RNS Number:9985N
Inveresk PLC
28 July 2003
INVERESK PLC
Interim Results for 6 months to 30 June 2003
Highlights
* Recapitalisation and refinancing exercise completed by April 2003
providing the company with a strong financial base from which to develop its
specialty paper businesses in St Cuthberts in Somerset and Carrongrove in
Stirlingshire, Scotland.
* Continuing businesses achieved profits for the 6 months to 30 June
2003 before interest of #2.021m compared to losses of #0.016m in the
corresponding period of the previous year. Retained profits for the period
attributable to shareholders amount to #1.609m (2002 Loss #10.216m).
* Positive levels of cash generation from the company's operating mills
is providing the impetus for focussed capital expenditure and planned
maintenance programmes of the company's paper making machinery resulting in
improved efficiency and expansion of available capacity.
* Development of higher value products at each mill customised to client
specification on a worldwide basis.
* Planned relaunch of the "Gemini" brand in Autumn 2003 at Carrongrove
Mill.
* Pulp prices have increased during the six months under review but have
since declined in line with expectations.
* Export led sales at both Carrongrove and St Cuthberts have benefited
from currency influences in respect of both the Euro and US dollar.
Alan Walker, Chief Executive Officer, said:
"We are very pleased to be able to confirm the company's restoration to profit.
The past difficulties are well and truly behind us and our management teams at
Carrongrove and St Cuthberts are now able to focus their energies on the many
challenges which lie before us in further developing our niche businesses".
For further information contact:-
Alan Walker Chief Executive Officer 0207 240 1234
Gordon Thomson Finance Director 01324 827200
Jan Bernander Non Executive Chairman 00 46 708 556400
Chairman's Statement
Results
Following a difficult period at the start of the year during which the
recapitalisation and refinancing was completed, the company has now settled into
its specific niche of providing specialty papers to a wide cross section of
international customers without the disruption of reorganisations and loss
making activities which have been consigned to history. Sales in the 6 months to
30 June 2003 for continuing businesses have increased overall by 6% to #21.922m
from #20.662m in 2002 whereas profits before interest have advanced to #2.021m
(2002 loss #0.016m).
This represents a significant turnaround in the company's trading fortunes which
has turned the tide after several years of debilitating losses and significant
changes within the management and organisational structure of the company.
Continuing Core Businesses
Throughout the period the Inveresk Group comprised:
* The Decorative and Artist Papers business based at the St Cuthberts
Mill in Somerset.
* The Graphic Boards business based at the Carrongrove Mill, Denny,
Stirlingshire in Scotland.
St Cuthberts
Despite difficult market conditions throughout Continental Europe and North
America volumes of foil based decorative furniture papers held up well. There
has been evidence of customer de-stocking during the second quarter of the year
but order books for August and beyond are showing healthy signs of resurgence
for the rest of the year during which we hope to operate at a higher capacity
level than has hitherto been the case.
In artist papers volumes have remained steady whilst significant growth is
evident though increased sales of inkjet papers. The mill's proven track record
of technical competence provides the opportunity for expansion in a number of
specialist areas where high value added papers have been developed for
commercial roll-out on an international basis.
Carrongrove
The Graphic Boards business has performed extremely well throughout the period
at all levels with enhanced margin contributions and increased productivity.
Major initiatives have been taken to improve production efficiency through
planned maintenance programmes and focussed capital expenditure. Much remains to
be done in this area but significant progress has been made to date. Plans have
been made to increase the available capacity within this mill over time.
Sales volumes have been steady after a buoyant start to the year. In common with
most areas of the paper industry the merchant customers, both in the UK and
Continental Europe, have gone through a period of de-stocking. Nevertheless,
there are now signs of a strong recovery from August onwards for the remainder
of the year which is traditionally the mill's "busy season". Significant
expansion is anticipated in both the United States and Canada following
marketing initiatives into North America.
Plans exist for the relaunch of the mill's principal brand "Gemini" later in the
year designed to promote greater awareness of the extended product range on
offer.
