Final Results
Morgan Crucible Co PLC
22 February 2005
22 February 2005
PRELIMINARY RESULTS FOR THE YEAR TO 4 JANUARY 2005
2004 2003
---------------------------------------------------
Group Turnover £m 795.9 849.6
---------------------------------------------------
Operating Profit* £m 53.7 42.6
---------------------------------------------------
Underlying PBT** £m 41.5 26.9
---------------------------------------------------
Net Debt £m 147.5 249.3
---------------------------------------------------
Underlying EPS*** pence 10.4p 9.1p
---------------------------------------------------
* Defined as statutory operating loss of £11.4 million (2003:loss £32.2
million) before goodwill amortisation of £6.4 million (2003: £7.5 million)
and operating exceptional charges of £58.7 million (2003: £67.3 million).
This measure of earnings is shown because the Directors consider that it
gives a better indication of underlying performance.
** Defined as statutory loss before tax of £78.4 million (2003: loss £78.0
million) before goodwill amortisation of £6.4 million (2003: £7.5 million)
and corporate and operating exceptional charges of £113.5 million (2003:
£97.4 million).
*** Basic underlying loss per share of 27.3p (2003: loss 28.9p) adjusted to
exclude the after tax impact of corporate and operating exceptional items
of 37.7p (2003: 38.0p).
Note: Average exchange rates used were US$1.8315 (2003: US$1.6349) and
Euro 1.4734 (2003: Euro 1.4456)
• Total turnover £795.9 million (2003: £849.6 million). Turnover
from continuing operations up 1.9% to £762.8 million (2003: £748.7 million)
despite adverse currency translation impact of £50.4 million.
• Underlying operating profit up 26.1% to £53.7 million (2003:
£42.6 million). Underlying operating profit from continuing operations up
37.2% to £53.9 million (2003: £39.3 million) despite adverse currency
translation impact of £5.0 million.
• Underlying operating margins for continuing business improved from 5.2% to
7.1%
• Underlying EPS improved by 14.3% to 10.4p (2003: 9.1p)
• Positive free cash flow for the year of £23.0 million compared to an outflow
of £8.8 million in 2003.
• Net debt reduced by over £100 million to £147.5 million (2003:
£249.3 million)
• Operating exceptional costs of £58.7 million (2003: £67.3 million) arising
from profit improvement initiatives of £47.5m and £11.2 million from corporate
costs.
• Profit improvement plan announced in February 2004 on track.
Commenting on the results, Chief Executive Officer, Warren Knowlton said:
'We are delivering on the commitments that we made to our shareholders a year
ago; namely, to achieve target cost savings and profit improvement opportunities
of up to £50 million by the end of 2006. We are making good progress in
rationalising the Group and in creating a strong core from which to grow
profitably. These results indicate that we have the capability to grow the top
line as well as to deliver on our cost rationalisation plans'.
Enquiries
Warren Knowlton, Group Chief Executive 01753 837 306
Mark Robertshaw, Chief Financial Officer 01753 837 302
Charlotte Hepburne-Scott, Robin Walker, Finsbury 020 7251 3801
Market Overview
The recovery of our key businesses is continuing, particularly those of the
Magnetics and Technical Ceramics Divisions. From a geographic perspective,
demand in both the Americas and Asia has been strong whereas the European
markets generally remain flat. The macro-economic variables that Morgan
experienced in 2004 are likely to continue to be factors in 2005 trading, namely
currency effects and increased raw materials prices and energy costs.
Turnover for the year was £795.9 million (2003: £849.6 million). On a continuing
basis, sales were up 1.9% at £762.8 million (2003: £748.7 million) despite the
adverse impact of currency translation. On a constant currency and continuing
business basis, turnover was up 7.1%.
Profit Improvement Plan
The profit improvement plan, as announced in February 2004, remains on track.
The programme benefits are focussed primarily on the Group's three larger
divisions (Magnetics, Insulating Ceramics and Carbon). Key projects in 2004
included site rationalisation in both the Carbon and Insulating Ceramics
businesses, expansion of our presence in lower-cost regions for all divisions,
and additional Joint Venture activity. We had a cash spend of £32 million on the
profit improvement plan in 2004 and are forecasting to spend c. £20 million of
cash in 2005.
Disposals
The Group disposed of a number of non-core activities during the year, the most
significant being the sale of the Auto and Consumer business in June. Other
disposals included the sale of the final two soft coatings businesses in the USA
and the UK for considerations of US$6.2 million and £3.4 million respectively,
and the Fulmer carbon operation for £1.1 million.
