20th Feb 2007 07:02
Low & Bonar PLC20 February 2007 20 February 2007 LOW & BONAR PLC Preliminary Results for Year ended 30 November 2006 Low & Bonar PLC (the "Group"), the Specialist Materials Group, today reports itsresults for the year ended 30 November 2006. Financial Highlights • Revenue increased by 28.0% to £224.5m (2005: £175.4m) • Operating profit* increased by 27.8% to £17.0m (2005: £13.3m) • Profit before taxation, amortisation and non-recurring items increased 20.5% to £14.7m (2005: £12.2m) • Final dividend increased by 6.1% to 2.80p (2005: 2.64p) making 4.38p for the year (2005: 4.15p) • Basic earnings per share increased to 5.80p from a loss of 6.39p • Earnings per share before amortisation and non-recurring items of 8.75p (2005: 9.50p) • Successful £41.1m rights issue (net of costs) and increased debt facility of £175m Where appropriate current and prior year numbers have been adjusted for theeffects of the rights issue. Operational Highlights • Acquisition of Colbond and Geo-Tipptex has doubled the size and strengthened the strategic position of the Technical Textiles Division. • Floors Division operating profit* increased by 20.2% to £10.7m (2005: £8.9m) • Technical Textiles Division operating profit* increased by 23.0% to £9.1m (2005: £7.4m), despite £5m raw material and energy price increases. * operating profit before amortisation and non-recurring items Commenting on the results Duncan Clegg, Chairman said: "It is pleasing to report another year of encouraging progress and substantialgrowth, most notably through the acquisition of Colbond. Yet again we have seenprogress in the underlying business notwithstanding a demanding raw materialenvironment. We will retain our strategic focus on the two core markets ofcontract flooring and technical textiles and I am confident we have thefinancial and commercial base to continue our recent record of significantgrowth both organically and from acquisitions. Our focus remains on driving value creation for shareholders through profitablecash generative growth, both from existing businesses and new acquisitions. Weare well positioned in diverse market places and have, thanks to a successfuldebt and equity fund raising exercise, a strong balance sheet to take advantageof opportunities as they arise." Paul Forman, Chief Executive commented: "This has been an extremely busy year and one with a number of significantachievements. Both the Floors and Technical Textiles businesses have achievedgrowth in profit whilst the acquisition of Colbond has provided a step change inthe size and market position of the Group. While raw material costs remain high,we expect that further supplier production capacity being installed globallynext year will finally put some downward pressure on our input costs." For further enquiries please contact: Low & Bonar PLC Paul Forman Chief Executive 020 7535 3180Kevin Higginson Finance Director 020 7535 3180 Tulchan Communications David Trenchard 020 7353 4200Peter Hewer 020 7353 4200 Chairman's Statement I am pleased to report that 2006 has been another year of continued progress andsubstantial growth, which included a step change in the size and market positionof the Group following the purchase of Colbond. This acquisition brings a numberof leading technical textile niche market positions, diversifies our rawmaterial purchase base, and gives us important new capability to support organicgrowth. Our Technical Textiles Division has shown strong sales and profit growth despitea high level of cost price inflation in polyethylene, polypropylene andpolyester - its primary raw materials. Our Floors business has continued itsmomentum of recent years and operating profit before amortisation of non currentassets, and non-recurring items has increased markedly. It has succeeded inimproving margins whilst building still further a good base for continuedorganic growth. IFRS----These are the first full accounts published under IFRS. Our preliminaryrestatement of last year's figures was published on 16 June 2006. The principaldifferences outlined in that document remain the key items, and whereappropriate data for the year ending 30 November 2005 has been restated. Financial Performance---------------------Total revenue increased by 28.0% to £224.5m (2005: £175.4m) reflecting themaiden sales contribution of the Colbond and Geo-Tipptex businesses sinceacquisition as well as organic growth. Profit before tax, amortisation and non recurring items increased by 20.5% to£14.7m from £12.2m last year. Non recurring items of £2.5m (2005: £9.3m) were incurred in the year, beingredundancy and restructuring costs within the existing specialist yarns andconstruction fibres businesses and redundancies within the recently acquiredColbond business, as well as aborted transaction costs in regard to the bidapproach in the first half of the year. The total for 2005 included the £8.5mfine imposed by the EU. We have appealed against the EU verdict, but a decisionon the appeal is not expected within the short term. Earnings per share (EPS) were 5.80p (2005: loss, 6.39p) on a statutory basis.EPS before amortisation and non-recurring items were 8.75p (2005: 9.50p). Bothof the comparative figures have been restated to take account of the bonusadjustment factor from the rights issue completed in August, and announced withthe Colbond acquisition. Both earnings per share figures were higher than normalin 2005 due to a lower than usual tax charge arising from resolution of prioryear items. Cash