TIDMAPI
RNS Number : 7726I
API Group PLC
04 June 2014
Press Release 4 June 2014
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 2014.
Financial Highlights
-- Revenues ahead by GBP2.3m (2.0%) to GBP114.7m (2013: GBP112.4m).
-- Profit before tax unchanged at GBP5.6m (2013: GBP5.6m).
Profit before tax of GBP6.3m on a pre-exceptional basis
(2013: GBP6.6m).
-- Stronger second half, with pre-exceptional profit before
tax ahead by GBP0.5m (+15%).
-- Diluted earnings per share 7.1p (2013: 7.2p). Excluding
exceptional items, diluted earnings per share 7.8p (2013:
8.4p).
-- Proposed final dividend of 1.3p per share, making 2.0p for
the full year (2013: 0.0p).
-- Cash flow from operations of GBP9.0m (2013: GBP8.6m), converted
at 91% of EBITDA (2013: 86%) and a net cash inflow of GBP2.8m
(2013: GBP1.2m).
-- GBP0.2m net cash at year end (2013: net debt of GBP2.6m),
the first time for 15 years that the Group has reported
a net cash position.
Operational Highlights
-- Another good performance from Laminates and further progress
at Foils Europe. Holographics back to breakeven in final
quarter after cost reduction measures. Operating margin
maintained at Foils Americas despite weaker sales in the
second half.
-- Laminates major new supply contract fully on stream during
second half.
-- Restructuring of UK foils operations completed; new distribution
facility established in Sheffield, leaving Livingston to
concentrate on manufacturing.
-- New ERP solution successfully implemented by Foils Americas;
roll-out in Foils Europe scheduled for 2014.
-- Capital additions and joint venture investment of GBP3.8m
(2013: GBP5.5m), including down payments on new metallising
equipment for UK and US foils plants.
Commenting on the results, Andrew Turner, Group Chief Executive
of API Group plc, said:
"In spite of a slightly weaker profit performance, these results
demonstrate further strengthening of the Group's financial
position, combined with continued substantial investment in the
operating assets of the business. The year-end net cash balance and
the re-introduction of a dividend after a break of more than ten
years, represent important milestones in the rehabilitation of the
Group.
Operational improvement and investment initiatives already
completed, as well as further projects planned for the new
financial year, are expected to strengthen API's position in its
key markets and enhance prospects for future sales and profit
growth."
- 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
CEO Review
Overall financial results
Group revenues for the twelve months to March 2014 increased by
2.0%, at both actual and constant FX rates, to GBP114.7m (2013:
GBP112.4m). Sales volumes were higher by 2.7%, with second half
volumes up 7.1% on the prior year compensating for a small decline
in the first six months.
In spite of the higher sales levels, added value margin declined
slightly due to sales mix between the business units, the impact of
less favourable exchange rates and higher levels of production
scrap at Laminates. This, together with slightly higher variable
costs, more than offset the contribution from higher sales to leave
pre-exceptional operating profits down by 4.8% at GBP7.4m (2013:
GBP7.8m). Operating margin was also lower, by 0.4%, at 6.5%.
At segment level, full year profits advanced at Laminates
(GBP0.2m) and Foils Europe (GBP0.1m) on the back of stronger
volumes. Holographics losses increased by GBP0.4m, due to lower
external sales, and Foils Americas profits declined by GBP0.2m, due
to lower activity in the last quarter.
In a reversal of the pattern experienced in the last two years
and as anticipated in our interim results statement, profitability
improved significantly in the second half; up GBP0.5m (+15%) on the
first half. Progress at Foils Europe (+GBP0.3m) and reduced losses
at Holographics (+GBP0.4m), as a result of cost reduction measures,
more than compensated for the weaker second half at Foils Americas
(-GBP0.4m). Operating margin for the second half improved to 6.9%
compared to 6.1% in the first half.
For the year as a whole, profit before tax was unchanged, at
GBP5.6m; although a small tax charge led to a marginal fall in
diluted earnings per share to 7.1p (2013:7.2p).
Exceptional costs of GBP0.7m (2013: GBP1.0m) have been
separately disclosed and relate to one-off costs and expenses
associated with organisational change in three business units.
Interest costs, including the new IAS19 pension interest charge,
were GBP0.1m lower at GBP1.1m (2013: GBP1.2m). On a pre-exceptional
basis, profit before tax was 4.5% lower at GBP6.3m (2013: 6.6m) and
diluted earnings per share were 7.8p, compared to 8.4p for the
prior year.
Cash from operations, post exceptional items, converted at 91%
of EBITDA (2013: 86%), with a net cash inflow of GBP2.8m compared
to GBP1.2m for the previous year. Whilst cash capital expenditure
of GBP3.5m was lower than the previous year (2013: GBP5.3m) capital
additions still represented 1.4 times depreciation and will remain
above depreciation for at least another two years as additional
capacity is introduced into the Foils businesses. The Group
completed its investment in the Czech Joint Venture after a further
GBP0.5m transfer of funds on top of the GBP0.4m paid last year.
With working capital broadly unchanged, the Group reported a small
net cash position at the financial year end of GBP0.2m (2013:
GBP2.6m debt).
