Final Results - Year Ended 31 December 1999
Elementis PLC
29 February 2000
ELEMENTIS plc
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 1999
Elementis beats operational efficiency targets
- Sales on continuing operations £535.1 million (1998: £534.2 million)
- Operating profit on continuing operations £56.8 million* (1998: £61.5
million*)
- Profit before tax £51.4 million* (1998: £49.6 million*)
- Earnings per share 9.3 pence* (1998: 9.0 pence*)
- Working capital cash inflow of £20.5 million in second half, £5.5 million
over target
- Headcount reduced by 322 versus target of 300
- £7.5 million annualised cost savings achieved to end December
*before goodwill amortisation and exceptionals
Lyndon Cole, Group Chief Executive of Elementis plc, said:
'The difficult trading conditions experienced towards the end of 1998
continued throughout 1999. Rigorous action has been taken throughout
Elementis to strengthen global management, improve operational efficiencies
and provide greater focus on customers. This is reflected in the improved
performance in the second half. There has been an encouraging start to
2000, although the continuing weakness of the euro remains a concern. The
Group-wide focus on business re-engineering should increasingly be reflected
in enhanced business performance as the year progresses.'
Enquiries
Elementis
Lyndon Cole Group Chief Executive 020 7398 1400
George Fairweather Group Finance Director
Anna Passey Head of Corporate Communications
Brunswick
Andrew Fenwick 020 7404 5959
Rupert Young
Overview and financial results
The difficult trading conditions experienced towards the end of 1998
continued throughout 1999. In particular, Chromium was impacted by
increased competition from producers in the Former Soviet Union and by low
demand for chrome oxide; Specialties was affected by lower sales of
rheological additives to the oil exploration drilling sector. Chemical
Distribution benefited from the strong US economy, although chlorine margins
were under pressure in the last few months of the year. Specialty Rubber
was impacted by reduced mining activity.
Operating profit on continuing operations, before goodwill amortisation and
exceptionals, was £56.8 million compared to £61.5 million in 1998. Operating
profit on the same basis for the second half of 1999 was £29.3 million, up 7
per cent on the first half and 17 per cent on the second half of 1998,
reflecting the continuing underlying improvement in business performance.
Profit before goodwill amortisation, exceptionals and tax was £51.4 million,
compared to £49.6 million in 1998 which included the results of discontinued
operations. Basic earnings per share before goodwill amortisation and
exceptionals increased by 3 per cent year on year to 9.3 pence.
Net exceptional charges before tax were £8.7 million (1998: £28.8 million).
Net cash inflow from operating activities was £74.1 million, compared to
£84.5 million in 1998 which included £7.1 million from discontinued
operations. Net borrowings at the year end were £45.5 million (1998: £48.0
million).
In 1999, the primary focus was on improving performance through business
re-engineering. Rigorous action has been taken to strengthen global
management, improve operational efficiencies and provide greater focus on
customers. In August, targets were announced to improve operational
efficiencies throughout Elementis; year on year headcount would be reduced
by around 300 by the end of 1999; improved use of working capital would
result in a cash inflow of at least £15 million in the second half of 1999.
These targets have been exceeded as headcount was reduced by 322 and there
was a working capital cash inflow of £20.5 million in the second half. The
Group is also on track to achieve its target of cutting Chromium and
Pigments & Specialties' costs by £10 million on an annualised basis by June
2000, when compared to the start of 1999. Annualised savings achieved to
the end of December 1999 were £7.5 million.
Dividends and issue of redeemable B shares
The Board is constantly seeking to manage the Group's affairs in a more tax
efficient manner for the overall benefit of shareholders. An important
element of this is to find ways to reduce the UK tax burden through the
utilisation of surplus advance corporation tax (ACT) (currently £23.7
million). Since April 1999, the amount of ACT that can be recovered against
mainstream corporation tax is restricted by shadow ACT on dividends.
The Board is not proposing to pay a final dividend (1998: 3.0 pence).
Instead, it proposes to issue redeemable B shares to shareholders on the
register on 28 April 2000, such that they will receive redeemable B shares
with a total nominal value of 3.1 pence for each ordinary share held. This
will be coupled with an offer to redeem these new shares for cash at their
nominal value on 2 May 2000. The total dividend for the year is therefore
2.0 pence per share (1998: 5.0 pence).
By not paying a final dividend, Elementis estimates that it will be able to
recover £1.4 million of ACT previously paid. The Board will consider making
further redeemable share issues until surplus ACT is utilised. Shadow ACT
on ordinary dividends would otherwise be around £5 million per annum.
Further details of the issue of redeemable B shares will be set out in a
letter to shareholders accompanying the Annual Report.
