Final Results

Macfarlane Group PLC 25 March 2003 25 March 2003 MACFARLANE GROUP READY TO DELIVER BENEFITS OF RESTRUCTURING PROGRAMME Pre-exceptional losses of Â£2.4m and net exceptional items of Â£3.3m, give a loss before taxation of Â£5.7m Final dividend maintained at 3.20p per share, giving full year dividend of 5.00p as in 2001 Cash restructuring costs of Â£1.6m and exceptional property cost of Â£0.7m incurred to streamline the business Assets gains of Â£2.3m generated Â£8.5m cash, with Â£12.0m cash generation from asset disposals expected 2003/04 11 of the 15 regional sites now fully operational with the remainder due to complete in 2003 Completed sites demonstrate readiness to benefit from the strategy and create a platform for growth Sir John Ward, Chairman of Macfarlane Group PLC, today said: 'Macfarlane Group's 2002 results reflect the ongoing transition within our distribution business, which will conclude in 2003. Recently issued economic statistics, identifying lower levels of activity in the manufacturing sector in the first two months of this year, are confirmed by our activity levels. The difficult market conditions, referred to in my previous statements, continue with no indication of improvements in the short-term. Management effort continues to focus on the transition programme to change fundamentally the shape and scope of our business, enabling the Group to provide best in class service to all our customers whilst at the same time seeking reductions in overheads to right-size our cost structure to match prevailing levels of activity. The majority of this programme is now completed and the teams in our new locations are now ready and eager to deliver the expected benefits. Your Board remains fully committed to the strategic direction which will see the replacement of over 45 trading branches and manufacturing sites with the creation of a national network of 15, state-of-the-art, regional distribution centres coupled with two manufacturing centres of excellence, providing a solid platform for future growth. Although we made the expected progress towards our objectives in the second half of the year, with 11 of the 15 locations now fully operational and our new management information system in place at all UK locations, the transition has taken longer to achieve and caused greater costs and disruption in the business than originally envisaged, with a consequent impact on results. Consolidation at four remaining locations, originally scheduled in 2002, will now take place in 2003. The considerable dislocation of the business, which is inevitable during a programme of such magnitude, is now starting to recede enabling our staff to focus on increasing market share. As announced last October the Chief Executive will continue to focus on the recovery in the Distribution business. The Board has now initiated a process to recruit a Chief Operating Officer with wide business experience, who should have the potential to become Chief Executive. As I have stated previously, this is a bold and challenging realignment of our business, particularly in the current economic climate. The programme will complete this year with further disposals of surplus properties continuing to deliver cash and earnings to support the costs of the transition. As reported in previous statements, although the benefits are taking longer to achieve than originally envisaged, your Board remains confident that Macfarlane Group can secure a strong market position, particularly once the trading cycle starts to show signs of improvement. We are not relying on the economy to make any recovery in 2003 and consequently we are cautious in terms of the immediate trading outlook, nevertheless your Board expects to make further progress streamlining the business in the current year.' Further information: Sir John Ward, Chairman 0141 333 9666 Iain Duffin, Chief Executive 0141 333 9666 John Love, Finance Director 0141 333 9666 Press and Media Gordon Beattie 01698 787878 Ann-marie Wilkinson 0207 398 3301 2002 2001 Trading performance Sales Profit/(loss) Sales Profit/(loss) Â£000 Â£000 Â£000 Â£000 Continuing 149,618 (1,951) 159,623 8,234 Discontinued - - 38,577 2,767 149,618 (1,951) 198,200 11,001 Net finance charge (398) (418) (Loss)/profit before exceptional items (2,349) 10,583 Gain on disposal of properties 2,145 822 (204) 11,405 Operating exceptional charges - see below (5,044) (10,058) Loss on disposal of business (410) (2,770) Pre-tax loss (5,658) (1,423) 2002 2001 Operating exceptional charges Â£000 Â£000 Cash costs: Programme to restructure distribution business 144 1,400 Duplicate property costs/costs to vacate empty premises 705 - Cost of headcount reductions 1,475 1,463 Non-cash costs: Charges