RNS Number:3759N
Low & Bonar PLC
10 July 2003
10 July 2003
Press Release/Stock Exchange Announcement
LOW & BONAR PLC 2003 INTERIM RESULTS
Low & Bonar PLC today reported its results for the half year ended 31 May 2003.
2003 2002 %
Turnover #89.4m #79.1m + 13
Operating profit (pre exceptional) # 5.2m # 3.9m + 33
Profit before tax # 4.3m # 3.8m + 13
Earnings per share (pre exceptional) 3.28p 2.44p + 34
Dividend per share 1.50p 2.50p
* Pre exceptional eps growing by 34% from 2.44p to 3.28p
* Floors:
- Operating profit growth from existing business of #0.5m despite lower
sales in demanding markets
- Acquired carpet tile business trading in line with expectation, and
achievement of synergies from acquisition on track
* Yarns & Fabrics:
- Continued growth in artificial grass yarns business
- Operating profit at Belgian business held despite steep rise in
polypropylene prices in 2nd quarter
* Plastics:
- Operating profit increased by #0.8m
- Revenue growth of 6%, originating in North America and Northern
Europe
- Turnaround of French business proceeding in line with expectations
* Ungeared balance sheet with #0.9m net cash reflecting strong cash
performance
* Dividend per share of 1.5p in line with the new dividend policy
announced at the year end
- 2 -
Commenting on the results, Low & Bonar's recently appointed Chief Executive,
Paul Forman, said:
"The market conditions in which we operate remain demanding. Nonetheless we
have achieved underlying revenue growth in four of our five business areas.
This, allied to cost restructuring activities, has produced Low & Bonar's first
like-for-like profit growth in a considerable period. I am pleased to report
that the programme to bring French Plastics to a breakeven level is progressing
as planned and that the acquisition of the carpet tile business is meeting the
expectations set out in the circular in January. Operating profit is improving
despite our having to contend with particularly high raw material costs in the
second quarter and an increased pension charge. A tight focus on cash
management has also enabled us to finish the half year with no borrowings,
despite the carpet tile business acquisition. It remains difficult to predict
the market conditions but I remain cautiously confident that we can continue
this improved performance in the second half."
- Ends -
Enquiries:
Duncan Clegg, Chairman
Paul Forman, Chief Executive
Jon Kempster, Finance Director
Low & Bonar PLC Tel: 020 7298 6820
Tim Spratt
Michelle Morton
Financial Dynamics Tel: 020 7831 3113
Photographs for the media are available at Visual Media Online
www.vismedia.co.uk 020 7436 9595
CHAIRMAN'S INTERIM STATEMENT
As we stated at the time of the Annual General Meeting, our markets remained
extremely demanding and raw material prices had increased substantially in the
second quarter.
Despite this backdrop our businesses achieved a good performance with pre
exceptional operating profit improving to #5.2m from #3.9m including a three
month contribution from the acquired carpet tile business. To provide
additional information, the segmental analysis below has been expanded to
isolate the central costs which includes the past service cost element of the UK
pension scheme.
Exceptional costs of #0.3m were incurred in our Floors operation because of a
reduction in headcount in the first half. In addition, integration costs of
#0.3m have been incurred, as predicted, as a consequence of the Gaskell Carpet
Tile Division acquisition. Profit before tax was #4.3m (2002: #3.8m) after an
interest expense of #0.3m (2002: #0.2m). Earnings per share were 2.87p (2002:
2.44p) with a tax rate of 34% (2002: 35%). On a pre exceptional basis, earnings
per share were 3.28p (2002: 2.44p).
Despite the acquisition of the carpet tile business a positive Group net cash
position has been maintained, albeit at a much reduced level of #0.9m (2002:
#9.4m). This has been possible due to a strong performance in managing working
capital and will continue to be a prime focus for the Group.
The directors have declared an interim ordinary dividend of 1.5p per share in
line with the new dividend policy announced in February 2003 (2002: 2.5p) which
will be paid on 2 October 2003 to ordinary shareholders on the register on 5
September 2003.
