2002 - Interim Results
Molins PLC
03 September 2002
International Specialist Engineers
Strong first six months of the year with earnings increase of 87%
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2002 2001 2001
(as restated) (as restated)
Turnover £48.6m £48.3m £111.3m
Operating profit (before goodwill) £6.0m £3.9m £9.4m
Profit before tax (after goodwill) £5.5m £3.3m £8.2m
Profit after tax £3.8m £2.1m £5.5m
Net debt £8.9m £11.0m £2.7m
Underlying earnings per share 22.6p 12.1p 31.2p
Basic earnings per share 20.9p 11.0p 29.1p
Dividend per share 4.0p 2.5p 7.5p
2001 results restated for the adoption of FRS 19 Deferred tax
Highlights from the interim results for the six months to 30 June 2002
• Operating profit increased by 54% to £6.0m
• Strong contribution from Arista Laboratories, acquired February 2002
• Significant improvement in performance of Packaging Machinery
• Growth in underlying earnings per share from 12.1p to 22.6p
• Interim dividend increased from 2.5p to 4.0p per share
Peter Byrom, Chairman, commented:
'Operating profit in the first six months of the current year increased by 54%
and underlying earnings per share increased by 87%. The improvement in
operating performance reflects a return to profit in the Packaging Machinery
division in the first half of the year compared with a loss in the same period
last year.
The Company is trading broadly in line with our expectations. Tobacco Machinery
is continuing to deliver a good level of profitability on slightly lower sales
levels than anticipated. The acquisition of Arista, which is trading strongly,
has helped to position the division to continue its development. There remains
little sign for optimism in the packaging machinery markets, but our businesses
are well placed to compete in their segments and continue to trade profitably.
We remain committed to developing both divisions through investment and
incremental acquisitions.'
Enquiries: Molins PLC Tel: 020 7638 9571
Peter Byrom, Chairman
David Cowen, Group Finance Director
Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571
Margaret George
CHAIRMAN'S STATEMENT
Operating profit, before goodwill amortisation, in the first six months of the
current year increased by 54% from £3.9m to £6.0m. Underlying earnings per
share increased from 12.1p to 22.6p, an increase of 87%. Basic earnings per
share were 20.9p compared with 11.0p last year. The improvement in operating
performance reflects a return to profit of £0.3m in the Packaging Machinery
division in the first half of the year compared with a loss of £1.8m in the same
period last year. Group profit before tax was £5.5m, compared with £3.3m in the
same period in 2001, on level sales of £48.6m (2001: £48.3m).
The current tax charge has been based on an effective rate of tax of 18%. As
expected, the Company has become tax paying on current year trading profits in
the UK. The results for the first time incorporate FRS 19 Deferred tax, which
requires full provision to be made for future tax liabilities. The impact of
FRS 19 is a deferred tax charge in the first six months of 2002 of £0.7m (2001:
£0.6m). This has the effect of increasing the overall tax charge to 31%.
Profit after tax was £3.8m, compared with £2.1m in 2001 (after restatement for
FRS 19).
Shareholders' funds and cash
Equity shareholders' funds were £58.7m, compared with £54.6m at 30 June 2001 and
£56.3m at 31 December 2001. These figures are stated after provision for
deferred tax in accordance with FRS 19.
Group net debt at 30 June 2002 was £8.9m, compared with £2.7m at the end of
2001. There was an operating cash outflow in the period of £0.6m with an
increase in working capital of £6.3m. This is largely as a result of an
increase in inventory levels of £4.1m and an increase in trade debtors of £1.4m.
Inventory has increased as we have taken the opportunity to purchase second
hand machinery for future rebuild activity and increased spare parts
stockholding to ensure the business meets customers' expectations of delivery
times. Other cash outflows in the period included the Arista acquisition costs
to date of £2.8m, tax paid of £1.3m and dividends paid of £0.9m.
Dividend
The directors have declared an interim dividend of 4.0p per ordinary share
(2001: 2.5p). The interim dividend will be paid on 24 October 2002 to
shareholders on the register on 20 September 2002.
Pensions
The Group is continuing to account for pensions under SSAP 24 Accounting for
pension costs. Given the Accounting Standards Board's recent announcement on
changes to its requirements for the adoption of FRS 17 Retirement benefits, it
is felt appropriate to continue with SSAP 24. Disclosures required under FRS 17
will be given in the full year report and accounts. Operating profit includes a
net pension credit of £1.5m (2001: £1.4m).
Operating review
Tobacco Machinery
The division has traded broadly in line with expectations over the first six
months of the year. Sales in the period were £30.6m compared with £32.3m last
year. Sales of both original equipment and rebuilt machines have been at
similar levels to those of 2001, although the order book for delivery in the
balance of the year for both product groups is a little lower than last year.
