RNS No 6576n
CREST PACKAGING PLC
21st July 1997
CREST PACKAGING plc
Preliminary Results for the year ended 30 April 1997
Crest Packaging plc ("Crest"), the flexible packaging and
folding carton manufacturer, announces Preliminary Results for
the year ended 30 April 1997.
Highlights
1997 1996 % Change
Turnover #50.4m #48.0m +5%
Operating profit before
restructuring costs #4.2m #3.3m +27%
Profit on ordinary activities
before tax #3.8m #3.2m +19%
Earnings per share
- before restructuring costs 8.3p 6.2p +34%
- basic 7.8p 6.2p +26%
Dividend per share
- final 2.75p 2.75p -
- total 4.125p 4.125p -
* Cartons Division grew significantly in terms of turnover
and profitability
- Turnover up 19% to #20.9m
- Operating profit was #2.1m compared with #0.7m in 1996
* Flexible Packaging market remains competitive and the
strength of sterling adversely affected results
- Turnover down 3% to #29.5m
- Operating profit was #2.7m compared with #3.2m in 1996
* Acquisition of Crest Chapman at year end for a cash
consideration of #3.8m
- Provision for restructuring costs - #350,000
* #4.5m investment in new equipment in Flexible Packaging
and Cartons to develop specialist market opportunities, two
and a half times the level of depreciation
Commenting on future prospects, Ian Tegner, Chairman, said:
"While Crest continues to make progress and expand, the
pressures created by the intensely competitive market
exacerbated by the current level of sterling against European
currencies are considerable. Furthermore we face no mean
challenge in turning round the Chapman acquisition from its
past loss-making and in generating an acceptable rate of
return on the purchase price. But we have confidence in the
potential of our aggressive investment in modern equipment and
our hard-earned position in the market place, based on skill,
quality and service."
For further information please contact:
Crest Packaging plc 01634 234444
Rodney Webb, Managing Director
Michael Kenny, Finance Director
Square Mile Communications Ltd 0171 583 4567
Susan Ellis/Louise Inwood
21 July 1997
CREST PACKAGING plc
Preliminary Results for the year ended 30 April 1997
Chairman's Statement
Results
Whilst the Packaging Industry has remained intensely
competitive throughout the past year, Group turnover grew by
5% to #50.4 million from #48.0 million. Operating profit
before provision for restructuring costs increased by 27% to
#4.2 million from #3.3 million which is an extremely
satisfying result, especially bearing in mind industry
conditions.
The balance of contribution to growth between our two
divisions was, however, reversed this year as Cartons,
operating predominantly in a UK market, and building strongly
on the investment of recent years, grew its profitability out
of a significant increase in turnover. Conversely Flexible
Packaging, which contributed the larger share of the previous
year's profits, operates in a pan-European market, where the
recent strength of sterling has created extreme pressure on
prices and margins on the 23% of its turnover which is
exported. The adverse impact of this has only partly been
offset by the benefits of the new Cerutti Gravure Press, which
came fully on stream in November 1996, and has enabled us to
focus on more complex, value added products.
Thus the operating margin of Flexible Packaging was reduced to
9.0% as compared with 10.4% in the previous year. Cartons, on
the other hand, increased its operating margin to 10.2% from
3.7%.
Profits before provision for restructuring costs and tax
increased to #4.2 million from #3.2 million, and after tax to
#3.2 million from #2.5 million. The tax charge of 18.2%
reflects the final settlement of liabilities on the sale of
property in 1993 and is more fully explained in the Financial
Review and the notes attached.
Strategic Development
For some time Crest has been looking to grow through
acquisition and to attain a greater presence in its markets.
We therefore took the opportunity to buy, on 30 April 1997,
the Wellingborough based Chapman business from Rexam. In
addition to its main business in Cartons, Chapman also has a
useful niche business in gravure work complementary to our own
flexible products.
The total investment in the Chapman business including costs
is #4.0 million. Assets acquired amount to #4.2 million, and
the discount reflects in part the need for substantial
restructuring and integration. A provision of #350,000 has
been charged against 1997 profits to reflect the estimated
costs involved in restructuring the Group.
