Interim Results
Cookson Group PLC
26 July 2001
26 July, 2001
ANNOUNCEMENT OF 2001 INTERIM RESULTS
* Results and dividend as previously indicated
- headline pre-tax profit of £30.9 million
- interim dividend maintained at 4.5p
- marked improvement in free cash flow
* Difficult trading conditions in Cookson's major markets
- unprecedented fall in demand in the electronics industry
- sharply lower steel production in North America
* Swift action taken to reduce costs and headcount
* Continued investment in new technology
Commenting on the results and current outlook, Stephen Howard, Group Chief
Executive, said:
'As reported in the trading update to shareholders on 29 June 2001, the
difficult conditions experienced in Cookson's major markets in the first
quarter have persisted, resulting in pre-tax profit for the first half of £
30.9 million, which is in line with the indication given at that time.
With regard to current trading, the de-stocking process and fall in end market
demand experienced by the electronics industry since the start of the year has
continued into the third quarter. As a consequence, order intake for the
Electronics division remains at depressed levels and the timing of a recovery
is uncertain. For the Ceramics division, the steel and foundry markets in the
USA and the UK remain tight. As in prior years, the Precious Metals division's
activity is second half biased and the outlook is cautiously optimistic.
It is against this background that management has taken, and will continue to
take, proactive and concerted action to address costs. Notwithstanding the
impact of current conditions on Cookson's short-term performance, we are
confident that the Group's strong, global market positions, its
competitiveness and its technology will ensure long-term success and deliver
value to shareholders.'
REVIEW OF OPERATIONS
Group - Ongoing Operations*
First Half Year
2001 2000 2000
Sales (£m) 1,097 1,125 2,412
Operating Profit (£m) 54.1 108.0 240.3
*The financial information for ongoing operations is stated at reported
exchange rates and before exceptional items and goodwill amortisation and
excludes not only the results of businesses disposed in 2000 and 2001 but also
that of Plastic Mouldings, which is in the process of disposal.
Sales for Cookson's ongoing operations in the first half of 2001 were 3% below
the same period last year and, after excluding the contribution of
acquisitions and the effect of currency translation, were down 17%. The fall
in revenue resulted largely from the downturn in the Group's major markets in
the USA, principally electronics and steel. The results of the current year
are brought into sharper focus when compared with the strong results of 2000,
which were buoyed by robust market conditions. Operating profit was £54.1
million, which represents a decrease of 50% over the first half of 2000 and
54% in organic terms. The decrease arose almost entirely from the Electronics
division and the North American activities of the Ceramics division.
The Group's Electronics division has been significantly impacted by a severe
downturn in the electronics industry which deepened as the half progressed. It
was first manifested in the USA in the first quarter and began to be felt in
other regions such as Europe and Asia-Pacific during the second quarter. The
impact of this unprecedented downturn on both the output and profitability of
our customers, peers and other major players in the industry has been well
publicised. The sharp fall in demand which the division's equipment sector,
Speedline Technologies, experienced from the beginning of the year spread to
other parts of the division during the second quarter. In particular, the
laminates business of Polyclad Technologies suffered from a significant drop
in demand in the second quarter. A cost reduction programme was initiated in
the first quarter throughout the Electronics division and headcount has been
reduced by some 19%. Further measures to realign the division's cost base to
take account of any further decline in activity from current levels will be
made if necessary.
With the exception of the USA and the UK, steel production volumes in the rest
of the world held up reasonably well throughout the first half. The North
American steel industry performed poorly during the first half of the year,
with steel production well down on last year. This has resulted in a marked
fall in profitability of the Ceramics division's steel related activities in
that region. As the Premier Refractories integration programme nears
completion, firm action is being taken which is focussed on improving
profitability in the division's USA and UK activities.
For the Precious Metals division, underlying trading performance in the first
half was broadly in line with last year. The absorption into the division's
European jewellery products activities of the Engelhard-CLAL (ECLAL)
acquisition, which was made in the second half of 2000, remains on track.
The USA continues to be the major operating region for the Group with sales in
the first half accounting for 43% of the total. For each of the last nine
months, manufacturing industry in the USA has experienced a fall in output -
the country's worst performance for over two decades. As a consequence, the
Group's operations in the USA have seen sales fall by 14% in the first half
and profits by 80%, accounting for three-quarters of the fall in the Group's
profits.
