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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Interim Results
RNS Number : 1635C
Macfarlane Group PLC
28 August 2008
 



28 August 2008

MACFARLANE GROUP'S INTERIM RESULTS TO 30 JUNE 2008

Profit before taxation from continuing operations for the six months up 100% to £1.0m (2007 £0.5m)

Sales growth of 12% from continuing operations

Net debt of £8.7m at June 2008, Group expects trading to be strongly cash positive in second half of 2008

Net provision of £0.7m made for discontinued activities

Interim dividend confirmed at 1p per share


Archie Hunter, Chairman of Macfarlane Group PLC today said:-

'The first half of 2008 was a period of further significant progress for Macfarlane Group as we continued to develop our core activities, doubling profits from our continuing operations in the process. This improvement was achieved despite significant supplier price increases across our businesses.

Profits before tax from continuing operations in the half-year increased to £1.0m from £0.5m in 2007 on turnover up 12.2% to £64.4 million.

Operating profits in our Packaging Distribution business increased to £0.6m (2007 - £0.3m). Turnover grew to £51.0 million, an increase of 15% of which 6% was organic and 9% was through acquisitions. These increases show the merit of targeting growth by both means, a strategy which we will hold to in the future. Online Packaging Limited ('Online'), our latest acquisition in January 2008, is operating well.

Our Manufacturing business increased operating profits to £0.9m (2007 - £0.5m) on turnover up 3.2% to £13.5 million. The profits increase reflected a strong operating performance in our Labels business, which benefited also from a strong Euro and a good performance in testing conditions from our Packaging Manufacturing business. 2008 has seen further development in the trading relationship between our Distribution and Packaging Manufacturing businesses and we intend to develop this further.

The commitment to focusing on core activities led to the decision last year to dispose of our Plastics operations based in Ireland and the disposal process is progressing. We have made provision for a net loss on discontinued activities of £0.7m.

An interim dividend of 1p per share will be paid on Thursday 23 October 2008 to shareholders on the register on Friday 26 September 2008.

It would be unrealistic to assume that we will be immune to the effects of a general economic downturn but we have taken actions to ensure that our infrastructure is in line with a reduced level of demand and we are confident that we have the business strength and momentum to cope. Profits generated to date are in line with our expectations.'



Further information:     Archie S. Hunter        Chairman               0141 333 9666

                                      Peter D. Atkinson      Chief Executive     0141 333 9666

                                      John Love                  Finance Director    0141 333 9666


The interim report will be sent to shareholders on 10 September 2008 and be available to members of the public at the Company's Registered Office, 21 Newton PlaceGlasgow G3 7PY from 12 September 2008.



Notes to Editors

Macfarlane Group PLC is a UK-based group of companies focused on packaging related activities. The Packaging Distribution business is the leading UK distributor of a comprehensive range of packaging consumable products. The Manufacturing Operations comprise three businesses, transit packaging manufacturing; self-adhesive and re-sealable labels; and plastics closures.


Headquartered in GlasgowScotland, Macfarlane Group employs 800 people at 23 sites, principally in the UK and Ireland and services 16,000+ customers, in a wide range of sectors including: consumer goods; logistics; electronics; food manufacturing and retailing; internet and home retailing.

  Interim Management Report

The Macfarlane Packaging Distribution business is the leading UK distributor of a comprehensive range of packaging consumable products. In a highly fragmented market, Macfarlane is the market leader with a market share in excess of 10%. The business operates through 16 Regional Distribution Centres (RDCs) supplying customers on a local, regional and national basis. The business enables customers to ensure their products are cost-effectively protected in transit and storage by providing them with a comprehensive product range, single source supply, just in time delivery and tailored stock management programmes. 

Business Performance

In the first six months of 2008 Packaging Distribution recorded an operating profit of £0.6m, compared to £0.3m the previous year. There were a number of factors that contributed to these results:

  • Sales revenue increased by 15% through a mixture of organic growth driven by both price and volume and the benefit of the acquisition of Online.

  • The impact of fuel, raw material and energy cost increases have resulted in supplier price increases being a significant feature in the first half of 2008. However we have been effective in working with our customers to manage the impact of these increases while maintaining our gross margin at an acceptable level.
  • The key investments we have made in our web-based packaging service, Packaging2U, and our dedicated new business team continue to have a positive effect in improving market presence and winning new accounts.

  • The acquisition of Online was completed in January 2008 and Hinckley, the smallest of Online's three sites, has been successfully integrated into our Coventry RDC. Online is a quality business and has significantly strengthened our position in the UK Packaging Distribution market.

