TIDMAVON
RNS Number : 3817X
Avon Rubber PLC
19 November 2014
News Release
Strictly embargoed until 07:00 19 November 2014
AVON RUBBER p.l.c.
("Avon", the "Group" or the "Company")
Audited results for the year ended 30 Sept 30 Sept
30 September 2014 2014 2013
GBPMillions GBPMillions
REVENUE 124.8 124.9
ADJUSTED EBITDA (*) 22.9 20.0
ADJUSTED OPERATING PROFIT (*) 17.0 14.2
ADJUSTED PROFIT BEFORE TAX (*) 16.6 13.7
NET CASH / (DEBT) 2.9 (10.9)
EARNINGS PER SHARE:
Adjusted basic (*) 43.7p 33.8p
Basic 36.2p 30.0p
Adjusted diluted (*) 42.3p 32.5p
Diluted 35.0p 28.8p
DIVIDEND PER SHARE 5.61p 4.32p
FINANCIAL HIGHLIGHTS:
-- Operating profit growth of 20% (26% at constant currency) and
profit before tax increased 21%
-- Return on sales (EBITDA divided by revenue) improved 2% from 16% to 18%
-- Diluted earnings per share increased 30% (37% at constant currency)
-- 156% conversion of operating profit to operating cash; debt
eliminated, GBP2.9m cash at year end
-- Dividend of 5.61p per share increased 30%
OPERATIONAL HIGHLIGHTS:
-- Order intake in Protection & Defence up 26% to GBP93m;
order book GBP33m for delivery in 2015
-- Growth in non-DOD sales from strong opening order book and
higher order intake; Protection & Defence operating margin
increased from 11.9% to 14.6%
-- 11 new product approvals including our Deltair self-contained
breathing apparatus (SCBA) and emergency escape breathing device
(EEBD)
-- The consolidation of our Lawrenceville site into our Cadillac site is substantially complete
-- Dairy operating margins increased from 16.3% to 17.9%
-- Cluster Exchange service successfully launched in EU and US
-- Dairy facility open for business in Brazil in Q1 2015
(*) Note:
The Directors believe that adjusted measures provide a more
useful comparison of business trends and performance. Adjusted
results exclude exceptional items, the amortisation of acquired
intangibles and defined benefit pension scheme costs. The term
adjusted is not defined under IFRS and may not be comparable with
similarly titled measures used by other companies.
All profit and earnings per share figures in this news release
relate to adjusted business performance (as defined above) unless
otherwise stated.
A reconciliation of adjusted measures to statutory measures is
provided below:
Statutory Adjustments Adjusted
-------------------------------- ---------- ------------ ---------
Group EBITDA (GBPm) 20.5 2.4 22.9
-------------------------------- ---------- ------------ ---------
Group Operating profit
(GBPm) 14.3 2.7 17.0
-------------------------------- ---------- ------------ ---------
Group Profit before Taxation
(GBPm) 13.9 2.7 16.6
-------------------------------- ---------- ------------ ---------
Group Profit for the year
(GBPm) 10.8 2.2 13.0
-------------------------------- ---------- ------------ ---------
Basic Earnings per Share
(pence) 36.2p 7.5p 43.7p
-------------------------------- ---------- ------------ ---------
Diluted Earnings per Share
(pence) 35.0p 7.3p 42.3p
-------------------------------- ---------- ------------ ---------
Protection & Defence EBITDA
(GBPm) 16.5 2.0 18.5
-------------------------------- ---------- ------------ ---------
Protection & Defence Operating
profit (GBPm) 11.3 2.3 13.6
-------------------------------- ---------- ------------ ---------
The adjustments comprise:
-- amortisation of acquired intangibles of GBP0.3m
-- defined benefit pension scheme costs of GBP0.4m, which relate
to a scheme closed to future accrual and therefore do not relate to
current operations
-- exceptional item of GBP2.0m relating to the consolidation of
Protection & Defence sites
-- tax effect of exceptional item of GBP0.5m
Further details are provided in note 3.
Commenting on the results, Peter Slabbert, Chief Executive
said:
"2014 has been an excellent year reflecting the strategic
decisions made over the last three years to invest in innovative
new products and technologies while expanding our international
markets. This strategy will continue to drive growth in the years
ahead."
For further enquiries, please contact:
Avon Rubber p.l.c.
Peter Slabbert, Chief Executive 020 7067 0700
Andrew Lewis, Group Finance Director (until 12 noon)
Sophie Williams, Group Public Relations Manager 01225 896 563
Weber Shandwick Financial
Nick Oborne 020 7067 0700
AN ANALYST MEETING WILL BE HELD AT 09.30AM THIS MORNING AT THE
OFFICES OF
WEBER SHANDWICK FINANCIAL, 2 WATERHOUSE SQUARE, 140 HOLBORN,
LONDON, EC1N 2AE.
Note to editors: The Group has transformed itself over recent
years into an innovative design and engineering group specialising
in two core markets, Protection & Defence and Dairy. With a
strong emphasis on research and development we design, test and
manufacture specialist products from a number of sites in the US
and UK, serving markets around the world. We achieve this through
nurturing the talent and aspirations of our employees to realise
their highest potential.
Avon Protection is the recognised global market leader in
advanced Chemical, Biological, Radiological and Nuclear (CBRN)
respiratory protection systems technology for the world's military,
homeland security, first responder, fire and industrial markets.
