5 Mar 2012 07:00
5 March 2012
BRITISH POLYTHENE INDUSTRIES PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
Results ahead of expectations
Highlights
·; Sales increased to £508 million (2010: £478 million) and operating profit, before net restructuring, increased to £21.6 million (2010: £17.9 million) reflecting another excellent performance from our European operations.
·; Adjusted profit before tax (before net restructuring gains* and net pension financing) rose by 21% to £19.1 million (2010: 15.8 million). Adjusted diluted earnings per share were 46.92p (2010: 38.31p), an increase of 22.5%.
·; On a statutory basis, the profit before tax was £19.2 million (2010: £16.7 million). Diluted earnings per share were 50.25p (2010: 51.07p).
·; Final dividend per share increased to 8.50p per share (2010: 7.85p), making a total for the year of 12.5p per share (2010: 11.5p)
·; Net borrowings reduced to £31.0 million (2010: £45.6m)
* Net restructuring reflects costs of £1.3 million for the closure of the Swansea site, offset by a £1.9 million gain on the sale of a previously closed site in Essex.
Commenting on the results Cameron McLatchie, Chairman of BPI, said:
"The Group performed well in 2011, with results just ahead of market expectations and well ahead of 2010. This was achieved against a background of difficult trading conditions, with volatile raw material costs and periods of subdued demand from certain sectors.
Our business is in better shape than ever and is growing in the more resilient sectors of the economy with emphasis on agriculture and the food chain. We have demonstrated in recent years that we can cope with significant raw material volatility, and your Board currently anticipates a further satisfactory year in 2012."
Enquiries
Cameron McLatchie, Chairman | 01475 501000 |
John Langlands, Chief Executive | 01475 501000 |
Charles Palmer / Clare Thomas | |
FTI Consulting | 020 7831 3113 |
Chairman's Statement
For the year ended 31 December 2011
INTRODUCTION
The group performed well in 2011, with results just ahead of market expectations and well ahead of 2010. This was achieved against a background of difficult trading conditions, with volatile raw material costs and periods of subdued demand from certain sectors.
Overall, operating profits and earnings rose by over 20%, year on year, and group borrowings reduced significantly during the period.
The Board is recommending an increased final dividend and considers the Group is well positioned to face a further challenging year in 2012.
RESULTS
Total volumes for the year were 273,200 tonnes (2010: 279,500), reflecting a reduction in demand in the second half from industrial and construction customers in the UK, and continuing reduction in product thickness.
On sales of £508 million (2010: £478 million), operating profit, before net restructuring, increased to £21.6 million (2010: £17.9 million). This increase can be attributed to another excellent performance from our European operations.
Net restructuring reflects costs of £1.3 million for the closure of the Swansea site, offset by a £1.9 million gain on the sale of a previously closed site in Essex. This is the second consecutive year that we have reported a net gain from restructuring and we do anticipate a further small gain when we sell the Swansea site.
Despite a significant reduction in overall borrowings, our borrowing costs increased slightly, as anticipated, reflecting the higher rates and fees as a result of the new banking facilities we reported last year.
The calculated charge for net retirement benefit financing reduced to £0.5 million (2010: £1.9 million) due to the impact of the Pension Funding Partnership, which is explained later in this Statement.
The adjusted profit before tax (before net restructuring gains and net pension financing) rose by 21% to £19.1 million (2010: £15.8 million) and the adjusted diluted earnings per share were 46.92p (2010: 38.31p), an increase of 22.5%.
On a statutory basis, including gains from sales of property, the profit before tax was £19.2 million (2010: £16.7 million) and diluted earnings per share were 50.25p (2010: 51.07p).
DIVIDEND
After the increase in the interim dividend to 4.0p per share (2010: 3.65p), the Board is recommending an increase in the final dividend to 8.5p per share (2010: second interim dividend 7.85p), making a total for the year of 12.5p per share (2010: 11.5p)
This final dividend is payable on 19 July to shareholders on the register at the close of business on 16 March 2012.
CASH FLOW AND BORROWINGS
The Group generated net cash of £13.8 million in 2011, influenced by the following factors; an increase in operating profits; a reduction in raw material costs towards the year-end; delays in planned capital expenditure; the sale of the Essex property.