Flow---------The rights issue in August 2006 raised £41.1m net of expenses, and allowed usboth to acquire Colbond and retain a strong balance sheet to take advantage offuture investment opportunities. Cash inflow from operations was £15.6m. During the year we invested £82.6m onacquisitions (including acquired debt) made a one off contribution to thepension fund (£6.0m) and paid the EU fine (£8.5m) which together contributed toa closing net debt of £46.1m compared with cash of £12.8m in the prior year. Committed bank facilities of £175m have been arranged during the year, with ageographically diverse group of high quality banks, led by The Royal Bank ofScotland plc. Unutilised committed facilities at the end of the period were inexcess of £125m. Dividends---------The Board is recommending a final ordinary dividend of 2.80p (2005: 2.64p, whenadjusted for the bonus adjustment factor relating to the rights issue) toshareholders on the register on 20 April 2007. This makes a total dividend forthe year of 4.38p (2005: 4.15p when adjusted for the bonus adjustment factorrelating to the rights issue). Dividend cover is 2.0 times, calculated on an earnings before amortisation andnon-recurring items basis. The payment of the dividend will be made on 16 May subject to the approval ofthe shareholders at the AGM on 9 May 2006. Board Changes-------------I would like to welcome Kevin Higginson who was appointed to the Board as GroupFinance Director on 5 September 2006, replacing Jon Kempster who left the Groupon 28 February 2006. Between these dates Caroline Thomas performed the role onan interim basis. Folkert Blaisse and Martin Flower joined as non executive directors on 1 January2007, and Chris Davies retired from the Board on 31 December 2006. I would liketo thank Chris for his significant contribution in his time as a director. Employees---------I would like to thank our employees for their continued efforts and enthusiasmthroughout the year. I also welcome our new colleagues who have joined the Groupfrom Colbond and Geo-Tipptex. As we continue on our growth path the skills andknowledge of our employees will be a key factor in achieving our aims and weactively encourage and require all staff to improve their skills. Outlook-------Market conditions and the trading performance of our business in the first twomonths of the year are in line with our expectations. I am confident we have thefinancial and commercial base to continue our recent record of significantgrowth both organically and through acquisitions. Raw material prices, are not expected to change significantly during 2007.However, during 2008 increased capacity amongst suppliers is expected to providea downward pressure on prices. Our focus remains on driving value creation for shareholders through profitablecash generative growth, both from existing businesses and new acquisitions. TheBoard believes we are well positioned, in diverse market places and with astrong balance sheet, to take advantage of opportunities as they arise. Duncan CleggChairman 20th February 2007 Group Chief Executive's Review of Operations -------------------------------------------- Our Group continues to grow whilst focusing on its two core activities. We areputting ever stronger foundations in place that underpin our profitability andgive us a good platform for continued growth. Overview--------2006 has seen the Group maintain the balance of driving growth in sales andprofits from its existing businesses whilst carrying out its most significantlevel of acquisitions in many years. In addition, 2006 has witnessed a materialreshaping of the shareholder base, a £41m rights issue and a new £175m debtfacility. All of these actions have put the Group and its two chosen strategiclegs - contract flooring and technical textiles - in yet stronger shape and wellpoised for further expansion. As has been the case over the recent few years, anupward trend in polymer pricing has been a demanding backdrop. Overall Group revenue increased by 28.0% to £224.5m (2005: £175.4m). The flataggregate year on year performance in Floors masked the fact that higher marginsales of manufactured branded products grew, whilst lower margin sales of thirdparty products declined, as anticipated. Important factors underlying thisgrowth are the continued improvement in our product development activity and thesustained progress in customer service levels. In our Technical Textiles activities we have seen sales grow by 63.7% to £127.2m(2005: £77.7m). Excluding Geo-Tipptex and Colbond, both of which were acquiredin the course of this year, sales grew by 6.7% to £82.9m (2005: £77.7m). Thisrepresented a combination of conspicuous progress from our global activities inwoven and non-woven textiles being offset by our grass activities, which feltthe impact of significantly increased competitive activity in price and volume.It is pleasing to report that both recently acquired businesses have performedat least in line with our expectations. Currently, we are investing inadditional capacity in many parts of the Technical Textiles Division to supportanticipated growth. As a result of these actions Group operating profit before non recurring itemsand amortisation of non current assets grew by 27.8% from £13.3m to £17.0m. At aDivisional level, Floors grew by 20.2% from £8.9m to £10.7m with product mix animportant factor. Technical Textiles increased by 23.0% from £7.4m to £9.1m,reflecting a slightly higher than anticipated contribution from our acquisitionsoffset by