Interim Results
ELEMENTIS PLC
5 August 1999
ELEMENTIS plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1999
* Sales on continuing operations £266.9 million (1998: £278.6 million)
* Operating profit on continuing operations £27.5 million* (1998: £36.4
million*)
* Profit before tax £24.5 million* (1998: £36.0 million*)
* Earnings per share 4.5 pence* (1998: 5.8 pence*)
* Interim dividend 2.0 pence per share (1998: 2.0 pence)
* before goodwill amortisation and exceptionals
Lyndon Cole, Group Chief Executive of Elementis plc, said:
'The difficult trading conditions experienced towards the end of 1998
continued throughout the first half of 1999. We have continued to take action
to strengthen global management, improve operational efficiencies and provide
greater focus on customers. Costs are being cut by more than £10 million on
an annualised basis by June 2000; headcount will be reduced by around 300 by
the end of 1999 and improved use of working capital is expected to result in a
cash inflow of at least £15 million in the second half.
'Despite the short-term trading pressures, we are increasingly confident that
the actions currently underway will lead to a sustained long-term improvement
in business performance across the Group.'
Enquiries
Elementis
Lyndon Cole Group Chief Executive 0207 398 1400
George Fairweather Group Finance Director
Anna Passey Head of Corporate Communications
Brunswick
Andrew Fenwick 0207 404 5959
Overview
The difficult trading conditions experienced towards the end of 1998 continued
throughout the first half of 1999. Chromium was impacted by increased
competition from producers in the Former Soviet Union and low demand for
chromic oxide; Specialties was affected by lower sales of rheological
additives to the oil exploration drilling sector.
Rigorous action has been taken to strengthen global management, improve
operational efficiencies and provide greater focus on customers. Plans are
being executed to reduce costs in Chromium and Pigments & Specialties by more
than £10 million on an annualised basis by June 2000 when compared to the
start of 1999; headcount will be reduced by around 300 by the end of the year.
Building upon the success achieved over the last two years, programmes to
improve trade working capital utilisation continue to deliver results; this
should result in a cash inflow of at least £15 million in the second half.
Results
Operating profit on continuing operations, before goodwill amortisation and
exceptionals, was £27.5 million, compared with £36.4 million in the first half
of 1998 and £25.1 million in the second half.
Profit before goodwill amortisation, exceptionals and tax was £24.5 million,
compared to £36.0 million in the first half of 1998. Basic earnings per
share, before goodwill and exceptionals, was 4.5 pence, compared with 5.8
pence in the first half of 1998 and 3.2 pence in the second half. Net
exceptional charges before tax were £6.8 million; net borrowings at the end of
June were £60.4 million.
The Board has declared an unchanged interim dividend of 2.0 pence per share
which will be paid on 9 November 1999 to shareholders on the register on 15
October 1999.
Business re-engineering
The 1998 Annual Report stated that improved business performance is being
driven by four key processes: operational excellence, customer focus,
innovation and human resources. Considerable progress has been made in each
of these areas since global business leaders were appointed to run Chromium,
Pigments, Specialties, and Specialty Rubber.
Operational excellence: In addition to the cost reduction and working capital
programme, focus continues on improving safety performance. Lost time
accidents reduced by 40 per cent in the first half compared with the first
half of 1998; in May, the Elementis Chromium site at Corpus Christi, Texas,
completed five years without a single lost time accident.
Customer focus: Sales and marketing functions have been significantly
strengthened; combined Elementis sales forces have been established in certain
regions, including, for the first time, a direct sales presence in Japan and
Northern Asia. Over 200 personnel are currently undertaking a new, tailor-
made sales training programme.
Innovation: New products launched during the period included Nanox, a patented
specialty grade zinc derivative.
Human resources: A number of senior appointments have been made and new
incentive schemes introduced for senior management to more closely align their
remuneration with the future success of the Group.
The Board
The Board was further strengthened in July by the appointment of two new non-
executive directors, Jim Ratcliffe and Eddie Wilson, both of whom have
extensive chemicals industry experience.
Current trading and outlook
Trading conditions continue to be difficult, particularly at Chromium.
