27th Feb 2007 07:03
Elementis PLC27 February 2007 27 February 2007 ELEMENTIS plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Elementis plc, the Global Specialty Chemicals Company, announces its results forthe year ended 31 December 2006. HIGHLIGHTS From continuing operations • Underlying sales up 6 per cent. • Operating profit before exceptional items up 97 per cent. • Improved operating profit in all business segments. • Profit before tax and exceptional items up 159 per cent. • Restructuring of overheads reduced costs by over £13 million. • Retirement benefit obligations reduced by £24.7 million (40 per cent). • Proposed final dividend up 9 per cent. Financial Summary 2006 2005Sales* £395.9m £399.4mOperating profit* £37.6m £19.1mProfit before tax* £30.1m £11.6mDiluted earnings per share* 6.7p 2.6pDividend/distribution to shareholders - final proposed 1.2p 1.1p - full year 2.4p 2.2pOperating profit/(loss) after exceptional items £40.6m £(25.4)mDiluted earnings per share after exceptional items 7.0p (8.8)p * from continuing businesses and before exceptional items Commenting on the results, Group Chief Executive, David Dutro said: "We are pleased to report the significant improvement in the Group'sperformance. We successfully implemented the strategic plan announced inOctober 2005 which, combined with strong global demand for our products,increased earnings and resulted in underlying sales growth of 6 per cent. Specialty Products reduced selling, general and administrative expenses by over£5 million while underlying sales improved by 7 per cent due to good growth inthe Coatings, Construction and Oilfield segments. Pigments' manufacturing costs were reduced by over £2 million by transitioningour North America based customers to our Tai Cang plant in China and underlyingsales improved by 6 per cent due to robust demand in Coatings, Chemicals andConstruction. In Chromium, the manufacturing base was restructured, reducing UK capacity by 50per cent and operating profit before exceptional items improved due to higheraverage selling prices. Profit improvement programs continued throughout 2006 and provide confidence inthe Group's ability to drive earnings progression. 2007 has started on apositive note and we believe that the current global environment will supportfurther progress and growth in shareholder value. With the restructuringprogram completed, we anticipate a positive cash flow in 2007 and acorresponding reduction in debt." - Ends - Enquiries ElementisRobert Beeston, Chairman 020 7408 9300Brian Taylorson, Finance Director Financial Dynamics 020 7831 3113Andrew DowlerGreg Quine Chairman's Statement The business strategy announced by the Group in October 2005 was targeted toimprove the base level of the Group's profits in 2006 from which to growearnings in subsequent years. This objective would be achieved through acombination of overhead cost reduction, leveraging the Pigments cost base,increased focus on the Specialties business segment and repositioning of theChromium business to stabilise earnings and reduce volatility. It is pleasing to report the very significant result that has been achievedthrough the successful implementation of this strategy. Results Operating profit from continuing operations, before exceptional items, improvedby 97 per cent over the previous year to £37.6 million and all businesses showedan increase. This significant improvement was in large part due to the Group'srestructuring exercise announced during 2005 which has resulted in fixed costsfalling by over £13 million in 2006. In addition Specialties and Pigments havebenefited from strong markets in most parts of the world and Chromium showedimproved earnings on the back of higher selling prices and the restructuring ofthe Eaglescliffe site. Revenue for the year was £395.9 million which is an increase of 6 per cent afteradjusting for businesses sold or exited. Pricing in Chromium was 11 per centhigher than the previous year, largely due to actions taken in 2005, while moremodest price improvements were achieved in our other businesses and marginimprovement will remain a priority for 2007. Pigments and Specialties bothbenefited from strong markets and the Surfactants business was restructured byeliminating low margin business to provide a sound platform as we move into2007. Diluted earnings per share from continuing operations, before exceptional items,was 6.7 pence versus 2.6 pence in 2005. There were a number of exceptional itemsrecorded in the year as part of the restructuring exercise which resulted in anet gain of £3.0 million. After exceptional items diluted earnings per share was7.0 pence. Debt levels remained at a similar level to the