Investment
Following the introduction of the Cerutti Gravure Press,
Flexible Packaging has focused on development of specialist
market opportunities. Investment has been authorised for the
expansion of our sophisticated extrusion capacity and in
pouchmaking for luxury foods.
Cartons has continued its investment of recent years with a
spend of #3.0 million in 1996/7. Its current focus is on
integration and improvement in efficiency of the Chapman
business.
Financial Position
With cashflow from operating activities of #7.2 million the
financial position of the Group remains strong with gearing of
23%, allowing continued investment.
Dividend
Our basic policy is to seek to maintain cover of two times for
our dividends over a period of years and this leads your Board
to recommend maintaining the total dividend of 4.125p per
share. The final dividend of 2.75p per share will be paid on
15 September 1997 to shareholders on the register on 15 August
1997.
The Board and Management
Bert Bowen, who has been with the Company (and its predecessor
Bowater businesses) for 18 years, decided to take early
retirement effective 30 June 1997. We are deeply grateful to
Bert for the significant part he has played in the development
of Crest as a major force in the flexible packaging industry,
and we wish him a long, active and happy retirement.
Bert Harman has assumed sole main Board responsibility for
Flexible, where production is now under Ian Curtis, who joined
us in July. At Cartons Roy Cook has taken additional
responsibility for Chapman, and has been joined by Paul
Goldman as divisional sales director.
All management and employees deserve our gratitude for the
vigour, skill and effectiveness with which they have met the
challenges of the past year.
Outlook
While Crest continues to make progress and expand, the
pressures created by the intensely competitive market
exacerbated by the current level of sterling against European
currencies are considerable. Furthermore we face no mean
challenge in turning round the Chapman acquisition from its
past loss-making and in generating an acceptable rate of
return on the purchase price. But we have confidence in the
potential of our aggressive investment in modern equipment and
our hard-earned position in the market place, based on skill,
quality and service.
Ian Tegner
Chairman
Managing Director's Review
The much improved result of the Group has been achieved at a
time when the Packaging Industry has produced a range of
disappointing results. The 27% increase in operating profit
before restructuring costs with the tax charge at 18.2%
results in an increase of 34% in earnings per share at 8.3p
(1996: 6.2p).
Our Cartons division is reaping the rewards of one of the
largest investment programmes in this industry, in relation to
its size. As a result the division has the ability to produce
more volume extremely efficiently and meet the needs of the
marketplace.
Flexible Packaging suffered, along with many other companies,
from the dramatic strengthening of sterling occurring over
such a short period. This put considerable pressure on margins
in the export market and in some cases volume has been lost.
Our policy of investing in the latest equipment has continued
in the year with expenditure at two and a half times the level
of depreciation. This was entirely funded by cash generated
by the businesses.
Flexible Packaging Division - Trading Review
Flexible Packaging experienced a difficult year, with turnover
reducing by 3% to #29.5 million (1996: #30.5 million). The
reduction in turnover was almost entirely due to the strength
of sterling referred to above, impacting on selling prices and
margins and reducing export sales to #6.8 million (1996: #7.6
million).
The continuing trend of smaller orders had an adverse impact
on operating costs although contributing to an increase in
added value.
This trend of more work content with static volumes and
adverse exchange rates had a negative impact on profitability,
with operating profit falling to #2.7 million in the year from
#3.2 million in 1996.
The Flexible Packaging market remains very competitive,
although the full year effect of the new 10 unit quick change
Cerutti press together with further investment in non print
equipment planned for 1997/98 will have an impact in the
coming year.
The challenges for the year ahead include a further tightening
of control over operating costs, coupled with exploiting the
sales opportunities afforded by recent and planned capital
expenditure.
During the first half year, investigations to determine which
method we use for abatement of VOC emissions will be
completed, in preparation for the December 1998 deadline.
Cartons Division -Trading Review
1996/97 has been an extremely successful year for the Cartons
business. Turnover climbed by 19% to #20.9 million from #17.5
million resulting in an operating profit of #2.1 million
(1996: #0.7 million). Return on sales was consequently 10.2%.
