Final Results
Elementis PLC
26 February 2008
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Elementis plc, a Global Specialty Chemicals Company, announces its results for
the year ended 31 December 2007.
HIGHLIGHTS
From continuing operations
• Operating profit before exceptional items up 21 per cent.
o Improved operating profit in all three business segments.
• Revenue up 4 per cent on a constant currency basis.
• Diluted earnings per share before exceptional items up 31 per cent.
• Sale of Pigments completed at a price of £71 million.
• Net borrowings reduced by £84.4 million to £16.2 million.
• Full year dividend up by 12.5 per cent to 2.7 pence.
FINANCIAL SUMMARY
2007 2006
Sales* £299.8m £302.0m
Operating profit* £38.1m £31.5m
Profit before tax* £33.8m £24.8m
Profit after tax* £32.0m £24.8m
Diluted earnings per share* 7.2p 5.5p
Profit for the year £48.1m £31.7m
Diluted earnings per share 10.8p 7.0p
Dividend to shareholders - final proposed 1.4p 1.2p
- full year 2.7p 2.4p
* from continuing operations and before exceptional items.
Commenting on the results, Group Chief Executive, David Dutro said:
'The Group has continued to make excellent progress in both earnings and cash
flow in 2007. We have improved the base level of earnings, stabilised results
from the Chromium business and improved cash flow. The Group has a strong
balance sheet and is in a firm position to drive profitable growth. Key to this
is the Specialty Products business which provides an ideal platform, possessing
a strong technology base, a broad geographic footprint, diverse markets and a
wide range of applications. We have made a strong start to the year, building on
the solid growth achieved in 2007, and expect to maintain progress in 2008 in
line with our expectations.'
- Ends -
Enquiries
Elementis 020 7408 9300
David Dutro, Group Chief Executive
Brian Taylorson, Finance Director
Financial Dynamics 020 7831 3113
Andrew Dowler
Greg Quine
Chairman's Statement
I am pleased to report that the Group has continued to make solid progress in
2007, with improvements in both earnings and cash flow. In addition the Group
made a significant strategic step forward on 31 August by completing the sale of
its Pigments business. This has further strengthened the Group's balance sheet
and provides a firm base for future profitable growth.
Results
Operating profit from continuing operations, and before exceptional items,
improved by 21 per cent to £38.1 million and all three businesses again
contributed to the improvement. Good demand in all of our major end markets was
a key driver in 2007, with the exception of the North American architectural
coatings and construction sectors which were impacted by the slowdown in US
housing. Specialty Products experienced good demand in industrial coatings and
oilfield, and made solid progress in sales to Europe and Asia, while Chromium
benefited from a one time energy rebate of £1.4 million and changes in Chinese
tax regulations prompted improved demand for chrome oxide and chromic acid.
Surfactants made steady progress through further product optimisation and
operating efficiencies. The Group's operating margin improved to 12.7 per cent
(2006: 10.4 per cent) led by Specialty Products where operating margins are now
over 20 per cent (2006: 17.3 per cent).
Revenue from continuing operations was £299.8 million in 2007, an increase of 4
per cent on a constant currency basis.
Net debt came down by £84.4 million to £16.2 million in 2007 and the Group has
also agreed a ten year funding plan with the UK Pension Trustees which will
eliminate the current funding deficit over the funding period and provide
greater certainty to the Group in its future cash flow planning. The Group's
combined deficits for retirement benefit obligations at the end of 2007 under
IAS 19 was £21.5 million versus £37.3 million a year earlier.
Diluted earnings per share from continuing operations, before exceptional items,
improved by 31 per cent to 7.2 pence as a result of the higher operating profit.
The Group recorded exceptional items of £12.5 million (2006: £1.7 million)
related to the gain on sale of the Pigments business and the recent
restructuring exercise. Earnings per share from continuing and discontinued
operations, after exceptional items, was 10.8 pence versus 7.0 pence in 2006.
Dividend
The Board is recommending a final dividend of 1.4 pence taking the total return
to shareholders for the year to 2.7 pence, an increase of 12.5 per cent. Subject
to approval at the Annual General Meeting, the dividend will be paid on 30 May
2008 to members on the register at the close of business on 2 May 2008. The
Board intends to continue to review the dividend policy as earnings performance
permits.
The Board
The Board is responsible for overseeing the Company's strategy in addition to
monitoring performance. Through its own actions and those of the Board
committees, the Board continues to meet its commitment to high standards of
corporate governance. The Board seeks to implement these standards in such a
manner that they provide real benefit for shareholders, employees and customers.
Matthew Peacock stepped down from the Board on 31 January 2008 and Ken Minton
has indicated his intention to leave the Board in April 2008. Matthew and Ken
have been on the Board since 2005 and have made significant contributions to the
Group's strategy and success, and for that I would like to thank them on behalf
of myself and the other directors. The remaining Board members represent a good
balance of industry, geography and functional experience, and so I feel it
necessary to add only one new director in 2008 as replacement for the two who
are leaving. We are actively engaged in a process to identify a suitable
individual and expect to make an announcement during the first half of 2008.
