Final Results - Year Ended 2 October 1999
Avon Rubber PLC
2 December 1999
PRELIMINARY RESULTS FOR THE YEAR ENDED 2 OCTOBER 1999
Avon Rubber p.l.c. announces its preliminary results for the
year to 2 October 1999 which the Board approved on 1 December
1999.
1999 1998
£MILLION £MILLION
-------- --------
TURNOVER
--------
Continuing 261.2 267.1
Acquisitions 5.0 -
-------- --------
266.2 267.1
-------- --------
OPERATING PROFIT - before Exceptionals
----------------
Continuing 21.4 22.4
Acquisitions 0.5 -
-------- --------
21.9 22.4
-------- --------
PROFIT BEFORE TAX
-----------------
- before Exceptionals 20.5 23.2
- after Exceptionals 21.9 23.9
EARNINGS PER SHARE
------------------
Basic 56.8p 62.4p
Continuing Activities
- before Exceptionals 53.5p 59.8p
Diluted 56.7p 61.7p
DIVIDEND PER SHARE 24.2p 22.8p
------------------
* Strong performances from North America and Continental
Europe helped to offset weak UK demand
* Substantial investment including acquisition of Flexo
automotive hose business in Spain
* Significant new business won
* 5th consecutive year of dividend increase to 24.2p per
share - up 6.1%
For further enquiries:
Avon Rubber p.l.c.
Steve Willcox - Chief Executive Between 10.30 - 12.30am
and 14.00 - 15.30pm
Terry Stead - Group Finance Director Tel: 0171 253 2252
Ludgate Communications
Richard Hews 0171 253 2252
Leone Lewis
INTRODUCTION
In line with our strategy for growth, we have continued to
invest in facilities, equipment, training and product
development and have succeeded in winning significant
contracts for new business.
Increased capacity in our Continental European and North
American facilities supported the increased sales and profits
in those regions. Early action to reduce costs could not fully
cover the reduction in profits caused by lower sales from our
UK factories.
Construction of two new manufacturing units in Wiltshire, UK
has proceeded to plan. The new buildings will provide world
class manufacturing facilities for the activities currently
located on the nearby Cooper-Avon Tyres site.
DIVIDEND
The Board are recommending a final dividend of 17.2p per share
which will be paid on 28 January 2000 to ordinary shareholders
on the register on 6 January 2000. When added to the interim
dividend of 7.0p per share the total dividend of 24.2p shows
an increase of 6.1% on the 1998 dividend of 22.8p and is the
fifth consecutive year of real increase in dividend.
RESULTS
Operating profit for the year was £21.9 million (1998: £22.4
million). As a result of a net interest charge of £1.4 million
(1998: net interest income £0.8 million) Group profit before
exceptional items and taxation was £20.5 million (1998: £23.2
million) on a turnover of £266.2 million (1998: £267.1
million). The Group profit after exceptional items and before
taxation was £21.9 million (1998: £23.9 million).
There was an exceptional gain of £1.4 million (1998: £0.7
million) which arose from insurance proceeds received for the
refurbishment of plant and machinery that could not be
replaced following the fire at our facility in Albion, New
York.
The taxation charge of £6.3 million (1998: £7.0 million)
represented 28.1% (1998: 30.2%) of profit before taxation and
exceptional items.
Profit after taxation was £15.6 million (1998: £16.9 million)
and basic earnings per share were 56.8p (1998: 62.4p). Profit
after taxation and before exceptional items was £14.7 million
(1998: £16.2 million) with earnings per share on the same
basis at 53.5p (1998: 59.8p).
The acquisition in Spain of Industrial Flexo SA and Proflex SA
at a cost of £20.7 million including net borrowings assumed of
£3.1 million, included goodwill of £13.2 million which is
being amortised over 20 years. The goodwill amortised during
the year was £0.2 million. In previous years goodwill on
acquisitions was written off to reserves in the year of
acquisition.
