19th Feb 2009 07:00
19 February 2009
Low & Bonar PLC
Preliminary Results for the financial year ended 30 November 2008
and Placing and Open Offer
Low & Bonar PLC ("Low & Bonar" or the "Group"), the international performance materials group, today announces its preliminary results for the financial year ended 30 November 2008 and the terms of a Placing and Open Offer.
Financial highlights:
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2007 As previously reported |
2007 Restated to exclude Floors Division |
2008 Excluding Floors Division |
% Growth (2008 v. 2007 restated) |
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Group revenue |
£311.8m |
£210.3m |
£335.2m |
+59.4% |
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Statutory Group operating profit |
£22.8m |
£11.1m |
£19.1m |
+72.1% |
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Group operating profit* |
£26.1m |
£14.1m |
£26.7m |
+89.4% |
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Group profit before tax* |
£22.4m |
£10.4m |
£16.0m |
+53.8% |
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Earnings per share* |
10.16p |
4.62p |
7.37p |
+59.5% |
* before amortisation and non-recurring items
Operational highlights:
Disposal of the Floors Division in September 2008 has transformed and refocused the Group.
Strategic emphasis now on creating a leading global performance materials business.
MTX performed strongly during its first full year of ownership.
Rate of product innovation increased through strong R&D focus.
Volatile raw material environment successfully mitigated.
Cost reductions and increases in operational productivity across the Group.
Divisional operating margins increased.
Leading positions maintained in a wide range of attractive niche markets.
Paul Forman, Chief Executive of Low & Bonar, said:
"2008 has been a very significant year for Low & Bonar, encompassing unprecedented levels of strategic refocusing, raw material volatility and changes to the economic background.
"Given the inherent seasonality in the Group's markets and the uncertainty surrounding global economic conditions, a clearer picture of underlying trading conditions and the outlook for the Group in 2009 is likely to take some time to emerge.
"The Board believes that the funds raised from the Placing and Open Offer announced today will improve the financial position and future prospects of the Group significantly and, at the appropriate time, allow it to invest in its planned organic growth initiatives and to take advantage of opportunities emerging from the current market environment. Our strategy of developing diverse product ranges for niche end markets and building leading market positions, allied to the underlying trend growth of the technical textile industry, all give the Board confidence for the medium to long-term prospects of the Group."
For further information, please contact:
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Low & Bonar PLC
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+44 (0)20 7535 3180
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Paul Forman, Chief Executive
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Kevin Higginson, Finance Director
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Hogarth Partnership Limited
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+44 (0)20 7357 9477
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Andrew Jaques/Rachel Hirst/Ian Payne
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DISCLAIMER
This announcement does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security.
This announcement is an advertisement and does not constitute a prospectus or prospectus equivalent document. Nothing in this announcement should be interpreted as a term or condition of the Placing and Open Offer. Any decision to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any security offered in connection with the Placing and Open Offer must be made only on the basis of the information contained in and incorporated by reference into the prospectus issued by Low & Bonar in respect of the Placing and Open Offer (the "Prospectus"). Copies of the Prospectus will be available on publication from Low & Bonar's head office.
No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by Low & Bonar. Subject to applicable law and regulation in the United Kingdom, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement or that the information in it is correct as at any subsequent date.
No statement in this announcement is intended as a profit forecast or a profit estimate. Prices and values of, and income from, securities may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.
Cautionary note regarding forward-looking statements
This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "intends", "plans, "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Group concerning, amongst other things, the results of operations, financial condition, liquidity, prospects, growth, strategies and dividend policy of the Group and the industries in which they operate.
By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition, liquidity, dividend policy and the development of the industries in which it operates may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, liquidity and dividend policy of the Group, and the development of the industries in which it operates, are consistent with the forward looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: the effect of the Placing and Open Offer on the Group; changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business, and market conditions.
You are advised to read this announcement and, once available the Prospectus and the information incorporated by reference therein, in their entirety for a further discussion of the factors that could affect the Group's future performance and the industries in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.
Other than in accordance with their legal or regulatory obligations, Low & Bonar does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
Chairman's statement 2008
The Group's core business is the high value-added manufacture and supply of performance materials, based primarily on technical textiles, for strategically attractive niche markets. It now operates from 13 factories in three continents and supplies fibres, yarns, woven and non-woven fabrics for applications in markets including civil engineering, environmentally sustainable construction, leisure, architecture and general industrial applications. The success of our products is determined more by their performance characteristics than by their aesthetic properties. The Group is focused on becoming a global leader in current and other attractive niche markets for performance materials and aims to provide distinct and sustained added-value to its customers' businesses.
Strategic realignment in 2008
On 30 September 2008, we completed the sale of the Floors Division for £123.0 million on a cash free, debt free basis (see page 6 for further details). The Board is grateful to the management and employees of the Division for their strong performance in recent years.
Following the disposal of its Floors Division in September 2008, the Group has focused its business on two areas of activity in the international technical textiles industry: first the production and supply of technical coated fabrics for use in the transport, print and architectural markets; and, secondly, of performance technical textiles, including woven and non-woven fabrics and yarns serving, inter alia, the civil engineering, leisure and horticultural markets.
This realignment is commented on further in the Business Review on pages 6 to 11.
Financial Performance
As a result of the sale of the Floors Division we are giving 2007 comparative figures both restated for the disposal and as previously reported. These figures are set out in the table below:
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£m |
2007 As previously reported |
2007 Restated to exclude Floors Division |
2008 Excluding Floors Division |
% Growth (2008 v. 2007 restated) |
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Group revenue |
311.8 |
210.3 |
335.2 |
59.4 |
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Group operating profit before amortisation and non-recurring items |
26.1 |
14.1 |
26.7 |
89.4 |
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Group profit before tax, amortisation and non-recurring items |
22.4 |
10.4 |
16.0 |
53.8 |
Reasons for the Placing and Open Offer and use of proceeds
The Group has this morning announced the terms of a Placing and Open Offer which is expected to generate net proceeds of approximately £30 million for the Company. The Board believes that the funds raised from the Placing and Open Offer will improve the financial position and future prospects of the Group significantly and, at the appropriate time, allow it to invest in its planned organic growth initiatives and to take advantage of opportunities emerging from the current market environment.
Following its good results for the year ended 30 November 2008, but having given consideration to its strategy and current trading conditions, the Company has reviewed its financing arrangements and the structure of its balance sheet. Economic conditions are strained worldwide and highly uncertain and therefore, the Board believes that identified investment opportunities for organic earnings growth are being lost or delayed through the need to conserve cash. These opportunities include initiatives to reduce capacity constraints and costs and improve cash generation capabilities. Under more favourable economic conditions, and if finance were to be available, the Board would be likely to pursue such opportunities. Initiatives to grow sales include capacity expansion projects related to supplying growth markets such as civil engineering and artificial grass; geographic expansion; removing capacity constraints in weaving; research and development expenditure in woven textiles and yarns, and the need to fund the working capital consequences of such growth in due course. Cost reduction initiatives include process automation in Colbond and manufacturing productivity enhancements in MTX. The Company typically targets cash payback from cost reduction projects of one to three years and three to four years for organic sales growth projects. The Company believes that these initiatives, if implemented, will support the upward trend in operating profit margins and enhance its strategic position.
Whilst economic conditions remain uncertain and trading muted, the Company intends to use the net proceeds of the Placing and Open Offer to reduce net borrowings until such time as it deems it prudent to implement its strategic and operational initiatives.
