Interim Results

Yule Catto & Co PLC 12 September 2001 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 Yule Catto is an international producer of speciality chemicals, which are supplied to global customers, ranging from manufacturers of medical gloves, paint and adhesives to the pharmaceuticals and cosmetics industries HIGHLIGHTS * Turnover of continuing operations similar to last year at £236.4m * Profit before taxation, amortisation of goodwill and exceptional items of £18.0m (2000: £25.0m) shows significant recovery over the £11.1m in second half of 2000 * Further increase in dividends of 4.3% to 4.9 pence per share * Production back on stream at Dutch fragrance facility * Margins being re-established as raw material prices fall * Acquisition of full control of Harlow Chemical Company creates global growth opportunities Anthony Richmond-Watson, Chairman, comments: We are benefiting from declining raw material prices and volume is holding up well in our particular markets, giving us cautious optimism for the short term. Looking further ahead, the Harlow Chemical Company acquisition and the completion of the Malaysian synthetic latex plant will provide substantial benefit. 12 September 2001 ENQUIRIES: YULE CATTO Tel: 01279 442791 Alex Walker, Chief Executive Sean Cummins, Finance Director COLLEGE HILL Tel: 020 7457 2020 Gareth David email: gareth.david@collegehill.com Lisa Pearson email: lisa.pearson@collegehill.com YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 RESULTS SUMMARY Continuing Continuing operations operations Total Total Six months to 30 June 2001 2000 2001 2000 unaudited unaudited unaudited unaudited £'000 £000 £000 £'000 Total Turnover 236,431 238,654 239,348 282,925 Earnings before interest, taxation, depreciation and amortisation 33,187 40,869 32,944 42,483 Operating profit before amortisation 24,136 32,349 23,893 32,397 Profit before taxation and amortisation * 18,283 24,959 18,040 25,007 Net borrowings 165,132 152,376 Free cash flow before dividends 1,208 4,704 Adjusted earnings per ordinary share 8.7p 11.3p 8.6p 11.3p Earnings per ordinary share - FRS3 4.2p 7.3p (5.2)p 20.8p Interim dividend per share 4.9p 4.7p * Excludes sale and termination of businesses YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 CHAIRMAN'S STATEMENT Overview Following the particularly difficult market conditions experienced last year, we are pleased to report that reducing raw material prices, a recovery in production levels at our Dutch facility and the benefits of the restructuring undertaken last year, have contributed towards a profit before taxation of £ 18.0 million. Whilst this is 28% lower than the equivalent period for 2000, it provides a significant improvement upon the £11.1 million reported for the second half of last year. We have in place a focused capital expenditure programme directed towards new marketing opportunities and that, coupled with the benefits of the recent acquisition of full control of Harlow Chemical Company, provides your Board with the confidence to increase the interim dividend to 4.9p (+4.3%). Review of Operations Polymer chemicals The rapid rise of raw material prices, the dominant theme of last year, has reversed and that, assisted by increases in selling prices, has produced an improving profitability through the first six months of 2001 over that achieved in the second half of last year. Volumes have been robust and, with further monomer price erosion, margins should maintain their recovery closer to levels achieved at the start of 2000. The construction of our synthetic latex plant in Malaysia is progressing in line with the original timescale and is scheduled for full commissioning in early 2002. The facility, primarily targeted at the nitrile latex market for dipped gloves, will use state of the art technology to satisfy our expanding South East Asian customer base from local production. The capacity released in Europe will be directed towards satisfying the more technically demanding markets for speciality latex, where impressive growth has been seen this year. Greater penetration of the market for carpet latex is also being achieved utilising our well located compounding facilities. Emulsion resins have enjoyed positive volume development across all geographical regions, but the strength of vinyl acetate prices in the first quarter inhibited margin recovery. A quiet global market for PVC has inevitably resulted in reduced volume for our auxiliary polymers. However, margins are returning to customary levels. Pharma & fine chemicals Our fragrance facility in Holland has steadily re-established production levels against a background of occasionally erratic raw material supply. Demand is ahead of the corresponding period last year and we look forward to profits returning to more normal levels. An increased requirement for natural products in the USA has reflected positively on our flavours business which, supported by further new product initiatives, augurs well for the future. Sales of Omeprazole have risen to become the most significant product within our generic pharmaceutical portfolio, following the successful penetration of the limited number of