Final Results
Macfarlane Group PLC
18 March 2008
18 March 2008
MACFARLANE GROUP RESULTS FOR THE YEAR TO 31 DECEMBER 2007
Profit before tax from continuing operations up 67% to £2.5 million
Net debt reduced to £3.1 million
Further progress on re-shaping the Group
Sharper focus on core activities
Benefits emerging from acquisitions
Full year dividend confirmed at 2p per share
Archie Hunter, Chairman of Macfarlane Group PLC today said: -
'2007 was a year of significant progress for Macfarlane Group as we continued to
re-shape the business and focus on our core activities, substantially increasing
profits from our continuing operations in the process.
2007 saw the benefits of the strategy set out three years ago. We have shown the
ability to grow the business significantly and we see the potential for further
progress in 2008.
Trading
Operating profits from continuing activities increased to £3.1 million (2006:
£2.0 million) on Group turnover up 13% at £119.7 million. Pre-tax profits
increased to £2.5 million (2006: £1.5 million).
• Packaging Distribution turnover increased by 15%, with operating profits
increasing from £0.44 million to £1.34 million.
• Our Manufacturing Operations turnover rose by 6%, with operating profits
increasing from £1.57 million to £1.73 million.
Earnings per share increased from 1.03p to 3.06p per share, with profits after
tax benefiting from a one-off deferred tax credit of £1.7 million. The Board
will pay a final dividend of 1p per share, which combined with the interim
dividend of 1p per share, results in a full year dividend of 2p per share.
Trading in the first part of 2008 is in line with the Board's expectations and
continues to show the benefits of the concentrated effort put in to running and
expanding our UK businesses, following the sale of businesses in the United
States and Mexico.
In our Packaging Distribution business, turnover increased by 15% from £80.9
million to £92.7 million. The acquisition of Bloomfield for £2.0 million in
October 2006 has demonstrated what targeted acquisitions can achieve; packaging
distribution profit more than tripled to £1.3 million in 2007 (2006: £0.4
million) and we are seeing continuing benefit from our scale and market
presence. Online Packaging was purchased for £5.1 million in January 2008 and is
trading well.
Trading (continued)
The link between our packaging distribution and packaging manufacturing
businesses in the UK is becoming more important and valuable each year. In
Packaging Distribution we are now three times the size of our nearest competitor
and with a UK market share of just over 10% there is considerable opportunity
for further profitable growth in the sector.
Our labels company faced considerable market consolidation in what was a
difficult year, but coped well to record a profit of £1.2 million on turnover up
4%.
More detailed comments on trading are contained in the operating review
following my statement.
Cash and Dividends
During 2007 our borrowings benefited from the disposal of our North American
interests and at the year-end our net debt was reduced to £3.1 million. The
disposal proceeds from our Kirkintilloch property, realised a further £2.4
million at the start of 2008.
The Board continues to recognise the importance to shareholders of a regular and
reliable dividend stream. I am pleased to report that, in addition to the
Interim Dividend of 1p per share announced in September, it is the intention of
the Board to declare a Final Dividend of 1p per share, payable in June, making a
dividend of 2p per share for the full year.
Future Prospects
Whilst the UK economy is entering an uncertain period, the Board is confident
that the broad range of industries we serve and the continued opportunity to
improve operational performance will enable the business to continue to
progress. 2008 has started well.
During the year we will further refine our business focus and will expect to
continue to make value-enhancing acquisitions to expand our UK reach. Recent
acquisitions have increased our geographic spread and, along with our
recruitment initiatives in the past two years, we have added considerably to our
customer offering and to our talent pool. Also, the disposal of our US/Mexico
business has freed up the time of senior executives to concentrate on internal
efficiencies, business innovation and expansion.
The development of Macfarlane Group into an increasingly stable business has
demanded huge effort and considerable personal commitment from management and
staff alike. The Board very much appreciates this and would like to take this
opportunity to thank them all for their contribution to our progress.'
