7th Mar 2007 07:01
Yule Catto & Co PLC07 March 2007 Yule Catto & Co plc Preliminary Results for the year ended 31 December 2006 Good progress has been made in the long-term development of the Group HIGHLIGHTS • Group revenue £551.7m (2005: £556.1m) • Underlying total sales* increased by 8% to £557.4m, (2005: £516.5m) • Profit before taxation* £31.5m, (2005: £34.4m) • Earnings per share* of 14.7p, (2005: 16.7p) • Dividend increased by 3% to 9.3p per share (2005: 9.0p) • Profit attributable to equity shareholders of the parent £3.4m (2005: £21.9m) • Strong volume growth in polymers • Seven pharmaceutical drug master file registrations in the year * Before special items, as defined in notes 1 and 9 Anthony Richmond-Watson, Chairman, comments: "Underlying profit before taxation reduced to £31.5 million as a result of thedifficulties in our Performance Chemical businesses. As we look to 2007, we areoptimistic that our Polymer business will once again deliver strong results.Our Pharmaceutical division continues to develop new generic products for futurefiling but will again be without the full benefit of a major new release thisyear. The remedial measures taken in the Performance Chemicals businessesshould lead to improvement in this division's results." 7 March 2007 ENQUIRIES: YULE CATTO Tel: 01279 442791 Adrian Whitfield, Chief Executive Sean Cummins, Finance Director COLLEGE HILL Tel: 020 7457 2020 Gareth David email: [email protected] RESULTS SUMMARY Underlying performance(a) IFRS 2006 2005 2006 2005 £'000 £'000 £'000 £'000 audited audited audited auditedYear to 31 December Total sales 557,357 516,458 565,786 568,707 EBITDA (b) 61,272 65,477 61,272 65,477Operating profit 42,959 46,186 21,451 46,193Profit before taxation 31,516 34,445 13,626 32,031 Earnings per share 14.7p 16.7p 2.4p 15.1pDividend per share (c ) 9.3p 9.0p 9.3p 9.0p Net borrowings (d) 166,271 165,591 150,656 171,266Free cash flow before dividends 8,479 19,786 8,479 19,786(e) Notes:The above table represents the results of Yule Catto and Co plc, its subsidiaries and its share of joint ventures. (a) Underlying performance is before special items. (See notes 1 and 9).(b) Earnings before interest, tax, non-recurring items, depreciation and amortisation. (See note 6).(c) Final dividend from 2006 of 5.5p per share will be paid on 4 July 2007 to members on the register at close of business on 1 June 2007. Under IFRS this liability is not accrued in the financial statements.(d) As reconciled at the bottom of the balance sheet.(e) As shown within the cash flow statement. BUSINESS REVIEW CHAIRMAN'S STATEMENT Throughout 2006 we continued to implement our plans for the long-termdevelopment of the Group. Our water-based Polymer business delivered anothersolid performance with strong volume and profit growth despite rapidly risingraw material prices and supply shortages. This performance confirms ourstrategy of geographical expansion around our existing business hubs andfocusing on market sectors where our product technology and manufacturingcapabilities give us real competitive advantage. Our Pharmaceutical businesscontinued to increase the range of generic and ethical products that it plans tomanufacture by registering further drug master files in the year. ThePerformance Chemicals businesses had a difficult year. As previously announced,we implemented plans to restructure significantly these businesses to reducecosts and focus on market segments offering better margins and growth. Overall,underlying profit before taxation reduced to £31.5 million as a result of thedifficulties in our Performance Chemicals businesses. The directors recommend a final dividend of 5.5 pence a share, which would makethe full payment for the year 9.3 pence (2005 9.0 pence a share), an increase of3.3%. Subject to shareholders' approval, the dividend will be paid on 4 July tomembers on the register at close of business on 1 June. We strive to improve the working conditions and safety of our employeeseverywhere and have set a target for 2007 to reduce levels of Lost TimeAccidents. We are also fully committed to the principles of sustainabledevelopment and have made significant progress against all of the 10-yeartargets contained in this programme. This has not been an easy year and, on behalf of the directors and shareholders,I would like to thank all our employees everywhere for their commitment in theircontribution towards the company's success. In August Adrian Whitfieldsucceeded Alex Walker as chief executive. Michael Peagram and Peter Welch haveindicated that they will not be standing for re-election to the Board, havingcompleted nine years as non-executive directors. We thank all three for theircontribution to the Company. The search for replacement independentnon-executive directors is in hand. Outlook In our principal Polymers business we will continue to expand our Europeancustomer base and are building on our success in Asia, where we plan to increaselatex capacity during the year. Despite