Final Results
Yule Catto & Co PLC
16 March 2006
Yule Catto & Co plc
Preliminary Results for the year ended 31 December 2005
Good progress has been made in the long-term development of the Group
HIGHLIGHTS
• Group revenue £556.1m (2004: £536.6m)
• Underlying group sales* increased by 6% to £532.1m, (2004:
£503.1m)
• Profit before taxation* £34.5m, (2004: £32.2m)
• Profit attributable to equity shareholders £21.9m (2004:
£19.1m)
• Earnings per share* of 16.7p, (2004: 13.9p)
• Dividend 9.0p per share (2004: 13.4p)
• Strong volume growth in polymers
• Successful implementation of restructuring programme,
delivering £22m gross proceeds to date
• Borrowings* reduced to £165.6m (2004: £187.6m)
• Net assets £55.5m (2004: £45.9m)
* Before special items, as defined in notes 1 and 9
Anthony Richmond-Watson, Chairman, comments:
'In Polymers, the start of the year has seen strong sales volume and we are
cautiously optimistic that as the year develops, performance will maintain its
forward progression. The long-term generic and ethical development programme for
the active pharmaceutical ingredient business continues to expand and the
necessary infrastructure is in place. We look forward to the growth created by
our investment and restructuring initiatives, being aided by more helpful market
conditions.'
16 March 2006
ENQUIRIES:
YULE CATTO Tel: 01279 442791
Alex Walker, Chief Executive
Sean Cummins, Finance Director
COLLEGE HILL Tel: 020 7457 2020
Gareth David email: gareth.david@collegehill.com
RESULTS SUMMARY
Underlying performance(a) IFRS
2005 2004 2005 2004
£'000 £'000 £'000 £'000
audited audited audited audited
Year to 31 December
Group sales 532,146 503,121 568,707 549,444
EBITDA (b) 65,504 65,614 65,504 65,614
Operating profit 46,213 45,088 46,193 44,947
Profit before taxation 34,472 32,158 32,031 31,757
Earnings per share 16.7p 13.9p 15.1p 13.2p
Dividend per share (c) 9.0p 13.4p 9.0p 13.4p
Net borrowings (d) (165,591) (187,641) (171,266) (178,537)
Free cash flow before dividends 19,786 13,344 19,786 13,344
(e)
Notes:
The above table represents the results of Yule Catto and Co plc, its
subsidiaries and its share of joint ventures.
(a) Underlying performance is before special items. (See notes 1 and 9)
(b) Earnings before interest, tax, non-recurring items, depreciation and
amortisation (See note 6)
(c) Final dividend for 2005 of 5.3p per share will be paid on 4 July 2006 to
members on the register at close of business on 2 June 2006.
Under IFRS this is not accrued in the financial statements.
(d) As reconciled at the bottom of the balance sheet.
(e) As shown within the cash flow statement.
CHAIRMAN'S STATEMENT
Good progress has been made in the long-term development of the Group. Forward
momentum in our water-based Polymer activities was sustained in the second six
months despite there being no respite from rising costs of petrochemical based
raw materials. Strong volume growth, better product mix and increased selling
prices all contributed to an improvement in unit margins, which more than offset
the rise in input costs. The future of our Pharmaceutical activities is in
large part linked to widening the portfolio of the generic products that we
manufacture. Enhanced levels of drug master file registration in the USA and
Europe were maintained and the infrastructure to support the approval programme
was strengthened. Profit in Performance chemicals moved forward by 8% as we
benefit from the reshaping of the division into a more focussed business.
Underlying profit before taxation for the group advanced by 7% to £34.5 million.
With a lower tax rate prevailing in the period and a reduced level of profit
attributable to minority interests, the associated earnings per share rose 20%
to 16.7 pence.
Movements in exchange rates have been a negative feature in recent years: the
weakening US Dollar has been detrimental to the value of transactions, whilst
our high Euro exposure has affected the translation of overseas results. The
quantum of the exchange rate risk remains the same, but with relative stability
in the two major currencies the impact in the year was broadly neutral.
