15 December 2009
InterBulk Group plc
("InterBulk" or the "Group")
Preliminary Results for the year ended 30 September 2009
InterBulk (AIM:INB), a leading provider of intermodal logistics solutions to
the chemical, polymer, food and mineral industries, announces its preliminary
results for the year ended 30 September 2009.
Financial Highlights
2009 2008
£'000 £'000
Revenue 232,460 250,167
Gross profit 36,818 37,065
EBITDA 23,519 23,301
(before exceptional items)
Operating profit 14,836 15,105
(before exceptional items and
amortisation)
Profit before tax 2,974 4,605
(before exceptional items)
(Loss)/profit for the year (2,399) 831
(after exceptional items)
* 7% reduction in revenue due to lower market activity
* EBITDA (before exceptional items) maintained at prior year level of £23.5m
* Profit before tax (before exceptional items) of £3.0m after absorbing
higher Euro interest cost
* Exceptional items in total of £5.7m of which £4.1m relates to the
modification of bank facility (£3.2m of which is non-cash in the current
year)
Operational Highlights
* European and US chemical and polymer customers hard hit at start of the
year by economic conditions leading to major reduction in our customer's
production and shipments
* Determined management response coupled to the Group's variable cost
business model enabled operating profitability to be maintained
* Noticeable recovery in the liquid bulk market during the second half of the
year but dry bulk remained challenging
* Excellent safety and service performance supported the winning of
additional business
* Our position continues to develop in global growth markets with the Russian
business ahead of expectations and an enlarged team targeting domestic
business in China
* New banking facilities were agreed in September 2009 which provide adequate
headroom in the current economic conditions to continue the development of
the Group
David Rolph, InterBulk Chairman, commented:
"The last 12 months have brought very challenging market conditions. We have
reacted quickly and decisively and, making full use also of our flexible cost
base,the Group has been able to stand firm and maintain EBITDA."
"We will continue to implement our updated strategy and combined with our
operational focus on excellence in safety and service, and the delivery of cost
effective and innovative solutions to our customers, places the Group in a
strong position to benefit as the general economy improves."
For further information, please contact:
InterBulk Group plc Tel: 01355 575 000
David Rolph, Non-Executive Chairman
Koert van Wissen, CEO
Scott Cunningham, Finance Director
Astaire Securities (NOMAD) Tel: 0207 448 4400
Antony Legge
Arden Partners (BROKER) Tel: 020 7398 1600
Chris Hardie
Buchanan Communications Tel: 020 7466 5000
Charles Ryland, Jeremy Garcia, Ben Romney
Chairman's Statement
I am pleased to present the results of InterBulk Group plc for the year ended
30 September 2009. During the year we have seen revenue 7% lower driven by a
sharp reduction in activity due to the unprecedented adverse economic
conditions affecting many of our major customers. However, as a result of our
variable cost business model, the global portfolio of our Liquid Bulk business
and our focus on cost control we have maintained our EBITDA before exceptional
items at the previous year's level which is an excellent result given the
prevailing market conditions.
Last December our outgoing Chairman anticipated a challenging year ahead, which
has proven to be the case. We primarily serve the chemical and plastics
industries and demand for these products was suddenly and heavily impacted by
the global economic storm which broke in the fourth quarter of 2008, the first
quarter of our financial year. End consumption in such different markets as
automotive and construction collapsed, and the oil price fall of more than two
thirds triggered a comprehensive destocking through the supply chain. Dozens of
our customers' facilities were temporarily idled worldwide and all this led to
a major reduction in physical movement. A number of customers were badly hit
and we suffered a significant blow when Artenius UK Limited entered
administration. The impact of which was reported at the end of July 2009.
Our liquid bulk business has recovered on the back of some important business
wins reported in our half year announcement, and the global and diverse nature
of the business which provides a robust platform for growth. Our business in
Russia has exceeded expectations and in the Americas and Asia volumes recovered
well in the last quarter. We are increasingly recognised as a growing player in
the Chinese domestic market although the development of new business lags
behind our initial expectations. We have further strengthened our team in China
which we believe will provide further impetus.
Our dry bulk business has continued to see weak demand in the second half of
the year. The business is concentrated in intra- European logistics solutions
for plastics and this market sector has been the hardest hit with movements
down 24% year on year. Our dry bulk activity in minerals and food has also
proved to be much more challenging than expected. In minerals, the collapse of
construction activity and the cancellation of projects to move cementitious
products was the main cause. In food we have seen significant restructuring at
established accounts and have not been able to gain new business at the planned
rate but remain positive about opportunities in this sector.