The integration of a number of significant acquisitions in the last two years
- Premier Refractories, Enthone, Achem and ECLAL - has strengthened the range,
depth and quality of Cookson's products and technology and has enhanced its
service offerings to customers. Throughout this integration process,
management has continued to optimise the strategic advantages and to capture
the cost savings that these acquisitions offered.
In addition to the cost reduction initiatives outlined above, a Group-wide
programme to attack costs was instituted early in the year, as was a programme
to generate cash and reduce borrowings. This latter initiative resulted in a
marked improvement in cash flow in the first half.
Management remains confident of the long-term benefits to be derived from
Cookson's global market positions and from its leading technologies. In
particular, management is convinced that the current downturn in the
electronics industry will pass and that growth will, in time, return. The
Group's competitive and financial position remains sound and management will
continue to take the firm and swift action that is necessary to respond to
market conditions.
Electronics
First Half Year
2001 2000 2000
Sales (£m) 497 617 1,311
Operating Profit (£m) 10.9 61.5 134.6
The results for the Electronics division were adversely impacted throughout
the first half by a sharp fall in output and demand in the electronics
industry, the extent of which was unprecedented in the USA. This downturn
deepened during the second quarter and, having first arisen in the USA,
thereafter spread to other regions including Europe and Asia-Pacific. In the
USA - the division's most important market - printed circuit board (PCB)
bookings for the industry as a whole fell by some 47% and many customers are
currently operating at substantially less than half of their installed
capacity.
Such has been the depth of the industry downturn that the division's sales for
the first half of 2001 were 20% down on the same period last year and 27%
lower in organic terms. As a result, operating profit decreased by 82% and by
virtually the same rate in organic terms. Whilst the fall in sales and profits
was significant, this is an industry phenomenon with many major customers and
competitors reporting losses and experiencing the same difficulties.
In the face of markedly lower levels of demand, management took swift and
concerted action in the first quarter to reduce the division's cost base. This
resulted in the implementation of a programme of measures, including a
reduction in the division's headcount by 1,600 employees. The scale of the
redundancy programme is most regrettable but is absolutely necessary for the
division to maintain its competitive position. Further measures continue to be
taken to realign the division's cost base as market conditions dictate.
The Polyclad Technologies sector is one of the world's most comprehensive
providers of PCB fabrication materials. The results for the first six months
were characterised by a dramatic decrease in demand in the second quarter
following a good first quarter. Sales for the first half were down 21% in
organic terms, as both inventory corrections by customers and price pressures
took hold. In response to this deterioration in demand, capacity has been
decommissioned temporarily in both the USA and Asia-Pacific. This has
inevitably delayed the full benefits expected to flow from the integration of
the Achem business which was acquired in the second half of 2000. Despite
this, Achem significantly enhances Polyclad's long-term market presence in
Asia-Pacific and has increased its ability to service key global customers in
the USA and Europe. The results of Enthone, which manufactures chemistry
products that complement the multi-layer laminates produced by Polyclad, were
not as heavily impacted as the other businesses in the sector. The integration
of Enthone is progressing well and is on course to be completed by the second
quarter of 2002. The original programme of plant and overhead rationalisation
is kept under constant review so that additional actions can be implemented as
dictated by market conditions.
The Speedline Technologies sector manufactures a range of equipment and
systems that are used in the PCB assembly and semiconductor packaging
industries. The exceptionally sharp fall in demand experienced by the
electronics industry at the start of the year was felt most acutely by
Speedline. The fall in demand accelerated in the second quarter and sales for
the first half were 51% lower than last year. Order book levels for Speedline
have deteriorated markedly during the first half of the year and are now some
85% lower than the record levels achieved this time last year.
The Alpha Fry Technologies sector is a leading global supplier of solder,
adhesives and related materials used in the assembly of PCBs. The sector's
results have been impacted negatively by the general downturn in the
electronics industry and sales fell by 18% compared with the first half of
2000. The adverse effect of this downturn in Europe and Asia-Pacific only
began to show in the second quarter, with reduced sales of solder paste and
spheres to the PCB assembly and semiconductor packaging markets.
Current industry forecasts are characterised by a lack of consensus as to how
long both the de-stocking process and slowdown in end market demand will
continue. Notwithstanding this uncertainty, management will ensure that the
division optimises its cost base to take account of current levels of
activity. The division will also continue to develop new products and services
so that it remains well positioned to improve market share and to take full
advantage of the upturn in demand when it arrives.
