9th Feb 2006 07:01
McBride PLC09 February 2006 9 February 2006 McBRIDE plc Interim Announcement for the half-year ended 31 December 2005 McBride supplies over 1.2 billion units of Private Label Household and PersonalCare products each year to Europe's leading retailers. Highlights of the half-year results are as follows: • Group turnover was £270.4 million, up 1% (2004: £268.0 million) • Operating profit was £15.4 million, down 18% (2004: £18.8 million) • Basic Earnings Per Share reduced 18% to 5.8p (2004: 7.1p) • Interim dividend per share of 1.6 pence, up 7% (2004: 1.5 pence) • Strong underlying cash flow * of £11.7 million (2004: £16.2 million) • Net debt reduced to £22.5 million (June 2005: £24.4 million) * Cash flow before financing activities excluding rationalisation costs andacquisition of subsidiaries Miles Roberts, Chief Executive, commented: "These results are in line with our expectations and have been achieved duringvery competitive market conditions and at a time when the performance of ourContinental European business was disappointing. The initial findings from acomprehensive business review show good opportunities to improve tradingperformance with substantial effort currently focused on improving customerservice and operational efficiency. Trading since the end of the half year has remained challenging but in line withour expectations." For further information please contact: McBride plc Miles Roberts, Chief Executive 01494 60 70 50 Financial Dynamics 020 7831 3113 Andrew Dowler Overview • Sales to UK increased 2% to £115.2 million. Operating profit was £10.5 million, a decline of 6% versus 2004/5 first half but 3% improvement versus the second half as ongoing operating efficiencies and overhead savings offset the combined impact of continued selling price deflation and high material costs. • Sales to Continental Europe were flat at £151.8 million (£151.1 million in 2004/5) as growth in Eastern Europe offset weak Western European markets, particularly France. Operating profit was also impacted by continuing selling price deflation and high material costs, declining 30% to £5.7m. • Personal Care sector sales, at £53.9 million, continued to grow from £45.7 million in 2004/5 first half and £50.4 million in the second half. • A continuing focus on cost, asset utilisation and working capital management produced a strong £11.7 million underlying cash flow in spite of continuing challenging market conditions. Capital expenditure remained below depreciation and working capital only increased by £1.4 million. • Following the initial findings of a business review, further substantial efficiency improvements have been identified and implementation is well underway. Additionally, assessments of under performing assets are nearing completion. • Levels of customer service recovered strongly during the first half of the year and have subsequently been held at consistently high levels. Strategy As outlined last September, the Group is undertaking a comprehensive review ofits businesses and strategy. The initial findings identified significantopportunities to improve trading performance and grow market share. As one of the leading European Private Label businesses in the household andpersonal care sectors, the Group has good market positions in both the UK andFrance and more modest positions in Spain, Italy and the Low Countries. Its widegeographic footprint allows it to benefit from the increasing share of theoverall European Grocery market being gained by the Private Label segment. Private Label share in Europe has grown consistently over many years as a resultof retailer consolidation, store fascia rationalisation and the cross borderexpansion of major retailers. This increasing share particularly reflects thegrowth of the hard and soft discount format, which has seen its share in 2004reach 17.8% of the European Grocery market with even more significant shares incountries such as Germany. Private Label is seen as an important component ofretailer profitability whilst at the same time offering value to the consumer. Although the fundamentals of the Private Label market are good, the environmentin Europe continues to be highly competitive with the overall retail grocerymarket showing flat sales. Competition between Retailers for market share isresulting in continuing price deflation which is putting their margins andprofitability under pressure. This is resulting in both Retailer consolidationand development of Private label at the same time as a move to develop into newmarkets and channels to provide growth. McBride is well positioned to benefitfrom these trends. The initial findings of the business and strategic review confirmed that whilstthe Group has a good reputation and technology with strong product offers, itslevel of competitiveness, geographic strength and retailer coverage,particularly on the Continent, needs to improve. The findings are focused onimproving the performance of current operation as well as looking fordisciplined opportunities to grow our share of the overall Private Label market. The review has highlighted: • the need to improve customer service • to become the most cost effective supplier • the need to reorganise internal structures to improve responsiveness and accountability for performance In addition we believe we can improve our market coverage in Europe. Inparticular we are under represented in the Hard Discount sector of the marketthat has shown significant growth over many years. Today this type of retailerrepresents a very significant part of the overall market. Turning first to theorganic growth opportunities, we can continue to leverage the Group'sconsiderable geographic footprint and capitalise on its operational scale andbreadth of technology. Organic growth will, where appropriate, be supported bydisciplined acquisition in order to increase product range, enter new markets orto increase capability across all Private Label channels. The Group's strongunderlying cash generation and financial position will underpin our growthstrategy. Good progress has been made on a number of new appointments, most recently a newManaging Director for the Continental European division has started and thesearch for a new Group Finance Director is well underway. Commercial Review Continental Europe The retail market throughout Europe remains highly competitive with the Frenchmarket showing a significant slow down particularly during the last three monthsof 2005 following changes under the new "Loi Dutreill" which encompasses supplyand promotional agreements between manufacturers and retail chains. The impactof this new legislation produced a negative impact on volumes but, goingforward, it is expected that this change in legislation will ultimately be tothe benefit of Private Label in France. During the half year Household retail(excludes contract business) sales were 2% lower than 2004/5, but Personal Careretail sales, 13% up on 2004/5, continued to grow. Sales growth in Belgium,Spain and Italy was offset by a reduction in France, where our ContinentalEuropean business is focused, and The Netherlands. The Group has continued to develop its manufacturing capability in Poland and afurther expansion of mixing and filling has been implemented. Retail sales toPoland, The Czech Republic and Hungary were up 10%, while total sales driven bya major uplift in contract sales in Poland, increased 36%. The net impact was aslight improvement in sales to Continental Europe of 0.5%. United Kingdom The UK market remains competitive with the major chains gaining further marketshare. Private label household products reached 33.7% volume share up from 33.0%last year with value share also improving from 23% to 23.2%. In McBride's corepersonal care sectors private label share of the market showed a 5.7% volumeincrease against the market increase of 2.9% whilst by value the private labelshowed a decline of 0.7% while the market overall grew 3.9% as consumers arebeing encouraged to purchase higher priced items. Total retail sales to the UK grew 3% underpinned by a 23% growth in PersonalCare, whilst, as in Continental Europe, Household declined, by 3%. Rest of World Rest of world covers all markets outside of Europe. First half sales at £3.4million were slightly below the £3.6 million in the previous year. Financial Review All the results here are reported under International Financial ReportingStandards (IFRS). The 2004/5 results as permitted by IFRS are not restated inrespect of IAS 32 / 39 Financial Instruments. A full analysis of the impact ofadopting IFRS including reconciliations to UK GAAP for the six months ended 31December 2004 and 30 June 2005 are included in a document published on 6December 2005, Adoption of International Financial Reporting Standards. Thisdocument is available at www.mcbride.co.uk within the investor relation'ssection. Profit and loss First half turnover improved £2.4 million (1%) to £270.4 million versus 2004/5with the growth driven by a strong Personal Care sector, up £8.2 million (18%).Household sector sales however experienced a difficult first half and were down£5.8 million (3%). In terms of geographic split, sales to UK improved 2%,whilst sales to Continental Europe and to the Rest of the World were broadlyflat. Strong growth in Eastern Europe, primarily Poland, offset weak WesternEuropean markets, particularly France, our largest Continental European market. Group operating profit, at £15.4 million, was 18% down on 2004/5 first half asoverhead cost reductions and operating efficiencies, primarily in the UK, onlypartially offset significantly higher material input costs and continuing salesprice deflation. The UK operating profit, at £10.5 million, was down 6% on 2004/5 first half but up 3% on the second half reflecting operating efficiencies,overhead reductions and an improving product mix. Continental Europe's profit,at £5.7 million, was 30% behind 2004/5 first half and 15% behind the secondhalf. First half net interest costs were £0.5 million versus £0.6 million in 2004/5.A £4.5 million taxation charge (2004: £5.5 million) represents a 30% effectiverate. Cash flow The first half underlying cash flow performance - excluding rationalisationcosts, share repurchases, dividends and translation - was strong at £11.7million. This compares well against £16.2 million in 2004/5 first half and£11.3 million in the second half. Despite higher material costs working capitalonly increased by £1.4 million and capital expenditure, at £7.5 million (2004:£8.7 million), remained below depreciation. It should be noted that PersonalCare sector capital expenditure at £1.4 million was £0.9 million higher than in2004/5 reflecting new product development and general growth in that sector. There was a £2.2 million spend relating to the 2004/5 income statementrationalisation programme charge and a £1.4 million outflow on share repurchasesnet of issue proceeds from the exercise of SAYE options. Net debt reduced £1.9million in the first half to £22.5 million at 31 December 2005. Balance sheet Property, plant and equipment reduced £2.0 million in the first half to £127.6million as £1.5 million was reclassified into assets held for resale. £1.0million of the reclassification relates to property at Breda following theclosure of its plant in 2004 and £0.5 million relates to Bampton (see 2004/5rationalisation costs below). The balance sheet also includes a £10.8 million liability net of deferred taxfor the UK defined benefit pension scheme deficit. The pre tax deficit hasincreased £4.3 million since June 2005 primarily due to lower liability discountrates in spite of an improved asset market environment. Return on average capital employed for the half year reduced to 25% from 30% forthe half year to December 2004. A continuing focus on asset utilisation andworking capital management was unable to offset the adverse dual impact of salesprice deflation and higher material input costs. 2004/5 rationalisation costs In 2004/5 there were £3.0 million of rationalisation costs charged to the incomestatement. £1.3 million related to the closure of the Bampton plant andtransfer of its activities to another UK site, and the remaining £1.7 millionrelated to a Group wide rationalisation exercise. The Bampton site was closedin the first half, with the production transfer expected to be completed earlyin the second half. As at 31 December 2005, £0.4 million of its provision hadnot been spent. The Group wide rationalisation exercise was completed by 31December 2005 and all its provision was spent. Senior Management Long Term Incentive Plan As indicated in the 2005 Annual Report a Long Term Incentive Plan was introducedduring the first half for senior executives in the Group. In total 425,019shares were granted on 9 December 2005 which will vest three years later, on 8December 2008, providing the Group has achieved certain earnings per share andTotal Shareholder Return targets. The charge in the income statement for thehalf year ended 31 December 2005 is less than £0.1 million. Earnings per share and dividends The weighted average number of shares in issue in the period was 177,575,301(2004:177,332,040). Earnings per share reduced to 5.8p, down 18% on 2004. An interim dividend of 1.6p, a 7% increase on 2004, will be paid on 26 May 2006to shareholders on the register on 28 April 2006. Current Trading and Outlook These results are in line with our expectations and have been achieved duringvery competitive market conditions and at a time when the performance of ourContinental European business was disappointing. The initial findings from acomprehensive business review show good opportunities to improve tradingperformance with substantial effort currently focused on improving customerservice and operational efficiency. Trading since the end of the half year has remained challenging but in line withour expectations. Consolidated income statement unaudited 6 months to 6 months to 31 Dec 31 Dec Year ended 2005 2004 30 June 2005 Note £m £m £m Revenue 1 270.4 268.0 537.1 Cost of sales (178.3) (171.6) (348.4)Gross profit 92.1 96.4 188.7 Distribution costs (17.7) (17.4) (34.0)Administrative costs: Before rationalisation costs (59.0) (60.2) (119.7) Rationalisation costs - - (3.0) Administrative costs including rationalisation costs (59.0) (60.2) (122.7)Operating profit 1 15.4 18.8 32.0 Financial Income 2.2 1.8 4.4Financial expenses (2.7) (2.4) (5.8)Net Financing costs 3 (0.5) (0.6) (1.4) Profit before tax 14.9 18.2 30.6Taxation 4 (4.5) (5.5) (9.2)Profit for the period 1 10.4 12.7 21.4 Attributable to:Equity holders of the parent 10.3 12.6 21.3Minority interest 0.1 0.1 0.1Profit for the period 10.4 12.7 21.4 Earnings per ordinary share (pence) 5 Basic 5.8 7.1 12.0 Diluted 5.7 6.8 11.6 Basic before rationalisation costs 5.8 7.1 13.2 Dividends 6 Paid in period (£m) 5.9 5.0 7.6 Paid in period (pence per share) 3.3 2.8 4.3 Proposed (£m) 2.8 2.8 5.9 Proposed (pence per share) 1.6 1.5 3.3 Note; all results are reported under International Financial Reporting Standards(IFRS). The 2004/5 results as permitted by IFRS 1 are not restated in respectof IAS 32 / 39 Financial Instruments. A full analysis of the impact of adoptingIFRS is available at www.mcbride.co.uk within the investor relations section. Consolidated balance sheet unaudited As at as at as at 31 Dec 2005 31 Dec 2004 30 June 2005 Note £m £m £m Non-current assetsIntangible assets 9.0 8.7 8.7Property, plant and equipment 127.6 134.6 129.6Other non-current assets 0.5 0.5 0.5Deferred tax 6.5 7.0 6.0 143.6 150.8 144.8 Current assetsAssets classified as held for sale 1.5 - -Inventories 46.1 43.7 41.3Trade and other receivables 99.1 109.0 106.3Cash and cash equivalents 0.2 0.6 0.3 146.9 153.3 147.9Total assets 1 290.5 304.1 292.7 EquityIssued share capital 17.7 17.7 17.7Share premium account 141.8 139.4 141.8Other reserves 0.2 0.9 0.4Retained earnings (61.7) (62.3) (62.0)Total equity attributable to equity holders of the parent 98.0 95.7 97.9Minority interest 0.4 0.2 0.2Total equity and reserves 98.4 95.9 98.1 Non-current liabilities Interest bearing loans and borrowings 15.4 23.3 20.7Employee benefits 7 15.5 14.5 11.2Provisions 2.1 2.1 2.2Deferred tax 7.1 6.1 6.6 40.1 46.0 40.7 Current liabilities Interest bearing loans and borrowings 7.3 6.8 4.0Trade and other payables 140.4 150.1 143.8Other financial liabilities 0.5 - -Current tax payable 2.8 2.6 2.0Provisions 1.0 2.7 4.1 152.0 162.2 153.9Total equity and liabilities 290.5 304.1 292.7 Consolidated cash flow statement unaudited 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 Note £m £m £m Profit before tax 14.9 18.2 30.6Net finance costs 0.5 0.6 1.4Pre-tax rationalisation charge in the period - - 3.0 Loss on sale of property, plant and equipment - - 0.1 Depreciation 9.1 9.2 18.6 Operating profit before changes in working capital 24.5 28.0 53.7Decrease in debtors 8.5 9.8 9.6Increase in inventories (4.4) (2.4) (1.1)Decrease in creditors (5.5) (4.2) (7.4)Rationalisation costs (2.2) (2.9) (3.7)Cash generated from operations 20.9 28.3 51.1Interest paid (0.9) (3.4) (2.8)Taxation paid (3.1) (3.0) (7.2)Net cash from operating activities 16.9 21.9 41.1 Cash flows from investing activitiesAcquisition of property, plant and equipment (7.2) (8.7) (17.5)Acquisition of intangible assets (0.3) - -APL acquisition / deferred consideration payment - (2.8) (2.8)Interest received 0.1 0.1 0.2 (7.4) (11.4) (20.1) Cash flows from financing activitiesProceeds from issue of share capital 0.6 - 2.9Repurchase of own shares (2.0) (1.9) (8.5)Repayment of borrowings (5.3) (5.8) (8.2)Payment of finance lease liabilities (0.2) (0.2) (0.4)Dividends paid (5.9) (5.0) (7.6) (12.8) (12.9) (21.8) Net decrease in cash and cash equivalents (3.3) (2.4) (0.8)Cash and cash equivalents at start of period (2.7) (1.8) (1.8)Effect of exchange rate fluctuations on cash held (0.1) - (0.1)Cash and cash equivalents at end of period (6.1) (4.2) (2.7) The pre tax rationalisation charge for the year ended 30 June 2005 has beenadded back to the operating profit before changes in working capital above sothat the cash flow impact can be separately highlighted, as rationalisationcosts, within cash generated from operations. Out of the £3.0 million totalrationalisation charge, £0.4 million was spent by 30 June 2005 and a further£2.2 million in the half year to 31 December 2005. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 £m £m £mDecrease in cash and cash equivalents in the period (3.3) (2.4) (0.8)Cash outflow from movement in debt 5.3 5.8 8.2Movement on finance leases 0.2 0.2 0.4Change in net debt resulting from cash flows 2.2 3.6 7.8Lease financing acquired with subsidiary - (0.3) (0.3)Other new lease financing - - (0.1)Translation differences (0.3) (1.4) (0.4)Movement in net debt in the period 1.9 1.9 7.0Net debt at the beginning of the period (24.4) (31.4) (31.4)Net debt at the end of the period (22.5) (29.5) (24.4) Consolidated statement of recognised income and expense unaudited 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 £m £m £m Profit for the period 10.4 12.7 