Dividend
Following payment of the interim dividend in January, the Board
is pleased to propose a final dividend of 1.3p per share. The
total, full-year dividend of 2.0p will be put to shareholders for
approval at the Annual General Meeting on July 15th and subject to
this approval, it is our intention that the final dividend will be
paid on August 1st to shareholders on the register as at July 11th,
with an ex-dividend date of Wednesday July 9th.
Outlook
The Board expects a continuation of the second half trading
momentum, with progression in results for the first half and for
the financial year as a whole.
At this stage, it is unclear how long Foils Americas will be
affected by the reduced demand from metallic pigment customers, but
any impact on the Group's results should be more than compensated
by the elimination of trading losses at Holographics and the
benefit of last year's restructuring at Foils Europe.
In respect of general market conditions, Foils Europe continues
to experience steady overall demand, whereas recent activity in the
decorative foils market in North America appears somewhat slower
than usual. At Laminates, the new financial year has started
strongly and there is a good pipeline of new business development
projects.
Management is pressing ahead with its operational improvement
and growth agenda, including the roll-out of the Group's new ERP
platform and investments in additional capacity for the Foils
businesses. These initiatives will strengthen API's ability to
service customers in key markets and enhance the Group's prospects
over the medium term.
Divisional Review
Laminates
As reported at the interim stage, API Laminates experienced
lower first half activity due to net adverse 'churn' of customer
packaging specifications moving between laminate and non-laminate
constructions and a reduced volume allocation on one of its key
supply positions. In the second half, this was more than
compensated by the commencement of bulk shipments against the major
new supply contract, produced on the newly-installed laminator. As
a result, second half revenues were 11% ahead of the first six
months and 25% higher than the comparative 6 month period last year
and full year revenues ended 7.4% higher, at GBP59.2m (2013:
GBP55.2m).
At the added value level, the contribution from higher sales was
partially offset by the impact of changes in currency exchange
rates and lower raw material efficiencies during the start-up phase
on the new laminator. Operating costs increased by 5% due primarily
to higher spend on plant maintenance and sales and marketing,
leaving operating profits GBP0.2m ahead of the prior year, at
GBP6.7m. Return on sales was slightly down on the prior year, but
still a very creditable 11.3% (2013: 11.8%).
Foils Europe
In spite of the disruption caused by the reorganisation of its
UK operations in the first half, Foils Europe recorded a second
successive year of profits growth. Revenues moved ahead 5.0% at
constant FX rates to GBP28.6m, with the Polish distribution unit
more than doubling sales in its second year, further progress in
Italy and an increased contribution from Germany. Revenues were
lower in the UK and Australia, the latter due to a factory closure
at a key customer in the label sector.
Full year volumes increased 9.1% and, whilst there was a fall in
average selling price due to mix, added value margin was slightly
ahead of prior year. Production costs were higher despite second
half labour savings arising from the UK restructuring, as were
outbound freight costs, general overheads and marketing expenses.
It is estimated that GBP0.2m of non-repeatable costs were incurred
in connection with the UK reorganisation in the first half year.
Profits increased by GBP0.3m in the second half with full year
operating profits advancing by 7.4% to GBP2.1m (2013: GBP2.0m) and
operating margin higher by 0.2%, at 7.5%.
Over the last three years, activity at Foils Europe's
manufacturing plant in Livingston has increased by 18% due to
growth in sales and repatriation of volume from the Group's
discontinued joint venture in China. With the facility now fully
loaded and good prospects for further growth, the Board has
approved capital investment to increase capacity, including a new
vacuum metalliser which came on stream in May 2014 and an
additional coating line planned for installation in the first
quarter of 2015. Foils Europe is also planning to roll out the
Group's new ERP business, following its successful implementation
in Foils Americas during the first half of the financial year just
ended.
Foils Americas
Revenues at Foils Americas were down 8.2% at constant FX rates
to GBP21.8m (2013: GBP24.0m) and were 9.0% lower than the prior
year at actual FX rates. Following several years of strong growth
in sales to the metallic pigment sector, the business experienced a
sharp decline in order levels in the last quarter, due primarily to
reduced conversion activity at one key customer. Sales of
decorative foils were also lower due in part to capacity allocation
in favour of the metallic pigment business in the earlier part of
the year and a slow-down in the US market during the harsh winter
period.
The impact on profits of the reduced sales contribution was
mitigated by an improvement in added value margins due to a more
favourable sales mix, lower average raw material costs and a
partial reversal of the prior year's reduction in inventory. With
costs broadly flat, operating profits were down just GBP0.2m, to
GBP1.7m (2013: GBP1.9m), with operating margins virtually unchanged
at 7.8% (2013: 7.9%).
At the beginning of the financial year, the US-based foils
business transitioned across to a new ERP platform. Whilst there
was a degree of initial disruption, the solution has now been
running smoothly for several months and providing the business with
a significantly improved information and control environment.
Holographics
API Holographics' revenues declined by 7.9% to GBP8.9m (2013:
GBP9.6m) with a recovery in sales of decorative holographic
products to sister API companies adding GBP0.5m (+23%), offset by a
reduction in third party revenues of GBP1.2m (-16%). The primary
cause of the decline in external sales was the ending of a
long-standing supply arrangement after the customer took production
in house. In addition, the timing of shipments on a second major
contract adversely impacted year-on-year comparatives.
