Final Results
Cookson Group PLC
26 February 2002
26 February 2002
ANNOUNCEMENT OF 2001 PRELIMINARY RESULTS
• Headline pre-tax profit of £6.7 million; in line with previous indications
• Strong cash flow generated; free cash flow of £73 million before dividends
• Gross borrowings reduced by £61 million and new credit facilities arranged
• As previously announced, final dividend for 2001 to be passed
• Extensive cost-cutting programmes implemented during year; near completion
Stephen Howard, Group Chief Executive, said:
'In line with the indication given in our fourth quarter trading update to
shareholders on 15 January 2002, pre-tax profit for the year was £6.7 million.
In the January update, it was also stated that there were some signs that the
downturn in the electronics industry may have begun to bottom out. External
indicators and comments from a number of influential players within the industry
since then suggest that this is the case. This is consistent with the experience
of Cookson's Electronics division which has recently seen weekly sales levels in
line with those in the fourth quarter of 2001.
Market conditions for our Ceramics division in the USA have shown signs of
improvement since the start of this year, with steel production levels in
January and early February exceeding those of the fourth quarter of last year.
There have, however, been signs of softening in some Northern European steel
markets.
In the Precious Metals division, activity levels in the Jewellery Products
sector are consistent with the seasonal trends normally experienced at this time
of year. The Precision Products sector's order intake has shown some signs of
bottoming out, consistent with the trends experienced by the US electronics
industry.
The past year was characterised by concerted action to reduce the Group's cost
base in response to the dramatic deterioration in trading conditions. However,
throughout the process of implementing cost-saving initiatives, management has
been mindful not to take action which could inhibit Cookson's ability to
continue to deliver productivity-driven process solutions to its customers. We
also remain determined to protect and enhance the Group's strong, global market
positions and to increase its competitiveness. By doing so, Cookson will be in
the best possible position to deliver sustainable growth and quality of earnings
as market conditions improve.'
OVERVIEW
Trading conditions experienced in 2001 by the Electronics division and by all of
the Group's US operations were the worst for many years and the extent of the
downturn experienced by our Electronics division was unprecedented in its
severity.
From the first quarter of the year, when the first signs of a sharp decline in
the electronics industry emerged, management responded swiftly and decisively by
implementing broad ranging cost-saving initiatives. This resulted in a
significant reduction in the Group's cost base over the course of the year, with
the workforce cut by some 3,400 people (16% of the total) by the end of the
year, underlining our determination to take action where market circumstances
dictate and to preserve Cookson's strong competitive positions. These programmes
will be completed in the first half of 2002 with a further reduction in
headcount of some 300 people.
The programme to dispose of non-core businesses continued during the year. The
sale of the Group's plastic mouldings businesses was concluded in four separate
transactions in the fourth quarter. This followed the sale of the magnesia
chemicals business in the first half of the year, together with a number of
other smaller disposals. Proceeds from disposals during the year amounted to £62
million.
The Group's financial position was strengthened by the arrangement of a new £450
million bank facility in December 2001 with a final maturity date of September
2004. Management also directed much effort to conserve cash and to maximise cash
generation and, despite the significant fall in profits, strong positive cash
flow was generated. As a result, gross borrowings were reduced by £61 million
over the year.
In the third quarter update in October, the Board announced that it did not
expect to recommend the payment of a final dividend for 2001. The Board reviewed
the dividend policy further in conjunction with the finalisation of the new
credit facility and, as a consequence, announced on 24 December 2001 that it had
been agreed that no cash dividend will be paid in 2002 or until certain
financial targets have been achieved. This policy will be kept under review.
REVIEW OF OPERATIONS
Group - Ongoing Operations*
2001 2000
Sales (£m) 2,012 2,412
Operating profit (£m) 56.5 240.3
*The financial information for ongoing operations is stated at reported exchange
rates and before exceptional items and goodwill amortisation and excludes the
results of businesses disposed in 2001 and 2000.
Sales for Cookson's ongoing operations in 2001 were 17% below last year and
operating profit was down by 76%. Whilst all three divisions recorded profit
declines, by far the most acute occurred in the Electronics division. The
financial results for 2001 are brought into particularly sharp focus when
compared with the results for 2000 when robust markets conditions were
experienced in the electronics industry and in most of the Group's other US
markets.
The Electronics division was significantly impacted by the industry downturn
that became evident in the USA in the first quarter and soon thereafter in
Europe and Asia-Pacific. The speed and severity with which the major electronics
markets deteriorated resulted in a significant turnaround in the division's
fortunes. Despite management taking prompt and decisive action to reduce costs
and headcount by 28%, the division recorded a loss of £14.3 million.
In the Ceramics division, operating profit was adversely affected by weakness in
the US and UK steel and foundry industries, both of which are major end-markets
for the division's products and services. Whilst results for the division's
steel and foundry businesses in the rest of the world held up reasonably well
and its glass activities improved, profits for the year were down 41% to £40.5
million.
