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Company Low & Bonar PLC
TIDM LWB
Headline

Half Yearly Report

Released 07:00 10-Jul-2014
Number 9095L07

RNS Number : 9095L
Low & Bonar PLC
10 July 2014
 



Low & Bonar

 

Half-Year Results for the six months to 31 May 2014       

 

STRONG FIRST HALF GROWTH, ON TRACK FOR SIGNIFICANT FULL YEAR PROGRESS

           

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group with leading positions in niche industrial markets, today announces its half-year results for the six months ended 31 May 2014.

 


     6 months to

   31 May



         12 months

          to 30 Nov


2014

 

 

20134

 

 

Actual

Constant

Currency1

20134

 







Revenue

£196.3m

£184.1m

+6.6%

+10.2%

£403.1m

Operating margin2

 

5.9%

5.5%

+40bps


7.8%

PBTA2

 

£8.6m

£7.0m

+22.9%

+34.9%

£25.3m

Profit before taxation (statutory)

£5.2m

£3.4m



£16.7m

Basic EPS2

 

1.86p

1.64p

+13.4%

+24.8%

5.98p

Dividend per share

0.95p

0.85p

+11.8%


2.60p

ROCE3

 

15.7%

13.9%

+180bps


16.3%

 

Highlights:

 

·      Strong sales and profit growth

·      Civil Engineering and Building Product sectors significantly ahead of weak comparatives

·      Texiplast acquisition successfully integrated and performing well

·      Interim dividend increased by 11.8% to 0.95p per share

·      Good sales momentum carried into traditionally stronger second half

·      Underlying performance on track to deliver management expectations for the full year

 

Martin Flower, Chairman, said:

 

"The Group has made a strong start to the year; constant currency sales and profits are significantly ahead of last year.  Notwithstanding currency headwinds, with good sales momentum carried into the Group's traditionally stronger second half, we remain confident that full year profits will show significant growth over last year.

 

During the last two years the Group has increased investment levels and built organisational capability to better position itself globally. We are now benefiting from these investments and expect to continue to grow and extend our geographic reach over the next two years."   

 

1 Constant currency is calculated by retranslating comparative period results at current period rates

2 Before amortisation and non-recurring items

3  Last 12 months' operating profit as a percentage of operating capital employed

4 Adjusted for IAS19 change in accounting for pensions


10th July 2014

For further information, please contact:

Low & Bonar PLC

020 7535 3180

Steve Good, Group Chief Executive


Mike Holt, Group Finance Director




Instinctif

020 7457 2020

Matthew Smallwood


Helen Tarbet


 

 

INTERIM STATEMENT

 

 

Results overview

We are pleased to report that the Group has made a strong start to the year.  Profit before tax, amortisation and non-recurring items on a constant currency basis increased by 34.9% on revenues up 10.2% on the first half of last year.

 

Strong sales growth drives significantly higher profits

In the first half of the year, constant currency sales growth excluding acquisitions was 8%. Texiplast, which was acquired in September 2013, performed in line with expectations and contributed an additional 2% to constant currency sales growth.  As anticipated, sales within Europe grew strongly, benefiting from a weak prior year comparative and a maiden contribution from Texiplast's largely European based business. Asia Pacific sales were 27% higher with good progress in China and the Middle East. After a period of strength, North American sales growth slowed as demand for our Flooring sector products became a little softer.     

 

Civil Engineering and Building Product sector sales, which had both been adversely affected by last year's long winter in Europe, rebounded and grew strongly by 14% and 18% respectively.  In the Leisure sector higher volumes of artificial grass yarns also led to a significant increase in sales and good progress in targeted niches within the Industrial sector contributed to an 8% improvement.  Overall demand in the Flooring sector was lacklustre despite a strong performance in the Asia Pacific region. Transport sector sales growth was modest. The benefit of a cyclical improvement in the trailer market was largely offset by the effect of a platform loss in the European automotive market part way through last year.

 

On a constant currency basis, Group profits increased by 35% (£2.2m) with Texiplast contributing £0.3m as expected. Operating margins rose by 40bps to 5.9%. The seeding of the Chinese market, in advance of local manufacturing, and the strong growth in lower margin artificial grass yarns sales both held back the extent of operating margin improvement in the period. However, we expect a further improvement in margins in the second half of the year.

 

The Group's sales and profits have been affected by the translation of overseas earnings, principally the US dollar and the euro, to sterling for reporting purposes. Throughout this year sterling has strengthened against all the currencies in which the Group makes its sales and profits. Following the Interim Management Statement in March, the Group's current year forecasts were re-set based on the dollar and the euro remaining at $1.65 and €1.20 to the pound for the rest of the year.  Should the current rates of $1.70 and €1.25 continue, reported sterling profits would be reduced by a further £0.5m.

 

Well positioned to execute global expansion

The Group has strong positions in attractive niche markets and remains committed to its medium-term target to grow sales at least 3% above Eurozone GDP growth, achieving operating margins of 10% and a return on capital of 17%.  In the last two years we have made significant investments and built organisational capability to accelerate growth and extend our geographic reach. We are now focused on making this happen and delivering our financial targets.

 

Last year's decision to build a local sales and technical team and distribution capability in China has significantly accelerated Bonar's growth in the APAC region and led us to commit to a £26m manufacturing investment in China which will produce products for the flooring, automotive and industrial markets by the end of 2016. Performance improvement in the Technical Coated Fabrics Division is now gaining momentum, benefiting from the recent investments made to improve operational efficiency and to augment growth through niche market focus and targeted geographic expansion.

Following the acquisition, Texiplast has performed well and in line with our expectations. The business has been fully integrated into the Bonar organisation and renamed Bonar Geosynthetics. Commercial activities have been merged into Bonar's well-invested regional sales organisation, product training has been completed, and the site has been re-organised and manufacturing capabilities improved. We are securing the commercial synergies identified at the time of the acquisition.

