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Low & Bonar PLC (LWB)

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Tuesday 05 February, 2013

Low & Bonar PLC

Final Results

RNS Number : 0963X
Low & Bonar PLC
05 February 2013
 



Low & Bonar PLC

 

Preliminary Results for the year ended 30 November 2012

 

GOOD TRADING PERFORMANCE

CONFIDENT OF CONTINUED PROGRESS

 

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group, today announces its preliminary results for the year ended 30 November 2012.

 

Highlights

Continuing operations

 


2012

2011

Actual

Constant currency(1)

Revenue

£380.5m

£388.7m

-2.1%

+2.6%

Operating margin (2)

8.0%

7.9%

+10bps


PBTA (2)

£ 24.5m

£23.4m

+4.7%

+10.7%

Profit before taxation (statutory) (3)

£6.1m

£23.4m



Adjusted earnings per share (2)

6.3p

6.0p

+5.2%

+11.6%

Dividend per share

2.4p

2.1p

+14.3%


Return on capital (4)

17.2%

16.8%

+40bps


                                                                                                       

·      Another year of profit growth, PBTA up 10.7% on a constant currency basis

·      Growth in underlying sales and margin improvement sustained; enabled by strong niche market positions

·      Invested £19.5m to accelerate future growth whilst continuing to reduce gearing

·      Earnings per share up 5%, full year dividend increased by 14% to 2.4p (2.6x cover)

·      Actions taken to reduce losses in the Yarns business, £11.2m provided for asset impairment

·      Confident of further progress underpinned by recent investments and increased focus outside of Europe

 

(1)      Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)      Profit before tax, amortisation and non-recurring items

(3)      After amortisation and non-recurring items

(4)      Last 12 months operating profit as a percentage of operating capital employed

 

Martin Flower, Chairman, said:

 

"These are good results during a period of continued macroeconomic challenge, particularly within Europe, providing further evidence of the quality and resilience of our business and its growth prospects.

 

"To enhance these growth prospects, the Group has made significant investments in reorganising its activities, building capability and extending capacity in attractive segments and geographies. These investments will begin to pay back in the coming year and further underpin the Board's confidence in a continuation of cash generative, profitable growth. The year has started in line with our expectations."

 

5 February 2013

 

 

 

 

 

For further information, please contact:

 

Low & Bonar PLC

020 7535 3180

Steve Good, Group Chief Executive


Mike Holt, Group Finance Director




College Hill

020 7457 2020

Matt Smallwood/ Helen Tarbet


 


Chairman's Statement

 

Low & Bonar continued to perform well during 2012 and I am pleased to report on another year of good progress.

 

Underlying profit before tax on a constant currency basis increased by 10.7% on revenues up 2.6% on last year.  This strong performance has been achieved against a background of macroeconomic weakness and uncertainty, particularly within Europe.  Demand for our products remains robust and reflects the diversity and strength of our niche market positions and products.

 

Profit before tax, amortisation and non-recurring items rose 4.7% to £24.5m (2011: £23.4m).  Earnings per share were 6.3 pence (2011: 6.0 pence), an increase of 5.2%.  Statutory profit before tax from continuing operations was £6.1m (2011: £23.4m) after non-recurring charges of £1.4m (2011: £5.7m credit) and an impairment charge of £11.2m in respect of the Yarns business.  Non-recurring charges principally relate to acquisition costs and the reorganisation of our newly formed Bonar business.

 

Investing to drive future growth

During the year, the Group has made further investments totalling £19.5m to support management initiatives for future growth.

 

To drive an acceleration in our growth outside of Europe, we have merged Colbond and Fabrics, the two major businesses within the Performance Technical Textiles division, to create a new division called Bonar. The changes give greater clarity, focus and accountability for international sales growth and development. Dedicated market teams will focus on leveraging the complete portfolio of products and technologies within the enlarged division.

 

The Group invested £13.2m (2011: £12.1m) in property, plant and equipment during the year to support volume growth in key markets and has already approved £2.6m of spend for 2013.  In addition, the Group completed its investment in a joint venture, Bonar Natpet, with National Petrochemical Industrial Company (NATPET) in Saudi Arabia.  Investment for the year was £3.6m making a total investment of £5.3m.  The joint venture, which will supply geotextiles to the fast growing Middle East civil engineering market, is expected to be commissioned during the second quarter of 2013.

 

On 1 March 2012, the Group purchased the business of Xero Flor International GmbH ("Xeroflor") for €6.0m. Xeroflor is an innovative business with a strong position in the fast growing green roofing market. The business has performed well and has added £0.5m to net profit during the year. Going forward, we expect that the sales and marketing resources within Bonar will enable profitable sales growth and build on existing components made and sold in this market.

 

Despite all of this investment activity, year-end net debt was further reduced to £82.6m (2011: £85.3m).

 

Yarns

Lower sales in the depressed artificial grass yarns market led to losses within our small Yarns business, despite recent cost reduction actions. As a result, the Group has taken further action to reduce costs and is working on additional measures to improve performance.  However, after assessing the potential range of future cash flows within the Yarns business, we have decided to provide £11.2m for the impairment of assets.

 

Increased Dividend

To reflect the Board's continuing confidence in the Group's future, we are proposing a final dividend payment of 1.6 pence per share (2011: 1.4 pence).  Subject to shareholders' approval at the Annual General Meeting in April, the dividend will be paid on 18 April 2013 to members registered as of 22 March 2013.  The proposed full year dividend of 2.4 pence per share (2011: 2.1 pence per share) is covered 2.6 times (2011: 2.8 times) by earnings before amortisation and non-recurring items.

 

People

At the heart of our business lie our people.  Our current and future success rests entirely with them.  I believe that Low & Bonar has a highly skilled and motivated team which is ambitious to achieve further success.  I would like to take this opportunity to thank them for their hard work during the year.

 

Folkert Blaisse will be stepping down after six years as a non-executive director of the Company once a new non-executive director has been appointed, which we expect to be at the end of April 2013.  I thank Folkert for his valuable support to the Board during a period of significant change.

 

Outlook

These are good results during a period of continued macroeconomic challenge, particularly within Europe, providing further evidence of the quality and resilience of our business and its growth prospects.

 

To enhance these growth prospects, the Group has made significant investments in reorganising activities, building capability and extending capacity in attractive segments and geographies. These investments will begin to pay back in the coming year and further underpin the Board's confidence in a continuation of cash generative, profitable growth.  The year has started in line with our expectations.

 

Martin Flower

5 February 2013

 

 

Business Review

 

Low & Bonar PLC is an international performance materials group using proprietary technologies to engineer polymers for a wide range of applications in niche industrial markets.

