16th Mar 2006 07:01
Yule Catto & Co PLC16 March 2006 Yule Catto & Co plc Preliminary Results for the year ended 31 December 2005 Good progress has been made in the long-term development of the Group HIGHLIGHTS • Group revenue £556.1m (2004: £536.6m) • Underlying group sales* increased by 6% to £532.1m, (2004: £503.1m) • Profit before taxation* £34.5m, (2004: £32.2m) • Profit attributable to equity shareholders £21.9m (2004: £19.1m) • Earnings per share* of 16.7p, (2004: 13.9p) • Dividend 9.0p per share (2004: 13.4p) • Strong volume growth in polymers • Successful implementation of restructuring programme, delivering £22m gross proceeds to date • Borrowings* reduced to £165.6m (2004: £187.6m) • Net assets £55.5m (2004: £45.9m) * Before special items, as defined in notes 1 and 9 Anthony Richmond-Watson, Chairman, comments: "In Polymers, the start of the year has seen strong sales volume and we arecautiously optimistic that as the year develops, performance will maintain itsforward progression. The long-term generic and ethical development programme forthe active pharmaceutical ingredient business continues to expand and thenecessary infrastructure is in place. We look forward to the growth created byour investment and restructuring initiatives, being aided by more helpful marketconditions." 16 March 2006 ENQUIRIES: YULE CATTO Tel: 01279 442791Alex Walker, Chief ExecutiveSean Cummins, Finance Director COLLEGE HILL Tel: 020 7457 2020Gareth David email: [email protected] RESULTS SUMMARY Underlying performance(a) IFRS 2005 2004 2005 2004 £'000 £'000 £'000 £'000 audited audited audited auditedYear to 31 December Group sales 532,146 503,121 568,707 549,444 EBITDA (b) 65,504 65,614 65,504 65,614Operating profit 46,213 45,088 46,193 44,947Profit before taxation 34,472 32,158 32,031 31,757 Earnings per share 16.7p 13.9p 15.1p 13.2pDividend per share (c) 9.0p 13.4p 9.0p 13.4p Net borrowings (d) (165,591) (187,641) (171,266) (178,537)Free cash flow before dividends 19,786 13,344 19,786 13,344(e) Notes: The above table represents the results of Yule Catto and Co plc, its subsidiaries and its share of joint ventures. (a) Underlying performance is before special items. (See notes 1 and 9)(b) Earnings before interest, tax, non-recurring items, depreciation and amortisation (See note 6)(c) Final dividend for 2005 of 5.3p per share will be paid on 4 July 2006 to members on the register at close of business on 2 June 2006. Under IFRS this 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. CHAIRMAN'S STATEMENT Good progress has been made in the long-term development of the Group. Forwardmomentum in our water-based Polymer activities was sustained in the second sixmonths despite there being no respite from rising costs of petrochemical basedraw materials. Strong volume growth, better product mix and increased sellingprices all contributed to an improvement in unit margins, which more than offsetthe rise in input costs. The future of our Pharmaceutical activities is inlarge part linked to widening the portfolio of the generic products that wemanufacture. Enhanced levels of drug master file registration in the USA andEurope were maintained and the infrastructure to support the approval programmewas strengthened. Profit in Performance chemicals moved forward by 8% as webenefit from the reshaping of the division into a more focussed business. Underlying profit before taxation for the group advanced by 7% to £34.5 million.With a lower tax rate prevailing in the period and a reduced level of profitattributable to minority interests, the associated earnings per share rose 20%to 16.7 pence. Movements in exchange rates have been a negative feature in recent years: theweakening US Dollar has been detrimental to the value of transactions, whilstour high Euro exposure has affected the translation of overseas results. Thequantum of the exchange rate risk remains the same, but with relative stabilityin the two major currencies the impact in the year was broadly neutral. The funding position of pensions continues to attract much publicity. The YuleCatto UK scheme has a high proportion of its assets allocated to equities andhence with world stock markets performing well, asset value has enjoyed adouble-digit growth for the third consecutive year. Conversely, a sharpreduction in bond yields towards the year end resulted in the calculation ofliabilities, as measured by IAS19, eroding much of the benefit, but overall thedeficit has reduced by £7.7 million. A full triennial valuation will beconducted in 2006 and a new schedule of contributions to address any shortfallwill be developed in conjunction with the scheme Trustees and accommodating therequirements