Last checked at 27 Feb 2009 07:00
27 February 2009 FOR IMMEDIATE RELEASE
2008 PRELIMINARY ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its results for the year ended 31 December 2008.
| 2008 | 2007 | |
| Sales Underlying operating profit*Profit before tax - continuing operationsProfit for the period Underlying earnings per share Basic earnings per share Dividends per shareNet debt | £91.5m £4.4m £8.8m £8.6m 16.1p 45.4p 5.0p £0.4m | £89.3m £5.4m £7.4m £7.9m 18.0p 42.0p 7.0p £7.6m |
* Continuing operations before net pension credit of £3.4m (2007: £3.0m) and profit from exceptional items in 2008 of £1.7m
Sale of site at Saunderton for cash of £16.2m, generating profit of £3.1m
Net debt reduced to £0.4m
Underlying operating profit of £4.4m (2007: £5.4m)
Proposed final dividend of 2.5p per share
Jonathan Azis, Chairman, commented:
"Sales in the year increased to £91.5m (2007: £89.3m) but as Molins continues to undertake change this increase was not reflected in the underlying operating profit. The sale of the Saunderton site was an important step in the progress of the Group, and that sale, which materially contributed to the reduction in net debt to £0.4m, means that we are better placed to face the challenges of a low point in the capital goods cycle."
| Enquiries: | Molins PLC Dick Hunter, Chief Executive; David Cowen, Group Finance Director | Tel: 020 7638 9571 |
| Issued by: | Citigate Dewe Rogerson Angharad Couch | Tel: 020 7638 9571 |
CHAIRMAN'S STATEMENT
In this my first statement as Chairman I am pleased to report an increase in sales to £91.5m (2007: £89.3m), although underlying operating profit (continuing operations before net pension credit and exceptional items) was lower at £4.4m (2007: £5.4m). Additionally the Group reported a net pension credit of £3.4m (2007: £3.0m) and profit from exceptional items of £1.7m, which comprised reorganisation costs of £1.4m and profit of £3.1m from the sale of the Group's former site at Saunderton, Buckinghamshire in December 2008. Basic earnings per share amounted to 45.4p (2007: 42.0p). Underlying earnings per share amounted to 16.1p (2007: 18.0p).
After a few years of strong cash flows, operating cash flow was weaker this year, but the sale of the Saunderton site for cash proceeds of £16.2m helped reduce net debt at the year end to £0.4m (2007: £7.6m).
Board
After ten years on the Board, most of them as executive Chairman, Peter Byrom retired from Molins at the end of January 2009. His contribution to the Group over this time has been considerable and his valuable experience and guidance will be greatly missed. Molins has also benefited from two other long-standing directors, Mike Steen who retired in June 2008, and John Wilson who will step down from the Board at the conclusion to the Company's Annual General Meeting in April 2009. Mike and John have provided the Board with important experience, judgement and independence. I would like to thank Peter, Mike and John for their contributions to the Group.
I am pleased to welcome to the Board John Allkins, the new senior independent director and Chair of the Audit Committee, and Andrew Cripps, Chair of the Remuneration Committee, who both joined as non-executive directors in August 2008.
Pension Schemes
The Group is the sponsor of a UK defined benefit pension scheme, as well as smaller such schemes in the USA. For many years the Group's results have benefited from a credit to the income statement from the accounting treatment of these pension schemes, which to aid understanding has been excluded when reporting underlying profits. However, in 2009 it is expected that rather than a net pension credit, which in 2008 was £3.4m, the Group will be reporting a net pension cost of around £2m. The significant movements in the financial markets in the past year have resulted in a much reduced accounting valuation of the surplus at the end of 2008 compared with twelve months earlier. The UK scheme will be undergoing its triennial actuarial funding valuation as at June 2009 and the results of that valuation will determine what additional payments the Company will be required to pay into the scheme if there is a funding deficit.
Outlook and Dividend
We are operating in an uncertain economic environment and are taking steps to protect the Group against the effects of the economic slowdown. Accordingly it was necessary to announce a number of redundancies before the year end and we are evaluating further actions. In view of the slowing of orders for the Group's capital goods the businesses have developed plans to mitigate the impact of reduced volumes.
