24th Feb 2006 07:00
Low & Bonar PLC23 February 2006 Low & Bonar PLC 24 February 2006 Press Release/Stock Exchange Announcement LOW & BONAR PLC 2005 PRELIMINARY RESULTSAND UPDATE ON APPROACH FOR THE COMPANY Low & Bonar PLC, the specialist materials group, today reports its results forthe year ended 30 November 2005. 2005 2004 ----- ------ Restated -------- Turnover £227.0m £201.7m 13% Turnover - continuing businesses £175.4m £142.4m 23% Operating profit pre exceptional items andamortisation of goodwill £13.6m £13.0m 4% PBT pre exceptional items and amortisation ofgoodwill £12.6m £12.0m 4% Earnings per share pre exceptional items andamortisation of goodwill 10.25p 7.73p 33% Dividend per share 4.70p 4.50p 4% Year end net cash £12.8m £15.0m Highlights • Turnover from continuing businesses up 23% to £175.4m. • Yarns & Fabrics' activities operating profit up by 37%. • Floors experiences a strong second half after restructuring and product launches in the first half. • PBT pre exceptional items and amortisation of goodwill increased by 4%. • Raw material price rises absorbed over the last year amount to c.£6m. • Dividend for the year up 4% to 4.70p. • Significant cashflow resulted in year end net cash balance of £12.8m. • Disposal of Plastics Division focuses the Group on its Floors and Yarns & Fabrics Divisions. • Two acquisitions in Yarns & Fabrics and a small purchase in Floors completed during the year. Update on approach On 1 December 2005, the Board announced that it had received an approach from athird party in relation to a possible offer being made for the Company. TheBoard emphasised at the time that discussions were at an early stage and therecould be no assurances that such an offer would be made. Although extensivediscussions have been carried out with the third party, no formal offer for theCompany has been forthcoming and talks have therefore ended. Low & Bonar is being advised by ABN AMRO Corporate Finance Limited. Commenting on the results, Duncan Clegg, Chairman, said: "The disposal of the Plastics Division, and the refocusing of the Group aroundour Floors and Yarns & Fabrics activities is the culmination of the three yearrecovery programme. From here we will be able to grow both organically andthrough acquisition from a much more stable base. The distortion to ourpost-exceptional results caused by some very material one off charges relatingto the disposal of Plastics and the EU fine should not detract from a positiveunderlying performance." Commenting on the results Paul Forman, Chief Executive said: "2005 has continued the progress of the last two years, notwithstanding sometough conditions in the operating environment. This progress has resulted in asatisfactory operating profit for the year and another year of profit growth.The acquisitions and the disposal of Plastics have left the Group strategicallyand financially set to deliver further progress in 2006." Enquiries: Paul Forman, Group Chief Executive Tel: 020 7535 3180 Mark Crossley, ABN AMRO Corporate Finance Limited Tel: 020 7678 8000 John MacGowan, Hugo Fisher, Hoare Govett Limited Tel: 020 7678 8000 David Trenchard, Peter Hewer, Tulchan Communications Group Ltd Tel: 020 7353 4200 Overview from Duncan Clegg, Chairman 2005 has been an important one for the Group strategically, and I am pleased toreport it has also shown continued financial progress. The focus on our tworemaining Divisions following the disposal of the Plastics Division representsthe culmination of the recovery process commenced three years ago. Moreover, preexceptional items and amortisation of goodwill earnings per share growth of 33%represents another encouraging step towards more acceptable profitabilitylevels, especially in the context of the continuing challenges of high rawmaterial prices. Our Yarns & Fabrics Division acquired LCM Construction Products Ltd, trading asADFIL, in December 2004, and Xirion NV in August 2005. Both of these complementour existing businesses. ADFIL utilises similar production technologies,enhances our purchasing scale and offers product cross-selling opportunities.Xirion provides important access to the major alternative technology in theartificial grass market thereby saving us very significant timescales indevelopment and market penetration. It will enable the enlarged business tooffer a full product range to existing and new customers. Our Floors Division grew sales and maintained pre exceptional operating profitlevels at a level similar to last year despite competitive pressures. Areorganisation, together with major new product launches in three of the mainranges, contributed to a strong second half. The MoD contract has deliveredsales ahead of our expectations. We also purchased selected assets andintellectual property from Threshold Floorings Limited (in Administration), asupplement to our existing UK entrance flooring activities. The disposal of the Plastics Division was completed in September 2005, for atotal consideration of c.