Net Debt
Net debt at the end of the year was £147.5 million compared with £249.3 million
in 2003, representing a reduction of £101.8 million. The net debt improvement
year on year can be attributed to a positive free cash flow of £23.0 million,
corporate disposals of net £24.3 million, and a net of £54.1 million from the
rights issue in February 2004. Balance sheet gearing decreased from 96.0% to
61.4% at the end of 2004.
Financial Review
Group underlying operating profit for continuing businesses before goodwill and
operating exceptional costs increased by 37.2% to £53.9 million (2003: £39.3
million). The Group's operating margins for the year were 7.1% on a continuing
basis (2003: 5.2%).
Operating exceptional costs for the year were £58.7 million (2003: £67.3
million). These included the costs of the Group's restructuring programmes of
£47.5 million (2003: £60.8 million) and £11.2 million (2003: £6.5 million) in
respect of the settlement of the US class actions and associated legal costs.
The goodwill amortisation was £6.4 million (2003: £7.5 million).
Corporate exceptional charges for the year totalled £54.8 million (2003: £30.1
million) of which the largest component was the £42.8 million loss on the sale
of businesses (2003: £21.3 million). This arose principally from £40.3 million
relating to the disposal of the Auto and Consumer business. The remainder of the
corporate exceptional charges for the year comprises an £8.2 million loss on
partial disposal of businesses, including £5.9m for the Fulmer operation, and a
£3.8m charge from the sale of various properties (2003: £2.3 million)
The net finance charge reduced in the year to £12.2 million (2003: £15.7
million) reflecting the positive free cash flow and the significant reduction in
Group borrowings. We continue to progress towards our aim of achieving a net
debt to EBITDA ratio of 1:1.
The tax charge for the period was £2.9 million (2003: a net credit of £2.4
million). The effective rate before all exceptional items and goodwill
amortisation was 25% (2003: 23%).
Underlying earnings per share for the period before goodwill amortisation was
10.4 pence (2003: 9.1 pence), restated for the effects of the rights issue.
The net cash inflow from operating activities was £66.7 million (2003: £45.3
million). Free cash inflow in the year of £23.0 million (2003: outflow £8.8
million) after capital expenditure of £38.3 million (2003: £34.3 million).
Receipts from property disposals were £10.2 million (2003: £2.0 million). Net
receipts from corporate disposals of £24.3 million (2003: £32.8 million) were
mainly from the sale of the Auto and Consumer business and the remaining soft
coatings operations.
Dividend Policy
The Board intends to resume the payment of dividends once the Company is
achieving a level of sustained profitability and cash generation. At this time
no dividend has been proposed given the continuing need to invest in the profit
improvement plan and to reduce net debt.
Operating Review
In the operating review all references to operating profit are stated before
goodwill amortisation and operating exceptional costs (EBITA).
Carbon
This business supplies products that exploit both the electrical and mechanical
properties of carbon. Turnover was up c.2% compared to last year at £196.1
million (2003: £192.1 million); however, year on year turnover expressed in
constant currency increased by over 8 %. Operating profit for the year was £19.6
million (2003: £19.2 million) despite adverse currency translation impact of
£2.2m.
The North American business delivered strong performance, driven particularly by
the high demand for personal body armour and core mechanical and electrical
products. In Asia the business saw both underlying market growth and an increase
in market share. The major markets in continental Europe remained difficult in
2004, but some growth in market share was achieved.
The Auto and Consumer global business that was formerly included in the Carbon
segment was sold in June to Energy Conversion Systems.
Magnetics
The performance of the Magnetics business improved significantly from the prior
year, both in terms of turnover and operating profit. Operating profit increased
to £9.8m (2003: £3.0 million), partially due to the development of new market
segments and increase in market share, and partially due to the benefits of the
restructuring actions undertaken. Notable market segments that have experienced
strong growth are electronic article surveillance and automotive applications
such as keyless-go systems. Such top-line growth, combined with the shift of
certain areas of production to high growth, lower-cost countries such as
Slovakia, Malaysia and China, has contributed to the division producing £181.2
million in turnover (2003: £172.1 million). On a constant currency basis, the
turnover for the division was up by 8.4% compared to 2003.
In August 2004, a joint venture with San Huan, a leading Chinese producer of
permanent magnets, was announced.
