RNS Number:9048R
Inveresk PLC
29 September 2005
Inveresk PLC
Interim Results for the six months ended 30 June 2005
HIGHLIGHTS
* Profit before interest increased to #4.576m (2004 #1.254m) pursuant to the
sale of the Gemini brand on 9 June 2005.
* Operating loss of #109,000 (2004 profit of #483,000) for the six months
to 30 June 2005 against a background of highly depressed markets throughout
Continental Europe and further afield. Sales margins remained under pressure
throughout the period.
* Interest costs of #536,000 (2004 #524,000) are in line with forecast and
are expected to decline sharply due to the significant reduction of debt
following the sale of Gemini on 9 June 2005 and the subsequent receipt of
Service Revenue from the buyers of the Gemini brand.
* Costs generally under control save for oil based raw materials and energy
costs which have risen significantly.
* Pulp prices although a little higher than the comparable period in 2004
are in line with expectations.
* New management installed at St Cuthberts designed to improve efficiencies
and penetrate new markets for pre impregnated decor based papers. Greater
emphasis on active selling and marketing on a global basis.
* Successful introduction of new range of artist pads/blocks well received
by market.
* Implementation of run down plan at Carrongrove Mill in Denny,
Stirlingshire progressing satisfactorily towards closure on or around 9
November 2005 at which date the business will transfer to Tullis Russell at
Markinch, Glenrothes.
* Pending the closure of the Carrongrove Mill in November 2005 a new asset
realisation programme will be introduced in order to sell all plant and
equipment to international buyers and investigate alternative uses for the
38 acre site which will be available for redevelopment close to the motorway
network connecting Glasgow and Edinburgh and situated only a few miles from
the City of Stirling.
* The asset realisation programme at Caldwells Mill in Inverkeithing, Fife,
remains on track with the sale of all plant and equipment now complete in
line with budget expectations. Progress has been achieved on the development
plans for the entire Inverkeithing Bay area in consultation with the other
major local landowners and with Fife Council with whom regular dialogue takes
place. A major scheme for the regeneration of this substantial area of Fife
is being formulated in conjunction with the Council's long term masterplan
for the community.
"The paper industry remains in a highly depressed state. Shareholders will
recognise that your Board has been convinced for some time of the need for
industry consolidation. It was for good sound commercial reasons that we sold
our leading Gemini brand to the highly respected Scottish papermakers, Tullis
Russell, in Markinch, Glenrothes, and the positive financial impact on our half
year results with further cash generation to come in the second half of the year
is demonstrated by the increase in net assets per share. We remain totally
committed to the elimination of all debt and the realisation of our real estate
portfolio which will in time enhance shareholder value."
Alan Walker, Chief Executive Officer Office: 020 7240 1234
Mobile: 07900 445623
CHAIRMAN'S STATEMENT
Results
The first six months of 2005 has been a very difficult period for the paper
industry with most producers experiencing margin pressure with low sales prices
and increased raw material and energy costs. Our business remains highly geared
to the major European economies and although the volume of tonnes sold in the
period increased by 6.1% year on year to 22,451 tonnes, margins remained
depressed with sales prices in real terms declining and with unrelenting
increases in oil related raw materials and spiralling energy costs. Currency
movements have been relatively stable throughout the period with no major impact
on profits. Turnover, of which more than 62% is exported, in the six months to
30 June 2005 increased by 2.8% to #20.545m from #19.986m in the first six months
of the previous year.
However, as a result of the announcement on 9 June 2005 in which we advised that
the Gemini brand had been sold for #5m before professional costs plus further
Service Revenue of #8m and a carried interest of up to #2m depending on the
level of sales tonnes achieved by the buyers from 9 November 2005 to 8 November
2006, profit before interest has increased to #4.576m compared to #1.254m in
2004. Your Board has taken the view that as the Service Revenue of #8m is being
earned and received in the second half of the year it would be prudent to
account for this in the period up to 31 December 2005 together with the
inevitable decommissioning and redundancy costs which will also be incurred in
the same period. We are pleased to report that the transitional arrangements
remain on track in every way and debt continues to fall in line with the receipt
of Service Revenue earned each month. It is anticipated that the Carrongrove
Mill will therefore close as planned at the beginning of November at which time
a new asset realisation programme will be put in place to turn the residual
asset base into cash for the continued retirement of debt and ultimate benefit
of shareholders.