+-----------------------------------------+---------------------------------------+
|Further information: | |
| | |
|Archie S. Hunter |Chairman 0141 333 9666 |
+-----------------------------------------+---------------------------------------+
|Peter D. Atkinson |Chief Executive 0141 333 9666 |
+-----------------------------------------+---------------------------------------+
|John Love |Finance Director 0141 333 9666 |
+-----------------------------------------+---------------------------------------+
Operating review
Revenue Revenue Profit Profit
2007 2006 2007 2006
Group Segment £000 £000 £000 £000
Packaging Distribution 92,654 80,853 1,338 436
Manufacturing Operations 27,083 25,460 1,727 1,571
Continuing activities 119,737 106,313
Operating profit 3,065 2,007
Net finance costs (598) (534)
Profit before tax from continuing 2,467 1,473
operations
All businesses within the Group were profitable in 2007 and this was achieved
despite continuing cost pressures on raw materials, fuel and energy.
Group debt continued to reduce during 2007 as more focus was brought to the
Group's activities.
We have demonstrated good progress in 2007. The focus of our plans for 2008 and
beyond is to continue to grow the business both organically and through
acquisition.
Packaging Distribution
Macfarlane's Packaging Distribution business is the leading UK distributor of a
comprehensive range of packaging consumable products. In a highly fragmented
market, Macfarlane is the market leader with a market share in excess of 10%.
The business operates through 15 Regional Distribution Centres (RDCs) supplying
customers on a local, regional and national basis. The business enables
customers to ensure their products are cost-effectively protected in transit and
storage by providing them with a comprehensive product range, single source
supply, just in time delivery and tailored stock management programmes.
Business Performance
In 2007 Packaging Distribution recorded an operating profit of £1.3m, compared
to £0.4m the previous year. There were a number of factors that contributed to
these results:
• Sales revenue increased by 10% on an organic basis, partly driven by
price increases and partly through volume growth;
• Sales growth was supplemented by the full year benefit of the acquisition
of Bloomfield Supplies Limited ('Bloomfield') made in 2006, which increased
sales revenues by an additional 5%;
• Supplier price increases remained a significant feature in 2007 due to
inflation in raw materials, energy and oil related costs. However we were
successful in managing price increases with our customers and this allowed
us to improve the gross margin to just over 30%;
• In 2007 our On-Time-In-Full ('OTIF') deliveries averaged 94% compared
with 92% in 2006 and 91% in 2005. This clearly demonstrates the progress we
are making in improving the service to our customers;
• In 2007 we increased product range penetration in our existing customer
base to an average 8.7 lines per customer compared with 8.6 in 2006 and 8.2
in 2005;
• During 2007 we opened 2,278 new customer accounts;
• We continued to make key investments in the business particularly in our
e-commerce capability, new business development and the strengthening of the
management team;
Operating review
Packaging Distribution
• Our 2007 customer satisfaction survey showed 81% of customers rating our
service above average (2006 - 86%) and of these, 29% rated our service as
excellent (2006 - 33%). Our slightly lower customer satisfaction score in
2007 reflects a growing need from our customers for help and advice on
identifying more environmentally friendly packaging solutions. One of our key
customer programmes in 2008 will address this;
• Visitors to Packaging2U our web-based packaging service doubled in 2007,
which has enabled us to access a number of market segments where
traditionally Macfarlane has not had a presence. We expect Packaging2U to
become profitable in 2008;
• During 2007 the dedicated new business team demonstrated its potential
with a series of major new customer wins; and
• Bloomfield was successfully integrated into the Macfarlane RDC network
and this has given us encouragement to pursue further similar acquisitions
in 2008.
Within our current network of 15 RDCs, based on our 2007 results we had 5 RDCs
performing at acceptable levels, 8 RDCs demonstrating improvements that indicate
their ability to achieve acceptable performance levels in the short-term and 2
RDCs where performance is currently not at the acceptable level.
The plan for 2008 is to focus our management actions in the following areas:
• Improve gross margin through effective management and recovery of likely
further supplier price changes;
• Accelerate organic sales growth particularly through effective
deployment of the new business development and national account teams;
• Ensure all RDCs are operating to their full profit potential;
• Build the Packaging2U business in order to deliver profits in 2008;
• Increase the efficiency of the logistics infrastructure through the
introduction of fleet management software;
• Improve our ability to respond to the increasing demands from our
customers regarding environmentally friendly packaging solutions;
• Deliver the benefits from the full year contribution of the Online
Packaging acquisition made in January 2008; and
• Accelerate market penetration through further targeted acquisitions.
