Final Results
Macfarlane Group PLC
27 March 2007
27 March 2007
MACFARLANE GROUP ANNOUNCES RESULTS FOR THE YEAR TO 31 DECEMBER 2006
Profit for the year, after tax and gains on discontinued operations,
totals £2.05m
Net bank borrowings reduced to £5.55m
Dividend intentions for 2007 reconfirmed
Profit before tax from continuing operations of £1.52m
Sales growth and margin recovery continues to date in 2007
Archie Hunter, Chairman of Macfarlane Group PLC today said:-
'I have to report to shareholders that the Group has produced profit before tax
from continuing operations for 2006 of £1.52m, that dividend payment intentions
for 2007 are as previously expressed and that our key businesses continue to
strengthen.
Trading
Profit for the year, after tax and including gains from discontinued operations,
was £2.1 million compared with £3.4 million for 2005. Earnings per share were
1.82p in 2006 compared to 3.01p in 2005. The 2006 result was achieved despite
trading disappointments in the middle of 2006.
Having returned to profit in 2005, the priority for the Group in 2006 was sales
growth. This has been achieved with increases in turnover in Distribution of 8%
and UK Packaging Manufacture of 12%, offsetting reductions of 12% in both the
Labels and US/Mexico Packaging businesses so that overall sales increased by 2%
to £130.1 million.
During 2006 there were significant industry-wide supplier-driven cost increases.
It proved difficult to pass these on to our customers in a timely fashion and
the impact was a reduction in our gross margin from 33.1% to 32.0% in the year.
Actions were taken immediately in the second half of the year to tighten margin
controls and these actions have seen a recovery in margins in the final quarter
of the year.
Despite these margin pressures, we continued our programme of investment in the
second half of the year with a number of revenue investments in Distribution's
e-commerce capability, new business development and strengthening of the
management team. The costs of these actions were more than covered by planned
asset disposal gains and non-recurring credits as set out in the operating
review of our manufacturing operations. We also commenced our acquisition
programme in Distribution with the purchase of Bloomfield Supplies Limited,
which generated a contribution of £0.1m in the final quarter.
We have maintained our market leading position in Distribution, being three
times larger than our nearest competitor, and our market share of just over 10%
demonstrates the potential for further growth.
More detailed comments on trading are set out in the operating review, following
my statement.
Cash and Dividends
Bank borrowings net of cash balances reduced to £5.6 million at 31 December 2006
and further improvements are expected in 2007. On top of this stock market and
assumed bond yield movements together with increased payments made during 2006
have seen a reduction in our recorded pension deficit, net of deferred taxation,
from £16.1 million to £11.1 million.
The Board recognises the importance which shareholders attach to the dividend
stream. A year ago I said that, subject to continued satisfactory trading, the
intention of the board was to establish in each year, the payment of an interim
dividend in October and a final dividend in June, following the Annual General
Meeting. Having already paid an interim dividend for 2006 of 1p per share it is
the intention of the Board to declare a final dividend for 2006 of 1p payable in
June 2007, subject to shareholder approval at the AGM in May this year. The
Board expects to pay a dividend of 2p per share for 2007 of which 1p will be
paid as an interim dividend in 2007.
Future Prospects
The Board believes that that the Group has gained from the experiences of 2006
and its response to them. It is confident that the key businesses on which we
will concentrate in 2007 have been strengthened. Further acquisitions will be
pursued.
A major element of the investment programme undertaken in 2006 related to
building the management team in terms of both numbers and competency. The
objective is to ensure that we have the necessary management strength to take
advantage of the business opportunities which we have identified. On behalf of
the Board I wish them every success.
We have recorded continued growth in sales and recovery in margins in 2007 to
date with a resultant increase in profitability compared to 2006.
We plan further profitable growth in 2007 and beyond.'