  • We have commenced a programme to introduce vehicle-routing software to ensure our in-house distribution fleet is operating in the most cost-effective manner. The results from the early stages in the implementation are encouraging with improved vehicle utilisation and reduced mileage per delivery, helping to offset increases in fuel costs.

  • Within our network of 16 RDCs, based on our half-year results we had 5 RDCs performing at acceptable levels of return, 9 RDCs demonstrating improvements that indicate the ability to achieve acceptable performance levels in 2008 and 2 RDCs where performance is currently not at the acceptable level.

The plan for the remainder of 2008 is to focus our management actions in the following areas:

  • Maintain a tight focus on the effective management of supplier price changes;

  • Continue to drive organic sales growth particularly through effective deployment of the new business development and national account teams;

  • Ensure all RDCs are operating to their full profit potential;

  • Accelerate the momentum in the Packaging2U business;

  • Complete the introduction of the vehicle-routing software to all remaining RDCs;

  • Evaluate additional opportunities to improve the cost effectiveness of the business;

  • Develop our ability to respond to increasing demands from customers regarding environmentally friendly packaging solutions;

  • Deliver the benefits from the full year contribution of the Online Packaging acquisition; and

  • Accelerate market penetration through further targeted acquisitions.

Manufacturing Operations

Macfarlane has two manufacturing businesses, Labels producing self-adhesive and resealable labels and Packaging Manufacturing producing bespoke composite transit packaging and protective packaging components.

In the first half of 2008 Macfarlane Group's Manufacturing Operations recorded a profit of £0.9 million, compared with £0.5 million in 2007. Key features of performance in the first six months of 2008 were:

  • Sales increased by 3.2% versus 2007 primarily through gains with existing customers;

  • Gross margins improved due to internal efficiencies from investments in new equipment in 2007; and

  • The overhead to sales ratio improved by 0.2% reflecting the nature of the fixed cost base of the manufacturing businesses.


Manufacturing Operations

Macfarlane Labels operates from two plants, Kilmarnock and Dublin, supplying design and production of high quality self-adhesive and re-sealable labels for consumer packs.

In the first half of 2008 sales improved in self-adhesive labels and slowed slightly in re-sealable labels. However with our first US customers now operational we expect re-sealable label sales to strengthen in the second half of the year.

The cost savings implemented in recent years are enabling the business to operate with a lower cost base and the profitability of the Labels business in the first half of 2008 was ahead of the same period in 2007.

We operate Packaging Manufacturing operations from two UK sites - Grantham and Westbury, both of which manufacture custom-designed packaging solutions for customers looking for cost-effective methods of protecting higher-value products in storage and transit.

Sales in our UK Packaging Manufacturing operations were ahead of the same period in 2007 with good growth in sales to Macfarlane Distribution and new business wins. However pressure on raw material pricing and planned overhead investments resulted in first half profits broadly at a similar level to 2007.

Our priorities for the Manufacturing Operations in the second half of 2008 are to:

  • Maintain our momentum in winning major new contracts in the self-adhesive labels business;

  • Improve our penetration in the re-sealable labels market, particularly in the USA;

  • Utilise the strong relationship with Macfarlane Distribution to strengthen sales in Packaging Manufacturing; and

  • Ensure recent overhead investments in Packaging Manufacturing reflect in improved profitability.

Discontinued Operations

Macfarlane Plastics operates from Wicklow in Ireland, designing and producing injection-moulded closures and dispensers primarily used in the packaging of powdered consumer products.

The Plastics business generated sales in the first half of 2008 ahead of 2007. However weaker margins due to continuing increases in raw material and energy costs caused results to be below the equivalent period in 2007.

Risks and uncertainties

The principal risks, which could impact on the performance of the Group, were outlined in our Annual Report and Accounts in 2007. (available on our website at www.macfarlanegroup.net) These risks and uncertainties remain substantially the same for the remaining six months of the financial year and are summarised below:-

  • Profitability is sensitive to supplier price changes, whether caused by movements in commodity-based raw material price movements or in manufacturers' energy and fuel costs;

  • In Packaging Distribution, our recruitment and retention of staff with good local market knowledge is vital to compete in local and regional markets;

  • In our Manufacturing Operations, there is a high level of dependency on a small number of major customers; and

  • Both our businesses serve a wide range of customers in the UK. The customer base covers a range of UK market sectors, however a major UK economic slowdown could adversely affect the Group's results.