Capital expenditure was £35.4 million (1998: £14.0 million) of
which £19.8 million (1998: £2.0 million) was associated with
the new facilities in Wiltshire. Before including the costs of
acquisitions and capital expenditure, the Group generated cash
of £9.8 million (1998: £22.2 million). As part of the funding
of the Spanish acquisitions a Euro loan was arranged, which
also reduced the balance sheet exposure of the assets of our
companies in countries with Euro based currencies. Net debt at
the year-end was £46.4 million (1998: £2.5 million).
AUTOMOTIVE
Avon Automotive has benefited substantially from an approach
which recognises the important combination of local
relationships supported by global customer links.
We have invested in Engineering, Sales Support and Product
Development Centres around the world. These facilities work
in close partnership with the major vehicle makers to offer a
comprehensive system design, build and test service. The
manufacturing facilities are strategically located to ensure
consistency of supply and quality to customer production
lines.
At constant exchange rates and including acquisitions,
turnover decreased by 3.7% to £187.8 million and operating
profits were lower by 15.4% in comparison to 1998 at £13.2
million. The return on sales was 7.0% compared with 8.0% in
1998.
Reductions in car builds by a number of our European customers
hit the profitability of our UK plants. These well publicised
shortfalls, caused by the late introduction of new models and
by poor sales of existing vehicles, eased during the last
quarter but affected most of the year.
The Continental European plants all gained business from new
models coming on stream and product lines which were
transferred from the UK and USA. Of particular relevance were
the blow moulding of air ducts and start up of Avon's
permeation resistant fuel hose 'CADbar' in France, and
increased coolant hose production in Portugal and the Czech
Republic. The acquisition of Industrial Flexo SA and Proflex
SA in Spain significantly increased our share of the European
coolant hose market as well as providing Avon with new
customers, new technologies and a strong local management
team.
In North America volumes remained buoyant and our ability to
introduce new variants of 'CADbar' maintained our technology
lead despite increased competition. The build up of coolant
hose volumes at the Orizaba factory in Mexico has established
the plant as a qualified automotive component facility gaining
the benefits of volume and scale.
Market conditions in all regions remained tough throughout the
year with continued pressure to reduce prices. These
requirements were met through a combination of cost reductions
and product redesigns. The newly formed procurement team was
able to leverage Avon's global purchasing and worked with
suppliers to achieve the most cost effective purchasing
practices. Our development of preferred suppliers will be of
increasing importance over the next few years.
During the year we won a number of new orders which will come
into production during the next three years and provide a
substantial platform for growth. New business with General
Motors, Ford, Daimler-Chrysler, VW and Nissan for hose and
anti-vibration products results from the ongoing investment in
process and product development, which enables us to offer
innovative products at a cost effective price from our global
manufacturing base.
TECHNICAL PRODUCTS
As the result of the actions we have taken in line with our
strategy of tighter focus, we have increased sales and
profits. Acquisitions that were made in 1997-1998 have been
integrated as we have continued to focus on those businesses
which offer the potential for growth and sustainable earnings.
This has led to the sale of our UK Fabrications business in
September 1999 and CQC Ltd during the following month.
At constant exchange rates, turnover of £78.4 million was
10.9% higher than 1998 and operating profits were 31.8% higher
at £8.7 million with a return on sales of 11.1% compared with
9.3% in 1998.
We are the world's largest manufacturers of rubber components
for machine milking systems. Our teams in the United States
and Europe maintain close liaison with major equipment
suppliers and contribute specialist expertise to support their
development programmes. During the year we successfully
transferred our dairy rubberware business from Cadillac,
Michigan, to our Hi-Life facility in Johnson Creek, Wisconsin.
This was achieved with no disruption to our customers and has
delivered benefits in line with our plans.
Our world-leading position in the design and manufacture of
military respirators enabled us to submit a tender for the
Joint Services General Purposes Mask Programme for US military
personnel. Bids are currently being evaluated and a decision
is expected early in year 2000.