With an unrivalled pedigree in mask design dating back to the
1920's, Avon Protection's advanced products are the first choice
for Personal Protective Equipment (PPE) users worldwide and are
placed at the heart of many international defence and tactical PPE
deployment strategies. Our expanding global customer base now
includes military forces, civil and first line defence troops,
emergency service teams and industrial, marine, mineral and oil
extraction site personnel. All put their trust in Avon's advanced
respiratory solutions to shield them from every possible
threat.
Our world-leading Dairy business and its Milkrite brand have a
global market presence. With a long history of manufacturing liners
and tubing for the dairy industry, Milkrite has become the leading
innovator and designer for products and services right at the heart
of milking. Our goal is always to improve and maintain animal
health. Working with the leading scientists and health specialists
in the global dairy industry we continue to invest in technology to
further improve the milking process and animal welfare. Our
products provide exceptional results for both the animal and the
milker, making the milk extraction process run smoothly. As our
market share and milking experience continue to grow, so does our
global presence.
For further information please visit the Group's website
www.avon-rubber.com
AVON RUBBER p.l.c.
INTRODUCTION
Avon has delivered another year of exceptionally strong growth
in 2014. We have further strengthened our business, improved our
margins and through sound operational management provided strong
cash generation moving us to a net cash position.
STRATEGY
In addition to the strong financial performance, we end the year
with a more robust and sustainable business. Both Protection &
Defence and Dairy are generating increased opportunities for
growth. In Protection & Defence we have 11 new product
approvals and are growing in all our market sectors. In Dairy we
are increasing our own brand Milkrite's market share, expanding our
product and service offerings and developing our distribution in
emerging markets. We have also invested GBP2m across the Group in
upgrading our IT systems over the past 18 months which will deliver
a single Group-wide ERP infrastructure to provide better business
integration and support our growing global business.
Our continued investment in product, brand and market
development and in our operational capability in 2014 should
position us to make further progress in the coming years.
GROUP RESULTS
Revenue was flat at GBP124.8m (2013: GBP124.9m) but increased 5%
on a constant currency basis.
Operating profit before depreciation and amortisation (EBITDA)
rose 14% to GBP22.9m (2013: GBP20.0m) and operating profit rose 20%
to GBP17.0m (2013: GBP14.2m) (an increase of 26% at constant
currency).
The progressive strengthening of sterling during the year gave
the Group a foreign exchange translation headwind. The US $/GBP
average rate was $1.65 (2013: $1.56) and this 9 cent headwind was
equivalent to GBP5.7m at a revenue level and GBP0.8m at an
operating profit level.
SEGMENTAL PERFORMANCE
PROTECTION & DEFENCE
Protection & Defence represented 74% (2013: 75%) of total
Group revenues. The business saw revenues decrease by 0.3% from
GBP93.2m to GBP92.8m (an increase of 4.7% at constant currency).
Underlying growth was due to growing non-DOD mask sales. Our strong
manufacturing capability and existing capacity allowed us to meet
this increase in customer demand.
Operating profit grew strongly to GBP13.6m (2013: GBP11.0m) up
23.0% and EBITDA was GBP18.5m (2013: GBP16.1m), representing a
return on sales (defined as EBITDA divided by revenue) of 20.0%
(2013: 17.3%). This reflects a richer mix of non-DOD sales and
improved operational performance, slightly offset by continued
investment in the infrastructure of the business.
Order intake was GBP93m with increased orders from the DOD, EMEA
and North American customers. Our DOD long-term M50 mask contract
is in its seventh year and we supplied 168,000 systems during the
year, bringing the total to over 1.2m systems so far under this
contract. As a result of higher order intake of 246,000 mask
systems we enter 2015 with an order book covering the first half
year sales at a slightly accelerated rate. Follow-on DOD M50 orders
are expected in the first half as 2015 DOD budgets are
released.
The filter requirement has less short-term visibility, but we
expect this consumable item to be a good source of repeat revenue
in the long term as more masks enter service. Whilst uncertainty
continues in the US regarding budget cuts and sequestration, we are
an established programme, delivering to schedule and the largest
user, the Army, has begun taking product. This gives us a
reasonable degree of comfort that mask system volumes will continue
at good levels for the foreseeable future.
During the year the Joint Service Aircrew Mask (JSAM) programme
design, development and testing work progressed well. This will
provide respiratory protection to a wide range of operators on the
DOD's fleet of fixed wing aircraft. This $6.7m development contract
is due to conclude at the end of our 2015 financial year and should
lead to a production contract which could be worth up to $74m.
Our newly developed Emergency Escape Breathing Device (EEBD)
received NIOSH approval to the new standard, with Avon being the
only manufacturer to date to achieve this. This product has
applications on board navy ships and in the mining sector. The US
Navy has an open solicitation to replace its ageing installed base
to which we will respond in our 2015 financial year.
DOD sales are a lower proportion of the division's sales as, in
line with our strategy, we have successfully grown our non-DOD
sales. Sales to US law enforcement and non-US military and law
enforcement increased from GBP25.0m to GBP31.0m as a result of
strong order intake in 2014 as we experience the benefit of the
increased sales and marketing resource added in prior years. We won
an industrial order in the final quarter of the year for 27,000
escape hoods of which the majority is for delivery in 2015.
