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Croda International (CRDA)

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Tuesday 19 February, 2008

Croda International

Final Results

Croda International PLC
19 February 2008



Tuesday, 19 February 2008
Unaudited




                            Croda International Plc

              Preliminary Results for the year to 31 December 2007

                     ANOTHER RECORD YEAR AND ROBUST OUTLOOK



Highlights                                                              2007          2006          change

Sales - continuing operations                                        £886.1m       £480.1m

Profit before tax - before exceptional items


- Continuing                                                          £66.5m        £52.5m          +26.7%
- Total including discontinued activities                             £74.7m        £54.5m          +37.1%


Profit before tax                                                     £60.9m        £17.2m

Earnings per share - before exceptional items                          37.1p         28.9p          +28.4%

Earnings per share - basic                                             64.8p          6.3p

Dividend per share                                                    15.75p        14.30p          +10.1%


•    Uniqema acquisition a tremendous success:
     -    Synergies achieved 12 months ahead of schedule
     -    Synergies contributed £17m to the full year result
     -    Total synergies now forecast to exceed £30m

•    Strong profit and margin performance in both Consumer Care and
     Industrial Specialities

•    Cost inflation fully recovered with average price increases of 12.3%

•    Record number of new product launches

•    £41m profit after tax on disposal of non core businesses


Commenting on the results, Chairman, Martin Flower said:

'This has been another exceptional year for Croda. Our ability to produce
consistent earnings and margin growth underlines the strength of our core
business and confirms our leadership position in our markets. Record results
have been achieved despite a strong currency headwind and a further rise in raw
material costs.

The integration of Uniqema is well ahead of schedule. The ongoing benefits of
this acquisition, combined with our strong underlying business and robust demand
for Croda products across the globe, mean that we are confident of delivering
further progress, in line with our expectations for 2008.'


For further information, please contact:

Mike Humphrey, Group Chief Executive                       Tel:    01405 860551
Sean Christie, Group Finance Director

Charlie Armitstead, Financial Dynamics                     Tel:   020 7269 7275


The company will broadcast the meeting with analysts in a live webcast
commencing at 09.30 AM on the company's website at www.croda.com.



Chairman's Statement

Introduction

This has been another exceptional year for Croda. Our ability to produce
consistent earnings and margin growth underlines the strength of our core
business and confirms our leadership position in the market. Record results have
been achieved despite a strong currency headwind and a further rise in raw
material costs.


Results

Underlying turnover*2 increased 3.0% on a constant currency basis with
significant average price increases outweighing volume reductions as we shed low
margin Uniqema business. Currency translation losses were lower in the second
half at 1.7% of turnover. As a result, underlying turnover for the year after
currency translation*2 was only 0.6% down on 2006 at £886.1m.

Continuing pre-tax profit*1 (after charging the full year's interest on last
year's acquisition of Uniqema) increased by 26.7% to £66.5m (2006: £52.5m).
Total pre-tax profit*1 including £8.2m contribution from disposed businesses
increased 37.1% to £74.7m (2006: £54.5m).

Earnings per share*1 increased by 28.4% to 37.1p (2006: 28.9p).

We sold a number of non core businesses during the year for £76.8m in total
which resulted in a £41.0m profit after tax on disposal.


Uniqema

The integration of Uniqema is well ahead of schedule. The benefits of this
acquisition have exceeded our expectations and we have increased our synergy
forecast to at least £30m per annum from the end of 2008 onwards. This, allied
to strong underlying trading across the enlarged group, has resulted in the
significant uplift in pre tax profit and earnings per share.


Dividend

The Board is recommending a final dividend of 10.8p per ordinary share, making a
total for the year of 15.75p up 10.1% on 2006. This gives a dividend cover of
2.4x. In the past we have sought to increase dividend cover. In the future
dividend growth will be more closely aligned to the underlying growth in
earnings per share.


Pricing

We increased prices by 12.3% in the year, fully recovering input cost inflation.
We will continue to pass on cost increases to our customers when necessary and
have already raised our selling prices in 2008.


Outlook

We have made a strong start to the year with good internal momentum driven by a
sound business model and increasing synergies from the Uniqema acquisition.
Whilst we expect consumer markets in the US and UK to be unexciting,  the
ongoing benefits of this acquisition, combined with our strong underlying
business and robust demand for Croda products across the globe, mean that we are
confident of delivering further progress in line with our expectations for 2008.


*1 Before exceptional items

*2 Continuing operations adjusted for the acquisition of Uniqema



Chief Executive's Review

2007 has been another year of extraordinary achievement for Croda. The business
has produced record sales and profits despite one of the most challenging
trading environments. The integration of Uniqema is ahead of target and
delivering better than expected synergies and we introduced the highest number
of product innovations in our history.

Croda's ability to deliver year-on-year growth is a testament to the leadership
position we have established in the global speciality chemicals market place.
The business benefits from a robust model that is not dependent upon a single
market or one major customer. Our diversity, in terms of geography, product
innovation, people and customers, means we can be confident in Croda's future
prospects and capacity to deliver superior returns.

