Final Results

RNS Number : 7726I
API Group PLC
04 June 2014
 



 

 

Press Release

4 June 2014

 

 

API Group plc

 

("API" or the "Group")

 

Final Results

 

API Group plc (AIM:API), a leading manufacturer of specialist foils and packaging materials, announces its final results for the year ended 31 March 2014.

 

Financial Highlights

 

· 

Revenues ahead by £2.3m (2.0%) to £114.7m (2013: £112.4m).

· 

Profit before tax unchanged at £5.6m (2013: £5.6m).  Profit before tax of £6.3m on a pre-exceptional basis (2013: £6.6m).

· 

Stronger second half, with pre-exceptional profit before tax ahead by £0.5m (+15%).

· 

Diluted earnings per share 7.1p (2013: 7.2p).  Excluding exceptional items, diluted earnings per share 7.8p (2013: 8.4p).

· 

Proposed final dividend of 1.3p per share, making 2.0p for the full year (2013: 0.0p).

· 

Cash flow from operations of £9.0m (2013: £8.6m), converted at 91% of EBITDA (2013: 86%) and a net cash inflow of £2.8m (2013: £1.2m).

· 

£0.2m net cash at year end (2013: net debt of £2.6m), the first time for 15 years that the Group has reported a net cash position.

 

Operational Highlights

 

· 

Another good performance from Laminates and further progress at Foils Europe.  Holographics back to breakeven in final quarter after cost reduction measures.  Operating margin maintained at Foils Americas despite weaker sales in the second half.

· 

Laminates major new supply contract fully on stream during second half.

· 

Restructuring of UK foils operations completed; new distribution facility established in Sheffield, leaving Livingston to concentrate on manufacturing.

· 

New ERP solution successfully implemented by Foils Americas; roll-out in Foils Europe scheduled for 2014.

· 

Capital additions and joint venture investment of £3.8m (2013: £5.5m), including down payments on new metallising equipment for UK and US foils plants.

 

Commenting on the results, Andrew Turner, Group Chief Executive of API Group plc, said:

"In spite of a slightly weaker profit performance, these results demonstrate further strengthening of the Group's financial position, combined with continued substantial investment in the operating assets of the business.  The year-end net cash balance and the re-introduction of a dividend after a break of more than ten years, represent important milestones in the rehabilitation of the Group.

 

Operational improvement and investment initiatives already completed, as well as further projects planned for the new financial year, are expected to strengthen API's position in its key markets and enhance prospects for future sales and profit growth."

 

- Ends -

 

For further information:

API Group plc


Andrew Turner, Group Chief Executive

Tel: +44 (0) 1625 650 334

Chris Smith, Group Finance Director

www.apigroup.com

 

Numis Securities (Broker)


James Serjeant

Tel: +44 (0) 20 7260 1000


www.numis.com

 

Cairn Financial Advisers (Nominated Adviser)


Tony Rawlinson / Avi Robinson

Tel: +44 (0) 20 7148 7900


www.cairnfin.com

 

Media enquiries:

Abchurch


Henry Harrison-Topham / Quincy Allan

Tel: +44 (0) 20 7398 7710

quincy.allan@abchurch-group.com

www.abchurch-group.com

 



 

 

CEO Review

 

Overall financial results

 

Group revenues for the twelve months to March 2014 increased by 2.0%, at both actual and constant FX rates, to £114.7m (2013: £112.4m).  Sales volumes were higher by 2.7%, with second half volumes up 7.1% on the prior year compensating for a small decline in the first six months.

 

In spite of the higher sales levels, added value margin declined slightly due to sales mix between the business units, the impact of less favourable exchange rates and higher levels of production scrap at Laminates.  This, together with slightly higher variable costs, more than offset the contribution from higher sales to leave pre-exceptional operating profits down by 4.8% at £7.4m (2013: £7.8m).  Operating margin was also lower, by 0.4%, at 6.5%.

 

At segment level, full year profits advanced at Laminates (£0.2m) and Foils Europe (£0.1m) on the back of stronger volumes.  Holographics losses increased by £0.4m, due to lower external sales, and Foils Americas profits declined by £0.2m, due to lower activity in the last quarter.

 

In a reversal of the pattern experienced in the last two years and as anticipated in our interim results statement, profitability improved significantly in the second half; up £0.5m (+15%) on the first half.  Progress at Foils Europe (+£0.3m) and reduced losses at Holographics (+£0.4m), as a result of cost reduction measures, more than compensated for the weaker second half at Foils Americas (-£0.4m).  Operating margin for the second half improved to 6.9% compared to 6.1% in the first half.

 

For the year as a whole, profit before tax was unchanged, at £5.6m; although a small tax charge led to a marginal fall in diluted earnings per share to 7.1p (2013:7.2p).

 

Exceptional costs of £0.7m (2013: £1.0m) have been separately disclosed and relate to one-off costs and expenses associated with organisational change in three business units.  Interest costs, including the new IAS19 pension interest charge, were £0.1m lower at £1.1m (2013: £1.2m).  On a pre-exceptional basis, profit before tax was 4.5% lower at £6.3m (2013: 6.6m) and diluted earnings per share were 7.8p, compared to 8.4p for the prior year.

