Mpac Group Plc Regulatory News (MPAC)

30 Aug 2006 07:01

Molins PLC30 August 2006 30 August 2006 FOR IMMEDIATE RELEASE 2006 INTERIM ANNOUNCEMENT Molins PLC, the international specialist engineering company, announces itsresults for the period ended 30 June 2006. 6 months 12 months 6 months to 30 June to 31 Dec to 30 June 2005 2005 2006 (restated) # (restated) # Sales £45.8m £51.7m £103.2mUnderlying operating profit* £1.6m £2.8m £6.3mProfit before tax - continuing operations £1.4m £0.8m £4.0mLoss from discontinued operation £(10.0)m £(0.8)m £(7.6)mLoss for the period £(9.0)m £(0.1)m £(4.0)m Cash generated from operations before reorganisation -continuing operations £5.4m £9.0m £14.5mNet debt £16.3m £21.6m £19.0m Underlying earnings per share* 4.6p 8.8p 24.3pBasic loss per share (48.6)p (0.3)p (21.9)p * Before net pension credit, reorganisation costs and discontinued operation # Restated to exclude discontinued operation where appropriate • Disposal of Sasib concluded• Group order book ahead of last year• Profits expected to be weighted towards the second half• Lower sales of new and rebuild machinery in Tobacco Machinery• Plans in hand for transfer of remaining Tobacco Machinery UK manufacturing and assembly to Czech Republic Peter Byrom, Chairman, commented: "Performance in the first half was mixed, with a number of positive actions anddevelopments in the Packaging Machinery and Scientific Services divisions beingoffset by lower activity levels in the Tobacco Machinery division. As we havepreviously stated, we expect profit performance this year to be more heavilyweighted towards the second half with a number of customers requiring deliveryat the end of the year. We have sold Sasib in Italy and thereby eliminated asource of continuing losses. In the second half of the year we will commencethe transfer of the remaining Tobacco Machinery manufacturing activities fromthe UK to the Czech Republic." Enquiries: Molins PLC Tel: 020 7638 9571 Peter Byrom, Chairman David Cowen, Group Finance Director Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571 Margaret George CHAIRMAN'S STATEMENT Performance in the first six months of the year was mixed, with a number ofpositive actions and developments being offset by lower levels of activity inthe Tobacco Machinery division. As Sasib was sold in July its results have beenpresented as a discontinued operation. Group sales for continuing operations in the six months to 30 June 2006 were£45.8m (2005: £51.7m) and underlying operating profit (which excludes netpension credit and reorganisation costs) was £1.6m (2005: £2.8m). Afterinterest and taxation costs, underlying earnings per share was 4.6p (2005:8.8p). Basic earnings per share for continuing operations was 5.4p (2005:4.0p). Sasib Molins announced in May 2006 the decision either to sell or close Sasib andsubsequently the company was sold to an Italian engineering business, ParitelS.p.A., on 28 July 2006. The total cash cost to Molins of this transaction was£3.4m. The impact of the sale on the Group financial statements is to report aspecial charge in the first half of the year of £8.5m (which includes thewrite-off of the net assets of Sasib), aggregated with the trading loss of £1.5mincurred by Sasib in the period to May 2006, making a total of £10.0m in respectof the discontinued operation. Tobacco Machinery The division, excluding Sasib, reported sales of £16.8m (2005: £22.7m) and anoperating loss before reorganisation costs of £0.1m (2005: £1.4m profit). The division entered the year with an order book which was slightly higher thanthe previous year and at 30 June 2006 was also ahead of the same time last year. Order intake for new and rebuild machinery and for upgrade and enhancementkits was subdued, resulting in an overall order intake that was approximately15% down on the previous year. Having made good progress in improving profitability in 2005, the division fellback to a near break-even position, with a number of low-margin contracts beingdelivered in the first half of the year. The weighting of sales towards thesecond half of the year will improve profitability, but overall profits areexpected to be below those of last year due to lower sales expectations. The transfer of manufacturing activities from Saunderton has progressed well todate and plans are in hand to move all the remaining production of parts andmanufacture and assembly of original equipment to the factory in Plzen. TheSaunderton facility will then specialise