Interim Results

RNS Number : 3625W

Croda International PLC

28 July 2009

 



Croda International Plc

Interim Results for the Six Months to 30 June 2009

STRONG PERFORMANCE IN CORE CONSUMER CARE BUSINESS 

Highlights	H1 2009	H1 2008*	Change
Sales - continuing operations	£447.5m	£464.1m	-3.6%
- Consumer Care	£237.1m	£203.4m	+16.6%
- Industrial Specialities	£210.4m	£260.7m	-19.3%
Operating profit/(loss) - continuing operations	£51.0m	£59.2m	-13.9%
- Consumer Care	£53.4m	£44.0m	+21.4%
- Industrial Specialities	(£2.4m)	£15.2m	n/a
Profit before tax and exceptionals
- Continuing	£43.6m	£50.6m	-13.8%
- Including discontinued activities	£40.6m	£57.6m	-29.5%
EPS - continuing operations	20.8p	24.5p	-15.1%
Dividend per share	6.5p	6.2p	+4.8%

* Re-presented for disposals 

• Record results from the Consumer Care division. 

• Impact of fall in glycerine prices and significant year-on-year declines in Industrial Specialities depressed overall performance although this division is now showing signs of recovery by breaking even in the second quarter and recording a profit in June.

• Cash flow strong, contributing £22.0m to a reduction of £47.0m in net debt to £351.1m. Positive exchange differences of £25.0m made up the balance.

• Announced closure of two UK production sites - Bromborough in Merseyside and Wilton on Teeside - creating cost savings of at least £5m per annum from 2010

Commenting on the results Martin Flower, Chairman, said:

'Our core Consumer Care business continues to demonstrate resilience with another period of strong growth in sales, profits and margins. The Group's strategy is to continue to capitalise on the compelling opportunities for future growth and drive further progress in this division. While the Industrial Specialities business has been hit hard by the recession, there are now signs of a recovery in demand. We expect this improvement to continue with a return to profitability in the second half. For these reasons, combined with the benefits coming through from our initiatives to reduce costs and generate cash, we are confident of making good progress in the rest of the year.'

For further information, please contact:

Mike Humphrey, Group Chief Executive	Tel: [phone]
Sean Christie, Group Finance Director
Charlie Armitstead, Financial Dynamics	Tel: [phone]

The company will broadcast the meeting with analysts live in a webcast commencing at 09:30AM on the company's website at www.croda.com.

Croda International Plc

Interim results for the six months to 30 June 2009

Continuing turnover declined 3.6% to £447.5m (2008: £464.1m) despite our core Consumer Care business delivering record results. This decline was as a result of the performance of the Industrial Specialities sector where sales are still well down on last year although demand has now started to improve. 

Sterling strengthened versus the year end position compared to the Dollar and Euro but on average was still weaker than the rates seen in the first half of 2008, giving a 16.2% currency translation benefit for the period. The year on year effect of last year's price increases and favourable mix boosted the average selling price per tonne by 3.1%. Continuing volumes declined by 22.9% overall as a result of the global recession, though we have seen a steadily improving monthly trend since the year end. 

Continuing operating profit decreased by 13.9% to £51.0m (2008: £59.2m), as the 21.4% growth in Consumer Care profit was outweighed by the losses incurred in Industrial Specialities. We saw a £6.6m year on year reduction in profitability from falling glycerine prices. Most of this shortfall occurred in Industrial Specialities.

Pre-tax profit from continuing operations was down 13.8% at £43.6m (2008: £50.6m) helped by a lower interest charge due to reduced debt levels and lower interest rates.

Earnings per share on continuing operations declined by 15.1% to 20.8p (2008: 24.5p), showing a similar trend to the pre tax profit decline but with a slightly higher tax charge than last year.

Cash generation was strong, contributing £22.0m to a reduction of £47.0m in net debt despite the payment of the 2008 final dividend amounting to £18.3m in the period. Net debt reduced to £351.1m at 30 June 2009 with the cash flow augmented by favourable exchange differences worth £25.0m. Capital expenditure was in line with depreciation and we saw significant reductions in working capital, driven by an impressive £27.9m decrease in stock levels since the start of the year.

