30th Aug 2005 07:01
Filtrona plc30 August 2005 Tuesday, 30 August 2005 FILTRONA plc INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2005 Filtrona plc, the international market leading speciality plastic and fibreproducts supplier, today announces its interim results for the six months ended30 June 2005. • Sales were £251.9m (2004: £237.6m), up 6.0%. • Operating profit before intangible amortisation was £30.0m (2004: £25.2m), up 11.6% excluding non recurring IFRS adjustments. • Profit before tax was £26.3m (2004: £24.2m), up 8.7%. • Underlying adjusted earnings per share were 7.7p (2004: 7.0p), up 10.0%. • Operating cash flow was £20.1m (2004: £16.9m), up 18.9%. • Net debt of £109.6m (December 2004: £120m). Commenting on today's announcement, Mark Harper, Chief Executive, Filtrona plc,said: "I am pleased to present Filtrona plc's maiden interim results as an independentpublic company, with sales up 6.0% and profit before tax up 8.7%, representing astrong start. Our key business ratios have improved with increases in cashgeneration, operating margins, return on capital employed and employeeproductivity. Filtrona's established market positions, combined with its spread of geographiesand broad customer base, have enabled the company to deliver good results. The Board is confident that the skills and experience of Filtrona employees,ongoing investment in service and supply chain efficiencies, new products andtechnological developments, coupled with the lowering of unit costs will enableFiltrona to continue to grow in line with expectations during the currentfinancial year." Enquiries:-Filtrona plc FinsburyMark Harper, Chief Executive Morgan BoneSteve Dryden, Finance Director Gordon SimpsonTel: 01908 359100 Tel: 0207 251 3801 Chairman's Statement I am pleased to present Filtrona plc's interim results for the six months to 30June 2005, the first since the company was listed on the London Stock Exchangeon 6 June 2005. The demerger of Filtrona has presented us with a tremendous opportunity tostrengthen further our international market positions and management. Thisprocess has already begun in the short period since the company was listed. Thecompany has continued to win new customers and is benefiting from therecruitment of new high quality senior management to complement the establishedteam. For the half year to 30 June 2005, sales were £251.9m (2004: £237.6m) up 6.0%.Operating profit before intangible amortisation and excluding non recurring IFRSadjustments was £30.0m (2004: £25.2m) up 11.6%. Profit before tax was £26.3m(2004: £24.2m) up 8.7% in line with expectations. As at 30 June 2005, net debtwas £109.6m. Our key business ratios improved over those of the first half oflast year with increases in cash generation, operating margins, return oncapital employed and in employee productivity. The Board has declared an interim dividend of 2.13 pence per share. The dividendwill be paid on 31 October 2005 to shareholders on the register on 30 September2005 with an ex-dividend date of 28 September 2005. Filtrona's established market positions, combined with its spread of geographiesand broad customer base, have enabled the company to deliver these good results. The Board is confident that the skills and experience of Filtrona employees, andongoing investment in service and supply chain efficiencies, new products andtechnological developments, coupled with the lowering of unit costs will enableFiltrona to continue to grow in line with expectations during the currentfinancial year. To conclude, I should like to thank all of the staff in Filtrona for theiroutstanding contribution to both the demerger process and these strong results. Jeff HarrisChairman30 August 2005 Operating Review Filtrona is an international, market leading speciality plastic and fibreproducts supplier with activities segmented into Plastic Technologies and FibreTechnologies. Plastic Technologies produces, sources and distributes protection and finishingproducts, self-adhesive tear tape and certain security products as well asproprietary and customised plastic extrusions and packaging items for consumerproducts. Fibre Technologies focuses on the production and supply of special filters forcigarettes and bonded fibre products such as reservoirs and wicks for writinginstruments and printers, household products and medical diagnostic devices. Filtrona has performed well in the first half of 2005. Underlying like-for-likesales at constant exchange rates excluding acquisition impact were up 4.8%.Underlying like-for-like operating profits at constant exchange rates and afterexcluding acquisitions and non recurring IFRS adjustments were up 7.7%. PLASTIC TECHNOLOGIESPlastic Technologies continued its robust performance with sales of £136.1m(2004: £119.9m) up 12.9% at constant exchange rates. Acquisitions contributed£2.9m of the £16.2m