 

Cash from operations, post exceptional items, converted at 91% of EBITDA (2013: 86%), with a net cash inflow of £2.8m compared to £1.2m for the previous year.  Whilst cash capital expenditure of £3.5m was lower than the previous year (2013: £5.3m) capital additions still represented 1.4 times depreciation and will remain above depreciation for at least another two years as additional capacity is introduced into the Foils businesses.  The Group completed its investment in the Czech Joint Venture after a further £0.5m transfer of funds on top of the £0.4m paid last year.  With working capital broadly unchanged, the Group reported a small net cash position at the financial year end of £0.2m (2013: £2.6m debt).

 

Dividend

 

Following payment of the interim dividend in January, the Board is pleased to propose a final dividend of 1.3p per share.  The total, full-year dividend of 2.0p will be put to shareholders for approval at the Annual General Meeting on July 15th and subject to this approval, it is our intention that the final dividend will be paid on August 1st to shareholders on the register as at July 11th, with an ex-dividend date of Wednesday July 9th.

 

Outlook

 

The Board expects a continuation of the second half trading momentum, with progression in results for the first half and for the financial year as a whole.

 

At this stage, it is unclear how long Foils Americas will be affected by the reduced demand from metallic pigment customers, but any impact on the Group's results should be more than compensated by the elimination of trading losses at Holographics and the benefit of last year's restructuring at Foils Europe.

 

In respect of general market conditions, Foils Europe continues to experience steady overall demand, whereas recent activity in the decorative foils market in North America appears somewhat slower than usual.  At Laminates, the new financial year has started strongly and there is a good pipeline of new business development projects.

 

Management is pressing ahead with its operational improvement and growth agenda, including the roll-out of the Group's new ERP platform and investments in additional capacity for the Foils businesses.  These initiatives will strengthen API's ability to service customers in key markets and enhance the Group's prospects over the medium term.

 



 

Divisional Review

 

Laminates

As reported at the interim stage, API Laminates experienced lower first half activity due to net adverse 'churn' of customer packaging specifications moving between laminate and non-laminate constructions and a reduced volume allocation on one of its key supply positions.  In the second half, this was more than compensated by the commencement of bulk shipments against the major new supply contract, produced on the newly-installed laminator.  As a result, second half revenues were 11% ahead of the first six months and 25% higher than the comparative 6 month period last year and full year revenues ended 7.4% higher, at £59.2m (2013: £55.2m).

 

At the added value level, the contribution from higher sales was partially offset by the impact of changes in currency exchange rates and lower raw material efficiencies during the start-up phase on the new laminator.  Operating costs increased by 5% due primarily to higher spend on plant maintenance and sales and marketing, leaving operating profits £0.2m ahead of the prior year, at £6.7m.  Return on sales was slightly down on the prior year, but still a very creditable 11.3% (2013: 11.8%).

 

Foils Europe

In spite of the disruption caused by the reorganisation of its UK operations in the first half, Foils Europe recorded a second successive year of profits growth.  Revenues moved ahead 5.0% at constant FX rates to £28.6m, with the Polish distribution unit more than doubling sales in its second year, further progress in Italy and an increased contribution from Germany.  Revenues were lower in the UK and Australia, the latter due to a factory closure at a key customer in the label sector.

 

Full year volumes increased 9.1% and, whilst there was a fall in average selling price due to mix, added value margin was slightly ahead of prior year.  Production costs were higher despite second half labour savings arising from the UK restructuring, as were outbound freight costs, general overheads and marketing expenses.  It is estimated that £0.2m of non-repeatable costs were incurred in connection with the UK reorganisation in the first half year.  Profits increased by £0.3m in the second half with full year operating profits advancing by 7.4% to £2.1m (2013: £2.0m) and operating margin higher by 0.2%, at 7.5%.

 

Over the last three years, activity at Foils Europe's manufacturing plant in Livingston has increased by 18% due to growth in sales and repatriation of volume from the Group's discontinued joint venture in China.  With the facility now fully loaded and good prospects for further growth, the Board has approved capital investment to increase capacity, including a new vacuum metalliser which came on stream in May 2014 and an additional coating line planned for installation in the first quarter of 2015.  Foils Europe is also planning to roll out the Group's new ERP business, following its successful implementation in Foils Americas during the first half of the financial year just ended.

 

Foils Americas

Revenues at Foils Americas were down 8.2% at constant FX rates to £21.8m (2013: £24.0m) and were 9.0% lower than the prior year at actual FX rates.  Following several years of strong growth in sales to the metallic pigment sector, the business experienced a sharp decline in order levels in the last quarter, due primarily to reduced conversion activity at one key customer.  Sales of decorative foils were also lower due in part to capacity allocation in favour of the metallic pigment business in the earlier part of the year and a slow-down in the US market during the harsh winter period.

 

The impact on profits of the reduced sales contribution was mitigated by an improvement in added value margins due to a more favourable sales mix, lower average raw material costs and a partial reversal of the prior year's reduction in inventory.  With costs broadly flat, operating profits were down just £0.2m, to £1.7m (2013: £1.9m), with operating margins virtually unchanged at 7.8% (2013: 7.9%).

 

At the beginning of the financial year, the US-based foils business transitioned across to a new ERP platform.  Whilst there was a degree of initial disruption, the solution has now been running smoothly for several months and providing the business with a significantly improved information and control environment.

