6th Dec 2006 07:02
API Group PLC05 December 2006 6 December 2006 API GROUP PLC Preliminary Results for the year ended 30 September 2006 • Refocusing of Group is yet to be reflected in results. • Sales from foils businesses rose by 5% on a worldwide basis, but European foils and laminates businesses performed poorly, adversely impacting Group results. • Geographically, US and Asia Pacific regions performed strongly while European business faced reduced demand and competitive pressures. • Group sales reduced by 3.4% to £102.0m and operating profit before goodwill and exceptional items reduced to £1.0m (2005: £3.6m). • After charging exceptional items and interest, loss before tax from continuing operations was £1.8m (2005: profit £1.6m) • Basic loss per share of 10.1p (2005: 28.7p loss). • Net borrowings increased by £8.8m to £15.5m, in part reflecting increased capital expenditure which related primarily to the construction of a major new facility in China. • Further progress is expected in the current year as a result of expansion in China, which is expected to begin delivering benefits in 2007, strengthening position of US business and steps taken to improve European performance. Commenting Richard Wright, Chairman of API, said: "Whilst these results are broadly in line with our comments in July, they arenevertheless disappointing at a financial level. However, operationally, goodprogress has been made and strategic objectives met. The business is betterfocused, has a good presence in the US and Asia Pacific and is addressing thedemand and competitive pressures in Europe. We are also making good progress inthe development of our new foils facility in China, which we expect to seecoming on stream in 2007. These all provide good opportunities for the futuredevelopment of the Group." Enquiries: API Group plc 01625 858 700 David Walton, Chief Executive Financial Dynamics 020 7831 3113 Tim Spratt/Nicola Biles Extracts from Chairman's Statement After several years of restructuring, API has successfully repositioned itselfas a focussed provider of specialised foil and laminate products for use in thepackaging and labelling of luxury and premium-branded consumer goods. As one ofonly three truly global providers of such products, API is well placed to takeadvantage of the increasing demand for luxury and premium-branded goodsworldwide. The Group is pursuing a business strategy which will deliver sustainablecompetitive advantages in each of its markets. Sales coverage in keygeographical territories and market sectors is being expanded, product rangesaround the world are being improved and rationalised and manufacturing is beingconcentrated in centres of excellence in lower cost economies. In support ofthis strategy, we have completed the acquisition of a distributor in Germany andcommitted to a major expansion of our already market-leading Chinese foilsbusiness. In 2007, the foils business will expand into Italy and the laminatesbusiness will continue to pursue new business opportunities in Eastern Europe. Operating Results Although good progress has been made with strategic objectives, this has yet tobe reflected in the financial performance of the Group, which continued to bedisappointing due to mixed trading conditions. Sales from continuing operations declined 3.4% to £102.0m during the currentyear, while operating profit from continuing operations before exceptional itemsreduced to £1.0m (£3.6m), reflecting the deterioration that occurred in theGroup's European businesses. After charging exceptional items of £0.9m andinterest of £1.9m, the loss before tax from continuing operations was £1.8m(profit £1.6m). The US and Asia-Pacific regions both performed strongly. However, weak demandand intensifying competitive pressures impacted performance in certainbusinesses in Europe. In response, a number of improvement initiatives have beenlaunched which we are confident will yield benefits during the current year. Net borrowings increased by £8.8m during the period to £15.5m and representedgearing of 66% at 30 September 2006. While the increase was partly attributableto the poor trading performance, it also reflected the significant capitalexpenditure incurred in connection with the new facility in China. Dividend In view of the increase in gearing during the year and the disappointingfinancial performance, the Board is not recommending the payment of a dividend.Cash generated from operations will be reinvested in the business. Board Changes Following the retirement of David Hudd at the Annual General Meeting held on 1February 2006, I was elected as Non-Executive Chairman and Andrew Walker, whohas been a Non-Executive Director of the Group since 2003, assumed theresponsibilities of Senior Independent Director and Chairman of the RemunerationCommittee. On