previous year. Dividend The Board is recommending a final dividend of 1.2 pence taking the total returnto shareholders for the year to 2.4 pence. Subject to approval at the AnnualGeneral Meeting, the dividend will be paid on 5 May 2007 to members on theregister at the close of business on 10 April 2007. The Board intends tocontinue to review the dividend policy as earnings performance permits. The Board I joined the Board as Chairman in September 2006 at which time Edward Bramsonstepped down as Executive Chairman, but remains on the Board as non-executiveDirector. Edward was the architect of the recent restructuring and I would liketo thank him on behalf of the whole Board for his excellent contribution toshareholder value and the future prospects of the Group. In January 2007 DavidDutro joined the Board as Group Chief Executive having previously been ChiefOperating Officer, Elementis Worldwide and before that President of ElementisPigments. David brings a wealth of experience in our businesses and ourindustry, and has played a leading role in developing and implementing therecent reorganisation and improvement in performance. I am confident thatElementis will continue to benefit from his leadership going forward. Environmental, health and safety Our performance in this area continues to be at the high end of industrystandards and the Board is committed to driving continuous improvement in thisimportant part of our business. People In the short time I have been on the Board I have visited a number of sites andoffices around the Group, and have been impressed by the quality and dedicationof our people. I would like to thank them for their hard work in delivering theexcellent results in 2006. Outlook We will continue to focus on the highest margin Specialties business segment asthe most significant driver of profitable growth in 2007. The Group will alsocontinue to benefit across all business segments from the successfulrestructuring, undertaken during the last two years, to improve businessefficiency. Improved cash flow and corresponding debt reduction will also beevident now that the cash costs of restructuring are largely behind us. 2007 has started on a positive note and we believe that the current globalenvironment will support further progress and growth in shareholder value. Robert BeestonChairman27 February 2007 Financial Performance Revenue Effect of Increase/ Revenue exchange Disposals (decrease) Revenue 2005 rates 2006 2006 2006 £million £million £million £million £millionSpecialties- Specialty Products 139.7 0.1 (4.7) 9.7 144.8- Surfactants 45.7 0.4 - - 46.1 ______ ______ ______ ______ ______ Specialties total 185.4 0.5 (4.7) 9.7 190.9Pigments 90.7 0.7 (1.5) 4.3 94.2Chromium 129.4 (0.6) - (12.0) 116.8Specialty Rubber 40.5 - (40.5) - -Inter-segment (6.1) - - 0.1 (6.0) ______ ______ ______ ______ ______ 439.9 0.6 (46.7) 2.1 395.9 ______ ______ ______ ______ ______ Introduction IFRS requires separate disclosure of items of income and expense which arematerial by virtue of their nature or amount. These items are considered to bemost appropriately disclosed as exceptional. Elementis management consider that the information presented in the tables inthis review provide useful financial information relating to the performance ofthe Group. This information should not be considered as an alternative, but assupplementary to the full IFRS income statement presented on page 11. Group results Group revenue increased by 6 per cent to £395.9 million in 2006, after adjustingfor businesses sold or exited and the Chromium, UK capacity rationalisation.Higher average selling prices were the main driver of the increase with pricingacross the Group up by 5 per cent over the previous year, due to increases inChromium and Specialties. Volumes improved in both Speciality Products andPigments due to good market demand in Coatings, Oilfield and Construction. InChromium volumes were lower due to the price increases implemented in 2005,while Surfactant volumes were lower due to product mix optimisation initiativeswhich resulted in lower volumes but which will achieve higher margins. Group operating profit from continuing businesses, before exceptional items, was£37.6 million versus £19.1 million in the previous year, an increase of 97 percent. Energy costs increased by £3.3 million, just under 10 per cent versus theprevious year and other raw materials and variable costs increased by around 9per cent, with most of the increases occurring in Chromium. These increases weremore than offset by improvements in sales and, in addition, Group fixed costswere reduced by over £13.0 million versus the previous year as a result of therestructuring program