 

Holographics

API Holographics' revenues declined by 7.9% to £8.9m (2013: £9.6m) with a recovery in sales of decorative holographic products to sister API companies adding £0.5m (+23%), offset by a reduction in third party revenues of £1.2m (-16%).  The primary cause of the decline in external sales was the ending of a long-standing supply arrangement after the customer took production in house.  In addition, the timing of shipments on a second major contract adversely impacted year-on-year comparatives.

 

The lower sales contribution resulted in losses widening to £0.7m (2013: £0.3m) as operating cost savings of £0.2m were offset by a partial reversal of a credit to profit for inventory build in the previous year.  After losses of £0.5m in the first half, management successfully implemented a cost reduction programme aimed at bringing the business back to a break even position in the final quarter.

 

For the longer term, the Board remains committed to the strategy approved in 2011, aimed at growing API's presence in the security and authentication market.  Whilst a number of new sales opportunities have been developed in pursuance of that objective, progress has so far been slower than expected and undermined by the loss of one particular supply position due to factors beyond management's control.  In the meantime, significant capital investments have been completed in enhanced security and extended product capabilities at the Salford manufacturing facility, and the new Joint Venture in the Czech Republic is supporting the business development effort with a significantly improved holographic origination service.

 



 

Financial Review

 

Principal risks and uncertainties

Our management structure, business reporting and risk management processes ensure we are informed of and responsive to business and marketplace trends, thereby making timely and informed strategic and tactical decisions. Financial risks comprise foreign currency, interest rates, credit, liquidity and defined benefit pension schemes. Operational risks comprise markets, commercial relationships, geographic, input costs, health & safety and environment.

 

Exceptional items

Exceptional charges totalling £0.7m (2013: £1.0m) were incurred during the year in relation to reorganisation costs in Foils Europe, Holographics and Laminates.

 

Finance costs

Net finance costs for the year reduced by £0.1m to £1.1m.  The non-cash, pension-related finance charge, calculated in accordance with the new IAS19 accounting standard, increased by £0.2m to £0.6m.  This increase was offset by interest and other costs relating to bank borrowings which fell by £0.2m to £0.6m (2013: £0.8m) as a result of lower average net debt and lower interest margins on both UK and US facilities.

 

Taxation

The Group continues to benefit from historic tax losses and non-utilised capital allowances in the UK.  As a result, the current tax charge of £0.4m (2013: £0.2m) was mostly offset by a deferred tax credit of £0.3m (2013: 0.2m).

 

In the UK, the current tax of £0.2m (2013: £0.1m) related entirely to API Laminates, where tax losses are now fully utilised. Taxable profits were partially sheltered by UK group relief (losses in API Holographics and Central companies) and capital allowances.  Overseas tax of £0.2m (2013: £0.1m) related to taxable profits in Germany and Italy.  Overall tax on profits in the UK and US Foils businesses continues to benefit from previously accumulated tax losses and non-utilised UK capital allowances.  In the period, a deferred tax charge of £1.5m (2013: £1.5m) was balanced by a deferred tax credit of £1.7m (2013: £1.6m); mostly from further recognition of historic tax losses in the Foils businesses.

 

The net deferred tax asset recognised in the Group's balance sheet reduced in the year by £0.3m to £6.1m (2013: £6.4m) predominantly due to a reduced deferred tax asset of £2.8m relating to the pension deficit (2013: £3.1m) as a consequence of lower corporation tax rates in the UK.

 

Remaining unrecognised tax losses, as at 31 March 2014, amounted to £2.1m in the UK (2013: £2.8m) and $4.1m in the US (2013: $9.0m), in addition to unclaimed capital allowances in the UK of £2.1m (2013: £3.9m).

 

Earnings per share

Diluted earnings per share were 7.1p, compared to 7.2p for last year.  Excluding exceptional items, diluted earnings per share were 7.8p (2013: 8.4p).

 

Shareholders' Funds

At 31 March 2014, the Group's net assets were £26.4m, an increase over the year of £3.5m or 15.2%.

 

Cash flow and net debt

There was a net cash inflow from operating activities (after cash flows for pension and finance costs) of £7.4m; up from £7.0m in the previous year.

 

Cash-flows resulting from capital expenditure amounted to £3.5m (2013: £5.3m) of which £3.3m was capitalised (2013: £5.1m). Spend included payments of £1.9m for projects scheduled to complete in the new financial year.  Two new foil metallisers, which are scheduled for installation in the first half of the new financial year, incurred project costs of £1.2m.  A further £0.7m was incurred on the new business IT system which is now operational in the US, with Foils Europe expected to complete by March 2015.  A further investment of £0.5m (2013: £0.4m) was made in the Czech joint venture origination company to complete the funding of its new equipment.  For the third successive year, capital investment was significantly ahead of depreciation of £2.4m (2013: £2.2m).

 

The impact on working capital of stronger sales activity in the final three months of the year compared to the equivalent period a year earlier was offset by improved working capital efficiency, with the result that working capital ended the year broadly unchanged.  Year-end efficiency, which is measured internally by reference to trailing three month sales (annualised), improved by 0.9% to 7.3% as a result of reduced inventories.

 

Consistent with the charge in the income statement, cash flow for interest expense reduced by £0.2m, to £0.4m.

 

Net cash at 31 March 2014 amounted to £0.2m, compared to net debt of £2.6m a year earlier.  The Group's year-end debt cover ratio (net debt to trailing 12 month EBITDA) was therefore zero (2013: 0.3x), as was gearing (net debt to shareholders funds) (2013: 11%).

