3rd Sep 2007 07:01
British Polythene Industries PLC03 September 2007 3 September 2007 BRITISH POLYTHENE INDUSTRIES PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007 • Sales of £226 million (2006: £230 million) • Profit before tax £8.8 million (2006: £9.2 million) • Diluted EPS 24.30p (2006: 25.01p) • Interim dividend maintained at 7.0p • Strategic acquisition of AT Films in Canada Commenting on the results and prospects, Cameron McLatchie, BPI Chairman said: "This is a satisfactory outcome for a period of challenging market conditionsand rising input costs. At this stage, we anticipate a reasonable outcome for the second half and forthe year as a whole, underpinned by the continuing sales of silage stretchwrap." EnquiriesCameron McLatchie, Chairman John Langlands, Chief Executive 01475 501000 Tim Spratt/ Nicola Biles Financial Dynamics 020 7831 3113 CHAIRMANS STATEMENT We indicated in our Pre-Close Trading Update on 27 June that the overall outcomefor the first six months would be a little below the same period in 2006. Theresults confirm that this is the case. This is a satisfactory outcome for aperiod of challenging market conditions and rising input costs. RESULTS On turnover of £226 million (2006: £230 million), our operating profit was £10.1million (2006: £10.7 million). Profit before tax was £8.8 million (2006: £9.2million). Fully diluted earnings per share were 24.30 pence (2006: 25.01 pence). These results were achieved on volumes broadly similar to last year and againsta background of small raw material price increases in every month. Sales ofsilage stretchwrap have been in line with the previous year and, unlike lastyear, we have continued to sell this product during the third quarter. DIVIDEND The Board has declared a maintained interim dividend of 7 pence per ordinaryshare for the period to 30 June 2007. This will be payable on 21 November 2007,to shareholders on the register at the close of business on 26 October 2007. CASH FLOW AND BORROWINGS We continue to manage our cash well and borrowings are in line with ourexpectations, despite the increased cost of raw materials. PENSIONS The projected deficit reduced to £22 million from £33 million at 31 December2006. We experienced reasonable appreciation on the funds' assets; but greaterbenefit came from the change in long term interest rates, which reduced thecalculation of our potential liabilities. On the advice of our actuaries, wehave revised our mortality expectations to reflect increasing longevity. ACQUISITION On Tuesday 21 August, we announced the acquisition of the AT Films business ofAT Plastics Inc (Canada), a subsidiary company of Celanese Corporation, for acash consideration of US$12 million subject to an adjustment to reflect the bookvalue of working capital at completion. The initial payment for working capitalwas US$11 million, which was included in the cash consideration of US$ 12million. AT Films manufactures polythene film products for the horticultural andagricultural markets, mainly in North America. The company has facilities inEdmonton and Westlock, Alberta, Canada and employs 65 people. In the lastfinancial year to 31 December 2006, AT Films sold 12,500 tonnes of polythenefilm products with an annual value of US$ 35 million. This acquisition enables us to progress our strategy of developing ourinternational agricultural and horticultural films business. In addition tooffering new geographic markets, AT Films brings new products to BPI including arange of large agricultural bags which are used to store silage and grain. Thestored grain is subsequently used as animal feed or as raw material in themanufacture of biofuels. We believe that there is significant opportunity toexpand sales of this product as global demand for biofuels increases. CURRENT TRADING AND PROSPECTS As indicated previously, trading conditions continue to be challenging. Much ofthe difficulty is the constant re-pricing of our products due to raw materialprice increases. We have had further increases at the start of the second half,but we are aware that raw material prices are flat in markets outside WesternEurope and we anticipate that the rate and frequency of increases must soonabate. As I indicated earlier in this statement, we have continued to sell silagestretchwrap in the third quarter. This is in marked contrast to last year wherewe had a very dry summer and sales had virtually stopped by the end of June.Despite the pressure on margins, due to raw material price increases, theadditional volume of sales of silage stretchwrap has ensured a better start tothe second half than last year. We will also exit 2007 with much lower stocks ofthis product than we had at the end of 2006, putting less pressure on pre-seasonsales in 2008. At this stage, we anticipate a reasonable outcome for the second half and forthe year as a whole, underpinned by the continuing sales of silage stretchwrap. British Polythene Industries PLCConsolidated income statementFor the six months ended 30 June 2007 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £m Note Turnover 2 226.0 229.9 414.2 