Interim Results

Yule Catto & Co PLC 12 September 2002 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2002 Yule Catto is an international producer of speciality chemicals, which are supplied to global customers, ranging from manufacturers of medical gloves, paint and adhesives to the pharmaceuticals and cosmetics industries HIGHLIGHTS * Growth in turnover for continuing activities of 7.6% to £254.5 million * Profit before tax up 47% at £26.5 million (2001: £18.0 million) * Earnings per share rise 42% to 12.1 pence (2001: 8.5 pence as restated) * Good cash generation despite high levels of business activity * Interim dividend increased to 5.1 pence (2001: 4.9 pence) * Product from Malaysian nitrile latex plant with customers for approval Anthony Richmond-Watson, Chairman, comments: 'Demand continues to hold up and that, plus a concerted effort to increase selling prices, should substantially reduce the impact of recent raw material cost increases. Over the long term, the realignment of our Polymer business, coupled with the expansion opportunity created by our investment in new capacity, will deliver significant benefit. The strong pipeline developing within our pharmaceutical active ingredient range also offers much potential.' 12 September 2002 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 Lisa Pearson email: lisa.pearson@collegehill.com RESULTS SUMMARY Six months to 30 June 2002 2001 Unaudited Unaudited £'000 £'000 Total turnover 254,512 239,348 Earnings before interest, taxation, depreciation and amortisation 43,542 32,944 Operating profit before amortisation 33,449 23,893 Profit before taxation and amortisation 26,455 18,040 * Net borrowings 220,055 165,132 Free cash flow before dividends 2,889 1,208 Adjusted earnings per ordinary share 12.1p 8.5p + Earnings per ordinary share - FRS3 6.8p (5.3)p + Interim dividend per share 5.1p 4.9p * Excludes sale and termination of businesses + Restated per note 3 CHAIRMAN'S STATEMENT Overview Against the current backcloth of uncertain macro-economic conditions, we are pleased to report a healthy increase in earnings, dividend and cash flow. The recently created global water-based polymer group, under the Synthomer banner, has made a strong debut and good growth continues for Omeprazole as it progressively becomes generic in more territories. Consequently, profit before taxation and amortisation of goodwill of £26.5 million has been achieved, an advance of 47% over the corresponding period. Turnover for continuing activities increased by 7.6% to £254.5 million. The benefits of our recent strategic acquisition and investment programme continue to flow through giving your Board the confidence to increase the interim dividend to 5.1p (2001: 4.9p) per ordinary share. Review of Operations Polymer Chemicals With the first time inclusion of full ownership of Harlow Chemical Company Limited, operating profit was nearly double the level achieved in the first half of 2001, with excellent progression in all geographic regions in which we operate. Lower raw material costs have been a feature, but good volume development across the majority of our business sectors, coupled with an enhanced mix as we drive towards more technically demanding applications, have combined to return margins to previously achieved levels. At the beginning of the year Yule Catto announced a major restructuring of its polymer chemicals business. The new entity, Synthomer, can claim to be a world leader in both technology and the breadth of product range offered for speciality applications. There has been a rapid integration of a number of operating sites under one management structure and the new organisation has been well received in the marketplace. Further rewards will accrue as we expand our European capacity, including de-bottlenecking critical processes in the UK and the construction of a new plant in Belgium. The new state of the art nitrile latex facility in Malaysia has been successfully commissioned and customer trials with product from this plant are well advanced. Following approval, the logistical advantage afforded by our location should ensure a rapid take up of available capacity, generating a positive contribution in the near term. Pharma & Fine Chemicals In the limited number of territories where the patent has expired, generic Omeprazole has gained significant market share from branded product. As a result, sales of our active ingredient have enjoyed substantial growth in Germany and Spain, whilst sales continue to increase in traditional markets. In the UK, the patent has recently expired offering further market opportunities. Our customers in the USA, where minimal quantities have been ordered to date, await the imminent outcome of protracted litigation over the Omeprazole patent. Considerable volumes are anticipated once clarification on patent expiry is achieved. Other generics have also delivered growth and further focus placed on reducing the cost of manufacture has been reflected in a positive movement in margin. We are on course with our stated strategy to develop three to six new generic products each year. The new pilot plant in Spain is operational and fully loaded with development projects for many months ahead. This bodes well for the medium-term expansion of our ethical range, which in the past has been impacted by regulatory delays and product withdrawal. Growth in our flavour and fragrance businesses has been held back following consolidation within the industry, causing customers to focus initially on integration programmes. We continue to introduce novel products, which are targeted at major global companies, and we are well placed to recover quickly our growth momentum. Performance Chemicals A combination of factors contributed towards a dip in profits during the second half of 2001, many of which have reversed, leading to a progressively improving result during the first six months. The price of caustic soda has reduced which, together with the introduction of a new copper digestion plant, has delivered a robust performance within our inorganic salts business. Our systematic investment in new kilns for ultramarine pigment manufacture has continued, achieving greater product consistency, higher quality and much needed additional capacity. We are very encouraged by the reception of ultramarine in potential new application areas, some of which are seeking the environmental benefits offered by this blue pigment. Growth in our organics business has been slower to recover but we are pleased to confirm that our facility in India is now manufacturing photographic products to the highest global standards. This