2008 HALF-YEAR ANNOUNCEMENT
2008 HALF-YEAR ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its results for the six months ended 30 June 2008.
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6 months |
6 months |
12 months |
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Sales |
£45.2m |
£41.1m |
£89.3m |
* Continuing operations before net pension credit of £1.7m (30 June 2007: £1.4m; 31 December 2007: £3.0m)
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Sales increase of 10%
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Underlying profit marginally down on previous year
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Expectation of strongly second half weighted year
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Interim dividend increase of 25% to 2.5p
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Option period for sale of Saunderton site extended to 18 December
Dick Hunter, Chief Executive, commented:
'The Group remains focused on the organic development of its businesses, through targeted product development, excellence in customer service and ongoing operational efficiency improvements.
'Overall, the Group is expected to produce a much stronger second half performance than in the first half, as has been the pattern over the last few years. Tobacco Machinery is expected to deliver sales in the full year at similar levels to last year, but as previously indicated this is unlikely to reflect as favourable a mix as in 2007. Packaging Machinery is expected to perform considerably more strongly in the second half of the year compared with the first half, and to show progress in the year as a whole. Scientific Services is also well placed to continue its progress.'
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Enquiries: |
Molins PLC Dick Hunter, Chief Executive; David Cowen, Group Finance Director |
Tel: 020 7638 9571 |
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Issued by: |
Citigate Dewe Rogerson Angharad Couch |
Tel: 020 7638 9571 |
Interim Management Report
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.
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 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, with main facilities in the UK and US.
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 2008 were £45.2m (2007: £41.1m). Profit for the period was £2.3m (2007: £1.9m) and basic earnings per share amounted to 12.0p (2007: 10.1p). Underlying operating profit (continuing operations before net pension credit) was £0.8m (2007: £1.0m) and underlying earnings per share amounted to 1.5p (2007: 2.7p).
Tobacco Machinery
Sales increased in the period by 15% to £17.2m (2007: £14.9m), with an increase in original and rebuild equipment sales more than compensating for a small and expected reduction in sales of spare parts and other aftermarket services. Operating profit in the period reduced to £0.4m (2007: £1.2m). Lower profit margins were achieved for equipment sales than in the aftermarket, and the impact of a strengthening currency in the Czech Republic has increased Czech product costs despite continued improvements in the efficiency of the division's main manufacturing plant. Overall, order intake was ahead of last year and the division is expected to deliver similar sales levels in the full year as the previous year, with a stronger performance in the second half compared with the first half of 2008.
The division's new cigarette making machine, Octave, which was presented at the industry trade show in November 2007, is undergoing a full production field trial in a customer's factory.
Packaging Machinery
Sales decreased in the period to £18.3m (2007: £19.7m), reflecting a combination of increases at ITCM, Langen Packaging and Cerulean Packing, but offset by a reduction in sales at Langenpac. The Langenpac reduction is due to a strongly second half weighted order book for the current year, combined with an unusually high level of sales in the first half of 2007.
Overall order intake in the division was down, with customers acting cautiously in respect of their capital investment decisions, reflecting uncertain global economic conditions. However, Langenpac achieved an increase in order intake in the period compared with last year, and whilst order intake at ITCM was lower, prospects for a strong level of order intake in the second half of the year for this business are good.
The division returned an operating loss in the period of £0.2m, compared with break-even in 2007. As anticipated, the performance at Langen Packaging was considerably improved, following a significant loss in 2007, as the operational improvement plan continued to take effect. Conditions, though, remain difficult in the North American market, compounded by the strong Canadian dollar. In line with its lower sales levels Langenpac returned a loss in the period, compared with a strong level of profit last year. Performance in the second half of the year is expected to be stronger in all parts of the division.
Scientific Services
Sales in the period increased to £9.7m (2007: £6.5m), leading to an improved operating profit in the half-year of £0.6m, compared with a loss in 2007 of £0.2m.
The improved divisional performance was driven by Cerulean, with the increased order intake experienced in the second half of 2007 continuing through the first half of this year, although investment plans throughout the tobacco industry remain uncertain. With relatively short delivery cycles, sales improved considerably compared with the equivalent period last year, which in turn resulted in improved profitability.
Performance at Arista Laboratories was broadly similar to last year. As previously communicated, one of its major customers has in-sourced part of its testing requirements in order to utilise better its own internal laboratory, which has impacted performance at Arista. There remain reasonable prospects of regulatory changes, especially in the US, which would lead to opportunities for the business, although the timing and impact of such legislation passing is uncertain.
Cash
Group net debt at 30 June 2008 was £14.4m (30 June 2007: £13.2m; 31 December 2007: £7.6m). The prime constituents of the adverse cash movement in the six month period were an increase in working capital levels of £5.7m, mainly as a result of the level of advance cash deposits held by the Group having reduced from a relatively high level at the end of 2007, reorganisation costs paid to the pension scheme of £0.6m and dividends paid of £1.0m. As in previous years it is expected that the Group will generate positive cash flows in the second half of the year, thereby reducing net debt from the half-year position.
