Final Results

RNS Number : 6923M

Molins PLC

29 August 2013

 



29 August 2013                                                                                  FOR IMMEDIATE RELEASE

 

 

Molins PLC

Half-year report for the six months ended 30 June 2013

Molins PLC, the international engineering and services company, announces its results for the six months ended 30 June 2013.

Group Highlights

·      Order intake maintained at same levels as last year

·      Increase in Group sales of 20% to £47.8m (2012: £39.9m)

·      Increase in Group underlying profit before tax to £1.5m (2012: £0.8m)

·      Underlying earnings per share increased to 6.5p (2012: 3.6p)

·      Net funds of £5.6m

·      Interim dividend per share maintained at 2.5p (2012: 2.5p)

Dick Hunter, Chief Executive, commented:

"The Group has had a strong first half, with increases in both sales and underlying profit.  We have continued our investment across the business, most notably in product development, as well as through the expansion of our Packaging Machinery presence in Asia.

The order book supports the Group's full year trading performance being second half weighted as in previous years.  The Board's expectation of performance for the full year remains unchanged."

Divisional Highlights

Scientific Services

·      Strong orders and sales growth at Cerulean, leading to improved trading performance

·      Order intake at Arista Laboratories lower than the prior year, as the regulatory regime for the testing of tobacco products in the USA has yet to be confirmed

·      Following investment in personnel, equipment and systems at Arista in anticipation of increased demand, trading performance was lower in the first half of the year

Packaging Machinery

·      Order intake maintained, with sales increase of 16% supported by strong opening order book

·      Trading performance at similar levels to previous year, reflecting slightly lower margins

·      Sales and service operations established in Asia

Tobacco Machinery

·      Sales growth of 22% reflecting strong opening order book for new machinery

·      Trading performance improved with increase in margins

For further information, please contact:

Molins PLC Dick Hunter, Chief Executive David Cowen, Group Finance Director Canaccord Genuity Limited   Bruce Garrow	Tel: [phone] Tel: [phone]
MHP Communications Andrew Jaques, Simon Hockridge, Naomi Lane	Tel: [phone]

MOLINS is an international business providing high performance machinery and instrumentation, as well as services and support for the production, packaging and analysis of consumer products.  The Group serves its customers through its wide geographic spread of sales, service and manufacturing locations. The Group is focused on the organic development of its businesses, through targeted product development, excellence in customer service and ongoing operational efficiency improvements, supported by acquisitive growth where appropriate.

	6 months to 30 June 2013		6 months to 30 June 2012 (restated)4		12 months to 31 Dec 2012 (restated)4
Sales Underlying operating profit1 Underlying profit before tax2 Underlying earnings per share3 Dividends per share Net funds Statutory profit before tax Statutory profit for the period Basic earnings per share	£47.8m £1.5m £1.5m 6.5p 2.5p £5.6m £0.7m £0.7m 3.5p		£39.9m £0.8m £0.8m 3.6p 2.5p £5.7m £0.2m £0.2m 1.0p		£93.0m £4.9m £4.9m 21.8p 5.5p £7.4m £4.5m £3.8m 20.6p

¹   Before non-underlying net charge of £0.4m (30 June 2012: £0.5m; 31 December 2012: £0.3m)

²   Before non-underlying net charge of £0.8m (30 June 2012: £0.6m; 31 December 2012: £0.4m), comprising net charges included in operating profit of £0.4m (30 June 2012: £0.5m; 31 December 2012: £0.3m) and interest expense on pension scheme balances of £0.4m (30 June 2012: £0.1m; 31 December 2012: £0.1m)

³   Before non-underlying net charge of £0.6m (30 June 2012: £0.5m; 31 December 2012: £0.3m), comprising net charges included in operating profit of £0.3m (30 June 2012: £0.4m; 31 December 2012: £0.2m) and interest expense on pension scheme balances of £0.3m (30 June 2012: £0.1m; 31 December 2012: £0.1m), all figures after tax

⁴  Restated to reflect amendments to IAS 19 Employee benefits and consequent changes to the Group's accounting policies