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Flooring
Excluding the acquisition of the carpet tile business, operating profit grew to
#4.0m for the half year (2002: #3.5m) despite a decline in sales to #25.8m
(2002: #27.7m). The revenue shortfall was caused by the decrease in sales of a
third party product in the US, subdued demand in the German and Benelux markets
and a SARS-driven slowdown in Hong Kong and Southern China.
Action was taken by the new Managing Director, Mark Sefton, to reduce many cost
elements. This drove operating margins up significantly from 12.7% in the first
half of 2002 to 15.5% in the first half of 2003. The focus now is to build on
this progress through a much more determined and structured approach to organic
growth. Our capabilities in this area are being further strengthened by
selective recruitment.
The newly acquired carpet tile business has been satisfactorily integrated into
Bonar Floors. Both its own level of trading and the post merger integration
work have met expectations fully and we are beginning to see selected examples
of large customers purchasing our full range of products as a "one-stop-shop"
offering.
Yarns & Fabrics
Yarns & Fabrics continued its improvement in sales despite demanding markets in
much of Europe, particularly Germany and Benelux. Sales of #23.4m compared to
#20.2m last year. Sales in our Dundee yarns business benefited from the
continued growth in artificial sports surfaces and the carpet backing yarns
business held up relatively well. The Belgian business had a more mixed
experience with non-woven fabrics and groundcovers progressing but a number of
other sectors experiencing very tough market conditions, especially in Spain and
Benelux.
Nonetheless the volume growth achieved across Yarns & Fabrics, together with
selective cost improvements, meant that we were able to grow profitability above
the 2002 half year levels despite a sharp upward movement in polypropylene
prices in the second quarter. In aggregate operating profit grew to #1.1m (2002:
#1.0m) for the first half year. Our expectation for the second half is of lower
material prices and hence scope for higher margins.
Plastics
Plastics moved further into profit driven by good sales growth across the
division and much improved cost control in our French operation. Sales were
#33.0m (2002: #31.2m) with an operating profit of #0.9m (2002: #0.2m). A number
of new product introductions have helped us grow in virtually every site and our
North American business saw some indications of limited market recovery towards
the end of the first half.
Cost reduction measures, allied to better operational control, ensured the
French operation moved ahead and tighter financial controls were instigated
across all the Plastics businesses. Our Danish business had a disappointing
first half and we have targeted the improvements necessary to ensure a better
performance going forward. Progress across Plastics is being consolidated by
strengthening the management teams in both Europe and North America.
Outlook
It remains difficult to predict the market conditions for the balance of the
year. Broadly our markets mirror the overall pattern of national GDP with the
US and the UK proving most resilient and Germany least so. I am pleased,
however, that a number of management actions, as contained in the January
strategic review, aimed at growing our market shares and improving our cost base
are starting to improve operating margins. I anticipate this improvement being
sustained through the second half and also expect some benefit from lower raw
material prices. Consequently, I remain cautiously confident that we can
continue this improved performance in the second half.
