Final Results
Yule Catto & Co PLC
12 March 2008
Yule Catto & Co plc
Preliminary Results for the year ended 31 December 2007
A good year, in which further broad progress has been made in the development of
the Group
HIGHLIGHTS
• Underlying total sales up 4.2% to £580.6m (2006 £557.4m)
• Profit before taxation* up 9.5% to £34.5m, (2006 £31.5m)
• Earnings per share* up 17.7% at 17.3p, (2006 14.7p)
• Dividend increased by 3.2% to 9.6p per share (2006 9.3p)
• Profit attributable to equity shareholders of the parent £13.8m (2006 £3.4m)
• Good volume growth in polymers
• Improved profitability within Impact Chemicals
* Before special items, as defined in notes 1 and 9
Anthony Richmond-Watson, Chairman, comments:
'Underlying profit before taxation increased to £34.5 million driven by
improvement in our Polymer business, and the benefits of restructuring the
Impact business. As we look to 2008, we are optimistic that our Polymer
business will deliver further improvement. Our Pharma Division will continue to
commercialise its strong product pipeline. The restructuring of Impact Division
should show further benefits.'
12 March 2008
ENQUIRIES:
YULE CATTO Tel: 01279 442791
Adrian Whitfield, Chief Executive
David Blackwood, Finance Director
COLLEGE HILL Tel: 020 7457 2020
Gareth David email: gareth.david@collegehill.com
RESULTS SUMMARY
Underlying performance(a) IFRS
2007 2006 2007 2006
£'000 £'000 £'000 £'000
audited audited audited audited
Year to 31 December
Total sales 580,641 557,357 580,641 565,786
EBITDA (b) 62,027 61,272 62,027 61,272
Operating profit 46,014 42,959 28,574 21,451
Profit before taxation 34,517 31,516 21,524 13,626
Profit attributable to equity holders 25,192 21,352 13,785 3,427
of the parent
Earnings per share 17.3p 14.7p 9.5p 2.4p
Dividend per share (c ) 9.6p 9.3p 9.6p 9.3p
Net borrowings (d) 170,831 166,271 150,341 150,656
Cash generated from operations 49,447 46,376 49,447 46,376
Free cash flow before dividends (e) 14,012 8,479 14,012 8,479
Notes:
The above table represents the results of Yule Catto and Co plc, its
subsidiaries and its share of joint ventures
(a) Underlying performance is before special items. (See notes 1 and 9).
(b) Earnings before interest, tax, non-recurring items, depreciation and
amortisation. (See note 6).
(c) Final dividend from 2007 of 5.7p per share will be paid on 4 July 2008
to members on the register at close of business on 6 June 2008. Under IFRS
this liability is not accrued in the financial statements.
(d) As reconciled at the bottom of the balance sheet.
(e) As shown within the cash flow statement.
BUSINESS REVIEW
CHAIRMAN'S STATEMENT
2007 was a good year for the Group. We made steady progress across all of our
divisions in both our operational performance and strategic plans to develop the
Group for the future. This showed through in the financial results.
The Polymers business had another good year, of growth in volumes and profit.
Our strategy in Polymers remains focused on geographical expansion around our
existing business hubs and developing market sectors where our product
technology and manufacturing capabilities give us real competitive advantage.
We are investing heavily in additional Nitrile capacity in Malaysia to take full
advantage of the continued growth in this product and the Asian region.
Our Pharma business continued to grow the range of generic and ethical products
that it plans to manufacture by registering further drug master files in the
year. As we had previously indicated Pharma earnings declined, in part due to
the phasing of orders in the second half of the year. We announced plans to
exit our Italian site to improve the operational cost base and the productivity
of the business. This exit is proceeding to plan.
Impact Chemicals has had a challenging year, but has delivered significant
improvement. We are clearly seeing the benefits of our strategy to raise the
performance of these businesses through restructuring and focussing on market
segments offering better margins and growth.
Overall, underlying Group profit before taxation increased some 10% to £34.5
million, and earnings per share by 18% to 17.3 pence per share.
The directors recommend a final dividend of 5.7 pence a share, which would make
the full payment for the year 9.6 pence (2006 9.3 pence a share), an increase of
3.2%. Subject to shareholders' approval, the dividend will be paid on 4 July to
members on the register at close of business on 6 June.
The working conditions and safety of our employees everywhere remains paramount
in the operation of our business. We set targets annually to reduce levels of
Lost Time Accidents, and against this measure we have been improving our safety
performance for many years. I am pleased we have made further progress in 2007
and have had our best ever year in terms of both 'all accident' and 'Lost Time
Accident' rates. We remain fully committed to the principles of sustainable
development and have made significant progress against all of the 10-year
targets in our sustainable development programme.
