Final Results
Croda International PLC
26 February 2003
Date: Wednesday, 26 February 2003
Croda International Plc
Preliminary Results Announcement 2002
Croda today announces its preliminary results for the year ended 31 December
2002:
Highlights
£m 2002 2001 Change
Total Sales 313.6 312.4 -
Sales for continuing operations 295.0 285.6 +3%
Pre-tax profit before exceptionals for continuing operations 38.3 31.2 +23%
Pre-tax profit before exceptional items 36.3 31.7 +14%
Earnings per share before exceptional items 17.7p 14.4p +23%
Earnings per share after exceptional items (0.5)p 16.2p N/A
Dividends per share 11.5p 11.3p +2%
• Continuing operations profits up 23%
• Normalised earnings per share also up 23%
• Oleochemicals trading profits up 17%
• Further reduction in net debt of £11.5m
• Strong balance sheet with gearing down to 32% and net debt of £52.1m
Commenting on the results, Chairman, Antony Beevor, said:
'The results for the year demonstrate the resilience of our core business and
the wisdom of concentrating our efforts on the Personal and Health Care sectors
which are demonstrating their ability to withstand the pressures affecting more
cyclical markets. We have restructured our European oleochemicals business from
the start of 2003 to increase the focus on growth in our core markets.
We believe therefore that in 2003, organic growth, new product deliveries and
the exit from low return businesses will mean that we are well placed for
further progress.'
For further information, please contact:
Mike Humphrey, Chief Executive Tel: 01405 863286
Barbara Richmond, Group Finance Director Tel: 01405 863286
Charlie Armitstead, Financial Dynamics Tel: 0207 269 7182
Or visit our web site at: www.croda.com where the presentation to analysts will
be available by midday today.
Chairman's Statement
Trading
The results for the year demonstrate the resilience of our core business and the
wisdom of concentrating our efforts on the Personal and Health Care sectors
which are demonstrating their ability to withstand the pressures affecting more
cyclical markets. I am particularly glad that again we are able to report a
very satisfactory cash position, showing rigorous control at both central and
local level.
At £38.3 million, pre-tax profits of continuing operations before exceptional
items were
23 per cent above last year on turnover up by 3 per cent at £295 million. The
Oleochemicals trading margin has returned to a normal level of over 16 per cent
following the dip in 2001.
Our UK oleochemicals business achieved good growth in 2002. The active
ingredients businesses in France, Sederma and Crodarom, showed significant
growth in both sales and profits. US oleochemical sales were 9 per cent higher
in Sterling terms and about 14 per cent higher in local currency, and margins
also increased. In fact, despite the currency turmoil in South America, sales
increased in the Americas by over 6 per cent in Sterling terms.
We have often said that product development in partnership with our customers is
the key to our future. Although the Health Care sector inevitably has long
development cycles, our pipeline continues to look promising. In the meantime
research and development continues with a number of new patent filings in 2002.
The tax charge at 35.8 per cent is as expected giving earnings per share before
exceptional items of 17.7 pence and a loss per share after exceptional items of
0.5 pence. In line with our stated objective of increasing our dividend cover
over the next few years your Board is proposing a final dividend of 7.59 pence
making 11.5 pence (2001 : 11.3 pence) for the year.
Finance
Last year I paid tribute to the efforts that had gone into improving our working
capital. It is therefore impressive that we should have achieved further
improvements this year. Net debt has been reduced by a further £11.5m to £52.1m
so that year end gearing has fallen to
32 per cent with interest cover at 10 times.
Restructuring
Our oleochemicals businesses in the UK and Europe were reorganised with effect
from the start of 2003. Croda Chemicals Europe incorporates the UK
oleochemicals manufacturing sites and all the UK and mainland European sales
operations in a single market driven structure under David Barraclough. The new
structure is to ensure enhanced focus on growth in our core markets and firmly
places the onus on the Product Development and Marketing teams to develop our
businesses in those markets with the manufacturing facilities in the UK to
support them.
Due to adverse market conditions, and consistent with our strategy, it was
necessary to sell or close a number of our less successful activities. This
included a major part of our gelatin business, the textile chemical business,
Brookstone, and the sale of our solvent recovery business. These units were not
core and could not, in the Board's belief, achieve satisfactory returns. We are
determined to focus our resources and management on those areas which have the
strongest and most certain prospects for growth. This is in the best interests
of all of our stakeholders. Nevertheless, your Board acknowledges the
difficulties for those directly affected as well as for those with
responsibility for managing the process.