Profit from operations 3 10.1 10.7 17.1 Borrowing costs (1.8) (1.4) (2.8)Net retirement benefit financing 4 0.5 (0.1) (0.3)Net financing costs (1.3) (1.5) (3.1) Profit before tax 8.8 9.2 14.0 Tax 5 (2.4) (2.6) (3.9) Profit for the period 6.4 6.6 10.1 Attributable to: Equity holders of the parent 6.4 6.6 10.1 Earnings per share Basic 7 24.41p 25.37p 38.79pDiluted 7 24.30p 25.01p 38.46p Consolidated statement of recognised income and expenseFor the six months ended 30 June 2007 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £mProfit for the period 6.4 6.6 10.1 Cash flow hedges: effective portion of net - (0.3) (0.3)changes in fair value Actuarial gain on defined benefit pension 9.1 10.5 17.4scheme Tax on items taken directly to equity (3.2) (3.2) (5.2)Movement on translation of overseas - (0.1) (0.2)undertakings and related borrowings Net income recognised directly in equity 5.9 6.9 11.7Total recognised income and expense for the 12.3 13.5 21.8period Attributable to: Equity holders of the parent 12.3 13.5 21.8 British Polythene Industries PLCConsolidated balance sheetAt 30 June 2007 30 June 30 June 31 2007 2006 December (unaudited) (unaudited) 2006 £m £m £m Note Non-current assets Goodwill 0.3 0.3 0.3Other intangible assets 1.5 1.4 1.8Property, plant and equipment 77.9 79.4 77.3Investments 0.1 0.1 0.1Deferred tax assets 2.3 9.0 5.9 82.1 90.2 85.4Current assets Inventories 47.2 46.0 59.5Trade and other receivables 83.8 88.6 60.5Cash at bank 0.6 1.0 0.5 131.6 135.6 120.5Current liabilities Bank overdraft 6.2 8.6 6.4Other loans and borrowings 1.0 1.0 1.0Trade and other payables 68.1 74.9 60.2Current tax liabilities 2.3 3.2 0.7 77.6 87.7 68.3 Net current assets 54.0 47.9 52.2 Total assets less current 136.1 138.1 137.6liabilities Non-current liabilities Other loans and borrowings 46.7 41.5 45.1Retirement and employee benefit 8 23.2 45.2 34.7obligations Deferred tax liabilities 2.5 2.3 2.5Deferred government grants 0.9 1.1 0.9 73.3 90.1 83.2 Net assets 62.8 48.0 54.4 Equity Issued share capital 9 6.6 6.6 6.6Share premium account 25.0 24.7 25.0Other reserves 7.4 7.5 7.4Retained earnings 23.6 9.0 15.2Total equity attributable to equity 62.6 47.8 54.2holders of the parent Minority interests 0.2 0.2 0.2 Total equity 62.8 48.0 54.4 British Polythene Industries PLCConsolidated cash flow statementFor the six months ended 30 June 2007 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £m Note Profit from operations 10.1 10.7 17.1 Amortisation of intangible assets 0.3 0.4 0.4Depreciation of property, plant and 6.1 6.1 12.3equipment IFRS 2 charge in relation to equity 0.3 0.2 0.3settled transactions Gain on disposal of property, plant (1.4) - (0.6)and equipment Adjustment relating to pensions (1.9) (0.4) (4.0)Operating cash flows before movements 13.5 17.0 25.5in working capital Decrease/ (increase) in inventories 12.3 9.3 (4.5)(Increase) / decrease in trade and (23.3) (25.7) 2.1other receivables Increase / (decrease) in payables 8.1 10.6 (3.7)Movements in working capital (2.9) (5.8) (6.1)Cash generated from operations 10.6 11.2 19.4 Interest paid (1.9) (1.4) (2.8)Income taxes paid (0.4) (3.2) (5.6)Net cash from operating activities 8.3 6.6 11.0 Investing activities Proceeds from sale of property, plant 2.1 0.4 0.9and equipment Purchase of property, plant and (7.5) (6.9) (12.0)equipment Purchase of intangible assets - (0.1) (0.5)Net cash used in investing activities (5.4) (6.6) (11.6) Net cash flows before financing 2.9 - (0.6) Financing activities Dividends paid 6 (3.9) (3.9) (5.7)Proceeds from the issue of share - 1.0 1.3capital Repurchase of ordinary shares (0.3) - (0.5)Net increase in bank loans 2.1 0.8 5.4Repayment of obligations under finance (0.5) (0.5) (1.0)leases Net cash used in financing activities (2.6) (2.6) (0.5) Net increase / (decrease) in cash and 0.3 (2.6) (1.1)cash equivalents Cash and cash equivalents at beginning (5.9) (4.9) (4.9)of period Effect of foreign exchange rate - (0.1) 0.1changes Cash and cash equivalents at end of (5.6) (7.6) (5.9)period 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 June2007 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 31 August 2007. The comparative figures for the financial year ended 31 December 2006 are notthe company's statutory accounts for that financial year. The statutory accountsfor the year ended 31 December 2006, which were prepared in accordance withInternational Financial Reporting Standards ('IFRSs') as adopted by the EU, havebeen reported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was (i) unqualified; (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report; and (iii) did not contain a statementunder section 237 (2) or (3) of the Companies 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 2006. 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 geographical segments. 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 the output is principally exported for sale by theGroup in the UK and Ireland. 