29th Feb 2008 07:01
Molins PLC29 February 2008 29 February 2008 FOR IMMEDIATE RELEASE 2007 PRELIMINARY ANNOUNCEMENT Molins PLC, the international specialist engineering company, announces itsresults for the year ended 31 December 2007. 2007 2006Sales £89.3m £88.6mUnderlying operating profit* £5.4m £7.6mProfit before tax - continuing operations £7.4m £5.4mProfit/(loss) for the period £7.9m £(8.5)m Underlying earnings per share* 18.0p 24.2pBasic earnings/(loss) per share 42.0p (45.6)pDividends per share 7.0p 4.0p Cash generated from operations before reorganisation - continuingoperations £8.8m £13.5mNet debt £7.6m £12.3m * Continuing operations before net pension credit of £3.0m (2006: £1.5m) andreorganisation costs in 2006 of £2.6m. • Another year of strong operating cash flow• Profit for the period after three years of losses• Underlying operating profit of £5.4m (2006: £7.6m)• Interim dividend payment (in lieu of final) of 5p per share• Circular to shareholders posted today re Saunderton property Peter Byrom, Chairman, commented: "Tobacco Machinery remains well placed to continue to deliver strong results,although the favourable sales mix that benefited the division in 2007 is notexpected to be repeated in 2008. Performance in Packaging Machinery is expectedto improve, principally through progress that we expect to see at LangenPackaging, although that business continues to face a considerable currencyimpact. The Scientific Services businesses entered the year with strongermomentum compared with the previous year, and, even though each of thebusinesses works to short order lead times, we expect to see an improvedperformance in the current year." Enquiries: Molins PLC Tel: 020 7638 9571 Dick Hunter, Chief Executive; David Cowen, Group Finance Director Issued by: Citigate Dewe Rogerson Tel: 020 7638 9571 Margaret George CHAIRMAN'S STATEMENT I am pleased to report that the Group returned to profit in the year with apost-tax profit of £7.9m (2006: £8.5m loss). Underlying operating profit(continuing operations before net pension credit and reorganisation costs) was£5.4m (2006: £7.6m), on similar sales of £89.3m (2006: £88.6m). Basic earningsper share amounted to 42.0p (2006: 45.6p loss). Underlying earnings per shareamounted to 18.0p (2006: 24.2p). As in the previous two years, cash flow was again strong, with £8.8m generatedfrom continuing operations before reorganisation costs. Net debt reduced by£4.7m in the year to £7.6m. The Board has declared an interim dividend (in lieu of final) of 5p per ordinaryshare, making a total of 7p for the year. (2006: 4p). Property Today, the Company posted a circular to shareholders seeking approval for thegrant of an option to e-shelter facility services GmbH to complete the purchaseof the Saunderton property on or before 3 October 2008 for a cash considerationof £17.5m. The circular includes a notice convening a general meeting of theCompany on 18 March 2008 at which the approval will be sought. If completed, the transaction will result in net cash proceeds, after costs andtaxation, of approximately £15.7m, and generate a profit to the Group ofapproximately £3.7m. The Company sold the property in Nottingham in August 2007 for £3.7m beforecosts. After costs and taxation, net proceeds amounted to £3.3m and profitafter taxation of £1.6m was generated. This followed the sale in 2006 of theSandiacre Rose Forgrove business which operates from the site. Board We announced on 25 January 2008 that I would be retiring as Chairman of theBoard at the end of January 2009, after what will be 10 years on the Board. Weare in the process of recruiting a non-executive director with a view to the newdirector becoming Chairman next year. We also announced that Dick Hunter, whohas been a member of the Board since 2004, had been appointed Chief Executive. Outlook Tobacco Machinery remains well placed to continue to deliver strong results,although the favourable sales mix that benefited the division in 2007 is notexpected to be repeated in 2008. Performance in Packaging Machinery is expected to improve, principally throughprogress that we expect to see at Langen Packaging, although that businesscontinues to face a considerable currency impact. The Scientific Services businesses entered the year with stronger momentumcompared with the previous year, and, even though each of the businesses worksto short order lead times, we expect to see an improved performance in thecurrent year. Peter Byrom, Chairman, 29 February 2008 OPERATING REVIEW TOBACCO MACHINERY The Tobacco Machinery division achieved a significantly improved level ofprofitability in 2007, following completion of a wide-ranging restructuringprogramme. Sales in the year were £32.9m (2006: £36.2m) and operating profitwas £3.7m (2006: £1.9m before reorganisation