6th Sep 2007 07:01
Yule Catto & Co PLC06 September 2007 Yule Catto & Co plc Interim Results for the six months ended 30 June 2007 HIGHLIGHTS • Underlying total sales* increased by 4.4% to £294.2m (2006: £281.8m) • Underlying profit before taxation* increased by 5.1% to £17.0m (2006: £16.2m) • Earnings per share* of 8.1p (2006: 7.6p) • Interim dividend 3.9p (2006: 3.8p) • Net borrowings* reduced to £164.3m (2006: £175.8m) • Polymer Chemicals shows continued expansion • Continued investment in Pharma Chemicals pipeline • Impact Chemicals beginning to show benefits of restructuring initiatives * Before special items, as defined in note 8 Anthony Richmond-Watson, Chairman, comments: "We consider our two core divisions to be well placed to increase shareholdervalue in the future and plan to invest in these businesses as we continue toextract value from the rationalisation of Impact Chemicals. Overall, we expectunderlying profits for the full year to show a modest improvement on our 2006results." 6 September 2007 ENQUIRIES: YULE CATTO Tel: 01279 442791Adrian Whitfield, Chief ExecutiveAndrew Burnett, Acting Finance Director COLLEGE HILL Tel: 020 7457 2020Gareth David email: [email protected] RESULTS SUMMARY Underlying performance(a) IFRS 2007 2006 2007 2006 Unaudited Unaudited Unaudited Unaudited £'000 £'000 £'000 £'000 Total sales 294,181 281,835 294,181 290,264 EBITDA (b) 30,368 31,859 30,368 31,859Total operating profit 22,754 22,453 15,952 22,294Profit before taxation 17,029 16,199 12,464 13,298 Net borrowings (164,283) (175,790) (144,460) (172,118)Free cash flow (c) 2,102 (14,783) 2,102 (14,783) Earnings per share 8.1p 7.6p 5.0p 5.6pDividend per share 3.9p 3.8p 3.9p 3.8p (a) Underlying performance excludes special items as shown in note 3.(b) Operating profit before depreciation, amortisation and non-recurring items.(c) As shown in the consolidated cash flow statement. CHAIRMAN'S STATEMENT Overview We have delivered a solid six months performance, with the Group's underlyingsales increasing 4.4% to £294.2 million and underlying profit before taxationincreasing 5.1% to £17.0 million, with each of the three divisions deliveringagainst their primary objectives. Polymers continued to show good volumegrowth, supported by new capacity which has come on stream in Malaysia. ThePharma business maintained its leading position in Omeprazole and investedfurther in its long-term pipeline. Whilst the benefits of the restructuringinitiated in 2006 were evidenced by a return to profit at Impact Chemicals. In addition, at the beginning of August, we announced the reshaping of our FineChemical production assets. We believe that improving the utilisation of ourEuropean assets, whilst investing in China, is a significant strategic step inthe long-term development of the Group. This should accelerate sales growth inAsia and enhance the cost effective supply of intermediary products into ourbusiness. The Board believes that these results confirm the strengthening position of theGroup and, as a result, has declared an interim dividend of 3.9 pence per share,being an increase of 3%. Polymer Chemicals Polymer division has maintained its strong growth performance with salesincreasing by 5% over the same period last year. Within Aqueous Polymers, a 30% increase in nitrile latex capacity in Malaysia atthe end of the first quarter underpinned sales growth in this business area. Afurther expansion of the Malaysian plant is now underway which we expect tocommission later this year. The demand for latex and dispersions was goodthroughout all our geographic regions driven by demand in the surface coatings,adhesives and construction industries. Auxiliary polymer sales reduced year-on-year owing to competitive pricing. TheGroup's natural rubber business also experienced margin pressures caused by theescalating price of natural rubber. Feedstock supplies were restricted by outages at crackers in Europe and the USA,combined with some monomer suppliers experiencing production difficulties. Thesituation is expected to improve in the second half. Overall, the growth inbusiness has been in line with respective market growth and geographicexpansion. However, this volume growth did not translate into increasedoperating profit in the first half as escalating raw material costs andshortages impacted profitability late in the period. Pharma Chemicals A sound first half year was underpinned by our generic Omeprazole businessposting good volume growth although, as expected, price erosion continues to bea factor in both the USA and European markets. The Spanish and Mexicanoperations both performed well and at the end of the first half we saw thelaunch of generic Zolpidem in the USA. This launch has progressed