Operating loss before exceptionals was £0.5 million, compared to an operating profit before exceptionals of £2.6 million in 2000, on sales 15 per cent lower at £46.0 million. On a constant currency basis, sales decreased by around 14 per cent. Operating loss before exceptionals in the second half of the year was £1.4 million, compared to an operating profit before exceptionals of £1.0 million in the second half of 2000, on sales down 20 per cent.

The full year sales decline was primarily the result of the decision taken early in 2001 not to pursue new process technology equipment contracts and the exit of other unprofitable sales lines. Adjusting for these factors, lower underlying sales in North America (reflecting output reductions by West Coast mining customers) were offset by strong sales growth in South Africa and Latin America. Sales in Europe were impacted by disruption caused by the aircraft crash at the Yateley, UK, facility in late December 2000.

Losses on the completion of remaining process technology equipment contracts were just under £1.0 million, all of which occurred in the second half.

Several new products were launched; LinaCrepe™, a form of uncured rubber can be moulded into shape and is particularly suitable for belting, hoses and roller covering applications. LinaDek™ abrasion resistant modular screens for the mining and construction industry were launched in the US. Cut-end hose lined with Linatex is now available to the construction industry in the US.

The programme to refocus and simplify the Linatex business was completed in February 2001, with the closure in Montreal of the last of 13 sites. Total headcount fell by 93 over the course of the year, a 13 per cent reduction. Exceptional restructuring costs of £0.5 million were charged in the first half. Cost savings from this programme were, however, more than offset by higher expenditure in other areas.

Further actions are under way to improve the cost competitiveness of the business, including the evaluation of step change improvements in manufacturing structure.

A £4.0 million continuous rubber sheet press was installed towards the end of the year and is currently being commissioned. This equipment will reduce operating costs further and enable Linatex sheet to be produced within tighter thickness tolerances for new applications and with enhanced bonding capabilities.

The ratio of trade working capital to sales reduced from 20 per cent at the end of 2000 to 14 per cent at the end of 2001, primarily as a result of an effective inventory reduction programme similar to that at Elementis Pigments.