Capital Reorganisation
It is proposed that the Placing and Open Offer will be undertaken at 25 pence per Placing and Open Offer Share. The Placing and Open Offer is conditional on, amongst other things, the completion of a Capital Reorganisation, for which the approval of Shareholders is being sought, which will result in the nominal value of each New Ordinary Share being reduced to five pence. Further details on the proposed Capital reorganisation are given in note 11.
Dividend
In light of the Placing and Open Offer, a final dividend will not be recommended for the year ended 30 November 2008. It is the Board's intention, subject to the Group's trading position and prevailing economic circumstances, to resume dividend payments for the year to 30 November 2009. It is the Board's intention that the level of the dividend payment would be established at a sustainable level with the dividend per share to be covered at least twice by earnings per share (before amortisation and non-recurring items).
Employees
Once again I would like to thank our employees throughout the Group for their continued very positive responses and initiatives throughout the year. Their hard work and responsiveness underpins our strong positions across our markets.
Current trading and outlook
The Group has experienced material year-on-year sales volume falls since 30 November 2008, although significant cost actions already taken and benefits from falls in the prices of its key raw materials have helped to mitigate the impact on financial performance. These sales volume declines had been anticipated in part due to customer shutdowns and destocking, as well as the impact of the strained economic conditions.
Given the inherent seasonality in the Group's markets and the uncertainty surrounding global economic conditions, a clearer picture of underlying trading conditions and the outlook for the Group in 2009 is likely to take some time to emerge. In addition to cost actions taken so far, the Group has identified other opportunities to reduce costs should conditions require it.
Our strategy of developing diverse product ranges for niche end markets and building leading market positions, allied to the underlying trend growth of the technical textile industry all give the Board confidence for the medium to long-term prospects of the Group.
BUSINESS REVIEW
Overview
2008 has been a very significant year for Low & Bonar, encompassing unprecedented levels of strategic refocusing, raw material volatility and changes to the economic background. I am pleased to report that the Group has entered what will be very testing times - but also times of great opportunity - in good financial and strategic shape. In the course of this highly active year, the financial performance was equally satisfying - Group profit before tax from continuing operations (before amortisation and non-recurring items) grew to £16.0 million on Group revenues of £335.2 million, an increase of 54% over the 2007 figure restated to reflect the disposal of the Floors Division. Consequently, earnings per share from continuing operations before amortisation and non-recurring items increased 60% to 7.37p (2007: 4.62p). This growth was underpinned not only by the maiden contribution of MTX, acquired in January 2008, but also by a healthy growth in Divisional operating margins from 8.5% to 9.6%. Given that the majority of our profits are earned in euros, there was also a benefit from translating results from euros to sterling.
Key Themes of 2008
Strategic refocusing
Commencing with the completion of the acquisition of MTX in January 2008, there have been four events this year completing the move to a more strategically focused Group based on the technical textiles industry. MTX, a leading producer of technical coated fabrics based in Germany and the Czech Republic, was acquired on 3 January 2008 for €163.0 million. It produces PVC-coated materials for the transport, architectural, print and general industrial sectors and operates in a segment that offers distinct scaling opportunities.
On 8 January 2008, we announced the acquisition of Westbond Ltd, a producer of fusion-bonded carpet tiles, for a total consideration of £10.9 million. During our period of ownership, it performed in line with internal expectations and, as envisaged, proved highly complementary to our existing Tessera carpet tile business. Westbond was successfully integrated into our Floors Division within six months of the acquisition.
In April 2008, the Group established Bonar Emirates Technical Yarns Industries LLC (BETY), a joint venture company to manufacture artificial grass yarns and carpet backing yarns based in Abu Dhabi. Through this initiative, the Group will be able to expand its existing European capacity in artificial grass yarn production to meet the expected high growth in demand for this product, and will have ready access to new markets in the Gulf and Middle East region. It will also provide access to lower input costs such as raw materials, energy and labour. We have treated BETY as a subsidiary in the Group accounts as we hold economic control.
In September 2008, the Company completed the sale of the Group's Floors Division (including Westbond) at a value of £123.0 million on a cash free, debt free basis. This was a very significant change to the Group's profile: Bonar Floors had been a valuable and important part of Low & Bonar for over 30 years. In the last few years the business had grown substantially, both organically and through acquisition, built a strong management team and developed a clear strategy, whilst generating very good margins. Nonetheless, the Board was supportive of the disposal because it believed that not only did the offer represent good value for the Company and shareholders, but also that it freed up management resource and cash to invest in developing the Group further as a leading technical textiles business. The disposal also reduced significantly the Group's debt levels. The Board is confident that the disposal of Bonar Floors will help Low & Bonar to meet its long-term strategic objective of creating a leading global performance materials business. The strategy will be discussed in more detail later in this section.
Raw material volatility
2008 was particularly noteworthy for the unprecedented volatility in our key raw materials, oil-based polymers including polyethylene, polypropylene, PVC, nylon and polyester. This is important because the spend on raw materials is approximately half our total sales value, with oil-based polymers representing by far the largest item of raw material expenditure. Three factors are widely regarded as critical to influencing the cost of those raw materials: the supply level for each polymer; global demand for each; and the price of crude oil. All these factors have varied very significantly throughout the year, with new supply coming on stream from the Gulf region, demand growing and then weakening in line with global industrial health and the well-documented movements in the oil price. Whilst we believe that the quality of our products and services, the strength of our customer relationships and our strong market positions all help to manage the margin implications of such volatility, there is necessarily at least, some impact in the short term. We have been able to compensate well through actions on other cost areas and grow operating margins in 2008 despite an overall negative impact from raw materials. The latter part of the year did indeed see some weakening from the historic high levels of August and September as the oil price and demand for individual polymers fell. We see no reason to assume that in the medium term this volatility will lessen, but are confident we can continue to maintain healthy margins as a consequence of the added-value we provide to our customers and our leading market positions.
Changes to the economic background
We consider one of the strategic strengths of the Group to be its diversity of geographies served and the variety of end-markets, ranging from civil engineering to leisure to horticulture. We have been able to build on our strong positions in niche markets by acquiring businesses that take us into new or complementary sectors that are set for growth, driven by factors such as legislation and environmental concerns. This means that we have seen volume growth in the technical textiles industry generally, and in our businesses in particular, above that of GDP. Nonetheless, changes to the overall economic environment do have a significant impact on short-term customer demand levels and we witnessed a clear weakening in overall demand from September onwards. However, we believe that, for the reasons outlined above, some of this impact can be mitigated and that indeed additional opportunities to gain market share will present themselves. We also believe that the trend growth rate in the industry of one to two times GDP should reassert itself over time.
Financial performance summary
Overall Group revenue from continuing operations increased by 59% to £335.2 million (2007 (restated): £210.3 million) of which £105.3 million was the effect of the MTX acquisition. The ten month revenue from Bonar Floors was £96.0 million, including Westbond, compared with a full 12-month figure of £101.5 million in 2007.
Revenue from continuing operations was broadly flat when adjusting for foreign exchange benefits as positive growth in the first half of the year was offset by the decline in the later part of the year and by the expected cessation of a non-strategic toll manufacturing contract previously held by Colbond. Decisions were taken at times throughout the year to turn away specific revenue opportunities if management believed the debt risk outweighed the reward.