costs). The division comprises operations in the UK, Czech Republic, Singapore, SouthAmerica and the USA, which, together with service engineers based in othercountries, provides the ability to meet customers' needs efficiently in allparts of the world. The division experienced an increase in sales of after-market products, partlyreflecting the favourable timing of orders towards the end of the previous year. However, this was more than offset by a reduction in lower margin sales ofrebuild equipment, which had entered the year with a low order book. With theimprovement in the cost base and efficiency of the business following thereorganisation carried out over the last three years, and the change in salesmix, the division produced considerably improved profitability. Market conditions continue to be challenging with a significant amount ofconsolidation within the cigarette manufacturing industry. Mergers andacquisitions of cigarette manufacturers continue, as well as the relocation ofmanufacturing activity from higher cost economies to lower cost environments.Sales opportunities for the division are driven by specific customer investmentrequirements. Against this backdrop, Molins Tobacco Machinery has continued tofocus on maintaining excellent contact with its customer base and providingafter-market services and a range of niche manufacturing equipment on aninternational basis. The Europe, Middle East and Africa regional sales team is based in Saunderton,UK, and services this wide geographical area through a combination of regionalsales managers, service engineers and industry specific agents. In 2007 therewas a low level of demand for new capital equipment within the higher costeconomies in this region. However, activity with the key customers in NorthAfrica continued to be strong and the team of locally based service engineershas been enlarged in this area in response to the market opportunities. Spareparts and service kit sales were significantly ahead of the prior year, helpedby the focus on key account management programmes and work done with customersto improve the performance of their manufacturing equipment. The North American market is serviced through the division's long-establishedoperation in Richmond, Virginia. Molins Richmond performed well in the year,with increased sales of equipment to the independent cigarette manufacturers. Molins Far East, based in Singapore, services the Asian markets. Order intakefor this region was higher than in 2006, although continued consolidation withinthe state-controlled industry in China and development of its indigenousmachinery manufacturing, resulted in a reduction in demand for both capitalequipment and spare parts in China. Order intake overall benefited from aparticularly large spare parts order from a key regional customer. The processof developing new products with suppliers based in the region and marketingthese products through the division's sales and service organisations hascontinued successfully. Molins do Brasil supplies the full range of Molins' original equipment, rebuildmachinery, spare parts and services to the cigarette manufacturers based withinSouth and Central America. As a result of the division's reorganisation, Molinsdo Brasil is now the rebuild machinery manufacturing centre for the division andis working closely with each of the regional sales and service teams to developsales of this equipment. The manufacturing operation in Plzen, Czech Republic, continued to growstrongly. The relocation of all machined parts that were previouslymanufactured at Saunderton to Plzen was successfully completed in the year,together with the majority of the machinery assembly activity. The division successfully launched a new mid-speed cigarette maker, Octave, atthe Tabexpo industry trade show towards the end of the year. The Octave hasbeen developed in partnership with a niche European supplier of tobaccoprocessing technology and is targeted at those segments within the industry thatrequire machinery with the highest level of product quality and the greatestlevel of manufacturing flexibility. The initial market response has beenpositive and the first machine will be installed in a customer's factory duringthe first half of 2008. The UK and Brazilian based engineering teams continue to focus on thedevelopment of upgrade and enhancement kits for the large Molins machine baseinstalled in cigarette factories world-wide. In summary, the division benefited from a period of stability followingcompletion of the restructuring programme and with lower costs and improvedservice, is well placed to continue its development in 2008, though a lessfavourable sales mix is likely to lead to a reduction in profit margins. PACKAGING MACHINERY Having entered the year with a significant order