Interim Results - Part 2
Cookson Group PLC
27 July 2000
Part 2
Group Profit and Loss Account
for the six months ended 30 June 2000
Half Half Full
Year Year year
2000 1999 1999
note £m £m £m
Turnover
Ongoing operations 1,136.4 702.8 1,614.9
Operations to be disposed 52.9 46.7 95.8
Continuing operations 1,189.3 749.5 1,710.7
Discontinued operations 45.3 101.8 199.4
Total turnover, including jvs 1 1,234.6 851.3 1,910.1
Share of joint ventures - ongoing
(40.6) (6.7) (20.5)
- disc - (16.3) (27.2)
(40.6) (23.0) (47.7)
Turnover of Group subsidiaries 1,194.0 828.3 1,862.4
Operating profit
Ongoing operations 109.7 57.8 144.1
Operations to be disposed 4.5 5.7 11.0
Continuing operations, incl jvs 114.2 63.5 155.1
Discontinued operations, incl jvs 4.6 10.0 17.4
Operating profit ** 118.8 73.5 172.5
Goodwill amortisation 1,6 (15.9) (2.6) (12.9)
Exceptional costs 1,2 (15.5) (10.1) (45.6)
Total operating profit 1,4 87.4 60.8 114.0
Comprising:
Continuing operations 79.8 50.3 95.1
Discontinued operations 4.6 8.0 14.5
Group operating profit 84.4 58.3 109.6
Share of joint ventures: ongoing 3.0 0.5 1.5
Share of joint ventures: discontinued - 2.0 2.9
3.0 2.5 4.4
87.4 60.8 114.0
Net loss on sale
of discontinued operations 3 - - (17.5)
Net loss on disposal of fixed assets - - (0.9)
Profit on ordinary activities
before interest 87.4 60.8 95.6
Interest 4
(26.8) (9.0) (24.0)
Profit on ordinary activities
before taxation 60.6 51.8 71.6
Taxation on profit on
ordinary activities (22.0) (15.7) (33.3)
Profit on ordinary activities
after taxation 38.6 36.1 38.3
Minority interests
(1.1) (0.6) (1.6)
Profit for the financial period 37.5 35.5 36.7
Dividends (32.4) (29.5) (68.4)
Net profit/(loss) transferred
to reserves 5.1 6.0 (31.7)
Basic EPS ** 5 9.3p 6.9p 15.5p
Basic and diluted EPS 5 5.2p 5.2p 5.2p
Interim dividend declared 4.5p 4.3p 4.3p
** Before all exceptional items and goodwill amortisation
Group Balance Sheet
as at 30 June 2000
At 30 At 31 At 30
June Dec June
note 2000 1999 1999
£m £m £m
Fixed assets
Goodwill 6 632.0 600.6 105.5
Tangible assets 7 473.0 483.5 439.3
Investments 8 102.4 95.5 48.2
Total fixed assets 1,207.4 1,179.6 593.0
Current assets
Stocks 318.5 282.2 234.6
Debtors 551.4 527.0 414.7
Cash at bank 62.9 50.1 50.3
Total current assets 932.8 859.3 699.6
Creditors: amounts falling due
within one year
Borrowings (22.1) (45.5) (15.2)
Enthone purchase consideration payable - (284.3) -
Other creditors (507.8) (496.3) (369.3)
(529.9) (496.3) (384.5)
Total current liabilities (529.9) (826.1) (384.5)
Net current assets 402.9 33.2 315.1
Total assets less current liabilities 1,610.3 1,212.8 908.1
Creditors: amounts falling due
after more than one year
Convertible bond (80.0) (80.0) (76.3)
Other borrowings (715.3) (386.0) (162.0)
Other creditors (55.7) (60.5) (33.9)
Provisions for liabilities and charges (106.8) (103.9) (78.5)
652.5 582.4 557.4
Equity capital and reserves
Called up share capital 362.6 362.6 345.9
Share premium account 375.3 375.3 331.2
Reserves 6 (91.1) (160.4) (126.4)
Total shareholders' funds 646.8 577.5 550.7
Minority interests 5.7 4.9 6.7
652.5 582.4 557.4
Statement of Group Cash Flows
for the six months ended 30 June 2000
Half Half Full
Year Year Year
2000 1999 1999
£m £m £m
Reconciliation of operating profit to