The funding position of pensions continues to attract much publicity. The Yule
Catto UK scheme has a high proportion of its assets allocated to equities and
hence with world stock markets performing well, asset value has enjoyed a
double-digit growth for the third consecutive year. Conversely, a sharp
reduction in bond yields towards the year end resulted in the calculation of
liabilities, as measured by IAS19, eroding much of the benefit, but overall the
deficit has reduced by £7.7 million. A full triennial valuation will be
conducted in 2006 and a new schedule of contributions to address any shortfall
will be developed in conjunction with the scheme Trustees and accommodating the
requirements of the Pensions Regulator.
The large and developing market in China offers many exciting business
opportunities, both as a new outlet for our products and as a source of low cost
raw materials for use in our manufacturing processes. In pursuit of this, we
have recently established a representative office in Guangzhou.
A review of underperforming and non-core activities resulted in the sale or
withdrawal from a number of businesses during the year. This process has
delivered gross proceeds of £22 million to date and additional income will be
generated following the sale of land associated with two discontinued operations
in the UK.
Primarily driven by the disposal exercise, net underlying borrowings reduced by
£22.0 million to £165.6 million at the year end. As expected, additions to
fixed assets were at a lower level as we continue to benefit from a period of
reduced capital requirement. The Board has approved the expansion of the
nitrile latex facility in Malaysia and entry into a new market for cytotoxic
pharmaceutical products; and therefore a modest increase in expenditure is
likely in the current year. As a result of higher volume and the rising costs
of raw materials, we have again seen an absorption of cash into working capital,
although not at the rate of the previous year.
In line with the guidance provided in the interim statement, the Directors are
recommending a final dividend of 5.3 pence per share which would take the full
year payment to 9.0 pence, being a reduction of 33 per cent on last year.
Subject to shareholder approval, the dividend will be paid on 4 July to members
on the register at close of business on 2 June. In the absence of unforeseen
circumstances, it is the Board's intention that, from this rebased level, the
group will resume a progressive dividend policy.
Alex Walker, our Chief Executive since 1986, will retire in August 2006 after 34
years with the Group. Alex has been instrumental in transforming Yule Catto
into the speciality chemical company it is today, delivering significant
shareholder value along the way. Following a rigorous search process, Adrian
Whitfield joined the Group on 1st March 2006 as a Director and Chief Executive
Designate. Adrian has extensive international industrial management experience.
I am sure he will make an invaluable contribution in the next stage of the
development of the Group. In addition, following the resignation of Gianni
Montezemolo, we welcomed Colin Williams to the Board as an independent
non-executive director on 6 December 2005.
In an increasingly competitive environment, the success of the group can only be
realised through the hard work and commitment of all our employees. On behalf
of the Directors and Shareholders, I would again like to thank everyone for
their contribution to the results achieved this year.
Safety, health and environment (SHE) are of the utmost importance and it is
pleasing to report, for the sixth consecutive year, an overall improvement in
SHE performance, with a 30% reduction in the lost time accident frequency rate
and a lower total number of reportable safety and environmental incidents. We
are fully committed to the principles of sustainable development and have
adopted guidelines issued by the UK Chemical Industry Association. In support
of this, financial incentives for senior managers have been modified to broaden
the categories targeted for improvement to include energy and waste. Finally, a
detailed analysis has been conducted to assess the economic implications of the
European Union REACH legislation. On the basis of current knowledge of the
regulatory framework, it appears that any financial exposure should be contained
within the existing cost structure.
Outlook
The price of crude oil remains high and there are no signs of raw material costs
subsiding. That said, the polymer business delivered good results last year as
the level of volatility reduced. The start of the year has seen strong sales
volume and we are cautiously optimistic that as the year develops, performance
will maintain its forward progression.
The long-term generic and ethical development programme for the active
pharmaceutical ingredient business continues to expand and the necessary
infrastructure is in place. We expect to see the benefit of new products during
the year which should provide some mitigation against the normal generic pricing
curve of the more mature products in our portfolio.
In difficult circumstances we delivered a solid performance in 2005 and look
forward to the growth created by our investment and restructuring initiatives,
being aided by more helpful market conditions.
Anthony Richmond-Watson
Chairman
16 March 2006
REVIEW OF OPERATIONS
POLYMER CHEMICALS
In almost every respect, our Polymer Chemicals businesses delivered a healthy
performance in 2005 and demonstrated good progress along our chosen growth path.
