Interim Results
Filtrona plc
30 August 2007
Filtrona plc
Interim results for the six months ended 30 June 2007
-----------------------------------------------------
Filtrona plc, the international, market leading, speciality plastic and fibre
products supplier, today announces its interim results for the six months ended
30 June 2007. Following the disposal of Globalpack, the Brazilian consumer
packaging business in June 2007, the results from continuing operations are
shown below.
• Operating margin up from 11.8% to 13.5%.
• Operating profit before intangible amortisation and restructuring costs,
17.2% ahead at constant exchange rates, and up 9.5% to a reported £34.7m
(2006: £31.7m).
• Profit before tax up 17.5% at constant exchange rates and before
restructuring costs of £4.2m. After adverse currency impacts and the
restructuring costs, reported profit before tax of £26.7m (2006: £28.2m)
down 5.3%.
• Revenue growth of 1.5% at constant exchange rates and reported revenue
down 4.5% to £257.2m (2006: £269.3m) due to adverse currency impacts.
• Adjusted earnings per share up 17.7% at constant exchange rates with
reported adjusted earnings per share of 9.3p (2006: 8.5p) up 9.4%.
• Interim dividend of 2.52p per share (2006: 2.30p) up 9.6%.
• Net debt of £115.1m (December 2006: £98.8m).
Commenting on today's announcement, Mark Harper, Chief Executive of Filtrona,
said:
'These strong results represent another positive step forward for Filtrona and
are well above historical levels in underlying organic profit growth terms. They
reinforce the value of our strong market positions and our ability to take
decisive and rapid action to address the challenges thrown up by the markets in
which we operate. With strong underlying growth and an improved operating
margin, supplemented by the contribution from recent acquisitions, the Board
remains confident of positive future progress.'
Enquiries
---------
Filtrona plc Finsbury
Mark Harper, Chief Executive James Leviton
Steve Dryden, Finance Director Gordon Simpson
Tel: 01908 359 100 Tel: 020 7251 3801
Notes
-----
1. A webcast of today's analyst presentation will be available on
www.filtrona.com by 5pm today.
2. 2006's comparatives, at constant exchange rates, were revenue £256.1m,
operating profit before intangible amortisation £29.6m, profit before tax
£26.3m and adjusted earnings per share of 7.9p.
Operating Review
Filtrona is an international, market leading, speciality plastic and fibre
products supplier with activities segmented into Plastic Technologies and Fibre
Technologies.
Following the disposal of Globalpack, the Brazilian consumer packaging business,
in June 2007, the results from continuing operations are shown below with
Globalpack's contribution to profits included as a single line net of interest,
tax and the costs of effecting the transaction.
Filtrona has continued to perform strongly for the six months ended 30 June
2007. The operating margin improved to 13.5% from 11.8% for the comparable
period last year. Operating profit before intangible amortisation and
restructuring costs was £34.7m (2006: £31.7m) up 9.5% on a reported basis and up
17.2% at constant exchange rates. Acquisitions accounted for 2.3% of this
growth. Revenue grew by 1.5% at constant exchange rates though, due to adverse
currency impacts, reported revenue was down 4.5% to £257.2m (2006: £269.3m).
Following the announcement at the end of 2006, restructuring costs of £4.2m were
incurred in the period. Profit before tax, excluding the restructuring costs and
at constant exchange rates, was up 17.5%. After the restructuring costs and
adverse currency impacts, reported profit before tax was down 5.3% to £26.7m
(2006: £28.2m). It is anticipated that the remaining £0.8m of the £5.0m
restructuring costs will be incurred in the second half of 2007. Adjusted
earnings per share were 9.3p (2006: 8.5p) up 9.4% and, at constant exchange
rates, were up 17.7%.
At 30 June 2007, net debt was £115.1m (2006: £117.4m) with the ratio of net debt
to earnings before interest, tax, depreciation and amortisation remaining at
1.4.
The Board has declared an interim dividend up 9.6% to 2.52p per share (2006:
2.30p) which will be paid on 26 October 2007 to shareholders on the register on
28 September 2007 with an ex-dividend date of 26 September 2007.
PLASTIC 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.
