17th Feb 2010 07:00
Strong cash flow and cost reduction programme ahead of plan
Rexam, the global consumer packaging company, announces its results for the full year to 31 December 2009.
|
Underlying business performance1 |
2009 |
|
2008 |
|
|
|
Sales (£m) |
4,866 |
|
4,618 |
|
|
|
Underlying operating profit (£m)1 |
446 |
|
466 |
|
|
|
Underlying profit before tax (£m)1 |
285 |
|
328 |
|
|
|
Underlying earnings per share (pence)1,5 |
25.4 |
|
31.5 |
|
|
|
Dividend per share (pence)5 |
8.0 |
|
18.7 |
|
|
Key points
|
• |
Strong free cash inflow of £290m compared with outflow of £128m in 2008 |
|
• |
Sales up 5% benefitting from favourable foreign exchange translation |
|
• |
Organic2 underlying operating profit down 17% impacted by weak volumes in Plastic Packaging and parts of Beverage Can Europe |
|
• |
Cost reduction programme ahead of plan at £29m in 2009 |
|
• |
Record operational efficiencies of £42m3 |
|
• |
Net debt reduced to £1.8bn |
|
• |
Final 2009 dividend of 8.0p proposed as previously announced |
Commenting on the 2009 results, Graham Chipchase, Rexam's Chief Executive, said:
"Trading conditions were difficult throughout 2009. However, we produced a strong cash performance, our cost reduction programme is ahead of plan and we delivered record efficiencies.
"Although the strength of any global economic recovery is unclear, volumes appear to be stabilising. However, we expect business conditions in a number of our operations to remain tough. In Beverage Can Europe, there is ongoing uncertainty as to the development of specialty cans and, in Russia, to the continued effect of the recession and the impact of new taxes on beer. In Closures, we have already taken action in 2010 to reduce cost further to counter what is an enduring weakness in beverage closures. In Personal Care, our performance in the current year will depend, in large part, on consumer confidence and discretionary spend in the US.
"We continue to maintain the tight management of cash and limit capital expenditure to below depreciation. Looking ahead, our single minded commitment is to enhance shareholder value. This means focusing on the fundamentals of cash flow optimisation, cost control and improving return on capital.
"We believe that the trading environment will remain challenging throughout the year but, as we benefit from the cost saving measures we are taking, overall we expect our performance to improve in 2010."
|
Statutory results4 |
2009 |
|
2008 |
|
|
|
Sales (£m) |
4,866 |
|
4,618 |
|
|
|
Operating profit (£m) |
92 |
|
380 |
|
|
|
(Loss )/profit before tax (£m) |
(59) |
|
240 |
|
|
|
(Loss )/profit for the financial period (£m) |
(29) |
|
171 |
|
|
|
Total basic (loss)/earnings per share (pence)5 |
(3.7) |
|
23.9 |
|
|
Key point
|
• |
Statutory operating profit includes £196m goodwill impairment charge and £108m restructuring charge as exceptional items |
1. Underlying business performance is before exceptional and other items
2. Organic change adjusts for impact of acquisitions, disposals and is at constant currency
3. Continuing operations
4. Statutory results include exceptional and other items
5. 2008 restated for the 2009 rights issue
17 February 2010
Enquiries
Rexam PLC 020 7227 4100
Graham Chipchase, Chief Executive
David Robbie, Finance Director
Financial Dynamics 020 7269 7291
Richard Mountain
Live webcast
An analyst presentation and investor meeting will be held today at 09:00 UK time at Allen & Overy LLP, One Bishops Square, London E1 6AD.
A dial in conference call will be held today at 14.30 UK time. For callers in the US, please dial +1 480 629 9722 or +1 877 941 2332. The dial in number in the UK is 0800 358 5263.
A copy of this release has been posted on the Rexam website, www.rexam.com. Subject to certain restrictions, the presentation will be webcast live on www.rexam.comand subsequently be available on demand.
This press release contains statements which are not based on current or historical fact and which are forward looking in nature. These forward looking statements reflect knowledge and information available at the date of preparation of this press release and the Company undertakes no obligation to update these forward looking statements. Such forward looking statements are subject to known and unknown risks and uncertainties facing the Group including, without limitation, those risks described in this press release, and other unknown future events and circumstances which can cause results and developments to differ materially from those anticipated. Nothing in this press release should be construed as a profit forecast.
CHAIRMAN'S STATEMENT
2009 was a difficult and turbulent year for most businesses as the global economy saw a significant reversal after years of growth. Retailers and suppliers dramatically reduced their inventory levels to protect cash and there was a radical change in consumer behaviour as loss of confidence caused individuals to rein in their expenditure, especially on discretionary purchases.
Rexam was not immune to these macro factors. Trading in 2009 was very challenging and it is disappointing to report a loss after tax on a statutory basis of £29m.
Details of our underlying and statutory performance can be found in the Business Review, but let me highlight the key points. In summary, reported Group sales grew 5% to £4,866m due to favourable foreign currency exchange. Organic sales, however, which exclude the impact of acquisitions, disposals and currency, declined 7% mainly due to the impact of lower volumes, especially in Plastic Packaging and parts of Beverage Can Europe, and the passthrough of lower aluminium and resin costs to customers. Underlying profit before tax was down 13% to £285m and underlying earnings per share dropped to 25.4p.
But the figures only tell part of the 2009 story. In the first part of the year we experienced, as did our customers, declining volumes. We focused therefore on taking cost out of the business and protecting our cash flow. Our expectation was that trading would stabilise in the second quarter as customers replenished stocks. We announced the closure of plants in both Beverage Cans and in Plastic Packaging to balance capacity with demand, as well as headcount reductions including a number of senior management positions. We focused on improving working capital and reduced capital expenditure to optimise cash flow.
However, conditions did not improve in the second quarter and it became apparent that destocking had given way to lower base demand especially in the more cyclical and premium parts of our business such as dispensing systems, specialty cans and beverage closures. As you will see in detail in the Business Review, this put pressure on profits and cash flow. It became clear that our capital structure would not cope with this drop in operating profits and that our credit rating consequently was coming under significant pressure. We had to act swiftly to address this, and that is why the Board decided to proceed with a rights issue.
Rights issue
Let me briefly give you more background to the rights issue. At the beginning of 2009 our debt stood at £2.6bn. Whilst a large part of the increase in 2008 was due to currency translation, driven by the weakness of sterling against the dollar, the underlying cause behind the level of debt was our significant capital expenditure programme and the acquisitions of OI Plastics and Rostar. The expectations were that these investments would yield the profit growth required to service and pay down debt and help to maintain our investment grade rating. Indeed, our investments did begin to bear fruit in the first half of 2008 when we saw 8% organic growth in both sales and operating profit.
In March 2009, the credit rating agency Standard & Poor's downgraded Rexam to the lowest investment grade rating with a stable outlook and, whilst Moody's reaffirmed its investment grade rating, it changed its outlook from stable to negative. The rating agencies indicated that unless we made meaningful debt repayment in 2010, there was a significant risk that we might lose our investment grade status. The continued trading shortfall in the second quarter of 2009 meant our ability to reduce that debt meaningfully became extremely questionable.
In the prevailing economic climate, the loss of investment grade would have had significant negative consequences on the cost and availability of credit. The Board did not consider this an acceptable risk, especially in view of the need to refinance approximately £2.5bn of debt facilities as they mature between 2011 and 2013. Given the results of trading in the first half, it would have been irresponsible to simply hope that our investment grade status would be maintained without any action by ourselves beyond what we were already doing or, indeed, hope that there would be a marked improvement in a global economy that was experiencing the longest and deepest recession in recent times. Having examined all options available, we determined that the only course that would strengthen our capital structure to accommodate the trading environment would be a rights issue.
I am pleased to say that the rights issue was successful and that Rexam is now rated stable outlook investment grade by both rating agencies. The rights issue raised £334m (net proceeds) which was used to pay down debt. Together with an excellent 2009 cash flow performance, we now have a much stronger balance sheet and debt at the end of the year, at £1.8bn, was £0.8bn down from a year earlier.
Change in dividend policy
The trading environment and the rights issue also caused us to re-examine our dividend policy. In 2008, we increased the dividend by 5% but did so by increasing the debt burden as we did not have enough free cash flow from which to pay that dividend. This was not a sustainable policy. In conjunction with the rights issue, we decided not to declare a 2009 interim dividend and, whilst this was disappointing to many of our shareholders in the short term, it was seen as best for the Company and shareholders in the long term. Recognising the importance of the dividend to many shareholders, the Board will propose a final 2009 dividend of 8p per share payable on 3 June 2010 to holders of shares registered on 7 May 2010, subject to shareholder approval at the AGM in May 2010.
In the medium term we intend to establish dividend cover in the range of 2.0 - 2.5 times underlying earnings, split broadly one third, two thirds between the interim and final payments. This is naturally predicated on financial resources being available and underlying earnings developing as currently anticipated.
Changes to the Board
One of the Board's most important tasks in 2009 was to manage the succession of the Chief Executive, Leslie Van de Walle, once he had signalled his intention to retire. The search for his successor by the Nomination Committee followed due process and was both swift and thorough. We are delighted that Graham Chipchase accepted the offer to become our new Chief Executive. He has been a member of the Board since 2003, first as Finance Director and then as Group Director, Plastic Packaging. He knows Rexam and its people well through his financial and operational roles and has demonstrated the leadership skills to take our Company forward. With Graham at the helm, we look forward with confidence to the next phase of Rexam's development.
I would like to take this opportunity to thank Leslie for his contribution to Rexam. He achieved much during a period of unprecedented turmoil in the global economy. We wish him every success in the future.
Summary
We are committed to improving our performance in 2010. The Board believes that the investments made in recent years to strengthen our business were the right decisions. As our profit performance declined in the wake of the global recession, we acted resolutely and are today more appropriately based in terms of cost and capital structure for the current trading environment.
