organisations. Once contracts start these provide for long-term and consistent revenue streams although the exact timing of initial production orders is less predictable. The transfer into production of the new generation US military respirator and the associated filters continues to make progress. We have received further orders for this respirator and expect the full rate production order shortly. This will enable our respiratory protection business in Cadillac, Michigan, to grow and operate at planned levels of profitability. The businesses situated in Hampton Park West are now showing significant improvements and production rates of the newly introduced rapid escape hood are approaching targeted levels. Our North American dairy business and engineered fabrications continue to demonstrate strong operational performance. RESULTS The Group reports full year results for the first time under International Financial Reporting Standards (IFRS), adopted from the date of transition being 1 October 2004. Revenue from continuing operations increased by 39% to Â£65.0m (2005: Â£46.9m). The operating loss decreased from Â£3.2m in 2005 to Â£2.5m; however, the operating loss before exceptional items increased from Â£1.9m to Â£2.0m. The exceptional charges for the year ended 30 September 2006 relate to a restructuring programme at our Hampton Park West facility to reduce its cost base and to the impairment of the loss making Mixing facility in Westbury, offset by a profit on the sale and leaseback of the Hampton Park West site. Group operating profit on an IFRS basis, but presented in a UK GAAP format, was Â£3.0m before exceptional items (2005: Â£6.2m) and the profit before tax and exceptional items on a similar basis was Â£1.7m (2005: Â£4.8m). Net interest costs increased to Â£3.4m (2005: Â£2.5m) due to higher global interest rates and higher levels of borrowings through much of the year. This follows the acquisition of International Safety Instruments (ISI) in June 2005 for an initial cash consideration of Â£11.7m, high levels of capital expenditure in our developing respiratory protection business and the later than expected completion of the sale of our Automotive business. Following this disposal, net debt reduced to Â£1.1m (2005: Â£51.7m) at year end. Prior to the effect of disposals and a high level of investment ahead of planned growth, we generated net cash from operating activities of Â£0.7m (2005: Â£4.2m). Further investment is planned for 2007, particularly in product development in our Protection business and in the working capital associated with planned growth. After net interest and other finance income the loss before tax was Â£3.7m (2005: Â£4.7m). After a tax charge of Â£2.0m (2005: Â£1.1m), the loss for the year from continuing operations was Â£5.7m (2005: Â£5.8m). The tax charge relates to tax on profits in our US entities and the derecognition of tax assets in the UK. Tax credits onlosses in the UK are not being recognised until there is greater certainty about the timing of their utilisation. The discontinued operations comprising the disposed Automotive business, the disposed business machines operations at Zatec and the closed business machines operation at Hampton Park West, incurred a loss for the year of Â£13.4m (2005: profit Â£0.7m). This reflects an operating profit before exceptional items of Â£5.0m (2005: Â£8.1m), a loss on disposal of the Automotive operations of Â£17.4m, a loss on disposal of Zatec of Â£0.6m, Â£0.9m of exceptional operating costs relating to the discontinuation of business machine operations in the UK and a tax credit of Â£0.6m (2005: charge Â£0.6m). The loss per share was 68.9p (2005: 19.1p) and the loss per share on continuing operations was 20.9p (2005: 21.9p). PROTECTION AND ENGINEERED PRODUCTS Sales revenue from continuing businesses increased by 39% to Â£65.0m (2005: Â£46.9m). This growth originated in three main areas. ISI's full year's sales totalled Â£11.3m (2005: Â£2.3m post acquisition) even though they suffered from a disappointing second half as a result of delayed Federal grants to fire departments in the US. Avon Engineered Fabrications' sales increased by 83% to Â£8.4m (2005: Â£4.6m) reflecting strong growth in our military portable storage tank business. In Protection we experienced an increase in recoverable product development activity and the commencement of respirator sales from our new facility in Cadillac, but lower sales in the UK. Dairy made modest progress in its mature markets with improvements primarily in the US. The UK Dairy operations stabilised following sales reductions in 2005. The Aerosol gasket business grew by 5% with further growth, particularly in the US, being targeted. The operating loss before exceptional items from continuing businesses was Â£2.0m (2005: Â£1.9m). This loss is shown after absorption of all central costs. Despite Automotive being part of the Group for much of the year no central costs were allocated to this segment. These costs have been further reduced since the disposal. The operating loss from continuing businesses represents a mixture of profitable stable businesses, businesses investing for growth and loss making operations: â€¢ Our US based businesses, Hi-Life (dairy), Avon Engineered Fabrications (flexible fabrications) and ISI (SCBA equipment) all made significant profit contributions. â€¢ The Protection businesses are resourced for further growth in respirators and rapid escape hoods. However, in the year, the UK business experienced a low level of legacy respirator sales. â€¢ Our UK Dairy and Aerosol gasket businesses underperformed due to an unacceptably