After a very strong 2006, growth in Plastic Technologies has moderated during
2007. Reported revenue was £136.7m (2006: £137.9m) a reduction of 0.9%, with
revenue at constant exchange rates up 4.8%. Operating profit increased to £21.7m
(2006: £21.4m) up 1.4%, with operating profit at constant exchange rates up
6.9%. Operating margin improved by 40 basis points from 15.5% to 15.9%.
Protection and Finishing Products has continued to trade well with further
increases in revenue and operating profit. At Moss, the pan-European plastic
parts supplier, the growth momentum was maintained by the combination of
increased marketing, successful new product introductions and the expansion of
the distribution network. Sales development across the Continental European
network was particularly encouraging within both recently opened and more
established locations. The new distribution unit in Hungary was opened
successfully. In addition, the mix of proprietary and custom products continued
to strengthen in favour of the more profitable proprietary lines.
Skiffy, the European specialist small nylon parts producer, achieved strong
revenue growth particularly from its principal location in Amsterdam. The
business is sustaining increased levels of marketing investment with the first
half sales benefiting from the launch of a new Skiffy catalogue, printed and
available online in eight languages.
Alliance, the US-based plastic parts supplier, traded well in spite of the more
challenging market conditions in the domestic US market. The new Alliance
Express location in Chicago achieved a very encouraging start to operations and
performance at the Alliance facility in Sao Paulo, Brazil has been very strong
with the benefits of local manufacture materially improving its competitive
position. Unit production costs at the Erie production facility continued to
fall and additional land was secured close to the existing site to support the
next phase in the implementation of the operational strategy for the business.
The acquisition of Duraco, based in Chicago, Illinois, was completed in May for
a consideration of $61m. Initial trading at Duraco has met expectations. The
integration is proceeding well and a senior executive from within Protection and
Finishing Products has been appointed President. This acquisition represents an
important strategic step as it broadens both the product and market bases for
the Protection and Finishing Products business.
Growth of the MSI oil country tubular goods thread protector business was
moderated due to de-stocking on the part of the steel pipeyards who form the
majority of MSI's customer base. The underlying fundamentals in the oil and gas
drilling sector remain strong and early trading in quarter three indicates that
activity is picking up.
Preparatory work began for the establishment of a Protection and Finishing
Products sales and distribution unit to serve the domestic Chinese market. This
operation will be based at the newly expanded Filtrona Fibertec facility in
Ningbo and will complement the existing successful finished products and tool
sourcing operation.
Coated and Security Products has delivered an improved performance in both
revenue and operating profit. The Payne tear tape business was assisted by both
growth in promotional and other value-added printed tapes and a labour
restructuring programme implemented in the first quarter. The successful
introduction of a cross feed application system for tear tape is expected to
support the continued development of fast moving consumer goods markets outside
the tobacco industry.
Strong volumes of the specialist laminates for the UK passport drove performance
at the Payne Security business and the new security label machinery has recently
run its first security label orders. FractureCode technology is now running in a
live environment within five manufacturing facilities but, as planned, further
revenue investments in product development and in the commercial team have
resulted in a small loss in the first half. The Company remains positive
regarding the long-term prospects of FractureCode, as an integral part of a
comprehensive suite of technologies positioned to meet the demands of emerging
security product markets, but the precise timing of the capture of further
customers and therefore the level of contribution that FractureCode by itself
will make in the coming years is uncertain.
The Coated and Security Products business continues to develop its range of
security technologies and carrier media. The security products market is
expected to continue to provide good opportunities for future growth as
customers migrate through increasingly sophisticated levels of product
authentication, and ultimately to individual item level identification and track
and trace.
After an excellent 2006, the Plastic Profile and Sheet business has encountered
much more challenging trading conditions in 2007 with a reduction in operating
performance in North America. Whilst a number of product sectors have continued
to grow in the US market, custom products revenues have reduced reflecting some
overall weakness in the US economy. The programme to consolidate the two
Massachusetts facilities is expected to be completed in the fourth quarter and
this consolidation will generate important operational savings. A medical clean
room is now under construction at the Athol, Massachusetts facility and the new
clean room in Monterrey, Mexico is complete and being commissioned. Both of
these investments are expected to facilitate rapid growth in the key target
market of medical products. The Enitor business in the Netherlands continued to
grow with the point-of-purchase market showing particular strength.