of the Pensions Regulator. The large and developing market in China offers many exciting businessopportunities, both as a new outlet for our products and as a source of low costraw materials for use in our manufacturing processes. In pursuit of this, wehave recently established a representative office in Guangzhou. A review of underperforming and non-core activities resulted in the sale orwithdrawal from a number of businesses during the year. This process hasdelivered gross proceeds of £22 million to date and additional income will begenerated following the sale of land associated with two discontinued operationsin the UK. Primarily driven by the disposal exercise, net underlying borrowings reduced by£22.0 million to £165.6 million at the year end. As expected, additions tofixed assets were at a lower level as we continue to benefit from a period ofreduced capital requirement. The Board has approved the expansion of thenitrile latex facility in Malaysia and entry into a new market for cytotoxicpharmaceutical products; and therefore a modest increase in expenditure islikely in the current year. As a result of higher volume and the rising costsof raw materials, we have again seen an absorption of cash into working capital,although not at the rate of the previous year. In line with the guidance provided in the interim statement, the Directors arerecommending a final dividend of 5.3 pence per share which would take the fullyear payment to 9.0 pence, being a reduction of 33 per cent on last year.Subject to shareholder approval, the dividend will be paid on 4 July to memberson the register at close of business on 2 June. In the absence of unforeseencircumstances, it is the Board's intention that, from this rebased level, thegroup will resume a progressive dividend policy. Alex Walker, our Chief Executive since 1986, will retire in August 2006 after 34years with the Group. Alex has been instrumental in transforming Yule Cattointo the speciality chemical company it is today, delivering significantshareholder value along the way. Following a rigorous search process, AdrianWhitfield joined the Group on 1st March 2006 as a Director and Chief ExecutiveDesignate. Adrian has extensive international industrial management experience.I am sure he will make an invaluable contribution in the next stage of thedevelopment of the Group. In addition, following the resignation of GianniMontezemolo, we welcomed Colin Williams to the Board as an independentnon-executive director on 6 December 2005. In an increasingly competitive environment, the success of the group can only berealised through the hard work and commitment of all our employees. On behalfof the Directors and Shareholders, I would again like to thank everyone fortheir contribution to the results achieved this year. Safety, health and environment (SHE) are of the utmost importance and it ispleasing to report, for the sixth consecutive year, an overall improvement inSHE performance, with a 30% reduction in the lost time accident frequency rateand a lower total number of reportable safety and environmental incidents. Weare fully committed to the principles of sustainable development and haveadopted guidelines issued by the UK Chemical Industry Association. In supportof this, financial incentives for senior managers have been modified to broadenthe categories targeted for improvement to include energy and waste. Finally, adetailed analysis has been conducted to assess the economic implications of theEuropean Union REACH legislation. On the basis of current knowledge of theregulatory framework, it appears that any financial exposure should be containedwithin the existing cost structure. Outlook The price of crude oil remains high and there are no signs of raw material costssubsiding. That said, the polymer business delivered good results last year asthe level of volatility reduced. The start of the year has seen strong salesvolume and we are cautiously optimistic that as the year develops, performancewill maintain its forward progression. The long-term generic and ethical development programme for the activepharmaceutical ingredient business continues to expand and the necessaryinfrastructure is in place. We expect to see the benefit of new products duringthe year which should provide some mitigation against the normal generic pricingcurve of the more mature products in our portfolio. In difficult circumstances we delivered a solid performance in 2005 and lookforward to the growth created by our investment and restructuring initiatives,being aided by more helpful market conditions. Anthony Richmond-Watson Chairman 16 March 2006 REVIEW OF OPERATIONS POLYMER CHEMICALS In almost every