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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Interim Results
RNS Number : 1598N
Macfarlane Group PLC
30 August 2011
 



 

 

30 August 2011

MACFARLANE GROUP'S INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2011

Ÿ Profit before tax and exceptional items up by 27% to £0.9m (2010: £0.7m)

Ÿ Sales increase by 7% to £68.5m (2010: £64.1m)

Ÿ Profit after tax and exceptional items of £0.7m (2010: £1.4m, reflecting an exceptional pension credit of £0.8m in 2010)

Ÿ Net debt of £10.4m at 30 June 2011 (30 June 2010: £9.7m)

Ÿ Group expects trading to be cash generative in second half of 2011

Ÿ Interim dividend of 0.50p per share proposed for payment October 2011 (2010: 0.50p per share)

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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

"In the face of ongoing economic constraints and continued raw material cost price increases, Macfarlane Group has further improved its performance in the first six months of 2011.  The business has focused on recovering supplier price increases from existing customers, seeking out new business opportunities and improving efficiencies and the Group has made progress on all these fronts.

Group turnover grew in the first half of 2011 by 7% to £68.5m, (2010: £64.1m) largely attributable to price-driven sales growth.  The inevitable time lag in passing on supplier price increases to customers had a resultant impact on gross margins, which reduced to 30.1% from 31.2% for the same period in 2010.  Our Packaging Distribution business increased turnover by 7% to £54.8m (2010: £51.3m), reflecting supplier price increases and higher levels of new business in target sectors.  Operating profit before exceptional costs in Packaging Distribution increased to £1.3m (2010: £1.2m). Our Manufacturing Operations also grew turnover by 7% to £13.7m (2010: £12.8m) with operating profit before exceptional items remaining at £0.1m (2010: £0.1m).  Our net interest cost for the period reduced by £0.1m and consequently, the Group recorded a 27% increase in profit before tax and exceptional items to £0.9m (2010: £0.7m).

The Group's pension deficit at 30 June 2011 was £15.6m (31 December 2010: £15.7m).  Although some movements in the pension deficit, such as stock market movements, remain outwith our control, further measures to reduce the deficit are planned.  Net debt at 30 June 2011 of £10.4m, is higher than at the level at 30 June 2010 when it was £9.7m.  The Group is again expected to be cash generative in the second half of the year and as a result, we anticipate debt levels reducing by the year-end.  The Board proposes that the interim dividend be maintained at its 2010 level of 0.50p per share, to be paid on 13 October 2011.

Trading in the second half of 2011 has started satisfactorily.  Our Packaging Distribution business is concentrating on further performance improvement with particular focus on the development of the business in the third party logistics sector and presentational and retail packaging together with ongoing programmes for new business generation and cost reduction.  Packaging Manufacturing is making good progress in key customer sectors and, although it is experiencing serious market pressures in its traditional self-adhesive label business, Labels continues to see growth in its Reseal-it™ business. The focus of the Group continues to be on organic growth of market share.

Whilst trading conditions will continue to be challenging and the outlook for the economy remains uncertain, nevertheless, the Board expects the Group to continue to deliver to its expectations for 2011."

Further enquiries:

Macfarlane Group

Tel: 0141 333 9666


Archie Hunter               Chairman



Peter Atkinson              Chief Executive



John Love                     Finance Director


 

Spreng & Co

Tel: 0141 229 0482


Callum Spreng

Mob: 07803 970103

 

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 the manufacture of transit packaging and the manufacture of self-adhesive and re-sealable labels.  Headquartered in Glasgow, Scotland, Macfarlane Group employs 700 people at 22 sites, principally in the UK and Ireland, servicing 20,000+ customers, in a wide range of sectors including: consumer goods; logistics; electronics; food manufacturing and retailing; internet and home retailing.



 

Interim Results - Management Report

Macfarlane Group's trading activities comprise two divisions, Packaging Distribution and Manufacturing Operations.

Packaging Distribution

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 estimated at 20%.  The business operates through 17 Regional Distribution Centres (RDCs) supplying customers on a local, regional and national basis.  We benefit customers by enabling them to ensure their products are cost-effectively protected in transit and storage by providing them with a broad product range, single source supply, just in time delivery and tailored stock management programmes.

In the first six months of 2011, operating profit achieved by Macfarlane Packaging Distribution before exceptional items was £1.3m, (2010: £1.2m). The supplier price increases experienced in 2010 continued to feature in 1H 2011 particularly on paper and polymer related products.  Management of these increases and working with the customer base to offset their impact were the key priorities in the first half of the year. However we were also able to build momentum with a number of our key strategic initiatives.