One of the fundamental ingredients of Croda's success is our people and the team
has never been stronger or more committed.  Throughout 2007, external pressures
were intense, and the tenacity and resolve of our staff has enabled Croda to
overcome increased raw material prices, increased energy costs and a strong
currency headwind to post an outstanding set of figures.

The acquisition of Uniqema has surpassed our expectations. From the outset our
principal objective was to combine the best elements of both companies and
create one team united under the Croda umbrella. This has now been done, and the
success of our integration and restructuring programme has enabled us to achieve
our original £20m synergy target twelve months ahead of schedule.  Furthermore,
we have now identified additional synergies and expect to deliver more than £30m
by the end of 2008. We were especially delighted that many of the newly acquired
sites have great capital projects with quick and secure returns. These
initiatives also reduce our energy usage and our environmental impact and, even
more importantly, make Croda a safer and better place to work all over the
world.

A good part of the resilience of the Croda business model is due to having
thousands of customers in hundreds of territories buying thousands of different
products.  Our biggest global customer represents just over 4% of turnover and
our top ten customers represent less than 15%.  In addition, many customers buy
as many as a hundred different products from Croda, which can be used in even
more formulations.  They are all designed to add value and performance to our
customers' products.  As a result of the acquisition of Uniqema, we now have
many more growing markets and many more potentially interesting technologies.

We made good progress in every area of the business as we continued our
relentless focus on our customers and on getting fair value for our investments
in quality and innovation. This ethos was spread across the whole business in
2007 enabling us to achieve average price increases of 12.3% across all market
sectors.  We continue to refine our product portfolio and reduce the proportion
of low value, commodity business, in favour of adding value to our in-house
feedstocks.

In areas where we can no longer add value we have made disposals.  We sold the
soap and fatty acid business at Klang, Malaysia, the bakery ingredients business
at Oldham, UK and also the packaged refrigeration lubricant business for a total
of £76.8m. We will continue to focus our business on market sectors and products
where we can add the most value for our customers and our shareholders.

For the first time we are including a comprehensive review with our annual
report on how we care for all our stakeholders and the environment.  In future
years we expect to include increasing amounts of data to more accurately measure
our progress.  As more than 70% of Croda's raw materials are from renewable
sources, we start from a strong position of sustainability.  Each year we must
do more to reduce our impact on the ecosystem.  There are some excellent
examples of recent initiatives in the report, including the forest of 25,000
native trees planted at our headquarters and the new wind turbine being
installed at our Hull site this year.

2007 was also a year in which we introduced our new structure of two divisions -
Consumer Care and Industrial Specialities.  They have different markets but one
unified focus - to grow profits through constant innovation.  We have
consolidated the global marketing network which was enlarged by the acquisition
of Uniqema and closed 6 offices leaving us with a dynamic global technical sales
force operating from 43 Croda offices in 36 countries.  This is a truly powerful
network and a key reason for our continuing success.


Consumer Care

Following the full integration programme this sector now consists of our global
businesses in the following markets: Personal Care, Health Care, Home Care and
Crop Care.

These are growth markets with an increasing need for innovation and sustainable
ingredients.  We have fully combined the various businesses with a great deal of
success.  Underlying growth was excellent in 2007 with sales reaching a new high
of £351.1m.  Operating profit was a record £71.7m, reflecting a margin of 20.4%.
This is especially pleasing as it means we have significantly improved the
margins of the acquired business.  This was achieved by a combination of focus
on value and moving away from the flawed Uniqema distribution model which gave
more margin to the intermediary than to the producer.  There is more margin to
be gained in 2008, as we continue the return to direct selling and direct
customer relationships.

The global market for Personal Care continues to grow at above 1.5 times global
GDP, with emerging countries more than compensating for flatter markets in more
established zones like the USA.  New active ingredients from Sederma once again
led the way, but our innovation pipeline is very healthy in all other areas of
Personal Care, with many new product opportunities.

Health Care made good progress in the area of high purity lipids with our
Puremax seal of approval now being used globally on more than 14 branded lines.
We also gained new business for high quality excipients.  The focus on Lanolin
and derivatives for wound care and medical skin care resulted in a number of
successful new product introductions by our customers.  The drive for ever
higher standards of purity and efficacy in our Health Care products exactly
mirrors the aspirations of our customers - and, more importantly, the end
consumer.

In Home Care, we focused heavily on demarketing unprofitable business whilst
introducing new products which will offer performance and value to our
customers' brands.  The consumer-led drive for sustainability and
biodegradability, coupled with a desire for more 'natural' raw materials
parallels Croda's innate strengths.

We are delighted to have a vibrant Crop Care business.  The agricultural
industry's need for biodegradable adjuvants, which give enhanced active delivery
and performance, fits exactly with our re-energised strategy in this fast
changing market.  The gestation time for business can be up to three years, due
to demanding test criteria, but it does lead to long term valuable business.  We
have a world class team in this area and have high hopes for the future, after
an excellent year in 2007.


