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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Inveresk | LSE:IVS | London | Ordinary Share | GB0004577697 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 1.625 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:8153Y Inveresk PLC 22 June 2007 INVERESK PLC ("Inveresk" or "the Company") Preliminary Results for 12 months to 31 December 2006 Highlights 2006 * Loss before taxation of #4.277m compared to a profit of #3.817m for the 12 months to 31 December 2005. * Group operating loss for the year of #2.002m as compared to #1.992m before fundamental reorganisation costs and those costs associated with transforming the activity base into real estate in preference to paper manufacture. * The paper industry continued to face problems on a global basis arising from worldwide over capacity, higher costs of both raw materials and energy against a background of static demand at reduced margins. * Realignment of cost base at St Cuthberts Mill in the face of competitive pressures, weaker margins and the need to reduce manpower. * Land, buildings and certain related plant and equipment at Carrongrove now contractually sold (subject only to the purification of title) for a little over #11.0m which will be received in July 2007 and will be used to pay down Bank debt. * Borrowing at year end amounted to #12.753m (2005 #9.445m) but will reduce significantly on completion of the sale of land, buildings and related plant and equipment in July 2007. * Efforts expended in 2006 to fill the spare capacity at St Cuthberts have been reasonably successful as we have entered 2007 with a higher capacity utilisation than experienced for some years. Margins, however, remain under pressure from a combination of competitive influences and raw material and energy cost increases, and St Cuthberts is focusing on longer production runs designed to assist production efficiencies within the mill. * Initiatives introduced in both Europe and the Far East confirm market potential on a global basis for the company's products both within the decor /pre impregnated papers and artists/inkjet ranges of paper on offer to a wide, discerning customer base throughout the world. * Ongoing Asset Realisation Programme is generally on track and will feature continuing emphasis on the remaining real estate sites held within the Company. * Initiatives started in 2006 include successful development of wet expansion pre-impregnated paper for the wood flooring sector for which patent application has been made. * Also planned in 2007 is the introduction of top of the range inkjet paper to be marketed under the brand "Somerset Photo". Alan Walker, Chief Executive, commented: "Whilst we remain active participants in certain specialised sectors within the paper industry it is self evident that our focus is in the process of shifting to the added value represented by the exploitation of our real estate portfolio. This source of revenue will feature prominently in future where the returns are significantly greater." For further information contact: Alan Walker Chief Executive Officer 0207 240 1234 (Mobile 07900 445623 Gordon Thomson Finance Director 01324 827200 Jan Bernander Chairman (00 46) 708 556 400 CHAIRMAN'S STATEMENT Overview The year to 31 December 2006 has been a very difficult year for the paper industry as a whole from which we were not immune as we continued to manage the transition of switching out of core paper activities into real estate activities with reduced dependence upon the paper industry for our future revenue streams. The outlook for both UK and European paper companies cannot be viewed with any degree of optimism at this time. The decision to sell our internationally respected Gemini brand for #13m back in 2005 (excluding a yet to be determined additional consideration from the continuing sales of Gemini) has proved to have been correct as the market for SBS coated board continues to stagnate with further consolidation in the sector expected. Agreement has been reached to sell the residual site at Carrongrove together with certain related plant and equipment for #11m (subject only to the purification of title) with financial completion expected to take place by mid July 2007. The proceeds of sale will be used to significantly reduce bank borrowings and reflect the Board's strategic desire to eliminate bank debt totally from the Company. Results The operating results for the year ended 31 December 2006 remain disappointing at the St Cuthberts Mill resulting in the Group overall, including central overheads, producing an operating loss of #2.002m as compared to an operating loss of #1.992m on continuing operations for the same period in 2005. In addition to this, costs of #0.594m relate to the reorganisation and cost reduction programme