Nylaflow, the braided plastic hose product line that was
acquired from DSM last year was relocated from Reading,
Pennsylvania and the opportunity was taken to upgrade the
production equipment at the time of the transfer to Cadillac,
Michigan.
The Zatec facility near Boston, Massachusetts, which
manufactures cleaning blades for business machines, has
introduced new working methods to increase productivity. The
result has been a leaner, more focussed operation, capable of
expanding its customer base. Blades are also manufactured in
our UK Business Machines joint venture Avon-Ames, where
development costs and low sales of established roller products
led to an unsatisfactory trading result.
Earlier investments in improved production equipment have
enhanced profitability in our market-leading aerosol gasket
business and enabled our plant at Malesherbes, France, to
provide supplies of high quality mixed compounds to other
facilities in addition to meeting its own requirements.
OUTLOOK
The coming year will see the completion of two new factories
in the UK. Despite the strength of sterling, the lower cost
base of these facilities together with recent investments in
our overseas operations will contribute to the strong
positioning of Avon as an international partner for customers
in our core markets.
We have won important new automotive contracts which will come
on stream over the next three years and the strong US economic
climate remains a positive indicator for our substantial
business activities in North America.
Whilst we expect further challenges during the coming year, we
will continue our strategic progress by means of selective
acquisitions, disposals and organic development.
SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year Year
Ended Ended
02-Oct-99 03-Oct-98
Note £'000 £'000
Turnover
Continuing activities 261,142 267,085
Acquisitions 5,022 -
-------- --------
Total turnover 266,164 267,085
-------- --------
Operating profit
Continuing activities 21,421 22,351
Acquisitions 459 -
-------- --------
Total operating profit 2 21,880 22,351
Profit on sale of fixed
assets and investments 3 1,422 718
-------- --------
Profit on ordinary
activities before interest 23,302 23,069
Interest payable (4,532) (3,014)
Interest receivable 3,136 3,850
-------- --------
Profit on ordinary
activities before taxation 21,906 23,905
Taxation 4 (6,257) (7,003)
-------- --------
Profit on ordinary
activities after taxation 15,649 16,902
Minority interests 133 254
-------- --------
Profit for the year 15,782 17,156
Dividends (including
non-equity interests) (6,733) (6,298)
-------- --------
Retained profit 9,049 10,858
-------- --------
Rate of dividend
Cumulative preference 6 7.0% 4.9%
Ordinary 6 24.2p 22.8p
Earnings per ordinary
share 7
Basic 56.8p 62.4p
Before exceptional items 53.5p 59.8p
Diluted 56.7p 61.7p
CONSOLIDATED STATEMENT
OF TOTAL RECOGNISED GAINS AND LOSSES
Year Year
Ended Ended
02-Oct-99 03-Oct-98
£'000 £'000
Profit for the year 15,782 17,156
Net exchange differences
on overseas investments (431) (1,268)
-------- --------
Total gains and losses for the year 15,351 15,888
======== ========
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year Year
Ended Ended
02-Oct-99 03-Oct-98
£'000 £'000
Opening shareholders' funds 80,405 105,791
Profit for the period 15,782 17,156
Dividends (6,733) (6,298)
Net exchange difference on
overseas investments (431) (1,268)
New share capital subscribed (net) 534 273
Goodwill written off on acquisitions - (35,249)
-------- --------
Closing shareholders' funds 89,557 80,405
======== ========
Equity shareholders' funds 89,057 79,905
Non-equity shareholders' funds 500 500
-------- --------
89,557 80,405
======== ========
CONSOLIDATED BALANCE SHEET
Year Year
Ended Ended
02-Oct-99 03-Oct-98
£'000 £'000
Fixed assets
Intangible assets 12,788 -
Tangible assets 102,102 67,408
Investments 900 1,001
-------- --------
115,790 68,409
Current assets
Stocks 24,014 21,444
Debtors - Amounts falling due
within one year 58,520 48,502
Debtors - Amounts falling due
after more than one year 4,831 5,419
Investments - 36,800