 

The main features of our 1H 2011 performance were:

 

l Sales at £54.8m were 7% above the same period in 2010, reflecting price inflation as well as a modest recovery in demand across a number of the key customer sectors we supply;

l New business revenue remains strong and is ahead of 2010 levels;

l Supplier price inflation has been significant in 1H 2011 and the time lag in recovering these increases from our customer base caused our gross margin to reduce to 29.2% compared with 29.9% in 1H 2010;

l Our operating costs (before exceptional items) increased by almost 4% compared to 2010, primarily driven by incremental expenditure to support the development of our strategic initiatives. However overheads as a percentage of sales are lower than in 2010;

l During 1H 2011 we commenced the relocation of the RDC at Hayes to lower cost premises; and

l There has been good progress on a number of the key strategic initiatives with momentum building particularly in the development of our business in the third party logistics sector ("3PL"), the increasing importance of our web-based presence through www.macfarlanepackaging.com and some good new business penetration following the launch of our presentational and retail packaging ("PRP") business.

 

We expect demand to remain subdued in the second half of 2011 and therefore our focus will be on a selection of key areas:

 

l We have created strong new business momentum and we will look to strengthen this further in 2H 2011, as we expand our focus in specific industry sectors, which benefit from Macfarlane's national coverage;

l Supplier pricing remains volatile and we will work closely both with our suppliers and customers to recover gross margin in 2H 2011;

l Work is under way to further reduce the long-term property costs of our Packaging Distribution business;

l We will accelerate the development of our key strategic initiatives, particularly our penetration of the 3PL sector, the roll out of our PRP business and utilising our web-based packaging service, www.macfarlanepackaging.com to improve new business growth and customer retention; and

l Continued implementation of productivity improvement initiatives through Best Practice programmes will help support all RDCs to ensure that they operate to their full potential.



 

Interim Results - Management Report (continued)

Manufacturing Operations

Macfarlane's manufacturing businesses comprise Labels producing self-adhesive and re-sealable labels and Packaging Manufacturing producing bespoke, composite transit packaging and protective packaging components.

In the first half of 2011 the Manufacturing Operations recorded an operating profit before exceptional items of £0.1m (2010: £0.1m). Key features of the performance in the first six months of 2011 were:

l Sales increased by 7% versus 1H 2010 as we experienced some recovery in demand, particularly in the industrial manufacturing sector; and

l Gross margins decreased to 33.4% compared with 36.4% in 1H 2010 reflecting margin pressures in all our businesses.

Labels operates from two plants, Kilmarnock and Dublin, designing and producing high quality self-adhesive and re-sealable labels primarily for consumer packs.

In the first half of 2011 sales revenue was 6% ahead of the same period in 2010 reflecting an increase in volume of 2% and a recovery of some raw material price increases. However the self-adhesive label sector remains extremely competitive as retailer pressure continues to impact margins unfavourably.  The position in the re-sealable sector is more positive and we have generated good first half growth.  New product sectors are beginning to adopt the re-sealable label format and we have identified growth opportunities with our Reseal-it™ product in both Europe and the USA.

Labels experienced significant cost increases from the supplier base in 2010 and in the current environment it has still not been possible to pass on these price increases fully to our customer base. As a result, profit in the first half of 2011 was below that achieved in the same period in 2010, primarily due to the margin weakness in the particularly competitive self-adhesive sector.

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

Sales in our UK Packaging Manufacturing operations were 8% ahead of the same period in 2010 as demand recovered in a number of the key sectors of UK industry that we serve.  However gross margins weakened due to the difficulty in recovering supplier price increases and as a result, Packaging Manufacturing profit in 1H 2011 was marginally below that achieved in 2010.

Our priorities for the Manufacturing Operations in the second half of 2011 are to:

l Continue to work with our customer base in Labels to recover supplier price increases;

l Increase our new business momentum in the UK self-adhesive labels market, particularly in the branded sectors in order to create a more balanced customer portfolio;

l Accelerate the Reseal-it™ growth momentum through improved geographic penetration, extending the Reseal-it™ product range and introducing Reseal-it™ to new product sectors;

l Focus on both operational and customer service improvements at our Westbury Packaging Manufacturing site;

l Improve margins in Packaging Manufacturing through increased focus on supplier price recovery;

l Accelerate current Packaging Manufacturing sales momentum, particularly in key sectors; and

l Continue to strengthen the relationship between our Packaging Manufacturing operations and Packaging Distribution operations to create both sales and cost synergies.

Summary and Future Outlook

The outlook for the UK economy remains uncertain and it is clear that trading conditions will continue to be challenging. The immediate priority is to ensure that we successfully manage through this period to restore margin stability, whilst growing sales and maintaining tight cost control.

The future progress of the business is dependent on the successful execution of our plans in respect of strategic development opportunities.  To date there has been good momentum in these plans and this will be accelerated in 2H 2011.

