Interim Results - 6 Months to 1 April 2000
API Group PLC
22 May 2000
SOUND PERFORMANCE DESPITE WEAK EURO
- Sales up 10% to £87.0m (£79.4m)
- Pre-tax profit, before goodwill and exceptional costs of £1.2m
(£1.6m), up 3% to £6.7m (£6.5m)
- Pre-tax profit up 12% to £5.5m (£4.9m)
- Adjusted eps of 12.8p (13.7p)
- Interim dividend increased 10% to 6.55p (5.96p)
- Core business acquisitions of Chromagem and Van Leer's UK metallised
paper operation.
- Excellent financial performance from joint venture in China
- Balance sheet remains strong with minimal gearing
Commenting on the results, API's Chief Executive Michael Smith said:
'While the trend in general trading conditions improves and we successfully
integrate businesses, the weakness of the euro continues to impact our
performance. We currently expect the Group's result for the year to be once
again heavily geared towards the second half - supported by the strong
positions we are developing in our markets, the improved productivity of
acquisitions under API management and the introduction of new products.'
INTERIM STATEMENT
Results for the half-year ended 1 April 2000
General trading conditions in the first half of the year have shown an
improving trend, reflected by a 10% improvement in sales to £87.0m (£79.4m).
However, this benefit has been substantially counteracted by the weak euro
which, when compared with the same period last year, has directly reduced
operating profit by £1.3m and is estimated to have indirectly reduced revenues
by an additional £1.0m due to pricing pressure from European competitors. The
Group increased pre-tax profit by 3% before goodwill and exceptional costs to
£6.7m (£6.5m). Pre-tax profit was up 12% to £5.5m (£4.9m) after deducting
£1.2m (£1.6m) for goodwill and exceptional costs. The exceptional costs
represent the continuing integration of API's hot stamping foil business with
that of Astor, acquired in 1998. This integration is expected to be completed
on schedule in the first six months of the next financial year. Operating
profit rose 4% to £6.9m (£6.6m) before goodwill and exceptional costs.
Adjusted earnings per share (before goodwill and exceptional costs) were 12.8p
(13.7p) and FRS3 earnings per share were 10.3p (10.2p). The interim dividend
has been increased by 10% to 6.55p (5.96p) and will be paid on 3 July 2000 to
shareholders on the register at the close of business on 9 June 2000.
Demand generally has shown a modest improvement. Overseas sales of £44.7m
(£37.1m) were up by 20% including a full half year contribution from Shen Yong
and by 9% on a like for like basis. Sales in the UK were flat, reflecting
competitive pressures from European manufacturers.
API has continued to use its strong balance sheet and cashflow to make
complementary acquisitions. On 14 March the Group acquired Chromagem, a US
based hologram designer and originator, for £1.7m in cash. Chromagem brings
to the Group acknowledged expertise in holographic design that will both
strengthen the sales offering to major customers and provide a focal point for
the development of API's expertise in decorative and security holography. In
turn, Chromagem will benefit significantly from the Group's customer base,
production capabilities and investment plans.
On 4 April the South Wales based metallised paper operation of Van Leer was
acquired for approximately £1m in cash. In addition, a further £4m will be
invested over the next twelve months for working capital and the necessary
capital expenditure to improve quality and productivity. The acquisition
complements the Group's current activities in metallised paper and provides
the Group with a leading position in this market segment in Europe. The Van
Leer plant made a loss during the 12 months prior to acquisition but, with
annualised sales of approximately £20m, the additional volume will allow
rationalisation and cost reduction opportunities between the Group's existing
Cheshire site and the newly acquired South Wales site. This acquisition makes
the Group the largest manufacturer of metallised paper in Europe and provides
the necessary mass to move the business forward.
API's balance sheet remains strong with net debt at the period end of £3.6m
(3 October 1999: £4.0m net funds). The main outflows during the period were
dividends of £2.9m, the acquisition of Chromagem £1.7m, and net capital
expenditure of £4.9m. Shareholders' funds increased to £109.7m (3 October
1999: £107.1m).