Technical Ceramics
The Technical Ceramics business enjoyed significant growth in both turnover and
operating profit against 2003. Turnover was £135.7 million (2003: £126.2
million) and operating profit increased to £6.6 million (2003: £0.4 million),
driven by improvement in its major markets such as medical and aerospace, and
good demand from the communications market for power tubes. On a constant
currency basis, turnover for the division was up by 13.6% compared to 2003.
Restructuring initiatives resulted in a reduction of overheads, significantly
contributing to the operating profit result.
Insulating Ceramics
The Insulating Ceramics business includes both heat management products for high
temperature applications as well as crucibles and related products for the
non-ferrous and precious foundry market. The business traded satisfactorily
during the period and turnover was £249.8 million (2003: £258.3 million). Year
on year growth in turnover expressed on a constant currency basis was 1.9%.
Market demand in the Americas has improved compared to 2003; however the
European markets struggled from a weak industrial economy with the added
pressure of a strong Euro/dollar exchange rate. The Asian markets, in particular
China, showed strong growth, partly through market share accretion and partly
through economic growth in the region. Operating profits were £17.9 million
(2003: £16.7 million) reflecting an increased market share in products such as
Superwool, and also the impact of the continuing restructuring actions which, in
combination, more than offset the downward pressures of raw material prices and
energy costs.
Since the year end, a joint venture with Hubei Kailong, a leading manufacturer
of ceramic fibre, has been announced.
Outlook
We anticipate the market conditions experienced in 2004 are likely to continue
in 2005, namely that growth remains healthy in the Americas and Asia, whilst
European markets remain flat.
As we have said before, we are not relying on market conditions to improve
trading performance. We will continue to take action to improve our cost base
and manufacturing productivity. We remain fully committed to our strategy of
delivering on our profit improvement plan and achieving sustainable earnings
growth. After another year of progress, Morgan Crucible is in a stronger
financial position and better placed in its key markets for the pursuit of
profitable longer-term growth.
Warren D. Knowlton
Group Chief Executive Officer
CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED 4 JANUARY 2005
------------------------------------------------------------------------------
2004 2003
Restated*
Note Total Total
£m £m
Turnover
Continuing operations 762.8 748.7
Discontinued operations 33.1 100.9
-------------------
Group turnover 1 795.9 849.6
Other operating income 1.8 3.3
-------------------
797.7 852.9
--------------------------------------------------------------------------------
|Operating profit before goodwill amortisation and |
|operating exceptionals |
|Continuing operations 53.9 39.3 |
|Discontinued operations (0.2) 3.3 |
| ------------------- |
| 53.7 42.6 |
| |
|Operating exceptionals 2 (58.7) (67.3)|
| --------------------|
|Operating (loss) before goodwill amortisation (5.0) (24.7)|
|Goodwill amortisation (6.4) (7.5)|
--------------------------------------------------------------------------------
Operating (loss)
Continuing operations (4.8) (28.3)
Discontinued operations (6.6) (3.9)
-------------------
Group operating (loss) 1 (11.4) (32.2)
Corporate exceptional items
Discontinued operations
-Loss on sale of businesses (42.8) (21.3)
Continuing operations
-Disposal of fixed assets (3.8) (2.3)
-Loss on partial disposal of businesses (8.2) (6.5)
-------------------
3 (54.8) (30.1)
-------------------
(Loss) on ordinary activities before interest and (66.2) (62.3)
taxation
Net finance charges and similar items (12.2) (15.7)
-------------------
(Loss) on ordinary activities before taxation (78.4) (78.0)
Taxation (charge)/credit (including exceptional 4
tax credit of £7.5 million(2003: £4.4 million credit)) (2.9) 2.4
-------------------
(Loss) on ordinary activities after taxation (81.3) (75.6)
Equity minority interest (1.8) (1.4)
-------------------
Net (loss) attributable to The Morgan Crucible (83.1) (77.0)
Company plc
Preference dividends on non-equity shares 5 - (1.2)
-------------------
Retained (loss) for the year (83.1) (78.2)
===================
(Loss)/earnings per share (Note 6)
2004 2003
Restated**
Before goodwill After goodwill Before goodwill After goodwill
amortisation amortisation amortisation amortisation
- underlying 10.4p 8.1p 9.1p 6.0p
- basic (27.3p) (29.5p) (28.9p) (31.9p)
- diluted (29.5p) (31.9p)
- underlying diluted 8.0p 6.0p
* Restated comparatives for the results of operations discontinued in the year.