Creating Shareholder Value
As widely chronicled during the period of recapitalisation and refinancing the
new management team has imposed tighter financial controls and disciplines
throughout the organisation. This has led to improved control over fixed costs
and avoided the erosion of profit on unnecessary Head Office costs which have
been reduced to a minimum. The availability of in excess of #20m of tax losses
and the positive level of cash generation from the company's two specialised
mill operations provides a backdrop for high operational gearing designed to
enhance shareholders' funds and improve enterprise value.
Later this year the company anticipates a positive outcome to the application to
the Court of Session in Edinburgh to "set off " the balance held at Share
Premium Account against the stated deficit in the Profit & Loss Account with the
ultimate objective of returning to the dividend list at the earliest possible
opportunity.
Finance
Borrowings are very much under control with a multi flexible long term facility
provided by Bank of Scotland. Pulp prices after a sharp rise during the period
have once again declined to anticipated levels. Currency influences have been
largely positive due to the company's high level of exports into Continental
Europe in particular, where the euro has strengthened significantly against the
# sterling. The Balance Sheet is now soundly based thanks to the support of our
new shareholder base for which we are immensely grateful. Working capital is
under control with the equalisation of our creditor standstill proving
invaluable. Supplier terms have now been renegotiated to standard terms on a
global basis and the payment profile is returning to normal.
Outlook
The paper industry in general appears to be suffering from a pronounced lack of
demand. Despite this, your company is better prepared for the challenges which
lie ahead than at any time in the recent past. The specialist niche areas within
which we operate offer a degree of technical sophistication and cooperation with
the customers to whom we remain dedicated and your Board of Directors is
confident that the significant progress which has been recorded during the past
six months will be maintained throughout the remainder of the year and beyond.
Indeed, we believe that, by bringing to market innovative new products and
solutions, and increasing our product offering and geographic presence in both
the Decorative/Artist and Graphic Boards markets, together with tight control
over our cost base through strategic manufacturing initiatives, the future
prospects of the newly restored Inveresk plc are viewed with considerable
optimism.
Jan Bernander
Chairman
INVERESK PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited
26 weeks to 30 26 weeks to 1 June 2002
June 2003
-------------------- ---------- --------- -------- ----------
Continuing Continuing Discontinued Total
Activities Activities Activities
#'000 #'000 #'000 #'000
-------------------- ---------- --------- -------- ----------
Turnover 21,922 20,662 26,311 46,973
Cost of sales (17,097) (15,985) (25,333) (41,318)
-------------------- ---------- --------- -------- ----------
Gross profit 4,825 4,677 978 5,655
Distribution costs (1,756) (1,627) (2,372) (3,999)
Administrative (1,112) (1,575) (1,331) (2,906)
costs
-------------------- ---------- --------- -------- ----------
Group operating 1,957 1,475 (2,725) (1,250)
profit/(loss)
Share of operating - - 72 72
profit in associate
-------------------- ---------- --------- -------- ----------
Total operating 1,957 1,475 (2,653) (1,178)
profit/(loss)
Fundamental 64 (1,491) (2,179) (3,670) (7,449)
reorganisation
costs
Loss on sale and - - (7,449) -
termination of
businesses
Attributable goodwill - - - 804
written off to
reserves
Profit on sale of - - 804
associate
-------------------- ---------- --------- -------- ----------
Profit/(loss) before 2,021 (16) (11,477) (11,493)
interest
Net Interest payable (412) (648)
- Group
Share of associate's - (11)
interest
Other finance - 85
income