General overcapacity in the logistics market continues to exert pressure on
margins and we have responded by keeping a tight control on our cost base while
continuing to maintain excellent service, which, together with our ability to
provide customers with a solution oriented approach ensures our
competitiveness.
InterBulk has a great team of people and I would like to take this opportunity
to thank each and every employee for their contribution to achieving these
encouraging results in such a challenging year.
Financial Highlights
Consolidated Exceptional Intangible 2009 2008
Income Items Amortisation Adjusted (pre Adjusted (pre
Statement exceptional exceptional
items and items and
amortisation) amortisation)
£'000 £'000 £'000 £'000 £'000
Revenue 232,460 - - 232,460 250,167
Gross 36,818 - - 36,818 37,065
profit
Operating 13,161 (1,305) (370) 14,836 15,105
profit
(Loss) / (2,746) (5,720) (370) 3,344 4,968
Profit
before tax
(Loss) / (2,399) (4,391) - 1,992 3,590
Profit
after tax
EBITDA 23,519 23,301
Net debt 118,071 104,244
* 7% reduction in revenue due to lower market activity
* EBITDA (before exceptional items) maintained at prior year level of £23.5m
* Operating profit (before goodwill amortisation and exceptional items) small
reduction to £14.8m with increase in operating profit margin from 6.0% to
6.4%
* Profit before tax (before goodwill amortisation and exceptional items) of £
3.0m after absorbing higher Euro interest cost
* Exceptional items in total of £5.7m of which £4.1m relates to the
modification of bank facility (£3.2m of which is non-cash in the current
year), £0.3m other finance items, £0.8m in respect of Artenius and £0.5m of
restructuring costs
* £11.3m of the increase in the net debt is due to the Euro/£ exchange rate
movement on debt with a year end rate of €1.09/£
As reported at the half year, we felt that, taking into account the volatile
business climate and the impact of the economic downturn on future trading, it
was appropriate to enter into a dialogue with Bank of Scotland, the Group's
principal bankers, to ensure that the current and expected global economic
conditions would be better reflected in our facility terms. The completion of
these discussions was announced at the end of September and the Group has
adequate headroom to allow the business to execute effectively its medium term
growth strategy and focus on the creation of shareholder value over the next
three years. This has triggered, however, significant exceptional costs and
together with those announced consequent to Artenius UK entering
administration, result in a net loss after tax.
Our Strategy
During early 2009, we revisited our strategy and updated it in light of the
completion of the integration of the enlarged group and the changed market
conditions the enlarged group faces. This was communicated in the interim
accounts.
InterBulk is a leading provider of intermodal logistics solutions to the
chemical, polymer, food and mineral industries. We have a well established
network and a partnership approach with our customers in Europe, Asia and the
Americas. We are recognised for excellent service and cost effective, inventive
solutions while achieving high standards of safety and environmental
protection.
We are building a high performance global team at InterBulk to reinforce this
base and to:
* Expand our operations in the growth regions of China, the Middle East, and
Russia
* Increase our inter-regional and export liquid bulk activity in the Americas
and South East Asia
* Establish solutions for deep sea dry bulk and develop our terminal network
* Grow our business in the food and minerals sectors
* Promote the sustainability of intermodal transport and lead the development
of the market
* Create strategic alliances with logistics service providers in key markets
* Enhance our leading IT platform to maximise operational efficiency
Outlook
The economic climate is showing signs of improved business confidence. However,
a high level of uncertainty remains as to whether this will be maintained
throughout the year ahead.
Our markets at the start of the new financial year shows a mixed picture. The
European plastics market, which has historically been the main segment we serve
with our dry bulk solutions, remains in a weak condition. Intra-European
movement will continue to be under pressure from Middle East imports as new
capacity comes on line in that region. We aim to get our dry bulk business back
onto a growth path by positioning ourselves additionally to provide European
logistics solutions for imported products, by further development of our
position in Eastern Europe, by introducing the intermodal concept to markets in
the Middle East and Asia which have up to now produced, stored and shipped
palletised rather than bulk products, and by diversifying into other bulk
materials. Our European customer base also provides opportunity for growth and
we are focussed on our cost effectiveness for this area. We have a pipeline of
business development prospects and we expect to see a return to growth in the
coming year.