Excellent work on lowering unit production costs, allied to good management of product mix and control of overhead spend, meant that operating profit from continuing operations before amortisation and non-recurring items grew by 89% to £26.7 million (2007 (restated): £14.1 million). MTX, which has met the stretching internal financial expectations established at the time of acquisition, contributed £12.3 million operating profit (before amortisation and non-recurring items) in its 11 months as part of the Group, and local operating profit from the remaining activities grew by £1.9 million, or 13%, despite the major escalation of raw material costs. It is encouraging to report that Divisional operating margins consequently increased from 8.5% to 9.6%.
Group profit before tax from continuing operations (before amortisation and non-recurring items) grew by 54% to £16.0 million (2007 (restated): £10.4 million). Net financing costs increased from £3.7 million to £10.7 million as a result of higher debt levels and increased bank margins. Operating non-recurring items were a net £1.4 million charge, comprised of a £2.3 million charge in respect of the restructuring of MTX post acquisition and a £0.9 million profit on the disposal of surplus land. A non-operating non-recurring charge of £6.2 million was incurred in respect of a potential funding deficit arising from the implementation of pensions equalisation (see note 6). Our pre amortisation and non-recurring items tax rate remained unchanged at 29%. Earnings per share from continuing operations before amortisation and non-recurring items increased by 60% to 7.37p (2007 (restated): 4.62p).
Our year end net debt position of £104.5 million (2007: £50.5 million) is a reflection of the acquisition and disposal activities, the translation impact of debt primarily denominated in euros, and good operational cash flow benefiting from strong management of working capital. The net debt/EBITDA ratio (for bank covenant purposes) for the year was 2.6 times versus a covenant of no more than 3.25 times and the interest cover covenant was 3.7 times versus a covenant of no less than 3 times.
Health and safety
The Board's rigorous commitment to health and safety matters remains undiminished. All statistics and incidents are subject to close scrutiny by myself and the senior management team. I am pleased to report that this continued emphasis, underpinned by training and selective capital investment, has meant that yet again the accident statistics have shown considerable year-on-year improvement. We believe that our level of accidents is half that experienced by our benchmark industry sectors across Europe and are intent on improving that ratio further still. MTX has been fully integrated into our Health & Safety processes and we are confident that it too will show the same improving trend in 2009.
Maintaining our environmental responsibilities
Our twin emphasis on acting responsibly in our manufacturing processes and on new product developments continues, but at an increased rate. Operationally we have successfully developed capabilities to re-use post-industrial polymer waste and are utilising this capacity wherever possible. Waste reduction programmes in all sites have the dual benefit of reducing our production unit costs and also improving our environmental footprint. Equally we are actively engaged in programmes targeting reductions in usage rates across packaging, electricity and other utilities. Our products themselves are increasingly focused on aspects of environmental responsibility, such as the benefits of reducing water consumption and lower chemical usage from artificial grass. We have launched, amongst others, "green" roof products, 100% recycled carpet backings and a product for motorway central reservations that consumes exhaust emissions. Work continues on innovations in areas like biodegradable options for specific end-markets.
Employees
As has been discussed, 2008 witnessed an increased level of change across the Group compared to the already very high levels of the last few years. Our global dimension is exemplified by the fact that our 14 factories (including the Middle East site under construction) are located in nine countries across three continents and this provides great opportunities for the beneficial sharing of ideas and approaches. I have been encouraged by the positive way our colleagues have embraced the transformation that has occurred within Low & Bonar over the last 12 months and responded to the more demanding trading environment. Regrettable but necessary decisions have been required to ensure our cost base is adjusted appropriately and the commitment of all those working for Low & Bonar to building the Group has remained excellent.
Strategy, Key Strengths and 2008 Performance Review
The principal activities are in the international manufacturing and supply of performance materials known as technical textiles. The global technical textile industry comprises, inter alia, fibres, yarns, woven and non-woven fabrics serving diverse markets for a wide range of niche industrial applications.
Strategy and key strengths
Strategy
The Group's objective is to become a global leader in the manufacture and supply of performance materials, based primarily on technical textiles, for strategically attractive niche markets. The Group is focused on becoming a global performance materials business, based primarily, but not exclusively, on technical textiles, which aims to provide distinct and sustained added-value to its customers' businesses. The Company believes that pursuing this strategy, backed by a stable management team, will result in higher returns and above-market growth rates. It is the Company's belief that a material increase in scale through the adoption of this strategy will give benefits in purchasing capability, utilisation of commercial infrastructure, scope to invest in state-of-the-art production equipment and shared knowledge and depth of pocket in research and development.
The Group's strategy is to develop a portfolio of leading global positions in carefully chosen niche markets and to realise purchasing, production and cross-selling synergies as appropriate. Cost and quality leadership is sought through constant process redesign and improvement. The Company believes that organic expansion will be achieved through further product innovation in all areas, geographic expansion and operational process improvement. This strategy for organic growth may be complemented by acquisitions in segments that are consistent with this strategy or which provide geographic expansion of the Group's core activities.
Key Strengths
The Directors believe that the Group has a number of key strengths that assist in underpinning its financial performance. These strengths include:
i) Leading market positions in the markets in which it operates
The acquisition strategy of the last five years has focused on building leading market positions in the niche markets in which the Group operates by either: (i) building on existing market positions, as was the case in the acquisitions of Xirion, a producer and supplier of artificial grass yarns, and GeoߛTipptex, a manufacturer of nonߛwoven geotextiles; or (ii) acquiring businesses that have leading market positions in new markets, as was the case with the acquisitions of the nonߛwoven business of Colbond and the technical coated fabrics business of MTX. The Directors believe that this acquisition strategy enables the Group to maintain strong operating margins.
ii) Customer diversity reducing overߛreliance on one specific country or end market
The Directors believe that the Group benefits from having limited exposure to any specific geographic market and through serving a wide range of end markets. In 2008, the Group's sales by destination amounted to approximately 5.5% to the United Kingdom, 70.5% to continental Europe, 15.7% to North America and 8.3% to the rest of the World, primarily Asia. The end markets are themselves diverse, with products finding their way into, inter alia, markets such as the civil engineering, carpet tile manufacture, horticulture, artificial sports pitches, building construction and large scale outdoor advertising media sectors.
iii) A growing investment in new product development
The Group places great significance on innovation as a means of developing new products to satisfy customer demands. Colbond, for example, has research and development facilities in the Netherlands and in the United States comprising 5% of its employees and has recently added to its capabilities to support the Yarns business. Sales from products introduced within the last 12 months have increased to almost 20% of the total. Specific examples of recent innovation include "F2F", a unique double-sided backing product for carpet tiles that enables customers to reduce inventory and set-up times, and technical coated fabrics specifically designed for the storage of biogas. Our Fabrics business has launched a new range of products to support its horticultural customers and a new "Cool Grass" product has been developed by the Yarns business which lowers the surface temperature of a sports pitch by up to 15ºC.
iv) The Group has a clearly demonstrated ability to execute and add value to acquisitions
The Group has completed seven acquisitions and joint ventures in technical textiles in the last five years, across Europe, North America, the Middle East and China. These investments have ranged in size from £3.0 million to €163.0 million and have built on existing businesses or added new businesses to the Group. The Directors believe that these acquisitions have created value, both financially and strategically, within the Group. MTX has, for example, generated €26.7 million of operating cash flow in the period to 30 November 2008, and GeoߛTipptex achieved record sales in the last quarter of 2008.
