Preliminary Results
Molins PLC
29 February 2008
29 February 2008
FOR IMMEDIATE RELEASE
2007 PRELIMINARY ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its
results for the year ended 31 December 2007.
2007 2006
Sales £89.3m £88.6m
Underlying operating profit* £5.4m £7.6m
Profit before tax - continuing operations £7.4m £5.4m
Profit/(loss) for the period £7.9m £(8.5)m
Underlying earnings per share* 18.0p 24.2p
Basic earnings/(loss) per share 42.0p (45.6)p
Dividends per share 7.0p 4.0p
Cash generated from operations before reorganisation - continuing
operations £8.8m £13.5m
Net debt £7.6m £12.3m
* Continuing operations before net pension credit of £3.0m (2006: £1.5m) and
reorganisation costs in 2006 of £2.6m.
• Another year of strong operating cash flow
• Profit for the period after three years of losses
• Underlying operating profit of £5.4m (2006: £7.6m)
• Interim dividend payment (in lieu of final) of 5p per share
• Circular to shareholders posted today re Saunderton property
Peter Byrom, Chairman, commented:
'Tobacco Machinery remains well placed to continue to deliver strong results,
although the favourable sales mix that benefited the division in 2007 is not
expected to be repeated in 2008. Performance in Packaging Machinery is expected
to improve, principally through progress that we expect to see at Langen
Packaging, although that business continues to face a considerable currency
impact. The Scientific Services businesses entered the year with stronger
momentum compared with the previous year, and, even though each of the
businesses works to short order lead times, we expect to see an improved
performance in the current year.'
Enquiries: Molins PLC Tel: 020 7638 9571
Dick Hunter, Chief Executive; David Cowen, Group Finance Director
Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571
Margaret George
CHAIRMAN'S STATEMENT
I am pleased to report that the Group returned to profit in the year with a
post-tax profit of £7.9m (2006: £8.5m loss). Underlying operating profit
(continuing operations before net pension credit and reorganisation costs) was
£5.4m (2006: £7.6m), on similar sales of £89.3m (2006: £88.6m). Basic earnings
per share amounted to 42.0p (2006: 45.6p loss). Underlying earnings per share
amounted to 18.0p (2006: 24.2p).
As in the previous two years, cash flow was again strong, with £8.8m generated
from continuing operations before reorganisation costs. Net debt reduced by
£4.7m in the year to £7.6m.
The Board has declared an interim dividend (in lieu of final) of 5p per ordinary
share, making a total of 7p for the year. (2006: 4p).
Property
Today, the Company posted a circular to shareholders seeking approval for the
grant of an option to e-shelter facility services GmbH to complete the purchase
of the Saunderton property on or before 3 October 2008 for a cash consideration
of £17.5m. The circular includes a notice convening a general meeting of the
Company on 18 March 2008 at which the approval will be sought.
If completed, the transaction will result in net cash proceeds, after costs and
taxation, of approximately £15.7m, and generate a profit to the Group of
approximately £3.7m.
The Company sold the property in Nottingham in August 2007 for £3.7m before
costs. After costs and taxation, net proceeds amounted to £3.3m and profit
after taxation of £1.6m was generated. This followed the sale in 2006 of the
Sandiacre Rose Forgrove business which operates from the site.
Board
We announced on 25 January 2008 that I would be retiring as Chairman of the
Board at the end of January 2009, after what will be 10 years on the Board. We
are in the process of recruiting a non-executive director with a view to the new
director becoming Chairman next year. We also announced that Dick Hunter, who
has been a member of the Board since 2004, had been appointed Chief Executive.
Outlook
Tobacco Machinery remains well placed to continue to deliver strong results,
although the favourable sales mix that benefited the division in 2007 is not
expected to be repeated in 2008.
Performance in Packaging Machinery is expected to improve, principally through
progress that we expect to see at Langen Packaging, although that business
continues to face a considerable currency impact.
The Scientific Services businesses entered the year with stronger momentum
compared with the previous year, and, even though each of the businesses works
to short order lead times, we expect to see an improved performance in the
current year.
Peter Byrom, Chairman, 29 February 2008
OPERATING REVIEW
TOBACCO MACHINERY
The Tobacco Machinery division achieved a significantly improved level of
profitability in 2007, following completion of a wide-ranging restructuring
programme. Sales in the year were £32.9m (2006: £36.2m) and operating profit
was £3.7m (2006: £1.9m before reorganisation costs).