respect, our Polymer Chemicals businesses delivered a healthyperformance in 2005 and demonstrated good progress along our chosen growth path. Raw material availability and cost were again a feature, with the aftermath ofthe hurricanes in the USA adding to the pressures caused by the persistence ofthe high price of crude oil. Despite these challenges, record sales volumes sawturnover rise 15.4% and that, coupled with higher capacity utilisation andimproving sales prices, provided a 23.5% increase in operating profit. The width of our product portfolio and the flexibility to adapt products forcustomers to give improved commercial and technical advantage remains a keystrength. In addition, new products have been successfully launched to addresschanging market conditions. This has assisted in the development of business inEurope and Asia in support of the manufacturing investments of recent years.Plans are in hand to increase capacity further for selected markets and regions. The world economy is adjusting to the higher costs of oil-based products. Thisis true of our customer base where a greater acceptance of higher sellingprices, plus the impact of changes in product mix, saw margins return todouble-digit as the year progressed. In the latter months of 2005 the volatility in raw material costs, while stillpresent, had reduced and the availability of monomers improved. Such anenvironment provides the conditions to increase the number of growthopportunities and maintain the momentum towards our long-term strategic goals ofexpanding into new markets and capturing target accounts. Synthetic Latex Global volumes of synthetic latex grew by close to 10% in the year. The meritsof a production facility in Malaysia close to our customers for nitrile glovedipping latex was a significant contributory factor. The rising shipping costsof our competitors based in Europe and the USA have been avoided and with anumber of new developments coming on stream the customer base has increased.Sales volumes of nitrile latex grew by a substantial 25% supported by processdevelopment initiatives which released 20% additional capacity at the Kluangfacility. With growth in this market set to continue, investment in additionalreactor capacity will commence in the second quarter of 2006. In Europe initiatives to widen activities in the speciality construction,textile and paper sectors achieved good progress with volumes up close to 10%.The results of efforts to develop sales to Eastern Europe are also starting toemerge. Difficult market conditions were again experienced in the carpet sectorwith, in particular, the UK industry seeing further contraction. In response tothis, compound manufacturing facilities in Holland have been rationalised withthe closure of the Ridderkerk site. This has resulted in a significantimprovement in productivity and enhances our status as the leading carpetcompound supplier to the European market. Emulsions The emulsion business in 2005 was subject to regional variations, but overallrecord tonnages were achieved. The 8% volume growth achieved in Europe was against the trend of publishedstatistics which showed a year-on-year decline in customer demand. The majorpart of this success came from higher sales to continental European customerssupplied from our Belgian facility. Our technology, which is well establishedin the UK, provides the platform to supply customers across a wide number ofapplication areas. With the freer supply of raw materials, the opportunity forgreater sales to these markets is being pursued. In South East Asia and the Middle East sales declined slightly, in line withgeneral market conditions. However, the fall was less than might have occurredsince customers in some sectors, such as construction in Malaysia and paint inSaudi Arabia, have reported substantial falls in demand. Emulsion sales in South Africa moved forward as general economic activityremained robust. The benefit of recent investments in reactor capacity emergedin both cost effectiveness and the ability to support increased customer demand.A new range of emulsion adhesives was also launched directed at broadening ouractivities in the packaging and wood industries. Polyvinyl Alcohol/Acetate Efforts initiated to develop sales in Asia have proved successful and providedcompensation for weaker polyvinyl alcohol demand in other parts of the world asa consequence of a slow-down in the PVC industry. Margins came under pressure due to the rising cost of Vinyl Acetate Monomer and,with customers having alternative technology options, reflecting these higherprices in the market has proved a difficult challenge. The unique properties ofour Alcotex range of stabilisers