4th Sep 2006 07:01
British Polythene Industries PLC04 September 2006 4 September 2006 BRITISH POLYTHENE INDUSTRIES PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2006 • Sales increase to £230 million (£226m) • Profit before tax £9.2 million (£10.1m) • Diluted earnings per share 25.01 p (28.13p) • Interim dividend maintained at 7p Commenting on the results and prospects, Cameron McLatchie, BPI Chairman said: "These results are in line with our pre-close update and have been affected byhigh raw material costs and, lower volumes, particularly in the UK. Marginsremain at reasonable levels and our European business continues to perform well.The challenging trading conditions have continued into the second half." Enquiries Cameron McLatchie, ChairmanJohn Langlands, Chief ExecutiveBritish Polythene Industries plc 01475 501000 Tim Spratt /Nicola BilesFinancial Dynamics 020 77831 3113 BRITISH POLYTHENE INDUSTRIES PLC INTERIM STATEMENT FOR THE 6 MONTHS ENDED 30 JUNE 2006 We indicated in our Pre-Close Trading Update on 30thJune that the outcome forthe first six months would be a little below the same period in 2005, due tolower volumes in certain sectors within the UK. The results confirm that thisis the case. RESULTS On turnover of £230 million, (2005: £226 million), our operating profit was£10.7 million, (2005: £12.2 million). Profit before tax was £9.2 million,(2005: £10.1 million). Fully diluted earnings per share were 25.0 pence, (2005:28.1 pence). These results were achieved despite a 6% drop in volumes in our business in theUK, where we experienced challenging trading conditions in the face of reduceddemand from many of our major customers, particularly industrial customersaffected by high energy costs. In addition, a colder spring affected our salesof agricultural and horticultural products. Our European business, which usually delivers the bulk of its earnings in thefirst half, did extremely well. Underpinned by the success of major capitalinvestments in recent years, the business enjoyed increased volumes and margins. The increase in Group turnover of just under 2%, achieved on volumes which fell3%, was the consequence of our ability to pass on higher raw material and energycosts to our customers. DIVIDEND The Board has declared a maintained interim dividend of 7 pence per ordinaryshare for the period to 30th June, 2006. This will be payable on 22nd November2006, to shareholders on the register at the close of business on 27th October2006. CASH FLOW AND BORROWINGS Despite the higher raw material costs, which have increased our investment inworking capital, our strong cash flow has reduced our borrowings by some £13million from this time last year. However, the potential for a reduction inworking capital, arising from any future drop in polymer prices, may still besome time away. PENSIONS We previously indicated that the Group was taking advice in relation to thedeficit in the Defined Benefit Pension Scheme. We are now discussing withmembers reduced benefit terms, alongside a £20 million additional cashcontribution by the Group, to be made over the next five years. Currently, wedo not anticipate that this will have any negative impact on earnings per share. EUROPEAN COMMISSION ENQUIRY AND REGULATORY MATTERS We announced on 30 June, in our Pre-Close Trading Update, that the EuropeanCommission had decided to close its files on the original investigation intoanti-competitive activities in Industrial Films. This is excellent news and theremoval of this uncertainty will allow us greater freedom going forward indeveloping the Group. We continue to ensure that we remain compliant with allcompetition legislation. Certain European polythene bag producers have complained to the EuropeanCommission, regarding product allegedly being dumped on the European market byproducers in the Peoples Republic of China (PRC). The Commission has indicatedan additional tariff of 8.6% duty on certain polythene bags imported from thePRC. This will affect certain bags that we currently import from our productionfacility in the PRC. We are exploring ways to minimise any impact on ourbusiness, and we are hopeful that we will not have to resort to legal means toresolve this issue. We also continue to make representations to the Scottish Parliament regardingthe Environmental Levy on Plastic Bags (Scotland) Bill, currently at Committeestage, which seeks to introduce a tax on certain plastic bags in Scotland.Despite overwhelming evidence that such a tax would have no environmental gains,and indeed would have the unintended consequence of damaging the environment,the polythene industry, including your Group, has had to expend considerableresources to fight against the prejudices of the misinformed who support thisBill. With