Manufacturing Operations
Macfarlane operates a range of manufacturing businesses, Labels producing
self-adhesive and resealable labels, and Packaging Manufacturing producing
bespoke composite transit packaging and protective components.
In 2007 Macfarlane Group's Manufacturing Operations recorded a profit of £1.7
million, an increase of £0.1 million on 2006. Key features of the Manufacturing
Operations performance in 2007 were:
• Sales increase 6% versus 2006;
• Gross margin was flat versus 2006 despite customer price pressure where
raw material price increases can not always be fully passed onto customers;
and
• The overhead to sales ratio improved by 0.2% reflecting the nature of
the fixed cost base of the manufacturing businesses, however total overheads
increased by £0.4 million reflecting additional investments in capacity in
both businesses.
Operating review
Manufacturing Operations
Labels
The principal activity of the Labels business is the production of self-adhesive
and resealable labels for major Fast Moving Consumer Goods ('FMCG') customers
primarily in European markets. The business operates from two production sites
in Kilmarnock and Dublin and a sales and design office in Sweden which focuses
on the development and growth of our resealable labels business - Reseal-itTM.
Business Performance
During 2007 the Macfarlane Labels business continued to experience the price and
margin pressure that has been a consistent feature over recent years. In
response the business has been transitioning itself away from the volatile lower
margin own brand food related business to more secure margin high-quality
branded products. This led to a 4% increase in sales and a 3% increase in volume
from 2006, with efficiency improvements giving a 5% improvement in
profitability. New business levels showed some improvement during the second
half of 2007 and it is expected that this will continue in 2008.
Reseal-itTM continues to progress well. The first machine sale in North America
was completed in 2007 and there is a growing level of interest from North
American customers in the Reseal-it product.
The priorities for the Labels business in 2008 are to:-
• Accelerate organic growth plans particularly in the branded products
sector;
• Improve operational efficiencies to counterbalance retail price pressure;
• Develop the Reseal-itTM product in the US market; and
• Broaden the re-sealable label product range.
Packaging Manufacturing
The principal activity of the business is the design and manufacture/assembly of
bespoke composite packaging for use in protecting goods in transit. The primary
components are corrugate, timber and foam. The business operates from two
manufacturing sites in Grantham and Westbury. The business supplies goods
directly to customers and via the Group's Distribution business focusing on such
sectors as aerospace, medical equipment, electronics and automotive.
Business Performance
The business had a solid year in 2007 building on the operational improvements
achieved during the last two years. Strong sales momentum was achieved with
growth of 11% versus last year. There was one significant customer win during
the year and sales growth via the Macfarlane Packaging Distribution channel was
12% ahead of last year. However the sales momentum achieved in 2007 was not
translated into profit growth due to investments both in equipment and
management, which will help secure future profitability. Margins were broadly
flat despite volatility in raw material prices.
The Group currently believes the retention of an in-house manufacturing
capability allows it to differentiate its offering from other packaging
distributors.
The priorities for 2008 are to:
• Improve the overall returns from the business;
• Recover gross margin through effective recovery of further cost
increases
• At Grantham the focus will be on growing sales directly and through the
in-house Distribution network; and
• Our Westbury location is focused on maintaining sales momentum while at
the same time introducing productivity improvement initiatives that were
effective at Grantham in 2007.
Operating review
Manufacturing operations
Plastics
The principal activity is the manufacture of injection moulded plastic packaging
and dispensing components particularly lids and scoops for the baby food market.
Business Performance
Sales revenue showed growth of 13% versus 2006 primarily through strong
performances from the existing base of customers. However input prices for raw
materials, energy and labour were not easily transferred to selling prices
resulting in a weak gross margin performance.
The overall result for 2007 was disappointing but the business continues to be
highly cash generative.
During 2007, working in co-operation with key customers, there have been major
improvements in the infrastructure of the business and our enhanced hygiene
procedures are at the leading edge of our industry.
During 2008 the management team will focus on:-
• Ensuring input price increases are effectively managed with our
customers;
• Achieving ISO22000 accreditation for the Wicklow facility;
• Establishing new lower cost raw material sources; and
• Continuing to improve operational efficiency.
