Mpac Group Plc Regulatory News (MPAC)

31 August 2012 FOR IMMEDIATE RELEASE

Molins PLC

Half-year report for the six months ended 30 June 2012

Molins PLC, the international engineering and services company, announces its results for the six months ended 30 June 2012.

Group Highlights

·; Order intake increase of 14%

·; Group sales of £39.9m (2011: £38.8m)

·; Group underlying profit before tax of £0.8m (2011: £1.7m)

·; Underlying earnings per share of 3.6p (2011: 6.3p)

·; Net funds of £5.7m

·; Interim dividend per share constant at 2.5p (2011: 2.5p)

Dick Hunter, Chief Executive, commented:

"As indicated previously, Group trading performance will be strongly second half weighted and the Board's expectation of performance for the full year remains unchanged. Order intake increased by 14% compared with the same period last year and was ahead in each division. We have continued our investment programme in Scientific Services in anticipation of the impact of regulation of tobacco products in the US by the FDA, which we expect to drive increased demand over the short to medium term. Each of the three divisions is well positioned to progress over the remainder of the year."

Divisional Highlights

Scientific Services

·; Sales at Cerulean slightly lower than the same period last year, but order intake maintained, with activity levels in the key Chinese market remaining strong

·; Order intake at Arista Laboratories ahead of last year, as testing of tobacco products commenced in compliance with legislation enacted in the USA

·; Continued investment in infrastructure, systems and personnel at Arista in anticipation of increased demand, leading to increased operating costs in the first half of the year

Packaging Machinery

·; Increase in sales of 16% leading to improved trading performance

·; Momentum in order intake maintained - 10% ahead of the same period last year

·; Strong order book in place for delivery in the second half of the year

Tobacco Machinery

·; Strong sales in aftermarket products

·; Increase in order intake reflected in a strong order book for delivery in the second half of the year

·; Margins reduced as expected, with no repeat of the higher-margin projects traded last year

For further information, please contact:

MOLINS is an international business providing a range of high performance machinery & instrumentation, as well as services & support for the production, packaging and analysis of consumer products. The Group serves its customers through its wide geographic spread of sales, service and manufacturing locations. The Group is focused on the organic development of its businesses, through targeted product development, excellence in customer service and ongoing operational efficiency improvements, supported by acquisitive growth where appropriate.

1 Before exceptional charge of £0.1m (30 June 2011: £0.3m charge; 31 December 2011: £1.0m credit)

2 Before exceptional charge of £0.1m (30 June 2011: £0.3m charge; 31 December 2011: £1.0m credit) and net financing income on pension scheme balances of £2.2m (30 June 2011: £2.4m; 31 December 2011: £4.9m)

3 Before exceptional charge of £0.1m (30 June 2011: £0.3m charge; 31 December 2011: £0.5m credit) and net financing income on pension scheme balances of £1.4m (30 June 2011: £1.5m; 31 December 2011: £3.1m), all figures after tax

INTERIM MANAGEMENT REPORT

Operating results

Group sales in the six months to 30 June 2012 were £39.9m (2011: £38.8m) and underlying operating profit (before exceptional items) was £0.8m (2011: £1.7m). The Group incurred costs of £0.1m (2011: £0.3m) in respect of exceptional items and recorded net financing income of £2.2m (2011: £2.4m), mainly arising from the accounting for the Group's pension schemes. Reported profit before tax was £2.9m (2011: £3.8m). The tax charge was £0.9m (2011: £1.4m), of which £0.1m (2011: £0.5m) related to the underlying profit (before exceptional items and net financing income on pension scheme balances), resulting in profit for the period of £2.0m (2011: £2.4m), of which underlying profit was £0.7m (2011: £1.2m). Basic earnings per share amounted to 10.5p (2011: 12.8p) and underlying earnings per share (before exceptional items and net financing income on pension scheme balances) amounted to 3.6p (2011: 6.3p). The Group's net funds position at 30 June 2012 was £5.7m (31 December 2011: £7.1m).