for impairment of goodwill 2,720 5,178 Asset impairment charges and other asset write-downs - 2,017 5,044 10,058 The loss before tax for the year to 31 December 2002 was Â£5.7m, compared to Â£1.4m in 2001. The loss per share, as restated for the effects of applying FRS 19 'Deferred Tax', totalled 3.25p compared with 3.63p in the previous year. Turnover reduced to Â£149.6m in 2002 from Â£198.2m during 2001, reflecting the disposal of the Plastics business in 2001 and the challenging market conditions with lower levels of activity apparent particularly from electronics and manufacturing customers. Trading performance The restructuring of the distribution business continued throughout the year, with 23 sites closed by the end of 2002, in most cases simply eliminating duplication of sites in key regions, consolidating all these sites into 11 large, more efficient centres providing a platform for future growth. In 2003 there are a further 4 consolidations on to new sites, with the closure of a further 7 sites during the year. Whilst economic conditions have impacted our ability to achieve profitability in the Distribution business in the final quarter of 2002 and in the opening months of 2003, the steps being taken to right-size the overhead base in the business, and reduce breakeven points, are expected to bear fruit as the advantages of our new capability provides the opportunity to increase market share. However given current economic conditions, it is likely to take until the final quarter of 2003 to achieve profitable trading across the business as a whole. Our Labels and Plastic Injection Moulding businesses continue to be at the forefront of technology in providing solutions for major customers with branded products. Both businesses have made considerable efforts to grow sales with existing customers and develop into new markets. Our Packaging Manufacturing business has continued to reduce its cost base and become more efficient. Whilst our strategy and focus continues to shift from selling only what we traditionally manufactured to sourcing what customers request, we will maintain and invest in value added manufacturing and assembly businesses where this is determined to be of strategic benefit in providing the required service to our customers. All our overseas locations continued to trade in line with expectations throughout 2002, with particularly strong performances recorded in Ireland and Hungary. Macfarlane Western Foam Inc., our business based in California, acquired the trade and assets of a smaller competitor in the same geographical area and is now starting to reap the benefits of the additional scale in its operations. In July 2002 we acquired Tom Brands Electrical Services Limited ('Brands'), supporting our strategy to provide a wider range of services to key customers. The acquisition provides opportunities to meet the requirements of major customers seeking partners who can demonstrate a capability to meet outsourcing needs both in the UK, USA, Latin America and Europe. Brands' operation in Mexico and our Hungarian operation are good examples of the opportunity to develop this strategy overseas. The Board believes that there are considerable opportunities from the acquisition of Brands, both in approaching Brands' own customers and supporting the service offering to Macfarlane Group's customers. This acquisition is now being integrated into the Group to support the service offering to customers using Brands' sophisticated track and trace software. The potential is being tested through a number of enquiries, which will help quantify the opportunity for future sales, but given current economic conditions the timing of the conversion of these opportunities is uncertain and as a result the Directors consider that it would be inappropriate to maintain the goodwill of Â£2.8m, which arose on acquisition. Property disposals Your Board has consistently articulated that part of its strategy of reshaping the business is to fund the transition through the earnings and cash generated from property disposals. This is reflected in our 2001 and 2002 results and even as we near the end of the programme, will continue into 2003 and 2004 with projected net proceeds from disposals in these two years in excess of Â£12.0m. Dividend The directors recommend payment of a final dividend of 3.20p to be paid on 29 May 2003 to shareholders on the register at 25 April 2003, which together with the interim dividend of 1.80p per share paid on 10 October 2002 makes a total of 5.00p for the year (2001 - 5.00p). Whilst your Board remains cautious of immediate trading prospects as market conditions continue to be challenging, we are well aware of the importance of dividends to shareholders