12th Mar 2008 07:00
Yule Catto & Co PLC12 March 2008 Yule Catto & Co plc Preliminary Results for the year ended 31 December 2007 A good year, in which further broad progress has been made in the development ofthe Group HIGHLIGHTS • Underlying total sales up 4.2% to £580.6m (2006 £557.4m) • Profit before taxation* up 9.5% to £34.5m, (2006 £31.5m) • Earnings per share* up 17.7% at 17.3p, (2006 14.7p) • Dividend increased by 3.2% to 9.6p per share (2006 9.3p) • Profit attributable to equity shareholders of the parent £13.8m (2006 £3.4m) • Good volume growth in polymers • Improved profitability within Impact Chemicals * Before special items, as defined in notes 1 and 9 Anthony Richmond-Watson, Chairman, comments: "Underlying profit before taxation increased to £34.5 million driven byimprovement in our Polymer business, and the benefits of restructuring theImpact business. As we look to 2008, we are optimistic that our Polymerbusiness will deliver further improvement. Our Pharma Division will continue tocommercialise its strong product pipeline. The restructuring of Impact Divisionshould show further benefits." 12 March 2008 ENQUIRIES: YULE CATTO Tel: 01279 442791Adrian Whitfield, Chief ExecutiveDavid Blackwood, Finance Director COLLEGE HILL Tel: 020 7457 2020Gareth David email: [email protected] RESULTS SUMMARY Underlying performance(a) IFRS 2007 2006 2007 2006 £'000 £'000 £'000 £'000 audited audited audited auditedYear to 31 December Total sales 580,641 557,357 580,641 565,786 EBITDA (b) 62,027 61,272 62,027 61,272Operating profit 46,014 42,959 28,574 21,451Profit before taxation 34,517 31,516 21,524 13,626Profit attributable to equity holders 25,192 21,352 13,785 3,427of the parentEarnings per share 17.3p 14.7p 9.5p 2.4pDividend per share (c ) 9.6p 9.3p 9.6p 9.3p Net borrowings (d) 170,831 166,271 150,341 150,656Cash generated from operations 49,447 46,376 49,447 46,376Free cash flow before dividends (e) 14,012 8,479 14,012 8,479 Notes: The above table represents the results of Yule Catto and Co plc, itssubsidiaries 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 andamortisation. (See note 6). (c) Final dividend from 2007 of 5.7p per share will be paid on 4 July 2008to members on the register at close of business on 6 June 2008. Under IFRSthis 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 2007 was a good year for the Group. We made steady progress across all of ourdivisions in both our operational performance and strategic plans to develop theGroup for the future. This showed through in the financial results. The Polymers business had another good year, of growth in volumes and profit.Our strategy in Polymers remains focused on geographical expansion around ourexisting business hubs and developing market sectors where our producttechnology and manufacturing capabilities give us real competitive advantage. We are investing heavily in additional Nitrile capacity in Malaysia to take fulladvantage of the continued growth in this product and the Asian region. Our Pharma business continued to grow the range of generic and ethical productsthat it plans to manufacture by registering further drug master files in theyear. As we had previously indicated Pharma earnings declined, in part due tothe phasing of orders in the second half of the year. We announced plans toexit our Italian site to improve the operational cost base and the productivityof the business. This exit is proceeding to plan. Impact Chemicals has had a challenging year, but has delivered significantimprovement. We are clearly seeing the benefits of our strategy to raise theperformance of these businesses through restructuring and focussing on marketsegments offering better margins and growth. Overall, underlying Group profit before taxation increased some 10% to £34.5million, and earnings per share by 18% to 17.3 pence per share. The directors recommend a final dividend of 5.7 pence a share, which would makethe full payment for the year 9.6 pence (2006 9.3 pence a share), an increase of3.2%. Subject to shareholders' approval, the dividend will be paid on 4 July tomembers on the register at close of business on 6 June. The working conditions and safety of our employees everywhere remains paramountin the operation of our business. We set targets annually to reduce levels ofLost Time Accidents, and against this measure we have been improving our safetyperformance for many years. I am pleased we have made further progress in 2007and have had our best ever year in terms of both "all accident" and "Lost TimeAccident" rates. We remain fully committed to the principles of sustainabledevelopment and have made significant progress against all of the 10-yeartargets in our sustainable