The Macfarlane business is well positioned and focused for both the short and medium-term. There is a range of both operational and strategic initiatives being implemented, which will enable the business to continue to improve financial performance and ensure the business achieves its full potential.



 
Risks and Uncertainties

The principal risks, which could impact on the performance of the Group, were outlined in our Annual Report and Accounts for 2010 (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 the key risks are summarised below: -

l 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;

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

l In Manufacturing Operations, there is a high dependency on a small number of major customers;

l Both our businesses serve a wide range of customers in the UK.  The customer base covers a range of UK market sectors, therefore a prolonged UK economic slowdown would adversely affect the Group's results;

l The Group's liquidity risk is managed by ensuring adequate access to appropriate levels of committed bank facilities.  Further information is set out in note 1;

l The Group's principal credit risk is attributable to its trade receivables which are presented in the balance sheet net of allowances for doubtful receivables as estimated by management; and

l The Group's pension scheme deficit is very sensitive to movements in interest rates, inflation and longevity assumptions.

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.

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.

This 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 announcement.  Such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future.  These statements should be treated with caution as 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.

Statement of Directors' Responsibilities

The Directors of Macfarlane Group PLC are

A.S. Hunter      Chairman

P.D. Atkinson   Chief Executive

G. Bissett          Non-Executive Director

J. Love             Finance Director

K.D. Mellor      Non-Executive Director and Senior Independent Director

 

The directors confirm that, to the best of their knowledge

(i)         the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(ii)        the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(iii)       the interim management report includes a fair review of the information required under DTR 4.2.8R (disclosure of related party transactions and material changes therein).

 

Approved by the Board of Directors on 30 August 2011 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 2011, which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 12.  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 information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity" 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 it 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 1 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 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 (UK and Ireland) 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 2011 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 LLP

Chartered Accountants and Statutory Auditor

Glasgow

United Kingdom

30 August 2011



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2011

 



 

 

 

Six months to 30 June 2011

£000

Six months

to 30 June

2010

before

exceptional

items

£000

 

 

 

 

Exceptional

items

£000

 

 

Six

months to

30 June

2010

£000

 

 

 

Year to 31

December

2010

£000


Note



(see Note 4)










Continuing operations

3






Revenue


68,520

64,121

-

64,121

135,450

Cost of sales


(47,926)

(44,093)

-

(44,093)

(93,510)



 

 

 

 

 

Gross profit


20,594

20,028

-

20,028

41,940

Distribution costs


(3,375)

(3,228)

-

(3,228)

(6,458)

Administrative expenses


(15,884)

(15,522)

1,150

(14,372)

(30,118)



 

 

 

 

 

Operating profit

3

1,335

1,278

1,150

2,428

5,364

Finance income

5

1,480

1,348

-

1,348

2,741

Finance costs

5

(1,894)

(1,903)

-

(1,903)

(3,908)



 

 

 

 

 

Profit before tax


921

723

1,150

1,873

4,197

Tax

6

(217)

(186)

(322)

(508)

(1,211)



 

 

 

 

 

Profit for the period

8

704

537

828

1,365

2,986



 

 

 

 

 








Earnings per ordinary share      8













  Basic and diluted


0.62p

0.47p

0.73p

1.20p

2.63p



 

 

 

 

 



 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2011

 

 

 

 

 

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010

 

Note

£000

£000

£000






Exchange difference on translation of foreign operations


88

(140)

(20)

Actuarial (loss)/gain on defined benefit pension schemes

10

(535)

(1,685)

1,540

Tax on items taken directly to equity





  Actuarial loss/(gain) for the period

11

144

472

(420)

  Long-term corporation tax rate change on pension deficit

11

(155)

-

(174)



 

 

 

Other comprehensive (expense)/income for the period


(458)

(1,353)

926

Profit for the period


704

1,365

2,986



 

 

 

Total comprehensive income for the period


246

12

3,912



 

 

 

 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2011


 

Note

Share

Capital

Revaluation

Reserve

Own

Shares

Translation

Reserve

Retained

Earnings

 

Total



£000

£000

£000

£000

£000

£000









At 1 January 2011


28,755

70

(855)

316

(1,051)

27,235

Profit for the period


-

-

-

-

704

704

Dividends

7

-

-

-

-

(1,193)

(1,193)

Exchange differences on translation of foreign operations


 

 

-

 

 

-

 

 

-

 

 

88

 

 

-

 

 

88

Actuarial loss on defined benefit pension scheme

 

 

10

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(535)

 

 

(535)

Tax on actuarial loss

11

-

-

-

-

144

144

Long-term corporation tax rate change on deferred tax

 

 

11





 

 

(155)

 

 

(155)

Transfer of own shares to pension scheme


 

-

 

