TIDMAPI
Press Release 29 May 2012
API Group plc
("API" or the "Group")
Final Results
API Group plc (AIM:API), a leading manufacturer of specialist foils and
packaging materials, announces its final results for the year ended 31 March
2012.
Financial Highlights
* 14% growth in revenues to GBP113.9m (2011: GBP100.0m)
* Operating profits advanced by 32% to GBP6.9m (2011: GBP5.2m)
* Improved results at Holographics (+ GBP1.0m), Foils Americas (+ GBP0.9m) and
Laminates (+ GBP0.5m). Profits at Foils Europe declined by GBP0.5m
* Profit before tax increased by 77% to GBP5.1m (2011: GBP2.9m)
* Basic earnings per share of 6.7 pence (2011: 3.5 pence)
* IAS 19 pension deficit (net of deferred tax) down by GBP0.7m to GBP6.5m
* Cash flow from operating activities GBP8.7m (2011: GBP8.5m)
* Net debt down to GBP3.6m compared to GBP8.5m at March 2011
* Increased capital investment, with additions of GBP3.5m (2011: GBP1.2m)
* Shareholder's funds increased by GBP6.0m (39%) to GBP21.3m
* Installation of the new laminator completed to schedule in April,
shipments for the new supply contract expected from late June
Commenting on the results, Richard Wright, Chairman of API Group plc, said: "It
is pleasing to report another substantial improvement in the Group's financial
results, in spite of the challenging economic conditions and pressures from
higher raw material costs. A second year of strong cash flow has transformed
the Group's balance sheet. With a robust pipeline of growth projects and
management focus on improving the profitability of the European foils business,
the Board is confident of making further progress in the current financial
year."
- Ends -
For further information:
API Group plc
Andrew Turner, Group Chief Executive Tel: +44 (0) 1625 650 334
Chris Smith, Group Finance Director www.apigroup.com
Numis Securities (Broker)
James Serjeant Tel: +44 (0) 20 7260 1000
www.numis.com
Cairn Financial Advisers (Nominated Adviser)
Tony Rawlinson / Avi Robinson Tel: +44 (0) 20 7148 7900
www.cairnfin.com
Media enquiries:
Abchurch
Julian Bosdet / Henry Harrison-Topham / Sarah Hollins Tel: +44 (0) 20 7398 7702
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
Against a background of weak economic conditions affecting most end markets, API
is pleased to report another year of significant improvement in financial
performance. With debt substantially reduced and positive momentum in sales and
profits, the Group has further strengthened its platform for future investment
and growth.
Sales for the year ended 31 March 2012 of GBP113.9m were 14% ahead of the previous
12 month period, operating profits increased by 32% to GBP6.9m (2011: GBP5.2m) and
profit before tax rose 77% to GBP5.1m (2011: GBP2.9m). Basic earnings per share of
6.7p advanced by 3.2p and net debt finished the year at GBP3.6m compared to GBP8.5m
a year earlier. Despite the adverse impact of exceptionally low bond yields,
the IAS pension deficit fell by GBP0.7m to GBP6.5m, net of deferred tax.
While Laminates remains the most significant contributor to Group results, year-
on-year profit improvement was driven by three of the four business units.
Holographics performed particularly strongly on the back of growth in target
security markets, registering a GBP1.0m increase in profits, Foils Americas
benefited from an improved sales mix and lower costs to record profits GBP0.9m
ahead of last year and Laminates delivered another excellent performance, with
profits up by GBP0.5m on 24% higher sales. Foils Europe profits were down by
GBP0.5m as recovering margins were offset by weaker volumes, especially in the
second half. In due course, the Board expects results to benefit from the
increased focus brought about by the recent establishment of separate management
teams for Foils Europe and Holographics.
As reported last year, a key challenge facing the business was the short supply
and surge in pricing of key raw materials. The situation is now much improved
with the supply-demand balance re-established in most material categories, new
sources of supply approved and, for the most part, residual cost increases
passed through to customers in higher selling prices. It is greatly encouraging
that the Group has been able to weather a period of such volatility in raw
material costs and that all businesses enter the new financial year with margins
substantially restored to previous levels.
Increased Group operating profits converted to strong cash flow with a
corresponding reduction in net debt. Year end net debt to EBITDA was down to
0.4x (2011: 1.1x), the healthiest Group financial position for at least a
decade. With the confidence of a stronger balance sheet, the Board has been
able to approve a number of capital expenditure projects aimed especially at
improving the level and resilience of earnings in the Laminates and Holographics
units. The Board will continue to examine options for growth oriented capital
investment whilst maintaining a conservative stance towards levels of debt.
Shareholders
In February 2012, the Group's two leading shareholders wrote to the Board
proposing that a sale process be commenced with the aim of securing a general
offer for the issued share capital of API Group plc. Following discussions with
these and other large shareholders and after due consideration, the Board issued
a statement on 30 March 2012 advising that, barring unforeseen events, such a
process would be explored during the third calendar quarter of 2012.
Dividend
In light of the Group's improved financial position, the Board now has greater
flexibility in assessing the options for use of funds. At this time payment of
a dividend is not being recommended but the Board will continue to keep its
policy under review with the aim of maximising returns for shareholders.
Board and Governance
There have been no changes to the composition of the Board since the last Annual
Report. The Board and its Committees have functioned well throughout the year.
In particular, I would like to thank the Directors nominated by our two leading
shareholders for their support during consideration of the sale proposals
referred to above.
Our People
On behalf of the Board, I must thank all the Group's employees for their
invaluable contribution to the achievements of the last 12 months and the
continued progress of the business in the face of such challenging economic
conditions.
Outlook
The Board remains cautiously optimistic about the Group's prospects for the new
financial year. The general economic climate and uncertainty surrounding the
Euro continues to impact consumer confidence and economic growth in the regions
and markets served by API. However, end markets for premium products which
drive a significant proportion of sales have so far proved relatively resilient.
As the Group enters the new financial year, Laminates volumes remain buoyant on
its existing core business and, with installation of the new laminator completed
to schedule in April, shipments against the new multi year supply contract are
expected to commence from late June.
In the Foils businesses, order levels are steady in most sectors with potential
for additional metallised pigment revenues in the US. Holographics is
continuing to make progress in security markets offsetting the lower inter-
company sales following the end of a significant joint project with Laminates.
Overall, the outlook on volumes and a full year benefit from pricing action
taken during 2011/12 to recover increased raw material costs, underpin the
Board's confidence in the Group making further progress in the coming year.
Richard C Wright
Chairman
29 May 2012
Business Review
Group Operating Results
Group revenues for the 12 months to March 2012 were GBP113.9m, an increase of
14.2% at constant exchange rates compared to the previous reporting period
(14.0% at actual exchange rates). All business units recorded increases in
revenues, with Laminates (+23.7%) and Holographics (+20.8%) having a
particularly strong year. The Foils businesses saw generally weak end markets
but achieved increased sales revenues due to improved product mix and higher
selling prices.
Operating profits increased by GBP1.7m or 32.4% to GBP6.9m (2011: GBP5.2m) with
operating margins at 6.0% compared to 5.2% for the previous 12 months.
Three of the Group's four business units increased operating profits.