net cash inflow from operating activities
Group operating profit before
exceptional items (note 4) 99.9 68.4 155.2
Depreciation and amortisation 47.4 28.9 66.1
Increase in stocks (30.9) (10.0) (5.2)
Increase in debtors (34.6) (38.2) (46.7)
Increase in creditors 3.3 19.4 25.7
Increase in working capital (62.2) (28.8) (26.2)
Decrease in provisions (2.5) (0.9) (3.1)
Cash payments in respect of
exceptional rationalisation costs (note 2) (14.4) (9.6) (21.1)
Net cash inflow from operating activities 68.2 58.0 170.9
Cash flow statement
Net cash inflow from operating activities 68.2 58.0 170.9
Dividends from joint ventures 1.0 - 2.4
Returns on investment and servicing of finance
Interest paid, net (note 4) (23.3) (9.0) (19.9)
Taxation (31.7) (13.2) (14.8)
Capital expenditure and financial investment
Payments to acquire fixed assets (34.5) (30.7) (80.6)
Receipts from disposal of fixed assets 0.9 0.5 13.7
(33.6) (30.2) (66.9)
Acquisitions and disposals
Net proceeds from disposal of
subsidiaries and joint ventures 109.4 96.4 158.2
Consideration for acquisition of
subsidiaries and joint ventures (313.3) (43.8) (394.0)
Other, including additional costs
for prior year disposals (3.7) (2.3) (10.8)
(207.6) 50.3 (246.6)
Dividends paid (37.5) (35.0) (66.0)
Net cash (outflow)/inflow before financing (264.5) 20.9 (240.9)
Financing
Issue of shares - 0.5 0.4
Increase/(decrease) in debt 279.2 (55.4) 199.5
Increase/(decrease) in cash during the period 14.7 (34.0) (41.0)
Reconciliation of net cash flow
to movement in net debt
Increase/(decrease) in cash during the period 14.7 (34.0) (41.0)
Cash flow from movement in debt
and lease financing (279.2) 55.4 (199.5)
Change in net debt resulting from cash flows (264.5) 21.4 (240.5)
Issue costs amortised - (0.2) (0.5)
Exchange adjustments (28.6) (5.7) (1.7)
Movement in net debt during the period (293.1) 15.5 (242.7)
Net debt at 1 January (461.4) (218.7) (218.7)
Net debt at end of period (754.5) (203.2) (461.4)
Statement of Total Group Recognised Gains and Losses
for the six months ended 30 June 2000
Half Half Full
Year Year Year
2000 1999 1999
£m £m £m
Profit for the period 37.5 35.5 36.7
Exchange adjustments 32.6 5.9 (3.9)
FRS15 adjustment (note 7) - - (6.0)
Total net recognised gains
relating to the period 70.1 41.4 26.8
Reconciliation of Movements in Group Shareholders' Funds
for the six months ended 30 June 2000
Half Half Full
Year Year Year
2000 1999 1999
£m £m £m
Shareholders' funds as at 1 January 577.5 538.3 538.3
Total net recognised gains
for the period (see above) 70.1 41.4 26.8
Dividends (32.4) (29.5) (68.4)
New share capital subscribed - 0.5 61.3
Goodwill in respect of disc operations 31.6 - 19.5
Net addition to shareholders' funds 69.3 12.4 39.2
Shareholders' funds at end of period 646.8 550.7 577.5
Note of Group Historical Cost Profits and Losses
for the six months ended 30 June 2000
There were no material differences between the Group profit for the period and
the historical cost equivalent.
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 2000 comprise the Telecommunication Products Sector. In addition
to these businesses, Discontinued operations in 1999 comprise Cookson Fibers,
Inc., the Group's 45% interest in Zimco, its 35% interest in Entek Holdings
LLC, TAM Ceramics, Inc., and Polyflex Circuits, Inc.