INTERIM MANAGEMENT REPORT

Operating results

Group sales in the six months to 30 June 2013 increased by 20% to £47.8m (2012: £39.9m) and underlying operating profit (before non-underlying net charges) increased to £1.5m (2012: £0.8m).  Additionally the Group incurred charges of £0.4m (2012: £0.4m) in respect of administering the Group's defined benefit pension schemes and £0.4m (2012: £0.1m) financing expense arising as a result of the accounting for the Group's pension schemes.  Reported profit before tax was £0.7m (2012: £0.2m).  The net tax charge on underlying profit (before non-underlying net charges) was £0.2m (2012: £0.1m), with a net tax credit of £0.2m (2012: £0.1m) in respect of non-underlying net charges, resulting in profit for the period of £0.7m (2012: £0.2m), of which underlying profit was £1.3m (2012: £0.7m).  Basic earnings per share amounted to 3.5p (2012: 1.0p) and underlying earnings per share (before non-underlying net charges) amounted to 6.5p (2012: 3.6p).  The Group's net funds position at 30 June 2013 was £5.6m (31 December 2012: £7.4m).    

Scientific Services

Sales in the period increased by 23% to £11.4m (2012: £9.3m) leading to an operating profit of £0.1m (2012: £0.1m loss).  The division, with its main facilities in the UK and USA, comprises Arista Laboratories, an independent tobacco and smoke constituent analytical laboratory, and Cerulean, which supplies process and quality control instruments to the tobacco industry, as well as other instruments and machinery to other industrial sectors.  Order intake at Cerulean was strong in most areas, with the key Chinese market remaining buoyant and the order book being supported by a large, one-off project for a customer in North Africa.  Sales grew in the period for both instruments and aftermarket products, which represented one-third of revenues.  The growth in revenues led to a commensurate increase in profitability.  The business continues to develop its product range both in the tobacco sector and to address other non-tobacco end markets.

Order intake at Arista Laboratories was lower than in the same period last year.  Although it was expected that regulatory requirements for the testing and reporting of tobacco product constituents in the USA would have been confirmed by the Food and Drug Administration (FDA) in the first half of the year, the regulatory framework was not forthcoming and the latest indication from the FDA is that guidance will be published in December 2013.  This has meant that activity levels at Arista have been considerably lower than the business is capable of delivering and these relatively low levels are expected to continue during the rest of the year.  The business is fully operational from its new laboratory facility in Richmond, Virginia where it services all the tobacco industry's tobacco and smoke testing requirements, and from where non-tobacco testing will be carried out as the business extends its activities into other end markets.

Packaging Machinery

Sales in the period increased by 16% to £18.4m (2012: £15.9m) and operating profit was £0.1m (2012: £0.1m, before reorganisation costs).  The division supplies engineering services and capital equipment through ITCM, based in the UK, and Langen Packaging Group, based in the Netherlands and Canada.  In addition, during the first part of this year, Langen has established sales and service offices in Asia to support customers' growth plans in that region.  Order intake overall has remained at similar levels to last year, with momentum in the European part of the division being offset by weaker demand in North America.  Good levels of order prospects remain for the second half of the year across all regions.  The increase in sales in the first half was supported by a strong opening order book, although margins were reduced as a result of an increase in high-engineering content projects, with a lower proportion of sales of standardised machines.  Sales and marketing costs have increased in the period in support of the investment in infrastructure in Asia. 

Tobacco Machinery

Sales in the period increased by 22% to £18.0m (2012: £14.7m) and operating profit increased to £1.3m (2012: £0.8m).  The division designs, manufactures, markets and services specialist machinery for the tobacco industry from its facilities in the UK, USA, Brazil, Singapore and Czech Republic.  Sales of new and rebuild machines were supported by a strong opening order book and also by the receipt of orders which required quick response times, which the division was able to deliver, reflecting the efficiency of its operations and the support it provides its customer base.  Although order intake overall was slightly weaker than in the same period last year, current order prospects are relatively strong.  Activity levels in the period were good which, together with the margins earned on increased sales, resulted in a strong financial performance.  The division continues its focus on new product development and continuing improvements in service performance.

Non-underlying items

Non-underlying items in the period comprise charges in respect of the administration costs of the Group's defined benefit pension schemes and financing expense on pension scheme balances, which are detailed in the Pension schemes section below.  Additionally, in the six months to 30 June 2012 and twelve months to 31 December 2012, charges in respect of reorganisations of £0.1m and £1.0m respectively were incurred.  Cash payments of £0.6m were made in the period to 30 June 2013 in respect of reorganisations in earlier periods.