 

Sustaining growth in underlying sales and margin improvement

 


2012

£m

2011

£m

Actual

Constant currency(1)

 

Revenues from external customers





Bonar (2)

238.7

238.7

-

+4.5%

Technical Coated Fabrics

115.3

119.4

-3.4%

+2.5%

Yarns (3)

  26.5

  30.6

-13.4%

-11.8%


380.5

388.7

  -2.1%

  +2.6%

 

Group operating margin (4)

 

8.0%

 

7.9%



                                                                                                                               

(1)   Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)   Formerly Performance Technical Textiles

(3)   Previously reported within Performance Technical Textiles

(4)   Before amortisation and non-recurring items

 

Underlying sales grew by 2.6% with Bonar and Technical Coated Fabrics increasing by 4.5% and 2.5% respectively. Yarns sales declined by 11.8%. Volumes for the year increased by 0.8%; average prices were 1.8% higher. In more difficult European markets, which represent some 70% of Group sales, it is pleasing to report another year of underlying sales growth. A combination of positive growth drivers in key segments, supported by market share growth, meant that we were able to offset the impact of a softening in demand in more cyclical segments.

 

Group operating margin improved to 8.0% (2011: 7.9%) despite a significant deterioration in the performance of the Yarns business and investments to build organisational capability across the Group. Excluding Yarns, margins for the remainder of the Group increased to 9.1% from 8.5% last year, based largely on higher average selling prices and more effective procurement. Raw material prices were volatile during the year; however, average prices were broadly comparable with last year's levels. This further improvement in margins continues to reflect the strength of the Group's market positions and its ability to manage sales pricing in volatile raw material polymer markets.

 

Reorganising and investing to drive future growth

The Group has continued to make investments to accelerate growth, increase capability and create a stronger business. During the year, there have been three areas of focus:  investing in people and organisational change; capital expenditure; and bolt-on acquisitions to expand either the Group's product range or its geographic reach.

 

The Group has implemented an organisational change and merged the two major businesses within the Performance Technical Textiles division, Colbond and Fabrics. The overlaps between these two businesses are significant and together they have greater scope and scale to grow globally. The enlarged business is being organised regionally with global business roles directing overall strategy for our key Civil Engineering, Flooring and Building & Industrial markets. In January 2013, the merged business was re-branded 'Bonar'. Bonar has a clear opportunity to leverage its successful European business and expertise in other regions and this organisational change is designed to accelerate this development and put it on a clear path to globalisation. At the same time, the Group made leadership changes within the Technical Coated Fabrics division to accelerate performance improvement. Across the Group we have been building organisational capabilities in support of these initiatives, with a consequent increase in the cost base. To drive growth and build a more market driven Group with global reach, the major areas of investment have been in sales, marketing and strategy development. Further recruitment is underway and we expect investments to begin to pay back in the coming year. We have also continued to invest and increase effectiveness in procurement and health and safety, both of which are already benefiting the Group.

 

We have increased capital investment to achieve capacity and capability extensions in target growth markets, most notably to support our US flooring business. Full year expenditure was £13.2m. In addition, we invested £3.6m in our Saudi Arabian joint venture which will provide a strong platform to access the fast growing civil engineering market in the Middle East.

 

On 2 March 2012, we announced the acquisition of Xeroflor for €6.0m. Xeroflor is an innovative business with a strong position in the fast growing green roofing market. Its core activity is the design and supply of value-added pre-vegetated mats used in green roof construction in both new and refurbished buildings. The Group sells a range of components to the green roofing market that are complementary to Xeroflor's designs and the acquisition has significantly improved the Group's access to this attractive niche in the building products market. The combination of Xeroflor's considerable expertise and the Group's scale and reach is supporting the next phase in the expansion of this sector. Xeroflor has been successfully integrated and is performing in line with our expectations.

 

Progress against medium term targets   

During the last three years, the Group has made significant financial progress since setting out medium term targets for growth and improvements in the quality of earnings. Underlying sales have grown by 33% since 2009, significantly higher than the 1.5 - 2.0 x GDP target.  Over the three year period operating margin has increased to 8.0% (9.1% ex-Yarns) from 7.3% compared to a target of 10% and return on capital employed has improved to 17.2% from 11.4%, compared to a medium term target of 17%.  As a result, profits have increased by 55% since 2009, and with strong cash conversion the Group has been able to fund growth investments and reinstate and grow dividends, whilst significantly reducing total net debt.

 

This year the Group has invested significantly in the capabilities and capacities required to build a global performance materials business.  It is therefore an appropriate time to update the Group's medium term targets.  The organic growth target is being increased and will now be related to Eurozone growth, our dominant regional market. The new target is to grow at an annual rate at least 3% greater than the growth in Eurozone GDP. This reflects the Group's continued confidence in being able to grow faster than the economies within its core geographic region and a continued commitment to market led innovation.  In addition, we will continue to invest in our business outside of Europe to enhance our growth prospects.

 

The quality of earnings targets will not change:  operating margins of 10% and return on capital of 17%.  The return on capital target is not being increased from the current 17%.  The Group's aim is to build a bigger and more global Group with at least 17% return on capital.

 

The Group has the ambition, opportunity and resolve to build a high quality global performance materials business.  The updated targets are, in our view, good benchmarks to track our progress in the medium term.

 

 

Bonar

Our Bonar division (formerly Performance Technical Textiles) supplies products such as geosynthetics, carpet tile backing, agrotextiles and construction fibres to the civil engineering, flooring, transport, industrial and construction sectors. 

 

 


2012

£m

2011

£m

Actual

Constant currency(1)

Revenue

£238.7m

     £238.7m

-

+4.5%

Operating profit (2)

£25.0m

      £22.8m

+9.6%

+14.7%

Operating margin (2)

10.5%

           9.6%



 

(1)        Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)        Before amortisation and non-recurring items

 

Underlying sales grew by 4.5%.  Reported sales were flat year on year as average exchange rates used to translate overseas sales into sterling had a significant adverse impact compared to last year's rates. Operating margins increased 90bps to 10.5%. Average selling prices were approximately 1.7% higher in the division and, whilst raw material costs were volatile during the year, they were marginally lower than last year. The key development this year has been the merger of the Colbond and Fabrics organisations to form 'Bonar'. The first phase of the integration is almost complete and the division is now moving on to the second phase where activities will be regionalised. It is very pleasing that, during a year when a great deal of management time has been committed to the integration, operating profits, on a constant currency basis, improved by 14.7%. The division has added costs this year to augment capabilities, particularly in sales and marketing, and this will also be a feature of the coming year as it invests in resources to build a more effective, globally present business.