However, sales of chromic acid are expected to grow, building upon the success
of the new branded product 'CA21'. Sales of rheological additives to the oil
exploration drilling sector are expected to recover towards the end of the
year. As the second half of the year progresses, the performance of Pigments
& Specialties should start to benefit from the significant restructuring
measures and the enhanced sales organisation.
Despite the short-term trading pressures, we are increasingly confident that
the actions currently underway will lead to a sustained long-term improvement
in business performance across the Group.
Review of Operations
Continuing operations - six months to 30 June
1999 1998
Operating Operating
Sales profit* Sales profit*
£ million £ million £ million £ million
Chromium 58.9 9.5 69.9 17.0
Pigments & Specialties 111.8 14.1 111.7 16.5
Chemical Distribution 73.1 2.7 72.1 1.2
Specialty Rubber 25.7 1.2 27.2 1.7
Inter-group (2.6) - (2.3) -
--------- --------- --------- ---------
266.9 27.5 278.6 36.4
========= ========= ========= =========
* before goodwill amortisation and exceptionals
Chromium
Operating profit before exceptionals for Elementis Chromium was £9.5 million,
compared to £17.0 million in the first half of 1998; sales decreased by 16 per
cent to £58.9 million.
Chromic oxide sales volumes were substantially lower than in the first half of
1998, mainly due to a continuation of the low demand from the aerospace/metal
alloy industries that impacted the 1998 second half results. Demand for
tanned leather grew in North America but weak demand elsewhere depressed
dichromate and chrome sulphate volumes. Low demand in the domestic markets of
chrome producers in the Former Soviet Union has driven them to compete more
aggressively in their export markets; currency devaluation has significantly
improved their cost competitiveness. Chromium profitability was also impacted
by substantially lower selling prices of the sodium sulphate by-product.
Chromic acid volume grew by nearly 10 per cent compared with the first half of
last year, building on the successful launch of the branded chromic acid
product 'CA21' in December 1998. The product gives significant customer
benefits as it is easy to handle, flows well and is dust-free.
Construction of the new $30 million kiln at Corpus Christi, Texas, is on
schedule; the plant will be mechanically complete by the end of this year, in
preparation for start-up early next year. Expansion of the pure salt plant at
Eaglescliffe in the UK is also on track for start-up early next year.
The new kiln will reduce operating costs by over £2 million on an annualised
basis by June 2000 when compared to the start of 1999. On a similar basis,
cost savings from managing Chromium on a global basis and focus on operational
excellence will reduce costs by at least £3 million. Together these will
substantially strengthen the business' cost competitive position. Exceptional
restructuring costs to achieve these savings are estimated at
£3 million of which £0.8 million was charged in the period.
Since the half year, the Chromium management team has been strengthened by the
appointment of a new Managing Director and Commercial Director.
Pigments & Specialties
Operating profit for Pigments & Specialties, before goodwill and exceptionals,
was £14.1 million, compared to £16.5 million in the first half of 1998 which
included only five months results from Rheox. Sales were level at £111.8
million.
At Elementis Pigments, operating profit was lower in the first half,
profitability being impacted by higher overhead absorption rates arising from
the restructuring process. Sales of the new range of high performance red and
yellow coatings grade pigments and construction grade Ferrispec granular
product from the new plant at Easton, Pennsylvania, both launched late last
year, are growing rapidly as new and existing customers approve the products.
The major restructuring and upgrading plans announced in 1997 are on schedule
for completion later this year. The Deanshanger site, near Milton Keynes in
the UK, closed in June with its finishing plant relocated to the Elementis
Specialties facility at Birtley near Durham. The upgrading of the two major
US facilities is progressing well.
At Elementis Specialties (including Rheox), operating profit before goodwill
and exceptionals, was also lower. Sales of rheological additives to the oil
exploration drilling sector declined by over 40 per cent compared to the first
half of 1998. Sales of rheological additives for water based coatings grew by
7 per cent as the acceptance rate at major customers develops. Since the half
year end, plans have been approved to invest £2 million in the Livingston
production facility in Scotland to meet growing worldwide demand for these
technically innovative products. Capacity in Livingston is also being
increased to replace the small, high cost production unit in Germany which
will close around the end of the year.