The development of supplier partnership arrangements with both
existing and new customers enabled the Company to attract
increased volume. New business is an essential feature of the
strategy to grow in size and capability within the cartons
market.
Part of our strategy is investment led, with our third Roland
R700 presses installed in February this year. This, together
with ancillary downstream equipment, provides the base for one
of the most productive and efficient carton operations in the
UK, able to compete with the best - a fundamental feature of
the food market it serves.
The Company was awarded Hygiene accreditation to the standards
laid down by the Royal Society of Hygiene in November 1996.
This is also regarded as a necessity to satisfy the stringent
demands of the food industry.
Acquisition
On 30 April 1997 we acquired the business of Rexam Cartons and
Print South at Wellingborough, now called Crest Chapman, for
#4.0 million including costs. The business had assets of #4.2
million and sales in the last calendar year of #12.7 million.
This comprised primarily litho printed cartons, of the type
made at Gillingham, and a niche operation of gravure printed
tea tags and tea sachets.
The business was losing substantial sums up to the time of
acquisition but reductions in costs and benefits of combining
with Gillingham are expected to eliminate the losses this
year. Overall cost advantages of the acquisition will come
from increasing the scale of the cartons business with two
sites, increased buying power, and efficient use of the
resources of both businesses.
The enlarged group is capitalising on the joint strengths and
technical resources of the two operations to provide greater
flexibility in serving the increasingly sophisticated and
demanding marketplace.
Group Financial Review
Asset Base
The acquisition of Crest Chapman was for an initial
consideration of #3.8 million, which is subject to adjustment
based on the net assets at 30 April 1997. These have been
included in our Balance Sheet, provisionally at a fair value
of #4.2 million, which is made up of freehold land and
buildings of #0.8 million, plant and machinery of #1.4
million, and net current assets of #2.0 million. Negotiations
are in progress with Rexam to agree the value of net current
assets which will form the basis of any revisions.
Investment in new equipment at Gillingham in the year totalled
#4.5 million compared with depreciation of #1.8 million. This
included the third Roland litho press in three years, a Bobst
Cutting and Creasing press and a Jagenburg gluer for Cartons
and the balance of the cost of the Cerutti gravure press for
Flexible Packaging.
Funding
There was no increase in net debt in the year from the
original activities in spite of investment in new equipment of
#4.5 million. Net debt did increase in the year due to the
acquisition of Crest Chapman, but the gearing at the year end
was still only 23 %.
The interest charge fell to #40,000 (1996: #124,000) after
capitalising interest costs of #42,000 (1996: #112,000).
New finance leases of #2.1 million were entered into in the
year to run over a 7 year period.
The main funding requirements are met by a variable rate group
overdraft facility. Alternative resources are regularly
assessed and may be used if they represent beneficial terms.
Working Capital
The working capital in the original businesses fell due to
tighter control of debtors, a slight improvement in stocks and
a reduction in creditors.
Taxation
The tax charge at 18.2% of pre-tax profit is after recognising
the last refund expected from the settlement of outstanding
tax matters arising from the sale of land to Tesco in 1993 but
does not include the expected release from the deferred tax
provision of #345,000 resulting from the Chancellor's proposed
reduction in the corporation tax rate. This will be taken in
1998 when the rate change is enacted.