The lower sales contribution resulted in losses widening to
GBP0.7m (2013: GBP0.3m) as operating cost savings of GBP0.2m were
offset by a partial reversal of a credit to profit for inventory
build in the previous year. After losses of GBP0.5m in the first
half, management successfully implemented a cost reduction
programme aimed at bringing the business back to a break even
position in the final quarter.
For the longer term, the Board remains committed to the strategy
approved in 2011, aimed at growing API's presence in the security
and authentication market. Whilst a number of new sales
opportunities have been developed in pursuance of that objective,
progress has so far been slower than expected and undermined by the
loss of one particular supply position due to factors beyond
management's control. In the meantime, significant capital
investments have been completed in enhanced security and extended
product capabilities at the Salford manufacturing facility, and the
new Joint Venture in the Czech Republic is supporting the business
development effort with a significantly improved holographic
origination service.
Financial Review
Principal risks and uncertainties
Our management structure, business reporting and risk management
processes ensure we are informed of and responsive to business and
marketplace trends, thereby making timely and informed strategic
and tactical decisions. Financial risks comprise foreign currency,
interest rates, credit, liquidity and defined benefit pension
schemes. Operational risks comprise markets, commercial
relationships, geographic, input costs, health & safety and
environment.
Exceptional items
Exceptional charges totalling GBP0.7m (2013: GBP1.0m) were
incurred during the year in relation to reorganisation costs in
Foils Europe, Holographics and Laminates.
Finance costs
Net finance costs for the year reduced by GBP0.1m to GBP1.1m.
The non-cash, pension-related finance charge, calculated in
accordance with the new IAS19 accounting standard, increased by
GBP0.2m to GBP0.6m. This increase was offset by interest and other
costs relating to bank borrowings which fell by GBP0.2m to GBP0.6m
(2013: GBP0.8m) as a result of lower average net debt and lower
interest margins on both UK and US facilities.
Taxation
The Group continues to benefit from historic tax losses and
non-utilised capital allowances in the UK. As a result, the current
tax charge of GBP0.4m (2013: GBP0.2m) was mostly offset by a
deferred tax credit of GBP0.3m (2013: 0.2m).
In the UK, the current tax of GBP0.2m (2013: GBP0.1m) related
entirely to API Laminates, where tax losses are now fully utilised.
Taxable profits were partially sheltered by UK group relief (losses
in API Holographics and Central companies) and capital allowances.
Overseas tax of GBP0.2m (2013: GBP0.1m) related to taxable profits
in Germany and Italy. Overall tax on profits in the UK and US Foils
businesses continues to benefit from previously accumulated tax
losses and non-utilised UK capital allowances. In the period, a
deferred tax charge of GBP1.5m (2013: GBP1.5m) was balanced by a
deferred tax credit of GBP1.7m (2013: GBP1.6m); mostly from further
recognition of historic tax losses in the Foils businesses.
The net deferred tax asset recognised in the Group's balance
sheet reduced in the year by GBP0.3m to GBP6.1m (2013: GBP6.4m)
predominantly due to a reduced deferred tax asset of GBP2.8m
relating to the pension deficit (2013: GBP3.1m) as a consequence of
lower corporation tax rates in the UK.
Remaining unrecognised tax losses, as at 31 March 2014, amounted
to GBP2.1m in the UK (2013: GBP2.8m) and $4.1m in the US (2013:
$9.0m), in addition to unclaimed capital allowances in the UK of
GBP2.1m (2013: GBP3.9m).
Earnings per share
Diluted earnings per share were 7.1p, compared to 7.2p for last
year. Excluding exceptional items, diluted earnings per share were
7.8p (2013: 8.4p).
Shareholders' Funds
At 31 March 2014, the Group's net assets were GBP26.4m, an
increase over the year of GBP3.5m or 15.2%.
Cash flow and net debt
There was a net cash inflow from operating activities (after
cash flows for pension and finance costs) of GBP7.4m; up from
GBP7.0m in the previous year.
Cash-flows resulting from capital expenditure amounted to
GBP3.5m (2013: GBP5.3m) of which GBP3.3m was capitalised (2013:
GBP5.1m). Spend included payments of GBP1.9m for projects scheduled
to complete in the new financial year. Two new foil metallisers,
which are scheduled for installation in the first half of the new
financial year, incurred project costs of GBP1.2m. A further
GBP0.7m was incurred on the new business IT system which is now
operational in the US, with Foils Europe expected to complete by
March 2015. A further investment of GBP0.5m (2013: GBP0.4m) was
made in the Czech joint venture origination company to complete the
funding of its new equipment. For the third successive year,
capital investment was significantly ahead of depreciation of
GBP2.4m (2013: GBP2.2m).
The impact on working capital of stronger sales activity in the
final three months of the year compared to the equivalent period a
year earlier was offset by improved working capital efficiency,
with the result that working capital ended the year broadly
unchanged. Year-end efficiency, which is measured internally by
reference to trailing three month sales (annualised), improved by
0.9% to 7.3% as a result of reduced inventories.
Consistent with the charge in the income statement, cash flow
for interest expense reduced by GBP0.2m, to GBP0.4m.
Net cash at 31 March 2014 amounted to GBP0.2m, compared to net
debt of GBP2.6m a year earlier. The Group's year-end debt cover
ratio (net debt to trailing 12 month EBITDA) was therefore zero
(2013: 0.3x), as was gearing (net debt to shareholders funds)
(2013: 11%).