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 2008, the net pension credit arising from the defined benefit schemes was £1.7m (2007: £1.4m). The IAS 19 valuation of the UK scheme at 30 June 2008 shows a deterioration, moving from a surplus of £25.9m before tax at 31 December 2007, to a surplus of £6.6m at the half-year. This decrease has largely arisen from an actuarial loss in the period, with a decrease in the value of the scheme's assets to £326.1m (31 December 2007: £355.0m) being only partially offset by a reduction in the value of the scheme's liabilities to £319.5m (31 December 2007: £329.1m). The net valuation of the US pension funds at 30 June 2008, with total assets of £11.9m, showed a deficit of £0.5m (31 December 2007: £0.4m surplus).
In the six months period the Group made payments to these funds of £0.4m for the regular cost of benefits, plus a final payment of £0.6m in respect of pension augmentation costs arising from redundancies announced in 2006.
Property
In March 2008 shareholder approval was obtained in respect of an agreement entered into by the Company, which granted the prospective purchaser of the Company's site in Saunderton, UK, e-shelter facility services GmbH, an option to acquire the property on or before 3 October 2008 for a cash consideration of £17.5m. Since that time the prospective purchaser has been working to obtain planning permission for its proposed scheme. Due to additional information requirements of the planning authority, planning permission is unlikely to have been obtained by the end of the option period. e-shelter is not prepared to exercise its option without the planning permission and therefore has sought, and the Company has granted, within the terms of the ordinary resolution approved by Molins' shareholders, an extension to the option period to 18 December 2008, to allow the acquisition of the property by 22 December 2008. All other terms and conditions of the proposed transaction, full details of which are contained in a circular sent to shareholders on 29 February 2008, have remained unchanged, which includes the payment by e-shelter to the Company of £300,000 on or before 30 September as a non-returnable deposit, in addition to amounts already received.
The book value of the property subject to the transaction was £13.1m at 30 June 2008 before deferred tax, £12.5m net of deferred tax. If completed the transaction will result in net cash proceeds, after costs and taxation, of approximately £15.7m and generate a profit to the Group of approximately £3.8m.
Related party transactions
There has been no material change in the nature of related party transactions from those described in note 32 of the 2007 Annual Report and Accounts and these are also referred to in note 14 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 8 and 9 of the Group's 2007 Annual Report and Accounts.
Dividend
The Board has declared an interim dividend in respect of 2008 of 2.5p per ordinary share (2007: 2p), which will be paid on 9 October 2008 to shareholders on the register on 12 September 2008. Dividends paid to shareholders in the six months to 30 June 2008 were 5p per ordinary share (2007: 4p).
Board
Jonathan Azis joined the Board as a non-executive director on 1 July 2008, and John Allkins and Andrew Cripps were appointed as non-executive directors on 1 August 2008. Mike Steen, a non-executive director since 2000, retired from the Board on 30 June 2008.
Outlook
Overall, the Group is expected to produce a much stronger second half performance than in the first half, as has been the pattern over the last few years. Tobacco Machinery is expected to deliver sales in the full year at similar levels to last year, but as previously indicated this is unlikely to reflect as favourable a mix as in 2007. Packaging Machinery is expected to perform considerably more strongly in the second half of the year compared with the first half, and to show progress in the year as a whole. Scientific Services is also well placed to continue its progress.
Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report
We confirm that to the best of our knowledge:
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the condensed set of financial statements has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU; and
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the Interim Management Report includes a fair review of the information required by:
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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
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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 2008
Condensed Consolidated Income Statement
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6 months to 30 June 2008 £m |
6 months to 30 June 2007 £m |
12 months to 31 Dec 2007 £m |
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Continuing operations |
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45.2 (32.7)
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(29.4)
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89.3 (63.2)
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Financial income |
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0.1 |
0.1 |
0.2 |
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Discontinued operations |
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Continuing operations |
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Condensed Consolidated Balance Sheet
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30 June |
30 June |
31 Dec |
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Non-current assets |
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Current assets |
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Current liabilities |
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Net current assets |
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15.4 |
8.9 |
7.9 |
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Total assets less current liabilities |
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57.6 |
66.8 |
62.7 |
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Non-current liabilities |
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Net assets |
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39.5 |
43.1 |
52.3 |
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Equity |
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Condensed Consolidated Statement of Cash Flows
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6 months |
6 months 30 June |
12 months |
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Continuing operations |
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Amortisation |
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0.7 |
0.5 |
1.2 |
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Other non-cash items |
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(1.5) |
(1.2) |
(2.7) |
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Working capital movements: |
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Taxation paid |
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(0.4) |
(0.5) |
(0.7) |
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Net cash from operating activities |
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(4.5) |
1.7 |
6.3 |
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Investing activities |
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Net cash from investing activities |
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(1.2) |
(1.9) |
(3.6) |
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Financing activities |
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Net cash from financing activities |
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5.4 |
(1.8) |
(9.1) |
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Discontinued operations Net cash from investing activities |
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Net cash from discontinued operations |
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(0.2) |
0.7 |
4.2 |
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Condensed Consolidated Statement of Recognised Income and Expense
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6 months |
6 months |
12 months |
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Currency translation movements arising on foreign |
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Notes to the Condensed set of Financial Statements
The comparative figures for the financial year ended 31 December 2007 are not the Group’s statutory accounts as defined in section 240 of the Companies Act 1985. 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 2007 are available from the Company’s registered office at 11 Tanners Drive, Blakelands, Milton Keynes MK14 5LU or from the Group’s website at www.molins.com.