Holographics (+ GBP1.0m) made excellent progress in growing sales in its target
security markets; Foils Americas (+ GBP0.9m) enjoyed strong demand for its metallic
pigment product and benefited from lower operating costs; and Laminates (+ GBP0.5m)
built on the previous year's growth in the tobacco and personal care sectors.
Margins in all businesses have now returned to more acceptable levels following
the significant raw material cost increases experienced in late 2010/early 2011.
The Group's second half performance was slightly weaker than the preceding six
months of 2011/12, although sales and operating profit were still ahead of the
second half of 2010/11 by 4.2% and 14.7% respectively (at constant exchange
rates).
Foils Europe
The Foils Europe business made limited progress in the period as the expected
recovery in margins from higher prices was offset by lower volumes, especially
in the second half. Full year sales of GBP29.2m were 2.6% ahead of last year
(1.5% at constant exchange rates). However, after accounting for the pass-
through of material costs in higher selling prices, volumes were down 8.3%,
leaving sales contribution broadly flat. On a regional basis, sales performance
was mixed, with growth in Italy and Australia more than offset by weakness in
France, the UK and key export markets in Eastern Europe, Middle East and
Africa. Operating costs were higher by GBP0.4m due to increased selling expenses
and poor matching of production costs to demand. The higher costs combined with
flat year-on-year sales contribution led to a fall in operating profit to GBP0.4m
compared with GBP0.9m in 2010/11.
The establishment of a separate management team for Foils Europe was completed
during the final quarter of the financial year and is focused on overhauling the
service proposition, driving sales growth and aligning costs to volumes. During
May 2012, a new sales and distribution hub commenced operations in Warsaw,
Poland.
Foils Americas
Foils Americas sales of GBP23.4m were 3.6% ahead of prior year at constant
exchange rates and 1.3% ahead at actual rates. The business benefited from
healthy orders for its metallic pigment intermediary (+30.8%) and some recovery
in the greeting card segment. Nevertheless, weak demand from the general
graphics and packaging sectors and an exit from a number of low margin accounts
led to a decline in overall volumes by 7.6%, albeit on a significantly improved
mix.
Higher selling prices and favourable sales mix compensated for lower volumes to
leave sales contribution broadly unchanged year on year. Operating costs were
lower by GBP0.9m driven by more effective use of coating capacity across the two
locations and lower general expenses. The resulting full year profit was GBP0.9m
ahead of 2010/11 at GBP1.2m, representing an operating margin of 5.0%.
In August 2011, the Foils Americas' New Jersey manufacturing facility suffered
severe flooding as a result of Hurricane Irene. Management and staff worked
tirelessly to bring production back on stream within just a few days and,
despite significant damage to stock and facilities, customers were spared any
significant disruption to supplies. Insurance policies ensured that losses
incurred as a result of the incident were settled with minimal impact on the
Group's income statement and cash position.
Laminates
API Laminates produced another very strong year for the Group with sales of
GBP54.8m, 24% higher than the preceding year ( GBP44.3m) and just less than double
the level reported in 2010 ( GBP28.0m). Increased allocation of brand owner
marketing spend towards higher added value packaging designs led to growth in
demand across the business' three key market sectors. Revenues in pan-European
tobacco increased 45.9%, health & beauty was ahead by 35.4% and alcoholic drinks
maintained the high levels of activity experienced in 2010/11. Approximately
7% of sales growth was accounted for by the partial pass through of higher input
costs relating to specification changes and increased material prices, leaving
underlying volumes ahead by 17.3%.
Contribution from higher volumes was diluted by some absorption of input cost
increases on certain long term customer contracts plus supply chain
inefficiencies experienced in the middle of the year connected with a new
product launch. Nevertheless, other costs were tightly controlled and operating
profits advanced by GBP0.5m to GBP5.7m, representing an operating margin of 10.4%.
Installation of the new lamination machine at Laminates' Poynton manufacturing
site was effectively managed, with minimal disruption to ongoing operations.
Significant progress was made establishing the raw material supply chain and
qualifying the finished product for the new customer supply contract. Volumes
are expected to come on stream towards the end of the first quarter of the new
financial year.
Holographics
Holographics sales demonstrated strong year-on-year improvement, ending the
period 20.8% higher at GBP13.0m (2011: GBP10.8m). The business delivered growth of
37.4% in its target segments of security, ID and product authentication assisted
by continued investment in sales & marketing and increased management focus.
Intra-group sales of decorative holographic products were flat year-on-year,
with the second half weaker than the first as a significant film supply
arrangement with Laminates came to an end.
Production costs and overheads increased to support the growth in security
sales. However, the richer business mix and improved recovery of fixed costs
resulted in operating profits GBP1.0m ahead at GBP1.6m with an operating margin of
12.4%.
Central Costs
Full year central costs were up GBP0.3m, including GBP0.1m relating to the Board's
consideration of options in response to certain shareholder actions, re-
organisation costs of GBP0.1m and exchange losses of GBP0.1m.
Discontinued Operations
In January 2011, the Group disposed of its 51% ownership in Shanghai Shen Yong
Stamping Foil Co. Ltd. Prior year comparatives include the results of the China
subsidiary as a fully consolidated entity but classified under discontinued
operations.
Impairment
The Board considers that no impairments to goodwill or asset carrying values are
necessary.
Finance Costs
For the year ended 31 March 2012, net finance costs fell GBP0.5m to GBP1.8m.
Financing costs relating to the Group's bank borrowings reduced by GBP0.3m,
comprising lower interest charges of GBP0.4m partly offset by an increase of GBP0.1m
relating to facility fee charges. Pension finance costs fell GBP0.2m as a result
of a lower non-cash pension charge ( GBP0.4m) but higher running costs for PPF levy
and investment advisory fees. Further details are provided in Note 9 below.
Taxation
For the year to 31 March 2012, net taxation of GBP0.1m has been charged to the
income statement. This compares to a net tax charge of GBP0.3m for the previous
12 months.
The Group continues to benefit from accumulated tax losses in the UK and USA. A
deferred tax charge of GBP1.5m (2011: GBP1.1m) principally on UK profits has been
balanced by a deferred tax credit of GBP1.5m (2011: GBP1.0m) primarily from
increased tax loss recognition relating to Foils Americas' recent improvement in
trading performance.
Remaining unrecognised tax losses at 31 March 2012 of GBP4.2m (2011: GBP3.6m) in the
UK and $12.6m (2011: $15.1m) in the US are in addition to unclaimed capital
allowances in the UK of GBP5.4m (2011: GBP8.7m).
Deferred tax assets associated with pension liabilities reduced from GBP2.5m at
March 2011 to GBP2.1m at 31 March 2012 in line with the fall in the net pension
deficit and the reduction in the UK corporate tax rate from 26% to 24% for the
coming financial year.
A full reconciliation of the total tax charge is shown in Note 5(b) below.
Earnings per Share
Basic earnings per share from continuing operations of 6.7p represents an
increase of 91% compared to 3.5p for the year ending 31 March 2011.
Shareholders' Funds
The Group's net assets rose to GBP21.3m at 31 March 2012, an increase of GBP6.0m
(+39.4%) on the position twelve months earlier.