Further information: Archie S. Hunter Chairman 0141 333 9666
Peter D. Atkinson Chief Executive 0141 333 9666
John Love Finance Director 0141 333 9666
Operating review
Group Segment Revenue Revenue Result Result
2006 2005 2006 2005
£000 £000 £000 £000
Packaging Distribution 80,853 73,915 590 409
Manufacturing Operations 49,214 53,332 1,656 2,267
________ _______ ______ ______
Continuing activities 130,067 127,247 2,246 2,676
======== =======
Net finance costs (731) (1,086)
______ ______
Profit from continuing trading 1,515 1,590
operations
Gain on disposal of properties - 1,300
Discontinued activities (Manufacturing
Operations) 849 782
______ ______
Profit before taxation 2,364 3,672
Tax Continuing activities (313) (161)
Discontinued activities - (126)
______ ______
Profit for the year 2,051 3,385
====== ======
The results for 2006 show the Group recording profits from continuing trading
operations of £1.5 million, a performance broadly in line with 2005.
All businesses within the Group, with the exception of our business in US/
Mexico, were profitable in 2006. Profitability was achieved despite unfavourable
market conditions during 2006 in the majority of the markets in which we operate
due to consistent and considerable cost pressures on raw materials, fuel and
energy.
Group debt continued to reduce during 2006.
We have demonstrated in 2006 an ability to sustain profitability and create a
solid foundation. The focus of our plans for 2007 and beyond is to build on this
base and grow the business both organically and through acquisition.
Packaging Distribution
Macfarlane's Packaging Distribution business is the leading UK distributor of a
comprehensive range of packaging consumable products. In a highly fragmented
market, Macfarlane is the market leader with a 10% market share. The business
operates through 16 Regional Distribution Centres (RDCs) supplying customers on
a local, regional and national basis. The business enables customers to package
their products cost effectively by providing them with a comprehensive product
range, single source supply, just in time delivery and tailored stock management
programmes.
In 2006 Packaging Distribution recorded a profit of £0.6m, compared to £0.4m the
previous year. There were a number of factors that contributed to these results:
• Sales revenue increased by 7% on an organic basis, partly driven by
price increases and partly through volume growth.
• The first half of 2006 was a significant period for supplier price
increases due to inflation in raw materials, energy and oil related costs.
This difficult pricing environment caused delays in passing through fully
supplier increases to customers, resulting in the gross margin being 1%
lower than for the same period in 2005;
• In 2006 our On-Time-In-Full ('OTIF') deliveries averaged 92% compared
with 91% in 2005 and 85% in 2004;
• In 2006 we increased product range penetration in our existing customer
base to an average 8.6 lines per customer compared with 8.2 in 2005 and 8.0
in 2004;
• During 2006 we opened 2,505 new customer accounts;
Operating review
Packaging Distribution
• We commenced in 2006 a programme to rationalise our supplier base to
source products more cost-effectively. Our current supplier base consists
of 646 companies, a reduction of 46 vs. 2005;
• Our headcount in 2006 stabilised at just over 400 and our overhead to
sales ratio reduced by 1.2% from 2005, although overheads increased by £1.1
million partly due to investments in e-commerce capability, new business
development and strengthening of management;
• In 2006, 80 major customers commenced trading with us electronically
using our new Customer Connect service;
• Our 2006 customer satisfaction survey showed 86% of customers rating our
service above average (2005 - 79%) and of these, 33% rated our service as
excellent (2005- 27%);
• Packaging2U our new web based packaging service had a successful start
up year and has enabled us to access a number of market segments where
traditionally Macfarlane has not had a presence. We expect Packaging2U to
become profitable in 2007;
• During 2006 we invested in a dedicated new business team to accelerate
sales growth and we will see the benefits from this investment in 2007; and
• In the final quarter of 2006, we made the first acquisition in the
distribution business for five years. Bloomfield Supplies Limited
('Bloomfield') has performed well since acquisition, contributing £0.1m in
the final quarter of the year and this gives us encouragement to pursue
further similar acquisitions in 2007.