** Restated comparatives for the impact of the Rights issue during the year.
CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 4 JANUARY 2005
The Group The Company
2004 2003 2004 2003
Restated* Restated*
£m £m £m £m
Fixed assets
Intangible assets - goodwill 93.8 112.2 - -
Tangible assets 326.3 386.3 0.8 1.7
Investment in subsidiary - - 793.5 811.8
undertakings
Other investments 5.6 5.6 0.3 0.9
-----------------------------------------
425.7 504.1 794.6 814.4
Current assets
Stocks 121.3 131.5 - -
-------------------------------------------------------------------------------
|Debtors - due within one year 165.6 178.2 62.1 44.6|
| - due after one year 23.8 28.5 5.5 7.5|
-------------------------------------------------------------------------------
Total debtors 189.4 206.7 67.6 52.1
Cash at bank and in hand 56.3 57.9 18.1 17.2
-----------------------------------------
367.0 396.1 85.7 69.3
Creditors - amounts falling due 250.5 253.1 59.2 39.7
within one year
-----------------------------------------
Net current assets 116.5 143.0 26.5 29.6
-----------------------------------------
Total assets less current 542.2 647.1 821.1 844.0
liabilities
Creditors - amounts falling due
after more than one year
Amounts payable to subsidiary - - 256.7 231.9
undertakings
Borrowings 137.5 230.6 78.9 166.0
Grants for capital expenditure 0.4 0.6 - -
-----------------------------------------
137.9 231.2 335.6 397.9
Provisions for liabilities and 163.9 156.1 14.9 8.3
charges
-----------------------------------------
301.8 387.3 350.5 406.2
-----------------------------------------
NET ASSETS 240.4 259.8 470.6 437.8
=========================================
Capital and reserves
Equity shareholders' funds
Called up share capital 72.5 58.0 72.5 58.0
Share premium account 84.0 44.4 84.0 44.4
Revaluation reserve 1.4 3.7 - -
Merger reserve - - 91.6 91.6
Other reserves 1.4 1.4 - -
Special reserve 22.1 6.0 - 41.7
Capital redemption reserve 28.0 28.0 28.0 28.0
Profit and loss account 18.0 105.7 192.2 171.8
-----------------------------------------
227.4 247.2 468.3 435.5
Non-equity shareholders' funds
Called up share capital 2.3 2.3 2.3 2.3
-----------------------------------------
229.7 249.5 470.6 437.8
-----------------------------------------
Minority interest
Equity 10.6 10.2 - -
Non-equity 0.1 0.1 - -
-----------------------------------------
10.7 10.3 - -
-----------------------------------------
CAPITAL EMPLOYED 240.4 259.8 470.6 437.8
=========================================
* The Group has complied with UITF Abstract 38 Accounting for ESOP trusts.
This has resulted in the reclassification of shares held in employee trusts
from investments to shareholders' funds and has been accounted for as a prior
year adjustment.
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 4 JANUARY 2005
2004 2003
Note £m £m £m £m
Net cash inflow from operating (a) 66.7 45.3
activities
Returns on investments and
servicing of finance
Interest received 1.5 2.3
Interest paid (14.8) (15.8)
Preference dividends paid - (2.3)
-------- --------
Net cash (outflow) from returns
on investments
and servicing of finance (13.3) (15.8)
Taxation (2.3) (6.0)
Capital expenditure and
financial investments
Purchase of tangible fixed assets (38.3) (34.3)
Other proceeds on sale of 10.2 2.0
tangible fixed assets
Purchase of investments (1.0) (0.6)
Disposal of investments 0.4 0.9
-------- --------
Net cash (outflow) from capital
expenditure and
financial investments (28.7) (32.0)
Acquisitions and disposals
Deferred consideration for prior (0.4) (0.4)
year acquisitions
Disposal of businesses 24.3 32.8
-------- --------
Net cash inflow from 23.9 32.4
acquisitions and disposals -------- --------
Cash inflow before use of liquid
resources and financing 46.3 23.9
Management of liquid resources 0.5 10.3
Financing
Increase in Ordinary share capital 54.1 -
Redemption of Preference shares - (28.0)
Purchase of shares for LTIP (3.3) -
Increase in bank loans 7.7 274.2
Repayment of bank loans (105.9) (270.5)
-------- --------
(47.4) (24.3)
-------- --------
Net (decrease)/increase in cash (0.6) 9.9