The division comprises operations in the UK, Czech Republic, Singapore, South
America and the USA, which, together with service engineers based in other
countries, provides the ability to meet customers' needs efficiently in all
parts of the world.
The division experienced an increase in sales of after-market products, partly
reflecting the favourable timing of orders towards the end of the previous year.
However, this was more than offset by a reduction in lower margin sales of
rebuild equipment, which had entered the year with a low order book. With the
improvement in the cost base and efficiency of the business following the
reorganisation carried out over the last three years, and the change in sales
mix, the division produced considerably improved profitability.
Market conditions continue to be challenging with a significant amount of
consolidation within the cigarette manufacturing industry. Mergers and
acquisitions of cigarette manufacturers continue, as well as the relocation of
manufacturing activity from higher cost economies to lower cost environments.
Sales opportunities for the division are driven by specific customer investment
requirements. Against this backdrop, Molins Tobacco Machinery has continued to
focus on maintaining excellent contact with its customer base and providing
after-market services and a range of niche manufacturing equipment on an
international basis.
The Europe, Middle East and Africa regional sales team is based in Saunderton,
UK, and services this wide geographical area through a combination of regional
sales managers, service engineers and industry specific agents. In 2007 there
was a low level of demand for new capital equipment within the higher cost
economies in this region. However, activity with the key customers in North
Africa continued to be strong and the team of locally based service engineers
has been enlarged in this area in response to the market opportunities. Spare
parts and service kit sales were significantly ahead of the prior year, helped
by the focus on key account management programmes and work done with customers
to improve the performance of their manufacturing equipment.
The North American market is serviced through the division's long-established
operation in Richmond, Virginia. Molins Richmond performed well in the year,
with increased sales of equipment to the independent cigarette manufacturers.
Molins Far East, based in Singapore, services the Asian markets. Order intake
for this region was higher than in 2006, although continued consolidation within
the state-controlled industry in China and development of its indigenous
machinery manufacturing, resulted in a reduction in demand for both capital
equipment and spare parts in China. Order intake overall benefited from a
particularly large spare parts order from a key regional customer. The process
of developing new products with suppliers based in the region and marketing
these products through the division's sales and service organisations has
continued successfully.
Molins do Brasil supplies the full range of Molins' original equipment, rebuild
machinery, spare parts and services to the cigarette manufacturers based within
South and Central America. As a result of the division's reorganisation, Molins
do Brasil is now the rebuild machinery manufacturing centre for the division and
is working closely with each of the regional sales and service teams to develop
sales of this equipment.
The manufacturing operation in Plzen, Czech Republic, continued to grow
strongly. The relocation of all machined parts that were previously
manufactured at Saunderton to Plzen was successfully completed in the year,
together with the majority of the machinery assembly activity.
The division successfully launched a new mid-speed cigarette maker, Octave, at
the Tabexpo industry trade show towards the end of the year. The Octave has
been developed in partnership with a niche European supplier of tobacco
processing technology and is targeted at those segments within the industry that
require machinery with the highest level of product quality and the greatest
level of manufacturing flexibility. The initial market response has been
positive and the first machine will be installed in a customer's factory during
the first half of 2008.
The UK and Brazilian based engineering teams continue to focus on the
development of upgrade and enhancement kits for the large Molins machine base
installed in cigarette factories world-wide.
In summary, the division benefited from a period of stability following
completion of the restructuring programme and with lower costs and improved
service, is well placed to continue its development in 2008, though a less
favourable sales mix is likely to lead to a reduction in profit margins.
PACKAGING MACHINERY
Having entered the year with a significant order book, the division delivered
higher sales of £38.7m, compared with £33.9m in the previous year. However,
owing to project completion issues at Langen Packaging, profitability was weak
and operating profit for the division fell to £0.3m (2006: £2.5m).
ITCM, based in Coventry, UK, delivered a solid year's performance, with sales
and profit at similar levels to the previous year. The business provides a
unique combination of bespoke creative engineering solutions for customers'
complex production and packaging needs, together with the production of the
machinery that delivers the solution, either as a one-off machine or in
production volumes. Following the success of the increased focus on business
development over the last few years, further resource has been applied to this
area. The customer base continues to expand, with a number of orders being
received from the pharmaceutical sector, as well as the food and personal care
sectors. The highlight in the year was the receipt of a significant order from
an important pharmaceutical customer, which will be delivered progressively
through 2008. One of the features of the business is that it tends to receive a
relatively small number of high-value contracts in the year, and it is important
to maintain a good level of order prospects, as such projects often take a
considerable time to convert to an order.