The Precious Metals division recorded an 18% decrease in operating profit to
£30.3 million. After a good first half, deteriorating market conditions in the
US jewellery market and in the industries served by the Precision Products
sector saw profits decline in the second half.
The USA remains the major operating region for Cookson with sales accounting for
43% of the total for 2001. However, due to the severely depressed state of the
Group's major markets in the USA, sales fell by 28% and an operating loss was
recorded for Cookson's activities in the region; over the last decade the USA
has typically provided between 50-60% of the Group's profits. Results for the
Group's European operations were mixed, with the UK remaining most difficult.
Trading conditions in Asia-Pacific were more favourable and, although sales were
down on the prior year, the extent of the decrease was less than in other
regions.
During the year, actions were taken to ensure that the cost base of each of the
Group's businesses was aligned with the market conditions faced. These
Group-wide programmes to attack costs were instituted from early in 2001 and,
together with integration programmes already underway, resulted in a reduction
in the workforce of 3,400 people in the year, with a further 300 jobs to go in
2002, and the closure or mothballing of 13 plants. The reduction in the Group's
annual cost base arising from these initiatives is some £90 million, of which
some £40 million accrued in 2001. Shareholders were kept apprised throughout the
year of the trading conditions being experienced and the actions taken to
address these issues as part of the Group's communication programme.
Electronics
2001 2000
Sales (£m) 856 1,311
Operating (loss)/ profit (£m) (14.3) 134.6
The results in 2001 for Cookson Electronics were characterised by the sharp fall
in output and demand in the electronics industry, the extent of which was
unprecedented in the USA. This downturn first arose in the USA and thereafter
spread to other regions, including Europe and Asia-Pacific. In the USA - the
division's most important market - printed circuit board (PCB) bookings for the
industry as a whole fell by nearly 49% compared with 2000. This sharp fall in
PCB output was the product of two phenomena: firstly, over-stocking throughout
the electronics manufacturing industry from late 2000 onwards; and secondly,
weak end-market demand which persisted throughout 2001.
The scale of the downturn in the electronics industry has resulted in many of
Cookson's major customers and competitors reporting operating losses and
significantly lower sales. The impact on the Electronics division in 2001 was a
sales decrease of 35% on the prior year and a fall in operating profit of £148.9
million, resulting in a loss of £14.3 million for the year.
As market conditions began to deteriorate in the early part of the year, swift
action was taken to reduce the division's cost base. A programme of measures was
implemented, including the closure, mothballing and consolidation of 7
facilities and headcount was reduced by over 2,300 employees, 28% of the
division's total in the year.
The PWB and Chemistry Group (which incorporates both Polyclad Technologies and
Enthone) is one of the world's most comprehensive providers of PCB fabrication
materials. In the face of a severe drop in demand for Polyclad's laminates
products, particularly in the USA, sales for the sector as a whole were down 31%
as both inventory corrections by customers and price pressures took hold. In
response to this deterioration in demand, laminate capacity was decommissioned
temporarily in both the USA and Asia-Pacific and headcount was reduced by 28%.
Enthone, whose chemistry products complement Polyclad's laminates, was not as
heavily impacted and, under the circumstances, good profits for the year were
achieved. The full integration of Enthone is on course to be completed by the
second quarter of 2002.
The Assembly Materials Group (incorporating Alpha-Fry Technologies) is a leading
global supplier of solder, adhesives and related materials used in the assembly
of PCBs. Whilst the sector's results were impacted negatively by the general
downturn in the electronics industry, with reduced sales of solder paste and
spheres to the PCB assembly and semiconductor packaging markets, the effects
were not fully felt until later in the year and were not quite as severe. As a
result, sales fell by 21% compared with 2000, although the success achieved in
cost containment programmes served to mitigate the impact on profits.
The Equipment Group (which incorporates Speedline Technologies) manufactures a
range of equipment and systems used in the PCB assembly and semiconductor
packaging industries. As a supplier of capital goods, it has historically been
the most sensitive to market conditions. Speedline was therefore impacted early
in the electronics industry downturn; the rate of order intake first began to
slow in the fourth quarter of 2000 and thereafter slowed dramatically in the
first quarter of 2001, decelerating further as the year progressed. As a result,
sales were 58% down on last year and order book levels ended the year some 80%
lower than at the end of 2000. In response to the market deterioration, a number
of facilities were consolidated into one site in the USA and employee numbers
were reduced by 49%.
The division continued to leverage its total process solution concept which
combines its equipment and materials capabilities to offer customers the
broadest choice of products and services in the industry. This enables customers
to enhance their efficiencies and lower their overall cost of manufacture.
Notwithstanding the ongoing focus on costs and cash flow, the division continued
to develop and introduce new products and service offerings. These include the
world's fastest high volume printer, the MPM AP Excel; Polyclad's laserable
prepreg laminates for microvia circuit board production; Enthone's ViaForm
second generation copper interconnect for integrated circuit semiconductor
wafers; and the recently announced alliance between Speedline and Philip's
Assembleon division to provide fully integrated assembly lines. Innovations such
as these are the division's lifeblood and enable it to remain well positioned to
improve market share and to take full advantage of the upturn in demand.