has, however, permitted the maintenance ofmarket share. As the PVC industry develops in Asia we remain well placed forfuture growth. Polyvinyl Acetate sales overall are running at the level of recent years. Newproduct developments for adhesive and additive applications are offsettingweaker sales to the automotive industry. Other Speciality Products After a slight dip in speciality natural rubber latex sales in 2004, volumespleasingly recovered in a year when underlying natural rubber prices rose. OurMalaysian operation is the leading supplier to the world condom manufacturingindustry. It is, therefore, not surprising that the first customer approvalsand sales for our recently established joint venture in India are at condommanufacturers in that country. Revertex Finewaters, our adhesives manufacturing company in Malaysia,successfully deployed new marketing tactics and products to re-establish theirhighly successful track record. Export sales throughout the region continue togrow. Sales of alkyd resins in Asia fell back slightly, but polyester sales grew asgood contract business in Malaysia/Singapore was secured. A shift towards morespecialised applications has also assisted in improving margins. Lithene polybutadiene sales continued at a solid level, but a shift in productmix has seen good margin development. A debottlenecking investment wascompleted in mid-2005 in order to facilitate new product introductions. PHARMA AND FINE CHEMICALS The value of sales for our Pharma & Fine Chemicals businesses again experiencedthe impact of the normal pattern of price erosion for our major generic productsas the market matures post patent expiry. Volume growth was achieved, butdespite good process development reducing product costs, unit marginscontracted. Sales in the last quarter of the year were particularly slower than expected ascustomers and regulatory approvals delayed the benefits of new initiatives inthe contract manufacturing business. Our strategy remains to strengthen and deepen the range of generic products withan eye to the medium and long term as patents expire. In addition, we continueto offer cost effective manufacturing and development services to the widerpharmaceutical industry. During 2005 there was a full programme of developmentand nine drug master files were registered in the USA and Europe. A number ofimportant customers have used these files to support the development of theirfuture product launches. The year saw the completion of two major investments in a new research centre inSpain and a cGMP pilot plant at our facility in Italy. These, along withstrengthened development teams, were applied to product development enabling thefiling of process patents covering a number of new products. Results from our Flavour & Fragrance businesses were held back by generallyweaker market conditions and pressure from customers seeking manufacturers inlow cost countries was also experienced. Pharma The Uquifa business in Spain experienced a good year from a volume standpoint,particularly in the field of generics. Sales volumes of omeprazole active againrose by 20% with demand growing in the important US market and good sales ofproduct in pelletised form. New equipment to bring in-house the manufacture ofpellets was commissioned in the year, but delays in the regulatory process meantSpanish Ministry of Health approval for our process only came at the very end ofthe year. Benefits from this investment will not only support omeprazolemargins, but permit the development of other active pharmaceutical ingredientswhich are supplied in pellet form. Ranitidine sales were strong in the USA and Europe with largely stable margins.Progress was also achieved in scaling up new processes for other proton pumpinhibitors. Antibacterial and antidepressant volumes grew, but here the rise insolvent prices constrained margin development. Progress was sustained in developing relationships with large Pharma companieswith the transfer of a number of long-established products to our plant frommultinational locations. The pilot plant featured strongly, being highlyutilised throughout the year. A good part of this was in the manufacture ofsmaller scale products for customer development programmes within the ethicalmarket. For our Italian operation, 2005 was a challenging year. Further delays within acustomer's approval process for a substantial contract were experienced andsizeable take up of generic products remains some way off. Additionally, aproduct in phase II/III of drug development, which used the particularmanufacturing capabilities of our Agrate plant, was withdrawn. On a brighter note, an important contract was agreed for the supply of