development programme. This has been a year in which much has been achieved. On behalf of thedirectors and shareholders, I would like to thank all our employees everywherefor their commitment and contribution towards the company's success. Outlook The closing months of 2007 and the start of 2008 were characterised by concernsof lower economic growth in the USA and parts of Western Europe. We have,however, made a satisfactory start to 2008 with continuing momentum in ourPolymers business. We will continue to expand the geography and customer base of our principalPolymers business. New product development remains an important element of howwe will achieve this. In addition we continue to look for additional ways toimprove our productivity and reduce our cost base. We have already committed ourselves to further investment in Asia forsignificant additional Latex capacity and should benefit from the rapid growththere. Consequently we expect another year of good results from our Polymerbusiness. In our Pharma business we will continue to develop new genericproducts for future filing whilst our previously announced re-structuring willbe complete by the end of 2008. The remedial measures taken in the ImpactChemicals business should lead to further improvement in its results. BUSINESS REVIEW (cont'd) - CHAIRMAN'S STATEMENT As we enter the year, the raw material situation for monomers looks set toremain volatile. We coped well with this situation in Polymers in 2007 throughselling price increases and reformulation, and will continue to manage ourresponse in a similar manner as 2008 progresses. ANTHONY RICHMOND-WATSON Chairman 12 March 2008 BUSINESS REVIEW (cont'd) CHIEF EXECUTIVE'S REPORT Overview 2007 has been a year in which the Group has moved forward on a number of frontsto develop the business. The result of this process is clearly demonstrated bythe 10% increase in underlying Group profit before taxation. It has also beenanother year in which the recent history of rising raw material prices haspersisted and we have had to work hard to mitigate the impact of this. Againstthis background, we have made good progress across the portfolio, and, althoughthe global economy looks challenging, we are cautiously optimistic about theGroup's performance in 2008. Polymers (73% of total sales) grew sales volumes by 4.3% and underlyingoperating profit by 6.2%. This was achieved in an environment of volatile andgenerally increasing monomer pricing, and ongoing supply constraints. Wesustained our operating margins year on year at 9.7%. The previously announced expansion of Nitrile capacity in Kluang, Malaysia wasbrought on line in November, and immediately sold out. The Group has committeditself to significant further expansion during 2008. This site is well locatedto provide reliable supply to major glove manufacturers. Market growth forsynthetic gloves remains strong and this investment confirms our intent toremain as a leading supplier. We also completed the expansion of our Mouscron, Belgium dispersion facility,where capacity increased by 30%. Pharmaceuticals (11% of total sales) saw sales little changed at £63.8 million.However second half year sales were substantially lower than the first half dueto order phasing which in part resulted in reduced underlying profitability of£7.4 million. The generic drug market continues to grow strongly but, asalways, is characterised by price erosion following patent expiry. Our strategyto address this is to maximise operating efficiencies whilst expanding ourproduct portfolio. During the year, we announced the closure of our mainItalian site and the transfer of production to Mexico and Spain to improve thecost base and productivity of the business. Looking forward, our programme ofincreasing our generic drugs pipeline made good progress with a further six drugmaster files registered. Impact Chemicals (16% of total sales) has suffered over several years fromaggressive competition and sub-optimal assets. During 2007 we announced theclosure of two facilities within this business; the Hull plant of HollidayPigments and the German plant of James Robinson. Both plant closures arerunning to schedule. In early 2008 we announced a restructuring of the WilliamBlythe plant in Church. We have already seen some of the benefit of theseactions with an increase in underlying profits in 2007 to £3.0 million from £1.0million in 2006. Good cash management remains a key priority for the Group. Borrowings increasedmodestly, but this was attributable to the impact of the strengthening euro onour euro denominated debt. During the year we have focused hard on theeffective management of working capital with average working capital reducing by£6.6 million compared with prior year, whilst capital expenditure was at similarlevels to 2006. We invested around £9.0 million in restructuring, the majorityof which we will recover, when we sell the sites and assets we are exiting. 