The disposal of Globalpack, the Brazilian consumer packaging business, was
completed in June for a cash consideration payable of $56m. The increasing
internationalisation of the consumer packaging market, combined with Filtrona's
very minor position within it, led the Board to conclude that Globalpack did not
fit with Filtrona's longer-term strategic plans. I would like to thank everyone
at Globalpack for their valued contribution to Filtrona over many years and wish
them every success for the future.
FIBRE TECHNOLOGIES
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 devices.
Fibre Technologies has staged a strong recovery in operating performance.
Reported operating profit increased to £17.0m (2006: £14.0m) up 21.4% with
operating profit at constant exchange rates up 30.8%. Operating margin improved
by 340 basis points from 10.7% to 14.1%. As expected, reported revenue was down
8.3% to £120.5m (2006: £131.4m) with revenue at constant exchange rates down
2.2%.
Cigarette Filters is achieving significant improvements in conversion costs with
a clear focus on continuous improvement and the new business model to secure
enhanced value for R&D services is already proving beneficial. The Monterrey,
Mexico facility has been consistently profitable in 2007 as a result of
sustained operational improvement. In Europe, the Salerno, Italy and Jarrow, UK
facilities both performed well and the creation of a new low cost filter
facility in Hungary is underway with production due to commence in the fourth
quarter of this year. Performance in Asia remained strong with each of the
facilities in India, Indonesia and Thailand contributing good results.
The previously announced restructuring within the Cigarette Filters business has
progressed well with the closure of the Richmond, Virginia facility and the
successful transfer of volumes to the Greensboro, North Carolina and Monterrey
facilities. As expected, due to the business losses announced last year, total
filter volumes reduced by 5.4% or 1.8 billion filters with a reduction of 9.9%
in special filters, partly mitigated by a 4.7% increase in monoacetate volumes.
The Fibertec Bonded Fibre Components business delivered strong results with all
locations performing well. Further market share gains continue to be made in
traditional areas of the business and the continued development of new products
and their associated intellectual property is driving growth in new applications
and new markets. The inkjet printer reservoir business secured with a major new
US entrant into the inkjet printer market has run well ahead of expectations and
a further new project with an existing original equipment manufacturer is due to
commence production at the end of 2007. The Ningbo, China facility is proving to
be consistently profitable and the factory extension is due for completion in
the third quarter of 2007.
PROSPECTS
These interim results represent another positive step forward for Filtrona and
are well above historical trends in organic profit growth terms. The Company
continues to pursue its strategy of achieving growth and building position in
its selected markets through a blend of organic development and value enhancing
acquisitions. With strong profit growth, supplemented by the contribution from
recent acquisitions, the Board remains confident that Filtrona's financial
performance will continue to progress in line with their expectations.
Consolidated income statement
Restated Restated
Six months six months year
ended ended ended
Note 30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
==========================================================================================================
Revenue 2 257.2 269.3 517.1
----------------------------------------------------------------------------------------------------------
Operating profit before intangible
amortisation and restructuring costs 34.7 31.7 59.2
Intangible amortisation (0.6) (0.5) (0.9)
Restructuring costs (4.2) - -
----------------------------------------------------------------------------------------------------------
Operating profit 2 29.9 31.2 58.3
Finance income 3 4.6 4.5 8.5
Finance expense 3 (7.8) (7.5) (14.6)
----------------------------------------------------------------------------------------------------------
Profit before tax 26.7 28.2 52.2
Income tax expense 4 (9.1) (9.5) (17.7)
----------------------------------------------------------------------------------------------------------
Profit from continuing operations 17.6 18.7 34.5
Profit from discontinued operations 10 2.0 0.4 1.5
----------------------------------------------------------------------------------------------------------
Profit for the period 19.6 19.1 36.0
==========================================================================================================
Attributable to:
Equity holders of Filtrona plc 18.1 18.4 34.5
Minority interests 1.5 0.7 1.5
