Half Yearly Report

RNS Number : 2179X

Molins PLC

27 August 2015

 



27 August 2015

AIM: MLIN                                                                   

 

Molins PLC

("Molins" or "Company" or "Group")

International specialist technology and services group

Half-year report for the six months to 30 June 2015

Key points

·      Results in line with management expectations

·      Disposal of analytical services laboratories business in May 2015 following strategic review

·      Reporting structure simplified to two divisions - Packaging Machinery and Instrumentation & Tobacco Machinery

·      Sales from continuing operations of £39.5m (2014: £38.9m)

·      Underlying profit before tax from continuing operations of £1.3m (2014: £1.7m)

Statutory profit before tax on continuing operations of £0.4m (2014: £1.0m)

·      Underlying earnings per share from continuing operations of 5.1p (2014: 7.5p)

Basic loss per share of 26.9p (2014: 0.9p)

·      Interim dividend maintained at 2.5p per share (2014: 2.5p)

·      Continued momentum in Packaging Machinery division - strong growth in H1 and a solid order book for H2

·      Instrumentation & Tobacco Machinery division affected by continuing challenging market conditions

·      Both divisions expected to deliver H2 weighted performances

Dick Hunter, Chief Executive, commented,

"The Group's results for the first half of the year are in line with management expectations. Trading in the Packaging Machinery division is considerably ahead of the same period last year, whilst the tough market conditions have impacted our instrumentation and tobacco machinery activities.

Looking ahead, as in previous years, the Group's full year trading performance will be significantly weighted towards the second half, and the Group remains on course to meet market expectations. We continue to focus on our growth initiatives, including further development, both organically and acquisitively, within our core market sectors of nutrition, beverages, healthcare, pharmaceutical and tobacco."

For further information, please contact:

Molins PLC Dick Hunter, Chief Executive David Cowen, Group Finance Director Panmure Gordon (UK) Limited (NOMAD)  Hugh Morgan / Peter Steel - Corporate Finance Tom Salvesen - Corporate Broking	Tel: [phone] (today)        [phone] Tel: [phone]
KTZ Communications Katie Tzouliadis	Tel: [phone]

HALF-YEAR MANAGEMENT REPORT

Introduction

The Group's results for the first half of the year are in line with management expectations. Trading in the Packaging Machinery division is considerably ahead of the same period last year, whilst tough market conditions in the tobacco sector have impacted the Instrumentation & Tobacco Machinery division. During the period, we disposed of the US-based analytical services laboratories business, following the completion of our strategic review.  As a consequence, we are now reporting the results of Molins' activities under two rather than three divisions, namely Packaging Machinery and Instrumentation & Tobacco Machinery. We have separately identified the financial information relating to the discontinued business.

Looking ahead, we do not expect any significant change in our trading environment in the second half and the Group remains on course to meet market expectations. 

Financial results

Sales from continuing operations in the six months to 30 June 2015 were £39.5m (2014: £38.9m) and underlying operating profit before tax was £1.4m (2014: £1.7m). After net finance expenses of £0.1m (2014: £nil) and a net tax charge on underlying profit of £0.3m (2014: £0.2m), underlying profit for the period was £1.0m (2014: £1.5m).  Underlying earnings per share on continuing operations were 5.1p (2014: 7.5p). These underlying results are stated before reorganisation costs of £0.1m (2014: £0.2m) and pension related charges of £0.8m (2014: £0.5m). Pension related costs comprised charges in respect of administering the Group's defined benefit pension schemes of £0.4m (2014: £0.4m) and financing expense on pension scheme balances of £0.4m (2014: £0.1m). 

On a statutory basis, profit before tax from continuing operations was £0.4m (2014: £1.0m). The net tax charge on underlying profit (before non-underlying net credits) was £0.3m (2014: £0.2m), with a net tax credit of £0.3m (2014: £0.1m) in respect of non-underlying charges, resulting in a profit for the period of £0.4m (2014: £0.9m). Losses on discontinued operations amounted to £5.7m (2014: £1.1m), details of which are shown in note 16. The basic loss per share, including losses on discontinued operations, amounted to 26.9p (2014: 0.9p).   

