Print page 
Press Releases
07 Jul 04
Low & Bonar PLC today reported its results for the half year ended 31 May 2004.
Commenting on the results, Low & Bonar’s Chief Executive, Paul Forman, said:
“This set of results represents the third six-month period of sustained progress, notwithstanding generally unhelpful market conditions. The performances of our Floors and Yarns & Fabrics Divisions are encouraging for both their growth in sales and in profit and we will continue to grow them both organically and through well-judged acquisitions. Our focus on tight cash management has given us a positive net cash balance and a strong balance sheet. The dividend increase reflects our belief in the prospects for further improvement.”
Enquiries:
CHAIRMAN’S INTERIM STATEMENT
I am pleased to report that we have continued the encouraging progress that was initially made in 2003. Our pre-exceptional profit has improved to £6.2m from £5.2m, with Floors moving ahead by some 14% and Yarns & Fabrics more than doubling compared to the first half of 2003. The segmental analysis for Plastics shows that some limited progress in Europe was more than offset by a disappointing result in North America, primarily due to a combination of low customer demand and high raw material prices.
Turnover was £94.7m (2003: £89.4m). Exceptional costs of £0.2m relate to legal charges incurred in relation to an European Commission investigation. Profit before tax was £5.7m (2003: £4.3m) after an interest expense of £0.3m (2003: £0.3m). Earnings per share were 3.80p (2003: 2.87p) with a tax rate of 33.5% (2003: 34.0%). On a pre-exceptional basis earnings per share were 3.91p (2003: 3.28p). It is pleasing to note that a positive Group net cash position of £5.8m has been achieved, enabling funds to be available for appropriate investments and acquisitions.
The directors have declared an interim ordinary dividend of 1.6p per share, an increase of 7% over 2003 (1.5p per share), which will be paid on 4 October 2004 to ordinary shareholders on the register on 10 September 2004.
CHIEF EXECUTIVE’S REVIEW OF OPERATIONS
Flooring
The combination of sales and profit growth in our original Flooring business, allied to a full six month contribution from Tessera, the former Gaskell carpet tile business, meant that last year’s progress was maintained. Including the acquisition, operating profit grew to £5.6m (2003: £5.0m) and sales grew to £38.4m (2003: £33.0m), thereby maintaining operating margins at a strong 14.7%.
Areas of particular strength in sales versus last year were France, our export business serving areas outside Europe, and Tessera. As well as the cost savings from the acquisition being achieved in line with expectations, we are beginning to see new sales of carpet tiles in markets as diverse as Australia, Spain and Russia. The second half sales in the UK will be buoyed by the commencement of the MoD contract, although set-up costs will nullify any meaningful profit contribution in 2004.
Work on our logistics and manufacturing processes is continuing to good effect with demonstrable progress in customer availability and unit production costs. The new management team remains confident of sustaining the progress made.
Yarns & Fabrics
Yarns & Fabrics made strong progress in both the Dundee yarn business and the Belgian technical fabrics business. The main factor behind Dundee’s growth remains the continued strong demand for its artificial grass product. In the case of our Belgian business, strong performances in our non-woven fabrics and industrial fabrics, together with additional new business streams in fibres, ensured very good sales growth despite continued tough market conditions.
The impact of this revenue growth, continued good work on cost efficiency improvements, and lower raw material prices than in the similar period of 2003, was that profit doubled from £1.1m in the first half of 2003 to £2.3m currently. Operating profit margins grew from 4.7% to 8.7% as a result. Looking ahead, raw material prices are expected to remain at current levels in the next few months compared to their traditional seasonal reduction.
Plastics
European Plastics moved profit forward slightly by £0.1m, mainly as a result of the progress in North European Plastics. This region, our most stable and well established in Plastics, increased operating margin from 3.6% to 4.3% through tighter cost control and increasing use of the Polish manufacturing operation. The Southern European business remained at a roughly breakeven level with continued progress in France offset by a sales-driven weakening in our small Spanish subsidiary. Both the Southern European businesses have found their trading environments very challenging, with the French chemical distribution market proving especially problematic.