Environmental, Health and Safety
The Board is actively engaged in monitoring this important aspect of our
business, and I am happy to report that our performance in this area remains in
the upper quartile of industry standards. We remain committed to achieving the
very best results and reporting in an open and transparent manner.
People
Our people have been instrumental in implementing a significant amount of
positive change in the Group over the recent period, affecting both them and
their families, and so I would again like to offer my sincere thanks to all of
them for their contributions to the Group's excellent performance.
Outlook
The Group has achieved a great deal over the last 24 months and now has a robust
platform of good quality earnings and a strong balance sheet on which to move
forward. We have made a strong start to the year, building on the solid growth
achieved in 2007, and expect to maintain progress in 2008 in line with our
expectations.
Financial Performance
Revenue
£million 2007 2006
Continuing operations
Specialty Products 141.6 144.8
Surfactants 46.3 46.1
Chromium 115.9 116.8
Inter-segment (4.0) (5.7)
______ ______
299.8 302.0
Discontinued operations
Pigments 59.7 93.9
______ ______
359.5 395.9
______ ______
Introduction
IFRS requires separate disclosure of items of income and expense which are
material by virtue of their nature or amount. These items are considered to be
most appropriately disclosed as exceptional.
The Board considers that the information presented in the tables in the Business
Review provide useful financial information relating to the performance of the
Group. This information should not be considered as an alternative, but as a
supplementary to the full IFRS income statement.
Group results
Group revenue from continuing operations was £299.8 million in 2007 which, after
adjusting for currency movements, represents an increase of 4 per cent over the
previous year, and all three businesses showed an increase on this basis. Market
trends were generally positive for each of the businesses with good demand in
most sectors except for the North American coatings and construction markets
which were impacted by the slowdown in US housing. Volumes were higher in
Specialty Products and Chromium but lower in Surfactants, and pricing was
improved in all three businesses compared to the previous year. Revenue
including discontinued businesses was £359.6 million (2006: £395.9 million)
reflecting the fact that the Pigments business was sold part way through the
year.
Group operating profit from continuing operations before exceptional items
increased by 21 per cent to £38.1 million (2006: £31.5 million), and all three
businesses contributed to the increase. The Group operating margin on the same
basis increased to 12.7 per cent (2006: 10.4 per cent), and the result benefited
from a one time energy rebate of £1.4 million at Chromium in the first half of
2007, and from £2.9 million (2006: £1.8 million) of currency hedging gains.
Diluted earnings per share from continuing operations, before exceptional items,
was 7.2 pence compared to 5.5 pence in the previous year. The increase was
largely driven by the increase in operating profit. After exceptional gains of
£12.5 million, which are described below, diluted earnings per share was 10.8
pence versus 7.0 pence in 2006.
Net borrowings decreased by £84.4 million in the year to £16.2 million following
the disposal of Pigments which reduced debt by around £66 million and was
complemented by £26.4 million of free cash flow from operations.
Elementis Specialty Products
The dominant theme in Specialty Products during 2007 has been one of robust
demand in all major sectors, except for North American coatings. Overall volumes
for the business increased by 3 per cent versus the previous year with sales to
the oilfield and construction sectors showing particularly strong gains.
Management has also continued to focus on improving operating efficiency with an
emphasis on manufacturing and supply chain management, and this has contributed
to operating margins improving to over 20 per cent versus 17 per cent in 2006.
Accelerating new product pipeline has also been a priority and a new colourant
viscosity stabiliser is currently being tested by over 25 customers and should
begin to contribute to sales in 2008.
Operating profit 2007
Operating profit Exceptional items Adjusted operating
£million profit
Continuing operations
Specialty Products 29.3 (0.5) 28.8
Surfactants 1.4 (0.5) 0.9
Chromium 15.0 (0.8) 14.2
Central costs (5.2) (0.6) (5.8)
______ ______ ______
40.5 (2.4) 38.1
______ ______ ______
(continued from table above)
Operating profit 2006
Operating profit Exceptional items Adjusted operating
profit
£million
Continuing operations
Specialty Products 25.9 (0.9) 25.0
Surfactants 0.3 0.3 0.6
Chromium 13.3 (1.4) 11.9
Central costs (6.0) - (6.0)
______ ______ ______
33.5 (2.0) 31.5
______ ______ ______
Sales in 2007 were £141.6 million compared to £144.8 million in 2006 which, on a
constant currency basis, is an increase of 3 per cent. Volumes increased by 3
per cent and average pricing improved by a similar amount, but relatively lower
sales to the higher margin North American region somewhat reduced the positive
impact of price and volume. In coatings, which accounts for around 65 per cent
of total sales, volumes increased by 4 per cent compared to the previous year
with gains in Europe (3 per cent) and Asia (7 per cent), more than compensating
for the weaker demand in North America where volumes were lower by 7 per cent.