 

Underlying sales to the Building Products, Flooring and Industrial sectors, which together represent more than 50% of sales, all grew strongly. Building Products advanced 15%, including a maiden contribution from the Xeroflor acquisition which contributed approximately half of this improvement. Growth in the USA was strong, supported by a modest recovery in the residential housing market and new product introductions. Sales in Europe were mixed. A strong performance in niche sectors, notably green roofing, more than offset a softening in demand for more traditional commercial building roofing products. The Flooring sector had another good year, advancing 8%. Sales in the USA and Asia grew strongly with European sales stable. The successful launch of "green" and better performing products continues to sustain our global product leadership in this sector. Sales also continue to benefit from the growing preference for tiles in commercial flooring installations, with the business also enjoying some success in penetrating new application areas of the flooring market. Sales in the Industrial sector improved by 9% with agrotextile applications the strongest performer. New products were launched in both the screens and groundcover niches and the initiative to build sales outside of the dominant Dutch market has been successful.

 

The Civil Engineering sector had a mixed year. Underlying sales were at the same level as a strong 2011, which delivered 20% growth. Sales of geotextiles and construction fibre products grew well; however, a reduction in tunneling projects adversely impacted sales of our other geosynthetic products. Sales improved markedly from a small base in the US and we are reviewing options to be a more significant player in this region. The European market was tougher, particularly in the second half of the year when demand softened in some construction sectors. We continue to target emerging market growth; however, we have yet to capitalise materially on the significant opportunities which exist in these markets for our products and technologies. The integration of the Colbond and Fabrics commercial activities in this sector and a new 'go-to-market' organisation are important steps to secure more traction in this initiative. The commissioning, in the coming year, of our geotextile joint venture plant in Saudi Arabia will be a catalyst for accelerating growth in this attractive region. Transport sales were disappointing. The recovery in the US market was largely in low- to mid-end platforms where our products are not specified and, in Europe, sales suffered from some destocking and premium brand platform transitions.  

 

Investment projects to upgrade and expand capacities for flooring products in the USA were successfully commissioned during the year. Disappointingly the commissioning date for our joint venture geotextile plant in Saudi Arabia has been delayed due to local administration complexities. We now expect to be manufacturing in the second quarter of 2013. Investment in health and safety related capital expenditure has been increased to support the Group-wide focus on improving our health and safety performance. This improvement programme was launched last year and the division is well advanced with its plans to become 'best in class'. Accident rates have reduced again this year; however, there remains some way to go to achieve all of our objectives.

 

Bonar remains well positioned to grow in its attractive European markets and is investing to accelerate its exposure to markets outside Europe, where significant growth opportunities exist for its products and technologies.

 

Technical Coated Fabrics Division

Our Technical Coated Fabrics division, Mehler Texnologies (MTX), supplies products such as side curtains for lorry trailers, advertising banners, tensioned structures, awnings, marquees and tarpaulins to the print, architectural and transport markets.

 

 


2012

£m

2011

£m

Actual

Constant currency(1)

Revenue

£115.3m

     £119.4m

-3.4%

+2.5%

Operating profit (2)

£10.7m

      £10.7m

-

+7.5%

Operating margin (2)

9.3%

           9.0%



 

(1)        Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)        Before amortisation and non-recurring items

 

Underlying sales grew by 2.5%.  Reported sales were 3.4% lower as average exchange rates used to translate overseas sales into sterling had a significant adverse impact compared to last year's rates.  Margins improved by 30bps to 9.3% with constant currency operating profits growing by 7.5%. The rate of sales growth was adversely influenced, particularly in the first half of the year, by a focus on margin quality. A more balanced approach to volume and margin management has been instigated by the new leadership team with a consequent improvement in volumes in the second half.

 

Sales performance, on a constant currency basis, was mixed across sectors. In the Building Products sector the division's permanent and semi-permanent architectural membranes for building applications grew strongly. Once again, a number of important reference projects were supplied this year as part of the initiative to enhance exposure to this attractive sector. These will aid future sales as will the investment we are making in building our product and personnel capabilities in the sector.  In the Transport sector, sales to the trailer side curtain market also improved, despite new truck registrations falling this year. Sales in the Industrial sector were lower. Growth in mining and container applications was more than offset by a further decline in print volumes with Asian competitors continuing to gain share in low-end applications.  In the Leisure sector, sales to boat and pool applications were also lower as these markets continue to suffer from reduced discretionary spending; Southern Europe was, as expected, particularly weak. The division has continued to build its capability to directly service regions outside of Europe with investments being made to accelerate progress in India, Brazil and USA.

 

Some progress has been made in improving operating efficiencies and a key focus of the new leadership team is to accelerate this. Significant improvements continue in the management of health and safety and all risks associated with operations. Accident rates have reduced again. The focus for capital expenditure is on efficiency and health and safety improvements, but expenditure levels will continue to remain well below depreciation. 

 

The division has attractive growth opportunities in architectural, industrial and other niches and this, combined with a commitment to operational excellence, will drive further improvements in the growth and quality of earnings.

 

Yarns Division

Our Yarns division, which was previously reported within Performance Technical Textiles, supplies yarns used in the manufacture of artificial grass in sports and landscaping applications as well as yarns used as a backing material in the manufacture of woven carpets.

 


2012

£m

2011

£m

Actual

Constant currency(1)

Revenue

£26.5m

£30.6m

-13.4%

-11.8%

Operating (loss)/profit (2)

£(1.8)m

£0.3m



Operating margin (2)

(6.8)%

1.0%



 

 

(1)         Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)         Before amortisation and non-recurring items

 

The business, which represents 7% of Group sales, has endured a difficult year. The Group restructured the business in 2011, removing some £3m of costs by consolidating manufacturing on two sites, one in Dundee and one in Abu Dhabi. This enabled the business to return a small operating profit last year despite its principal market, artificial grass yarns, being affected by a reduction in discretionary public funding for new and replacement sports fields. This trend continued in 2012, with volumes and prices lower, resulting in the business making an operating loss of £1.8m. Actions have already been taken to reduce costs across the business and we are working on additional measures to further improve performance. As a result, the Group is confident that the performance of the business will improve in 2013.

 


FINANCIAL REVIEW

Pre-tax profit

Profit before tax, amortisation and non-recurring items from continuing operations increased by 4.7% to £24.5m (2011: £23.4m), an increase of 10.7% on a constant currency (underlying) basis.  Operating profits were 5.2% higher on an underlying basis, but the impact of a weaker Euro (on largely Euro denominated profits) resulted in reported profits of £30.5m showing no improvement (2011: £30.6m).  Interest costs were £1.2m lower at £6.0m (2011: £7.2m).  Notional interest on pension liabilities was £0.9m (2011: £1.2m) and borrowing costs fell to £5.1m (2011: £6.0m), largely as a result of a lower blended interest rate during the year.  Statutory profit before tax was £6.1m (2011: £23.4m), with a net non-recurring charge of £12.6m (2011: £5.7m credit) and a £5.8m charge for amortisation (2011: £5.7m).