-

 

44

 

-

 

(24)

 

20

Credit in respect of share-based payments


 

-

 

-

 

-

 

-

 

8

 

8



 

 

 

 

 

 

At 30 June 2011


28,755

70

(811)

404

(2,102)

26,316



 

 

 

 

 

 



 

MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2010


 

Note

Share

Capital

Revaluation

Reserve

Own

Shares

Translation

Reserve

Retained

Earnings

 

Total



£000

£000

£000

£000

£000

£000









At 1 January 2010


28,755

70

(943)

336

(3,257)

24,961

Profit for the period


-

-

-

-

1,365

1,365

Dividends

7

-

-

-

-

(1,134)

(1,134)

Exchange differences on translation of foreign operations


 

 

-

 

 

-

 

 

-

 

 

(140)

 

 

-

 

 

(140)

Actuarial loss on defined benefit pension scheme

 

 

10

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,685)

 

 

(1,685)

Tax on actuarial loss

11

-

-

-

-

472

472

Credit in respect of share-based payments


 

-

 

-

 

-

 

-

 

2

 

2



 

 

 

 

 

 

At 30 June 2010


28,755

70

(943)

196

(4,237)

23,841



 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

FOR THE YEAR ENDED 31 DECEMBER 2010


 

Note

Share

Capital

Revaluation

Reserve

Own

Shares

Translation

Reserve

Retained

Earnings

 

Total



£000

£000

£000

£000

£000

£000









At 1 January 2010


28,755

70

(943)

336

(3,257)

24,961

Profit for the year


-

-

-

-

2,986

2,986

Dividends

7

-

-

-

-

(1,700)

(1,700)

Exchange differences on translation of foreign operations


 

 

-

 

 

-

 

 

-

 

 

(20)

 

 

-

 

 

(20)

Actuarial loss on defined benefit pension scheme

 

 

10

 

 

-

 

 

-

 

 

-

 

 

-

 

 

1,540

 

 

1,540

Tax on actuarial loss

11

-

-

-

-

(594)

(594)

Transfer of own shares to pension scheme


 

-

 

-

 

88

 

-

 

(52)

 

36

Credit in respect of share-based payments


 

-

 

-

 

-

 

-

 

26

 

26



 

 

 

 

 

 

At 31 December 2010


28,755

70

(855)

316

(1,051)

27,235



 

 

 

 

 

 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEET AT 30 JUNE 2011 (UNAUDITED)



30 June

2011

30 June

2010

31 December

2010


Note

£000

£000

£000

Non-current assets

 

 

 

 

Goodwill


24,149

24,151

24,149

Other intangible assets


2,104

2,408

2,257

Property, plant and equipment


8,297

8,471

8,280

Other receivables


857

856

856

Deferred tax asset

11

4,388

6,477

4,672



 

 

 

Total non-current assets


39,795

42,363

40,214



 

 

 

Current assets





Inventories


10,355

9,525

9,080

Trade and other receivables


33,973

30,720

34,514

Cash and cash equivalents

9

187

272

138



 

 

 



44,515

40,517

43,732



 

 

 








 

 

 

Total assets

3

84,310

82,880

83,946



 

 

 

Current liabilities





Trade and other payables


30,632

28,244

32,568

Current tax liabilities


13

8

-

Provisions


332

-

291

Obligations under finance leases

9

277

273

296

Bank overdrafts and loans

9

10,050

9,200

6,408



 

 

 

Total current liabilities


41,304

37,725

39,563



 

 

 

Net current assets


3,211

2,792

4,169



 

 

 

Non-current liabilities





Retirement benefit obligations

10

15,558

19,993

15,725

Deferred tax liabilities

11

544

670

628

Provisions


250

-

291

Other creditors


113

129

120

Obligations under finance leases

9

225

522

384



 

 

 

Total non-current liabilities


16,690

21,314

17,148



 

 

 








 

,

 

Total liabilities


57,994

59,039

56,711



 

 

 








 

 

 

Net assets

3

26,316

23,841

27,235



 

 

 

Equity





Share capital


28,755

28,755

28,755

Revaluation reserve


70

70

70

Own shares


(811)

(943)

(855)

Translation reserve


404

196

316

Retained earnings


(2,102)

(4,237)

(1,051)



 

 

 

Total equity


26,316

23,841

27,235



 

 

 



MACFARLANE GROUP PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2011

 

 

 

 

Six months

to 30 June

Six months

to 30 June

Year to 31

December

 

 

Note

2011

£000

2010

£000

2010

£000






Net cash (outflow)/inflow from operating activities

9

(1,799)

(1,099)

2,407



 

 

 






Investing activities





Interest received


6

2

47

Disposal of subsidiary undertaking


23

-

32

Proceeds on disposal of property, plant and equipment


3

-

-

Purchases of property, plant and equipment


(455)