Raw material availability and cost were again a feature, with the aftermath of
the hurricanes in the USA adding to the pressures caused by the persistence of
the high price of crude oil. Despite these challenges, record sales volumes saw
turnover rise 15.4% and that, coupled with higher capacity utilisation and
improving sales prices, provided a 23.5% increase in operating profit.
The width of our product portfolio and the flexibility to adapt products for
customers to give improved commercial and technical advantage remains a key
strength. In addition, new products have been successfully launched to address
changing market conditions. This has assisted in the development of business in
Europe and Asia in support of the manufacturing investments of recent years.
Plans are in hand to increase capacity further for selected markets and regions.
The world economy is adjusting to the higher costs of oil-based products. This
is true of our customer base where a greater acceptance of higher selling
prices, plus the impact of changes in product mix, saw margins return to
double-digit as the year progressed.
In the latter months of 2005 the volatility in raw material costs, while still
present, had reduced and the availability of monomers improved. Such an
environment provides the conditions to increase the number of growth
opportunities and maintain the momentum towards our long-term strategic goals of
expanding into new markets and capturing target accounts.
Synthetic Latex
Global volumes of synthetic latex grew by close to 10% in the year. The merits
of a production facility in Malaysia close to our customers for nitrile glove
dipping latex was a significant contributory factor. The rising shipping costs
of our competitors based in Europe and the USA have been avoided and with a
number of new developments coming on stream the customer base has increased.
Sales volumes of nitrile latex grew by a substantial 25% supported by process
development initiatives which released 20% additional capacity at the Kluang
facility. With growth in this market set to continue, investment in additional
reactor capacity will commence in the second quarter of 2006.
In Europe initiatives to widen activities in the speciality construction,
textile and paper sectors achieved good progress with volumes up close to 10%.
The results of efforts to develop sales to Eastern Europe are also starting to
emerge. Difficult market conditions were again experienced in the carpet sector
with, in particular, the UK industry seeing further contraction. In response to
this, compound manufacturing facilities in Holland have been rationalised with
the closure of the Ridderkerk site. This has resulted in a significant
improvement in productivity and enhances our status as the leading carpet
compound supplier to the European market.
Emulsions
The emulsion business in 2005 was subject to regional variations, but overall
record tonnages were achieved.
The 8% volume growth achieved in Europe was against the trend of published
statistics which showed a year-on-year decline in customer demand. The major
part of this success came from higher sales to continental European customers
supplied from our Belgian facility. Our technology, which is well established
in the UK, provides the platform to supply customers across a wide number of
application areas. With the freer supply of raw materials, the opportunity for
greater sales to these markets is being pursued.
In South East Asia and the Middle East sales declined slightly, in line with
general market conditions. However, the fall was less than might have occurred
since customers in some sectors, such as construction in Malaysia and paint in
Saudi Arabia, have reported substantial falls in demand.
Emulsion sales in South Africa moved forward as general economic activity
remained robust. The benefit of recent investments in reactor capacity emerged
in both cost effectiveness and the ability to support increased customer demand.
A new range of emulsion adhesives was also launched directed at broadening our
activities in the packaging and wood industries.
Polyvinyl Alcohol/Acetate
Efforts initiated to develop sales in Asia have proved successful and provided
compensation for weaker polyvinyl alcohol demand in other parts of the world as
a consequence of a slow-down in the PVC industry.
Margins came under pressure due to the rising cost of Vinyl Acetate Monomer and,
with customers having alternative technology options, reflecting these higher
prices in the market has proved a difficult challenge. The unique properties of
our Alcotex range of stabilisers has, however, permitted the maintenance of
market share. As the PVC industry develops in Asia we remain well placed for
future growth.
Polyvinyl Acetate sales overall are running at the level of recent years. New
product developments for adhesive and additive applications are offsetting
weaker sales to the automotive industry.
Other Speciality Products
After a slight dip in speciality natural rubber latex sales in 2004, volumes
pleasingly recovered in a year when underlying natural rubber prices rose. Our
Malaysian operation is the leading supplier to the world condom manufacturing
industry. It is, therefore, not surprising that the first customer approvals
and sales for our recently established joint venture in India are at condom
manufacturers in that country.
Revertex Finewaters, our adhesives manufacturing company in Malaysia,
successfully deployed new marketing tactics and products to re-establish their
highly successful track record. Export sales throughout the region continue to
grow.