Ceramics
First Half Year
2001 2000 2000
Sales (£m) 382 361 738
Operating Profit (£m) 26.6 32.6 68.6
The US steel industry performed poorly during the first half with steel
production 13% down on last year. This resulted in a marked fall in
profitability for the steel related activities of the Ceramics division in
that region and, consequently, for the division as a whole. Sales for the
first six months were up 6% over 2000 although down 3% in organic terms and,
as a result, operating profit decreased by 18%.
The performance of the Iron and Steel sector, which represents some two-thirds
of the division's sales, is closely linked to the level of steel production in
its major markets. Apart from the USA and the UK, steel production volumes in
the rest of the world held up reasonably well and output was up 2%. However,
this performance was more than offset by the effects of the sharp decline in
steel production in the USA, the sector's largest market, and the continued
difficult trading conditions experienced in the UK. As a result, sales for the
sector were down 7% in organic terms over the first half of 2000. Growth in
steel production in emerging markets such as South America, Central Europe and
Asia remained sound and, as the sector has a meaningful presence in these
regions, this provided some cushion against the depressed volumes being
generated by the USA and UK operations. The programme to integrate the Premier
Refractories business continues as planned and the manufacturing site
integration process in the USA and UK, the most significant element of this
programme, is currently underway. This programme will result in a further
reduction in headcount of some 360 people and closure of 6 plants in the
second half, the costs of which were provided for at the end of last year.
Results for the Foundry and Industrial Products sector were mixed for the
first half of the year. Sales levels increased over last year, but the impact
of high energy prices and the generally difficult trading conditions in the
USA held back profit growth. During the first quarter, the non-core magnesia
chemicals business was sold.
In the Glass sector, sales and profits improved on last year, benefiting from
a number of customers commissioning furnace-lining projects, which may signal
the end of the cyclical downturn which has depressed this business in recent
years. There has also been strong growth from the solar crucibles business, an
area in which the division has developed technological leadership.
As with the Electronics division, the trading outlook is uncertain and
management will continue to ensure it optimises the Ceramics division's cost
base whilst maintaining a strong commitment to investment in new products and
technology.
Precious Metals
First Half Year
2001 2000 2000
Sales (£m) 219 147 363
Operating Profit (£m) 16.6 13.9 37.1
Sales and profits for the division were up 49% and 19% respectively,
significantly enhanced by the contribution of the ECLAL jewellery products
business which was acquired in September 2000. Excluding this acquisition,
sales and profits for the division, at constant exchange rates, were
marginally better than last year.
In the Jewellery sector, the slowdown in activity experienced by the mill
businesses during 2000, both in the USA and the UK, continued into the current
year, although the impact on margins was mitigated as a result of an
improvement in product mix. In the Findings and Components business, a
favourable product mix also helped maintain sales levels and the Tiffany
product line was good for most of the period.
Having ended 2000 on a strong note, the Precision Products sector experienced
a reduction in demand in the second quarter from automotive, electronics and
telecommunications customers. Although business conditions softened in the
second quarter, promising growth is being experienced in the photonic and
opto-electronic market.
GROUP FINANCIAL REVIEW
First Half Year
2001 2000 2000
Profit before Tax (£m)* 30.9 92.0 197.7
Earnings per Share (pence)* 2.9 9.3 20.1
Dividend (pence) 4.5 4.5 10.0
Free Cash Flow (£m) 22.7 (56.9) 36.3
*before goodwill amortisation and all exceptional items
Profit before Tax
Headline profit before tax of £30.9 million, i.e. before goodwill amortisation
and exceptional items, reflects a decrease of 66% over the £92.0 million
achieved in 2000. In summary, the £61.1 million decrease arose as follows:
* £53.9 million lower operating profit from ongoing operations, mitigated by a
positive currency translation effect; and
* £8.3 million reduction in the contribution from businesses disposed or in
the process of disposal;
partly offset by:
* £1.1 million reduction in net interest payable.
Taxation
The total tax charge for the first half of 2001 is £9.3 million. No tax charge
or credit arises on the exceptional items. The effective rate of taxation on
profit before goodwill amortisation and exceptional items is based on an
estimate for the full year of 30% which compares with the rate in 2000 of 26%.
The increased average rate of tax results from lower operating profits in the
US-based businesses and, as a consequence, higher profits arising in regions
which have comparatively high effective tax rates.