The sale of the Gemini brand in June manifests the vision of your Board to play
a consolidation role within the specialty market areas in which we operate.
Faced with deeply depressed market conditions throughout the UK and Europe we
believe this strategy will ultimately deliver the best returns for shareholders
given the strength of competition and the industry's inability to increase
margin contribution on a sustainable basis.
Core Business
During the period the Company comprised:-
* The Foil, Decor, Artists and Inkjet paper business based at the St Cuthberts
Mill in Somerset.
* The Graphics Boards business based at the Carrongrove Mill, Denny,
Stirlingshire in Scotland which will close on or around 9 November 2005.
* The Company's significant land portfolio which will play an increasingly
important role in the development of the Company's future.
St Cuthberts
Over the last few years this mill has struggled to achieve full capacity
utilisation. The first half of 2005 has been no exception with volumes of foil
based furniture and decorative papers remaining static against a background of
declining sales within the furniture industry.
A significant number of initiatives have been introduced by the restructured
management team designed to promote greater levels of control and efficiency
within the production area of the mill and an increased emphasis on selling and
marketing across a wide range of international customers. This technically
driven speciality business places high demands on strategic cooperation with our
valued customers who have grown to expect from us creative ideas, quality
service and flexibility throughout all levels of our organisation.
The ongoing development of our artist and inkjet papers is very encouraging with
our principal brands, Bockingford, Saunders Waterford and Somerset enjoying
international appeal on a global basis. A new range of artist pads/blocks has
been introduced to the market and has been well received by our distributors and
customers. The sales organisation has been strengthened and plans are in place
to increase our penetration of international markets through existing and newly
appointed distributors with whom we shall continue to work closely.
Carrongrove
In simple terms it has been business as usual at Carrongrove. Volumes have
performed to better than expected levels but margins have fallen through a
combination of sales price pressure in international markets where many of the
European economies are under performing and the escalation of oil based raw
material prices and soaring energy costs. In real terms sales prices are going
backwards with margins squeezed by several percentage points and this remains
the single biggest challenge facing the paper industry at this time.
Your Board's vision has been for some time that consolidation is fundamental to
the industry's future as a whole and in the best interests of your Company now.
It is for these reasons that on 9 June 2005 we announced the sale of our Gemini
brand, which enjoys an enviable reputation throughout the UK, Europe and North
America, to highly respected paper producers, Tullis Russell of Markinch,
Glenrothes in Fife, an admired competitor within the Scottish paper industry.
For the past few months we have been working closely with Tullis Russell so as
to ensure a smooth transfer of the business in the first week of November 2005.
The transitional arrangements remain on track whilst in the meantime we continue
to produce as normal with the same levels of commitment to the provision of
service and quality to our valued customers on an international basis. The mill
continues to operate near to full capacity but has seen its operating profits
decline significantly due to the margin pressures previously referred to.
The closure of this mill in early November will be a sad event for the Company
and the local community of Denny. The Company is making every effort to assist
the workforce in gaining alternative employment within the area through
initiatives including, inter alia, out placement, executive search, counselling
and retraining programmes. A number of employees will also move into well earned
retirement at this time. We thank all who have devoted so much time and put so
much effort into the promotion of Gemini as the highly respected and
internationally recognised brand that it is today, and we wish our successors at
Tullis Russell good fortune in continuing the development of the brand into the
future.
Asset Realisation Programme
This programme was commenced in the last weeks of 2003 following the surrender
of the lease by our tenant at Caldwells Mill in Inverkeithing. As one chapter
reaches a conclusion another starts as the Carrongrove Mill is scheduled to
close in early November 2005 thereby necessitating the instigation of a new
programme to realise the assets which will be surplus to requirements after the
transfer of the Gemini business to Tullis Russell in Markinch. The principal
aims of our programme are as follows:-
* To decommission the Caldwells and Carrongrove Mills having due
regard to Health & Safety and Environmental regulations and to sell all paper
making plant and equipment for cash consideration.
* To maximise the return to shareholders through the creation of the added
value to be gained from securing planning consents for the alternative uses
that our Inverkeithing and Denny sites can be put to. Your Company's land
portfolio at these two sites totals approximately 60 acres.
Your Board is pleased to advise that all plant and equipment at the Caldwells
Mill in Inverkeithing has now been sold to international buyers who have come
from all corners of the world to purchase equipment from us. The experience
gained during this process will help greatly when we commence a similar exercise
at Carrongrove Mill in Denny just as soon as closure is effected in early
November 2005. The cash proceeds gained from the realisation programme are in
line with our expectations and have been used to reduce debt.