continuing high raw material prices, weare optimistic that our Polymer business will once again deliver strong results. Our Pharmaceutical division continues to develop new generic products forfuture filing but will again be without the full benefit of a major new releasethis year. The remedial measures taken in the Performance Chemicals businessesshould lead to improvement in this division's results. ANTHONY RICHMOND-WATSONChairman 7 March 2007 BUSINESS REVIEW (cont'd)CHIEF EXECUTIVE'S REPORT Overview 2006 was a year which saw the Group continue to face issues which have persistedfor a number of years, in particular rapidly increasing raw material prices andFar Eastern competition. Despite this, many of our businesses have made goodprogress and we enter 2007 with optimism for the year ahead. Polymers (72% of underlying total sales) grew sales volumes by 5.5% andunderlying operating profit by 13%. This was achieved in an environment oflimited monomer supplies and volatile pricing. Pharmaceuticals and Fine Chemicals (16% of underlying total sales) grew sales inexcess of 7%, but suffered a further margin squeeze resulting in profitabilitydeclining circa. 13%. These reduced margins were, in part, a reflection of thenormal pattern of price erosion within the generic drugs market, but werecompounded by our inability to recover fully raw material price increases withinour Fine Chemicals businesses. Our programme of increasing our generic drugspipeline made good progress with a further seven drug master files registered. Performance Chemicals (12% of underlying total sales) have suffered over severalyears from aggressive competition and sub-optimal assets. During 2006 weimplemented planned rationalisation within two of these businesses. Externalsupply problems severely impacted the performance of the third business. As aconsequence, sales were flat but underlying operating profit declined by £6.2million. The Group completed or committed to a number of strategically important projectswithin the year: • Following another year of strong growth for Nitrile Latex products, the Group confirmed its commitment to a further expansion of the facility in Kluang, Malaysia. This site is well located to provide reliable supply to major glove manufacturers. Market growth for synthetic gloves remains strong and the investment confirms our intent to remain as a market leading supplier. • A key facet of the Group's strategy remains increased sales of its products into Continental Europe. To support this growth the facility in Mouscron had been previously expanded to allow the manufacture of Dispersion products. This capacity is now full and we have committed to a further 50% increase to be commissioned late 2007. • We commissioned our new high containment pilot plant in Uquifa Italy. This plant was built in cooperation with a major customer and is currently manufacturing product for their use. This facility broadens the range of products able to be manufactured by Uquifa and enhances our capability to carry out new product research for our customers, especially in the field of high potency compounds and cytotoxic research. • Following a very successful first 18 months for our representative office in Guangzhou, China, we have decided to upgrade the capabilities of this facility through the establishment of a locally recognised trading company. We anticipate all the necessary approvals for this to be completed by mid-2007. We continue to review under-performing assets for opportunities to release fundsfor more productive use. During the year, Reabrook was sold to its managementfor a potential total consideration of £4.3 million. Good cash management remains a key priority for the Group and year endborrowings remain at prior year levels, although capital expenditure hasincreased modestly. BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT Polymer Division We operate 13 factories within four geographical regions: Europe, Pacific Rim,Middle East and South Africa. Core products are water-based Polymers - bothdispersions and latices, Polyvinyl Alcohol/Acetate and a number of morespecialised products. 2006 was another good year for our Polymer businesses, characterised by strongvolume growth, double digit profit growth and enhanced margins. These excellentresults were achieved against a background of restricted monomer availability,volatile prices and restructuring within some of our core markets. Metrics of particular note include: • Sales up 9%• Underlying profit growth of 13%• Record dispersion volumes up by 12%• Latex volumes up by 7%• Record Liquid Polybutadiene sales up by 11% Milestones included: our Mouscron facility reaching its nominal capacity; thelaunch of a "second generation" Nitrile rubber latex with enhanced mechanicalproperties to support our glove customers in their goal to improve "feel"without jeopardising strength; and the commissioning of a new large scaledispersion reactor within our Dammam, Saudi Arabia joint venture, whichincreases