Shareholder Returns
Earnings
Headline earnings per share, i.e. before goodwill amortisation and all
exceptional items, amounted to 2.9 pence per share, compared with 9.3 pence
achieved in 2000. Basic earnings per share after goodwill amortisation and
exceptional items amounted to 0.3 pence (2000: 5.2 pence). The average number
of shares in issue for the period was 723 million (2000: 721 million).
Dividend
As indicated in the trading update provided to shareholders on 29 June 2001,
an interim dividend of 4.5 pence per ordinary share has been declared (2000:
4.5 pence). The dividend will be paid on 19 October 2001 to shareholders on
the register at 7 September 2001. The final dividend for 2000 of £39.8 million
is fully covered by free cash flow in the first half of 2001.
Exceptional Items
The cost in the first half for the redundancy programmes in the Electronics
and Ceramics divisions was £7.4 million and was accounted for as an
exceptional operating item. Cash spend associated with these initiatives was £
4.1 million in the first half. In respect of the integration of the Premier
and Enthone businesses, a further £8.0 million was outlaid. Approximately £26
million remains to be spent on these projects, all of which is expected to be
outlaid over the next twelve months.
A non-operating exceptional surplus of £8.2 million arose in the first half of
2001, comprising a £12.7 million profit for property disposals, which
generated cash proceeds of £20.9 million, and a loss of £4.5 million on the
disposal of non-core businesses.
Cash Flow
Operating cash flow for the first half of 2001 amounted to £76.4 million which
was £40.8 million better than 2000, despite operating profits being £66.5
million lower than the first half of last year. This significant cash flow
improvement over the first half of 2000 arose mainly from the following:
* £67.5 million decrease in working capital requirements arising from both
management actions and lower levels of trading activity in the period; and
* £26.0 million lower net capital expenditure.
Tax payments of £12.0 million were made in the first half of 2001, a reduction
of £19.7 million on the first half of 2000, mainly due to lower pre-tax
profits.
Interest payments on Group borrowings remained broadly level with the first
half of last year. As part of an ongoing hedging programme to optimise the mix
of fixed and floating rate debt and to maintain stable and predictable
effective interest rates, $400 million of interest rate swaps were closed out
during the period. This generated £26.0 million in cash proceeds and,
accordingly, net interest payments were only £1.9 million in the first half
(2000: £23.3 million).
As a consequence of these cash initiatives, the Group's free cash inflow
before payment of dividend amounted to £62.5 million; this compares with an
equivalent outflow of £19.4 million in the first six months of 2000. Net free
cash flow was £22.7 million, £79.6 million better than the first half of 2000.
Net Investment
Total cash consideration for acquisitions and other investments amounted to £
12.3 million in the first half of 2001. This arose from the acquisition of a
thin slab casting technology business and for payments connected with prior
year acquisitions.
The disposal of the magnesia chemicals business of the Ceramics division was
completed in the first half of 2001 for a net cash consideration of £21.3
million.
Borrowings and Financial Condition
As at 30 June 2001, net borrowings amounted to £775 million with an average
maturity of 4.5 years. Interest cover for the twelve month period ended June
2001 was 3.6 times and net borrowings to EBITDA was 3.0 times. Gearing -
expressed as gross borrowings as a percentage of total invested capital
including unamortised goodwill - was 45.8%. These ratios are consistent with
the Group's current financing targets.
CURRENT TRADING AND OUTLOOK
With regard to current trading, the de-stocking process and fall in end market
demand experienced by the electronics industry since the start of the year has
continued into the third quarter. As a consequence, order intake for the
Electronics division remains at depressed levels and the timing of a recovery
is uncertain. For the Ceramics division, the steel and foundry markets in the
USA and the UK remain tight. As in prior years, the Precious Metals division's
activity is second half biased and the outlook is cautiously optimistic.
It is against this background that management has taken, and will continue to
take, proactive and concerted action to address costs. Notwithstanding the
impact of current conditions on Cookson's short-term performance, we are
confident that the Group's strong, global market positions, its
competitiveness and its technology will ensure long-term success and deliver
value to shareholders.
For further information please contact:
Stephen Howard, Group Chief Executive
Tel: 020 7766 4500
Fax: 020 7747 6603
E-mail: stephen_howard@cookson.co.uk
Dennis Millard, Group Finance Director
Tel: 020 7766 4500
Fax: 020 7747 6603
E-mail: dennis_millard@cookson.co.uk
Copies of Cookson's 2001 Interim Report are being posted to the shareholders
of the Company on 26 July 2001 and will be available on the Company's website
and at the Registered Office of the Company from that date.