acytotoxic product. The necessary investment to modify part of our new pilotplant is currently in progress and will be commissioned in the second half of2006. This creates an important new opportunity to develop business in arapidly growing market area. While sales levels from our Mexican company were largely similar to the previousyear, the mix has altered with the generic products growing at a time of slowerofftake by ethical customers. Ciprofloxacine was particularly strong and salesof the antipsychotic Zolpidem to Europe increased. This latter product willcome off patent in the USA in the second half of 2006 and that, coupled withgood ethical demand, is anticipated to aid performance in the months ahead.Terbinafine, an antifungal, saw sales rise rapidly to become the leadingproduct made by Uquifa in Mexico. This opportunity was supported by ourpharmaceutical dossier registration programme in Europe. The search for cost competitive intermediates to utilise as precursors to ourregistered products and processes is a key feature of the pharmaceutical market.The opening of our group representative office in China will assist inaccessing this ever more important supplier base for such starting materials. Flavour & Fragrances The flavour and fragrance market saw another year of weaker demand and thesearch for reduced input costs encouraged customers to seek product from lowcost countries, particularly in Asia. Oxford Chemicals' quality standards and niche product offerings were used togreat effect to combat this threat, but margin was somewhat impacted. Rawmaterials on which to base a range of natural products have now been secured andthese are in the process of being introduced to the market. The fragrance business of PFW has suffered through a sharp rise in its mainpetrochemical based raw material at a time when new competition has enteredtheir market. Important certification approval targets were reached for salesthroughout the European Union which will assist in sustaining sales volumes. PERFORMANCE CHEMICALS 2005 was an active year of restructuring and reshaping for our PerformanceChemicals businesses. Underlying sales achieved from ongoing activities fell by5.5%, but the associated operating profits moved forward by 7.7%. There were some significant achievements in the disposal of operations withAutoclenz listed on AIM in December with a total value of £18m. Earlier in theyear the disposal of Brencliffe and the Holliday Dispersions operations for acombined value of £3.9m were successfully concluded. Restructuring within theremaining businesses continued with the announcement of the closure of the JamesRobinson manufacturing site in Huddersfield and the decision to exit the sulphurdioxide derivatives business of William Blythe. All of the above is a direct response to changes in our customer base andpositions our operations to deliver more effectively our speciality productswhich are technically demanding in both specification and manufacture. The continuing activities are beginning to see the benefits of this process,aided by new product initiatives. In particular, the speciality inorganicoperations have achieved some important advances and the high marginphotochromic products are demonstrating a sharp increase in sales. To setagainst this, the weakness of the US Dollar to Sterling and the Euro remains aconcern; and the rapid rise in the price of gas will impact the costs of theultramarine pigment manufacturing process. China is a major market for our performance chemical companies. They have beenthe first to take advantage of our new representative office by stationingtechnical sales representatives in Guangzhou to support customer contacts. Inorganic Chemicals Stability has now been achieved in the timber treatment business with theopportunity for growth as other UK manufacturers withdraw from the market.Major progress can be reported in the development of high purity copper chromatefor catalyst manufacture. Significant breakthroughs in new business in thisarea were achieved in the latter months of the year. Tin products, used in non-toxic flame retardants, progressed well in overseasmarkets as did sales of products directed at the pharmaceutical and glassmanufacturing industries. New applications in brake pads and flame retardantpaints hold promise for the future. Iodine based products saw sales ofspeciality products to the electronic and printing sectors, most notably highpurity periodic acid. The continuation of the difficult trading conditions in the SO2 market hasresulted in our decision to vacate the manufacturing site at Hapton. Thetransfer of other profitable processes to the main William Blythe site at Churchwill