both the capacity and the range of products able to be manufactured.Following encouragement from existing customers and a thorough marketing review,we inaugurated Synthomer LLC in Powell, Ohio. This will act as a sales officefor our existing product range in North America with product initially beingexported from our European facilities, but subsequently using productmanufactured locally. In the UK we have approved and subsequently commissioned an expansion of ourLiquid Polybutadiene capacity. This range of speciality products has grownstrongly over recent years and we anticipate this continuing for the foreseeablefuture. As we move into 2007, monomer availability and pricing remain difficult despitethe fall in the price of oil since its peak in August. Additional globalmonomer capacity is scheduled to commission in 2008, hopefully alleviating thecurrent tight supply. Until this happens we will remain vigilant in passing oncost increases and look to maintain or expand overall margins through newproduct development and ongoing business development. Synthetic Latex European markets continue to restructure, in part due to the relatively highcost of labour and compliance costs; but also because off-shore manufacturebecomes more financially attractive as indigenous markets develop. This has ledto a number of our core markets reducing in size and/or location. Despite thisdifficult environment, our factories remain at or close to capacity. Ourongoing drive to maintain competitiveness has identified opportunities toincrease capacity further, on a cost effective basis, as well as improve overallefficiency. The Nitrile glove market continues to grow strongly and we have maintained ourmarket leading position. We expect that the current extension of the plant, toprovide a 33% increase in capacity, will be commissioned during Q2 2007.Further expansion is planned for 2008. Dispersions As to be expected, market conditions vary significantly between geographies.However, we retained our market leading positions in the UK, Saudi Arabia, SouthAfrica and Malaysia. We enjoyed record dispersion volumes in 2006, 12% ahead of2005. These volumes were driven by strong growth in Europe, the Middle East andMalaysia, in all cases customer relationships, good business development andongoing new product development were key to underpinning this achievement. BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT Specialities The Group manufactures a variety of speciality polymer chemicals, including: Polyvinyl Alcohol. We are one of the world's leading suppliers of lowhydrolysis Polyvinyl Alcohol supplied in particular into the PVC industry. 2006was another excellent year for the business with sales volumes to the PVCindustry 12% ahead. We have now broadened our product range to includeadditional grades. To support the ongoing development of this business, ourcore facility will be de-bottlenecked in 2007. Liquid Polybutadiene. 2006 was a record year for the business, with volumes 11%ahead of prior year and overall margins improved. We believe the businessretains the ability for ongoing growth in the medium term and have invested inincreasing capacity during 2006. Alkyds/Resins/Adhesives. These businesses are based in Malaysia supplying boththe domestic market and exporting within the region. This year has held mixedfortunes with erratic raw material availability and pricing eroding margins,whilst a competitive market place and customer restructuring impacted a numberof longer-term relationships. Despite these difficulties, the businessesperformed creditably with our adhesives business achieving record profitabilityand being well positioned for further growth in 2007. Pharma and Fine Chemicals Uquifa manufactures both generic and ethical active pharmaceutical ingredientsthrough four production units in Spain (2), Italy and Mexico. Our customers aretypically finished dosage formulators with the majority of sales being withinEurope and North America. We operate two fine chemical businesses - Oxford Chemicals producing flavoursfor the food ingredient industry, and PFW supplying aroma chemicals for use in avariety of fragrances. 2006 was a solid year for our Pharmachem businesses with underlying salesadvancing 9%, supporting steady profitability. As is normal for the industry,generic prices continued to erode as competition increases post launch, but wehad good success in mitigating this through our well-established productdevelopment pipeline and our ongoing focus on maximising efficiencies andoptimising costs. Wherever possible, we protect margins by registering ourintellectual property. A key strategy in the future development of this business is to build anincreasingly broad customer base and to be involved in "early stage" researchand manufacturing for our customers. Our laboratories and pilot plants werefully loaded for a significant proportion of 2006 with an ongoing flow of newcontracts. The completion and commissioning of our new high containment