Final Results

Low & Bonar PLC

("Low & Bonar" or "the Group")

Final Results for the year ended 30 November 2013

MOMENTUM REGAINED, CONFIDENT OF FURTHER PROGRESS

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group, today announces its final results for the year ended 30 November 2013.

Highlights

Continuing operations

· Strong second half performance resulted in another year of sales and profit growth

· Further investments made to enhance the Group's strategic positioning and growth prospects

· Dividend increase of 8% reflecting the Board's confidence in the coming year

(1) Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2) Profit before tax, amortisation and non-recurring items

(3) After amortisation and non-recurring items

(4) Last 12 months operating profit as a percentage of operating capital employed

Martin Flower, Chairman, said:

"These are good results during a period of continued macroeconomic challenge in Europe and poor weather in the first half of the year, providing further evidence of the quality and resilience of our business and its growth prospects.

The Group has continued to make investments to drive future growth: extending its product range in attractive segments with the acquisition of Texiplast, and increasing its geographic reach. These investments are already contributing to the current year and further underpin the Board's confidence in a continuation of cash generative, profitable growth."

4 February 2014

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CHAIRMAN's STATEMENT

I am pleased to report that the Group had a strong second half and delivered another year of profit growth.

Profit before tax, amortisation and non-recurring items on a constant currency basis increased by 2.7% on revenues up 2.8% on last year. The second half of the year saw like-for-like revenues increase by 5.1% and pre-tax profits by 16.6% against a background of continuing macroeconomic weakness in Europe which accounts for about two thirds of Group sales. Including Texiplast, reported sales increased by 6.3% and pre-tax profits by 19.1% in the second half. Demand for our products remains robust and reflects the diversity and strength of our niche market positions and products.

Profit before tax, amortisation and non-recurring items rose 6.5% to £26.1m (2012: £24.5m). Earnings per share were broadly unchanged at 6.2 pence (2012: 6.3 pence) taking into account the 10% share placing in September. Statutory profit before tax from continuing operations was £17.8m (2012: £6.1m) after non-recurring charges of £2.7m (2012: £12.6m) and an amortisation charge of £5.6m (2012: £5.8m). Non-recurring charges in 2013 principally relate to costs associated with acquiring Texiplast and starting-up our geotextile joint venture, Bonar Natpet, in Saudi Arabia.

Investing to drive future growth

During the year, the Group has made further investments totalling £21.2m to support management initiatives for future growth.

To drive growth within the Group's civil engineering sector, we acquired Texiplast, a manufacturer of soil reinforcement, separation, filtration and erosion control products for a net cash payment of €18.9m (£15.9m) on 6 September. The acquisition of Texiplast, which is performing well, enables Bonar to become a more integrated provider of solutions for civil engineering projects, provides sales leverage for the extended product range and improves access to Texiplast's principal Central and Eastern European markets. We continue to seek other investment opportunities, including those outside of Europe.

The Group invested £11.3m (2012: £13.2m) in property, plant and equipment during the year to support volume growth in key markets. In addition, the Group's joint venture in Saudi Arabia, Bonar Natpet, began manufacturing from its new factory. The joint venture, which will supply geotextiles to the fast growing Middle East civil engineering market, will gradually build sales during 2014. We are also planning to make further capital investments in Asia in the coming year.

We have continued to invest in organisational capability, particularly within sales and marketing in Bonar, both in North America and Asia. We have also strengthened the leadership team in Technical Coated Fabrics to support its strategy of driving growth through expansion in attractive niche markets and operational efficiency. Both of these investments are now delivering benefits.

Share placing

The Group successfully completed a placing of ordinary shares representing 10% of its share capital on 11 September raising £20m. The proceeds funded the acquisition of Texiplast and will provide the Group with the flexibility and headroom to continue to pursue its growth ambitions.

Yarns

Although conditions remain tough within the artificial grass yarns market, we are pleased that actions taken to reduce costs and improve performance have produced a small, but encouraging, profit this year. Further actions are being taken to improve performance within the Yarns business.