sales growth. Operating profit increased to £18.6m (2004: £15.7m) up 17.0% at constant exchange rates. Underlying like-for-like operating profits at constant exchange rates and excluding acquisition impact increased by 9.9%. Margins improved by 60 basis points from 13.1% to 13.7%. Protection and Finishing Products achieved very good growth. The Moss businessachieved market share gains in continental Europe and a new Moss distributionbusiness was established in the Czech Republic reflecting the company's strategyof developing its distribution infrastructure in Central and Eastern Europe.Moss also established a Chinese Representative Office within the Fibertec Ningbofacility to expand the sourcing of tooling and finished products from China. The Skiffy business continued on its successful development path as increasedinvestment in range development, productivity improvement and marketingprogrammes, including a new catalogue, yielded positive results. The Alliancebusiness in the US developed well, in spite of a slowdown in the US automotivesector, due to increased investments in marketing and new product development.The Alliance regional distribution operations performed particularly well. TheAlliance national distribution operation based at Sao Paulo in Brazil once againshowed positive growth and local production is being expanded in the second halfof this year. The MSI oil country tubular goods thread protector businesscontinued to benefit from the high levels of drilling activity in the oil andgas sector. Coated and Security Products has continued to benefit from increased volumes oftear tapes for brand promotion and brand security applications. During theperiod, the coated and security businesses were combined in a marketrepositioning exercise under the 'Payne' banner which has growing brand equityin the tear tape, document authentication, personal identification and brandprotection markets. Further promotional business was secured with an importantFMCG brand owner involving tear tapes with individual item numbering for a majorconsumer promotion. This capability, involving digital printing technology, isexpected to have applications in a broad range of consumer product categories.The Payne innovation programme continued to yield benefit as business wassecured for a high security film laminate on the next generation UK passport.The Payne personal identification business took advantage of the change in UKlicensing law which requires licensees in licensed premises to wear an identitybadge or card. The new 6 station printer in Richmond, USA came on stream and theFractureCode development programme continues to yield positive results as itprogresses successfully through phased trials with an FMCG market leader. The Plastic Profile and Sheet business achieved robust sales growth both inNorth America and Europe. Sales of point of purchase products were buoyant inboth geographies and North American sales in the transportation and medicalproduct categories were particularly encouraging. The Monterrey facility inMexico continued its rapid sales development and the Enitor business in theNetherlands is continuing to win new export business, especially in the UK, andconstruction of a factory extension in Buitenpost will begin in the second halfof the year. Globalpack, our Brazilian consumer packaging business, has encountered toughtrading conditions. The business has secured attractive new projects in tubesfor dairy food items and specialised closures for shampoo containers which willassist second half operating results. Volumes in our roll on ball joint ventureremain strong and a new line will be commissioned in early 2006. FIBRE TECHNOLOGIESSales in Fibre Technologies were £115.8m (2004: £117.7m) a reduction of 1.1% atconstant exchange rates. Operating Profit was £14.0m (2004: £12.7m) up 12.9% atconstant exchange rates. After adjusting for non recurring IFRS accountingadjustments, underlying operating profit at constant exchange rates was up by2.2% and margins improved by 20 basis points from 11.9% to 12.1%. Cigarette Filters total volumes grew by 0.7%. Special filter volumes grew by5.9% and were up in all regions, driven by market growth and the capture offurther outsourced volumes. Monoacetate volumes fell by 5.7%. The margin benefitof this mix improvement was reduced by a combination of one-off restructuringand start up costs. Lower total filter volumes in Europe were more than offset by growth of volumesin the Americas and Asia where average selling prices are lower. Europeanvolumes suffered due to weakness in Germany and the impact of previousself-manufacture decisions by a key customer in both Russia and Italy. As aresult of the reduced European volumes and high Swiss unit costs, the decisionwas taken to close the manufacturing facility at Crissier in Switzerland, thesavings from which will