The Group operates a formal framework for the identification and evaluation of the major business risks faced by each business and determines an appropriate course of action to manage these risks.  

  

Future Outlook

The first half of 2008 has demonstrated an encouraging uplift in profit performance with improving results from both our Packaging Distribution and Manufacturing businesses. This has been achieved despite weakening demand conditions in the UK economy and pressure on costs.

Given the ongoing uncertainty in the UK economy, action plans have already been implemented to reduce the cost base in the second half of the year to ensure our infrastructure is in line with the likely lower level of demand. These plans, together with the momentum we have created and the impact of seasonality should ensure continued profit growth in the second half of the year.

The performance improvement plan management is currently implementing continues to gives us confidence that the Group is well positioned to fully develop its potential in the chosen markets.


 

Statement of Directors' Responsibilities


The directors confirm that, to the best of their knowledge, the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and that the interim management report includes a fair review of the information required under DTR 4.2.7 and DTR 4.2.8, namely:-


(i)   An indication of the important events that have occurred during the six months and their impact   
     
on the financial statements and a description of the principal risks and uncertainties for the 
      
remaining six months of the year; and

(ii)  Material related party transactions during the six months and any material changes in the related   
     
party transactions described in the last annual report.


The Directors of Macfarlane Group PLC were listed in the Macfarlane Group PLC Annual Report for 31 December 2007 and there have been no changes to the Board since that date. This list is maintained on the Macfarlane Group PLC website www.macfarlanegroup.net 


Approved by the Board of Directors on 28 August 2008 and signed on its behalf by





Peter D Atkinson            John Love

Chief Executive                Finance Director

  

INDEPENDENT REVIEW REPORT TO MACFARLANE GROUP PLC



Introduction


We have been engaged by the company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2008, which comprises the consolidated income statement, the consolidated statement of recognised income and expense, the consolidated reconciliation of movements in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 16. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the condensed set of financial statements.


This report is made solely to the company in accordance with the International Standard on Review Engagements 2410 (UK and Ireland) issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review 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, for our review work, for this report, or for the conclusions we have formed.


Directors' responsibilities


The half yearly financial report, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 


As disclosed in note 2 the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in the half yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.


Our responsibility


Our responsibility is to express to the Company a conclusion on the condensed set of financial statements included in the half yearly financial report based on our review.


Scope of review


We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of the persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.


Conclusion


Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.




Deloitte & Touche LLP

Chartered Accountants and Registered Auditor

Glasgow

United Kingdom

28 August 2008

  MACFARLANE GROUP PLC

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2008







Six months to 30 June 2008


Six months to 30 June

2007


Year to 31 December 2007


Note

£000


£000


£000

Continuing operations







Revenue

3

64,430


57,389


119,737

Cost of sales


(44,048)


(38,978)


(81,442)








Gross profit


20,382


18,411


38,295

Distribution costs


(3,442)


(2,998)


(5,791)

Administrative expenses


(15,513)


(14,674)


(29,453)

Non-recurring net property gains


-


-


14








Operating profit

3

1,427


739


3,065

Investment income

4

1,555


1,472


2,947

Finance costs

4

(1,993)


(1,758)


(3,545)








Profit before tax


989


453


2,467

Tax

5

(278)


(187)


979








Profit for the period from continuing operations

8

711


266


3,446








Discontinued operations







Loss for the period from discontinued operations

6

(613)


(1,989)


(1,616)








Profit/(loss) for the period

8

98


(1,723)


1,830








Earnings/(loss) per ordinary share

8






From continuing operations







    Basic


0.63p


0.24p


3.06p















    Diluted


0.63p


0.24p


3.06p















From continuing and discontinued operations







    Basic


0.09p


(1.53p)


1.63p















    Diluted


0.09p


(1.53p)


1.62p









  MACFARLANE GROUP PLC

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2008







Six months to 30 June 2008


Six months to 30 June

2007


Year to 31 December 2007


Note

£000


£000


£000








Exchange difference on translation of foreign operations


343


(135)


748

Actuarial (losses)/gains on defined benefit pension schemes


14


(307)



2,055



393

Tax on items taken directly to equity


85


(842)


(381)








Net income recognised directly in equity


121


1,078


760

Profit/(loss) for the period


98


(1,723)


1,830








Total recognised income and expense for the period


219


(645)


2,590









MACFARLANE GROUP PLC

CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2008




Six months to 30 June

2008


Six Months to 30 June

2007


Year to 31 December 2007


Note

£000


£000


£000








Profit/(loss) for the period


98


(1,723)


