30th Aug 2006 07:01
Filtrona plc30 August 2006 30 August 2006 Filtrona plc Interim results for the six months ended 30 June 2006 Filtrona plc, the international, market leading, speciality plastic and fibreproducts supplier, today announces its interim results for the six months ended30 June 2006. • Sales were £282.9m (2005: £251.9m) up 12.3%. • Operating profit before intangible amortisation was £32.4m (2005: £30.0m) up 8.0%. • Profit before tax was £28.9m (2005: £26.3m) up 9.9%. • Adjusted earnings per share were 8.5p (2005: 7.7p) up 10.4%. • Interim dividend of 2.30p per share (2005: 2.13p) up 8.0%. • Net debt of £117.4m (December 2005: £120.2m). Commenting on today's announcement, Mark Harper, Chief Executive of Filtrona,said: "These good results represent above trend organic growth for Filtrona andreflect the underlying strength of the company within its international nichemarkets." Enquiries Filtrona plc FinsburyMark Harper, Chief Executive James LevitonSteve Dryden, Finance Director Gordon Simpson Tel: 01908 359 100 Tel: 020 7251 3801 Note A webcast of today's analyst presentation will be available on www.filtrona.comby 5pm today. Operating review Filtrona is an international, market leading, speciality plastic and fibreproducts supplier with activities segmented into Plastic Technologies and FibreTechnologies. For the six months ended 30 June 2006, Filtrona has continued to perform wellwith revenues of £282.9m (2005: £251.9m) up 12.3%. Operating profit beforeintangible amortisation was £32.4m (2005: £30.0m) up 8.0%. Profit before tax was£28.9m (2005: £26.3m) up 9.9%. At 30 June 2006, net debt was £117.4m with gearing improving to 85.1% (2005:93.0%). Adjusted earnings per share were 8.5p (2005: 7.7p) up 10.4%. The Board has declared an interim dividend up 8.0% to 2.30p per share (2005:2.13p) which will be paid on 27 October 2006 to shareholders on the register on29 September 2006 with an ex-dividend date of 27 September 2006. Underlying like-for-like revenues at constant exchange rates were up 8.0%.Underlying like-for-like operating profits at constant exchange rates, andtaking account of the benefit in 2005 from lower central services costs in thepre-demerger period, were also up 8.0%. 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 and packaging items for consumerproducts. Plastic Technologies delivered excellent revenue and profit growth driven bysustained investment in marketing programmes, new products and productivityimprovements. Reported revenues were £151.5m (2005: £136.1m) up 11.3% withunderlying like-for-like revenues at constant exchange rates up 7.0%. Reportedoperating profit increased to £22.1m (2005: £18.6m) up 18.8% with underlyinglike-for-like operating profit at constant exchange rates up 14.5%. Marginsimproved by 90 basis points to 14.6% (2005: 13.7%). Protection and Finishing Products continued to achieve strong growth. At Moss,the continued success of new product introductions and further good progress inContinental Europe more than offset the challenging trading conditions in the UKwhich are expected to persist. The expansion of the Moss North Europeandistribution hub was completed and this will yield important service benefits tothe Continental European operations. Growth from the Central European operationswas encouraging. The disposal of a small non-core plastic promotional productsbusiness was completed in February. The Skiffy business continued to perform ahead of the forecasts set at the timeof the acquisition in 2004 as a result of increased investment in marketingprogrammes and productivity improvements. A new Skiffy distribution operation inPoland is planned to commence operations in the second half of the year. Alliance continued to progress as planned. A new manufacturing facility wasestablished in Sao Paulo, Brazil as scheduled and further investment in toolingis underway. The Alliance Express network continued to trade well, benefitingfrom the ongoing marketing programme. The configuration of the Erie,Pennsylvania central warehouse was modified to achieve improved stockingdensity. Performance at the MSI oil country tubular goods thread protector business wasagain particularly strong buoyed by the sustained high levels of drillingactivity in the oil and gas sector. Additional investments in new productionmachinery and tooling at Houston, Texas and Vera Cruz, Mexico are deliveringsignificant benefits. Coated and Security Products continued to progress with satisfactory revenuegrowth. Volumes of printed tapes for promotions were depressed as some importantcustomers in the tobacco sector reduced promotional activity. The Indonesianoperation was relocated to the new Cigarette Filters facility in Surabaya andthe printer in Richmond, US was upgraded to facilitate the printing of securityapplications. The requirement for productivity upgrades has generated the needfor new slitting lines in the UK and US which will be installed during thesecond half of the year. Supplies of laminate for the new generation UK passportcommenced and volumes built steadily through the period. In May the acquisitionof the CORGI