Non-recurring items

During the year, the Group incurred £12.6m of non-recurring costs from continuing operations (2011: £5.7m credit) and £nil (2011: £2.2m credit) from discontinued operations.

The carrying value of assets within the Yarns business has been reviewed.  Taking into account the potential recoverable value of its assets and the projected value in use of the Yarns business, an impairment charge of £11.2m (2011: £nil) has been booked against these assets.

The Group incurred £0.7m (2011: £nil) of costs in connection with its acquisition of Xeroflor and the investigation of another potential acquisition, and £0.2m (2011: £0.3m) of start-up costs in relation to Bonar Natpet, its joint venture in Saudi Arabia.

A further £0.5m (2011: £nil) of non-recurring costs arose in relation to the integration of the Group's principal Performance Technical Textile operations into a single global business, Bonar.

In the year to November 2011, non-recurring credits totaling £5.7m arose mainly from the closure of the UK pension scheme to future accrual and the switch from RPI to CPI in the calculation of future pension increases.

A £2.2m non-recurring credit, on a partial refund of the European Commission fine levied on one of the Group's former businesses, was also recognised in discontinued operations in 2011.  The refund was received in December 2011.

Taxation

The overall tax charge on the profit before tax was £4.7m (2011: £4.2m).  The tax charge on profit from continuing operations before amortisation and non-recurring items was £6.4m (2011: £5.8m), a rate of 26.0% (2011: 25.0%).  The effective tax rate during 2012 was 28.3% (2011: 28.0%), marginally higher than last year due to a higher proportion of profits in the USA and losses within Yarns.  Prior year adjustments reduced the tax rate by 2.3% (2011: 3.0%) and relate primarily to changing estimates in respect of earlier years.  The Group continues to benefit from Innovation Box credits in the Netherlands.  The tax rate for 2013 is expected to be marginally higher than 2012.

Acquisitions

On 1 March 2012, the Group acquired the business of Xeroflor for cash consideration of €6.0m, generating goodwill of £1.5m.  Xeroflor's business has been integrated into our Bonar segment, and contributed £2.3m and £0.5m to the Group's sales and operating profit before amortisation and non-recurring items for the year respectively.

During the year, the Group paid the initial equity investment of £5.3m for its 50/50 Saudi Arabian joint venture, Bonar Natpet.  After repayment of £1.7m of prepayments made in 2011, the net cash outflow was £3.6m in the year.  A further £0.2m (2011: £0.3m) of start-up costs were incurred.  The joint venture is expected to be commissioned in the second quarter of 2013.

Cash

Overall net debt decreased to £82.6m from £85.3m at November 2011 even though £19.5m was invested to increase the Group's capacity and capability to drive future growth.  Trade working capital as a percentage of sales increased from 21% last year to 22%, contributing to a cash outflow into working capital of £4.3m (2011: £11.1m outflow).  Cash inflow from operations was £40.3m (2011: £29.7m).

 

During the year, the Group spent £8.6m (2011: £1.7m) on acquisitions and joint ventures and £14.2m (2011: £13.1m) on property, plant and equipment and intangible assets.  Excluding replacement capital expenditure, the amount invested in driving future growth was £19.5m (2011: £11.3m).

The analysis of the Group's total external debt is as follows:

 


2012

2011


£m

£m

Cash and cash equivalents

26.9

20.9

Total bank debt

(109.5)

(106.2)

Net bank debt

(82.6)

(85.3)

Net derivative liabilities

-

-

Total external debt

(82.6)

(85.3)

The gearing ratio of total external debt to EBITDA was unchanged at 1.9 times (2011: 1.9 times).

Pensions

The charges for pensions are calculated in accordance with the requirement of IAS 19 Employee Benefits. During the year, the Group's UK defined benefit scheme continued to adopt a lower risk investment strategy in which the interest rate and inflation risks were more closely hedged and the exposure to equities was held at 25% of the scheme's assets (2011: 22%). The UK scheme deficit has risen to £15.1m (2011: £6.1m), principally due to a reduction in the rate used to discount the scheme's liabilities, which was itself impacted by the reduction in bond yields.  The deficit in the Group's overseas schemes in Belgium, Germany and the USA increased to £9.7m (2011: £8.1m).

Return on capital

The Group's return on operating capital employed further improved during the year to 17.2% (2011: 16.8%; 2010: 15.2%).

 

Earnings per share

Earnings per share before amortisation and non-recurring items increased by 5.2%, marginally ahead of pre-tax profit growth, to 6.3 pence (2011: 6.0 pence) based on a weighted average number of 288.4 million shares (2011: 287.9 million).

Dividends

Taking into account these good results and our confidence in the future prospects of the Group, the Board is recommending a final dividend of 1.6 pence per share (2011: 1.4 pence), increasing the full year dividend to 2.4 pence per share (2011: 2.1 pence).  Subject to shareholders' approval at the Annual General Meeting in April, the dividend will be paid on 18 April 2013 to members registered as of 22 March 2013.  The proposed full year dividend is covered 2.6 times by earnings before amortisation and non-recurring items.



 

Risks and uncertainties

 

Global economic activity risks

Mitigating strategy

The Group may be adversely affected by global economic conditions, particularly in its principal markets in mainland Europe and North America. The current depressed global economy and the volatility of international markets could result in reduced levels of demand for the Group's products, a greater risk of debtors defaulting on payment terms and a higher risk of inventory obsolescence.

Local operating management are responsible for monitoring their own markets and are empowered to respond quickly to changing conditions. Production costs may be quickly flexed to balance production with demand, including the use of short-time working arrangements where available. Further actions, such as reducing the Group's cost base and cancelling or delaying capital investment plans, are available to allow continued profitability in the face of a sustained reduction in volumes.

The Group has a broad base of customers and no single customer represents more than 3% of total revenue. Group policies ensure customers are given an appropriate level of credit based on their trading history and financial status, and a prudent approach is adopted towards credit control. Credit insurance is used where available.

Growth strategy risks

Mitigating strategy

The Board believes that growth, both organic and through acquisitions, is a fundamental part of its strategy for the Group. The Board reviews such growth opportunities on an ongoing basis and its acquisition strategy is based on appropriate acquisition targets being available and on acquired companies being integrated rapidly and successfully into the Group.

The current focus of the Group is on profitable, cash generative organic growth supplemented by acquisition where appropriate.

The senior management team is experienced and has successfully executed and integrated several acquisitions in the past.