£24m after costs. Financial performance Overall turnover increased by 13% to £227.0m (2004: £201.7m). The two continuingDivisions, Floors and Yarns & Fabrics grew turnover by 23%, from £142.4m to£175.4m. This increase reflects a combination of organic growth andacquisitions. Operating profits before exceptional items and amortisation ofgoodwill increased by 4% to £13.6m compared with £13.0m the previous year. PBT(pre exceptional items and amortisation of goodwill) also increased by 4% to£12.6m from £12.0m in 2004. Total exceptional items of £37.8m include the costs of a £8.4m fine imposed bythe European Commission, the £1.1m reorganisation costs incurred in our FloorsDivision and a loss of £28.4m relating to the disposal of the Plastics Division.This loss includes £20.6m of goodwill previously written off to reserves whenthe businesses were acquired which is charged to the profit and loss account,but has no effect on shareholders' funds of the Group. Legal costs of £89,000were incurred in relation to the Capital Reorganisation undertaken in the year.This was necessitated by the loss arising on the disposal of the PlasticsDivision and the adoption of accounting standard FRS17 on pension accounting. The loss before tax was £26.6m (2004: profit, £11.0m). This reflects theexceptional items. Earnings per share before exceptional items and goodwillamortisation were 10.25p (2004: 7.73p). Basic earnings per share were a loss of28.49p (2004: profit, 7.03p). The taxation charge on a pre exceptional items andamortisation of goodwill basis is £2.0m (2004: £4.2m) representing an effectivetax rate of 16% (2004: 35%) The low tax charge principally arises from theadjustment of tax relating to prior years which has given rise to a tax creditin the year. Cash flow from operating activities of £7.6m aided the achievement of a year endnet cash balance of £12.8m. The net effect of the amounts spent on acquisitions,and generated by the disposal of Plastics, was a cash inflow of £3.0m in theyear. Dividends--------- The Board is recommending a final ordinary dividend of 3.00p (2004: 2.90p)payable on 26 May 2006 to shareholders on the register on 28 April 2006, makinga total ordinary dividend for the year of 4.70p (2004: 4.50p). The payment ofthe dividend is subject to shareholders' approval at the annual general meetingto be held on 24 May 2006. Board change------------ Jon Kempster, the Group Finance Director will leave the Group on 28 February2006. Jon joined the Group five years ago as Group Finance Director and duringthe last three and a half years has assisted Paul Forman, Group Chief Executive,in stabilising the Group and providing a platform from which the Group canprogress to the next stage of its development. The position in the short termwill be covered by an interim finance director, Caroline Thomas, pending apermanent appointment. Caroline has been working with our Floors Division. Aprocess to replace Jon will be commenced immediately. The Board would like tothank Jon for his significant contribution to the Company during its recoveryphase. European Commission update--------------------------- On 30 November 2005, following the conclusion of its investigation the EuropeanCommission notified the Company and its subsidiary Bonar Technical Fabrics ofits decision that they infringed Article 81 of the European Commission Treaty.The investigations involved an alleged cartel relating to industrial bags, amarket which the Group exited in 1997 following the sales of its Belgianpackaging business to British Polythene Industries PLC. The turnover of theBelgian packaging business in 1997 was approximately £17m, of which industrialbags was a minority. The European Commission has imposed a fine of £8.4mincluding legal costs on the Group out of fines totalling €290 million. Weconsider the amount of the fine to be disproportionate and we have lodged anappeal against the decision. Group Chief Executive's review------------------------------ Low & Bonar has continued to make progress during 2005, in particular with ourinitiatives to drive organic sales growth and control costs, and also throughfurther strategic acquisitions and the disposal of the Plastics Division. All ofthis has been achieved despite demanding conditions in our market places andwith continued significant increases in key raw material costs, whichexperienced a year on year increase of over £6m. The revenue from the Floors and Yarns & Fabrics businesses owned at the end ofthe financial year 2004 grew by 18% and 14% respectively. This was anencouraging performance given they are operating in many markets that showedlimited growth, especially in continental Europe. The continued