22nd Feb 2006 07:00
Morgan Crucible Co PLC22 February 2006 PRELIMINARY RESULTS FOR THE PERIOD ENDED 4 JANUARY 2006 2005 2004Revenue £m 745.7 795.9Underlying operating profit* £m 66.0 55.8Underlying PBT** £m 52.9 39.7Underlying EPS *** pence 13.1 10.0Net cash/(debt) £m 50.5 (147.9) Operating profit/(loss) £m 33.6 (6.7)Profit before tax £m 20.4 (31.0)Basic EPS pence 18.1 (22.2) * Defined as operating profit of £33.6 million (2004: loss £6.7 million) beforefinancing costs of £13.1 million (2004: £16.1 million) and before restructuringcosts of £29.7 million (2004: £47.5 million), costs associated with thesettlement of prior period litigation of £2.3 million (2004: £11.2 million) andlosses on property disposals of £0.4 million (2004: £3.8 million). This measureof earnings is shown because the Directors consider that it gives a betterindication of underlying performance. ** Defined as operating profit of £33.6 million (2004:loss of £6.7 million)before restructuring costs of £29.7 million (2004: £47.5 million), costsassociated with the settlement of prior period litigation of £2.3 million (2004:£11.2 million) and losses on property disposals of £0.4 million (2004: £3.8million) and after net financing costs of £13.1 million (2004: £16.1 million). *** Defined as basic earnings/(loss) per share of 18.1p (2004: loss 22.2p)adjusted to exclude the after tax impact of restructuring costs, costs ofsettlement of prior period litigation and losses on property disposals of 5.0p(2004: 32.2p). • Top line growth: • Turnover from continuing operations up 4.8% to £609.8 million (2004: £581.6 million) including a favourable currency translation impact of £8.5 million • Profitability increasing: • Underlying operating profit from continuing operations up 32.9% to £55.4 million (2004: £41.7 million) including a favourable currency translation impact of £1.3 million • Underlying operating margins for continuing businesses improved from 7.2% to 9.1% • Underlying EPS improved by 31.0% to 13.1p (2004: 10.0p) • Financial position transformed: • Net cash of £50.5 million (2004: net debt of £147.9 million) • Significant decrease of c£60 million in pension deficit • Dividend payment resumed at 2.5p per share Commenting on the results, Chief Executive Officer, Warren Knowlton said: "Morgan is progressing well into the next phase of its development. Ourthree-year profit improvement programme is entering its last phase in 2006 andis delivering results ahead of schedule. I am pleased to report that in 2005volume growth and pricing improvements are of similar importance to costreductions as drivers for our increasing profitability. The elimination of bankdebt and the significant reduction in the Group pension deficit following thesuccessful sale of the Magnetics division have transformed the financialstrength of the Company. As a result, we are well placed to focus on profitablegrowth both organically and through bolt-on acquisitions. We are aiming formid-teen operating profit margins as the Group's medium-term goal. Theconfidence of the Board is reflected in the resumption of dividend payments." Strategy Morgan Crucible's strong financial momentum has continued throughout 2005. TheGroup has successfully driven its core business to nearly 10% underlyingoperating margins by the second half of 2005. This puts us approximately oneyear ahead of our profit improvement plan announced in early 2004 to achievedouble-digit margins on a run rate basis by the end of 2006. Our cost base has improved each year since 2002. We are progressively shiftingour manufacturing footprint to lower cost countries and, combined with ongoingreductions in overhead costs, this has driven down our total employment costs(from continuing businesses) as a percentage of sales from 39.3% in 2002 to35.7% in 2005. We have targeted attractive, higher growth markets and coupled with ourconcentration on increasing the value-added component within our product range,have reversed year on year price erosion. Our pricing position is now firmlyinto positive territory. Non-core businesses have been disposed