Dividend

We are increasing the interim dividend by 4.8% to 6.5p per share (2008: 6.2p) reflecting our confidence in the underlying strength of the business and the markets in which it operates.

Divisional performance

Following a change of management reporting lines, we have transferred our Home Care market reporting from Consumer Care to Industrial Specialities. All reported figures are on the new basis with 2008 comparatives restated.

Home Care turnover and profit in the first half were as follows:

	2009	2008
Turnover	£10.3m	£10.0m
Operating profit	£0.7m	£0.1m

Consumer Care sales rose 16.6% to £237.1m (2008: £203.4m) and operating profit increased by 21.4% to £53.4m (2008: £44.0m) with return on sales increasing to 22.5% (2008: 21.6%). All markets saw sales and profit progress, though Crop Care growth slowed in the second quarter and basic fatty acid and glycerine sales into Consumer Care were well down. Health Care demand remained robust throughout the world.

In Industrial Specialities, sales declined 19.3% to £210.4m (2008: £260.7m) and the division recorded a loss of £2.4m (2008: £15.2m profit). There were three main causes of this profit reduction:

• Significant volume reductions in key industrial markets.

• Adverse pricing for the by-product glycerine versus last year.

• Entering the year with a stock of high priced raw materials as commodity prices were falling.

We have seen a steady but modest increase in volumes throughout the period, though volumes are still well below the levels seen in the corresponding period of 2008. 

Second quarter trading

Continuing pre-tax profit at £21.9m (2008: £26.6m) in the second quarter was similar to that reported in the first quarter but trading trends were different. Consumer Care sales and profits were lower in the second quarter due to the timing of the Easter holidays, reduced Crop Care volumes (seasonality) and a lower currency translation benefit. Despite this, sales and profits were still ahead of very strong 2008 comparatives. Industrial Specialities broke even in the second quarter and returned to profit in June. This was still well down on 2008 but an encouraging improvement on the first quarter due to improving volumes, lower raw material pricing and overhead cost savings.

Balance sheet

The balance sheet remains strong with reduced debt levels. At 30 June 2009, the Group had £442.4m of committed bank facilities plus a number of uncommitted credit lines. The majority of committed facilities run to June 2011. As a result of falling corporate bond rates, the IAS19 gross pension deficit has increased to £189.7m, more in line with recent actuarial valuations which were used to calculate the cash contributions to the fund. We expect the cash contributions to the pension fund over and above the charge in the profit and loss account to be no more than £10.0m in 2009 compared to £8.9m in 2008. In the first half this amounted to £3.8m (2008: £4.7m).

Site closures

We have announced the closure of two UK production sites, Bromborough in Merseyside and Wilton on Teeside, the latter of which will transfer significant volumes to other Group operations and reduce overheads. We have also announced the closure of the shared services centre in Wilton and have restructured the production management teams across our two largest European sites. Total exceptional cash costs of the site closures will be around £23m though we would expect a benefit from a reduction in working capital of at least £10m. The majority of the cash outflow will occur in 2010. 

The ongoing benefit from these actions will be the elimination of Bromborough losses plus net cost savings from the closure of Wilton of at least £5m per annum from 2010 onwards. In addition to the cash costs, exceptional asset write downs of around £35m will be posted in the current year. As the closure of Wilton was announced after 30 June 2009, its related closure costs will not be charged until the second half.

Outlook

We have a robust business model, with growth in Consumer Care sales and profits, allied to strong margins. Industrial Specialities volumes are improving and the division is moving back into profit as we enter the second half. We have demonstrated our continuing ability to generate cash and we have taken out significant costs across the Group. The business is well placed to benefit from the upturn in industrial end markets when it arrives and we are confident of making good progress in the rest of the year.

Statement of directors' responsibilities

The directors' confirm that this condensed consolidated interim financial information is prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of Croda International Plc are listed in the Group's financial statements for the year ended 31 December 2008, with the exception of the following changes in the period: Mr D M Dunn retired on 29 April 2009, and Mr P N N Turner was appointed on 1 June 2009. A list of current directors is maintained on the Croda website:  www.croda.com.