Increased Dividend

To reflect the Board's continuing confidence in the Group's future, we are proposing a final dividend payment of 1.75 pence per share (2012: 1.6 pence). Subject to shareholders' approval at the Annual General Meeting in March, the dividend will be paid on 17 April 2014 to members registered as of 21 March 2014. The proposed full year dividend of 2.6 pence per share (2012: 2.4 pence per share) is covered 2.4 times (2012: 2.6 times) by earnings before amortisation and non-recurring items.

People

Our key asset is our people. Our current and future success rests entirely with them. I believe that Low & Bonar has a highly skilled and motivated team, which is ambitious to achieve further success. I would like to take this opportunity to thank them for their hard work during a challenging year.

As separately announced today, Steve Good has informed the Board of his intention to retire from full time executive roles. A search for a new Chief Executive has begun. Steve will remain in his current role until the second half of the year before handing over to his successor.

Outlook

The Group has continued to make investments to drive future growth: extending its product range in attractive segments with the acquisition of Texiplast, and increasing its geographic reach. These investments are already contributing to the current year and further underpin the Board's confidence in a continuation of cash generative, profitable growth.

Martin Flower

4 February 2014

Business Review

Low & Bonar PLC is an international performance materials group using proprietary technologies to engineer polymers for a wide range of applications in niche industrial markets.

Sales and profit momentum resumed in second half

(1) Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2) Before amortisation and non-recurring items

It is pleasing to report strong sales and profit growth in both Technical Coated Fabrics and Yarns, where management actions are now beginning to deliver real improvement in these businesses including market share gains. Bonar faced difficult market conditions in Europe particularly during the first half of the year and a constrained recovery in the second half within Civil Engineering.

After a difficult first half, due to abnormal weather conditions across Europe which saw sales decline by 4.2% within Europe and 1.1% overall, sales for the second half were 5.1% ahead of last year on a like-for-like constant currency basis and 6.3% ahead including an in-line fourth quarter contribution of £2.5m from our recently acquired geosynthetic business in Slovakia, Texiplast. This resulted in like-for-like constant currency sales growth of 2.1% for the year as a whole, 2.8% up on last year with the inclusion of Texiplast.

Group operating margins for the year were unchanged at 8.0%, but comfortably ahead during the second half of the year at 9.9% (H2 2012: 9.1%). Margins in the second half were buoyed by a small profit within Yarns and generally better volumes throughout the Group, particularly in North America and Europe, offsetting further investment in organisational capability.

Investing and building for the future

The Group has continued to make investments to accelerate growth, increase capability and create a stronger business. As with last year, there have been three areas of focus: bolt-on acquisitions to expand either the Group's product range or its geographic reach; capital expenditure; and investing in people and organisational change.

On 6 September 2013, we announced the acquisition of Texiplast for €18.9m (£15.9m). Texiplast manufactures high strength geosynthetic products for demanding applications in the Civil Engineering market such as soil reinforcement, separation, filtration and erosion control. The acquisition extends our technology base and product range within civil engineering and enables a stronger solution sell within this important market for the Group. It also provides sales synergies for both Texiplast's products and Bonar's existing products and strengthens our position in the growing Central and East European market. Texiplast is performing in line with our expectations and is being integrated within the Bonar division.

We have made further capital investments to increase capacity and capability for target growth markets within Bonar and to improve operational efficiency within Technical Coated Fabrics. Full year expenditure was £11.3m of which £5.3m was on expansion. In addition, our Saudi Arabian joint venture with NATPET, Bonar Natpet, has begun manufacturing products for the Civil Engineering market in the Middle East and will provide a strong platform to access this fast growing market over the next two years.

The merger and reorganisation of Colbond and Fabrics, the two major businesses within the former Performance Technical Textiles division, to create Bonar has been completed, increasing its scope and scale to grow more globally. The enlarged business is organised regionally with global business roles directing overall strategy for our key civil engineering, flooring and building & industrial markets. In January 2013, the merged business was re-branded 'Bonar'. Bonar has a clear opportunity to leverage its successful European business and expertise in other regions and this organisational change is designed to accelerate this development and put it on a clear path to globalisation. In July 2013, the second phase was completed with regional management teams established for EMEA, North America and Asia accountable for the execution of the key market strategies. A new sales and logistics organisation was set up during the year in Shanghai, China to augment our focus in Asia, particularly in the fast growing Flooring market.