This has been a year in which much has been achieved. On behalf of the
directors and shareholders, I would like to thank all our employees everywhere
for their commitment and contribution towards the company's success.
Outlook
The closing months of 2007 and the start of 2008 were characterised by concerns
of lower economic growth in the USA and parts of Western Europe. We have,
however, made a satisfactory start to 2008 with continuing momentum in our
Polymers business.
We will continue to expand the geography and customer base of our principal
Polymers business. New product development remains an important element of how
we will achieve this. In addition we continue to look for additional ways to
improve our productivity and reduce our cost base.
We have already committed ourselves to further investment in Asia for
significant additional Latex capacity and should benefit from the rapid growth
there. Consequently we expect another year of good results from our Polymer
business. In our Pharma business we will continue to develop new generic
products for future filing whilst our previously announced re-structuring will
be complete by the end of 2008. The remedial measures taken in the Impact
Chemicals business should lead to further improvement in its results.
BUSINESS REVIEW (cont'd) - CHAIRMAN'S STATEMENT
As we enter the year, the raw material situation for monomers looks set to
remain volatile. We coped well with this situation in Polymers in 2007 through
selling price increases and reformulation, and will continue to manage our
response in a similar manner as 2008 progresses.
ANTHONY RICHMOND-WATSON
Chairman
12 March 2008
BUSINESS REVIEW (cont'd)
CHIEF EXECUTIVE'S REPORT
Overview
2007 has been a year in which the Group has moved forward on a number of fronts
to develop the business. The result of this process is clearly demonstrated by
the 10% increase in underlying Group profit before taxation. It has also been
another year in which the recent history of rising raw material prices has
persisted and we have had to work hard to mitigate the impact of this. Against
this background, we have made good progress across the portfolio, and, although
the global economy looks challenging, we are cautiously optimistic about the
Group's performance in 2008.
Polymers (73% of total sales) grew sales volumes by 4.3% and underlying
operating profit by 6.2%. This was achieved in an environment of volatile and
generally increasing monomer pricing, and ongoing supply constraints. We
sustained our operating margins year on year at 9.7%.
The previously announced expansion of Nitrile capacity in Kluang, Malaysia was
brought on line in November, and immediately sold out. The Group has committed
itself to significant further expansion during 2008. This site is well located
to provide reliable supply to major glove manufacturers. Market growth for
synthetic gloves remains strong and this investment confirms our intent to
remain as a leading supplier.
We also completed the expansion of our Mouscron, Belgium dispersion facility,
where capacity increased by 30%.
Pharmaceuticals (11% of total sales) saw sales little changed at £63.8 million.
However second half year sales were substantially lower than the first half due
to order phasing which in part resulted in reduced underlying profitability of
£7.4 million. The generic drug market continues to grow strongly but, as
always, is characterised by price erosion following patent expiry. Our strategy
to address this is to maximise operating efficiencies whilst expanding our
product portfolio. During the year, we announced the closure of our main
Italian site and the transfer of production to Mexico and Spain to improve the
cost base and productivity of the business. Looking forward, our programme of
increasing our generic drugs pipeline made good progress with a further six drug
master files registered.
Impact Chemicals (16% of total sales) has suffered over several years from
aggressive competition and sub-optimal assets. During 2007 we announced the
closure of two facilities within this business; the Hull plant of Holliday
Pigments and the German plant of James Robinson. Both plant closures are
running to schedule. In early 2008 we announced a restructuring of the William
Blythe plant in Church. We have already seen some of the benefit of these
actions with an increase in underlying profits in 2007 to £3.0 million from £1.0
million in 2006.
Good cash management remains a key priority for the Group. Borrowings increased
modestly, but this was attributable to the impact of the strengthening euro on
our euro denominated debt. During the year we have focused hard on the
effective management of working capital with average working capital reducing by
£6.6 million compared with prior year, whilst capital expenditure was at similar
levels to 2006. We invested around £9.0 million in restructuring, the majority
of which we will recover, when we sell the sites and assets we are exiting.
Polymer Division
We operate 13 factories within four geographical regions: Europe, Pacific Rim,
Middle East and South Africa. Core products are water-based Polymers, both
dispersions and lattices, polyvinyl alcohol/acetate and a number of more
specialised products.
2007 was another good year for our Polymer businesses. Sales volumes were at
record levels, up 4.3%, with sales turnover up 6.5%. Operating profits were up
6.2% compared to 2006 and operating margins were sustained at 9.7%. These good
results were achieved against a background of restricted monomer availability,
volatile prices and restructuring within some of our core markets.
BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT
Whilst the product portfolio and the geographic coverage of our operations
remained unchanged, the main growth of our activities occurred in Asia. In
Kluang, Malaysia, in order to meet the growing sales demand, we were able to
bring forward our latex expansion plans in two phases with a 33% increase in
capacity in April and a further expansion in November, effectively increasing
the installed capacity by circa 60% compared to 2006. Concurrently, the
Mouscron, Belgium dispersion plant was subject to a major de-bottlenecking
project which was completed in late 2007 increasing the dispersion capacity of
the site by 30%. In addition, minor de-bottlenecking took place on the latex
plant in Langelsheim, Germany. In the USA we initiated dispersion manufacture
under a toll manufacturing arrangement with a local polymeriser.
These enhancements in capacity are already being effectively used and further
production capacity expansion is planned for 2008. Nevertheless, maintaining the
excellent growth seen over the past few years was a difficult challenge in 2007.
Polymer producers generally had to endure repeated interruptions in raw
material supplies and increases in all major monomer costs. The industry was
characterised by feedstock shortages, which in turn affected the supply lines of
all our top ten raw materials. Many of our suppliers called force majeure as
they either were unable to get the necessary feedstock volumes or they
experienced significant plant outages. This situation was not helped by the
cost of oil, the backbone of the feedstock supply, which increased 69% during
the year. As a result we worked hard to reflect these costs in the market
place. However, we hope that the additional global capacity for a number of
monomers planned for commissioning in the fourth quarter of 2008 and throughout
2009 will alleviate the tight raw material supply and allow input prices to ease
in due course.
For Polymer Division this restricted monomer supply and volatile raw material
pricing together with continued restructuring of some of our core markets
encouraged us to advance our product development programmes to stimulate demand.
In 2007 we widened our nitrile latex, dispersions and polybutadiene product
portfolios, whilst at the same time developing complementary products to sell
alongside our core latex, dispersion and polyvinyl alcohol activities.
Synthetic Latex
Throughout 2007 the European latex market was subject to further customer
rationalisation, particularly in the large commodity markets such as paper. Our
business, whilst experiencing some disturbance from this restructuring, remains
speciality orientated. We were able to increase sales despite a number of our
main markets not growing as customers sought to manufacture in other parts of
the world. The market for our synthetic nitrile latex grew significantly as a
result of the greater use of synthetic rubber gloves in the health and
semi-medical markets, and we were able to benefit from this through the newly
commissioned capacity at our Kluang factory in Malaysia.
Expanding our operations in Asia remains a key part of Polymer Division's
strategy and in 2008 we expect the momentum to continue with increases in both
latex and dispersion capacity planned.
Dispersions
The dispersion market unfortunately experienced the worst of the raw material
volatility. However, with the advantage of dispersion production in all our
regional activities, combined with good technical support and continued product
development, we were able to maintain supply and service to all our customers.
As a result, we gained market share and are able to report record dispersion
volumes whilst retaining our market leadership in the UK, South Africa, the
Middle East and Malaysia.
Specialities
The Group manufactures a variety of speciality polymer chemicals, including:
Polyvinyl Alcohol
To maintain our status as the world's leading supplier of low hydrolysis
polyvinyl alcohol to the PVC industry, we have changed the profile of our
technical package to meet the ongoing demand of the PVC resins industry. In so
doing we have added new products to the range specifically designed for the
technological and geographic changes which have occurred in the manner and
location in which PVC is produced. As a result, the Polymer Division is now not
only able to supply its well established primary and secondary PVC
BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT
stabilisers, but has added newly developed grades alongside supplementary
polymers used in the polymerisation of PVC.
Liquid Polybutadiene
In 2007 sales of liquid polybutadiene were at a record level and 10.1% higher in
tonnes compared to 2006. The expansion of the production facilities in 2006
provided the capacity to develop sales and in 2007 the geographic portfolio now
includes Asia and the USA. A further expansion of production is planned for
2008.
Alkyds and Polyester
Our resin business operates from the Kluang, Malaysia site with sales
predominantly in South East Asia. Sales this year have been at record levels
(8.6% and 16.2% higher than 2006 for alkyds and polyester respectively). This
is a notable achievement considering the significant increase in raw material
prices which always gives rise to fluctuations in demand. Our excellent service
and product quality have enabled this significant growth.
Pharma Chemicals
2007 sales were at a similar level to those in 2006. However sales in the
second half were reduced as a consequence of order phasing. We continued to
make progress on our filings of Drug Master Files (DMF's) and six DMF's were
filed in 2007. Following a thorough review a decision was made at the mid year
to close our Italian plant and transfer a number of products to Spain and Mexico
to underpin our future competiveness and profitability.
