Interim Results
Cookson Group PLC
27 July 2004
27 July 2004
COOKSON GROUP PLC INTERIM REPORT TO SHAREHOLDERS
First Half Highlights
• Group profit* before tax improves significantly
- £42.0 million vs. £5.5 million last year
• Electronics division continues robust recovery
- turnover up 21% and operating profit* more than triples to £25.8 million
- Laminates sector moves into profit*
• Ceramics and Precious Metals divisions achieve higher turnover and profits*
• Borrowings rise by £27 million to fund higher activity levels
- further improvement in working capital ratios
- comfortably within banking facilities
• Strategic review of Precious Metals determines division should be retained
• Nick Salmon appointed Chief Executive with effect from 19 July 2004
*(before amortisation of intangible assets and exceptional items)
Commenting on the results, Nick Salmon, Chief Executive, said:
'The benefits of much improved trading conditions are evident in these results,
as is the work that has been done to put Cookson in a position to take advantage
of the recovery in its markets.
'The priorities for management in the second half of 2004 are to focus on
improving the performance of all businesses, to take advantage of the positive
trading environment and to continue to address any part of the Group that is
underperforming. Over the next few months, I will be spending a great deal of
time getting to know the businesses and the management teams across the Company,
so that I can formulate a measured and informed view of the way ahead.
'As to the second half of 2004, current market indicators anticipate that
underlying trading conditions will remain similar to those of the first half.
Based on this assumption, and that the second half is traditionally the stronger
trading period for the Precious Metals division, the improved performance of the
Group should continue.'
OVERVIEW
Group Results
A combination of improved trading conditions and the realisation of the benefits
from cost saving initiatives implemented across the Group have led to
significantly improved results.
Turnover for the Group's continuing operations of £842 million for the first
half of 2004 was up 13% at constant exchange rates over the same period last
year. Operating profit before amortisation of intangible assets and exceptional
items rose by 86% at constant exchange rates to £55.1 million. This resulted in
a 2.5 percentage point improvement in return on sales to 6.5%.
Higher operating profit from continuing operations, the eradication of the
losses of Speedline, which was sold in the second half of 2003, and lower
interest costs led to a marked increase in Group profitability. As a result,
Group profit before tax, amortisation of intangible assets and exceptional items
of £42.0 million was significantly ahead of both the £5.5 million earned in the
first half of the prior year and the £27.1 million achieved in the second half
of 2003. Profit before tax but after amortisation of intangible assets and
exceptional items was £8.0 million, which was £22.5 million better than the
£14.5 million loss in the first half of 2003. Headline earnings per share were
1.4 pence compared to 0.2 pence in the first half of 2003.
Working capital requirements rose, as expected, given the significantly higher
levels of activity seen since the end of 2003, and this contributed to a free
cash outflow in the first half of 2004 of £21.2 million. Nevertheless,
continued focus on working capital management resulted in a further improvement
in the ratio of trade working capital to sales. Net debt at the period end was
£386 million and Group borrowings remain comfortably within banking facilities.
Strategic Initiatives
Further progress has been made to return the Laminates sector of the Electronics
division to an acceptable level of performance and a modest profit was earned in
the first half; this compares with a loss of £11 million in the same period of
last year. This business is undergoing major restructuring which has resulted
in a considerable reduction in installed capacity in its US and European
operations whilst building on its presence in the Asia-Pacific market and
broadening its high-end product offerings. The restructuring programme will be
completed and new product introductions will be fully on-stream in the second
half.
In March, the Board announced that it was in the early stages of reviewing its
options regarding the Precious Metals division. This review incorporated the
possible sale of the division, as well as the restructuring of certain
underperforming activities. It has been concluded that a sale of the division
as a whole would not, at this time, enhance shareholder value; this is
particularly in light of the division's improved trading performance. The sale
of certain non-core parts of the business may yet be pursued. The
rationalisation of the division's activities in France, announced in January, is
underway and will be completed early next year. This will result in a markedly
reduced cost base.
Cookson continued to increase its geographic footprint in the fast-growing
Asia-Pacific region as many of its customers in the West migrate their
operations to this region, and local capacity and capabilities continue to grow.
In the first half, the region accounted for almost 40% of the Electronics
division's turnover and the Ceramics division's sales to customers in this
region increased to 17%. Investment in capacity by both divisions has also
accelerated over the last two years. Importantly, the Group's Asia-Pacific
operations continue to generate strong profit growth and high margins and in the
first half contributed 50% of the Group's operating profit.
During the period, prices for many of the Group's key raw materials - tin,
copper, resins, fibreglass cloth and certain petroleum-based products - have
risen substantially, especially that of tin which is trading at prices some 70%
higher than a year ago. Pricing initiatives have been put in place in each
division to ensure that the Group's overall profitability is protected.
REVIEW OF OPERATIONS
Group - continuing operations
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 842 795 745 1,624
Operating profit* (£m) 55.1 32.1 29.6 81.2
Return on sales 6.5% 4.0% 4.0% 5.0%
*(before amortisation of intangible assets and exceptional items)
Turnover for the Group's continuing operations in the first half of 2004 was 6%
higher than the same period last year and, after excluding the effect of
currency translation, was up 13% at constant exchange rates. Turnover in the
Electronics division was 21% higher than last year and that of the Ceramics and
Precious Metals divisions up 8% and 9% respectively, at constant exchange rates.
Operating profit before amortisation of intangible assets and exceptional items
of £55.1 million was 72% higher than the same period in 2003 and up 86% at
constant exchange rates. The £25.5 million increase in operating profit in the
first half of 2004 arose from increases in operating profit, at constant
exchange rates, of £19.0 million by the Electronics division, £3.6 million by
the Ceramics division and £2.9 million by the Precious Metals division.
Electronics division
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 331 296 275 604
Operating profit* (£m) 25.8 7.0 6.8 22.6
Return on sales 7.8% 2.4% 2.5% 3.7%
*(before amortisation of intangible assets and exceptional items; includes the
results of Cookson Fukuda - see below)
Market conditions for the Electronics division remained favourable in the first
half. Demand for materials used in the manufacture of printed circuit boards
(PCBs) was strong throughout the period in Asia-Pacific and North America, but
was muted in Europe. This was on the back of solid growth in consumption of
electronic goods worldwide. Conditions in the division's non-PCB markets were
generally sound.