In light of the Group's recent record of strong cash conversion
and the reduced levels of bank debt, and following a review of
medium term business plans, the Board announced in December 2013
its intention to re-introduce a meaningful and sustainable dividend
that would be affordable out of future cash flows after providing
for finance and pension costs and funding of capital investment
requirements. An interim dividend of 0.7p was paid to shareholders
in January at a cost of GBP0.5m and a final dividend of 1.3p is
being recommended to shareholders for approval at the AGM on July
15th 2014.
Borrowings and liquidity
The Group's policy is to ensure that banking facilities are
adequate to meet foreseeable peak requirements arising from
variations in working capital and the timing of capital
expenditure. Facilities are in place to independently finance the
two main operations based in the UK and North America.
During the year, new UK facilities were agreed with HSBC plc.
These include a Revolving Credit facility of GBP13.5m and ancillary
facilities of GBP7.5m to cover FX contracts, Letters of Credit and
sundry other items. The facilities extend to December 2017 and are
subject to two quarterly financial covenant tests. Lending is
secured via a floating charge over the Group's UK assets. Total
facilities under the previous funding arrangement with Barclays
Bank plc, as at 31 March 2013 amounted to GBP12.8m.
In North America, funding has been arranged with Wells Fargo
Bank, until April 2015. Facilities comprise an amortising loan,
amounting to $0.9m at 31 March 2014 (2013: $1.2m), and a $5.5m
asset backed working capital facility. Borrowings are secured on
working capital, plant and equipment and the Kansas property and
are subject to quarterly covenant tests. The soon-to-be-installed
new metalliser for the Kansas facility is being funded via a
separate asset financing agreement with Wells Fargo.
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 2014
Average 1.59 1.19
Closing 1.67 1.21
----------------- ----- -----
31 March 2013
Average 1.58 1.23
Closing 1.52 1.18
----------------- ----- -----
Pensions
The UK and US businesses each operate defined benefit pension
schemes for the benefit of past and current employees. Both schemes
are closed to future accrual and are accounted for under IAS 19R.
At 31 March 2014 the Group's IAS 19R gross pension liability was
assessed at GBP13.3m (2013: GBP13.3m). When adjusting for the
recognised deferred tax asset of GBP2.8m (2013: GBP3.1m), the net
liability equates to GBP10.5m (2013: GBP10.2m). A small increase in
the gross UK deficit was matched by reduced net liabilities on the
US plan. The deferred tax asset reduced by GBP0.3m as a result of
lower UK tax rates.
In the UK, the API Group plc Pension and Life Assurance Fund has
approximately 1,520 pensioners and deferred members. The fund was
closed to future service accrual on 31 December 2008 following on
from a decision to admit no new members since October 2006. The UK
scheme's last triennial valuation date was 30 September 2013. The
valuation results and funding plan were approved by the Trustees
and the Company in May 2014. The outcome was broadly in line with
the funding plan from September 2010 and, as a consequence, the
Company will continue its annual deficit reduction payment of
GBP0.7m per annum. The Company also pays all administration fees on
behalf of the Fund and works collaboratively with the Trustees on
many aspects of scheme management, in particular investment
strategy.
As at 31 March 2014, the gross deficit of the UK fund has been
calculated at GBP12.6m (2013: GBP12.3m) under the valuation
principles of IAS 19R. A benefit from a small increase in the
discount rate to 4.40% (2013: 4.30%) was offset by changes to
assumptions used for mortality. The average life expectancy
assumption has been increased by 0.65 years across the population
as a result of a postcode review of the membership carried out for
the 2013 funding valuation. Additionally, an experience loss of
GBP1.2m has been recognised relating to the triennial revision of
expected future cash benefits to be paid. Inflation assumptions
remain unchanged.
In the US, the API Foils North America Pension Plan was closed
to new entrants and future accrual in 2004. Membership is
approximately 160 current and past employees. Details of the net
deficit of GBP0.7m (2013: GBP1.0m) are included in Note 9 to the
financial statements. Also in the US, current and past employees
covered by union contracts at the Group's New Jersey manufacturing
facility are members of a union-managed, multi-employer defined
benefit pension plan. The plan operates under the terms of the
site's collective bargaining agreement and remains fully open. In
accordance with IAS 19R, this scheme is accounted for as a defined
contribution plan.
