Interim Results

Yule Catto & Co PLC 09 September 2003 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 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 • Profit before tax up 37% at £36.2 million* (2002: £26.5 million) • Earnings per share rise 36% to 16.5 pence* (2002: 12.1 pence) • Record levels of free cash flow - £33.5 million • Interim dividend increases to 5.3 pence per share, a growth of 4% • Good contribution from sales of generic omeprazole to USA • Volume growth in water based polymers, supported by new capacity Anthony Richmond-Watson, Chairman, comments: 'We are delighted to report on a half year that saw a substantial rise in earnings, supported by record levels of free cash flow and a further increase in the dividend. Taking account of the results already achieved this year, we continue to expect to deliver a new record level of profit for the full year.' 9 September 2003 * Before amortisation of goodwill, sale and termination of businesses and profit on sale of fixed assets. 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 ------------------------------------- Crawford Burden email:crawford.burden@collegehill.com ----------------------------------------- YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 RESULTS SUMMARY Six months to 30 June 2003 2002 Unaudited Unaudited £'000 £'000 Total turnover 284,549 254,512 Earnings before interest, taxation, depreciation and amortisation 54,754 * 43,542 Operating profit before amortisation 43,173 * 33,449 Profit before taxation and amortisation 36,233 * 26,455 Net borrowings 181,029 220,055 Free cash flow before dividends 33,486 2,889 Adjusted earnings per ordinary share 16.5p 12.1p Earnings per ordinary share - FRS3 16.3p 6.8p Interim dividend per share 5.3p 5.1p * Excludes sale and termination of businesses and profit on sale of fixed assets YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CHAIRMAN'S STATEMENT Overview We are delighted to report on a half year that saw a substantial rise in earnings, supported by record levels of free cash flow and a further increase in the dividend. In the water-based polymer division, good volume growth has been achieved, the benefits of which have been masked by high raw material costs. The long-term focus on being a low-cost manufacturer of generic active pharmaceutical ingredients has delivered outstanding rewards, whilst the anticipated improvement in Performance Chemicals has begun to materialise. The resultant profit before taxation, amortisation of goodwill and exceptional items of £36.2 million is a creditable 37% increase over the first half of 2002. Your Board has increased the interim dividend to 5.3 pence (2002: 5.1 pence) per ordinary share, a growth of 4%. Review of Operations Polymer Chemicals Divisional profit of 10% on sales is a noteworthy performance in a marketplace exhibiting lower demand due to weakness in the major global economies, combined with margin pressure arising from higher raw material costs. This has been achieved by maintaining our strategy of focussing on more technically demanding applications, whilst benefiting from previous strategic investments. The recently created Synthomer business has made excellent progress in extending our product portfolio to an ever larger customer base. The expansion of dispersion capacity in Europe is progressing in line with expectation and will provide the platform for future growth. In Malaysia, the levels of production in the new nitrile facility have progressively increased as more customers take up the benefits of local production: capacity utilisation is currently 65%. The acquisition of Ditar in early 2003 has established a market leading position for the supply of compound to the carpet industry and in addition, through the supply of latex from Synthomer's facilities, operating efficiencies have been improved and overall returns enhanced. The rising cost of raw materials experienced towards the end of last year persisted relentlessly throughout the current period, primarily due to the uncertainty surrounding Iraq. Following the cessation of major hostilities the price of oil weakened, alleviating the upward pressure on the cost of monomers. In the third quarter of the year there has been some softening in raw material pricing. Pharma & Fine Chemicals The success of generic omeprazole sales to the United States was a key feature in the positive development of profits in the division, but growth was also experienced in other generics and the portfolio of ethical contracts continues to expand. YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CHAIRMAN'S STATEMENT (cont'd) Sales of ranitidine maintained their advance and with the prospect of further contracts additional manufacturing capacity has been approved. We have enjoyed growth in the veterinary sector, achieved sales into anti-diabetes and anti-arthritis applications, whilst the new pilot plant is fully loaded with early phase development contracts. Following the withdrawal from cephalosporins, a major facility in Italy has been successfully decontaminated and is already being put to good use manufacturing products for newly secured contracts. Omeprazole sales have performed extremely well, with the USA territory being particularly buoyant as the generic product established a high share of the Prilosec(R) market. In an unprecedented move ahead of the completion of