Ceramics
2001 2000
Sales (£m) 731 738
Operating profit (£m) 40.5 68.6
Some two-thirds of the division's sales are closely linked to the level of steel
production in its major markets. The sharp decline during 2001 in steel
production and the foundry industry in the USA - the division's largest market -
together with continued difficult trading conditions experienced in the UK,
contributed to sales for the division being 1% lower than 2000, with operating
profit down 41% on the prior year.
With key markets deteriorating as the year progressed, decisive action was taken
to reduce the division's cost base. A number of initiatives were implemented,
including a reduction in headcount of some 750 employees, 8% of the total
workforce.
The programme to integrate the Premier Refractories business is now
substantially complete, the total costs being covered by the provisions
established in the prior year. The final stage of the programme has involved the
integration of manufacturing sites in the USA and UK. This programme will be
completed in the first half of 2002.
Sales for the Iron and Steel sector were down 6% versus 2000, having been
significantly impacted by the decline in US steel industry activity during the
year where steel production was down 11%. Outside the USA and the UK, however,
volumes held up comparatively well and output was up 1%. The growth in steel
production in emerging markets such as South America, Central Europe and Asia
remained sound and the division's meaningful presence in these regions provided
some cushion against the depressed volumes being generated by the USA and UK
operations.
Results for the Foundry and Industrial Products sector were mixed, with sales up
7% over last year. However, the impact of high energy prices and the generally
difficult trading conditions in the USA held back profit. The magnesia chemicals
business, a non-core part of the division, was sold early in the year.
Sales for the Glass sector grew by 18% and profits were up on last year. The
improvement in results was mainly due to a number of previously deferred
furnace-lining projects being undertaken and strong growth in the solar
crucibles business, an area in which the division has developed technological
leadership.
The division's commitment to technical excellence and innovation continued in
2001. Patent applications have been made for a number of important new
developments, including a new generation of ladle gates that have a unique
ability to change the ladle shroud automatically and significant improvements
have been made to the performance of our range of stopper rods. An exclusive
co-operation agreement has also been signed to develop and optimise refractories
for thin strip casting technology. This dedication to technical excellence
places the division at the forefront of the refractory industry worldwide.
Precious Metals
2001 2000
Sales (£m) 425 363
Operating profit (£m) 30.3 37.1
Sales for the division were up 17% and include the contribution of the E-CLAL
jewellery products business which was acquired in September 2000. Excluding this
acquisition, sales were down 13% compared with the prior year. The deterioration
in general economic conditions in the USA began to impact the division towards
the end of the first half and this was compounded by the erosion of consumer
confidence which resulted from the terrorist attacks in September.
The impact of deteriorating market conditions on operating profit was mitigated
in the first half of the year by the effects of both a favourable product mix
and the commencement of cost containment initiatives. However, as trading
conditions became more difficult in the second half, volume growth weakened and
full year operating profit was down 18% on the prior year.
In the Jewellery Products sector, activity levels experienced by the US and UK
mill businesses remained under pressure throughout the year, although new
product introductions provided a boost to output in the value-added findings and
semi-finished jewellery activities. Demand for the sector's products is closely
linked to consumer spending. Thus the weakening in consumer confidence,
particularly in the USA in the second half of the year, resulted in sales being
down 9% in organic terms and profits were below those achieved in 2000. The
integration of the European E-CLAL business is advancing well and management
remains confident that the level of savings anticipated at the time of the
acquisition will be delivered.
In the Precision Products sector, the reduction in demand from its USA-based
automotive, electronics and telecommunications customers that took effect in the
second quarter, continued through the second half. As a result, sales were down
18% and profits were below last year.
Management has responded to the decline in business levels with a focus on
implementing cost-cutting measures, including headcount reductions, throughout
the division. This focus was directed to ensure the business maintained its
strong reputation for customer service and new product development whilst
optimising the division's cost base.
GROUP FINANCIAL REVIEW
2001 2000
Profit before Tax (£m)* 6.7 197.7
Earnings per Share (pence)* 0.7 20.1
Dividend (pence) 4.5 10.0
Free Cash Flow before Dividends (£m) 73.3 106.3
*before goodwill amortisation and all exceptional items
Profit before Tax
Profit before tax, goodwill amortisation and exceptional items of £6.7 million
reflects a decrease of £191.0 million over 2000. This shortfall arose as
follows:
- £183.8 million lower operating profit from ongoing operations (which included
an £8.1 million
positive contribution from currency translation);
- £4.4 million reduction in the contribution from businesses disposed during
2001 and £5.5
million from those disposed in 2000;
which was, in turn, offset by:
- £2.7 million decrease in interest.
The deterioration in profit trend, both during 2001 and in comparison with last
year, is highlighted by the following half-yearly analysis of profit before tax,
goodwill amortisation and exceptional items:
£ million
2001 2000
First Half 30.9 92.0
Second Half (24.2) 105.7
________ _________
Year 6.7 197.7
________ _________
The net loss before tax but after goodwill amortisation (£38.6 million),
operating exceptionals (£31.2 million) and deficit on disposal of fixed assets
and businesses (£46.1 million) was £109.2 million (2000: profit £122.6 million).