Sales to architectural coatings were mostly affected by the slowdown in North
America, but sales volumes in industrial coatings remained at a similar level to
the previous year. Industrial sales volumes were strong in Europe (up 13 per
cent) which more than offset weaker architectural sales (down 7 per cent).
Both architectural and industrial segments showed good volume gains in Asia.
Oilfield sales volumes improved by 6 per cent over the previous year with strong
gains in North America due to the continued drilling activity, plus the
application of new technical approaches by drilling companies to access areas
such as oil bearing shales. In construction, volumes were strongly ahead in
Europe (up 15 per cent) as a result of a buoyant market and some new
applications for defoamers and hectorite products.
Consumer sales volumes improved by 1 per cent with good gains in Europe, due to
growth in antiperspirants and colour cosmetics, compensating for lower growth in
North America where growth in antiperspirants and agricultural applications was
offset by weaker demand in paintballing.
Operating profit before exceptional items was £28.8 million in 2007, which is an
increase of 15 per cent (2006: £25.0 million) with currency having a negligible
effect due to the Group's hedging programme. Improved sales contributed about 9
per cent with the balance coming from reductions in variable costs, where energy
costs were almost £1.0 million lower than the previous year due to management's
decision to take fixed price contracts towards the end of 2006. Variable
logistics and some raw material costs were also marginally lower than the
previous year. Fixed costs were more or less unchanged versus 2006 as
efficiencies in selling, general and administration costs offset modest
inflation in manufacturing costs.
Elementis Surfactants
The Surfactants business has continued a process of optimising the product
portfolio by reducing sales of lower margin commodity products, and focussing on
more differentiated applications where there is greater opportunity to improve
pricing in response to raw material inflation. Consequently sales have continued
to decline in areas such as textiles, leather and pulp and paper but increased
in agriculture, plastics and feed. In addition there is a strong focus on
operational efficiency and cost management in the business to help improve
margins.
Sales in 2007 were £46.3 million compared to £46.1 million in the previous year,
with currency having a negligible effect. Volumes were 8 per cent lower than the
previous year due to the product optimisation program, but also due to lower
sales into the oilfield sector where the stronger Euro made the product offering
less competitive in a predominantly US dollar market. Average pricing across all
products improved by almost 9 per cent as pricing initiatives were launched in
lower margin sectors and in response to rising raw material costs.
Operating profit before exceptional items was £0.9 million in 2007 versus £0.6
million in 2006, with no material impact from currency movements. Improved
pricing more than offset the effects of lower volumes and higher raw material
costs, and fixed costs were maintained at 2006 levels.
Elementis Chromium
In Chromium, 2007 was a year of positive market dynamics and the first full year
of trading since a number of strategic changes were made in the first quarter of
2006. At that time 50 per cent of production capability at the Eaglescliffe, UK
site was mothballed and the business increased its hedging activities in energy
and currency. This was done with a view to creating a more stable earnings
environment, and also included a greater focus on sustainable sales and better
optimisation of production capacity. Market demand for chrome chemicals was
favourable in 2007, particularly in the second half of the year assisted by
changes in tax regulations in China. During the second quarter the Chinese
government eliminated VAT rebates on a broad list of materials, including chrome
metal, chrome oxide and chromic acid, which reduced the competitiveness of
Chinese exporters and thereby increased demand for those products in North
America and Europe. Strength in demand has allowed selling prices to increase in
line with raw materials, where chrome ore costs have been rising as a result of
continued Chinese demand for steel.
Sales in 2007 were £115.9 million, which is an increase of 13 per cent after
adjusting for currency movements of £7.6 million and the impact of the UK plant
closure in March 2006 of £7.0 million. A 12 per cent increase in sales volume
was the main contributor to the year on year improvement, driven by sales of
chromic acid and chrome oxide following the changes in China. Average selling
prices were 4 per cent higher than the previous year due to price increases
implemented in the second half of the year, but were offset by a slightly less
favourable product mix.
Revenue from continuing operations
Effect of
Revenue exchange Increase Revenue
2006 rates 2007 2007
£million £million £million £million
Specialty Products 144.8 (6.9) 3.7 141.6
Surfactants 46.1 (0.3) 0.5 46.3
Chromium 116.8 (7.6) 6.7 115.9
Inter-segment (5.7) 0.6 1.1 (4.0)
______ ______ ______ ______
302.0 (14.2) 12.0 299.8
______ ______ ______ ______
Operating profit from continuing operations
Operating Effect of Operating
profit * exchange Increase profit *
2006 rates 2007 2007
£million £million £million £million
Specialty Products 25.0 (0.1) 3.9 28.8
Surfactants 0.6 (0.1) 0.4 0.9
Chromium 11.9 (0.7) 3.0 14.2
Central costs (6.0) - 0.2 (5.8)
______ ______ ______ ______
31.5 (0.9) 7.5 38.1
______ ______ ______ ______
* before exceptional items
Geographic sales trends showed strong volume gains in North America and in
Europe following the changes in China, while sales volumes to Asia Pacific were
lower than the previous year as Chinese exporters refocused their attention back
to their home market.