pilotplant in Italy further increases our breadth of capability in terms of bothchemistry and the nature of products able to be manufactured. We believeCytotoxic products will become of increasing interest to pharmaceuticalcompanies in the coming years. The constant rationalisation of the customer base and changing buying trendsamongst the world's major healthcare organisations present both challenges andopportunities. Generic Omeprazole sales continue to develop well as itsefficacy and cost effectiveness are understood in comparison with other protonpump inhibitor products. During the year our Spanish plants received approvalto produce enteric coated Omeprazole pellets and this product will be rolled outto all our European based customers during 2007. The next product due to come off patent, for which we hold a drug master file(DMF), is Zolpidem which, due to a late paediatric extension, will happen inmid-2007. We have already supplied launch quantities of the product andanticipate some re-ordering within 2007. Our DMF programme continued apace with seven new registrations achieved duringthe year. We now have a work programme stretching several years ahead andanticipate being able to register approximately six products a year for theforeseeable future. BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT Our Fine Chemicals businesses had a difficult year, with rapidly escalating rawmaterial prices and a highly competitive market place. Both businesses wereable to grow sales through their business development initiatives and excellentproduct development. However, neither business was able to fully recoverincreased raw material costs. Oxford Chemicals launched a range of naturalmolecule products following strong demand from its customers and, although smallscale, these "novel" products have been well received. PFW reached itsinstalled capacity for Isojasmonate and we have commenced a de-bottleneckingexercise to double capacity. Performance Chemicals There are three businesses in this Division - Holliday Pigments, James Robinsonand William Blythe - providing ultramarine pigment, hair and photochromic dyesand iodine and metal salts respectively. 2006 has been a difficult year for our Performance Chemicals businesses. Allhold excellent market positions but have suffered from strong competition andincreasing operating costs. As previously announced, we embarked on arestructuring programme within both William Blythe and James Robinson, in bothcases closing a UK site to reduce costs and refocus the business on productareas with more attractive margins and growth. We hope to release for sale bothof these sites by the end of Q2 2007. As also announced, we experienced severeoperating problems within the UK facility of Holliday Pigments caused by thevariation of a low level ingredient of our raw material. Although these supplyissues were rectified early in Q3, the operational issues during the first halfof the year caused premature failures to several key pieces of plant in thesecond half of the year resulting in the annual shutdown being advanced andextended to allow remedial work to be carried out. As a consequence of theseproblems, sales and profitability were significantly reduced. The plant hassubsequently been re-commissioned satisfactorily. We are currently evaluating anumber of options to improve the contribution from this business. Within William Blythe, we announced our planned exit from the SO2 business atthe end of 2005. Implicit in this decision was the closure of our site atHapton and the relocation of non-SO2 related production to the sister site atChurch. Sales volumes for continuing operations grew by 10% and gross margin by6%. This performance was achieved despite large increases in the prices of manyof our key raw materials. Excluding restructuring costs, the company'sprofitability has improved and ongoing product and business developmentopportunities offer the ability for further progress in 2007. James Robinson also announced the closure of its UK site, with manufacturingbeing relocated to its German and Indian facilities. The head office, researchand development and global sales will remain UK based, operating from newlyconstructed premises. The business won The Queen's Award for Enterprise in the Innovation category forthe development of photochromic dyes. This area remains of strong strategicinterest and one in which we have been successful in patenting a number ofdevelopments. Usage remains predominantly in the ophthalmic market, but wecontinue to develop options for security applications. Following the agreement of a long-term supply contract with one of our existingcustomers, we successfully commissioned plant in India for the production of anincreased range of fuel markers. After several years of restructuring in the hair dyes market with the associatedfocus on cost/price reduction, it is pleasing to see several customers activelyprogressing new products. In other product areas trading was subdued