Last checked at 26 Feb 2010 07:00
2009 PRELIMINARY ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its results for the year ended
31 December 2009.
|
|
2009 |
| 2008 (restated)# |
|
| Sales Underlying operating profit* Profit before tax - continuing operations Profit for the period
Underlying earnings per share§ Basic earnings per share Dividends per share
Net cash from operating activities - continuing operations Net funds/(debt) | £83.8m £3.5m £2.1m £1.1m
11.3p 5.8p 5.0p
£8.0m £5.0m |
| £91.5m £3.0m £8.8m £6.7m
10.9p 35.2p 5.0p
£(3.2)m £(0.4)m |
|
# Restated to reflect changes in accounting for tax in respect of the UK pension scheme and in respect of underlying operating profit and underlying earnings per share to include the service cost of providing pension benefits to employees
* Continuing operations before exceptional charge of £0.4m (2008: £1.7m profit)
§ Continuing operations before exceptional charge of £0.4m (2008: £1.5m profit) and net financing expense on pension scheme balances of £0.6m (2008: £3.1m income), all figures after tax
| • Increase in underlying earnings |
| • Strong cash flows, resulting in net funds of £5.0m |
| • Funding plan for UK pension scheme agreed |
| • Higher level of order book entering 2010 |
| • Final dividend maintained at 2.5p per share |
Dick Hunter, Chief Executive, commented:
"The Group improved its underlying operating profit and generated significant cash flows. Performance in Tobacco Machinery and Scientific Services was strong, although performance in Packaging Machinery was disappointing. Overall, we expect performance in 2010 to be similar to that of last year."
| 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
I am pleased to report that despite difficult economic circumstances, underlying operating profit (continuing operations before exceptional items) improved to £3.5m (2008: £3.0m), even though sales were lower at £83.8m (2008: £91.5m). Underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 11.3p (2008: 10.9p). Basic earnings per share amounted to 5.8p (2008: 35.2p). The Group ended 2009 with net funds of £5.0m (2008: £0.4m net debt), which was the result of strong operating cash flow in the year of £8.0m.
The Group started 2010 with an improved order book, although there is continuing uncertainty in all markets. The Tobacco Machinery division's new Octave cigarette making machine has generated good levels of interest with a number of significant orders received in the year. The management of the Langen Packaging Group, part of the Packaging Machinery division which had a disappointing year, has been reorganised so as to benefit from the different experiences of the North American and European markets and to serve better its global customers. The Scientific Services division performed strongly and improved its trading in the year.
UK Pension Scheme
We are almost at the end of the regular triennial actuarial funding valuation of Molins' UK defined benefit pension scheme as at 30 June 2009. Using assumptions appropriate for the scheme's circumstances the trustee has valued the scheme at a funding level of 96%, which equates to a deficit of £12.1m. The Company and the trustee have agreed a deficit recovery plan under which the Company will pay £1.2m per annum to the scheme, in monthly instalments commencing July 2010. This translates to a nine year recovery plan, subject to review at the next triennial valuation in 2012. Both the valuation and the recovery plan are, in the normal way, subject to review by the Pensions Regulator.
To assist shareholders we now show within underlying operating profit a charge for the service cost of providing pension benefits to employees of £1.0m (2008: £1.4m). This had previously been excluded from the definition of underlying operating profit.
The Company continues to balance its responsibilities to all stakeholders, as it takes actions to strengthen the business.
Outlook and Dividends
As stated we have entered the year with a higher level of order book than twelve months earlier and expect that sales will improve in the current year. We will remain vigilant in respect of the cost base and continue to monitor it closely. However in 2009 performance in Tobacco Machinery and Scientific Services each benefited from a favourable sales mix and we expect that both divisions will find it challenging to maintain the same level of performance this year. Overall, we expect performance to be similar in the current year with that of last year.
The Board is recommending maintaining the final dividend of 2.5p, making a total of 5.0p for the year (2008: 5.0p).
Jonathan Azis, Chairman
26 February 2010
OPERATING REVIEW
Tobacco Machinery
The division delivered sales of £36.0m in the year (2008: £34.9m as reported, £36.6m at constant exchange rates) and operating profit, before exceptional items, increased to £2.9m (2008: £2.3m). This level of performance was achieved despite uncertainties in the market and benefited from a favourable aftermarket sales mix.
Order intake was 15% higher than in the previous year (on constant exchange rates), with the increase mainly as a result of a significant order for the division's new Octave cigarette making machine, following successful completion of its full production trial. These machines will be delivered in a phased manner, during 2010 and 2011, although at lower profit margins than would be expected on an ongoing basis, as the division develops its logistics and assembly operations for this machine. Orders have also been received from other customers for this machine, which represents a promising product launch. Although orders for rebuild machines were down, demand for aftermarket products was maintained at similar levels to last year, although this was supported by a few one-off equipment upgrade projects.