Cash Flow and Net Debt
The Group had another strong year for cash generation with a net cash inflow
from operating activities of GBP8.7m exceeding the GBP8.5m generated for the year to
31 March 2011.
Control of working capital is a key aspect of the Group's debt management. At
the end of March 2012, working capital efficiency, measured by reference to
trailing three month sales (annualised), was 7.9% compared to 8.9% at 31 March
2011. Despite higher sales activity, year-end working capital was GBP1.0m lower
than 12 months earlier.
With a much improved balance sheet, the Board has been able to sanction
increased capital spending to enhance the Group's asset base and earnings
potential, including the new machine for Laminates announced in July 2011. As a
consequence, for the 12 months to March 2012, capital additions amounted to
GBP3.5m, three times the level of the previous year. Cash flows relating to this
capital investment amounted to GBP2.7m (2011: GBP1.2m) of which the new production
line at Laminates accounted for GBP1.2m ( GBP2011: GBP0.2m). Depreciation for the year
was GBP2.4m (2011: GBP2.9m).
Interest expense cash flow reduced by GBP0.7m to GBP0.8m for the year.
Net debt (financial liabilities excluding the fair value of derivatives, less
cash) reduced substantially for the second consecutive year, closing at GBP3.6m
compared with GBP8.5m one year earlier and GBP10.0m at 30 September 2011.
As at 31 March 2012, the Group's debt cover ratio (net debt to trailing 12 month
EBITDA) was down to 0.4x (2011: 1.1x, 2010: 3.9x) with gearing (net debt to
shareholders funds) at 17% (2011: 56%, 2010: 107%).
Borrowings and Liquidity
The Group's policy is to ensure that bank facilities and other funding are
sufficient to meet foreseeable peak borrowing requirements. Facilities are in
place to independently finance the Group's main operations based in the UK and
North America.
The Group's UK banking facilities are with Barclays Bank plc and are in place
until July 2013. During the year, the Group extended its facilities with
Barclays with temporary increases in term and overdraft loans to meet expected
peak cash flows relating to the Laminates investment project and the working
capital build to support the associated supply deal. Facilities at 31 March
2012 totalled GBP16.75m (2011: GBP14.1m) comprising amortising loans of GBP8.0m
repayable over the term of the facility with a final GBP4.25m due in July 2013, a
term loan of GBP3.75m repayable in July 2013 and a multi-option overdraft facility
of GBP5.0m renewable in November 2012. UK borrowings are secured against the
Group's UK assets and are subject to four quarterly financial covenant targets.
In North America, bank facilities are with Wells Fargo Bank and extend to
October 2013. Facilities comprise a $1.5m amortising loan and a $5.5m asset
backed overdraft facility. Borrowings are secured on working capital, plant and
equipment and the Kansas property and are subject to quarterly covenant targets.
Foreign Currency Exchange Rates
Exchange rates used for the translation of results and assets of US, Euro zone
and China based operations are shown below.
Rate to GBP1 US$ Euro RMB
=------------------------------------
31 March 2012
Average 1.59 1.16 -
Closing 1.60 1.20 -
=------------------------------------
31 March 2011
Average 1.56 1.18 10.36
Closing 1.60 1.13 10.50
=------------------------------------
Pensions
The Group operates a number of pension schemes for the benefit of its past and
current employees. UK and US defined benefit pension plans, both of which are
closed to future accrual, are accounted for under IAS 19. At 31 March 2012 the
Group's IAS 19 gross pension liability was calculated at GBP8.6m (2011: GBP9.7m).
After accounting for a deferred tax asset of GBP2.1m (2010: GBP2.5m) the net
liability amounts to GBP6.5m (2011: GBP7.2m).
The API Group plc Pension and Life Assurance Fund, the UK based fund, has
approximately 1,620 pensioners and deferred members and net liabilities assessed
at GBP7.5m (2011: GBP9.0m). The UK scheme has admitted no new members since October
2006 and the scheme was closed to future service accrual on 31 December 2008.
Exceptionally low yields on gilts have pulled down the discount rates used to
value scheme liabilities from 5.65% to 4.85%. The resultant increase in
liabilities of GBP9.4m has been mitigated by lower long term inflation assumptions
( GBP2.7m) and an experience gain of GBP7.2m arising from updated member data used
for calculating the scheme liabilities. In addition, the UK scheme benefited
from above-target asset investment performance of GBP0.3m and received a deficit-
reduction contribution from the Company of GBP0.7m (2011: GBP0.4m).
The UK scheme recently completed its triennial valuation based on its position
at 30 September 2010. The valuation calculated a funding deficit of GBP15.7m with
a funding ratio of 81%. As part of the completion of the review, the Company
and Scheme Trustees agreed a funding plan which left the schedule of
contributions by the Company unchanged from the previous arrangement. Under the
new plan, it is estimated that annual contributions of GBP0.7m per annum, in
conjunction with assumed return on scheme assets, will reduce the scheme deficit
to zero by June 2019. The Company also continues to pay all pension related
administration fees on behalf of the Fund.
In the US, the Company defined benefit scheme was closed to new entrants and
future accrual in 2004. Membership is approximately 170 current and past
employees. Details of the net deficit of GBP1.1m (2011: GBP0.7m) are included in
Note 9 below.
At the Group's US manufacturing facility in New Jersey, current and past US
employees covered by union contracts are members of a union managed multi-
employer defined benefit pension plan. This scheme remains open and operates
under the terms of the site's collective bargaining agreement. In accordance
with IAS 19, this scheme is accounted for as a defined contribution plan.
