Interim Results
Filtrona plc
30 August 2005
Tuesday, 30 August 2005
FILTRONA plc
INTERIM RESULTS FOR THE SIX MONTHS
TO 30 JUNE 2005
Filtrona plc, the international market leading speciality plastic and fibre
products supplier, today announces its interim results for the six months ended
30 June 2005.
• Sales were £251.9m (2004: £237.6m), up 6.0%.
• Operating profit before intangible amortisation was £30.0m
(2004: £25.2m), up 11.6% excluding non recurring IFRS adjustments.
• Profit before tax was £26.3m (2004: £24.2m), up 8.7%.
• Underlying adjusted earnings per share were 7.7p (2004: 7.0p), up 10.0%.
• Operating cash flow was £20.1m (2004: £16.9m), up 18.9%.
• Net debt of £109.6m (December 2004: £120m).
Commenting on today's announcement, Mark Harper, Chief Executive, Filtrona plc,
said:
'I am pleased to present Filtrona plc's maiden interim results as an independent
public company, with sales up 6.0% and profit before tax up 8.7%, representing a
strong start. Our key business ratios have improved with increases in cash
generation, operating margins, return on capital employed and employee
productivity.
Filtrona's established market positions, combined with its spread of geographies
and broad customer base, have enabled the company to deliver good results.
The Board is confident that the skills and experience of Filtrona employees,
ongoing investment in service and supply chain efficiencies, new products and
technological developments, coupled with the lowering of unit costs will enable
Filtrona to continue to grow in line with expectations during the current
financial year.'
Enquiries:-
Filtrona plc Finsbury
Mark Harper, Chief Executive Morgan Bone
Steve Dryden, Finance Director Gordon Simpson
Tel: 01908 359100 Tel: 0207 251 3801
Chairman's Statement
I am pleased to present Filtrona plc's interim results for the six months to 30
June 2005, the first since the company was listed on the London Stock Exchange
on 6 June 2005.
The demerger of Filtrona has presented us with a tremendous opportunity to
strengthen further our international market positions and management. This
process has already begun in the short period since the company was listed. The
company has continued to win new customers and is benefiting from the
recruitment of new high quality senior management to complement the established
team.
For the half year to 30 June 2005, sales were £251.9m (2004: £237.6m) up 6.0%.
Operating profit before intangible amortisation and excluding non recurring IFRS
adjustments was £30.0m (2004: £25.2m) up 11.6%. Profit before tax was £26.3m
(2004: £24.2m) up 8.7% in line with expectations. As at 30 June 2005, net debt
was £109.6m. Our key business ratios improved over those of the first half of
last year with increases in cash generation, operating margins, return on
capital employed and in employee productivity.
The Board has declared an interim dividend of 2.13 pence per share. The dividend
will be paid on 31 October 2005 to shareholders on the register on 30 September
2005 with an ex-dividend date of 28 September 2005.
Filtrona's established market positions, combined with its spread of geographies
and broad customer base, have enabled the company to deliver these good results.
The Board is confident that the skills and experience of Filtrona employees, and
ongoing investment in service and supply chain efficiencies, new products and
technological developments, coupled with the lowering of unit costs will enable
Filtrona to continue to grow in line with expectations during the current
financial year.
To conclude, I should like to thank all of the staff in Filtrona for their
outstanding contribution to both the demerger process and these strong results.
Jeff Harris
Chairman
30 August 2005
Operating Review
Filtrona is an international, market leading speciality plastic and fibre
products supplier with activities segmented into Plastic Technologies and Fibre
Technologies.
Plastic Technologies produces, sources and distributes protection and finishing
products, self-adhesive tear tape and certain security products as well as
proprietary and customised plastic extrusions and packaging items for consumer
products.
Fibre Technologies focuses on the production and supply of special filters for
cigarettes and bonded fibre products such as reservoirs and wicks for writing
instruments and printers, household products and medical diagnostic devices.
Filtrona has performed well in the first half of 2005. Underlying like-for-like
sales at constant exchange rates excluding acquisition impact were up 4.8%.
Underlying like-for-like operating profits at constant exchange rates and after
excluding acquisitions and non recurring IFRS adjustments were up 7.7%.