Sales were maintained at broadly similar levels across the product range. Geographically, lower sales in North and South America were compensated for by increases in the rest of the world. Demand in North America, which is serviced by the division's sales and service operation in Richmond, USA, showed some signs of weakness in the year, with very limited sales of machinery, but aftermarket was supported by strong sales of performance enhancement kits. Sales in South America, from the division's service and manufacturing facility in Brazil, were impacted by uncertainty created in the Brazilian market from increases in the taxation of tobacco consumer products. This led to a number of customers delaying investment activities and as a result sales of rebuild machines were lower than in the previous year. The business responded by reducing its headcount in the year by some 25% at a cost of £0.2m (reported within exceptional items), with overall divisional headcount reduced by 9% in the year.
Sales in the Asia Pacific region, which is serviced from the division's operation in Singapore, showed growth in the year, with particularly strong sales into China, partly as a result of demand created by the major overhaul and upgrading of a customer's factory. However, local sourcing by customers of spare parts in China continues, which presents challenges in respect of maintaining sales levels in this territory. The Asia Pacific sales team, which is based out of the division's operation in Singapore, continues to provide support and service to a wide range of existing customers, as well as developing new leads with businesses that are seeking to upgrade their factories into more automated production facilities. The Europe, Middle East and African region is serviced from the division's UK operation at Saunderton. Sales in these territories were strong in the period, with increased sales of machines offsetting a small decline in aftermarket sales. The UK remains the engineering and logistics centre of the division, and further development and improvement of existing products and of the supply chain progressed in the year. Having resided on the Saunderton site for over 50 years, the UK business, which includes the division's main warehousing activities, will relocate to new leased premises a few miles away in Princes Risborough by the end of the first half of 2010.
The division's profitability was strongly supported by the manufacturing and assembly facility in Plzen, Czech Republic. The combination of a strong and balanced factory loading, as well as continued operational efficiency improvements, contributed to lower unit costs and helped the division maintain profit margins despite a slightly adverse sales mix compared with the previous year. This was despite the further strengthening of the average value of the Czech currency in the period, which continues to put pressure on cost rates. Having developed the Octave machine in the UK, much work has centred on the development of the assembly skills for this machine in the Czech Republic, which has progressed well.
Many challenges continue to face the tobacco industry and these have led to consolidation of manufacturers and rationalisation of their production capacity, which in turn leads to uncertain market conditions. The division has focused on the quality of its service performance, as well as engineering developments aimed at enhancing its core product offering, and this has contributed to a strong performance in the year. Performance in 2010 will be partly dependent on timing of orders for new machinery and repair and overhaul.
Packaging Machinery
Performance in the year was substantially lower than in the previous year, with sales of £25.8m (2008: £37.0m as reported, £39.8m at constant exchange rates) and operating loss, before exceptional items, of £1.9m (2008: £0.3m).
The division comprises ITCM, based in Coventry, UK, which provides innovative machinery and engineering solutions to packaging and processing needs, Cerulean Packing, based in Milton Keynes, UK, which supplies tube packing machinery and the Langen Packaging Group, based in Mississauga, Canada and in Wijchen, the Netherlands, which supplies highly automated product handling, cartoning and robotic end-of-line machinery and systems.
The division entered 2009 with a much lower order book than twelve months earlier, following weak levels of order intake in the second half of 2008. Order intake strengthened a little in the first half of 2009 and improved further in the second half, resulting in it being some 30% ahead of the previous year and the order book entering 2010 being considerably higher than twelve months previously. However, this still represents lower levels of prospective activity than has typically been the case in prior years and is a reflection of the continuing difficult economic conditions. This is being felt particularly in North America, where potential orders are still taking a long time to formalise and placement tends to get delayed. The European market is also difficult, but there have been some signs of increased activity in the last few months.
The businesses took steps to reduce operating costs, with a reduction in headcount of 15% in the year. However, whilst this helped in balancing resources with the workload, cost over-runs on a number of projects adversely impacted the trading performance of the division.
ITCM had a particularly difficult year. Although order intake was ahead of the previous year, a significant proportion of these orders are for delivery in 2010. Sales in 2009 were considerably lower than the previous year. Performance was also impacted by two technically challenging projects that incurred significant cost over-runs. One of these projects was successfully commissioned at the customer's factory in the year.
Within the Langen Packaging Group much work has been carried out to ensure that the review and risk assessment processes are robust so projects are delivered with the planned profit margins. This has continued to progress, aided by the greater links between the Dutch and Canadian management groups. Nevertheless, a number of projects delivered disappointing profit margins and this remains a major area of focus. Overall the Langen Packaging Group delivered a similar level of performance compared with the previous year, on considerably lower sales. The Canadian business is particularly affected by the strength of the Canadian dollar compared with the US dollar, with the majority of its sales being made in the United States, and work is focused on the logistics process to partly mitigate this effect. Langen Packaging Group has continued to develop its products, with the emphasis placed on harmonisation of the range between the Netherlands and Canada, whilst maintaining the flexibility to meet the most demanding of customers' product handling and packaging needs.