Bonar Plastics North America made progress on the second half of 2003, although it saw a decline in profitability against the comparable period in 2003. A major factor was raw material pricing, which had an impact of £0.2m versus the first half of 2003. The challenge remains to increase prices where competitive conditions allow and to sustain the progress on sales, especially in material handling.
Steve Good, the Divisional Managing Director appointed in March 2004, is developing the commercial programme required to build on the progress made in the Division during the last 18 months.
European Commission Update
As we announced on 10 May 2004, the Group is one of a number of groups which have received a statement of objection from the European Commission investigating allegations of a cartel relating to industrial bags, a market which the Group exited in 1997 following the sale of its Belgian packaging business to BPI. The turnover of the Belgian packaging business in 1997 was c.£17m of which industrial bags was only a part. We are continuing to co-operate fully with the Commission in its enquiry.
OUTLOOK
We anticipate continued progress through volume-based market share gain and cost reduction action rather than by underlying market growth or significant pricing increases. With the exception of specific markets like grass yarns, or known new contract wins like the MoD, we are not anticipating helpful market conditions, nor are we expecting significantly easing raw material prices. Nonetheless we remain confident that the continued progress will be sustained in the second half of the year.
Low & Bonar PLC 2004 Interim Results
Low & Bonar PLC today reported its results for the half year ended 31 May 2004.
| 2004 | 2003 | % |
|
|---|---|---|---|
| Turnover | £94.7m | £89.4m | + 6 |
| Operating profit before exceptionals | £ 6.2m | £ 5.2m | + 20 |
| PBT pre exceptionals and amortization | £ 6.1m | £ 5.1m | + 21 |
| Profit before tax | £ 5.7m | £ 4.3m | + 31 |
| Earnings per share before exceptionals | 3.91p | 3.28p | + 19 |
| Earnings per share | 3.80p | 2.87p | + 32 |
| Dividend per share | 1.60p | 1.50p | + 7 |
- Group PBT* and eps* grew by 19%
- Strong sales and profit performance in Floors with further sales growth opportunities in second half from recently won MoD contract
- Successful integration of carpet tile acquisition
- Yarns & Fabrics profit doubled, driven by excellent performance in Belgian technical fabrics business
- Plastics showed progress in Europe but declined in North America
- Strong balance sheet with £6m net cash
- Interim dividend per share increased by 7% to 1.6p
Commenting on the results, Low & Bonar’s Chief Executive, Paul Forman, said:
“This set of results represents the third six-month period of sustained progress, notwithstanding generally unhelpful market conditions. The performances of our Floors and Yarns & Fabrics Divisions are encouraging for both their growth in sales and in profit and we will continue to grow them both organically and through well-judged acquisitions. Our focus on tight cash management has given us a positive net cash balance and a strong balance sheet. The dividend increase reflects our belief in the prospects for further improvement.”
- Ends -
Enquiries:
| Duncan Clegg, Chairman | |
| Jon Kempster, Finance Director | |
| Low & Bonar PLC | Tel: 020 7298 6820 |
| Alexia Latham | |
| Tulchan Communications | Tel: 020 7353 4200 |
CHAIRMAN’S INTERIM STATEMENT
I am pleased to report that we have continued the encouraging progress that was initially made in 2003. Our pre-exceptional profit has improved to £6.2m from £5.2m, with Floors moving ahead by some 14% and Yarns & Fabrics more than doubling compared to the first half of 2003. The segmental analysis for Plastics shows that some limited progress in Europe was more than offset by a disappointing result in North America, primarily due to a combination of low customer demand and high raw material prices.