Foils, Laminates and Metallised Paper
Operating profit rose 24% to £5.2m (£4.2m) on sales up 13% to £62.2m (£55.3m),
reflecting in part the inclusion of a full half-year contribution from the
Chinese joint venture Shen Yong which manufactures and supplies hot stamping
foils mainly into the Chinese market. The performance of the different
elements of the Division experienced contrasting fortunes. The Foils
activities supplying the label and carton-printing customers enjoyed an upturn
in demand and, including the results from China, produced a 55% improvement in
operating profit. By contrast, the Laminating activities experienced a 40%
decline in operating profit; this arose from, firstly, the one off effect of a
fall in tobacco packaging sales as the logistics chain reduced stock levels -
mainly as a result of the threat of changes in duty legislation - and
secondly, a reduction in demand from a software producer.
The performance of the Foils business is creditable given that for six weeks
during the period production at the Kansas facility was shut down due to a
failure of the solvent emissions incineration plant. Disruption to customers
and cost to the business was minimised as API's other Foils operations
fulfilled the shortfall caused by the lack of supplies from Kansas. Loss of
profits, including the increased cost of supplying from the other operations,
is covered by insurance.
The performance of the security related businesses is encouraging. Sales of
security holographics increased by over 30% compared to the same period last
year, aided by the addition of new wide web embossing equipment. This
capability also supported growth in non-security diffraction sales through the
core foils and laminates business and progress in both of these areas is
anticipated to continue in the second half year. The development of
additional technologies to drive the future growth of the security business is
on plan, with roll out scheduled for next year.
Converted Products
Operating profit fell 30% to £1.7m (£2.4m) on sales up 3% to £24.8m (£24.2m.)
Learoyd did not achieve the planned level of high added value security bag
sales, although the business case for the product remains valid and contract
discussions continue with a number of major potential customers. Morris
Plastics had a difficult half year, suffering from the disruption of moving
the business to new premises. However, the move has allowed capacity to be
increased, resulting in new contracts being secured. The Group's release
coatings business has had to contend with excess industry capacity and the
currency factor, placing downward pressure on prices across its customer base.
Tenza contained the currency-induced impact of pricing pressure by improving
productivity as new equipment came on stream. Tenza also benefited from a
surge in demand for its packing list envelope from direct delivery internet
businesses.
The Division has embarked on a programme of rationalisation, cost reduction,
productivity improvements and new higher added value product introductions to
help offset the recent decline in results.
Prospects
The international trading climate for the Group's business has improved, as is
evident from the performance of the Foils operations, including Shen Yong.
However, the positive impact of increased trading activity and the successful
integration of businesses are being undermined by sterling's continuing
strength in relation to the euro and the prospect of increases in raw material
prices.
Our current order position and the Group's ongoing dialogue with customers
both indicate that once again the Group's results will be heavily geared
towards the second half. API's focus continues to be on new product
development and building the Group's security business. The acquisition of
Chromagem is an important step in the strategy of building an integrated
security business offering a comprehensive and international range of products
and services to combat counterfeiting of brand packaging, currency and
official documents.