The consumer packaging industry remains fundamentally attractive and the sector is relatively resilient. Rexam is a strong and profitable global business. We have a sound financial position following the rights issue, well invested assets with good market positions and the right people in the right place.
We demonstrated a reasonably resilient operational performance in 2009 and the actions we have taken are well on track to deliver value for shareholders. On behalf of the Board, I would like to thank the executive team for their leadership of the business and all our employees across the globe for their contribution in achieving these results. My thanks also go to our shareholders for their support during this challenging year.
We are today a stronger and more competitive Company than at the start of 2009 and we are well placed to participate in the upturn when it comes.
Peter Ellwood
Chairman
17 February 2010
OUR VISION AND STRATEGY
The vast majority of our sales are made to large consumer products companies which are typically major multinational or regional brand owners.
Our customers are invariably world class organisations - often considered best in class in their category. They are well consolidated and continue to rationalise their supplier base and focus on cost. Generally, they look to align themselves with global partners who understand the scale and nature of their business and who can also supply their needs at a local level. They require support for their growth plans in established and emerging markets and consistency in terms of technological capability, service and quality. They expect their partners to understand the drivers of their markets and to be proactive in contributing to innovative solutions to changing packaging needs and in driving costs out of the supply chain. They also expect them to act in a responsible manner and support their own efforts towards sustainability.
Our vision
Our vision is to be the best global consumer packaging company - a reference for all others in our industry.
Being best is a journey rather than a destination, and it plays to one of our core values: continuous improvement. Being the best for our shareholders entails continuous and sustainable value creation.
Being the best for our customers means consistently setting ourselves new challenges to excel in providing them with quality products and world class service. Being the best for our people means ensuring that they have a safe and fair place of work in which they can develop fully.
Our strategy
We have evolved our strategy in light of the changing environment. To ensure that we deliver shareholder value, our strategy is based on taking the lead in four key areas: achieving best performance; strengthening relationships with our customers and suppliers; relentlessly pursuing operational excellence and building a winning organisation.
To achieve best performance, our focus is on the fundamentals of cash generation, cost control, improved return on capital and absolute profits.
Strengthening our relationships with customers and suppliers hinges on continuing to develop our market insight to guide our quality and service as well as our innovation and product development, and delivering value through the whole supply chain and being recognised for these aspects of our offering.
Relentlessly pursuing operational excellence means taking the lead in key areas such as safety, operations, sustainability and risk management. These are the fundamentals of a quality business and play to our proven core strengths.
Building a winning organisation means fostering a culture that consistently drives performance towards our vision and delivers on promises.
BUSINESS REVIEW
2009 was an extraordinary year in which we made progress in a number of strategic areas as we pursued our vision to become the best global consumer packaging company.
Group performance
Our financial performance did not meet all our key measurement criteria. Whilst a number of our businesses performed as we expected, others turned out to be impacted more by the recession than we had hoped. Overall, our business turned out to be less resilient than had been the case in previous economic downturns.
Reported sales rose to £4.9bn due to the benefit of foreign exchange translation. Organic sales were down 7% owing to a decline in volumes largely in Plastic Packaging and some parts of Beverage Can Europe, together with the lower cost of aluminium and resin passed through to customers.
Underlying operating profit was £446m, a 4% reduction on a reported basis but a 17% decline on an organic basis. We achieved some price improvements in our Beverage Cans business and benefited from significant cost reductions. However, these were insufficient to offset the impact of lower volumes referred to above. Underlying profit before tax was £285m and underlying earnings per share were 25.4p compared with £328m and 31.5p respectively in 2008.
Statutory results
Results on a statutory basis include the effect of acquisitions, disposed businesses, currency translation and exceptional and other items.
The exceptional and other items are described in more detail in the Financial Review. Sales for continuing operations were £4,866m (2008: £4,618m) and loss before tax was £59m (2008: profit £240m). Total loss for the financial period was £29m (2008: profit £171m) and total basic loss per share was 3.7p (2008: earnings per share 23.9p).
Focus on cash flow and cost
During this period of turmoil in financial markets and the global economy, we focused on improving cash flow and reducing cost.
We were very pleased with our strong cash performance. This was mainly driven by tighter control of working capital and reduced capital expenditure. Working capital inflow for the year was £40m compared with an outflow of cash in 2008 of £155m. We cut capital expenditure to £184m (2008: £389m).
We acted swiftly and resolutely to cut costs. The closure of 15% of our North American beverage can capacity, started in mid 2008, was completed in July 2009. The announced restructuring of our European beverage can business is also complete. The Dmitrov plant in Moscow, Russia, was closed in August and the Dunkirk plant in France closed in December. These measures will reduce costs by £20m per year from 2010 for one off cash costs of around £30m.
The reorganisation of Plastic Packaging announced in May, for an exceptional charge of about £45m at a cash cost of £35m, is on track to deliver annualised savings of £30m in 2010 and beyond. The reorganisation involves the closure and consolidation of seven plants across the Plastic Packaging operations, five in the US and two in Europe, as well as a 10% reduction in headcount (some 1,500 employees) across the sector. The programme is progressing according to plan with two of the seven plants now closed and 1,100 of the planned redundancies already made. Additional actions undertaken in 2009 included shortened working hours for all Personal Care employees during the second half of the year.
As a result of the trading environment in 2009, £193m of goodwill attributable to the Closures business was written off. We will be shutting an additional Closures plant in the US which will deliver incremental savings of £7m by 2011 for a cost of £13m, of which £6m is cash.
Our restructuring actions will result in annual savings of some £75m in 2010, of which £29m came through in 2009, ahead of plan. With the savings from the action in the Closures business, this target will increase to £82m by 2011.
Record efficiency savings
We delivered a record £42m of efficiency savings across the Group as we pursued relentlessly the continued application of six sigma and lean enterprise methodologies. Beverage Cans made significant savings through lower spoilage and reduced energy consumption as well as further lightweighting of their products. In Plastic Packaging, major savings arose from scrap reduction and recycling programmes, maintenance cost reductions and enhancements in injection moulding technology.
Summary and outlook
Trading conditions were difficult throughout 2009. However, we produced a strong cash performance, our cost reduction programme is ahead of plan and we delivered record efficiencies.
Although the strength of any global economic recovery is unclear, volumes appear to be stabilising. However, we expect business conditions in a number of our operations to remain tough. In Beverage Can Europe, there is ongoing uncertainty as to the development of specialty cans and, in Russia, to the continued effect of the recession and the impact of new taxes on beer. In Closures, we have already taken action in 2010 to reduce cost further to counter what is an enduring weakness in beverage closures. In Personal Care, our performance in the current year will depend, in large part, on consumer confidence and discretionary spend in the US.
We continue to maintain the tight management of cash and limit capital expenditure to below depreciation. Looking ahead, our single minded commitment is to enhance shareholder value. This means focusing on the fundamentals of cash flow optimisation, cost control and improving return on capital.
We believe that the trading environment will remain challenging throughout the year but, as we benefit from the cost saving measures we are taking, overall we expect our performance to improve in 2010.
Beverage Cans
|
|
2009 |
2008 |
|
Sales |
£3,573m |
£3,289m |
|
Underlying operating profit |
£310m |
£306m |
|
Return on sales |
8.7% |
9.3% |
Beverage Cans proved to be relatively resilient in the face of the global recession. Reported sales grew 9% chiefly due to favourable foreign exchange translation.
Excluding the effect of passthrough of lower raw material costs, organic sales were flat as pricing benefits in Europe and North America and volume growth in South America were offset by weaker volumes in parts of the European business and the North American operation.
Organic operating profit fell 10%. Cost savings in the European and North American businesses and the increased volumes in South America, particularly Brazil, were cancelled out by the decline in volumes in European specialty cans, and by the effect of the economic decline in Russia. As a result, margins also fell.
Beverage Can Europe & Asia
Industry volumes in Europe were weaker than expected. As a whole, the European beverage can market declined 3% with beer accounting for the majority of the decline. We indicated last year that specialty cans were untried in a recession and, indeed, they proved less resilient than standard cans.
Volumes in the Russian market, which dropped dramatically in the second half of 2008, continued to decline and did not stabilise until the final quarter of the year, finishing 26% down on 2008.
Our own European beverage can volumes were down 9% reflecting our greater exposure to Russia and specialty cans. Excluding Russia, our volumes of standard cans were broadly flat with a good performance especially in the Scandinavian markets. Our total specialty can volumes were down 14% as consumers moved away from premium priced beverages in cans and customers launched fewer new products.
The closure of two plants in Russia and France will reduce our cost base and cut our European beverage can making capacity by 7% creating a more favourable balance between demand and the location of our capacity.
Beverage Can North America
The beverage can market in North America stabilised in the second half to its more normal long term trend, leaving a 1% decline for the year as a whole. Rexam's total volumes for the year declined 3%. Our 24oz can continued to perform well with volumes up 7% benefiting from continued growth in iced teas and beer which favour this size of can. Our standard can volumes declined 5% primarily owing to our greater exposure to premium brands as consumers moved to "own label" products.
The restructuring programme announced in the second half of 2008 is on track to deliver around £20m in anticipated savings in 2010. The Oklahoma facility, which was the final element of the plant reorganisation, was closed at the start of July 2009. In all, we have reduced our 12oz can making capacity in North America by 15% and reduced our headcount by around 270 people.
Beverage Can South America
South America maintained its growth trajectory. We delivered strong volume growth driven by Brazil and Chile where consumer behaviour has been largely unaffected by the global economic downturn. Overall our volumes grew 9% with standard cans up 3%. Our own standard can volumes are almost maximised by current capacity constraints. We are to reopen the Pouso Alegre plant in Minas Gerais. It will have a capacity of 800m standard cans and will be ready for the final quarter of 2010.
Specialty can volumes in South America grew by more than 50%, albeit from a low base. They continued to increase their penetration amongst all drinks categories owing to strong market growth as well as the successful launch of Rexam's Sleek™ can in the region. Specialty cans now account for 15% of our total volume in South America compared with 11% in 2008.