-------------------- ---------- --------- -------- ----------
Profit/(loss) on 1,609 (12,067)
ordinary activities
before taxation
Tax on profit/(loss) - 1,851
on ordinary
activities
-------------------- ---------- --------- -------- ----------
Retained profit/ 1,609 (10,216)
(loss) for the
period
-------------------- ---------- --------- -------- ----------
Basic earnings/(loss) 1.8p (19.7)p
per share
Diluted earnings/ 1.7p (19.7)p
(loss) per share
Earnings/(loss) per 1.7p (3.4)p
share before
exceptional items
INVERESK PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Audited
13 months ended 31 December 2002
--------------------- -------- -------- -------- -------- -------
Unallocated Total
Continuing Head Office Continuing Discontinued Total
Mill Business Costs Activities Activities
#'000 #'000 #'000 #'000 #'000
------------------- -------- -------- -------- --------- -------
Turnover 44,682 - 44,682 37,257 81,939
Cost of sales (35,070) (865) (35,935) (37,172) (73,107)
------------------- -------- -------- -------- --------- -------
Gross profit 9,612 (865) 8,747 85 8,832
Distribution costs (3,532) - (3,532) (3,655) (7,187)
Administrative (2,978) (570) (3,548) (1,909) (5,457)
costs
------------------- -------- -------- -------- --------- -------
Group operating 3,102 (1,435) 1,667 (5,479) (3,812)
profit/(loss)
Share of operating - - - 72 72
profit in associate
------------------- -------- -------- -------- --------- -------
Total operating 3,102 (1,435) 1,667 (5,407) (3,740)
profit/(loss)
Fundamental (71) (3,593) (3,664) (2,010) (5,674)
reorganisation
costs
Loss on sale and - - - (12,929) (12,929)
termination of
businesses
Attributable goodwill - - - (11,536) (11,536)
written off to
reserves
Profit on sale of - - - 803 803
associate
------------------- -------- -------- -------- --------- -------
Profit/(loss) before 3,031 (5,028) (1,997) (31,079) (33,076)
interest
Net Interest payable (1,371)
- Group
Share of associate's (11)
interest
Other finance 152
income
------------------- -------- -------- -------- --------- -------
Profit/(loss) on (34,306)
ordinary activities
before taxation
Tax on profit/(loss) 5,118
on ordinary
activities
------------------- -------- -------- -------- --------- -------
Retained profit/ (29,188)
(loss) for the
period
------------------- -------- -------- -------- --------- -------
Basic earnings/(loss) (56.3)p
per share
Diluted earnings/ (56.3)p
(loss) per share
Earnings/(loss) per (3.8)p
share before
exceptional items
INVERESK PLC
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 1 June 31 December
2003 2002 2002
#'000 #'000 #'000
---------------------------- --------- --------- ----------
Fixed assets
Tangible assets 27,591 20,790 28,470
Investments 400 259 300
---------------------------- --------- --------- ----------
27,991 21,049 28,770
Current assets
Stocks 4,299 9,744 3,597
Debtors 7,545 19,678 11,599
Debtors - deferred taxation 3,750 - 3,750
Cash at bank and in hand 123 268 329
---------------------------- --------- --------- ----------
15,717 29,690 19,275
Creditors:amounts falling due within
one year
Bank overdrafts and short term debt (4,375) (20,429) (15,040)
Other creditors (10,836) (20,727) (20,834)
(15,211) (41,156) (35,874)
Net current assets/(liabilities) 506 (11,466) (16,599)
Total assets less current liabilities 28,497 9,583 12,171
Creditors:amounts falling due after - - -
more than one year
Bank loans and other debt (8,000) - -
Provisions for liabilities and (3,332) (5,998) (4,916)
charges
---------------------------- --------- --------- ----------
Net assets excluding pension assets/ 17,165 3,585 7,255
(liabilities)
---------------------------- --------- --------- ----------
Pension assets/(liabilities)
Defined benefit schemes with net - 5,069 -
assets
Defined benefit schemes with net (3,373) (4,394) (3,615)
liabilities
---------------------------- --------- --------- ----------
Net assets including pension assets/ 13,792 4,260 3,640
(liabilities)
---------------------------- --------- --------- ----------
Capital and reserves
