31st Jul 2007 07:01
Elementis PLC31 July 2007 31 July 2007 ELEMENTIS plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Elementis plc, a Global Specialty Chemicals Company, announces its results forthe six months ended 30 June 2007. HIGHLIGHTS • Underlying sales up 5 per cent (adjusted for currency and exited plant capacity). o Good demand in most key markets. • Operating profit up 26 per cent. o Specialty Products operating margin increased to 21 per cent (15 per cent in 2006). o Includes one-time energy rebate of £1.4 million in Chromium. • Earnings per share 4.2 pence, up 31 per cent (22 per cent excluding energy rebate). • Net debt reduced by £14.9 million since the end of 2006, to £85.7 million. • Dividend increased to 1.3 pence (up 8 per cent). Financial Summary 2007 2006 Sales* £197.7m £210.9mOperating profit* £22.8m £18.1mProfit before tax* £19.6m £14.4mDiluted earnings per share* 4.2p 3.2pDividend per share to shareholders 1.3p 1.2p * Including the results of the Pigments business, classified asdiscontinued. Commenting on the results, Group Chief Executive, David Dutro said: "We are pleased to report the continued improvement in the Group's performance.Demand in most of our key markets was positive which enabled us to grow ourunderlying sales by 5 per cent, and by maintaining our focus on operatingefficiencies Elementis has increased both earnings and cash flow during thefirst half of 2007. Specialty Products' operating margins increased from 15 to 21 per cent,reflecting the inherent quality of this business, and underlying sales improvedby 4 per cent with good growth in Oilfield and European and Asia Pacificcoatings sectors. Chromium experienced robust demand for chromic acid, and chrome oxide salesbenefited from improved demand in North America and Europe following recentstructural tax changes in China. The operating result of £7.5 million includedthe benefit of a one-time energy rebate of £1.4 million; otherwise the resultreflected a consistent performance compared to last year. In May 2007 we signed an agreement with Rockwood Holdings to sell our Pigmentsbusiness for US$140 million. The transaction is subject to regulatory approvals,including a filing under the Hart-Scott-Rodino Act in the United States, and isexpected to close before the end of 2007. In the first half of 2007 the businessdelivered a similar result to the previous year in challenging marketconditions. Our Surfactants business made a slower start but demand improved toward the endof the first half of the year and should continue into the second half. Overall market dynamics have been positive for the Group in the first half of2007 and we expect this trend to continue into the second half of the year. Ourmain priorities for the second half will be a continued focus on drivingprofitable growth in Specialty Products, stable progress in Chromium and thesuccessful closing of the Pigments transaction." - Ends - Enquiries Elementis plc Tel: +44 (0) 20 7408 9300David Dutro, Group Chief ExecutiveBrian Taylorson, Finance Director Financial Dynamics Tel: +44 (0) 20 7831 3113Andrew DowlerGreg Quine Chairman's Statement I am pleased to report that Elementis has continued to make good progress byfurther improving operating performance and reducing debt through positiveoperating cash flow. In addition, the Group made an important strategic step inMay this year when it announced that it had agreed to sell its global Pigmentsbusiness to Rockwood Holdings for US$140 million. This was the result of anunsolicited offer from Rockwood that the Board considered to be an appropriatevalue for the business, which has made good progress following the successfulcompletion of its China manufacturing base. The transaction is subject toregulatory approvals, including a filing under the Hart-Scott-Rodino Act in theUnited States, and is expected to close before the end of 2007. Proceeds fromthe sale will initially be used to reduce net borrowings, but the Board isreviewing other potential uses and will provide an update before completion. Results Operating profit increased by 26 per cent in the first half of 2007 to £22.8million. Almost all of the increase was from the Specialty Products businesswhere operating margins improved to 21 per cent in the current period versus 15per cent in the first half of 2006. This is particularly pleasing as itdemonstrates the inherent quality of this business, which is being restoredthrough the efforts of David Dutro and his management team. Consistent with ourstrategy of reducing earnings volatility in the Chromium business, operatingprofit for the first half of 2007 was £7.5 million compared to £6.0 million inthe same period last year, with the current period benefiting from a one timeenergy rebate in the United States of £1.4 million. Operating profit forPigments was in line with previous year, while Surfactants started more slowlythan expected but improved towards the end of the first half. Revenue for the