identity card printing operation was completed and the business hasbeen successfully transferred to the Mold facility in North Wales where a majorupgrade programme has been completed. Investment continues to be made in thedevelopment of proprietary security technologies for use across the business. FractureCode has just concluded a three and a half year licence agreement with amajor FMCG company and follow up activities are being undertaken after asuccessful launch at the May Intergraf Symposium. During the first half,investments in building the organisation and in further developing the handheldreader have, as expected, resulted in operating losses. FractureCode is expectedto generate a meaningful contribution to Filtrona's profits in 2009. The Plastic Profile and Sheet business achieved very strong growth as salesprogressed positively at each of the North American facilities with excellentrevenues from the point of purchase and aerospace markets. Performance was alsoassisted by the closure of the small Phoenix, Arizona facility at the start ofthe year and the transfer of volumes to the facilities at Chicago and Tacoma inthe US and Monterrey, Mexico. Significant productivity and performanceimprovement was delivered at Chicago. As a result of business growth, facilityexpansions in the Netherlands and Mexico are due to become operational later in2006 and early in 2007 respectively. The Globalpack Consumer Packaging business in Brazil experienced a return of thetough trading conditions which characterised the majority of 2005. Although thebusiness has continued to win new customers, margins on existing business havecome under pressure due to market overcapacity, particularly in tubes. The thirdroll-on ball line came on stream successfully at the end of the first quarterand ball volumes continue to grow satisfactorily. The business is focused onboth product innovation and operational cost reduction in response to the morechallenging market conditions. 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 delivered good revenue growth though operating profits werelevel with the same period in 2005. Revenue was £131.4m (2005: £115.8m) up 13.5%and operating profit was £14.0m (2005: £14.0m). Margins were reduced by 150basis points from 12.1% to 10.6% and operating profit at constant exchange rateswas down 2.8%. The Cigarette Filters business continued to encounter difficult conditions witha mixed performance across its manufacturing facilities. Overall volumes were up0.3% with an encouraging 17.7% increase in special filters offset as expected bya 19.3% decline in monoacetate filters. The facility at Monterrey, Mexico hascontinued to incur higher than anticipated costs to achieve the appropriatelevels of quality and productivity resulting in losses in the period.Forthcoming volume reductions in North America driven by an important customer'sdecision to transfer significant volumes of cigarette manufacturing out of thatregion has generated the need for a capacity review. Performance at the UKfacility in Jarrow has improved, but the integration of new technologies afterthe closure of the Swiss operations held back results. In Asia, the transfer ofthe Indonesian business to a new and larger facility was successfully completedand the volumes produced in this facility are growing rapidly. The Fibertec Bonded Fibre Components business progressed well in the period. TheNingbo, China facility moved into profitability as volumes continued to grow dueboth to production transfers and to new business won in the region. A plantexpansion is due to commence later in the year to support the growth beingachieved in China. The recovery in household products volumes has continued, newEuropean and Asian business has been won in writing instruments, and significantnew projects remain on track for commercialisation in the inkjet printer andmedical products sectors. An investment programme to upgrade the facility inReinbek, Germany is due to commence later in the year. Prospects These interim results represent an above trend performance in organic growthterms and Filtrona continues to seek investments to develop its niche marketpositions. The Board is confident that Filtrona will continue to progresssatisfactorily in the second half of the year although financial performance islikely to be affected by a weaker dollar and higher interest rates. Mark HarperChief Executive30 August 2006 Consolidated income statement Note Six months Six months Year ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m--------------------------------------------------------------------------------Revenue 2 282.9 251.9 513.7--------------------------------------------------------------------------------Operating profit before intangible amortisation and demerger expense 32.4 30.0 57.8Intangible amortisation (0.5) (0.4) (0.8)Demerger expense - - (1.0)--------------------------------------------------------------------------------Operating profit 2 31.9 29.6 56.0Finance income 3 4.7 1.1 5.6Finance expense 3 (7.7) (4.4) (11.6)--------------------------------------------------------------------------------Profit