an ongoing court process, new entrants have recently announced their intention to begin sales of generic omeprazole to the USA market. This inevitably will create a substantially more competitive commercial environment for our active ingredient and affect margins. However, with lower pricing, generic omeprazole may more rapidly penetrate the large and expanding wider proton pump inhibitor market, providing the opportunity for increased volume sales. We have ample capacity installed to support growth and are developing processes to optimise operating efficiencies further. Our fragrance business continues to recover from the disruption to its supply of raw materials three years ago, with both volume and margins advancing. In flavours, difficult market conditions have been widely reported and this has been reflected in our performance. Performance Chemicals Good progress has been made in recovering from several difficulties experienced in the second half of 2002. Profits have advanced 6% over the corresponding period of last year and might have been better but for production restrictions arising from a fire at our ultramarine factory in France last September. The metal salts business benefited from strong demand for tin applications in glass as did SO2 derivatives, particularly in carbonated drinks. The transition from CCA to alternative timber treatment technologies is gathering pace and we should benefit as a major supplier of the new generation products. Approvals for the use of ultramarine pigment in automotive paints are progressing; this sector offers excellent opportunities in the future. Unfortunately, short-term results have been affected by limitations on output caused by the fire in France. However, rectification work is well advanced and a resumption of normal production is anticipated early next year. YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CHAIRMAN'S STATEMENT (cont'd) Improved contribution came from further penetration of the hair dye market, combined with a good mix. Our speciality dyes for the petroleum industry have recently become the standard across Europe for fuel identification, thereby doubling sales, and growth was recorded for photographic developers as major customer approvals were secured. Exceptional Items In 2000 we announced the withdrawal from the textile dye market. Following the sale of the surplus land in June this year, the liabilities have been successfully closed out more quickly and favourably than originally expected. The cash proceeds were £2.4 million, generating an exceptional credit to the profit and loss account of £7.4 million. Borrowings Net borrowings have reduced significantly from the position at 31 December 2002 to £181.0 million. The higher level of operating profit, combined with a reduced level of capital expenditure, was boosted by the proceeds from the sale of fixed assets. In addition, the normal seasonal increase in working capital was not as significant as in previous years. All of this has resulted in an exceptionally strong free cash flow of £33.5 million. Dividend The interim dividend of 5.3 pence per ordinary share will be paid on 20 November 2003 to members on the register at close of business on 24 October 2003. Outlook Whilst there is a good order book across the range of pharmaceutical active ingredients, the extent of the impact on our results of new entrants into the US generic omeprazole market is uncertain. Demand in our Polymer business continues to be strong and margins should be restored if the softening trend in raw material pricing is maintained. Additionally, a solid contribution from Performance Chemicals is expected. Taking account of the results already achieved this year, we continue to expect to deliver a new record level of profits for the full year. ANTHONY RICHMOND-WATSON Chairman 9 September 2003 YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CONSOLIDATED PROFIT & LOSS ACCOUNT 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December 2003 2002 2002 Unaudited Unaudited Audited £000 £000 £000 Turnover of company and 279,833 249,935 501,562 subsidiaries Share of turnover of joint 4,716 4,577 9,216 ventures ----------- ----------- ---------- Total turnover 284,549 254,512 510,778 ----------- ----------- ---------- Operating profit Existing operations 42,305 32,743 65,252 Amortisation of goodwill (7,701) (7,621) (15,244) ----------- ----------- ---------- Operating profit of company 34,604 25,122 50,008 and subsidiaries Share of operating profit of 868 706 1,437 joint ventures ----------- ----------- ---------- Total operating profit 35,472 25,828 51,445 Sale and termination of 4,775 - - businesses Profit/(loss) on disposal of 2,651 - (1,825) fixed assets Interest payable (net) (6,940) (6,994) (14,127) ----------- ----------- ---------- Profit/(loss) on ordinary 35,958 18,834 35,493 activities before taxation Taxation on profit on ordinary (11,812) (7,963) (16,293) activities ----------- ----------- ---------- Profit/(loss) on ordinary 24,146 10,871 19,200 activities after taxation Minority interests (596) (999) (1,852) ----------- ----------- ---------- Profit/(loss) attributable to 23,550 9,872 17,348 shareholders Ordinary dividends (7,675) (7,411) (18,095) ----------- ----------- ---------- Retained profit/(loss) for the 15,875 2,461 (747) financial period ----------- ----------- ---------- Operating profit