Acquisitions are made subject to clearly defined criteria in existing or adjacent segments whose products and technologies are well understood, and only after extensive pre-acquisition due diligence. Acquisition proposals are supported by a detailed post-acquisition integration plan that is rigorously managed through to completion.

Organic growth/competition risks

Mitigating strategy

The markets in which the Group operates are mature and highly competitive with respect to price, geographic distinction, functionality, brand recognition and the effectiveness of sales and marketing.

The Group has chosen to operate in attractive niche markets within the technical textile industry, using proprietary technology to manufacture products which are important determinants of the performance and/or efficiency of our customers' final product or process.

Significant resources are dedicated to developing and maintaining strong relationships with our customers, and to developing new and innovative products which meet their precise needs.

The Board believes that these factors maintain its strong competitive position.

Business continuity risks

Mitigating strategy

The occurrence of major operational problems could have a material adverse effect on the Group.

The Group has business continuity measures in place to minimise the impact of any disruption to its operations. These are supported by regular site visits from risk management and internal audit. Where appropriate, risks are partially transferred through insurance programmes.

Raw material pricing risks

Mitigating strategy

The Group's profitability can be affected by the purchase price of its key raw materials and its ability to reflect any changes through its selling prices. The Group's main raw materials are polypropylene, polyester, nylon, polyethylene and PVC. The prices of these raw materials are volatile, and they are influenced ultimately by oil prices and the balance of supply and demand for each polymer.

The Group has a good level of expertise in polymer purchasing and uses a number of suppliers to ensure a balance between competitive pricing and continuity of supply.

The Group's focus on operating efficiencies and the strength of its product propositions has in the past allowed the effect of raw material cost increases to be successfully mitigated.

Employee risks

Mitigating strategy

 

The Group is reliant on its ability to attract, develop and retain key employees.

Employee retention and development is a key feature in ensuring the continued success of the Group. Employees are recruited and regularly appraised against a formal job specification. Formal policies cover all material aspects of employment and we are committed to high standards of health and safety at work, effective communication with employees and employee development.

 

Funding risks

Mitigating strategy

 

The Group, like many other companies, is dependent on its ability to both service its existing debts and to access sufficient funding to refinance its liabilities when they fall due and to provide sufficient capital to finance its growth strategy.

The Group manages its capital to safeguard its ability to continue as a going concern, to optimise its capital structure and to provide sufficient liquidity to support its operations and the Board's strategic plans. The Group's borrowing requirements are continually being reforecast to ensure funding is in place to support its operations and growth plans. Compliance with the covenants associated with these facilities is closely monitored.

 

Treasury risks

Mitigating strategy

 

Foreign exchange is the most significant treasury risk for the Group. The reported value of profits earned by the Group's overseas entities is sensitive to the strength of Sterling, particularly against the Euro and, to a lesser extent, the US Dollar. The Group is exposed to a lesser extent to other treasury risks such as interest rate risk and counterparty credit risk.

Group policy ensures treasury activities are focused on the management of risk with high quality counterparties; no speculative transactions are undertaken. The Group uses financial instruments to manage the exposures that may arise from its business operations as a result of movements in financial markets.

 

Pension funding risks

Mitigating strategy

 

The Group may be required to increase its contributions into its defined benefit pension schemes to cover funding shortfalls. The funding may be affected by poor investment performance of pension fund investments, changes in the discount rate applied and longer life expectancy of members.

The main Group scheme is closed to new members and to future benefit accrual; and assumptions, including funding rates, are set in line with the actuaries' recommendations. Regular dialogue takes place with pension fund trustees and the Board regularly discusses pension fund strategy.

 

Laws and regulations risks

Mitigating strategy

 

The Group's operations are subject to a wide range of laws and regulations, including employment, environmental and health and safety legislation, along with product liability and contractual risks.

The Group's policy manuals ensure all applicable legal and regulatory requirements are met or exceeded in all territories in which it operates, and ongoing programmes and systems monitor compliance and provide training for relevant employees.

Product liability risks are managed through stringent quality control procedures covering review of goods on receipt and prior to despatch and all manufacturing processes. Insurance cover, appropriate for the nature of the Group's business and its size, is maintained. The Group also seeks to minimise risks through its terms and conditions of trading.

 

 



Responsibility statement of the Directors on the Annual Report and Accounts

The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 30 November 2012. Certain parts thereof are not included within this Preliminary Announcement.

 

The Directors confirm, to the best of their knowledge, that:

·      the financial statements, prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and

·      the management report, which comprises the Chairman's Statement and the Business Review, includes a fair review of the development and performance of the business and of the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

Directors

The Directors of the Company are:

Martin Flower, Chairman

Steve Good, Chief Executive Officer

Mike Holt, Group Finance Director

Steve Hannam, Non-Executive Director

Folkert Blaisse, Non-Executive Director

John Sheldrick, Non-Executive Director

 

Related party transactions

There are no related party transactions requiring disclosure.

 

 

 

Steve Good                              Mike Holt

5 February 2013                         5 February 2013



 

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

 

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, and liquidity are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business and market conditions. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements in this announcement may not occur.

 

Other than in accordance with its legal or regulatory obligations, the Group does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise.

Consolidated Income Statement

for the year ended 30 November

 

 

 




2012



2011




 

Before amortisation and non-recurring items

 

Amortisation and non-recurring items

(note 6)

 

 

 

 

 

Total

 

Before amortisation and non-recurring items

 

Amortisation and non-recurring items

(note 6)

 

 

 

 

 

Total


Note









£m

£m

£m

£m

£m

£m

















Revenue

2

380.5

-

380.5

388.7

-

388.7









Operating profit

2

30.5

(18.4)

12.1

30.6

-

30.6









Financial income


7.0

-

7.0

10.6

-

10.6

Financial expense


(13.0)

-

(13.0)

(17.8)

-

(17.8)

Net financing costs

3

(6.0)

-

(6.0)

(7.2)

-

(7.2)









Profit/(loss) before taxation


24.5

(18.4)

6.1

23.4

-

23.4









Taxation

4

(6.4)

1.7

(4.7)

(5.8)

1.6

(4.2)









Profit/(loss) after taxation


18.1

 

 

18.1

 

 

-

(16.7)

 

 

(16.7)

 

 

-

1.4

 

 

1.4

 

 

-

17.6

 

 

17.6

 

 

-

1.6

 

 

1.6

 

 

2.2

19.2

 

 

19.2

 

 

2.2



Profit/(loss) for the year from continuing operations




Profit for the year from discontinued operations

 

6



Profit/(loss) for the year


18.1

(16.7)

1.4

17.6

3.8

21.4









Attributable to








Equity holders of the company


18.1

(16.7)