A number of new products were launched during the period, the most significant
being Nanox, a patented specialty grade zinc derivative with full range
ultraviolet absorbency and transparency properties.
During the period, a combined Pigments & Specialties selling organisation was
established. The former Rheox sales force in North America now sells
colourants and additives, giving customers access to the full Elementis range.
In Europe, the Specialties sales force will also represent Pigments in the
coatings market. In May, a joint venture was established in Japan to give
Elementis a direct and technical sales presence in the world's second largest
specialty chemicals market. Certain Elementis Specialties support functions
have also recently been integrated.
Completion of the Elementis Pigments restructuring plans, the Elementis
Specialties integration project and focus on operational excellence will
reduce costs by at least £5 million on an annualised basis by June 2000 when
compared to the start of 1999. Future exceptional restructuring costs to
achieve these savings are estimated at £3.5 million, including £2.5 million of
Pigments costs previously announced; these are in addition to a £0.3 million
fixed asset impairment charge incurred in the first half for the closure of
rheological additives production in Germany.
Chemical Distribution
Operating profit increased to £2.7 million, from £1.2 million in the first
half of 1998, as a result of continued volume growth and margin improvement
across the majority of the product range and the ongoing focus on cost
control. Sales at £73.1 million were 5 per cent lower in US dollar terms
reflecting lower pricing.
Specialty Rubber
Operating profit before exceptionals at Linatex was £1.2 million, compared to
£1.7 million in the first half of 1998. Sales reduced by 6 per cent to £25.7
million. Trading was impacted by difficult minerals processing markets and
customer rescheduling of engineering projects, some of which is expected to be
recovered in the second half.
Following completion of the first stage of the strategic review announced late
last year, Linatex reorganised its regional-based operations into three global
business units: Industrial Rubber Applications, Minerals Processing and
Engineering Process Technologies plus a separate European distribution
business. This resulted in £0.5 million of initial exceptional restructuring
costs.
Business plans for each global unit are being developed. These will focus on
sales growth opportunities and on achieving a step reduction in operating
costs. Further details will be announced in the Autumn.
Exceptionals
Net exceptional charges before tax were £6.8 million. These comprised:
* £6.6 million for the settlement of a US lawsuit relating to the death of
an employee in 1989 as announced in May;
* £1.3 million of restructuring costs;
* £0.3 million fixed asset impairment charge;
* £1.4 million profit on the disposal of a former Harcros builders'
merchants branch.
Contracts have been exchanged to sell the remaining former Harcros branch at
Kingston, UK for £5.3 million; this should result in a second half exceptional
profit of £5.0 million on completion which is scheduled for November.
Cash flow and balance sheet
Net cash inflow from continuing operating activities was £32.7 million
compared to £23.0 million in the first half of 1998.
Cash expenditure on fixed assets totalled £21.9 million, of which just over
half was at Elementis Chromium.
Working capital outflow was £1.1 million compared to £17.1 million for
continuing operations in the first half of 1998. Building upon the success
achieved over the last few years, programmes to improve working capital
utilisation continue to deliver results; this should result in a net working
capital cash inflow of at least £15 million in the second half. Net
borrowings at the end of June were £60.4 million compared to £48.0 million at
the end of December 1998. Shareholders' funds at the half year were £369.7
million compared to £367.8 million at December 1998.
Year 2000
The Group's year 2000 computer technology compliance programme is now largely
complete. Work on the remaining outstanding items is scheduled for completion
over the coming weeks. The estimate of the total cost of resolving year 2000
issues is unchanged at £1 million.