Strategy
The Board of Elementis remains committed to creating value for shareholders
through organic growth and selective acquisitions that have the capacity to
earn returns above the cost of capital. In May, a direct and technical
sales presence was set up in Japan, the world's second largest specialty
chemicals market, to grow market share. This made a positive contribution
to operating profit in 1999. A similar direct presence has also been
established in Northern Asia. Acquisition focus is on specialty additives
and specialty colour.
Health, safety and the environment
The drive for operational excellence continues, while preserving the
integrity of our commitment to the health and safety of employees, their
communities and the environment. The significant improvement in safety
performance in 1999 is encouraging. The chemical industry's key measure,
lost time accident frequency, reduced by 36 per cent year on year,
the fifth consecutive year of improvement.
Current trading and outlook
The Group-wide focus on business re-engineering should increasingly be
reflected in enhanced performance as the year progresses. The Chromium and
Pigments & Specialties annualised cost savings target has now been increased
by 10 per cent to £11 million by June 2000. A new target has been set for
Specialty Rubber to achieve annualised cost savings of £3 million by June
2001.
Chromium continues to benefit from the introduction of CA21 chromic acid
product into the metal finishing market, although trading conditions in
leather tanning and metal alloys for aerospace markets remain difficult.
There are signs that a number of Asian economies are improving, particularly
benefiting Pigments & Specialties. Specialty Rubber continues to be
impacted by the difficult minerals processing market. Overall, there has
been an encouraging start to 2000, although the continuing weakness of the
euro remains a concern; sales in January were up 7 per cent year on year.
Review of operations
Continuing operations
For the year ended 31
December 1999 1998
Sales Operating Sales Operating
profit* profit*
£million £million £million £million
Chromium 118.2 20.3 129.7 27.1
Pigments & Specialties 222.9 28.5 213.9 27.1
Chemical Distribution 144.5 5.5 139.2 2.6
Specialty Rubber 54.9 2.4 56.7 4.7
Associates - 0.1 - -
Inter-group (5.4) - (5.3) -
________ _________ ________ _________
535.1 56.8 534.2 61.5
======== ========= ======== =========
*before goodwill amortisation and exceptionals
Chromium
Operating profit before exceptionals was £20.3 million compared to £27.1
million in 1998; sales decreased by 9 per cent to £118.2 million. Operating
profit before exceptionals in the second half of 1999 was £10.8 million, up
14 per cent on the first half and 7 per cent on the second half of 1998.
This reflects the continuing focus on operational excellence, the drive to
reduce costs and the move to managing Elementis Chromium on a global basis.
A new managing director was appointed to Elementis Chromium in July. Since
then, customer focus has been significantly enhanced with the appointment of
a commercial director and business leaders for each of the principal
products.
Chrome oxide sales volumes were substantially lower, mainly due to
relatively low demand from the metal alloy market, particularly aerospace,
which first impacted results in the second half of 1998. Demand for North
American tanned hide remained strong and shipments into the Asia Pacific
leather sector have started to recover. Low demand in domestic markets in
the Former Soviet Union has driven chromium producers to compete more
aggressively in their export markets. Currency devaluation has
significantly improved their cost competitiveness, the effect of which was
evident throughout the year. Chromium profitability was also impacted by
substantially lower selling prices of the sodium sulphate by-product.
Chromic acid volumes grew modestly in timber treatment markets; volumes of
the branded chromic acid product CA21 grew substantially in the metal
finishing market, reflecting the superior handling properties of the
product. CA21 was awarded Millennium Product status for innovation by the
UK's Design Council.
Construction of the new $30 million kiln at Corpus Christi, Texas is
mechanically complete and in the commissioning phase. Following a period of
dual operation, it is anticipated that the rotary hearth it replaces will be
decommissioned around the mid-year. Expansion of the pure salt plant at
Eaglescliffe, UK is also mechanically complete, and will be commissioned for
full operation in the late Spring.
Focus on operational excellence and the move to managing Elementis Chromium
on a global basis has reduced costs by around £4 million on an annualised
basis over the course of 1999. A further £2 million cost reduction is
targeted by June 2000 on an annualised basis from the operation of the new
kiln as previously announced. Total savings will therefore exceed the £5
million target announced in August 1999 by 20 per cent. Exceptional
restructuring costs of £2.4 million were incurred during the year to achieve
these savings.
The ratio of trade working capital to sales reduced from 24 per cent at the
end of 1998 to 19 per cent at the end of 1999, with inventory down by over
£5 million.
Pigments & Specialties
Operating profit before goodwill amortisation and exceptionals was £28.5
million, compared to £27.1 million for 1998 which included only 11 months
results for Rheox. On a like for like basis, sales increased by 1 per cent
year on year to £222.9 million. Operating profit before goodwill
amortisation and exceptionals for the second half was £14.4 million, up 2
per cent on the first half and 36 per cent on the second half of 1998.
