Financial review (continued)
Specialty Rubber
 |
|
|
|
|
| £million |
2004 |
|
2003 |
|
 |
| Sales |
45.9 |
|
42.7 |
|
|
| Adjusted
operating result* |
0.2 |
|
- |
|
|
| Operating
profit/(loss) |
0.2 |
|
(0.3 |
) |
|
* before exceptionals
Sales in Specialty Rubber increased by 8 per cent to £45.9
million, due to strong volume growth largely in Asia Pacific, South
Africa and Europe. Higher sales volumes and improved pricing were
partly offset by fixed cost increases. The operating profit before
exceptionals for the year was £0.2 million compared to break-even
in the previous year.
Exceptionals
Total exceptional items before taxation
in the year were £2.6
million (2003: £0.4 million).
These comprised:
|
£million |
|
| Operating: |
|
|
|
| Redundancy
and restructuring costs |
(2.9 |
) |
|
| Non
operating: |
|
|
|
| Profit on disposal
of property |
2.6 |
|
|
| Loss on termination
of business |
(2.3 |
) |
|
| |
(2.6 |
) |
|
The redundancy and restructuring costs comprise £1.3 million
of redundancy costs at Chromium's Eaglescliffe site and £1.6
million incurred in the first phase of the integration of Sasol
Servo BV following its acquisition in June 2004.
The profit on disposal of property of £2.6 million is from
the sale and leaseback of Specialty Rubber's Yateley, UK
property.
The loss on termination of business of £2.3 million is
to provide for the book value of the Group's 50 per cent
interest in Enenco together with any residual site clean-up costs.
This follows a decision made by the joint venture parties during
2004 to close the business.
Interest
£million |
2004 |
2003 |
|
| On net borrowings |
(3.8 |
) |
(1.9 |
) |
|
| Pension finance
charge |
(1.1 |
) |
(4.2 |
) |
|
| Discount on
provisions |
(0.9 |
) |
(0.9 |
) |
|
| Other |
0.2 |
|
0.8 |
|
|
| Total |
(5.6 |
) |
(6.2 |
) |
|
Interest payable on net borrowings increased during the year
by £1.9
million due to higher borrowings and a higher cost of borrowing. The finance
charge in respect of pension and post-retirement benefits decreased by £3.1
million in the year due to a lower pension deficit and an improvement on
the expected return on pension scheme assets.
Interest cover – the ratio of operating profit before goodwill
amortisation and exceptionals to interest on net borrowings was
3.1 times (2003: 12.9 times).
Taxation
|
|
|
Effective |
| Tax (charge)/credit |
£million |
|
rate |
| |
|
|
|
|
|
| Before
goodwill amortisation and exceptionals |
(0.2 |
) |
2 |
% |
|
| Goodwill
amortisation |
- |
|
- |
|
|
| Exceptionals |
(0.2 |
) |
(9 |
%) |
|
| Total |
- |
|
- |
|
|
The effective rate of tax on profit before goodwill amortisation and exceptionals
was 2 per cent (2003: 29 per cent).
The decrease in the rate was due to the resolution of open issues
from prior periods and the utilisation of losses. Potential deferred
tax assets of £28.8 million (2003: £23.2 million) have
not yet been recognised.
The effective tax rate on profit before goodwill amortisation
and exceptionals in 2005 will continue to be dependent on the mix
of profits primarily between the UK and overseas.
Earnings per share
Earnings per share for the year was a loss of 1.8 pence per share (2003: earnings
of 1.0 pence per share), mainly due to the lower operating profit for the
year. Earnings per share before goodwill amortisation and exceptionals was
53 per cent lower at 1.4 pence (2003: 3.0 pence) due to the lower operating
profit but partly offset by lower FRS17 pension finance charges and a lower
tax rate.
Dividends and issue of redeemable B shares
The Board did not declare an interim dividend and, similarly, is not proposing
a final dividend. The Board instead intends to continue with the programme,
started in 2000, of issuing and redeeming redeemable B shares.
The total nominal value of redeemable B shares issued to shareholders
during 2004 was 2.2 pence per ordinary share.
The Board intends to issue further redeemable B shares to ordinary
shareholders on the register on 26 April 2005, such that they receive
redeemable B shares with a total nominal value of 1.1 pence for
each ordinary share held. This compares with 1.1 pence for the
comparable issue last year. This will be coupled with an offer
to redeem these new shares for cash at their nominal value on 3
May 2005. A further offer will also be made to existing holders
of redeemable B shares to redeem these shares for cash at their
nominal value on 3 May 2005.
Cash flow
Net borrowings increased by £43.3 million in the year to £90.2
million. The cash outflow due to changes in working capital increased by £5.1
million as higher stocks and debtors due to increased volumes and the transitional
effects of the ERP implementation, were partially offset by higher creditors.
The ratio of working capital to sales increased from 17.5 per cent to 18.3
per cent after adjusting for the acquisition in Specialties which was made
part way through the year.
The cash flow is summarised below:
| |
2004 |
|
2003 |
|
| |
£million |
|
£million |
|
|
| |
|
|
|
|
|
| Earnings
before interest, tax, exceptionals, depreciation and amortisation |
27.2 |
|
40.1 |
|
|
| Change
in working capital |
(5.1 |
) |
(2.9 |
) |
|
| Other |
(7.0 |
) |
(22.0 |
) |
|
| Capital
expenditure |
(22.0 |
) |
(21.0 |
) |
|
| |
(6.9 |
) |
(5.8 |
) |
|
| Redemption
of B shares |
(9.2 |
) |
(9.5 |
) |
|
| Acquisitions
and disposals |
(30.7 |
) |
0.8 |
|
|
| Currency
fluctuations |
3.5 |
|
5.0 |
|
|
| |
(43.3 |
) |
(9.5 |
) |
|
| Net
borrowings at start of year |
(46.9 |
) |
(37.4 |
) |
|
| Net
borrowings at end of year |
(90.2 |
) |
(46.9 |
) |
|
Other cash flows decreased by £15.0 million, due to lower contributions
to pension schemes and less paid on provisions and net tax refunds of £4.5
million.
Financial review
continues on the next page >
[Page 2 of 3]
|
