30th Aug 2007 07:01
Filtrona plc30 August 2007 Filtrona plc Interim results for the six months ended 30 June 2007 ----------------------------------------------------- Filtrona plc, the international, market leading, speciality plastic and fibreproducts supplier, today announces its interim results for the six months ended30 June 2007. Following the disposal of Globalpack, the Brazilian consumerpackaging business in June 2007, the results from continuing operations areshown below. • Operating margin up from 11.8% to 13.5%. • Operating profit before intangible amortisation and restructuring costs, 17.2% ahead at constant exchange rates, and up 9.5% to a reported £34.7m (2006: £31.7m). • Profit before tax up 17.5% at constant exchange rates and before restructuring costs of £4.2m. After adverse currency impacts and the restructuring costs, reported profit before tax of £26.7m (2006: £28.2m) down 5.3%. • Revenue growth of 1.5% at constant exchange rates and reported revenue down 4.5% to £257.2m (2006: £269.3m) due to adverse currency impacts. • Adjusted earnings per share up 17.7% at constant exchange rates with reported adjusted earnings per share of 9.3p (2006: 8.5p) up 9.4%. • Interim dividend of 2.52p per share (2006: 2.30p) up 9.6%. • Net debt of £115.1m (December 2006: £98.8m). Commenting on today's announcement, Mark Harper, Chief Executive of Filtrona,said: "These strong results represent another positive step forward for Filtrona andare well above historical levels in underlying organic profit growth terms. Theyreinforce the value of our strong market positions and our ability to takedecisive and rapid action to address the challenges thrown up by the markets inwhich we operate. With strong underlying growth and an improved operatingmargin, supplemented by the contribution from recent acquisitions, the Boardremains confident of positive future progress." Enquiries---------Filtrona plc FinsburyMark Harper, Chief Executive James LevitonSteve Dryden, Finance Director Gordon SimpsonTel: 01908 359 100 Tel: 020 7251 3801 Notes-----1. A webcast of today's analyst presentation will be available on www.filtrona.com by 5pm today.2. 2006's comparatives, at constant exchange rates, were revenue £256.1m, operating profit before intangible amortisation £29.6m, profit before tax £26.3m and adjusted earnings per share of 7.9p. Operating Review Filtrona is an international, market leading, speciality plastic and fibreproducts supplier with activities segmented into Plastic Technologies and FibreTechnologies. Following the disposal of Globalpack, the Brazilian consumer packaging business,in June 2007, the results from continuing operations are shown below withGlobalpack's contribution to profits included as a single line net of interest,tax and the costs of effecting the transaction. Filtrona has continued to perform strongly for the six months ended 30 June2007. The operating margin improved to 13.5% from 11.8% for the comparableperiod last year. Operating profit before intangible amortisation andrestructuring costs was £34.7m (2006: £31.7m) up 9.5% on a reported basis and up17.2% at constant exchange rates. Acquisitions accounted for 2.3% of thisgrowth. Revenue grew by 1.5% at constant exchange rates though, due to adversecurrency impacts, reported revenue was down 4.5% to £257.2m (2006: £269.3m). Following the announcement at the end of 2006, restructuring costs of £4.2m wereincurred in the period. Profit before tax, excluding the restructuring costs andat constant exchange rates, was up 17.5%. After the restructuring costs andadverse currency impacts, reported profit before tax was down 5.3% to £26.7m(2006: £28.2m). It is anticipated that the remaining £0.8m of the £5.0mrestructuring costs will be incurred in the second half of 2007. Adjustedearnings per share were 9.3p (2006: 8.5p) up 9.4% and, at constant exchangerates, were up 17.7%. At 30 June 2007, net debt was £115.1m (2006: £117.4m) with the ratio of net debtto earnings before interest, tax, depreciation and amortisation remaining at1.4. The Board has declared an interim dividend up 9.6% to 2.52p per share (2006:2.30p) which will be paid on 26 October 2007 to shareholders on the register on28 September 2007 with an ex-dividend date of 26 September 2007. PLASTIC TECHNOLOGIES Plastic Technologies produces, sources and distributes protection and finishingproducts, self-adhesive tear tape and certain security products as well asproprietary and customised plastic extrusions. After a very strong 2006, growth in Plastic Technologies has moderated during2007. Reported revenue was £136.7m (2006: £137.9m) a reduction of 0.9%, withrevenue at constant exchange rates up 4.8%. Operating profit increased to £21.7m(2006: £21.4m) up 1.4%, with operating profit at constant exchange rates up6.9%. Operating margin improved by 40 basis points from 15.5% to 15.9%. Protection and Finishing Products has continued to trade well with furtherincreases in revenue and operating profit. At Moss, the pan-European plasticparts supplier, the growth momentum was maintained by the combination ofincreased marketing, successful new product introductions and the expansion ofthe distribution network. Sales development across the Continental Europeannetwork was particularly encouraging within both recently opened and moreestablished locations. The