that was initiated by the Board in 2005. Operating profitalso benefited from £1.8 million of currency hedging gains which were splitequally between Specialties and Chromium. Diluted earnings per share from continuing businesses, before exceptional items,was 6.7 pence compared to 2.6 pence in the previous year. The increase waslargely driven by the improvement in operating profit. After exceptional gainsof £3.0 million, which are described below, diluted earnings per share was 7.0pence versus a loss per share of 7.2 pence in 2005. Elementis Specialties Specialty Products Revenue in Specialty Products was £144.8 million in 2006, an increase of 7 percent over the previous year after adjusting for a business sold in 2005.Improved volumes in both Coatings and Oilfield additives was the Operating profit 2006 Operating Exceptional Adjusted£million profit items* operating profitContinuing operationsSpecialties - Specialty Products 25.9 (0.9) 25.0 - Surfactants 0.3 0.3 0.6 ______ ______ ______ 26.2 (0.6) 25.6Pigments 7.1 (1.0) 6.1Chromium 13.3 (1.4) 11.9Central costs (6.0) - (6.0) ______ ______ ______ 40.6 (3.0) 37.6Discontinued operationsSpeciality Rubber - - - ______ ______ ______ 40.6 (3.0) 37.6 ______ ______ ______ * excluding profit / (loss) on disposal of business (continued from table above)Operating profit 2005 Operating Exceptional Adjusted operating£million profit items* profitContinuing operationsSpecialties - Specialty Products 14.6 2.4 17.0 - Surfactants 0.1 0.5 0.6 ______ ______ ______ 14.7 2.9 17.6Pigments (5.9) 7.1 1.2Chromium (21.7) 29.5 7.8Central costs (12.5) 5.0 (7.5) ______ ______ ______ (25.4) 44.5 19.1Discontinued operationsSpeciality Rubber 1.2 - 1.2 ______ ______ ______ (24.2) 44.5 20.3 ______ ______ ______ * excluding profit / (loss) on disposal of business main cause of the increase, while overall pricing was over 2 per cent betterthan the previous year largely due to selective increases in these two sectorsduring the second half. In Coatings, strong demand drove volume improvements ofclose to 15 per cent in Europe and Asia, while demand in North America wasinitially strong, it slowed in the second half due to a slow down in housingstarts so that full year volumes ended higher by around 5 per cent. Oilfieldvolumes improved by around 8 per cent versus the previous year due to higher oilprices and increased drilling activity, and were particularly strong in Europedue to new business in the Nordic region. In the US, the largest region, volumesimproved by around 4 per cent while Canadian markets were somewhat softer due tosome switching of drilling resources away from deeper wells and growing activityin oil sands projects. Operating profit before exceptional items in 2006 improved by 47 per cent to£25.0 million. Fixed costs decreased by more than £5.0 million due to therestructuring program initiated in 2005 to reduce selling, general andadministration costs. Otherwise, higher revenue more than offset increases inraw materials and energy. Surfactants Revenue in Surfactants was £46.1 million in 2006, marginally higher than theprevious year. Good volume growth was seen in the oilfield sector but this wasoffset by the planned optimisation initiative. As part of this initiative, lowmargin business has been reduced and margin enhancement programs were introducedduring the second half of the year which should continue to benefit the businessinto 2007. Operating profit before exceptional items was unchanged at £0.6 million in 2006.Improvements in the sales mix were not sufficient to offset around £3.0million of increases in raw materials and energy costs, but the business alsobenefited from over £2.0 million of fixed cost improvements due torationalisation of the manufacturing site in the Netherlands. Elementis Pigments Revenue in Pigments increased by 4 per cent in 2006 to £94.2 million and by 6per cent excluding sales to the US driers market which was exited during theyear. Higher volumes in Coatings, Chemical and Construction applications werethe main driver of the increase and prices were raised on a number of keyproducts in response to higher energy and raw material prices, although pricingmeasured across the whole business was relatively stable year on year. InCoatings the North American customers were successfully transitioned to the newChinese product following the start up of the plant in Tai Cang, and volumesincreased with key customers due to strong consumer demand. Volumes alsoimproved in Europe and Asia Pacific. Construction volumes were higher in NorthAmerica and Asia Pacific due to good demand while volumes in Europe wereimpacted by a decision to exit from some low margin sales. The granular ironoxide