Enterprise Resource Planning
I am glad to report that the roll out across the Group of our SAP enterprise
resource planning system continues to go well, thanks to the great amount of
effort invested in preparation and training at each unit due to be brought on to
the system. In 2002 the installation was successfully completed at our sales
operations in France, Italy and Germany. The system has now been in operation
long enough at sufficient locations for us to be convinced of the benefits of
this investment and it will be installed in Brazil in 2003.
Safety, Health and the Environment
In my last Statement I wrote at some length about the importance we attach to
issues related to Health, Safety and the Environment. It is an unusual (and
unwise) manufacturer nowadays that does not do so and we continue to give these
areas high priority, not only in this country but also globally.
People
The Croda culture is one of notable loyalty to the company and a surprisingly
large number of individuals have worked in the Group for the majority of their
working lives. This culture is of great value and I would like on your behalf
to thank our team for their loyalty over the years as well as for their efforts
during 2002.
Outlook
We cannot entirely escape the consequences of what is going on around us in the
financial world and in common with many others face increased cost pressures.
Nevertheless, we believe that in 2003, organic growth, new product deliveries
and the exit from low return businesses will mean we are well placed for further
progress.
Operating Review
The turbulence of 2002 proved once again that there is no substitute for clarity
of strategy and precise timeliness of implementation. Croda had a good year in
spite of the global conditions. We never wavered from our chosen path to
increase innovation and add value for our customers. Our continued focus on
Consumer Care paid real dividends in increased profits, cash generation and real
growth in our core speciality Oleochemical business. On continuing operations
sales were up 3.3%, with the core speciality Oleochemical business increasing
sales by over 5%. Operating profit for continuing operations increased by 15.9%
and profit before tax, helped by lower interest charges, was 22.8% higher than
2001. The core speciality Oleochemical operations returned to a more normal
trading margin of 16.7% and now represents over 88% of group turnover and nearly
93% of trading profit. It was once again a tough year for the remaining
industrial businesses but in spite of falling sales, margins were increased to a
creditable 9.7% from 9.2% in 2001. These businesses are well managed operations
which performed well against their global peer group.
For the first time in a number of years we increased sales in the UK for our
continuing operations with particular growth in Personal Care, and overall sales
in Europe were up over 4%, in what was a very tough market. Sales were down in
France and flat in Germany and Italy, but we achieved good growth in the Benelux
countries, Spain, Switzerland and especially Poland, Hungary and the Czech
Republic.
In the Americas, we returned to the historically strong growth we had enjoyed
for many years prior to the second half turmoil of 2001. Sales in the USA
increased by nearly 9%. In some parts of Latin America we increased sales
substantially, compensating for the flat performances in the financially
challenged areas such as Argentina and Brazil. There was also a welcome
increase in sales in Canada.
In Asia, there was a mixed performance. Sales in Japan were flat in extremely
difficult circumstances, but there was good growth in China, South Korea, and
most of South East Asia. Sales in Africa, mainly South Africa, were up almost
10%, but as expected, sales in the Middle East dropped heavily due to political
and economic uncertainty in the region.
Our choice of focus over diversification brought its rewards with sales up
substantially in our target area of Consumer Care. There was a fall in sales
revenue in Plastics Additives caused by the drop in demand in the Middle East,
exacerbated by the volume driven strategy of some competition.
It was again a record year for new product introductions, including Keravis for
hair strengthening, the Eyeliss and Ryzasol skin care active ingredients, and a
number of products from our Crodamazon range in Brazil. This bodes well for
future growth. We continued to invest in our core research competencies and
expect even more great ideas in the future from our dedicated and creative
science teams.
We moved swiftly to continue the strategic focus on true specialities. We sold
Croda Distillates, our solvent recycling business. We closed down the small
textile chemicals business and exited the manufacture of commodity gelatin
products as the aftermath of BSE and continued regulatory pressures took its
toll.
I am pleased to report that capital expenditure was again much better
controlled. This does not mean we are ignoring our future, merely that the
heavy expenditure of the last ten years is bearing fruit. Singapore output grew
in line with plan. Our recent investment in the USA is now fully operational,
giving us both capacity and efficiency. We constructed and commissioned a brand
new lanolin plant in Brazil and completed the new plant and capacity
improvements at Rawcliffe Bridge, which enabled the successful transfer of the
Westbrook business and subsequent closure of the leased site in Bradford. The
SAP system is continuing to provide benefits across Europe and the roll out
continues this year in Brazil followed by Singapore. Again, cash generation was
strong with great efforts at the business units backed by shrewd management at
the centre. We are proud of the achievements in once again reducing debt, but
there will be no let up in the drive to reduce working capital.