The Board has approved discussions with a number of parties who have expressed
interest in acquiring this business and therefore the results of the business
have been treated as discontinued in the income statement.
US/Mexico
Macfarlane had packaging manufacturing and assembly operations in California and
Mexico, with two plants in Mexico and two in California. The business focused on
foam-based packaging components supplying the electronics, healthcare and food
and drink sectors of the market.
Following a strategic review in the first half of 2007, the Board decided that
it was appropriate to exit our operations in US/Mexico. These operations had not
made any significant return in recent years and consumed considerable executive
management time. Accordingly the Board considered offers for the business
although these would be likely to generate a loss on disposal. In October 2007
Macfarlane US/Mexico was sold to Specialized Packaging Group L.P. resulting in a
loss of £1.8 million. Of this loss, £0.7 million related to the accumulated
exchange loss for the US/Mexican operations, written off over a number of years
which accounting standards require to be brought into the calculation of the
loss on disposal in the current year. An equivalent credit to reserves is also
recorded.
Future Outlook
Our objectives in 2007 were to continue progress in improving Group
profitability, bring a greater focus to the activities of the Group and build
both organically and through acquisition our UK market-leading position in
Packaging Distribution.
In overall terms we are pleased with what has been achieved in 2007:
• Packaging Distribution has demonstrated good sales momentum and returns
are improving;
• UK Packaging Manufacture is showing sustainable profit performance;
• The Labels business is showing stability in the UK and good growth
potential for Re-Seal it in North America;
• Plastics has demonstrated a reliable revenue base;
• We have successfully managed the sale of our foam operations in US/
Mexico.
The acquisition of Online Packaging early in 2008 demonstrates our commitment to
building our market-leading position in UK Packaging Distribution and additional
acquisition opportunities are being evaluated for implementation during 2008.
Our future priorities are to continue to bring greater focus to the activities
of the Group in order to allow management to concentrate their time on building
and improving returns from our key businesses.
Macfarlane Group PLC
Consolidated income statement
For the year ended 31 December 2007
2007 2006
Note £000 £000
* As restated
Continuing operations
Revenue 2 119,737 106,313
Cost of sales (81,442) (72,522)
Gross profit 38,295 33,791
Distribution costs (5,791) (5,490)
Administrative expenses (29,453) (26,294)
Non-recurring net property gains 4 14 -
Operating profit 3,065 2,007
Finance income 5 2,947 2,762
Finance expense 5 (3,545) (3,296)
Profit before tax 2,467 1,473
Tax 6 979 (315)
Profit for the year from continuing operations 3,446 1,158
Discontinued operations
(Loss)/profit for the year from discontinued 2 / 9 (1,616) 893
operations
Profit for the year 1,830 2,051
Earnings per share 8
From continuing operations
Basic 3.06p 1.03p
Diluted 3.06p 1.02p
From continuing and discontinued operations
Basic 1.63p 1.82p
Diluted 1.62p 1.81p
* The comparative figures are restated for the reasons set out in note 3 with no
impact on the profit for that year.
