TIDMAPI
RNS Number : 3021G
API Group PLC
05 June 2013
Press Release 5 June 2013
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 2013.
Financial Highlights
-- Pre exceptional profit before tax increased 35% to GBP6.8m
(2012: GBP5.1m).
-- Diluted earnings per share (pre exceptional) up 36% to 8.7
pence (2012: 6.4 pence).
-- Revenues marginally lower at GBP112.4m (2012: GBP113.9m).
-- Pre exceptional operating profits ahead by 23% to GBP8.5m
(2012: GBP6.9m).
-- Exceptional costs of GBP1.0m for fees and expenses relating
to formal sale process and reorganisation costs (2012: GBPnil).
-- Cash generated from operations of GBP9.2m (2012: GBP10.4m).
-- Intention to commence dividend payments after the next interim
results in November.
-- Net debt down further, to GBP2.6m (2012: GBP3.6m).
Operational Highlights
-- Strong profits growth from Laminates and the two Foils businesses,
partially offset by decline at Holographics.
-- Cash generation and balance sheet strength supports capital
expenditure to improve operational efficiencies and exploit
growth opportunities. Capital additions in 2013 of GBP5.1m
(2012: GBP3.5m).
-- Bulk shipments now commenced on major Laminates supply contract.
Continued build-up in volumes expected throughout the new
financial year.
Commenting on the results, Richard Wright, Non-Executive
Chairman of API Group plc, said:
"The Board is pleased to report another year of significant
profit growth. The Group's balance sheet strength and cash flow
performance has started to provide significant flexibility for
capital investment in growth projects and operational improvements
and the resumption of dividend payments.
The Group has demonstrated resilience in the face of challenging
economic circumstances and the Board remains confident in the
prospect for further progress in the year ahead."
- 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
Henry Harrison-Topham / Quincy Allan Tel: +44 (0) 20 7398
7710
quincy.allan@abchurch-group.com www.abchurch-group.com
Chairman's Statement
I am pleased to report another year of significant progress for
the Group, with increasing levels of profitability reflecting a
culture of continuous improvement in the quality of our day-to-day
operations and a consistent approach to seeking and converting
those market opportunities where API can best create value for
customers.
After two years of strong organic growth, revenues for the 12
months to 31 March 2013 fell marginally, to GBP112.4m (2012:
GBP113.9m). Nevertheless, operating profit before exceptional items
increased by 23% to GBP8.5m (2012: GBP6.9m), benefitting from an
improved sales mix, lower average raw material prices and greater
conversion efficiencies. The Group's operating margin reached 7.5%
compared to 6.0% for the previous year.
The three largest business units, Laminates, Foils Europe and
Foils Americas delivered a combined profit improvement of 43% or
GBP3.1m, which was partly offset by a disappointing result at
Holographics (GBP0.3m loss). It is especially pleasing to note the
substantial improvement in performance at Foils Europe following
the decision 18 months ago to create a stand-alone management team
for that business. Despite the set-back at Holographics, the
overall progress demonstrated in this year's results underlines the
value of the Group's portfolio of businesses. Not forgetting that
Holographics had an excellent year in 2011/12, the Board expects a
more resilient performance over the medium term as the investment
programme currently underway strengthens its positioning in the
growing security and authentication market.
With reduced interest costs, profit before tax (pre-exceptional)
grew 35% and diluted earnings per share increased 36% to 8.7 pence
(2012: 6.4 pence). The Group recorded exceptional costs of GBP1.0m
(2012: GBPnil) comprising fees and expenses associated with the
formal sale process and reorganisation costs in Foils Europe and
Holographics. After these costs, profit before tax increased 15%
and diluted earnings per share by 17% to 7.5 pence per share.
The Group delivered another strong cash flow performance,
despite significantly higher levels of capital expenditure
resulting in year-end net debt decreasing by GBP1.0m to GBP2.6m.
Capital expenditure in the period increased from GBP3.5m to
GBP5.1m, equating to 2.4x depreciation. Whilst a number of projects
are only partially complete, the Board remains confident that these
investments represent an effective use of funds and will deliver
significant benefit to earnings over the long term.
Dividend
The Board has recently undertaken a review of its dividend
policy. As previously indicated, cash generation and balance sheet
strength have started to afford the Group greater flexibility in
use of funds. After a number of years of priority given to debt
reduction, the Board has now adopted a policy of a balanced
allocation of free cash flow between capital investment aimed at
ensuring continued profit growth and returning a portion of funds
to shareholders in the form of a regular and meaningful
dividend.
The Board has decided not to recommend a dividend at the
forthcoming Annual General Meeting but is pleased to announce its
intention, subject to the Group's financial performance at the
time, to declare a dividend at the next set of interim results at
the end of November 2013 and to pursue a progressive dividend
policy thereafter.
Shareholders and formal sale process
Following representations from the Group's two leading
shareholders in February 2012 and subsequent consultations with
advisers and other shareholders, the Board initiated a formal sale
process for the Group commencing September 2012. After a
comprehensive exercise and full consideration of the alternatives,
the sale process was terminated in February 2013 after it became
clear that the potential offers available were unlikely, in the
view of the Board, to deliver best value to shareholders. Costs of
GBP0.5m were incurred during the financial year relating to this
exercise.
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, especially in overseeing the
delivery of improved trading results concurrent with a thorough,
albeit inconclusive, formal sale process.
Our people
The continued commitment of the API workforce to the success of
the business has been greatly appreciated by the Board, especially
during a time of uncertainty about the future ownership of the
Group. I would like to thank all our employees for their
contribution to the performance and development of the Group over
the past twelve months.
Outlook
The outlook for the year ahead remains unchanged and the Board
expects further progress in operating results with profits more
weighted towards the second half as volumes build on the new
Laminates supply contract and the recovery in Holographics gains
strength.
Both Foils businesses are continuing to trade steadily, with
management focused on operational improvements including targeted
capacity additions and cost reduction initiatives. In Laminates,
growth from the new supply contract will provide resilience against
some previously announced volume losses. Holographics is expected
to benefit from new leadership and a strengthened proposition to
customers, as the current investment programme progresses towards
completion.
