Final Results - Year Ended 31 December 1999
Molins PLC
29 February 2000
1999 PRELIMINARY ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its
results for the year ended 31 December 1999.
1999 1998
Sales £110.6m £140.6m*
Operating profit (before exceptional items) £3.3m £8.5m*
Profit before tax (before exceptional items) £3.7m £9.2m
Profit/(loss) £4.2m (£12.9m)
Earnings per share - before exceptional items 6.6p 16.3p
Earnings/(loss) per share - after exceptional items 11.8p (36.2p)
Dividends per share 6.5p 8.0p
Net assets per ordinary share 208p 196p
* Continuing businesses
Highlights
* Continued growth in Packaging Machinery with profits up 43%
* Tobacco Machinery division in profit
* Strong balance sheet with net cash balance of £8.2m
* Repurchased 9% of issued capital
Peter Byrom, Chairman, commented:
'The results are in line with the outlook expressed in the interim
statement. The Packaging Machinery division achieved good growth in orders,
activity, sales and profits. The market for tobacco machinery showed further
decline in the year, affecting sales of both original equipment and spares.
Nevertheless the division was still able to report a small profit for the
year.'
'The tobacco business continues to undergo significant change in response to
the reorganisation and consolidation among cigarette manufacturers and the
increasingly challenging market for their products.'
'The Packaging Machinery division has strong order books and we expect to
show further good progress in 2000.'
Enquiries: Molins PLC Tel: 020 7638 9571
Peter Byrom, Chairman
David Cowen, Group Finance Director
Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571
Margaret George
Chairman's statement
The Packaging Machinery division achieved good growth in orders, activity,
sales and profits. The market for tobacco machinery showed further decline,
affecting sales of original equipment and, to a lesser extent, spares.
Turnover (continuing operations)
1999 1998
£m £m
Tobacco Machinery 68.4 100.2 -32%
Packaging Machinery 42.2 40.4 +5%
----- -----
110.6 140.6 -21%
----- -----
Tobacco Machinery
Demand for tobacco machinery continued to decline through the year. The
market has been affected by the major consolidation among manufacturers of
cigarettes, the rationalisation of manufacturing facilities by most
manufacturers and the decline in smoking in many Western economies. There
have been very few new orders for original equipment throughout the industry
and the demand for spares has reduced as manufacturers retire surplus
equipment and consolidate spares inventories within fewer factories.
Molins has responded by reducing the scale of its operations. At the end of
1999 there were 815 people employed in the Tobacco Machinery division
compared with 2,000 in June 1997. The transfer of the spares business from
Peterborough to Saunderton was more difficult than originally envisaged and
resulted in a decline in factory efficiency. The issues are being addressed
and efficiencies and customer service are improving progressively.
Molins has the greatest share of machines installed with cigarette
manufacturers worldwide. We are continuing to develop partnerships with our
customers to prolong the life and enhance the efficiency of installed
equipment while maintaining the resources necessary to respond to any
increases in demand for original equipment.
Packaging Machinery
Langen, based in Toronto, Canada, is a leading manufacturer of horizontal
cartoning equipment for manufacturers of pharmaceutical and fast moving
consumer goods. Its sister company, Langenpac, is based in Wijchen, the
Netherlands. They provide innovative solutions for complex and novel
packaging concepts as well as a standard range of equipment. Sandiacre, based
in Nottingham and in Richmond, Virginia, USA, is a leading manufacturer of
vertical form fill and seal packaging equipment. Coventry based Molins
International Technology Centre Machinery ('ITCM') carries out specific
product developments on behalf of Molins' existing businesses as well as for
external customers.
Excluding the turnover of Molins Australia, sold in 1999, the Packaging
Machinery division's sales grew by 9% in the year. The sales growth is less
than the increase in activity rate. At the end of 1999 there were several
contracts, including a major one for a multinational pharmaceutical group,
which were well advanced and will be delivered and taken to profit in the
first half of 2000. The new management teams at Langen and Langenpac have
settled in well. Both companies have strong order books. Sandiacre has had a
mixed year, with sales in the Americas growing by some 24% but, while the UK
remained quite buoyant, demand in continental Europe was weak. This
resulted in an overall reduction in Sandiacre's sales.
ITCM continues its development work with Unilever for pyramid and other tea
bag equipment. Sales have been made into the UK, France and South Africa in
the year. Other innovations in the year included the development of machines
for personal hygiene products, cereal packaging and flexible packaging
applications.