Overall, given the general economic conditions for each of the markets the Group's businesses operate in, we expect Group sales to reduce in the current year, with a consequent reduction in performance mitigated by actions to reduce the cost base and improve efficiency in each of the businesses.
The Board is recommending a final dividend of 2.5p, making a total of 5.0p for the year (2007: 7.0p). The Board's stated recognition of the importance of dividends has been balanced by its cautious view of trading conditions and the uncertainty in respect of the future funding requirements of the pension schemes.
Jonathan Azis, Chairman
27 February 2009
OPERATING REVIEW
Tobacco Machinery
As expected the Tobacco Machinery division's profit in the year was lower than in the previous year, with the division delivering operating profit (before exceptional items) of £2.8m (2007: £3.7m), reflecting a change in sales mix in the year and increased production costs owing to the relative weakening of the value of sterling. Sales in the year were a little higher at £34.9m (2007: £32.9m).
Overall order intake in the year was marginally higher than in the previous year, with an increase in new and rebuild machine orders offsetting a small reduction in aftermarket orders. The overall level of orders on hand at the beginning of 2009 was at similar levels to that of twelve months previously. Sales of aftermarket products, including spare parts, declined in the year as expected, reflecting the relatively high level of sales in the early part of the prior year as well as a reduction in orders. An increase in sales of machinery more than compensated for this decline, although overall profit margins were reduced as a consequence of the mix change. Good progress has been made in the performance of the Czech manufacturing and assembly factory, but the 20% increase in the average value of the Czech currency against sterling compared with the previous year has more than offset these efficiency gains and led to increased costs for the division.
Whilst the division has not experienced evidence of a significant reduction in demand for its products as a consequence of the poor economic environment, the division has nevertheless taken action to improve efficiency through the reduction of employee numbers in Saunderton, UK and Richmond, USA. The division continues to provide its full range of service and support activities from its 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. Continuous improvement in service performance to its customers remains of key importance to the Group, and momentum in this area has been maintained through the year.
Order intake in the Europe, Middle East and Africa region increased in the period for all product groups. The region is managed from the UK, with continued focus on key customer contacts and on-site support where appropriate. Order intake was also strong in South America where orders for new and rebuild machinery increased in the year, although aftermarket demand was a little weaker. Similarly, the Asia Pacific region also experienced an increase in demand for machinery, although demand in the aftermarket product groups reduced as the termination of a distribution agreement with a third-party machine manufacturer took effect, and as demand from China continued to reduce as local sourcing increased, which we expect to continue in 2009. Demand was generally weaker in North America but profits were maintained as the business continued to focus on its cost base as well as delivering projects cost effectively.
The division's new medium speed cigarette making machine, Octave, successfully completed its protocol tests at the first customer's factory. Prospects for the machine remain favourable, although timing of orders is uncertain. The UK and Brazilian based engineering teams continue to focus on the development of upgrade and enhancement kits for the large number of installed Molins machines in cigarette factories world-wide, as well as the development programme for Octave.
Market conditions in the cigarette manufacturing industry remain challenging, with continued consolidation and relocation of manufacturing activity. The division, though, has positioned itself to service its customers from a cost effective supply base (although costs have been impacted by adverse currency movements) and focused its product development activities in areas where good prospects exist. Demand remains potentially volatile, with general uncertainty in all markets and territories, and the timing of orders for new machinery will have a significant bearing on performance in the year. Accordingly expectations are for a lower level of performance in this division during 2009 compared with 2008.
Packaging Machinery
The division's operating profit (before exceptional items) was £0.1m (2007: £0.3m) on sales of £37.0m, 4% down on last year's sales of £38.7m, but 14% down assuming constant exchange rates.
The division comprises ITCM, based in Coventry, UK, which provides innovative machinery and engineering solutions to packaging and processing needs, Cerulean Packing, which is based in Milton Keynes, UK and supplies tube packing machinery and the Langen Packaging Group, which supplies highly automated product handling, cartoning and robotic end-of-line machinery and systems. The name Langen Packaging Group has been introduced to recognise the unified global sales coverage, common business strategy in respect of products and marketing, with greater management links, of Langen Packaging, based in Mississauga, Canada and Langenpac, based in Wijchen, the Netherlands.