before tax 28.9 26.3 50.0Income tax expense 4 (9.8) (9.2) (17.0)--------------------------------------------------------------------------------Profit for the period 19.1 17.1 33.0-------------------------------------------------------------------------------- Attributable to:Equity holders of Filtrona 18.4 16.5 31.6Minority interests 0.7 0.6 1.4--------------------------------------------------------------------------------Profit for the period 19.1 17.1 33.0-------------------------------------------------------------------------------- Earnings per share attributable toequity holders of Filtrona:Basic 5 8.4p 7.5p 14.4pDiluted 5 8.3p 7.5p 14.4p-------------------------------------------------------------------------------- Consolidated balance sheet Note 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m--------------------------------------------------------------------------------AssetsProperty, plant and equipment 6 177.6 165.6 180.5Intangible assets 7 61.9 57.3 63.0Deferred tax assets 3.0 2.2 1.6--------------------------------------------------------------------------------Total non-current assets 242.5 225.1 245.1Inventories 59.3 59.7 59.8Income tax receivable 1.0 0.6 1.6Trade and other receivables 91.9 89.5 85.6Derivative assets 0.4 0.1 0.1Cash and cash equivalents 8 20.8 36.6 30.7--------------------------------------------------------------------------------Total current assets 173.4 186.5 177.8--------------------------------------------------------------------------------Total assets 415.9 411.6 422.9-------------------------------------------------------------------------------- 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 4.0 3.3 5.3Retained earnings 206.2 187.7 197.3--------------------------------------------------------------------------------Attributable to equityholders of Filtrona 132.3 113.1 124.7Minority interests 5.7 4.7 5.6--------------------------------------------------------------------------------Total equity 138.0 117.8 130.3-------------------------------------------------------------------------------- LiabilitiesInterest bearing loans andborrowings 137.3 130.0 145.2Retirement benefitobligations 36.1 34.7 35.8Other payables 3.4 2.6 2.1Provisions 2.8 7.2 2.5Deferred tax liabilities 11.6 11.6 11.4--------------------------------------------------------------------------------Total non-current liabilities 191.2 186.1 197.0 Bank overdrafts 0.3 1.3 5.0Interest bearing loans andborrowings 0.6 14.9 0.7Derivative liabilities 0.3 - 0.8Income tax payable 12.2 15.2 15.2Trade and other payables 69.8 72.6 68.9Provisions 3.5 3.7 5.0--------------------------------------------------------------------------------Total current liabilities 86.7 107.7 95.6--------------------------------------------------------------------------------Total liabilities 277.9 293.8 292.6--------------------------------------------------------------------------------Total equity and liabilities 415.9 411.6 422.9-------------------------------------------------------------------------------- Consolidated statement of cash flows Note Six months Six months Year ended ended Ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m--------------------------------------------------------------------------------Operating activitiesProfit before tax 28.9 26.3 50.0Adjustments for: Net finance expense 3.0 3.3 6.0 Intangible amortisation 0.5 0.4 0.8 Depreciation 11.4 10.4 22.1 Share option expense 0.7 0.6 1.1 Other items (0.6) 1.1 1.1Increase in inventories (2.0) (3.5) (2.2)Increase in trade andother receivables (9.0) (10.8) (4.7)Increase in trade andother payables 3.7 7.8 2.1Acquisition of employeetrust shares - (1.0) (1.0)Other cash movements (1.0) (0.2) (4.6)--------------------------------------------------------------------------------Cash inflow from operatingactivities 35.6 34.4 70.7Income tax paid (11.6) (5.2) (13.8)--------------------------------------------------------------------------------Net cash inflow fromoperating activities 24.0 29.2 56.9-------------------------------------------------------------------------------- Investing activitiesInterest received 0.5 0.5 1.2Acquisition of property,plant and equipment (15.9) (15.1) (38.2)Proceeds from sale ofproperty, plant andequipment 0.9 0.8 0.9Acquisition of businessesnet of cash acquired (0.5) - (4.6)Proceeds from sale ofbusinesses 0.3 - -Other investing cash flows (0.5) (0.1) (0.4)--------------------------------------------------------------------------------Net cash outflow frominvesting activities (15.2) (13.9) (41.1)-------------------------------------------------------------------------------- Financing activitiesInterest paid (3.9) (3.6) (6.7)Dividends paid to equityholders (9.3) - (4.7)(Repayments of)/proceedfrom short term loans (0.1) 13.8 (0.6)(Repayments of)/proceedsfrom long term loans (0.2) 121.3 133.7Capital contributions fromformer parent company - 4.2 4.2Repayments to formerparent company - (147.0) (147.0)--------------------------------------------------------------------------------Net cash outflow fromfinancing activities (13.5) (11.3) (21.1)-------------------------------------------------------------------------------- Net (decrease)/increase incash and cash equivalents (4.7) 4.0 (5.3)-------------------------------------------------------------------------------- Net cash and cashequivalents at thebeginning of the period 25.7 29.7 29.7Net (decrease)/increase incash and cash equivalents (4.7) 4.0 (5.3)Net effect of currencytranslation on cash andcash equivalents (0.5) 1.6 1.3--------------------------------------------------------------------------------Net cash and cashequivalents at the end ofthe period 8 20.5 35.3 25.7-------------------------------------------------------------------------------- Consolidated statement of recognised income and expense Six months Six months Year ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m--------------------------------------------------------------------------------Recognition of defined benefit pensionschemes on demerger: Actuarial loss - (34.7) (34.7) Deferred tax credit on actuarial loss - 10.5 10.5Other actuarial losses on definedbenefit pension schemes (1.3) - (2.0)Deferred tax credit on otheractuarial losses on definedbenefit pension schemes 0.4 - 0.7Movement on cash flow hedge - 0.1 (0.1)Foreign exchange translationdifferences (1.4) 5.1 7.4--------------------------------------------------------------------------------Income and expense recogniseddirectly in equity (2.3) (19.0) (18.2)Profit for the period 19.1 17.1 33.0--------------------------------------------------------------------------------Total recognised income andexpense for the period 16.8 (1.9) 14.8-------------------------------------------------------------------------------- Attributable to:Equity holders of Filtrona 16.2 (2.7) 12.9Minority interests 0.6 0.8 1.9--------------------------------------------------------------------------------Total recognised income and expense 16.8 (1.9) 14.8-------------------------------------------------------------------------------- Notes 1. Basis of preparation This interim financial information has been prepared and approved by theDirectors in accordance with the accounting policies that were applied in thepreparation of the Company's published consolidated financial statements for theyear ended 31 December 2005. The accounting policies, which conform to IFRS, have been consistently appliedto all periods presented. The figures for the six months to 30 June 2006 and 30 June 2005 are unauditedand do not constitute statutory accounts of Filtrona within the meaning ofSection 240 of the Companies Act 1985. However, the auditors have carried out areview of the figures to 30 June 2006 and their report is set out in theIndependent Review Report. The comparative figures for the financial year ended31 December 2005 are not the company's statutory accounts for that financialyear. Those accounts have been reported on by the company's auditors anddelivered to the registrar of companies. The report of the auditors was (i)unqualified, (ii) did not include a reference to any matters to which theauditors 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 CompaniesAct 1985. 2. Summarised segmental analysis Revenue Operating profit------------------------------------------------------------------------------------------------ Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m £m £m £m------------------------------------------------------------------------------------------------ PlasticTechnologies 151.5 136.1 273.3 22.1 18.6 37.6FibreTechnologies 131.4 115.8 240.4 14.0 14.0 26.9CentralServices - - - (3.7) (2.6) (6.7)------------------------------------------------------------------------------------------------ 282.9 251.9 513.7 32.4 30.0 57.8Intangibleamortisation (0.5) (0.4) (0.8)Demergerexpense - - (1.0)------------------------------------------------------------------------------------------------Total 282.9 251.9 513.7 31.9 29.6 56.0------------------------------------------------------------------------------------------------ 3. Net finance expense Six months Six months Year ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m--------------------------------------------------------------------------------Finance incomeBank deposits 0.5 0.5 1.1Other finance income 0.1 - 0.1Expected return on pension schemeassets 4.1 0.6 4.4-------------------------------------------------------------------------------- 4.7 1.1 5.6-------------------------------------------------------------------------------- Finance expenseLoans and overdrafts (3.8) (2.1) (5.4)Former parent company financing - (1.7) (1.7)Other finance expense - - (0.1)Interest on pension schemeliabilities (3.9) (0.6) (4.4)-------------------------------------------------------------------------------- (7.7) (4.4) (11.6)--------------------------------------------------------------------------------Net finance expense (3.0) (3.3) (6.0)-------------------------------------------------------------------------------- 4. Income tax expense A tax expense of 34% (six months ended 30 Jun 2005: 35%, year ended 31 Dec 2005:34%) on the profit of the underlying operations has been provided based on theestimated effective tax rate for the year. Income tax expense in the UK is £0.5m (six months ended 30 Jun 2005: £0.5m, yearended 31 Dec 2005: £1.1m). 