Business sentiment amongst our Liquid Bulk customers, who cover a wider
portfolio, is more positive. Strong economic growth in the BRIC economies
supports an element of this improvement. Recovery of activity levels seen in
the second half has continued into the first two months of the new financial
year.
Globally, logistics infrastructure remains under-utilised and our customers
will remain focused on cost efficiencies. As a result, operational efficiency
will be an important factor in the next year. We believe, that InterBulk has
the right strategy, cost base, business model and people in place to meet these
challenges. Our current year results, which have maintained the EBITDA
generated by the business, shows resilience to the current volatile market
place.
In summary, we expect to experience growth in our liquids business with slower
recovery in our dry bulk volumes in the coming year. The good work performed by
the team this year and the maintenance of our underlying EBITDA puts the
business in a good position to maximise on opportunities as the general economy
improves.
Chief Executive's Review
Operational Highlights
The full extent of the global economic recession has impacted our business
throughout the year covered by this review. The team has responded well by
taking swift actions and our variable cost business model has been an important
factor in ensuring that we continue to achieve positive results despite this
challenging environment. We have continued to focus on delivery of our stated
group strategy. Key operational highlights include:
* Customer Excellent customer service levels in terms of both on time
Service delivery and health & safety performance. These two areas are
seen as key in our operations and are continually reinforced
into our business processes and culture.
* Customer Significant new business wins in the year with AkzoNobel and
wins Syngenta and we saw growth in a number of key relationships,
for example Lucite.
* Contingency Management moved quickly to adapt our business to the global
Planning market conditions with good control of the operational cost
base, equipment costs, overhead levels and a focus on cash
management.
* Liquid Bulk Excellent performance in the year in a volatile market. While
at a lower scale than planned we continued to grow the
business and fleet size. Fleet utilisation as we closed the
year has recovered to pre-crisis levels.
* Dry Bulk The team responded well to the impact from the fall in demand
within the European polymer market. Good support for our
growth in other geographical areas and cargo diversification
initiatives as we start our new financial year.
* Geographical Our recently established Russian operation exceeded
expansion expectations. This offset slower than expected progress in our
domestic China expansion plans. Our Liquid Bulk deep-sea
activity continued to grow in the second half of the year with
a closing level of activity beyond those experienced in 2008.
The dry bulk deep-sea geographic expansion initiatives form a
basis for growth and have a good pipeline of prospects.
The Market
Due to the weakening economic conditions many of our European customers have
closed production plants, delayed opening of new plants, or are operating units
well below full production capacity. They have engaged in significant
restructuring activity in the last year and we would expect this will continue
into next year. The period from November 2008 to February 2009 was very
challenging with sharp reductions in volumes in line with the banking crisis, a
sharp drop in end user demand and also a deep-destocking along all areas of the
supply chain. Outside Europe we have seen regions less affected by the global
downturn. For our business this includes Eastern European countries and Russia,
North East Asia and South America. We believe these regions will continue to
grow well. Although the destocking has come to an end, underlying global demand
for chemicals has in the first half year "lost" two to three years of
anticipated growth. In the second half year we have seen a slow improvement in
business confidence and a consolidation of activity. The Liquid Bulk area in
particular has seen a consistent growth trend.
We believe that the tough market conditions have also impacted our competitors,
and for those with a greater proportion of fixed costs, for example through
truck ownership and direct employment of drivers, the drop in volumes will have
created more operational and financial challenges. It is clear that the drop in
demand does mean an oversupply of logistics resources not only for intermodal
equipment but also for traditional modes of transportation such as road tank
and silo trucks. There is also an over capacity of storage space such as fixed
storage tanks and dry bulk silos in the market. We are seeing, therefore,
greater competition from our direct intermodal competitors and also from the
traditional modes of road transport as the operators seek to ensure some form
of asset utilisation by tackling lanes which, from a cost perspective are
clearly intermodal domain. Nevertheless we remain the leader in European
intermodal container logistics with 7,600 tankcontainers for liquid bulk
products and 11,200 dry bulk containers supported by 300 special tipping
trailers.
Over the last 12 months we have managed the volatile market circumstances well
via our variable cost business model and proactive approach to customer service
and retention. However, we are not complacent and expect that the underlying
business environment will remain challenging.
Operational Performance
Liquid Bulk
The Liquid Bulk business has shown to be more resilient to the global market
conditions and we have been helped by the translational impact of the weakness
in Sterling. The intra-European business has been affected more than deep-sea
export business with activity falling by 14% in terms of the number of moves.