of successfully over the past threeyears. Most notably in 2005 the Magnetics division was sold for the veryattractive price of £300 million comprising £225 million cash and £75 million ofpension and other employee benefits assumed by the purchaser. This hastransformed the balance sheet of Morgan Crucible and reduced the pension deficitsubstantially. At the end of 2005, we had a positive net cash position of £50million compared to the net debt of £350 million in 2002. The significantly improved financial strength of the Group leaves us well placedto invest in the profitable growth of our businesses both organically andthrough bolt-on acquisitions in our core markets. As a result, we are now wellpositioned to aim for mid-teen margins. Financial Review Note: The financial statements have been prepared under 'International FinancialReporting Standards'(IFRS). All the figures quoted below are on an IFRS basis. Under transitional requirements for the move from UK GAAP to IFRS acomprehensive review of the changes which have been made are shown on the Morganwebsite and will be shown in the 2005 statutory accounts when they arepublished. These include the Group's new accounting policies under IFRS and thetransitional disclosures for the 2004 comparative data showing reconciliationsbetween UK GAAP and IFRS both for the balance sheet and the income statement. Reference is made to underlying operating profit and underlying EPS below bothof which are defined at the front of this statement. These measures of earningsare shown because the Directors consider that they give a better indication ofunderlying performance. Group underlying operating profit for continuing businesses increased by 32.9%to £55.4 million (2004: £41.7 million). Underlying operating profit margins fromcontinuing businesses for the year were 9.1%. This compares to 7.2% in theequivalent period in 2004. All three of our major business units contributed tothis increase in margin. The Group has continued to implement its 'Profit Improvement Programme' in theyear with restructuring charges being £29.7 million (2004: £47.5 million). Wehave also incurred costs associated with settlement of prior period litigationin 2005 of £2.3 million (2004: £11.2 million). The Group disposed of the Magnetics division in September 2005 for an enterprisevalue of c£300 million, comprising £225 million of cash and £75 million ofpension and other employee liabilities assumed by the purchaser. This disposalhas transformed the balance sheet of Morgan eliminating net debt and creating ayear-end net cash position of £50.5 million. The profit on disposal net of taxwas £42.6 million. The net finance charge was £13.1 million (2004: £16.1 million). Net bankinterest and similar charges were £10.0 million (2004: £12.3 million), animprovement of £2.3 million from 2004 as our cash position improved in the yearand the Magnetics disposal monies were received in December 2005. Part of thefinance charge under IFRS is the net IAS 19 (Employee Benefits) interest chargeon pension scheme net liabilities which was £3.5 million (2004: £3.8 million).The gain on remeasurement of interest rate swaps to fair value was £0.4 million(2004: £nil). The tax charge for the year, including £21.4 million on the disposal of theMagnetics division was £30.2 million (2004: £2.5 million). The effective taxrate before restructuring costs, costs associated with settlement of priorperiod litigation and losses on property disposals was 25% (2004: 25%). Underlying earnings per share was 13.1 pence (2004: 10.0 pence). The net cash inflow from operating activities was £48.5 million (2004: £50.2million) which included an adverse cash impact from restructuring costs andcosts associated with anti-trust litigation of £30.8 million (2004: £26.0million). Working capital increased by £6.2 million (2004: decrease £7.0million). Year Year 2005 2004 £m £mNet cash from operating activities 48.5 50.2Interest received 2.3 1.5Net capital expenditure (38.1) (28.1) _____ _____Free cash flow 12.7 23.6Cash flows from other investing 190.8 23.3activitiesCash