Cookson management will make a presentation to analysts on 26 July at 9:00am
(UK time). This will be broadcast live on Cookson's website. An archive
version will be available on the website from 27 July.
Cookson Group plc, The Adelphi, 1-11 John Adam Street, London WC2N 6HJ
Corporate website: www.cooksongroup.co.uk
Group Profit and Loss Account
for the six months ended 30 June 2001
Half Half Full
year year year
2001 2000 2000
note £m £m £m
Turnover
Ongoing operations, including joint ventures 1,096.8 1,125.5 2,412.4
Operations to be disposed 52.0 52.9 99.1
Discontinued operations 5.9 56.2 70.1
Total turnover 1 1,154.7 1,234.6 2,581.6
Operating profit
Ongoing operations, including joint ventures 54.1 108.0 240.3
Operations to be disposed 3.4 4.5 3.8
Operating exceptional items - ongoing 1, 2 (7.4) (15.5) (38.4)
Goodwill amortisation - ongoing 1, 6 (19.4) (15.9) (35.9)
Discontinued operations (0.9) 6.3 8.7
Total operating profit 1 29.8 87.4 178.5
Net profit/(loss) on sale of operations and fixed 3 8.2 - (0.8)
assets
Profit on ordinary activities before interest 38.0 87.4 177.7
Interest (25.7) (26.8) (55.1)
Profit on ordinary activities before taxation 12.3 60.6 122.6
Taxation on profit on ordinary activities (9.3) (22.0) (45.1)
Profit on ordinary activities after taxation 3.0 38.6 77.5
Minority interests (0.8) (1.1) (2.0)
Profit for the financial period 2.2 37.5 75.5
Dividends (32.5) (32.4) (72.2)
Net (loss)/profit transferred to reserves (30.3) 5.1 3.3
Earnings per Share: 5
Basic, before all exceptional items and goodwill 2.9p 9.3p 20.1p
amortisation
Basic 0.3p 5.2p 10.5p
Diluted 0.3p 5.2p 10.4p
Interim dividend declared 4.5p 4.5p 4.5p
Group Balance Sheet
as at 30 June 2001
At 30 At 31 At 30
June Dec June
note 2001 2000 2000
£m £m £m
Fixed assets
Goodwill 6 694.0 708.0 632.0
Tangible assets 535.2 526.0 473.0
Investments 7 90.7 93.0 102.4
Total fixed assets 1,319.9 1,327.0 1,207.4
Current assets
Stocks 312.8 335.1 318.5
Debtors 459.7 553.9 551.4
Cash at bank 81.5 40.1 62.9
Total current assets 854.0 929.1 932.8
Creditors: amounts falling due within one year
Borrowings (47.6) (51.2) (22.1)
Other creditors (460.9) (590.4) (507.8)
Total current liabilities (508.5) (641.6) (529.9)
Net current assets 345.5 287.5 402.9
Total assets less current liabilities 1,665.4 1,614.5 1,610.3
Creditors: amounts falling due after more than
one year
Convertible bond (80.0) (80.0) (80.0)
Other borrowings (729.1) (702.9) (715.3)
Other creditors (132.0) (91.3) (55.7)
Provisions for liabilities and charges (88.4) (94.5) (106.8)
635.9 645.8 652.5
Equity capital and reserves
Called up share capital 363.8 363.0 362.6
Share premium account 377.0 376.1 375.3
Reserves 6 (113.5) (100.0) (91.1)
Total shareholders' funds 627.3 639.1 646.8
Minority interests 8.6 6.7 5.7
635.9 645.8 652.5
Statement of Group Cash Flows
for the six months ended 30 June 2001
Half Half Full
Year Year Year
2001 2000 2000
note
£m £m £m
Reconciliation of operating profit to net cash
inflow
From operating activities
Group operating profit before exceptional items 33.4 99.9 209.0
Depreciation and goodwill amortisation 52.4 47.4 98.3
Decrease/(increase) in working capital 5.3 (62.2) (1.7)
Decrease in provisions - (2.5) (2.3)
Cash payments in respect of exceptional 2 (12.1) (14.4) (26.7)
rationalisation costs
Net cash inflow from operating activities 79.0 68.2 276.6
Cash flow statement
Net cash inflow from operating activities 79.0 68.2 276.6
Dividends from joint ventures 5.0 1.0 2.4
Capital expenditure and financial investment
Payments to acquire fixed assets (28.5) (34.5) (91.8)