European export has seen a lower volume reduction of only 11% and our export
activity from the UK has been particularly strong, assisted by new business
becoming operational in the second half, including a 3 year contract agreed
with AkzoNobel for the distribution and collection of varnishes, lacquers and
resins in bulk for their facility in Birmingham and new business from Syngenta
as a result of a global tender win. Our Russian team which was established last
year in St. Petersburg has performed above expectations in the first full year
of operations.
Our focus on expanding our deep-sea activity has paid off in the current
environment and allowed us to adapt well. In the Americas a strong result had
been delivered. A reduction in the number of export moves of 11% year on year
has been more than offset primarily in the first half by the strengthening of
the US$ and by an increase in the level of temporary storage income. During the
second half we have seen the number of tanks used for temporary storage fall
back to a more regular level as customers adjusted their intake to revised
trade flows and storage demand. The improvement in export volumes also seen in
the second half has continued into the New Year. However, due to economic
reasons and currency value fluctuations, the balance of demand can change
quickly so we remain vigilant to the operational task of fleet balance around
the regions.
Asia has been the most resilient of our markets and despite a dip in activity
during the first half of the year we completed the year with moves being in
line with prior year. Our China team and infrastructure has supported the China
export business which has remained strong. Due to our focus on resolving the
impact of the recession in Europe and USA, the progress and investments in the
domestic China development has been slower than expected, however the market
opportunity remains significant and further growth of our business in China
remains a strategic priority.
The tankcontainer liquid bulk business is global and performance of the regions
(Europe, Asia and the Americas) is characterised by a strong interdependency.
We have an integrated tank container fleet whereby we balance and compensate
for fleet shortages and over capacity between the regions. Traffic flows and
prices are monitored closely both centrally and regionally by our fleet
management function and pricing is used as the main tool in controlling the
balance. During the last quarter we recommenced our fleet expansion plans and
have decided to on-hire additional tank containers to maintain flexibility.
Dry Bulk
The major part of our dry bulk business serves the European polymer industry
which has been hit by a deeper recessionary impact than the other chemical
sectors. Our customer base in this area witnessed an unprecedented fall in
demand for their products combined with a three month (November 2008 to January
2009) period of deep destocking as the sudden fall in oil price triggered a
reduction of stocks through the various value chains. This led to some
significant change in the supply side of the European polymer market. One
example was the closure and subsequent administration process of Artenius (UK)
Limited which impacted both base load volumes and the balance of our fleet. The
demand for our dry bulk service for polymer has been stable but at a depressed
level in the second half year. For the whole year the number of moves fell 24%,
or 21% if the impact of Artenius is excluded, which is comparable with the
independent feedback we obtain from the polymer industry concerning their
activity levels. An important part of our intermodal solution is the flexible
storage which our bulk containers can provide. With our customers operating at
very low stock levels and a surfeit of unutilised silo storage existing around
Europe the income from this area has also fallen. Overall the utilisation of
our own fleet of specialised 30 foot containers and discharge trailers has
dropped, and we have addressed this by rebalancing investment and refurbishment
plans and scrapping old, high maintenance cost equipment. This will be
continually monitored in light of market conditions. Operating profit margins
fell to 4.3% in these tough market conditions. I am pleased to report that
despite this backdrop our commercial efforts in the last year, excluding the
impact of the Wilton site, have secured a positive net gain and when market
conditions improve, these will support business growth.
Our reliance on the European polymer market is recognised and we have a
strategy to diversify both in terms of materials handled and geography. Food
and minerals are the two main areas where our intermodal solutions have the
greatest opportunity for providing cost effective and safe logistics solutions.
These markets contributed approximately £13m of revenue in the year and have
good potential. We are building Dry Bulk business outside of Europe from a low
base. We achieved £4m of revenue from this activity which included for example
the sale of dry bulk liners for sugar exports from Africa to Europe. We
continue to build our team and capability and the commercial pipeline continues
to grow. We have established a dedicated team to focus on the Middle East
mainly for the polymer market including the final delivery to end users in
Europe and Asia, but other interesting non-polymer opportunities have already
been identified.