Industrial Specialities

With our reorganisation now complete, the Industrial Specialities sector
consists of: Base Oleochemicals, Lubricant Additives, Coatings Additives and
Polymer Additives.

With sales at £535.0m and operating profit of £17.0m, this division's progress
benefitted from our strong pricing policy and willingness to walk away from
unprofitable business.  Profits increased substantially over the course of the
year and we expect real progress towards our long term margin target of 10% in
2008 and beyond.  The large base oleochemicals business became profitable in
spite of suffering the brunt of a storm of natural oil cost increases.  There
was a small amount of extra profit from revitalised glycerine prices towards the
end of the year, which should continue into at least the first half of 2008.
Our plans to reduce our base oleochemical footprint and add value to the
building blocks have started to bear fruit.  By walking away from loss making '
plant fillers', our factories are now producing better quality products and
better customer service.  Relatively simple investments due on stream over the
next two years will reduce our costs of production and energy considerably.

We sold a large part of the Lubricant product portfolio during 2007.  Finished
lubricants for refrigeration did not fit our future focus on additives and
distracted the team from concentrating on the core business.  Good progress was
made with new additives in automotive, industrial, marine and agricultural
lubricants.  A number of our patented technologies are now finding favour as
greener solutions to improve lubrication and reduce energy usage.  Our in-house
special fatty acid and dimer building blocks give us a solid platform for future
progress.

We have a strong and dynamic Coatings Additives business, which was refocused in
2007.  New and patented technologies based on our expertise in dimers, esters
and associated chemistries were well received in many application areas.  We
helped major automotive manufacturers reduce their VOC emissions and we also
helped to put a spring in the step of a major leisure footwear manufacturer.  A
strong research and development team and a new emphasis on customer needs will
support profitable growth in this growing global business.

The Polymer Additives business had another good year, especially in additives
for polyolefins, where Croda is the world leader.  New markets are being created
and new types of plastic require new types of lubricants and other additives.
Croda products are overwhelmingly based on natural feedstocks, utilising and
adding value to the base oleochemical building blocks.


Summary

Croda set itself tough objectives in 2007 and the fact that they have been
achieved is a credit to the entire team. With Uniqema now fully integrated into
our business, Croda's prospects are even brighter for the future. We will
continue to challenge our own orthodoxies, and relentlessly innovate to achieve
further growth in our chosen markets.  The Croda story is about profitable
sustainability.  We are proud of our recent achievements, but there is much more
to do in 2008 and beyond.



Financial review

Turnover

Underlying turnover*2 increased 3.0% on a constant currency basis with
significant average price increases outweighing volume reductions as we shed low
margin business. We saw particularly strong turnover growth in November and
December. Currency translation losses were lower in the second half at 1.7% of
turnover. As a result underlying turnover for the year after currency
translation*2 was only 0.6% down on 2006 at £886.1m.

Selling prices increased by 9.9% in the first half for the continuing
businesses. This increased to 14.8% in the second period, making the average for
the year 12.3%. These increases fully recovered the inflationary costs the
Company bore in the year and increased margins on products at the bottom end of
the portfolio.

Underlying volumes declined 9.2% over the year as we improved the quality of the
acquired business and shed unprofitable lines.

We see no change in our long term underlying revenue growth targets of 2 times
global GDP for our Consumer Care business and 1.5 times global GDP for
Industrial Specialities.


Operating profit

Continuing operating profit*1 increased 32.0% to £88.7m from the £67.2 pro-forma
profit achieved in 2006. (£7.5m continuing pre acquisition Uniqema profit added
to last year's reported operating profit of £59.7m). This increase was achieved
despite adverse currency translation of £3.0m. Like sales, profit showed an
improving trend throughout the year with increasing revenues boosted by mounting
levels of synergy from last year's acquisition of Uniqema.

For the year, synergies contributed £17.0m (2006: £2.0m) to profit before tax
with an exit run rate over £20m. Headcount savings were the biggest element of
this total at £5.6m followed by savings in distribution and logistics at £2.9m
and raw material price savings of £2.4m. Lower IT, insurance, consultancy and a
number of other smaller savings made up the balance.

We now expect total synergies from the Uniqema acquisition to exceed £30m by the
end of 2008 with the extra level of business brought in house from ex-Uniqema
distributors, further headcount reductions, improved yields and savings in
energy and logistics being the main elements.

On a divisional basis, Consumer Care's continuing operating margin passed the
20% level even including Uniqema's initially lower returns.  Profit of £71.7m
(2006: £50.8m) gave a 20.4% margin for the year on £351.1m turnover (2006:
£264.1m) with an improving trend into the second half. Second half margins were
higher than those achieved by Croda in the first half of 2006, before the
Uniqema acquisition.

Our target operating margin of 20%+ for Consumer Care has been achieved.