commence in the near future. This should lead to a more efficient singlesite operation focussed on products with a growing future. Organic Chemicals and Pigments James Robinson has for some time been going through a period of change torationalise its facilities. After the final closure of manufacturing in the UKdue in mid-2006, customers will be served from the high technical capabilitiesof our German facility and, for large volume products, the low operating costbase of our Indian joint venture. Exciting opportunities lie within the photochromic market where the technicalexcellence and range of our products enabled sales to double in 2005. Newopportunities outside the important ophthalmic sector in the areas such assecurity marking are being pursued. Hair dye sales were sustained, but marginsof the larger volume products came under pressure from Asian manufacturers.Colour developer sales fell back as the move to digital photography gatheredpace, but an agreement to make a range of fuel markers will substantially expandour Indian operations. The ultramarine business had a challenging year with a downturn in sales asdistributors reduced stocking levels. In France the operations performed welldelivering a good all round performance. On the other hand, the UK operationwas plagued by production issues that restricted output. Actions to alter thisposition are in hand with good progress being achieved towards key performancetargets. Our products remain the standard by which the ultramarine marketjudges quality and there remain numerous applications to grow volumes,particularly in the increasingly important China market. The acceptance processfor new products in automotive, construction and ink continues but customertesting regimes, by definition, remain a lengthy process. Other Activities Our Consumer Chemicals products faced mixed market conditions throughout theyear, exacerbated by rising raw material costs. Little growth was seen in themarkets we serve and further reshaping of the cost base was initiated. A marked increase in customer confidence was seen in the last quarter of 2005resulting in a strong order book for the early part of 2006. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004 Note £'000 £'000 £'000 £'000 audited audited audited auditedGroup revenue 556,051 536,567Share of joint ventures revenue 12,656 12,877Group sales 1,2 568,707 549,444 Group revenue 556,051 536,567 Company and subsidiaries 45,334 43,139Joint ventures 859 1,808Operating profit 1,2 46,193 44,947 Interest payable (15,424) (13,229) Interest receivable 3,683 299 (11,741) (12,930) Fair value adjustment 4 (2,421) (260)Finance costs (14,162) (13,190) Profit before taxation 32,031 31,757Taxation (8,998) (11,317)Profit for the year 23,033 20,440 Profit attributable to minority 1,180 1,303interestsProfit attributable to equity 21,853 19,137shareholders 23,033 20,440 Earnings per shareBasic 15.1p 13.2pDiluted 14.9p 13.1p CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 2005 2004 £'000 £'000 audited auditedNon-current assetsGoodwill 172,443 172,443Other intangible assets 815 773Property, plant and equipment 140,064 148,729Deferred tax assets 2,531 1,860Investment in joint ventures 4,064 3,053 319,917 326,858 Current assetsInventories 66,495 70,907Trade and other receivables 103,244 109,517Cash and cash equivalents 46,027 93,868 215,766 274,292 Current liabilitiesBorrowings (37,385) (102,244)Trade and other payables (129,523) (122,645)Current tax liability (53,050) (52,512)Derivatives at fair value (4,312) (17,152)Net current liabilities (8,504) (20,261) Non-current liabilitiesBorrowings (179,908) (170,161)Trade and other payables (306) (436)Deferred tax (6,056) (14,279)Post retirement benefit obligations (69,637) (75,802) (255,907) (260,678) Net assets 55,506 45,919 Share capital 14,480 14,480Share premium 31,829 31,829Capital redemption reserve 949 949Hedging and translation reserve (481) (947)Retained earnings 4,009 (4,798)Equity attributable to equity holders of the parent 50,786 41,513Minority interests 4,720 4,406Total equity 55,506 45,919 Analysis of net borrowingCash and cash equivalents 46,027 93,868Current borrowings (37,385) (102,244)Non-current borrowings (179,908) (170,161)Net borrowings (171,266) (178,537)Add back: special items 5,675 (9,104)Net borrowings (underlying performance) (165,591) (187,641) The financial statements were approved by the Board of Directors and authorisedfor issue on 16 March 2006. CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004Year to 31 December Notes £'000 £'000 £'000 £'000 audited audited audited auditedOperatingCash generated from operations 5 57,791 49,181 Interest received 3,683 299 