18th Feb 2008 07:00
Low & Bonar PLC18 February 2008 18 February 2008 PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2007 Low & Bonar PLC ("Low & Bonar" or the "Group"), the international technicaltextiles and contract flooring manufacturer, today announces its preliminaryresults for the year ended 30 November 2007. Highlights include: • Group profit before tax* up 52% to £22.4m (2006: £14.7m) on revenues up 39% at £311.8m (2006: £224.5m); acquisitive and organic growth achieved. • Earnings per share* increased by 16% to 10.16p (2006: 8.75p). • Final dividend increased by 11% to 3.1p (2006:2.80p). • A strong performance across the business with both Divisions delivering growth in sales, profit and market share. • Technical Textiles Division benefited strongly from the successful integration of the Colbond and Geo-Tipptex acquisitions and enhanced operating margins. Floors Division growth underpinned by focus on higher margin own-brand products. • Chinese JV continued to grow and maintained double digit operating margins, with especially strong sales of grass yarn products. • Significant opportunities for selected, value-adding acquisitions that give the Group access to complementary products and/or new geographic markets. Two deals completed January 2008. * before amortisation and non-recurring items Duncan Clegg, Low & Bonar's Chairman, commented: "We are in growing sectors with strong market positions and we view the futurewith confidence. "We believe that our businesses are well positioned to take advantage of thesignificant opportunities we see ahead and expect continued progress in bothDivisions over the coming year. Our end markets - with their negligible exposureto any downturn in consumer confidence - continue to look resilient. "The start of our new financial year has been in line with our expectations". Paul Forman, Low & Bonar's Chief Executive, commented: "Low & Bonar's diverse product range and global leadership position in ourchosen niche markets have enabled us to deliver strong increases in sales andprofits in 2007 at the same time as investing significantly in value-addingacquisitions, new product innovations, international expansion and enhancedoperational efficiencies to drive our future growth. Our end-markets continue tobe robust and we remain positive about the outlook for the current year andbeyond." For further information, please contact: Low & Bonar plc +44 (0)20 7535 3180Paul Forman, Chief ExecutiveKevin Higginson, Finance Director Hogarth Partnership Limited +44 (0)20 7357 9477Rachel Hirst/Andrew Jaques/Ian Payne NOTE TO EDITORS 1. Low and Bonar is a world leading technical textiles and contract flooring manufacturer, operating from over 20 sites in 9 countries. The Group is quoted on the London Stock Exchange and is committed to delivering shareholder value through a strategy of organic and acquisitive growth. Recent acquisitions include the acquisitions of Mehler Texnologies, the German-based manufacturer of technically coated fabrics, and Westbond, the specialist UK producer of fusion-bonded carpet tiles. Low & Bonar comprises two divisions: Technical Textiles and Contract Flooring. The key characteristics of its businesses are that they manufacture added-value products based on advanced technology and address markets with strong growth potential. Many of Low & Bonar's products are leaders in their niche markets. 2. You can view or download copies of this announcement and our latest Half Year and Annual reports from our website at www.lowandbonar.com or request free printed copies by contacting Matthew Joy, Company Secretary. Chairman's Statement We have once again enjoyed a successful year and made considerable progresstowards enhancing shareholder value through successfully pursuing our twinobjectives of organic and acquisition based growth. Looking back over the last 12 months we have seen encouraging organic growth insales and profit margins from both the Technical Textiles and the FloorsDivisions, and we believe both are well set for continued progress. You willfind a detailed review of the two Divisions in the Chief Executive's Review. Since the year end we have announced two acquisitions in line with our strategyto pursue value-adding opportunities that are consistent with the divisionalstrategies. Mehler Texnologies Group provides the Technical Textiles Divisionwith a complementary range of high value added technical coated fabrics andWestbond Ltd is an attractive bolt on acquisition for Floors, producing premiumcarpet tiles to add to our existing range of flooring products. We have achieved greater strategic scale in both divisions and, based on prioryear performance, these two acquisitions will add incremental revenue of circa£100m giving pro-forma group revenue of circa £400m. Financial Performance Total Group revenue increased by 38.9% to £311.8m (2006 £224.5m) reflectinggrowth across the existing businesses as well as full year contributions fromColbond and Geotipptex, the two businesses we acquired in 2006. Profit before tax, amortisation and non-recurring items increased significantlyto £22.4m from £14.7m last year, an increase of 52.4%. Profit before taxincreased by 94.9% to £19.1m from £9.8m last year. Earnings per share (EPS) before amortisation and non-recurring items was 10.16p(2006:8.75p), an increase of 16.1%. EPS was 8.60p (2006:5.80p) on a statutorybasis, an increase of 48.3%. Cash Flow Net cash flow from operating activities was strong at £22.9m (2006: £2.4moutflow), and this was used to invest further in the business with net capitalexpenditure increasing to £13.6m compared with £8.4m in the prior year. Net debtat the year end was £50.5m (2006: £46.1m), with interest cover at 7.1 times on aprofit before amortisation and non-recurring items basis. Dividends Your Board is recommending a final ordinary dividend of 3.1p (2006: 