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 lattices, polyvinyl alcohol/acetate and a number of morespecialised products. 2007 was another good year for our Polymer businesses. Sales volumes were atrecord levels, up 4.3%, with sales turnover up 6.5%. Operating profits were up6.2% compared to 2006 and operating margins were sustained at 9.7%. These goodresults were achieved against a background of restricted monomer availability,volatile prices and restructuring within some of our core markets. BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT Whilst the product portfolio and the geographic coverage of our operationsremained unchanged, the main growth of our activities occurred in Asia. InKluang, Malaysia, in order to meet the growing sales demand, we were able tobring forward our latex expansion plans in two phases with a 33% increase incapacity in April and a further expansion in November, effectively increasingthe installed capacity by circa 60% compared to 2006. Concurrently, theMouscron, Belgium dispersion plant was subject to a major de-bottleneckingproject which was completed in late 2007 increasing the dispersion capacity ofthe site by 30%. In addition, minor de-bottlenecking took place on the latexplant in Langelsheim, Germany. In the USA we initiated dispersion manufactureunder a toll manufacturing arrangement with a local polymeriser. These enhancements in capacity are already being effectively used and furtherproduction capacity expansion is planned for 2008. Nevertheless, maintaining theexcellent growth seen over the past few years was a difficult challenge in 2007.Polymer producers generally had to endure repeated interruptions in rawmaterial supplies and increases in all major monomer costs. The industry wascharacterised by feedstock shortages, which in turn affected the supply lines ofall our top ten raw materials. Many of our suppliers called force majeure asthey either were unable to get the necessary feedstock volumes or theyexperienced significant plant outages. This situation was not helped by thecost of oil, the backbone of the feedstock supply, which increased 69% duringthe year. As a result we worked hard to reflect these costs in the marketplace. However, we hope that the additional global capacity for a number ofmonomers planned for commissioning in the fourth quarter of 2008 and throughout2009 will alleviate the tight raw material supply and allow input prices to easein due course. For Polymer Division this restricted monomer supply and volatile raw materialpricing together with continued restructuring of some of our core marketsencouraged us to advance our product development programmes to stimulate demand.In 2007 we widened our nitrile latex, dispersions and polybutadiene productportfolios, whilst at the same time developing complementary products to sellalongside our core latex, dispersion and polyvinyl alcohol activities. Synthetic Latex Throughout 2007 the European latex market was subject to further customerrationalisation, particularly in the large commodity markets such as paper. Ourbusiness, whilst experiencing some disturbance from this restructuring, remainsspeciality orientated. We were able to increase sales despite a number of ourmain markets not growing as customers sought to manufacture in other parts ofthe world. The market for our synthetic nitrile latex grew significantly as aresult of the greater use of synthetic rubber gloves in the health andsemi-medical markets, and we were able to benefit from this through the newlycommissioned capacity at our Kluang factory in Malaysia. Expanding our operations in Asia remains a key part of Polymer Division'sstrategy and in 2008 we expect the momentum to continue with increases in bothlatex and dispersion capacity planned. Dispersions The dispersion market unfortunately experienced the worst of the raw materialvolatility. However, with the advantage of dispersion production in all ourregional activities, combined with good technical support and continued productdevelopment, we were able to maintain supply and service to all our customers.As a result, we gained market share and are able to report record dispersionvolumes whilst retaining our market leadership in the UK, South Africa, theMiddle East and Malaysia. Specialities The Group manufactures a variety of speciality polymer chemicals, including: Polyvinyl Alcohol To maintain our status as the world's leading supplier of low hydrolysispolyvinyl alcohol to the PVC