By order of the Board

Mike Humphrey

Group Chief Executive

Sean Christie

Group Finance Director

Independent review report to Croda International Plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009, which comprises the Group income statement, Group statement of comprehensive income, Group balance sheet, Group statement of changes in equity, Group cash flow statement and related notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of interim financial information performed by the independent auditor of the entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

Leeds

27 July 2009

Group income statement

				Audited
Unaudited £m	Note	2009 First half	2008 First half*	2008 Full year* Before exceptional items	2008 Full year* Exceptional items	2008 Full year* Total
Continuing operations
Revenue	2	447.5	464.1	911.1	-	911.1
Cost of sales		(345.5)	(352.6)	(698.7)	-	(698.7)
		______	______	______	______	______
Gross profit		102.0	111.5	212.4	-	212.4
Operating expenses		(51.0)	(52.3)	(99.8)	-	(99.8)
		______	______	______	______	______
Operating profit	2	51.0	59.2	112.6	-	112.6
Financial expenses	3	(8.1)	(12.3)	(25.5)	-	(25.5)
Financial income	3	0.7	3.7	9.2	-	9.2
		______	______	______	______	______
Profit before tax		43.6	50.6	96.3		96.3
Tax		(15.3)	(17.6)	(31.5)	-	(31.5)
		______	______	______	______	______
Profit after tax from continuing operations		28.3	33.0	64.8	-	64.8
Discontinued operations
Non-exceptional (loss)/profit  after tax		(3.0)	5.2	5.0	-	5.0
Exceptional loss after tax		(34.2)	(9.0)	-	(8.6)	(8.6)
	5	(37.2)	(3.8)	5.0	(8.6)	(3.6)
		______	______	______	______	______
(Loss)/profit for the period		(8.9)	29.2	69.8	(8.6)	61.2
		______	______	______	______	______
Attributable to:
Minority interest		0.2	0.1			0.2
Equity shareholders		(9.1)	29.1			61.0
		______	______			______
		(8.9)	29.2			61.2
		______	______			______
		pence per share	pence per share	pence per share		pence per share
(Loss)/earnings per share of 10p
Basic
Total		(6.8)	21.7	51.8		45.3
Continuing operations		20.8	24.5	48.1		48.1
Diluted
Total		(6.8)	21.3	50.9		44.6
Continuing operations		20.5	24.1	47.3		47.3
Ordinary dividends
Interim		6.50	6.20			6.20
Final						13.55

* re-presented for discontinued operations

Group statement of comprehensive income

				Audited
Unaudited £m		2009 First half	2008 First half	2008 Full year
(Loss)/profit for the period		(8.9)	29.2	61.2
Other comprehensive (expense)/income
Currency translation differences		(12.0)	4.4	26.4
Movement in fair value of cash flow hedges		(0.8)	1.2	(2.8)
Actuarial movement on retirement benefit liabilities (net of deferred tax)		(82.3)	(18.1)	(18.2)
		______	______	______
Total comprehensive (expense)/income for the period		(104.0)	16.7	66.6
		______	______	______

Group balance sheet

				Audited
Unaudited £m	Note	At 30 June 2009	At 30 June 2008	At 31 December 2008
Assets
Non-current assets
Intangible assets		200.3	202.9	203.4
Property, plant and equipment	6	325.8	324.5	392.4
Investments		11.1	7.7	12.7
Deferred tax assets		83.2	52.0	49.4
		______	______	______
		620.4	587.1	657.9
		______	______	______
Current assets
Inventories		156.8	174.9	201.9
Trade and other receivables		163.2	214.7	185.8
Cash and cash equivalents		46.0	42.1	42.3
Other financial assets	7	-	1.6	-
Assets classified as held for sale		-	1.2	1.1
		______	______	______
		366.0	434.5	431.1
		______	______	______
Liabilities
Current liabilities
Trade and other payables		(138.4)	(214.0)	(179.8)
Borrowings and other financial liabilities	7	(60.6)	(107.5)	(87.2)
Provisions		(15.0)	(10.1)	(7.0)
Current tax liabilities		(15.4)	(25.3)	(10.2)
		______	______	______
		(229.4)	(356.9)	(284.2)
		______	______	______
Net current assets		136.6	77.6	146.9
		______	______	______
Non-current liabilities
Borrowings and other financial liabilities		(339.7)	(276.2)	(355.6)
Other payables		(3.8)	(3.3)	(4.7)
Retirement benefit liabilities		(189.7)	(80.4)	(88.5)
Provisions		(35.5)	(38.3)	(41.5)
Deferred tax liabilities		(44.0)	(43.2)	(49.2)
		______	______	______
		(612.7)	(441.4)	(539.5)
		______	______	______
Net assets		144.3	223.3	265.3
		______	______	______
Shareholders' equity		142.9	221.7	263.3
Minority interest in equity		1.4	1.6	2.0
		______	______	______
Total equity		144.3	223.3	265.3
		______	______	______