Group Income Statement
For the year ended 31 March 2012
Year
ended Year ended
31 March 31 March
2012 2011
Note GBP'000 GBP'000
Continuing operations
Revenue 2 113,935 99,963
Cost of sales (87,149) (76,386)
----------------------
Gross profit 26,786 23,577
Distribution costs (3,886) (3,284)
Administrative expenses (16,022) (15,099)
----------------------
Operating profit from continuing operations 2,3 6,878 5,194
Finance revenue 4 13 17
Finance costs 4 (1,832) (2,354)
----------------------
(1,819) (2,337)
----------------------
Profit on continuing operations before taxation 5,059 2,857
Tax expense 5 (105) (265)
----------------------
Profit from continuing operations 4,954 2,592
Discontinued operations
Loss from discontinued operations - (4,124)
----------------------
Profit/(loss) for the year 4,954 (1,532)
----------------------
Profit/(loss) attributable to equity holders of the
Parent
* continuing operations 4,954 2,592
* discontinued operations - (612)
----------------------
4,954 1,980
Loss attributable to non-controlling interest
* discontinued operations - (3,512)
----------------------
Profit/(loss) for the year 4,954 (1,532)
----------------------
Earnings per share (pence)
Basic earnings per share from continuing 6 6.7 3.5
operations
Diluted earnings per share from continuing 6 6.4 3.4
operations
Basic earnings per share on profit for the
year 6 6.7 2.7
Diluted earnings per share on profit for the
year 6 6.4 2.6
Group Statement of Comprehensive Income
for the year ended 31 March 2012
Year ended 31 March 2012 Equity holders of the Non-controlling
Parent interests Total
GBP'000 GBP'000 GBP'000
Profit for the year 4,954 - 4,954
-------------------------------------------------
Exchange differences on (4) - (4)
retranslation of foreign
operations
Change in fair value of
effective cash flow hedges 937 937
Actuarial gains on defined -
benefit pension plans 300 300
Tax on items relating to
components of other (419) - (419)
comprehensive income
-------------------------------------------------
Other comprehensive income
for the year, net of tax 814 - 814
-------------------------------------------------
Total comprehensive income
for the year 5,768 - 5,768
-------------------------------------------------
Equity
Year ended 31 March 2011 holders of the Non-controlling
Parent interests Total
GBP'000 GBP'000 GBP'000
Profit/(loss) for the year 1,980 (3,512) (1,532)
----------------------------------------
Exchange differences on retranslation (379) (13) (392)
of foreign operations
Loss arising on net asset hedge (121) - (121)
Change in fair value of effective cash -
flow hedges (329) (329)
Actuarial gains on defined benefit -
pension plans 6,586 6,586
Tax on items relating to components of (2,104) - (2,104)
other comprehensive income
----------------------------------------
Other comprehensive income for the
year, net of tax 3,653 (13) 3,640
----------------------------------------
Total comprehensive income for the year 5,633 (3,525) 2,108
----------------------------------------
Group Balance Sheet
at 31 March 2012
31 March 31 March
2012 2011
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 7 17,936 16,804
Intangible assets - goodwill 5,188 5,188
Trade and other receivables 32 94
Deferred tax assets 5,230 5,478
----------------------
28,386 27,564
----------------------
Current assets
Trade and other receivables 15,485 16,848
Inventories 12,237 12,409
Other financial assets 474 -
Cash and short-term deposits 10,068 4,175
----------------------
38,264 33,432
----------------------
----------------------
Total assets 2 66,650 60,996
----------------------
Liabilities
Current liabilities
Trade and other payables 22,261 21,952
Financial liabilities 8 4,522 2,830
Income tax payable 307 365
----------------------
27,090 25,147
----------------------
Non-current liabilities
Financial liabilities 8 9,237 10,514
Deferred tax liabilities 307 238
Provisions 76 85
Deficit on defined benefit pension plans 9 8,618 9,719
----------------------
18,238 20,556
----------------------
----------------------
Total liabilities 45,328 45,703
----------------------
----------------------
Net assets 21,322 15,293
----------------------
Equity
Called up share capital 767 766
Share premium 7,136 7,136
Other reserves 8,816 8,565
Foreign exchange reserve 255 259
Retained profit/(loss) 4,348 (1,433)
----------------------
API Group shareholders' equity 21,322 15,293
----------------------
Group Statement of Changes in Equity
for the year ended 31 March 2012
Equity Foreign Total
Share Share Other Exchange Retained share-holders'
capital premium reserves reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2010 701 7,136 8,595 3,309 (7,805) 11,936
----------------------------------------------------------
Profit for the year - - - - 1,980 1,980
Other comprehensive
income:
Exchange differences
on retranslation of - - - (379) - (379)
foreign operations
Loss arising on net
asset hedge - - - (121) - (121)
Change in fair value
of effective cash - - - - (329) (329)
flow hedges
Actuarial gains on - - - - 6,586 6,586
defined benefit
pension plans
Tax on items - - - - (2,104) (2,104)
relating to
components of other
comprehensive income
----------------------------------------------------------
Total comprehensive - - - (500) 6,133 5,633
income for the year
----------------------------------------------------------
Transfer to income
statement on - - - (2,550) - (2,550)
disposal of
subsidiaries
Issue of shares 65 - - - - 65
Shares acquired by
Employee Benefit - - (30) - - (30)
Trust
Share-based payments - - - - 239 239
----------------------------------------------------------
At 31 March 2011 766 7,136 8,565 259 (1,433) 15,293
----------------------------------------------------------
Profit for the year - - - - 4,954 4,954
Other comprehensive
income:
Exchange differences
on retranslation of - - - (4) - (4)
foreign operations
Change in fair value - - - - 937 937
of effective cash
flow hedges
Actuarial gains on - - - - 300 300
defined benefit
pension plans
Tax on items - - - - (419) (419)
relating to
components of other
comprehensive income
----------------------------------------------------------
Total comprehensive - - - (4) 5,772 5,768
income for the year
----------------------------------------------------------
Issue of shares 1 - - - - 1
Shares acquired by - - - - (1) (1)
the Company
Shares acquired by
Employee Benefit - - (11) - - (11)
Trust
Transferred on
exercise of share
options - - 262 - (262) -
Share-based payments - - - - 185 185
Tax relating to
items accounted for
directly through
equity - - - - 87 87
----------------------------------------------------------
At 31 March 2012 767 7,136 8,816 255 4,348 21,322
----------------------------------------------------------
Group Statement of Changes in Equity (continued)
for the year ended 31 March 2012
Shareholders' equity Non-controlling Total equity
interest
GBP'000 GBP'000 GBP'000
At 1 April 2010 11,936 5,375 17,311
Total comprehensive
income for the year 5,633 (3,525) 2,108
Transfer to income
statement on disposal
of subsidiaries (2,550) - (2,550)
Elimination of
minority interest on
disposal - (1,850) (1,850)
Issue of shares 65 - 65
Shares acquired by
Employee Benefit Trust (30) - (30)
Share based payments 239 - 239
------------------------------------------------------
At 31 March 2011 15,293 - 15,293
Total comprehensive
income for the year 5,768 - 5,768
Issue of shares 1 - 1
Shares acquired by the
Company (1) - (1)
Shares acquired by
Employee Benefit Trust (11) - (11)
Share-based payments 185 - 185
Tax relating to items
accounted for directly
through equity 87 - 87
------------------------------------------------------
At 31 March 2012 21,322 - 21,322
------------------------------------------------------
Group Cash Flow Statement
for the year ended 31 March 2012
Year ended Year ended
31 March 2012 31 March 2011
Note GBP'000 GBP'000
Operating activities
Group profit before tax from continuing
operations 5,059 2,857
Adjustments to reconcile Group profit before
tax to
net cash flow from operating activities
Operating loss from discontinued operations - (7,215)
Net finance costs 1,819 2,337
Depreciation of property, plant and equipment 2,368 2,942
Impairment of property, plant and equipment - 5,850
(Profit)/loss on disposal of property, plant
and equipment (2) 28
Movement in fair value foreign exchange
contracts (83) 78
Share-based payments 185 239
Difference between pension contributions paid
and amounts recognised in the income
statement (1,539) (1,037)
Decrease/(increase) in inventories 156 (2,047)
Decrease/(increase) in trade and other
receivables 1,260 (2,588)
(Decrease)/increase in trade and other
payables (304) 7,201
Movement in provisions (9) (12)
----------------------------
Cash generated from operations 8,910 8,633
Income taxes paid (171) (140)
----------------------------
Net cash flow from operating activities 8,739 8,493
----------------------------
Investing activities
Interest received 13 17
Purchase of property, plant and equipment (2,736) (1,153)
Sale of property, plant and equipment 5 21
Sale of subsidiary undertakings - 1,783
Cash and cash equivalents of subsidiary
undertakings sold - (296)
----------------------------
Net cash flow from investing activities (2,718) 372
----------------------------
Financing activities
Interest paid (832) (1,480)
Proceeds from share issues 1 65
Purchase of shares by the Company (1) -
Purchase of shares by Employee Benefit Trust (11) (30)
New borrowings 1,913 1,214
Repayment of borrowings (996) (5,382)
----------------------------
Net cash flow from financing activities 74 (5,613)
----------------------------
Increase in cash and cash equivalents 6,095 3,252
Effect of exchange rates on cash and cash
equivalents 8 13
Cash and cash equivalents at the beginning of
the period 2,719 (546)
----------------------------
Cash and cash equivalents at the end of the
period 8,822 2,719
----------------------------
Notes to the consolidated financial statements
1. Group accounting policies
Publication of abridged accounts
The Group's financial statements for the year ended 31 March 2012 were
authorised for issue by the Board of Directors on 28 May 2012 and the balance
sheet was signed on the Board's behalf by Andrew Turner, Group Chief Executive.