(162)

(406)



 

 

 

Net cash used in investing activities


(423)

(160)

(327)



 

 

 






Financing activities





Dividends paid

7

(1,193)

(1,134)

(1,700)

Repayments of obligations under finance leases


(178)

(163)

(278)

Increase/(decrease) in bank overdrafts


3,642

2,292

(500)



 

 

 

Net cash generated from/(used in) financing activities

2,271

995

(2,478)



 

 

 






Net increase/(decrease) in cash and cash equivalents


49

(264)

(398)






Cash and cash equivalents at beginning of period


138

536

536



 

 

 

Cash and cash equivalents at end of period

9

187

272

138



 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.       Basis of preparation

This condensed set of financial statements for the six months ended 30 June 2011 has been prepared on the basis of the accounting policies set out in the Group's 2010 statutory accounts.  There have been no changes in accounting policies in the six months ended 30 June 2011.  The condensed set of financial statements has also been prepared in accordance with the recognition and measurement criteria of IFRS's and the Disclosure and Transparency Rules of the Financial Services Authority.  These condensed financial statements constitute a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency 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 Group's business activities, together with the factors likely to affect its future development, performance and financial position are set out in the Interim Management Report on pages 1 to 4.

The Group's principal financial risks in the medium term relate to liquidity and credit risk.  Liquidity risk is managed by ensuring that the Group's day-to-day working capital requirements are met by having access to banking facilities with suitable terms and conditions to accommodate the requirements of the Group's operations.  Credit risk, which is heightened as a result of the difficulties customers may face in the current climate, is managed by applying considerable rigour in managing the Group's trade receivables. The Directors believe that the Group is adequately placed to manage its financial risks effectively despite the current uncertain economic outlook.

The Group's principal banking facility of £12.0 million has been renewed until 29 February 2012 and the Directors are of the opinion that the Group's cash forecasts and revenue projections, which they believe are based on prudent market data and past experiencetaking account of reasonably possible changes in trading performance given current market and economic conditions, show that the Group should be able to operate within its current facilities and comply with its banking covenants.  The Group has held preliminary discussions with its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal may not be forthcoming on commercially acceptable terms.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing this condensed set of financial statements.

These condensed financial statements were approved by the Board of Directors on 30 August 2011.

This condensed set of financial statements is unaudited but has been formally reviewed by the auditors and their report to the Company is set out on page 5.

2.       General information

The information for the year ended 31 December 2010 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006, 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 498 of the Companies Act 2006 and did not contain a statement under either Section 498 (2) or Section 498 (3) of that Act.

The interim report will be posted to shareholders on 9 September 2011.  Copies will be available from the registered office, 21 Newton Place, Glasgow G3 7PY and available on the Company's website, www.macfarlanegroup.net, from that date.

3.       Segmental information

The Group's principal business segment is Packaging Distribution, comprising the distribution of packaging materials and supply of storage and warehousing services in the UK.  This constitutes over 75% of Group turnover and profit and as such, the Group has elected to combine the remaining operations for the manufacture and supply of self-adhesive and resealable labels to a variety of FMCG customers in the UK & Europe and the design, manufacture and assembly of timber, corrugated and foam-based packaging materials in the UK into one segment headed Manufacturing Operations.  None of the individual business segments within Manufacturing Operations represent more than 10% of Group turnover and profit.



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

3.         Segmental information (continued)

 

 

Trading results continuing operations

 

 

 

 

Six months

to 30 June

2011


 

 

£000

Packaging Distribution


 


Revenue



54,831

Cost of sales



(38,809)


 


 

Gross profit



16,022

Net operating expenses



(14,748)


 


 

Operating profit



1,274


 

 

 





Manufacturing Operations




Revenue



13,689

Cost of sales



(9,117)


 


 

Gross profit



4,572

Net operating expenses



(4,511)


 


 

Operating profit



61


 

 

 





 

 

Six months

to 30 June

2010 before

exceptional

items

 

 

 

Exceptional items

 

 

Six months

to 30 June

2010


£000

£000

£000



(see note 4)


Packaging Distribution


 


Revenue

51,317

-

51,317

Cost of sales

(35,952)

-

(35,952)


 

 

 

Gross profit

15,365

-

15,365

Net operating expenses

(14,205)

523

(13,682)


 

 

 

Operating profit

1,160

523

1,683


 

 

 





Manufacturing Operations




Revenue

12,804

-

12,804

Cost of sales

(8,141)

-

(8,141)


 

 

 

Gross profit

4,663

-

4,663

Net operating expenses

(4,545)

627

(3,918)


 

 

 

Operating profit

118

627

745


 

 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

 