At Elementis Pigments, operating profit before exceptionals was lower than
in 1998 due to higher overhead absorption rates arising from the
restructuring process and reduced sales in the low margin European
construction market. Overall sales to the coatings market were modestly up
in 1999, with sales in Asia up by over 80 per cent. Sales of construction
grade Ferrispec doubled in 1999 with 18 customer equipment installations
completed. Sales of Copperas Red, a calcined synthetic product, and high
purity blacks into the personal care and cosmetics industries both grew
substantially during 1999. Demand for synthetic black iron oxide magnetite
for the toner market remained strong throughout the year.
The major restructuring and upgrading plans announced in 1997 are
substantially complete. The Deanshanger site, near Milton Keynes in the UK,
closed in June and its finishing plant relocated to Birtley, near Durham in
the UK. The upgrading of the two major US facilities at East St. Louis,
Illinois and Easton, Pennsylvania is nearing completion. Within the next
few months, the Northampton, UK distribution and administration centre will
be consolidated into Birtley. The decision has also been taken to close the
anhydrous aluminium chloride production facility in Birtley in order to
focus production in Allentown, Pennsylvania in the US; and the small
pigments manufacturing facility in Toronto, Canada will be consolidated into
Easton later in the year.
At Elementis Specialties, operating profit before goodwill amortisation and
exceptionals increased year on year on a comparable basis. Total sales and
sales of rheological additives for solvent based coatings and ink
applications were at a similar level to the full year in 1998. Sales of
water based rheological additives for coatings grew by around 15 per cent
year on year as the acceptance rate by major customers develops and the
product offering broadens. The £2 million investment in the Rheolate
production facility for water based coatings in Livingston, Scotland is
scheduled for completion in June 2000. This will enable Elementis
Specialties to meet growing worldwide demand for these technically
innovative products. Capacity in Livingston is also being increased to
replace the small, high cost production unit in Germany which closed in
December 1999. Sales of rheological additives to the oil exploration
drilling sector declined year on year by one third, but strengthened
considerably over the last four months of the year.
Sales of specialty additives were up by around 15 per cent year on year,
driven by the key coatings customers' increased need for low volatile
organic compounds (VOC) and alkyl phenol ethoxylate free products.
Elementis Specialties offers a range which can be applied in both solvent
and water based systems.
Twelve new products were launched during 1999, the most significant being
Nanox, a patented specialty grade zinc derivative with a full range of
ultraviolet absorbency and transparency properties. Nanox is gaining
approval at several key personal care specifiers and customers and was
awarded Millennium Product status for innovation by the UK's Design Council.
Other successful products launched in 1999 were:
- Bentone 38V - vegetable based rheological gels for the
personal care market
- Rheolate 400 series - an extension of the water based Rheolate range
of additives that broadens the Elementis
offering to the coatings market
- Eclipse - a patented ultraviolet cure elastomer for the
electrical encapsulation industry
The former Rheox sales force has added colourants and additives to their
product offering, giving customers improved access to the full Elementis
Specialties range of products and services. Certain support functions were
also integrated in the first half of the year.
In May, a direct and technical sales presence was established in Japan, the
world's second largest specialty chemicals market. Sales in Japan increased
by nearly 70 per cent year on year; as a result, this new venture made a
positive contribution to operating profit in 1999. A similar direct presence
has also been established in Northern Asia (excluding Japan) where sales
grew by just under 25 per cent year on year.
The Elementis Pigments restructuring programme, the Elementis Specialties
integration project and the focus on operational excellence have reduced
costs by around £3.5 million on an annualised basis over the course of 1999,
with a further £1.5 million reduction targeted by June 2000. Exceptional
restructuring costs of £2.4 million were incurred during the year to achieve
these savings, with approximately £1.5 million to be charged in 2000 to
complete the project.
A £2.7 million asset impairment charge was made in 1999, mainly relating to
the Toronto pigments and Birtley anhydrous aluminium chloride plant closures
and for the Shenzhen plant in China, where the Group is seeking to re-
negotiate arrangements with one of its joint venture partners who wishes to
exit.
The ratio of trade working capital to sales reduced from 24 per cent at the
end of 1998 to 19 per cent at the end of 1999, with inventory down by nearly
£8 million.
Chemical Distribution
Operating profit increased for the third consecutive year to £5.5 million,
of which £2.8 million was in the second half. This compared to £2.6 million
in 1998 (1998: second half £1.4 million). The year on year increase is the
result of continued volume growth, particularly in caustic soda, margin
improvement across the majority of the product range and the ongoing focus
on cost control.