Group statement of changes in equity

				Audited
Unaudited £m		2009 First half	2008 First half	2008 Full year
Total equity at beginning of period		265.3	219.7	219.7
(Loss)/profit for the period		(9.1)	29.2	61.0
Other comprehensive (expense)/income		(94.6)	(12.5)	5.1
Transactions with owners:
Dividends on equity shares		(18.3)	(14.5)	(22.9)
Share based payments		1.4	1.3	1.5
Consideration received for sale of own shares held in trust		0.2	0.2	0.6
		______	______	______
Total transactions with owners		(16.7)	(13.0)	(20.8)
		______	______	______
Transactions with minority interests:
Share of profit after tax		0.2	0.1	0.2
Currency translation differences		(0.5)	-	0.3
Dividends paid to minority shareholders		(0.3)	(0.2)	(0.2)
		______	______	______
Total minority interest transactions		(0.6)	(0.1)	0.3
		______	______	______
Total equity at end of period		144.3	223.3	265.3
		______	______	______

Group statement of cash flows

				Audited
Unaudited £m	Note	2009 First half	2008 First half	2008 Full year
Cash flows from operating activities
Continuing operations
Operating profit		51.0	59.2	112.6
Adjustments for:
Depreciation and loss on disposal of fixed assets		17.2	14.1	30.9
Changes in working capital		20.5	(15.2)	(4.9)
Pension fund contributions in excess of service cost		(3.8)	(4.7)	(8.9)
Share based payments		1.4	1.3	1.6
Movement on provisions		(6.0)	(10.9)	(16.7)
		______	______	______
Cash generated from continuing operations		80.3	43.8	114.6
Discontinued operations		(2.0)	4.5	6.2
Interest paid		(11.8)	(13.1)	(22.5)
Tax paid		(8.8)	(15.6)	(41.3)
		______	______	______
Net cash generated from operating activities		57.7	19.6	57.0
		______	______	______
Cash flows from investing activities
Acquisition of subsidiaries		-	(1.8)	(4.1)
Purchase of property, plant and equipment	6	(18.9)	(23.3)	(51.9)
Purchase of computer software		-	-	(0.1)
Proceeds from sale of property, plant and equipment		3.3	0.1	0.6
Proceeds from sale of investments		-	-	0.2
Proceeds from sale of businesses (net of costs)		-	49.9	49.4
Cash paid against non-operating provisions		(2.0)	-	(1.2)
Interest received		0.3	1.2	1.6
		______	______	______
Net cash (used in)/generated from investing activities		(17.3)	26.1	(5.5)
		______	______	______
Cash flows from financing activities
Additional borrowings		21.7	-	67.5
Repayment of borrowings		(24.2)	(29.4)	(85.4)
Net purchase of own shares		0.2	0.2	0.6
Dividends paid	4	(18.6)	(14.7)	(23.1)
Other		-	-	(0.3)
		______	______	______
Net cash used in financing activities		(20.9)	(43.9)	(40.7)
		______	______	______
Net movement in cash and cash equivalents		19.5	1.8	10.8
Cash and cash equivalents brought forward		17.3	1.2	1.2
Exchange differences		(3.1)	(1.4)	5.3
		______	______	______
Cash and cash equivalents carried forward
		33.7	1.6	17.3
		______	______	______
Cash and cash equivalents carried forward comprise:
Cash at bank and in hand		46.0	42.1	42.3
Bank overdrafts		(12.3)	(40.5)	(25.0)
		______	______	______
		33.7	1.6	17.3
		______	______	______

A reconciliation of the cash flows above to the movement in net debt is shown in note 8.

Notes to the interim report

1.    a)  General information

The Company is a public limited company (Plc) incorporated and domiciled in the UK. The Company is listed on the London Stock Exchange. This condensed consolidated interim report was approved for issue on 27 July 2009.

