REG-Interbulk Group PLC: Half-yearly Report  - Part 1


Released: 29/06/2009

For immediate release 29 June 2009 InterBulk Group plc ("InterBulk" or the "Group") Interim Results for the six months ended 31 March 2009 InterBulk Group plc (AIM: INB), a leading provider of global intermodal logistics solutions for the movement of liquid and dry bulk materials, announces its interim results for the six month period ended 31 March 2009. Interim Highlights * Operating profit (before exceptional items and amortisation) increased 30% to £9.0m * Profit before tax (before all exceptional items and amortisation) increased 92% to £3.4m * Adjusted EPS increased by 88% to 0.81p for the 6 month period to 31 March 2009 * Significant new business wins with Syngenta, AkzoNobel and Lucite International * Swift implementation of contingency plan for overall cost reduction * InterBulk well placed to benefit when the general economic climate improves Commenting on the results, Chairman of InterBulk, David Rolph said: "We are proud to be able to report a strong performance during what has been a difficult trading environment. As anticipated the period has been challenging, resulting in some of our customers in certain industries being particularly affected by the downturn. Despite this, through a combination of our resilient business model and swift action taken by management to implement cost reductions, InterBulk remains well positioned in our chosen markets. We have made good progress towards achieving our vision to be a global leader in intermodal logistics solutions for liquid and dry bulk materials. " 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 Dowgate Capital Advisers (NOMAD) Tel: 020 7492 4777 James Caithie Arden Partners 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 interim results for InterBulk Group plc for the 6 months to 31 March 2009, a period in which InterBulk Group plc has delivered a strong performance in a challenging economic environment. We have made good progress towards achieving our vision to be a global leader in intermodal logistics solutions for liquid and dry bulk materials. Last December our outgoing chairman anticipated a challenging year ahead. This has proven to be the case. Our customers in the chemical and polymer industry have been significantly impacted by the downturn in the global economy. However, I can report that our business has coped well in this challenging environment with further growth in operating profit during the period. Our outsourced international business model, together with prompt implementation of tough but necessary actions to trim overheads has allowed us to manage the impact of the lower activity level. The response from our team has been excellent. Financial Highlights 6 months to 6 months to 31 March 31 March Change % 2009 2008 £'000 £'000 Revenue 116,940 121,696 -4% Gross profit 19,325 17,456 +11% EBITDA before exceptional items 13,343 10,915 +22% Operating profit before exceptional items 9,029 6,942 +30% and amortisation Profit before tax before all exceptional 3,403 1,776 +92% items and amortisation Profit / (loss) before tax 1,847 (1,622) Net debt 114,695 105,756 * 4% reduction in revenue due to falling market activity worldwide * EBITDA (before exceptional items) increased 22% to £13.3m * Operating profit (before exceptional items and amortisation) increased 30% to £9.0m * Profit before tax (before all exceptional items and amortisation) increased 92% to £3.4m * Exceptional items of £0.4m are reported within the operating profit and £ 0.9m within finance expenses * Adjusted EPS increased by 88% to 0.81p for the 6 month period to 31 March 2009 * Increase in net debt due solely to currency effect with period end exchange rate of #1.08/£ Our Strategy 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 InterBulk global team 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 Our Performance Liquid Bulk The European Liquid Bulk business which serves the chemical industry has been substantially impacted by the economic conditions. Domestic business has been affected more than deep sea export. The volume reduction was offset by the favourable translational impact of EUR and USD denominated business and this has resulted in stable revenue. Our team in St Petersburg has made a good start to our market entry into Russia. Two customer successes have been publicised in the 6 month period. A 3 year contract for logistic services has been agreed with AkzoNobel for the distribution and collection of varnishes, lacquers and resins in bulk for their facility in Birmingham, UK. The contract is expected to have a value of £9m over 3 years. We have also extended the contract for logistics services with Lucite International to 2011 with a value of £7m per annum. This is one of our largest contracts for the intermodal transportation of liquid chemicals in tankcontainers. These two successes are testament to our high quality service and track record. During June 2009 we also announced that we had been awarded new business as a result of a global tender by Syngenta. We have been working very closely with this leading customer to demonstrate our capabilities, and have now increased our business to an estimated £3m per annum. Asia