the issues already highlighted in our specialist yarns (grass) andalso of a year on year increase in raw material and energy costs of over £5m.Continued tight control over central costs and interest expense meant that Groupprofit before tax (before non recurring items and amortisation) grew by 20.5% to£14.7m (2005: £12.2m). Non recurring costs for the year totalled £2.5m,comprising redundancy and other restructuring costs within existing specialistyarns and construction fibres businesses, redundancies within the recentlyacquired Colbond business and aborted deal costs from the bid approach in thefirst half of the year. The Group's statutory earnings per share (EPS) increased to 5.80p from a loss of6.39p. However, EPS before non recurring items and amortisation declinedslightly from 9.50p to 8.75p. Last year, EPS was higher than normal due to alower than usual tax charge, arising from the resolution of prior year issues.By way of illustration, if EPS were calculated on the pre tax, amortisation andnon recurring items basis it would have increased by 17.1% to 12. 38p (2005:10.57p). Our year end net debt position of £46.1m (2005: net cash of £12.8m) reflectscontinued good operational cash flow as well as the spend on the twoacquisitions, a £6.0m pensions contribution, payment (subject to appeal) of the£8.5m EU fine and a delayed 2005 dividend. To sustain this progress, we continue to invest in the development of ourpeople, the upgrading of our operational capacity and the continued improvementof our health and safety environment. Acquisition Activity--------------------We made two significant acquisitions in 2006, both increasing our presence inthe Technical Textiles market. In March 2006 we announced the acquisition ofGeo-Tipptex, extending our activities in non-woven textiles for the civilengineering market. Based in Hungary, its addition to the Group consolidates ourposition as one of the leading suppliers of technical textile products for thecivil engineering market in Europe, as well as enhancing our position furtherafield. At the end of July we acquired Colbond, a manufacturer with productionfacilities in the Netherlands, Germany and North America. Colbond is a majorsupplier of non-woven textiles for the flooring, automotive and constructionmarkets, as well as of three-dimensional polymeric mats used in specialistapplications for industries including civil engineering, construction andgeneral manufacturing. As well as complementing some of our existing productofferings, Colbond brings high quality product development capabilities and anumber of new leading market positions in technical textile niche markets. Ithas also created a material increase in scale, doubling the size of ourtechnical textile activities. In addition to the above, during April weincreased the stake in our Chinese business, Yihua Bonar to 60.0%. It is our intention to continue to pursue strategically and financiallyattractive acquisitions in both the Group's legs. We have the financial andstrategic capacity to do so and, perhaps most importantly, the managementcapability to absorb and add value to new additions. Employees----------Last year I thanked all members of the Group for coping with a year of verysignificant change. If anything, 2006 witnessed a period of even greater changeand, in very many parts of the Group, even greater operational progress. I amdeeply grateful to each and every member of our team for their contribution toour continued progress, and we as a Board remain equally committed to continuedinvestment in their personal development and right to work in a supportive andsafe environment. Paul FormanGroup Chief Executive 20th February 2007 Divisional Reviews------------------ Floors Division---------------Specialist contract flooring products and services provided by a global salesand marketing organisation and six manufacturing sites in Europe. The Floors Division continued the encouraging growth in sales of itsmanufactured product ranges and also in its profitability in 2006. No one majorchange has driven this improvement. The restructuring and the increasedinvestment in sales and marketing spend in 2005, increased new productdevelopment, continued productivity improvements in our manufacturingoperations, more focus on purchasing through its centralisation and increasedservice levels to customers all contributed to growth in sales and profit. Divisional turnover remained flat year on year at £97.3m (2005: £97.7m). Theapparent flat sales trend year on year marks the decline in Ministry of Defence(MoD) third party sales that had been anticipated at the start of the contractbeing offset by growth in the sales of higher margin manufactured products. Divisional operating profit before non recurring items and amortisation of noncurrent assets grew by 20.2% from £8.9m to £10.7m, with operating marginsincreased from 9.1% to 11.0% representing progress from the levels experiencedin the first half of 2005. Return on net operating assets grew to 27% (2005:23%). Commercially, 2006 has seen Floors progress on many fronts. The pace of newproduct introductions has been increased further from 2005. All manufacturedproduct brands increased their year on year sales into the contract market. TheTessera carpet tile business, underpinned by excellent service levels and anumber of new product launches, grew very successfully in its core UK market andhas now been introduced into France. Flotex delivered solid sales growth in itscore contract markets, offset by particular