26th Feb 2008 07:01
Elementis PLC26 February 2008 PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Elementis plc, a Global Specialty Chemicals Company, announces its results forthe year ended 31 December 2007. HIGHLIGHTS From continuing operations • Operating profit before exceptional items up 21 per cent. o Improved operating profit in all three business segments. • Revenue up 4 per cent on a constant currency basis. • Diluted earnings per share before exceptional items up 31 per cent. • Sale of Pigments completed at a price of £71 million. • Net borrowings reduced by £84.4 million to £16.2 million. • Full year dividend up by 12.5 per cent to 2.7 pence. FINANCIAL SUMMARY 2007 2006Sales* £299.8m £302.0mOperating profit* £38.1m £31.5mProfit before tax* £33.8m £24.8mProfit after tax* £32.0m £24.8mDiluted earnings per share* 7.2p 5.5p Profit for the year £48.1m £31.7mDiluted earnings per share 10.8p 7.0pDividend to shareholders - final proposed 1.4p 1.2p - full year 2.7p 2.4p * from continuing operations and before exceptional items. Commenting on the results, Group Chief Executive, David Dutro said: "The Group has continued to make excellent progress in both earnings and cashflow in 2007. We have improved the base level of earnings, stabilised resultsfrom the Chromium business and improved cash flow. The Group has a strongbalance sheet and is in a firm position to drive profitable growth. Key to thisis the Specialty Products business which provides an ideal platform, possessinga strong technology base, a broad geographic footprint, diverse markets and awide range of applications. We have made a strong start to the year, building onthe solid growth achieved in 2007, and expect to maintain progress in 2008 inline with our expectations." - Ends - EnquiriesElementis 020 7408 9300David Dutro, Group Chief ExecutiveBrian Taylorson, Finance Director Financial Dynamics 020 7831 3113Andrew DowlerGreg Quine Chairman's Statement I am pleased to report that the Group has continued to make solid progress in2007, with improvements in both earnings and cash flow. In addition the Groupmade a significant strategic step forward on 31 August by completing the sale ofits Pigments business. This has further strengthened the Group's balance sheetand provides a firm base for future profitable growth. Results Operating profit from continuing operations, and before exceptional items,improved by 21 per cent to £38.1 million and all three businesses againcontributed to the improvement. Good demand in all of our major end markets wasa key driver in 2007, with the exception of the North American architecturalcoatings and construction sectors which were impacted by the slowdown in UShousing. Specialty Products experienced good demand in industrial coatings andoilfield, and made solid progress in sales to Europe and Asia, while Chromiumbenefited from a one time energy rebate of £1.4 million and changes in Chinesetax regulations prompted improved demand for chrome oxide and chromic acid.Surfactants made steady progress through further product optimisation andoperating efficiencies. The Group's operating margin improved to 12.7 per cent(2006: 10.4 per cent) led by Specialty Products where operating margins are nowover 20 per cent (2006: 17.3 per cent). Revenue from continuing operations was £299.8 million in 2007, an increase of 4per cent on a constant currency basis. Net debt came down by £84.4 million to £16.2 million in 2007 and the Group hasalso agreed a ten year funding plan with the UK Pension Trustees which willeliminate the current funding deficit over the funding period and providegreater certainty to the Group in its future cash flow planning. The Group'scombined deficits for retirement benefit obligations at the end of 2007 underIAS 19 was £21.5 million versus £37.3 million a year earlier. Diluted earnings per share from continuing operations, before exceptional items,improved by 31 per cent to 7.2 pence as a result of the higher operating profit. The Group recorded exceptional items of £12.5 million (2006: £1.7 million)related to the gain on sale of the Pigments business and the recentrestructuring exercise. Earnings per share from continuing and discontinuedoperations, after exceptional items, was 10.8 pence versus 7.0 pence in 2006. Dividend The Board is recommending a final dividend of 1.4 pence taking the total returnto shareholders for the year to 2.7 pence, an increase of 12.5 per cent. Subjectto approval at the Annual General Meeting, the dividend will be paid on 30 May2008 to members on the register at the close of business on 2 May 2008. TheBoard intends to continue to review the dividend policy as earnings performancepermits. The Board The Board is responsible for overseeing the Company's strategy in addition tomonitoring performance. Through its own actions and