product continued to make good progress. In Driers a decision was madeduring the year to exit the unprofitable North American business and thisreduced revenue by around £1.5 million. Operating profit before exceptional items was £6.1 million for the year versus£1.2 million in 2005. As well as the positive impact of higher sales, thecurrent year also benefited from a reduction of £3.6 million in fixed costs duemainly to improved manufacturing costs following the start up of the Tai Cangplant in 2005. Elementis Chromium The Chromium business was significantly restructured during the first half of2006. Part of the Eaglescliffe, UK plant was closed in March 2006 reducing theglobal manufacturing capacity of the business by 25 per cent. The net impact ofthis on operating profit in 2006 was largely neutral as the loss of salesvolumes was offset by a reduction in manufacturing costs. In addition morehedging activity has been undertaken in both energy and currency, and contractdiscussions with customers have focussed more on sharing the volatile costelements or setting a fixed price that allows Elementis to hedge them. All ofthis has been done to improve the quality of earnings by reducing volatility andthereby improving predictability. Results for the year also benefited from theaggressive price improvement program that was implemented throughout 2005.Consequently average selling prices in 2006 were around 11 per cent higher thanthe previous year, more than offsetting increases in raw materials and energy ofaround £13.0 million, of which £1.7 million was energy. Selling prices have beenrelatively stable during 2006. 2006 2005 £million £millionSales - UK 38.4 56.4 - US 78.4 73.0 ______ ______ 116.8 129.4 ______ ______Adjusted operating profit/(loss)* - UK 1.7 (0.3) - US 10.2 8.1 ______ ______ 11.9 7.8 ______ ______* before exceptional items In the US sales increased by 7 per cent over the previous year with higherpricing being the main driver of the improvement. Otherwise volumes were lowerin the chromic acid market due to changes in the Chromated Copper Arsenate ('CCA') market for timber treatment at the beginning of 2005. Operating profitbefore exceptional items improved by 26 per cent to £10.2 million as higherselling prices outpaced increases in energy and raw materials, and fixed costsbenefited from £0.5 million of insurance recoveries relating to a historic legalsettlement. In the UK sales also increased by 7 per cent over the previous year afteradjusting for the effects of the plant closure. Metal oxide volumes were down byaround 10 per cent due to increases in price implemented in 2005, but sales offirst pass oxide to the Southern European ceramics market were up on higherdemand. Operating profit before exceptional items improved to £1.7 million in2006 from a loss of £0.3 million in the previous year. Higher selling pricesmore than offset lower volumes and increases in energy and raw materials. Central costs Central costs are costs that are not identifiable as expenses of a particularbusiness, and are comprised of expenditures of the Board of Directors and thecorporate office. In 2006, as a result of restructuring initiated in 2005 toreduce overheads, central costs have been reduced by £1.5 million to £6.0million. Exceptional items There were net exceptional gains before taxation of £3.0 million (2005: chargesof £47.7 million) in the year. In the first half of 2006 there was acurtailment gain of £1.7 million which arose as a result of changes to theGroup's US defined benefit pension scheme. This was offset by a charge of £1.7million in relation to further restructuring of the administrative activities ofElementis Specialties which reduced the head count by 34 employees. In the second half, Elementis has amended its post retirement medical benefitscheme in its Specialties division where participants have become eligible forsimilar benefits from the government. As a result an exceptional gain of £2.0million was recorded. In addition, a credit of £1.0 million is included asexceptional which relates to the release of restructuring provisions no longerrequired. Interest Continuing operations 2006 2005 £million £million Finance income 0.2 0.3Finance cost of borrowings (8.3) (6.6) ______ ______ (8.1) (6.3)Pension finance income/(charge) 1.6 (0.4)Discount on provisions (1.0) (0.8) (7.5) (7.5) ______ ______ An increase of £1.8 million in net interest payable on bank borrowings, due to acombination of higher interest rates and higher borrowings, was offset by afavourable variance of £2.0 million in pension finance income/(charge). Anincreased return on UK pension scheme assets and lower interest costs on schemeliabilities resulted in