issues in less strategicallyimportant markets. Our entrance system brands, Nuway and Coral, enjoyed apositive year with good progress in the retail and transport segmentsespecially. The growth of our entrance system business also reflects thesuccessful integration of the Threshold business acquired during 2005: ofparticular note was a sole supplier contract with Marks & Spencer. In addition, we have seen progress from improvements in our approach to servingspecific geographic markets, with an evolution of our channel strategydelivering pleasing results in the Netherlands and France. The MoD contractcontinues to perform well with sales for the year as a whole again ahead ofexpectations, albeit this was primarily due to a very strong first half and asecond half that was affected by the effective moratorium on certain types ofMoD spending. Across the Division, the quality of our service and products hasagain enabled us to mitigate, through price rises, the negative impact of costinflation in raw materials. Operationally, there was encouraging evidence of continued improvement acrossall our manufacturing sites. Major highlights include the customer serviceperformance of our Tessera carpet tiles facility where a ship to schedule rateof over 99% was achieved throughout the second half, and Tessera Direct, amarketing programme based on guaranteed availability, which continues to bewarmly received by our customers. The Nuway plant has successfully coped withvolumes more than 20% up year on year. In France we have been highly successful at progressing a new technologyplatform, digitally printed Flotex, whilst maintaining excellent cost controland service levels. I am also pleased to report that our UK Flotex plant sawencouraging operational progress in the latter part of the year. Ourproductivity is moving in the right direction across all manufacturing sites.This operational progress across the Division, allied to good cost control and apositive move in product mix, has ensured that operating margins moved forwardencouragingly in 2006. Our strategy will remain that of targeted organic growth focusing on new productintroductions, selective geographic expansion and class leading service levels.We will continue to take advantage of the opportunities to sell multipleproducts through our well established sales channels. The increasing stabilityof the operational platform provides a strong set of foundations for our growthstrategy. Additional investments will also be made to help drive continuedproduct innovation and operational productivity. As has been our approach forsome time, we will continue to assess strategically valuable acquisitionopportunities that build on the encouraging progress to date. Technical Textiles Division---------------------------The design, production and marketing of technical textiles - yarns, fibres andwoven and non-woven textiles - for a wide range of niche industrial applicationsserved from eight production facilities in Europe, one in North America and onein the People's Republic of China. 2006 has proved to be a significant year for the former Yarns & FabricsDivision. Two acquisitions have been made, including the purchase of Colbond, acompany as large as the original Yarns & Fabrics Division itself. Theseacquisitions are to be incorporated in a new enlarged division, TechnicalTextiles. Additionally, a new management structure has been put in place toensure we optimise the strategic and commercial synergy benefits of the variousbusinesses in the portfolio. All our businesses based in Europe and NorthAmerica now report as a single organisation. Our specialist yarn businesses arenow being managed together, and the manufacturing activities and overallmanagement of our construction fibres business have been successfully relocatedto Belgium. Steps have been taken to ensure that close co-ordination now existsin those businesses that serve the civil engineering market where we have aleading European market position. In addition, we have a separate managementteam tasked with developing our Asian activities in technical textiles as wellas providing management capacity for new acquisitions. Including part year contributions from Geo-Tipptex and Colbond, Divisional salesgrew by 63.7% to £127.2m (2005: £77.7m) and operating profit before nonrecurring items and amortisation of non current assets grew by 23.0% to £9.1m(2005: £7.4m). The impact of the first time contributions were offset by anestimated £5m increase in raw material and energy costs and difficult tradingconditions in specialist yarns. Return on net operating assets decreased from14% to 6% but the primary reason for this was the inclusion of the full assetvalue of Colbond but only four months' profit contribution. The acquisition ofGeo-Tipptex and Colbond have been strategically positive steps and both haveperformed ahead of our expectations. The non recurring reorganisation costs incurred in our specialist yarns businessreflect our decision to rebalance product capacities in response to a rapidlychanging market structure. The woven textile, non-woven textile and fibre businesses have grown aggregatesales and profit. This constitutes a very commendable performance in thedemanding raw material pricing environment. Our Belgian operations continued toincrease margins, grow market share in key product segments and haveadditionally extracted record levels of output in construction fibres since thetransfer of manufacturing early in the year. Our Chinese business, in