the same date, Brian Birkenhead joined the Board as an IndependentNon-Executive Director and was appointed Chairman of the Audit Committee. Brianbrings a wealth of experience and knowledge having previously been FinanceDirector of National Power and Johnson Matthey plc. The Board was further strengthened later in the year by the appointment ofMartin O'Connell and Luke Wiseman. Martin O'Connell joined the Board on 1 May2006 shortly after his retirement from Field Packaging, one of API's largestcustomers. Luke Wiseman was appointed on 1 September 2006 as a representative ofSteel Partners II LLP, the Group's largest shareholder with a beneficialinterest of 29.5%. Both are regarded as non-independent for the purposes ofcompliance with the Combined Code by virtue of their current or former executiveroles. Accounting Reference Date After due consideration, including consultation with major shareholders, theBoard has decided to change the Group's accounting reference date to 31 March.The Group's financial performance is generally highly dependant on trading inthe summer months and the change in accounting reference date is intended tofacilitate the continued provision to shareholders of timely and accurateguidance on likely outcome for the year. The change in accounting reference datewill be achieved by the adoption of an eighteen month transitional accountingperiod commencing on 1 October 2006 and ending on 31 March 2008. Extracts from Chief Executive's Review and Business Review This has been another challenging year for the Group, with several of ourbusinesses experiencing tough market conditions. Despite this, the upward trendin performance in the US operations was maintained and the businesses in theAsia-Pacific region, including the Chinese joint venture, continued to performstrongly. In contrast, the performance of the European business wasdisappointing. Whilst holographic foils performed well, the general foilsbusiness struggled in the face of tough competition and the laminates businessexperienced weak underlying demand resulting in a significant reversal infortunes compared with the previous year. On a worldwide basis, the Group's foil activities increased their sales by 5%.The strategically important US and Chinese foils businesses both performed well,as did the European holographic foil business. In contrast, the European foilsbusiness performed poorly and the situation was worse in Laminates, where salesfell by 15%. Operating margins and profitability improved in the US and Chinese foilsbusiness and in the European holographic foils business, while the general foilsand laminates businesses in Europe both experienced a sharp decline inprofitability due to lower sales. Each of our businesses experienced upward pressure on raw materials and utilityprices during the period. Whilst the impact of raw material price movements wasmitigated by more effective purchasing and reductions in avoidable waste, itproved more challenging to offset the impact of increases in utility prices,which were particularly severe in the US. As a major user of both electricityand gas, reducing overall consumption is an area on which we intend to focusmuch more actively in future. Some time ago, the Board recognised that changes in customer behaviour andpurchasing preferences were beginning to adversely impact the performance of thefoils business in the US and Europe. As in most industries, customers aredemanding higher quality, increased versatility, lower cost and improvedservice. Competition amongst leading western manufacturers has intensified andin recent years, significant improvements in quality and consistency have leadto greater acceptance of lower-cost foils from the Far East, particularly in theEuropean market. As one of only three large, international manufacturers of foil products, API iswell-placed to respond to these challenges. To achieve success in such dynamicmarkets, we believe that the foils business needs to continually evolve, investfor the future and pursue distinct strategies in its sales and distribution,manufacturing and holographic activities. In sales and distribution, we are working hard to become a more responsive andcustomer focused organisation and will achieve this through improved salescoverage and better service delivered through a broader base of distributioncapabilities located in key markets. During 2006, we strengthened our salesforce in both the US and Europe, commenced the reorganisation of our UKdistribution operations and successfully integrated a distributor that weacquired in Germany. During 2007, we will complete the reorganisation in the UKand establish a sales and distribution operation in the large, strategicallyimportant Italian market. To compete successfully in challenging and increasingly international markets,the