Cash

Net funds at 30 June 2013 were £5.6m (30 June 2012: £5.7m; 31 December 2012: £7.4m).  Net cash inflow from operating activities in the first half of the year was £1.3m, which is net of reorganisation costs paid of £0.6m, deficit recovery payments to the UK defined benefit pension scheme of £0.6m and tax paid of £0.7m.  Net capital and product development cash outflow was £2.5m.  Ordinary dividends of £0.6m were paid in the period.

Pension schemes

The Group is responsible for defined benefit schemes in the UK and the USA, in which there are no active members, which it accounts for in accordance with IAS 19 Employee benefits.  Changes to IAS 19 have taken effect for 2013 reporting, with the prior year comparative figures being restated.  Financing income/expense is now calculated by applying the discount rate used for valuing the schemes' liabilities to the value of the net pension asset/liability at the beginning of the year, rather than calculating financing income by applying the expected return on assets to the value of the schemes' assets at the beginning of the year and financing expense by applying the discount rate to the value of the schemes' liabilities at the beginning of the year.  As the discount rate is lower than the expected return on assets, financing income/expense is lower than would have been reported under IAS 19 before its requirements changed.  Additionally for 2013 reporting, the expense of administering the pension schemes can no longer be accounted for as a reduction in the expected return on schemes' assets and is instead charged separately to operating profit within the income statement.

The IAS 19 valuation of the UK scheme at 30 June 2013 shows a surplus of £0.8m (£0.5m net of deferred tax), compared with a deficit of £13.9m (£10.7m net of deferred tax) at the beginning of the period.  The value of the scheme's assets at 30 June 2013 was £333.8m (31 December 2012: £322.5m), and the value of the scheme's liabilities was £333.0m (31 December 2012: £336.4m).  The net valuation of the USA pension schemes at 30 June 2013, with total assets of £15.2m, showed a deficit of £4.4m (£2.7m net of deferred tax), compared with a deficit of £5.3m (£3.2m net of deferred tax) at the beginning of the period.  The aggregate expense of administering the pension schemes was £0.4m (2012: £0.4m).  The net financing expense on pension scheme balances was £0.4m (2012: £0.1m).

The UK scheme was subject to a formal actuarial valuation as at 30 June 2012.  This valuation is close to completion and is expected to show a deficit as at that date of approximately £53m.  The level of deficit funding required is expected to increase from £1.2m per annum to £1.7m per annum (increasing by inflation) from July 2013, which is expected to equate to a deficit recovery period of 17 years.

Related party transactions

There has been no material change in the nature of related party transactions from those described in note 29 of the 2012 Annual Report and Accounts and these are also referred to in note 13 of this Half-year report.

Risks

Molins is subject to a number of risks which could have a serious impact on the performance of the business.  The Board regularly considers the principal risks that the Group faces and how to mitigate their potential impact.  The key risks to which the business is exposed have not changed significantly over the past six months and are not expected to do so over the remaining six months of the financial year.  Further information on the principal risks and uncertainties faced by the Group is included on pages 13 and 14 of the Group's 2012 Annual Report and Accounts.

Cautionary statement

This Interim management report (IMR) has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.  The IMR should not be relied on by any other party or for any other reason.  The IMR contains certain forward-looking statements.  These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.  This IMR has been prepared for the Group as a whole and therefore emphasises those matters which are significant to Molins PLC and its subsidiary undertakings when viewed as a whole.

Dividend

The Board has declared an interim dividend of 2.5p per ordinary share (2012: 2.5p), which will be paid on 10 October 2013 to ordinary shareholders registered at the close of business on 20 September 2013.  Dividends paid to shareholders in the six months to 30 June 2013 were 3.0p per ordinary share (2012: 2.75p).

Outlook

The order book supports the Group's full year trading performance being second half weighted as in previous years.  The Board's expectation of performance for the full year remains unchanged.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT

We confirm that to the best of our knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU; and
·      the Interim management report includes a fair review of the information required by:
	(a)	DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
	(b)	DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Dick Hunter