at St Cuthberts reducing manpower by 29 persons, and costs of #1.023m were incurred in finally exiting from the SBS paperboard trade allowing the sale of the decommissioned site at Carrongrove to take place, with the benefit and profits accruing in 2007. Interest costs incurred were #0.738m compared to #0.880m in 2005 leaving pre tax losses of #4.277m compared to profits of #3.817m in 2005 which of course included the proceeds of sale of the Gemini brands at that time. With product sales at St Cuthberts of #13.304m for the year to 31 December 2006 as compared to #13.574m in 2005 it can be demonstrated that demand within the specialised areas of furniture (PIP) papers, decor, artists and inkjet papers remains flat with increasing levels of competition and consequential pressure on margins across the entire range. A particular feature of the results in 2006 has been the unprecedented increases in energy costs which simply have had to be absorbed and could not be passed on to customers. The Company's balance sheet remains soundly based as it is under-pinned by the real estate portfolio which is likely to be realised for cash in the coming years at values substantially in excess of the carrying values within the Balance Sheet. This process is due to start in July 2007 with the realisation of the Carrongrove site and the subsequent reduction in bank borrowings. Asset Realisation Programme Plant and Equipment Some but not all of the plant and equipment at Carrongrove has been sold. Following decommissioning of the Carrongrove Mill the plant and equipment has been marketed to all corners of the world to a range of international buyers. Due to the number of mill closures throughout Europe and North America there is a surfeit of second hand equipment which has influenced prices downwards. The directors are considering a number of strategic options in relation to the future use and destination of the residual plant and equipment in order to maximum the return to the Company. Land for Future Development Inverkeithing As shareholders will be aware this 18 acre site is located on the shores of the River Forth at Inverkeithing which lies due North of Edinburgh at the gateway to the Kingdom of Fife. Inveresk will participate in the bigger picture in relation to this site because it plays such a pivotal role in the overall Structure Plan of Fife Council. This large scale scheme is likely to transform over time the entire area around Inverkeithing Bay and will provide new homes, shops, schools, leisure facilities and employment opportunities to many local people. Shareholders will be aware that the Structure Plan was ratified by Fife Council at the end of April 2006 and that for some time we have been waiting for the formal adoption of it by the Scottish Executive. We continue to await this endorsement so that the project may commence but the decision has been delayed somewhat by the Scottish Parliament elections and the formation of a new Government. The fundamentals remain the same and this forward thinking plan will provide in due course substantial benefits to the local community in Fife as well as accrue considerable financial returns to our shareholders. The site is ready for immediate redevelopment. Organisation The management structure has been slimmed down over recent years with numbers employed at St Cuthberts now numbering 92 with accounting and corporate functions operating partly out of Scotland and London. The Company employs a total of 106 including directors. Environment Inveresk develops and supplies paper products that print, beautify and promote artistic expertise. From an environmental perspective it is important that both manufacture and usage as well as waste products have as little impact on the environment as possible. Inveresk is therefore in the forefront of the development of products that combine function with environmental compatibility. At St Cuthberts, as well as Carrongrove until the sale of Gemini, the Company has been and continues striving to * replace any hazardous substances or chemicals in products as far as is technically feasible and financially viable * minimise environmental impact in the manufacturing process * minimise the volume of waste and waste products * work continuously in-house with training, information and discussion in order to stimulate the development of expertise in environmental as well as health and safety issues. Pensions The Company's Pension Schemes remain in relatively good order and compare favourably with the UK pensions industry as a whole. There are a number of planned initiatives designed to reduce long-term liabilities. Prospects at St Cuthberts This mill remains an enigma within the Inveresk portfolio of assets in that it offers so much in terms of potential but delivers little. This small mill (by large