Half Yearly Report

RNS Number : 1605Q

Molins PLC

28 August 2014

 



 

AIM: MLIN                                                                               

 

 

Molins PLC

International specialist technology and services group

Half-year report for the six months ended 30 June 2014

Key points

·      H1 performance broadly in line with management expectations although market conditions in the Middle East and eastern Europe adversely impacted the Tobacco Machinery division 

·      Sales of £40.0m (2013: £47.8m)

·      Underlying profit before tax of £0.6m (2013: £1.5m)

Statutory loss before tax of £0.1m (2013: profit of £0.7m)

·      Underlying earnings per share of 2.1p (2013: 6.5p)

Basic loss per share of 0.9p (2013: earnings of 3.5p)

·      Interim dividend per share maintained at 2.5p (2013: 2.5p)

·      Good progress in the Scientific Services and Packaging Machinery divisions; Tobacco Machinery division affected by order deferrals

·      Continuing focus on product development across all divisions

·      Ongoing penetration of target market sectors (including healthcare and pharmaceutical)

·      Ordinary shares admitted to trading on AIM in June

·      Despite some near term challenges, the Board continues to view prospects positively

Dick Hunter, Chief Executive, commented,

"Molins' performance in the first half of the year was broadly in line with management expectations with sales of £40.0m and underlying pre-tax profit of £0.6m.  The Scientific Services and Packaging Machinery divisions showed good progress, with sales in local currencies up by 4% and 9% respectively on the prior period, however the Tobacco Machinery division felt the impact of adverse market conditions.

As in previous years, the Group's full year trading performance will be significantly weighted towards the second half.  The Board is mindful of the strength of sterling and current market conditions for the Tobacco Machinery division.  The prospects for the Scientific Services and Packaging Machinery divisions continue to be encouraging.  We continue to pursue our growth initiatives in all divisions."

For further information, please contact:

Molins PLC Dick Hunter, Chief Executive David Cowen, Group Finance Director Panmure Gordon (UK) Limited (NOMAD)  Hugh Morgan / Peter Steel - Corporate Finance Tom Salvesen - Corporate Broking	Tel: [phone] (today)        [phone] Tel: [phone]
KTZ Communications Katie Tzouliadis / Deborah Walter	Tel: [phone]

HALF-YEAR MANAGEMENT REPORT

Introduction

Results for the first half of the financial year are broadly in line with management expectations.  The Scientific Services and Packaging Machinery divisions showed encouraging progress, with sales in local currencies up by 4% and 9% respectively on the prior period, however the Tobacco Machinery division saw market conditions toughen, with order deferrals. 

We continue to make good progress with product development across all three divisions and our ongoing strategy to build our presence in our chosen markets, which include nutrition, beverages, healthcare and pharmaceutical as well as tobacco, continues.

In June, we were pleased to see the Company's ordinary shares admitted to trading on AIM.  The move delivers a number of benefits to the Company and also supports our long-term strategy of combining organic growth with complementary acquisitions.

Financial results

Sales in the six months to 30 June 2014 totalled £40.0m (2013: £47.8m) and underlying operating profit before tax was £0.6m (2013: £1.5m).  After nil net finance expenses, the underlying profit before tax was £0.6m (2013: £1.5m).  The net tax charge on underlying profit was £0.2m (2013: £0.2m) resulting in an underlying profit for the period of £0.4m (2013: £1.3m).  Underlying earnings per share were 2.1p (2013: 6.5p).  These underlying results are stated before reorganisation costs of £0.2m (2013: £nil) and pension-related charges of £0.5m (2013: £0.8m).  Reorganisation costs in the period related to the Scientific Services and Tobacco Machinery divisions.  Pension-related costs comprised charges in respect of administering the Group's defined benefit pension schemes of £0.4m (2013: £0.4m) and financing expense on pension scheme balances of £0.1m (2013: £0.4m). 

On a statutory basis, the loss before tax was £0.1m (2013: £0.7m profit) which includes the benefit of a net tax credit of £0.1m (2013: £0.2m) in respect of non-underlying net charges.  The basic loss per share amounted to 0.9p (2013: earnings per share of 3.5p). 

Finances

Net debt at 30 June 2014 was £0.9m (30 June 2013: £5.6m net cash and 31 December 2013: £5.2m net cash).  Net cash outflow from operating activities in the first half of the year was £3.5m, which is net of an increase in working capital levels of £3.9m, deficit recovery payments to the UK defined benefit pension scheme of £0.9m and tax paid of £0.9m.  Net capital and product development expenditure was £2.2m.  Ordinary dividends of £0.6m were paid in the period.