industry, we have changed the profile of ourtechnical package to meet the ongoing demand of the PVC resins industry. In sodoing we have added new products to the range specifically designed for thetechnological and geographic changes which have occurred in the manner andlocation in which PVC is produced. As a result, the Polymer Division is now notonly able to supply its well established primary and secondary PVC BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT stabilisers, but has added newly developed grades alongside supplementarypolymers used in the polymerisation of PVC. Liquid Polybutadiene In 2007 sales of liquid polybutadiene were at a record level and 10.1% higher intonnes compared to 2006. The expansion of the production facilities in 2006provided the capacity to develop sales and in 2007 the geographic portfolio nowincludes Asia and the USA. A further expansion of production is planned for2008. Alkyds and Polyester Our resin business operates from the Kluang, Malaysia site with salespredominantly in South East Asia. Sales this year have been at record levels(8.6% and 16.2% higher than 2006 for alkyds and polyester respectively). Thisis a notable achievement considering the significant increase in raw materialprices which always gives rise to fluctuations in demand. Our excellent serviceand product quality have enabled this significant growth. Pharma Chemicals 2007 sales were at a similar level to those in 2006. However sales in thesecond half were reduced as a consequence of order phasing. We continued tomake progress on our filings of Drug Master Files (DMF's) and six DMF's werefiled in 2007. Following a thorough review a decision was made at the mid yearto close our Italian plant and transfer a number of products to Spain and Mexicoto underpin our future competiveness and profitability. In our Spanish plants, sales were solid with volumes at their highest level fora number of years. This was supported by strong sales of enteric coatedOmeprazole pellets following the approval of our in-house manufacturing capacitylate in 2006. Pantoperazole was launched in Spain at the back end of the yearand over the next few years our partner will be rolling sales out in Europe asthe patent expires in various European countries. Our other antiulcerfranchises did particularly well, including Ranitidine. Our antibacterial,Ciprofloxacine, sold well in Europe with a number of customers improving theirmarket share. A number of new products were introduced at the pilot plant levelto support approvals in a number of European markets and the USA. We continueto move products out of the pilot plant into mainstream production, allowing usto develop further new products. Our Spanish pilot plant is fully loaded untilthe second half of 2008 for both development and customer specific products.Pricing pressure was heightened by the dollar/euro exchange rate and increasedraw material costs for all producers, including the Chinese and Indiancompetition. A marketing strategy was implemented in the last quarter of theyear to increase prices and restore margins going forward. Our Mexican plant had its best year in sales and operating profit for the lastten years. The results were achieved by a combination of much improved volumesof intermediates and Active Pharmaceutical Intermediates (API's), as well as thelaunch of Zolpidem in the USA, following patent expiry. A number of genericfranchises in the antiparasitic, antifungal and arthritic field saw good growthin sales to both Europe and the USA with several key generic customers launchingproducts. It was pleasing to note that this growth came from products thatUquifa launched in 2003/4 and have been awaiting regulatory approvals in variousmarkets. Our investment in obtaining regulatory approvals is key to our successand goes on apace. The pilot plant was partially upgraded to help in the numberof filed DMF's. The relationship between the Mexican peso and the dollar meantmargins were not unduly undermined. However, as in Spain, the increased cost ofraw materials was of concern and in the last quarter the same marketing strategyon selling prices was rolled out in Mexico. The combination of lower pricing and euro/dollar exchange meant margins in Italywere significantly lower than in previous years. After a thorough review, weannounced the closure of the main manufacturing plant in Italy. A number ofproducts are being transferred to Spain and Mexico and regulatory approval iscurrently being sought. This transfer will be complete in 2008. At the sametime, following the BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT announcement of the closure of the James Robinson, Dieburg site in Germany, anumber of