and would intend to use funds from property disposals to support existing levels of dividend. However, the level of dividend payments will, as always, require to be considered as prospective trading performance becomes clearer, allowing the Board to assess the immediate and longer-term ability to underpin dividend payments. Finance Shareholders approved two special resolutions on 9 May 2001 and 14 May 2002 giving the company authority to buy back shares in the company. During 2002, the company bought back 4,256,000 ordinary shares, representing 3.57% of the company's called up share capital for a total consideration of Â£2,608,000 for cancellation. The purchases took place at a number of dates between 14 January 2002 and 13 November 2002. The prices paid for the shares ranged from 381/2p per share to 87p per share. It is the Directors' intention to seek shareholder approval to renew this authority at the AGM on 13 May 2003 to continue to have the flexibility to buy back shares should this be appropriate. Cash outflow from operating activities was Â£0.3m (2001 cash inflow - Â£17.7 million) and the Group's financing requirements have been met by short-term borrowings. Following acquisitions and capital expenditure totalling Â£14.4m during the year and share buy-backs costing Â£2.6m the Group had net debt of Â£14.0m at 31 December 2002, compared to net funds of Â£2.7m the previous year. There was a net interest charge of Â£0.4 million, the same as in 2001. Macfarlane Group still faces modest investments to establish an appropriate base for future growth but our executive remains confident that, by a continued realignment of the asset base, the necessary investments can be funded in a cash neutral manner. The transitional arrangements of Financial Reporting Standard 17 on retirement benefits have again been adopted, requiring certain disclosures at 31 December 2002 of the net pension scheme asset or deficit. Our UK defined benefits pension scheme has a deficit net of tax of Â£11.6m (2001 - Deficit Â£4.8m). The ongoing funding of the pension scheme is determined by a full actuarial valuation performed by the Group's independent actuary. As a result of the valuation carried out on 1 May 2002, the final salary scheme was closed to new entrants and the employer contribution rate increased from 13.5% to 15.5% of pensionable salary, and the employee contribution rate increased from 5.0% to 7.0% of pensionable salary with effect from 1 July 2002. This contribution level is expected to reverse the deficit over the estimated remaining service lives of the employees. Management and employees Delivering the benefits from such a fundamental transition programme in our business is no easy task. We have a number of good management teams with a wealth of experience in packaging as well as some exciting new talent. All our management teams and employees deserve our continuing gratitude for their commitment in addressing the challenges readily evident in today's business environment as well as taking the hard decisions necessary to obtain the benefits from the restructuring programme. Future prospects Sir John Ward concluded: - Macfarlane Group's strategy is to be a leading packaging distributor and value add service provider. Investments in manufacturing will be made where it can provide robust and sustainable earnings while providing critical manufacturing skills to augment both the benefits of scale now within the Group and the extensive choice of products available to our 50,000 customers. Our property divestment programme continues and is expected to generate additional profits and cash in 2003 to offset the costs of transition. Major progress has been made in recent months to exit vacant premises and this will have a major impact in our efforts to reduce our cost base. Although the expected benefits in our Distribution business are taking longer to achieve and causing greater disruption than originally envisaged, there are encouraging signs that where the transition has been completed, our people are ready to deliver the benefits of the strategy. Your Board believes that our distribution business will benefit in 2003 from the actions being taken to streamline the business. Market activity, particularly in recent months, remains at lower than expected levels. Whilst trading conditions remain challenging and the prospects of economic growth in 2003 are limited, much of our recent activity has been of necessity inward focused given the need to concentrate our activities on our people, new premises and the introduction of the new information systems. As the greater part of this activity is now behind us, our teams have a real appetite and a clear opportunity to focus on increasing our market