PLASTIC TECHNOLOGIES
Plastic Technologies continued its robust performance with sales of £136.1m
(2004: £119.9m) up 12.9% at constant exchange rates. Acquisitions contributed
£2.9m of the £16.2m sales growth. Operating profit increased to £18.6m
(2004: £15.7m) up 17.0% at constant exchange rates. Underlying like-for-like
operating profits at constant exchange rates and excluding acquisition impact
increased by 9.9%. Margins improved by 60 basis points from 13.1% to 13.7%.
Protection and Finishing Products achieved very good growth. The Moss business
achieved market share gains in continental Europe and a new Moss distribution
business was established in the Czech Republic reflecting the company's strategy
of developing its distribution infrastructure in Central and Eastern Europe.
Moss also established a Chinese Representative Office within the Fibertec Ningbo
facility to expand the sourcing of tooling and finished products from China.
The Skiffy business continued on its successful development path as increased
investment in range development, productivity improvement and marketing
programmes, including a new catalogue, yielded positive results. The Alliance
business in the US developed well, in spite of a slowdown in the US automotive
sector, due to increased investments in marketing and new product development.
The Alliance regional distribution operations performed particularly well. The
Alliance national distribution operation based at Sao Paulo in Brazil once again
showed positive growth and local production is being expanded in the second half
of this year. The MSI oil country tubular goods thread protector business
continued to benefit from the high levels of drilling activity in the oil and
gas sector.
Coated and Security Products has continued to benefit from increased volumes of
tear tapes for brand promotion and brand security applications. During the
period, the coated and security businesses were combined in a market
repositioning exercise under the 'Payne' banner which has growing brand equity
in the tear tape, document authentication, personal identification and brand
protection markets. Further promotional business was secured with an important
FMCG brand owner involving tear tapes with individual item numbering for a major
consumer promotion. This capability, involving digital printing technology, is
expected to have applications in a broad range of consumer product categories.
The Payne innovation programme continued to yield benefit as business was
secured for a high security film laminate on the next generation UK passport.
The Payne personal identification business took advantage of the change in UK
licensing law which requires licensees in licensed premises to wear an identity
badge or card. The new 6 station printer in Richmond, USA came on stream and the
FractureCode development programme continues to yield positive results as it
progresses successfully through phased trials with an FMCG market leader.
The Plastic Profile and Sheet business achieved robust sales growth both in
North America and Europe. Sales of point of purchase products were buoyant in
both geographies and North American sales in the transportation and medical
product categories were particularly encouraging. The Monterrey facility in
Mexico continued its rapid sales development and the Enitor business in the
Netherlands is continuing to win new export business, especially in the UK, and
construction of a factory extension in Buitenpost will begin in the second half
of the year.
Globalpack, our Brazilian consumer packaging business, has encountered tough
trading conditions. The business has secured attractive new projects in tubes
for dairy food items and specialised closures for shampoo containers which will
assist second half operating results. Volumes in our roll on ball joint venture
remain strong and a new line will be commissioned in early 2006.
FIBRE TECHNOLOGIES
Sales in Fibre Technologies were £115.8m (2004: £117.7m) a reduction of 1.1% at
constant exchange rates. Operating Profit was £14.0m (2004: £12.7m) up 12.9% at
constant exchange rates. After adjusting for non recurring IFRS accounting
adjustments, underlying operating profit at constant exchange rates was up by
2.2% and margins improved by 20 basis points from 11.9% to 12.1%.
Cigarette Filters total volumes grew by 0.7%. Special filter volumes grew by
5.9% and were up in all regions, driven by market growth and the capture of
further outsourced volumes. Monoacetate volumes fell by 5.7%. The margin benefit
of this mix improvement was reduced by a combination of one-off restructuring
and start up costs.
Lower total filter volumes in Europe were more than offset by growth of volumes
in the Americas and Asia where average selling prices are lower. European
volumes suffered due to weakness in Germany and the impact of previous
self-manufacture decisions by a key customer in both Russia and Italy. As a
result of the reduced European volumes and high Swiss unit costs, the decision
was taken to close the manufacturing facility at Crissier in Switzerland, the
savings from which will improve performance in the second half of the year.
Encouragingly, additional outsourced volumes were secured with a major customer
for European supply during the second half of the year and the first customer
for Filtrona's new active patch technology was captured.
Volumes in the Americas progressed well with the new Monterrey facility in
Mexico continuing to build its volume and agreement was reached with the
principal customer of the Venezuelan facility for an extension to the exclusive
special filter supply contract for a further 5 years. Asian volumes continued to
progress and a programme of investment has begun for the upgrading of the
Indonesian operations which will include a move to a new facility and the
installation of high speed equipment.