Sales of alkyd resins in Asia fell back slightly, but polyester sales grew as
good contract business in Malaysia/Singapore was secured. A shift towards more
specialised applications has also assisted in improving margins.
Lithene polybutadiene sales continued at a solid level, but a shift in product
mix has seen good margin development. A debottlenecking investment was
completed in mid-2005 in order to facilitate new product introductions.
PHARMA AND FINE CHEMICALS
The value of sales for our Pharma & Fine Chemicals businesses again experienced
the impact of the normal pattern of price erosion for our major generic products
as the market matures post patent expiry. Volume growth was achieved, but
despite good process development reducing product costs, unit margins
contracted.
Sales in the last quarter of the year were particularly slower than expected as
customers and regulatory approvals delayed the benefits of new initiatives in
the contract manufacturing business.
Our strategy remains to strengthen and deepen the range of generic products with
an eye to the medium and long term as patents expire. In addition, we continue
to offer cost effective manufacturing and development services to the wider
pharmaceutical industry. During 2005 there was a full programme of development
and nine drug master files were registered in the USA and Europe. A number of
important customers have used these files to support the development of their
future product launches.
The year saw the completion of two major investments in a new research centre in
Spain and a cGMP pilot plant at our facility in Italy. These, along with
strengthened development teams, were applied to product development enabling the
filing of process patents covering a number of new products.
Results from our Flavour & Fragrance businesses were held back by generally
weaker market conditions and pressure from customers seeking manufacturers in
low cost countries was also experienced.
Pharma
The Uquifa business in Spain experienced a good year from a volume standpoint,
particularly in the field of generics. Sales volumes of omeprazole active again
rose by 20% with demand growing in the important US market and good sales of
product in pelletised form. New equipment to bring in-house the manufacture of
pellets was commissioned in the year, but delays in the regulatory process meant
Spanish Ministry of Health approval for our process only came at the very end of
the year. Benefits from this investment will not only support omeprazole
margins, but permit the development of other active pharmaceutical ingredients
which are supplied in pellet form.
Ranitidine sales were strong in the USA and Europe with largely stable margins.
Progress was also achieved in scaling up new processes for other proton pump
inhibitors. Antibacterial and antidepressant volumes grew, but here the rise in
solvent prices constrained margin development.
Progress was sustained in developing relationships with large Pharma companies
with the transfer of a number of long-established products to our plant from
multinational locations. The pilot plant featured strongly, being highly
utilised throughout the year. A good part of this was in the manufacture of
smaller scale products for customer development programmes within the ethical
market.
For our Italian operation, 2005 was a challenging year. Further delays within a
customer's approval process for a substantial contract were experienced and
sizeable take up of generic products remains some way off. Additionally, a
product in phase II/III of drug development, which used the particular
manufacturing capabilities of our Agrate plant, was withdrawn.
On a brighter note, an important contract was agreed for the supply of a
cytotoxic product. The necessary investment to modify part of our new pilot
plant is currently in progress and will be commissioned in the second half of
2006. This creates an important new opportunity to develop business in a
rapidly growing market area.
While sales levels from our Mexican company were largely similar to the previous
year, the mix has altered with the generic products growing at a time of slower
offtake by ethical customers. Ciprofloxacine was particularly strong and sales
of the antipsychotic Zolpidem to Europe increased. This latter product will
come off patent in the USA in the second half of 2006 and that, coupled with
good ethical demand, is anticipated to aid performance in the months ahead.
Terbinafine, an antifungal, saw sales rise rapidly to become the leading
product made by Uquifa in Mexico. This opportunity was supported by our
pharmaceutical dossier registration programme in Europe.
The search for cost competitive intermediates to utilise as precursors to our
registered products and processes is a key feature of the pharmaceutical market.
The opening of our group representative office in China will assist in
accessing this ever more important supplier base for such starting materials.
Flavour & Fragrances
The flavour and fragrance market saw another year of weaker demand and the
search for reduced input costs encouraged customers to seek product from low
cost countries, particularly in Asia.
Oxford Chemicals' quality standards and niche product offerings were used to
great effect to combat this threat, but margin was somewhat impacted. Raw
materials on which to base a range of natural products have now been secured and
these are in the process of being introduced to the market.
