Final Results

Paterson Zochonis PLC 7 September 2000 PATERSON ZOCHONIS plc PRELIMINARY ANNOUNCEMENT Highlights * Considerable success has been achieved during the year with pre- tax profits before exceptional items increasing from £29.4m to £39.5m reflecting: * Improved operating results in Indonesia, Nigeria, Eastern Europe and China. * The consolidation of Nigeria as a subsidiary rather than an associate. * Net funds have increased from £28.9m to £85.6m as a result of the improved profitability and reductions in working capital. * The board is recommending a dividend increase for the year of 10.25%. Europe The UK business has achieved an increase in turnover of 18% but advertising and promotion costs, particularly in supporting the extension of the Imperial Leather brand with Foamburst and Aquasource, have restricted profit improvement. Benefits from these launches will be seen in the current year. Sales levels in Eastern Europe have remained at a similar level to the previous year, however the continuing action taken to reduce costs has resulted in the unit moving into profitability. The Greek unit has experienced a difficult year, with a very competitive local market and tight monetary policy being maintained within the country. This has impacted on turnover and profitability. Asia Overall results in the region have shown improvement in profitability with Indonesia performing particularly strongly with sales and profit growth in excess of 20%. In China, the programme of reorganisation and cost reduction undertaken last year has resulted in a material reduction in losses being incurred, however future progress depends on sales growth being achieved through the new distribution network now being established. The board remains optimistic of the success of this venture in the longer term. Australia has had a disappointing year suffering generally from pressure on margins, but indications of improvement are now being seen. Thailand and the Middle East achieved improved results. Africa During the year the group has increased its interest in the Nigerian company to over 50%, and since the year-end has increased this further to 59%. Although these are early days, the actions now being taken by the new civilian government in Nigeria and the effect of higher oil prices are beginning to impact positively throughout the economy. Turnover and profitability of the Nigerian subsidiary show some improvement on the previous year after a number of years of decline. Results in the other African units, Ghana, Kenya and Cameroun, are similar to the previous year. Exceptional item As disclosed in previous years' annual report and accounts, the results of the Nigerian companies took account of provisions for claims by group companies for technical fees and royalties which were unpaid. Prior to 1st June 1999, due to the operation of exchange control restrictions and the degree of uncertainty relating to the items concerned, these items had not been recognised in the group's operating profit. These amounts have now been reflected as exceptional income of £6.0m within operating profit, and since the year-end have been remitted in full. Dividend As a result of improved profitability, reductions in working capital and a strong performance in the equity portfolio, the balance sheet has been strengthened with net funds increasing from £28.9m to £85.6m. The combination of these factors has enabled the board to recommend a dividend increase of 10.25%. PATERSON ZOCHONIS plc Outlook Improvements in operating performance should be achieved in all our major units in the year to 31st May 2001, as a result of the continuing actions being taken to increase operating margins and the current economic stability in our principal developing markets. Presentation of accounts The group's interest in the listed company in Nigeria has increased to over 50% and the results and net assets, previously accounted for as an associate, have been consolidated as a subsidiary from 1st June 1999. The impact on the results for the period is shown separately on the face of the profit and loss account. The impact on the consolidated balance sheet and operating cash flow is shown