Annual Financial Report

RNS Number : 1672B

Cookson Group PLC

11 April 2012

 

11 April 2012

Cookson Group plc

Pursuant to Listing Rule 9.6.1R copies of the documents listed below have been submitted to the Financial Services Authority National Storage Mechanism and will shortly be available for viewing at: www.hemscott.com/nsm.do

-     Annual Report and Accounts for the year ended 31 December 2011 ("2011 Annual Report and Accounts")

-     Circular and Notice of Annual General Meeting to be held on 17 May 2012

-     Form of proxy for the Annual General Meeting ("AGM") to be held on 17 May 2012

The following resolution is being proposed as special business at the forthcoming AGM:

Resolution 20seeks approval to continue to call general meetings on 14 clear days' notice. The Company would like to preserve the ability to call general meetings (other than an AGM) on 14 clear days' notice. The Company does not propose to use this reduced notice period as a matter of routine, but wishes to maintain the flexibility to do so where it is merited by the business of the meeting, for example, because the matter to be discussed is time sensitive or in the interests of Shareholders as a whole. The approval will be effective until the Company's next AGM, when it is intended that a similar resolution will be proposed. The Company will also need to meet the requirements for electronic voting under the Shareholder Rights Directive in order to be able to call a general meeting on 14 clear days' notice.  Resolution 20 is proposed as a special resolution.

Printed copies of the AGM documents are being posted or otherwise made available to shareholders today.  Copies of the 2011 Annual Report and Accounts and 2012 Notice of Meeting, which includes explanatory notes on the proposed resolutions, are available on the Company's website at www.cooksongroup.co.uk.

IMPORTANT: EXPLANATORY NOTE AND WARNING

The primary purpose of this announcement is to inform the market about the publication of Cookson Group plc's 2011 Annual Report and Accounts.

The information below, which is extracted from the 2011 Annual Report and Accounts, is included solely for the purpose of complying with DTR 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with Cookson's Preliminary Results announcement issued on 27 February 2012. Together these constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full 2011 Annual Report and Accounts.

"Principal Risks and Uncertainties

As described in the Corporate Governance Report, there is a continuous process for identifying, evaluating and managing significant risks faced by Cookson. Group management operates a risk management process designed to identify the key risks facing each business and reports to the Audit Committee on the process of how those risks are being managed. The Board is responsible for the Group's risk management and also reviews the role of insurance and other measures used in managing risks across the Group. The Board receives regular reports on any major issues that have arisen during the year and makes an annual assessment of how the risks have changed over the period under review.

Throughout its global operations, Cookson faces various risks, both internal and external, which could have a material impact on the Group's long-term performance. Cookson manages the risks inherent in its operations in order to mitigate exposure to all forms of risk, where practical, and to transfer risk to insurers, where cost-effective. The risks below are not the only ones that the Group will face. Some risks are not yet known and some that are not currently deemed material could later become material. All of these risks could materially affect the Group, its businesses, results of future operations or financial condition.