 

In light of the Group's recent record of strong cash conversion and the reduced levels of bank debt, and following a review of medium term business plans, the Board announced in December 2013 its intention to re-introduce a meaningful and sustainable dividend that would be affordable out of future cash flows after providing for finance and pension costs and funding of capital investment requirements.  An interim dividend of 0.7p was paid to shareholders in January at a cost of £0.5m and a final dividend of 1.3p is being recommended to shareholders for approval at the AGM on July 15th 2014.

 

Borrowings and liquidity

The Group's policy is to ensure that banking facilities are adequate to meet foreseeable peak requirements arising from variations in working capital and the timing of capital expenditure.  Facilities are in place to independently finance the two main operations based in the UK and North America.

 

During the year, new UK facilities were agreed with HSBC plc.  These include a Revolving Credit facility of £13.5m and ancillary facilities of £7.5m to cover FX contracts, Letters of Credit and sundry other items.  The facilities extend to December 2017 and are subject to two quarterly financial covenant tests.  Lending is secured via a floating charge over the Group's UK assets. Total facilities under the previous funding arrangement with Barclays Bank plc, as at 31 March 2013 amounted to £12.8m.

 

In North America, funding has been arranged with Wells Fargo Bank, until April 2015.  Facilities comprise an amortising loan, amounting to $0.9m at 31 March 2014 (2013: $1.2m), and a $5.5m asset backed working capital facility.  Borrowings are secured on working capital, plant and equipment and the Kansas property and are subject to quarterly covenant tests.  The soon-to-be-installed new metalliser for the Kansas facility is being funded via a separate asset financing agreement with Wells Fargo.



 

Foreign currency exchange rates

Exchange rates used for the translation of results and assets of US and Euro-zone based operations are shown below.

 

Rate to £1

US $

Euro

 

31 March 2014



Average

1.59

1.19

Closing

1.67

1.21

 

31 March 2013



Average

1.58

1.23

Closing

1.52

1.18

 

 

Pensions

The UK and US businesses each operate defined benefit pension schemes for the benefit of past and current employees.  Both schemes are closed to future accrual and are accounted for under IAS 19R.  At 31 March 2014 the Group's IAS 19R gross pension liability was assessed at £13.3m (2013: £13.3m).  When adjusting for the recognised deferred tax asset of £2.8m (2013: £3.1m), the net liability equates to £10.5m (2013: £10.2m).  A small increase in the gross UK deficit was matched by reduced net liabilities on the US plan.  The deferred tax asset reduced by £0.3m as a result of lower UK tax rates.

 

In the UK, the API Group plc Pension and Life Assurance Fund has approximately 1,520 pensioners and deferred members.  The fund was closed to future service accrual on 31 December 2008 following on from a decision to admit no new members since October 2006.  The UK scheme's last triennial valuation date was 30 September 2013.  The valuation results and funding plan were approved by the Trustees and the Company in May 2014.  The outcome was broadly in line with the funding plan from September 2010 and, as a consequence, the Company will continue its annual deficit reduction payment of £0.7m per annum.  The Company also pays all administration fees on behalf of the Fund and works collaboratively with the Trustees on many aspects of scheme management, in particular investment strategy.

 

As at 31 March 2014, the gross deficit of the UK fund has been calculated at £12.6m (2013: £12.3m) under the valuation principles of IAS 19R.  A benefit from a small increase in the discount rate to 4.40% (2013: 4.30%) was offset by changes to assumptions used for mortality.  The average life expectancy assumption has been increased by 0.65 years across the population as a result of a postcode review of the membership carried out for the 2013 funding valuation.  Additionally, an experience loss of £1.2m has been recognised relating to the triennial revision of expected future cash benefits to be paid.  Inflation assumptions remain unchanged.

 

In the US, the API Foils North America Pension Plan was closed to new entrants and future accrual in 2004.  Membership is approximately 160 current and past employees.  Details of the net deficit of £0.7m (2013: £1.0m) are included in Note 9 to the financial statements.  Also in the US, current and past employees covered by union contracts at the Group's New Jersey manufacturing facility are members of a union-managed, multi-employer defined benefit pension plan.  The plan operates under the terms of the site's collective bargaining agreement and remains fully open.  In accordance with IAS 19R, this scheme is accounted for as a defined contribution plan.



 

Group Income Statement

for the year ended 31 March 2014

 



Year ended

31 March

2014


Year ended

31 March

2013*


Note

£'000


£'000

Revenue

2

114,712


112,426

Cost of sales


(86,617)


(84,179)

Gross profit


28,095


28,247

Distribution costs


(3,952)


(4,249)

Administrative expenses (excluding exceptional items)


(16,716)


(16,196)

Operating profit before exceptional items

2

7,427


7,802

Exceptional items

3

(705)


(1,029)

Operating profit


6,722


6,773






Finance revenue

4

2


10

Finance costs

4

(1,132)


(1,217)



(1,130)


(1,207)

Profit before taxation


5,592


5,566

Tax (expense) / credit

5

(150)


19

Profit for the year


5,442


5,585






Earnings per share (pence)





Basic earnings per share on profit for the year

6

7.4


7.6

Underlying basic earnings per share on profit for the year

6

8.1


8.8

Diluted earnings per share on profit for the year

6

7.1


7.2

Underlying diluted earnings per share on profit for the year

6

7.8


8.4






* restated for IAS19 - Employee benefits (revised)

 

All profits are attributable to equity holders of the Parent and relate to continuing operations.