Half Half Full
Year Year Year
2000 1999 1999
Oper'g Op Op
Turnover profit Turnover profit Turnover profit
BY DIVISION £m £m £m £m £m £m
Electronics 617.5 61.5 364.9 27.2 790.1 64.6
Ceramics 371.7 34.3 203.8 18.4 541.6 49.5
Precious Metals 147.2 13.9 134.1 12.2 283.2 30.0
Ongoing 1,136.4 109.7 702.8 57.8 1,614.9 144.1
operations
Goodwill
amortisation - (15.9) - (2.6) - (12.9)
Exceptional items - (15.5) - (10.1) - (45.6)
Operations to
be disposed 52.9 4.5 46.7 5.7 95.8 11.0
Discontinued 45.3 4.6 101.8 10.0 199.4 17.4
operations
Total Group 1,234.6 87.4 851.3 60.8 1,910.1 114.0
Of the exceptional charge of £15.5m in 2000 (1999: half year £10.1m; full year
£45.6m), £13.7m related to Ceramics (1999: half year £6.1m; full year £30.6m);
£1.8m to Electronics (1999: half year £3.1m; full year £9.6m); £nil to
Precious Metals (1999: half year £0.6m; full year £0.6m); £nil to the Group's
central functions (1999: half year £nil; full year £3.2m) and £nil to
discontinued operations (1999: half year £0.3m; full year £1.6m).
Of the goodwill amortisation charge of £15.9m in 2000 (1999: half year £2.6m;
full year £12.9m), £8.3m related to Electronics (1999: half year £0.8m; full
year £4.6m), £6.7m to Ceramics (1999: half year £1.1m, full year £7.2m) and
£0.9m to Precious Metals (1999: half year £0.7m; full year £1.1m).
Half
GEOGRAPHICAL Year
2000
By
location By
of Group customer
oper'tns location
Oper'g
Turnover profit Turnover
£m £m £m
United Kingdom 142.7 1.8 113.1
Continental Europe 226.3 18.5 229.0
USA 563.6 53.5 543.1
Asia-Pacific 140.0 26.5 144.6
Rest of the World 63.8 9.4 106.6
Ongoing operations 1,136.4 109.7 1,136.4
Goodwill amortisation - (15.9) -
Exceptional items - (15.5) -
Operations to be disposed 52.9 4.5 52.9
Discontinued operations 45.3 4.6 45.3
Total Group 1,234.6 87.4 1,234.6
Half Full
GEOGRAPHICAL contd / Year Year
1999 1999
By By
location By location By
of customer of customer
Group Group
oper'tns location oper'tns location
Oper' Oper'
g g
T'over profit T'over T'over profit T'over
£m £m £m £m £m £m
United Kingdom 90.2 6.1 61.3 215.7 10.1 169.3
Continental Europe 135.9 5.5 139.9 305.3 19.5 345.9
USA 381.3 36.3 346.4 889.7 86.1 743.4
Asia-Pacific 59.0 7.5 97.6 145.5 24.8 212.6
Rest of the World 36.4 2.4 57.6 58.7 3.6 143.7
Ongoing operations 702.8 57.8 702.8 1,614.9 144.1 1,614.9
Goodwill amortisation - (2.6) - - (12.9) -
Exceptional items - (10.1) - - (45.6) -
Operations to be disposed 46.7 5.7 46.7 95.8 11.0 95.8
Discontinued operations 101.8 10.0 101.8 199.4 17.4 199.4
Total Group 851.3 60.8 851.3 1,910.1 114.0 1,910.1
Of the exceptional charge of £15.5m in 2000 (1999: half year £10.1m; full year
£45.6m), £6.6m was in the United Kingdom (1999: half year £3.6m; full year
£21.4m), £0.2m was in Continental Europe (1999: half year £0.5m; full year
£3.2m), £8.7m was in the USA (1999: half year £5.6m; full year £20.2m) and
£nil in the Rest of the World (1999: half year £0.4m; full year £0.8m).
Of the goodwill amortisation charge of £15.9m in 2000 (1999: half year £2.6m;
full year £12.9m), £1.2m was in the United Kingdom (1999: half year £0.9m;
full year £1.9m), £3.2m was in Continental Europe (1999: half year £0.5m; full
year £1.6m), £7.8m was in the USA (1999: half year £1.1m; full year £7.4m),
£3.3m was in Asia-Pacific (1999: half year £nil; full year £1.8m) and £0.4m
was in the Rest of the World (1999: half year £0.1m; full year £0.2m).
2 Exceptional costs
Half Half Full
Year Year Year
2000 1999 1999
£m £m £m
Group-wide rationalisation programme - 10.1 21.0
Integration of Premier Refractories 13.7 - 22.9
Integration of Enthone-OMI 1.8 - -
Other - - 1.7
Total before tax 15.5 10.1 45.6
Taxation attributable (1.9) (1.1) (2.3)
Total after tax 13.6 9.0 43.3
The Group-wide rationalisation programme comprised the closure or
rationalisation of the activities at 30 of the Group's manufacturing and
distribution facilities, the discontinuance of certain product lines and the
streamlining of divisional administration functions. Cash spend in 2000 was
£5.2m (1999: half year £9.6m; full year £14.2m) leaving £7.3m provided at 30
June 2000 (31 December 1999: £12.1m; 30 June 1999 £8.3m).