As previously indicated, the business was becoming space constrained and during
the year an extension was built which has increased the workshop space by 50%.
The business also invested in its managerial and technical capabilities in the
year and in a new enterprise resource planning system.
Langenpac, based in Wijchen, the Netherlands, supplies highly automated product
handling, cartoning and end-of-line machinery to European customers and
progressively to customers in Asia. It entered the year with a strong order
book, which led to the highest level of sales in its 20 year history. Projects
delivered in the year included the supply of a high-value integrated packing
line to a blue-chip cereal manufacturer, which reinforced Langenpac's
capabilities to manage such large-scale projects. Following product development
over the last few years, it increased its sales of more standard cartoning
machines, some of which were sold by Langen Packaging into North America.
However, whilst sales levels were strong, order intake in the year was much
reduced from the particularly high levels experienced in the previous year. The
business continues to focus on specific market niches and segments, including
contact lenses, premium packaging for the drinks industry, tissues and
stick-packs, as well as on its more traditional food sectors.
Despite record sales and profits, the business returned a lower than planned
margin resulting from a combination of low margins on the bought-in elements of
its integrated packing lines, pricing pressures and operational inefficiencies.
The expected move into new leased premises did not take place in the year but is
expected to occur in the second half of 2008 and this should help the business
improve its project delivery efficiency.
Langen Packaging, based in Mississauga, Canada, had a difficult year and
incurred a considerable loss. Having started the year with a strong order book,
profit margins on a number of its integration and robotic projects were much
lower than planned as the business experienced cost over-runs. With the
majority of Langen's customers being based in the US, the competitive position
of the business was also affected by the 15% strengthening over the year of the
Canadian dollar against the US dollar. A number of actions have been taken,
including a change in senior management and a wide-ranging improvement plan has
been instigated. Market conditions are challenging, with signs of an economic
slow-down in the US, but the business entered the year with a satisfactory order
book and this, together with operational improvements, is expected to lead to an
improved performance in 2008.
Cerulean Packing, which supplies tube packing machinery from its base in Milton
Keynes, UK, experienced much lower sales and profit levels compared with the
previous year. Prospects, though, for this range of equipment are now more
encouraging with the possibility of an improvement in activity levels in the
year.
Overall, the financial performance of the division was disappointing, owing
mostly to the underperformance at Langen Packaging. The causes of this
underperformance are understood but will take some time to rectify. Good
progress was made at ITCM and Langenpac, and although market conditions are
challenging, we are optimistic that they will continue to progress in the
current year.
SCIENTIFIC SERVICES
The Scientific Services division, which comprises Cerulean and Arista
Laboratories, entered the year with a relatively low order book which, as
expected, led to reduced sales and profit compared with 2006. Sales in the year
were £17.7m (2006: £18.5m) and operating profit reduced to £1.4m (2006: £3.2m).
Cerulean, based in Milton Keynes, UK, is the market-leading supplier of quality
control instruments and analytical smoke constituent capture machinery to the
tobacco industry, independent laboratories and government bodies. The business
has a considerable network of global sales and service offices, which provide
localised support to its extensive customer base.
Overall, the business experienced a small increase in sales compared with the
previous year, with the impact of the sale of a large project for a closed-loop
control system outweighing a reduction in sales across the balance of Cerulean's
product range. Profits, though, were lower, reflecting the reduced margin on
this large project compared with margins achieved on its standard product range.
As previously advised, the business experienced a significant reduction in
demand in the second half of 2006. This led to a much reduced order book as it
entered the year and this demand pattern continued into the first half of 2007.
However, a strong increase in order intake in the second half of the year has
continued into the first few weeks of 2008. Overall, order intake for
instruments showed growth over the previous year, for both the established QTM
range as well as the newer C(2) range which, after a process of validation and
customer trials, is finding its place in resolving customers' needs. But with
the consolidation within the tobacco sector impacting demand for new
instrumentation and quality control systems, expectations remain quite fragile.
Product development activities continue to be a key part of Cerulean's strategic
development. The business now offers to the market its broadest product
portfolio, having launched a number of small manual measurement instruments
during the year, as well as introducing the Quantum range of instruments. These
instruments use established technology in a more accessible format, adding
improvements in speed and connectivity capability.
