RNS No 5809j
CREST PACKAGING PLC
21st July 1998
Crest Packaging plc
Preliminary Results for the year ended 30 April 1998
Crest Packaging plc ("Crest"), the flexible packaging and
folding carton manufacturer, announces Preliminary Results for
the year ended 30 April 1998.
1998 1997
Turnover #60.9m #50.4m
Operating profit before restructuring costs #3.5m #4.2m
Profit on ordinary activities before tax #2.7m #3.8m
Earnings per share 5.5p 7.8p
Dividend per share - final 1.375p 2.75p
- total 2.75p 4.125p
* Strong performance from Cartons division including first
full year contribution from Crest Chapman
* Review of Flexible Packaging division to help achieve
levels of efficiency needed to compete successfully in
difficult marketplace
* Ongoing strength of Sterling continues to affect Group
* Significant investment in modern equipment to provide
further capacity for growth
Ian Tegner, Chairman of Crest, commented:
"The past financial year has been a difficult one for the
Group. 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 remain considerable.
"The restructured management team which has already been
successful in developing profitable expansion of the Cartons
business is now concentrating on these challenges. The recent
restructuring in Flexible Packaging is one step towards
generating an acceptable rate of return on the assets employed
in the business".
For further information, please contact:
Crest Packaging plc 01634 234444
Roy Cook, Managing Director
Mike Kenny, Deputy Managing Director
Square Mile Communications Ltd 0171 583 4567
Louise Robson
Crest Packaging plc
Preliminary Results for the year ended 30 April 1998
CHAIRMAN'S STATEMENT
Results
Following the acquisition of Crest Chapman on 30 April 1997,
the total Group turnover has increased by
20.8% to #60.9 million from #50.4 million. The ongoing
business excluding Crest Chapman, however, shows
a decline of 2.1% to #49.3 million.
Within the Cartons division, turnover, including the first
full year contribution from Crest Chapman, increased by
62.1% to #33.8 million from #20.9 million.
The ongoing business increased by 6.6% to #22.2 million.
Turnover in Flexible Packaging has declined to #27.1 million
from #29.5 million, a reduction of 8.3%.
Operating profit before restructuring costs was #3.5 million
compared to #4.2 million. Operating margins in both divisions
reduced from the previous year's levels with Flexible
Packaging now 6.6% compared to 9.0% and Cartons' ongoing
business reducing to 7.9% reducing from 10.2%. After the
integration of Crest Chapman, Cartons combined margin
was 6.9%.
The main reasons behind the reduction in
both turnover and margins were the continuing strength of
Sterling in our pan-European markets leading to the loss of
hard won business in export markets and the impact of
integrating Crest Chapman. In response to these pressures
there has been a further restructuring in the Flexible
Packaging division and a charge of #250,000 has been made
against the the profits in the year just ended. This will
result in savings of some #450,000 for the 1998/99 year.
The interest charge of #562,000 compared to #40,000 reflects
the acquisition of Crest Chapman and the investment in
new equipment in both Flexible Packaging and Cartons
during 1996/97 and 1997/98.
Profits before tax reduced to #2.7 million compared to #3.8
million and after tax to #2.2 million compared to #3.1
million. The tax charge of 18.5% reflects the release of a
proportion of the deferred tax provision following the
reduction in the Corporation tax rate from 33% to 31%.
A complete explanation of the tax charge is included in the
Managing Director's Review.
Crest Chapman
The acquisition of Crest Chapman from Rexam was completed on
30 April 1997. Refocusing of the business, with changes in
management and improved mix, including transfer of some
business from the ongoing Cartons division, has improved
efficiencies and productivity and with realistic asset
values this has resulted in a significant improvement in
performance. An operating profit of #639,000 was achieved
on third party turnover of #11.6 million in Crest's ownership.
The preceding full financial year reported a loss before
interest of #919,000 on turnover of #12.7 million.
Investment
The continued progress of the Cartons business supported the
decision to invest in a further new Roland 700 and ancillary
equipment at a cost of #2 million. This will provide
further capacity for the continued growth of the Cartons
division. Following installation in March, Crest is the only
carton converter with four Roland 700 machines in the UK
and is well established as a modern progressive supplier to
the food industry.
The Flexible Packaging business has placed an order for a
thermal oxidiser to comply with the obligations on VOC
emissions imposed by the Environmental Protection Act at a cost
of #700,000. In addition, the business has been
consolidating production onto the new 10 unit Cerutti gravure
press commissioned in 1996/97 and additional investment
opportunities continue to be assessed in order to drive greater
efficiencies and improve quality within environmental obligations.