in sales, engineering support andservice, logistics, warehousing and distribution. Consultations with theworkforce are in progress on this next stage of reorganisation which willinvolve a further sizable reduction in the number of people working at theSaunderton site. The process is expected to be completed by the end of Marchnext year. In addition, a significant proportion of the infrastructure costs atSaunderton will be reduced, the benefits of which will be deliveredprogressively through 2007. Packaging Machinery Sales in the period were £19.8m (2005: £20.8m) and operating profit was £0.3m(2005: £0.2m). Order intake has been encouraging, with an increase of 25% in the first sixmonths compared with the same period last year. The improved order flow hasbeen strongest from the non-food sector, with the food sector remaining quiteweak. The level of the order book was approximately 50% higher at 30 June 2006than twelve months previously. Despite the increase in orders, sales were a little lower in the first half ofthe year, reflecting the timing of customer delivery requirements. Whilst atlow levels, profitability marginally improved. The division continues to develop its product ranges, both in terms offunctionality and cost effectiveness. Langen and Langenpac have extended theirproduct range over the last eighteen months, with the development of thecartoning machinery platform being well received and some orders already placed. The move into robotic cartoning and end-of-line applications is alsoprogressing well and is accounting for a growing share of all sales. ITCMcontinues to serve its customer base with solution-led engineering services andassociated production and packaging machinery. It also continues to extend itsrange of customers. Performance at Sandiacre Rose Forgrove was less positive,with order intake a little lower than the previous year and pricing pressurecontinuing to affect financial performance. Improvement programmes are beingmaintained in all of the businesses, both in terms of products and operationaleffectiveness. Scientific Services Sales in the period were £9.2m (2005: £8.2m) and operating profit was £1.4m(2005: £1.2m). Sales in the division increased in the first half of the year, with Ceruleanbenefiting from a strong opening order book and with sales growth at Arista.There was a corresponding improvement in operating profit. However, orderintake at Cerulean has been slowing after the very strong performance in 2005.This was partially offset by the increase in orders at Arista, where thebenefits from several long-term programmes to develop new services and customersare being felt. Arista entered the second half of the year with a strong orderoutlook. Cerulean is continuing to focus on new product developments, with the C(2)product line gaining market acceptance, other new products entering their launchphase and new automation systems being developed. Cash and equity Group net debt at 30 June 2006 was £16.3m, compared with £19.0m at 31 December2005. Net cash flow from the continuing operating activities was £4.9m in the period,after payments of £0.2m for reorganisation and £0.3m for taxation. Part of thecash flow was generated from a further reduction of £2.1m in working capital,following a reduction of £4.6m in 2005. Other cash outflows in the first halfof the year include net capital expenditure of £0.9m, development expenditure of£1.1m, net interest paid of £0.5m and £0.6m in respect of Sasib's operatingactivities. The impact of the sale of Sasib in the second half of the year willbe to increase net debt by £3.4m. Group equity reduced in the period to £23.5m at 30 June 2006, compared with£29.9m at 31 December 2005. The reduction arises mainly from the net loss inthe period of £9.0m (comprising £1.0m profit in respect of continuing operationsand £10.0m loss in respect of the discontinued operation), £0.6m unfavourableexchange rate movements and a decrease in the pension schemes liabilities of£3.3m (net of deferred tax). Dividend In view of the ongoing restructuring of the Tobacco Machinery division and thecosts associated with the sale of Sasib, the Board has decided not to pay aninterim dividend. Pension valuations An actuarial valuation of the Group's main defined benefit scheme is beingcarried out as at 30 June 2006, although it will not be completed for a numberof months. This review will, inter alia, assess the latest mortality data andits implications in respect of the valuation of the