Turnover for the Electronics division in the first half of 2004 was 12% higher
than the same period last year and up 21% at constant exchange rates. Turnover
in all sectors of the division grew strongly: Assembly Materials rose by 26%,
Laminates by 32% and Chemistry by 11% at constant exchange rates. The
sequential improvement in turnover, that began to take hold in the second half
of 2003, was maintained in the period; year-on-year turnover growth of 18% and
23% was achieved in the first and second quarters of 2004 respectively at
constant exchange rates, and turnover in the second quarter of £172 million was
8% higher than the first quarter of 2004.
Operating profit before amortisation of intangible assets and exceptional items
of £25.8 million was more than three times that of the same period in 2003, at
both reported and constant exchange rates, and was 80% higher than the second
half of 2003 at constant exchange rates. All sectors of the division recorded
year-on-year profit increases in the first half with the £18.6 million increase
at constant exchange rates arising as follows:
- Assembly Materials: £2.7 million;
- Laminates (excluding Cookson Fukuda): £10.7 million; and
- Chemistry: £5.2 million.
Profits in the second quarter of 2004 of £13.5 million were £8.5 million higher
than the second quarter last year and £1.2 million (10%) better than the first
quarter of 2004.
The year-on-year improvement in the division's profitability was underscored by
return on sales rising by 5.3 percentage points over the first half of 2003 to
7.8% at constant exchange rates.
In May 2004, it was decided to wind up the company's 50/50 joint venture with
Fukuda. Cookson Fukuda manufactured copper foil used in PCB manufacture and its
operations, which are based in Newcastle-upon-Tyne, UK, are in the process of
being exited. The Group's share of the joint venture's turnover to the end of
May was £1.1 million and of its operating loss £0.4 million (H1 2003: loss £0.8
million).
Assembly Materials
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 135 117 108 241
Operating profit* (£m) 10.6 8.6 7.9 17.8
Return on sales 7.8% 7.4% 7.3% 7.4%
*(before amortisation of intangible assets and exceptional items)
Demand was robust for the sector's products for the electronics industry in the
first half and sound for its industrial markets. Regionally, activity was
strong in Asia-Pacific and began to recover in the first quarter in North
America but was generally muted in Europe.
Turnover was up by 16% on last year and by 26% at constant exchange rates.
However, nearly two-thirds of this rate of increase related to sharply higher
tin prices being passed on to customers. The average price of tin in the first
half of 2004 was c.70% higher in sterling terms than the same period last year
and has risen by nearly 60% since the beginning of 2004. Tin is the primary raw
material used in the manufacture of the majority of the sector's products and in
the first half of 2004 the cost of tin was approximately one-third of the
sector's turnover. Pricing initiatives are in place throughout the sector to
recover input price increases.
Despite the significant increase in raw material costs, the sector achieved
operating profit growth of 35% at constant exchange rates over the first half of
2003 and return on sales rose by 0.5 percentage points to 7.8%.
Assembly Materials continued to invest in new product development, particularly
in its innovative, lead-free product range and in its well-developed presence in
Asia-Pacific, including the commissioning of a new R&D facility in India.
Laminates
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 66 54 50 113
Operating profit/(loss)* (£m) 0.6 (11.1) (10.1) (15.6)
Return on sales 0.9% (20.6%) (20.2%) (13.8%)
*(before amortisation of intangible assets and exceptional items: excludes
Cookson Fukuda JV)
The sharp improvement in demand for the sector's laminate products, which are
mainly targeted at the high-end of the PCB fabrication market, continued
throughout the first half. Turnover was 22% higher than last year and up 32% at
constant exchange rates. The positive momentum accelerated through the first
half, with turnover increasing year-on-year, at constant exchange rates, by 22%
in the first quarter and by 43% in the second; and, in the second quarter,
turnover of £35 million was up 10% on the preceding first quarter. Growth in
turnover was particularly robust in both Asia-Pacific and the USA, although soft
in Europe, and was boosted by the new high-end GETEK product range.
The Laminates sector's profitability improved markedly in the first half in
comparison with the previous year on the back of sharply higher turnover and a
significantly lower cost base. As anticipated, the sector returned to profit in
the second quarter.
During the first half, the prices of key raw materials - i.e. glass fibre cloth
and copper foil - began to rise sharply. As a result, pricing initiatives were
instituted throughout the sector which are designed to protect margins.
The capacity rationalisation initiative which commenced last year is nearing
completion and in-house manufacture of the new GETEK range is due to come fully
on stream in the second half; this will further reduce the Laminates sector's
cost base.
Chemistry
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 129 123 116 247
Operating profit* (£m) 15.0 10.3 9.8 22.2
Return on sales 11.6% 8.3% 8.5% 9.0%
*(before amortisation of intangible assets and exceptional items; includes EEJA
joint venture)
The Chemistry sector's products are sold to the PCB market and the general
electronics industry and for other industrial and automotive applications.
Similar to the other sectors of the Electronics division, demand for Chemistry's
products was healthy in Asia-Pacific and the USA but subdued in Europe. As a
consequence, turnover rose by 4% over the previous year and by 11% at constant
exchange rates.
The sound increase in turnover contributed to a 53% rise in the sector's profits
at constant exchange rates and a 3.1 percentage point increase in return on
sales to 11.6%. Profitability was also boosted by sales of the semiconductor
copper products partnership with ATMI - a leading global distributor of
speciality materials, equipment and services to the semiconductor industry - and
by a particularly strong first quarter performance by the sector's joint venture
in Japan.
Ceramics division
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 359 351 331 711
Operating profit* (£m) 26.0 24.4 22.4 50.0
Return on sales 7.2% 7.0% 6.8% 7.0%
*(before amortisation of intangible assets and exceptional items)
Turnover for the Ceramics division in the first half of 2004 was 2% higher than
the same period last year and was up by 8% at constant exchange rates.
Operating profit of £26.0 million was 6% higher than the same period in 2003 and
up 16% at constant exchange rates. As a consequence, the division's return on
sales rose by 0.4 percentage points to 7.2%.
