Half Yearly Report

13th Jul 2009 07:00



Monday 13 July 2009

Low & Bonar PLC

Interim Results for the six months ended 31 May 2009

RESILIENT PERFORMANCE 

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group, today announces its interim results for the six months ended 31 May 2009. 

Financial summary:

	6 months	6 months***	12 months***
	May-09	May-08	Nov-08
Revenue	£139.5m	£157.5m	£335.2m
Operating Profit	£ 0.4m	£ 8.2m	£ 19.1m
Adjusted Operating Profit*	£ 9.1m	£ 11.1m	£ 26.7m
Normalised Profit**	£ 5.1m	£ 5.9m	£ 16.0m
Net debt	£ 98.7m	£208.2m	£104.5m

* Before amortisation and non-recurring items.

** Before tax, amortisation and non-recurring items.

*** Restated for the disposal of the Floors business.

Operational highlights: 

Sales stabilised in the majority of our end markets, where we have successfully maintained our leading positions.

  

Duncan Clegg, Chairman of Low & Bonar, said: 

"The Group has seen an encouraging improvement in sales patterns during the second quarter and the period since.

In its business planning, however, the Board is only anticipating a slight recovery in year on year sales levels during the second half. Cost actions and raw material benefits will broadly mitigate the impact of the low year on year volumes. Due to our normal seasonal trends we expect a materially improved second half profit and, as a result, the Board's expectation of profitability for the year remains unchanged.

With strong, well invested market positions and having focused on a number of cost and efficiency initiatives, the Group is well placed to benefit from any further improvement in sales as and when economies around the world recover."

For further information, please contact:

Low & Bonar PLC	+44 (0)20 7535 3180
Paul Forman, Chief Executive
Kevin Higginson, Finance Director
Hogarth Partnership Limited	+44 (0)20 7357 9477
Rachel Hirst/Ian Payne

 Chairman's Statement

Introduction

Despite the difficult global economic conditions faced during the period, I am pleased to report on a resilient first half for the Group, during which we have substantially maintained operating margins and continued to make progress across several of our niche performance materials markets.

Whilst sales have been lower than we anticipated at the start of the year, there has been a marked improvement in the second quarter.

Management has acted swiftly and decisively to reduce the cost base, achieving an annualised cost saving of significantly in excess of £10m in the second quarter. There has also been a strong focus on increasing internal cash generation which, along with the successful c.£30m fundraising in March, has helped to strengthen the balance sheet significantly.

Focused strategy and end market diversity

Since the disposal of the Floors Division in September 2008 the Group has been focused on becoming a global leader in both existing and other attractive niche markets for performance materials. These markets are both large and fragmented, and as the global economy recovers they will continue to offer long term growth and margin opportunities. They are underpinned by resilient environmental, economic and regulatory drivers.

Our Technical Coated Fabrics business supplies products such as outdoor printed screens, architectural awnings and trailer curtain sides to the print, architectural and transport markets. Our Performance Technical Textiles business supplies products such as geotextiles, artificial grass yarns, carpet tile backing and construction fibres to the civil engineering, carpet tile manufacturing, leisure and construction sectors.

Results

	6 months	6 months***	12 months***
	May-09	May-08	Nov-08
Revenue	£139.5m	£157.5m	£335.2m
Operating Profit	£ 0.4m	£ 8.2m	£ 19.1m
Adjusted Operating Profit*	£ 9.1m	£ 11.1m	£ 26.7m
Normalised Profit**	£ 5.1m	£ 5.9m	£ 16.0m
Net debt	£ 98.7m	£208.2m	£104.5m

* Profit before amortisation and non-recurring items.

** Before tax, amortisation and non-recurring items.

*** Restated for the disposal of the Floors business.

Although sales in the six months ended 31 May 2009 were significantly lower than in the same period of 2008, with February representing the low point, the Group saw an improvement during the most recent quarter. The pattern of greater stability in sales is being experienced in the majority of our end-markets, with civil engineering, carpet tiles and selected building products performing relatively strongly, although sales into the automotive and truck markets (representing only some 14% of sales in 2008) continued at depressed levels. Sales in the Middle East and Asia were comparatively strong.

Total sales for the period fell 11% to £139.5m (2008: £157.5m). Sales in the period included the benefit of six months' contribution from MTX, our technical coated fabrics business, compared to five months last year (2008: £8.8m). Reported sales were also improved during the half year due to the benefits from translation of a weaker sterling (£30.6m).

Operating profit before amortisation and non-recurring items fell to £9.1m compared to £11.1m in the same period last year.

The decline in operating profits before amortisation and non-recurring items was mitigated through a combination of significantly lower raw material prices and prompt decisive action to reduce costs, which enabled us to hold operating margins at 6.5% compared to 7.0% in the prior year.

