Mpac Group Plc Regulatory News (MPAC)

31 Aug 2007 07:01

Molins PLC31 August 2007 2007 INTERIM ANNOUNCEMENT Molins PLC, the international specialist engineering company, announces itsresults for the period ended 30 June 2007. 6 months 6 months to 30 June 12 months to 30 June 2006 to 31 Dec 2007 (restated)# 2006 Sales £41.1m £40.6m £88.6mUnderlying operating profit* £1.0m £2.3m £7.6mReorganisation costs - £(0.1)m £(2.6)mProfit before tax - continuing operations £1.9m £2.2m £5.4mProfit/(loss) from discontinued operations £0.2m £(10.6)m £(12.2)mProfit/(loss) for the period £1.9m £(9.0)m £(8.5)m Underlying earnings per share* 2.7p 7.2p 24.2pBasic earnings/(loss) per share 10.1p (48.6)p (45.6)pDividend per share 2.0p - 4.0p Cash generated from operations before reorganisation -continuing operations £2.7m £4.8m £13.5mNet debt £13.2m £16.3m £12.3m * Continuing operations before net pension credit of £1.4m (30 June 2006: £0.5m;31 December 2006: £1.5m) and reorganisation costs of£nil (30 June 2006: £0.1m; 31 December 2006: £2.6m) # Restated to exclude discontinued operations where appropriate • Loss at Langen Packaging impacted division's overall result• Operational improvements lifted profits in Tobacco Machinery• Reduced profitability in Scientific Services as expected• Property transactions announced• Interim dividend of 2p following payment of 4p in March• Profits expected to be heavily weighted towards the second half Peter Byrom, Chairman, commented: "The performance of the Packaging Machinery division was disappointing in thefirst half, despite strong sales growth, principally as a result of thesignificant underperformance at Langen Packaging. Benefits from the subsequentaction will take time to be realised and we expect that Langen's performancewill continue to impact the full year's results more than previouslyanticipated. We expect that the Tobacco Machinery division will continue itsprogress. We also expect that Scientific Services will have a much improvedsecond half of the year, but that profits for the full year will fall short ofthose in 2006. "Overall, the Group is expected to produce a much stronger second halfperformance than in the first half. However, the performance on an underlyingbasis for the full year is expected to be lower than in 2006, reflecting theanticipated underperformance in the first half in Scientific Services and thedifficulties being experienced in Langen." 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 Group sales in the six months to 30 June 2007 were £41.1m (2006: £40.6m).Profit after tax in the period was £1.9m, compared with a loss in the 2006 halfyear of £9.0m. The basic earnings per share for continuing operations was 8.9p(2006: 8.8p). Underlying operating profit (continuing operations before netpension credit and reorganisation costs) was £1.0m (2006: £2.3m) and underlyingearnings per share was 2.7p (2006: 7.2p). Packaging Machinery Sales in the period were £19.7m (2006: £14.6m), with the division returning abreak-even performance (2006: £1.0m operating profit). Despite significantly increased sales arising from the much improved order bookat the start of the year, the profitability of the division was particularlyaffected by the performance of Langen Packaging, based in Canada. Langen'ssales remained at similar levels to 2006 but profit margins on a number of itsintegration and robotic projects were considerably lower than planned as thebusiness experienced cost overruns. The change in focus in this business overthe last two years, motivated by market trends, is taking longer to assimilatethan expected and has led to the business incurring a significant loss in thefirst half of the year. The business' competitive position has also beencompromised over the last two years with a 14% strengthening of the Canadiandollar against the US dollar. The high order book has been maintained whichshould lead to much higher second half sales offsetting some of the first halflosses. Langenpac's sales were substantially higher in the first