Interim Results
MOLINS PLC
6 September 1999
1999 INTERIM RESULTS
Molins PLC, the international specialist engineering company, announces its
results for the six months ended 30 June 1999.
1999 1998
Half Half Year
Year £m
£m
Turnover 59.1 101.4
Operating profit before exceptional items 1.9 5.0
Profit/(loss) before taxation 2.0 (11.3)
Net cash/(borrowings) 9.6 (13.7)
Earnings/(loss) per share 3.7p (43.0)p
Dividend per share 2.5p 6.5p
Peter Byrom, Chairman, commented:
'These results are in line with our expectations. The packaging machinery
businesses are developing well. The tobacco machinery business is undergoing
radical restructuring in response to very low levels of original equipment
demand and the consolidation and rationalisation of the major international
cigarette manufacturers. This process is not complete and we are taking
actions to improve the return on capital employed in the tobacco machinery
business.'
Enquiries:
Peter Byrom, Chairman Molins PLC Tel: 0171 638 9571
Peter Grant, Chief Executive
Issued by:
Margaret George Citigate Dewe Rogerson Tel: 0171 638 9571
CHAIRMAN'S STATEMENT
The Packaging Machinery division achieved growth in orders,
sales and profits. The tobacco machinery business faces a
difficult international market as a result of the consolidation
and restructuring of the cigarette manufacturers around the
world.
Six months turnover (continuing operations)
1999 1998
£m £m
Tobacco Machinery 35.8 52.2 -31.4%
Packaging Machinery 23.3 19.6 +18.9%
_________ _________
59.1 71.8 -17.7%
_________ _________
Tobacco Machinery
Demand for tobacco machinery has declined by more than 60% over
the last three years. The cost base of the Tobacco Machinery
division has already been reduced by some £50 million per annum
at a one-off cost of £35 million. The numbers employed will be
about 800 at the end of this year compared with 2,000 in June
1997. Internationally the demand for original equipment is very
low and in recent months the company has experienced a reduction
in spares demand from certain customers which themselves are
undergoing consolidation and rationalisation.
Restructuring is continuing within the provisions already made.
The transfer of the spares business from Peterborough to
Saunderton was effected at the end of last year and integration
into the Saunderton site has been a major focus in the first
half. Work is in progress to improve manufacturing efficiencies
at Saunderton. Key technical skills have been retained to
ensure that Molins is in a position to take advantage of any
upturn in demand.
We are developing the aftermarket opportunities arising from the
substantial installed base of Molins machinery throughout the
world. Molins intends to play a key role working in partnership
with its customers to prolong the life and enhance the
performance of existing machinery, supported by continuing
product development.
We are focused on providing our customers with world class
quality and service from our spares and service operations and
are re-organising our management structure and strengthening the
management team to achieve this.
Packaging Machinery
The increase in sales mainly reflects higher shipments at Langen
and Langenpac. The senior management teams of both Langen and
Langenpac have been strengthened in the first half of this year.
Both companies have full order books for the remainder of the
year and Langen won a major contract with a pharmaceutical group
for delivery next year. Sandiacre continued to show good growth
in North America but sales were slightly down overall due to
lower activity in Europe. Molins Food Machinery and the
International Technology Centre continued to make progress with
customer-funded, innovative teabag machinery projects.
Operating results
Operating profits of the Packaging Machinery division increased
from £1.4 million to £1.8 million (up 28%). Operating profits
of the Tobacco Machinery division declined from £3.0 million to
£0.1 million. Group profit before tax was £2.0 million,
compared with £3.9 million (before exceptional items) for
continuing operations in the first half of last year. Earnings
per share were 3.7p compared with 8.1p (before exceptional
items) last year.
Shareholders' funds and cash
Group shareholders' funds were £71.7 million at 30 June 1999
(1998: £67.1 million) compared with £70.4 million at 31 December
1998.
Net cash amounted to £9.6 million compared with £10.9 million at
31 December 1998.
The net cash inflow from operating activities in the first half
was £0.1 million (1998: outflow £1.3 million), after disbursing
£3.9 million (1998: £3.5 million) in respect of exceptional
restructuring costs charged against profits last year.
At the Annual General Meeting shareholders approved a resolution
giving the Company authority to purchase up to 10% of its own
share capital. During the first half year a total of 200,000
shares (0.56% of the shares in issue) were purchased by the
Company for cancellation, at an average cost of 126.5p per
share.
