Renold Regulatory News (RNO)

17 Nov 2009 07:00



Renold plc

Interim results for the half year to 30 September 2009

Renold plc, a leading international supplier of industrial chains and related power transmission products, today announces its interim results for the half year ended 30 September 2009.

Financial Summary

	Half year ended 30 September
	2009 £m		2008 £m
Revenue	75.5		95.2
Operating (loss)/profit	(3.7)		6.0
Operating (loss)/profit before exceptional items	(2.3)		6.0
(Loss)/profit before tax	(8.8)		4.1
(Loss)/profit after tax	(7.5)		2.8
Other information
Basic and diluted (loss)/earnings per share	(9.7)p		3.9p
Adjusted (loss)/earnings per share - (adjusting for the after tax effects of exceptional items and the non-cash IAS 19 finance charge)	(3.1)p		4.3p

Highlights

Fully underwritten £26.9 million net fundraising announced today

Proceeds to reduce bank debt

Remainder to repay, but not cancel, borrowings under revolving and overdraft facilities

Additional funding to invest in operational improvements

£13 million of annualised overheads eliminated since September 2008

A further £3 million reduction of annualised overheads to be achieved in 2009/10

Operational Overview

Sales adversely impacted by recession and destocking - early signs of destocking ending in Europe

Winning market share particularly with products from acquisitions in China and India 

Cost reductions of approximately £10 million should be retained as top line improves

Company well placed to take advantage of consolidation opportunities

Prospects

Matthew Peacock, Chairman of Renold plc, said:

"The business has been resized through a series of major cost reductions with an annualised reduction of £16 million expected by year end. Our markets have stabilised over the past few months albeit at significantly lower levels than last year. Destocking by both our OEM and distributor customers continues to have an adverse impact but the first signs of this coming to an end are apparent and our orders are expected to grow by the first quarter of 2010/11 as destocking ends. The £26.9 million fundraising announced today protects the Group against delayed recovery or recession after-shock and positions the Group for recovery."

17 November 2009

Renold plc	Tel: 01625 547700
Bob Davies, Group Chief Executive
Peter Bream, Group Finance Director
Singer Capital Markets	Tel: 020 3205 7500
Nicholas How
Richard Savage
College Hill	Tel: 020 7457 2020
Mark Garraway
Adam Aljewicz

Chairman's Statement 

The results for the six months to 30 September 2009 are in line with the Board's expectations with a 21% (29% at constant exchange rates) reduction in sales as a result of the global recession. Management has taken swift and aggressive actions to reduce costs, resizing the business to underlying demand levels to ensure that the Group can take advantage of a recovery in its markets, when that arrives.

Group Results

Sales for the first half to 30 September 2009 were £75.5 million (2008/09: £95.2 million), a reduction of 21% versus the same period last year (29% at constant exchange rates).

 

Operating loss before exceptional items of £2.3 million (2008/09: profit £6.0 million). Operating loss after exceptional items of £3.7 million (2008/09: profit £6.0 million).

Net financing costs of £5.1 million (2008/09: £1.9 million) including the exceptional refinancing charge of £2.3 million and net charge of £1.7 million (2008/09: £0.5 million) relating to pension plan balances which increased principally as a result of accounting for PPF levies on the UK pension schemes.

Reported tax credit of £1.3 million (2008/09: charge £1.3 million), resulting in an effective rate of 15% (2008/09: 32%). Adjusted (loss)/earnings per share of (3.1) pence (2008/09: 4.3 pence) and basic (loss)/earnings per share of (9.7) pence (2008/09: 3.9 pence).

Cash Flow and Borrowings

Cash absorbed by operations was £1.0 million (2008/09: £9.2 million). The principal working capital movements were a net reduction in payables of £7.4 million (2008/09: £10.7 million) due to seasonality and a tighter credit environment, a net reduction of £1.7 million (2008/09: increase £2.5 million) in inventory and a net reduction of £8.3 million in receivables (2008/09: increase £1.1 million) due to improved management processes and lower levels of activity. Capital expenditure amounted to £0.8 million (2008/09: £3.0 million).