API Group plc is a public company incorporated and domiciled in England &
Wales. The Company's ordinary shares are traded on the Alternative Investment
Market of the London Stock Exchange.
The preliminary announcement figures for the year ended 31 March 2012 and the
comparative figures for the year ended 31 March 2011 are an abridged version of
the Group's statutory accounts which carry an unmodified audit report. They do
not constitute statutory accounts within the meaning of sections 434 to 436 of
the Companies Act 2006 and no statutory accounts have yet been filed with the
Registrar of Companies for the year ended 31 March 2012. Statutory accounts for
the year ended 31 March 2011 have been filed with the Registrar of Companies.
The auditor's report on these accounts was unqualified and did not contain an
emphasis of matter, nor did it contain a statement under section 498 of the
Companies Act 2006. The statutory accounts for the year ended 31 March 2012 will
be delivered to the registrar of Companies following the Company's Annual
General Meeting.
The Annual Report and Accounts for the year ended 31 March 2012 will be posted
to shareholders by 21 June 2012 prior to the Annual General Meeting on 19 July
2012. Copies of the Annual Report and Accounts will be available to members of
the public from 22 June 2012 at the Group's registered office at Second Avenue,
Poynton Industrial Estate, Poynton, Cheshire SK12 1ND.
Basis of preparation and statement of compliance with IFRS
The Group's financial statements have been prepared under the historical cost
convention in accordance with International Financial Reporting Standards
(IFRSs) issued by the International Accounting Standards Board (IASB) as adopted
by the European Union as they apply to the financial statements of the Group for
the year ended 31 March 2012 and applied in accordance with the Companies Act
2006. The Group has applied optional exemptions available to it under IFRS 1.
The consolidated financial statements are presented in sterling and all values
are rounded to the nearest thousand ( GBP'000) except when otherwise indicated.
Going concern
The Group meets its day-to-day working capital requirements through overdraft
and loan facilities, as detailed in Note 8 of the consolidated financial
statements. The principal facilities relate to the UK and the US. These
facilities currently extend to July 2013 and October 2013 respectively.
The Group has demonstrated further recovery over the financial year ended 31
March 2012. However, the unsettled general economic environment, particularly in
its main European and US markets could adversely affect demand for its
products. The Group's forecasts and projections, allowing for a possible
deterioration in trading performance, show that the Group has a reasonable
expectation of being able to operate within the level of currently available
facilities. Accordingly, as set out in the Directors' Report, the accounts have
been prepared on the going concern basis.
Accounting policies
The principal accounting policies which apply in preparing the financial
statements for the year ended 31 March 2012. These policies have been
consistently applied to all periods presented unless otherwise stated.
2. Segmental analysis
The Group produces monthly management information to enable the Board, including
the Group Chief Executive, to monitor the financial performance of its
constituent parts. This information is analysed by business unit. Following the
disposal of the China business in 2011, the residual businesses within the Asia
Pacific unit are now managed and reported within the Foils Europe business
unit. The Holographics business unit is now managed and reported separately
from Foils Europe and comparative figures have been adjusted accordingly.
Revenue
Year ended Year ended
31 March 2012 31 March 2011
GBP'000 GBP'000
Continuing operations
Total revenue by origin
Foils Europe 29,158 28,429
Foils Americas 23,446 23,151
Holographics 13,015 10,775
Laminates 54,823 44,321
----------------- -----------------
120,442 106,676
----------------- -----------------
Inter-segmental revenue
Foils Europe 980 1,095
Foils Americas 566 733
Holographics 4,868 4,855
Laminates 93 30
----------------- -----------------
6,507 6,713
----------------- -----------------
External revenue by origin
Foils Europe 28,178 27,334
Foils Americas 22,880 22,418
Holographics 8,147 5,920
Laminates 54,730 44,291
----------------- -----------------
Segment revenue 113,935 99,963
----------------- -----------------
External revenue by destination
Continuing operations
UK 37,778 36,881
Rest of Europe 48,243 33,213
Americas 21,105 21,264
Asia Pacific 6,062 7,898
Africa 747 707
----------------- ----------------
113,935 99,963
----------------- ----------------
Discontinued operations
Europe - 895
Asia Pacific - 6,530
----------------- ----------------
- 7,425
----------------- ----------------
All revenue is derived from the sale of goods.
During the year ended 31 March 2012 there were two major customers, reported
within the Laminates segment, which comprised 10% or more of the total external
revenue, amounting to GBP19,841,000 (2011: GBP14,696,000) and GBP17,601,000 (2011:
GBP11,880,000) respectively.
Segment result
Year ended Year ended
31 March 2012 31 March 2011
GBP'000 GBP'000
Continuing operations
Operating profit
Foils Europe 389 857
Foils Americas 1,173 244
Holographics 1,615 567
Laminates 5,704 5,245
----------------- -----------
Segment result 8,881 6,913
Central costs (2,003) (1,719)
----------------- -----------
Total operating profit 6,878 5,194
----------------- -----------
Central costs comprise primarily of salaries, other employment costs and
corporate advisory fees relating to the central management of the Group.
Year ended Year ended
31 March 31 March
2012 2011
GBP'000 GBP'000
Assets
Foils Europe 17,082 18,104
Foils Americas 13,552 14,385
Holographics 6,915 6,661
Laminates 13,276 11,637
------------ -------------------------------------------------
Segment assets 50,825 50,787
Unallocated 15,825 10,209
------------ -------------------------------------------------
66,650 60,996
------------ -------------------------------------------------
3. Operating profit
Year ended Year ended
31 March 2012 31 March 2011
GBP'000 GBP'000
This is stated after charging/(crediting):
Research and development expenditure expensed during
the period 718 722
Depreciation of property, plant and equipment 2,367 2,942
(Profit)/loss on disposal of property, plant and
equipment (2) 28
Cost of inventories recognised as an expense 64,246 59,141
Including write-down of inventories to net
realisable value 481 186
Net foreign currency differences 8 (48)
Operating lease payments - minimum lease payments 1,054 1,018
Audit of the financial statements 79 77
Other fees payable to the Group's Auditor
- audit of the UK defined benefit pension scheme 5 5
- local statutory audits for subsidiaries 73 67
- other services - 2
Costs associated with major flood at US factory (see
below) 690 -
Insurance recovery in respect of the flood (see
below) (747) -
In August 2011, the manufacturing facility in New Jersey, US, sustained
significant damage due to flooding caused by Hurricane Irene. The costs
relating to the damage have been recovered through insurance.