In our Spanish plants, sales were solid with volumes at their highest level for
a number of years. This was supported by strong sales of enteric coated
Omeprazole pellets following the approval of our in-house manufacturing capacity
late in 2006. Pantoperazole was launched in Spain at the back end of the year
and over the next few years our partner will be rolling sales out in Europe as
the patent expires in various European countries. Our other antiulcer
franchises did particularly well, including Ranitidine. Our antibacterial,
Ciprofloxacine, sold well in Europe with a number of customers improving their
market share. A number of new products were introduced at the pilot plant level
to support approvals in a number of European markets and the USA. We continue
to move products out of the pilot plant into mainstream production, allowing us
to develop further new products. Our Spanish pilot plant is fully loaded until
the second half of 2008 for both development and customer specific products.
Pricing pressure was heightened by the dollar/euro exchange rate and increased
raw material costs for all producers, including the Chinese and Indian
competition. A marketing strategy was implemented in the last quarter of the
year to increase prices and restore margins going forward.
Our Mexican plant had its best year in sales and operating profit for the last
ten years. The results were achieved by a combination of much improved volumes
of intermediates and Active Pharmaceutical Intermediates (API's), as well as the
launch of Zolpidem in the USA, following patent expiry. A number of generic
franchises in the antiparasitic, antifungal and arthritic field saw good growth
in sales to both Europe and the USA with several key generic customers launching
products. It was pleasing to note that this growth came from products that
Uquifa launched in 2003/4 and have been awaiting regulatory approvals in various
markets. Our investment in obtaining regulatory approvals is key to our success
and goes on apace. The pilot plant was partially upgraded to help in the number
of filed DMF's. The relationship between the Mexican peso and the dollar meant
margins were not unduly undermined. However, as in Spain, the increased cost of
raw materials was of concern and in the last quarter the same marketing strategy
on selling prices was rolled out in Mexico.
The combination of lower pricing and euro/dollar exchange meant margins in Italy
were significantly lower than in previous years. After a thorough review, we
announced the closure of the main manufacturing plant in Italy. A number of
products are being transferred to Spain and Mexico and regulatory approval is
currently being sought. This transfer will be complete in 2008. At the same
time, following the
BUSINESS REVIEW (cont'd) - CHIEF EXECUTIVE'S REPORT
announcement of the closure of the James Robinson, Dieburg site in Germany, a
number of additional pharmaceutical products are currently being transferred to
Spain. Approval of the level 5 high containment facility was obtained and
production of a cytotoxic product for a large pharmaceutical company has already
commenced.
We also announced our intention of constructing a greenfield site in China to
underpin our raw material and intermediate position. We continue to make
progress on this and the final selection of the site is nearing completion.
Impact Chemicals
Impact Chemicals Division comprises:
• James Robinson manufacturing hair, photochromic and other dyes,
• William Blythe manufacturing iodine and metal salts
• Holliday Pigments manufacturing ultramarine pigments
• Oxford Chemicals manufacturing high impact flavour chemicals
• PFW manufacturing aroma chemicals.
2007 was a year of improving financial performance, but one which again
presented the Division with a number of significant commercial and operational
challenges.
Sales for the year were below prior year as we focused on producing and selling
higher margin products.
In the first half of 2007, it became clear that the market and operational
challenges in some of our businesses continued to inhibit the speed of
turn-round of the Impact Division. After extensive review, this led to the
announcement and implementation of selective restructuring to deliver the
required financial improvements. Consequently, the Division announced that it
would concentrate the manufacture of all Ultramarine at its Comines site in
France, with the closure of operations at Holliday Pigments in Hull. This
closure was completed in the fourth quarter on schedule. The transfer to Comines
has gone smoothly with the business showing greatly improved financial
performance in the fourth quarter. In the third quarter, an announcement was
made on the closure of James Robinson's Dieburg site in Germany. This reflected
the decline of the James Robinson photographic business and continued pricing
pressure from Chinese competition. The site is scheduled to close at the end of
2008 and is a key step for James Robinson in the ongoing refocus of its
portfolio to higher value applications.
Whilst these changes were being progressed, the Division continued to focus on
supporting its leading position in many markets. Of note is the continued
development of Oxford's 'natural flavours' strategy which will result in a
number of new materials coming to the market in 2008. This strategy is enhanced
by the establishment of a new three year research project focussed on Sulphur
chemistry, supported by the UK Government Technology Strategy Board (TSB). At
PFW the fourth quarter saw the introduction of new 'musk' materials to support
the expansion of polycyclic musk usage in the fragrance industry. William
Blythe successfully opened its new Iodine facility which will benefit the sales
of higher value products such as SMP and Periodic Acid, key materials used in
the silk screen printing and silicon wafer industry.
Overall 2007, can be seen as one of good progress for the Division. Whilst
difficult decisions had to be taken, new opportunities have opened up in several
businesses, and we have made strides in building greater sustainability into the
Division's financial performance.