high cost base which has now been addressed. The Mixing operation incurred a significant loss and central costs were at levels higher than we expect going forward. The opportunity for improvement clearly lies in delivering the planned revenue growth, particularly in respiratory protection, cost reductions in the UK actioned through the now completed restructuring and elimination of loss making activities. Discontinued business revenue fell by 15% to Â£5.5m (2005: Â£6.5m). Falling revenues at our business machine blades operation led to the disposal of Zatec which was completed in September. In addition, we closed our UK business machine roller manufacturing operation in June, exiting another loss making business in long-term decline. The loss incurred in the discontinued operations (before exceptional items) was Â£0.9m (2005: Â£0.7m). AUTOMOTIVE (DISCONTINUED BUSINESS) Revenue of Â£160.2m (2005: Â£186.4m) reflects the reduced trading period of a little over ten months to 11 August, the challenge of growing sales in a generally stable market, price down pressures and a disproportionate exposure in the US market to the traditional Big 3 automotive manufacturers each of whom continued to lose market share. The resulting operating profit (excluding any allocation of central costs) was Â£5.9m (2005: Â£2.1m after exceptional operating items of Â£6.7m). At a trading level therefore, operating profit reduced by Â£2.9m. As a percentage of sales this is a reduction from 4.7% in 2005 to 3.7% in 2006, reinforcing our belief that we were unlikely to deliver acceptable returns from this business going forward. The reduction in profitability resulted despite significant cost elimination activities, including three facility closures in recent years along with the accompanying charges and associated write-offs. Publicly announced cuts in production by major US customers, after the disposal was completed, confirm the volatility of the market and support our strategy to exit this area of our business. CAPITAL STRUCTURE AND DIVIDEND At the time of our interim statement in May, and following the disposal of the Automotive business, we stated that the Board would consider the appropriate capital structure for the Group. This would require balancing important factors, including perceived growth/acquisition opportunities, product development programmes, restructuring plans, on-going pension obligations and distribution policy. The Board has undertaken this review and believes the Group is now poised for a period of organic growth, particularly in respiratory protection. This will require funding for both working capital and new product development. In addition, the Board wishes to be in a position to make appropriate acquisitions in pursuit of the Group's strategy. There is still a deficit in the pension fund despite improved asset returns in the year, but with the latest valuation taking account of increased life expectancy. As a result the Board is of the opinion that, having taken into account current financing availability and potential debt capacity, any enhanced distribution may inhibit the opportunities for growth. The Board is, however, recommending an unchanged final dividend of 4.8p per share (2005: 4.8p per share) which will be paid on 2 February 2007 to shareholders on the register on 12 January 2007. When added to the interim dividend of 3.7p per share (2005: 3.7p per share) the total dividend is unchanged at 8.5p per share (2005: 8.5p per share). The Board recognises that this dividend is not covered by current earnings but is committed to returning to appropriate levels of dividend cover going forward. OUTLOOK The last eighteen months has been a period of significant strategic change for the Group. Having disposed of our Automotive business and closed or restructured other loss making activities, we are now focused on the opportunities in respiratory protection, dairy, aerosol gaskets and engineered fabrications. Our position in respiratory protection has been strengthened by the acquisition of ISI, the launch of the new escape hood and the transfer into production of the new M50 range of respirators and their associated filters for the US government. In the UK we are seeing the benefits of the cost reduction measures taken last year. We are also experiencing increased demand for our legacy respiratory protection products and our new escape hood. In North America both our dairy and engineered fabrications businesses continue to perform well. Since the year end the overall performance from our continuing operations is improving and we expect significant growth from the North American respiratory protection business. The Board is confident that the strategic changes that have been made have laid the foundation for a period of exciting and profitable growth for the Group. CONSOLIDATED INCOME STATEMENT For the year ended 30 September Note Year to Year to 30 Sept 06 30 Sept 05 (unaudited) (unaudited) Â£'000 Â£'000 ______________________________________________________________________________ Continuing operations Revenue 2 65,042 46,860 Operating loss from continuing operations 2 (2,461) (3,198) _______________________________________________________________________________ _______________________________________________________________________________ Operating loss is analysed as: Before exceptional items (1,997) (1,909) Exceptional operating charges (464) (1,289) _______________________________________________________________________________ _______________________________________________________________________________ Interest receivable 123 193 Interest payable (3,493) (2,670) Other finance income 2,151 1,010 _______________________________________________________________________________ Loss before tax (3,680) (4,665) Taxation 3 (2,045) (1,116) _______________________________________________________________________________ Loss for the year from continuing operations (5,725) (5,781) Discontinued operations (Loss)/profit for the year from discontinued operations 4 (13,402) 735 _______________________________________________________________________________ Loss for the year (19,127) (5,046) _______________________________________________________________________________ (Loss)/profit attributable to minority interest (209) 115 Loss attributable to equity shareholders (18,918) (5,161) _______________________________________________________________________________ (19,127) (5,046) _______________________________________________________________________________ Loss per share 6 Basic (68.9)p (19.1)p Diluted (68.9)p (19.1)p Loss per share from continuing operations Basic (20.9)p (21.9)p Diluted (20.9)p (21.9)p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 30 September Year to Year to 30 Sept 06 30 Sept 05 (unaudited) (unaudited) Â£'000 Â£'000 _______________________________________________________________________________ Loss for the financial year (19,127) (5,046) Actuarial (loss)/gain recognised in retirement benefit scheme (2,143) 3,974 Movement on deferred tax relating to retirement benefit liabilities 115 (6,275) Net exchange differences offset in reserves (809) 606 _______________________________________________________________________________ Net losses not recognised in income statement (2,837) (1,695) _______________________________________________________________________________ Total recognised expense for the year (21,964) (6,741) _______________________________________________________________________________ Attributable to: Minority interest (209) 115 Equity shareholders (21,755) (6,856) _______________________________________________________________________________ Total recognised expense for the year (21,964) (6,741) _______________________________________________________________________________ CONSOLIDATED BALANCE SHEET As at 30 September Note As at As at 30 Sept 06 30 Sept 05 (unaudited) (unaudited) Â£'000 Â£'000 _______________________________________________________________________________ Assets Non-current assets Goodwill & intangible assets 17,103 30,296 Property, plant and equipment 20,815 71,294 Investments accounted for using equity method - 146 Trade and other receivables - 604 Deferred tax assets 1,101 3,208 _______________________________________________________________________________ 39,019 105,548 Current assets Inventories 11,257 24,004 Trade and other receivables 15,530 51,227 Derivative financial instruments - 24 Cash and cash equivalents 6,893 8,919 _______________________________________________________________________________ 33,680 84,174 Liabilities Current liabilities Borrowings 8,000 35,884 Trade and other payables 18,505 47,270 Current tax liabilities 736 1,153 _______________________________________________________________________________ 27,241 84,307 _______________________________________________________________________________ Net current assets/(liabilities) 6,439 (133) _______________________________________________________________________________ Non-current liabilities Borrowings - 24,754 Deferred tax liabilities 2,293 3,116 Other non-current liabilities 1,071 1,155 Retirement benefit obligations 14,666 23,076 Provisions 3,426 5,615 _______________________________________________________________________________ 21,456 57,716 _______________________________________________________________________________ Net assets 24,002 47,699 _______________________________________________________________________________ Shareholders' equity Ordinary shares 28,275 28,121 Share premium account 34,191 34,070 Revaluation reserve - 1,751 Capital redemption reserve 500 500 Translation reserve (203) 606 Profit and loss account (39,317) (18,114) _______________________________________________________________________________ Equity shareholders' funds 7 23,446 46,934 Minority interests (equity interests) 556 765 _______________________________________________________________________________ Total equity 24,002 47,699 _______________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 September Note Year to Year to 30 Sept 06 30 Sept 05 (unaudited) (unaudited) Â£'000 Â£'000 _______________________________________________________________________________ Cash flows from operating activities Cash generated from operations 8 6,261 8,613 Interest received 123 234 Interest paid (3,890) (2,568) Tax paid (1,750) (2,062) _______________________________________________________________________________ Net cash from operating activities 744 4,217 _______________________________________________________________________________ Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) - (11,395) Disposal of subsidiaries (net of cash disposed) 51,972 - Net proceeds from sale of property, plant and equipment 4,935 - Net purchase of property, plant and equipment - (7,072) Capitalised development costs (5,182) (4,774) _______________________________________________________________________________ Net cash generated from/(used in) investing activities 51,725 (23,241) _______________________________________________________________________________ Cash flows from financing activities Net proceeds from issues of ordinary share capital 275 297 Net movements in loans and finance leases (51,156) 20,058 