Cash at bank and in hand 17,336 6,473
-------- --------
104,701 118,638
Creditors
Amounts falling due within
one year 67,215 55,389
-------- --------
Net current assets 37,486 63,249
Total assets less current
liabilities 153,276 131,658
Creditors
Amounts falling due after
more than one year 55,115 43,564
Provisions for liabilities
and charges 6,276 5,263
-------- --------
Net assets 91,885 82,831
======== ========
Capital and reserves
Ordinary share capital 27,824 27,718
Preference share capital 500 500
Share premium account 34,070 33,642
Revaluation reserve 2,723 2,735
Profit and loss account 24,440 15,810
-------- --------
Shareholders' funds
(incl.non-equity interests) 89,557 80,405
Minority interests 2,328 2,426
-------- --------
Total capital employed 91,885 82,831
======== ========
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Year Year
Ended Ended
02-Oct-99 03-Oct-98
Note £'000 £'000
Operating activities
Operating profit 21,880 22,351
Goodwill amortisation 163 -
Depreciation 9,734 8,871
Movement in working
capital and provisions (8,905) 1,787
Other movements (646) 84
-------- --------
Net cash flow from operating
activities 22,226 33,093
Associated company dividends
received - 149
Returns on investments and
servicing of finance (1,926) 1,230
Corporation tax paid (4,215) (7,624)
Net capital expenditure (32,226) (12,878)
Purchase of fixed asset
investments - (292)
Sale of fixed asset investments - 145
Purchase of subsidiary undertakings (17,957) (44,262)
Equity dividends paid (6,394) (5,930)
-------- --------
Net cash outflow before
management of liquid resources
and financing (40,492) (36,369)
Decrease/(Increase) in cash
deposits treated as
liquid resources 36,800 (1,800)
Financing
Issue of ordinary shares 534 273
Issue of shares to minority
shareholders - 149
Movement in loans and finance
leases 13,760 26,937
-------- --------
Increase/(decrease) in cash in
the period 10,602 (10,810)
======== ========
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash
in the period 10,602 (10,810)
Movements in loans and finance
leases (13,760) (26,935)
Movement in liquid resources (36,800) 1,800
Amortisation of loan costs (50) -
Loans and finance leases acquired
from acquisitions (3,457) -
Exchange differences (429) 993
-------- --------
Movement in net debt in
the period (43,894) (34,952)
Net (debt)/funds at the
beginning of the period (2,472) 32,480
-------- --------
Net debt at the end
of the period 8 (46,366) (2,472)
======== ========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. The figures and financial information for the year ended
2 October 1999 do not constitute the statutory financial
statements for that year. Those financial statements have not
yet been delivered to the Registrar, nor have the auditors yet
reported on them. The company's accounting period ends on the
Saturday nearest to 30 September each year. The period ended 2
October 1999 consisted of 52 weeks (1998 53 weeks).
This preliminary announcement has been prepared using
accounting policies that are consistent with the policies
detailed in the financial statements for the year ended 3
October 1998 except for the introduction of the following:
* Interest is capitalised gross during the period of
construction where it relates either to the financing
of major projects with long periods of development or
to dedicated financing of other projects. All other
interest is charged against income.
* In accordance with Financial Reporting Standard No 10
'Goodwill and Intangible Assets' (FRS10), goodwill
arising on acquisitions made on or after 3 October
1998 is capitalised and amortised on a straight line
basis over its useful economic life. Previously all
goodwill was written off against reserves in the year
of acquisition. On the subsequent disposal or
termination of a previously acquired business, the
profit or loss on disposal is determined after
including the attributable amount of purchased
goodwill previously written off. The results of
businesses acquired are included from the effective
date of acquisition and businesses sold are included
up to the date of disposal.