 

 


Group Statement of Comprehensive Income

for the year ended 31 March 2014

 



Year ended

31 March

2014


Year ended

31 March

2013*

 



£'000


£'000

 

Profit for the year


5,442


5,585

 

Items that may be reclassified to profit or loss in subsequent periods:





 

Exchange differences on retranslation of foreign operations


(1,390)


703

 

Change in fair value of effective cash flow hedges


863


(639)

 

Items not reclassified to profit or loss in subsequent periods:





 

Re-measurement (losses)/gains on defined benefit pension schemes


(513)


(5,243)

 

Tax on items relating to components of other comprehensive income


(350)


1,228

 

Other comprehensive income for the year, net of tax


(1,390)


(3,951)

 

Total comprehensive income for the year attributable to equity holders of the Parent


4,052


1,634

 






 

* restated for IAS19 - Employee benefits (revised)





 

 



 

Group Balance Sheet

at 31 March 2014

 



31 March

2014


31 March

2013


Note

£'000


£'000

Assets





Non-current assets





Property, plant and equipment


21,490


21,313

Intangible assets - goodwill


5,188


5,188

Investment in joint venture interest


880


378

Financial assets


-


152

Deferred tax assets

5

6,412


6,617



33,970


33,648

Current assets





Trade and other receivables


16,593


15,811

Inventories


12,126


12,864

Other financial assets


594


184

Cash and short-term deposits

7

8,606


6,189



37,919


35,048

Total assets

2

71,889


68,696






Liabilities





Current liabilities





Trade and other payables


22,632


22,428

Financial liabilities

8

432


3,766

Income tax payable


635


373



23,699


26,567

Non-current liabilities





Financial liabilities

8

8,033


5,574

Deferred tax liabilities

5

306


211

Provisions


56


66

Deficit on defined benefit pension schemes

9

13,364


13,349



21,759


19,200

Total liabilities


45,458


45,767

Net assets


26,431


22,929






Equity





Called up share capital


767


767

Share premium


7,136


7,136

Other reserves


8,818


8,816

Foreign exchange reserve


(432)


958

Retained profit


10,142


5,252

Equity shareholders' funds


26,431


22,929

 

 



 

Group Statement of Changes in Equity

for the year ended 31 March 2014

 


Equity

share

capital

Share

premium

Other

reserves

Foreign

exchange

reserve

Retained

earnings

Total

share-holders'

equity


£'000

£'000

£'000

£'000

£'000

£'000

At 1 April 2012

767

7,136

8,816

255

4,348

21,322

Profit for the year*

-

-

-

-

5,585

5,585

Other comprehensive income:







Exchange differences on retranslation of foreign operations

-

-

-

703

-

703

Change in fair value of effective

cash flow hedges

-

-

-

-

(639)

(639)

Re-measurement losses on defined benefit pension schemes*

-

-

-

-

(5,243)

(5,243)

Tax on items relating to components of other comprehensive income*

-

-

-

-

1,228

1,228

Total comprehensive income for the year

-

-

-

703

931

1,634

Shares acquired by Employee Benefit Trust

-

-

(94)

-

-

(94)

Transferred on exercise of share options

-

-

94

-

(94)

-

Share-based payments

-

-

-

-

85

85

Tax relating to items accounted for directly through equity

-

-

-

-

(18)

(18)

At 31 March 2013

767

7,136

8,816

958

5,252

22,929

Profit for the year

-

-

-

-

5,442

5,442

Other comprehensive income:







Exchange differences on retranslation of foreign operations

-

-

-

(1,390)

-

(1,390)

Change in fair value of effective

cash flow hedges

-

-

-

-

863

863

Re-measurement losses on defined benefit pension schemes

-

-

-

-

(513)

(513)

Tax on items relating to components of other comprehensive income

-

-

-

-

(350)

(350)

Total comprehensive income for the year

-

-

-

(1,390)

5,442

4,052

Dividends

-

-

-

-

(518)

(518)

Shares acquired by Employee Benefit Trust

-

-

(32)

-

-

(32)

Transferred on exercise of share options / LTIP

-

-

34

-

(34)

-

At 31 March 2014

767

7,136

8,818

(432)

10,142

26,431

 

* restated for IAS19 - Employee benefits (revised)

 

An interim dividend of 0.7 pence per share (2013: nil) was approved by the Board on 2 December 2013 and was paid on 9 January 2014 to equity holders on the register at the close of business on 13 December 2013.