improve performance in the second half of the year.Encouragingly, additional outsourced volumes were secured with a major customerfor European supply during the second half of the year and the first customerfor Filtrona's new active patch technology was captured. Volumes in the Americas progressed well with the new Monterrey facility inMexico continuing to build its volume and agreement was reached with theprincipal customer of the Venezuelan facility for an extension to the exclusivespecial filter supply contract for a further 5 years. Asian volumes continued toprogress and a programme of investment has begun for the upgrading of theIndonesian operations which will include a move to a new facility and theinstallation of high speed equipment. Sales progressed within the Fibertec business with a strong performance ininkjet printer components but they were held back by reduced demand in thehousehold products market segment which impacted the Reinbek facility inGermany. This shortfall has generated the need for a headcount reductionprogramme which is underway. The Ningbo facility in China has started upsuccessfully with the first customer being a local writing instrumentmanufacturer who has not previously sourced from Filtrona. The future prospectsfor this facility are very positive. The innovation programme at the researchand development centre in Richmond, USA continues to yield very good results interms of both new products and additional intellectual property. We haverecently commercialised a new bonded fibre product for a medicine dispensingsystem and an important new inkjet printer reservoir project is progressingtowards commercialisation in 2006. As a result of cost reductions from restructuring, the capture of additionaloutsourced filter volumes, and the benefits of higher production levels inMexico and China, Fibre Technologies is expected to regain a degree of momentumin the second half with the full benefits coming through in 2006. PROSPECTSThese first half year results are in line with expectations for the currentfinancial year and provide a solid platform for Filtrona to continue to progressin the future. They represent a good start for Filtrona as an independent listedcompany and demonstrate the underlying resilience of the business. Filtrona'sstrong international market positions, and continued focus on innovation andproductivity give us confidence that the company will continue to developsatisfactorily and meet expectations for the current financial year. Mark HarperChief Executive30 August 2005 Consolidated Income Statement Note Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- ------- -------- -------- -------- Revenue 2 251.9 237.6 477.5------------------------------- ------- -------- -------- --------Operating profit beforeintangible amortisation 2 30.0 25.2 48.1Intangible amortisation (0.4) (0.2) (0.5)------------------------------- ------- -------- -------- --------Operating profit beforefinancing and tax 29.6 25.0 47.6Finance income 3 1.1 0.4 0.9Finance expense 3 (4.4) (1.2) (2.8)------------------------------- ------- -------- -------- --------Profit before tax * 26.3 24.2 45.7Income tax expense 4 (9.2) (7.6) (14.0)------------------------------- ------- -------- -------- --------Profit for the period 17.1 16.6 31.7------------------------------- ------- -------- -------- -------- Attributable to:Equity holders of Filtrona 16.5 16.0 30.5Minority interests 0.6 0.6 1.2------------------------------- ------- -------- -------- --------Profit for the period 17.1 16.6 31.7------------------------------- ------- -------- -------- -------- Earnings per share attributableto equity holders of Filtrona: Basic 5 7.5p 7.3p 13.9pDiluted 5 7.4p 7.3p 13.9p------------------------------- ------- -------- -------- -------- * In the Listing Particulars dated 17 May 2005, retirement benefit obligations were accounted for on a defined benefit basis. Under IAS 19: Employee benefits (revised) ('IAS 19 (revised)'), Filtrona has to account for defined benefit pension schemes on a defined contribution basis up to the date of demerger and on a defined benefit basis thereafter. The impact of this is shown in the Pro Forma information. Consolidated Balance Sheet Note 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- ------- -------- -------- -------- AssetsProperty, plant and equipment 165.6 147.3 152.5Intangible assets 57.3 56.4 57.6Deferred tax assets 2.2 0.2 0.2------------------------------- ------- -------- -------- --------Total non current assets 225.1 203.9 210.3 Inventories 59.7 52.2 53.3Income tax receivable 0.6 0.1 0.5Trade and other receivables 89.5 81.1 78.0Derivative assets 0.1 - -Cash and cash equivalents 6 36.6 24.7 31.3------------------------------- ------- -------- -------- --------Total current assets 186.5 158.1 163.1------------------------------- ------- -------- -------- --------Total