The Group's Saudi Arabian geotextile manufacturing facility commenced production towards the end of last year. Sales and production will build up this year, albeit slightly slower than previously anticipated, with the joint venture expected to make a material contribution to the Group results in 2015. 

 

 

On track for significant full year progress

The Group's profits are traditionally weighted towards the second half of the year and this has been further skewed following the acquisition of Texiplast which makes circa 80% of its annual profits in the second half due to the end use of its products. We have made good progress in the first half of the year and with continued sales momentum into our traditionally stronger period we remain confident of meeting management expectations for the full year.

 

New Group Chief Executive

As announced on 6 June, Brett Simpson will join the Company on 26 August and will replace Steve Good as Group Chief Executive with effect from 8 September.   Brett has extensive international experience in general management, marketing, commercial and production roles in the chemical and plastics sector which will be of great value to the Group as we embark on the next stage of our development to establish ourselves as a global performance materials business.

 

Divisional review

 

Bonar

Our Bonar division supplies products such as geosynthetics, carpet tile and automotive carpet backings, roofing components, agrotextiles and construction fibres to the civil engineering, flooring, transport, industrial and building products markets.

 


2014

 

2013

 

Actual

Constant currency(1)

Revenue

£115.1m

£111.3m

+3.4%

+6.8%

Operating profit (2)

£7.4m

£6.7m

+10.4%

+15.3%

Operating margin (2)

6.4%

6.0%

+40bps

+40bps

 

(1)         Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)         Before amortisation and non-recurring items

 

On a constant currency basis sales, excluding acquisitions, increased by 3.5%. Texiplast contributed a further 3.3% to constant currency sales growth.  Operating profits rose by 15.3% with margins improving by 40bps.

 

Civil Engineering grew strongly with sales 14% ahead of the weak prior year comparative. Texiplast contributed approximately two thirds of this increase. Building product sales grew by 13%, driven by another strong performance in the US, assisted by a recovering housing market; demand for our products in commercial building applications, however, remained subdued in Europe. Good progress in building our activities in the filtration market and new product launches helped Industrial sales advance by 6%. As anticipated, sales to the transport sector were weak following the loss of a major automotive platform part way through last year. Flooring sales, which have grown strongly over the last three years, had a disappointing start to the year. Demand remained subdued in sluggish European markets; however sales in China grew strongly supported by our recently established sales and technical service organisation in Shanghai. In the US, sales suffered from a slow, weather-impacted start to the year, and a decision by a key customer to switch from a single sourcing to a dual sourcing procurement strategy.

 

Overall, weaker demand in the Flooring market and the expected adverse mix effect of seeding the Chinese market held back divisional performance in the first half of the year. With the benefits of the Texiplast acquisition coming through and the launch of new products in the Industrial, Automotive and Flooring markets, we are confident of making good progress in the second half of the year.  The leadership team is also being strengthened to ensure that the significant number of strategic initiatives being undertaken by the division is successfully executed.

 

 

Technical Coated Fabrics

Our Technical Coated Fabrics division, Mehler Texnologies (MTX), supplies products such as side curtains for lorry trailers, advertising banners, tensioned architectural structures, awnings, marquees and containers to the transport, building products, print, leisure and industrial markets.

 

 

 

2014

 

2013

 

Actual

Constant currency(1)

Revenue

£63.3m

£58.8m

+7.7%

+11.7%

Operating profit (2)

£6.8m

£5.4m

+25.9%

+36.0%

Operating margin (2)

10.7%

9.1%

+160bps

+160bps

 

(1)         Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)         Before amortisation and non-recurring items

 

Sales in the Technical Coated Fabrics division grew by 11.7% on a constant currency basis, and operating margins improved from 9.1% to 10.7% with operating profit improving by 36% on a constant currency basis.  

 

The division had a strong first half of the year with increasing contributions from its sales growth and efficiency initiatives. Significant growth was achieved in the targeted, higher margin architecture and niche industrial sectors. Sales to the transport sector progressed well as share gains continued and the trailer market enjoyed a modest cyclical recovery. Growth rates in the print and leisure sectors improved following new product introductions.  The recent investments made in the sales and distribution organisation has produced good short-term results with sales outside of Europe growing by 29% compared to last year. MTX also made good progress in Europe where sales increased by 8% compared to the first half of last year.

 

The benefits from operational improvement measures are also building as projects to improve processes, quality, efficiencies and health and safety are systematically followed. High return capital investments of some £4m have been sanctioned in the last 12 months which are expected to support further margin improvement across the division. We anticipate the division having a good year and believe that it is well positioned to secure further value from our operational excellence and niche market growth strategies.

 

Yarns

Our Yarns division supplies yarns used in manufacture of artificial grass in sports and landscaping applications as well as yarns used as backing material in the manufacture of woven carpet installations.

 


2014

 

2013

 

Actual

Constant currency(1)

Revenue

£17.9m

£14.0m

+27.9%

+30.4%

Operating profit (2)

£(0.1)m

£0.2m



Operating margin (2)

(0.6)%

1.4%



 

(1)         Constant currency is calculated by retranslating comparative period results at current period exchange rates

(2)         Before amortisation and non-recurring items

 

Sales in the Yarns division grew strongly once again, improving 30.4% on a constant currency basis. Recently launched new grass yarns continue to improve our share in a recovering but still highly competitive market. Average selling prices were marginally lower and limited the positive effect from incremental volumes. The business has also followed a more normal production pattern this year which will result in a greater proportion of annual profits falling in the second half compared to last year. We expect to make further financial progress this year and, following the buy-out of our minority partner's stake in the Middle East, we have greater flexibility to implement additional improvement measures.