Cerulean Packing, which forms a small part of the division, delivered a lower level of sales and profit in the year, although prospects for 2010 are a little improved.
Overall, a combination of considerably lower sales and cost over-runs on a number of projects resulted in a particularly disappointing performance in the year. Although the order book was higher entering 2010, the market conditions are still weak and the outlook remains uncertain. Management is focused on improving project management processes and reducing the cost base where there is excess capacity whilst maintaining high levels of customer support and service.
Scientific Services
The division, which comprises Cerulean and Arista Laboratories, delivered a strong performance in the year, with sales of £22.0m (2008: £19.6m as reported, £20.8m at constant exchange rates) and operating profit of £2.5m (2008: £1.0m before exceptional items).
Cerulean is the market-leading supplier of quality control instruments and analytical smoke constituent capture machinery to the tobacco industry. It is based in Milton Keynes, UK and is complemented by sales and service offices in a number of other key geographical areas in supporting its global customer base.
Sales in the year exceeded expectations, with demand being maintained relatively evenly through the year. Whilst all markets remained strong, particular success was achieved in China where Cerulean's work in re-establishing itself in this market resulted in a further increase in sales. Demand rose for smoking machines and quality control instruments, which includes the well established QTM range, the C² range and the newer Quantum range, as well as a series of smaller and more specific instruments developed over the last few years. Additionally, sales into the aftermarket grew in the year, which helped to improve profit margins.
Cerulean remains focused on maintaining its product leadership and continues to commit significant resources to development activities. These include not only the enhancement of the current range, but also a widening of the product portfolio, as well as research work in more innovative concepts which may lead to development of future products. Much attention has also been focused this year on the supply chain, as a few suppliers have been affected by the difficult economic conditions, leading to potential disruption to supply. The business has developed further contingency plans in the period to counteract this risk and worked with suppliers to help alleviate any difficulties so that customers have not been affected.
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. Its sales in the year were at similar levels to the previous year, but margins were improved through a more evenly spread distribution of work in the year, thereby helping laboratory efficiency.
In June 2009 US legislation was passed placing the regulation of tobacco products with the US Food and Drug Administration (FDA). The full consequences of this, in terms of the required testing regimes, will become understood as the FDA develops its regulatory system. It is expected that this change in regulation will lead to increased business opportunities for Arista in the medium term and consequently it is investing in its systems and infrastructure, as well as maintaining dialogue with those current and prospective customers who will be affected by the legislation.
Both businesses in the division operate to short order lead-times which can change their outlook quite quickly. With Cerulean, the market remains quite buoyant currently, although the level of order intake in 2009 was boosted in some markets by both the need to meet specific regulatory requirements and to modernise factory floor instrumentation. As these projects are completed the business expects to see some reduction in the current level of sales activity in these markets. There are no short-term indicators at Arista which would suggest activity levels are likely to change significantly in 2010, although the business is dependent on a number of non-repeating projects in any one year, the level of which is difficult to predict.
FINANCIAL REVIEW
Profit in the period was £1.1m (2008: £6.7m). Underlying operating profit (continuing operations before exceptional items) was £3.5m (2008: £3.0m) and underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 11.3p (2008: 10.9p). Basic earnings per share (continuing operations) amounted to 6.3p (2008: 35.2p). Net funds at the end of the year were £5.0m, following strong operating cash flows (2008: £0.4m net debt).
To aid the understanding of the Group's performance, the definition of underlying operating profit has been changed this year to include the service cost of providing pension benefits to employees. Similarly, the underlying earnings per share definition has been changed to only exclude exceptional items and net financing income/expense on pension scheme balances, as well as discontinued operations. All comparative figures have been restated accordingly. In addition, the Group has formally adopted IFRIC 14 IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction for the year ended 31 December 2009, although had applied its principles in 2008. The interpretation of the accounting treatment of tax under IFRIC 14 has changed and consequently the results for the year ended 31 December 2008 have been restated and the Group's tax liability on the UK pension scheme surplus has been reclassified from employee benefits to deferred tax liabilities. The effect of these changes has been to increase the taxation charge in the income statement for the year ended 31 December 2008 by £1.9m. This amount was previously recognised through the statement of recognised income and expense. The tax liability of £0.9m at 31 December 2008 on the UK pension scheme surplus has been reclassified from employee benefits to deferred tax liabilities. As a consequence of the restatement, and in accordance with IAS 1 (revised) Presentation of financial statements, the financial statements include the statement of financial position as at 31 December 2007.
Operating Results
The trading performance of the Group is discussed in the Operating review.
Group revenue was £83.8m, compared with £91.5m in 2008. Sales in the Tobacco Machinery division were £36.0m (2008: £34.9m) and operating profit before exceptional items was £2.9m (2008: £2.3m). Packaging Machinery division sales decreased to £25.8m (2008: £37.0m) and the operating loss before exceptional items was £1.9m (2008: £0.3m). Scientific Services division sales increased to £22.0m (2008: £19.6m) and operating profit before exceptional items increased to £2.5m (2008: £1.0m).