assets 411.6 362.0 373.4------------------------------- ------- -------- -------- -------- EquityIssued capital 54.8 274.1 274.1Translation reserve 3.3 (2.1) (1.6)Other reserves 55.0 (142.2) (161.5)------------------------------- ------- -------- -------- --------Total equity attributable toequity holders of Filtrona 113.1 129.8 111.0Minority interests 4.7 3.3 3.9------------------------------- ------- -------- -------- --------Total equity 117.8 133.1 114.9------------------------------- ------- -------- -------- -------- LiabilitiesInterest bearing loans and borrowings 130.0 118.9 148.6Retirement benefit obligations * 34.7 - -Other payables 2.6 3.0 3.1Provisions 7.2 3.1 3.7Deferred tax liabilities 11.6 18.6 18.6------------------------------- ------- -------- -------- --------Total non current liabilities 186.1 143.6 174.0 Bank overdrafts 1.3 2.8 1.6Interest bearing loans and borrowings 14.9 0.7 1.1Income tax payable 15.2 10.0 11.3Trade and other payables 72.6 70.3 68.6Provisions 3.7 1.5 1.9------------------------------- ------- -------- -------- --------Total current liabilities 107.7 85.3 84.5------------------------------- ------- -------- -------- --------Total liabilities 293.8 228.9 258.5------------------------------- ------- -------- -------- --------Total equity and liabilities 411.6 362.0 373.4------------------------------- ------- -------- -------- -------- * In the Listing Particulars dated 17 May 2005, retirement benefit obligations were accounted for on a defined benefit basis and the liability at 31 December 2004 was £28.2m before deferred tax asset of £8.4m. Under IAS 19 (revised), Filtrona has to account for defined benefit pension schemes on a defined contribution basis up to the date of demerger and on a defined benefit basis thereafter. Consolidated Statement of Cash Flows Note Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- ------- -------- -------- ------- Operating activitiesProfit before tax 26.3 24.2 45.7Adjustments for: Net finance expense 3.3 0.8 1.9 Intangible amortisation 0.4 0.2 0.5 Depreciation 10.4 10.2 20.1 Share option expense 0.6 0.6 1.1 Impairment of property, plant and equipment - 1.3 2.3 Other items 1.1 0.8 2.5Increase in inventories (3.5) (3.5) (5.7)Increase in trade and other receivables (10.8) (12.2) (8.5)Increase in trade and other payables 7.8 6.3 4.8Acquisition of employee trust shares (1.0) - -Other cash movements (0.2) (0.4) (0.6)Income tax paid (5.2) (7.1) (13.2)------------------------------- ------- -------- -------- -------Net cash inflow fromoperating activities 29.2 21.2 50.9------------------------------- ------- -------- -------- ------- Investing activitiesInterest received 0.5 0.7 0.8Acquisition of property,plant and equipment (15.1) (12.8) (34.8)Proceeds from sale ofproperty, plant and equipment 0.8 1.4 1.4Acquisition of businesses netof cash acquired - (22.3) (22.5)Other investing cash flows (0.1) 0.1 (0.9)------------------------------- ------- -------- -------- -------Net cash outflow frominvesting activities (13.9) (32.9) (56.0)------------------------------- ------- -------- -------- ------- Financing activitiesInterest paid (3.6) (1.7) (2.8)Dividends paid to former parent company - - (34.3)Proceeds from/(repayments of)short term loans 13.8 (0.2) 0.2Proceeds from/(repayments of)long term loans 121.3 (0.1) (0.1)(Repayments to)/proceeds fromformer parent company (142.8) 13.6 48.9------------------------------- ------- -------- -------- -------Net cash (outflow)/inflowfrom financing activities (11.3) 11.6 11.9------------------------------- ------- -------- -------- ------- Net increase/(decrease) incash and cash equivalents 4.0 (0.1) 6.8------------------------------- ------- -------- -------- ------- Net cash and cash equivalentsat the beginning of theperiod 29.7 22.5 22.5Net increase/(decrease) incash and cash equivalents 4.0 (0.1) 6.8Net effect of currencytranslation on cash and cashequivalents 1.6 (0.5) 0.4------------------------------- ------- -------- -------- -------Net cash and cash equivalentsat the end of the period 6 35.3 21.9 29.7------------------------------- ------- -------- -------- ------- Consolidated Statement of Recognised Income and Expense Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m ------------------------------- -------- -------- -------- Recognition of defined benefitpension schemes on demerger: Actuarial loss (34.7) - - Deferred tax credit on actuarial loss 10.5 - -Foreign exchange translation differences 5.1 (2.2) (1.7)------------------------------- -------- -------- --------Income and expense recogniseddirectly in equity (19.1) (2.2) (1.7)Profit for the period 17.1 16.6 31.7------------------------------- -------- -------- --------Total recognised income and expense for the period (2.0) 14.4 30.0Adoption of IAS 32 and IAS 39 0.1 - -------------------------------- -------- -------- --------Total recognised income and expense (1.9) 14.4 30.0------------------------------- -------- -------- -------- Attributable to:Equity holders of Filtrona (2.7) 13.9 28.9Minority interests 0.8 0.5 1.1------------------------------- -------- -------- --------Total recognised income and (1.9) 14.4 30.0expense -------- -------- --------------------------------------- Consolidated Statement of Changes in Total Equity Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------------- -------- -------- -------- Total recognised income and expensefor the period (2.0) 14.4 30.0Acquisition of employee trust shares (1.0) - -Dividends paid to former parent company - - (34.3)Reduction of share capital (219.3) - -Transfer to retained earnings 219.3 - -Former parent company's contributionto the defined benefit pensionscheme net of deferred tax credit 1.0 - -Former parent company's capitalcontribution 4.2 11.7 11.7Dividends paid to minority interests - (0.2) (0.2)Share option expense 0.6 0.6 1.1------------------------------------- -------- -------- --------Net movement for the period 2.8 26.5 8.3Total equity at the beginning of theperiod 114.9 106.6 106.6Adoption of IAS 32 and IAS 39 0.1 - -------------------------------------- -------- -------- --------Total equity at the end of the period 117.8 133.1 114.9------------------------------------- -------- -------- -------- Attributable to:Equity holders of Filtrona 113.1 129.8 111.0Minority interests 4.7 3.3 3.9------------------------------------- -------- -------- --------Total equity at the end of the period 117.8 133.1 114.9------------------------------------- -------- -------- -------- Notes to the Interim Financial Statement 1. Basis of preparation On 6 June 2005 the Filtrona business was demerged from Bunzl plc ('Bunzl') andthe ordinary shares of Filtrona plc ('Filtrona') were listed on the London StockExchange. Prior to the demerger the Filtrona businesses were reorganised underFiltrona International Limited under the common control of Bunzl (outside thescope of IFRS 3) and have been presented as if Filtrona had always existedindependently for the purposes of the comparatives. The demerger was effected bythe payment of a dividend in specie by Bunzl and has been accounted for as if itwere a reverse acquisition. The unaudited financial statements for the six months ended 30 June 2005 havebeen prepared in accordance with the International Accounting Standards andInternational Financial Reporting Standards (collectively 'IFRS') expected to beendorsed by the European Union and available for use by European companies at 31December 2005. In particular, the directors have assumed that IAS 19 (revised)will be adopted by the EU in sufficient time that it will be available for usein the annual financial statements for the year ending 31 December 2005. The accounting policies, which conform to IFRS, are set out on Filtrona'swebsite at www.filtrona.com. These policies have been consistently applied toall the periods presented except for those relating to the classification andmeasurement of financial instruments. The accounting policies may change as a result of decisions taken by theEuropean Commission on endorsement of IFRS, and therefore will possibly requireupdating when the annual financial statements are prepared for the year ending31 December 2005. These interim financial statements do not constitute statutory accounts ofFiltrona within the meaning of Section 240 of the Companies Act 1985. Thecomparative figures for the year ended 31 December 2004 are not statutoryaccounts for that financial year. Statutory accounts of Bunzl for the year ended31 December 2004, within which the Filtrona business was included until 6 June2005, were prepared under accounting principles generally acceptable in the UK('UK GAAP') and have been filed with the Registrar of Companies. The auditors'report on those accounts was unqualified and did not contain any statement underSection 237 of the Companies Act 1985. IFRS 1: First-time adoption of International Financial Reporting Standards('IFRS 1') permits certain exemptions from the full requirements of IFRS in thetransition period. Filtrona has taken the following exemptions: i Business combinations: Filtrona has chosen not to apply IFRS 3: Business combinations retrospectively to business combinations that occurred before the date of transition to IFRS.ii Financial instruments: Filtrona has taken advantage of the exemption not to present financial information compliant with IAS 32: Financial instruments: disclosure and presentation and IAS 39: Financial instruments: recognition and measurement for the comparative periods ended 31 December 2004. Consequently, the restatement of the opening balance sheet at 1 January 2004, the results for the year ended 31 December 2004 and the balance sheet