pension income of £1.6 million in 2006 compared to anexpense in the previous year of £0.4 million. Interest cover, the ratio of operating profit before exceptional items tointerest on net borrowings, was 4.6 times (2005: 3.3 times). Taxation Tax charge £million Effective rate per cent Before exceptional items (0.1) -Exceptional items (1.3) 43.3 ______ ______ Total (1.4) 4.2 ______ ______ The tax charge on profit before exceptional items comprised overseas corporationtax of £1.1 million less prior period credits of £1.0 million. Tax on exceptional items of £1.3 million relates to deferred taxation in respectof exceptional gains of £3.7 million on pension and post retirement medicalbenefits. The overall tax charge was 4.2 per cent of profit before taxationwhich is lower than the standard rate of UK corporation tax due to theamortisation of goodwill in the US for tax purposes. Earnings per share Reported basic and diluted earnings per share from continuing operations were7.1 pence (2005: loss of 8.8 pence) and 7.0 pence (2005: loss of 8.8 pence)respectively. After adjusting for exceptional items, basic and diluted earningsper share from continuing operations were 6.8 pence (2005: 2.6 pence) and 6.7pence (2005: 2.6 pence) per share respectively. Diluted earnings per share fromcontinuing operations, before exceptional items increased by 158 per cent onprevious year mainly due to the increase in operating profit before exceptionalitems. Distribution to shareholders In 2005 the Group ceased its policy of issuing and redeeming B shares toshareholders as a method of making a distribution. As a result, all of theredeemable B shares outstanding on 1 November 2006 were compulsorily redeemedfor £2.1 million. During 2006 the Group paid a final dividend in respect of theyear ended 31 December 2005 of 1.1 pence per share. An interim dividend of 1.2pence per share was paid on 3 November 2006 and the Board is proposing a finaldividend of 1.2 pence per share which will be paid on 5 May 2007. Cash flow The cash flow is summarised below: 2006 2005 £million £million Ebitda1 52.4 38.5Change in working capital (13.0) 1.9Capital expenditure (13.2) (16.8)Pension (7.8) (14.1)Interest and tax (8.7) (9.4)Other (0.2) (1.8) ______ ______ 9.5 (1.7)Distribution to shareholders (10.1) (9.7)Acquisitions and disposals 1.4 23.7Exceptional items (10.8) (12.7)Currency fluctuations 8.8 (8.8) ______ ______Increase in net borrowings (1.2) (9.2)Net borrowings at start of year (99.4) (90.2) ______ ______Net borrowings at end of year (100.6) (99.4) ______ ______ 1 Ebitda - earnings before interest, tax, exceptional items, depreciation andamortisation Ebitda1 increased by 36 per cent to £52.4 million (2005: £38.5 million) in theyear due to the higher operating profit. The Group invested £13.0 million inadditional working capital, partly due to a strategic build of inventory atElementis Chromium and partly to support growth at Elementis Specialties.Capital expenditure amounted to 89 per cent of depreciation (2005: 93 per cent)and payments to pension schemes, net of service cost, decreased by £6.3 millionfollowing a £7.0 million contribution in 2005 in connection with the disposal ofSpecialty Rubber. As a result of the restructuring that was announced in 2005,there was a cash outflow on exceptional items of £10.8 million (2005: £12.7million) in the year. Currency fluctuations had a positive impact on net borrowings in the year of£8.8 million and despite the restructuring spend and investment in workingcapital, the increase in net debt was limited to £1.2 million. Balance sheet 2006 2005 £million £million Intangible fixed assets 151.6 170.6Other net assets 148.3 118.6 ______ ______ 299.9 289.2 ______ ______ Equity 199.3 189.8Net borrowings 100.6 99.4 ______ ______ 299.9 289.2 ______ ______ Gearing 2 (per cent) 34 34 2 the ratio of net borrowings to equity plus net borrowings Currency fluctuations also had a significant effect on equity during the year.The main exchange rates relevant to the Group are set out below: 2006 2005 Year end Average Year end AverageUS dollar 1.96 1.84 1.72 1.82Euro 1.48 1.47 1.46 1.46 ______ ______ ______ ______ The majority of the Group's assets are denominated in US dollars and the weakerUS dollar in the year resulted in a reduction to equity of £23.0 million (2005:increase of £18.3 million). Goodwill, which the Group does not hedge, decreasedby £18.7 million as a result of currency fluctuations. The main movements in equity were the retained profit for the year of £31.7million, actuarial gains on pension schemes of £8.6 million, the exchange losson translation of foreign operations of £23.0 million and dividends paid of£10.1 million. Pensions and