Arista Laboratories, based in Richmond, Virginia and Kingston upon Thames, UK,
is an independent tobacco and cigarette smoke constituent testing laboratory,
for regulatory, research and product development purposes.
The business experienced a disappointing year in terms of its financial
performance. Whilst it performed at similar levels in the first half of the
year compared with the comparable period last year, second half performance, as
previously anticipated, was significantly impacted by the delay in order
placement by its main UK customer. This led to significantly reduced sales from
the UK operation compared with 2006.
The market drivers for the business, though, remain positive. Regulation in
respect of tobacco products continues to grow in many parts of the world
including the UK, the EU, North and South America. Arista has developed its
range of testing capabilities to meet these demands, and in particular has
invested in its ignition propensity testing laboratory in the UK.
FINANCIAL REVIEW
The Group returned to profit in the year and generated strong cash flow. Profit
for the period was £7.9m (2006: £8.5m loss), which benefited from profit in
respect of discontinued operations of £2.3m (2006: £12.2m loss). Underlying
operating profit (continuing operations before net pension credit and
reorganisation costs) was lower than the previous year at £5.4m (2006: £7.6m).
Underlying earnings per share decreased to 18.0p (2006: 24.2p) and basic
earnings per share amounted to 42.0p (2006: 45.6p loss). The Group maintained
strong cash flows, generating £8.8m from continuing operations before
reorganisation costs, with net debt reducing by £4.7m in the year.
Operating results
The trading performance of the Group is discussed in the Operating review.
Group revenue was £89.3m for continuing businesses, compared with £88.6m in
2006. Tobacco Machinery division sales reduced to £32.9m (2006: £36.2m) but
operating profit increased to £3.7m (2006: £1.9m before reorganisation costs of
£2.6m). Packaging Machinery division sales increased to £38.7m (2006: £33.9m),
but the division's operating profit decreased to £0.3m (2006: £2.5m).
Scientific Services division sales decreased to £17.7m (2006: £18.5m) and
operating profit decreased to £1.4m (2006: £3.2m).
Interest and taxation
Net interest expense in 2007 was £1.0m (2006: £1.1m). The taxation charge for
continuing operations was £1.8m (2006: £1.7m after reorganisation costs),
resulting in an effective tax rate of 24% (2006: 31%), reflecting the reduction
in the UK corporation tax rate to 28% on the Group's deferred tax balances and a
number of non-recurring credits.
Discontinued businesses
Profit from discontinued operations was £2.3m in the year, which comprised £1.6m
profit from the sale of a property in Nottingham, which had been retained by the
Group when the Sandiacre Rose Forgrove business was sold in 2006, and the
release of warranty and disposal provisions of £0.7m relating to the 2006 sales
of Sasib S.p.A. and Sandiacre Rose Forgrove.
Earnings per share
Basic earnings per share amounted to 42.0p (2006: 45.6p loss). Basic earnings
per share for continuing operations amounted to 29.7p (2006: 20.2p) and
underlying earnings per share (continuing operations before net pension credit
and reorganisation costs) amounted to 18.0p (2006: 24.2p).
Dividends
The Board has decided to pay an interim dividend (in lieu of final) of 5p per
ordinary share which, together with the interim dividend of 2p paid in October
2007, results in a total dividend of 7p per ordinary share in respect of 2007
(2006: 4p per ordinary share). The dividend will be paid on 4 April 2008 to
shareholders on the register on 14 March 2008.
Cash, treasury and funding activities
Group net debt reduced to £7.6m at the year end (2006: £12.3m). Net cash inflow
from continuing operations before reorganisation costs, was £8.8m (2006:
£13.5m). Reorganisation costs of £1.3m (2006: £1.4m) relating to the Tobacco
Machinery division were paid in the year, having been charged in the income
statement in 2006. A payment of £0.5m was made in the year to the UK defined
benefit pension scheme, consequent to the disposal of the Nottingham property.
Net taxation payments of £0.7m (2006: £1.0m) and net interest payments of £1.0m
(2006: £1.1m) were also made in the year. Investment expenditure in property,
plant and equipment was £2.5m (2006: £1.4m) and product development expenditure
was £1.2m (2006: £1.9m). In addition to the sale of the Nottingham property,
the Group sold property, plant and equipment assets in the year which yielded
cash receipts of £0.1m (2006: £1.3m). The net cash inflow in respect of the
discontinued businesses was £4.2m (2006: £2.7m outflow), comprising net receipts
of £0.9m from Paritel S.p.A., the acquirer of the Sasib business, following the
settlement of all outstanding claims between the parties in respect of the sale
of that business, £3.7m proceeds from the sale of the Nottingham property, less
£0.4m outflow in respect of the Sandiacre Rose Forgrove and Sasib businesses.