countries where patent protection has expired. Patent expiry in other territories will progressively deliver further growth and the major market of the USA should open up for generic Omeprazole during the course of next year. Sales of other generics are good, in particular Ranitidine where volume growth has largely balanced the fall in sales price as the market matures. The ethical sector continues to benefit from early stage development contracts but, in common with many who supply the life science industry, we have experienced delays and disappointments during the latter stages of drug developments, which has effected short term profits. Performance chemicals Process improvements within ultramarine pigments have enhanced our already acknowledged worldwide market leadership, creating new opportunities to build on the growth achieved in the first six months. For Inorganic chemicals the wet start to the year caused a delay in the traditional timber treatment business, which consequently reduced volumes. A recovery is evident as demand returns during the summer months. A sharp rise in the cost of caustic soda and a drying up of supplies of copper etchant from the electronics industry were further challenges effecting this business. Sales of hair dye intermediates and photochromic products have advanced strongly, producing good results. Our position in the photographic market has also been strengthened by the commissioning of the facility in India and customer approvals are well advanced. Discontinued Operations In May we completed the final part of our withdrawal from the building products sector through a management buyout of Unilock Limited, a loss making operation, for a nominal consideration. The disposal creates an exceptional charge of £13.5 million in the profit and loss account relating substantially to the reintroduction of goodwill previously written-off. The cash impact of the transaction is anticipated to be positive. Cash Flow Net borrowings of £165.1 million are similar to December 2000 and have been achieved by vigilant cash management, as we increase expenditure on the important capital investment programme directed at the expansion of our global facilities. To offset this short-term demand we have held the seasonal increases in working capital below their historic levels. Post Balance Sheet Event On 6 August we acquired 100% control of Harlow Chemical Company Limited for £ 54.6 million, through the purchase of the remaining 50% shareholding from our joint venture partner. This is an important step in the development of a global capability in water-based polymers and, along with our strong SBR Latex specialities, provides the opportunity to serve customers worldwide with a unique portfolio of products. Dividend The interim dividend of 4.9 pence per ordinary share will be paid on 21 November 2001 to members on the register at close of business on 2 November 2001. Health & Safety During the Annual General Meeting on 23 May I told shareholders of the serious accident that occurred the previous day at our manufacturing facility in Milan Italy. It is with great regret that I have to inform you that the injuries sustained by the three employees involved have proved fatal. On behalf of the Directors may I offer our sympathy to the families and friends who lost loved ones as a result of this incident. Investigations are ongoing as to the causes of this accident in full co-operation with the relevant authorities. Outlook At the macro-economic level there is much publicity surrounding recessionary pressures, making the current outlook far from certain. However, we are benefiting from declining raw material prices and volume is holding up well in our particular markets, giving us cautious optimism for the short term. Looking further ahead, the Harlow Chemical Company acquisition and the completion of the Malaysian synthetic latex plant will provide substantial benefit. Lord Catto It is with sadness that we record the death on 3 September of Lord Catto, previously Chairman of Yule Catto for over 40 years. A E RICHMOND-WATSON Chairman 12 September 2001 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 Consolidated Profit & Loss Account 6 months ended 30 June 2001 Continuing Discontinued operations operations Total Unaudited Unaudited Unaudited £000 £000 £000 Turnover of company and subsidiaries 213,540 2,917 216,457 Share of turnover of joint ventures 22,891 - 22,891 Total turnover 236,431 2,917 239,348 Operating profit Existing operations 21,362 (243) 21,119 Amortisation of goodwill (6,466) - (6,466) Operating profit/(loss) of company and subsidiaries 14,896 (243) 14,653 Share of operating profit of joint ventures 2,774 - 2,774 Total operating profit/(loss) 17,670 (243) 17,427 Sale and termination of businesses - (13,498) (13,498) Cost of fundamental restructuring Interest payable (net) (5,853) - (5,853) Profit/(loss) on ordinary activities before taxation 11,817 (13,741) (1,924) Taxation on profit on ordinary activities (5,310) 169 (5,141) Profit/(loss) on ordinary activities after taxation 6,507 (13,572) (7,065) Minority interests (448) - (448) Profit/(loss) attributable to shareholders 6,059 (13,572) (7,513) Ordinary