progressreflects the fact that many of our businesses have strong market positions inthe attractive, often fragmented, niche markets in which they operate. They are,increasingly, able to grow their volume through gain in market share, acapability which has been supported by our willingness to invest in thecommercial fabric of our business and its production capacity. The net result of this progress in organic sales and strong actions on costs,such as our Floors Division restructuring programme in mid 2005, is a series ofyear on year increases within continuing businesses of 23% in sales and 11% inoperating profit (pre exceptional items and amortisation of goodwill). Operatingprofit margins in the second half of the year were a very creditable 11.0% and11.7% in Floors and Yarns & Fabrics respectively. The Group's earnings per sharebefore exceptional items and amortisation of goodwill grew by 33%. Our year endcash position of £12.8m (2004: £15.0m) underlines the Group's strong cash flowprofile, notwithstanding a particularly strong year for cash generation in 2004.This financial performance is being underpinned by increasing investment in, andfocus on, the calibre of our Divisional teams. Given all the factors above, Iremain confident that 2006 will see continued progress based on an increasinglystrong set of foundations in our two remaining business streams. Acquisition and disposal activity--------------------------------- In 2005 we made two significant additions to our Group, both in the Yarns &Fabrics Division. The first was in December 2004: LCM Construction Products Ltd,trading as ADFIL. ADFIL is a leading global player in the supply of fibres thatare added to concrete to enhance surface durability and provide other structuralbenefits. At the end of August, we acquired Xirion NV, the world leader in thehigh growth monofilament grass yarn market. Xirion brings access to an importantnew technology, as well as to a fast growth segment of the market, and increasesour access to the continental European market. We also took advantage of an opportunity to acquire the assets and intellectualproperty of Threshold Floorings Limited, a supplier and developer of flooringentrance systems. The acquisition extends the Bonar Floors' product range, whichwill be manufactured and sold through our existing facilities. Looking ahead, our focus on driving value-enhancing and strategicallyappropriate acquisitions in Floors and Yarns & Fabrics will continue. Indeed,the Group has the financial strength and the clear strategic direction toescalate this approach. In September 2005 the disposal of the Plastics Division was completed for c.£24m(including a post-completion adjustment paid to the Company in January 2006) after costs to Promens. At the time of my becoming Group Chief Executive, astrategic review was carried out on all our Divisions. This concluded thatPlastics should be the focus of a two to three year recovery programme, and thatwe should then determine the best way forward strategically for the Divisiononce we were able to review alternatives from a position of materially bettercommercial health. The receipt of the offer, and review of other disposal orretention options, convinced the Board that disposal to Promens was the bestoutcome for shareholders. Employees---------- Yet again 2005 has witnessed much change in all aspects of the business. Thishas required significant and widespread hard work and dedication. It is onlythrough the wholehearted efforts of all our employees - both those in thecontinuing Group and in our former Plastics Division - that the recovery overthe last three years has been made possible. The Board is grateful to all ouremployees for their efforts and will continue to invest in training anddevelopment programmes - many of which have been newly launched - to providesupport and the appropriate skills. Floors------- Specialist contract flooring products and services provided by a global salesand marketing organisation and six manufacturing sites in Europe. Divisional turnover increased by 18% to £97.7m in 2005 (2004: £83.1m). Of thisgrowth £13.2m arose from the full year effect of the MoD contract. Divisionaloperating profit declined slightly to £9.3m (2004: £9.7m) primarily due toexpected growth related investments. Return on net operating assets fell to 24%(2004: 26%). Operating margins were disappointing in the first half, and this led us todevelop the restructuring programme announced in June. This resulted in anexceptional charge of £1.1m (2004: nil). The effect of the actions taken was toincrease margins in the second half to 11.0%. As anticipated this is nearer tothe historic levels we have enjoyed in recent years, and compares with 9.1% inthe second half of last year. During the year we had a major relaunch of three of our major ranges, Flotex,Tessera