half of the yearcompared with 2006 after entering the year with a strong order book. Thebusiness, which is based in the Netherlands, delivered improved profitability inthe period, although its overall gross margin was reduced as competitivepressures impacted pricing. Order intake slowed in the first half compared withthe very strong period the previous year and second half sales and profitabilityare expected to be noticeably lower than the first half. The planned move intonew leased premises in the second half of 2007 has been delayed as the site willnot be ready, although this will not have any material impact on the performanceof the business this year. ITCM's sales and profit were slightly reduced compared with the same period in2006. Its order intake this year has been strong and the business is wellplaced to deliver increased levels of sales and profit in the second half. Theextension to its production facility, increasing the available space by 50%, wascompleted in July. Tobacco Machinery Sales in the period were £14.9m (2006: £16.8m) and operating profit was £1.2m(2006: £0.1m operating loss before reorganisation costs). The division has completed the previously announced organisational changes,including the transfer of all the remaining manufacturing and substantially allof the assembly operations out of the UK to the Czech Republic and Brazilianfactories and other parts of the supply chain. The improvement in operationalefficiency and cost reductions which have arisen from this reorganisation helpedto contribute to an improved profit performance on lower sales. Order intake inthe period was marginally lower than in 2006, which is expected to lead toreduced sales in the year as a whole, although the operational changes to thedivision should continue to deliver an improved profit performance. Later this year the division will launch its new cigarette making machine withan output of 8,000 cigarettes per minute. It has been developed using industryleading technology and is targeted to meet cigarette manufacturers' needs forgreater manufacturing flexibility and lower production costs. Scientific Services Sales in the period were £6.5m (2006: £9.2m) and the division returned anoperating loss of £0.2m (2006: £1.4m operating profit). The cyclical nature of Cerulean's market has led, over the last number of years,to periods of strong performance followed by periods of weaker performance. Thereduction in order intake in the second half of 2006 and into the first half of2007, reported previously, has resulted in a sharp fall in sales in the firsthalf of the year. Order intake in the last three months has been stronger andthis is expected to contribute to a much improved performance in the second halfof the year. Cerulean continues to address its markets through the developmentof new products to complement its existing range. Arista Laboratories performed at similar levels to the comparable period in2006, although the number of contract research projects placed with the USbusiness, which was a source of sales growth in 2006, was lower in the firsthalf. Also, Arista's main customer in the UK has been reassessing the timing ofits requirements and this is likely to affect adversely the second half morethan previously expected. Overall, Arista is expected to have a stronger secondhalf than first half, but it is unlikely to match the performance of last year. Cash and equity Group net debt at 30 June 2007 was £13.2m, compared with £12.3m at 31 December2006. Net cash flow from the continuing operating activities was £1.7m in theperiod, after payments of £0.5m in respect of the reorganisation instigated in2006, and £0.5m for taxation. Non-operating cash outflows included net capitalexpenditure of £1.3m (including £0.5m for the expansion of ITCM's premises),development expenditure of £0.6m, net interest paid of £0.5m and dividends paidof £0.8m. In addition £1.0m was received consequent to the sale of Sasib S.p.A.in 2006 (although it is expected that this will be utilised in the payment