Consolidated Profit & Loss Account
for the six months ended 30 June 1999
Before
goodwill 1999 1998
amortisat Six Six 1998
ion Goodwill months months Year
& except- amortis- Except- to 30 to 30 to 31
ionals ation ionals June June Dec
Note £million £million £million £million £million £million
Turnover
Continuing
operations 266.9 - - 266.9 278.6 534.2
Discontinued
operations - - - - 306.2 508.4
--------- --------- --------- --------- --------- ---------
Turnover:
Group and
share of
joint
venture 266.9 - 266.9 584.8 1,042.6
Less share
of
discontinued
joint
venture's
turnover - - - - (45.7) (68.2)
--------- --------- --------- --------- --------- ---------
Group
turnover 3 266.9 - - 266.9 539.1 974.4
========= ========= ========= ========= ========= =========
Group
operating
profit
Continuing
operations
------------------------------------------------------------------------------
---------------------------------------------------------------------------
Before
goodwill
amortisation
and
exceptionals 27.5 - - 27.5 36.4 61.5
Goodwill
amortisation - (6.3) - (6.3) (5.0) (11.2)
Exceptionals - - (8.2) (8.2) - (3.2)
------------------------------------------------------------------------------
---------------------------------------------------------------------------
27.5 (6.3) (8.2) 13.0 31.4 47.1
Discontinued
operations - - - - (0.7) (7.0)
--------- --------- --------- --------- --------- ---------
3/4 27.5 (6.3) (8.2) 13.0 30.7 40.1
Share of
operating
profit:
Joint
venture -
discontinued
operations - - - - 1.5 2.1
Associates -
discontinued
operations - - - - (0.1) (0.1)
--------- --------- --------- --------- --------- ---------
Operating
profit 27.5 (6.3) (8.2) 13.0 32.1 42.1
Profit on
disposal of
property 4 - - 1.4 1.4 - 5.0
Loss on
disposal of
businesses
- discont-
inued
operations - - - - (11.5) (26.9)
--------- --------- --------- --------- --------- ---------
Profit on
ordinary
activities
before
interest 27.5 (6.3) (6.8) 14.4 20.6 20.2
Interest
rate swap
cancellation
costs - - - - - (2.3)
Net interest
payable (3.0) - - (3.0) (2.5) (8.3)
--------- --------- --------- --------- --------- ---------
Profit on
ordinary
activities
before tax
------------------------------------------------------------------------------
---------------------------------------------------------------------------
Before
goodwill
amortisation
and
exceptionals 24.5 - - 24.5 36.0 49.6
Goodwill
amortisation - (6.3) - (6.3) (5.0) (11.2)
Exceptionals - - (6.8) (6.8) (12.9) (28.8)
------------------------------------------------------------------------------
---------------------------------------------------------------------------
24.5 (6.3) (6.8) 11.4 18.1 9.6
Tax on
profit on
ordinary
activities 5 (5.4) - 0.3 (5.1) (5.8) (8.4)
--------- --------- --------- --------- --------- ---------
Profit on
ordinary
activities
after tax 19.1 (6.3) (6.5) 6.3 12.3 1.2
Minority
interests
- equity 0.1 - - 0.1 - -
--------- --------- --------- --------- --------- ---------
Profit for
the
financial
period 19.2 (6.3) (6.5) 6.4 12.3 1.2
Dividends 6 (8.6) - - (8.6) (8.6) (21.6)
--------- --------- --------- --------- --------- ---------
Amount
transferred
(from)/to
reserves 10.6 (6.3) (6.5) (2.2) 3.7 (20.4)
========= ========= ========= ========= ========= =========
Earnings per
ordinary
share 7
Basic and
diluted 1.5p 2.4p 0.3p
Basic and
diluted
before
goodwill
amortisation
and
exceptionals 4.5p 5.8p 9.0p
Consolidated Balance Sheet
at 30 June 1999
1999 1998 1998
30 June 30 June 31 Dec
£million £million £million
Fixed assets
Goodwill 236.0 236.7 231.9
Tangible assets 172.0 165.0 155.5
Investment in joint venture - 38.7 -
Investment in associated undertakings 1.8 1.6 1.6
-------- -------- --------
409.8 442.0 389.0
-------- -------- --------
Current assets
Stocks 76.6 117.1 85.5
Debtors 122.6 225.8 108.8
Cash at bank and in hand 212.5 84.1 224.7
-------- -------- --------
411.7 427.0 419.0
-------- -------- --------
Creditors: amounts falling due within one year
Borrowings 14.3 41.3 24.6
Proposed dividend 8.7 8.6 13.0
Creditors 114.1 126.1 98.7
-------- -------- --------
137.1 176.0 136.3
-------- -------- --------
Net current assets 274.6 251.0 282.7
-------- -------- --------
Total assets less current liabilities 684.4 693.0 671.7
-------- -------- --------
Creditors: amounts falling due after more than
one year
Borrowings 258.6 263.1 248.1