Whilst economic conditions remain challenging, the Group has
proved resilient over recent years and the Board expects this to
continue. Management will continue the drive to increase
operational efficiency and to ensure the Group's businesses are
well positioned to take advantage of both specific growth
opportunities as well as any general economic recovery.
Richard C Wright
Chairman
5 June 2013
Business Review
Group Operating Results
For the twelve months to March 2013, Group revenues were
GBP112.4m; a decline of 1.3% on the previous year. On a constant
currency basis, revenues were ahead 0.3% and volumes increased 1.6%
with the slight decline in average selling prices being primarily
attributable to changes in sales mix between products and business
units.
Despite slightly lower sales, Group pre-exceptional operating
profits increased by 23% or GBP1.6m to GBP8.5m (2012: GBP6.9m) due
to a higher margin sales mix and lower raw material costs. The
overall operating margin of 7.5% was 1.5% ahead of the previous
year.
At divisional level, three of the four businesses delivered
improved operating profits, with particularly encouraging progress
at Foils Europe (+GBP1.6m). Profits at Foils Americas were ahead by
GBP0.7m and Laminates delivered another strong performance
(+GBP0.8m), whilst the weakness at Holographics reported at the
interim stage continued in the second half to leave its full year
operating profits lower by GBP1.9m.
As in the previous year, second half profitability was weaker
than the first half as Laminates activity fell back from extremely
strong start and Holographics suffered a loss-making third quarter.
Nevertheless, a second half benefitting from a significantly
increased contribution from Foils Europe and lower central costs
was still 11% ahead of the same period last year.
Laminates
Following two consecutive years of strong double digit growth,
reported revenues at Laminates edged ahead just 0.6% to GBP55.2m
(2012: GBP54.8m). Excluding the impact of exchange rates, sales
grew by 3.3% despite the absence of any expected incremental volume
associated with the previously announced major new supply contract.
The underlying growth was driven by increased shipments of
packaging material for health and beauty products whilst sales to
the tobacco, alcoholic drinks and other sectors were broadly
unchanged.
Improved supply chain and raw material efficiencies plus a
slightly richer sales mix contributed to an improved margin over
material costs which translated, through flat operating costs, to a
14% increase in operating profit to GBP6.5m (2012: GBP5.7m) and an
operating margin of 11.8% (2012: 10.4%).
Whilst progress on the new supply contract has been
disappointingly slow, qualification of the new-specification
material at customer packaging plants has now been completed and
shipments have commenced. Volumes are expected to ramp up
throughout the coming year. In the meantime, the extra capacity
afforded by the new laminator contributed significantly to the
achievement of record volumes and profits at API Laminates in
2012/13.
Foils Europe
Foils Europe enjoyed a strong recovery in profitability after a
challenging couple of years. Despite reported revenues down by 7.3%
(5.4% at constant exchange rates) at GBP27.0m (2012: GBP29.2m),
operating profit of GBP2.0m was ahead GBP1.6m, delivering an
operating margin of 7.3% (2012: 1.3%), including 9.2% for the
second half.
Sales volumes were broadly flat year-on-year, with average
selling prices lower due to product mix and some impact from
exchange rates. In Europe, weaker sales on the Continent were
partly offset by growth in the UK and an encouraging start by the
new sales and distribution hub in Poland which commenced operations
in May 2012. Shipments in the Asia Pacific region, accounting for
approximately 15% of Foils Europe sales, were 5% lower due to
reduced activity in New Zealand and Hong Kong.
Foils Europe benefitted from the establishment of a stand-alone
management team during 2012 and an increased focus on cost control
and margin management. Cost saving initiatives contributed an
estimated GBP0.7m in the year, with the remaining profit
improvement driven by lower raw material prices, more effective
loading of the factory and a better sales mix.
Foils Americas
Revenues at Foils Americas of GBP24.0m were 2.2% up the on prior
year at actual exchange rates and 1.3% ahead at constant rates. The
business benefitted from a second straight year of growth in the
metallic pigment sector and higher sales on holographic products,
partly offset by a decline in pigment foil volumes. The core US
market for packaging and graphics foils remained flat offset by
some encouraging progress on sales into South America.
Added value margins improved due to a more favourable sales mix
and lower average material costs. These factors more than
compensated for higher administrative costs, bonus and incentive
payments, and a charge to costs for sales made out of inventory. As
a result, full year profits rose 61% to GBP1.9m (2012: GBP1.2m)
with an operating margin of 7.9% (2012: 5.0%).
Holographics
The Holographics business experienced a marked reversal of
fortunes in the reporting period. Following a significant
improvement in profit in the previous year, the business returned a
loss of GBP0.3m (2012: GBP1.6m profit) after the scheduled
completion of a major joint project with Laminates was compounded
by lower sales of other decorative products to sister companies
within the Group and reduced shipments on a long-standing supply
arrangement for brand protection holograms.
Total revenues of GBP9.6m were down 26% (2012: GBP13.0m) with
inter-company sales accounting for GBP2.8m of the shortfall.
Further progress was made in developing direct sales to customers
in the security and authentication market following the significant
growth achieved last year. However, new business was insufficient
to compensate for the reduction in orders on an established
contract due to de-stocking ahead of the customer taking an
increased proportion of the work in-house. In response, operating
costs were reduced by GBP0.5m but this was not enough to compensate
for the fall in sales contribution in a business with relatively
high gross margins and fixed costs.
The programme to strengthen API's proposition in the security
and authentication market commenced with the upgrade of the Salford
production facility, investment to provide additional product
features and commencement of a joint venture for holographic
origination. The GBP1.6m of capital additions in the period
represents approximately half of the total investment approved by
the Board.
Central costs
Central costs for the twelve months to March 2013 were GBP0.4m
lower than the previous year, due primarily to reduced incentive
payments and the non-recurrence of a number of one-off charges
affecting the prior year.
Impairment
The Board considers that no impairments to goodwill or asset
carrying values are necessary.
