Final Results
PATERSON ZOCHONIS PLC
7 September 1999
PATERSON ZOCHONIS plc
PRELIMINARY ANNOUNCEMENT
Operating and financial review
Global review
Good progress was made during the year in most units, however
the serious economic and trading conditions experienced in
Eastern Europe and China, as previously announced, have impacted
the group's results. During the year, significant losses were
incurred in these units, but actions have already been taken to
improve their performance.
Europe
The UK business had a good year with improved turnover and
profitability. A new shower product, Imperial Leather
Foamburst, was successfully launched at the beginning of the
financial year and a new skin moisturising washing range,
Imperial Leather Aquasource, was introduced this spring.
In Eastern Europe the currency and credit difficulties,
particularly in Russia and Ukraine, severely affected our
business from the autumn of 1998. Turnover reduced immediately,
although there are currently signs of some improvement. Action
has been taken to reduce costs in all areas of the business.
The new factory in Greece, badly damaged by fire in 1997, has
now been repaired and turnover and profitability have been
maintained at similar levels to last year.
Asia
Generally our units in the Far East had a good year, in
particular in Indonesia and Thailand where growth in turnover
and profitability was significant. Their improved results were
however largely negated by the problems encountered in China.
The increasingly competitive nature of the Chinese market
resulted in lower selling prices and reduced margins forcing
that company to re-assess the focus and structure of its
business. The company is now concentrated much more on its
range of soap products, severely curtailing other activities and
bringing more distribution under its own control. These broad
measures have enabled the losses incurred in the year to be
reduced quickly with the aim of growing the business into
profitability in the near future. As a result of the revised
strategy, an exceptional provision of £6.3m has been made to
cover losses on under-utilised plant and machinery and necessary
stock and debtor write-offs.
Africa
Kenya and Ghana maintained trading profits at a similar level to
the previous year, however, profitability of the associate in
Nigeria was affected by the reduction in consumer demand as a
result of the depressed economy caused mainly by the weak price
of oil. With the impact now of higher oil prices and the
actions taken by the new civilian government, there is some
indication of a slow pick up in activity.
Post balance sheet event
Since the year end, the group's interest in the associated
company in Nigeria has increased to over 50%. The results and
net assets will be consolidated as a subsidiary from 1st June
1999. Details of the listed associated company and its
subsidiaries are set out in note 2.
Investment
During the year, current asset investments have been reduced to
fund the completion of the capital investment programme and to
reduce borrowings. As a result, investment income has risen in
the year, with profits being taken on the disposal of equity
investments.
Outlook
The major investment programme of the last few years was largely
completed by the year-end. The priorities of the group for the
immediate future are to consolidate existing businesses and to
concentrate on profitability and cash generation, to enable the
group to resume its long term strategy of growth in its
principal developing markets.
The very first priority has been to tackle the problem areas of
China and Poland, both of which have growth potential for the
group going forward. Rapid action on cost cutting and
consolidation in these areas has resulted in improved
performance in the current year. Any modest recovery in the
overall economic conditions in Nigeria, Indonesia, China and
Eastern Europe will further improve profitability. Group cash
flow is now positive and the board is recommending a dividend
increase of 5.4%.
