RNS No 2930q
MOLINS PLC
12th March 1998
1997 PRELIMINARY ANNOUNCEMENT
Molins PLC, the international specialist engineering company, announces its
results for the year ended 31 December 1997.
1997 1996
Turnover #254.8m #306.2m
______________ ______________
_________ ________
Operating profit (before exceptional items) #13.1m #38.3m
Exceptional items
- Restructuring costs #(17.9)m #(3.9)m
- Langston #(13.4)m -
Interest #(1.9)m #(1.0)m
____________ ____________
(Loss)/profit before taxation #(20.1)m #33.4m
____________ ____________
(Loss)/earnings per share (58.9)p 72.8p
Earnings per share (before exceptional items) 16.3p 81.0p
Dividends per share 15.0p 22.0p
Net assets #83.0m #106.1m
Net borrowings #7.3m #11.7m
Chairman, Michael Orr, commented:
"The Group's results for 1997 were very disappointing, reflecting in
particular a sharp reduction in demand in the Tobacco Machinery division and
the consequent need to restructure its operations. Substantial cost
reductions have already been made in an effort to underpin profitability.
Even so, with sterling remaining strong, we will do well to achieve improved
operating results in the current year. We will continue to take whatever
action is required to establish a sound base from which to move forward in
future years."
Issued by: Margaret George
Enquiries: Michael Orr, Chairman
Peter Grant, Acting Chief Executive and Group Finance Director
Tel: 0171 638 9571
Date: 12 March 1998
Chairman's statement
As foreshadowed, the Group's results for 1997 were very disappointing,
reflecting in particular a sharp reduction in demand in the Tobacco
Machinery division from the record level of sales last year and the
consequent need to restructure its operations.
Results
On sales of #254.8m (1996: #306.2m), down 17%, the Group operating profit
(before exceptional items) was #13.1m (1996: #38.3m). Exceptional
charges totalled #31.3m (1996: #3.9m), comprising #17.9m for
restructuring in the Tobacco Machinery division and #13.4m in respect of
accounting irregularities at Langston. Accordingly, the Group loss
before tax amounted to #20.1m (1996: profit #33.4m) and the loss after
tax to #20.6m (1996: profit #24.9m). Earnings per share (before
exceptional items) were 16.3p (1996: 81.0p) and the loss per share (after
exceptional items) was 58.9p (1996: earnings of 72.8p).
Operations
During the year under review, the Tobacco Machinery division's results
suffered from a sudden and unexpected fall in demand in its main market
for original equipment in China and, to a lesser extent, from reduced
spending by most multinationals pending the outcome of the continuing
discussions in the USA on the proposed tobacco litigation settlement.
Market prospects were further dampened by the weakness of south east
Asian currencies and the continuing strength of sterling. Sales were
down 18% to #150.5m (1996: #183.2m) and operating profits (before
exceptional items) to #9.1m (1996: #28.4m). With no signs of improvement
in prospect, the Board decided not to wait for the adverse factors in the
market to unfold in their entirety but rather to take decisive action to
restructure the division. Accordingly, the Group announced in November a
restructuring programme involving the reduction of 25% of the division's
workforce, which previously totalled some 2,000 people. Most of this
reduction was implemented by the end of the year. In addition, sub-
contract work was brought back in house wherever appropriate.
The market for corrugated board machinery remained weak for most of the
year, although order intake picked up in the fourth quarter as conditions
gradually improved. An investigation into certain accounting
irregularities at Langston gave rise to a #13.4m exceptional charge. In
summary, the investigation, which cost #1.2m, concluded that profits and
net assets had been overstated at Langston over a number of years to the
aggregate sum of US$20.8m (#12.2m) before tax and US$14.8m (#8.7m) after
tax. On sales down 31% at #70.3m (1996: #101.6m), the division achieved
a profit before exceptional items of #0.1m in 1997 against an overstated
#6.6m reported last year.
The Packaging Machinery division achieved sales of #34.0m (1996: #21.4m)
and an operating profit of #3.9m (1996: #3.3m), including a full year's
contribution from Langen, acquired in November 1996. The division's
performance reflects the weak order position of Langen at the start of
the year together with the adverse effects of the strength of sterling on
Sandiacre's profit margins. Langen's order book improved to a more normal
position during the course of the year, albeit too late to achieve more
than a small contribution to profits.
Financial position
Following the exceptional charges, which amounted to #26.3m net of tax,
Group shareholders' funds at 31 December 1997 were #82.8m against #105.9m
reported at 31 December 1996. Net assets per share were 231p (1996:
303p).