book, the division deliveredhigher sales of £38.7m, compared with £33.9m in the previous year. However,owing to project completion issues at Langen Packaging, profitability was weakand operating profit for the division fell to £0.3m (2006: £2.5m). ITCM, based in Coventry, UK, delivered a solid year's performance, with salesand profit at similar levels to the previous year. The business provides aunique combination of bespoke creative engineering solutions for customers'complex production and packaging needs, together with the production of themachinery that delivers the solution, either as a one-off machine or inproduction volumes. Following the success of the increased focus on businessdevelopment over the last few years, further resource has been applied to thisarea. The customer base continues to expand, with a number of orders beingreceived from the pharmaceutical sector, as well as the food and personal caresectors. The highlight in the year was the receipt of a significant order froman important pharmaceutical customer, which will be delivered progressivelythrough 2008. One of the features of the business is that it tends to receive arelatively small number of high-value contracts in the year, and it is importantto maintain a good level of order prospects, as such projects often take aconsiderable time to convert to an order. As previously indicated, the business was becoming space constrained and duringthe year an extension was built which has increased the workshop space by 50%.The business also invested in its managerial and technical capabilities in theyear and in a new enterprise resource planning system. Langenpac, based in Wijchen, the Netherlands, supplies highly automated producthandling, cartoning and end-of-line machinery to European customers andprogressively to customers in Asia. It entered the year with a strong orderbook, which led to the highest level of sales in its 20 year history. Projectsdelivered in the year included the supply of a high-value integrated packingline to a blue-chip cereal manufacturer, which reinforced Langenpac'scapabilities to manage such large-scale projects. Following product developmentover the last few years, it increased its sales of more standard cartoningmachines, some of which were sold by Langen Packaging into North America.However, whilst sales levels were strong, order intake in the year was muchreduced from the particularly high levels experienced in the previous year. Thebusiness continues to focus on specific market niches and segments, includingcontact lenses, premium packaging for the drinks industry, tissues andstick-packs, as well as on its more traditional food sectors. Despite record sales and profits, the business returned a lower than plannedmargin resulting from a combination of low margins on the bought-in elements ofits integrated packing lines, pricing pressures and operational inefficiencies.The expected move into new leased premises did not take place in the year but isexpected to occur in the second half of 2008 and this should help the businessimprove its project delivery efficiency. Langen Packaging, based in Mississauga, Canada, had a difficult year andincurred a considerable loss. Having started the year with a strong order book,profit margins on a number of its integration and robotic projects were muchlower than planned as the business experienced cost over-runs. With themajority of Langen's customers being based in the US, the competitive positionof the business was also affected by the 15% strengthening over the year of theCanadian dollar against the US dollar. A number of actions have been taken,including a change in senior management and a wide-ranging improvement plan hasbeen instigated. Market conditions are challenging, with signs of an economicslow-down in the US, but the business entered the year with a satisfactory orderbook and this, together with operational improvements, is expected to lead to animproved performance in 2008. Cerulean Packing, which supplies tube packing machinery from its base in MiltonKeynes, UK, experienced much lower sales and profit levels compared with theprevious year. Prospects, though, for this range of equipment are now moreencouraging with the possibility of an improvement in activity levels in theyear. Overall, the financial performance of the division was disappointing, owingmostly to the underperformance at Langen Packaging. The causes of thisunderperformance are understood but will take some time to rectify. Goodprogress was made at ITCM and Langenpac, and although market conditions arechallenging, we are optimistic that they will continue to progress in thecurrent year. SCIENTIFIC SERVICES The Scientific Services division, which comprises Cerulean and AristaLaboratories, entered the year with a relatively low