2.8p) toshareholders on the register on 21 March 2008. This makes a total dividend forthe year of 4.85p (2006: 4.38p), which is covered 2.1 times calculated on anearnings before amortisation and non-recurring items basis and represents anincrease of 10.7%. This reflects the Board's confidence in the Group's futuregrowth prospects. Payment of the dividend will be made on 17 April 2008 subjectto the approval of shareholders at the AGM on 9th April 2008. Employees I would like to take this opportunity of welcoming our new colleagues in MehlerTexnologies Group and Westbond Ltd to Low & Bonar. We now employ over 2,500 people in 20 main operations located in the US, westernand eastern Europe and China. It is through their very positive responses to thechallenges set by the Board that we have made so much progress in recent years.The Board wishes to thank all our existing colleagues for their hard work andskill in driving the business forward. We maintain our commitment to investingin the development of our employees and to further developing Low & Bonar as anemployer of choice. Acquisitions Since the year end we have acquired two new businesses. Mehler Texnologies Group On 29 November 2007, we announced the acquisition of Mehler Texnologies Group(MTX) for €166.0m (approximately £119.4m) on a cash free debt free basis subjectto certain post completion adjustments, and completed on 3 January 2008. MTX is a leading producer of technical coated fabrics based in Germany and theCzech Republic. It produces PVC coated materials for the transport,architectural, print and general industrial sectors. We believe that MTXrepresents another important strategic step for Low & Bonar in the developmentof its technical textiles activities. The acquisition is expected to be earnings enhancing to Low & Bonar in 2008. Westbond On 8 January 2008 we announced the acquisition of Westbond Ltd, a producer offusion bonded carpet tiles, for a total consideration of up to £10.9m. TheWestbond brand and product range are highly complementary to our existingTessera carpet tile business, and the business is particularly successful in thearchitect and design community both in the UK and Continental Europe. Outlook We are in growing sectors with strong market positions and we view the futurewith confidence. As we move into 2008 we hear much talk about uncertainty in the general economicenvironment. We have faced a number of management challenges over recent yearsincluding high raw material prices and strong competition, but through theefforts of our team we have managed to prosper. We believe that our businessesare well positioned to take advantage of the significant opportunities we seeahead and expect continued progress in both Divisions over the coming year.Based on prior year performance, when aggregating our new acquisitions on apro-forma basis, less than 20% of sales will be achieved from the UK, circa 60%from the rest of Europe and less than 15% from the US. Our end markets - withtheir negligible exposure to any downturn in consumer confidence - continue tolook resilient. The start of our new financial year has been in line with our expectations. Group Chief Executive's Review of Operations Overview 2007 was a very good year for Low & Bonar. Group profit before tax (beforeamortisation and non-recurring items) grew by 52% to £22.4m on Group revenues of£311.8m, an increase of 39%. This performance has been achieved against abackdrop of major strategic change across the Group and bears out the robustnessof our growth strategy. Our focus in 2007 has been two-fold: to ensure that the transformationalacquisition of Colbond that we completed in 2006 was successfully integrated;and to achieve strong organic sales and profits growth in our Technical Textilesand Flooring Divisions. Significant progress was made against both objectives. Both the Technical Textiles and Floors Divisions grew sales, profit andoperating returns as the benefits of our renewed focus on own-brand productinnovation, international expansion and operational efficiencies had asignificant positive impact. Revenue growth was achieved against a background ofa comparatively benign market environment which saw key raw material and energycosts grow at a slower rate than previously, as well as through gains in marketshare. There is now a highly consistent level of profit performance across thevast majority of the Group. Performance summary Overall Group revenue increased by 38.9% to £311.8m (2006: £224.5m), of which£71.9m was the full year effect of acquisitions and £15.4m, or 6.9%, was organicgrowth on a like-for-like basis. The Technical Textiles Division benefited from both a full year contributionfrom the Colbond and Geo-Tipptex acquisitions and organic growth across each ofits business units with resultant growth in revenue of 65.3% to £210.3m (2006:£127.2m). Of this, £71.9m came from the full year impact of acquisitions andlike-for-like organic growth was therefore 8.8%. Virtually all end-marketsexperienced underlying growth and a combination of excellent service levels andenhanced new product development generated additional revenue. Another keyelement in facilitating this revenue increase was the installation of additionalmanufacturing capacity in many of our facilities. Floors grew total sales by 4.3% to £101.5m (2006: £97.3m) but this overallpicture masks an improved 7.5% growth in our sales of in-house manufacturedbranded products, which have materially higher margins, due to the anticipateddecline of £3.1m in factored sales of third party product to the Ministry ofDefence. An increase in new product introductions and the internationalexpansion of our successful UK floor tiles business were key elements in thisincreased growth of branded products. The good revenue growth, allied to widespread manufacturing improvements andcontinued cost control, ensured