1.4

17.2

3.8

21.0

Non-controlling interest

8

-

-

-

0.4

-

0.4



18.1

(16.7)

1.4

17.6

3.8

21.4

















Earnings per share

7







 

Continuing operations

Basic

Diluted


 

 

6.28p

6.08p

 

 

 

 

 

0.47p

0.46p

 

 

5.97p

5.81p


 

 

6.53p

6.36p

 

Discontinued operations

Basic

Diluted

 

Total

Basic

Diluted


 

 

-

-

 

 

6.28p

6.08p


 

 

-

-

 

 

0.47p

0.46p

 

 

-

-

 

 

5.97p

5.81p


 

 

0.76p

0.74p

 

 

7.29p

7.10p











Consolidated Statement of Other Comprehensive Income

for the year ended 30 November

 













2012

2011





Note

£m

£m








Profit for the year





1.4

21.4

Other comprehensive income







Actuarial (loss)/gain on defined benefit pension scheme





(13.9)

3.7

Deferred tax on defined benefit pension scheme





0.7

-

Exchange differences on translation of foreign operations, net of hedging


(8.3)

2.6

Other comprehensive income for the year, net of tax



(21.5)

6.3








Total comprehensive income for the year





(20.1)

27.7








Attributable to







Equity holders of the parent





(20.2)

27.1

Non-controlling interest




8

0.1

0.6






(20.1)

27.7









Consolidated Balance Sheet

as at 30 November

 








2012

2011



Note

£m

£m






Non-current assets





Goodwill



74.2

84.9

Intangible assets



36.7

40.6

Property, plant and equipment



108.8

115.0

Investment in joint venture



5.3

-

Investment in associate



0.4

0.4

Deferred tax assets



3.3

2.5




228.7

243.4






Current assets





Inventories



75.1

75.6

Trade and other receivables



69.3

75.2

Cash and cash equivalents



26.9

20.9




171.3

171.7

Current liabilities





Interest-bearing loans and borrowings



-

2.1

Current tax liabilities



6.2

5.4

Trade and other payables



76.2

80.2

Provisions



0.1

0.5




82.5

88.2






Net current assets



88.8

83.5






Total assets less current liabilities



317.5

326.9






Non-current liabilities





Interest-bearing loans and borrowings



109.5

104.1

Deferred tax liabilities



23.5

24.8

Post-employment benefits



24.8

14.2

Other payables



1.8

1.0




159.6

144.1






Net assets



157.9

182.8






Equity attributable to equity holders of the parent





Share capital



45.5

45.3

Share premium account



55.5

54.1

Translation reserve



(37.0)

(28.6)

Retained earnings



87.9

106.1






Total equity attributable to





Equity holders of the parent



151.9

176.9

Non-controlling interest


8

6.0

5.9






Total equity



157.9

182.8











 

 

 

 

Consolidated Cash Flow Statement

for the year ended 30 November

 




2012

2011




£m

£m






Profit for the year from continuing operations



1.4

19.2

Profit for the year from discontinued operations



2.2

Profit for the year

 



1.4

21.4

Adjustments for:





Depreciation



12.1

12.3

Impairment of non-current assets



11.2

-

Amortisation



6.4

6.3

Income tax expense



4.7

4.2

Net financing costs



6.0

7.2

Non-recurring pension credits



-

(6.0)

Partial EU fine refund



2.2

(2.2)

Increase in inventories



(2.8)

(15.3)

Increase in trade and other receivables

(1.6)

(2.5)

Increase in trade and other payables


0.1

6.7

Decrease in provisions


(0.4)

(3.1)

Gain on disposal of non-current assets



(0.2)

(0.2)

Equity-settled share-based payment



0.9

Cash inflow from operations



40.3

29.7






Interest received



0.1

2.9

Interest paid



(4.9)

(8.7)

Tax paid



(3.9)

(7.6)

Pension cash contributions in excess of operating charge


(3.4)






Net cash inflow from operating activities



27.7

12.9






Acquisition of subsidiaries



(5.0)

-

Acquisition of property, plant and equipment



(13.2)

(12.1)

Equity investment in joint ventures



(5.3)

-

Prepaid participation in joint ventures



1.7

(1.7)

Proceeds from disposal of non-current assets



0.4

0.4

Intangible assets purchased



(1.0)






Net cash outflow from investing activities



(22.4)

(14.4)






Proceeds of share issues



0.2

-

Drawdown of borrowings



9.1

66.7

Repayment of borrowings



(1.7)

(33.5)

Finance lease capital repayments



-

(0.2)

Settlement of cash flow hedges



-

(16.9)

Equity dividends paid



(5.2)






Net cash inflow from financing activities


10.9






Net cash inflow



6.6

9.4






Cash and cash equivalents at start of year



20.9

11.6

Foreign exchange differences



(0.6)

(0.1)





Cash and cash equivalents at end of year



26.9

20.9



 

Consolidated Statement of Changes in Equity

for the year ended 30 November

 


Share capital

Share premium

Translation reserve

Retained earnings

Equity attributable to equity holders of the parent

Non-controlling interest

Total equity


£m

£m

£m

£m

£m

£m

£m

At 1 December 2010

45.3

54.1

(31.0)

85.7

154.1

5.3

159.4









Total comprehensive income for the year

 

-

 

-

 

2.4

 

24.7

 

27.1

 

0.6

 

27.7

Dividends paid to Ordinary Shareholders

 

-

 

-

 

-

 

(5.2)

 

(5.2)

 

-

 

(5.2)

Share-based payment

-

-

-

0.9

0.9

-

0.9

Net increase for the year

-

-

2.4

20.4

22.8

0.6

23.4









At 30 November 2011

45.3

54.1

(28.6)

106.1

176.9

5.9

182.8









Total comprehensive income for the year

 

-

 

-

 

(8.4)

 

(11.8)

 

(20.2)

 

0.1

 

(20.1)

Dividends paid to Ordinary Shareholders

 

-

 

-

 

-

 

(6.3)

 

(6.3)

 

-

 

(6.3)

Shares issued

0.2

1.4

-

(1.3)

0.3

-

0.3

Share-based payment

-

-

-

1.2

1.2

-

1.2

Net increase/(decrease) for the year

0.2

1.4

(8.4)

(18.2)

(25.0)

0.1

(24.9)









At 30 November 2012

45.5

55.5

(37.0)

87.9

151.9

6.0

157.9


Notes

 

1.  Basis of preparation

 

The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand pounds.  They are prepared on the historical cost basis except for the revaluation to fair value of certain financial instruments.

 

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU (adopted IFRS).   During the year, the Group has adopted the following new Standards, Interpretations and Amendments, none of which have had a significant impact on the Group financial statements:

·      Amendments to IFRS 7 Financial Instruments: Disclosures (disclosure of specific types of assets which are transferred but not de-recognised).