Our decision to focus on organic growth seems to be wholly vindicated. We have
the strength in our balance sheet to make suitable acquisitions, but we also
have the strength of mind to pursue only those that will add true value.
Oleochemicals
Results 2002 2001 %
£m £m Change
External Turnover 260.1 247.4 5
Trading Profit 43.4 37.0 17
Margin 16.7 15.0 11
Capital Employed 198.2 205.5 (4)
Return on Capital 21.9% 18.0% 22
This was a strong performance in challenging market conditions. Trading profits
increased by 17.3% on a sales increase of 5.1%. We continued to refine the
product portfolio and returned to a trading margin of 16.7%. In spite of a
number of raw material price increases, we increased gross margins. We
continued to implement price increases and again improved the product mix.
We achieved good growth in Personal Care, led once again by Sederma. They
enhanced their leadership in the Actives market with another sparkling set of
new product introductions. Last year's key product launch, Matrixyl, was a
great success. Planned customer launches in 2003 will ensure that it becomes
the most exciting new product for Skin Care in recent years. Our plant extracts
business, Crodarom, also had a terrific year by moving up the value chain with
an emphasis on quality and innovation.
In North America, the drop in performance in 2001 was completely reversed by
aggressive marketing of both new and more mature products. The new capacity in
Mill Hall has been very welcome and we look forward to more progress in 2003.
The most significant event in this sector was the formation of a pan European
company, combining all the sales and marketing operations throughout the
European mainland with the four main manufacturing operations in the UK. This
new operation faces the market place through customer and industry focused
business units, supported by a unitary manufacturing and logistics resource.
With the exception of Plastics Additives, this business demonstrated good growth
in sales and profits and the new structure will accelerate the process.
In the planning of this new operation, it became obvious that the commodity
gelatin business was unsustainable. With some regret, especially for the people
involved, we decided to exit this business. We also closed the Westbrook site
in Bradford as planned.
In Latin America, we opened the new high quality lanolin plant in Brazil, which
has put clear water between Croda and indigenous manufacturers in this important
region. The Crodamazon project continued on its upward path, with launches in
Europe and the USA which generated a number of exciting enquiries. The
financial instability in the region was extremely well managed and good growth
was secured in a number of countries.
The Singapore plant increased output again and sales from this operation were up
over 16%. There was excellent progress in Personal Care in China and most of
South East Asia. We maintained sales in the Japanese market in adverse market
conditions and the innovation and high quality workforce at Croda Japan give us
cause for optimism going forward. The team at Croda South Africa increased
sales by a very creditable 10%. Emlyn Horne, who has managed this business very
successfully for many years, retires in April and I would like to thank him for
his exceptionally successful leadership throughout all the turmoil of recent
years in this important market.
There was strong growth in our Health Care business which increased sales by
over 14%. We invoiced our first commercial quantity for the exciting Asthma
project and we are fully prepared for supply of Polidocanol to Provensis.
Though both of these projects will not have major impact for some time, solid
progress is being made. The new ultra high purity lipid plant has had a
positive impact as we move the business into the higher value added area of
pharmaceuticals. Globally, Health Care remains one of our key growth platforms
for the future.
The renewed focus on Home Care has produced excellent results and much new
business is in the pipeline. We continue to do well in the supply of additives
for wet wipes/non-wovens. The project to transfer protein technology from Hair
Care to Fabric Care has been successful and we expect significant sales in this
new business area.
Once again, the results for speciality Oleochemicals were underpinned by our
global marketing network, which we will expand again in 2003. This global
spread is a major strength for Croda and enables us to be much less reliant on
one or two major customers than our peer group.
In the last annual report, I remarked that 2002 would be a better year for our
core business, and so it has proved to be. The pipeline of new products means
we should expect further solid progress in 2003.
Other
Results 2002 2001 %
£m £m Change
External Turnover 34.9 38.2 (9)
Trading Profit 3.4 3.5 (3)
Margin 9.7 9.2 5
Capital Employed 21.3 21.8 (2)
Return on Capital 16.0% 16.1% (1)
It was another difficult year for these small units which operate in a much more
depressed environment than our core business. However, it is pleasing to report
increased margins which resulted in flat profits on turnover down by over 8%.