has been the most resilient of our markets. Revenue and margins were up against prior period with an even split between inter Asian traffic flows and business to and from Europe and the Americas. We have expanded our China team and infrastructure during the last 6 months. The local domestic business is at an early stage of development. The international business is fully integrated with our global operations. We have confirmed the significant market opportunity which exists in China both with our existing customer base and new Asian customers. Further growth of our business in China is a strategic priority. Our Liquid Bulk business in the Americas has delivered impressive results. The strengthening of the US$ has made a material impact, but the underlying performance has also been good. We have seen a reduction in the number of export moves performed, which is also linked to prevailing exchange rates, but this was partially compensated by an increase in the level of temporary storage income. Our South American team has performed well, with positive results achieved in Brazil in particular. In terms of our global fleet, imbalances in the USA continue to be an operational challenge. This is an industry wide issue with the slowdown in exports from the USA resulting in surplus stocks of tankcontainers in the region. We have decided to exit the Asian Flexi-tanks business due to weak margins which continued with a loss of £0.1m in the current 6 month period to 31 March 2009. In the current economic climate we decided that management time and resources could be better employed on other growth opportunities. We will retain the capability to provide a Flexi-tank solution as part of an integrated supply chain solution but we no longer treat it as a focus area, certainly for the immediate future. Dry Bulk The major part of our Dry Bulk business serves the European polymer industry. An important focus in the last 6 months has been to adapt our business to the significant changes affecting our customers. They have witnessed an unprecedented fall in demand for their products combined with a 3 month (November to January) period of deep destocking as the sudden fall in oil price triggered a reduction in the value of stocks through the various value chains. Since January, the demand for polymer has remained depressed with no end yet in sight to the challenges of a range of end use sectors including construction and automotive. The very large consumer packaging sector has on the other hand remained reasonably resilient. During the last 6 months we have successfully retained our high customer service levels. This has been the foundation to gain ground in tender processes and new business development despite the highly competitive state of the marketplace. We will continue on this basis and the impact of the good work of our team will be seen as the new gains become operational. Across the Group the European polymer business has been the area most impacted by the economic situation with an 18% reduction in revenue. Prompt action to manage costs has meant that our operating profit in this area has held up well with only a small decrease in margin to 6.1% compared to 6.5% in the prior period. Our reliance on the polymer market is recognised and we have a strategy to diversify into other markets. 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 £7.0m of revenue in the 6 months to 31 March 2009 and have good potential. We are building Dry Bulk business outside of Europe from scratch. We achieved £ 1.1m of revenue from non-European business in the 6 months to 31 March 2009. However, our pipeline of projects is growing. Recently we secured a £1m contract for the sale of dry bulk liners for sugar exports from Mauritius to Europe, and we have also made our first delivery of Polymer from North America to Europe. We are building our team and capability for this area and these business wins are encouraging at this stage. 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. As a result, the excellent prospects for business at the beginning of this year did not materialise and commercial success has been delayed. 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 a small operating loss of £0.3m in the 6 month period and we expect that the full impact of cost management in the second half will result in a breakeven position in this unit. 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. This project has been delayed slightly and the opening should now take place in October 2009. Our focused approach on terminal operations are currently opening up a new pipeline of growth opportunities with our existing customer base. Contingency Planning The last 6 months have been very demanding on our operations. Our variable cost model gives us a competitive advantage compared to companies with a high fixed cost base. Nevertheless, we have promptly implemented our contingency plan for overall cost reduction comprising: * Reduction of operational cost base (third party trucking, rail and shipping) to align with lower demand * Closure of our UK liner manufacturing site which commenced in September 2008 * Workforce reductions in Europe, supported by some reorganisation of our regional offices * Exit