Chief Executive

David Cowen

Group Finance Director

29 August 2013

CONDENSED CONSOLIDATED INCOME STATEMENT

		6 months to 30 June 2013				6 months to 30 June 2012 (restated)
	Notes	Underlying £m	Non-underlying (note 5) £m	Total £m		Underlying £m	Non-underlying (note 5) £m	Total £m
Revenue Cost of sales	4	47.8 (35.2)	- -	47.8 (35.2)		39.9 (28.8)	- -	39.9 (28.8)
Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses		12.6 - (4.2) (6.4) (0.5)	- - - (0.4) -	12.6 - (4.2) (6.8) (0.5)		11.1 - (4.0) (6.3) -	- - - (0.5) -	11.1 - (4.0) (6.8) -
Operating profit	4, 7	1.5	(0.4)	1.1		0.8	(0.5)	0.3
Financial income Financial expenses	6 6	0.1 (0.1)	- (0.4)	0.1 (0.5)		0.1 (0.1)	- (0.1)	0.1 (0.2)
Net financing expense	4, 6	-	(0.4)	(0.4)		-	(0.1)	(0.1)
Profit before tax Taxation	4 8	1.5 (0.2)	(0.8) 0.2	0.7 -		0.8 (0.1)	(0.6) 0.1	0.2 -
Profit for the period		1.3	(0.6)	0.7		0.7	(0.5)	0.2
Basic earnings per ordinary share Diluted earnings per ordinary share	9 9			3.5p 3.4p				1.0p 0.9p

CONDENSED CONSOLIDATED INCOME STATEMENT

			12 months to 31 December 2012 (restated)
	Notes		Underlying £m	Non-underlying (note 5) £m	Total £m
Revenue Cost of sales	4		93.0 (65.7)	- -	93.0 (65.7)
Gross profit Other operating income Distribution expenses Administrative expenses Other operating expenses			27.3 - (8.0) (13.7) (0.7)	- 1.5 - (1.8) -	27.3 1.5 (8.0) (15.5) (0.7)
Operating profit	4, 7		4.9	(0.3)	4.6
Financial income Financial expenses	6 6		0.2 (0.2)	- (0.1)	0.2 (0.3)
Net financing expense	4, 6		-	(0.1)	(0.1)
Profit before tax Taxation	4 8		4.9 (0.8)	(0.4) 0.1	4.5 (0.7)
Profit for the period			4.1	(0.3)	3.8
Basic earnings per ordinary share Diluted earnings per ordinary share	9 9				20.6p 19.9p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 months to 30 June 2013 £m		6 months to 30 June 2012 (restated) £m		12 months to 31 Dec 2012 (restated) £m
Profit for the period		0.7		0.2		3.8
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss Actuarial gains/(losses) Tax on items that will not be reclassified to profit or loss		15.9 (4.0)		(12.5) 3.3		(17.6) 4.4
		11.9		(9.2)		(13.2)
Items that may be reclassified subsequently to profit or loss Currency translation movements arising on foreign currency net investments Effective portion of changes in fair value of cash flow hedges Net changes in fair value of cash flow hedges transferred to profit or loss		0.3 (0.1) -		(0.7) (0.2) (0.1)		(0.7) 0.3 -
		0.2		(1.0)		(0.4)
Other comprehensive income/(expense) for the period		12.1		(10.2)		(13.6)
Total comprehensive income/(expense) for the period		12.8		(10.0)		(9.8)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital £m	Share premium £m	Translation reserve £m	Capital redemption reserve £m	Hedging reserve £m	Retained earnings £m	Total equity £m
6 months to 30 June 2013 Balance at 1 January 2013	5.0	26.0	3.5	3.9	0.2	(8.1)	30.5
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- 0.3	- -	- (0.1)	0.7 11.9	0.7 12.1
Total comprehensive income/(expense) for the period	-	-	0.3	-	(0.1)	12.6	12.8
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(0.6) 0.1	(0.6) 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.5)	(0.5)
Balance at 30 June 2013	5.0	26.0	3.8	3.9	0.1	4.0	42.8
6 months to 30 June 2012 Balance at 1 January 2012	5.0	26.0	4.2	3.9	(0.1)	2.0	41.0
Profit for the period, as restated Other comprehensive income/(expense) for the period, as restated	- -	- -	- (0.7)	- -	- (0.3)	0.2 (9.2)	0.2 (10.2)
Total comprehensive income/(expense) for the period	-	-	(0.7)	-	(0.3)	(9.0)	(10.0)
Dividends to shareholders Equity-settled share-based transactions	- -	- -	- -	- -	- -	(0.5) 0.1	(0.5) 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.4)	(0.4)
Balance at 30 June 2012	5.0	26.0	3.5	3.9	(0.4)	(7.4)	30.6
12 months to 31 December 2012 Balance at 1 January 2012	5.0	26.0	4.2	3.9	(0.1)	2.0	41.0
Profit for the period, as restated Other comprehensive income/(expense) for the period, as restated	- -	- -	- (0.7)	- -	- 0.3	3.8 (13.2)	3.8 (13.6)
Total comprehensive income/(expense) for the period	-	-	(0.7)	-	0.3	(9.4)	(9.8)
Dividends to shareholders Equity-settled share-based transactions Tax on items recorded directly in equity	- - -	- - -	- - -	- - -	- - -	(1.0) 0.2 0.1	(1.0) 0.2 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.7)	(0.7)
Balance at 31 December 2012	5.0	26.0	3.5	3.9	0.2	(8.1)	30.5