LOW & BONAR PLC
Unaudited Consolidated Profit and Loss Account for the half year ended 31 May
2003
Six months Six months Year
ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Turnover
Existing 82,168 79,081 162,637
Acquisitions 7,201 - -
89,369 79,081 162,637
Operating profit before amortisation and exceptional
costs
Existing 4,229 3,933 7,722
Acquisitions 1,087 - -
Amortisation
Acquisitions (138) - -
Exceptional operating costs (note 5)
Existing
- restructuring costs (308) - (1,348)
Acquisitions
- integration costs (274) - -
Operating profit
Existing 3,921 3,933 6,374
Acquisitions 675 - -
4,596 3,933 6,374
Exceptional non-operating costs (note 5)
Loss on disposal of business - - (1,683)
Net interest payable (254) (175) (215)
Profit on ordinary activities before taxation 4,342 3,758 4,476
Taxation (1,475) (1,315) (2,383)
Profit on ordinary activities after taxation 2,867 2,443 2,093
Dividends:
Preference (11) (11) (23)
Ordinary (1,492) (2,487) (3,979)
Transferred to/(from)reserves 1,364 (55) (1,909)
Ordinary dividend per share 1.50p 2.50p 4.00p
Earnings per share before exceptional items 3.28p 2.44p 4.88p
Basic and diluted earnings per share 2.87p 2.44p 2.08p
LOW & BONAR PLC
Summary Unaudited Group Balance Sheet at 31 May 2003
31/5/03 31/5/02 30/11/02
#000 #000 #000
Fixed assets
Tangible assets 62,923 60,072 57,455
Goodwill 10,071 - -
72,994 60,072 57,455
Working capital
Stocks 34,898 26,377 24,087
Debtors 51,864 45,403 42,436
Creditors (47,112) (35,856) (35,992)
39,650 35,924 30,531
Net cash 883 9,410 18,231
Tax, dividends and other liabilities (9,929) (7,939) (9,278)
103,598 97,467 96,939
Capital and reserves
Share capital 50,137 50,137 50,137
Reserves 53,461 47,330 46,802
103,598 97,467 96,939
LOW & BONAR PLC
Summary Unaudited Consolidated Cash Flow Statement for the half year ended 31
May 2003
Six months Six months Year
ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Net cash inflow/(outflow) from operating activities (note 6) 4,223 (344) 11,132
Net interest paid (219) (473) (524)
Non-equity dividends paid (11) (11) (23)
Returns on investment and servicing of finance (230) (484) (547)
Tax (paid)/recovered (921) (50) 1,193
Purchase of tangible fixed assets (2,068) (2,953) (5,632)
Sale of tangible fixed assets 443 2,841 2,840
Receipt of government grants 140 - -
Capital expenditure (1,485) (112) (2,792)
Acquisitions and disposals (note 7) (18,318) - 333
Equity dividends paid (1,492) (3,482) (5,970)
Net cash (outflow)/inflow before management of
liquid resources and financing (18,223) (4,472) 3,349
Management of liquid resources 4,000 22,900 30,000
Financing (7,426) (24,223) (31,686)
(Decrease)/increase in cash (21,649) (5,795) 1,663
Reconciliation of net cash
Opening net cash 18,231 14,858 14,858
Exchange 875 (976) 24
Net cash flow (18,223) (4,472) 3,349
Closing net cash 883 9,410 18,231
LOW & BONAR PLC
Consolidated Statement of Total Recognised Gains and Losses
for the half year ended 31 May 2003
Six months Six months Year
ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Profit for the period 2,867 2,443 2,093
Currency translation differences on overseas
net investments and related borrowings 5,295 (642) (470)
Total recognised gains and losses for the 8,162 1,801 1,623
financial period
Prior year adjustment for implementation of
FRS 19 'Deferred Tax' - (3,833) (3,595)
Total recognised gains and losses since
last annual report 8,162 (2,032) (1,972)
LOW & BONAR PLC
Reconciliation of Movements in Consolidated Shareholders' Funds
for the half year ended 31 May 2003
Six months Six months Year
Ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Profit for the period 2,867 2,443 2,093
Dividends (1,503) (2,498) (4,002)
Result for period 1,364 (55) (1,909)
Other recognised gains and losses
relating to the period 5,295 (642) (470)
Goodwill transferred to profit and loss account
on disposal of business - - 1,154
Net increase/(decrease) in shareholders' funds 6,659 (697) (1,225)
Shareholders' funds at start 96,939 98,164 98,164
Shareholders' funds at end 103,598 97,467 96,939
LOW & BONAR PLC
Segmental information for the half year ended 31 May 2003
Turnover Profit
Six mths Six mths Year Six mths Six mths Year