The improved cash generation, and a translation of the sterling value of our significant European borrowings at the year-end, resulted in a reduction of borrowings to £31.0 million (2010: £45.6 million). We are unlikely to see a recurrence of all of the above factors in the current year.
Gross capital expenditure for 2011 was £14.6 million (2010: £15.1 million), and we currently expect that expenditure for 2012 will be around £18 million, reflecting the delayed expenditure for 2011, and further investment in new equipment. Major items planned to complete in 2012 include a washing plant for contaminated film waste at Rhymney, a 5-layer agricultural stretch-film line at Zele, a flexographic printing press at Hardenberg and a 3-layer co-extrusion line at Sevenoaks.
GROUP PENSION SCHEME
The IAS 19 deficit in the UK defined benefit pension scheme increased from £55 million at 31 December 2010 to £60 million at 31 December 2011.
This was due to a further reduction in the net discount rate applied to the liabilities of the scheme. We have also further reviewed the longevity assumptions reflected in the IAS 19 valuation to reflect increasing life expectancy. In common with many other schemes, given the current volatility experienced by many investments, returns fell short of the level previously assumed.
The company agreed with the trustees of the scheme a property backed cash payment plan (the Pension Funding Partnership) under which the Company will make inflation linked payments to the scheme of £1.8 million per annum for a period of 20 years starting in January 2012. This additional funding stream was recognised on inception as an asset of the scheme at a value of £19.6 million and at the year end, the value of the asset was £20.7 million. The consequent reduction in the deficit as it appears in the Group's balance sheet is offset by a matching non-controlling interest. The scheme's income from the partnership is recognised as a credit to net retirement benefit financing. As this is offset by an equal and opposite non controlling interest there is no impact on reported earnings per share.
A triennial actuarial review of the fund was carried out at 6 April 2011 and the actuary certified a deficit at that date of £54 million. The company has agreed a revised future funding rate of £3.2 million per annum effective from April 2012. These future payments are inflation linked and are in addition to the pension funding partnership payments of £1.8 million. This agreed funding plan is designed to eliminate the scheme deficit over a nine year period. The agreed funding plan also requires additional one off payments if the company achieves stretching profit before tax targets.
The actuarial valuation of the pension scheme deficit reflects yields on government bonds at historically low levels together with a more prudent view of longevity. These yields have continued to reduce since 6 April 2011 and this will have increased the deficit further in the period to 31 December 2011.
BOARD CHANGES
Eric Hagman, retired as a Director and Chairman of the Audit Committee at our AGM in May 2011, after serving some nine years on the Board. Eric made a valuable contribution over a period that saw many changes in accounting results and regulations.
In July 2011, we appointed Ian Russell as a Director and Chairman of the Audit Committee. Ian is a member of the Institute of Chartered Accountants of Scotland and has considerable current and past experience on a number of Boards.
In line with current recommendations, all Directors will now seek re-election at each Annual General Meeting of the Group.
THE UK CORPORATE GOVERNANCE CODE
I can confirm that we do have an effective Board which is collectively responsible for the long-term success of the Company.
I regard the current Board as extremely competent, that it has the necessary breadth of skills to fulfil its tasks, and that the Board is supplied with sufficient and timely information upon which to make the necessary deliberations and judgements.
The Board is challenging of executive proposals, and the Committees of the Board do fulfil the independent functions that are required of them.
REGULATORY ISSUES
We announced on 3 August that the Office of Fair Trading had closed their enquiry into the agricultural films market. This was followed by our announcement on 27 September that the European Commission had closed their enquiry into the same market sector. The Group's legal and associated costs incurred during the period of the above investigations amounted to some £0.6 million and involved many hours of executive input.
The Company will continue to operate its longstanding policy of extensive guidelines and controls designed to ensure that all our operations comply with competition laws.
GROUP DEVELOPMENT
The major positive for the year has been the continued success of our European business. Sound investment in equipment and excellent management of capacity has resulted in continued improvement in product quality and customer service. Current capital investments look very promising and further investment is planned to support all three operating sites.
In the UK, we reorganised our Films operations, with a clearer distinction between the stretch-film and shrink and converter film operations. This has resulted in greater focus on process issues and we have already approved investments in both operations. There is considerable room for upside in the performance of the UK stretch-film operations, and action has been taken to improve results over the next few years, as planned alterations in the process are effected.