Within our current network of 16 RDCs, based on our 2006 results we had 6 RDCs
performing at acceptable levels, 7 RDCs demonstrating improvements that indicate
their ability to achieve acceptable performance levels and 3 RDCs where
performance is not at the acceptable level. During the final quarter of 2006 we
have made investments to strengthen our RDC management team and this should help
drive significant performance benefits in 2007.
The plan for 2007 is to focus our management actions in the following areas:
• Recover the gross margin erosion experienced in 2006 through more
effective management and recovery of supplier price changes;
• Accelerate sales growth through effective deployment of the new business
development team;
• Improve the returns from the 3 underperforming RDCs;
• Ensure the Packaging2U business builds on a successful start up year and
contributes positively to 2007 profitability;
• Deliver the benefits from the full year contribution of the Bloomfield
acquisition; and
• Following the successful acquisition of Bloomfield in 2006 we will look
to accelerate market penetration through additional acquisitions in 2007.
Manufacturing Operations
Macfarlane operates a range of manufacturing businesses, producing self adhesive
and re-sealable labels, plastic injection moulded closures and dispensers,
bespoke composite transit packaging and foam based packaging and protective
components.
In 2006 Macfarlane Group's Manufacturing Operations recorded a profit of £1.7
million, a reduction of £0.6 million on the previous year.
The key features of the Manufacturing Operations performance in 2006 were:
• Sales were 4% down versus 2005 primarily due to sales reductions at
Labels as we transitioned away from low margin own brand food business and
weaker trading conditions in the US;
• Gross margin was 0.7% down versus 2005 with the major reductions at
Labels due to customer price pressure and Plastics where raw material price
increases could not be fully passed onto customers; and
• The overhead to sales ratio was 0.4% ahead of last year reflecting the
nature of the fixed cost base of the manufacturing businesses. However
total overheads reduced by over £1.0 million benefiting from reduced
depreciation in Labels of £0.2 million following changes in estimates of
residual values of machinery and gains on disposal of machinery of
£0.2 million primarily in the Labels business.
Operating review
Manufacturing Operations
Labels
The principal activity of the Labels business is the production of self-adhesive
and re-sealable labels for major FMCG customers primarily in European markets.
The business operates from two production sites in Kilmarnock and Dublin and a
sales and design office in Sweden which focuses on the development and growth of
our re-sealable labels business - Reseal-it(TM).
During 2006 the Macfarlane Labels business continued to experience the price and
margin pressure that has been a consistent feature over recent years. In
response the business has been transitioning itself away from the volatile lower
margin own brand food related business to more secure margin high-quality
branded products. This led to a 13% reduction in sales of which 10% was a
reduction in volume from 2005 and a consequential reduction in profit. This
transition programme will continue during the first half of 2007 and it is
expected that volumes will begin to recover in the second half of 2007.
In response to the market place pressures further production efficiencies have
been sought to mitigate the impact of margin reduction. Production capacity has
been reduced with three low efficiency machines being sold and a number of
redundancies made in both the Dublin and Kilmarnock plants.
Reseal-it(TM) continues to progress well. The first machine sale in North
America is expected in the first half of 2007 and other applications for the
Reseal-it (TM) technology are being explored.
The priorities in 2007 are to:-
• Accelerate organic growth plans particularly in the branded products
sector;
• Improve operational efficiencies to counterbalance retail price
pressure;
• Introduce Reseal-it(TM) to the US market; and
• Broaden the re-sealable label product range.
Plastics
The principal activity of the company is the manufacture of injection moulded
plastic packaging and dispensing components particularly lids and scoops for the
baby food market.
Business performance improved in 2006 compared to 2005 with a small increase in
volume leading to sales growth of over 4%. This was achieved in difficult market
conditions with raw material prices increasing by over 20% during the course of
the year. Relationships with key customers in Europe and Asia continue to be
strong.
The overall result was a move from an operating loss in 2005 to a profit in
2006, with the business continuing to be highly cash generative. Further
improvements in infrastructure and hygiene procedures are planned for 2007 with
the objective of securing ISO22000 accreditation.
