RNS Number:3314W
Inveresk PLC
10 March 2004
INVERESK PLC
("Inveresk" or "the Company")
Preliminary Results for 12 months to 31 December 2003
Inveresk is pleased to announce its first annual results following the
completion of its restructuring and refinancing in April 2003. The Company has
been restored to profitability recording pre-tax profits of #3.032M for the year
to 31 December 2003 compared to pre-tax losses of #34.306M for the 13 months to
31 December 2002.
Highlights
* Refinanced Balance Sheet advancing net shareholders' funds to #17.3M from
#3.6M at 31 December 2002.
* Successful issue of equity in April 2003 raising #8.2 million via a placing
which was underwritten by 17 institutional and other investors.
* Return to profitability without charge to corporation tax due to carry forward
loss relief.
* High level of cash generation allowing equalisation of standstill arrangements
of in excess of #12.5M with major suppliers, all of whom have been restored to
normal trading terms.
* Decentralised Head Office costs and eliminated excesses.
* Improved productivity and efficiency levels through planned maintenance and
limited capital expenditure.
* Proposed dividend payment of 0.25p reflecting the Board's optimism in the
Company's future prospects.
* Potential for the Company to progress to debt free status arising out of
future profit generation and the realisation of surplus assets through land
development following the agreed lease surrender in December 2003 with Klippan
International plc at the Caldwells Mill in Fife.
* Restoration of Inveresk's credibility in the eyes of customers, suppliers and
the paper industry as a whole.
Alan Walker, Chief Executive commented "These results confirm the restoration to
underlying profitability. Within our speciality market niches, significant
opportunities exist for profitablegrowth. Despite difficult trading conditions
prevailing in most European territories, we believe that through technical
innovation, we can offer our customers product differentiation on a highly
competitive basis."
For further information contact:
Alan Walker Chief Executive Officer 0207 240 1234 (Mobile: 07710 620260)
Gordon Thomson Finance Director 01324 827200
Jan Bernander Chairman (00 46) 708 556 400
CHAIRMAN'S STATEMENT
Results
When I wrote to shareholders in August 2003 to report on the interim results for
the 6 months to 30 June 2003 the Company had experienced buoyant trading in the
early part of the year. The industry subsequently suffered a downturn in demand
during the second half of the year as a consequence of de-stocking in most
European countries. Your Company was not immune to the general decline in demand
but remained profitable at the operating level throughout the period due in no
small measure to the actions taken by the new Board of Directors as part of the
restructuring put in place immediately after my appointment as chairman and Mr.
Alan Walker's appointment as CEO on 29 October 2002.
Turnover for 2003 for continuing activities was #39.74M as compared to #44.68M
for the 13 month period to 31 December 2002. Profit from continuing activities
and before exceptional items was #2.03 million compared to #1.67 million, whilst
profits before tax amounted to #3.032M (2002 loss of #34,306M) giving earnings
per share of 2.7p (2002 loss of 56.3p). This represents a significant turnaround
in your Company's performance. The income statement has benefited from realised
gains arising from the sale of assets previously written down as part of the
rationalisation programme and from the release of provisions no longer required
due to stringent control over fundamental reorganisation costs. This past year
was always viewed as a year during which a financial transformation would take
place thereby creating a springboard for future growth. The rehabilitation of
the Company has been successfully completed with shareholders' funds advancing
to #17.3M from #3.6M at the start of the year. All aspects of the Balance Sheet
have improved with particular emphasis on the Company's ability to generate cash
and increase the effectiveness of its working capital ratios.
Dividend
As an indication of the Directors' confidence in the future the Board has
decided to recommend the payment of a final dividend of 0.25p per share. This is
the first dividend to be declared by your Company since 1999 and it is pleasing
that the speed of recovery has been so rapid despite the difficult trading
environment that continuesto pervade the paper industry as a whole. The
dividend will cost #360,000, is covered 8.4 times by pre-tax profits and if
approved by shareholders at the forthcoming Annual General Meeting will be paid
on 2 July 2004 to shareholders on the register on 4 June.