Plastic Packaging
|
|
2009 |
2008 |
|
Sales |
£1,241m |
£1,273m |
|
Underlying operating profit |
£130m |
£157m |
|
Return on sales |
10.5% |
12.3% |
The challenging global economic environment had a considerable effect on Plastic Packaging. Whilst the Healthcare division remained resilient throughout the year, the Personal Care and Closures divisions reported significant volume declines. This was due initially to customer destocking and subsequently to lower consumer demand. There were some signs of stabilisation in trading conditions in the second half and we began to benefit from the cost reduction actions taken earlier in the year.
On a reported basis, Plastic Packaging sales were down 3% to £1,241m. The benefit of foreign exchange translation did not compensate a fall in organic sales which came from significant volume declines in Personal Care and Closures as well as the effect of the passthrough of lower resin costs to customers. Underlying pricing remained broadly flat despite pricing pressure.
Organic operating profit was down 30% as cost and efficiencies and the benefit of foreign exchange were unable to offset the impact of the negative volumes and the change in product mix. Operating margin declined to 10.5%.
The plant closures and restructuring of the business have led to a 5% reduction in our overall injection moulding capacity. This will not impair our ability to benefit from the upturn when it comes. We have sufficient capacity to grow with the market.
Resin costs remained below the levels experienced in 2008. In around 80% of our sales contracts, the resin costs are passed through to our customers, so minimising our exposure to the movement in resin prices. In addition, we have made further progress to hedge future resin usage where customer contracts do not contain terms to allow resin passthrough, thus reducing our exposure to future resin price rises.
Personal Care
Personal Care was impacted by a slowdown in the fragrance and cosmetics market in both the US and Europe resulting in a significant drop in volume. The stabilisation in performance in the second half was the result of a strong demand for foam pumps following the H1N1 outbreak, improved demand for lotion products as well as some new product launches as customers' confidence returned.
In general, customers worked to smaller batch sizes and shorter order commitments while retailers reduced stock holding and expected suppliers to be more flexible and to be able to cope with any fluctuations in demand.
We acted swiftly to the drop in demand with cost saving initiatives, including plant closures, plant restructuring, headcount reductions, salary freezes and furloughs. In the US, we announced the closure of a plant in Pompano, FL, in June and the sale of the Sussex, WI, plant to its management in December. Additional restructuring in the US, included the closure of the Holden, MA, plant, the relocation of the Innovation Centre to Buffalo Grove, Il, and the closure of a sales office in Purchase, NY. In Europe, following negotiations with local works councils, we are undertaking a significant restructuring of the Personal Care plants in Annecy and Simandre in France.
Closures
Closures was also severely impacted by the effects of the recession. Full year volumes declined significantly and continuing reduced consumer demand for bottled beverages in the US did not show any recovery in the second half in what is a more enduring trend. Consumer demand for high barrier food products showed signs of improvement in the second half.
Cost saving initiatives were implemented including headcount reduction. In the US, the closure of the Hamlet, NC, plant was announced in October whilst the Hot Springs, AR, plant underwent consolidation. The sale in June of the Deeside business in the UK marked our exit from the non high barrier food container market.
In February 2010 we announced the closure of our Constantine, MI, plant. This will incur an exceptional charge of some £13m this year at a cash cost of £6m and result in savings of £2m in 2010 and of £5m in 2011 and beyond.
Healthcare
Healthcare remained largely resilient to the current economic environment as the products rely less on consumers' disposable income. Volumes increased slightly on the back of continued strong growth in our pharmaceutical packaging business as new devices came into production, although this was partially offset by reductions in the primary packaging and prescription parts of the business.
The Healthcare division restructured during the year bringing the three separate divisions into one central organisation. The aim is to reduce costs and continue to leverage synergies in quality, technology, operations and sales and strengthen relationships with customers.
In December we announced the closure of the Nashua, NH, plant as part of the alignment of our manufacturing capabilities across our global business.
Financial review
The financial review of our results is based on what we term the underlying business performance, as shown in the first column of the table below, which excludes exceptional and other items. We feel that the underlying figures aid comparison and understanding of the Group's financial performance.
|
|
Underlying business performance1 £m |
Exceptional and other items1 £m |
Total £m |
|
2009: |
|
|
|
|
Sales |
4,866 |
- |
4,866 |
|
Operating profit/(loss) |
446 |
(354) |
92 |
|
Share of associates and joint ventures profit/(loss) after tax |
1 |
(4) |
(3) |
|
Total net finance cost2 |
(162) |
14 |
(148) |
|
Profit/(loss) before tax |
285 |
(344) |
(59) |
|
Profit/(loss) after tax attributable to Rexam PLC |
200 |
(229) |
(29) |
|
|
|
|
|
|
Total basic loss per share (p) |
|
|
(3.7) |
|
Underlying earnings per share (p) |
25.4 |
|
|
|
Proposed final dividend per share (p)3 |
|
|
8.0 |
|
|
|
|
|
|
2008: |
|
|
|
|
Sales |
4,618 |
- |
4,618 |
|
Operating profit/(loss) |
466 |
(86) |
380 |
|
Share of associates and joint ventures profit after tax |
1 |
- |
1 |
|
Total net finance cost2 |
(139) |
(2) |
(141) |
|
Profit/(loss) before tax |
328 |
(88) |
240 |
|
Profit/(loss) after tax |
226 |
(55) |
171 |
|
Attributable to: |
|
|
|
|
Rexam PLC |
|
|
172 |
|
Minority interests |
|
|
(1) |
|
|
|
|
171 |
|
|
|
|
|
|
Total basic earnings per share (restated) (p)4 |
|
|
23.9 |
|
Underlying earnings per share (restated) (p)4 |
31.5 |
|
|
|
Interim and final dividends per share (restated) (p)4 |
|
|
18.7 |
|
1 |
Underlying business performance is the primary performance measure used by management, who believe that the exclusion of exceptional and other items aids comparison of underlying performance of continuing operations. Exceptional items include the gains and losses on disposal of businesses, the restructuring and integration of businesses, major asset impairments and disposals, significant litigation and tax related claims and significant gains arising on reduction of retiree medical and pension liabilities. Other items include the amortisation of certain acquired intangible assets (customer contracts and relationships and technology and patents) and fair value changes on financing derivative financial instruments. |
|
2 |
Underlying total net finance cost comprises net interest of £131m (2008: £132m) and retirement benefit obligations net finance cost of £31m (2008: £7m) and excludes fair value changes on financing derivative financial instruments. |
|
3 |
Subject to approval at AGM 2010 and payable on 3 June 2010. |
|
4 |
Restated for the 2009 rights issue. |
A summary of underlying business performance is set out below.
|
|
2009 £m |
2008 £m |
|
Ongoing operations |
4,814 |
4,562 |
|
Disposals |
52 |
56 |
|
Sales |
4,866 |
4,618 |
|
|
|
|
|
Ongoing operations |
440 |
463 |
|
Disposals |
6 |
3 |
|
Underlying operating profit |
446 |
466 |
|
Share of associates and joint ventures profit after tax |
1 |
1 |
|
Underlying total net finance cost |
(162) |
(139) |
|
Underlying profit before tax |
285 |
328 |
|
Underlying profit after tax |
200 |
226 |
|
|
|
|
|
Underlying earnings per share (p) |
25.4 |
31.5 |
The following tables, showing sales and underlying operating profit, compare the ongoing operations on a consistent basis to demonstrate "like for like" trading performance. This basis includes the 2008 acquisition of the Russian beverage can maker Rostar as if acquired on 1 January 2008 (by adding its pre acquisition results) but excludes disposals and businesses held for sale (described as "Disposals"). Organic change is the year on year change in ongoing operations from businesses owned since the beginning of 2009 at constant exchange rates.
The disposal group was the Petainer plastic bottle business which was sold in November 2009.
Analysis of sales movement
|
|
Total £m |
Beverage Cans £m |
Plastic Packaging £m |
|
Sales reported 2008 |
4,618 |
|
|
|
Disposals |
(56) |
|
|
|
Ongoing operations 2008 reported 2009 |
4,562 |
3,289 |
1,273 |
|
Acquisition 2008 - Rostar |
10 |
10 |
- |
|
Currency fluctuations |
618 |
408 |
210 |
|
Ongoing operations 2008 pro forma basis |
5,190 |
3,707 |
1,483 |
|
Organic change in sales |
(376) |
(134) |
(242) |
|
Ongoing operations reported 2009 |
4,814 |
3,573 |
1,241 |
|
Disposals |
52 |
|
|
|
Sales reported 2009 |
4,866 |
|
|
Organic sales, which exclude the impact of acquisitions, disposals and currency, fell by £376m or 7%. In Beverage Cans the reduction in volumes in the European and North American operations, together with the impact of the passthrough of lower aluminium costs, was offset by pricing benefits in Europe and North America, and volume gains in the South American operation. For Plastic Packaging, the impact was twofold: the passthrough effect of lower resin costs and significant volume declines in Closures and Personal Care due initially to customer destocking and subsequently to lower consumer demand in the global economic downturn. Healthcare, however, produced a resilient performance compared with the prior year.