The fragrance business of PFW has suffered through a sharp rise in its main
petrochemical based raw material at a time when new competition has entered
their market. Important certification approval targets were reached for sales
throughout the European Union which will assist in sustaining sales volumes.
PERFORMANCE CHEMICALS
2005 was an active year of restructuring and reshaping for our Performance
Chemicals businesses. Underlying sales achieved from ongoing activities fell by
5.5%, but the associated operating profits moved forward by 7.7%.
There were some significant achievements in the disposal of operations with
Autoclenz listed on AIM in December with a total value of £18m. Earlier in the
year the disposal of Brencliffe and the Holliday Dispersions operations for a
combined value of £3.9m were successfully concluded. Restructuring within the
remaining businesses continued with the announcement of the closure of the James
Robinson manufacturing site in Huddersfield and the decision to exit the sulphur
dioxide derivatives business of William Blythe.
All of the above is a direct response to changes in our customer base and
positions our operations to deliver more effectively our speciality products
which are technically demanding in both specification and manufacture.
The continuing activities are beginning to see the benefits of this process,
aided by new product initiatives. In particular, the speciality inorganic
operations have achieved some important advances and the high margin
photochromic products are demonstrating a sharp increase in sales. To set
against this, the weakness of the US Dollar to Sterling and the Euro remains a
concern; and the rapid rise in the price of gas will impact the costs of the
ultramarine pigment manufacturing process.
China is a major market for our performance chemical companies. They have been
the first to take advantage of our new representative office by stationing
technical sales representatives in Guangzhou to support customer contacts.
Inorganic Chemicals
Stability has now been achieved in the timber treatment business with the
opportunity for growth as other UK manufacturers withdraw from the market.
Major progress can be reported in the development of high purity copper chromate
for catalyst manufacture. Significant breakthroughs in new business in this
area were achieved in the latter months of the year.
Tin products, used in non-toxic flame retardants, progressed well in overseas
markets as did sales of products directed at the pharmaceutical and glass
manufacturing industries. New applications in brake pads and flame retardant
paints hold promise for the future. Iodine based products saw sales of
speciality products to the electronic and printing sectors, most notably high
purity periodic acid.
The continuation of the difficult trading conditions in the SO2 market has
resulted in our decision to vacate the manufacturing site at Hapton. The
transfer of other profitable processes to the main William Blythe site at Church
will commence in the near future. This should lead to a more efficient single
site operation focussed on products with a growing future.
Organic Chemicals and Pigments
James Robinson has for some time been going through a period of change to
rationalise its facilities. After the final closure of manufacturing in the UK
due in mid-2006, customers will be served from the high technical capabilities
of our German facility and, for large volume products, the low operating cost
base of our Indian joint venture.
Exciting opportunities lie within the photochromic market where the technical
excellence and range of our products enabled sales to double in 2005. New
opportunities outside the important ophthalmic sector in the areas such as
security marking are being pursued. Hair dye sales were sustained, but margins
of the larger volume products came under pressure from Asian manufacturers.
Colour developer sales fell back as the move to digital photography gathered
pace, but an agreement to make a range of fuel markers will substantially expand
our Indian operations.
The ultramarine business had a challenging year with a downturn in sales as
distributors reduced stocking levels. In France the operations performed well
delivering a good all round performance. On the other hand, the UK operation
was plagued by production issues that restricted output. Actions to alter this
position are in hand with good progress being achieved towards key performance
targets. Our products remain the standard by which the ultramarine market
judges quality and there remain numerous applications to grow volumes,
particularly in the increasingly important China market. The acceptance process
for new products in automotive, construction and ink continues but customer
testing regimes, by definition, remain a lengthy process.
Other Activities
Our Consumer Chemicals products faced mixed market conditions throughout the
year, exacerbated by rising raw material costs. Little growth was seen in the
markets we serve and further reshaping of the cost base was initiated.
A marked increase in customer confidence was seen in the last quarter of 2005
resulting in a strong order book for the early part of 2006.