Taxation
The net tax credit for 2001 is £3.1 million. After excluding a tax credit of
£3.4 million on net exceptional charges, the tax charge on profit before tax and
goodwill amortisation amounted to £0.3 million at an effective rate of 5% (2000:
26%).
Shareholder Returns
Earnings
Headline earnings per share, i.e. before goodwill amortisation and all
exceptional items, amounted to 0.7 pence per share compared with 20.1 pence
achieved in 2000. Basic earnings per share after goodwill amortisation and
exceptional items amounted to a loss of 14.9 pence (2000: profit of 10.5 pence).
The average number of shares in issue was 723 million (2000: 721 million).
Dividends
In July, the Board declared an interim dividend for 2001 of 4.5 pence per share
which was paid to shareholders in October. In the third quarter update to
shareholders on 5 October, the Board announced its intention not to recommend
the payment of a final dividend for 2001 given the deterioration in profits in
the third quarter and the uncertain short-term outlook. Accordingly, total
dividends per share for 2001 were 4.5 pence compared with the 10.0 pence for the
previous year.
The Board reviewed the Group's near-term dividend policy further in conjunction
with the finalisation of the new credit facility and, as a consequence,
announced on 24 December 2001 that it had been agreed that no cash dividend will
be paid in 2002 or until certain financial targets have been achieved. This
policy will be kept under review.
Exceptional Items
Operating Exceptionals
Operating exceptional items totalling £31.2 million have been charged in 2001
(2000: £38.4 million) relating to the implementation of the wide-ranging
programme of cost savings initiatives outlined in this review. Of the 2001
charge, £11.0 million represents asset write-downs. The remaining costs to
complete this programme are currently estimated to be £15 million which will be
charged and outlaid in 2002.
Total cash spend in 2001 in respect of operating exceptional items was £32.2
million. This includes the above cost saving programmes and £15.9 million
provided for in previous years relating to the programmes to integrate the
Premier Refractories and Enthone businesses into the Ceramics and Electronics
division respectively. Total amounts provided for but unspent at the end of 2001
for the aforementioned programmes is £19.6 million.
Non-Operating Exceptionals
Non-operating exceptional items of £46.1 million arose in 2001 (2000: £0.8
million). This comprised a net loss of £59.4 million on the disposal of non-core
businesses, primarily the plastic mouldings and magnesia chemicals businesses.
This was offset by a net profit of £13.3 million, primarily on the disposal and
sale and leaseback of certain of the Group's UK properties.
Cash Flow
Considerable effort was sustained throughout the year both to conserve cash and
to maximise cash generation given the considerable fall in the Group's operating
profit.
Cash inflow from operating activities for 2001 amounted to £154.4 million, which
was £122.2 million lower than 2000. In summary, this decrease arose as follows:
- £188.9 million decrease in profit before interest, tax, depreciation and
amortisation of
goodwill ('EBITDA') to £118.4 million;
- £4.5 million additional outlay in respect of exceptional rationalisation
costs;
offset by:
- £71.2 million incremental cash inflow from a reduction in net working capital
requirements.
The success in significantly reducing working capital is the result of a series
of initiatives implemented within each division from early in the year and from
a determined effort to maximise cash flow. Although a large measure of the cash
flow from working capital arose as a consequence of significantly lower trading
levels and the resulting reduction in both accounts receivable and trade
creditors, cash inflow of £94.9 million from a reduction in inventory was
particularly notable.
Capital expenditure in 2001 was also kept under tight control and was £23.4
million lower than last year at £68.4 million. The ratio of capital expenditure
to depreciation was 1.1 times (2000: 1.5 times). Disposal and sale and leaseback
of properties generated £34.0 million (2000: £3.4 million).
A £12.1 million decrease in tax payments in 2001 to £21.6m arose primarily due
to the availability of tax losses in the UK and USA and the receipt of tax
repayments in respect of prior years. This was partly offset by the payment of
taxes in the Group's other regions.
Net interest payments decreased by £19.3 million to £31.3 million primarily as a
result of £28.2 million of cash proceeds generated from the close-out of
interest rate swaps as part of an ongoing hedging programme to optimise the mix
of fixed and floating rate debt.
Before dividend payments, the Group's free cash flow for 2001 amounted to £73.3
million, only £33.0 million lower than 2000, a considerable achievement
considering the £191 million fall in pre-tax profit. After payment of £72.3
million of dividends the Group generated positive free cash flow of £1.0 million
- this is the seventh successive year in which positive net free cash flow has
been achieved. Over the same seven year period, the Group has consistently
generated strong free cash flow, averaging £83 million per annum. This further
demonstrates the resilience of this year's cash performance in the face of a
particularly difficult trading environment.
Acquisitions and Disposals
The disposal of non-core businesses, including the Group's plastic mouldings and
magnesia chemicals businesses, was completed during the year for a total
consideration of £62.1 million, including £2.0 million of loan notes.