ADRIAN WHITFIELD
Chief Executive
12 March 2008
BUSINESS REVIEW (cont'd)
FINANCIAL REVIEW
Income Statement - Underlying Performance
Total sales increased by 4.2% to £580.6 million, driven by good volume growth in
Polymers. Turnover remains predominately within Europe with some 56% of sales
(2006 58%). However we continue to make progress in other parts of the world,
in particular Asia, assisted by ongoing investment in the Malaysian facility.
Asian sales now account for 26% of the business (2006 23%) and will continue to
increase with our commitment to further expansion in 2008.
With the international nature of the business, movements in foreign currency
exchange rates can affect the value of transactions made by the Group where
pricing of our products is in non domestic currency, and in the translation of
results from overseas subsidiaries. With regard to the former, the Group
generally hedges transactions once entered into and in addition, where exchange
rates continue to be adverse, we look to increase sale prices or sell in
domestic currency. The latter is mainly influenced by the euro, with the
Malaysian ringgit and South African rand becoming more significant. In 2007,
the average rate for the euro was comparable to 2006 so translation effects were
not significant.
Average borrowings for the period were nearly 2% lower than 2006, though the net
interest charge of £11.5 million was 1% higher than last year. World interest
rates have drifted up during the year, but a large proportion of the Group's
exposure is hedged, which has softened the adverse impact.
The underlying tax rate of 22% reflects the benefits of pioneer status on our
investment in Malaysia and the settlement of some prior year tax positions.
This is an improvement on the prior year rate of 28%.
Profit attributable to minority interests has increased to £1.7 million due to
the success of the Revertex operations in the Far East, which has a 30%
shareholding external to the Group.
The resultant underlying earnings per share of 17.3 pence is a year-on-year
increase of 18%. A final dividend of 5.7 pence per share has been proposed by
the Board, which would take the full year payout to 9.6 pence, an increase of
3.2%. Underlying dividend cover is 1.8 times.
Income Statement - Special Items
To provide a clearer indication of the Group's underlying performance, a number
of special items, are shown in a separate column of the Income Statement.
Special Items includes;
• During the year we announced the closure of our Italian Pharma plant,
Holliday Pigments Hull site and the James Robinson manufacturing plant in
Dieburg, Germany. Site closure and run down costs for these activities are
disclosed in special items. This includes the write down of fixed assets on
these sites as appropriate.
• We utilise various cross currency and interest rate swaps for hedging
purposes, which involve maturities of up to twelve years. IFRS requires
that where the strict requirements of IAS 39 are not met, changes in the
market value should be recognised annually in the income statement.
However, such financial instruments are maintained by the Group for the
length of the contract and over their lifetime have a fair value of nil.
Hence, the notional annual adjustment is segregated from the underlying
performance.
• As a result of the actions taken in 2007 to reduce the cost of the Group's
UK pension scheme, the Group recognised an exceptional profit of £10.8
million (2006 £nil), being the reduction of accrued benefits arising from
these actions. This profit is shown in special items.
BUSINESS REVIEW (cont'd) - FINANCIAL REVIEW
Pensions
In the main UK defined benefit pension scheme the majority of investments are in
equities. Whilst equity markets delivered positive returns during the year, the
actual return of 3.7% fell below the expected return. The yield on AA bonds
increased significantly during the year, which has reduced liabilities, and
action taken by the Group to manage employee benefits further reduced
liabilities by £10.8 million. The overall effect of these changes was a
significant reduction in the net balance sheet liability to £33.6 million for
this scheme.
IFRS
On an unadjusted IFRS basis, Group revenue increased by £13.9 million to £565.6
million reflecting good growth in Polymer Chemicals partly offset by a reduction
in Impact Division following the 2006 restructuring. Profit before taxation at
£21.5 million was £7.9 million higher than the previous period, of which £3.0
million relates to a better trading performance with the remainder being a
reduction in the special items.
Borrowings
Net underlying borrowings, adjusted for the mark-to-market effect of
derivatives, are slightly up on to last year at £170.8 million, due to the
impact of a stronger euro on the Group's euro denominated debt, which resulted
in an increase of £5.6 million.
In 2006 we reported a year of increased capital expenditure, following a number
of years of lower capital investment. This has continued in 2007 as we have
invested in expanding the Malaysia nitrile facility. A similar level of
investment in 2008 will be directed at further capacity expansion and various
upgrades in process efficiency.
Overall, the programme of restructuring the Impact Chemicals and Pharma
Divisions is expected to be broadly cash neutral. However the timing of closure
events has initially resulted in a net cash outflow across 2006 and 2007, with a
gross spend of £9.0 million in 2007. This was partially offset by sale proceeds
of £2.4 million from associated assets, mainly the sale of James Robinsons'
Huddersfield site. Further sales are expected in 2008 and beyond, including the
Hapton site (William Blythe), the Dieburg site (James Robinson) and the Uquifa
Italy site.