Exceptional items
Costs totalling GBP0.5m were incurred during the year in
relation to the formal sale process initiated in September 2012. In
February 2013, the Board announced the termination of the process,
having concluded that a sale of the Group was unlikely to gain
sufficient recognition for the underlying value of the business or
to deliver the best outcome for shareholders.
Other costs classified as exceptional relate primarily to
reorganisation costs in both Foils Europe and Holographics.
Further details are provided in Note 3 to the financial
statements.
Finance costs
For the twelve months ended 31 March 2013, net finance costs
were down by GBP0.2m to GBP1.6m. Finance costs associated with the
Group's defined benefit pension plans increased GBP0.1m as a result
of a higher levy by the UK Pension Protection Fund partly offset by
lower investment management and advisory fees. Financing costs
relating to bank facilities reduced by GBP0.2m, predominantly due
to lower average debt levels and the conclusion of an interest rate
hedge on a portion of UK borrowings. Further details are provided
in Note 4 to the financial statements.
Taxation
The income statement for the year to 31 March 2013 includes a
nil net tax charge (2012: GBP0.1m). Current taxation of GBP0.1m has
been offset by a deferred tax credit of GBP0.1m.
The Group's potential liability for corporation tax on profits
continues to benefit from prior years accumulated tax losses in
both the UK and USA and non-utilised UK capital allowances. In the
period, a deferred tax charge of GBP1.5m (2012: GBP1.3m) has been
balanced by a deferred tax credit of GBP1.6m (2012: GBP1.3m) mostly
from further recognition of historic tax losses in Foils
Americas.
A full reconciliation of the tax charge is shown in Note 5(d) to
the financial statements.
The net deferred tax recognised in the Group's balance sheet
increased during the year to GBP6.4m (2012: GBP4.9m) primarily as a
result of an increase in the deferred tax assets related to the UK
and US pension deficits (GBP1.0m) and US tax losses.
Remaining unrecognised tax losses at 31 March 2013 of GBP2.8m in
the UK (2012: GBP4.2m) and $9.0m in the US (2012: $12.6m) are in
addition to unclaimed capital allowances in the UK of GBP3.9m
(2012: GBP5.4m).
Earnings per share
Diluted earnings per share grew 17% to 7.5p, compared to 6.4p
for the year ending 31 March 2012. Excluding exceptional items,
diluted earnings per share of 8.7p represents a 36% increase on the
prior year.
Shareholders' Funds
The Group's net assets increased to GBP22.9m at 31 March 2013 up
7.5% (GBP1.6m) on the position one year earlier.
Cash flow and net debt
After allowing for pension and finance costs, net cash inflow
from operating activities in the year to 31 March 2013 was GBP7.0m,
compared to GBP7.9m for the prior year.
As indicated in the interim results, the Board has approved a
number of key capital projects which have been progressing towards
completion. Capital additions during the year amounted to GBP5.1m
(2012: GBP3.5m), including residual payments on the new laminator
at Poynton, refurbishment and enhancements at the Holographics site
in Salford and expenditure on a new business IT system being
progressively introduced in the Foils businesses. In addition, an
investment of GBP0.4m was made in the Czech joint venture
origination company to fund the purchase of new equipment.
Depreciation for the year was GBP2.2m (2012: GBP2.4m).
Working capital ended the year broadly in line with the position
last year. Working capital efficiency, measured by reference to
trailing three month sales (annualised), was 8.2% compared to 7.9%
at 31 March 2012. Year-end inventory included GBP0.8m of additional
raw material stock to support the ramp up of the new supply
contract in Laminates. The Group maintains a vigilant approach to
the control of working capital within the constraints of commercial
and operating pressures.
Consistent with the charge in the income statement, cash flow
for interest expense reduced by GBP0.2m, to GBP0.6m.
Year-end net debt (financial liabilities excluding the fair
value of derivatives, less cash) fell GBP1.0m compared to the
position at 31 March 2012, to GBP2.6m. As at 31 March 2013, the
Group's debt cover ratio (net debt to trailing 12 month EBITDA) was
down to 0.3x (2012: 0.4x), with gearing (net debt to shareholders
funds) at 11% (2012: 17%).
The Group has continued to maintain its strong record of cash
conversion which, given the reduced level of bank debt, is
providing the Board with increased flexibility in the use of funds.
After a review of business plans and sensitivities, the Board has
determined that a meaningful and sustainable dividend would be
affordable out of future cash flows after providing for finance and
pension costs and a continuation of capital investment at the
current rate.
Borrowings and liquidity
The Group policy is to ensure that banking facilities are
adequate to support average debt levels and to provide flexibility
to meet foreseeable peak borrowing requirements depending
especially on the variation in working capital needs and the timing
of capital expenditure. 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
were recently extended until July 2014. Facilities at 31 March 2013
totalled GBP12.8m (2012: GBP16.5m) comprising: loans of GBP4.0m
amortising over the term of the facility, a term loan of GBP3.8m
repayable at the end of the facility agreement and a multi-option
overdraft facility of GBP5.0m renewable in November 2013. UK
borrowings are secured against the Group's UK assets and are
subject to quarterly financial covenant targets.
In North America, bank facilities are with Wells Fargo Bank and,
following a recent review, are now in place to April 2015.
Facilities comprise $1.2m (2012: $1.5m) amortising loans 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 and Euro-zone based operations are shown below.
Rate to GBP1 US $ Euro
--------------- ------ -----
31 March 2013
Average 1.58 1.23
Closing 1.52 1.18
--------------- ------ -----
31 March 2012
Average 1.59 1.16
Closing 1.60 1.20
--------------- ------ -----
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 2013 the Group's IAS 19
gross pension liability was assessed at GBP13.3m (2012: GBP8.6m).
When adjusting for the recognised deferred tax asset of GBP3.1m
(2012: GBP2.1m), the net liability amounts to GBP10.2m (2012:
GBP6.5m).