Sales to the fire market were flat in the first half of the year
as purchasers put procurement decisions on hold pending release of
the new, delayed, NFPA standard. Our new Deltair SCBA, designed to
meet these new US regulations and to enhance operational
performance, was approved in April 2014. It is one of only three
units to receive approval to date and has been well received by the
market in early customer trials. This led to a relatively stronger
conclusion to the year and our target of converting this pipeline
of opportunity into revenue in 2015 has begun well as we carry
forward confirmed orders for 600 Deltair units.
AEF again made a positive contribution to divisional operating
profit, winning hovercraft skirt and fuel and water storage tank
orders. We enter 2015 with order coverage for the first half of the
year, which gives us excellent visibility in this part of the
business.
DOD spares sales have grown this year, as expected; as the
installed base of masks grows so does the DOD's requirement to fill
its supply chain.
We have consolidated our Protection & Defence operations
from four US sites into three ahead of the expiry of the lease on
our Lawrenceville, Georgia facility in 2015. The move is
substantially complete and we are pleased that our operations team
brought the project in on time and on budget. Our Cadillac,
Michigan facility is now the centre of excellence for both mask
manufacture and filter technology as well as the supplied air
products previously manufactured in Lawrenceville.
DAIRY
Dairy revenues increased by 0.8% to GBP32.0m (2013: GBP31.7m)
(up 5.0% on a constant currency basis) reflecting the success of
our Cluster Exchange service and growth of the Milkrite brand in
Europe.
Operating profit increased by 10.7% to GBP5.7m (2013: GBP5.2m)
(up 17.0% at constant currency). EBITDA was GBP6.6m (2013:
GBP5.8m), giving a return on sales (as defined above) of 20.7%, up
from 18.4% in 2013.
The difficult market conditions experienced during the latter
part of the previous financial year began to improve as a result of
the better 2013 harvest which resulted in lower animal feed costs.
This, together with higher milk prices, reduced the pressure on
farmer revenues and margins and led to a return of more normal
levels of demand for our consumable products.
Milkrite increased as a proportion of total revenue providing a
richer sales mix. Only four years ago OEM customers represented 47%
of our revenue; at the end of this year this had fallen to 31%,
reflecting the success of the Milkrite brand.
In recent years the business has demonstrated through the launch
of its ImpulseAir liner that the industry is receptive to new
technology which improves farm efficiency and animal health, with
our proprietary product now enjoying a 21% market share in the US
(2013: 19%).
The launch of the ImpulseAir liner in Europe, where market share
grew to 2.5%, contributed to an increase in Milkrite's overall
market share (now 16.5%), delivering returns on our investment in
the sales force, enhanced technical support and a larger
distributor network.
This success has given us the confidence to invest further in
product development resource and to commence work on the next
generation of products. The first example of this, our Cluster
Exchange service, which was successfully launched in the US and
Europe at the end of 2013, gained momentum as the year developed
and by the end of the year was servicing 256,000 cows on 887 farms.
This add-on service for the farmer increases the value of each
direct liner sale we make and should lead to a more robust business
model. Under this programme farmers outsource to us their liner
change process, which we deliver through service centres
established in our existing facilities, with the support of our
dealers and third-party logistics specialists.
In China, after a softer first half when the dairy industry was
restructured following a number of issues, including contaminated
milk, contaminated feed and an outbreak of foot and mouth disease,
we were pleased to see volumes returning to expected levels in a
market which has excellent long-term potential.
In many other emerging markets, including Brazil and India, the
number of dairy cows being milked using automated milking processes
is growing strongly. This is adding to the market potential for the
consumable products we sell. We plan to harness this potential by
establishing sales and distribution functions in these markets as
they develop and consequently we have established a sales and
distribution centre in Brazil in the first quarter of the new
financial year.
FINANCE EXPENSES
Net interest costs remained constant at GBP0.3m (2013: GBP0.3m).
Other (non-cash) finance expenses associated with the unwinding of
discounts on provisions were GBP0.2m (2013: GBP0.2m).
TAXATION
The statutory tax charge totalled GBP3.1m (2013: GBP3.6m) on a
statutory profit before tax of GBP13.9m (2013: GBP12.4m). In 2014
the Group paid tax in the US, but not in the UK due to brought
forward tax losses. The effective tax rate for the year is 22%
(2013: 29%), reflecting a more favourable geographic mix of
profits.
The adjusted effective tax rate, where the tax charge and the
profit before taxation are adjusted for exceptional items, the
amortisation of acquired intangibles and defined benefit pension
scheme costs is 21% (2013: 27%). In 2014 the US Federal tax rate
was 34% and the Group's effective tax rate reflects the
predominance of US revenues and earnings. Unrecognised deferred tax
assets in respect of tax losses in the UK amounted to GBP1.4m
(2013: GBP2.8m).
EARNINGS PER SHARE
Basic earnings per share were 43.7p (2013: 33.8p) and diluted
earnings per share were 42.3p (2013: 32.5p).
NET CASH AND CASHFLOW
Net cash at the end of the year was GBP2.9m (2013: net debt of
GBP10.9m). The Group had no borrowings at the year end; total bank
facilities were GBP24.5m, which are US dollar denominated and
committed to 30 November 2017.