foils business needs a product range that delivers enhanced performance andfunctionality at ever reducing cost. This is being achieved through continuousdevelopment and rationalisation of our existing product ranges, improvement inproductivity in our US and European operations and the migration ofmanufacturing to modern, efficient facilities in low-cost locations such as theUS mid-West and China. During 2006, we introduced a range of versatile general purpose foilsmanufactured exclusively in China that has been very well received in westernmarkets. We also began construction of a new 300,000 square foot foilmanufacturing facility in China. Scheduled for completion in mid-2007, this willhouse our existing Chinese business and will become our main world-wideproduction centre for mainstream, high-volume products. As output from Chinaincreases, manufacturing facilities in the US and Europe will be progressivelyrefocused on production of more specialised and more technically demandingproducts where fast moving niche markets require responsive local supply. Our European holographic foils business continues to strengthen its position asa leading supplier of high-quality holographic foils and embossable basematerials for both security and decorative applications. During 2006, weinvested in additional capacity, all of which was fully utilised by the end ofthe year. In 2007, we will further increase capacity and will also bring to themarket new developments in UV embossing technology. API is now firmlyestablished as a leader in its chosen markets and we are evaluating options forcontinued development and expansion in this attractive and exciting sector. API's laminates business has enjoyed a market leading position in Europe formany years. However, it currently faces a number of strategic challenges, themost significant of which are its dependence on a small number of largecustomers and the emergence of a high-quality printing and converting industryin Eastern Europe. Increasingly, large customers are looking to lower costproducers to source packaging currently manufactured in the UK, France, Italy orGermany. Whilst those producers are currently content to source their rawmaterials from premier western manufacturers, such as API, it is inevitable thatin time local sources will be sought. We are working hard to defend our position through improving manufacturingefficiency and reducing production costs in our UK facility and are alsoactively evaluating opportunities in Eastern Europe to address the costchallenges we face from existing customers and to target emerging local markets. Americas The US foils business continued to focus on improving productivity, efficiencyand customer service levels and was able to maintain the steady upward trend inperformance that has been evident since 2004. Sales increased by over 15% in thecurrent year and operating margins improved dramatically. There was continuedstrong demand for products in the metallic-ink and greetings cards sectors andincreasing penetration of the general label and carton markets. In recent months, as the US foils business has grown, it has effectively becomecapacity constrained. We have successfully introduced products that arepart-manufactured in China and these have been well received by customers.However, there are limits on the volumes that can be obtained in this way inadvance of the completion of the new Chinese manufacturing facility.Consequently, we are evaluating options for expanding capacity in the relativelynear future in the US to enable us to more aggressively target new sectors inwhich the business currently has a relatively limited presence. During 2006, as part of our continuing commitment to minimise the impact of ourmanufacturing processes on the environment, we invested heavily in upgrading theemissions management systems in each of our US facilities. This involved thefull enclosure of most solvent using equipment, together with the installationof state-of-the-art regenerative thermal oxidation equipment to achieve cleanemissions. We also invested in a new, large-format metalliser to both improveproductivity and provide a degree of back-up in the event of equipment failurein one or other of our manufacturing facilities. Asia-Pacific In the Asia-Pacific region, sales increased by 4% following a recovery in thedemand for holographic products in the tobacco sector and strong growth in salesof new products in the Chinese domestic market. Exports also grew as aproportion of total sales, with an increase in the value of products sold toother API Group companies and particularly strong growth in India and Russia.The increase in sales would have been greater, but for teething problemsencountered during the summer months in the manufacture of a new range ofhigh-performance, general