Analysis of underlying operating profit movement
|
|
Total £m |
Beverage Cans £m |
Plastic Packaging £m |
|
Underlying operating profit reported 2008 |
466 |
|
|
|
Disposals |
(3) |
|
|
|
Ongoing operations 2008 reported 2009 |
463 |
306 |
157 |
|
Acquisition 2008 - Rostar |
1 |
1 |
- |
|
Currency fluctuations |
66 |
37 |
29 |
|
Ongoing operations 2008 pro forma basis |
530 |
344 |
186 |
|
Organic change in underlying operating profit |
(90) |
(34) |
(56) |
|
Ongoing operations reported 2009 |
440 |
310 |
130 |
|
Disposals |
6 |
|
|
|
Underlying operating profit reported 2009 |
446 |
|
|
Analysis of the organic change in underlying operating profit is set out below.
|
|
Total £m |
Beverage Cans £m |
Plastic Packaging £m |
|
Price changes (including passthrough) |
(83) |
(13) |
(70) |
|
Cost changes |
112 |
11 |
101 |
|
Price and cost changes |
29 |
(2) |
31 |
|
Volume and mix changes |
(161) |
(55) |
(106) |
|
Efficiency and other savings |
42 |
23 |
19 |
|
Organic change in underlying operating profit |
(90) |
(34) |
(56) |
Underlying operating profit, after adjusting for the impact of acquisitions, disposals and currency, fell by £90m reflecting the fall in volume in most parts of the business partly offset by cost reductions and efficiency savings across the Group.
The principal drivers within the Beverage Can operations were the decline in European volumes, particularly in specialty cans and as a result of the economic decline in Russia, offset by cost savings in the European and North American business following the capacity reduction initiatives, licence income of £11m and volume gains in the South American operation, particularly in Brazil. The effect of price increases, offset by the passthrough of falling aluminium costs, has largely covered other input cost increases.
Plastic Packaging reported a 30% decline in underlying operating profit predominantly due to the effect of the economic downturn on volumes. Price changes of £70m reflect the impact of lower resin costs being passed through to customers; underlying pricing was flat. The overall volume decline, as discussed in the sales analysis above, was compensated in part by cost savings realised following the integration of OI Plastics in 2008 and cost reduction initiatives implemented in the current year together with efficiency savings.
Exchange rates
The exchange rates used to translate the consolidated income statement and balance sheet are set out below:
|
|
2009 |
2008 |
|
Average: |
|
|
|
Euro |
1.12 |
1.26 |
|
US dollar |
1.57 |
1.86 |
|
|
|
|
|
Closing: |
|
|
|
Euro |
1.11 |
1.04 |
|
US dollar |
1.61 |
1.48 |
Consolidated income statement
The US dollar and the euro, the principal currencies that impacted our results, both strengthened significantly against sterling in the year. The net effect of currency translation caused sales and underlying operating profit compared with 2008 to increase by £618m and £66m respectively.
The movement in exchange rates had the following impact on the translation into sterling for reported sales and underlying operating profit in 2009:
|
|
Sales £m |
Underlying operating profit £m |
|
Euro |
142 |
21 |
|
US dollar |
468 |
45 |
|
Other currencies |
8 |
- |
|
|
618 |
66 |
In addition to the translation exposure, the Group is also exposed to movements in exchange rates on certain of its transactions. These exposures are largely hedged and principally include the US dollar/euro/rouble and the US dollar/Brazilian real movement for the European and South American Beverage Can operations respectively.
Consolidated balance sheet
Most of the Group's borrowings are denominated in US dollars and euros. Currency movements were substantial, reducing net borrowings by £192m and net equity by £150m.
Underlying total net finance cost
|
|
2009 £m |
2008 £m |
|
Net interest |
(131) |
(132) |
|
Retirement benefit obligations net finance cost |
(31) |
(7) |
|
Underlying total net finance cost |
(162) |
(139) |
The underlying total net finance cost increased by £23m compared with the prior year, primarily due to the increase in retirement benefit obligations net finance cost as discussed in "Retirement benefits" below.
The average market interest rates for US dollar borrowings were down by around 2.25% and for euro borrowings 3.4% compared with the prior year. The overall average interest rate charge for the year for Rexam was around 5.6%, which is marginally lower than the prior year. This average reflects the increased proportion of fixed rate debt, such as that on the US private placement and US bond issues made in June 2008, the reduction of floating rate debt following the rights issue in July 2009 and the higher arrangement and facility fees attributed to the negotiation of new bank facilities during the first half of the year.
Based on reported underlying operating profit, interest cover was 3.4 times compared with 3.5 times for 2008. The reduction is due to the fall in underlying operating profit. Interest cover is based on underlying operating profit and underlying total net interest expense excluding charges in respect of retirement benefit obligations.
Tax
The tax charge for the year was £85m (30%) on profit before exceptional and other items (2008: £102m (31%)). The rate reflects the mix of territories in which Rexam operates, the availability of tax incentives in certain jurisdictions, and active management of tax risks. In 2010 and beyond we anticipate the rate to remain around the same level.
Cash tax payments in the year were £62m, the same as in 2008. It is expected that the cash tax paid in future years will remain below the underlying tax charge in the consolidated income statement, in a range of approximately 70% to 80% of that charge.
Exceptional and other items
The exceptional and other items arising in 2009 in respect of continuing operations are as follows:
|
|
Before tax £m |
Tax £m |
After tax £m |
|
Exceptional items: |
|
|
|
|
Impairment of goodwill |
(196) |
74 |
(122) |
|
Restructuring of businesses |
(108) |
24 |
(84) |
|
Disposal of businesses |
(5) |
5 |
- |
|
Total exceptional items included in operating profit |
(309) |
103 |
(206) |
|
Amortisation of certain acquired intangible assets |
(45) |
16 |
(29) |
|
Total exceptional and other items included in operating profit |
(354) |
119 |
(235) |
|
Exceptional items - loss on sale of an associate |
(4) |
- |
(4) |
|
Financing derivative market value changes |
14 |
(4) |
10 |
|
Total exceptional and other items |
(344) |
115 |
(229) |
Exceptional items
Impairment of goodwill
As a result of the trading environment experienced throughout the year by the Plastic Packaging Closures and Beverage Cans India businesses, the carrying value of the goodwill related to these businesses was reassessed. Consequently, it was determined that £196m of goodwill be written off; £193m attributable to Plastic Packaging Closures (including £113m already written off in June 2009) originally arising on the acquisition of OI Plastics in 2007 and £3m on Beverage Cans India that was also written off in June 2009.
Restructuring of businesses
The total restructuring and plant closure cost in respect of the reorganisation of Plastic Packaging is £45m. The restructuring plan reflects the closure and consolidation of plants within Personal Care, Closures and Healthcare and a redundancy programme in Healthcare and in its North American administration function. There will be a charge amounting to some £18m (of which £11m is cash) in 2010 for this restructuring programme and to close a further Closures US facility to address falling demand in this business. Within Beverage Cans, a restructuring charge of £56m has been made to cover the closure of the Dmitrov, Russia and Dunkirk, France facilities within the European business, in response to volume decline in that region, and for the reorganisation of the North American business initiated in 2008. A further charge of £6m will be made in 2010 for the European restructuring. In addition, £7m has been charged in respect of a reduction in corporate staff, including cancellation of certain long term incentives. These restructuring programmes are expected to benefit underlying operating profit by £82m on an annual basis, with £29m already realised in 2009.
Disposal of businesses
In November 2009, the Group disposed of the Petainer plastic bottle business based in Sweden and the Czech Republic for £15m and in December 2009 it disposed of a small Personal Care business based in Sussex, WI for £4m. The combined loss on these two transactions before tax was £5m.
Loss on sale of an associate
In May 2009, the Group disposed of its interest in an associate plastic packaging business based in Mexico for £2m realising a loss of £4m.
Other items
Amortisation of certain acquired intangible assets
Intangible assets, such as technology patents and customer contracts, are required to be recognised on the acquisition of businesses and amortised over their useful life. The directors consider that separate disclosure, within exceptional and other items, of the amortisation of such acquired intangibles amounting to £45m before tax (2008: £44m) aids comparison of organic change in underlying profit.
Fair value changes on financing derivatives
The fair value of the derivatives arising on financing activities directly relates to changes in interest rates and foreign exchange rates. The fair value will change as the transactions to which they relate mature, as new derivatives are transacted and due to the passage of time. The fair value change on financing derivatives for the year was a net gain of £14m (2008: net loss £2m). The impact of derivatives arising on trading items such as commodities and forward foreign exchange contracts is included within underlying operating profit.
(Loss)/earnings per share
|
|
2009 |
2008 restated |
|
Underlying earnings per share (p) |
25.4 |
31.5 |
|
Basic (loss)/earnings per share (p) |
(3.7) |
23.9 |
|
|
|
|
|
Average number of shares in issue (millions) |
787 |
721 |
|
Year end number of shares in issue (millions) |
877 |
643 |
Underlying earnings per share reduced by 19% from 31.5p, as restated for the rights issue, to 25.4p. This is due to the decline in underlying operating profit together with the increase in retirement benefit obligations net finance cost and the impact of the rights issue in July 2009.
The basic loss per share, which includes exceptional and other items and discontinued operations, was 3.7p per share (2008: earnings per share 23.9p, restated). The reduction reflects the impact of exceptional items in 2009, primarily arising from a significant goodwill impairment charge and higher restructuring cost as actions were taken to mitigate the impact of the global economic downturn.
Retirement benefits
Retirement benefit obligations (net of tax) on the balance sheet as at 31 December 2009 were £279m, an increase of £109m compared with £170m reported at 31 December 2008. This was principally due to changes in actuarial values amounting to £120m (after tax) arising as a result of lower discount rates, which are used to value the liabilities in the defined benefit pension plans, and lower bond values in the US funded plan partly offset by higher equity values in the UK plan.
A summary of retirement benefits is set out in note 4.