The charge of £22.9m in 1999 related to costs arising from the integration of
Premier Refractories International, Inc., which was acquired in August 1999.
Of the 1999 charge, £10.2m related to asset write-downs and £6.9m was spent,
leaving £5.8m provided at 31 December 1999. A further £23m of cash costs are
expected to be charged in 2000, of which £13.7m has been charged in the first
half. Cash spend was £7.4m in the first half of 2000, leaving £12.1m provided
at 30 June 2000.
The costs involved in the integration of the Enthone-OMI group of businesses
are expected to total £13m of which £1.8m was incurred in the first half of
the year, with the remaining charge being expected in the second half of the
year.
3 Net Loss on sale of discontinued operations
The net result on sale of discontinued operations in 2000 comprises a profit
on the sale of the Group's Telecommunication Sector businesses of £3.2m after
goodwill write-off of £29.6m and a loss on the sale of Polyflex Circuits of
£3.2m after goodwill written-off of £2.0m. There were no profits or losses in
the 1999 half year.
The net loss on sale of discontinued operations in the 1999 full year includes
a loss on the sale of the Group's 35% interest in Entek Holdings LLC of £9.0m
after goodwill written-off of £12.3m, a profit of £5.4m on the sale of TAM
Ceramics, Inc., after goodwill written-off of £7.2m and additional costs
relating to prior year disposals of £13.9m.
4 Interest
From year end 1999, precious metals consignment fees are included within Group
operating profit, whereas in prior years they were included in the net
interest charge. Prior period comparatives have been restated accordingly.
Consignment fees were £3.0m in 2000 (1999: half year £1.8m; full year £5.2m).
5 Earnings per share (EPS)
Basic EPS are calculated using a weighted average of 721m (1999: half year
687m; full year 700m) 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 3m
(1999: half year 2m; full year 3m). On the face of the Group profit and loss
account, EPS are shown both before and after goodwill amortisation and
exceptional items.
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 £37.5m (1999:
half year £35.5m; full year £36.7m), to which goodwill amortisation and
exceptional items totalling £31.4m (1999: half year £12.7m; full year £76.9m)
are added back and from which the associated tax credit of £1.9m (1999: half
year £1.1m; full year £5.2m) is deducted.
6 Goodwill
Goodwill arising in 2000 amounted to £17.2m (1999: half year £14.1m; full year
£519.6m) 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 Tangible Fixed Assets
The Company adopted Financial Reporting Standard 15, 'Tangible Fixed Assets'
for its 1999 accounts and has changed its policy of carrying certain of the
Group's tangible fixed assets at valuation. The effect of this change of
policy was that the carrying amount of all tangible fixed assets have been
restated to historical cost less accumulated depreciation, necessitating a
decrease of £6.0m in the 1999 accounts.
8 Investments
Investments include £54.4m (31 December 1999 £50.6m; 30 June 1999 £21.6m) in
respect of joint ventures and £48.0m (31 December 1999 £44.9m; 30 June 1999
£26.6m) in respect of other investments, £30.5m 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
£62.9m (31 December 1999 £58.5m; 30 June 1999 £25.0m) less the Group's share
of gross liabilities of £8.5m (31 December 1999 £7.9m; 30 June 1999 £3.4m).
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 11 to 16 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 2000.
KPMG Audit Plc, Chartered Accountants
26 July 2000, London
Financial information
For the purpose of these interim financial statements, 'Group' results
represent the results of the parent company and its subsidiary companies,
whereas 'Total' results represent Group results together with the Group's
share of the results of its joint ventures.
The interim financial statements have been prepared on the basis of the
accounting policies adopted in the Group's audited statutory accounts for
1999. The interim accounts were approved by the Board of Directors on 26 July
2000.
The Financial information set out on pages 11 to 16 for the six month periods
ended 30 June 2000 and 30 June 1999 is unaudited but has been reviewed by the
Company's auditor. The comparative figures for the financial year ended 31
December 1999 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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