dividends (7,095) - (7,095) Retained profit/(loss) for the financial period (1,036) (13,572) (14,608) Operating profit before amortisation 24,136 (243) 23,893 Profit before taxation (excluding amortisation and sale and termination of businesses) 18,283 (243) 18,040 Earnings per share - Adjusted 8.7p (0.1)p 8.6p - FRS3 4.2p (9.4)p (5.2)p Dividends per ordinary share 4.9p - 4.9p Consolidated Profit & Loss Account (cont'd) 6 months ended 30 June 2000 12 months ended Continuing Discontinued December 2000 operations operations Total Total Unaudited Unaudited Unaudited Audited £000 £000 £000 £000 Turnover of company and subsidiaries 217,668 40,929 258,597 470,219 Share of turnover of joint ventures 20,986 3,342 24,328 41,774 Total turnover 238,654 44,271 282,925 511,993 Operating profit Existing operations 28,756 (24) 28,732 41,883 Amortisation of goodwill (6,490) - (6,490) (12,955) Operating profit/(loss) of company and subsidiaries 22,266 (24) 22,242 28,928 Share of operating profit of joint ventures 3,593 72 3,665 6,182 Total operating profit/(loss) 25,859 48 25,907 35,110 Sale and termination of businesses - 30,332 30,332 (4,884) Cost of fundamental restructuring (2,334) Interest payable (net) (7,390) - (7,390) (11,913) Profit/(loss) on ordinary activities before taxation 18,469 30,380 48,849 15,979 Taxation on profit on ordinary activities (6,844) (9,954) (16,798) (18,195) Profit/(loss) on ordinary activities after taxation 11,625 20,426 32,051 (2,216) Minority interests (665) - (665) (629) Profit/(loss) attributable to shareholders 10,960 20,426 31,386 (2,845) Ordinary dividends (6,879) - (6,879) (16,643) Retained profit/(loss) for the financial period 4,081 20,426 24,507 (19,488) Operating profit before amortisation 32,349 48 32,397 48,065 Profit before taxation (excluding amortisation and sale and termination of businesses) 24,959 48 25,007 36,152 Earnings per share - Adjusted 11.3p - 11.3p 16.9p - FRS3 7.3p 13.5p 20.8p (1.9)p Dividends per ordinary share 4.7p - 4.7p 11.6p YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 Consolidated Balance Sheet 30 June 30 June 31 December 2001 2000 2000 Unaudited Unaudited Audited £000 £000 £000 Goodwill 219,214 231,891 225,680 Fixed Assets 152,573 169,242 153,265 Working capital and provisions 17,027 28,873 9,197 Dividends (17,086) (17,212) (9,991) Net borrowings (165,132) (152,376) (164,785) Net assets 206,596 260,418 213,366 Shareholders' funds 202,225 255,335 208,949 Minority interests 4,371 5,083 4,417 Capital employed 206,596 260,418 213,366 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 Consolidated Cash Flow Statement 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 Unaudited Unaudited Audited £000 £000 £000 Net cash inflow from operating activities 23,753 28,184 51,146 Interest paid (5,667) (8,753) (12,220) Dividends received less paid to minorities 623 427 4,926 Taxation paid (7,120) (4,894) (8,856) Net capital expenditure (10,381) (10,260) (24,741) Free cash flow before dividends 1,208 4,704 10,255 Acquisition and disposal of businesses (1,264) 53,133 61,962 Equity dividends paid - - (16,988) Issue of ordinary shares - 32 36 Purchase of own shares (9,979) (17,924) Exchange movements (291) 2,108 248 Movement in net borrowings (347) 49,998 37,589 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2001 Notes to the financial statements 1. Analysis of total turnover 6 months ended 30 June 2001 6 months ended 30 June 2000 Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 £000 £000 Analysis by activity Polymer chemicals 112,011 - 112,011 110,229 2,892 113,121 Pharma & fine chemicals 44,769 - 44,769 49,362 - 49,362 Performance chemicals 79,651 - 79,651 79,063 3,635 82,698 Building products - 2,917 2,917 - 37,744 37,744 236,431 2,917 239,348 238,654 44,271 282,925 2. Analysis of profit 6 months ended 30 June 2001 6 months ended 30 June 2000 Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited £000 £000 £000 £000 £000 £000 Analysis by activity Polymer chemicals 11,308 - 11,308 14,235 (348) 13,887 Pharma & fine chemicals 4,943 - 4,943 8,668 - 8,668 Performance chemicals 10,095 - 10,095 11,705 (1,133) 10,572 Building products - (243) (243) - 1,529 1,529 Holding companies (2,048) - (2,048) (2,149) - (2,149) Interest payable by joint ventures (162) - (162) (110) - (110) 24,136 (243) 23,893 32,349 48 32,397 3. These accounts have been prepared on the basis of the accounting policies set out in the group's audited accounts for the year ended 31 December 2000. 4. The financial information for the year ended 31 December 2000 has been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. 5. This statement will be sent to all shareholders on 12 September and can be obtained by the public from the company's registered office at Temple Fields, Harlow, Essex, CM20 2BH. 6. An interim dividend of 4.9p (4.7p) per share, totalling £7.1 million (£ 7.0 million) has been declared by the directors. 7. 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 - 144.8 million (150.9 million). 8. Adjusted earnings per share excludes the sale and termination of businesses and the amortisation of goodwill.

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