Changes to the actuarial value of retirement benefits at the balance sheet date are shown in the consolidated statement of comprehensive income. These changes increased the retirement benefit obligations by £120m in 2009 as follows:
|
|
£m |
|
Defined benefit pension plans: |
|
|
Plan liabilities - principally lower discount rates and higher inflation |
(259) |
|
Plan assets - higher than expected returns on equities offset by lower than expected returns on bonds |
73 |
|
Retiree medical liabilities - improved claims trend offset by lower discount rates |
5 |
|
Actuarial losses before tax |
(181) |
|
Tax |
61 |
|
Actuarial losses after tax |
(120) |
The retirement benefit obligations net finance cost is analysed as follows:
|
|
2009 £m |
2008 £m |
|
Defined benefit pension plans: |
|
|
|
Expected return on plan assets |
127 |
140 |
|
Interest on plan liabilities |
(150) |
(140) |
|
|
(23) |
- |
|
Retiree medical - interest on liabilities |
(8) |
(7) |
|
Net finance cost |
(31) |
(7) |
The increase in retirement benefit obligations net finance cost in 2009 compared with 2008 can be mainly attributed to lower expected returns on pension plan assets and higher discount rates at 1 January 2009 versus 1 January 2008 on pension plan liabilities. It is estimated that the net finance cost in 2010 will fall to around £15m; this reduction is due mainly to higher expected asset returns and lower discount rates offset by the impact of a higher pension deficit at 31 December 2009.
The total cash payments in respect of retirement benefits are as follows:
|
|
2009 £m |
2008 £m |
|
Defined benefit pension plans |
20 |
53 |
|
Other pension plans |
12 |
9 |
|
Retiree medical |
11 |
9 |
|
Total cash payments |
43 |
71 |
Cash payments to defined benefit pension plans reduced as a result of an agreed reduction in the deficit contribution to the UK plan, from £22m to £5m, and lower discretionary contributions to the US funded plan. Based on current actuarial projections, it is expected that cash contributions to defined benefit pension plans in 2010 will be around £26m.
Pension legislation in the US will require the US defined benefit plans to meet a higher minimum statutory funding standard in the future and to make cash contributions sufficient to eliminate funding deficits over seven years. Based on current actuarial projections, it is estimated that cash contributions to the US defined benefit plan will be increased by around $80m in 2011 compared with 2010.
Cash flow
Free cash flow for the year resulted in an inflow of £290m compared with an outflow of £128m for 2008. This reflects a significant reduction in capital expenditure (being some 80% of depreciation) and a substantial improvement in working capital. The latter improvement is due to a combination of factors; the reversal of adverse factors that impacted the Group in late 2008, principally related to inventories, the fall in sales as referred to above and initiatives to actively reduce the level of working capital.
|
|
2009 £m |
2008 £m |
|
Underlying operating profit |
446 |
466 |
|
Depreciation and amortisation1 |
227 |
178 |
|
Retirement benefit obligations |
(18) |
(46) |
|
Change in working capital |
40 |
(155) |
|
Restructuring costs |
(36) |
(19) |
|
Other movements |
6 |
14 |
|
Cash generated |
665 |
438 |
|
Capital expenditure (net) |
(174) |
(383) |
|
Net interest and tax paid |
(201) |
(183) |
|
Free cash flow |
290 |
(128) |
|
Equity dividends |
(79) |
(131) |
|
Business cash flow |
211 |
(259) |
|
Acquisitions2 |
(5) |
(136) |
|
Disposals |
21 |
- |
|
Cash flow including borrowings acquired and disposed |
227 |
(395) |
|
Share capital changes |
334 |
1 |
|
Exchange differences |
192 |
(627) |
|
Other non cash movements |
20 |
(18) |
|
Net borrowings at the beginning of the year |
(2,601) |
(1,562) |
|
Net borrowings at the end of the year3 |
(1,828) |
(2,601) |
|
1 |
Excludes amortisation of certain acquired intangibles amounting to £45m (2008: £44m). |
|
2 |
Includes net borrowings acquired of £nil (2008: £12m). |
|
3 |
Net borrowings comprises borrowings £2,095m (2008: £2,859m) less cash and cash equivalents £113m (2008: £75m), collateral deposits £nil (2008: £42m) and certain financial derivative instruments £154m (2008: £141m). |
Capital expenditure
|
|
2009 |
2008 |
|
Capital expenditure (gross) (£m)1 |
184 |
389 |
|
Depreciation and amortisation (£m)2 |
227 |
178 |
|
Ratio (times) |
0.8 |
2.2 |
1 Capital expenditure is on a cash basis and includes computer software that has been capitalised.
2 Amortisation excludes £45m (2008: £44m) amortised on patents, customer contracts and intangibles other than computer software.
Gross capital expenditure was £184m, 0.8 times depreciation and amortisation. This lower level of expenditure reflects a substantially reduced investment in strategic and growth projects. The principal projects completed were in the Beverage Can business and in the European operations in particular, including the new can plant in Denmark and additional can lines in Spain and Egypt. Plastic Packaging has also continued to invest, albeit at a lower level given the tough economic environment, to support a range of products particularly in the pharmaceutical markets.
It is expected that capital expenditure in 2010 will be broadly similar to 2009.
Acquisitions and disposals
Expenditure on acquisitions, including net borrowings assumed, was £5m for the acquisition of the remaining 50% of Rexam Pavisa, a Mexican based personal care plastic packaging manufacturer. The Group has disposed of its Petainer plastic bottle business, a small US Personal Care business and its interest in an associate company based in Mexico for an aggregate consideration of £21m.
Balance sheet and borrowings
|
|
As at 31.12.09 £m |
As at 31.12.08 £m |
|
Goodwill and other intangible assets |
2,481 |
2,949 |
|
Property, plant and equipment |
1,723 |
1,982 |
|
Retirement benefits (net of tax) |
(279) |
(170) |
|
Other net assets |
225 |
16 |
|
|
4,150 |
4,777 |
|
|
|
|
|
Total equity, including minority interests |
2,322 |
2,176 |
|
Net borrowings1 |
1,828 |
2,601 |
|
|
4,150 |
4,777 |
|
|
|
|
|
Return on capital employed (%)2 |
9.5 |
11.0 |
|
Interest cover (times)3 |
3.4 |
3.5 |
|
Gearing (%)4 |
79 |
120 |
|
1 |
Net borrowings comprise borrowings, cash and cash equivalents, collateral deposits and certain derivative financial instruments. |
|
2 |
Underlying operating profit plus share of associates profit after tax divided by the average of opening and closing of shareholders' equity after adding back retirement benefit obligations (net of tax) and net borrowings. |
|
3 |
Based on underlying operating profit divided by underlying total net interest expense. |
|
4 |
Based on net borrowings divided by total equity including minority interests. |
The level of net borrowings at 31 December 2009, down by £773m compared with the previous year, reflects the strong cash flow in the year, the proceeds of the rights issue and the favourable impact of currency translation. The currency denomination of our net borrowings, including financing derivatives, is as follows:
|
|
As at 31.12.09 £m |
As at 31.12.08 £m |
|
US dollar |
1,719 |
2,063 |
|
Euro |
400 |
373 |
|
Sterling and other |
(291) |
165 |
|
Net borrowings |
1,828 |
2,601 |
For the management of foreign currency asset matching and interest rate risk, the profile of gross borrowings is 70% (2008: 79%) in US dollars, 27% (2008: 15%) in euros and 3% (2008: 6%) in other currencies.
Our gearing has fallen from 120% to 79% following the reduction in net borrowings. Interest cover at 3.4 times is outside our preferred target range, but should improve going forward as the full year effect of the rights issue is reflected. We remain comfortably within our debt covenants and our liquidity remains strong with committed debt headroom at over £1bn at the year end.
At 31 December 2009, the Group's principal committed loan and bank facilities totalled some £3bn in varying currencies and maturities (of which £148m is due in 2010), as detailed below:
|
|
Currency |
Maturity |
Facility £m |
|
Subordinated bond |
Euro swapped to US$ |
2067 |
625 |
|
US private placement and bond |
US$ |
2013 |
482 |
|
Medium term note |
Euro |
2013 |
621 |
|
Revolving credit facility1 |
Multi currency |
2012 |
647 |
|
Bilateral bank facilities |
Multi currency |
2012 |
258 |
|
Bilateral bank facilities |
Multi currency |
2011 |
221 |
|
Revolving credit facility1 |
Multi currency |
2010 |
128 |
|
Bilateral bank facility |
GBP |
2010 |
20 |
|
Total committed loan and bank facilities |
|
|
3,002 |
1 The existing £775m revolving credit facility will be replaced by a £647m forward start revolving credit facility in November 2010.
Net borrowings include interest accruals and certain financial derivatives as set out below:
|
|
As at 31.12.09 £m |
As at 31.12.08 £m |
|
Net borrowings excluding derivative financial instruments |
1,982 |
2,742 |
|
Derivative financial instruments |
(154) |
(141) |
|
Net borrowings |
1,828 |
2,601 |
Derivative financial instruments comprise instruments relating to net borrowings (cross currency and interest rate swaps) and those related to other business transactions (forward commodity and forward foreign exchange deals). Total derivative financial instruments are set out below:
|
|
As at 31.12.09 £m |
As at 31.12.08 £m |
|
Cross currency swaps |
146 |
126 |
|
Interest rate swaps |
11 |
12 |
|
Foreign exchange forward contracts |
(3) |
3 |
|
Derivative financial instruments included in net borrowings |
154 |
141 |
|
Other derivative financial instruments |
28 |
(239) |
|
Total derivative financial instruments |
182 |
(98) |
The increase in the value of cross currency swaps can be mainly attributed to the effect of the relatively weaker US dollar on the swaps related to the €750m subordinated bond offset by the maturity in March 2009 of swaps related to medium term notes. The increase in value of other derivatives was due mainly to the rise in aluminium prices and the maturity of loss making aluminium commodity derivative contracts.
Treasury risk management
Rexam's treasury risk management is based upon sound economic objectives and good corporate practice.
Derivative and other financial instruments are used to manage trading exposures, liabilities and assets under parameters laid down by the Board, which are monitored by its Finance Committee. The Group's major hedging activities are to mitigate the following risks:
|
(i) |
Commodity price and currency transaction risks for aluminium purchases made by its European and South American beverage can operations and for resin purchases made by its Plastic Packaging businesses; |
|
(ii) |
Fair value and cash flow interest rate risks associated with the Group's borrowing facilities; and |
|
(iii) |
Currency translation risks of net assets in overseas subsidiaries. |
The Group has not used derivative financial instruments for purposes other than for hedging its exposures.