Group Income Statement
for the year ended 31 March 2014
Year ended Year ended
31 March 31 March
2014 2013*
Note GBP'000 GBP'000
------------------------------------- ----- ----------- -----------
Revenue 2 114,712 112,426
Cost of sales (86,617) (84,179)
------------------------------------- ----- ----------- -----------
Gross profit 28,095 28,247
Distribution costs (3,952) (4,249)
Administrative expenses (excluding
exceptional items) (16,716) (16,196)
------------------------------------- ----- ----------- -----------
Operating profit before exceptional
items 2 7,427 7,802
Exceptional items 3 (705) (1,029)
------------------------------------- ----- ----------- -----------
Operating profit 6,722 6,773
Finance revenue 4 2 10
Finance costs 4 (1,132) (1,217)
------------------------------------- ----- ----------- -----------
(1,130) (1,207)
------------------------------------- ----- ----------- -----------
Profit before taxation 5,592 5,566
Tax (expense) / credit 5 (150) 19
------------------------------------- ----- ----------- -----------
Profit for the year 5,442 5,585
------------------------------------- ----- ----------- -----------
Earnings per share (pence)
Basic earnings per share on
profit for the year 6 7.4 7.6
Underlying basic earnings per
share on profit for the year 6 8.1 8.8
Diluted earnings per share on
profit for the year 6 7.1 7.2
Underlying diluted earnings
per share on profit for the
year 6 7.8 8.4
------------------------------------- ----- ----------- -----------
* restated for IAS19 - Employee benefits (revised)
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 2014
Year ended Year ended
31 March 31 March
2014 2013*
GBP'000 GBP'000
--------------------------------------- ------ ------------- -----------
Profit for the year 5,442 5,585
Items that may be reclassified
to profit or loss in subsequent
periods:
Exchange differences on retranslation
of foreign operations (1,390) 703
Change in fair value of effective
cash flow hedges 863 (639)
Items not reclassified to
profit or loss in subsequent
periods:
Re-measurement (losses)/gains
on defined benefit pension
schemes (513) (5,243)
Tax on items relating to components
of other comprehensive income (350) 1,228
----------------------------------------------- ------------- -----------
Other comprehensive income
for the year, net of tax (1,390) (3,951)
----------------------------------------------- ------------- -----------
Total comprehensive income
for the year attributable
to equity holders of the Parent 4,052 1,634
* restated for IAS19 - Employee
benefits (revised)
Group Balance Sheet
at 31 March 2014
31 March 31 March
2014 2013
Note GBP'000 GBP'000
-------------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 21,490 21,313
Intangible assets - goodwill 5,188 5,188
Investment in joint venture interest 880 378
Financial assets - 152
Deferred tax assets 5 6,412 6,617
-------------------------------------- ----- --------- ---------
33,970 33,648
-------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 16,593 15,811
Inventories 12,126 12,864
Other financial assets 594 184
Cash and short-term deposits 7 8,606 6,189
-------------------------------------- ----- --------- ---------
37,919 35,048
-------------------------------------- ----- --------- ---------
Total assets 2 71,889 68,696
-------------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables 22,632 22,428
Financial liabilities 8 432 3,766
Income tax payable 635 373
-------------------------------------- ----- --------- ---------
23,699 26,567
-------------------------------------- ----- --------- ---------
Non-current liabilities
Financial liabilities 8 8,033 5,574
Deferred tax liabilities 5 306 211
Provisions 56 66
Deficit on defined benefit pension
schemes 9 13,364 13,349
-------------------------------------- ----- --------- ---------
21,759 19,200
-------------------------------------- ----- --------- ---------
Total liabilities 45,458 45,767
-------------------------------------- ----- --------- ---------
Net assets 26,431 22,929
-------------------------------------- ----- --------- ---------
Equity
Called up share capital 767 767
Share premium 7,136 7,136
Other reserves 8,818 8,816
Foreign exchange reserve (432) 958
Retained profit 10,142 5,252
-------------------------------------- ----- --------- ---------
Equity shareholders' funds 26,431 22,929
-------------------------------------- ----- --------- ---------
Group Statement of Changes in Equity
for the year ended 31 March 2014
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 2012 767 7,136 8,816 255 4,348 21,322
---------------------------- -------- -------- --------- ---------- ---------- ---------------
Profit for the year* - - - - 5,585 5,585
Other comprehensive
income:
Exchange differences
on retranslation of
foreign operations - - - 703 - 703
Change in fair value
of effective
cash flow hedges - - - - (639) (639)
Re-measurement losses
on defined benefit pension
schemes* - - - - (5,243) (5,243)
Tax on items relating
to components of other
comprehensive income* - - - - 1,228 1,228
---------------------------- -------- -------- --------- ---------- ---------- ---------------
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
---------------------------- -------- -------- --------- ---------- ---------- ---------------
Profit for the year - - - - 5,442 5,442
Other comprehensive
income:
Exchange differences
on retranslation of
foreign operations - - - (1,390) - (1,390)
Change in fair value
of effective
cash flow hedges - - - - 863 863
Re-measurement losses
on defined benefit pension
schemes - - - - (513) (513)
Tax on items relating
to components of other
comprehensive income - - - - (350) (350)
---------------------------- -------- -------- --------- ---------- ---------- ---------------
Total comprehensive
income for the year - - - (1,390) 5,442 4,052
---------------------------- -------- -------- --------- ---------- ---------- ---------------
Dividends - - - - (518) (518)
Shares acquired by Employee
Benefit Trust - - (32) - - (32)
Transferred on exercise
of share options / LTIP - - 34 - (34) -
At 31 March 2014 767 7,136 8,818 (432) 10,142 26,431
---------------------------- -------- -------- --------- ---------- ---------- ---------------
* restated for IAS19 - Employee benefits (revised)