 

Amortisation and non-recurring items

The charge for amortisation of acquired intangible assets was £2.8m in the period, the same as the first half of last year.  During the period, the Group incurred £0.6m of non-recurring items, principally relating to the clean-up costs at Texiplast's site in Slovakia.  In the six months to 31 May 2013, non-recurring costs of £0.8m were incurred, most of which related to the setting up of our joint venture manufacturing facility in Saudi Arabia and a sales office in China.

 

Increased dividend

To reflect the Board's continuing confidence in the Group's future, we are declaring an interim dividend of 0.95 pence per share, an increase of 11.8% on last year, payable on 25 September 2014 to shareholders registered on 29 August 2014.

 

Cash flow and refinancing

Net debt, which is seasonally higher at the half year, increased to £103.4m from £86.8m at the start of the year. During the period, our joint venture in Saudi Arabia, Bonar Natpet, repaid £6.0m of its bridging loan and the balance of £3.1m is expected to be repaid during the second half. As noted earlier, the Group bought out the minority shareholder's interest in the Yarns business based in Abu Dhabi at a cost of £1.2m.  In comparison to last year, working capital efficiency improved to 26% compared to 27% for the first half of last year.

 

The Group successfully completed the re-financing of its revolving credit facility. The new facility, signed on
2 July, is for a term of five years with an increased availability of up to €165m with an accordion for a further €30m if required. Pricing for the new facility is 40bps lower than the old facility. In total, the Group now has committed debt funding of €210m (2013: €175m).

 

Return on capital

The Group's operating return on capital on an annualised basis was 15.7% compared to 13.9% in the first half of last year.  We expect return on capital will be close to our 17% target by the year-end. 

 

 

Martin Flower

Steve Good

Chairman

Group Chief Executive

 

10 July 2014

 

 

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, and liquidity are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business and market conditions. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements in this announcement may not occur.

Other than in accordance with its legal or regulatory obligations, the Group does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise.

 



 

LOW & BONAR PLC

Condensed Consolidated Income Statement

 


Six months ended

31 May 2014

Unaudited

Six months ended

31 May 2013

Unaudited

Year ended

30 November 2013



(restated - see Note 3)

(restated - see Note 3)


Before amortisation

Amortisation


Before amortisation

Amortisation


Before amortisation

Amortisation



and non-recurring

and non-recurring


and non-recurring

and non-recurring


and non-recurring

and non-recurring



items

 items

Total

items

 items

Total

items

 items

Total












£m

£m

£m

£m

£m

£m

£m

£m

£m











Revenue

196.3

-

196.3

184.1

-

184.1

403.1

-

403.1











Operating profit/(loss)

11.6

(3.4)

8.2

10.1

(3.6)

6.5

31.4

(8.0)

23.4











Financial income

3.7

-

3.7

4.0

-

4.0

6.7

-

6.7

Financial expense

(6.4)

-

(6.4)

(7.1)

-

(7.1)

(12.8)

-

(12.8)

Net financing costs

(2.7)

-

(2.7)

(3.1)

-

(3.1)

(6.1)

-

(6.1)

Share of results of joint venture

 

(0.3)

 

-

 

(0.3)

 

-

 

-

 

-

 

-

 

(0.6)

 

(0.6)

Profit/(loss) before taxation

8.6

(3.4)

5.2

7.0

           (3.6)          

3.4

25.3

(8.6)

16.7











Taxation

(2.4)

0.8

(1.6)

(1.9)

0.9

(1.0)

(6.7)

1.8

(4.9)

Profit/(loss) after taxation

6.2

(2.6)

3.6

5.1

(2.7)

2.4

18.6

(6.8)

11.8











Attributable to










Equity holders of the Company

6.1

(2.6)

3.5

4.8

(2.7)

2.1

18.1

(6.8)

11.3

Non-controlling interest 

 

0.1

 

-

 

0.1

 

0.3

 

-

 

0.3

 

0.5

 

-

 

0.5


6.2

(2.6)

3.6

5.1

(2.7)

2.4

18.6

(6.8)

11.8

 

Earnings per share










 










Total










Basic

1.86p


1.07p

 1.64p


 0.72p

 5.98p


 3.74p

Diluted

1.83p


1.05p

 1.60p


 0.70p

 5.86p


 3.66p


 

LOW & BONAR PLC

Condensed Consolidated Balance Sheet

 



31 May

2014

Unaudited

31 May

2013

Unaudited

30 November

2013

 


£m

£m

£m

 





Non-current assets





Goodwill


79.6

77.5

81.2

Intangible assets


30.6

35.7

34.0

Property, plant and equipment


110.0

112.1

114.2

Investment in joint venture


4.3

5.3

4.7

Investment in associate


0.5

0.5

0.4

Deferred tax assets


3.1

3.6

3.1

 


228.1

234.7

237.6

Current assets





Inventories


93.0

91.1

86.8

Trade and other receivables


83.2

82.0

81.7

Cash and cash equivalents


21.0

25.1

17.9

 


197.2

198.2

186.4

 





Current liabilities





Interest-bearing loans and borrowings


87.6

-

-

Current tax liabilities


4.1

4.2

5.4

Trade and other payables


75.4

79.8

82.9

Provisions


-

0.1

-

Derivative liabilities


-

-

0.1

 


167.1

84.1

88.4

 





Net current assets


30.1

114.1

98.0

Total assets less current liabilities


258.2

348.8

335.6

 





Non-current liabilities





Interest-bearing loans and borrowings


36.8

131.9

104.7

Deferred tax liabilities


21.7

23.0

23.2

Post-employment benefits


13.4

19.3

12.7

Other payables


1.5

1.8

1.9

 