----------------------------------------------------------------------------------------------------------
Profit for the period 19.6 19.1 36.0
==========================================================================================================
Earnings per share attributable to equity holders of Filtrona plc:
Basic 5 8.3p 8.4p 15.8p
==========================================================================================================
Diluted 5 8.2p 8.3p 15.6p
==========================================================================================================
Earnings per share from continuing operations attributable to equity holders
of Filtrona plc:
Basic 5 7.8p 8.3p 15.3p
=========================================================================================================
Diluted 5 7.7p 8.2p 15.1p
=========================================================================================================
Consolidated balance sheet
Note 30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
=========================================================================================================
Assets
Property, plant and equipment 6 166.3 177.6 178.4
Intangible assets 84.5 61.9 59.5
Deferred tax assets 0.2 3.0 0.3
---------------------------------------------------------------------------------------------------------
Total non-current assets 251.0 242.5 238.2
Inventories 54.1 59.3 55.7
Income tax receivable 2.9 1.0 1.8
Trade and other receivables 93.8 91.9 81.1
Derivative assets 0.7 0.4 0.2
Cash and cash equivalents 8 34.0 20.8 20.7
---------------------------------------------------------------------------------------------------------
Total current assets 185.5 173.4 159.5
---------------------------------------------------------------------------------------------------------
Total assets 436.5 415.9 397.7
=========================================================================================================
Equity
Issued capital 54.8 54.8 54.8
Capital redemption reserve 0.1 0.1 0.1
Other reserve (132.8) (132.8) (132.8)
Translation reserve (1.8) 4.0 1.6
Retained earnings 226.7 206.2 219.0
---------------------------------------------------------------------------------------------------------
Attributable to equity holders of Filtrona plc 147.0 132.3 142.7
Minority interests 4.2 5.7 6.0
---------------------------------------------------------------------------------------------------------
Total equity 151.2 138.0 148.7
=========================================================================================================
Liabilities
Interest bearing loans and borrowings 145.2 137.3 117.9
Retirement benefit obligations 28.9 36.1 30.9
Other payables - 3.4 -
Provisions 7 8.1 2.8 2.7
Deferred tax liabilities 9.6 11.6 11.6
---------------------------------------------------------------------------------------------------------
Total non-current liabilities 191.8 191.2 163.1
Bank overdrafts 3.5 0.3 1.0
Interest bearing loans and borrowings 0.4 0.6 0.6
Derivative liabilities - 0.3 0.3
Income tax payable 17.2 12.2 16.0
Trade and other payables 67.5 69.8 65.0
Provisions 7 4.9 3.5 3.0
---------------------------------------------------------------------------------------------------------
Total current liabilities 93.5 86.7 85.9
---------------------------------------------------------------------------------------------------------
Total liabilities 285.3 277.9 249.0
---------------------------------------------------------------------------------------------------------
Total equity and liabilities 436.5 415.9 397.7
=========================================================================================================
Consolidated statement of cash flows
Restated Restated
Six months six months year
ended ended ended
Note 30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
=========================================================================================================
Operating activities
Profit before tax from continuing operations 26.7 28.2 52.2
Adjustments for:
Net finance expense 3.2 3.0 6.1
Intangible amortisation 0.6 0.5 0.9
Restructuring costs 4.2 - -
Depreciation 10.3 10.3 20.7
Share option expense 0.8 0.7 1.2
Other items 0.2 (0.6) (0.3)
Increase in inventories (0.4) (2.8) (0.8)
(Increase)/decrease in trade and other receivables (8.3) (8.8) 0.2
Increase in trade and other payables 3.5 3.5 0.4
Restructuring costs paid (3.3) - -
Acquisition of employee trust shares (1.7) - (1.2)
Additional pension contributions (0.4) (0.2) (1.5)
Other cash movements (0.2) (0.8) (1.9)
---------------------------------------------------------------------------------------------------------
Cash inflow from operating activities of continuing operations 35.2 33.0 76.0
---------------------------------------------------------------------------------------------------------
Income tax paid (10.6) (11.3) (18.0)
Net cash inflow from operating activities of discontinued operations 3.3 2.3 3.1