4. Finance revenue and finance costs
Year ended Year ended
31 March 2012 31 March 2011
GBP'000 GBP'000
Finance revenue
Interest receivable on bank and other short term
cash deposits 3 2
Other interest receivable 10 15
----------------------------
13 17
----------------------------
Finance costs
Interest payable on bank loans and overdrafts (1,045) (1,356)
Other interest payable (49) (24)
Finance cost in respect of defined benefit pension
plans (738) (974)
----------------------------
(1,832) (2,354)
----------------------------
5. Taxation
(a) Tax on profit/(loss) on ordinary activities
Year ended Year ended
31 March 31 March
2012 2011
GBP'000 GBP'000
Tax (expensed)/credited in the income statement
Continuing operations
Current income tax
UK Corporation tax - -
Overseas tax - current year expense (101) (135)
- adjustments in respect of prior years (19) (37)
--------- --------------
Total current income tax expense (120) (172)
--------- --------------
Deferred tax
Origination and reversal of temporary differences
- defined benefit pension plan (209) (17)
- tax losses (174) 466
- capital allowances 448 (443)
- effect of change in tax rate (50) (99)
--------- --------------
Total deferred tax (expense)/credit 15 (93)
--------- --------------
Total tax expense in the income statement (105) (265)
--------- --------------
Tax expense on items accounted for through other comprehensive income
Deferred tax
Actuarial gains and losses on defined pension schemes (78) (1,845)
Change in fair value of effective cash flow hedges (94) -
Effect of change in tax rate (247) (259)
--------- ----------
(419) (2,104)
--------- ----------
Tax credit on items accounted for directly through equity
Deferred tax
Share-based payments 87 -
------ ----
(b) Reconciliation of the total tax charge
The tax rate in the income statement for the year is lower than the standard
rate of corporation tax in the UK of 26% (2011: 28%). The differences are
reconciled below:
Year
ended Year ended
31 March 31 March
2012 2011
GBP'000 GBP'000
Profit before taxation from continuing operations 5,059 2,857
Loss before taxation from discontinued operations - (4,124)
--------- ------------
Accounting profit/(loss) before income tax 5,059 (1,267)
--------- ------------
Accounting profit/(loss) multiplied by the UK standard
rate of corporation tax of 26% (2011: 28%) 1,315 (355)
Adjustments to tax charge in respect of prior period 19 37
Adjustments in respect of foreign tax rates 22 18
Increase in deferred tax asset recognised on losses and
capital allowances (1,346) (1,111)
Losses for which deferred tax is not recognised 43 2,131
Other temporary differences for which deferred tax is not
recognised (90) 196
Effect of change in tax rate 50 99
Expenses not deductible for tax purposes 92 154
Profit on sale of subsidiaries not subject to tax - (904)
--------- ------------
Total tax expense reported in the income statement 105 265
--------- ------------
(c) Unrecognised tax losses
The Group has unrecognised tax losses arising in the UK of GBP4,246,000 (2011:
GBP3,355,000) that are available and may be offset against future taxable profits
of those businesses in which the losses arose. The UK tax Group also has
unrecognised capital allowances of GBP5,442,000 (2011: GBP8,677,000) available to
offset against future taxable profits at the rate of 18% (2011: 20%) a year on a
reducing balance basis. The Group has unrecognised US federal tax losses
carried forward of $12,584,000 (2011: $15,124,000), which are available for
offset against future profits for a period of between 10 and 20 years.
(d) Deferred tax
The deferred tax included in the balance sheet is analysed as follows:
31 March 31 March
2012 2011
GBP'000 GBP'000
Deferred tax liability
Revaluation of fixed assets (220) (238)
Fair value of cash flow hedges (87) -
------------ -----------
(307) (238)
------------ -----------
Deferred tax asset
Defined benefit pension plans 2,068 2,527
Tax losses 1,736 2,036
Capital allowances 1,258 915
Share-based payments 168 -
------------ -----------
5,230 5,478
------------ -----------
On 21 March 2012 the UK Government announced a reduction in the main rate of UK
corporation tax rate to 24% with effect from 1 April 2012. This change became
substantively enacted on 29 March 2012 and therefore the effect of the rate
reduction creates a reduction in the total deferred tax asset which has been
included in the figures shown above. This change will also reduce the Group's
future current tax charge accordingly. The UK Government also proposed changes
to further reduce the main rate of corporation tax by one per cent per annum to
22% by 1 April 2014. The overall effect of the further reductions from 24% to
22%, if these applied to the total deferred tax balance at 31 March 2012 would
be to reduce the deferred tax asset by approximately GBP297,000.
6. Earnings per ordinary share
Basic earnings per share is calculated by dividing the net profit/(loss) for the
year attributable to ordinary equity holders of the Parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the net profit/(loss)
attributable to ordinary equity holders of the Parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all dilutive
potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Year ended Year ended
31 March 31 March
2012 2011
GBP'000 GBP'000
Profit attributable to equity holders of the Parent -
continuing operations 4,954 2,592
Loss attributable to equity holders of the Parent -
discontinued operations - (612)
------------ -----------
Net profit attributable to equity holders of the Parent 4,954 1,980
------------ -----------
Year ended Year ended
31 March 31 March
2012 2011
No No
Basic weighted average number of ordinary shares 73,857,692 73,447,050
Dilutive effect of employee share options and contingent
shares 3,974,702 2,443,955
------------ -----------
Diluted weighted average number of shares 77,832,394 75,891,005
------------ -----------
The basic weighted average number of shares excludes the 3,000,000 shares owned
by the API Group plc No.2 Employee Benefit Trust (2011: 3,058,221). These
contingent shares are included in the diluted weighted average number of shares.