Macfarlane Group PLC
Consolidated statement of recognised income and expense
For the year ended 31 December 2007
2007 2006
£000 £000
Exchange differences on translation of overseas 78 (764)
operations
Exchange differences realised on disposal of subsidiary 670 -
companies
Exchange difference on translation of foreign 748 (764)
operations
Actuarial gains on defined benefit pension 393 5,835
schemes
Tax on items taken directly to equity actuarial (111) (1,751)
gain
long-term rate change (270) -
Net income recognised directly in equity 760 3,320
Profit for the year 1,830 2,051
Total recognised income and expense for the year 2,590 5,371
Macfarlane Group PLC
Consolidated reconciliation of movements in shareholders' equity
For the year ended 31 December 2007
Note 2007 2006
£000 £000
Profit for the year 1,830 2,051
Dividends to equity holders in the year 7 (2,252) (1,125)
Net income recognised directly in equity (as 760 3,320
above)
Credit in respect of share based payments 82 140
Movements in equity in the year 420 4,386
Opening equity 29,825 25,439
Closing equity 30,245 29,825
Macfarlane Group PLC
Consolidated balance sheet at 31 December 2007
Note 2007 2006
£000 £000
Non-current assets
Goodwill 18,646 18,973
Property, plant and equipment 9,637 13,112
Investment property - 1,701
Other receivables 872 1,057
Deferred tax asset 3,917 4,560
Total non-current assets 33,072 39,403
Current assets
Inventories 8,095 9,811
Trade and other receivables 31,108 29,508
Deferred tax asset 1,665 -
Cash and cash equivalents 348 2,195
Total current assets 41,216 41,514
Non-current assets classified as held for sale 9 4,238 -
45,454 41,514
Total assets 78,526 80,917
Current liabilities
Trade and other payables 28,087 26,710
Current tax liabilities 407 663
Obligations under finance leases 182 44
Bank overdrafts and loans 3,252 7,747
Liabilities directly associated with assets 9 1,409 -
classified as held for sale
Total current liabilities 33,337 35,164
Net current assets 12,117 6,350
Non-current liabilities
Retirement benefit obligations 11 14,272 15,873
Other creditors 169 -
Obligations under finance leases 503 55
Total non-current liabilities 14,944 15,928
Total liabilities 48,281 51,092
Net assets 30,245 29,825
Equity
Share capital 28,755 28,755
Revaluation reserves 70 167
Own shares (1,406) (1,406)
Translation reserves (52) (800)
Retained earnings 2,878 3,109
Total equity 30,245 29,825
Macfarlane Group PLC
Consolidated cash flow statement
For the year ended 31 December 2007
Note 2007 2006
£000 £000
Net cash from operating activities 10 4,025 160
Investing activities
Interest received 46 9
Disposal of subsidiary undertaking 3,088 2,102
Acquisition of subsidiary undertaking (800) (1,262)
Proceeds on disposal of property, plant and 44 1,472
equipment
Purchases of property, plant and equipment (988) (604)
Net cash from investing activities 1,390 1,717
Financing activities
Dividends paid 7 (2,252) (1,125)
Repayments of obligations under finance leases (34) (268)
Decrease in bank overdrafts (4,495) (83)
Net cash used in financing activities (6,781) (1,476)
Net (decrease)/increase in cash and cash (1,366) 401
equivalents
Cash and cash equivalents at beginning of year 2,195 1,794
Cash and cash equivalents at end of year 829 2,195
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
1. General information
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements as defined in Section 240
of the Companies Act 1985 and has been extracted from the full statutory
accounts for the years ended 31 December 2007 and 31 December 2006 respectively.
The information for the year ended 31 December 2006 does not constitute the
Group's statutory financial statements as defined in Section 240 of the
Companies Act 1985. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified pursuant to Section 235 of the Companies Act 1985 and did not
contain a statement under sub-section 237 (2) or (3) of that Act.
The auditors' report on the statutory financial statements for the year ended 31
December 2007 was unqualified pursuant to Section 235 of the Companies Act 1985
and did not contain a statement under sub-section 237 (2) or (3) of that Act.
2. Split between continuing and discontinued activities
2007 2006
Continuing Discontinued Total Continuing Discontinued Total
£000 £000 £000 £000 £000 £000
Revenue 119,737 18,312 138,049 106,313 23,754 130,067
Cost of sales (81,442) (12,082) (93,524) (72,522) (15,978) (88,500)
Gross profit 38,295 6,230 44,525 33,791 7,776 41,567
Distribution costs (5,791) (881) (6,672) (5,490) (1,029) (6,519)
Administration costs (29,453) (5,027) (34,480) (26,294) (6,508) (32,802)
Non-recurring net
property gains
14 - 14 - - -
Operating profit 3,065 322 3,387 2,007 239 2,246
Net finance costs (598) (140) (738) (534) (197) (731)
Profit before tax 2,467 182 2,649 1,473 42 1,515
Tax 979 2 981 (315) 2 (313)
Profit after tax 3,446 184 3,630 1,158 44 1,202
(Loss)/profit on disposal
of operations - (1,800) (1,800) - 849 849
Profit for the year 3,446 (1,616) 1,830 1,158 893 2,051
3. Segmental information
The Group's activities are centred on two principal activities, with those
manufacturing operations discontinued in the current and prior years disclosed
separately.
(i) Packaging Distribution
The Distribution of packaging materials and supply of storage and warehousing
services in the UK.