Sales of spare parts were lower, partly reflecting our focus on improving
service levels by shortening order lead times, thereby allowing customers to
decrease their stock levels. As expected, sales of Cerulean products were lower
in the first half against a strong first half last year, reflecting the adverse
phasing of customers orders. The division made an operating profit of £3.9m,
after a goodwill charge of £0.3m, which compares with £4.1m after goodwill of
£0.2m in the first six months of 2001.
This is a year of partial change for Cerulean as it redefines its product
offering and continues further product development. Its range of analytical
equipment has been extended and further products are in an advanced stage of
development. This activity and the phasing of customer orders has resulted in
Cerulean earning significantly less profit in the first half of 2002 compared
with last year. The second half profit performance is expected to be similar to
that of 2001. Overall, we remain pleased with the performance of this business,
which was acquired in October 2000, and have every confidence in its continued
progress within its specialist field of quality control instrumentation.
Arista Laboratories Inc., an independent smoke constituent analytical laboratory
based in Richmond, Virginia, was purchased in February 2002, for an initial
payment of £2.8m, with a further £0.5m payable later in 2002 subject to certain
performance criteria. Arista has performed well since its acquisition,
contributing £1.7m of turnover to the division in the first half of 2002 and an
operating profit of £0.5m. Order intake in the period of Molins ownership has
been excellent, exceeding initial expectations. As planned at the time of the
acquisition, we have invested in Arista to expand its capacity as it continues
to win new business from both existing and new customers. We are currently in
the process of setting up a laboratory in the UK which will complement the US
operation and strengthen Arista's European presence.
The division has been focusing strongly on product development, including the
launch of an upgraded Molins MK 9 making machine. This increases the productive
capacity of the machine from 5,000 to 6,000 cigarettes per minute. We are
working with customers to evaluate the benefit of the improved performance in
relation to the rest of their line equipment and expect an increasing flow of
orders over the coming months. A new version of the market-leading Concord
cigarette handling system, which will allow handling of cigarettes out of the
reservoir on a first in first out basis, will be launched in the second half.
At the same time an enhanced version of the Pegasus filter distribution system
will be launched. Important additions to the Passim range of machines are also
being developed. Overall, the division is trading well and with the development
of products, the acquisition of Arista and improvements in service to customers,
we remain confident in its continued progress.
Packaging Machinery
Sales in the first six months of 2002 improved to £18.0m compared with £16.0m in
the same period last year. The increase is largely as a result of the
acquisition of Rose Forgrove in April 2001. Operating profit was £0.3m,
compared with a loss of £1.8m in the same period last year. All of the
businesses in this division continue to operate in difficult market conditions
giving an erratic pattern to order intake. The cost base of the businesses was
reduced in 2001 in response to these market conditions and this has resulted in
an improvement in the trading performance. The activity levels in the division
have typically been weighted towards the second half of the year and this
situation is expected to be repeated. Given the continued commitment to
improving the operational efficiencies of the businesses and the control of
projects, trading is expected to remain profitable.
All of the businesses in the division continue to develop their product ranges.
The new generation 'Chinook' cartoner, designed by Langenpac, was launched at
the Interpack trade show in Dusseldorf. This cartoner should help to enhance
Langenpac's and Langen's positions in their respective markets. Similarly,
Sandiacre's reciprocating jawed vertical form, fill and seal bagging machine has
already established market acceptance and contributed to the sales performance
in the period. Employee numbers are similar to levels at the end of last year.
We remain vigilant in assessing the outlook for the market.
Outlook
The Company is trading broadly in line with our expectations. Tobacco Machinery
is continuing to deliver a good level of profitability on slightly lower sales
levels than anticipated. The acquisition of Arista, which is trading strongly,
has helped to position the division to continue its development. There remains
little sign for optimism in the packaging machinery markets, but our businesses
are well placed to compete in their segments and continue to trade profitably.
We remain committed to developing both divisions through investment and
incremental acquisitions.