in the year
------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET BORROWINGS
Net (decrease)/increase in cash (0.6) 9.9
in the year
Cash flow from decrease/ 98.2 (3.7)
(increase) in loans
Cash flow from (decrease) in deposits (0.5) (10.3)
-------- --------
Change in net borrowings 97.1 (4.1)
resulting from cash flows
Exchange movement 4.7 6.4
-------- --------
Movement in net borrowings 101.8 2.3
during the period
Opening net borrowings (249.3) (251.6)
-------- --------
Closing net borrowings (147.5) (249.3)
========= ========
CONSOLIDATED FREE CASH FLOW FOR THE YEAR ENDED 4 JANUARY 2005
2004 2003
Note £m £m
Net cash inflow from operating activities (a) 66.7 45.3
Net interest paid (13.3) (13.5)
Taxation (2.3) (6.0)
-------- --------
Cash earnings 51.1 25.8
Dividends paid - (2.3)
-------- --------
Post dividend cash flow 51.1 23.5
Capital expenditure (38.3) (34.3)
Proceeds on sale of tangible fixed assets 10.2 2.0
-------- --------
Free cash flow 23.0 (8.8)
======== ========
------------------------------------------------------------------------------
(a) Reconciliation of operating loss) to net cash inflow from operating activities
2004 2003
Contin- Discon- Contin- Discon-
uing tinued Total uing tinued Total
£m £m £m £m £m £m
Operating (loss) (4.8) (6.6) (11.4) (28.3) (3.9) (32.2)
Depreciation 33.9 1.6 35.5 38.2 5.2 43.4
Amortisation 6.2 0.2 6.4 6.5 1.0 7.5
of goodwill
Loss on sale 0.4 0.1 0.5 0.2 0.4 0.6
of plant and
machinery
Exceptional 12.4 - 12.4 15.2 - 15.2
non-cash
operating costs
(Increase)/ (2.2) (0.9) (3.1) 5.3 (2.0) 3.3
decrease in stocks
(Increase)/ (8.8) (2.0) (10.8) 13.0 0.3 13.3
decrease in debtors
Increase/ 18.7 2.9 21.6 (14.8) (0.6) (15.4)
(decrease) in
creditors
Increase/ 11.2 4.4 15.6 9.8 (0.2) 9.6
(decrease) in
provisions
--------------------------------------------------------
Net cash 67.0 (0.3) 66.7 45.1 0.2 45.3
inflow from
operating
activities
=========================================================
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED
4 JANUARY 2005
2004 2003
£m £m
Net (loss) attributable to shareholders (83.1) (77.0)
(Deficit) on write-off of revalued assets - (0.3)
Return on investments 0.2 0.3
Foreign currency translation (3.7) 4.5
------- -------
Total recognised (losses) relating to the year (86.6) (72.5)
======= =======
CONSOLIDATED RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED
4 JANUARY 2005
2004 2003
Restated
£m £m
Net (loss) attributable to shareholders (83.1) (77.0)
(Deficit) on write-off of revalued assets - (0.3)
Return on investments 0.2 0.3
Goodwill written back to profit and loss account
on disposals 16.1 11.8
Dividends - (1.2)
------- -------
(66.8) (66.4)
Issue of Ordinary shares 54.1 -
Redemption of Preference shares - (28.0)
Purchase of shares for LTIP (3.4) (0.7)
Foreign currency translation (3.7) 4.5
------- -------
Net decrease to shareholders' funds (19.8) (90.6)
before UITF Abstract 38 adjustment) 249.5 340.1
------- -------
Closing shareholders' funds 229.7 249.5
======= =======
NOTES TO THE ACCOUNTS
1. SEGMENTAL INFORMATION
Net operating assets Turnover Operating profit/(loss)
2004 2003 2004 2003 2004 2003
Restated* Restated** Restated**
£m £m £m £m £m £m
Product group
Carbon 104.4 142.8 196.1 192.1 19.6 19.2
Technical Ceramics 89.3 105.9 135.7 126.2 6.6 0.4
Insulating Ceramics 126.1 138.1 249.8 258.3 17.9 16.7
Magnetics 124.6 134.3 181.2 172.1 9.8 3.0
----------------------------------------------------------------
Continuing 444.4 521.1 762.8 748.7 53.9 39.3
operations
Discontinued - 45.6 33.1 100.9 (0.2) 3.3
operations
Central assets 6.9 5.3
----------------------------------------------------------------
451.3 572.0 795.9 849.6 53.7 42.6
Operating (58.7) (67.3)
exceptionals
Goodwill (6.4) (7.5)
amortisation ------- -------
Group operating (11.4) (32.2)
(loss) ======= ========
The central assets include land and buildings, prepayments and other creditors of the
non operating and holding companies. The discontinued operations in 2004 include the
Auto and Consumer business and sale of the two remaining Coatings operations.