the many challenges currently facing Scotland, one could think of amore useful focus for valuable parliamentary time. CURRENT TRADING AND PROSPECTS Trading continues to be very challenging and we have made a slow start to thesecond half. Many of our customers continue to report poor demand and theiroff-take of packaging is below last year. Other customers have down-gauged,making their product specification thinner, in an attempt to contain packagingcosts. We have been notified by our raw material suppliers of their intent to increaseprices again in September. Those suppliers who are not fully integrated back tothe wellhead are being squeezed by the increase in ethylene costs. It remains tobe seen if these feedstock costs will come down with the oil price or retain alink to the even more volatile gas price. As demand for feedstock for plasticproducts continues to grow in the Far East, we cannot expect any relief fromthese prices until new ethylene capacity comes on-stream and this may take yearsrather than months. Faced with the twin challenges of record high raw material costs and poordemand, it would be rash of us to predict that we will approach the results weachieved in the second half last year. Nevertheless, as an efficient producerwith a strong market position and the ability to generate significant cash flow,we are relatively well placed to address these challenges. British Polythene Industries PLCConsolidated income statementFor the six months ended 30 June 2006 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £m NoteTurnover 2 229.9 225.8 410.2 Profit from operations 3 10.7 12.2 23.3 Borrowing costs (1.4) (1.8) (3.2) Net retirement benefit financing 4 (0.1) (0.3) (0.4) Net financing costs (1.5) (2.1) (3.6) Profit before tax 9.2 10.1 19.7 Tax 5 (2.6) (2.8) (5.4) Profit for the period 6.6 7.3 14.3 Attributable to:Equity holders of the parent 6.6 7.3 14.2 Minority interests - equity - - 0.1 6.6 7.3 14.3 Earnings per shareBasic 7 25.37 28.37 55.20Diluted 7 25.01 28.13 54.28 The above activities relate to continuing operations. Consolidated statement of recognised income and expenseFor the six months ended 30 June 2006 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £m Profit for the year 6.6 7.3 14.3 Cash flow hedges: effective portion of net changes in fair value (0.3) - 0.3Actuarial gain / (loss) on defined benefit pension scheme 10.5 (4.2) (11.8) Tax on items taken directly to equity (3.2) 1.3 3.5 Movement on translation of overseas undertakings and related (0.1) - 0.2borrowings Net income / (expense) recognised directly in equity 6.9 (2.9) (7.8) Total recognised income and expense for the year 13.5 4.4 6.5Attributable to:Equity holders of the parent 13.5 4.4 6.4Minority interests - equity - - 0.1 13.5 4.4 6.5 British Polythene Industries PLCConsolidated balance sheetAt 30 June 2006 30 June 30 June 31 2006 2005 December (unaudited) (unaudited) 2005 Restated see note 8 £m £m £m NoteNon-current assetsGoodwill 0.3 0.3 0.3Other intangible assets 1.4 2.0 1.7Property, plant and equipment 79.4 80.7 79.2Investments 0.1 0.1 0.1Deferred tax assets 9.0 9.8 12.2 90.2 92.9 93.5Current assetsInventories 46.0 45.6 55.3Trade and other receivables 88.6 82.5 63.2Cash at bank 1.0 1.1 0.9 135.6 129.2 119.4Current liabilitiesBank overdraft 8.6 17.3 5.8Other loans and borrowings 1.0 1.1 1.0Trade and other payables 74.9 65.8 64.9Current tax liabilities 3.2 3.4 3.8 87.7 87.6 75.5 Net current assets 47.9 41.6 43.9 Total assets less current liabilities 138.1 134.5 137.4 Non-current liabilitiesOther loans and borrowings 41.5 45.8 41.2Retirement and employee benefit obligations 8 45.2 48.7 56.0Deferred tax liabilities 2.3 2.2 2.3Deferred government grants 1.1 0.8 0.7 90.1 97.5 100.2 Net assets 48.0 37.0 37.2 EquityIssued share capital 9 6.6 6.5 6.5Share premium account 24.7 23.8 23.8Other reserves 7.5 7.0 7.9Retained earnings 9.0 (0.4) (1.2)Total equity attributable to equity holders 47.8 36.9 37.0 of the parentMinority interests 0.2 0.1 0.2 Total equity 48.0 37.0 37.2 British Polythene Industries PLCConsolidated cash flow statementFor the six months ended 30 June 2006 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £m NoteProfit from operations 10.7 12.2 23.3 Amortisation of intangible assets 0.4 0.5 0.9 Depreciation of property, plant and equipment 6.1 6.0 12.4 IFRS 2 charge in relation to equity settled transactions 0.2 - 0.3Gain on disposal of property, plant and equipment - - (0.9)Adjustment relating to pensions (0.4) (0.5) (0.9) Operating cash flows before movements in working capital 17.0 18.2 35.1 Decrease in inventories 9.3 12.2 2.7 Increase in trade and other receivables (25.7) (21.1) (1.4)Increase / (decrease) in payables 10.6 (1.5) (2.6) Movements in working capital (5.8) (10.4) (1.3) Cash