There were no significant changes during the year in the financial risks,
principally currency risks and interest rate movements, to which the business is
exposed and the Group treasury policy has remained unchanged. The Group does
not trade in financial instruments and enters into derivatives (principally
forward foreign exchange contracts) solely for the purpose of minimising
currency exposures on sales or purchases in other than the functional currencies
of its various operations.
The Group maintains bank facilities appropriate to its expected needs. In the
UK, at 31 December 2007, these comprised secured, committed borrowing facilities
of £16.1m (2006: £23.1m), which had reduced in line with the scheduled loan
repayments under those pre-existing facilities. In December 2007 new committed
bilateral borrowing facilities were entered into with Lloyds TSB Bank plc and
Fortis Bank NA/SV totalling £18m. These new facilities are committed for five
years, expiring in December 2012. The facilities, which are subject to
covenants covering earnings, interest cover and tangible net worth, are both
sterling and multi-currency denominated. Additionally, the Group maintains
committed facilities from overseas banks of £5.2m, denominated in US dollars and
euros. Short-term overdrafts and borrowings are utilised around the Group to
meet local cash requirements. These are typically denominated in local
currencies. Foreign currency borrowings are used to hedge investments in
overseas subsidiaries where appropriate.
Pension valuations
The Group's main defined benefit scheme is in the UK. Changes were made to the
benefit structure of this scheme in 2006, principally moving the pension accrual
link from final salary to career average for future entitlements, thereby
reducing the uncertainty of the cost to the fund in respect of the benefit.
Also, employee contribution rates were increased to 8% of earnings from 1 July
2007 for most employees, but to 6% for those employees joining the scheme after
1 April 2006 for which a lower benefit rate is accrued. A scheme specific
funding valuation as at 30 June 2006 was completed by the fund's trustee during
the year. This showed a funding level of 102% of liabilities, which was a
similar position to the previous formal valuation in 2003 despite an increase in
the scheme's liabilities of 6% due to changed mortality assumptions applicable
at the date of the valuation. At the same time the trustee is obliged to look
at the solvency position of the fund and this showed a deficit of 31%.
Valuations are extremely sensitive to a number of factors outside the control of
the Group, including discount rates. Company contributions for ongoing benefits
have been agreed at 5% in respect of members who joined the scheme after 1 April
2006 and 11% for all other members. During the year the Company made payments
to the fund of £1.2m for the regular cost of benefits, £0.7m for pension
augmentation costs relating to redundancies announced in 2006 (and in respect of
which a further and final payment of £0.6m will be made before 30 June 2008),
and £0.5m additional funding consequent to the sale by the Group of the
Nottingham property.
The Group has adopted IAS 19 (revised) Employee benefits as its basis of
accounting for pension costs. The 2007 valuation of the UK fund's assets and
liabilities was undertaken as at 31 December 2007 based on detailed valuation
work carried out as at 30 June 2006, updated to reflect changes existing at the
2007 year end. The significantly smaller US defined benefit schemes were valued
at 31 December 2007, using actuarial data as of 1 January 2007, updated for
conditions existing at the year end. Under IAS 19 (revised) the Group has
elected to recognise all actuarial gains and losses outside of the income
statement.
In 2007, the net pension credit arising from the Group's defined benefit schemes
for continuing operations was £3.0m (2006: £1.5m), before accounting for
deferred tax. The IAS 19 (revised) valuation of the UK fund showed a net
surplus of £25.9m at 31 December 2007 (2006: £6.6m deficit) and the US pension
funds showed an aggregated net surplus of £0.4m (2006: £0.4m deficit), all
amounts being before tax. The combined market value of the Group's defined
benefit schemes' assets at 31 December 2007 was £367.7m, and the value of the
liabilities on an IAS 19 (revised) basis at 31 December 2007 was £341.4m.