The Group's financial position remains strong. Net borrowings at the
year end of #7.3m were #4.4m lower than the previous year. Net interest
charges amounted to #1.9m (1996: #1.0m), reflecting the funding of the
Langen acquisition.
Dividend
Taking account of the 1997 results and the outlook for 1998, a reduced
final dividend of 8.5p per share (1996: 15.5p) is recommended, which,
together with the interim dividend of 6.5p per share, would make a total
for the year of 15.0p per share (1996: 22.0p), giving dividend cover of
1.1 times before exceptional items (1996: 3.6 times). If approved, the
final dividend will be paid on 20 May 1998 to ordinary shareholders
registered on 3 April 1998.
Board and management
Following Peter Harrisson's resignation from the Board in January 1998
after two years as Chief Executive, Peter Grant assumed the
responsibilities of Chief Executive in addition to his existing
responsibilities as Group Finance Director. He continues as Acting Chief
Executive for the time being and a permanent appointment will be made as
soon as alternative outside candidates have been considered. In the
meantime, Clive Chapman, formerly Managing Director, Finance and
Corporate Planning of Nestor Healthcare Group plc, has joined the Group
on an interim basis as Director of Finance. He is taking on many of the
duties of the Group Finance Director so as to allow Peter Grant to give
more time to the Chief Executive's role. Bill Baugh, an executive
director since 1987, also resigned from the Board at the end of December
and we wish him well in the appointment which he has now taken up
elsewhere.
Michael Wright, an executive director from 1985 to 1990 and a non-
executive director since then, has decided not to stand for re-election
at the Annual General Meeting as a result of increased commitments
following his appointment as Vice-Chancellor of Aston University. His
contribution to the Group's affairs throughout his term of office has
been greatly appreciated by all his colleagues. The appointment of a
further non-executive director is under consideration by the Nomination
Committee .
Employees
This has been a difficult year for the Group. As always, employees have
to cope with additional challenges in such circumstances and I should
like to thank them on your behalf for facing up to the demands placed
upon them.
Outlook
The pressures which have been felt by the Tobacco Machinery division
throughout the year are affecting all its competitors similarly, with
insufficient orders for original equipment to utilise the available
productive capacity across the industry. Demand for tobacco machinery has
fallen abruptly from the record levels of two years ago to the lowest
level for many years. There is little reason to suppose that the order
flow for original equipment will strengthen in the immediate future and,
accordingly, a further reduction in the Group's capacity cannot be ruled
out. However, subject to any exceptional costs arising from this, the
continuing flow of revenues from the sale of spares, coupled with the
actions already taken to reduce operating costs, should ensure that the
division as a whole remains profitable.
Growth prospects in the remainder of the Group's business are better.
The Corrugated Board Machinery division has benefited from the improving
market conditions and the Packaging Machinery division is beginning to
win further business internationally, albeit in markets which remain
highly competitive.
With no signs of an early recovery in the tobacco machinery market in
evidence, the Board has had to accept that the Group's capacity to earn
profits is diminished and is likely to remain so for some time to come.
Accordingly, despite the strength of the balance sheet, the Board has
decided to recommend a reduction in the final dividend to 8.5p per share
(1996: 15.5p). The reduced total of 15.0p per share (1996: 22.0p)
compares with earnings per share before exceptional items of 16.3p (1996:
81.0p).
Substantial cost reductions have already been made in an effort to
underpin profitability. Even so, with sterling remaining strong, we will
do well to achieve improved operating results in the current year. We
will continue to take whatever action is required to establish a sound
base from which to move forward in future years.
J C Orr
Chairman
12 March 1998
Group operating review
After commencing the year with a cautious but positive outlook, 1997 was
a year of adversity for much of the Group.
In April, the accounting irregularities discovered at Langston
necessitated an extensive independent investigation. Immediate action
was taken to replace certain senior management in the USA and the Group
was fortunate to be able to get a new team in and operating effectively
very quickly.
In the second half of the year it became increasingly apparent that
demand for tobacco machinery had been adversely affected by three
external factors.
First, demand from the important Chinese market all but stalled as the
authorities sought to exert stronger central control. Their action
affected production levels and reduced cash generation in a number of
factories, compromising their ability to finance investment plans. Some
orders expected in the first half were confirmed towards the end of the
year, but at lower volumes and certain shipments were delayed
temporarily, pending receipt of letters of credit.