Government grants 0.8 0.8 0.8
-------- -------- --------
259.4 263.9 248.9
Provisions for liabilities and charges 52.9 50.7 52.6
-------- -------- --------
312.3 314.6 301.5
-------- -------- --------
372.1 378.4 370.2
======== ======== ========
Capital and reserves
Called up share capital 21.6 21.6 21.6
Share premium 1.1 0.9 1.1
Profit and loss account 347.0 353.3 345.1
-------- -------- --------
Shareholders' funds - equity 369.7 375.8 367.8
Minority interests - equity 2.4 2.6 2.4
-------- -------- --------
372.1 378.4 370.2
======== ======== ========
Net borrowings (60.4) (220.3) (48.0)
Cash Flow Statement
for the six months ended 30 June 1999
1999 1998
Six Six 1998
months months Year
to 30 to 30 to 31
June June Dec
Note £million £million £million
Net cash inflow from operating
activities
Continuing operations 32.7 23.0 77.4
Discontinued operations - 9.3 7.1
-------- -------- --------
32.7 32.3 84.5
Dividends from joint venture - - 0.2
Returns on investments and servicing
of finance
Interest rate swap cancellation costs - - (2.3)
Private placement redemption costs - (9.8) (9.8)
Net interest (paid)/received (1.8) 0.8 (6.6)
Dividends paid to minority
shareholders in subsidiaries - (0.1) (0.4)
Tax received/(paid) 0.8 (2.0) (7.0)
Capital expenditure and financial
investment
Purchase of fixed assets (21.9) (17.5) (32.6)
Fixed assets disposals 2.3 0.7 7.1
Acquisitions and disposals
Acquisition of businesses (0.2) (282.9) (283.7)
Disposal of businesses (0.2) 4.5 161.1
Equity dividends paid (12.9) - (8.6)
-------- -------- --------
Cash outflow before use of liquid
resources and financing (1.2) (274.0) (98.1)
Financing and management of liquid
resources 8 1.3 274.8 103.3
-------- -------- --------
Increase in cash 9 0.1 0.8 5.2
======== ======== ========
Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities for the six months ended 30 June 1999
1999 1998
Six Six 1998
months months Year
to 30 to 30 to 31
June June Dec
£million £million £million
Operating profit 13.0 32.1 42.1
Goodwill amortisation 6.3 5.0 11.2
Depreciation (less grants credited) 8.2 8.5 16.6
Share of profits of joint venture - (1.5) (2.1)
Share of losses of associated undertakings - 0.1 0.1
(Profit)/loss on disposal of fixed assets - (0.1) 0.1
Exceptionals in operating profit 8.2 1.4 4.6
Cash outflow on exceptionals (0.7) (1.7) (3.4)
Fundamental restructuring costs - (2.3) (2.7)
Decrease in stocks 11.1 9.8 17.6
(Increase)/decrease in debtors (11.2) (1.6) 14.7
Decrease in creditors (1.0) (17.0) (13.6)
Provisions (1.2) (0.4) (0.7)
-------- -------- --------
Net cash inflow from operating activities 32.7 32.3 84.5
======== ======== ========
Statement of Total Recognised Gains and Losses
for the six months ended 30 June 1999
1999 1998
Six Six 1998
months months Year
to 30 to 30 to 31
June June Dec
£million £million £million
Profit for the financial period 6.4 12.3 1.2
Currency translation differences 4.8 (2.4) (0.5)
Taxation on currency translation differences
on foreign currency borrowings (0.7) - (0.4)
-------- -------- --------
Total recognised gains for the financial
period 10.5 9.9 0.3
======== ======== ========
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 1999
1999 1998
Six Six 1998
months months Year
to 30 to 30 to 31
June June Dec
£million £million £million
Profit for the financial period 6.4 12.3 1.2
Dividends (8.6) (8.6) (21.6)
Share option schemes allotments - 1.0 1.1
Return of capital to shareholders - (402.2) (402.2)
Goodwill on disposal of businesses acquired
prior to 1 January 1998 charged to profit
and loss account - 11.5 26.0
Currency translation differences 4.8 (2.4) (0.5)
Taxation on currency translation differences
on foreign currency borrowings (0.7) - (0.4)
-------- -------- --------
Net increase/(decrease) in shareholders'
funds 1.9 (388.4) (396.4)
At beginning of the financial period 367.8 764.2 764.2
-------- -------- --------
At end of the financial period 369.7 375.8 367.8
======== ======== ========
Notes
1. Accounting policies
Basis of preparation
The financial information for the first six months of 1999 and 1998, which is
unaudited but has been reviewed by the Company's auditors, does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985
and it is presented on the basis of accounting policies set out in the
financial statements of Elementis plc for the year ended 31 December 1998.