Dividend

The Board is pleased to declare an interim dividend of 2.5p per ordinary share (2013: 2.5p), which will be paid on 9 October 2014 to ordinary shareholders registered at the close of business on 19 September 2014.  Dividends paid to shareholders in the six months to 30 June 2014 were 3.0p per ordinary share (2013: 3.0p).  

Operating performance

Scientific Services

Sales in first half increased to £11.7m (2013: £11.4m) and operating profit, before reorganisation costs, improved to £0.7m (2013: £0.1m).  The division, with its main facilities in the UK and USA, develops, supplies and supports process and quality control instruments and machinery for the tobacco industry (where it is the market leader) and other industrial sectors.  In addition, it provides analytical services, which test for the constituents of tobacco and smoke.  These services are used for regulatory, research and product development purposes. 

Sales of process and quality control instruments and machinery grew, with demand remaining strong for quality control instruments in our major markets and demand for cigarette smoke capture machines ahead of the prior period.  We launched a new instrument for the testing of e-cigarettes in the period and this has received strong market interest, resulting in initial sales.  Good progress is being made in extending the division's product range for a variety of industrial applications.  Sales of the division's newer products, for carton testing and air sampling, increased in the period.  As well as supplying standardised instruments, the division's strength in technical innovation enables it to engineer specialised equipment to meet specific customer requirements and the business continued to benefit from this type of product. 

Order intake for laboratory-based analytical services was slightly higher than the prior period, with work secured from a number of new customers, and increased activity with e-cigarette manufacturers.  However, as expected, overall sales were lower against the prior period which benefited from a large one-off sale in the early part of last year.  We have reduced costs in this area of the division's operations, which has helped to improve its performance compared with the prior period, and cost levels continue to be monitored given the continuing uncertainty over the timing for the introduction of new tobacco product testing regulations in the USA.  Nonetheless, the business is making progress in establishing new customer relationships.     

Packaging Machinery

While sales grew by 9% in local currencies, they were impacted by the strength of sterling resulting in a marginal reduction to £18.3m (2013: £18.4m).  Operating profit was maintained at £0.1m (2013: £0.1m).  The division supplies engineering services and capital equipment through its operations in the UK, the Netherlands, Canada and Singapore.

The division's UK based specialist engineering and machinery business continued to make good progress in its strategy to increase its customer base, especially in the pharmaceutical sector and in healthcare, and is well positioned to progress in a number of other FMCG markets.  This was reflected in first half sales which grew, benefiting from a strong opening order book.  The division's non-UK operations showed growth on a local currency basis but were impacted by the strength of sterling.  The strategy of introducing a more standardised range of products continues, with new "hygienic" variants of standard machines being well received by the market, resulting in initial orders.  The sales and service office in Singapore, which we opened last year, is performing well and will help to support the division's growth in the region.    

Tobacco Machinery

Sales in the period were £10.0m (2013: £18.0m) and operating loss, before reorganisation costs, was £0.2m (2013: £1.3m profit).  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.  The division delivers a significant portion of its machinery to countries in North Africa, the Middle East and South East Asia.  The division also provides spares and servicing to customers in more than 120 countries globally.

Results reflect adverse market conditions in some of our main markets, with the division experiencing reduced order demand and aftermarket activity.  In particular two large orders to the Middle East and eastern Europe, which were expected to have been delivered in the period, were deferred.  Appropriate cost control measures reflecting current market conditions have been implemented.  Looking ahead, the division continues with its product development initiatives, with the commercialisation of the Alto cigarette-making machine, and the launch of a new cigarette-packing machine expected to have a positive impact on activity over the medium-term.

Pension schemes

The Group is responsible for defined benefit pension schemes in the UK and the USA.  There are no active members and the schemes are accounted for in accordance with IAS 19 Employee benefits.

The IAS 19 valuation of the UK scheme at 30 June 2014 shows a deficit of £6.3m (£5.0m net of deferred tax), compared with a deficit of £2.5m (£2.0m net of deferred tax) at the beginning of the period.  The value of the scheme's assets at 30 June 2014 was £339.2m (31 December 2013: £337.9m), and the value of the scheme's liabilities increased to £345.5m (31 December 2013: £340.4m), reflecting lower interest rates.  The net valuation of the USA pension schemes at 30 June 2014, with total assets of £14.4m, showed a deficit of £3.6m (£2.2m net of deferred tax), compared with a deficit of £3.1m (£1.9m net of deferred tax) at the beginning of the period.  The aggregate expense of administering the pension schemes was £0.4m (2013: £0.4m).  The net financing expense on pension scheme balances was £0.1m (2013: £0.4m).

