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