Operating profit before exceptional items in 2007 was £14.2 million versus £11.9
million in the previous year. The business benefited from a one time energy
rebate of energy costs in the US as a result of an electricity industry
reorganisation in the State of Texas, which amounted to £1.4 million. Otherwise
the improvement in sales contributed over £9.0 million to operating profit, more
than offsetting increases in fixed and variable costs of around £8.0 million. In
variable costs, chrome ore prices increased by almost 40 per cent over the
previous year. Energy costs, excluding the one time rebate, were slightly lower
than the previous year due to the timing of hedging activity, where fixed price
contracts were concluded by the beginning of 2007. Manufacturing fixed costs
were also higher due to an extensive maintenance programme in the second half of
2007, which was implemented in order to ensure the reliability of plant
operations during a period of high capacity utilisation.
Currency movements reduced operating profit by £0.9 million, with the impact
being significantly lower due to hedging activities.
Central costs
Central costs are costs that are not identifiable as expenses of a particular
business, and are comprised of expenditures of the Board of Directors and the
corporate office. In 2007 central costs have been reduced by £0.2 million.
Exceptional items
Exceptional items after taxation were £12.5 million in the year (2006: £1.7
million). The Group made a gain on disposal of its Pigments business of £16.3
million (2006: £nil). The Pigments business was sold for gross proceeds of
£70.7 million on 31 August 2007.
Past service credits and curtailment gains following changes to the Group's post
retirement medical benefit schemes were £2.0 million (2006: £3.7 million) and
the release of restructuring provisions previously charged as exceptional was
£1.1 million (2006: 1.0 million). Tax charges of £6.9 million (2006: £1.3
million), primarily in relation to the business disposal, were included within
exceptional items.
Interest
Continuing operations
2007 2006
£million £million
Finance income 0.4 0.2
Finance cost of borrowings (6.4) (7.8)
______ ______
(6.0) (7.6)
Pension finance income 2.3 1.7
Discount on provisions (0.6) (0.8)
(4.3) (6.7)
______ ______
Interest on continuing operations decreased by £2.4 million in the year. Lower
borrowings following the disposal of the Pigments business on 31 August 2007
reduced interest on net borrowings by £1.6 million. Interest income from
pension schemes increased by £0.6 million due to a lower pension deficit.
Interest cover, the ratio of operating profit before exceptional items to
interest on net borrowings was 6.7 times in 2007 (2006: 4.6 times).
Taxation
Tax charge Effective
rate
£million per cent
Before exceptional items 2.0 5.3
Exceptional items 6.9 35.5
______ ______
Total 8.9 15.6
______ ______
Tax charges amount to £8.9 million in the year (2006: £1.4 million). Tax on
continuing operations before exceptional items was £1.8 million (2006: £nil),
which represents 5.3 per cent of profit before taxation. The tax charge on
discontinued operations was £0.2 million (2006: £0.5 million). The disposal of
the Group's global Pigments business utilised losses in the US and resulted in
the recognition of an exceptional deferred tax charge of £5.8 million. A
further £1.1 million of taxation was charged to exceptional items in relation to
past service credits on post retirement medical benefits and the release of
unutilised provisions.
Earnings per share
Note 7 sets out a number of calculations of earnings per share. To better
understand the underlying trading performance of the Group, earnings per share
reported under IFRS is adjusted for items classified as exceptional and for
discontinued operations. Diluted earnings per share from continuing and
discontinued operations and before exceptional items increased by 19 per cent to
8.0 pence (2006: 6.7 pence).
Diluted earnings per share from continuing and discontinued operations reported
under IFRS was 54 per cent above 2006 at 10.8 pence (2006: 7.0 pence).
Discontinued operations
Discontinued operations representing the Pigments business which was sold on 31
August 2007, contributed £3.6 million to the profit for the year before
exceptional items (2006: £5.2 million). Pigments' sales in the eight months
ended 31 August 2007 were £59.7 million (2006: £93.9 million) and its operating
profit before exceptional items was £4.3 million (2006: £6.1 million). Interest
and taxation were £0.7 million (2006: £0.9 million). The business was sold for
gross proceeds of £70.7 million with net assets of £46.6 million. After
deducting costs incurred in the disposal and net debt transferred to the
purchaser, the gain on disposal was £16.3 million.