in note 1. PATERSON ZOCHONIS plc Consolidated Profit and Loss Account for the Year to 31st May 2000 2000 1999 £000 £000 Turnover Group - third parties 307,804 304,057 - associated companies - 53,240 ------- ------- 307,804 357,297 Former Nigerian associate now consolidated as a subsidiary 101,270 - ------- ------- 409,074 357,297 ------- ------- Operating profit Group excluding Nigeria 18,548 17,048 Former Nigerian associate now consolidated as a subsidiary 11,248 - Exceptional income / (charge) 5,979 (6,292) ------- ------- 35,775 10,756 Share of operating profit of associated companies - 4,832 Investment income 14,616 14,445 Interest payable (4,856) (6,960) ------- ------- Profit on ordinary activities before taxation 45,535 23,073 Taxation on profit on ordinary activities (13,903) (7,443) ------- ------- Profit on ordinary activities after 31,632 15,630 taxation Equity minority interests (2,667) 3,106 ------- ------- Profit for the financial year 28,965 18,736 Preference dividends (770) (770) ------- ------- Profit attributable to ordinary capital 28,195 17,966 Ordinary dividends (10,201) (9,252) Profit for the financial year retained £17,994 £8,714 ====== ===== Earnings per ordinary share after exceptional item 59.43p 37.87p Earnings per ordinary share before exceptional item 50.61p 46.62p The results for both years arise from continuing operations PATERSON ZOCHONIS plc Balance Sheets as at 31st May 2000 The group Parent company 2000 1999 2000 1999 £000 £000 £000 £000 Fixed assets Intangible assets 539 299 - - Tangible assets 179,873 149,378 - - Investments: Subsidiary companies - - 81,323 76,403 Associated companies - 34,565 - 7,187 ------- ------- ------ ----- 180,412 184,242 81,323 83,590 ------- ------- ------ ----- Current assets Stocks 92,906 61,081 - - Debtors 56,142 62,403 54,311 59,955 Investments 102,388 69,665 43,474 36,427 Cash at bank and in hand 10,799 7,804 - - ------- ------- ------ ----- 262,235 200,953 97,785 96,382 Creditors - amounts falling due within one year (112,735) (120,107) (37,405) (44,990) ------- ------- ------ ----- Net current assets 149,500 80,846 60,380 51,392 ------- ------- ------ ----- Total assets less current 329,912 265,088 141,703 134,982 liabilities Creditors - amounts falling due after one year (19,744) (14,546) (9,625) - ------- ------- ------ ----- Provisions for liabilities and charges (7,718) (1,830) (195) - ------- ------- ------ ----- Net assets £302,450 £248,712 £131,883 £134,982 ====== ===== ===== ===== Capital and reserves Equity ordinary share capital 4,744 4,744 4,744 4,744 Non-equity preference share 7,898 7,898 7,898 7,898 capital ------- ------- ------ ----- Total called up share capital 12,642 12,642 12,642 12,642 Reserves attributable to equity interests: Revaluation reserve 46,911 46,656 - - Profit and loss account 197,770 185,740 119,241 122,340 ------- ------- ------ ----- Total shareholders' funds 257,323 245,038 131,883 134,982 Equity minority interests 45,127 3,674 - - ------- ------- ------ ----- £302,450 £248,712 £131,883 £134,982 ===== ===== ===== ===== PATERSON ZOCHONIS plc Group Cash Flow Statement 2000 1999 £000 £000 Cash flow from operating activities 72,321 6,366 Returns on investments and servicing of 6,604 7,864 finance Taxation (9,124) (6,701) Capital expenditure and financial investment (6,869) (25,019) Acquisitions and disposals (5,133) (1) Equity dividends paid (9,394) (8,777) ----- ------ Cash inflow / (outflow) before use of liquid resources and financing 48,405 (26,268) Management of liquid resources (15,555) 37,738 Financing (24,119) (11,637) ----- ----- Increase / (decrease) in cash in the period £8,731 £(167) ==== ==== 2000 1999 £000 £000 Reconciliation of net cash flow to movement in net funds Increase / (decrease) in cash in the period 8,731 (167) Cash outflow from financing 24,119 11,637 Cash outflow / (inflow) from management of liquid resources 15,555 (37,738) ----- ----- Change in net funds resulting from cash flows 48,405 (26,268) Currency retranslation 29 701 Deposits and loans in former associate now consolidated as a subsidiary 8,263 - ----- ----- Movement in net funds in the period 56,697 (25,567) Opening net funds 28,926 