26th Jul 2006 07:02
Croda International PLC26 July 2006 26 July 2006 CRODA INTERNATIONAL PLC Interim results announcement June 2006 Highlights 2006 2005Sales for continuing operations £164.5m £154.5m + 6.5%Pre-tax profit for continuing operations £27.9m £25.1m + 11.2%Earnings per share for continuing operations 14.7p 12.5p + 17.6%Dividend per share 4.65p 4.35p + 6.9% • Pre-tax profits up 11.2% to £27.9m • Group sales up 6.5% to £164.5m o Consumer Care sales up 8.2% • Earnings per share up 17.6% • 4.65p interim dividend, up 6.9% • £32.4m returned to shareholders: o £21.5m treasury stock buyback o £10.9m final dividend paid • Acquisition of Uniqema announced Commenting on the results, Chairman, Martin Flower, said: "This was a strong performance in spite of the headwinds of higher input costs,particularly energy. Pre-tax profits on continuing operations were up over 11%on sales up 6.5%, including 2.5% from currency translation. We were pleased to announce the acquisition of Uniqema from ICI PLC on 29 June. This transforming acquisition gives Croda a great opportunity to further enhance shareholder value." For further information, please contact: Mike Humphrey, Group Chief Executive Tel: 01405 860551 Sean Christie, Group Finance Director Tel: 01405 860551 Charlie 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 midday today Chairman's Statement I am pleased to report a strong set of results for the first half of 2006.Overall pre-tax profits on continuing operations for the period were up 11.2% at£27.9m, compared to £25.1m for the same period last year, on sales up 6.5%. Iam also delighted that Croda has reached agreement to acquire the Uniqemabusiness from ICI PLC. The deal is expected to complete in early September. In line with the Group's stated objective to dispose of non-core activities,Croda sold its metal treatments division to Shell UK Limited for an initialconsideration of £3.9m. Continuing earnings per share increased 17.6% to 14.7p (2005 12.5p) and as aresult, the Board has declared an interim dividend of 4.65p, 6.9% higher thanlast year. Trading The first quarter profit uplift reported at the AGM continued in the secondquarter, resulting in continuing pre-tax profits up 11.2% for the half versusthe previous year. In the second quarter, improved margins versus last yearcompensated for fewer working days. We continued to focus on high margin, highadded value products, reducing the level of toll processing and technical oiltrading at Seatons. In Consumer Care, sales were buoyant with all regionsmaking progress versus the previous year. Currency translation added around2.5% to the sales increase, partially compensating for higher input costs,particularly energy. Finance We continued to buyback shares in the market. In the first quarter, 4.3m shareswere purchased at a cost of £21.5m, taking the total purchased to 12.5m sharesat a cost of £52.4m since the programme began in December 2004. The tax rate was slightly lower than last year, representing the relativetrading in the various tax regimes in which Croda operates. Net debt at the end of June was £39.1m, with strong underlying cash generationbefore the £32.4m returned to shareholders via the share buyback and 2005 finaldividend payment in June. Outlook Firm demand continues in our core markets and we remain confident of furtherprogress for the rest of 2006. We look forward to integrating Uniqema, creatinga new platform for growth. Croda International PlcResults for the six months ended 30 June 2006 Condensed Group income statement Note 2006 2005 2005 First First FullUnaudited £m Half Half Year Continuing operationsRevenue 2 164.5 154.5 305.6 Cost of sales (113.3) (106.5) (214.5) ______ ______ ______Gross profit 51.2 48.0 91.1 Operating expenses (23.4) (22.1) (40.0) ______ ______ ______ Operating profit 2 27.8 25.9 51.1 Net financial income 3 0.1 (0.8) (1.9) ______ ______ ______ Profit before tax 27.9 25.1 49.2 Tax (9.9) (9.0) (17.6) ______ ______ ______Profit after tax fromcontinuing operations 18.0 16.1 31.6 Profit after tax fromdiscontinued operations 5 0.9 0.7 1.2 ______ ______ ______Profit for the period 18.9 16.8 32.8 _____ _____ _____ Attributable to: Minority interest - - 0.1Equity