Shareholders are fully aware that your Company owns valuable land which formerly
comprised the Caldwells Mill located on the shoreline of the River Forth in
Inverkeithing looking southwards towards Edinburgh. This strategic site adjacent
to the Forth Road and Rail Bridges along with several other sites around
Inverkeithing Bay is the subject of detailed discussion with local landowners,
Fife Council and Scottish Enterprise. In accordance with the Council's master
plan for the area discussions are taking place on a regular basis which are
likely to have a major impact on the local community as the plan extends to
improvements in infrastructure, the environment and the social welfare of the
residents of Inverkeithing and the surrounding area within the Kingdom of Fife.
This is a medium to long term project extending to housing, business and leisure
facilities and as your Company is not a development company as such we are
actively involved in the selection of investment/development partners with whom
we can work in the future in order to promote shareholders' best interests as
well as playing a pivotal role in securing the most appropriate planning
configuration for the community as a whole and the achievement of the Council's
long term regeneration aspirations.
Finance
The Balance Sheet of the Company is in good order with net asset value per share
moving ahead strongly pursuant to the sale of the Gemini brand. It is
anticipated that shareholders' funds are likely to increase steadily as the
asset realisation programme moves into full swing in terms of land development.
The Company continues to benefit from available tax losses in excess of #20m for
set-off against future profitability. In line with improved stock market
conditions the Company's two closed pension schemes are jointly in surplus and
your Board is looking at ways and means of addressing the long term liabilities
of each scheme so as to ensure future stability and protection against the
possible effects of any economic and/or market downturn.
Interest charges at #536,000 (2004: #524,000) are more or less as expected.
Following the sale of the Gemini brand and the receipt of Service Revenue in the
period following 30 June 2005, debt is being retired at a rapid rate in line
with your Board's stated ambition to secure a debt free status as soon as
practicable.
Costs in all areas of the business remain in sharp focus although the closure of
the Carrongrove Mill will eliminate much of the business risk associated with
running a large scale industrial paper plant with all the attendant issues
determined by soaring energy costs and Government bureaucracy imposed through
statutory requirements which render British manufacturing uncompetitive in the
global markets in which we operate.
Outlook and Shareholder Value
Your Company is in the process of altering its future strategic direction as
required by market forces. By associating ourselves with the industry
consolidation which we believe to be so necessary within the paper industry and
through selling our Gemini brand, we are determined to take those actions which
are seen as necessary to eliminate inherent business risk in favour of the more
secure route to enhanced shareholder value through the opportunities afforded by
the redevelopment of the Company's land portfolio and the enhanced value so
created in a debt free company.
We remain in niche markets through our St Cuthberts Mill in Somerset where a
number of strategic options are available to us to grow and develop the two
separate businesses going forward. We shall pursue these strategic options
vigorously.
Despite the general malaise which remains prevalent within the paper industry as
a whole your Board remains confident that further progress will be achieved
during the second half of 2005 in terms of meeting our strategic objectives and
the creation of shareholder value to which we remain dedicated.