An interim dividend of 0.7 pence per share (2013: nil) was
approved by the Board on 2 December 2013 and was paid on 9 January
2014 to equity holders on the register at the close of business on
13 December 2013.
Group Cash Flow Statement
for the year ended 31 March 2014
Year ended Year ended
31 March 31 March
2014 2013*
Note GBP'000 GBP'000
-------------------------------------------- ---- ---------- ----------
Operating activities
Group profit before tax 5,592 5,566
Adjustments to reconcile Group profit
before tax to net cash flow from operating
activities
Net finance costs 1,130 1,207
Depreciation of property, plant and
equipment 2,367 2,173
Profit on disposal of property, plant
and equipment (4) (5)
Movement in fair value foreign exchange
contracts 44 (38)
Share-based payments - 85
(Decrease)/increase in inventories 221 (361)
Increase in trade and other receivables (1,216) (101)
Increase in trade and other payables 832 68
Decrease in provisions (10) (10)
-------------------------------------------- ---- ---------- ----------
Cash generated from operations 8,956 8,584
Interest paid (396) (583)
Pension contributions and scheme expenses
paid (973) (960)
Income taxes paid (155) (50)
-------------------------------------------- ---- ---------- ----------
Net cash flow from operating activities 7,432 6,991
-------------------------------------------- ---- ---------- ----------
Investing activities
Interest received 2 10
Purchase of property, plant and equipment (3,465) (5,296)
Investment in joint venture (502) (378)
Sale of property, plant and equipment 4 23
-------------------------------------------- ---- ---------- ----------
Net cash flow used in investing activities (3,961) (5,641)
-------------------------------------------- ---- ---------- ----------
Financing activities
Dividends paid (518) -
Purchase of shares by Employee Benefit
Trust (32) (94)
New borrowings 12,340 -
Arrangement fees for new borrowings (183) -
Repayment of borrowings (12,567) (4,148)
-------------------------------------------- ---- ---------- ----------
Net cash flow used in financing activities (960) (4,242)
-------------------------------------------- ---- ---------- ----------
Increase/(decrease) in cash and cash
equivalents 2,511 (2,892)
Effect of exchange rates on cash and
cash equivalents (92) 25
Cash and cash equivalents at the beginning
of the year 7 5,955 8,822
-------------------------------------------- ---- ---------- ----------
Cash and cash equivalents at the end
of the year 7 8,374 5,955
-------------------------------------------- ---- ---------- ----------
* restated for IAS19 - Employee benefits (revised)
Notes
1. Preparation of financial statements
Authorisation of financial statements
The Group's financial statements for the year ended 31 March
2014 were authorised for issue by the Board of Directors on 3 June
2014 and the balance sheet was signed on the Board's behalf by
Andrew Turner, Group Chief Executive.
API Group plc is a public limited 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
2014 and the comparative figures for the year ended 31 March 2013
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 2014. Statutory
accounts for the year ended 31 March 2013 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 2014 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 2014
will be posted to shareholders by 20 June 2014 prior to the Annual
General Meeting on 15 July 2014. Copies of the Annual Report and
Accounts will be available to members of the public from 20 June
2014 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, except as disclosed in the accounting
policies, in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union as they apply to
the financial statements of the Group for the year ended 31 March
2014 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.
Changes in accounting policies
In the preparation of the group financial statements, the Group
followed the same accounting policies and methods of computation as
compared with those applied in the previous year, except for the
adoption of new standards and interpretations and revisions of the
existing standards as of 1 April 2013.
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
2014 2013
GBP'000 GBP'000
---------------------------- ----------- -----------
Total revenue by origin
Laminates 59,237 55,163
Foils Europe 28,580 27,021
Foils Americas 21,819 23,972
Holographics 8,888 9,646
118,524 115,802
---------------------------- ----------- -----------
Inter-segmental revenue
Laminates 13 2
Foils Europe 707 757
Foils Americas 567 556
Holographics 2,525 2,061
3,812 3,376
---------------------------- ----------- -----------
External revenue by origin
Laminates 59,224 55,161
Foils Europe 27,873 26,264
Foils Americas 21,252 23,416
Holographics 6,363 7,585
Segment revenue 114,712 112,426
---------------------------- ----------- -----------
All revenue is derived from the sale of goods.
2. Segmental analysis (continued)
Segment result
Year ended Year ended
31 March 31 March
2014 2013*
GBP'000 GBP'000
------------------------------------- ----------- -----------
Operating profit before exceptional
items
Laminates 6,680 6,515
Foils Europe 2,130 1,984
Foils Americas 1,699 1,893
Holographics (724) (275)
Segment result 9,785 10,117
Central costs (2,358) (2,315)
------------------------------------- ----------- -----------
Total operating profit before
exceptional items 7,427 7,802
------------------------------------- ----------- -----------
Central costs comprise primarily salaries, defined benefit
pensions costs, other employment costs and corporate advisory fees
relating to the central management of the Group.
* restated for IAS19 - Employee benefits (revised)
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
------------------------------ ----------- -----------
Assets
Laminates 15,182 13,550
Foils Europe 18,586 17,889
Foils Americas 13,163 14,544
Holographics 8,295 8,719
Segment assets 55,226 54,702
Unallocated:
Deferred tax assets 6,412 6,617
Cash and short-term deposits 8,606 6,189
Other 1,645 1,188
------------------------------ ----------- -----------
Total assets 71,889 68,696
------------------------------ ----------- -----------
3. Exceptional items
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
Restructuring of operating businesses (705) (488)
Fees associated with the formal sale process - (541)
(705) (1,029)
--------------------------------------------- ---------- ----------
Restructuring of operating businesses relates primarily to
redundancy, severance settlements and other costs associated with
business restructuring in the Foils Europe, Laminates and
Holographics businesses.