1,830

Dividends to equity holders in the period

7

(1,125)


(1,125)


(2,252)

Exchange differences on translation of foreign operations

343


(135)


748

Actuarial (losses)/gains on defined benefit pension schemes


14


(307)



2,055



393

Tax on items taken directly to equity


85


(842)


(381)

Credit in respect of share based payments


62


59


82








Movements in equity in the period


(844)


(1,711)


420

Opening equity


30,245


29,825


29,825








Closing equity


29,401


28,114


30,245










  MACFARLANE GROUP PLC

CONSOLIDATED BALANCE SHEET AT 30 JUNE 2008 (UNAUDITED)



30 June 

2008


30 June

2007


31 December

2007


Note

£000


£000


£000

Non-current assets







Goodwill


22,812


18,646


18,646

Property, plant and equipment


9,956


9,303


9,637

Investment property


-


1,701


-

Other receivables


875


1,059


872

Deferred tax asset

15

3,801


3,610


3,917








Total non-current assets


37,444


34,319


33,072








Current assets







Inventories


8,848


8,261


8,095

Trade and other receivables


29,985


27,180


31,108

Deferred tax asset

15

1,565


-


1,665

Cash and cash equivalents


641


890


348

Assets classified as held for sale

11

4,096


8,149


4,238










45,135


44,480


45,454















Total assets


82,579


78,799


78,526

Current liabilities







Trade and other payables


27,578


22,551


28,087

Current tax liabilities


58


220


407

Obligations under finance leases


209


41


182

Bank overdrafts and loans


9,222


11,107


3,252

Liabilities directly associated with assets classified as held for sale


11


1,475



3,551



1,409








Total current liabilities


38,542


37,470


33,337








Net current assets


6,593


7,010


12,117








Non-current liabilities







Retirement benefit obligations

14

14,021


13,180


14,272

Other creditors


160


-


169

Obligations under finance leases


455


35


503








Total non-current liabilities


14,636


13,215


14,944















Total liabilities


53,178


50,685


48,281















Net assets


29,401


28,114


30,245








Equity







Share capital


28,755


28,755


28,755

Revaluation reserves


70


167


70

Own shares


(1,406)


(1,406))


(1,406)

Translation reserves


291


(936)


(52)

Retained earnings


1,691


1,534


2,878








Total equity


29,401


28,114


30,245








  MACFARLANE GROUP PLC

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2008





Six months to 30 June


Six months to 30 June


Year to 31 December



Note

2008

£000


2007

£000


2007

£000








Net cash (outflow)/inflow from operating activities 

13

(2,695)


(2,518)


4,025















Investing activities







Interest received


48


11


46

Disposal of subsidiary undertaking

10

-


-


3,088

Acquisition of subsidiary undertaking

12

(3,630)


-


(800)

Proceeds on disposal of property, plant and equipment


2,408


29


44

Purchases of property, plant and equipment


(589)


(288)


(988)








Net cash (used in)/from investing activities


(1,763)


(248)


1,390















Financing activities







Dividends paid

7

(1,125)


(1,125)


(2,252)

Repayments of obligations under finance leases


(21)


(23)


(34)

Increase/(decrease) in bank overdrafts


5,970


3,370


(4,495)








Net cash generated from/(used in) financing activities

4,824


2,222


(6,781)








Net increase/(decrease) in cash and cash equivalents


366


(544)


(1,366)








Cash and cash equivalents at beginning of period


829


2,195


2,195








Cash and cash equivalents at end of period

13

1,195


1,651


829








  MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2008

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.    General information

The information for the year ended 31 December 2007 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985, but has been extracted from the Group's statutory accounts which have been filed with the Registrar of Companies. The auditors' report on these statutory accounts was unqualified pursuant to Section 235 of the Companies Act 1985 and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

2.    Basis of preparation

This condensed set of financial statements for the six months ended 30 June 2008 has been prepared on the basis of the accounting policies set out in the Group's 2007 statutory accounts and were approved by the Board of Directors on 28 August 2008. There have been no changes in accounting policies in the six months ended 30 June 2008. The condensed set of financial statements has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules. The Group has applied IAS 34 'Interim Financial Reporting' as adopted by the European Union in the preparation of this condensed set of financial statements. The condensed set of financial statements are unaudited but have been formally reviewed by the auditors and their report to the Company is set out on page 5.

3.    Segmental information

The Group's activities remain centred around two principal activities, with those Manufacturing Operations being classified as discontinued in the current and prior years disclosed separately.