v) The Group has a strong management team which has delivered significant financial improvement
In the year ended 30 November 2002, before the current management team joined the Group, the relevant part of Low & Bonar, Yarns & Fabrics, generated divisional operating profit of approximately £2.6 million on sales of £44.3 million, representing an operating margin before central costs of 5.9%, based on figures derived using UK GAAP. In the year ended 30 November 2008, the sales of the Technical Textiles Division were £335.2 million, divisional operating profit before amortisation and non-recurring items was £32.1 million and the operating margin before central costs was 9.6%, based on figures derived using IFRS. This growth in margins was achieved at a time when average raw material costs have doubled approximately.
vi) Many of the markets served have positive longߛterm trend growth
A number of structural factors determine the underlying growth of the markets served by the Group, other than those purely associated with macroeconomic trends: the level of global investment in infrastructure; the rate of change in commercial use from broadloom carpets to carpet tiles; the installation of artificial grass sports pitches; the use of artificial grass for landscaping applications; the use of coated fabrics for permanent and semiߛpermanent structures; and the importance of yield improvement and energy reduction in horticulture. The overall technical textiles industry is believed to have been growing in volume above underlying GDP over the last five years due to substitution and new market development factors. Whilst overall economic activity is one factor in determining the growth rates of the Group's various markets, there are many other determinants, including those stated above, which taken together the Directors believe should sustain strong growth rates in core markets over the long term.
2008 Performance review
Highlights
Successful acquisition of MTX
Cost control and operational productivity compensate for lower H2 sales
Rate of product innovation increased
Volatile raw material environment successfully mitigated
Operating margin increased to almost 10%
Despite a slower final quarter, 2008 proved a satisfying year financially and operationally. The biggest event was the acquisition of MTX, our technical coated fabrics business, and its subsequent integration and I am pleased to report that results to date are marginally higher than the stretching internal expectations that were set at the time of acquisition.
Technical Coated Fabrics
MTX operates from two factories in Germany and one in the Czech Republic and a network of overseas sales offices. The main products are truck side tarpaulins, larger fabrics for outdoor advertising applications, permanent and semi-permanent structures, and various other specialist applications including the marine, pool and outdoor leisure sectors. Market demand is influenced by underlying economic drivers such as the number and replacement pattern of commercial vehicles in Europe, outdoor media expenditure, architectural trends and product substitution. The market is estimated to be worth approximately £2 billion globally and hence offers significant scope for our further growth.
At the time of the MTX acquisition, a detailed set of plans was developed to ensure sales, profit margins and cash flow were optimised. This initiative has progressed well to date despite the trailer market being adversely impacted by the economic environment in the latter half of the year. The business has significantly reduced its working capital, sustained good operating margins and implemented many of the Group processes relating to financial and operational control. Looking ahead, opportunities exist to optimise manufacturing productivity and working capital efficiency still further as well as to expand its geographic presence and to increase the rate of innovation and hence sales growth. The diverse geographic nature of its sales network is proving an asset to our other businesses, as well as its expertise in coating technology.
Performance Technical Textiles
(i) Technical Fabrics
The Technical Fabrics business produces and supplies woven and non-woven geotextiles, agrotextiles and other industrial textiles; it also supplies specialist fibres added to concrete, primarily in the civil engineering industry. It manufactures from factories in Belgium, Hungary and China. The European business continued its track record of growth in sales and profit, delivering record margins. A particular highlight of the year was the very good performance of Geo-Tipptex, the Hungarian manufacturer of non-woven geotextiles used in civil engineering that was acquired in 2006. This business has benefited from the increase and upgrading of its production capacity in 2007, enabling it to improve margins and product quality. Elsewhere, the businesses serving the civil engineering market and horticulture markets for groundcovers fared well and retain leading positions across Europe. Encouragingly for the future, the focus of the management team on enhancing its new product pipeline is starting to bear fruit with the proportion of sales from new products gaining steadily throughout the year, such as specialist applications like cherry cloth, Phormidrain and mushroom mats. It is also making good headway in less developed, higher growth geographic markets - most notably the Gulf region. Our Chinese joint venture experienced unprecedentedly high levels of raw material cost escalation as well as market softening from their Chinese customers supplying product into Europe and North America. Nonetheless, the long-term potential remains undoubted and we are using expertise from across the Group to bring standards of production and financial performance to a consistently high level.
(ii) Bi-component Non-wovens and Three Dimensional Mats
Colbond sells non-woven specialty fabrics as backing for carpet tiles, higher end automotive applications and for roofing membranes. It also produces three-dimensional mats used as flow media and separation media in civil engineering and composites amongst others. The business performed well to maintain its profit despite being the one business with some exposure both to the automotive and residential housing market, which proved difficult throughout 2008. Excellent levels of product innovation enabled sales to grow elsewhere, with sales into the civil engineering, general industrial and US carpet tile sectors all performing notably well. As importantly, the production teams on both sides of the Atlantic made great strides in productivity improvements and achieved reductions of over 10% for certain core products. Additionally the completion of a new warehouse in July 2008 has started to improve service and reduce cost. Like Fabrics it saw significant growth in sales from products recently introduced and looks set to maintain this trend. Entry into new end markets is also being strenuously targeted and is likely to produce tangible benefits in 2009. Sales initiatives into growth markets like "green" buildings and composites have been prioritised further given their greater underlying resilience in the current economic environment and their long term growth potential. In the broader context, Colbond's R&D capability remains a core strength that much of the business calls upon to good effect and it leads the way in many aspects of health, safety and environmental practice. Its safety record is pre-eminent within the Group and is clear best practice.
(iii) Technical Yarns
Bonar Technical Yarns manufactures and supplies a range of high-specification synthetic yarns for use in the production of synthetic sport and landscaping surfaces as well as in woven Axminster and Wilton carpets. The key development in this business in 2008 was the establishment of a joint venture in Abu Dhabi. The production facility is expected to commence production of grass yarn in the second half of 2009 and will add to the existing European production capacity in Scotland and Belgium. As well as bringing access to lower production costs it is situated close to one of the expected growth markets for both sports and landscape applications. 2008 saw Yarns face the highest raw material price increases across the Group and a lot of good work on raw material and direct labour efficiency ensured that this negative effect was broadly mitigated. Underlying sales volume growth was achieved and new customers were obtained globally but further progress needs to be made for the business to achieve its profit potential. Encouragingly, significant growth in new product development output has been achieved and the business is in better underlying shape than it has been for a long time, due to a lot of hard work across all facets of the business.