 



 

 

Group Cash Flow Statement

for the year ended 31 March 2014

 



Year ended

31 March

2014


Year ended

31 March

2013*


Note

£'000


£'000

Operating activities





Group profit before tax


5,592


5,566

Adjustments to reconcile Group profit before tax to net cash flow from operating activities





Net finance costs


1,130


1,207

Depreciation of property, plant and equipment


2,367


2,173

Profit on disposal of property, plant and equipment


(4)


(5)

Movement in fair value foreign exchange contracts


44


(38)

Share-based payments


-


85

(Decrease)/increase in inventories


221


(361)

Increase in trade and other receivables


(1,216)


(101)

Increase in trade and other payables


832


68

Decrease in provisions


(10)


(10)

Cash generated from operations


8,956


8,584

Interest paid


(396)


(583)

Pension contributions and scheme expenses paid


(973)


(960)

Income taxes paid


(155)


(50)

Net cash flow from operating activities


7,432


6,991






Investing activities





Interest received


2


10

Purchase of property, plant and equipment


(3,465)


(5,296)

Investment in joint venture


(502)


(378)

Sale of property, plant and equipment


4


23

Net cash flow used in investing activities


(3,961)


(5,641)

 





Financing activities





Dividends paid


(518)


-

Purchase of shares by Employee Benefit Trust


(32)


(94)

New borrowings


12,340


-

Arrangement fees for new borrowings


(183)


-

Repayment of borrowings


(12,567)


(4,148)

Net cash flow used in financing activities


(960)


(4,242)






Increase/(decrease) in cash and cash equivalents


2,511


(2,892)

Effect of exchange rates on cash and cash equivalents


(92)


25

Cash and cash equivalents at the beginning of the year

7

5,955


8,822

Cash and cash equivalents at the end of the year

7

8,374


5,955






* restated for IAS19 - Employee benefits (revised)

 

 


Notes

 

1. Preparation of financial statements

 

Authorisation of financial statements

The Group's financial statements for the year ended 31 March 2014 were authorised for issue by the Board of Directors on 3 June 2014 and the balance sheet was signed on the Board's behalf by Andrew Turner, Group Chief Executive.

 

API Group plc is a public limited company incorporated and domiciled in England and Wales.  The Company's ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange.

 

Publication of abridged accounts

The preliminary announcement figures for the year ended 31 March 2014 and the comparative figures for the year ended 31 March 2013 are an abridged version of the Group's statutory accounts which carry an unmodified audit report.  They do not constitute statutory accounts within the meaning of sections 434 to 436 of the Companies Act 2006 and no statutory accounts have yet been filed with the Registrar of Companies for the year ended 31 March 2014.  Statutory accounts for the year ended 31 March 2013 have been filed with the Registrar of Companies.  The auditor's report on these accounts was unqualified and did not contain an emphasis of matter, nor did it contain a statement under section 498 of the Companies Act 2006.  The statutory accounts for the year ended 31 March 2014 will be delivered to the registrar of Companies following the Company's Annual General Meeting.

 

The Annual Report and Accounts for the year ended 31 March 2014 will be posted to shareholders by 20 June 2014 prior to the Annual General Meeting on 15 July 2014.  Copies of the Annual Report and Accounts will be available to members of the public from 20 June 2014 at the Group's registered office at Second Avenue, Poynton Industrial Estate, Poynton, Cheshire SK12 1ND.

 

Basis of preparation and statement of compliance with IFRS

The Group's financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 March 2014 and applied in accordance with the Companies Act 2006. The Group has applied optional exemptions available to it under IFRS 1.

 

The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

 

Going concern

The Directors are satisfied, on the basis of the Group's latest financial projections and facilities available, that the Group has adequate financial resources to continue to operate for the foreseeable future.  The Directors therefore continue to adopt the going concern basis in preparing these financial statements.

 

Changes in accounting policies

In the preparation of the group financial statements, the Group followed the same accounting policies and methods of computation as compared with those applied in the previous year, except for the adoption of new standards and interpretations and revisions of the existing standards as of 1 April 2013.

 



 

 

2. Segmental analysis

 

The Group produces monthly management information to enable the Board, including the Group Chief Executive, to monitor the financial performance of its constituent parts.  This information is analysed by business unit.

 

Revenue



Year ended

31 March

2014


Year ended

31 March

2013



£'000


£'000

Total revenue by origin





Laminates


59,237


55,163

Foils Europe


28,580


27,021

Foils Americas


21,819


23,972

Holographics


8,888


9,646



118,524


115,802






Inter-segmental revenue





Laminates


13


2

Foils Europe


707


757

Foils Americas


567


556

Holographics


2,525


2,061



3,812


3,376






External revenue by origin





Laminates


59,224


55,161

Foils Europe


27,873


26,264

Foils Americas


21,252


23,416

Holographics


6,363


7,585

Segment revenue


114,712


112,426

 

All revenue is derived from the sale of goods.

 



 

2. Segmental analysis (continued)

 

Segment result


Year ended

31 March

2014


Year ended

31 March

2013*


£'000


£'000

Operating profit before exceptional items




Laminates

6,680


6,515

Foils Europe

2,130


1,984

Foils Americas

1,699


1,893

Holographics

(724)


(275)

Segment result

9,785


10,117

Central costs

(2,358)


(2,315)

Total operating profit before exceptional items

7,427


7,802

 

Central costs comprise primarily salaries, defined benefit pensions costs, other employment costs and corporate advisory fees relating to the central management of the Group.