Our ISO-Veyor technology is aimed at the market for cement and related
products. This market in particular has been impacted by global economic
conditions and the slump in construction. We have scaled back our direct sales
and marketing efforts accordingly, but we remain committed to this innovative
solution and the value it can bring when conditions improve in the construction
industry. The business unit reported an operating loss of £0.5m in the year. We
have a fleet of 70 units and we have seen utilisation slowly improve. This
along with tight cost control supports our aim to achieve a break-even holding
position until the market conditions support further investment.
Logistics Terminals
We currently operate six logistics terminals in Europe which are connected to
our customer's manufacturing plants and play a vital role in our ability to
deliver logistics solutions by providing on and off site support to production
and material handling. Due to the current low throughput from our customers
using these terminals, our profitability is running at a reduced level.
Meanwhile, we are working with our partners to complete our largest tri-modal
terminal for intermodal shipments in the Port of Duisburg, Germany. After some
local permit delays we expect opening taking place in March 2010. Our approach
to develop terminal operations is opening up a new pipeline of growth
opportunities with our existing customer base, in particular for the Middle
East polymer export to Europe via terminals such as Duisburg where we offer
materials handling, storage and trans-shipment services.
People
Our Human Resource management has faced many challenges in the current business
conditions and we have tried to support those staff affected by cost reduction
initiatives in a professional and supportive basis. The Group aims to retain
and attract top performing individuals within the industry by communicating
effectively, involving employees in the business issues, ensuring effective
performance reviews, providing coaching and development, using appropriate
incentive schemes, maintaining our commitment to Health and Safety and
providing equal opportunities for all staff. We would like to thank everybody
who has worked hard over the past year in a challenging environment, delivering
positive results, excellent customer service and positioning the group well for
the future.
Corporate Social Responsibility
InterBulk Group passionately campaigns for 100% safe operations and protection
of people and the environment. InterBulk is fully committed to sustainability
and is a partner to the chemical industry Responsible Care™ charter.
All aspects of Quality, Health, Safety, Security and Environmental ("QHSSE")
performance are considered in detail during Board meetings and the responsible
care principles are cascaded throughout the company at all levels and passed
along the chemicals supply chain.
Acting according to uncompromising levels of responsible care and environmental
standards to protect people and nature is a core value of the InterBulk Group.
Summary
We believe that our ability to retain and grow existing business and achieve
new business wins is the result of us providing excellent and safe logistic
solutions to our customers. Although the chemical industry is now experiencing
a period of low growth, we believe there are good opportunities to grow by the
substitution of packaging and transportation such as drums, road tankers,
parcel tank vessels, and by further expansion in growth areas such as Russia,
the Middle East and China. The economic and environmental drivers to switch to
intermodal methods of transportation and storage remain strong.
Group Income Statement
For the year ended 30 September 2009
Total before Exceptional Total Total Exceptional Total
exceptional items before items
items exceptional
items
2009 2009 2009 2008 2008 2008
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 232,460 - 232,460 250,167 - 250,167
Cost of sales (195,642) - (195,642) (213,102) - (213,102)
Gross profit 36,818 - 36,818 37,065 - 37,065
Administrative (22,352) (1,305) (23,657) (22,323) (441) (22,764)
expenses
Operating 14,466 (1,305) 13,161 14,742 (441) 14,301
profit
Analysed as:
Operating
profit before
depreciation & 23,519 (1,305) 22,214 23,301 (441) 22,860
amortisation
Depreciation (8,683) - (8,683) (8,196) - (8,196)
of tangible
assets
Amortisation (370) - (370) (363) - (363)
of intangible
assets
Finance income 27 - 27 241 - 241
Finance (11,519) (4,415) (15,934) (10,378) (3,445) (13,823)
expenses
(11,492) (4,415) (15,907) (10,137) (3,445) (13,582)
Profit/(loss) 2,974 (5,720) (2,746) 4,605 (3,886) 719
before
taxation
Taxation (982) 1,329 347 (1,015) 1,127 112
Profit/(loss) 1,992 (4,391) (2,399) 3,590 (2,759) 831
for the year
Earnings per
share (pence)
Basic (0.79p) 0.27p
Diluted (0.79p) 0.27p
Group Statement of Recognised Income and Expense