In a period of rising raw materials cost, combined with good volume growth in
many of our businesses, upward pressure on working capital becomes more acute.
However we have focussed very hard on this area during 2007 and despite
increased input costs, we have reduced working capital during the year by £4.0
million.
DAVID BLACKWOOD
Finance Director
12 March 2008
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
Continuing operations Continuing operations
Note Underlying Special IFRS Underlying Special IFRS
performance items performance items
£'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Group revenue 565,595 - 565,595 543,226 8,429 551,655
Share of joint ventures' revenue 15,046 - 15,046 14,131 - 14,131
Total sales 2 580,641 - 580,641 557,357 8,429 565,786
Group revenue 565,595 - 565,595 543,226 8,429 551,655
Company and subsidiaries before 44,885 - 44,885 41,888 - 41,888
special items
Operations sold or closed during - (28,237) (28,237) - (1,809) (1,809)
the year
UK pension fund - past service - 10,797 10,797 - - -
credit
Impairment of non-current assets - - - - (19,699) (19,699)
Company and subsidiaries 44,885 (17,440) 27,445 41,888 (21,508) 20,380
Share of joint ventures 1,129 - 1,129 1,071 - 1,071
Operating profit/(loss) 2 46,014 (17,440) 28,574 42,959 (21,508) 21,451
Interest payable (16,046) - (16,046) (13,564) - (13,564)
Interest receivable 4,549 - 4,549 2,121 - 2,121
(11,497) - (11,497) (11,443) - (11,443)
Fair value adjustment - 4,447 4,447 - 3,618 3,618
Finance costs 4 (11,497) 4,447 (7,050) (11,443) 3,618 (7,825)
Profit/(loss) before taxation 34,517 (12,993) 21,524 31,516 (17,890) 13,626
Taxation (7,646) 1,586 (6,060) (8,820) (35) (8,855)
Profit/(loss) for the year 26,871 (11,407) 15,464 22,696 (17,925) 4,771
Profit attributable to minority 1,679 - 1,679 1,344 - 1,344
interests
Profit attributable to equity 25,192 (11,407) 13,785 21,352 (17,925) 3,427
holders of the parent
26,871 (11,407) 15,464 22,696 (17,925) 4,771
Earnings per share
Basic 17.3p (7.8)p 9.5p 14.7p (12.3)p 2.4p
Diluted 17.2p (7.8)p 9.4p 14.6p (12.3)p 2.3p
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007
2007 2006
£'000 £'000
audited audited
Non-current assets
Goodwill 172,443 172,443
Other intangible assets 591 439
Property, plant and equipment 108,468 110,167
Deferred tax assets 762 1,179
Investment in joint ventures 3,177 3,300
285,441 287,528
Current assets
Inventories 65,001 66,080
Trade and other receivables 115,078 105,166
Cash and cash equivalents 108,352 65,917
Derivatives at fair value 1,813 -
290,244 237,163
Current liabilities
Borrowings (133,585) (57,802)
Trade and other payables (148,300) (124,892)
Current tax liability (48,948) (52,100)
Derivatives at fair value (26,000) (22,336)
(356,833) (257,130)
Non-current liabilities
Borrowings (125,108) (158,771)
Trade and other payables (460) (372)
Deferred tax liability (6,445) (6,316)
Post retirement benefit obligations (41,236) (77,884)
(173,249) (243,343)
Net assets 45,603 24,218
Called up share capital 14,566 14,566
Share premium 33,034 33,034
Capital redemption reserve 949 949
Hedging and translation reserve (9,087) (7,371)
Retained earnings 416 (21,031)
Equity attributable to equity holders of the parent 39,878 20,147
Minority interests 5,725 4,071
Total equity 45,603 24,218
Analysis of net borrowing
Cash and cash equivalents 108,352 65,917
Current borrowings (133,585) (57,802)
Non-current borrowings (125,108) (158,771)
Net borrowings (150,341) (150,656)
Add back: special items (20,490) (15,615)
Net borrowings (underlying performance) (170,831) (166,271)
The financial statements were approved by the Board of Directors and authorised
for issue on 12 March 2008.
CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2007
2007 2006
Notes £'000 £'000 £'000 £'000
audited audited audited audited
Operating
Cash generated from operations 5 49,447 46,376
Interest received 4,549 2,121
Interest paid (15,611) (13,581)
Net interest paid (11,062) (11,460)
UK corporation tax received 1,179 -
Overseas corporate tax paid (11,636) (9,196)
Total tax paid (10,457) (9,196)
Net cash inflow from operating activities 27,928 25,720
Investing
Dividends received from joint ventures 1,202 1,385
Purchase of property, plant and equipment (16,994) (18,468)
Sale of property, plant and equipment 2,413 1,539
Net capital expenditure and financial investment (14,581) (16,929)
Sale of businesses - 3,660
Net cash impact of acquisitions and disposals - 3,660
Net cash outflow from investing activities (13,379) (11,884)
Financing
Equity dividends paid (13,689) (13,251)
Dividends paid to minority interests (537) (1,697)
Purchase of own shares (25) (246)
Issue of shares - 1,291
Proceeds of non-current borrowings 174 154
Net cash outflow from financing activities (14,077) (13,749)
Increase in cash and bank overdrafts during the year 472 87
Comprised of:
Cash and cash equivalents 51,896 23,160
Bank overdrafts (51,424) (23,073)
472 87
RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO MOVEMENT IN NET
BORROWINGS
2007 2006
£'000 £'000
audited audited
Net cash inflow from operating activities 27,928 25,720
Add back: dividends received from joint ventures 1,202 1,385
Less: net capital expenditure and financial investment (14,581) (16,929)
Less: dividends paid to minority interests (537) (1,697)
Free cash flow before dividends 14,012 8,479
Net cash impact of acquisitions and disposals - 3,660
Purchase of own shares (25) (246)
Issue of shares - 1,291
Equity dividends paid (13,689) (13,251)
Exchange movements (4,858) (613)
Movement in net borrowings (underlying performance) (4,560) (680)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the YEAR ENDED 31
DECEMBER 2007
2007 2006
Minority Equity Total Minority Equity Total
interests holders of interests holders of
the parent the parent
£'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Actuarial gains and losses - 21,698 21,698 - (13,551) (13,551)
Tax on items recognised directly in - (519) (519) - (1,409) (1,409)
equity
Exchange differences 512 (1,716) (1,204) (296) (6,890) (7,186)
Profit for the year 1,679 13,785 15,464 1,344 3,427 4,771
Total recognised income/(expenditure) for 2,191 33,248 35,439 1,048 (18,423) (17,375)
the period
1 Special items
The special items disclosed are made up as follows:
2007 2006
Note Special items Special items
£'000 £'000
audited audited
Total sales
Revenue of operations sold or closed during the year - 8,429
Operating profit/(loss)
Operating profit/(loss) of operations sold or closed - 117
during the year
Profit or loss arising from the sale or closure of 3 (28,237) (1,926)
operations
(28,237) (1,809)
UK pension fund - past service credit 10,797 -
Impairment of non-current assets - (19,699)
(17,440) (21,508)
Finance costs
Fair value adjustment 4 4,447 3,618
Taxation
Taxation on operating profit/(loss) of businesses sold or 1,586 (35)
closed during the year
Taxation on profit or loss arising from the sale or - -
closure of operations
1,586 (35)
2 Segmental analysis
2007 2006
Underlying Special IFRS Underlying Special IFRS
performance items performance items
£'000 £'000 £'000 £'000 £'000 £'000
audited audited audited audited audited audited
Total sales by activity
Polymer Chemicals 425,221 - 425,221 399,084 - 399,084
Pharma Chemicals 63,784 - 63,784 64,404 - 64,404
Impact Chemicals 91,636 - 91,636 93,869 8,429 102,298
580,641 - 580,641 557,357 8,429 565,786
Operating profit by activity
Polymer Chemicals 41,157 - 41,157 38,749 - 38,749
Pharma Chemicals 7,443 (12,461) (5,018) 8,133 - 8,133
Impact Chemicals 3,005 (15,776) (12,771) 964 (21,508) (20,544)
Unallocated corporate expenses (5,591) 10,797 5,206 (4,887) - (4,887)
46,014 (17,440) 28,574 42,959 (21,508) 21,451
2007 2006
£'000 £'000
audited audited
Total sales by destination
United Kingdom 91,349 98,203
Other Europe 231,560 227,158
Asia 150,332 128,003
Africa and Middle East 55,428 54,005
Rest of World 51,972 58,417
580,641 565,786
3 Profit or loss arising from the sale or closure of an
operation
2007 2006
Cash Costs Fixed asset Total Total
write off
£'000 £'000 £'000 £'000
audited audited
Closure of Uquifa's Italian manufacturing site (6,151) (6,310) (12,461) -
Closure of Holliday Pigments UK manufacturing site (7,616) - (7,616) -
Closure of James Robinson's German (6,050) (3,869) (9,919) -
manufacturing site
Sale of Huddersfield site 1,759 - 1,759 -
Sale of Brencliffe Limited - - - 198
Sale of Holliday Dispersions Ltd and SA - - - 485
Sale of Autoclenz Limited - - - 699
Restructuring of James Robinson Limited - - - 235
Restructuring of William Blythe Limited - - - 336
Sale of Reabrook Limited - - - (3,994)
Releases from provisions created prior to 2006 - - - 115
(18,058) (10,179) (28,237) (1,926)
4 Finance costs
The fair value adjustment is the mark to market adjustment in respect of cross
currency and interest rate derivatives used for hedging purposes where IAS 39
hedge accounting is not applied.