During 2007 the management team will focus on:-
• Building on the operational improvements achieved in 2006 in order to
maintain profitability;
• Upgrading the manufacturing facility in response to customer
expectations; and
• Establishing new lower cost raw material sources.
Packaging Manufacture
The principal activity of the business is the design and manufacture/assembly of
bespoke composite packaging for use in protecting goods in transit. The primary
components are corrugate, timber and foam. The business operates from two
manufacturing sites in Grantham and Westbury. The business supplies goods
directly to customers and via the Group's Distribution business focusing on such
sectors as aerospace, medical equipment, electronics and automotive.
Operating review
Manufacturing Operations
Packaging Manufacture
The business had a very successful year in 2006 building on the operational
improvements achieved during the last two years. Strong sales momentum was
achieved with one significant customer win and good growth via the Macfarlane
Distribution channel. The sales momentum achieved in 2006 was effectively
translated into good year on year profit growth. Total sales grew by 12% with
above average growth in sales through the distribution channel. This channel now
comprises approximately 25% of total sales and this is expected to grow still
further in future years. Margins were broadly flat despite volatility in raw
material prices.
The Group currently believes the retention of an in-house manufacturing
capability allows it to differentiate its offering from other distributors and
to be able to offer comprehensive design and manufacturing services for bespoke
packaging solutions. During 2006 we strengthened the management in the business
and this strengthening will continue in 2007.
The priorities for 2007 are to:
• Improve the overall returns from the business;
• At Grantham the focus will be on growing sales partly through the
Distribution network;
• Our Westbury location is focused on maintaining sales momentum while at
the same time introducing productivity improvement initiatives that were
effective at Grantham in 2006; and
• We will continue to strengthen the management team.
US/Mexico
Macfarlane has packaging manufacturing and assembly operations in California and
Mexico. There are two plants in Mexico and two in California. The business is
focussed on foam based packaging components supplying the electronics,
healthcare and food and drink sectors of the market.
Following the return of the business to profitability in 2005, the performance
in 2006 was disappointing:-
• Sales in 2006 were below 2005 partly due to slower demand and there was
some sales impact from west-coast based customers re-locating their
manufacturing facilities to the east coast; and
• Margin erosion was experienced as there were difficulties in fully
recovering supplier price increases, resulting in a small loss for the year.
The new operation in Tijuana was successfully established and returned a profit
in the year as customers in Southern California were supplied from this new
lower cost facility and new customers were gained in Northern Mexico.
Our priorities in 2007 are to:
• Fully utilise the lower cost benefits of the new manufacturing facility
in Tijuana;
• Strengthen our relationships with the key US brokers/distributors;
• Create more direct customer relationships particularly in the medical
and food and drink segments;
• Work more effectively with our supplier base to control and manage
changes to raw material pricing; and
• Develop added value foam applications where there is less vulnerability
to competitive pricing.
Future Outlook
Following the return to profitability of the Macfarlane Group in 2005, 2006 was
a difficult year particularly due to the pressure on raw material prices. It is
pleasing therefore that we have demonstrated our ability to maintain Group
profitable trading in these testing market conditions.
In human resource terms the Group is now stronger. All of the businesses are
demonstrating improving levels of customer service and beginning to demonstrate
the ability to grow market share organically and through targeted acquisition.
Over the coming years we will build on the strong foundation that has been
created. Our priority is to continue the process of giving greater focus to the
Group's activities. This will enable us to concentrate management resources on
accelerating growth and financial returns from the key businesses.
