Final Results - Year Ended 31 Dec 1999, Part 2
Cookson Group PLC
6 March 2000
PART 2
GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1999
1999
Before
exceptional
items and
goodwill
amortisation
Exceptio
nal
Operatio items
ns and
disconti goodwill
nued
and to amortisa
be tion
Ongoing disposed (notes
busines (note 1) 1,2,3) Total
ses
note £m £m £m £m
Turnover
Continuing operations 1,614.9 223.2 - 1,838.1
Discontinued
operations - 72.0 - 72.0
Total turnover 1 1,614.9 295.2 - 1,910.1
Share of joint
ventures:
- continuing (20.5) - - (20.5)
- discontinued - (27.2) - (27.2)
Turnover - Group
subsidiaries 1,594.4 268.0 - 1,862.4
Operating profit
Continuing operations 142.6 20.4 (45.6) 117.4
Goodwill amortisation
- continuing 6 - - (12.9) (12.9)
Discontinued
operations - 5.1 - 5.1
Group operating
profit 142.6 25.5 (58.5) 109.6
Share of joint
ventures 1.5 2.9 - 4.4
Total operating
profit 1 144.1 28.4 (58.5) 114.0
Loss on sale or
termination of
discontinued
operations and on
disposal
of fixed assets 3 - - (18.4) (18.4)
Profit before
interest 144.1 28.4 (76.9) 95.6
Interest 4 (24.0)
Profit before
taxation 71.6
Taxation on profit
on ordinary
activities (33.3)
Profit/(loss) after
taxation 38.3
Minority interests (1.6)
Profit/(loss) for the
financial year 36.7
Dividends (68.4)
Net loss transferred
to reserves (31.7)
Basic earnings per
share before all
exceptional items
and goodwill
amortisation 5 15.5p
Basic and diluted
earnings per share 5 5.2p
GROUP PROFIT AND LOSS ACCOUNT / contd
1998
Before
exceptional
items and
goodwill
amortisation
Exceptio
nal
Operatio items
ns and
disconti goodwill
nued
and to amortisa
be tion
Ongoin disposed (notes
g
busine (note 1) 1,2,3) Total
sses
note £m £m £m £m
Turnover
Continuing operations 1,376.6 175.3 - 1,551.9
Discontinued
operations - 208.1 - 208.1
Total turnover 1 1,376.6 383.4 - 1,760.0
Share of joint
ventures:
- continuing (16.8) - - (16.8)
- discontinued - (59.7) - (59.7)
Turnover - Group 1,359.8 323.7 - 1,683.5
subsidiaries
Operating profit
Continuing operations 129.6 18.4 (49.5) 98.5
Goodwill amortisation
- continuing 6 - - (2.8) (2.8)
Discontinued
operations - 16.3 - 16.3
Group operating
profit 129.6 34.7 (52.3) 112.0
Share of joint
ventures 1.2 4.5 - 5.7
Total operating
profit 1 130.8 39.2 (52.3) 117.7
Loss on sale or
termination of
discontinued
operations and on
disposal
of fixed assets 3 - - (89.6) (89.6)
Profit before
interest 130.8 39.2 (141.9) 28.1
Interest 4 (18.7)
Profit before
taxation 9.4
Taxation on profit
on ordinary
activities (27.4)
Profit/(loss) after
taxation (18.0)
Minority interests (2.1)
Profit/(loss) for the
financial year (20.1)
Dividends (64.6)
Net loss transferred
to reserves (84.7)
Basic earnings per
share before
before all
exceptional items
and goodwill
amortisation 5 16.0p
Basic and diluted
earnings per share 5 (2.9)p
GROUP BALANCE SHEET AS AT 31 DECEMBER 1999
note 1999 1998
£m £m
Fixed assets
Goodwill 6 600.6 93.9
Tangible assets 7 483.5 484.6
Investments 8 95.5 38.9
Total fixed assets 1,179.6 617.4
Current assets
Stocks 282.2 230.4
Debtors 527.0 376.6
Cash at bank 50.1 96.8
Total current assets 859.3 703.8
Creditors: amounts falling due within one
year
Borrowings (45.5) (23.0)
Enthone purchase consideration payable (284.3) -
Other creditors (496.3)(361.3)
Total current liabilities (826.1)(384.3)
Net current assets 33.2 319.5
Total assets less current liabilities 1,212.8 936.9
Creditors: amounts falling due after more
than one year
Convertible bond (80.0)(77. 3)
Other borrowings (386.0)(215.2)
Other creditors (60.5) (27.9)
Provisions for liabilities and charges (103.9) (71.6)
582.4 544.9
Equity capital and reserves
Called up share capital 362.6 345.8
Share premium account 375.3 330.8
Reserves (160.4)(138.3)
Total shareholders funds 577.5 538.3
Minority interests 4.9 6.6
582.4 544.9
STATEMENT OF GROUP CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
£m £m £m £m
Reconciliation of operating
profit
to net cash inflow from
operating activities
Group operating profit
before exceptional items 155.2 161.5
Depreciation and goodwill