Industrial Specialities' returns were more significantly diluted by the
acquisition of Uniqema. Operating profits of £17.0m represented a 3.2% return on
£535.0m turnover. (2006: £8.9m and £216.0m respectively).

We have a long term target operating margin in Industrial Specialities of 10%
and we expect to make further progress towards this goal in 2008.


Pre-tax profit

Continuing pre-tax profit*1 (after charging the full year's interest on last
year's acquisition of Uniqema) increased by 26.7% to £66.5m (2006: £52.5m).
Total pre-tax profit*1 increased 37.1% to £74.7m (2006: £54.5m).


Earnings per share

Earnings per share*1 increased by 28.4% to 37.1p (2006: 28.9p). The 33.5% tax
rate on continuing operations was only marginally higher than 2006 and we are
comfortable that this rate is sustainable in the medium term.


Dividend

We propose to increase the final dividend by 11.9% to 10.8p, making a total for
the year of 15.75p (2006: 14.3p), up 10.1%. Dividend cover*1 increased to 2.4x
compared to 2.0x in 2006. We expect future dividend increases to be more closely
aligned to earnings growth.


Disposals

We sold three businesses in 2007. Food Services was sold for £7.4m in June,
Klang for £9.8m in September and Refrigerant Lubricants for £59.6m at the end of
October. We made a net profit on disposal of £41.0m after tax from these
businesses in addition to an operating profit pre disposal of £8.2m.


Exceptional items

The main exceptional item was the £41.0m profit after tax on disposal discussed
above.

There was an additional £5.6m exceptional operating expense, mainly relating to
additional termination payments to ex Uniqema distributors reflecting the extra
turnover and profit being repatriated to Croda as part of the higher synergy
expectation.


Cash flow

The main underlying driver of cash was EBITDA of £128.4m (2006: £82.1m)

Working capital increased significantly during the year due to a number of
factors including inflation and changing distribution arrangements.  In
addition, a very strong, sales driven performance through November into December
meant that year end working capital levels were ahead of those normally
associated with our quietest month. We made a number of payments into the
pension scheme during the year totalling £70m following the acquisition of
Uniqema. Capital expenditure was a little ahead of depreciation at £38.1m with a
number of fast payback Uniqema projects being sanctioned.

We had a net cash inflow from disposals of £75.7m and spent £17.5m on
restructuring post the acquisition of Uniqema. All this increased net debt by
£36.1m to £366.0m


Pensions

Our deficit has fallen sharply as we have agreed the various transfers due from
ICI post the acquisition of Uniqema and we continued to contribute to the fund
at a higher level than the charge to profits.

Rising bond yields reduced our liabilities leaving the year end deficit at
£59.3m (2006: £159.9m). Within this total our UK final salary scheme has a
deficit of only £7.5m.


Balance Sheet

At £219.7m, our net assets are much higher than 2006 as the increase in net debt
was outweighed by the reduction in the pension deficit.


Financial KPIs

                                                           2007              2006             Target
Return on sales*                                           10.0%             7.5%              15%
EPS growth (before exceptional items)                     +28.4%            +12.9%            +5-10%
ROIC (post tax)*                                           8.1%              6.9%             > WACC

Net debt/EBITDA*                                           2.8x              3.3x              < 3x
EBITDA interest cover*                                     5.8x              4.2x              > 4x

* 2006 pro-forma full year Uniqema


We have a number of demanding financial KPI targets and we have made good
progress on all of these during the year.

Return on sales has increased to 10% in 2007 versus 7.5% on a like for like
basis in 2006. Before dilution from the acquisition of Uniqema, Croda beat its
15% target and we would expect steady progress towards this goal as we
re-position and integrate the acquired business. We already exceed the target in
our Consumer Care business and the biggest incremental gains should come in
Industrial Specialities.

We aim to grow earnings per share at a higher rate than underlying sales growth
and have comfortably beaten the 5-10% target in recent years.

Growth coupled to Return on Invested Capital (ROIC) is the driver of shareholder
value. The acquisition of Uniqema reduced the ROIC, but also reduced our
Weighted Average Cost of Capital (WACC) since the deal was predominantly
financed through debt.

We employ two widely used ratios to measure our ability to pay our debt. Both
net debt/EBITDA and EBITDA interest cover are ahead of target in 2007.