flows from financing (1.8) 50.5activitiesExchange movement (3.3) 4.7Opening net debt (147.9) (250.0) _____ _____Closing net debt 50.5 (147.9) _____ _____ Final Dividend Morgan has demonstrated sustained net free cash flow over the past two yearscoupled with strong improvement in underlying business profitability and, assuch, the Board is recommending a final dividend of 2.5 pence per Ordinary sharefor the year. Morgan's intention is to have a progressive dividend policy goingforward. The dividend will be paid on 6th July 2006 to Ordinary shareholders onthe register of members at the close of business on 2nd June 2006. A DividendRe-Investment Plan will be made available for Ordinary shareholders who wouldlike to take their dividends by way of shares and details will be posted toshareholders in due course. Operating Review Carbon Morgan Carbon supplies products that exploit both the electrical and mechanicalproperties of carbon - combining our materials technology, with in-depthapplication knowledge, to produce added value components for the markets weserve. Turnover of the business was up 1.9% compared to last year at £199.9million (2004: £196.1 million). Underlying operating profit for the continuingbusiness showed a strong improvement at £27.4 million (2004: £20.9 million).Turnover growth was subdued by a temporary decline in Armour sales midwaythrough the year as the US military changed its specifications. The newspecifications were met during the second half of 2005 and sales volumes arereturning to their previous levels. General market conditions in the Americas remain robust. Performance was strongin the traditional brush and seals and bearings markets and also in thesemiconductor market. The industrial market in Europe showed limited growth,although further improvement was generated in niche added value applicationssuch as "Press to Size" mechanical components used in domestic applications andelectrical rotary businesses. There was good organic growth across most of thebusinesses in Asia, particularly in China, and the division benefited from thecapital and resource investments that continue to be made in the region. Theprogramme of site rationalisation, overhead reduction and the move to low costmanufacturing countries is continuing successfully. Technical Ceramics The Technical Ceramics business trading performance reflects substantialprogress during the year. Turnover grew 6.7% to £144.8 million (2004: £135.7million) and underlying operating profit increased by 64.9% to £12.2 million(2004: £7.4 million). Free cash flow was also strong, with the focus on balancesheet efficiency continuing to release cash within the business. During 2005,cost reductions made through our continuing improvement programme more thanoffset energy and raw material price increases. We will continue to focus onthese initiatives in 2006. Technical Ceramics made improvements across all its regions. US markets werestrong throughout the year whilst Europe was stable. In Asia our increasedcapacity allowed us to increase sales by over 40% from 2004, albeit from a smallbase. In terms of products, sales growth is being driven by piezo ceramic,medical and aerospace applications which are higher-margin markets.Opportunities to further develop our interests in these areas are being pursued. Insulating Ceramics The Insulating Ceramics businesses' trading performance reflects steady progressduring the year. Turnover grew 6.1% to £265.1 million (2004: £249.8 million) andunderlying operating profit increased by 14.4% to £21.5 million (2004:£18.8million). The Thermal Ceramics division finished 2005 with a buoyant order book and salesin the second half ahead of the comparative period last year. There was stronggrowth in NAFTA, Asia and Latin America facilitated by expansion andmodernisation of facilities in China, India, Australia, Brazil and Korea.Personnel reduction plans in Europe and NAFTA have continued to sustainprofitability in spite of the impact of the cost rises in raw materials and,more significantly, in energy which have put pressure on