REG - Macfarlane Group PLC - Half Yearly Report <Origin Href="QuoteRef">MACF.L</Origin> - Part 2
29/10/2014 15:47
- Part 2: For the preceding part double click ID:nRSb1750Qa
997 (294) 1,291
3. Segmental information (continued) Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Group segment - total revenue
Packaging Distribution 56,978 54,896 116,280
Manufacturing Operations 15,767 15,121 32,180
Inter-segment revenue (2,599) (1,924) (4,589)
External revenue - continuing operations 70,146 68,093 143,871
Operating profit - continuing operations
Packaging Distribution 1,514 1,535 4,918
Manufacturing Operations 221 475 997
Operating profit 1,735 2,010 5,915
Net finance costs (see note 5) (516) (599) (1,199)
Profit before tax 1,219 1,411 4,716
Tax (see note 6) (257) (409) (1,260)
Profit for the period 962 1,002 3,456
The Packaging Distribution business has historically benefited from additional
demand in the final months of the year, resulting in revenue and profitability
at higher levels in the second half of the year.
30 June2014£000 30 June2013£000 31 December2013£000
Total assets
Packaging Distribution 69,314 68,280 68,493
Manufacturing Operations 14,245 13,087 13,371
Total assets 83,559 81,367 81,864
Net assets
Packaging Distribution 18,784 17,887 19,949
Manufacturing Operations 6,724 7,080 6,475
Net assets 25,508 24,967 26,424
4. Exceptional items Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to31 December2013£000
Property costs for vacated premises - (193) (336)
Tax thereon - 5 5
Exceptional items after tax - (188) (331)
During 2013 the Group incurred exceptional costs of £0.3 million to terminate
the leases for surplus properties to minimise future costs and took a
write-down against its owned property to reflect the latest assessment of
realisable value. This represents a continuation of our proactive approach to
reducing ongoing property costs and exposures.
Exceptional items are those transactions that are material to the income
statement and their separate disclosure is necessary for an appropriate
understanding of the Group's financial performance.
5. Finance income and finance costs Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Interest on bank loans and overdrafts (201) (206) (418)
Interest on obligations under finance leases (1) (3) (6)
Net interest expense on retirement benefit obligation (See note 11) (314) (390) (775)
Total finance costs (516) (599) (1,199)
Net finance costs (516) (599) (1,199)
6. Tax Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Current tax
UK corporation tax - (105) (806)
Overseas tax (79) (16) (62)
Prior year adjustments 42 12 11
Total current tax (37) (109) (857)
Total deferred tax (See note 12) (220) (300) (403)
Total (257) (409) (1,260)
Tax for the first six months has been charged at 23.5% (2013 - 25.8%)
representing the best estimate of the effective tax charge for the full year.
7. Dividends Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Amounts recognised as distributions to equity holders in the period
Final Dividend (1.10p per share) (2013 1.05p per share) 1,265 1,202 1,202
Interim Dividend (2013 0.50p per share) - - 572
Distributions in the period 1,265 1,202 1,774
Dividends were not paid on the Own shares held in the Employee Share Ownership
Trust.
The dividend of 0.50p per share, payable on 16 October 2014 was declared on 28
August 2014 and has therefore not been included as a liability in these
condensed financial statements.
8. Earnings per share Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Earnings
Earnings from continuing operations for the purposes of basic earnings per share being net profit attributable to equity holders of the parent 962 1,002 3,456
30 June2014 30 June2013 31 December 2013
Number of shares '000
Weighted average number of ordinary shares in issue 115,019 115,019 115,019
Weighted average number of Own shares in Employee Share Ownership Trust (368) (1,141) (846)
Weighted average number of shares in issue for the purposes of basic earnings per share 114,651 113,878 114,173
Effect of dilutive potential ordinary shares due to share options - 41 96
Weighted average number of shares in issue for the Purposes of diluted earnings per share 114,651 113,919 114,269
Earnings per share 0.84p 0.88p 3.03p
9. Acquisition of subsidiary
On 2 May 2014, the Group acquired 100% of the issued share capital of PSD
Industrial Holdings Limited, the immediate parent company of Lane Packaging
Limited, for a consideration of approximately £0.9 million. £0.7 million of
the consideration was paid in cash on acquisition, with the remainder
comprising deferred consideration which will become payable in the second
quarter of 2015, subject to certain trading targets being met in the year to
30 April 2015. The business is a Packaging Distributor and is accounted for
in the Packaging Distribution segment.