*1 Before exceptional items

*2 Continuing operations adjusted for the acquisition of Uniqema




Croda International Plc
Preliminary announcement of trading results for the year ended 31 December 2007
Group income statement


                                                2007            2007         2007         2006        2006       2006
                                Note              £m              £m           £m           £m          £m         £m
                                              Before                                    Before
                                         exceptional     Exceptional               exceptional Exceptional              
                                               items           items                     items       items
                                                                            Total                               Total

Continuing operations
Revenue                          2             886.1               -        886.1        480.1           -      480.1

Cost of sales                                (686.9)           (7.0)      (693.9)      (352.8)       (7.3)    (360.1)   
                                              ______          ______       ______       ______      ______     ______

Gross profit                                  199.2            (7.0)        192.2        127.3       (7.3)      120.0   

Operating expenses                           (111.6)             1.4      (110.2)       (68.9)      (25.7)     (94.6)   
                                                     
Share of associate's post-tax
profits                                          1.1               -          1.1          1.3           -        1.3
                                              ______          ______       ______       ______      ______     ______

Operating profit                 2              88.7           (5.6)         83.1         59.7      (33.0)       26.7
                                    
Financial expenses               3            (31.1)               -       (31.1)       (13.3)       (2.3)     (15.6)
                                           
Financial income                 3               8.9               -          8.9          6.1           -        6.1
                                              ______          ______       ______       ______      ______     ______
                                                                                                              
Profit before tax                               66.5           (5.6)         60.9         52.5      (35.3)       17.2
                                        
Tax                              4            (22.3)             1.9       (20.4)       (17.5)         6.8     (10.7)
                                            
Profit after tax from continuing
operations                                      44.2           (3.7)         40.5         35.0      (28.5)        6.5

Profit after tax from            
discontinued operations          7               5.9            41.0         46.9          1.5           -        1.5

                                              ______          ______       ______       ______      ______     ______

Profit for the year                             50.1            37.3         87.4         36.5      (28.5)        8.0
                                              ______          ______       ______       ______      ______     ______

Attributable to:

Minority interest                                                             0.1                                   -

Equity shareholders                                                          87.3                                 8.0
                                                                           ______                              ______

                                                                             87.4                                 8.0
                                                                           ______                              ______
                                                                                                              


                                                          pence per                                  pence per
                                                              share                                      share
Earnings per share of 10p (note 5)
Basic
Total                                                          64.8                                        6.3
Total before exceptional items                                 37.1                                       28.9
Continuing operations                                          29.9                                        5.1
Continuing operations before exceptional items                 32.7                                       27.7

Diluted
Total                                                          63.6                                        6.2
Continuing operations                                          29.4                                        5.0

Ordinary dividends (note 6)
Interim                                                        4.95                                       4.65
Final                                                         10.80                                       9.65
                                                          



Group statement of recognised income and expense
                                                                                           
                                                              2007                             2006
                                                                £m                               £m

Profit for the year                                           87.4                              8.0
                            
Exchange differences                                           6.6                            (3.6)
Movement in fair value of cash flow hedges                   (0.4)                              0.8
                                                    
Actuarial movement on retirement benefit
   obligations (net of deferred tax)                          21.0                             13.5
                                                            ______                           ______

Total recognised income and expense                          114.6                             18.7
                                                            ______                           ______





Attributable to:

Minority interest                                               0.1

Equity shareholders                                           114.5                            18.7
                                                              _____                           _____

                                                              114.6                            18.7
                                                             ______                          ______



Group balance sheet at 31 December


                                                                2007                           2006
                                                 Note             £m                             £m
                                                                                            restated

Assets
Non-current assets
Intangible assets                                               203.5                          206.1
Property, plant and equipment                                   342.2                          333.5
Investments:
   Associated undertaking                                         9.2                           11.0
   Other                                                          0.9                            0.9
Deferred tax assets                                              43.1                           60.0
                                                             ________                          _____

                                                                598.9                          611.5
                                                             ________                          _____

Current assets
Inventories                                                     161.4                          133.5
Trade and other receivables                                     186.4                          192.5
Cash and cash equivalents                                        43.4                           48.6
Other financial assets                              8             0.4                            0.8
Current tax assets                                                  -                            2.6
Assets classified as held for sale                                1.2                            1.2
                                                             ________                         ______

                                                                392.8                          379.2
                                                             ________                         ______

Liabilities
Current liabilities
Trade and other payables                                      (175.5)                        (195.1)
Borrowings and other financial liabilities          8          (83.5)                         (54.2)
Provisions                                          9          (14.2)                         (17.4)
Current tax liabilities                                        (11.5)                              -
                                                             ________                         ______

                                                              (284.7)                        (266.7)
                                                             ________                          _____

Net current assets                                              108.1                          112.5
                                                             ________                         ______
Non-current liabilities
Borrowings and other financial liabilities          8         (325.9)                        (324.3)
Other payables                                                  (3.3)                          (3.3)
Retirement benefit liabilities                                 (59.3)                        (159.9)
Provisions                                          9          (45.0)                         (56.0)
Deferred tax liabilities                                       (53.8)                         (54.1)
                                                             ________                         ______

                                                              (487.3)                        (597.6)
                                                             ________                          _____

Net assets                                                      219.7                          126.4
                                                             ________                         ______

Equity shareholders' funds                         10           218.0                          124.5
Minority interests                                                1.7                            1.9
                                                             ________                         ______

Total equity                                                    219.7                          126.4
                                                             ________                         ______



2006 figures have been restated following finalisation of the Uniqema fair value
exercise (note 11).