scale paper manufacturing standards) lies just outside the idyllic City of Wells in Somerset on a site in excess of 30 acres. It has for a number of years struggled to achieve profitability given the age of its equipment and its lack of investment over an extended period of time. It was one of the original pioneers into pre-impregnated papers (PIP's) used extensively within the decor and furniture sectors whilst also benefiting from some of the world's best known brands in artist papers including, inter alia, Bockingford, Saunders Waterford and the Somerset range of products. Notwithstanding the enviable reputation which St Cuthberts enjoys for innovation, flexibility and a keen desire on the part of customers to work with our technical team it is clear that we do not have the economic scale to "go it alone" particularly in the PIP market which is characterised by both customers and competitors driving down the sales margins to levels which are in reality not sustainable. It is for this reason that your Board continues to seek out strategic like minded partners with whom suitable alliances can be agreed for future collaboration using the undoubted competitive advantages of St Cuthberts know how with a more modern approach to production, efficiency and productivity. As margins have been squeezed in 2006 the management team has managed to reduce the headcount by 29 employees whilst at the same time gaining an increase of 20% in annual tonnage for 2007 albeit at margins which do not compare favourably with those earned in recent years. Product development has also included a new process for dealing with wet expansion for the wooden floor manufacturers and a top of the range inkjet product of exceptional quality which will be launched in mid 2007 under the Somerset Photo brand. All efforts will be expended in returning the mill to profit whilst continuing to seek the aforementioned strategic alliances for the future. Dividend As a direct consequence of the absence of distributable reserves the Board is not in a position to propose a dividend. In 2007 now that our real estate strategy is beginning to bear fruit and the Company approaches a debt free status, your Board will be pursuing actively the various ways in which shareholders can be rewarded in a tax efficient manner. The Board Your Board of Directors meets monthly and is always attentive to control over operating costs within St Cuthberts and those central costs which arise from being listed on the London Stock Exchange. The paper industry is no place for the faint hearted and your Board has had a clear vision as to the alternative strategy available through its portfolio of real estate. We will continue to pursue this strategy in order to maximise shareholder value over time. One of the Group's most valuable assets is the commitment, energy, innovation and resourcefulness of its employees and we thank our staff for their continuing support as the new strategic direction is pursued. The sale in 2007 of the assets at Carrongrove and the substantial elimination of borrowings is seen as a platform for future success. Jan Bernander Chairman 22 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the financial year ended 31 December 2006 2006 2005 Total Total (restated) #'000 #'000 ---------- ---------- Turnover Continuing operations 13,304 13,574 Discontinued operations - 22,811 ---------- ---------- 13,304 36,385 Cost of Sales (12,925) (30,834) ---------- ---------- Gross profit 379 5,551 Distribution costs (856) (3,503) Administrative expenses (1,525) (3,145) Other operating income - 7,520 ---------- ---------- Group operating (loss)/profit ---------- ---------- Continuing operations (2,002) (1,992) Discontinued operations - 8,415 ---------- ---------- (2,002) 6,423 Fundamental reorganisation charge (594) (7) Loss on sale and termination of businesses (1,023) (2,695) Gain on sale of fixed assets 100 606 ---------- ---------- (Loss)/Profit before interest (3,519) 4,327 Net interest payable - Group (738) (880) Other finance (expense)/income (20) 370 ---------- ---------- (Loss)/Profit on ordinary activities before (4,277) 3,817 taxation Taxation on (loss)/profit on ordinary activities 1,147 (4,897) ---------- ---------- Loss on ordinary activities after taxation (3,130) (1,080) ---------- ---------- Loss for the financial year (3,130) (1,080) ========== ========== Basic loss per share - total (2.3) p (0.8) p Diluted loss per share - total (2.3) p (0.8) p Additional earnings per share measures are included in note 4. CONSOLIDATED BALANCE SHEET At 31 December 2006 2006 2005 #'000 #'000 --------- --------- Fixed assets Tangible assets 9,708 10,410 --------- --------- Current assets Properties held for sale 10,005 10,005 Stocks 2,619 2,989 Debtors 3,231 5,462 Cash at bank and in hand 4 16 --------- --------- 15,859 