those of the Boardcommittees, the Board continues to meet its commitment to high standards ofcorporate governance. The Board seeks to implement these standards in such amanner that they provide real benefit for shareholders, employees and customers.Matthew Peacock stepped down from the Board on 31 January 2008 and Ken Mintonhas indicated his intention to leave the Board in April 2008. Matthew and Kenhave been on the Board since 2005 and have made significant contributions to theGroup's strategy and success, and for that I would like to thank them on behalfof myself and the other directors. The remaining Board members represent a goodbalance of industry, geography and functional experience, and so I feel itnecessary to add only one new director in 2008 as replacement for the two whoare leaving. We are actively engaged in a process to identify a suitableindividual and expect to make an announcement during the first half of 2008. Environmental, Health and Safety The Board is actively engaged in monitoring this important aspect of ourbusiness, and I am happy to report that our performance in this area remains inthe upper quartile of industry standards. We remain committed to achieving thevery best results and reporting in an open and transparent manner. People Our people have been instrumental in implementing a significant amount ofpositive change in the Group over the recent period, affecting both them andtheir families, and so I would again like to offer my sincere thanks to all ofthem for their contributions to the Group's excellent performance. Outlook The Group has achieved a great deal over the last 24 months and now has a robustplatform of good quality earnings and a strong balance sheet on which to moveforward. We have made a strong start to the year, building on the solid growthachieved in 2007, and expect to maintain progress in 2008 in line with ourexpectations. Financial Performance Revenue£million 2007 2006Continuing operationsSpecialty Products 141.6 144.8Surfactants 46.3 46.1Chromium 115.9 116.8Inter-segment (4.0) (5.7) ______ ______ 299.8 302.0Discontinued operationsPigments 59.7 93.9 ______ ______ 359.5 395.9 ______ ______ 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. The Board considers that the information presented in the tables in the BusinessReview provide useful financial information relating to the performance of theGroup. This information should not be considered as an alternative, but as asupplementary to the full IFRS income statement. Group results Group revenue from continuing operations was £299.8 million in 2007 which, afteradjusting for currency movements, represents an increase of 4 per cent over theprevious year, and all three businesses showed an increase on this basis. Markettrends were generally positive for each of the businesses with good demand inmost sectors except for the North American coatings and construction marketswhich were impacted by the slowdown in US housing. Volumes were higher inSpecialty Products and Chromium but lower in Surfactants, and pricing wasimproved in all three businesses compared to the previous year. Revenueincluding discontinued businesses was £359.6 million (2006: £395.9 million)reflecting the fact that the Pigments business was sold part way through theyear. Group operating profit from continuing operations before exceptional itemsincreased by 21 per cent to £38.1 million (2006: £31.5 million), and all threebusinesses contributed to the increase. The Group operating margin on the samebasis increased to 12.7 per cent (2006: 10.4 per cent), and the result benefitedfrom a one time energy rebate of £1.4 million at Chromium in the first half of2007, and from £2.9 million (2006: £1.8 million) of currency hedging gains. Diluted earnings per share from continuing operations, before exceptional items,was 7.2 pence compared to 5.5 pence in the previous year. The increase waslargely driven by the increase in operating profit. After exceptional gains of£12.5 million, which are described below, diluted earnings per share was 10.8pence versus 7.0 pence in 2006. Net borrowings decreased by £84.4 million in the year to £16.2 million followingthe disposal of Pigments which reduced debt by around £66 million and wascomplemented by £26.4 million of free cash flow from operations. Elementis Specialty Products The dominant theme in Specialty Products during 2007 has been one of robustdemand in all major sectors, except for North American coatings. Overall volumesfor the business increased by 3 per cent versus the previous year with sales tothe oilfield and construction sectors showing particularly strong gains.Management has also continued to focus on improving operating efficiency with anemphasis on manufacturing and supply chain management, and this has contributedto operating margins improving to