from Asian Flexi-tank business * Programme to review asset utilisation with return of hired tank containers and tight controls for capital expenditure * Tight control of discretionary spend * Continued focus on credit control procedures and managing cash In summary, our management moved quickly and we have already adapted our business model to react to market conditions. Importantly this was achieved without impacting the success already made in improving our customer relationships by providing an excellent service. Net Debt The Group has net debt (defined as bank loans, overdrafts and obligations under finance leases less cash and cash equivalents) at 31 March 2009 of £114.7m (30 September 2008: £104.2m). This net debt position is split as follows: 31 March 2009 30 September 2008 £'000 £'000 Bank of Scotland senior debt 89,219 82,378 Other bank loans 2,655 2,466 Asset finance lease creditor 32,912 28,717 Less: Cash and cash equivalents (10,091) (9,317) 114,695 104,244 During the 6 months to 31 March 2009 we have continued to make all scheduled loan repayments. The increase in our net debt position is driven by the EUR/GBP exchange rate movement as the majority of our financial liabilities are EUR denominated. The movement in our net debt (see note 9) includes a £13.3m negative impact due to this currency impact. If the 31 March 2009 net debt was retranslated at #1.17/GBP being the actual exchange rate on the 24 June 2009 then there would be a reduction of approximately £6.2m from that reported above. The age profile of our debt is shown below. Less than 1-2 2-3 3-4 4-5 More 1 year years years years years than £'000 £'000 £'000 £'000 £'000 5 years £'000 Bank of Scotland 3,625 3,992 4,602 3,671 29,026 44,303 senior debt Other bank loans 569 615 754 615 102 - Asset finance lease 6,142 6,555 4,946 5,057 3,673 6,539 creditor 10,336 11,162 10,302 9,343 32,801 50,842 The Group has a long term debt package which includes a committed revolving credit and ancillary facility of £10m for working capital purposes until 31 March 2013. The Board is satisfied that our debt obligations can be met and that we require no additional working capital facility or any extension of bank facilities for the foreseeable future. The Group achieved all covenant tests during the period. The Group's covenants include provisions to increase the levels of the tests over time. We have examined a range of forecast scenarios and in certain circumstances some future covenant tests may not be fully met. The Group has recently entered into discussions with its bankers to establish revised covenant tests which the Board believe will provide a better match to the Group's future growth plans, updated in the light of the current global economic conditions and potential further volatility in exchange rates. These discussions are progressing on a constructive basis and we expect to reach a satisfactory conclusion in the near future. Outlook Our well established European customer base is going through a very challenging period of low demand, overcapacity and margin pressure. They anticipate neither a near term nor a rapid recovery and have introduced wide reaching reorganisations including plant closures as the weakest operations fall by the wayside. We expect more announcements in this vein and are monitoring and managing as far as possible our exposure to such changes. For our European business we believe that activity levels in polymers have now stabilised, albeit at a lower level and with limited recovery likely in the short-term. Conditions in these markets will remain tough as competitors from all modes of transport attempt to maintain asset utilisation. Our liquid chemicals business has been resilient, particularly in the Americas and we expect this good performance to be maintained. Our team is focused on service excellence to protect and where possible grow our market share, while at the same time ensuring the optimisation of our operations in the next 6 months. The chemical and polymer industry has made and will continue to make very large investments in the growth economies of the world and in regions with major feedstock advantage. China and the Middle East feature prominently among these. InterBulk does have growth opportunities which are linked to bringing the intermodal logistics solutions to these markets and our key actions are spelt out in our updated strategy. Delivery of these strategic elements will not have a major financial impact in the remainder of this year, but they represent increasingly a major source of growth in years to come. Our business model is flexible and management has reacted well to the current unprecedented economic conditions and despite this challenging environment we have grown our profitability. This foundation, along with our updated strategy, leave us well positioned to benefit when the general economic climate improves. David Rolph Non-Executive Chairman 29 June 2009 Consolidated Income Statement For the 6 months ended 31 March 2009 (unaudited) Notes 6 months to 6 months to Year to 31 March 2008 31 March 2009 30 September 2008 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Revenue 3 116,940 121,696 250,167 Cost of sales (97,615) (104,240) (213,102) Gross