Exceptional Items
The Group incurred net exceptional charges of £0.4m in the year (2008: £1.7m profit), before tax. This comprised reorganisation costs of £0.7m (2008: £1.4m), reflecting redundancies made within the Tobacco Machinery and Packaging Machinery divisions, and net profit in respect of property of £0.3m (2008: £3.1m), comprising £0.4m profit from the sale of the Langen Packaging Group property in the Netherlands for a sum of £1.0m, less costs of £0.1m associated with the preparation for the move from the Saunderton site.
Following the sale of the Company's former site at Saunderton in December 2008, notice was served to the Company in June 2009 for the tobacco machinery business that still operates from there to vacate the site within twelve months in accordance with the sale agreement. This resulted in a payment of £0.4m to the Company as compensation for the loss of the agreed rent-free occupation of the site until December 2011. The Company also received a final payment of £0.1m in respect of the sale of the site. Alternative premises have been located within the vicinity of Saunderton and the Company entered into a lease agreement prior to the end of the year. The business will be relocated during the first half of 2010, for which a non-capital cost provision of £0.6m was held at the end of the year. In addition the business is expected to incur capital leasehold improvement expenditure of approximately £1.2m in 2010.
Interest and Taxation
Net interest expense in 2009 was £1.0m (2008: £4.1m net interest income). Included within net interest is the net financing expense on pension scheme balances of £0.9m (2008: £4.8m net financing income), which is explained in the Pension Valuations paragraph below. Non-pension related net interest expense was £0.1m, compared with £0.7m in the previous year. The tax charge on underlying profits (continuing operations before exceptional items and net financing income/expense on pension scheme balances) was £1.2m, an effective rate of 35% (2008: 9%, reflecting a number of non-recurring credits). The total taxation charge on the Group's profit before tax on continuing operations was £0.9m (2008: £2.1m), an effective rate of 43% (2008: 24%). The effective rate of tax was impacted by permanent differences and losses in jurisdictions where no related deferred tax asset has been recognised, partly mitigated by tax incentives.
Earnings per Share
Basic earnings per share amounted to 5.8p (2008: 35.2p). Basic earnings per share for continuing operations amounted to 6.3p (2008: 35.2p) and underlying earnings per share (continuing operations before exceptional items and net financing income/expense on pension scheme balances) amounted to 11.3p (2008: 10.9p).
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 2009, results in a total dividend of 5.0p per ordinary share in respect of 2009 (2008: 5.0p per ordinary share). The dividend will be paid on 14 May 2010 to shareholders registered at the close of business on 23 April 2010.
Cash, Treasury and Funding Activities
Group net funds were £5.0m at the end of the year (2008: £0.4m net debt). Net cash inflow from operating activities was £8.0m (2008: £3.2m outflow), which benefited from a positive working capital movement of £2.7m (2008: £6.8m adverse) and is after payments of £1.2m in respect of reorganisation costs, including pension related payments of £0.5m in respect of redundancies carried out in 2008 and £0.1m in respect of redundancies in 2009, and net taxation payments of £0.2m (2008: £0.7m). Capital expenditure of £1.6m (2008: £1.2m) and capitalised product development expenditure of £1.1m (2008: £1.5m) were incurred in the year. The Group received in aggregate £1.5m in respect of the sale in 2008 of the site at Saunderton and the sale in the year of property in the Netherlands. The sale of surplus plant and equipment returned cash receipts of £0.1m (2008: £0.2m). Net interest of £0.1m (2008: £0.7m) and dividends of £1.0m (2008: £1.5m) were also paid in the year. The net cash outflow in respect of discontinued businesses that were sold in 2006 was £0.4m (2008: £0.4m).
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 2009 these comprised secured, committed borrowing facilities with Lloyds TSB Bank plc and Fortis Bank SA/NV of £11.1m. 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 multi‑currency denominated. The Group is operating well within covenant levels. Additionally, the Group maintains a committed facility overseas of £3.1m, denominated in US dollars. Short‑term overdrafts and borrowings are utilised in certain parts of the Group to meet local cash requirements and these are typically denominated in local currencies. Foreign currency borrowings are used to hedge investments in overseas subsidiaries where appropriate.