---------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 27.9 24.0 61.1
=========================================================================================================
Investing activities
Interest received 0.1 0.4 0.8
Acquisition of property, plant and equipment (12.0) (14.8) (32.3)
Proceeds from sale of property, plant and equipment 0.1 0.9 1.8
Acquisition of businesses net of cash acquired 9 (31.5) (0.5) (0.5)
Proceeds from sale of business 10 14.4 0.3 0.3
Income tax paid on sale of business (1.0) - -
Other investing cash flows (0.7) (0.5) (0.8)
---------------------------------------------------------------------------------------------------------
Net cash outflow from investing activities of continuing operations (30.6) (14.2) (30.7)
---------------------------------------------------------------------------------------------------------
Net cash outflow from investing activities of discontinued operations (2.6) (1.0) (1.8)
---------------------------------------------------------------------------------------------------------
Net cash outflow from investing activities (33.2) (15.2) (32.5)
=========================================================================================================
Financing activities
Interest paid (3.1) (3.9) (7.1)
Dividends paid to equity holders (10.1) (9.3) (14.3)
Proceeds from/(repayments of)short-term loans 0.4 - (0.1)
Proceeds from/(repayments of)long-term loans 29.8 (0.2) (11.8)
---------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from financing
activities of continuing operations 17.0 (13.4) (33.3)
---------------------------------------------------------------------------------------------------------
Net cash outflow from financing activities of discontinued operations (0.6) (0.1) (0.1)
---------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from financing activities 16.4 (13.5) (33.4)
=========================================================================================================
Net increase/(decrease) in cash and cash equivalents 11.1 (4.7) (4.8)
=========================================================================================================
Net cash and cash equivalents at the beginning of the period 19.7 25.7 25.7
Net increase/(decrease) in cash and cash equivalents 11.1 (4.7) (4.8)
Net effect of currency translation on cash and cash equivalents (0.3) (0.5) (1.2)
---------------------------------------------------------------------------------------------------------
Net cash and cash equivalents at the end of the period 8 30.5 20.5 19.7
=========================================================================================================
Consolidated statement of recognised income and expense
Six months Six months Year
ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
=========================================================================================================
Actuarial gains/(losses) on defined benefit pension schemes 1.4 (1.3) 2.2
Deferred tax (expense)/credit on actuarial gains/(losses) on
defined benefit pension schemes (0.9) 0.4 (0.7)
Foreign exchange translation differences:
Transferred to profit on disposal of discontinued operations (5.0) - -
Attributable to equity holders of Filtrona plc 1.1 (1.3) (3.7)
Attributable to minority interests 0.3 (0.1) (0.3)
---------------------------------------------------------------------------------------------------------
Income and expense recognised directly in equity (3.1) (2.3) (2.5)
Profit for the period 19.6 19.1 36.0
---------------------------------------------------------------------------------------------------------
Total recognised income and expense for the period 16.5 16.8 33.5
=========================================================================================================
Attributable to:
Equity holders of Filtrona plc 15.2 16.2 32.3
Minority interests 1.3 0.6 1.2
---------------------------------------------------------------------------------------------------------
Total recognised income and expense 16.5 16.8 33.5
=========================================================================================================
Notes
1. Basis of preparation
This interim financial information has been prepared and approved by the Directors in accordance with the
accounting policies that were applied in the preparation of the Company's published consolidated financial
statements for the year ended 31 December 2006.
The accounting policies, which conform to IFRS as adopted for use by the EU, have been consistently applied
to all periods presented.
The consolidated income statement, consolidated statement of cash flows and related notes for the comparative
periods have been restated, in accordance with IFRS, to reflect the disposal of Globalpack, which was previously
reported in the Plastic Technologies segment and has been reclassified as discontinued operations.