as we hadenvisaged and we are now working with our customers to maintain their positionin the market. Pricing pressure has affected the competitive position of our Italian operationand we have previously announced the proposed closure of the main Milan Italianfacility, with the subsequent transfer of most products to sister plants inSpain and Mexico. We continue to see a number of enquiries from the biotech and pharma sectors forpotential inclusion in our future portfolio. Our commitment to development ofnew products in these sectors continues apace with two drug master file (DMF)registrations in the first half of the year. Impact Chemicals The Impact Chemicals division has made steady progress following the previouslyannounced restructuring programmes. The division continues to focus on marginimprovement and cost reduction and, whilst the second half remains challenging,we anticipate improved performance in a number of areas. As previously announced, the Hull site of Holliday Pigments has been unable toreturn to satisfactory levels of profitability, resulting in the decision toclose the facility and focus production in Comines, France. However strongmarket demand for ultramarine pigment gives us confidence for the underlyingperformance of this business in the second half. UK Pension Fund The triennial valuation of the UK pension fund has been concluded and we haveagreed a schedule of contributions for the next three years with the Trustees.These have been set at a similar level to existing contributions. We have alsosuccessfully concluded the review of the package of benefits provided to membersof the fund, which has reduced the deficit by £10.5 million. Borrowings Net borrowings, adjusted for movements in the mark-to-market of financialderivatives, have decreased since the year end by £2.0 million to £164.3million. We are pleased with this result, reflecting the strong focus that wehave placed on reducing working capital. This action restricted the seasonalgrowth in working capital over the first six months to £6.2 million comparedwith the increase of £23.8 million in 2006. The closures of both the Hapton site of William Blythe Ltd and the UK plant ofthe James Robinson business were completed in the period. We continue to expect that, following the sale of properties at the Hull,Dieburg and Milan plants, these recently announced closures will be cashneutral. However, the next six months will see a modest cash outflow as theclosure process at each site continues. Dividend The interim dividend of 3.9 pence per ordinary share (2006: 3.8p) will be paidon 16 November 2007 to members on the register at close of business on 19October 2007. Board and Management Jeremy Maiden and Dr Alexander Dobbie were appointed Non-Executive Directorswith effect from 20 August 2007. The search for a Finance Director is welladvanced. Other significant personnel changes include the appointment of FrankSiddle as Director of Group HR and Derick Whyte as Chief Executive of ImpactChemicals. Frank joins the company from Caterpillar (UK) and Derick joins usfrom ICI where he was Vice President of Acheson Industries. (As previouslyannounced the businesses previously organised under Fine Chemicals andPerformance Chemicals have been combined under the heading of Impact Chemicals). Internal promotions include the appointment of Andrew Lanham as ManagingDirector of Synthomer Europe and Brendan Catlow as Managing Director, SynthomerMalaysia. Outlook We expect our Polymer business will continue to see good volume growth as weinvest in additional new capacity in Asia. In parallel, we are focused onincreasing profitability by improving the operating efficiency and commercialstrengths of this business. Within our Pharma business the medium term outlook is improved, following therationalisation of our European asset base, together with the planned investmentin China. However, given the phasing of customer orders, we expect trading to bequieter in the second half. We consider our two core divisions to be well placed to increase shareholdervalue in the future and plan to invest in these businesses as we continue toextract value from the rationalisation of Impact Chemicals. Overall, we expectunderlying profits for the full year to show a modest improvement on our 2006results. Anthony Richmond-Watson Chairman 6 September 2007 Consolidated income statement for the SIX MONTHS ENDED 30 JUNE 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Unaudited Unaudited Audited Audited £'000 £'000 £'000 £'000 £'000 £'000 Group revenue 287,018 283,567 551,655Share of joint ventures' revenue 7,163 6,697 14,131Total sales 294,181 290,264 565,786 Group revenue 287,018 283,567 551,655 Company and subsidiaries