additional pharmaceutical products are currently being transferred toSpain. Approval of the level 5 high containment facility was obtained andproduction of a cytotoxic product for a large pharmaceutical company has alreadycommenced. We also announced our intention of constructing a greenfield site in China tounderpin our raw material and intermediate position. We continue to makeprogress on this and the final selection of the site is nearing completion. Impact Chemicals Impact Chemicals Division comprises: • James Robinson manufacturing hair, photochromic and other dyes, • William Blythe manufacturing iodine and metal salts • Holliday Pigments manufacturing ultramarine pigments • Oxford Chemicals manufacturing high impact flavour chemicals • PFW manufacturing aroma chemicals. 2007 was a year of improving financial performance, but one which againpresented the Division with a number of significant commercial and operationalchallenges. Sales for the year were below prior year as we focused on producing and sellinghigher margin products. In the first half of 2007, it became clear that the market and operationalchallenges in some of our businesses continued to inhibit the speed ofturn-round of the Impact Division. After extensive review, this led to theannouncement and implementation of selective restructuring to deliver therequired financial improvements. Consequently, the Division announced that itwould concentrate the manufacture of all Ultramarine at its Comines site inFrance, with the closure of operations at Holliday Pigments in Hull. Thisclosure was completed in the fourth quarter on schedule. The transfer to Comineshas gone smoothly with the business showing greatly improved financialperformance in the fourth quarter. In the third quarter, an announcement wasmade on the closure of James Robinson's Dieburg site in Germany. This reflectedthe decline of the James Robinson photographic business and continued pricingpressure from Chinese competition. The site is scheduled to close at the end of2008 and is a key step for James Robinson in the ongoing refocus of itsportfolio to higher value applications. Whilst these changes were being progressed, the Division continued to focus onsupporting its leading position in many markets. Of note is the continueddevelopment of Oxford's "natural flavours" strategy which will result in anumber of new materials coming to the market in 2008. This strategy is enhancedby the establishment of a new three year research project focussed on Sulphurchemistry, supported by the UK Government Technology Strategy Board (TSB). AtPFW the fourth quarter saw the introduction of new "musk" materials to supportthe expansion of polycyclic musk usage in the fragrance industry. WilliamBlythe successfully opened its new Iodine facility which will benefit the salesof higher value products such as SMP and Periodic Acid, key materials used inthe silk screen printing and silicon wafer industry. Overall 2007, can be seen as one of good progress for the Division. Whilstdifficult decisions had to be taken, new opportunities have opened up in severalbusinesses, and we have made strides in building greater sustainability into theDivision's financial performance. ADRIAN WHITFIELD Chief Executive 12 March 2008 BUSINESS REVIEW (cont'd) FINANCIAL REVIEW Income Statement - Underlying Performance Total sales increased by 4.2% to £580.6 million, driven by good volume growth inPolymers. Turnover remains predominately within Europe with some 56% of sales(2006 58%). However we continue to make progress in other parts of the world,in particular Asia, assisted by ongoing investment in the Malaysian facility.Asian sales now account for 26% of the business (2006 23%) and will continue toincrease with our commitment to further expansion in 2008. With the international nature of the business, movements in foreign currencyexchange rates can affect the value of transactions made by the Group wherepricing of our products is in non domestic currency, and in the translation ofresults from overseas subsidiaries. With regard to the former, the Groupgenerally hedges transactions once entered into and in addition, where exchangerates continue to be adverse, we look to increase sale prices or sell indomestic currency. The latter is mainly influenced by the euro, with theMalaysian ringgit and South African rand becoming more significant. In 2007,the average rate for the euro was comparable to 2006 so translation effects werenot significant. Average borrowings for the period were nearly 2% lower than 2006, though the netinterest charge of £11.5 million was 1% higher than last year. World interestrates have drifted up during the year, but a large proportion of the