73.4

176.0

142.5

 





Net assets


184.8

172.8

193.1

 





 





Equity attributable to equity holders of the parent




Share capital


47.3

45.7

47.2

Share premium account


73.9

58.8

73.9

Translation reserve


(41.4)

(27.4)

(36.9)

Retained earnings


99.3

89.0

102.5

Total equity attributable to





Equity holders of the parent


179.1

166.1

186.7

Non-controlling interest


5.7

6.7

6.4

Total equity


184.8

172.8

193.1

 





 



LOW & BONAR PLC

Condensed Consolidated Cash Flow Statement

 

 


Six months

Six months

Year

 

 

ended

ended

ended

 

 

31

May

2014

Unaudited

31

May

2013

Unaudited

(restated - see Note 3)

30 November 2013

 

(restated - see Note 3)

 

 

£m

£m

£m

 





Profit for the period


3.6

2.4

11.8

Adjustments for:





Depreciation


6.3

6.4

12.8

Amortisation


3.2

3.1

6.3

Income tax expense


1.6

1.0

4.9

Net financing costs


2.7

3.1

6.1

Share of results of joint venture


0.3

-

0.6

Increase in working capital


(24.0)

(16.5)

(4.8)

Non-cash pension charges


0.4

0.5

1.4

Decrease in provisions


-

-

(0.1)

Repayment of / (issue of) short-term loan to joint venture


6.0

-

(9.1)

Loss on disposal of property, plant and equipment


-

-

0.3

Equity-settled share-based payment


0.4

0.4

0.6

Cash inflow from operations


0.5

0.4

30.8

 





Net financing costs paid


(2.3)

(2.4)

(4.8)

Tax paid


(3.9)

(4.4)

(6.8)

Pension cash contributions


(0.3)

(0.2)

(4.0)

Net cash (outflow)/inflow from operating activities


(6.0)

(6.6)

15.2

 





Acquisition of subsidiaries


-

-

(15.9)

Acquisition of property, plant and equipment


(5.2)

(4.0)

(11.3)

Prepaid participation in joint ventures


-

(6.1)

-

Intangible assets purchased


(0.4)

(0.3)

(2.1)

Purchase of non - controlling interest


(1.2)

-

-

Net cash outflow from investing activities


(6.8)

(10.4)

(29.3)

 





Drawdown of borrowings


22.1

19.7

-

 

Repayment of borrowings


-

-

(8.5)

 

Proceeds of share issues


0.1

0.1

19.9

 

Equity dividends paid


(5.7)

(4.7)

(7.2)

 

Net cash inflow from financing activities


16.5

15.1

4.2

 

 


 



 

Net cash inflow / (outflow)


3.7

(1.9)

(9.9)

 

 





 

Cash and cash equivalents at start of period


17.9

26.9

26.9

 

Foreign exchange differences


(0.6)

0.1

0.9

 

 





 

Cash and cash equivalents at end of period


21.0

25.1

17.9

  

 

 

 

LOW & BONAR PLC

Condensed Consolidated Statement of Comprehensive Income








Six months

Six months

Year



ended

ended

ended



31 May

2014

Unaudited

31 May

2013

Unaudited

30 November

2013




(restated - see Note 3)

(restated - see Note 3)



£m

£m

£m






Profit for the period


3.6

2.4

11.8






Other comprehensive (expense) / income





Items that may be reclassified subsequently to profit or loss:





Exchange differences on translation of foreign operations, net of hedging


 

(4.8)

 

10.0

 

0.1






Items that will not be reclassified to profit or loss:





Actuarial (loss) /gain on defined benefit pension scheme


 

(0.6)

 

6.8

 

10.4

Deferred tax on defined benefit pension schemes


-

-

(0.4)






Total other comprehensive (expense) / income for the period, net of tax


 

(5.4)

 

16.8

 

10.1

Total comprehensive (expense) / income for the period


 

(1.8)

 

19.2

 

21.9

 





Attributable to





Equity holders of the parent


(1.6)

18.5

21.5

Minority interest


(0.2)

0.7

0.4

 


(1.8)

19.2

21.9

 

 

Condensed Consolidated Statement of Changes in Equity








Six months

Six months

Year



ended

ended

ended



31 May

2014

Unaudited

31 May

2013

Unaudited

30 November

2013



£m

£m

£m






Shareholders' equity at start of period


186.7

151.9

151.9

 





Total comprehensive (expense) / income for the period


 

(1.6)

 

18.5

 

21.5

Dividends paid to Ordinary Shareholders


(5.7)

(4.7)

(7.2)

Shares issued


-

3.5

19.9

Share-based payment


0.4

(3.1)

0.6

Purchase of non-controlling interest


(0.7)

-

-

Net (decrease) / increase in shareholders' funds


(7.6)

14.2

34.8






Shareholders' equity at end of period


179.1

166.1

186.7











 

 

 

LOW & BONAR PLC 

Notes on Interim Report 2014

 

Responsibility Statement

 

We confirm that to the best of our knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

·      the interim report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

 

 

By order of the Board

 

 

By order of the Board

Steve Good

Mike Holt

Group Chief Executive

Group Finance Director

10 July 2014

10 July 2014

 

 



LOW & BONAR PLC

Notes on Interim Report 2014

 

1.        Segmental information for the six months ended 31 May 2014

The Group's principal activities are in the international manufacturing and supply of those performance materials commonly referred to as technical textiles. For the purposes of management reporting to the chief operating decision maker, the Group is organised into three reportable operating divisions: Bonar, Technical Coated Fabrics and Yarns. Financial information for each operating division is also available in a disaggregated form in line with the identified cash generating units. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis.