Pension Valuations
Significant progress has been made on the scheme specific funding valuation of the Group's defined benefit scheme in the UK as at 30 June 2009. The trustee of the scheme has set assumptions for this valuation, having consulted with the Company as appropriate. The valuation shows a funding level of 96% of liabilities, which represents a deficit of £12.1m. The previous valuation in 2006 resulted in a funding level of 102% of liabilities, the decline being mainly as a consequence of changed financial conditions in the global economy and the impact on asset values, as well as a further strengthening of the mortality assumptions in line with empirical evidence. The solvency position of the fund, which reflects the scheme's position if it was wound up at that date, shows a funding level of 60%. Valuations are extremely sensitive to a number of factors outside the control of the Group, including discount rates. The trustee of the scheme and the Company have agreed a deficit recovery plan, which commits the Company to paying to the scheme £1.2m per annum, in monthly instalments, commencing July 2010. The deficit recovery period is estimated to be nine years, which is scheduled to be formally reassessed as at 30 June 2012. In addition to the deficit recovery payments, Company contributions from 1 July 2010 for ongoing benefits will be 3.3% in respect of members who joined the scheme after March 2006 and 7.9% for the majority of other members, reduced from the current rates of 5% and 11% respectively. The valuation and deficit recovery plan will shortly be submitted to the Pensions Regulator for its review, which is the standard process for all such valuations.
The Group has adopted IAS 19 (revised) as its basis of accounting for pension costs. The 2009 accounting valuation of the UK fund's assets and liabilities was undertaken as at 31 December 2009 based on the detailed funding valuation work carried out as at 30 June 2009, updated to reflect conditions existing at the 2009 year end and to reflect the specific requirements of IAS 19 (revised). The smaller US defined benefit schemes were valued at 31 December 2009, using actuarial data as of 1 January 2009, 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. The IAS 19 (revised) valuation of the UK scheme showed a net deficit of £11.4m at 31 December 2009 (2008: £2.7m surplus), before tax. The value of the scheme's assets at 31 December 2009 was £313.0m (2008: £283.8m), but this increase was more than offset by an increase in the value of the scheme's liabilities as the discount rate has decreased reflecting the fall in corporate bond yields. The accounting valuations of the US pension schemes showed an aggregated netdeficit of £3.1m (2008: £3.8m), all amounts being before tax, with assets of £13.5m (2008: £13.4m).
In previous years the net accounting charge/credit in respect of the defined benefit schemes, which comprises the service cost of providing such benefits each year, the interest cost on scheme obligations (IOO) and the expected return on scheme assets (ERA), has been charged/credited within operating profit in the income statement. As an alternative to this treatment, IAS 19 (revised) allows for the IOO and the ERA to be charged/credited to financial income and expense in the income statement, which, to provide greater clarity of the impact of the Group's defined benefit schemes on the income statement, the Group has chosen to do from this year. Comparative figures for prior years have been restated accordingly.
In 2009, the pension service cost charged to operating profit was £1.0m (2008: £1.4m), before curtailment costs. Net financing expense in respect of the schemes was £0.9m (2008: £4.8m income), comprising IOO of £18.6m (2008: £19.7m) and ERA of £17.7m (2008: £24.5m). Mainly as a result of the increase in the value of the schemes' assets, since the beginning of 2009, the Group expects to report net financing income on pension scheme balances in 2010 of around £2m, which compares to net financing expense of £0.9m in 2009.
During the year the Company made payments to the UK defined benefit scheme of £0.8m for the regular cost of benefits and £0.6m for pension augmentation costs relating to redundancies announced in 2008 and 2009. Only negligible payments were made to the US schemes.
Equity
Group equity at 31 December 2009 was £31.3m (2008: £40.2m). The movement arises from profit for the period of £1.1m, favourable movements on the fair value of cash flow hedges of £0.5m (net of tax), less actuarial losses, net of tax, in respect of the Group's defined benefit schemes of £9.3m, dividend payments of £1.0m and equity‑settled share‑based transactions of £0.2m.