new distribution unit in Hungary was openedsuccessfully. In addition, the mix of proprietary and custom products continuedto strengthen in favour of the more profitable proprietary lines. Skiffy, the European specialist small nylon parts producer, achieved strongrevenue growth particularly from its principal location in Amsterdam. Thebusiness is sustaining increased levels of marketing investment with the firsthalf sales benefiting from the launch of a new Skiffy catalogue, printed andavailable online in eight languages. Alliance, the US-based plastic parts supplier, traded well in spite of the morechallenging market conditions in the domestic US market. The new AllianceExpress location in Chicago achieved a very encouraging start to operations andperformance at the Alliance facility in Sao Paulo, Brazil has been very strongwith the benefits of local manufacture materially improving its competitiveposition. Unit production costs at the Erie production facility continued tofall and additional land was secured close to the existing site to support thenext phase in the implementation of the operational strategy for the business. The acquisition of Duraco, based in Chicago, Illinois, was completed in May fora consideration of $61m. Initial trading at Duraco has met expectations. Theintegration is proceeding well and a senior executive from within Protection andFinishing Products has been appointed President. This acquisition represents animportant strategic step as it broadens both the product and market bases forthe Protection and Finishing Products business. Growth of the MSI oil country tubular goods thread protector business wasmoderated due to de-stocking on the part of the steel pipeyards who form themajority of MSI's customer base. The underlying fundamentals in the oil and gasdrilling sector remain strong and early trading in quarter three indicates thatactivity is picking up. Preparatory work began for the establishment of a Protection and FinishingProducts sales and distribution unit to serve the domestic Chinese market. Thisoperation will be based at the newly expanded Filtrona Fibertec facility inNingbo and will complement the existing successful finished products and toolsourcing operation. Coated and Security Products has delivered an improved performance in bothrevenue and operating profit. The Payne tear tape business was assisted by bothgrowth in promotional and other value-added printed tapes and a labourrestructuring programme implemented in the first quarter. The successfulintroduction of a cross feed application system for tear tape is expected tosupport the continued development of fast moving consumer goods markets outsidethe tobacco industry. Strong volumes of the specialist laminates for the UK passport drove performanceat the Payne Security business and the new security label machinery has recentlyrun its first security label orders. FractureCode technology is now running in alive environment within five manufacturing facilities but, as planned, furtherrevenue investments in product development and in the commercial team haveresulted in a small loss in the first half. The Company remains positiveregarding the long-term prospects of FractureCode, as an integral part of acomprehensive suite of technologies positioned to meet the demands of emergingsecurity product markets, but the precise timing of the capture of furthercustomers and therefore the level of contribution that FractureCode by itselfwill make in the coming years is uncertain. The Coated and Security Products business continues to develop its range ofsecurity technologies and carrier media. The security products market isexpected to continue to provide good opportunities for future growth ascustomers migrate through increasingly sophisticated levels of productauthentication, and ultimately to individual item level identification and trackand trace. After an excellent 2006, the Plastic Profile and Sheet business has encounteredmuch more challenging trading conditions in 2007 with a reduction in operatingperformance in North America. Whilst a number of product sectors have continuedto grow in the US market, custom products revenues have reduced reflecting someoverall weakness in the US economy. The programme to consolidate the twoMassachusetts facilities is expected to be completed in the fourth quarter andthis consolidation will generate important operational savings. A medical cleanroom is now under construction at the Athol, Massachusetts facility and the newclean room in Monterrey, Mexico is complete and being commissioned. Both ofthese investments are expected to facilitate rapid growth in the key targetmarket of medical products. The Enitor business in the Netherlands continued togrow with the point-of-purchase market showing particular strength. The disposal of Globalpack, the Brazilian consumer packaging business, wascompleted in June for a cash consideration payable of $56m. The increasinginternationalisation of the consumer packaging market, combined with Filtrona'svery minor position within it, led the Board to conclude that Globalpack did notfit with Filtrona's longer-term strategic plans. I would like to thank everyoneat Globalpack for their valued contribution to Filtrona over many years and wishthem every success for the future. FIBRE TECHNOLOGIES 