RISK AND IMPACT	MITIGATION
The financial performance and financial position of Cookson may be adversely affected by a significant weakening in demand in its core end-markets.  End-market conditions, and the Group's trading performance, improved markedly during the first half of 2011, reflecting the continuation of the recovery from the economic downturn which started in the fourth quarter of 2008 and persisted through much of 2009. Whilst the recovery has been strong, end-markets (and revenue) for a number of our businesses is still not yet back to pre-crisis levels. However, since midsummer 2011, concerns about the world economy have intensified with growing evidence of a slowdown both in the economies of the developed and developing world. Whilst fears of a "double-dip" recession in the US and a "hard landing" in China seem to have abated in recent months, market commentators are still concerned about slowing global growth rates generally (including in China) and the likelihood of low, or possibly, negative growth in Europe. In addition to clear evidence of slowing worldwide economic growth, concerns about the stability of the Eurozone and the European financial/banking system have not totally receded. It is as yet unclear to what extent the seeming insolvency of Greece and the fiscal weakness of other countries such as Ireland, Spain, Italy and Portugal will impact the euro currency and the banking system. Whilst, for now, a liquidity squeeze in the banking system seems to have been avoided, there can be no certainty that this risk will not return. This is concerning given that this was the catalyst for the severe downturn in the "real" economy in late 2008/early 2009. Cookson's divisions supply predominantly consumable products, on short lead times, to the global steel, foundry, electronics and precious metals industries. As such the Group's expectations of future trading are based upon the Directors' assessment of end-market conditions, which conditions are subject to some uncertainty. In the event that end-market conditions suffer further significant deterioration, Cookson may experience further reductions in trading activity, a lower share price, the financial failure of one or more of its key customers and suppliers, asset impairments, lower profitability and a material adverse impact on its financial position.	The Board regularly reviews Group strategy, which determines the markets in which the Group operates. The current spread of the Group's major businesses, both geographically and by end-market served, provides some protection to the Group should conditions, in particular markets, deteriorate. Further, the reduction in the Group's cost base during the last three years provides additional insulation to the adverse impact of any near-term market downturn. Also, in view of the extent of the de-stocking which took place during 2009 in the Group's end-markets, the Directors believe that any downturn in its end-markets is likely to be less severe than that experienced in 2009. Following the cost-reduction initiatives and equity raising successfully completed during 2009 and the debt refinancing recently completed in 2010 and 2011, the Directors believe that the Group is well positioned financially to sustain a further downturn in end-market activity should this occur.
The Group's financial position and trading results may be adversely affected by fluctuations in exchange rates, interest rates or the rate of inflation. The Group has no control over changes in foreign currency exchange rates, or inflation and interest rates. In the normal course of business, many transactions are carried out by Group businesses in currencies other than their reporting currency, leading to transactional foreign exchange risk, although this is not material for the Group overall. The Group is exposed to the effect of translating the results and net assets of its overseas subsidiaries into sterling. Significant fluctuations in the value of currencies in which it operates, in interest rates, or in rates of inflation may adversely impact the Group's financial position, results of operations and ability to comply with its financial covenants.	The Group attempts to manage transactional and balance sheet translation risks associated with currency exchange rate fluctuations through its hedging and funding policies and it is Group policy that foreign currency transaction exposures that are material at an individual operating unit level are hedged using appropriate instruments such as forward foreign exchange contracts. For its key operating currencies, the Group broadly matches the currency profile of its borrowings with the currencies of its asset base, but does not hedge translational impact on the income statements of overseas subsidiaries. Where appropriate, the Group manages its interest rate exposures using interest rate swaps or other instruments.
The Group may lose customers to competitors with new or alternative technologies if its businesses either do not adequately adapt to market developments or are unable to protect, maintain and enforce their intellectual property. The markets in which many of the Group's businesses operate can experience rapid changes due to the introduction of new technologies. The Group's continued success depends upon its ability to continue to develop and produce new and enhanced products and services on a cost-effective and timely basis in accordance with customer demands. If the Group fails to adequately adapt to market developments related to new products and technology, it could lose customers to suppliers with better or less costly products. Throughout its operations, the Group relies on a combination of trade secrets, patents, confidentiality procedures and agreements, and copyright and trade mark laws to protect its proprietary rights. If the Group fails to or is unable to protect, maintain and enforce its existing intellectual property, this may result in the loss of the Group's exclusive right to use technologies and processes which are included or used in its businesses. In addition, the laws of certain foreign countries in which the Group operates may not protect proprietary rights to the same extent as those of, for example, the UK or the US.	Cookson invests significant amounts in research and development and endeavours to sustain its competitive advantage and take appropriate action to ensure that its cost base remains competitive. In 2011, total research and development spend was £42.1m, equivalent to 1.9% of net sales value. The Group applies for patents over its major products, technologies and processes in a number of jurisdictions, including in Europe and the US. New product and service offerings by competitors are regularly monitored and any perceived breach of a Group patent is vigorously challenged. To the extent possible, the Group avoids holding key intellectual property in countries which do not afford an acceptable degree of legal protection to the Group.