Secondly, the continuing discussions in the USA on the proposed tobacco
litigation settlement started to affect spending by most multinationals.
The consequential increase in cigarette prices is expected to dampen
demand in the USA and productive capacity looks set to be reduced
accordingly. Furthermore, multinationals are contemplating moving
production abroad. The effect has been to reduce orders in the USA for
new machines, rebuilds and spare parts, especially in the fourth quarter
of the year.
The third factor affecting the tobacco machinery market has been the
collapse in currencies in many Asian countries, leading to a sharp fall
in capital investment. Although this market has in recent years been
less important for Molins than China and the USA, its weakness has had
the effect of reducing worldwide demand and intensifying pressure on the
industry as a whole.
The reorganisation of the Tobacco Machinery division, announced in
November, led to a reduction in the division's workforce of about 500
people, by the end of the year. The factory in Sao Paulo, Brazil, was
closed, the building sold and Molins do Brasil reopened early in 1998 in
much smaller and more suitable premises 300 miles south in Curitiba.
On a somewhat brighter note, the Packaging Machinery division saw a
substantial improvement in order intake at both Langen operations in the
second half. Sandiacre continued to show top line growth,
notwithstanding the strength of sterling. Further deliveries of tea bag
machinery were made by Molins Food Machinery.
Group investment in new plant and equipment was reduced to #5.0m (1996:
#10.0m) as the Tobacco Machinery division concentrated on retrenchment.
However, a further investment of #0.8m was made in the joint venture in
Kunming, which is scheduled to commence trading as a rebuild and parts
supplier for the Chinese market in 1998. The Group invested #9.3m (1996:
#11.1m) in product development and all divisions introduced important
enhancements to existing products as well as a number of new products.
At the end of the year net borrowings amounted to #7.3m (1996: #11.7m),
representing gearing of 9% (1996: 11%). Cash outflows of #7.9m (1996:
#1.8m) in respect of exceptional items were offset by inflows from
customers' advance payments due to the improving order books at Langston
and Langen. Despite the large exceptional charges the balance sheet
remains strong and gives the Group the strength to take any further steps
necessary to reshape the business for a resumption of growth.
Tobacco Machinery
The division implemented a major restructuring programme in response to a
substantial fall off in demand from China and an anticipated reduction in
demand in Asia and North America.
The division had a difficult trading year, particularly in its new
equipment and rebuild businesses as a result of the reduced demand,
especially in China. Consequently, overall sales were down by 18% to
#150.5m (1996: #183.2m) and operating profit before exceptional costs
down by 68% to #9.1m (1996: #28.4m).
Having entered the year with a backlog that reflected a normal
marketplace, it did not prove possible to maintain that position in the
light of reduced demand. Action was taken to realign operations,
resulting in a reduction of some 25% in the division's workforce.
At Original Equipment, Saunderton, which faced a sudden and unexpected
fall in demand in the second half, the workforce was reduced by about a
third. The new generation mid-speed range Passim filter cigarette making
combination, introduced last year, continued to strengthen its position
as a market leader. It delivered exceptional output performance for its
users, evidenced by substantial new orders received near the end of 1997
from two leading multinational customers. Product development continued
to receive priority and good progress was made with further enhancements
to the Passim range and the Concord, Pegasus and Match handling systems.
The Spares business had a disappointing year. Although there was notable
sales success in the Middle East this was offset by reduced demand from
China and North America towards the end of the year. Productivity was
below expectations, in part due to industrial disruption in support of a
pay claim. Recognising the weak market conditions, the workforce was
reduced by 55 people during the last quarter. Major changes in
manufacturing processes and business planning and control were initiated
in the year, for implementation during 1998.
In the Americas, Molins Richmond further capitalised on its successful
Pegasus high speed handling and distribution system with major export
sales and another increase in profit. Short term prospects in the USA
led to a small reduction in the workforce in November. In December,
Molins do Brasil closed its Sao Paulo plant. It re-opened in February
1998 with a much more streamlined operation in Curitiba, closer to its
major customers.
The Chinese Joint Venture has now commenced construction of its factory,
with completion planned for mid 1998. Production of parts and machine
rebuild activities for the Chinese market will commence during the second
half of the year.
The division's management team, with a blend of experienced and new
employees, has responded wholeheartedly to the challenge of facing up to
the difficult trading conditions, building on the excellent customer
relationships and the substantial installed base of Molins' equipment
throughout the world.
Corrugated Board Machinery
A difficult year against a background of weak but improving market
conditions.