Distribution to shareholders
During 2007 the Group paid a final dividend in respect of the year ended 31
December 2006 of 1.2 pence per share. An interim dividend of 1.3 pence per
share was paid on 5 October 2007 and the Board is proposing a final dividend of
1.4 pence per share which will be paid on 30 May 2008.
Cash flow
The cash flow is summarised below:
2007 2006
£million £million
Ebitda1 54.8 52.4
Change in working capital 0.2 (13.0)
Capital expenditure (8.9) (13.2)
Other 0.9 0.2
______ ______
Operating cash flow 47.0 26.4
Pension (10.6) (7.8)
Interest and tax (7.6) (8.7)
Exceptional items (1.6) (10.8)
Other (0.8) (0.4)
______ ______
Free cash flow 26.4 (1.3)
Dividends (11.1) (10.1)
Acquisitions and disposals 66.8 1.4
Currency fluctuations 2.3 8.8
______ ______
Movement in net borrowings 84.4 (1.2)
Net borrowings at start of year (100.6) (99.4)
______ ______
Net borrowings at end of year (16.2) (100.6)
______ ______
1 Ebitda - earnings before interest, tax, exceptional items, depreciation and
amortisation
Ebitda increased by 5 per cent to £54.8 million in the year (2006: £52.4
million). After adjusting for discontinued activities which contributed £6.1
million (2006: £9.6 million), Ebitda from continuing operations increased by 14
per cent. Working capital cash flow, which increased in 2006 to support the
Chromium business and fund growth in Specialty Products, improved by £13.2
million in 2007. Working capital management in the year reduced debtor days by
5 to 53 and increased creditor days by 1 to 68 days.
Capital expenditure decreased by £3.8 million to £9.4 million which represents
73 per cent of depreciation (2006: 89 per cent). Pension contributions net of
service cost increased by £2.8 million mainly due to higher payments to UK
schemes.
Free cash flow, defined as cash flow available to finance returns to
shareholders, repayment of debt or new investments, increased by £27.7 million
to £26.4 million in 2007. This, together with net proceeds from businesses
disposed of £66.8 million (2006: £1.4 million), reduced borrowings by £84.4
million (2006: increase of £1.2 million) to £16.2 million at 31 December 2007
(2006: £100.6 million).
Balance sheet
2007 2006
£million £million
Intangible fixed assets 147.9 151.6
Other net assets 98.2 148.3
______ ______
246.1 299.9
______ ______
Equity 229.9 199.3
Net borrowings 16.2 100.6
______ ______
246.1 299.9
______ ______
Gearing 2 (per cent) 7 34
2 the ratio of net borrowings to equity plus net borrowings
The disposal of the Pigments business and the strong performance from continuing
operations were the main contributors to a £30.6 million increase in equity in
the year. Debt reduction from operating cash flow and business disposals
reduced gearing to 7 per cent (2006: 34 per cent). Other net assets were £50.1
million lower than previous year, primarily due to the Pigments disposal.
Currency fluctuations did not have a significant effect on equity during the
year and the main exchange rates relevant to the Group are set out below:
2007 2006
Year Year
end Ave end Ave
US dollar 1.99 2.00 1.96 1.84
Euro 1.36 1.46 1.48 1.47
______ ______ ______ ______
Pensions and other post retirement benefits
Retirement benefit obligations decreased by £15.8 million in the year to £21.5
million (2006: £37.3 million). Total contributions to pension and post
retirement benefit schemes amounted to £13.5 million (2006: £12.0 million).
Actuarial gains of £0.8 million (2006: £8.6 million) and curtailment gains and
settlements of £2.0 million (2006: £3.7 million) also reduced the liability. Net
finance income of £2.2 million (2006: £1.6 million) offset the current service
cost of £2.1 million (2006: £2.4 million).
During the year, based on the most recent actuarial valuation on 30 September
2005, the Group agreed to pay £6.4 million per annum to fund the deficit in the
UK scheme over a ten year period. Arrangements with the UK trustees are subject
to review in line with the scheme's triennial valuations.