Net borrowings, including finance lease obligations and preference shares, at 30 September 2009 were £39.6 million compared with £40.1 million at 30 September 2008 and £37.2 million at 31 March 2009. Movements from March 2009 being largely financing costs paid.

Dividend

The Board has recommended that no interim dividend be paid. The directors consider it unlikely that a final dividend will be paid this year but they will consider future dividend policy in the light of results from the business going forward.

Business Review

The significant downturn in sales in the second half of the last financial year continued into this financial year with a major reduction in orders and sales from most customers and markets as a result of the global economic crisis. Decisive action has been taken to resize the business to the new demand levels with a focus on cost reduction and net debt reduction. In the last 12 months the Group headcount has been reduced by 793 people (25%) including the closure of our manufacturing facility in Poland. Employment costs were further reduced through short-term working and pay-cuts for the Board, senior management teams and most staff.

As at September 2009 annualised overheads of £13 million have been eliminated. Further savings in overheads with an annual benefit of £3 million are expected to be delivered in the remainder of the year. Of this total of £16 million per year of overhead savings, approximately £10 million per year are expected to be retained in the longer term.

To assist the reduction in net debt, capital expenditure has been restricted to health and safety, equipment maintenance and spend associated with new product launches. Inventory volumes have continued to be managed down with a further reduction of £1.7 million in the first half year. 

Although overall sales are down by 29% (at a constant exchange rate), the Board believes that destocking at distributors as well as at end users accounts for approximately half of the shortfall in overall demand. The Board therefore anticipates that the end of destocking should have a positive impact on sales. The directors believe that customer destocking is now coming to an end in parts of Europe and is expected to finish in the USA by the first quarter of 2010/11. Overall order intake has improved by 20% in recent months, from a low in February 2009, showing increasing stabilisation and some early evidence of recovery.

Capital raising highlights

In August 2009 the Company finalised the renewal of its three year bank facility with The Royal Bank of Scotland plc and Fortis Bank S.A./N.V..Credit facilities under this arrangement total £31 million, including a £20 million multicurrency revolving credit facility and an £11 million multicurrency term-loan both of which expire on 30 June 2012.

Today the Company has announced that it has raised £26.9 million after expenses through the conditional completion of a firm placing and placing and open offer of 142,500,000 new ordinary shares at 20p per share. The placing is conditional, inter alia, on shareholder approval at a general meeting convened for 9 December 2009 and the fundraising is expected to complete with admission of the new ordinary shares to listing on the Official List and trading on the London Stock Exchange on 10 December 2009. The firm placing and placing and open offer was fully underwritten by Singer Capital Markets. 

The proceeds of this fundraising will be used to reduce bank debt through the repayment and cancellation of the £11 million multicurrency term-loan with RBS/Fortis. The remainder of the proceeds will be used in the short-term to repay, but not cancel, borrowings under revolving and overdraft facilities. This additional funding headroom will enable the Company to invest in operational improvements with short-term payback and, with a more robust balance sheet, will position the Company for expected consolidation opportunities. With the repayment of the £11 million multicurrency term-loan and through the raising of additional funds the Company has secured additional flexibility in its banking arrangements including the relaxation of financial and non-financial covenants.

Pensions

The UK pension schemes' deficit net of deferred tax is £32.6 million (30 September 2008: £11.1 million). As at September 2009 all of the three UK defined benefit pension schemes were closed to future accrual resulting in a curtailment gain of £1.0 million in this first half year. The liability for retirement benefit obligations was £73.8 million (30 September 2008: £35.8 million), an increase of £18.7 million from £55.1 million at 31 March 2009. Although plan assets increased by £12.3 million during this period, this increase was more than offset by an increase of £31.0 million in the IAS 19 valuation of plan liabilities principally as a result of the discount rate declining from 6.9% to 5.6% as a result of market interest rate movements. Of the £73.8 million obligation, £23.3 million arises in respect of non-UK unfunded schemes which are not required to be prefunded.

Risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain those detailed in the Annual Report for the year ended March 2009. The Group's results have particular exposure to the movements in steel prices and the US Dollar/GB Pound exchange rate. The valuation of retirement benefit obligations is significantly impacted by changes to the value of pension scheme investments and by changes to the discount rate assumption which is based on the AA rated corporate bond yield. In addition the current global recession has significantly impacted the Group's markets, suppliers and customers and significant uncertainty remains as to when destocking and the global recession will end and whether it will cause a return to previous economic activity levels in all of the Group's markets. The Group's geographically diverse operations will be carefully monitored to ensure that, as much as possible, supply will be kept in equilibrium with demand. The Group's principal bank credit facility expires in June 2012. The Group operates with adequate headroom on its facilities and covenants.

Outlook

At the end of October 2009 the Group is experiencing increasing stabilisation in its global markets and customers are indicating their destocking programmes will be concluding in the foreseeable future. When this occurs it should have a significant positive impact on the Group's sales. The directors believe that the Group's performance should be further enhanced by market share gains, its high operational gearing, and the retention of approximately £10 million of the recent cost savings.

Statement of directors' responsibilities

The directors confirm that to the best of their knowledge:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so. 

The directors of Renold plc are listed in the Annual Report for the year ended 31 March 2009. A list of current directors is maintained on the Group website at www.renold.com.

By order of the Board

Robert Davies	Peter Bream
Chief Executive	Finance Director
16 November 2009	16 November 2009

Condensed Consolidated Income Statement

for the six months ended 30 September 2009 (unaudited)

			First half				Full year
	Note		2009/10 £m		2008/09 £m		2008/09 £m
Revenue	3		75.5		95.2		194.7
Operating costs			(79.2)		(89.2)		(187.1)
Operating (loss)/profit			(3.7)		6.0		7.6
Operating (loss)/profit before exceptional items			(2.3)		6.0		10.0
Exceptional items	4		(1.4)		-		(2.4)
Operating (loss)/profit			(3.7)		6.0		7.6
Financial costs			(7.4)		(7.8)		(16.0)
Financial revenue			4.6		5.9		11.3
Exceptional refinancing costs	4		(2.3)		-		-
Net financing costs	5		(5.1)		(1.9)		(4.7)
(Loss)/profit before tax			(8.8)		4.1		2.9
Taxation	6		1.3		(1.3)		(0.8)
(Loss)/profit for the financial period			(7.5)		2.8		2.1
Attributable to:
Equity holders of the parent			(7.5)		2.8		2.1
Minority interests			-		-		-
			(7.5)		2.8		2.1
Earnings per share	7
Basic (loss)/earnings per share			(9.7)p		3.9p		2.8p
Diluted (loss)/earnings per share			(9.7)p		3.9p		2.8p
Adjusted (loss)/earnings per share *			(3.1)p		4.3p		7.3p
Diluted adjusted (loss)/earnings per share *			(3.1)p		4.3p		7.3p

*Adjusted for the after tax effects of exceptional items.

Condensed Consolidated Statement of Comprehensive Income and Expense

for the six months ended 30 September 2009 (unaudited)

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
(Loss)/profit for the period	(7.5)		2.8		2.1
Other comprehensive income/(expense):
Recycling of losses on cash flow hedges to the income statement	-		0.2		0.5
Net gains/(losses) on cash flow hedges taken to equity	2.6		0.1		(1.8)
Foreign exchange translation differences	(0.7)		3.4		3.4
(Losses)/gains on fair value of hedging net investments in foreign operations	(2.2)		(0.7)		5.5
Actuarial losses on retirement benefit obligations	(19.5)		(5.5)		(22.3)
Tax on components of other comprehensive income	5.5		1.5		4.6
Other comprehensive expense for the period net of tax	(14.3)		(1.0)		(10.1)
Total comprehensive (expense)/income for the period	(21.8)		1.8		(8.0)