fund's liabilities.Employer contributions into the UK pension fund commenced from 1 July 2006. Property Molins' first planning application for the development of commercial property onthe 26 acre site at Saunderton was made in the second half of 2005 and wasrejected by Wycombe District Council. A second application was made in August2006, which addresses the issues raised by the Council from the firstapplication and the response is awaited. Outlook The Tobacco Machinery division is undertaking the next step in its fundamentalrestructuring of the business, with the remaining assembly and machiningoperations moving from Saunderton to the Czech Republic. This will result in areorganisation charge in the second half of the year. The physical moves arenot planned to be completed until the first months of 2007 allowing the businessto finish its current work-load at the Saunderton facility. Order intake hasbeen disappointing, especially for new and rebuild machinery, and tradingprofits in the year are expected to be lower than in 2005. The Packaging Machinery division is experiencing positive trends in its orderintake, which is expected to be reflected in an increase in sales in the secondhalf of the year and an improvement in profitability. Margins, though, areunder pressure, as Sandiacre Rose Forgrove continues to face difficult marketconditions and Langen's robotics and integration projects deliver lower margins,as a higher proportion of the sales value comes from products bought-in frombusiness partners. The Scientific Services division is well placed to sustain its progress, withArista expected to perform strongly, compensating for a softening in Cerulean'sperformance. Peter ByromChairman30 August 2006 Consolidated income statement 6 months to 30 June 2006 6 months to 30 June 2005 Before Before reorganisation Reorganisation reorganisation Reorganisation Total Total costs (restated)Continuing operations costs costs (restated) costs Notes £m £m £m £m £m £m (note 4) (note 4) Revenue 3 45.8 - 45.8 51.7 - 51.7 Operating profit/(loss) 3, 4, 6 2.0 (0.1) 1.9 2.9 (2.0) 0.9Profit on closure of associate 5 - - - - 0.5 0.5 2.0 (0.1) 1.9 2.9 (1.5) 1.4Profit/(loss) before financingcostsFinancial income 0.1 - 0.1 0.1 - 0.1Financial expenses (0.6) - (0.6) (0.7) - (0.7) Net financing costs (0.5) - (0.5) (0.6) - (0.6) Profit/(loss) before tax 1.5 (0.1) 1.4 2.3 (1.5) 0.8 Taxation (0.4) - (0.4) (0.6) 0.5 (0.1) Profit/(loss) for the period 1.1 (0.1) 1.0 1.7 (1.0) 0.7 Discontinued operation Loss from discontinued operation 11 (10.0) - (10.0) (0.8) - (0.8) Profit/(loss) for the period (8.9) (0.1) (9.0) 0.9 (1.0) (0.1) Basic earnings/(loss)per ordinary share 7 (48.6)p (0.3)p Diluted earnings/(loss)per ordinary share (48.6)p (0.3)p Continuing operations Basic earningsper ordinary share 7 5.4p 4.0p Diluted earningsper ordinary share 5.0p 3.7p Consolidated income statement (continued) 12 months to 31 December 2005 Before reorganisation Goodwill Reorganisation Total costs impairment costs (restated)Continuing operations (restated) (restated) Notes £m (restated) £m £m £m (note 4) Revenue 3 103.2 - - 103.2 Operating profit/(loss) 3, 4, 6 6.8 - (2.3) 4.5 Profit on closure of associate 5 - - 0.5 0.5 6.8 - (1.8) 5.0Profit/(loss) before financing costsFinancial income 0.3 - - 0.3Financial expenses (1.3) - - (1.3) Net financing costs (1.0) - - (1.0) Profit/(loss) before tax 5.8 - (1.8) 4.0 Taxation (0.9) - 0.5 (0.4) Profit/(loss) for the period 4.9 - (1.3) 3.6 Discontinued operation Loss from discontinued operation 11 (1.0) (6.7) 0.1 (7.6) Profit/(loss) for the period 3.9 (6.7) (1.2) (4.0) Basic earnings/(loss)per ordinary share 7 (21.9)p Diluted earnings/(loss)per ordinary share (21.9)p Continuing operations Basic earningsper ordinary share 7 19.2pDiluted earningsper ordinary share 17.9p Consolidated balance sheet 30 June 30 June 31 Dec 2006 2005 2005 Notes £m £m £mNon-current assetsIntangible assets 13.8 19.4 13.5Property, plant and equipment 26.4 29.0 28.7Trade and other receivables 0.6 0.9 1.2Employee benefits - 1.5 -Deferred tax assets 3.8 6.0 5.4 44.6 56.8 48.8 Current assetsInventories 20.9 30.9 27.2Trade and other receivables 19.7 23.9 22.6Taxation receivable 0.1 1.2 0.2Cash and cash equivalents 1.8 4.8 2.8Assets classified as held for sale 11 10.2 - - 52.7 60.8 52.8Current liabilitiesBank overdrafts (0.3) (1.5) (1.9)Interest-bearing loans and borrowings (3.0) (6.0) (2.4)Trade and other payables (25.1) (29.4) (25.6)Taxation payable (0.8) (1.1) (0.9)Provisions (1.5) (4.0) (2.2)Liabilities classified as held for sale 11 (14.5) - - (45.2) (42.0) (33.0) Net current assets 7.5 18.8 19.8 Total assets less current liabilities 52.1 75.6 68.6 Non-current liabilitiesInterest-bearing loans and borrowings (14.8) (18.9) (17.5)Trade and other payables (0.2) (0.1) (0.2)Employee benefits 8 (9.5) (20.4) (16.9)Deferred tax liabilities (4.1) (4.3) (4.1) (28.6) (43.7) (38.7) Net assets 23.5 31.9 29.9 EquityIssued capital 5.0 5.0 5.0Share premium 26.0 26.0 26.0Reserves 4.2 1.8 4.8Retained earnings (11.7) (0.9) (5.9) Total equity 10 23.5 31.9 29.9 Consolidated statement of cash flows 6 months 12 months 6 months to 30 June to 31 Dec to 30 June 2005 2005 2006 (restated) (restated) Notes £m £m £mContinuing operations Operating activities Operating profit 1.9 0.9 4.5Reorganisation costs included in operating profit 0.1 2.0 2.3 Amortisation 0.6 0.5 0.9Depreciation 1.2 1.2 2.4 Other non-cash items (0.5) - (0.2) Working capital movements: - (Increase)/decrease in inventories (0.8) 4.8 6.6 - (Increase)/decrease in trade and other receivables (0.1) 1.5 1.5 - Increase/(decrease) in trade and other payables 3.3 (1.8) (3.2) - Decrease in provisions (0.3) (0.1) (0.3) Cash generated from operations before reorganisation 5.4 9.0 14.5 Reorganisation costs paid (0.2) (1.8) (3.2) Cash generated from operations 5.2 7.2 11.3 Taxation (paid)/received (0.3) 0.2 0.7 Net cash from operating activities 4.9 7.4 12.0 Investing activities Proceeds from sale of plant and equipment 0.3 0.1 0.3Net proceeds from closure of associate - 0.5 0.5 Acquisition of property, plant and equipment (1.2) (0.6) (1.4)Development expenditure (1.1) (0.4) (1.5) Net cash from investing activities (2.0) (0.4) (2.1) Financing activities Issue of new shares - 0.1 0.1Interest received 0.1 0.2 0.3Interest paid (0.6) (0.6) (1.3)Decrease in borrowings (0.7) (4.2) (9.5) Net cash from financing activities (1.2) (4.5) (10.4) Discontinued operation Net cash from operating activities (0.6) (2.9) (2.2)Net cash from investing activities - - 0.1Net cash from financing activities (0.5) (0.4) (0.8) Net cash from discontinued operation 11 (1.1) (3.3) (2.9) Net increase/(decrease) in cash and cash equivalents 9 0.6 (0.8) (3.4) Cash and cash equivalents at 1 January 0.9 4.2 4.2Effect of exchange rate fluctuations on cash held - (0.1) 0.1 Cash and cash equivalents at period end 1.5 3.3 0.9 Consolidated statement of recognised income and expense 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 2006 2005 2005 £m £m £mCurrency translation movements arising on foreigncurrency net investments (0.6) 1.4 1.9Actuarial gains 3.3 1.2 2.4 Net income recognised directly in equity 2.7 2.6 4.3 (9.0) (0.1) (4.0)Loss for the period (6.3) 2.5 0.3Total recognised income and expense for the period Notes to interim announcement 1. The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 2005 financial statements. The results for the full year 2005 have been extracted from the Group's full accounts for that year which included an unqualified audit report and have been filed with the Registrar of Companies. 2. The financial statements for the half year ended June 2006 have not been audited, although the auditor has carried out an independent review. 3. Segmental analysis Business segments Revenue Operating profit/(loss) 6 months 6 months 12 months 6 months 6 months 12 months to 30 June to 30 June to 31 Dec to 30 June to 30 June to 31 Dec Continuing operations 2006 2005 2005 2006 2005 2005 (restated) (restated) (restated) (restated) £m £m £m £m £m £m Tobacco Machinery 16.8 22.7 41.6 (0.1) 1.4 2.4 Packaging Machinery 19.8 20.8 43.7 0.3 0.2 1.3 Scientific Services 9.2 8.2 17.9 1.4 1.2 2.6 45.8 51.7 103.2 Underlying operating profitbefore net pension credit andreorganisation costs 1.6 2.8 6.3 Reorganisation costs (beforeprofit on closure of associate) (0.1) (2.0) (2.3) Net pension credit (excludingcurtailment costs) 0.4 0.1 0.5 Operating profit 1.9 0.9 4.5 4. The reorganisation costs (before profit on closure of associate) relate to the restructuring of the Tobacco Machinery division and comprise redundancy and other restructuring costs. 5. The profit on closure of associate relates to the receipt of loan/capital repayments in 2005, following the net write off of the investment in the Kunming Molins company in China in 2004. 