18,472 Creditors: amounts falling due within one year Bank overdrafts and short term debt (8,449) (3,923) Other creditors (3,229) (6,048) --------- --------- (11,678) (9,971) --------- --------- Net current assets 4,181 8,501 --------- --------- Total assets less current liabilities 13,889 18,911 Creditors: amounts falling due after more than one year (4,308) (5,538) Provisions for liabilities and charges (440) (575) --------- --------- Net assets excluding pension assets/(liabilities) 9,141 12,798 Pension assets/(liabilities) Defined benefit schemes with net assets 987 2,173 Defined benefit schemes with net liabilities (2,368) (3,768) --------- --------- Net assets including pension assets/(liabilities) 7,760 11,203 ========= ========= Capital and reserves Called up share capital 1,438 1,438 Revaluation reserve 11,170 11,220 Profit and Loss Account (4,848) (1,455) --------- --------- Total shareholders' funds 7,760 11,203 ========= ========= CONSOLIDATED CASH FLOW STATEMENT for the financial year ended 31 December 2006 2006 2005 #'000 #'000 ---------- ---------- Net cash (outflow)/inflow from operating activities (2,679) 7,788 Returns on investment and servicing of finance (716) (980) Capital expenditure and financial investment 87 341 Acquisitions and disposals - (564) Equity dividends paid - (360) ---------- ---------- Net cash (outflow)/inflow before financing (3,308) 6,225 Financing (1,230) (1,231) ---------- ---------- (Decrease)/increase in cash in the year (4,538) 4,994 ========== ========== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2006 2005 #'000 #'000 ---------- ---------- (Decrease)/increase in cash in the year (4,538) 4,994 Cash outflow from debt and lease financing 1,230 1,231 ---------- ---------- Change in net debt resulting from cash flows (3,308) 6,225 Net debt at beginning of the year (9,445) (15,670) ---------- ---------- Net debt at end of the year (12,753) (9,445) ========== ========== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the financial year ended 31 December 2006 2006 2005 (restated) #'000 #'000 ---------- ---------- Loss for the financial year (3,130) (1,080) Unrealised surplus on revaluation of properties - 60 Exchange adjustments on foreign currency net investments (1) (1) Actuarial losses recognised in pension schemes (335) (3,478) Deferred tax arising on gains in pension schemes - 228 ---------- ---------- Total recognised gains and losses relating to the year (3,466) (4,271) Prior year adjustment (note 2) (1) (241) ---------- ---------- Total gains and losses recognised since last annual (3,467) (4,512) report ========== ========== Notes Note 1 FINANCIAL INFORMATION Accounting Policies The preliminary financial information has been prepared on the basis of the accounting policies set out in the most recent accounts for the year ended 31 December 2005, except that in the preliminary financial information FRS20 "Accounting for share based payments" has been adopted for the first time. The accounting policy under the new standard is set out below together with an indication of the effects of its adoption. Basis of Preparation The financial information set out above does not constitute the Company's statutory accounts for years ended 31 December 2006 or 2005 but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies, and those for 2006 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was (i) unqualified, and (ii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. Annual Report and Accounts The Annual Report and Accounts for the year ended 31 December 2006 will be posted to shareholders shortly and will be available to the public, free of charge, at the Company's registered office: Carrongrove Mill, Denny, Stirlingshire FK6 5HJ. Note 2 PRIOR YEAR ADJUSTMENT As a result of adopting FRS20 "Accounting for share based payments", a prior year adjustment has been made in respect of the fair value of share options expensed. For the year to 31 December 2006 a charge to the profit and loss account of #23,000 has been made with a corresponding increase in the charge to the profit and loss account for the year to 31 December 2005 of #1,000. There is no effect on the net assets at 31 December 2006 or 31 December 2005. Note 3 EXCEPTIONAL ITEMS Exceptional charges/(credits) included within the (loss)/profit on ordinary activities before taxation are analysed as follows: Year ended Year ended 31 December 31 December 2006 2005 #'000 #'000 ---------- ---------- Administrative expenses - Operating exceptional charge Goodwill impairment charge - 564 ---------- ---------- - 564 ---------- ---------- Fundamental reorganisation costs Restructuring costs 594 7 ---------- ---------- 594 7 ---------- ---------- Loss on sale and termination of businesses Sale of intellectual property and related assets - (4,768) Loss on termination of