The financial information for the six months ended 30 June 2007 and 30 June 2006 are unaudited and do not
constitute statutory accounts of Filtrona within the meaning of Section 240 of the Companies Act 1985. However,
the Auditor has carried out a review of the financial information for the six months ended 30 June 2007 and their
report is set out in the Independent Review Report. The comparative figures for the financial year ended 31 December
2006 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the
Company's Auditor and delivered to the Registrar of Companies. The report of the Auditor was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying
their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
2. Segment analysis
Revenue Operating profit
--------------------------------------- ----------------------------------------
Restated Restated Restated Restated
Six months six months year Six months six months year
ended ended ended ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m £m £m £m
======================================================================================================
Continuing operations
Plastic Technologies 136.7 137.9 262.4 21.7 21.4 39.0
Fibre Technologies 120.5 131.4 254.7 17.0 14.0 28.1
Central Services+ - - - (4.0) (3.7) (7.9)
------------------------------------------------------------------------------------------------------
257.2 269.3 517.1 34.7 31.7 59.2
Intangible amortisation (0.6) (0.5) (0.9)
Restructuring costs (4.2) - -
------------------------------------------------------------------------------------------------------
Total 257.2 269.3 517.1 29.9 31.2 58.3
======================================================================================================
Operating margin* 13.5% 11.8% 11.4%
+ Central Services includes group accounts, tax, treasury, legal, internal audit, corporate development,
human resources, information technology and other services provided centrally to support the business segments
* Operating margin is defined as operating profit before intangible amortisation and restructuring costs
divided by revenue
3. Net finance expense
Restated Restated
Six months six months year
ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
======================================================================================================
Continuing operations
Finance income
Bank deposits 0.2 0.3 0.7
Other finance income - 0.1 0.1
Expected return on pension scheme assets 4.4 4.1 7.7
------------------------------------------------------------------------------------------------------
4.6 4.5 8.5
------------------------------------------------------------------------------------------------------
Finance expense
Loans and overdrafts (3.5) (3.6) (7.1)
Interest on pension scheme liabilities (4.3) (3.9) (7.5)
------------------------------------------------------------------------------------------------------
(7.8) (7.5) (14.6)
------------------------------------------------------------------------------------------------------
Net finance expense (3.2) (3.0) (6.1)
======================================================================================================
4. Income tax expense for continuing operations
A tax expense of 34.0% (six months ended 30 Jun 2006: 33.7%; year ended 31 Dec 2006: 33.9%) on the profit
of the underlying continuing operations has been provided based on the estimated effective tax rate for
the year.
Income tax expense in the UK is £0.3m (six months ended 30 Jun 2006: £0.5m; year ended 31 Dec 2006: £2.4m).
5. Earnings per share
Restated Restated
Six months six months year
ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
======================================================================================================
Continuing operations
Earnings attributable to equity holders of Filtrona plc 17.0 18.2 33.5
Adjustment* 3.2 0.3 0.6
------------------------------------------------------------------------------------------------------
Adjusted earnings 20.2 18.5 34.1
======================================================================================================
Discontinued operations
Earnings attributable to equity holders of Filtrona plc 1.1 0.2 1.0
======================================================================================================
Basic weighted average ordinary shares in issue (million) 218.0 218.9 218.8
Dilutive effect of employee share option plans (million) 1.6 2.1 1.8
------------------------------------------------------------------------------------------------------
Diluted weighted average ordinary shares (million) 219.6 221.0 220.6
======================================================================================================
Continuing operations
Basic earnings per share 7.8p 8.3p 15.3p
Adjustment* 1.5p 0.2p 0.3p
------------------------------------------------------------------------------------------------------
Adjusted earnings per share 9.3p 8.5p 15.6p
======================================================================================================
Diluted basic earnings per share 7.7p 8.2p 15.1p
======================================================================================================
Discontinued operations
Basic earnings per share 0.5p 0.1p 0.5p
======================================================================================================
Diluted basic earnings per share 0.5p 0.1p 0.5p
======================================================================================================
* The adjustment relates to intangible amortisation and restructuring costs less tax relief thereon
6. Property, plant and equipment
During the period Filtrona's continuing operations spent £12.0m (six months ended 30 Jun 2006: £14.8m;
year ended 31 Dec 2006: £32.3m) on land and buildings, plant and machinery and fixtures, fittings and
equipment.
Land and buildings, plant and machinery and fixtures, fittings and equipment with a net book value of
approximately £0.2m (six months ended 30 Jun 2006: £1.1m; year ended 31 Dec 2006: £1.5m) were disposed
of for proceeds of £0.1m (six months ended 30 Jun 2006: £0.9m; year ended 31 Dec 2006: £1.8m).