purpose foils for the European market. The construction of the new factory near Shanghai is progressing well. Followingcompletion of the land purchase earlier in the year, construction began inearnest during June. Erection of the main factory building is now well advanced.Orders have already been placed for new coating and metallising equipment and weare optimistic that the new factory could be operational and in production asearly as the middle of 2007. Europe Foils In the European foils business, sales declined slightly despite the successfulintroduction of a number of new products and the extension of our sales anddistribution capabilities into the strategically important German market throughthe acquisition of MEPA. Whilst the holographic foils business continued toperform well, growing sales and maintaining margins, the general foils businesssuffered as tough competition resulted in an underlying deterioration in salesand margin erosion. The difficulties of the European foils business were compounded by constraintson the availability of product from China. The current Chinese factory isoperating under government imposed limits on solvent emissions which restrictoutput until such time as the relocation to the new facility is complete. Theposition was further exacerbated over the summer months by unforeseen technicalproblems caused by the unusual heat and humidity experienced in Shanghai. Thisresulted in a supply interruption for several months, the destruction ofsignificant quantities of inventory and the requirement to manufacture atadditional cost in facilities in the UK and US to maintain supply to customers.Problems of this nature have been addressed in the design of the new Chinesefactory. In contrast to the above, the holographic foils business performed wellachieving record levels of profitability on sharply increased sales.Improvements in the performance of key products and investment in additionalmanufacturing capacity enabled the business to consolidate its position as aleading supplier to the European security industry and a number of major newcontracts were won. We continue to invest in both people and technology and areconfident that further profitable growth will occur. Laminates The Laminates business had a very difficult year as a number of major customersreduced expenditure on laminated board products, either due to reductions intheir own promotional budgets or, in a small number of cases, the decision toswitch away from laminates for cost or other strategic reasons. Sales reduced by15%, and in a business with high operational gearing and a relatively smallnumber of alternative sources of revenue, this inevitably resulted in a steepdecline in profitability. In response to the decline in sales during the first half, the workforce wasreduced and a number of other cost reduction and performance improvementmeasures were initiated. The actions taken during the summer months haveresulted in an improvement in the performance and the business has tradedprofitably in recent months. We were also successful in winning a number ofsignificant pieces of new business during the second half and volumes underthese contracts are ramping up satisfactorily. The business remains under pressure as customers evaluate the merits of lessexpensive, although less visually attractive, alternatives to laminated boardand as the migration of large-scale carton production to Eastern Europecontinues. Both of these factors contribute to intense pressure on margins andwe continue to constantly review the actions that can be taken to improveproductivity and reduce production costs. Prospects The Group is committed to a number of strategic initiatives which we believewill significantly enhance its competitive position over time. The relocationand expansion of our operations in China and the strengthening position of ourUS business, together with the steps we have taken to improve performance inEurope, provide exciting opportunities for the future development of the Group. Despite the temporary difficulties experienced in certain of our Europeanbusinesses, the Board continues to believe that the Group is well positioned totake advantage of the growth that is occurring in each of its core markets. Wecontinue to see strong performance from our businesses in the US andAsia-Pacific and are confident that the action taken in our European businesseswill deliver improvement during the current year. We remain confident that theinitiatives outlined above will deliver appropriate returns to our shareholdersin due course. Group Income Statementfor the year ended 30 September 2006 2006 2005 £'000 £'000 Continuing operationsRevenue 101,979 105,570Cost of sales (80,656) (82,767)Gross profit 21,323 22,803 Other operating costs (20,329) (19,241) Operating profit before