at 31 December 2004 have been prepared using the accounting policies for financial instruments previously adopted under UK GAAP. The result of the adoption of IAS 39 on 1 January 2005 was the recognition of a derivative asset of £0.1m.iii Cumulative translation differences: one of the requirements of IAS 21: The effects of changes in foreign exchange rates is that cumulative exchange gains and losses on retranslating opening net worth in overseas subsidiary undertakings, net of related foreign currency borrowings and foreign currency hedging contracts together with differences arising from the use of average and year end exchange rates be separately disclosed. Filtrona has adopted the exemption in IFRS 1 allowing these cumulative translation differences to be reset to zero at the transition date.iv Fair value or revaluation at deemed cost: Filtrona has adopted the exemption to restate revalued items of property, plant and equipment as held at deemed cost at the date of transition. Filtrona has elected not to adopt the following exemption: Share-based payments: Filtrona has not adopted the exemption to apply IFRS 2: Share-based payments only to awards made after 7 November 2002, instead a full retrospective approach has been followed on all awards granted but not fully vested at the date of transition. Impairment Goodwill was tested for impairment at 1 January 2004, the date of transition toIFRS, even though no indication of impairment existed. Debt and finance cost In the Accountant's Report contained in the Listing Particulars, fundingbalances between Filtrona and Bunzl were described as 'parent company financing'within non current liabilities, reflecting the debt to be transferred from Bunzlto Filtrona on demerger. In the Listing Particulars interest on the parent company financing wascalculated at an interest rate reflecting the effective finance cost that Bunzlincurred during the year. Filtrona's finance cost shown in these interimfinancial statements reflects Filtrona's actual interest costs includinginterest payable to Bunzl. Tax Filtrona's income tax expense in 2004 benefited from its membership of Bunzl taxgroups in different tax jurisdictions. In 2005, the income tax expense incurredby Filtrona only reflects reliefs and charges relevant to Filtrona tax groups. Pensions Filtrona operates defined benefit and defined contribution pension schemes,which were split out from the schemes operated by Bunzl. In the ListingParticulars, Filtrona accounted for certain pension expense on a defined benefitbasis. Under IAS 19 (revised), Filtrona has to account for this pension expenseon a defined contribution basis up to the date of demerger and on a definedbenefit basis thereafter. 2. Summarised segmental analysis Revenue Operating Profit -------- -------- -------- -------- ------- -------- Six months to Six months to Year to Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m £m £m £m------------------ -------- -------- -------- -------- ------- -------- Plastic Technologies 136.1 119.9 241.5 18.6 15.7 33.2Fibre Technologies 115.8 117.7 236.0 14.0 12.7 23.9Corporate * - - - (2.6) (3.2) (9.0)------------------ -------- -------- -------- -------- ------- -------- 251.9 237.6 477.5 30.0 25.2 48.1Intangible amortisation (0.4) (0.2) (0.5)------------------ -------- -------- -------- -------- ------- --------Total 251.9 237.6 477.5 29.6 25.0 47.6------------------ -------- -------- -------- -------- ------- -------- * Certain pension expense in Plastic Technologies and Fibre Technologies is accounted for on a defined benefit basis. The difference between this pension expense on a defined benefit and defined contribution basis prior to demerger is accounted for in Corporate. This has decreased/(increased) Corporate expense by £0.1m (six months to 30 Jun 2004: £(0.3)m, year to 31 Dec 2004: £(1.5)m). 3. Net finance expense Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- -------- -------- -------- Finance incomeBank deposits 0.5 0.4 0.8Other finance income - - 0.1Expected return on pension scheme assets 0.6 - -------------------------------- -------- -------- -------- 1.1 0.4 0.9------------------------------- -------- -------- -------- Finance expenseLoans and overdrafts (2.1) - -Interest paid to former parent company (1.7) (1.2) (2.8)Interest on pension scheme liabilities (0.6) - -------------------------------- -------- -------- -------- (4.4) (1.2) (2.8)------------------------------- -------- -------- --------Net finance expense (3.3) (0.8) (1.9)------------------------------- -------- -------- -------- 4. Income tax expense A tax expense of 35% on the profit of the underlying operations has beenprovided based on the estimated effective tax rate for the year. 5. Earnings per share Six months to Six months to Year to 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- -------- -------- -------- Profit