In the year we invested GBP6.8m (2013: GBP11.1m) in property,
plant and equipment and new product development. In the Protection
& Defence business this focused on our new product development
programme, Project Fusion. In Dairy we invested in the hardware
required to support our Cluster Exchange service offering. Across
the Group we continued our investment in a common IT platform to
support the Group's future growth ambitions.
Operating activities generated cash of GBP26.5m (2013:
GBP15.5m), representing 156% of operating profit (2013: 109%).
Through sound operational management the Group has driven a strong
conversion of profits into cash and this was supplemented by the
phasing of customer payments including GBP3.5m of accelerated
payments from a major customer ahead of its financial year-end.
Receivables at 30 September 2014 were lower than the previous year
due to this phasing and these accelerated payments.
UK RETIREMENT BENEFIT OBLIGATIONS
The balance, as measured under IAS 19 Revised, associated with
the Group's UK retirement benefit obligation, which has been closed
to future accrual, has moved from a GBP11.3m deficit at 30
September 2013 to a GBP16.0m deficit at 30 September 2014. This
movement has resulted from a decrease in the discount rate. IAS 19
Revised specifies the use of AA corporate bond (rather than gilt)
yields to set the discount rate.
During 2014, the Group paid total contributions of GBP0.5m. A
new triennial actuarial valuation took place as at 31 March 2013.
That valuation showed the scheme to be 98.0% funded on a continuing
basis and this has given rise to a new deficit recovery plan under
which the payments for the Group financial years ending 30
September will be as follows: 2015: GBP550,000, 2016: GBP675,000,
2017: GBP700,000 and 2018: GBP700,000. These amounts include
GBP250,000 p.a. in respect of administration expenses. An update to
the actuarial position as at 30 September 2014 has been obtained
and this shows a deficit of GBP10m, which represents a funding
level of 97%.
RESEARCH AND DEVELOPMENT
Intangible assets totalling GBP17.2m (2013: GBP16.5m) form a
significant part of the balance sheet as we invest in new product
development. This can be seen from our expanding product range,
particularly respiratory protection products. The annual charge for
amortisation of intangible assets was GBP1.8m (2013: GBP1.9m).
Our total investment in research and development (capitalised
and expensed) amounted to GBP7.0m (2013: GBP6.4m) of which GBP4.5m
(2013: GBP2.1m) was customer funded and has been recognised as
revenue.
In Dairy we have started to expand our product range under the
Milkrite brand beyond liners and tubing into non-rubber goods such
as liner shells and claws.
We have started to see the benefits of these efforts, which
underpin the long-term prosperity of the Group, during our 2014
financial year.
DIVIDEND
Based on the Group's improved profitability, cash generation and
the confidence the Board has in the Group's future prospects, the
Board is pleased to propose a 30% increase in the final dividend to
shareholders of 3.74p per ordinary share (2013: 2.88p).
This, combined with the 2014 interim dividend of 1.87p, results
in a full year dividend of 5.61p (2013: 4.32p), up 30%.
OPPORTUNITIES
Last year we highlighted that the nature of our challenge had
changed and that management was now firmly focused on growth and
margin enhancement. Both of these are clearly reflected in the 2014
results.
Looking forward we see our global market leading positions
delivering further opportunities for organic growth. We will
continue to invest in innovative new technologies and products and
in building our brand and market reach to bring these opportunities
to fruition. Our strong balance sheet will also support
complementary acquisitions which can deliver synergistic
benefits.
BOARD CHANGES
After serving as a Non-Executive Director since March 2005
Stella Pirie will stand down at the AGM in January 2015. Stella has
made a significant contribution during a period of remarkable
progress and change for the Group, for which she has our
considerable thanks. A recruitment process to appoint a suitable
replacement is underway and an announcement will be made at the
appropriate time.
OUTLOOK
Our strategy has significantly improved the shape of the Group,
reduced the risk profile and improved margins. This is providing
continued growth and the outlook for the future remains
positive.
In our global Protection & Defence business we have good
visibility of DOD revenues for 2015 and expect to see growth in the
fire and industrial markets. New products will contribute to growth
and we should see a positive operational gearing effect from a
stable cost base.
The Dairy business is well positioned with positive current
market conditions and long-term market growth potential. We expect
volume growth from our investment in the emerging markets of China
and Brazil and from the Cluster Exchange programme. We continue to
invest in enhanced milking technologies.