Consolidated Income Statement
for the year ended 30 November
|
2008 |
2007 Restated1 |
||||||
|
Before amortisation and non-recurring items |
Amortisation and non-recurring items (note 6) |
Total |
Before amortisation and non-recurring items |
Amortisation and non-recurring items (note 6) |
Total |
||
|
Note |
|||||||
|
£m |
£m |
£m |
£m |
£m |
£m |
||
|
Revenue |
2 |
335.2 |
- |
335.2 |
210.3 |
- |
210.3 |
|
Operating profit |
2 |
26.7 |
(7.6) |
19.1 |
14.1 |
(3.0) |
11.1 |
|
Non-operating expenses |
- |
(6.2) |
(6.2) |
- |
- |
- |
|
|
Financial income |
10.6 |
- |
10.6 |
9.4 |
- |
9.4 |
|
|
Financial expenses |
(21.3) |
- |
(21.3) |
(13.1) |
- |
(13.1) |
|
|
Net financing costs |
3 |
(10.7) |
- |
(10.7) |
(3.7) |
- |
(3.7) |
|
Profit before taxation |
16.0 |
(13.8) |
2.2 |
10.4 |
(3.0) |
7.4 |
|
|
Taxation |
4 |
(4.7) |
2.1 |
(2.6) |
(3.0) |
0.9 |
(2.1) |
|
Profit/(loss) after taxation |
11.3 |
(11.7) |
(0.4) |
7.4 |
(2.1) |
5.3 |
|
|
Profit/(loss) for the year from continuing operations |
11.3 |
(11.7) |
(0.4) |
7.4 |
(2.1) |
5.3 |
|
|
Profit for the year from discontinued operations |
10 |
6.3 |
54.5 |
60.8 |
8.4 |
(0.3) |
8.1 |
|
Profit for the year |
17.6 |
42.8 |
60.4 |
15.8 |
(2.4) |
13.4 |
|
|
Attributable to |
|||||||
|
Equity holders of the Company |
17.7 |
42.8 |
60.5 |
15.5 |
(2.4) |
13.1 |
|
|
Minority interest |
8 |
(0.1) |
- |
(0.1) |
0.3 |
- |
0.3 |
|
17.6 |
42.8 |
60.4 |
15.8 |
(2.4) |
13.4 |
||
|
Earnings/(loss) per share |
7 |
||||||
|
Continuing operations: Basic Diluted |
7.37p 7.19p |
(0.20)p (0.20)p |
4.62p 4.54p |
3.27p 3.22p |
|||
|
Discontinued operations: Basic Diluted Total: Basic Diluted |
4.10p 4.00p 11.47p 11.19p |
39.65p 38.70p 39.45p 38.50p |
5.54p 5.45p 10.16p 9.99p |
5.33p 5.24p 8.60p 8.46p |
|||
1 restated following the disposal of the Floors Division (note 10)
Consolidated Balance Sheet
as at 30 November
|
|
||||||
|
2008 |
2007 |
|||||
|
Note |
£m |
£m |
||||
|
Non-current assets |
||||||
|
Goodwill |
82.3 |
48.0 |
||||
|
Intangible assets |
56.5 |
21.2 |
||||
|
Property, plant and equipment |
125.8 |
97.3 |
||||
|
Investment in associate |
0.3 |
0.2 |
||||
|
Deferred tax assets |
2.7 |
2.8 |
||||
|
267.6 |
169.5 |
|||||
|
Current assets |
||||||
|
Inventories |
73.8 |
51.3 |
||||
|
Trade and other receivables |
72.2 |
61.5 |
||||
|
Derivative assets |
2.0 |
0.2 |
||||
|
Cash and cash equivalents |
27.5 |
5.8 |
||||
|
175.5 |
118.8 |
|||||
|
Current liabilities |
||||||
|
Interest bearing loans and borrowings |
16.0 |
8.4 |
||||
|
Current tax liabilities |
8.4 |
5.7 |
||||
|
Trade and other payables |
74.4 |
72.3 |
||||
|
Provisions |
6 |
2.3 |
- |
|||
|
Derivative liabilities |
15.2 |
1.6 |
||||
|
116.3 |
88.0 |
|||||
|
Net current assets |
59.2 |
30.8 |
||||
|
Total assets less current liabilities |
326.8 |
200.3 |
||||
|
Non-current liabilities |
||||||
|
Interest bearing loans and borrowings |
116.0 |
47.9 |
||||
|
Deferred tax liabilities |
28.3 |
15.1 |
||||
|
Post employment benefits |
11.9 |
4.8 |
||||
|
Provisions |
6 |
6.0 |
- |
|||
|
Other payables |
0.1 |
1.4 |
||||
|
162.3 |
69.2 |
|||||
|
Net assets |
164.5 |
131.1 |
||||
|
Equity attributable to equity holders of the parent |
||||||
|
Share capital |
38.6 |
38.5 |
||||
|
Share premium account |
30.6 |
30.3 |
||||
|
Translation reserve |
(9.5) |
(1.9) |
||||
|
Retained earnings |
100.1 |
61.1 |
||||
|
Total equity attributable to |
||||||
|
Equity holders of the parent |
159.8 |
128.0 |
||||
|
Minority interest |
8 |
4.7 |
3.1 |
|||
|
Total equity |
164.5 |
131.1 |
||||
Statement of Recognised Income and Expense
for the year ended 30 November
|
|
2008 |
2007 |
||||
|
Note |
£m |
£m |
||||
|
Foreign exchange translation differences |
(4.0) |
(2.1) |
||||
|
Deferred tax on share based payment |
(0.2) |
(0.2) |
||||
|
Actuarial (loss)/gain on defined benefit pension scheme |
(15.7) |
12.0 |
||||
|
Deferred tax on defined benefit pension scheme |
0.5 |
(3.5) |
||||
|
Net (expenses)/income recognised directly in equity |
(19.4) |
6.2 |
||||
|
(Loss)/ profit for the year from continuing operations Profit for the year from discontinued operations |
(0.4) 60.8 |
5.3 8.1 |
||||
|
Total recognised income for the year |
41.0 |
19.6 |
||||
|
Attributable to |
||||||
|
Equity holders of the parent |
39.8 |
19.3 |
||||
|
Minority interest |
8 |
1.2 |
0.3 |
|||
|
41.0 |
19.6 |
|||||
Consolidated Cash Flow Statement
for the year ended 30 November
|
|
2008 |
2007 |
||||
|
£m |
£m |
|||||
|
(Loss)/profit for the year from continuing operations |
(0.4) |
5.3 |
||||
|
Profit for the year from discontinued operations |
60.8 |
8.1 |
||||
|
60.4 |
13.4 |
|||||
|
Adjustments for |
||||||
|
Depreciation |
13.6 |
9.8 |
||||
|
Amortisation |
7.0 |
3.3 |
||||
|
Income tax expense |
6.6 |
5.7 |
||||
|
Net financing costs |
10.8 |
3.7 |
||||
|
Increase in inventories |
(7.5) |
(0.6) |
||||
|
Decrease/(increase) in trade and other receivables |
3.6 |
(7.5) |
||||
|
Increase in trade and other payables |
3.1 |
4.0 |
||||
|
Increase in provisions |
8.3 |
- |
||||
|
Gain on disposal of property, plant and equipment |
(0.7) |
- |
||||
|
Gain on disposal of discontinued operations |
(55.9) |
- |
||||
|
Equity settled share based payment |
1.4 |
1.2 |
||||
|
Other |
- |
0.1 |
||||
|
Cash inflow from operations |
50.7 |
33.1 |
||||
|
Interest received |
2.6 |
1.7 |
||||
|
Interest paid |
(11.3) |
(4.5) |
||||
|
Tax paid |
(5.0) |
(3.9) |
||||
|
Pension cash contributions in excess of operating charge |
(12.1) |
(3.5) |
||||
|
Net cash inflow from operating activities |
24.9 |
22.9 |
||||
|
Acquisition of subsidiaries, net of cash |
(132.9) |
- |
||||
|
Acquisition of property, plant and equipment |
(16.8) |
(15.1) |
||||
|
Intangible assets purchased |
(1.4) |
(1.5) |
||||
|
Finance lease capital repayments |
(0.3) |
(0.3) |
||||
|
Disposal of discontinued operations, net of cash disposed of |
114.7 |
- |
||||
|
Disposal of property, plant and equipment |
2.2 |
1.5 |
||||
|
Net cash outflow from investing activities |
(34.5) |
(15.4) |
||||
|
Proceeds of share issues |
0.1 |
0.6 |
||||
|
Inflow from new borrowings |
68.2 |
4.4 |
||||
|
External debt disposed with subsidiaries |
1.8 |
- |
||||
|
Movement in cash flow hedges |
(33.5) |
(3.6) |
||||
|
Equity dividends paid |
(7.7) |
(7.0) |
||||
|
Net cash inflow/(outflow) from financing activities |
28.9 |
(5.6) |
||||
|
Net cash inflow |
19.3 |
1.9 |
||||
|
Cash and cash equivalents at start of year |
5.8 |
3.3 |
||||
|
Foreign exchange differences |
2.4 |
0.6 |
||||
|
Cash and cash equivalents at end of year |
27.5 |
5.8 |
||||
|
Notes |
||||||
1. Basis of preparation
The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand pounds. They are prepared on the historical cost basis except for the revaluation to fair value of certain financial instruments.