that Group operating profit, before amortisationand non-recurring items, grew by 53% from £17.0m to £26.1m. At a Divisionallevel, Technical Textiles increased operating profit before amortisation andnon-recurring items by 97%, from £9.1m to £17.9m, assisted by acquisitions andachieved in spite of another rise in input costs of some £2.5m. Floors grew by12% to £12.0m (2006: £10.7m), benefiting from a combination of positive salesgrowth and product mix factors. Group profit before tax (before amortisation and non-recurring items) grew by52% to £22.4m (2006: £14.7m). There were no non-recurring costs incurred in thecourse of the year. Statutory earnings per share (EPS) grew by 48% to 8.60p(2006: 5.80p). Earnings per share before amortisation and non-recurring itemsincreased by 16% to 10.16p (2006: 8.75p). Our year end net debt position of £50.5m (2006: £46.1m) is a reflection of animprovement in the working capital to sales ratio, increased capital expenditurein relation to depreciation as we invest to support growth, an increase individends and an agreed top-up contribution to the pension scheme. The Group'sinterest cover remains at 7.1 times on a profit before amortisation andnon-recurring items basis. Acquisition activity 2007 witnessed a period of consolidation and integration of previousacquisitions, most notably Colbond. At the end of the financial year weannounced, subject to shareholder approval, the agreed purchase of MehlerTexnologies (MTX), a leading European manufacturer of technical coated fabrics.This was subsequently approved and completed on 3 January 2008. The acquisitionof MTX, which has manufacturing facilities in Germany and the Czech Republicthat supply specialist fabrics into the transport, large-scale advertising andspecialist architecture markets, brings an additional set of skills, productsand customers in a growth market. Additionally, on 8 January 2008, the acquisition of Westbond Ltd, the leadingEuropean manufacturer of high-end fusion bonded carpet tiles, was announced.Westbond supplies premium floor tiles that are complementary to those of ourexisting mid-market supplier, Tessera, and enables both Westbond and Tessera tobenefit from revenue opportunities through leveraging each other's differentareas of selling strength. Both MTX and Westbond are leaders in their markets. We will use the experience derived from nine acquisitions in the last five yearsto ensure that maximum value is created by these recent acquisitions, and remainwatchful for other value-adding opportunities that are consistent with ourdivisional strategies. Health & Safety The Board and the senior executive team regard it as one of their paramountduties to ensure all employees can work in a safety-conscious and responsiblework environment. Both Divisions have made significant investments in trainingand capital expenditure to support this objective and I am pleased to reportthat we have had a significant reduction in what were already low levels ofreportable accidents. This, of course, is a programme which will continue toreceive much management focus and appropriate levels of investment. Maintaining Our Environmental Responsibilities The responsibilities of the Group in protecting the environment are an importantpoint of focus. Technical Textiles continues to improve its environmental efficienciesoperationally and is developing important new products. Examples of operationalprogress include investments enabling us to process post-consumer recycledpolymers and programmes reducing unit energy costs in production. Major productinitiatives include carpet backing using 100% post consumer recycled PET,artificial grass yarn focused on landscaping applications in hot climates whichhelp conserve limited water supplies, and synthetic materials for the civilengineering sector that absorb particulate emissions produced by vehicles andreduce the maintenance costs of areas adjacent to roads. Our Floors Division today recycles the vast majority of its production waste -for example as a filler in the backing of a number of products. End of lifeproduct take-back programmes for our customers already exist and we are lookingat broadening this offering. We are working with various suppliers of utilitiesto improve energy and water usage levels and are exploring the economicfeasibility of plant-specific wind turbines. Other initiatives such as the useof 100% recycled packaging materials and reduced chemical usage are being rolledout wherever possible. Employees In the last five years, Low & Bonar has been through a sustained period ofpositive, challenging change in many parts of the organisation. As we continueto grow through acquisition so the size and cultural breadth of our employeebase increases markedly. I remain deeply grateful to all my colleagues acrossthe world for their continued commitment and professionalism, and the very majorrole they have played in this year's very good result for the Group. I alsowelcome those who have joined us from MTX and Westbond and wish them aproductive and rewarding time as part of the enlarged Group. Outlook Low & Bonar's diverse product range and leadership positions in our chosen nichemarkets have enabled us to deliver strong increases in sales and profits in 2007at the same time as investing significantly in value-adding acquisitions, newproduct innovations, international expansion and enhanced operationalefficiencies to drive our future growth. Our end-markets continue to be robustand we remain positive about the outlook for the current year and beyond. Divisional Review Technical Textiles Division This Division specialises in the design, production and marketing of technicaltextiles - yarns, fibres and woven and non-woven textiles - for a wide range ofniche industrial applications Divisional performance summary at a glance: • New organisational structure and management