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
Note £'000 £'000 £'000 £'000
audited audited audited audited
Group revenue 556,051 536,567
Share of joint ventures revenue 12,656 12,877
Group sales 1,2 568,707 549,444
Group revenue 556,051 536,567
Company and subsidiaries 45,334 43,139
Joint ventures 859 1,808
Operating profit 1,2 46,193 44,947
Interest payable (15,424) (13,229)
Interest receivable 3,683 299
(11,741) (12,930)
Fair value adjustment 4 (2,421) (260)
Finance costs (14,162) (13,190)
Profit before taxation 32,031 31,757
Taxation (8,998) (11,317)
Profit for the year 23,033 20,440
Profit attributable to minority 1,180 1,303
interests
Profit attributable to equity 21,853 19,137
shareholders
23,033 20,440
Earnings per share
Basic 15.1p 13.2p
Diluted 14.9p 13.1p
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005
2005 2004
£'000 £'000
audited audited
Non-current assets
Goodwill 172,443 172,443
Other intangible assets 815 773
Property, plant and equipment 140,064 148,729
Deferred tax assets 2,531 1,860
Investment in joint ventures 4,064 3,053
319,917 326,858
Current assets
Inventories 66,495 70,907
Trade and other receivables 103,244 109,517
Cash and cash equivalents 46,027 93,868
215,766 274,292
Current liabilities
Borrowings (37,385) (102,244)
Trade and other payables (129,523) (122,645)
Current tax liability (53,050) (52,512)
Derivatives at fair value (4,312) (17,152)
Net current liabilities (8,504) (20,261)
Non-current liabilities
Borrowings (179,908) (170,161)
Trade and other payables (306) (436)
Deferred tax (6,056) (14,279)
Post retirement benefit obligations (69,637) (75,802)
(255,907) (260,678)
Net assets 55,506 45,919
Share capital 14,480 14,480
Share premium 31,829 31,829
Capital redemption reserve 949 949
Hedging and translation reserve (481) (947)
Retained earnings 4,009 (4,798)
Equity attributable to equity holders of the parent 50,786 41,513
Minority interests 4,720 4,406
Total equity 55,506 45,919
Analysis of net borrowing
Cash and cash equivalents 46,027 93,868
Current borrowings (37,385) (102,244)
Non-current borrowings (179,908) (170,161)
Net borrowings (171,266) (178,537)
Add back: special items 5,675 (9,104)
Net borrowings (underlying performance) (165,591) (187,641)
The financial statements were approved by the Board of Directors and authorised
for issue on 16 March 2006.
CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
Year to 31 December Notes £'000 £'000 £'000 £'000
audited audited audited audited
Operating
Cash generated from operations 5 57,791 49,181
Interest received 3,683 299
Interest paid (15,095) (12,680)
Net interest paid (11,412) (12,381)
UK corporation tax (paid)/received (74) 316
Overseas corporate tax paid (10,964) (8,820)
Total tax paid (11,038) (8,504)
Net cash inflow from operating activities 35,341 28,296
Investing
Dividends received from joint ventures 130 1,854
Purchase of property, plant and equipment (14,331) (16,920)
Sale of property, plant and equipment 45 186
Net capital expenditure and financial investment (14,286) (16,734)
Purchase of businesses - (1,358)
Sale of businesses 18,858 -
Net cash impact of acquisitions and disposals 18,858 (1,358)
Net cash inflow/(outflow) from investing activities 4,702 (16,238)
Financing
Equity dividends paid (16,796) (19,086)
Dividends paid to minority interests (1,399) (72)
Purchase of own shares (369) (185)
Repayment of current borrowings excluding bank - (12,000)
overdrafts
(Repayment)/proceeds of long term borrowings (5,033) 26,486
Net cash outflow from financing activities (23,597) (4,857)
Increase in cash and bank overdrafts during the 16,446 7,201
year
Comprised of:
Cash and cash equivalents (46,623) 1,515
Bank overdrafts 63,069 5,686
16,446 7,201
Reconciliation of net cash flow from operating activities to movement in net borrowings
2005 2004
£'000 £'000
audited audited
Net cash inflow from operating activities 35,341 28,296
Add back: dividends received from joint ventures 130 1,854
Less: net capital expenditure and financial (14,286) (16,734)
investment
Less: dividends paid to minority interests (1,399) (72)
Free cash flow before dividends 19,786 13,344
Net cash impact of acquisitions and disposals 18,858 (1,358)
Purchase of own shares (369) (185)
Equity dividends paid (16,796) (19,086)