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 devices. Fibre Technologies has staged a strong recovery in operating performance.Reported operating profit increased to £17.0m (2006: £14.0m) up 21.4% withoperating profit at constant exchange rates up 30.8%. Operating margin improvedby 340 basis points from 10.7% to 14.1%. As expected, reported revenue was down8.3% to £120.5m (2006: £131.4m) with revenue at constant exchange rates down2.2%. Cigarette Filters is achieving significant improvements in conversion costs witha clear focus on continuous improvement and the new business model to secureenhanced value for R&D services is already proving beneficial. The Monterrey,Mexico facility has been consistently profitable in 2007 as a result ofsustained operational improvement. In Europe, the Salerno, Italy and Jarrow, UKfacilities both performed well and the creation of a new low cost filterfacility in Hungary is underway with production due to commence in the fourthquarter of this year. Performance in Asia remained strong with each of thefacilities in India, Indonesia and Thailand contributing good results. The previously announced restructuring within the Cigarette Filters business hasprogressed well with the closure of the Richmond, Virginia facility and thesuccessful transfer of volumes to the Greensboro, North Carolina and Monterreyfacilities. As expected, due to the business losses announced last year, totalfilter volumes reduced by 5.4% or 1.8 billion filters with a reduction of 9.9%in special filters, partly mitigated by a 4.7% increase in monoacetate volumes. The Fibertec Bonded Fibre Components business delivered strong results with alllocations performing well. Further market share gains continue to be made intraditional areas of the business and the continued development of new productsand their associated intellectual property is driving growth in new applicationsand new markets. The inkjet printer reservoir business secured with a major newUS entrant into the inkjet printer market has run well ahead of expectations anda further new project with an existing original equipment manufacturer is due tocommence production at the end of 2007. The Ningbo, China facility is proving tobe consistently profitable and the factory extension is due for completion inthe third quarter of 2007. PROSPECTS These interim results represent another positive step forward for Filtrona andare well above historical trends in organic profit growth terms. The Companycontinues to pursue its strategy of achieving growth and building position inits selected markets through a blend of organic development and value enhancingacquisitions. With strong profit growth, supplemented by the contribution fromrecent acquisitions, the Board remains confident that Filtrona's financialperformance will continue to progress in line with their expectations. Consolidated income statement Restated Restated Six months six months year ended ended ended Note 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m==========================================================================================================Revenue 2 257.2 269.3 517.1----------------------------------------------------------------------------------------------------------Operating profit before intangible amortisation and restructuring costs 34.7 31.7 59.2Intangible amortisation (0.6) (0.5) (0.9)Restructuring costs (4.2) - -----------------------------------------------------------------------------------------------------------Operating profit 2 29.9 31.2 58.3Finance income 3 4.6 4.5 8.5Finance expense 3 (7.8) (7.5) (14.6)----------------------------------------------------------------------------------------------------------Profit before tax 26.7 28.2 52.2Income tax expense 4 (9.1) (9.5) (17.7)----------------------------------------------------------------------------------------------------------Profit from continuing operations 17.6 18.7 34.5Profit from discontinued operations 10 2.0 0.4 1.5----------------------------------------------------------------------------------------------------------Profit for the period 19.6 19.1 36.0========================================================================================================== Attributable to:Equity holders of Filtrona plc 18.1 18.4 34.5Minority interests 1.5 0.7 1.5----------------------------------------------------------------------------------------------------------Profit for the period 19.6 19.1 36.0========================================================================================================== Earnings per share attributable to equity holders of Filtrona plc: Basic 5 8.3p 8.4p 15.8p==========================================================================================================Diluted 5 8.2p 8.3p 15.6p========================================================================================================== Earnings per share from continuing operations attributable to equity holders of Filtrona plc: Basic 5 7.8p 8.3p 15.3p=========================================================================================================Diluted 5 7.7p 8.2p 15.1p========================================================================================================= Consolidated balance sheet Note 