before 43,173 33,449 66,689 amortisation Profit before taxation (excluding amortisation, sale and termination of 36,233 26,455 52,562 businesses and profit/(loss) on sale of fixed assets) Earnings per share - 16.5p 12.1p 23.9p Adjusted - FRS3 16.3p 6.8p 12.0p Dividends per ordinary share 5.3p 5.1p 12.5p YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CONSOLIDATED BALANCE SHEET 30 June 30 June 31 December 2003 2002 2002 Unaudited Unaudited Audited £000 £000 £000 Fixed Assets Goodwill 239,145 250,347 242,724 Tangible fixed assets 174,767 175,083 173,291 Investment in joint ventures 3,116 3,418 3,014 Investments 45 57 51 ------------- ---------- --------- 417,073 428,905 419,080 Current assets Stocks 66,422 62,803 60,740 Debtors 105,894 106,977 111,403 Bank and cash balances 11,149 3,989 6,553 ------------- ---------- --------- 183,465 173,769 178,696 Creditors - due within one year Borrowings (31,894) (63,811) (57,527) Dividends (18,390) (17,629) (10,715) Other Creditors (157,155) (146,098) (158,959) ------------- ---------- --------- Net current liabilities (23,974) (53,769) (48,505) ------------- ---------- --------- Total assets less current 393,099 375,136 370,575 liabilities Creditors - due after one year Borrowings (160,284) (160,233) (160,217) Other creditors (66) (297) (71) Provisions for liabilities and (25,564) (24,737) (25,059) charges ------------- ---------- --------- Net assets 207,185 189,869 185,228 ------------- ---------- --------- Capital and reserves Called up share capital 14,480 14,480 14,480 Reserves 187,212 170,444 165,834 ------------- ---------- --------- Shareholders' funds 201,692 184,924 180,314 Minority interests 5,493 4,945 4,914 ------------- ---------- --------- Capital employed 207,185 189,869 185,228 ------------- ---------- --------- YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 CONSOLIDATED CASH FLOW STATEMENT 6 months ended 6 months ended 12 months ended 30 June 30 June 31 December 2003 2002 2002 Unaudited Unaudited Audited £000 £000 £000 £000 £000 £000 Net cash 55,670 25,108 72,802 inflow from operating activities Dividends 792 553 1,410 received from joint ventures Returns on investments and servicing of finance Net interest (8,200) (6,497) (13,649) paid Dividends paid (49) (65) (923) to minority ------- ------- ------- interests Net cash (8,249) (6,562) (14,572) outflow from returns on investments and servicing of finance Taxation (7,351) (7,436) (10,897) Capital expenditure and financial investment Purchase of (10,133) (10,446) (20,862) tangible fixed assets Sale of 2,757 1,672 1,910 tangible fixed assets Investments - - 12 net of ------- ------- ------- disposals (7,376) (8,774) (18,940) ---------- -- ---------- --- ----------- Free cash flow 33,486 2,889 29,803 before dividends Acquisitions and disposals Purchase of (4,105) - - businesses Equity - - (17,598) dividends ---------- -- ---------- --- ----------- paid Cash inflow 29,381 2,889 12,205 before management of liquid resources and financing Financing Exchange 781 221 (231) movements ---------- -- ---------- --- ----------- Movement in 30,162 3,110 11,974 net ---------- -- ---------- --- ----------- borrowings YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 NOTES TO THE FINANCIAL STATEMENTS 1. Analysis of total turnover 6 months ended 6 months ended 30 June 2003 30 June 2002 Unaudited Unaudited £'000 £'000 Analysis by activity Polymer Chemicals 148,125 132,359 Pharma & Fine Chemicals 61,020 48,641 Performance Chemicals 75,404 73,512 -------- --------- 284,549 254,512 -------- --------- 2. Analysis of profit 6 months ended 6 months ended 30 June 2003 30 June 2002 Unaudited Unaudited £'000 £'000 Analysis by activity Polymer Chemicals 14,455 21,138 Pharma & Fine Chemicals 23,664 7,786 Performance Chemicals 7,103 6,727 Holding Companies (2,049) (2,202) -------- --------- 43,173 33,449 -------- --------- YULE CATTO & COMPANY PLC Interim Results for the six months ended 30 June 2003 NOTES TO THE FINANCIAL STATEMENTS (cont'd) 3. Reconciliation of operating profit to net cash inflow from operating activities 30 June 30 June 31 December 2003 2002 2002 Unaudited Unaudited Audited £000 £000 £000 Operating profit 35,472 25,828 51,445 Share of profits of joint ventures (868) (706) (1,437) --------- -------- ---------- 34,604 25,122 50,008 Depreciation charge 11,581 10,093 20,671 Cash impact of termination of (155) (366) (510) business Amortisation of goodwill 7,701 7,621 15,244 ESOP trust - - (523) Profit on sale of tangible fixed - 22 - assets Increase in stocks (4,150) (2,236) (279) Decrease/(increase) in debtors 9,855 (7,750) (11,093) Decrease in creditors and provisions (3,766) (7,398) (716) --------- -------- ---------- Net cash inflow from operating 55,670 25,108 72,802 activities --------- -------- ---------- 4. The financial information for the year ended 31 December 2002 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 9 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 5.3p (5.1p) per share, totalling £7.7 million (£7.4 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 - 144.3 million (144.8 million). 8. Adjusted earnings per share excludes the sale and termination of businesses, profit on sale of fixed assets and the amortisation of goodwill. This information is provided by RNS The company news service from the London Stock Exchange

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