Results for the year to 31 March 2012

19 June 2012   

Umeco plc

Results for the year to 31 March 2012

Umeco plc ('Umeco') is an international provider of advanced composite materials primarily to the aerospace & defence, wind energy, recreation and automotive industries.

* a definition of adjusted measures is set out in note 1 to the press release and in note 4 to the announcement of results.

Financial highlights - continuing operations

·; Revenue increased by 7.5 per cent to £223.0 million

·; Adjusted operating profit £21.7 million up 11.3 per cent, operating margins rose to 9.7 per cent (2011: 9.4 per cent)

·; Adjusted profit before tax up 23.8 per cent

·; No final dividend declared, following announcement of recommended offer from Cytec

·; Net cash balance of £8.6 million (2011: net debt £74.3 million)

Status of recommended offer

·; Shareholder approval obtained at the Court Meeting and General Meeting held on 28 May 2012

·; Completion subject to satisfaction of conditions, including competition clearances and Court sanction

·; Scheme of arrangement expected to become effective on 20 July 2012

Neil Johnson, Chairman, said:

"As Umeco enters a new phase in its long history it is well positioned in growing markets with an experienced management team focused on the future growth prospects. The offer from Cytec of 550 pence per Umeco share represents a valuation that reflects this potential whilst providing certainty, in cash, to Umeco shareholders."

Andrew Moss, Chief Executive, said:

"In a period of major change we successfully delivered a good performance in the year to 31 March 2012, with profits in line with our expectations. During the year we made significant progress with the successful disposal of Supply Chain enabling us to focus on enhancing our position as a leading global composite materials and solutions business. We also acquired high quality assets for our new business in Germany and opened our joint venture in China, giving us a foothold in the world's largest wind energy market.

Whilst we need to be vigilant in an uncertain macroeconomic environment, Umeco is in good shape to enjoy the structural growth opportunities for advanced composite materials"

There will be a conference call for analysts and shareholders at 8.30am this morning. Conference call details are as follows:

Dial in (UK Freephone): 0800 694 0257

Dial in (international): +44 (0) 1452 555 566

Conference ID: 89321205

For further information please contact:

Umeco plc Tel: +44 (0) 1926 331 800

Andrew Moss, Chief Executive

Steve Bowers, Finance Director

Hudson Sandler Tel: +44 (0) 20 7796 4133

Andrew Hayes

Andrew Leach

Notes to the press release

1. Adjusted profit and earnings per share measures

Umeco uses adjusted figures as key performance indicators. Adjusted figures are stated before the results of discontinued operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The differences between the total and adjusted measures of operating profit, profit before tax and profit attributable to owners of Umeco are reconciled in note 4 to the announcement of results. The narrative in this announcement is based on the adjusted measures of operating profit, profit before tax and earnings per share. These provide a more consistent measure of operating performance.

2. Discontinued operations

On 20 May 2011, Umeco entered into a disposal agreement with Quicksilver Holdco Limited for the sale and purchase of the entire issued capital of the Pattonair companies, which at the time constituted one of Umeco's three business streams. The disposal was approved by shareholders at a general meeting held on 13 June 2011 and completed on 29 July 2011 for a net consideration of approximately £112.5 million before transaction costs, excluding £8.0 million deferred consideration. The payment of the £8.0 million deferred consideration will be satisfied by four equal instalments of £2.0 million, to be paid on 29 June 2012, 29 September 2012, 31 December 2012 and 29 March 2013. The results of the Pattonair companies have accordingly been classified as a discontinued operation.

On 8 July 2010, the Group completed the sale of the business and assets of Advanced Composites Group SA (Pty) Limited which is incorporated and operated in South Africa. Its results have accordingly been presented separately from continuing operations and are disclosed as a discontinued operation.

The values of selected key performance indicators for continuing operations and, where indicated, including discontinued operations, are set out below:

3. Continuing operations

Umeco's continuing operations are managed through two business streams:

- Structural Materials - development, manufacture and supply of advanced composite materials; and

- Process Materials - development, manufacture and supply of vacuum bagging materials.