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m=========================================================================================================AssetsProperty, plant and equipment 6 166.3 177.6 178.4Intangible assets 84.5 61.9 59.5Deferred tax assets 0.2 3.0 0.3---------------------------------------------------------------------------------------------------------Total non-current assets 251.0 242.5 238.2Inventories 54.1 59.3 55.7Income tax receivable 2.9 1.0 1.8Trade and other receivables 93.8 91.9 81.1Derivative assets 0.7 0.4 0.2Cash and cash equivalents 8 34.0 20.8 20.7---------------------------------------------------------------------------------------------------------Total current assets 185.5 173.4 159.5---------------------------------------------------------------------------------------------------------Total assets 436.5 415.9 397.7========================================================================================================= EquityIssued capital 54.8 54.8 54.8Capital redemption reserve 0.1 0.1 0.1Other reserve (132.8) (132.8) (132.8)Translation reserve (1.8) 4.0 1.6Retained earnings 226.7 206.2 219.0---------------------------------------------------------------------------------------------------------Attributable to equity holders of Filtrona plc 147.0 132.3 142.7Minority interests 4.2 5.7 6.0---------------------------------------------------------------------------------------------------------Total equity 151.2 138.0 148.7========================================================================================================= LiabilitiesInterest bearing loans and borrowings 145.2 137.3 117.9Retirement benefit obligations 28.9 36.1 30.9Other payables - 3.4 -Provisions 7 8.1 2.8 2.7Deferred tax liabilities 9.6 11.6 11.6---------------------------------------------------------------------------------------------------------Total non-current liabilities 191.8 191.2 163.1Bank overdrafts 3.5 0.3 1.0Interest bearing loans and borrowings 0.4 0.6 0.6Derivative liabilities - 0.3 0.3Income tax payable 17.2 12.2 16.0Trade and other payables 67.5 69.8 65.0Provisions 7 4.9 3.5 3.0---------------------------------------------------------------------------------------------------------Total current liabilities 93.5 86.7 85.9---------------------------------------------------------------------------------------------------------Total liabilities 285.3 277.9 249.0---------------------------------------------------------------------------------------------------------Total equity and liabilities 436.5 415.9 397.7========================================================================================================= Consolidated statement of cash flows Restated Restated Six months six months year ended ended ended Note 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m=========================================================================================================Operating activities Profit before tax from continuing operations 26.7 28.2 52.2Adjustments for: Net finance expense 3.2 3.0 6.1 Intangible amortisation 0.6 0.5 0.9 Restructuring costs 4.2 - - Depreciation 10.3 10.3 20.7 Share option expense 0.8 0.7 1.2 Other items 0.2 (0.6) (0.3)Increase in inventories (0.4) (2.8) (0.8)(Increase)/decrease in trade and other receivables (8.3) (8.8) 0.2Increase in trade and other payables 3.5 3.5 0.4Restructuring costs paid (3.3) - -Acquisition of employee trust shares (1.7) - (1.2)Additional pension contributions (0.4) (0.2) (1.5)Other cash movements (0.2) (0.8) (1.9)---------------------------------------------------------------------------------------------------------Cash inflow from operating activities of continuing operations 35.2 33.0 76.0---------------------------------------------------------------------------------------------------------Income tax paid (10.6) (11.3) (18.0)Net cash inflow from operating activities of discontinued operations 3.3 2.3 3.1---------------------------------------------------------------------------------------------------------Net cash inflow from operating activities 27.9 24.0 61.1========================================================================================================= Investing activitiesInterest received 0.1 0.4 0.8Acquisition of property, plant and equipment (12.0) (14.8) (32.3)Proceeds from sale of property, plant and equipment 0.1 0.9 1.8Acquisition of businesses net of cash acquired 9 (31.5) (0.5) (0.5)Proceeds from sale of business 10 14.4 0.3 0.3Income tax paid on sale of business (1.0) - -Other investing cash flows (0.7) (0.5) (0.8)---------------------------------------------------------------------------------------------------------Net cash outflow from investing activities of continuing operations (30.6) (14.2) (30.7)---------------------------------------------------------------------------------------------------------Net cash outflow from investing activities of discontinued operations (2.6) (1.0) (1.8)---------------------------------------------------------------------------------------------------------Net cash outflow from investing activities (33.2) (15.2) (32.5)========================================================================================================= Financing activitiesInterest paid (3.1) (3.9) (7.1)Dividends paid to equity holders (10.1) (9.3) (14.3)Proceeds from/(repayments of)short-term loans 0.4 - (0.1)Proceeds from/(repayments of)long-term loans 29.8 (0.2) (11.8)---------------------------------------------------------------------------------------------------------Net cash inflow/(outflow) from financing activities of continuing operations 17.0 (13.4) (33.3)---------------------------------------------------------------------------------------------------------Net cash outflow from financing activities of discontinued operations (0.6) (0.1) (0.1)---------------------------------------------------------------------------------------------------------Net cash inflow/(outflow) from financing activities 16.4 (13.5) (33.4)========================================================================================================= Net increase/(decrease) in cash and cash equivalents 11.1 (4.7) (4.8)========================================================================================================= Net cash and cash equivalents at the beginning of the period 19.7 25.7 25.7Net increase/(decrease) in cash and cash equivalents 11.1 (4.7) (4.8)Net effect of currency translation on cash and cash equivalents (0.3) (0.5) (1.2)---------------------------------------------------------------------------------------------------------Net cash and cash equivalents at the end of the period 8 30.5 20.5 19.7========================================================================================================= Consolidated statement of recognised income and expense Six months Six months Year ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m=========================================================================================================Actuarial gains/(losses) on defined benefit pension schemes 1.4 (1.3) 2.2Deferred tax (expense)/credit on actuarial gains/(losses) ondefined benefit pension schemes (0.9) 0.4 (0.7)Foreign exchange translation differences: Transferred to profit on disposal of discontinued operations (5.0) - - Attributable to equity holders of Filtrona plc 1.1 (1.3) (3.7) Attributable to minority interests 0.3 (0.1) (0.3)---------------------------------------------------------------------------------------------------------Income and expense recognised directly in equity (3.1) (2.3) (2.5)Profit for the period 19.6 19.1 36.0---------------------------------------------------------------------------------------------------------Total recognised income and expense for the period 16.5 16.8 33.5========================================================================================================= Attributable to:Equity holders of Filtrona plc 15.2 16.2 32.3Minority interests 1.3 0.6 1.2---------------------------------------------------------------------------------------------------------Total recognised income and expense 16.5 16.8 33.5========================================================================================================= Notes 1. Basis of preparation This interim financial information has been prepared and approved by the Directors in accordance with the accounting policies that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2006. The accounting policies, which conform to IFRS as adopted for use by the EU, have been consistently applied to all periods presented. The consolidated income statement, consolidated statement of cash flows and related notes for the comparative periods have been restated, in accordance with IFRS, to reflect the disposal of Globalpack, which was previously reported in the Plastic Technologies segment and has been reclassified as discontinued operations. The financial information for the six months ended 30 June 2007 and 30 June 2006 are unaudited and do not constitute statutory accounts of Filtrona within the meaning of Section 240 of the Companies Act 1985. However, the Auditor has carried out a review of the financial information for the six months ended 30 June 2007 and their report is set out in the Independent Review Report. The comparative figures for the financial year ended 31 December 2006 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's Auditor and delivered to the Registrar of Companies. The report of the Auditor was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor 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. 2. Segment analysis Revenue Operating profit --------------------------------------- ---------------------------------------- Restated Restated Restated Restated Six months six months year Six months six months year ended ended ended ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m £m £m £m======================================================================================================Continuing operationsPlastic Technologies 136.7 137.9 262.4 21.7 21.4 39.0Fibre Technologies 120.5 131.4 254.7 17.0 14.0 28.1Central Services+ - - - (4.0) (3.7) (7.9)------------------------------------------------------------------------------------------------------ 257.2 269.3 517.1 34.7 31.7 59.2Intangible amortisation (0.6) (0.5) (0.9)Restructuring costs (4.2) - -------------------------------------------------------------------------------------------------------Total 257.2 269.3 517.1 29.9 31.2 58.3======================================================================================================Operating margin* 13.5% 11.8% 11.4% + Central Services includes