7. Provisions
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
==================================================================================
Movements
Beginning of year 5.7 7.5 7.5
Restructuring costs 0.9 - -
Acquisition 0.2 0.3 0.3
Disposal warranties 6.4 - -
Utilised (0.1) (1.4) (2.0)
Currency translation (0.1) (0.1) (0.1)
----------------------------------------------------------------------------------
End of year 13.0 6.3 5.7
==================================================================================
Non-current 8.1 2.8 2.7
Current 4.9 3.5 3.0
----------------------------------------------------------------------------------
13.0 6.3 5.7
==================================================================================
Provisions relate primarily to employees' compensation claims, legal claims,
vacant properties and environmental clean-up expenses. Non-current provisions
are generally long-term in nature with timing of utilisation uncertain.
8. Analysis of net debt
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
==================================================================================
Cash at bank and in hand 32.8 17.4 15.8
Short term deposits repayable on demand 0.6 2.9 2.5
Short term deposits not repayable on demand 0.6 0.5 2.4
----------------------------------------------------------------------------------
Cash and cash equivalents 34.0 20.8 20.7
Overdrafts (3.5) (0.3) (1.0)
----------------------------------------------------------------------------------
Net cash and cash equivalents 30.5 20.5 19.7
Debt due within one year (0.4) (0.6) (0.6)
Debt due after one year (145.2) (137.3) (117.9)
----------------------------------------------------------------------------------
Net debt (115.1) (117.4) (98.8)
==================================================================================
9. Acquisition
On 3 May 2007, Filtrona acquired the assets and business of Duraco, Inc.('Duraco') based in Chicago, Illinois
for a cash consideration of £31.7m. Duraco is a market leading manufacturer and supplier of self-adhesive
foam products for protection and finishing applications in a broad array of served markets including point of
purchase products and white goods.
On acquisition the assets and liabilities of the business acquired were adjusted to reflect their fair values
to Filtrona. The fair value adjustments are provisional and subject to finalisation for up to one year from the
date of acquisition.
Duraco contributed £2.4m to revenue and £0.5m to operating profit before intangible amortisation and
restructuring costs in the period to 30 June 2007.
A summary of the acquisition of Duraco is detailed below:
Book value Revaluation Consistency Fair value of
at of accounting assets
acquisition policy acquired
£m £m £m £m
--------------------------------------------------------------------------------------------------------------
Property, plant and equipment 1.4 1.6 - 3.0
Inventories 1.2 - (0.2) 1.0
Receivables 2.1 - (0.1) 2.0
Deferred tax - 0.3 - 0.3
Payables (0.9) - - (0.9)
Provisions - (0.2) - (0.2)
--------------------------------------------------------------------------------------------------------------
3.8 1.7 (0.3) 5.2
Customer relationships 14.1
Goodwill 12.4
--------------------------------------------------------------------------------------------------------------
Consideration 31.7
Satisfied by:
Cash consideration 30.4
Acquisition expenses settled in cash 1.1
Accrued acquisition expenses 0.2
==============================================================================================================
Net cash outflow in respect of the acquisition of Duraco comprised:
Cash consideration 30.4
Acquisition expenses settled in cash during the period 1.1
--------------------------------------------------------------------------------------------------------------
Net cash outflow in respect of the acquisition of Duraco 31.5
==============================================================================================================
The adjustment to property, plant and equipment reflects the open market value of the freehold property.
The adjustment to inventories and receivables reflects the impact of applying Filtrona group accounting
policies to these items.
The adjustment to deferred tax reflects the asset arising from a permanent difference between the accounting
and tax base of property, plant and equipment.
The adjustment to provisions includes amounts relating to the reassessment of potential liabilities that were
not fully recognised on acquisition.
Included in the £12.4m of goodwill recognised above is the value of the unique revenue synergy opportunities
available to Filtrona through the integration of the business. Due to its nature this asset cannot be individually
identified nor reliably measured.
10. Discontinued operations
On 29 June 2007, Filtrona completed the disposal of Globalpack, its Brazilian consumer packaging business,
to the Itavema Group for total gross consideration of £27.9m. The disposal resulted in a profit before tax
of £2.7m which has been recognised as discontinued operations in the income statement.