CONSOLIDATED INCOME STATEMENT
|
|
| 2009 |
| 2008 | ||||
|
|
Notes |
Before exceptional items £m |
Exceptional items £m (note 3) |
Total £m |
| Before exceptional items (restated) £m |
Exceptional items (restated) £m (note 3) |
Total (restated) £m |
| Continuing operations Revenue
Cost of sales
|
2 |
83.8
(59.7)
|
-
(0.2)
|
83.8
(59.9)
|
|
91.5
(67.7)
|
-
(0.4)
|
91.5
(68.1)
|
| Gross profit
Other operating income
Distribution expenses
Administrative expenses
Other operating expenses
|
| 24.1
-
(7.2)
(13.0)
(0.4)
| (0.2)
0.4
(0.1)
(0.3)
(0.2)
| 23.9
0.4
(7.3)
(13.3)
(0.6)
|
| 23.8
0.2
(6.7)
(13.9)
(0.4)
| (0.4)
3.1
(0.1)
(0.4)
(0.5)
| 23.4
3.3
(6.8)
(14.3)
(0.9)
|
| Operating profit
| 2, 4 | 3.5 | (0.4) | 3.1 |
| 3.0 | 1.7 | 4.7 |
| Financial income Financial expenses |
| 17.8 (18.8)
| - -
| 17.8 (18.8)
|
| 24.6 (20.5)
| - -
| 24.6 (20.5)
|
| Net financing (expense)/income |
4 |
(1.0)
|
-
|
(1.0)
|
|
4.1
|
-
|
4.1
|
| Profit before tax
Taxation |
| 2.5
(0.9)
| (0.4)
-
| 2.1
(0.9)
|
| 7.1
(1.9)
| 1.7
(0.2)
| 8.8
(2.1)
|
| Profit from continuing operations
|
|
1.6
|
(0.4)
|
1.2
|
|
5.2
|
1.5
|
6.7
|
| Discontinued operations |
|
|
|
|
|
|
| |
| Loss from discontinued operations |
9 |
(0.1)
|
-
|
(0.1)
|
|
-
|
-
|
-
|
| Profit for the period |
| 1.5
| (0.4)
| 1.1
|
| 5.2
| 1.5
| 6.7
|
|
Basic earnings per ordinary share
Diluted earnings per ordinary share |
5
|
|
|
5.8p
5.8p
|
|
|
|
35.2p
35.2p
|
| Continuing operations Basic earnings per ordinary share
Diluted earnings per ordinary share |
5
|
|
|
6.3p
6.3p
|
|
|
|
35.2p
35.2p
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|
2009 £m |
| 2008 (restated) £m |
| Profit for the period
| 1.1
|
| 6.7
|
| Other comprehensive income/(expense) Currency translation movements arising on foreign currency net investments Effective portion of changes in fair value of cash flow hedges Net changes in fair value of cash flow hedges transferred to profit or loss Actuarial losses Tax on items in other comprehensive income/(expense)
|
- 0.7 (0.1) (13.2) 3.8
|
|
3.3 - - (32.1) 11.4
|
| Other comprehensive income/(expense) for the period
| (8.8)
|
| (17.4)
|
| Total comprehensive income/(expense) for the period
| (7.7)
|
| (10.7)
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
Share capital £m |
Share premium £m |
Translation reserve £m | Capital redemption reserve £m |
Hedging reserve £m |
Retained earnings £m |
Total equity £m |
|
Balance at 1 January 2008 |
5.0 |
26.0 |
1.1 |
3.9 |
- |
16.3 |
52.3 |
|
Profit for the period Other comprehensive income/(expense) for the period
|
-
- |
-
- |
-
3.3 |
-
- |
-
- |
6.7
(20.7) |
6.7
(17.4) |
| Total comprehensive income/(expense) for the period
|
-
|
-
|
3.3
|
-
|
-
|
(14.0)
|
(10.7)
|
| Dividends to shareholders Equity-settled share-based transactions (LTIP)
| -
-
| -
-
| -
-
| -
-
| -
-
| (1.5)
0.1
| (1.5)
0.1
|
| Total transactions with owners, recorded directly in equity
|
- |
- |
- |
- |
- |
(1.4) |
(1.4) |
| Balance at 31 December 2008
| 5.0
| 26.0
| 4.4
| 3.9
| -
| 0.9
| 40.2
|
|
Balance at 1 January 2009 |
5.0 |
26.0 |
4.4 |
3.9 |
- |
0.9 |
40.2 |
|
Profit for the period Other comprehensive income/(expense) for the period
|
-
- |
-
- |
-
- |
-
- |
-
0.5 |
1.1
(9.3) |
1.1
(8.8) |
| Total comprehensive income/(expense) for the period
|
- |
- |
- |
- |
0.5 |
(8.2) |
(7.7) |
| Dividends to shareholders Equity-settled share-based transactions (LTIP)
| -
- | -
- | -
- | -
- | -
- | (1.0)
(0.2) | (1.0)
(0.2) |
| Total transactions with owners, recorded directly in equity
|
- |
- |
- |
- |
- |
(1.2) |
(1.2) |
| Balance at 31 December 2009
| 5.0
| 26.0
| 4.4
| 3.9
| 0.5
| (8.5)
| 31.3
|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
|
|
|
Notes |
2009 £m |
| 2008 (restated) £m |
| 2007 (restated) £m |
| Non-current assets Intangible assets Property, plant and equipment Other receivables Employee benefits Deferred tax assets
|
6 |
14.1 9.7 0.5 - 4.0
|
|
14.9 10.6 0.9 2.7 2.1
|
|
13.3 23.4 0.5 26.3 0.4
|
|
|
| 28.3
|
| 31.2
|
| 63.9
|
| Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents |
|
18.1 17.6 0.1 10.2
|
|
17.1 22.2 0.6 7.2
|
|
15.1 18.3 0.3 3.5
|
|
|
| 46.0 |
| 47.1 |
| 37.2 |
| Current liabilities Bank overdrafts Interest-bearing loans and borrowings Trade and other payables Current tax liabilities Provisions |
|
- - (20.5) (0.8) (1.9)
|
|
(0.3) - (22.4) (0.8) (2.1)
|
|
(0.8) (0.6) (25.1) (1.0) (1.8)
|