group accounts, tax, treasury, legal, internal audit, corporate development, human resources, information technology and other services provided centrally to support the business segments* Operating margin is defined as operating profit before intangible amortisation and restructuring costs divided by revenue 3. Net finance expense Restated Restated Six months six months year ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m====================================================================================================== Continuing operationsFinance incomeBank deposits 0.2 0.3 0.7Other finance income - 0.1 0.1Expected return on pension scheme assets 4.4 4.1 7.7------------------------------------------------------------------------------------------------------ 4.6 4.5 8.5------------------------------------------------------------------------------------------------------ Finance expenseLoans and overdrafts (3.5) (3.6) (7.1)Interest on pension scheme liabilities (4.3) (3.9) (7.5)------------------------------------------------------------------------------------------------------ (7.8) (7.5) (14.6)------------------------------------------------------------------------------------------------------Net finance expense (3.2) (3.0) (6.1)====================================================================================================== 4. Income tax expense for continuing operations A tax expense of 34.0% (six months ended 30 Jun 2006: 33.7%; year ended 31 Dec 2006: 33.9%) on the profit of the underlying continuing operations has been provided based on the estimated effective tax rate for the year. Income tax expense in the UK is £0.3m (six months ended 30 Jun 2006: £0.5m; year ended 31 Dec 2006: £2.4m). 5. Earnings per share Restated Restated Six months six months year ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m====================================================================================================== Continuing operationsEarnings attributable to equity holders of Filtrona plc 17.0 18.2 33.5Adjustment* 3.2 0.3 0.6------------------------------------------------------------------------------------------------------Adjusted earnings 20.2 18.5 34.1====================================================================================================== Discontinued operationsEarnings attributable to equity holders of Filtrona plc 1.1 0.2 1.0====================================================================================================== Basic weighted average ordinary shares in issue (million) 218.0 218.9 218.8Dilutive effect of employee share option plans (million) 1.6 2.1 1.8------------------------------------------------------------------------------------------------------Diluted weighted average ordinary shares (million) 219.6 221.0 220.6====================================================================================================== Continuing operationsBasic earnings per share 7.8p 8.3p 15.3pAdjustment* 1.5p 0.2p 0.3p------------------------------------------------------------------------------------------------------Adjusted earnings per share 9.3p 8.5p 15.6p======================================================================================================Diluted basic earnings per share 7.7p 8.2p 15.1p====================================================================================================== Discontinued operationsBasic earnings per share 0.5p 0.1p 0.5p======================================================================================================Diluted basic earnings per share 0.5p 0.1p 0.5p====================================================================================================== * The adjustment relates to intangible amortisation and restructuring costs less tax relief thereon 6. Property, plant and equipment During the period Filtrona's continuing operations spent £12.0m (six months ended 30 Jun 2006: £14.8m; year ended 31 Dec 2006: £32.3m) on land and buildings, plant and machinery and fixtures, fittings and equipment. Land and buildings, plant and machinery and fixtures, fittings and equipment with a net book value of approximately £0.2m (six months ended 30 Jun 2006: £1.1m; year ended 31 Dec 2006: £1.5m) were disposed of for proceeds of £0.1m (six months ended 30 Jun 2006: £0.9m; year ended 31 Dec 2006: £1.8m). 7. Provisions 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m================================================================================== MovementsBeginning of year 5.7 7.5 7.5Restructuring costs 0.9 - -Acquisition 0.2 0.3 0.3Disposal warranties 6.4 - -Utilised (0.1) (1.4) (2.0)Currency translation (0.1) (0.1) (0.1)----------------------------------------------------------------------------------End of year 13.0 6.3 5.7================================================================================== Non-current 8.1 2.8 2.7Current 4.9 3.5 3.0---------------------------------------------------------------------------------- 13.0 6.3 5.7================================================================================== Provisions relate primarily to employees' compensation claims, legal claims,vacant properties and environmental clean-up expenses. Non-current provisionsare generally long-term in nature with timing of utilisation uncertain. 