For the year ended 30 September 2009
2009 2008
£'000 £'000
Net exchange differences on retranslation of foreign 4,951 3,805
operations
Net losses on net investment hedge taken to equity (5,087) (1,232)
Net losses on cashflow hedge transferred to equity, net (1,907) (41)
of tax
Actuarial gains/(loss) on retirement benefit 28 (118)
obligations
Movement of deferred tax on retirement benefit (8) 31
obligations
Net (expenses)/income recognised directly in equity (2,023) 2,445
(Loss)/profit for the financial year (2,399) 831
Total recognised (expenses)/income for the year (4,422) 3,276
Group Balance Sheeet
At 30 September 2009
Group Group
2009 2008
£'000 £'000
ASSETS
Non-current assets
Goodwill 125,694 118,397
Other intangible assets 4,442 4,074
Property, plant and equipment 66,917 64,790
Deferred tax assets 1,577 821
198,630 188,082
Current assets
Inventories 1,927 3,308
Trade and other receivables 36,260 39,978
Cash and cash equivalents 5,208 9,317
43,395 52,603
Total assets 242,025 240,685
LIABILITIES
Current liabilities
Financial liabilities (14,689) (10,270)
Trade and other payables (52,788) (58,891)
Current tax liabilities (281) (97)
(67,758) (69,258)
Non-current liabilities
Financial liabilities (112,029) (104,081)
Deferred tax liabilities (4,160) (5,359)
Retirement benefit obligations (73) (38)
(116,262) (109,478)
Total liabilities (184,020) (178,736)
Net assets 58,005 61,949
SHAREHOLDERS' EQUITY
Ordinary shares 30,289 30,289
Share premium 26,431 26,431
Warrants 1,874 1,424
Retirement benefit obligations reserve (7) (27)
Cumulative translation reserve 2,428 2,564
Share option reserve 83 55
Hedge reserve (2,394) (487)
Retained earnings (699) 1,700
Total equity attributable to shareholders 58,005 61,949
Group Cash Flow Statement
For the year ended 30 September 2009
2009 2008
£'000 £'000
Cashflows from operating activities
Cash generated from operations 18,954 21,091
Tax (paid)/ received (1,118) 509
Net cash flow from operating activities 17,836 21,600
Cashflows from investing activities
Interest received 27 241
Sale of property, plant and equipment 588 384
Purchases of property, plant and equipment (1,268) (2,189)
(net of finance lease)
Payments to acquire intangible fixed assets (553) (95)
Payment of deferred consideration - (543)
Net cash flow from investing activities (1,206) (2,202)
Cashflows from financing activities
Interest and fees paid (12,912) (10,125)
Repayment of borrowings (4,017) (2,807)
Repayment of capital element of finance (5,916) (5,238)
leases
Net cash flow from financing activities (22,845) (18,170)
(Decrease)/increase in cash and cash (6,215) 1,228
equivalents
Effect of exchange rates on cash and cash 129 688
equivalents
Cash and cash equivalents at the beginning 9,317 7,401
of the year
Cash and cash equivalents at the end of the 3,231 9,317
year
Notes to the preliminary results
1. The financial information set out in the preliminary announcement does not
constitute the Group's statutory accounts within the meaning of the
Companies Act 2006 and has been extracted from the full accounts for the
years ended 30 September 2009 and 30 September 2008 respectively. A copy of
the statutory accounts for the period ended 30 September 2008 has been
delivered to the Registrar of Companies. The auditors' report on the
financial statements was unqualified and did not include a statement under
section 495 and 496 of the Companies Act 2006. The statutory financial
statements for the year ended 30 September 2009 have been finalised and
approved by the Directors but not yet signed. They will be signed on the
basis of the financial information presented by the directors in the
preliminary announcement and will be delivered to the Registrar of
Companies in due course.
These financial statements have been prepared in accordance with the accounting
policies based on International Financial Reporting Standards ("IFRS") and
IFRIC interpretations endorsed by the European Union (EU) and with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost convention as
modified by the revaluation of derivative financial instruments.
2. Segment information
The Directors consider that the risks and rates of return are strongly affected
by both differences in its services and differences in the geographical areas
in which it operates. The Directors consider that there are two business
segments being the provision of logistics services for Dry Bulk material and
for Liquid Bulk material. Other activities such as capital sales of specialist
dry bulk containers ("ISO-Veyors") are business segments, but are below 10% of
the Group's activity, and therefore are not reportable segments.
The operations are based on three geographical areas. The analysis by
geographical area of the Group's turnover and segment result is set out below.
The sales analysis set out below is based on the location where the order is
received and invoiced and where the assets are located.