generated from operations 11.2 7.8 33.8 Interest paid (1.4) (1.8) (3.2) Income taxes paid (3.2) (1.8) (4.0) Net cash from operating activities 6.6 4.2 26.6 Investing activitiesProceeds from sale of property, plant and equipment 0.4 0.2 2.7Purchase of property, plant and equipment (6.9) (8.3) (14.0)Purchase of intangible assets (0.1) (0.2) (0.3)Net cash used in investing activities (6.6) (8.3) (11.6) Net cash flows before financing - (4.1) 15.0 Financing activitiesDividends paid 6 (3.9) (3.6) (5.4)Proceeds from the issue of share capital 1.0 0.1 0.1Repurchase of ordinary shares - (0.4)Increase / (decrease) in bank loans 0.8 4.1 (0.9)Repayment of obligations under finance leases (0.5) (0.5) (1.1)Net cash from financing activities (2.6) 0.1 (7.7) Net (decrease) / increase in cash and cash equivalents (2.6) (4.0) 7.3 Cash and cash equivalents at beginning of period (4.9) (12.4) (12.4)Effect of foreign exchange rate changes (0.1) 0.2 0.2 Cash and cash equivalents at end of period (7.6) (16.2) (4.9) British Polythene Industries PLC Notes to the consolidated interim financial statements 1. Significant accounting policies British Polythene Industries PLC (the "Company") is a company domiciled andincorporated in the United Kingdom. The consolidated interim financialstatements ("interim statements") of the Company for the 6 months ended 30 June2006 incorporate the financial statements of the Company and its subsidiaries(together referred to as the "Group"). The interim report was authorised for issue by the directors on 1 September2006. The figures for the financial year ended 31 December 2005 are not the company'sstatutory accounts for that financial year. The statutory accounts for the yearended 31 December 2005, which were prepared in accordance with InternationalFinancial Reporting Standards ('IFRSs') as adopted by the EU, have been reportedon by the Company's auditors and delivered to the Registrar of Companies. Thereport of the auditors was (i) unqualified, (ii) included a reference touncertainty surrounding a Competition Directorate of the European Commissioninquiry and (iii) did not contain statements under section 237 (2) or (3) of theCompanies Act 1985. This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the company'spublished consolidated financial statements for the year ended 31 December 2005.Certain comparative figures as at 30 June 2005 have been reclassified to conformwith the final presentation adopted in the audited financial statements for theyear ended 31 December 2005. The interim statements are prepared on the historical cost basis except forderivative financial instruments and the assets of the defined benefit pensionscheme which are stated at their fair value. The preparation of the interim statements requires the directors to makejudgements, estimates and assumptions that affect the application of policiesand reported amounts of assets and liabilities, income and expenses. Theestimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making the judgementsabout carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates. 2. Segment reporting Segment information is presented in respect of the Group's geographicalsegments. Inter-segment pricing is determined on an arms length basis. Segment results include items directly attributable to the segment as well asthose that can be allocated on a reasonable basis. Primary segment - Geographical The Group operates in two principal geographic regions - "UK & Ireland" and "Continental Europe". UK & Ireland includes all of the UK manufacturing andmerchanting activities along with the Irish sales offices which distributepredominantly UK manufactured products. It also includes the manufacturingoperation in China from which substantially all of the output is exported forsale by the Group in the UK. Continental Europe comprises the manufacturing andmerchanting activities located in Belgium, Holland and France. These two regionsare the basis on which the Group reports its primary segment information. British Polythene Industries PLC Notes to the consolidated interim financial statements Segment information about these regions is presented below. Segment information by UK & Ireland Continental Europe Eliminations Consolidatedgeographic region (unaudited) (unaudited) (unaudited) (unaudited) 6 months ended 30 June 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £mTurnoverExternal sales 176.2 177.1 53.7 48.7 - 229.9 225.8Inter-segment sales 0.8 1.6 0.1 0.2 (0.9) (1.8) - -Total turnover 177.0 178.7 53.8 48.9 (0.9) (1.8) 229.9 225.8 Profit from operations 5.3 8.4 5.4 3.8 - - 10.7 12.2 Net financing costs (1.5) (2.1) Profit before tax 9.2 10.1Tax (2.6) (2.8) Profit for the year 6.6 7.3 Segment information by UK & Ireland Continental