RNS Number:5183R
Punch Graphix PLC
20 February 2007
20 February 2007
Punch Graphix plc
Preliminary Results for the Year Ended 31 December 2006
Punch Graphix plc ('Punch Graphix' or the 'Company'), the digital and pre-press
printing systems group, today announces its preliminary results for the
financial year ended 31 December 2006.
+----------------------------------+----------------+-------------+------------+
|(in Euro000) | Year ended| Year ended| Percentage|
| |31 December 2006| 31 December| |
| | | 2005| increase/|
| | (unaudited)| (audited)| decrease|
+----------------------------------+----------------+-------------+------------+
| | | | |
+----------------------------------+----------------+-------------+------------+
|Revenue | 173,340| 158,263| +10%|
+----------------------------------+----------------+-------------+------------+
|EBITDA | 41,694| 34,760| +20%|
+----------------------------------+----------------+-------------+------------+
|Operating profit* | 22,481| 21,477| +5%|
+----------------------------------+----------------+-------------+------------+
|Profit before taxation | 21,212| 18,453| +15%|
+----------------------------------+----------------+-------------+------------+
|Net profit (equity interests) | 15,901| 12,424| +28%|
+----------------------------------+----------------+-------------+------------+
|Earnings per Share (Eurocents) | 15.5| 13.32| +17%|
+----------------------------------+----------------+-------------+------------+
* In accordance with IFRS3, the recognition of deferred tax assets, relating in
most part to the acquisition in 2004 of basysPrint GmbH in Boizenburg, Germany,
has led to an increase in the depreciation and amortization charge. The effect
is to reduce the Operating Result and Result before Tax by some Euro1.8 million. As
a result the Group could benefit from the recognition of deferred tax assets.
PRELIMINARY STATEMENT
Overview
2006 was another year of progress for the Company and the Executive Directors
believe that our well balanced business model with high recurring revenues and
our presence in both digital and offset sectors is suited to challenge a dynamic
and competitive environment.
Offer by Punch International
On 8 January 2007 Punch international launched a mandatory offer 128p per share
for the shares in Punch Graphix that it did not already own. On 23 January 2007,
the independent Committee of the Board of Directors issued its statement
expressing its reservations regarding the Punch International proposal,
considering the Company's past performance. When the offer closed for
acceptances on 13 February 2007 Punch International had increased its
shareholding in Punch Graphix from 49% to 92.58%. Subsequently, Punch
International has stated that it will seek to procure the cancellation of
trading on AIM and the admission to trading on Euronext Brussels of Punch
Graphix Shares.
This is therefore Punch Graphix's last preliminary results statement as an
AIM-listed company. The Board of Punch Graphix would like to record its
appreciation to shareholders for their support since the Company's Admission to
trading on AIM in May 2005.
Business Review
Results overview
2006 was a very satisfactory year for the Group, with both the high-end digital
colour printing systems division (Xeikon) and the computer-to-plate prepress
division (basysPrint and OEM) showing healthy development. Group revenue was
Euro173.3m, an increase of 9.5% over 2005. Of this, approximately one-third was
generated by prepress activities, and approximately two-thirds by digital
printing activities. The split between equipment sales and sales of consumables
and services was approximately even.
The Group operating result was Euro22.5m, an increase of 5% over 2005. In
accordance with IFRS3, the recognition of deferred tax assets, relating in most
part to the acquisition in 2004 of basysPrint GmbH in Boizenburg, Germany, has
led to an increase in the depreciation and amortization charge. The effect is to
reduce the Operating Result and Result before Tax by some Euro1.8 million. After
taking into account this audit adjustment, which came to light after the
preparation of the profit estimate set out in the document dated 22 January 2007
in response to the Punch International offer, the Board confirms that the
trading results were in line with that profit estimate.
Profit before tax and earnings per share rose by 15% and 16% respectively over
2005.
Markets and key drivers
During 2006, market conditions remained favourable for Punch Graphix. Digital
colour printing was the fastest growing of all printing technologies with a
wider range of printers adopting new applications. In addition, ongoing trends
such as the increasing use of colour printing and a widening use of
personalisation in printed media, have contributed to growth.
The CtP equipment market remained fairly stable overall, reflecting a
combination of the mature offset markets in Europe and the United States, and
the faster growth experienced in Asia and South America. Key drivers for the CtP
market included the continuing upgrade of the large installed base of earlier
computer-to-film solutions and first generation CtP machines, the search for
more productive solutions and the further consolidation of the printing market
into large facilities in lower cost geographies such as Asia and South America.