The Group therefore enters the new year in a much stronger position strategically, both in terms of market positioning and organisational capability and with capacity to deliver a year of significant progress. The successful share placing in September also provides the financial headroom and flexibility to continue to pursue growth opportunities.

Bonar

Our Bonar division supplies products such as geosynthetics, carpet tile backing, agrotextiles and construction fibres to the civil engineering, flooring, transport, industrial and construction sectors.

(1) Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2) Before amortisation and non-recurring items

Reported sales were 2.9% above last year. Sales on a constant currency basis, including a £2.5m contribution from Texiplast, were flat. First half sales were 5.3% lower than last year on a like-for-like basis, due to the abnormal weather conditions across Europe affecting civil engineering and building products markets which were both nearly 10% down and account for about 50% of divisional sales. Second half sales on a like-for-like basis were 2.2% ahead of last year as Civil Engineering (+2.6%) and Building Products (+8.9%) sales recovered, albeit the recovery within Civil Engineering was constrained by inventory shortages and extended lead-times. A maiden contribution from Texiplast advanced civil engineering sales by a further 5.2% in the second half, in line with our expectations. The acquisition provides a strong platform for future growth. Building product sales were strong in the USA with increased demand within the residential property market offsetting softness in the European commercial market.

Underlying sales to the Flooring market were steady throughout the year. North American and Asian volumes continue to grow; however demand has been lacklustre in Europe. Automotive sales were disappointing, down 5.6% on last year, as a key customer switched sourcing on one of its platforms part-way through the year. Industrial markets were mixed. Good progress continued in new filtration applications; however, this was offset by a more subdued agricultural screens market.

The integration of the Colbond and Fabrics commercial activities was completed during the year creating a new 'go-to-market' organisation. The focus is now on accelerating growth, particularly outside of Europe. The division continues to seek investment opportunities in the USA and has recently set-up a new sales team and warehousing in Shanghai, China to support and drive growth in Asia, with a particular focus on China, Taiwan, Malaysia and Australia.

Our joint venture geotextile plant in Saudi Arabia began manufacturing shortly before year-end. Utilisation is expected to gradually build up during the upcoming year and the joint venture is expected to make a small but positive profit contribution. Importantly, the ramp up will free up much needed capacity within Europe to support growth in civil engineering. Capital expenditure totalled £7.5m within Bonar, which included £2.5m on extending capacity and £2.9m relating to health and safety projects. Accident rates have reduced significantly this year and, whilst there remains some way to go to achieve all of our objectives, this year's progress has been excellent.

Bonar remains well positioned to grow in its European markets and continues to invest to accelerate its exposure to markets outside Europe, where significant growth opportunities exist for its products and technologies.

Technical Coated Fabrics

Our Technical Coated Fabrics division, Mehler Texnologies (MTX), supplies products such as side curtains for lorry trailers, advertising banners, tensioned structures, awnings, marquees and tarpaulins to the print, architectural and transport markets.

(1) Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2) Before amortisation and non-recurring items

Sales on a constant currency basis grew by 4.9%. Sales were better than last year in all major sectors and margins improved by 40bps to 9.7% with constant currency operating profits growing by 13.2%. The rate of sales growth was particularly strong in the second half of the year (+6.1%). Improved margins reflect increased volumes, but more importantly management's focus on margins within the trailer and niche industrial markets.

In the Transport sector, sales to the trailer side curtain market advanced 7.1% due to share gains and increased activity in the new truck market. Sales in the Industrial sector were also strong, up 6.7% on last year with growth in container applications and increased demand in higher-end print applications, whilst competition from low-cost Asian competitors continued to take uncontested share gains in low-end applications. In the Leisure sector, sales to boat and pool applications were also lower as these markets continue to suffer from reduced discretionary spending; Southern Europe was, as expected, particularly weak. The division has continued to build its capability to directly service regions outside of Europe with new investments having been made to accelerate progress in India, Brazil and the USA. Capital expenditure totalled £4.6m and included £2.0m on improving manufacturing capability.