Langen Packaging returned to a near break-even position in 2008, following a significant loss in the previous year, when a number of projects suffered from significant cost over-runs. A wide-ranging improvement plan was instigated and the benefits of this have been seen through the year. Whilst further improvement is anticipated, the business has made significant progress in the year with the majority of new orders received and delivered within the year generating profit margins that met or exceeded expectations. There remained some legacy costs from projects taken in 2006 and 2007 which impacted in 2008 and detracted from its overall performance, but these are largely resolved and are not expected to hinder the business going forward. Even though Langen is more secure operationally, the global economic slowdown has led to a low level of order intake in the last number of months, overall much reduced compared with the previous year, and the business has entered 2009 with a relatively low order book. Quoting activity remains high, however decision making by prospective customers is extended and the actual placement of orders is often being deferred. The business has suffered over the last two years from a strong Canadian dollar compared with the value of the US dollar, which has weakened Langen's competitive position. However, the relative values have changed over the last few months and this currently puts Langen in a position where it can compete more effectively for prospective orders in the USA.
After a strong year in 2007 for Langenpac, which benefited from a high opening order book and resulted in a good level of profit, 2008 was particularly disappointing, as the business returned an operating loss in the year. Sales were down in the year, resulting in lower profitability, which was further impacted by cost over-runs on some projects. Particular attention is being applied in this business to its project management processes, and greater links are being forged between the Dutch and Canadian management groups. The business has successfully focused on developing a comprehensive portfolio of standard machinery over the last few years, as well as continuing to develop its expertise in complex product handling requirements. Whilst order intake increased marginally in the year (on constant currency values), intake in the last few months of the year was quite low, which resulted in a lower order book as the business entered the current year compared with twelve months previously.
ITCM delivered sales slightly higher than in the previous year, and whilst operating profit margins were lower the business delivered a strong level of profit. Order intake was considerably lower than the previous year, and a number of large prospective orders which were expected to be placed in the second half of the year have been further delayed. Whilst it is not apparent that this is due to general economic conditions, and there are specific reasons for a delay in each of the prospective projects, it is evident that customers, as with the rest of the division, are being cautious in committing significant expenditure.
Cerulean Packing forms a small part of the division, but contributed a higher level of sales in the year, as well as improved profits.
Overall, a combination of lower sales, lower activity in the second half of the year and poor project performance at Langenpac resulted in a disappointing performance in the division as a whole. Order intake was substantially lower than in 2007, and the division entered 2009 with a much lower order book than twelve months earlier. A number of substantial order prospects are currently in discussion, which if secured, and together with operational improvements, allows us to look forward to the expectation of a moderate improvement in performance.
Scientific Services
The Scientific Services division, which comprises Cerulean and Arista Laboratories, delivered increased sales of £19.6m (2007: £17.7m) and operating profit (before exceptional items) of £1.5m (2007: £1.4m).
Cerulean is based in Milton Keynes, UK, and has sales and service support offices in a number of other key geographical areas, providing localised support to its customers. It is the market-leading supplier of quality control instruments and analytical smoke constituent capture machinery to the tobacco industry, independent laboratories and government bodies. Order levels were particularly strong in the first half of the year and, although demand reduced a little in the second half, overall the value of orders exceeded those in the previous year. Investment plans in the tobacco industry remain uncertain, although the first few weeks of 2009 has seen order intake at similar levels to last year.
The business increased its sales compared with the previous year by 10% and improved its profit margins. Having experienced a loss of market share in Asia, and China in particular, over the last few years, a renewed sales approach has seen activity in that region improve. Overall, demand for both Cerulean's longer established QTM range of instruments and the newer C² range increased in the year, although demand for smoking machines reduced. Product development, which is central to Cerulean's market leadership and strategic development, was concentrated on both the incremental improvement of existing products, and development of a range of innovative new products to meet emerging demands.