Digital printing solutions (Xeikon)
Xeikon enjoyed another strong year overall, especially in the sale of
consumables. This was driven by systems sold and installed during 2005 coming on
stream and, in particular, a number of existing US customers substantially
increasing their toner requirements.
The number of pages printed by the installed base of Xeikon machines grew by
over 25% during the year. The Group launched its new generation digital colour
printing system, the Xeikon 6000, in September 2006, in combination with a new
toner range (Form Adapted), and a major update to the X-800 digital front-end.
The expectation in the market place of the launch of the Xeikon 6000 restricted
orders for Xeikon 5000 machines. However, the Xeikon 6000 is helping equipment
sales in the high-end part of our targeted market, with the first units being
delivered in the later part of 2006.
The combination of the Xeikon 6000, the FA toner range and the updated X-800
digital front-end sets a new standard in digital colour printing for speed,
productivity, image quality, substrate range and extended applications. These
features, combined with favourable printing costs, put Punch Graphix ahead of
its competition in this market segment. This was further reinforced early
February 2007 by the introduction of the Xeikon 4000 and the Xeikon 5000Plus
digital colour printing systems.
Prepress solutions
Prepress activity was strong throughout the year, particularly in the emerging
CtP markets in Asia. The basysPrint approach of combining readily available and
cost competitive UV plates and CtP equipment without the need for film has been
more widely adopted, indicating greater acceptance of the Group's technology. As
a result, unit sales of basysPrint prepress equipment were significantly ahead
of 2005.
During 2006, basysPrint was chosen as a preferred partner and has entered into a
co-marketing agreement with ArtworkSystems, the prepress front-end software
market leader. Other arrangements with plate suppliers also helped increase the
awareness of, and confidence in, the basysPrint brand. In October 2006, we
introduced new optics to the ''Very Large Format'' range which have been well
received by the market. They offer clear advantages in terms of speed of imaging
and scalability and considerably extend the life of the lighting unit.
The extension of the factory in Boizenburg, Germany, which commenced in the
summer of 2006, was completed early 2007 and will improve order flow and reduce
delivery and installation lead times. Our new facility in Shenzhen, China
assembled its first commercial engine in September 2006.
We further developed our relationship with our key newspaper market partner,
Agfa, in line with agreements entered into in 2005. These provide the Company
with greater transparency on orders and allow for a more structured approach to
joint product development.
Strategy and prospects
During 2006, as part of its ongoing growth strategy, the Group invested
significantly in plant and machinery to support its expansion program, including
new equipment for the toner factory in Heultje, Belgium, the expansion of the
Boizenburg CtP factory and the establishment of the facility in Shenzhen, China.
The strategy of expanding our own sales and services organisations progressed
further in 2006.
New approaches to team management were deployed across the Company to focus on
continuous improvement through sharing best practice and efficiencies.
Empowerment of our people at all levels for business excellence is a key
component of our strategy for growth.
Productivity levels are expected to increase further through the continued
streamlining of the Group. Priorities for 2007 include further upgrading the
Group's professional capabilities and enhancements to processes which are vital
to the long-term future and growth of Punch Graphix, such as marketing, sales
and service, purchasing, production and IT.
The Group's commitment to research and development investment has historically
resulted in a number of product enhancements and new product launches which have
provided the foundation for the ongoing growth and competitiveness of Punch
Graphix.
We are highly confident about the prospects for Punch Graphix for the current
year and beyond.
Board Changes
In light of the outcome of the Punch International offer, and Punch
International's stated intention to implement changes to the composition of the
Board, Geoffrey White (Chairman), Ken Humphreys and Nigel McCorkell (both
independent non-executive directors) have resigned from the Board with effect
from 20 February 2007. The Executive Directors express their recognition for
their significant contribution to the development of the Company during their
terms in office.
At the request of Punch International, the Company has today appointed Philippe
Ghekiere to the Board as Non-Executive Chairman and Wim Deblauwe as a
Non-Executive Director.
Mr Ghekiere , aged 46, is Executive Director and General Counsel of The Capital
Markets Company NV since 1999. He is also Vice Chairman of the Board of
Kinepolis group NV. Before he was a partner of Allen & Overy.
Mr Deblauwe, aged 33, previously worked within Xeikon, being appointed Chief
Financial Officer in 2002 and later becoming Vice President Sales and Marketing
of Punch Graphix. Following the IPO of Punch Graphix he was appointed Chief
Financial Officer of Punch International and since November 2005, he was
nominated as Managing Director of the Group. Before joining Xeikon in 2002 he
worked in the financial sector for ING.
Disclosures required under para (g) of Schedule 2 of the AIM rules are contained
within the Board changes announcement issued today.