8. Analysis of net debt 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m================================================================================== Cash at bank and in hand 32.8 17.4 15.8Short term deposits repayable on demand 0.6 2.9 2.5Short term deposits not repayable on demand 0.6 0.5 2.4----------------------------------------------------------------------------------Cash and cash equivalents 34.0 20.8 20.7Overdrafts (3.5) (0.3) (1.0)----------------------------------------------------------------------------------Net cash and cash equivalents 30.5 20.5 19.7Debt due within one year (0.4) (0.6) (0.6)Debt due after one year (145.2) (137.3) (117.9)----------------------------------------------------------------------------------Net debt (115.1) (117.4) (98.8)================================================================================== 9. Acquisition On 3 May 2007, Filtrona acquired the assets and business of Duraco, Inc.('Duraco') based in Chicago, Illinois for a cash consideration of £31.7m. Duraco is a market leading manufacturer and supplier of self-adhesive foam products for protection and finishing applications in a broad array of served markets including point of purchase products and white goods. On acquisition the assets and liabilities of the business acquired were adjusted to reflect their fair values to Filtrona. The fair value adjustments are provisional and subject to finalisation for up to one year from the date of acquisition. Duraco contributed £2.4m to revenue and £0.5m to operating profit before intangible amortisation and restructuring costs in the period to 30 June 2007. A summary of the acquisition of Duraco is detailed below: Book value Revaluation Consistency Fair value of at of accounting assets acquisition policy acquired £m £m £m £m--------------------------------------------------------------------------------------------------------------Property, plant and equipment 1.4 1.6 - 3.0Inventories 1.2 - (0.2) 1.0Receivables 2.1 - (0.1) 2.0Deferred tax - 0.3 - 0.3Payables (0.9) - - (0.9)Provisions - (0.2) - (0.2)-------------------------------------------------------------------------------------------------------------- 3.8 1.7 (0.3) 5.2Customer relationships 14.1Goodwill 12.4--------------------------------------------------------------------------------------------------------------Consideration 31.7Satisfied by:Cash consideration 30.4Acquisition expenses settled in cash 1.1Accrued acquisition expenses 0.2==============================================================================================================Net cash outflow in respect of the acquisition of Duraco comprised:Cash consideration 30.4Acquisition expenses settled in cash during the period 1.1--------------------------------------------------------------------------------------------------------------Net cash outflow in respect of the acquisition of Duraco 31.5============================================================================================================== The adjustment to property, plant and equipment reflects the open market value of the freehold property. The adjustment to inventories and receivables reflects the impact of applying Filtrona group accounting policies to these items. The adjustment to deferred tax reflects the asset arising from a permanent difference between the accounting and tax base of property, plant and equipment. The adjustment to provisions includes amounts relating to the reassessment of potential liabilities that were not fully recognised on acquisition. Included in the £12.4m of goodwill recognised above is the value of the unique revenue synergy opportunities available to Filtrona through the integration of the business. Due to its nature this asset cannot be individually identified nor reliably measured. 10. Discontinued operations On 29 June 2007, Filtrona completed the disposal of Globalpack, its Brazilian consumer packaging business, to the Itavema Group for total gross consideration of £27.9m. The disposal resulted in a profit before tax of £2.7m which has been recognised as discontinued operations in the income statement. The results for Globalpack are presented below: Six months Six months Year ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m========================================================================================================= Revenue 13.6 13.6 27.1 Operating profit 1.7 0.7 2.4Finance income 0.1 0.2 0.3Finance expense (0.1) (0.2) (0.3)---------------------------------------------------------------------------------------------------------Profit before tax from discontinued operations 1.7 0.7 2.4Profit on disposal of discontinued operations 2.7 - -Income tax expense (2.4) (0.3) (0.9)---------------------------------------------------------------------------------------------------------Profit for the period from discontinued operations 2.0 0.4 1.5========================================================================================================= Attributable to:Equity holders of Filtrona plc 1.1 0.2 1.0Minority interests 0.9 0.2 0.5---------------------------------------------------------------------------------------------------------Profit for the period 2.0 0.4 1.5========================================================================================================= Earnings per share