shareholders 18.9 16.8 32.7 ____ _____ ____ 18.9 16.8 32.8 _____ _____ _____ pence per pence per pence per share share shareEarnings per share of 10p BasicTotal 15.4 13.0 25.6Continuing operations 14.7 12.5 24.7 DilutedTotal 15.2 13.0 25.2Continuing operations 14.5 12.5 24.3 Ordinary dividendsInterim 4.65 4.35 4.35Final 9.00 Condensed Group statement of recognised income and expense 2006 2005 2005 First First FullUnaudited £m Half Half Year Profit attributable to equity shareholders 18.9 16.8 32.7Exchange differences (2.4) 1.6 4.7Actuarial movement on retirement benefit liabilities (net of deferred tax) 14.5 - (3.8) ______ ______ ______Total recognised income attributable to equity shareholders 31.0 18.4 33.6 ______ ______ ______ Condensed Group balance sheet At At AtUnaudited £m 30 June 30 June 31 December Note 2006 2005 2005AssetsNon-current assetsGoodwill 6.5 6.5 6.5Property, plant and equipment 119.8 126.2 122.4Investments 0.8 11.1 1.4Deferred tax assets 28.4 33.8 36.0 ________ ______ ______ 155.5 177.6 166.3 ________ ______ ______ Current assetsInventories 55.3 55.9 53.4Trade and other receivables 62.1 64.3 55.7Cash and cash equivalents 6 23.5 36.2 39.3Other financial assets - 0.3 0.1Assets classified as held for sale 5 10.3 - 15.4 ______ ______ ______ 151.2 156.7 163.9 _______ ______ ______ LiabilitiesCurrent liabilitiesTrade and other payables (48.3) (66.6) (46.6)Borrowings and other financial liabilities 6 (34.7) (36.0) (24.2) Current tax liabilities (5.0) (4.4) (5.5) _______ ______ ______ (88.0) (107.0) (76.3) _______ ______ ______Net current assets 63.2 49.7 87.6 ______ ______ ______Non-current liabilitiesBorrowings and other financial liabilities 6 (27.9) (21.3) (39.4)Other payables (0.8) (0.7) (1.0)Retirement benefit liabilities (82.3) (102.5) (107.1)Provisions (9.6) (8.6) (9.6)Deferred tax liabilities (16.4) (15.4) (16.2) ______ ______ ______ (137.0) (148.5) (173.3) ______ ______ ______ Net assets 81.7 78.8 80.6 ______ ______ ______ Shareholders' equity 81.5 77.9 79.7Minority interest in equity 0.2 0.9 0.9 _______ ______ ______ Total equity 81.7 78.8 80.6 ______ ______ ______ Condensed Group cash flow statement Note 2006 2005 2005Unaudited £m First First Full Half Half YearCash flows from operating activitiesContinuing operationsOperating profit 27.8 25.9 51.1Adjustments for: Depreciation and loss on disposal of fixed assets 7.0 7.0 14.0 Changes in working capital (7.9) (3.9) 3.4 Pension fund contributions in excess of service cost (0.5) (1.4) (2.8) Share based payments 0.5 0.4 0.7 ______ ______ ______Cash generated from continuing operations 26.9 28.0 66.4Discontinued operations 0.2 0.8 1.2Interest paid (1.7) (1.5) (3.7)Tax paid (10.1) (9.1) (15.9) ______ ______ ______Net cash generated from operating activities 15.3 18.2 48.0 ______ ______ ______Cash flows from investing activitiesPurchases of property, plant and equipment (6.0) (4.1) (9.1)Proceeds from sale of property, plant and equipment 0.9 0.2 1.4Proceeds from sale of investments 0.5 - -Proceeds from sale of businesses (net of costs) 3.4 - -Cash paid against provisions - (5.0) (5.2)Interest received 0.4 0.5 1.3 ______ ______ ______Net cash used in investing activities (0.8) (8.4) (11.6) ______ ______ ______Cash flows from financing activitiesAdditional borrowings - 4.8 15.0Repayment of borrowings (10.5) - (0.6)Net purchases of own shares (18.8) (8.9) (21.8)Dividends paid 4 (11.6) (5.4) (21.7)Other 0.3 - (0.1) ______ ______ ______Net cash used in financing activities (40.6) (9.5) (29.2) ______ ______ ______ Net movement in cash and cash equivalents 9 (26.1) 0.3 7.2Cash and cash equivalents brought forward 26.4 17.5 17.5Exchange differences (0.9) 1.1 1.7 ______ ______ ______Cash and cash equivalents carried forward (0.6) 18.9 26.4 ______ ______ ______ Cash and cash equivalents carried forward compriseCash at bank and in hand 23.5 36.2 39.3Bank overdrafts (24.1) (17.3) (12.9) ______ ______ ______ (0.6) 18.9 26.4 ______ ______ ______ A reconciliation of the cash flows above to the movement in net debt is shown atnote 9. Notes to the interim report 1. Basis of preparation This interim financial report has been prepared under the historical costconvention and in accordance with the