exceptional items 994 3,562 Exceptional items:Restructuring (863) (226)Professional expenses incurred in respect of takeover approach - (204) Operating profit from continuing operations 131 3,132 Finance revenue 85 117Finance costs (1,698) (1,524)Other finance expense - pensions (311) (142) (1,924) (1,549) (Loss) / profit on continuing activities before taxation (1,793) 1,583Tax expense - UK (122) (3) - Overseas (613) (501)(Loss) / profit from continuing operations (2,528) 1,079 Discontinued operationsLoss from discontinued operations (230) (10,149) Loss for the period (2,758) (9,070) Attributable to:Profit attributable to minority equity interest 695 574Loss attributable to equity holders of the parent (3,453) (9,644)Total loss for the period (2,758) (9,070) Earnings per share (pence)Basic (loss) / earnings per share from continuing operations (9.4) 1.5Diluted (loss) / earnings per share from continuing operations (9.1) 1.4Basic loss per share on loss for the period (10.1) (28.7)Diluted loss per share on loss for the period (9.8) (27.6) Group Statement of Recognised Income and Expensefor the year ended 30 September 2006 2006 2005 £'000 £'000 Exchange differences on retranslation of foreign operations (972) 604Actuarial (losses) / gains on defined benefit pension plans (1,311) 1,920Tax on items taken directly to or transferred from equity 393 (708) Net (expense) / income recognised directly in equity (1,890) 1,816Loss for the period (2,758) (9,070) Total recognised income and expense for the year (4,648) (7,254) Attributable to: Equity holders of the parent (5,176) (7,993)Minority equity interests 528 739 (4,648) (7,254) Group Balance Sheet at 30 September 2006 2006 2005 £'000 £'000AssetsNon-current assetsProperty, plant and equipment 30,500 28,692Intangible assets 6,480 6,480Deferred tax asset on defined benefit pension plan 3,263 3,151Other receivables - 2,000 40,243 40,323Current assetsTrade and other receivables 20,112 17,824Inventories 13,195 12,614Cash 4,909 10,396 38,216 40,834 Total assets 78,459 81,157 LiabilitiesCurrent liabilitiesTrade and other payables 22,306 23,306Financial liabilities 1,758 2,102Income tax payable 379 327Provisions 306 593 24,749 26,328Non-current liabilitiesFinancial liabilities 18,674 14,980Deferred tax liabilities 659 818Provisions 93 109Defined benefit pension plan deficit 10,879 10,503 30,305 26,410 Total liabilities 55,054 52,738 Net assets 23,405 28,419 EquityCalled up share capital 8,612 8,592Share premium 244 211Capital redemption reserve 549 549ESOP reserve (251) (251)Foreign exchange reserve (366) 439Retained earnings 9,179 13,419 API Group shareholders' equity 17,967 22,959 Minority interest 5,438 5,460 Total equity 23,405 28,419 Group Cash Flow Statementfor the year ended 30 September 2006 2006 2005 £'000 £'000 Operating activitiesGroup operating profit 131 3,132Adjustments to reconcile group operating profit to net cash flows from operating activitiesOperating loss from discontinued operations (230) (1,974)Depreciation and impairment of property, plant and equipment 3,457 4,412(Profit) / loss on disposal of property, plant and equipment (22) 149Share-based payments 131 87Difference between pension contributions paid and amounts recognised in the income statement (835) (378)Decrease in inventories (870) (892)(Increase) / decrease in trade and other receivables (523) 6,043Decrease in trade and other payables (1,120) (6,424)Movement in provisions (293) (590) Cash (used in) / generated from operations (174) 3,565Income taxes paid (656) (563)Net cash flow from operating activities (830) 3,002 Investing activities Interest received 85 117Purchase of property, plant and equipment (6,140) (4,806)Sale of property, plant and equipment 244 50Purchase of subsidiary undertakings - (1,069)Sale of subsidiary undertakings - 8,033 Net cash flow from investing activities (5,811) 2,325 Financing activities Interest paid (2,047) (1,483)Dividends paid to minority interests (487) (788)Proceeds from share issues 53 340Cash received from exercise of share options - 347New borrowings 1,956 -Repayment of borrowings - (5,310) Net cash flow from financing activities (525) (6,894)Decrease in cash and cash equivalents (7,166) (1,567)Effect of exchange rates on cash and cash equivalents 116 244Cash and cash equivalents at the beginning of the period 10,396 11,719 Cash and cash equivalents at the end of the period 3,346 10,396 Notes Segmental analysis The primary segment reporting format is determined to be geographical. At 30September 2006, the Group is organised into three distinct independently managedgeographic segments, Europe, North America and Asia Pacific. Secondary segmentinformation is reported by business segment. Primary reporting format 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000By Geographical segment