In the UK, the API Group plc Pension and Life Assurance Fund has
approximately 1,520 pensioners and deferred members. The fund has
admitted no new members since October 2006 and the scheme was
closed to future service accrual on 31 December 2008. At 31 March
2013, the net liabilities of the fund were assessed at GBP12.3m
(2012: GBP7.6m). The discount rate, used to estimate the present
value of scheme liabilities, was down again from the already
historically low levels applying at March 2012. The change in the
discount rate from 4.85% to 4.30% resulted in an increase of
GBP7.9m in calculated liabilities over the year. Inflation
assumptions also rose slightly adding a further GBP1.5m to the net
liabilities whilst the fund's assets performed well, assisted by
buoyant stock markets, returning double the assumed rate of 5.2%
and narrowing the deficit by GBP3.9m. In line with the 2011
agreement with the scheme Trustees, the fund received a
deficit-reduction contribution from the Company of GBP0.7m (2012:
GBP0.7m).
The UK scheme's last triennial valuation was assessed on its
position at 30 September 2010. The Trustees will commence the next
valuation, as at 30 September 2013, later this year with a
completion deadline of 31 December 2014. The Company continues to
pay all pension related administration fees on behalf of the
Fund.
In 2004 the US defined benefit pension plan was closed to new
entrants and future accrual. Membership is approximately 170
current and past employees. Details of the net deficit of GBP1.0m
(2012: GBP1.1m) are included in Note 11 to the financial
statements.
At the Group's New Jersey manufacturing facility in the US,
current and past 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 2013
Year ended Year ended
31 March 31 March
2013 2012
Note GBP'000 GBP'000
------------------------------------- ----- ----------- -----------
Revenue 2 112,426 113,935
Cost of sales (84,179) (87,149)
------------------------------------- ----- ----------- -----------
Gross profit 28,247 26,786
Distribution costs (4,249) (3,886)
Administrative expenses (excluding
exceptional items) (15,531) (16,022)
------------------------------------- ----- ----------- -----------
Operating profit before exceptional
items 2 8,467 6,878
Exceptional items 3 (1,029) -
------------------------------------- ----- ----------- -----------
Operating profit 7,438 6,878
Finance revenue 4 10 13
Finance costs 4 (1,632) (1,832)
------------------------------------- ----- ----------- -----------
(1,622) (1,819)
------------------------------------- ----- ----------- -----------
Profit before taxation 5,816 5,059
Tax expense 5 (41) (105)
------------------------------------- ----- ----------- -----------
Profit for the year 5,775 4,954
------------------------------------- ----- ----------- -----------
Earnings per share (pence)
Basic earnings per share on
profit for the year 6 7.8 6.7
Underlying basic earnings per
share on profit for the year 6 9.1 6.7
Diluted earnings per share
on profit for the year 6 7.5 6.4
Underlying diluted earnings
per share on profit for the
year 6 8.7 6.4
------------------------------------- ----- ----------- -----------
All profits are attributable to equity holders of the Parent and
relate to continuing operations
Group Statement of Comprehensive Income
for the year ended 31 March 2013
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
--------------------------------------- ----------- -----------
Profit for the year 5,775 4,954
Exchange differences on retranslation
of foreign operations 703 (4)
Change in fair value of cash
flow hedges (639) 937
Actuarial (losses)/gains on
defined benefit schemes (5,493) 300
Tax on items relating to components
of other comprehensive income 1,288 (419)
--------------------------------------- ----------- -----------
Other comprehensive income
for the year, net of tax (4,141) 814
--------------------------------------- ----------- -----------
Total comprehensive income
for the period attributable
to equity holders of the Parent 1,634 5,768
--------------------------------------- ----------- -----------
Group Balance Sheet
at 31 March 2013
31 March 31 March
2013 2012
Note GBP'000 GBP'000
-------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 7 21,313 17,936
Intangible assets - goodwill 5,188 5,188
Investment in joint venture
interest 8 378 -
Trade and other receivables - 32
Financial assets 152 -
Deferred tax assets 5 6,617 5,230
-------------------------------- ----- --------- ---------
33,648 28,386
-------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 15,811 15,485
Inventories 12,864 12,237
Other financial assets 184 474
Cash and short-term deposits 9 6,189 10,068
-------------------------------- ----- --------- ---------
35,048 38,264
-------------------------------- ----- --------- ---------
Total assets 2 68,696 66,650
-------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables 22,428 22,261
Financial liabilities 10 3,766 4,522
Income tax payable 373 307
-------------------------------- ----- --------- ---------
26,567 27,090
-------------------------------- ----- --------- ---------
Non-current liabilities
Financial liabilities 10 5,574 9,237
Deferred tax liabilities 5 211 307
Provisions 66 76
Deficit on defined benefit
pension schemes 11 13,349 8,618
-------------------------------- ----- --------- ---------
19,200 18,238
-------------------------------- ----- --------- ---------
Total liabilities 45,767 45,328
-------------------------------- ----- --------- ---------
Net assets 22,929 21,322
-------------------------------- ----- --------- ---------
Equity
Called up share capital 767 767
Share premium 7,136 7,136
Other reserves 8,816 8,816
Foreign exchange reserve 958 255
Retained profit 5,252 4,348
-------------------------------- ----- --------- ---------
API Group shareholders' equity 22,929 21,322
-------------------------------- ----- --------- ---------
Group Statement of Changes in Equity
for the year ended 31 March 2013
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 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 foreign operations - - - (4) - (4)
Change in fair value of effective
cash flow hedges - - - - 937 937
Actuarial gains on defined benefit
pension schemes - - - - 300 300
Tax on items relating to components
of other comprehensive income - - - - (419) (419)
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Total comprehensive income for
the year - - - (4) 5,772 5,768
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Issue of shares 1 - - - - 1
Shares acquired by the Company - - - - (1) (1)
Shares acquired by Employee Benefit
Trust - - (11) - - (11)
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
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Profit for the year - - - - 5,775 5,775
Other comprehensive income:
Exchange differences on retranslation
of foreign operations - - - 703 - 703
Change in fair value of effective
cash flow hedges - - - - (639) (639)
Actuarial losses on defined benefit
pension schemes - - - - (5,493) (5,493)
Tax on items relating to components
of other comprehensive income - - - - 1,288 1,288
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Total comprehensive income for
the year - - - 703 931 1,634
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Shares acquired by Employee Benefit
Trust - - (94) - - (94)
Transferred on exercise of share
options - - 94 - (94) -
Share-based payments - - - - 85 85
Tax relating to items accounted