first half of 2007 was £197.7 million which, after adjusting forcurrency movements and the effect of closing part of the Chromium manufacturingfacility in 2006, represents an increase of 5 per cent compared to the previousyear. On the same basis, Specialty Products and Chromium showed good growth onincreased volumes, while Pigments' sales were slightly lower than last year dueto the recent slowdown in the US housing market. Surfactants' sales were similarto last year. Diluted earnings per share was 4.2 pence for the first half of 2007, an increaseof 31 per cent over the previous year, and the Group's net debt level has fallenby £14.9 million since the end of 2006 demonstrating the ability that ourbusinesses have to convert operating profit into cash. Dividend The Board is declaring an interim dividend of 1.3 pence per share compared with1.2 pence at this time last year. The Board intends to progress dividendpayments as earnings performance permits. The Board At the Company's Annual General Meeting in April this year Edward Bramsonannounced his decision to step down from the Board. As I commented in mystatement in April, we thank Edward for his excellent contribution to the Boardand wish him success in his future endeavours. Environmental, Health and Safety Our performance in this area has continued to be of a high standard, with onlyone employee incident recorded in the current period under review which requiredthree days or more away from work. However the Group is not complacent in thisimportant area of our business and will continue to strive for the higheststandards. Current trading and outlook Overall market dynamics have been positive for the Group in the first half of2007 and we expect this trend to continue into the second half of the year. Ourmain priorities for the second half will be a continued focus on drivingprofitable growth in Specialty Products, stable progress in Chromium and thesuccessful closing of the Pigments sale transaction. Robert BeestonChairman31 July 2007 Business reviewfor the six months ended 30 June 2007Revenue Partial Effect of closure of Increase/ Revenue exchange UK (decrease) Revenue 2006 rates Chromium 2007 2007 £million £million £million £million £million Specialty Products 76.8 (5.4) - 2.8 74.2Surfactants 24.7 (1.0) - 0.8 24.5Chromium 61.9 (5.2) (7.0) 7.5 57.2Inter-segment (3.2) - - 0.3 (2.9) ______ ______ ______ ______ ______Continuing operations 160.2 (11.6) (7.0) 11.4 153.0Pigments 50.7 (3.7) - (2.3) 44.7 ______ ______ ______ ______ ______ 210.9 (15.3) (7.0) 9.1 197.7 ______ ______ ______ ______ ______ Group results Group revenue from continuing operations was £153.0 million in the first half of2007 which, after adjusting for currency effects and the closure of part of theUK Chromium facility in March 2006, represents an increase of 8 per cent overthe previous period. All three businesses showed an increase on this basis.Market trends were generally positive for the businesses with good demand inmost regions except for the North American coatings and construction marketswhich were impacted by the slowdown in US housing. Volumes were higher inChromium and Specialty Products but lower in Surfactants due to the productoptimisation program in that business. Pricing was also increased in all threebusinesses when compared to the previous period. Revenue including discontinuedoperations was £197.7 million (2006: £210.9 million) which is 5 per cent higherthan prior period after making the same adjustments. Operating profit from continuing operations before exceptional items increasedby 33 per cent to £20.1 million (2006: £15.1 million). Specialty Products wasthe main driver of the increase, while Chromium benefited from a one time energyrebate of £1.4 million. Excluding this, energy costs across the businesses wererelatively flat versus the prior period due to more stable markets and theimpact of hedging approximately 70 per cent of total energy costs. The resultsalso include the benefit of £2.1 million (2006: £0.6 million) from the currencyhedging program where approximately 80 per cent of the main exposures have beenfixed for 2007, with most of the benefit falling in Specialties and Chromium.As a result of the hedging program the net effect of currency movements onoperating profit for the first half of 2007 was minimal when compared to theprevious period. Operating profit including discontinued operations increasedby 26 per cent in the first half of 2007 to £22.8 million (2006: £18.1 million). Net borrowings have reduced by £24.0 million since 30 June 2006 and by £14.9million in the period. Elementis Specialty Products Demand for rheological products in the first half of 2007, which representaround 70 per cent of total sales, was good in all major sectors with theexception of North American coatings which felt the impact of the slowdown inthe US housing market. Sales volumes of coatings in Europe and Asia Pacific werestrong, more than offsetting the softer