|
|
| (23.2)
|
| (25.6)
|
| (29.3)
|
| Net current assets |
| 22.8
|
| 21.5
|
| 7.9
|
| Total assets less current liabilities |
| 51.1 |
| 52.7 |
| 71.8 |
|
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Deferred tax liabilities |
6
|
(5.2) (14.5) (0.1)
|
|
(7.3) (3.8) (1.4)
|
|
(9.7) - (9.8)
|
|
|
| (19.8) |
| (12.5) |
| (19.5) |
| Net assets | 2 | 31.3
|
| 40.2
|
| 52.3
|
|
Equity Issued capital Share premium Reserves Retained earnings |
|
5.0 26.0 8.8 (8.5) |
|
5.0 26.0 8.3 0.9 |
|
5.0 26.0 5.0 16.3 |
| Total equity |
| 31.3
|
| 40.2
|
| 52.3
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Notes |
2009 £m |
| 2008 (restated) £m |
| Continuing operations Operating activities Operating profit Exceptional items included in operating profit Amortisation Impairment charge Depreciation Pension service costs Other non-cash items Pension payments Working capital movements: - increase in inventories - decrease/(increase) in trade and other receivables - decrease in trade and other payables
|
|
3.1 0.4 1.3 0.1 1.8 1.0 (0.2) (0.8)
(0.7) 5.0 (1.6)
|
|
4.7 (1.7) 1.2 - 2.0 1.4 0.1 (0.9)
(0.5) (1.5) (4.8)
|
| Cash generated from operations before reorganisation
Reorganisation costs paid Pension payment following sale of Saunderton site
|
3 |
9.4
(1.2) -
|
|
-
(1.5) (1.0)
|
| Cash generated from/(used in) operations
Taxation paid
|
| 8.2
(0.2)
|
| (2.5)
(0.7)
|
| Net cash from operating activities |
| 8.0
|
| (3.2)
|
| Investing activities Interest received Net proceeds from sale of Saunderton site Proceeds from sale of other property, plant and equipment Acquisition of property, plant and equipment Development expenditure
|
|
0.1 0.5 1.1 (1.6) (1.1)
|
|
0.1 15.7 0.2 (1.2) (1.5)
|
| Net cash from investing activities
|
| (1.0)
|
| 13.3
|
| Financing activities Interest paid Repayment of term loans Net decrease against revolving facilities Dividends paid
|
|
(0.2) (0.2) (2.0) (1.0)
|
|
(0.8) (0.6) (3.1) (1.5)
|
| Net cash from financing activities
|
| (3.4)
|
| (6.0)
|
| Discontinued operations Net cash from investing activities
|
|
(0.4)
|
|
(0.4)
|
| Net cash from discontinued operations
|
| (0.4)
|
| (0.4)
|
|
Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held
| 7 |
3.2 6.9 0.1
|
|
3.7 2.7 0.5
|
| Cash and cash equivalents at period end
|
| 10.2
|
| 6.9
|
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 2009 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 2009 or 2008. Statutory accounts for 2008 have been delivered to the Registrar of Companies. The auditors have reported on the 2009 and 2008 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 in respect of the 2008 statutory accounts or under section 498 (2) or (3) of the Companies Act 2006 in respect of the 2009 statutory accounts.
2. Operating segments
Segment information
|
| Tobacco Machinery |
| Packaging Machinery |
| Scientific Services |
| Total | ||||||||
|
|
2009 £m |
| 2008 (restated) £m |
|
2009 £m |
| 2008 (restated) £m |
|
2009 £m |
| 2008 (restated) £m |
|
2009 £m |
| 2008 (restated) £m |
|
Revenue - continuing operations |
36.0 |
|
34.9 |
|
25.8 |
|
37.0 |
|
22.0 |
|
19.6 |
|
83.8 |
|
91.5 |
|
Underlying segment operating profit/(loss) before exceptional items
Exceptional items
|
2.9
(0.3)
|
|
2.3
2.1
|
|
(1.9)
(0.1)
|
|
(0.3)
(0.2)
|
|
2.5
-
|
|
1.0
(0.2)
|
|
3.5
(0.4)
|
|
3.0
1.7
|
| Segment operating profit/(loss)
|
2.6 |
|
4.4 |
|
(2.0) |
|
(0.5) |
|
2.5 |
|
0.8 |
|
3.1 |
|
4.7 |
|
Net financing (expense)/income |
|
|
|
|
|
|
|
|
|
|
|
|
(1.0) |
|
4.1 |
| Profit before tax
Taxation
|
|
|
|
|
|
|
|
|
|
|
|
| 2.1
(0.9) |
| 8.8
(2.1) |
| Profit from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2
|
|
6.7
|
| Discontinued operations Loss from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
(0.1) |
|
- |
| Profit for the period
|
|
|
|
|
|
|
|
|
|
|
|
| 1.1
|
| 6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment assets Segment liabilities
| 26.5 (9.7)
|
| 26.6 (9.5)
|
| 16.7 (9.7)
|
| 19.4 (10.6)
|
| 8.7 (4.0)
|
| 9.9 (3.8)
|
| 51.9 (23.4)
|
| 55.9 (23.9)
|
| Segment net assets - continuing operations | 16.8 |
| 17.1 |
| 7.0 |
| 8.8 |
| 4.7 |
| 6.1 |
| 28.5 |
| 32.0 |
|
Net liabilities - discontinued operations
Unallocated net assets
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2)
3.0
|
|
(0.4)
8.6
|
| Total net assets
|
|
|
|
|
|
|
|
|
|
|
|
| 31.3 |
| 40.2 |
Geographical information
|