Interest paid (15,095) (12,680)Net interest paid (11,412) (12,381) UK corporation tax (paid)/received (74) 316 Overseas corporate tax paid (10,964) (8,820)Total tax paid (11,038) (8,504)Net cash inflow from operating activities 35,341 28,296 InvestingDividends received from joint ventures 130 1,854 Purchase of property, plant and equipment (14,331) (16,920) Sale of property, plant and equipment 45 186Net capital expenditure and financial investment (14,286) (16,734) Purchase of businesses - (1,358) Sale of businesses 18,858 -Net cash impact of acquisitions and disposals 18,858 (1,358)Net cash inflow/(outflow) from investing activities 4,702 (16,238) FinancingEquity dividends paid (16,796) (19,086)Dividends paid to minority interests (1,399) (72)Purchase of own shares (369) (185)Repayment of current borrowings excluding bank - (12,000)overdrafts(Repayment)/proceeds of long term borrowings (5,033) 26,486Net cash outflow from financing activities (23,597) (4,857) Increase in cash and bank overdrafts during the 16,446 7,201year Comprised of:Cash and cash equivalents (46,623) 1,515Bank overdrafts 63,069 5,686 16,446 7,201 Reconciliation of net cash flow from operating activities to movement in net borrowings 2005 2004 £'000 £'000 audited auditedNet cash inflow from operating activities 35,341 28,296Add back: dividends received from joint ventures 130 1,854Less: net capital expenditure and financial (14,286) (16,734)investmentLess: dividends paid to minority interests (1,399) (72)Free cash flow before dividends 19,786 13,344 Net cash impact of acquisitions and disposals 18,858 (1,358)Purchase of own shares (369) (185)Equity dividends paid (16,796) (19,086)Exchange movements 571 (3,080) Movement in net borrowings (underlying performance) 22,050 (10,365) STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004 Minority Equity Total Minority Equity Total interests holders of interests holders of the parent the parentYear to 31 December £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited audited Actuarial gains and losses - 3,442 3,442 - 2,540 2,540Tax on items recognised directly in - (34) (34) - (1,798) (1,798)equityExchange differences 533 466 999 (269) (945) (1,214)Profit for the year 1,180 21,853 23,033 1,303 19,137 20,440Total recognised income for the 1,713 25,727 27,440 1,034 18,934 19,968period 1 Consolidated income statement analysis 2005 2004 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 auditedGroup revenue 519,490 36,561 556,051 490,244 46,323 536,567Share of joint ventures revenue 12,656 - 12,656 12,877 - 12,877Group sales 2 532,146 36,561 568,707 503,121 46,323 549,444 Group revenue 519,490 36,561 556,051 490,244 46,323 536,567 Company and subsidiaries 45,354 (20) 45,334 43,280 (141) 43,139Joint ventures 859 - 859 1,808 - 1,808Operating profit/(loss) 2 46,213 (20) 46,193 45,088 (141) 44,947 Finance costs 4 (11,741) (2,421) (14,162) (12,930) (260) (13,190) Profit/(loss) before taxation 34,472 (2,441) 32,031 32,158 (401) 31,757Taxation (9,148) 150 (8,998) (10,824) (493) (11,317)Profit/(loss) for the year 25,324 (2,291) 23,033 21,334 (894) 20,440 Profit attributable to minority 1,180 - 1,180 1,303 - 1,303interestsProfit attributable to equity 24,144 (2,291) 21,853 20,031 (894) 19,137holders of the parent 25,324 (2,291) 23,033 21,334 (894) 20,440 Earnings per shareBasic 16.68p (1.58)p 15.10p 13.86p (0.62)p 13.24pDiluted 16.49p (1.56)p 14.93p 13.70p (0.61)p 13.09p Discontinued operations There are no discontinued operations. As detailed in note 3, a number ofbusinesses were sold or closed during the year, however these do not satisfy thecriteria of IFRS 5 to be treated as discontinued operations. Special items The special items disclosed are made up as follows: 2005 2004 Note Special items Special items £'000 £'000 audited auditedGroup salesRevenue of operations sold or closed during the year 36,561 46,323 Operating profit/(loss)Operating (loss)/profit of operations sold or closed (156) 1,643during the yearProfit or loss arising from the sale or closure of 3 136 -operationsImpairment of non-current assets - (1,784) (20) (141) Finance costsFair value adjustment 4 (2,421) (260) TaxationTaxation on operating (loss)/profit of businesses sold or - (493)closed during the yearTaxation on profit or loss arising from the sale or 150 -closure of operations 150 (493) 2 Segmental analysis 2005 2004 Underlying Special IFRS Underlying Special IFRS performance items performance itemsYear to 31 December £'000 £'000 £'000 £'000 £'000 £'000 audited audited audited audited audited auditedGroup sales by activity Polymer Chemicals 364,770 - 364,770 316,108 - 316,108 Pharma & Fine Chemicals 82,170 - 82,170 96,868 - 96,868 