Dividend
Following the offer and subsequent increase in shareholding to 92.58% of Punch
Graphix by Punch International, the decision on any proposed final dividend for
the year to 31 December 2006 will be taken by the Annual General Meeting on 21
May 2007.
Financial Review
The results published in this statement have been prepared under the
International Financial Reporting Standards as adopted by the European Union.
The Group reported a strong full second year, in revenue, profit and earnings
per share.
Trading
Revenues increased from Euro158.3m, in 2005, to Euro173.3m in 2006. The majority of
this increase was driven by organic growth. The split between digital printing
and prepress was 68% against 32%. Compared to the previous year, the split
between equipment sales and recurring revenues (sales of consumables for the
digital printing machines, spare parts and servicing) grew in favour of the
recurring revenue
EBITDA (earnings before interest, tax, depreciation and amortisation) increased
by 20% from Euro34.6m, in 2005 to Euro41.7m in 2006. In revenue terms this represents
a margin of 24%. Operating profit on revenue for the year was Euro22.5m, which
represents an increase of 5% on the previous year.
The tax charge of Euro5.2m reflects an effective tax rate of 25%. This compares to
an effective tax rate of 30% in 2005. The Group has no longer benefited from
some material tax losses but could benefit from the recognition of deferred tax
assets.
Minority interest and earning per share
Minority interests decreased further from Euro435,000 in 2005 to Euro101,000. The
Group acquired the minority interests in Germany and in Italy. In the reported
year, earnings per share increased by more than 16% to 15.5 euro cent. The
average number of shares in issue in the calculation of earnings per share was
102.2 million. For 2005, the Company had on average 93.3 million shares in
issue.
Cash flow
Cash flow from operating activities increased from Euro3.9m to Euro27.4m despite an
increase in working capital of Euro1.3m.
Payables remained stable at Euro20.5m. Improvements to the purchasing process have
encouraged more timely payments to suppliers which enable stronger relationships
and more advantageous partnership agreements . Events in 2006 such as the
Linomedia acquisition and the new products inventory build-up for the Xeikon
6000 and FA toner range justified higher inventory levels at year end.
Inventory management remains an operational challenge which has benefited from
attention in 2006 and will continue to do so in 2007, particularly through the
further reduction of slow moving stocks levels. Capital expenditure was Euro9.5m on
tangible assets (improvement and replacement of production equipment and assets
held for rental contracts and demonstration equipment). The Heultje and Shenzen
investments are completed in 2006 and the extension of Boizenburg facility is
completed in 2007. The largest component of investment in intangible assets is
to be found in the capitalisation of development activities of Euro7.6m.
Cash and short-term investments at the end of the year amounted to Euro39.8m. The
results were positively influenced by the market value of our hedging
instruments (Financial result of Euro0.9m).
Shareholder's funds
Shareholders' funds totalled Euro107.9m the increase in the year of Euro12.6m is
driven mainly by the retained earnings of Euro12.7m.
-Ends-
For further information, please contact:
Punch Graphix plc + 32 3 443 1911
Ben van Assche, Chief Executive Officer
Hogarth Partnership + 44 (0) 207 357 9477
John Olsen / Barnaby Fry
Consolidated Balance sheet
31/12/2006 31/12/2005
Euro '000 Euro '000
(Unaudited) (Audited)
----------- ----------
Non Current Assets 89,495 84,817
----------- ----------
Intangible Assets 27,274 25,152
PPE: Property, Plant & Equipment 53,619 49,973
Investments in associates 221 2,171
Receivables 4,788 6,497
Deferred tax assets 3,593 1,024
----------- ----------
Current Assets 130,653 108,962
----------- ----------
Inventories 44,122 32,491
Trade debtors 39,817 34,995
Other amounts receivable 6,189 11,409
Cash and cash equivalents 39,798 30,029
Financial Instruments 727 38
----------- ----------
TOTAL ASSETS 220,148 193,779
----------- ----------
Shareholders Equity 107,859 95,403
----------- ----------
Ordinary Shares 15,029 15,027
Share Premium Account 50,378 50,378
Retained earnings 43,150 30,604
Other Reserves 3,300 3,300
Translation Differences (3,998) (3,906)
----------- ----------
Minority Interests 527 624
----------- ----------
Total equity 108,386 96,027
----------- ----------
Non Current Liabilities 47,604 46,187
----------- ----------
Interest bearing loans & borrowings 43,191 40,932
Deferred tax liabilities 3,198 4,180