Receipts from disposal of fixed assets 3 20.9 0.9 3.4
(7.6) (33.6) (88.4)
Operating cash flow 76.4 35.6 190.6
Returns on investment and servicing of finance
Interest paid, net (27.9) (23.3) (50.6)
Proceeds from close-out of interest rate swaps 4 26.0 - -
(1.9) (23.3) (50.6)
Taxation (12.0) (31.7) (33.7)
Dividends paid (39.8) (37.5) (70.0)
Free cash inflow/(outflow) 22.7 (56.9) 36.3
Acquisitions and disposals
Net proceeds from disposal of subsidiaries and 24.8 109.4 99.0
joint ventures
Consideration for acquisition of subsidiaries and (9.6) (313.3) (426.9)
joint ventures
Other, including additional costs for prior year (2.7) (3.7) (7.4)
disposals
12.5 (207.6) (335.3)
Net cash inflow/(outflow) before financing 35.2 (264.5) (299.0)
Financing
Issue of shares 1.7 - 1.7
Increase in debt 4.5 279.2 266.0
Increase/(decrease) in cash during the period 41.4 14.7 (31.3)
Statement of Total Group Recognised Gains and Losses
for the six months ended 30 June 2001
Half year Half year Full year
2001 2000 2000
£m £m £m
Profit for the period 2.2 37.5 75.5
Exchange adjustments 16.8 32.6 25.5
Total net recognised gains relating to the 19.0 70.1 101.0
period
Reconciliation of Movements in Group Shareholders' Funds
for the six months ended 30 June 2001
Half year Half year Full year
2001 2000 2000
£m £m £m
Shareholders' funds as at 1 January 639.1 577.5 577.5
Total net recognised gains for the period (see 19.0 70.1 101.0
above)
Dividends (32.5) (32.4) (72.2)
New share capital subscribed 1.7 - 1.2
Goodwill in respect of discontinued operations - 31.6 31.6
Net (reduction) / addition to shareholders' funds (11.8) 69.3 61.6
Shareholders' funds at end of period 627.3 646.8 639.1
Reconciliation Of Net Cash Flow To Movement In Net Debt
For the six months ended 30 June 2001
Half year Half year Full year
2001 2000 2000
£m £m £m
Increase/(decrease) in cash during the period 41.4 14.7 (31.3)
Cash flow from movement in debt and lease (4.5) (279.2) (266.0)
financing
Change in net debt resulting from cash flows 36.9 (264.5) (297.3)
Issue costs amortised (0.6) - (1.2)
Exchange adjustments (17.5) (28.6) (34.1)
Movement in net debt during the period 18.8 (293.1) (332.6)
Net debt at 1 January (794.0) (461.4) (461.4)
Net debt at end of period (775.2) (754.5) (794.0)
Notes to the accounts
1. Segmental analyses
The results reported as operations to be disposed represent those of the
Group's Plastic Mouldings businesses. The businesses reported as discontinued
operations in 2001 comprise the Group's magnesia chemicals business. In
addition to this business, discontinued operations in 2000 comprise the
Telecommunication Products Sector and Polyflex Circuits, Inc.
Half year 2001 Half year 2000 Full year 2000
Operating Operating Operating
Turnover profit Turnover profit Turnover profit
By Division £m £m £m £m £m £m
Electronics 496.6 10.9 617.4 61.5 1,311.4 134.6
Ceramics 381.5 26.6 360.9 32.6 738.4 68.6
Precious Metals 218.7 16.6 147.2 13.9 362.6 37.1
Ongoing operations 1,096.8 54.1 1,125.5 108.0 2,412.4 240.3
Operations to be 52.0 3.4 52.9 4.5 99.1 3.8
disposed
Goodwill amortisation - (19.4) - (15.9) - (35.9)
Exceptional items - (7.4) - (15.5) - (38.4)
Continuing operations 1,148.8 30.7 1,178.4 81.1 2,511.5 169.8
Discontinued 5.9 (0.9) 56.2 6.3 70.1 8.7
operations
Total Group 1,154.7 29.8 1,234.6 87.4 2,581.6 178.5
The Group's share of turnover and operating profit of joint ventures included
in ongoing operations amounted to £48.1m (2000: half year £40.6m; full year £
99.7m) and £3.8m (2000:half year £3.0m; full year £7.9m) respectively. The
majority of these relate to the Electronics division in Asia-Pacific.