Comparatives for the six months to 30 June 1998 have been restated in
accordance with FRS12.
2. Exchange rates
The principal currency in which the Group conducts its business is the US
dollar. For the six months to 30 June 1999, the average exchange rate was
$1.61 (1998: $1.65, Year to 31 December 1998: $1.66). The US dollar rate at
30 June 1999 was $1.58 (1998: $1.67, 31 December 1998: $1.66).
3. Segmental information
Group turnover Group operating profit
1999 1998 1999 1998
Six Six 1998 Six Six 1998
months months Year months months Year
to 30 to 30 to 31 to 30 to 30 to 31
June June Dec June June Dec
£million £million £million £million £million £million
Analysis by
activity
Chromium
Before
exceptionals 58.9 69.9 129.7 9.5 17.0 27.1
Exceptionals - - - (7.4) - -
Inter-group
turnover (2.6) (2.3) (5.3) - - -
-------- -------- -------- -------- -------- --------
56.3 67.6 124.4 2.1 17.0 27.1
-------- -------- -------- -------- -------- --------
Pigments &
Specialties
Before
exceptionals 111.8 111.7 213.9 14.1 16.5 27.1
Exceptionals - - - (0.3) - (3.2)
-------- -------- -------- -------- -------- --------
111.8 111.7 213.9 13.8 16.5 23.9
Goodwill
amortisation - - - (6.3) (5.0) (11.2)
-------- -------- -------- -------- -------- --------
111.8 111.7 213.9 7.5 11.5 12.7
-------- -------- -------- -------- -------- --------
Chemical
Distribution 73.1 72.1 139.2 2.7 1.2 2.6
-------- -------- -------- -------- -------- --------
Specialty
Rubber
Before
exceptionals 25.7 27.2 56.7 1.2 1.7 4.7
Exceptionals - - - (0.5) - -
-------- -------- -------- -------- -------- --------
25.7 27.2 56.7 0.7 1.7 4.7
-------- -------- -------- -------- -------- --------
Total -
continuing
operations
Before
exceptionals 266.9 278.6 534.2 27.5 36.4 61.5
Exceptionals - - - (8.2) - (3.2)
-------- -------- -------- -------- -------- --------
266.9 278.6 534.2 19.3 36.4 58.3
Goodwill
amortisation - - - (6.3) (5.0) (11.2)
-------- -------- -------- -------- -------- --------
266.9 278.6 534.2 13.0 31.4 47.1
-------- -------- -------- -------- -------- --------
Total -
discontinued
operations
Before
exceptionals - 260.5 440.2 - 0.7 (5.6)
Exceptionals - - - - (1.4) (1.4)
-------- -------- -------- -------- -------- --------
- 260.5 440.2 - (0.7) (7.0)
-------- -------- -------- -------- -------- --------
266.9 539.1 974.4 13.0 30.7 40.1
======== ======== ======== ======== ======== ========
Analysis by
area of
operations
North America 180.6 176.6 343.9 9.9 15.8 27.4
Europe 77.5 92.2 171.6 2.7 15.3 18.1
Rest of the
World 8.8 9.8 18.7 0.4 0.3 1.6
-------- -------- -------- -------- -------- --------
Continuing
operations 266.9 278.6 534.2 13.0 31.4 47.1
Discontinued
operations - 260.5 440.2 - (0.7) (7.0)
-------- -------- -------- -------- -------- --------
266.9 539.1 974.4 13.0 30.7 40.1
======== ======== ======== ======== ======== ========
4. Exceptionals
1999
Six months
to 30 June
£million
Operating exceptional costs
Chromium
Settlement of US lawsuit 6.6
Restructuring costs 0.8
Pigments & Specialties
Impairment of fixed assets 0.3
Specialty Rubber
Restructuring costs 0.5
------
8.2
======
Profit on disposal of property 1.4
======
Tax on exceptionals was a credit of £0.3 million.