(ii) Manufacturing Operations
The manufacture and supply of self-adhesive and re-sealable labels to a variety
of FMCG customers in the UK and Europe and the manufacture, assembly and supply
of timber, corrugated and foam-based packaging materials in the UK.
Discontinued Operations
The Manufacturing Operations in US/Mexico were sold in the second half of 2007
and are classified as discontinued in the consolidated income statement. In
addition the decision to dispose of the Group's plastic injection-moulding
operation was taken in the first half of 2007. Consequently the results of this
operation for 2006 were re-classified as discontinued operations in the
consolidated income statement.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
3. Segmental information (continued)
Packaging Distribution 2007 2006
£000 £000
Revenue 92,654 80,853
Cost of sales (64,565) (56,650)
Gross profit 28,089 24,203
Net operating expenses (26,751) (23,767)
Operating profit 1,338 436
Manufacturing Operations
Revenue 27,083 25,460
Cost of sales (16,877) (15,872)
Gross profit 10,206 9,588
Net operating expenses (8,479) (8,017)
Operating profit 1,727 1,571
2007 2006
£000 £000
Packaging Distribution 1,338 436
Manufacturing Operations 1,727 1,571
Operating profit 3,065 2,007
Net finance costs (598) (534)
Profit before tax 2,467 1,473
Tax 979 (315)
Profit from continuing operations 3,446 1,158
(Loss)/profit from discontinued operations after (1,616) 893
tax
Profit after tax and discontinued operations 1,830 2,051
2007 2006
Group segment £000 £000
Packaging Distribution 16,510 16,425
Manufacturing Operations 10,906 13,400
Continuing operations 27,416 29,825
Discontinued operations 2,829 -
Net assets 30,245 29,825
4. Non-recurring net property gains
An investment property was sold during 2007 for a consideration of £2,386,000
realising a gain of £539,000 which has been offset by amounts totalling £525,000
due under certain of the Group's vacant properties.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
5. Net finance expense 2007 2006
£000 £000
Interest on bank loans and overdrafts (446) (292)
Interest on obligations under finance leases (24) (12)
Interest cost of pension scheme liabilities (3,075) (2,992)
Total finance expense (3,545) (3,296)
Expected return on pension scheme assets 2,900 2,631
Investment income 47 131
Total finance income 2,947 2,762
Net finance expense (598) (534)
6. Tax 2007 2006
£000 £000
Current tax
United Kingdom corporation tax at 30% (2006: 30%) - (57)
Foreign tax (66) (86)
Adjustments in respect of prior periods (228) 187
Current tax (charge)/credit (294) 44
Deferred taxation credit/(charge) 1,273 (359)
Total tax credit/(charge) 979 (315)
The major feature of the 2007 tax credit relates to the recognition of a
deferred tax asset for the Group's corporation tax losses. A value of £1,665,000
has been recognised in the current year for the first time as it is now regarded
as more likely than not that these losses will be recovered within the short
term.
The standard rate of tax for the year, based on the UK rate of corporation tax
is 30% (2006 - 30%). Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions. The deferred tax credit includes a
charge of £385,000 in relation to the reversal of the deferred tax asset on the
pension deficit. £47,000 of this charge relates to the change in the long-term
rate of tax from 30% to 28% with effect from April 2008.
The actual tax charge for the current and previous year is less than 30% of the
results as set out in the income statement for the reasons set out in the
following reconciliation:
Profit before taxation 2,467 1,473
Tax on profit at 30% (740) (442)
Factors affecting tax charge for the year:-
Depreciation in excess of capital allowances 8 (216)
Tax charge on contributions to defined benefit pension (385) (380)
scheme
Non taxable gain 162 -
Other differences 171 (353)
Tax losses utilised 299 836
Tax losses recognised as a deferred tax asset 1,665 -
Difference on overseas tax rates 27 53
Adjustments in respect of prior periods (228) 187
Tax credit/(charge) for the year 979 (315)
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
7. Dividends 2007 2006
£000 £000
Amounts recognised as distributions to equity holders in
the year:
Final dividend for the year ended 31 December 2006 of 1.00p
per share (2006 - Nil) 1,126 -
Interim dividend for the year ended 31 December 2007 of
1.00p per share (2006 - 1.00p per share) 1,126 1,125
2,252 1,125
Dividends are not payable on own shares held in the employee share trust.