Decrease/(increase) in derivatives 24 (12) Dividends paid to shareholders (2,332) (2,293) _______________________________________________________________________________ Net cash (used in)/ generated from financial activities (53,189) 18,050 _______________________________________________________________________________ Effects of exchange rate changes (89) 68 _______________________________________________________________________________ Net decrease in cash and cash equivalents (809) (906) Cash and cash equivalents at beginning of the year 7,702 8,608 _______________________________________________________________________________ Cash and cash equivalents at end of the year 6,893 7,702 _______________________________________________________________________________ NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS 1. Basis of preparation Financial Reporting (a) The figures and financial information for the year ended 30 September 2006 do not constitute the statutory financial statements for that year. Those financial statements have not yet been delivered to the Registrar, nor have the auditors reported on them. The financial statements have been prepared in accordance with our accounting policies published in our IFRS conversion statement on 11 May 2006, which is available on our website at http:/ www.avon-rubber.com/corporate/pressrelease.htm. (b) The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as adopted by the European Union (collectively 'IFRS') and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The 2006 financial statements are the Group's first full year consolidated financial statements prepared under IFRS, with a transition date to IFRS of 1 October 2004. Consequently, the comparative figures for 2005 and the Group's balance sheet as at 1 October 2004 have been restated to comply with IFRS, with the exception of IAS 32: 'Financial instruments: disclosure and presentation' and IAS 39: 'Financial instruments: recognition and measurement' which have been applied from 1 October 2005. In addition, IFRS 1 on first time adoption allows certain exemptions from retrospective application of IFRS in the opening balance sheet at 1 October 2004. For full details, of the 2005 restatement visit the investor section of our website www.avonrubber.com. 2. Segmental analysis Due to the differing natures of the products and their markets, Avon Rubber p.l.c.'s primary reporting segment is by business. The secondary reporting format comprises the geographical segments by origin. _____________________________________________________________________________________________ Primary Continuing Discontinued reporting format - business segments For the year Protection & Protection & ended Engineered Automotive Engineered 30 September Products Components Products Total Unallocated Group 2006 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 _____________________________________________________________________________________________ Revenue 65,042 160,245 5,469 165,714 - 230,756 _____________________________________________________________________________________________ Segment result before exceptional operating items (1,997) 5,877 (918) 4,959 - 2,962 Exceptional operating items (464) - (917) (917) - (1,381) _____________________________________________________________________________________________ Segment result after exceptional operating items (2,461) 5,877 (1,835) 4,042 - 1,581 Loss on disposal of operations - (17,381) (645) (18,026) - (18,026) Interest receivable 123 123 Interest payable (3,493) (3,493) Other finance income 2,151 2,151 _____________________________________________________________________________________________ Loss before tax (2,461) (11,504) (2,480) (13,984) (1,219) (17,664) Taxation (2,045) 582 - 582 - (1,463) _____________________________________________________________________________________________ Loss for the year (4,506) (10,922) (2,480) (13,402) (1,219) (19,127) _____________________________________________________________________________________________ Loss attributable to minority interest (209) Loss attributable to equity shareholders (18,918) _____________________________________________________________________________________________ (19,127) _____________________________________________________________________________________________ _____________________________________________________________________________________________ Primary Continuing Discontinued reporting format - business segments For the year Protection & Protection & ended Engineered Automotive Engineered 30 September Products Components Products Total Unallocated Group 2005 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 _____________________________________________________________________________________________ Revenue 46,860 186,391 6,484 192,875 - 239,735 _____________________________________________________________________________________________ Segment result before exceptional operating items (1,909) 8,801 (709) 8,092 - 6,183 Exceptional operating items (1,289) (6,734) (135) (6,869) - (8,158) _____________________________________________________________________________________________ Segment result after exceptional operating items (3,198) 2,067 (844) 1,223 - (1,975) Share of post tax profits of joint venture - 78 - 78 - 78 Interest receivable 193 193 Interest payable (2,670) (2,670) Other finance income 1,010 1,010 _____________________________________________________________________________________________ Loss before tax (3,198) 2,145 (844) 1,301 (1,467) (3,364) Taxation (1,116) (566) - (566) - (1,682) _____________________________________________________________________________________________ (Loss)/profit for the year (4,314) 1,579 (844) 735 (1,467) (5,046) _____________________________________________________________________________________________ Profit attributable to minority interest 115 Loss attributable to equity shareholders (5,161) _____________________________________________________________________________________________ (5,046) _____________________________________________________________________________________________ __________________________________________________________________________________________________________ Secondary Continuing Discontinued reporting format - geographical segments For the year ended 30 September North North 2006 Europe America Total Europe America Total Group Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 __________________________________________________________________________________________________________ Revenue 22,266 42,776 65,042 91,230 74,484 165,714 230,756 __________________________________________________________________________________________________________ Segment result before exceptional operating items (7,084) 5,087 (1,997) 946 4,013 4,959 2,962 Exceptional operating items (464) - (464) (917) - (917) (1,381) __________________________________________________________________________________________________________ Segment result after exceptional operating items (7,548) 5,087 (2,461) 29 4,013 4,042 1,581 __________________________________________________________________________________________________________ __________________________________________________________________________________________________________ Secondary Continuing Discontinued reporting format - geographical segments For the year ended 30 September North North 2005 Europe America Total Europe America Total Group Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 __________________________________________________________________________________________________________ Revenue 23,962 22,898 46,860 111,124 81,751 192,875 239,735 __________________________________________________________________________________________________________ Segment result before exceptional operating items (5,287) 3,378 (1,909) 4,309 3,783 8,092 6,183 Exceptional operating items (1,289) - (1,289) (5,937) (932) (6,869) (8,158) __________________________________________________________________________________________________________ Segment result after exceptional operating items (6,576) 3,378 (3,198) (1,628) 2,851 1,223 (1,975) __________________________________________________________________________________________________________ Central costs which were previously allocated to all business segments, have been allocated only to continuing operations. The exceptional operating items comprise: ________________________________________________________________________________ 2006 2005 Â£'000 Â£'000 ________________________________________________________________________________ Profit on disposal of fixed assets 4,415 - Fixed asset impairment (3,442) - Other operating charges - continuing (1,437) (1,289) ________________________________________________________________________________ Exceptional operating items - continuing (464) (1,289) Other operating charges - discontinued (917) (6,869) ________________________________________________________________________________ (1,381) (8,158) ________________________________________________________________________________ The profit on disposal of fixed assets relates to the profit on the sale and leaseback of the facility at Hampton Park West, Melksham, UK. The fixed asset impairment relates to our UK mixing facility. Both these are included in the Protection and Engineered Products continuing business segment and European secondary segment. The other operating charges relate to the restructuring of our UK Protection & Engineered Products continuing operations (Â£1,437,000) and the costs associated with the discontinuance of business machine products manufactured in the UK (Â£917,000). 3. Taxation The split of the tax charge/(credit) between UK and overseas is as follows: ________________________________________________________________________________ Year to Year to Year to Year to 30 Sept 06 30 Sept 06 30 Sept 06 30 Sept 05 Continuing Discontinued Total Total Â£'000 Â£'000 Â£'000 Â£'000 ________________________________________________________________________________ United Kingdom 1,011 (634) 377 223 Overseas 1,034 52 1,086 893 ________________________________________________________________________________ 2,045 (582) 1,463 1,116 ________________________________________________________________________________ The tax charge relating to the sale of operations is Â£Nil (2005: Â£Nil) 4. Results from discontinued operations 30 Sept 06 30 Sept 05 Â£'000 Â£'000 ________________________________________________________________________________ Revenue 165,714 192,875 Operating profit from discontinued operations 4,042 1,223 ________________________________________________________________________________ Operating profit/(loss) is analysed as: Before exceptional items 4,959 8,092 Exceptional operating items (917) (6,869) ________________________________________________________________________________ Share of post tax profits of joint venture - 78 Taxation on profits from discontinued operations 582 (566) Loss on disposal (18,026) - ________________________________________________________________________________ (Loss)/profit for the year from discontinued operations (13,402) 735 ________________________________________________________________________________ The loss on disposal has been calculated as follows: Automotive Zatec Â£'000 Â£'000 ________________________________________________________________________________ Proceeds from sale 58,729 349 Costs associated with sale (4,880) (16) ________________________________________________________________________________ 53,849 333 Taxation on disposal - - ________________________________________________________________________________ Net proceeds from sale 53,849 333 Net assets disposed of (69,330) (978) ________________________________________________________________________________ (15,481) (645) Other provisions (1,900) - ________________________________________________________________________________ Loss on disposal after tax (17,381) (645) ________________________________________________________________________________ The Group's Automotive components business was sold on 11 August 2006. Zatec was sold on 29 September 2006. 5. Dividends The directors are proposing a final dividend in respect of the year ending 30 September 2006 of 4.8p which will absorb an estimated Â£1,325,000 of shareholders' funds. The dividend will be paid on 2 February 2007 to shareholders on the register at noon on 12 January 2007. In accordance with IFRS the proposed final dividend is not recorded as a liability nor reflected in the income statement. 6. Earnings per share Basic loss per share is based on a loss attributable to ordinary shareholders of Â£18,918,000 (2005: Â£5,161,000) and 27,454,995 (2005: 26,963,971) ordinary shares, being the weighted average of the shares in issue during the period on which dividends are paid. Loss per share on continuing operations is based on a loss of Â£5,725,000 (2005: Â£5,781,000). The company has dilutive potential ordinary shares in respect of the Sharesave Option Scheme and the Performance Share Plan. The diluted loss per share is not materially different to the basic loss per share. 7. Reconciliation of changes in equity Year to Year to 30 Sept 06 30 Sept 05 Â£'000 Â£'000 ________________________________________________________________________________ At the beginning of the year 46,934 55,405 Loss for the period attributable to equity shareholders (18,918) (5,161) Dividends (2,331) (2,294) Actuarial (loss)/gain recognised in retirement benefit schemes (2,143) 3,974 Movement on deferred tax relating to retirement benefit liabilities 115 (6,275) Net exchange differences offset in reserves (809) 606 New share capital subscribed 275 297 Movement in respect of employee share scheme 323 382 ________________________________________________________________________________ At the end of the year 23,446 46,934 ________________________________________________________________________________ 8. Cash generated from operations Year to Year to 30 Sept 06 30 Sept 05 Â£'000 Â£'000 ________________________________________________________________________________ Continuing operations Loss for the financial year (5,725) (5,781) Adjustments for: Tax 2,045 1,116 Depreciation 2,126 2,438 Impairment of fixed assets 3,442 - Amortisation and impairment of intangibles 613 191 Net interest expense 3,370 2,477 Other finance income (2,151) (1,010) Movements in working capital and provisions (5,655) (4,041) Other movements (3,985) 343 ________________________________________________________________________________ Cash used in continuing operations (5,920) (4,267) ________________________________________________________________________________ Discontinued operations: (Loss)/profit for the financial year (13,402) 735 Adjustments for: Tax (582) 566 Depreciation 5,047 5,813 Loss on sale of subsidiaries 18,026 - Amortisation and impairment of intangibles 1,128 2,312 Movements in working capital and provisions 1,964 3,554 Other movements - (100) ________________________________________________________________________________ Cash generated from discontinued operations 12,181 12,880 ________________________________________________________________________________ Cash generated from operations 6,261 8,613 ________________________________________________________________________________ 9. Analysis of net debt Amortisation As at Cash Disposal of of loan issue Exchange As at 30 Sep 05 Flow subsidiaries costs movements 30 Sept 06 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 __________________________________________________________________________________________ Cash at bank and in hand 3,902 68 (2,122) - (25) 1,823 Overdrafts (1,217) 1,226 - - (9) - Current asset investments classified as cash equivalents 5,017 108 - - (55) 5,070 __________________________________________________________________________________________ Cash and cash equivalents 7,702 1,402 (2,122) - (89) 6,893 Debt due after 1 year (24,754) 24,754 - - - - Debt due within 1 year (34,665) 26,389 - (83) 359 (8,000) Finance leases (2) 2 - - - - __________________________________________________________________________________________ (51,719) 52,547 (2,122) (83) 270 (1,107) __________________________________________________________________________________________ 10. Copies of the directors' report and the audited financial statements for the year ended 30 September 2006 will be posted to shareholders and may also be obtained from the company's registered office at Hampton Park West, Semington Road, Melksham, Wiltshire, SN12 6NB, England. (Telephone +44 1225 896871), or via the corporate website (www.avon-rubber.com). This information is provided by RNS The company news service from the London Stock Exchange

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