The UK scheme was subject to a formal actuarial valuation as at 30 June 2012, which showed a funding deficit as at that date of £53.0m.  The agreed level of deficit funding is £1.7m per annum (increasing by 2.1% per annum, except in respect of the payments for the year to 30 June 2016 which will increase by the percentage increase in ordinary dividends in respect of the Company's 2014 financial year if higher than 2.1%).  The deficit recovery plan will be formally reassessed following the next scheme specific funding valuation, which will be carried out as at 30 June 2015. 
 

Outlook

As in previous years, the Group's full year trading performance will be significantly weighted towards the second half.  The Board is mindful of the strength of sterling and current market conditions for the Tobacco Machinery division.  The prospects for the Scientific Services and Packaging Machinery divisions continue to be encouraging.

The Group continues to focus on its growth initiatives, including further development, both organically and acquisitively, within our core sectors.

Dick Hunter

Chief Executive

David Cowen

Group Finance Director

28 August 2014

CONDENSED CONSOLIDATED INCOME STATEMENT

		6 months to 30 June 2014				6 months to 30 June 2013
	Notes	Underlying £m	Non-underlying (note 5) £m	Total £m		Underlying £m	Non-underlying (note 5) £m	Total £m
Revenue Cost of sales	4	40.0 (28.5)	- -	40.0 (28.5)		47.8 (35.2)	- -	47.8 (35.2)
Gross profit Distribution expenses Administrative expenses Other operating expenses		11.5  (4.6) (6.1) (0.2)	- - (0.6) -	11.5  (4.6) (6.7) (0.2)		12.6  (4.2) (6.4) (0.5)	- - (0.4) -	12.6  (4.2) (6.8) (0.5)
Operating profit	4, 7	0.6	(0.6)	-		1.5	(0.4)	1.1
Financial income Financial expenses	6 6	0.1 (0.1)	- (0.1)	0.1 (0.2)		0.1 (0.1)	- (0.4)	0.1 (0.5)
Net financing expense	4, 6	-	(0.1)	(0.1)		-	(0.4)	(0.4)
(Loss)/profit before tax Taxation	4 8	0.6 (0.2)	(0.7) 0.1	(0.1) (0.1)		1.5 (0.2)	(0.8) 0.2	0.7 -
(Loss)/profit for the period		0.4	(0.6)	(0.2)		1.3	(0.6)	0.7
Basic (loss)/earnings per ordinary share Diluted (loss)/earnings per ordinary share	9 9			(0.9)p (0.9)p				3.5p 3.4p

CONDENSED CONSOLIDATED INCOME STATEMENT (CONTINUED)

			12 months to 31 December 2013
	Notes		Underlying £m	Non-underlying (note 5) £m	Total £m
Revenue Cost of sales	4		105.2 (76.6)	- -	105.2 (76.6)
Gross profit Distribution expenses Administrative expenses Other operating expenses			28.6  (8.5) (13.8) (0.8)	- - (0.9) -	28.6  (8.5) (14.7) (0.8)
Operating profit	4, 7		5.5	(0.9)	4.6
Financial income Financial expenses	6 6		0.2 (0.3)	- (0.7)	0.2 (1.0)
Net financing expense	4, 6		(0.1)	(0.7)	(0.8)
(Loss)/profit before tax Taxation	4 8		5.4 (0.8)	(1.6) 0.5	3.8 (0.3)
(Loss)/profit for the period			4.6	(1.1)	3.5
Basic (loss)/earnings per ordinary share Diluted (loss)/earnings per ordinary share	9 9				18.0p 17.6p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
(Loss)/profit for the period		(0.2)		0.7		3.5
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss Actuarial (losses)/gains Tax on items that will not be reclassified to profit or loss		(4.7) 1.0		15.9 (4.0)		13.5 (3.6)
		(3.7)		11.9		9.9
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 Tax on items that may be reclassified to profit or loss		(0.5) (0.3) 0.1		0.3 (0.1) -		(1.5) (0.8) 0.1
		(0.7)		0.2		(2.2)
Other comprehensive (expense)/income for the period		(4.4)		12.1		7.7
Total comprehensive (expense)/income for the period		(4.6)		12.8		11.2