order book which, asexpected, led to reduced sales and profit compared with 2006. Sales in the yearwere £17.7m (2006: £18.5m) and operating profit reduced to £1.4m (2006: £3.2m). Cerulean, based in Milton Keynes, UK, is the market-leading supplier of qualitycontrol instruments and analytical smoke constituent capture machinery to thetobacco industry, independent laboratories and government bodies. The businesshas a considerable network of global sales and service offices, which providelocalised support to its extensive customer base. Overall, the business experienced a small increase in sales compared with theprevious year, with the impact of the sale of a large project for a closed-loopcontrol system outweighing a reduction in sales across the balance of Cerulean'sproduct range. Profits, though, were lower, reflecting the reduced margin onthis large project compared with margins achieved on its standard product range. As previously advised, the business experienced a significant reduction indemand in the second half of 2006. This led to a much reduced order book as itentered the year and this demand pattern continued into the first half of 2007.However, a strong increase in order intake in the second half of the year hascontinued into the first few weeks of 2008. Overall, order intake forinstruments showed growth over the previous year, for both the established QTMrange as well as the newer C(2) range which, after a process of validation andcustomer trials, is finding its place in resolving customers' needs. But withthe consolidation within the tobacco sector impacting demand for newinstrumentation and quality control systems, expectations remain quite fragile. Product development activities continue to be a key part of Cerulean's strategicdevelopment. The business now offers to the market its broadest productportfolio, having launched a number of small manual measurement instrumentsduring the year, as well as introducing the Quantum range of instruments. Theseinstruments use established technology in a more accessible format, addingimprovements in speed and connectivity capability. Arista Laboratories, based in Richmond, Virginia and Kingston upon Thames, UK,is an independent tobacco and cigarette smoke constituent testing laboratory,for regulatory, research and product development purposes. The business experienced a disappointing year in terms of its financialperformance. Whilst it performed at similar levels in the first half of theyear compared with the comparable period last year, second half performance, aspreviously anticipated, was significantly impacted by the delay in orderplacement by its main UK customer. This led to significantly reduced sales fromthe UK operation compared with 2006. The market drivers for the business, though, remain positive. Regulation inrespect of tobacco products continues to grow in many parts of the worldincluding the UK, the EU, North and South America. Arista has developed itsrange of testing capabilities to meet these demands, and in particular hasinvested in its ignition propensity testing laboratory in the UK. FINANCIAL REVIEW The Group returned to profit in the year and generated strong cash flow. Profitfor the period was £7.9m (2006: £8.5m loss), which benefited from profit inrespect of discontinued operations of £2.3m (2006: £12.2m loss). Underlyingoperating profit (continuing operations before net pension credit andreorganisation costs) was lower than the previous year at £5.4m (2006: £7.6m).Underlying earnings per share decreased to 18.0p (2006: 24.2p) and basicearnings per share amounted to 42.0p (2006: 45.6p loss). The Group maintainedstrong cash flows, generating £8.8m from continuing operations beforereorganisation costs, with net debt reducing by £4.7m in the year. Operating results The trading performance of the Group is discussed in the Operating review. Group revenue was £89.3m for continuing businesses, compared with £88.6m in2006. Tobacco Machinery division sales reduced to £32.9m (2006: £36.2m) butoperating profit increased to £3.7m (2006: £1.9m before reorganisation costs of£2.6m). Packaging Machinery division sales increased to £38.7m (2006: £33.9m),but the division's operating profit decreased to £0.3m (2006: £2.5m).Scientific Services division sales decreased to £17.7m (2006: £18.5m) andoperating profit decreased to £1.4m (2006: £3.2m). Interest and taxation Net interest expense in 2007 was £1.0m (2006: £1.1m). The taxation charge forcontinuing operations was £1.8m (2006: £1.7m after reorganisation costs),resulting in an effective tax rate of 24% (2006: 31%), reflecting the reductionin the UK corporation tax rate to 28% on the Group's deferred tax balances and anumber of non-recurring credits. Discontinued businesses Profit from discontinued operations was £2.3m in