US demand. Sales to construction,personal care and oilfield segments globally were ahead of 2006 levels. Inaddition, the new management team has been working on further improving theoperating performance of the business and new product development. As a resultoperating margins have improved from 15 per cent in the first half of 2006 toaround 21 per cent in the current period and new products, including a range ofcolourant stability additives, are currently being tested in the market. Sales for the first half of 2007 were £74.2 million versus £76.8 million in theprevious year, and currency movements reduced sales by £5.4 million. Excludingthese currency effects sales increased by 4 per cent mainly due to improvedvolumes but also from improved selling prices. Sales volumes to the coatingssector increased by 7 per cent, despite slower demand in North America, andoilfield volumes increased by 8 per cent. In the oilfield sector, the currenthigh levels of drilling activity are a positive influence, but also new drillingtechniques for adverse conditions are providing opportunities for newapplications of premium organoclays. In other sectors, construction salesvolumes improved by 3 per cent with strong growth in Europe and Asia Pacificoffsetting reduced demand in North America, which is a trend that was alsoevident in personal care as both sectors continued to benefit from the uniqueproperties of hectorite clay. Sales also benefited from improved pricing as aresult of across the board increases at the end of 2006. Relatively highercoatings sales in Europe and Asia Pacific in the first half of 2007 softened theimpact of these increases as margins are slightly lower in these regionscompared to North America. Operating profitfor the six months ended 30 June 2007 Adjusted Operating Exceptional Operating£million profit items profit Specialty Products 15.3 - 15.3Surfactants 0.5 - 0.5Chromium 7.5 - 7.5Central costs (3.2) - (3.2) ______ ______ ______Continuing operations 20.1 - 20.1Pigments 2.7 - 2.7 ______ ______ ______ 22.8 - 22.8 ______ ______ ______ (continued from table above) Operating profitfor the six months ended 30 June 2006 Operating Exceptional Adjusted£million profit items operating profit Specialty Products 10.7 1.1 11.8Surfactants 0.1 0.3 0.4Chromium 6.4 (0.4) 6.0Central costs (3.1) - (3.1) ______ ______ ______Continuing operations 14.1 1.0 15.1Pigments 4.0 (1.0) 3.0 ______ ______ ______ 18.1 - 18.1 ______ ______ ______ Operating profit before exceptional items was £15.3 million in the first half of2007 compared to £11.8 million in the same period last year, representing anincrease of 30 per cent with no material currency effect year on year.Approximately half of this improvement came from the increased sales with thebalance coming from structural cost improvements, especially in selling, generaland administration. Elementis Surfactants In the first half of 2007 the Surfactants business has continued to focus onoptimising its product mix by exiting low margin business and improvingoperating efficiencies. Progress has been made, although sales to the oilfieldsector started the year more slowly than anticipated due to initial delays insome drilling projects, but improved towards the end of the first half. Salesfor the first half of 2007 were £24.5 million; similar to the same period lastyear, but 3 per cent higher after adjusting for currency movements. Volumes were12 per cent lower than the previous period due to the sales optimisation processand the slower start to the oilfield sales, but this was more than offset bypositive improvements in pricing as a result of price increases introduced atthe end of 2006. Operating profit before exceptional items was similar to the same period lastyear at £0.5 million, with higher selling prices compensating for increases inraw materials. Elementis Chromium As part of the Chromium business strategy, several steps have been taken to helpreduce earnings volatility. These include more hedging of currency and energycosts, better optimisation of production capacity and a greater focus onsustainable sales. These steps have contributed to the operating profit beforeexceptional items in the first half of 2007 being at a similar level to theprevious year before taking account of one time items. In addition, after aslower start, demand for chromium products during the first half of 2007 hasbeen positive overall. Changes in Chinese tax regulations affecting chrome metaland other basic materials, since the beginning of the year, have helped createadditional demand for chrome oxide in North America and Europe. This momentum islikely to continue into the second half of the year resulting in theannouncement of price increases with effect from July. Sales for the first half of 2007 were £57.2 million versus £61.9 million in thesame period last year. The closure of part of the Eaglescliffe, UK plant inMarch 2006 reduced sales by approximately £7.0 million and currency movements bya further £5.0 million. Excluding these two items sales increased by 16 per centwith increased volumes being the main contributor. Chromic acid sales volumesmanufactured in the US increased by 46 per cent as product exited due to theclosure of the UK plant was largely replaced with US product, but sales werealso positively impacted by strong demand from Latin America and China. Salesvolumes of chrome oxide increased by 31 per cent largely due to the tax changesin China. Chrome sulphate sales volumes for leather tanning increased by 5 percent as a result of good demand from leather tanneries, while sales volumes ofsodium dichromate were 12 per cent lower as production was optimised to producehigher margin products in response to the stronger demand. Pricing was flatoverall due to the increased demand coming later in the first half of 2007, butthis is being addressed in the second half of the year. Operating profit before exceptional items in the first half of 2007 was £7.5million compared to £6.0 million in the same period last year. Currency had nonet effect versus last year, but the business benefited from a one time rebateof energy costs in the US as a result of an electricity industry reorganisationby the State of Texas, and amounted to £1.4 million. Otherwise energy costs weresimilar to the previous year and raw material inflation was offset by theincrease in sales. The impact of the UK plant closure on the year on yearcomparison of operating profit was largely neutral, with lost sales volumesbeing offset by a reduction in fixed costs. Elementis Pigments A challenging market environment for Pigments driven by the recent slowdown inthe US housing market impacted sales to both the US coatings and constructionmarkets, which together account for almost 50 per cent of total sales. Despitethis down turn the business was able to achieve an operating profit similar tothe previous year through disciplined cost management and innovative marketing,including the launch of a new Ready Mix product into the construction market.This product offering provides enhanced processing capabilities to ourcustomers, and established more than ten new accounts during the first half of2007. Sales in Pigments were 12 per cent lower in the first half of 2007 at £44.7million when compared to the same period last year. Currency movements reducedreported sales by 7 per cent, while volumes were 6 per cent lower. Sales volumesin coatings and chemical applications were up 15 per cent in Asia Pacific whichpartly offset lower volumes in both North America and Europe. Price increases ofbetween 3 and 5 per cent were implemented at selected accounts. In theconstruction sector volumes were lower in most regions. Sales of driers inEurope made good progress with volumes up 3 per cent over the previous year. Operating profit before exceptional items was £2.7 million for the first half of2007, which is £0.3 million lower than the previous year, as cost efficienciespartly offset the effects of the lower sales volumes. Net finance costs Net finance costs on continuing operations were £0.4 million lower than for thesix months ended 30 June 2006. Lower average borrowings, partly offset byhigher interest rates, reduced net finance costs by £0.3 million and the balancewas due to increased finance income on pension funds. Interest cover, the ratioof operating profit before exceptional items to interest on net borrowings, was5.2 times (2006: 3.9 times). Taxation The Group's tax charge on profit before exceptional items was 5.0 per cent(2006: 1.3 per cent). This is lower than the standard rate for UK Corporationtax primarily because the Group benefits from a tax deduction in the US inrespect of goodwill amortisation. Earnings per share Basic and diluted earnings per share increased by 31 per cent to 4.2 pence(2006: 3.2 pence) in the period. This includes 0.3 pence (2006: nil) in respectof an energy refund to the Chromium business. From continuing operations, basicearnings per share before exceptional items was 3.7 pence (2006: 2.7 pence) andthe diluted equivalent figure was 3.7 pence (2006: 2.6 pence). Cash flowThe cash flow is summarised below: 30 June 30 June 2007 2006 £million £millionEarnings before interest, tax, exceptionals,depreciation and amortisation (Ebitda) 29.9 25.4Change in working capital (2.7) (16.5)Pension (1.5) (1.6)Interest and tax (4.8) (4.2)Restructuring (1.0) (8.1)Other 1.6 0.1Capital expenditure (3.2) (5.0) ______ ______ 18.3 (9.9)Distribution to shareholders (5.3) (4.8)Currency fluctuations 1.9 4.4 ______ ______ 14.9 (10.3)Net borrowings at start of period (100.6) (99.4) ______ ______Net borrowings at end of period (85.7) (109.7) ______ ______ In the first half of 2007 the Group reduced borrowings by £14.9 million (2006:increase of £10.3 million) and, at the period end, net borrowings were £24.0million lower than at 30 June 2006. During the first half, Ebitda increased by18 per cent above the comparative period, which increased cash flow by £4.5million. Working capital outflows, which typically increase in the first sixmonths due to seasonal factors, were £13.8 million lower than 2006. This waspartly due to a strategic build of inventory in the second half of 2006 and as aresult inventory decreased by £1.1 million in the first six months of 2007(2006: increase of £6.8 million). In addition, cash outflows to suppliers were£8.1 million better than previous year due to more efficient management ofpayments which increased creditors days by 3 days compared to June 2006. Theother main positive variance compared to prior period was a £7.1 millionreduction in restructuring spend as the programmes implemented in 2005 and 2006are now virtually complete. Balance sheet 30 June 30 June 2007 2006 £million £million Tangible fixed assets 96.9 130.4Other net assets 199.1 166.7 296.0 297.1Equity 210.3 187.4Net borrowings 85.7 109.7 296.0 297.1Gearing1 29% 37% 1 the ratio of net borrowings to equity attributable to parent plus netborrowings Tangible fixed assets are £33.5 million lower than 30 June 2006 because theassets and liabilties of the Pigments division have been reclassified as 'heldfor sale'. Other net assets have increased as a consequence. Equity hasincreased by £22.9 million since 30 June 2006, primarily due to retainedearnings of £26.1 million. Currency differences on translation of foreignoperations reduced equity by £14.2 million, but this has been partly offset byactuarial gains on pension schemes of £8.9 million and other credits to equityof £2.1 million. Gearing was reduced to 29 per cent (2006: 37 per cent) at theend of June 2007. The main sterling currency exchange rates in the period were: 2007 2007 2006 2006 30 June Average 30 June Average US dollar 2.01 1.97 1.85 1.79Euro 1.45 1.45 1.45 1.45 ______ ______ ______ ______ The majority of the Group's assets are denominated in US dollars and the weakerUS dollar has reduced equity by £14.2 million in the last twelve months.Elementis uses dollar and euro borrowings to mitigate the currency translationexposure on its assets denominated in foreign currencies, subject to theprovisions of IAS 39 in respect of hedge accounting. Profits of overseasoperations are translated at average rates in each period and the average USdollar rate has weakened by 9 per cent against sterling in the first half of2007. Forward contracts taken out in 2005 and 2006 have reduced the impact ofthe dollar weakness on the reported results in the period ended 30 June 2007. David Dutro Brian TaylorsonChief Executive Officer Finance Director31 July 2007 31 July 2007 Consolidated income statementfor the six months ended 30 June 2007 Note 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionContinuing operationsRevenue 3 153.0 160.2 302.0Cost of sales (101.5) (106.9) (203.1) ______ ______ ______Gross profit 51.5 53.3 98.9Distribution costs (20.5) (24.3) (43.5)Administrative expenses (10.9) (13.9) (21.9) ______ ______ ______Operating profit before exceptional items 20.1 15.1 31.5Exceptional items - (1.0) 2.0 ______ ______ ______Operating profit 3 20.1 14.1 33.5Finance income 4 1.2 1.1 1.9Finance costs 5 (4.1) (4.4) (8.6) ______ ______ ______Profit before tax and exceptional items 17.2 11.8 24.8Exceptional items - (1.0) 2.0 ______ ______ ______Profit before income tax 3 17.2 10.8 26.8Tax 8 (0.9) (0.1) (0.9) ______ ______ ______Profit from continuing operations 16.3 10.7 25.9 ______ ______ ______Discontinued operationPost tax profit from discontinued operation 7 2.3 3.5 5.8 ______ ______ ______Profit for the period 18.6 14.2 31.7 ______ ______ ______Attributable to: Equity holders of the parent 18.6 14.1 31.6Minority interests - 0.1 0.1 ______ ______ ______ 18.6 14.2 31.7 ______ ______ ______Earnings per shareFrom continuing and discontinued operationsBasic (pence) 9 4.2 3.2 7.1Diluted (pence) 9 4.2 3.2 7.0From continuing operationsBasic (pence) 9 3.7 2.7 5.9Diluted (pence) 9 3.7 2.6 5.8 ______ ______ ______ Consolidated statement of recognised income and expensefor the six months ended 30 June 2007 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £million Exchange differences on translation of foreign operations (2.5) (11.7) (23.0)Actuarial gain/(loss) on pension and other post retirementschemes - - 8.6(Loss)/gain on cash flow hedges (1.3) 0.6 1.9Net (expense)/income recognised in equity (3.8) (11.1) (12.5)Profit for the period 18.6 14.2 31.7 ______ ______ ______Total recognised income and expense for the period 14.8 3.1 19.2 ______ ______ ______Attributable to: 14.8 3.0 19.1 Equity holders of the parentMinority interests - 0.1 0.1 ______ ______ ______ 14.8 3.1 19.2 ______ ______ ______ Consolidated balance sheetat 30 June 2007 2007 2006 2006 30 June 30 June 31 December Note £million £million £millionNon-current assetsGoodwill and other intangible assets 146.6 159.8 151.6Property, plant and equipment 96.9 130.4 126.1Interests in associates and other investments 0.6 3.2 1.7Deferred