Further progress has been made in improving operating efficiencies, a key focus of the leadership team. Despite significant improvements in the management of health and safety risks, accident rates increased. Health and safety related capital expenditure was £0.9m.

The division has attractive growth opportunities in Architectural, Industrial and other niches and this, combined with a commitment to operational excellence, will drive further improvements in the growth and quality of earnings.

Yarns

Our Yarns division supplies yarns used in the manufacture of artificial grass in sports and landscaping applications as well as yarns used as a backing material in the manufacture of woven carpets.

(1) Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2) Before amortisation and non-recurring items

The business, which represents 8% of Group sales, made significant progress this year. Sales volumes increased by 24% partly through slightly easier, although still tough, market conditions but mainly through share gains. Sales to the USA and the Middle East were particularly strong. Actions taken last year to reduce costs across the business added to operational leverage to deliver a small operating profit of £0.5m. We are continuing to work on additional measures to improve performance and the Group is confident that the business will make further progress in 2014.

FINANCIAL REVIEW

Pre-tax profit

Profit before tax, amortisation and non-recurring items from continuing operations increased by 6.5% to £26.1m (2012: £24.5m), an increase of 2.7% on a constant currency (underlying) basis. Operating profits were 5.6% higher than last year at £32.2m (2012: £30.5m) including a contribution of £0.4m from Texiplast, acquired on 6 September 2013. On an underlying basis, operating profits were 1.9% ahead. Statutory profit before tax was £17.8m (2012: £6.1m) after a net non-recurring charge of £2.7m (2012: £12.6m) and a £5.6m charge for amortisation (2012: £5.8m).

Non-recurring items

The Group incurred £0.9m of costs in connection with its acquisition of Texiplast and £0.1m in relation to potential acquisitions. In 2012, costs of £0.7m were incurred in relation to acquisitions, mainly in respect of the acquisition of Xeroflor. A further £1.2m (2012: £0.2m) of non-recurring costs arose in relation to the start-up of the Group's joint venture, Bonar Natpet, which was commissioned during the second half of the year. This included £0.6m (2012: £nil) of the Group's share of costs borne by the joint venture.

Other non-recurring costs related to the set-up of a new legal entity, sales office and warehousing facility in China (£0.3m) and the integration of the Group's principal Performance Technical Textile operations into a single global business, Bonar, which began last year (£0.2m (2012: £0.5m)).

The carrying value of assets within each Cash Generating Unit has been reviewed and no impairment or write-back has been booked. Last year, an impairment charge of £11.2m was booked against the assets within the Yarns business.

Taxation

The overall tax charge on the profit before tax was £5.0m (2012: £4.7m). The tax charge on profit from continuing operations before amortisation and non-recurring items was £6.8m (2012: £6.4m), a rate of 26.0% (2012: 26.0%). The full effective tax rate during 2013 was 27.9% (2012: 77.5%), substantially lower than last year due to the non-deductible asset impairment arising in 2012. Prior year adjustments increased the tax rate by 1.2% (2012: reduced by 2.3%) and relate primarily to changing estimates in respect of earlier years. The tax rate on profit from continuing operations before amortisation and non-recurring items for 2014 is expected to be marginally higher than 2013 due principally to recent legislative changes in the Netherlands.

Acquisitions

On 6 September 2013, the Group acquired the trade and assets of Texiplast for a net cash consideration of €18.9m (£15.9m). The fair value of assets totalled £10.2m including marketing and customer relationship intangible assets of £0.7m. Goodwill arising on the acquisition was £5.7m. Texiplast's business has been integrated into our Bonar segment, and contributed £2.5m and £0.4m to the Group's sales and operating profit before amortisation and non-recurring items for the year respectively.

The acquisition was funded by a 10% placing of ordinary shares, which raised £19.8m net of costs. The placing also provides flexibility and headroom for the Group to pursue its growth ambitions.