team successfully established • Colbond fully integrated and exceeding expectations • Fabrics achieved significant growth in sales and margins • Yarns saw good year-on-year progress in H2 The Technical Textiles Division was created in its current form on 1 December2006 through the combination of the former Yarns & Fabrics Division and Colbond,which had been acquired four months previously. The creation of this Divisionwas an important step in our strategy of building a larger single platform thatcould call upon multiple production technologies but had scale benefits in R&Dinvestments. Through this structure we are better able to realise the strategicand commercial synergy benefits achievable from our different activities. TheDivision comprises three entities - Fabrics, Technical Yarns and Colbond - withtheir own management teams. MTX will become a fourth leg within this structure.I am very pleased with how quickly and smoothly this new organisation has beddeddown over the last 12 months and this lays strong foundations for the Division'sfuture success. A conscious decision was taken to set up a separate managementteam outside the Division tasked with developing our Asian activities intechnical textiles and we have also seen the benefits of this specific focus. Financially the Division enjoyed a very successful year. Including first fullyear contributions from Geo-Tipptex and Colbond, Divisional sales grew by 65% to£210.3m (2006: £127.2m). The growth of this Division is highlighted by the factthat over the last two years, sales have increased by 170% through a combinationof organic growth and acquisition. Divisional operating profit beforeamortisation and non-recurring items grew by 97% to £17.9m (2006: £9.1m).Divisional operating margins (pre amortisation) therefore grew pleasingly from7.2% to 8.5%, with return on net assets increasing to 10.7%. Colbond, whichrepresented a very significant acquisition for the Group, continues to performahead of our expectations and has fitted into the Division very satisfactorily.Across the Division we have seen operating margins (pre amortisation) grow as aresult of operational gearing, productivity improvements and programmes focusedon optimising product gross margins. This progress must be seen in the context,yet again, of rising input costs. The Fabrics business (BTF, Adfil, Geo-Tipptex) progressed very satisfactorily onall key financial metrics, with BTF in particular delivering excellent resultsand record margins. Growth in the higher margin agrotextiles and geotextilessegments, allied to positive productivity initiatives, produced double digitoperating margins for the first time. The agriculture market grew strongly inEurope, particularly in the professional horticulture segment where our screensand groundcovers continue to hold leading positions. The broader technologyplatform now available within the Division opened up new opportunities to offerour customers an enhanced product range to this segment. Our sales ofgeotextiles products into the civil engineering market had another year ofencouraging growth in their core geographies but also experienced good progressin the higher growth Central European and Asian regions. Additionalmanufacturing capacity has been successfully installed in Hungary at a cost ofsome €4m to serve growing Eastern European demand. Not only does this providefor further volume growth but it has improved production efficiency and localproduct quality. Our Technical Yarns business has also been managed as a single entity since thebeginning of the financial year. We have already seen very significant benefitsfrom this new structure, with productivity, quality, employee satisfaction,health and safety and customer service all taking material steps forward. On theback of this progress, and against the backdrop of buoyant demand globally forboth artificial grass and carpet backing yarn, excellent volume growth wasdelivered after a difficult 2006. The business is being successfullyrepositioned with an increased focus on adding value to our key carpetmanufacturing customers. A new development centre has been established inColbond's Arnhem facility and several new products have been launched this year,most notably the patented "cool grass", a product which lowers the surfacetemperature of installations in hot climates. Operationally we have invested ina programme to improve the process for the finishing of artificial grass yarnsand benefits are already significant in cost and quality. As a result of theseimprovements, we have seen a second half financial performance that shows markedyear-on-year improvements, a trend that has continued into the start of thecurrent financial year. Colbond had a very successful first full year in the Group and, as expected, hasmaterially increased our capabilities and infrastructure in R&D, and henceassisted our strategy of innovation-led growth. Carpet backing sales, which areprimarily into the commercial tile market, performed very well in both the USand Europe. New lower weight products and the development of carpet backingusing post-consumer recycled materials have improved further the value ourofferings bring to our customers' businesses. Growth in total carpet backingsales and in European automotive products more than compensated for a toughmarket environment in our much smaller US automotive segment. Our activities inbuilding and industrial markets again produced double digit sales growth assuccess in developing niche markets comfortably offset the impact of thedownturn in US housing starts. There have been a number of interesting productlaunches in this business sector and Enkamoss is a good example. This is aninnovation which delivers environmental benefits by absorbing particulateemissions produced by vehicles as well as reducing the maintenance costs ofareas adjacent to roads. Since acquiring