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	30 June 2013 £m		30 June 2012 £m		31 Dec 2012 £m
Non-current assets Intangible assets Property, plant and equipment Investment property Employee benefits Deferred tax assets	7	14.9 11.8 0.8 0.8 3.7		14.6 10.7 - - 5.2		14.5 11.7 - - 7.8
		32.0		30.5		34.0
Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents		19.5 21.6 0.1 14.0		18.1 19.0 0.1 12.2		18.1 21.5 - 13.3
		55.2		49.4		52.9
Current liabilities Trade and other payables Current tax liabilities Provisions		(28.2) (1.1) (1.5)		(24.8) (0.8) (1.3)		(26.9) (1.0) (1.7)
		(30.8)		(26.9)		(29.6)
Net current assets		24.4		22.5		23.3
Total assets less current liabilities		56.4		53.0		57.3
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Deferred tax liabilities	7	(8.4) (4.4) (0.8)		(6.5) (15.9) -		(5.9) (19.2) (1.7)
		(13.6)		(22.4)		(26.8)
Net assets	4	42.8		30.6		30.5
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 7.8 4.0		5.0 26.0 7.0 (7.4)		5.0 26.0 7.6 (8.1)
Total equity		42.8		30.6		30.5

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 months to 30 June 2013 £m		6 months to 30 June 2012 (restated) £m		12 months to 31 Dec 2012 (restated) £m
Operating activities Operating profit Non-underlying items included in operating profit Amortisation Depreciation Defined benefit scheme pension service costs Other non-cash items Defined benefit scheme pension payments Working capital movements:   - increase in inventories   - decrease/(increase) in trade and other receivables   - increase in trade and other payables   - increase/(decrease) in provisions		1.1 0.4 0.7 0.9 - 0.1 (0.6) (1.2) 0.6 0.4 0.2		0.3 0.5 0.6 1.0 0.5 0.1 (0.8) (2.6) 1.3 1.2 (0.1)		4.6 0.3 1.4 2.1 0.9 (0.3) (1.6) (2.6) (0.7) 3.5 0.3
Cash generated from operations before reorganisation   Reorganisation costs paid	5	2.6 (0.6)		2.0 (0.3)		7.9 (0.5)
Cash generated from operations   Taxation paid		2.0 (0.7)		1.7 (0.4)		7.4 (0.8)
Net cash from operating activities		1.3		1.3		6.6
Investing activities Interest received Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Acquisition of investment property Capitalised development expenditure		0.1 0.1 (1.0) (0.7) (0.8)		0.1 - (1.5) - (0.4)		0.2 0.1 (3.9) - (1.2)
Net cash from investing activities		(2.3)		(1.8)		(4.8)
Financing activities Interest paid Net increase against revolving facilities Dividends paid	10	(0.1) 2.3 (0.6)		(0.1) 1.3 (0.5)		(0.2) 0.7 (1.0)
Net cash from financing activities		1.6		0.7		(0.5)
Net increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held	11	0.6 13.3 0.1		0.2 12.3 (0.3)		1.3 12.3 (0.3)
Cash and cash equivalents at period end		14.0		12.2		13.3

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

1.  General information

The Half-year results for the current and comparative period are unaudited but have been reviewed by the auditor, KPMG Audit Plc, and its report is set out on page 18.  The information for the year ended 31 December 2012 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The Group's statutory accounts have been reported on by the Group'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 its report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.  The Group's statutory accounts for the year ended 31 December 2012 are available from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY or from the Group's website at www.molins.com.

Having made due enquiries the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the condensed set of financial statements.

The condensed set of financial statements was approved by the Board of directors on 29 August 2013.