Chairman's Statement

Overview

We successfully divested Pattonair on 29 July 2011 and as a result Umeco plc ('Umeco') became a business focused on the advanced composites market. The business performed well in the year to 31 March 2012, with trading in the second half building upon the encouraging first half year.

On 12 April 2012, the Boards of Umeco and Cytec Industries Inc. ('Cytec') announced that they had reached agreement on the terms of a recommended cash offer by Cytec UK Holdings Limited, a wholly‑owned subsidiary of Cytec, for the entire issued and to be issued share capital of Umeco. It is intended that the acquisition will be effected by way of a Court-sanctioned Scheme of Arrangement of Umeco under Part 26 of the Companies Act 2006 ('Scheme of Arrangement').

Under the terms of the acquisition, Umeco shareholders will be entitled to receive 550 pence in cash for each Umeco share held at the reduction record time, valuing the entire issued and to be issued share capital of Umeco at approximately £274 million. The consideration of 550 pence in cash for each Umeco share represents a premium of approximately 46.3 per cent to the closing price of 376 pence per Umeco share on 11 April 2012, being the last dealing day prior to announcement of the proposed acquisition.

On 28 May 2012, the shareholders of Umeco overwhelmingly voted in favour of the Scheme of Arrangement and the proposal by Cytec. The acquisition is expected to complete on 20 July 2012, subject to satisfaction or waiver of the outstanding conditions, including the receipt of certain competition clearances and sanction of the Scheme of Arrangement by the Court.

The Board of Umeco believes that the offer from Cytec of 550 pence per Umeco share is an attractive price for Umeco shareholders, and represents a valuation that reflects the future growth potential of Umeco whilst providing certainty, in cash, to Umeco shareholders.

Results and dividend

As a consequence of the disposal of Pattonair, Umeco's Supply Chain operation, the results for this business are shown as a discontinued operation in the consolidated financial statements. Excluding Supply Chain, revenue from continuing operations in the year to 31 March 2012 was £223.0 million (2011: £207.4 million), an increase of 7.5 per cent. Adjusted operating profit increased by 11.3 per cent to £21.7 million (2011: £19.5 million).

Consistent with the terms of the proposed acquisition by Cytec, the Board is not proposing a final dividend and therefore the total dividend for the year is proposed to be the interim dividend of 4.00 pence per ordinary share (2011: total dividend 18.25 pence).

Strategy

Following the disposal of Supply Chain in July 2011, Umeco has been focused on its advanced composites business, which principally serves the aerospace & defence, wind energy, automotive, recreation and industrial sectors. Umeco's focus within these end sectors is those segments with underlying long term growth prospects, coupled with a propensity to switch to lighter weight, high-strength advanced composite materials driven by structural factors such as environmental regulation, rising fuel costs and safety considerations.

Following the good progress Umeco made with the execution of its growth strategy, the Board of Umeco received an approach from Cytec which culminated in the Board of Umeco recommending an offer to be made by way of a Scheme of Arrangement.

Cytec is focused on continuing to develop its product and applications technologies in the composites market. Accordingly, Cytec understands the strategic value in creating a larger advanced composites offering in the industrial applications segment, building on the success of the Umeco business which has been developed to date.

The acquisition should provide significant opportunities for Umeco to expand its offering in the rapidly growing industrial markets for advanced composite materials through leveraging its customer service excellence, know-how and the leading technologies of the combined entity within existing and new customer relationships.

Board changes

On 20 May 2011, we announced that Andrew Moss (formerly Chief Operating Officer) had been appointed as Chief Executive and Steve Bowers (formerly Group Financial Controller) had been appointed as Finance Director.

Andrew Moss joined Umeco in 1999. He joined the Board in June 2008 on his appointment as Chief Operating Officer, prior to which he was Chief Executive of Umeco Composites. Andrew has a broad industrial and aerospace background, and was previously Chief Executive of the Automotive and Building Products Group of Invensys plc.

Steve Bowers joined Umeco in 1998 having qualified as a chartered accountant with KPMG. He has been Company Secretary since 1999 and was appointed Group Financial Controller in 2004.