4. Finance revenue and finance costs
Year ended Year ended
31 March 31 March
2014 2013*
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
Finance revenue
Interest receivable on bank and other short-term
deposits 1 2
Other interest receivable 1 8
------------------------------------------------- ---------- ----------
2 10
------------------------------------------------- ---------- ----------
Finance costs
Interest payable on bank loans and overdrafts (533) (804)
Other interest payable (41) (17)
Finance cost in respect of defined benefit
pension plans (558) (396)
------------------------------------------------- ---------- ----------
(1,132) (1,217)
------------------------------------------------- ---------- ----------
Included within interest payable on bank overdrafts and loans is
GBP178,000 (2013: GBP235,000) relating to the amortisation of fees
and expenses incurred in obtaining bank facilities.
* restated for IAS19 - Employee benefits (revised)
5. Taxation
a) Tax (expense)/credit in the income statement
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
-------------------------------------------------- ------------- ----------
Current income tax
UK corporation tax (330) (75)
UK corporation tax - adjustment to prior
years 75 -
Overseas tax (164) (80)
Total current income tax expense (419) (155)
------------------------------------------------------ --------- ----------
Deferred tax
Origination and reversal of temporary differences
* defined benefit pension plan 35 (135)
* tax losses and other short-term differences 501 588
* capital allowances (118) (275)
- effect of change in tax rate (149) (4)
------------------------------------------------------ --------- ----------
Total deferred tax credit 269 174
------------------------------------------------------ --------- ----------
Total tax (expense) / credit in the income
statement (150) 19
------------------------------------------------------ --------- ----------
(b) Tax credit/(expense) on items accounted
for through other comprehensive income
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
-------------------------------------------- ------------- ----------
Deferred tax
Re-measurement gains and losses on defined
benefit
pension schemes 94 1,258
Change in fair value of effective cash flow
hedges (198) 151
Effect of change in tax rate (246) (181)
------------------------------------------------ --------- ----------
(350) 1,228
------------------------------------------------ --------- ----------
(c) Tax (expense)/credit on items accounted
for directly through equity
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
---------------------------------------------- ------------- ----------
Deferred tax
Share-based payments - (18)
-------------------------------------------------- --------- ----------
(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 23% (2013: 24%).
The differences are reconciled below:
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Accounting profit before tax 5,592 5,566
------------------------------------------------ ---------- ----------
Accounting profit multiplied by the UK standard
rate of corporation tax of 23% (2013: 24%) 1,286 1,336
Adjustments to tax charge in respect of
prior periods (75) (81)
Adjustments in respect of foreign tax rates 95 55
Increase in deferred tax asset recognised
on losses and capital allowances (1,454) (1,595)
Losses for which deferred tax is not recognised 63 94
Other temporary differences for which deferred
tax is not recognised 6 (33)
Effect of change in tax rate 152 4
Expenses not deductible for tax purposes 77 201
Total tax expense / (credit) reported in
the income statement 150 (19)
------------------------------------------------ ---------- ----------
(e) Unrecognised tax losses
The Group has unrecognised tax losses arising in the UK of
GBP2,068,000 (2013: GBP2,819,000) 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 GBP2,078,000 (2013: GBP3,857,000) available to offset
against future taxable profits at the rate of 18% (2013: 18%) a
year on a reducing balance basis. The Group has unrecognised US
federal tax losses carried forward of $4,097,000 (2013:
$8,963,000), which are available for offset against future profits
for a period of between 9 and 17 years.
(f) Deferred tax
The deferred tax included in the balance sheet is analysed as
follows:
31 March 31 March
2014 2013
GBP'000 GBP'000
------------------------------- -------- --------
Deferred tax liability
Revaluation of fixed assets (183) (211)
Fair value of cash flow hedges (123) -
------------------------------- -------- --------
(306) (211)
------------------------------- -------- --------
Deferred tax asset
Defined benefit pension plans 2,806 3,070
Tax losses 2,724 2,376
Capital allowances 737 941
Fair value of cash flow hedges - 64
Share-based payments 145 166
------------------------------- -------- --------
6,412 6,617
------------------------------- -------- --------
Reductions in the UK corporation tax rate from 26% to 24%
(effective from 1 April 2012) and to 23% (effective from 1 April
2013) were substantially enacted on 26 March 2012 and 3 July 2012
respectively. Further reductions to 21% (effective from 1 April
2014) and 20% (effective from 1 April 2015) were substantively
enacted on 2 July 2013. This will impact the Group's future current
tax charge accordingly. The deferred tax assets and liabilities at
31 March 2014 have been calculated based on the rates of 20% and
21% substantively enacted at the balance sheet date.