Macfarlane Group PLC
Consolidated income statement
For the year ended 31 December 2006
2006 2005
Note £000 £000
Continuing operations
Revenue 2 130,067 127,247
Cost of sales (88,500) (85,122)
_______ _______
Gross profit 41,567 42,125
Distribution costs (6,519) (6,521)
Administrative expenses (32,802) (32,928)
_______ _______
Operating profit before property transactions 3 2,246 2,676
Gain on disposal of properties 4 - 1,300
_______ _______
Operating profit 2,246 3,976
Finance income 5 2,762 2,383
Finance expense 5 (3,493) (3,469)
_______ _______
Profit before tax 1,515 2,890
Tax 6 (313) (161)
_______ _______
Profit for the year from continuing operations 1,202 2,729
Discontinued operations
Profit for the year from discontinued operations 849 656
_______ _______
Profit for the year 2,051 3,385
======= =======
Earnings per share 8
From continuing operations
Basic 1.07p 2.43p
======= =======
Diluted 1.06p 2.41p
======= =======
From continuing and discontinued operations
Basic 1.82p 3.01p
======= =======
Diluted 1.81p 2.99p
======= =======
Macfarlane Group PLC
Consolidated statement of recognised income and expense
For the year ended 31 December 2006
2006 2005
£000 £000
Exchange difference on translation of foreign operations (764) 144
Actuarial gains/(losses) on defined benefit pension schemes 5,835 (5,553)
Tax on items taken directly to equity (1,751) 1,666
_______ ______
Net income/(expense) recognised directly in equity 3,320 (3,743)
Profit for the year 2,051 3,385
_______ ______
Total recognised income and expense for the year 5,371 (358)
======= ======
Macfarlane Group PLC
Consolidated reconciliation of movements in shareholders' equity
For the year ended 31 December 2006
Note 2006 2005
£000 £000
Profit for the year 2,051 3,385
Dividends to equity holders in the year 7 (1,125) (844)
Net income/(expense) recognised directly in equity 3,320 (3,743)
Credit in respect of share based payments 140 -
_______ _______
Movements in equity in the year 4,386 (1,202)
Opening equity 25,439 26,641
_______ _______
Closing equity 29,825 25,439
======= =======
Macfarlane Group PLC
Consolidated balance sheet at 31 December 2006
Note 2006 2005
£000 £000
Non-current assets
Goodwill 18,973 17,182
Property, plant and equipment 13,112 14,608
Investment property 1,701 1,701
Other receivables 1,057 863
Deferred tax asset 4,560 6,651
_______ _______
Total non-current assets 39,403 41,005
_______ _______
Current assets
Inventories 9,811 8,803
Trade and other receivables 29,508 29,639
Cash and cash equivalents 2,195 1,203
_______ _______
Total current assets 41,514 39,645
Non-current assets classified as held for sale 9 - 1,925
_______ _______
41,514 41,570
Total assets 80,917 82,575
======= =======
Current liabilities
Trade and other payables 26,710 24,681
Current tax liabilities 663 796
Obligations under finance leases 44 272
Bank overdrafts and loans 7,747 7,830
Liabilities directly associated with assets classified
as held for sale 9 - 485
_______ _______
Total current liabilities 35,164 34,064
_______ _______
Net current assets 6,350 5,581
_______ _______
Non-current liabilities
Retirement benefit obligations 11 15,873 22,977
Obligations under finance leases 55 95
_______ _______
Total non-current liabilities 15,928 23,072
_______ _______
Total liabilities 51,092 57,136
======= =======
_______ _______
Net assets 29,825 25,439
======= =======
Equity
Share capital 28,755 28,755
Revaluation reserves 167 167
Own shares (1,406) (1,406)
Translation reserves (800) (36)
Retained earnings 3,109 (2,041)
_______ _______
Total equity 29,825 25,439
======= =======
Macfarlane Group PLC
Consolidated cash flow statement
For the year ended 31 December 2006
Note 2006 2005
£000 £000
Net cash from operating activities 10 160 1,990
_______ _______
Investing activities
Interest received 9 119
Disposal of subsidiary undertaking 2,102 -
Acquisition of subsidiary undertaking (1,262)
Proceeds on disposal of property, plant and equipment 1,472 6,255
Purchases of property, plant and equipment (604) (869)
_______ _______
Net cash from investing activities 1,717 5,505
_______ _______
Financing activities
Dividends paid 7 (1,125) (844)
Repayments of obligations under finance leases (268) (479)
Decrease in bank overdrafts (83) (6,396)
_______ _______
Net cash used in financing activities (1,476) (7,719)
_______ _______
Net increase/(decrease) in cash and cash equivalents 401 (224)
Cash and cash equivalents at beginning of year 1,794 2,018
_______ _______
Cash and cash equivalents at end of year 2,195 1,794
======= =======
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
1. General information
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements as defined in Section 240
of the Companies Act 1985 and has been extracted from the full statutory
accounts for the years ended 31 December 2006 and 31 December 2005 respectively.