Finances

Net debt at 30 June 2015 was £3.9m (30 June 2014: £0.9m and 31 December 2014: £2.1m). Net cash inflow from operating activities (continuing operations) in the first half of the year was £1.4m. This is after a decrease in working capital levels of £0.2m, deficit recovery payments to the UK defined benefit pension scheme of £0.9m and tax paid of £0.1m. Capital and product development expenditure was £1.6m (net) and intellectual property, relating to a product which will be commercialised by the Group, was purchased at a cost of £0.2m. Net cash outflow in relation to the discontinued operations in the period was £0.7m. Ordinary dividends of £0.6m were paid in the period.

Dividend

The Board is pleased to declare an interim dividend of 2.5p per ordinary share (2014: 2.5p), which will be paid on 8 October 2015 to ordinary shareholders registered at the close of business on 18 September 2015. Dividends paid to shareholders in the six months to 30 June 2015 were 3.0p per ordinary share (2014: 3.0p).  

Operating performance

Packaging Machinery

The division supplies highly automated product processing, handling, cartoning and robotic end-of-line packaging machinery and systems from its operations in the UK, the Netherlands, Canada and Singapore.

All parts of the division have performed ahead of the same period last year, with sales increasing to £21.8m (2014: £18.3m). This represents a rise of 26% in local currencies and 19% after the translation impact arising from the strengthening of sterling. Operating profit improved to £1.1m (2014: £0.1m) and we expect to see a continuing improvement in margins in the second half. 

These encouraging results have been supported by our moves to create a standardised range of products, as well as our ongoing focus on innovative engineering and applications skills. Our continued focus on customer support and service resulted in increased orders from our multinational and regional customers in most parts of the world. In local currencies, orders increased by 18% in the period.  We are continuing to benefit from expansion in Asia and increasing activity in South America, which is supported by the Group's existing infrastructure in Brazil.

With strong order books in place for delivery in the second half of the year, the division is well placed to continue to progress and we are seeking further operational efficiencies, aided by the development of its standardised product range.

Instrumentation & Tobacco Machinery

The division comprises both the Group's tobacco machinery activities and its quality control, testing and analytics instrumentation business, which has customers in both the tobacco and other FMCG sectors. 

Sales in the period were £17.7m (2014: £20.6m) and operating profit, before reorganisation costs, was £0.3m (2014: £1.6m). 

As anticipated, market conditions in the tobacco sector continued to be challenging. Activity levels have declined in most geographic regions, particularly in Europe and South East Asia, and with the larger multinational customers. The strength of sterling, especially compared with the euro, has also impacted the division adversely. The performance of the tobacco machinery part of the division has therefore remained under pressure. The impact of these conditions on instrumentation activities only started to be felt in the first quarter of 2015, with order intake and sales reducing in the period, although immediate order prospects are a little more encouraging. We have taken measures across the division to reduce operating costs and defer expenditure where appropriate and will continue to do so in the second half. 

We continued with product development initiatives across the division. Alto, our 10,000 per minute cigarette making machine, successfully completed field trials in the first half of the year, and field trials for Optima, our new cigarette packing machine, will commence later this year. These two major initiatives, with others to develop ancillary equipment, mean that the division will have completed a significant programme of development, enabling it to supply a complete make-pack cigarette production line of equipment in a range of speeds. Significantly, the programme also ensures that the business is positioned to compete in a larger proportion of the market.  We also continued to enhance the product range of the instrumentation business to support both its market-leading position in the tobacco sector and its expansion into new sectors. Our purchase in the period of the intellectual property for non-invasive thermometry measurement equipment will assist our initiatives to increase our presence in the nutrition sector.

Pension schemes

The Group is responsible for defined benefit pension schemes in the UK and the USA. There are no active members and the schemes are accounted for in accordance with IAS 19 Employee benefits.