ofoutstanding obligations in respect of Sasib), and £0.3m was paid in respect ofthe costs of sale of Sandiacre Rose Forgrove. Group equity increased in the period to £43.1m at 30 June 2007, compared with£24.1m at 31 December 2006. The increase arises mainly from a net increase inthe valuation of the Group's pension schemes of £17.8m and the net profit in theperiod of £1.9m, partially offset by the dividend payment of £0.8m. Dividend The Board reintroduced the payment of a dividend to ordinary shareholders in thefirst half of 2007, after an absence of three years, and has declared an interimdividend of 2p per ordinary share, which will be paid on 11 October 2007 toshareholders on the register on 14 September 2007. Pension valuations An actuarial valuation of the Group's main defined benefit scheme is beingcarried out as at 30 June 2006 and is expected to be finalised before the end ofSeptember 2007. It is expected to show a funding surplus of approximately 3% ofliabilities as at 30 June 2006, which would be a similar position to theprevious triennial valuation, despite an increase in the scheme's liabilities ofapproximately 6% due to changed mortality assumptions. It is anticipated thatthe Company will pay £1.3m into the scheme to reflect the actuarial cost of thereorganisation in the Tobacco Machinery division in 2006. Half of this will bepaid in the second half of 2007 and the balance in 2008. This will not impactthe Group's Income Statement. Total payments of £0.6m were made to the UKpension scheme in the period to 30 June 2007 in respect of current benefits. The IAS 19 (revised) Employee Benefits valuation of the UK defined benefitscheme at 30 June 2007 shows an improved position, moving from a deficit at 31December 2006 of £6.6m to a surplus of £20.5m, before deferred tax. Thisimprovement has largely arisen from an increase in corporate bond yields, whichare used as the discount rate for valuing the scheme's liabilities and to whichthe valuation is particularly sensitive. The scheme's assets were valued at£352.7m at 30 June 2007 (31 December 2006: £348.4m). The net liability of theGroup's US defined benefit schemes has increased marginally in the period to£0.6m (31 December 2006: £0.4m), before deferred tax, with assets valued at£12.5m. Property In July 2007, Molins signed a conditional contract to sell the Tobacco Machinerydivision's site at Saunderton, Buckinghamshire, comprising 26 acres of developedland and buildings, together with 25 acres of agricultural land. Theconsideration on completion is £18.85m, or £18.35m if completion is effectedbefore 30 November 2007. On completion, Molins will lease approximately 5,000square metres of building space on a rent-free basis for up to three years tocontinue its current activities. The prospective buyer is e-shelter facilityservices GmbH, a German based company providing data centre services. Thecontract provides that the buyer has a period of exclusivity during which itwill seek to satisfy various practical conditions relating to the site. Ifthese conditions are satisfied the consent of shareholders in a general meetingwill be sought, which is required in view of the size of the transactionrelative to the Group. The receipt by the buyer of satisfactory planningpermission for its development scheme is also a condition to the contract. Thebuyer has paid Molins £100,000 as a non-returnable deposit. The book value of the assets subject to the transaction was £13.3m beforedeferred tax (£10.1m after deferred tax) at 30 June 2007. Rental income fromthe site of £0.1m was received by Molins in the period to 30 June 2007 (12months to 31 December 2006: £0.2m). The net proceeds from the sale of the siteare estimated to be approximately £16m after tax and expenses. Molins made a second planning application for the development of commercialproperty on the site in August 2006. The Wycombe District Council has made nodetermination on this application, despite its statutory duties.Notwithstanding the conditional sale contract for the