The information for the year ended 31 December 2005 does not constitute the
Group's statutory financial statements as defined in Section 240 of the
Companies Act 1985. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified pursuant to Section 235 of the Companies Act 1985 and did not
contain a statement under sub-section 237 (2) or (3) of that Act.
The auditors' report on the statutory financial statements for the year ended 31
December 2006 was unqualified pursuant to Section 235 of the Companies Act 1985
and did not contain a statement under sub-section 237 (2) or (3) of that Act.
2. Split between continuing and discontinued activities
2006 2005
Continuing Discontinued Total Continuing Discontinued Total
£000 £000 £000 £000 £000 £000
Revenue 130,067 - 130,067 127,247 3,618 130,865
Cost of sales (88,500) - (88,500) (85,122) (2,082) (87,204)
_______ _____ _______ _______ ______ _______
Gross profit 41,567 - 41,567 42,125 1,536 43,661
Distribution costs (6,519) - (6,519) (6,521) (104) (6,625)
Administration
costs (32,802) - (32,802) (32,928) (682) (33,610)
_______ _____ _______ _______ ______ _______
Operating profit
before property
transactions 2,246 - 2,246 2,676 750 3,426
Gain on property
disposals - - - 1,300 - 1,300
_______ _____ _______ _______ ______ _______
Operating profit 2,246 - 2,246 3,976 750 4,726
Net finance costs (731) - (731) (1,086) 32 (1,054)
_______ _____ _______ _______ ______ _______
Profit before tax 1,515 - 1,515 2,890 782 3,672
Tax (313) - (313) (161) (126) (287)
_______ _____ _______ _______ ______ _______
Profit after tax 1,202 - 1,202 2,729 656 3,385
Disposal of
operations - 849 849 - - -
_______ _____ _______ _______ ______ _______
Profit for the year 1,202 849 2,051 2,729 656 3,385
======= ===== ======= ======= ====== =======
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
3. Segmental information
The Group's activities are centred around two principal activities, with those
manufacturing operations discontinued in the current and prior years disclosed
separately.
(i) Packaging Distribution
The distribution of packaging materials from a network of 15 Regional
Distribution Centres in the UK. The acquired activities of Bloomfield Packaging
Supplies Limited in Gloucester.
(ii) Manufacturing Operations
The manufacture and supply of self-adhesive and re-sealable labels and
plastic-injection moulded products to a variety of FMCG customers in the UK and
Europe and the manufacture, assembly and supply of timber, corrugated and foam
based packaging materials in the UK and US/Mexico.
(iii) Discontinued Operations
The operations in Hungary were sold at the start of 2006 and are classified as
discontinued in the financial statements for 2005.