The proposed final dividend of 1.00p per share will be paid on 12 June 2008 to
those shareholders on the register at 23 May 2008 and is subject to approval by
shareholders at the Annual General Meeting in 2008 and has not been included as
a liability in these financial statements.
8. Earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is based on the
following data:
2007 2006
£000 £000
Earnings from continuing and discontinued operations for
the purposes of earnings per share being profit for the
year 1,830 2,051
Add/(less) Loss/(profit) for the year from discontinued 1,616 (893)
operations
Earnings from continuing operations for the purposes of
earnings per share being profit for the year from
continuing operations 3,446 1,158
Number of shares in issue for the purposes of calculating 2007 2006
basic and diluted earnings per share
No. of No. of
shares '000 shares '000
Weighted average number of ordinary shares in issue 115,019 115,019
Own shares in Employee Share Ownership Trusts (2,491) (2,491)
Weighted average number of shares in issue for the
purposes of basic earnings per share 112,528 112,528
Effect of dilutive potential ordinary shares due to share 166 601
options
Weighted average number of shares in issue for the
purposes of diluted earnings per share 112,694 113,129
9. Discontinued operations, non-current assets and current liabilities
classified as held for sale
In April 2007 the Board decided to divest the Plastics business. In October
2007, the Group's US and Mexican Packaging manufacturing subsidiaries were sold,
following a decision to divest taken in May 2007. As the decisions to sell the
respective businesses were taken before 31 December 2007, the results of the
businesses for 2006 and 2007 are classified as discontinued operations in the
consolidated income statement. The components of the Plastics business's balance
sheet are classified as non-current assets and current liabilities held for sale
at 31 December 2007.
In January 2006, the Group's Hungarian subsidiary was sold and the gain on
disposal is reflected in the 2006 results.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
9. Discontinued operations, non-current assets and current liabilities
classified as held for sale
2007 2006
Manufacturing Operations £000 £000
Revenue 18,312 23,754
Cost of sales (12,082) (15,978)
Gross profit 6,230 7,776
Net operating expenses (5,908) (7,537)
Operating profit 322 239
Net interest paid (140) (197)
(Loss)/gain on disposal of subsidiary undertaking (1,800) 849
(Loss)/profit before tax (1,618) 891
Tax 2 2
Post-tax (loss)/profit from discontinued operations (1,616) 893
(Loss)/gain on disposal of subsidiary undertaking
Goodwill 327 -
Property, plant and equipment 1,107 167
Inventories 723 265
Trade receivables 4,022 902
Cash and cash equivalents 249 591
Trade payables (1,109) (485)
Net assets disposed of 5,319 1,440
Accumulated foreign exchange loss on disposal (670) -
(Loss)/gain on disposal of subsidiary undertaking (1,130) 900
Total consideration 3,519 2,340
Cash 3,337 2,153
Deferred consideration 182 187
Total consideration 3,519 2,340
Non-current assets held for sale
The major classes of assets and liabilities comprising the operations classified
as held for sale at 31 December 2007 are as follows:-
2007 2006
£000 £000
Property, plant and equipment 2,064 -
Inventories 455 -
Trade receivables 1,238 -
Cash and cash equivalents 481 -
Total assets classified as held for sale 4,238 -
Trade and other payables (1,290) -
Deferred tax liabilities (119) -
(1,409) -
Total net assets classified as held for sale 2,829 -
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
10. Notes to the cash flow statement 2007 2006
£000 £000
Operating profit Continuing operations 3,065 2,246
Discontinued operations 322 -
Operating profit 3,387 2,246
Adjustments for:
Depreciation of property, plant and equipment 2,094 2,136
Gain on disposal of property, plant and equipment (539) (191)
Operating cash flows before movements in working capital 4,942 4,191
Decrease/(increase) in inventories 538 (681)
(Increase)/decrease in receivables (4,379) 58
Increase/(decrease) in payables 5,433 (999)
Adjustment for pension scheme funding (1,383) (1,630)
Cash generated by operations 5,151 939
Income taxes paid (554) (195)
Interest paid (572) (584)
Net cash from operating activities 4,025 160
2007 2006
£000 £000
(Decrease)/increase in cash and cash equivalents in the year (1,366) 401
Decrease in bank overdrafts 4,495 83
Cash flows from debt and lease financing (586) 268
Movement in net debt in the year 2,543 752
Opening net debt (5,651) (6,403)
Closing net debt (3,108) (5,651)
Net debt comprises:
Cash and cash equivalents 348 2,195
Cash and cash equivalents in business held for resale 481 -
Bank overdrafts and loans (3,252) (7,747)
Net bank debt (2,423) (5,552)
Obligations under finance leases Due within one year (182) (44)
Due outwith one year (503) (55)
Closing net debt (3,108) (5,651)
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with maturity of three months or less. Cash inflows in
respect of the discontinued operations for operating activities amounted to
£821,000 for 2007, (2006 Nil) cash inflows in respect of investing activities
totalled £2,930,000 (2006 - £2,102,000) and cash outflows from financing
activities amounted to £268,000 (2006 £Nil).