and Coral. Such a breadth of range change was a major event for theDivision, and contributed to the first half margin decline, as it increased ourshort term operational complexity significantly as well as increasing directcosts. The MoD contract is performing well with sales ahead of our expectations.Elsewhere, the continental European contract businesses grew satisfactorily, asdid our non-European export activities. As in 2004, the Division has had tocontend with significant cost rises in raw materials, but sales price increases,combined with increased plant utilisation and purchasing programmes, helped tomitigate this. During the year we took advantage of an opportunity to acquire selected assetsand intellectual property of Threshold Floorings Limited (in Administration), asupplier and developer of flooring entrance systems. The acquisition extends theBonar Floors' product range and customer base in this sector. Threshold'sproducts will be manufactured and sold through our existing infrastructure. Further progress was made with our initiatives to drive organic sales growth,most notably an unprecedented level of new product introductions. Equally, muchhas been done to improve the manufacturing operations across the Division;availability has improved, new state-of-the-art production equipment has beenadded, health and safety standards have been enhanced and stock control systemshave been further developed. These improvements, allied to a number of newmanagement appointments, will underpin the continued progress of Bonar Floors. Looking ahead, in 2006 we will continue to grow organically by focusing onattaining class-leading operational and selling processes, continued investmentin product range launches and selective upgrading of our production capabilityto ensure product differentiation. We will also consider opportunities forstrategically complementary acquisitions. Yarns & Fabrics--------------- The design, production and marketing of technical textiles - yarns, fibres, andwoven and non-woven textiles - for a wide range of niche industrialapplications. These global markets are serviced from five production facilitiesin Europe and one in the People's Republic of China. Including a three month contribution from Xirion, ADFIL since early December anda full year from Yihua Bonar, turnover grew by 31% to £77.7m (2004: £59.3m).Divisional operating profit grew by 37% to £7.3m (2004: £5.3m). Return on salescontinued to improve for the Division, to 9.4% (2004: 9.0%). I believe this is avery creditable performance given the year on year increase of raw materialprices of over £4m and is more than 40% up on the margin achieved in 2003. Thereturn on net operating assets fell from 18% to 15%, due primarily to the effectof having all of the Xirion assets but only three months of its earnings. Our Belgian business, the largest element of the Division, undertook a majorinvestment in its non-woven capacity which reduced available capacity in thefirst half. The upgrade programme went well, and is improving both product costand quality. Notwithstanding this temporary reduction in capacity the businessgrew sales and profits very satisfactorily, driven by increased productivity andsuccessful new product launches. 2005 has been an important year for our yarns businesses. Our Dundee businesscontinued to perform well on the back of sustained growth in fibrillated grassyarns and a stable carpet backing business. We have introduced part of the grassmanufacturing process into our Chinese operation, Yihua Bonar, and expect toscale up to full manufacturing capability in 2006. The relationship withSinopec, the other shareholder in Yihua Bonar, developed through this venture isproving to be a positive asset for us as we look at further opportunities toexpand in China. In August we acquired Xirion, the world leader in the highergrowth monofilament grass yarn market. The acquisition complements our existingartificial grass yarn activities, as monofilament is the major alternativetechnology in the grass yarn market. The acquisition will enable the combinedbusiness to offer a full product offering to existing and new customersimmediately. The acquisition of LCM Construction Products Ltd, trading as ADFIL, took placein December 2004. Notwithstanding high polypropylene prices and significantinternal change, the business performed satisfactorily and it maintained marginlevels. We are working to ensure that ADFIL gets the benefits of being part of alarger group. Most specifically, we have, in early 2006, moved the manufacturingof the fibres to Belgium, where our existing business has the capability toabsorb it alongside its existing operation. This will have a one off cost ofapproximately £0.5m in 2006. This will further enable ADFIL to build on itssuccessful track record on sales and marketing