Group'sexposure is hedged, which has softened the adverse impact. The underlying tax rate of 22% reflects the benefits of pioneer status on ourinvestment in Malaysia and the settlement of some prior year tax positions.This is an improvement on the prior year rate of 28%. Profit attributable to minority interests has increased to £1.7 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 17.3 pence is a year-on-yearincrease of 18%. A final dividend of 5.7 pence per share has been proposed bythe Board, which would take the full year payout to 9.6 pence, an increase of3.2%. Underlying dividend cover is 1.8 times. Income Statement - Special Items To provide a clearer indication of the Group's underlying performance, a numberof special items, are shown in a separate column of the Income Statement.Special Items includes; • During the year we announced the closure of our Italian Pharma plant, Holliday Pigments Hull site and the James Robinson manufacturing plant in Dieburg, Germany. Site closure and run down costs for these activities are disclosed in special items. This includes the write down of fixed assets on these sites as appropriate. • 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. • As a result of the actions taken in 2007 to reduce the cost of the Group's UK pension scheme, the Group recognised an exceptional profit of £10.8 million (2006 £nil), being the reduction of accrued benefits arising from these actions. This profit is shown in special items. BUSINESS REVIEW (cont'd) - FINANCIAL REVIEW Pensions In the main UK defined benefit pension scheme the majority of investments are inequities. Whilst equity markets delivered positive returns during the year, theactual return of 3.7% fell below the expected return. The yield on AA bondsincreased significantly during the year, which has reduced liabilities, andaction taken by the Group to manage employee benefits further reducedliabilities by £10.8 million. The overall effect of these changes was asignificant reduction in the net balance sheet liability to £33.6 million forthis scheme. IFRS On an unadjusted IFRS basis, Group revenue increased by £13.9 million to £565.6million reflecting good growth in Polymer Chemicals partly offset by a reductionin Impact Division following the 2006 restructuring. Profit before taxation at£21.5 million was £7.9 million higher than the previous period, of which £3.0million relates to a better trading performance with the remainder being areduction in the special items. Borrowings Net underlying borrowings, adjusted for the mark-to-market effect ofderivatives, are slightly up on to last year at £170.8 million, due to theimpact of a stronger euro on the Group's euro denominated debt, which resultedin an increase of £5.6 million. In 2006 we reported a year of increased capital expenditure, following a numberof years of lower capital investment. This has continued in 2007 as we haveinvested in expanding the Malaysia nitrile facility. A similar level ofinvestment in 2008 will be directed at further capacity expansion and variousupgrades in process efficiency. Overall, the programme of restructuring the Impact Chemicals and PharmaDivisions is expected to be broadly cash neutral. However the timing of closureevents has initially resulted in a net cash outflow across 2006 and 2007, with agross spend of £9.0 million in 2007. This was partially offset by sale proceedsof £2.4 million from associated assets, mainly the sale of James Robinsons'Huddersfield site. Further sales are expected in 2008 and beyond, including theHapton site (William Blythe), the Dieburg site (James Robinson) and the UquifaItaly site. In a period of rising raw materials cost, combined with good volume growth inmany of our businesses, upward pressure on working capital becomes more acute.However we have focussed very hard on this area during 2007 and despiteincreased input costs, we have reduced working capital during the year by £4.0million. DAVID BLACKWOOD Finance Director 12 March 2008 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 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 565,595 - 565,595 543,226 8,429 551,655Share of joint ventures' revenue 15,046 - 15,046 14,131 - 14,131Total sales 2 580,641 - 580,641 557,357 8,429 565,786 Group revenue 565,595 - 565,595 543,226 8,429 551,655 Company and subsidiaries before 44,885 - 44,885 41,888 - 41,888special itemsOperations sold or closed during - (28,237) (28,237) - (1,809) (1,809)the yearUK pension fund - past service - 10,797 10,797 - - -creditImpairment of non-current assets - - - - (19,699) (19,699) Company and subsidiaries 44,885 (17,440) 27,445 41,888 (21,508) 20,380Share of joint ventures 1,129 - 1,129 1,071 - 1,071Operating