attributable to equity holders of Filtrona plc:Basic 0.5p 0.1p 0.5p=========================================================================================================Diluted 0.5p 0.1p 0.5p========================================================================================================= Income tax expense is analysed as follows: Six months Six months Year ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 £m £m £m--------------------------------------------------------------------------------------------------------- On profit on ordinary activities 0.7 0.3 0.9On profit on disposal 1.7 - -========================================================================================================= 2.4 0.3 0.9========================================================================================================= The major classes of assets and liabilities sold are analysed as follows: £m---------------------------------------------------------------------------------------------------------Assets and liabilities disposed of other than cashProperty, plant and equipment 17.5Inventories 2.1Trade and other receivables 6.2Trade and other payables (4.9)---------------------------------------------------------------------------------------------------------Net assets disposed of other than cash and cash equivalents 20.9========================================================================================================= £m---------------------------------------------------------------------------------------------------------Gain on disposal of discontinued operationsCash consideration 15.4Disposal expenses settled in cash (0.4)Cash and short-term deposits in Globalpack on disposal (0.6)---------------------------------------------------------------------------------------------------------Net cash inflow in respect of disposal of Globalpack 14.4=========================================================================================================Fair value of deferred consideration 10.2Net assets disposed of less minority share (18.4)Cumulative exchange gains deferred in equity 5.0Accrued disposal expenses (1.6)Warranty provisions (6.4)Closure expenses (0.4)Accelerated share option expense (0.1)---------------------------------------------------------------------------------------------------------Gain on disposal of discontinued operations 2.7========================================================================================================= Closure expenses relate to the exit from a Coated and Security Products office in Barcelona, Spain. 11. Dividends Per share Total --------------------------------------- ---------------------------------------- Six months six months year Six months six months year ended ended ended ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006 p p p £m £m £m====================================================================================================== 2006 interim:paid 27 October 2006 2.30 2.30 5.0 5.02006 final:paid 4 May 2007 4.60 10.1Proposed 2007 interim:payable 26 October 2007 2.52 5.5------------------------------------------------------------------------------------------------------ 2.52 2.30 6.90 5.5 5.0 15.1====================================================================================================== The proposed interim dividend for 2007 of 2.52p per 25p ordinary share will be paid on 26 October 2007 to equity holders on the share register on 28 September 2007. 12. Related party transactions There were no significant related party transactions during the period. 13. Exchange rates The principal exchange rates for Filtrona were: Average Closing --------------------------------------- ---------------------------------------- Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30 Jun 2007 30 Jun 2006 31 Dec 2006 30 Jun 2007 30 Jun 2006 31 Dec 2006======================================================================================================US$:£ 1.97 1.79 1.85 2.01 1.85 1.96•:£ 1.48 1.46 1.47 1.49 1.45 1.48====================================================================================================== Independent Review Report to Filtrona plc IntroductionWe have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, consolidated balance sheet, consolidated statement of cash flows,consolidated statement of recognised income and expense and related notes. Wehave read the other information contained in the Interim Statement andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilitiesThe Interim Statement, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the Interim Statement in accordance with theListing Rules of the Financial Services Authority which require that theaccounting policies and presentation applied to the interim figures should beconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. Review work performedWe 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 UK. A review consists principally of making enquiries ofFiltrona management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Statements on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusionOn 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 2007. KPMG Audit PlcChartered AccountantsLondon30 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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