Consolidated income statement
for the year ended 31 December 2007
2007
Before Exceptional After
exceptional items exceptional
items (note 5) items
Note £million £million £million
Continuing operations
Revenue 299.8 - 299.8
Cost of sales (199.3) - (199.3)
______ ______ ______
Gross profit 100.5 - 100.5
Distribution costs (39.2) - (39.2)
Administrative expenses (23.2) 2.4 (20.8)
______ ______ ______
Operating profit 38.1 2.4 40.5
Finance income 3 2.7 - 2.7
Finance costs 4 (7.0) - (7.0)
______ ______ ______
Profit before income tax 33.8 2.4 36.2
Tax 6 (1.8) (0.7) (2.5)
______ ______ ______
Profit for the year from continuing operations 32.0 1.7 33.7
Discontinued operations
Profit from discontinued operation 3.6 10.8 14.4
Profit for the year 35.6 12.5 48.1
______ ______ ______
Attributable to:
Equity holders of the parent 35.6 12.4 48.0
Minority interests - 0.1 0.1
______ ______ ______
35.6 12.5 48.1
______ ______ ______
Earnings per share
From continuing and discontinued operations:
Basic (pence) 7 8.1 10.9
Diluted (pence) 7 8.0 10.8
From continuing operations:
Basic (pence) 7 7.2 7.6
Diluted (pence) 7 7.2 7.5
(continued from table above)
2006
Before Exceptional After
exceptional
exceptional items
items (note 5) items
Note £million £million £million
Continuing operations
Revenue 302.0 - 302.0
Cost of sales (203.1) - (203.1)
______ ______
Gross profit 98.9 - 98.9
Distribution costs (43.5) - (43.5)
Administrative expenses (23.9) 2.0 (21.9)
______ ______ ______
Operating profit 31.5 2.0 33.5
Finance income 3 1.9 - 1.9
Finance costs 4 (8.6) - (8.6)
______ ______ ______
Profit before income tax 24.8 2.0 26.8
Tax 6 - (0.9) (0.9)
______ ______ ______
Profit for the year from continuing operations 24.8 1.1 25.9
Discontinued operations
Profit from discontinued operation 5.2 0.6 5.8
Profit for the year 30.0 1.7 31.7
______ ______ ______
Attributable to:
Equity holders of the parent 29.9 1.7 31.6
Minority interests 0.1 - 0.1
______ ______ ______
30.0 1.7 31.7
______ ______ ______
Earnings per share
From continuing and discontinued operations:
Basic (pence) 7 6.8 7.1
Diluted (pence) 7 6.7 7.0
From continuing operations:
Basic (pence) 7 5.6 5.9
Diluted (pence) 7 5.5 5.8
Consolidated balance sheet
at 31 December 2007
2007 2006
31 December 31 December
£million £million
Non-current assets
Goodwill and other intangible assets 147.9 151.6
Property, plant and equipment 96.4 126.1
Interests in associates 0.1 0.7
Other investments - 1.0
Deferred tax assets - 7.3
______ ______
Total non-current assets 244.4 286.7
______ ______
Current assets
Inventories 49.4 67.7
Trade and other receivables 52.9 70.1
Derivatives - 3.0
Cash and cash equivalents 8.4 14.5
______ ______
Total current assets 110.7 155.3
______ ______
Total assets 355.1 442.0
______ ______
Current liabilities
Bank overdrafts and loans - (0.7)
Trade and other payables (51.4) (61.8)
Derivatives (2.0) -
Current tax liabilities (3.6) (3.3)
Provisions (0.2) (2.4)
______ ______
Total current liabilities (57.2) (68.2)
______ ______
Non-current liabilities
Loans and borrowings (24.6) (114.4)
Retirement benefit obligations (21.5) (37.3)
Deferred tax liabilities (3.4) -
Provisions (16.3) (19.0)
Government grants (1.5) (2.2)
______ ______
Total non-current liabilities (67.3) (172.9)
______ ______
Total liabilities (124.5) (241.1)
______ ______
Net assets 230.6 200.9
______ ______
Equity
Share capital 22.3 22.1
Share premium 5.2 3.6
Other reserves 66.4 71.0
Retained earnings 136.0 102.6
______ ______
Total equity attributable to equity holders of the parent 229.9 199.3
Minority equity interests 0.7 1.6
______ ______
Total equity 230.6 200.9
______ ______
Consolidated cash flow statement
for the year ended 31 December 2007
2007 2006
£million £million
Operating activities:
Profit for the year 48.1 31.7
Adjustments for:
Investment income (2.7) (1.9)
Finance costs 7.0 8.6
Tax charge 2.5 0.9
Depreciation and amortisation 12.4 14.8
Decrease in provisions (0.3) (2.2)
Pension contributions net of current service cost (10.7) (7.8)
Share based payments 0.9 0.9
Exceptional items (12.5) (1.7)
Cash flow in respect of exceptional items (1.6) (10.8)
______ ______
Operating cash flow before movement in working capital 43.1 32.5
Increase in inventories (0.5) (9.8)
Increase in trade and other receivables (1.2) (1.6)
______ ______
Increase/(decrease) in trade and other payables 1.9 (1.6)
______ ______
Cash generated by operations 43.3 19.5
Income taxes paid (1.2) (0.7)
Interest paid (7.0) (8.3)
______ ______
Net cash flow from operating activities 35.1 10.5
Investing activities:
Interest received 0.6 0.3
Disposal of property, plant and equipment 0.4 1.5
Purchase of property, plant and equipment (8.9) (13.2)
Disposal of businesses 60.6 1.4
Acquisition of intellectual property (0.5) -
Other investments 1.1 -
______ ______
Net cash flow from investing activities 53.3 (10.0)
Financing activities:
Issue of shares 1.8 2.0
Redemption of B shares - (2.1)
Dividends paid (11.1) (10.1)
Purchase of own shares (2.6) (2.4)
(Decrease)/increase in borrowings repayable after one year (82.5) 17.9
______ ______
Net cash from/(used in) financing activities (94.4) 5.3
______ ______
Net (decrease)/increase in cash and cash equivalents (6.0) 5.8
Cash and cash equivalents at 1 January 13.8 8.4
Foreign exchange on cash and cash equivalents 0.6 (0.4)
______ ______
Cash and cash equivalents at 31 December 8.4 13.8
______ ______
Consolidated statement of recognised income and expense
for the year ended 31 December 2007
2007 2006
£million £million
Exchange differences on translation of foreign operations - (23.0)
Actuarial gain on pension and other post-retirement schemes 0.8 8.6
Deferred tax associated with pension and other post-retirement schemes (2.4) -
Losses on cash flow hedges taken to equity (4.6) 1.9
______ ______
Net expense recognised in equity (6.2) (12.5)
Profit for the year 48.1 31.7
______ ______
Total recognised income and expense 41.9 19.2
Total recognised income and expense is attributable to:
Equity holders of the parent 41.8 19.1
Minority interests 0.1 0.1
______ ______
41.9 19.2
______ ______
Notes to the financial statements
1 Preparation of the preliminary announcement
The financial information in this statement does not constitute the Company's
statutory accounts for the years ended 31 December 2007 or 2006 but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
registrar of companies, and those for 2007 will be delivered in due course. The
auditors have reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew attention
by way of emphasis without qualifying their report and (iii) did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
2 Basis of preparation
Elementis plc is a company incorporated in the UK. The information within this
document has been prepared under International Financial Reporting Standards as
adopted by the EU (adopted IRFS) and approved by the Board of Directors on 26
February 2008.
The Group's financial statements have been prepared on the historical cost basis
except that derivative financial instruments and financial instruments held for
trading or available for sale are stated at their fair value. Non-current
assets held for sale are stated at the lower of carrying amount and fair value
less costs to sell. The accounting policies have been consistently applied
across group companies to all periods presented.
3 Finance income
Continuing operations Discontinued operations
2007 2006 2007 2006
£million £million £million £million
Interest on bank deposits 0.4 0.2 - -
Expected return on pension scheme assets 26.2 25.2 1.1 1.0
Interest on pension scheme liabilities (23.9) (23.5) (1.2) (1.1)
______ ______ ______ ______
Pension and other post retirement liabilities 2.3 1.7 (0.1) (0.1)
______ ______ ______ ______
2.7 1.9 (0.1) (0.1)
______ ______ ______ ______
(continued from table above)
Total
2007 2006
£million £million
Interest on bank deposits 0.4 0.2
Expected return on pension scheme assets 27.3 26.2
Interest on pension scheme liabilities (25.1) (24.6)
______ ______
Pension and other post retirement liabilities 2.2 1.6
______ ______
2.6 1.8
______ ______
4 Finance costs
Continuing operations Discontinued operations
2007 2006 2007 2006
£million £million £million £million
Interest on bank loans 6.4 7.8 0.3 0.5
Unwind of discount on provisions 0.6 0.8 0.1 0.2
______ ______ ______ ______
7.0 8.6 0.4 0.7
______ ______ ______ ______
(continued from table above)
Total
2007 2006
£million £million
Interest on bank loans 6.7 8.3
Unwind of discount on provisions 0.7 1.0
______ ______
7.4 9.3
______ ______
5 Exceptional items
Continuing operations Discontinued operations
2007 2006 2007 2006
£million £million £million £million
Curtailment gains and past service credits on 1.3 2.7 0.7 1.0
pension schemes
Release of prior year restructuring provisions 1.1 1.0 - -
Integration and restructuring - (1.7) - -
Disposal of business - - 16.3 -
______ ______ ______ ______
2.4 2.0 17.0 1.0
Tax charge on exceptional items (0.7) (0.9) (6.2) (0.4)
______ ______ ______ ______
1.7 1.1 10.8 0.6
______ ______ ______ ______
(continued from table above)
Total
2007 2006
£million £million
Curtailment gains and past service credits on 2.0 3.7
pension schemes
Release of prior year restructuring provisions 1.1 1.0
Integration and restructuring - (1.7)
Disposal of business 16.3 -
______ ______
19.4 3.0
Tax charge on exceptional items (6.9) (1.3)
______ ______
12.5 1.7
______ ______
Following the implementation of adopted IFRS, the Group has decided to continue
its separate presentation of certain items as exceptional. These are items
which, in management's judgement, need to be disclosed separately by virtue of
their size or incidence in order for the reader to obtain a proper understanding
of the financial information.