Net cash consideration in respect of acquisitions amounted to £19.5 million in
2001, mainly in respect of the finalisation of prior years' acquisitions. In
addition, £5.4 million was spent in 2001 (2000: £7.4 million) in the fulfilment
of obligations for prior year business disposals.
Borrowings
At the end of 2001, the Company arranged a new £450 million multi-currency
revolving credit facility. This new syndicated facility, in which all of the
Group's current relationship banks have participated, has a final maturity date
of September 2004 and replaces existing facilities of some £500 million, of
which £265 million was due for repayment in 2002. The new facility is partially
secured on certain assets of some of the Group's subsidiaries and reduces by £50
million in April 2003 and by a further £100 million in September 2003.
At 31 December 2001, the Group had total committed borrowing facilities of £920
million, with maturities ranging from 2003 to 2012. Facilities primarily consist
of the new banking facility, £390 million of US private placement notes ($570
million) and £80 million of convertible bonds. The Group's gross borrowings
amounted to £773.2 million at the end of 2001, £61 million lower than at the end
of the previous year. Net debt, including cash balances, was £749.6 million. As
at 31 December 2001, the Group was in compliance with all covenants in all of
its borrowings arrangements.
During the fourth quarter of 2001, it was decided to fix the interest rates of
the majority of the Group's borrowings. The current average interest rate
payable on the Group's borrowings - excluding the amortisation of fees - is
approximately 6%.
NEW ACCOUNTING STANDARDS
FRS 17: Pensions
The Group will be adopting FRS 17 for the year ending 31 December 2003. Had FRS
17 been adopted at 31 December 2001, the Group balance sheet would have recorded
a net amount representing a valuation of the assets and obligations of the
Group's defined benefit pension schemes using prescribed methodologies. This
includes valuing assets at the market values ruling as at 31 December 2001. The
assets of these schemes are held in trustee administered funds which are not
Group companies and, therefore, are not consolidated into the Group accounts. As
a result, there is no direct cash flow impact on the Group. Under FRS 17, a
deficit estimated at £21 million, net of deferred tax, would have been reflected
in the Group balance sheet as at 31 December 2001 in respect of the Group's
principal defined benefit pension schemes.
FRS 19: Deferred Tax
The Group will be adopting FRS 19 for the year ending 31 December 2002. Had FRS
19 been adopted at 31 December 2001 it is estimated that an additional deferred
tax asset in respect of trading losses and other short-term timing differences
of some £50 million would have been recognised. As a consequence, the Group's
shareholders funds would have been increased by the same amount.
Had both of these new accounting standards been adopted at 31 December 2001, the
net effect would have been to increase shareholders' funds by £29 million.
BOARD OF DIRECTORS
Following the retirement of Greg Parkos on 31 December 2001, Barry W. Perry
joined the Board as a non-executive Director on 1 January 2002. Mr. Perry is
Chairman and Chief Executive Officer of Engelhard Corporation and is also a
non-executive director of Arrow Electronics, Inc.
CURRENT TRADING AND OUTLOOK
In the fourth quarter trading update that was issued on 15 January, it was
stated that there were some signs that the downturn in the electronics industry
may have begun to bottom out. External indicators - such as increased December
shipments by US computer and electronics manufacturing plants and sequential
month-on-month increases in North American PCB orders and shipments throughout
the fourth quarter - and comments from a number of influential players within
the industry since then suggest that this is the case. This is consistent with
the experience of Cookson's Electronics division which, following a slow start
to January due to extended holiday season close-downs at both its own and its
customers' facilities, has recently seen weekly sales levels return in line with
those in the fourth quarter of 2001.
Prolonged holiday breaks also occurred in the US steel industry but, once these
were completed, US steel production levels began to gather momentum and
production in January and early February exceeded that seen throughout the
fourth quarter of last year. There have, however, been signs of softening in
some Northern European steel markets.
In the Precious Metals division, activity levels in the Jewellery Products
sector are consistent with the seasonal trends normally experienced at this time
of year. The Precision Products sector order intake has shown some signs of
bottoming out, consistent with the trends experienced by the US electronics
industry.
Throughout the process of implementing cost-saving initiatives, management has
been mindful not to take action which could inhibit Cookson's ability to
continue to deliver productivity-driven process solutions to its customers. We
remain determined to protect and enhance the Group's strong, global market
positions and to increase its competitiveness. By doing so, Cookson will be in
the best possible position to deliver sustainable growth and quality of earnings
as market conditions improve.
For further information please contact:
Stephen Howard, Group Chief Executive
Tel: 020 7766 4500
Fax: 020 7747 6603
E-mail: SLH@cookson.co.uk
Dennis Millard, Group Finance Director
Tel: 020 7766 4500
Fax: 020 7747 6603
E-mail: DHM@cookson.co.uk
Copies of Cookson's 2001 Annual Report are being posted to the shareholders of
the Company on 25 March 2002 and will be available on the Company's website and
at the Registered Office of the Company from that date.