5 Reconciliation of operating profit to cash generated from
operations
2007 2006
£'000 £'000
audited audited
Reconciliation of operating profit to cash generated from
operations
Operating profit 28,574 21,451
Less: share of profits of joint ventures (1,129) (1,071)
27,445 20,380
Impairment of non-current assets - 19,699
Depreciation and amortisation 16,013 18,313
Profit or loss arising from the sale or closure of operations 28,237 1,926
UK pension fund - past service credit (10,797) -
Profit on sale of fixed assets (196) (794)
Share based payments 298 299
Cash impact of termination of businesses (8,985) (6,096)
Pension funding in excess of IAS 19 charge (5,550) (3,181)
Decrease/(increase) in inventories 3,925 (3,947)
Increase in trade and other receivables (6,398) (10,496)
Increase in trade and other payables 6,434 10,547
Unrealised exchange gains (979) (274)
Cash generated from operations 49,447 46,376
6 Reconciliation of EBITDA
2007 2006
Underlying IFRS Underlying IFRS
£'000 £'000 £'000 £'000
audited audited audited audited
Operating profit 46,014 28,574 42,959 21,451
Less: Profit or loss arising from the sale or closure - - - (117)
of operations
Less: Operating profit or loss of businesses sold or - 28,237 - 1,926
closed during the year
Add back: impairment of non-current assets - - - 19,699
Less: UK Pension Fund - Past service credit - (10,797) - -
Add back: amortisation 247 247 227 227
Add back: depreciation 15,766 15,766 18,086 18,086
EBITDA 62,027 62,027 61,272 61,272
7 Dividends
2007 2006
Pence per share Pence per share
audited audited
Interim 3.9 3.8
Final 5.7 5.5
Total 9.6 9.3
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in these financial
statements.
8 Further information
The financial information set out above does not comprise the company's
statutory accounts. It has been derived from the Group's audited accounts for
the year ended 31 December 2007, which will be delivered to the Registrar of
Companies following the Annual General Meeting. The auditors' report was
unqualified and did not contain any statement under section 237 (2) or (3) of
the Companies Act 1985. While the financial information included in this
preliminary announcement has been computed in accordance with International
Financial Accounting Standards (IFRS), this announcement itself does not contain
sufficient information to comply with IFRS. The company expects to publish full
financial statements that comply with IFRS, a copy of which will be posted to
the shareholders, on 14 April 2008.
The financial statements were approved by the Board of Directors on 12 March
2008.
The accounting policies used to prepare these accounts are the same as those
used in the preparation of the Group's audited accounts for the year ended 31
December 2006, which has been delivered to the Registrar of Companies. Copies
can be obtained by the public from the company's registered office Temple
Fields, Harlow, Essex, CM20 2BH, or on the company website www.yulecatto.com.
A final dividend of 5.7p (2006 5.5p) per share, totalling £8.3m, (2006 £8.0m)
has been recommended by the directors.
Earnings per ordinary share are based on the attributable profit for the period
and the weighted average number of shares in issue during the period - 145.6m
(2006 145.5m).
9 Glossary of terms
Total sales Total sales represent the total of revenue from Yule Catto and Co plc, its
subsidiaries, and its share of the revenue of joint ventures.
EBITDA EBITDA is calculated as operating profit before depreciation, amortisation and
non-recurring items.
Operating profit Operating profit represents profit before finance costs and taxation.
Non-recurring items Non-recurring items are defined as:
• Profit or loss impact arising from the sale or closure of an operation;
• Impairment of non-current assets; and
• Other non-operating or one-off items.
Special items The following are disclosed separately as special items in order to provide a clearer
indication of the Group's underlying performance:
• Non-recurring items;
• Mark to market adjustments in respect of cross currency and interest rate
derivatives used for hedging purposes where IAS 39 hedge accounting is not applied;
• Revaluation of USD loan notes from the rate of the related cross currency
swaps to the year end rate.
Free cash flow Free cash flow represents cash flow before cash impact of acquisitions and disposals,
purchase of own shares, equity dividends paid and exchange movements.
Net borrowings Net borrowings represents cash and cash equivalents together with short and long term
borrowings, as adjusted for the effect of related derivative instruments irrespective
of whether they qualify for hedge accounting.
This information is provided by RNS
The company news service from the London Stock Exchange
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