Clive Snowdon, formerly Chief Executive, and Doug Robertson, formerly Finance Director, resigned from the Board on 20 May 2011.

It is intended that upon the Scheme of Arrangement becoming effective, Andrew Moss, Chief Executive, Steve Bowers, Finance Director and each of the Non-executive Directors of Umeco will each resign from their office as a director of Umeco and, in respect of the Chief Executive and Finance Director, that they will resign as employees of Umeco. They will each receive compensation in line with their legal rights and the provisions of their respective service contracts or letters of appointment.

Management and employees

Cytec has assured the Board of Umeco that, upon the Scheme of Arrangement becoming effective, the existing employment rights, including pension rights, of the management and employees of Umeco will be safeguarded. Discussions between Cytec and Umeco's senior management in relation to any specific ongoing roles to be assigned to them in the enlarged group (following the Scheme of Arrangement becoming effective), and their ongoing terms of employment, may take place before the acquisition has completed.

The management and employees of Umeco have done an outstanding job in transforming Umeco into a highly successful business focused on the advanced composites market. I am especially proud of their achievements over the past year, one in which Umeco has undergone significant change, and thank them for their support and commitment.

Summary

As Umeco enters a new phase in its long history it is well positioned in growing markets with an experienced management team focused on the future growth prospects. The offer from Cytec of 550 pence per Umeco share represents a valuation that reflects this potential whilst providing certainty, in cash, to Umeco shareholders.

Neil Johnson

Chairman

19 June 2012

Chief Executive's Review

Umeco is an advanced composite materials business delivering innovation that provides real advantage across the globe for blue chip manufacturers.

Advanced composite materials are light weight and high-performance, characteristics for which there is growing demand across a wide range of end markets. There are strong structural drivers of growth in our markets with an increasing requirement for materials that address issues associated with rising fuel prices and concerns for the environment.

Our strategy is to focus our efforts on higher growth end markets and we aim to grow our share in these markets by exploiting our proven portfolio of products and technologies and building on long term and well established blue chip customer relationships. Our technology, know-how and service levels are key differentiators which set us apart from the competition.

Today, we are well positioned and are now unified around a single Umeco brand. This joined up approach is critical to our growth plans and our ability to better leverage our customer relationships and service ethos under one trading name which is a global leader in the market for advanced composites.

Results

Umeco grew revenue by 7.5 per cent to £223.0 million and adjusted operating profit by 11.3 per cent to £21.7 million, reflecting strong growth in our aerospace activities partially offset by weakness in the wind energy sector.

Our business is managed through two business streams - Structural Materials and Process Materials.

Structural Materials

Structural Materials develops, manufactures and supplies a broad range of advanced composite materials. It also has a growing European presence in the distribution of composite resins, reinforcements and related products.

Structural Materials enjoyed good growth in its revenues from aerospace & defence, recreation, especially motorsport, and other industrial sectors. Revenue growth from our distribution activities in Europe contributed 3.9 per cent of the overall 15.8 per cent growth.

Operating profits grew by 5.6 per cent with the lower operating margin in the year reflecting revenue growth biased toward the lower margin distribution business, coupled with lower research & development grant income in the first half of the year.

Sector review

Aerospace & defence

Structural Materials' aerospace & defence revenues grew by 12.4 per cent, led by our UK business. This was largely driven by demand for ballistic protection materials for the 200 vehicle Foxhound contract awarded to Force Protection Europe by the UK Ministry of Defence. This order was completed in February 2012 and work immediately commenced on a follow-on order for materials for a further 100 vehicles.

We are pleased with the progress we are making on materials, including our out-of-autoclave product range, for which we are the only source qualified by Airbus, and tooling for A350 XWB applications. In March 2012, we announced that GE Aviation placed an order for the first 18 ship sets of our MTM®44-1 out-of-autoclave prepreg for the outer and mid-section fixed trailing edge panels for the Airbus A350 XWB wing.

Wind energy

Structural Materials' relatively low revenues in the wind energy sector decreased during the year as a result of reduced demand for our specialist materials used in the structure of moulding tools for turbine blades.