On 1 November 2011, we announced our intention to close the site at Swansea, the oldest polythene operation in the Group. We had been making polythene bags in Swansea since the 1960s, and moved to the current factory in 1984. The original industrial customer base had been slowly eroded over the years, and recent investment in mailing products for the e-commerce market, although successful, had been unable to fill the gap. The products have been transferred to other Group sites and the major customers have signified that they are pleased with both quality and service.
Despite the changes we made to the UK industrial operations by closing the Stockton site, and the significant improvement in performance that this has generated, we continue to have difficulty in achieving an acceptable return in this sector. Subdued and patchy demand, particularly from customers supplying the construction sector, has resulted in shorter and less efficient loadings on machines. The situation was partly helped by the work transferred from the Swansea site, but neither of our two larger industrial sites is fully loaded, and the short-term outlook for demand does not look promising.
Nonetheless, we do anticipate an improved performance in 2012, but this may be tempered by demand. In the longer term, these operations are well positioned to benefit from any upturn in demand from their traditional customer base.
The agricultural stretch-film line installed in Canada made excellent product in 2011, and this has been well received by customers. We are currently evaluating options for further investment at that site.
Our operation in China has secured a contract for the supply of bread bags to a large bakery in New Zealand. They have previously supplied similar product to the UK and the Middle East.
Our retail-facing businesses in the UK, although fairly busy, are finding it difficult to generate adequate returns in a very competitive market.
RAW MATERIAL
2011 again showed that our businesses are coping well with the fluctuating raw material cycle.
The price of polyethylene polymer, our basic raw material, rose early in the year, and we incurred significant additional raw material costs during the first half. The second half saw prices stabilise and then start to decline slowly. We exited the year with the price much lower than at the end of 2010, resulting in a significant boost to our cash flow and associated reduction in our borrowings.
This lower level of price did not last long, and both January and February have seen significant increases, taking price levels back to the levels we experienced last summer. We have now been advised that the March contract for ethylene has been settled with a further large increase and it is inevitable that this will translate into a further increase in polyethylene polymers for March. These increases are being accepted by the market at the current time, but this higher level of price will no doubt attract imports, as Europe, once again, becomes the most attractive market globally for polyethylene polymers.
Against a background of patchy demand and converters closing for summer holidays, it seems unlikely that these European polymer prices will hold up for the remainder of the year.
PROSPECTS AND CURRENT TRADING
At this time of year, we are entering the main agricultural film season, and with the advantage of increased capacity and improved products, we are well placed to improve performance on the previous year. However, it is unlikely that we will get the same favourable growing conditions, especially on the European mainland. Last year's extended season resulted in additional sales, but has had the effect of depleting stocks for the 2012 season.
Demand in the industrial and construction sectors remains subdued, and we currently anticipate a further year of patchy demand but, with the actions taken over the last few years, we do expect some improvement in our performance in these sectors.
It is inevitable that margins will be affected, short term, by the current polymer price increases, as these costs are passed through to customers.
Despite the above factors, our business is in better shape than ever and is growing in the more resilient sectors of the economy with emphasis on agriculture and the food chain. We have demonstrated in recent years that we can cope with significant raw material volatility, and your Board currently anticipates a further satisfactory year in 2012.