The IAS 19 valuation of the UK scheme at 30 June 2015 shows a deficit of £7.6m (£6.1m net of deferred tax), compared with a deficit of £14.1m (£11.3m net of deferred tax) at the beginning of the period.  The value of the scheme's assets at 30 June 2015 was £349.3m (31 December 2014: £347.9m), and the value of the scheme's liabilities decreased to £356.9m (31 December 2014: £362.0m).  The net valuation of the USA pension schemes at 30 June 2015, with total assets of £14.6m, showed a reduced deficit of £6.0m (£3.6m net of deferred tax), compared with a deficit of £6.5m (£3.9m net of deferred tax) at the beginning of the period. The aggregate expense of administering the pension schemes was £0.4m (2014: £0.4m). The net financing expense on pension scheme balances was £0.4m (2014: £0.1m).

The UK scheme is subject to a formal triennial actuarial valuation as at 30 June 2015, with the deficit recovery plan being formally reassessed following its completion. The results of the last funding valuation, as at 30 June 2012, showed a funding level of 86% of liabilities, which represented a deficit of £53.0m. The level of deficit funding is £1.8m per annum (increasing by 2.1% per annum). 

Outlook

As in previous years, the Group's full year trading performance will be significantly weighted towards the second half, and the Group remains on course to meet market expectations. We continue to focus on our growth initiatives, including further development, both organically and acquisitively, within our core market sectors of nutrition, beverages, healthcare, pharmaceutical and tobacco.

Dick Hunter                           David Cowen

Chief Executive                     Group Finance Director

27 August 2015

CONDENSED CONSOLIDATED INCOME STATEMENT

		6 months to 30 June 2015				6 months to 30 June 2014
	Notes	Underlying £m	Non-underlying (note 5) £m	Total £m		Underlying £m	Non-underlying (note 5) £m	Total £m
Continuing operations Revenue Cost of sales	4	39.5 (28.4)	- -	39.5 (28.4)		38.9 (26.8)	- -	38.9 (26.8)
Gross profit Distribution expenses Administrative expenses Other operating expenses		11.1 (4.3) (5.1) (0.3)	- - (0.5) -	11.1 (4.3) (5.6) (0.3)		12.1  (4.6) (5.7) (0.1)	- - (0.6) -	12.1  (4.6) (6.3) (0.1)
Operating profit	4, 7	1.4	(0.5)	0.9		1.7	(0.6)	1.1
Financial income Financial expenses	6 6	- (0.1)	- (0.4)	- (0.5)		0.1 (0.1)	- (0.1)	0.1 (0.2)
Net financing expense	4, 6	(0.1)	(0.4)	(0.5)		-	(0.1)	(0.1)
Profit before tax Taxation	4 8	1.3 (0.3)	(0.9) 0.3	0.4 -		1.7 (0.2)	(0.7) 0.1	1.0 (0.1)
Profit for the period from continuing operations Loss for the period from discontinued operations	16	1.0 -	(0.6) (5.7)	0.4 (5.7)		1.5 -	(0.6) (1.1)	0.9 (1.1)
Loss for the period		1.0	(6.3)	(5.3)		1.5	(1.7)	(0.2)
Basic loss per ordinary share Diluted loss per ordinary share	9 9			(26.9)p (26.9)p				(0.9)p (0.9)p

CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)

			12 months to 31 December 2014
	Notes		Underlying £m	Non-underlying (note 5) £m	Total £m
Continuing operations Revenue Cost of sales	4		87.4 (61.0)	- -	87.4 (61.0)
Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses			26.4 -  (8.9) (11.7) (0.4)	- 0.2 - (1.4) -	26.4 0.2  (8.9) (13.1) (0.4)
Operating profit	4, 7		5.4	(1.2)	4.2
Financial income Financial expenses	6 6		0.2 (0.3)	- (0.2)	0.2 (0.5)
Net financing expense	4, 6		(0.1)	(0.2)	(0.3)
Profit before tax Taxation	4 8		5.3 (0.9)	(1.4) 0.3	3.9 (0.6)
Profit for the period from continuing operations			4.4	(1.1)	3.3
Loss for the period from discontinued operations	16		-	(3.6)	(3.6)
Loss for the period			4.4	(4.7)	(0.3)
Basic loss per ordinary share Diluted loss per ordinary share	9 9				(1.3)p (1.3)p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Loss for the period		(5.3)		(0.2)		(0.3)
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss Actuarial gains/(losses) Tax on items that will not be reclassified to profit or loss		6.9 (1.5)		(4.7) 1.0		(15.5) 3.6
		5.4		(3.7)		(11.9)
Items that may be reclassified subsequently to profit or loss Currency translation movements arising on foreign currency net investments Effective portion of changes in fair value of cash flow hedges Tax on items that may be reclassified to profit or loss		(1.7) (0.2) -		(0.5) (0.3) 0.1		(1.3) (0.1) -
		(1.9)		(0.7)		(1.4)
Other comprehensive income/(expense) for the period		3.5		(4.4)		(13.3)
Total comprehensive expense for the period		(1.8)		(4.6)		(13.6)