J Moger Woolley, Non Executive Chairman
Michael J Smith, Group Chief Executive
Enquiries:
Michael Smith, Group Chief Executive
Dennis Holt, Group Finance Director
API Group plc Tel: 0207 831 3113 (22/05/2000)
Tel: 01625 610334 (thereafter)
Tim Spratt / Tania Wild
Financial Dynamics Tel: 0207 831 3113
GROUP PROFIT & LOSS ACCOUNT
for the six months ended 1 April 2000
6 months to 1 April 2000 6 months 12 months
to to
Continuing Exceptional 3 April 3 October
operations items Total 1999 1999
£'000 £'000 £'000 £'000 £'000
Turnover 87,008 - 87,008 79,423 176,700
Cost of sales
(64,347) - (64,347) (58,954) (128,341)
Including
goodwill
amortisation (503) - (503) (443) (948)
Gross profit 22,661 - 22,661 20,469 48,359
Distribution
costs (3,480) - (3,480) (3,462) (6,536)
Administrative
expenses (12,816) (659) (13,475) (12,031) (25,999)
Operating
profit 6,365 (659) 5,706 4,976 15,824
Profit on
disposal of
land and
buildings - - 405
Profit on
ordinary
activities
before
interest and
tax 5,706 4,976 16,229
Net interest
expense (200) (118) (323)
Profit on
ordinary
activities
before tax 5,506 4,858 15,906
Taxation (1,520) (1,361) (4,453)
Profit on
ordinary
activities
after tax 3,986 3,497 11,453
Profit
attributable
to minority
equity
interests (553) (72) (492)
Profit for the period 3,433 3,425 10,961
Preference
dividends - (9) (9)
Profit
attributable to
ordinary
shareholders 3,433 3,416 10,952
Ordinary dividends
(2,186) (1,996) (4,886)
Balance
transferred to
reserves 1,247 1,420 6,066
Dividends per ordinary 25p
share 6.55p 5.96p 14.60p
Earnings per ordinary 25p
share
Basic 10.3p 10.2p 32.8p
Diluted 10.3p 10.2p 32.6p
Adjusted profit before tax
£'000 6,668 6,478 18,315
(Profit before exceptional
items, goodwill and tax)
Adjusted earnings per
ordinary 25p share (before
exceptional items and
goodwill)
Basic 12.8p 13.7p 37.9p
Diluted 12.8p 13.7p 37.8p
GROUP BALANCE SHEET
at 1 April 2000
1April 3 April 3 October
2000 1999 1999
£'000 £'000 £'000
Fixed assets
Intangible assets 19,876 18,569 18,093
Tangible assets 60,171 57,577 58,083
Investments 2,416 1,864 1,823
82,463 78,010 77,999
Current assets
Stocks 23,686 19,999 19,584
Debtors 46,740 44,572 51,518
Cash at bank and in hand 6,155 7,374 12,002
76,581 71,945 83,104
Creditors - Amounts falling due
within one year
Creditors (37,185) (28,863) (41,185)
Current taxation (2,645) (4,453) (2,847)
Dividends (2,186) (1,996) (2,890)
(42,016) (35,312) (46,922)
Net current assets 34,565 36,633 36,182
Total assets less current
liabilities 117,028 114,643 114,181
Creditors - Amounts falling due
after more than
one year (344) (4,519) (409)
Provisions for liabilities and
charges (651) (694) (814)
116,033 109,430 112,958
Minority interests (6,344) (5,619) (5,813)
Total net assets 109,689 103,811 107,145
Share capital and reserves
Called up share capital 8,463 8,463 8,463
Share premium account 50,563 50,563 50,563
Revaluation reserve 2,189 2,189 2,616
Capital redemption reserve 549 549 549
Profit and loss account 47,925 42,047 44,954
Equity shareholders' funds 109,689 103,811 107,145
GROUP CASHFLOW STATEMENT
for the six months ended 1 April 2000
6 months 6 months 6 months
to to to
1 April 3 April 3 October
2000 1999 1999
£'000 £'000 £'000
Reconciliation of operating profit
to net cash flow
from operating activities
Operating profit 5,706 4,976 15,824
Depreciation and amortisation less
government grants 3,869 3,256 7,117
(Profit) on replacement of tangible
fixed assets (15) (7) (35)
(Increase) in stocks (3,827) (270) (68)
Decrease in debtors 4,204 10,598 3,503
(Decrease) in creditors (6,865) (10,272) (4,075)
(Decrease)/Increase in provisions (163) 102 222
Net cash inflow from operating
activities 2,909 8,383 22,488
Cash flow statement
Net cash inflow from operating
activities 2,909 8,383 22,488
Returns on investments and
servicing of finance (404) (127) (332)
Taxation (1,470) (828) (4,896)
Capital expenditure and financial
investment (4,188) (3,834) (9,127)