over 20 per cent versus 17 per cent in 2006.Accelerating new product pipeline has also been a priority and a new colourantviscosity stabiliser is currently being tested by over 25 customers and shouldbegin to contribute to sales in 2008. Operating profit 2007 Operating profit Exceptional items Adjusted operating£million profitContinuing operationsSpecialty Products 29.3 (0.5) 28.8Surfactants 1.4 (0.5) 0.9Chromium 15.0 (0.8) 14.2Central costs (5.2) (0.6) (5.8) ______ ______ ______ 40.5 (2.4) 38.1 ______ ______ ______ (continued from table above)Operating profit 2006 Operating profit Exceptional items Adjusted operating profit£millionContinuing operationsSpecialty Products 25.9 (0.9) 25.0Surfactants 0.3 0.3 0.6Chromium 13.3 (1.4) 11.9Central costs (6.0) - (6.0) ______ ______ ______ 33.5 (2.0) 31.5 ______ ______ ______ Sales in 2007 were £141.6 million compared to £144.8 million in 2006 which, on aconstant currency basis, is an increase of 3 per cent. Volumes increased by 3per cent and average pricing improved by a similar amount, but relatively lowersales to the higher margin North American region somewhat reduced the positiveimpact of price and volume. In coatings, which accounts for around 65 per centof total sales, volumes increased by 4 per cent compared to the previous yearwith gains in Europe (3 per cent) and Asia (7 per cent), more than compensatingfor the weaker demand in North America where volumes were lower by 7 per cent.Sales to architectural coatings were mostly affected by the slowdown in NorthAmerica, but sales volumes in industrial coatings remained at a similar level tothe previous year. Industrial sales volumes were strong in Europe (up 13 percent) which more than offset weaker architectural sales (down 7 per cent). Both architectural and industrial segments showed good volume gains in Asia.Oilfield sales volumes improved by 6 per cent over the previous year with stronggains in North America due to the continued drilling activity, plus theapplication of new technical approaches by drilling companies to access areassuch as oil bearing shales. In construction, volumes were strongly ahead inEurope (up 15 per cent) as a result of a buoyant market and some newapplications for defoamers and hectorite products. Consumer sales volumes improved by 1 per cent with good gains in Europe, due togrowth in antiperspirants and colour cosmetics, compensating for lower growth inNorth America where growth in antiperspirants and agricultural applications wasoffset by weaker demand in paintballing. Operating profit before exceptional items was £28.8 million in 2007, which is anincrease of 15 per cent (2006: £25.0 million) with currency having a negligibleeffect due to the Group's hedging programme. Improved sales contributed about 9per cent with the balance coming from reductions in variable costs, where energycosts were almost £1.0 million lower than the previous year due to management'sdecision to take fixed price contracts towards the end of 2006. Variablelogistics and some raw material costs were also marginally lower than theprevious year. Fixed costs were more or less unchanged versus 2006 asefficiencies in selling, general and administration costs offset modestinflation in manufacturing costs. Elementis Surfactants The Surfactants business has continued a process of optimising the productportfolio by reducing sales of lower margin commodity products, and focussing onmore differentiated applications where there is greater opportunity to improvepricing in response to raw material inflation. Consequently sales have continuedto decline in areas such as textiles, leather and pulp and paper but increasedin agriculture, plastics and feed. In addition there is a strong focus onoperational efficiency and cost management in the business to help improvemargins. Sales in 2007 were £46.3 million compared to £46.1 million in the previous year,with currency having a negligible effect. Volumes were 8 per cent lower than theprevious year due to the product optimisation program, but also due to lowersales into the oilfield sector where the stronger Euro made the product offeringless competitive in a predominantly US dollar market. Average pricing across allproducts improved by almost 9 per cent as pricing initiatives were launched inlower margin sectors and in response to rising raw material costs. Operating profit before exceptional items was £0.9 million in 2007 versus £0.6million in 2006, with no material impact from currency movements. Improvedpricing more than offset the effects of lower volumes and higher raw materialcosts, and fixed costs were maintained at 2006 levels. Elementis Chromium In Chromium, 2007 was a year of positive market dynamics and the first full yearof trading since a number of strategic changes were made in the first quarter of2006. At that