Paperboard business 911 7,466 Pension curtailment following termination of Paperboard business - (194) Loss on sale of Graphics business 271 192 Release of unused provisions (159) (1) ---------- ---------- 1,023 2,695 ---------- ---------- Gain on sale of fixed assets (100) (606) ---------- ---------- Total exceptional charges 1,517 2,660 ========== ========== The tax effect of the exceptional charges is #378,000 credit (2005: #174,000 credit). Note 4 EARNINGS/(LOSS) PER SHARE Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2006 2005 2006 2005 Earnings/(loss) Earnings/(loss) Earnings/(loss) Earnings/(loss) (restated) (restated) #'000 #'000 pence per share pence per share --------- ---------- ---------- ---------- Basic - continuing operations (3,130) (1,221) (2.3) (0.9) Basic - discontinued operations - 141 - 0.1 --------- ---------- ---------- ---------- Basic - (3,130) (1,080) (2.3) (0.8) Total Adjusted for: Exceptional charge 1,517 2,660 1.1 2.0 Tax relief on exceptional charges/ (378) (174) (0.3) (0.1) (credits) Exceptional deferred tax charge - 3,750 - 2.7 --------- ---------- ---------- ---------- Adjusted basic (1,991) 5,156 (1.5) 3.8 - Total --------- ---------- ---------- ---------- Diluted - continuing operations (3,130) (1,221) (2.3) (0.9) Diluted - discontinued operations - 141 - 0.1 --------- ---------- ---------- ---------- Diluted - (3,130) (1,080) (2.3) (0.8) Total ========= ========== ========== ========== 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 and those held as Treasury shares. The weighted average number of shares used in each calculation is as follows: Year ended Year ended 31 December 31 December 2006 2005 Number of Number of shares shares (000s) (000s) ---------- --------- Average of shares in issue during the financial year 135,055 136,334 Adjustment for the dilutive effect of employee and director share options 1,660 1,897 ---------- --------- Average of shares in issue during the financial year diluted 136,715 138,231 ========== ========= Note 5 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the financial year ended 31 December 2006 Year ended Year ended 31 December 31 December 2006 2005 (restated) #'000 #'000 ---------- ---------- Loss for the financial year (3,130) (1,080) Dividends - (360) ---------- ---------- Retained loss for the financial year (3,130) (1,440) Treasury shares purchased - (266) Shares purchased by ESOP trust - (126) Share options expensed 23 2 Other recognised losses for the financial year (336) (3,191) ---------- ---------- Net decrease in shareholders' funds (3,443) (5,021) Shareholders' funds at the beginning of financial year 11,203 16,224 ---------- ---------- Shareholders' funds at the end of the financial year 7,760 11,203 ========== ========== Note 6 RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES Year ended Year ended 31 December 31 December 2006 2005 (restated) #'000 #'000 ---------- ---------- Group operating (loss)/profit (2,002) 6,423 Exceptional charges (1,517) (2,096) Depreciation charges 715 3,507 Impairment of goodwill - 564 Expensing of share options 23 2 Amortisation of government grants (2) (2) Gain on sale of tangible fixed assets (100) (615) Pension curtailments - (194) Pension contributions (701) (776) Pension service costs 132 215 Decrease in Stocks 370 1,576 Decrease in Debtors 2,231 2,350 Decrease in Creditors (1,693) (3,470) (Decrease)/increase in provisions (135) 304 ---------- ---------- Net cash (outflow)/inflow from operating activities (2,679) 7,788 ========== ========== Note 7 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN CASH FLOW STATEMENT Year ended Year ended 31 December 31 December 2006 2005 #'000 #'000 ---------- ---------- Returns on investment and servicing finance Interest received 10 24 Interest paid (726) (1,004) ---------- ---------- (716) (980) ========== ========== Capital expenditure Purchase of tangible fixed assets (39) (301) Purchase of own shares by ESOP - (126) Purchase of own shares - Treasury shares - (266) Sale of tangible fixed assets 126 1,034 ---------- ---------- 87 341 ========== ========== Acquisitions and disposals Purchase of subsidiary - (564) ---------- ---------- - (564) ========== ========== Financing Bank and other loans repaid (1,230) (1,231) ---------- ---------- (1,230) (1,231) ========== ========== Note 8 TAX ON PROFIT ON ORDINARY ACTIVITIES Year ended Year ended 31 December 31 December 2006 2005 #'000 #'000 ---------- ---------- Current tax Corporation tax at 30% (1,147) 1,147 Deferred tax Origination/reversal of timing differences - 3,750 ---------- ---------- Total excluding pension scheme movements (1,147) 4,897 ========== ========== This information is provided by RNS The company news service from the London Stock Exchange END FR QFLFLDQBZBBE
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