To avoid income statement volatility, and where such benefits outweigh the costs of compliance, the Group has designated many of its economic hedges as hedging instruments under IAS39. However, for certain effective economic hedging relationships such hedge accounting treatment is not permitted under IFRS. Where hedge accounting is not achieved, fair value movements on derivatives are recorded in the consolidated income statement which could give rise to earnings volatility.
It is the Group's policy to maintain a range of maturity dates for its borrowings, and to refinance them at the appropriate time so as to reduce refinancing risk. The issue of longer term borrowings, through the MTN programme, the issue of a subordinated bond or through other bond and debt markets, is a key element of the Group's debt and financial risk management process. A €700m MTN, to mature in March 2013, was issued in March 2006. A €750m subordinated bond issued in June 2007 was swapped into US dollars, at floating rates, to enable it to partly fund the acquisition of OI Plastics. Although the subordinated bond matures in 2067, Rexam has the option to redeem after 10 years or on any interest payment date thereafter. In June 2008, the Group issued a US$550m US public bond and made a US$225m US private placement, both at fixed interest rates and maturing in 2013.
In 2009, the Group secured around £700m in bilateral facilities and refinanced a substantial portion of the £775m revolving credit facility to underpin its access to liquidity and to address the 2010 maturities. Following the rights issue in July 2009, the Group elected to cancel some £285m of bank facilities. The Group has also taken advantage of a recent improvement in market conditions to buy back some €10m of the MTN bonds in 2009 to rebalance the debt mix. Since the end of the year another €12m of these bonds have been purchased and further purchases may be made if these conditions continue.
Key group risk factors
Risk management is part of our focus on operational excellence, a key strategic priority for the Group. Rexam faces a wide range of risks that may affect the execution and implementation of its strategy, the main ones being market, operational, environmental, social, governance as well as financial. A more detailed section on risks is included in the annual report.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
|
|
Notes |
|
2009 £m |
2008 £m |
||
|
Sales |
2 |
|
4,866 |
4,618 |
||
|
Operating expenses |
|
|
(4,774) |
(4,238) |
||
|
Underlying operating profit |
2 |
|
446 |
466 |
||
|
Exceptional items |
3 |
|
(309) |
(42) |
||
|
Amortisation of certain acquired intangible assets |
|
|
(45) |
(44) |
||
|
Operating profit |
|
|
92 |
380 |
||
|
Share of underlying post tax profits of associates and joint ventures |
|
|
1 |
1 |
||
|
Exceptional items |
3 |
|
(4) |
- |
||
|
Share of post tax (losses)/profits of associates and joint ventures |
|
|
(3) |
1 |
||
|
Retirement benefit obligations net finance cost |
4 |
|
(31) |
(7) |
||
|
Underlying interest expense |
|
|
(134) |
(144) |
||
|
Fair value changes on financing derivatives |
|
|
14 |
(2) |
||
|
Interest expense |
|
|
(120) |
(146) |
||
|
Interest income |
|
|
3 |
12 |
||
|
Underlying profit before tax |
|
|
285 |
328 |
||
|
Exceptional items |
3 |
|
(313) |
(42) |
||
|
Amortisation of certain acquired intangible assets |
|
|
(45) |
(44) |
||
|
Fair value changes on financing derivatives |
|
|
14 |
(2) |
||
|
(Loss)/profit before tax |
|
|
(59) |
240 |
||
|
Tax on underlying profit |
|
|
(85) |
(102) |
||
|
Tax on exceptional items |
3 |
|
103 |
18 |
||
|
Tax on amortisation of certain acquired intangible assets |
|
|
16 |
14 |
||
|
Tax on fair value changes on financing derivatives |
|
|
(4) |
1 |
||
|
Tax |
|
|
30 |
(69) |
||
|
(Loss)/profit for the financial year |
|
|
(29) |
171 |
||
|
Attributable to: |
|
|
|
|
||
|
Equity shareholders of Rexam PLC |
|
|
(29) |
172 |
||
|
Minority interests |
|
|
- |
(1) |
||
|
|
|
|
(29) |
171 |
||
|
|
|
|
|
|
||
|
|
|
|
2009 Pence |
2008 restated Pence |
||
|
(Loss)/earnings per share |
5 |
|
|
|
||
|
Basic |
|
|
(3.7) |
23.9 |
||
|
Diluted |
|
|
(3.7) |
23.9 |
||
|
Underlying |
|
|
25.4 |
31.5 |
||
For details of equity dividends paid and proposed see note 6.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
|
|
2009 £m |
2008 £m |
|
(Loss)/profit for the financial year |
(29) |
171 |
|
Actuarial losses on retirement benefits |
(181) |
(30) |
|
Tax on actuarial losses on retirement benefits |
61 |
4 |
|
Exchange differences before recognition of net investment hedges |
(207) |
651 |
|
Net investment hedges recognised |
57 |
(184) |
|
Exchange differences recycled to the income statement on disposal of subsidiaries |
(14) |
- |
|
Cash flow hedges recognised |
73 |
(189) |
|
Tax on cash flow hedges |
(48) |
35 |
|
Cash flow hedges transferred to inventory |
163 |
9 |
|
Cash flow hedges transferred to the income statement |
14 |
- |
|
Changes in market value of available for sale financial assets |
(4) |
3 |
|
Other comprehensive income for the year |
(86) |
299 |
|
Total comprehensive income for the year |
(115) |
470 |
|
Attributable to: |
|
|
|
Equity shareholders of Rexam PLC |
(115) |
471 |
|
Minority interests |
- |
(1) |
|
|
(115) |
470 |
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER
|
|
2009 £m |
2008 £m |
|
Assets |
|
|
|
Non current assets |
|
|
|
Goodwill
|
1,886 |
2,246 |
|
Other intangible assets |
595 |
703 |
|
Property, plant and equipment |
1,723 |
1,982 |
|
Investments in associates and joint ventures |
54 |
63 |
|
Pension asset (Note 4) |
- |
16 |
|
Deferred tax assets |
201 |
137 |
|
Trade and other receivables |
80 |
63 |
|
Available for sale financial assets |
21 |
30 |
|
Derivative financial instruments |
275 |
342 |
|
|
4,835 |
5,582 |
|
Current assets |
|
|
|
Inventories |
432 |
614 |
|
Trade and other receivables |
630 |
833 |
|
Available for sale financial assets |
2 |
1 |
|
Derivative financial instruments |
65 |
54 |
|
Cash and cash equivalents |
113 |
75 |
|
Assets classified as held for sale |
4 |
39 |
|
|
1,246 |
1,616 |
|
Total assets |
6,081 |
7,198 |
|
|
|
|
|
Liabilities |
|
|
|
Current liabilities |
|
|
|
Borrowings |
(140) |
(587) |
|
Derivative financial instruments |
(17) |
(265) |
|
Current tax |
(15) |
(4) |
|
Trade and other payables |
(748) |
(1,053) |
|
Provisions |
(62) |
(21) |
|
Liabilities classified as held for sale |
- |
(15) |
|
|
(982) |
(1,945) |
|
Non current liabilities |
|
|
|
Borrowings |
(1,955) |
(2,272) |
|
Derivative financial instruments |
(141) |
(229) |
|
Retirement benefit obligations (Note 4) |
(396) |
(244) |
|
Deferred tax liabilities |
(99) |
(151) |
|
Non current tax |
(87) |
(91) |
|
Other payables |
(47) |
(33) |
|
Provisions |
(52) |
(57) |
|
|
(2,777) |
(3,077) |
|
Total liabilities |
(3,759) |
(5,022) |
|
Net assets |
2,322 |
2,176 |
|
|
|
|
|
Equity |
|
|
|
Ordinary share capital |
563 |
413 |
|
Share premium account |
989 |
1,005 |
|
Capital redemption reserve |
351 |
351 |
|
Retained earnings |
55 |
77 |
|
Other reserves |
362 |
328 |
|
Shareholders' equity |
2,320 |
2,174 |
|
Minority interests |
2 |
2 |
|
Total equity |
2,322 |
2,176 |
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
|
|
2009 £m |
2008 £m |
|
Cash flows from operating activities |
|
|
|
Cash generated from operations |
708 |
396 |
|
Interest paid |
(142) |
(133) |
|
Tax paid |
(62) |
(62) |
|
Net cash flows from operating activities |
504 |
201 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
Capital expenditure |
(184) |
(389) |
|
Proceeds from sale of property, plant and equipment |
10 |
6 |
|
Acquisition of subsidiaries |
(5) |
(112) |
|
Disposal of subsidiaries |
19 |
- |
|
Acquisition of joint venture |
- |
(2) |
|
Disposal of associate |
2 |
- |
|
Interest received |
3 |
12 |
|
Net cash flows from investing activities |
(155) |
(485) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from borrowings |
19 |
477 |
|
Repayment of borrowings |
(540) |
(115) |
|
Proceeds from rights issue (net of expenses of £16m) |
334 |
- |
|
Proceeds from issue of share capital on options |
- |
1 |
|
Dividends paid to equity shareholders |
(79) |
(131) |
|
Net cash flows from financing activities |
(266) |
232 |
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
83 |
(52) |
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
(25) |
36 |
|
Exchange differences and other adjustments |
4 |
(9) |
|
Net increase/(decrease) in cash and cash equivalents |
83 |
(52) |
|
Cash and cash equivalents at the end of the year |
62 |
(25) |
|
|
|
|
|
Cash and cash equivalents comprise: |
|
|
|
Cash at bank and in hand |
40 |
62 |
|
Short term bank deposits |
73 |
13 |
|
Bank overdrafts |
(51) |
(100) |
|
|
62 |
(25) |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
Ordinary share capital £m |
Share premium account £m |
Capital redemption reserve £m |
Retained earnings £m |
Other reserves £m |
Shareholders' equity £m |
Minority interests £m |
Total equity £m |
|
At 1 January 2009 |
413 |
1,005 |
351 |
77 |
328 |
2,174 |
2 |
2,176 |
|
Loss for the financial year |
- |
- |
- |
(29) |
- |
(29) |
- |
(29) |
|
Actuarial losses on retirement benefits |
- |
- |
- |
(181) |
- |
(181) |
- |
(181) |
|
Tax on actuarial losses on retirement benefits |
- |
- |
- |
61 |
- |
61 |
- |
61 |
|
Exchange differences before recognition of net investment hedges |