Acquisitions and disposals (1,852) (3,507) (4,808)
Equity dividends paid (2,890) (2,656) (4,652)
Net cash outflow before financing (7,895) (2,569) (1,327)
Financing (5) (720) (5,027)
Increase in net debt in the period (7,900) (3,289) (6,354)
Exchange movement 278 178 (62)
Balance sheet movement in net debt (7,622) (3,111) (6,416)
OTHER STATEMENTS
6 months 6 months 12 months
to to to
1 April 3 April 3 October
2000 1999 1999
£'000 £'000 £'000
Statement of total recognised gains
and losses
Profit attributable to members of
the parent company 3,433 3,425 10,961
Currency translation differences on
foreign currency
net investments 1,297 1,599 287
Total gains and losses recognised
since last annual
report and accounts 4,730 5,024 11,248
Reconciliation of movements in
shareholders' funds
Profit attributable to members of
the parent company 3,433 3,425 10,961
Cancellation of preference shares - (549) (549)
Dividends (2,186) (2,005) (4,895)
Currency translation differences on
foreign currency
net investments 1,297 1,599 287
Net addition to shareholders' funds 2,544 2,470 5,804
Opening shareholders' funds 107,145 101,341 101,341
Closing shareholders' funds 109,689 103,811 107,145
SEGMENTAL ANALYSIS
6 months 6 months 12 months
to to to
1 April 3 April 3 October
2000 1999 1999
£'000 £'000 £'000
Analysis of turnover by destination
United Kingdom 42,351 42,335 89,083
France 4,707 3,914 8,427
Germany 3,339 3,623 7,119
Scandinavia 3,230 3,997 7,865
Other European countries 8,732 6,930 16,621
Americas 15,773 14,199 34,714
Rest of World 8,876 4,425 12,871
87,008 79,423 176,700
Analysis of turnover by origin
United Kingdom 64,335 63,352 133,384
Continental Europe 761 763 2,281
Americas 16,284 14,237 35,858
Rest of World 5,628 1,071 5,177
87,008 79,423 176,700
Analysis of profit before interest
and tax by origin
United Kingdom 4,059 5,108 13,019
Continental Europe 126 135 73
Americas 1,432 1,207 4,429
Rest of World 1,251 146 1,117
6,868 6,596 18,638
Exceptional items and goodwill (1,162) (1,620) (2,409)
5,706 4,976 16,229
£748,000 of the exceptional items and goodwill arise in the United Kingdom
(April 1999 £1,323,000: October 1999 £1,699,000), £366,000 arise in the
Americas (April 1999 £292,000: October 1999 £655,000) and £48,000 arise in the
Rest of the World (April 1999 £5,000: October 1999 £55,000).
Analysis of turnover by activity
Foils & laminates 62,185 55,252 126,597
Converted products and variable 24,823 24,171 50,103
information
87,008 79,423 176,700
Analysis of profit before interest
and tax by activity
Foils & laminates 5,159 4,157 14,034
Converted products and variable 1,709 2,439 4,604
information
6,868 6,596 18,638
Exceptional items and goodwill (1,162) (1,620) (2,409)
5,706 4,976 16,229
£1,069,000 of the exceptional items and goodwill relate to the foils and
laminates division (April 1999: £1,589,000, October 1999 £2,169,000) and
£93,000 relate to the converted products and variable information division
(April 1999 £31,000: October 1999: £240,000).
NOTES
BASIS OF PREPARATION
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 3 October 1999. The taxation charge is based on the estimated effective
rate of taxation for the full year (28%). Other expenses are accrued in
accordance with the same principles used in the preparation of the annual
accounts.
DIVIDENDS
The interim dividend will be paid on 3 July 2000 to shareholders on the
register on 9 June 2000.
PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The financial information for the full preceding year is
based on the statutory accounts for the financial year ended 3 October 1999 .
Those accounts, upon which the auditors issued an unqualified opinion, have
been delivered to the Registrar of Companies.
INTERIM STATEMENT
The interim statement is being mailed to shareholders on 31 May and will be
available at the company's registered office, Silk House, Park Green,
Macclesfield, Cheshire, SK11 7NU.
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