 

* restated for IAS19 - Employee benefits (revised)

 


Year ended

31 March

2014


Year ended

31 March

2013


£'000


£'000

Assets




Laminates

15,182


13,550

Foils Europe

18,586


17,889

Foils Americas

13,163


14,544

Holographics

8,295


8,719

Segment assets

55,226


54,702

Unallocated:




Deferred tax assets

6,412


6,617

Cash and short-term deposits

8,606


6,189

Other

1,645


1,188

Total assets

71,889


68,696

 

 

3. Exceptional items

 


Year ended

31 March

2014


Year ended

31 March

2013

 


£'000


£'000

 

Restructuring of operating businesses

(705)


(488)

Fees associated with the formal sale process

-


(541)


(705)


(1,029)

 

Restructuring of operating businesses relates primarily to redundancy, severance settlements and other costs associated with business restructuring in the Foils Europe, Laminates and Holographics businesses.

 

 



 

4. Finance revenue and finance costs

 


Year ended

31 March

2014


Year ended

31 March

2013*


£'000


£'000

Finance revenue




Interest receivable on bank and other short-term deposits

1


2

Other interest receivable

1


8


2


10

Finance costs




Interest payable on bank loans and overdrafts

(533)


(804)

Other interest payable

(41)


(17)

Finance cost in respect of defined benefit pension plans

(558)

(396)

 

(1,132)


(1,217)

 

Included within interest payable on bank overdrafts and loans is £178,000 (2013: £235,000) relating to the amortisation of fees and expenses incurred in obtaining bank facilities.

 

* restated for IAS19 - Employee benefits (revised)

 

 

5. Taxation

 

a) Tax (expense)/credit in the income statement





Year ended

31 March

2014


Year ended

31 March

2013


£'000


£'000

Current income tax




UK corporation tax

(330)


(75)

UK corporation tax - adjustment to prior years

75


-

Overseas tax

(164)


(80)

Total current income tax expense

(419)


(155)

 

Deferred tax




Origination and reversal of temporary differences




- defined benefit pension plan

35


(135)

- tax losses and other short-term differences

501


588

- capital allowances

(118)


(275)

- effect of change in tax rate

(149)


(4)

Total deferred tax credit

269


174





Total tax (expense) / credit in the income statement

(150)


19

 

 

(b) Tax credit/(expense) on items accounted for through other comprehensive income





Year ended

31 March

2014


Year ended

31 March

2013


£'000


£'000

Deferred tax




Re-measurement gains and losses on defined benefit

pension schemes

94


1,258

Change in fair value of effective cash flow hedges

(198)


151

Effect of change in tax rate

(246)


(181)


(350)


1,228

 



 

 

(c) Tax (expense)/credit on items accounted for directly through equity





Year ended

31 March

2014


Year ended

31 March

2013


£'000


£'000

Deferred tax




Share-based payments

-


(18)

 

(d) Reconciliation of the total tax charge

 

The tax rate in the income statement for the year is lower than the standard rate of corporation tax in the UK of 23% (2013: 24%).  The differences are reconciled below:

 


Year ended

31 March

2014


Year ended

31 March

2013


£'000


£'000

Accounting profit before tax

5,592


5,566





Accounting profit multiplied by the UK standard rate of corporation tax of 23% (2013: 24%)

1,286


1,336

Adjustments to tax charge in respect of prior periods

(75)


(81)

Adjustments in respect of foreign tax rates

95


55

Increase in deferred tax asset recognised on losses and capital allowances

(1,454)


(1,595)

Losses for which deferred tax is not recognised

63


94

Other temporary differences for which deferred tax is not recognised

6


(33)

Effect of change in tax rate

152


4

Expenses not deductible for tax purposes

77


201

Total tax expense / (credit) reported in the income statement

150


(19)

 

 

(e) Unrecognised tax losses

 

The Group has unrecognised tax losses arising in the UK of £2,068,000 (2013: £2,819,000) that are available and may be offset against future taxable profits of those businesses in which the losses arose.  The UK tax Group also has unrecognised capital allowances of £2,078,000 (2013: £3,857,000) available to offset against future taxable profits at the rate of 18% (2013: 18%) a year on a reducing balance basis.  The Group has unrecognised US federal tax losses carried forward of $4,097,000 (2013: $8,963,000), which are available for offset against future profits for a period of between 9 and 17 years.

 

(f) Deferred tax

 

The deferred tax included in the balance sheet is analysed as follows:


31 March

2014


31 March

2013


£'000


£'000

Deferred tax liability




Revaluation of fixed assets

(183)


(211)

Fair value of cash flow hedges

(123)


-


(306)


(211)





Deferred tax asset




Defined benefit pension plans

2,806


3,070

Tax losses

2,724


2,376

Capital allowances

737


941

Fair value of cash flow hedges

-


64

Share-based payments

145


166


6,412


6,617





Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective from 1 April 2013) were substantially enacted on 26 March 2012 and 3 July 2012 respectively.  Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013.  This will impact the Group's future current tax charge accordingly.  The deferred tax assets and liabilities at 31 March 2014 have been calculated based on the rates of 20% and 21% substantively enacted at the balance sheet date.

 

6. Earnings per ordinary share

 

Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.

 

Earnings used to calculate underlying basic and diluted earnings per share exclude exceptional items, net of tax.