Property
A circular was sent to shareholders on 29 February 2008, containing details of a
proposed transaction in respect of surplus property owned by the Company in
Saunderton, UK. In summary, approval is being sought to grant the prospective
purchaser of the site an option to acquire the property on or before 3 October
2008 for a cash consideration of £17.5m. The book value of the property subject
to the transaction was £13.2m at 31 December 2007 before deferred tax, £12.6m
net of deferred tax. If completed the transaction will result in net cash
proceeds, after costs and taxation of approximately £15.7m and generate a profit
to the Group of approximately £3.7m. Full details of the proposed transaction
are contained in the circular.
Equity
Group equity at 31 December 2007 was £52.3m (2006: £24.1m), representing 259p
per ordinary share. The increase arises from actuarial gains in respect of the
Group's defined benefit schemes of £18.0m, profit for the period of £7.9m,
currency translation movements on the net assets of the overseas businesses of
£1.3m, deferred tax adjustments to items previously taken directly to equity of
£1.8m and equity-settled share-based transactions of £0.3m, net of dividend
payments of £1.1m.
Consolidated income statement
2007 2006
Before
reorg. Reorg.
Total costs costs Total
Notes £m £m £m £m
(note 3)
Continuing operations
Revenue 2 89.3 88.6 - 88.6
Cost of sales (63.2) (58.1) (1.5) (59.6)
Gross profit 26.1 30.5 (1.5) 29.0
Other operating income 0.2 0.5 - 0.5
Distribution expenses (5.4) (7.7) (0.1) (7.8)
Administrative expenses (12.3) (13.9) (0.1) (14.0)
Other operating expenses (0.2) (0.3) (0.9) (1.2)
Operating profit 2, 4 8.4 9.1 (2.6) 6.5
Financial income 0.2 0.2 - 0.2
Financial expenses (1.2) (1.3) - (1.3)
Net financing costs (1.0) (1.1) - (1.1)
Profit before tax 7.4 8.0 (2.6) 5.4
Taxation (1.8) (2.4) 0.7 (1.7)
Profit from continuing
operations 5.6 5.6 (1.9) 3.7
Discontinued operations
Profit/(loss) from discontinued
operations 9 2.3 (12.2) - (12.2)
Profit/(loss) for the period 7.9 (6.6) (1.9) (8.5)
Basic earnings/(loss) per
ordinary share 5 42.0p (45.6)p
Diluted earnings/(loss) per
ordinary share 38.0p (45.6)p
Continuing operations
Basic earnings per ordinary
share 5 29.7p 20.2p
Diluted earnings per ordinary
share 27.0p 18.4p
Consolidated balance sheet
2007 2006
Notes £m £m
Non-current assets
Intangible assets 13.3 13.3
Property, plant and equipment 23.4 22.3
Other receivables 0.5 0.5
Employee benefits 6 17.2 -
Deferred tax assets 0.4 2.7
54.8 38.8
Current assets
Inventories 15.1 12.9
Trade and other receivables 18.3 23.4
Current tax assets 0.3 0.5
Cash and cash equivalents 3.5 4.7
Assets held for sale 9 - 1.8
37.2 43.3
Current liabilities
Bank overdrafts (0.8) (0.1)
Interest-bearing loans and borrowings (0.6) (4.3)
Trade and other payables (25.1) (26.8)
Current tax liabilities (1.0) (0.8)
Provisions (1.8) (2.8)
(29.3) (34.8)
Net current assets 7.9 8.5
Total assets less current liabilities 62.7 47.3
Non-current liabilities
Interest-bearing loans and borrowings (9.7) (12.6)
Trade and other payables - (0.2)
Employee benefits 6 - (7.0)
Deferred tax liabilities (0.7) (3.4)
(10.4) (23.2)
Net assets 2 52.3 24.1
Equity
Issued capital 5.0 5.0
Share premium 26.0 26.0
Reserves 5.0 3.7
Retained earnings 16.3 (10.6)
Total equity 52.3 24.1
Consolidated statement of cash flows
2007 2006
Note £m £m
Continuing operations
Operating activities
Operating profit 8.4 6.5
Reorganisation costs included in operating profit - 2.6
Amortisation 1.2 1.1
Depreciation 2.0 2.2
Profit on sale of property, plant and equipment - (0.3)
Other non-cash items (2.7) (1.5)
Pension payments (1.2) (0.7)
Working capital movements:
- (Increase)/decrease in inventories (1.4) 2.9
- Decrease/(increase) in trade and other receivables 5.4 (6.5)
- (Decrease)/increase in trade and other payables (2.8) 7.7
- Decrease in provisions (0.1) (0.5)