profit/(loss) 2 46,014 (17,440) 28,574 42,959 (21,508) 21,451 Interest payable (16,046) - (16,046) (13,564) - (13,564)Interest receivable 4,549 - 4,549 2,121 - 2,121 (11,497) - (11,497) (11,443) - (11,443)Fair value adjustment - 4,447 4,447 - 3,618 3,618Finance costs 4 (11,497) 4,447 (7,050) (11,443) 3,618 (7,825) Profit/(loss) before taxation 34,517 (12,993) 21,524 31,516 (17,890) 13,626Taxation (7,646) 1,586 (6,060) (8,820) (35) (8,855)Profit/(loss) for the year 26,871 (11,407) 15,464 22,696 (17,925) 4,771 Profit attributable to minority 1,679 - 1,679 1,344 - 1,344interestsProfit attributable to equity 25,192 (11,407) 13,785 21,352 (17,925) 3,427holders of the parent 26,871 (11,407) 15,464 22,696 (17,925) 4,771 Earnings per shareBasic 17.3p (7.8)p 9.5p 14.7p (12.3)p 2.4pDiluted 17.2p (7.8)p 9.4p 14.6p (12.3)p 2.3p CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 £'000 £'000 audited auditedNon-current assetsGoodwill 172,443 172,443Other intangible assets 591 439Property, plant and equipment 108,468 110,167Deferred tax assets 762 1,179Investment in joint ventures 3,177 3,300 285,441 287,528 Current assetsInventories 65,001 66,080Trade and other receivables 115,078 105,166Cash and cash equivalents 108,352 65,917Derivatives at fair value 1,813 - 290,244 237,163 Current liabilitiesBorrowings (133,585) (57,802)Trade and other payables (148,300) (124,892)Current tax liability (48,948) (52,100)Derivatives at fair value (26,000) (22,336) (356,833) (257,130) Non-current liabilitiesBorrowings (125,108) (158,771)Trade and other payables (460) (372)Deferred tax liability (6,445) (6,316)Post retirement benefit obligations (41,236) (77,884) (173,249) (243,343) Net assets 45,603 24,218 Called up share capital 14,566 14,566Share premium 33,034 33,034Capital redemption reserve 949 949Hedging and translation reserve (9,087) (7,371)Retained earnings 416 (21,031)Equity attributable to equity holders of the parent 39,878 20,147Minority interests 5,725 4,071Total equity 45,603 24,218 Analysis of net borrowingCash and cash equivalents 108,352 65,917Current borrowings (133,585) (57,802)Non-current borrowings (125,108) (158,771)Net borrowings (150,341) (150,656)Add back: special items (20,490) (15,615)Net borrowings (underlying performance) (170,831) (166,271) The financial statements were approved by the Board of Directors and authorisedfor issue on 12 March 2008. CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 Notes £'000 £'000 £'000 £'000 audited audited audited auditedOperatingCash generated from operations 5 49,447 46,376 Interest received 4,549 2,121 Interest paid (15,611) (13,581)Net interest paid (11,062) (11,460) UK corporation tax received 1,179 - Overseas corporate tax paid (11,636) (9,196)Total tax paid (10,457) (9,196)Net cash inflow from operating activities 27,928 25,720 InvestingDividends received from joint ventures 1,202 1,385 Purchase of property, plant and equipment (16,994) (18,468) Sale of property, plant and equipment 2,413 1,539Net capital expenditure and financial investment (14,581) (16,929) Sale of businesses - 3,660Net cash impact of acquisitions and disposals - 3,660Net cash outflow from investing activities (13,379) (11,884) FinancingEquity dividends paid (13,689) (13,251)Dividends paid to minority interests (537) (1,697)Purchase of own shares (25) (246)Issue of shares - 1,291Proceeds of non-current borrowings 174 154Net cash outflow from financing activities (14,077) (13,749) Increase in cash and bank overdrafts during the year 472 87 Comprised of:Cash and cash equivalents 51,896 23,160Bank overdrafts (51,424) (23,073) 472 87 RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO MOVEMENT IN NETBORROWINGS 2007 2006 £'000 £'000 audited auditedNet cash inflow from operating activities 27,928 25,720Add back: dividends received from joint ventures 1,202 1,385Less: net capital expenditure and financial investment (14,581) (16,929)Less: dividends paid to minority interests (537) (1,697)Free cash flow before dividends 14,012 8,479 Net cash impact of acquisitions and disposals - 3,660Purchase of own shares (25) (246)Issue of shares - 1,291Equity dividends paid (13,689) (13,251)Exchange movements (4,858) (613) Movement in net borrowings (underlying performance) (4,560) (680) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the YEAR ENDED 31DECEMBER 2007 2007 2006 Minority Equity Total Minority Equity Total interests holders of interests holders of the parent the parent £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Actuarial gains and losses - 21,698 21,698 - (13,551) (13,551)Tax on items recognised directly in - (519) (519) - (1,409) (1,409)equityExchange differences 512 (1,716) (1,204) (296) (6,890) (7,186)Profit for the