PATERSON ZOCHONIS plc
Consolidated Profit and Loss Account for the Year to 31st May 1999
1999 1999 1999 1998
Before
Exceptional Exceptional
item item Total Total
(note 1) (Restated)
£000 £000 £000 £000
Turnover 357,297 - 357,297 355,946
Cost of sales (227,710) (5,177) (232,887) (225,298)
Gross profit 129,587 (5,177) 124,410 130,648
Selling & distribution (71,703) (1,115) (72,818) (73,319)
expenses
Administrative expenses (40,836) - (40,836) (37,159)
Group operating profit 17,048 (6,292) 10,756 20,170
Share of operating profit of 4,832 - 4,832 6,392
associated companies
21,880 (6,292) 15,588 26,562
Investment income - group 14,445 - 14,445 12,559
companies
Interest payable:
Group companies (5,831) - (5,831) (5,466)
Associated companies (1,129) - (1,129) (945)
(6,960) - (6,960) (6,411)
Profit on ordinary activities 29,365 (6,292) 23,073 32,710
before taxation
Taxation on profit on ordinary (7,443) - (7,443) (10,572)
activities
Profit on ordinary activities £21,922 £(6,292) 15,630 22,138
after taxation
Equity minority interests 3,106 1,006
Profit for the financial year 18,736 23,144
Preference dividends (770) (770)
Profit attributable to 17,966 22,374
ordinary capital
Ordinary dividends (9,252) (8,777)
Profit for the financial year £8,714 £13,597
retained
Earnings per ordinary share
after 37.87p 47.16p
exceptional item
Earnings per ordinary share
before 46.62p 47.16p
exceptional item
The results for both years arise from continuing operations.
PATERSON ZOCHONIS plc
Balance Sheets as at 31st May 1999
The group Parent company
1999 1998 1999 1998
£000 £000 £000 £000
Fixed assets
Intangible assets 299 - - -
Tangible assets 149,378 125,596 - -
Investments:
Subsidiary companies - - 76,403 75,036
Associated companies 34,565 26,864 7,187 7,036
Other investments - 61 - 61
184,242 152,521 83,590 82,133
Current assets
Stocks 61,081 55,625 - -
Debtors 62,403 62,673 59,955 51,589
Investments 69,665 107,082 36,427 59,922
Cash at bank and in hand 7,804 6,166 - -
200,953 231,546 96,382 111,511
Creditors - amounts falling (120,107) (143,061) (44,990) (62,589)
due within one year
Net current assets 80,846 88,485 51,392 48,922
Total assets less current 265,088 241,006 134,982 131,055
liabilities
Creditors - amounts falling (14,546) (14,427) - -
due after one year
Provisions for liabilities and (1,830) (4,412) - (1,875)
charges
Net assets £248,712 £222,167 £134,982 £129,180
Capital and reserves
Equity ordinary share capital 4,744 4,744 4,744 4,744
Non-equity preference share 7,898 7,898 7,898 7,898
capital
Total called up share capital 12,642 12,642 12,642 12,642
Reserves attributable to
equity interests:
Revaluation reserve 46,656 26,772 - -
Profit and loss account 185,740 177,106 122,340 116,538
Total shareholders' funds 245,038 216,520 134,982 129,180
Equity minority interests 3,674 5,647 - -
£248,712 £222,167 £134,982 £129,180
PATERSON ZOCHONIS plc
Group Cash Flow Statement
1999 1998
(Restated)
£000 £000
Cash flow from operating activities 6,366 23,834
Dividends received from associated companies - 1,873
Returns on investments and servicing
of finance 7,864 6,840
Taxation (6,701) (9,574)
Capital expenditure and financial investment (25,019) (27,602)
Acquisitions and disposals (1) (2,054)
Equity dividends paid (8,777) (8,327)
Cash outflow before use of liquid resources
and financing (26,268) (15,010)
Management of liquid resources 37,738 (547)
Financing (11,637) 17,218
(Decrease) / increase in cash in the period £(167) £1,661
1999 1998
£000 £000
Reconciliation of net cash flow to movement in
net funds
(Decrease) / increase in cash in the period (167) 1,661
Cash outflow / (inflow) from financing 11,637 (17,218)
Cash (inflow ) / outflow from management of (37,738) 547
liquid resources
Change in net funds resulting from cash flows (26,268) (15,010)
Currency retranslation 701 1,153
Movement in net funds in the period (25,567) (13,857)
Opening net funds 54,493 68,350
Closing net funds £28,926 £54,493
PATERSON ZOCHONIS plc
Group Cash Flow Statement continued