Overall, normalised profit was down 14% to £5.1m (2008: £5.9m).

The Group incurred £5.0m of non-recurring costs to restructure and reduce the cost base of the business and a further £2.2m to terminate certain of our bank drawings and access the lower ongoing levels of LIBOR.

The lower profit, combined with the increased number of shares arising from our Placing and Open Offer completed in March 2009, led to a fall in earnings per share. Statutory EPS was a loss of 1.77p (2008: profit of 3.57p). EPS before amortisation and non-recurring items fell to 1.75p (2008: 2.45p).

Placing and Open Offer, and Capital Reorganisation

On 11 March 2009 we completed a Placing and Open Offer of 6 open offer shares for every 7 existing ordinary shares to raise c.£30m net of expenses at a price of 25p. At the same time we implemented a Capital Reorganisation which resulted in the nominal value of each existing ordinary share being reduced from 25p to 5p.

Net debt 

Net debt at the end of May 2009 was £98.7m, a reduction from £104.5m at the end of November 2008. The cash inflow of c.£30m from the placing and open offer was largely offset by the cash costs of our restructuring programme, normal seasonal working capital movements and the impact of cash outflows on settled foreign currency swaps prior to the implementation of our Cross Currency Swap.

  

Dividends

The Board is not proposing to pay an interim dividend. However, as indicated at the time of the placing and open offer, the Board confirms its intention, subject to the Group's trading position and prevailing economic circumstances, to pay a final dividend for the year to 30 November 2009.

 

Current trading and outlook

The Group has seen an encouraging improvement in sales patterns during the second quarter and the period since.

In its business planning, however, the Board is only anticipating a slight recovery in year on year sales levels during the second half. Cost actions and raw material benefits will broadly mitigate the impact of the low year on year volumes. Due to our normal seasonal trends we expect a materially improved second half profit and, as a result, the Board's expectation of profitability for the year remains unchanged.

With strong, well invested market positions and having focused on a number of cost and efficiency initiatives, the Group is well placed to benefit from any further improvement in sales as and when economies around the world recover.

Duncan Clegg

Chairman

13 July 2009

Group Chief Executive's Review of Operations

Overview

Consistency of performance and selective investment in the future have been the key features of the last six months. The first half of 2009 represented a reassuringly robust year on year performance despite the most demanding trading conditions. Our operating margins' stability illustrates this clearly. We are also seeing the benefits of our strategic focus from disposing of Bonar Floors. Our diversity of end markets and geographies served has reduced exposure to any one specific customer grouping and we have continued to introduce new products and enter new markets. In this way we are doing everything possible to ensure an acceptable 2009 outcome whilst building a successful base for 2010 and beyond. Four features of this period are particularly noteworthy: decisive action on costs to protect profitability, maintenance and growth of strong market positions, selective investment in product development and geographic expansion, and the creation of a stronger balance sheet to facilitate prudent growth.

Decisive cost action

Decisive management action on cost has proved highly beneficial in sustaining profitability despite significant year on year volume declines. The Group now has 12% fewer employees compared to the half year in 2008 and short-time working has been consistently introduced wherever possible, most notably in our Belgian and German factories. The net effect of these and other actions has been an annualised saving of significantly in excess of £10m in our second quarter.

Growing our market positions

Our strategy of developing a portfolio of market leading products and diversifying into new end markets and geographies has also been a positive factor underpinning our performance. Our market strength and the quality of our propositions means we have been able to maintain and even grow our material margins, taking advantage of some reduction in our key raw material costs since their peak in the summer of 2008. Furthermore our growing presence in central Europe, the Middle East and Asia has been instrumental in offsetting the sharp market volume decreases experienced across western Europe and North America: for example, sales to the Middle East and Asia are now almost 10% of the Group total.

Selective investment in growth 

Whilst continuing to deliver margins consistent with last year we have continued to invest carefully for our future growth. The clearest illustration of this is the £2.3m investment made in the period in our start-up grass yarn joint venture in Abu Dhabi, Bonar Emirates Technical Yarns. This facility will be operational shortly and will both significantly reduce our production cost and position the business close to one of the most dynamic regional markets for artificial grass surfaces in the world. Investment in new products is also being maintained and I am pleased to report that some 15% of our sales come from products introduced within the last 12 months.

  

Balance sheet strength 

Action has been taken to protect our finances in the event of the macroeconomic environment worsening. Our balance sheet is both prudent given the financial environment, and will also allow us to invest for growth where there is a commercially compelling case. The successful equity placing in March raised c.£30m net of expenses and we are targeting in the medium term a net debt : EBITDA ratio of 2x as we believe this represents the right balance of prudence and efficiency. In addition to securing external financing, much effort is focused on internal cash generation, with prominent examples being the trade working capital of MTX being reduced by £14m in the last 12 months and capital expenditure in the period for our existing businesses totalling £3.0m, or less than half of depreciation.