(i)  Packaging Distribution

    The distribution of packaging materials from a UK network of Regional Distribution Centres.

(ii)  Manufacturing Operations

    The manufacture and supply of self-adhesive and re-sealable labels to a variety of FMCG customers in the UK and Europe and the design, manufacture, assembly and supply of timber, corrugated and foam-based packaging materials in the UK.

Discontinued Operations

The decision to dispose of the Group's Manufacturing Operations in US/Mexico and plastic-injection moulding operation in Ireland was taken in the first half of 2007 and the results from both operations are disclosed as discontinued operations in the consolidated income statement. The Manufacturing Operations in US/Mexico were sold in October 2007 with details of the disposal set out in note 10. The component parts of the plastic injection-moulding business held for sale at 30 June 2008 are set out in note 11.



Six months to 30 June

2008


Six Months to 30 June 2007


Year to 31 December 2007

Packaging Distribution

£000


£000


£000







Revenue

50,958


44,329


92,654

Cost of sales

(35,950)


(30,793)


(64,565)







Gross profit

15,008


13,536


28,089

Net operating expenses

(14,446)


(13,268)


(26,751)







Operating profit

562


268


1,338







Manufacturing Operations












Revenue

13,472


13,060


27,083

Cost of sales

(8,098)


(8,185)


(16,877)







Gross profit

5,374


4,875


10,206

Net operating expenses

(4,509)


(4,404)


(8,479)







Operating profit

865


471


1,727



3.    Segmental information (continued)

Six months to 30 June

2008


Six Months to 30 June 2007


Year to 31 December 2007

Trading results    Continuing operations

£000


£000


£000







Group segment - total revenue






Packaging Distribution

50,994


44,550


93,205

Manufacturing Operations

15,731


14,961


31,043

Inter-segment revenue

(2,295)


(2,122)


(4,511)







External Revenue        continuing operations

64,430


57,389


119,737













Packaging Distribution

562


268


1,338

Manufacturing Operations

865


471


1,727







Operating profit        continuing operations

1,427


739


3,065

Net finance costs        (see note 4)

(438)


(286)


(598)







Profit before tax

989


453


2,467

Tax

(278)


(187)


979

Loss for the period from discontinued operations

(613)


(1,989)


(1,616)







Profit/(loss) after tax and discontinued operations

98


(1,723)


1,830













Net assets

30 June

2008


30 June 2007


31 December 2007

Group segment

£000


£000


£000







Packaging Distribution

19,007


16,729


16,510

Manufacturing Operations

7,773


6,787


10,906







Continuing operations

26,780


23,516


27,416

Discontinued operations

2,621


4,598


2,829







Net assets

29,401


28,114


30,245













4.    Investment income and finance costs

Six months to 30 June

2008


Six Months to 30 June 2007


Year to 31 December 2007


£000


£000


£000







Expected return on pension scheme assets

1,524


1,453


2,900

Investment income

31


19


47







Total investment income

1,555


1,472


2,947













Interest on bank loans and overdrafts

(271)


(206)


(446)

Interest on obligations under finance leases

(21)


(4)


(24)

Interest cost of pension scheme liabilities

(1,701)


(1,548)


(3,075)







Total finance costs

(1,993)


(1,758)


(3,545)



















Net finance costs

(438)


(286)


(598)








5.    Tax

Six months to 30 June

2008


Six Months to 30 June 2007


Year to 31 December 2007


£000


£000


£000

Current tax






    UK corporation tax

-


-


-

    Overseas tax

(23)


(21)


(66)

    Prior year

-


65


(228)







Current tax

(23)


44


(294)

Deferred tax

(255)


(231)


1,273







Total

(278)


(187)


979







Tax for the first six months has been charged at 28% representing the best estimate of the effective tax charge for the full year. Tax has been provided for the period to 30 June 2008, reflecting the expected tax rate for the full year on overseas earnings. Of the deferred tax charge of £255,000, £155,000 relates to the reduction in the pension deficit in the period and £100,000 reflects the charge for the use of tax losses brought forward, which were valued as a deferred tax asset in the second half of 2007. 