Overall volumes grew by 4 per cent year on year, driven by caustic soda up
31 per cent and sodium hypochlorite up 40 per cent, partially offset by rock
salt down 28 per cent. Despite price pressure, margins improved across the
majority of the product range, although chlorine margins eroded in the
latter part of the year. Sales at £144.5 million were at a similar level to
1998 in US dollar terms, reflecting lower pricing.
Specialty Rubber
Operating profit before exceptionals was £2.4 million, compared to £4.7
million in 1998. Sales reduced by 3 per cent to £54.9 million. Operating
profit before exceptionals in the second half of the year was £1.2 million,
flat on the first half but 60 per cent below the second half of 1998.
Trading was significantly affected as reduced mining activity impacted the
minerals processing markets, particularly in the US and Australia. Copper
and iron ore production fell by over 10 per cent in the US as four out of
the top 15 mines closed. High South African interest rates and low gold
pricing also impacted sales. Minerals processing sales were down by more
than 10 per cent year on year as a result.
Following completion of the first stage of a strategic review, Linatex re-
organised its regional-based operations into three global business units;
minerals processing, process technologies and industrial rubber, plus a
separate European distribution business. Process technologies' sales were
up by around 5 per cent in 1999.
Linatex has embarked on a programme to reduce the complexity of its
manufacturing sites and service centres and to simplify commercial activity
by using distributors to service smaller customers. This will re-focus the
business on its core specialty rubber capability and profitable sales
opportunities. Installation of a state-of-the-art £1.5 million rubber
conversion and mixing plant in Malaysia is currently in a commissioning
phase and will provide a lower cost, more consistent quality feedstock for
the Linatex sheet manufacturing and moulding processes. Over the next 18
months the number of operating sites will be cut from 25 to 12, which will
reduce annualised costs by £3 million and headcount by 125. Exceptional
costs of this restructuring are estimated at £3.5 million, of which £1.2
million was charged in 1999.
Exceptionals
Net exceptional charges before tax were £8.7 million, compared to £28.8
million in 1998. For 1999, exceptionals comprised:
- £6.6 million charge for the settlement of US litigation
- £6.0 million of restructuring costs
- £2.7 million of asset impairment charges
- £6.6 million profit on the disposal of surplus properties, including the
last two former Harcros builders' merchants branches
Interest
Net interest payable was £5.4 million, compared to £8.3 million in 1998.
This decrease reflects lower net borrowing levels throughout the year,
partially offset by narrowing sterling/US dollar interest rate
differentials. Interest cover (the number of times that the net interest
charge is covered by operating profit before goodwill amortisation and
exceptionals) was 10.5 times for 1999 (1998: 7.0 times).
Taxation
The effective rate of tax on profit before goodwill amortisation and
exceptionals was 22.0 per cent, compared with 14.5 per cent in 1998. This
rate is substantially lower than the standard UK corporate tax rate for a
number of reasons, including tax relief on purchased US goodwill and the
utilisation of surplus advance corporation tax, partially offset by higher
overseas tax rates and unrelieved overseas tax losses. The rate in 1998 was
lower than in 1999 because of favourable prior year adjustments in 1998 and
writing down allowances on impaired BOCM PAULS assets until that business
was sold. Tax on exceptional items was a credit of £0.8 million (1998:
charge of £1.2 million).
At 31 December 1999, surplus advance corporation tax available for offset
against future tax liabilities on UK profits was £23.7 million.
Earnings per share
Basic earnings per share before goodwill amortisation and exceptionals
increased by 3 per cent year on year to 9.3 pence. Basic earnings per
share, after goodwill and exceptionals, was 4.6 pence (1998: 0.3 pence).
The weighted average number of shares in issue during the year was 431.5
million (1998: 472.9 million); the number of shares in issue at the year end
was 431.5 million.
Cash flow and balance sheet
Net cash inflow from operating activities was £74.1 million, compared to
£84.5 million in 1998 which included £7.1 million from discontinued
operations.
The inflow from reduced working capital was £19.4 million, compared to £4.6
million inflow from continuing operations in 1998; this reflects the ongoing
focus on reducing working capital towards industry best practice standards.
In the second half of the year, the working capital inflow was £20.5 million
which was £5.5 million ahead of the £15 million target published in August.
In the three years to December 1998, aggregate working capital cash inflow,
including discontinued operations up until their date of sale, was £88.7
million.
Cash expenditure on fixed assets in 1999 totalled £43.9 million (1998: £32.6
million); this compares with net depreciation of £15.3 million (1998: £16.6
million). Significant projects in 1999 included construction of the new
chromium kiln in the US, expansion of the pure salt plant in the UK and the
upgrading of pigments manufacturing facilities in the US. Cash expenditure
on fixed assets is likely to be significantly lower in 2000 but still well
ahead of depreciation due to extended payment terms on work completed in
1999.