and new product developments. Our strategy for the Division remains one of developing a portfolio of globalspecialist technical textile, yarn and fibre producers, realising purchasing,production and cross-selling synergies as appropriate. Organic expansion will beachieved through capacity investment, increasing product differentiation andfurther product innovation in all areas. This will be complemented byacquisitions in segments that are consistent with this strategy or providegeographic expansion of our core activities. Outlook-------The market environment is not expected to change significantly and raw materialsprices are anticipated to remain at their current high levels for this year.Nonetheless, through our strategic focus on two Divisions and throughacquisitions and internally driven initiatives, I expect 2006 to see continuedprogress, building on the strong base and hard work of the last three years. Paul FormanGroup Chief Executive ABN AMRO Corporate Finance Limited, which is authorised and regulated in theUnited Kingdom by the Financial Services Authority, is acting exclusively forLow & Bonar PLC and for no one else in connection with the approach for theCompany and will not be responsible to anyone other than Low & Bonar PLC forproviding the protections afforded to clients of ABN AMRO Corporate FinanceLimited or for giving advice in connection with the approach for the Company,the content of this announcement or any other matter referred to herein. Hoare Govett Limited, which is authorised and regulated in the UK by theFinancial Services Authority, is acting for Low & Bonar PLC and no-one else inconnection with this announcement and will not be responsible to anyone otherthan Low & Bonar PLC for providing the protections afforded to clients of HoareGovett Limited nor for providing advice in relation to this announcement nor anyother matter referred to in this announcement.. Consolidated Profit and Loss Account------------------------------------for the year ended 30 November 2005----------------------------------- 2005 2005 2005 2004 2004 2004 Before Before goodwill Goodwill goodwill Goodwill amortisation amortisation amortisation amortisation and and and and exceptional exceptional exceptional exceptional items items TOTAL items items Total £000 £000 £000 £000 £000 £000 Restated Restated Restated TurnoverContinuing 165,474 - 165,474 142,422 - 142,422Acquisitions 9,929 - 9,929 - - -Discontinued 51,583 - 51,583 59,229 - 59,229 -------- -------- -------- -------- ----- ------- 226,986 - 226,986 201,651 - 201,651 ======== ======== ========= ======== ===== ======= Operating profitContinuing 11,118 (1,792) 9,326 11,778 (1,006) 10,772Acquisitions 1,932 (718) 1,214 - - -Discontinued 536 - 536 1,246 - 1,246 ------- ------- ------ ------- ------- ------- 13,586 (2,510) 11,076 13,024 (1,006) 12,018 Exceptionalnon-operating items(note 3)Businessesdisposed of - (36,855) (36,855) - - -Gain on saleof fixed assets - 233 233 - - - ------- ------- ------- ------- ------ ------ - (36,622) (36,622) - - - Net interestpayable (1,017) - (1,017) (981) - (981) ------- -------- ------- ------- ------ ------ Profit/(loss)on ordinaryactivitiesbefore taxation 12,569 (39,132) (26,563) 12,043 (1,006) 11,037 Taxation onprofit/(loss)on ordinary activities (2,024) 454 (1,570) (4,218) 308 (3,910) ------ ------ ------- ------- ------- ------- Profit/(loss)on ordinaryactivitiesafter taxation 10,545 (38,678) (28,133) 7,825 (698) 7,127 ------- ------- ------- ------- Minority Interest -equity (292) (109) ------ -------- (Loss)/profitfor thefinancial year (28,425) 7,018 Dividends(including non-equity)(note 1) (4,733) (4,509) ======== ======= Transferred(from)/to reserves (33,158) 2,509 ======== ======= Earnings perordinary sharebefore amortisationof goodwill 10.25p 7.73pand exceptional items (note 2) Basic(losses)/earnings perordinary share (note 2) (28.49p) 7.03p ======== ===== Fully diluted(losses)/earnings perordinary share (note 2) (27.87p) 6.88p ======== ====== Group Balance Sheetat 30 November 2005------------------- Group 2005 2004 Restated £000 £000 Fixed assetsIntangible assets 31,043 10,824Tangible assets 38,818 58,423 -------- ---------- 69,861 69,247 ======== ========== Current assetsStocks 29,528 33,681Debtors 39,245 44,620Cash and short term deposits(note 5) 14,733 28,938 -------- -------- 83,506 107,239 -------- -------- Creditors - due within one yearBank and other borrowings (note 5) 1,903 6,097Other creditors 58,082 55,508 -------- -------- 59,985 61,605 -------- -------- Net current assets 23,521 45,634 -------- -------- Total assets less current liabilities 93,382 114,881 -------- -------- Creditors - due after one yearBank and other borrowings (note 5) - 7,888Other creditors 4,088 2,969 ------- -------- 4,088 10,857 ------- -------- Provisions for liabilities and