Of the exceptional charge of £7.4m in 2001 (2000: half year £15.5m; full year
£38.4m), £1.0m related to Ceramics (2000: half year £13.7m; full year £23.5m)
and £6.4m to Electronics (2000: half year £1.8m; full year £14.9m).
Of the goodwill amortisation charge of £19.4m in 2001 (2000: half year £6.7m,
full year £15.0m) and £1.5m to Precious Metals (2000: half year £0.9m; full
year £2.3m).
Half year 2001 Half year 2000
By By By By
location customer location customer
of Group location of Group
operations operations location
Geographical Turnover Operating Turnover Operating Turnover
profit profit
£m £m £m £m £m
United 126.3 0.5 89.7 142.7 1.8 113.1
Kingdom
Continental 286.4 16.3 301.1 226.3 18.5 229.0
Europe
USA 474.2 10.4 465.3 552.7 51.8 532.2
Asia-Pacific 146.4 19.1 134.0 140.0 26.5 144.6
Rest of the 63.5 7.8 106.7 63.8 9.4 106.6
World
Ongoing 1,096.8 54.1 1,096.8 1,125.5 108.0 1,125.5
operations
Operations 52.0 3.4 52.0 52.9 4.5 52.9
to be
disposed
Goodwill - (19.4) - - (15.9) -
amortisation
Exceptional - (7.4) - - (15.5) -
items
Continuing 1,148.8 30.7 1,148.8 1,178.4 81.1 1,178.4
operations
Discontinued 5.9 (0.9) 5.9 56.2 6.3 56.2
operations
Total Group 1,154.7 29.8 1,154.7 1,234.6 87.4 1,234.6
Full year 2000
By location By
of Group customer
operations location
Geographical Turnover Operating profit Turnover
£m £m £m
United Kingdom 281.8 4.2 183.0
Continental Europe 494.4 45.9 543.5
USA 1,200.5 116.1 1,047.1
Asia-Pacific 318.8 58.9 423.8
Rest of the World 116.9 15.2 215.0
Ongoing operations 2,412.4 240.3 2,412.4
Operations to be disposed 99.1 3.8 99.1
Goodwill amortisation - (35.9) -
Exceptional items - (38.4) -
Continuing operations 2,511.5 169.8 2,511.5
Discontinued operations 70.1 8.7 70.1
Total Group 2,581.6 178.5 2,581.6
Of the exceptional charge of £7.4m in 2001 (2000: half year £15.5m; full year
£38.4m), £0.5m was in the United Kingdom (2000: half year £6.6m; full year £
19.9m), £nil was in Continental Europe (2000: half year £0.2m; full year £
4.2m), £6.9m was in the USA (2000: half year £8.7m; full year £13.1m) and £nil
in the Rest of the World (2000: half year £nil; full year £1.2m).
Of the goodwill amortisation charge of £19.4m in 2001 (2000: half year £15.9m;
full year £35.9m), £1.5m was in the United Kingdom (2000: half year £1.2m;
full year £3.0m), £3.4m was in Continental Europe (2000: half year £3.2m; full
year £6.6m), £10.0m was in the USA (2000: half year £7.8m; full year £18.0m),
£4.0m was in Asia-Pacific (2000: half year £3.3m; full year £7.3m) and £0.5m
was in the Rest of the World (2000: half year £0.4m; full year £1.0m).
2. Operating exceptional Items
Half year Half year Full year
2001 2000 2000
£m £m £m
2001 redundancy programme 7.4 - -
Integration of Premier - 13.7 23.5
Integration of Enthone - 1.8 14.9
Total before tax 7.4 15.5 38.4
Taxation attributable - (1.9) (3.1)
Total after tax 7.4 13.6 35.3
The cost of the 2001 redundancy programmes in the Electronics and Ceramics
divisions charged in the Group accounts is £7.4m, of which £4.1m was paid in
the first half, leaving £3.3m accrued at 30 June.
The respective charges in 2000 relating to the integration programmes of
Premier Refractories International, Inc. ('Premier') and of Enthone-OMI
('Enthone'), both of which were acquired in 1999, represented the final
provision for the costs which have been committed in order to finalise these
programmes. The Premier integration programme is expected to be substantially
complete by December 2001 and the Enthone programme by June 2002. Cash spend
in the first half of 2001 was £8.0m, leaving aggregate provisions of £22.0m as
at 30 June 2001.