3.         Segmental information (continued)

 

 

Trading results continuing operations

Year to

31 December

2010

before

exceptional

items

 

 

 

 

Exceptional items

 

 

 

Year to

31 December

2010


£000

£000

£000



(see note 4)


Packaging Distribution


 


Revenue

109,093

-

109,093

Cost of sales

(76,782)

-

(76,782)


 

 

 

Gross profit

32,311

-

32,311

Net operating expenses

(27,887)

180

(27,707)


 

 

 

Operating profit

4,424

180

4,604


 

 

 





Manufacturing Operations




Revenue

26,357

-

26,357

Cost of sales

(16,728)

-

(16,728)


 

 

 

Gross profit

9,629

-

9,629

Net operating expenses

(9,535)

666

(8,869)


 

 

 

Operating profit

94

666

760


 

 

 

 


Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000

Group segment - total revenue




Packaging Distribution

54,831

51,472

109,253

Manufacturing Operations

15,925

15,105

31,020

Inter-segment revenue

(2,236)

(2,456)

(4,823)


 

 

 

External revenue continuing operations

68,520

64,121

135,450


 

 

 





Operating profit continuing operations




Packaging Distribution

1,274

1,683

4,604

Manufacturing Operations

61

745

760


 

 

 

Operating profit

1,335

2,428

5,364

Net finance costs                      (see note 5)

(414)

(555)

(1,167)


 

 

 

Profit before tax

921

1,873

4,197

Tax                                          (see note 6)

(217)

(508)

(1,211)


 

 

 

Profit for the period

704

1,365

2,986


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

3.       Segmental information (continued)

 

30 June

2011

30 June

2010

31 December

2010


£000

£000

£000

Total assets




Packaging Distribution

67,395

65,438

67,361

Manufacturing Operations

16,915

17,442

16,585


 

 

 

Total assets

84,310

82,880

83,946


 

 

 

Net assets

 

 

 

Packaging Distribution

19,840

17,510

19,674

Manufacturing Operations

6,476

6,331

7,561


 

 

 

Net assets

26,316

23,841

27,235


 

 

 





4.       Exceptional items

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000

Pension scheme




Curtailment gain on freezing pensionable salaries (see note 10)

-

1,200

1,200

Related professional costs

-

(50)

(63)


 

 

 


-

1,150

1,137

Provisions against rental voids and vacant properties

-

-

(291)


 

 

 

Net exceptional credit in 2010

-

1,150

846

Taxation charge thereon

-

(322)

(239)


 

 

 

Exceptional gain after related tax

-

828

607


 

 

 

 

During 2010, Macfarlane Group PLC, made the decision to amend benefits for active members in the scheme by freezing pensionable salaries at the levels current at 30 April 2009.  Following a consultation process with the active members affected, the change took effect on 30 April 2010.  As a result no further salary inflation applied for active members who elected to remain in the scheme and a curtailment gain of £1,200,000 was recorded as a result of this change.

 

The Group has a number of vacant and partly sub-let leasehold properties, with the majority of the head leases expiring before 2020.  At 31 December 2010, the company reclassified amounts of £291,000, previously held as short-term accruals into provisions.  The company also reassessed the provision made for residual lease commitments together with other outgoings for dilapidations, after taking into account existing sub-tenant arrangements and assumptions relating to later periods of vacancy.  As a result an additional provision of £291,000 was made during the second half of 2010.

 

Exceptional items are those transactions that are material to the income statement and their separate disclosure is necessary for an appropriate understanding of the Group's financial performance.

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

5.       Finance income and finance costs

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000





Expected return on pension scheme assets (See note 10)

1,479

1,346

2,694

Investment income

1

2

47


 

 

 

Total finance income

1,480

1,348

2,741


 

 

 

Interest on bank loans and overdrafts

(219)

(140)

(415)

Interest on obligations under finance leases

(17)

(30)

(64)

Interest cost of pension scheme liabilities (See note 10)

(1,658)

(1,733)

(3,429)


 

 

 

Total finance costs

(1,894)

(1,903)

(3,908)


 

 

 






 

 

 

Net finance costs

(414)

(555)

(1,167)


 

 

 

 

6.       Tax

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000

Current tax




  UK corporation tax

-

-

2

  Overseas tax

(29)

5

(6)

  Prior year

1

-

-


 

 

 

Current tax

(28)

5

(4)

Deferred tax   (See note 11)

(189)

(513)

(1,207)


 

 

 

Total

(217)

(508)

(1,211)


 

 

 

Tax for the first six months has been charged at 26.5% representing the best estimate of the effective tax charge for the full year.  The charge in the first six months of the year is lower than the statutory rate due to a release of deferred tax on other intangible assets of £42,000 relating to the long-term corporation tax rate change as set out in note 11.