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 2014 Balance at 1 January 2014	5.0	26.0	2.0	3.9	(0.5)	4.1	40.5
Loss for the period Other comprehensive expense for the period	- -	- -	- (0.5)	- -	- (0.2)	(0.2) (3.7)	(0.2) (4.4)
Total comprehensive expense for the period	-	-	(0.5)	-	(0.2)	(3.9)	(4.6)
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 2014	5.0	26.0	1.5	3.9	(0.7)	(0.3)	35.4
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
12 months to 31 December 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	- -	- -	- (1.5)	- -	- (0.7)	3.5 9.9	3.5 7.7
Total comprehensive income/(expense) for the period	-	-	(1.5)	-	(0.7)	13.4	11.2
Dividends to shareholders Equity-settled share-based transactions Purchase of own shares Tax on items recorded directly in equity	- - - -	- - - -	- - - -	- - - -	- - - -	(1.1) 0.2 (0.2) (0.1)	(1.1) 0.2 (0.2) (0.1)
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(1.2)	(1.2)
Balance at 31 December 2013	5.0	26.0	2.0	3.9	(0.5)	4.1	40.5

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Notes	30 June 2014 £m		30 June 2013 £m		31 Dec 2013 £m
Non-current assets Intangible assets Property, plant and equipment Investment property Employee benefits Deferred tax assets	7	15.7 10.9 0.8 - 4.3		14.9 11.8 0.8 0.8 3.7		15.2 11.2 0.8 - 3.2
		31.7		32.0		30.4
Current assets Inventories Trade and other receivables Current tax assets Cash and cash equivalents		22.9 21.4 0.1 8.5		19.5 21.6 0.1 14.0		18.5 24.3 - 15.0
		52.9		55.2		57.8
Current liabilities Trade and other payables Current tax liabilities Provisions		(28.0) (0.5) (1.4)		(28.2) (1.1) (1.5)		(29.5) (1.2) (1.6)
		(29.9)		(30.8)		(32.3)
Net current assets		23.0		24.4		25.5
Total assets less current liabilities		54.7		56.4		55.9
Non-current liabilities Interest-bearing loans and borrowings Employee benefits Deferred tax liabilities	7	(9.4) (9.9) -		(8.4) (4.4) (0.8)		(9.8) (5.6) -
		(19.3)		(13.6)		(15.4)
Net assets	4	35.4		42.8		40.5
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 4.7 (0.3)		5.0 26.0 7.8 4.0		5.0 26.0 5.4 4.1
Total equity		35.4		42.8		40.5

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Notes	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
Operating activities Operating profit Non-underlying items included in operating profit Amortisation Depreciation Other non-cash items Defined benefit pension payments Working capital movements:   - increase in inventories   - decrease/(increase) in trade and other receivables   - (decrease)/increase in trade and other payables   - (decrease)/increase in provisions		- 0.6 0.6 1.0 0.2 (0.9) (4.7) 1.9 (0.9) (0.2)		1.1 0.4 0.7 0.9 0.1 (0.6) (1.2) 0.6 0.4 0.2		4.6 0.9 1.4 1.8 0.2 (1.5) (1.0) (3.4) 2.4 0.4
Cash (used in)/generated from operations before reorganisation   Reorganisation costs paid	5	(2.4) (0.2)		2.6 (0.6)		5.8 (0.7)
Cash flows from operations   Taxation paid		(2.6) (0.9)		2.0 (0.7)		5.1 (1.0)
Cash flows from operating activities		(3.5)		1.3		4.1
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) - (1.3)		0.1 0.1 (1.0) (0.7) (0.8)		0.2 0.2 (1.9) (0.7) (2.2)
Cash flows from investing activities		(2.1)		(2.3)		(4.4)
Financing activities Interest paid Purchase of own shares Net (decrease)/increase against revolving facilities Dividends paid	10	(0.1) - (0.2) (0.6)		(0.1) - 2.3 (0.6)		(0.3) (0.2) 4.2 (1.1)
Cash flows from financing activities		(0.9)		1.6		2.6
Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held	11	(6.5) 15.0 -		0.6 13.3 0.1		2.3 13.3 (0.6)
Cash and cash equivalents at period end		8.5		14.0		15.0

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 auditors, KPMG LLP, and their report is set out after the Notes.  The comparative information for the year ended 31 December 2013 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 (which for that period was KPMG Audit Plc, a subsidiary of KPMG LLP) 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 2013 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 28 August 2014.