Operating results
Operating profits for the Packaging Machinery division increased from £2.1m
to £3.0m, an increase of 43%, while those of the Tobacco Machinery division
fell from £6.4m to £0.3m in line with the expectation expressed in the
interim statement. The company had a positive net cash balance throughout
the year and earned interest of £0.4m (1998: £0.1m).
In the second half of the year the Company closed its Australian subsidiary.
It was no longer viable having lost its Langston distributorship following
the sale of Langston by the Company in 1998. This resulted in an exceptional
post tax loss of £0.2m. Also, in the second half of the year agreement was
reached with the purchasers of Langston on all outstanding matters arising
from the sale. This resulted in an exceptional charge before tax of £0.2m and
an exceptional tax credit of £2.2m. The effect of the exceptional items was
to increase earnings by £1.8m.
Tax on operating results amounted to £1.3m, an effective rate of 35.1%. This
amount includes withholding taxes of £0.4m on dividends paid by foreign
subsidiaries.
Earnings per share before exceptional items amounted to 6.6p (1998: 16.3p).
After exceptional items earnings per share amounted to 11.8p (1998: loss of
36.2p).
Shareholders' funds and cash
During the year the Company purchased for cancellation a total of 3,097,045
shares, representing 8.7% of the issued capital, at an aggregate cost of
£3.8m. The average price at which shares were purchased was 123p.
Equity shareholders' funds before share purchases increased from £69.5m to
£71.2m. The purchases reduced year end equity shareholders' funds to £67.4m.
Net assets per ordinary share increased from 196p to 208p, an increase of 6%.
The net cash balances at the beginning of the year amounted to £10.9m and
closing balances amounted to £8.2m. Net cash flow benefited from £4.5m
proceeds in relation to the Langston agreement and £1.1m proceeds from the
sale and closure of the business activities of Molins Australia. These
inflows were offset by a cash outflow of £5.5m in relation to continued
restructuring in the Tobacco Machinery division and £3.8m in connection with
share purchases. The balance of the restructuring provision at the year end
amounted to £3.4m. The net cash flow from operating activities, excluding
restructuring costs, amounted to £4.6m (1998: £15.9m).
Dividend
The directors have proposed a final dividend of 4.0p per share which with the
interim dividend of 2.5p gives a total dividend for the year of 6.5p
(1998: 8.0p). The final dividend will be paid on 17 May 2000 to
ordinary shareholders registered on 14 April 2000.
Board changes
I was appointed to the Board as a non-executive director on 4 February 1999.
David Cowen was appointed Group Finance Director on 8 February 1999 and Dr
Amar Sabberwal joined the Board as a non-executive director on 4 May 1999.
Michael Steen was appointed today as a non-executive director.
At the Annual General Meeting on 21 April 1999 Michael Orr retired as
Chairman, Sir Lindsay Bryson and Dr John Parnaby retired as directors and I
was appointed Chairman.
On 9 December 1999 Peter Grant stepped down as Group Chief Executive
following a period of major rationalisation. We are grateful to him for his
contribution in a time of great transition. I assumed executive
responsibility for the Group and Dr Sabberwal has been appointed Chief
Executive of the Tobacco Machinery division. Mr Grant resigned as a director
on 9 February 2000.
Outlook
The next few months will see further rationalisation and re-organisation of
the Tobacco Machinery division to bring its activities in line with market
conditions. Steps are being taken to improve productivity and to reduce
costs. A series of projects is in progress to enhance the service to our
customers to meet their needs and to develop partnerships with customers to
mutual advantage. We also continue to focus on the better utilisation and
efficient use of the assets employed in the division.
The Packaging Machinery division has strong order books and we expect to show
further good progress in 2000.
Peter Byrom
Chairman
29 February 2000
Group profit and loss account for the year ended 31 December
1999
Before 1999
exceptional Exceptional 1999
items items Total
£m £m £m
Turnover
- Continuing operations 110.6 - 110.6
- Discontinued operations - - -
----- ----- -----
Total turnover 110.6 - 110.6
Cost of sales (85.1) - (85.1)
----- ----- -----
Gross profit 25.5 - 25.5
Net operating expenses (22.2) - (22.2)
----- ----- -----
Operating profit/(loss)
- Continuing operations 3.3 - 3.3
- Discontinued operations - - -
----- ----- -----
Total operating profit/ (loss) 3.3 - 3.3
(Loss)/profit on sale/closure
of businesses - (0.3) (0.3)
Net interest receivable 0.4 - 0.4
----- ----- -----
Profit/(loss) on ordinary activities
before taxation 3.7 (0.3) 3.4
Taxation (1.3) 2.1 0.8
----- ----- -----
Profit/(loss) for the financial year 2.4 1.8 4.2
Dividends (including non-equity) (2.2) - (2.2)
----- ----- -----
Retained profit/(loss)
for the year 0.2 1.8 2.0
----- ----- -----
Basic and fully diluted
earnings/(loss) per ordinary share 6.6p 5.2p 11.8p
Interim dividend paid October 1999 2.5p
Proposed final dividend 4.0p
-----
Total 6.5p
-----
Dividend cover
(before exceptional items) 1.0 times
The weighted average number of ordinary shares in issue during 1999
was 34,846,109 (1998: 35,572,959).