·      Amendments to IAS 12 Income Taxes (deferred tax on investment property revaluations).

·      Revised IAS 23 Related Party Disclosures (simplified definition of 'related party' and amended definitions concerning related parties to government organisations).

 

At the date of authorisation of these financial statements there are a number of Standards and Interpretations in issue but not yet effective and which have not yet been applied in these financial statements.  It is anticipated that adoption of these Standards and Interpretations in future periods will not have a material impact on the Group's financial results; however the following Standards will alter disclosure:

 

·      The Amendments to IAS 19 Employee Benefits, effective for the year ending 30 November 2014, will alter the recognition and disclosure requirements for the Group's defined benefit pension plans. 

·      The adoption of IFRS 9 Financial Instruments, effective for the year ending 30 November 2016, will affect the measurement and disclosure of the Group's financial instruments. 

 

The annual report and financial statements for the year ended 30 November 2012 were approved by the Board of Directors on 5 February 2013 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies.  The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The auditor's report on the statutory accounts for the year ended 30 November 2012 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.  The statutory accounts of Low & Bonar PLC for the year ended 30 November 2011 have been delivered to the Registrar of Companies.  The auditor's report on the statutory accounts for the year ended 30 November 2011 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

 

2. Segmental information

 

For the purposes of management reporting to the chief operating decision maker, the Group is organised into three reportable operating divisions: Bonar, Technical Coated Fabrics and Yarns.  Financial information for each operating division is also available in a disaggregated form in line with the identified cash generating units.  Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis.  The Group's reportable segments have changed to reflect the integration of the Group's principal Performance Technical Textiles operations into a single global business, Bonar, and comparative information has been restated on the same basis.

 

The Group's principal activities are in the international manufacturing and supply of those performance materials commonly referred to as technical textiles.  The Group's business is focused on three areas of activity in the international technical textiles industry: the production and supply of (a) performance technical textiles; (b) technical coated fabrics for use in the transport, print and architectural market, and (c) artificial yarns for use in landscaping, sports and flooring markets; and information is presented in this form for the purposes of management reporting to the chief operating decision maker.  Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. 

 

Unallocated items comprise mainly cash and cash equivalents, interest-bearing loans, borrowings, derivative assets and liabilities, post-employment benefits, taxation balances and corporate assets and expenses.  Inter-segment sales are not material.

 

2012

 

 

Bonar

Technical Coated Fabrics

 

 

Yarns

 

Unallocated Central

 

 

Total


£m

£m

£m

£m

£m







Revenue from external customers

238.7

115.3

26.5

-

380.5







Operating profit/(loss) before amortisation and non-recurring items

 

25.0

 

10.7

 

(1.8)

 

(3.4)

 

30.5

Amortisation

(3.0)

(2.8)

-

-

(5.8)

Operating profit/(loss) before non-recurring items

22.0

7.9

(1.8)

(3.4)

24.7

Non-recurring items

(0.8)

-

(11.2)

(0.6)

(12.6)

Operating profit/(loss)

21.2

7.9

(13.0)

(4.0)

12.1

Net financing costs





(6.0)

Profit before taxation





6.1

Taxation





(4.7)

Profit for the year from continuing operations





1.4

Profit for the year from discontinued operations





-

Profit for the year





1.4













Reportable segment assets

145.6

83.9

23.4

-

252.9

Intangible assets and goodwill





110.9

Investment in joint venture





5.3

Investment in associate





0.4

Cash and cash equivalents





26.9

Other unallocated assets





3.6

Total Group assets





400.0







Reportable segment liabilities

(49.0)

(21.8)

(6.2)

-

(77.0)

Loans and borrowings





(109.5)

Post-employment benefits





(24.8)

Other unallocated liabilities





(30.8)

Total Group liabilities





(242.1)







Other information






Additions to property, plant and equipment

10.9

2.1

0.1

-

13.1

Depreciation

7.4

3.5

1.2

-

12.1

 



2. Segmental information (continued)

 

 

2011

 

 

 

Bonar

Technical Coated Fabrics

 

 

Yarns

 

Unallocated Central

 

 

Total


£m

£m

£m

£m

£m







Revenue from external customers

238.7

119.4

30.6

-

388.7







Operating profit/(loss) before amortisation and non-recurring items

 

22.8

 

10.7

 

0.3

 

(3.2)

 

30.6

Amortisation

(2.7)

(3.0)

-

-

(5.7)

Operating profit/(loss) before non-recurring items

20.1

7.7

0.3

(3.2)

24.9

Non-recurring items

-

-

-

5.7

5.7

Operating profit

20.1

7.7

0.3

2.5

30.6

Net financing costs





(7.2)

Profit before taxation





23.4

Taxation





(4.2)

Profit for the year from continuing operations

Profit for the year from discontinued operations





19.2

2.2

Profit for the year





21.4







Reportable segment assets

147.8

87.5

29.0

-

264.3

Intangible assets and goodwill





125.5

Investment in joint venture





-

Investment in associate





0.4

Cash and cash equivalents





20.9

Other unallocated assets





4.0

Total Group assets





415.1







Reportable segment liabilities

(47.3)

(22.0)

(8.6)

-

(77.9)

Loans and borrowings





(106.2)

Post-employment benefits





(14.2)

Other unallocated liabilities





(34.0)

Total Group liabilities





(232.3)







Other information






Additions to property, plant and equipment

8.0

2.6

1.5

-

12.1

Depreciation

7.8

3.5

1.0

-

12.3

 



 

3. Financial income and financial expense

 




2012

2011




£m

£m

Financial income





Interest income



0.1

2.9

Expected return on pension plan assets



6.9

7.7




7.0

10.6

Financial expense





Interest on bank overdrafts and loans



(4.9)

(8.5)

Amortisation of bank arrangement fees



(0.5)

(0.5)

Interest on pension scheme liabilities



(7.8)

(8.9)

Amounts capitalised within property, plant and equipment

0.2

0.1




(13.0)

(17.8)






Net financing costs



(6.0)

(7.2)

 

4. Taxation




2012

2011

Current tax



£m

£m

UK corporation tax





   Current year



-

-

   Prior year



(0.2)

-

Overseas tax





   Current year



5.5

5.4

   Prior year



(0.4)

(0.9)

Total current tax



4.9

4.5






Deferred tax

 



(0.2)

(0.3)

Total tax charge in the income statement



4.7

4.2

 

5. Dividends   

 

Amounts recognised as distributions to equity holders in the year




2012

2011




£m

£m

Final dividend for the year ended





30 November 2011 - 1.4p per share (2010: 1.1p per share)

4.0

3.2






Interim dividend for the year ended





30 November 2012 - 0.8p per share (2011: 0.7p per share)

2.3

2.0

   








6.3

5.2

 

The Directors have proposed a final dividend in respect of the financial year ended 30 November 2012 of 1.6p which will absorb an estimated £4.7m of shareholders' funds.  Conditional on approval by shareholders at the Annual General Meeting to be held on 9 April 2013 and accordingly not accrued in these accounts, it will be paid on 18 April 2013 to shareholders who are on the register of members at close of business on 22 March 2013.