site, Molins has appealedagainst the non-determination of the application, but this is in its earlystages. In December 2006 Molins completed the sale of the Sandiacre Rose Forgrove (SRF)business but retained the property in Nottingham from which SRF operates, with ashort-term lease to the new owners of the business. The property was classifiedin the balance sheet at 30 June 2007 as an asset held for sale at a value of£1.8m (£1.7m after deferred tax). In August 2007 it was sold for £3.7m in cashand, after tax and expenses, is expected to realise net proceeds ofapproximately £3.1m. Outlook The performance of the Packaging Machinery division was disappointing in thefirst half, despite strong sales growth, principally as a result of thesignificant underperformance at Langen Packaging. Benefits from the subsequentaction will take time to be realised and we expect that Langen's performancewill continue to impact the full year's results more than previouslyanticipated. We expect that the Tobacco Machinery division will continue itsprogress. We also expect that Scientific Services will have a much improvedsecond half of the year, but profits for the full year will fall short of thosein 2006. Overall, the Group is expected to produce a much stronger second halfperformance than in the first half. However, the performance on an underlyingbasis for the full year is expected to be lower than in 2006, reflecting theanticipated underperformance in the first half in Scientific Services and thedifficulties being experienced in Langen. Peter Byrom, Chairman - 31 August 2007 Consolidated income statement 6 months to 30 June 2006 12 months to 31 December 2006 Before 6 months reorg. Before to 30 June costs Reorg. Total reorg. Reorg. 2007 (restated) costs (restated) costs costs Total Notes £m £m £m £m £m £m £m (note 4) (note 4) Continuing operations 3 41.1 40.6 - 40.6 88.6 - 88.6Revenue Operating profit 3,4,5 2.4 2.8 (0.1) 2.7 9.1 (2.6) 6.5 Financial income 0.1 0.1 - 0.1 0.2 - 0.2Financial expenses (0.6) (0.6) - (0.6) (1.3) - (1.3) Net financing costs (0.5) (0.5) - (0.5) (1.1) - (1.1) Profit before tax 1.9 2.3 (0.1) 2.2 8.0 (2.6) 5.4 Taxation 6 (0.2) (0.6) - (0.6) (2.4) 0.7 (1.7) Profit from continuingoperations 1.7 1.7 (0.1) 1.6 5.6 (1.9) 3.7 Discontinued operationsProfit/(loss) fromdiscontinued operations 7 0.2 (10.6) - (10.6) (12.2) - (12.2) Profit/(loss) for the period 1.9 (8.9) (0.1) (9.0) (6.6) (1.9) (8.5) Basic earnings/(loss) perordinary share 8 10.1p (48.6)p (45.6)p Diluted earnings/(loss) perordinary share 9.1p (48.6)p (45.6)p Continuing operationsBasic earnings per ordinary 8 8.9p 8.8p 20.2pshare Diluted earnings per 8.1p 8.0p 18.4pordinary share Consolidated balance sheet 30 June 30 June 31 Dec 2007 2006 2006 Notes £m £m £mNon-current assetsIntangible assets 13.3 13.8 13.3Property, plant and equipment 22.8 26.4 22.3Other receivables 0.5 0.5 0.5Employee benefits 5 20.5 - -Deferred tax assets 0.8 3.8 2.7 57.9 44.5 38.8 Current assetsInventories 14.7 20.9 12.9Trade and other receivables 18.7 19.8 23.4Taxation receivable 0.5 0.1 0.5Cash and cash equivalents 3.6 1.8 4.7Assets held for sale 11 1.8 10.2 1.8 39.3 52.8 43.3Current liabilitiesBank overdrafts (0.3) (0.3) (0.1)Interest-bearing loans and borrowings (2.0) (3.0) (4.3)Trade and other payables (25.4) (25.1) (26.8)Taxation payable (0.5) (0.8) (0.8)Provisions (2.2) (1.5) (2.8)Liabilities held for sale - (14.5) - (30.4) (45.2) (34.8) Net current assets 8.9 7.6 8.5 Total assets less current liabilities 66.8 52.1 47.3 Non-current liabilitiesInterest-bearing loans and borrowings (14.5) (14.8) (12.6)Trade and other payables - (0.2) (0.2)Employee benefits 5 (0.6) (9.5) (7.0)Deferred tax liabilities (8.6) (4.1) (3.4) (23.7) (28.6) (23.2) Net assets 43.1 23.5 24.1 EquityIssued capital 5.0 5.0 5.0Share premium 26.0 26.0 26.0Reserves 3.7 4.2 3.7Retained earnings 8.4 (11.7) (10.6) Total equity 10 43.1 23.5 24.1 Consolidated statement of cash flows 6 months 6 months to 30 June 12 months Note to 30 June 2006 to 31 Dec 2007 (restated) 2006 £m £m £mContinuing operations Operating activitiesOperating profit 2.4 2.7 6.5Reorganisation costs included in operating profit - 0.1 2.6Amortisation 0.5 0.5 1.1Depreciation 1.0 1.1 2.2Profit on sale of property, plant and equipment - - (0.3)Other non-cash items (1.2) (0.6) (1.5)Pension payments (0.6) - (0.7)Working capital movements: - (Increase)/decrease in inventories (1.8) (0.7) 2.9 - Decrease/(increase) in trade and other receivables 4.3 (0.8) (6.5) - (Decrease)/increase in trade and other payables (1.8) 2.8 7.7 - Decrease in provisions (0.1) (0.3) (0.5) Cash generated from operations before reorganisation 2.7 4.8 13.5 Reorganisation costs paid (0.5) (0.2) (1.4) Cash generated from operations 2.2 4.6 12.1Taxation paid (0.5) (0.3) (1.0) Net cash from operating activities 1.7 4.3 11.1 Investing activitiesProceeds from sale of property, plant and equipment 0.1 0.3 1.3Acquisition of property, plant and equipment (1.4) (1.0) (1.4)Development expenditure (0.6) (0.9) (1.9) Net cash from investing activities (1.9) (1.6) (2.0) Financing activitiesInterest received 0.1 0.1 0.2Interest paid (0.6) (0.6) (1.3)Decrease in borrowings (0.5) (0.7) (1.5)Dividends paid (0.8) - - Net cash from financing activities (1.8) (1.2) (2.6) Discontinued operations - - (0.2)Net cash from operating activities 0.7 (0.4) (2.2)Net cash from investing activities - (0.5) (0.3)Net cash from financing activities Net cash from discontinued operations 0.7 (0.9) (2.7) Net (decrease)/increase in cash and cash equivalents 9 (1.3) 0.6 3.8 4.6 0.9 0.9Cash and cash equivalents at 1 January - - (0.1)Effect of exchange rate fluctuations on cash held 3.3 1.5 4.6Cash and cash equivalents at period end Consolidated statement of recognised income and expense 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 2007 2006 2006 £m £m £mCurrency translation movements arising on foreigncurrency net investments - (0.6) (1.3)Actuarial gains 17.8 3.3 3.8Tax on items taken directly to equity (0.1) - - Net income recognised directly in equity 17.7 2.7 2.5 Currency translation movements transferred to loss on disposalsProfit/(loss) for the period - - 0.2 1.9 (9.0) (8.5)Total recognised income and expense for the period 19.6 (6.3) (5.8) 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 2006 financial statements. The results for the full year 2006 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 period ended 30 June 2007 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 6 months to 30 June 12 months 6 months to 30 June 12 months to 30 June 2006 to 31 Dec to 30 June 2006 to 31 DecContinuing operations 2007 (restated) 2006 2007 (restated) 2006 £m £m £m £m £m £m Packaging Machinery 19.7 14.6 33.9 - 1.0 2.5 Tobacco Machinery 14.9 16.8 36.2 1.2 (0.1) 1.9 Scientific Services 6.5 9.2 18.5 (0.2) 1.4 3.2 41.1 40.6 88.6 Underlying operating profitbefore net pension credit andreorganisation costs 1.0 2.3 7.6 Reorganisation costs - (0.1) (2.6) Net pension credit (excludingcurtailment costs) 1.4 0.5 1.5 Operating profit 2.4 2.7 6.5 4. The reorganisation costs in 2006 relate to the restructuring of the Tobacco Machinery division and comprise redundancy (including related pension costs) and other restructuring costs. 5. The Group accounts for pensions under IAS 19 (revised) Employee benefits. A formal valuation of the UK pension fund is being carried out as at 30 June 2006 and its assumptions, modified as appropriate, have been applied in the financial statements, updated to reflect conditions at 30 June 2007. Operating profit includes a net pension credit for the 6 months to 30 June 2007 of £1.4m (6 months to 30 June 2006: £0.5m; 12 months to 31 December 2006: £1.5m excluding curtailment costs). In addition, in the 12 months to 31 December 2006, curtailment costs of £0.9m arising from redundancies were incurred, which are reported in reorganisation costs, and a net pension credit of £0.5m (6 months to 30 June 2006: £0.1m cost) was reported in respect of the discontinued operation Sandiacre Rose Forgrove. Employee benefits comprise the current net pension surplus of the UK defined benefit pension scheme of £20.5m (31 December 2006: £6.6m liability) and the current net pension liability of the US defined benefit pension schemes of £0.6m (31 December 2006: £0.4m), all figures before deferred tax. Deferred tax has been applied at 28% to the surplus in the UK scheme, being the corporation tax rate that will be in force from 1 April 2008. The appropriateness of applying this rate in future periods will be kept under review. 