Group cash flow statement

                                                        Note             2007                        2006
                                                                           £m                          £m

                                                                                          
Cash flows from operating activities
Continuing operations
Operating profit                                                         83.1                        26.7
Adjustments for:
  Depreciation, amortisation and loss on disposal of
fixedassets
     fixed assets                                                        31.3                        19.2
  Share of associate's post-tax profits                                 (1.1)                       (1.3)
  Exceptional provision                                                   5.6                        33.0
  Other provisions                                                        0.4                         0.2
  Cash paid against operating provisions                               (17.5)                       (3.5)
  Changes in working capital                                           (60.0)                         5.1
  Pension fund contributions in excess of service
    costs                                                              (70.0)                      (11.3)
  Share based payments                                                    1.1                         1.0
  Dividend from associate                                                 2.8                           -
                                                                       ______                      ______

Cash absorbed by continuing operations                                 (24.3)                        69.1
Discontinued operations                                                   9.1                         1.2
Exceptional financial expenses                                              -                       (2.3)
Interest paid                                                          (26.8)                      (11.6)
Tax paid                                                               (14.2)                      (19.1)
                                                                       ______                      ______

Net cash absorbed by operating activities                              (56.2)                        37.3
                                                                       ______                      ______
                                                                                                 
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)                        7.7                     (356.2)
Purchase of property, plant and equipment                              (37.5)                      (22.6)
Purchase of computer software                                           (0.6)                           -
Proceeds from sale of property, plant, equipment
   and other investments                                                  0.2                         2.0
Proceeds from sale of businesses (net of costs)                          75.7                         3.2
Cash paid against non-operating provisions                              (0.6)                       (0.2)
Interest received                                                         3.1                         1.5
                                                                       ______                      ______
                                                                                                   
Net cash generated from investing activities                             48.0                     (372.3)
                                                                       ______                      ______
                                                                                                   
Cash flows from financing activities
Additional borrowings                                                    66.6                       341.9
Repayment of borrowings                                                (63.9)                      (27.9)
Capital element of finance lease repayments                             (0.1)                       (0.2)
Net purchases of own shares                                             (2.4)                      (18.2)
Proceeds from share placement                                               -                        60.6
Dividends paid                                           6             (20.0)                      (17.9)
                                                                       ______                      ______
                                                                                                  
Net cash absorbed by financing activities                              (19.8)                       338.3
                                                                       ______                      ______
                                                                                                   
Net movement in cash and cash equivalents                              (28.0)                         3.3
                                                                                                      
Cash and cash equivalents brought forward                                28.0                        26.4
Exchange differences                                                      1.2                       (1.7)
                                                                       ______                      ______
                                                                                                   
Cash and cash equivalents carried forward                                 1.2                        28.0
                                                                       ______                      ______
                                                                                                 
Cash and cash equivalents carried forward comprise
Cash at bank and in hand                                                 43.4                        48.6
Bank overdrafts                                                        (42.2)                      (20.6)
                                                                       ______                      ______
                                                                                                   
                                                                          1.2                        28.0
                                                                       ______                      ______
                                                                                                   
Reconciliation to net debt
Net movement in cash and cash equivalents                              (28.0)                         3.3
                                                                                                      
Movement in debt and lease financing                                    (2.6)                     (313.8)
                                                                       ______                      ______
                                                                                                   
Change in net debt from cash flows                                     (30.6)                     (310.5)
                                                                                                  
Loans in acquired businesses                                                -                       (0.8)
                                                                                                    
New finance lease contracts                                             (0.1)                       (0.1)
                                                                                                    
Exchange differences                                                    (5.4)                         5.7
                                                                                                     
                                                                       ______                       _____
                                                                                                    
                                                                       (36.1)                     (305.7)
                                                                                                  
Net debt brought forward                                              (329.9)                      (24.2)
                                                                                                   
                                                                       ______                       _____
                                                                                                    
Net debt carried forward                                              (366.0)                     (329.9)
                                                                       ______                       _____
                                                                                                    



Notes to the preliminary announcement


1.     Basis of preparation


In preparing this financial information, management has used the
principal accounting policies as set out in the Group's annual financial
statements for the year ended 31 December 2006. The results shown for 2007 are
unaudited. The financial information contained in this announcement does not
constitute statutory accounts within the meaning of Section 240(3) of the
Companies Act 1985. Statutory accounts of the Company in respect of the
financial year ended 31 December 2006, upon which the Company's auditors have
given a report which was unqualified and did not contain a statement under
Section 237(2) or Section 237(3) of that Act, have been delivered to the
Registrar of Companies.


2.     Segmental information

Primary reporting format - business segments

At 31 December 2007 the Group was organised on a worldwide basis into
two main business segments, relating to the manufacture and sale of the Group's
products which are destined for either the Consumer Care market or the market
for Industrial Specialities.  There is no material trade between segments.
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.  Uniqema has been fully
integrated into the Group's pre-acquisition structure and is no longer reported
as a stand alone segment.