Papermaking
The Company continues to operate from its two speciality mills at Carrongrove
outside Stirling in Scotland and St Cuthberts in Wells, Somerset. Despite
weakening demand throughout the industry in the second half of the year,
Carrongrove recorded satisfactory operating profits through the production and
sale of its single and double sided SBS coated boards. The autumn re-launch of
the "Gemini" brand was very successful and the management team continues to
focus on newmarkets, product innovation and continuous improvements to
operating efficiencies.
After a very promising start to the year the overall performance at St Cuthberts
was disappointing and failed to live up to the Board's expectations. This was
mainly due to lack of volume in the furniture industry where demand for the
highly specialised pre-impregnated resin based decorative papers was subdued.
Considerable technical expertise exists within the management team at St
Cuthberts and as a result of new products developed in-house there is scope for
optimism that volumes will recover in the current year to a more appropriate
level of capacity utilisation.
Papers used in the artist sector and those for laser inkjet photography enjoyed
a solid year with positive development of the Company's leading brands. Plans
exist to further develop this increasingly lucrative quality end of the market.
Asset Realisation Programme
Shareholders will recall that the sale of the Caldwells' graphic business on
29th October 2002 to Klippan International plc, a subsidiary of Klippan AB of
Sweden heralded the start of the recovery of your Company's trading future.
Through this sale, Inveresk eliminated significant losses arising out of its
graphicpaper activities. This disposal allowed your new Board of Directors to
concentrate on those niche areas where Inveresk has a serious market share both
in Europe and, in the case of pre-impregnated resin based papers, the global
market. At the same time the elimination of losses greatly assisted the new
management's ability to restructure and refinance the Company in order to create
shareholder value and build a platform for future growth.
Klippan AB announced on 29th August 2003 its intentionto run down the
activities of the Caldwells Mill which subsequently closed on 28th November
2003. Following positive discussions with Scottish Enterprise Fife and the
Planning Department of Fife Council, Inveresk agreed to accept a surrender by
Klippan of the underlying lease of the Caldwells Mill which included all plant,
equipment, buildings and land which in three locations amounts to some 25 acres
in all. In effect from 1st January 2004 all assets reverted to Inveresk and the
lease came toan end.
The decommissioning of the Caldwells Mill has been largely completed by Klippan
International plc and your management team is now actively engaged in the sale
of all plant and equipment to potential buyers from all corners of the world.
Thereafter and in cooperation with Scottish Enterprise Fife and Fife Council
Planning Department a project to develop the entire area will get underway which
is likely to include possible alternative uses of the land in question. This
project will of course take time and it is hoped that at its conclusion it will
be seen as a major boost to the Inverkeithing community, notwithstanding the sad
loss of 150 jobs in the area. It is your Board's stated objective to leave
behind a legacy in the 21st Century which will be of benefit to the local
community rather than to witness yet further industrial decay on the shores of
the River Forth. Our project will be of massive benefit to Inverkeithing and to
those living and working in the area and in conjunction with Scottish Enterprise
Fife and Fife Council we hope to give rise to the regeneration of Inverkeithing
and its surrounding area.
In the final analysis we intend to "work" these assets to the benefit of all
parties. In the case of the Caldwells assets the low yield of #100,000 from the
lease, rising incrementally by the same amount over 5 years, has been swapped
for the considerably greater potential of realising these assets for cash
consideration over time with the clear objectiveof paying down bank debt as
soon as practicable thereby potentially rendering the Company debt free in the
short to medium term.
Central costs and litigation
Central management, of which there are now few, have enjoyed a particularly
successful year in reducing costs and bringing the commercial litigation,
referred to at the time of the Company' s Placing and Open Offer in April 2003,
to a successful conclusion in every case save for the small number of industrial
tribunal claims which have yet to be heard but the impact of which is not
material.
Your Company will continue to review costs and endeavour to reduce fixed costs
whilst maintaining a low overhead structure. The excellent work carried out in
terms of managing the workingcapital will be continued through strict
disciplines and systematic review.