- |
- |
- |
- |
(207) |
(207) |
- |
(207) |
|
Net investment hedges recognised |
- |
- |
- |
- |
57 |
57 |
- |
57 |
|
Exchange differences recycled to the income statement on disposal of subsidiaries |
- |
- |
- |
- |
(14) |
(14) |
- |
(14) |
|
Cash flow hedges recognised |
- |
- |
- |
- |
73 |
73 |
- |
73 |
|
Tax on cash flow hedges |
- |
- |
- |
- |
(48) |
(48) |
- |
(48) |
|
Cash flow hedges transferred to inventory |
- |
- |
- |
- |
163 |
163 |
- |
163 |
|
Cash flow hedges transferred to the income statement |
- |
- |
- |
- |
14 |
14 |
- |
14 |
|
Changes in market value of available for sale financial assets |
- |
- |
- |
- |
(4) |
(4) |
- |
(4) |
|
Other comprehensive income for the year |
- |
- |
- |
(120) |
34 |
(86) |
- |
(86) |
|
Total comprehensive income for the year |
- |
- |
- |
(149) |
34 |
(115) |
- |
(115) |
|
Proceeds from rights issue (net of expenses) |
150 |
(16) |
- |
- |
200 |
334 |
- |
334 |
|
Transfers |
- |
- |
- |
200 |
(200) |
- |
- |
- |
|
Share options: value of services provided |
- |
- |
- |
6 |
- |
6 |
- |
6 |
|
Dividends paid to equity shareholders |
- |
- |
- |
(79) |
- |
(79) |
- |
(79) |
|
At 31 December 2009 |
563 |
989 |
351 |
55 |
362 |
2,320 |
2 |
2,322 |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2008 |
413 |
1,004 |
351 |
60 |
3 |
1,831 |
2 |
1,833 |
|
Profit/(loss) for the financial year |
- |
- |
- |
172 |
- |
172 |
(1) |
171 |
|
Actuarial losses on retirement benefits |
- |
- |
- |
(30) |
- |
(30) |
- |
(30) |
|
Tax on actuarial losses on retirement benefits |
- |
- |
- |
4 |
- |
4 |
- |
4 |
|
Exchange differences before recognition of net investment hedges |
- |
- |
- |
- |
651 |
651 |
- |
651 |
|
Net investment hedges recognised |
- |
- |
- |
- |
(184) |
(184) |
- |
(184) |
|
Cash flow hedges recognised |
- |
- |
- |
- |
(189) |
(189) |
- |
(189) |
|
Tax on cash flow hedges |
- |
- |
- |
- |
35 |
35 |
- |
35 |
|
Cash flow hedges transferred to inventory |
- |
- |
- |
- |
9 |
9 |
- |
9 |
|
Changes in market value of available for sale financial assets |
- |
- |
- |
- |
3 |
3 |
- |
3 |
|
Other comprehensive income for the year |
- |
- |
- |
(26) |
325 |
299 |
- |
299 |
|
Total comprehensive income for the year |
- |
- |
- |
146 |
325 |
471 |
(1) |
470 |
|
Share options: value of services provided |
- |
- |
- |
2 |
- |
2 |
- |
2 |
|
Share options: proceeds from shares issued |
- |
1 |
- |
- |
- |
1 |
- |
1 |
|
Dividends paid to equity shareholders |
- |
- |
- |
(131) |
- |
(131) |
- |
(131) |
|
Increase in minority interests |
- |
- |
- |
- |
- |
- |
1 |
1 |
|
At 31 December 2008 |
413 |
1,005 |
351 |
77 |
328 |
2,174 |
2 |
2,176 |
NOTES
1 Basis of preparation
In preparing the consolidated financial statements, comparative amounts for earnings per share and dividends per share have been restated as a result of the July 2009 rights issue.
The Group has adopted the following new and amended IFRS as of 1 January 2009.
|
(i) |
IFRS8 'Operating Segments'. For more information see the segment analysis in note 2. |
|
(ii) |
IAS1 (Revised) 'Presentation of Financial Statements'. The revised standard requires all non shareholder changes in equity to be presented separately from shareholder changes in equity. As a result, the Group presents non shareholder changes in equity in the consolidated statement of comprehensive income and shareholder changes in equity in the consolidated statement of changes in equity. |
|
(iii) |
IFRS7 'Financial instruments - Disclosures' (Amendment). The amendment requires enhanced disclosures concerning fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. |
|
(iv) |
IFRS2 (Amendment) 'Share based payment'. This amendment deals with vesting conditions and cancellations. It clarifies that vesting conditions are only service and performance conditions. Other features of a share based payment are not vesting conditions. These non vesting features would need to be included in the grant date fair value for transactions with employees; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. The amendment does not have a material impact on the consolidated financial statements. |
|
(v) |
IAS23 (Revised) 'Borrowing Costs'. This revision of an existing standard requires the capitalisation of borrowing costs directly attributable to an acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The revision does not have a material impact on the consolidated financial statements. |
The following accounting standards and amendments to existing standards are not yet effective and have not been early adopted by the Group.
(i) IFRS3 (Revised) 'Business Combinations'.
(ii) IAS27 (Revised) 'Consolidated and Separate Financial Statements'.
There are no other accounting standards or IFRICs that are not yet effective that would be expected to have a material impact on the Group.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.
Rexam presents underlying operating profit, underlying profit before tax and underlying earnings per share information as it believes these measures provide a helpful indication of its performance and underlying trends. The term underlying refers to the relevant measure being reported before exceptional items, the amortisation of certain intangible assets and fair value changes on financing derivatives. These measures are used by Rexam for internal performance analysis and as a basis for incentive compensation arrangements for employees. The terms underlying and exceptional items are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measurements of profit.
2 Segment analysis
With effect from 1 January 2009, the Group adopted IFRS8 'Operating Segments'. This accounting standard requires a "through the eyes of management" approach under which segment information is presented on the same basis as that used for internal reporting purposes.
For internal reporting, Rexam is organised into three operating segments for Beverage Cans based on the geographical locations of Europe and Asia, North America and South America, and into one operating segment for Plastic Packaging. For financial reporting purposes, the three operating segments for Beverage Cans are combined into one reportable segment.
Beverage Cans comprise aluminium and steel cans for a wide variety of beverages including carbonated soft drinks and beer. Plastic Packaging comprises rigid plastic products for customers in the Healthcare, Personal Care and Closures divisions.
(i) Segment information 2009
|
|
Sales £m |
Underlying operating profit £m |
Underlying return on sales % |
Exceptional and other items* £m |
Profit/(loss) £m |
|
Beverage Cans |
3,573 |
310 |
8.7 |
(69) |
241 |
|
Plastic Packaging |
1,241 |
130 |
10.5 |
(287) |
(157) |
|
Total reportable segments |
4,814 |
440 |
9.1 |
(356) |
84 |
|
Disposals and businesses for sale |
52 |
6 |
11.5 |
2 |
8 |
|
|
4,866 |
446 |
9.2 |
(354) |
92 |
|
Share of post tax losses of associates and joint ventures |
|
|
|
|
(3) |
|
Retirement benefit obligations net finance cost |
|
|
|
|
(31) |
|
Net interest expense |
|
|
|
|
(117) |
|
Loss before tax |
|
|
|
|
(59) |
|
Tax |
|
|
|
|
30 |
|
Loss for the financial year |
|
|
|
|
(29) |
Underlying operating profit comprises operating profit before exceptional items and the amortisation of certain acquired intangible assets. Underlying operating profit is included as it is felt that adjusting operating profit for exceptional items and the amortisation of certain acquired intangible assets provides a better indication of the Group's performance. Underlying return on sales comprises underlying operating profit divided by sales.
Non specific central costs are allocated on the basis of net assets excluding investments in associates and joint ventures, net borrowings and tax.
(ii) Segment information 2008
|
|
Sales £m |
Underlying operating profit £m |
Underlying return on sales % |
Exceptional and other items* £m |
Profit £m |
|
Beverage Cans |
3,289 |
306 |
9.3 |
(36) |
270 |
|
Plastic Packaging |
1,273 |
157 |
12.3 |
(50) |
107 |
|
Total reportable segments |
4,562 |
463 |
10.1 |
(86) |
377 |
|
Disposals and businesses for sale |
56 |
3 |
5.4 |
- |
3 |
|
|
4,618 |
466 |
10.1 |
(86) |
380 |
|
Share of post tax profits of associates and joint ventures |
|
|
|
|
1 |
|
Retirement benefit obligations net finance cost |
|
|
|
|
(7) |
|
Net interest expense |
|
|
|
|
(134) |
|
Profit before tax |
|
|
|
|
240 |
|
Tax |
|
|
|
|
(69) |
|
Profit for the financial year |
|
|
|
|
171 |
*Other items comprise the amortisation of certain acquired intangible assets.
3 Exceptional items
|
|
2009 £m |
2008 £m |
|
Impairment of goodwill |
(196) |
- |
|
Restructuring of businesses |
(108) |
(31) |
|
Disposal of subsidiaries |
(5) |
- |
|
Other exceptional items |
- |
(11) |
|
Exceptional items included in operating profit |
(309) |
(42) |
|
Disposal of associate |
(4) |
- |
|
Exceptional items included in profit before tax |
(313) |
(42) |
|
Tax on exceptional items |
103 |
18 |
|
Total exceptional items after tax |
(210) |
(24) |
During 2009, goodwill in relation to the Plastic Packaging Closures cash generating unit was impaired by £193m and goodwill in relation to the Beverage Cans India cash generating unit was impaired by £3m following tests for impairment triggered by expected declines in future profitability and cash flow forecasts resulting from adverse market conditions.