Condensed Consolidated Statement of Financial Position

as at 30 September 2009 (unaudited)	Note	30 September 2009 £m		30 September 2008 £m		31 March 2009 £m
Assets Non-current assets
Goodwill		22.1		21.1		24.5
Other intangible fixed assets		0.9		1.7		1.1
Property, plant and equipment		48.6		45.2		51.1
Investment property		2.2		1.9		2.2
Other non-current assets		0.5		0.4		0.4
Deferred tax assets		20.5		11.1		14.2
		94.8		81.4		93.5
Current assets
Inventories		43.7		47.0		46.4
Trade and other receivables		27.4		38.2		37.1
Derivative financial instruments		-		0.1		-
Current tax asset		0.2		0.1		0.7
Cash and cash equivalents	9	9.0		8.4		11.3
		80.3		93.8		95.5
Asset held for sale		-		0.8		-
		80.3		94.6		95.5
Total assets		175.1		176.0		189.0
Liabilities
Current liabilities
Borrowings	9	(12.6)		(16.8)		(44.4)
Trade and other payables		(30.2)		(34.4)		(37.6)
Derivative financial instruments		(0.3)		(0.9)		(2.9)
Provisions		(2.3)		(3.8)		(2.9)
		(45.4)		(55.9)		(87.8)
Net current assets		34.9		38.7		7.7
Non-current liabilities
Borrowings	9	(35.5)		(31.2)		(3.6)
Provisions		(0.5)		(0.5)		(0.5)
Preference shares	9	(0.5)		(0.5)		(0.5)
Trade and other payables		(0.1)		(0.6)		(0.5)
Deferred tax liabilities		(0.9)		(1.9)		(0.9)
Retirement benefit obligations	8	(73.8)		(35.8)		(55.1)
		(111.3)		(70.5)		(61.1)
Total liabilities		(156.7)		(126.4)		(148.9)
Net assets		18.4		49.6		40.1
Equity
Issued share capital		19.3		19.3		19.3
Share premium		9.6		9.6		9.6
Currency translation reserve		4.7		1.6		7.6
Other reserves		0.7		(0.5)		(1.9)
Retained earnings		(17.5)		18.0		3.9
Equity attributable to equity holders of the parent		16.8		48.0		38.5
Minority interests		1.6		1.6		1.6
Total shareholders' equity		18.4		49.6		40.1

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 September 2009 (unaudited)

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
Cash flows from operating activities (Note 9)
Cash (absorbed)/generated by operations	(1.0)		(9.2)		1.1
Income taxes received/(paid)	0.7		(0.7)		(1.7)
Net cash from operating activities	(0.3)		(9.9)		(0.6)
Cash flows from investing activities
Acquisition of subsidiary	-		(5.7)		(5.6)
Purchase of property, plant and equipment	(0.8)		(2.8)		(5.5)
Purchase of intangible assets	-		(0.2)		(0.3)
Proceeds on disposal of property, plant and equipment	-		-		1.7
Interest received	-		-		0.1
Net cash from investing activities	(0.8)		(8.7)		(9.6)
Cash flows from financing activities
Financing costs paid	(3.0)		(1.1)		(2.5)
Proceeds from borrowings	6.5		6.6		4.8
Repayment of borrowings	(5.6)		(5.2)		(4.6)
Issue of ordinary shares	-		5.1		5.1
Payment of finance lease obligations	-		-		(0.1)
Net cash from financing activities	(2.1)		5.4		2.7
Net decrease in cash and cash equivalents	(3.2)		(13.2)		(7.5)
Net cash and cash equivalents at beginning of period	8.6		14.2		14.2
Effects of exchange rate changes	(0.4)		0.1		1.9
Net cash and cash equivalents at end of period	5.0		1.1		8.6
Cash and cash equivalents	9.0		8.4		11.3
Overdrafts (included in borrowings - Note 9)	(4.0)		(7.3)		(2.7)
	5.0		1.1		8.6

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2009 (unaudited)