Arista Laboratories, based in Richmond, USA and Kingston upon Thames, UK, is an independent tobacco and cigarette smoke constituent testing laboratory, for regulatory, research and product development purposes. In the year, Arista's sales were lower than in the previous twelve months, with an increase in ignition propensity work, following investment in 2007, being outweighed by lower routine testing work. Overall, performance was lower than the previous year.
With anticipated regulatory testing, consequent changes in strategic priorities in respect of research and development, and industry consolidation and restructuring, there is quite a large degree of uncertainty in Arista's main market in North America. Having suffered early in the year with customer in-sourcing, which impacted performance in 2008, Arista is well placed to benefit from work packages that may become available during 2009, although the competitive environment is challenging. Other opportunities exist in the testing of smokeless tobacco products, which are now being promoted by the major cigarette manufacturers. Prospective legislation which would result in the US Food & Drug Administration regulating tobacco products in the USA has yet to pass, but there appears to be strong momentum behind the legislative bill. If the bill does pass it is likely to lead to mandatory testing in the USA, and would provide medium range opportunities for Arista.
Although both of the businesses in the division operate to short order lead-times which can change their outlook quite quickly, we expect the division as a whole to continue to perform satisfactorily.
FINANCIAL REVIEW
Profit in the period was £8.6m (2007: £7.9m). Underlying operating profit (continuing operations before net pension credit and exceptional items) was £4.4m (2007: £5.4m) and underlying earnings per share amounted to 16.1p (2007: 18.0p). Basic earnings per share amounted to 45.4p (2007: 42.0p). Following the sale of the Saunderton site, net debt reduced to £0.4m at the year end (2007: £7.6m).
Operating Results
The trading performance of the Group is discussed in the Operating review.
Group revenue was £91.5m, a small increase compared with £89.3m in 2007, although on constant exchange rates this equates to a reduction of 4%. Sales in the Tobacco Machinery division increased to £34.9m (2007: £32.9m) but operating profit before exceptional items decreased to £2.8m (2007: £3.7m) reflecting an expected unfavourable change in sales mix. Packaging Machinery division sales decreased to £37.0m (2007: £38.7m) and operating profit before exceptional items decreased to £0.1m (2007: £0.3m). Scientific Services division sales increased to £19.6m (2007: £17.7m) and operating profit before exceptional items increased to £1.5m (2007: £1.4m).
Property
On 3 December 2008 the Group completed the sale of its Saunderton site for a cash consideration of £16.2m and at the same time entered into a three year, rent-free, lease to carry on its operations on a part of that site at an additional value to the Group of £0.7m. This transaction resulted in a pre-tax profit of £3.1m, after transaction costs of £0.4m and a provision of £0.4m in respect of the estimated costs of relocating from the Saunderton site.
Reorganisation Costs
The Group incurred reorganisation costs of £1.4m in the year, mainly in respect of the Tobacco Machinery division, comprising redundancy payments and related pension costs. Payments of £0.8m were made during the year in respect of these costs.
Interest and Taxation
Net interest expense in 2008 was £0.7m (2007: £1.0m). The tax charge on underlying profits (before net pension credit and exceptional items) was £0.6m, reflecting an effective rate of 16% (2007: 23%). This relatively low rate of tax arose as a consequence of a number of non-recurring credits, including the favourable settlement of a long-standing claim in the UK. The total taxation charge on the Group's profit before tax was £0.2m (2007: £1.8m). This included a tax charge in respect of the sale of the Saunderton site of £0.6m, but benefited from no tax being charged to the income statement in relation to the UK net pension credit and the corporation tax deduction available on payments into the UK pension scheme. No deferred tax liability has been recognised in the balance sheet in respect of the UK pension scheme due to the Group reporting an IAS 19 (revised) Employee benefits surplus.
Earnings per Share
Basic earnings per share amounted to 45.4p (2007: 42.0p). Basic earnings per share for continuing operations amounted to 45.4p (2007: 29.7p) and underlying earnings per share (continuing operations before net pension credit and exceptional items) amounted to 16.1p (2007: 18.0p).
Dividends
The Board is recommending a final dividend of 2.5p per ordinary share which, together with the interim dividend of 2.5p paid in October 2008, results in a total dividend of 5.0p per ordinary share in respect of 2008 (2007: 7.0p per ordinary share). The dividend will be paid on 8 May 2009 to shareholders on the register on 17 April 2009.