Net cash inflow before the use of liquid resources and financing was £9.6
million compared to an outflow of £98.1 million in 1998. Excluding
acquisitions and disposals, which significantly impacted the 1998 figures,
free cash inflow was £10.3 million, compared to £24.5 million in 1998.
Net borrowings at the year end were £45.5 million (1998: £48.0 million).
Consolidated profit & loss account
for the year ended 31 December 1999
Before
goodwill Goodwill
amort- amort- Except- 1999 1998
isation isation ionals
&
exceptionals
Note £mill- £mill- £mill- £mill- £mill-
ion ion ion ion ion
Turnover
Continuing
operations 535.1 - - 535.1 534.2
Discontinued
operations - - - - 508.4
______ ______ ______ ______ _______
Turnover: Group and
share of joint
venture 535.1 - - 535.1 1,042.6
Less share of
discontinued joint
venture's turnover
- - - - (68.2)
______ ______ ______ ______ _______
Group turnover 3 535.1 - - 535.1 974.4
====== ====== ====== ====== ======
Group operating
profit
Continuing
operations
Before goodwill
amortisation and
exceptionals 56.7 - - 56.7 61.5
Goodwill
amortisation - (12.5) - (12.5) (11.2)
Exceptionals - - (15.3) (15.3) (3.2)
56.7 (12.5) (15.3) 28.9 47.1
Discontinued
operations - - - - (7.0)
______ _______ ______ ______ _______
3/4 56.7 (12.5) (15.3) 28.9 40.1
Share of operating
profit/(loss):
Joint venture -
discontinued
operations - - - - 2.1
Associates -
continuing
operations 0.1 - - 0.1 -
Associates -
discontinued
operations - - - - (0.1)
______
56.8
_______ ______ ______ _______
Operating profit (12.5) (15.3) 29.0 42.1
Profit on disposal
of properties - - 6.6 6.6 5.0
Loss on disposal of - - - - (26.9)
businesses
- discontinued
operations
______ _______ ______ ______ _______
Profit on ordinary 56.8 (12.5) (8.7) 35.6 20.2
activities before
interest
Interest rate swap
cancellation costs - - - - (2.3)
Net interest
payable (5.4) - - (5.4) (8.3)
______ _______ ______ ______ _______
Profit on ordinary
activities before
tax
Before goodwill
amortisation and
exceptionals 51.4 - - 51.4 49.6
Goodwill
amortisation - (12.5) - (12.5) (11.2)
Exceptionals - - (8.7) (8.7) (28.8)
51.4 (12.5) (8.7) 30.2 9.6
Tax on profit on
ordinary activities
5 (11.3) - 0.8 (10.5) (8.4)
______ _______ ______ ______ _______
Profit on ordinary
activities after
tax 40.1 (12.5) (7.9) 19.7 1.2
Minority interests
- equity 0.1 - 0.2 0.3 -
______ _______ ______ ______ _______
Profit for the
financial year 40.2 (12.5) (7.7) 20.0 1.2
Dividends (8.6) - - (8.6) (21.6)
______ _______ ______ ______ _______
Amount transferred
to/(from) reserves 31.6 (12.5) (7.7) 11.4 (20.4)
====== ======= ====== ====== =======
Earnings per
ordinary share 6
Basic and diluted 4.6p 0.3p
Basic and diluted before goodwill
amortisation and exceptionals 9.3p 9.0p
Balance sheets
at 31 December 1999
Group Company
1999 1998 1999 1998
£mill- £mill- £mill- £mill-
ion ion ion ion
Fixed assets
Goodwill 225.5 231.9 - -
Tangible assets 182.7 155.5 - -
Investments 1.8 1.6 959.0 959.0
______ _______ _______ ________
410.0 389.0 959.0 959.0
______ _______ _______ ________
Current assets
Stocks 71.6 85.5 - -
Debtors 104.9 108.8 1.1 -
Cash at bank and in hand 79.9 224.7 - -
______ _______ _______ ________
256.4 419.0 1.1 -
______ _______ _______ ________
Creditors: amounts falling due
within one year
Borrowings 11.2 24.6 7.7 8.8
Proposed dividend - 13.0 - 13.0
Creditors 109.4 98.7 0.4 0.8
______ _______ _______ _______
120.6 136.3 8.1 22.6
______ _______ _______ _______
Net current
assets/(liabilities) 135.8 282.7 (7.0) (22.6)
______ ______ _______ _______
Total assets less current
liabilities 545.8 671.7 952.0 936.4
______ _______ _______ _______
Creditors: amounts falling due
after more than one year
Borrowings 114.2 248.1 - -
Government grants 0.8 0.8 - -
Amounts due to subsidiary
undertakings - - 304.9 342.7
______ _______ _______ _______
115.0 248.9 304.9 342.7
Provisions for liabilities and
charges 48.1 52.6 0.3 -
______ _______ _______ _______
163.1 301.5 305.2 342.7
______ _______ ______ _______
382.7 370.2 646.8 593.7
====== ======= ====== =======
Capital and reserves