Within Beverage Cans, a restructuring charge of £56m has been made to cover the closure of the Dmitrov and Dunkirk facilities within the European business in response to volume decline in that region and for the reorganisation of the North American business initiated in 2008. The total restructuring charge in respect of the reorganisation of Plastic Packaging was £45m, reflecting the closure and consolidation of plants within Personal Care, Closures and Healthcare and a redundancy programme in Healthcare and in its North American administration function. In addition, £7m has been charged in respect of a reduction in corporate staff, including cancellation of certain long term incentives.
In November 2009, the Group disposed of its Petainer plastic bottle business based in Sweden and the Czech Republic for £15m and in December 2009 it disposed of a small Plastic Packaging Personal Care business based in Sussex, WI for £4m. The combined loss on these two transactions before tax was £5m.
In May 2009, the Group disposed of its interest in an associated Plastic Packaging business based in Mexico realising a loss of £4m.
Tax on exceptional items in 2009 relates to impairment of goodwill of £74m, restructuring of businesses of £24m and disposal of subsidiaries of £5m.
4 Retirement benefit obligations
(i) Summary
|
|
UK defined benefit pensions £m |
USA defined benefit pensions £m |
Other defined benefit pensions £m |
Total defined benefit pensions £m |
Other pensions £m |
Total pensions £m |
Retiree medical £m |
Gross retirement benefit obligations £m |
|
At 1 January 2009 |
16 |
(54) |
(43) |
(81) |
(20) |
(101) |
(127) |
(228) |
|
Exchange differences |
- |
8 |
3 |
11 |
1 |
12 |
9 |
21 |
|
Service cost |
(7) |
(4) |
(1) |
(12) |
(12) |
(24) |
(1) |
(25) |
|
Exceptional items |
1 |
1 |
- |
2 |
- |
2 |
- |
2 |
|
Net finance cost |
(2) |
(19) |
(2) |
(23) |
- |
(23) |
(8) |
(31) |
|
Actuarial changes |
(36) |
(154) |
4 |
(186) |
- |
(186) |
5 |
(181) |
|
Cash contributions and benefits paid |
17 |
1 |
2 |
20 |
12 |
32 |
11 |
43 |
|
Transfers |
- |
3 |
- |
3 |
- |
3 |
- |
3 |
|
At 31 December 2009 |
(11) |
(218) |
(37) |
(266) |
(19) |
(285) |
(111) |
(396) |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2008 |
68 |
(101) |
(30) |
(63) |
(17) |
(80) |
(98) |
(178) |
|
Exchange differences |
- |
(17) |
(8) |
(25) |
(4) |
(29) |
(33) |
(62) |
|
Service cost |
(10) |
(4) |
(1) |
(15) |
(9) |
(24) |
(1) |
(25) |
|
Exceptional items |
- |
(3) |
- |
(3) |
- |
(3) |
4 |
1 |
|
Net finance cost |
15 |
(14) |
(1) |
- |
- |
- |
(7) |
(7) |
|
Actuarial changes |
(89) |
64 |
(5) |
(30) |
1 |
(29) |
(1) |
(30) |
|
Cash contributions and benefits paid |
32 |
19 |
2 |
53 |
9 |
62 |
9 |
71 |
|
Transfers |
- |
2 |
- |
2 |
- |
2 |
- |
2 |
|
At 31 December 2008 |
16 |
(54) |
(43) |
(81) |
(20) |
(101) |
(127) |
(228) |
|
|
2009 £m |
2008 £m |
|
Gross retirement benefit obligations |
(396) |
(228) |
|
Deferred tax |
117 |
58 |
|
Net retirement benefit obligations |
(279) |
(170) |
(ii) Principal actuarial assumptions
|
|
UK 2009 % |
USA 2009 % |
Other 2009 % |
UK 2008 % |
USA 2008 % |
Other 2008 % |
|
Future salary increases |
5.20 |
4.00 |
3.07 |
4.30 |
4.00 |
3.07 |
|
Future pension increases |
3.70 |
- |
2.00 |
2.80 |
- |
2.00 |
|
Discount rate |
5.70 |
5.50 |
5.06 |
6.00 |
6.25 |
5.05 |
|
Inflation rate |
3.70 |
2.50 |
2.00 |
2.80 |
2.50 |
2.00 |
|
Expected return on plan assets (net of administration expenses): |
|
|
|
|
|
|
|
Equities |
7.75 |
7.56 |
8.30 |
7.47 |
7.49 |
8.70 |
|
Bonds |
4.70 |
4.76 |
3.70 |
4.47 |
4.50 |
3.20 |
|
Cash and other |
0.25 |
3.16 |
1.00 |
1.82 |
3.01 |
4.00 |
To develop the expected return on plan assets assumptions, the Group considered the current level of expected returns on risk free investments, primarily government bonds, the historical level of the risk premium associated with the asset class concerned and the expectations for future returns of the asset class. The resulting returns for equities, bonds and cash were then reduced to allow for administration expenses.
The mortality assumptions used in valuing the liabilities of the UK pension plan in 2009 and 2008 are based on the standard tables PA92 as published by the Institute and Faculty of Actuaries. These tables are adjusted to reflect the circumstances of the plan membership. The life expectancy assumed for male pensioners aged 65 is 21.2 years (2008: 21.2 years) and for female pensioners aged 65 is 24.3 years (2008: 24.3 years).
The life expectancy at age 65 assumed for male non pensioners currently aged 45 is 23.4 years (2008: 23.4 years) and for female non pensioners currently aged 45 is 26.7 years (2008: 26.7 years).
The mortality assumptions used in valuing the liabilities of the US pension plans in 2009 and 2008 are based on the RP2000 combined active and retiree mortality table projected to 2006 weighted 70% blue collar and 30% white collar. The life expectancy assumed for male pensioners aged 65 is 17.8 years (2008: 17.8 years) and for female pensioners aged 65 is 20.2 years (2008: 20.2 years).
5 (Loss)/earnings per share
(i) Basic and diluted (loss)/earnings per share
|
|
|
|
2009 Pence |
2008 restated Pence |
|
Basic |
|
|
(3.7) |
23.9 |
|
Diluted |
|
|
(3.7) |
23.9 |
|
|
2009 £m |
2008 £m |
|
(Loss)/profit for the financial year attributable to shareholders of Rexam PLC |
(29) |
172 |
|
|
2009 Millions |
2008 restated Millions |
|
Weighted average number of shares in issue as originally stated |
786.5 |
642.3 |
|
Bonus element of rights issue |
- |
78.6 |
|
Weighted average number of shares in issue as restated |
786.5 |
720.9 |
|
Dilution on conversion of outstanding share options |
- |
0.2 |
|
Weighted average number of shares in issue on a diluted basis as restated |
786.5 |
721.1 |
Earnings per share have been restated for the 2009 rights issue.
There are 0.2 million share options outstanding at 31 December 2009 that could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share for 2009 because they were anti dilutive.
(ii) Underlying earnings per share
|
|
2009 Pence |
2008 restated Pence |
|
Underlying earnings per share |
25.4 |
31.5 |
|
|
2009 £m |
2008 £m |
|
Underlying profit before tax |
285 |
328 |
|
Tax on underlying profit |
(85) |
(102) |
|
Underlying profit for the financial year |
200 |
226 |
|
Attributable to: |
|
|
|
Equity shareholders of Rexam PLC |
200 |
227 |
|
Minority interests |
- |
(1) |
|
|
200 |
226 |
Underlying earnings per share is based on underlying profit for the financial year attributable to equity shareholders of Rexam PLC divided by the weighted average number of shares in issue. Underlying profit for the financial year is profit before exceptional items, the amortisation of certain acquired intangible assets and fair value changes on financing derivatives. Underlying earnings per share is included as it is felt that adjusting basic earnings per share for exceptional items, the amortisation of certain acquired intangible assets and fair value changes on financing derivatives provides a better indication of the Group's performance.
6 Equity dividends
|
|
2009 £m |
2008 £m |
|
Final dividend for 2008 of 10.9p restated paid on 2 July 2009 |
79 |
- |
|
Interim dividend for 2008 of 7.8p restated paid on 4 November 2008 |
- |
56 |
|
Final dividend for 2007 of 10.4p restated paid on 3 June 2008 |
- |
75 |
|
|
79 |
131 |
Dividends per share have been restated for the 2009 rights issue.
A final dividend per equity share of 8.0p has been proposed for 2009 and, subject to shareholder approval, is payable on 3 June 2010. The proposed final dividend has not been accrued in these consolidated financial statements.
7 Net borrowings
|
|
2009 £m |
2008 £m |
|
At the beginning of the year |
(2,601) |
(1,562) |
|
Exchange differences |
192 |
(627) |
|
Acquisition of subsidiaries |
- |
(22) |
|
Change in cash and cash equivalents |
83 |
(52) |
|
Proceeds from borrowings |
(19) |
(477) |
|
Repayment of borrowings |
540 |
115 |
|
Movement in collateral deposits |
(43) |
42 |
|
Fair value and other changes |
20 |
(18) |
|
At the end of the year |
(1,828) |
(2,601) |
|
8 |
A copy of the information to be provided to financial analysts is available on request from the Company Secretary, Rexam PLC, 4 Millbank, London SW1P 3XR and is also on Rexam's website, www.rexam.com. |
|
9 |
The Annual Report 2009 will be published on www.rexam.com at the end of March 2010. At that time the Annual Report 2009 will be mailed to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report 2009 is available online and will, at the time of that notification, receive a Proxy Form together with the Notice of Annual General Meeting 2010. |
Related Shares:
REX.L