The fair values assigned to the assets acquired, which are equivalent to book
values, and the consideration paid and provisional estimate of the deferred
consideration payable are set out below:-
30 June2014£000
Net assets acquired
Other intangible assets 663
Property, plant and equipment 76
Inventories 72
Trade and other receivables 453
Bank loans and overdrafts (532)
Trade and other payables (681)
Current tax liabilities (16)
Finance lease liabilities (56)
Deferred tax liabilities (133)
Net assets acquired (154)
Goodwill arising on acquisition 1,001
Total consideration 847
Satisfied by:
Cash 684
Deferred consideration 163
Total consideration 847
Net cash outflow arising on acquisition
Cash consideration (684)
Bank loans and overdrafts acquired (532)
Net cash outflow (1,216)
The goodwill arising on the acquisition of Lane Packaging Limited is
attributable to the anticipated future profitability of the distribution of
the Group's product ranges in new geographical markets in the UK and
anticipated operating synergies from the future combination of activities with
the existing Packaging Distribution network.
Lane Packaging Limited contributed £0.5 million to revenue and £19,000 to the
Group's profit before tax for the period between the date of acquisition and
30 June 2014.
10. Notes to the cash flow statement Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Operating profit before exceptional items 1,735 2,203 6,251
Adjustments for:
Amortisation of intangible assets 147 143 295
Depreciation of property, plant and equipment 487 514 1,036
Profit on disposal of property, plant and equipment (35) (24) (12)
Operating cash flows before movements in working capital 2,334 2,836 7,570
(Increase)/decrease in inventories (1,224) (1,048) 189
Decrease/(increase) in receivables 1,069 1,941 (809)
(Decrease)/increase in payables (784) 60 765
Decrease in provisions (30) (500) (693)
Adjustment for pension scheme funding - recurring funding (1,395) (1,529) (2,493)
Cash (absorbed by)/generated by operations (30) 1,760 4,529
Income taxes paid (385) (275) (678)
Interest paid (202) (211) (424)
Net cash (outflow)/inflow from operating activities (617) 1,274 3,427
Movement in net debt
(Decrease)/increase in cash and cash equivalents in period (5,740) (409) 783
Cash flows from lease financing 35 63 126
Movement in net debt in the period (5,705) (346) 909
Opening net debt (5,915) (6,824) (6,824)
Closing net debt (11,620) (7,170) (5,915)
Net debt comprises:-
Cash and cash equivalents 258 315 477
Bank overdraft (2,824) (1,389) (359)
Cash and cash equivalents in statement of cash flows (2,566) (1,074) 118
Bank loans (9,000) (6,000) (6,000)
Net bank debt (11,566) (7,074) (5,882)
Obligations under finance leases
Due within one year (16) (96) (33)
Due outwith one year (38) - -
Closing net debt (11,620) (7,170) (5,915)
Cash and cash equivalents (which are presented as a single class of asset on
the face of the balance sheet) comprise cash at bank and other short-term
highly liquid investments with maturity of three months or less.
The drawdown under our new bank facility comprised £11.8 million at 30 June
2014. £9.0m of funding drawn down is considered to represent loan finance due
to the intended purpose for which it was drawn, with the remaining £2.8m
financing short-term movements in working capital. For the purposes of the
cash flow statement, £9.0m has been presented as bank loans and £2.8m
presented as overdraft funding and included in cash and cash equivalents.
The loans in 2013 totalling £6.0m were refinanced in February 2014 as set out
in note 1.
11. Retirement benefit obligations
The figures below have been prepared by AON Hewitt and are based on the
results of the triennial actuarial valuation as at 1 May 2011, updated to 30
June 2014, 30 June 2013 and 31 December 2013. The assets in the scheme and
the net liability position of the scheme as calculated under IAS 19 are as
follows:
Investment class 30 June2014£000 30 June2013£000 31 December2013£000
Equities
UK equities and equity funds 5,486 7,554 5,790
Overseas equity funds 9,654 8,170 9,289
Multi-asset diversified funds 17,974 13,436 16,414
Bonds
Liability Driven Investment funds 15,516 - -
Government gilt funds (fixed interest) - 8,173 8,128
Government gilt funds (index-linked) - 4,937 4,918
Corporate bond fund 10,082 9,180 9,488
Other
Cash 220 632 211
Fair value of assets 58,932 52,082 54,238
Present value of scheme liabilities (72,117) (68,869) (70,134)
Pension scheme deficit (13,185) (16,787) (15,896)
Deferred tax asset (see note 12) 2,637 3,861 3,179
Pension scheme deficit net of related deferred tax asset (10,548) (12,926) (12,717)
These amounts were calculated using the following principal assumptions as
required under IAS 19:
Assumptions 30 June 2014 30 June 2013 31 December 2013
Discount rate 4.30% 4.60% 4.50%
Rate of increase in salaries 0.00% 0.00% 0.00%
Rate of increase in pensions in payment 3% or 5% for fixed increases or 3.30% for LPI 3% or 5% for fixed increases or 2.90% for LPI 3% or 5% for fixed increases or 3.30% for LPI
Inflation assumption (RPI) 3.30% 3.40% 3.40%
Inflation assumption (CPI) 2.40% 2.50% 2.50%
Life expectancy beyond normal retirement age of 65
Male 22.7 years 22.6 years 22.6 years
Female 25.1 years 24.9 years 25.1 years
25.1 years
Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Movement in scheme deficit in the period
At start of period (15,896) (18,898) (18,898)
Current service costs (67) (73) (148)
Contributions from sponsoring companies 3,962 1,529 2,748
Net finance cost (314) (390) (775)
Remeasurement of net pension scheme liability in the period (870) 1,045 1,177
At end of period (13,185) (16,787) (15,896)
Sensitivity to key assumptions
The key assumptions used for IAS 19 are discount rate, inflation and
mortality. If different assumptions were used, then this could have a
material effect on the results disclosed. Assuming all other assumptions are
held static then a movement in the following key assumptions would affect the
level of the deficit as shown below:-
Assumptions Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Discount rate movement of +0.1% 1,226 1,192 1,192
Inflation rate movement of +0.1% (288) (281) (281)
Mortality movement of +0.1 year in age rating 238 231 231
The sensitivity information has been prepared using the same method as adopted
when adjusting the results of the latest funding valuation to the balance
sheet date and is consistent with the approach adopted in previous years.