accounting policies used in the Group'sfinancial statements for the year ended 31 December 2005. The IFRS andinterpretations that will be applicable as at 31 December 2006, including thosethat will be applicable on an optional basis, are not yet known with certaintyat the time of preparing this report. The financial information included in this interim financial report for the sixmonths ended 30 June 2006 does not constitute statutory accounts as defined insection 240 of the Companies Act 1985 and is unaudited. The comparativeinformation for the six months ended 30 June 2005 is also unaudited. Thecomparative figures for the year ended 31 December 2005 have been extracted fromthe Group's financial statements as filed with the Registrar of Companies, onwhich the auditors gave an unqualified opinion and did not make a statementunder section 237 of the Companies Act 1985. 2. Segmental information Primary reporting format - business segments At 30 June 2006 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. 2006 2005 2005 First First Full Half Half Year £m £m £mTurnover - continuing operationsConsumer Care 113.5 104.9 207.8Industrial Specialities 51.0 49.6 97.8 _____ _____ _____ 164.5 154.5 305.6 _____ _____ _____ Operating profit - continuing operationsConsumer Care 23.8 22.0 43.9Industrial Specialities 4.0 3.9 7.2 _____ _____ _____ 27.8 25.9 51.1 _____ _____ _____ There are no sales between business segments and all operating costs of theGroup are allocated between the segments. 2. Segmental information (continued) Secondary reporting format - geographical segments The sales analysis in the table below is based on the location of the customer. 2006 2005 2005 First First Full Half Half Year £m £m £m Turnover by destination -continuing operationsEurope 71.0 69.0 131.7Americas 60.6 55.9 111.5Asia 22.3 20.2 42.3Rest of World 10.6 9.4 20.1 _____ _____ _____ 164.5 154.5 305.6 _____ _____ _____ 3. Net financial income Net bank interest payable (1.3) (1.0) (2.3)Expected return on pension schemeassets less interest on scheme liabilities 1.4 0.2 0.4 _____ _____ _____ 0.1 (0.8) (1.9) _____ _____ _____ 4. Dividends paid Pence per shareOrdinary2004 Interim - paidJanuary 2005 4.10 - 5.4 5.42004 Final - approvedApril 2005, paid July 2005 8.40 - - 10.72005 Interim - paidOctober 2005 4.35 - - 5.52005 Final - paid June2006 9.00 10.9 - - _____ _____ _____ 10.9 5.4 21.6Preference (paid June andDecember) - - 0.1Dividends paid to minorityshareholders 0.7 - - _____ _____ _____ 11.6 5.4 21.7 _____ _____ _____ An interim dividend in respect of 2006 of 4.65p per share, amounting to a totaldividend of £5.6m, was declared by the directors at their meeting on 25 July2006. This interim report does not reflect the 2006 interim dividend payable.The dividend will be paid on 6 October 2006 to shareholders registered on 8September 2006. 5. Discontinued operations On 27 March 2006, in continuance of the Group's stated objective to dispose ofnon-core activities, the Group's metal treatments division was sold to Shell UKLimited for an initial consideration of £3.9m, with a further £0.8m payable ayear from the date of sale contingent upon the business achieving apre-determined level of profits. The sale did not include the non-currentassets of the business, primarily land and buildings, however the Group hasreceived a valuation of the land and buildings which is significantly in excessof their carrying value. Accordingly, there has been no re-measurement to fairvalue less costs to sell. Under the terms of the sale agreement, followingcompletion the Group was committed to an initial three month period of tollmanufacture. A subsequent agreement signed on 21 June 2006 extends the periodof manufacture for a maximum of a further six months. Once this period iscomplete, the directors are confident that the valuation of the land andbuildings will be realised through their disposal. In addition, during 2005, the Group, in conjunction with the company's majorityshareholder, commenced the process of selling its holding in the Group's soleassociate, Baxenden Chemicals Limited and at 30 June the process was continuing.The Board remain committed to the disposal plan and consider it highly probablethat the