margins. Priceincreases large enough to offset the rises in input costs have proved difficultto implement. The launch of a new high temperature bio-soluble fibre(Superwool(TM) 607HT) during the second half of 2005 is enabling the ThermalCeramics business to increase its market share, while new joint ventures inChina and Russia signed in December further improve our geographic presence. Demand in Europe for the Crucibles business continued to fall sharply and energyand raw material prices escalated rapidly, reducing margins. However tradingstabilised in the latter part of 2005. Sales into the Americas grew modestly,despite the well publicised difficulties facing US automobile producers, drivenin part by improved sales of furnace equipment aimed at reducing fuel and energycosts. Sales into Asia continued to record double-digit growth, with little signof any imminent interruption to this trend. The benefits of some fixed costreduction showed through in the second half and contributed to an improvinglevel of profitability. Outlook The financial transformation of Morgan, which accelerated in 2005, provides astrong platform for growth. All three major divisions continue to make goodprogress in margin improvement with the Group's double digit operating margintarget now very close to being realised a year ahead of schedule. Going forward,Morgan will be looking to leverage its much strengthened position to aim formid-teen margins in the medium term with profitable growth coming bothorganically and through bolt-on acquisitions. The decision to reinstate dividendpayments reflects Morgan's improved financial position and the confidence of theBoard. Lars Kylberg Chairman Warren Knowlton Chief Executive Officer CONSOLIDATED INCOME STATEMENTfor the year ended 4 January 2006 Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations 2005 2005 2005 2004 2004 2004 Note £m £m £m £m £m £mRevenue 1 609.8 135.9 745.7 581.6 214.3 795.9 Operating costs before restructuring costs, cost associated with settlement of prior period anti-trust litigation and property disposals (554.4) (125.3) (679.7) (539.9) (200.2) (740.1) ________ ________ _______ ________ _________ _______Profit from operations before restructuring costs, costs associated with settlement of prior period anti-trust litigation and property disposals 1 55.4 10.6 66.0 41.7 14.1 55.8 Restructuring costs and costs associated with settlement of priorperiod anti-trust litigation 4 (29.9) (2.1) (32.0) (44.9) (13.8) (58.7)Loss on disposal of property (0.4) - (0.4) (4.6) 0.8 (3.8) ________ ________ _______ ________ _________ _______Operating profit/(loss) 25.1 8.5 33.6 (7.8) 1.1 (6.7) Finance income 22.7 - 22.7 20.9 - 20.9Finance expenses (33.4) (2.4) (35.8) (33.6) (3.4) (37.0) ________ ________ _______ ________ _________ _______Net financing costs 2 (10.7) (2.4) (13.1) (12.7) (3.4) (16.1) Loss on partial disposal of businesses (0.1) - (0.1) (8.2) - (8.2) ________ ________ _______ ________ _________ _______ Profit/(loss) before taxation 14.3 6.1 20.4 (28.7) (2.3) (31.0) Income tax expense 3 (4.8) (4.0) (8.8) (2.5) - (2.5) ________ ________ _______ ________ _________ _______ Profit/(loss) after taxation but before gain on sale of discontinued operations 9.5 2.1 11.6 (31.2) (2.3) (33.5) Gain/(loss) on sale of discontinued operations, net of tax - 42.6 42.6 - (26.7) (26.7) ________ ________ _______ ________ _________ _______ Profit/(loss) for the period 9.5 44.7 54.2 (31.2) (29.0) (60.2) ======== ======== ======= ======== ========= =======Profit/(loss) for period attributable to:Equity holders of the parent 7.2 44.7 51.9 (33.0) (29.0) (62.0)Minority interest 2.3 - 2.3 1.8 - 1.8 ________ ________ _______ ________ _________ _______ 9.5 44.7 54.2 (31.2) (29.0) (60.2) ======== ======== ======= ======== ========= =======Earnings/(loss) per share 5Basic 2.5p 15.6p 18.1p (11.8p) (10.4p) (22.2p)Diluted 2.4p 14.8p 17.2p (11.8p) (10.4p) (22.2p) DividendsProposed final dividend - pence 2.5p - - £m 7.3 - CONSOLIDATED BALANCE SHEETas at 4 January 2006 2005 2004 £m £m _______ ______AssetsProperty, plant and