time 50 per cent of production capability at the Eaglescliffe, UKsite was mothballed and the business increased its hedging activities in energyand currency. This was done with a view to creating a more stable earningsenvironment, and also included a greater focus on sustainable sales and betteroptimisation of production capacity. Market demand for chrome chemicals wasfavourable in 2007, particularly in the second half of the year assisted bychanges in tax regulations in China. During the second quarter the Chinesegovernment eliminated VAT rebates on a broad list of materials, including chromemetal, chrome oxide and chromic acid, which reduced the competitiveness ofChinese exporters and thereby increased demand for those products in NorthAmerica and Europe. Strength in demand has allowed selling prices to increase inline with raw materials, where chrome ore costs have been rising as a result ofcontinued Chinese demand for steel. Sales in 2007 were £115.9 million, which is an increase of 13 per cent afteradjusting for currency movements of £7.6 million and the impact of the UK plantclosure in March 2006 of £7.0 million. A 12 per cent increase in sales volumewas the main contributor to the year on year improvement, driven by sales ofchromic acid and chrome oxide following the changes in China. Average sellingprices were 4 per cent higher than the previous year due to price increasesimplemented in the second half of the year, but were offset by a slightly lessfavourable product mix. Revenue from continuing operations Effect of Revenue exchange Increase Revenue 2006 rates 2007 2007 £million £million £million £millionSpecialty Products 144.8 (6.9) 3.7 141.6Surfactants 46.1 (0.3) 0.5 46.3Chromium 116.8 (7.6) 6.7 115.9Inter-segment (5.7) 0.6 1.1 (4.0) ______ ______ ______ ______ 302.0 (14.2) 12.0 299.8 ______ ______ ______ ______ Operating profit from continuing operations Operating Effect of Operating profit * exchange Increase profit * 2006 rates 2007 2007 £million £million £million £million Specialty Products 25.0 (0.1) 3.9 28.8Surfactants 0.6 (0.1) 0.4 0.9Chromium 11.9 (0.7) 3.0 14.2Central costs (6.0) - 0.2 (5.8) ______ ______ ______ ______ 31.5 (0.9) 7.5 38.1 ______ ______ ______ ______ * before exceptional items Geographic sales trends showed strong volume gains in North America and inEurope following the changes in China, while sales volumes to Asia Pacific werelower than the previous year as Chinese exporters refocused their attention backto their home market. Operating profit before exceptional items in 2007 was £14.2 million versus £11.9million in the previous year. The business benefited from a one time energyrebate of energy costs in the US as a result of an electricity industryreorganisation in the State of Texas, which amounted to £1.4 million. Otherwisethe improvement in sales contributed over £9.0 million to operating profit, morethan offsetting increases in fixed and variable costs of around £8.0 million. Invariable costs, chrome ore prices increased by almost 40 per cent over theprevious year. Energy costs, excluding the one time rebate, were slightly lowerthan the previous year due to the timing of hedging activity, where fixed pricecontracts were concluded by the beginning of 2007. Manufacturing fixed costswere also higher due to an extensive maintenance programme in the second half of2007, which was implemented in order to ensure the reliability of plantoperations during a period of high capacity utilisation. Currency movements reduced operating profit by £0.9 million, with the impactbeing significantly lower due to hedging activities. 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 2007 central costs have been reduced by £0.2 million. Exceptional items Exceptional items after taxation were £12.5 million in the year (2006: £1.7million). The Group made a gain on disposal of its Pigments business of £16.3million (2006: £nil). The Pigments business was sold for gross proceeds of£70.7 million on 31 August 2007. Past service credits and curtailment gains following changes to the Group's postretirement medical benefit schemes were £2.0 million (2006: £3.7 million) andthe release of restructuring provisions previously charged as exceptional was£1.1 million (2006: 1.0 million). Tax charges of £6.9 million (2006: £1.3million), primarily in relation to the business disposal, were included withinexceptional items. InterestContinuing operations 2007 2006 £million £millionFinance income 0.4 0.2Finance cost of borrowings (6.4) (7.8) ______ ______ (6.0) (7.6)Pension finance income 2.3 1.7Discount on provisions (0.6) (0.8) (4.3) (6.7) ______ ______ Interest on continuing operations decreased by £2.4 million in the year. Lowerborrowings following the disposal of the Pigments business on 31 August 2007reduced interest on net borrowings by £1.6 