Recreation

Revenue in this sector, which includes motorsport, marine and other sporting goods applications, grew by 20.4 per cent. During the year, we were successful in winning further sales in Formula 1 and this made a significant contribution to revenue growth. Activity in the marine sector was slightly ahead of last year and revenue in the high value recreational sector improved due to growing demand, in particular arising from supplying customised composite solutions to a market and technology leader in sporting goods.

Automotive

Revenue in the automotive sector increased by 3.4 per cent all of which arose in the second half of the year as new projects came on stream. Our UK and US businesses enjoyed strong growth and are active on a number of projects. High profile applications of our materials technology include both GTA Motor's 'Spano' Super Sports Car and Koenigsegg's Agera R Hypercar which recently broke a Guinness World speed record.

Other industrial sectors

Applications where the high strength, light weight characteristics of advanced composite materials are attractive arise in a wide range of industries. Umeco's portfolio of composite materials has a diverse customer base including those in healthcare, electrical equipment and industrial machinery. Revenue grew by 23.8 per cent, the majority of which arose from the expanded geographic coverage of our distribution business. During the second half of the prior year, Structural Materials' distribution business successfully extended its agreement with Ashland to include Finland and France, with both these territories making a significant contribution to revenue in the year to 31 March 2012.

Business development

Umeco was the lead partner alongside Tilsatec, Sigmatex, Exel Composites, NetComposites and the University of Leeds in the multi-partner UK project 'FibreCycle' which has received a JEC Innovations Award. The aim of the project was to develop materials based on carbon fibres recovered from waste streams to allow manufacturing of technical fabric for thermoplastic and thermoset applications in the composites industry.

Our Structural Materials business in the US was awarded US$2.0 million of funding from the United States Navy for research & development efforts in support of our out-of-autoclave materials and technology development. This is the third phase of a programme to increase the technology readiness level of our materials to permit deployment on military and other air and space vehicles. The programme of work will be undertaken over the next two years.

We have successfully completed a collaborative project to demonstrate the automated processing and manufacture of cost-effective advanced composite structures for the automotive industry in partnership with ABB Ltd, Bentley Motors Ltd and ESI Group. A follow-on project with Aston Martin is currently in progress.

In the rail industry, our MTM®82S-C prepreg has been hailed a resounding success for Bombardier's Class 379 Passenger trains used on the Stansted Airport rail link. Our materials provide a significant weight reduction, over 40 per cent, compared to the previous design being used by Bombardier.

We are installing an additional manufacturing line at our Structural Materials site in the UK. This £3.1 million investment will add capacity to our existing product range, as well as providing additional functionality to meet and exceed our customers' requirements. The line is expected to be installed during autumn 2012.

The relocation of Structural Materials' Californian operations is proceeding to plan. The administrative areas of the operation relocated in November 2011 and the new machinery became operational in February 2012. The remainder of the production machinery together with existing staff will relocate by the end of the current financial year. Capital expenditure on this project was US$5.6 million in the year to 31 March 2012. Total spend is expected to be US$12.0 million of which US$11.6 million has already been expended.

Process Materials

Process Materials develops, manufactures and supplies vacuum bagging materials to the composites industry and other markets.

Process Materials enjoyed good growth in its revenues from aerospace & defence, recreation and automotive. Revenue growth was held back by the slowdown of demand in the Chinese wind energy sector coupled with the impact of destocking the distribution channel ahead of the opening of our manufacturing joint venture in September 2011.

Operating profits grew by 18.4 per cent with the improved margins in the year reflecting the revenue growth biased towards the higher margin aerospace & defence sector, coupled with the pricing actions taken in the second half of the prior year.

Sector review

Aerospace & defence

Our aerospace & defence revenues grew by 17.4 per cent maintaining the strong growth trend established over the past two years. Increasing build rates for large commercial aircraft both at Boeing and Airbus coupled with progress on new aircraft programmes such as A350 XWB and B787 is driving growth in this sector.