Peter Slabbert Andrew Lewis
Chief Executive Group Finance Director
19 November 2014 19 November 2014
Consolidated Statement of Comprehensive
Income
for the year ended 30 September 2014
Year to 30 Sept 2014 Year to 30 Sept 2013
Statutory Adjustments Adjusted Statutory Adjustments Adjusted
(restated**)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Revenue 2 124,779 - 124,779 124,851 - 124,851
Cost of sales (83,264) - (83,264) (91,140) - (91,140)
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Gross profit 41,515 - 41,515 33,711 - 33,711
Selling and
distribution
costs (11,505) - (11,505) (9,101) - (9,101)
General and
administrative
expenses (15,685) 2,678 (13,007) (11,607) 1,220 (10,387)
Operating profit 2 14,325 2,678 17,003 13,003 1,220 14,223
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Operating profit
is analysed
as:
Before depreciation
and amortisation 20,486 2,417 22,903 19,220 803 20,023
Depreciation
and amortisation (6,161) 261 (5,900) (6,217) 417 (5,800)
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Operating profit 14,325 2,678 17,003 13,003 1,220 14,223
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Finance income 1 - 1 1 - 1
Finance costs (275) - (275) (348) - (348)
Other finance
expense (187) 12 (175) (253) 33 (220)
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Profit before
taxation 13,864 2,690 16,554 12,403 1,253 13,656
Taxation 4 (3,053) (450) (3,503) (3,566) (122) (3,688)
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Profit for
the year 10,811 2,240 13,051 8,837 1,131 9,968
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Other comprehensive
expense
Actuarial loss
recognised
on retirement
benefit schemes
(***) (4,851) - (4,851) (9,180) - (9,180)
Net exchange
differences
offset in reserves
(****) (306) - (306) (74) - (74)
Other comprehensive
expense for
the year, net
of taxation (5,157) - (5,157) (9,254) - (9,254)
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Total comprehensive
income/(expense)
for the year 5,654 2,240 7,894 (417) 1,131 714
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Consolidated Statement of Comprehensive
Income
for the year ended 30 September 2014
(continued)
Earnings per
share
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
Basic 6 36.2p 43.7p 30.0p 33.8p
Diluted 6 35.0p 42.3p 28.8p 32.5p
----------------------- ----- ---------- ------------ --------- ------------- ------------ ----------
**Restated for the change in accounting for pension costs. See
note 1.
*** Items that are not subsequently reclassified to the income
statement.
****Items that may be subsequently reclassified to the income
statement.
Consolidated Balance Sheet
as at 30 September 2014
As at As at
30 Sept 30 Sept
14 13
Note GBP'000 GBP'000
---------------------------------------- ----- --------- ---------
Assets
Non-current assets
Intangible assets 17,240 16,541
Property, plant and equipment 19,575 20,387
36,815 36,928
---------------------------------------- ----- --------- ---------
Current assets
Inventories 12,887 13,374
Trade and other receivables 19,157 20,677
Derivative financial instruments 2 214
Cash and cash equivalents 10 2,925 184
---------------------------------------- -----
34,971 34,449
---------------------------------------- ----- --------- ---------
Liabilities
Current liabilities
Trade and other payables 17,755 16,680
Provisions for liabilities and charges 7 1,846 616
Current tax liabilities 6,852 6,073
---------------------------------------- -----
26,453 23,369
---------------------------------------- ----- --------- ---------
Net current assets 8,518 11,080
---------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings 10 - 11,059
Deferred tax liabilities 2,315 2,977
Retirement benefit obligations 16,029 11,279
Provisions for liabilities and charges 7 1,973 1,997
---------------------------------------- -----
20,317 27,312
--------- ---------
Net assets 25,016 20,696
---------------------------------------- ----- --------- ---------
Shareholders' equity
Ordinary shares 8 31,023 30,723
Share premium account 34,708 34,708
Capital redemption reserve 500 500
Translation reserve (932) (626)
Accumulated losses (40,283) (44,609)
---------------------------------------- -----
Total equity 25,016 20,696
---------------------------------------- ----- --------- ---------
Consolidated Cash Flow Statement
for the year ended 30 September 2014
Year
Year to to
30 Sept 30 Sept
14 13
Note GBP'000 GBP'000
---------------------------------------------- ----- --------- ---------
Cash flows from operating activities
---------------------------------------------- ----- --------- ---------
Cash generated before the impact of
exceptional items 26,500 15,541
Cash impact of exceptional items (983) (241)
---------------------------------------------- ----- --------- ---------
Cash generated from operations 9 25,517 15,300
Finance income received 1 1
Finance costs paid (315) (365)
Retirement benefit deficit recovery
contributions (513) (592)
Tax paid (2,903) (2,229)
Net cash generated from operating activities 21,787 12,115
---------------------------------------------- ----- --------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 19 2
Purchase of property, plant and equipment (3,753) (6,339)
Capitalised development costs and purchased
software (3,062) (4,715)
Acquisition of VR Technology Holdings (50) (439)
Net cash used in investing activities (6,846) (11,491)
---------------------------------------------- ----- --------- ---------
Cash flows from financing activities
Net movements in loans (10,805) 2,281
Dividends paid to shareholders (1,422) (1,132)
Purchase of own shares - (1,765)
Net cash used in financing activities (12,227) (616)
---------------------------------------------- ----- --------- ---------
Net increase in cash, cash equivalents
and bank overdrafts 2,714 8
Cash, cash equivalents and bank overdrafts
at beginning of the year 184 176
Effects of exchange rate changes 27 -
---------------------------------------------- ----- --------- ---------
Cash, cash equivalents and bank overdrafts
at end of the year 10 2,925 184
---------------------------------------------- ----- --------- ---------
Consolidated Statement of Changes
in Equity
for the year ended 30 September 2014
Share Share Other Accumulated
capital Premium reserves losses Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----- -------- -------- --------- ------------ --------
At 1 October 2012 30,723 34,708 (52) (41,482) 23,897
Profit for the year** - - - 8,837 8,837
Unrealised exchange
differences on overseas
investments - - (74) - (74)
Actuarial loss recognised
on retirement benefit
scheme** - - - (9,180) (9,180)
--------------------------- ----- -------- -------- --------- ------------ --------
Total comprehensive
expense for the year - - (74) (343) (417)
Dividends paid - - - (1,132) (1,132)
Purchase of shares by
the employee benefit
trust - - - (1,765) (1,765)
Movement in respect
of employee share scheme - - - 113 113
--------------------------- ----- -------- -------- --------- ------------ --------
At 30 September 2013 30,723 34,708 (126) (44,609) 20,696
Profit for the year - - - 10,811 10,811
Unrealised exchange
differences on overseas
investments - - (306) - (306)
Actuarial loss recognised
on retirement benefit
scheme - - - (4,851) (4,851)
--------------------------- ----- -------- -------- --------- ------------ --------
Total comprehensive
income for the year - - (306) 5,960 5,654
Dividends paid 5 - - - (1,422) (1,422)
Issue of shares 8 300 - - - 300
Purchase of shares by
employee benefit trust 8 - - - (300) (300)
Movement in respect
of employee share scheme - - - 88 88
At 30 September 2014 31,023 34,708 (432) (40,283) 25,016
--------------------------- ----- -------- -------- --------- ------------ --------
Other reserves consist of the capital redemption reserve of
GBP500,000 (2013: GBP500,000) and the translation reserve of
GBP932,000 (2013: GBP626,000).