Peter Byrom
Chairman
3 September 2002
Group profit and loss account
6 months 12 months
6 months to 30 June to 31 Dec
to 30 June 2001 2001
2002 (as restated) (as restated)
Notes £m £m £m
Turnover 1
- existing businesses 46.9 48.3 111.3
- acquisitions 1.7 - -
Total turnover - continuing operations 48.6 48.3 111.3
Operating profit 1
- existing businesses 5.2 3.7 9.0
- acquisitions 0.5 - -
Total operating profit - continuing operations 5.7 3.7 9.0
Net interest payable (0.2) (0.4) (0.8)
Profit on ordinary activities before taxation 5.5 3.3 8.2
Taxation 6 (1.7) (1.2) (2.7)
Profit for the period 3.8 2.1 5.5
Dividends (including non-equity) (0.8) (0.5) (1.4)
Retained profit for the period 3.0 1.6 4.1
==== ==== ====
Underlying earnings per ordinary share 7 22.6p 12.1p 31.2p
Basic earnings per ordinary share 7 20.9p 11.0p 29.1p
Diluted earnings per ordinary share 19.4p 10.5p 27.6p
Dividend per ordinary share 8 4.0p 2.5p 7.5p
Group balance sheet
30 June 31 Dec
30 June 2001 2001
2002 (as restated) (as restated)
Notes £m £m £m
Fixed assets
Intangible assets - goodwill 10.4 8.6 8.3
Tangible assets 20.9 22.3 20.9
Investments 3.8 4.0 3.9
35.1 34.9 33.1
Current assets
Stocks 26.7 30.5 23.1
Debtors - due within one year 22.6 20.5 22.7
Debtors - due after more than one year 9 24.7 20.9 22.1
Cash and short-term bank deposits 3.3 1.2 2.4
77.3 73.1 70.3
Creditors - amounts falling due within one year
Borrowings (1.1) (2.1) (3.0)
Other creditors (32.4) (32.6) (32.5)
Proposed dividend (0.7) (0.5) (0.9)
(34.2) (35.2) (36.4)
Net current assets 43.1 37.9 33.9
Total assets less current liabilities 78.2 72.8 67.0
Creditors - amounts falling due after more than one year
Borrowings (11.1) (10.1) (2.1)
Provisions for liabilities and charges 6 (7.5) (7.2) (7.7)
Net assets 59.6 55.5 57.2
Capital and reserves
Called up share capital 5.9 5.9 5.9
Share premium account 25.8 25.6 25.6
Revaluation reserve 5.7 5.8 5.7
Capital redemption reserve 3.9 3.9 3.9
Profit and loss account 18.3 14.3 16.1
Shareholders' funds (including £0.9m of non-equity
interests) 59.6 55.5 57.2
===== ===== =====
Net debt (8.9) (11.0) (2.7)
Group cash flow statement
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2002 2001 2001
£m £m £m
Net cash (outflow)/inflow from operating activities (0.6) 3.7 14.3
Returns on investments and servicing of finance
Net interest paid (0.4) (0.4) (0.7)
Taxation (1.3) (0.1) (0.8)
Capital expenditure (net of sale proceeds) (0.8) (1.4) (2.1)
Acquisitions and disposals
Purchase of business (2.8) (1.1) (1.1)
Cash acquired with business 0.2 - -
Net cash outflow from acquisitions and disposals (2.6) (1.1) (1.1)
Equity dividends paid (0.9) (0.8) (1.3)
Net cash (outflow)/inflow before management of
liquid resources and financing (6.6) (0.1) 8.3
Management of liquid resources - 0.1 0.1
Financing
Purchase of own shares for cancellation - (2.0) (2.0)
Issue of new shares 0.2 - -
Debt due after more than one year: increase/(decrease) in
borrowings 9.3 1.3 (6.6)
Net cash inflow/(outflow) from financing 9.5 (0.7) (8.6)
Increase/(decrease) in cash in the period 2.9 (0.7) (0.2)
===== ===== =====
Closing net debt (8.9) (11.0) (2.7)
Statement of total recognised gains and losses
6 months 12 months
6 months to 30 June to 31 Dec
to 30 June 2001 2001
2002 (as restated) (as restated)
Note £m £m £m
Profit for the period 3.8 2.1 5.5
Currency translation movements arising on foreign
currency net investments (0.8) 0.4 (0.4)
Total recognised gains and losses in the period 3.0 2.5 5.1
Prior period adjustment (FRS 19 Deferred tax) 6 (4.2) - -
Total recognised gains and losses since the last annual
report and accounts (1.2) 2.5 5.1
Reconciliation of operating profit to net cash flow from operating activities
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2002 2001 2001
£m £m £m
Operating profit 5.7 3.7 9.0
Amortisation of goodwill 0.3 0.2 0.4
Depreciation 1.2 1.4 2.7
Other movements 0.2 0.2 0.8
Movements in exceptional items
Cash movements in restructuring and rationalisation provisions (0.2) (0.1) (0.8)
Working capital movements
Stocks (4.1) (2.8) 4.0
Debtors (1.3) 3.3 0.4
Creditors and other provisions (0.9) (0.8) 0.5
Pension fund prepayment (1.5) (1.4) (2.7)
Net cash (outflow)/inflow from operating activities (0.6) 3.7 14.3
===== ===== =====