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 for the year 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 underlying 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
2014 2013*
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
Net profit attributable to equity holders
of the Parent 5,442 5,585
Adjustments to arrive at underlying earnings:
Exceptional items 705 1,029
Tax credit on exceptional items (162) (103)
---------------------------------------------- ---------- ----------
Underlying earnings 5,985 6,511
---------------------------------------------- ---------- ----------
Year ended Year ended
31 March 31 March
2014 2013
No No
---------------------------------------------- ---------- ----------
Basic weighted average number of ordinary
shares 73,892,566 73,748,730
Dilutive effect of employee share options
and contingent shares 3,265,060 3,600,787
---------------------------------------------- ---------- ----------
Diluted weighted average number of ordinary
shares 77,157,626 77,349,517
---------------------------------------------- ---------- ----------
The basic weighted average number of shares excludes the
2,750,000 shares owned by the API Group plc No.2 Employee Benefit
Trust (2013: 3,000,000). These contingent shares are included in
the diluted weighted average number of shares. On 2 September 2013,
250,000 shares which had vested under the LTIP were exercised.
There have been no 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
2014 2013*
pence pence
-------------------------------------- ---------- ----------
Basic earnings per share 7.4 7.6
Underlying basic earnings per share 8.1 8.8
Diluted earnings per share 7.1 7.2
Underlying diluted earnings per share 7.8 8.4
-------------------------------------- ---------- ----------
* restated for IAS19 - Employee benefits (revised)
7. Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash
and cash equivalents comprise the following:
31 March 31 March
2014 2013
GBP'000 GBP'000
----------------------------- -------- --------
Short-term deposits - 4,500
Cash at bank and in hand 8,606 1,689
----------------------------- -------- --------
Cash and short-term deposits 8,606 6,189
Bank overdrafts (Note 17) (232) (234)
----------------------------- -------- --------
8,374 5,955
----------------------------- -------- --------
8. Financial liabilities
31 March 31 March
2014 2013
GBP'000 GBP'000
--------------------------------------------------- ---------- ---------
Current
Bank overdrafts 232 234
Current instalments due on bank loans 187 2,957
Interest rate swaps - 16
Forward foreign exchange contracts 13 559
--------------------------------------------------- ---------- ---------
432 3,766
--------------------------------------------------- ---------- ---------
Non-current
Non-current instalments due on bank loans 8,033 5,574
8,033 5,574
--------------------------------------------------- ---------- ---------
Bank loans
Bank loans comprise the following:
31 March 31 March
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Revolving loans (UK) 7,329 7,754
Term loans (US) 891 777
-------------------------------------------- -------- --------
8,220 8,531
Less: current instalments due on bank loans (187) (2,957)
-------------------------------------------- -------- --------
8,033 5,574
-------------------------------------------- -------- --------
The Group's banking facilities comprise:
UK facilities
The Group's lending arrangements in the UK were moved from
Barclays Bank plc to HSBC plc in November 2013. The facilities with
HSBC are for a period to 31 December 2017 and comprise a GBP13.5m
multicurrency revolving facility agreement and ancillary facilities
of GBP7.5m to cover FX contracts, letters of credit and sundry
other items. At 31 March 2014, UK facilities drawn down comprised
revolving loans of GBP7.5m with interest rates of 2.0%. The
facilities are subject to two quarterly financial covenant targets
reflecting the financial performance of the Group excluding the
impact of the Foils Americas business unit. Covenants relate to
Interest Cover and Leverage. At 31 March 2014, the covenant ratios
were comfortably within targets.
US facilities
The US facilities are with Wells Fargo Bank; these facilities
are scheduled for renewal in April 2015. At 31 March 2014 they
comprised amortising loans of $0.9m (2013: $1.2m), a revolving
credit facility of up to $5.5m (2013: $5.5m), depending on the
level of working capital and a new 5 year loan of $0.5m relating to
the metalliser. At 31 March 2014, interest rates were 3.5%. The
total debt outstanding is subject to a quarterly covenant
obligation relating to Fixed Costs Cover. During the year to 31
March 2014 the US business met all its covenant obligations. The
revolving credit facility is secured on working capital to the
value of GBP5,189,000 (2013: GBP5,861,000) and the loans over
certain property, plant and equipment.
9. Pensions and other post-retirement benefits
The assets and liabilities of the defined benefit schemes
are:
At 31 March 2014
United Kingdom United States Total
GBP'000 GBP'000 GBP'000
------------------------------------ ----------------------- ------------- ---------
Equities 40,485 918 41,403
Bonds 20,981 1,106 22,087
Hedge funds 11,105 - 11,105
Property 7,384 63 7,447
Cash 56 - 56
------------------------------------ ----------------------- ------------- ---------
Fair value of scheme assets 80,011 2,087 82,098
Present value of scheme liabilities (92,631) (2,831) (95,462)
------------------------------------ ----------------------- ------------- ---------
Net pension liability before
deferred tax (12,620) (744) (13,364)
------------------------------------ ----------------------- ------------- ---------
At 31 March 2013
United Kingdom United 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 before
deferred tax (12,323) (1,026) (13,349)
------------------------------------ ----------------------- ------------- ---------
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
2014 2013 2014 2013
% % % %
------------------------------- -------- -------- -------- --------
Rate of increase in pensions
in payment 2.35 2.35
Rate of increase to deferred
pensions 2.35 2.35
Inflation - CPI 2.35 2.35
Discount rate 4.40 4.30 4.50 4.25
Post-retirement mortality
(in years):
Member age 65 (current life
expectancy) - male 20.9 20.3
Member age 65 (current life
expectancy) - female 23.1 22.3
Member age 45 (life expectancy
at 65) - male 22.7 22.0
Member age 45 (life expectancy
at 65) - female 25.0 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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