Group profit and loss account for the year ended 31 December
1998
Before 1998
exceptional Exceptional 1998
items items Total
£m £m £m
Turnover
- Continuing operations 140.6 - 140.6
- Discontinued operations 29.6 - 29.6
----- ----- -----
Total turnover 170.2 - 170.2
Cost of sales (127.9) (12.6) (140.5)
----- ----- -----
Gross profit 42.3 (12.6) 29.7
Net operating expenses (33.2) (3.4) (36.6)
----- ----- -----
Operating profit/(loss)
- Continuing operations 8.5 (16.0) (7.5)
- Discontinued operations 0.6 - 0.6
----- ----- -----
Total operating profit/ (loss) 9.1 (16.0) (6.9)
(Loss)/profit on sale/closure
of businesses - 0.2 0.2
Net interest receivable 0.1 - 0.1
----- ----- -----
Profit/(loss) on ordinary activities
before taxation 9.2 (15.8) (6.6)
Taxation (3.4) (2.9) (6.3)
----- ----- -----
Profit/(loss) for the financial year 5.8 (18.7) (12.9)
Dividends (including non-equity) (2.9) - (2.9)
----- ----- -----
Retained profit/(loss) for the year 2.9 (18.7) (15.8)
----- ----- -----
Basic and fully diluted
earnings/(loss) per ordinary share 16.3p (52.5)p (36.2)p
Interim dividend paid October 1999 6.5p
Proposed final dividend 1.5p
-----
Total 8.0p
-----
Dividend cover
(before exceptional items) 2.0 times
The weighted average number of ordinary shares in issue during 1999
was 34,846,109 (1998: 35,572,959).
Group balance sheet as at 31 December
1999 1998
£m £m
Fixed assets
Tangible assets 26.9 29.4
Investments 2.1 1.9
----- -----
29.0 31.3
----- -----
Current assets
Stocks 30.8 38.1
Debtors - due within one year 28.5 36.9
Debtors - due after more than one year 16.7 18.8
Cash at bank and in hand 9.8 13.7
----- -----
85.8 107.5
Creditors - amounts falling due within one year
Borrowings (1.2) (2.4)
Other creditors (37.6) (53.1)
Proposed dividend (1.3) (0.5)
----- -----
(40.1) (56.0)
Net current assets 45.7 51.5
----- -----
Total assets less current liabilities 74.7 82.8
Creditors - amounts falling due after more
than one year
Borrowings (0.4) (0.4)
Other creditors (0.2) (0.3)
----- -----
(0.6) (0.7)
Provisions for liabilities and charges (5.8) (11.5)
----- -----
Net assets 68.3 70.6
----- -----
Capital and reserves
Called up share capital 9.0 9.8
Share premium account 25.6 25.6
Capital redemption reserve 0.8 -
Revaluation reserve 7.3 17.7
Profit and loss account 25.6 17.3
----- -----
Shareholders' funds (including non-equity interests) 68.3 70.4
Minority interests - 0.2
----- -----
68.3 70.6
----- -----
Net cash 8.2 10.9
Net assets - per ordinary share 208p 196p
Group cash flow statement for the year ended 31 December
1999 1998
£m £m
Net cash (outflow)/inflow from
operating activities (note 6) (0.9) 5.6
Return on investments and servicing of finance 0.4 (0.2)
Taxation 0.3 (6.0)
Capital expenditure (net) (1.4) 0.3
Acquisitions and disposals 3.8 24.1
Equity dividends paid (1.5) (5.4)
----- -----
Net cash inflow before management of liquid
resources and financing 0.7 18.4
Management of liquid resources 3.7 (4.6)
Financing (3.9) (14.5)
----- -----
Increase/(decrease) in cash in the period 0.5 (0.7)
----- -----
Reconciliation of net cash flow to movement in net funds/(debt) for
the year ended 31 December
1999 1998
£m £m
Increase/(decrease) in cash in the period 0.5 (0.7)
Cash (inflow)/outflow from movement in liquid resources (3.7) 4.6
Cash outflow from decrease in debt and lease financing 0.1 14.6
----- -----
Change in net funds/(debt) resulting from cash flows (3.1) 18.5
Translation difference 0.4 (0.3)
----- -----
Movement in net funds/(debt) in the period (2.7) 18.2
Net funds/(debt) at 1 January 10.9 (7.3)
----- -----
Net funds at 31 December 8.2 10.9
----- -----
Statement of total group recognised gains and losses for the year
ended 31 December
1999 1998
£m £m
Profit/(loss) for the year 4.2 (12.9)
Currency translation differences arising on
foreign currency net investments (0.3) -
Unrealised surplus on revaluation of properties - 1.4
----- -----
Total recognised gains/(losses) for the year 3.9 (11.5)
----- -----
Notes to the preliminary announcement
1. The Group's accounts have been prepared in accordance with
applicable accounting and financial reporting standards.