profit 19,325 17,456 37,065 Administrative expenses (10,478) (10,705) (22,323) Operating profit before 8,847 6,751 14,742 exceptional items Analysed as: Operating profit before 13,343 10,915 23,301 exceptional items, depreciation & amortisation Depreciation of (4,314) (3,973) (8,196) tangible assets Amortisation of (182) (191) (363) intangible assets Exceptional items 6 (446) - (441) Operating profit 3 8,401 6,751 14,301 Finance income 27 167 241 Finance expenses 4 (5,653) (5,333) (10,378) Profit before taxation, 2,775 1,585 4,164 and finance expense exceptional items Exceptional finance 4 (928) (3,207) (3,445) expenses Profit/(loss) before 1,847 (1,622) 719 taxation Taxation 7 (640) 486 112 Profit /(loss) for the 1,207 (1,136) 831 period Earnings per share (pence) - Basic 5 0.40p (0.37p) 0.27p - Diluted 5 0.40p (0.37p) 0.27p - Adjusted (Basic and 5 0.81p 0.43p 1.31p Diluted) Consolidated Statement of Recognised Income and Expenses For the 6 months ended 31 March 2009 (unaudited) 6 months to 6 months to Year to 31 March 2009 31 March 2008 30 September 2008 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net exchange difference on retranslation of foreign 6,640 4,097 3,805 operations Net losses on net investment hedge taken to equity net of tax (6,183) (1,470) (1,232) Net losses on cash flow hedge (2,614) (558) (41) taken to equity, net of tax Actuarial gains/(losses) on 22 81 (118) retirement benefit obligations Movement of deferred tax on retirement benefit obligations (6) 28 31 Net (losses)/gains not recognised in income statement (2,141) 2,178 2,445 Profit/(loss) for the financial 1,207 (1,136) 831 period Total recognised (expense)/income for the period (934) 1,042 3,276 Consolidated Balance Sheet At 31 March 2009 (unaudited) 31 March 31 March 2008 30 September 2009 2008 Notes (unaudited) (unaudited) (audited) £'000 £'000 £'000 ASSETS Non-current assets Goodwill 126,406 118,922 118,397 Other intangible assets 3,891 4,222 4,074 Property, plant and equipment 69,822 62,935 64,790 Deferred tax assets 821 434 821 Investments - 46 - 200,940 186,559 188,082 Current assets Inventories 2,256 4,607 3,308 Trade and other receivables 36,191 40,701 39,978 Current tax - 943 - Cash and cash equivalents 10,091 7,243 9,317 48,538 53,494 52,603 Total assets 249,478 240,053 240,685 LIABILITIES Current liabilities Financial liabilities (10,526) (11,220) (10,270) Trade and other payables (54,324) (60,769) (58,891) Current tax liabilities (470) - (97) (65,320) (71,989) (69,258) Non-current liabilities Financial liabilities (118,680) (103,286) (104,081) Deferred tax liabilities (4,406) (5,002) (5,359) Retirement benefit obligations (43) (75) (38) (123,129) (108,363) (109,478) Total liabilities (188,449) (180,352) (178,736) Net assets 61,029 59,701 61,949 SHAREHOLDERS' EQUITY Ordinary shares 10 30,289 30,289 30,289 Share premium 10 26,431 26,431 26,431 Consideration warrants 10 1,424 1,424 1,424 Retirement benefit obligations 10 (11) 169 (27) reserve Share option reserve 10 69 41 55 Cumulative translation reserve 10 3,021 2,618 2,564 Hedge reserve 10 (3,101) (1,004) (487) Retained earnings 10 2,907 (267) 1,700 Total equity attributable to 61,029 59,701 61,949 shareholders Consolidated Cash Flow Statement For the 6 months ended 31 March 2009 (unaudited) Notes 6 months to 6 months to Year to 30 31 March 31 March September 2009 2008 2008 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flows from operating activities Cash generated from 8 11,713 10,608 21,091 operations Tax (paid)/received (261) 215 509 Net cash flow from 11,452 10,823 21,600 operating activities Cash flows from i nvesting activities Interest received 27 167 241 Sale of property, 219 29 384 plant and equipment Payment of deferred - (543) (543) consideration Purchases of (1,348) (1,326) (2,189) property, plant and equipment (net of finance lease) Payments to acquire (21) (10) (95) intangible fixed assets Net cash flow from (1,123) (1,683) (2,202) investing activities Cash flows from financing activities Interest paid (5,592) (5,405) (10,125) Repayment of (1,740) (987) (2,807) borrowings Repayment of (3,083) (3,281) (5,238) capital element of finance leases Net cash flow from (10,415) (9,673) (18,170) financing activities (Decrease)/increase (86) (533) 1,228 in cash and cash equivalents Effect of exchange 860 375 688 rates on cash and cash equivalents Cash and cash 9,317 7,401 7,401 equivalents at the beginning of the period Cash and cash 10,091 7,243 9,317 equivalents at the end of the period Notes to the Interim Financial Statements 1. Basis of preparation The interim financial information has been prepared in accordance with the AIM Rules for companies and has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. As permitted, the Group has chosen not to adopt IAS 34 - Interim Financial Reporting, in preparing these interim financial statements, and therefore this information is not wholly compliant with International Financial Reporting Standards. The interim financial statements are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The interim financial report should be read in conjunction with the financial statements for the year ended 30 September 2008. The statutory accounts for the year ended 30 September 2008 have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under either Section 237(2) or 237 (3) of the Companies Act 1985. 