	Share capital £m	Share premium account £m	Retained earnings £m	Currency translation reserve £m	Other Reserves £m	Minority Interests £m	Total equity £m
BALANCE AT 1 APRIL 2008	17.5	6.3	19.1	(1.3)	(0.6)	-	41.0
Profit for the year	-	-	2.1	-	-	-	2.1
Recycling of losses on cash flow hedges to the income statement	-	-	-	-	0.5	-	0.5
Net losses on cash flow hedges	-	-	-	-	(1.8)	-	(1.8)
Foreign exchange translation difference	-	-	-	3.4	-	-	3.4
Actuarial losses	-	-	(22.3)	-	-	-	(22.3)
Gains on fair value of hedging net investments in foreign operations	-	-	-	5.5	-	-	5.5
Tax on items recognised directly in equity	-	-	4.6	-	-	-	4.6
Total comprehensive income for the period	-	-	(15.6)	8.9	(1.3)	-	(8.0)
Proceeds from share placing	1.8	3.5	-	-	-	-	5.3
Associated costs of placing	-	(0.2)	-	-	-	-	(0.2)
Share-based payment charge	-	-	0.4	-	-	-	0.4
Minority interests arising on acquisition	-	-	-	-	-	1.6	1.6
BALANCE AT 31 MARCH 2009	19.3	9.6	3.9	7.6	(1.9)	1.6	40.1
Loss for the year	-	-	(7.5)	-	-	-	(7.5)
Net gains on cash flow hedges	-	-	-	-	2.6	-	2.6
Foreign exchange translation difference	-	-	-	(0.7)	-	-	(0.7)
Actuarial losses	-	-	(19.5)	-	-	-	(19.5)
Losses on fair value of hedging net investments in foreign operations	-	-	-	(2.2)	-	-	(2.2)
Tax on items recognised directly in equity	-	-	5.5	-	-	-	5.5
Total comprehensive income for the period	-	-	(21.5)	(2.9)	2.6	-	(21.8)
Share-based payment charge	-	-	0.1	-	-	-	0.1
BALANCE AT 30 SEPTEMBER 2009	19.3	9.6	(17.5)	4.7	0.7	1.6	18.4
BALANCE AT 1 APRIL 2008	17.5	6.3	19.1	(1.3)	(0.6)	-	41.0
Profit for the year	-	-	2.8	-	-	-	2.8
Recycling of losses on cash flow hedges to the income statement	-	-	-	0.2	-	-	0.2
Net gains on cash flow hedges	-	-	-	-	0.1	-	0.1
Foreign exchange translation difference	-	-	-	3.4	-	-	3.4
Actuarial losses	-	-	(5.5)	-	-	-	(5.5)
Losses on fair value of hedging net investments in foreign operations	-	-	-	(0.7)	-	-	(0.7)
Tax on items recognised directly in equity	-	-	1.5	-	-	-	1.5
Total comprehensive income for the period	-	-	(1.2)	2.9	0.1	-	1.8
Proceeds from share placing	1.8	3.5	-	-	-	-	5.3
Associated costs of placing	-	(0.2)	-	-	-	-	(0.2)
Share-based payment charge	-	-	0.1	-	-	-	0.1
Minority interests arising on acquisition	-	-	-	-	-	1.6	1.6
BALANCE AT 30 SEPTEMBER 2008	19.3	9.6	18.0	1.6	(0.5)	1.6	49.6

Notes to the Interim Condensed Consolidated Financial Statements

1. Corporate information

The condensed consolidated interim financial statements for the six months to 30 September 2009 were approved by the Board on 16 November 2009. These statements have not been audited or reviewed by the Group's Auditors pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information.

 

Renold plc is a limited liability company, incorporated and registered under the laws of in England and Wales, whose shares are publicly traded. The principal activities of the Company and its subsidiaries are described in Note 3 and the performance in the half year is set out in the Interim Management Report.

These interim condensed consolidated financial statements do not constitute statutory accounts of the Group within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2009 have been filed with the Registrar of Companies. The Auditors' report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237(2) or Section 237(3) of the Companies Act 1985.

 

Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 September 2009 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 ("Interim Financial Reporting") as adopted by the European Union. It does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2009.

Except as described below, the accounting policies, presentation and method of computation applied by the Group in these interim condensed consolidated interim financial statements are the same as those applied in the Group's latest audited financial statements for the year ended 31 March 2009.

Changes in accounting policy

The following new standards, amendments to standards or interpretations are mandatory for the financial year ending 31 March 2010:

Adoption of the following revised standards and interpretations did not have any material effect on the financial performance or position of the Group:

Significant accounting judgements, estimates and assumptions

The preparation of these interim condensed consolidated 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 applied to the consolidated financial statements for the year ended 31 March 2009.

Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 March 2009.

3. Segment information

The Group's activities are in one operating segment, Industrial Power Transmission. The consolidated income statement therefore relates wholly to the Industrial Power Transmission business. This is the basis on which the business is monitored.

The geographical analysis of revenue by market areas is as follows:

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
United Kingdom	7.0		10.8		19.9
Rest of Europe	20.8		33.8		63.9
North America	27.2		30.0		67.8
Other countries	20.5		20.6		43.1
	75.5		95.2		194.7

The geographical analysis of assets by location is as follows:

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
United Kingdom	28.6		31.7		29.1
Rest of Europe	35.4		39.9		37.0
North America	46.5		48.0		53.6
Other countries	36.8		36.8		40.9
Unallocated assets	27.8		19.6		28.4
	175.1		176.0		189.0

4. Exceptional items

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
Included in Operating costs:
Reorganisation and redundancy costs	1.4		-		2.4
	1.4		-		2.4

Included in net Financing costs:
Costs associated with refinancing	2.3		-		-
	2.3		-		-

5. Net financing costs

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
Financial costs:
Interest payable on bank loans and overdrafts	(1.1)		(1.3)		(2.8)
Amortised financing costs	-		(0.1)		(0.2)
Interest cost of financial liabilities not at fair value through the income statement	(1.1)		(1.4)		(3.0)
Interest cost on pension plan balances	(6.3)		(6.4)		(13.0)
	(7.4)		(7.8)		(16.0)
Exceptional financing costs:
Costs associated with refinancing	(2.3)		-		-
	(2.3)		-		-
Financial revenue:
Interest receivable on bank deposits	-		-		0.1
Interest income on financial assets not at fair value through the income statement	-		-		0.1
Expected return on pension plan assets	4.6		5.9		11.2
	4.6		5.9		11.3
Net financing costs	(5.1)		(1.9)		(4.7)

6. Taxation

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
Current tax:
- UK	-		-		-
- Overseas	(0.3)		0.6		0.9
	(0.3)		0.6		0.9
Deferred tax:
- UK	-		0.4		0.2
- Overseas	(1.0)		0.3		(0.3)
	(1.0)		0.7		(0.1)
Income tax (credit)/expense	(1.3)		1.3		0.8

7. Earnings per share

Basic earnings per share is calculated by dividing the profit/(loss) for the period by the weighted average number of shares in issue during the period. Diluted earnings per share takes into account the dilutive effect of the options and awards outstanding under the Group's employee share schemes. The calculation of earnings per share is based on the following data:

	First half				Full year
	2009/10 Pence per share		2008/09 Pence per share		2008/09 Pence per share
Basic EPS	(9.7)		3.9		2.8
Diluted EPS	(9.7)		3.9		2.8
Adjusted EPS	(3.1)		4.3		7.3
Diluted adjusted EPS	(3.1)		4.3		7.3
	£m		£m		£m
(Loss)/profit for calculation of adjusted EPS
(Loss)/profit for the financial period	(7.5)		2.8		2.1
Adjusted for the after tax effects of exceptional items:
- Costs associated with refinancing	2.3		-		-
- Redundancy and restructuring costs	1.3		-		2.0
- Net financing cost arising on pension plan balances	1.5		0.3		1.3
	(2.4)		3.1		5.4
	Thousands		Thousands		Thousands
Weighted average number of ordinary shares
For calculating basic earnings per share	77,065		72,047		74,363
Effect of dilutive securities - employee share options	-		287		-
For calculating diluted earnings per share	77,065		72,334		74,363

The adjusted earnings per share numbers have been provided in order to give a useful indication of underlying performance by the exclusion of exceptional items and the non-cash IAS19 charge.