Scientific Services

Sales in the period were £9.3m (2011: £9.3m) and operating loss was £0.1m (2011: £0.9m profit). The division, with its main facilities in the UK and US, comprises Cerulean, which supplies process and quality control instruments for the tobacco industry, and Arista Laboratories, an independent tobacco and smoke constituent analytical laboratory. Sales at Cerulean were marginally lower than the previous year, but order intake was maintained, with activity levels in the key Chinese market remaining strong. Cerulean's performance reflected slightly reduced margins, resulting from a customer-led change in product mix and a greater incidence of bespoke engineering customisation for specific projects.

Order intake at Arista Laboratories was ahead of last year, as testing of tobacco products by manufacturers commenced in compliance with legislation enacted in the USA in June 2009 and regulated by the US Food and Drug Administration (FDA). The FDA has provided guidance to the industry about the testing methodologies to be used for 2012, although manufacturers are interpreting what is required in different ways. Also, for 2012, the FDA has advised that manufacturers need to test their products for a reduced number of constituents than is envisaged for later years. Guidance is awaited for the 2013 testing requirements. In anticipation of increased demand Arista has continued to invest in its infrastructure, systems and personnel, and will be moving to new premises in the second half of the year. The consequence of this increased investment has been that costs have increased in the first half of the year.

Packaging Machinery

Sales in the period were £15.9m (2011: £13.7m) and operating profit (before exceptional items) was £0.1m (2011: £1.0m loss). The division, which supplies engineering services and capital equipment, operates through three businesses based in the UK, the Netherlands and Canada, namely Langen Packaging Group, ITCM and Cerulean Packing. The momentum in order intake experienced in the second half of last year was maintained, with orders 10% ahead of the same period last year. The increase in sales in the first half was supported by a strong opening order book and the loading within each business was improved compared with the previous year, leading to an increase in business efficiency. The result has been a significant improvement in performance in the period and with a strong order book in place for delivery in the second half of the year, it is expected that the division will perform strongly over the next six months.

Tobacco Machinery

Sales in the period were £14.7m (2011: £15.8m) and operating profit was £0.8m (2011: £1.8m, before exceptional items). The division designs, manufactures, markets and services specialist machinery for the tobacco industry from its bases in the UK, US, Brazil, Singapore and Czech Republic. Sales of new and rebuild machines were at lower levels than the previous year, with sales weighted to the second half of the year. Sales of aftermarket products were ahead of last year, with particularly strong sales in Africa and Asia. As expected, performance in the first half did not match that of last year, which benefited from the sale of a number of high margin projects. However, the business is well placed to perform more strongly in the second half, with an increase in order intake reflected in a strong order book for delivery over the next six months.

Exceptional items

The Group incurred an exceptional charge of £0.1m in the period (2011: £0.3m), in respect of reorganisation costs in the Packaging Machinery division.

Cash

Net funds at 30 June 2012 were £5.7m (30 June 2011: £6.3m; 31 December 2011: £7.1m). Net cash inflow from operating activities in the first half of the year was £1.3m, and is net of reorganisation costs paid of £0.3m and tax paid of £0.4m. Net capital and product development expenditure was £1.9m. Ordinary dividends of £0.5m were paid in the period.

Pension valuations

The Group operates defined benefit schemes in the UK and US which it accounts for in accordance with IAS 19 Employee benefits. The IAS 19 valuation of the UK scheme at 30 June 2012 shows a deficit of £10.3m (£7.8m net of deferred tax), compared with a surplus of £1.6m (£1.0m net of deferred tax) at the beginning of the period. The value of the scheme's assets at 30 June 2012 was £315.7m (31 December 2011: £322.5m), and the value of the scheme's liabilities was £326.0m (31 December 2011: £320.9m). The net valuation of the US pension schemes at 30 June 2012, with total assets of £15.0m, showed a deficit of £5.6m (£3.4m net of deferred tax), compared with a deficit of £5.0m (£3.0m net of deferred tax) at the beginning of the period. The aggregate cost of providing pension benefits to active members of the Group's schemes in the period was £0.5m (2011: £0.6m), which was charged to operating profit. Additionally, net financing income on pension scheme balances was £2.2m (2011: £2.4m), comprising £10.0m income on the schemes' assets and £7.8m expense on the schemes' liabilities. Net financing income on pension scheme balances is calculated by applying an interest rate, reflecting the expected rate of return at the beginning of the year, to the value of the pension schemes' assets at the beginning of the year, less an interest expense calculated by applying the discount rate used in valuing the pension schemes' liabilities at the beginning of the year to the value of those liabilities.