Analysis of net
funds
At 31st May Cash Exchange At 31st May
1998 flow Difference 1999
£000 £000 £000 £000
Cash in hand and at 6,166 1,564 74 7,804
bank
Overdrafts (15,245) (1,731) 473 (16,503)
(167)
Loans due within one (38,548) 11,624 (159) (27,083)
year
Loans due after one (4,962) 13 (8) (4,957)
year
11,637
Deposits 40,960 2,505 321 43,786
Other current asset 66,122 (40,243) - 25,879
investments
(37,738)
£54,493 £(26,268) £701 £28,926
Statement of Total Recognised Gains and Losses
1999 1998
(Restated)
£000 £000
Profit for the financial year
Group companies 16,056 19,275
Associated companies 2,680 3,869
18,736 23,144
Currency retranslation
Group companies 590 (19,094)
Associated companies (2,400) (205)
(1,810) (19,299)
Surplus on revaluation
Group companies 13,118 1,794
Associated companies 8,496 -
21,614 1,794
Total recognised gains and losses for the year £38,540 £5,639
PATERSON ZOCHONIS plc
NOTES
1. Exceptional item
As discussed in the operating and financial review, an
exceptional provision was made during the year in respect of the
group's operations in China:
£000
Write down of fixed assets 3,436
Provision for obsolete stock 1,741
Provision for bad debts 1,115
Effect on profit before taxation 6,292
Taxation -
Minority share 2,138
Effect on retained profit £4,154
2. Listed associated company
The group share of the profits and net assets of the listed
associated company and its subsidiaries in Nigeria is based on
the audited accounts for the year ended 31st May 1999 translated
to sterling at the rates of exchange stated:
1999 1998
Group Group
Total share Total share
of 48.41% of 48.22%
£000 £000 £000 £000
Turnover 95,330 46,062 103,143 48,829
Profit before taxation 7,664 3,703 11,506 5,447
Taxation (2,117) (1,023) (3,334) (1,578)
Profit after taxation £5,547 £2,680 £8,172 £3,869
Fixed assets 44,845 21,711 26,091 12,582
Current assets 71,971 34,844 75,260 36,293
Creditors (due within one (39,843) (19,290) (40,638) (19,597)
year)
Creditors (due after one year) (688) (333) (1,967) (949)
Provisions for liabilities
and charges (7,793) (3,773) (5,822) (2,808)
Net assets £68,492 £33,159 £52,924 £25,521
Share capital:
1,116,969,367 ordinary shares
of 50k each
(1998 - 1,116,969,367 shares) 3,631 1,758 3,979 1,919
Reserves 64,861 31,401 48,945 23,602
68,492 33,159 52,924 25,521
Proposed dividend 2,905 1,406 2,785 1,343
Group interest £34,565 £26,864
£1=N153.8056 (1998 - £1=N140.3700)
PATERSON ZOCHONIS plc
3. AGM and dividend
The board is recommending a final dividend of 13.65p per share
which, together with the interim dividend of 5.85p gives a total
distribution of 19.5p, an increase of 5.4% over the total of
18.5p last year.
The date of the annual general meeting has been fixed for Monday
November 1st 1999 and dividend warrants in respect of the
proposed final dividend, subject to shareholders' approval, will
be posted on that day to members on the register at 5.00 pm on
1st October 1999.
4. Presentation of accounts
Under the requirements of Financial Reporting Standard 9
'Associates and Joint Ventures', interest payable by associates
is now shown separately from the share of operating profit in
those companies in the profit and loss account. Resultant
changes have also been made to the statement of total recognised
gains and losses and the cash flow statement. Comparative
figures have been restated accordingly.
5. Basis of accounts
The 1999 results are an abridged version of the statutory
accounts for the year ended 31st May 1999 which have been
approved by the board of directors and which will carry an
unqualified audit report. The 1998 results are an abridged
restated version of the statutory accounts for the year ended
31st May 1998 which carry an unqualified audit report and which
have been filed with the Registrar of Companies. Neither
accounts contain a statement in respect of s.237(2) of the
Companies Act 1985.
Enquiries 7th September 1999
Paterson Zochonis plc
0161 491 8000 Graham Calder
(Between 9.00 am and 5.15 pm) Finance Director