million. Interest income frompension schemes increased by £0.6 million due to a lower pension deficit. Interest cover, the ratio of operating profit before exceptional items tointerest on net borrowings was 6.7 times in 2007 (2006: 4.6 times). TaxationTax charge Effective rate £million per centBefore exceptional items 2.0 5.3Exceptional items 6.9 35.5 ______ ______Total 8.9 15.6 ______ ______ Tax charges amount to £8.9 million in the year (2006: £1.4 million). Tax oncontinuing operations before exceptional items was £1.8 million (2006: £nil),which represents 5.3 per cent of profit before taxation. The tax charge ondiscontinued operations was £0.2 million (2006: £0.5 million). The disposal ofthe Group's global Pigments business utilised losses in the US and resulted inthe recognition of an exceptional deferred tax charge of £5.8 million. Afurther £1.1 million of taxation was charged to exceptional items in relation topast service credits on post retirement medical benefits and the release ofunutilised provisions. Earnings per share Note 7 sets out a number of calculations of earnings per share. To betterunderstand the underlying trading performance of the Group, earnings per sharereported under IFRS is adjusted for items classified as exceptional and fordiscontinued operations. Diluted earnings per share from continuing anddiscontinued operations and before exceptional items increased by 19 per cent to8.0 pence (2006: 6.7 pence). Diluted earnings per share from continuing and discontinued operations reportedunder IFRS was 54 per cent above 2006 at 10.8 pence (2006: 7.0 pence). Discontinued operations Discontinued operations representing the Pigments business which was sold on 31August 2007, contributed £3.6 million to the profit for the year beforeexceptional items (2006: £5.2 million). Pigments' sales in the eight monthsended 31 August 2007 were £59.7 million (2006: £93.9 million) and its operatingprofit before exceptional items was £4.3 million (2006: £6.1 million). Interestand taxation were £0.7 million (2006: £0.9 million). The business was sold forgross proceeds of £70.7 million with net assets of £46.6 million. Afterdeducting costs incurred in the disposal and net debt transferred to thepurchaser, the gain on disposal was £16.3 million. Distribution to shareholders During 2007 the Group paid a final dividend in respect of the year ended 31December 2006 of 1.2 pence per share. An interim dividend of 1.3 pence pershare was paid on 5 October 2007 and the Board is proposing a final dividend of1.4 pence per share which will be paid on 30 May 2008. Cash flow The cash flow is summarised below: 2007 2006 £million £millionEbitda1 54.8 52.4Change in working capital 0.2 (13.0)Capital expenditure (8.9) (13.2)Other 0.9 0.2 ______ ______Operating cash flow 47.0 26.4Pension (10.6) (7.8)Interest and tax (7.6) (8.7)Exceptional items (1.6) (10.8)Other (0.8) (0.4) ______ ______Free cash flow 26.4 (1.3)Dividends (11.1) (10.1)Acquisitions and disposals 66.8 1.4Currency fluctuations 2.3 8.8 ______ ______Movement in net borrowings 84.4 (1.2)Net borrowings at start of year (100.6) (99.4) ______ ______Net borrowings at end of year (16.2) (100.6) ______ ______ 1 Ebitda - earnings before interest, tax, exceptional items, depreciation andamortisation Ebitda increased by 5 per cent to £54.8 million in the year (2006: £52.4million). After adjusting for discontinued activities which contributed £6.1million (2006: £9.6 million), Ebitda from continuing operations increased by 14per cent. Working capital cash flow, which increased in 2006 to support theChromium business and fund growth in Specialty Products, improved by £13.2million in 2007. Working capital management in the year reduced debtor days by5 to 53 and increased creditor days by 1 to 68 days. Capital expenditure decreased by £3.8 million to £9.4 million which represents73 per cent of depreciation (2006: 89 per cent). Pension contributions net ofservice cost increased by £2.8 million mainly due to higher payments to UKschemes. Free cash flow, defined as cash flow available to finance returns toshareholders, repayment of debt or new investments, increased by £27.7 millionto £26.4 million in 2007. This, together with net proceeds from businessesdisposed of £66.8 million (2006: £1.4 million), reduced borrowings by £84.4million (2006: increase of £1.2 million) to £16.2 million at 31 December 2007(2006: £100.6 million). Balance sheet 2007 2006 £million £millionIntangible fixed assets 147.9 151.6Other net assets 98.2 148.3 ______ ______ 246.1 299.9 ______ ______Equity 229.9 199.3Net borrowings 16.2 100.6 ______ ______ 246.1 299.9 ______ ______Gearing 2 (per cent) 7 34 2 the ratio of net borrowings to equity plus net borrowings The disposal of the Pigments business and the strong performance from continuingoperations were the main