share. The Board believes that the strategic direction of the Group is sound and the continuing steps being taken to streamline the business will strengthen trading prospects by reducing the company's cost base. The Board's objective is to ensure that a robust business is created, which can not only withstand market uncertainty, but also gain market share by providing the highest levels of service to our customers.' Macfarlane Group PLC Year ended 31 December 2002 Consolidated profit and loss account Before Before exceptional Exceptional 2002 exceptional Exceptional 2001 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 TURNOVER As restated (See note 2) Continuing 142,370 - 142,370 159,623 - 159,623 Acquisitions 7,248 - 7,248 - - - 149,618 - 149,618 159,623 - 159,623 Discontinued operations - - - 38,577 - 38,577 Total turnover 149,618 - 149,618 198,200 - 198,200 Cost of sales 99,819 - 99,819 129,532 - 129,532 Gross profit 50,429 - 50,429 68,668 - 68,668 Net overheads 52,380 5,044 57,424 57,667 10,058 67,725 OPERATING (LOSS)/PROFIT (1,951) (5,044) (6,995) 11,001 (10,058) 943 OPERATING (LOSS)/PROFIT Continuing (729) (2,241) (2,970) 8,234 (10,058) (1,824) Acquisitions (1,222) (2,803) (4,025) - - - (1,951) (5,044) (6,995) 8,234 (10,058) (1,824) Discontinued operations - - - 2,767 - 2,767 OPERATING (LOSS)/PROFIT (1,951) (5,044) (6,995) 11,001 (10,058) 943 Exceptional items Gain on disposal of fixed assets - 2,145 2,145 - 822 822 Loss on disposal of business - (410) (410) - (2,770) (2,770) LOSS BEFORE INTEREST (1,951) (3,309) (5,260) 11,001 (12,006) (1,005) Investment income 215 - 215 1,172 - 1,172 Interest payable and similar charges (613) - (613) (1,590) - (1,590) LOSS BEFORE TAXATION (2,349) (3,309) (5,658) 10,583 (12,006) (1,423) Tax on loss on ordinary activities (1,836) 3,071 LOSS FOR FINANCIAL YEAR (3,822) (4,494) Dividends on equity shares 5,745 6,050 LOSS FOR FINANCIAL YEAR (9,567) (10,544) Loss per ordinary share (3.25p) (3.63p) Diluted loss per ordinary share (3.25p) (3.63p) Dividends per share 5.00p 5.00p Corporation tax rate (2001 excluding exceptional items) 32.4% 16.4% Notes: 1. Earnings per share are calculated on the basis of the weighted average of 117,605,351 shares in issue (31 December 2001 - 123,689,153). Diluted earnings per share are calculated on the weighted average on a diluted basis in accordance with FRS 14 'Earnings Per Share' of 117,882,668 shares. (31 December 2001 - 124,680,084). As the diluted loss per share reduces the loss per share the original loss per share has been reflected as the diluted figure in the accounts. 2. The figures for 2002 are extracted from those shown in the statutory accounts on which the auditors will issue an unqualified report today and which will not contain a statement under s237(2) or (3) of the Companies Act 1985. A copy of the full accounts for 2001 on which the auditors have issued an unqualified report, has been filed with the Registrar of Companies. The figures for 2001 are derived from the published accounts as restated for the effects of applying FRS19 'Deferred Tax' as set out in note 3 to the consolidated balance sheet. Macfarlane Group PLC 31 December 2002 Consolidated balance sheet As at 31 As at 31 December December 2002 2001 Â£000 Â£000 As restated (See note 3) Fixed assets Intangible assets 18,250 19,084 Tangible assets 35,951 39,511 Investments 825 - 55,026 58,595 Current assets Stocks 12,883 11,175 Debtors 37,055 37,755 Cash at bank and in hand 2,915 7,501 52,853 56,431 Creditors: amounts falling due within one year 48,196 41,135 Net current assets 4,657 15,296 Total assets less current liabilities 59,683 73,891 Creditors: amounts falling due after more than one year 1,080 1,763 Provisions for liabilities and charges 115 1,459 Total net assets 58,488 70,669 Operating assets by division Continuing 66,947 67,946 Acquisitions 5,552 - Operating assets 72,499 67,946 Net (debt)/funds (14,011) 2,723 Net assets 58,488 70,669 Notes: 1. Audited accounts will be sent to shareholders on or about 4 April 2003 and will be available to members of the public at the Company's Registered Office, 21 Newton Place, Glasgow, G3 7PY from 11 April 2003. 2. The Annual General Meeting will be held on Tuesday 13 May 2003 and the final dividend payable to shareholders on the register at close of business on 25 April 2003 will be paid on 29 May 2003. 