Iron and Steel
This sector accounts for approximately 65% of the Ceramics division's turnover
and supplies its refractory products to the iron and steel industry. As the
majority of these products are consumed in the process of making steel, sales
are closely linked to steel production volumes in the regions in which its
products are sold. In the first half of 2004, steel production in the sector's
major markets - North America and the European Union - rose by 3% and 4%
respectively. The sector also continued to benefit from continued strong growth
in steel production in emerging markets, such as China, India and South America,
where it has built a significant presence. In addition, the sector carried out
a larger number of furnace relining projects than in the prior year. As a
consequence, turnover for the Iron and Steel sector rose by 9% at constant
exchange rates and profits increased commensurately.
Foundry and Industrial Processes
These operations produce heat containment and flow control products for a wide
variety of industries and applications in North America, Europe and
Asia-Pacific. Turnover for these sectors - which together accounted for some
24% of the division's total - increased by 2% at constant exchange rates over
the first half of 2003 although profits were lower than last year.
Glass
The sector enjoyed a buoyant first half, with turnover growing by 22% at
constant exchange rates, as a result of both its relining and consumable product
ranges enjoying strong demand. This, in turn, resulted in a sharp improvement in
profitability.
Precious Metals division
First Half Year
2004 2003 2003 2003
@ 2003 exchange @ 2004 exchange @ 2003 exchange
rates rates rates
Turnover (£m) 151 148 139 309
Operating profit* (£m) 3.3 0.7 0.4 8.6
Return on sales 2.2% 0.5% 0.3% 2.8%
*(before amortisation of intangible assets and exceptional items)
Turnover for the Precious Metals division increased by 2% in the first half and
by 9% at constant exchange rates. Reported turnover for the period included the
effect of a gold price 14% higher in sterling terms than last year; when the
impact of the increase in the price of gold and other precious metals is
excluded, the 'ex-metals' increase in turnover amounted to 7% at constant
exchange rates. Production of and demand for gold jewellery improved over the
same period last year in both the USA and Europe, although levels remain
relatively low in comparison with historic trends. Demand for the division's
silver products, however, was strong. Importantly, the sharp fall in sales in
the USA that was experienced in the latter part of the first quarter of 2003,
due to large merchandisers reducing inventory, did not reoccur in 2004.
Operating profit for the division rose by £2.6 million as a consequence of both
the increased level of turnover and a lower cost base following the cost
reduction initiative implemented in the second quarter of 2003.
The programme to rationalise the division's French activities has now commenced,
agreement having been reached in May on the terms of the Social Plan, which is
the statutory consultation process required for such initiatives. The programme
encompasses the closure of 4 manufacturing and distribution sites and a
headcount reduction of 132 employees. The division's remaining European
manufacturing capacity will be realigned, with the Birmingham, UK site being the
dedicated manufacturer of gold products and the Madrid, Spain operation
producing silver products. The exceptional charge in 2004 for this programme
amounts to £10.7 million, in addition to the £2.3 million charge raised in 2003.
Total cash related costs for the programme are approximately £10 million, of
which half will be outlaid in 2004 and the balance in 2005. The cost savings
will begin to accrue in the fourth quarter of 2004 with annual benefits of some
£4 million when fully implemented.
GROUP FINANCIAL REVIEW
First Half Year
2004 2003 2003
@ 2003 exchange @ 2003 exchange
rates rates
Profit before tax (£m)* 42.0 5.5 32.6
Earnings per share (pence)* 1.4 0.2 1.1
Free cash flow (£m) (21.2) 8.8 15.7
Net debt (£m) 386 364 359
*(before amortisation of intangible assets and exceptional items)
Profit before tax
Profit before tax, amortisation of intangible assets and exceptional items of
£42.0 million for the first half of 2004 reflected an improvement of £36.5
million over the same period in 2003, with the increase arising as follows:
• £25.5 million rise in operating profit at constant exchange
rates for continuing operations;
• £2.5 million negative exchange rate translation variance for
operating profit of continuing operations, primarily due to the
14% increase in the US dollar/sterling average exchange rate
from $1.61 in the first half of 2003 to $1.82 in 2004;
• eradication of the £9.9 million losses generated by
operations discontinued in the second half of last year,
predominantly Speedline; and
• £3.6 million reduction in net interest payable, mainly due to
lower bank financing costs and a positive exchange rate
translation effect of £1.6 million.
The Group incurred an operating exceptional charge of £11.0 million in the first
half of 2004 (2003: £2.7 million). This mainly related to the programme to
rationalise the French operations of the Precious Metals division, as outlined
above (£10.7 million).
Non-operating exceptional charges amounted to £6.7 million (2003: £0.5 million
credit) and primarily consisted of the Group's 50% share in the losses on the
winding-up of the Cookson Fukuda operations in the UK and the dissolution of the
joint venture, as outlined above. Amortisation of goodwill and other intangible
assets of £16.3 million arose in the first half of 2004 (2003: £17.8 million).
As a consequence, Group profit before tax, after amortisation of intangible
assets and both operating and non-operating exceptional items, amounted to £8.0
million in the first half of 2004 compared to a loss of £14.5 million in the
same period last year.
Taxation
The tax charge and effective tax rate on profit before amortisation of
intangible assets and exceptional items was £12.6 million and 30% respectively
(2003: 30%). A tax credit of £0.1 million (2003: £1.2 million charge) arose for
exceptional items.
Shareholder returns
Earnings per share
Headline earnings per share, i.e. before amortisation of intangible assets and
all exceptional items, amounted to 1.4 pence per share, compared to 0.2 pence
per share in 2003. Basic loss per share, i.e. after amortisation of intangible
assets and all exceptional items, amounted to 0.4 pence per share, compared to a
loss of 1.0 pence per share in 2003. The weighted average number of shares in
issue during the period was 1,883 million (2003: 1,880 million).
Dividends
The Board decided in October 2001 to suspend the payment of dividends and stated
that it would resume payment once certain financial targets had been met.
Whilst a considerable improvement in the Group's financial condition and
profitability has been achieved since then, no interim dividend has been
proposed.