The year started with a low order book as paper prices fell
substantially, leading to the large integrated forest products groups
reporting significantly reduced profitability. Sales were down by 31% to
#70.3m (1996: #101.6m) and operating profit before exceptional costs down
to #0.1m against an overstated #6.6m reported for 1996. As the year
progressed paper prices started to strengthen and progressively this gave
rise to increased quotation activity and improving order intake at
Langston.
All of Langston's manufacturing operations were consolidated at Cherry
Hill, supported by joint ventures in China and Mexico. This followed the
closure of the Hunt Valley, Maryland, factory in December 1996 and the
reorganisation of the Bristol, UK operation, in the first half of 1997,
to concentrate on sales and service activities.
The discovery of and subsequent investigation into accounting
irregularities at Langston, in the USA, caused a significant disruption
to the business. Decisive action was taken to replace certain senior
management and a number of other measures were implemented. As the year
progressed the new management team established a clear strategic
direction, the order book increased and stocks and debtors were reduced.
There was a particularly good cash inflow during the second half.
Molins Australia had a disappointing year, reporting a small loss largely
due to reduced sales following the termination of a distribution
agreement in 1996. Some jobs were cut in the middle of the year.
Working with Langston, however, Molins Australia helped to secure an
order from Amcor for further machinery to manufacture Xitex, a
revolutionary cost-reduced corrugated board.
A number of initiatives were taken by Langston to strengthen the product
range through technology licence agreements with specialist suppliers.
These included a joint development agreement with Interfic to manufacture
and sell a revolutionary double facer and a new glue machine jointly
developed with Kohler. Continued product development resulted in
improvements to the Jumbo flexo folder gluer and further advances with
Langston's leading single facer technology. Other initiatives are in
progress which will strengthen Langston's product and market position
further.
Packaging Machinery
Notwithstanding the strength of sterling, Sandiacre achieved further
sales growth but the division's results were tempered by the weak first
half order position at Langen.
Further progress was made with integrating the Langen businesses into
Molins, including establishing links with Sandiacre and other Molins'
operations. Although the overall operating performance was
disappointing, there are positive signs of potential in all parts of the
division - Langen with improving order books, Sandiacre with turnover
growth and Molins Food Machinery with its growing expertise in tea bag
machinery. Sales were up 59% to #34.0m (1996: #21.4m) and operating
profit increased by 18% to #3.9m (1996: #3.3m).
Langen in Canada and its sister company Langenpac in Holland both entered
the year with relatively low order books and, in consequence, made only a
small contribution to Group profit in the year. However, order intake
improved throughout the year and both companies entered 1998 with much
higher order books.
Throughout 1997, Langen and Langenpac continued to work on a number of
new product developments including machinery for packaging videos,
vertical and high speed case packers and a stand-alone accumulation
system. These innovations broaden the markets for the business and are
expected to result in repeat orders during 1998.
The strength of sterling has adversely impacted margins at Sandiacre,
which exports much of its vertical form fill and seal bagging machinery.
However, Sandiacre is a strong business which can withstand these effects
and is continuing to grow its volumes around the world. Sales to the USA
almost doubled during the year and repeat orders from major US food
manufacturers are starting to come through. Sandiacre's strategy of
developing relationships with multi-national producers of fast moving
consumer goods is showing results with significant orders in China, Egypt
and Russia. Much of this success can be attributed to the company's
continuing emphasis on incremental product development, with the new twin
tube D-action machine proving particularly successful.
Molins Food Machinery supplied further machines and continued to
concentrate on supporting Van den Bergh in its high-profile and
successful launch of the PG Tips Pyramid tea bag in the UK.
Research and Development
Research and development remains of considerable importance to the Group,
with expenditure of #9.3m (1996: #11.1m).
Product development takes place at each of the major sites where
significant engineering capability exists. Molins International
Technology Centre (ITC) provides the Group with a unique resource with
focused technology and specific product developments taking place on
behalf of Molins' existing businesses as well as external customers. The
ITC also facilitates awareness of technology and product development
throughout the Group.
Although the technology needs of existing businesses are diverse, the
Group's focus on materials processing and packaging has led to common
technologies being leveraged across the Group. Examples of such
technologies include independent drives, continuous motion machines and
materials sealing.
The association of the ITC with a number of international food companies
has continued. Projects have been carried out on behalf of customers
around the world, providing them with the opportunity to manufacture or
package new products or achieve efficiency gains in existing operations.