 



6. Amortisation and non-recurring items

 

During the year the Group recognised significant non-recurring items and amortisation as detailed below.

 




2012

2011




£m

£m

Amounts charged/(credited) to operating profit




Joint venture start-up costs



0.2

0.3

Acquisition related costs



0.7

-

Reorganisation costs



0.5

-

Impairment of non-current assets



11.2

-

Effect of change in pension indexation legislation



-

(4.9)

Curtailment gain



-

(1.1)

Total non-recurring items



12.6

(5.7)

Amortisation charge



5.8

5.7

Total charge to operating profit



18.4

-






Amounts credited to discontinued operations




Partial EU fine refund



-

(2.2)






Current year

During the year, the Group has incurred £0.2m (2011: £0.3m) of initial costs in respect of its joint venture in Saudi Arabia.

The Group incurred £0.7m (2011: £nil) of costs in connection with the acquisition of the trade and assets of Xero Flor International GmbH (see Note 9) and in connection with another potential acquisition.

Reorganisation costs of £0.5m (2011: £nil) were incurred in relation to the integration of the Group's principal Performance Technical Textile operations into a single global business, Bonar.

The performance of the Yarns business during the year has been affected by deteriorating market conditions, particularly by further reductions in discretionary public funding for artificial sports pitches, which have had an adverse impact on the projected value in use of the Yarns CGU.  Consequently an impairment to goodwill and property, plant and equipment of £8.4m and £2.8m respectively has been recognised.

Prior year

Following the announcement by the UK Government on 8 July 2010 of their intention to use CPI rather than RPI to calculate statutory minimum increases in both deferred pensions and pensions in payment, the Trustee of the Group's main UK pension scheme notified deferred members of this change. After due consideration by the Company, including discussions with its legal advisers and the Trustee, of the impact of the change on the valuation of the Scheme liabilities at 30 November 2011, and pursuant to the guidance set out in UITF 48, an actuarial gain of £4.9m was credited to the income statement as a non-recurring past service credit in the year ended 30 November 2011. The Group's UK defined benefit scheme was also closed to future accrual during the period to 30 November 2011, resulting in a non-recurring curtailment credit to the income statement of £1.1m.

In November 2011 the EU's General Court agreed a 25% reduction in the €12.24m fine imposed on the Company and its subsidiary Bonar Technical Fabrics NV by the European Commission in 2005, for infringing Article 81 of the European Community Treaty in connection with a cartel relating to industrial bags, a market the Group exited in 1997 following the sale of its Belgian packaging business. The reimbursement, including interest and net of associated legal costs, totalled £2.2m and was shown as a non-recurring item within discontinued operations. The reimbursement was received in December 2011.

 



 

7. Earnings per share

 

Reconciliations of the earnings and weighted-average number of shares used in the calculations are set out below

 



2012



2011



 

 

 

Earnings

Weighted average number of shares

 

 

Per share amount

 

 

 

Earnings

Weighted average number of shares

 

 

Per share amount


£m

(millions)

p

£m

(millions)

p








     Statutory - continuing operations







     Basic earnings per share







     Earnings attributable to ordinary

     shareholders

1.4

288.447

0.47

18.8

287.889

6.53

     Effect of dilutive items







     Share-based payment

-

9.215


-

7.959


     Diluted earnings per share

1.4

297.662

0.46

18.8

295.848

6.36 








     Statutory - discontinued operations







     Basic earnings per share







     Earnings attributable to ordinary shareholders

-

288.447

-

2.2

287.889

0.76

     Effect of dilutive items







     Share-based payment

-

9.215


-

7.959


     Diluted earnings per share

-

297.662

-

2.2

295.848

0.74








     Statutory - total







     Earnings per share







     Earnings attributable to ordinary

     shareholders

1.4

288.447

0.47

21.0

287.889

7.29

     Effect of dilutive items







     Share-based payment

-

9.215


-

7.959

-

     Diluted earnings per share

1.4

297.662

0.46

21.0

295.848

7.10








     Before amortisation and non-recurring      items - continuing operations and total







     Basic earnings per share







     Earnings attributable to ordinary shareholders

18.1

288.447

6.28

17.2

287.889

5.97

     Effect of dilutive items







     Share-based payment

-

9.215


-

7.959


     Diluted earnings per share

18.1

297.662

6.08

17.2

295.848

5.81

 

8. Non-controlling interest

 



2012

£m

2011

£m





At 1 December


5.9

5.3





Share of profit after taxation


-

0.4

Exchange adjustment


0.1

0.2

At 30 November


6.0

5.9





 

 



 

9. Business combination

On 1 March 2012 the Group acquired the trade and assets of Xero Flor International GmbH ("Xeroflor"), an innovative business with a strong position in the growing green roofing market, on a cash-free debt-free basis for a cash consideration of €6.0m (£5.0m).  Costs of £0.3m relating to the acquisition have been charged to non-recurring items.  Results of the acquired business are included within the results of the Bonar segment.

The acquired business contributed £2.3m to the Group's consolidated revenue for the period and increased the Group's consolidated profit before interest, tax, amortisation and non-recurring items for the period by £0.5m.  Had the business been owned by the Group for the entire period, the contribution to the Group's consolidated revenue and consolidated profit before interest, tax, amortisation and non-recurring items would have been £3.0m and £0.6m respectively.

The provisional fair values of the identifiable assets and liabilities acquired are as follows:

 


Book value at acquisition

Fair value adjustments

Provisional fair value


£m

£m

£m

Intangible assets:




Marketing related

-

0.7

0.7

Customer relationships

-

1.5

1.5

Technology based

-

1.0

1.0

Order backlog

-

0.3

0.3





Property, plant and equipment

0.1

-

0.1





Inventories

0.2

-

0.2

Trade and other receivables

-

-

-





Trade and other payables

(0.3)

-

(0.3)

Assets acquired

-

3.5

3.5





Consideration:




Cash consideration



4.6

Consideration in escrow



0.4

Fair value of consideration



5.0





Goodwill arising on acquisition



1.5

 

10. The Annual General Meeting

 

The Annual General Meeting will be held on 9 April 2013 at The Thistle Hotel Marble Arch, Bryanston Street, London W1H 7EH.

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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