2.  Basis of preparation

(a) Statement of compliance

The condensed set of financial statements for the six months ended 30 June 2013 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.  It does not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Group for the year ended 31 December 2012.

(b) Judgements and estimates

The preparation of the condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing the condensed set of financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were of the same type as those that applied to the financial statements for the year ended 31 December 2012.

3.  Significant accounting policies

Except as described below, the accounting policies in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 December 2012.  The following changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2013.

Changes in accounting policies

As required, the Group has adopted amendments to IAS 19 Employee benefits, including consequential amendments to other standards, with a date of initial application of 1 January 2013, and restated the prior year's results accordingly.  The Group has changed its accounting policies with respect to the basis for accounting for financing income/expense on the value of the defined benefit pension schemes' assets/liabilities and with respect to the costs of administering the defined benefit pension schemes.

The Group determines financing income/expense for the period by applying the discount rate used for valuing the schemes' liabilities to the value of the net pension asset/liability at the beginning of the year.  Previously, the Group calculated financing income by applying the expected return on assets to the value of the schemes' assets at the beginning of the year and financing expense by applying the discount rate to the value of the schemes' liabilities at the beginning of the year (taking into account any changes during the period as a result of contributions and benefit payments).  Additionally, the expense of administering the pension schemes is now charged separately to operating profit within the income statement.  Previously it was accounted for as a reduction in the expected return on schemes' assets.

For the period to 30 June 2012, the restatement has reduced profit for the period as previously reported by £1.8m and increased other comprehensive income by £1.8m.  For the year to 31 December 2012, the restatement has reduced profit for the period as previously reported by £3.8m and increased other comprehensive income by £3.8m.

4.  Operating segments

The Group has three operating segments which are the Group's three divisions.  These divisions form the basis of the Group's management and internal reporting structure.  Further details in respect of the Group structure and performance of the three divisions are set out in the Interim management report. 

	Revenue										Profit
	6 months to 30 June 2013 £m				6 months to 30 June 2012 £m			12 months to 31 Dec 2012 £m					6 months to 30 June 2013 £m				6 months to 30 June 2012 (restated) £m				12 months to 31 Dec 2012 (restated) £m
Scientific Services	11.4		9.3				23.1					0.1			(0.1)				1.2
Packaging Machinery	18.4		15.9				38.8					0.1			0.1				1.5
Tobacco Machinery	18.0		14.7				31.1					1.3			0.8				2.2
	47.8		39.9				93.0
Underlying operating profit												1.5			0.8				4.9
Non-underlying items included in operating profit												(0.4)			(0.5)				(0.3)
Operating profit												1.1			0.3				4.6
Net financing expense												(0.4)			(0.1)				(0.1)
Profit before tax												0.7			0.2				4.5

Net financing expense includes dividends paid on preference shares.  The Company has in issue 900,000 6% fixed cumulative preference shares.  The preference dividend is payable on 30 June and 31 December and amounted to £0.1m in the 12 months ended 31 December 2012.

Segment assets	30 June 2013 £m		30 June 2012 £m		31 Dec 2012 £m
Scientific Services Packaging Machinery Tobacco Machinery	12.9 20.9 23.7		12.5 19.6 24.3		13.6 19.1 26.5
Total segment assets Total segment liabilities	57.5 (27.4)		56.4 (29.0)		59.2 (29.9)
Segment net assets - continuing operations	30.1		27.4		29.3
Net liabilities - discontinued operations	(0.2)		(0.1)		(0.1)
Unallocated net assets	12.9		3.3		1.3
Total net assets	42.8		30.6		30.5

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2012.

5.  Non-underlying items

Charges classified as non-underlying items were incurred in respect of the administration costs of the Group's defined benefit pension schemes, which are paid for out of the assets of the Group's pension schemes, and financing expense on pension scheme balances, and which are detailed in note 7 below.  Additionally, in the     6 months to 30 June 2012 and 12 months to 31 December 2012, charges in respect of reorganisations of £0.1m and £1.0m were incurred.  Cash payments of £0.6m were made in the period to 30 June 2013 in respect of reorganisations in earlier periods, of which £0.2m was paid to the UK defined benefit pension scheme. 