Current trading and Outlook
The management of Inveresk is now in a position to focus on its chosen markets
as never before. The torrid period of inward problem solving has now come to a
welcome conclusion. Management at both mills continue in their efforts to
maximise production through selective capital expenditure and planned
maintenance programmes with customer focus remaining a primary objective.
Greater emphasis is being placed on product innovation so as to increase our
product offering and our mill teams are working cohesively with our valued
customers to respond to their technical and service level requirements. As
previously stated, 2003 was a yearof two halves during which strong demand in
the first six months was replaced by a period of lower sales volumes due to
de-stocking in most markets. Encouragingly, the period since November 2003 has
seen order levels recovering to normal and during the first 10 weeks of 2004
both mills have been operating at a high level of capacity utilisation. The
launch of new products to a receptive market is likely to have a significant
impact in the current year and beyond. Greater utilisation of our proven
technical expertise in niche markets creates a competitive advantage which
increasingly gives the opportunity to place new products before our customers
with a greater level of technical sophistication to meet their specific
requirements.
One of the Company's principal assets remains its management and staff to whom
we offer our grateful thanks for their efforts during the past year. As part of
our outward thinking considerable emphasis is being placed on training and
personal developmentof managers within the organisation. This process is likely
to be continuous and meritorious performance will be recognised and rewarded.
Your Board of Directors views the future with confidence. We remain dedicated to
the interests of our shareholders and recognise the need to create and build
shareholder value. Significant progress has been made during 2003 and we will
continue to explore all opportunities which are likely to be beneficial to the
continued well being of your Company, its customers, employees and shareholders.
Jan Bernander
10 March 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the financial year ended 31 December 2003
Year ended 31 December 2003 13 months ended 31 December2002
Total Continuing Unallocated Total Discontinued Total
Mill Head Continuing Activities
Business Office Activities
Costs
#'000 #'000 #'000 #'000 #'000 #'000
------ -------- -------- -------- -------- --------
Turnover 39,742 44,682 - 44,682 37,257 81,939
Cost of Sales (31,995) (35,070) (865) (35,935) (37,172) (73,107)
------ -------- -------- -------- -------- --------
Gross
profit/(loss) 7,747 9,612 (865) 8,747 85 8,832
Distribution costs (3,189) (3,532) - (3,532) (3,655) (7,187)
Administrative
expenses (2,530) (2,978) (570) (3,548) (1,909) (5,457)
------ -------- -------- -------- -------- --------
Groupoperating
profit/(loss) 2,028 3,102 (1,435) 1,667 (5,479) (3,812)
Share of operating
profit in associate - - - - 72 72
------ -------- -------- -------- -------- --------
Total Group
operating
profit/(loss) 2,028 3,102 (1,435) 1,667 (5,407) (3,740)
Fundamental
reorganisation
credit/(costs) 704 (71) (3,593) (3,664) (2,010) (5,674)
Gain/(loss) on
sale and termination
of businesses 1,216 - - - (12,929) (12,929)
Attributable goodwill
written off to
reserves - - - - (11,536) (11,536)
Profit on sale
of associate - - - - 803 803
------ -------- -------- -------- -------- --------
Profit/(loss)
before interest 3,948 3,031 (5,028) (1,997) (31,079) (33,076)
Net interest
payable - Group (645) (1,371)
Share of associate's
interest - (11)
Other finance
(expense)/income (271) 152
------ -------- -------- -------- -------- --------
Profit/(loss)
on ordinary activities
before taxation 3,032 (34,306)
Taxation on
profit/(loss)
on ordinary activities 130 5,118
------ -------- -------- -------- -------- --------
Profit/(loss)
for the financial
period 3,162 (29,188)
Dividends (360) -
------ -------- -------- -------- -------- --------
Retained
profit/(loss)
for the financial
period 2,802 (29,188)
------ -------- -------- -------- -------- --------
Basic
earnings/(loss)
per share 2.7p (56.3)p
Diluted
earnings/(loss)
per share 2.6p (56.3)p
Earnings/(loss)
per share before
exceptional items 1.1p (3.8)p
------ -------- -------- -------- -------- --------
A final dividend of 0.25p on 143,804,750 ordinary shares is proposed for the
financial year ended 31 December 2003 (2002: nil).