contributors to a £30.6 million increase in equity inthe year. Debt reduction from operating cash flow and business disposalsreduced gearing to 7 per cent (2006: 34 per cent). Other net assets were £50.1million lower than previous year, primarily due to the Pigments disposal. Currency fluctuations did not have a significant effect on equity during theyear and the main exchange rates relevant to the Group are set out below: 2007 2006 Year Year end Ave end AveUS dollar 1.99 2.00 1.96 1.84Euro 1.36 1.46 1.48 1.47 ______ ______ ______ ______ Pensions and other post retirement benefits Retirement benefit obligations decreased by £15.8 million in the year to £21.5million (2006: £37.3 million). Total contributions to pension and postretirement benefit schemes amounted to £13.5 million (2006: £12.0 million).Actuarial gains of £0.8 million (2006: £8.6 million) and curtailment gains andsettlements of £2.0 million (2006: £3.7 million) also reduced the liability. Netfinance income of £2.2 million (2006: £1.6 million) offset the current servicecost of £2.1 million (2006: £2.4 million). During the year, based on the most recent actuarial valuation on 30 September2005, the Group agreed to pay £6.4 million per annum to fund the deficit in theUK scheme over a ten year period. Arrangements with the UK trustees are subjectto review in line with the scheme's triennial valuations. Consolidated income statement for the year ended 31 December 2007 2007 Before Exceptional After exceptional items exceptional items (note 5) items Note £million £million £millionContinuing operationsRevenue 299.8 - 299.8Cost of sales (199.3) - (199.3) ______ ______ ______Gross profit 100.5 - 100.5Distribution costs (39.2) - (39.2)Administrative expenses (23.2) 2.4 (20.8) ______ ______ ______Operating profit 38.1 2.4 40.5Finance income 3 2.7 - 2.7Finance costs 4 (7.0) - (7.0) ______ ______ ______Profit before income tax 33.8 2.4 36.2Tax 6 (1.8) (0.7) (2.5) ______ ______ ______Profit for the year from continuing operations 32.0 1.7 33.7Discontinued operationsProfit from discontinued operation 3.6 10.8 14.4Profit for the year 35.6 12.5 48.1 ______ ______ ______Attributable to:Equity holders of the parent 35.6 12.4 48.0Minority interests - 0.1 0.1 ______ ______ ______ 35.6 12.5 48.1 ______ ______ ______Earnings per shareFrom continuing and discontinued operations:Basic (pence) 7 8.1 10.9Diluted (pence) 7 8.0 10.8From continuing operations:Basic (pence) 7 7.2 7.6Diluted (pence) 7 7.2 7.5 (continued from table above) 2006 Before Exceptional After exceptional exceptional items items (note 5) items Note £million £million £millionContinuing operationsRevenue 302.0 - 302.0Cost of sales (203.1) - (203.1) ______ ______Gross profit 98.9 - 98.9Distribution costs (43.5) - (43.5)Administrative expenses (23.9) 2.0 (21.9) ______ ______ ______Operating profit 31.5 2.0 33.5Finance income 3 1.9 - 1.9Finance costs 4 (8.6) - (8.6) ______ ______ ______Profit before income tax 24.8 2.0 26.8Tax 6 - (0.9) (0.9) ______ ______ ______Profit for the year from continuing operations 24.8 1.1 25.9 Discontinued operationsProfit from discontinued operation 5.2 0.6 5.8Profit 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 discontinued operations:Basic (pence) 7 6.8 7.1Diluted (pence) 7 6.7 7.0From continuing operations:Basic (pence) 7 5.6 5.9Diluted (pence) 7 5.5 5.8 Consolidated balance sheetat 31 December 2007 2007 2006 31 December 31 December £million £millionNon-current assetsGoodwill and other intangible assets 147.9 151.6Property, plant and equipment 96.4 126.1Interests in associates 0.1 0.7Other investments - 1.0Deferred tax assets - 7.3 ______ ______Total non-current assets 244.4 286.7 ______ ______Current assetsInventories 49.4 67.7Trade and other receivables 52.9 70.1Derivatives - 3.0Cash and cash equivalents 8.4 14.5 ______ ______Total current assets 110.7 155.3 ______ ______Total assets 355.1 442.0 ______ ______Current liabilitiesBank overdrafts and loans - (0.7)Trade and other payables (51.4) (61.8)Derivatives (2.0) -Current tax liabilities (3.6) (3.3)Provisions (0.2) (2.4) ______ ______Total current liabilities (57.2) (68.2) ______ ______Non-current liabilitiesLoans and borrowings (24.6) (114.4)Retirement benefit obligations (21.5) (37.3)Deferred tax liabilities (3.4) -Provisions (16.3) (19.0)Government grants (1.5) (2.2) ______ ______Total non-current liabilities (67.3) (172.9) ______ ______Total liabilities (124.5) (241.1) ______ ______Net assets 230.6 200.9 ______ ______ EquityShare capital 22.3 22.1Share premium 5.2 3.6Other reserves 66.4 71.0Retained earnings 136.0 102.6 ______ ______Total equity attributable to equity holders of the parent 229.9 199.3Minority equity interests 0.7 1.6 ______ ______Total equity 230.6 200.9 ______ ______ Consolidated cash flow statementfor the year ended 31 December 2007 2007 2006 £million £millionOperating activities:Profit for the year 48.1 31.7Adjustments for:Investment income (2.7) (1.9)Finance costs 7.0 8.6Tax charge 2.5 0.9Depreciation and amortisation 12.4 14.8Decrease in provisions (0.3) (2.2)Pension contributions net of current service cost (10.7) (7.8)Share based payments 0.9 0.9Exceptional items (12.5) (1.7)Cash flow in respect of exceptional items (1.6) (10.8) ______ ______Operating cash flow before movement in working capital 43.1 32.5Increase in inventories (0.5) (9.8)Increase in trade and other receivables (1.2) (1.6) ______ ______Increase/(decrease) in trade and other payables 1.9 (1.6) ______ ______Cash generated by operations 43.3 19.5Income taxes paid (1.2) (0.7)Interest paid (7.0) (8.3) ______ ______Net cash flow from operating activities 35.1 10.5Investing activities:Interest received 0.6 0.3Disposal of property, plant and equipment 0.4 1.5Purchase of property, plant and equipment (8.9) (13.2)Disposal of businesses 60.6 1.4Acquisition of intellectual property (0.5) -Other investments 1.1 - ______ ______Net cash flow from investing activities 53.3 (10.0)Financing activities:Issue of shares 1.8 2.0Redemption of B shares - (2.1)Dividends paid (11.1) (10.1)Purchase of own shares (2.6) (2.4)(Decrease)/increase in borrowings repayable after one year (82.5) 17.9 ______ ______Net cash from/(used in) financing activities (94.4) 5.3 ______ ______Net (decrease)/increase in cash and cash equivalents (6.0) 5.8Cash and cash equivalents at 1 January 13.8 8.4Foreign exchange on cash and cash equivalents 0.6 (0.4) ______ ______Cash and cash equivalents at 31 December 8.4 13.8 ______ ______ Consolidated statement of recognised income and expensefor the year ended 31 December 2007 2007 2006 £million £millionExchange differences on translation of foreign operations - (23.0)Actuarial gain on pension and other post-retirement schemes 0.8 8.6Deferred tax associated with pension and other post-retirement schemes (2.4) -Losses on cash flow hedges taken to equity (4.6) 1.9 ______ ______Net expense recognised in equity (6.2) (12.5)Profit for the year 48.1 31.7 ______ ______Total recognised income and expense 41.9 19.2Total recognised income and expense is attributable to:Equity holders of the parent 41.8 19.1Minority interests 0.1 0.1 ______ ______ 41.9 19.2 ______ ______ Notes to the financial statements 1 Preparation of the preliminary announcement The financial information in this statement does not constitute the Company'sstatutory accounts for the years ended 31 December 2007 or 2006 but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theregistrar of companies, and those for 2007 will be delivered in due course. Theauditors have reported on those accounts; their report was (i) unqualified, (ii)did not include a reference to any matters to which the auditors drew attentionby way of emphasis without qualifying their report and (iii) did not contain astatement under section 237(2) or (3) of the Companies Act 1985. 2 Basis of preparation Elementis plc is a company incorporated in the UK. The information within thisdocument has been prepared under International Financial Reporting Standards asadopted by the EU (adopted IRFS) and approved by the Board of Directors on 26February 2008. 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 Finance income Continuing operations Discontinued operations 2007 2006 2007 2006 £million £million £million £millionInterest on bank deposits 0.4 0.2 - -Expected return on pension scheme assets 26.2 25.2 1.1 1.0Interest on pension scheme liabilities (23.9) (23.5) (1.2) (1.1) ______ ______ ______ ______Pension and other post retirement liabilities 2.3 1.7 (0.1) (0.1) ______ ______ ______ ______ 2.7 1.9 (0.1) (0.1) ______ ______ ______ ______ (continued from table above) Total 2007 2006 £million £millionInterest on bank deposits 0.4 0.2Expected return on pension scheme assets 27.3 26.2Interest on pension scheme liabilities (25.1) (24.6) ______ ______Pension and other post retirement liabilities 2.2 1.6 ______ ______ 2.6 1.8 ______ ______ 4 Finance costs Continuing operations Discontinued operations 2007 2006 2007 2006 £million £million £million £millionInterest on bank loans 6.4 7.8 0.3 0.5Unwind of discount on provisions 0.6 0.8 0.1 0.2 ______ ______ ______ ______ 7.0 8.6 0.4 0.7 ______ ______ ______ ______ (continued from table above) Total 2007 2006 £million £millionInterest on bank loans 6.7 8.3Unwind of discount on provisions 0.7 1.0 ______ ______ 7.4 9.3 ______ ______ 5 Exceptional items Continuing operations Discontinued operations 2007 2006 2007 2006 £million £million £million £millionCurtailment gains and past service credits on 1.3 2.7 0.7 1.0pension schemesRelease of prior year restructuring provisions 1.1 1.0 - -Integration and restructuring - (1.7) - -Disposal of business - - 16.3 - ______ ______ ______ ______ 2.4 2.0 17.0 1.0Tax charge on exceptional items (0.7) (0.9) (6.2) (0.4) ______ ______ ______ ______ 1.7 1.1 10.8 0.6 ______ ______ ______ ______ (continued from table above) Total 2007 2006 £million £millionCurtailment gains and past service credits on 2.0 3.7pension schemesRelease of prior year restructuring provisions 1.1 1.0Integration and restructuring - (1.7)Disposal of business 16.3 - ______ ______ 19.4 3.0Tax charge on exceptional items (6.9) (1.3) ______ ______ 12.5 1.7 ______ ______ 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. 