The condensed set of financial statements for the six months ended 30 June 2008 has been prepared in accordance with IAS 34 Interim financial reporting as adopted by the EU. They do 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 2007.
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Revenue |
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Operating profit/(loss) |
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6 months 30 June |
6 months to 30 June |
12 months 31 Dec |
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6 months |
6 months 30 June |
12 months 31 Dec |
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Continuing operations |
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Tobacco Machinery |
17.2 |
14.9 |
32.9 |
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0.4 |
1.2 |
3.7 |
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Packaging Machinery |
18.3 |
19.7 |
38.7 |
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(0.2) |
- |
0.3 |
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Scientific Services |
9.7 |
6.5 |
17.7 |
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0.6 |
(0.2) |
1.4 |
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Underlying operating profit before net pension credit |
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0.8 |
1.0 |
5.4 |
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Net pension credit |
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1.7 |
1.4 |
3.0 |
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Operating profit |
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Net financing costs |
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(0.4) |
(0.5) |
(1.0) |
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Profit before tax |
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2.1 |
1.9 |
7.4 |
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6 months 30 June |
6 months |
12 months |
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Tax charge on underlying profit |
(0.1) |
- |
(1.0) |
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Tax on Group pension schemes: |
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- tax credit on pension contributions |
0.3 |
- |
- |
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- tax charge on net pension credit |
- |
(0.4) |
(1.0) |
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- tax credit on reduction in UK corporation tax rate on deferred tax balances |
- |
0.2 |
0.2 |
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Taxation |
0.2 |
(0.2) |
(1.8) |
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6 months |
6 months |
12 months |
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Profit for the period |
2.3 |
1.9 |
7.9 |
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Net pension credit (net of tax) |
(2.0) |
(1.2) |
(2.2) |
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Profit from discontinued operations |
- |
(0.2) |
(2.3) |
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Underlying earnings for the period |
0.3 |
0.5 |
3.4 |
10. Reconciliation of net cash flow to movement in net debt
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6 months |
6 months |
12 months |
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Net decrease in cash and cash equivalents |
(0.5) |
(1.3) |
(2.2) |
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Cash (outflow)/inflow from movement in borrowings |
(6.8) |
0.5 |
7.0 |
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Change in net debt resulting from cash flows |
(7.3) |
(0.8) |
4.8 |
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Translation movements |
0.5 |
(0.1) |
(0.1) |
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Movement in net debt in the period |
(6.8) |
(0.9) |
4.7 |
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Opening net debt |
(7.6) |
(12.3) |
(12.3) |
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Closing net debt |
(14.4) |
(13.2) |
(7.6) |
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Analysis of net debt |
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Cash and cash equivalents - current assets |
2.7 |
3.6 |
3.5 |
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Bank overdrafts - current liabilities |
(0.2) |
(0.3) |
(0.8) |
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Interest-bearing loans and borrowings - current liabilities |
- |
(2.0) |
(0.6) |
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Interest-bearing loans and borrowings - non-current liabilities |
(16.9) |
(14.5) |
(9.7) |
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Closing net debt |
(14.4) |
(13.2) |
(7.6) |
11. Reconciliation of movements in equity
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6 months |
6 months |
12 months |
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Opening equity |
52.3 |
24.1 |
24.1 |
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Profit for the period |
2.3 |
1.9 |
7.9 |
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Currency translation movements arising on foreign currency net investments |
1.5 |
- |
1.3 |
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Actuarial (losses)/gains |
(22.6) |
17.8 |
27.1 |
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Withholding tax movements on pension scheme surplus |
6.8 |
- |
(9.1) |
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Tax on items taken directly to equity |
- |
(0.1) |
1.8 |
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Equity-settled share-based transactions (LTIP) |
0.2 |
0.2 |
0.3 |
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Dividends to shareholders |
(1.0) |
(0.8) |
(1.1) |
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Net (decrease)/increase in equity |
(12.8) |
19.0 |
28.2 |
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Closing equity |
39.5 |
43.1 |
52.3 |
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 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Cash Flows, the Consolidated Statement of Recognised Income and Expense 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.
As disclosed in note 2, 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 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.
KPMG Audit Plc
Chartered Accountants
Milton Keynes
28 August 2008
This information is provided by RNS
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