Colbond, we have continued to investselectively to improve operational effectiveness and capacity at key locations.By the end of 2007, we completed the upgrade of one European spinning line. Weare also significantly increasing production capacity in North America and haveestablished new storage and handling facilities to allow us to purchase bothvirgin and recycled raw materials more competitively. Our Chinese business, owned in partnership with Sinopec, one of China's largestoil and gas companies, continued to grow and maintain double digit operatingmargins. Of particular note commercially was a 70% increase in grass yarn sales,achieved by tailoring our product offerings to local customer requirements andopening up new routes to market. We have also successfully increased our wovencapacity by 25% in the course of the year in anticipation of strong growth indomestic demand for our high quality carpet backing and geotextiles productsdriven by very buoyant economic conditions in China. We believe we have a strongrelationship with Sinopec, which adds considerably to the strength of ouroperations there. 2008 will see a continuation of our Divisional strategy, with a priority beingthe successful integration of our recent sizeable acquisition, MTX, into ourinfrastructure. We continue to develop the focus on R&D and innovation whilstincreasing the focus of the organisation on providing a portfolio of solutionsfor our targeted end-markets like civil engineering, horticulture and carpetmanufacturing. Our over-arching focus - on industrial rather than consumerend-markets, an emphasis on innovation as a means of higher customer value-addedand market share gain, and maximising the synergies across the Division -remains as strong as ever. Floors Division This Division provides specialist contract flooring products and servicesdelivered by a global sales and marketing organisation Divisional performance summary at a glance: • Increased growth in higher margin branded products • International expansion continued across Europe • Sales mix and productivity improvements drove further margin increases Bonar Floors had an extremely positive year, with overall revenue growing by 4%underpinned by sales of branded own-manufactured products growing by 8%,operating profit (pre amortisation) increasing by 12%, and operating marginsprogressing strongly from 11.0% to 11.8%. Despite a significant increase incapital expenditure in support of global capacity expansion and productivityimprovements, it is pleasing to note that Divisional return on capital employedalso grew from 26.8% to 27.6%. The growth in branded products, the largest year-on-year improvement for manyyears, was due to a number of factors. We saw growth in our underlying marketsdriven primarily by continued investment across Europe in the construction andrefurbishment of commercial and government buildings. Furthermore, significantlevels of new product launches, additional improvements to our already-excellentservice levels and geographic expansion all played their part. At a brand levelFlotex, and our entrance systems products, Coral and Nuway, performedparticularly strongly. Specific geographic markets that performed especiallywell included Benelux, benefiting from the growth in direct sales, plus Russiaand Asia. Commercial highlights included the continued successful geographic expansion ofTessera carpet tiles, with sales outside the UK more than doubling as the FloorsDivision utilised its considerable international sales strength. France andCentral Europe fared particularly well. Another notable development, in December2007, was the Division's establishment of Bonar Floors Espana SA and the openingof a showroom in Madrid. The new sales team will seek to capitalise on thegrowing commercial office sector in Spain. Perhaps most significant, however, is the progress made by our Flotex brand.This has been the largest selling brand historically in our flooring portfoliosince the 1970s, with a stable and loyal customer base that has valued itsperformance qualities of durability, hygiene and - relative to vinyl products -comfort. In the recent past, the Division has invested significant time andresource in new digital printing technology which has opened up whole newaesthetic possibilities with a virtually infinite design capability. The designteam worked in conjunction with world renowned designer, Ettore Sottsass, todevelop a radically new range utilising their new printing technology andthereby allying Flotex's traditional qualities with a new area of aestheticstrength. It is believed that this will, over time, open up entirely new marketopportunities for Flotex and is a very clear example of the transition BonarFloors has made from being a manufacturing-led to a much more market-drivenorganisation. Operationally there has been significant progress and investment across allareas of manufacturing and logistics throughout Europe. Our pleasingly widerange of achievements include productivity increases that have helped drivemargin increases, strong health and safety performances with four of our sixsites having no reportable accidents in the year, major new investments incapacity and technology, and record customer service levels. More particularly,a number of sites experienced exceptionally high monthly outputs at differentstages of the year, with November registering the highest output for a number ofyears in two factories in the UK and Holland. There were achievements of particular note across all operating facilities.Ripley, the UK Flotex manufacturing facility, continued its improvement in allaspects of quality, output and safety throughout the year driven by a new localmanagement team. The UK Tessera carpet tile business maintained a 100% record onthe market-leading Tessera Direct guaranteed service proposition, benefitingsuch customers as RBS and