Other Liabilities 1,215 1,075
----------- ----------
Current Liabilities 64,158 51,565
----------- ----------
Trade payables 20,464 21,457
Other current payables 23,831 20,715
Current tax liabilities 7,020 4,025
Borrowings 10,810 2,848
Provisions 1,920 2,190
Financial instruments 113 330
----------- ----------
TOTAL LIABILITIES AND EQUITY 220,148 193,779
----------- ----------
Consolidated income statement
31/12/2006 31/12/2005
Euro '000 Euro '000
(Unaudited) (Audited)
----------- ----------
Total Sales 164,439 153,210
Other Operating Income 8,901 5,053
----------- ----------
TOTAL REVENUES 173,340 158,263
----------- ----------
Change in inventories 13,798 2,952
Purchases (78,403) (69,066)
Salaries & employee benefits (35,855) (29,963)
Depreciation & amortisation (15,906) (10,167)
Impairment losses on current assets (3,307) (3,117)
Other operating charges (31,185) (27,425)
----------- ----------
TOTAL OPERATING EXPENSES 150,858 136,786
----------- ----------
OPERATING RESULT 22,481 21,477
----------- ----------
Finance Income 3,009 1,329
Finance Cost (4,161) (4,084)
Share of results of associates (118) (269)
----------- ----------
RESULT BEFORE TAX 21,212 18,453
----------- ----------
Taxes (5,210) (5,594)
----------- ----------
NET RESULT 16,002 12,859
----------- ----------
Net result - Equity interest 15,901 12,424
Net result - Minority interest 101 435
Earnings per share (Eurocents) (see note) 15.5 13.3
----------- ----------
Note: The earnings per share are calculated on the basis of a weighted average
number of ordinary shares in issue during the period of 102,241,327 (2005:
93,258,058)
Consolidated Cash Flow Statement
2006 2005
Euro'000 Euro'000
(Unaudited) (Audited)
-------- --------
Profit before tax 21,212 18,453
Operating activities:
Impairment losses (goodwill) - 265
Depreciation 15,906 10,167
Provisions (271) 143
Inventories (7.498) (4,398)
Trade and other receivables 13.074 (13,482)
Trade and other payables (6.918) (4.202)
Net finance charges (P&L) (1,152) 2.753
Profit on sale of fixed assets 575 (257)
Share of results of associates 118 269
Interest paid (cash) (3,930) (3,792)
Tax paid (3,656) (1.975)
-------- --------
Net cash from operating activities 27.460 3,944
-------- --------
Investing activities
Cash to acquire subsidiary (1.714) (497)
Cash acquired of the sale of associates 30 -
Purchase of property, plant & equipment (9,488) (7,951)
Proceeds from sale of property, plant & 2,270 4,352
equipment
Own work capitalised of intangible (7,608) (5.386)
assets
Purchase of intangible assets (1,473) (901)
Interest received (cash) 1,961 1,329
-------- --------
Net cash used in investing activities (16,022) (9.054)
-------- --------
Financing activities
Proceeds from the issue of share capital - 28.311
Capital element of finance leases paid (1,310) (4.798)
Capital element of finance leases 1,286 -
received
Proceeds from new loans & borrowings 9.542 6.440
Reimbursement of loans & borrowings (7.442) -
Dividends paid to shareholders (3,899) -
-------- --------
Net cash from financing activities (1,823) 29.953
-------- --------
Foreign exchange 154 128
-------- --------
Total movement in cash 9,769 24.971
-------- --------
Cash and cash equivalents:
At the beginning of the period 30,029 5,058
At the end of the Period 39,798 30,029
Movement 9,769 24.971
-------- --------
Notes to the Financial Statements
1. Basis of accounting
The financial information for the year ended 31 December 2006 (the 'Financial
Information') has been prepared in accordance with the accounting policies
applied in the 2005 Annual Report which are consistent with the accounting
policies that will be applied in the 2006 Annual Report.
The financial information set out in this preliminary announcement does not
constitute the company's statutory accounts for the year ended 31 December 2006
or 2005. The financial information for the year ended 31 December 2005 is
derived from the statutory accounts for that year, which have been delivered to
the registrar of companies. The auditors reported on those accounts; their
report was unqualified and did not contain a statement under s237 (2) or (3) of
the Companies Act 1985. The statutory accounts for the year ended 31 December
2006 will be finalised on the basis of the financial information presented in
this preliminary announcement and delivered to the registrar of companies
following the annual general meeting.
This Preliminary Announcement was approved by the Board of Directors on 19
February 2007. The Financial Information for the year to 31 December 2006 is
unaudited.
This information is provided by RNS
The company news service from the London Stock Exchange
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