6. The Group accounts for pensions under IAS 19 (revised) Employee benefits. A formal valuation of the UK pension fund was carried out at 30 June 2003 and its assumptions have been applied in the financial statements, updated to reflect conditions at 30 June 2006. The net pension credit for the 6 months to 30 June 2006 was £0.4m and a cost for the 6 months to 30 June 2005 of £0.4m (curtailment costs of £0.5m less £0.1m net credit). 7. Earnings/(loss) per ordinary share is based upon the profit/(loss) for the period and on a weighted average of 18,542,562 shares in issue during the period (30 June 2005: 18,319,586). Underlying earnings per ordinary share, which is calculated on continuing operations before net pension credit and reorganisation costs (net of taxation impact), was 4.6p for the 6 months to 30 June 2006 (6 months to 30 June 2005: 8.8p; 12 months to 31 December 2005: 24.3p). Basic loss per ordinary share for the discontinued operation was 54.0p for the 6 months to 30 June 2006 (6 months to 30 June 2005: 4.3p; 12 months to 31 December 2005: 41.1p). 8. Employee benefits include the net pension liability of the UK defined benefit pension scheme of £8.0m (31 December 2005: £14.3m) and the net pension liability of the US defined benefit pension scheme of £1.5m (31 December 2005: £0.3m), all figures before deferred tax. 9. Reconciliation of net cash flow to movement in net debt 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 2006 2005 2005 £m £m £m Increase/(decrease) in cash and cash equivalents 0.6 (0.8) (3.4)Cash inflow from movement in borrowings and finance leases 1.2 4.6 10.2 Change in net debt resulting from cash flows 1.8 3.8 6.8Net debt classified as held for sale at period end 0.9 - -Translation movements - 0.6 0.2 Movement in net debt in the period 2.7 4.4 7.0Opening net debt (19.0) (26.0) (26.0) Closing net debt (16.3) (21.6) (19.0) Analysis of net debt Cash and cash equivalents - current assets 1.8 4.8 2.8Bank overdrafts - current liabilities (0.3) (1.5) (1.9)Interest-bearing loans and borrowings - current liabilities (3.0) (6.0) (2.4)Interest-bearing loans and borrowings - non-current liabilities (14.8) (18.9) (17.5) Closing net debt (16.3) (21.6) (19.0) 10. Reconciliation of movements in equity 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 2006 2005 2005 £m £m £m Opening equity 29.9 29.2 29.2 Loss for the period (9.0) (0.1) (4.0)Currency translation movements arising on foreigncurrency net investments (0.6) 1.4 1.9Issue of new shares - 0.1 0.1Actuarial gains 3.3 1.2 2.4Equity-settled share-based transactions (LTIP) (0.1) 0.1 0.3 Net (decrease)/increase in equity (6.4) 2.7 0.7 Closing equity 23.5 31.9 29.9 11. The Group announced on 24 May 2006 its intention to either sell or close its Italian subsidiary Sasib S.p.A., part of the Tobacco Machinery division. At the balance sheet date a sale was highly probable and therefore in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations the assets and liabilities of Sasib have been classified as held for sale in the Group balance sheet. Sasib was subsequently sold on 28 July 2006. The assets and liabilities of Sasib at 30 June 2006 are shown at fair value, less costs to sell the company, and the results and cash flows of Sasib have been shown as a discontinued operation in the income statement and consolidated statement of cash flows. The comparative figures in the income statement and consolidated statement of cash flows have been restated to show the results and cash flows of the discontinued operation separately from continuing operations. Sasib S.p.A. was sold on 28 July 2006 for a nominal consideration. The discontinued operation incurred a loss of £10.0m in the 6 months to 30 June 2006, which includes a loss after tax of £1.5m incurred in the period to May 2006, plus a loss of £8.5m arising from the transaction which comprises the write-off of the net assets of Sasib, cash injected into the business following the announcement to sell or close, costs of disposal and provisions made against Sasib-related inventories held elsewhere within the Group. The net liabilities classified as held for sale in the balance sheet at 30 June 2006 were £4.3m (assets: £10.2m; liabilities £14.5m), which includes a provision for transaction expenses and further cash injections made subsequent to the balance sheet date. 12. The Interim Report will be sent to all shareholders in September 2006 and additional copies will be available from the Company's registered office at 11 Tanners Drive, Blakelands, Milton Keynes, MK14 5LU. This information is provided by RNS The company news service from the London Stock Exchange