All movements in other reserves relate to the translation
reserve.
**Restated for the change in accounting for pension costs. See
note 1.
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS FOR THE YEAR ENDED
30 SEPTEMBER 2014
1. Basis of preparation
a) These financial results do not comprise statutory accounts
for the year ended 30 September 2014 within the meaning of Section
434 of the Companies Act 2006. Statutory accounts for the year
ended 30 September 2013 were approved by the Board of Directors on
20 November 2013 and delivered to the Registrar of Companies.
Statutory accounts for the year ended 30 September 2014 will be
delivered to the Registrar following the Company's Annual General
Meeting. The report of the auditors on these accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498 of the Companies
Act 2006.
b) This financial information has been prepared in accordance
with International Financial Reporting Standards and International
Financial Reporting Interpretations Committee (IFRIC)
interpretations as adopted by the European Union (collectively
'IFRSs') and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
c) Standards, amendments and interpretations effective in 2014
The following amendment has been adopted in preparing the
condensed consolidated financial information for the year ended 30
September 2014:
- IAS 19 (revised), 'Employee benefits'
The main changes affecting the Group are as follows:
-- Interest income or expense has been calculated by applying
the discount rate to the net defined benefit liability or asset as
at the previous year end. Previously interest cost was calculated
on the defined benefit obligation and expected return calculated on
plan assets.
-- Costs associated with investment management are deducted from
the return on plan assets (which is unchanged from the previous
standard). Other expenses are recognised in the consolidated
statement of comprehensive income as incurred.
This resulted in an increase in the amounts charged to the
income statement of GBP0.8m for the year ended 30 September 2014
over the cost under the previous standard and a 2.6p reduction in
earnings per share, with a similar impact on the statutory
comparatives for the year ended 30 September 2013, as shown
below:
Year to 30 Sept
2013
Reported Restate Restated
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- -------- ---------
Operating profit 13,423 (420) 13,003
Finance income 1 - 1
Finance costs (348) - (348)
Other finance income/(expense) 118 (371) (253)
----------------------------------------- --------- -------- ---------
Profit before taxation 13,194 (791) 12,403
Taxation (3,566) - (3,566)
----------------------------------------- --------- -------- ---------
Profit for the year 9,628 (791) 8,837
----------------------------------------- --------- -------- ---------
Other comprehensive expense
Actuarial loss recognised on retirement
benefit scheme (9,971) 791 (9,180)
Net exchange differences offset
in reserves (74) - (74)
----------------------------------------- --------- -------- ---------
Other comprehensive expense for
the year, net of taxation (10,045) 791 (9,254)
----------------------------------------- --------- -------- ---------
Total comprehensive expense for
the year (417) - (417)
----------------------------------------- --------- -------- ---------
Earnings per share
Basic 32.7p (2.7p) 30.0p
Diluted 31.4p (2.6p) 28.8p
----------------------------------------- --------- -------- ---------
In the analysis above, the discount rate has been applied to the
net deficit. Administration costs have been charged against
operating profit and investment management costs have been included
in other comprehensive income.
On the face of the consolidated statement of comprehensive
income, adjusted results have been disclosed which exclude defined
benefit pension scheme costs as these relate to a scheme closed to
future accrual and are not therefore relevant to current
operations. No adjustment has been made to other comprehensive
income.
d) The classification of overhead costs between selling and
distribution costs and general and administrative expenses has been
represented to provide more relevant information. There is no
impact on operating profit.
2. Segmental analysis
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Group Executive team.
The Group has two clearly defined business segments, Protection
& Defence and Dairy, and operates out of the UK and the US.