has contributed to the attainment of a number of customer approvals and a rapidly growing order book. Sales of hair dyes have been impacted by the timing of customer requirements, with a greater bias towards the second half. Borrowings Net borrowings have reduced marginally from their 2001 year end position to £220.1 million: this was achieved despite the normal seasonal rise in working capital being affected by a particularly active second quarter. The higher level of operating profit, coupled with a reduced level of expenditure on fixed assets, have contributed to our improved free cash flow of £2.9 million. An anticipated lower level of capital expenditure, in conjunction with a reversal of the growth in working capital, should provide the customary strong free cash flow performance in the second half. Dividend The interim dividend of 5.1 pence per ordinary share will be paid on 21 November 2002 to members on the register at close of business on 1 November 2002. Outlook The global economy displays little sign of the emergence of a sustained recovery. Within our industry the cost of monomers, our major raw materials, have risen in recent months causing margins to fall from the levels achieved in the first half. Demand continues to hold up and that, plus a concerted effort to increase selling prices, should substantially reduce the impact of the cost increases. Over the long term, the realignment of our Polymer business, coupled with the expansion opportunity created by our investment in new capacity, will deliver significant benefit. The strong pipeline developing within our pharmaceutical active ingredient range offers much potential, whilst the niche nature and spread of our Performance sector provides a solid platform. With our traditional focus on profit and cash generation, overall we remain cautiously optimistic regarding the near and medium term outlook. A E RICHMOND-WATSON Chairman 12 September 2002 Consolidated Profit & Loss Account 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December 2002 2001 2001 (Restated) (Restated) Unaudited Unaudited Unaudited £000 £000 £000 Turnover of company and subsidiaries 249,935 216,457 443,930 Share of turnover of joint ventures 4,577 22,891 30,891 Total turnover 254,512 239,348 474,821 Operating profit Existing operations 32,743 21,119 48,989 Amortisation of goodwill (7,621) (6,466) (13,893) Operating profit of company and 25,122 14,653 35,096 subsidiaries Share of operating profit of joint ventures 706 2,774 3,881 Total operating profit 25,828 17,427 38,977 Sale and termination of businesses - (13,498) (13,498) Interest payable (net) (6,994) (5,853) (12,590) Profit/(loss) on ordinary activities before 18,834 (1,924) 12,889 taxation Taxation on profit on ordinary activities (7,963) (5,274) (12,003) Profit/(loss) on ordinary activities after taxation 10,871 (7,198) 886 Minority interests (999) (464) (1,316) Profit/(loss) attributable to shareholders 9,872 (7,662) (430) Ordinary dividends (7,411) (7,095) (17,245) Retained profit/(loss) for the financial period 2,461 (14,757) (17,675) Operating profit before amortisation 33,449 23,893 52,870 Profit before taxation (excluding amortisation and sale and termination of businesses) 26,455 18,040 40,280 Earnings per share - Adjusted 12.1p 8.5p 18.6p - FRS3 6.8p (5.3)p (0.3)p Dividends per ordinary share 5.1p 4.9p 12.0p Consolidated Balance Sheet 30 June 30 June 31 December 2002 2001 2001 (Restated) (Restated) Unaudited Unaudited Unaudited £000 £000 £000 Goodwill 250,347 219,214 257,968 Fixed Assets 178,558 151,398 175,908 Working capital 23,385 30,473 9,544 Provisions (24,737) (25,973) (24,806) Dividends (17,629) (17,086) (10,218) Net borrowings (220,055) (165,132) (223,165) Net assets 189,869 192,894 185,231 Shareholders' funds 184,924 188,570 181,031 Minority interests 4,945 4,324 4,200 Capital employed 189,869 192,894 185,231 Consolidated Cash Flow Statement 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December 2002 2001 2001 Unaudited Unaudited Audited £000 £000 £000 Net cash inflow from operating activities 25,108 23,753 79,615 Interest paid (6,497) (5,667) (12,244) Dividends received less paid to minorities 488 623 2,646 Taxation paid (7,436) (7,120) (7,186) Net capital expenditure (8,774) (10,381) (31,168) Free cash flow before dividends 2,889 1,208 31,663 Acquisition and disposal of businesses - (1,264) (70,292) Equity dividends paid - - (17,018) Issue of ordinary shares - - - Exchange movements 221 (291) (2,733) Movement in net borrowings 3,110 (347) (58,380) Notes to the financial statements 1. Analysis of total turnover 6 months ended 6 months ended 30 June 2002 30 June 2001 Unaudited Unaudited £'000 £'000 Polymer Chemicals 132,359 112,011 Pharma & Fine Chemicals 48,641 44,769 Performance Chemicals 73,512 79,651 Building Products - 2,917 254,512 239,348 2. Analysis of profit 6 months ended 6 months ended 30 June 2002 30 June 2001 Unaudited Unaudited £000 £000 Polymer Chemicals 21,138 11,308 Pharma & Fine Chemicals 7,786 4,943 Performance Chemicals 6,727 10,095 Building Products - (243) Holding companies (2,194) (2,048) Interest payable by joint ventures (8) (162) 33,449 23,893 3. These accounts have been prepared on the basis of the accounting policies set out in the group's audited accounts for the year ended 31 December 2001, except for the deferred tax. In accordance with FRS19, which is effective for accounting periods ending on or after 23 January 2002, deferred tax is accounted for on a full provision basis, recognising in total the potential future tax effects of past transactions. No discounting has been applied. A prior period adjustment of £12.8 million is the cumulative prior period effect of this change of deferred tax accounting policy and has been charged against reserves. Comparatives have been restated accordingly for this change in accounting policy. 4. The financial information for the year ended 31 December 2001 has been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. 5. This statement will be sent to all shareholders on 12 September and can be obtained by the public from the company's registered office at Temple Fields, Harlow, Essex, CM20 2BH. 6. An interim dividend of 5.1p (4.9p) per share, totalling £7.4 million (£7.1 million) has been declared by the directors. 7. 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 - 144.8 million (144.8 million). 8. Adjusted earnings per share excludes the sale and termination of businesses and the amortisation of goodwill. This information is provided by RNS The company news service from the London Stock Exchange

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