England's API Group reports 32% year-over-year increase in Q1 operating profit to £6.9M; Q1 sales up 14% to £113.9M, laminates main contributor to group results, followed by holographics for security markets

CHESHIRE, England , May 29, 2012 (press release) – Against a background of weak economic conditions affecting most end markets, API Group is pleased to report another year of significant improvement in financial performance. With debt substantially reduced and positive momentum in sales and profits, the Group has further strengthened its platform for future investment and growth.

Sales for the year ended 31 March 2012 of GBP113.9m were 14% ahead of the previous 12 month period, operating profits increased by 32% to GBP6.9m (2011: GBP5.2m) and
profit before tax rose 77% to GBP5.1m (2011: GBP2.9m). Basic earnings per share of 6.7p advanced by 3.2p and net debt finished the year at GBP3.6m compared to GBP8.5m
a year earlier. Despite the adverse impact of exceptionally low bond yields, the IAS pension deficit fell by GBP0.7m to GBP6.5m, net of deferred tax.

While Laminates remains the most significant contributor to Group results, year-on-year profit improvement was driven by three of the four business units. Holographics performed particularly strongly on the back of growth in target security markets, registering a GBP1.0m increase in profits, Foils Americas benefited from an improved sales mix and lower costs to record profits GBP0.9m ahead of last year and Laminates delivered another excellent performance, with profits up by GBP0.5m on 24% higher sales. Foils Europe profits were down by
GBP0.5m as recovering margins were offset by weaker volumes, especially in the second half. In due course, the Board expects results to benefit from the increased focus brought about by the recent establishment of separate management teams for Foils Europe and Holographics.

As reported last year, a key challenge facing the business was the short supply and surge in pricing of key raw materials. The situation is now much improved with the supply-demand balance re-established in most material categories, new sources of supply approved and, for the most part, residual cost increases passed through to customers in higher selling prices. It is greatly encouraging that the Group has been able to weather a period of such volatility in raw material costs and that all businesses enter the new financial year with margins substantially restored to previous levels.

Increased Group operating profits converted to strong cash flow with a corresponding reduction in net debt. Year end net debt to EBITDA was down to 0.4x (2011: 1.1x), the healthiest Group financial position for at least a decade. With the confidence of a stronger balance sheet, the Board has been able to approve a number of capital expenditure projects aimed especially at improving the level and resilience of earnings in the Laminates and Holographics units. The Board will continue to examine options for growth oriented capital investment whilst maintaining a conservative stance towards levels of debt.


In February 2012, the Group's two leading shareholders wrote to the Board proposing that a sale process be commenced with the aim of securing a general offer for the issued share capital of API Group plc. Following discussions with these and other large shareholders and after due consideration, the Board issued a statement on 30 March 2012 advising that, barring unforeseen events, such a process would be explored during the third calendar quarter of 2012.


In light of the Group's improved financial position, the Board now has greater flexibility in assessing the options for use of funds. At this time payment of a dividend is not being recommended but the Board will continue to keep its policy under review with the aim of maximising returns for shareholders.

Board and Governance

There have been no changes to the composition of the Board since the last Annual Report. The Board and its Committees have functioned well throughout the year. In particular, I would like to thank the Directors nominated by our two leading shareholders for their support during consideration of the sale proposals referred to above.

Our People

On behalf of the Board, I must thank all the Group's employees for their invaluable contribution to the achievements of the last 12 months and the continued progress of the business in the face of such challenging economic conditions.


The Board remains cautiously optimistic about the Group's prospects for the new financial year. The general economic climate and uncertainty surrounding the Euro continues to impact consumer confidence and economic growth in the regions and markets served by API. However, end markets for premium products which drive a significant proportion of sales have so far proved relatively resilient. As the Group enters the new financial year, Laminates volumes remain buoyant on its existing core business and, with installation of the new laminator completed to schedule in April, shipments against the new multi year supply contract are expected to commence from late June.

In the Foils businesses, order levels are steady in most sectors with potential for additional metallised pigment revenues in the US. Holographics is continuing to make progress in security markets offsetting the lower inter-company sales following the end of a significant joint project with Laminates. Overall, the outlook on volumes and a full year benefit from pricing action
taken during 2011/12 to recover increased raw material costs, underpin the Board's confidence in the Group making further progress in the coming year.

Find the full Q1 report here.

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