as severalcustomers restructured and the photographic market continued to contract due tothe growth in digital imagery. ADRIAN WHITFIELDChief Executive 7 March 2007 BUSINESS REVIEW (cont'd)FINANCIAL REVIEW Income Statement - Underlying Performance Total sales increased by 8% to £557.4 million, driven by strong volume growth inboth Polymers and Pharma & Fine Chemicals. Turnover is predominately withinEurope with 57% of sales going to this region: however we continue to makeprogress in other parts of the world, in particular Asia, assisted by ongoinginvestment in the Malaysian facility. Movements in foreign currency exchange rates can affect the value oftransactions made by the Group and the translation of results from overseassubsidiaries. With regard to the former, the primary exposure is to the USdollar which during the period weakened compared to sterling, particularlytowards the year-end, causing a loss of £0.6 million. The latter is mainlyinfluenced by the Euro, with the Malaysian Ringgit and South African Randbecoming more significant, resulting in a small negative impact. Average borrowings for the period were 7% lower than 2005 which has beenreflected in a reduced interest charge of £11.4 million. Although worldinterest rates have drifted up during the year, a large proportion of theGroup's exposure is hedged, which has softened the consequences. The tax rate of 28.0% reflects the benefits of pioneer status on our investmentin Malaysia and the settlement of some prior year tax positions. Profit attributable to minority interests has increased to £1.3 million due tothe success of the Revertex operations in the Far East, which has a 30%shareholding external to the Group. The resultant underlying earnings per share of 14.7 pence is a year-on-yeardecline of 12%. A final dividend of 5.5 pence per share has been proposed bythe Board, which would take the full year payout to 9.3 pence, an increase of3.3%. Dividend cover is 1.6 times. Income Statement - Special Items To provide a clearer indication of the Group's underlying performance, it isnecessary to highlight, and separately disclose, a number of special items(which are defined in note 9). The significant issues in the year include; • Turnover, operating profit and the taxation impact arising from the sale of Reabrook Limited and the closure of the sulphur dioxide business. • As a result of the 2006 operating loss within Performance Chemicals division together with the near-term trading outlook, we have reassessed the appropriate carrying value of the associated fixed assets and concluded that, prudently, this should be reduced by £20 million. There are a number of initiatives to improve the operational performance and there may be scope in the future to revalue the assets upwards if we become more confident that the profit recovery is sustainable. • We utilise various cross currency and interest rate swaps for hedging purposes, which involve maturities of up to twelve years. IFRS requires that where the strict requirements of IAS 39 are not met, changes in the market value should be recognised annually in the income statement. However, such financial instruments are maintained by the Group for the length of the contract and over their lifetime have a fair value of nil. Hence, the notional annual adjustment is segregated from the underlying performance. Pension In the main UK defined benefit pension fund, strong global financial marketscombined with a high proportion of plan assets being in equities, havecontributed to investment returns of 15.2% in the year. However, changes inactuarial assumptions, including increased mortality rates, had a morepronounced BUSINESS REVIEW (cont'd) - FINANCIAL REVIEW impact on the calculation of liabilities, resulting in the net pension liabilityin the balance sheet at 31 December 2006 increasing to £69.3 million. The pension scheme is undergoing a triennial valuation, effective 31 March 2006. We are working with the trustees to determine the actuarial position at thatdate, together with the schedule of contributions necessary to recover thedeficit. In addition, in common with many UK companies, there is recognitionthat in a world of longer life expectancy and low interest rates, the cost ofproviding pension benefits must be contained. Therefore, we are in aconsultation process with employees to review the benefits package. Bothexercises are being conducted in tandem and should be concluded during 2007. Borrowings Net underlying borrowings, adjusted for the mark-to-market of derivatives, aresimilar to last year at £166.3 million. Following a number of years of lower capital requirement, as anticipated, thecash applied to fixed asset expenditure has increased in the year as we investin a number of exciting growth initiatives. The largest project was the nextphase of expanding the Malaysia nitrile facility. A similar level of investmentin 2007 will be directed at further capacity expansion and various upgrades inprocess efficiency. Overall, the