Business Segments
Year ended 30 September 2014
Protection & Defence Dairy Unallocated Group
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------------------- -------- ------------ --------
Revenue 92,818 31,961 124,779
------------------------------------------------------- --------------------- -------- ------------ --------
Segment result before depreciation, amortisation,
exceptional items and defined pension scheme
costs 18,542 6,600 (2,239) 22,903
Depreciation of property, plant and equipment (3,289) (771) (67) (4,127)
Amortisation of development costs and software (1,670) (94) (9) (1,773)
------------------------------------------------------- --------------------- -------- ------------ --------
Segment result before amortisation of acquired
intangibles, exceptional items and defined
pension scheme costs 13,583 5,735 (2,315) 17,003
Amortisation of acquired intangibles (261) (261)
Exceptional items (2,017) (2,017)
Defined benefit pension scheme costs (400) (400)
------------------------------------------------------- --------------------- -------- ------------ --------
Segment result 11,305 5,735 (2,715) 14,325
Finance income 1 1
Finance costs (275) (275)
Other finance expense (187) (187)
------------------------------------------------------- --------------------- -------- ------------ --------
Profit before taxation 11,305 5,735 (3,176) 13,864
Taxation (3,053) (3,053)
------------------------------------------------------- --------------------- -------- ------------ --------
Profit for the year 11,305 5,735 (6,229) 10,811
------------------------------------------------------- --------------------- -------- ------------ --------
Segment assets 52,128 13,501 6,157 71,786
------------------------------------------------------- --------------------- -------- ------------ --------
Segment liabilities 12,011 1,946 32,813 46,770
------------------------------------------------------- --------------------- -------- ------------ --------
Other segment items
Capital expenditure
- intangible assets 2,725 337 - 3,062
- property, plant and equipment 1,898 1,825 8 3,731
------------------------------------------------------- --------------------- -------- ------------ --------
Year ended 30 September
2013
Protection Dairy Unallocated Group
& Defence
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----------- -------- ------------ --------
Revenue 93,137 31,714 124,851
---------------------------------- ----------- -------- ------------ --------
Segment result before
depreciation, amortisation,
exceptional items and
defined benefit pension
scheme costs 16,136 5,835 (1,948) 20,023
Depreciation of property,
plant and equipment (3,221) (623) (52) (3,896)
Amortisation of development
costs and software (1,868) (32) (4) (1,904)
---------------------------------- ----------- -------- ------------ --------
Segment result before
amortisation of acquired
intangibles, exceptional
items and defined benefit
pension scheme costs 11,047 5,180 (2,004) 14,223
Amortisation of acquired
intangibles (417) (417)
Exceptional items (383) (383)
Defined benefit pension
scheme costs (420) (420)
---------------------------------- ----------- -------- ------------ --------
Segment result 10,247 5,180 (2,424) 13,003
Finance income 1 1
Finance costs (348) (348)
Other finance expense (253) (253)
---------------------------------- ----------- -------- ------------ --------
Profit before taxation 10,247 5,180 (3,024) 12,403
Taxation (3,566) (3,566)
---------------------------------- ----------- -------- ------------ --------
Profit for the year 10,247 5,180 (6,590) 8,837
---------------------------------- ----------- -------- ------------ --------
Segment assets 57,556 11,748 2,073 71,377
---------------------------------- ----------- -------- ------------ --------
Segment liabilities 10,691 3,371 36,619 50,681
---------------------------------- ----------- -------- ------------ --------
Other segment items
Capital expenditure
- intangible assets 3,474 304 809 4,587
- property, plant and
equipment 4,665 1,419 91 6,175
---------------------------------- ----------- -------- ------------ --------
3. Amortisation of acquired intangible assets and exceptional items
2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Amortisation of acquired intangible assets 261 417
------------------------------------------------- -------- --------
Exceptional items 2014 2013
GBP'000 GBP'000
-------------------------------------------- -------- --------
Relocation of AEF facility - 304
Relocation of Lawrenceville facility 2,017 -
Acquisition costs - 79
------------------------------------------------- -------- --------
2,017 383
-------------------------------------------- -------- --------
The tax impact of the above is a GBP0.45m reduction in overseas
tax payable (2013: GBP0.12m)
In the consolidated statement of comprehensive income the
exceptional items are included within administrative expenses.
The acquisition costs in 2013 relate to the purchase of VR
Technology Holdings and other potential acquisitions investigated
that year.
4. Taxation
2014 2013
GBP'000 GBP'000
----------------------------- -------- --------
United Kingdom - -
Overseas 3,053 3,566
------------------------------ -------- --------
3,053 3,566
Effect of exceptional items 450 122
------------------------------ -------- --------
Adjusted tax charge 3,503 3,688
------------------------------ -------- --------
The effective tax rate for the year is 22% (30 September 2013:
29%).
The adjusted effective tax rate, where the tax charge and the
profit before taxation are adjusted for exceptional items, the
amortisation of acquired intangibles and defined benefit pension
scheme costs is 21% (30 September 2013: 27%).
5. Dividends
On 6 Feburary 2014, the shareholders approved a final dividend
of 2.88p per qualifying ordinary share in respect of the year ended
30 September 2013. This was paid on 21 March 2014 absorbing
GBP862,000 of shareholders' funds.
On 30 April 2014, the Board of Directors declared an interim
dividend of 1.87p (2013: 1.44p) per qualifying ordinary share in
respect of the year ended 30 September 2014. This was paid on 5
September 2014 absorbing GBP560,000 (2013: GBP424,000) of
shareholders' funds.