Cash flow
Net cash inflow from operating activities
In the first half of 2004, the Group's net cash inflow from operating activities
was £14.1 million. This arose from EBITDA (operating profit of Group
subsidiaries plus depreciation and amortisation of intangible assets) of £76.2
million in the period being largely offset by a £5.5 million outlay for
rationalisation costs and a £53.7 million outflow for trade working capital.
The increase in trade working capital consisted of a 7% rise (£41.5 million at
average exchange rates) in accounts receivable and inventory since the end of
2003 - which compares favourably with an increase in the levels of activity over
the period of c.15% - and a £12.2 million reduction in trade creditors. The
reduction in trade creditors was due to a number of factors including a change
in the payables profile, primarily as a result of the increase in the cost of
tin purchased since the end of 2003, which is usually on payment terms of less
than two weeks. Despite these increases, the ratio of average trade working
capital to turnover in the first half of 2004 of 20.7% was lower than 2003,
maintaining the consistent improvement in the working capital to sales ratio
that has been evident since 2001.
Capital expenditure
Payments to acquire fixed assets in the first half of 2004 were £14.4 million
which represented 0.6 times depreciation (2003: 0.5 times). Proceeds of £2.9
million for the sale of non-core properties were received in 2004 (2003: £4.7
million).
Free cash flow
Free cash outflow for the first half of 2004 was £21.2 million, which compares
with an inflow of £8.8 million in the first half of 2003. The decrease was
mainly due to a net year-on-year increase in trade working capital (£57.8
million), offsetting the £29.0 million improvement in EBITDA.
Acquisitions and disposals
Net cash outflow for acquisitions and disposals in the first half of 2004 was
£12.0 million which consisted of a net outlay of £2.4 million for the sale and
closure of subsidiaries, additional costs for prior year disposals of £5.1
million and £4.5 million for acquisitions, including deferred consideration of
£1.6 million.
Net cash flow before financing
As a result of the above, net cash outflow before financing for the first half
of 2004 was £33.2 million and, together with a favourable translation exchange
rate adjustment of £6.7 million, resulted in an increase in the Group's net debt
of £27.3 million in the first half of 2004.
Net debt
As at 30 June 2004, the Group's net debt amounted to £386 million, with gross
borrowings of £424 million, drawn on available medium- to long-term committed
facilities of £500 million, as set out below:
30 June 31 December
2004 2003
£m £m
$570 million of US Private Placement loan notes 312 318
7% convertible bonds 80 80
£108 million committed bank facility 10 -
Other loans and overdrafts 22 17
Gross borrowings 424 415
less: Cash 38 57
Net Debt 386 359
The US Private Placement loan notes are repayable at various dates between 2005
and 2012 and have an average maturity of 5.4 years. The £108 million committed
bank facility matures in December 2006. The 7% convertible bonds are repayable
at par in November 2004; an £80 million term facility, which matures in December
2005, was arranged last year to repay the convertible bonds.
DIRECTORATE
Stephen Howard, who has been a Director of Cookson since 1992, announced on 5
May 2004 his intention to relinquish the role of Chief Executive he had held
since 1997. Subsequently, Nick Salmon was appointed Chief Executive with
effect from 19 July 2004.
Anthony Alexander, who had been a non-executive Director since 1996, retired at
the Company's Annual General Meeting on 14 May 2004 and Kent Atkinson replaced
him as Senior Independent Director. John Sussens was appointed as a
non-executive Director on 1 May 2004. Jan Pieter Oosterveld was appointed as a
non-executive Director on 15 June 2004.
Raymond Sharpe, who had been an Executive Director since 1995 and was Chief
Executive of the Electronics division, resigned from the Company on 19 May 2004.
June de Moller, who has been a non-executive Director since 1999, will retire
from the Board on 1 October 2004. She will be succeeded as Chairman of the
Remuneration Committee by John Sussens.
CURRENT OUTLOOK
Demand for materials and components for the electronics industry, which began to
recover in the second half of 2003 and continued to do so throughout the first
half of 2004, is expected to be sustained in the second half of the year.
Steel production, which is the key indicator of activity for the Ceramics
division, is expected to be at similar levels in the second half to that of the
first half in North America and Europe, with continued growth in emerging
markets.
For the jewellery industry, trading activity has traditionally been higher
during the second half in the USA and Europe due to fourth quarter holiday
season buying. On the basis of this normal trading pattern, levels of activity
for the Precious Metals division should improve in the second half over the
first.
In summary, for the Group as whole, underlying trading conditions are expected
to remain similar to those of the first half. Based on this assumption, and
that the second half is traditionally the stronger trading period for the
Precious Metals division, the improved performance of the Group should continue.
Shareholder/analyst enquiries:
Nick Salmon, Chief Executive Cookson Group plc
Dennis Millard, Group Finance Director Tel: 020 7061 6500
Lisa Williams, Investor Relations Manager
Press enquiries:
John Olsen Hogarth Partnership
Tel: 020 7357 9477
Cookson management will make a presentation to analysts on 27 July at 9:00am (UK
time). This will be broadcast live on Cookson's website, www.cooksongroup.co.uk.
An archive version of the presentation will be available on the website later
that day.
Forward Looking Statements
This announcement contains certain forward looking statements regarding the
Group's financial condition, results of operations, cash flows, dividends,
financing plans, business strategies, operating efficiencies or synergies,
budgets, capital and other expenditures, competitive positions, growth
opportunities for existing products, plans and objectives of management and
other matters. Statements in this document that are not historical facts are
hereby identified as 'forward looking statements' for the purpose of the safe
harbour provided by Section 21E of the Exchange Act and Section 27A of the
Securities Act. Such forward looking statements, including, without limitation,
those relating to the future business prospects, revenues, working capital,
liquidity, capital needs, interest costs and income, in each case relating to
Cookson, wherever they occur in this document, are necessarily based on
assumptions reflecting the views of Cookson and involve a number of known and
unknown risks, uncertainties and other factors that could cause actual results,
performance or achievements to differ materially from those expressed or implied
by the forward looking statements. Such forward looking statements should,
therefore, be considered in light of various important factors. Important
factors that could cause actual results to differ materially from estimates or
projections contained in the forward looking statements include without
limitation: economic and business cycles; trends in Cookson's principal
industries; competition in Cookson's principal markets; the terms and
conditions of Cookson's financing arrangements; foreign currency rate
fluctuations; and acquisitions or disposals of businesses or assets.