By business area
Dry Bulk Liquid Others Eliminations Total
Bulk
Year ended 30 September 2009 £'000 £'000 £'000 £'000 £'000
Revenue
Sales to external customers 104,002 127,675 783 - 232,460
Results
Segment result before 4,509 11,551 (683) - 15,377
exceptional items
Exceptional items (992) (300) (13) - (1,305)
Segment results after 3,517 11,251 (696) 14,072
exceptional items
Unallocated expenses (911)
Group operating profit 13,161
(after exceptional items)
Net finance expenses (15,907)
(including exceptional
items)
Loss before taxation (2,746)
Taxation 347
Net loss for the year (2,399)
Dry Bulk Liquid Others Eliminations Total
Bulk
Year ended 30 September 2008 £'000 £'000 £'000 £'000 £'000
Revenue
Sales to external customers 126,190 122,427 1,550 - 250,167
Results
Segment result before 8,634 7,715 (665) - 15,684
exceptional items
Exceptional items (441) - - - (441)
Segment results after 8,193 7,715 (665) - 15,243
exceptional items
Unallocated expenses (942)
Group operating profit 14,301
(after exceptional items)
Net finance expenses (13,582)
(including exceptional
items)
Profit before taxation 719
Taxation 112
Net profit for the year 831
By geographic area
Europe Americas Asia Eliminations Total
Year ended 30 September £'000 £'000 £'000 £'000 £'000
2009
Revenue
Sales to external customers 193,840 21,907 16,713 - 232,460
Results
Segment result before 12,976 2,411 (10) - 15,377
exceptional items
Exceptional items (1,005) - (300) - (1,305)
Segment result after 11,971 2,411 (310) 14,072
exceptional items
Unallocated expenses (911)
Group operating profit 13,161
(after exceptional items)
Net finance expenses (15,907)
(including exceptional
items)
Loss before taxation (2,746)
Taxation 347
Net loss for the year (2,399)
Europe Americas Asia Eliminations Total
Year ended 30 September £'000 £'000 £'000 £'000 £'000
2008
Revenue
Sales to external customers 215,808 18,995 15,364 - 250,167
Results
Segment result before 15,038 719 (73) - 15,684
exceptional items
Exceptional items (441) - - - (441)
Segment result after 14,597 719 (73) - 15,243
exceptional items
Unallocated expenses (942)
Group operating profit 14,301
(after exceptional items)
Net finance expenses (13,582)
(including exceptional
items)
Profit before taxation 719
Taxation 112
Net profit for the year 831
3. Finance expenses
2009 2008
£'000 £'000
Interest payable on bank loans and 8,870 8,405
overdrafts
Amortisation of deferred finance costs 351 265
Finance charges payable under finance 2,273 1,694
leases and hire purchase contracts
Interest on pension scheme assets/ 25 14
liabilities
Finance expense (before exceptional 11,519 10,378
items)
Exceptional item 4,415 3,445
Total finance expenses 15,934 13,823
4. Exceptional items
The gross exceptional items in the year to 30 September 2009 of £5,720,000
consists of:
a. Charged to operating profit
Items charged to operating profit totalling £1,305,000 is made up of an
exceptional charge of £462,000 in the year relating to a redundancy programme
mainly impacting the UK workforce and exit costs associated with the closure of
the flexi-tank business in Asia and an exceptional charge of £843,000 relating
to the Artenius UK Limited plant closure and subsequent insolvency procedures.
In 2008 exceptional charges of £441,000 in the year related to the closure of
the UK factory involved in the manufacturing of the specialist liners used for
the transportation of dry bulk materials.
b. Charged to finance expense
Included in the finance expense is an exceptional charge of £4,415,000. The
majority of this relates to the accounting treatment and fees associated with
the modified bank loan facility concluded on the 30 September 2009. The first
element of this relates to a £2,285,000 non-cash write off of previously
deferred finance costs. These costs had up until the 30 September 2009 been
deferred against the carrying value of the bank loans and were planned to be
amortised over the remaining term of the loans. However, on the signing of the
modified bank loan facility this deferred amount required to be immediately
expensed. The fees and expenses associated with the new modified loan facility
also require to be immediately expensed. This equates to an amount of £
1,835,000 although £900,000 of this is not payable until 30 September 2012. The
balance of the total exceptional finance charge of £295,000 (2008: £349,000)
relates to unrealised non-cash exchange loss relating to some asset finance
which is maintained in currencies other than sterling to match cash inflows.