FRS14, 'Earnings per Share' has been adopted and,
consequently, basic and diluted earnings per share have
been calculated in accordance with the new methodology.
Comparative basic and diluted earnings per share for 1998
have been re-calculated on the same basis.
Other financial reporting standards which have been adopted
for the year ended 2 October 1999, but do not impact on the
presentation of information in the preliminary announcement
are as follows:
* FRS 11 Impairment of fixed assets and goodwill
* FRS 12 Provisions, contingent liabilities and
contingent assets
* FRS 13 Derivatives and other financial instruments:
disclosures
2. Segmental Information : Continuing activities
Year Ended Year Ended
02-Oct-99 03-Oct-98
£'000 £'000
a) External sales by destination:
United Kingdom 51,655 63,025
Other European 73,776 68,020
North America 133,926 129,963
Rest of World 6,807 6,077
-------- --------
266,164 267,085
======== ========
b) External sales by origin:
United Kingdom 90,621 103,759
Other European 41,385 36,291
North America 134,158 127,035
-------- --------
266,164 267,085
======== ========
c) Operating profit by origin:
United Kingdom 3,298 5,478
Other European 3,743 2,435
North America 14,839 14,438
------- -------
21,880 22,351
======== ========
d) External sales by business sector:
Automotive Components 187,815 196,097
Technical Products 78,349 70,988
-------- --------
266,164 267,085
======== ========
e) Operating profit by business sector:
Automotive Components 13,198 15,740
Technical Products 8,682 6,611
-------- --------
21,880 22,351
======== ========
f) Profit before taxation and
exceptional items: 20,484 23,187
======== ========
g) Analysis of external sales and operating profit:
External Sales
- First half of year 131,596 128,695
- Second half of year 134,568 138,390
-------- --------
266,164 267,085
======== ========
Operating profit
- First half of year 10,050 9,609
- Second half of year 11,830 12,742
-------- --------
21,880 22,351
======== ========
3. The exceptional gain arose from insurance proceeds
received for the refurbishment of plant and machinery that
could not be replaced. The expenditure on the major
refurbishment has been capitalised and the proceeds taken
as an effective gain on disposal. The gain of £1,422,000 is
before taking account of the related tax charge of
£498,000.
4. The taxation charge, based on the results for the year,
comprises:
1999 1998
Current taxation: £'000 £'000
United Kingdom corporation tax
at 30.5% (1998 31%) 546 1,981
Overseas taxes 3,651 5,077
Associated company 14 51
-------- --------
4,211 7,109
2,046 (106)
-------- --------
Deferred Tax 6,257 7,003
======== ========
5. Profit and loss accounts of foreign group undertakings
are translated at average rates of exchange and balance
sheets are translated at year-end rates.
6. If approved, payment of the final dividend on the
ordinary shares will be made on 28 January 2000 to
shareholders on the register at the close of business on 6
January 2000. The cost will be £4,762,000 (1998:
£4,458,000).
The half year dividend on the 500,000 7% cumulative
preference shares will be paid at the rate of 3.5p per
share on 31 December 1999 to shareholders on the register
at close of business on 3 December 1999. The cost will be
£17,500 (1998 £12,250). The title of these shares has been
changed during the year following the abolition of ACT.
7.Basic earnings per share amount to 56.8p (1998 62.4p) and
are based on profit after taxation, and deduction of
minority interests, and non-equity dividends, of
£15,747,000 (1998 £17,131,000) and 27,721,000 ordinary
shares (1998 27,454,000) being the weighted average of the
shares in issue during the year.
Earnings per share before exceptional items amount to 53.5p
(1998 59.8p) and are based on profit after taxation and
deduction of minority interests and non-equity dividends,
of £14,823,000 (1998: £16,413,000).
Diluted earnings per share amount to 56.7p (1998 61.7p) and
are based on profit after taxation, and deduction of
minority interests, and non-equity dividends of £15,747,000
(1998: £17,131,000) and 27,795,000 ordinary shares (1998:
27,750,000) being the diluted weighted average number of
shares in issue during the year.