The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU (adopted IFRS). At the date of authorisation of these financial statements there are a number of Standards and Interpretations in issue but not yet effective and have therefore not yet been applied in these financial statements. The Directors anticipate that adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
The financial information contained in this preliminary announcement was approved by the Board on 19 February 2009. The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 November 2008 or 2007. Statutory accounts for 2007 have been delivered to the registrar of companies and those for 2008 will be delivered in due course. The auditors have reported on those accounts, their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying 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 was organised into two operating divisions - Floors and Technical Textiles. Following the disposal of the Floors Division, one segment, Technical Textiles is reported. The Floors Division has been shown as a discontinued operation. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly cash and cash equivalents, interest bearing loans, borrowings, post employment benefits, taxation balances and corporate assets and expenses. Intra-segment sales are not material.
Following the disposal of the Floors Division, the Group's principal activities are in the international manufacturing and supply of those performance materials commonly referred to as technical textiles. The global technical textiles industry comprises, inter alia, fibres, yarns, woven fabrics and non-woven fabrics serving diverse markets such as the hygiene, automotive, construction, industrial and healthcare markets. Following the disposal of the Floors Division, the Group has focused its business into two areas of activity in the international technical textiles industry: the production and supply of (a) technical coated fabrics for use in the transport, print and architectural markets; and (b) performance technical textiles.
The Floors Division supplied floor coverings to the contract flooring market.
|
2008 |
||||||
|
Primary segment - Business |
Technical Textiles |
Unallocated Central |
Total |
|||
|
£m |
£m |
£m |
||||
|
Revenue- Continuing operations |
335.2 |
- |
335.2 |
|||
|
Operating profit before amortisation and non-recurring items |
32.1 |
(5.4) |
26.7 |
|||
|
Amortisation |
(6.2) |
- |
(6.2) |
|||
|
Operating profit before non-recurring items |
25.9 |
(5.4) |
20.5 |
|||
|
Non-recurring items |
(1.4) |
- |
(1.4) |
|||
|
Operating profit |
24.5 |
(5.4) |
19.1 |
|||
|
Non-operating expenses - non-recurring items |
(6.2) |
|||||
|
Net financing costs |
(10.7) |
|||||
|
Profit before taxation |
2.2 |
|||||
|
Taxation |
(2.6) |
|||||
|
Loss for the year from continuing operations Profit for the year from discontinued operations (note 10) |
(0.4) 60.8 |
|||||
|
60.4 |
||||||
|
2008 |
||||||
|
Technical Textiles |
Unallocated Central |
Total |
||||
|
£m |
£m |
£m |
||||
|
Capital expenditure - Continuing operations |
12.9 |
0.1 |
13.0 |
|||
|
Capital expenditure - Discontinued operations |
5.2 |
|||||
|
Capital expenditure - Total |
18.2 |
|||||
|
Depreciation - Continuing operations |
11.7 |
0.1 |
11.8 |
|||
|
Depreciation - Discontinued operations |
1.8 |
|||||
|
Depreciation - Total |
13.6 |
|||||
|
£m |
£m |
|||||
|
Segment assets |
409.7 |
409.7 |
||||
|
Segment liabilities |
(66.5) |
(66.5) |
||||
|
Segment net assets - Continuing operations |
343.2 |
343.2 |
||||
|
Unallocated assets and liabilities |
(74.2) |
|||||
|
Cash and cash equivalents |
27.5 |
|||||
|
Interest-bearing borrowings |
(132.0) |
|||||
|
Group net assets |
164.5 |
|||||
|
2007 Restated |
|||||||
|
Technical Textiles |
Unallocated Central |
Total |
|||||
|
£m |
£m |
£m |
|||||
|
Revenue |
210.3 |
- |
210.3 |
||||
|
Operating profit before amortisation and non-recurring items |
17.9 |
(3.8) |
14.1 |
||||
|
Amortisation |
(3.0) |
- |
(3.0) |
||||
|
Operating profit before non-recurring items |
14.9 |
(3.8) |
11.1 |
||||
|
Non-recurring items |
- |
- |
- |
||||
|
Operating profit |
14.9 |
(3.8) |
11.1 |
||||
|
Net financing costs |
- |
(3.7) |
(3.7) |
||||
|
Profit before taxation |
14.9 |
(7.5) |
7.4 |
||||
|
Taxation |
(2.1) |
||||||
|
Profit for the year from continuing operations Profit for the year from discontinued operations |
5.3 8.1 |
||||||
|
13.4 |
|||||||
|
Capital expenditure - Continuing operations |
11.1 |
0.5 |
11.6 |
||||
|
Capital expenditure - Discontinued operations |
5.0 |
||||||
|
Capital expenditure - Total |
16.6 |
||||||
|
Depreciation - Continuing operations |
7.9 |
7.9 |
|||||
|
Depreciation - Discontinued operations |
1.9 |
||||||
|
Depreciation - Total |
9.8 |
||||||
|
Segment assets |
209.2 |
209.2 |
|||||
|
Segment liabilities |
(42.0) |
(42.0) |
|||||
|
Segment net assets - Continuing operations |
167.2 |
167.2 |
|||||
|
Segment assets - Discontinued operations |
68.0 |
||||||
|
Segment liabilities - Discontinued operations |
(24.5) |
||||||
|
Unallocated assets and liabilities |
(29.1) |
||||||
|
Cash and cash equivalents |
5.8 |
||||||
|
Interest-bearing borrowings |
(56.3) |
||||||
|
Group net assets |
131.1 |
||||||
3. Financial income and financial expenses
|
|
2008 |
2007 |
||||
|
|
£m |
£m |
||||
|
Financial income |
||||||
|
Interest income |
2.2 |
1.7 |
||||
|
Expected return on pension plan assets |
8.4 |
7.7 |
||||
|
10.6 |
9.4 |
|||||
|
Financial expenses |
||||||
|
Interest on bank overdrafts and loans |
(11.7) |
(5.0) |
||||
|
Amortisation and write down of bank arrangement fees |
(0.7) |
(0.1) |
||||
|
Interest on finance leases |
(0.1) |
- |
||||
|
Interest on pension scheme liabilities |
(8.8) |
(8.0) |
||||
|
(21.3) |
(13.1) |
4. Taxation
|
|
2008 |
2007 Restated |
||||
|
Current tax |
|
£m |
£m |
|||
|
UK corporation tax |
||||||
|
Current year |
(1.2) |
(2.3) |
||||
|
Overseas tax |
||||||
|
Current year |
4.1 |
3.7 |
||||
|
Prior year |
0.3 |
0.2 |
||||
|
4.4 |
3.9 |
|||||
|
Total current tax |
3.2 |
1.6 |
||||
|
Deferred tax |
(0.6) |
0.5 |
||||
|
Tax charge on continuing operations |
2.6 |
2.1 |
||||
|
Tax from discontinued operations (excluding gain on disposal) Tax on disposal of discontinued operation |
4.0 - |
3.6 - |
||||
|
Total tax charge in the income statement |
6.6 |
5.7 |
5. Dividends
Amounts recognised as distributions to equity holders in the year
|
|
2008 |
2007 |
|||||
|
|
£m |
£m |
|||||
|
Final dividend for the year ended |
|||||||
|
30 November 2007 - 3.10p per share (2007: 2.80p per share) |
4.7 |
4.3 |
|||||
|
Interim dividend for the year ended |
|||||||
|
30 November 2008 - 1.925p per share (2007: 1.75p per share) |
3.0 |
2.7 |
|||||
|
|
|||||||
|
7.7 |
7.0 |
||||||
In light of the Placing and Open Offer (see Note 11), a final dividend will not be recommended for the year ended 30 November 2008. It is the Board's intention, subject to the Group's trading position and prevailing economic circumstances, to resume dividend payments for the year to 30 November 2009.