6 Income tax expense Continuing operations Discontinued operations 2007 2006 2007 2006 £million £million £million £millionCurrent tax:Overseas corporation tax 0.9 1.2 1.3 0.1Adjustments in respect of prior years:United Kingdom 0.2 (0.1) - -Overseas (1.2) (2.3) - - ______ ______ ______ ______Total current tax (0.1) (1.2) 1.3 0.1Deferred tax:Overseas 2.6 1.1 5.1 0.4Adjustments in respect of prior years - 1.0 - - ______ ______ ______ ______Total deferred tax 2.6 2.1 5.1 0.4 ______ ______ ______ ______Income tax expense for the year 2.5 0.9 6.4 0.5 ______ ______ ______ ______Comprising:Before exceptional items 1.8 - 0.2 0.1Exceptional items 0.7 0.9 6.2 0.4 ______ ______ ______ ______ 2.5 0.9 6.4 0.5 ______ ______ ______ ______ (continued from table above) Total 2007 2006 £million £millionCurrent tax:Overseas corporation tax 2.2 1.3Adjustments in respect of prior years:United Kingdom 0.2 (0.1)Overseas (1.2) (2.3) ______ ______Total current tax 1.2 (1.1)Deferred tax:Overseas 7.7 1.5Adjustments in respect of prior years - 1.0 ______ ______Total deferred tax 7.7 2.5 ______ ______Income tax expense for the year 8.9 1.4 ______ ______Comprising:Before exceptional items 2.0 0.1Exceptional items 6.9 1.3 ______ ______ 8.9 1.4 ______ ______ The tax charge on profit before exceptional items from continuing operationsrepresents an effective tax rate on profit before exceptional items for the yearended 31 December 2007 of 5.3 per cent (2006: nil). The rate is lower than thestandard UK corporation tax due to the amortisation of goodwill in the US fortax purposes and the utilisation of UK tax losses. Tax on exceptional itemscomprised taxation of £5.9 million (2006: £nil) in respect of the disposal ofPigments business and £1.0 million in respect of curtailment gains on pensionschemes and provision releases (2006: £1.3 million). As a Group involved inoverseas operations, the amount of profitability in each jurisdiction, transferpricing legislation and local tax rate changes, will affect future tax charges. The total charge for the year can be reconciled to the accounting profit asfollows: 2007 2007 2006 2006 £million per cent £million per centProfit before tax:Continuing operations 36.2 - 26.8 -Discontinued operations 20.8 - 6.3 - 57.0 - 33.1 - Tax on ordinary activities at 30 per cent (2006: 30 per cent) 17.1 30.0 9.9 30.0Difference in overseas effective tax rates (0.1) (0.2) (0.3) (1.0)Expenses not deductible for tax purposes 0.2 0.4 0.2 0.6Tax losses and other deductions (7.3) (12.8) (3.7) (11.2)Tax benefit from US goodwill deduction - - (3.9) (11.8)Adjustments in respect of prior years (1.0) (1.8) (0.8) (2.4)Tax charge/(credit) and effective tax rate for the year 8.9 15.6 1.4 4.2 A deferred tax charge of £2.4 million (2006: £nil) has been recognised in equityin the year in respect of actuarial gains and losses. 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: 2007 2006 £million £millionEarnings:Earnings for the purpose of basic earnings per share 48.0 31.6Exceptional items net of tax (12.4) (1.7) ______ ______Adjusted earnings 35.6 29.9 ______ ______ 2007 2006Number of shares:Weighted average number of shares for the purposes of basic earnings per 441.9 439.4shareEffect of dilutive share options 3.3 7.4 ______ ______Weighted average number of shares for the purposes of diluted earnings 445.2 446.8per share ______ ______ 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: 2007 2006 £million £millionProfit for the year attributable to equity holders of the parent 48.0 31.6Profit for the year from discontinued operations (14.4) (5.8) ______ ______Profit/(loss) from continuing operations 33.6 25.8Exceptional items from continuing operations after minority interest (1.6) (1.1) ______ ______Adjusted earnings from continuing operations 32.0 24.7 ______ ______ 2007 2006 pence penceEarnings per share:From continuing and discontinued operations:Basic 10.9 7.1Diluted 10.8 7.0Basic before exceptional items 8.1 6.8Diluted before exceptional items 8.0 6.7From continuing operations:Basic 7.6 5.9Diluted 7.5 5.8Basic before exceptional items 7.2 5.6Diluted before exceptional items 7.2 5.5From discontinued operations:Basic 3.3 1.2Diluted 3.3 1.2 ______ ______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Elementis