Lloyds TSB. Production levels at the Telford facility,manufacturing aluminium entrance systems, grew by some 25% in response to verysignificant sales growth, driven in part by major contract wins such as HeathrowT5. Equally, our French manufacturing site has successfully absorbedconsiderable internal change, most notably the development of digitally printedFlotex. The Dutch facility maintained a very consistent performance level whilstproducing a number of new product ranges. Our strategy for organic growth remains based on the same pillars of new productintroductions, selective geographic expansion and class leading service levels.Our implementation of these key pillars continues at a rapid pace. We arepleased with the growing success of the "bundled" product offering being soldunder the umbrella Bonar Floors brand and via a direct salesforce with access toall our products. In addition, we continue to explore new and complementaryproduct areas that can be sold through these same channels, whether they be madeby ourselves, sourced externally or added via acquisition, as with Westbond. Consolidated Income Statementfor the year ended 30 November 2007 2007 2006 Before Amortisation Before Amortisation amortisation and amortisation and and non- and non- non- recurring non- recurring recurring items recurring items items (Note 6) Total items (Note 6) Total Note £m £m £m £m £m £m Revenue 2 311.8 - 311.8 224.5 - 224.5 ======= ======= ======= ======= ======= ======= Operating profit 26.1 (3.3) 22.8 17.0 (4.9) 12.1 Financial income 9.4 - 9.4 9.0 - 9.0Financial expenses (13.1) - (13.1) (11.3) - (11.3) ------- ------- ------- ------- ------- -------Net financing costs 3 (3.7) - (3.7) (2.3) - (2.3) Profit before 22.4 (3.3) 19.1 14.7 (4.9) 9.8taxationTaxation 4 (6.6) 0.9 (5.7) (4.2) 1.5 (2.7) ------- ------- ------- ------- ------- -------Profit after taxation 15.8 (2.4) 13.4 10.5 7.1 Profit for the year 15.8 (2.4) 13.4 10.5 (3.4) 7.1 ======= ======= ======= ======= ======= ======= Attributable toEquity holders of the 15.5 (2.4) 13.1 10.1 (3.4) 6.7CompanyMinority interest 8 0.3 - 0.3 0.4 - 0.4 ------- ------- ------- ------- ------- ------- 15.8 (2.4) 13.4 10.5 (3.4) 7.1 ======= ======= ======= ======= ======= ======= Earnings per share 7 Basic 8.60p 5.80pDiluted 8.46p 5.72p Balance Sheetas at 30 November 2007 2007 2006 Note £m £m Non current assetsGoodwill 48.0 46.6Intangible assets 21.2 22.4Property, plant and equipment 97.3 90.2Investment in associate 0.2 0.1Deferred tax assets 2.8 7.3 --------- -------- 169.5 166.6 Current assetsInventories 51.3 49.5Trade and other receivables 61.5 52.2Derivative assets 0.2 0.9Cash and cash equivalents 5.8 3.3 --------- -------- 118.8 105.9Current liabilitiesInterest bearing loans and borrowings 8.4 12.5Current tax liabilities 5.7 4.1Trade and other payables 72.3 63.6Derivative liabilities 1.6 0.1 --------- -------- 88.0 80.3 --------- --------Net current assets 30.8 25.6 Non current liabilitiesInterest bearing loans and borrowings 47.9 36.9Deferred tax liabilities 15.1 16.7Post employment benefits 4.8 19.8Other payables 1.4 1.9 --------- -------- 69.2 75.3 Net assets 131.1 116.9 ========= ======== Equity attributable to equity holders of the parentShare capital 38.5 38.3Share premium account 30.3 29.9Translation reserve (1.9) 0.2Retained earnings 61.1 45.7 --------- -------- Total equity attributable toEquity holders of the parent 128.0 114.1Minority interest 8 3.1 2.8 --------- -------- Total equity 131.1 116.9 ========= ======== Statement of Recognised Income and Expensefor the year ended 30 November 2007 2007 2006 Note £m £m Foreign exchange translation differences (2.1) (1.1)Fair value movement in cash flow hedges - (0.3)Deferred tax on share based payment (0.2) -Actuarial gain on defined benefit pension scheme 12.0 7.3Deferred tax on defined benefit pension scheme (3.5) (2.2) ------- -------Net income recognised directly in equity 6.2 3.7 Profit for the year 13.4 7.1 ------- ------- Total recognised income for the year 19.6 10.8 Attributable toEquity holders of the parent 19.3 10.7Minority interest 8 0.3 0.1 ------- ------- 19.6 10.8 ======= ======= Consolidated Cash Flow Statementfor the year ended 30 November 2007 2007 2006 £m £m Profit for the year from continuing operations 13.4 7.1 Adjustments forDepreciation 9.8 7.0Amortisation 3.3 2.4Income tax expense 5.7 2.7Net financing costs 3.7 2.3Increase in inventories (0.6) (6.7)(Increase)/decrease in trade and other receivables (7.5) 1.0Increase/(decrease) in trade and other payables 4.0 (0.7)Equity settled share based payment 1.2 1.0Other 0.1 - ------- -------Cash inflow from operations 33.1 16.1 Interest received 1.7 1.4Interest paid (4.5) (3.2)Tax paid (3.9) (1.7)EU fine paid - (8.5)Pension cash contributions in excess of operating charge (3.5) (6.0) ------- ------- Net cash inflow/(outflow) from operating activities 22.9 (1.9) Acquisition of subsidiaries and associate - net of cash - (36.7)Acquisition of property, plant and equipment (15.1) (9.9)Intangible assets purchased (1.5) (0.3)Finance lease capital repayments (0.3) (0.5)Disposal of subsidiaries - 1.5Disposal of property, plant and equipment 1.5 1.5 ------- -------Net cash outflow from investing activities (15.4) (44.4) Proceeds of share issues 0.6 43.1Purchase of own shares - (1.5)Inflow from new borrowings 4.4 46.0External debt acquired with subsidiaries - (45.9)Movement in cash flow hedges (3.6) -Equity dividends paid (7.0) (6.6) ------- ------- Net cash (outflow)/inflow from financing activities (5.6) 35.1 ------- ------- Net cash inflow/(outflow) 1.9 (11.2) Cash and cash equivalents at start of year 3.3 14.7Foreign exchange differences 0.6 (0.2) ------- ------- Cash and cash equivalents at end of year 5.8 3.3 ======= ======= Notes 1. Basis of preparation Notes The financial statements are presented in pounds sterling, rounded to thenearest hundred thousand pounds. They are prepared on the historical cost basisexcept for the revaluation to fair value of certain financial instruments. The Group financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted by the EU (adoptedIFRS). At the date of authorisation of these financial statements there are anumber of Standards and Interpretations in issue but not yet effective and havetherefore not yet been applied in these financial statements. The Directorsanticipate that adoption of these Standards and Interpretations in futureperiods will have no material impact on the financial statements of the Group. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 30 November 2007 or 2006. Statutoryaccounts for 2006 have been delivered to the registrar of companies and thosefor 2007 will be delivered in due course. The auditors have reported on thoseaccounts, their reports were (i) unqualified, (ii) did not include references toany matters to which the auditors drew attention by way of emphasis withoutqualifying their reports and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Segmental information For management purposes, the Group is organised into two operating divisions -Technical Textiles and Floors. Both Divisions operate internationally. TheseDivisions are the basis on which the Group reports its primary segmentinformation. Segment assets and liabilities include items directly attributableto segments as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly cash and cash equivalents, interest bearingloans, borrowings, post employment benefits, taxation balances and corporateassets and expenses. Inter-segment sales are not material. The Technical Textiles Division serves four principal markets, the first ofwhich includes the production and supply of specialist yarns. The secondinvolves the production and distribution of woven and non-woven industrialfabrics, geotextiles and agrotextiles used in a wide number of applications. Thethird activity is the production and supply of fibres for specialistapplications in the concrete construction industry. The final product group isthe production and supply of three dimensional polymeric mats and composites forcivil engineering and industrial applications. The Floors Division supplies floor coverings to the contract flooring market. 2007Primary segment - Business Technical Floors Unallocated Total Textiles Central £m £m £m £m Revenue 210.3 101.5 - 311.8 ======== ======== ========= =======Operating profit before amortisation andnon-recurring items 17.9 12.0 (3.8) 26.1 -------- -------- --------- -------Amortisation of intangibles (3.0) (0.3) - (3.3) -------- -------- --------- -------Operating profit before non-recurring 14.9 11.7 (3.8) 22.8itemsNon-recurring items - - - - -------- -------- --------- -------Operating profit 14.9 11.7 (3.8) 22.8Net financing costs - - (3.7) (3.7) -------- -------- --------- -------Profit before taxation 14.9 11.7 (7.5) 19.1Taxation (5.7) -------Profit after taxation 13.4 ======= Capital expenditure 11.1 5.0 0.5 16.6 ======== ======== ========= =======Depreciation 7.9 1.9 - 9.8 ======== ======== ========= ======= Segment assets 209.2 68.0 277.2Segment liabilities (42.0) (24.5) (66.5) -------- -------- -------Segment net assets 167.2 43.5 210.7 ======== ========Unallocated assets and liabilities (29.1)Cash and cash equivalents 5.8Interest bearing borrowings (56.3) -------Group net assets 131.1 ======= 2006 Technical Floors Unallocated Total Textiles Central £m £m £m £m Revenue 127.2 97.3 - 224.5 ======== ======== ========= ======= Operating profit before amortisation andnon-recurring items 9.1 10.7 (2.8) 17.0Amortisation of intangibles (2.2) (0.2) - (2.4) -------- -------- --------- -------Operating profit before non-recurring 6.9 10.5 (2.8) 14.6itemsNon-recurring items (2.0) - (0.5) (2.5) -------- -------- --------- -------Operating profit 4.9 10.5 (3.3) 12.1Net financing costs - - (2.3) (2.3) -------- -------- --------- -------Profit before taxation 4.9 10.5 (5.6) 9.8Taxation (2.7) -------Profit after taxation 7.1 ======= Capital expenditure 7.9 2.2 0.1 10.2 ======== ======== ========= =======Depreciation 5.2 1.7 0.1 7.0 ======== ======== ========= ======= Segment assets 200.7 58.6 259.3Segment liabilities (40.7) (18.6) (59.3) -------- -------- -------Segment net assets 160.0 40.0 200.0 ======== ========Unallocated assets and liabilities (37.0)Cash and cash equivalents 3.3Interest bearing borrowings (49.4) -------Group net assets 116.9 ======= 3. Financial income and financial expenses 2007 2006 £m £mFinancial incomeInterest income on deposits 1.7 1.4Expected return on pension plan assets 7.7 7.6 -------- --------- 9.4 9.0 ======== =========Financial expensesInterest on bank overdrafts and loans (5.0) (3.3)Amortisation of bank arrangement fees (0.1) -Interest on finance leases - (0.1)Interest on pension scheme liabilities (8.0) (7.9) -------- --------- (13.1) (11.3) ======== ========= 4. Taxation 2007 2006Current tax £m £mUK corporation taxcurrent year - -prior year - - -------- -------- - -Overseas taxcurrent year 4.9 3.0prior year 0.2 - -------- -------- 5.1 3.0 -------- -------- Total current tax 5.1 3.0 -------- -------- Deferred tax 0.6 (0.3) -------- -------- Total tax charge in the income statement 5.7 2.7 ======== ======== 5. Dividends Amounts recognised as distributions to equity holders in the year 2007 2006 £m £mFinal dividend for the year ended30 November 2006 - 2.80p per share (2006: 2.64p per share) 4.3 3.1 Interim dividend for the year ended30 November 2007 - 1.75p per share (2006: 1.58p per share) 2.7 1.8 -------- -------- 7.0 4.9 ======== ======== In addition the Directors are proposing a final dividend in respect of thefinancial year ended 30 November 2007 of 3.1p which will absorb an estimated£4.8m of shareholders' funds. Conditional upon approval by shareholders at theAnnual General Meeting to be held on 9 April 2008 and accordingly not accrued inthese accounts, it will be paid on 17 April 2008 to shareholders who are on theregister of members on 21 March 2008. 