The ITC continues with its extensive involvement in developing innovative
tea bag machinery and there are a number of other technologies in the
pipeline. The tea bag machines provided to Van den Bergh have enabled it
to market the PG Tips Pyramid tea bag across the UK and increase its
share of the tea bag market. Similarly, in France, the tea bag machines
supplied to Fralib have enabled it to launch its Tchae product, a round
tea bag with string and tag, developing the market in green tea. Both
products won a Unilever award for product innovation, the Pyramid product
taking first prize overall and the Fralib product taking first place in
its category. This type of third party development work provides the
opportunity for organic growth as well as practical applications for the
development of the Group's engineering skills.
Molins investment in research and development will continue, with the
focus reflecting the changing needs of customers and world markets.
Group profit and loss account
1997 1996
Before 1997 Before 1996
exceptio Exceptio 1997 exceptio Exceptio 1996
nal nal nal nal
items items Total items items Total
For the year ended #m #m #m #m #m #m
31 December
Turnover 254.8 - 254.8 306.2 - 306.2
Cost of sales (195.5) (23.9) (219.4) (217.9) (2.8) (220.7)
_____ _____ _____ _____ _____ _____
Gross profit 59.3 (23.9) 35.4 88.3 (2.8) 85.5
Net operating (46.2) (7.4) (53.6) (50.0) (1.1) (51.1)
expenses
_____ _____ _____ _____ _____ _____
Operating 13.1 (31.3) (18.2) 38.3 (3.9) 34.4
(loss)/profit
Net interest (1.9) - (1.9) (1.0) - (1.0)
payable
_____ _____ _____ _____ _____ _____
(Loss)/profit on
ordinary
activities before 11.2 (31.3) (20.1) 37.3 (3.9) 33.4
taxation
Taxation (5.5) 5.0 (0.5) (9.6) 1.1 (8.5)
_____ _____ _____ _____ _____ _____
(Loss)/profit for
the
financial year 5.7 (26.3) (20.6) 27.7 (2.8) 24.9
Dividends
(including (5.4) - (5.4) (7.6) - (7.6)
non-equity)
_____ _____ _____ _____ _____ _____
Retained
(loss)/profit
for the year 0.3 (26.3) (26.0) 20.1 (2.8) 17.3
_____ _____ _____ _____ _____ _____
(Loss)/earnings
per 16.3p (75.2)p (58.9)p 81.0p (8.2)p 72.8p
ordinary share
Interim dividend
paid 6.5p 6.5p
October 1997
Proposed final 8.5p 15.5p
dividend
_____ _____
Total 15.0p 22.0p
_____ _____
Dividend cover
(before 1.1 3.6
exceptional items) times times
The weighted average number of ordinary shares in issue during 1997 was
34,968,954 (1996: 34,183,637)
Group balance sheet
1997 1996
As at 31 December #m #m
Fixed assets
Tangible assets 49.8 54.7
Investments 2.0 1.2
_____ _____
51.8 55.9
_____ _____
Current assets
Stocks 60.9 78.1
Debtors - due within one year 61.6 66.0
Debtors - due after more than one year 14.5 13.9
Cash at bank and in hand 9.2 9.8
_____ _____
146.2 167.8
Creditors - amounts falling due within one
year
Borrowings (1.5) (16.3)
Other creditors (81.6) (84.1)
Proposed dividend (3.0) (5.4)
_____ _____
(86.1) (105.8)
Net current assets 60.1 62.0
Total assets less current liabilities 111.9 117.9
Creditors - amounts falling due after
more than one year
Borrowings (15.0) (5.2)
Other creditors (0.7) (0.9)
_____ _____
(15.7) (6.1)
Provisions for liabilities and charges (13.2) (5.7)
_____ _____
Net assets 83.0 106.1
_____ _____
Capital and reserves
Called up share capital 9.8 9.5
Share premium account 25.5 21.0
Revaluation reserve 18.3 17.8
Profit and loss account 29.2 57.6
_____ _____
Shareholders' funds (including 82.8 105.9
non-equity interests)
Minority interests 0.2 0.2
____ _____
83.0 106.1
____ _____
Net borrowings (7.3) (11.7)
Gearing 9% 11%
Net assets - per ordinary share 231p 303p
Group cash flow statement
1997 1996
For the year ended 31 December #m #m
Cash inflow from operating activities (note 22.7 27.6
6)
Return on investments and servicing of (1.8) (1.1)
finance
Taxation (6.0) (8.2)
Capital expenditure (net) (3.8) (9.6)
Acquisitions and disposals (1.0) (20.5)
Equity dividends paid (7.7) (7.1)
____ _____
Cash inflow/(outflow) before management of
liquid
resources and financing 2.4 (18.9)
Management of liquid resources - 6.5
Financing (2.1) (0.1)
____ _____
Increase/(decrease) in cash in the period 0.3 (12.5)
____ ____
Reconciliation of net cash flow to movement in net debt
1997 1996
For the year ended 31 December #m #m
Increase/(decrease) in cash in the period 0.3 (12.5)
Cash inflow from movement in liquid resources - (6.5)
Cash outflow from decrease in debt and lease 4.8 1.5
financing
_____ _____
Change in net debt/cash resulting from cash 5.1 (17.5)
flows
Loans acquired with subsidiaries - (1.6)
Translation difference (0.7) 0.6
_____ _____
Movement in net debt/cash in the period 4.4 (18.5)
Net (debt)/cash at 1 January (11.7) 6.8
_____ _____
Net debt at 31 December (7.3) (11.7)
_____ _____
Notes to the preliminary announcement
1 The Group accounts have been prepared in accordance with applicable
accounting and financial reporting standards.