the year, which comprised £1.6mprofit from the sale of a property in Nottingham, which had been retained by theGroup when the Sandiacre Rose Forgrove business was sold in 2006, and therelease of warranty and disposal provisions of £0.7m relating to the 2006 salesof Sasib S.p.A. and Sandiacre Rose Forgrove. Earnings per share Basic earnings per share amounted to 42.0p (2006: 45.6p loss). Basic earningsper share for continuing operations amounted to 29.7p (2006: 20.2p) andunderlying earnings per share (continuing operations before net pension creditand reorganisation costs) amounted to 18.0p (2006: 24.2p). Dividends The Board has decided to pay an interim dividend (in lieu of final) of 5p perordinary share which, together with the interim dividend of 2p paid in October2007, results in a total dividend of 7p per ordinary share in respect of 2007(2006: 4p per ordinary share). The dividend will be paid on 4 April 2008 toshareholders on the register on 14 March 2008. Cash, treasury and funding activities Group net debt reduced to £7.6m at the year end (2006: £12.3m). Net cash inflowfrom continuing operations before reorganisation costs, was £8.8m (2006:£13.5m). Reorganisation costs of £1.3m (2006: £1.4m) relating to the TobaccoMachinery division were paid in the year, having been charged in the incomestatement in 2006. A payment of £0.5m was made in the year to the UK definedbenefit pension scheme, consequent to the disposal of the Nottingham property.Net taxation payments of £0.7m (2006: £1.0m) and net interest payments of £1.0m(2006: £1.1m) were also made in the year. Investment expenditure in property,plant and equipment was £2.5m (2006: £1.4m) and product development expenditurewas £1.2m (2006: £1.9m). In addition to the sale of the Nottingham property,the Group sold property, plant and equipment assets in the year which yieldedcash receipts of £0.1m (2006: £1.3m). The net cash inflow in respect of thediscontinued businesses was £4.2m (2006: £2.7m outflow), comprising net receiptsof £0.9m from Paritel S.p.A., the acquirer of the Sasib business, following thesettlement of all outstanding claims between the parties in respect of the saleof that business, £3.7m proceeds from the sale of the Nottingham property, less£0.4m outflow in respect of the Sandiacre Rose Forgrove and Sasib businesses. There were no significant changes during the year in the financial risks,principally currency risks and interest rate movements, to which the business isexposed and the Group treasury policy has remained unchanged. The Group doesnot trade in financial instruments and enters into derivatives (principallyforward foreign exchange contracts) solely for the purpose of minimisingcurrency exposures on sales or purchases in other than the functional currenciesof its various operations. The Group maintains bank facilities appropriate to its expected needs. In theUK, at 31 December 2007, these comprised secured, committed borrowing facilitiesof £16.1m (2006: £23.1m), which had reduced in line with the scheduled loanrepayments under those pre-existing facilities. In December 2007 new committedbilateral borrowing facilities were entered into with Lloyds TSB Bank plc andFortis Bank NA/SV totalling £18m. These new facilities are committed for fiveyears, expiring in December 2012. The facilities, which are subject tocovenants covering earnings, interest cover and tangible net worth, are bothsterling and multi-currency denominated. Additionally, the Group maintainscommitted facilities from overseas banks of £5.2m, denominated in US dollars andeuros. Short-term overdrafts and borrowings are utilised around the Group tomeet local cash requirements. These are typically denominated in localcurrencies. Foreign currency borrowings are used to hedge investments inoverseas subsidiaries where appropriate. Pension valuations The Group's main defined benefit scheme is in the UK. Changes were made to thebenefit structure of this scheme in 2006, principally moving the pension accruallink from final salary to career average for future entitlements, therebyreducing the uncertainty of the cost to the fund in respect of the benefit.Also, employee contribution rates were increased to 8% of earnings from 1 July2007 for most employees, but to 6% for those employees joining the scheme after1 April 2006 for which a lower benefit rate is accrued. A scheme specificfunding valuation as at 30 June 2006 was completed by the fund's trustee duringthe year. This showed a funding level of 102% of liabilities, which was asimilar position to the previous formal valuation in 2003 despite an increase inthe scheme's liabilities of 6% due to changed mortality assumptions applicableat the date of the valuation. At the same time the trustee is obliged to lookat the solvency position of the fund and