Financial Position
After the recent investments referred to above, the
level of gearing remains satisfactory at #7.8 million,
33.7% (1997: #5.3 million, 23%) and the business has a
solid base to continue to invest for the future.
Dividend
Our basic basic policy has been to seek cover of
two times for our dividends over a period of years and this
policy has been maintained since flotation. However profits
have not improved over that period as we had hoped and we have
concluded that we can no longer maintain the level of dividend
which has been paid for the last three years. In view
of the current level of profits the Board recommends a total
dividend for the year of 2.75p, a reduction of 33% as as
compared with previous years.
The final dividend of 1.375p per share will be paid on 1
October 1998 to shareholders on the register on 7 September
1998.
The Board and Management
As announced at the Interim Results in December, Bert Harman
retired at the end of March 1998 after thirty years with the
Group. He played a major role in the successful development
of the Flexible Packaging division and we wish him a long
and happy retirement.
From 1 January 1998 Rodney Webb moved to a part-time role
as Deputy Chairman concentrating on Group and strategic
matters and Roy Cook became Group Managing Director.
Michael Kenny became Deputy Managing Director and retained
responsibility for Finance and continues as Company Secretary.
All management and employees deserve our gratitude for the
vigour, skill and effectiveness with which they have met the
very considerable challenges of the past year.
Outlook
We continue to remain confident that our investment in modern
equipment is the right strategy to reinforce our well-earned
position in the marketplace.
The past financial year has been a difficult one for the
Group. 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 remain considerable.
The restructured management team, which has already been
successful in developing profitable expansion of the
Cartons business, is now concentrating on these challenges.
The recent restructuring in Flexible Packaging is one step
towards generating an acceptable rate of return on the assets
employed in the business.
Ian Tegner
Chairman
MANAGING DIRECTOR'S REVIEW
This has been a year of significant change for Crest
Packaging, involving the integration of a new business into
the Group with the new issues presented in dealing with a
second site and my succession to the role of Managing Director
that has resulted in my making this report for the first time.
Acquiring Crest Chapman has proved to be a very successful
step and the integration of the combined Cartons division is
continuing. Further opportunities to develop both divisions
are actively considered but such a step will only be
undertaken where there is a clear rationale and justification
for the investment that is expected to improve the return on
assets of the overall Group.
Perhaps one of the most significant events for the overall
business has been the continued growth in importance of the
Cartons division to the Group. For the first time in many
years the sales turnover and profit of the Cartons division
has exceeded that of Flexible Packaging.
The Cartons division has undertaken one of the largest
investment programmes in this industry, in relation to its
size, and is now well placed as one of the leading carton
converters in the country.
An assessment of the strategic potential and market
positioning of the Flexible Packaging division is currently
being undertaken to include a reassessment of the ongoing
investment programme. Notwithstanding this the division is
well equipped to produce more volume extremely efficiently and
meet the needs of the existing marketplace.
Flexible Packaging Division
Trading Review
The strength of Sterling during the past year has meant that
it has not been possible to generate the desired returns from
the pan-European flexible packaging market. Against that
background turnover reduced to #27.1 million from #29.5
million including a drop of #1.4 million in Flexible Packaging
export sales.
Divisional operating profit reduced to #1.8 million from #2.7
million, representing a return on sales of 6.6% compared to
9.0% achieved in the year to April 1997.
Following my appointment in January 1998 a review of the
market positioning, asset base and manning levels of the
business commenced. A restructuring was finalised with the
workforce early in May which is one step towards achieving the
level of efficiency needed to continue to successfully compete
in this market.
Additional investments are being considered to improve the
productivity and responsiveness of the business to the demands
and expectations of the customer base in a cost effective
manner. Investments will continue to be made if the market
positioning of the business and the financial returns to be
derived therefrom are anticipated to be satisfactory.
To meet the obligations of the Environmental Protection Act to
restrict the emissions of Volatile Organic Compounds into the
atmosphere an oxidiser has been ordered and is expected to be
installed before the end of 1998. This is a similar solution
to that adopted by most of the flexible packaging industry.
Cartons Division
Trading Review
The Cartons division has continued to grow and with the
acquisition of Crest Chapman on 30 April 1997 turnover has
increased overall to #33.8 million, an increase of 62.1%.
Profitability has also grown to #2.3 million from #2.1 million
including the contribution from Crest Chapman.
Return on sales was 6.9% compared to the exceptional return of
10.2% achieved in the year to April 1997.