Wind energy

Our revenues in the wind energy sector declined by 21.3 per cent, however excluding China our revenues grew by 13.9 per cent. We anticipated a decline in activity as we switched production of materials for China to our joint venture, but this was exacerbated by a reduction in demand from Chinese customers. After a record 2010, there has been a tightening of government regulation and, coupled with bottlenecks in the electricity grid, turbine producers are reacting to this slowdown in demand by destocking. We are pleased that the recovery in this sector commenced in the final quarter of the year and remain confident about the long term growth potential of this important sector. Overall, we are pleased by the progress made in this sector.

Recreation & automotive

Revenues in the recreation sector grew by 14.7 per cent reflecting modest growth in end markets and some new business wins. Automotive sector revenues grew by 70.6 per cent due to increased sales of specialist film products to this sector during the second half of the year.

Other industrial sectors

Process Materials' revenues declined in other industrial sectors by 18.8 per cent. Growth in demand from the composites sectors was more than offset by a sharp decline during the first half of the year in the demand for specialist films not directly related to composites applications in Continental Europe. During the second half markets stabilised and looking forward we expect this specialist films product line to respond to the macroeconomic factors impacting European markets.

Business development

In September 2010, in line with our strategy to establish a presence in the world's leading area for wind energy, we announced a joint venture agreement with our Chinese distributor, Shanghai Leadgo Technology Co., Ltd. to manufacture vacuum bagging films specifically for the wind energy sector. The facility was formally opened on 21 September 2011 and has successfully commenced production ahead of schedule and on budget. This is a significant development for Umeco in the world's largest market for wind energy.

Process Materials has made good progress in qualifying a new range of specialist bagging film for aerospace applications. These are being manufactured at our facility in Italy, for which new equipment has recently been ordered. This is expected to be operational in mid 2012 and will provide the capability to make a wider range of products.

Strategic developments

On 7 June 2011, Umeco joined the National Composites Centre with a place on the board. We are enjoying developing a close working relationship with world-leading manufacturers and UK academics to develop new technologies and promote the application of composites.

On 8 August 2011, we announced that our German subsidiary, Umeco Composites GmbH, had purchased certain of the assets of Fenotec Ges.i.L from the administrator for the cash sum of €2.2 million (£1.9 million). The assets purchased, which are located in Beelitz near Berlin, comprise freehold buildings and high quality production equipment. These are being used to manufacture Umeco's range of prepreg advanced composite materials. We are well advanced in the process of introducing our own proven product range to this facility. The acquisition provides an excellent opportunity for us to get closer to our customers in Continental Europe.

We are in the process of establishing a Wholly Owned Foreign Enterprise in China and this is expected to be completed during 2012. The operation will be a sales and distribution hub, based in Shanghai, offering local technical and sales support to Umeco's extensive network of distributors and agents in the fast growing Asian market as well as providing a more direct channel to customers in the region across its entire product range. This important development involves minimal recruitment and other costs at this stage.

Supply Chain disposal

The sale of the Supply Chain business was approved by shareholders at the general meeting held on 13 June 2011 and completion occurred on 29 July 2011. Proceeds received from the disposal were in line with the terms we announced on 20 May 2011. The net cash inflow relating to the Supply Chain business in the year, including proceeds received net of cash balances disposed and attributable corporate costs, was £84.4 million. Under the terms of the disposal agreement, deferred consideration of £8.0 million is receivable in instalments during the year to 31 March 2013.

Outlook

In a period of major change we successfully delivered a good performance in the year to 31 March 2012, with profits in line with our expectations. During the year we made significant progress with the successful disposal of Supply Chain enabling us to focus on enhancing our position as a leading global composite materials and solutions business. We also acquired high quality assets for our new business in Germany and opened our joint venture in China, giving us a foothold in the world's largest wind energy market.

Whilst we need to be vigilant in an uncertain macroeconomic environment, Umeco is in good shape to enjoy the structural growth opportunities for advanced composite materials.

Andrew Moss

Chief Executive

19 June 2012

Finance Director's Review

Operating results

Revenue from continuing operations was 7.5 per cent higher than last year. The growth in revenue reflects improvements in demand in the markets served by Structural Materials and Process Materials.