6.  Net financing expense

	6 months		6 months		12 months
	to 30 June		to 30 June		to 31 Dec
	2013		2012		2012
			(restated)		(restated)
	£m		£m		£m
Financial income Amounts receivable on cash and cash equivalents	0.1		0.1		0.2
	0.1		0.1		0.2
Financial expenses Defined benefit pension scheme finance expense Amounts payable on bank loans and overdrafts Preference dividends paid	(0.4) (0.1) -		(0.1) (0.1) -		(0.1) (0.1) (0.1)
	(0.5)		(0.2)		(0.3)
Net financing expense	(0.4)		(0.1)		(0.1)

7.  Employee benefits

The Group accounts for pensions under IAS 19 Employee benefits.  A formal valuation of the UK defined benefit pension scheme is being carried out as at 30 June 2012, and formal valuations of the USA defined benefit schemes were carried out as at 1 January 2013, and their assumptions, modified as appropriate, have been applied in the condensed set of financial statements, updated to reflect actual experience and conditions at 30 June 2013.  Profit before tax for the 6 months to 30 June 2013 includes charges in respect of IAS 19 pension schemes administration costs of £0.4m (6 months to 30 June 2012: £0.4m; 12 months to 31 December 2012: £0.8m) and financing expense on pension scheme balances of £0.4m (6 months to 30 June 2012: £0.1m; 12 months to 31 December 2012: £0.1m).  Also included within profit before tax in the 12 months to 31 December 2012 were credits totalling £1.5m in respect of actions taken within the Group's pension scheme in the UK.  Payments to the Group's UK defined benefit scheme in the period included £0.6m in respect of the agreed deficit recovery plan.

Employee benefits as shown in the condensed consolidated statement of financial position were:

	30 June 2013 £m		30 June 2012 £m		31 Dec 2012 £m
UK scheme Fair value of assets Present value of defined benefit obligations	333.8 (333.0)		315.7 (326.0)		322.5 (336.4)
Defined benefit asset/(liability)	0.8		(10.3)		(13.9)
USA schemes Fair value of assets Present value of defined benefit obligations	15.2 (19.6)		15.0 (20.6)		14.7 (20.0)
Defined benefit liability	(4.4)		(5.6)		(5.3)

8.  Taxation

The Group tax charge for the 6 months to 30 June 2013 amounted to £nil (6 months to 30 June 2012: £nil; 12 months to 31 December 2012: £0.7m) and is calculated as follows:

	6 months		6 months		12 months
	to 30 June		to 30 June		to 31 Dec
	2013		2012		2012
			(restated)		(restated)
	£m		£m		£m
Tax charge on underlying profit Tax credit on non-underlying items	0.2 (0.2)		0.1 (0.1)		0.8 (0.1)
Taxation	-		-		0.7

The Group's consolidated effective tax rate in respect of underlying profit for the 6 months to 30 June 2013 is 11% (6 months to 30 June 2012: 11%; 12 months to 31 December 2012: 16%).

The UK Finance Bill 2013, which contains legislation for some of the proposals announced by the Chancellor in the 20 March 2013 Budget, was substantively enacted on 2 July 2013.  The Bill introduced a further reduction in the rate of UK corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015.  Deferred tax assets and liabilities are measured at tax rates that are enacted or substantively enacted at the end of the reporting period and therefore the reduction in the corporate tax rate from 23% to 20% has not been taken into account in the calculation of the effective tax rate applied in this condensed set of financial statements.

9.  Earnings per share

Basic earnings per ordinary share is based upon the profit for the period and on a weighted average of 19,326,857 shares in issue during the period (6 months to 30 June 2012: 19,048,071; 12 months to 31 December 2012: 19,067,302).  The weighted average number of shares excludes shares held by the employee trust in respect of the Company's long-term incentive arrangements.

Diluted earnings per ordinary share is based upon the profit for the period and on a diluted weighted average of 19,856,326 shares in issue during the period (6 months to 30 June 2012: 19,687,662; 12 months to 31 December 2012: 19,795,541).  The diluted weighted average number of shares includes the diluting effect, if any, of own shares held by the employee trust.