Operational performance

Our Technical Coated Fabrics business, MTX, performed creditably to deliver an operating margin of 6.4% (2008: 9.4%). This was achieved despite a virtual halving of its major market, flexible side curtains for European trailers. Significant work on its cost base and new product launches for its architectural and printed screen markets were instrumental in delivering the half year result. Our integration activities continue to make good progress and the senior team has been strengthened further, with both senior financial and commercial appointments.

Our Performance Technical Textiles businesses performed very satisfactorily in most areas and maintained 2008's operating margin of over 8% (2008: 8.2%) despite volume decline. A particularly strong margin performance from the Fabrics and Colbond businesses in the second quarter offset a disappointing sales performance in Technical Yarns as the artificial grass market remains very subdued. These businesses have benefited from lower raw material costs, a reduced manufacturing cost base and expansion into new applications such as filtration and "green" buildings. Core end markets such as civil engineering have, as expected, proved more stable as spend on infrastructure is being maintained globally.

 

Paul FormanGroup Chief Executive13 July 2009

  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 their 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.

LOW & BONAR PLC

Condensed consolidated Income Statement 

	Six months ended			Six months ended			Year ended
	31 May 2009 Unaudited			31 May 2008 Restated 1 Unaudited			30 November 2008
	Before amortisation and non-recurring items	Amortisation and non-recurring items	Total	Before amortisation and non-recurring items	Amortisation and non-recurring items	Total	Before amortisation and non-recurring items	Amortisation and non-recurring items	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	139.5	-	139.5	157.5	-	157.5	335.2	-	335.2
Operating profit	9.1	(8.7)	0.4	11.1	(2.9)	8.2	26.7	(7.6)	19.1
Non-operating expenses	-	-	-	-	-	-	-	(6.2)	(6.2)
Financial income	7.3	-	7.3	1.1	-	1.1	10.6	-	10.6
Financial expense	(11.3)	(2.2)	(13.5)	(6.3)	-	(6.3)	(21.3)	-	(21.3)
Net financing costs	(4.0)	(2.2)	(6.2)	(5.2)	-	(5.2)	(10.7)	-	(10.7)
Profit/(loss) before taxation	5.1	(10.9)	(5.8)	5.9	(2.9)	3.0	16.0	(13.8)	2.2
Taxation	(1.4)	3.0	1.6	(2.0)	0.8	(1.2)	(4.7)	2.1	(2.6)
Profit/(loss) after taxation	3.7	(7.9)	(4.2)	3.9	(2.1)	1.8	11.3	(11.7)	(0.4)
Profit/(loss) for the year from continuing operations	3.7	(7.9)	(4.2)	3.9	(2.1)	1.8	11.3	(11.7)	(0.4)
Profit for the year from discontinued operations	-	0.4	0.4	4.6	(0.8)	3.8	6.3	54.5	60.8
Profit/(loss) for the period	3.7	(7.5)	(3.8)	8.5	(2.9)	5.6	17.6	42.8	60.4
Attributable to
Equity holders of the Company	3.8	(7.5)	(3.7)	8.4	(2.9)	5.5	17.7	42.8	60.5
Minority interest	(0.1)	-	(0.1)	0.1	-	0.1	(0.1)	-	(0.1)
	3.7	(7.5)	(3.8)	8.5	(2.9)	5.6	17.6	42.8	60.4
Earnings per share
Continuing operations
Basic	1.75p		(1.95)p	2.45p		1.11p	7.37p		(0.20)p
Diluted	1.74p		(1.95)p	2.41p		1.09p	7.19p		(0.20)p
Discontinued operations
Basic	-		0.18p	2.99p		2.46p	4.10p		39.65p
Diluted	-		0.18p	2.94p		2.42p	4.00p		38.70p
Total
Basic	1.75p		(1.77)p	5.44p		3.57p	11.47p		39.45p
Diluted	1.74p		(1.77)p	5.35p		3.51p	11.19p		38.50p

1- Restated following the disposal of the Floors Division (note 8)