Adjusted operating profit was £21.7 million, £2.2 million higher than the previous year and our operating margin improved to 9.7 per cent (2011: 9.4 per cent).

Structural Materials' operating margin decreased to 8.2 per cent (2011: 9.0 per cent). This was due to the effects of additional distribution revenues which attract lower margins, dual running costs associated with the relocation of our operations in California and, in the first half of the year, lower income from grant funding providers in respect of our research & development activities. The operating margin of Process Materials increased to 12.3 per cent (2011: 10.0 per cent), due to a favourable sales mix with activity biased toward the aerospace & defence sector.

The performance of the Group including discontinued operations reflects the four month contribution from the Supply Chain business. Including discontinued operations, total revenue decreased by 32.2 per cent to £311.9 million (2011: £459.9 million) and adjusted operating profit reduced by 24.3 per cent to £25.2 million (2011: £33.3 million).

Exchange rates

The majority of Group revenue from continuing operations is generated by overseas subsidiaries and a significant proportion of UK business is transacted in foreign currencies, principally the US dollar and the Euro. Exchange rate effects were limited in the year due to the relative stability of principal exchange rates and, at constant exchange rates, the increase in revenue from continuing operations for the year would have been just £1.2 million higher than the reported figure.

Net financial expense

Net financial expense, excluding revaluations of financial instruments, was £3.2 million in aggregate (2011: £5.8 million), of which £1.4 million (2011: £3.1 million) related to continuing operations with the remainder being attributable to discontinued operations. For the period to the date of disposal of the Supply Chain business, financial income and expense have been allocated between continuing and discontinued operations, with central interest costs being apportioned based upon funding provided to business units and consideration paid for acquisitions.

The average interest rate payable in the year to 31 March 2012 on debt balances was 6.4 per cent (2011: 6.3 per cent). Following completion of the disposal of the Supply Chain business, variations in the Group's net cash and debt levels have reduced significantly.

Intangible amortisation

The amortisation charge for continuing operations was £4.0 million (2011: £5.3 million). This related to the amortisation of intangible assets arising on acquisitions, principally the benefit of product approvals, order books and customer relationships on hand at the dates of acquisition. No impairment charges have been made in the year.

Significant items

No significant items were incurred in respect of continuing operations (2011: £2.8 million). Significant items of £2.1 million (2011: £0.2 million) were charged to profit before tax in relation to discontinued operations, comprising £1.1 million for compensation to directors for loss of office and £1.0 million in respect of the write-off of prepaid bank fees.

Profit before tax

Adjusted profit before tax from continuing operations was £20.3 million (2011: £16.4 million), a rise of 23.8 per cent. Total profit before tax from continuing operations was £16.5 million (2011: £8.6 million).

Adjusted profit before tax, including discontinued operations, was £23.0 million (2011: £27.5 million), a decrease of 16.4 per cent.

Tax

The effective tax rate on adjusted profit before tax from continuing operations was 32.0 per cent (2011: 27.6 per cent). The effective tax rate on adjusted profit before tax, including discontinued operations, was 32.5 per cent (2011: 28.7 per cent).

The effective tax rate on profit before tax from continuing operations was 31.5 per cent (2011: 22.4 per cent).

Discontinued operations

Completion of the sale of the Supply Chain business occurred on 29 July 2011. The principal terms of the disposal are an unadjusted cash and debt free value of approximately £145.8 million. The net consideration was £112.5 million, before transaction costs, excluding £8.0 million deferred consideration which will be received in four equal quarterly instalments between 29 June 2012 and 29 March 2013.

Supply Chain is classified as a discontinued operation in the consolidated financial statements, along with Advanced Composites Group SA (Pty) Limited ('ACG South Africa'), the business and assets of which were disposed in the prior year.

In the year to 31 March 2012, revenue from discontinued operations was £88.9 million (2011: £252.5 million) and adjusted operating profit was £3.5 million (2011: £13.8 million).

Earnings per share

Adjusted earnings per share from continuing operations were 28.6 pence, 16.3 per cent higher than last year (2011: 24.6 pence). Total earnings per share from continuing operations were 23.3 pence (2011: 13.9 pence).