 

Unallocated items comprise mainly cash and cash equivalents, intangible assets and goodwill, interest-bearing loans, borrowings, investments in joint ventures and associates, post-employment benefits and corporate assets and expenses Inter-segment sales are not material.


 

 

Bonar

Technical Coated Fabrics

 

 

Yarns

 

Unallocated Central

 

 

Total


£m

£m

£m

£m

£m







 

Revenue from external customers

 

115.1

 

63.3

 

17.9

 

-

 

196.3







Operating profit  /(loss) before amortisation and non-recurring items

7.4

6.8

 

(0.1)

(2.5)

11.6

Amortisation of acquired intangible assets

(1.4)

(1.4)

-

-

(2.8)

Operating profit / (loss) before non-recurring items

6.0

5.4

(0.1)

(2.5)

8.8

Non-recurring items

(0.4)

-

-

(0.2)

(0.6)

Operating profit / (loss)

5.6

5.4

(0.1)

(2.7)

8.2

Financial Income





3.7

Financial Expense





(6.4)

Net financing costs





(2.7)

Share of results of joint venture





(0.3)

Profit before taxation





5.2

Taxation





(1.6)

Profit for the period





3.6







Reportable segment assets

164.7

91.0

30.0

-

285.7

Intangible assets and goodwill





110.2

Investment in joint venture





4.3

Investment in associate





0.5

Cash and cash equivalents





21.0

Other unallocated assets





3.6

Total Group assets





425.3







Reportable segment liabilities

(45.6)

(22.1)

(8.8)

-

(76.5)

Loans and borrowings





(124.4)

Post-employment benefits





(13.4)

Other unallocated liabilities





(26.2)

Total Group liabilities





(240.5)







Other information






Additions to property, plant and equipment

3.9

0.6

0.2

-

4.7

Additions to intangible assets and goodwill

0.2

0.2

-

-

0.4

Depreciation 

4.1

1.8

0.4

-

6.3









 

LOW & BONAR PLC

Notes on Interim Report 2014

 

Segmental information for the six months ended 31 May 2013

 


 

 

Bonar

Technical Coated Fabrics

 

 

Yarns

 

Unallocated Central

 

 

Total


£m

£m

£m

£m

£m






(restated - see Note 3)

 

Revenue from external customers

 

111.3

 

58.8

 

14.0

 

-

 

184.1







Operating profit / (loss) before amortisation and non-recurring items

6.7

5.4

 

0.2

(2.2)

10.1

Amortisation of acquired intangible assets

(1.3)

(1.5)

-

-

(2.8)

Operating profit / (loss) before non-recurring items

5.4

3.9

0.2

(2.2)

7.3

Non-recurring items

(0.4)

-

-

(0.4)

(0.8)

Operating profit / (loss)

5.0

3.9

0.2

(2.6)

6.5

Financial Income





4.0

Financial Expense





(7.1)

Net financing costs





(3.1)

Share of results of joint venture





-

Profit before taxation





3.4

Taxation





(1.0)

Profit for the period





2.4







Reportable segment assets

166.3

87.7

30.6

-

284.6

Intangible assets and goodwill





113.2

Investment in joint venture





5.3

Investment in associate





0.5

Cash and cash equivalents





25.1

Other unallocated assets





4.2

Total Group assets





432.9







Reportable segment liabilities

(49.9)

(21.8)

(9.6)

-

(81.3)

Loans and borrowings





(131.9)

Derivative liabilities





-

Post-employment benefits





(19.3)

Other unallocated liabilities





(27.6)

Total Group liabilities





(260.1)







Other information






Additions to property, plant and equipment

2.7

0.8

0.5

-

4.0

Additions to intangible assets and goodwill

0.3

-

-

-

0.3

Depreciation 

4.2

1.8

0.4

-

6.4







Reconciliation of revenues at constant exchange rates




Revenue at average exchange rates prevailing in the period

 

111.3

 

58.8

 

14.0

 

-

 

184.1

Adjustment to restate at average exchange rates prevailing in the six months ended 31 May 2014

 

 

(3.6)

 

 

(2.1)

 

 

(0.3)

 

 

-

 

 

(6.0)

Revenue restated at constant exchange rates

107.7

56.7

13.7

-

178.1













 

 

 

 

LOW & BONAR PLC

Notes on Interim Report 2014

 

Segmental information for the year ended 30 November 2013


 

 

Bonar

Technical Coated Fabrics

 

 

Yarns

 

Unallocated Central

 

 

Total


£m

£m

£m

£m

£m






(restated - see Note 3)

 

Revenue from external customers

245.6

124.7

32.8

-

403.1







Operating profit / (loss) before amortisation and non-recurring items

23.0

12.1

0.5

(4.2)

31.4

Amortisation of acquired intangible assets

(2.7)

(2.9)

-

-

(5.6)

Operating profit /(loss) before non-recurring items

20.3

9.2

0.5

(4.2)

25.8

Non-recurring items

(2.1)

-

-

(0.3)

(2.4)

Operating profit / (loss)

18.2

9.2

0.5

(4.5)

23.4

Financial Income





6.7

Financial Expense





(12.8)

Net financing costs





(6.1)

Share of results of joint venture





(0.6)

Profit before taxation





16.7

Taxation





(4.9)

Profit for the year





11.8







Reportable segment assets

168.1

86.5

27.7

-

282.3

Intangible assets and goodwill





115.2

Investment in joint venture





4.7

Investment in associate





0.4

Cash and cash equivalents





17.9

Other unallocated assets





3.5

Total Group assets





424.0







Reportable segment liabilities

(52.2)

(23.5)

(8.5)

-

(84.2)

Loans and borrowings





(104.7)

Post-employment benefits





(12.7)

Derivative liabilities





(0.1)

Other unallocated liabilities





(29.2)

Total Group liabilities





(230.9)