Cookson management will make a presentation to analysts on 26 February 2002 at
9:00am (UK time). This will be broadcast live on Cookson's website. An archive
version will be available on the website from 27 February.
Cookson Group plc, The Adelphi, 1-11 John Adam Street, London WC2N 6HJ
Corporate website: www.cooksongroup.co.uk
Note: This announcement contains forward-looking statements about Cookson.
Although the Company believes its expectations are based on reasonable
assumptions, any such statements may be influenced by factors that could cause
actual outcomes and results to be materially different from those predicted.
These forward looking statements are subject to numerous risks and uncertainties
that could cause actual results to differ materially from those in such
statements, certain of which are beyond the control of Cookson.
Group Profit and Loss Account
for the year ended 31 December 2001
2001 2000
Before
exceptional
items and Before exceptional items
goodwill and goodwill amortisation
amortisation Total Total
note £m £m £m £m
Turnover
Continuing operations, including joint 2,012.3 2,012.3 2,412.4 2,412.4
ventures
Discontinued operations 87.1 87.1 169.2 169.2
Total turnover, including joint ventures 1 2,099.4 2,099.4 2,581.6 2,581.6
Operating profit
Continuing operations, including joint 1 56.5 56.5 240.3 240.3
ventures
Exceptional items - continuing 2 - (31.2) - (38.4)
Goodwill amortisation - continuing 6 - (38.6) - (35.9)
Discontinued operations 1 2.6 2.6 12.5 12.5
Total operating profit / (loss) 59.1 (10.7) 252.8 178.5
Net loss on sale of operations 3 - (59.4) - (0.8)
Net profit on sale of fixed assets 3 - 13.3 - -
Profit /(loss) before interest and taxation 59.1 (56.8) 252.8 177.7
Interest (52.4) (52.4) (55.1) (55.1)
Profit / (loss) before taxation 6.7 (109.2) 197.7 122.6
Taxation (0.3) 3.1 (51.0) (45.1)
Profit / (loss) after taxation 6.4 (106.1) 146.7 77.5
Minority interests (1.5) (1.5) (2.0) (2.0)
Profit / (loss) for the year 5 4.9 (107.6) 144.7 75.5
Dividends (32.3) (72.2)
Net (loss) / profit transferred to reserves (139.9) 3.3
Earnings per share: 5
- Basic 0.7p (14.9p) 20.1p 10.5p
- Diluted 0.7p (14.9p) 20.0p 10.4p
Statement of Group Cash Flows
For the year ended 31 December 2001
2001 2000
note £m £m
Operating profit of Group subsidiaries before exceptional items 17.1 209.0
but after goodwill amortisation
Depreciation 62.7 62.4
Goodwill amortisation 38.6 35.9
Decrease / (increase) in stocks 94.9 (37.6)
Decrease in debtors 124.7 1.0
(Decrease) / increase in creditors (150.1) 34.9
Decrease/(increase) in working capital 69.5 (1.7)
Decrease in provisions (1.3) (2.3)
Cash payments in respect of operating exceptional items (32.2) (26.7)
Net cash inflow from operating activities 154.4 276.6
Dividends from joint ventures 6.2 2.4
Returns on investment and servicing of finance
Interest paid, net (59.5) (50.6)
Proceeds from close-out of interest rate swaps 4 28.2 -
(31.3) (50.6)
Taxation (21.6) (33.7)
Capital expenditure and financial investment
Payments to acquire fixed assets (68.4) (91.8)
Receipts from disposal of fixed assets 34.0 3.4
(34.4) (88.4)
Free cash flow before dividends 73.3 106.3
Dividends paid (72.3) (70.0)
Net free cash flow 1.0 36.3
Acquisitions and disposals
Net proceeds from disposal of subsidiaries and joint ventures 60.1 99.0
Consideration for acquisition of subsidiaries and joint ventures (19.5) (426.9)
Additional costs relating to prior years' disposals (5.4) (7.4)
35.2 (335.3)
Net cash inflow / (outflow) before financing 36.2 (299.0)
Financing
Issue of shares 1.7 1.7
(Decrease)/increase in debt (27.7) 266.0
Increase/(decrease) in cash during the period 10.2 (31.3)
Group Balance Sheet
as at 31 December 2001
Note 2001 2000
£m £m
Fixed assets
Goodwill 6 664.9 708.0
Tangible assets 487.2 526.0
Investments 7 79.8 93.0
Total fixed assets 1,231.9 1,327.0
Current assets
Stocks 230.7 335.1
Debtors 433.2 553.9
Cash at bank 23.6 40.1
Total current assets 687.5 929.1
Creditors: amounts falling due within one year
Borrowings (17.0) (51.2)
Other creditors (416.6) (590.4)
Total current liabilities (433.6) (641.6)
Net current assets 253.9 287.5
Total assets less current liabilities 1,485.8 1,614.5
Creditors: amounts falling due after more than one year
Convertible bond (80.0) (80.0)
Other borrowings (676.2) (702.9)
Other creditors (91.6) (91.3)