2. Accounting policies The accounting policies adopted are consistent with those of the financial statements for the year ended 30 September 2008 and are applied as described on pages 30 to 36 in those financial statements. As noted in the Chairman's Statement we recently entered into discussions with our bank to establish revised future covenant tests in the Group's banking facilities. The Group requires no extension to bank facilities and the Board is satisfied that the Group can meet all loan and interest repayments as scheduled for the foreseeable future. The Directors are confident, based on dialogue with the Group's bankers to date, that an acceptable conclusion to these discussions should be reached in the near future. The Directors have concluded after carefully reviewing the Group's business plan and the constructive nature of the discussions on changes to future covenant tests, that a satisfactory conclusion to these discussions will be reached and so continue to adopt the going concern basis in preparing the financial statements. 3. 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 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. 6 months to 31 March 2009 Geographic Europe Americas Asia Total £'000 £'000 £'000 £'000 Revenue Sales to external customers 96,428 12,022 8,490 116,940 Results Segment result before exceptional items 7,112 1,880 225 9,217 Exceptional items (146) - (300) (446) Segment result after exceptional items 6,966 1,880 (75) 8,771 Unallocated expenses (370) Group operating profit 8,401 Net finance expenses (6,554) Profit before taxation 1,847 Taxation (640) Net profit for the period 1,207 Business Dry Bulk Liquid Others Total Bulk £'000 £'000 £'000 £'000 Revenue Sales to external customers 51,274 65,253 413 116,940 Results Segment result before exceptional items 3,197 6,362 (342) 9,217 Exceptional items (133) (300) (13) (446) Segment result after exceptional items 3,064 6,062 (355) 8,771 Unallocated expenses (370) Group operating profit 8,401 Net finance expenses (6,554) Profit before taxation 1,847 Taxation (640) Net profit for the period 1,207 6 months to 31 March 2008 Geographic Europe Americas Asia Total £'000 £'000 £'000 £'000 Revenue Sales to external customers 105,361 9,022 7,313 121,696 Results Segment result 6,238 582 324 7,144 Unallocated expenses (393) Group operating profit 6,751 Net finance expenses (8,373) Loss before taxation (1,622) Taxation 486 Net loss for the period (1,136) Business Dry Bulk Liquid Others Total Bulk £'000 £'000 £'000 £'000 Revenue Sales to external customers 62,154 58,925 617 121,696 Results Segment result 4,039 3,422 (317) 7,144 Unallocated expenses (393) Group operating profit 6,751 Net finance expenses (8,373) Loss before taxation (1,622) Taxation 486 Net loss for the period (1,136) 4. Finance Expenses 6 months to 6 months to Year to 31 March 31 March 30 September 2009 2008 2008 £'000 £'000 £'000 Interest payable on bank loans 4,361 4,283 8,405 and overdrafts Amortisation of deferred finance 142 130 265 costs Finance charges payable under 1,138 916 1,694 finance leases and hire purchase contracts Interest on pension scheme 12 4 14 assets / liabilities Finance expense (before 5,653 5,333 10,378 unrealised exchange loss and exceptional items) Unrealised exchange loss on long - 3,207 3,045 term bank debt 928 - 400 Unrealised exchange loss on translation of asset finance Total finance expense 6,581 8,540 13,823 Included in the finance expense in prior period was an unrealised non-cash exchange loss on an element of long-term debt denominated in Euros to create a hedge against annual Euro trading income. The associated bank loan is repayable on the 31 March 2014, so any exchange movements are well away from becoming realised unless an earlier redenomination is deemed appropriate. A change in designation of this Euro loan to a balance sheet hedge was adopted in the prior period. The unrealised non-cash exchange loss also includes a £928,000 unrealised exchange loss (year to 30 September 2008: £0.4m) relating to some asset finance which is maintained in currencies other than sterling to match cash inflows. The group's bank loans are borrowed at floating rates of interest and can use forward rate agreements or interest rate swaps to generate the desired interest profile and to manage the group's exposure to interest rate fluctuations. At 31 March 2009, 92% (31 March 2008: 91%) of the Group's financial liabilities were at fixed rates after taking account of interest rate swaps. The interest rate swaps expire on 30 September 2010 and at 31 March 2009 has a fair value of £ 4,420,000 (30 September 2008: £790,000) which is included in the financial liabilities in the balance sheet. 5. Earnings per ordinary share The basic earnings per share are calculated by dividing the profit for the financial period 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. 6 months to 6 months to Year to 31 March 2009 31 March 2008 30 September 2008 £'000 £'000 £'000 Profit/(loss) for the period 1,207 (1,136) 831 (£'000) The weighted - More to follow, for following part double click [ID:nPRrT0368b]