chargesDeferred taxation 4,434 5,169 Net pension scheme deficit 19,669 22,052 ______ ______ 65,191 76,803 ====== ====== Capital and reservesEquity and non-equity called up share capital 25,458 50,291Share premium account - 60,453Exchange reserve (6,516) (7,542)Share scheme reserve 735 -Profit and loss account 42,741 (28,548) Shareholders' funds -------- --------- Equity 62,018 74,254- Non-equity 400 400 -------- -------- 62,418 74,654 -------- -------- Minority Interest - equity 2,773 2,149 -------- --------- 65,191 76,803 ======== ======== Consolidated Group Cash Flow Statementfor the year ended 30 November 2005 2005 2004 Restated £000 £000 £000 £000 Net cash inflow from operating 7,623 21,407activities (note 4) Interest received 1,046 573Interest paid (1,773) (1,403)Non-equity dividends paid (12) (23) ------ ------Returns on investments and servicing of finance (739) (853) Tax paid (2,019) (3,699) Purchase of tangible fixed assets (7,681) (6,871)Sale of tangible fixed assets 732 614Receipt of government grants 60 - ------ ------ Capital expenditure (6,889) (6,257) Acquisitions (note 6) (20,815) (2,405)Cash acquired with subsidiaries 1,042 609(note 6)Disposal of subsidiaries (note 7) 22,762 65 ------- -----Acquisitions and disposals 2,989 (1,731) Equity dividends paid (2,894) (4,278) ------- ------Net cash (outflow)/inflow beforemanagement of liquid (1,929) 4,589resources and financing Management of liquid resourcesDecrease in short term deposits (3,071) 2,200 Proceeds of share issues 255 183Purchase of own shares (261) -Capital element of lease repayments (202) -(Repayment of)/additional loan due under one year (4,182) 1,034Repayment of loans due after one year (7,872) (4,500) ------- ------- Financing (12,262) (3,283) -------- ------- (Decrease)/increase in cash (note 5) (17,262) 3,506 ======= ======= Consolidated Statement of Total Recognised Gains and Lossesfor the year ended 30 November 2005 2005 2004 Restated £000 £000 (Loss)/profit for the financial year (28,425) 7,018 Currency translation differences on overseas netinvestments and related borrowings 1,027 (1,609) Actuarial loss on pension scheme (1,664) (1,233) Movement on deferred tax asset relating to pension 499 370scheme ------ ------ Total recognised (losses)/gains for the year (28,563) 4,546 ======Prior year adjustment, implementation of FRS 17 (29,318) -------- Total losses recognised since last annual report (57,881) ======== Reconciliation of Movements in Consolidated Shareholders' Fundsfor the year ended 30 November 2005 2005 2004 Restated £000 £000 Shareholders' funds at start of year as previously 103,972 102,373reported Prior year adjustment (29,318) (28,056) -------- --------Shareholders' funds at start of year restated 74,654 74,317 -------- -------- (Loss)/profit for the financial year (28,425) 7,018 Dividends (4,733) (4,509) Other recognised losses relating to the year (138) (2,472) New share capital issued 255 183 Goodwill transferred to profit and loss account ondisposal of subsidiaries 20,637 - Share based payment 168 117 ------- ------- Net (decrease)/increase in shareholders' funds (12,236) 337 _______ ______Shareholders' funds at end of year 62,418 74,654 ======== ======== Segmental Information Turnover Profit Net assets 2005 2004 2005 2004 2005 2004 Restated Restated Restated £000 £000 £000 £000 £000 £000Classes ofbusiness Floors 97,725 83,132 9,316 9,699 38,225 37,060Yarns & Fabrics- existing businesses 67,749 59,290 6,111 5,334 24,393 30,171- acquisitions 9,929 - 1,214 - 23,298 - ------ ------ ------ ------ ------ ------Yarns & Fabrics 77,678 59,290 7,325 5,334 47,691 30,171 ------ ------ ------ ------ ------ ------- SpecialistMaterials 175,403 142,422 16,641 15,033 85,916 67,231 Plastics -discontinuedoperations 51,583 59,229 536 1,246 - 28,895 -------- -------- ------- ------- -------- ------ 226,986 201,651 17,177 16,279 85,916 96,126 ======== ========= Central costs (4,901) (3,838) ------- ------Pre-exceptionaloperating profit 12,276 12,441Exceptionaloperating items (1,200) (423) ------- -------Operating profit 11,076 12,018Exceptional non-operatingitems (36,622) -Net interest (1,017) (981) -------- ------ Group(loss)/profitbefore taxation (26,563) 11,037 ======== ======= Non-operatingliabilities (33,555) (34,276)Net cash 12,830 14,953 ------- -------Total net assets 65,191 76,803 Geographicalsegments By originUnited Kingdom 90,886 69,438 8,949 7,603 43,849 37,719Continental Europe 111,775 110,233 7,507 7,925 36,630 42,901 North America 19,009 20,360 134 483 - 11,781Asia 5,316 1,620 587 268 5,437 3,725 ------- ------- ----- ------ ------ ------- 226,986 201,651 17,177 16,279 85,916 96,126 ======= ======= ====== ====== Central costs (4,901) (3,838) ------- ------Pre-exceptionaloperating 12,276 12,441profitExceptionaloperating items (1,200) (423) ------- -------Operating 11,076 12,018profitExceptional non-operatingitems (36,622) -Net interest (1,017) (981) ------ ------ Group (loss)/profitbefore taxation (26,563) 11,037 ======= ======= Non-operatingliabilities (33,555) (34,276)Net cash 12,830 14,953 -------- -------Total net 65,191 76,803assets ======== ======== Turnover bydestinationUnited Kingdom 62,505 49,735ContinentalEurope 114,140 108,039North America 33,631 29,041Rest of World 16,710 14,836 ------- -------- 226,986 201,651 ======= ======== Non-operating liabilities represent other debtors greater than one year, tax anddeferred tax, dividends, provisions and equity minority interests. 