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
11. Pension scheme
The Group operates a pension scheme based on final pensionable salary for its UK
operations. The assets of the scheme are held separately from those of the Group
in managed funds under the overall supervision of the scheme trustees.
The contributions are determined by the scheme's qualified actuary on the basis
of triennial valuations using the projected unit method. The most recent
triennial valuation was as at 1 May 2005. The principal assumptions adopted were
that investment returns would average 7.75% per annum and that salary increases
would average 3.5% per annum. The valuation showed that the market value of the
relevant assets of the scheme was £35,259,000 and the actuarial value of these
assets represented 76% of the value of benefits that had accrued to members.
Balance sheet disclosures
The figures below have been based on the triennial actuarial valuation as at 1
May 2005, updated to the current year-end. The assets in the scheme, the net
liability position for the scheme at 31 December 2007 and the expected rates of
return were:
Fair value Fair value Fair value Fair value
2007 2006 2005 2004
Asset class £000 £000 £000 £000
Equities 28,162 26,785 24,077 19,911
Bonds 16,859 16,661 16,678 15,173
Other (cash) 11 184 21 37
Fair value of assets 45,032 43,630 40,776 35,121
Present value of scheme (59,304) (59,503) (63,753) (52,545)
liabilities
Deficit in the scheme (14,272) (15,873) (22,977) (17,424)
Related deferred tax asset 3,996 4,762 6,893 5,227
Net pension liability (10,276) (11,111) (16,084) (12,197)
The scheme's liabilities were calculated on the following bases as required
under IAS 19:
Assumptions 2007 2006 2005 2004
Discount rate 5.80% 5.25% 4.75% 5.25%
Rate of increase in salaries 3.25% 2.75% 2.75% 2.75%
Inflation assumption 3.25% 2.75% 2.75% 2.75%
Life expectancy beyond normal
retirement date of 65
Male 21.3 years 19.5 years 19.5 years 17.2 years
Female 24.0 years 22.4 years 22.4 years 21.0 years
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2007
11. Pension scheme (continued)
2007 2006 2005 2004
Movement in scheme deficit in £000 £000 £000 £000
year
At 1 January (15,873) (22,977) (17,424) (17,312)
Current service cost (272) (353) (298) (438)
Employer contributions 1,571 1,925 746 621
Curtailment gains 84 58 - -
Net finance costs (175) (361) (448) (517)
Actuarial gain in the period 393 5,835 (5,553) 222
At 31 December (14,272) (15,873) (22,977) (17,424)
During 2007, the Group made additional payments of £1.3 million to reduce the
pension scheme deficit. These payments, combined with an improvement in equity
returns and an increase from 5.25% to 5.80% in the bond yields assumed in the
valuation of the pension scheme liabilities had a positive impact on the deficit
recorded in our balance sheet.
12. Posting to shareholders and Annual General Meeting
The Annual Report and Accounts will be sent to shareholders on Wednesday 9 April
2008. The Annual General Meeting will take place at the Thistle Hotel, Cambridge
Street Glasgow at 12 noon on Tuesday 20 May 2008. The Annual Report and Accounts
will be available to members of the public at the Company's Registered Office,
21 Newton Place, Glasgow G3 7PY from 11 April 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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