Cash, Treasury and Funding Activities
Group net debt reduced to £0.4m at the year end (2007: £7.6m). Net cash outflow from operating activities was £3.2m (2007: £6.3m inflow). The outflow in the year was impacted by an adverse working capital movement in the year of £6.8m (2007: £1.1m favourable), as deposit payments in advance and net amounts due under construction contracts reduced by £6.3m, reflecting the timing of order placements and deliveries. Payments in respect of reorganisation costs of £1.5m were made in the year, including a final payment of £0.6m to the UK pension scheme in respect of redundancies carried out in 2006. Further to the reorganisation in 2008 payments of £0.6m are expected to be made in 2009. A payment of £1.0m was made to the UK defined benefit pension scheme consequent to the sale of the Saunderton site. Net taxation payments of £0.7m (2007: £0.7m) were made in the year. Cash flows from investing activities included capital expenditure of £1.2m (2007: £2.5m) and capitalised product development expenditure of £1.5m (2007: £1.2m). In respect of the sale of the Group's site at Saunderton, the Group received payments, net of expenses paid, of £15.7m. The Group sold plant and equipment in the year which yielded cash receipts of £0.2m (2007: £0.1m). Net interest of £0.7m (2007: £1.0m) and dividends of £1.5m (2007: £1.1m) were also paid in the year. The net cash outflow in respect of discontinued businesses that were sold in 2006 was £0.4m (2007: £4.2m inflow).
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 2008 these comprised secured, committed borrowing facilities with Lloyds TSB Bank plc and Fortis Bank SA/NV of £11.1m, these facilities having reduced during the year from £18.0m following the sale of the Saunderton site. These facilities, which are committed until December 2012, are subject to covenants covering earnings, interest cover and tangible net worth, and are both sterling and multiߛcurrency denominated. Additionally, the Group maintains committed facilities from overseas banks of £4.2m, denominated in US dollars and euros. Shortߛterm 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 largest defined benefit scheme is in the UK. The last scheme specific funding valuation, as at 30 June 2006, 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, which reflects the scheme's position if it was wound up at that date, 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 are 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 £0.9m for the regular cost of benefits, £0.6m for pension augmentation costs relating to redundancies announced in 2006, and £1.0m additional funding consequent to the sale of the Saunderton site.
The Group has adopted IAS 19 (revised) as its basis of accounting for pension costs. The 2008 valuation of the UK fund's assets and liabilities was undertaken as at 31 December 2008 based on detailed valuation work carried out as at 30 June 2006, updated to reflect conditions existing at the 2008 year end. The smaller US defined benefit schemes were valued at 31 December 2008, using actuarial data as of 1 January 2008, 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 2008, the net pension credit arising from the Group's defined benefit schemes was £3.4m (2007: £3.0m), before curtailment costs and tax. The IAS 19 (revised) valuation of the UK fund showed a net surplus of £2.7m at 31 December 2008 (2007: £25.9m), before tax, reflecting a significant reduction in the value of the scheme's assets in the year, partly offset by a reduction in the value of liabilities as the discount rate has increased reflecting an increase in corporate bond yields. The value of the scheme's assets at 31 December 2008 was £283.8m (2007: £355.0m). The accounting valuations of the US pension schemes showed an aggregated net deficit of £3.8m (2007: £0.4m net surplus), all amounts being before tax, with assets much reduced in US dollars at $19.4m compared with $25.3m at 31 December 2007, but with changes in year end exchange rates the value in sterling of the assets increased to £13.4m (2007: £12.7m).
As a result of the significant change in the valuations of the schemes, and particularly as the value of the assets has declined so much during the year, the Group expects to incur a net pension charge in 2009, estimated at £2m, which compares with the net pension credit of £3.4m reported in 2008.
Equity
Group equity at 31 December 2008 was £40.2m (2007: £52.3m). The movement arises from profit for the period of £8.6m, favourable currency translation movements on the net assets of the overseas businesses of £3.3m and equityߛsettled shareߛbased transactions of £0.1m, less actuarial losses, net of withholding tax movements, in respect of the Group's defined benefit schemes of £22.6m and dividend payments of £1.5m.