Baxenden Chemicals again produced good results in challenging market conditions.
Fire Fighting Chemicals increased profitability after a poor year in 2001 and
Seatons performed well as it outsourced manufacture to mainland Europe. We
exited the solvent recovery business by selling Croda Distillates. Croda
Application Chemicals and our small company in Australia, Celtite, both had
difficult years but remained in profit.
Summary
In 2002, we increased sales, increased productivity, increased margins,
continued cash generation, increased innovation, reduced debt, continued to
sharpen our focus and most importantly, substantially increased profits. Behind
these achievements is a committed creative workforce, a consistent strategy, and
an unrivalled ability to implement change. We have learned from both our
successes and our failures and we will be stronger because of these lessons.
The corporate culture of innovation and common sense has enabled us to achieve
much over the last few years. There are no certainties in these times of
political and financial turmoil, but we will continue to try to deliver on our
commitments to all our stakeholders and look forward to the challenges of 2003
and beyond.
Financial Review
Trading
We continued to make progress in 2002 with overall sales of £295m for the
continuing businesses up 3.3% in sterling terms, an increase of almost 6% on a
constant currency basis.
In terms of sales volumes the picture is mixed. Sales volumes rose by nearly
7%, with the major exception of the high volume, low value technical oils
business, where volumes fell 15%.
Operating margins returned to their pre-2001 levels at 16.7% for Oleochemicals
and 9.7% for the Other businesses, producing margins for the continuing
operations of 15.9% compared to 14.2% in 2001.
In line with most companies we will experience increased pension and insurance
costs in 2003. The change in pension costs is detailed later in this review and
insurance costs are expected to rise by just over £1m to £5.5m.
Exceptional Items
The exceptional items relate primarily to our withdrawal from a number of
business areas which were declining in terms of volumes and margins and where we
saw no profitable future for the Group. In one case, our solvent recovery
business, we were successful in selling the business but in the other cases the
businesses had to be closed.
The total exceptional cost for the year was £28.9m, although the net cash cost
will be a modest £4.2m.
The trading losses of these businesses totalled £2m and have been reported in
the Profit and Loss Account under the heading of discontinued operations.
Taxation
In last year's Financial Review I noted that even with the introduction of FRS
19, the new Accounting Standard on deferred taxation, I did not expect our tax
rate in 2002 to exceed significantly the 34.7% reported (pre FRS 19) last year.
In line with our expectation, the tax rate on our trading operations for 2002
was 35.8%. The adoption of FRS 19 has increased the comparative rate for 2001
to 40% as a consequence of the Standards requirement to make full provision for
deferred tax on fixed asset timing differences.
Dividends
Again I refer you to last year's Review on the subject of dividends when I
pointed out our dividend cover at that time had fallen to 1.4 times and that it
was and remains your Board's intention to increase this over the next few years.
Accordingly the Board is proposing a final dividend of 7.59 pence making a total
of 11.5 pence for the year. With the increase in our earnings per share before
exceptional items, this raises our cover to over 1.5 times. With strong cash
generation again in 2002, the cash inflow per share is 20 pence giving a cash
flow dividend cover of over 1.7 times.
Cash
It was another very successful year for cash generation, with net debt falling
by £11.5m to £52.1m and this, together with lower interest rates, has led to a
reduction in our interest expense from £5.3m to £4m.
We further reduced working capital by £1.4m, with inventories in particular
falling by almost £5m. Our sales days tied up in working capital decreased from
87 in 2001 to 76 in 2002. As already discussed elsewhere in the announcement,
capital expenditure was relatively low in 2002 at £14.1m.
The cash outflow on taxation returned to a more normal level at a little under
£11m from the abnormally low £3.7m in 2001.
Treasury Policy
The Group's treasury policies are approved by the Board and subject to regular
reporting and review.
The main financial risks faced by the Group relate to currency, interest rates
and the availability of capital.
As far as currency risk is concerned, transaction risk is hedged up to two
months forward by the use of foreign currency bank balances and forward currency
contracts. Translation currency exposure is not hedged but the risk is reduced
by matching interest expense to foreign currency earnings where it is efficient
to do so.
In terms of interest rate risk the policy is to maintain at least half of the
Group's borrowings at floating interest rates, with interest rate swaps being
used where appropriate.