2.  Basis of preparation

(a) Statement of compliance

The condensed set of financial statements for the six months ended 30 June 2014 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU.  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 2013.

(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 2013.

3.  Significant accounting policies

The accounting policies, presentation and methods of computation applied by the Group in this condensed set of financial statements are the same as those applied in the Group's latest audited financial statements.

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 Half-year management report. 

	Revenue						Profit/(loss)
	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m			6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
Scientific Services	11.7		11.4		26.5			0.7		0.1		1.1
Packaging Machinery	18.3		18.4		44.3			0.1		0.1		1.5
Tobacco Machinery	10.0		18.0		34.4			(0.2)		1.3		2.9
	40.0		47.8		105.2
Underlying operating profit								0.6		1.5		5.5
Non-underlying items included in operating profit								(0.6)		(0.4)		(0.9)
Operating profit								-		1.1		4.6
Net financing expense								(0.1)		(0.4)		(0.8)
(Loss)/profit before tax								(0.1)		0.7		3.8

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 2013.

Segment assets	30 June 2014 £m		30 June 2013 £m		31 Dec 2013 £m
Scientific Services Packaging Machinery Tobacco Machinery	14.9 21.6 26.6		12.9 20.9 23.7		14.0 22.5 23.8
Total segment assets Total segment liabilities	63.1 (27.7)		57.5 (27.4)		60.3 (28.9)
Segment net assets - continuing operations	35.4		30.1		31.4
Net liabilities - discontinued operations	(0.1)		(0.2)		(0.1)
Unallocated net assets	0.1		12.9		9.2
Total net assets	35.4		42.8		40.5

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2013.

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 from the assets of the 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 2014, charges in respect of reorganisations of £0.2m (6 months to 30 June 2013: £nil; 12 months to 31 December 2013: £0.1m) were incurred.  In the period to 30 June 2014 cash payments of £0.2m (6 months to 30 June 2013: £0.6m; 12 months to 31 December 2013: £0.7m) were made in respect of reorganisations. 

6.  Net financing expense

	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £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	(0.1) (0.1) -		(0.4) (0.1) -		(0.7) (0.2) (0.1)
	(0.2)		(0.5)		(1.0)
Net financing expense	(0.1)		(0.4)		(0.8)

7.  Employee benefits

The Group accounts for pensions under IAS 19 Employee benefits.  A formal valuation of the UK defined benefit pension scheme was carried out as at 30 June 2012, and formal valuations of the USA defined benefit schemes were carried out as at 1 January 2014, 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 2014.  Profit before tax for the 6 months to 30 June 2014 includes charges in respect of IAS 19 pension schemes administration costs of £0.4m (6 months to 30 June 2013: £0.4m; 12 months to 31 December 2013: £0.8m) and financing expense on pension scheme balances of £0.1m (6 months to 30 June 2013: £0.4m; 12 months to     31 December 2013: £0.7m).  Payments to the Group's UK defined benefit scheme in the period of £0.9m were in respect of the agreed deficit recovery plan.

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

	30 June 2014 £m		30 June 2013 £m		31 Dec 2013 £m
UK scheme Fair value of assets Present value of defined benefit obligations	339.2 (345.5)		333.8 (333.0)		337.9 (340.4)
Defined benefit (liability)/asset	(6.3)		0.8		(2.5)
USA schemes Fair value of assets Present value of defined benefit obligations	14.4 (18.0)		15.2 (19.6)		14.3 (17.4)
Defined benefit liability	(3.6)		(4.4)		(3.1)

 8.  Taxation

The tax charge for the 6 months to 30 June 2014 amounted to £0.1m (6 months to 30 June 2013: £nil; 12 months to 31 December 2013: £0.3m) and is calculated as follows:

	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
Tax charge on underlying profit Tax credit on non-underlying items	0.2 (0.1)		0.2 (0.2)		0.8 (0.5)
Taxation	0.1		-		0.3

The Group's consolidated effective tax rate in respect of underlying profit for the 6 months to 30 June 2014 is 34% (6 months to 30 June 2013: 11%; 12 months to 31 December 2013: 14%).

The UK Finance Bill 2013 was substantively enacted on 2 July 2013.  The Bill introduced a 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.  The deferred tax asset at 30 June 2014 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

9.  Earnings per share

Basic earnings per ordinary share is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period excluding shares held by the employee trust in respect of the Company's long-term incentive arrangements.  For diluted earnings per ordinary share, the weighted average number of shares includes the diluting effect, if any, of own shares held by that employee trust.

	6 months to 30 June 2014		6 months to 30 June 2013		12 months to 31 Dec 2013
Basic EPS - weighted average number of ordinary shares Diluting effect of shares held by the employee trust	19,489,824 -		19,326,857 529,469		19,399,424 448,065
Diluted EPS - adjusted weighted average number of ordinary shares¹	19,489,824		19,856,326		19,847,489

¹ In the 6 months to 30 June 2014 the effect of dilution would be to decrease the loss per ordinary share and is therefore excluded from the dilution calculation.  The adjusted weighted average number of ordinary shares for the diluted underlying EPS calculation (see below) in the 6 months to 30 June 2014 is 20,015,507.

Underlying earnings per ordinary share and diluted underlying earnings per ordinary share, which are calculated on profit before non-underlying items, for the 6 months to 30 June 2014 amounted to 2.1p (6 months to 30 June 2013: 6.5p; 12 months to 31 December 2013: 23.9p) and 2.0p (6 months to 30 June 2013: 6.4p; 12 months to 31 December 2013: 23.4p) respectively.  

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 2014 of £0.4m (6 months to 30 June 2013: £1.3m; 12 months to 31 December 2013: £4.6m) which is calculated as follows:

	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
(Loss)/profit for the period Non-underlying items (net of tax)	(0.2) 0.6		0.7 0.6		3.5 1.1
Underlying profit for the period	0.4		1.3		4.6

10.  Dividends

	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
Dividends to shareholders paid in the period Final dividend for the year ended 31 December 2012 of 3.0p per share Interim dividend for the year ended 31 December 2013 of 2.5p per share Final dividend for the year ended 31 December 2013 of 3.0p per share	- - 0.6		0.6 - -		0.6 0.5 -
	0.6		0.6		1.1

An interim dividend for the year ending 31 December 2014 of 2.5p per ordinary share will be paid on 9 October 2014 to ordinary shareholders registered at the close of business on 19 September 2014.

11.  Reconciliation of net cash flow to movement in net (debt)/funds

	6 months to 30 June 2014 £m		6 months to 30 June 2013 £m		12 months to 31 Dec 2013 £m
Net (decrease)/increase in cash and cash equivalents Cash inflow/(outflow) from movement in borrowings	(6.5) 0.2		0.6 (2.3)		2.3 (4.2)
Change in net funds resulting from cash flows	(6.3)		(1.7)		(1.9)
Translation movements	0.2		(0.1)		(0.3)
Movement in net funds in the period	(6.1)		(1.8)		(2.2)
Opening net funds	5.2		7.4		7.4
Closing net (debt)/funds	(0.9)		5.6		5.2
Analysis of net (debt)/funds
Cash and cash equivalents - current assets	8.5		14.0		15.0
Interest-bearing loans and borrowings - non-current liabilities	(9.4)		(8.4)		(9.8)
Closing net (debt)/funds	(0.9)		5.6		5.2

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 2013.

At 1 January 2014 and 30 June 2014 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 2014 £m		30 June 2013 £m		31 Dec 2013 £m
Financial assets Derivative instruments in designated hedge accounting relationship Loans and receivables (including cash and cash equivalents)	0.1 23.4		- 28.1		0.1 32.8
	23.5		28.1		32.9
Financial liabilities Derivative instruments in designated hedge accounting relationship Amortised cost	0.4 37.0		0.4 36.2		0.8 38.5
	37.4		36.6		39.3

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 defined benefit pension schemes.  There has been no material change in the nature of the related party transactions described in note 30 of the 2013 Annual Report and Accounts.

14.  Principal risks and uncertainties

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 16 and 17 of the Group's 2013 Annual Report and Accounts.

15.  Half-year report

The Half-year report will be sent to all shareholders on 5 September 2014 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 2014 which comprises the condensed consolidated income statement, 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.  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 report in accordance with the AIM Rules. 

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 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 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules. 

Peter Selvey

for and on behalf of KPMG LLP

Chartered Accountants

Altius House

One North Fourth Street

Milton Keynes

MK9 1NE

28 August 2014

 

END

 

 

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