In the UK the Company is currently paying £1.2m per annum to the Group's defined benefit scheme in monthly instalments, which commenced in July 2010, following the formal actuarial valuation of the scheme as at 30 June 2009, which showed a deficit as at that date of £12.1m. The deficit recovery period was estimated to be nine years. The UK scheme is subject to a formal actuarial valuation as at 30 June 2012 and this valuation, which will take a number of months to complete, will determine the future level of deficit funding required. The Company also makes payments to the scheme to cover the regular cost of benefits and any extra funding strains that may arise as a consequence of redundancies.

Related party transactions

There has been no material change in the nature of related party transactions from those described in note 30 of the 2011 Annual Report and Accounts and these are also referred to in note 13 of this Half-year report.

Risks

Molins is subject to a number of risks which could have a serious impact on the performance of the business. The Board regularly considers the principal risks that the Group faces and how to mitigate their potential impact. The key risks to which the business is exposed have not changed significantly over the past six months and are not expected to do so over the remaining six months of the financial year. Further information on the principal risks and uncertainties faced by the Group is included on pages 10 and 11 of the Group's 2011 Annual Report and Accounts.

Cautionary statement

This Interim management report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other reason. The IMR contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Molins PLC and its subsidiary undertakings when viewed as a whole.

Dividend

The Board has declared an interim dividend in respect of 2012 of 2.5p per ordinary share (2011: 2.5p), which will be paid on 11 October 2012 to ordinary shareholders registered at the close of business on 21 September 2012. Dividends paid to shareholders in the six months to 30 June 2012 were 2.75p per ordinary share (2011: 2.5p).

Outlook

As indicated previously, Group trading performance will be strongly second half weighted. The Board's expectation of performance for the full year remains unchanged, whilst remaining mindful of the global economic environment. Each of the three divisions is well positioned to progress over the remainder of the year.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT

We confirm that to the best of our knowledge:

By order of the Board

Dick Hunter

Chief Executive

David Cowen

Group Finance Director

31 August 2012

CONDENSED CONSOLIDATED INCOME STATEMENT

CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

1. General information

The half-year results for the current and comparative period are unaudited but have been reviewed by the auditor, KPMG Audit Plc, and its report is set out on page 18. The comparative figures for the financial year ended 31 December 2011 are not the Group's statutory accounts as defined in section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 December 2011 have been extracted from the Group's statutory accounts for that year. The Group's statutory accounts have been reported on by the Group's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The Group's statutory accounts for the year ended 31 December 2011 are available from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY or from the Group's website at www.molins.com.

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

The condensed set of financial statements was approved by the Board of directors on 31 August 2012.

2. Accounting policies

The condensed set of financial statements for the six months ended 30 June 2012 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU and the Disclosure and Transparency Rules of the UK's Financial Services Authority. It does not include all of the information required for full annual financial statements, and should be read in conjunction with the financial statements of the Group for the year ended 31 December 2011.

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

3. Estimates

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

In preparing the condensed set of financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were of the same type as those that applied to the financial statements for the year ended 31 December 2011.

4. Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the financial statements for the year ended 31 December 2011.

5. Operating segments

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

Net financing income includes dividends paid on preference shares. The Company has in issue 900,000 6% fixed cumulative preference shares. The preference dividend is payable on 30 June and 31 December and amounted to £0.1m in the 12 months ended 31 December 2011.

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2011.

6. Exceptional items

The exceptional charge of £0.1m in the 6 months to 30 June 2012 was in respect of reorganisation costs in the Packaging Machinery division. Cash payments of £0.1m were made in the period in respect of this reorganisation. In addition, cash payments of £0.2m were made in the period in respect of reorganisations carried out in 2011.

The exceptional charge of £0.3m in the 6 months to 30 June 2011 related to reorganisations carried out within the Packaging Machinery and Tobacco Machinery divisions. The exceptional credit of £1.0m in the 12 months to 31 December 2011 comprised £0.4m in respect of reorganisations carried out within the Packaging Machinery and Tobacco Machinery divisions and credits totalling £1.4m in respect of the Group's pension schemes in the UK and US.