Called up share capital 21.6 21.6 21.6 21.6
Share premium 1.1 1.1 1.1 1.1
Other reserves - - 534.4 534.4
Profit and loss account 357.7 345.1 89.7 36.6
______ ______ _______ _______
Shareholders' funds - equity 380.4 367.8 646.8 593.7
Minority interests - equity 2.3 2.4 - -
______ _______ _______ _______
382.7 370.2 646.8 593.7
====== ======= ======= =======
Net borrowings (45.5) (48.0)
Cash flow statement
for the year ended 31 December 1999
1999 1998
Note £mill- £mill- £mill- £mill-
ion ion ion ion
Net cash inflow from operating
activities
Continuing operations 74.1 77.4
Discontinued operations - 7.1
____ _____
74.1 84.5
Dividends from joint venture - 0.2
Returns on investments and
servicing of finance
Interest rate swap cancellation
costs - (2.3)
Private placement redemption
costs - (9.8)
Interest received 8.8 13.8
Interest paid (14.4) (20.4)
Dividends paid to minority
shareholders in subsidiaries - (0.4)
______ ______
(5.6) (19.1)
Taxation (4.7) (7.0)
Capital expenditure and
financial investment
Purchase of fixed assets (43.9) (32.6)
Fixed assets disposals 12.0 7.1
______ _______
(31.9) (25.5)
Acquisitions and disposals
Acquisition of businesses (0.2) (283.7)
Disposal of businesses (0.5) 161.1
______ _______
(0.7) (122.6)
Equity dividends paid (21.6) (8.6)
______ _______
Cash inflow/(outflow) before
use of liquid resources and
financing 9.6 (98.1)
Financing and management of
liquid resources 7 (1.7) 103.3
______ ______
Increase in cash 8 7.9 5.2
====== ======
Reconciliation of operating profit to net cash inflow from operating
activities
for the year ended 31 December 1999
1999 1998
£mill- £mill-
ion ion
Operating profit 29.0 42.1
Goodwill amortisation 12.5 11.2
Depreciation (less grants credited) 15.3 16.6
Share of profits of joint venture - (2.1)
Share of (profits)/losses of associated
undertakings (0.1) 0.1
Loss on disposal of fixed assets 0.2 0.1
Exceptionals in operating profit 15.3 4.6
Cash outflow on exceptionals (12.2) (3.4)
Fundamental restructuring costs - (2.7)
Decrease in stocks 15.0 17.6
(Increase)/decrease in debtors (6.2) 14.7
Increase/(decrease) in creditors 10.6 (13.6)
Decrease in provisions (5.3) (0.7)
______ ______
74.1 84.5
====== ======
Statement of total recognised gains and losses
for the year ended 31 December 1999
1999 1998
£mill- £mill-
ion ion
Profit for the financial year 20.0 1.2
Currency translation differences 2.2 (0.5)
Taxation on currency translation differences
on foreign currency borrowings (1.0) (0.4)
______ ______
Total recognised gains for the year 21.2 0.3
====== ======
Reconciliation of movements in shareholders' funds
for the year ended 31 December 1999
1999 1998
£mill- £mill-
ion ion
Profit for the financial year 20.0 1.2
Dividends (8.6) (21.6)
______ _______
Amounts transferred to/(from) reserves 11.4 (20.4)
Share option schemes allotments - 1.1
Return of capital to shareholders - (402.2)
Goodwill on disposal of businesses acquired -
prior to 1 January 1998 charged to profit and
loss account 26.0
Currency translation differences 2.2 (0.5)
Taxation on currency translation differences
on foreign currency borrowings (1.0) (0.4)
______ _______
Net increase/(decrease) in shareholders' funds
12.6 (396.4)
At 1 January 367.8 764.2
______ _______
At 31 December 380.4 367.8
====== =======
Notes to the financial statements
1. Preparation of preliminary announcement
The financial information in this statement does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
financial information for the year ended 31 December 1998 has been extracted
from the financial statements for that year which have been delivered to the
Registrar of Companies. The report of the auditors on those financial
statements was unqualified and did not contain a statement under Section 237
of the Companies Act 1985.
2. Exchange rates
The principal currency in which the Group conducts its business is the US
dollar. In 1999, the average exchange rate was $1.62 compared with $1.66 in
1998. The US dollar exchange rate at 31 December 1999 was $1.61 compared
with $1.66 at 31 December 1998.