amortisation 66.1 57.9
(Increase)/decrease in
working capital (26.2) 4.1
Decrease in provisions (3.1) (0.6)
Payments in respect of
exceptional
rationalisation costs
(note 2) (21.1) (6.3)
Net cash inflow from
operating activities 170.9 216.6
Cash flow statement Free Free
Cash Cash
Flow Flow
Net cash inflow from 170.9 170.9 216.6 216.6
operating activities
Dividends from joint
ventures 2.4 2.4 3.3 3.3
Interest paid (19.9) (19.9) (18.2) (18.2)
Taxation (14.8) (14.8) (46.2) (46.2)
Capital expenditure
Payments to acquire fixed
assets (80.6) (85.2)
Receipts from disposal of
fixed assets 13.7 14.6
(70.6)
(66.9) (66.9) (70.6)(70.6)
Acquisitions and disposals
Net proceeds from disposal
of subsidiaries 140.9 -
Consideration for
acquisition of
subsidiaries and joint (394.0) (190.4)
ventures
Net proceeds from divestment
of joint ventures 17.3 65.0
Other, including additional
costs
for prior year disposals (10.8) 2.6
(246.6) (122.8)
Dividends paid (66.0) (66.0) (64.5) (64.5)
Free cash flow 5.7 20.4
Net cash outflow before (240.9) (102.4)
financing
Financing
Issue of shares 0.4 2.7
Increase in debt 199.5 70.3
Decrease in cash during the
period (41.0) (29.4)
Reconciliation of net cash
flow
to movement in net debt
Decrease in cash during the
period (41.0) (29.4)
Cash flow from movement in
debt
and lease financing (199.5) (70.3)
Change in net debt resulting
from cash flows (240.5) (99.7)
Issue costs amortised (0.5) (0.5)
Loans acquired with
subsidiaries - (7.5)
ESOP deferred option premium - (5.7)
Foreign exchange difference (1.7) 0.8
Movement in net debt during (242.7) (112.6)
the period
Net debt at 1 January (218.7) (106.1)
Net debt at 31 December (461.4) (218.7)
STATEMENT OF TOTAL GROUP RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
£m £m
Profit/(loss) for the financial year 36.7 (20.1
Exchange adjustments (3.9) (5.6)
FRS 15 adjustment (note 7) (6.0) -
Total net recognised gains/(losses) 26.8 (25.7)
relating to the year
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS FUNDS
FOR THE YEAR ENDED 31 DECEMBER 1999
1999 1998
£m £m
Shareholders funds as at 1 January 538.8 571.1
Total net recognised gains/(losses)for the
year (see above) 26.8 (25.7)
Dividends (68.4) (64.6)
New share capital subscribed 61.3 4.6
Cancellation of non-equity share capital - (1.8)
Goodwill transferred to the profit and loss
account in respect of the sale or termination
of operations 19.5 54.7
Net addition/(reduction)to shareholders
funds 39.2 (32.8)
Shareholders funds as at 31 December 577.5 538.3
NOTE OF GROUP HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 1999
There were no material differences between the Group loss for the year and the
historical cost equivalent
NOTES TO THE ACCOUNTS
1 Segmental analyses
The results reported as operations to be disposed represent those of the
Group's Telecommunication Products and Plastic Mouldings businesses, which
formed part of the Group's former Engineering division. The businesses
comprising the results of discontinued operations are Cookson Fibers, Zimco
and Entek (former Engineering division) and TAM Ceramics and Polyflex
(Electronics division).
1999 1998
Operating Operating
Turnov profit Turno profit
er ver
By Business £m £m £m £m
Electronics 790.1 64.6 686.0 51.0
Ceramics 541.6 49.5 415.4 52.4
Precious Metals 283.2 30.0 275.2 27.4
Ongoing operations 1,614.9 144.1 1,376.6 130.8
Operations to be 223.2 20.4 175.3 18.4
disposed
Discontinued 72.0 8.0 208.1 20.8
operations
Goodwill amortisation - (12.9) - (2.8)
- ongoing (note 6)
Exceptional items - - (45.6) - (49.5)
ongoing
Total 1,910.1 114.0 1,760.0 117.7
2 Operating exceptional items
1999 1998
£m £m
Rationalisation programme 21.0 49.5
Integration of Premier 22.9 -
Refractories
International, Inc.
Other 1.7 -
Total before tax 45.6 49.5
Taxation attributable (2.3) (9.7)
Total after tax 43.3 39.8
The £21.0m charge in 1999 relates to a Group wide rationalisation programme
initiated in 1998. Cash spend in 1999 was £14.2m, leaving £12.1m provided at
31 December 1999. No further charges relating to this programme are expected
to be made.