other post retirement benefits Retirement benefit obligations decreased by £24.7 million in the year to £37.3million (2005: £62.0 million). Total contributions to pension and postretirement benefit schemes amounted to £12.0 million (2005: £19.1 million).Actuarial gains of £8.6 million (2005: loss of £1.5 million) and curtailmentgains and settlements of £3.7 million (2005: 10.4 million) also reduced theliability. In addition, net finance income of £1.6 million (2005: expense of£0.4 million) and currency gains of £2.9 million were partly offset by thecurrent service cost of £4.2 million (2005: £6.0 million). This was lower thanprevious year because of the Elementis Chromium and Elementis Specialties Deldenrestructuring in 2005 and as a result of changes to the US defined benefitpension scheme. Consolidated income statementfor the year ended 31 December 2006 2006 Before Exceptional After exceptional items exceptional items (note 5) items Note £million £million £millionContinuing operationsRevenue 395.9 - 395.9Cost of sales (274.7) - (274.7) ______ ______ ______Gross profit 121.2 - 121.2Distribution costs (52.6) - (52.6)Administrative expenses (31.0) 3.0 (28.0) ______ ______ ______Operating profit/(loss) 37.6 3.0 40.6Profit on disposal of business - - -Investment income 3 0.2 - 0.2Finance costs 4 (7.7) - (7.7) ______ ______ ______Profit/(loss) before income tax 30.1 3.0 33.1Tax 6 (0.1) (1.3) (1.4) ______ ______ ______Profit/(loss) for the year fromcontinuing operations 30.0 1.7 31.7 Discontinued operationsProfit/(loss) from discontinued operation - - -Profit/(loss) for the year 30.0 1.7 31.7 ______ ______ ______Attributable to:Equity holders of the parent 29.9 1.7 31.6Minority interests 0.1 - 0.1 ______ ______ ______ 30.0 1.7 31.7 ______ ______ ______ Earnings per shareFrom continuing and discontinuedoperations:Basic (pence) 7 6.8 7.1Diluted (pence) 7 6.7 7.0From continuing operations:Basic (pence) 7 6.8 7.1Diluted (pence) 7 6.7 7.0 (continued from table above) 2005 Before Exceptional After exceptional items exceptional items (note 5) items Note £million £million £millionContinuing operationsRevenue 399.4 - 399.4Cost of sales (280.8) (41.0) (321.8) ______ ______ ______ Gross profit 118.6 (41.0) 77.6Distribution costs (58.5) (2.6) (61.1)Administrative expenses (41.0) (0.9) (41.9) ______ ______ ______ Operating profit/(loss) 19.1 (44.5) (25.4)Profit on disposal of business - 4.6 4.6Investment income 3 0.3 - 0.3Finance costs 4 (7.8) - (7.8) ______ ______ ______ Profit/(loss) before income tax 11.6 (39.9) (28.3)Tax 6 (0.3) (3.1) (3.4) ______ ______ ______Profit/(loss) for the year fromcontinuing operations 11.3 (43.0) (31.7) Discontinued operationsProfit/(loss) from discontinued operation 1.1 (7.8) (6.7)Profit/(loss) for the year 12.4 (50.8) (38.4) ______ ______ ______Attributable to:Equity holders of the parent 12.2 (50.3) (38.1)Minority interests 0.2 (0.5) (0.3) ______ ______ ______ 12.4 (50.8) (38.4) ______ ______ ______Earnings per shareFrom continuing and discontinuedoperations:Basic (pence) 7 2.8 (8.8)Diluted (pence) 7 2.8 (8.8)From continuing operations:Basic (pence) 7 2.6 (7.2)Diluted (pence) 7 2.6 (7.2) Consolidated balance sheetat 31 December 2006 2006 2005 31 December 31 December £million £millionNon-current assetsGoodwill and other intangible assets 151.6 170.6Property, plant and equipment 126.1 141.1Interests in associates 0.7 0.7Other investments 1.0 2.6Deferred tax assets 7.3 11.1 ______ ______Total non-current assets 286.7 326.1 ______ ______ Current assetsInventories 67.7 63.5Trade and other receivables 73.1 75.6Cash and cash equivalents 14.5 13.0 ______ ______Total current assets 155.3 152.1 ______ ______Total assets 442.0 478.2 ______ ______ Current liabilitiesBank overdrafts and loans (0.7) (4.6)Trade and other payables (61.8) (69.5)Current tax liabilities (3.3) (5.6)Provisions (2.4) (11.8) ______ ______Total current liabilities (68.2) (91.5) ______ ______ Non-current liabilitiesLoans and borrowings (114.4) (107.8)Retirement benefit obligations (37.3) (62.0)Deferred tax liabilities - (0.3)Provisions (19.0) (22.4)Government grants (2.2) (2.3) ______ ______Total non-current liabilities (172.9) (194.8) ______ ______Total liabilities (241.1) (286.3) ______ ______Net assets 200.9 191.9 ______ ______ EquityShare capital 22.1 21.8Share premium 3.6 1.9Other reserves 71.0 89.5Retained earnings 102.6 76.6 ______ ______ Total equity attributable to equity holders of the parent 199.3 189.8Minority equity interests 1.6 2.1 ______ ______Total equity 200.9 191.9 ______ ______ Consolidated cash flow statementfor the year ended 31 December 2006 2006 2005 £million £millionOperating activities:Profit/(loss) for the year 31.7 (38.4)Adjustments