Consolidated cash flow statement
For the year ended 31 December 2011
2011 | 2010 | ||
Note | £m | £m | |
Turnover | 2 | 507.7 | 477.7 |
Profit from operations before net restructuring | 21.6 | 17.9 | |
Restructuring costs | (1.3) | (1.0) | |
Gain on sale of properties | 1.9 | 3.8 | |
Net restructuring | 0.6 | 2.8 | |
Profit from operations | 2 | 22.2 | 20.7 |
Borrowing costs | (2.5) | (2.1) | |
Net retirement benefit financing | (0.5) | (1.9) | |
Net financing costs | (3.0) | (4.0) | |
Profit before tax | 19.2 | 16.7 | |
Tax | (4.4) | (3.1) | |
Profit for the year | 14.8 | 13.6 | |
Attributable to: | |||
Equity holders of the parent | 13.6 | 13.6 | |
Non controlling interests | 1.2 | - | |
14.8 | 13.6 | ||
Earnings per share | |||
Basic | 4 | 52.77p | 52.20p |
Diluted | 4 | 50.25p | 51.07p |
Diluted earnings per share before net restructuring | 4 | 46.92p | 38.31p |
Consolidated statement of comprehensive income
For the year ended 31 December 2011
2011 | 2010 | ||
£m | £m | ||
Profit for the year | 14.8 | 13.6 | |
Cash flow hedges: effective portion of net changes in fair value | 0.3 | (0.3) | |
Actuarial (loss) / gain on defined benefit pension scheme | (27.7) | 0.9 | |
Opening surplus on Irish Polythene Industries pension scheme | - | 0.2 | |
Movement on translation of overseas undertakings and related borrowings | 0.5 | - | |
Tax on components of other comprehensive income | 5.7 | (0.9) | |
Other comprehensive income for the year | (21.2) | (0.1) | |
Total comprehensive income for the year | (6.4) | 13.5 | |
Attributable to: | |||
Equity holders of the parent | (7.5) | 13.5 | |
Minority interests | 1.1 | - | |
Total comprehensive income for the year | (6.4) | 13.5 |
Consolidated balance sheet
At 31 December 2011
2011 | 2010 | ||
£m | £m | ||
Note | |||
Non-current assets | |||
Goodwill | 0.4 | 0.4 | |
Other intangible assets | 1.2 | 1.7 | |
Property, plant and equipment | 85.9 | 86.1 | |
Retirement benefit asset | - | 0.2 | |
Deferred tax assets | 20.9 | 15.2 | |
108.4 | 103.6 | ||
Current assets | |||
Inventories | 67.3 | 66.9 | |
Trade and other receivables | 50.4 | 55.0 | |
Cash at bank | 0.3 | 0.3 | |
118.0 | 122.2 | ||
Current liabilities | |||
Bank overdraft | 4.8 | 5.5 | |
Other loans and borrowings | 2.6 | 2.6 | |
Derivative financial instruments | 0.5 | 0.5 | |
Trade and other payables | 72.5 | 71.6 | |
Current tax liabilities | 1.6 | 1.7 | |
82.0 | 81.9 | ||
Net current assets | 36.0 | 40.3 | |
Total assets less current liabilities | 144.4 | 143.9 | |
Non-current liabilities | |||
Other loans and borrowings | 23.9 | 37.8 | |
Derivative financial instruments | 0.5 | 0.5 | |
Retirement and employee benefit obligations | 5 | 60.9 | 56.1 |
Deferred tax liabilities | 3.6 | 3.9 | |
Deferred government grants | 0.9 | 1.0 | |
89.8 | 99.3 | ||
Net assets | 54.6 | 44.6 | |
Equity | |||
Issued share capital | 6.6 | 6.6 | |
Share premium account | 25.1 | 25.1 | |
Other reserves | 9.1 | 8.3 | |
Retained earnings | (7.2) | 4.3 | |
Total equity | 54.6 | 44.6 |
Consolidated cash flow statement
For the year ended 31 December 2011
2011 | 2011 | 2010 | 2010 | |
£m | £m | £m | £m | |
Profit from operations | 22.2 | 20.7 | ||
Amortisation of intangible assets | 0.7 | 0.7 | ||
Depreciation and impairment of property, plant and equipment | 12.6 | 12.6 | ||
IFRS 2 charge in relation to equity settled transactions | 1.6 | 0.6 | ||
Gain on disposal of property, plant and equipment | (2.0) | (3.9) | ||
Adjustment relating to pensions | (3.6) | (3.2) | ||
Operating cash flows before movements in working capital | 31.5 | 27.5 | ||
Increase in inventories | - | (5.4) | ||
Decrease / (increase) in trade and other receivables | 5.0 | (6.0) | ||
Increase in trade and other payables | 0.9 | 6.6 | ||
Movements in working capital | 5.9 | (4.8) | ||