programme of restructuring the Performance chemicals division isexpected to be broadly cash neutral, however the timing of critical events hasinitially resulted in a cash outflow of £6.1 million in 2006, with proceeds fromland sales anticipated in 2007. After the balance sheet date, we exchangedcontracts to sell the vacant Huddersfield site and the Hapton land should followlater in the year. In a period of rising raw material cost, combined with good volume growth inmany of our businesses, upward pressure on working capital becomes more acute. Arenewed focus in this area has contained the increase to £3.9 million. Free cash flow was struck at £8.5 million. Positive contributions towards cashgeneration also include the sale of Reabrook Limited in June, deliveringproceeds of £3.7 million, and £1.3 million from the issue of ordinary shares tosatisfy save-as-you-earn share options which matured in February 2006. IFRS Group revenue was broadly in line with the corresponding period at £551.7million. Profit before taxation of £13.6 million was lower than the 2005 figureof £32.0 million principally as a result of the special items discussed above.Net borrowings are £150.7 million which includes a positive swing of £21.3million in relation to the mark to market of relevant financial instruments. SEAN CUMMINSFinance Director 7 March 2007 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 Note £'000 £'000 £'000 £'000 audited audited audited audited Group revenue 1,2 551,655 556,051Share of joint ventures' revenue 1,2 14,131 12,656 Total sales 565,786 568,707 Group revenue 551,655 556,051 Company and subsidiaries before 1,2 40,079 45,334impairmentsImpairment of non current assets 1,2 (19,699) - Company and subsidiaries 20,380 45,334Share of joint ventures 1,2 1,071 859 Operating profit 1,2 21,451 46,193 Interest payable (13,564) (15,424) Interest receivable 2,121 3,683 (11,443) (11,741) Fair value adjustment 4 3,618 (2,421) Finance costs (7,825) (14,162) Profit before taxation 13,626 32,031Taxation (8,855) (8,998) Profit for the year 4,771 23,033 Profit attributable to minority interests 1,344 1,180Profit attributable to equity holders of 3,427 21,853the parent 4,771 23,033 Earnings per shareBasic 2.4p 15.1pDiluted 2.3p 14.9p CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 2006 2005 £'000 £'000 audited auditedNon-current assetsGoodwill 172,443 172,443Other intangible assets 439 815Property, plant and equipment 110,167 140,064Deferred tax assets 1,179 2,531Investment in joint ventures 3,300 4,064 287,528 319,917 Current assetsInventories 66,080 66,495Trade and other receivables 105,166 103,244Cash and cash equivalents 65,917 46,027 237,163 215,766 Current liabilitiesBorrowings (57,802) (37,385)Trade and other payables (124,892) (129,523)Current tax liability (52,100) (53,050)Derivatives at fair value (22,336) (4,312) Net current liabilities (19,967) (8,504) Non-current liabilitiesBorrowings (158,771) (179,908)Trade and other payables (372) (306)Deferred tax liability (6,316) (6,056)Post retirement benefit obligations (77,884) (69,637) (243,343) (255,907) Net assets 24,218 55,506 Called up share capital 14,566 14,480Share premium 33,034 31,829Capital redemption reserve 949 949Hedging and translation reserve (7,371) (481)Retained earnings (21,031) 4,009 Equity attributable to equity holders of the parent 20,147 50,786Minority interests 4,071 4,720 Total equity 24,218 55,506 Analysis of net borrowingCash and cash equivalents 65,917 46,027Current borrowings (57,802) (37,385)Non-current borrowings (158,771) (179,908) Net borrowings (150,656) (171,266)Add back: special items (15,615) 5,675 Net borrowings (underlying performance) (166,271) (165,591) The financial statements were approved by the Board of Directors and authorisedfor issue on 7 March 2007. CONSOLDIATED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005Year to 31 December Notes £'000 £'000 £'000 £'000 audited audited audited auditedOperatingCash generated from operations 5 46,376 57,791 Interest received 2,121 3,683 Interest paid (13,581) (15,095) Net interest paid (11,460) (11,412) UK corporation tax paid - (74) Overseas corporate tax paid (9,196) (10,964) Total tax paid (9,196) (11,038) Net cash inflow from operating activities 25,720 35,341 InvestingDividends received from joint ventures 1,385 130 Purchase of property, plant and equipment (18,468) (14,331) Sale of property, plant and equipment 1,539 45 Net capital expenditure and financial investment (16,929) (14,286) Sale of businesses 3,660 18,858 Net cash impact of acquisitions and disposals 3,660 18,858 Net cash (outflow)/inflow from investing activities (11,884) 4,702 FinancingEquity dividends paid (13,251) (16,796)Dividends paid to minority interests (1,697) (1,399)Purchase of own shares (246) (369)Issue of shares 1,291 -Proceeds/(repayment) of non-current borrowings 154 (5,033) Net cash outflow from financing activities (13,749) (23,597) Increase in cash and bank overdrafts during the 87 16,446year