 

The following reflects the income and share data used in the basic and diluted earnings per share computations:

 

 

Year ended

31 March

2014


Year ended

31 March

2013*


£'000


£'000

Net profit attributable to equity holders of the Parent

5,442


5,585

Adjustments to arrive at underlying earnings:




Exceptional items

705


1,029

Tax credit on exceptional items

(162)


(103)

Underlying earnings

5,985


6,511

 




 

Year ended

31 March

2014


Year ended

31 March

2013

 

No


No

Basic weighted average number of ordinary shares

73,892,566


73,748,730

Dilutive effect of employee share options and contingent shares

3,265,060


3,600,787

Diluted weighted average number of ordinary shares

77,157,626


77,349,517

 

The basic weighted average number of shares excludes the 2,750,000 shares owned by the API Group plc No.2 Employee Benefit Trust (2013: 3,000,000). These contingent shares are included in the diluted weighted average number of shares. On 2 September 2013, 250,000 shares which had vested under the LTIP were exercised.

 

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. 

 

Earnings per ordinary share

 

Year ended

31 March

2014


Year ended

31 March

2013*

 

pence


pence

Basic earnings per share

7.4


7.6

Underlying basic earnings per share

8.1


8.8

Diluted earnings per share

7.1


7.2

Underlying diluted earnings per share

7.8


8.4

 

* restated for IAS19 - Employee benefits (revised)



 

 

7. Cash and cash equivalents

 

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following:

 


31 March

2014


31 March

2013


£'000


£'000

Short-term deposits

-


4,500

Cash at bank and in hand

8,606


1,689

Cash and short-term deposits

8,606


6,189

Bank overdrafts (Note 17)

(232)


(234)

 

8,374


5,955

 

 

8. Financial liabilities

 





31 March

2014


31 March

2013


£'000


£'000

Current




Bank overdrafts

232


234

Current instalments due on bank loans

187


2,957

Interest rate swaps

-


16

Forward foreign exchange contracts

13


559

 

432


3,766

 




Non-current




Non-current instalments due on bank loans

8,033


5,574

 

8,033


5,574




 

Bank loans

Bank loans comprise the following:





31 March

2014


31 March

2013


£'000


£'000

Revolving loans (UK)

7,329


7,754

Term loans (US)

891


777

 

8,220


8,531

Less: current instalments due on bank loans

(187)


(2,957)

 

8,033


5,574

 

The Group's banking facilities comprise:

 

UK facilities

The Group's lending arrangements in the UK were moved from Barclays Bank plc to HSBC plc in November 2013.  The facilities with HSBC are for a period to 31 December 2017 and comprise a £13.5m multicurrency revolving facility agreement and ancillary facilities of £7.5m to cover FX contracts, letters of credit and sundry other items.  At 31 March 2014, UK facilities drawn down comprised revolving loans of £7.5m with interest rates of 2.0%.  The facilities are subject to two quarterly financial covenant targets reflecting the financial performance of the Group excluding the impact of the Foils Americas business unit.  Covenants relate to Interest Cover and Leverage.  At 31 March 2014, the covenant ratios were comfortably within targets.

 

 

US facilities

The US facilities are with Wells Fargo Bank; these facilities are scheduled for renewal in April 2015.  At 31 March 2014 they comprised amortising loans of $0.9m (2013: $1.2m), a revolving credit facility of up to $5.5m (2013: $5.5m), depending on the level of working capital and a new 5 year loan of $0.5m relating to the metalliser.  At 31 March 2014, interest rates were 3.5%.  The total debt outstanding is subject to a quarterly covenant obligation relating to Fixed Costs Cover.  During the year to 31 March 2014 the US business met all its covenant obligations.  The revolving credit facility is secured on working capital to the value of £5,189,000 (2013: £5,861,000) and the loans over certain property, plant and equipment.

 

9. Pensions and other post-retirement benefits

 

The assets and liabilities of the defined benefit schemes are:

 

At 31 March 2014


          United Kingdom


United States


Total


£'000


£'000


£'000

Equities

40,485


918


41,403

Bonds

20,981


1,106


22,087

Hedge funds

11,105


-


11,105

Property

7,384


63


7,447

Cash

56


-


56

Fair value of scheme assets

80,011


2,087


82,098

Present value of scheme liabilities

(92,631)


(2,831)


(95,462)

 






Net pension liability before deferred tax

(12,620)


(744)


(13,364)

 






 

 

At 31 March 2013


          United Kingdom


United States


Total


£'000


£'000


£'000

Equities

39,200


987


40,187

Bonds

22,075


986


23,061

Hedge funds

10,605


-


10,605

Property

6,677


82


6,759

Cash

-


-


-

Fair value of scheme assets

78,557


2,055


80,612

Present value of scheme liabilities

(90,880)


(3,081)


(93,961)

 






Net pension liability before deferred tax

(12,323)


(1,026)


(13,349)

 

The major assumptions used in determining the value of the defined benefit schemes are disclosed below.

 

 

United Kingdom


United States


31 March


31 March


31 March


31 March

 


2014


2013


2014


2013

 


%


%



%

 

Rate of increase in pensions in payment

2.35


2.35




 

Rate of increase to deferred pensions

2.35


2.35




 

Inflation - CPI

2.35


2.35




 

Discount rate

4.40


4.30



4.25

 

Post-retirement mortality (in years):








Member age 65 (current life expectancy) - male

20.9


20.3





Member age 65 (current life expectancy) - female

23.1


22.3





Member age 45 (life expectancy at 65) - male

22.7


22.0





Member age 45 (life expectancy at 65) - female

25.0


24.3





 

 

These assumptions have been selected after consultation with the Group's UK pension advisors, KPMG LLP and the Group's US actuaries, Prudential Retirement.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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