7.       Dividends

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000

Amounts recognised as distributions to equity holders in the period




Final Dividend (1.05p per share) (2010    1.00p per share)

1,193

1,134

1,134

Interim Dividend                                    (2010    0.50p per share)

-

-

566


 

 

 

Distributions in the period

1,193

1,134

1,700


 

 

 

Dividends are not payable on shares held in the Employee Share Trust.

The dividend of 0.50p per share, payable on 13 October 2011 was declared on 30 August 2011 and has therefore not been included as a liability in these condensed financial statements.



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

 

8.       Earnings per share

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010

Earnings

£000

£000

£000

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

 

 

704

 

 

1,365

 

 

2,986


 

 

 


 


 


30 June

2011

30 June

2010

31 December 2010

Number of shares '000




Weighted average number of ordinary shares in issue

115,019

115,019

115,019

Weighted average number of Own shares in Employee Share Ownership Trusts

 

(1,490)

 

(1,671)

 

(1,646)


 

 

 

Weighted average number of shares in issue for the

purposes of basic earnings per share

 

113,529

 

113,348

 

113,373

Effect of dilutive potential ordinary shares due to share options

25

-

-


 

 

 

Weighted average number of shares in issue for the

purposes of diluted earnings per share

 

113,554

 

113,348

 

113,373


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

9.       Notes to the cash flow statement

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000





Operating profit before exceptional items

1,335

2,428

5,364

     Exceptional items                  (see note 4)

-

(1,150)

(846)


 

 

 

Operating profit

1,335

1,278

4,518

Adjustments for:




     Amortisation of intangible assets

153

153

304

     Depreciation of property, plant and equipment

481

504

1,004


 

 

 

Operating cash flows before movements in working capital

1,969

1,935

5,826





     Increase in inventories

(1,275)

(643)

(198)

     Decrease/(increase) in receivables

517

(592)

(4,449)

     (Decrease)/increase in payables

(1,916)

(339)

4,357

     Adjustment for pension scheme funding

(861)

(1,295)

(2,636)


 

 

 

Cash (used in)/generated by operations

(1,566)

(934)

2,900





     Income taxes paid

(16)

(12)

5

     Interest paid

(217)

(153)

(498)


 

 

 

Net cash (outflow)/inflow from operating activities

(1,799)

(1,099)

2,407


 

 

 

 


Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010

Movement in net debt

£000

£000

£000





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

49

(264)

(398)

       (Increase)/decrease in bank overdrafts

(3,642)

(2,292)

500

       Cash flows from debt and lease financing

178

163

278


 

 

 

Movement in net debt in the period

(3,415)

(2,393)

380

Opening net debt

(6,950)

(7,330)

(7,330)


 

 

 

Closing net debt

(10,365)

(9,723)

(6,950)


 

 

 

Net debt comprises: -




       Cash and cash equivalents at end of period

187

272

138

       Bank overdrafts and loans

(10,050)

(9,200)

(6,408)


 

 

 

Net bank debt

(9,863)

(8,928)

(6,270)

Obligations under finance leases




       Due within one year

(277)

(273)

(296)

       Due outwith one year

(225)

(522)

(384)


 

 

 

Closing net debt

(10,365)

(9,723)

(6,950)


 

 

 

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.



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

10.     Retirement benefit obligations

The figures below have been based on the results of the triennial actuarial valuation as at 1 May 2008, updated to 30 June 2011, 31 December 2010 and 30 June 2010.  The assets in the scheme, the net liability position of the scheme as calculated under IAS 19 and the principal assumptions were:


30 June

2011

30 June

2010

31 December

2010


£000

£000

£000





Fair value of assets

45,664

40,632

45,293

Present value of scheme liabilities

(61,222)

(60,625)

(61,018)


 

 

 

Pension scheme deficit

(15,558)

(19,993)

(15,725)

Deferred tax asset                     (see note 11)

4,045

5,598

4,246


 

 

 

Pension scheme deficit net of related deferred tax asset

(11,513)

(14,395)

(11,479)


 

 

 

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

Assumptions

30 June 2011

30 June 2010

31 December 2010





Discount rate

5.50%

5.50%

5.50%

Rate of increase in salaries

0.00%

0.00%

0.00%

Rate of increase in pensions in payment

3% or 5%

for fixed increases

or 2.75% for LPI

3% or 5%

for fixed increases

or 2.75% for LPI

3% or 5%

for fixed increases

or 2.75% for LPI

Inflation assumption

3.50%

3.20%

3.50%

Life expectancy beyond normal retirement age of 65




Male

21.7 years

21.3 years

21.5 years

Female

24.1 years

24.0 years

24.0 years

 


Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010

Movement in scheme deficit in the period

£000

£000

£000





At start of period

(15,725)