6. Non-recurring items
During the year the Group incurred significant one off items as detailed below
|
|
2008 |
2007 |
||||
|
|
£m |
£m |
||||
|
Amounts charged/ (credited) to operating profit |
||||||
|
Post acquisition integration and restructuring of MTX |
2.3 |
- |
||||
|
Profit on disposal of land |
(0.9) |
- |
||||
|
1.4 |
- |
|||||
|
Amounts charged to non operating expenses |
||||||
|
Pensions equalisation costs |
6.2 |
- |
The Group has made provision for £2.3 million of one-off integration and restructuring costs at MTX following its acquisition in January 2008. These costs have been charged to operating profit as a non-recurring item, and are expected to be paid during 2009.
During the year, surplus land was disposed at Colbond Inc generating a profit on disposal of £0.9 million.
The Company and the trustees of the Company's main UK defined benefit scheme (the "Scheme") have continued to take professional advice on the implementation of the measures necessary to reflect the impact of the changes in normal retirement age for members of pension schemes following the Barber decision on 17 May 1990 by the European Court of Justice and the Scheme's consequent decision in 1991 to equalise retirement age for men and women at 65 years. Although further advice is currently being sought, the Company and the trustee believe that it is likely that additional funding will be required in at least one of the UK Scheme's component sections.
Actuaries have been instructed by the Company to consider these matters. Preliminary results have been obtained which show there is a potential additional funding deficit arising from the implementation of the measures referred to in the paragraph above and a charge of £6.2 million has been incurred resulting in a year end provision of £6.0 million being created by the Company to cover this and certain associated professional costs. The provision is made taking account of the estimate of the funding liability under IAS 19.
When the estimate of the additional funding liability is confirmed, this will form part of the IAS 19 pension liability. The Company is required to agree a revised schedule of contributions to be made to the Scheme with the Trustee as part of the ongoing triennial valuation of the Scheme by no later than 30 June 2009 which will take the Scheme's overall funding deficit into account. A legal claim against certain professional advisers in respect of any liability arising is likely to be made but no recoveries have been assumed for the purpose of calculating the provision required.
There remains uncertainty as to whether certain other sections of the UK schemes were appropriately equalised at the time of merger into the UK scheme. The Company and the Trustee continue to take advice on these matters and consequently no quantification of any additional funding that may be required in respect of these sections is possible at the date of approval of these financial statements.
7. Earnings per share
|
2008 |
2007 |
|
|||||
|
|
Earnings |
Weighted average number of shares |
Per share amount |
Earnings |
Weighted average number of shares |
Per share amount |
|
|
£m |
(millions) |
p |
£m |
(millions) |
p |
||
|
Statutory - continuing operations |
|||||||
|
Basic (loss)/earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
(0.3) |
153.740 |
(0.20) |
5.0 |
152.933 |
3.27 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
- |
3.807 |
- |
2.557 |
|||
|
Diluted (loss)/earnings per share |
(0.3) |
157.547 |
(0.20) |
5.0 |
155.490 |
3.22 |
|
|
2008 |
2007 |
|
|||||
|
Earnings |
Weighted average number of shares |
Per share amount |
Earnings |
Weighted average number of shares |
Per share amount |
||
|
£m |
(millions) |
p |
£m |
(millions) |
p |
||
|
Statutory - discontinued operations |
|||||||
|
Basic earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
60.8 |
153.740 |
39.65 |
8.1 |
152.933 |
5.33 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
- |
3.807 |
- |
2.557 |
|||
|
Diluted earnings per share |
60.8 |
157.547 |
38.70 |
8.1 |
155.490 |
5.24 |
|
|
Statutory - total |
|||||||
|
Basic earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
60.5 |
153.740 |
39.45 |
13.1 |
152.933 |
8.60 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
3.807 |
- |
2.557 |
||||
|
Diluted earnings per share |
60.5 |
157.547 |
38.50 |
13.1 |
155.490 |
8.46 |
|
|
Before amortisation and non-recurring items - continuing operations |
|||||||
|
Basic earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
11.4 |
153.740 |
7.37 |
7.1 |
152.933 |
4.62 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
- |
3.807 |
- |
2.557 |
|||
|
Diluted earnings per share |
11.4 |
157.547 |
7.19 |
7.1 |
155.490 |
4.54 |
|
|
Before amortisation and non-recurring items - discontinued operations |
|||||||
|
Basic earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
6.3 |
153.740 |
4.10 |
8.4 |
152.933 |
5.54 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
- |
3.807 |
- |
2.557 |
|||
|
Diluted earnings per share |
6.3 |
157.547 |
4.00 |
8.4 |
155.490 |
5.45 |
|
|
Before amortisation and non-recurring items - total |
|||||||
|
Basic earnings per share |
|||||||
|
Earnings attributable to ordinary shareholders |
17.7 |
153.740 |
11.47 |
15.5 |
152.933 |
10.16 |
|
|
Effect of dilutive items |
|||||||
|
Share based payment |
- |
3.807 |
- |
2.557 |
|||
|
Diluted earnings per share |
17.7 |
157.547 |
11.19 |
15.5 |
155.490 |
9.99 |
|
8. Minority interest
|
2008 £m |
2007 £m |
|||||
|
At 1 December |
3.1 |
2.8 |
||||
|
Acquisition of subsidiary |
0.4 |
- |
||||
|
Share of (loss)/profit after taxation |
(0.1) |
0.3 |
||||
|
Exchange adjustment |
1.3 |
- |
||||
|
At 30 November |
4.7 |
3.1 |
||||
9. Acquisitions
(a) Mehler Texnologies ("MTX") acquisition
On 3 January 2008 the Group acquired 100% of the share capital of the individual companies within the MTX Group for €163.0 million on a cash-free and debt-free basis from Mehler AG. MTX is a leading producer of technical coated fabrics and produces premium materials for a variety of uses, including side curtains for the transport market and fabrics for the architectural and print markets.
|
|
|
Book value
|
Fair value
|
Fair value
|
|
|
|
|
adjustments and accounting policy alignment
|
|
|
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Intangible assets
|
|
0.2
|
34.4
|
34.6
|
|
Deferred tax assets
|
|
0.4
|
-
|
0.4
|
|
Property, plant and equipment
|
|
21.6
|
4.5
|
26.1
|
|
Inventories
|
|
28.7
|
(0.9)
|
27.8
|
|
Trade and other receivables
|
|
26.9
|
(0.3)
|
26.6
|
|
Current tax liabilities
|
|
-
|
(1.0)
|
(1.0)
|
|
Trade and other payables
|
|
(11.6)
|
(1.2)
|
(12.8)
|
|
Deferred tax liabilities
|
|
(0.1)
|
(10.8)
|
(10.9)
|
|
Post-employment benefits
|
|
(2.6)
|
-
|
(2.6)
|
|
Net assets
|
|
63.5
|
24.7
|
88.2
|
|
|
|
|
|
|
|
Cash consideration paid including costs
|
|
|
|
(122.1)
|
|
Less cash acquired with business
|
|
|
|
1.6
|
|
Net cash outflow
|
|
|
|
(120.5)
|
|
Goodwill arising on consolidation
|
|
|
|
32.3
|
|
|
|
|
|
|
The fair value adjustments above have arisen as follows:
The goodwill arising on the acquisition of the MTX Group is attributable to the anticipated profitability from the sale of the group's existing products in new markets, and the anticipated future technological and operational synergies from the integration into the Group.
