Chairman's Statement

Martin Flower
These are excellent results during a period that has seen significant raw material inflation and macro-economic challenges and further demonstrate the quality of our business and its growth prospects.
Martin Flower

I am delighted to report another year of significant profit growth and progress for the Group.

Profit before tax, amortisation and non-recurring items rose 26% to £23.4m (2010: £18.6m) on revenues ahead by 13% at £388.7m. Sales volumes were up 6% on last year and reflect strong fundamental growth drivers, increasing contribution from new products and emerging markets supported by a further recovery in some of the Group's heartland markets, albeit to a much lesser extent this year. Operating margins improved to 7.9% (2010: 7.5%) despite severe raw material price inflation for most of the year. I am also pleased to report that, as a result of decisive actions, the Yarns business returned to profitability even though the demand for artificial grass yarns was depressed in its main markets.

Earnings per share increased by 35% based on profit before amortisation and non-recurring items aided by a lower tax rate of 25% (2010: 31%) which now includes tax benefits associated with innovation. Statutory profit before tax from continuing operations was £23.4m (2010: £10.2m) with non-recurring income of £5.7m (2010: £1.6m losses), which principally relates to changes in the Group's UK defined benefit pension scheme, offsetting a £5.7m charge for amortisation (2010: £6.8m).

Results highlights
Continuing operations
  2011 2011
Revenue £388.7m £344.6m
Operating margin* 7.9% 7.5%
Profit before tax* £23.4m £18.6m
Basic earnings per share* 6.0p 4.4p
Profit before tax (statutory) £23.4m £10.2m
Full year dividend per share 2.1p 1.6p
Total net debt** £85.3m £77.9m
Return on capital employed 16.8% 15.2%

* Before amortisation and non-recurring items.
** Including debt-related derivatives in 2010.

Further commentary on these results and the divisional performances is contained in the Business Review.

Investing for further growth

During the year, the Group has made further investments in management initiatives to drive profitable growth.

The Group continues to focus on innovation to augment sales growth and improve margins in Western European and North American markets. A number of new products were successfully launched during the year and the product development pipeline continues to improve. A record 15.8% (2010: 14.3%) of sales came from new products developed in the last three years, close to our medium-term target.

The Group invested £12.1m (2010: £6.7m) in property, plant and equipment during the year to support volume growth in key markets and has already approved £7.9m of spend for 2012. In addition, the Group is investing in a joint venture, Bonar Natpet, with National Petrochemical Industrial Company (NATPET) in Saudi Arabia which will design, manufacture and sell geotextile products for the fast growing civil engineering markets in the Middle East and the Indian subcontinent. The Group is also actively looking for investment opportunities in Latin America and Asia to support international sales growth and further access higher growth emerging markets.

The Group has made significant investments to enhance its organisational capability and structure. New appointments have been made within sales, marketing, operations and procurement to accelerate business development activities and margin improvement. This will continue into 2012. There has also been an increased focus on health and safety aligned to the Group's commitment to have zero work place accidents.

Increased dividend

Taking into account these excellent results and our confidence in the future prospects of the Group, the Board is recommending a final dividend of 1.4 pence per share (2010: 1.1 pence), increasing the full year dividend to 2.1 pence per share (2010: 1.6 pence). Subject to shareholders' approval at the Annual General Meeting in March, the dividend will be paid on 19 April 2012 to members registered as of 23 March 2012. The proposed full year dividend is covered 2.8 times by earnings before amortisation and non-recurring items.


On 1 October 2011, I was pleased to invite John Sheldrick to join the Board as a non-executive director. John was Group Finance Director of Johnson Matthey plc from 1995 until his retirement in 2009 and is a non-executive director of GKN plc and Fenner PLC and a former non-executive director of API Group PLC. John’s extensive financial experience will be of great value to the Board and the Audit Committee as will his background in international manufacturing as the Group pursues profitable growth through globalisation and product and process innovation.

On 28 February 2012, Chris Littmoden will be stepping down as a non-executive director of the Company after seven years. I would like to take this opportunity to thank Chris for his valuable contribution to the Board during a period of significant change.

As always, it is my pleasure to acknowledge the skills and dedication of employees throughout the Group who have once again delivered an exceptional performance. Their skills, and the strength of the management team, are the real assets of the Group.


These are excellent results during a period that has seen significant raw material inflation and macro-economic challenges within Europe and further demonstrate the quality of our business and its growth prospects.

The Group is targeting markets with strong fundamental growth drivers and continues to invest in a range of initiatives to sustain profitable growth through innovation, increased emerging market exposure and efficiency improvements.

The Group's good trading momentum has continued into the new year and the Board remains confident that the Group is well-positioned to make further progress towards our stated targets.

Martin Flower
7 February 2012

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