6. Non recurring items 2007 2006 £m £mAmounts charged to operating profitTechnical Textiles restructuring - 2.0Aborted transaction costs - 0.5 -------- -------- - 2.5 ======== ======== Technical Textiles reorganisation costs include redundancy and otherrestructuring costs within the existing specialist yarn and construction fibresbusinesses, and redundancies within the Colbond business. 7. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding excluding those held by the ESOP which are treated as cancelled forthe purpose of this calculation. For diluted earnings per share, the weightedaverage number of ordinary shares in issue is adjusted to assume conversion ofall dilutive potential ordinary shares. The Group has two classes of dilutivepotential ordinary shares: being those share options granted to employees wherethe exercise price is less than the average market price of the Company'sordinary shares during the year and those long term incentive plan awards forwhich the performance criteria have been satisfied. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below 2007 2006 Earnings Weighted Per share Earnings Weighted Per share average number amount average number amount of shares of shares £m (millions) p £m (millions) p StatutoryBasic earnings per shareEarnings attributable to 13.1 152.933 8.60 6.7 115.481 5.80ordinary shareholdersEffect of dilutive itemsShare based payment - 2.557 - 1.689 ------- -------- ------- -------Diluted earnings per share 13.1 155.490 8.46 6.7 117.170 5.72 ======= ======== ======= ======= Before amortisation andnon-recurring itemsBasic earnings per shareEarnings attributable to 15.5 152.933 10.16 10.1 115.481 8.75ordinary shareholdersEffect of dilutive itemsShare based payment - 2.557 - 1.689 ------- -------- ------- -------Diluted earnings per share 15.5 155.490 9.99 10.1 117.170 8.62 ======= ======== ======= ======= 8. Minority interest 2007 2006 £m £m At 1 December 2.8 2.8 Acquisition of subsidiary - (0.1)Share of profit after taxation 0.3 0.4Exchange adjustment - (0.3) ------- -------At 30 November 3.1 2.8 ======= ======= 9. Prior year acquisition On 31 July 2006 the Group acquired 100% of the share capital of the ColbondGroup for a cash consideration of up to €106.9m and the provisional fair valueof identifiable assets and liabilities as disclosed in the 2006 Group FinancialStatements arising from the acquisition are shown in the table below Fair Book Value Fair Value Adjustments Value £m £m £m Investment in associate 0.1 - 0.1Intangible assets 0.2 12.5 12.7Deferred tax assets 1.1 0.6 1.7Property, plant and equipment 50.7 - 50.7Inventories 12.1 - 12.1Trade and other receivables 13.1 - 13.1Current tax liabilities (0.2) (1.0) (1.2)Trade and other payables (18.2) (2.5) (20.7)Deferred tax liabilities (7.8) (3.7) (11.5)Post employment benefits (3.8) - (3.8) --------- ---------- --------Net assets 47.3 5.9 53.2 ========= ========== ======== Cash consideration paid including costs 30.1Less cash acquired with business (3.7)Add external debt acquired 45.9Net cash outflow 72.3 --------Goodwill arising on consolidation 19.1 ======== The provisional fair values made in the 2006 Group Financial Statements have nowbeen reviewed and the following adjustments have been made to fair values. £mAdjustment to deferred tax liabilities 1.5Adjustment to deferred tax asset 0.1Adjustment to current tax liabilities (0.5)Adjustment to trade and other payables (0.8) -------- 0.3 ======== The fair value adjustments are now final. 10. Post balance sheet events a) MTX Acquisition The Group completed the acquisition of MTX group on 3 January 2008 for €166m ona cash-free and debt-free basis. The MTX Group is a leading producer oftechnical coated fabrics. They produce premium materials for a variety of uses,including side curtains for the transport market and fabrics for thearchitectural and print markets. The acquisition represents another major stepforward in pursuing the Technical Textiles business of the Group. Cross-sellingand raw material cost saving opportunities are likely as a result of theacquisition. The acquisition was funded through a combination of existing and new financialresources with amounts drawn down under the existing debt facilities and a newdebt facility. The new debt facility of €90m has been provided by Royal Bank ofScotland and Bayerische Landesbank, with interest payable at a rate between 0.6%and 1.5% above the London inter-bank offered rate and repayable in December2011. Due to the timing of the acquisition it has not yet been possible to apply fairvalues to MTX Group's net assets acquired. b) Westbond Acquisition On 8 January 2008 the Group acquired Westbond Limited, a producer offusion-bonded carpet tiles. The Westbond brand and product range iscomplementary to the Floors Tessera business and the business again expects torealise benefits from cross-selling opportunities and cost savings synergies. Subject to later adjustment for certain changes to the level of net cash andworking capital at completion the consideration for the acquisition will be upto a maximum of £10.9m. An initial payment of £6.4 million has been made incash. Deferred consideration will become payable in cash by 31 July 2008,dependent upon the profitability of Westbond for its financial year to 30 April2008. Deferred consideration in excess of £4.1 million will be held in escrowand released on revenue thresholds from key customers during Westbond's 2008/9financial year being reached. 11. The annual general meeting The Annual General Meeting will be held on 9 April 2008 at the Cumberland Hotel,Marble Arch. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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