The operating exceptionals of £58.7 million comprise, Carbon £16.5 million (2003: £22.0
million), Technical Ceramics £5.7 million (2003: £10.3 million), Insulating Ceramics
£7.8 million (2003: £10.3 million), Magnetics £7.6 million (2003: £19.8 million),
Holding Companies £14.9 million (2003: £4.9 million), and discontinued £6.2 million
(2003: £nil).
Goodwill amortisation comprises, Carbon £1.1 million (2003: £1.5 million), Technical
Ceramics £1.2 million (2003: £1.5 million), Insulating Ceramics £0.5 million (2003:
£0.5 million) and Magnetics £3.6 million (2003: £4.0 million).
Geographical area
The analysis shown below is based on the location of the contributing companies:
Net operating assets Turnover Operating profit/(loss)
2004 2003 2004 2003 2004 2003
Restated* Restated** Restated**
£m £m £m £m £m £m
United Kingdom
Sales in the UK 33.9 33.5
Sales overseas 41.9 40.9
--------------------
Total United 66.7 87.0 75.8 74.4 0.8 1.2
Kingdom
Rest of Europe 184.0 217.1 345.7 321.5 22.5 19.2
The Americas 138.2 160.7 244.9 257.7 19.8 7.9
Far East and 51.6 52.0 83.0 81.9 8.3 8.6
Australasia
Middle East and 3.9 4.3 13.4 13.2 2.5 2.4
Africa
----------------------------------------------------------------
444.4 521.1 762.8 748.7 53.9 39.3
Discontinued - 45.6 33.1 100.9 (0.2) 3.3
operations
Central assets 6.9 5.3
----------------------------------------------------------------
451.3 572.0 795.9 849.6 53.7 42.6
Operating (58.7) (67.3)
exceptionals
Goodwill (6.4) (7.5)
amortisation ------- --------
Group operating (loss) (11.4) (32.2)
======= ========
* Restated comparatives for UITF Abstract 38 Accounting for ESOP trusts, £0.7
million.
** Restated comparatives for the results of operations discontinued in the year.
Turnover
2004 2003
Restated
£m £m
The analysis shown below is based on the
location of the customer:
United Kingdom 45.7 49.0
Rest of Europe 316.7 309.3
The Americas 267.6 254.2
Far East and Australasia 113.4 116.5
Middle East and Africa 19.4 19.7
------------------
762.8 748.7
Discontinued operations 33.1 100.9
------------------
795.9 849.6
==================
2. OPERATING EXCEPTIONALS
The Group has incurred and provided for the costs of restructuring, £47.5
million (2003: £60.8 million), and in respect of the settlement of the US
class actions and associated legal costs, £11.2 million (2003: £6.5 million).
3. CORPORATE EXCEPTIONAL ITEMS
The corporate exceptional items relating to the sale of businesses, £42.8
million (2003: £21.3 million), include disposals of the Auto and Consumer
business and the sale of the two remaining Coatings operations. The loss on
partial disposal of businesses, £8.2 million (2003: £6.5 million), includes
the disposal of a small, discrete manufacturing facility in the U.S. The
goodwill written off as part of the business disposals is £25.8 million
(2003: £24.2 million). Disposal of fixed assets, £3.8 million (2003: £2.3
million), relates to various property disposals.
4. TAXATION CHARGE/(CREDIT)
2004 2003
£m £m
United Kingdom corporation tax:
Corporation tax on (loss) for the period at 30% - (0.4)
(2003: 30%)
Adjustment in respect of prior years 0.2 (4.5)
---------------
0.2 (4.9)
Overseas current tax 6.0 3.1
---------------
Total current tax 6.2 (1.8)
===============
Deferred tax:
United Kingdom (2.9) -
Overseas (0.4) (0.6)
---------------
Total deferred tax (3.3) (0.6)
===============
---------------
Total taxation 2.9 (2.4)
===============
Overseas tax includes a credit of £3.1 million (2003: £2.2 million credit)
arising on total exceptional losses of £80.2 million (2003: losses of
£66.6 million). United Kingdom tax includes a tax credit of £4.4 million
(2003: £2.2 million credit) arising on total exceptional losses of £33.3
million (2003: £30.8 million).