(20,366)

(20,366)

Normal service cost

(79)

(106)

(119)

Contributions

951

1,327

2,705

Settlement gains

9

24

50

Curtailment gains                       (see note 4)

-

1,200

1,200

Other finance charges

(179)

(387)

(735)

Actuarial (loss)/gain in the period

(535)

(1,685)

1,540


 

 

 

At end of period

(15,558)

(19,993)

(15,725)


 

 

 

Movement in fair value of scheme assets

 

 

 

Scheme assets at start of period

45,293

40,622

40,622

Expected return on scheme assets

1,479

1,346

2,694

Actual return less expected return on scheme assets

(535)

(1,137)

2,094

Contributions from sponsoring companies

951

1,327

2,705

Contributions from scheme members

38

73

134

Benefits paid

(1,562)

(1,599)

(2,956)


 

 

 

Scheme assets at end of period

45,664

40,632

45,293


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

10.     Retirement benefit obligations (continued)

Six months

to 30 June

2011

Six months

to 30 June

2010

Year to 31

December

2010


£000

£000

£000

Movement in present value of defined benefit obligations

 

 

 

Obligations at start of period

(61,018)

(60,988)

(60,988)

Service costs

(79)

(106)

(119)

Interest costs

(1,658)

(1,733)

(3,429)

Settlement gains

9

24

50

Curtailment gains

-

1,200

1,200

Contributions from scheme members

(38)

(73)

(134)

Actuarial loss on liabilities in the period

-

(548)

(554)

Benefits paid

1,562

1,599

2,956


 

 

 

Obligations at end of period

(61,222)

(60,625)

(61,018)


 

 

 





11.     Deferred tax

30 June

2011

30 June

2010

31 December

2010

Deferred tax asset on pension scheme deficit

£000

£000

£000

 




At start of period

4,246

5,702

5,702

Charge on actuarial movement in the period applied through statement of comprehensive income

 

144

 

472

 

(420)

Charge on actuarial deficit in the period due to long-term corporation tax rate change applied through statement of comprehensive income

 

 

(155)

 

 

-

 

 

(174)

Charge through income statement based on curtailment gain in the period

 

-

 

(332)

 

(318)

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

 

(190)

 

(244)

 

(544)


 

 

 

Deferred tax asset on pension scheme deficit (see note 10)

4,045

5,598

4,246

Deferred tax assets on other timing differences

343

879

426


 

 

 

Deferred tax asset

4,388

6,477

4,672


 

 

 

Deferred tax asset on other timing differences




At start of period

426

858

858

(Charge)/credit through income statement

(83)

21

(432)


 

 

 

Deferred tax asset

343

879

426


 

 

 

Deferred tax liability on other intangible assets




At start of period

(628)

(712)

(712)

Credit through income statement




         Credit on movement in other intangible assets in the period

42

42

84

         Long-term corporation tax rate change

42

-

-


 

 

 

Deferred tax liability

(544)

(670)

(628)


 

 

 



MACFARLANE GROUP PLC

SIX MONTHS ENDED 30 JUNE 2011

NOTES TO THE GROUP CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

11.     Deferred tax (continued)

The Finance Act 2011, which provided for a reduction in the main rate of corporation tax from 28% to 26% effective from 1 April 2011, was substantively enacted on 29 March 2011. The rate reduction has been reflected in these financial statements.

The Finance Act 2011, which provides for a reduction in the main rate of corporation tax from 26% to 25% effective from 1 April 2012, was substantively enacted on 19 July 2011. As it was not substantively enacted at the balance sheet date, the rate reduction is not yet reflected in these financial statements in accordance with IAS 10, as it is a non-adjusting event occurring after the reporting period.

The impact of the rate reduction, which will be reflected in the next reporting period, is estimated to reduce our UK deferred tax balances provided at 30 June 2011 by a net value of £0.2 million.

The Government has also indicated that it intends to enact future reductions in the main tax rate of 1% each year down to 23% by 1 April 2014.  The future 1% main tax rate reduction is expected to have a similar impact on our financial statements as outlined above, however the actual impact will be dependent on our deferred tax position at that time.

 

12.     Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed.

Details of individual and collective remuneration of the Company's Directors and dividends received by the Directors for calendar year 2011 will be disclosed in the Group's Annual Report for the year ending 31 December 2011.

The fair value of investments, shown in the pension scheme disclosures in note 10, includes 1,145,918, 1,065,918 and 819,506 shares in Macfarlane Group PLC at 30 June 2011, 31 December 2010 and 30 June 2010 with a value of £309,000, £320,000 and £151,000 respectively.

The directors are satisfied that there are no other related party transactions occurring during the six month period which require disclosure.


This information is provided by RNS
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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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