equipment 235.3 319.8Intangible assets 46.6 107.1Other investments 6.1 5.6Other receivables 0.3 3.5Deferred tax assets 27.4 31.2 _______ ______Total non-current assets 315.7 467.2 _______ ______ Inventories 77.8 121.3Trade and other receivables 140.9 165.3Cash and cash equivalents 160.0 56.3 _______ ______Total current assets 378.7 342.9 _______ ______Total assets 694.4 810.1 _______ ______ LiabilitiesInterest-bearing loans and borrowings 57.3 137.9Employee benefits 124.2 183.0Grants for capital expenditure 0.3 0.4Provisions 4.3 5.0Deferred tax liabilities 28.1 42.1 _______ ______Total non-current liabilities 214.2 368.4 _______ ______ Bank overdraft 27.2 0.8Interest-bearing loans and borrowings 25.0 65.5Trade and other payables 203.9 184.0Provisions 28.4 38.3 _______ ______Total current liabilities 284.5 288.6 _______ ______ Total liabilities 498.7 657.0 _______ ______Total net assets 195.7 153.1 ======= ======EquityIssued capital 75.5 74.8Share premium 85.0 84.0Reserves 41.4 35.0Retained earnings (19.6) (51.4) _______ ______Total equity attributable to equity holders of the parent company 182.3 142.4 _______ ______Minority interest 13.4 10.7 _______ ______Total equity 195.7 153.1 ======= ====== CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 4 January 2006 2005 2004 Note £m £m _______ ______Operating activitiesProfit/(loss) for the period 54.2 (60.2)Adjustments for:Depreciation 30.0 34.4Amortisation 1.3 1.4Interest expense 13.1 16.1Loss on sale of property, plant and equipment 0.6 4.3Income tax expense 8.8 2.5Equity settled share based payment expenses 2.5 1.7 _______ ______Operating profit before changes in working capital and provisions 110.5 0.2 (Increase)/decrease in trade and other receivables (5.8) (11.5)(Increase)/decrease in inventories (9.0) (3.1)Increase/(decrease) in trade and other payables 8.6 21.6Non cash operating costs relating to restructuring 8.5 12.4Increase/(decrease) in provisions and employee benefits (1.9) 12.8 _______ ______Cash generated from operations 110.9 32.4 Interest paid (13.7) (14.8)Taxation (6.2) (2.3)Loss on partial disposal of businesses 0.1 8.2Gain on sale of discontinued operations (42.6) 26.7 _______ ______Net cash from operating activities 48.5 50.2 Investing activitiesPurchase of property, plant and equipment (43.6) (38.3)Proceeds from sale of property, plant and equipment 5.5 10.2Purchase of investments (2.8) (1.0)Proceeds from sale of investments 0.7 0.4Interest received 2.3 1.5Acquisitions of subsidiaries, net of cash acquired (3.0) -Disposal of subsidiaries, net of cash disposed of 195.9 23.9 _______ ______Net cash from investing activities 155.0 (3.3) Financing activitiesProceeds from the issue of share capital 1.7 54.1Purchase of shares for LTIP (3.5) (3.3)Repayment of borrowings (125.2) (97.6)Payment of finance lease liabilities (1.2) (1.0) _______ ______Net cash from financing activities (128.2) (47.8) Net increase/(decrease) in cash and cash equivalents 75.3 (0.9)Cash and cash equivalents at start of period 56.3 57.9Effect of exchange rate fluctuations on cash held 2.0 (0.7) _______ ______Cash and cash equivalents at period end 6 133.6 56.3 ======= ====== CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 4 January 2006 2005 2004 £m £m _______ ______Foreign exchange translation differences 5.0 (2.5)Actuarial losses on defined benefit plans (16.2) (39.0)Net gain/(loss) on hedge of net investment in foreign subsidiary (1.5) -Cash flow hedges:Effective portion of changes in fair value 0.2 -Change in fair value of equity securities available-for-sale 0.3 0.2 _______ ______Income and expense recognised directly in equity (12.2) (41.3)Profit/(loss) for the period 54.2 (60.2) _______ ______Total recognised income and expense for the period 42.0 (101.5) ======= ====== Attributable to:Equity holders of the parent 39.7 (103.3)Minority interest 2.3 1.8 _______ ______Total recognised income and expenses for the period 42.0 (101.5) ======= ======Total recognised income and expenses for the period 42.0 (101.5)Effect of adoption of IAS 32 and 39, net of tax, on 5 January 2005 (with 2004 not restated) * (0.5) - _______ ______ 41.5 (101.5) ======= ====== CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 4 January 2006 2005 2004 £m £m _______ ______Equity attributable to equity holders of the parent at 5 January 142.4 193.3Effect of adoption of IAS 32 and 39, net of tax, on 5 January 2005 (with 2004 not restated) * (0.5) -Recognised income and expense for the year 39.7 (103.3)New ordinary share capital issued (net of expenses) 1.7 54.1Relating to own shares (3.5) (3.4)Relating to share-based payment 2.5 1.7 _______ ______Equity attributable to equity holders of the parent at 4 January 182.3 142.4 ======= ====== 2005 2004 £m £m _______ ______*Effect of change in accounting policyEffect of adoption of IAS 32 and 39, net of tax, on 5January 2005 (with 2004 not restated) on:Cash flow hedge reserve (0.1) -Retained earnings (0.4) - _______ ______ (0.5) - ======= ====== NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Basis of preparation The attached financial statements are the Group's first financial statementsfollowing the adoption of International Financial Reporting Standards (IFRS).These financial statements have been prepared in accordance with IFRS adoptedfor use in the EU ('Adopted IFRS') in accordance with EU Law (IAS Regulation EC/606/2002). As allowed by IFRS 1 'First-time adoption of IFRS', the Group adopted IAS 32'Financial instruments: disclosure and presentation' and IAS 39 'Financialinstruments: recognition and measurement', prospectively from 5 January 2005.Consequently, until 4 January 2005, the Group continued to hedge account forforecast foreign exchange transactions and commodity exposures in accordancewith UK GAAP, and hence the comparative financial statements exclude the impactof these standards. On 8 July 2005, the Group published a comprehensive analysis of the impact ofadopting IFRS from 5 January 2004 - available from the Company's web site atwww.morganplc.com. This included income statement and balance sheetreconciliations, as well as details of the accounting policies applied inrestating its financial statements for the year ended 4 January 2005 and as at 5January 2004. Some small adjustments have been made to these statements toreflect reclassifications more accurately. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 4 January 2005 or 2006. Statutoryaccounts for 2005, which were prepared under UK GAAP, have been delivered to theregistrar of companies, and those for 2005, prepared under accounting standardsadopted by the EU, will be delivered in due course. The auditors have reportedon those accounts; their reports were (i) unqualified, (ii) did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their reports and (iii) did not contain statementsunder sections 237(2) or (3) of the Companies Act 1985. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segment reporting Business segments Carbon Technical Thermal Crucibles Discontinued Consolidated Ceramics Ceramics 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m £m £m ______ ______ _______ ______ ______ ______ ______ ______ ______ ______ ______ ______Revenue from external customers 199.9 196.1 144.8 135.7 236.7 220.3 28.4 29.5 135.9 214.3 745.7 795.9 ______ ______ _______ ______ ______ ______ ______ ______ ______ ______ ______ ______Segment profit 15.3 0.2 8.6 1.1 9.2 8.0 1.3 3.2 8.5 1.1 42.9 13.6 ______ ______ _______ ______ ______ ______ ______ ______ ______ ______ ______ ______Unallocated costs (9.3) (20.3) ______ ______Operating profit/(loss) 33.6 (6.7)Net financing costs (13.1) (16.1)Loss on partial disposal of businesses (0.1) (8.2)Income tax expense (8.8) (2.5)Gain/(loss) on sale ofdiscontinued operations, net of tax 42.6 (26.7) ______ ______Profit/(loss) for the period 54.2 (60.2) ====== ======Segment underlying operating profit * 27.4 20.9 12.2 7.4 19.7 15.9 1.8 2.9 10.6 14.1 71.7 61.2 ______ ______ _______ ______ ______ ______ ______ ______ ______ ______ ______ ______Unallocated costs (5.7) (5.4) ______ ______Underlying operating profit 66.0 55.8 ====== ====== Revenue from external customers