this showed a deficit of 31%.Valuations are extremely sensitive to a number of factors outside the control ofthe Group, including discount rates. Company contributions for ongoing benefitshave been agreed at 5% in respect of members who joined the scheme after 1 April2006 and 11% for all other members. During the year the Company made paymentsto the fund of £1.2m for the regular cost of benefits, £0.7m for pensionaugmentation costs relating to redundancies announced in 2006 (and in respect ofwhich a further and final payment of £0.6m will be made before 30 June 2008),and £0.5m additional funding consequent to the sale by the Group of theNottingham property. The Group has adopted IAS 19 (revised) Employee benefits as its basis ofaccounting for pension costs. The 2007 valuation of the UK fund's assets andliabilities was undertaken as at 31 December 2007 based on detailed valuationwork carried out as at 30 June 2006, updated to reflect changes existing at the2007 year end. The significantly smaller US defined benefit schemes were valuedat 31 December 2007, using actuarial data as of 1 January 2007, updated forconditions existing at the year end. Under IAS 19 (revised) the Group haselected to recognise all actuarial gains and losses outside of the incomestatement. In 2007, the net pension credit arising from the Group's defined benefit schemesfor continuing operations was £3.0m (2006: £1.5m), before accounting fordeferred tax. The IAS 19 (revised) valuation of the UK fund showed a netsurplus of £25.9m at 31 December 2007 (2006: £6.6m deficit) and the US pensionfunds showed an aggregated net surplus of £0.4m (2006: £0.4m deficit), allamounts being before tax. The combined market value of the Group's definedbenefit schemes' assets at 31 December 2007 was £367.7m, and the value of theliabilities on an IAS 19 (revised) basis at 31 December 2007 was £341.4m. Property A circular was sent to shareholders on 29 February 2008, containing details of aproposed transaction in respect of surplus property owned by the Company inSaunderton, UK. In summary, approval is being sought to grant the prospectivepurchaser of the site an option to acquire the property on or before 3 October2008 for a cash consideration of £17.5m. The book value of the property subjectto the transaction was £13.2m at 31 December 2007 before deferred tax, £12.6mnet of deferred tax. If completed the transaction will result in net cashproceeds, after costs and taxation of approximately £15.7m and generate a profitto the Group of approximately £3.7m. Full details of the proposed transactionare contained in the circular. Equity Group equity at 31 December 2007 was £52.3m (2006: £24.1m), representing 259pper ordinary share. The increase arises from actuarial gains in respect of theGroup's defined benefit schemes of £18.0m, profit for the period of £7.9m,currency translation movements on the net assets of the overseas businesses of£1.3m, deferred tax adjustments to items previously taken directly to equity of£1.8m and equity-settled share-based transactions of £0.3m, net of dividendpayments of £1.1m. Consolidated income statement 2007 2006 Before reorg. Reorg. Total costs costs Total Notes £m £m £m £m (note 3)Continuing operationsRevenue 2 89.3 88.6 - 88.6 Cost of sales (63.2) (58.1) (1.5) (59.6) Gross profit 26.1 30.5 (1.5) 29.0 Other operating income 0.2 0.5 - 0.5Distribution expenses (5.4) (7.7) (0.1) (7.8)Administrative expenses (12.3) (13.9) (0.1) (14.0)Other operating expenses (0.2) (0.3) (0.9) (1.2) Operating profit 2, 4 8.4 9.1 (2.6) 6.5 Financial income 0.2 0.2 - 0.2Financial expenses (1.2) (1.3) - (1.3) Net financing costs (1.0) (1.1) - (1.1) Profit before tax 7.4 8.0 (2.6) 5.4 Taxation (1.8) (2.4) 0.7 (1.7) Profit from continuingoperations 5.6 5.6 (1.9) 3.7 Discontinued operationsProfit/(loss) from discontinuedoperations 9 2.3 (12.2) - (12.2) Profit/(loss) for the period 7.9 (6.6) (1.9) (8.5) Basic earnings/(loss) perordinary share 5 42.0p (45.6)p Diluted earnings/(loss) perordinary share 38.0p (45.6)p Continuing operationsBasic earnings per ordinaryshare 5 29.7p 20.2p Diluted earnings per ordinaryshare 27.0p 18.4p Consolidated balance sheet 2007 2006 Notes £m £mNon-current assetsIntangible assets 13.3 13.3Property, plant and equipment 23.4 22.3Other receivables 0.5 0.5Employee benefits 6 17.2 -Deferred tax assets 0.4 2.7 54.8 38.8 Current assetsInventories 15.1 12.9Trade and other receivables 18.3 23.4Current tax assets 0.3 0.5Cash and cash equivalents 3.5 4.7Assets held for sale 9 - 1.8 37.2 43.3Current liabilitiesBank overdrafts (0.8) (0.1)Interest-bearing loans and borrowings (0.6) (4.3)Trade and other payables (25.1) (26.8)Current tax liabilities (1.0) (0.8)Provisions (1.8) (2.8) (29.3) (34.8) Net current assets 7.9 8.5 Total assets less current liabilities 62.7 47.3 