Pensions
As previously reported Croda operates defined benefit and defined contribution
pension schemes. The vast majority of our UK employees, who currently comprise
56% of the total workforce, are covered by defined benefit schemes and have been
for many years. The current depressed state of the UK stock market has had an
impact on the Group's pension funds and the accounting for their funding. In
order to attempt to provide a useful representation of our current pension
situation and comply with the requirements of SSAP 24 and FRS 17, I have
summarised in the table below for our UK pension schemes the balance sheet
position at 31 December. Also included is the actuarial position at 5 October
2002, the date of the latest actuarial valuation of these schemes which is
currently being finalised.
2002 2001
£m Actuarial SSAP 24 FRS 17 SSAP 24 FRS 17
(estimated)
Asset/(Liability) (35.1) 32.2 (89.7) 28.7 (5.6)
Deferred Tax 10.5 (9.7) 26.9 (8.6) 1.7
Net Asset/(Liability) (24.6) 22.5 (62.8) 20.1 (3.9)
Not surprisingly the net liability of the pension fund as measured by FRS 17 has
risen to £62.8m at the end of 2002 compared to the net actuarial liability of
£24.6m. As mentioned in this review last year, FRS 17 measures a long term fund
at a single point in time. In terms of funding decisions it is the actuarial
values which are of most importance. Accordingly, whilst the net liability
under FRS 17 has risen to £62.8m, the net actuarial deficit of £24.6m does not
give the Board significant cause for concern, representing less than 10% of the
market capitalisation of the Group.
In addition I have produced a table below showing the charge to the Profit and
Loss Account for our UK schemes under the two Accounting Standards in 2002 and
our estimate of the 2003 expense.
Profit and Loss Expense
2003 Estimated 2002
£m SSAP 24 FRS 17 SSAP 24 FRS 17
Before operating profit (6.0) (4.4) (3.6) (5.3)
Financing - (0.8) - 2.8
Net Cost (6.0) (5.2) (3.6) (2.5)
The above table illustrates that as a result of the October 2002 actuarial
valuation of our UK pensions schemes, our pension expense will increase under
both Accounting Standards in line with most companies. A further point of note
is that the cash funding of the UK pension schemes by the Group in 2003 is
expected to be approximately £6m which is very similar to the amount paid in
2002 and, therefore, the cash flow will not suffer the same increase in cost as
the Profit and Loss Account.
Under the current Accounting Standard, SSAP 24, we do not expect any significant
change in this pension expense in the next few years. The full implementation
of FRS 17 in 2005, however, will mean it is not possible to determine pension
expenses more than 12 months ahead.
Croda International Plc
Preliminary announcement of trading results for the year ended 31 December 2002
Group profit and loss account
As restated
Continuing Discontinued 2002 Continuing Discontinued 2001
operations operations Total operations operations Total
£m £m £m £m £m £m
Turnover 295.0 18.6 313.6 285.6 26.8 312.4
_______ _____ _______ _______ _____ _______
Operating profit
Group operating profit 39.9 (2.0) 37.9 34.2 0.4 34.6
Share of associates'
operating profit 2.4 - 2.4 2.3 0.1 2.4
_______ ____ _______ _______ _____ _______
Total operating profit 42.3 (2.0) 40.3 36.5 0.5 37.0
Exceptional items - (28.9) (28.9) - 2.5 2.5
Net interest payable (4.0) - (4.0) (5.3) - (5.3)
_______ ____ _______ _______ _____ _______
Profit before taxation 38.3 (30.9) 7.4 31.2 3.0 34.2
_______ ____ _______ _____
UK taxation (1.6) (3.4)
Overseas taxation (11.4) (9.3)
Tax on exceptional items 5.0 (0.1)
_______ _______
Loss after taxation (0.6) 21.4
Minority interests and preference dividends (0.1) (0.2)
_______ _______
Loss attributable to ordinary shareholders (0.7) 21.2
Ordinary dividends (15.0) (14.7)
_______ _______
Reserves transfer (15.7) 6.5
_______ _______
Earnings per share Pence per Pence per
share share
Basic (0.5) 16.2
Basic before exceptional items 17.7 14.4
Ordinary dividends
Interim 3.91 3.85
Final 7.59 7.45
Summarised balance sheet
As restated
At 31 December At 31 December
2002 2001
£m £m
Fixed assets 173.3 194.3
Stock 51.5 60.5
Debtors 89.7 84.9
Cash at bank and in hand 24.2 17.3
Creditors falling due within one year (83.1) (82.8)
Creditors falling due after one year (61.6) (64.8)
Provisions for liabilities and charges (31. 2) (34.4)
_______ _______
162.8 175.0
_______ _______
Shareholders' funds 161.7 173.8
Minority interests 1.1 1.2
_______ _______
162.8 175.0
_______ _______
Movements in shareholders' funds
Loss attributable to ordinary shareholders (0.7) 21.2
Ordinary dividends (15.0) (14.7)
Goodwill written back on disposal 5.2 4.3
Currency translation differences (1.6) (5.0)
_______ _______
Net movement in shareholders' funds (12.1) 5.8
Opening shareholders' funds 173.8 168.0
_______ _______
Closing shareholders' funds 161.7 173.8
_______ _______
Note
With the exception of the prior year adjustment explained in note 4 to the
preliminary announcement there were no other recognised gains or losses except
for those detailed above.