Sales progressed within the Fibertec business with a strong performance in
inkjet printer components but they were held back by reduced demand in the
household products market segment which impacted the Reinbek facility in
Germany. This shortfall has generated the need for a headcount reduction
programme which is underway. The Ningbo facility in China has started up
successfully with the first customer being a local writing instrument
manufacturer who has not previously sourced from Filtrona. The future prospects
for this facility are very positive. The innovation programme at the research
and development centre in Richmond, USA continues to yield very good results in
terms of both new products and additional intellectual property. We have
recently commercialised a new bonded fibre product for a medicine dispensing
system and an important new inkjet printer reservoir project is progressing
towards commercialisation in 2006.
As a result of cost reductions from restructuring, the capture of additional
outsourced filter volumes, and the benefits of higher production levels in
Mexico and China, Fibre Technologies is expected to regain a degree of momentum
in the second half with the full benefits coming through in 2006.
PROSPECTS
These first half year results are in line with expectations for the current
financial year and provide a solid platform for Filtrona to continue to progress
in the future. They represent a good start for Filtrona as an independent listed
company and demonstrate the underlying resilience of the business. Filtrona's
strong international market positions, and continued focus on innovation and
productivity give us confidence that the company will continue to develop
satisfactorily and meet expectations for the current financial year.
Mark Harper
Chief Executive
30 August 2005
Consolidated Income Statement
Note Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- ------- -------- -------- --------
Revenue 2 251.9 237.6 477.5
------------------------------- ------- -------- -------- --------
Operating profit before
intangible amortisation 2 30.0 25.2 48.1
Intangible amortisation (0.4) (0.2) (0.5)
------------------------------- ------- -------- -------- --------
Operating profit before
financing and tax 29.6 25.0 47.6
Finance income 3 1.1 0.4 0.9
Finance expense 3 (4.4) (1.2) (2.8)
------------------------------- ------- -------- -------- --------
Profit before tax * 26.3 24.2 45.7
Income tax expense 4 (9.2) (7.6) (14.0)
------------------------------- ------- -------- -------- --------
Profit for the period 17.1 16.6 31.7
------------------------------- ------- -------- -------- --------
Attributable to:
Equity holders of Filtrona 16.5 16.0 30.5
Minority interests 0.6 0.6 1.2
------------------------------- ------- -------- -------- --------
Profit for the period 17.1 16.6 31.7
------------------------------- ------- -------- -------- --------
Earnings per share attributable
to equity holders of Filtrona:
Basic 5 7.5p 7.3p 13.9p
Diluted 5 7.4p 7.3p 13.9p
------------------------------- ------- -------- -------- --------
* In the Listing Particulars dated 17 May 2005, retirement benefit obligations
were accounted for on a defined benefit basis. Under IAS 19: Employee benefits
(revised) ('IAS 19 (revised)'), Filtrona has to account for defined benefit
pension schemes on a defined contribution basis up to the date of demerger and
on a defined benefit basis thereafter. The impact of this is shown in the Pro
Forma information.
Consolidated Balance Sheet
Note 30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- ------- -------- -------- --------
Assets
Property, plant and equipment 165.6 147.3 152.5
Intangible assets 57.3 56.4 57.6
Deferred tax assets 2.2 0.2 0.2
------------------------------- ------- -------- -------- --------
Total non current assets 225.1 203.9 210.3
Inventories 59.7 52.2 53.3
Income tax receivable 0.6 0.1 0.5
Trade and other receivables 89.5 81.1 78.0
Derivative assets 0.1 - -
Cash and cash equivalents 6 36.6 24.7 31.3
------------------------------- ------- -------- -------- --------
Total current assets 186.5 158.1 163.1
------------------------------- ------- -------- -------- --------
Total assets 411.6 362.0 373.4
------------------------------- ------- -------- -------- --------
Equity
Issued capital 54.8 274.1 274.1
Translation reserve 3.3 (2.1) (1.6)
Other reserves 55.0 (142.2) (161.5)
------------------------------- ------- -------- -------- --------
Total equity attributable to
equity holders of Filtrona 113.1 129.8 111.0
Minority interests 4.7 3.3 3.9
------------------------------- ------- -------- -------- --------
Total equity 117.8 133.1 114.9
------------------------------- ------- -------- -------- --------
Liabilities
Interest bearing loans and borrowings 130.0 118.9 148.6
Retirement benefit obligations * 34.7 - -
Other payables 2.6 3.0 3.1
Provisions 7.2 3.1 3.7
Deferred tax liabilities 11.6 18.6 18.6
------------------------------- ------- -------- -------- --------
Total non current liabilities 186.1 143.6 174.0
Bank overdrafts 1.3 2.8 1.6
Interest bearing loans and borrowings 14.9 0.7 1.1
Income tax payable 15.2 10.0 11.3
Trade and other payables 72.6 70.3 68.6
Provisions 3.7 1.5 1.9
------------------------------- ------- -------- -------- --------
Total current liabilities 107.7 85.3 84.5
------------------------------- ------- -------- -------- --------
Total liabilities 293.8 228.9 258.5
------------------------------- ------- -------- -------- --------
Total equity and liabilities 411.6 362.0 373.4
------------------------------- ------- -------- -------- --------
* In the Listing Particulars dated 17 May 2005, retirement benefit obligations
were accounted for on a defined benefit basis and the liability at 31 December
2004 was £28.2m before deferred tax asset of £8.4m. Under IAS 19 (revised),
Filtrona has to account for defined benefit pension schemes on a defined
contribution basis up to the date of demerger and on a defined benefit basis
thereafter.
