Interim Results - 6 Months to 30 November 1999

Paterson Zochonis PLC 15 February 2000 PATERSON ZOCHONIS plc The directors submit the unaudited accounts of the group for the half-year to 30 November 1999 Consolidated Profit and Loss Account Half-year Half-year to 30 to 30 Year to November November 31 May 1999 1998 1999 £000 £000 £000 Turnover Group - third parties 157,186 158,685 304,057 - associated - 28,791 53,240 companies 157,186 187,476 357,297 Former Nigerian associate now consolidated as a subsidiary 47,610 - - £204,796 £187,476 £357,296 Operating profit Group excluding 9,160 7,366 7,048 Nigeria Former Nigerian associate Now consolidated as a subsidiary 6,317 - - 15,477 7,366 17,048 Exceptional income 5,979 - (6,292) (charge) 21,456 7,366 10,756 Share of operating profit of associated - 3,059 4,832 companies Investment income 9,788 5,560 14,445 Interest payable (3,705) (4,639) (6,960) Profit before 27,539 11,346 23,073 taxation Taxation United Kingdom (5,103) (2,784) (3,575) Overseas (2,779) (591) (2,845) On share of profits of associated companies - (635) (1,023) (7,882) (4,010) (7,443) Profit after 19,657 7,336 15,630 taxation Equity minority (1,288) 441 3,106 interests Profit attributable to members of the 18,369 7,777 18,736 company Dividends (3,303) (3,161) (10,022) Profit for the £15,066 £4,616 £8,714 period retained Earnings per ordinary and 'A' ordinary share of 10p After exceptional 37.91p 15.58p 37.87p items Before exceptional 29.08p 15.58p 46.62p items Dividend per ordinary and 'A' ordinary share 6.15p 5.85p 19.50p of 10p Paterson Zochonis plc Consolidated Balance Sheet 30 30 November November 31 May 1999 1998 1999 £000 £000 £000 Fixed assets Intangible assets 559 - 299 Tangible assets 190,242 133,435 149,378 Investments - 27,629 34,565 190,801 161,064 184,242 Current assets Stocks 104,313 63,527 61,081 Debtors 67,700 75,475 62,403 Investments 88,818 100,316 69,665 Cash at bank and in hand 9,411 6,554 7,804 270,242 245,872 200,953 Creditors (due within one year) Bank loans and overdrafts (55,389) (66,462) (43,5860 Others (92,411) (90,761) (76,521) (147,800) (157,223) (120,107) Net current assets 122,442 88,649 80,846 Total assets less current liabilities 313,243 249,713 265,088 Creditors (due after one year) Bank loans - (5,217) (4,957) Others (10,193) (9,775) (9,589) (10,193) (14,992) (14,546) Provisions for liabilities and (9,816) (3,697) (1,830) charges Net assets £293,234 £231,024 £248,712 Capital and reserves Equity ordinary share capital 4,744 4,744 4,744 Non-equity preference share capital 7,898 7,898 7,898 Total called up share capital 12,642 12,642 12,642 Reserves attributable to equity 239,988 213,077 232,396 interests Total shareholders' funds 252,630 225,719 245,038 Equity minority interests 40,604 5,305 3,674 £293,234 £231,024 £248,712 Paterson Zochonis plc Group Cash Flow Statement Half-year Half-year to 30 to 30 Year to November November 31 May 1999 1998 1999 £000 £000 £000 Cash flow from operating activities - note 1(ii) 18,914 (6,680) 6,366 Returns on investments and servicing of finance 5,277 1,317 7,864 Taxation (1,713) (1,936) (6,701) Capital expenditure and financial investment (5,738) (12,150) (25,019) Acquisitions and disposals - note 1 (iii) (5,133) - (1) Equity dividends paid (6,476) - (8,777) Cash inflow/(outflow) before use of liquid resources and financing 5,131 (19,449) (26,268) Management of liquid resources (2,464) 7,011 37,738 Financing (7,171) 8,450 (11,637) Decrease in cash in the period £(4,504) £(3,988) £(167) Reconciliation of net cash flow to movement in net funds Decrease in cash in the period (4,504) (3,988) (167) Cash outflow / (inflow) from financing 7,171 (8,450) 11,637 Cash outflow / (inflow) from management of liquid resources 2,464 (7,011) (37,738) Change in net funds resulting from 5,131 (19,449) (26,268) cash flows Currency retranslation 520 147 701 Deposits and loans in former associate now 8,263 - - consolidated as a subsidiary Movement in net funds in the period 13,914 (19,302) (25,567) Opening net funds 28,926 54,493 