54,493 ----- ----- Closing net funds £85,623 £28,926 ----- ----- PATERSON ZOCHONIS plc Group Cash Flow Statement continued Analysis of net funds Deposits and loans At 31st in Other At 31st May Cash former non-cash Exchange May 1999 Flow associate Movement difference 2000 £000 £000 £000 £000 £000 £000 Cash in hand and at bank 7,804 3,018 - - (23) 10,799 Overdrafts (16,503) 5,713 - - 219 (10,571) ----- 8,731 Loans due within one year (27,083) 24,119 (8,498) (4,544) (987) (16,993) Loans due after one year (4,957) - - 4,544 413 - ----- 24,119 Deposits 43,786 22,736 16,761 - 407 83,690 Other current asset investments 25,879 (7,181) - - - 18,698 ----- 15,555 ----- ----- ----- ----- ----- ----- £28,926 £48,405 £8,263 - £29 £85,623 ===== ===== ===== ===== ===== ===== Statement of Total Recognised Gains and Losses 2000 1999 £000 £000 Profit for the financial year Group companies 28,965 16,056 Associated companies - 2,680 ----- ----- 28,965 18,736 Currency retranslation Group companies (7,474) 590 Associated companies - (2,400) ----- ----- (7,474) (1,810) Surplus on revaluation Group companies - 13,118 Associated companies - 8,496 ----- ----- - 21,614 Reversal of taxation on Nigeria revaluation surplus 1,765 - ----- ----- Total recognised gains and losses for the year £23,256 £38,540 ===== ===== PATERSON ZOCHONIS plc NOTES 1. Impact of consolidation of Nigerian companies Group companies Excluding Nigeria Nigeria Total Total 2000 2000 2000 1999 £000 £000 £000 £000 (i)Balance sheet as at 31st May 2000 Fixed assets 135,701 44,711 180,412 184,242 Current assets Stocks 41,767 51,139 92,906 61,081 Debtors 52,678 3,464 56,142 62,403 Investments 87,920 14,468 102,388 69,665 Cash at bank and in hand 8,868 1,931 10,799 7,804 ----- ----- ----- ------ 191,233 71,002 262,235 200,953 Creditors (due within one year) Bank loans and overdrafts (18,696) (8,868) (27,564) (43,586) Other (73,975) (11,196) (85,171) (76,521) ----- ----- ----- ----- (92,671) (20,064) (112,735) (120,107) ----- ----- ----- ----- Net current assets 98,562 50,938 149,500 80,846 ----- ----- ----- ----- Total assets less current liabilities 234,263 95,649 329,912 265,088 Creditors (due after one year) (19,018) (726) (19,744) (14,546) Provisions for liabilities and charges (1,591) (6,127) (7,718) (1,830) ----- ----- ----- ----- Net assets £213,654 £88,796 £302,450 £248,712 ----- ----- ----- ----- (ii)Net cash flow from operating activities Operating profit 24,527 11,248 35,775 10,756 Amortisation of goodwill 21 1 22 8 Depreciation and adjustments on disposals 12,736 2,769 15,505 13,944 Provisions 347 1,407 1,754 (2,669) Stocks 16,648 245 16,893 (5,897) Debtors 8,931 (404) 8,527 (1,228) Creditors (7,043) 888 (6,155) (8,548) ----- ----- ----- ----- Net cash flow from operating activities £56,167 £16,154 £72,321 £6,366 ===== ===== ===== ===== (iii)Acquisitions and disposals Included within the above heading on the cash flow statement is £5,684,000 net overdraft in former associate now consolidated as a subsidiary. PATERSON ZOCHONIS plc 2. AGM and dividend The board is recommending a final dividend of 15.35p per share which, together with the interim dividend of 6.15p gives a total distribution of 21.5p, an increase of 10.25% over the total of 19.5p last year. The date of the annual general meeting has been fixed for Monday November 6th 2000 and dividend warrants in respect of the proposed final dividend, subject to shareholders' approval, will be posted on that day to members on the register at 5.00 pm on 6th October 2000. 3. Basis of accounts The 2000 results are an abridged version of the statutory accounts for the year ended 31st May 2000 which have been approved by the board of directors and which carry an unqualified audit report. The 1999 results are an abridged version of the statutory accounts for the year ended 31st May 1999 which carry an unqualified audit report and which have been filed with the Registrar of Companies. Neither accounts contain a statement in respect of s.237(2) or (3) of the Companies Act 1985. Enquiries Paterson Zochonis plc 0161 491 8000 Graham Calder (Between 9.00 am and 5.15 pm) Finance Director

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