6.    Discontinued operations

Six months to 30 June

2008


Six Months to 30 June

2007


Year to 

31 December

2007

The results for current and comparative periods are as follows:-

£000


£000


£000







Revenue

3,691


10,836


18,312

Cost of sales

(2,239)


(7,183)


(12,082)







Gross profit

1,452


3,653


6,230

Net operating expenses

(1,315)


(3,742)


(5,908)







Operating profit/(loss) 

137


(89)


322

Net interest paid

-


(100)


(140)

Impairment loss on re-measurement of discontinued operations

(750)


(1,800)


-

Loss on disposal of subsidiary undertaking    (see note 10)

-


-


(1,800)







Loss before tax

(613)


(1,989)


(1,618)

Tax

-


-


2







Post-tax loss from discontinued operations

(613)


(1,989)


(1,616)







Details of Discontinued Operations are set out in note 3. Comparative figures for June 2007 and December 2007 include results for the Group's Manufacturing Operations in US/Mexico for the six months to 30 June 2007 and the period from 1 January to 8 October 2007, the disposal date, respectively.

No depreciation has been charged in respect of discontinued businesses as required by IFRS5 in arriving at the operating result, but if the assets were not held for sale then depreciation of £237,000 (June 2007 £98,000 and December 2007 £300,000) would have been charged.

The net loss on re-measurement of discontinued operations, includes write-downs in the values of assets in our Plastics business to reflect the current view of realisable values and disposal costs.

Cash inflows in respect of the discontinued operations for operating activities amounted to £156,000 for 2008 (2007, outflow of £509,000 in the six months to 30 June 2007 and an inflow of £821,000 for the year to 31 December 2007). Cash outflows in respect of investing activities totalled £50,000 (2007, £121,000 in the six months to 30 June 2007 and inflows of £2,930,000 for the year to 31 December 2007) and cash outflows from financing activities were Nil (2007, £Nil in the six months to 30 June 2007 and £268,000 for the year to 31 December 2007).



7.    Dividends

Six months to 30 June

2008


Six Months to 30 June

2007


Year to 31 December 2007


£000


£000


£000

Amounts recognised as distributions to equity holders in the period






Final dividend in respect of the year ended 31 December 2007 (1.00p per share)    (2006 Final     1.00p per share)


1,125



1,125



1,125

Interim dividend for the year ended 31 December 2007

-


-


1,127







Distributions in the period

1,125


1,125


2,252







Dividends are not payable on shares held in the employee share trust.

The interim dividend payable on 23 October 2008 was declared on 28 August 2008 and has therefore not been included as a liability in these financial statements.

8.    Earnings/(loss) per share

Six months to 30 June

2008


Six Months to 30 June

2007


Year to 

31 December 2007

Earnings

£000


£000


£000

Earnings from continuing and discontinued operations being net profit attributable to equity holders of the parent


98



(1,723)



1,830

Add: Loss for the period from discontinued operations

613


1,989


1,616







Earnings from continuing operations for the purposes of basic earnings per share being net profit attributable to equity holders of the parent



711




266




3,446














30 June

2008


30 June

2007


31 December 2007

Number of shares






Weighted average number of ordinary shares in issue '000

115,019


115,019


115,019

Own shares in Employee Share Ownership Trusts '000

(2,491)


(2,491)


(2,491)







Weighted average number of shares in issue for the 

Purposes of basic earnings per share '000


112,528



112,528



112,528

Effect of dilutive potential ordinary shares due to share options

20


192


166







Weighted average number of shares in issue for the 

Purposes of diluted earnings per share '000


112,548



112,720



112,694







9.    Performance share plans

A conditional award to executive directors under the Performance Share Plan ('PSP') was made on 30 June 2008 based on 50% of salary. Peter Atkinson, Graham Casey and John Love received conditional rights to 581,706, 258,763 and 270,275 shares respectively.

The first performance condition is based on an earnings per share ('EPS') target for 1/3 of the award. This requires EPS in 2010 to be 4.1p - 4.6p for 25% - 100% of this part of the award to vest working on a straight-line basis. The remaining 2/3 of the award is based on Total Shareholder Return ('TSR'), requiring annual growth in TSR to be 20% - 25% for 25% - 100% of the award to vest, again working on a straight-line basis from a base price of 25.5p. No re-testing of the award is allowed.  