Post balance sheet event
On 26 August 1999 the Group entered into an agreement with its
former business, Langston, which was sold in 1998, to accept
early repayment, at a discount, of the subordinated loan note
which formed part of the proceeds of sale. At the same time a
number of other Langston related assets have been realised and
various obligations have been discharged. These transactions
have an overall cash benefit to the Group of some £4.0 million,
of which £2.5 million has since been received.
Dividend
The directors have declared an interim dividend of 2.5p per
ordinary share (1998:6.5p), the reduction being in line with
the reduced level of final dividend declared in March this year
and the stated intention to redress the balance between the
interim and final dividends. The interim dividend will be
payable on 28 October 1999 to shareholders on the register on 24
September 1999 and is covered 1.5 times by earnings.
Board
The Board was pleased to announce on 4 May 1999 the appointment
of Dr Amar Sabberwal as a non-executive director. A former
director of T&N plc, Dr Sabberwal brings a wealth of
international experience in manufacturing industry.
Outlook
Given the very low levels of demand for original equipment and
the softening in demand for spares in recent months, it will be
a challenge for the Tobacco Machinery division to achieve a
result in the second half of 1999 which is any better than that
achieved in the first half.
The benefits of the actions now being taken in the Tobacco
Machinery division to improve manufacturing efficiencies and the
return on capital employed will be seen progressively but will
have little impact on the financial results this year. In the
medium term, the actions being taken to reposition the tobacco
machinery business to serve its aftermarket are expected to
restore growth, even if demand for original equipment remains at
a low ebb for some time.
The flow of orders for the Packaging Machinery division
continues to be encouraging and the division is expected to show
good progress in 1999 compared with last year.
Peter Byrom
Chairman
6 September 1999
Group profit and loss account
6 months to 30 June 1998
6 months Before
to 30 June exceptional Exceptional
1999 items items Total
Note £m £m £m £m
Turnover
- Continuing operations 59.1 71.8 - 71.8
- Discontinued operations - 29.6 - 29.6
----- ----- ----- -----
1 59.1 101.4 - 101.4
===== ===== ===== =====
Operating profit/(loss)
- Continuing operations 1.9 4.4 (16.0) (11.6)
- Discontinued operations - 0.6 - 0.6
----- ----- ----- -----
1.9 5.0 (16.0) (11.0)
Profit on sale of
discontinued operations - - 0.2 0.2
Net interest
receivable/(payable) 0.1 (0.5) - (0.5)
----- ----- ----- -----
Profit/(loss)on ordinary
activities before taxation 2.0 4.5 (15.8) (11.3)
Taxation (0.7) (1.6) (2.4) (4.0)
----- ----- ----- -----
Profit/(loss) for the
period 1.3 2.9 (18.2) (15.3)
Dividends
(including non-equity) 8&9 (0.9) (2.3) - (2.3)
----- ----- ----- -----
Retained profit/(loss)
for the period 0.4 0.6 (18.2) (17.6)
===== ===== ===== =====
Earnings/(loss) per
ordinary share 7 3.7p 8.1p (51.1)p (43.0)p
----- ----- ----- -----
Dividend per
ordinary share 9 2.5p 6.5p - 6.5p
----- ----- ----- -----
12 months to 31 December 1998
Before
exceptional Exceptional
items items Total
Note £m £m £m
Turnover
- Continuing operations 140.6 - 140.6
- Discontinued operations 29.6 - 29.6
----- ----- -----
1 170.2 - 170.2
===== ===== =====
Operating profit/(loss)
- Continuing operations 8.5 (16.0) (7.5)
- Discontinued operations 0.6 - 0.6
----- ----- -----
9.1 (16.0) (6.9)
Profit on sale of
discontinued operations - 0.2 0.2
Net interest
receivable/(payable) 0.1 - 0.1
----- ----- -----
Profit/(loss) on ordinary
activities before taxation 9.2 (15.8) (6.6)
Taxation (3.4) (2.9) (6.3)
----- ----- -----
Profit/(loss) for the
period 5.8 (18.7) (12.9)
Dividends
(including non-equity) 8 & 9 (2.9) - (2.9)
----- ----- -----
Retained profit/(loss)
for the period 2.9 (18.7) (15.8)
===== ===== =====
Earnings/(loss) per
ordinary share 7 16.3p (52.5)p (36.2)p
----- ----- -----
Dividend per
ordinary share 9 8.0p - 8.0p
----- ----- -----
Group balance sheet
30 30 31
June June Dec
1999 1998 1998