Other information






Additions to property, plant and equipment

6.2

4.5

0.6

0.3

11.6

Additions to intangible assets and goodwill

8.3

0.2

-

-

8.5

Depreciation 

8.3

3.7

0.8

-

12.8







Reconciliation of revenues at constant exchange rates




Revenue at average exchange rates prevailing in the year

245.6

124.7

32.8

-

403.1

Adjustment to restate at average exchange rates prevailing in the six months ended 31 May 2014

 

 

(9.3)

 

 

(4.8)

 

 

(0.8)

 

 

-

 

 

(14.9)

Revenue restated at constant exchange rates

236.3

119.9

32.0

-

388.2















LOW & BONAR PLC

Notes on Interim Report 2014

 

Geographical information


External revenue by location of customers

Non-current assets by location of assets


Six months ended

31 May

2014

Six months ended

31 May

2013

Year ended 30 November

2013

31 May

2014

31 May

2013

30 November

2013


£m

£m

£m

£m

£m

£m








Western Europe

114.2

108.7

238.0

181.8

182.6

189.5

Eastern Europe

17.9

13.7

33.2

9.4

10.3

10.0

North America

33.9

35.4

74.8

21.9

24.7

22.9

Middle East

11.9

7.8

17.9

6.9

8.1

7.2

Asia

11.5

11.0

23.2

5.0

5.4

4.9

Rest of the World

6.9

7.5

16.0

-

-

-









196.3

184.1

403.1

225.0

231.1

234.5








Revenues arising in the UK, which is the parent company's country of domicile, were £12.6m (six months ended 31 May 2013: £10.7m; year ended 30 November 2013: £24.3m).  The net book value of non-current assets located in the UK at 31 May 2014 was £1.1m (31 May 2013: £2.8m; 30 November 2013: £0.9m).  More than 10% of the Group's revenues arose in Germany.  The net book value of non-current assets located in Germany at 31 May 2014 was £81.0m (31 May 2013: £89.0m; 30 November 2013: £85.2m) and revenues arising in Germany in the period ended 31 May 2014 were £34.5m (six months ended 31 May 2013: £31.0m; year ended 30 November 2013: £71.1m).

 

2.               General information

Low & Bonar PLC is a company domiciled and incorporated in Scotland. The interim condensed consolidated financial statements (the 'interim financial statements') of the Company as at and for the six months ended 31 May 2014 comprise the Company and its subsidiaries (together the 'Group') and the Group's interests in its associates and joint ventures. The consolidated financial statements of the Group as at and for the year ended 30 November 2013 are available on request from the Company's head office or from the Group's website at www.lowandbonar.com.

 

3.               Basis of preparation

The interim financial statements are prepared in accordance with IAS 34, 'Interim Financial Reporting', as endorsed and adopted for use in the European Union. This interim condensed consolidated financial information has not been audited or reviewed by the Group's auditors in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board.  The information has been prepared on the basis of accounting policies consistent with those applied in the consolidated financial statements for the year ended 30 November 2013, except as noted below. 

·   The Group has adopted the Amendments to IAS 19 'Employee Benefits', which has altered the recognition requirements for the Group's defined benefit plans. The impact of the adoption of this standard can be seen further on in Note 3..

·   The Group has adopted IFRS 13 'Fair Value Measurement'. This is a standard to replace existing guidance on fair value measurement in different IFRSswith a single definition of fair value, a framework for measuring fair values and disclosures about fair value measurements. The adoption of this standard has had no significant impact.

The interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements for the Group as at and for the year ended 30 November 2013. 



 

LOW & BONAR PLC

Notes on Interim Report 2014

IAS 19 'Employee Benefits' - restatement

As a result of the amendment to IAS 19 Employee Benefits, the Group has changed its accounting policy with respect to determining the income or expense related to its defined benefit scheme.  The revised standard requires retrospective application, therefore the narrative below reflects the adjustments made to the comparative amounts for the year ended 30 November 2013 and six months ended 31 May 2013.

The impact from the revision of the accounting policy is that operating profit and profit before tax, amortisation and non-recurring items as at 30 November 2013 are £0.8m lower (six months ended 31 May 2013: £0.4m lower); and statutory operating profit and profit before tax are £1.1m lower (six months ended 31 May 2013: £0.6m lower); due to:

•  pension administration costs of £1.1m (six months ended 31 May 2013: £0.6m), which were previously reported within financing costs, being reclassified into administrative expenses.  £0.8m of these costs  (six months ended 31 May 2013: £0.4m) have been charged against operating profit before tax, amortisation and non-recurring items, and £0.3m (six months ended 31 May 2013: £0.2m) against non-recurring items, due to the nature of the costs concerned; and

•  financing costs are £1.1m higher (six months ended 31 May 2013: £0.6m higher), due to the interest cost and expected return on scheme assets being replaced by a single net interest charge, calculated by applying the discount rate to the net defined benefit liability.

 

Correspondingly, actuarial gains in the Consolidated Statement of Comprehensive Income increased by £1.1m for the year ended 30 November 2013 (six months ended 31 May 2013: increased by £0.6m). The tax impact of the restatement is a reduction in the income statement tax charge of £0.1m for the year to 30 November 2013 (six months ended 31 May 2013: reduction of £0.1m) and a corresponding increase in the tax charge in the Consolidated Statement of Comprehensive Income.

 

Due to the restatement, earnings per share for the year ended 30 November 2013 (based on earnings before amortisation and non-recurring items) reduced to 5.98p from the 6.23p previously reported (six months ended 31 May 2013: reduced to 1.64p from 1.74p previously reported).