The difference between the weighted average number of
shares in issue and the diluted weighted average number of
shares in issue relates to unexercised share options.
Adjusted earnings per share figures have been calculated in
addition to the basic and diluted figures since, in the
opinion of the directors, this gives a better understanding
of the Group's performance.
8. Analysis of movement in net debt
As at
03-Oct-98 Cash flow
£'000 £'000
Cash in bank and in hand 6,473 10,313
Overdrafts (2,366) (105)
Debt due after 1 year (41,240) (7,752)
Debt due within 1 year (103) (6,671)
Finance leases (2,036) 613
Current asset investments 36,800 (36,800)
------- -------
(2,472) (40,402)
------- -------
Exchange As at
movements Acquisitions 02-Oct-99
£'000 £'000 £'000
Cash in bank and
in 48 502 17,336
Overdrafts 178 (108) (2,401)
Debt due after 1 year (605) (3,282) (52,879)
Debt due within 1 year (54) - (6,828)
Finance leases 4 (175) (1,594)
Current asset investments - - -
-------- -------- --------
(429) (3,063) (46,366)
-------- -------- --------
9.On 30 June 1999 the Group acquired two Spanish companies;
Industrial Flexo S.A. and Proflex S.A. The total cost of
the acquisition was £17,681,000 including £850,000 of
acquisition expenses. The fair value of the net assets
acquired totalled £4,529,000 giving rise to goodwill of
£13,152,000.
10. The company completed the sale of its subsidiary
company, CQC Ltd (formerly known as CQC PLC) on 15 October
1999 to a new company Crossco (430) Ltd which was formed by
three existing directors of CQC, Mr M Rennie, Managing
Director, Mr P Gulliford, Marketing Director and Mr A
Greene, Finance Director.
Based in Barnstaple, Devon the company manufactures a wide
range of advanced textile based clothing and personal
protection equipment for armed forces and, at the date of
the disposal, employed 157 people.
The consideration for this disposal amounted to £1.6
million in cash. Additionally, and by a separate
transaction, the Group also sold the freehold site, from
which CQC Ltd operated, for a consideration of £1.0 million
in cash.
The sale of the business, which was regarded as non-core to
the Group's activities did not result in any significant
gain or loss based upon the carrying value in the accounts
(including goodwill previously written off against
reserves). During the year ended 2 October 1999, CQC Ltd
made a profit before interest, tax and management charges
of £0.6 million.
11. Over the last three years the Group has conducted a
review aimed at ensuring that all IT systems will be Year
2000 compliant in time to support business operations and
that all embedded chips in production and process equipment
are checked and where necessary replaced. This review has
been extensive and subject to external audit by specialist
consultants acting for customers and we believe that we
have taken all reasonable steps to ensure that all
significant IT systems (including production and process
equipment) will be compliant by the end of the year.
However, the diversity of systems in use and reliance on
third parties for some services means that it is impossible
to guarantee that no Year 2000 problems will arise.
Contingency and 'Roll Over' plans have been designed to
promote a smooth transition to the new millennium and to
minimise disruption caused by unexpected internal or
external failures. Major customers and suppliers have been
contacted and where appropriate Avon staff have carried out
on-site audits.
The incremental costs of this exercise have been covered
within normal IT expenditure and are not considered
material.
12. Copies of the directors' report and the audited
financial statements for the year ended 2 October 1999 will
be posted to shareholders by 22 December 1999 and may be
obtained thereafter from the company's registered office at
Manvers House, Kingston Road, Bradford on Avon, Wiltshire
BA15 1AA (Telephone 01225 861100).
Latest directors dealings
- 22 minutes ago Tatton Asset Management
- 1 hour ago Zotefoams
- 2 hours ago Antofagasta
- 2 hours ago United Utilities Group
- 3 hours ago Morgan Sindall Group