for the period attributableto equity holders of Filtrona 16.5 16.0 30.5Adjustment * 0.3 0.1 0.3------------------------------- -------- -------- --------Adjusted profit for the period attributable to equity holders of Filtrona 16.8 16.1 30.8------------------------------- -------- -------- -------- Basic weighted average ordinaryshares in issue (million) # 219.3 219.3 219.3Dilutive effect of employee shareoption plans (million) 3.1 - -------------------------------- -------- -------- --------Diluted weighted average ordinaryshares (million) 222.4 219.3 219.3------------------------------- -------- -------- -------- Basic earnings per share 7.5p 7.3p 13.9pAdjustment * 0.2p - 0.1p------------------------------- -------- -------- --------Adjusted earnings per share 7.7p 7.3p 14.0p------------------------------- -------- -------- --------Diluted basic earnings per share 7.4p 7.3p 13.9p------------------------------- -------- -------- -------- * The adjustment relates to intangible amortisation less tax relief thereon.# The number of ordinary shares issued on demerger has been used as the weighted average number for the period prior to demerger. 6. Analysis of net debt 30 Jun 2005 30 Jun 2004 31 Dec 2004 £m £m £m------------------------------- -------- -------- -------- Cash at bank and in hand 29.0 19.1 24.9Short term deposits repayable on demand 5.8 4.9 4.7Short term deposits not repayable ondemand 1.8 0.7 1.7------------------------------- -------- -------- --------Cash and cash equivalents 36.6 24.7 31.3Overdrafts (1.3) (2.8) (1.6)------------------------------- -------- -------- --------Net cash and cash equivalents 35.3 21.9 29.7Debt due within one year (14.9) (0.7) (1.1)Debt due after one year (130.0) (0.3) (0.3)Amounts due to former parent company - (118.6) (148.3)------------------------------- -------- -------- --------Net debt (109.6) (97.7) (120.0)------------------------------- -------- -------- -------- 7. Dividends Per share Total -------- -------- Six months to Six months to 30 Jun 2005 30 Jun 2005 £m------------------------------- -------- -------- Interim dividend 2.13p 4.7------------------------------- -------- -------- The proposed interim dividend for 2005 of 2.13p per 25p ordinary share will bepaid on 31 October 2005 to equity holders on the share register on 30 September2005. Independent Review Report by KPMG Audit Plc Introduction We have been engaged by Filtrona plc ('Filtrona') to review the financialinformation set out on pages 5 to 11 and we have read the other informationcontained in the Interim Statement and considered whether it contains anyapparent misstatements or material inconsistencies with the financialinformation. This report is made solely to Filtrona in accordance with the terms of ourengagement to assist Filtrona in meeting the requirements of the Listing Rulesof the Financial Services Authority. Our review has been undertaken so that wemight state to Filtrona those matters we are required to state to it in thisreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than Filtrona for our reviewwork, for this report, or for the conclusions we have reached. Directors' responsibilities The Interim Statement, including the financial information contained therein, isthe responsibility of and has been approved by the directors. The directors areresponsible for preparing the Interim Statement in accordance with the ListingRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual financial statements except where any changes, and the reasonsfor them, are disclosed. As disclosed in note 1 to the financial information, the next annual financialstatements of Filtrona will be prepared in accordance with IFRS adopted for usein the European Union. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with those IFRS adopted for use by the European Union. This isbecause, as disclosed in note 1, the directors have anticipated that certainstandards, which have yet to be formally adopted for use in the EU, will beadopted in time to be applicable to the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of Filtrona management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review is substantially lessin scope than an audit performed in accordance with Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. KPMG Audit Plc 8 Salisbury SquareChartered Accountants London, EC4Y 8BB30 August 2005 United Kingdom Pro Forma Information 1. Reconciliation to previously reported numbers Note Six months to Year to 30 Jun 2004 31 Dec 2004 £m £m------------------------------- ------ -------- -------- Operating profitOperating profit as previously reported bythe former parent company under UK GAAP 1 29.9 59.1Apportioned central costs 2 (2.5) (4.9)Share option expense 3 (0.6) (1.1)Non continuing adjustments arising onadoption of IFRS 4 (1.3) (3.5)------------------------------- ------ -------- -------- Operating profit on the basis used in theListing Particulars 25.5 49.6Pension adjustment 5 (0.3) (1.5)------------------------------- ------ -------- --------Operating profit as published in theinterim statement 25.2 48.1------------------------------- ------ -------- -------- Notes 1 Operating profit as previously reported by the former parent company under UK GAAP For the six months to 30 June 2004 and the year to 31 December 2004, Filtrona was reported under UK GAAP as a business area within Bunzl. 