The financial information included in this interim financial report for the six months ended 30 June 2009 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 and is unaudited. The comparative information for the six months ended 30 June 2008 is also unaudited. The comparative figures for the year ended 31 December 2008 have been extracted from the Group's financial statements, as filed with the Registrar of Companies, on which the auditors gave an unqualified opinion and did not make a statement under section 237 of the Companies Act 1985.

b) Basis of preparation

This interim financial report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and IAS 34 'Interim financial reporting' (as adopted by the EU). The report should be read in conjunction with the Group's financial statements for the year ending 31 December 2008, which were prepared in accordance with IFRSs as adopted by the EU.

c) Accounting policies

The accounting policies adopted in preparing this report are consistent with those used in the Group's financial statements for the year ended 31 December 2008 as described in those statements. The following new standards, amendments to existing standards or interpretations are mandatory for the first time for financial years beginning on or after 1 January 2009, and have been adopted by the Group effective from 1 January 2009:-

- IAS 1 (revised), 'Presentation of financial statements', The revised standard brings new disclosure requirements regarding 'non-owner changes in equity' and owner changes in equity, which are now required to be shown separately. Under this revised guidance the Group has elected to continue to present two performance statements: an income statement and a statement of comprehensive income (previously the 'Statement of Recognised Income and Expense'). The financial statements have been prepared under the revised disclosure requirements.

- IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. IFRS 8 requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in a change to reported segments, which remain as Consumer Care and Industrial Specialities.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but do not have any impact on the Group - IFRIC 13 'Customer loyalty programmes', IFRIC 14 'The limit on a defined benefit asset, minimum funding requirements and their interaction', IFRIC 15 'Agreements for the construction of real estate', IFRIC 16 'Hedges of a net investment in a foreign operation', IAS 39 (amendment) 'Financial instruments: Recognition and measurement', IFRS 2 (amendment) 'Share based payments - vesting conditions and cancellations', IAS 23 (revised), 'Borrowing costs', IAS 27 (revised) 'Consolidated and separate financial statements', IAS 32 and IAS 1 (amendment) 'Puttable financial instruments and obligations arising on liquidation'.

The following amendment to a standard is expected to have a disclosure only impact on the financial statements for the year ending 31 December 2009 - IFRS 7 (amendment) 'Financial instruments: Disclosures'.

2.    Segmental information

At 30 June 2009 the Group is 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. These are the segments for which summary management information is presented to the Finance Committee and Executive Committee, which is deemed to be the Group's chief operating decision maker.

Income statement	2009 First half £m	2008 First half* £m	2008 Full year* £m
Revenue - continuing operations
Consumer Care	237.1	203.4	418.4
Industrial Specialities	210.4	260.7	492.7
	______	______	______
	447.5	464.1	911.1
	______	______	______
Operating profit/(loss) - continuing operations
Consumer Care	53.4	44.0	89.5
Industrial Specialities	(2.4)	15.2	23.1
	______	______	______
	51.0	59.2	112.6
	______	______	______

There is no material trade between segments. All operating costs of the Group are allocated between the segments.

Total assets
Segment total assets:
Consumer Care	292.9	287.8	336.4
Industrial Specialities	353.0	428.8	446.8
	_____	______	_____
Total segment assets	645.9	716.6	783.2
Goodwill (excluding software)	200.2	200.4	200.3
Assets classified as held for sale	-	1.2	1.1
Tax assets	83.2	52.0	49.4
Cash, other financial assets and other investments	57.1	51.4	55.0
	______	______	______
	986.4	1,021.6	1,089.0
	______	______	______

* Re-presented for discontinued operations

3.    Net financial expenses

	2009 First half £m	2008 First half £m	2008 Full year £m
Financial expenses
Bank interest payable	7.9	12.3	25.5
Expected interest on pension scheme liabilities less return on scheme assets	0.2	-	-
	______	______	______
	8.1	12.3	25.5
	______	______	______
Financial income
Bank interest receivable	(0.7)	(0.4)	(2.1)
Expected return on pension scheme assets less interest on scheme liabilities	-	(3.3)	(7.1)
	______	______	______
	(0.7)	(3.7)	(9.2)
	______	______	______
Net financial expenses	7.4	8.6	16.3
	______	______	______