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 2. Segment reporting (continued) Segment information UK & Ireland Continental Eliminations Consolidated by geographic region Europe (unaudited) (unaudited) (unaudited) (unaudited) 6 months ended 30 2007 2006 2007 2006 2007 2006 2007 2006June £m £m £m £m £m £m £m £mTurnover External sales 170.9 176.2 55.1 53.7 226.0 229.9Inter-segment sales 0.4 0.8 0.5 0.1 (0.9) (0.9) - -Total turnover 171.3 177.0 55.6 53.8 (0.9) (0.9) 226.0 229.9 Profit from 5.2 5.3 4.9 5.4 - - 10.1 10.7operations Net financing costs (1.3) (1.5) Profit before tax 8.8 9.2Tax (2.4) (2.6) Profit for the period 6.4 6.6 Segment UK & Ireland Continental Eliminations Consolidatedinformation by Europe geographic region Year ended 31 2006 2006 2006 2006December £m £m £m £mTurnover External sales 328.7 85.5 - 414.2Inter-segment 1.6 0.4 (2.0) -sales Total turnover 330.3 85.9 (2.0) 414.2 Profit from 9.7 7.4 - 17.1operations Net financing (3.1)costs Profit before tax 14.0Tax (3.9)Profit for the 10.1year 3. Profit from operations 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £mProfit from operations is stated after charging / (crediting): Restructuring costs relating to closures 1.4 0.3 0.5Profit on disposal of closed sites (1.1) - (0.5) 0.3 0.3 - British Polythene Industries PLC Notes to the consolidated interim financial statements 4. Net retirement benefit financing 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £m Expected return on pension scheme assets 5.7 4.8 9.4Interest on pension liabilities (5.2) (4.9) (9.7)Net retirement benefit financing 0.5 (0.1) (0.3) 5. Tax Corporation tax for the interim period is charged at 27% (June 2006: 28%),representing the estimated annual effective tax rate for the full financialyear. 6. Dividend 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £mAmounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 December 3.9 - -2006 of 15.0p per share Final dividend for the year ended 31 December - 3.9 3.92005 of 15.0p per share Interim dividend for the year ended 31 - - 1.8December 2006 of 7.0p per share 3.9 3.9 5.7 Proposed interim dividend for the year ending 1.8 1.8 -31 December 2007 of 7.0p (2006: 7.0p) per share The proposed interim dividend of 7.0p (2006: 7.0p) per share will be paid on 21November 2007 to shareholders on the register at close of business on 26 October2007.The interim dividend was approved by the Board on 31 August 2007 and has notbeen included as a liability as at 30 June 2007. 7. Earnings per share The calculation of basic and diluted earnings per share at 30 June 2007 wasbased on the profit attributable to ordinary shareholders of £6.4 million (sixmonths ended 30 June 2006 - £6.6 million, full year 2006 - £10.1 million). Diluted earnings per share is calculated below: 6 months 6 months Year ended ended ended 30 June 2007 30 June 2006 31 December (unaudited) (unaudited) 2006Weighted average number of ordinary shares 000s 000s 000s Issued ordinary shares at 1 January 26,462 25,894 25,894Effect of shares issued 29 273 367Effect of own shares held (269) (204) (221)Weighted average number of ordinary 26,222 25,963 26,040shares Effect of share options and long-term 117 431 220incentive plan shares in issue Diluted weighted average number of 26,339 26,394 26,260ordinary shares British Polythene Industries PLC Notes to the consolidated interim financial statements 8. Retirement and employee benefit obligations 6 months ended 30 June Year ended 2007 2006 31 December (unaudited) (unaudited) 2006 £m £m £m Fair value of scheme assets 176.0 153.4 169.5Present value of scheme liabilities (197.7) (197.0) (202.7)Deficit in British Polythene defined benefit (21.7) (43.6) (33.2)pension scheme Other employee benefit obligations (1.5) (1.6) (1.5)Retirement and employee benefit obligations (23.2) (45.2) (34.7)Related deferred tax asset 6.1 13.3 10.0 (17.1) (31.9) (24.7) Provision for retirement benefit obligations at 30 June has been calculated on asimilar basis as at the previous 31 December. The reduction in the pensionscheme deficit at 30 June 2007 is the result of an increase in the discount rateapplied to the scheme liabilities, good investment returns and higher employercontributions offset by increasing life expectancy. 9. Share capital Date of No of Issue SharesMovements in equity share capital At 31 December 2006 26,461,762Exercise of SAYE Options Various 35,722At 30 June 2007 26,497,484 At 30 June 2006 26,333,669 10. Acquisition The Group announced the purchase, on 21 August 2007, of the AT Films business ofAT Plastics Inc (Canada), a subsidiary company of Celanese Corporation, for acash consideration of US$12 million subject to an adjustment to reflect the bookvalue of working capital at completion. AT Films manufactures polythene film products for the horticultural andagricultural markets, mainly in North America. The company has facilities inEdmonton and Westlock, Alberta, Canada and employs 65 people. In the lastfinancial year to 31 December 2006, AT Films sold 12,500 tonnes of polythenefilm products with a sales value of US$ 35 million. 11. Interim report Copies of the interim report, which is being sent to all shareholders on 7September 2007, 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