| Revenue (by location of customer) | ||||||
|
| 2009 £m |
| 2009 % |
| 2008 £m |
| 2008 % |
| Continuing operations |
|
|
|
|
|
|
|
| United Kingdom United States of America Rest of the world | 7.1 16.7 60.0
|
| 8 20 72
|
| 8.2 24.0 59.3
|
| 9 26 65
|
|
| 83.8
|
| 100
|
| 91.5
|
| 100
|
3. The exceptional net charge of £0.4m in the year includes costs of £0.7m related to reorganisations carried out during the year within the Tobacco Machinery division and the Packaging Machinery division, and costs of £0.1m in relation to the preparation for the relocation of the Tobacco Machinery business based at Saunderton. In addition, profit of £0.4m on the sale of a property in the Netherlands was realised in the year. Cash payments in respect of reorganisation costs of £1.2m were made in the year, including a payment of £0.6m to the UK pension scheme in respect of redundancies carried out in 2008 and 2009.
Net profit from exceptional items of £1.7m in 2008 includes profit of £3.1m on the sale of the Saunderton site. In addition, costs related to reorganisations carried out during 2008 within the Tobacco Machinery division and the Scientific Services division were £1.2m. Costs of £0.2m were also incurred in the Netherlands following the relocation of Langen Packaging to new premises. Cash payments in respect of reorganisation costs of £1.5m were made in 2008, including a payment of £0.6m 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. The 2009 accounting valuation of the UK fund's assets and liabilities was undertaken as at 31 December 2009 based on the detailed funding valuation work of the UK defined benefit scheme carried out as at 30 June 2009, updated to reflect actual experience and conditions at 31 December 2009 and to reflect the specific requirements of IAS 19 (revised). Operating profit includes pension costs of £1.1m (2008: £1.9m), comprising current service costs of £1.0m (2008: £1.4m) in respect of ongoing benefits and curtailment costs of £0.1m (2008: £0.5m) arising from redundancies in the year. Net financing (expense)/income includes the interest cost on pension scheme obligations of £18.6m (2008: £19.7m) and the expected return on pension scheme assets of £17.7m (2008: £24.5m).
5. Basic earnings per ordinary share is based upon the profit for the period of £1.1m (2008: £6.7m) and on a weighted average of 18,968,324 shares in issue during the year (2008: 18,968,324). The weighted average number of shares excludes shares held by the employee trust in respect of long-term incentive arrangements.
Basic earnings per ordinary share on continuing operations is based upon the profit from continuing operations of £1.2m (2008: £6.7m) 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 exceptional items and net financing income/expense on pension scheme balances, amounted to 11.3p for the year (2008: 10.9p).
6. Employee benefits include the net pension liability of the UK defined benefit pension scheme of £11.4m (2008: £2.7m surplus) and the net pension liability of the US defined benefit pension schemes of £3.1m (2008: £3.8m), all figures before tax.
7. Reconciliation of net cash flow to movement in net funds/(debt)
|
|
| 2009 £m
|
| 2008 £m
|
| Net increase in cash and cash equivalents Cash inflow from movement in borrowings
|
| 3.2 2.2
|
| 3.7 2.7
|
| Change in net funds/(debt) resulting from cash flows
Translation movements
|
| 5.4
-
|
| 7.4
(0.2)
|
| Movement in net funds/(debt) in the period
Opening net debt
|
| 5.4
(0.4)
|
| 7.2
(7.6)
|
| Closing net funds/(debt)
|
| 5.0 |
| 0.4 |
8. Analysis of net funds/(debt)
|
|
| 2009 £m
|
| 2008 £m
|
| Cash and cash equivalents - current assets Bank overdrafts - current liabilities Interest-bearing loans and borrowings - non-current liabilities
|
| 10.2 - (5.2)
|
| 7.2 (0.3) (7.3)
|
| Closing net funds/(debt)
|
| 5.0 |
| (0.4) |
9. Discontinued operations
The loss from discontinued operations of £0.1m (2008: £nil) comprises aggregate charges before tax of £0.2m in respect of a dilapidations claim on the Group's former site in Nottingham and a claim that relates to a former Group business but for which Molins retains the responsibility.
10. The Annual Report and Accounts will be sent to all shareholders in March 2010 and additional copies will be available on the Group's website at www.molins.com, or from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY.