27th Jul 2005 07:00
Croda International PLC27 July 2005 Wednesday, 27 July 2005 Croda International Plc Interim Results Announcement Six months to 30 June 2005 Highlights 2005 2004 Sales for continuing operations £158.9m £146.5m +8.5% Pre-tax profit for continuing operations £25.8m £22.4m +15% Earnings per share 13.0p 11.6p +12% Dividend per share 4.35p 4.10p + 6% • Pre-tax profits up 15% • Consumer Care sales up 11.7% • Consumer Care volumes up 11% • Consumer Care margins maintained at 21% • Dividend increased 6% to 4.35p per share • Continued Treasury share buy back programme Commenting on the results, Chairman, Antony Beevor, said: "Demand from our customers has continued to be good. In particular, in theConsumer Care segment sales rose by 11.7% on volumes which were 11% up on theprevious year. The principal driver of growth was skin care, which is one ofthe fastest growing parts of the personal care market worldwide. Overall, ongoing demand remains good across the business. We anticipate furtherproduct launches in the second half giving us confidence in the continued growthof the business in our chosen markets. We expect 2005 to be another year ofprogress for the Group." For further information, please contact: Mike Humphrey, Chief Executive Tel: 01405 860551 Barbara Richmond, Group Finance Director Tel: 01405 860551 Charles Watenphul or Andrew Dowler, Financial Dynamics Tel: 0207 831 3113 Or visit our web site at: www.croda.com where the presentation to analysts willbe available by 10.30 a.m. today. Croda International Plc Chairman's Statement These are the first set of results we have prepared under InternationalFinancial Reporting Standards (IFRS). Profit before tax for the first sixmonths was £25.8m, 15% ahead of the same period last year. Sales fromcontinuing operations increased by 8.5%. For the first time in a number ofyears currency had no significant effect on sales values or profits in the firsthalf. The tax rate of 34.9% was in line with expectations, resulting in earnings pershare of 13p (2004 11.6p). As a result of this strong performance, the Boardhas declared an interim dividend 6% higher than last year. This dividend of4.35p (2004 4.1p) will be payable to shareholders on 6 October 2005, in linewith best practice and three months earlier than the Company has previously paidthe interim dividend. Trading At the AGM in April, I reported the year had started strongly. Demand hascontinued to be good in the second quarter. In particular, in the Consumer Caresegment (comprising the Personal, Health and Home Care businesses) sales roseby 11.7% on volumes which were 11% up on the previous year. Whilst all of thissegment performed well, the principal driver of growth was skin care, which isone of the fastest growing parts of the Personal Care market worldwide. Theoperating margin in Consumer Care was maintained at 21%. Sales of Industrial Specialities were up 2.7% on volumes which were 2.5% lower.The good performance in higher added value plastics additives was partly offsetby lower volumes of commodity industrial products. Geographically, we achieved very good growth in the Americas, with NorthAmerican sales up 16% and those in South America up almost 35%. Europe alsoperformed well with an increase in mainland Europe of 8%. Sales in Asia grew ata lower rate overall with good growth in some areas such as China and littlegrowth in countries such as Indonesia. Finance Again we achieved a good cash performance with operating cash inflow of 14.5pper share (2004 12.7p). We continued to buy back shares into Treasury in thefirst half and have now purchased in total 6.5 million shares at a cost of£23.5m since the buy back programme began in December of last year. We alsoreturned to the market 1.4 million shares as a result of the exercise ofemployee share options in the first half. Net debt at the end of June was £20.8m producing gearing of 26.4% (2004 24.7%). Further information on the impact of IFRS on the accounting policies and 2004results can be found by visiting our website www.croda.com and going to the "Latest Announcements" in the Investor centre. Outlook Overall, ongoing demand remains good across the business. Also we anticipatefurther product launches in the second half, giving us confidence in thecontinued growth of the business in our chosen markets. We expect 2005 to beanother year of progress for the Group. As already announced I will be retiring at the end of September, handing over toMartin Flower. I have been privileged to be Chairman of Croda for the last threeand a half years and I wish Martin all possible success in the future. Croda International PlcResults for the six months ended 30 June 2005 Condensed Group income statement Unaudited £m Note 2005 2004 2004 First First Full Half Half YearContinuing operationsTurnover 2 158.9 146.5 291.1 Cost of sales (110.4) (104.4) (206.5) ______ ______ ______Gross profit 48.5 42.1 84.6 Operating expenses (22.7) (19.8) (39.3) Share of associate's post-tax profits Profit before tax 1.1 1.7 2.6 Tax (0.3) (0.5) (0.8) 0.8 1.2 1.8 ______ ______ ______Operating profit 2 26.6 23.5 47.1 Finance costs 3 (0.8) (1.1) (1.9) ______ ______ ______Profit before tax 25.8 22.4 45.2 Tax (9.0) (7.5) (15.2) ______ ______ ______Profit after tax from continuing operations 16.8 14.9 30.0 Discontinued operations 5 - 0.5 0.7 Minority interest and preference dividends - (0.2) (0.2) ______ ______ ______Profit attributable to ordinary shareholders 16.8 15.2 30.5 _____ _____ _____ pence per pence per pence per share share shareEarnings per share of 10pBasicTotal 13.0 11.6 23.3Continuing operations 13.0 11.3 22.8 DilutedTotal 13.0 11.6 23.1Continuing operations 13.0 11.3 22.7 Ordinary dividendsInterim 4.35 4.10 4.10Final 8.40 Condensed Group balance sheet Unaudited £m Note At At At 30 June 30 June 31 December 2005 2004 2004AssetsNon-current assetsProperty, plant and equipment 126.2 130.1 127.4Intangible assets 6.5 6.5 6.5Investments 11.1 11.2 10.9Deferred tax assets 33.8 32.4 34.1 ______ ______ ______ 177.6 180.2 178.9 ______ ______ ______ Current AssetsInventories 55.9 52.1 52.0Trade and other receivables 64.3 59.0 54.9Cash, cash equivalents and other financial assets 6 36.5 28.2 32.4 ______ ______ ______ 156.7 139.3 139.3 ______ ______ ______ LiabilitiesCurrent liabilitiesTrade and other payables (66.6) (51.3) (42.1)Borrowings and other financial liabilities 6 (36.0) (18.0) (15.6)Current tax liabilities (4.4) (6.1) (4.8) ______ ______ ______ (107.0) (75.4) (62.5) ______ ______ ______Net current assets 49.7 63.9 76.8 ______ ______ ______Non-current liabilitiesBorrowings and other financial 6 liabilities (21.3) (31.1) (32.0)Other payables (0.7) (0.7) (0.9)Retirement benefit obligations (102.5) (99.9) (104.1)Provisions (8.6) (14.0) (13.6)Deferred tax liabilities (15.4) (13.9) (15.5) ______ ______ ______ (148.5) (159.6) (166.1) ______ ______ ______Net assets 78.8 84.5 89.6 ______ ______ ______ Equity shareholders' funds 77.9 83.3 88.8Minority interests 0.9 1.2 0.8 ______ ______ ______ Total equity 78.8 84.5 89.6 ______ ______ ______ Condensed statement of recognised income and expense Unaudited £m 2005 2004 2004 First First Full Half Half Year Profit attributable to ordinary shareholders 16.8 15.2 30.5Exchange differences 1.6 (1.6) (0.7)Actuarial movement on retirement benefit obligations (net of deferred tax) - - (5.2) ______ ______ ______Total recognised income and expense 18.4 13.6 24.6 ______ ______ ______ Condensed statement of changes in equity Unaudited £m 2005 2004 2004 First First Full Half Half Year Opening shareholders' equity 88.8 84.1 84.1Total recognised income 18.4 13.6 24.6Ordinary dividends on equity shares (16.2) (15.5) (15.5)Transactions in own shares (13.3) 1.0 (4.7)Share based payments 0.2 0.1 0.3 ______ ______ ______Closing shareholders' equity 77.9 83.3 88.8 ______ ______ ______ Condensed Group cash flow statement Unaudited £m Note 2005 2004 2004 First First Full Half Half YearCash flows from operating activitiesProfit before tax Continuing operations 25.8 22.4 45.2 Discontinued operations - (0.2) (0.2)Adjustments for: Depreciation and loss on disposal of fixed assets 7.1 7.2 14.5 Changes in working capital (3.6) (3.0) (0.7) Net financing cost 0.8 1.1 1.9 Pension fund contributions in excess of service costs (1.4) (2.2) (3.8) Share based payments 0.4 0.3 0.4 Share of profit of associated undertaking (0.8) (1.2) (1.8)Dividend received from associated undertaking 0.5 0.8 1.9 ______ ______ ______Cash generated from operations 28.8 25.2 57.4Interest paid (1.5) (1.8) (3.4)Tax paid (9.1) (7.3) (12.5) ______ ______ ______Net cash generated from operating activities 18.2 16.1 41.5 ______ ______ ______Cash flows from investing activitiesPurchases of property, plant and equipment (4.1) (8.9) (14.9)Proceeds from sale of property, plant and equipment 0.2 2.2 1.3Proceeds from sale of businesses (net of costs) - 3.2 4.6Cash paid against provisions (5.0) - -Interest received 0.5 0.6 1.1 ______ ______ ______Net cash used in investing activities (8.4) (2.9) (7.9) ______ ______ ______Cash flows from financing activitiesAdditional borrowings 4.8 - -Repayment of borrowings - (5.2) (3.3)Net purchases of own shares (8.9) 1.0 (4.7)Dividends paid 4 (5.4) (5.4) (16.0)Other - (0.1) - ______ ______ ______Net cash used in financing activities (9.5) (9.7) (24.0) ______ ______ ______ Net increase in cash and cash equivalents 0.3 3.5 9.6Cash and cash equivalents brought forward 17.5 8.5 8.5Exchange differences 1.1 (0.6) (0.6) ______ ______ ______Cash and cash equivalents carried forward 18.9 11.4 17.5 ______ ______ ______ Cash and cash equivalents carried forward compriseCash at bank and in hand 36.2 28.2 32.4Bank overdrafts (17.3) (16.8) (14.9) ______ ______ ______ 18.9 11.4 17.5 ______ ______ ______Reconciliation to net debtNet increase in cash and cash equivalents 0.3 3.5 9.6Increase in debt and lease financing (4.8) 5.2 3.3 ______ ______ ______Change in net debt from cash flows (4.5) 8.7 12.9New finance lease contracts - - (0.1)Exchange differences (1.1) (0.1) 1.5 ______ ______ ______ (5.6) 8.6 14.3Net debt brought forward (15.2) (29.5) (29.5) ______ ______ ______Net debt carried forward (20.8) (20.9) (15.2) ______ ______ ______ Notes to the interim report 1. Basis of preparation The financial information in this interim report has been prepared on the basisof all IFRS's that had been published by 31 December 2004 and apply toaccounting periods beginning on or after 1 January 2005. The Group has also, aspermitted, early adopted the amendment to IAS 19 'Employee Benefits - ActuarialGains and Losses' that was published by the International Accounting StandardsBoard ('IASB') in December 2004. The standards used are those endorsed by theEU together with those standards and interpretations that had been issued by theIASB but had not been endorsed by the EU at the time of preparing thesestatements (July 2005). The directors expect that the amendments to IAS 19 'Employee Benefits - Actuarial Gains and Losses' issued by the IASB will be fullyadopted by the EU and will therefore be available for use in the IFRS financialstatements for the year ended 31 December 2005. During 2005 further standards and interpretations may be issued that will beapplicable for financial years beginning on or after 1 January 2005 or that areapplicable to later accounting periods but may be adopted early. The Group'sfirst IFRS financial statements may, therefore, be prepared in accordance withsome different accounting policies from the financial information presentedhere. Additionally, IFRS is currently being applied in the United Kingdom, andin a large number of other countries simultaneously, for the first time.Furthermore, due to a number of new and revised standards included within thebody of standards that comprise IFRS, there is not yet a significant body ofestablished practice on which to draw in forming opinions regardinginterpretation and application. Accordingly, practice is continuing to evolve.At this preliminary stage, therefore, the full financial effect of reportingunder IFRS as it will be applied and reported on in the Group's first IFRSfinancial statements cannot be determined with certainty and may be subject tochange. In June 2005, the Group published via the Stock Exchange and on its website(croda.com) a 'Statement on the Transition to International Accounting Standardsand International Financial Reporting Standards' ('the transition statement').This statement described the likely impact of the transition from UK GAAP toIFRS on the Group's equity, net income and cash flows, as well as providing eachof the reconciliations required by IFRS 1. The interim report should be read inconjunction with the transition statement. The accounting policies followed in the preparation of this interim report wereset out in full in the transition statement and have been consistently appliedto all the years presented except for those relating to the classification andmeasurement of financial instruments. The Group has made use of the exemptionavailable under IFRS 1 to only apply IAS 32 and IAS 39 from 1 January 2005. The comparative figures for the financial year ended 31 December 2004 are notthe Group's statutory accounts for the financial year. Those accounts, whichwere prepared under UK GAAP in accordance with the Companies Act 1985, have beenreported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was unqualified and did not containstatements under section 237(2) or (3) of the Companies Act 1985. 2. Segmental information Primary reporting format - business segments At 30 June 2005 the Group is organised on a worldwide basis into two mainbusiness segments, relating to the manufacture and sale of the Group's productswhich are destined for either the Consumer Care market or the market forIndustrial Specialities. 2005 2004 2004 First First Full Half Half Year £m £m £mTurnover - continuing operationsConsumer Care 104.9 93.9 187.3Industrial Specialities 54.0 52.6 103.8 ______ ______ ______ 158.9 146.5 291.1 ______ ______ ______ Operating profit - continuing operationsConsumer Care 22.0 20.3 40.7Industrial Specialities 4.6 3.2 6.4 ______ ______ ______ 26.6 23.5 47.1 ______ ______ ______ There are no sales between business segments and all operating costs of theGroup are allocated between the segments. Secondary reporting format - geographical segments The sales analysis in the table below is based on the location of the customer. 2005 2004 2004 First First Full Half Half Year £m £m £mTurnover by destination - continuing operationsoperationsEurope 72.8 69.6 132.7Americas 55.9 47.2 97.4Asia 20.3 20.0 41.0Rest of World 9.9 9.7 20.0 ______ ______ ______ 158.9 146.5 291.1 ______ ______ ______3. Finance costs 2005 2004 2004 First First Full Half Half Year £m £m £m Net bank interest payable 1.0 1.2 2.1Expected return on pension scheme assets less interest on scheme liabilities (0.2) (0.1) (0.2) ______ ______ ______ 0.8 1.1 1.9 ______ ______ ______ 4. Dividends paid Pence 2005 2004 2004 per First First Full share Half Half Year £m £m £m Ordinary2003 Interim - paid January 2004 4.02 - 5.3 5.32003 Final - approved April 2004, paid July 2004 7.83 - - 10.22004 Interim - paid January 2005 4.10 5.4 - - _____ _____ _____ 5.4 5.3 15.5Preference (paid June and December) - - 0.1Dividends paid to minority shareholders - 0.1 0.4 _____ _____ _____ 5.4 5.4 16.0 _____ _____ _____ A final dividend in respect of 2004 of 8.4p per share, amounting to a totaldividend of £10.8m, was approved at the Company's AGM on 21 April 2005 and waspaid on 7 July 2005. An interim dividend in respect of 2005 of 4.35p per share, amounting to a totaldividend of £5.5m, was declared by the directors at their meeting on 26 July2005. The interim report does not reflect the 2005 interim dividend payable.The dividend will be paid on 6 October 2005 to shareholders registered on 9September 2005. 5. Discontinued operations During 2004 the Group sold its Fire Fighting Chemicals and rock anchormanufacturing businesses. The results of these businesses up to the point ofdisposal are included within discontinued operations on the face of the incomestatement along with any profit or loss arising on the business disposal itselfand the profits or losses arising from the subsequent disposals of propertiespreviously occupied by disposed businesses. The impact on the income statementis summarised below. 2005 2004 2004 First First Full Half Half Year £m £m £m Profit before tax of discontinued operations to point of disposal - (0.2) (0.2)Profit on disposal and closure of discontinued operations - 0.3 (0.5)Profit on disposal of fixed assets in discontinued operations - 0.6 0.6Tax - (0.2) 0.8 ______ ______ ______ - 0.5 0.7 ______ ______ ______ 6. Financial assets and liabilities The Group manages its interest rate profile by use of an interest rate swap toconvert a proportion of its fixed rate debt to a floating rate. Under IFRS, thefair value of such derivative instruments must be recognised in the financialstatements with a corresponding fair value adjustment to the underlying loaninstrument. Accordingly, a financial asset of £0.3m has been recognised withincurrent assets, being the fair value of the interest rate swap, and current andnon-current financial liabilities include £0.1m and £0.2m respectively inrecognition of the corresponding adjustment to the fair value of the Group'sfixed rate debt at 30 June 2005. 7. Treasury shares During the period covered by this interim report the Company purchased 4,537,305shares on the open market to be held as treasury shares for a consideration of£17.2m. Included within this consideration is an amount of £4.4m accrued inrespect of purchases contracted before the period end with a settlement dateshortly after the period end. The Company now holds 6,522,589 shares in totalas treasury shares. These shares have been deducted from shareholders' equityand will be held until such time as the Board decides to cancel, reissue or usethem to satisfy share options. 8. Accounting estimates and judgements The Group's critical accounting policies under IFRS, as discussed in thetransition statement, have been set by management with the approval of the AuditCommittee. The application of these policies requires estimates and assumptionsto be made concerning the future and judgements to be made on the applicabilityof policies to particular situations. Estimates and judgements are continuallyevaluated and are based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under thecircumstances. Under IFRS an estimate or judgement may be considered critical if it involvesmatters that are highly uncertain, or where different estimation methods couldreasonably have been used, or if changes in the estimate that would have amaterial impact on the Group's results are likely to occur from period toperiod. The only such critical judgement required when preparing the Group'saccounts is discussed below. Environmental provisions At 30 June 2005, the Group has an environmental provision of £8.6m in respect ofsoil and potential ground water contamination on a number of sites. Theseprovisions were established in line with UK GAAP and have been reviewed toensure compliance with IFRS. Based on information currently available, thislevel of provision is considered appropriate by the directors. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Croda International