Other information

The comparative figures for the financial year ended 30 November 2013 are not the Company's statutory accounts for that financial year as defined in section 434 of the Companies Act 2006. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial statements are presented in Pounds Sterling, rounded to the nearest hundred thousand Pounds. They are prepared on the historical cost basis except for the valuation to fair value of certain financial instruments.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Except as described above, in preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation were the same as those applied to the consolidated financial statements as at and for the year ended 30 November 2013.

Included within the Other Receivables balance is £3.5m owed by Bonar Natpet LLC, a joint venture, £3.1m of which relates to a bridging loan with the Group (30 November 2013: £9.1m).  Note 11 also sets out the detail of the transaction undertaken in May 2014 to purchase the non-controlling interest in Bonar Emirates Technical Yarns Industries LLC. Other than these transactions, there have been no related party transactions or changes in related party transactions described in the latest annual report that could have a material effect on the financial position or performance of the Group in the first six months of the financial year.

 

LOW & BONAR PLC

Notes on Interim Report 2014

Other Information (continued)

The Group's business has a seasonal bias towards the second half of the financial year due to higher levels of infrastructure and civil engineering spend in the Northern hemisphere summer period. 

This interim report was approved by the Board of Directors on 10 July 2014.

 

4.               Taxation

Taxation on profit / (loss) before taxation, amortisation, non-recurring items and share of results of joint ventures has been provided at a rate of 26.5% for the six months ended 31 May 2014 which is the estimated rate of tax for the full year (six months ended 31 May 2013: 27%; year ended 30 November 2013: 26%). 

 

5.               Dividend

The Board has declared an interim ordinary dividend of 0.95p per share payable on 25 September 2014 to Ordinary Shareholders on the register of members at close of business on 29 August 2014.  In accordance with IAS 10 "Events after the Balance Sheet Date", this dividend has not been reflected in the interim accounts.  During the period a final dividend of 1.75p was paid to Ordinary Shareholders in respect of the financial year ended 30 November 2013.

 

6.               Earnings per share

Basic earnings per share and earnings per share before amortisation and non-recurring items are based on the weighted average number of Ordinary Shares in issue during the half year. The calculation of fully-diluted earnings per share is based on the weighted average number of Ordinary Shares in issue plus the dilutive effect of outstanding share options and the Low & Bonar 2003 Long-Term Incentive Plan (the '2003 LTIP') awards (to the extent to which performance criteria had been achieved at 31 May 2014).

During the period 1,169,271 ordinary shares were issued (six months ended 31 May 2013: 4,831,846 ordinary shares were issued; year ended 30 November 2013: 35,378,808 ordinary shares issued (including 29,626,000 from the share placing)).

The weighted average number of Ordinary Shares and diluted weighted average number of Ordinary Shares are set out below.



31 May

2014

31 May

2013

30 November

2013


(millions)

(millions)

(millions)

    





Weighted average number of shares


326.486

292.388

301.035

Effect of dilutive items


5.824

7.430

7.249

Diluted weighted average number of shares


332.310

299.818

308.284






The directors consider that the calculation of earnings per share before amortisation and non-recurring items gives a more meaningful indication of the Group's underlying performance.  For the six months ended 31 May 2014, the basic EPS measure was 1.86p per share (six months ended 31 May 2013 (restated): 1.64p; year ended 30 November 2013 (restated): 5.98p).



 

LOW & BONAR PLC

Notes on Interim Report 2014

 

7.               Amortisation and non-recurring items

 

 


Six months
Six months
Year

 


ended

ended

ended

 


31 May

2014

31 May

2013

30 November 2013

 


£m

£m

£m

 


 

(restated - see Note 3)

(restated - see Note 3)

Amounts charged to operating profit


 

 

 

Joint venture start-up costs


-

0.3

0.6

China office set-up costs


-

0.1

0.3

Acquisition related costs


0.1

-

1.0

Reorganisation costs


-

0.2

0.2

Site clean-up costs


0.4

-

-

Non-recurring pension admin costs


0.1

0.2

0.3

Total non-recurring items


0.6

0.8

2.4

Amortisation of acquired intangible assets


2.8

2.8

5.6

Total charge to operating profit


3.4

3.6

8.0

Share of results of joint venture


-

-

0.6

Total charge to profit before tax


3.4

3.6

8.6



 

 


Current period

During the period the Group incurred £0.4m  of site clean-up costs in its recently acquired Slovakian operation, Bonar Geosynthetics a.s. (formerly Texiplast a.s) (six months ended 31 May 2013: £nil; year ended 30 November 2013: £nil). These costs were incurred to ensure that the site meets the Group's health, safety and environmental standards.

As discussed in Note 3, the amendment to IAS 19 Employee Benefits has resulted in administration costs of running the Group's pension schemes being reported in operating profit. Due to the nature of the costs, £0.1m have been recorded as non-recurring items (six months ended 31 May 2013: £0.2m; year ended 30 November 2013: £0.3m).

£0.1m of other acquisition costs were also incurred in relation to other potential acquisitions.

Prior period

During the year ended 30 November 2013, the Group incurred £0.6m (six months ended 31 May 2013: £0.3m) of costs in respect of its joint venture in Saudi Arabia.  The Group also incurred a £0.6m loss (six months ended 31 May 2013: £nil) in the year from their share of the results of the joint venture, Bonar Natpet LLC.

The Group also incurred £1.0m of costs in the year ended 30 November 2013 (six months ended 31 May 2013: £nil) in connection with the acquisition of Bonar Geosynthetics a.s. and in connection with another potential acquisition.

 

In the year ended 30 November 2013, £0.2m (six months ended 31 May 2013: £0.2m) of costs were incurred in relation to the integration of the Group's principal Performance Technical Textile operations into a single business, Bonar and £0.3m of initial costs in relation to the set-up of a wholly owned subsidiary in China, L&B Shanghai Trading Co were incurred (six months ended 31 May 2013: £0.1m).