3. The results for the year ended 31 December 2001 have been restated for the effects of applying FRS 19 'Deferred Tax'. FRS 19 requires full provision for future corporation tax liabilities resulting in a prior year adjustment, which has decreased shareholders' funds and increased provisions by Â£0.25m at 31 December 2001. In adopting FRS 19 the Group has decided not to use the option of discounting liabilities allowed by the standard. Comparative amounts have been restated and consequently reserves have decreased and provisions increased by Â£0.25m at 31 December 2001. The tax charge for the financial year ended 31 December 2001 as shown in the profit and loss account reduced by Â£0.94m. Macfarlane Group PLC Year ended 31 December 2002 Consolidated cash flow statement Year ended 31 Year ended December 31 December 2002 2001 Â£000 Â£000 Net cash (outflow)/inflow from operating activities (note 1) (281) 17,726 Cash outflow from returns on investments and servicing finance (318) (990) Tax paid (3,780) (3,654) Net cash inflow from capital expenditure & financial investment 735 11,357 Net cash (outflow)/inflow from acquisitions and disposals (4,422) 16,588 Equity dividends paid (5,917) (6,230) Net cash (outflow)/inflow before liquid resources and financing (13,983) 34,797 Net cash outflow from financing (4,116) (7,474) (Decrease)/increase in cash in the period (note 2) (18,099) 27,323 Notes: 1.Reconciliation of operating profit to net cash (outflow)/inflow from Year ended 31 Year ended operating activities December 31 December 2002 2001 Â£000 Â£000 Operating (loss)/profit before exceptional items (1,951) 11,001 Gain on disposal of property 2,145 822 Exceptional costs (5,044) (10,058) (4,850) 1,765 Depreciation and impairment of tangible assets 4,964 6,846 Amortisation and impairment of intangible assets 3,699 6,205 Gain on disposal of tangible assets (2,290) (960) Decrease in stocks 1 2,505 Decrease in debtors 2,529 6,126 Decrease in creditors (4,334) (4,761) Net cash (outflow)/inflow from operating activities (281) 17,726 2. Reconciliation of net cash flows to movement in net debt (Decrease)/increase in cash in the period (18,099) 27,323 Cash inflow from decrease in debt and lease financing 1,508 1,299 (16,591) 28,622 New finance leases - (1,925) Borrowings acquired with subsidiaries (143) (16) Loan notes issued on acquisition of subsidiary - (800) Finance leases disposed with business - 122 Movement in net debt in the period (16,734) 26,003 Opening funds/(net debt) 2,723 (23,280) Closing (net debt)/funds (14,011) 2,723 Macfarlane Group PLC Year ended 31 December 2002 Reconciliation of movements in shareholders' funds Year ended 31 Year ended December 31 December 2002 2001 Â£000 Â£000 As restated Loss for the financial year (3,822) (4,494) Dividends on equity shares (5,745) (6,050) (9,567) (10,544) Purchase of ordinary shares (2,608) (6,175) Exchange movement on retranslation of overseas subsidiaries (6) (14) Deferred taxation on revalued assets in revaluation reserve - (222) Write back of goodwill on disposal of business/subsidiary - 19,977 Net (reduction in)/addition to shareholders' funds (12,181) 3,022 Opening shareholders' funds as previously stated 70,919 68,837 Prior year adjustment (250) (1,190) Opening shareholders' funds as restated 70,669 67,647 Closing shareholders' funds 58,488 70,669 Analysis of turnover and loss before taxation 2002 Year ended 31 December 2001 Â£000 Â£000 Â£000 Â£000 Continuing Continuing Discontinued Total Turnover: Continuing 142,370 159,623 - 159,623 Discontinued - - 38,577 38,577 Acquisitions 7,248 - - - 149,618 159,623 38,577 198,200 Cost of sales 99,189 104,666 24,866 129,532 Gross profit 50,429 54,957 13,711 68,668 Net overheads 52,380 46,723 10,944 57,667 (1,951) 8,234 2,767 11,001 Exceptional restructuring costs (5,044) (10,058) - (10,058) Gain on disposal of fixed assets 2,145 822 - 822 Loss on disposal of businesses (410) - (2,770) (2,770) Loss before interest (5,260) (1,002) (3) (1,005) Net interest (398) 361 (779) (418) (5,658) (641) (782) (1,423) Included in the current year figures are Â£5,630,000 (cost of sales), Â£2,840,000 (net overheads), Â£83,000 exceptional operating costs and Â£1,305,000 (operating loss) attributable to acquisitions, which relate to Tom Brands Electrical Services Limited and Brands Electronics de Mexico SA, de CV and Pacific Tech Products Inc. In 2001 the Group sold the trade assets and certain liabilities of its UK Plastics Division. This comprises the amounts shown in the comparative figures as discontinued. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Macfarlane Group (MACF)

Monday, 13th May 2024

COMPANIES COVERED:

VCT DPLM ZOO

Diploma shares jump as full year guidance is upgraded in the wake of successful acquisitions but Victrex slides as forecast headwinds hit home. Zoo Digital also finds support as last year’s woes for the wider entertainment industry fade.

Full Archive

UK 100

Latest directors dealings

7 hours ago Argentex Group
7 hours ago Centrica
8 hours ago OSB Group
8 hours ago Legal & General Group
8 hours ago Team17 Group

All directors dealings today