1. Dividends 2005 2004 £000 £000On non-equity sharesFirst, second and third cumulative preferencestockHalf year to 31 May 2005 11 11Half year to 30 November 2005 12 12 ----- ----- 23 23On equity sharesOrdinary sharesInterim dividend of 1.70p (2004 - 1.60p) 1,704 1,592Final dividend of 3.00p (2004 - 2.90p) 3,006 2,894 ----- ------ 4,733 4,509 ===== ====== The interim dividend of 1.70p was not declared until 21 November 2005 and waspaid on 16 December 2005. The declaration and payment of the interim dividendwas delayed whilst the Company awaited confirmation from the Court of Session inScotland of the cancellation of the Company's share premium account and thecancellation of its paid up capital to the extent of 25p per issued ordinaryshare and the reduction on the nominal value of its ordinary shares from 50p to25p. 2. Earnings per ordinary share 2005 2004 Restated £000 £000(Losses)/profits arecalculated as follows (Loss)/profit after tax (28,133) 7,127Preference dividend (23) (23)Minority interest (292) (109) ------- ------(Losses)/profits attributable to equity shareholders (28,448) 6,995 Exceptional operating items 1,200 423Tax relief thereon (360) (134)Exceptional non-operating items 36,622 -Tax expense thereon 80 - -------- -------Earnings before exceptional items 9,094 7,284 Amortisation of goodwill 1,310 583Tax relief thereon (174) (174) -------- ------ Earnings before amortisation of goodwil andexceptional items 10,230 7,693 ======== ====== Basic (loss)/earnings per share (28.49p) 7.03p Earnings per share before exceptional itemsand amortisation of goodwil 10.25p 7.73p ======== ======= Fully diluted (loss)/earnings per share (27.87p) 6.88p ======== ======= An additional calculation of earnings per share before amortisation of goodwilland exceptional costs and before exceptional costs is given in order to providea more meaningful comparison of underlying performance. All earnings per share calculations are based on the weighted average number ofordinary shares in issue during the year of 99,840,631 (2004: 99,526,756). Thecalculation of fully diluted earnings per share is based on the ordinary sharesin issue plus the dilutive effect of the Low & Bonar 1997 Share Save Scheme andthe 2003 Low & Bonar Long Term Incentive Plan awards (to the extent to which theperformance criteria had been achieved at 30 November) was 2,228,285 (2004:2,133,080). The number of shares included in the calculation of fully dilutedearnings per share was 102,068,916 (2004: 101,659,836). Other awards under the2003 Long Term Incentive Plan are non-dilutive as the shares concerned aretreated on a contingent basis in accordance with the treatment prescribed byFRS14. 3. Exceptional items 2005 2004 £000 £000 Operating exceptional itemsLegal costs - (423)Floors restructuring (1,111) -Capital reorganisation costs (89) - ----------- ------- (1,200) (423) ========= =======Non operating exceptional itemsLoss on disposal of Plastics Division (28,416) -EU fine related to previously disposed business (8,439) -Gain on sale of fixed assets 233 - ----------- ------------ (36,622) - ========== ============ 4. Net cash inflow from operating activities 2005 2004 Restated £000 £000 Operating profit 11,076 12,018Depreciation 6,844 7,553Amortisation 1,310 583Write back of government grants (65) (73)Increase in stocks (1,965) (2,230)Increase in debtors (4,357) (1,425)(Decrease)/increase in creditors (263) 6,729Pensions contributions in excess of operating charge (5,370) (1,865)Credit in respect of Long Term Incentive Plan 413 117 --------- ---------- Net cash inflow from operating activities 7,623 21,407 ========= ========== 5. Reconciliation and analysis of net cash Short Borrowings Borrowings term bank under over Net Cash deposits one year one year cash/(debt) £000 £000 £000 £000 £000 At 1 December 2003 20,862 7,000 (5,049) (12,427) 10,386Cash flow 3,506 (2,200) (1,034) 4,500 4,772Exchange ratefluctuations (230) - (14) 39 (205) ------- ----- ------ ---- ------- At 1 December 2004 24,138 4,800 (6,097) (7,888) 14,953Cash flow (17,262) 3,071 4,182 7,872 (2,137)Exchange ratefluctuations (14) - 12 16 14 ------- ---- ------ ----- ------ At 30 November 2005 6,862 7,871 (1,903) - 12,830 ======= ======= ======= ===== ======= 2005 2004 Cash Cash £000 £000 Per balance sheet 14,733 28,938Short term bank depositsincluded (7,871) (4,800) ------- ------- As above 6,862 24,138 ======= ======= 6. Acquisitions The Group acquired LCM Construction Products Ltd. (trading as ADFIL), on 7December 2004, for a maximum cash consideration including costs of up to£13,401,000, including the repayment of external debt of £4,885,000. The Groupacquired cash balances of £204,000. Acquisition costs were £630,000. Theprevious shareholders of LCM Construction Products Ltd. were Lloyds TSBDevelopment Capital and the existing management team who have remained with thebusiness. Book Fair Value Fair Value Adjustments Value £000 Fixed assets 471 (190) 281 Stock 411 ( 30) 381 Debtors 1,750 - 1,750 Creditors (1,545) (100) (1,645) ------ ------ ------Net assets acquired 1,087 (320) 767 ------ ------ ------ Cash consideration paid in periodincluding costs 5,930 Less cash acquired with business (204) Add external debt repaid onacquisition 4,885 -------Net cash outflow during period 10,611 Included within creditors at 30November 2005 2,480 -------Total consideration payable 13,091 ======= Goodwill arising on acquisition 12,324 ======= The fair value adjustments to fixed assets and stock represent changes to ensureconsistency with group accounting policies; that to creditors represents theinclusion of additional liabilities relating to a lease. Xirion The Group acquired Xirion NV ("Xirion"), on 31 August 2005, for a cashconsideration including costs of £9.3m. Book Fair Value Fair Value Adjustments Value £000 £000 £000Fixed assets 2,343 - 2,343 Stock 738 - 738 Debtors 566 - 566 Creditors (1,878) (304) (2,182) Taxation (70) - (70) Finance Leases (1,464) - (1,464) ------- ------- -------Net assets acquired 235 (304) (69) ------- ------- ------ Cash consideration paid in periodincluding costs 9,297 Less cash acquired with business (838) Add borrowings acquired with business 595 ------Net cash outflow during period 9,054 ====== Goodwill arising on acquisition 9,123 ====== The fair value adjustment relates to the inclusion of an additional liabilitiesfor VAT and supplier rebates. On 19 October 2005, the Group acquired certain assets and intellectual propertyfrom Threshold Floorings Limited (in Administration) for a total consideration,including costs, of £108,000. The purchased goodwill amounted to £82,000. 7. Disposal of subsidiaries On 8 September 2005 the Group disposed its entire Plastics division for a cashconsideration (net of costs) of £23,718,000. Disposals during the year had a net cash flow of £1,217,000 from operatingactivities, paid £251,000 net interest and utilised £1,307,000 for capitalexpenditure up to their dates of disposal. The businesses were purchased by Promens hf, an Icelandic company. Promens hf isa related party of Atorka hf who directly and via another related party, AFLFjarfestingarfelag, own a substantial proportion of the equity of Low & BonarPLC. At the time of sale AFL Fjarfestingarfelag owned 21,312,500 sharesamounting to 21.2% of Low & Bonar's issued share capital. The assets disposed of were as follows. £000Fixed Assets 22,976Stock 7,216Debtors 13,406Cash 1,681Creditors (11,143)Tax 43Deferred tax (655)Intra group borrowings (2,027) ------- 31,497Proceeds of disposal less costs 23,718 -------Loss on disposal before goodwill written back (7,779)Goodwill written back (20,637) --------Loss on disposal (28,416) -------- Proceeds of disposal less costs 23,718Less amounts included in other debtors at 30 November 2005* (1,418)Add amounts included in other creditors at 30 November 2005 116Intra group borrowings repaid 2,027Cash disposed (1,681) ------Net cash inflow 22,762 ------ *Of the aggregate consideration, £1,418,000 was outstanding as at 30 November2005, and this has been paid subsequently. 8. This preliminary announcement has been prepared on the basis of theaccounting policies set out in the annual report for the year ended 30 November2004 as adjusted for the adoption of Financial Reporting Standard 17 (RetirementBenefits). 9. The financial information set out in this preliminary announcement does notconstitute the company's statutory accounts for the year ended 30 November 2005or 2004 but is derived from those accounts. Statutory accounts for 2004 havebeen delivered to the registrar of companies, whereas those for 2005 will bedelivered following the company's annual general meeting. The auditors havereported on those accounts; their reports were unqualified and did not contain astatement under section 237(2) or (3) of the Companies Act 1985. -------------------------- (1) Figures for 2004 have been restated throughout this announcement followingthe adoption of FRS17. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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