year 1,679 13,785 15,464 1,344 3,427 4,771Total recognised income/(expenditure) for 2,191 33,248 35,439 1,048 (18,423) (17,375)the period 1 Special items The special items disclosed are made up as follows: 2007 2006 Note Special items Special items £'000 £'000 audited audited Total salesRevenue of operations sold or closed during the year - 8,429 Operating profit/(loss)Operating profit/(loss) of operations sold or closed - 117during the yearProfit or loss arising from the sale or closure of 3 (28,237) (1,926)operations (28,237) (1,809)UK pension fund - past service credit 10,797 -Impairment of non-current assets - (19,699) (17,440) (21,508) Finance costsFair value adjustment 4 4,447 3,618 TaxationTaxation on operating profit/(loss) of businesses sold or 1,586 (35)closed during the yearTaxation on profit or loss arising from the sale or - -closure of operations 1,586 (35) 2 Segmental analysis 2007 2006 Underlying Special IFRS Underlying Special IFRS performance items performance items £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Total sales by activity Polymer Chemicals 425,221 - 425,221 399,084 - 399,084 Pharma Chemicals 63,784 - 63,784 64,404 - 64,404 Impact Chemicals 91,636 - 91,636 93,869 8,429 102,298 580,641 - 580,641 557,357 8,429 565,786 Operating profit by activity Polymer Chemicals 41,157 - 41,157 38,749 - 38,749 Pharma Chemicals 7,443 (12,461) (5,018) 8,133 - 8,133 Impact Chemicals 3,005 (15,776) (12,771) 964 (21,508) (20,544) Unallocated corporate expenses (5,591) 10,797 5,206 (4,887) - (4,887) 46,014 (17,440) 28,574 42,959 (21,508) 21,451 2007 2006 £'000 £'000 audited auditedTotal sales by destinationUnited Kingdom 91,349 98,203Other Europe 231,560 227,158Asia 150,332 128,003Africa and Middle East 55,428 54,005Rest of World 51,972 58,417 580,641 565,786 3 Profit or loss arising from the sale or closure of anoperation 2007 2006 Cash Costs Fixed asset Total Total write off £'000 £'000 £'000 £'000 audited audited Closure of Uquifa's Italian manufacturing site (6,151) (6,310) (12,461) -Closure of Holliday Pigments UK manufacturing site (7,616) - (7,616) -Closure of James Robinson's German (6,050) (3,869) (9,919) -manufacturing siteSale of Huddersfield site 1,759 - 1,759 -Sale of Brencliffe Limited - - - 198Sale of Holliday Dispersions Ltd and SA - - - 485Sale of Autoclenz Limited - - - 699Restructuring of James Robinson Limited - - - 235Restructuring of William Blythe Limited - - - 336Sale of Reabrook Limited - - - (3,994)Releases from provisions created prior to 2006 - - - 115 (18,058) (10,179) (28,237) (1,926) 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 fromoperations 2007 2006 £'000 £'000 audited audited Reconciliation of operating profit to cash generated fromoperations Operating profit 28,574 21,451Less: share of profits of joint ventures (1,129) (1,071) 27,445 20,380 Impairment of non-current assets - 19,699Depreciation and amortisation 16,013 18,313Profit or loss arising from the sale or closure of operations 28,237 1,926UK pension fund - past service credit (10,797) -Profit on sale of fixed assets (196) (794)Share based payments 298 299Cash impact of termination of businesses (8,985) (6,096)Pension funding in excess of IAS 19 charge (5,550) (3,181)Decrease/(increase) in inventories 3,925 (3,947)Increase in trade and other receivables (6,398) (10,496)Increase in trade and other payables 6,434 10,547Unrealised exchange gains (979) (274) Cash generated from operations 49,447 46,376 6 Reconciliation of EBITDA 2007 2006 Underlying IFRS Underlying IFRS £'000 £'000 £'000 £'000 audited audited audited audited Operating profit 46,014 28,574 42,959 21,451Less: Profit or loss arising from the sale or closure - - - (117)of operationsLess: Operating profit or loss of businesses sold or - 28,237 - 1,926closed during the yearAdd back: impairment of non-current assets - - - 19,699Less: UK Pension Fund - Past service credit - (10,797) - -Add back: amortisation 247 247 227 227Add back: depreciation 15,766 15,766 18,086 18,086EBITDA 62,027 62,027 61,272 61,272 7 Dividends 2007 2006 Pence per share Pence per share audited audited Interim 3.9 3.8Final 5.7 5.5Total 9.6 9.3 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 2007, 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 14 April 2008. The financial statements were approved by the Board of Directors on 12 March2008. 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 2006, 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 5.7p (2006 5.5p) per share, totalling £8.3m, (2006 £8.0m)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 - 145.6m(2006 145.5m). 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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