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
Earnings/(loss) per ordinary share
Year ended Year ended
31 March 31 March
2012 2011
Pence pence
Continuing operations
Basic earnings per share 6.7 3.5
Diluted earnings per share 6.4 3.4
Discontinued operations
Basic loss per share - (0.8)
Diluted loss per share - (0.8)
Total
Basic earnings per share 6.7 2.7
Diluted earnings per share 6.4 2.6
7. Property, plant and equipment
Long
leasehold Plant Office
Freehold Freehold land & & and IT
land buildings buildings machinery equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2010 2,265 8,054 10,030 59,824 6,861 87,034
Additions - 14 - 950 189 1,153
Disposals - - - (86) (370) (456)
Disposal of subsidiary - - (8,330) (13,124) - (21,454)
Foreign currency
adjustment (107) (391) (7) (736) (120) (1,361)
----------------------------------------------------------
At 31 March 2011 2,158 7,677 1,693 46,828 6,560 64,916
Additions - - - 3,230 258 3,488
Disposals - - - (565) (145) (710)
Foreign currency
adjustment 6 23 - 6 (8) 27
----------------------------------------------------------
At 31 March 2012 2,164 7,700 1,693 49,499 6,665 67,721
----------------------------------------------------------
Depreciation
At 1 April 2010 - 2,990 1,631 48,858 4,783 58,262
Provided during the
year - 226 240 1,956 520 2,942
Impairment during the
period (see note 7) - - 4,438 1,412 - 5,850
Disposals - - - (85) (322) (407)
Disposal of subsidiary - - (5,442) (12,220) - (17,662)
Foreign currency
adjustment - (226) (1) (539) (107) (873)
----------------------------------------------------------
At 31 March 2011 - 2,990 866 39,382 4,874 48,112
Provided during the
year - 203 57 1,636 471 2,367
Disposals - - - (561) (145) (706)
Foreign currency
adjustment - 13 - 3 (4) 12
----------------------------------------------------------
At 31 March 2012 - 3,206 923 40,460 5,196 49,785
----------------------------------------------------------
Net book value at 31
March 2012 2,164 4,494 770 9,039 1,469 17,936
----------------------------------------------------------
Net book value at 31
March 2011 2,158 4,687 827 7,446 1,686 16,804
----------------------------------------------------------
Net book value at 31
March 2010 2,265 5,064 8,399 10,966 2,078 28,772
----------------------------------------------------------
Construction work-in-progress
Included in the cost of property, plant and equipment is GBP2,878,000 (2011:
GBP168,000; 2010: GBPnil) relating to construction work-in-progress.
Security
The Group's UK borrowings of GBP11,514,000 (2011: GBP10,196,000) are secured by
fixed and floating charges on the UK assets of the Group including fixed assets
to the value of GBP10,076,000 (2011: GBP8,397,000). The US loans of GBP887,000 (2011:
GBP1,034,000) are pledged against property, plant and equipment to the value of
GBP5,598,000 (2011: GBP6,184,000).
8. Financial liabilities
31 March 31 March
2012 2011
GBP'000 GBP'000
Current
Bank overdrafts 1,246 1,456
Current instalments due on bank loans 3,196 779
Interest rate swaps 80 97
Forward foreign exchange contracts - 498
------------ -----------
4,522 2,830
------------ -----------
Non-current
Non-current instalments due on bank loans 9,205 10,451
Interest rate swaps 32 63
------------ -----------
9,237 10,514
------------ -----------
In the UK, the Group has taken out an interest rate swap for the period 2 August
2010 to 1 November 2012 for a fixed amount of GBP5m. In the US interest rate
swaps have been taken out for the period 1 July 2010 to 30 October 2013 for
fixed and amortising amounts totalling $3.0m at 31 March 2012 (2011: $3.3m).
Bank loans
Bank loans comprise the following:
31 March 31 March
2012 2011
GBP'000 GBP'000
Term loans (UK) 11,514 10,196
Term loans (US) 887 1,034
------------ -----------
12,401 11,230
Less: current instalments due on bank loans (3,196) (779)
------------ -----------
9,205 10,451
------------ -----------
The Group's banking facilities comprise:
UK facilities
The Group's lending arrangements in the UK are with Barclays Bank plc. At 31
March 2012, UK facilities comprised a term loan of GBP5.7m repayable between April
2012 and July 2013 (2011: GBP6.4m repayable between April 2011 and July 2013) and
a term loan of GBP3.8m repayable in July 2013 (2011: GBP3.8m repayable in July
2013). During the year, a new loan of GBP2.0m was negotiated, repayable between
June 2012 and April 2013. In addition there is a multi option overdraft
facility of GBP5.0m (2011: GBP3.5m). Interest cost for the period averaged 3.4%
(2011: 5.0%) above LIBOR for term loans and 3.3% (2011: 3.6%) above Base Rate
for the overdraft. The total debt under committed and revolving facilities is
subject to four quarterly financial covenant targets reflecting the financial
performance of the Group excluding the impact of the Foils Americas business
unit. Covenants are for Debt Cover, Total Service Payments Cover, Senior
Interest Cover and Tangible Net Worth. At 31 March 2012, Debt Cover, the ratio
of net debt to 12 month trailing EBITDA was 0.3x (2011: 1.0x) and this and all
other covenant ratios were comfortably within targets.
US facilities
The US facilities are with Wells Fargo. At 31 March 2012 they comprised
amortising loans of $1.5m repayable between April 2012 and October 2013 (2011:
$1.8m repayable between April 2011 and October 2013) and a revolving credit
facility of up to $5.5m (2011: $5.5m), depending on the level of working
capital. Interest cost for the period averaged 4.5% (2011: 4.5%) above LIBOR
for the term loans and 3.8% (2011: 3.8%) above LIBOR for the credit facility.
The total debt outstanding is subject to quarterly covenant obligations relating
to profitability, net worth and cash flow. During the year to 31 March 2012 the
US business met all its covenant obligations. The US facilities are secured on
working capital to the value of GBP5,823,000 (2011: GBP6,040,000).
9. Pensions and other post-retirement benefits
The Group operates a number of pension schemes. Current UK employees
participate in a defined contribution scheme. Overseas employees participate in
a variety of different pension arrangements of the defined contribution type and
are funded in accordance with local practice. A non contributory scheme is
operated for members of the North New Jersey Teamsters 11 Union employed at the
Company's site in Rahway, New Jersey. This scheme is a multi-employer defined
benefit scheme which is accounted for as a defined contribution scheme, as the
information available from the scheme administrators is insufficient for it to
be accounted for as a defined benefit scheme. Under the rules of the scheme the
employer is not liable for any deficit of the scheme unless it withdraws from
the scheme.
In the UK, a defined benefit pension scheme, the API Group Pension and Life
Assurance Scheme, was closed to future accrual in December 2008. This was a
funded pension scheme for the Company and its UK subsidiaries providing benefits
based on final pensionable earnings, funded by the payment of contributions to a
separately administered trust fund. A second defined benefit scheme, operated in
the US, the API Foils, Inc. North American Pension Plan, is also closed to
future accrual.