Performance Chemicals 85,206 36,561 121,767 90,145 46,323 136,468 532,146 36,561 568,707 503,121 46,323 549,444Operating profit by activity Polymer Chemicals 34,159 (1,276) 32,883 27,663 (540) 27,123 Pharma & Fine Chemicals 10,903 - 10,903 16,355 - 16,355 Performance Chemicals 5,833 1,256 7,089 5,414 399 5,813 Unallocated corporate (4,682) - (4,682) (4,344) - (4,344)expenses 46,213 (20) 46,193 45,088 (141) 44,947 2005 2004 £'000 £'000 audited auditedGroup sales by destinationUnited Kingdom 123,767 128,634Other Europe 228,641 218,470Asia 115,204 98,870Africa and Middle East 49,120 45,863Rest of World 51,975 57,607 568,707 549,444 3 Profit or loss arising from the sale or closure of an operation 2005 2004Year to 31 December £'000 £'000 audited auditedSale of Brencliffe Limited 347 -Sale of Holliday Dispersions Ltd and SA (1,974) -Sale of Autoclenz Limited 13,614 -Restructure of James Robinson Limited (4,813) -Restructure of William Blythe Limited (5,762) -Restructure of Ditar Ridderkerk BV (1,276) - 136 - The shares of Brencliffe Limited were sold on 31 March 2005. The business and assets of Holliday Dispersions Limited were sold on 11 August2005, followed by the sale of the shares of Holliday Dispersions SA on 14October 2005. The shares in Autoclenz Limited were sold on 7 December 2005. In January 2005 an announcement was made announcing the closure of DitarRidderkerk BV. In July 2005, the closure of James Robinson's manufacturing facilities atHuddersfield was announced. In December 2005, an announcement was made detailing the withdrawal of WilliamBlythe Limited from the sulphur dioxide business, which will result in theclosure of the Hapton site. 4 Finance costs The fair value adjustment is the mark to market adjustment in respect of crosscurrency and interest rate derivatives used for hedging purposes where IAS 39hedge accounting is not applied. 5 Reconciliation of operating profit to cash generated from operations 2005 2004Year to 31 December £'000 £'000 audited audited Reconciliation of operating profit to cash generated fromoperations Operating profit 46,193 44,947Less: share of profits of joint ventures (859) (1,808) 45,334 43,139Impairment of non-current assets - 1,784Depreciation and amortisation 19,291 20,526Profit or loss arising from the sale or closure of operations (136) -Cash impact of termination of businesses (761) (280)Loss on sale of fixed assets (73) -Share based payments 711 1,212Decrease / (increase) in inventories 1,550 (4,645)Increase in trade and other receivables (1,380) (10,083)Decrease in trade and other payables (4,042) (4,357)Unrealised exchange (gains) / losses (2,703) 1,885 Cash generated from operations 57,791 49,181 6 Reconciliation of EBITDA 2005 2004 Underlying IFRS Underlying IFRS £'000 £'000 £'000 £'000Year to 31 December audited audited audited audited Operating profit 46,213 46,193 45,088 44,947Less: Profit arising from the sale or closure of - (136) - -operationsLess: Operating profit or loss of businesses sold or - 156 - (1,643)closed during the yearAdd back: Impairment of non-current assets - - - 1,784Add back: amortisation 307 307 439 439Add back: depreciation 18,984 18,984 20,087 20,087EBITDA 65,504 65,504 65,614 65,614 7 Dividends 2005 2004 Pence per Pence per share share audited audited Interim 3.7 5.5Final 5.3 7.9Total 9.0 13.4 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 2005, 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 19 April 2006. The financial statements were approved by the Board of Directors on 16 March2006. The accounting policies used to prepare these accounts are the same as thoseused in the preparation of the Group's restated IFRS audited accounts for theyear ended 31 December 2004, which were published in a transition document dated8 September 2005. This statement presents and explains the adjustments to 31December 2004 in detail, and can be obtained by the public from the company'sregistered office Temple Fields, Harlow, Essex, CM20 2BH, or on the companywebsite www.yulecatto.com. A final dividend of 5.3p (2004: 7.9p) per share, totalling £7.7m, (2004: £11.4m)has been declared 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 - 144.7m(2004: 144.6m). 9 Glossary of terms Group sales Group sales represent the total of revenue from Yule Catto and Co plc, its subsidiaires, 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; and • The transitional adjustment required to reflect movements in fair value caused by variations in interest rates, and subsequent amortisation thereof, to the extent that these constituted effective hedges under UK GAAP. 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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