Cash flows from exceptional items excluding tax effect (0.2) (0.1) (0.8)
Other cash flows (0.4) 3.8 15.1
Net cash (outflow)/inflow from operating activities (0.6) 3.7 14.3
Reconciliation of net cash flow to movement in net debt
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2002 2001 2001
£m £m £m
Increase/(decrease) in cash in the period 2.9 (0.7) (0.2)
Cash inflow from decrease in liquid resources - (0.1) (0.1)
Cash (inflow)/outflow from (increase)/decrease in debt and lease
financing (9.3) (1.3) 6.6
Change in net debt resulting from cash flows (6.4) (2.1) 6.3
Finance leases acquired with business (0.1) - -
Translation movements 0.3 (0.2) (0.3)
Movement in net debt in the period (6.2) (2.3) 6.0
Opening net debt (2.7) (8.7) (8.7)
Closing net debt (8.9) (11.0) (2.7)
Reconciliation of movements in shareholders' funds
6 months 12 months
6 months to 30 June to 31 Dec
to 30 June 2001 2001
2002 (as restated) (as restated)
Note £m £m £m
Opening shareholders' funds - as previously reported 61.4 58.1 58.1
Prior period adjustment (FRS 19 Deferred tax) 6 (4.2) (2.6) (2.6)
Opening shareholders' funds - as restated 57.2 55.5 55.5
Profit for the period 3.8 2.1 5.5
Dividends (0.8) (0.5) (1.4)
Currency translation movements arising on foreign currency
net investments (0.8) 0.4 (0.4)
Purchase of own shares for cancellation - (2.0) (2.0)
Issue of new shares 0.2 - -
Net increase in shareholders' funds 2.4 - 1.7
Closing shareholders' funds 59.6 55.5 57.2
===== ===== =====
Notes
1 Segmental analysis
Turnover Operating profit/(loss)
6 months 6 months 12 months 6 months 6 months 12 months
to 30 June to 30 June to 31 Dec to 30 June to 30 June to 31 Dec
2002 2001 2001 2002 2001 2001
£m £m £m £m £m £m
By activity:
Continuing operations
Tobacco Machinery
- existing businesses 28.9 32.3 69.4 3.4 4.1 8.1
- acquisitions 1.7 - - 0.5 - -
Tobacco Machinery 30.6 32.3 69.4 3.9 4.1 8.1
Packaging Machinery 18.0 16.0 41.9 0.3 (1.8) (1.7)
48.6 48.3 111.3 4.2 2.3 6.4
===== ===== =====
Net pension credit 1.5 1.4 2.6
Operating profit 5.7 3.7 9.0
=====
2 The interim financial statements have been prepared on the
basis of the accounting policies set out in the Group's 2001 statutory accounts,
with the exception of deferred tax which has been accounted for in accordance
with FRS 19 Deferred tax.
3 The financial information for the half year has not been
audited, although the auditor has carried out an independent review.
4 The results for the full year 2001 have been extracted from
the Group's full accounts for that year which included an unqualified audit
report and have been filed with the Registrar of Companies.
5 Operating profit is stated after charging goodwill
amortisation of £0.3m (30 June 2001: £0.2m; 31 December 2001: £0.4m).
6 As a result of implementing FRS 19 Deferred tax, the tax
charge for the period includes a deferred tax charge of £0.7m. The results for
the periods ended 31 December 2001 and 30 June 2001 have been restated
accordingly. The effect is to increase deferred tax liabilities and decrease
retained reserves at 31 December 2001 by £4.2m and 30 June 2001 by £3.2m. The
effect on the restated comparative tax charge is to increase the charge for the
half year to 30 June 2001 by £0.6m and to increase the charge for the year to 31
December 2001 by £1.5m. The deferred tax charge includes £0.5m (30 June 2001:
£0.4m) in relation to the net pension credit.
7 Earnings per ordinary share is based upon the profit after
taxation less the preference dividend and on a weighted average of 18,173,300
shares in issue during the period (30 June 2001: 19,032,000). Underlying
earnings per ordinary share is calculated before the charge for goodwill
amortisation.
8 The cost of the interim dividend of 4.0p per ordinary share
for the six months to 30 June 2002 will amount to £0.7m. The preference
dividend paid on 30 June 2002 amounted to £27,000 (30 June 2001: £27,000).
9 Debtors due after more than one year includes a pension
fund prepayment of £23.3m (31 December 2001: £21.9m).
10 The average US dollar exchange rate for the period to 30 June
2002 was US$1.45 (2001: US$1.44) and the rate at 30 June 2002 was US$1.52 (2001:
US$1.41). The rate at 31 December 2001 was US$1.46.
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