Factors affecting the tax charge/(credit) for the period:
The tax assessed for the period is higher than the standard rate of
corporation tax in the UK.
The differences are explained below.
2004 2003
£m £m
(Loss) on ordinary activities before taxation (78.4) (78.0)
Taxation on (loss) on ordinary activities at standard
rate of UK corporation tax of 30% (2003 : 30%) (23.5) (23.4)
Difference comprises:
Asset write offs and other non deductible items 23.2 11.3
Goodwill amortisation not deductible for tax purposes 1.9 2.3
Overseas losses not utilised 2.8 10.8
Effect of movement of timing differences 3.3 0.6
Other, including adjustments in respect of prior years (1.5) (3.4)
-----------------
Current tax charge/(credit) for the period 6.2 (1.8)
=================
5. DIVIDENDS 2004 2003
£m £m
Preference dividends on non-equity shares - 1.2
=================
6. (LOSS)/EARNINGS PER ORDINARY SHARE
a. Basic and underlying (loss)/earnings per share
2004 2003
Restated*
Before goodwill After goodwill Before goodwill After goodwill
amortisation amortisation amortisation amortisation
£m £m £m £m
(Loss) after tax (76.7) (83.1) (69.5) (77.0)
and minority
interest
Preference - - (1.2) (1.2)
dividend
----------------------------------------------------------------
Basic (loss) (76.7) (83.1) (70.7) (78.2)
Adjusted by all post 106.0 106.0 93.0 93.0
tax exceptional items
----------------------------------------------------------------
Underlying earnings 29.3 22.9 22.3 14.8
===============================================================
Weighted average 281,370,979 244,941,539
number of
Ordinary shares
Basic (loss) per (27.3p) (29.5p) (28.9p) (31.9p)
share
Underlying earnings 10.4p 8.1p 9.1p 6.0p
per share
The Directors have disclosed an underlying earnings per share as, in their
opinion, this gives a better indication of the underlying performance of the
Group and assists comparison with the results of earlier years.
* Restated comparatives for the impact of the Rights issue during the year.
b. Diluted earnings 2004 2003
Restated
£m £m
Basic and diluted (loss) (83.1) (78.2)
Adjusted by all post tax exceptional 106.0 93.0
items --------------------------
Underlying diluted earnings 22.9 14.8
==========================
Weighted average number of Ordinary 281,370,979 244,941,539
shares
Dilutive effect of share option schemes 6,652,880 1,770,766
288,023,859 246,712,305
==========================
Diluted (loss) per share (29.5p) (31.9p)
Diluted underlying earnings per share 8.0p 6.0p
7. PENSION COSTS
The Group accounts for pension costs in accordance with SSAP 24: Accounting
for Pension Costs or local best practice. Where local best practice is
followed the resulting charge is not materially different from the charge
which would arise under SSAP 24.
The transitional disclosures required by FRS 17: Post Retirement Benefits
will be made in the financial statements. These show that had FRS 17 been
fully adopted in the year, the liability provided for on the balance sheet
as at 4 January 2005 would increase by £81.4 million (2003 : £43.2
million).
The financial information contained in this Preliminary Statement does not
amount to statutory accounts for the Company's financial years ended 4 January
2005 and 4 January 2004. It has been approved by the Board of Directors on 22
February 2005 and has been prepared on a consistent basis with the accounting
policies set out in the Group's 2003 annual report and accounts. The financial
information for 2003 is derived from the statutory accounts for the year ended 4
January 2004 which have been filed with the Registrar of Companies. The auditors
have reported on the 2003 accounts; their report was unqualified and did not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The
statutory accounts for 2004 will be finalised on the basis of the financial
information presented by the directors in this preliminary statement and will be
delivered to the Registrar of Companies following the Annual General Meeting of
the Company in April 2005.
This preliminary statement will be dispatched to all registered holders of
Ordinary shares and First and Second Preference shares. Copies of this statement
may be obtained from the Secretary at the Registered Office of the Company,
Quadrant, 55-57 High Street, Windsor, Berkshire, SL4 1LP.
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