21.4Foreign exchange translation differences 0.2 (0.1) (0.1)Gain / (loss) on net investment hedge - 0.9 (0.1)Actuarial loss net of deferred tax (3.0) (3.4) (1.1)Total recognised income and expense for the period 7.6 10.1 20.1 Attributable to:Equity shareholders of the parent 7.4 10.0 20.0Minority interest 0.2 0.1 0.1 7.6 10.1 20.1 Reconciliation of equity attributable to equity holders of the parent unaudited 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 £m £m £m At start of period 97.9 92.7 92.7Opening adjustment re adoption of IAS 32 / 39 (0.3) - - 97.6 92.7 92.7Profit for the year attributable to equity holders of the 10.3 12.6 21.3parentOther recognised income and expenses (2.9) (2.6) (1.3)Tax on share options taken directly to equity (0.4) (0.1) (0.8)Own shares acquired and held (0.3) - (2.4)Own shares acquired and cancelled (1.0) (1.9) (6.9)Shares issued 0.6 - 2.9Equity dividends (5.9) (5.0) (7.6)At end of period 98.0 95.7 97.9Notes to the interim financial statements Segment Reporting unaudited Segment information is presented below in respect of the Group's geographical,UK and Continental Europe, and business, Household and Personal Care, segments.The primary format, geographic segments, is based on the Group's management andinternal reporting structure. Geographic segments Segment revenue Segment profit 6 months to 6 months to Year ended 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 Jun 2005 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £m £m £m £mUK 123.5 120.2 243.3 10.5 11.2 21.4Continental Europe 152.1 151.3 301.1 5.7 8.2 14.9Total reporting segments 275.6 271.5 544.4 16.2 19.4 36.3Inter segment revenue (5.2) (3.5) (7.3) - - -Rationalisation costs - - (3.0)Corporate (0.8) (0.6) (1.3) Revenue/Operating Profit 270.4 268.0 537.1 15.4 18.8 32.0 Net finance costs (0.5) (0.6) (1.4)Income tax expense (4.5) (5.5) (9.2)Profit after tax 10.4 12.7 21.4 The £3.0 million rationalisation costs in the year ended 30 June 2005 splits outinto £2.3 million in the UK and £0.7 million in Continental Europe. Segment assets Segment liabilities As at As at As at As at As at As at 31 Dec 2005 31 Dec 2004 30 Jun 2005 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £m £m £m £mUK 110.4 119.9 115.8 (72.8) (78.2) (71.7)Continental Europe 173.4 176.9 170.3 (91.8) (93.5) (90.3)Total reporting segments 283.8 296.8 286.1 (164.6) (171.7) (162.0)Corporate 6.7 7.3 6.6 (27.5) (36.5) (32.6)Total 290.5 304.1 292.7 (192.1) (208.2) (194.6) Segment capital expenditure Segment depreciation 6 months to 6 months to Year ended 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 Jun 2005 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £m £m £m £mUK 3.4 3.5 8.0 4.5 4.6 9.5Continental Europe 4.1 5.1 9.4 4.6 4.6 9.1Total reporting segments 7.5 8.6 17.4 9.1 9.2 18.6Corporate - 0.1 0.1 - - -Total 7.5 8.7 17.5 9.1 9.2 18.6 Business segments Segment revenue Segment assets 6 months to 6 months to Year ended As at As at As at 31 Dec 2005 31 Dec 2004 30 Jun 2005 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £m £m £m £mHousehold 216.5 222.3 441.0 223.2 239.8 230.5Personal Care 53.9 45.7 96.1 60.6 57.0 55.6Total reporting segments 270.4 268.0 537.1 283.8 296.8 286.1Corporate 6.7 7.3 6.6Total 290.5 304.1 292.7 Segment capital expenditure 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £mHousehold 6.1 8.1 14.8Personal Care 1.4 0.5 2.6Total reporting segments 7.5 8.6 17.4Corporate - 0.1 0.1Total 7.5 8.7 17.5 External revenue by destination 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 Jun 2005 £m £m £mUK 115.2 113.3 227.4Continental Europe 151.8 151.1 302.8Rest of the World 3.4 3.6 6.9 270.4 268.0 537.1 2) Basis of preparationEU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Group, for the year ending 30 June 2006, be preparedin accordance with International Financial Reporting Standards (IFRSs) asadopted for use in the EU ("adopted IFRSs"). These interim financial statements for the half year ended 31 December 2005 and31 December 2004, and the comparative figures for the year ended 30 June 2005have been prepared on the basis of the recognition and measurement requirementsof IFRSs in issue that either are endorsed by the EU and effective (or availablefor early adoption) at 30 June 2006 or are expected to be endorsed and effective(or available for early adoption) at 30 June 2006, the Group's first annualreporting date at which it is required to use adopted IFRSs. Based on theseadopted and unadopted IFRSs, the directors have made assumptions about theaccounting policies expected to be applied when the first annual IFRS financialstatements are prepared for the year ending 30 June 2006. The Group published a document on 6 December 2005, Adoption of InternationalFinancial Reporting Standards, which