Non-current liabilitiesInterest-bearing loans and borrowings (9.7) (12.6)Trade and other payables - (0.2)Employee benefits 6 - (7.0)Deferred tax liabilities (0.7) (3.4) (10.4) (23.2) Net assets 2 52.3 24.1 EquityIssued capital 5.0 5.0Share premium 26.0 26.0Reserves 5.0 3.7Retained earnings 16.3 (10.6) Total equity 52.3 24.1 Consolidated statement of cash flows 2007 2006 Note £m £mContinuing operationsOperating activitiesOperating profit 8.4 6.5Reorganisation costs included in operating profit - 2.6 Amortisation 1.2 1.1Depreciation 2.0 2.2Profit on sale of property, plant and equipment - (0.3) Other non-cash items (2.7) (1.5)Pension payments (1.2) (0.7) Working capital movements: - (Increase)/decrease in inventories (1.4) 2.9 - Decrease/(increase) in trade and other receivables 5.4 (6.5) - (Decrease)/increase in trade and other payables (2.8) 7.7 - Decrease in provisions (0.1) (0.5) Cash generated from operations before reorganisation 8.8 13.5 Reorganisation costs paid (1.3) (1.4)Pension payment following sale of Nottingham property (0.5) - Cash generated from operations 7.0 12.1 Taxation paid (0.7) (1.0) Net cash from operating activities 6.3 11.1 Investing activities Proceeds from sale of property, plant and equipment 0.1 1.3 Acquisition of property, plant and equipment (2.5) (1.4)Development expenditure (1.2) (1.9) Net cash from investing activities (3.6) (2.0) Financing activitiesInterest received 0.2 0.2Interest paid (1.2) (1.3)Decrease in borrowings (7.0) (1.5)Dividends paid (1.1) - Net cash from financing activities (9.1) (2.6) Discontinued operationsNet cash from operating activities - (0.2)Net cash from investing activities 4.2 (2.2)Net cash from financing activities - (0.3) Net cash from discontinued operations 4.2 (2.7) Net (decrease)/increase in cash and cash equivalents 7 (2.2) 3.8Cash and cash equivalents at 1 January 4.6 0.9Effect of exchange rate fluctuations on cash held 0.3 (0.1) Cash and cash equivalents at period end 2.7 4.6 Consolidated statement of recognised income and expense 2007 2006 Note £m £mCurrency translation movements arising on foreigncurrency net investments 1.3 (1.3)Actuarial gains 27.1 3.8Withholding tax on pension asset 6 (9.1) -Tax on items taken directly to equity 1.8 - Net income recognised directly in equity 21.1 2.5 Currency translation movements transferred to loss on disposalsProfit/(loss) for the period - 0.2 7.9 (8.5)Total recognised income and expense for the period 29.0 (5.8) Notes to preliminary announcement 1. The Group's accounts have been prepared in accordance withInternational Accounting Standards and International Financial ReportingStandards that were effective at 31 December 2007 and adopted by the EU. The financial information set out above does not constitute theCompany's statutory accounts for the years ended 31 December 2007 or 2006.Statutory accounts for 2006 have been delivered to the registrar of companies,and those for 2007 will be delivered following the Company's Annual GeneralMeeting. The auditors have reported on those accounts; their reports were (i)unqualified, (ii) did not include references to any matters to which theauditors drew attention by way of emphasis without qualifying their reports and(iii) did not contain statements under section 237 (2) or (3) of the CompaniesAct 1985. 2. Segmental analysis Business segments Tobacco Packaging Scientific Machinery Machinery Services Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m Revenue -continuing operations 32.9 36.2 38.7 33.9 17.7 18.5 89.3 88.6 -discontinued operations - 12.8 Revenue - total 89.3 101.4 Underlying segment operating profit before net pension credit and reorganisation costs 3.7 1.9 0.3 2.5 1.4 3.2 5.4 7.6 Reorganisation costs - (2.6) - - - - - (2.6) Segment operating profit/(loss) before net pension credit 3.7 (0.7) 0.3 2.5 1.4 3.2 5.4 5.0 Net pension credit (ex. curtailmentcosts) 3.0 1.5 Operating profit 8.4 6.5 Net financing costs (1.0) (1.1) Profit before tax 7.4 5.4 Taxation (1.8) (1.7) Profit from continuing operations 5.6 3.7 Discontinued operationsProfit/(loss) from discontinuedoperations 2.3 (12.2) Profit/(loss) for the period 7.9 (8.5) Segment net assets 24.2 24.5 3.5 2.7 16.8 15.9 44.5 43.1 Net (liabilities)/assets -discontinued operations (0.8) 1.3 Unallocated net assets/(liabilities) 8.6 (20.3)(including net debt and pensionassets/liabilities) Total net assets 52.3 24.1 Geographical segments Revenue Segment net assets (by destination of goods) (by location of assets) 2007 2007 2006 2006 2007 2006 £m % £m % £m £mContinuing operationsUnited Kingdom 13.0 15 9.2 11 27.4 27.9Continental Europe 12.9 14 18.1 20 10.0 6.4North America 29.3 33 23.9 27 5.9 7.2Asia 18.3 20 22.0 25 0.2 0.6Rest of the world 15.8 18 15.4 17 1.0 1.0 89.3 100 88.6 100 44.5 43.1 3. The reorganisation costs in 2006 of £2.6m before tax relate to therestructuring of the Tobacco Machinery division. 