disposal will have taken place within twelve months. Accordingly, thecarrying value of the Group's investment in Baxenden (£10.3m) has beencategorised within current assets as 'assets classified as held for sale'. Theimpact of discontinued operations on the income statement is as follows: 2006 2005 2005 First First Full Half Half Year £m £m £m Operating profit of discontinuedoperations 1.3 1.0 1.9Profit on disposal and closure ofdiscontinued operations - - (0.3)Profit on disposal of fixed assets indiscontinued operations - - 0.3Tax (0.4) (0.3) (0.7) _____ _____ _____ 0.9 0.7 1.2 _____ _____ _____ 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 liability of £0.1m (2005: £0.3m asset) hasbeen recognised within current liabilities, being the fair value of the interestrate swap, and current and non-current financial liabilities include a debitadjustment of £0.1m (2005: £0.1m credit) and £nil (2005: £0.2m credit)respectively in recognition of the corresponding adjustment to the fair value ofthe Group's fixed rate debt. 7. Condensed statement of changes in equity 2006 2005 2005 First First Full Half Half Year £m £m £m Opening shareholders' equity 79.7 88.8 88.8Total recognised income 31.0 18.4 33.6Dividends on equity shares (10.9) (16.2) (21.7)Transactions in own shares (18.8) (13.3) (21.8)Share based payments 0.5 0.2 0.8 _____ _____ _____Closing shareholders' equity 81.5 77.9 79.7 _____ _____ _____ 8. Treasury shares During the period covered by this interim report the Company purchased 4,335,000shares on the open market to be held as treasury shares for a consideration of£21.5m. The Company now holds 12,457,589 shares in total as treasury shares.These shares have been deducted from shareholders' equity and will be held untilsuch time as the Board decided to cancel, reissue or use them to satisfy shareoptions. 9. Reconciliation of movement in net debt 2006 2005 2005 First First Full Half Half Year £m £m £m Net movement in cash and cashequivalents (26.1) 0.3 7.2Movement in debt and lease financing 10.2 (4.8) (14.3) _____ _____ _____Change in net debt from cash flows (15.9) (4.5) (7.1)New finance lease contracts - - (0.2)Exchange differences 1.0 (1.1) (1.7) _____ _____ _____ (14.9) (5.6) (9.0)Net debt brought forward (24.2) (15.2) (15.2) _____ _____ _____Net debt carried forward (39.1) (20.8) (24.2) _____ _____ _____ 10. Accounting estimates and judgements The Group's critical accounting policies under IFRS have been set by managementwith the approval of the Audit Committee. The application of these policiesrequires estimates and assumptions to be made concerning the future andjudgements to be made on the applicability of policies to particular situations.Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. 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 2006, the Group has an environmental provision of £8.5m 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. 11.Post balance sheet events On 29 June 2006, the Group announced the proposed acquisition of Uniqema, adivision of Imperial Chemical Industries PLC ("ICI") for a consideration of£410m on a cash and debt free basis. At completion, the Group will pay £370mand assume £40m of unfunded retirement benefit liabilities. As part of thecompletion mechanics, there will be an adjustment for working capital and anadjustment for any retirement benefit liabilities, which will be funded, net oftax, by ICI. The acquisition constitutes a "Reverse Takeover" under the UK Listing Rules byvirtue of its size and is subject to the approval of the Croda shareholders,which will be sought at an Extraordinary General Meeting ("EGM") that isanticipated to be held in late August, and obtaining the necessary competitionclearances. The Circular inviting shareholders to vote at the EGM is expectedto be posted in the near future. Given that the transaction is a "ReverseTakeover", Croda's ordinary shares were suspended from trading on 29 June 2006,pending the publication of a Prospectus for the enlarged Group. It isanticipated that the Prospectus will be published in late August 2006 and thattrading in Croda shares will recommence shortly thereafter. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Croda International