4.    Dividends paid

	Pence per share	2009 First half £m	2008 First half £m	2008 Full year £m
Ordinary
2007 Final - paid June 2008	10.80	-	14.5	14.5
2008 Interim - paid October 2008	6.20	-	-	8.3
2008 Final - paid June 2009	13.55	18.3	-	-
		______	______	______
		18.3	14.5	22.8
Preference (paid June and December)		-	-	0.1
Dividends paid to minority shareholders		0.3	0.2	0.2
		______	______	______
		18.6	14.7	23.1
		______	______	______

An interim dividend in respect of 2009 of 6.50p, amounting to a total dividend of £8.8m, was declared by the directors at their meeting on 27 July 2009. This interim report does not reflect the 2009 interim dividend payable. The dividend will be paid on 8 October 2009 to shareholders registered on 4 September 2009.

5.    Discontinued operations

In April 2009, continuing its strategy to reduce exposure to basic commodity sectors, the Group announced the closure of its operations at Bromborough in Merseyside, United Kingdom.

During 2008, the Group sold its 46.5% stake in its associate, Baxenden Chemicals Capital Limited, to Chemtura Corporation for £13m and its Chicago Oleochemicals business was sold to H.I.G. Capital LLC for £46.8m.

	2009 First half £m	2008 First half £m	2008 Full year £m
Operating (loss)/profit of discontinued operations	(3.0)	6.6	6.4
Income from disposed associate	-	0.4	0.4
Loss on disposal and closure of discontinued operations	(37.8)	(10.3)	(9.9)
Tax	3.6	(0.5)	(0.5)
	______	______	______
Total loss after tax from discontinued operations	(37.2)	(3.8)	(3.6)
	______	______	______

6.    Property, plant and equipment

	2009 First half £m	2008 First half £m	2008 Full year £m
Opening net book amount	392.4	342.2	342.2
Exchange differences	(37.8)	12.9	72.7
Additions	18.9	23.3	52.4
Business disposals and closures	(29.9)	(38.4)	(39.1)
Other disposals and write offs	(0.1)	(0.1)	(3.0)
Depreciation charge for period	(17.7)	(15.4)	(32.8)
	______	______	______
Closing net book amount	325.8	324.5	392.4
	______	______	______

At 30 June 2009 the Group had contracted capital expenditure commitments of £6.1m (2008: £10.8m).

7.    Financial assets and liabilities

During 2006 the Group took out additional interest rate swaps to fix a proportion of the floating rate acquisition funding, these swaps are being designated as cash flow hedges. Under IFRS the fair value of such derivative instruments must be recognised in the financial statements. Accordingly, a financial liability of £3.2m (30 June 2008: asset of £1.6m) has been recognised within current liabilities (30 June 2008: current assets), being the fair value of the interest rate swaps designated as cash flow hedges, with a corresponding adjustment to equity.

8.    Reconciliation to net debt

	2009 First half £m	2008 First half £m	2008 Full year £m
Net movement in cash and cash equivalents	19.5	1.8	10.8
Movement in debt and lease financing	2.5	29.4	18.2
	______	______	______
Change in net debt from cash flows	22.0	31.2	29.0
New finance lease contracts	-	-	(0.6)
Exchange differences	25.0	(6.8)	(60.5)
	______	______	______
	47.0	24.4	(32.1)
Net debt brought forward	(398.1)	(366.0)	(366.0)
	______	______	______
Net debt carried forward	(351.1)	(341.6)	(398.1)
	______	______	______

9.    Post balance sheet events

On 8 July 2009 the Group announced the closure of its operations at Wilton on Teeside, United Kingdom.  Expected cash closure costs of approximately £13m and a relatively small asset write-off of around £5m will be charged in the second half of the year.

10.    Accounting estimates and judgements

The Group's critical accounting policies under IFRS have been set by management with the approval of the Audit Committee. The application of these policies requires estimates and assumption 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 difference 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. The critical judgements required when preparing the Group's accounts are as follows:

(i) Provisions - the Group has made significant provision for potential environmental liabilities and for the costs of the restructuring exercise following the acquisition of Uniqema.