The foregoing list of important factors is not exhaustive. When relying on
forward looking statements, careful consideration should be given to the
foregoing factors and other uncertainties and events, as well as factors
described in documents the Company files with the UK and US regulators from time
to time including its annual reports and accounts.
Such forward looking statements speak only as of the date on which they are
made. Except as required by the Rules of the UK Listing Authority and the London
Stock Exchange and applicable law, Cookson undertakes no obligation to update
publicly or revise any forward looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward looking events discussed in this report might not
occur.
Cookson Group plc
265 Strand, London WC2R 1DB, United Kingdom
Tel: +44 (0) 20 7061 6500 Fax: +44 (0) 20 7061 6600 www.cooksongroup.co.uk
Registered in England & Wales No. 251977
Independent Review Report by KPMG Audit Plc to Cookson Group plc
Introduction
We have been engaged by the Company to review the financial information set out
on pages 15 to 22 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.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules which 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 for use in the United Kingdom. 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 2004.
KPMG Audit Plc, Chartered Accountants
27 July 2004, London
Group Profit and Loss Account
for the six months ended 30 June 2004
Before Before
exceptional Exceptional exceptional Exceptional
items and items and items and items and
amortisation amortisation Half amortisation amortisation Half Full
of of year of of year year
intangibles intangibles 2004 intangibles intangibles 2003 2003
note £m £m £m £m £m £m £m
Turnover 2
Continuing
operations 841.5 - 841.5 795.0 - 795.0 1,623.9
Discontinued
operations - - - 34.2 - 34.2 57.8
Total turnover 841.5 - 841.5 829.2 - 829.2 1,681.7
Share of
joint
ventures (24.4) - (24.4) (21.1) - (21.1) (41.2)
Turnover of
Group
subsidiaries 817.1 - 817.1 808.1 - 808.1 1,640.5
Operating 2
profit/(loss)
Continuing
operations
before
amortisation
of intangible
assets and
exceptional
items 52.5 - 52.5 31.0 - 31.0 79.2
Operating
exceptional
items 2,3 - (11.0) (11.0) - (2.7) (2.7) (22.2)
Amortisation
of intangible
assets 2 - (16.3) (16.3) - (17.8) (17.8) (34.7)
Continuing
operations 52.5 (27.3) 25.2 31.0 (20.5) 10.5 22.3
Discontinued
operations 2 - - - (9.9) - (9.9) (17.0)
Group
operating
profit/(loss) 52.5 (27.3) 25.2 21.1 (20.5) 0.6 5.3
Share of
joint
ventures 2.6 - 2.6 1.1 - 1.1 2.0
Total
operating
profit/(loss) 55.1 (27.3) 27.8 22.2 (20.5) 1.7 7.3
Net loss on
sale or
closure of
operations 4
(Loss)/profit
before
goodwill
written-back/
off - (5.5) (5.5) - 18.5 18.5 (23.2)
Goodwill
written-back/
off - (2.3) (2.3) - (19.4) (19.4) (142.5)
- (7.8) (7.8) - (0.9) (0.9) (165.7)
Net profit on
sale of fixed
assets - 1.1 1.1 - 1.4 1.4 5.1
Profit/(loss) on
ordinary
activities
before
interest 55.1 (34.0) 21.1 22.2 (20.0) 2.2 (153.3)
Net interest 5 (13.1) - (13.1) (16.7) - (16.7) (34.0)
Profit/(loss) on
ordinary
activities
before
taxation 42.0 (34.0) 8.0 5.5 (20.0) (14.5) (187.3)
Taxation on
profit/(loss)
on ordinary
activities (12.6) 0.1 (12.5) (1.7) (1.2) (2.9) (14.8)
Profit/(loss) on
ordinary
activities
after
taxation 29.4 (33.9) (4.5) 3.8 (21.2) (17.4) (202.1)
Minority
interests (2.5) - (2.5) (0.9) - (0.9) (2.4)
Profit/(loss)
for the
financial
period 26.9 (33.9) (7.0) 2.9 (21.2) (18.3) (204.5)
Dividends - - - - - - -
Net loss
transferred to
reserves 26.9 (33.9) (7.0) 2.9 (21.2) (18.3) (204.5)
Earnings per
share 6
Basic, before
amortisation
of intangible
assets and
all
exceptional
items 1.4p 0.2p 1.1 p
Basic and
diluted (0.4)p (1.0)p (10.9)p
Statement of Group Cash Flows
for the six months ended 30 June 2004
Half year 2004 Half year 2003 Full year 2003
Free Free Free
cash cash cash
flow flow flow
note £m £m £m £m £m £m
Net cash
inflow from
operating
activities
(see page 18) 14.1 47.7 107.5
Dividends from
joint ventures 2.2 1.1 2.2
Capital
expenditure
Payments to
acquire fixed
assets (14.4) (13.8) (48.5)
Receipts from
disposal of
fixed assets 2.9 4.7 5.8
(11.5) (9.1) (42.7)
Operating cash
flow 4.8 4.8 39.7 39.7 67.0 67.0
Returns on
investment and
servicing of
finance
Interest
paid (15.8) (18.5) (35.1)
Interest
received 0.5 0.4 0.7
Proceeds from
close-out of
interest rate
swaps 5 - - 5.3
Dividends paid
to minority
interests (2.1) (1.2) (1.5)
(17.4) (17.4) (19.3) (19.3) (30.6) (30.6)
Taxation (8.6) (8.6) (11.6) (11.6) (20.7) (20.7)
Acquisitions and
disposals
Net (outlay
for)/proceeds
from sale or
closure of
subsidiaries
subsidiaries
and joint
ventures (2.4) 46.1 49.7
Consideration
for
acquisition of
subsidiaries
and joint
ventures (4.5) (2.8) (19.1)
Other,
including
additional
costs for
prior years'
disposals (5.1) (5.7) (9.1)
(12.0) 37.6 21.5
Free cash flow
before
dividends (21.2) 8.8 15.7
Dividends paid - - - - - -
Free cash flow (21.2) 8.8 15.7
Net cash (outflow)
/inflow before
financing and
management of
liquid
resources (33.2) 46.4 37.2
Management of
liquid resources
(Decrease)/
increase in
short-term
deposits (3.2) 0.3 -
Financing
Issue of
shares 0.8 - -