for directly through equity - - - - (18) (18)
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
At 31 March 2013 767 7,136 8,816 958 5,252 22,929
-------------------------------------- -------- -------- --------- ---------- ---------- ---------------
Group Cash Flow Statement
for the year ended 31 March 2013
Year ended Year ended
31 March 31 March
2013 2012
Note GBP'000 GBP'000
-------------------------------------------- ----- ---------- ----------
Operating activities
Group profit before tax 5,816 5,059
Adjustments to reconcile Group profit
before tax to net cash flow from
operating activities
Net finance costs 1,622 1,819
Depreciation of property, plant and
equipment 2,173 2,368
Profit on disposal of property, plant
and equipment (5) (2)
Movement in fair value foreign exchange
contracts (38) (83)
Share-based payments 85 185
(Increase)/decrease in inventories (361) 156
(Increase)/decrease in trade and
other receivables (101) 1,260
Increase/(decrease) in trade and
other payables 68 (304)
Decrease in provisions (10) (9)
-------------------------------------------- ----- ---------- ----------
Cash generated from operations 9,249 10,449
Interest paid (583) (832)
Pension contributions and scheme
expenses paid (1,625) (1,539)
Income taxes paid (50) (171)
-------------------------------------------- ----- ---------- ----------
Net cash flow from operating activities 6,991 7,907
-------------------------------------------- ----- ---------- ----------
Investing activities
Interest received 10 13
Purchase of property, plant and equipment (5,296) (2,736)
Investment in joint venture (378) -
Sale of property, plant and equipment 23 5
-------------------------------------------- ----- ---------- ----------
Net cash flow from investing activities (5,641) (2,718)
-------------------------------------------- ----- ---------- ----------
Financing activities
Proceeds from share issues - 1
Purchase of shares by the Company - (1)
Purchase of shares by Employee Benefit
Trust (94) (11)
New borrowings - 1,913
Repayment of borrowings (4,148) (996)
-------------------------------------------- ----- ---------- ----------
Net cash flow from financing activities (4,242) 906
-------------------------------------------- ----- ---------- ----------
(Decrease)/increase in cash and cash
equivalents (2,892) 6,095
Effect of exchange rates on cash
and cash equivalents 25 8
Cash and cash equivalents at the
beginning of the year 8 8,822 2,719
-------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at the
end of the year 8 5,955 8,822
-------------------------------------------- ----- ---------- ----------
The presentation of the Group Cash Flow Statement has been
changed from previous years. Interest is now included in net
cash flow from operating activities instead of net cash from
financing activities. The impact of this is to reduce net cash
flow from operating activities by GBP583,000 (2012: GBP832,000)
and to increase net cash flow from financing activities by
the same amounts. The Directors consider the revised presentation
to better reflect the underlying nature of the cash flows and
are in accordance with internal management reporting.
Notes to the Consolidated Financial Statements
1. Preparation of financial statements
Authorisation of financial statements
The Group's financial statements for the year ended 31 March
2013 were authorised for issue by the Board of Directors on 4 June
2013 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 and Wales. The Company's ordinary shares are traded on the
Alternative Investment Market of the London Stock Exchange.
Publication of abridged accounts
The preliminary announcement figures for the year ended 31 March
2013 and the comparative figures for the year ended 31 March 2012
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 2013. Statutory
accounts for the year ended 31 March 2012 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 2013 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 2013
will be posted to shareholders by 18 June 2013 prior to the Annual
General Meeting on 11 July 2013. Copies of the Annual Report and
Accounts will be available to members of the public from 18 June
2013 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 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 2013 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 Directors are satisfied, on the basis of the Group's latest
financial projections and facilities available, that the Group has
adequate financial resources to continue to operate for the
foreseeable future. The Directors therefore continue to adopt the
going concern basis in preparing these financial statements.
Accounting policies
The principal accounting policies which apply in preparing the
financial statements for the year ended 31 March 2013 are
consistent with those disclosed in the Group's audited accounts for
the year ended 31 March 2012.
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.
Revenue
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
---------------------------- ----------- -----------
Total revenue by origin
Laminates 55,163 54,823
Foils Europe 27,021 29,158
Foils Americas 23,972 23,446
Holographics 9,646 13,015
115,802 120,442
---------------------------- ----------- -----------
Inter-segmental revenue
Laminates 2 93
Foils Europe 757 980
Foils Americas 556 566
Holographics 2,061 4,868
3,376 6,507
---------------------------- ----------- -----------
External revenue by origin
Laminates 55,161 54,730
Foils Europe 26,264 28,178
Foils Americas 23,416 22,880
Holographics 7,585 8,147
Segment revenue 112,426 113,935
---------------------------- ----------- -----------
External revenue by destination
UK 28,655 37,778
Rest of Europe 55,606 48,243
Americas 21,318 21,105
Asia Pacific 6,553 6,062
Africa 294 747
--------------------------------- -------- --------
Segment revenue 112,426 113,935
--------------------------------- -------- --------
All revenue is derived from the sale of goods.
Segment result
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
------------------------------------- ----------- -----------
Operating profit before exceptional
items
Laminates 6,515 5,704
Foils Europe 1,984 389
Foils Americas 1,893 1,173
Holographics (275) 1,615
Segment result 10,117 8,881
Central costs (1,650) (2,003)
------------------------------------- ----------- -----------
Total operating profit before
exceptional items 8,467 6,878
------------------------------------- ----------- -----------
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
2013 2012
GBP'000 GBP'000
------------------------------ ----------- -----------
Assets
Laminates 13,550 13,276
Foils Europe 17,889 17,082
Foils Americas 14,544 13,552
Holographics 8,719 6,915
Segment asset 54,702 50,825
Unallocated:
Deferred tax assets 6,617 5,230
Cash and short-term deposits 6,189 10,068
Other 1,188 527
------------------------------ ----------- -----------
Total assets 68,696 66,650
------------------------------ ----------- -----------
3. Exceptional items
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
-------------------------------- ---------- ----------
Restructuring of operating
businesses (488) -
Fees associated with the formal
sale process (541) -
(1,029) -
-------------------------------- ---------- ----------
Restructuring of operating businesses relates primarily to
redundancy and other costs associated with business restructuring
in the Foils Europe and Holographics businesses.
