Interim Results

RNS Number : 1547Y

Molins PLC

28 August 2009

 



28 August 2009                            FOR IMMEDIATE RELEASE

2009 HALF-YEAR ANNOUNCEMENT

Molins PLC, the international specialist engineering company, announces its results for the six months ended 

30 June 2009.

	6 months to 30 June 2009		6 months to 30 June 2008 (restated)#		12 months to 31 Dec 2008 (restated)#
Sales Underlying operating profit* Profit before tax - continuing operations Profit for the period Underlying earnings per share* Basic earnings per share Dividends per share Cash generated from/(used in) operations before reorganisation - continuing operations Net funds/(debt)	£42.2m £1.9m £0.6m £0.1m 6.0p 0.6p 2.5p £3.6m £2.6m		£45.2m £0.8m £2.1m £1.3m 1.5p 6.9p 2.5p £(3.4)m £(14.4)m		£91.5m £4.4m £8.8m £6.7m 16.1p 35.2p 5.0p - £(0.4)m

# Restated to reflect changes in accounting for tax in respect of the UK pension scheme

*  Continuing operations before net pension cost of £1.0m (30 June 2008: £1.7m credit; 31 December 2008: £3.4m credit) and exceptional charge of £0.2m (30 June 2008: £nil; 31 December 2008: £1.7m profit)

	Increase in underlying earnings
	Strong cash flow resulting in net funds of £2.6m
	Maintained interim dividend of 2.5p

Dick Hunter, Chief Executive, commented:

'Both the Tobacco Machinery and Scientific Services divisions have performed ahead of the Board's expectations in the period, although performance in the Packaging Machinery division was lower than expected.  The Group has delivered an improved underlying trading result in the first half compared with last year, with the expectation that performance in the full year will be more evenly split between the two halves than has been the pattern over the last few years.  Overall the Board's expectations remain in line with those at the beginning of the year.'

Enquiries:	Molins PLC Dick Hunter, Chief Executive;  David Cowen, Group Finance Director	Tel: [phone]
Issued by:	Citigate Dewe Rogerson Angharad Couch	Tel: [phone]

  Interim Management Report

Group structure and strategy

The Group operates through a number of businesses focused on providing high performance equipment and services for the production, packaging and analysis of consumer products. Molins Tobacco Machinery designs, manufactures, markets and services specialist machinery for the tobacco industry from its bases in the UK, US, Brazil, Singapore and Czech Republic. The Packaging Machinery division, which supplies engineering services and capital equipment, operates through four businesses based in the UK, the Netherlands and Canada. The Scientific Services division, with main facilities in the UK and US, comprises two businesses, one of which supplies process and quality control instruments for the tobacco industry and the other being an independent tobacco and smoke constituent analytical laboratory.

The Group remains focused on the organic development of these businesses, through targeted product development, excellence in customer service and ongoing operational efficiency improvements.

Operating results

Group sales in the six months to 30 June 2009 were £42.2m (2008: £45.2m).  The Group's net funds position improved in the period by £3.0m.  Underlying operating profit (continuing operations before net pension cost/credit and exceptional items) was £1.9m (2008: £0.8m). The Group incurred a net pension cost in the period of £1.0m (2008: £1.7m credit), as indicated at the beginning of the year, and also incurred net costs of £0.2m in respect of exceptional items and a loss from discontinued operations of £0.2m. Profit for the period was £0.1m (2008: £1.3m). Basic earnings per share amounted to 0.6p (2008: 6.9p) and underlying earnings per share (continuing operations before net pension cost/credit and exceptional items) amounted to 6.0p (2008: 1.5p).  

Tobacco Machinery

Sales in the period were £18.7m (2008: £17.2m). At constant exchange rates the increase in sales was £0.6m, with an increase in original and rebuild equipment sales more than compensating for a small and expected reduction in spare parts sales and other aftermarket services. Underlying operating profit in the period, before exceptional items, was £1.7m (2008: £0.4m). Order intake for new machines has been particularly strong in the period, with an order received for ten of the division's new Octave cigarette making machines, following successful completion of its full production trial. Delivery of the machines is scheduled over 2010 and 2011. Order intake at Molins do Brasil was lower than expected as a prospective large order for repair and overhaul work was delayed, and has yet to be received.  The other businesses within the division performed well in the period, and in particular the factory in the Czech Republic where the benefit of a strong loading and improved operating efficiency resulted in lower unit costs.  Divisional headcount has been reduced by 7% since the start of the year.

Packaging Machinery

Sales in the period were £13.3m (2008: £18.3m), reflecting reductions at ITCM and Langen Packaging in Canada, marginally offset by an increase in sales at Langen Packaging in the Netherlands. This reduction reflects the lower order book at the start of the year compared with twelve months earlier. The economic conditions continue to be challenging and are adversely affecting customers' requirements for capital goods and their speed of decision making, reflected in the order intake in the period which was at similar levels to last year.  The businesses have taken steps to reduce operating costs with a reduction in headcount of 15% since the start of the year. Further actions are planned to reduce costs.

The division returned an underlying operating loss, before exceptional items, in the period of £1.2m (2008: £0.2m).

Scientific Services

Sales in the period were £10.2m (2008: £9.7m), which at constant exchange rates represents a decline of 7%. Operating profit was £1.4m (2008: £0.6m).

Order intake at Cerulean continued to be strong, with good levels of activity across most geographic markets, in particular in China. Profit margins in Cerulean improved, with a favourable product mix and continued work with the supply chain helping to improve performance. Performance at Arista Laboratories was at similar levels to last year.  In June 2009 US legislation was passed placing the regulation of tobacco products with the US Food & Drug Administration (FDA).  The full consequences of this, in terms of the required testing regimes, will become fully understood as the FDA develops its regulatory system. However, it is expected that this change in regulation will lead to increased business opportunities for Arista in the medium term. 

Exceptional items

The Group incurred a net exceptional charge of £0.2m in the period. Reorganisation costs in the period of £0.5m were incurred, reflecting redundancies made within the Tobacco Machinery and Packaging Machinery divisions. In respect of property, the Group generated a net profit of £0.3m, from the profitable sale of a property in the Netherlands, partly offset by costs associated with the preparation for the move from the Saunderton site.

Discontinued operations

In the period the Group recorded a net charge of £0.2m, reflecting a dilapidations claim on its former site in Nottingham and an ongoing product performance claim for which Molins retains responsibility, relating to a former Group business.

Cash

The generation of net cash flow in the period of £2.5m, together with favourable exchange rate movements of £0.5m, resulted in net funds at 30 June 2009 of £2.6m (30 June 2008: £14.4m net debt; 31 December 2008: £0.4m net debt).  Net cash generated from operating activities was £2.8m, which benefited from a decrease in working capital of £0.8m, and is net of payments to the pension fund of £0.4m and reorganisation costs paid of £0.5m.  Capital and product development expenditure was £1.0m and proceeds from the sale of property were £1.5m.  Dividends were paid of £0.5m.

Property

Following the sale of the Company's former site at Saunderton in December 2008, notice was served to the Company in June 2009 for the tobacco machinery business that still operates from there to vacate the site within twelve months in accordance with the sale agreement. This resulted in a payment of £0.4m to the Company in June as compensation for the loss of the agreed rent-free occupation of the site until December 2011. A project is underway to find suitable alternative premises. The Company also received a final payment of £0.1m related to the sale of the site.

Following the move of premises by Langen Packaging in the Netherlands towards the end of 2008, its freehold site was sold in the period for a sum of £1.0m.

Pension valuations

The Group operates defined benefit schemes in the UK and US, and has adopted IAS 19 (revised) Employee benefits as its basis of accounting for these schemes. In the first six months of 2009, the net pension cost, excluding curtailment costs of £0.1m, arising from the defined benefit schemes was £1.0m, (2008: £1.7m credit). This cost is largely determined by conditions existing at 1 January 2009, and reflects the significant movements in the financial markets during 2008. The IAS 19 valuation of the UK scheme at 30 June 2009 shows a further deterioration, moving from a surplus of £2.7m before tax at 31 December 2008, to a deficit of £24.3m at the half-year. This deterioration has arisen largely from an actuarial loss in the period, with a decrease in the value of the scheme's assets to £277.2m (31 December 2008: £283.8m), and more significantly an increase in the value of the scheme's liabilities to £301.5m (31 December 2008: £281.1m), reflecting the impact of changes in actuarial assumptions. The net valuation of the US pension funds at 30 June 2009, with total assets of £12.0m, showed a deficit of £3.1m (31 December 2008: £3.8m).

The UK Fund is subject to a formal actuarial valuation as at 30 June 2009. This valuation, which will take a number of months to complete, will determine the level of funding that the Company will be committed to paying to the Fund to recover any deficit that may exist. Currently the Company makes payments to the Fund to cover the cost of on-going benefits being earned and to cover extra funding strains that may arise from any redundancies that are made.

Related party transactions

There has been no material change in the nature of related party transactions from those described in note 31 of the 2008 Annual Report and Accounts and these are also referred to in note 13 of this Half-Yearly Financial 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 6 and 7 of the Group's 2008 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 in respect of 2009 of 2.5p per ordinary share (2008: 2.5p), which will be paid on 8 October 2009 to shareholders on the register on 11 September 2009. Dividends paid to shareholders in the six months to 30 June 2009 were 2.5p per ordinary share (2008: 5p). 

Outlook

Both the Tobacco Machinery and Scientific Services divisions have performed ahead of the Board's expectations in the period, although performance in the Packaging Machinery division was lower than expected.  The Group has delivered an improved underlying trading result in the first half compared with last year, with the expectation that performance in the full year will be more evenly split between the two halves than has been the pattern over the last few years.  As stated at the time of the announcement of the 2008 full year results, given the general economic conditions, the effect of which is being particularly felt in the Packaging Machinery division, we expect Group sales to reduce in the current year, with cost base reductions and efficiency improvements mitigating the impact of the reduced sales.  Overall the Board's expectations remain in line with those at the beginning of the year.

Responsibility Statement of the Directors in respect of the Half-Yearly Financial 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

28 August 2009

Condensed Consolidated Income Statement

		6 months to 30 June 2009						12 months to 31 December 2008
	Notes	Before exceptional items £m	Exceptional items £m (note 6)	Total £m		6 months to 30 June 2008 (restated) £m		Before exceptional items (restated) £m	Exceptional items (restated) £m (note 6)	Total (restated) £m
Continuing operations Revenue	5	42.2	-	42.2		45.2		91.5	-	91.5
Cost of sales		(30.7)	(0.2)	(30.9)		(32.7)		(65.3)	(0.4)	(65.7)
Gross profit		11.5	(0.2)	11.3		12.5		26.2	(0.4)	25.8
Other operating income		-	0.4	0.4		0.1		0.2	3.1	3.3
Distribution expenses		(3.6)	-	(3.6)		(2.8)		(5.7)	(0.1)	(5.8)
Administrative expenses		(6.7)	(0.2)	(6.9)		(7.1)		(12.5)	(0.4)	(12.9)
Other operating expenses		(0.3)	(0.2)	(0.5)		(0.2)		(0.4)	(0.5)	(0.9)
Operating profit	5, 7	0.9	(0.2)	0.7		2.5		7.8	1.7	9.5
Financial income		-	-	-		0.1		0.1	-	0.1
Financial expenses		(0.1)	-	(0.1)		(0.5)		(0.8)	-	(0.8)
Net financing costs	5	(0.1)	-	(0.1)		(0.4)		(0.7)	-	(0.7)
Profit before tax	5	0.8	(0.2)	0.6		2.1		7.1	1.7	8.8
Taxation	8	(0.3)	-	(0.3)		(0.8)		(1.9)	(0.2)	(2.1)
Profit from continuing operations		0.5	(0.2)	0.3		1.3		5.2	1.5	6.7
Discontinued operations
Loss from discontinued operations	9	(0.2)	-	(0.2)		-		-	-	-
Profit for the period		0.3	(0.2)	0.1		1.3		5.2	1.5	6.7
Basic earnings per ordinary share	10			0.6p		6.9p				35.2p
Diluted earnings per ordinary share	10			0.6p		6.9p				35.2p
Continuing operations Basic earnings per ordinary share	10			1.7p		6.9p				35.2p
Diluted earnings per ordinary share	10			1.7p		6.9p				35.2p

Condensed Consolidated Statement of Comprehensive Income

	6 months to 30 June 2009 £m		6 months to 30 June 2008 (restated) £m		12 months to 31 Dec 2008 (restated) £m
Profit for the period	0.1		1.3		6.7
Other comprehensive income/(expense)
Currency translation movements arising on foreign currency net investments	(1.1)		1.5		3.3
Effective portion of changes in fair value of cash flow hedges	0.3		-		-
Net changes in fair value of cash flow hedges transferred to profit or loss	(0.1)		-		-
Actuarial losses	(26.1)		(22.9)		(32.1)
Tax on actuarial losses	7.5		8.1		11.4
Other comprehensive income/(expense) for the period	(19.5)		(13.3)		(17.4)
Total comprehensive income/(expense) for the period	(19.4)		(12.0)		(10.7)

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 2009 Balance at 1 January 2009	5.0	26.0	4.4	3.9	-	0.9	40.2
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- (1.1)	- -	- 0.2	0.1 (18.6)	0.1 (19.5)
Total comprehensive income/(expense) for the period	-	-	(1.1)	-	0.2	(18.5)	(19.4)
Dividends to shareholders Equity-settled share-based transactions (LTIP)	- -	- -	- -	- -	- -	(0.5) (0.2)	(0.5) (0.2)
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.7)	(0.7)
Balance at 30 June 2009	5.0	26.0	3.3	3.9	0.2	(18.3)	20.1
6 months to 30 June 2008 Balance at 1 January 2008	5.0	26.0	1.1	3.9	-	16.3	52.3
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- 1.5	- -	- -	1.3 (14.8)	1.3 (13.3)
Total comprehensive income/(expense) for the period	-	-	1.5	-	-	(13.5)	(12.0)
Dividends to shareholders Equity-settled share-based transactions (LTIP)	- -	- -	- -	- -	- -	(1.0) 0.2	(1.0) 0.2
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(0.8)	(0.8)
Balance at 30 June 2008	5.0	26.0	2.6	3.9	-	2.0	39.5
12 months to 31 December 2008 Balance at 1 January 2008	5.0	26.0	1.1	3.9	-	16.3	52.3
Profit for the period Other comprehensive income/(expense) for the period	- -	- -	- 3.3	- -	- -	6.7 (20.7)	6.7 (17.4)
Total comprehensive income/(expense) for the period	-	-	3.3	-	-	(14.0)	(10.7)
Dividends to shareholders Equity-settled share-based transactions (LTIP)	- -	- -	- -	- -	- -	(1.5) 0.1	(1.5) 0.1
Total transactions with owners, recorded directly in equity	-	-	-	-	-	(1.4)	(1.4)
Balance at 31 December 2008	5.0	26.0	4.4	3.9	-	0.9	40.2

Condensed Consolidated Statement of Financial Position

	Notes	30 June 2009 £m		30 June 2008 (restated) £m		31 Dec 2008 (restated) £m
Non-current assets Intangible assets Property, plant and equipment Other receivables Employee benefits Deferred tax assets	7	14.2 9.2 0.7 - 8.3		13.3 23.2 0.6 6.6 0.8		14.9 10.6 0.9 2.7 2.1
		32.4		44.5		31.2
Current assets Inventories Trade and other receivables  Current tax assets Cash and cash equivalents		16.6 17.6 0.2 10.2		15.8 19.2 0.4 2.7		17.1 22.2 0.6 7.2
		44.6		38.1		47.1
Current liabilities Bank overdrafts Trade and other payables Current tax liabilities Provisions		- (18.5) (0.8) (2.5)		(0.2) (20.4) (0.5) (1.6)		(0.3) (22.4) (0.8) (2.1)
		(21.8)		(22.7)		(25.6)
Net current assets		22.8		15.4		21.5
Total assets less current liabilities		55.2		59.9		52.7
Non-current liabilities Interest-bearing loans and borrowings Trade and other payables Employee benefits Deferred tax liabilities	7	(7.6) (0.1) (27.4) -		(16.9) - (0.5) (3.0)		(7.3) - (3.8) (1.4)
		(35.1)		(20.4)		(12.5)
Net assets	5	20.1		39.5		40.2
Equity Issued capital Share premium Reserves Retained earnings		5.0 26.0 7.4 (18.3)		5.0 26.0 6.5 2.0		5.0 26.0 8.3 0.9
Total equity		20.1		39.5		40.2

Condensed Consolidated Statement of Cash Flows

	Notes	6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m
Continuing operations Operating activities Operating profit Exceptional items included in operating profit Amortisation Depreciation Net pension cost/(credit) Other non-cash items Pension payments Working capital movements:   - decrease/(increase) in inventories   - decrease/(increase) in trade and other receivables   - decrease in trade and other payables   - increase in provisions		0.7 0.2 0.6 0.9 1.0 (0.2) (0.4) - 3.8 (3.3) 0.3		2.5 - 0.7 1.0 (1.7) 0.2 (0.4) 0.1 (0.7) (5.1) -		9.5 (1.7) 1.2 2.0 (3.4) 0.1 (0.9) (0.5) (1.5) (4.8) -
Cash generated from/(used in) operations before reorganisation Reorganisation costs paid Pension payment following sale of Saunderton site		3.6 (0.5) -		(3.4) (0.7) -		- (1.5) (1.0)
Cash generated from/(used in) operations Taxation paid		3.1 (0.3)		(4.1) (0.4)		(2.5) (0.7)
Net cash from operating activities		2.8		(4.5)		(3.2)
Investing activities Interest received Net proceeds from sale of Saunderton site Proceeds from sale of other property, plant and equipment Acquisition of property, plant and equipment Development expenditure		- 0.5 1.0 (0.5) (0.5)		0.1 - 0.1 (0.6) (0.7)		0.1 15.7 0.2 (1.2) (1.5)
Net cash from investing activities		0.5		(1.1)		13.3
Financing activities Interest paid Repayment of term loans Net increase/(decrease) against revolving facilities Dividends paid	11	(0.1) (0.2) 1.1 (0.5)		(0.5) (0.6) 7.4 (1.0)		(0.8) (0.6) (3.1) (1.5)
Net cash from financing activities		0.3		5.3		(6.0)
Discontinued operations Net cash from investing activities		(0.2)		(0.2)		(0.4)
Net cash from discontinued operations		(0.2)		(0.2)		(0.4)
Net increase/(decrease) in cash and cash equivalents	12	3.4		(0.5)		3.7
Cash and cash equivalents at 1 January		6.9		2.7		2.7
Effect of exchange rate fluctuations on cash held		(0.1)		0.3		0.5
Cash and cash equivalents at period end		10.2		2.5		6.9

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 Audit Plc, and their report is set out on page 16.  The comparative figures for the financial year ended 31 December 2008 are not the Group's statutory accounts as defined in section 435 of the Companies Act 2006.  The comparative figures for the financial year ended 31 December 2008 have been extracted from the Group's statutory accounts for that year (as restated).  The Group's statutory accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies.  The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.  The Group's statutory accounts for the year ended 31 December 2008 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 2009.

2.  Accounting policies

The condensed set of financial statements for the six months ended 30 June 2009 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 Services 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 2008.

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

Changes in accounting policy

Presentation of financial statements

The Group has applied IAS 1 (revised) Presentation of financial statements, which became effective as of 1 January 2009. The Group has presented in the condensed consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the condensed consolidated statement of comprehensive income. Comparative information has also been represented so that it also is in conformity with the revised standard.  

Determination and presentation of operating segments

The Group has applied IFRS 8 Operating segments, which became effective as of 1 January 2009. The Group has determined and presented operating segments based on the internal information that is provided to the Group's chief operating decision maker. Previously operating segments were determined and presented in accordance with IAS 14 Segment reporting. The identification of operating segments in accordance with IFRS 8 has not resulted in any change to the basis of segmentation that was reported in the financial statements of the Group for the year ended 31 December 2008.

Accounting for share-based transactions

The Group has applied the amendment to IFRS 2 Share-based payment, which became effective as of 1 January 2009. This amendment provides a definition of vesting conditions and specifies the accounting treatment for non-vesting conditions. The adoption of this amendment has not resulted in any material impact on the Group's condensed set of financial statements. 

Prior year adjustment

The Group has formally adopted IFRIC 14 IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction for the period ended 30 June 2009.  The interpretation of how to implement IFRIC 14 has changed, and consequently the results for the periods ended 30 June 2008 and 31 December 2008 have been restated and the Group's tax liability on the UK pension scheme surplus has been reclassified from employee benefits to deferred tax liabilities.

Previously the carrying value of the surplus of the UK pension scheme had been shown on the balance sheet net of withholding tax at 35% and the movement in withholding tax shown in the statement of recognised income and expense. Following the adoption of IFRIC 14 the Group is now accounting for deferred tax at 35% on the UK pension surplus with any movement in deferred tax shown in either the income statement or statement of comprehensive income in accordance with the requirements of IAS 12 Income taxes. 

The effect of these changes has been to increase the taxation charge in the condensed consolidated income statement for the 6 months to 30 June 2008 by £1.0m (12 months to 31 December 2008: £1.9m). These amounts were previously recognised through the statement of recognised income and expense. A withholding tax liability of £2.3m at 30 June 2008 (31 December 2008: £0.9m) has been reclassified from employee benefits to deferred tax liabilities.

3.  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 2008. 

4.  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 2008. 

5.  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						Operating profit/(loss)
	6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m			6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m
Continuing operations
Tobacco Machinery	18.7		17.2		34.9			1.7		0.4		2.8
Packaging Machinery	13.3		18.3		37.0			(1.2)		(0.2)		0.1
Scientific Services	10.2		9.7		19.6			1.4		0.6		1.5
	42.2		45.2		91.5
Underlying operating profit before net pension (cost)/credit and exceptional items								1.9		0.8		4.4
Net pension (cost)/credit (excluding curtailment costs)								(1.0)		1.7		3.4
Exceptional items								(0.2)		-		1.7
Operating profit								0.7		2.5		9.5
Net financing costs								(0.1)		(0.4)		(0.7)
Profit before tax								0.6		2.1		8.8

Net financing costs include 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 2008.

Segment assets	6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m
Tobacco Machinery Packaging Machinery Scientific Services	22.8 15.0 20.5		34.6 16.9 20.6		26.8 18.2 20.7
Total segment assets Unallocated assets	58.3 18.7		72.1 10.5		65.7 12.6
Total assets Total liabilities	77.0 (56.9)		82.6 (43.1)		78.3 (38.1)
Net assets	20.1		39.5		40.2

There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since 31 December 2008. 

6.  Exceptional items

The exceptional net charge of £0.2m in the 6 months ended 30 June 2009 includes costs of £0.5m related to reorganisations carried out during the period within the Tobacco Machinery division and the Packaging Machinery division, and costs of £0.1m in relation to the preparation for the relocation of the Tobacco Machinery business based at Saunderton. In addition, profit of £0.4m on the sale of a property in the Netherlands was realised in the period.

Net profit from exceptional items of £1.7m in 2008 includes profit of £3.1m on the sale of the Saunderton site. In addition, costs related to reorganisations carried out during 2008 within the Tobacco Machinery division and the Scientific Services division were £1.2m. Costs of £0.2m were also incurred in the Netherlands following the relocation of Langen Packaging to new premises.

7.  Employee benefits

The Group accounts for pensions under IAS 19 (revised) Employee benefits.  A formal valuation of the UK defined benefit pension scheme was carried out as at 30 June 2006 and its assumptions, modified as appropriate, have been applied in the condensed set of financial statements, updated to reflect actual experience and conditions at 30 June 2009.  Operating profit includes a net pension cost for the 6 months to 30 June 2009 of £1.1m (6 months to 30 June 2008: £1.7m credit; 12 months to 31 December 2008: £2.9m credit), comprising a £1.0m net cost (6 months to 30 June 2008: £1.7m credit; 12 months to 31 December 2008: £3.4m credit) in respect of ongoing benefits, and curtailment costs of £0.1m (6 months to 30 June 2008: £nil; 12 months to 31 December 2008: £0.5m) arising from redundancies in the period. 

Employee benefits include the net pension liability of the UK defined benefit pension scheme of £24.3m (30 June 2008: £6.6m surplus; 31 December 2008: £2.7m surplus) and the net pension liability of the US defined benefit pension schemes of £3.1m (30 June 2008: £0.5m; 31 December 2008: £3.8m), all figures before tax. The value of the assets held by the UK scheme at 30 June 2009 was £277.2m (31 December 2008: £283.8m) and the value of the liabilities increased to £301.5m (31 December 2008: £281.1m).  The value of the assets held by the US schemes at 30 June 2009 was £12.0m (31 December 2008: £13.4m).

8.  Taxation

The Group tax charge on continuing operations for the 6 months to 30 June 2009 amounted to £0.3m (6 months to 30 June 2008: £0.8m; 12 months to 31 December 2008: £2.1m) and is calculated as follows:

	6 months to 30 June 2009 £m		6 months to 30 June 2008 (restated) £m		12 months to 31 Dec 2008 (restated) £m
Tax charge on underlying profit Tax (credit)/charge on Group pension schemes (excluding curtailment costs) Tax charge on exceptional items	0.7 (0.4) -		0.1 0.7 -		0.6 1.3 0.2
Taxation	0.3		0.8		2.1

The Group's consolidated effective tax rate in respect of underlying profit for the 6 months to 30 June 2009 is 36% (6 months to 30 June 2008: 36%; 12 months to 31 December 2008: 17%). The tax charge on underlying profit for the 12 months to 31 December 2008 includes a credit of £0.5m relating to capital losses utilised in the year for which no deferred tax asset had previously been recognised.

The comparative figures for the periods ended 30 June 2008 and 31 December 2008 have been restated to include deferred tax in relation to the surplus of the UK pension scheme (see note 2).

9.  Discontinued operations

In the period the Group recorded a net charge of £0.2m in respect of a dilapidations claim on its former site in Nottingham and a claim that relates to a former Group business but for which Molins retains the responsibility.

10.  Earnings per share

Basic earnings per ordinary share is based upon the profit for the period and on a weighted average of 18,968,324 shares in issue during the period (6 months to 30 June 2008: 18,968,324; 12 months to 31 December 2008: 18,968,324).  The weighted average number of shares excludes shares held by the employee trust in respect of the long-term incentive plan.

Diluted earnings per ordinary share is based upon the profit for the period and on a diluted weighted average of 18,968,324 shares in issue during the period (6 months to 30 June 2008: 18,968,657; 12 months to 31 December 2008: 18,968,324).  The diluted weighted average number of shares includes the diluting effect, if any, of own shares held by the employee trust and of share options.

Underlying earnings per ordinary share, which is calculated on profit from continuing operations before net pension cost/credit and exceptional items, amounted to 6.0p for the 6 months to 30 June 2009 (6 months to 30 June 2008: 1.5p; 12 months to 31 December 2008: 16.1p).  The calculation of underlying earnings per ordinary share is based on underlying profit for the 6 months to 30 June 2009 of £1.1m (6 months to 30 June 2008: £0.3m; 12 months to 31 December 2008: £3.1m) and is calculated as follows:

	6 months to 30 June 2009 £m		6 months to 30 June 2008 (restated) £m		12 months to 31 Dec 2008 (restated) £m
Profit for the period Net pension cost/(credit) (net of tax) Exceptional items (net of tax) Loss from discontinued operations	0.1 0.6 0.2 0.2		1.3 (1.0) - -		6.7 (2.1) (1.5) -
Underlying earnings for the period	1.1		0.3		3.1

11. Dividends

	6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m
Dividends to shareholders paid in the period: Interim dividend (in lieu of final) for the year ended 31 December 2007 of 5p per share Interim dividend for the year ended 31 December 2008 of 2.5p per share Final dividend for the year ended 31 December 2008 of 2.5p per share	- - 0.5		1.0 - -		1.0 0.5 -
	0.5		1.0		1.5

An interim dividend for the year ending 31 December 2009 of 2.5p per ordinary share will be paid on 8 October 2009 to shareholders on the register on 11 September 2009.

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

	6 months to 30 June 2009 £m		6 months to 30 June 2008 £m		12 months to 31 Dec 2008 £m
Net increase/(decrease) in cash and cash equivalents Cash (outflow)/inflow from movement in borrowings	3.4 (0.9)		(0.5) (6.8)		3.7 3.7
Change in net funds/(debt) resulting from cash flows	2.5		(7.3)		7.4
Translation movements	0.5		0.5		(0.2)
Movement in net funds/(debt) in the period	3.0		(6.8)		7.2
Opening net debt	(0.4)		(7.6)		(7.6)
Closing net funds/(debt)	2.6		(14.4)		(0.4)
Analysis of net funds/(debt)
Cash and cash equivalents - current assets	10.2		2.7		7.2
Bank overdrafts - current liabilities	-		(0.2)		(0.3)
Interest-bearing loans and borrowings - non-current liabilities	(7.6)		(16.9)		(7.3)
Closing net funds/(debt)	2.6		(14.4)		(0.4)

13.  Related parties

The Group has related party relationships with its directors and with the UK and US pension schemes. There has been no material change in the nature of the related party transactions described in note 31 of the 2008 Annual Report and Accounts. 

14. Half-Yearly Financial Report

The Half-Yearly Financial Report will be sent to all shareholders in September 2009 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-Yearly Financial Report for the six months ended 30 June 2009 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Financial Position and Condensed Consolidated Statement of Cash Flows and the related explanatory notes.  We have read the other information contained in the Half-Yearly Financial 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 Services Authority ('the UK FSA').  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-Yearly Financial Report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the Half-Yearly Financial Report in accordance with the DTR of the UK FSA.

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-Yearly 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-Yearly Financial 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-Yearly Financial Report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

M Matthewman
for and on behalf of KPMG Audit Plc
Chartered Accountants
Milton Keynes

28 August 2009

 

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