Refinancing
costs paid (1.1) - (1.5)
Increase/
(decrease) in
debt 18.2 (24.5) (21.9)
(Decrease)/increase
in cash during the
period (18.5) 22.2 13.8
Group Balance Sheet
as at 30 June 2004
At 30 At 30 At 31
June June December
2004 2003 2003
as as
restated restated
(note 1) (note 1)
note £m £m £m
Fixed assets
Goodwill and
other
intangible
assets 7 487.6 564.6 514.0
Tangible
assets 332.0 376.6 350.7
Investments 1,8 43.7 62.5 49.1
Total fixed
assets 863.3 1,003.7 913.8
Current assets
Stocks 193.8 196.0 172.9
Debtors : amounts falling due within one year 9 343.3 335.4 335.0
: amounts falling due after more than one
year 9 61.0 67.7 62.2
Cash 38.2 64.6 56.8
Total current
assets 636.3 663.7 626.9
Creditors: amounts falling due within one year
Borrowings (10.0) (10.1) (15.0)
Convertible bonds (80.0) - (80.0)
Other creditors 9 (303.6) (363.8) (335.5)
Total current
liabilities (393.6) (373.9) (430.5)
Net current
assets 242.7 289.8 196.4
Total assets
less current
liabilities 1,106.0 1,293.5 1,110.2
Creditors: amounts falling due after more than one
year
Borrowings (334.0) (338.3) (320.3)
Convertible bonds - (80.0) -
Other creditors 5,9 (97.9) (85.2) (91.7)
Provisions for
liabilities
and charges (70.8) (63.1) (71.3)
603.3 726.9 626.9
Equity capital and reserves
Called up
share capital 375.4 375.4 375.4
Own shares
held by
Employee Share
Ownership Plan 1 (12.4) (12.4) (12.4)
Share premium
account 643.4 642.6 642.6
Profit and
loss account 1,10 (620.7) (494.7) (596.4)
Other reserves 205.9 205.9 205.9
Total
shareholders'
funds 591.6 716.8 615.1
Minority
interests 11.7 10.1 11.8
603.3 726.9 626.9
Statement of Total Group Recognised Gains and Losses
for the six months ended 30 June 2004
Half Half Full
year year year
2004 2003 2003
£m £m £m
Loss for the period (7.0) (18.3) (204.5)
Exchange adjustments (19.6) 9.1 (7.6)
Total net recognised losses relating to
the period (26.6) (9.2) (212.1)
Reconciliation of Movements in Group Shareholders' Funds
for the six months ended 30 June 2004
Half Half Full
year year year
2004 2003 2003
as as
restated restated
(note 1) (note 1)
£m £m £m
Shareholders' funds as at 1 January
As previously stated 618.0 717.3 717.3
Prior period adjustment (note 1) (2.9) (2.9) (2.9)
As restated 615.1 714.4 714.4
Total net recognised losses relating to the
period (26.6) (9.2) (212.1)
New share capital issued 0.8 - -
Goodwill transferred to the profit and loss
account in respect of the sale of operations 2.3 11.6 112.8
Net (reduction in)/addition to shareholders' funds (23.5) 2.4 (99.3)
Shareholders' funds at end of period 591.6 716.8 615.1
Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities
for the six months ended 30 June 2004
Half Half Full
year year year
2004 2003 2003
£m £m £m
Operating profit of Group subsidiaries before
exceptional items, but after
amortisation of intangible assets 36.2 3.3 27.5
Depreciation 23.7 26.1 52.6
Amortisation of intangible assets 16.3 17.8 34.7
(Increase) in stocks (26.5) (13.0) (9.2)
(Increase)/decrease in trade debtors (15.0) 14.3 9.3
(Decrease)/increase in trade creditors (12.2) 2.8 10.2
Net (increase)/decrease in trade working capital (53.7) 4.1 10.3
Cash payments in respect of exceptional rationalisation
costs (5.5) (6.6) (14.0)
Other (2.9) 3.0 (3.6)
Net cash inflow from operating activities 14.1 47.7 107.5
Reconciliation of Net Cash Flow to Movement in Net Debt
for the six months ended 30 June 2004
Half Half Full
year year year
2004 2003 2003
£m £m £m
Net cash (outflow)/inflow before financing
and management of liquid resources (33.2) 46.4 37.2
Issue of shares 0.8 - -
Refinancing costs paid (1.1) - (1.5)
Amortisation of refinancing costs (0.5) (2.3) (3.6)
Exchange adjustments 6.7 20.3 37.6
(Increase)/decrease in net debt during the period (27.3) 64.4 69.7
Net debt at 1 January (358.5) (428.2) (428.2)
Net debt at end of period (385.8) (363.8) (358.5)
Notes to the Accounts
1. Prior period adjustment
The Company has made a prior period adjustment during the first half of 2004
following the release of Urgent Issues Task Force (UITF) Abstract 38 'Accounting
for ESOP Trusts'. This Abstract superseded UITF Abstract 13, which required that
own shares in the Company held through its Employee Share Ownership Plan (ESOP)
be disclosed as a fixed asset investment on the face of the Company's balance
sheet. Due consideration needed to be made at each reporting period to the
existence of impairment in the carrying value of the investment. UITF Abstract
38 now requires that such shares be held as a deduction from equity, at the
gross cost paid by the Company for the shares.
The adoption of UITF Abstract 38 has given rise to a cumulative prior period
adjustment to opening retained earnings of £9.5m credit at 30 June 2004 and 30
June 2003. This represents the reversal of provisions charged through the profit
and loss account between 1998 and 2002 to recognise impairment in the carrying
value of the ESOP shares. The gross cost of the ESOP shares at all times between
1 January 2003 and 30 June 2004 was £12.4m. Under UITF Abstract 38 this is now
deducted from equity, resulting in a net reduction in shareholders' funds of
£2.9m, being the carrying value of the ESOP shares.