Jan Bernander, Chairman
29 September 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
26 weeks to 26 weeks to Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
Turnover 20,545 19,986 40,711
Cost of sales (17,239) (16,361) (33,824)
------------------------- ----------- ----------- -----------
Gross profit 3,306 3,625 6,887
Distribution costs (2,073) (1,808) (3,620)
Administrative expenses (1,342) (1,334) (2,656)
------------------------- ----------- ----------- -----------
Group operating (loss)/ profit (109) 483 611
Fundamental reorganisation credit - - 58
Gain/(loss) on sale and termination
of businesses 4,685 771 (100)
Gain on sale of fixed assets - - 601
------------------------- ----------- ----------- -----------
Profit before interest 4,576 1,254 1,170
Net interest payable - Group (536) (524) (1,102)
Other finance income - - 116
------------------------- ----------- ----------- -----------
Profit on ordinary activities before
taxation 4,040 730 184
Taxation on profit on ordinary - - -
activities
------------------------- ----------- ----------- -----------
Profit for the financial period 4,040 730 184
Dividends - - (360)
------------------------- ----------- ----------- -----------
Retained profit for the period 4,040 730 (176)
------------------------- ----------- ----------- -----------
Basic earnings per share 2.9 p 0.5 p 0.1 p
Diluted earnings per share 2.9 p 0.5 p 0.1 p
Earnings per share before exceptional
items (0.5) p 0.0 p (0.1) p
------------------------- ----------- ----------- -----------
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
(restated)
#'000 #'000 #'000
--------------------------- -------- ----------- -----------
Fixed assets
Tangible assets 23,440 24,210 23,980
Current assets
Stocks 4,309 4,791 4,565
Debtors 8,740 7,943 8,462
Debtors - deferred taxation 3,750 3,750 3,750
Cash at bank and in hand 75 61 60
--------------------------- -------- ----------- -----------
16,874 16,545 16,837
Creditors: amounts falling due within one
year
Bank overdrafts and short term debt (5,659) (7,480) (8,961)
Other creditors (8,660) (7,423) (8,832)
--------------------------- -------- ----------- -----------
(14,319) (14,903) (17,793)
Net current assets/(liabilities) 2,555 1,642 (956)
Total assets less current liabilities 25,995 25,852 23,024
Creditors: amounts falling due after more
than one year (6,154) (8,000) (6,769)
Provisions for liabilities and charges (254) (312) (320)
--------------------------- -------- ----------- -----------
Net assets excluding pension
assets/(liabilities) 19,587 17,540 15,935
Pension assets/(liabilities)
Defined benefit schemes with net assets 3,575 3,110 3,655
Defined benefit schemes with net (2,825) (3,229) (3,125)
liabilities
--------------------------- -------- ----------- -----------
Net assets including pension
assets/(liabilities) 20,337 17,421 16,465
--------------------------- -------- ----------- -----------
Capital and reserves
Called up share capital 1,438 1,438 1,438
Treasury Shares (88) - -
Revaluation reserve 11,205 11,279 11,260
Profit and loss account 7,782 4,704 3,767
--------------------------- -------- ----------- -----------
Total equity shareholders' funds 20,337 17,421 16,465
--------------------------- -------- ----------- -----------
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
Net cash outflow from operating activities 4,800 (983) 294
Returns on investment and servicing of
finance (684) (512) (1,059)
Capital expenditure and financial (184) 2,152 1,531
investment
Dividends paid - - (360)
------------------------- ----------- ----------- -----------
Net cash inflow before financing 3,932 657 406
Financing (615) - -
------------------------- ----------- ----------- -----------
Increase in cash in the period 3,317 657 406
------------------------- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
--------------------------- -------- ----------- -----------
Profit for the period 4,040 730 184
Exchange adjustments on foreign currency
net investments 2 1 1
Actuarial gains recognised in the pension
schemes - - 659
Deferred tax arising on gains in the
pension schemes - - (547)
--------------------------- -------- ----------- -----------
Total recognised gains and losses relating
to the financial period 4,042 731 297
--------------------------- -------- ----------- -----------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
Profit for the financial period 4,040 730 184
Dividends - - (360)
------------------------- ----------- ----------- -----------
Retained profit for the financial period 4,040 730 (176)
Shares purchased by ESOP trust (82) (205) (417)
Treasury shares (88) - -
Share options expensed - - 50
Other recognised gains for the financial
period 2 1 113
------------------------- ----------- ----------- -----------
Net increase/(reduction) in shareholders'
funds 3,872 526 (430)
Shareholders' funds at beginning of
financial period 16,465 16,895 16,895
------------------------- ----------- ----------- -----------
Shareholders' funds at end of financial
period 20,337 17,421 16,465
------------------------- ----------- ----------- -----------
NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
Reported profit on ordinary activities
before taxation 4,040 730 184
Difference between historical cost
depreciation charge and the actual
depreciation charge of the year calculated
on the revalued amount 55 90 109
------------------------- ----------- ----------- -----------
Historical cost profit on ordinary
activities before taxation 4,095 820 293
------------------------- ----------- ----------- -----------
Historical cost profit for the period
retained after taxation, minority 4,095 820 (67)
interests and dividends
------------------------- ----------- ----------- -----------
NOTES TO THE INTERIM ACCOUNTS
1. Basis of Preparation
The interim accounts for the twenty six weeks ended 30 June 2005 and twenty six
weeks ended 30 June 2004, which are unaudited, have been prepared on the basis
of accounting policies consistent with those set out in the Company's financial
statements for the period ended 31 December 2004.