Continuing Discontinued Total Continuing Discontinued TotalTotal revenue by originEurope 74,845 - 74,845 79,220 13,278 92,498North America 25,958 129 26,087 22,806 181 22,987Asia Pacific 13,035 - 13,035 12,614 6 12,620 113,838 129 113,967 114,640 13,465 128,105Inter-segmental salesEurope 9,593 - 9,593 7,007 647 7,654North America 494 - 494 933 38 971Asia Pacific 1,772 - 1,772 1,130 - 1,130 11,859 - 11,859 9,070 685 9,755External sales by originEurope 65,252 - 65,252 72,213 12,631 84,844North America 25,464 129 25,593 21,873 143 22,016Asia Pacific 11,263 - 11,263 11,484 6 11,490 101,979 129 102,108 105,570 12,780 118,350External sales by destinationUK 34,398 14 34,412 40,460 6,024 46,484Continental Europe 25,467 - 25,467 26,516 5,474 31,990Americas 25,769 106 25,875 22,205 181 22,386Asia Pacific 12,681 9 12,690 12,498 1,053 13,551Rest of World 3,664 - 3,664 3,891 48 3,939 101,979 129 102,108 105,570 12,780 118,350Segment ResultOperating profit / (loss)Europebefore exceptional items 205 - 205 4,290 (1,213) 3,077exceptional items (597) - (597) - 46 46 (392) - (392) 4,290 (1,167) 3,123North Americabefore exceptional items 1,521 (53) 1,468 425 (307) 118exceptional items (242) (177) (419) - (500) (500) 1,279 (230) 1,049 425 (807) (382)Asia Pacificbefore exceptional items 1,276 - 1,276 1,066 - 1,066exceptional items - - - (36) - (36) 1,276 - 1,276 1,030 - 1,030Central costsbefore exceptional items (2,008) - (2,008) (2,219) - (2,219)exceptional items (24) - (24) (394) - (394) (2,032) - (2,032) (2,613) - (2,613)Total operating profit / (loss) 994 (53) 941 3,562 (1,520) 2,042before exceptional itemsTotal operating profit / (loss) 131 (230) (99) 3,132 (1,974) 1,158Share of operating loss in joint venture - - - - (55) (55) 131 (230) (99) 3,132 (2,029) 1,103Loss on disposal of discontinued operations - - - - (8,120) (8,120)Profit / (loss) on ordinary operations before interest andtaxation 131 (230) (99) 3,132 (10,149) (7,017)Net finance costs (1,613) - (1,613) (1,407) - (1,407)Other finance expense - pensions (311) - (311) (142) - (142)Profit / (loss) before taxation (1,793) (230) (2,023) 1,583 (10,149) (8,566)Income tax (735) - (735) (504) - (504)Net profit / (loss) for the year (2,528) (230) (2,758) 1,079 (10,149) (9,070) Notes (continued) Segmental analysis (continued) Primary reporting format 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000Assets and liabilities Continuing Discontinued Total Continuing Discontinued TotalSegment assetsEurope 50,885 - 50,885 53,110 - 53,110North America 14,726 22 14,748 14,637 45 14,682Asia Pacific 12,826 - 12,826 13,365 - 13,365Total assets 78,437 22 78,459 81,112 45 81,157Segment liabilitiesEurope 49,428 - 49,428 47,399 - 47,399North America 3,914 - 3,914 3,693 7 3,700Asia Pacific 1,712 - 1,712 1,639 - 1,639Total Liabilities 55,054 - 55,054 52,731 7 52,738Other segment informationCapital expenditureEurope 2,280 - 2,280 2,910 435 3,345North America 1,468 - 1,468 1,160 9 1,169Asia Pacific 2,392 - 2,392 292 - 292 6,140 - 6,140 4,362 444 4,806DepreciationEurope 2,413 - 2,413 2,737 449 3,186North America 617 41 658 795 60 855Asia Pacific 386 - 386 371 - 371 3,416 41 3,457 3,903 509 4,412ImpairmentEurope - - - - 190 190North America - - - - 212 212Asia Pacific - - - - - - - - - - 402 402 Secondary reporting format By business segmentTotal salesFoils 76,584 - 76,584 71,012 - 71,012Laminates 37,254 - 37,254 43,628 - 43,628Metallised Paper - - - - 3,351 3,351Converted Products - - - - 9,933 9,933Chromagem - 129 129 - 181 181 113,838 129 113,967 114,640 13,465 128,105Inter-segmental salesFoils 11,859 - 11,859 9,070 - 9,070Laminates - - - - - -Metallised Paper - - - - 11 11Converted Products - - - - 636 636Chromagem - - - - 38 38 11,859 - 11,859 9,070 685 9,755External salesFoils 64,725 - 64,725 61,942 - 61,942Laminates 37,254 - 37,254 43,628 - 43,628Metallised Paper - - - - 3,340 3,340Converted Products - - - - 9,297 9,297Chromagem - 129 129 - 143 143 101,979 129 102,108 105,570 12,780 118,350Other segment informationSegment assetsFoils 48,725 - 48,725 49,370 - 49,370Laminates 15,172 - 15,172 13,751 - 13,751Head Office 14,540 - 14,540 17,991 - 17,991Chromagem - 22 22 - 45 45Total assets 78,437 22 78,459 81,112 45 81,157Capital expenditureFoils 4,720 - 4,720 1,953 - 1,953Laminates 806 - 806 376 - 376Head Office 614 - 614 2,034 - 2,034Metallised Paper - - - - 372 372Converted Products - - - - 62 62Chromagem - - - - 9 9Total capital expenditure 6,140 - 6,140 4,363 443 4,806 Notes (continued) Operating profit 2006 2005 £'000 £'000Exceptional items charged against operating profit from continuingoperations comprise:Restructuring of operating businesses 651 390Charlotte facility closure costs 242 -London office closure costs 7 82Release of provision for vacant property (37) -Release of provision for legal claims - (246)Professional