LOW & BONAR PLC

Condensed Consolidated Group Balance Sheet 

		31 May 2009 Unaudited	31 May 2008 Unaudited	30 November 2008
		£m	£m	£m
Non-current assets
Goodwill		86.6	99.3	82.3
Intangible assets		56.0	61.7	56.5
Property, plant and equipment		126.8	129.3	125.8
Investment in associate		0.4	0.2	0.3
Deferred tax assets		3.9	4.4	2.7
		273.7	294.9	267.6
Current assets
Inventories		69.9	93.4	73.8
Trade and other receivables		66.0	98.5	72.2
Derivative assets		0.4	0.8	2.0
Cash and cash equivalents		18.0	9.8	27.5
		154.3	202.5	175.5
Current liabilities
Interest bearing loans and borrowings		9.2	12.7	16.0
Current tax liabilities		4.9	8.0	8.4
Trade and other payables		52.0	93.7	74.4
Provisions		2.8	-	2.3
Derivative liabilities		30.3	9.1	15.2
		99.2	123.5	116.3
Net current assets		55.1	79.0	59.2
Total assets less current liabilities		328.8	373.9	326.8
Non-current liabilities
Interest bearing loans and borrowings		107.5	205.3	116.0
Deferred tax liabilities		28.5	27.0	28.3
Post-employment benefits		27.1	9.7	11.9
Provisions		5.8	-	6.0
Other payables		0.2	1.5	0.1
		169.1	243.5	162.3
Net assets		159.7	130.4	164.5
Equity attributable to equity holders of the parent
Share capital		45.3	38.5	38.6
Reserves		109.2	88.5	121.2
Total equity shareholders' funds		154.5	127.0	159.8
Minority interests		5.2	3.4	4.7
Total equity		159.7	130.4	164.5

  LOW & BONAR PLC

Condensed Consolidated Cash Flow Statement

		Six months	Six months	Year
		ended	ended	Ended
		31 May 2009 Unaudited	31 May  2008 Unaudited	30 November 2008
		£m	£m	£m
(Loss)/profit for the period from continuing operations		(4.2)	1.8	(0.4)
Profit for the period from discontinued operations		0.4	3.8	60.8
(Loss)/profit for the period		(3.8)	5.6	60.4
Adjustments for:
Depreciation		6.7	7.1	13.6
Impairment		0.6	-	-
Amortisation		3.7	3.4	7.0
Income tax (credit)/expense		(1.6)	2.4	6.6
Net financing costs		6.2	5.2	10.8
(Increase)/decrease in working capital		(4.0)	(16.7)	7.5
Gain on disposal of property, plant and equipment		-	-	(0.7)
Gain on disposal of discontinued operations		-	-	(55.9)
Equity-settled share-based payment		0.4	0.7	1.4
Other		-	0.1	-
Cash inflow from operations		8.2	7.8	50.7
Net financing costs paid		(6.6)	(3.1)	(8.7)
Tax paid		(3.1)	(1.8)	(5.0)
Pension cash contributions in excess of operating charge		-	(1.7)	(12.1)
Net cash (outflow)/inflow from operating activities		(1.5)	1.2	24.9
Acquisition of subsidiaries, net of cash acquired		(2.8)	(128.2)	(132.9)
Acquisition of property, plant and equipment		(5.3)	(7.5)	(16.8)
Intangible assets purchased		(0.5)	(0.8)	(1.4)
Finance lease capital repayments		(0.1)	(0.2)	(0.3)
Disposal of discontinued operations, net of cash disposed of		(0.5)	-	114.7
Disposal of property, plant and equipment		-	0.1	2.2
Net cash outflow from investing activities		(9.2)	(136.6)	(34.5)
Proceeds of share issues		30.1	-	0.1
Repayment of borrowings		(19.0)	-	-
Inflow from new borrowings		-	159.9	68.2
External debt disposed with subsidiaries		-	-	1.8
Movement in cash flow hedges		(10.6)	-	(33.5)
Equity dividends paid		-	(4.8)	(7.7)
Net cash inflow from financing activities		0.5	155.1	28.9
Net cash (outflow)/inflow		(10.2)	19.7	19.3
Cash and cash equivalents at start of period		27.5	5.8	5.8
Foreign exchange differences		0.7	(15.7)	2.4
Cash and cash equivalents at end of period		18.0	9.8	27.5

  LOW & BONAR PLC

Condensed Consolidated Statement of Recognised Income and Expense

		Six months	Six months	Year
		ended	ended	ended
		31 May 2009	31 May 2008	30 November 2008
		£m	£m	£m
Foreign exchange translation differences		(17.3)	0.1	(4.0)
Deferred tax on share-based payment		-	0.1	(0.2)
Actuarial loss on defined benefit pension scheme		(14.3)	(3.4)	(15.7)
Deferred tax on defined benefit pension scheme		-	1.1	0.5
Net expense recognised directly in equity		(31.6)	(2.1)	(19.4)
(Loss)/profit for the period from continuing operations		(4.2)	1.8	(0.4)
Profit for the period from discontinued operations		0.4	3.8	60.8
Total recognised (expense)/income for the period		(35.4)	3.5	41.0
Attributable to:
Equity holders of the parent		(35.8)	3.1	39.8
Minority interest		0.4	0.4	1.2
		(35.4)	3.5	41.0