for:Investment income (0.2) (0.3)Finance costs 7.7 7.9Tax charge 1.4 3.4Depreciation and amortisation 14.8 18.2Decrease in provisions (2.2) (1.3)Pension contributions net of current service cost (7.8) (14.1)Share based payments 0.9 0.8Exceptional items (3.0) 47.7Cash flow in respect of exceptional items (10.8) (12.7) ______ ______ Operating cash flow before movement in working capital 32.5 11.2Increase in inventories (9.8) (1.0)(Increase)/decrease in trade and other receivables (1.6) 0.3 ______ (Decrease)/increase in trade and other payables (1.6) 2.6 ______ ______ Cash generated by operations 19.5 13.1Income taxes (paid)/received (0.7) (2.6)Interest paid (8.3) (7.2) ______ ______ Net cash flow from operating activities 10.5 3.3Investing activities:Interest received 0.3 0.4Disposal of property, plant and equipment 1.5 -Purchase of property, plant and equipment (13.2) (16.8)Disposal of businesses 1.4 23.7 ______ ______ Net cash flow from investing activities (10.0) 7.3Financing activities:Issue of shares 2.0 0.9Redemption of B shares (2.1) (9.7)Dividends paid (10.1) -Purchase of own shares (2.4) -Decrease in borrowings repayable within one year - (3.0)Increase/(decrease) in borrowings repayable after one year 17.9 (0.9)Repayment of obligations under finance lease - (0.2) ______ ______ Net cash from/(used in) financing activities 5.3 (12.9) ______ ______ Net increase/(decrease) in cash and cash equivalents 5.8 (2.3)Cash and cash equivalents at 1 January 8.4 10.3Foreign exchange on cash and cash equivalents (0.4) 0.4 ______ ______ Cash and cash equivalents at 31 December 13.8 8.4 ______ ______ Consolidated statement of recognised income and expensefor the year ended 31 December 2006 2006 2005 £million £million Exchange differences on translation of foreign operations (23.0) 18.3Actuarial gain/(loss) on pension and other post-retirement schemes 8.6 (1.5)Deferred tax associated with pension and other post-retirement schemes - (0.9)Gains on cash flow hedges taken to equity 1.9 0.7 ______ ______ Net expense/(income) recognised in equity (12.5) 16.6Profit/(loss) for the year 31.7 (38.4) ______ ______ Total recognised income and expense 19.2 (21.8)Effect of change in accounting policyEffect of adoption of IAS 32 and 39 on 1 January 2005 on:Share capital - (2.2) ______ ______ 19.2 (24.0) ______ ______ Total recognised income and expense is attributable to:Equity holders of the parent 19.1 (23.7)Minority interests 0.1 (0.3) ______ ______ 19.2 (24.0) ______ ______ Notes to the financial statements 1 Preparation of the preliminary announcement The financial information in this statement is unaudited and does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985.The comparative figures for the year ended 31 December 2005 are not the Group'sfinancial statements for that year. Those financial statements, which wereprepared under International Financial Reporting Standards as adopted by the EU(adopted IFRS), have been reported on by the Group's auditor and delivered tothe Registrar of Companies. The report of the auditor was unqualified and didnot contain statements under section 237(2) or (3) of the Companies Act 1985.This preliminary announcement was approved by the Board of Directors on 27February 2007. 2 Basis of preparation Elementis plc is a company incorporated in the UK. The information within thisdocument has been prepared and approved by the directors in accordance withadopted IFRS. The Group's financial statements have been prepared on the historical cost basisexcept that derivative financial instruments and financial instruments held fortrading or available for sale are stated at their fair value. Non-currentassets held for sale are stated at the lower of carrying amount and fair valueless costs to sell. The accounting policies have been consistently appliedacross group companies to all periods presented. 3 Investment income Continuing operations Discontinued Total operations 2006 2005 2006 2005 2006 2005 £million £million £million £million £million £millionInterest on bank deposits 0.2 0.3 - - 0.2 0.3 ______ ______ ______ ______ ______ ______ 4 Finance costs Continuing operations Discontinued Total operations 2006 2005 2006 2005 2006 2005 £million £million £million £million £million £millionInterest on bank loans 8.3 6.5 - 0.1 8.3 6.6Interest on other loans - 0.1 - - - 0.1 ______ ______ ______ ______ ______ ______ Total borrowing costs 8.3 6.6 - 0.1 8.3 6.7Interest on corporation tax payments - 0.1 - - - 0.1Unwind of discount on provisions 1.0 0.7 - - 1.0 0.7Expected return on pension scheme assets (26.2) (24.8) - - (26.2) (24.8)Interest on pension scheme liabilities 24.6 25.2 - - 24.6 25.2 ______ ______ ______ ______ ______ ______Pension and other post retirementliabilities (1.6) 0.4 - - (1.6) 0.4 ______ ______ ______ ______ ______ ______ 7.7 7.8 - 0.1 7.7 7.9 ______ ______ ______ ______ ______ ______ 5 Exceptional items 2006 2005 £million £millionContinuing operations:Pigments East St Louis rationalisation - (7.1)Chromium restructure - (31.4)Integration of Specialties and Pigments (1.7) (3.3)Integration of Servo business - (6.5)Disposal of business - 4.6Insurance recovery - 1.1Settlement of legal claims - (2.4)Head office restructure - (3.4)Curtailment gains on pension schemes 3.7 8.5Release of prior year restructuring provisions 1.0 - ______ ______ 3.0 (39.9)Discontinued operations:Disposal of business - (7.8) ______ ______ 3.0 (47.7)Tax (charge)/ credit on exceptional items (1.3) (3.1) ______ ______ 1.7 (50.8) ______ ______ Following the implementation of adopted IFRS, the Group has decided to continueits separate presentation of certain items as exceptional. These are itemswhich, in management's judgement, need to be disclosed separately by virtue oftheir size or incidence in order for the reader to obtain a proper understandingof the financial information. Exceptional items in the year, which were alladministrative expenses, comprise a charge of £1.7 million to restructurefurther the general and administrative activities at Elementis Specialties andPigments which resulted in a head count reduction of 34 employees. Changes tothe Group's US defined benefit pension scheme and to its post retirement medicalbenefit scheme resulted in past service gains of £3.7 million in the year. Inaddition, exceptional items includes a credit of £1.0 million which relates tothe release of restructuring provisions no longer required. 6 Income tax expense Continuing operations Discontinued Total operations 2006 2005 2006 2005 2006 2005 £million £million £million £million £million £millionCurrent tax:UK corporation tax at 30% - (0.3) - - - (0.3)Overseas corporation tax 1.3 0.5 - 0.1 1.3 0.6Adjustments in respect of prior yearsUnited Kingdom (0.1) - - - (0.1) -Overseas (2.3) 0.3 - (0.3) (2.3) - ______ ______ ______ ______ ______ ______ Total current tax (1.1) 0.5 - (0.2) (1.1) 0.3Deferred tax:United Kingdom - (4.0) - - - (4.0)Overseas 1.5 2.4 - - 1.5 2.4Adjustments in respect of prior years 1.0 2.1 - 0.2 1.0 2.3ACT written off - 2.4 - - - 2.4 ______ ______ ______ ______ ______ ______ Total deferred tax 2.5 2.9 - 0.2 2.5 3.1 ______ ______ ______ ______ ______ ______ Income tax expense for the year 1.4 3.4 - - 1.4 3.4 ______ ______ ______ ______ ______ ______ The tax charge on profit before exceptional items was £0.1 million (2005: £0.3million) and represents an effective tax rate on profit before exceptional itemsfor the year to 31 December 2006 of nil (2005: 2.6 per cent). The rate is lowerthan the standard UK corporation tax due to the amortisation of goodwill in theUS for tax purposes. Tax on exceptional items was a charge of £1.3 million(2005: £3.1 million) and this related to deferred taxation on gains of £3.7million in respect of pension and post retirement benefit schemes. 7 Earnings per share The calculation of the basic and diluted earnings per share attributable to theordinary equity holders of the parent is based on the following: 2006 2005 £million £millionEarnings:Earnings for the purpose of basic earnings per share 31.6 (38.1)Exceptional items net of tax (1.7) 50.3 ______ ______ Adjusted earnings 29.9 12.2 ______ ______ 2006 2005Number of shares:Weighted average number of shares for the purposes of basic earnings per share 439.4 434.2Effect of dilutive share options 7.4 7.4 ______ ______ Weighted average number of shares for the purposes of diluted earnings per share 446.8 441.6 ______ ______ The calculation of the basic and diluted earnings per share from continuingoperations attributable to the ordinary equity holders of the parent is based onthe following: 2006 2005 £million £millionProfit/(loss) for the year attributable to equity holders of the parent 31.6 (38.1)Profit for the year from discontinued operations - 6.7 ______ ______ Profit/(loss) from continuing operations 31.6 (31.4)Exceptional items from continuing operations after minority interest (1.7) 42.5 ______ ______ Adjusted earnings from continuing operations 29.9 11.1 ______ ______ 2006 2005 pence penceEarnings per share:From continuing and discontinued operations:Basic 7.1 (8.8)Diluted 7.0 (8.8)Basic before exceptional items 6.8 2.8Diluted before exceptional items 6.7 2.8From continuing operations:Basic 7.1 (7.2)Diluted 7.0 (7.2)Basic before exceptional items 6.8 2.6Diluted before exceptional items 6.7 2.6 ______ ______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Elementis