Provisions for liabilities and charges (77.4) (94.5)
560.6 645.8
Equity capital and reserves
Called up share capital 363.8 363.0
Share premium account 377.0 376.1
Goodwill written-off (433.6) (481.4)
Other 37.5 175.5
Profit and loss account (396.1) (305.9)
Other reserves 205.9 205.9
Total shareholders' funds 550.6 639.1
Minority interests 10.0 6.7
560.6 645.8
Statement of Total Group Recognised Gains and Losses
For the year ended 31 December 2001 2001 2000
£m £m
(Loss)/profit for the year (107.6) 75.5
Exchange adjustments 1.9 25.5
Total net recognised (losses)/gains for the year (105.7) 101.0
Analysis of Movements in Group Shareholders' Funds
For the year ended 31 December 2001 2001 2000
£m £m
Shareholders' funds at 1 January 639.1 577.5
Total net recognised (losses)/gains for the year (see above) (105.7) 101.0
Dividends (32.3) (72.2)
New share capital subscribed 1.7 1.2
Goodwill in respect of the sale of operations 47.8 31.6
Net movement on shareholders' funds (88.5) 61.6
Shareholders' funds at 31 December 550.6 639.1
Reconciliation of net cash flow to movement in net debt
For the year ended 31 December 2001 2001 2000
£m £m
Increase/(decrease) in cash during the period 10.2 (31.3)
Cash flow from movement in debt 27.7 (266.0)
Change in net debt resulting from cash flows 37.9 (297.3)
Issue costs amortised and accrued refinancing costs 7.2 (1.2)
Exchange adjustments (0.7) (34.1)
Movement in net debt during the period 44.4 (332.6)
Net debt at 1 January (794.0) (461.4)
Net debt at 31 December (749.6) (794.0)
Notes to the accounts
1 Segmental analyses
The results of discontinued operations comprise mainly those of the Group's
Plastic Mouldings and Magnesia Chemicals businesses. In addition to these
businesses, the 2000 results of discontinued operations primarily included the
Group's Telecommunication Products businesses.
2001 2000
Operating Group Operating Group
Turnover profit/ employees Turnover profit/ (loss) employees
(loss)
By Business £m £m No £m £m No
Electronics 855.6 (14.3) 6,213 1,311.4 134.6 8,458
Printed Wiring Board and Chemistry 456.2 663.5
Assembly Materials 272.6 347.2
Equipment 126.8 300.7
Ceramics 731.1 40.5 7,967 738.4 68.6 8,903
Iron and Steel 478.2 508.6
Foundry and Industrial Products 171.8 161.0
Glass 81.1 68.8
Precious Metals 425.6 30.3 3,052 362.6 37.1 3,481
Jewellery Products 346.5 266.4
Precision Products 79.1 96.2
Ongoing operations 2,012.3 56.5 17,232 2,412.4 240.3 20,842
Goodwill amortisation (note 6) (38.6) (35.9)
Exceptional items (31.2) (38.4)
Continuing operations 2,012.3 (13.3) 17,232 2,412.4 166.0 20,842
Discontinued operations 87.1 2.6 169.2 12.5 1,230
Total Group 2,099.4 (10.7) 17,232 2,581.6 178.5 22,072
The Group's share of turnover and operating profit of joint ventures included in
ongoing operations amounted to £83.0m (2000: £99.7m) and £3.4m (2000: £7.9m)
respectively. The majority of these relate to the Electronics division in
Asia-Pacific. Of the exceptional charge of £31.2m in 2001 (2000: £38.4m), £25.1m
related to Electronics (2000: 14.9m) and £6.1m to Ceramics (2000: £23.5m). Of
the goodwill amortisation charge of £38.6m in 2001 (2000: £35.9m), £20.3m
related to Electronics (2000: £18.6m), £15.4m to Ceramics (2000: £15.0m), and
£2.9m to Precious Metals (2000: £2.3m).
2001 2000
By location By By location By
of Group customer of Group customer
operations location operations location
Operating Operating
Turnover Profit/ Turnover Turnover profit/ Turnover
(loss) (loss)
Geographical £m £m £m £m £m £m
United Kingdom 214.0 (3.9) 163.0 281.8 4.2 183.0
Continental Europe 533.1 21.5 552.0 494.4 45.9 543.5
USA 865.3 (9.0) 767.5 1,200.5 116.1 1,047.1
Asia-Pacific 276.6 36.8 338.4 318.8 58.9 423.8
Rest of the World 123.3 11.1 191.4 116.9 15.2 215.0
Ongoing Operations 2,012.3 56.5 2,012.3 2,412.4 240.3 2,412.4
Goodwill amortisation - (38.6) - - (35.9) -
Exceptional items - (31.2) - - (38.4) -
Continuing operations 2,012.3 (13.3) 2,012.3 2,412.4 166.0 2,412.4
Discontinued operations 87.1 2.6 87.1 169.2 12.5 169.2
Total Group 2,099.4 (10.7) 2,099.4 2,581.6 178.5 2,581.6
Of the exceptional charge of £31.2m in 2001 (2000: £38.4m), £5.7m was in the
United Kingdom (2000: £19.9m), £1.3m was in Continental Europe (2000: £4.2m),
£22.8m was in the USA (2000: £13.1m) and £1.4m in the Rest of the World (2000:
£1.2m).