Reconciliation of changes in Shareholders' Equity

		Six months	Six months	Year
		ended	ended	ended
		31 May 2009	31 May 2008	30 November 2008
		£m	£m	£m
Shareholders' Equity at start of period		159.8	128.0	128.0
Total recognised (expense)/income for the period		(35.8)	3.1	39.8
Foreign exchange translation differences recycled from reserves		-	-	(2.3)
Dividends paid to ordinary shareholders		-	(4.8)	(7.7)
Ordinary shares issued		30.1	-	-
Share-based payment		0.4	0.7	2.0
Net (decrease)/increase in shareholders' funds		(5.3)	(1.0)	31.8
Shareholders' Equity at end of period		154.5	127.0	159.8

  

LOW & BONAR PLC

Responsibility Statement 

 

By order of the Board By order of the Board

PA Forman  KH Higginson

Group Chief Executive  Group Finance Director

  LOW & BONAR PLC

Notes on Interim Report 2009 

1. Segmental information for the six months ended 31 May 2009

Following the disposal of the Floors Division in September 2008, the Group's activities are focused on two areas of activity in the international performance materials industry:

Technical Coated Fabrics - the production and supply of technical coated fabrics for use in the transport, print and architectural markets

Performance Technical Textiles - including woven and non-woven fabrics and yarns serving, inter alia, the civil engineering, carpet backing, leisure and horticultural markets.

Until November 2008, these activities were reported as a single division, Technical Textiles. From 1 December 2008, these activities have been managed and in future will be reported as separate units. The comparative information for the six months ended 31 May 2008 and the year ended 30 November 2008 has been restated to accord with the new presentation.

Primary segment - Business	Technical Coated Fabrics	Performance Technical Textiles	Central	Total
	£m	£m	£m	£m
Revenue - Continuing operations	45.4	94.1	-	139.5
Operating profit before amortisation and non-recurring items	2.9	7.6	(1.4)	9.1
Amortisation	(1.6)	(2.1)	-	(3.7)
Operating profit before non-recurring items	1.3	5.5	(1.4)	5.4
Non-recurring items	(1.1)	(3.2)	(0.7)	(5.0)
Operating profit	0.2	2.3	(2.1)	0.4
Non-operating expenses - non-recurring items				-
Net financing costs				(4.0)
Net financing costs - non-recurring				(2.2)
Loss before taxation				(5.8)
Taxation				1.6
Loss for the period from continuing operations				(4.2)
Profit for the period from discontinued operations				0.4
				(3.8)
Capital expenditure - Continuing operations	0.4	5.4	-	5.8
Depreciation and impairment - Continuing operations	1.8	5.4	0.1	7.3
Segment assets	158.3	242.4	-	400.7
Segment liabilities	(15.0)	(35.2)	-	(50.2)
Segment net assets	143.3	207.2	-	350.5
Unallocated assets and liabilities				(92.1)
Cash and cash equivalents				18.0
Interest bearing borrowings				(116.7)
Group net assets				159.7

  

Secondary segment - Geography
		Europe £m	North America £m	Middle East and Asia £m	Unallocated £m	Total £m
Revenue - Continuing operations		114.0	21.7	3.8	-	139.5
Operating profit before non-recurring items		4.3	2.8	(0.3)	(1.4)	5.4
Non-recurring items						(5.0)
Operating profit						0.4
Non-operating expenses - non-recurring items						-
Net financing costs						(4.0)
Net financing costs - non-recurring						(2.2)
Loss before taxation						(5.8)
Taxation						1.6
Loss for the period from continuing operations						(4.2)
Profit for the period from discontinued operations						0.4
						(3.8)
Capital expenditure - Continuing operations		2.9	-	2.9	-	5.8
Segment assets		355.8	32.7	12.2	-	400.7
Segment liabilities		(46.0)	(3.4)	(0.8)	-	(50.2)
Segment net assets		309.8	29.3	11.4	-	350.5
Unallocated assets and liabilities						(92.1)
Cash and cash equivalents						18.0
Interest bearing borrowings						(116.7)
Group net assets						159.7

Segmental information for the six months ended 31 May 2008 (restated)

Primary segment - Business	Technical Coated Fabrics	Performance Technical Textiles	Central	Total
	£m	£m	£m	£m
Revenue - Continuing operations	48.9	108.6	-	157.5
Operating profit before amortisation and non-recurring items	4.6	8.9	(2.4)	11.1
Amortisation	(1.1)	(1.8)	-	(2.9)
Operating profit before non-recurring items	3.5	7.1	(2.4)	8.2
Non-recurring items	-	-	-	-
Operating profit	3.5	7.1	(2.4)	8.2
Non-operating expenses - non-recurring items				-
Net financing costs				(5.2)
Profit before taxation				3.0
Taxation				(1.2)
Profit for the period from continuing operations				1.8
Profit for the period from discontinued operations				3.8
				5.6

  