Total comprehensive expense for the period arises from: Continuing operations Discontinued operations		3.9 (5.7)		(3.5) (1.1)		(10.0) (3.6)
		(1.8)		(4.6)		(13.6)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital £m	Share premium £m	Translation reserve £m	Capital redemption reserve £m	Hedging reserve £m	Retained earnings £m	Total equity £m
6 months to 30 June 2015 Balance at 1 January 2015	5.0	26.0	0.7	3.9	(0.6)	(9.1)	25.9
Loss for the period Other comprehensive (expense)/income for the period	- -	- -	- (1.7)	- -	- (0.2)	(5.3) 5.4	(5.3) 3.5
Total comprehensive expense for the period	-	-	(1.7)	-	(0.2)	0.1	(1.8)
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(0.6) 0.1	(0.6) 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.5)	(0.5)
Balance at 30 June 2015	5.0	26.0	(1.0)	3.9	(0.8)	(9.5)	23.6
6 months to 30 June 2014 Balance at 1 January 2014	5.0	26.0	2.0	3.9	(0.5)	4.1	40.5
Loss for the period Other comprehensive expense for the period	- -	- -	- (0.5)	- -	- (0.2)	(0.2) (3.7)	(0.2) (4.4)
Total comprehensive expense for the period	-	-	(0.5)	-	(0.2)	(3.9)	(4.6)
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(0.6) 0.1	(0.6) 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.5)	(0.5)
Balance at 30 June 2014	5.0	26.0	1.5	3.9	(0.7)	(0.3)	35.4
12 months to 31 December 2014 Balance at 1 January 2014	5.0	26.0	2.0	3.9	(0.5)	4.1	40.5
Loss for the period Other comprehensive expense for the period	- -	- -	- (1.3)	- -	- (0.1)	(0.3) (11.9)	(0.3) (13.3)
Total comprehensive expense for the period	-	-	(1.3)	-	(0.1)	(12.2)	(13.6)
Dividends to shareholders Equity-settled share-based transactions Purchase of own shares Tax on items recorded directly in equity	- - - -	- - - -	- - - -	- - - -	- - - -	(1.1) 0.3 (0.1) (0.1)	(1.1) 0.3 (0.1) (0.1)
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(1.0)	(1.0)
Balance at 31 December 2014	5.0	26.0	0.7	3.9	(0.6)	(9.1)	25.9

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	30 June 2015 £m		30 June 2014 £m		31 Dec 2014 £m
Non-current assets Intangible assets Property, plant and equipment Investment property Deferred tax assets		15.0 8.1 0.8 4.9		15.7 10.9 0.8 4.3		15.7 11.3 0.8 6.4
		28.8		31.7		34.2
Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents		19.7 21.7 0.1 4.3		22.9 21.4 0.1 8.5		18.5 26.0 0.2 9.8
		45.8		52.9		54.5
Current liabilities Trade and other payables Current tax liabilities Provisions Provisions held within discontinued operations		(27.2) (0.4) (1.2) (0.3)		(28.0) (0.5) (1.4) -		(28.6) (0.4) (1.3) -
		(29.1)		(29.9)		(30.3)
Net current assets		16.7		23.0		24.2
Total assets less current liabilities		45.5		54.7		58.4
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Provisions held within discontinued operations	7	(8.2) (13.6) (0.1)		(9.4) (9.9) -		(11.9) (20.6) -
		(21.9)		(19.3)		(32.5)
Net assets	4	23.6		35.4		25.9
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 2.1 (9.5)		5.0 26.0 4.7 (0.3)		5.0 26.0 4.0 (9.1)
Total equity		23.6		35.4		25.9