CONSOLIDATED INCOME STATEMENT
| 2008 | 2007 | ||||||
| Notes | Before Exceptional Items £m | Exceptional Items £m (note 3) | Total £m | £m | |||
| Continuing operations Revenue | 2 | 91.5 | - | 91.5 | 89.3 | ||
| Cost of sales | (65.3) | (0.4) | (65.7) | (63.2) | |||
| Gross profit | 26.2 | (0.4) | 25.8 | 26.1 | |||
| Other operating income | 0.2 | 3.1 | 3.3 | 0.2 | |||
| Distribution expenses | (5.7) | (0.1) | (5.8) | (5.4) | |||
| Administrative expenses | (12.5) | (0.4) | (12.9) | (12.3) | |||
| Other operating expenses | (0.4) | (0.5) | (0.9) | (0.2) | |||
| Operating profit | 2, 4 | 7.8 | 1.7 | 9.5 | 8.4 | ||
| Financial income Financial expenses | 0.1 (0.8) | - - | 0.1 (0.8) | 0.2 (1.2) | |||
| Net financing costs | (0.7) | - | (0.7) | (1.0) | |||
| Profit before tax Taxation | 7.1 (0.4) | 1.7 0.2 | 8.8 (0.2) | 7.4 (1.8) | |||
| Profit from continuing operations | 6.7 | 1.9 | 8.6 | 5.6 | |||
| Discontinued operations | |||||||
| Profit from discontinued operations | 9 | - | - | - | 2.3 | ||
| Profit for the period | 6.7 | 1.9 | 8.6 | 7.9 | |||
| Basic earnings per ordinary share Diluted earnings per ordinary share | 5 | 45.4p 41.7p | 42.0p 38.0p | ||||
| Continuing operations Basic earnings per ordinary share Diluted earnings per ordinary share | 5 | 45.4p 41.7p | 29.7p 27.0p | ||||
CONSOLIDATED BALANCE SHEET
| Notes | 2008 £m | 2007 £m | |
| Non-current assets Intangible assets Property, plant and equipment Other receivables Employee benefits Deferred tax assets | 6 | 14.9 10.6 0.9 1.8 2.1 30.3 | 13.3 23.4 0.5 17.2 0.4 54.8 |
| Current assetsInventories Trade and other receivables Current tax assets Cash and cash equivalents |
| 17.1 22.2 0.6 7.2 47.1 | 15.1 18.3 0.3 3.5 37.2 |
| Current liabilitiesBank overdrafts Interest-bearing loans and borrowings Trade and other payables Current tax liabilities Provisions | (0.3) - (22.4) (0.8) (2.1) (25.6) | (0.8) (0.6) (25.1) (1.0) (1.8) (29.3) | |
| Net current assets | 21.5 | 7.9 | |
| Total assets less current liabilities | 51.8 | 62.7 | |
| Non-current liabilitiesInterest-bearing loans and borrowings Employee benefits Deferred tax liabilities | 6 | (7.3) (3.8) (0.5) (11.6) | (9.7) - (0.7) (10.4) |
| Net assets | 2 | 40.2 | 52.3 |
| EquityIssued capital Share premium Reserves Retained earnings Total equity | 5.0 26.0 8.3 0.9 40.2 | 5.0 26.0 5.0 16.3 52.3 |
CONSOLIDATED STATEMENT OF CASH FLOWS
| Notes | 2008 £m | 2007 £m | |
| Continuing operations Operating activities Operating profit Exceptional items included in operating profit |
9.5 (1.7) |
8.4 - | |
| Amortisation Depreciation Net pension credit | 1.2 2.0 (3.4) | 1.2 2.0 (3.0) | |
| Other non-cash items Pension payments | 0.1 (0.9) | 0.3 (1.2) | |
| Working capital movements: - increase in inventories - (increase)/decrease in trade and other receivables - decrease in trade and other payables - decrease in provisions | (0.5) (1.5) (4.8) - | (1.4) 5.4 (2.8) (0.1) | |
| Cash generated from operations before reorganisation Reorganisation costs paid Pension payments following sale of propertiesCash (used in)/generated from operations |
3 |
-
(1.5) (1.0) (2.5) |
8.8
(1.3) (0.5) 7.0 |
| Taxation paid | (0.7) | (0.7) | |
| Net cash from operating activitiesInvesting activities | (3.2) | 6.3 | |
| Interest received Net proceeds from sale of Saunderton site Proceeds from sale of plant and equipment | 0.1 15.7 0.2 | 0.2 - 0.1 | |
| Acquisition of property, plant and equipment Development expenditure | (1.2) (1.5) | (2.5) (1.2) | |
| Net cash from investing activities | 13.3 | (3.4) | |
| Financing activities Interest paid Repayment of term loansNet decrease in borrowings against revolving facilities Dividends paid | (0.8) (0.6) (3.1)
(1.5) | (1.2) (7.0) -
(1.1) | |
| Net cash from financing activities | (6.0) | (9.3) | |
| Discontinued operationsNet cash from investing activitiesNet cash from discontinued operations | (0.4) (0.4) | 4.2 4.2 | |
| Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at period end | 7 | 3.7 2.7 0.5 6.9 | (2.2) 4.6 0.3 2.7 |
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
| Note | 2008 £m | 2007 £m | |
| Currency translation movements arising on foreign currency net investments | 3.3 | 1.3 | |
| Actuarial (losses)/gains | (30.8) | 27.1 | |
| Withholding tax movements on pension scheme surplus | 6 | 8.2 | (9.1) |
| Tax on items taken directly to equity | - | 1.8 | |
| Net (expense)/income recognised directly in equity | (19.3) | 21.1 | |
| Profit for the period | 8.6 | 7.9 | |
| Total recognised income and expense for the period | (10.7) | 29.0 |
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 2008 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 2008 or 2007. Statutory accounts for 2007 have been delivered to the registrar of companies. The auditors have reported on the 2008 and 2007 statutory 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. Segment reporting
Business segments
| Tobacco Machinery | Packaging Machinery | Scientific Services | Total | |||||||||
| 2008 £m | 2007 £m | 2008 £m | 2007 £m | 2008 £m | 2007 £m | 2008 £m | 2007 £m | |||||
| Revenue - continuing operations | 34.9
| 32.9
| 37.0
| 38.7 | 19.6
| 17.7
| 91.5
| 89.3
| ||||
| Underlying segment operating profit before net pension credit and exceptional items | 2.8 | 3.7 | 0.1 | 0.3 | 1.5 | 1.4 | 4.4 | 5.4 | ||||
| Exceptional items | 2.1
| -
| (0.2)
| -
| (0.2)
| -
| 1.7
| -
| ||||
| Segment operating profit/(loss) before net pension credit | 4.9
| 3.7
| (0.1)
| 0.3
| 1.3
| 1.4
| 6.1 | 5.4 | ||||
| Net pension credit (ex. curtailment costs) Operating profit Net financing costs Profit before tax Taxation Profit from continuing operations | 3.4
9.5 (0.7)
8.8 (0.2)
8.6 | 3.0
8.4 (1.0)
7.4 (1.8)
5.6 | ||||||||||
| Discontinued operations Profit from discontinued operations Profit for the period | -
8.6
| 2.3
7.9
| ||||||||||
| Segment net assets - continuing operations Net liabilities - discontinued operations Unallocated net (liabilities)/assets (including net debt and pension assets/liabilities) Total net assets | 17.0
| 24.2
| 8.2
| 3.5
| 16.4
| 16.8
| 41.6 (0.4) (1.0)
40.2
| 44.5 (0.8) 8.6
52.3
| ||||
Geographical segments
| Revenue(by destination of goods) | Segment assets(by location of assets) | ||||||
|
| 2008 £m | 2008 % | 2007 £m | 2007 % | 2008 £m | 2007 £m | |
| Continuing operations | |||||||
| United Kingdom Continental EuropeNorth AmericaAsia Rest of the world | 8.2 17.9 29.1 18.4 17.9 | 9 20 31 20 20 | 13.0 12.9 29.3 18.3 15.8 | 15 14 33 20 18 | 30.4 10.9 16.1 2.0 6.3 | 39.5 8.9 14.6 3.2 4.4 | |
| 91.5 | 100 | 89.3 | 100 | 65.7 | 70.6 | ||
3. Net profit from exceptional items of £1.7m includes profit of £3.1m on the sale of the Saunderton site. In addition, costs related to reorganisations carried out during the year within the Tobacco Machinery division and the Scientific Services division were £1.2m, comprising redundancy costs and related pension costs. Costs of £0.2m were incurred during the year at Langenpac following its relocation to new premises. Payments in respect of reorganisation costs of £1.5m (2007: £1.3m) were made in the year, including a payment of £0.6m (2007: £0.7m) to the UK pension scheme in respect of redundancies carried out in 2006.