which wenow hold a 60.0% interest, commenced manufacture of artificial grass yarn forthe high-growth domestic market, continued to set the industry quality standardsin domestic geotextiles and carpet backing, and enhance its productivityfurther. Additional capacity investment is being made to ensure its stronggrowth trajectory continues. Whilst finding it challenging in a highlycompetitive market to offset its increased polypropylene costs with sales pricegrowth, our construction fibres business has increased its new productinitiatives and is well set for renewed growth. Geo-Tipptex has successfullyaugmented our position in the European geotextiles market and a new non-wovenline is planned to be installed in the first half of 2007 to support thecontinuation of the strong growth achieved in this market over the last twoyears. Our specialist yarns business, comprising monofilament and fibrillated grass,and carpet yarns, performed in aggregate below last year and our expectations.The overall market environment for the supply of artificial grass remainspositive, with independent research predicting global growth rates of over 10%per annum. This is driven not only by the increasing popularity of artificialsports surfaces, but by the growth of artificial turf for landscapingapplications. Nevertheless, the combination of markedly increased polyethyleneraw material costs, a highly competitive environment depressing selling prices,and a major move amongst specific customers to monofilament grass were allfactors that impacted fibrillated yarn volumes, ensured significant pressure ongross margins, and necessitated the rebalancing of production capacities betweenvarious product types. Actions have been taken to address these issues with anon recurring cost in 2006 to reduce the workforce by some 30 people, and afurther worsening of the competitive environment is not envisaged in 2007. Colbond, acquired in July 2006, doubled the scale of our technical textileactivities and gives the new Division a much stronger platform for productdevelopment and hence innovation led growth, the core of our strategy for thisDivision. As well as adding to our product range for civil engineering marketsit has brought a number of leading market positions in new non-woven markets anddiversified the Group's raw material base. The integration plan, like underlyingperformance, is proceeding well. Significant capital investments are alreadyunder way to provide operational efficiencies in 2007 and 2008. Financially,Colbond has benefited from a less aggressive cost trend in its core rawmaterial, polyester from those experienced in polypropylene and polyethylene,and from encouraging levels of sales growth in specialty backings for flooringand niche construction products especially. I am also very encouraged by the waythat it has positively and constructively engaged with the rest of the Group inan effort to both give and receive what ever shared value is available. 2007 will see the continuation of the strategy for technical textiles, namely afocus on industrial rather than consumer end-markets, an emphasis on innovationas a means of higher value-added and market share gain, and a drive to maximisethe synergies across the Division. Strategically attractive acquisitions willcontinue to be pursued on a global basis. Consolidated Income StatementFor the year ended 30 November 2006----------------------------------- 2006 2005 Before Amortisation Before amortisation and non- amortisation Amortisation and non- recurring and non- and non- recurring items recurring recurring items (note 9) Total items items Total £m £m £m £m £m £m Notes Revenue 2 224.5 - 224.5 175.4 - 175.4 ===== ==== ===== ===== ==== ===== Operating profit 17.0 (4.9) 12.1 13.3 (2.1) 11.2 EU fine 9 - - - - (8.5) (8.5) Financial income 9.0 - 9.0 8.3 - 8.3Financial expenses (11.3) - (11.3) (9.4) - (9.4) ----- ---- ----- ----- ---- -----Net financing costs 3 (2.3) - (2.3) (1.1) - (1.1) Profit before taxation 14.7 (4.9) 9.8 12.2 (10.6) 1.6Taxation on UK companies 1.7 0.8 2.5 0.9 0.3 1.2Taxation on overseas companies (5.9) 0.7 (5.2) (2.1) - (2.1) ----- ---- ----- ----- ---- -----Taxation 4 (4.2) 1.5 (2.7) (1.2) 0.3 (0.9) ----- ---- ----- ----- ---- ----- Profit after taxation 10.5 (3.4) 7.1 11.0 (10.3) 0.7 Discontinued operations - - - - (7.6) (7.6) ----- ---- ----- ----- ---- -----Profit/(loss) for the year 10.5 (3.4) 7.1 11.0 (17.9) (6.9) ===== ==== ===== ===== ==== ===== Attributable to:Equity holders of the Company 10.1 (3.4) 6.7 10.7 (17.9) (7.2)Minority interest 8 0.4 - 0.4 0.3 - 0.3 ----- ---- ----- ----- ---- ----- 10.5 (3.4) 7.1 11.0 (17.9) (6.9) ===== ==== ===== ===== ==== ===== Earnings/(losses) per share from continuing and discontinued business 6Basic 5.80p (6.39)pDiluted 5.72p (6.25)p Earnings per share from continuing business 6Basic 5.80p 0.36pDiluted 5.72p 0.35p Consolidated Balance Sheetfor the year ended 30 November 2006----------------------------------- 2006 2005 Notes £m £m Non current assetsGoodwill 46.6 25.0Intangible fixed assets 22.4 9.0Property, plant and equipment 90.2 38.1Investment in associate 0.1 -Deferred tax assets 7.3 9.4 ----- ----- 166.6 81.5 Current assetsInventories 49.5 29.6Trade and other receivables 52.2 39.2Financial assets 0.9 -Cash and cash equivalents 3.3 14.7 ----- ----- 105.9 83.5Current liabilitiesInterest bearing loans and borrowings 12.5 1.9Current tax liabilities 4.1 1.7Trade and other payables 63.6 53.4Financial liabilities 0.1 - ----- ----- 80.3 57.0 ----- -----Net