Exchange movements 571 (3,080)
Movement in net borrowings (underlying performance) 22,050 (10,365)
STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2005
2005 2004
Minority Equity Total Minority Equity Total
interests holders of interests holders of
the parent the parent
Year to 31 December £'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Actuarial gains and losses - 3,442 3,442 - 2,540 2,540
Tax on items recognised directly in - (34) (34) - (1,798) (1,798)
equity
Exchange differences 533 466 999 (269) (945) (1,214)
Profit for the year 1,180 21,853 23,033 1,303 19,137 20,440
Total recognised income for the 1,713 25,727 27,440 1,034 18,934 19,968
period
1 Consolidated income statement analysis
2005 2004
Continuing operations Continuing operations
Note Underlying Special IFRS Underlying Special IFRS
performance items performance items
£'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Group revenue 519,490 36,561 556,051 490,244 46,323 536,567
Share of joint ventures revenue 12,656 - 12,656 12,877 - 12,877
Group sales 2 532,146 36,561 568,707 503,121 46,323 549,444
Group revenue 519,490 36,561 556,051 490,244 46,323 536,567
Company and subsidiaries 45,354 (20) 45,334 43,280 (141) 43,139
Joint ventures 859 - 859 1,808 - 1,808
Operating profit/(loss) 2 46,213 (20) 46,193 45,088 (141) 44,947
Finance costs 4 (11,741) (2,421) (14,162) (12,930) (260) (13,190)
Profit/(loss) before taxation 34,472 (2,441) 32,031 32,158 (401) 31,757
Taxation (9,148) 150 (8,998) (10,824) (493) (11,317)
Profit/(loss) for the year 25,324 (2,291) 23,033 21,334 (894) 20,440
Profit attributable to minority 1,180 - 1,180 1,303 - 1,303
interests
Profit attributable to equity 24,144 (2,291) 21,853 20,031 (894) 19,137
holders of the parent
25,324 (2,291) 23,033 21,334 (894) 20,440
Earnings per share
Basic 16.68p (1.58)p 15.10p 13.86p (0.62)p 13.24p
Diluted 16.49p (1.56)p 14.93p 13.70p (0.61)p 13.09p
Discontinued operations
There are no discontinued operations. As detailed in note 3, a number of
businesses were sold or closed during the year, however these do not satisfy the
criteria of IFRS 5 to be treated as discontinued operations.
Special items
The special items disclosed are made up as follows:
2005 2004
Note Special items Special items
£'000 £'000
audited audited
Group sales
Revenue of operations sold or closed during the year 36,561 46,323
Operating profit/(loss)
Operating (loss)/profit of operations sold or closed (156) 1,643
during the year
Profit or loss arising from the sale or closure of 3 136 -
operations
Impairment of non-current assets - (1,784)
(20) (141)
Finance costs
Fair value adjustment 4 (2,421) (260)
Taxation
Taxation on operating (loss)/profit of businesses sold or - (493)
closed during the year
Taxation on profit or loss arising from the sale or 150 -
closure of operations
150 (493)
2 Segmental analysis
2005 2004
Underlying Special IFRS Underlying Special IFRS
performance items performance items
Year to 31 December £'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Group sales by activity
Polymer Chemicals 364,770 - 364,770 316,108 - 316,108
Pharma & Fine Chemicals 82,170 - 82,170 96,868 - 96,868
Performance Chemicals 85,206 36,561 121,767 90,145 46,323 136,468
532,146 36,561 568,707 503,121 46,323 549,444
Operating profit by activity
Polymer Chemicals 34,159 (1,276) 32,883 27,663 (540) 27,123
Pharma & Fine Chemicals 10,903 - 10,903 16,355 - 16,355
Performance Chemicals 5,833 1,256 7,089 5,414 399 5,813
Unallocated corporate (4,682) - (4,682) (4,344) - (4,344)
expenses
46,213 (20) 46,193 45,088 (141) 44,947
2005 2004
£'000 £'000
audited audited
Group sales by destination
United Kingdom 123,767 128,634
Other Europe 228,641 218,470
Asia 115,204 98,870
Africa and Middle East 49,120 45,863
Rest of World 51,975 57,607
568,707 549,444
3 Profit or loss arising from the sale or closure of an operation
2005 2004
Year to 31 December £'000 £'000
audited audited
Sale of Brencliffe Limited 347 -
Sale of Holliday Dispersions Ltd and SA (1,974) -
Sale of Autoclenz Limited 13,614 -
Restructure of James Robinson Limited (4,813) -
Restructure of William Blythe Limited (5,762) -
Restructure of Ditar Ridderkerk BV (1,276) -
136 -
The shares of Brencliffe Limited were sold on 31 March 2005.