tax assets 6.4 11.2 7.3 ______ ______ ______Total non-current assets 250.5 304.6 286.7 ______ ______ ______ Current assetsInventories 47.2 70.8 67.7Trade and other receivables 57.1 77.5 73.1Cash and cash equivalents 17.4 19.1 14.5 ______ ______ ______Current assets 121.7 167.4 155.3Non-current assets classified as held for sale 7 64.9 - - ______ ______ ______Total current assets 186.6 167.4 155.3 ______ ______ ______Total assets 437.1 472.0 442.0 ______ ______ ______ Current liabilitiesBank overdrafts and loans (0.7) (128.8) (0.7)Trade and other payables (51.5) (62.7) (61.8)Current tax liabilities (2.4) (6.7) (3.3)Provisions (1.6) (5.2) (2.4) ______ ______ ______Current liabilities (56.2) (203.4) (68.2)Liabilities associated with non-current assets 7 (14.5) - - classified as held for sale ______ ______ ______Total current liabilities (70.7) (203.4) (68.2) ______ ______ ______ Non-current liabilitiesLoans and borrowings (102.4) - (114.4)Retirement benefit obligations (34.3) (55.8) (37.3)Provisions (16.3) (21.3) (19.0)Government grants (1.5) (2.4) (2.2) ______ ______ ______Total non-current liabilities (154.5) (79.5) (172.9) ______ ______ ______Total liabilities (225.2) (282.9) (241.1) ______ ______ ______Net assets 211.9 189.1 200.9 ______ ______ ______ EquityShare capital 22.2 22.0 22.1Share premium 5.0 2.6 3.6Other reserves 67.8 78.8 71.0Retained earnings 115.3 84.0 102.6 ______ ______ ______Equity attributable to equity holders of the 12 210.3 187.4 199.3parentMinority equity interests 1.6 1.7 1.6 ______ ______ ______Total equity and reserves 211.9 189.1 200.9 ______ ______ ______ Consolidated cash flow statementfor the six months ended 30 June 2007 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionOperating activities:Profit for the period 18.6 14.2 31.7Adjustments for:Finance income (1.2) (1.1) (0.2)Finance costs 4.4 4.8 7.7Tax 1.0 0.2 1.4Depreciation and amortisation 7.1 7.3 14.8Decrease in provisions - (0.5) (2.2)Pension contributions net of current service cost (1.5) (1.6) (7.8)Share based payments 0.5 0.4 0.9Exceptional items charged less cash outflow (1.0) (8.1) (13.8) ______ ______ ______ Operating cash flows before movements in working capital 27.9 15.6 32.5Decrease/(increase) in inventories 1.1 (6.8) (9.8)Increase in trade and other receivables (4.7) (2.5) (1.6)Increase/(decrease) in trade and other payables 0.9 (7.2) (1.6) ______ ______ ______Cash generated by operations 25.2 (0.9) 19.5Income taxes paid (1.2) (0.3) (0.7)Interest paid (3.6) (4.1) (8.3) ______ ______ ______Net cash flow from operating activities 20.4 (5.3) 10.5Investing activities:Interest received 0.1 0.2 0.3Purchase of property, plant and equipment (3.2) (5.0) (13.2)Proceeds from sale of property, plant and equipment 0.1 1.2 1.5Acquisition of business (0.6) - -Disposal of businesses 0.5 - 1.4 ______ ______ ______Net cash used in investing activities (3.1) (3.6) (10.0)Financing activities:Issue of shares 1.6 0.9 2.0Redemption of B shares - - (2.1)Purchase of own shares (0.6) (1.9) (2.4)Dividends paid (5.3) (4.8) (10.1)(Decrease)/increase in borrowings repayable after one year (9.9) 25.4 17.9Net cash(used in)/from financing activities (14.2) 19.6 5.3 ______ ______ ______Net increase in cash and cash equivalents 3.1 10.7 5.8Cash and cash equivalents at beginning of period 13.8 8.4 8.4Foreign exchange on cash and cash equivalents (0.2) (0.5) (0.4) ______ ______ ______Cash and cash equivalents at end of period 16.7 18.6 13.8 ______ ______ ______ Notes to the interim financial statementsfor the six months ended 30 June 2007 1 General Information Elementis plc ('the Company) and its subsidiaries (together, 'the Group')manufactures specialty chemicals. The Group has operations in the US, UK, theNetherlands and China. On 11 May 2007, the Group announced the sale of itsglobal Pigments business subject to regulatory approvals. This business hasbeen classified as a discontinued operation and comparatives have been restatedin accordance with IFRS 5. The assets and liabilities of the Pigments have beenclassified as a 'held for sale' in the balance sheet at 30 June 2007. Balancesheet comparatives are not restated under IFRS 5. In addition, the Group hasrestated its segment reporting to provide greater clarity of the underlyingperformance of its business units and now discloses financial informationseparately for Specialty Products and Surfactants. The Company is a limitedliability company incorporated and domiciled in the UK. The Company has itsprimary listing on the London Stock Exchange. The financial information for the first six months of 2007 and 2006, which isunaudited but has been reviewed by the Company's auditor, does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985,and is presented on the basis of accounting policies set out in the financialstatements of Elementis plc for the year ended 31 December 2006. This interimfinancial information was approved for issue on 31 July 2007. The comparative figures for the year ended 31 December 2006 are not theCompany's statutory accounts for that financial year. Those accounts, whichwere prepared and approved by the directors in accordance with InternationalFinancial Reporting Standards as adopted by the EU (adopted IFRS), have beenreported on by the Company's auditor and delivered to the Registrar ofCompanies. The auditor's report was unqualified and did not contain statementsunder section 237 (2) or (3) of the Companies Act 1985. 