The information for the year ended 31 December 2004 does not constitute
statutory accounts and has been abstracted from the financial statements for
that period which have been filed with the Registrar of Companies. The
independent auditors' report on those accounts was qualified only on the basis
of a disagreement about the accounting treatment of the profit on a sale of a
piece of land which was recognised in the 2004 accounts.
The valuation of net liabilities of the defined benefit pension schemes in the
interim accounts at 30 June 2005 reflects the opening balance sheet position
adjusted for current service costs and contributions made to the schemes. A full
review and update of the net pension assets/liabilities for the defined benefit
pension schemes will be carried out for the end of the financial year.
2. Taxation
As a result of tax losses brought forward there is anticipated to be no current
tax charge or credit in the current year.
The deferred tax asset continues to represent the directors' estimate of losses
that will be utilised in the foreseeable future based on current levels of
profitability and will be reviewed at the end of the financial year.
3. Interim Dividend
There will be no payment of interim dividend for the half year.
4. Earnings/(loss) per share
6 months ended 6 months ended 12 months ended 6 months ended 6 months ended 12 months ended
30 June 30 June 31 December 30 June 30 June 31 December
2005 2004 2004 2005 2004 2004
Earnings/(loss) Earnings/(loss) Earnings/(loss) Earnings/(loss) Earnings/(loss) Earnings/(loss)
#'000 #'000 #'000 pence per share pence per share pence per share
----------- --------- --------- --------- --------- -------- ---------
Basic 4,040 730 184 2.9 0.5 0.1
Adjusted for:
Exceptional
credits (4,685) (771) (272) (3.4) (0.5) (0.2)
----------- --------- --------- --------- --------- -------- ---------
Adjusted basic (645) (41) (88) (0.5) 0.0 (0.1)
----------- --------- --------- --------- --------- -------- ---------
Diluted 4,040 730 184 2.9 0.5 0.1
----------- --------- --------- --------- --------- -------- ---------
The adjusted figures are shown to provide shareholders with additional
information on operations before exceptional items.
Earnings per share are calculated for the issued shares excluding those
registered in the name of The Inveresk ESOP Trustee Company Limited and those
held as Treasury shares.
6 months ended 6 months ended 12 months ended
30 June 2005 30 June 2004 31 December 2004
Number of Number of Number of
Shares Shares Shares
(000s) (000s) (000s)
-------------------------- ----------- ----------- -----------
Average of shares in issue
during the financial
period 137,186 139,996 139,531
Adjustment for the
dilutive effect of
employee and director
share options 1,778 966 1,143
-------------------------- ----------- ----------- -----------
Average of shares in issue
during the financial
period diluted 138,964 140,962 140,674
-------------------------- ----------- ----------- -----------
5. Provisions for Liabilities and Charges
Restructuring Onerous Lease Total
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
At 31 December 2004 280 40 320
Charge to profit and loss 225 - 225
Costs incurred (291) - (291)
Amounts released unused - - -
------------------------- ----------- ----------- -----------
At 30 June 2005 214 40 254
------------------------- ----------- ----------- -----------
6. Reconciliation of Operating Profit/(Loss) to Net Cash Inflow/(Outflow) from
Operating Activities
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ---------- ----------- -----------
Group operating (loss)/profit (109) 483 611
Exceptional items 4,685 771 559
Depreciation charges 554 527 1,068
Expensing of share options - - 50
Amortisation of government grants - - (2)
Net Pension asset/liability (220) (625) (1,045)
Gain on sale of tangible fixed assets - (700) (602)
Increase in working capital (44) (1,150) (64)
Decrease in provisions (66) (289) (281)
------------------------- ---------- ----------- -----------
Net cash inflow/(outflow) from operating
activities 4,800 (983) 294
------------------------- ---------- ----------- -----------
7. Movement in Net Debt
Unaudited Unaudited Audited
Interim Interim Year ended
30 June 30 June 31 December
2005 2004 2004
#'000 #'000 #'000
------------------------- ----------- ----------- -----------
Increase in cash 3,317 657 406
Cash outflow from debt financing 615 - -
------------------------- ----------- ----------- -----------
Decrease in net debt in period 3,932 657 406
Net debt at beginning of period (15,670) (16,076) (16,076)
------------------------- ----------- ----------- -----------
Net debt at end of period (11,738) (15,419) (15,670)
------------------------- ----------- ----------- -----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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