In 2008 the exceptional finance charge also included an unrealised non-cash
loss of £3,445,000 on an element of long-term debt denominated in Euros to
create a hedge against annual Euro trading income. The designation of this loan
was changed to a balance sheet hedge at the end of June 2008. Since that date
exchange gains and losses have been recorded within a separate component of
equity, the cumulative exchange reserve.
5. Earnings per ordinary share
The basic earnings per share is calculated by dividing the (loss)/profit for
the financial year attributable to shareholders by the weighted average number
of shares in issue. In calculating the diluted profit per share, warrants and
options outstanding have been taken into account.
2009 2008
(Loss)/profit for the year (£'000) (2,399) 831
Weighted average number of shares 302,892,041 302,892,041
(number)
Effect of outstanding warrants and - -
options
Adjusted weighted average number
of ordinary shares (number) 302,892,041 302,892,041
Basic (loss)/profit per share (pence) (0.79)p 0.27p
Diluted (loss)/profit per share (0.79)p 0.27p
(pence)
InterBulk Group plc assesses the performance of the Group by adjusting earnings
per share, calculated in accordance with IAS 33, to exclude exceptional items
and goodwill amortisation and believes that the exclusion of such items
provides a better comparison of business performance. The calculation of
earnings per ordinary share on a basis which excluded exceptional items is
based on the following adjusted earnings:
2009 2008
£'000 £'000
(Loss)/profit for the year (2,399) 831
Exclude exceptional items (net of 4,391 2,759
attributable taxation)
Exclude amortisation of intangible 370 363
assets
Adjusted earnings 2,362 3,953
An adjusted earnings per share figure
is presented below:-
Basic earnings per share 0.78p 1.31p
pre-exceptional items (pence)
Diluted earnings per share 0.78p 1.31p
pre-exceptional items (pence)
6. Cash flow from operations
2009 2008
£'000 £'000
(Loss)/profit before taxation (2,746) 719
Adjustments for:
Depreciation 8,683 8,196
Amortisation of intangible assets 370 363
(Loss)/gain on sale of fixed assets (193) 34
Finance income (27) (241)
Finance expenses 15,934 13,823
Decrease/(increase) in inventories 1,381 (254)
Decrease/(increase) in trade & other 2,830 (2,751)
receivables
Increase in retirement benefit 35 171
obligations
(Decrease)/increase in payables (7,313) 1,031
Cash generated from operations 18,954 21,091
7. Analysis of Group net debt
1 October Cashflow Exchange Non-cash 30 September
2008 differences movements 2009
£'000 £'000 £'000 £'000 £'000
Cash and cash 9,317 (6,215) 129 - 3,231
equivalents
Loans (84,844) 4,017 (7,940) (1,210) (89,977)
Finance leases (28,717) 5,916 (3,516) (5,008) (31,325)
(104,244) 3,718 (11,327) (6,218) (118,071)
During the year we felt that, taking into account the volatile business climate
and the impact of the economic downturn on future trading, it was appropriate
to enter into a dialogue with Bank of Scotland, the Group's principal bankers,
to ensure that the current and expected global economic conditions would be
better reflected in our facility terms. The completion of these discussions was
announced at the end of September and the Group has adequate headroom to allow
the business to execute effectively its medium term growth strategy and focus
on the creation of shareholder value over the next three years.
The modified profile consists of Term A £9.7m, Term B £44.1m and Mezzanine
subordinated loan of £33.8m. Only the Term Loan A is repayable in quarterly
instalments over the next 3 years with repayments in each year of £1.2m, £2.6m
and £5.9m, respectively. Term A and Term B have interest which is on a paid
basis. The margins on these loans are 3.5% and 4.25% above Libor, respectively.
The Mezzanine subordinated loan has no cash paid interest requirements with
interest accrued into the principle value of the loan on a quarterly basis. The
margin on the Mezzanine loan is 12% above Libor. The Term B and Mezzanine
subordinated loan are both repayable on 30 September 2012.
Fees associated with the modified bank facilities are described above being
recorded as an exceptional item in the year. In addition, 15,144,602 warrant
instruments were issued to Bank of Scotland, being 5% of the issued share
capital. These warrants have an exercise price of 10 pence and a five year
exercise period. A fair value for these warrants has been assessed at £450,000
with this value recorded within equity reserves and offset against the
associated bank debt at 30 September 2009.
8. Availability of Accounts
Copies of the full Report and Accounts for the year ended 30 September 2009 are
being sent to shareholders. Further copies will be available from 1 Redwood
Crescent, East Kilbride, Glasgow, G74 5PA.