The Group's financial condition may be materially adversely affected by any significant liabilities for any defects of its products or services. If a product of the Group or of one of the Group's industrial customers does not conform to agreed specifications or is otherwise defective, the Group may be subject to claims by its customers arising from end-product defects, injury to individuals or other such claims. Legal claims have been brought against certain Group companies by third parties alleging that persons have been harmed by exposure to hazardous materials used by those companies in the manufacture of industrial and consumer products, and further claims may be brought in the future. Certain of the Group's subsidiaries are subject to suits, predominantly in the US, relating to a small number of products containing asbestos manufactured prior to the acquisition of those subsidiaries by the Group. These suits usually also name many other product manufacturers. To date, the Group is not aware of there being any liability verdicts against any of these subsidiaries.	The Board believes that, taking into account legal advice received, the Group's insurance arrangements, indemnification provided by former owners of certain of the subsidiaries impacted and financial provisions, none of the currently pending or potential claims will, either individually or in the aggregate, have a material adverse impact on the Group's financial position and results of operations.
The Group's worldwide operations and businesses may be adversely affected by various political, legal, regulatory and other developments in countries in which it operates. The Group is subject to various legal and regulatory regimes, including those covering taxation and environmental matters; and political risks including the imposition of trade barriers, changes of regulatory requirements, lack of protection for intellectual property rights and the volatility of input costs, selling prices, taxes and currencies. In particular, operating within the rapidly evolving developing nations can expose the Group's businesses to significant local risks and challenges. Future global political, legal or regulatory developments concerning Group businesses may affect their ability to operate and to operate profitably in the affected jurisdictions. Should Group businesses fail to comply with applicable legal and regulatory requirements, this may result in a financial loss or restriction on their ability to operate. The Group's businesses are subject to a variety of operational risks, including natural catastrophe, terrorist action, theft, fraud and, particularly in developing nations, insufficient supply of high-quality local management and technical personnel. If any of the operational risks materialise to a significant extent, this could result in a substantial interruption to a facility, loss of future insurance cover, a potential loss of customers and revenue and financial loss.	As part of its planning process before entering a new market or territory, or expanding in an existing market or territory, the Group undertakes a rigorous assessment of the risks involved. In addition, the spread of the Group's major businesses, both geographically and by end-market served, provides some protection to the Group should any of its businesses be adversely impacted by legal, regulatory or other changes in an individual market or territory. The Group has in place an insurance programme covering all of its businesses which provides an acceptable level of coverage for the operational risks which they face.
A withdrawal or reduction of precious metal consignment arrangements, or increased precious metal prices resulting in consignment lines being fully utilised, may cause a shortage of raw materials requiring the business to be restructured and downsized and may result in a short-term material increase in the Group's financial indebtedness. The Group's precious metal fabrication operations utilise significant quantities of precious metals, primarily gold by value. These metals are held predominantly on consignment under contractual arrangements whereby the consignor retains title to the metal and the associated risks and benefits of ownership, with the result that the physical metal so held is not recorded in the Group balance sheet. These arrangements are uncommitted in that the consignor has the right, with limited or in some cases no notice, to demand physical return or purchase of its consigned metal. The utilisation of consigned precious metals is established practice in the precious metals industry. Should precious metals consignors decide to reduce or withdraw the facilities for whatever reason, or require a return of the consigned metal, or increased metal prices lead to the consignment arrangements becoming fully utilised, the Group's precious metal fabrication operations may suffer shortages of raw materials requiring the business to be restructured and downsized in order to be able to operate within its available consignment facilities. In the short-term this may require precious metals to be purchased, which could materially increase the Group's financial indebtedness pending completion of the downsizing.	Cookson has successfully maintained precious metal consignment arrangements of this nature for over 20 years. The Group has close commercial relationships with its group of consignor banks. Management seeks to operate the business at all times with appropriate headroom within the consignment facilities, taking account of anticipated levels of business activity and precious metals prices.

Responsibility Statement of the Directors in respect of the Annual Financial Report

"Each of the Directors whose names and functions are indicated below confirms that to the best of their knowledge:

·     the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·     the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

The names and functions of the Directors of Cookson Group plc are as follows:

Jeff Harris                    Chairman

Nick Salmon                Chief Executive

Mike Butterworth          Group Finance Director

François Wanecq        Executive Director

Emma FitzGerald        Non-executive Director

Jeff Hewitt                    Non-executive Director and Chairman of the Audit Committee

Peter Hill                      Non-executive Director

Jan Oosterveld            Non-executive Director

John Sussens             Non-executive Director, Senior Independent Director and Chairman of the
                                    Remuneration Committee

On behalf of the Board

Mike Butterworth

27 February 2012"

Forward looking statements

This announcement contains certain forward looking statements which may include reference to one or more of the following: 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 announcement that are not historical facts are hereby identified as "forward looking statements". Such forward looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Cookson, wherever they occur in this announcement, 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; the terms and conditions of Cookson's financing arrangements; foreign currency rate fluctuations; competition in Cookson's principal markets; acquisitions or disposals of businesses or assets; and trends in Cookson's principal industries.

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 regulator 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 announcement might not occur.

 

END

 

 

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