3. Segmental information
Group turnover Group operating Net assets
profit
1999 1998 1999 1998 1999 1998
£mill- £mill- £mill- £mill- £mill- £mill-
ion ion ion ion ion ion
Analysis by activity
Chromium
Before exceptionals 118.2 129.7 20.3 27.1 118.0 109.5
Inter-group turnover
(5.4) (5.3) - - - -
Exceptionals - - (8.8) - - -
______ _____ ______ ______ ______ ______
112.8 124.4 11.5 27.1 118.0 109.5
______ _____ ______ ______ ______ ______
Pigments &
Specialties
Before goodwill
amortisation and
exceptionals 222.9 213.9 28.5 27.1 332.3 338.6
Goodwill
amortisation - - (12.5) (11.2) - -
Exceptionals - - (5.3) (3.2) - -
______ _____ ______ ______ ______ ______
222.9 213.9 10.7 12.7 332.3 338.6
______ _____ ______ ______ ______ ______
Chemical
Distribution 144.5 139.2 5.5 2.6 5.0 3.4
______ _____ ______ ______ ______ ______
Specialty Rubber
Before exceptionals 54.9 56.7 2.4 4.7 21.9 22.9
Exceptionals - - (1.2) - - -
______ _____ ______ ______ ______ ______
54.9 56.7 1.2 4.7 21.9 22.9
______ _____ _____ ______ ______ ______
Total - continuing
operations
Before goodwill
amortisation and
exceptionals 535.1 534.2 56.7 61.5 477.2 474.4
Goodwill
amortisation - - (12.5) (11.2) - -
Exceptionals - - (15.3) (3.2) - -
______ _____ ______ ______ ______ ______
535.1 534.2 28.9 47.1 477.2 474.4
______ _____ ______ ______ ______ ______
Total - discontinued
operations
Before exceptionals - 440.2 - (5.6) - -
Exceptionals - - - (1.4) - -
______ _____ ______ ______ ______ ______
- 440.2 - (7.0) - -
______ _____ ______ ______ ______ ______
Unallocated
liabilities - - - - (94.5) (104.2)
______ _____ ______ ______ ______ ______
535.1 974.4 28.9 40.1 382.7 370.2
====== ===== ====== ====== ====== ======
Group Group operating Net assets
turnover profit
1999 1998 1999 1998 1999 1998
£mill- £mill- £mill- £mill- £mill- £mill-
ion ion ion ion ion ion
Analysis by area of
operations
Continuing
operations:
North America 357.6 343.9 24.2 27.4 336.4 330.7
Europe 157.3 171.6 4.8 18.1 127.2 131.1
Rest of the World 20.2 18.7 (0.1) 1.6 13.6 12.6
_____ _____ _______ ______ _____ _____
535.1 534.2 28.9 47.1 477.2 474.4
Discontinued
operations:
Europe - 440.2 - (7.0) - -
Unallocated
liabilities - - - - (94.5) (104.2)
_____ _____ ______ ______ ______ ______
535.1 974.4 28.9 40.1 382.7 370.2
===== ===== ====== ====== ====== ======
Unallocated liabilities comprise:
1999 1998
£mill- £mill-
ion ion
Net borrowings (45.5) (48.0)
Taxation and dividends (15.2) (21.7)
Post retirement benefits and government grants (15.9) (16.9)
Other (17.9) (17.6)
_______ ________
(94.5) (104.2)
======= ========
Group turnover analysed by geographical markets
Continuing Discontinued Total
operations operations
1999 1998 1999 1998 1999 1998
£mill- £mill- £mill- £mill- £mill- £mill-
ion ion ion ion ion ion
North America 336.8 322.7 - 0.1 336.8 322.8
Europe 141.4 159.5 - 435.0 141.4 594.5
Rest of the World 56.9 52.0 - 5.1 56.9 57.1
______ _____ _____ ______ ______ ______
535.1 534.2 - 440.2 535.1 974.4
====== ===== ===== ====== ====== ======
4. Exceptionals
Group operating profit includes the following:
Settlement of Restructur- Impairment of Total
US litigation ing costs assets
1999 1998 1999 1998 1999 1998 1999 1998
£mill- £mill- £mill- £mill- £mill- £mill- £mill- £mill-
ion ion ion ion ion ion ion ion
Continuing
operations:
Chromium 6.4 - 2.4 - - - 8.8 -
Pigments &
Specialties 0.2 - 2.4 3.2 2.7 - 5.3 3.2
Specialty
Rubber - - 1.2 - - - 1.2 -
_____ _____ ____ ____ _____ ____ ____ ____
6.6 - 6.0 3.2 2.7 - 15.3 3.2
Discontinued
operations - - - 1.4 - - - 1.4
_____ _____ ____ ____ _____ ____ ____ ____
6.6 - 6.0 4.6 2.7 - 15.3 4.6
===== ===== ==== ==== ===== ==== ==== ====
Tax on these charges was a credit of £0.8 million (1998: £0.4 million).