                                                                       2007                         2006
                                                                         £m                           £m
Revenue - continuing operations
Consumer Care                                                         351.1                        264.1
Industrial Specialities                                               535.0                        216.0
                                                                     ______                       ______

                                                                      886.1                        480.1
                                                                     ______

Operating profit - continuing operations before exceptional
items
Consumer Care                                                          71.7                         50.8
Industrial Specialities                                                17.0                          8.9
                                                                     ______

                                                                       88.7                         59.7


        Secondary reporting format - geographical segments


The sales analysis in the table below is based on the location of the
customer.

                                                                      2007                          2006
                                                                        £m                            £m
Revenue by destination - continuing operations
operations
Europe                                                                419.2                        218.7
Americas                                                              309.0                        171.6
Asia                                                                  116.5                         61.2
Rest of World                                                          41.4                         28.6
                                                                     ______

                                                                      886.1                        480.1
                                                                     ______                        _____


3.     Net financial expenses

                                                                     2007                          2006
                                                                       £m                            £m

Financial expenses
Bank interest payable                                                31.1                          13.3
                                                                    _____                        ______

Financial income
Bank and other interest receivable                                  (3.9)                         (3.1)                 
Expected return on pension scheme assets
  less interest on scheme liabilities                               (5.0)                         (3.0)                 
                                                                   ______
                                                                                                  
                                                                    (8.9)                         (6.1)
                                                                   ______

Net financial expenses                                               22.2                           7.2


The above analysis excludes £ nil (2006: £2.3m) of exceptional financial
expenses.

4.     Tax
                                                                2007                        2006
                                                                  £m                          £m
Analysis of tax charge for the year
United Kingdom current tax                                     (3.7)                       (1.1)
Overseas current tax                                            17.8                        12.4
Deferred tax                                                     6.3                        (0.6)
                                                               _____                       ______

                                                                20.4                        10.7
                                                               ______                      ______


5.     Earnings per share

                                                                     2007                          2006
                                                                        p                             p

Earnings per share - continuing operations before         
exceptional items                                                    32.7                          27.7
Impact of exceptional items and discontinued operations              32.1                        (21.4)
                                                                   ______                        ______

Earnings per share - basic                                           64.8                           6.3
                                                                   ______                         _____


6.     Dividends paid

                                                                Pence               2007             2006
                                                                  per                 £m               £m
                                                                share
Ordinary
2005 Final - paid June 2006                                      9.00                  -             10.9
2006 Interim - paid October 2006                                 4.65                  -
                                                                                                      6.2
2006 Final - paid June 2007                                      9.65               13.0                -
2007 Interim - paid October 2007                                 4.95                6.7                -
                                                                                   _____            _____
                                                                                                
                                                                                    19.7             17.1

Preference (paid June and
  December)                                                                          0.1              0.1
                                                                                                     
Dividends paid to minority
  shareholders                                                                       0.2              0.7
                                                                                                      
                                                                                   _____            _____
                                                                                                    
                                                                                    20.0             17.9
                                                                                   _____


The directors are proposing a final dividend of 10.8p per share (£14.6m) in
respect of the financial year ending 31 December 2007.  It will be paid on 5
June 2008 to shareholders registered on 2 May 2008.  The total dividend for the
year ending 31 December 2007 is 15.75p per share (£21.7m).


7.     Discontinued operations

During 2007, in line with the Group's strategic restructuring following
the acquisition of Uniqema, the Group disposed of three businesses; Food
Services, Refrigeration Lubricants and its Malaysian manufacturing operation.

The Food Services business was sold to AAK in June 2007 for £7.4m cash
consideration, with the sale including all current and non-current assets of the
business. The Refrigeration Lubricants business was sold to Lubrizol in October
2007 for a total cash consideration of £59.6m, with inventory, customer lists
and product formulations passing across as part of the sale. No fixed assets
were disposed of as part of this transaction. The Group's Malaysian
manufacturing operation, Uniqema Malaysia SDN BHD, was sold to KLK for £9.8m in
September 2007 with all assets associated with the site and its bulk
oleochemicals manufacturing operations being transferred.

The impact of the operations discontinued in 2007, which, aside from a
small part of the Malaysian operation, resided within the Industrial
Specialities segment, is as follows:

                                                                           2007              2006
                                                                            £m                £m

Pre tax operating results from discontinued operations                      8.2               2.0
Tax                                                                        (2.3)             (0.5)
                                                                          ______            ______

Post tax operating results from discontinued operations                     5.9               1.5
                                                                          ______            ______

Profit on disposal                                                         41.0                -
                                                                          ______            ______

Total profit after tax from discontinued operations                        46.9               1.5
                                                                          ______            ______


8.     Financial assets and liabilities

The Group manages its interest rate profile using a combination of
interest rate swaps.  Since 2002 a fair value swap has been used to convert a
proportion of the Group's fixed rate debt to a floating rate.  During 2006 the
Group took out additional interest rate swaps to fix a proportion of the
floating rate acquisition funding, these swaps being designated as cash flow
hedges.