The charge of £22.9m relates to costs arising from the integration of Premier
Refractories International, Inc. ('Premier'), which was acquired during the
year. Of the 1999 charge, £10.2m related to asset write-downs and £6.9m was
spent, leaving £5.8m provided at 31 December 1999. A further £23.0m of cash
costs are expected to be charged in 2000.
3 Loss on sale or termination of discontinued operations and on disposal of
fixed assets.
Net losses on sale or termination of operations in 1999 include
a loss on the sale of the Group's 35% interest in Entek Holdings LLC of
£9.0m, after goodwill written off of £12.3m; a profit of £5.4m on the sale of
TAM Ceramics, after goodwill written off of £7.2m; and additional costs
relating to prior year disposals of £13.9m (1998: £10.3m). In 1998 the total
loss included the write-off of all the goodwill which arose on the acquisition
of the businesses comprising Cookson Fibers, Inc (£58.3m) and the Group's 45%
share of Zimco Holdings Pty Ltd (£2.1m), both of which were disposed of in
early 1999. For the full year 1998, the loss totalled £80.6m of which £60.4m
was goodwill.
The net loss on disposal of fixed assets comprises £0.9m of losses (1998:
£10.3m of losses net of £1.3m of profits). In 1999, the taxation credit
attributable to the losses was £nil (1998: £0.8m).
4 Interest
From 1999, precious metals consignment fees are included within Group
operating profit, whereas in prior years they were included in the net
interest charge. Prior year comparatives have been restated accordingly.
Consignment fees were £5.2m both in 1999 and in 1998.
5 Earnings per share
Basic earnings per share are calculated using a weighted average of 700m
(1998: 685m) ordinary shares in issue during the year. Diluted earnings per
share are calculated assuming conversion of outstanding dilutive share
options. These adjustments give rise to an increase in average ordinary
shares of 2.9m (1998:1.9m). On the face of the Group profit and loss account,
earnings per share are shown both before and after goodwill amortisation and
exceptional items. There were 725m shares in issue at 31 December 1999
(1998: 692m).
The Directors believe that the calculation of earnings per share excluding
goodwill amortisation and all exceptional items, together with the associated
tax charge or credit, gives the most appropriate measure of the underlying
earnings of the Group. This calculation is based on earnings of £36.7m (1998:
£20.1m loss), less goodwill amortisation and exceptional items totalling
£76.9m (1998: £141.9m) and less the associated tax credit of £5.2m (1998:
£11.9m).
6 Goodwill
Goodwill arising in 1999 amounted to £519.6m (1998: £102.4m) and is being
amortised over its estimated life of 20 years. Accumulated goodwill arising
prior to 1998, which remains written-off directly against Group reserves,
amounts to £513.0m (1998: £532.5m). Of this total, £85.1m relates to the
business reported as operations to be disposed.
Of the 1999 goodwill amortisation of £12.9m (1998: £2.8m), £4.6m related to
Electronics (1998: £0.5m), £ 7.2m to Ceramics (1998: £1.5m) and £1.1m to
Precious Metals (1998: £0.8m).
7 Tangible fixed assets
The Company has adopted Financial Reporting Standard 15, 'Tangible Fixed
assets', for the 1999 accounts and has changed its policy of carrying certain
of the Group's tangible fixed assets at valuation. The effect of this change
of policy is that the carrying amount of all tangible fixed assets have now
been restated to historical cost less accumulated depreciation, necessitating
an adjustment of £6.0m, the impact of which is not material on the Group
accounts.
8 Investments
Investments include joint ventures and the Group's investment in a revenue-
sharing arrangement with Electric Lightwave, Inc.
9 Acquisitions
The contribution to turnover of acquisitions for continuing operations was
£177.1m and for operating profit was £14.3m.
10 Post balance sheet event
Following the acquisition of the Enthone-OMI group of companies, announced
in December 1999, the balance of the purchase consideration amounting to
£284.3m ($459.8m) was paid on 10 January 2000.
11 Financial information
For the purpose of this preliminary announcement, 'Group' results represent
the results of the parent company and its subsidiary companies, whereas
'Total' results represent Group results together with the Group's share of
the results of its joint ventures.
The financial statements have been prepared on the basis of accounting
policies set out in the Group's audited statutory accounts for 1999 and
were approved by the Board of Directors on 3 March 2000.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 1999 or 1998 but is
derived from those accounts. Statutory accounts for 1998 have been
delivered to the Registrar of Companies, and those for 1999 will be delivered
following the Company's Annual General Meeting. The auditors have reported
those accounts; their reports were unqualified and did not contain
statements under section 237(2) or (3) of the Companies Act 1985. These
sections address whether proper accounting records have been kept, whether
the Company's accounts are in agreement with these records and whether
the auditor has obtained all the information and explanations necessary for
the purposes of their audit.
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