6 Income tax expense
Continuing operations Discontinued operations
2007 2006 2007 2006
£million £million £million £million
Current tax:
Overseas corporation tax 0.9 1.2 1.3 0.1
Adjustments in respect of prior years:
United Kingdom 0.2 (0.1) - -
Overseas (1.2) (2.3) - -
______ ______ ______ ______
Total current tax (0.1) (1.2) 1.3 0.1
Deferred tax:
Overseas 2.6 1.1 5.1 0.4
Adjustments in respect of prior years - 1.0 - -
______ ______ ______ ______
Total deferred tax 2.6 2.1 5.1 0.4
______ ______ ______ ______
Income tax expense for the year 2.5 0.9 6.4 0.5
______ ______ ______ ______
Comprising:
Before exceptional items 1.8 - 0.2 0.1
Exceptional items 0.7 0.9 6.2 0.4
______ ______ ______ ______
2.5 0.9 6.4 0.5
______ ______ ______ ______
(continued from table above)
Total
2007 2006
£million £million
Current tax:
Overseas corporation tax 2.2 1.3
Adjustments in respect of prior years:
United Kingdom 0.2 (0.1)
Overseas (1.2) (2.3)
______ ______
Total current tax 1.2 (1.1)
Deferred tax:
Overseas 7.7 1.5
Adjustments in respect of prior years - 1.0
______ ______
Total deferred tax 7.7 2.5
______ ______
Income tax expense for the year 8.9 1.4
______ ______
Comprising:
Before exceptional items 2.0 0.1
Exceptional items 6.9 1.3
______ ______
8.9 1.4
______ ______
The tax charge on profit before exceptional items from continuing operations
represents an effective tax rate on profit before exceptional items for the year
ended 31 December 2007 of 5.3 per cent (2006: nil). The rate is lower than the
standard UK corporation tax due to the amortisation of goodwill in the US for
tax purposes and the utilisation of UK tax losses. Tax on exceptional items
comprised taxation of £5.9 million (2006: £nil) in respect of the disposal of
Pigments business and £1.0 million in respect of curtailment gains on pension
schemes and provision releases (2006: £1.3 million). As a Group involved in
overseas operations, the amount of profitability in each jurisdiction, transfer
pricing legislation and local tax rate changes, will affect future tax charges.
The total charge for the year can be reconciled to the accounting profit as
follows:
2007 2007 2006 2006
£million per cent £million per cent
Profit before tax:
Continuing operations 36.2 - 26.8 -
Discontinued operations 20.8 - 6.3 -
57.0 - 33.1 -
Tax on ordinary activities at 30 per cent (2006: 30 per cent) 17.1 30.0 9.9 30.0
Difference in overseas effective tax rates (0.1) (0.2) (0.3) (1.0)
Expenses not deductible for tax purposes 0.2 0.4 0.2 0.6
Tax losses and other deductions (7.3) (12.8) (3.7) (11.2)
Tax benefit from US goodwill deduction - - (3.9) (11.8)
Adjustments in respect of prior years (1.0) (1.8) (0.8) (2.4)
Tax charge/(credit) and effective tax rate for the year 8.9 15.6 1.4 4.2
A deferred tax charge of £2.4 million (2006: £nil) has been recognised in equity
in the year in respect of actuarial gains and losses.
7 Earnings per share
The calculation of the basic and diluted earnings per share attributable to the
ordinary equity holders of the parent is based on the following:
2007 2006
£million £million
Earnings:
Earnings for the purpose of basic earnings per share 48.0 31.6
Exceptional items net of tax (12.4) (1.7)
______ ______
Adjusted earnings 35.6 29.9
______ ______
2007 2006
Number of shares:
Weighted average number of shares for the purposes of basic earnings per 441.9 439.4
share
Effect of dilutive share options 3.3 7.4
______ ______
Weighted average number of shares for the purposes of diluted earnings 445.2 446.8
per share ______ ______
The calculation of the basic and diluted earnings per share from continuing
operations attributable to the ordinary equity holders of the parent is based on
the following:
2007 2006
£million £million
Profit for the year attributable to equity holders of the parent 48.0 31.6
Profit for the year from discontinued operations (14.4) (5.8)
______ ______
Profit/(loss) from continuing operations 33.6 25.8
Exceptional items from continuing operations after minority interest (1.6) (1.1)
______ ______
Adjusted earnings from continuing operations 32.0 24.7
______ ______
2007 2006
pence pence
Earnings per share:
From continuing and discontinued operations:
Basic 10.9 7.1
Diluted 10.8 7.0
Basic before exceptional items 8.1 6.8
Diluted before exceptional items 8.0 6.7
From continuing operations:
Basic 7.6 5.9
Diluted 7.5 5.8
Basic before exceptional items 7.2 5.6
Diluted before exceptional items 7.2 5.5
From discontinued operations:
Basic 3.3 1.2
Diluted 3.3 1.2
______ ______
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