Cash generated from operations | 37.4 | 22.7 | ||
Special contribution to the pension scheme | (19.6) | - | ||
Interest paid | (2.4) | (2.2) | ||
Income taxes paid | (4.6) | (2.4) | ||
Net cash from operating activities | 10.8 | 18.1 | ||
Investing activities | ||||
Purchase of property, plant and equipment | (14.4) | (14.7) | ||
Capital amount of hire purchase received | - | 2.7 | ||
Net purchase of property, plant and equipment | (14.4) | (12.0) | ||
Purchase of intangible assets | (0.2) | (0.4) | ||
Proceeds from sale of property, plant and equipment | 2.8 | 6.6 | ||
Net cash used in investing activities | (11.8) | (5.8) | ||
Net cash flows before financing | (1.0) | 12.3 | ||
Financing activities | ||||
Investment in partnership by pension scheme | 19.6 | - | ||
Dividends paid (note 3) | (3.1) | (2.9) | ||
Net decrease in bank loans | (10.9) | (6.9) | ||
Repayment of obligations under hire purchase | (2.6) | (2.5) | ||
Repurchase of ordinary shares | (1.7) | (1.0) | ||
Net cash used in financing activities | 1.3 | (13.3) | ||
Net increase/ (decrease) in cash and cash equivalents | 0.3 | (1.0) | ||
Cash and cash equivalents at beginning of year | (5.2) | (4.3) | ||
Effect of foreign exchange rate changes | 0.4 | 0.1 | ||
Cash and cash equivalents at end of year | (4.5) | (5.2) |
Consolidated statement of changes in equity
For the year ended 31 December 2011
Attributable | |||||||
Share | Share | Other | Retained | to owners of | Minority | ||
Capital | Premium | Reserves | Earnings 1 | the parent | Interests | Total | |
£m | £m | £m | £m | £m | £m | £m | |
Balance at 1 January 2011 | 6.6 | 25.1 | 8.3 | 4.3 | 44.3 | 0.3 | 44.6 |
Profit for the year | - | - | - | 13.6 | 13.6 | 1.2 | 14.8 |
Cash flow hedges: effective portion of net changes in fair value | - | - | 0.3 | - | 0.3 | - | 0.3 |
Actuarial gain on defined benefit pension schemes | - | - | - | (27.6) | (27.6) | (0.1) | (27.7) |
Movement on translation of overseas undertakings and related borrowings | - | - | 0.5 | - | 0.5 | - | 0.5 |
Tax on components of other comprehensive income | - | - | - | 5.7 | 5.7 | - | 5.7 |
Total comprehensive income for the year | - | - | 0.8 | (8.3) | (7.5) | 1.1 | (6.4) |
Investment in partnership by pension scheme | - | - | - | - | - | 19.6 | 19.6 |
IFRS 2 charge in relation to equity settled transactions | - | - | - | 1.6 | 1.6 | - | 1.6 |
Increase in own shares held | - | - | - | (1.7) | (1.7) | - | (1.7) |
Dividends | - | - | - | (3.1) | (3.1) | - | (3.1) |
Balance at 31 December 2011 | 6.6 | 25.1 | 9.1 | (7.2) | 33.6 | 21.0 | 54.6 |
Attributable | |||||||
Share | Share | Other | Retained | to owners of | Minority | ||
Capital | Premium | Reserves | Earnings 1 | the parent | Interests | Total | |
£m | £m | £m | £m | £m | £m | £m | |
Balance at 1 January 2010 | 6.6 | 25.1 | 8.6 | (6.2) | 34.1 | 0.3 | 34.4 |
Profit for the year | - | - | - | 13.6 | 13.6 | - | 13.6 |
Cash flow hedges: effective portion of net changes in fair value | - | - | (0.3) | - | (0.3) | - | (0.3) |
Actuarial loss on defined benefit pension scheme | - | - | - | 0.9 | 0.9 | - | 0.9 |
Opening surplus on Irish Polythene Industries pension scheme | - | - | - | 0.2 | 0.2 | - | 0.2 |
Tax on components of other comprehensive income | - | - | - | (0.9) | (0.9) | - | (0.9) |
Total comprehensive income for the year | - | - | (0.3) | 13.8 | 13.5 | - | 13.5 |
IFRS 2 charge in relation to equity settled transactions | - | - | - | 0.6 | 0.6 | - | 0.6 |
Increase in own shares held | - | (1.0) | (1.0) | - | (1.0) | ||
Dividends | - | - | - | (2.9) | (2.9) | - | (2.9) |
Balance at 31 December 2010 | 6.6 | 25.1 | 8.3 | 4.3 | 44.3 | 0.3 | 44.6 |
¹ As at 31 December 2011 the holding company retained earnings amounted to £39.5 million (2010: £34.6 million) and are not affected by movements in retirement benefit obligations.