 

LOW & BONAR PLC

Notes on Interim Report 2014

 

8.               Pensions and other post-employment assets and liabilities

The Group operates a number of pension schemes in the UK and overseas. These are either defined benefit or defined contribution in nature. The assets of the schemes are held separately from those of the Group.

The movement in the Group's UK and overseas defined benefit schemes' deficits in the six months ended 31 May 2014 is summarised below.

 

 
UK schemes
 
Overseas schemes

Six months ended 31 May 2014

Total

Six months ended 31 May 2013

Total

Year ended 30 November 2013

Total

 

£m

£m

£m

£m

£m

 




(restated - see Note 3)

(restated - see Note 3)

Net liability at start of period

 

(3.8)

 

(8.9)

 

(12.7)

 

(24.8)

 

(24.8)

Current service cost

-

(0.1)

(0.1)

0.1

(0.3)

Interest cost

(0.1)

(0.1)

(0.2)

(0.5)

(0.8)

Contributions from employers  

-

0.3

0.3

0.2

00.2

4.0

4.0

Administration costs

(0.3)

-

(0.3)

(0.6)

(1.1)

Actuarial (loss) / gain

(0.6)

-

(0.6)

6.8

10.4

Exchange adjustments

-

0.2

0.2

(0.5)

(0.1)

Net liability at end of period             

 

(4.8)

 

(8.6)

 

(13.4)

 

(19.3)

 

(12.7)

 

9.               Reconciliation of net cash flow to movement in net debt

 


 
Six months
 
Six months
 
Year

 


ended

ended

ended

 


31 May

2014

31 May

2013

30 November 2013

 


£m

£m

£m

Net increase / (decrease) in cash and cash equivalents


3.7

(1.9)

(9.9)

Net cash flow from movements in debt financing


(22.1)

(19.7)

8.5

Amortisation of bank arrangement fees


(0.2)

(0.2)

(0.5)

Foreign exchange differences


2.0

(2.4)

(2.3)

Movement in net debt in period


(16.6)

(24.2)

(4.2)

Net debt at start of period


(86.8)

(82.6)

(82.6)

Net debt at end of period


(103.4)

(106.8)

(86.8)



 

 


Derivative liabilities


-

-

(0.1)

Total net debt and derivative liabilities


(103.4)

(106.8)

(86.9)

 



31 May 2014

31 May

2013

30 November 2013



£m

£m

£m

Analysis of net debt


 

 


Cash at bank and in hand


21.0

25.1

17.9

Bank loans and overdrafts falling due within one year


 

           (87.8)

 

-

 

-

5.9% €45m Senior Note due 2016


(36.6)

(38.5)

(37.4)

Bank loans and overdrafts falling due after more than one year


 

-

 

(93.9)

 

(67.5)

Prepaid arrangement fees


0.4

0.9

0.6

Preference shares


(0.4)

(0.4)

(0.4)

Net debt


(103.4)

(106.8)

(86.8)



 

 


 

LOW & BONAR PLC

Notes on Interim Report 2014

 

10.             Fair Value of financial instruments

 

Estimation of fair value

The major methods and assumptions used in estimating the fair values of financial instruments are summarised as follows.

 

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

 

Trade and other receivables/payables

The fair value of trade and other receivables and trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

 

Interest-bearing financial assets and liabilities

The fair value of interest-bearing assets and liabilities that bear interest at floating rates approximates to their carrying value. The fair value of the fixed interest financial liabilities is determined by discounting future contracted cash flows, using appropriate yield curves, to their net present value.

 

Forward exchange contracts

The fair value of forward foreign exchange contracts is based on their publicly available market price. If this is not available, forward contracts are marked to market based on the current spot rate.

 

All financial instruments have been measured using a Level 2 valuation method.

 

11.              Purchase of non-controlling interest

 

On 11 May 2014, the Group purchased the non-controlling interest in Bonar Emirates Technical Yarns Industries LLC for a cash consideration of $2m (£1.2m).  As this was a transaction with minority equity owners of the business without a change of control, it has been recognised as an equity transaction in the Group's reserves and not as a business combination or investment. Directly attributable costs of £0.1m have been recorded in equity.

As a result of the purchase of this non-controlling interest, the financial statements show no non-controlling interest in the Condensed Consolidated Balance Sheet in relation to Bonar Emirates Technical Yarns Industries LLC and record a non-controlling share of profits only up to 11 May 2014, being £0.0m.


 

12.            Risks and uncertainties

The Board has considered the principal risks and uncertainties affecting the Group in the second half of the year.  The Group has in place processes for identifying, evaluating and managing key risks.  The principal risks and uncertainties, together with the approach to their mitigation, are discussed in the Business Review on pages 22 and 23 of the 2013 Annual Report, which is available on the Group's website at www.lowandbonar.com, remain relevant and there are no significant changes.  In summary, the Group's principal risks and uncertainties are:

·      Global economic activity

·      Employees

·      Growth strategy

·      Funding risks

·      Organic growth and competition

·      Cyber security

·      Treasury risks

·      Pension funding

·      Business continuity

·      Laws and regulations

·      Raw material pricing


The Directors have reviewed the Group's medium-term forecasts along with possible changes in trading performance arising from these uncertainties to determine whether the Group's committed banking facilities are sufficient to support its projected liquidity requirements and whether the forecast earnings are sufficient to meet the covenants associated with its facilities.  The Directors believe that the Group's current committed borrowing facilities, which comprise a €165m revolving loan facility maturing in July 2019 and a €45m private placement note maturing in September 2016 are sufficient to support the current requirements of the Group, and that the Group will continue to operate within the associated covenants.

After making enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the interim financial statements.

 


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Half Yearly Report - RNS