£m £m £m
Fixed assets
Tangible assets 28.9 30.3 29.4
Investments 1.9 2.1 1.9
----- ----- -----
30.8 32.4 31.3
===== ===== =====
Current assets
Stocks 35.1 42.2 38.1
Debtors - due within one year 36.1 50.1 36.9
Debtors - due after more than one year 19.9 18.1 18.8
Business sale proceeds - cash - 24.4 -
Cash at bank and in hand 11.8 3.2 13.7
----- ----- -----
102.9 138.0 107.5
Creditors - amounts falling due
within one year
Borrowings (1.8) (6.5) (2.4)
Other creditors (53.1) (64.4) (55.4)
Proposed dividend (0.9) (2.3) (0.5)
----- ----- -----
(55.8) (73.2) (58.3)
----- ----- -----
Net current assets 47.1 64.8 49.2
----- ----- -----
Total assets less current
liabilities 77.9 97.2 80.5
Creditors - amounts falling due
after more than one year
Borrowings (0.4) (10.4) (0.4)
Other creditors (0.3) (0.3) (0.3)
----- ----- -----
(0.7) (10.7) (0.7)
Provisions for liabilities and
charges (5.5) (19.2) (9.2)
----- ----- -----
Net assets 71.7 67.3 70.6
===== ===== =====
Capital and reserves
Called up share capital 9.7 9.8 9.8
Share premium account 25.6 25.6 25.6
Capital redemption reserve 0.1 - -
Revaluation reserve 17.8 16.1 17.7
Profit and loss account 18.5 15.6 17.3
----- ----- -----
Shareholders' funds
(including non-equity interests) 71.7 67.1 70.4
Minority interests - 0.2 0.2
----- ----- -----
71.7 67.3 70.6
===== ===== =====
Net assets per share 200p 186p 196p
Group cash flow statement
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
Net cash inflow/(outflow) from
operating activities 0.1 (1.3) 5.6
Returns on investments and servicing
of finance
Net interest received/(paid) 0.1 (0.6) (0.2)
----- ----- -----
Net cash inflow/(outflow) for returns
on investments and servicing of finance 0.1 (0.6) (0.2)
Taxation (0.7) (1.4) (6.0)
Capital expenditure (net of sale proceeds) (0.4) 0.2 0.3
Acquisitions and disposals
Investment in joint venture - (0.3) (0.3)
Sale of businesses 0.2 - 24.4
----- ----- -----
Net cash inflow/(outflow) for
acquisitions and disposals 0.2 (0.3) 24.1
Equity dividends paid (0.6) (3.0) (5.4)
----- ----- -----
Net cash (outflow)/inflow before
management of liquid resources
and financing (1.3) (6.4) 18.4
Management of liquid resources 2.5 - (4.6)
Financing
Issue of ordinary share capital - 0.1 0.1
Redemption of ordinary share capital (0.1) - -
Decrease in loans and finance lease
obligations - (0.4) (14.6)
----- ----- -----
Net cash outflow from financing (0.1) (0.3) (14.5)
----- ----- -----
Increase/(decrease) in cash
in the period 1.1 (6.7) (0.7)
===== ===== =====
Closing net funds/(debt) 9.6 (13.7) 10.9
===== ===== =====
Reconciliation of operating
profit/(loss) to net cash flow
from operating activities
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
Operating profit/(loss) 1.9 (11.0) (6.9)
Depreciation 1.7 3.4 5.8
Movements in restructuring and
rationalisation provisions
New provisions created - 16.0 16.0
Cash movements (3.9) (3.5) (10.1)
Working capital movements 0.4 (6.2) 0.8
----- ----- -----
Net cash inflow/(outflow) from
operating activities 0.1 (1.3) 5.6
===== ===== =====
Reconciliation of net cash flow
to movement in net funds/(debt)
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
Increase/(decrease) in cash
in the period 1.1 (6.7) (0.7)
Cash (inflow)/outflow from
movement in liquid resources (2.5) - 4.6
Cash outflow from decrease in
debt and lease financing - 0.4 14.6
----- ----- -----
Change in net funds/(debt)
resulting from cash flows (1.4) (6.3) 18.5
Translation difference 0.1 (0.1) (0.3)
----- ----- -----
Movement in net funds/(debt)
in the period (1.3) (6.4) 18.2
Opening net funds/(debt) 10.9 (7.3) (7.3)
----- ----- -----
Closing net funds/(debt) 9.6 (13.7) 10.9
===== ===== =====
Reconciliation of movements
in shareholders funds
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
Profit/(loss) for the period 1.3 (15.3) (12.9)
Dividends (0.9) (2.3) (2.9)
----- ----- -----
Retained profit/(loss) for the period 0.4 (17.6) (15.8)
Property revaluation - - 1.4
Goodwill adjustment on sale of business - 1.9 1.9
Issue of ordinary share capital - 0.1 0.1
Redemption of ordinary share capital (0.3) - -
Other recognised gains and
losses for the period 1.2 (0.1) -
----- ----- -----
Net increase/(decrease) in
shareholders' funds 1.3 (15.7) (12.4)
Opening shareholders' funds 70.4 82.8 82.8
----- ----- -----
Closing shareholders' funds 71.7 67.1 70.4
===== ===== =====
Notes
1.Segmental analysis
Turnover
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
By activity
Continuing operations
Tobacco Machinery 35.8 52.2 100.2
Packaging Machinery 23.3 19.6 40.4
----- ----- -----
59.1 71.8 140.6
Discontinued operations - 29.6 29.6
----- ----- -----
59.1 101.4 170.2
Exceptional items - - -
----- ----- -----
59.1 101.4 170.2
===== ===== =====
1.Segmental analysis
Operating profit/(loss)
6 months to 6 months to 12 months to
30 June 30 June 31 Dec
1999 1998 1998
£m £m £m
By activity
Continuing operations
Tobacco Machinery 0.1 3.0 6.4
Packaging Machinery 1.8 1.4 2.1
----- ----- -----
1.9 4.4 8.5
Discontinued operations - 0.6 0.6
----- ----- -----
1.9 5.0 9.1
Exceptional items - (16.0) (16.0)
----- ----- -----
1.9 (11.0) (6.9)
===== ===== =====
2. At 30 June 1999, provisions for liabilities and charges include
£5.0m (December 1998: £8.9m, June 1998 £16.0m) in respect of
restructuring and rationalisation of the Tobacco Machinery division.
3. Post balance sheet event
On 26 August 1999 the Group entered into an agreement with its
former business, Langston, which was sold in 1998, to accept
early repayment, at a discount, of the subordinated loan note
which formed part of the proceeds of sale. At the same time a
number of other Langston related assets have been realised and
various obligations have been discharged. These transactions
have an overall cash benefit to the Group of some £4.0 million,
of which £2.5 million has already been received.
4. The results for the full year 1998 have been extracted from the
Group's full accounts for that year which included an
unqualified audit report and have been filed with the Registrar
of Companies.
5. The interim financial statements have been prepared on the
basis of the accounting policies set out in the Group's 1998
statutory accounts. In the half year results and the balance
sheet at 30 June 1999 FRS 12 and 14 have been adopted.
6. The financial information for the half year has not been
audited, although the auditors have carried out a review.
7. Earnings per ordinary share are based upon the profit after
taxation less the preference dividend and on a weighted average
of 35,571,549 shares in issue during the period (1998:35,571,021).
8. The preference dividend payable on 30 June 1999 amounted to
£27,000 (1998:£18,900).
9. The cost of the interim dividend of 2.5p per ordinary share
for the six months to 30 June 1999 will amount to £0.9m.
10. Year 2000
The Company has established a comprehensive Group-wide programme
to ensure that with reasonable certainty:
a) all products currently supplied by Group companies have been
tested and are year 2000 compliant when operated as designed
and specified;
b) all material management information systems are, or will be
in reasonable time, year 2000 compliant;
c) key suppliers have demonstrated their own commitment to
continuity of supply of goods and services and have given
reasonable assurances concerning compliance of products.
Progress in implementation is regularly reported to the Board,
and such progress is considered to be satisfactory.
However, given the unique nature and complexity of the problem
it is not possible for any organisation to be certain that there
will be no year 2000 disruption, even if its own systems are
compliant in all material respects.
A number of the Group's business systems have been upgraded
which, as well as dealing with year 2000 compliance, will also
have the benefit of increased functionality and efficiency.
Total expenditure in the six months ended 30 June 1999, relating
at least in part to year 2000 compliance, amounted to £1.1m
(full year 1998:£1.3m, first half year 1998:£0.7m) of which
£0.6m (full year 1998:£0.6m, first half year 1998:£0.3m)
represents capital expenditure.
11. The average US dollar exchange rate for the period to 30
June 1999 was US$1.61(1998:US$1.65) and the rate at 30 June 1999
was US$1.58 (1998:US$1.67). The rate at 31 December 1998 was
US$1.66.
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