6. The tax charge for the period to 30 June 2007 of £0.2m includes a credit of £0.4m relating to the effect on deferred tax balances of the reduction in the UK corporation tax rate from 30% to 28% as of 1 April 2008, which was substantively enacted in June 2007. 7. Profit from discontinued operations in the period to 30 June 2007 comprises rental income received from the Nottingham property occupied by HayssenSandiacre Europe, formerly Sandiacre Rose Forgrove, a business which was disposed of by the Group in 2006, and a prior year tax adjustment relating to this business. The loss from discontinued operations in 2006 comprises the losses on trading and on disposal of Sasib S.p.A. and the Sandiacre Rose Forgrove business, both of which were sold in that year. 8. Basic earnings/(loss) per ordinary share is based upon the profit/ (loss) for the period and on a weighted average of 18,836,600 shares in issue during the period (30 June 2006: 18,542,562). Underlying earnings per ordinary share, which is calculated on continuing operations before net pension credit and reorganisation costs, was 2.7p for the 6 months to 30 June 2007 (6 months to 30 June 2006: 7.2p; 12 months to 31 December 2006: 24.2p). 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 2007 2006 2006 £m £m £m Net (decrease)/increase in cash and cash equivalents (1.3) 0.6 3.8Cash inflow from movement in borrowings and finance leases 0.5 1.2 1.8 Change in net debt resulting from cash flows (0.8) 1.8 5.6Net debt classified as held for sale at period end - 0.9 -Decrease in borrowings and finance leases on sale of discontinued operations - - 0.9Translation movements (0.1) - 0.2 Movement in net debt in the period (0.9) 2.7 6.7Opening net debt (12.3) (19.0) (19.0) Closing net debt (13.2) (16.3) (12.3) Analysis of net debtCash and cash equivalents - current assets 3.6 1.8 4.7Bank overdrafts - current liabilities (0.3) (0.3) (0.1)Interest-bearing loans and borrowings - current liabilities (2.0) (3.0) (4.3)Interest-bearing loans and borrowings - non-current liabilities (14.5) (14.8) (12.6) Closing net debt (13.2) (16.3) (12.3) 10. Reconciliation of movements in equity 6 months 6 months 12 months to 30 June to 30 June to 31 Dec 2007 2006 2006 £m £m £m Opening equity 24.1 29.9 29.9 Profit/(loss) for the period 1.9 (9.0) (8.5)Currency translation movements arising on foreigncurrency net investments - (0.6) (1.3)Actuarial gains 17.8 3.3 3.8Tax on items taken directly to equity (0.1) - -Currency translation movements transferred to loss ondisposals - - 0.2Equity-settled share-based transactions (LTIP) 0.2 (0.1) -Dividends to shareholders (0.8) - - Net increase/(decrease) in equity 19.0 (6.4) (5.8) Closing equity 43.1 23.5 24.1 11. Subsequent events Subsequent to the balance sheet date, the Group signed a conditional contract to sell the freehold interest in its land and buildings at Saunderton for a consideration of £18.85m (or £18.35m if completion is before 30 November 2007), subject to the buyer's due diligence, Molins shareholder approval and the receipt by the buyer of satisfactory planning permission. At 30 June 2007 the book value of the assets subject to the transaction was £13.3m before deferred tax. The Group sold its Nottingham property for £3.7m before costs in August 2007. The property was classified in the balance sheet at 30 June 2007 as an asset held for sale at a value of £1.8m before deferred tax. 12. The Interim Report will be sent to all shareholders in September 2007 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