Consolidated Statement of Cash Flows
Note Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- ------- -------- -------- -------
Operating activities
Profit before tax 26.3 24.2 45.7
Adjustments for:
Net finance expense 3.3 0.8 1.9
Intangible amortisation 0.4 0.2 0.5
Depreciation 10.4 10.2 20.1
Share option expense 0.6 0.6 1.1
Impairment of property, plant and equipment - 1.3 2.3
Other items 1.1 0.8 2.5
Increase in inventories (3.5) (3.5) (5.7)
Increase in trade and other receivables (10.8) (12.2) (8.5)
Increase in trade and other payables 7.8 6.3 4.8
Acquisition of employee trust shares (1.0) - -
Other cash movements (0.2) (0.4) (0.6)
Income tax paid (5.2) (7.1) (13.2)
------------------------------- ------- -------- -------- -------
Net cash inflow from
operating activities 29.2 21.2 50.9
------------------------------- ------- -------- -------- -------
Investing activities
Interest received 0.5 0.7 0.8
Acquisition of property,
plant and equipment (15.1) (12.8) (34.8)
Proceeds from sale of
property, plant and equipment 0.8 1.4 1.4
Acquisition of businesses net
of cash acquired - (22.3) (22.5)
Other investing cash flows (0.1) 0.1 (0.9)
------------------------------- ------- -------- -------- -------
Net cash outflow from
investing activities (13.9) (32.9) (56.0)
------------------------------- ------- -------- -------- -------
Financing activities
Interest paid (3.6) (1.7) (2.8)
Dividends paid to
former parent company - - (34.3)
Proceeds from/(repayments of)
short term loans 13.8 (0.2) 0.2
Proceeds from/(repayments of)
long term loans 121.3 (0.1) (0.1)
(Repayments to)/proceeds from
former parent company (142.8) 13.6 48.9
------------------------------- ------- -------- -------- -------
Net cash (outflow)/inflow
from financing activities (11.3) 11.6 11.9
------------------------------- ------- -------- -------- -------
Net increase/(decrease) in
cash and cash equivalents 4.0 (0.1) 6.8
------------------------------- ------- -------- -------- -------
Net cash and cash equivalents
at the beginning of the
period 29.7 22.5 22.5
Net increase/(decrease) in
cash and cash equivalents 4.0 (0.1) 6.8
Net effect of currency
translation on cash and cash
equivalents 1.6 (0.5) 0.4
------------------------------- ------- -------- -------- -------
Net cash and cash equivalents
at the end of the period 6 35.3 21.9 29.7
------------------------------- ------- -------- -------- -------
Consolidated Statement of Recognised Income and Expense
Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- -------- -------- --------
Recognition of defined benefit
pension schemes on demerger:
Actuarial loss (34.7) - -
Deferred tax credit on actuarial
loss 10.5 - -
Foreign exchange translation
differences 5.1 (2.2) (1.7)
------------------------------- -------- -------- --------
Income and expense recognised
directly in equity (19.1) (2.2) (1.7)
Profit for the period 17.1 16.6 31.7
------------------------------- -------- -------- --------
Total recognised income and expense
for the period (2.0) 14.4 30.0
Adoption of IAS 32 and IAS 39 0.1 - -
------------------------------- -------- -------- --------
Total recognised income and expense (1.9) 14.4 30.0
------------------------------- -------- -------- --------
Attributable to:
Equity holders of Filtrona (2.7) 13.9 28.9
Minority interests 0.8 0.5 1.1
------------------------------- -------- -------- --------
Total recognised income and (1.9) 14.4 30.0
expense -------- -------- --------
-------------------------------
Consolidated Statement of Changes in Total Equity
Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------------- -------- -------- --------
Total recognised income and expense
for the period (2.0) 14.4 30.0
Acquisition of employee trust shares (1.0) - -
Dividends paid to former parent company - - (34.3)
Reduction of share capital (219.3) - -
Transfer to retained earnings 219.3 - -
Former parent company's contribution
to the defined benefit pension
scheme net of deferred tax credit 1.0 - -
Former parent company's capital
contribution 4.2 11.7 11.7
Dividends paid to minority interests - (0.2) (0.2)
Share option expense 0.6 0.6 1.1
------------------------------------- -------- -------- --------
Net movement for the period 2.8 26.5 8.3
Total equity at the beginning of the
period 114.9 106.6 106.6
Adoption of IAS 32 and IAS 39 0.1 - -
------------------------------------- -------- -------- --------
Total equity at the end of the period 117.8 133.1 114.9
------------------------------------- -------- -------- --------