2 Apportioned central costs Filtrona's share of central costs for the provision of support in areas such as accountancy, legal and insurance, has been apportioned on the basis of estimates of Filtrona's share of corporate costs incurred by Bunzl in each period, and the estimated cost of providing the same level of support services independently by Filtrona. 3 Share option expense Under IFRS, Filtrona is required to account for an expense for the fair value of options and other share based incentives granted to employees (including directors). 4 Non continuing adjustments arising on adoption of IFRS As previously reported under UK GAAP, the Filtrona business made fair value adjustments to goodwill and the revaluation reserve. Under IFRS these adjustments were charged to the income statement. 5 Pension adjustment The pension expense for defined benefit schemes in the Listing Particulars was calculated on a defined benefit basis. Under IAS 19 (revised) Filtrona has to account for defined benefit pension schemes on a defined contribution basis up to the date of demerger and on a defined benefit basis thereafter. A reconciliation of UK GAAP to IFRS upon transition is provided in the Listing Particulars. 2. Underlying results The following information is presented because the directors believe it moreaccurately reflects the underlying performance of Filtrona if it had operatedindependently for the 18 months covered by this Interim Statement. Six months to 30 Jun 2004 Year to 31 Dec 2004 -------------- ---------------- Notes Reported Adjustments Underlying Reported Adjustments Underlying £m £m £m £m £m £m-------------------- ----- ------ ------- ------ ------ -------- ------ Revenue 237.6 - 237.6 477.5 - 477.5 Operating profit beforepension adjustment andintangible amortisation 1 25.5 1.3 26.8 49.6 3.5 53.1Pension adjustment 2 (0.3) 0.3 - (1.5) 1.5 -Intangible amortisation (0.2) - (0.2) (0.5) - (0.5)-------------------- ----- ------ ------- ------ ------ -------- ------Operating profit beforefinancing and tax 25.0 1.6 26.6 47.6 5.0 52.6Finance income 0.4 - 0.4 0.9 - 0.9Finance expense 3 (1.2) (1.3) (2.5) (2.8) (2.4) (5.2)-------------------- ----- ------ ------- ------ ------ -------- ------Profit before tax 24.2 0.3 24.5 45.7 2.6 48.3Income tax expense 4 (7.6) (1.0) (8.6) (14.0) (2.9) (16.9)-------------------- ----- ------ ------- ------ ------ -------- ------Profit for the period 16.6 (0.7) 15.9 31.7 (0.3) 31.4-------------------- ----- ------ ------- ------ ------ -------- ------ Attributable to:Equity holders of Filtrona 16.0 (0.7) 15.3 30.5 (0.3) 30.2Minority interests 0.6 - 0.6 1.2 - 1.2-------------------- ----- ------ ------- ------ ------ -------- ------Profit for the period 16.6 (0.7) 15.9 31.7 (0.3) 31.4 Earnings per share attributable to equity holders of Filtrona: Basic 7.3 (0.3) 7.0 13.9 (0.1) 13.8--------------------- ------ ------ ------ ------ ------ ------Adjusted 7.3 (0.3) 7.0 14.0 (0.1) 13.9--------------------- ------ ------ ------ ------ ------ ------ Notes 1 Operating profit before pension adjustment and intangible amortisation The non continuing IFRS adjustments have been added back to operating profit to enable comparison for the six months to 30 June 2005. 2 Pension adjustment Under IFRS, Filtrona has to present defined benefit pension expense on a defined contribution basis up to the date of demerger. The directors believe that since these schemes operate on a defined benefit basis, it is more appropriate to present this pension expense on a defined benefit basis over the entire period of this statement. 3 Finance expense The finance expense represents a charge allocated by Bunzl reflecting the effective finance expense that Bunzl incurred during the period of this statement. The directors believe that the adjustment more accurately reflects the expense that Filtrona would have incurred had it operated independently of Bunzl. 4 Income tax expense The income tax expense previously reflected the actual expense of the companies making up Filtrona and reflects benefits, reliefs and charges which arose from membership of Bunzl tax groups. The directors believe that the adjustment more accurately reflects the expense that Filtrona would have incurred had it operated independently of Bunzl. 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