10.    Disposal of subsidiary

As set out in note 3, the Group's US/Mexican subsidiaries were sold in October 2007, with the resultant loss on disposal being disclosed in the financial statements for 2007. The amounts treated as disposed of in the comparative periods are as follows:-




Year to 

31 December

2007




£000

Net assets disposed




Goodwill



327

Property, plant and equipment



1,107

Inventories



723

Trade and other receivables



4,022

Trade payables



(1,109)





Net assets disposed of



5,070

Loss on disposal        (see Note 6)



(1,800)





Total consideration (net of attributable expenses)



3,270





Cash consideration (net of attributable expenses)



3,088

Deferred consideration



182





Total consideration (net of attributable expenses)



3,270





11.    Non-current assets held for sale

The major classes of assets and liabilities comprising the operations classified as held for sale at 30 June 2008 and the previous year's reporting dates are as follows:-


30 June

2008


30 June

2007


31 December

2007


£000


£000


£000







Property, plant and equipment

1,711


2,078


2,064

Inventories

440


1,148


455

Trade and other receivables

1,391


4,162


1,238

Cash and cash equivalents

554


761


481







Total assets classified as held for sale

4,096


8,149


4,238

Total liabilities associated with assets classified as held for sale

(1,475)


(3,551)


(1,409)







Net assets classified as held for sale

2,621


4,598


2,829








12.  Acquisition of subsidiary

On 8 January 2008, the Group acquired 100% of the issued share capital of Online Packaging Limited, for a consideration of approximately £5.3 million. £4.5 million of the consideration has been paid, with the deferred consideration becoming payable in the first quarter of 2009, subject to certain trading targets being met in the year to 31 December 2008. The business is a Packaging Distributor and is accounted for in the Packaging Distribution segment.

The provisional fair values assigned to the assets acquired, which are equivalent to book values, and the consideration paid and payable are set out below:-


30 June

2008


£000

Net assets acquired


Property, plant and equipment

228

Inventories

429

Trade and other receivables

1,603

Cash and cash equivalents

906

Trade and other payables

(1,758)

Current tax liabilities

(198)

Deferred tax liabilities

(40)



Total assets

1,170

Goodwill

4,166



Total consideration

5,336



Satisfied by:


Cash 

(4,536)

Deferred consideration

(800)



Total consideration

(5,336)



Net cash outflow arising on acquisition


Cash consideration

(4,536)

Cash and cash equivalents acquired

906




(3,630)



The goodwill arising on the acquisition of Online Packaging Limited is attributable to the anticipated future profitability of the distribution of the Group's product ranges in additional geographical markets in the UK and anticipated operating synergies from the future combination of activities with the existing Packaging Distribution network. The allocation of the purchase premium currently shown as goodwill, to separable classes of intangible assets will be concluded in the second half of 2008, with amortisation charges adjusted based on that allocation.

Online Packaging Limited contributed £3.9 million revenue and £0.1m to the Group's profit before tax for the period between the date of acquisition and 30 June 2008.


13.    Notes to the cash flow statement

Six months to 30 June

2008


Six Months to 30 June

2007


Year to 31 December 2007


£000


£000


£000







Operating profit/(loss)    Continuing operations

1,427


739


3,065

            Discontinued operations

137


(89)


322







Profit from operations    

1,564


650


3,387

Adjustments for:






    Depreciation of property, plant and equipment

1,023


1,048


2,094

    Gain on disposal of property, plant and equipment

(1)


(24)


(539)







Operating cash flows before movements in working capital

2,586


1,674


4,942







    (Increase)/decrease in inventories

(309)


402


538

    Decrease/(increase) in receivables

190


(1,834)


(4,379)

    (Decrease)/increase in payables

(3,569)


(1,338)


5,433

    Adjustment for pension scheme funding

(735)


(736)


(1,383)







Cash generated by operations

(1,837)


(1,832)


5,151

    Income taxes paid

(570)


(389)


(554)

    Interest paid

(288)


(297)


(572)







Net cash (outflow)/inflow from operating activities

(2,695)


(2,518)


4,025









Six months to 30 June

2008


Six Months to 30 June

2007


Year to 31 December 2007

Movement in net debt

£000


£000


£000







Increase/(decrease) in cash and cash equivalents in period

366


(544)


(1,366)

(Increase)/decrease in bank overdrafts

(5,970)


(3,370)


4,495

Cash flows from debt and lease financing

21


23


(586)







Movement in net debt in the period

(5,583)


(3,891)


2,543

Opening net debt

(3,108)


(5,651)


(5,651)







Closing net debt

(8,691)


(9,542)


(3,108)







Net debt comprises:-






Cash and cash equivalents                

641


890


348

Cash and cash equivalents in business held for resale    

554


761


481







Cash and cash equivalents at end of period

1,195


1,651


829

Bank overdrafts in business held for resale

-


(10)


-

Bank overdrafts and loans

(9,222)


(11,107)


(3,252)







Net bank debt

(8,027)


(9,466)


(2,423)

Obligations under finance leases

(664)


(76)


(685)







Closing net debt

(8,691)


(9,542)


(3,108)







Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with maturity of three months or less.