2. Segmental analyses
In each of the following analyses, the costs of the Group's corporate activities
have been allocated primarily according to the relative sales contribution of
each continuing operating segment to the total. Inter-segment sales are not
material in relation to total Group turnover, whether analysed by division/
sector or by geographic location of operations. The Group's share of results of
joint ventures is not material in relation to the total amount for the Group and
is included in the segments analysed below. Of the results of continuing
operations, the contribution from acquisitions to turnover and operating profit
in 2004 and 2003 was not material.
The results reported as discontinued operations mainly comprise the Electronics
division's Speedline business, which was sold in November 2003. Speedline was
based in the USA, with satellite operations in Europe and Asia. Other disposals
in 2003 included the Precision Products sector of the Precious Metals division
which was sold in January 2003 and largely based in the USA, three non-core
European businesses in the Ceramics and Precious Metals divisions and a non-core
Asia-Pacific joint venture in the Electronics division. These discontinued
operations previously formed part of the Group's ongoing operations and
comparatives have been restated accordingly.
Half year 2004 Half year 2003 Full year 2003
By division/sector Operating Operating Operating
Turnover profit/ Turnover profit/ Turnover profit/
(loss) (loss) (loss)
£m £m £m £m £m £m
Electronics 331.2 25.8 295.7 7.0 604.0 22.6
Laminates 67.1 0.2 55.5 (11.9) 115.7 (17.4)
Chemistry 128.8 15.0 123.4 10.3 247.4 22.2
Assembly Materials 135.3 10.6 116.8 8.6 240.9 17.8
Ceramics 359.4 26.0 351.4 24.4 711.1 50.0
Precious Metals 150.9 3.3 147.9 0.7 308.8 8.6
841.5 55.1 795.0 32.1 1,623.9 81.2
Amortisation of intangible assets - (16.3) - (17.8) - (34.7)
Exceptional items - (11.0) - (2.7) - (22.2)
Continuing operations 841.5 27.8 795.0 11.6 1,623.9 24.3
Discontinued operations - - 34.2 (9.9) 57.8 (17.0)
Total Group 841.5 27.8 829.2 1.7 1,681.7 7.3
Of the charge for amortisation of intangible assets of £16.3m (2003: half year
£17.8m; full year £34.7m), £8.5m related to Electronics (2003: half year £9.3m;
full year £17.5m), £6.8m to Ceramics (2003: half year £7.4m; full year £15.1m)
and £1.0m to Precious Metals (2003: half year £1.1m; full year £2.1m). Of the
Electronics charge for amortisation of intangible assets of £8.5m, £1.2m related
to Laminates (2003: half year £0.9m; full year £1.8m), £5.3m to Chemistry (2003:
half year £6.1m; full year £12.1m) and £2.0m to Assembly Materials (2003: half
year £2.3m; full year £3.6m).
Of the total exceptional items of £11.0m (2003: half year £2.7m; full year
£22.2m), nil related to Electronics (2003: half year £2.7m; full year £18.5m),
£0.3m to Ceramics (2003: half year nil; full year £0.8m) and £10.7m to Precious
Metals (2003: half year nil; full year £2.9m). Of the Electronics exceptional
items of nil, nil related to Laminates (2003: half year £0.8m; full year
£11.3m), nil to Chemistry (2003: half year £0.3m; full year £2.4m) and nil to
Assembly Materials (2003: half year £1.6m; full year £4.8m).
2. Segmental analyses (continued)
Half year 2004 Half year 2003 Full year 2003
By By By By By By
location location location
of Group customer of Group customer of Group customer
operations location operations location operations location
Operating Operating Operating
Turnover profit/ Turnover Turnover profit/ Turnover Turnover profit/ Turnover
(loss) (loss) (loss)
£m £m £m £m £m £m £m £m £m
United Kingdom 78.7 0.7 68.2 82.5 - 67.9 166.2 2.8 123.6
Continental
Europe 250.3 14.2 239.1 244.2 10.6 239.4 486.1 21.4 471.2
USA 276.0 7.0 257.5 262.5 (6.1) 257.4 546.4 (1.4) 519.6
Asia-Pacific 171.4 27.9 191.2 135.3 18.8 145.3 289.2 44.3 331.5
Rest of the
World 65.1 5.3 85.5 70.5 8.8 85.0 136.0 14.1 178.0
841.5 55.1 841.5 795.0 32.1 795.0 1,623.9 81.2 1,623.9
Amortisation
of intangible
assets - (16.3) - - (17.8) - - (34.7) -
Exceptional
items - (11.0) - - (2.7) - - (22.2) -
Continuing
operations 841.5 27.8 841.5 795.0 11.6 795.0 1,623.9 24.3 1,623.9
Discontinued
operations - - - 34.2 (9.9) 34.2 57.8 (17.0) 57.8
Total Group 841.5 27.8 841.5 829.2 1.7 829.2 1,681.7 7.3 1,681.7
Of the charge for amortisation of intangible assets of £16.3m (2003: half year
£17.8m; full year £34.7m), £1.8m (2003: half year £1.8m; full year £3.6m) was in
the UK, £2.1m (2003: half year £2.3m; full year £4.7m) in Continental Europe,
£8.9m (2003: half year £10.1m; full year £19.0m) in the USA, £2.7m (2003: half
year £2.9m; full year £5.7m) in Asia-Pacific and £0.8m (2003: half year £0.7m;
full year £1.7m) in the Rest of the World.
Of the exceptional items of £11.0m (2003: half year £2.7m; full year £22.2m),
£0.6m (2003: half year nil; full year £1.0m) was in the UK, £10.1m (2003: half
year £1.2m; full year £10.7m) in Continental Europe, £0.3m (2003: half year
£1.5m; full year £7.4m) in the USA, nil (2003: half year nil; full year £3.0m)
in Asia-Pacific and nil (2003: half year nil; full year £0.1m) in the Rest of
the World.
3. Operating exceptional items
Of the £11.0m charge incurred in the first half of 2004, £10.7m related to a
programme to rationalise the Precious Metals division's activities in France. An
operating exceptional charge of £2.3m was booked in late 2003 under this
programme, relating mainly to asset write-offs. Total cash costs of
approximately £10m are expected to be incurred under the programme, of which
£0.8m was incurred in the first half of 2004, with the balance of expenditure in
the second half of 2004 and the first half of 2005.