5. Earnings per share Six months Six months Year ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m-------------------------------------------------------------------------------- Profit for the periodattributable to equity holders ofFiltrona 18.4 16.5 31.6Adjustment* 0.3 0.3 1.2--------------------------------------------------------------------------------Adjusted profit for the periodattributable to equity holders ofFiltrona 18.7 16.8 32.8-------------------------------------------------------------------------------- Basic weighted average ordinaryshares in issue (million) 218.9 219.3# 219.1#Dilutive effect of employee shareoption plans (million) 2.1 0.2 0.8--------------------------------------------------------------------------------Diluted weighted average ordinaryshares (million) 221.0 219.5 219.9-------------------------------------------------------------------------------- Basic earnings per share 8.4p 7.5p 14.4pAdjustment* 0.1p 0.2p 0.6p--------------------------------------------------------------------------------Adjusted earnings per share 8.5p 7.7p 15.0p--------------------------------------------------------------------------------Diluted basic earnings per share 8.3p 7.5p 14.4p-------------------------------------------------------------------------------- * The adjustment relates to intangible amortisation and demerger expense less tax relief thereon # The number of ordinary shares issued on demerger was used as the weighted average number for the period prior to demerger 6. Property, plant and equipment During the period Filtrona spent £15.9m on land and buildings, plant andmachinery and fixtures, fittings and equipment. Land and buildings, plant and machinery and fixtures, fittings and equipmentwith a net book value of approximately £1.1m were disposed of for proceeds of£0.9m. 7. Intangible assets During the period Filtrona purchased certain assets and the business of the CSLDigital Print division of CORGI Services Limited and, concurrently, entered intoa five year agreement with CORGI Group Limited for the exclusive supply of gasinstaller identity cards. The value of this agreement and the customer listattached to the business is included on the balance sheet as an intangibleasset. 8. Analysis of net debt 30 Jun 2006 30 Jun 2005 31 Dec 2005 £m £m £m------------------------------------------------------------------------------ Cash at bank and in hand 17.4 29.0 22.6Short term deposits repayable ondemand 2.9 5.8 7.1Short term deposits not repayable ondemand 0.5 1.8 1.0------------------------------------------------------------------------------Cash and cash equivalents 20.8 36.6 30.7Overdrafts (0.3) (1.3) (5.0)------------------------------------------------------------------------------Net cash and cash equivalents 20.5 35.3 25.7Debt due within one year (0.6) (14.9) (0.7)Debt due after one year (137.3) (130.0) (145.2)------------------------------------------------------------------------------Net debt (117.4) (109.6) (120.2)------------------------------------------------------------------------------ 9. Dividends Per share Total---------------------------------------------------------------------------------------------- Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30 Jun 2006 30 Jun 2005 31 Dec 2005 30 Jun 2006 30 Jun 2005 31 Dec 2005 p p p £m £m £m---------------------------------------------------------------------------------------------- 2005 interim: paid 31 October 2005 2.13 2.13 4.7 4.72005 final: paid 28 April 2006 4.27 9.3Proposed 2006 interim:payable 27October 2006 2.30 5.0---------------------------------------------------------------------------------------------- 2.30 2.13 6.40 5.0 4.7 14.0---------------------------------------------------------------------------------------------- The proposed interim dividend for 2006 of 2.30p per 25p ordinary share will bepaid on 27 October 2006 to equity holders on the share register on 29 September 2006. 10. Related party transactions There were no significant related party transactions during the period. 11. 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 2006 30 Jun 2005 31 Dec 2005 30 Jun 2006 30 Jun 2005 31 Dec 2005----------------------------------------------------------------------------------------- US$:£ 1.79 1.86 1.81 1.85 1.77 1.72•:£ 1.46 1.46 1.47 1.45 1.48 1.46----------------------------------------------------------------------------------------- Independent Review Report to Filtrona plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 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' responsibilities The 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 performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of Filtrona management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) 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 2006. KPMG Audit PlcChartered AccountantsLondon30 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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