current assets 25.6 26.5 Non current liabilitiesInterest bearing loans and borrowings 36.9 -Deferred tax liabilities 16.7 7.0Post employment benefits 19.8 28.9Other payables 1.9 3.5 ----- ----- 75.3 39.4 Net assets 116.9 68.6 ===== ===== Equity attributable to equity holders of the parentShare capital 38.3 25.5Share premium account 29.9 -Translation reserve 0.2 1.0Retained earnings 45.7 39.3 ----- ----- Total equity attributable to :Equity holders of the parent 114.1 65.8Minority interest 8 2.8 2.8 ----- ----- Total equity 116.9 68.6 ===== ===== Statement of Recognised Income and Expensefor the year ended 30 November 2006----------------------------------- 2006 2005 £m £m Foreign exchange translation differences (1.1) 1.3Fair value movement in cash flow hedges (0.3) -Deferred tax on share based payment - 0.2Actuarial gain/(loss) on defined benefit pension scheme 7.3 (1.0)Deferred tax on defined benefit pension scheme (2.2) 0.3 ----- ----Net income recognised directly in equity 3.7 0.8 Profit/(loss) for the year 7.1 (6.9) ----- ----Total recognised income and (expense) for the year 10.8 (6.1) ===== ==== Attributable to:Equity holders of the parent 10.7 (6.7)Minority interest 0.1 0.6 ----- ---- 10.8 (6.1) ===== ==== Effect of changes in accounting policy:Effect of adoption of IAS 39 on 1 December 2005 (with 2005 not restated) on : Total recognised income and (expense) for the year 10.8 (6.1)Adjustment to retained earnings 0.3 - ----- ---- 11.1 (6.1) ===== ==== Consolidated Cash Flow Statementfor the year ended 30 November 2006----------------------------------- 2006 2005 Notes £m £m Profit/(loss) for the year 7.1 (6.9)Less discontinued operations - 7.6 ---- ----Profit for the year from continuing operations 7.1 0.7 Adjustments for:Depreciation 7.0 4.7Amortisation 2.4 1.1Income tax expense 2.7 0.9Net financing costs 2.3 1.1EU fine - 8.5Increase in inventories (6.7) (1.7)Decrease/(increase) in trade and other receivables 1.0 (3.7)(Decrease)/increase in trade and other payables (1.2) 2.7Equity settled share based payment 1.0 0.3 ---- ----Cash inflow from operations 15.6 14.6 Financial income 1.4 1.0Financial expenses (3.2) (1.5)Tax paid (1.7) (2.0)EU fine paid (8.5) -Pension cash contributions in excess of operatingcharge (6.0) (5.4) ---- ----Net cash (outflow)/inflow from operating activities (2.4) 6.7 Acquisition of subsidiaries and associate - net ofcash 7 (36.7) (19.8)Acquisition of plant, property and equipment (9.9) (6.0)Intangible assets purchased (0.3) (0.4)Disposal of subsidiaries 1.5 20.2Disposal of plant, property and equipment 1.5 0.3 ---- ----Net cash outflow from investing activities (43.9) (5.7) Proceeds of share issues 43.1 0.3Purchase of own shares (1.5) (0.3)Repayment of loans - (12.3)Additional loans 46.0 -External debt acquired with subsidiaries 7 (45.9) -Equity dividends paid (6.6) (2.9) ---- ----Net cash inflow/(outflow) from financing activities 35.1 (15.2) ---- ----Net cash outflow (11.2) (14.2) Cash and cash equivalents at start of year 14.7 28.9Exchange (0.2) - ---- ----Cash and cash equivalents at end of year 3.3 14.7 ==== ==== Notes----- 1. Basis of Preparation----------------------- 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 accounting policies have been applied consistently to all periods presentedin these financial statements and in preparing an opening IFRS balance sheet at1 December 2004 for the purposes of transition to adopted IFRS. Financialinstruments accounting was determined on different bases in the year ended 30November 2005 and the year ending 30 November 2006 due to the transitionalprovisions of IAS 32 "Financial Instruments Presentation and Disclosure" and IAS39 "Financial Instruments Measurement and Recognition". The Group has elected toapply UK GAAP to its comparative accounts (i.e. 1 December 2004 to 30 November2005) and implement IAS 32 and IAS 39 at 1 December 2005. On 1 December 2005 inaccordance with IAS 32 and IAS 39 all derivative financial instruments wererecorded at their fair value and preference shares with a nominal value of £0.4mwere reallocated to non-current liabilities, interest bearing borrowings. Thenet adjustment to equity at 1 December 2005 was a decrease of £0.1m. Thisadjustment has no impact on the basic and diluted earnings per share for theperiod 1 December 2005 to 30 November 2006. 2. Segmental information------------------------ 2006 Floors Technical Unallocated Total Textiles Central £m £m £m £m Revenue 97.3 127.2 - 224.5 ===== ===== ==== ===== Operating profitbefore amortisationand non-recurring items 10.7 9.1 (2.8) 17.0Amortisation of intangibles (0.2) (2.2) - (2.4) ----- ----- --- -----Operating profitbefore non-recurring items 10.5 6.9 (2.8) 14.6Non-recurring items - (2.0) (0.5) (2.5) ----- ----- --- -----Operating profit 10.5 4.9 (3.3) 12.1Net financing costs - - (2.3) (2.3) ----- ----- --- -----Profit before taxation 10.5 4.9 (5.6) 9.8Taxation (2.7) -----Profit after taxation 7.1 ===== Capital expenditure 2.2 7.9 0.1 10.2 ===== ===== === =====Depreciation 1.7 5.3 0.1 7.1 ===== ===== === =====Impairment - - - - ===== ===== === ===== Segment assets 58.6 200.7 259.3Segment liabilities (18.6) (40.7) (59.3) ----- ----- -----Segment net assets 40.0 160.0 200.0 ===== =====Unallocated liabilities (37.0)Cash and cash equivalents 3.3Interest bearing borrowings (49.4) -----Group net assets 116.9 ===== 2005 Floors Technical Unallocated Total Textiles Central £m £m £m £m Revenue 97.7 77.7 - 175.4 ===== ===== ==== ===== Operating profitbefore amortisationand non-recurring