CONSOLIDATED BALANCE SHEET
At 31 December 2003
2003 2002
#'000 #'000
--------- ---------
Fixed assets
Tangible assets 26,394 28,470
Investments 400 300
--------- ---------
26,794 28,770
Current assets
Stocks 4,842 3,597
Debtors 7,808 11,599
Debtors - deferred taxation 3,750 3,750
Cash at bank and in hand 70 329
--------- ---------
16,470 19,275
Creditors: amounts falling due within one year
Bank overdrafts and short term debt (8,146) (15,040)
Other creditors (8,478) (20,834)
--------- ---------
(16,624) (35,874)
Net current liabilities (154) (16,599)
Total assets less current liabilities 26,640 12,171
Creditors: amounts falling due after more than
one year (8,000) -
Provisions for liabilities and charges (601) (4,916)
--------- ---------
Net assets excluding pension assets/
(liabilities) 18,039 7,255
Pension assets/(liabilities)
Defined benefit schemes with net assets 3,166 -
Defined benefit schemes with net liabilities (3,910) (3,615)
--------- ---------
Net assets including pension assets/
(liabilities) 17,295 3,640
--------- ---------
Capital and reserves
Called up share capital 1,438 5,382
Share premium account - 14,426
Revaluation reserve 11,369 11,549
Capital redemption reserve - 173
Profit and loss account 4,488 (27,890)
--------- ---------
Total equity shareholders' funds 17,295 3,640
--------- ---------
CONSOLIDATED CASH FLOW STATEMENT
for the financial year ended 31 December 2003
Year ended 13 months
31 December ended 31
December
2003 2002
#'000 #'000
----------- ----------
Net cash (outflow)/inflow from
operating activities (9,192) 2,343
Returns on investment and servicing
of finance (886) (1,553)
Capital expenditure and financial
investment 167 (1,854)
Acquisitions and disposals - 5,285
----------- ----------
Net cash (outflow)/inflow before
financing (9,911) 4,221
Financing 8,827 (2,302)
----------- ----------
(Decrease)/increase in cash in the
period (1,084) 1,919
----------- ----------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
(Decrease)/increase in cash in the period (1,084) 1,919
----------- ----------
Cash (inflow)/outflow from debt and lease financing (281) 2,302
----------- ----------
Change in net debt resulting from cash flows (1,365) 4,221
Net debt at beginning of the period (14,711) (18,932)
----------- ----------
Net debt at end of the period (16,076) (14,711)
----------- ----------
Notes to the accounts
Note 1
The financial information set out in this announcement does not constitute the
Group's statutory accounts for either the financial year ended 31 December 2003
or the 13 months ended 31 December 2002 but is derived from those accounts.
Statutory accounts for 2002 have been delivered to the Registrar of Companies,
whereas those for 2003 will be delivered shortly. The auditors have reported on
those accounts; their reports were unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
Note 2
EXCEPTIONAL ITEMS
Exceptional (credits)/charges included within the profit/(loss) on ordinary
activities before taxation are analysed as follows:
Year ended 13 months
31 ended
December 31 December
2003 2002
#'000#'000
--------- ----------
Fundamental reorganisation costs
Fixed asset writedowns - 1,456
Restructuring costs - 4,218
Release of unused provisions (704) -
--------- ----------
(704) 5,674
--------- ----------
Loss on sale and termination of businesses
(Profit)/loss on termination of labels business (600) 8,618
Loss on sale of Graphics business 1,024 2,616
(Profit)/loss on sale of Kilbagie Mill (375) 1,695
Release of unused provisions (1,265) -
--------- ----------
(1,216) 12,929
Attributable goodwill written off to reserves - 11,536
--------- ----------
(1,216) 24,465
--------- ----------
Profit on sale of associate - (803)
--------- ----------
Total exceptional (credits)/charges (1,920) 29,336
--------- ----------
Note 3
EARNINGS / (LOSS) PER SHARE
Year ended 13 months Year ended 13 months
ended ended
31 December 31 December 31 December 31 December
2003 2002 2003 2002
---------- ---------- ---------- ---------
Earnings/ Earnings/ Earnings/ Earnings/
(loss) (loss) (loss) (loss)
#'000 #'000 pence per pence per
share share
---------- ---------- ---------- ---------
Basic 3,162 (29,188) 2.7 (56.3)
Adjusted for:
Exceptional (credits)/costs - 29,336 (1.6) 56.6
Tax relief on exceptional
(credits)/costs (1,920) (2,100) - (4.1)
---------- ---------- ---------- ---------
Adjusted basic 1,242 (1,952) 1.1 (3.8)
---------- ---------- ---------- ---------
Diluted 3,162 (29,188) 2.6 (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.