The results for Globalpack are presented below:
Six months Six months Year
ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
=========================================================================================================
Revenue 13.6 13.6 27.1
Operating profit 1.7 0.7 2.4
Finance income 0.1 0.2 0.3
Finance expense (0.1) (0.2) (0.3)
---------------------------------------------------------------------------------------------------------
Profit before tax from discontinued operations 1.7 0.7 2.4
Profit on disposal of discontinued operations 2.7 - -
Income tax expense (2.4) (0.3) (0.9)
---------------------------------------------------------------------------------------------------------
Profit for the period from discontinued operations 2.0 0.4 1.5
=========================================================================================================
Attributable to:
Equity holders of Filtrona plc 1.1 0.2 1.0
Minority interests 0.9 0.2 0.5
---------------------------------------------------------------------------------------------------------
Profit for the period 2.0 0.4 1.5
=========================================================================================================
Earnings per share attributable to equity holders of Filtrona plc:
Basic 0.5p 0.1p 0.5p
=========================================================================================================
Diluted 0.5p 0.1p 0.5p
=========================================================================================================
Income tax expense is analysed as follows:
Six months Six months Year
ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006
£m £m £m
---------------------------------------------------------------------------------------------------------
On profit on ordinary activities 0.7 0.3 0.9
On profit on disposal 1.7 - -
=========================================================================================================
2.4 0.3 0.9
=========================================================================================================
The major classes of assets and liabilities sold are analysed as follows:
£m
---------------------------------------------------------------------------------------------------------
Assets and liabilities disposed of other than cash
Property, plant and equipment 17.5
Inventories 2.1
Trade and other receivables 6.2
Trade and other payables (4.9)
---------------------------------------------------------------------------------------------------------
Net assets disposed of other than cash and cash equivalents 20.9
=========================================================================================================
£m
---------------------------------------------------------------------------------------------------------
Gain on disposal of discontinued operations
Cash consideration 15.4
Disposal expenses settled in cash (0.4)
Cash and short-term deposits in Globalpack on disposal (0.6)
---------------------------------------------------------------------------------------------------------
Net cash inflow in respect of disposal of Globalpack 14.4
=========================================================================================================
Fair value of deferred consideration 10.2
Net assets disposed of less minority share (18.4)
Cumulative exchange gains deferred in equity 5.0
Accrued disposal expenses (1.6)
Warranty provisions (6.4)
Closure expenses (0.4)
Accelerated share option expense (0.1)
---------------------------------------------------------------------------------------------------------
Gain on disposal of discontinued operations 2.7
=========================================================================================================
Closure expenses relate to the exit from a Coated and Security Products office in Barcelona, Spain.
11. Dividends
Per share Total
--------------------------------------- ----------------------------------------
Six months six months year Six months six months year
ended ended ended ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006
p p p £m £m £m
======================================================================================================
2006 interim:
paid 27 October 2006 2.30 2.30 5.0 5.0
2006 final:
paid 4 May 2007 4.60 10.1
Proposed 2007 interim:
payable 26 October 2007 2.52 5.5
------------------------------------------------------------------------------------------------------
2.52 2.30 6.90 5.5 5.0 15.1
======================================================================================================
The proposed interim dividend for 2007 of 2.52p per 25p ordinary share will be paid on 26 October 2007
to equity holders on the share register on 28 September 2007.
12. Related party transactions
There were no significant related party transactions during the period.
13. Exchange rates
The principal exchange rates for Filtrona were:
Average Closing
--------------------------------------- ----------------------------------------
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006
======================================================================================================
US$:£ 1.97 1.79 1.85 2.01 1.85 1.96
€:£ 1.48 1.46 1.47 1.49 1.45 1.48
======================================================================================================
Independent Review Report to Filtrona plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the consolidated income
statement, consolidated balance sheet, consolidated statement of cash flows,
consolidated statement of recognised income and expense and related notes. 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 the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company 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 the Company 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 of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts except
where any changes, and the reasons for them, are disclosed.
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 UK. 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 excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Statements on Auditing (UK and Ireland) 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 2007.
KPMG Audit Plc
Chartered Accountants
London
30 August 2007
This information is provided by RNS
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