explained the accounting policy changes andthe key financial impacts of the change from UK GAAP to IFRS for the half yearended 31 December 2004 and the year ended 30 June 2005. This document can belocated at www.mcbride.co.uk within the investor relations section. There hasbeen a reclassification of the deferred tax balances as at 31 December 2004 and30 June 2005 from that document to this to more accurately present the balancesheet positions. The Group has taken the option as permitted by IFRS 1 to adopt IAS 32 and IAS 39from 1 July 2005 onwards. The comparative periods have not been restated. The adopted IFRSs that will be effective (or available for early adoption) inthe annual financial statements for the year ending 30 June 2006 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for that annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 30 June 2006. The interim financial statements for the six months ended 31 December 2005 wereapproved by the Board on 8 February 2006. Section 240 statement - The figures for the financial year ended 30 June 2005are not the company's statutory accounts for that financial year. Thoseaccounts, which were prepared under UK Generally Accepted Accounting Practices,have been reported on by the company's auditors and delivered to the registrarof companies. The report of the auditors was unqualified and did not containstatements under section 237 (2) or (3) of the Companies Act 1985. 3) Net financing costs On the income statement, financial income includes £1.5 million (2004: £1.4million) in respect of the expected return on pension scheme assets andfinancial expenses includes £1.6million (2004: £1.4 million) in respect ofinterest on pension scheme liabilities, pertaining to the UK defined benefitpension scheme. This nets out to a £0.1 million charge (2004: nil). 4) Taxation The £4.5 million tax charge for the half year ended 31 December 2005 (2004: £5.5million) consists of £2.4 million (2004: £3.1 million) of UK tax and £2.1million (2004: £2.4 million) of overseas tax. 5) Earnings per ordinary shareBasic earnings per share is calculated on profit after tax and minorityinterests in accordance with IAS 33 Earnings per share. For the half year endedDecember 2005 it is based on 177,575,301 ordinary shares of 10 pence each whichis the weighted average number of ordinary shares in issue during the period(2004: 177,332,040). Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares to take account of the Group's share based paymentschemes where their conversion is dilutive. For the six months ended December2005 it is based on 180,988,170 (2004: 184,763,839). Adjusted basic earnings per share is shown by reference earnings beforerationalization costs since the directors consider this gives a more meaningfulmeasure of the underlying performance of the Group. 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 £m £m £mEarnings used to calculate Basic and Diluted EPS 10.3 12.6 21.3Rationalisation costs after tax - - 2.1Adjusted earnings 10.3 12.6 23.4 6) Dividends The proposed interim dividend of 1.6 pence per share (2004: 1.5 pence) wasapproved by the Board on 8 February 2006. However, the £2.8 million cost (2004:£2.6 million) was not included as a liability as at 31 December 2005 inaccordance with IAS 10 Events after the balance sheet date. Dividends paid inthe period totaled £5.9 million (2004: £5.0 million). 7) Employee benefits Under IFRS, the Group's opening balance sheet as at 1 July 2004 reflects theassets and liabilities of its defined benefit scheme. From this transitiondate, the Group has chosen to apply the amendment to IAS 19 Employee benefitswhich allows actuarial gains and losses to be recognised immediately in theConsolidated Statement of Recognised Income and Expense. As at 31 December 2005there is a £15.5 million employee benefit liability less a £4.7 million deferredtax asset. Financial calendar for the year ending 30 June 2006 DividendsInterim Announcement 9 February 2006 Payment 26 May 2006Final Announcement September 2006 Payment November 2006ResultsInterim Announcement 9 February 2006Preliminary statement for full year Announcement September 2006Report and Accounts Circulated September 2006Annual General Meeting To be held 31 October 2006 Exchange rates The exchange rates used for conversion to sterling were as follows: Unaudited Unaudited Audited 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 Average rate: Euro 1.47 1.46 1.46 Polish Zloty 5.82 6.34 6.14 Czech Koruna 43.27 45.89 44.86 Hungarian Forint 364.8 361.9 361.3 Closing rate: Euro 1.46 1.41 1.48 Polish Zloty 5.59 5.75 5.99 Czech Koruna 42.27 42.87 44.51 Hungarian Forint 367.4 347.0 365.7 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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