Cash generated from operations before reorganisation 8.8 13.5
Reorganisation costs paid (1.3) (1.4)
Pension payment following sale of Nottingham property (0.5) -
Cash generated from operations 7.0 12.1
Taxation paid (0.7) (1.0)
Net cash from operating activities 6.3 11.1
Investing activities
Proceeds from sale of property, plant and equipment 0.1 1.3
Acquisition of property, plant and equipment (2.5) (1.4)
Development expenditure (1.2) (1.9)
Net cash from investing activities (3.6) (2.0)
Financing activities
Interest received 0.2 0.2
Interest paid (1.2) (1.3)
Decrease in borrowings (7.0) (1.5)
Dividends paid (1.1) -
Net cash from financing activities (9.1) (2.6)
Discontinued operations
Net cash from operating activities - (0.2)
Net cash from investing activities 4.2 (2.2)
Net cash from financing activities - (0.3)
Net cash from discontinued operations 4.2 (2.7)
Net (decrease)/increase in cash and cash equivalents 7 (2.2) 3.8
Cash and cash equivalents at 1 January 4.6 0.9
Effect of exchange rate fluctuations on cash held 0.3 (0.1)
Cash and cash equivalents at period end 2.7 4.6
Consolidated statement of recognised income and expense
2007 2006
Note £m £m
Currency translation movements arising on foreign
currency net investments 1.3 (1.3)
Actuarial gains 27.1 3.8
Withholding tax on pension asset 6 (9.1) -
Tax on items taken directly to equity 1.8 -
Net income recognised directly in equity 21.1 2.5
Currency translation movements transferred to loss on disposals
Profit/(loss) for the period - 0.2
7.9 (8.5)
Total recognised income and expense for the period
29.0 (5.8)
Notes to preliminary announcement
1. The Group's accounts have been prepared in accordance with
International Accounting Standards and International Financial Reporting
Standards that were effective at 31 December 2007 and adopted by the EU.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2007 or 2006.
Statutory accounts for 2006 have been delivered to the registrar of companies,
and those for 2007 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts; their reports were (i)
unqualified, (ii) did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their reports and
(iii) did not contain statements under section 237 (2) or (3) of the Companies
Act 1985.
2. Segmental analysis
Business segments
Tobacco Packaging Scientific
Machinery Machinery Services Total
2007 2006 2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m £m £m
Revenue -continuing operations 32.9 36.2 38.7 33.9 17.7 18.5 89.3 88.6
-discontinued operations - 12.8
Revenue - total 89.3 101.4
Underlying segment operating profit
before net pension credit and
reorganisation costs 3.7 1.9 0.3 2.5 1.4 3.2 5.4 7.6
Reorganisation costs - (2.6) - - - - - (2.6)
Segment operating profit/(loss)
before net pension credit 3.7 (0.7) 0.3 2.5 1.4 3.2 5.4 5.0
Net pension credit (ex. curtailment
costs) 3.0 1.5
Operating profit 8.4 6.5
Net financing costs (1.0) (1.1)
Profit before tax 7.4 5.4
Taxation (1.8) (1.7)
Profit from continuing operations 5.6 3.7
Discontinued operations
Profit/(loss) from discontinued
operations 2.3 (12.2)
Profit/(loss) for the period 7.9 (8.5)
Segment net assets 24.2 24.5 3.5 2.7 16.8 15.9 44.5 43.1
Net (liabilities)/assets -
discontinued operations (0.8) 1.3
Unallocated net assets/(liabilities) 8.6 (20.3)
(including net debt and pension
assets/liabilities)
Total net assets 52.3 24.1
Geographical segments
Revenue Segment net assets
(by destination of goods) (by location of assets)
2007 2007 2006 2006 2007 2006
£m % £m % £m £m
Continuing operations
United Kingdom 13.0 15 9.2 11 27.4 27.9
Continental Europe 12.9 14 18.1 20 10.0 6.4
North America 29.3 33 23.9 27 5.9 7.2
Asia 18.3 20 22.0 25 0.2 0.6
Rest of the world 15.8 18 15.4 17 1.0 1.0
89.3 100 88.6 100 44.5 43.1
3. The reorganisation costs in 2006 of £2.6m before tax relate to the
restructuring of the Tobacco Machinery division.