14.    Retirement benefit obligations

The figures below have been based on the results of the triennial actuarial valuation as at 1 May 2005, updated to 30 June 2008, 31 December 2007 and 30 June 2007. The assets in the scheme, the net liability position of the scheme as calculated under IAS 19 and the principal assumptions were:


30 June

2008


30 June

2007


31 December

2007


£000


£000


£000







Fair value of assets

40,784


44,143


45,032

Present value of scheme liabilities

(54,805)


(57,323)


(59,304)







Pension scheme deficit

(14,021)


(13,180)


(14,272)

Deferred tax asset

3,926


3,689


3,996







Pension scheme deficit net of related deferred tax asset

(10,095)


(9,491)


(10,276)







The scheme's liabilities were calculated on the following bases as required under IAS 19:

Assumptions 

30 June 2008

30 June 2007

31 December 2007





Discount rate

6.60%

5.80%

5.80%

Rate of increase in salaries

3.90%

3.20%

3.25%

Rate of increase in pensions in payment

3% or 5% 

for fixed increases 

or 3.20% for LPI

3% or 5% 

for fixed increases 

or 3.20% for LPI

3% or 5% 

for fixed increases 

or 2.75% for LPI

Inflation assumption

3.90%

3.20%

3.25%

Life expectancy beyond normal retirement date of 65




Male

21.3 years

19.5 years 

21.3 years

Female

24.0 years

22.4 years

24.0 years



Six months to 30 June

2008


Six Months to 30 June

2007


Year to

31 December

2007

Movement in scheme deficit in the period

£000


£000


£000







At start of period

(14,272)


(15,873)


(15,873)

Normal service cost

(114)


(149)


(272)

Contributions

763


798


1,571

Curtailment gains

86


84


84

Other finance charges

(177)


(95)


(175)

Actuarial (loss)/gain in the period

(307)


2,055


393







At end of period

(14,021)


(13,180)


(14,272)









Six months to 30 June

2008


Six Months to 30 June

2007


Year to

31 December

2007

Movement in fair value of scheme assets

£000


£000


£000







Scheme assets at start of period

45,032


43,630


43,630

Expected return on scheme assets

1,524


1,453


2,900

Actual return less expected return on scheme assets

(5,152)


(563)


(942)

Contributions from sponsoring companies

763


798


1,571

Contributions from scheme members

89


98


200

Benefits paid

(1,472)


(1,273)


(2,327)







Scheme assets at end of period

40,784


44,143


45,032














Six months 

to 30 June

2008


Six Months to 30 June

2007


Year to

31 December

2007

Movement in present value of defined benefit obligations

£000


£000


£000







Obligations at start of period

(59,304)


(59,503)


(59,503)

Service costs

(114)


(149)


(272)

Interest costs

(1,701)


(1,548)


(3,075)

Curtailment gain

86


84


84

Contributions from scheme members

(89)


(98)


(200)

Actuarial gain on liabilities in the period

4,845


2,618


1,335

Benefits paid

1,472


1,273


2,327







Obligations at end of period

(54,805)


(57,323)


(59,304)













15.    Deferred tax asset

30 June

2008


30 June

2007


31 December 2007


£000


£000


£000

Deferred tax asset on pension scheme deficit






At start of period

3,996


4,762


4,762

Charge on actuarial movement in the period applied through statement of recognised income and expense


85



(842)



(381)

Charge through income statement based on payments made to reduce deficit in the period


(155)



(231)



(385)







Deferred tax asset on pension scheme deficit (see note 14)

3,926


3,689


3,996

Deferred tax liabilities on timing differences

(125)


(79)


(79)







Net deferred tax asset - due after one year

3,801


3,610


3,917







Deferred tax asset on corporation tax losses






At start of period

1,665


-


-

(Charged)/credited through income statement 

(100)


-


1,665







Net deferred tax asset - due within one year

1,565


-


1,665







16.    Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed. The directors are satisfied that there are no other related party transactions occurring during the six month period which require disclosure.


  

Cautionary Statement


This announcement has been prepared solely to provide additional information to shareholders to assess the Group's strategy and the potential for the strategy to succeed. It should not be relied on by any other party or for any other purpose.

The announcement contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report. Such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and business risk factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.




This information is provided by RNS
The company news service from the London Stock Exchange
 
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IR DDLFLVVBFBBL
Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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