before 15,454 21,853 40,079impairmentsImpairment of non-current assets - - (19,699)Company and subsidiaries 15,454 21,853 20,380Share of joint ventures 498 441 1,071Operating profit 15,952 22,294 21,451 Interest payable (7,419) (6,692) (13,564) Interest receivable 1,694 438 2,121 (5,725) (6,254) (11,443) Fair value adjustment 2,237 (2,742) 3,618Finance costs (3,488) (8,996) (7,825) Profit before taxation 12,464 13,298 13,626Taxation (4,428) (4,488) (8,855)Profit for the year 8,036 8,810 4,771 Profit attributable to minority 757 576 1,344interestsProfit attributable to equity 7,279 8,234 3,427holders of the parent 8,036 8,810 4,771 Earnings per shareBasic 5.0p 5.6p 2.4pDiluted 5.0p 5.6p 2.3p Consolidated balance sheet as at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 Unaudited Unaudited Audited £'000 £'000 £'000Non-current assetsGoodwill 172,443 172,443 172,443Other intangible assets 381 691 439Property, plant and equipment 111,297 129,229 110,167Deferred tax assets 1,220 2,607 1,179Investment in joint ventures 3,673 3,700 3,300 289,014 308,670 287,528 Current assetsInventories 63,582 67,473 66,080Trade and other receivables 112,966 119,419 105,166Cash and cash equivalents 84,755 49,322 65,917 261,303 236,214 237,163 Current liabilitiesBorrowings (74,563) (50,796) (57,802)Trade and other payables (128,979) (117,102) (124,892)Current tax liability (53,850) (53,488) (52,100)Dividends (8,010) (7,717) -Derivatives at fair value (24,488) (16,486) (22,336)Net current liabilities (28,587) (9,375) (19,967) Non-current liabilitiesBorrowings (154,652) (170,644) (158,771)Trade and other payables (366) (509) (372)Deferred tax liability (6,407) (6,143) (6,316)Post retirement benefit obligations (33,731) (61,744) (77,884) (195,156) (239,040) (243,343) Net assets 65,271 60,255 24,218 EquityCalled up share capital 14,566 14,565 14,566Share premium 33,034 33,026 33,034Capital redemption reserve 949 949 949Hedging and translation reserve (7,703) (4,015) (7,371)Retained earnings 19,597 11,260 (21,031)Equity attributable to equity holders of the parent 60,443 55,785 20,147Minority interests 4,828 4,470 4,071Total equity 65,271 60,255 24,218 Analysis of net borrowingCash and cash equivalents 84,755 49,322 65,917Current borrowings (74,563) (50,796) (57,802)Non-current borrowings (154,652) (170,644) (158,771)Net borrowings (144,460) (172,118) (150,656)Add back: special items (19,823) (3,672) (15,615)Net borrowings (underlying performance) (164,283) (175,790) (166,271) The financial statements were approved by the Board of Directors and authorisedfor issue on 6 September 2007. Consolidated cash flow for the SIX MONTHS ENDED 30 JUNE 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Unaudited Unaudited Audited Audited £'000 £'000 £'000 £'000 £'000 £'000OperatingCash generated from operations 19,178 2,782 46,376 Interest received 1,694 438 2,121 Interest paid (7,205) (6,786) (13,581)Net interest paid (5,511) (6,348) (11,460) UK corporation tax received 954 - - Overseas corporate tax paid (3,537) (4,065) (9,196)Total tax paid (2,583) (4,065) (9,196)Net cash inflow / (outflow) from operating 11,084 (7,631) 25,720activities InvestingDividends received from joint ventures 78 631 1,385 Purchase of property, plant and equipment (9,060) (7,102) (18,468) Sale of property, plant and equipment - - 1,539Net capital expenditure and financial (9,060) (7,102) (16,929)investment Sale of businesses - 3,849 3,660 Net cash impact of acquisitions and - 3,849 3,660disposalsNet cash outflow from investing activities (8,982) (2,622) (11,884) FinancingEquity dividends paid - - (13,251)Dividends paid to minority interests - (681) (1,697)Purchase of own shares (25) (140) (246)Issue of shares - 1,282 1,291Proceeds of non-current borrowings - - 154Net cash (outflow)/ inflow from financing (25) 461 (13,749)activities Increase/(decrease) in cash and bank 2,077 (9,792) 87overdrafts during the year Comprised of:Cash and cash equivalents 18,838 5,021 23,160Bank overdrafts (16,761) (14,813) (23,073) 2,077 (9,792) 87 RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO MOVEMENT IN NET BORROWINGS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Net cash inflow/(outflow) from operating 11,084 (7,631) 25,720activitiesDividends received from joint ventures 78 631 1,385Net capital expenditure and financial (9,060) (7,102) (16,929)investmentDividends paid to minority interests - (681) (1,697)Free cash flow 2,102 (14,783) 8,479 Net cash impact of acquisitions and - 3,849 3,660disposalsPurchase of own shares (25) (140) (246)Issue of shares - 1,282 1,291Equity dividends paid - - (13,251)Exchange movements (89) (407) (613) Movement in net borrowings (underlying 1,988 (10,199) (680)performance) Consolidated