Attributable to:
Equity holders of Filtrona 113.1 129.8 111.0
Minority interests 4.7 3.3 3.9
------------------------------------- -------- -------- --------
Total equity at the end of the period 117.8 133.1 114.9
------------------------------------- -------- -------- --------
Notes to the Interim Financial Statement
1. Basis of preparation
On 6 June 2005 the Filtrona business was demerged from Bunzl plc ('Bunzl') and
the ordinary shares of Filtrona plc ('Filtrona') were listed on the London Stock
Exchange. Prior to the demerger the Filtrona businesses were reorganised under
Filtrona International Limited under the common control of Bunzl (outside the
scope of IFRS 3) and have been presented as if Filtrona had always existed
independently for the purposes of the comparatives. The demerger was effected by
the payment of a dividend in specie by Bunzl and has been accounted for as if it
were a reverse acquisition.
The unaudited financial statements for the six months ended 30 June 2005 have
been prepared in accordance with the International Accounting Standards and
International Financial Reporting Standards (collectively 'IFRS') expected to be
endorsed by the European Union and available for use by European companies at 31
December 2005. In particular, the directors have assumed that IAS 19 (revised)
will be adopted by the EU in sufficient time that it will be available for use
in the annual financial statements for the year ending 31 December 2005.
The accounting policies, which conform to IFRS, are set out on Filtrona's
website at www.filtrona.com. These policies have been consistently applied to
all the periods presented except for those relating to the classification and
measurement of financial instruments.
The accounting policies may change as a result of decisions taken by the
European Commission on endorsement of IFRS, and therefore will possibly require
updating when the annual financial statements are prepared for the year ending
31 December 2005.
These interim financial statements do not constitute statutory accounts of
Filtrona within the meaning of Section 240 of the Companies Act 1985. The
comparative figures for the year ended 31 December 2004 are not statutory
accounts for that financial year. Statutory accounts of Bunzl for the year ended
31 December 2004, within which the Filtrona business was included until 6 June
2005, were prepared under accounting principles generally acceptable in the UK
('UK GAAP') and have been filed with the Registrar of Companies. The auditors'
report on those accounts was unqualified and did not contain any statement under
Section 237 of the Companies Act 1985.
IFRS 1: First-time adoption of International Financial Reporting Standards
('IFRS 1') permits certain exemptions from the full requirements of IFRS in the
transition period. Filtrona has taken the following exemptions:
i Business combinations: Filtrona has chosen not to apply IFRS 3: Business
combinations retrospectively to business combinations that occurred before the
date of transition to IFRS.
ii Financial instruments: Filtrona has taken advantage of the exemption not to
present financial information compliant with IAS 32: Financial instruments:
disclosure and presentation and IAS 39: Financial instruments: recognition and
measurement for the comparative periods ended 31 December 2004. Consequently,
the restatement of the opening balance sheet at 1 January 2004, the results for
the year ended 31 December 2004 and the balance sheet at 31 December 2004 have
been prepared using the accounting policies for financial instruments previously
adopted under UK GAAP. The result of the adoption of IAS 39 on 1 January 2005
was the recognition of a derivative asset of £0.1m.
iii Cumulative translation differences: one of the requirements of IAS 21: The
effects of changes in foreign exchange rates is that cumulative exchange gains
and losses on retranslating opening net worth in overseas subsidiary
undertakings, net of related foreign currency borrowings and foreign currency
hedging contracts together with differences arising from the use of average and
year end exchange rates be separately disclosed. Filtrona has adopted the
exemption in IFRS 1 allowing these cumulative translation differences to be
reset to zero at the transition date.
iv Fair value or revaluation at deemed cost: Filtrona has adopted the exemption
to restate revalued items of property, plant and equipment as held at deemed
cost at the date of transition.