Adjusted earnings per share including discontinued operations were 32.3 pence (2011: 40.8 pence).

Dividends

In light of the offer from Cytec for Umeco, the Board is not proposing a final dividend and therefore the dividend for the year is proposed to comprise the interim dividend of 4.00 pence per ordinary share (2011: total dividend 18.25 pence). This interim dividend was paid in February 2012 and the value of the dividend was £2.0 million.

Operating cash flow

Operating profit conversion to cash for continuing operations was 88.5 per cent (2011: 80.0 per cent) and remains within our anticipated range of between 80.0 per cent and 100.0 per cent. There was a net outflow in respect of working capital, provisions and retirement benefit obligations of £7.0 million (2011: £5.2 million). Increases in inventories to support the Group's ongoing growth led to an outflow of £6.2 million (2011: £5.6 million). Debtors increased only marginally, by £0.3 million (2011: £10.0 million), reflecting the Group's tight credit control environment which continues to be maintained to ensure our exposure to credit risk remains at an acceptable level. The ratio of working capital to revenue for continuing operations increased from 11.4 per cent to 13.1 per cent.

Capital expenditure

Gross capital expenditure for continuing operations of £11.3 million (2011: £6.5 million) was £7.5 million higher than depreciation. The capital expenditure primarily comprised £3.5 million at Structural Materials' new premises in California, £1.9 million for the assets purchased in Germany from Fenotec Ges.i.L and, within Process Materials, £2.6 million for equipment to manufacture bagging films for the aerospace market.

Free cash flow

Operating cash flow less interest, tax and capital expenditure from continuing operations generated £3.6 million (2011: £2.5 million). Tax paid by continuing operations was £0.9 million lower than the current tax charge in the financial statements, as a result of the receipt of refunds in respect of prior years.

Net debt and banking facilities

Net cash was £8.6 million (2011: net debt of £74.3 million). Foreign exchange effects caused the sterling value of debt to fall by £1.8 million, which principally arose during the period to the disposal of the Supply Chain business. 

The proceeds of the disposal of Supply Chain of £106.4 million net of costs were used to fully repay the Group's committed credit facilities with Lloyds Banking Group. In conjunction with the disposal, the Group entered into an agreement for a new five year committed multi currency revolving credit bank facility with HSBC Bank plc and Santander UK plc, comprising £15.0 million and US$25.0 million facilities. This facility provides us with the financial flexibility to invest in opportunities that can deliver long term returns.

Equity

Equity attributable to shareholders grew from £171.6 million to £173.7 million. This principally results from the retained profit for the year of £13.8 million, less an actuarial loss arising in retirement benefit obligations of £2.1 million net of tax, a loss debited to the translation reserve of £3.6 million and dividends paid of £7.5 million. An expense relating to share based payments of £0.8 million was credited directly to reserves.

Pensions

The Group operates a number of defined contribution pension schemes and two defined benefit plans. The defined benefit plans are closed to new entrants and the latest actuarial valuations of these plans show a deficit of £2.6 million (2011: £3.7 million). The Board has agreed with the plans' trustees that the deficits will be funded over a five year period and, accordingly, special payments were paid to the plans during the year of £1.2 million (2011: £1.2 million). In addition, a one-off lump sum contribution of £0.7 million was paid in September 2011 by the Group following completion of the disposal of the Supply Chain business. Under the terms of the Supply Chain disposal agreement, Umeco retains funding responsibility for the defined benefit plans; however the Supply Chain business' employees ceased to accrue further benefits under the plans from completion of the disposal.

The deficits of the defined benefit plans have been recognised on the balance sheet, with the IAS19 valuation of the plans at 31 March 2012 showing a shortfall in assets to liabilities of £1.7 million (2011: £2.0 million). 

Currency exchange risk

The Group seeks to hedge currency exchange risks by matching purchases and revenues that are denominated in foreign currencies. Where this is not possible, forward currency contracts may be taken out to protect exposures. Group policy prohibits speculation in currency management.