Comprised of:Cash and cash equivalents 23,160 (46,623)Bank overdrafts (23,073) 63,069 87 16,446 Reconciliation of net cash flow from operating activities to movement in net borrowings 2006 2005 £'000 £'000 audited audited Net cash inflow from operating activities 25,720 35,341Add back: dividends received from joint ventures 1,385 130Less: net capital expenditure and financial (16,929) (14,286)investmentLess: dividends paid to minority interests (1,697) (1,399) Free cash flow before dividends 8,479 19,786 Net cash impact of acquisitions and disposals 3,660 18,858Purchase of own shares (246) (369)Issue of shares 1,291 -Equity dividends paid (13,251) (16,796)Exchange movements (613) 571 Movement in net borrowings (underlying performance) (680) 22,050 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the YEAR ENDED 31DECEMBER 2006 2006 2005 Minority Equity Total Minority Equity Total interests holders of interests holders of the parent the parentYear to 31 December £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Actuarial gains and losses - (13,551) (13,551) - 3,442 3,442Tax on items recognised directly in - (1,409) (1,409) - (34) (34)equityExchange differences (296) (6,890) (7,186) 533 466 999Profit for the year 1,344 3,427 4,771 1,180 21,853 23,033 Total recognised income/(expenditure) 1,048 (18,423) (17,375) 1,713 25,727 27,440for the period 1 Consolidated income statement analysis 2006 2005 Continuing operations Continuing operations Note Underlying Special IFRS Underlying Special IFRS performance items performance items £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Group revenue 543,226 8,429 551,655 503,802 52,249 556,051Share of joint ventures' 14,131 - 14,131 12,656 - 12,656revenue Total sales 2 557,357 8,429 565,786 516,458 52,249 568,707 Group revenue 543,226 8,429 551,655 503,802 52,249 556,051 Company and subsidiaries 41,888 (1,809) 40,079 45,327 7 45,334before impairmentsImpairment of non-current - (19,699) (19,699) - - -assets Company and subsidiaries 41,888 (21,508) 20,380 45,327 7 45,334Share of joint ventures 1,071 - 1,071 859 - 859 Operating profit/(loss) 2 42,959 (21,508) 21,451 46,186 7 46,193 Finance costs 4 (11,443) 3,618 (7,825) (11,741) (2,421) (14,162) Profit/(loss) before taxation 31,516 (17,890) 13,626 34,445 (2,414) 32,031Taxation (8,820) (35) (8,855) (9,148) 150 (8,998)Profit/(loss) for the year 22,696 (17,925) 4,771 25,297 (2,264) 23,033 Profit attributable to 1,344 - 1,344 1,180 - 1,180minority interestsProfit attributable to equity 21,352 (17,925) 3,427 24,117 (2,264) 21,853holders of the parent 22,696 (17,925) 4,771 25,297 (2,264) 23,033 Earnings per shareBasic 14.67p (12.32)p 2.35p 16.66p (1.56)p 15.10pDiluted 14.58p (12.24)p 2.34p 16.47p (1.54)p 14.93p Discontinued operations There are no discontinued operations. As detailed in note 3, Reabrook Limitedwas sold during the year, however this sale does not satisfy the criteria ofIFRS 5 to be treated as discontinued operations. Special items The special items disclosed are made up as follows: 2006 2005 Note Special items Special items £'000 £'000 audited audited Total salesRevenue of operations sold or closed during the year 8,429 52,249 Operating profit/(loss)Operating profit/(loss) of operations sold or closed 117 (129)during the yearProfit or loss arising from the sale or closure of 3 (1,926) 136operationsImpairment of non-current assets (19,699) - (21,508) 7 Finance costsFair value adjustment 4 3,618 (2,421) TaxationTaxation on operating profit/(loss) of businesses sold or (35) -closed during the yearTaxation on profit or loss arising from the sale or - 150closure of operations (35) 150 2 Segmental analysis 2006 2005 Underlying Special IFRS Underlying Special IFRS performance items performance itemsYear to 31 December £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Total sales by activity Polymer Chemicals 399,084 - 399,084 364,770 - 364,770 Pharma & Fine Chemicals 88,479 - 88,479 82,170 - 82,170 Performance Chemicals 69,794 8,429 78,223 69,518 52,249 121,767 557,357 8,429 565,786 516,458 52,249 568,707 Operating profit by activity Polymer Chemicals 38,749 - 38,749 34,159 (1,276) 32,883 Pharma & Fine Chemicals 9,455 - 9,455 10,903 - 10,903 Performance Chemicals (358) (21,508) (21,866) 5,806 1,283 7,089 Unallocated corporate (4,887) - (4,887) (4,682) - (4,682)expenses 42,959 (21,508) 21,451 46,186 7 46,193 2006 2005 £'000 £'000 audited auditedTotal sales by destinationUnited Kingdom 98,203 123,767Other Europe 227,158 228,641Asia 128,003 115,204Africa and Middle East 54,005 49,120Rest of World 58,417 51,975 565,786 568,707 3 Profit or loss arising from the sale or closure of an operation 2006 2005Year to 31 December £'000 £'000 audited audited Sale of Brencliffe Limited 198 347Sale of Holliday Dispersions Ltd and SA 485 (1,974)Sale of Autoclenz Limited 699 13,614Restructuring of James Robinson Limited 235 (4,813)Restructuring of William Blythe Limited 336 (5,762)Restructuring of Ditar Ridderkerk BV - (1,276)Sale of Reabrook Limited (3,994) -Releases from provisions created prior to 2005 115 - (1,926) 136 The shares of Reabrook Limited were sold on 5 June 2006. 