Called up share capital 6,282 5,382 5,382
Share premium account 22,072 14,426 14,426
Revaluation reserve 11,459 - 11,549
Capital redemption reserve 173 173 173
Profit and loss account (26,194) (15,721) (27,890)
---------------------------- --------- --------- ----------
Total equity shareholders' funds 13,792 4,260 3,640
---------------------------- --------- --------- ----------
INVERESK PLC
CONSOLIDATED CASHFLOW STATEMENT
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 1 June 31 December
2003 2002 2002
#'000 #'000 #'000
----------------------------- --------- -------- ----------
Net cash (outflow)/inflow from (5,465) (1,751) 2,343
operating activities
Returns on investment and servicing of (466) (1,018) (1,553)
finance
Taxation - - -
Capital expenditure and financial (56) (832) (1,854)
investment
Purchase of own shares (100) - -
Acquisitions and disposals - 2,372 5,285
----------------------------- --------- -------- ----------
Net cash (outflow)/inflow before (6,087) (1,229) 4,221
financing
Net cash inflow/(outflow) from 4,512 (1,007) (2,302)
financing
----------------------------- --------- -------- ----------
(Decrease)/increase in cash in the (1,575) (2,236) 1,919
period
INVERESK PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 2003 1 June 2002 31 December
2002
#'000 #'000 #'000
--------------------------- ---------- --------- -----------
Profit/(loss) for the period 1,609 (10,216) (29,188)
Goodwill on terminations and - - 11,536
disposals previously written off
to reserves
Unrealised surplus on revaluation - - 11,549
of properties
Exchange adjustments on foreign (3) (2) (1)
currency net investments
Actuarial gains/(losses) - 1,960 (4,805)
recognised in the pension
schemes
Deferred tax arising on gains/ - (588) 1,443
(losses) in the pension schemes
--------------------------- ---------- --------- -----------
Total recognised gains/(losses) 1,606 (8,846) (9,466)
relating to the financial
period
--------------------------- ---------- --------- -----------
RECONCILIATION OF MOVEMENTS IN
SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 2003 1 June 2002 31 December
2002
#'000 #'000 #'000
Profit/(loss) for the financial 1,609 (10,216) (29,188)
period
Other recognised (losses)/gains (3) 1,370 19,722
for the financial period
Issue of ordinary shares 6,346 - -
Loans converted to equity 2,200 - -
--------------------------- ---------- --------- -----------
Net increase/(reduction) in a 10,152 (8,846) (9,466)
shareholders' funds
Shareholders' funds at the 3,640 13,106 13,106
beginning of financial period
--------------------------- ---------- --------- -----------
Shareholders' funds at end of 13,792 4,260 3,640
financial period
--------------------------- ---------- --------- -----------
NOTE OF CONSOLIDATED HISTORICAL
COST PROFITS AND LOSSES
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 2003 1 June 2002 31 December
2002
#'000 #'000 #'000
--------------------------- ---------- --------- -----------
Reported profit on ordinary 1,609 (12,067) (34,306)
activities before taxation
Difference between historical
cost depreciation charge and the
actual depreciation charge of the
year calculated on the revalued
amount 90 - -
--------------------------- ---------- --------- -----------
Historical cost profit on 1,699 (12,067) (34,306)
ordinary activities before
taxation
--------------------------- ---------- --------- -----------
Historical cost profit for the
period retained after taxation,
minority interests and
dividends 1,699 (10,216) (29,188)
--------------------------- ---------- --------- -----------
INVERESK PLC
Notes
1 Basis of Preparation
The interim accounts for the twenty six weeks ended 30 June 2003 and twenty six
weeks ended 1 June 2002, 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 13 month period ended 31 December 2002, which carried an
unqualified independent auditors' report and which have been filed with the
Registrar of Companies. The accounts for the 13 month period ended 31 December
2002 presented in this report are an abridged version of the financial
statements.