The division's capacity and flexibility has been further
expanded with the acquisition of Crest Chapman. The
successful turnaround of the business previously owned by
Rexam has given the Cartons division, with the benefit of a
second site, the ability to service a substantially increased
level of business.
With the investment in a fourth Roland 700 and ancillary
equipment commissioned in March 1998 production can now be
allocated in partnership with the customer base to the most
appropriate location to optimise production efficiencies and
customer service levels.
Further investment in these businesses is expected to be
modest this year as the integration process becomes fully
completed and the anticipated ongoing growth is successfully
absorbed.
Crest Chapman
The performance of this business continued to improve in the
second half of the year producing an operating profit of
#639,000 on third party turnover of #11.6 million compared to
#264,000 of #5.8 million in the first half.
In the full financial year prior to acquisition the business
achieved sales of #12.7 million and generated a loss of
#919,000. Part of this improvement has been achieved by
improving efficiency and reducing manpower. The number of
people employed in the business reduced to 124 at the end of
the year from the initial 158 on acquisition.
This business is now integrated into the Cartons division and
its performance is included within the results for that
division.
GROUP FINANCIAL REVIEW
Asset Base
Investment during the year totalled #3.7 million including #2
million on the fourth new Roland 700 litho printing machine
and related cutting and creasing equipment, installed in March
and April 1998. Other items acquired during the year included
a new pouchmaking machine and new slitting equipment to
improve flexibility and capability.
The acquisition of Crest Chapman from Rexam was completed on
30 April 1997 at an initial cost of #4 million for assets
provisionally valued at #4.2 million. A modest reduction of
#129,000 in the acquisition cost was negotiated with Rexam
based on lower asset values at the time of completion than had
been anticipated and a restatement of the fair values was
undertaken. The final asset values acquired were freehold
land and buildings of #0.8 million plant and machinery of #1.4
million and net current assets of #1.6 million totalling #3.8
million. The final cost of acquisition was also #3.8 million
resulting in the Capital Reserve of #247,000, provisionally
created last year, being eliminated.
A customer of that business prior to the acquisition has
disputed the sums due from them included in the balance sheet
at that time. This has led to a legal claim being issued
against that customer and Rexam for a sum in excess of #0.5
million. The final value of the assets acquired will
inevitably depend of the outcome of that claim. Any variation
in the final sum received, together with related costs not
recovered through the claim, will be reflected through the
Profit and Loss account in future periods.
Funding
Net debt in the year increased to #7.8 million, 33% from #5.3
million, 23% at April 1997 due to the reduction in funds
generated from operations and the continuing investment
programme above.
The interest charge rose to #562,000 from #40,000 in the year
to April 1997. In 1997 interest costs of #42,000 relating to
the investment in the 10 unit Cerutti gravure press were
capitalised in line with Group policy. No such projects were
in hand during the year to April 1998 and no capitalisation of
interest has occurred. The increase in interest reflects the
investment of #3.8 million in acquiring Crest Chapman on 30
April 1997 and the significant investment in new machinery in
1996/97 and 1997/98 totalling #8.2 million, including the
commissioning in March and April 1998 of the fourth Roland 700
and related equipment.
New finance leases of #1.8 million were entered into in the
year to run over a 7 year period and Barclays Bank plc
implemented an acceptance credit facility which was utilised
to the extent of #2 million at the year end.
The main funding requirements are now met by finance leases on
specific plant and machinery and a variable rate group
overdraft and acceptance credit facility. Alternative sources
are regularly assessed and may be used if they represent
beneficial terms.
Working Capital
Working capital in the businesses was temporarily extended due
to the dispute with a customer acquired from Rexam referred to
above, extended credit provided to a customer who has made a
product liability claim against Crest which is currently being
investigated by the insurers and staff recruitment
difficulties which have now been addressed.
Taxation
The tax charge is based on a current tax charge of 12.6%
reflecting the extensive investment programme undertaken over
recent years. This is the cash liability that the Group would
expect to pay to the Inland Revenue this year. Adjustment for
current tax in prior years and a provision for deferred tax on
the current year's trading totalling 19.5%, when combined
with the current tax liability, give a headline charge of
32.1%.
The reduction in the future tax rate to 31% allows a
compensating #367,000 release of the deferred tax provision
which had been previously reserved at 33% that reduces the
charge in the year to April 1998 to 18.5%. A further
#200,000 will be released when the tax rate falls to 30%.