Notes to the consolidated financial statements
For the year ended 31 December 2011
1. Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRSs").
2. Segment reporting
The Group has three reportable segments: UK & Ireland, Mainland Europe and North America. The segments were established by reviewing the management information regularly presented to the entity's chief operating decision maker (CODM), which has been identified as the Board of Directors. The information presented to the Board is consistent with the three reportable segments identified above, with the UK & Ireland business further segregated by business activity. As all of the UK & Ireland segments meet the aggregation criteria set out in IFRS 8, they have been aggregated to form one reportable segment as permitted by the standard.
UK & Ireland includes all of the UK manufacturing and merchanting activities along with the Irish sales operation which distributes predominately UK manufactured products. It also includes the manufacturing operation in China from which most of the output is exported for sale by the Group in the UK. Mainland Europe comprises the manufacturing and merchanting activities located in Belgium, the Netherlands and France. North America comprises the manufacturing business in Canada with sales throughout North America.
Segment profit
An analysis of the Group's revenue and results by operating segment for the periods is presented below. The measure of segment profit provided to the CODM is profit from operations.
UK & Ireland | Mainland Europe |
North America | Total | |||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Turnover | ||||||||
Total sales | 341.9 | 335.9 | 141.5 | 118.1 | 28.3 | 26.4 | 511.7 | 480.4 |
Inter-segment sales | (1.5) | (1.0) | (2.3) | (1.5) | (0.2) | (0.2) | (4.0) | (2.7) |
External sales | 340.4 | 334.9 | 139.2 | 116.6 | 28.1 | 26.2 | 507.7 | 477.7 |
Profit from operations before net restructuring | 7.4 | 7.9 | 13.4 | 9.2 | 0.8 | 0.8 | 21.6 | 17.9 |
Net restructuring | 0.6 | 3.1 | - | (0.3) | - | - | 0.6 | 2.8 |
Profit from operations | 8.0 | 11.0 | 13.4 | 8.9 | 0.8 | 0.8 | 22.2 | 20.7 |
Net financing costs | (3.0) | (4.0) | ||||||
Profit before tax | 19.2 | 16.7 | ||||||
Tax | (4.4) | (3.1) | ||||||
Profit for the year | 14.8 | 13.6 | ||||||
Depreciation, amortisation and impairment | 9.2 | 9.2 | 3.6 | 3.7 | 0.5 | 0.4 | 13.3 | 13.3 |
Capital expenditure | 7.3 | 10.4 | 6.5 | 3.3 | 0.2 | 1.3 | 14.0 | 15.0 |
Notes to the consolidated financial statements
For the year ended 31 December 2011
Segment assets
The Group's assets are analysed by operating segment as follows
UK & Ireland | Mainland Europe |
North America | Total | |||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
£m | £m | £m | £m | £m | £m | £m | £m | |
Non-current assets* | 62.4 | 64.9 | 22.8 | 20.7 | 2.3 | 2.6 | 87.5 | 88.2 |
Inventories and trade and other receivables | 85.2 | 86.9 | 29.0 | 32.5 | 8.2 | 8.2 | 122.4 | 127.6 |
147.6 | 151.8 | 51.8 | 53.2 | 10.5 | 10.8 | 209.9 | 215.8 | |
Elimination of intercompany debtors | (4.7) | (5.7) | ||||||
Retirement benefit asset | - | 0.2 | ||||||
Deferred tax assets | 20.9 | 15.2 | ||||||
Cash at bank | 0.3 | 0.3 | ||||||
Total assets | 226.4 | 225.8 | ||||||
* The measure of non-current asset used for segmental reporting comprises goodwill, other intangible assets, investments and property, plant and equipment. It excludes deferred tax and retirement benefit assets.