After the balance sheet date the Board of Directors proposed a
final dividend of 3.74p per qualifying ordinary share in respect of
the year ended 30 September 2014, which will absorb an estimated
GBP1,119,000 of shareholders' funds. Subject to shareholder
approval, the dividend will be paid on 20 March 2015 to
shareholders on the register at the close of business on 20
February 2015. In accordance with accounting standards this
dividend has not been provided for and there are no corporation tax
consequences.
6. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year, excluding those
held in the employee share ownership trust. The company has
dilutive potential ordinary shares in respect of the Performance
Share Plan. Adjusted earnings per share adds back to profit the
effect of the amortisation of acquired intangible assets,
exceptional items and defined benefit pension costs.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below.
2014 2013
----------------------------------- ---- -------- ------ -------- -------- ------- -----------------
Weighted average number of
ordinary shares in
issue used in basic calculations
(thousands) 29,871 29,451
Potentially dilutive shares
(weighted average) (thousands) 979 1,231
Fully diluted number of
ordinary shares
(weighted average) (thousands) 30,850 30,682
----------------------------------------- -------- ------ -------- -------- ------- -----------------
2014 2014 2014 2013 2013 2013
Basic Diluted Basic Diluted
eps eps eps eps
GBP'000 pence pence GBP'000 pence pence
----------------------------------- ---- -------- ------ -------- -------- ------- -----------------
Profit attributable
to equity shareholders
of the Company 10,811 36.2 35.0 8,837 30.0 28.8
Adjustments 2,240 7.5 7.3 1,131 3.8 3.7
Profit excluding amortisation
of acquired intangibles
assets, exceptional
items and defined benefit
pension scheme costs 13,051 43.7 42.3 9,968 33.8 32.5
----------------------------------------- -------- ------ -------- -------- ------- -----------------
7. Provisions for liabilities and charges
Facility Property
Relocation obligations Total
GBP'000 GBP'000 GBP'000
--------------------------- ----------- ------------ --------
Balance at 1 October 2012 - 2,993 2,993
Unwinding of discount - 220 220
Payments in the year - (600) (600)
--------------------------- ----------- ------------ --------
Balance at 30 September
2013 - 2,613 2,613
Charged in the year 1,637 1,632 3,269
Unwinding of discount - 175 175
Payments in the year (1,191) (1,056) (2,247)
Exchange difference 8 1 9
--------------------------- ----------- ------------ --------
Balance at 30 September
2014 454 3,365 3,819
--------------------------- ----------- ------------ --------
8. Share capital
2014 2013
------------------------------ ------- -------
Number of shares (thousands) 31,023 30,723
Ordinary shares (GBP'000) 31,023 30,723
------------------------------- ------- -------
During the year, 300,000 ordinary shares with a nominal value of
GBP1 per share were issued at par to the Avon Rubber p.l.c.
Employee Share Ownership Trust No. 1.
9. Cash generated from operations
2014 2013
GBP'000 GBP'000
--------------------------------------- -------- --------
Profit for the year 10,811 8,837
Adjustments for:
Taxation 3,053 3,566
Depreciation 4,127 3,896
Amortisation of intangible assets 2,034 2,321
Defined benefit pension scheme cost 400 420
Finance income (1) (1)
Finance costs 275 348
Other finance expense 187 253
Loss on disposal of intangibles 149 62
Loss on disposal of property, plant
and equipment 209 24
Movement in respect of employee share
scheme 88 113
Decrease in inventories 370 2,259
Decrease/(increase)
in receivables 1,479 (6,295)
Increase/(decrease) in payables and
provisions 2,336 (503)
25,517 15,300
--------------------------------------- -------- --------
10. Analysis of net cash / (debt)
This note sets out the calculation of net cash / (debt), a
measure considered important in explaining our financial
position.
At 30
At 1 Oct Exchange Sept
Cash
2013 flow movements 2014
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- ---------- --------
Cash at bank and in hand 184 2,714 27 2,925
--------------------------------- --------- -------- ---------- --------
Net cash and cash equivalents 184 2,714 27 2,925
Debt due in more than 1 year (11,059) 10,805 254 -
(10,875) 13,519 281 2,925
------------------------------- --------- -------- ---------- --------
On 9 June 2014 the Group agreed new bank facilities with
Barclays Bank and Comerica Bank. The combined facility comprises a
revolving credit facility of $40m and expires on 30 November 2017.
This facility is priced on the dollar LIBOR plus a margin of 1.25%
and includes financial covenants which are measured on a quarterly
basis. The Group was in compliance with its financial covenants
during 2014 and 2013.
11. Exchange rates
The following significant exchange
rates applied during the year.
Average Closing Average Closing
rate rate rate rate
2014 2014 2013 2013
--------------- ----------- ---------- -------- --------
US Dollar 1.654 1.631 1.559 1.612
Euro 1.221 1.281 1.188 1.191
----------------- ----------- ---------- -------- --------
Fair value of financial instruments
The fair value of forward exchange contracts is determined by
using valuation techniques using year end spot rates, adjusted for
the forward points to the value date of the contract.
12. Annual Report & Accounts
Copies of the Directors' report and the audited financial
statements for the year ended 30 September 2014 will be posted to
shareholders who have elected to receive a copy and may also be
obtained from the Company's registered office at Hampton Park West,
Semington Road, Melksham, Wiltshire, SN12 6NB, England. Full
audited financial statements will be available on the Company's
website at www.avon-rubber.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGGGPGUPCGMR
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