8. Retirement benefit obligations

The Group's retirement benefit obligation is summarised as follows:

	At 30 September 2009 £m		At 30 September 2008 £m		At 31 March 2009 £m
Funded plan obligations	(209.1)		(180.8)		(179.4)
Funded plan assets	158.6		164.0		146.3
Net funded plan obligations	(50.5)		(16.8)		(33.1)
Unfunded obligations	(23.3)		(19.0)		(22.0)
Total retirement benefit obligations	(73.8)		(35.8)		(55.1)

The increase in the Group's liability from £55.1 million at 31 March 2009 to £73.8 million at 30 September 2009 is primarily due to the decrease in the discount rate assumption applied to the UK pension plans from 6.9% at 31 March 2009 to 5.6% at 30 September 2009 in line with market conditions. The increase in liabilities has been partially offset by the increase in the value of assets following strong asset returns over the period.

9. Cash generated by operations

	First half				Full year
	2009/10 £m		2008/09 £m		2008/09 £m
(Loss)/profit before taxation	(8.8)		4.1		2.9
Depreciation and amortisation	2.4		2.2		4.7
Profit on plant and equipment disposals	-		-		(0.7)
Equity share plans	0.1		0.1		0.4
Net finance costs	5.1		1.8		4.7
Decrease/(increase) in inventories	1.7		(2.5)		3.4
Decrease/(increase) in receivables	8.3		(1.1)		3.8
Decrease in payables	(7.4)		(10.7)		(13.0)
Decrease in provisions	(0.5)		(2.1)		(2.0)
Movement on pension plans	(1.9)		(1.2)		(3.9)
Movement on derivative financial instruments	-		0.2		0.8
Cash (absorbed)/generated by operations	(1.0)		(9.2)		1.1

The reconciliation of the movement in cash and cash equivalents to movement in net debt is as follows:

	At 30 September 2009 £m		At 30 September 2008 £m		At 31 March 2009 £m
Decrease in cash and cash equivalents	(3.2)		(13.2)		(7.5)
Change in net debt resulting from cash flows	(0.9)		(1.4)		(0.2)
Other non-cash movements	(0.1)		-		-
Foreign currency translation differences	1.8		(1.6)		(5.6)
Change in net debt during the period	(2.4)		(16.2)		(13.3)
Net debt at start of year	(37.2)		(23.9)		(23.9)
Net debt at end of year	(39.6)		(40.1)		(37.2)

Net debt comprised:
Cash and cash equivalents	9.0		8.4		11.3
Borrowings:
Bank overdrafts	(4.0)		(7.3)		(2.7)
Bank loans - current	(8.5)		(9.4)		(41.6)
Obligations under finance leases - current	(0.1)		(0.1)		(0.1)
Sub-total - current borrowings	(12.6)		(16.8)		(44.4)
Bank loans - non-current	(35.4)		(31.0)		(3.5)
Obligations under finance leases - non-current	(0.1)		(0.2)		(0.1)
Sub-total - non-current borrowings	(35.5)		(31.2)		(3.6)
Preference shares	(0.5)		(0.5)		(0.5)
Net debt	(39.6)		(40.1)		(37.2)

10. Subsequent Event

Subsequent to the end of the interim reporting period, on 17 November 2009 the Company announced that it had raised £26.9 million after expenses through the conditional completion of a firm placing and placing and open offer of 142,500,000 new ordinary shares at 20p per share. The placing is conditional, inter alia, on shareholder approval at a general meeting convened for 9 December 2009 and the fundraising is expected to complete with admission of the new ordinary shares to listing on the Official List and trading on the London Stock Exchange on 10 December 2009. The firm placing and placing and open offer was fully underwritten by Singer Capital Markets. 

The proceeds of this fundraising will be used to reduce bank debt through the repayment and cancellation of the £11 million multicurrency term-loan with RBS/Fortis. The remainder of the proceeds will be used in the short-term to repay, but not cancel, borrowings under revolving and overdraft facilities. This additional funding headroom will enable the Company to invest in operational improvements with short-term payback and, with a more robust balance sheet, will position the Company for expected consolidation opportunities. With the repayment of the £11 million multicurrency term-loan and through the raising of additional funds the Company has secured additional flexibility in its banking arrangements including the relaxation of financial and non-financial covenants.

ENDIR QDLBFKFBXFBK