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Operating activities Operating profit from continued operations Non-underlying items included in operating profit Amortisation Depreciation Other non-cash items Defined benefit pension payments Working capital movements:   - increase in inventories   - decrease/(increase) in trade and other receivables   - increase/(decrease) in trade and other payables   - decrease in provisions		0.9 0.5 0.6 0.5 (0.1) (0.9) (2.5) 2.6 0.2 (0.1)		1.1 0.6 0.6 0.7 - (0.9) (4.4) 2.0 (0.6) (0.2)		4.2 1.2 1.1 1.2 0.1 (1.8) (0.6) (1.5) (0.6) (0.2)
Cash generated from/(used in) operations before reorganisation and discontinued operations   Cash used in discontinued operations Reorganisation costs paid	16 5	1.7 (0.9) (0.2)		(1.1) (1.3) (0.2)		3.1 (2.1) (0.5)
Cash flows from operations   Taxation paid		0.6 (0.1)		(2.6) (0.9)		0.5 (1.0)
Cash flows from operating activities		0.5		(3.5)		(0.5)
Investing activities Interest received Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Acquisition of intellectual property Capitalised development expenditure Proceeds on disposal of discontinued operations		- 0.3 (0.7) (0.2) (1.2) 0.2		0.1 0.1 (1.0) - (1.3) -		0.2 0.2 (2.1) - (3.1) -
Cash flows from investing activities		(1.6)		(2.1)		(4.8)
Financing activities Interest paid Purchase of own shares Net (decrease)/increase against revolving facilities Dividends paid	10	(0.1) - (3.6) (0.6)		(0.1) - (0.2) (0.6)		(0.3) (0.1) 1.8 (1.1)
Cash flows from financing activities		(4.3)		(0.9)		0.3
Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held	11	(5.4) 9.8 (0.1)		(6.5) 15.0 -		(5.0) 15.0 (0.2)
Cash and cash equivalents at period end		4.3		8.5		9.8

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

1.  General information

The Half-year results for the current and comparative period are unaudited but have been reviewed by the auditors, KPMG LLP, and their report is set out after the notes. The comparative information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies.  The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.  The Group's statutory accounts for the year ended 31 December 2014 are available from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY or from the Group's website at www.molins.com.

Having made due enquiries the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the condensed set of financial statements.

The condensed set of financial statements was approved by the Board of directors on 27 August 2015.

2.  Basis of preparation

(a) Statement of compliance

The condensed set of financial statements for the 6 months ended 30 June 2015 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU. It does not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Group for the year ended       31 December 2014.

(b) Judgements and estimates

The preparation of the condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing the condensed set of financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were of the same type as those that applied to the financial statements for the year ended 31 December 2014.

3.  Significant accounting policies

The accounting policies, presentation and methods of computation applied by the Group in this condensed set of financial statements are the same as those applied in the Group's latest audited financial statements.

4.  Operating segments

The Group has two operating segments which are the Group's two divisions. These divisions form the basis of the Group's management and internal reporting structure. Further details in respect of the Group structure and performance of the two divisions are set out in the Half-year management report. 

	Revenue									Profit
Continuing operations	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m					12 months to 31 Dec 2014 £m			6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Packaging Machinery	21.8		18.3					40.5			1.1		0.1		1.8
Instrumentation & Tobacco Machinery	17.7		20.6					46.9			0.3		1.6		3.6
	39.5		38.9					87.4
Underlying operating profit											1.4		1.7		5.4
Non-underlying items included in operating profit											(0.5)		(0.6)		(1.2)
Operating profit											0.9		1.1		4.2
Net financing expense											(0.5)		(0.1)		(0.3)
Profit before tax											0.4		1.0		3.9

Net financing expense includes dividends paid on preference shares. The Company has in issue 900,000 6% fixed cumulative preference shares.  The preference dividend is payable on 30 June and 31 December and amounted to £0.1m in the 12 months ended 31 December 2014.