4. Finance revenue and finance costs
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
----------------------------------- ---------- ----------
Finance revenue
Interest receivable on bank and
other short-term deposits 2 3
Other interest receivable 8 10
----------------------------------- ---------- ----------
10 13
----------------------------------- ---------- ----------
Finance costs
Interest payable on bank loans and
overdrafts (804) (1,045)
Other interest payable (17) (49)
Finance cost in respect of defined
benefit pension plans (811) (738)
----------------------------------- ---------- ----------
(1,632) (1,832)
----------------------------------- ---------- ----------
Included within interest payable on bank overdrafts and loans is
GBP235,000 (2012: GBP250,000) relating to the amortisation of fees
and expenses incurred in obtaining bank facilities.
5. Taxation
a) Tax (expense)/credit in the income
statement
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Current income tax
UK corporation tax (75) -
Overseas tax - current year expense (80) (101)
- adjustments in respect of prior
years - (19)
--------------------------------------------------- ---------- ----------
Total current income tax expense (155) (120)
--------------------------------------------------- ---------- ----------
Deferred tax
Origination and reversal of temporary
differences
* defined benefit pension plan (195) (209)
* tax losses and other short-term differences 588 (174)
* capital allowances (275) 448
- effect of change in tax rate (4) (50)
--------------------------------------------------- ---------- ----------
Total deferred tax credit 114 15
--------------------------------------------------- ---------- ----------
Total tax expense in the income
statement (41) (105)
--------------------------------------------------- ---------- ----------
(b) Tax credit/(expense) on items
accounted for through other comprehensive
income
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
------------------------------------------- ---------- ----------
Deferred tax
Actuarial gains and losses on defined
pension schemes 1,318 (78)
Change in fair value of effective
cash flow hedges 151 (94)
Effect of change in tax rate (181) (247)
------------------------------------------- ---------- ----------
1,288 (419)
------------------------------------------- ---------- ----------
(c) Tax (expense)/credit on items
accounted for directly through equity
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
--------------------------------------- ---------- ----------
Deferred tax
Share-based payments (18) 87
--------------------------------------- ---------- ----------
(d) 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 24% (2012: 26%).
The differences are reconciled below:
Year ended Year ended
31 March 31 March
2013 2012
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Accounting profit before tax 5,816 5,059
------------------------------------------ ---------- ----------
Accounting profit multiplied by the
UK standard rate of corporation tax
of 24% (2012: 26%) 1,396 1,315
Adjustments to tax charge in respect
of prior period (81) 19
Adjustments in respect of foreign
tax rates 55 22
Increase in deferred tax asset recognised
on losses and capital allowances (1,595) (1,346)
Losses for which deferred tax is not
recognised 94 43
Other temporary differences for which
deferred tax is not recognised (33) (90)
Effect of change in tax rate 4 50
Expenses not deductible for tax purposes 201 92
Total tax expense reported in the
income statement 41 105
------------------------------------------ ---------- ----------
(e) Unrecognised tax losses
The Group has unrecognised tax losses arising in the UK of
GBP2,819,000 (2012: GBP4,246,000) 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 GBP3,857,000 (2012: GBP5,442,000) available to offset
against future taxable profits at the rate of 18% (2012: 18%) a
year on a reducing balance basis. The Group has unrecognised US
federal tax losses carried forward of $8,963,000 (2012:
$12,584,000), which are available for offset against future profits
for a period of between 10 and 18 years.
(f) Deferred tax
The deferred tax included in the balance sheet is analysed as
follows:
31 March 31 March
2013 2012
GBP'000 GBP'000
------------------------------- -------- --------
Deferred tax liability
Revaluation of fixed assets (211) (220)
Fair value of cash flow hedges - (87)
------------------------------- -------- --------
(211) (307)
------------------------------- -------- --------
Deferred tax asset
Defined benefit pension plans 3,070 2,068
Tax losses 2,376 1,736
Capital allowances 941 1,258
Fair value of cash flow hedges 64 -
Share-based payments 166 168
------------------------------- ----- -----
6,617 5,230
------------------------------- ----- -----
A reduction in the UK corporation tax from 24% to 23% with
effect from 1 April 2013 was substantively enacted on 3 July 2012.
The effect of this rate reduction creates a reduction in the net
deferred tax asset which has been included in the figures shown
above. The UK Government also proposed changes to further reduce
the main rate of corporation tax to 21% in the year commencing 1
April 2014 and 20% in the year commencing 1 April 2015. The overall
effect of the further reductions from 23% to 20%, if these applied
to the total deferred tax balances at 31 March 2013 would be to
reduce the net deferred tax asset by approximately GBP589,000.
These changes will also reduce the Group's current tax charge for
future years accordingly.
6. Earnings per ordinary share
Basic earnings per share is calculated by dividing the net
profit 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 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.
Earnings used to calculate adjusted basic and diluted earnings
per share exclude exceptional items, net of tax.
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
2013 2012
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Net profit attributable to equity
holders of the Parent 5,775 4,954
Adjustments to arrive at underlying
earnings:
Exceptional items 1,029 -
Tax credit on exceptional items (103) -
------------------------------------------ ---------- ----------
Underlying earnings 6,701 4,954
------------------------------------------ ---------- ----------
Year ended Year ended
31 March 31 March
2013 2012
No No
------------------------------------------ ---------- ----------
Basic weighted average number of ordinary
shares 73,748,730 73,655,895
Dilutive effect of employee share
options and contingent shares 3,600,787 3,972,039
------------------------------------------ ---------- ----------
Diluted weighted average number of
ordinary shares 77,349,517 77,627,934
------------------------------------------ ---------- ----------
The basic weighted average number of shares excludes the
3,000,000 shares owned by the API Group plc No.2 Employee Benefit
Trust (2012: 3,000,000). These contingent shares are included in
the diluted weighted average number of shares.