The valuation of net liabilities of the defined benefit pension schemes in the
interim accounts at 30 June 2003 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 13 months ended 6 months ended 6 months ended 13 months ended
30 June 1 June 31 December 30 June 1 June 31 December
2003 2002 2002 2003 2002 2002
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 1,609 -10,216 -29,188 1.8 -19.7 -56.3
Adjusted for:
Exceptional -64 10,315 29,336 -0.1 19.9 56.6
costs
Tax relief on 19 -1,885 -2,100 - -3.6 -4.1
exceptional
costs
------------ -------- -------- --------- -------- -------- ---------
Adjusted 1,564 -1,786 -1,952 1.7 -3.4 -3.8
basic
------------ -------- -------- --------- -------- -------- ---------
Diluted 1,609 -10,216 -29,188 1.7 -19.7 -56.3
------------ -------- -------- --------- -------- -------- ---------
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 in
accordance with UITF 13.
-------------------------- ---------- ---------- -----------
6 months ended 6 months ended 13 months ended
30 June 2003 1 June 2002 31 December
Number of 2002
shares Number of Number of
(000s) Shares Shares
(000)s (000s)
-------------------------- ---------- ---------- -----------
Average of shares in issue 91,407 51,821 51,821
during the financial period
Adjustment for the dilutive 2,538 - -
effect of employee and
director share options
-------------------------- ---------- ---------- -----------
Average of shares in issue 93,945 51,821 51,821
during the financial period
diluted
-------------------------- ---------- ---------- -----------
In 2002 the anti-dilutive effect of share options was excluded from the diluted
earnings per share calculation.
In 2003 the effect is dilutive and therefore the share options are included in
the 2003 diluted calculation.
5 Provisions for Liabilities and Charges
-------------- ------------ ---------- ----------- ----------
Onerous
Restructuring Lease Environmental Total
#000 #000 #000 #000
-------------- ------------ ---------- ----------- ----------
At 31 December 2002 4,580 196 140 4,916
Charge/(credit) to - - - -
profit and loss
Costs incurred (1,520) - - (1,520)
Amounts released (64) - - (64)
unused
-------------- ------------ ---------- ----------- ----------
At 30 June 2003 2,996 196 140 3,332
-------------- ------------ ---------- ----------- ----------
6 Reconciliation of Operating Profit/(Loss) to Net Cash Inflow/(Outflow)
from Operating Activities
----------------------- ---------- ----------- ----------
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 2003 1 June 2002 31 December
2002
#'000 #'000 #'000
----------------------- ---------- ----------- ----------
Group operating profit/(loss) 1,957 (1,250) (3,812)
Exceptional items - release of unused 64 (10,543) (17,800)
provision/(charges)
Depreciation charges 935 1,465 2,509
Non cash fixed asset movements - 3,528 7,046
Amortisation of government grants - - (3)
Pension curtailment - (440) (927)
Net Pension asset/liability (242) (174) (255)
Gain on sale of tangible fixed assets - - (498)
Gain on sale of associate - - (803)
(Increase)/decrease in working capital (6,595) 2,961 15,266
(Decrease)/increase in provisions (1,584) 2,702 1,620
----------------------- ---------- ----------- ----------
Net cash (outflow)/inflow from operating (5,465) (1,751) 2,343
activities
-------------------------------------------- ---------- ----------- ----------
7 Movement in Net Debt
----------------------- ---------- ----------- ----------
Unaudited Unaudited Audited
Interim Interim 13 months ended
30 June 2003 1 June 2002 31 December
2002
#'000 #'000 #'000
----------------------- ---------- ----------- ----------
(Decrease)/increase in cash (1,575) (2,236) 1,919
Cash outflow from debt financing 1,834 1,007 2,302
Loans converted to equity 2,200 - -
Translation differences - - -
----------------------- ---------- ----------- ----------
Decrease/(increase) in net debt in period 2,459 (1,229) 4,221
-------------------------------------------
Net debt at beginning of period (14,711) (18,932) (18,932)
----------------------- ---------- ----------- ----------
Net debt at end of period (12,252) (20,161) (14,711)
----------------------- ---------- ----------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
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