Europe Eliminations Consolidatedgeographic region Year ended 31 December 2005 2005 2005 2005 £m £m £m £mTurnoverExternal sales 330.5 79.7 - 410.2Inter-segment sales 2.3 0.4 (2.7) - Total turnover 332.8 80.1 (2.7) 410.2 Profit from operations 17.8 5.5 - 23.3 Net financing costs (3.6) Profit before tax 19.7Tax (5.4) Profit for the year 14.3 3. Profit from operations 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £mProfit from operations is stated after charging:Restructuring costs relating to closures 0.3 1.3 1.1Profit on disposal of closed site - - (0.5) 0.3 1.3 0.6 In the prior year interim statement restructuring costs of £1.3 million weredisclosed in the Income Statement. British Polythene Industries PLCNotes to the consolidated interim financial statements 4. Net retirement benefit financing 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £m Expected return on pension scheme assets 4.8 4.3 8.7Interest on pension liabilities (4.9) (4.6) (9.1) Net retirement benefit financing (0.1) (0.3) (0.4) 5. Tax Corporation tax for the interim period is charged at 28% (June 2005: 28%),representing the estimated annual effective tax rate for the full financialyear. 6. Dividend 6 months ended 30 June Year ended (unaudited) 31 December 2006 2005 2005 £m £m £mAmounts recognised as distributions to equity holders in theperiod:Final dividend for the year ended 31 December 2005 of 15.0p per share 3.9 - -Final dividend for the year ended 31 December 2004 of 14.0p per share - 3.6 3.6Interim dividend for the year ended 31 December 2005 of 7.0p per share - - 1.8 3.9 3.6 5.4 Proposed interim dividend for the year ending 31 December 2006 of 7.0p (2005: 7.0p) per share 1.8 1.8 - The proposed interim dividend of 7.0p (2005: 7.0p) per share will be paid on 22November 2006 to shareholders on the register at close of business on 27 October2006. The interim dividend was approved by the Board on 1 September 2006 and has notbeen included as a liability as at 30 June 2006. 7. Earnings per share The calculation of basic and diluted earnings per share at 30 June 2006 wasbased on the profit attributable to ordinary shareholders of £6.6 million (sixmonths ended 30 June 2005 - £7.3 million, full year 2005 - £14.2 million). 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December (unaudited) (unaudited) 2005Weighted average number of ordinary shares 000s 000s 000s Issued ordinary shares at 1 January 25,894 25,864 25,864Effect of shares issued 273 17 22Effect of own shares held (204) (148) (160) Weighted average number of ordinary shares 25,963 25,733 25,726 Effect of share options in issue 431 220 433 Diluted weighted average number of ordinary shares 26,394 25,953 26,159 British Polythene Industries PLCNotes to the consolidated interim financial statements 8. Retirement and employee benefit obligations 6 months ended 30 June Year ended 2006 2005 31 December (unaudited) (unaudited) 2005 £m £m £m Fair value of scheme assets 153.4 138.6 154.5Present value of scheme liabilities (197.0) (185.6) (208.8)Deficit in the British Polythene defined benefit pension scheme (43.6) (47.0) (54.3)Other employee benefit obligations (1.6) (1.7) (1.7)Retirement and employee benefit obligations (45.2) (48.7) (56.0)Related deferred tax asset 13.3 14.3 16.5 (31.9) (34.4) (39.5) Provision for retirement benefit obligations at 30 June has been calculated on asimilar basis as at the previous 31 December. The reduction in the schemedeficit in 2006 is mainly the result of an increase in the discount rate appliedto the scheme liabilities. Other employee obligations as at 30 June 2005 have been adjusted in line withthe audited financial statements as at 31 December 2005 to include a "Jubilee"provision in the Netherlands which provides for additional payments to employeeswith long service of £0.6 million (the related credit for deferred taxation of£0.2 million has been included within the deferred tax provision). This item wasincluded as an opening adjustment to reserves at 31 December 2004 under IFRS inthe accounts for the year to 31 December 2005. 9. Share capital Date of No of Issue SharesMovements in equity share capitalAt 31 December 2005 25,894,393Exercise of SAYE Options Various 4,276Exercise of Executive Share Options Various 435,000At 30 June 2006 26,333,669 At 30 June 2005 25,892,250 10. Contingent Liabilities On the 30 June 2006 we announced that the European Commission have decided toclose the files on the original investigation into anti competitive activitiesin Industrial Film. 11. Interim report Copies of the interim report which are being sent to all shareholders on 8September 2006 will be available at the Registered Office of the Company, OneLondon Wall, London, EC2Y 5AB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BPI.L