Rodney A J Webb
Managing Director
For further information please contact:
Crest Packaging plc 01634 234444
Rodney Webb, Managing Director
Michael Kenny, Finance Director
Square Mile Communications Ltd 0171 583 4567
Susan Ellis/Louise Inwood
Crest Packaging plc
Group Profit and Loss Account
for the year ended 30 April 1997
1997 1996
#'000 #'000
Turnover - continuing operations 50,398 48,005
Change in stocks of finished goods
and work in progress 670 138
Own work capitalised 185 225
51,253 48,368
Other operating income 216 207
51,469 48,575
Raw materials and consumables 27,597 26,724
Other external charges 6,559 6,102
Staff costs 11,367 10,960
Restructuring costs 350 -
Total staff costs 11,717 10,960
Depreciation 1,752 1,491
Operating profit
- before restructuring costs 4,194 3,298
- restructuring costs 350 -
Total operating profit
- continuing operations 3,844 3,298
Net interest payable (40) (124)
Profit on ordinary activities
before taxation 3,804 3,174
Taxation (694) (673)
Profit on ordinary activities
after taxation 3,110 2,501
Dividends 1,653 1,653
Profit retained for the year 1,457 848
Earnings per share
- before restructuring costs 8.3p 6.2p
- basic 7.8p 6.2p
Crest Packaging plc
Group Balance Sheet as at 30 April 1997
1997 1996
#'000 #'000
Fixed assets:
Tangible assets 27,066 22,104
Current assets:
Stocks 7,800 6,493
Debtors 13,957 11,437
21,757 17,930
Creditors: amounts falling due
within one year 17,878 13,084
Net current assets 3,879 4,846
Total assets less current
liabilities 30,945 26,950
Creditors: amounts falling due after
more than one year 2,749 1,046
Provisions for liabilities and charges:
Deferred tax 5,749 5,161
22,447 20,743
Capital and reserves:
Called-up share capital 2,004 2,004
Profit and loss account 20,196 18,739
Other reserves 247 -
Equity shareholders' funds 22,447 20,743
Crest Packaging plc
Cashflow Statement for the year ended 30 April 1997
1997 1996
Net cashflow from operating
activities 7,198 3,303
Returns on investments and
servicing of finance
Net interest paid (87) (89)
Interest paid on finance leases (99) (43)
(186) (132)
Taxation
Net corporation tax (paid)/received (771) 787
Capital expenditure and financial
investment
Purchase of tangible fixed assets (4,532) (3,953)
Proceeds from sale of tangible
fixed assets 72 63
(4,460) (3,890)
Acquisitions and disposals (3,800) 0
Equity dividends paid (1,653) (1,652)
Cash outflow before management of
liquid resources and financing (3,672) (1,584)
Financing
Issue of ordinary shares 0 2
Net cash inflows from finance
leases 1,951 1,190
Decrease in cash in the period (1,721) (392)
NOTES:
1. The final dividend will be paid on 15 September 1997 to
shareholders on the register on 15 August 1997.
2. Corporation tax on taxable profit for the current year's
trading at #820,000 represents a charge of 20% against
the profit before tax. That combines with the increase
in the provision for deferred tax relating to the current
year's trading of #459,000 to reflect the tax charged to
the P&L for the Group.
In addition, a credit of #714,000 follows the previous
year's credit of #1,656,000 which was mainly allocated to
the provision for deferred tax. An additional #130,000
has been transferred to the deferred tax provision in
respect of prior years.
3. Earnings per share.
Before restructuring costs: The calculation of basic
earnings per ordinary share before restructuring costs is
based on the operating profit before restructuring costs
(#4,194,000) less net interest payable (#40,000) and the
tax charge relating to that profit (#810,000). The
resultant profit after tax #3,344,000 representing the
profit generated by the Group in the ordinary course of
business (1996: #2,501,000) is compared to the weighted
average number of ordinary shares in issue during the
year of 40,079,998 (1996: 40,053,313), and is not
materially different when calculated on a fully diluted
basis.
After restructuring costs: The basic earnings per share
is calculated by comparing the profit after tax
#3,110,000 to the weighted average number of ordinary
shares in issue during the year of 40,079,998 (1996:
40,053,131), and is not materially different when
calculated on a fully diluted basis.
4. The figures for the year ended 30 April 1997 are
unaudited and do not constitute full accounts within the
meaning of S.240 of the Companies Act 1985. The figures
for the year ended 30 April 1996 have been extracted from
the full accounts of that year which have been delivered
to the Registrar of Companies and on which the auditors
issued and unqualified report.
5. The Annual Report and Accounts will be sent to
shareholders in due course. Further copies will be
available from the Company Secretary, Crest Packaging
plc, Courteney Road, Gillingham, Kent ME8 0RX.
END
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