The weighted average number of shares used in each calculation is as follows:
Year 13 months
ended ended
31 December 31 December
2003 2002
Number of Number of
shares shares
(000s) (000s)
-------- -----------
Average of shares in issue during
the financial period 116,309 51,821
Adjustment for the dilutive
effect of employee
and director share options 4,000 -
-------- -----------
Average of shares in issue during
the financial period diluted 120,309 51,821
-------- -----------
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
Note 4
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2003 2002
#'000 #'000
--------- ----------
Profit/(loss) for the financial period 3,162 (29,188)
Dividends (360) -
--------- ----------
Retained profit/(loss) for the financial period 2,802 (29,188)
Other recognised gains for the financial period 2,307 19,722
Issue of ordinary shares 6,346 -
Loans converted to equity 2,200 -
--------- ----------
Net increase/(reduction) in shareholders' funds 13,655 (9,466)
Shareholders' funds at the beginning of financial period 3,640 13,106
--------- ----------
Shareholders' funds at end of financial period 17,295 3,640
--------- ----------
Note 5
DIVIDENDS
A final dividend of 0.25p per ordinary share, amounting to #360,000, is proposed
for the financial year ending 31 December 2003 (2002 : nil).
Note 6
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES
Year ended 13 months
ended
31 December 31 December
2003 2002
#'000 #'000
--------- ----------
Group operating profit/(loss) 2,028 (3,812)
Exceptional credits/(charges) 1,920 (17,800)
Depreciation charges 1,089 2,509
Impairment of fixed assets 1,319 7,046
Amortisation of government grants (3) (3)
Loss/(gain) on sale of tangible fixed assets 1 (19)
Gain on sale of associate - (803)
Gain on sale of tangible fixed assets -
exceptional items (600) (479)
Pension curtailments - (927)
Movement on net pension asset/liability (700) (255)
(Increase)/decrease in Stocks (1,245) 5,300
Decrease in Debtors 3,791 8,359
(Decrease)/increase in Creditors (12,477) 1,607
(Decrease)/increase in provisions (4,315) 1,620
--------- ----------
Net cash (outflow)/ inflow from operating
activities (9,192) 2,343
--------- ----------
Note 7
ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN CASH FLOW STATEMENT
Year ended 13 months
ended
31 December 31 December
2003 2002
#'000 #'000
--------- ----------
Returns on investment and servicing finance
Interest received 15 115
Interest paid (901) (1,668)
--------- ----------
(886) (1,553)
--------- ----------
Capital expenditure
Purchase of tangible fixed assets (333) (1,879)
Purchase of own shares (100) -
Sale of tangible fixed assets 600 25
--------- ----------
167 (1,854)
--------- ----------
Acquisitions and disposals
Sale of Kilbagie mill - 1,685
Sale of associate - 746
Sale of tangible fixed assets - 854
Sale of Caldwells business 2,000
--------- ----------
- 5,285
--------- ----------
Financing
Issue of ordinary share capital 6,346 -
Bank and other loans repaid (7,713) (2,287)
New bank loan 8,000 -
New loans (since converted to ordinary shares) 2,200 -
Capital element of hire purchase payments (6) (15)
--------- ----------
8,827 (2,302)
--------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
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