Segment assets	30 June 2015 £m		30 June 2014 £m		31 Dec 2014 £m
Packaging Machinery Instrumentation & Tobacco Machinery	29.0 35.0		21.6 38.1		24.4 34.3
Total segment assets Total segment liabilities	64.0 (33.2)		59.7 (29.9)		58.7 (26.6)
Segment net assets - continuing operations	30.8		29.8		32.1
Net (liabilities)/assets - discontinued operations	(0.3)		2.7		3.1
Unallocated net (liabilities)/assets	(6.9)		2.9		(9.3)
Total net assets	23.6		35.4		25.9

The basis of segmentation has changed from that previously reported in each of the periods of 6 months to 30 June 2014 and 12 months to 31 December 2014. Following the sale of the analytical services laboratories business, the Group's reporting structure has been simplified to two divisions, as shown above, reflecting the different characteristics and markets in which they each operate.

5.  Non-underlying items

Charges classified as non-underlying items were incurred in respect of the administration costs of the Group's defined benefit pension schemes, which are paid from the assets of the pension schemes, and financing expense on pension scheme balances, which are detailed in note 7. Additionally, in the 6 months to 30 June 2015, charges in respect of reorganisations of £0.1m (6 months to 30 June 2014: £0.2m; 12 months to 31 December 2014: £0.5m) were incurred.  In the period to 30 June 2015 cash payments of £0.1m (6 months to 30 June 2014: £0.2m; 12 months to 31 December 2014: £0.1m) were made in respect of reorganisations. 

6.  Net financing expense

	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Financial income Amounts receivable on cash and cash equivalents	-		0.1		0.2
	-		0.1		0.2
Financial expenses Defined benefit pension scheme finance expense Amounts payable on bank loans and overdrafts Preference dividends paid	(0.4) (0.1) -		(0.1) (0.1) -		(0.2) (0.2) (0.1)
	(0.5)		(0.2)		(0.5)
Net financing expense	(0.5)		(0.1)		(0.3)

7.  Employee benefits

The Group accounts for pensions under IAS 19 Employee benefits. A formal valuation of the UK defined benefit pension scheme was carried out as at 30 June 2012, and formal valuations of the USA defined benefit schemes were carried out as at 1 January 2015, and their assumptions, updated to reflect actual experience and conditions at 30 June 2015 and modified as appropriate for the purposes of IAS 19, have been applied in the condensed set of financial statements.  Profit before tax for the 6 months to 30 June 2015 includes charges in respect of pension scheme administration costs of £0.4m (6 months to 30 June 2014: £0.4m; 12 months to 31 December 2014: £0.9m) and financing expense on pension scheme balances of £0.4m (6 months to 30 June 2014: £0.1m; 12 months to 31 December 2014: £0.2m).  Payments to the Group's UK defined benefit pension scheme in the period of £0.9m (6 months to 30 June 2014: £0.9m; 12 months to  31 December 2014: £1.8m) were in respect of the agreed deficit recovery plan.

Employee benefits as shown in the Condensed Consolidated Statement of Financial Position were:

	30 June 2015 £m		30 June 2014 £m		31 Dec 2014 £m
UK scheme Fair value of assets Present value of defined benefit obligations	349.3 (356.9)		339.2 (345.5)		347.9 (362.0)
Defined benefit liability	(7.6)		(6.3)		(14.1)
USA schemes Fair value of assets Present value of defined benefit obligations	14.6 (20.6)		14.4 (18.0)		15.4 (21.9)
Defined benefit liability	(6.0)		(3.6)		(6.5)
Total defined benefit liability	(13.6)		(9.9)		(20.6)

8.  Taxation

The tax charge for the 6 months to 30 June 2015 amounted to £nil (6 months to 30 June 2014: £0.1m; 12 months to 31 December 2014: £0.6m) and is calculated as follows:

	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Tax charge on underlying profit Tax credit on non-underlying items	0.3 (0.3)		0.2 (0.1)		0.9 (0.3)
	-		0.1		0.6

The Group's consolidated effective tax rate in respect of underlying profit for the 6 months to 30 June 2015 is 24%  (6 months to 30 June 2014: 13%; 12 months to 31 December 2014: 18%).

The UK Finance Bill 2013, which was substantively enacted on 2 July 2013, introduced a reduction in the rate of UK corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015.  Deferred tax assets and liabilities are measured at tax rates that are enacted or substantively enacted at the end of the reporting period.  The deferred tax asset at 30 June 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.  In the Budget on 8 July 2015, the Chancellor announced additional planned reductions to 18% by 2020. Consequently, this is expected to reduce the Company's future tax charge.

9.  Earnings per share

Basic earnings per ordinary share is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period excluding shares held by the employee trust in respect of the Company's long-term incentive arrangements. For diluted earnings per ordinary share, the weighted average number of shares includes the diluting effect, if any, of own shares held by the employee trust. The effect of dilution for each of the periods reported would be to decrease the loss per ordinary share and is therefore excluded from the dilution calculation.

The weighted average number of ordinary shares for both the basic EPS, diluted EPS and underlying EPS calculations in the 6 months to 30 June 2015 is 19,522,213 (6 months to 30 June 2014: 19,489,824; 12 months to 31 December 2014: 19,491,966).

The adjusted weighted average number of ordinary shares for the diluted underlying EPS calculation in the 6 months to 30 June 2015 is 19,808,933 (6 months to 30 June 2014: 20,015,507; 12 months to 31 December 2014: 19,984,410).

Underlying EPS and diluted underlying EPS, which are calculated on profit before non-underlying items, for the 6 months to 30 June 2015 amounted to 5.1p (6 months to 30 June 2014: 7.5p; 12 months to 31 December 2014: 22.4p) and 5.0p (6 months to 30 June 2014: 7.3p; 12 months to 31 December 2014: 21.9p) respectively. 

The calculations of underlying EPS and diluted underlying EPS are based on underlying profit for the 6 months to 30 June 2015 of £1.0m (6 months to 30 June 2014: £1.5m; 12 months to 31 December 2014: £4.4m) which is calculated as follows:

	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Loss for the period Non-underlying items (net of tax)	(5.3) 6.3		(0.2) 1.7		(0.3) 4.7
Underlying profit for the period	1.0		1.5		4.4

10.  Dividends

	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Dividends to shareholders paid in the period Final dividend for the year ended 31 December 2013 of 3.0p per share Interim dividend for the year ended 31 December 2014 of 2.5p per share Final dividend for the year ended 31 December 2014 of 3.0p per share	- - 0.6		0.6 - -		0.6 0.5 -
	0.6		0.6		1.1

An interim dividend for the year ending 31 December 2015 of 2.5p per ordinary share will be paid on 8 October 2015 to ordinary shareholders registered at the close of business on 18 September 2015.

11.  Reconciliation of net cash flow to movement in net (debt)/funds

	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Net decrease in cash and cash equivalents Cash inflow/(outflow) from movement in borrowings	(5.4) 3.6		(6.5) 0.2		(5.0) (1.8)
Change in net (debt)/funds resulting from cash flows	(1.8)		(6.3)		(6.8)
Translation movements	-		0.2		(0.5)
Movement in net debt in the period	(1.8)		(6.1)		(7.3)
Opening net (debt)/funds	(2.1)		5.2		5.2
Closing net debt	(3.9)		(0.9)		(2.1)
Analysis of net debt
Cash and cash equivalents - current assets	4.3		8.5		9.8
Interest-bearing loans and borrowings - non-current liabilities	(8.2)		(9.4)		(11.9)
Closing net debt	(3.9)		(0.9)		(2.1)

12.  Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the financial statements for the year ended 31 December 2014.

At 1 January 2015 and 30 June 2015 the Group held all financial instruments at Level 2 (as defined in IFRS 7 Financial instruments: disclosures) and there have been no transfers of assets or liabilities between levels of the fair value hierarchy.

Categories of financial instruments	30 June 2015 £m		30 June 2014 £m		31 Dec 2014 £m
Financial assets Derivative instruments in designated hedge accounting relationship Loans and receivables (including cash and cash equivalents)	0.2 17.6		0.1 23.4		- 30.0
	17.8		23.5		30.0
Financial liabilities Derivative instruments in designated hedge accounting relationship Amortised cost	0.6 34.7		0.4 37.0		0.5 40.0
	35.3		37.4		40.5

Amortised cost comprises interest-bearing loans and borrowings and trade and other payables, excluding foreign currency derivatives.

The Group enters into forward foreign exchange contracts solely for the purpose of minimising currency exposures on sale and purchase transactions.  The Group classified its forward foreign exchange contracts used for hedging as cash flow hedges and states them at fair value.

The fair value is the gain/loss on all open forward foreign exchange contracts at the period end. These amounts are based on the market values of equivalent instruments at the period end date and all relate to those forward foreign exchange contracts that have been designated as effective cash flow hedges under IAS 39 Financial instruments - recognition and measurement.

13.  Related parties

The Group has related party relationships with its directors and with the UK and USA defined benefit pension schemes.  There has been no material change in the nature of the related party transactions described in note 30 of the 2014 Annual Report and Accounts.

14.  Principal risks and uncertainties

Molins is subject to a number of risks which could have a serious impact on the performance of the business. The Board regularly considers the principal risks that the Group faces and how to mitigate their potential impact.  The key risks to which the business is exposed have not changed significantly over the past six months (other than the elimination of exposure to the testing regime for tobacco related products in the USA following the sale of the analytical services laboratories business) and are not expected to do so over the remaining six months of the financial year. Further information on the principal risks and uncertainties faced by the Group is included on pages 12 and 13 of the Group's 2014 Annual Report and Accounts.

15.  Half-year report

The Half-year report will be made available to shareholders on 7 September 2015 on the Group's website at www.molins.com.  The Half-year report will not be available in printed form.

16.  Discontinued operations

On 31 May 2015 the Group sold the trade and assets of Arista Laboratories, Inc. The table below shows the results of the discontinued operations which are included in the Group's Condensed Consolidated Income Statement and Condensed Consolidated Statement of Cash Flow.

Income statement	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Revenue from trading activities Costs from trading activities	0.7 (1.6)		1.1 (2.2)		2.5 (4.5)
Loss from trading activities Proceeds from disposal Costs incurred on disposal Loss on disposal of net assets Impairment of goodwill	(0.9) 0.3 (0.4) (3.4)  (1.3)		(1.1) - - - -		(2.0) - - - (1.6)
Loss before and after tax	(5.7)		(1.1)		(3.6)

Cash flow statement	6 months to 30 June 2015 £m		6 months to 30 June 2014 £m		12 months to 31 Dec 2014 £m
Operating activities Operating loss Depreciation Net movements in working capital	(0.9) 0.2 0.1		(1.1) 0.3 (0.5)		(2.0) 0.6 (0.7)
Cash used in operations before reorganisation   Reorganisation costs paid	(0.6) (0.3)		(1.3) -		(2.1) -
Cash flows from operating activities	(0.9)		(1.3)		(2.1)
Investing activities Net proceeds on disposal	0.2		-		-
Cash flows from investing activities	0.2		-		-
Net decrease in cash and cash equivalents	(0.7)		(1.3)		(2.1)

INDEPENDENT REVIEW REPORT TO MOLINS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half-year report for the six months ended 30 June 2015 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of financial position, condensed consolidated statement of cash flows and the related explanatory notes.  We have read the other information contained in the Half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. 

Directors' responsibilities

The Half-year report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-year report in accordance with the AIM Rules. 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.  The condensed set of financial statements included in this Half-year report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half-year report based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half-year report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules. 

Peter Selvey

for and on behalf of KPMG LLP

Chartered Accountants

Altius House

One North Fourth Street

Milton Keynes

MK9 1NE

27 August 2015

 

END

 

 

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