4 Finance costs The fair value adjustment is the mark to market adjustment in respect of crosscurrency and interest rate derivatives used for hedging purposes where IAS 39hedge accounting is not applied. 5 Reconciliation of operating profit to cash generated from operations 2006 2005Year to 31 December £'000 £'000 audited audited Reconciliation of operating profit to cash generated fromoperations Operating profit 21,451 46,193Less: share of profits of joint ventures (1,071) (859) 20,380 45,334Impairment of non-current assets 19,699 -Depreciation and amortisation 18,313 19,291Profit or loss arising from the sale or closure of operations 1,926 (136)Cash impact of termination of businesses (6,096) (761)Profit on sale of fixed assets (794) (73)Share based payments 299 711(Increase)/decrease in inventories (3,947) 1,550Increase in trade and other receivables (10,496) (1,380)Pension funding in excess of IAS 19 charge (3,181) (2,992)Increase/(decrease) in trade and other payables 10,547 (1,050)Unrealised exchange gains (274) (2,703) Cash generated from operations 46,376 57,791 6 Reconciliation of EBITDA 2006 2005 Underlying IFRS Underlying IFRS £'000 £'000 £'000 £'000Year to 31 December audited audited audited audited Operating profit 42,959 21,451 46,186 46,193Less: Profit or loss arising from the sale or closure of - (117) - 129operationsLess: Operating profit or loss of businesses sold or - 1,926 - (136)closed during the yearAdd back: impairment of non-current assets - 19,699 - -Add back: amortisation 227 227 307 307Add back: depreciation 18,086 18,086 18,984 18,984EBITDA 61,272 61,272 65,477 65,477 7 Dividends 2006 2005 Pence per Pence per share share audited audited Interim 3.8 3.7Final 5.5 5.3 Total 9.3 9.0 The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. 8 Further information The financial information set out above does not comprise the company'sstatutory accounts. It has been derived from the Group's audited accounts forthe year ended 31 December 2006, which will be delivered to the Registrar ofCompanies following the Annual General Meeting. The auditors' report wasunqualified and did not contain any statement under section 237 (2) or (3) ofthe Companies Act 1985. While the financial information included in thispreliminary announcement has been computed in accordance with InternationalFinancial Accounting Standards (IFRS), this announcement itself does not containsufficient information to comply with IFRS. The company expects to publish fullfinancial statements that comply with IFRS, a copy of which will be posted tothe shareholders, on 16 April 2007. The financial statements were approved by the Board of Directors on 7 March2007. The accounting policies used to prepare these accounts are the same as thoseused in the preparation of the Group's audited accounts for the year ended 31December 2005, which has been delivered to the Registrar of Companies. Copiescan be obtained by the public from the company's registered office TempleFields, Harlow, Essex, CM20 2BH, or on the company website www.yulecatto.com. A final dividend of 5.5p (2005: 5.3p) per share, totalling £8.0m, (2005: £7.7m)has been recommended by the directors. Earnings per ordinary share are based on the attributable profit for the periodand the weighted average number of shares in issue during the period - 145.5m(2005: 144.7m). 9 Glossary of terms Total sales Total sales represent the total of revenue from Yule Catto and Co plc, its subsidiaries, and its share of the revenue of joint ventures. EBITDA EBITDA is calculated as operating profit before depreciation, amortisation and non-recurring items. Operating profit Operating profit represents profit before finance costs and taxation. Non-recurring items Non-recurring items are defined as: • Profit or loss impact arising from the sale or closure of an operation; • Impairment of non-current assets; and • Other non-operating or one-off items. Special items The following are disclosed separately as special items in order to provide a clearer indication of the Group's underlying performance: • Non-recurring items; • Mark to market adjustments in respect of cross currency and interest rate derivatives used for hedging purposes where IAS 39 hedge accounting is not applied; • Revaluation of USD loan notes from the rate of the related cross currency swaps to the year end rate. Free cash flow Free cash flow represents cash flow before cash impact of acquisitions and disposals, purchase of own shares, equity dividends paid and exchange movements. Net borrowings Net borrowings represents cash and cash equivalents together with short and long term borrowings, as adjusted for the effect of related derivative instruments irrespective of whether they qualify for hedge accounting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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