Turnover was £94.7m (2003: £89.4m). Exceptional costs of £0.2m relate to legal charges incurred in relation to an European Commission investigation. Profit before tax was £5.7m (2003: £4.3m) after an interest expense of £0.3m (2003: £0.3m). Earnings per share were 3.80p (2003: 2.87p) with a tax rate of 33.5% (2003: 34.0%). On a pre-exceptional basis earnings per share were 3.91p (2003: 3.28p). It is pleasing to note that a positive Group net cash position of £5.8m has been achieved, enabling funds to be available for appropriate investments and acquisitions.
The directors have declared an interim ordinary dividend of 1.6p per share, an increase of 7% over 2003 (1.5p per share), which will be paid on 4 October 2004 to ordinary shareholders on the register on 10 September 2004.
CHIEF EXECUTIVE’S REVIEW OF OPERATIONS
Flooring
The combination of sales and profit growth in our original Flooring business, allied to a full six month contribution from Tessera, the former Gaskell carpet tile business, meant that last year’s progress was maintained. Including the acquisition, operating profit grew to £5.6m (2003: £5.0m) and sales grew to £38.4m (2003: £33.0m), thereby maintaining operating margins at a strong 14.7%.
Areas of particular strength in sales versus last year were France, our export business serving areas outside Europe, and Tessera. As well as the cost savings from the acquisition being achieved in line with expectations, we are beginning to see new sales of carpet tiles in markets as diverse as Australia, Spain and Russia. The second half sales in the UK will be buoyed by the commencement of the MoD contract, although set-up costs will nullify any meaningful profit contribution in 2004.
Work on our logistics and manufacturing processes is continuing to good effect with demonstrable progress in customer availability and unit production costs. The new management team remains confident of sustaining the progress made.
Yarns & Fabrics
Yarns & Fabrics made strong progress in both the Dundee yarn business and the Belgian technical fabrics business. The main factor behind Dundee’s growth remains the continued strong demand for its artificial grass product. In the case of our Belgian business, strong performances in our non-woven fabrics and industrial fabrics, together with additional new business streams in fibres, ensured very good sales growth despite continued tough market conditions.
The impact of this revenue growth, continued good work on cost efficiency improvements, and lower raw material prices than in the similar period of 2003, was that profit doubled from £1.1m in the first half of 2003 to £2.3m currently. Operating profit margins grew from 4.7% to 8.7% as a result. Looking ahead, raw material prices are expected to remain at current levels in the next few months compared to their traditional seasonal reduction.
Plastics
European Plastics moved profit forward slightly by £0.1m, mainly as a result of the progress in North European Plastics. This region, our most stable and well established in Plastics, increased operating margin from 3.6% to 4.3% through tighter cost control and increasing use of the Polish manufacturing operation. The Southern European business remained at a roughly breakeven level with continued progress in France offset by a sales-driven weakening in our small Spanish subsidiary. Both the Southern European businesses have found their trading environments very challenging, with the French chemical distribution market proving especially problematic.
Bonar Plastics North America made progress on the second half of 2003, although it saw a decline in profitability against the comparable period in 2003. A major factor was raw material pricing, which had an impact of £0.2m versus the first half of 2003. The challenge remains to increase prices where competitive conditions allow and to sustain the progress on sales, especially in material handling.
Steve Good, the Divisional Managing Director appointed in March 2004, is developing the commercial programme required to build on the progress made in the Division during the last 18 months.
European Commission Update
As we announced on 10 May 2004, the Group is one of a number of groups which have received a statement of objection from the European Commission investigating allegations of a cartel relating to industrial bags, a market which the Group exited in 1997 following the sale of its Belgian packaging business to BPI. The turnover of the Belgian packaging business in 1997 was c.£17m of which industrial bags was only a part. We are continuing to co-operate fully with the Commission in its enquiry.
OUTLOOK
We anticipate continued progress through volume-based market share gain and cost reduction action rather than by underlying market growth or significant pricing increases. With the exception of specific markets like grass yarns, or known new contract wins like the MoD, we are not anticipating helpful market conditions, nor are we expecting significantly easing raw material prices. Nonetheless we remain confident that the continued progress will be sustained in the second half of the year.