API Group back in positive territory as profits rise on stable revenue

Specialist foils and packaging materials maker API Group has posted a 29 per cent increase in pre-tax profit (PTP), driven by operating profits in the six months ended Sptember 30th.

PTP totalled £3.7m (2011: £2.9m), while operating profits came in at £4.6m (2011: £3.8m).

Revenue proved to be less impressive, however, marginally higher at £58.8m, compared to £58.5m the same period the previous year. The cost of sales was also lower, by £1.0m, resulting in gross profit of £15.1m (2011: £13.8m).

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The company's directors were happy with its position, not least given the period of recovery it has been in for the past five years, saying that while growth in the period was modest compared to the last two years, "it is encouraging that underlying demand for API products remains robust".

In an interview with Sharecast and Digital Look, Chief Executive, Andrew Turner added: "Although one or two things have not necessarily gone to plan, we feel pretty positive about where the company is at this time".

The group suffered when raw material prices rocketed in early 2011, but said costs have now recovered and as a result added value margins improved across the business to the levels immediately prior to the rise.

At divisional level, three of the group's four business units contributed higher profits. Laminates performed particularly strongly, with operating profits ahead by £1.3m despite delays in the start-up of its major new supply contract.

Both Foils businesses made encouraging progress, with Americas profits higher by £0.3m and Europe by £0.4m. As expected, volumes at Holographics suffered from the completion of a large joint project with Laminates. Shipments to third party customers were also lower, leading to a reversal in operating profits at that division of £0.9m.

Net financing costs at the interim stage were £0.9m, unchanged on the same period last year. Cash interest costs were lower by 13%, offset by higher pension running costs.

Operating profits before exceptional items reached £5.0m; a margin on sales of 8.5%, an increase of £1.2m (+33%) over the first half of last year and a £1.9m improvement on the preceding six months.

Earlier this year the company announced that it had begun a formal sale process of the group and on Thursday confirmed that "a number of indicative offers have been received". API had no further comment to make on the situation.

Looking ahead, Turner added: "Despite challenging economic conditions, the board's expectations for the full year remain substantially unchanged, with management's primary focus on the conversion of a number of specific sales opportunities, as well as the successful execution of key capital expenditure projects designed to enhance our product and service offering to customers."

The share price fell 0.36% to 69p by 14:09.