2. The financial information set out above does not constitute
the Group's statutory accounts for the years ended 31 December
1999 and 1998 but is extracted therefrom. The Group's
statutory accounts for 1999 will be sent to shareholders by 27
March 2000 with the notice of the Annual General Meeting. The
Group's statutory accounts for 1999 and 1998 each received an
unqualified auditors report.
3. Segmental analysis for the year ended 31 December
The results are analysed by business segment as follows:
1999
1999 1998 Operating
Turnover Turnover profit/(loss)
£m £m £m
Tobacco Machinery 68.4 100.2 0.3
Packaging Machinery 42.2 40.4 3.0
----- ----- -----
110.6 140.6 3.3
Discontinued operations - 29.6 -
----- ----- -----
110.6 170.2 3.3
----- -----
Exceptional item - Tobacco
Machinery restructuring -
-----
Operating profit/(loss) 3.3
-----
1998
Operating 1999 1998
profit/(loss) Net assets Net assets
£m £m £m
Tobacco Machinery 6.4 44.4 46.5
Packaging Machinery 2.1 15.7 13.2
----- ----- -----
8.5 60.1 59.7
Discontinued operations 0.6 - -
----- ----- -----
9.1 60.1 59.7
Exceptional item - Tobacco
Machinery restructuring (16.0)
-----
Operating profit/(loss) (6.9)
-----
Net cash 8.2 10.9
----- -----
Net assets 68.3 70.6
----- -----
4. Turnover by geographical destination of goods for the year
ended 31 December
1999 1999 1998 1998
£m % £m %
United Kingdom 18.6 17 17.8 10
Continental Europe 18.1 16 21.4 13
North America 41.2 37 70.5 41
Asia 17.4 16 36.8 22
Rest of world 15.3 14 23.7 14
----- ----- ----- -----
110.6 100 170.2 100
----- ----- ----- -----
5. Exceptional items for the year ended 31 December
1999
Exceptional 1999 1999
items Taxation Net
£m £m £m
Restructuring of Tobacco
Machinery division - - -
Sale of Langston business
(discontinued operation) (0.2) 2.2 2.0
Closure of Australian operation (0.1) (0.1) (0.2)
----- ----- -----
(0.3) 2.1 1.8
----- ----- -----
1998
Exceptional 1998 1998
items Taxation Net
£m £m £m
Restructuring of Tobacco
Machinery division (16.0) 0.4 (15.6)
Sale of Langston business
(discontinued operation) 0.2 (3.3) (3.1)
Closure of Australian operation - - -
----- ----- -----
(15.8) (2.9) (18.7)
----- ----- -----
6. Reconciliation of operating profit/(loss) to operating cash flows
1999 1998
For the year ended 31 December £m £m
Operating profit/(loss) 3.3 (6.9)
Depreciation 3.3 5.8
Other movements (0.4) 0.2
Movements in restructuring and
rationalisation provisions:
- new provisions created - 16.0
- cash movements (5.5) (10.1)
Working capital movements:
- stocks 6.3 1.4
- debtors 0.3 12.1
- creditors and other provisions (8.2) (12.9)
----- -----
Net cash (outflow)/inflow
from operating activities (0.9) 5.6
----- -----
Cash flows from exceptional items
excluding tax effect (5.5) (10.3)
Other cash flows 4.6 15.9
----- -----
Net cash (outflow)/inflow from operating activities (0.9) 5.6
----- -----
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