Filtrona has elected not to adopt the following exemption:
Share-based payments: Filtrona has not adopted the exemption to apply IFRS 2:
Share-based payments only to awards made after 7 November 2002, instead a full
retrospective approach has been followed on all awards granted but not fully
vested at the date of transition.
Impairment
Goodwill was tested for impairment at 1 January 2004, the date of transition to
IFRS, even though no indication of impairment existed.
Debt and finance cost
In the Accountant's Report contained in the Listing Particulars, funding
balances between Filtrona and Bunzl were described as 'parent company financing'
within non current liabilities, reflecting the debt to be transferred from Bunzl
to Filtrona on demerger.
In the Listing Particulars interest on the parent company financing was
calculated at an interest rate reflecting the effective finance cost that Bunzl
incurred during the year. Filtrona's finance cost shown in these interim
financial statements reflects Filtrona's actual interest costs including
interest payable to Bunzl.
Tax
Filtrona's income tax expense in 2004 benefited from its membership of Bunzl tax
groups in different tax jurisdictions. In 2005, the income tax expense incurred
by Filtrona only reflects reliefs and charges relevant to Filtrona tax groups.
Pensions
Filtrona operates defined benefit and defined contribution pension schemes,
which were split out from the schemes operated by Bunzl. In the Listing
Particulars, Filtrona accounted for certain pension expense on a defined benefit
basis. Under IAS 19 (revised), Filtrona has to account for this pension expense
on a defined contribution basis up to the date of demerger and on a defined
benefit basis thereafter.
2. Summarised segmental analysis
Revenue Operating Profit
-------- -------- -------- -------- ------- --------
Six months to Six months to Year to Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004 30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m £m £m £m
------------------ -------- -------- -------- -------- ------- --------
Plastic Technologies 136.1 119.9 241.5 18.6 15.7 33.2
Fibre Technologies 115.8 117.7 236.0 14.0 12.7 23.9
Corporate * - - - (2.6) (3.2) (9.0)
------------------ -------- -------- -------- -------- ------- --------
251.9 237.6 477.5 30.0 25.2 48.1
Intangible amortisation (0.4) (0.2) (0.5)
------------------ -------- -------- -------- -------- ------- --------
Total 251.9 237.6 477.5 29.6 25.0 47.6
------------------ -------- -------- -------- -------- ------- --------
* Certain pension expense in Plastic Technologies and Fibre Technologies is
accounted for on a defined benefit basis. The difference between this pension
expense on a defined benefit and defined contribution basis prior to demerger is
accounted for in Corporate. This has decreased/(increased) Corporate expense by
£0.1m (six months to 30 Jun 2004: £(0.3)m, year to 31 Dec 2004: £(1.5)m).
3. Net finance expense
Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- -------- -------- --------
Finance income
Bank deposits 0.5 0.4 0.8
Other finance income - - 0.1
Expected return on pension scheme assets 0.6 - -
------------------------------- -------- -------- --------
1.1 0.4 0.9
------------------------------- -------- -------- --------
Finance expense
Loans and overdrafts (2.1) - -
Interest paid to former parent company (1.7) (1.2) (2.8)
Interest on pension scheme liabilities (0.6) - -
------------------------------- -------- -------- --------
(4.4) (1.2) (2.8)
------------------------------- -------- -------- --------
Net finance expense (3.3) (0.8) (1.9)
------------------------------- -------- -------- --------
4. Income tax expense
A tax expense of 35% on the profit of the underlying operations has been
provided based on the estimated effective tax rate for the year.