STATEMENT OF RECOGNISED INCOME AND EXPENSE for the SIX MONTHS ENDED 30 June 2007 Six months ended 30 June 2007 Six months ended 30 June 2006 Minority Equity Total Minority Equity Total interests holders of interests holders of the parent the parent Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited £'000 £'000 £'000 £'000 £'000 £'000 Actuarial gains and losses - 41,358 41,358 - 5,901 5,901Tax on items recognised directly - - - - - -in equityExchange differences - (332) (332) (146) 3,534 3,388Profit for the year 757 7,279 8,036 576 8,234 8,810Total recognised income for the 757 48,305 49,062 430 17,669 18,099period Year ended 31 December 2006 Minority Equity Total interests holders of the parent Audited Audited Audited £'000 £'000 £'000 Actuarial gains and losses - (13,551) (13,551)Tax on items recognised directly in equity - (1,409) (1,409)Exchange differences (296) (6,890) (7,186)Profit for the year 1,344 3,427 4,771Total recognised income/(expenditure) for 1,048 (18,423) (17,375)the period 1 Basis of presentation The accompanying consolidated financial statements of Yule Catto & Co plc havebeen prepared in accordance with recognition and measurement principles requiredby International Financial Reporting Standards (IFRS). The consolidatedfinancial statements have been prepared using accounting policies consistent inall material respects with those applied in the Company's Annual Report for theyear ended 31 December 2006. This statement does not seek to comply with IAS 34"Interim Financial Reporting". The financial statements for the six monthsended 30 June 2007 are unaudited and do not constitute statutory financialstatements within the meaning of section 240 of the Companies Act 1985. 2 Consolidated income statement analysis Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing operations Continuing operations Unaudited Unaudited Underlying Special IFRS Underlying Special IFRS performance items performance items £'000 £'000 £'000 £'000 £'000 £'000 Group revenue 287,018 - 287,018 275,138 8,429 283,567Share of joint ventures' 7,163 - 7,163 6,697 - 6,697revenueTotal sales 294,181 - 294,181 281,835 8,429 290,264 Group revenue 287,018 - 287,018 275,138 8,429 283,567 Company and subsidiaries 22,256 (6,802) 15,454 22,012 (159) 21,853Share of joint ventures' 498 - 498 441 - 441Operating profit/(loss) 22,754 (6,802) 15,952 22,453 (159) 22,294 Finance costs (5,725) 2,237 (3,488) (6,254) (2,742) (8,996) Profit/(loss) before 17,029 (4,565) 12,464 16,199 (2,901) 13,298taxationTaxation (4,428) - (4,428) (4,536) 48 (4,488)Profit/(loss) for the year 12,601 (4,565) 8,036 11,663 (2,853) 8,810 Profit attributable to 757 - 757 576 - 576minority interestsProfit attributable to 11,844 (4,565) 7,279 11,087 (2,853) 8,234equity holders of theparent 12,601 (4,565) 8,036 11,663 (2,853) 8,810 Earnings per shareBasic 8.1p (3.1)p 5.0p 7.6p (2.0)p 5.6pDiluted 8.1p (3.1)p 5.0p 7.6p (2.0)p 5.6p Discontinued operations There are no discontinued operations. A number of businesses were sold orclosed during the period. However, these do not satisfy the criteria of IFRS 5to be treated as discontinued operations. 3 Special items The special items disclosed are made up as follows: Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Total salesRevenue of businesses sold or closed - 8,429 8,429during the period Operating profitOperating profit of businesses sold - 146 117or closed during the periodProfit or loss arising from the sale (6,802) (305) (1,926)or closure of operationsImpairment of non current assets - - (19,699) (6,802) (159) (21,508) The special item of £6,802,000 relates to the closure of Holliday Pigments Ltd'smanufacturing site in Hull. 4 Segmental analysis - underlying performance Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited* Unaudited* £'000 £'000 £'000 Total sales by activity Polymer Chemicals 210,739 199,419 399,084 Pharma Chemicals 36,140 32,487 64,404 Impact Chemicals 47,302 49,929 93,869 294,181 281,835 557,357 Operating profit by activity Polymer Chemicals 19,844 20,300 38,749 Pharma Chemicals 4,424 3,941 8,133 Impact Chemicals 1,356 1,108 964 Unallocated corporate expenses (2,870) (2,896) (4,887)Operating profit 22,754 22,453 42,959 Finance costs (5,725) (6,254) (11,443) Underlying profit before taxation 17,029 16,199 31,516 \* The underlying performance of the Pharma Chemicals and Impact Chemicalsdivisions has been adjusted to reflect the reclassification of companies betweenthese divisions announced on 17 May 2007, in line with internal managementstructures. The effect has been to reclassify the results of the Fine Chemicalscompanies, Oxford Chemicals Limited and PFW Aroma Chemicals BV, from theirhistoric inclusion in the Pharma division, into the new division, ImpactChemicals. The remaining companies in the Impact Chemicals division are thosehistorically reported within the Performance Chemicals division. 