2 Accounting estimates and judgements The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of income, expense, assets and liabilities.The significant estimates and judgements made by management were consistent withthose applied to the consolidated financial statements for the year ended 31December 2006. 3 Segment reporting For management purposes the Group is currently organised into four operatingdivisions - Specialty Products, Surfactants, Chromium, and Pigments (nowclassified as a discontinued operation). Principal activities are as follows: Specialty Products - production of rheological and surface chemistry additives;Surfactants - production of surface active ingredients;Chromium - production of chromium chemicals. Six months ended 30 June 2007 Gross Inter-segment External £million £million £millionRevenue from continuing operationsSpecialty Products 74.2 (0.1) 74.1Surfactants 24.5 - 24.5Chromium 57.2 (2.8) 54.4 ______ ______ ______ 155.9 (2.9) 153.0 All revenues relate to the sale of goods (continued from table above) Six months ended 30 June 2006 Gross Inter-segment External £million £million £millionRevenue from continuing operationsSpecialty Products 76.8 (0.2) 76.6Surfactants 24.7 - 24.7Chromium 61.9 (3.0) 58.9 ______ ______ ______ 163.4 (3.2) 160.2 ______ ______ ______ All revenues relate to the sale of goods Six months ended 30 June 2007 Before After exceptional Exceptional exceptional items items items £million £million £millionResult from continuing operationsSpecialty Products 15.3 - 15.3Surfactants 0.5 - 0.5Chromium 7.5 - 7.5Central costs (3.2) - (3.2) ______ ______ ______ 20.1 - 20.1Finance income 1.2 - 1.2Finance costs (4.1) - 4.1 ______ ______ ______Profit before tax 17.2 - 17.2 ______ ______ ______ (continued from table above) Six months ended 30 June 2006 Before After exceptional Exceptional exceptional items items items £million £million £millionResult from continuing operationsSpecialty Products 11.8 (1.1) 10.7Surfactants 0.4 (0.3) 0.1Chromium 6.0 0.4 6.4Central costs (3.1) - (3.1) ______ ______ ______ 15.1 (1.0) 14.1Finance income 1.1 - 1.1Finance costs (4.4) - (4.4) ______ ______ ______Profit before tax 11.8 (1.0) 10.8 ______ ______ ______ Year ended 31 December 2006 Revenue from continuing operations Gross Inter-segment External £million £million £million Specialty Products 144.8 (0.3) 144.5Surfactants 46.1 - 46.1Chromium 116.8 (5.4) 111.4Central costs - - - ______ ______ ______ 307.7 (5.7) 302.0Finance incomeFinance costsProfit before tax (continued from table above) Year ended 31 December 2006 Result from continuing operations Before After exceptional Exceptional exceptional items items items £million £million £million Specialty Products 25.0 0.9 25.9Surfactants 0.6 (0.3) 0.3Chromium 11.9 1.4 13.3Central costs (6.0) - (6.0) ______ ______ ______ 31.5 2.0 33.5Finance income 1.8 - 1.8Finance costs (8.5) - (8.5) ______ ______ ______Profit before tax 24.8 2.0 26.8 ______ ______ ______ 4 Finance income 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionContinuing operationsInterest on bank deposits 0.1 0.2 0.2Pension and other post-retirement liabilities Expected return on pension scheme assets 11.4 13.2 26.2 Interest on pension scheme liabilities (10.3) (12.3) (24.5) ______ ______ ______ 1.1 0.9 1.7 ______ ______ ______ 1.2 1.1 1.9 ______ ______ ______ 5 Finance costs 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £ million £millionContinuing operationsInterest on bank loans 3.7 3.9 7.8Interest on corporation tax payments - 0.1 -Unwind of discount on provisions 0.4 0.4 0.8 ______ ______ ______ 4.1 4.4 8.6 ______ ______ ______ 6 Exceptional items 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £ million £ million £ million Continuing operationsIntegration at Specialty Products and Surfactants - (1.7) (1.7)Curtailment gains on pension schemes - 0.7 2.7Release of prior year restructuring provision - - 1.0 ______ ______ ______ - (1.0) 2.0Tax charge on exceptional items - - (0.9) ______ ______ ______ - (1.0) 1.1 ______ ______ ______ 7 Discontinued operation On 11 May 2007, the Group entered into a sale agreement to dispose of itsPigments division. This transaction, which is expected to complete within sixmonths, has been classified as a disposal group held for sale and therefore beenpresented separately in the balance sheet. The proceeds of disposal areexpected to exceed the book value of the related net assets and accordingly noimpairment losses have been recognised on the classification of