5. Earnings per share
Six months to Six months to Year to
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- -------- -------- --------
Profit for the period attributable
to equity holders of Filtrona 16.5 16.0 30.5
Adjustment * 0.3 0.1 0.3
------------------------------- -------- -------- --------
Adjusted profit for the period attributable
to equity holders of Filtrona 16.8 16.1 30.8
------------------------------- -------- -------- --------
Basic weighted average ordinary
shares in issue (million) # 219.3 219.3 219.3
Dilutive effect of employee share
option plans (million) 3.1 - -
------------------------------- -------- -------- --------
Diluted weighted average ordinary
shares (million) 222.4 219.3 219.3
------------------------------- -------- -------- --------
Basic earnings per share 7.5p 7.3p 13.9p
Adjustment * 0.2p - 0.1p
------------------------------- -------- -------- --------
Adjusted earnings per share 7.7p 7.3p 14.0p
------------------------------- -------- -------- --------
Diluted basic earnings per share 7.4p 7.3p 13.9p
------------------------------- -------- -------- --------
* The adjustment relates to intangible amortisation less tax relief thereon.
# The number of ordinary shares issued on demerger has been used as the weighted
average number for the period prior to demerger.
6. Analysis of net debt
30 Jun 2005 30 Jun 2004 31 Dec 2004
£m £m £m
------------------------------- -------- -------- --------
Cash at bank and in hand 29.0 19.1 24.9
Short term deposits repayable on demand 5.8 4.9 4.7
Short term deposits not repayable on
demand 1.8 0.7 1.7
------------------------------- -------- -------- --------
Cash and cash equivalents 36.6 24.7 31.3
Overdrafts (1.3) (2.8) (1.6)
------------------------------- -------- -------- --------
Net cash and cash equivalents 35.3 21.9 29.7
Debt due within one year (14.9) (0.7) (1.1)
Debt due after one year (130.0) (0.3) (0.3)
Amounts due to former parent company - (118.6) (148.3)
------------------------------- -------- -------- --------
Net debt (109.6) (97.7) (120.0)
------------------------------- -------- -------- --------
7. Dividends
Per share Total
-------- --------
Six months to Six months to
30 Jun 2005 30 Jun 2005
£m
------------------------------- -------- --------
Interim dividend 2.13p 4.7
------------------------------- -------- --------
The proposed interim dividend for 2005 of 2.13p per 25p ordinary share will be
paid on 31 October 2005 to equity holders on the share register on 30 September
2005.
Independent Review Report by KPMG Audit Plc
Introduction
We have been engaged by Filtrona plc ('Filtrona') to review the financial
information set out on pages 5 to 11 and we have read the other information
contained in the Interim Statement and considered whether it contains any
apparent misstatements or material inconsistencies with the financial
information.
This report is made solely to Filtrona in accordance with the terms of our
engagement to assist Filtrona in meeting the requirements of the Listing Rules
of the Financial Services Authority. Our review has been undertaken so that we
might state to Filtrona those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than Filtrona for our review
work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The Interim Statement, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the Interim Statement in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where any changes, and the reasons
for them, are disclosed.
As disclosed in note 1 to the financial information, the next annual financial
statements of Filtrona will be prepared in accordance with IFRS adopted for use
in the European Union.
The accounting policies that have been adopted in preparing the financial
information are consistent with those that the directors currently intend to use
in the next annual financial statements. There is, however, a possibility that
the directors may determine that some changes to these policies are necessary
when preparing the full annual financial statements for the first time in
accordance with those IFRS adopted for use by the European Union. This is
because, as disclosed in note 1, the directors have anticipated that certain
standards, which have yet to be formally adopted for use in the EU, will be
adopted in time to be applicable to the next annual financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Filtrona management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
KPMG Audit Plc 8 Salisbury Square
Chartered Accountants London, EC4Y 8BB
30 August 2005 United Kingdom
Pro Forma Information
1. Reconciliation to previously reported numbers
Note Six months to Year to
30 Jun 2004 31 Dec 2004
£m £m
------------------------------- ------ -------- --------
Operating profit
Operating profit as previously reported by
the former parent company under UK GAAP 1 29.9 59.1
Apportioned central costs 2 (2.5) (4.9)
Share option expense 3 (0.6) (1.1)
Non continuing adjustments arising on
adoption of IFRS 4 (1.3) (3.5)
------------------------------- ------ -------- --------
Operating profit on the basis used in the
Listing Particulars 25.5 49.6
Pension adjustment 5 (0.3) (1.5)
------------------------------- ------ -------- --------
Operating profit as published in the
interim statement 25.2 48.1
------------------------------- ------ -------- --------
Notes
1 Operating profit as previously reported by the former parent company under UK GAAP
For the six months to 30 June 2004 and the year to 31 December 2004, Filtrona
was reported under UK GAAP as a business area within Bunzl.