54,493 Closing net funds £42,840 £35,191 £28,926 Reconciliation of operating profit to operating cash flows Operating profit 21,456 7,366 10,756 Amortisation of goodwill 13 - 8 Depreciation and adjustments on 8,282 6,137 13,944 disposals Provisions 915 (748) (2,669) Stocks (753) (7,147) (5,897) Debtors (3,485) (12,220) (1,228) Creditors (7,514) (68) (8,548) Net cash flow from operating £18,914 £(6,680) £6,366 activities Paterson Zochonis plc Group Cash Flow Statement continued Analysis of net funds Deposits At 31 and loans Other At 30 May Cash in former non-cash Exchange November 1999 flow associate movement difference 1999 £000 £000 £000 £000 £000 £000 Cash in hand and 7,804 1,727 - - (120) 9,411 at bank Overdrafts (16,503) (6,231) - - 455 (22,279) (4,504) Loans due within one year (27,083) 7,171 (8,498) (4,724) 24 (33,110) Loans due after one year (4,957) - - 4,724 233 - 7,171 Deposits 43,786 10,251 16,761 - (72) 70,726 Other current asset 25,879 (7,787) - - - 18,092 investments 2,464 £28,926 £5,131 £8,263 - £520 £42,840 Statement of Total Recognised Gains and Losses Half-year Half-year to 30 to 30 Year to November November 31 May 1999 1998 1999 £000 £000 £000 Profit for the period Group companies 18,369 6,432 16,056 Associated companies - 1,345 2,680 18,369 7,777 18,736 Currency retranslation Group companies (7,474) 5,200 590 Associated companies - (617) (2,400) (7,474) 4,583 (1,810) Surplus on revaluation Group companies - - 13,118 Associated companies - - 8,496 - - 21,614 Total recognised gains and losses £10,895 £12,360 £38,540 for the period Paterson Zochonis plc Notes 1. Impact of consolidation of Nigerian companies Group companies Excluding Nigeria Nigeria Total £000 £000 £000 (i)Balance sheet as at 30 November 1999 Fixed assets 141,850 48,951 190,801 Current assets Stocks 49,182 55,131 104,313 Debtors 61,355 6,345 67,700 Investments 76,320 12,498 88,818 Cash at bank and in hand 7,668 1,743 9,411 194,525 75,717 270,242 Creditors (due within one year) Bank loans and overdrafts (35,338) (20,051) (55,389) Others (80,015) (12,396) (92,411) (115,353) (32,447) (147,800) Net current assets 79,172 43,270 122,442 Total assets less current 221,022 92,221 313,243 liabilities Creditors (due after one year) (9,515) (678) (10,193) Provisions for liabilities and charges (1,452) (9,816) (8,364) Net assets £210,055 £83,179 £293,234 (ii) Net cash flow from operating activities Operating profit 15,139 6,317 21,456 Amortisation of goodwill 13 - 13 Depreciation and adjustments on disposals 6,782 1,500 8,282 Provisions 288 627 915 Stocks 9,423 (10,176) (753) Debtors (507) (2,978) (3,485) Creditors (8,132) 618 (7,514) Net cash flow from operating £23,006 £(4,092) £18,914 activities (iii) Acquisitions and disposals Included within the above heading on the cash flow statement is £5,685,000 net overdraft in former associate now consolidated as a subsidiary. Paterson Zochonis plc Operating and Financial Review Results and dividends An interim dividend of 6.15p per share for the half-year to 30 November 1999 (1998 - 5.85p) has been declared, payable on 7 April 2000 to ordinary and 'A' ordinary shareholders on the register on 10 March 2000. £000 £000 Profit for the period 18,369 Dividends: Preference shares 71/2% cumulative 29 10% cumulative 356 385 Ordinary and 'A' ordinary shares Interim at 6.15p 2,918 Profit retained £15,066 Presentation of accounts The group's interest in the associated company in Nigeria has increased to over 50% and the results and net assets have been consolidated as a subsidiary from 1 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 cashflow is shown in note 1. Global review Progress has been achieved in focusing on the immediate priorities of profit improvement and cash generation. Group operating profit, excluding Nigeria, increased to £9.2m from £7.4m, principally as a result of improvements made in Eastern Europe and China. Profit before taxation increased to £27.5m from £11.3m reflecting: * The inclusion of Nigeria as a subsidiary rather than as an associate. * Exceptional