Six monthsto 30 June2014£000 Six monthsto 30 June2013£000 Year to 31December2013£000
Movement in fair value of scheme assets
Scheme assets at start of period 54,238 51,349 51,349
Interest income 1,245 1,122 2,241
Return on scheme assets (exc. amounts shown in interest income) 1,221 7 1,469
Contributions from sponsoring companies 3,962 1,529 2,748
Contributions from scheme members 38 36 70
Benefits paid (1,772) (1,961) (3,639)
Scheme assets at end of period 58,932 52,082 54,238
Movement in present value of defined benefit obligations
Obligations at start of period (70,134) (70,247) (70,247)
Current service costs (67) (73) (148)
Interest cost (1,559) (1,512) (3,016)
Contributions from scheme members (38) (36) (70)
Changes in assumptions underlying the defined benefit obligations (2,091) 1,038 (292)
Benefits paid 1,772 1,961 3,639
Obligations at end of period (72,117) (68,869) (70,134)
Investments
The trustees, in co-operation with the Group, have changed the profile of the
pension scheme's investments in recent years to provide a more effective match
against the pension scheme liabilities. As a result, despite the reductions
in bond yields in the first half of 2014 causing an increase in liabilities,
improved investment returns have helped offset this.
Funding
UK pension legislation requires that pension schemes be funded prudently.
Macfarlane Group PLC is currently paying deficit reduction contributions in
accordance with an agreement with the scheme trustees to reduce the deficit
over 13 years.
The triennial actuarial valuation of the scheme due at 1 May 2014 is currently
in progress.
12. Deferred tax 30 June2014£000 30 June20133000 31 December2013£000
Deferred tax asset on pension scheme deficit
At start of period 3,179 4,346 4,346
Credit/(charge) on actuarial movement in the period applied through statement of comprehensive income 174 (239) (271)
Charge on actuarial deficit in the period due to long-term corporation tax rate change applied through statement of comprehensive income - - (476)
Charge through income statement based on payments made to reduce deficit in the period (716) (246) (420)
Deferred tax asset on pension scheme deficit (see note 11) 2,637 3,861 3,179
Deferred tax assets on other timing differences 915 451 449
Deferred tax asset at end of period 3,552 4,312 3,628
Deferred tax asset on other timing differences
At start of period 449 560 560
Credit/(charge) through income statement 466 (109) (111)
Deferred tax asset at end of period 915 451 449
Deferred tax liability on other intangible assets
At start of period (253) (381) (381)
Inherited on acquisition (see note 9) (133) - -
Credit through income statement
Credit on movement in other intangible assets in the period 30 55 128
Deferred tax liability at end of period (356) (326) (253)
The Chancellor's Autumn Statement on 5 December 2012 announced that the UK
corporation tax rate would reduce to 20% by 2015. The most recent rate
reductions to 21% from April 2014 and 20% from April 2015 were substantively
enacted on 2 July 2013 and have been reflected in the financial statements at
30 June 2014 and 31 December 2013 respectively.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed.
Details of individual and collective remuneration of the Company's Directors
and dividends received by the Directors for calendar year 2014 will be
disclosed in the Group's Annual Report for the year ending 31 December 2014.
Peter Atkinson, the Group's Chief Executive, exercised options over 551,372
ordinary shares of 25p each on 8 May 2014. The consideration paid for the
shares was £143,357. He then sold 442,500 ordinary shares for a consideration
of £194,700. As a result of these transactions, his beneficial holding in
Macfarlane Group PLC increased from 745,300 ordinary shares to 854,172
ordinary shares, representing 0.74% of the issued share capital of 115,019,000
ordinary shares.
The directors are satisfied that there are no other related party transactions
occurring during the six month period which require disclosure.
14. Interim Report
The interim report will be posted to shareholders on 12 September 2014.
Copies will be available from the registered office, 21 Newton Place, Glasgow
G3 7PY and available on the Company's website, www.macfarlanegroup.com, from
that date.
This information is provided by RNS
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