The retranslation of the Group's net investment in overseas businesses led to a net loss of £0.2 million being debited to the translation reserve.

Summary

In the year we combined growth in revenue levels with improving operating margins and continued to maintain our tight working capital control environment. Umeco's balance sheet was transformed during the year, providing a strong financial position. Combined with our new banking facilities, this financial position gives Umeco the ability to capitalise on the strong structural growth drivers in our markets.

Steve Bowers

Finance Director

19 June 2012

For the year to 31 March 2012

For the year to 31 March 2012

As at 31 March 2012

For the year to 31 March 2012

For the year to 31 March 2012

Consolidated Statement of Changes in Equity

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For the year to 31 March 2012

Consolidated Statement of Changes in Equity (continued)

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For the year to 31 March 2012

Notes to the announcement of results

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For the year to 31 March 2012

1 Basis of preparation

Umeco plc (the 'Company') is domiciled in the UK. The consolidated financial statements of the Company as at and for the year to 31 March 2012 comprise the Company and its subsidiaries, together with a share of the results, assets and liabilities of jointly controlled entities (joint ventures) using the proportionate consolidation method of accounting (together referred to as the 'Group') and have been prepared in accordance with IFRS adopted for use in the EU.

The financial information set out in this announcement, which was approved by the Board on 19 June 2012, does not constitute the Company's statutory accounts for the years to 31 March 2012 and 31 March 2011 but is derived from the 2012 statutory accounts. The statutory accounts for the year to 31 March 2011 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The statutory accounts for the year to 31 March 2012 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the statutory accounts for the years to 31 March 2012 and 31 March 2011, their reports were unqualified, did not include references to any matter which the auditors drew attention to by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

In the process of applying the Group's accounting policies, management has made a number of judgements. The process of preparing these consolidated financial statements inevitably requires the Group to make estimates and assumptions concerning the future and the resulting accounting estimates may not equal the related actual results. The estimates and judgements that have the most significant effect on the amounts included within these consolidated financial statements were the same as those that applied to the audited consolidated financial statements for the year to 31 March 2011.

Following the decisions to dispose of the Supply Chain and ACG South Africa businesses, the results of these undertakings have been classified as discontinued operations.

Notes to the announcement of results

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For the year to 31 March 2012

2 Segmental reporting

The Group has two continuing reportable segments, as described below, which are the Group's strategic business units. The strategic business units are the Structural Materials business stream, which undertakes the development, manufacture and supply of advanced composite materials, and the Process Materials business stream, which undertakes the development, manufacture and supply of vacuum bagging materials. The strategic business units offer different products and services, and are managed separately as they require different technology and marketing strategies. For each of the strategic business units, the Chief Executive reviews internal management reports on a monthly basis.

Details of the calculation of adjusted operating profit, together with a reconciliation of reportable segment adjusted operating profit to total operating profit, are set out in note 4.

There are no material transactions between the Group's two reportable segments.

The continuing operations' biggest customer accounted for 2.7 per cent (2011: 3.3 per cent) of net revenue from continuing operations.

Information regarding reportable segments

Notes to the announcement of results

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For the year to 31 March 2012

2 Segmental reporting (continued)

Information regarding reportable segments (continued)

Notes to the announcement of results

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For the year to 31 March 2012

2 Segmental reporting (continued)

Reconciliations of reportable segment information

Notes to the announcement of results

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For the year to 31 March 2012

2 Segmental reporting (continued)

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is provided based on the geographical location of the customer and the geographical location of the business unit. Segment assets are based on the geographical location of the assets.

Notes to the announcement of results

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For the year to 31 March 2012

2 Segmental reporting (continued)

Geographical segments (continued)

3 Financial income and expense

Notes to the announcement of results

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For the year to 31 March 2012

4 Reconciliation of adjusted profit measures

Umeco uses adjusted figures as key performance indicators, as these are considered to provide a more consistent measure of operating performance. Adjusted figures are stated before the results of discontinued operations, amortisation and impairment charges relating to intangible assets, significant items, the revaluation of financial instruments based on their market values and associated tax effects. The total and adjusted profit measures are reconciled below.