4. The Group accounts for pensions under IAS 19 (revised) Employee benefits. A formal valuation of the UK defined benefit pension scheme was carried out as at 30 June 2006 and its assumptions, modified as appropriate, have been applied in the financial statements, updated to reflect actual experience and conditions at 31 December 2008. Operating profit includes a net pension credit of £2.9m (2007: £3.0m), comprising a £3.4m net credit (2007: £3.0m) in respect of ongoing benefits, less curtailment costs of £0.5m (2007: £nil) arising from redundancies in the year. The £3.4m net credit in respect of ongoing benefits comprises current service costs of £1.4m, interest on the pension obligations of £19.7m, offset by the expected return on the schemes' assets of £24.5m.
5. Basic earnings per ordinary share is based upon the profit for the period of £8.6m (2007: £7.9m) and on a weighted average of 18,968,324 shares in issue during the year (2007: 18,903,387). The weighted average number of shares excludes shares held by the long-term incentive plan (LTIP) trust.
Basic earnings per ordinary share on continuing operations is based upon the profit from continuing operations of £8.6m (2007: £5.6m) and the weighted average number of ordinary shares as shown above. Underlying earnings per ordinary share, which is calculated on profit from continuing operations before net pension credit and exceptional items, amounted to 16.1p for the year (2007: 18.0p).
6. Employee benefits include the net pension surplus of the UK defined benefit pension scheme of £2.7m (31 December 2007: £25.9m) and the net pension liability of the US defined benefit pension schemes of £3.8m (31 December 2007: £0.4m surplus), 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 2008. At the end of the life of the scheme the Company has an unconditional right to a refund and any such refund would be paid out only on a net of tax basis from the scheme, therefore the carrying value of the UK surplus has been shown net of withholding tax at 35%. Withholding tax of £8.2m (2007: £9.1m charge) has been credited to the statement of recognised income and expense in relation to the movement in the net surplus of the UK pension scheme in the year.
7. Reconciliation of net cash flow to movement in net debt
| 2008 £m | 2007 £m | ||
| Net increase/(decrease) in cash and cash equivalentsCash inflow from movement in borrowingsChange in net debt resulting from cash flowsTranslation movements Movement in net debt in the periodOpening net debt Closing net debt | 3.7 3.7 7.4 (0.2) 7.2 (7.6) (0.4) | (2.2) 7.0 4.8 (0.1) 4.7 (12.3) (7.6) |
8. Analysis of net debt
| 2008 £m | 2007 £m | ||
| Cash and cash equivalents - current assets Bank overdrafts - current liabilities Interest-bearing loans and borrowings - current liabilities Interest-bearing loans and borrowings - non-current liabilitiesClosing net debt | 7.2 (0.3) - (7.3) (0.4) | 3.5 (0.8) (0.6) (9.7) (7.6) |
9. Discontinued operations
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 profit on sale before and after tax was £1.5m. In addition the Group earned rental income of £0.1m from the property to the date of its sale. Profit from discontinued operations in 2007 also included £0.7m arising from the negotiated settlement of claims and the release of provisions in connection with the disposal of the Sandiacre Rose Forgrove business and Sasib S.p.A., which was also sold in 2006.
10. The Annual Report and Accounts will be sent to all shareholders in March 2009 and additional copies will be available from the Company's registered office at 11 Tanners Drive, Blakelands, Milton Keynes MK14 5LU.