ended ended Ended ended ended ended
31/5/03 31/5/02 30/11/02 31/5/03 31/5/02 30/11/02
#000 #000 #000 #000 #000 #000
CLASSES OF BUSINESS
Floors
- Existing businesses 25,820 27,713 56,072 4,006 3,523 7,553
- Acquisitions 7,201 - - 949 - -
Yarns & Fabrics 23,393 20,194 44,342 1,093 978 2,630
Total Specialist Materials 56,414 47,907 100,414 6,048 4,501 10,183
North European Plastics 11,580 10,073 21,721 419 678 836
South European Plastics 9,904 10,390 18,728 (138) (910) (1,948)
North American Plastics 11,471 10,711 21,774 645 395 489
Total Plastics 32,955 31,174 62,223 926 163 (623)
89,369 79,081 162,637 6,974 4,664 9,560
Central costs (1,796) (731) (1,838)
Exceptional operating costs (582) (1,348)
-
Operating profit 4,596 3,933 6,374
Exceptional non-operating costs - - (1,683)
Net interest payable (254) (175) (215)
Profit on ordinary activities before taxation 4,342 3,758 4,476
GEOGRAPHICAL SEGMENTS
United Kingdom 25,703 17,306 37,125 4,439 3,320 7,328
Continental Europe 52,195 49,939 102,092 1,890 1,434 2,267
North America 11,471 11,836 23,420 645 (90) (35)
89,369 79,081 162,637 6,974 4,664 9,560
Central costs (1,796) (731) (1,838)
Exceptional operating costs (582) (1,348)
-
Operating profit 4,596 3,933 6,374
Exceptional non-operating costs - - (1,683)
Net interest payable (254) (175) (215)
Profit on ordinary activities before taxation 4,342 3,758 4,476
LOW & BONAR PLC
Notes on Interim Report 2003
1. This interim report has been prepared on the basis of the accounting
policies set out in the annual report for the year ended 30 November 2002, with
the addition of the accounting policy for purchased Goodwill which is set out in
note 7.
2. This interim report was approved by the board of directors on 10 July
2003.
3. Taxation on the operating profit after interest before exceptional items has
been provided at a rate of 34% for the six months ended 31 May 2003 (2002 - 35%)
which is the estimated rate of tax for the full year.
4. Earnings per share are based on the weighted average of ordinary shares in
issue during the half year of 99,474,690 (2002 - 99,474,690). There is no
dilutive effect of unexercised share options.
5. Exceptional items
Six months Six months Year
ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Operating
Floors European restructuring (308) - -
Carpet tiles integration costs (274) - -
Senior group management changes - - (812)
Floors US closure costs - - (536)
(582) - (1,348)
Non-operating
Loss on disposal of business - - (1,683)
6. Net cash inflow/(outflow) from operating activities
Six months Six months Year
Ended ended ended
31/5/03 31/5/02 30/11/02
#000 #000 #000
Operating profit 4,596 3,933 6,374
Depreciation and amortisation 4,053 3,986 7,738
Write back of government grants (42) (30) (68)
Increase in working capital (4,384) (8,233) (2,912)
4,223 (344) 11,132
7. The Group acquired the trade and assets of the carpet tile
division of Gaskell plc on 21 February 2003. The Directors consider that the
fair values are not materially different from book values at the date of
acquisition.
Book Value
& Fair Value
#000
Fixed assets 4,476
Stock 6,056
Debtors 3,877
Creditors (5,329)
Net assets acquired 9,080
Purchase consideration, including costs 19,289
Goodwill arising on acquisition 10,209
Analysis of Purchase consideration including costs:
Cash paid during period 18,318
Included within creditors at 31 May 2003 971
19,289
Purchased Goodwill is capitalised on the balance sheet and amortised
through the profit and loss account over its estimated useful life. The
Directors consider that the estimated useful life of the Goodwill arising on the
acquisition of the carpet tiles business is 20 years.
8 The comparative figures for the financial year ended 30
November 2002 are not the company's statutory accounts for that financial year.
Those accounts have been reported on by the company's auditors and delivered
to the registrar of companies. The report of the auditors was unqualified and
did not contain a statement under section 237(2) or (3) of the Companies Act
1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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