this operationas held for sale. The results of this business are reported within discontinuedoperations as follows: 2007 2006 2006 Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 30 June 30 June 31 December £ million £ million £ millionIncome statement:Revenue 44.7 50.7 93.9Cost of sales (34.3) (39.0) (71.6) ______ ______ ______Gross profit 10.4 11.7 22.3Distribution costs (4.5) (4.7) (9.1)Administrative expenses (3.2) (3.0) (6.1) ______ ______ ______Operating profit before exceptional items 2.7 3.0 6.1Exceptional items - 1.0 1.0Finance costs (0.3) (0.4) (0.8) ______ ______ ______Profit before tax 2.4 3.6 6.3Tax (0.1) (0.1) (0.5) ______ ______ ______Post tax profit for the period from discontinued operation 2.3 3.5 5.8 ______ ______ ______ Earnings per share from discontinued operations:Basic (pence) 0.5 0.8 1.2Diluted (pence) 0.5 0.8 1.2 ______ ______ ______ The major classes of assets and liabilities of the Pigments division classifiedas held for sale are as follows: 2007 Unaudited 30 June £ million Goodwill and other intangible assets 2.4Property, plant and equipment 24.4Investments 0.5Inventories 18.5Trade and other receivables 19.1 ______Total assets classified as held for sale 64.9 ______ Trade and other payables (10.8)Provisions (3.7) ______Total liabilities associated with assets classified as held for sale (14.5) ______ 8 Tax The tax charge on profit before exceptional items from continuing operations of£0.9 million (2006: £0.1 million) is based on an estimated effective tax rate onprofit before exceptional items for the year to 31 December 2006 of 5.0 per cent(2006: 1.3 per cent). The rate is lower than the standard UK corporation taxrate primarily due to the amortisation of goodwill in the US for tax purposes. The tax charge on profit from the discontinued operation was £0.1 million(2006: £0.1 million). 9 Earnings per share 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31December £million £million £millionEarnings for the purposes of basic earnings per share 18.6 14.1 31.6Exceptional items net of tax - - (1.7) ______ ______ ______Adjusted earnings 18.6 14.1 29.9 ______ ______ ______ Number(m) Number(m) Number(m)Weighted average number of shares for the purposes of basic 442.9 435.5 439.4earnings per shareEffect of dilutive share options 3.3 11.0 7.4 ______ ______ ______Weighted average number of shares for the purposes of 446.2 446.5 446.8diluted earnings per share ______ ______ ______ The calculation of the basic and diluted earnings per share from continuingoperations attributable to the ordinary equity holders of the parent is based onthe following: 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionProfit for the period attributable to equity holders of theparent 18.6 14.1 31.6Profit for the period from discontinued operations (2.3) (3.5) (5.8)Profit from continuing operations 16.3 0.6 25.8Exceptional items from continuing operations before - 1.0 (1.1)minority interestsAdjusted earnings from continuing operations 16.3 11.6 24.7 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December pence pence penceEarnings per share:From continuing and discontinuing operations:Basic 4.2 3.2 7.1Diluted 4.2 3.2 7.0Basic before exceptional items 4.2 3.2 6.8Diluted before exceptional items 4.2 3.2 6.7 From continuing operations:Basic 3.7 2.4 5.9Diluted 3.7 2.4 5.8Basic before exceptional items 3.7 2.7 5.6Diluted before exceptional items 3.7 2.6 5.5 ______ ______ ______ 10 Dividends The following dividends were declared and paid by the Group: 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £million Dividends paid on ordinary shares 5.3 4.8 10.1 An interim dividend of 1.3 pence per share (2006: 1.2 pence) has been approvedand will be paid on 5 October 2007 to shareholders on the register at 7September 2007. 11 Movement in net borrowings 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionChange in net borrowings resulting from cash flowsIncrease in cash and cash equivalents 3.1 10.7 5.8Decrease/(increase) in borrowings 9.9 (25.4) (17.9) ______ ______ ______ 13.0 (14.7) (12.1)Redeemable B shares - - 2.1Currency translation differences 1.9 4.4 8.8 ______ ______ ______Decrease/(increase) in net borrowings 14.9 (10.3) (1.2)Net borrowings at beginning of period (100.6) (99.4) (99.4) ______ ______ ______Net borrowings at end of period (85.7) (109.7) (100.6) ______ ______ ______ 12 Changes in equity 2007 2006 2006 Six months Six months Year ended ended ended 30 June 30 June 31 December £million £million £millionTotal recognised income and expense for the period 14.8 3.0 19.1Purchase of own shares (0.6) (1.9) (2.4)Issue of shares 1.6 0.9 2.0Share based payments 0.5 0.4 0.9Dividends paid (5.3) (4.8) (10.1) ______ ______ ______Net increase/(decrease) in equity attributable to the 11.0 (2.4) 9.5parentAt beginning of period 199.3 189.8 189.8 ______ ______ ______At end of period 210.3 187.4 199.3 ______ ______ ______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Elementis