2 The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 1997 and 1996,
but is extracted therefrom. The Group's statutory accounts for 1997
will be filed following the Annual General Meeting. The Group's
statutory accounts for 1997 and 1996 each received an unqualified
auditors' report.
3 Segmental analysis
The results are analysed by business segment as follows:
1997 1996
1997 1996 Operating Operating 1997 1996
Turnover Turnover profit profit Net Net
assets assets
For the year ended #m #m #m #m #m #m
31 December
Tobacco 150.5 183.2 9.1 28.4 55.2 70.3
Corrugated Board 70.3 101.6 0.1 6.6 26.5 39.8
Packaging 34.0 21.4 3.9 3.3 8.6 7.7
_____ _____ _____ _____ _____ _____
254.8 306.2 13.1 38.3 90.3 117.8
_____ _____
Exceptional items (31.3) (3.9)
_____ _____
Operating (18.2) 34.4
(loss)/profit
Net interest (1.9) (1.0)
payable
_____ _____
(Loss)/profit (20.1) 33.4
before taxation
_____ _____
Net borrowings (7.3) (11.7)
_____ _____
Net assets 83.0 106.1
_____ _____
4 Turnover by geographic destination of goods
1997 1997 1996 1996
For the year ended 31 December #m % #m %
United Kingdom 24.0 9 23.8 8
Continental Europe 20.4 8 22.6 7
North America 96.4 38 115.4 38
Asia 74.8 29 108.1 35
Rest of world 39.2 16 36.3 12
_____ _____ _____ _____
254.8 100 306.2 100
_____ _____ _____ _____
5 Exceptional items
1997 1996
Exceptional 1997 1997 Exceptioal 1996 1996
items Taxation Net items Taxation Net
For the year ended #m #m #m #m #m #m
31 December
Restructuring of
Tobacco
Machinery division
- UK (11.4) 1.3 (10.1) (1.0) 0.2 (0.8)
- Overseas (6.5) - (6.5) - - -
_____ _____ _____ _____ _____ _____
(17.9) 1.3 (16.6) (1.0) 0.2 (0.8)
Rationalisation of
Corrugated
Board Machinery - - - (2.9) 0.9 (2.0)
division
Adjustments in
respect of
Langston
accounting
irregularities (13.4) 3.7 (9.7) - - -
_____ _____ _____ _____ _____ _____
(31.3) 5.0 (26.3) (3.9) 1.1 (2.8)
_____ _____ _____ _____ _____ _____
6 Reconciliation of operating profit to operating cash flows
1997 1996
For the year ended 31 December #m #m
Operating (loss)/profit (18.2) 34.4
Depreciation 6.9 6.6
Movements in restructuring and
rationalisation provisions:
- asset writedowns 3.9 0.4
- increase in provisions for liabilities and 6.4 0.8
charges
Non cash adjustments in respect of accounting
irregularities at Langston 12.2 -
Working capital movements:
- stocks 6.8 (1.2)
- debtors 8.5 2.1
- creditors and other provisions (3.8) (15.2)
- other - (0.3)
_____ _____
Net cash inflow from operating activities 22.7 27.6
_____ _____
Cash flows from exceptional items excluding (7.9) (1.8)
tax effect
Other cash flows 30.6 29.4
_____ _____
Net cash inflow from operating activities 22.7 27.6
_____ _____
END
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