5. Tax on profit on ordinary activities
The charge for United Kingdom tax has been based on a corporation tax rate
of 30.25 per cent (1998: 31 per cent). If deferred tax had been fully
provided in 1999 under the liability method, the tax charge for the year
would have increased by £4.1 million (1998: decreased by £3.5 million).
1999 1998
£mill- £mill-
ion ion
Reconciliation of the tax charge:
Notional tax charge before goodwill amortisation and
exceptionals at UK corporation tax rate
(1999: 30.25 per cent, 1998: 31 per cent) 15.5 15.4
Recoverable ACT (1.0) (1.6)
Benefit of excess capital allowances in discontinued
operations - (1.8)
Differences in overseas effective tax rates 3.9 2.2
Benefit of US goodwill (5.7) (5.7)
Overseas tax losses unrelieved 0.4 2.6
Other current tax items 0.2 (0.7)
Deferred tax under provided on excess capital
allowances and other timing differences (2.0) (1.0)
Prior year adjustments - (2.2)
______ ______
11.3 7.2
Tax (credit)/charge on exceptionals (0.8) 1.2
______ ______
10.5 8.4
====== ======
6. Earnings per ordinary share
1999 1998
Profit Weighted Profit Weighted
for the average for the average
financial number Earnings financial number Earnings
year of per year of per
£mill- shares share £mill- shares share
ion million pence ion million pence
Basic
earnings per
share 20.0 431.5 4.6 1.2 472.9 0.3
Share - 1.8 - - 1.6 -
options
________ _______ _______ _______ _______ _______
Diluted
earnings per
share 20.0 433.3 4.6 1.2 474.5 0.3
________ _______ _______ _______ _______ _______
Basic
earnings per
share 20.0 431.5 4.6 1.2 472.9 0.3
Goodwill
amortisation 12.5 - 2.9 11.2 - 2.4
Exceptionals
net of
taxation 7.7 - 1.8 30.0 - 6.3
_______ _______ _______ _______ _______ _______
Basic
earnings per
share before
goodwill
amortisation
and
exceptionals 40.2 431.5 9.3 42.4 472.9 9.0
Share - 1.8 - - 1.6 -
options
________ _______ _______ _______ _______ _______
Diluted
earnings per
share before
goodwill
amortisation
and
exceptionals 40.2 433.3 9.3 42.4 474.5 9.0
======= ======= ======= ======= ======= =======
Earnings per share before goodwill amortisation and exceptionals provides a
measure of the underlying financial performance of the Group on a comparable
basis with many other groups.
7. Financing and management of liquid resources
1999 1998
£mill- £mill-
ion ion
Financing
Issue of ordinary share capital - share options - 1.1
Funds provided by minority interests - 1.0
Return of capital to shareholders - (402.2)
Loan notes issued - 19.5
Loan notes redeemed (1.3) (10.7)
Decrease in borrowings repayable within one year (6.3) (108.4)
(Decrease)/increase in borrowings repayable after
one year (140.1) 245.5
________ _________
(147.7) (254.2)
________ _________
Management of liquid resources
New cash deposits (5.4) (5.6)
Repayment of cash deposits 151.4 363.1
_______ ________
146.0 357.5
________ ________
Total financing and management of liquid resources
(1.7) 103.3
======== ========
8. Reconciliation of net cash flow to movement in net (borrowings)/cash
1999 1998
£mill- £mill-
ion ion
Change in net (borrowings)/cash resulting from
cash flows:
Increase in cash in the period 7.9 5.2
Decrease/(increase) in borrowings 147.7 (145.9)
Decrease in liquid resources (146.0) (357.5)
_______ ________
9.6 (498.2)
Currency translation differences (7.1) (0.4)
_______ ________
Decrease/(increase) in net borrowings 2.5 (498.6)
Net (borrowings)/ cash at 1 January (48.0) 450.6
_______ ________
Net borrowings at 31 December (45.5) (48.0)
======= =======
9. Contingent liabilities
The Group has been notified of a potential warranty claim, under the
contract for the sale of Pauls Malt, relating to export refunds from the
Intervention Board for Agricultural Produce. Should such a claim
materialise, this will be vigorously defended and, in any event, in the
opinion of the directors, this will not have a significant effect on the
financial position of the Group.
10. Annual General Meeting and Annual Report
The Annual General Meeting of Elementis plc will be held on Friday 28 April
2000 at 10.00 am at the City Conference Centre, 80 Coleman Street, London
EC2R 5BJ. The Annual Report of Elementis plc for 1999 will be posted on or
about 20 March 2000. Copies will be available from the Company's registered
office.
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