Under IFRS, the fair value of such derivative instruments must be
recognised in the financial statements with, in the case of fair value hedges, a
corresponding fair value adjustment to the underlying loan instrument.
Accordingly, a financial asset of £0.4m has been recognised within current
assets, being the fair value of the interest rate swaps designated as cash flow
hedges. As the fair value hedge has no value at 31 December 2007, no adjustment
has been made to the fair value of the underlying loan.


9.     Accounting estimates and judgements

The Group's critical accounting policies under IFRS have been
established by management with the approval of the Audit Committee.  The
application of these policies requires estimates and assumptions to be made
concerning the future and judgements to be made on the applicability of policies
to particular situations.  Estimates and judgements are continually evaluated
and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.

Under IFRS an estimate or judgement may be considered critical if it
involves matters that are highly uncertain, or where different estimation
methods could reasonably have been used, or if changes in the estimate that
would have a material impact on the Group's results are likely to occur from
period to period.  Critical judgement has been required when preparing the
Group's accounts as follows:


Provisions

At 31 December 2007, the Group has an environmental provision of £15.1m
in respect of soil and potential ground water contamination on a number of
sites.  Restructuring provisions, totalling £21.5m as at 31 December 2007,
largely relate to the continuing restructuring of the Group following the
acquisition of Uniqema in 2006.  Other provisions include those established as
part of the FV exercise following the acquisition of Uniqema.  These relate,
amongst other items, to provisions in respect of onerous contracts.

Based on environmental information currently available and the detailed
plans established for the restructuring of the Group, this level of provision is
considered appropriate by the directors.


Goodwill and fair value of assets acquired

The Group's goodwill carrying value increased significantly in 2006
following the acquisition of Uniqema. The Group tests annually whether goodwill
has suffered any impairment and the Group's goodwill value has been supported by
detailed value-in-use calculations relating to the recoverable amounts of the
underlying cash generating units. These calculations require the use of
estimates, however as recoverable amounts significantly exceed carrying values,
including goodwill, there is no impairment within a wide range of assumptions.


Retirement benefit liabilities

The Group's principal retirement benefit schemes are of the defined benefit
type. Year end recognition of the liabilities under these schemes and the
valuation of assets held to fund these liabilities require a number of
significant assumptions to be made, relating to levels of scheme membership,
mortality rates, key financial market indicators such as inflation and
expectations on future salary growth and asset returns. These assumptions are
made by the Group in conjunction with the schemes' actuaries and the directors
are of the view that any estimation should be prudent and in line with consensus
opinion.


10.   Condensed statement of changes in equity

                                                                  2007                 2006
                                                                    £m                   £m

Opening shareholders' equity                                     124.5                 79.7
Shares issued                                                      -                   60.6
Total recognised income                                          114.5                 18.7
Dividends (note 6)                                              (19.8)               (17.2)
Transactions in own shares                                       (2.4)               (18.2)
Share based payments                                              1.2                   0.9
                                                               _________             ______

Closing shareholders' equity                                     218.0                124.5
                                                               _________             ______



11.   Acquisition of Uniqema

On 1 September 2006, the Group completed the purchase of the Uniqema
business from ICI plc and the Group's 2006 financial statements included
provisional information on the fair values of assets acquired and consideration.
By 31 August 2007 the Group had completed its review of the acquired asset base
and had finalised the fair values of all acquired assets and liabilities.
Additionally during 2007, the final adjustments were agreed with respect to the
purchase consideration. The table below shows the carrying value of Uniqema's
net assets immediately prior to acquisition along with the final fair values and
consideration.


           Carrying values           Provisional          Final fair value             Final fair values
           pre-acquisition         fair value at            adjustments in                            £m
                        £m      31 December 2006                      2007
                                              £m                        £m

Intangible             6.9                   6.9                         -                           6.9
assets
Property,            248.2                 217.1                         -                          217.1
plant and
equipment
Inventories           82.9                  82.9                                                     82.9
Receivables          111.6                 111.6                         -                          111.6
Cash and cash         18.1                  18.1                         -                           18.1
equivalents
Loans acquired       (0.8)                 (0.8)                         -                          (0.8)
Payables           (118.3)               (131.3)                       5.2                        (126.1)
Deferred            (23.2)                (22.2)                      12.2                         (10.0)
taxation
Provisions           (8.5)                 (8.5)                    (23.0)                         (31.5)
Retirement          (68.1)                (68.1)                    (19.4)                         (87.5)
benefit
liabilities
Minority             (1.6)                 (1.6)                         -                          (1.6)
interest
                     ______               ______                    ______                        ______

Net assets        
acquired             247.2                 204.1                    (25.0)                         179.1
Goodwill                                   177.7                      15.7                         193.4
                     ______               ______                    ______                        ______

Total                 
consideration                              381.8                     (9.3)                         372.5
                                          ______                    ______                        ______



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