Underlying earnings per ordinary share and diluted underlying earnings per ordinary share amounted to 6.5p for the 6 months to 30 June 2013 (6 months to 30 June 2012: 3.6p; 12 months to 31 December 2012: 21.8p) in respect of underlying earnings per share and 6.4p (6 months to 30 June 2012: 3.5p; 12 months to 31 December 2012: 21.0p) in respect of diluted underlying earnings per ordinary share.  The calculations of underlying earnings per ordinary share and diluted underlying earnings per ordinary share are based on underlying profit for the 6 months to 30 June 2013 of £1.3m (6 months to 30 June 2012: £0.7m; 12 months to   31 December 2012: £4.1m) which is calculated as follows:

	6 months to 30 June 2013 £m		6 months to 30 June 2012 (restated) £m		12 months to 31 Dec 2012 (restated) £m
Profit for the period Financing expense on pension scheme balances (net of tax) Non-underlying items included in operating profit (net of tax)	0.7 0.3 0.3		0.2 0.1 0.4		3.8 0.1 0.2
Underlying profit for the period	1.3		0.7		4.1

10.  Dividends

	6 months to 30 June 2013 £m		6 months to 30 June 2012 £m		12 months to 31 Dec 2012 £m
Dividends to shareholders paid in the period Final dividend for the year ended 31 December 2011 of 2.75p per share Interim dividend for the year ended 31 December 2012 of 2.5p per share Final dividend for the year ended 31 December 2012 of 3.0p per share	- - 0.6		0.5 - -		0.5 0.5 -
	0.6		0.5		1.0

An interim dividend for the year ending 31 December 2013 of 2.5p per ordinary share will be paid on 10 October 2013 to ordinary shareholders registered at the close of business on 20 September 2013.

11.  Reconciliation of net cash flow to movement in net funds

	6 months to 30 June 2013 £m		6 months to 30 June 2012 £m		12 months to 31 Dec 2012 £m
Net increase in cash and cash equivalents Cash outflow from movement in borrowings	0.6 (2.3)		0.2 (1.3)		1.3 (0.7)
Change in net funds resulting from cash flows	(1.7)		(1.1)		0.6
Translation movements	(0.1)		(0.3)		(0.3)
Movement in net funds in the period	(1.8)		(1.4)		0.3
Opening net funds	7.4		7.1		7.1
Closing net funds	5.6		5.7		7.4
Analysis of net funds
Cash and cash equivalents - current assets	14.0		12.2		13.3
Interest-bearing loans and borrowings - non-current liabilities	(8.4)		(6.5)		(5.9)
Closing net funds	5.6		5.7		7.4

12.  Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the financial statements for the year ended 31 December 2012.

At 1 January 2013 and 30 June 2013 the Group held all financial instruments at Level 2 (as defined in IFRS 7 Financial instruments: disclosures) and there have been no transfers of assets or liabilities between levels of the fair value hierarchy.

Categories of financial instruments 

	30 June 2013 £m		30 June 2012 £m		31 Dec 2012 £m
Financial assets Derivative instruments in designated hedge accounting relationship Loans and receivables (including cash and cash equivalents)	- 28.1		0.1 26.0		1.0 29.3
	28.1		26.1		30.3
Financial liabilities Derivative instruments in designated hedge accounting relationship Amortised cost	0.4 36.2		0.5 30.8		0.5 32.3
	36.6		31.3		32.8

Amortised cost comprises interest-bearing loans and borrowings and trade and other payables, excluding foreign currency derivatives.

The Group enters into forward foreign exchange contracts solely for the purpose of minimising currency exposures on sale and purchase transactions. The Group classified its forward foreign exchange contracts used for hedging as cash flow hedges and states them at fair value.

The fair value is the gain/loss on all open forward foreign exchange contracts at the period end. These amounts are based on the market values of equivalent instruments at the period end date and all relate to those forward foreign exchange contracts that have been designated as effective cash flow hedges under IAS 39 Financial instruments - recognition and measurement.

13.  Related parties

The Group has related party relationships with its directors and with the UK and USA pension schemes. There has been no material change in the nature of the related party transactions described in note 29 of the 2012 Annual Report and Accounts.

14.  Half-year report

The Half-year report will be sent to all shareholders in September 2013 and additional copies will be available from the Company's registered office at Rockingham Drive, Linford Wood East, Milton Keynes MK14 6LY or from the Group's website at www.molins.com.

INDEPENDENT REVIEW REPORT TO MOLINS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Half-year report for the six months ended 30 June 2013 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of financial position, condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the Half-year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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 Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). 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 Half-year report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-year financial report in accordance with the DTR of the UK FCA.

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this Half-year financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Half-year report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half-year report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Peter Selvey

for and on behalf of KPMG Audit Plc

Chartered Accountants

Altius House

One North Fourth Street

Milton Keynes

MK9 1NE

29 August 2013

 

END

 

 

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