5. Tax
The tax charge of £5.4 million is based on an estimated effective tax rate on
profit before goodwill amortisation and exceptionals for the Year to 31
December 1999 of 22 per cent. The rate is lower than the standard UK
corporation tax rate for a number of reasons including tax relief on purchased
US goodwill and deferred tax timing differences.
6. Dividends
An interim dividend of 2.0 pence per share (1998: 2.0 pence) will be paid on 9
November 1999 to shareholders on the register at the close of business on 15
October 1999.
7. Earnings per share
1999 1998 1998
Six months Six months Year
to 30 June to 30 June to 31 Dec
pence pence pence
per share per share per share
Basic earnings per ordinary share 1.5 2.4 0.3
Goodwill amortisation 1.5 1.0 2.4
Exceptionals net of taxation 1.5 2.4 6.3
---------- ---------- ----------
Basic earnings per ordinary share
before goodwill amortisation and
exceptionals 4.5 5.8 9.0
========== ========== ==========
Basic earnings per share are based on profit for the period of £6.4 million
(1998: £12.3 million, Year to 31 December 1998: £1.2 million) and on the
weighted average number of ordinary shares in issue during the period of 431.5
million (1998: 515.1 million, Year to 31 December 1998: 472.9 million). Basic
earnings per ordinary share before goodwill amortisation and exceptionals are
based on earnings of £19.2 million (1998: £30.1 million, Year to 31 December
1998: £42.4 million).
Diluted earnings per share are based on an adjusted weighted average number of
shares of 431.5 million, (1998: 515.6 million, Year to 31 December 1998: 474.5
million).
8. Financing and management of liquid resources
1999 1998 1998
Six months Six months Year
to 30 June to 30 June to 31 Dec
£million £million £million
Issue of ordinary share capital - 1.0 1.1
Funds provided by minority interests - 0.9 1.0
Return of capital to shareholders - (402.2) (402.2)
Increase in net borrowings 1.3 675.1 503.4
---------- ---------- ----------
1.3 274.8 103.3
========== ========== ==========
8. Reconciliation of net cash flow to movement in net borrowings
1999 1998 1998
Six months Six months Year
to 30 June to 30 June to 31 Dec
£million £million £million
Change in net borrowings resulting
from cash flows:
Increase in cash in the period 0.1 0.8 5.2
Decrease/(increase) in debt and
leasing finance 6.2 (170.7) (145.9)
Decrease in liquid resources (7.5) (504.4) (357.5)
---------- ---------- ----------
(1.2) (674.3) (498.2)
Currency translation differences (11.2) 3.4 (0.4)
---------- ---------- ----------
Movement in net borrowings (12.4) (670.9) (498.6)
Net (borrowings)/cash at beginning of
the financial period (48.0) 450.6 450.6
---------- ---------- ----------
Net borrowings at end of the financial
period (60.4) (220.3) (48.0)
========== ========== ==========
10. Contingent liabilities
The Group has been notified of a potential warranty claim, under the contract
for the sale of Pauls Malt, relating to export refunds from the Intervention
Board for Agricultural Produce. Should such a claim materialise, this will be
vigorously defended and, in any event, in the opinion of the directors, this
will not have a significant effect on the financial position of the Group.
Auditors' independent review report to Elementis plc
Introduction
We have been instructed by the Company to review the attached financial
information and we have read the other information contained in the interim
report for any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the London Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual financial statements except where
any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists principally
of making enquiries of Group management and applying analytical procedures to
the financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed
in accordance with Auditing Standards and, therefore, provides a lower level
of assurance than an audit. Accordingly, we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review, we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 30 June 1999.
PricewaterhouseCoopers
Chartered Accountants
London
5 August 1999
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