On 2 May 2013, 47,250 share options were exercised. This does
not have an effect on the earnings per share figures disclosed
below. 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 per ordinary share
Year ended Year ended
31 March 31 March
2013 2012
pence pence
-------------------------------------- ---------- ----------
Basic earnings per share 7.8 6.7
Underlying basic earnings per share 9.1 6.7
Diluted earnings per share 7.5 6.4
Underlying diluted earnings per share 8.7 6.4
-------------------------------------- ---------- ----------
7. Property, plant and equipment
Long
leasehold Plant Office
Freehold Freehold land and and and IT
land buildings buildings machinery equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- ----------- ----------- ---------- ----------- -------
Cost
At 1 April 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
Additions - 1,419 283 1,661 1,780 5,143
Disposals - - - (974) (371) (1,345)
Foreign currency
adjustment 99 364 - 720 151 1,334
------------------ --------- ----------- ----------- ---------- ----------- -------
At 31 March 2013 2,263 9,483 1,976 50,906 8,225 72,853
------------------ --------- ----------- ----------- ---------- ----------- -------
Depreciation
At 1 April 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
Provided during
the year - 206 61 1,387 519 2,173
Disposals - - - (966) (361) (1,327)
Foreign currency
adjustment - 223 - 577 109 909
------------------ --------- ----------- ----------- ---------- ----------- -------
At 31 March 2013 - 3,635 984 41,458 5,463 51,540
------------------ --------- ----------- ----------- ---------- ----------- -------
Net book value
at 31 March 2013 2,263 5,848 992 9,448 2,762 21,313
------------------ --------- ----------- ----------- ---------- ----------- -------
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
------------------ --------- ----------- ----------- ---------- ----------- -------
Construction work-in-progress
Included in the cost of property, plant and equipment is
GBP1,751,000 (2012: GBP2,878,000; 2011: GBP168,000) relating to
construction work-in-progress.
Commitments
Amounts contracted in respect of property, plant and equipment
(including construction work-in-progress) amounted to GBP404,000
(2012: GBP1,969,000).
Security
The Group's UK borrowings of GBP7,754,000 (2012: GBP11,514,000)
are secured by fixed and floating charges on the UK assets of the
Group including fixed assets to the value of GBP12,668,000 (2012:
GBP10,076,000). The US loans of GBP777,000 (2012: GBP887,000) are
pledged against property, plant and equipment to the value of
GBP5,400,000 (2012: GBP5,598,000).
8. Investment in joint venture
During the year, the Group acquired a 50% interest in a newly
formed company, API Optix s.r.o. ("APIO"). The Group has also
advanced loans to APIO that will be converted to equity. The total
investment is as follows:
31 March 31 March
2013 2012
GBP'000 GBP'000
----------------------------- -------- --------
Investment in equity capital 3 -
Loan receivable 375 -
----------------------------- -------- --------
378 -
----------------------------- -------- --------
The Group's interests in the assets and liabilities of the joint
venture are as follows:
31 March 31 March
2013 2012
GBP'000 GBP'000
-------------------- -------- --------
Non-current assets 24 -
Current assets 168 -
Current liabilities (189) -
-------------------- -------- --------
3 -
-------------------- -------- --------
APIO acts as a service company for the joint venture
shareholders and its revenue represents only the recharge of costs
incurred. Net income is GBPnil, accordingly there is no separate
disclosure of the Group's share of results in the Income
Statement.
Under the joint venture agreement, the Group is committed to
inject further funds of approximately GBP500,000.
9. Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash
and cash equivalents comprise the following:
31 March 31 March
2013 2012
GBP'000 GBP'000
----------------------------- -------- --------
Short-term deposits 4,500 6,000
Cash at bank and in hand 1,689 4,068
----------------------------- -------- --------
Cash and short-term deposits 6,189 10,068
Bank overdrafts (Note 17) (234) (1,246)
----------------------------- -------- --------
5,955 8,822
----------------------------- -------- --------
Cash at bank and on deposit are held at major banks with high
quality credit ratings. The maximum exposure to credit risk is
represented by their respective carrying values.
10. Financial liabilities
31 March 31 March
2013 2012
GBP'000 GBP'000
----------------------------------- -------- --------
Current
Bank overdrafts 234 1,246
Current instalments due on bank
loans 2,957 3,196
Interest rate swaps 16 80
Forward foreign exchange contracts 559 -
----------------------------------- -------- --------
3,766 4,522
----------------------------------- -------- --------
Non-current
Non-current instalments due on
bank loans 5,574 9,205
Interest rate swaps - 32
----------------------------------- -------- --------
5,574 9,237
----------------------------------- -------- --------
Bank loans
Bank loans comprise the following:
31 March 31 March
2013 2012
GBP'000 GBP'000
----------------------------------- -------- --------
Term loans (UK) 7,754 11,514
Term loans (US) 777 887
----------------------------------- -------- --------
8,531 12,401
Less: current instalments due
on bank loans (2,957) (3,196)
----------------------------------- -------- --------
5,574 9,205
----------------------------------- -------- --------
The Group's banking facilities comprise:
UK facilities
The Group's lending arrangements in the UK are with Barclays
Bank plc. In December 2012, agreement was reached to extend these
facilities for a further year to July 2014. At 31 March 2013, UK
facilities comprised term loans of GBP4.0m repayable between April
2013 and July 2014 (2012: GBP7.7m repayable between April 2012 and
July 2013) and a term loan of GBP3.8m repayable in July 2014 (2012:
GBP3.8m repayable in July 2013). In addition there is a
multi-option overdraft facility of GBP5.0m (2012: GBP5.0m).
Interest cost for the period averaged 3.1% (2012: 3.4%) above LIBOR
for term loans and 2.9% (2012: 3.3%) above Base Rate for the
overdraft. At 31 March 2013, the total debt under committed and
revolving facilities was subject to three 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, Senior Interest Cover and Tangible Net Worth.
At 31 March 2013, Debt Cover, the ratio of net debt to 12 month
trailing EBITDA, was 0.3x (2012: 0.3x) and this and all other
covenant ratios were comfortably within targets.