The assets and liabilities of the defined benefit schemes are:
At 31 March 2012
United
United Kingdom States Total
GBP'000 ÂGBP'000 GBP'000
Equities 34,508 778 35,286
Bonds 21,174 920 22,094
Hedge Funds 10,624 - 10,624
Property - 71 71
Cash 6,960 - 6,960
---------------- --------- ---------
Fair value of scheme assets 73,266 1,769 75,035
Present value of scheme liabilities (80,821) (2,832) (83,653)
---------------- --------- ---------
Net pension liability (7,555) (1,063) (8,618)
---------------- --------- ---------
At 31 March 2011
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
Equities 42,347 772 43,119
Bonds 28,327 951 29,278
Property - 72 72
Cash 139 - 139
------------ ----------- -----------
Fair value of scheme assets 70,813 1,795 72,608
Present value of scheme liabilities (79,843) (2,484) (82,327)
------------ ----------- -----------
Net pension liability (9,030) (689) (9,719)
------------ ----------- -----------
The amounts recognised in the Group Income Statement and Group Statement of
Comprehensive Income for the year are as follows:
Year ended 31 March 2012
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
Recognised in the Income Statement
Recognised in arriving at operating profit - - -
Expected return on scheme assets (4,397) (119) (4,516)
Interest cost on scheme liabilities 4,351 119 4,470
Scheme expenses borne by employers 784 - 784
--------- -------- --------
Other finance cost 738 - 738
--------- -------- --------
Taken to the Statement of Comprehensive Income
Actual return on scheme assets 4,641 56 4,697
Less: expected return on scheme assets (4,397) (119) (4,516)
--------- -------- --------
244 (63) 181
Other actuarial gains and losses 485 (366) 119
--------- -------- --------
Actuarial gains and losses recognised in the
Statement of Comprehensive Income 729 (429) 300
--------- -------- --------
Year ended 31 March 2011
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
Recognised in the Income Statement
Recognised in arriving at operating profit - - -
--------- -------- --------
Expected return on scheme assets (4,273) (128) (4,401)
Interest cost on scheme liabilities 4,662 129 4,791
Scheme expenses borne by employers 584 - 584
--------- -------- --------
Other finance cost 973 1 974
--------- -------- --------
Taken to the Statement of Comprehensive Income
Actual return on scheme assets 4,960 163 5,123
Less: expected return on scheme assets (4,273) (128) (4,401)
--------- -------- --------
687 35 722
Other actuarial gains and losses 5,993 (129) 5,864
--------- -------- --------
Actuarial gains and losses recognised in the
Statement of Comprehensive Income 6,680 (94) 6,586
--------- -------- --------
The major assumptions used in determining the value of the defined benefit
schemes are disclosed below.
United Kingdom United States
31 March 31 March 31 March 31 March
2012 2011 2012 2011
% % % %
Rate of increase in pensions in
payment 2.20 2.50
Rate of increase to deferred
pensions 2.20 2.50
Inflation 2.20 2.50 3.00 3.00
Discount rate 4.85 5.55 4.50 5.00
Expected rates of return on scheme
assets 5.20 6.32 6.75 7.50
Equities 6.05 7.30
Bonds 4.00 4.85
Hedge Funds 6.05 n/a
Cash 0.50 0.50
Post-retirement mortality (in
years):
Current pensioners at 65 - male 20.3 20.0
Current pensioners at 65 - female 22.3 22.1
Future pensioners at 65 - male 22.0 21.8
Future pensioners at 65 - female 24.3 24.1
These assumptions have been selected after consultation with the Group's UK
pension advisors, KPMG LLP and the Group's US actuaries, Prudential Retirement.
The rate of increase in pensions and the inflation rate assumptions in the UK
are based on statistics published by the Bank of England for long-term estimates
of the Retail Price Index ("RPI"). At 31 March 2012, the relevant inflation
rate based on the RPI for the duration of the UK Scheme was 3.2% (2011: 3.5%).
The statutory basis of indexation used by the Scheme is based on the Cost Price
Index ("CPI"). It is estimated that the long-term CPI is approximately 1.0%
(2011: 1.0%) lower than the RPI. A 0.1% variation in the inflation rate would
result in a change in the present value of the scheme liabilities of
approximately GBP0.9m (2011: GBP0.9m).
The discount rate for the UK scheme has been set by reference to the iBoxx AA
corporate bond 15-year index. The rate has been modified to take account of the
duration of the scheme, which is approximately 18 years. A 0.1% variation in
the discount rate would result in a change in the present value of the scheme
liabilities of approximately GBP1.4m (2011: GBP1.4m).
In the UK, the mortality assumptions for both the current and previous years are
based on nationally published tables using 130% of the S1P*A YoB CMI 2009 model
with 1.25% long term rate of improvement. In the US, mortality assumptions are
in accordance with the IRS Static Mortality tables for the relevant year.
Scheme assets are stated at their market values at the respective balance sheet
dates and overall expected rates of return are established by applying published
brokers' forecasts to each category of scheme assets.
Following closure of the UK Scheme to future accrual, the Group has agreed to
make contributions up to 2019 in order to make up the funding shortfall. The
agreed contributions for the year ended 31 March 2013 are GBP700,000.
Changes in the present value of the defined benefit obligations are analysed as
follows:
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
At 1 April 2010 83,863 2,464 86,327
Interest cost 4,662 129 4,791
Benefits paid (2,689) (102) (2,791)
Actuarial gains and losses (5,993) 129 (5,864)
Foreign currency differences - (136) (136)
----------- ---------- ----------
At 31 March 2011 79,843 2,484 82,327
Interest cost 4,351 119 4,470
Benefits paid (2,888) (146) (3,034)
Actuarial gains and losses (485) 366 (119)
Foreign currency differences - 9 9
----------- ---------- ----------
At 31 March 2012 80,821 2,832 83,653
----------- ---------- ----------
Changes in the fair value of the defined benefit assets are analysed as follows:
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
At 1 April 2010 68,142 1,779 69,921
Expected return on plan assets 4,273 128 4,401
Employer contributions 400 51 451
Benefits paid (2,689) (102) (2,791)
Actuarial gains and losses 687 35 722
Foreign currency differences - (96) (96)
----------- ---------- ----------
At 31 March 2011 70,813 1,795 72,608
Expected return on plan assets 4,397 119 4,516
Employer contributions 700 58 758
Benefits paid (2,888) (146) (3,034)
Actuarial gains and losses 244 (63) 181
Foreign currency differences - 6 6
----------- ---------- ----------
At 31 March 2012 73,266 1,769 75,035
----------- ---------- ----------
History of experience gains and losses:
Eighteen
Year Year Year Months
Year ended ended ended Ended
ended 31 31 31
31 March March March March 31 March
2012 2011 2010 2009 2008
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom
Fair value of scheme assets 73,266 70,813 68,142 55,312 64,851
Present value of defined benefit
obligation (80,821) (79,843) (83,863) (61,630) (68,178)
---------------------------------------------
Deficit in the scheme (7,555) (9,030) (15,721) (6,318) (3,327)
---------------------------------------------
Experience adjustments arising on
plan liabilities 7,033 - (100) 395 2,926
---------------------------------------------
Experience adjustments arising on
plan assets 244 687 12,772 (11,289) (3,191)
---------------------------------------------
United States
Fair value of scheme assets 1,769 1,795 1,779 1,447 1,459
Present value of defined benefit
obligation (2,832) (2,484) (2,464) (2,210) (1,614)
----------------------------------------
Deficit in the scheme (1,063) (689) (685) (763) (155)
----------------------------------------
Experience adjustments arising on plan
liabilities 40 (5) (74) 24 (14)
----------------------------------------
Experience adjustments arising on plan
assets (63) 35 298 (536) (80)
----------------------------------------
The cumulative amount of actuarial gains recognised since 1 October 2004 in the
Group Statement of Comprehensive Income is GBP421,000 (2011: GBP121,000). The
Directors are unable to determine how much of the pension scheme deficit
recognised on transition to IFRS and taken directly to equity of GBP13,099,000 is
attributable to actuarial gains and losses since inception of those schemes.
Consequently, the Directors are unable to determine the amount of actuarial
gains and losses that would have been recognised in the Group Statement of
Comprehensive Income before 1 October 2004.
- Ends -
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: API Group PLC via Thomson Reuters ONE
[HUG#1615407]
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