			Technical Coated Fabrics £m		Performance Technical Textiles £m		Central  £m	Total £m
Capital expenditure - Continuing operations			1.0		4.3		-	5.3
Capital expenditure - Discontinued operations								3.3
Capital expenditure - Total								8.6
Depreciation - Continuing operations			1.6		4.3		-	5.9
Depreciation - Discontinued operations								1.2
Depreciation - Total								7.1
Segment assets			159.8		237.9		-	397.7
Segment liabilities			(14.3)		(45.1)		-	(59.4)
Segment net assets - Continuing operations			145.5		192.8		-	338.3
Segment net assets - Discontinued operations								55.0
Unallocated assets and liabilities								(54.7)
Cash and cash equivalents								9.8
Interest bearing borrowings								(218.0)
Group net assets								130.4
Secondary segment - Geography
		Europe £m		North America £m		Middle East and Asia £m	Unallocated £m	Total £m
Revenue - Continuing operations		131.0		23.0		3.5	-	157.5
Operating profit before non-recurring items		9.1		1.5		-	(2.4)	8.2
Non-recurring items								-
Operating profit								8.2
Non-operating expenses - non-recurring items								-
Net financing costs								(5.2)
Profit before taxation								3.0
Taxation								(1.2)
Profit for the period from continuing operations								1.8
Profit for the period from discontinued operations								3.8
								5.6
Capital expenditure - Continuing operations		4.1		1.0		0.2	-	5.3
Capital expenditure - Discontinued operations		3.3		-		-	-	3.3
Capital expenditure - Total		7.4		1.0		0.2	-	8.6
Segment assets		358.8		30.0		8.9	-	397.7
Segment liabilities		(55.2)		(3.6)		(0.6)	-	(59.4)
Segment net assets - Continuing operations		303.6		26.4		8.3	-	338.3
Segment net assets - Discontinued operations								55.0
Unallocated assets and liabilities								(54.7)
Cash and cash equivalents								9.8
Interest bearing borrowings								(218.0)
Group net assets								130.4

Segmental information for the year ended 30 November 2008

Primary segment - Business	Technical Coated Fabrics	Performance Technical Textiles	Central	Total
	£m	£m	£m	£m
Revenue - Continuing operations	105.3	229.9	-	335.2
Operating profit before amortisation and non-recurring items	12.3	19.8	(5.4)	26.7
Amortisation	(2.6)	(3.6)	-	(6.2)
Operating profit before non-recurring items	9.7	16.2	(5.4)	20.5
Non-recurring items				(1.4)
Operating profit				19.1
Non-operating expenses - non-recurring items				(6.2)
Net financing costs				(10.7)
Profit before taxation				2.2
Taxation				(2.6)
Loss for the year from continuing operations				(0.4)
Profit for the year from discontinued operations				60.8
				60.4
Capital expenditure - Continuing operations	4.2	8.7	0.1	13.0
Capital expenditure - Discontinued operations				5.2
Capital expenditure - Total				18.2
Depreciation - Continuing operations	2.7	9.0	0.1	11.8
Depreciation - Discontinued operations				1.8
Depreciation - Total				13.6
Segment assets	162.8	246.9	-	409.7
Segment liabilities	(19.2)	(47.3)	-	(66.5)
Segment net assets - Continuing operations	143.6	199.6	-	343.2
Unallocated assets and liabilities				(74.2)
Cash and cash equivalents				27.5
Interest bearing borrowings				(132.0)
Group net assets				164.5

  

Secondary segment - Geography
		Europe £m	North America £m		Middle East and Asia £m		Unallocated £m	Total £m
Revenue - Continuing operations		276.5	51.0		7.7		-	335.2
Operating profit before non-recurring items		23.6	2.7		0.2		(6.0)	20.5
Non-recurring items								(1.4)
Operating profit								19.1
Non-operating expenses - non-recurring items								(6.2)
Net financing costs								(10.7)
Profit before taxation								2.2
Taxation								(2.6)
Loss for the year from continuing operations								(0.4)
Profit for the year from discontinued operations								60.8
								60.4
		Europe £m	North America £m		Middle East and Asia £m		Unallocated £m	Total £m
Capital expenditure - Continuing operations		10.2	2.2		0.6		-	13.0
Capital expenditure - Discontinued operations		5.2	-		-		-	5.2
Capital expenditure - Total		15.4	2.2		0.6		-	18.2
Segment assets		363.8	35.7		10.2			409.7
Segment liabilities		(60.4)	(5.5)		(0.6)			(66.5)
Segment net assets - Continuing operations		303.4	30.2		9.6			343.2
Unallocated assets and liabilities								(74.2)
Cash and cash equivalents								27.5
Interest bearing borrowings								(132.0)
Group net assets								164.5

2.  General information

Low & Bonar PLC is a Company domiciled in the United Kingdom. The interim condensed consolidated financial statements (the "interim financial statements") of the Company as at and for the six months ended 31 May 2009 comprise the Company and its subsidiaries (together the "Group") and the Group's interests in its associates. The consolidated financial statements of the Group as at and for the year ended 30 November 2008 are available on request from the Company's registered office or www.lowandbonar.com.