in discontinued comprises the Magnetics division£135.9 million (2004: £181.2 million), the Auto and Consumer business £nil(2004: £31.7 million) and three Technical Ceramics operations £nil (2004: £1.4million). Segment profit in discontinued comprises the Magnetics division £8.5million (2004: £7.4 million), the Auto and Consumer business £nil (2004: £6.5million loss) and three Technical Ceramics operations £nil (2004: £0.2 million).Segment underlying operating profit in discontinued comprises the Magneticsdivision £10.6 million (2004: £14.2 million), the Auto and Consumer business£nil (2004: £0.3 million loss) and three Technical Ceramics operations £nil(2004: £0.2 million). * This measure of profit (before all restructuring costs, cost associated withsettlement of anti-trust litigation and property disposals) is shown because theDirectors consider that it gives a better indication of underlying performance. Geographical segments Europe Americas Far East & Middle East & Discontinued Unallocated Consolidated Australia Africa 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m £m £m £m £m ----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ----- ----- ------ ------Revenue from external customers 237.6 241.0 268.2 244.6 90.5 82.6 13.5 13.4 135.9 214.3 - - 745.7 795.9 ----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ----- ----- ------ ------ 2. Net finance income and expense 2005 2004 £m £m _____ ______Interest expense (11.3) (13.8)Interest on IAS 19 obligations (24.5) (23.2) _____ ______Financial expenses (35.8) (37.0) ===== ======Interest income 1.3 1.5Expected return on IAS 19 scheme assets 21.0 19.4Gain on remeasurement of interest rate swaps to fair value 0.4 - _____ ______Financial income 22.7 20.9 ===== ====== 3. Taxation - Income tax expense Recognised in the income statement 2005 2004 £m £m ______ ______Current tax expenseCurrent year 36.0 6.0Adjustments for prior years 0.3 0.2 ______ ______ 36.3 6.2 ______ ______Deferred tax expenseOrigination and reversal of temporary differencesBenefit of losses recognised 4.0 (3.7) (10.1) - ______ ______ (6.1) (3.7) ______ ______Total income tax expense in income statement 30.2 2.5 ====== ====== Reconciliation of effective tax rate 2005 2005 2004 2004 £m % £m % ______ _______ ______ ______Profit/(loss) before tax 84.4 (57.7)Income tax using the domestic corporation tax rate 25.3 30.0 (17.3) 30.0Non-deductible expenses 14.7 17.4 17.0 (29.5)Effect of tax losses utilised (10.1) (12.0) 1.9 (3.3)Under/(over) provided in prior years 0.5 0.6 0.2 (0.3)Other (0.2) (0.2) 0.7 (1.2) ______ _______ ______ ______ 30.2 35.8 2.5 (4.3) ====== ======= ====== ====== Reconciliation of profit/(loss) before tax 2005 2004 £m £m ______ ______Shown on income statement 20.4 (31.0)Add: gain on sale of discontinued operations, gross of tax 64.0 (26.7) ______ ______Profit/(loss) before tax shown above in tax rate reconciliation 84.4 (57.7) ====== ====== 4. Restructuring costs and costs associated with settlement of anti-trustlitigation Costs of restructuring were £29.7 million (2004: £47.5 million) and legal costsassociated with settlement of anti-trust litigation were £2.3 million (2004:£11.2 million). 5. Earnings per share Basic earnings per share The calculation of basic earnings per share at 4 January 2006 was based on theprofit/(loss) attributable to Equity holders of the Morgan Crucible Company plcof £51.9 million (4 January 2005: £62.0 million loss) and a weighted averagenumber of ordinary shares outstanding during the period ended 4 January 2006 of286,553,767 (4 January 2005: 279,423,850) calculated as follows: 2005 2004 £m £m ___________ ___________ Profit/(loss) attributable to Equity holders of the Morgan Crucible Company plc 51.9 (62.0) =========== ===========Weighted average number of ordinary sharesIssued ordinary shares at 5 January 290,200,179 232,050,876Effect of shares issued in period and Treasury shares held by the Company (3,646,412) 47,372,974 ___________ ___________ Weighted average number of ordinary shares at period end 286,553,767 279,423,850 =========== =========== Diluted