Of the goodwill amortisation charge of £38.6m in 2001 (2000: £35.9m), £3.6m was
in the United Kingdom (2000: £3.0m), £4.3m was in Continental Europe (2000:
£6.6m), £23.2m was in the USA (2000: £18.0m), £6.3m was in Asia-Pacific (2000:
£7.3m) and £1.2m was in the Rest of the World (2000: £1.0m).
2 Operating exceptional Items
2001 2000
£m £m
2001 rationalisation programme 31.2 -
Premier integration - 23.5
Enthone integration - 14.9
Total pre-tax operating exceptional items 31.2 38.4
Taxation attributable (3.4) (3.1)
Total after-tax operating exceptional items 27.8 35.3
Of the 2001 charge, £11.0m represents asset write-downs. In accordance with
FRS12, any remaining costs of this programme, currently estimated at £15m, will
be charged in 2002.
The respective charges in 2000 relating to the integration programmes of Premier
Refractories International, Inc. ('Premier') and of Enthone-OMI ('Enthone'),
both of which were acquired in 1999, represented the final provision for the
costs which had been committed in order to finalise these programmes. The
Premier integration programme is now substantially complete and the Enthone
programme is expected to be substantially completed by June 2002.
Total amounts provided but unspent at 31 December 2001 in respect of all
operating exceptional items was £19.6 million.
3 Net (loss)/profit on sale of operations and fixed assets
The sale of non-core businesses in 2001, including primarily the Group's Plastic
Mouldings and Magnesia Chemicals businesses, produced a net loss of £59.4m,
after goodwill written-off of £63.2m. This includes the release of £15.6m of
provisions, established in previous years relating to business disposals, no
longer required. The net profit on sale of fixed assets of £13.3m in 2001
includes the sale and leaseback of certain of the Group's UK properties, which
generated a profit of £13.5m, for £34.0 million cash proceeds.
The sale of non-core businesses in 2000, including the Group's Telecommunication
Products and the Polyflex businesses, produced a net loss of £0.8m, after
goodwill written-off of £31.6m.
4 Interest
As part of an ongoing hedging programme to optimise the mix of fixed and
floating rate debt and to maintain stable and predictable effective interest
rates, a number of interest rate swaps were closed out during the period. This
generated £28.2m in cash proceeds and accordingly, net interest payments were
only £31.3m in 2001 (2000: £50.6m).
5 Earnings per share (EPS)
Basic EPS are calculated using a weighted average of 723m (2000: 721m) ordinary
shares in issue during the period. Diluted EPS are calculated assuming
conversion of outstanding dilutive share options. These adjustments give rise to
an increase in average ordinary shares of 1m (2000: 4m). On the face of the
Group profit and loss account, EPS are shown both before and after goodwill
amortisation and all exceptional items. The number of shares in issue as at 31
December 2001 was 728m (2000: 726m).
The Directors believe that the calculation of EPS excluding goodwill
amortisation and all exceptional items, together with the associated tax charge
or credit, gives the most appropriate measure of the underlying earning capacity
of the Group. This calculation is based on a loss of £107.6m (2000: £75.5m
earnings), to which goodwill amortisation and exceptional items totalling
£120.9m (2000: £75.1m) are added back and from which the associated tax credit
of £3.4m (2000: £5.9m) is deducted.
6 Goodwill
Goodwill arising in 2001 amounted to £1.8m (2000: £114.3m) and is being
amortised over its estimated life of 20 years. Accumulated goodwill arising
prior to 1998, which remains written-off directly against Group reserves,
amounts to £433.6m (2000: £481.4m).
7 Investments
Investments include £33.5m (2000: £42.0m) in respect of joint ventures and
£46.3m (2000: £51.0m) in respect of other investments, £29.7m of which comprise
the Group's investment in a revenue-sharing arrangement with Electric Lightwave,
Inc.
Investments in joint ventures consist of the Group's share of gross assets of
£49.9m (2000: £62.5m) less the Group's share of gross liabilities of £16.4m
(2000: £20.5m).
8 Financial information
For the purpose of this preliminary announcement, 'Group' results represent the
results of the Company and its subsidiary companies, whereas 'Total' results
represent Group results together with the Group's share of the results of its
joint ventures.
The financial statements have been prepared on the basis of accounting policies
set out in the Group's audited statutory accounts for 2001 and were approved by
the Board of Directors on 26 February 2002.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2001 or 2000 but is derived
from those accounts. Statutory accounts for 2000 have been delivered to the
Registrar of Companies, and those for 2001 will be delivered following the
Company's Annual General Meeting. The auditor has reported on those accounts;
its reports were unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985. These sections address whether proper
accounting records have been kept, whether the Company's accounts are in
agreement with these records and whether the auditor has obtained all the
information and explanations necessary for the purposes of its audit.
This information is provided by RNS
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Friday, 31st May 2024
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