3. Net profit/(loss) on sale of operations and fixed assets
The net profit on sale of operations and fixed assets of £8.2m in 2001 arose
from the sale of two of the Group's UK properties, which generated a net
profit of £12.7m, for £20.9m cash proceeds, net of a loss of £4.5m arising on
the sale of non-core businesses, after goodwill written-off of £15.4m. The net
result on sale of operations in 2000 comprised a profit on the sale of the
Group's Telecommunication Sector businesses of £3.4m, after goodwill
written-off of £29.6m and a loss on the sale of Polyflex Circuits of £4.2m,
after goodwill written-off of £2.0m, both of which occurred in the first half
of the year.
4. Interest
As part of an ongoing hedging programme to optimise the mix of fixed and
floating rate debt and to maintain stable and predictable effective interest
rates, $400m of interest rate swaps were closed out during the period. This
generated £26.0m in cash proceeds and accordingly, net interest payments were
only £1.9m in the first half (2000: £23.3m).
5. Earnings per share (EPS)
Basic EPS are calculated using a weighted average of 723m (2000: half year
721m; full year 721m) ordinary shares in issue during the period. Diluted EPS
are calculated assuming conversion of outstanding dilutive share options.
These adjustments give rise to an increase in average ordinary shares of 2m
(2000: half year 3m; full year 4m). On the face of the Group profit and loss
account, EPS are shown both before and after goodwill amortisation and all
exceptional items. The number of shares in issue as at 30 June 2001 was 728m
(2000: 725m).
The Directors believe that the calculation of EPS excluding goodwill
amortisation and all exceptional items, together with the associated tax
charge or credit, gives the most appropriate measure of the underlying earning
capacity of the Group. This calculation is based on earnings of £2.2m (2000:
half year £37.5m; full year £75.5m), to which goodwill amortisation and
exceptional items totalling £18.6m (2000: half year £31.4m; full year £75.1m)
are added back and from which the associated tax credit of £nil (2000: half
year £1.9m; full year £5.9m) is deducted.
6. Goodwill
Goodwill arising in 2001 amounted to £4.1m (2000: half year £17.2m; full year
£114.3m) and is being amortised over its estimated life of 20 years.
Accumulated goodwill arising prior to 1998, which remains written-off directly
against Group reserves, amounts to £481.4m. Of this total, £47.8m relates to
the businesses reported as operations to be disposed.
7. Investments
Investments include £37.5m (31 December 2000: £42.0m; 30 June 2000: £54.4m) in
respect of joint ventures and £53.2m (31 December 2000: £51.0m; 30 June 2000:
£48.0m) in respect of other investments, £32.1m of which comprise the Group's
investment in a revenue-sharing arrangement with Electric Lightwave, Inc.
Investments in joint ventures consist of the Group's share of gross assets of
£55.8m (31 December 2000: £62.5m; 30 June 2000: £62.9m) less the Group's share
of gross liabilities of £18.3m (31 December 2000: £20.5m; 30 June 2000: £
8.5m).
8. Financial information
The interim financial statements have been prepared on the basis of the
accounting policies adopted in the Group's audited statutory accounts for
2000. The interim accounts were approved by the Board of Directors on 26 July
2001. The financial information set out on pages 10 to 15 for the six month
periods ended 30 June 2001 and 30 June 2000 is unaudited but has been reviewed
by the Company's auditor. The comparative figures for the financial year ended
31 December 2000 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor and
delivered to the registrar of companies. The report of the auditor was
unqualified and did not contain a statement under section 237 (2) or (3) of
the Companies Act 1985. These sections address whether proper accounting
records have been kept, whether the Company's accounts are in agreement with
these records and whether the auditor has obtained all the information and
explanations necessary for the purposes of their audit.
Independent Review Report by KPMG Audit Plc to Cookson Group plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 10 to 15 and we have read the other information contained in the
Interim Report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999
/4: Review of interim financial information issued by the Auditing Practices
Board. A review consists principally of making enquiries of Group management
and applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review is substantially less in scope than an audit performed in accordance
with Auditing Standards and therefore provides a lower level of assurance than
an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.
KPMG Audit Plc, Chartered Accountants
26 July 2001, London
Latest directors dealings
- 51 minutes ago ADVFN
- 58 minutes ago ADVFN
- 1 hour ago Flutter Entertainment (CDI)
- 1 hour ago Legal & General Group
- 2 hours ago Auction Technology Group