items 8.9 7.4 (3.0) 13.3Amortisation of intangibles (0.2) (0.9) - (1.1) ----- ----- ---- -----Operating profit before non- recurring items 8.7 6.5 (3.0) 12.2Non-recurring items (1.1) 0.2 (0.1) (1.0) ----- ----- ---- -----Operating profit 7.6 6.7 (3.1) 11.2EU Fine - - (8.5) (8.5)Net financing costs - - (1.1) (1.1) ----- ----- ---- -----Profit before taxation 7.6 6.7 (12.7) 1.6Taxation (0.9)Discontinued operations (7.6) -----Profit after taxation (6.9) ===== Capital expenditure 1.0 4.3 - 5.3 ===== ===== ==== =====Depreciation 1.7 2.9 0.1 4.7 ===== ===== ==== =====Impairment - - - - ===== ===== ==== ===== Segment assets 59.6 79.4 139.0Segment liabilities (20.2) (24.7) (44.9) ----- ----- -----Segment net assets 39.4 54.7 94.1 ===== =====Unallocated liabilities (38.3)Cash and cash equivalents 14.7Interest bearing borrowings (1.9) -----Group net assets 68.6 ===== 3. Finance Costs---------------- 2006 2005 £m £mFinancial income:Interest income on deposits 1.4 1.3Expected return on pension plan assets 7.6 7.0 ----- ----- 9.0 8.3 ===== =====Financial expenses:Interest on bank overdrafts and loans (3.3) (2.0)Interest on finance leases (0.1) -Interest on pension scheme liabilities (7.9) (7.4) ----- ----- (11.3) (9.4) ===== ===== 4. Taxation----------- 2006 2005Current tax £m £mUK corporation tax- current year - -- prior year - (1.6) ---- ---- - (1.6)Overseas tax- current year 3.0 1.8- prior year - (0.4) ---- ---- 3.0 1.4 ---- ---- Total current tax 3.0 (0.2) ---- ---- Deferred tax (0.3) 1.1 ---- ---- Total tax charge in the income statement 2.7 0.9 ---- ---- 5. Dividend ----------- Amounts recognised as distributions to equity holders in the period: 2006 2005 £m £mFinal dividend for the year ended30 November 2005 - 2.64p per share* (2004: 2.57p per share*) 3.1 2.9 Interim dividend for the year ended30 November 2006 - 1.58p per share* (2005: 1.51p per share*) 1.8 1.7 --- --- 4.9 4.6 === === * Restated for the effects of the rights issue. In addition the Directors are proposing a final dividend in respect of thefinancial year ended 30 November 2006 of 2.8p which will absorb an estimated£4.3m of shareholders' funds. Conditional upon approval by shareholders at theAnnual General Meeting to be held on 9 May 2007 and accordingly not accrued inthese accounts, it will be paid on 16 May 2007 to shareholders who are on theregister of members on 20 April 2007. 6. 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 Employee Share Ownership Plan which aretreated as cancelled for the purpose of this calculation. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The group has two classes of dilutive potential ordinary shares: beingthose share options granted to employees where the exercise price is less thanthe average market price of the Company's ordinary shares during the year andthose long term incentive plan awards for which the performance criteria havebeen satisfied. During August 2006 £41.1m net of costs was raised by a fully underwritten 1 for2 rights issue at 85p. The closing market price on 6 July 2006, the latest dateprior to the announcement of the rights issue was 131.75p. The rights pricerepresented a 35% discount to the closing share price on 6 July 2006. Thecomparative earnings per share for the year ended 30 November 2005 has beenrestated to allow for easy comparison. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: 2006 2005 Weighted Weighted average average number Per share number Per share Earnings of shares amount Earnings of shares amount £m (millions) p £m (millions) p (restated) (restated)Statutory - continuingand discontinued businessBasic earnings per shareEarnings/(losses)attributableto ordinary shareholders 6.7 115.481 5.80 (7.2) 112.600 (6.39)Effect of dilutiveitems Share basedpayment - 1.689 - - 2.513 - --- ------ ---- ---- ------- ----Dilutedearnings per share 6.7 117.170 5.72 (7.2) 115.113 (6.25) === ======= ==== ==== ======= ==== Statutory - continuing businessBasic earnings per shareEarnings attributableto ordinaryshareholders 6.7 115.481 5.80 0.4 112.600 0.36Effect of dilutive itemsShare based payment - 1.689 - - 2.513 - --- ------- ---- ---- ------- ----Diluted earnings per share 6.7 117.170 5.72 0.4 115.113 0.35 === ======= ==== ==== ======= ==== Before amortisationand non-recurring itemsBasic earnings per shareEarnings attributable to ordinary shareholders 10.1 115.481 8.75 10.7 112.600 9.50Effect of dilutiveitems Share based payment - 1.689 - - 2.513 - ---- ------- ---- ---- ------- ----Diluted earnings per share 10.1 117.170 8.62 10.7 115.113 9.30 ==== ======= ==== ==== ======= ==== 7. Acquisitions--------------- The Group purchased 100% of the voting shares of two companies during the yearfor a total consideration and costs of £82.0m (including the assumption of cashbalances of £3.8m and external debt of £45.9m), of which £72.3m was in respectof Colbond Investments B.V. (the "Colbond Group"). In addition the Groupincreased its stake in its Chinese subsidiary Yihua Bonar from 50.1% to 60.1% byway of a transaction that involved the grant of a perpetual licence of theGroup's proprietary intellectual property of the manufacture of artificial grassyarns to Yihua Bonar. All of these purchases have been accounted using the purchase method ofaccounting. From the dates of acquisition to 30 November 2006 the acquisitionscontributed £44.3m of revenue (Colbond Group £34.7m) and £2.1m profit after taxto the Group (Colbond Group £1.4m). If the acquisitions had occurred on 1 December 2005 Group revenue would havebeen £295.6m and profit after tax would have been £9.5m. These amounts have beencalculated using the Group's accounting policies and by adjusting the results ofthe subsidiary to reflect the additional depreciation and amortisation thatwould have been charged assuming the fair value adjustments to property, plantend equipment and intangible assets had applied from 1 December 2005 with theconsequential tax effects. The goodwill arising on the acquisitions during the year is attributable to theanticipated profitability of these acquisitions and the future operatingsynergies arising in the enlarged group. These acquisitions bring access to newmarkets and product ranges and will provide opportunities to generate additionalprofitability and operating efficiencies respect of existing markets. (a) Colbond Group Acquisition ------------------------- On 31 July 2006 the Group acquired 100% of the share capital of Colbond Groupfor a maximum cash consideration of up to €106.9m. Colbond Group is a producerof synthetic non-woven textiles (for flooring, automotive, and constructionappliances) and three dimensional polymeric mats and composites (for civilengineering building and industrial appliances). The acquisition represents animportant strategic step in the development of the Group's Technical TextilesDivision. The Group acquired Colbond Group with cash balances of £3.7m and aggregateborrowings of £45.9m. Acquisition costs were £2.9m. Of the total consideration€3.6m is deferred and dependent upon certain vendor warranty obligations beingmet. The fair value of identifiable assets and liabilities arising from theacquisition are as follows: Book Fair Value Fair Value Adjustments Value £m £m £mInvestment 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 45.9 ----Net cash outflow 72.3 ----Goodwill arising on consolidation 19.1 ==== The fair value adjustments above have arisen as follows and are provisional: (i) Recognition of intangible assets for marketing related assets,customer relationships and technology based assets. (ii) Assets and liabilities have been fair valued at the date ofacquisition. (iii) Provision has been made for onerous contracts in accordance with IFRS 3"Business Combinations". (iv) As required by IAS 12 "Income Taxes" current and deferred tax has beenprovided on the above adjustments. (b) Geo-Tipptex acquisition ----------------------- On 28 February 2006 the Group acquired 100% of the share capital of Geo-TipptexKft for a maximum cash consideration of €14.0m including the assumption of cashbalances of £0.1m. Acquisition costs were £0.3m. €2.0m of the consideration wasplaced in escrow of which €1.0m remains in escrow at 30 November 2006. The fairvalue of identifiable assets and liabilities arising from the acquisition are asfollows: Book Fair Value Fair Value Adjustments Value £m £m £m Intangible assets - 2.8 2.8Property, plant and equipment 1.8 0.3 2.1Inventories 2.0 - 2.0Trade and other receivables 2.5 - 2.5Trade and other payables (2.1) (0.1) (2.2)Deferred tax liabilities - (0.4) (0.4) ---- ---- ----Net assets 4.2 2.6 6.8 Cash consideration paid including costs 9.8Less cash acquired with business (0.1) ----Net cash outflow 9.7 ----Goodwill arising on consolidation 2.9 ==== The fair value adjustments above relate principally to intangible fixed assetsacquired and the associated deferred tax liabilities. At 31 May 2006 fair value adjustments in respect of Geo-Tipptex were shown asprovisional. The total amount was £2.2m at this date. These fair valueadjustments of £2.6m are now final. (c) Yihua Bonar acquisition ----------------------- The Group increased its stake in its Chinese subsidiary Yihua Bonar from 50.1%to 60.0% on 26 April 2006. The transaction was completed by way of a grant of aperpetual licence of the Group's proprietary intellectual property in themanufacture of artificial grass yarns to Yihua Bonar. The technology licence wasvalued at £1.2m. (d) Deferred consideration ---------------------- The Group paid deferred consideration of £0.6m in respect of the acquisition ofLCM Construction Products Ltd. Deferred consideration of £1.2m was outstandingat 30 November 2006. (e) Prior year acquisitions ---------------------- During the year ended 30 November 2005 the Group reported a net cash outflow of£19.8m in relation to LCM Construction Products Ltd and Xirion NV. This amountwas net of cash balances acquired of £1.0m. 8. Minority interest-------------------- 2006 2005 £m £m At 1 December 2.8 2.2 Acquisition of subsidiary (0.1) -Share of profit after taxation 0.4 0.3Exchange adjustment (0.3) 0.3 ---- ----At 30 November 2.8 2.8 ==== ==== 9. Amortisation and non-recurring items--------------------------------------- During the year the Group incurred significant one off items as detailed below. 2006 2005 £m £mAmounts charged to operating profit:Technical Textiles restructuring 2.0 -Floors restructuring - 1.1Aborted transaction costs 0.5 -Gain on sale of fixed assets - (0.2)Capital reorganisation - 0.1 ---- ---- 2.5 1.0Amortisation 2.4 1.1 ---- ---- 4.9 2.1 ==== ==== ---- ----EU Fine - 8.5 ==== ==== Technical Textiles reorganisation costs include redundancy and otherrestructuring costs within the existing specialist yarn and construction fibresbusinesses, and redundancies within the recently acquired Colbond business. 10. The Annual General Meeting------------------------------ The Annual General Meeting will be held on 9 May 2007 at the Cumberland Hotel,Marble Arch. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
LWB.L