  

3. Basis of preparation

The interim financial statements are prepared in accordance with IAS 34, 'Interim Financial Reporting' as endorsed and adopted for use in the European Union. This interim condensed consolidated financial information has not been audited or reviewed by the Group's auditors and the information has been prepared on the basis of accounting policies consistent with those applied in the consolidated financial statements for the year ended 30 November 2008 except as noted below.

The following Interpretations and Amendments are effective for the first time for the year ending 30 November 2009:

IFRIC 11, IFRS 2, Group and Treasury Share Transactions, provides guidance on whether share-based payment transactions, involving treasury shares or group entities should be accounted for as equity-settled or cash-settled share-based payment transactions.

Amendments to IAS 39, Financial Instruments: Recognition and Measurement and IFRS 7, Financial Instruments: Disclosures, permit the reclassification of some financial instruments under limited circumstances and require additional disclosures in the event that a reclassification is made.

IFRIC 13, Customer Loyalty Programmes addresses accounting for loyalty award credits provided to customers who buy goods or services. 

These Interpretations and Amendments do not have any impact on the Group's accounts.

In addition, the Group has adopted the amendments to IAS 23 Borrowing Costs which require capitalisation of borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. There is no longer an option to immediately expense those borrowing costs. Whilst this represents a change in the Group's accounting policy, the application of the revised standard is prospective. This change is not considered to be significant although additional disclosures will be required in the Group's financial statements for the year ending 30 November 2009.

The interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements for the Group as at and for the year ended 30 November 2008.

The comparative figures for the financial year ended 30 November 2008 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was i) unqualified, ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 

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 valuation to fair value of certain financial instruments. 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. 

Except as described below, in preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 30 November 2008. 

There have been no related party transactions or changes in related party transactions described in the latest annual report that could have a material effect on the financial position or performance of the Group in the first six months of the financial year.

The Group's business has a slight seasonal bias towards the second half of the financial year due to higher levels of infrastructure and civil engineering spend in the Northern hemisphere summer period.

This interim report was approved by the board of directors on 13 July 2009.

4. Taxation

Taxation on the operating profit after interest has been provided at a rate of 29% for the six months ended 31 May 2009 (2008: 30%, including taxation on discontinued operations) which is the estimated rate of tax for the full year.

5. Dividend

In the light of the Placing and Open Offer, a final dividend was not recommended for the year ended 30 November 2008. The Board confirms its intention, subject to the Group's trading position and prevailing economic circumstances, to resume dividend payments for the year ending 30 November 2009. The Board is not proposing to pay an interim dividend this year and will assess the level of dividend for the full year at that time.

 

6. Earnings per share

Basic earnings per share and earnings per share before amortisation and non-recurring items are based on the weighted average number of ordinary shares in issue during the half year. The calculation of fully diluted earnings per share is based on the weighted average number of ordinary shares in issue plus the dilutive effect of outstanding share options and the Low & Bonar 2003 

Long-Term Incentive Plan (the '2003 LTIP') awards (to the extent to which performance criteria had been achieved at 31 May 2009). 

Capital reorganisation

On 11 March 2009, the Company's Ordinary Share capital was reorganised by means of a Capital Reorganisation involving: (i) the subdivision and reclassification of each issued Ordinary Share into one New Ordinary Share of five pence and one Deferred Share of 20 pence; and (ii) the subdivision of each authorised but unissued Ordinary Share into five New Ordinary Shares of five pence each. On completion of the Capital Reorganisation, each Ordinary Shareholder held one New Ordinary Share and one Deferred Share for each Ordinary Share previously held.

  

Shares Issued During the Year

During the period the Company raised £29.9m, net of costs by means of a fully underwritten Placing and Open Offer of 132,489,559 shares. The Offer Price was 25p.

Weighted average number of shares and diluted weighted average number of shares are set out below. 

		31 May 2009	31 May 2008	30 November 2008
		(millions)	(millions)	(millions)
Weighted average number of shares		212.597	153.786	153.740
Effect of dilutive items		0.550	2.627	3.807
Diluted weighted average number of shares		213.147	156.413	157.547

The directors consider that the calculation of earnings per share before amortisation and non- recurring items from continuing operations gives a more meaningful indication of the underlying performance. For the six months ended 31 May 2009 this figure was 1.75p per share, (May 2008: 2.45p; November 2008: 7.37p).