2 Apportioned central costs
Filtrona's share of central costs for the provision of support in areas such as
accountancy, legal and insurance, has been apportioned on the basis of estimates
of Filtrona's share of corporate costs incurred by Bunzl in each period, and the
estimated cost of providing the same level of support services independently by
Filtrona.
3 Share option expense
Under IFRS, Filtrona is required to account for an expense for the fair value of
options and other share based incentives granted to employees (including directors).
4 Non continuing adjustments arising on adoption of IFRS
As previously reported under UK GAAP, the Filtrona business made fair value
adjustments to goodwill and the revaluation reserve. Under IFRS these adjustments
were charged to the income statement.
5 Pension adjustment
The pension expense for defined benefit schemes in the Listing Particulars was
calculated on a defined benefit basis. Under IAS 19 (revised) Filtrona has to
account for defined benefit pension schemes on a defined contribution basis up
to the date of demerger and on a defined benefit basis thereafter.
A reconciliation of UK GAAP to IFRS upon transition is provided in the Listing Particulars.
2. Underlying results
The following information is presented because the directors believe it more
accurately reflects the underlying performance of Filtrona if it had operated
independently for the 18 months covered by this Interim Statement.
Six months to 30 Jun 2004 Year to 31 Dec 2004
-------------- ----------------
Notes Reported Adjustments Underlying Reported Adjustments Underlying
£m £m £m £m £m £m
-------------------- ----- ------ ------- ------ ------ -------- ------
Revenue 237.6 - 237.6 477.5 - 477.5
Operating profit before
pension adjustment and
intangible amortisation 1 25.5 1.3 26.8 49.6 3.5 53.1
Pension adjustment 2 (0.3) 0.3 - (1.5) 1.5 -
Intangible amortisation (0.2) - (0.2) (0.5) - (0.5)
-------------------- ----- ------ ------- ------ ------ -------- ------
Operating profit before
financing and tax 25.0 1.6 26.6 47.6 5.0 52.6
Finance income 0.4 - 0.4 0.9 - 0.9
Finance expense 3 (1.2) (1.3) (2.5) (2.8) (2.4) (5.2)
-------------------- ----- ------ ------- ------ ------ -------- ------
Profit before tax 24.2 0.3 24.5 45.7 2.6 48.3
Income tax expense 4 (7.6) (1.0) (8.6) (14.0) (2.9) (16.9)
-------------------- ----- ------ ------- ------ ------ -------- ------
Profit for the period 16.6 (0.7) 15.9 31.7 (0.3) 31.4
-------------------- ----- ------ ------- ------ ------ -------- ------
Attributable to:
Equity holders of Filtrona 16.0 (0.7) 15.3 30.5 (0.3) 30.2
Minority interests 0.6 - 0.6 1.2 - 1.2
-------------------- ----- ------ ------- ------ ------ -------- ------
Profit for the period 16.6 (0.7) 15.9 31.7 (0.3) 31.4
Earnings per share attributable to equity holders of Filtrona:
Basic 7.3 (0.3) 7.0 13.9 (0.1) 13.8
--------------------- ------ ------ ------ ------ ------ ------
Adjusted 7.3 (0.3) 7.0 14.0 (0.1) 13.9
--------------------- ------ ------ ------ ------ ------ ------
Notes
1 Operating profit before pension adjustment and intangible amortisation
The non continuing IFRS adjustments have been added back to operating profit to
enable comparison for the six months to 30 June 2005.
2 Pension adjustment
Under IFRS, Filtrona has to present defined benefit pension expense on a defined
contribution basis up to the date of demerger. The directors believe that since
these schemes operate on a defined benefit basis, it is more appropriate to
present this pension expense on a defined benefit basis over the entire period
of this statement.
3 Finance expense
The finance expense represents a charge allocated by Bunzl reflecting the
effective finance expense that Bunzl incurred during the period of this
statement. The directors believe that the adjustment more accurately reflects
the expense that Filtrona would have incurred had it operated independently of Bunzl.
4 Income tax expense
The income tax expense previously reflected the actual expense of the companies
making up Filtrona and reflects benefits, reliefs and charges which arose from
membership of Bunzl tax groups. The directors believe that the adjustment more
accurately reflects the expense that Filtrona would have incurred had it
operated independently of Bunzl.
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