income of £6.0m as explained below. * High levels of investment income, with gains being taken on the disposal of elements of the equity portfolio as a result of the high level of world markets. Net funds have increased by £13.9m to £42.8m in the period. This improvement has arisen as a result of: * Improved profitability. * Reduced capital expenditure following completion of the group's immediate expansion plans. * Reductions in working capital, other than in Nigeria where stock levels were higher than the year end by £10.2m as a result of the seasonal nature of the trade. Europe The UK business has improved turnover by 20% in the first half year but improved profitability has been restricted by high advertising and promotion costs, in particular with supporting the extension of the Imperial Leather brand with Foamburst and Aquasource. Although sales levels in Eastern Europe are showing only a marginal improvement, the continuing action taken to reduce costs has resulted in the unit moving to break even in the period. Turnover and profitability in Greece are lower than in the previous year reflecting a very competitive local market with tight monetary controls being maintained within the country. Paterson Zochonis plc Operating and Financial Review continued Asia Overall results in the region have shown improvement in profitability with Indonesia performing particularly strongly with sales and profits 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. Australia has had a disappointing first half suffering generally from pressure on margins. Africa 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 are similar to the previous year. Exceptional item As disclosed in the annual report and accounts, the results of the Nigerian companies take account of provisions for claims by group companies for technical fees and royalties which are 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 have not been recognised in the group's operating profit until received. As a result of the improving political situation and the availability of dollar currency in Nigeria, the directors consider that these items should now be reflected within the group's operating profit, consequently exceptional income of £6.0m arises and is reflected within operating profit for the current period. Investments The equity portfolio has performed strongly in the period reflecting the growth in world markets. Profits were taken on elements of the portfolio which were converted into cash deposits. Unrealised gains remain at a similar level to the year end. Directors Mr. J.D.M. Smith will join the board on 1 March 2000 as a non- executive director. Mike Smith retired from the board of BTR plc in 1996 after a 28 year career with that company, the last nine as a main board director. His broad experience of running businesses both in Europe and around the world will be of great benefit to the group. Outlook The improvements being achieved in operating profitability and cash generation should continue in the second half of the year. The actions taken in tackling last year's problem areas of China and Eastern Europe are having an immediate favourable effect. With the move to positive cashflow and return to higher profitability, the board has announced an increase in the interim dividend of 5%. Paterson Zochonis plc Operating and Financial Review continued Year ended 31 May 1999 The half-year figures are unaudited. The figures for the year ended 31 May 1999 are an abridged statement of the group audited accounts for that year. The audited accounts, containing an unqualified audit report, have been delivered to the Registrar of Companies. Copies of the interim statement are being mailed to shareholders on 15 February 2000 and will also be available from the registered office: Cussons House Bird Hall Lane Stockport SK3 OXN Enquiries between the hours of 9.00 a.m. and 5.15 p.m. on 15 February 2000 to: Graham Calder Finance Director Paterson Zochonis plc Tel: 0161 491 8000

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