3. Dividends
2011 | 2010 | |
£m | £m | |
Amounts recognised as distributions to equity holders in the year: | ||
Second interim dividend for the year ended 31 December 2010 of 7.85p per share (2009: Second interim dividend of 7.5p) | 2.0 | 2.0 |
Interim dividend for the year ended 31 December 2011 of 4.00p per share (2010: 3.65p) | 1.1 | 0.9 |
3.1 | 2.9 | |
Proposed final dividend for the year ended 31 December 2011 of 8.5p per share (2010: Second interim dividend of 7.85p) | 2.3 | 2.1 |
The proposed final dividend of 8.5p per share will be paid on 19 July 2012 to shareholders on the register at close of business on 16 March 2011. It was approved by the Board on 2nd March 2012 and has not been included as a liability as at 31 December 2011.
4. Earnings per ordinary share
2011 | 2010 | |
Weighted average number of ordinary shares | 000 | 000 |
Issued ordinary shares at 1 January | 26,501 | 26,498 |
Effect of own shares held | (729) | (445) |
Weighted average number of ordinary shares | 25,772 | 26,053 |
Effect of share options and long term incentive plan shares in issue | 1,294 | 575 |
Diluted weighted average number of ordinary shares | 27,066 | 26,628 |
Profit attributable to ordinary shareholders | £13.6m | £13.6m |
Profit attributable to ordinary shareholders before net restructuring | £12.7m | £10.2m |
Basic earnings per ordinary share | 52.77p | 52.20p |
Diluted earnings per ordinary share | 50.25p | 51.07p |
Diluted earnings per ordinary share before net restructuring | 46.92p | 38.31p |
5. Retirement and employee benefit obligations
2011 | 2010 | |
£m | £m | |
British Polythene Industries Pension Scheme | ||
Fair value of scheme assets | 196.8 | 176.1 |
Present value of scheme liabilities | (256.3) | (230.9) |
Deficit in the scheme | (59.5) | (54.8) |
(Deficit)/surplus in Irish Polythene Industries Pension Scheme | (0.1) | 0.2 |
Other employee benefits | (1.3) | (1.3) |
Retirement and other employee benefit obligations | (60.9) | (55.9) |
Related deferred tax asset/liability | 14.8 | 14.8 |
Net pension liability | (46.1) | (41.1) |
Pension Funding Partnership
During the period the Group agreed with the trustees of the UK defined benefit pension scheme a property backed cash payment plan (The Pension Funding Partnership) to help address the scheme's funding deficit. Certain freehold properties were transferred to a limited partnership established by the Group. This partnership is controlled by the Group and is consolidated in its financial statements. The fair value of the assets transferred was £21.9 million. The Group made a special contribution of £19.6 million to the pension scheme and on the same date the pension scheme obtained a nominal limited interest in the partnership for the same amount. This provides the scheme with a distribution of the profits of the partnership of £1.8 million per annum, increasing in line with CPI, for a period of 20 years starting in January 2012. The distribution is subject to discretion exercisable by the Group in certain circumstances. Should the scheme have a funding surplus in the future, there is a mechanism for the payments to cease.
The present value of this additional funding stream has been recognised as an asset of the pension scheme at a value of £20.7 million. This reduction in the deficit as it appears on the Group's balance sheet is offset by a matching non-controlling interest. The Scheme's income arising from the Pension Funding Partnership is credited to the Net Retirement Benefit Financing Charge, but as this is offset by an equal and opposite non controlling interest and there is no impact on reported earnings per share calculations.
6. Contingent Liabilities
In April 2010, the Group was visited by officials from the European Commission ("EC") and Office of Fair Trading ("OFT") carrying out separate unannounced inspections into the agricultural films market. The Commission stated that it has reason to believe that the companies concerned in these inspections may have violated EU antitrust rules that prohibit cartels and restrictive business practices and /or abuse of a dominant market position. During the period both the EC and OFT concluded their enquiries with no action being taken.
The group is aware of a risk of civil claims arising from the European Commission's Decision on 30 November 2005 that a cartel had operated in the industrial bags market in the Benelux countries, Spain, Germany and France between 1982 and June 2001.
7. Statutory accounts
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2011 or 2010 but is derived from the 2011 accounts. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.
8. Annual General Meeting
The Annual General Meeting will be held on Friday, 11 May 2012 at 12 noon at the Company's Head Office, 96 Port Glasgow Road, Greenock, PA15 2UL.
9. Results
The results will not be advertised in any newspapers.