7. Net financing income

8. Employee benefits

The Group accounts for pensions under IAS 19 Employee benefits. A formal valuation of the UK defined benefit pension scheme was carried out as at 30 June 2009, and formal valuations of the US defined benefit schemes were carried out as at 1 January 2012, and their assumptions, modified as appropriate, have been applied in the condensed set of financial statements, updated to reflect actual experience and conditions at 30 June 2012. Operating profit includes the aggregate cost of providing pension benefits to active members for the 6 months to 30 June 2012 of £0.5m (6 months to 30 June 2011: £0.6m; 12 months to 31 December 2011: £1.1m). In addition, profit before tax for the 6 months to 30 June 2012 includes net financing income on pension scheme balances of £2.2m (6 months to 30 June 2011: £2.4m; 12 months to 31 December 2011: £4.9m). Also included within profit before tax in the 12 months to 31 December 2011 were credits totalling £1.4m in respect of the Group's pension schemes in the UK and US.

Employee benefits as shown in the condensed consolidated statement of financial position were:

9. Taxation

The Group tax charge for the 6 months to 30 June 2012 amounted to £0.9m (6 months to 30 June 2011: £1.4m; 12 months to 31 December 2011: £3.3m) and is calculated as follows:

The Group's consolidated effective tax rate in respect of underlying profit for the 6 months to 30 June 2012 is 11% (6 months to 30 June 2011: 30%; 12 months to 31 December 2011: 22%).

The Finance Bill 2012, which contains legislation for some of the proposals announced by the Chancellor in the 21 March 2012 Budget, was substantively enacted on 3 July 2012. The Bill introduced a further reduction in the rate of UK corporation tax to 23% from 1 April 2013. Deferred tax assets and liabilities are measured at tax rates that are enacted or substantively enacted at the end of the reporting period and therefore the reduction in the corporate tax rate from 24% to 23% has not been taken into account in the calculation of the effective tax rate applied in this condensed set of financial statements.

10. Earnings per share

Basic earnings per ordinary share is based upon the profit for the period and on a weighted average of 19,048,071 shares in issue during the period (6 months to 30 June 2011: 18,968,324; 12 months to 31 December 2011: 18,968,324). The weighted average number of shares excludes shares held by the employee trust in respect of the Company's long-term incentive arrangements.

Diluted earnings per ordinary share is based upon the profit for the period and on a diluted weighted average of 19,687,662 shares in issue during the period (6 months to 30 June 2011: 19,437,241; 12 months to 31 December 2011: 19,573,769). The diluted weighted average number of shares includes the diluting effect, if any, of own shares held by the employee trust.

Underlying earnings per ordinary share and diluted underlying earnings per ordinary share, which are calculated on profit before exceptional items and net financing income on pension scheme balances, amounted to 3.6p for the 6 months to 30 June 2012 (6 months to 30 June 2011: 6.3p; 12 months to 31 December 2011: 18.3p) in respect of underlying earnings per share and 3.5p (6 months to 30 June 2011: 6.2p; 12 months to 31 December 2011: 17.7p) in respect of diluted underlying earnings per ordinary share. The calculation of underlying earnings per ordinary share and diluted underlying earnings per ordinary share are based on underlying profit for the 6 months to 30 June 2012 of £0.7m (6 months to 30 June 2011: £1.2m; 12 months to 31 December 2011: £3.5m) which is calculated as follows:

11. Dividends

An interim dividend for the year ending 31 December 2012 of 2.5p per ordinary share will be paid on 11 October 2012 to ordinary shareholders registered at the close of business on 21 September 2012.

12. Reconciliation of net cash flow to movement in net funds

13. Related parties

The Group has related party relationships with its directors and with the UK and US pension schemes. There has been no material change in the nature of the related party transactions described in note 30 of the 2011 Annual Report and Accounts.

14. Half-year report

The Half-year report will be sent to all shareholders in September 2012 and additional copies will be available from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY or from the Group's website at www.molins.com.

INDEPENDENT REVIEW REPORT TO MOLINS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half-year report for the six months ended 30 June 2012 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of financial position, condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the Half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half-year report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

M Matthewmanfor and on behalf of KPMG Audit PlcChartered AccountantsAltius House

One North Fourth Street

Milton Keynes

MK9 1NE31 August 2012