Roy Cook
Managing Director
For further information, please contact:
Crest Packaging plc 01634 234444
Roy Cook, Managing Director
Mike Kenny, Deputy Managing Director
Square Mile Communications Ltd 0171 583 4567
Louise Robson
Crest Packaging plc
Group Profit and Loss Account
For the Year Ended 30 April 1998
1998 1997
#'000 #'000
Turnover
- from continuing operations 49,322 50,398
- from acquisitions 11,573 -
------- -------
Total turnover 60,895 50,398
Change in stocks of finished goods
and work in progress 413 670
Own work capitalised 75 185
------- -------
61,383 51,253
Other operating income 281 216
------- -------
61,664 51,469
------- -------
Raw materials and consumables 31,737 27,597
Other external charges 9,474 6,559
Staff costs 14,685 11,367
Restructuring costs 250 350
------- -------
Total staff costs 14,935 11,717
Depreciation 2,259 1,752
------- -------
Operating profit
- from continuing operations 2,620 3,844
- from acquisitions 639 -
------- -------
Total operating profit 3,259 3,844
Net interest payable 562 40
------- -------
Profit on ordinary activities
before taxation 2,697 3,804
Taxation 500 694
------- -------
Profit on ordinary activities
after taxation 2,197 3,110
Dividends 1,102 1,653
------- -------
Profit retained for the year 1,095 1,457
------- -------
Earnings per share 5.5p 7.8p
Crest Packaging plc
Group Balance Sheet
As at 30 April 1998
1998 1997
#'000 #'000
Fixed assets:
Tangible assets 28,367 27,066
------- -------
Current assets:
Stocks 8,648 7,800
Debtors 15,088 13,957
------- -------
23,736 21,757
Creditors: amounts falling due
within one year 18,803 17,878
------- -------
Net current assets 4,933 3,879
------- -------
Total assets less current liabilities 33,300 30,945
Creditors: amounts falling due
after more than one year 3,935 2,749
Provisions for liabilities and charges:
Deferred tax 6,070 5,749
------- -------
23,295 22,447
------- -------
Capital and reserves:
Called-up share capital 2,004 2,004
Other reserves - 247
Profit and loss account 21,291 20,196
------- -------
Equity shareholders' funds 23,295 22,447
------- -------
Crest Packaging plc
Group Cash Flow Statement
For the Year Ended 30 April 1998
1998 1997
#'000 #'000
Net cash inflow from operating activities 2,759 7,200
------- -------
Returns on investments and servicing
of finance:
Net interest paid (182) (87)
Interest paid on finance leases (255) (99)
------- -------
(437) (186)
Taxation:
Net corporation tax received/(paid) 145 (773)
------- -------
Capital expenditure and financial
investment:
Purchase of tangible fixed assets (1,888) (4,532)
Proceeds from sales of tangible
fixed assets 169 72
------- -------
(1,719) (4,460)
Acquisitions 129 (3,800)
Equity dividends paid (1,653) (1,653)
------- -------
Cash outflow before financing (776) (3,672)
Financing:
Issue of ordinary shares - -
Net cash inflows from finance leases (388) 1,951
Issue of acceptance credits 2,000 -
------- -------
Increase/(decrease) in cash in the year 836 (1,721)
------- -------
Segmental analysis
Manufacture and printing Manufacture and
of flexible packaging printing of cartons Total Total
1998 1997 1998 1997 1998 1997
#'000 #'000 #'000 #'000 #'000 #'000
Turnover:
Sales to
third
parties 27,078 29,540 33,817 20,858 60,895 50,398
------ ------ ------ ------ ------ ------
Profit:
Segment
profit 1,780 2,656 2,327 2,128 4,107 4,784
Restructuring costs (250) (350)
Common costs (598) (590)
------ ------
Operating profit 3,259 3,844
Net interest payable (562) (40)
------ ------
Profit on ordinary
activities before tax 2,697 3,804
------ ------
Turnover arose wholly in the United Kingdom and
comprises sales in the following geographical 1998 1997
markets:
#'000 #'000
By destination:
United Kingdom 53,457 43,248
Other European countries 4,586 5,513
Rest of the world 2,852 1,637
------ ------
60,895 50,398
------ ------
Notes:
1. The final dividend will be paid on 1 October 1998 to
shareholders on the register on 7 September 1998.
2. Earnings per share
The basic earnings per share is calculated by comparing the
profit after tax #2,197,000 to the weighted average number
of ordinary shares in issue during the year of 40,088,302
(1997: 40,079,998) and is not materially different when
calculated on a fully diluted basis.
3. The figures for the year ended 30 April 1998 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 1997 have been extracted from the full
accounts for of that year which have been delivered to the
Registrar of Companies and on which the auditors issued an
unqualified report.
4. 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
FR FCDCNODKKAOB
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