4. The Group accounts for pensions under IAS 19 (revised) Employee
benefits. An actuarial valuation of the UK pension fund at 30 June 2006 was
completed in the year and the assumptions of this valuation have been applied in
the financial statements, updated to reflect conditions at 31 December 2007.
Operating profit includes a net pension credit of £3.0m (2006: £1.5m) in respect
of ongoing benefits comprising current service costs of £1.8m, interest on the
pension obligations of £18.4m, offset by the expected return on the schemes'
assets of £23.2m.
In addition in 2006 there were curtailment costs of £0.9m arising from
redundancies, which are reported in reorganisation costs, and in respect of
Sandiacre Rose Forgrove, a discontinued operation, £0.3m of pension costs less
£0.8m of curtailment benefits.
5. Basic earnings/(loss) per ordinary share is based upon the profit for
the period of £7.9m (2006: £8.5m loss) and on a weighted average of 18,903,387
shares in issue during the year (2006: 18,576,888). Basic earnings per ordinary
share on continuing operations is based upon the profit for the period of £5.6m
(2006: £3.7m) and the weighted average number of ordinary shares as shown above.
Underlying earnings per ordinary share, which is calculated on continuing
operations before net pension credit and reorganisation costs, was 18.0p for the
year (2006: 24.2p).
6. Employee benefits include the aggregated net pension surpluses of the
UK defined benefit pension scheme of £25.9m (31 December 2006: £6.6m deficit)
and the US defined pension schemes of £0.4m (31 December 2006: £0.4m deficit),
all figures before tax.
The Group has assessed the impact of the IAS 19 (revised) asset ceiling and has
considered the principles set out in IFRIC14 IAS19 - The limit on a defined
benefit asset, minimum funding requirement and their interaction in determining
the inclusion of the full value of the pension asset on the balance sheet at 31
December 2007. The carrying value of the surplus in the UK scheme has been
shown net of withholding tax reflecting the expected manner of its recovery at
the end of the life of the scheme.
7. Reconciliation of net cash flow to movement in net debt
2007 2006
£m £m
Net (decrease)/increase in cash and cash equivalents (2.2) 3.8
Cash inflow from movement in borrowings and finance leases 7.0 1.8
Change in net debt resulting from cash flows 4.8 5.6
Decrease in borrowings and finance leases on sale of
discontinued operations - 0.9
Translation movements (0.1) 0.2
Movement in net debt in the period 4.7 6.7
Opening net debt (12.3) (19.0)
Closing net debt (7.6) (12.3)
8. Analysis of net debt
2007 2006
£m £m
Cash and cash equivalents - current assets 3.5 4.7
Bank overdrafts - current liabilities (0.8) (0.1)
Interest-bearing loans and borrowings - current liabilities (0.6) (4.3)
Interest-bearing loans and borrowings - non-current (9.7) (12.6)
liabilities
(7.6) (12.3)
Closing net debt
9. Discontinued operations and assets held for sale
On 30 August 2007, the Group sold its freehold interest in a property in
Nottingham that had been classified as an asset held for sale at 31 December
2006 and had been retained by the Group when it sold the Sandiacre Rose Forgrove
business in 2006. The cash consideration was £3.7m and the profit on sale
before and after tax was £1.5m. Also the Group earned rental income of £0.1m
from the property to the date of its sale. In addition £0.7m profit in 2007
arises from the negotiated settlement of claims and the release of provisions in
connection with the prior year disposals of Sandiacre Rose Forgrove and Sasib
S.p.A. These businesses were sold on 18 December 2006 and 28 July 2006
respectively, and resulted in a loss from discontinued operations of £12.2m in
2006.
10. Subsequent event
On 29 February 2008 the Company posted a circular to shareholders seeking
approval for the grant of an option to e-shelter facility services GmbH to
complete the purchase for a cash consideration of £17.5m of the Saunderton
property on or before 3 October 2008. The circular includes a notice convening
a general meeting of the Company on 18 March 2008 at which the approval will be
sought. If completed the transaction will result in net cash proceeds, after
costs and taxation, of approximately £15.7m, and will generate a profit to the
Group of approximately £3.7m. The property is included as property, plant and
equipment in the balance sheet, with a carrying value of £13.2m (before deferred
tax) at 31 December 2007.
11. The Annual Report and Accounts will be sent to all shareholders in March
2008 and additional copies will be available from the Company's registered
office at 11 Tanners Drive, Blakelands, Milton Keynes, MK14 5LU.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 10th January 2025
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