Summarised cash flow
2002 2001
£m £m
Group operating profit 37.9 34.6
Depreciation 15.7 15.2
Amortisation 0.6 0.5
Working capital 1.4 10.5
Other (4.0) (2.8)
_______ _______
Operating cash flow 51.6 58.0
Interest (3.9) (5.4)
Dividends paid (14.8) (14.6)
Taxation (10.7) (3.7)
Fixed assets purchased (13.9) (23.6)
Net purchase of own shares (0.8) (1.3)
Acquisitions and disposals 0.7 30.0
Other (0.2) (1.7)
_______ _______
Movement in net debt from cash flows 8.0 37.7
New finance lease contracts (0.2) (0.1)
Exchange differences 3.7 (1.4)
_______ _______
Movement in net debt in the period 11.5 36.2
_______ _______
Notes to the preliminary announcement
1. Segmental analysis of continuing operations
2002 2001
£m £m
Turnover
Oleochemicals 260.1 247.4
Other 34.9 38.2
_______ _______
295.0 285.6
_______ _______
Trading profit
Oleochemicals 43.4 37.0
Other 3.4 3.5
_______ _______
46.8 40.5
Central costs (4.5) (4.0)
_______ _______
Operating profit 42.3 36.5
_______ _______
Turnover by geographical destination
United Kingdom 50.2 48.6
Rest of Europe 81.4 78.2
Americas 97.5 91.6
Asia 39.6 38.1
Rest of World 26.3 29.1
_______ _______
295.0 285.6
_______ _______
Turnover by market
Personal and Health Care 160.7 150.0
Home Care and Plastics Additives 43.7 43.4
Industrial Specialities 55.7 54.0
Other 34.9 38.2
_______ _______
295.0 285.6
_______ _______
2. Exceptional items
Loss on disposal and closure of
discontinued operations
Loss on disposal (23.7) 3.7
Goodwill written back (5.2) (4.3)
_______ _______
(28.9) (0.6)
Profit on disposal of fixed assets
in discontinued operations - 3.1
_______ _______
(28.9) 2.5
_______ _______
3. Shareholders' funds
Throughout this announcement shareholders' funds include non-equity
interests of £1.1m.
4. Additional matters
a. The financial information above is derived from the Group's full
statutory accounts on which the auditors have reported; their report was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. Statutory accounts for 2001 have been filed with the
Registrar of Companies and those for 2002 will be delivered following the Annual
General Meeting.
b. The final dividend of 7.59p will be paid on 4 July 2003 to
shareholders registered on 6 June 2003.
c. The above financial information has been prepared on the basis of the
accounting policies which are to be set out in the Group's 2002 statutory
accounts, and in accordance with all applicable UK accounting standards and the
Companies Act 1985. The accounting policies are consistent with those applied
in previous years as set out in the Group's 2001 statutory accounts with the
exception of a change in accounting policy for deferred taxation arising from
the required adoption of Financial Reporting Standard 19. The previous policy
of the Group was to provide for taxation on the timing differences between
profits computed for taxation purposes and profits per the financial statements
only to the extent that such taxation was likely to be payable in the
foreseeable future. FRS 19 requires that full provision be made for deferred
taxation. This change in accounting policy results in a prior year adjustment,
reducing shareholders' funds at 1 January 2001 by £10.6m, increasing the
pre-exceptional tax charge for the year ended 31 December 2001 by £1.7m and
reducing the exceptional tax charge for the year ended
31 December 2001 by £2.4m. For the year ended 31 December 2002 the
pre-exceptional tax charge has increased by £0.1m and the tax credit on
exceptional items has increased by £3.9m due to the change in accounting policy.
This information is provided by RNS
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