2006 2005 2006 2005
Revenue Revenue Result Result
Group Segment £000 £000 £000 £000
Packaging Distribution 80,853 73,915 590 409
Manufacturing Operations 49,214 53,332 1,656 2,267
_______ _______ _______ _______
Continuing activities 130,067 127,247 2,246 2,676
Discontinued operations - 3,618 - 750
_______ _______ _______ _______
130,067 130,865 2,246 3,426
======= =======
Profit from discontinued operations - (750)
_______ _______
Operating profit before property
transactions 2,246 2,676
Gain on disposal of properties - 1,300
Operating profit 2,246 3,976
Net finance costs (731) (1,086)
_______ _______
Profit before tax 1,515 2,890
Tax (313) (161)
_______ _______
Profit from continuing operations 1,202 2,729
Profit from discontinued operations after tax 849 656
_______ _______
Profit after tax and discontinued
operations 2,051 3,385
======= =======
4. Gain on disposal of properties
Two properties were sold during 2005 for a combined consideration of £4,880,000
and a gain of £1,300,000.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
5. Net finance expense 2006 2005
£000 £000
Interest on bank loans and overdrafts (489) (698)
Interest on obligations under finance leases (12) (43)
Interest cost of pension scheme liabilities (2,992) (2,728)
______ ______
Total finance expense (3,493) (3,469)
______ ______
Expected return on pension scheme assets 2,631 2,280
Investment income 131 103
______ ______
Total finance income 2,762 2,383
Net finance expense (731) (1,086)
====== ======
6. Tax 2006 2005
£000 £000
Current tax
United Kingdom corporation tax at 30% (2005: 30%) (57) (40)
Foreign tax (97) (121)
Adjustments in respect of prior periods 193 -
_____ _____
Current tax charge/(credit) 39 (161)
Deferred taxation (352) -
_____ _____
Total (313) (161)
===== =====
The standard rate of tax for the year, based on the UK rate of corporation tax
is 30% (2005 - 30%). Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions. The deferred tax charge of £352,000
includes a charge of £380,000 in relation to the reversal of the deferred tax
asset on the pension deficit. This was a consequence of the payments made during
2006 to reduce the deficit.
The actual tax charge for the current and previous year is less than 30% of the
results as set out in the income statement for the reasons set out in the
following reconciliation:
2006 2005
£000 £000
Profit before taxation 1,515 2,890
_____ _____
Tax on profit at 30% (455) (867)
Factors affecting tax charge for the year:-
Depreciation in excess of capital allowances (216) 107
Tax charge on contributions to defined benefit pension scheme (380) -
Non taxable gain - 390
Other differences (333) (1,000)
Tax losses utilised 836 1,281
Difference on overseas tax rates 42 (72)
Adjustments in respect of prior periods 193 -
_____ _____
Tax charge for the year (313) (161)
===== =====
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
7. Dividends 2006 2005
£000 £000
Amounts recognised as distributions to equity holders in the
year:
Interim dividend for the year ended 31 December 2006 of 1.00p
per share (2005 - Special interim dividend of 0.75p per share) 1,125 844
===== =====
Dividends are not payable on own shares held in the employee share trust.
The proposed final dividend of 1.00p per share is subject to approval by
shareholders at the Annual General Meeting in 2007 and has not been included as
a liability in these financial statements.
8. Earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the
following data:
2006 2005
£000 £000
Earnings from continuing and discontinued
operations for the purposes of earnings per share
being profit for the year 2,051 3,385
Less Profit for the year from discontinued
operations (849) (656)
_____ _____
Earnings from continuing operations for the
purposes of earnings per share being profit for
the year from continuing operations 1,202 2,729
===== =====
Number of shares in issue for the purposes of
calculating basic and diluted earnings per share 2006 2005
No. of No. of
shares shares
'000 '000
Weighted average number of ordinary shares in
issue 115,019 115,019
Own shares in Employee Share Ownership Trusts (2,491) (2,491)
_______ _______
Weighted average number of shares in issue for the 112,528 112,528
purposes of basic earnings per share
Effect of dilutive potential ordinary shares due
to share options 601 602
_______ _______
Weighted average number of shares in issue for the 113,129 113,130
purposes of diluted earnings per share
======= =======
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
9. Non-current assets and current liabilities classified as held for sale
In January 2006, the Group's Hungarian subsidiary was sold. As the decision to
sell the business was taken before 31 December 2005, consequently the results of
the subsidiary for 2005 are classified as discontinued operations in the
consolidated income statement. The component parts of the balance sheet sold in
January 2006 are classified as non-current assets and current liabilities held
for sale at 31 December 2005.