MTX Group contributed £105.3 million to revenue and £5.1 million to the Group's profit before tax for the period between the date of acquisition and 30 November 2008. If the acquisition of MTX had been completed on the first day of the current period, Group revenues for the period would have been £342.2 million and Group profit from continuing operations after tax would have been £0.2 million.
(b) Westbond acquisition
On 8 January 2008 the Group acquired 100% of the share capital of Westbond Limited, a producer of fusion bonded carpet tiles. Of the total consideration of £10.9 million, £4.5 million was deferred and dependent on certain revenue and profitability targets being met. The targets were met and the deferred consideration was paid during July 2008. Westbond was disposed of on 30 September 2008 as part of the disposal of the Floors Division (see note 10).
|
Book |
Fair Value |
Fair |
|||
|
value |
adjustments |
value |
|||
|
£m |
£m |
£m |
|||
|
Intangible assets |
- |
4.0 |
4.0 |
||
|
Property, plant and equipment |
0.4 |
- |
0.4 |
||
|
Inventories |
1.6 |
(0.4) |
1.2 |
||
|
Trade and other receivables |
1.7 |
- |
1.7 |
||
|
Current tax liabilities |
(0.4) |
(0.1) |
(0.5) |
||
|
Trade and other payables |
(1.5) |
(0.1) |
(1.6) |
||
|
Deferred tax liabilities |
- |
(1.2) |
(1.2) |
||
|
Net assets |
1.8 |
2.2 |
4.0 |
||
|
Cash consideration including costs |
11.4 |
||||
|
Less cash acquired with business |
(0.4) |
||||
|
Add external debt acquired |
|||||
|
Net cash outflow |
11.0 |
||||
|
Goodwill arising on consolidation |
7.0 |
||||
The fair value adjustments above have arisen as follows:
(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 of acquisition.
(iii)Adjustments have been made to inventories and payables in accordance with IFRS 3.
(iv)As required by IAS12 "Income Taxes", current and deferred tax has been provided on the above adjustments.
The goodwill arising on acquisition of Westbond is attributable to the creation of significant opportunities for cross-selling and other synergies.
Westbond's results are included in the profit on disposal of discontinued operations.
(c) Bonar Emirates Technical Yarns Industries LLC
During the year the Group established Bonar Emirates Technical Yarns Industries LLC ("BETY") in conjunction with Abu Dhabi Basic Industries Corporation PJSC to manufacture artificial grass yarns and carpet backing yarns, based in Abu Dhabi. BETY is treated as a subsidiary in the Group accounts as the Group holds economic control. Goodwill of £0.4 million arose on the investment during the year.
(d) Prior year acquisitions
Geo-Tipptex
During the year, additional contingent consideration of £0.4 million was paid which had not been reflected in the original acquisition price used in the acquisition accounting. This resulted in an increase in the value of goodwill.
Colbond Group
During the year, an adjustment was made to increase goodwill by £3.0 million reflecting additional contingent consideration that is now anticipated to become payable.
(e) Deferred consideration
The Group paid deferred consideration of £0.6 million in respect of the acquisition of LCM Construction Products Ltd during the year.
10. Discontinued operations
On 30 September 2008, the Group sold its Floors Division for a debt and cash free cash consideration of £123.0 million.
The net cash inflow, after payment of costs, for the year to November 2008 was £116.5 million. After settlement of all costs, the net cash inflow is expected to be £113.9 million. The detailed income statement analysis of the discontinued operations which have been included as a single line comprising a profit after tax of £60.8 million in the consolidated income statement for the year ended 30 November 2008 is as follows:
|
2008 |
2007 |
||
|
£m |
£m |
||
|
Revenue |
96.0 |
101.5 |
|
|
Expenses Operating profit before amortisation and non-recurring items Amortisation Non-recurring items |
(85.6) 10.4 (0.8) (0.6) |
(89.5) 12.0 (0.3) - |
|
|
Operating profit |
9.0 |
11.7 |
|
|
Net finance costs |
(0.1) |
- |
|
|
Profit on ordinary activities before tax |
8.9 |
11.7 |
|
|
Profit attributable to disposal |
55.9 |
- |
|
|
Profit before tax |
64.8 |
11.7 |
|
|
Attributable tax expense |
(4.0) |
(3.6) |
|
|
Net profit attributable to discontinued operations |
60.8 |
8.1 |
The effect of the disposal on the individual assets and liabilities of the Group is shown below:
|
2008 |
||
|
£m |
||
|
Goodwill Intangible assets Property, plant and equipment Inventories Trade receivables Employee benefits Trade and other payables Current tax liabilities Deferred tax liabilities |
17.4 4.7 18.4 22.5 21.8 (0.5) (21.1) (1.0) (1.9) |
|
|
Net identifiable assets and liabilities |
60.3 |
|
|
Consideration received, satisfied in cash |
131.1 |
|
|
Cash and cash equivalents disposed of |
(9.9) |
|
|
External debt disposed of |
1.8 |
|
|
Foreign exchange translation differences recycled from reserves |
2.3 |
|
|
Costs of disposal |
(9.1) |
|
|
Profit attributable to disposal |
55.9 |
11. Post balance sheet events
The Directors announced on 19 February 2009 that the Company proposes to raise approximately £30 million (net of expenses) by way of a Placing and Open Offer of 132,489,559 Open Offer Shares at 25 pence per Ordinary Share.
The Placing and Open Offer has been fully underwritten by the Placing Agents, namely, Numis Securities Limited, RBS Hoare Govett Limited and Evolution Securities Limited. The Open Offer Shares to be issued pursuant to the Placing and Open Offer, when fully paid, will rank pari passu with the Ordinary Shares or, after the Capital Reorganisation, the New Ordinary Shares.
Before proceeding with the Placing and Open Offer, the Company's Ordinary Share capital will be reorganised by means of the Capital Reorganisation which will involve: (i) the subdivision and reclassification of each issued Ordinary Share into one New Ordinary Share of five pence and one Deferred Share of 20 pence; and (ii) the subdivision of each authorised but unissued Ordinary Share into five New Ordinary Shares of five pence each. On completion of the Capital Reorganisation, each Ordinary Shareholder will hold one New Ordinary Share and one Deferred Share for each Ordinary Share currently held.
12. The annual general meeting
The Annual General Meeting will be held on or around 6 May 2009 at The Cumberland Hotel, Great Cumberland Place, London, W1A 4RF.
Related Shares:
LWB.L