expenses incurred in respect of takeover approach - 204 863 430 Exceptional items are material items which derive from events or transactionsthat fall within the ordinary activities of the group and which need to bedisclosed by virtue of their size or incidence. Earnings per share 2006 2005 £'000 £'000Continuing operationsNet (loss) / profit attributable to equity holders of the parent (3,223) 505Exceptional items after tax attributable to equity holders of the parent 863 430Net (loss) / profit from continuing operations before exceptional items (2,360) 935attributable to equity holders of the parentDiscontinued operationsNet loss attributable to equity holders of the parent (230) (10,149)Loss on disposal of discontinued operations attributable to equity - 8,120holders of the parentExceptional items attributable to equity holders of the parent 177 454Net loss from discontinued operations before exceptional items attributable to equity holders of the parent (53) (1,575) 2006 2005 pence penceContinuing operationsBasic (loss) / earnings per share (9.4) 1.5Diluted loss per share (9.1) 1.4 Discontinued operationsBasic loss per share (0.7) (30.2)Diluted loss per share (0.7) (29.0) TotalBasic loss per share (10.1) (28.7)Diluted loss per share (9.8) (27.6) Notes (continued) Discontinued operations Discontinued operations for the year represent the results of Chromagem, asubsidiary which ceased trading during March 2006. Discontinued operations inprior year include the results of the Metallised Paper division and theConverted Products division together with the loss incurred on disposal. Thesedivisions were sold on 8 December 2004 and 20 January 2005 respectively. 2006 2005 £'000 £'000 Revenue 129 12,780Expenses (359) (14,754)Operating loss and loss after tax for the period for discontinued operations (230) (1,974)Share of post tax loss in joint venture - (55)Total operating loss: group and share of joint venture (230) (2,029)Loss on disposal of discontinued operations - (8,120)Loss for the period from discontinued operations (230) (10,149) Basis of preparation This is the first year in which the group has prepared its consolidatedfinancial statements under International Financial Reporting Standards ('IFRS').The date of transition to IFRS was 1 October 2004. The group has appliedoptional exemptions available to it under IFRS 1. Comparative information at 30September 2005 and for the year then ended has been restated from UK GenerallyAccepted Accounting Practice (UK GAAP) to comply with IFRS. The optionalexemptions applied in respect of IFRS 1 are set out in the group's interimreport for the six months ended 31 March 2006. Also included in the interimreport are the group's accounting policies and reconciliations to IFRS from thepreviously published UK GAAP financial statements. The accounts have been prepared using the accounting policies referred to aboveand these policies have been consistently applied to all years presented. Publication of abridged accounts The preliminary announcement figures for the year ended 30 September 2006 andthe comparative figures for the year ended 30 September 2005 are an abridgedversion of the Group's statutory accounts which carry an unqualified auditreport and do not contain a statement under S237 (2) or (3) of the Companies Act1985. The Group's audited statutory accounts for the year ended 30 September2006 will be filed in due course with the Registrar of Companies. The Group'saudited statutory accounts for the year ended 30 September 2005 have been filedwith the Registrar of Companies. The Annual Report and Accounts for the year ended 30 September 2006 will beposted to shareholders by 12 January 2007 prior to the Annual General Meeting on30 March 2007. Copies of the Annual Report and Accounts will be available tomembers of the public from 15 January 2007 at the Group's registered office atSecond Avenue, Poynton Industrial Estate, Poynton, Cheshire SK12 1ND. Contingent liabilities The consideration for the sale of the Converted Products Division, which wassold in January 2005, includes a deferred element totalling £2.0 million. It ispayable in January 2007 and, should the purchaser default, it is guaranteed byan independent insurance company. A potential claim has been received from thepurchasers of the Converted Products Division, Tri-Q Limited which may affectthe recoverability of £750,000 of the deferred consideration. The Directorsconsider that any claim will be unsuccessful and will robustly defend any legalaction. Legal advice obtained indicates that a successful outcome is probableand consequently, no provision against the recoverability of the deferredconsideration has been made in the accounts. End. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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