10. Notes to the cash flow statement 2006 2005
£000 £000
Operating profit Continuing operations 2,246 3,976
Discontinued operations - 750
______ ______
Operating profit 2,246 4,726
Adjustments for:
Depreciation of property, plant and equipment 2,136 3,349
Gain on disposal of property, plant and equipment (191) (1,075)
______ ______
Operating cash flows before movements in working
capital 4,191 7,000
Increase in inventories (681) (379)
Decrease/(increase) in receivables 58 (1,981)
Decrease in payables (999) (1,233)
Adjustment for pension scheme funding (1,630) (448)
______ ______
Cash generated by operations 939 2,959
Income taxes paid (195) (212)
Interest paid (584) (757)
______ ______
Net cash from operating activities 160 1,990
====== ======
2006 2005
£000 £000
Increase/(decrease) in cash and cash equivalents in the
year 401 (224)
Decrease in bank overdrafts 83 6,396
Cash flows from debt and lease financing 268 479
______ ______
Movement in net debt in the year 752 6,651
Opening net debt (6,403) (13,054)
______ ______
Closing net debt (5,651) (6,403)
====== ======
Net debt comprises:
Cash and cash equivalents 2,195 1,203
Cash and cash equivalents in business held for resale - 591
Bank overdrafts and loans (7,747) (7,830)
Obligations under finance leases (99) (367)
_______ ______
Closing net debt (5,651) (6,403)
======= ======
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with maturity of three months or less. Cash inflows in
respect of the discontinued operations for operating activities amounted to £Nil
for 2006, (2005 Inflow of £531,000) cash inflows in respect of investing
activities totalled £2,102,000 (2005 - £32,000) and cash inflows (2005 -
outflows) from financing activities amounted to £Nil (2005 £268,000).
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2006
11. Pension scheme
The Group operates a pension scheme based on final pensionable salary for its UK
operations. The assets of the scheme are held separately from those of the Group
in managed funds under the overall supervision of the scheme trustees.
The contributions are determined by the scheme's qualified actuary on the basis
of triennial valuations using the projected unit method. The most recent
triennial valuation was as at 1 May 2005. The principal assumptions adopted were
that investment returns would average 7.75% per annum and that salary increases
would average 3.5% per annum. The valuation showed that the market value of the
relevant assets of the scheme was £35,259,000 and the actuarial value of these
assets represented 76% of the value of benefits that had accrued to members.
Balance sheet disclosures
The figures below have been based on the triennial actuarial valuation as at 1
May 2005, updated to the current year-end. The assets in the scheme, the net
liability position for the scheme at 31 December 2006 and the expected rates of
return were:
Fair Fair Fair
value value value
Asset class 2006 2005 2004
£000 £000 £000
Equities 26,785 24,077 19,911
Bonds 16,661 16,678 15,173
Other (cash) 184 21 37
_______ _______ _______
Fair value of assets 43,630 40,776 35,121
Present value of scheme liabilities (59,503) (63,753) (52,545)
_______ _______ _______
Deficit in the scheme (15,873) (22,977) (17,424)
Related deferred tax asset 4,762 6,893 5,227
_______ _______ _______
Net pension liability (11,111) (16,084) (12,197)
======= ======= =======
During 2006, the Group made additional payments of £1.3 million to commence a
meaningful reduction in the pension scheme deficit. These payments, combined
with an improvement in equity returns and an increase from 4.75% to 5.25% in the
bond yields assumed in the valuation of the pension scheme liabilities had a
very positive impact on the deficit recorded in our balance sheet.
12. Posting to shareholders and Annual General Meeting
The Annual Report and Accounts will be sent to shareholders on Thursday 12 April
2007. The Annual General Meeting will take place at the Thistle Hotel, Cambridge
Street Glasgow at 12 noon on Tuesday 15 May 2007. The Annual Report and Accounts
will be available to members of the public at the Company's Registered Office,
21 Newton Place, Glasgow G3 7PY from 16 April 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 10th January 2025
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