US facilities
The US facilities are with Wells Fargo Bank. In March 2013,
agreement was reached to extend these facilities for a further
period to April 2015. At 31 March 2013 they comprised amortising
loans of $1.2m repayable between April 2013 and April 2015 (2012:
$1.5m repayable between April 2012 and October 2013) and a
revolving credit facility of up to $5.5m (2012: $5.5m), depending
on the level of working capital. Interest cost for the period
averaged 4.5% (2012: 4.5%) above LIBOR for the term loans and 3.8%
(2012: 3.8%) above LIBOR for the credit facility. The total debt
outstanding is subject to a quarterly covenant obligation relating
to Fixed Costs Cover. During the year to 31 March 2013 the US
business met all its covenant obligations. The US facilities are
secured on working capital to the value of GBP5,861,000 (2012:
GBP5,823,000).
11. 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 2013
United United
Kingdom States Total
GBP'000 GBP'000 GBP'000
------------------------------------ -------- ------- ---------
Equities 39,200 987 40,187
Bonds 22,075 986 23,061
Hedge funds 10,605 - 10,605
Property 6,677 82 6,759
Cash - - -
------------------------------------ -------- ------- ---------
Fair value of scheme assets 78,557 2,055 80,612
Present value of scheme liabilities (90,880) (3,081) (93,961)
------------------------------------ -------- ------- ---------
Net pension liability (12,323) (1,026) (13,349)
------------------------------------ -------- ------- ---------
At 31 March 2012
United United
Kingdom States Total
GBP'000 GBP'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)
------------------------------------ -------- ------- ---------
The amounts recognised in the Group Income Statement and Group
Statement of Comprehensive Income for the year are as follows:
Year ended 31 March 2013
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 3,860 122 3,982
Interest cost on scheme liabilities (3,842) (126) (3,968)
Scheme expenses borne by employers (825) - (825)
---------------------------------------- -------- ------- --------
Other finance cost (807) (4) (811)
---------------------------------------- -------- ------- --------
Taken to the Statement of Comprehensive
Income
Actual return on scheme assets 7,792 172 7,964
Less: expected return on scheme
assets (3,860) (122) (3,982)
---------------------------------------- -------- ------- --------
3,932 50 3,982
Other actuarial gains and losses (9,418) (57) (9,475)
---------------------------------------- -------- ------- --------
Actuarial gains and losses
recognised in the Statement
of Comprehensive Income (5,486) (7) (5,493)
---------------------------------------- -------- ------- --------
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
---------------------------------------- -------- ------- --------
The major assumptions used in determining the value of the
defined benefit schemes are disclosed below.
United Kingdom United States
31 31 31 31
March March March March
2013 2012 2013 2012
% % % %
----------------------------- ------- --------- ------- ---------
Rate of increase in pensions
in payment 2.35 2.20
Rate of increase to deferred
pensions 2.35 2.20
Inflation 2.35 2.20 3.00 3.00
Discount rate 4.30 4.85 4.25 4.50
Expected rates of return
on scheme assets 5.18 5.20 6.75 6.75
Equities 5.75 6.05
Bonds 3.50 4.00
Hedge funds 5.75 6.05
Property 5.75 6.05
Post-retirement mortality
(in years):
Current pensioners at 65
- male 20.3 20.3
Current pensioners at 65
- female 22.3 22.3
Future pensioners at 65
- male 22.0 22.0
Future pensioners at 65
- female 24.3 24.3
----------------------------- ------- --------- ------- ---------
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 2013, the relevant inflation rate based on the
RPI for the duration of the UK Scheme was 2.35% (2012: 3.20%). The
statutory basis of indexation used by the Scheme is based on the
Consumer Price Index ("CPI"). It is estimated that long-term CPI is
approximately 1.0% (2012: 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 GBP1.0m
(2012: 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 GBP1.6m (2012: 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 2014 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 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
Interest cost 3,842 126 3,968
Benefits paid (3,201) (86) (3,287)
Actuarial gains and losses 9,418 57 9,475
Foreign currency differences - 152 152
----------------------------- -------- ------- --------
At 31 March 2013 90,880 3,081 93,961
----------------------------- -------- ------- --------
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 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
Expected return on plan assets 3,860 122 3,982
Employer contributions 700 100 800
Benefits paid (3,201) (86) (3,287)
Actuarial gains and losses 3,932 50 3,982
Foreign currency differences - 100 100
------------------------------- -------- ------- --------
At 31 March 2013 78,557 2,055 80,612
------------------------------- -------- ------- --------
History of experience gains and losses:
Year Year Year Year
Year ended ended ended ended
ended 31 31 31 31
31 March March March March March
2013 2012 2011 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- -------- -------- -------- --------
United Kingdom
Fair value of scheme assets 78,557 73,266 70,813 68,142 55,312
Present value of defined
benefit obligation (90,880) (80,821) (79,843) (83,863) (61,630)
----------------------------- --------- -------- -------- -------- --------
Deficit in the scheme (12,323) (7,555) (9,030) (15,721) (6,318)
----------------------------- --------- -------- -------- -------- --------
Experience adjustments
arising on plan liabilities - 7,033 - (100) 395
----------------------------- --------- -------- -------- -------- --------
Experience adjustments
arising on plan assets 3,932 244 687 12,772 (11,289)
----------------------------- --------- -------- -------- -------- --------
United States
Fair value of scheme assets 2,055 1,769 1,795 1,779 1,447
Present value of defined
benefit obligation (3,081) (2,832) (2,484) (2,464) (2,210)
----------------------------- ------- ------- ------- ------- -------
Deficit in the scheme (1,026) (1,063) (689) (685) (763)
----------------------------- ------- ------- ------- ------- -------
Experience adjustments
arising on plan liabilities 19 40 (5) (74) 24
----------------------------- ------- ------- ------- ------- -------
Experience adjustments
arising on plan assets 50 (63) 35 298 (536)
----------------------------- ------- ------- ------- ------- -------
The cumulative amount of actuarial losses recognised since 1
October 2004 in the Group Statement of Comprehensive Income is
GBP5,072,000 (2012: gains of GBP421,000). 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 information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDLSSGBGXS
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