The £2.7m charge in the first half of 2003 largely related to rationalisation
programmes in the Electronics division announced in 2002.
4. Net loss on sale or closure of operations
The net loss on sale or closure of operations of £7.8m related largely to the
winding-up of the Laminates sector's joint venture with Fukuda. Closure costs
and asset write-offs incurred were £5.3m and £2.3m of goodwill was written-back/
off from reserves.
The net loss on sale or closure of operations in the first half of 2003 of £0.9m
included a £1.3m loss on the sale of the Precision Products sector of the
Precious Metals division, after the write-back/off of £19.4m of goodwill. The
net loss for the full year 2003 included a £141.5m loss on the sale of the
Electronics division's Speedline business, after the write-back/off of goodwill
of £114.9m.
5. Net interest
Half Half Full
year year year
2004 2003 2003
£m £m £m
Net interest payable 15.3 16.9 33.0
Deferred income relating to closed-out
interest rate swaps (2.7) (2.5) (5.0)
Amortisation of refinancing costs 0.5 2.3 3.6
Interest charge for the period -
operating 13.1 16.7 31.6
Exceptional amortisation of refinancing
costs - - 2.4
Interest charge for the period - total 13.1 16.7 34.0
The full year charge for 2003 included an exceptional amortisation charge in the
second half to write-off unamortised prepaid debt raising costs of £2.4m
relating to a syndicated bank facility that was replaced at the end of 2003.
Included in other creditors at 30 June 2004 is deferred income of £25.1m
relating to closed-out interest rate swaps (30 June 2003: £30.3m; 31 December
2003: £27.8m). During 2001-2003, interest rate swaps were closed-out realising
aggregate proceeds of £43.8m. The balance is being released as a credit to
interest over the term of the original swaps.
6 Earnings per share
Basic earnings per share are calculated using a weighted average of 1,883m
ordinary shares in issue during the period (2003: half year 1,880m; full year
1,880m). The ordinary shares held by the ESOP have been excluded from the
weighted average number of shares, as the Trustee of the ESOP has waived its
rights to receive dividends on the shares held. The ESOP held 12m ordinary
shares as at 30 June 2004 (2003: half year 12m; full year 12m). Diluted earnings
per share are calculated assuming conversion of outstanding dilutive share
options. These adjustments give rise to an increase in average ordinary shares
of nil (2003: half year nil; full year nil). On the face of the Group profit and
loss account, earnings per share are shown both before and after the
amortisation of intangible assets and all exceptional items. The number of
ordinary shares in issue as at 30 June 2004 was 1,895m (2003: half year 1,892m;
full year 1,892m).
The Directors believe that the calculation of earnings per share excluding the
amortisation of intangible assets 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 a loss of
£7.0m (2003: half year £18.3m loss; full year £204.5m loss), to which
amortisation of intangible assets and exceptional items, net of tax, totalling
£33.9m (2003: half year £21.2m; full year £224.9m) are added back.
7 Goodwill and other intangible assets
At 30 At 30 At 31
June June December
2004 2003 2003
£m £m £m
Goodwill 479.9 564.6 505.6
Other intangible assets 7.7 - 8.4
Total goodwill and other intangible assets 487.6 564.6 514.0
Further goodwill of £1.4m arose in the first half of 2004 on a small acquisition
by the Ceramics division.
Accumulated goodwill arising prior to 1998, which remained written-off directly
against Group reserves, amounted to £315.5m (30 June 2003: £419.0m; 31 December
2003: £317.8m).
Other intangible assets arose in 2003 on the purchase of a perpetual licensing
agreement in the USA.
8 Investments
Investments include £14.5m (30 June 2003: £19.9m; 31 December 2003: £18.8m) in
respect of joint ventures and £29.2m (30 June 2003: £42.6m; 31 December 2003:
£30.3m) in respect of other investments, £21.4m of which comprises the Group's
investment in a revenue-sharing arrangement with Electric Lightwave, Inc.
Comparative figures for 30 June 2003 and 31 December 2003 have been stated in
accordance with UITF Abstract 38 (see note 1).
9 Debtors and other creditors
At 30 At 30 At 31
June June December
2004 2003 2003
£m £m £m
Debtors
Amounts falling within one year:
Net trade debtors 274.5 281.7 264.4
Other debtors 68.8 53.7 70.6
343.3 335.4 335.0
Debtors falling due after more than one year 61.0 67.7 62.2
Total debtors 404.3 403.1 397.2
Other creditors
Amounts falling within one year:
Trade creditors 133.7 153.8 150.0
Other creditors 169.9 210.0 185.5
303.6 363.8 335.5
Other creditors falling due after
more than one year 97.9 85.2 91.7
Total other creditors 401.5 449.0 427.2
10 Profit and loss account
At 30 At 30 At 31
June June December
2004 2003 2003
as As
restated restated
(note 1) (note 1)
£m £m £m
Balance at beginning of period
As previously reported (605.9) (506.6) (506.6)
Prior period adjustment (note 1) 9.5 9.5 9.5
As restated (596.4) (497.1) (497.1)
Loss for the
financial period (7.0) (18.3) (204.5)
Exchange
adjustments (19.6) 9.1 (7.6)
Goodwill
written-back/off
on sale of
operations 2.3 11.6 112.8
Balance at end
of period (620.7) (494.7) (596.4)
11 Exchange rates
The principal exchange rates used for the period were as follows:
30 30 31
June June December
Average rate, period ending 2004 2003 2003
US dollar ($ per £) 1.82 1.61 1.63
Euro (€ per £) 1.48 1.46 1.45
Singapore dollar ($ per £) 3.10 2.81 2.84
Japanese yen (Y per £) 197 191 189
Period end rate
US dollar ($ per £) 1.83 1.66 1.79
Euro (€ per £) 1.50 1.45 1.42
Singapore dollar ($ per £) 3.13 2.90 3.04
Japanese yen (Y per £) 197 196 192
12 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 2003
except as stated in note 1. The interim accounts were approved by the Board of
Directors on 27 July 2004. The financial information for the six month periods
ended 30 June 2004 and 30 June 2003 is unaudited but has been reviewed by the
Company's auditor. The comparative figures for the financial year ended 31
December 2003 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.
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