4. The Group accounts for pensions under IAS 19 (revised) Employeebenefits. An actuarial valuation of the UK pension fund at 30 June 2006 wascompleted in the year and the assumptions of this valuation have been applied inthe financial statements, updated to reflect conditions at 31 December 2007.Operating profit includes a net pension credit of £3.0m (2006: £1.5m) in respectof ongoing benefits comprising current service costs of £1.8m, interest on thepension obligations of £18.4m, offset by the expected return on the schemes'assets of £23.2m. In addition in 2006 there were curtailment costs of £0.9m arising fromredundancies, which are reported in reorganisation costs, and in respect ofSandiacre Rose Forgrove, a discontinued operation, £0.3m of pension costs less£0.8m of curtailment benefits. 5. Basic earnings/(loss) per ordinary share is based upon the profit forthe period of £7.9m (2006: £8.5m loss) and on a weighted average of 18,903,387shares in issue during the year (2006: 18,576,888). Basic earnings per ordinaryshare on continuing operations is based upon the profit for the period of £5.6m(2006: £3.7m) and the weighted average number of ordinary shares as shown above. Underlying earnings per ordinary share, which is calculated on continuingoperations before net pension credit and reorganisation costs, was 18.0p for theyear (2006: 24.2p). 6. Employee benefits include the aggregated net pension surpluses of theUK defined benefit pension scheme of £25.9m (31 December 2006: £6.6m deficit)and the US defined pension schemes of £0.4m (31 December 2006: £0.4m deficit),all figures before tax. The Group has assessed the impact of the IAS 19 (revised) asset ceiling and hasconsidered the principles set out in IFRIC14 IAS19 - The limit on a definedbenefit asset, minimum funding requirement and their interaction in determiningthe inclusion of the full value of the pension asset on the balance sheet at 31December 2007. The carrying value of the surplus in the UK scheme has beenshown net of withholding tax reflecting the expected manner of its recovery atthe end of the life of the scheme. 7. Reconciliation of net cash flow to movement in net debt 2007 2006 £m £mNet (decrease)/increase in cash and cash equivalents (2.2) 3.8Cash inflow from movement in borrowings and finance leases 7.0 1.8 Change in net debt resulting from cash flows 4.8 5.6Decrease in borrowings and finance leases on sale ofdiscontinued operations - 0.9Translation movements (0.1) 0.2 Movement in net debt in the period 4.7 6.7Opening net debt (12.3) (19.0) Closing net debt (7.6) (12.3) 8. Analysis of net debt 2007 2006 £m £mCash and cash equivalents - current assets 3.5 4.7Bank overdrafts - current liabilities (0.8) (0.1)Interest-bearing loans and borrowings - current liabilities (0.6) (4.3)Interest-bearing loans and borrowings - non-current (9.7) (12.6)liabilities (7.6) (12.3)Closing net debt 9. Discontinued operations and assets held for sale On 30 August 2007, the Group sold its freehold interest in a property inNottingham that had been classified as an asset held for sale at 31 December2006 and had been retained by the Group when it sold the Sandiacre Rose Forgrovebusiness in 2006. The cash consideration was £3.7m and the profit on salebefore and after tax was £1.5m. Also the Group earned rental income of £0.1mfrom the property to the date of its sale. In addition £0.7m profit in 2007arises from the negotiated settlement of claims and the release of provisions inconnection with the prior year disposals of Sandiacre Rose Forgrove and SasibS.p.A. These businesses were sold on 18 December 2006 and 28 July 2006respectively, and resulted in a loss from discontinued operations of £12.2m in2006. 10. Subsequent event On 29 February 2008 the Company posted a circular to shareholders seekingapproval for the grant of an option to e-shelter facility services GmbH tocomplete the purchase for a cash consideration of £17.5m of the Saundertonproperty on or before 3 October 2008. The circular includes a notice conveninga general meeting of the Company on 18 March 2008 at which the approval will besought. If completed the transaction will result in net cash proceeds, aftercosts and taxation, of approximately £15.7m, and will generate a profit to theGroup of approximately £3.7m. The property is included as property, plant andequipment in the balance sheet, with a carrying value of £13.2m (before deferredtax) at 31 December 2007. 11. The Annual Report and Accounts will be sent to all shareholders in March2008 and additional copies will be available from the Company's registeredoffice at 11 Tanners Drive, Blakelands, Milton Keynes, MK14 5LU. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mpac Group Plc