The environmental provision relates to soil and potential ground water contamination on a number of sites, both currently in use and previously occupied, in Europe and the Americas. Restructuring provisions relate to the ongoing plans to integrate the acquired Uniqema business with the existing Croda businesses. Provisions are made where a constructive or legal obligation can be quantified and where the timing of the transfer of economic benefits relating to the provisions cannot be ascertained with any degree of certainty.  

In relation to the environmental provision, the directors consider that the balance will be utilised within 20 years. With regard to the restructuring provisions, significant elements have been utilised to date and the directors' view is that there will be further elements that will be utilised in the remainder of 2009 with the balance largely utilised by 2011. Based on information currently available and on the detailed plans established for the restructuring of the Group, this level of provision is considered appropriate by the directors.

Following an announcement in April 2009, the Group made a £10m provision for closure costs at its Bromborough site.

(ii) 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 recoverable amounts as calculated at the end of last year far exceed carrying value, including goodwill and as there has been no indication thus far this year of subsequent impairment, there is no sensitivity with regard to impairment.

(iii) Retirement benefit liabilities - the Group's principal retirement benefit schemes are of the defined benefit type. 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, 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. As a result of falling bond rates, the IAS 19 gross pension deficit at 30 June 2009 has increased to £189.7m.

11.    Principal risks

Each division considers strategic, operational and financial risks and identifies actions to mitigate those risks. These risk profiles are updated at least annually. The principal risks and uncertainties for the remaining six months of the financial year are the same risks and uncertainties referred to and discussed in the Group's most recent Annual Report, which can be found at www.croda.com. These risks remain as;  a major site event, loss of key personnel, interruption of raw material supply, major environmental incident, product liability, regulatory compliance, IT failure, management of pension fund assets and working capital management.

12.    Related party transactions

The Group has not entered into any material transactions with related parties in the first six months of the year.

Supplementary analysis of continuing operations restated for discontinued operations and Home Care move

30 June 2009

unaudited £m

	2009		2009		2009
Turnover trends	Q1		Q2		H1
Average price	+ 8.0%		- 1.7%		+ 3.1%
Volume	- 26.2%		- 19.5%		- 22.9%
Underlying	- 18.2%		- 21.2%		- 19.8%
Currency	+ 20.1%		+ 12.4%		+ 16.2%
Continuing sales	+ 1.9%		- 8.8%		- 3.6%
	2009		2009		2009
	Q1		Q2		H1
Turnover
Consumer Care	128.2		108.9		237.1
Industrial Specialities	102.6		107.8		210.4
	______		______		______
	230.8		216.7		447.5
	______		______		______
Profits
Consumer Care	28.7		24.7		53.4
Industrial Specialities	(2.4)		-		(2.4)
	______		______		______
Operating Profit	26.3		24.7		51.0
Interest	(4.6)		(2.8)		(7.4)
	______		______		______
Profit before tax	21.7		21.9		43.6
	______		______		______

	2008		2008		2008
	H1		H2		Year
Turnover
Consumer Care	203.4		215.0		418.4
Industrial Specialities	260.7		232.0		492.7
	______		______		______
	464.1		447.0		911.1
	______		______		______
Profits
Consumer Care	44.0		45.5		89.5
Industrial Specialities	15.2		7.9		23.1
	______		______		______
Operating Profit	59.2		53.4		112.6
Interest	(8.6)		(7.7)		(16.3)
	______		______		______
Profit before tax	50.6		45.7		96.3
	______		______		______

	2008		2008		2008		2008		2008
	Q1		Q2		Q3		Q4		Year
Turnover
Consumer Care	100.5		102.9		105.8		109.2		418.4
Industrial Specialities	126.0		134.7		129.6		102.4		492.7
	______		______		______		______		______
	226.5		237.6		235.4		211.6		911.1
	______		______		______		______		______
Profits
Consumer Care	20.8		23.2		21.5		24.0		89.5
Industrial Specialities	7.4		7.8		6.6		1.3		23.1
	______		______		______		______		______
Operating Profit	28.2		31.0		28.1		25.3		112.6
Interest	(4.2)		(4.4)		(3.8)		(3.9)		(16.3)
	______		______		______		______		______
Profit before tax	24.0		26.6		24.3		21.4		96.3
	______		______		______		______		______

 

END

 

 

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