5 Reconciliation of profit from operations to cash generated from operations Six months ended Six months ended Year ended 31 30 June 2007 30 June 2006 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Operating profit 15,952 22,294 21,451Less: share of profit of joint ventures' (498) (441) (1,071) 15,454 21,853 20,380 Impairment of non current assets - - 19,699Depreciation and amortisation 7,614 9,406 18,313Profit or loss arising from the sale or 6,802 305 1,926closure of operationsCash impact of termination of businesses (1,692) (3,233) (6,096)Loss / (profit) on sale of fixed assets 70 83 (794)Share based payments 25 140 299Decrease / (increase) in inventories 2,408 (3,107) (3,947)Increase in trade and other receivables (7,810) (21,365) (10,496)Pension funding in excess of IAS 19 charge (2,928) (1,272) (3,181)(Decrease) / increase in trade payables and (772) 655 10,547provisionsUnrealised exchange losses / (gains) 7 (683) (274) Cash generated from operations 19,178 2,782 46,376 6 Changes in equity (unaudited) Share Share Capital Own Hedging and Minority Retained Total capital premium redemption shares translation interest earning reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 14,566 33,034 949 - (7,371) 4,071 (21,031) 24,218Profit for the year - - - - - 757 7,279 8,036Actuarial gains and - - - - - - 41,358 41,358lossesExchange differences on - - - - (339) - 1 (338)translations of overseasoperationsNet investment hedging - - - - 7 - - 7Total recognised - - - - (332) 757 48,638 49,063(expenditure)/income forthe periodDividends paid - - - - - - (8,010) (8,010)Shares purchased by ESOP - - - 25 - - - 25trustShare based payments - - - (25) - - - (25) At 30 June 2007 14,566 33,034 949 - (7,703) 4,828 19,597 65,271 7 Further information The financial information for the year ended 31 December 2006 has been extractedfrom the statutory accounts, which have been filed with the Registrar ofCompanies. The auditors' report on those accounts was unqualified and did notcontain any statement under section 237 of the Companies Act 1985. The financial statements were approved by the Board of Directors on 6 September2007. The proposed interim dividend was approved by the Board on 6 September 2007 andhas not been included as a liability as at 30 June 2007 in these financialstatements. This statement will be sent to all shareholders on 13 September 2007 and can beobtained by the public from the Company's registered office at Temple Fields,Harlow, Essex, CM20 2BH, or on the company website www.yulecatto.com. Earnings per ordinary share are based on the attributable profit for the periodand the weighted average number of shares in issue during the period to June2007 of 145.7 million (2006: 145.3 million). 8 Glossary of terms Total sales Total sales represent the total of revenue from Yule Catto and Co plc, its subsidiaries, and its share of the revenue of joint ventures.EBITDA EBITDA is calculated as operating profit before depreciation, amortisation and non-recurring items.Operating profit Operating profit represents profit before finance costs and taxation.Non-recurring items Non-recurring items are defined as: • Profit or loss impact arising from the sale or closure of an operation; • Impairment of non-current assets; and • Other non-operating or one-off items.Special items The following are disclosed separately as special items in order to provide a clearer indication of the Group's underlying performance: • Non-recurring items; • Mark to market adjustments in respect of cross currency and interest rate derivatives used for hedging purposes where IAS 39 hedge accounting is not applied; • Revaluation of US Dollar loan notes from the rate of the related cross currency swaps to the period end rate; and • The transitional adjustment required to reflect movements in fair value caused by variations in interest rates, and subsequent amortisation thereof, to the extent that these constituted effective hedges under UK GAAP.Underlying performance Underlying performance represents the statutory performance of the Group under IFRS, excluding special items.Free cash flow Free cash flow represents cash flow before cash impact of acquisitions and disposals, purchase and issue of own shares, equity dividends paid and exchange movements.Net borrowings Net borrowings represents cash and cash equivalents together with short and long term borrowings, as adjusted for the effect of related derivative instruments irrespective of whether they qualify for hedge accounting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Synthomer