7. Non-recurring items

			Six months	Six months	Year
			ended	ended	ended
			31 May 2009	31 May 2008	30 November 2008
			£m	£m	£m
	Amounts charged to operating profit
	Post acquisition integration and restructuring of MTX		-	-	2.3
	Profit on disposal of land		-	-	(0.9)
	Restructuring costs including asset impairments		5.0	-	-
			5.0	-	1.4
	Amounts charged to non-operating expenses
	Pensions equalisation costs		-	-	6.2
	Amounts charged to finance costs
	Loan break fees		2.2	-	-

During the period, costs of £5.0m were incurred to restructure and reduce the cost base of the business. Restructuring programmes have taken place within Technical Coated Fabrics, Performance Technical Textiles and within central head office functions. In addition, loan break fees of £2.2m were incurred to terminate certain of our bank drawings.

In the period, legal proceedings have been served in respect of the pensions equalisation issue for which a provision was created during 2008. There have been no changes in our best estimate of the pensions equalisation liability.

  

8. Discontinued operations

The discontinued operations relate to the Floors Division, which was sold on 30 September 2008 for a debt-free, cash-free consideration of £123.0m. The detailed analysis of the discontinued operations is as follows:

		Six months	Six months	Year
		ended	ended	ended
		31 May 2009	31 May 2008	30 November 2008
		£m	£m	£m
Revenue		-	55.9	96.0
Expenses		-	(49.8)	(85.6)
Operating profit before amortisation and non-recurring items		-	6.1	10.4
Amortisation		-	(0.5)	(0.8)
Non-recurring items		0.4	(0.6)	(0.6)
Operating profit		0.4	5.0	9.0
Net finance costs		-	-	(0.1)
Profit on ordinary activities before tax		0.4	5.0	8.9
Profit attributable to disposal		-	-	55.9
Profit before tax		0.4	5.0	64.8
Attributable tax expense		-	(1.2)	(4.0)
Net profit attributable to discontinued operations		0.4	3.8	60.8

During the period ended 31 May 2009, a number of accruals for costs related to the disposal were released as they are no longer required.

9. Pensions and other post-retirement assets and liabilities

The Group operates a number of pension schemes in the UK and overseas. These are either defined benefit or defined contribution in nature. The assets of the schemes are held separately from those of the Group. 

  

The movement in the Group's UK and overseas defined benefit schemes' deficits in the six months ended 31 May 2009 is summarised below. 

	UK Schemes	Overseas Schemes	Six months ended 31 May 2009 Total	Six months ended 31 May 2008 Total	Year ended 30 November  2008 Total
	£m	£m	£m	£m	£m
Net liability at start of period	(4.4)	(7.5)	(11.9)	(4.8)	(4.8)
Arising on acquisition	-	-	-	(2.6)	(2.6)
Current service costs	(0.1)	(0.1)	(0.2)	(0.4)	(0.8)
Expected return on plan assets	3.5	0.2	3.7	4.2	8.5
Interest cost	(4.1)	(0.4)	(4.5)	(4.4)	(8.8)
Employer contributions	0.1	0.2	0.3	2.1	12.2
Actuarial losses	(14.2)	(0.1)	(14.3)	(3.4)	(15.7)
Arising on disposal	-	-	-	-	0.7
Curtailment gain	-	-	-	-	0.6
Exchange adjustments	-	(0.2)	(0.2)	(0.4)	(1.2)
Net liability at end of period	(19.2)	(7.9)	(27.1)	(9.7)	(11.9)

10. Mehler Texnologies ("MTX") acquisition

On 3 January 2008 the Group acquired 100% of the share capital of the individual companies within the MTX Group for €163.0 million on a cash-free, debt-free basis from Mehler AG. During the period to 31 May 2009, the acquisition accounting was finalised resulting in a £0.3 million increase in goodwill in respect of final fair value adjustments and costs of acquisition.

11. Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. Recent volatility in the financial markets has added to market uncertainty. The current global economic conditions create uncertainty particularly over the level of demand for the Group's products and the price of its raw materials. Limitations on the Group's ability to fund its financing requirements may rise given current credit market conditions. The Group's results continue to be exposed to foreign exchange risks associated with our international operations. Further information on the principal long-term risks and uncertainties of the Group is included in the latest annual report. The Directors still consider these risks and uncertainties to be appropriate.

The Directors have reviewed the Group's medium term forecasts along with possible changes in trading performance arising from these uncertainties to determine whether the Group's committed banking facilities are sufficient to support it's projected liquidity requirements, and whether the forecast earnings are sufficient to meet the covenants associated with the banking facilities.

The Group's committed banking facilities are due for renewal in December 2011 and no matters have been brought to the attention of the Directors to suggest that refinancing the facilities will not be possible at or before that date.

After making enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the interim financial statements.

ENDIR SFSFISSUSEFW

---

Related Shares:

LWB.L