Cash

Overall net debt increased to £86.8m from £82.6m at November 2012. Cash inflow from operations was £39.6m (2012: £40.3m) excluding a shareholder loan of £9.1m to the Group's 50/50 Saudi Arabian joint venture, Bonar Natpet. Since year-end, £6.0m has been repaid and the balance of the loan is expected to be repaid in the coming year.

Trade working capital as a percentage of sales increased from 22% last year to 23%, contributing to a cash outflow into working capital of £4.8m (2012: £4.3m) excluding the joint venture loan.

During the year, the Group spent £15.9m (2012: £8.6m) on acquisitions and joint ventures, £11.3m (2012: £13.2m) on property, plant and equipment and £2.1m (2012: £1.0m) on intangible assets. Excluding replacement and health & safety capital expenditure, the amount invested in equipment to support future growth was £5.3m (2012: £9.5m).

The analysis of the Group's net debt is as follows:

The gearing ratio of total net debt to EBITDA was unchanged at 1.9 times.

Pensions

The charges for pensions are calculated in accordance with the requirement of IAS 19 Employee Benefits. During the year, the Group's UK defined benefit scheme continued to adopt a lower risk investment strategy in which the interest rate and inflation risks were more closely hedged and the exposure to equities was held at 27% of the scheme's assets (2012: 25%). The UK scheme deficit has reduced to £3.8 m (2012: £15.1m), principally due to the outperformance of the scheme's assets against their expected return. The deficit in the Group's overseas schemes in Belgium, Germany and the USA reduced to £8.9 m (2012: £9.7m).

Return on capital

The Group's return on operating capital employed at the year end was 16.8% (2012: 17.2%).

Earnings per share

Earnings per share before amortisation and non-recurring items were marginally lower than last year at 6.2 pence per share (2012: 6.3 pence) due to a higher number of shares following the share placing in September. The weighted average number of shares was 301.0 million (2012: 288.4 million).

Dividends

Taking into account performance during the second half of the year and our confidence in the future prospects of the Group, the Board is recommending a final dividend of 1.75 pence per share (2012: 1.6 pence), increasing the full year dividend to 2.6 pence per share (2012: 2.4 pence). Subject to shareholders' approval at the Annual General Meeting in March, the dividend will be paid on 17 April 2014 to members registered as of 21 March 2014. The proposed full year dividend is covered 2.4 times by earnings before amortisation and non-recurring items.

Risks and Uncertainties

Responsibility statement of the Directors on the Annual Report and Accounts

The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 30 November 2013. Certain parts thereof are not included within this Preliminary Announcement.

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the company and the undertakings included in the consolidation taken as a whole; and

Directors

The Directors of the Company are:

Martin Flower, Chairman

Steve Good, Chief Executive Officer

Mike Holt, Group Finance Director

Steve Hannam, Non-Executive Director

Trudy Schoolenberg, Non-Executive Director

John Sheldrick, Non-Executive Director

Related party transactions

There are no related party transactions requiring disclosure.

Steve Good Mike Holt

4 February 2014 4 February 2014

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", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

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 and liquidity 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, and liquidity are consistent with the forward looking statements contained in this announcement, 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: 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. 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 its legal or regulatory obligations, the Group 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.

Consolidated Income Statement

for the year ended 30 November

Consolidated Statement of Other Comprehensive Income

for the year ended 30 November

Consolidated Balance Sheet

as at 30 November

Consolidated Cash Flow Statement

for the year ended 30 November

Consolidated Statement of Changes in Equity

for the year ended 30 November

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 financial information set out above does not constitute the company's statutory accounts for the years ended 30 November 2013 or 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2. Segmental information

The Group's principal activities are in the international manufacturing and supply of those performance materials commonly referred to as technical textiles. For the purposes of management reporting to the chief operating decision maker, the Group is organised into three reportable operating divisions: Bonar, Technical Coated Fabrics and Yarns. Financial information for each operating division is also available in a disaggregated form in line with the identified cash generating units. 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, goodwill and intangible assets, derivative assets and liabilities, post-employment benefits and corporate assets and expenses. Inter-segment sales are not material.

3. Financial income and financial expense