The business and assets of Holliday Dispersions Limited were sold on 11 August
2005, followed by the sale of the shares of Holliday Dispersions SA on 14
October 2005.
The shares in Autoclenz Limited were sold on 7 December 2005.
In January 2005 an announcement was made announcing the closure of Ditar
Ridderkerk BV.
In July 2005, the closure of James Robinson's manufacturing facilities at
Huddersfield was announced.
In December 2005, an announcement was made detailing the withdrawal of William
Blythe Limited from the sulphur dioxide business, which will result in the
closure of the Hapton site.
4 Finance costs
The fair value adjustment is the mark to market adjustment in respect of cross
currency and interest rate derivatives used for hedging purposes where IAS 39
hedge accounting is not applied.
5 Reconciliation of operating profit to cash generated from
operations
2005 2004
Year to 31 December £'000 £'000
audited audited
Reconciliation of operating profit to cash generated from
operations
Operating profit 46,193 44,947
Less: share of profits of joint ventures (859) (1,808)
45,334 43,139
Impairment of non-current assets - 1,784
Depreciation and amortisation 19,291 20,526
Profit or loss arising from the sale or closure of operations (136) -
Cash impact of termination of businesses (761) (280)
Loss on sale of fixed assets (73) -
Share based payments 711 1,212
Decrease / (increase) in inventories 1,550 (4,645)
Increase in trade and other receivables (1,380) (10,083)
Decrease in trade and other payables (4,042) (4,357)
Unrealised exchange (gains) / losses (2,703) 1,885
Cash generated from operations 57,791 49,181
6 Reconciliation of EBITDA
2005 2004
Underlying IFRS Underlying IFRS
£'000 £'000 £'000 £'000
Year to 31 December audited audited audited audited
Operating profit 46,213 46,193 45,088 44,947
Less: Profit arising from the sale or closure of - (136) - -
operations
Less: Operating profit or loss of businesses sold or - 156 - (1,643)
closed during the year
Add back: Impairment of non-current assets - - - 1,784
Add back: amortisation 307 307 439 439
Add back: depreciation 18,984 18,984 20,087 20,087
EBITDA 65,504 65,504 65,614 65,614
7 Dividends
2005 2004
Pence per Pence per
share share
audited audited
Interim 3.7 5.5
Final 5.3 7.9
Total 9.0 13.4
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in these financial
statements.
8 Further information
The financial information set out above does not comprise the company's
statutory accounts. It has been derived from the Group's audited accounts for
the year ended 31 December 2005, which will be delivered to the Registrar of
Companies following the Annual General Meeting. The auditors' report was
unqualified and did not contain any statement under section 237 (2) or (3) of
the Companies Act 1985. While the financial information included in this
preliminary announcement has been computed in accordance with International
Financial Accounting Standards (IFRS), this announcement itself does not contain
sufficient information to comply with IFRS. The company expects to publish full
financial statements that comply with IFRS, a copy of which will be posted to
the shareholders, on 19 April 2006.
The financial statements were approved by the Board of Directors on 16 March
2006.
The accounting policies used to prepare these accounts are the same as those
used in the preparation of the Group's restated IFRS audited accounts for the
year ended 31 December 2004, which were published in a transition document dated
8 September 2005. This statement presents and explains the adjustments to 31
December 2004 in detail, and can be obtained by the public from the company's
registered office Temple Fields, Harlow, Essex, CM20 2BH, or on the company
website www.yulecatto.com.
A final dividend of 5.3p (2004: 7.9p) per share, totalling £7.7m, (2004: £11.4m)
has been declared by the directors.
Earnings per ordinary share are based on the attributable profit for the period
and the weighted average number of shares in issue during the period - 144.7m
(2004: 144.6m).
9 Glossary of terms
Group sales Group sales represent the total of revenue from Yule Catto and Co plc, its
subsidiaires, 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 USD loan notes from the rate of the related cross currency
swaps to the year 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.
Free cash flow Free cash flow represents cash flow before cash impact of acquisitions and disposals,
purchase 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.
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