earnings per share The calculation of diluted earnings per share at 4 January 2006 wasbased on net profit/(loss) attributable to Equity holders of the MorganCrucible Company plc of £51.9 million (4 January 2005: £62.0 millionloss) and a weighted average number of ordinary shares outstandingduring the period ended 4 January 2006 of 301,088,360 (4 January 2005:286,076,731), calculated as follows: 2005 2004 £m £m ___________ ___________Profit/(loss) attributable to Equity holders of the Morgan Crucible Company plc 51.9 (62.0) =========== =========== Weighted average number or ordinary sharesWeighted average number of ordinary shares 286,553,767 281,370,979Effect of share options/incentive schemes 14,534,593 4,705,752 ___________ ___________Diluted weighted average number of ordinary shares 301,088,360 286,076,731 =========== ===========Underlying earnings per share The calculations of underlying earnings per share at 4 January 2006 was based on profit from operations before restructuring costs, costs associated with settlement of anti-trust litigation and property disposals less, net finance costs, income tax expense (excluding tax credit arising from restructuring, anti-trust litigation and property disposals of £4.3 million, (4 January 2005: £7.5 million)) and minority interest of £37.5 million (4 January 2005: £27.9 million) and a weighted average number of ordinary sharesoutstanding during the period ended 4 January 2006 of 286,553,767 (4 January 2005: 279,423,850) calculated as follows: 2005 2004 £m £m ___________ ___________Profit from operations before restructuring costs and costs associated with settlement of anti-trust litigation, less net finance charge costs, income tax expense and minority interest 37.5 27.9 =========== =========== Weighted average number of ordinary sharesIssued ordinary shares at 5 January 290,200,179 232,050,876Effect of shares issued in period and Treasury shares held by the Company (3,646,412) 47,372,974 ___________ ___________Weighted average number of ordinary shares at period end 286,553,767 279,423,850 =========== ===========Underlying earnings per share (pence) 13.1p 10.0p Underlying diluted earnings per share The calculations of underlying diluted earnings per share at 4 January 2006 wasbased on profit from operations before restructuring costs, costs associatedwith settlement of anti-trust litigation and property disposals less, netfinance costs, income tax expense (excluding tax credit arising fromrestructuring, anti-trust litigation and property disposals £4.3 million, (4January 2005: £7.5 million)) and minority interest of £37.5 million (4 January2005: £27.9 million) and a weighted average number of ordinary sharesoutstanding during the period ended 4 January 2006 of 301,088,360 (4 January2005: 286,076,731) calculated as follows: 2005 2004 £m £m ___________ ___________Profit from operations before restructuring costs and costs associated with settlement of anti-trust litigation, less net finance charge costs, income tax expense and minority interest 37.5 27.9 =========== =========== Weighted average number of ordinary shares Weighted average number of ordinary shares 286,553,767 281,370,979Effect of shares options/incentive schemes 14,534,593 4,705,752 ___________ ___________Diluted weighted average number of ordinary shares 301,088,360 286,076,731 =========== ===========Underlying diluted earnings per share (pence) 12.5p 9.8p 6. Cash and cash equivalents/bank overdrafts 2005 2004 £m £m ______ ______Cash and cash equivalents per balance sheet 160.0 56.3Bank overdrafts subject to cash pooling arrangements (26.4) - ______ ______Cash and cash equivalents per cash flow statement 133.6 56.3 ====== ====== Bank overdrafts subject to cash pooling arrangements (26.4) -Other bank overdrafts (0.8) (0.8) ______ ______Total bank overdrafts (27.2) (0.8) ====== ====== 'Cash and cash equivalents' in the 2004 balance sheet were shown net ofbank overdrafts subject to cash pooling arrangements of £17.4million. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Morgan Advanced Materials